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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1999
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______________ to _________________.
COMMISSION FILE NUMBER ________
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INVITROGEN CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 33-0373077
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1600 FARADAY AVENUE
CARLSBAD, CALIFORNIA 92008
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 760-603-7200
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock $.01 Par Value
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes /X/ or No / /
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. /X/
The aggregate market value of the voting and non-voting common equity
held by nonaffiliates of the registrant as of February 29, 2000 was
$1,541,755,988 based on the last reported sale price of $84.50 per share on
February 29, 2000.
The number of outstanding shares of the registrant's common stock as of
February 29, 2000 was 23,040,997.
DOCUMENTS INCORPORATED BY REFERENCE: Certain information called for by
Part III of the Form 10-K will either be filed with the Commission under
Regulation 14A under the Securities Exchange Act of 1934 or by amendment to
this Form 10-K, in either case on or before April 30, 2000.
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INVITROGEN CORPORATION
Annual Report on Form 10-K
for the Year Ended December 31, 1999
TABLE OF CONTENTS
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PART I
Item 1. Business........................................................................................... 1
Item 2. Properties......................................................................................... 20
Item 3. Legal Proceedings.................................................................................. 21
Item 4. Submission of Matters to a Vote of Security Holders................................................ 21
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.............................. 21
Item 6. Selected Financial Data............................................................................ 21
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.............. 22
Item 7A. Quantitative and Qualitative Disclosures About Market Risk......................................... 27
Item 8. Financial Statements and Supplementary Data........................................................ F-1
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure............... 28
PART III
Item 10. Directors and Executive Officers of the Registrant................................................. 28
Item 11. Executive Compensation............................................................................. 28
Item 12. Security Ownership of Certain Beneficial Owners and Management..................................... 28
Item 13. Certain Relationships and Related Transactions..................................................... 28
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FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains certain "forward-looking"
statements within the meaning of the Private Securities Litigation Reform
Act of 1995 which provides a "safe harbor" for these types of statements.
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; and
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.
Forward-looking statements are subject to risks and uncertainties which
include those listed in this Form 10-K and other risks identified from
time to time in our filings with the Securities and Exchange Commission
(SEC), press releases and other communications. Because of these risks
and uncertainties, our actual results may differ materially from the
expectation we describe in our forward-looking statements
TRADEMARKS
The Invitrogen logo, Discovery Line-TM-, DNA DipStick-TM-, Echo-TM-,
Gene Pool-TM-, Hybrid Hunter-TM-, Micro-FastTrack-TM-, Northern
Territory-TM- and Zero Background-TM- are trademarks of Invitrogen.
MaxBac-Registered Trademark-, FastTrack-Registered Trademark-,
GeneStorm-Registered Trademark-, One Shot-Registered Trademark-, TA
Cloning-Registered Trademark-, TOPO-Registered Trademark- and Zero
Blunt-Registered Trademark- are Invitrogen trademarks which have been
registered with the United States Patent and Trademark Office.
Invitrogenomics-TM-, Morphagen-TM- and Morphatides-TM- are trademarks of
Invitrogen for which registration applications have been filed with the
United States Patent and Trademark Office.
XCell II-TM-, BlueHorizon-TM- and Mark12-TM- are trademarks of
NOVEX. NOVEX-Registered Trademark-, Serva-Registered Trademark-,
QuickPoint-Registered Trademark-, NuPAGE-Registered Trademark-,
PowerEase-Registered Trademark-, SeeBlue-Registered Trademark-,
MultiMark-Registered Trademark- and SilverXpress-Registered Trademark-
are trademarks of NOVEX which have been registered with the United
States Patent and Trademark Office. WesternBreeze-TM- is a trademark of
NOVEX for which an application for registration has been filed with the
United States Patent and Trademark Office.
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IN THIS FORM 10-K, UNLESS THE CONTEXT REQUIRES OTHERWISE, "COMPANY,"
"WE," "OUR," AND "US" MEANS INVITROGEN CORPORATION AND ITS SUBSIDIARIES
EXCEPT RESEARCH GENETICS, INC.
PART I
ITEM 1-BUSINESS
FORMATION OF THE COMPANY AND SUBSEQUENT TRANSACTIONS
Invitrogen Corporation is incorporated in the state of Delaware and has
its principal offices in Carlsbad, California. We are a leading provider of
research kits which simplify and improve genetic and other molecular biology
research. We develop, manufacture and market research tools in kit form and
provide other research products and services to corporate, academic and
governmental entities. We began operations as a California partnership in
1987 and incorporated in 1989 in the state of California. In 1997 we
reincorporated in Delaware.
In August 1999, Invitrogen merged with NOVEX, a developer and
manufacturer of pre-cast electrophoresis gels and associated products for
gene and protein analysis. As consideration for the merger we issued
2,530,124 shares of our common stock and assumed options which were converted
into options to purchase 469,678 shares of our common stock. Invitrogen
merged with NOVEX because we believe that NOVEX's pre-cast gel
electrophoresis product lines are highly complementary with Invitrogen's
product lines. In connection with the integration of NOVEX, we reduced the
size of our U.S. workforce by approximately 14%. We have recently announced
the closing of our Frankfurt, Germany manufacturing facility which was
acquired as part of the NOVEX merger. We believe this facility represents
excess capacity, and expect its closure to be complete on or about March 31,
2000.
On February 2, 2000 we completed our merger with Research Genetics, Inc.
As consideration for the merger, we issued 3,200,000 shares of our common
stock for all of the capital stock of Research Genetics. Upon their
employment by Invitrogen's subsidiary, we also issued options to purchase
750,000 shares of our common stock to employees of Research Genetics.
Research Genetics is located in Huntsville, Alabama and continues to operate
there as our subsidiary.
Research Genetics is a leading supplier of products and services for
functional genomics and gene-based drug discovery research. Research
Genetics' product lines include DNA microarrays and custom software for
microarray data analysis, Polymerase Chain Reaction (PCR) primers that
amplify all or a specific portion of selected genes, genetic markers that are
used to locate disease genes, various genomic and cDNA libraries, and
custom-made DNA. Research Genetics currently offers microarrays of 30,000
different human genes, one of the world's largest collections of commercially
available, sequence-validated clones.
Unless otherwise noted, we have not included the operations of Research
Genetics in this report because the merger was not completed in 1999.
OVERVIEW
We develop, manufacture and market research tools in kit form and
provide other research products and 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. 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 and products allow
researchers to perform these activities more accurately, efficiently and with
greater reproducibility compared to conventional research methods. Our kits
and products 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 "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. In addition,
through our NOVEX product line we develop, manufacture and market research
electrophoresis products in pre-cast form, which improves the speed,
reliability and convenience of gel electrophoresis. Gel electrophoresis is a
technique that is used as a tool to visualize the results of many different
types of molecular biology experiments. As such, gel electrophoresis is
integral to the majority of the molecular biology activities that our other
kits and products address. In February 2000 we merged with Research Genetics,
Inc., a leading supplier of products and services for functional genomics and
gene-based drug discovery research. From 1995 through 1999, we experienced
compound annual growth in revenue of 29% and in net income of 65% (excluding
merger-related costs, net of tax).
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Based on independent market studies, in 1999 researchers spent over $1.6
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 and
supply market. Based on independent market studies, we project sales of gene
cloning, expression and analysis kits to grow approximately 21% in 2000,
compared to approximately 14% growth 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 the study of genetic material
and molecular biology research;
Increasing availability of new data from the Human Genome Project, a
federally funded effort to sequence the human genome, and other genome
sequencing projects;
Proliferation of high-throughput molecular biology research techniques;
and
Increasing investment in commercial research activities.
We offer approximately 700 kits and other products that researchers use
to conduct key molecular biology research activities. Our kits and products
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 proprietary 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 1998 sales of these kits, we
estimate that researchers who used TOPO TA Cloning Kits in 1998 saved over
seven million hours compared to standard cloning methods.
In 1998 we 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 marketing this technology under
the name Invitrogenomics. We are using this new technology to rapidly clone
and patent collections of full-length genes, which we are licensing and
selling. To date, we have assembled a collection of over 2,300 full-length
cloned human genes that correctly express their specific proteins. In
addition, we are using 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.
We believe we have assembled one of the broadest portfolios of gene
cloning, expression and analysis-related intellectual property in our
industry. To date, we have obtained over 85 licenses, which provide us with
access to over 200 patents and applications covering gene cloning, expression
and analysis materials and techniques. In total, we own or control 35 issued
and pending patents and applications. 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, gene
expression and gene analysis-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.
PRODUCTS AND SERVICES
We currently offer approximately 700 gene identification, cloning,
expression and analysis products and services. The following table describes
our top selling products, as well as the leading product lines in our key
areas of focus:
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GENE IDENTIFICATION PRODUCTS
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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.
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Micro-FastTrack Kit This kit is a modified version of the
FastTrack Kit, optimized for improved results
when isolating mRNA from small sample sizes.
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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.
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GENE CLONING PRODUCTS
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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.
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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 five minutes.
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Echo Cloning System The Echo Cloning System utilizes recombination to
enable researchers to clone DNA rapidly and
simultaneously into multiple expression vectors,
eliminating the repetitive subcloning and
sequencing steps that would normally be required.
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Zero Blunt PCR Cloning Kit This kit enables researchers to efficiently clone
blunt-ended PCR products by employing a lethal
gene that prevents bacterial growth unless the
cloning reaction was successful.
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GENE EXPRESSION PRODUCTS
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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.
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MaxBac Baculovirus Expression This complete kit provides researchers with all
System required components to perform System gene
expression in insect cells (including vectors,
cell lines, viral stocks, growth media,
transfection reagents and protocols).
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Ecdysone-Inducible Mammalian This system provides tightly controlled,
Expression System inducible expression in mammalian cells,
Expression System allowing researchers to
study the effects of a particular protein by
turning on and off its expression as desired.
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GENE ANALYSIS PRODUCTS
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GeneStorm Expression-Ready Researchers can purchase the gene they wish to
Clones study, cloned into a quality vector and tested
to verify that it expresses protein.
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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.
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Pre-Cast NuPAGE Gels NuPAGE gels can be used in place of Tris
Glycine gels for protein electrophoresis.
These patented gels provide superior
resolution, run in half the time of
conventional gels and have a one-year shelf
life. In addition, NuPAGE gel stability allows
ambient temperature shipping and room
temperature storage.
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Pre-Cast Tris Glycine Gels TG gels are available in 12 different
percentages. These traditional Laemmli-type
gels are used for SDS-PAGE. TG gels have a
refrigerated shelf life of 3-4 months.
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Pre-Cast Isoelectric Focusing NOVEX supplies pH 3-7 and pH 3-10 pre-cast
Gels IEF gels in the standard vertical 10cm x 10cm
format as well as in a horizontal format,
which allows up to 43 samples to be run
simultaneously.
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Pre-Cast TBE Polyacrylamide Gels Tris borate EDTA (TBE) gels are used to
provide high-resolution separation of double-
stranded DNA fragments such as PCR products.
They are also widely used to conduct single-
stranded conformational polymorphism (SSCP)
studies to detect single point DNA mutations
and gel mobility shift assays to characterize
DNA-protein interactions.
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QuickPoint These ultra thin, polyacrylamide gels are used
for the rapid separation of single-stranded
DNA for sequencing. They run in only 15
minutes, compared to three hours for
conventional sequencing gels. QuickPoint gels
are useful for analyzing the results of RNase
Protection Assay experiments and for running
short DNA sequences from site-directed
mutagenesis and differential display
experiments.
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WesternBreeze This complete kit provides all of the
components required for western blotting. Kit
components have been optimized to provide low
background and high sensitivity.
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XCell II Mini-Cell and This apparatus holds the gels and buffers
Blotting Apparatus during electrophoresis and western blotting.
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Pre-Made Protein We make three protein standards used during
Standards electrophoresis to determine the approximate
molecular weights of proteins in a sample.
Mark12 is a ready-to-use protein standard
that does not require dilution or pretreatment.
SeeBlue is a broad range pre-mixed and
pre-stained standard. MultiMark is a
multi-colored standard that is particularly
useful for western blotting. In addition, we
make a liquid mix pI 3-10 IEF marker for
determining the isoelectric point of proteins.
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SUPPORT PRODUCTS
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One Shot INV(alpha)F, TOP10F These three different bacterial strains are
and TOP10 Competent E. COLI sold ready-to-use for cloning and expression
experiments to transfer vectors into bacteria.
They are packaged in convenient, single-use
aliquots to prevent loss of efficiency caused
by freeze-thaw cycles.
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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.
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RESEARCH SERVICES
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Invitrogenomics Invitrogenomics services include a variety of
functional genomics and molecular biological
services, such as high-throughput gene cloning
and gene expression.
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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.
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. We have 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 are then sold ready-to-use or used to create
ready-to-use Northern blots, cDNA for PCR and cDNA libraries. This enables
researchers to use high quality materials and to study the similarities and
differences between normal, fetal and cancerous tissues. These products save
researchers time and effort because the upstream experiments required to
prepare these materials as well as the failures caused by working with
inferior materials are eliminated.
GENE CLONING PRODUCTS
TA CLONING KIT. This kit enables researchers to clone TAQ
polymerase-generated PCR products quickly and efficiently. The kit contains
prepared cloning vector, competent cells for transferring the vector into
after the cloning reaction and all required buffers and enzyme for cloning.
To clone with the TA Cloning Kit, researchers perform a normal PCR
reaction, add a portion of it to a tube that contains TA Cloning vector and
T4 DNA ligase in a ligation buffer, then incubate this ligation reaction for
10-12 hours, or overnight. This reaction is then added to a tube of competent
bacteria, which are then plated onto an agar plate. The plates are incubated
for a day to allow colonies to form. Colonies are then picked based on a
color selection method. Positive colonies, or those that have incorporated
PCR product, are white, while negatives are blue. DNA is then isolated from
positive colonies to verify that the cloning was successful and to determine
the orientation of the PCR product that inserted into the vector.
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 to add sticky overhangs. Among these steps
are the addition of extra bases to the PCR primers to add restriction sites,
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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%.
We are the sole owner by assignment of U.S. and foreign patents on the
TA Cloning method and materials.
TOPO TA CLONING KIT. This kit is an improved version of the TA Cloning
Kit. It contains prepared cloning vector, competent cells for transferring
the vector into after the cloning reaction and all buffers required for
cloning.
TOPO TA Cloning is a combination of the TA Cloning method, which is
described above, and 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 TA
Cloning, therefore, saves researchers a full day as they are able perform
their ligation reaction and transform it into bacteria on the same day.
We are 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.
ECHO CLONING SYSTEM. This system enables researchers to clone DNA
rapidly and simultaneously into multiple expression vectors, eliminating the
repetitive subcloning and sequencing steps that would normally be required
when expression in a variety of hosts is desired. The system is available in
a variety of configurations, depending on which expression vectors the
researcher wants. The complete cloning and expression system contains an
Echo-adapted TOPO TA Cloning vector, called a donor vector, competent cells
for transferring the donor vector into after the cloning reaction and cloning
buffer. It also contains the researcher's choice of an Echo-adapted
bacterial, yeast, insect or mammalian expression vector, called an acceptor
vector, recombinase protein, cells for transferring the recombination
reaction into and recombination buffer. The donor and acceptor vectors, cells
and recombinase are available in sets or can be purchased individually. In
addition, researchers can add a recombination site to any other expression
vector to create their own Echo-adapted acceptor vector.
To use the Echo Cloning System, researchers first clone their
TAQ-amplified PCR product into the donor vector using the rapid TOPO TA
Cloning method described above. Because PCR is a process that can introduce
random mutations into amplified DNA, researchers then sequence their clone to
verify its integrity. Once the clone is confirmed, it can be moved into any
or all of the acceptor vectors simply by combining the donor vector and the
acceptor vector in a buffer containing the recombinase protein. During a
30-minute incubation, the recombinase protein causes the two vectors to fuse
together at their recombination sites. This recombination places the cloned
DNA from the donor vector next to the expression elements in the acceptor
vector. The recombination reaction is added to a tube of competent bacteria
and plated onto an agar plate for selection via an overnight incubation.
Colonies are picked and DNA is then isolated and tested to verify successful
recombination. The resulting vector is ready for expression.
The Echo Cloning System is advantageous because it enables researchers
to move an identical piece of DNA into multiple expression vectors. As
described, researchers frequently wish to express the same gene in multiple
hosts. Previous methods required researchers to PCR clone into each separate
expression vector and then to verify each clone by sequencing. Echo Cloning
eliminates the need for multiple subcloning and sequencing steps, saving
researchers time and effort and providing them with more uniform results as
they are assured of expressing the same DNA sequence in each different host
type.
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.
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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 a broad line of expression vectors, providing
researchers with the ability to perform various types of experiments in
different hosts to reach a conclusion. Our new Echo Cloning System described
above facilitates these experiments by enabling a gene to be simultaneously
cloned into multiple expression vectors. 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.
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 2,300 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 sold
to Invitrogen's customers and used in Invitrogenomics research.
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HYBRID HUNTER SYSTEMS. Molecular interaction is a technique used to
determine if various molecules are able to bind to, or interact with one
another. Because most cellular processes are mediated through pathways of
many proteins, determining if a given protein interacts with other proteins
or nucleic acid molecules is one of the keys to understanding its function.
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 kits contain "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. Our Hybrid Hunter
Systems have been designed using technologies that help prevent the
occurrence of false interactions.
PRE-CAST GEL SYSTEM. There are three key advantages to our pre-cast gel
electrophoresis system: ease-of-use, versatility and performance.
The core of our pre-cast gel system is the XCell II Mini-Cell apparatus
and the polyacrylamide gels that are pre-cast in easy-to-handle 10cm X
10cm plastic cassettes. The gels are individually pouched and
ready-to-use. The researcher simply opens the storage pouch, places two
gels in the Mini-Cell, adds buffer and loads the samples into the sample
wells. An electrical charge is applied to the Mini-Cell for about one
hour to complete the electrophoresis process. After electrophorcsis is
complete, the plastic cassette is opened and the slab gel containing the
separated proteins is released for staining or western blotting.
We offer over 180 pre-cast gels to meet researchers' diverse needs.
These gels incorporate ten different gel chemistries, each optimized for
a particular application, as well as 37 different gel percentages
(porosities) for optimizing the separation of different kinds of samples.
Gradient gels such as the 4-20% Tris-Glycine gel are used to separate a
broad range of proteins on a single gel. Our pre-cast IEF gels contain
compounds called amphoytes that enable the separation of proteins based
on their native electrical charge rather than their size. A variety of
sample well formats and thicknesses allows the users to select the
appropriate gel for their application.
Important research decisions are made based upon the results of
electrophoresis experiments, so reliable, high quality gel performance is
essential. It is difficult for a researcher making gels on an occasional
basis to ensure the quality of the gel prior to use, in particular,
gradient gels or IEF gels. We use proprietary and patented technology to
produce highly reproducible gels with superior qualities such as gel
straightness, and crisp, sharp separation of bands (resolution).
These products include:
PRE-CAST NUPAGE GELS. NuPAGE is a unique, patented, long-shelf life (one
year) family of gels for SDS-PAGE protein electrophoresis. NuPAGE is used in
place of the traditional Tris-Glycine gels when faster run time (as little as
40 minutes), improved resolution and long shelf life is desired. The long
shelf life aspect allows the product to be stored and shipped at ambient
temperature and reduces the number of unused expired gels, leading to reduced
costs for the end-user.
PRE-CAST TRIS-GLYCINE GELS. These are the traditional gels used for
SDS-PAGE analysis of proteins. We offer 12 different Tris-Glycine gel
percentages. Tris-Glycine gels have a refrigerated shelf life of three to
four months.
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PRE-CAST IEF GELS. We offer pre-cast IEF gels in the 10cm X 10cm
vertical format. This gel allows the researcher to separate proteins based on
native charge rather than size.
PRE-CAST TBE GELS. TBE (Tris Borate EDTA) gels are used to separate
double-stranded DNA fragments while TBE-Urea gels are used to separate single
stranded RNA and DNA. These gels are used in gel mobility shift assays, a
common technique for identifying and characterizing DNA:protein interactions.
After the run, the DNA:protein complex can be extracted from the gel for
further study.
QUICKPOINT. These ultra-thin 10cm X 12cm pre-cast polyacrylamide gels
are used for rapid separation of short DNA sequences and analysis of
double-stranded DNA fragments. The 15-minute run time is a significant
improvement over the three hours it takes to run standard manual sequencing
gels. Typically, researchers would have to make a large (30cm X 40cm)
standard DNA sequencing gel in order to analyze even short DNA sequences. Now
researchers have the option of using pre-made, easy-to-handle gels with
significantly shorter run times, while still getting the single base
resolution needed to read the DNA sequence.
WESTERNBREEZE. This is a complete western blotting reagent kit that has
been optimized to generate blots with clean backgrounds and high sensitivity.
Western blotting is typically a time-consuming, complex process with many
steps, several different reagents and multiple formulas from which to choose.
Researchers typically use reagents from different vendors and spend a great
deal of time working out satisfactory blotting conditions. The WesternBreeze
kit is optimized to work the first time, providing a significant time
savings. All of the solutions are packaged as pre-mixed solutions for maximum
ease-of-use.
XCELL II MINI-CELL AND BLOTTING APPARATUS. This apparatus is
specifically designed to run our pre-cast gels. A simple wedge design
eliminates buffer leakage, a common problem found in traditional
electrophoresis apparatus that can result in interruption of the run and
sample loss. Our blotting apparatus fits inside the XCell II Mini-Cell,
saving space, reducing buffer volume and reducing transfer time.
PRE-MADE PROTEIN STANDARDS. Protein standards for electrophoresis are a
mixture of proteins with known molecular weights. Standards are run on a gel
with unknown samples in order to help determine the molecular weight of the
samples. The NOVEX Mark12 protein standard is a wide range standard that is
stable in liquid form and is ready to load onto the gel. NOVEX SeeBlue
pre-stained, wide-range standard has exceptionally sharp bands for more
accurate molecular weight determination. NOVEX MultiMark is a ready-to-use
multi-colored pre-stained marker used primarily for western blotting. NOVEX
ready-to-use IEF markers are used for determining the isoelectric point of
proteins separated in isoelectric focusing gels.
SUPPORT PRODUCTS
ONE SHOT INV(ALPHA)F', 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. We
sell many different bacterial strains, each with different characteristics
used by researchers depending on the experiment to be performed. Our
best-selling bacteria are competent, meaning that they have been processed in
a manner that makes them able to bring vector in from outside their cell
walls.
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 walls. 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.
Our 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
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antibiotic resistance gene. We also sell 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 less efficient, including propagation, cloning, transformation and
transfection. 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.
RESEARCH SERVICES
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 are marketing under
the name Invitrogenomics. We are using our Invitrogenomics 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 libraries of over 2,300 full-length cloned human genes that express
their encoded proteins. We plan to continue to develop a proprietary
collection of full-length genes, which can be sold and licensed to corporate
partners for drug discovery and other commercial development activities.
We intend to focus the Invitrogenomics activities and technology on two
important business opportunities. First, as genome sequencing efforts
accelerate, pharmaceutical, biotechnology and agricultural firms will wish to
analyze large amounts of data to isolate relevant gene targets as quickly as
possible. To do so, these companies will need to conduct cloning and
expression-testing on a large scale. We are using our high-throughput
technology and personnel to provide gene cloning and expression services for
corporate partners on a contract basis. Second, as we build 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 17 personnel,
primarily in research and development, manufacturing and marketing. Business
development activities are conducted primarily by our senior management.
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. We seek
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 $9.7 million, $8.6 million and $5.9 million on research and
development activities in 1999, 1998 and 1997, respectively. No material
portion of this investment in research and development was sponsored by our
customers.
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SALES AND MARKETING
We currently market our products in over 30 countries throughout the
world. We sell our products directly to customers in the United States,
Germany, Switzerland, the United Kingdom and 16 other countries. In addition,
we utilize specialized distributors to market our products exclusively in
more than 13 other countries as well as in some of the countries in which we
sell directly. These independent distributors may also market research
products for other companies, including some products that are competitive
with our offerings. For more information regarding foreign sales and
revenues, see Note 1 to our Consolidated Financial Statements. As of December
31, 1999 we employed approximately 116 people in our sales and marketing
department worldwide to market our products and provide customer support and
service.
Our sales strategy has been to employ scientists to work as our
technical sales representatives. Most technical sales representatives have an
extensive background in biology. A thorough knowledge of biological
techniques and an understanding of the research process allows our sales
representatives to become advisors, acting in a consultative role with our
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 products. We advertise in 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. Invitrogen's
website allows researchers to view an on-line catalog, download technical
manuals and vector sequences, read our newsletter and participate in
interactive forums and discussion groups. The website for our NOVEX
subsidiary allows researchers to view an on-line catalog and download NOVEX
technical manuals and application notes.
MANUFACTURING
The U.S. manufacturing facilities for Invitrogen products 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 Invitrogen's 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.
Our U.S. manufacturing facilities for NOVEX products are located in San
Diego, California. NOVEX's manufacturing department is responsible for
production, quality testing, process improvements, customer service and
shipping. The engineering department supports the manufacturing department
with development of proprietary manufacturing automation, 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.
We also have a manufacturing facility in Heidelberg, Germany for
formulating and packaging fine chemicals. We have announced the closing of
our Frankfurt, Germany manufacturing facility which was acquired as part of
the NOVEX merger. We believe this facility represents excess capacity, and
expect its closure to be complete on or about March 31, 2000.
TECHNOLOGY LICENSING
Many of our products are manufactured or sold under the terms of license
agreements which require us to 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 bring our
new technologies to market. Our significant licenses or exclusivity rights
expire at various times during the next fifteen years. These licenses include:
TA CLONING. The patents on this cloning method were formerly co-owned by
Invitrogen and Molecular Biology Resources. We had an exclusive license from
Molecular Biology Resources for cloning purposes. In
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June 1999 we purchased all of Molecular Biology Resources' rights in the TA
Cloning patents and are now the sole owner of those patents. The patents on
this cloning method have been issued in the United States, the United
Kingdom, the Netherlands, France and Germany.
TOPO CLONING. This patented technology significantly accelerates gene
cloning and is an enhancement to our 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, we
obtained exclusive worldwide rights to commercialize this technology for all
purposes for the life of the underlying patent. 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. We paid an
up-front fee to CAYLA and pay royalties on sales of kits and vectors
containing this gene. We also make minimum royalty commitments to CAYLA,
which grow at a fixed rate from year to year, in exchange for exclusive
rights. In addition, we have historically purchased Zeocin and certain
additional antibiotics exclusively from CAYLA at a price set each year. We
have agreed that our purchases will grow each year, in order to obtain
most-favored pricing terms.
ZERO BACKGROUND. We licensed the CCDB or Zero Background gene, used for
selection of successful clones, from the Universite Libre de Bruxelles in
1995 for a ten-year period, unless otherwise terminated under the provisions
of the license. 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, 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 have 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 for the life of patents underlying the technology. 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 under the same terms and
conditions as the most favorable non-exclusive 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 considerations 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 underlying 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, and we may lose a competitive
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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.
PATENTS AND PROPRIETARY TECHNOLOGIES
We consider 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 nine issued patents in the United States and two
issued patent families in five other major industrialized nations, and, in
total, own or control 35 issued and pending patents and 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 16 issued United States patents will expire between 2012 and
2019 and our 11 foreign patents will expire between August 2000 and 2014. The
patents which expire in 2000 relate to the electrophoresis products of our
Serva subsidiary.
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 Invitrogen.
Patent applications in the United States are maintained in secrecy until
patents issue. Also, publication of discoveries in the scientific or patent
literature tends 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. The scope of any
of our issued patents may not 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 and 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, a third party may learn our trade secrets
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 and price sensitive.
We expect the intensity of competition to increase. Currently, we compete
primarily with other life sciences research product 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 difficulties in generating sales to customers who initially
purchased products from competitors. Similarly, we believe that there is a
significant
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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 may suffer. See below "Risk
Factors - Competition in the Life Sciences Research Market Could Reduce Sales."
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. Our 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 us.
EMPLOYEES
As of December 31, 1999, we employed approximately 376 persons, of whom
38 hold Ph.D. or M.D. degrees and 44 hold other advanced degrees.
Approximately 73 employees are engaged in research and development, 116 in
sales and marketing, 148 in manufacturing and 39 in supporting corporate
development, intellectual property, finance and other administrative
functions.
Our success will depend in large part upon our ability to attract and
retain employees. We face 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.
RISK FACTORS THAT MAY AFFECT FUTURE PERFORMANCE
FAILURE TO SUCCESSFULLY INTEGRATE RESEARCH GENETICS OR NOVEX INTO OUR
OPERATIONS COULD REDUCE OUR PROFITABILITY
We closed our merger with NOVEX in August 1999 and our merger with
Research Genetics on February 2, 2000. Both are now our wholly-owned
subsidiaries. Our integration of the operations of these companies is ongoing
and will require significant efforts from each company, including the
coordination of research and development and sales and marketing efforts. We
may find it difficult to integrate the operations of these acquired
companies. Personnel may leave or be terminated because of the mergers. In
September 1999 we reduced the size of our U.S. workforce by approximately 14%
and we recently announced the closing of our Frankfurt, Germany manufacturing
facility in connection with the integration of NOVEX. Such employee
terminations or resignations or facility closures may require us to make
severance or other payments and may result in related litigation.
Research Genetics' operations are located in Huntsville, Alabama, while
the balance of our U.S. headquarters and the bulk of our other operations are
located in Carlsbad, California. This physical separation of facilities could
make it difficult for us to effectively communicate with, manage and
integrate Research Genetics' staff and operations with the rest of
Invitrogen. Such difficulties could significantly hurt our operations and
consequently our financial results.
NOVEX or Research Genetics customers, distributors or suppliers may
terminate their arrangements with us, or demand amended terms to these
arrangements, because of the merger. Invitrogen management may have their
attention diverted while trying to integrate the companies. Such diversion of
management's attention or difficulties in the transition process could have a
material adverse impact on us. If we are not able to successfully integrate
the operations of Research Genetics or NOVEX, our expectations of future
results of operations may not be met. Factors which will determine the
success of the mergers include:
Changes in the favorable market reaction to NOVEX's, Research Genetics'
and Invitrogen's significant products;
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Competitive factors, including technological advances attained by
competitors and patents granted to or contested by competitors, which
would result in their ability to compete against us more effectively;
The ability of the combined company to increase sales of all three
companies' products; and
The ability of the combined company to operate efficiently and achieve
cost savings.
Even if the companies are able to integrate operations, there can be no
assurance that synergies will be achieved. The failure to achieve synergies
could have a material adverse effect on the business, results of operations
and financial condition of the combined company.
FAILURE TO MANAGE GROWTH COULD IMPAIR OUR BUSINESS
Our business has grown rapidly. Our net revenues increased from $32.6
million in 1996 to $68.3 million in 1999. During that same period we
significantly expanded our operations in the United States and in Europe. The
number of our employees has increased from approximately 220 at December 31,
1996 to approximately 376 at December 31, 1999.
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; and
Recruiting and training of 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 workforce worldwide.
We have developed a high-throughput gene cloning and expression system
by scaling up our TOPO TA Cloning technology. We are commercializing this
technology under the name Invitrogenomics. 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.
Our recent mergers with NOVEX and Research Genetics will require
additional investments in operations, product research and development and
sales and marketing which are significant expenses. Failure to successfully
manage and coordinate the growth of the combined company could adversely
impact our revenue and profits.
REDUCTION IN RESEARCH AND DEVELOPMENT BUDGETS AND GOVERNMENT FUNDING MAY
IMPACT 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.
In recent years, the United States pharmaceutical industry has undergone
substantial downsizing and consolidation. Further mergers or corporate
consolidations in the pharmaceutical industry could cause us to lose
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<PAGE>
existing customers and potential future customers, which could have a
material adverse effect on our business, financial condition and results of
operations.
A significant portion of our sales have been to researchers,
universities, government laboratories and private foundations whose funding
is dependent upon grants from government agencies such as the U.S. National
Institutes of Health (NIH) and similar domestic and international agencies.
Also, a portion of our direct revenues comes from NIH Small Business
Innovation Research grant funds. Although the level of research funding has
increased during the past several years, we cannot assure you that this trend
will continue. Government funding of research and development is subject to
the political process, which is inherently fluid and unpredictable. Our
revenues may be adversely affected if our customers delay purchases as a
result of uncertainties surrounding the approval of government budget
proposals. Also, government proposals 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 sales and operating
results.
FAILURE TO LICENSE NEW TECHNOLOGIES COULD IMPAIR OUR NEW PRODUCT DEVELOPMENT
Our business model of providing products to researchers working on a
variety of genetic projects requires us to develop a wide spectrum of
products. To generate broad product lines it is advantageous to sometimes
license technologies from the scientific community at large rather than
depending exclusively on our own employees. 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. Over 40% of our
revenues are from products manufactured or sold under licenses from third
parties.
From time to time we are notified or become aware of patents held by
third parties which are related to technologies we are selling or may sell in
the future. After a review of these patents, we may decide to obtain a
license for these technologies from such third parties. We are currently in
the process of negotiating several such licenses and expect that we will also
negotiate these types of licenses in the future. There can be no assurances
that we will be able to negotiate such licenses on favorable terms, or at all.
Our ability to gain access to technologies needed for new products and
services depends in part on our ability to convince inventors that we can
successfully commercialize their inventions. We cannot assure you that we
will be able to continue to 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.
LOSS OF LICENSES COULD HURT OUR PERFORMANCE
Some of our licenses do not run for the length of the underlying 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.
OUR MARKET SHARE DEPENDS ON NEW PRODUCT INTRODUCTIONS AND ACCEPTANCE
The market for our products and services is only about fifteen years
old. Rapid technological change and frequent new product introductions are
typical for the market. For example, prepackaged kits to perform research in
particular cell lines and already-isolated genetic material are only now
coming into widespread use among
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<PAGE>
researchers. Our future success will depend in part on continuous, 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 may 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.
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 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 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. Some of the
factors affecting market acceptance of new products include:
Availability, quality and price relative to competitive products;
The timing of introduction of the product relative to competitive
products;
Scientists' opinion of the product's utility;
Citation of the product in published research; and
General trends in life sciences research.
The expenses or losses associated with unsuccessful product development
activities or lack of market acceptance of our new products could materially
adversely affect our business, operating results and financial condition.
LOSS OF KEY PERSONNEL COULD HURT OUR BUSINESS
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."
COMPETITION IN THE LIFE SCIENCES RESEARCH MARKET COULD REDUCE SALES
The markets for our products are very competitive and price sensitive.
Many other life science research product 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. If a competitor develops superior
technology or cost-effective alternatives to our kits and other products, our
business, operating results and financial condition could be materially
adversely affected.
The market for our electrophoresis products is also subject to specific
competitive risks. This market is highly price competitive. Our competitors
have in the past and may in the future compete by lowering prices on certain
products. In certain cases, we may respond by lowering our prices which would
reduce revenues and profits. Conversely, failure to anticipate and respond to
price competition may hurt our market share.
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. To the extent we are unable to be the first to develop and
supply new products, our competitive position will suffer. See above
"Business - Competition" for more information.
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DISTRIBUTORS MAY FORCE US TO USE MORE EXPENSIVE MARKETING AND DISTRIBUTION
CHANNELS
Certain of our 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 force us to
supply the large distributors with our products at a discount to reach those
customers. For similar reasons many larger customers, including the federal
government, have requested and may in the future request special pricing
arrangements, including blanket purchase agreements. These agreements may
limit our pricing flexibility, especially with respect to our electrophoresis
products, which could adversely impact our business, financial condition and
results of operations. Currently we do not have the capability to accept and
process orders through our website. Accordingly, we may implement sales
through Internet vendors. Internet sales through third parties may negatively
impact our gross margins as the commission paid on Internet sales would be an
additional cost not incurred through the use of non-Internet vendors.
WE RELY ON THIRD PARTY MANUFACTURERS TO MANUFACTURE SOME OF OUR PRODUCTS AND
COMPONENTS
We rely on third party manufacturers to supply many of our raw
materials, product components and in some cases, entire products. In
particular, we purchase all of the cassettes used in our pre-cast
electrophoresis gels from a single third party manufacturer. Also, we
recently contracted with an outside vendor for the production of our
PowerEase instrument products. Manufacturing problems may occur with these
and other outside sources. If such problems occur, there can be no assurance
that we will be able to manufacture our products profitably or on time.
INTERNATIONAL UNREST OR FOREIGN CURRENCY FLUCTUATIONS COULD ADVERSELY AFFECT
OUR RESULTS
Including subsidiaries and distributors, our products are currently
marketed in over 30 countries throughout the world. Our international
revenues, which include revenues from our Netherlands and Germany
subsidiaries and export sales, represented 35% of our product revenues in
1999 and 1998 and 29% in 1997. 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
fully 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; and
- 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
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transactions to manage our foreign currency exposure, but we cannot assure
you that our strategies will adequately protect our operating results from
the effects of exchange rate fluctuations. For more information see below
"Management's Discussion and Analysis of Financial Condition and Results of
Operations-Currency Hedging and Foreign Currency Translation."
The Asia/Pacific region in the past has experienced unstable economic
conditions and significant devaluation in its currencies. 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.
INABILITY TO PROTECT OUR TECHNOLOGIES COULD AFFECT OUR ABILITY TO COMPETE
Our success depends to a significant degree upon our ability to develop
proprietary products and technologies. However, we cannot assure you that
patents will be granted on any of our patent applications. We also cannot
assure you that the scope of any of our issued patents will be sufficiently
broad to offer meaningful protection. We only have patents issued in selected
countries. Therefore, third parties can make, use and sell products covered
by our patents in any country in which we do not have patent protection. In
addition, our issued patents or patents we license could be successfully
challenged, invalidated or circumvented so that our patent rights would not
create an effective competitive barrier. The right to use our products is
given to our customers under label licenses that are for research purposes
only. These licenses could be contested and no assurances can be made that we
would either be aware of an unauthorized use or be able to enforce the
restrictions in a cost-effective manner. See "Business-Patents and
Proprietary Technologies" for more information regarding our existing and
pending patents.
PUBLICITY OF TRADE SECRETS COULD AID OUR COMPETITORS
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. If our trade secrets become known we may lose our
competitive position.
INTELLECTUAL PROPERTY OR OTHER LITIGATION COULD HARM OUR BUSINESS
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
proceedings brought by 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.
If a third party claimed an intellectual property right to technology we
use, we might need 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.
In addition to intellectual property litigation, other substantial,
complex or extended litigation could result in large expenditures by us and
distraction of our management. For example, lawsuits by employees,
stockholders, collaborators or distributors could be very costly and
substantially disrupt our business. Disputes from time to time with such
companies or individuals are not uncommon and we cannot assure you that we
will always be able to resolve them out of court.
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<PAGE>
THE MARKET PRICE OF OUR STOCK COULD BE VOLATILE, WHICH MAY IMPAIR YOUR
INVESTMENT
The market price of our common stock has been subject to volatility and,
in the future, the market 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;
- Economic conditions;
- Disputes concerning patents or proprietary rights;
- Changes in earnings estimates by market research analysts;
- Sales of common stock by existing holders;
- Loss of key personnel; and
- Securities class action or other litigation.
The market price for our common stock may also be affected by our
ability to meet analyst's expectations. Any failure to meet such
expectations, even slightly, could have an adverse effect on the market price
of our common stock and the convertible notes. In addition, the stock market
is subject to extreme price and volume fluctuations. This volatility has had
a significant effect on the market prices of securities issued by many
companies for reasons unrelated to the operating performance of these
companies. In the past, following periods of volatility in the market price
of a company's securities, securities class action litigation has often been
instituted against that company. If similar litigation were instituted
against us, it could result in substantial costs and a diversion of our
management's attention and resources, which could have an adverse effect on
our business, results of operations and financial condition. See "Price Range
of Common Stock."
OUR ANTI-TAKEOVER DEFENSE PROVISIONS MAY DETER POTENTIAL ACQUIRORS AND MAY
DEPRESS OUR 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
Invitrogen. These provisions include the following:
- We may issue preferred stock with rights senior to those of our
common stock;
- We have a classified Board of Directors;
- Our by-laws prohibit action by written consent by stockholders; and
- We require advance notice for nomination of directors and for
stockholder proposals.
These provisions could discourage potential takeover attempts and could
adversely affect the market price of our common stock and the convertible
notes.
ACCIDENTS RELATED TO HAZARDOUS MATERIALS COULD ADVERSELY AFFECT OUR BUSINESS
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 of property or injury to individuals from these
materials cannot be completely eliminated. In the event of such an accident,
we could be liable for any damages that result, which could seriously damage
our business. Additionally, any accident could partially or completely shut
down our research and manufacturing facilities and operations.
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<PAGE>
POTENTIAL PRODUCT LIABILITY CLAIMS COULD AFFECT OUR EARNINGS AND FINANCIAL
CONDITION
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.
FUTURE SALES OF CURRENTLY OUTSTANDING SHARES COULD ADVERSELY 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. As of December 31, 1999, we had
outstanding 19,071,140 shares of common stock. Of these shares, approximately
13,054,865 are registered and freely tradable. All of the remaining
approximately 6,016,275 shares are unregistered but may be sold in accordance
with Rule 144 and Rule 701 of the Securities Act of 1933, as amended.
Following this offering, approximately 4,795,364 registered and unregistered
shares will be subject to 90-day lock-up agreements, subject to certain
exceptions. 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, in
February 2000 we issued 3,200,000 unregistered shares of common stock as
consideration for our merger with Research Genetics. Holders of 4,082,942
shares of common stock will have the right to request that we register their
shares for sale in the public market.
CONTROL OF INVITROGEN BY EXECUTIVE OFFICERS AND DIRECTORS MAY IMPEDE CHANGES
TO INVITROGEN OR ITS POTENTIAL SALE
As of February 29, 2000, our executive officers and directors
collectively beneficially owned approximately 21.8% of our outstanding common
stock. Executive officers and directors may therefore be able to exercise
effective 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."
ABSENCE OF DIVIDENDS COULD REDUCE OUR ATTRACTIVENESS TO INVESTORS
Some investors favor companies that pay dividends, particularly in
market downturns. 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 "Dividends."
ITEM 2 - PROPERTIES
We lease an approximately 60,000 square foot facility in Carlsbad,
California for our headquarters, as well as for marketing and product support
operations, research and development and manufacturing activities. We
presently pay rent of approximately $40,000 per month with predetermined
cost-of-living rent increases at annual intervals. The lease expires in
February 2007. We believe that adequate facilities will be available upon the
conclusion of our lease. We are currently in the process of building new
headquarters facilities (see discussion below) and our current building will
house our manufacturing operations. We also own an approximately 17,000
square foot facility in the Netherlands to support sales and distribution in
Europe.
Our NOVEX subsidiary leases two buildings comprising a total of
approximately 41,000 square feet at its San Diego, California location, which
is used for manufacturing. We presently pay rent of approximately $30,000 per
month plus $11,000 per month for tenant improvements. The lease expires in
2000 and we hold options to extend the lease for another two years. We
believe that adequate facilities will be available upon the conclusion of
this lease. NOVEX also leases approximately 12,000 square feet in Frankfurt,
Germany and 18,000 square feet in Heidelberg, Germany, which leases run
through 2002 and 2001 respectively. Payments under these leases total
approximately $22,000 per month and include all utilities for the Frankfurt
facilities. We expect to close our Frankfurt facilities by March 31, 2000.
We recently signed 10-year leases for two new facilities adjacent to our
current corporate headquarters, totaling approximately 57,000 square feet.
One facility will serve as corporate headquarters, the other will house
research and development functions. Rent for these facilities will be
approximately $56,000 per month.
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ITEM 3 - LEGAL PROCEEDINGS
From time to time we have been and expect to be involved in legal
proceedings arising from our ordinary business operations. In early 1999, our
NOVEX subsidiary received a letter outlining a $1.1 million claim from a
distributor in Austria. The letter stated that the claim arose from the
termination of NOVEX's relationship with the distributor. We also received a
letter from a supplier alleging breach of contract in a supply arrangement.
No formal legal action has been taken in either case. None of the proceedings
that are currently pending are expected to have a material adverse effect on
our financial condition and business operations.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders during the fourth
quarter of 1999. Our annual meeting of stockholders will be held at our
principal offices in Carlsbad, California on April 27, 2000 at 10:00 am.
Matters to be voted on will be included in our proxy statement to be filed
with the SEC and distributed to our stockholders prior to the meeting.
PART II
ITEM 5 - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
STOCK PRICES
Our common stock trades on The Nasdaq National Stock Market-Registered
Tradmark- under the symbol IVGN. Public trading of our stock began on
February 26, 1999. The table below provides the high and low sales prices of
our common stock and preferred stock for the period indicated, as reported by
The Nasdaq Stock Market-Registered Tradmark-.
<TABLE>
<CAPTION>
HIGH LOW
<S> <C> <C>
YEAR ENDED DECEMBER 31, 1999:
First quarter (beginning February 26)...................... $15.50 $12.00
Second quarter............................................. 26.00 12.88
Third quarter.............................................. 35.13 23.38
Fourth quarter............................................. 67.38 23.25
<CAPTION>
HIGH LOW
<S> <C> <C>
YEAR ENDED DECEMBER 31, 2000:
First quarter (through February 29)........................ $98.94 $47.75
</TABLE>
On February 29, 2000, the last reported sale price of our common stock
on the Nasdaq National Market was $84.50. As of February 29, 1999, there were
23,040,997 shares of common stock outstanding and approximately 356
shareholders of record of our common stock.
DIVIDENDS
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.
ITEM 6 - SELECTED FINANCIAL DATA
The following selected data should be read in conjunction with our
financial statements located elsewhere in this Form 10-K and "Item
7-Management's Discussion and Analysis of Financial Condition and Results of
Operations." The following five year selected financial data reflects the
operations of Invitrogen prior to the completion of the merger with Research
Genetics, which occurred on February 2, 2000, and does not include financial
data of Research Genetics.
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FIVE YEAR SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Revenues...................................... $68,312 $53,660 $ 41,182 $32,556 $24,728
Net income.................................... 6,665 4,230 2,435 2,336 1,332
Net income (loss) applicable to common
shares..................................... 7,413(1) 3,126 (13,215)(2) 2,165 1,222
Earnings (loss) per share:
Basic....................................... $ 0.47(1) $ 0.26 $ (1.15)(2) $ 0.20 $ 0.10
Diluted..................................... $ 0.40(1) $ 0.23 $ (1.15)(2) $ 0.17 $ 0.10
Cash, cash equivalents and short-term
investments................................ 102,220 6,530 9,317 1,430 649
Total assets.................................. 135,544 32,050 23,947 13,342 9,877
Long-term obligations, less current portion... 721 1,116 628 888 1,022
Non-voting redeemable common stock of
Invitrogen B.V............................. - 1,599 1,295 1,306 1,143
Convertible preferred stock .................. - 16,141 15,242 - -
Total stockholders' equity ................... 125,622 4,676 985 6,700 4,098
</TABLE>
-------------------
(1) 1999 includes a $1.0 million credit to equity for an adjustment to the
beneficial conversion feature related to convertible preferred stock.
(2) 1997 includes a $15 million charge to equity for an adjustment to the
beneficial conversion feature related to convertible preferred stock.
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS REFLECT THE OPERATIONS OF INVITROGEN PRIOR TO THE
COMPLETION OF THE MERGER WITH RESEARCH GENETICS, AND UNLESS SPECIFICALLY
STATED OTHERWISE, DO NOT INCLUDE RESEARCH GENETICS' FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
OVERVIEW
We develop, manufacture and market research tools in kit form and
provide other research products and 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. Substantially all of our revenue to date has come
from the sale of these research kits and related 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 and other products
in our manufacturing facilities in Carlsbad and San Diego, California. In
addition, we purchase products from third party manufacturers. We also
have a manufacturing facility in Heidelberg, Germany for formulating and
packaging fine chemicals.
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
facilities in the United States and at a facility we own in the
Netherlands. A small proportion of our sales are 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, we have obtained
over 85 licenses, which provide us with access to over 200 patents
covering gene cloning, expression and analysis materials and techniques.
22
<PAGE>
In June 1998, we began using our high-throughput cloning and expression
technologies, which we market under the name Invitrogenomics. We are using
this technology to rapidly clone and patent full-length genes which we are
licensing and selling. In addition, we use our Invitrogenomics technology to
provide gene cloning and expression services on a contract basis to
pharmaceutical, biotechnology and agricultural companies. Invitrogenomics
products and services have generated limited revenues to date.
Our revenues have increased significantly since our inception, and from
1995 to 1999, we have experienced compound annual revenue growth of 29%. The
increase in our revenues has been due to several factors, including the
continued growth of the market for gene cloning, expression and analysis
kits, increasing market acceptance of our gene cloning, expression and
analysis 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.
We have acquired a significant number of patent rights from third
parties as part of our business activities. These patent rights are used as a
basis for the development of our research kits and Invitrogenomics
technologies. We have historically paid and are obligated to pay in the
future to such third parties royalties relating to sales of some of our
research kits and selected services. Royalty expense is recognized as a cost
of revenue as the related royalties are incurred.
On August 17, 1999 we completed our merger with NOVEX. This transaction
has been accounted for as a pooling of interests and the consolidated
financial statements and other financial data included in this report have
been restated for all periods prior to the merger to reflect the combined
financial and operating results of Invitrogen and NOVEX.
In May 1998, NOVEX purchased the assets of the Serva product line from
Boehringer Ingelheim Bioproducts Partnership in Heidelberg, Germany.
Revenues, expenses and acquired assets relating to this product line are
included in our consolidated financial statements from the date of
acquisition.
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 their 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; and
- 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.
23
<PAGE>
RESULTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1999 AND 1998
REVENUES. Revenues for the year ended December 31 increased $14.6
million, or 27%, from $53.7 million in 1998 to $68.3 million for 1999. For
these same periods, revenues in North America increased $10.0 million, or
28%, from $35.7 million to $45.8 million, and revenues outside of North
America increased $4.6 million, or 25.8%, from $17.9 million to $22.6
million. The overall increase in revenue was primarily attributable to
continued market growth for gene cloning, expression and analysis kits and
increased market penetration of our gene cloning, expression and analysis
product lines. While our European revenue increase was positively impacted by
an additional five months of revenues from our Serva fine chemicals product
line, acquired in May 1998, currency rates adversely affected revenues
denominated in U.S. Dollars by $1.8 million, a 3.4% decline in revenues.
Holding currency conversion rates constant with those in 1998 and excluding
the Serva product line revenues, European revenues increased 39%.
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 $34.5 million in 1998 to
$45.3 million in 1999. Gross margin as a percentage of revenues increased
from 64% to 66% 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 in addition to general price
increases, higher grant revenue, lower shipping costs and decreased royalty
expenses. The increase in gross margins was partially offset by currency
losses incurred by our Netherlands subsidiary on inventory purchased from our
U.S. operations.
We believe that gross margin for future periods could be affected by
sale volumes, competitive conditions, royalty payments on licensed
technologies and foreign exchange factors. The functional currency of our
Netherlands subsidiary, Invitrogen B.V., is the Netherlands Guilder (NLG) and
for our German subsidiaries, NOVEX GmbH and Serva GmbH, is the Deutsche Mark.
The translation from NLG and the Deutsche Mark to the U.S. Dollar for revenue
and expenses is based on the average exchange rate during the period; large
increases or decreases in the spread between currencies have affected and may
continue to affect gross margin and reported income. All three European
subsidiaries conduct their European business in the currencies of their
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.
SALES AND MARKETING. Sales and marketing expenses increased 22% from
$11.4 million in 1998 to $13.9 million in 1999. As a percentage of revenues,
sales and marketing expenses decreased from 21% to 20% for these periods as
our revenue growth continued to outpace spending on sales and marketing.
GENERAL AND ADMINISTRATIVE. General and administrative expenses
increased 9% from $8.1 million in 1998 to $8.8 million in 1999. 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 and
requirements as a newly public company. 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.
RESEARCH AND DEVELOPMENT. Research and development expenses increased
13% from $8.6 million in 1998 to $9.7 million in 1999. As a percentage of
revenues, research and development expenses decreased from 16% in 1998 to 14%
in 1999 as our revenue growth has outpaced our spending for research and
development. The absolute increase resulted from increased costs associated
with the expansion of research and business development competencies in our
core gene cloning, expression and analysis business.
OTHER INCOME (EXPENSE). Other income and expense, net, increased $1.5
million, from $0.2 million in 1998, to $1.7 million in 1999. This increase
resulted mainly from higher interest income earned on larger average balances
of cash and cash equivalents during the period.
PROVISION FOR INCOME TAXES. Our effective tax rate decreased from 36% in
1998 to 35% for 1999. The decrease in our effective tax rate resulted from
tax deductible interest earned on investments during 1999 offset by certain
merger related costs incurred in August 1999 that are not deductible for tax
purposes.
24
<PAGE>
YEARS ENDED DECEMBER 31, 1998 AND 1997
REVENUES. Revenue increased $12.5 million, or 30%, from $41.2 million in
1997 to $53.7 million in 1998. For these same periods, revenues in North
America increased $5.8 million, or 20%, from $29.6 million to $35.4 million,
and revenue outside North America increased $6.7 million, or 57%, from $11.6
million to $18.3 million. The acquisition of the Serva product line in 1998
accounted for $2.8 million of the increase in revenues for 1998. Excluding
the Serva product line revenues in 1998, revenue growth outside North America
was $3.8 million, or 33%. The overall increase in revenue was primarily
attributable to continued market growth for gene cloning, expression and
analysis kits and increased market penetration of our gene cloning,
expression and analysis product lines. In 1998 our new products contributed
approximately $2.7 million in revenue.
GROSS MARGIN. Our gross margin increased from $25.2 million in 1997 to
$34.5 million in 1998. Gross margin as a percentage of revenues increased
from 61% to 64% 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. These improvements were offset
slightly by a low gross margin on Serva product revenues which was 36% in
1998 and one-time charges to cost of goods sold for process and design
changes in the manufacturing of electrophoresis products in 1998. Foreign
currency fluctuations had a negligible impact during both periods.
SALES AND MARKETING. Sales and marketing expenses increased 37% from
$8.3 million in 1997 to $11.4 million in 1998. As a percentage of revenues,
sales and marketing expenses increased from 20% to 21% for these periods.
These increases resulted from the growth of our field sales force in North
America and Europe and the addition of expenses related to the Serva product
line.
GENERAL AND ADMINISTRATIVE. General and administrative expenses
increased 11% from $7.3 million in 1997 to $8.1 million in 1998. As a
percentage of revenues, general and administrative expenses decreased from
18% to 15% for these periods. The absolute increase resulted from the
continued expansion of administrative resources to support our growth and the
addition of expenses related to the Serva product line. 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.
RESEARCH AND DEVELOPMENT. Research and development expenses increased
45% from $5.9 million in 1997 to $8.6 million in 1998. As a percentage of
revenues, research and development expenses increased from 14% to 16% 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 continue to expand our gene cloning,
expression, analysis and related products.
OTHER INCOME (EXPENSE). Other income and expense, net, increased $0.1
million, from $0.1 million in 1997, to $0.2 million in 1998. This increase
resulted from higher interest income earned on larger average balances of
cash and cash equivalents during the period offset by lower gains on foreign
currency transactions.
PROVISION FOR INCOME TAXES. Our effective tax rate remained the same at
36% for 1998 and 1997. Years Ended December 31, 1997 and 1996
LIQUIDITY AND CAPITAL RESOURCES
Net cash from operating activities generated $10.9 million during 1999.
Net cash generated from financing activities totaled $88.8 million and
reflects $107.9 million in net proceeds from the sale of common stock in our
initial public offering, our secondary stock offering and from stock option
exercises, reduced by $17.1 million that was used to redeem preferred and
non-voting common stock and pay accrued dividends and $2.1 million that was
used to pay off debt acquired in the NOVEX merger. Capital expenditures and
payments for intangible assets for 1999 totaled $2.8 million and $1.3
million, respectively.
In August 1999 we completed our merger with NOVEX. As consideration for
the merger, we issued 2,530,124 shares of our common stock for all of the
outstanding common stock of NOVEX and assumed the outstanding options of
NOVEX which were converted into options to purchase 469,678 shares of our
common stock. Costs incurred as a result of the merger and related
integration are expected to be $4.4 million and are subject to change. These
costs were expensed in August 1999, after the merger was completed.
As of December 31, 1999 we had cash and cash equivalents totaling $102.2
million and working capital of $113.9 million. Our funds are currently
invested in U.S. Treasury and government agency obligations, commercial paper
and dividend-bearing securities. With the cash available from our initial
public offering we reduced our available
<PAGE>
line of credit from $10.0 million to $3.0 million in June 1999. This line of
credit expires in October 2001, and at December 31, 1999 no amounts were
outstanding. In August 1999 we assumed NOVEX's $1.2 million line of credit
facility, which expires in August 2000. At December 31, 1999, $35,000 was
outstanding under this line of credit.
In November 1999, we completed an equity offering and issued 2,400,000
shares of our common stock at a price of $25.00 per share. We received $56.5
million in cash, net of underwriting discounts, commissions and offering
costs.
During the fourth quarter of 1999 we recorded a current income tax
receivable of $4.5 million and current deferred income taxes of $1.7 million
representing amounts deductible for income tax purposes for non-qualified
stock option exercises and disqualifying dispositions of our common stock by
employees during the 1999. This benefit is reflected as additional paid-in
capital in the December 31, 1999 balance sheet.
On February 2, 2000 we completed our merger with Research Genetics. As
consideration for the merger, we issued 3,200,000 shares of our common stock
for all of the outstanding common stock of Research Genetics. Costs incurred
as a result of the merger and related integration are expected to be $6.1
million and are subject to change. These costs will be expensed in February
2000, after the merger is completed.
In March 2000 we issued $172,500,000 in 5 1/2% Convertible Subordinated
Notes due 2007. The notes were priced on February 24, 2000 at 100% of their
principal amount and are convertible into 2,024,648 shares of Invitrogen's
common stock. Interest is payable semiannually on March 1 and September 1.
The Notes may be redeemed, in whole or in part, at the option of Invitrogen
on or after March 1, 2003.
We expect that our cash and cash equivalents, funds from operations and
interest income earned thereon will be sufficient to fund our operations for
at least two years. Our 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, competing technological and market developments and future business
acquisitions.
CURRENCY HEDGING AND FOREIGN CURRENCY TRANSLATION
We conduct business transactions with our subsidiary in the Netherlands
and with our foreign distributors, including those in Asia, in U.S. Dollars.
Transactions with the German subsidiaries are denominated in foreign
currencies. We have not taken any action to reduce our exposure to changes in
foreign currency exchange rates, such as options or futures contracts with
respect to transactions with our German subsidiaries or transactions with our
European customers. However, 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. At December
31, 1999 outstanding options totaled $2.8 million and mature on various dates
through December 2000.
NLG is the functional currency for Invitrogen B.V. and the Deutsche Mark
is the functional currency for NOVEX GmbH and Serva GmbH. The translation
from NLG and the Deutsche Mark to the U.S. Dollar for balance sheet accounts
is done using the current exchange rate in effect at the balance sheet date
and for revenue 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., NOVEX GmbH and Serva GmbH conduct
their 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 and are
included in the Consolidated Statements of Income in the respective period
incurred.
YEAR 2000 EFFECT ON COMPUTER SYSTEMS
Although the date is now past January 1, 2000 and we have not
experienced immediate adverse impact from the transition to the Year 2000, we
cannot provide assurances that we, our customers or our vendors have not been
affected in a manner that is not yet apparent. In addition, some computer
programs that were date-sensitive to the Year 2000 may not have been
programmed to process the Year 2000 as a leap year, and any negative
consequential effects may remain unknown. As a result, we will continue to
monitor our Year 2000 compliance and the Year 2000 compliance of our
customers and vendors. Due to the general uncertainty inherent in the Year
2000 problem, especially the uncertainty regarding the Year 2000 compliance
of our customers and vendors, we are unable to determine at this time whether
the Year 2000 problem will have a material adverse effect on our business,
results of operations and financial condition.
<PAGE>
To date we have spent immaterial amounts to comply with accounting and
statutory requirements regarding the Year 2000. We believe that we will spend
minimal additional amounts 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
may have to spend substantial amounts 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.
ISSUES RELATED TO THE EUROPEAN MONETARY CONVERSION
On January 1, 1999, certain member states of the European Economic
Community (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
Euro and the existing national currency, such as the Netherlands Guilder,
French Franc or Deutsche Mark. Businesses will be required to complete
transition to the Euro and begin reporting and conducting their transactions
in the Euro by January 1, 2002. On July 1, 2002 the existing national
currencies will be withdrawn and will no longer be considered legal tender.
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 have tested our internal systems and are able to process
orders and invoices in the Euro as well as the local currency for the members
of the monetary union. To date we have spent immaterial amounts to comply
with these statutory requirements. These assessments have not been
independently verified. However, we have not determined the costs related to
any problems that may arise in the future due to the inability of any of our
customers or vendors to comply with the statutory requirements. Any such
problems may materially adversely affect our business, operating results and
financial condition.
ITEM 7A.-QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are subject to interest rate risk. Our investment portfolio is
maintained in accordance with our investment policy which defines allowable
investments, specifies credit quality standards and limits the credit
exposure of any single issuer. We do not utilize any form of interest rate
swap agreements to manage our exposure to fluctuations in earnings due to
changes in interest rates. At December 31, 1999, cash and cash equivalents
are invested primarily in securities with maturities of less than 90 days.
Since the fair value of the Invitrogen's cash and cash equivalents
approximated carrying value due to the short-term nature of the investments,
any increase in interest rates would not have had a material impact on the
ending fair value of our cash equivalents. We would, however, be at risk for
lower earnings should interest rates decline unexpectedly.
See also the discussion above under "Currency Hedging and Foreign
Currency Translation" for additional quantitative and qualitative disclosures
about market risk.
<PAGE>
ITEM 8-FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
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, 1999 and 1998 and the related consolidated statements of income,
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1999. 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 in the United States. 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, 1999 and 1998 and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 1999 in conformity with generally accepted
accounting principles in the United States.
ARTHUR ANDERSEN LLP
San Diego, California
March 1, 2000
F-1
<PAGE>
INVITROGEN CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PAR VALUE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------
1999 1998
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents..................................................... $ 102,220 $ 2,316
Short-term investments........................................................ - 4,214
Accounts receivable, net of allowance for doubtful accounts of $435 and $266.. 7,027 5,628
Note receivable officer....................................................... - 150
Inventories................................................................... 5,344 5,374
Income taxes receivable....................................................... 4,495 -
Deferred income taxes......................................................... 3,216 767
Prepaid expenses and other current assets..................................... 845 1,294
---------- ---------
Total current assets........................................................ 123,147 19,743
Property and Equipment, net...................................................... 8,400 10,036
Intangible Assets, net........................................................... 3,651 1,708
Deferred income taxes............................................................ 117 106
Other Assets..................................................................... 229 457
---------- ---------
Total assets................................................................ $ 135,544 $ 32,050
========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Note payable to bank.......................................................... $ 35 $ 779
Current portion of long term obligations...................................... 1,011 995
Accounts payable.............................................................. 2,351 3,106
Accrued expenses.............................................................. 4,724 2,836
Income taxes payable.......................................................... 1,080 802
---------- ---------
Total current liabilities................................................... 9,201 8,518
---------- ---------
Long term obligations............................................................ 721 1,116
---------- ---------
Commitments and contingencies
Non-voting Redeemable Common Stock of Invitrogen B.V; Subsidiary common stock,
66,000 shares authorized; no shares issued or outstanding on December 31,
1999 and 18,000 issued and outstanding on December 31, 1998................... - 1,599
---------- ---------
Convertible Redeemable Preferred Stock; $0.01 par value, 2,202,942 shares
authorized; no shares issued or outstanding on December 31, 1999 and
2,202,942 shares issued and outstanding on December 31, 1998.................. - 16,141
---------- ---------
Stockholders' Equity:
Common stock; $0.01 par value, 50,000,000 shares authorized; 19,071,140 and
9,948,035 shares issued and outstanding at December 31, 1999 and 1998,
respectively.................................................................. 191 100
Additional paid-in-capital....................................................... 119,496 4,705
Deferred compensation............................................................ (746) (962)
Value of common stock designated pursuant to Employee Stock Ownership Plan....... - 100
Foreign currency translation adjustment........................................ (520) (40)
Retained earnings.............................................................. 7,201 773
---------- ---------
Total stockholders' equity.................................................. 125,622 4,676
---------- ---------
Total liabilities and stockholders' equity.................................. $ 135,544 $ 32,050
========== =========
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
F-2
<PAGE>
INVITROGEN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
----------------------------------
1999 1998 1997
<S> <C> <C> <C>
Revenues ....................................................... $ 68,312 $ 53,660 $ 41,182
Cost of Revenues ............................................... 23,018 19,191 15,958
-------- -------- --------
Gross margin ................................................ 45,294 34,469 25,224
Operating Expenses:
Sales and marketing .......................................... 13,900 11,352 8,305
General and administrative ................................... 8,837 8,091 7,312
Research and development ..................................... 9,699 8,603 5,918
Merger costs ................................................. 4,379 - -
-------- -------- --------
Total operating expenses .................................. 36,815 28,046 21,535
-------- -------- --------
Income from operations .................................. 8,479 6,423 3,689
-------- -------- --------
Other Income (Expense):
Net gains (losses) on foreign currency transactions .......... (90) 25 145
Interest and other expense ................................... (244) (249) (242)
Interest and other income .................................... 2,054 441 214
-------- -------- --------
1,720 217 117
-------- -------- --------
Income before provision for income taxes ....................... 10,199 6,640 3,806
Provision for income taxes ..................................... 3,534 2,410 1,371
-------- -------- --------
Net income ..................................................... 6,665 4,230 2,435
Less: Preferred stock dividends ............................ (163) (900) (475)
Accretion of non-voting redeemable common stock ...... (74) (204) (175)
Adjustment to beneficial conversion feature related to
convertible preferred stock ......................... 985 - (15,000)
-------- -------- --------
Net income (loss) applicable to common shares ........... $ 7,413 $ 3,126 $(13,215)
======== ======== ========
Earnings (loss) per share:
Basic ........................................................ $ 0.47 $ 0.26 $ (1.15)
======== ======== ========
Diluted ...................................................... $ 0.40 $ 0.23 $ (1.15)
======== ======== ========
Weighted average shares used in per share calculation:
Basic ........................................................ 15,869 12,152 11,461
Diluted ...................................................... 18,429 13,883 11,461
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-3
<PAGE>
INVITROGEN COPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK
---------------------------------------
COMMON STOCK SERIES A SERIES B ADDITIONAL
---------------- ---------------- ---------------- PAID-IN
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1996 ............ 2,522 $ 26 7,226 $ - 1,188 $ - $ 4,356
Recapitalization of stock ................. 8,414 84 (7,226) - (1,188) - (84)
Value of common stock designated pursuant
to Employee Stock Ownership Plan ........ - - - - - - -
Deferred compensation ..................... - - - - - - 664
Amortization of deferred compensation
expense ................................. - - - - - - -
Common stock issued under employee plans .. 202 2 - - - - 258
Repurchase of common stock ................ (87) (1) - - - - (333)
Repurchase of common stock under stock
purchase agreement ...................... (1,102) (11) - - - - (1,104)
Beneficial conversion feature related to
convertible preferred stock ............. - - - - - - 15,000
Accretion of beneficial conversion
feature related to convertible
preferred stock ......................... - - - - - - (15,000)
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 ............ 9,949 100 - - - - 3,757
Value of common stock designated
pursuant to Employee Stock Ownership
Plan .................................... - - - - - - -
Deferred compensation ..................... - - - - - - 683
Amortization of deferred compensation
expense ................................. - - - - - - -
Common stock issued under employee plans .. 33 - - - - - 130
Tax effect of exercise of stock options ... - - - - - - 138
Repurchase of common stock ................ (34) - - - - - (150)
Stock option issued 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 ............ 9,948 100 - - - - 4,705
Initial public stock offering ............. 3,525 35 - - - - 48,094
Conversion of redeemable preferred stock .. 2,203 22 - - - - 729
Adjustment to beneficial conversion
feature related to convertible preferred
stock .................................. - - - - - - (985)
Accretion of beneficial conversion
feature related to convertible preferred
stock ................................... -- -- - - - - 985
Secondary stock offering .................. 2,400 24 - - - - 56,443
Deferred compensation ..................... -- -- - - - - 126
Amortization of deferred compensation
expense ................................. -- -- - - - - (20)
Common stock issued under employee plans 995 10 - - - - 3,219
Tax effect of exercise of stock options ... -- -- - - - - 6,200
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, 1999 .......... 19,071 $ 191 - $ - - - $119,496
====== ====== ====== ====== ====== ====== ======
<CAPTION>
EMPLOYEE
OWNERSHIP FOREIGN RETAINED
DEFERRED PLAN CURRENCY EARNINGS STOCKHOLDERS' COMPREHENSIVE
COMPENSATION CONTRIBUTION TRANSLATION (DEFICIT) EQUITY INCOME
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1996 ............ $ - $ 100 $ (29) $ 2,247 $ 6,700 $ -
Recapitalization of stock ................. - - - - - -
Value of common stock designated pursuant
to Employee Stock Ownership Plan ........ - 100 - - 100 -
Deferred compensation ..................... (664) - - - - -
Amortization of deferred compensation
expense ................................. 169 - - - 169 -
Common stock issued under employee plans .. - (100) - - 160 -
Repurchase of common stock ................ - - - - (334) -
Repurchase of common stock under stock
purchase agreement ...................... - - - (6,385) (7,500) -
Beneficial conversion feature related to
convertible preferred stock ............. - - - - (15,000) -
Accretion of beneficial conversion
feature related to convertible
preferred stock ......................... - - - - 15,000 -
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 ... - - (95) - (95) (95)
Net income ................................ - - - 2,435 2,435 2,435
-------- -------- -------- -------- --------- ---------
Balance at December 31, 1997 ............ (495) 100 (124) (2,353) 985 $ 2,340
=========
Value of common stock designated
pursuant to Employee Stock Ownership
Plan .................................... - 100 - - 100 -
Deferred compensation ..................... (683) - - - - -
Amortization of deferred compensation
expense ................................. 216 - - - 216 -
Common stock issued under employee plans .. - (100) - - 30 -
Tax effect of exercise of stock options ... - - - - 138 -
Repurchase of common stock ................ - - - - (150) -
Stock option issued 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 ... - - 84 - 84 84
Net income ................................ - - - 4,230 4,230 4,230
-------- -------- -------- -------- --------- ---------
Balance at December 31, 1998 ............ (962) 100 (40) 773 4,676 $ 4,314
=========
Initial public stock offering ............. - - - - 48,129 -
Conversion of redeemable preferred stock .. - - - - 751 -
Adjustment to beneficial conversion
feature related to convertible preferred
stock .................................. - - - - 985 -
Accretion of beneficial conversion
feature related to convertible preferred
stock ................................... - - - - (985) -
Secondary stock offering .................. - - - - 56,467 -
Deferred compensation ..................... (126) - - - - -
Amortization of deferred compensation
expense ................................. (342) - - - 322 -
Common stock issued under employee plans... - (100) - - 3,129 -
Tax effect of exercise of stock options ... - - - - 6,200 -
Preferred stock dividends declared and
accretion of redemption value over
stated value on subsidiary common
stock issued to NOM ..................... - - - (237) (237) -
Foreign currency translation adjustment ... - - (480) - (480) (480)
Net income ................................ - - - 6,665 6,665 6,665
-------- -------- -------- -------- --------- ---------
Balance at December 31, 1999 ............ $ (746) $ - $ (520) $ 7,201 $ 125,622 $ 6,185
======== ======== ======== ======== ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
INVITROGEN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
-----------------------------------------
1999 1998 1997
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income .............................................................. $ 6,665 $ 4,230 $ 2,435
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization ........................................... 2,717 1,957 1,345
Amortization of deferred compensation ................................... 322 216 169
Employee stock ownership plan contribution .............................. - 100 100
Deferred income taxes ................................................... (761) 118 (578)
Non-cash write-off of investments ....................................... - - 330
Non-cash merger related costs ........................................... 1,820 - -
Other non-cash adjustments .............................................. 362 26 161
Changes in operating assets and liabilities:
Accounts receivable .................................................... (1,752) (1,690) (773)
Inventories ............................................................ (50) (2,120) 80
Prepaid expenses and other current assets .............................. (70) (665) (170)
Other assets ........................................................... 12 (179) (265)
Accounts payable ....................................................... (684) 1,190 745
Accrued expenses ....................................................... 1,968 951 233
Income taxes payable ................................................... 303 442 (295)
--------- --------- ---------
Net cash provided by operating activities ........................... 10,852 4,576 3,517
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Change in short term investments ........................................ 4,214 (438) (3,777)
Payment received on note receivable from officer ........................ 150 - 415
Purchases of property and equipment ..................................... (2,754) (7,120) (2,697)
Payments for intangible assets .......................................... (1,267) (576) (249)
Investment in related party ............................................. - - (500)
--------- --------- ---------
Net cash provided by (used in) investing activities ................. 343 (8,134) (6,808)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Advances (principal payments) on lines of credit, net ................... (714) (184) 638
Proceeds from long term obligations ..................................... - 1,300 361
Principal payments on long term obligations ............................. (1,411) (845) (586)
Proceeds from sale of preferred stock ................................... - - 14,766
Proceeds from sale of common stock ...................................... 107,939 30 161
Redemption of preferred and common stock and payment of accrued
dividends ........................................................... (17,060) - -
Repurchase of common stock .............................................. - (150) (7,834)
--------- --------- ---------
Net cash provided by (used in) financing activities ................. 88,754 151 7,506
Effect of exchange rate changes on cash ................................. (45) 183 (105)
--------- --------- ---------
Net increase (decrease) in cash and cash equivalents ................ 99,904 (3,224) 4,110
Cash and cash equivalents, beginning of period .......................... 2,316 5,540 1,430
--------- --------- ---------
Cash and cash equivalents, end of period ................................ $ 102,220 $ 2,316 $ 5,540
========= ========= =========
(CONTINUED ON NEXT PAGE)
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
----------------------------------------
1999 1998 1997
<S> <C> <C> <C>
NONCASH INVESTING AND FINANCING ACTIVITIES:
Conversion of Convertible Redeemable Preferred Stock into Redeemable
Preferred Stock ....................................................... $ 14,015 $ - $ -
======== ======== =======
Conversion of Redeemable Preferred Stock into Common Stock .............. $ 751 $ - $ -
======== ======== =======
Preferred dividends declared ............................................ $ 163 $ 900 $ 475
======== ======== =======
Accretion of redemption value for redeemable common stock ............... $ 74 $ 204 $ 175
======== ======== =======
Deferred compensation ................................................... $ 164 $ 683 $ 664
======== ======== =======
Contribution of common stock to ESOP .................................... $ 100 $ 100 $ 100
======== ======== =======
Note issued for patent rights ........................................... $ 1,000 $ - $ -
======== ======== =======
Converted deposit to note receivable-officer ............................ $ - $ 150 $ -
======== ======== =======
Options issued for assets of Morphagen, Inc. ............................ $ - $ 147 $ -
======== ======== =======
Note issued for Serva product line assets acquired ...................... $ - $ 500 $ -
======== ======== =======
Accretion of beneficial conversion feature of convertible preferred stock $ - $ - $15,000
======== ======== =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest .................................................. $ 142 $ 253 $ 236
======== ======== =======
Cash paid for income taxes .............................................. $ 2,944 $ 1,466 $ 1,604
======== ======== =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
INVITROGEN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1999, 1998 AND 1997
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 (see Note 3).
On August 17, 1999, the Company consummated a merger with NOVEX, in a
stock-for-stock transaction (see Note 2). NOVEX, formerly known as Novel
Experimental Technology, a California Corporation, was incorporated on April
5, 1989. NOVEX manufactures protein and nucleic acid electrophoresis gels and
related equipment, solutions, standards, and fine chemicals, primarily for
use in research laboratories. This transaction has been accounted for as a
pooling of interests and, accordingly, the Company's consolidated financial
statements have been restated for all periods prior to the business
combination to include the financial results of Invitrogen and NOVEX.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the
Company and its 100% controlled subsidiaries, Invitrogen B.V., which
commenced operations in The Netherlands in April 1993, NOVEX Electrophoresis
GmbH (formerly known as Anamed GmbH), which commended operations in Germany
in December 1992, Serva GmbH, incorporated in Germany in May 1998, Invitrogen
Export Company, Ltd., a foreign sales corporation incorporated in 1996 and
NOVEX International Sales Corporation, incorporated in February 1997. All
significant intercompany accounts and transactions have been eliminated in
consolidation.
CONCENTRATIONS OF RISKS
SEGMENT AND GEOGRAPHIC DATA. The Company has adopted Statement of
Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information" and has determined that it operates in
one business segment dedicated to molecular biology research. The Company
does not report product line information as it would be impracticable to do
so. Information about the Company by geographic area is as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS) 1999 1998 1997
<S> <C> <C> <C>
Product sales to unrelated customers located in:
North America .................................... $43,255 $34,171 $28,893
Europe ........................................... 19,528 15,157 8,967
Pacific Rim ...................................... 3,812 3,108 2,651
------- ------- -------
Total product revenue ......................... $66,595 $52,436 $40,511
======= ======= =======
Net long-lived assets located in:
North America .................................... $ 5,957 $ 6,656
Europe ........................................... 2,443 3,380
------- -------
Total net long-lived assets ................... $ 8,400 $10,036
======= =======
</TABLE>
CUSTOMERS. Approximately $19.8 million, $15.7 million and $12.8 million,
or 29%, 29% and 31% of the Company's revenues during the years ended December
31, 1999, 1998, and 1997, 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.
F-7
<PAGE>
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 $954,000, $649,000 and $671,000 in 1999,
1998 and 1997, 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, 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, 1999 and 1998 consist primarily of U.S. Treasury and government
agency obligations, commercial paper and dividend-bearing securities.
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 20 years) using the straight-line
method. Amortization of leasehold improvements is computed on the
straight-line method over the shorter of the lease term or the estimated
useful lives of the assets. Maintenance and repairs are charged to operations
as incurred. When assets are sold, or otherwise disposed of, the cost and
related accumulated depreciation are removed from the accounts and any gain
or loss is included in operations.
INTANGIBLE ASSETS
Intangible assets, representing 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. The excess of cost over the fair
value of the net tangible assets purchased (goodwill) arose from the
Company's 1996 acquisition of its wholly-owned subsidiary, NOVEX
Electrophoresis GmbH, and is being amortized over ten 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 balance sheet accounts of the Company's foreign operations are
translated from their respective foreign currencies into U.S. dollars at the
exchange rate in effect at the balance sheet date and revenue and expense
accounts are translated using an average exchange rate during the period of
recognition. The effects of translation are recorded as a separate component
of stockholders' equity. Exchange gains and losses arising from transactions
F-8
<PAGE>
denominated in foreign currencies are recorded using the actual exchange
differences on the date of the transaction and are included in the Consolidated
Statements of Income.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of all financial instruments such as cash
equivalents, 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 line of credit and obligations under capital leases approximate
fair value because the interest rates on these instruments are subject to
change with, or approximate, market interest rates.
COMPUTATION OF EARNINGS PER SHARE
The Company has adopted the provisions of Statement of Financial
Accounting Standards No. 128 ("SFAS No. 128"), "Earnings Per Share." SFAS No.
128 requires companies to compute basic and diluted per share data for all
periods for which an income statement is presented. Basic earnings per share
was computed by dividing net income by the weighted average number of common
shares outstanding during the period. Diluted earnings per share reflects the
potential dilution that could occur if the income were divided by the
weighted-average number of common shares and potential common shares from
outstanding stock options. Potential common shares were calculated using the
treasury stock method and represent incremental shares issuable upon exercise
of the Company's outstanding options. Diluted earnings per share does not
consider the impact of the conversion of outstanding redeemable convertible
preferred stock as its inclusion would be anti-dilutive for all periods
presented. Potentially dilutive securities are not considered in the
calculation of net loss per share as their impact would be antidilutive.
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 December 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in Financial
Statements." This SAB summarizes the SEC's view in applying generally
accepted accounting principles to revenue recognition in financial
statements. This SAB is effective for all registrants during the first
quarter of fiscal 2000. Management has reviewed the impact of SAB 101 on the
Company's financial statements, and does not believe that its adoption will
have a material impact on the Company's 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.
F-9
<PAGE>
2. BUSINESS COMBINATIONS
NOVEX MERGER
On August 17, 1999, the Company consummated a merger with NOVEX, in a
stock-for-stock transaction. NOVEX manufactures protein and nucleic acid
electrophoresis gels and related equipment, solutions, standards, and fine
chemicals, primarily for use in research laboratories.
Invitrogen issued 2,530,124 shares of common stock in exchange for all
the outstanding shares of NOVEX stock based on an exchange ratio of
approximately .23188 shares of Invitrogen common stock for each share of
NOVEX common stock. Invitrogen also assumed and exchanged all options to
purchase NOVEX common stock for options to purchase 469,678 shares of
Invitrogen common stock. The merger is intended to qualify as a tax-free
reorganization and has been accounted for as a pooling of interests. In
August 1999, after the merger was completed, the Company recorded $4.4
million in merger-related costs. These costs included transaction costs to
complete the merger, severance, write-downs of duplicate property, plant and
equipment and other costs to close duplicate facilities. The duplicate
facilities were located in San Diego, California and in Frankfurt, Germany
and the closure of these facilities included workforce reductions of
approximately 45 employees in 1999 and 22 in 2000. It is expected that the
closure of the duplicate facilities will be completed by the end of 2000. At
December 31, 1999 the Company had $1.7 million remaining in accrued merger
related costs, which are subject to change.
Prior to the merger, NOVEX used a fiscal year ending March 31. In order
to report the combined results on a consistent basis, NOVEX's fiscal years
have been recast to a twelve-month period ended December 31, for all periods
presented. These recast results have been combined with the corresponding
fiscal years ended December 31, 1999, 1998 and 1997, of Invitrogen to arrive
at the financial information presented. The combined results of operations of
Invitrogen and NOVEX are presented as if the merger had occurred at the
beginning of the periods presented.
SERVA ACQUISITION
In May 1998, the Company purchased the assets of the Serva product line
from Boehringer Ingelheim Bioproducts Partnership ("Boehringer Ingelheim") in
Heidelberg, Germany. The purchase price was $1.5 million comprised of $.8
million in cash, acquisition costs of $.2 million, and a promissory note for
$.5 million. The assets acquired include inventory and property with an
estimated fair value of $1.5 million. Revenues, expenses and acquired assets
relating to this product line are included in the consolidated financial
statements from the date of acquisition
3. RELATED PARTY TRANSACTIONS
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 former
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.
COMMON STOCK
In connection with the Company's recapitalization in 1997, 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.
SERIES A. All outstanding shares of Series A common stock have been
issued to founders, directors, employees or consultants of the Company
pursuant to agreements which entitles the Company to repurchase the shares at
the current market value in the event of termination of employment.
SERIES B. All outstanding shares of Series B common stock have been
issued to the president and majority stockholder of the Company. The Series B
common stock has the same rights, preferences, privileges and restrictions of
Series A common stock except the Series B shares may not vote in the election
of directors of the
F-10
<PAGE>
Company. In 1997, the Company converted all the outstanding Series B common
stock to Series A common stock on a one to one basis.
4. INVENTORIES
Inventories include material, labor and overhead costs and consist of
the following at December 31:
<TABLE>
<CAPTION>
(IN THOUSANDS) 1999 1998
<S> <C> <C>
Raw materials and components ............... $1,405 $1,610
Work in process ............................ 856 1,118
Finished goods ............................. 3,083 2,646
------ ------
$5,344 $5,374
====== ======
</TABLE>
5. PROPERTY AND EQUIPMENT
Property and equipment consist of the following at December 31:
<TABLE>
<CAPTION>
(IN THOUSANDS) 1999 1998
<S> <C> <C>
Land ......................................... $ 185 $ 216
Building ..................................... 1,400 1,629
Machinery and equipment ...................... 12,578 12,215
Leasehold improvements ....................... 1,969 1,516
Construction in process ...................... 10 302
-------- --------
16,142 15,878
Accumulated depreciation and amortization .... (7,742) (5,842)
-------- --------
$ 8,400 $ 10,036
======== ========
</TABLE>
6. INTANGIBLE ASSETS
Intangible assets consist of the following at December 31:
<TABLE>
<CAPTION>
(IN THOUSANDS) 1999 1998
<S> <C> <C>
Licensing agreements (see Note 11) .......... $ 2,841 $ 984
Patents and trademarks ...................... 1,259 848
Goodwill .................................... 156 156
Other ....................................... 49 49
------- -------
4,305 2,037
Accumulated amortization .................... (654) (329)
------- -------
$ 3,651 $ 1,708
======= =======
</TABLE>
7. ACCRUED EXPENSES
Accrued expenses consist of the following at December 31:
<TABLE>
<CAPTION>
(IN THOUSANDS) 1999 1998
<S> <C> <C>
Accrued purchases ........................... $ 733 $ 678
Accrued payroll and related expenses ........ 1,233 1,148
Accrued benefit plan contributions .......... 692 254
Accrued merger related costs ................ 1,661 --
Accrued other ............................... 405 756
------- -------
$ 4,724 $ 2,836
======= =======
</TABLE>
F-11
<PAGE>
8. LINES OF CREDIT
In June 1999 the Company reduced its available line of credit from $10
million to $3 million. The credit facility bears interest at the bank's Libor
rate (6.5% at December 31, 1999) plus 2% or the bank's prime rate (8.5% at
December 31, 1999). The line of credit expires on October 1, 2001. No amounts
were outstanding on this credit facility at December 31, 1999. The line is
collateralized by assets with a net book value of $135.5 million at December
31, 1999. The line of credit agreement contains various normal and customary
financial covenants, which the Company was in compliance with for all periods
presented.
The Company has available an additional credit facility from a bank,
which provides a revolving line of credit for advances up to $1.2 million and
bears interest at the bank's prime lending rate (8.5% at December 31, 1999)
plus 1.0%. At December 31, 1999, $35,000 was outstanding on this line of
credit and $1,165,000 was available. The credit facility expires in August
2000. The line is collateralized by assets with a net book value of $7.7
million at December 31, 1999.
9. LONG TERM OBLIGATIONS
The Company leases certain equipment under capital leases are due in
aggregate monthly installments of $8,000 and mature at various dates through
November 2002. Property and equipment, net, at December 31, 1999 and 1998,
include approximately $326,000 and $398,000, respectively, of equipment under
capital leases which have been capitalized.
Long term Obligations consist of the following at December 31:
<TABLE>
<CAPTION>
(IN THOUSANDS) 1999 1998
<S> <C> <C>
Note payable to Molecular Biology Resources, principal and interest due
annually through June 2003, with interest at 6%, supported by a standby
letter of credit with a bank .............................................. $ 1,030 $ -
Note payable to Boehringer Ingelheim, payable $500 plus interest on
December 31, 1999, with interest at 8%, supported by a standby letter of
credit with a bank, paid in full January 2000 ............................. 500 500
Other notes payable ......................................................... 30 1,474
Capital leases .............................................................. 172 137
------- -------
1,732 2,111
Less current maturities ..................................................... (1,011) (995)
------- -------
$ 721 $ 1,116
======= =======
</TABLE>
Maturities of long term obligations at December 31, 1999 are as
follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Years Ending December 31,
2000.................................................. $ 1,011
2001.................................................. 410
2002.................................................. 211
2003.................................................. 100
-------
$ 1,732
=======
</TABLE>
F-12
<PAGE>
10. INCOME TAXES
Significant components of the Company's deferred tax assets and
liabilities are as follows at December 31:
<TABLE>
<CAPTION>
(IN THOUSANDS) 1999 1998
<S> <C> <C>
Deferred tax assets:
Various accruals ................................. $ 749 $ 675
Net operating loss and credit carryforwards ...... 2,147 --
State taxes ...................................... 66 91
Depreciation and amortization .................... 161 --
Other ............................................ 356 121
------- -------
Total deferred tax assets .......................... 3,479 887
Deferred tax Liabilities:
Valuation allowance .............................. -- --
Depreciation and amortization .................... (146) (14)
------- -------
Net deferred tax assets ............................ $ 3,333 $ 873
======= =======
</TABLE>
Income before income taxes includes the following components for the
years ended December 31:
<TABLE>
<CAPTION>
(IN THOUSANDS) 1999 1998 1997
<S> <C> <C> <C>
United States ........................... $ 7,584 $ 5,528 $ 3,065
Foreign ................................. 2,615 1,112 741
------- ------- -------
$10,199 $ 6,640 $ 3,806
======= ======= =======
</TABLE>
The provision for income taxes consists of the following for the years
ended December 31:
<TABLE>
<CAPTION>
(IN THOUSANDS) 1999 1998 1997
<S> <C> <C> <C>
Current:
Federal .............................. $ 4,007 $ 1,587 $ 1,285
State ................................ 972 363 329
Foreign .............................. 1,015 342 334
------- ------- -------
Total current provision ................ 5,994 2,292 1,948
Deferred:
Federal .............................. (2,109) 100 (433)
State ................................ (351) 18 (144)
------- ------- -------
Total deferred provision ............... (2,460) 118 (577)
------- ------- -------
Total provision ........................ $ 3,534 $ 2,410 $ 1,371
======= ======= =======
</TABLE>
The difference between the provision for income taxes and the amounts
that would be obtained by applying the Federal statutory rate to income
before income taxes relates primarily to the utilization of certain tax
credit and net operating loss carryforwards.
The provision for income taxes differs from the amount computed by
applying the federal statutory rate to the Company's income before provision
for income taxes as follows for the years ended December 31:
<TABLE>
<CAPTION>
(IN THOUSANDS) 1999 1998 1997
<S> <C> <C> <C>
Federal tax provision at statutory rate ...... $ 3,465 $ 2,258 $ 1,294
State tax, net of federal benefit ............ 288 398 228
Foreign Sales Corporation Benefit ............ (98) (74) (39)
Research and development and other credits ... (252) (323) (197)
Change in valuation allowance ................ -- (80) 26
Other ........................................ 131 231 59
------- ------- -------
Provision for income taxes ................... $ 3,534 $ 2,410 $ 1,371
======= ======= =======
</TABLE>
F-13
<PAGE>
The tax benefit associated with the disqualifying dispositions by
employees of shares issued in the Company's stock options plans reduced taxes
payable by $6,200,000 and $138,000 for 1999 and 1998, respectively. A portion
of this benefit was utilized in the current year and has been reflected as
additional paid-in capital in the accompanying statement of stockholders'
equity.
11. COMMITMENTS AND CONTINGENCIES
OPERATING LEASES
The Company leases certain equipment and its office and manufacturing
facilities under operating leases which expire through September 2010.
Certain rental commitments provide for specific escalating rental payments
and certain commitments have renewal options extending through the year 2015.
Rent expense under all operating leases was $1.2 million, $1.3 million and
$1.0 million for the years ended December 31, 1999, 1998 and 1997,
respectively.
Future minimum lease commitments for operating leases at December 31,
1999 are as follows:
<TABLE>
<S> <C>
Years Ending December 31,
2000................................................. $ 1,475
2001................................................. 1,490
2002................................................. 1,326
2003................................................. 1,335
2004................................................. 1,388
Thereafter........................................... 6,209
--------
Total minimum lease payments....................... $ 13,223
========
</TABLE>
LICENSING AGREEMENTS
The Company manufactures and sells certain products under several
licensing agreements. The agreements require royalty payments based upon
various percentages of sales or profits from the products. Terms of the
agreements generally range from the remaining life of the patent up to twenty
years and initial costs are amortized over their terms using the
straight-line method. Total royalties paid under the agreements were
approximately $992,000, $996,000, and $815,000 for the years ended December
31, 1999, 1998 and 1997, respectively.
Certain of the licensing agreements require guaranteed minimum annual
royalty payments, to maintain exclusively. Future minimum guaranteed
royalties at December 31, 1999 are as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Years Ending December 31,
2000................................................. $ 533
2001................................................. 598
2002................................................. 608
2003................................................. 611
2004................................................. 575
Thereafter........................................... 2,227
-------
$ 5,152
=======
</TABLE>
PURCHASE COMMITMENTS
The Company has minimum purchase commitments for inventory from certain
vendors. Future minimum guaranteed minimum purchase commitments at December
31, 1999 are as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Years Ending December 31,
2000................................................. $ 812
2001................................................. 837
2002................................................. 987
2003................................................. 1,026
2004................................................. 1,000
Thereafter........................................... 1,871
-------
$ 6,533
=======
</TABLE>
F-14
<PAGE>
LITIGATION
The Company and its subsidiaries are subject to claims and from time to
time are named as defendants in legal proceedings. In the opinion of
management, the amount of ultimate liability, if any, with respect to those
actions will not materially affect the financial position or results of
operations of the Company.
HEDGING
At December 31, 1999 the Company had outstanding put options to sell 1.7
million pounds sterling at $1.63 per pound. Additionally, the Company had
outstanding call options to purchase 1.7 million pounds sterling at $1.66 per
pound. These contracts expire monthly through December 2000. The above
contracts had no net value at December 31, 1999.
12. REDEEMABLE COMMON STOCK OF INVITROGEN B.V.
Effective February 26, 1993, Invitrogen B.V. entered into a money loan
agreement with N.V. Noordelijke Ontwikkelingsmaatschappij, Investment and
Development Company for the Northern Netherlands ("NOM"). As of December 31,
1994, the due date of the Loan, the Company had borrowed $618,000, at a 15%
effective interest rate, under the agreement which had provisions by which
NOM could convert its loan balance to Invitrogen B.V. common stock. On April
7, 1995, the Company, Invitrogen B.V. and NOM entered into a Shareholders'
Agreement. As a result, Invitrogen B.V. issued 18,000 shares of non-voting
redeemable common stock to NOM in exchange for NLG 1.8 million. The proceeds
from the issuance of the non-voting redeemable common stock were utilized to
retire the outstanding debt of $618,000 (NLG 1.2 million). The Company
redeemed all of the shares on April 7, 1999 for the redemption amount of NLG
3,150,000 (USD $1,507,000).
The excess of the redemption value over the issue price was accredited
by periodic charges to equity over the life of the issue through April 7,
1999.
13. PREFERRED STOCK
AUTHORIZED SHARES
The Company has authorized 6,405,884 shares of preferred stock,
designated as follows:
<TABLE>
<CAPTION>
SHARES
<S> <C>
Series A cumulative convertible redeemable preferred stock......... 2,202,942
Series A redeemable preferred stock................................ 2,202,942
Undesignated preferred stock....................................... 2,000,000
-----------
Total preferred shares............................................. 6,405,884
===========
</TABLE>
The Series A Cumulative Convertible Redeemable Preferred Stock
("Convertible Preferred Stock") accrues dividends at a rate of 6% per annum
and has a liquidation preference of $6.8091 per share plus accrued and unpaid
dividends. Additionally, the Convertible Preferred Stock entitles the holder
thereof to elect one director of the Company and vote on certain other
significant transactions, voting together as one separate class. The
Convertible Preferred Stock may be voluntarily converted upon the election of
holders of not less than 66.67% of the voting power of this stock. The rate
at which the Convertible Preferred Stock converts to common stock is
automatically adjusted in the event of most future issuances of equity
securities by the Company below the original purchase price of the
Convertible Preferred Stock. After June 18, 2003, any holders of the
Convertible Preferred Stock have the right to require the Company to redeem
their shares for the original purchase price plus accrued dividends. There
were no shares of Convertible Preferred Stock outstanding at December 31,
1999.
The Series A Redeemable Preferred Stock ("RPS") accrues dividends at 3%
per annum and entitles the holder thereof to one vote per outstanding share
in the election of one director of the Company, voting together as a separate
class. The RPS is redeemable upon the occurrence of a qualified public
offering or sale or other qualified event. Upon liquidation, the RPS is
entitled to be paid out of the assets of the Company at the redeemable base
liquidation amount (original issue price of $6.8091 per share plus accrued
dividends) per share determined at the measurement date. There were no shares
of RPS outstanding at December 31, 1999.
F-15
<PAGE>
ISSUED SHARES
On June 20, 1997, the Company entered into a stock purchase agreement
with a group of three investors ("Investors"). The Company sold 2,202,942
shares of Convertible Preferred Stock at $6.8091 per share to the Investors
in exchange for $14,766,000, net of issuance costs. Additionally, the Company
repurchased and retired 1,101,471 shares of the Company's common stock at
$6.8091 per share, representing the fair value of these shares, from certain
stockholders of the Company in exchange for $7.5 million. In accordance with
EITF D-60, the maximum possible premium to holders of convertible preferred
stock ($15 million) was recognized as a beneficial conversion feature through
a charge to equity on June 20, 1997, the date the Convertible Preferred Stock
first became convertible. This $15 million charge has been recognized as a
reduction to earnings available to common stockholders in 1997.
SUBSEQUENT CONVERSION AND REDEMPTION
In February 1999, upon the closing of the Company's IPO (see Note 14),
each of the 2,202,942 outstanding shares of Convertible Preferred Stock were
automatically converted into 2,202,942 shares of common stock and 2,202,942
shares of RPS. At the closing of the IPO, the RPS was redeemed for
$14,015,000 and accumulated dividends on the Convertible Preferred Stock of
$1,538,000 were paid. Upon determination of the final redemption price of
$14,015,000 at the IPO a credit to equity of $985,000 was recorded which has
been reported as an adjustment to Income Available to Common Stockholders in
the income statement for the quarter ended March 31, 1999.
14. COMMON STOCK, INITIAL PUBLIC OFFERING AND SECONDARY STOCK OFFERING
AUTHORIZED SHARES
In November 1998, the Company amended its bylaws to reflect an increase
of authorized shares of common stock from 20,000,000 to 50,000,000.
STOCK SPLIT
On June 20, 1997, the Company approved a recapitalization which
authorized 20,000,000 shares of common stock and a stock split that converted
each share of Class A and Class B stock into seven shares of common stock of
the Company. All prior period share amounts have been restated to reflect the
stock split.
INITIAL PUBLIC OFFERING
In February 1999, the Company completed its initial public offering and
issued 3,525,000 newly issued shares of its Common Stock at a price of $15.00
per share. The Company received $48.1 million in cash, net of underwriting
discounts, commissions and other offering costs.
SECONDARY STOCK OFFERING
In November 1999, the Company completed a secondary stock offering and
issued 2,400,000 newly issued shares of its Common Stock at a price of $25.00
per share. The Company received $56.5 million in cash, net of underwriting
discounts, commissions and offering costs.
15. EARNINGS PER SHARE
Earnings per share is calculated as follows for the years ended
December 31:
<TABLE>
<CAPTION>
1999
-----------------------------------------------------
INCOME SHARES
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (NUMERATOR) (DENOMINATOR) AMOUNT
<S> <C> <C> <C>
Basic EPS:
Income available to common stockholders.................... $7,413 15,869 $0.47
========
Stock options.............................................. - 2,560
-------- --------
Diluted EPS:
Income available to common stockholders plus assumed
conversions............................................. $7,413 18,429 $0.40
======== ======== ========
</TABLE>
F-16
<PAGE>
<TABLE>
<CAPTION> 1998
-----------------------------------------------------
<S> <C> <C> <C>
INCOME SHARES
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (NUMERATOR) (DENOMINATOR)(1) AMOUNT
Basic EPS:
Income available to common stockholders................... $3,126 12,152 $0.26
========
Stock options............................................. - 1,731
-------- --------
Diluted EPS:
Income available to common stockholders plus assumed
conversions............................................ $3,126 13,883 $0.23
======== ======== ========
<CAPTION>
1997
-----------------------------------------------------
INCOME SHARES
(NUMERATOR) (DENOMINATOR)(1) AMOUNT
<S> <C> <C> <C>
Basic and Diluted EPS:
Loss available to common stockholders..................... $(13,215) 11,461 $(1.15)
========= ======== ========
</TABLE>
- ------------------------
(1) 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 convertible preferred stock to be a nominal issuance and
outstanding for all periods since the original issuance of the underlying
security.
16. EMPLOYEE BENEFIT PLANS
EMPLOYEE STOCK OWNERSHIP PLANS
The Company has an Employee Stock Ownership Plan ("ESOP") covering all
Invitrogen 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 $100,000 were designated for the ESOP for each of
the years ended December 31, 1998 and 1997. Future contributions to the ESOP
were terminated as of December 31, 1998. The assets of the ESOP were
distributed to the participants or rolled into the Invitrogen 401(k) plan or
other qualified retirement plans as designated by the participants in
December 1999 and January 2000.
The Company also has a 401(k)/ESOP plan covering all NOVEX employees who
have completed 1,000 or more hours of service within a twelve-month period.
Contributions to the 401(k)/ESOP are based upon a Company match of employee
401(k) salary deferrals, as well as a discretionary percentage of eligible
participants' total compensation. The Company made contributions of $117,000,
$136,000 and $383,000 for the years ended December 31, 1999, 1998 and 1997,
respectively. The Company intends to terminate the 401(k)/ESOP plan and to
distribute the assets to the participants or roll those assets into the
Invitrogen 401(k) plan or other qualified retirement plans as designated by
the participants.
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
$313,000, $179,000 and $134,000, for the years ended December 31, 1999, 1998
and 1997, respectively.
EMPLOYEE STOCK PURCHASE PLAN
The Company has an employee stock purchase plan which became effective
upon the Company's initial public offering in February 1999. During 1999
employees purchased 34,191 shares at an average price of $12.86 per share. As
of December 31, 1999 there were 215,809 shares of the Company's common stock
reserved for future issuance under the plan.
F-17
<PAGE>
17. STOCK OPTION PLANS
The Company has four stock option plans, the 1995 and 1997 Invitrogen
Corporation Stock Option Plans and the 1996 and 1998 NOVEX Stock Option/Stock
Issuance Plans. Under these 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 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 recognizes as
compensation expense the difference between the exercise price and the fair
market value of the common stock on the date of grant. Stock based compensation
expense is deferred and recognized over the vesting period of the stock option.
During the years ended December 31, 1999, 1998 and 1997 the Company recognized
$322,000, $216,000 and $169,000, respectively, in stock based compensation
expense.
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>
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 1999 1998 1997
<S> <C> <C> <C>
Income available to common stockholders:
As reported................................ $7,413 $3,126 $(13,215)
Pro forma.................................. 5,386 2,892 (13,229)
Basic earnings per share:
As reported................................ $ 0.47 $ 0.26 $ (1.15)
Pro forma.................................. 0.34 0.24 (1.15)
Diluted earnings per share:
As reported................................ $ 0.40 $ 0.23 $ (1.15)
Pro forma.................................. 0.29 0.21 (1.15)
</TABLE>
Under these four Plans, the Company may grant up to 5,962,875 options, of
which 3,430,800 are outstanding and 1,365,359 are available for future issuance
at December 31, 1999. 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,
1997, 1998 and 1999 and changes during the periods then ended is presented in
the tables below:
<TABLE>
<CAPTION>
WTD. AVG.
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) SHARES EX. PRICE
<S> <C> <C>
Outstanding at December 31, 1996............. 3,605 $ 1.01
Granted..................................... 393 $ 3.88
Exercised................................... (179) $ 0.90
Canceled.................................... (1,579) $ 0.90
------
Outstanding at December 31, 1997............. 2,240 $ 1.60
Granted..................................... 1,429 $ 8.00
Exercised................................... (20) $ 1.66
Canceled.................................... (29) $ 2.80
------
Outstanding at December 31, 1998............. 3,620 $ 4.12
Granted..................................... 1,155 $ 25.69
Exercised................................... (953) $ 2.75
Canceled.................................... (391) $ 15.89
------
Outstanding at December 31, 1999............. 3,431 $ 10.40
======
Exercisable at December 31, 1999............. 1,540 $ 4.76
</TABLE>
F-18
<PAGE>
At December 31, 1999:
<TABLE>
<CAPTION>
(OPTIONS IN THOUSANDS)
WTD. AVG.
REMAINING
OPTIONS OPTIONS EXERCISE CONTRACTUAL
OUTSTANDING EXERCISABLE PRICE LIFE IN YEARS
<S> <C> <C> <C>
1,024 916 $ 0.84-$ 1.78 5.1
1,108 403 $ 3.28-$ 8.63 8.0
489 110 $12.00-$19.44 9.0
787 111 $24.56-$29.75 9.6
23 - $47.88-$48.00 10.0
----- -----
3,431 1,540 $10.40 7.7
===== =====
</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 of options granted during the years
ended December 31 are as follows:
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
Weighted average risk free interest rate........... 5.55% 5.48% 5.89%
Expected option life............................... 5.4 yrs 8.7 yrs 7.0 yrs
Expected stock price volatility.................... 45% 0% 0%
Expected dividend yield............................ - - -
Weighted average fair value of options granted..... $12.47 $3.04 $1.26
</TABLE>
18. SUBSEQUENT EVENTS
RESEARCH GENETICS MERGER
On February 2, 2000, the Company completed a merger with Research Genetics,
a privately held U.S. company that supplies products and services for functional
genomics and gene-based drug discovery research. The Company issued 3.2 million
shares of common stock for all of the outstanding common stock of Research
Genetics. The transaction will be accounted for as a pooling of interests and
qualifies as a tax free exchange. Costs incurred as a result of the merger and
related integration are expected to be $6.1 million and are subject to change.
These costs will be expensed in February 2000 upon completion of the merger.
The following supplemental combined financial information is presented to
show the combined results of operations of Invitrogen and Research Genetics as
if the merger had occurred at the beginning of the periods presented.
<TABLE>
<CAPTION>
SUPPLEMENTAL COMBINED FINANCIAL INFORMATION AS OF
DECEMBER 31,
-------------------------------------------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 1999 1998 1997
Income available to common stockholders:
<S> <C> <C> <C>
Revenues $ 92,880 $ 70,567 $ 55,334
Net income 9,060 5,519 3,417
Net income (loss) applicable to common
shares 9,808(1) 4,415 (12,233)(2)
Earnings (loss) per share:
Basic $ 0.51(1) $ 0.29 $ (0.83)(2)
Diluted $ 0.45(1) $ 0.26 $ (0.83)(2)
</TABLE>
-----------------------
(1)1999 includes a $1.0 million credit to equity for an adjustment to the
beneficial conversion feature related to convertible preferred stock.
(2)1997 includes a $15 million charge to equity for an adjustment to the
beneficial conversion feature related to convertible preferred stock.
F-19
<PAGE>
CONVERTIBLE SUBORDINATED NOTES
On March 1, 2000 we issued $172,500,000 in 5 1/2% Convertible Subordinated
Notes due 2007. The notes were priced on February 24, 2000 at 100% of their
principal amount and are convertible into 2,024,648 shares of Invitrogen's
common stock. Interest is payable semiannually on March 1 and September 1. The
Notes may be redeemed, in whole or in part, at the option of Invitrogen on or
after March 1, 2003.
F-20
<PAGE>
ITEM 9-CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
None.
PART III
Note that in this Form 10-K, we "incorporate by reference" certain
information in parts of other documents filed with the Securities and Exchange
Commission (SEC). The SEC allows us to disclose important information by
referring to it in that manner. Please refer to such information.
ITEM 10-DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information about Directors of the Company is incorporated by reference
from our Proxy Statement for the 2000 Annual Meeting of Stockholders.
ITEM 11-EXECUTIVE COMPENSATION
Information about executive compensation is incorporated by reference from
our Proxy Statement for the 2000 Annual Meeting of Stockholders.
ITEM 12-SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information about security ownership of certain beneficial owners and
management is incorporated by reference from our Proxy Statement for the 2000
Annual Meeting of Stockholders.
ITEM 13-CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information about certain relationships and transactions with related
parties is incorporated by reference from our Proxy Statement for the 2000
Annual Meeting of Stockholders.
PART IV
ITEM 14-EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) List of Financial Statements and Financial Statement Schedules:
The following consolidated financial statements of Invitrogen Corporation
are included in Item 8.
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
(1) (A) Report of Independent Public Accountants.......................... F-1
(B) Consolidated Financial Statements
(i) Consolidated Balance Sheets-.................................. F-2
(ii) Consolidated Statements of Income-............................ F-3
(iii) Consolidated Statements of Stockholders' Equity-.............. F-4
(iv) Consolidated Statements of Cash Flows-........................ F-5
(v) Notes to Consolidated Financial Statements-................... F-7
(2) Financial Statement Schedules: None.
(3) List of exhibits filed with this annual report......................... 30
</TABLE>
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the quarter ended December 31,
1999.
(c) Exhibits: For a list of exhibits filed with this annual report, refer to
the exhibit index beginning on page [ ].
(d) Financial Statement Schedules: none.
28
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
INVITROGEN CORPORATION
By: /s/ James R. Glynn
-----------------------------------
James R. Glynn
Executive Vice President, Chief
Financial Officer and Director
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
President, Chief Executive Officer and Chairman of March 13, 2000
the Board of Directors
/s/ Lyle C. Turner (PRINCIPAL EXECUTIVE OFFICER)
- -----------------------------------------------
Lyle C. Turner
Executive Vice President, Chief Financial Officer March 13, 2000
and Director
/s/ James R. Glynn (PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER)
- -----------------------------------------------
James R. Glynn
March 13, 2000
/s/ Lewis J. Shuster Chief Operating Officer and Director
- -----------------------------------------------
Lewis J. Shuster
March 13, 2000
/s/ David E. McCarty Director
- -----------------------------------------------
David E. McCarty
March 13, 2000
/s/ Bradley G. Lorimier Director
- -----------------------------------------------
Bradley G. Lorimier
March 13, 2000
/s/ Donald W. Grimm Director
- -----------------------------------------------
Donald W. Grimm
March 13, 2000
/s/ Kurt R. Jaggers Director
- -----------------------------------------------
Kurt R. Jaggers
March 13, 2000
/s/ Jay M. Short Director
- -----------------------------------------------
Jay M. Short
</TABLE>
29
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
<S> <C>
*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.
*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.
**10.13 Assignment of Intellectual Property Conditional on Payment Dated as of
May 31, 1999, by and between Molecular Biology Resources and Invitrogen
Corporation.
**10.14 Agreement and Plan of Merger, dated as of June 14, 1999, among
Invitrogen Corporation, INVO Merger Corporation and NOVEX.
***10.15 1996 NOVEX Stock Option/Stock Issuance Plan and forms of Incentive
Stock Option Agreement and Nonstatutory Stock Option Agreement
thereunder.
***10.16 1998 NOVEX Stock Option/Stock Issuance Plan and forms of Incentive
Stock Option Agreement and Nonstatutory Stock Option Agreement
thereunder.
***10.17 Employment Agreement between NOVEX and David E. McCarty dated July 22,
1997, assumed by Invitrogen on August 17, 1999.
***10.18 Promissory Note from Lyle C. Turner dated December 1998.
***10.19 Novel Experimental Technology 401(k) Employee Ownership Plan and Trust
Agreement, dated April 1, 1997, as amended.
***10.20 Invitrogen Corporation Employee Stock Ownership Plan, dated January 1,
1996.
10.21 5 1/2% Convertible Subordinated Note Due 2007.
10.22 5 1/2% Convertible Subordinated Notes due 2007, Purchase Agreement
dated February 25, 2000.
10.23 Indenture dated as of March 1, 2000 between Invitrogen Corporation and
State Street Bank and Trust Company of California, N.A.
10.24 5 1/2% Convertible Subordinated Notes Due 2007, Registration Rights
Agreement dated as of March 1, 2000 by and among Invitrogen
Corporation, and Donaldson, Lufkin & Jenrette Securities Corporation et
al., as Initial Purchasers.
+10.25 Agreement and Plan of Reorganization, dated as of February 1, 2000,
among Invitrogen Corporation, RG Merger Corporation and Research
Genetics, Inc.
10.26 2000 Nonstatutory Stock Option Plan.
13.1 Annual Report to Security Holders.
***21.1 List of Subsidiaries.
23.1 Consent of Arthur Andersen LLP, Independent Public Accountants.
</TABLE>
- -----------
* Incorporated by reference to the Registrant's Registration Statement on
Forms S-1 (File No. 333-68665).
** Incorporated by reference to the Registrant's Registration Statement on
Form S-4 (File No. 333-82593).
*** Incorporated by reference to the Registrant's Registration Statement on
Forms S-1 (File No. 333-87085).
+ Incorporated by reference to the Registrant's Current Report on Form 8-K
(File No. 000-25317).
30
<PAGE>
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK,
NEW YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE
OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE &
CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC
(AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC) ANY TRANSFER, PLEDGE OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL
INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN WHOLE,
BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL NOTE SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN
THE INDENTURE REFERRED TO ON THE REVERSE HEREOF.
THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY
ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND
THE SECURITY EVIDENCED HEREBY AND ANY SHARES OF COMMON STOCK ISSUED UPON
CONVERSION HEREOF MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH
PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER
MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE
SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THE SECURITY
EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH SECURITY
AND ANY SHARES OF COMMON STOCK ISSUED UPON CONVERSION HEREOF MAY BE RESOLD,
PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1) (a) TO A PERSON WHO THE SELLER
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE
144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144A, (b) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER
THE SECURITIES ACT, IF AVAILABLE, (c) OUTSIDE THE UNITED STATES TO A NON-U.S.
PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE
SECURITIES ACT OR (d) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF
COUNSEL IF THE COMPANY SO REQUESTS), (2) TO THE COMPANY OR (3) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH ANY
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER
APPLICABLE JURISDICTION AND (B) THE PURCHASER WILL, AND EACH SUBSEQUENT
PURCHASER IS REQUIRED TO, NOTIFY ANY SUBSEQUENT PURCHASER FROM IT OF THE
SECURITY EVIDENCED HEREBY OR ANY COMMON STOCK ISSUABLE UPON CONVERSION HEREOF
OF THE RESALE RESTRICTIONS SET FORTH IN (A) ABOVE.
<PAGE>
No. 1
$172,500,000
CUSIP No. 461 85R AA8
5 1/2% CONVERTIBLE SUBORDINATED NOTE DUE 2007
Invitrogen Corporation, a Delaware corporation (the "COMPANY"),
promises to pay to Cede & Co., or registered assigns, the principal sum of One
Hundred Seventy-Two Million Five Hundred Thousand Dollars ($172,500,000.00), or
such other amount as is indicated on Schedule A hereof, on March 1, 2007,
subject to the further provisions of this Note set forth on the reverse hereof
which further provisions shall for all purposes have the same effect as if set
forth at this place.
Interest Payment Dates: March 1 and September 1, commencing September 1, 2000
Record Dates: February 15 and August 15
IN WITNESS WHEREOF, Invitrogen Corporation has caused this Note to be
signed manually or by facsimile by one of its duly authorized officers.
Dated: March 1, 2000
INVITROGEN CORPORATION
By: /s/ James R. Glynn
---------------------------------------
Title: Executive Vice President & CFO
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the 5 1/2% Convertible Subordinated
Notes due 2007 described in the
within-mentioned Indenture.
State Street Bank and Trust Company of California, N.A., as Trustee
By: /s/ Mark Henson
----------------------------
Authorized Officer
<PAGE>
INVITROGEN CORPORATION
5 1/2% Convertible Subordinated Note due 2007
1. INTEREST. INVITROGEN CORPORATION, a Delaware corporation (the
"COMPANY"), is the issuer of 5 1/2% Convertible Subordinated Notes due 2007
(the "NOTES"). The Notes will accrue interest at a rate of 5 1/2% per annum.
The Company promises to pay interest on the Notes in cash semiannually on
each March 1 and September 1, commencing on September 1, 2000, to Holders of
record on the immediately preceding February 15 and August 15, respectively.
Interest on the Notes will accrue from the most recent date to which interest
has been paid, or if no interest has been paid, from March 1, 2000. Interest
will be computed on the basis of a 360-day year of twelve 30-day months. The
Company will pay interest on overdue principal at the interest rate borne by
the Notes, compounded semiannually, and it shall pay interest on overdue
installments of interest (without regard to any applicable grace period) at
the same interest rate compounded semiannually.
2. REGISTRATION RIGHTS. The holder of this Note is entitled to the
benefits of a Registration Rights Agreement, dated as of March 1, 2000, among
the Company and the Initial Purchasers (the "REGISTRATION RIGHTS AGREEMENT").
Pursuant to the Registration Rights Agreement the Company has agreed for the
benefit of the Holders of the Notes, that (i) it will, at its cost, within 90
days after the closing of the sale of the Notes (the "CLOSING"), file a shelf
registration statement (the "SHELF REGISTRATION STATEMENT") with the Securities
and Exchange Commission (the "COMMISSION") with respect to resales of the Notes
and the Common Stock issuable upon conversion thereof, (ii) it will use its best
efforts to cause such Shelf Registration Statement to be declared effective
within 180 days after the Closing, and (iii) it will use its best efforts to
keep such Shelf Registration Statement continuously effective under the
Securities Act, subject to certain exceptions specified in the Registration
Rights Agreement until the second anniversary of the date of the Closing. As
set forth in the Registration Rights Agreement, the Company will be permitted to
suspend use of the prospectus that is part of the Shelf Registration Statement
during certain periods of time and in certain circumstances relating to pending
corporate developments and public filings with the SEC and similar events. If
(a) the Company fails to file the Shelf Registration Statement required by the
Registration Rights Agreement on or before the date specified above for such
filing, (b) such Shelf Registration Statement is not declared effective by the
Commission on or prior to the date specified above for such effectiveness, or
(c) the Shelf Registration Statement is declared effective but thereafter ceases
to be effective or useable in connection with resales of Transfer Restricted
Securities (as defined in the Registration Rights Agreement) during the periods
specified in the Registration Rights Agreement (each such event referred to in
clauses (a) through (c) above a "REGISTRATION DEFAULT"), then the Company will
pay special interest to each Holder of Transfer Restricted Securities, with
respect to the first 90-day period immediately following the occurrence of such
Registration Default in an amount equal to an increase in the annual interest
rate on the Notes of 0.25% ("SPECIAL INTEREST") and with respect to each
subsequent 90-day period, additional amounts equal to an increase in the annual
interest rate on the Notes of 0.25% until all Registration Defaults have been
cured, up to a maximum increase in the annual interest rate on the Notes equal
to 1.0%. All accrued Special Interest shall be paid by the Company on each
3
<PAGE>
Interest Payment Date for which Special Interest is owed to the holders of
Global Notes by wire transfer of immediately available funds or by federal
funds check and to holders of certificated Notes registered as such as of the
preceding Record Date by mailing checks to their registered addresses.
Following the cure of all Registration Defaults, the application of Special
Interest will cease.
3. PAYMENTS. All payments made by the Company on this Note shall
be made without deduction or withholding for or on account of, any and all
present or future taxes, duties, assessments, or governmental charges of
whatever nature unless the deduction or withholding of such taxes, duties,
assessments or governmental charges is then required by law.
4. METHOD OF PAYMENT. The Company will pay interest on the Notes
(except defaulted interest) to the Persons who are registered Holders of
Notes at the close of business on the record date for the next interest
payment date even though Notes are canceled after the record date and on or
before the interest payment date. Holders must surrender Notes to a Paying
Agent to collect principal and premium payments. The Company will pay
principal, premium, if any, interest and Special Interest, if any, in money
of the United States that at the time of payment is legal tender for payment
of public and private debts. However, the Company may pay principal,
premium, if any, interest and Special Interest, if any, by check payable in
such money. It may mail an interest or Special Interest check to a Holder's
registered address. If a Holder so requests, principal, premium, if any,
interest and Special Interest, if any, shall be paid by wire transfer of
immediately available funds to an account previously specified in writing by
such Holder to the Company and the Trustee.
5. PAYING AGENT, CONVERSION AGENT AND REGISTRAR. The Trustee
will act as Paying Agent, Conversion Agent and Registrar in the City of New
York, New York. The Company may change any Paying Agent, Conversion Agent or
Registrar without prior notice. The Company or any of its Affiliates may act
in any such capacity.
6. INDENTURE. The Company issued the Notes under an Indenture,
dated as of March 1, 2000 (the "INDENTURE"), between the Company and State
Street Bank and Trust Company of California, N.A., as Trustee. The terms of
the Notes include those stated in the Indenture and those made part of the
Indenture by the Trust Indenture Act of 1939 (15 U.S. Code Sections
77aaa-77bbbb) (the "TIA") as in effect on the date of the Indenture. The
Notes are subject to, and qualified by, all such terms, certain of which are
summarized hereon, and Holders are referred to the Indenture and such Act for
a statement of such terms. The Notes are unsecured general obligations of
the Company limited to $172,500,000 in aggregate principal amount and
subordinated in right of payment to all existing and future Senior Debt of
the Company.
7. OPTIONAL REDEMPTION. At any time on or after March 1, 2003
the Company may redeem any portion of the Notes, in whole or in part, upon
not less than 30 nor more than 60 days' notice, at the redemption prices
(expressed as percentages of principal amount thereof), together with accrued
and unpaid interest thereon to, but excluding, the applicable redemption
date. If redeemed during the period beginning March 1, 2003 and ending on
February 29, 2004, the redemption price shall be 103.143%, and if redeemed
during the 12-month period commencing on March 1:
4
<PAGE>
<TABLE>
<CAPTION>
Year Redemption Price
---- ----------------
<S> <C>
2004...................... 102.357%
2005...................... 101.571%
2006...................... 100.786%
2007...................... 100.000%
</TABLE>
In the event the Company redeems less than all of the outstanding Notes,
the Notes to be redeemed shall be selected by the Trustee in accordance with
Section 3.02 of the Indenture. In the event a portion of an outstanding Note is
selected for redemption and such Note is converted in part after such selection,
the converted portion of such Note shall be deemed (so far as may be) to be the
portion to be selected for redemption in accordance with Section 3.02 of the
Indenture. The Company may not give notice of any redemption if the Company has
defaulted in payment of interest and the default is continuing.
8. NOTICE OF REDEMPTION. Notice of redemption will be mailed at
least 30 days but not more than 60 days before the redemption date to each
Holder of the Notes to be redeemed at his address of record. The Notes in
denominations larger than $1,000 may be redeemed in part but only in integral
multiples of $1,000. In the event of a redemption of less than all of the
Notes, the Notes will be chosen for redemption by the Trustee in accordance with
the Indenture. On and after the redemption date, interest ceases to accrue on
the Notes or portions of them called for redemption.
If this Note is redeemed subsequent to a record date with respect to
any interest payment date specified above and on or prior to such interest
payment date, then any accrued interest will be paid to the Person in whose name
this Note is registered at the close of business on such record date.
9. MANDATORY REDEMPTION. The Company will not be required to make
mandatory redemption or repurchase payments with respect to the Notes. There
are no sinking fund payments with respect to the Notes.
10. REPURCHASE AT OPTION OF HOLDER. If there is a Change of Control,
the Company shall be required to offer to purchase on the Purchase Date all
outstanding Notes at a purchase price equal to 100% of the aggregate principal
amount thereof, plus accrued and unpaid interest, if any, to the Purchase Date.
Holders of Notes that are subject to an offer to purchase will receive a Change
of Control Offer from the Company in accordance with Section 3.09 of the
Indenture and may elect to have such Notes or portions thereof in authorized
denominations purchased by completing the form entitled "Option of Holder to
Elect Purchase" appearing below.
11. SUBORDINATION. The payment of the principal of, interest on or
any other amounts due on the Notes is subordinated in right of payment to all
existing and future Senior Debt of the Company, as described in the Indenture.
Each Holder, by accepting a Note, agrees to such subordination and authorizes
and directs the Trustee on its behalf to take such action as may be necessary or
appropriate to effectuate the subordination so provided and appoints the Trustee
as its attorney-in-fact for such purpose.
5
<PAGE>
12. CONVERSION. The holder of any Note has the right, exercisable
at any time following the Issuance Date and prior to the close of business
(New York time) on the date of the Note's maturity, to convert the principal
amount thereof (or any portion thereof that is an integral multiple of
$1,000) into shares of Common Stock at the initial Conversion Price of $85.20
per share, subject to adjustment under certain circumstances as set forth in
the Indenture, except that if a Note is called for redemption, the conversion
right will terminate at the close of business on the Business Day immediately
preceding the date fixed for redemption.
To convert a Note, a holder must (1) complete and sign a conversion
notice substantially in the form set forth below, (2) surrender the Note to a
Conversion Agent, (3) furnish appropriate endorsements or transfer documents
if required by the Registrar or Conversion Agent and (4) pay any transfer or
similar tax, if required. No payment or adjustment will be made for accrued
and unpaid interest on a converted Note, but if any holder surrenders a Note
for conversion after the close of business on the record date for the payment
of an installment of interest and prior to the opening of business on the
next interest payment date, then, notwithstanding such conversion, the
interest payable on such interest payment date shall be paid to the holder of
such Note on such record date. Any Notes that are, however, delivered to the
Company for conversion after any record date but before the next interest
payment date must, except as described in the next sentence, be accompanied
by a payment equal to the interest payable on such interest payment date on
the principal amount of convertible notes being converted. The payment to
the Company described in the preceding sentence shall not be required if,
during that period between a record date and the next interest payment date,
a conversion occurs on or after the date that the Company has issued a
redemption notice and prior to the date of redemption stated in such notice.
If any Notes are converted after an interest payment date but on or before
the next record date, no interest will be paid on those Notes. The number of
shares issuable upon conversion of a Note is determined by dividing the
principal amount of the Note converted by the Conversion Price in effect on
the Conversion Date. No fractional shares will be issued upon conversion but
a cash adjustment will be made for any fractional interest.
A Note in respect of which a holder has delivered an "Option of
Holder to Elect Purchase" form appearing below exercising the option of such
holder to require the Company to purchase such Note may be converted only if
the notice of exercise is withdrawn as provided above and in accordance with
the terms of the Indenture. The above description of conversion of the Notes
is qualified by reference to, and is subject in its entirety by, the more
complete description thereof contained in the Indenture.
13. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in
registered form, without coupons, in denominations of $1,000 and integral
multiples of $1,000. The transfer of Notes may be registered, and Notes may
be exchanged, as provided in the Indenture. The Registrar may require a
Holder, among other things, to furnish appropriate endorsements and transfer
documents and to pay any taxes and fees required by law or permitted by the
Indenture. The Registrar need not exchange or register the transfer of any
Note or portion of a Note selected for redemption (except the unredeemed
portion of any Note being redeemed in part). Also, it need not exchange or
register the transfer of any Note for a period of 15 days before a selection
of Notes to be redeemed.
6
<PAGE>
14. PERSONS DEEMED OWNERS. Except as provided in Section 4 of
this Note, the registered Holder of a Note may be treated as its owner for
all purposes.
15. UNCLAIMED MONEY. If money for the payment of principal or
interest remains unclaimed for two years, the Trustee and the Paying Agent
shall pay the money back to the Company at its written request. After that,
Holders of Notes entitled to the money must look to the Company for payment
unless an abandoned property law designates another Person and all liability
of the Trustee and such Paying Agent with respect to such money shall cease.
16. DEFAULTS AND REMEDIES. The Notes shall have the Events of
Default set forth in Section 8.01 of the Indenture. Subject to certain
limitations in the Indenture, if an Event of Default occurs and is
continuing, the Trustee by notice to the Company or the Holders of at least
25% in aggregate principal amount of the then outstanding Notes by notice to
the Company and the Trustee may declare all the Notes to be due and payable
immediately, except that in the case of an Event of Default arising from
certain events of bankruptcy, insolvency or reorganization, all unpaid
principal and interest accrued on the Notes shall become due and payable
immediately without further action or notice. The Holders of a majority in
principal amount of the Notes then outstanding by written notice to the
Trustee may rescind an acceleration and its consequences if the rescission
would not conflict with any judgment or decree and if all existing Events of
Default have been cured or waived except nonpayment of principal or interest
that has become due solely because of the acceleration. Holders may not
enforce the Indenture or the Notes except as provided in the Indenture.
Subject to certain limitations, Holders of a majority in principal amount of
the then outstanding Notes issued under the Indenture may direct the Trustee
in its exercise of any trust or power. The Company must furnish annually
compliance certificates to the Trustee. The above description of Events of
Default and remedies is qualified by reference, and subject in its entirety,
to the more complete description thereof contained in the Indenture.
17. AMENDMENTS, SUPPLEMENTS AND WAIVERS. Subject to certain
exceptions, the Indenture or the Notes may be amended or supplemented with
the consent of the Holders of at least a majority in principal amount of the
then outstanding Notes (including consents obtained in connection with a
tender offer or exchange offer for Notes), and any existing default may be
waived with the consent of the Holders of a majority in principal amount of
the then outstanding Notes. Without the consent of any Holder, the Indenture
or the Notes may be amended among other things, to cure any ambiguity, defect
or inconsistency, to provide for uncertificated Notes in addition to or in
place of certificated Notes, to provide for assumption of the Company's
obligations to Holders, to make any change that does not adversely affect the
rights of any Holder or to qualify the Indenture under the TIA or to comply
with the requirements of the SEC in order to maintain the qualification of
the Indenture under the TIA.
18. TRUSTEE DEALINGS WITH THE COMPANY. The Trustee, in its
individual or any other capacity may become the owner or pledgee of the Notes
and may otherwise deal with the Company or an Affiliate with the same rights
it would have, as if it were not Trustee, subject to certain limitations
provided for in the Indenture and in the TIA. Any Agent may do the same with
like rights.
7
<PAGE>
19. NO RECOURSE AGAINST OTHERS. A director, officer, employee,
incorporator or shareholder of the Company, as such, shall not have any
liability for any obligations of the Company under the Notes or the Indenture
or for any claim based on, in respect of or by reason of such obligations or
their creation. Each Holder of the Notes by accepting a Note waives and
releases all such liability. The waiver and release are part of the
consideration for the issue of the Notes.
20. GOVERNING LAW. THE INTERNAL LAWS OF THE STATE OF NEW YORK
SHALL GOVERN THE INDENTURE AND THE NOTES WITHOUT REGARD TO CONFLICT OF LAW
PROVISIONS THEREOF.
21. AUTHENTICATION. The Notes shall not be valid until
authenticated by the manual signature of an authorized officer of the Trustee
or an authenticating agent.
22. ABBREVIATIONS. Customary abbreviations may be used in the
name of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN
ENT (= tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and UGMA (=
Uniform Gifts to Minors Act).
The Company will furnish to any Holder of the Notes upon written
request and without charge a copy of the Indenture. Request may be made to:
Invitrogen Corporation
1600 Faraday Avenue
Carlsbad, California 92008
Attention: James R. Glynn
Executive Vice President
8
<PAGE>
ASSIGNMENT FORM
To assign this Note, fill in the form below:
(I) or (we) assign and transfer this Note to
__________________________________________
(INSERT ASSIGNEE'S SOCIAL SECURITY OR TAX I.D. NO.)
__________________________________________
__________________________________________
(PRINT OR TYPE ASSIGNEE'S NAME, ADDRESS AND ZIP CODE)
and irrevocably appoint _________________________________ agent to transfer this
Note on the books of the Company. The agent may substitute another to act for
him.
Your Signature: __________________________________________________
(SIGN EXACTLY AS YOUR NAME APPEARS ON THE OTHER SIDE OF THIS NOTE)
Date: __________________
Signature Guarantee: *____________________________________________
In connection with any transfer of any of the Notes evidenced by this
certificate occurring prior to the date that is two years after the later
of the date of original issuance of such Notes and the last date, if any,
on which such Notes were owned by the Company or any Affiliate of the
Company, the undersigned confirms that such Notes are being transferred:
CHECK ONE BOX BELOW
(1) / / to the Company or any subsidiary thereof,
(2) / / to a qualified institutional buyer in compliance with Rule 144A,
(3) / / outside the United States in compliance with Rule 904 under the
Securities Act,
(4) / / pursuant to the exemption from registration provided by Rule 144
under the Securities Act (if available) or
(5) / / pursuant to an effective registration statement under the
Securities Act.
- ------------------
(*) Signature must be guaranteed by a commercial bank, trust company or member
firm of the New York Stock Exchange
<PAGE>
----------------------------
Signature
Signature Guarantee*
- -----------------------------
Signature must be guaranteed
__________________________________________________________________
TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing this Note for
its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities
Act of 1933, and is aware that the sale to it is being made in reliance on
Rule 144A and acknowledges that it has received such information regarding
the Company as the undersigned has requested pursuant to Rule 144A or has
determined not to request such information and that it is aware that the
transferor is relying upon the undersigned's foregoing representations in
order to claim the exemption from registration provided by Rule 144A.
Date:
-----------------------
- ------------------
* Signature must be guaranteed by a commercial bank, trust company or member
firm of the New York Stock Exchange.
NOTICE: To be executed by an executive officer
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note or a portion thereof repurchased by
the Company pursuant to Section 3.09 or 4.07 of the Indenture, check the
box: [ ]
If the purchase is in part, indicate the portion (in denominations of
$1,000 or any integral multiple thereof) to be purchased:
______________________
Your Signature: __________________________________________________
(SIGN EXACTLY AS YOUR NAME APPEARS ON THE OTHER SIDE OF THIS NOTE)
Date:
-------------------------
Signature Guarantee:**/
- ------------------
**/ Signature must be guaranteed by a commercial bank, trust company or member
firm of the New York Stock Exchange.
<PAGE>
ELECTION TO CONVERT
To Invitrogen Corporation
The undersigned owner of this Note hereby irrevocably exercises the option
to convert this Note, or the portion below designated, into Common Stock of
Invitrogen Corporation in accordance with the terms of the Indenture
referred to in this Note, and directs that the shares issuable and
deliverable upon conversion, together with any check in payment for
fractional shares, be issued in the name of and delivered to the
undersigned, unless a different name has been indicated in the assignment
below. If the shares are to be issued in the name of a person other than
the undersigned, the undersigned will pay all transfer taxes payable with
respect thereto.
Any holder of Notes, upon the exercise of its conversion rights in
accordance with the terms of the Indenture and the Note, agrees to be bound
by the terms of the Registration Rights Agreement relating to the Common
Stock issuable upon conversion of the Notes.
Date:
in whole ___
Portions of Note to be converted ($1,000 or
integral multiples thereof): $______________
____________________________________________
Signature
Please Print or Typewrite Name and Address,
Including Zip Code, and Social Security or Other
Identifying Number
____________________________________________
____________________________________________
____________________________________________
Signature Guarantee:*_______________________
- ------------------
* Signature must be guaranteed by a commercial bank, trust company or member
firm of the New York Stock Exchange.
<PAGE>
SCHEDULE A
SCHEDULE OF PRINCIPAL AMOUNT
The initial principal amount of this Global Note shall be $172,500,000.
The following increases or decreases in the principal amount of this Global
Note have been made:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Signature of
Amount of Amount of authorized Date of
decrease in increase in officer of exchange
principal principal Principal Trustee or following
amount of this amount of this amount of this Notes such decrease
Global Note Global Note Global Note Custodian or increase
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
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</TABLE>
<PAGE>
INVITROGEN CORPORATION
$150,000,000
Principal Amount
5 1/2% Convertible Subordinated Notes due 2007
Purchase Agreement
February 25, 2000
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
BEAR, STEARNS & CO. INC.
CHASE SECURITIES INC.
DAIN RAUSCHER INCORPORATED
U.S. BANCORP PIPER JAFFRAY INC.
<PAGE>
5 1/2% Convertible Subordinated Notes due 2007
INVITROGEN CORPORATION
PURCHASE AGREEMENT
February 25, 2000
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
BEAR, STEARNS & CO. INC.
CHASE SECURITIES INC.
DAIN RAUSCHER INCORPORATED
U.S. BANCORP PIPER JAFFRAY INC.
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 Donaldson, Lufkin & Jenrette Securities
Corporation ("DLJ"), Bear, Stearns & Co. Inc., Chase Securities Inc., Dain
Rauscher Incorporated and U.S. Bancorp Piper Jaffray Inc. (each an "INITIAL
PURCHASER" and, collectively, the "INITIAL PURCHASERS") an aggregate of
$150,000,000 in principal amount of its 5 1/2% Convertible Subordinated Notes
due 2007 (the "FIRM NOTES"), subject to the terms and conditions set forth
herein. The Company also proposes to issue and sell to the Initial Purchasers
not more than an additional $22,500,000 principal amount of its 5 1/2%
Convertible Subordinated Notes due 2007 (the "ADDITIONAL NOTES"), if
requested by the Initial Purchasers as provided in Section 2 hereof. The
Firm Notes and the Additional Notes are herein collectively referred to as
the "NOTES". The Notes are to be issued pursuant to the provisions of an
indenture (the "INDENTURE"), to be dated as of the Closing Date (as defined
below), between the Company, and State Street Bank and Trust Company of
California, N.A., as trustee (the "TRUSTEE"), pursuant to which the Notes, as
provided therein, will be convertible at the option of the holders thereof
into shares of the Company's common stock, par value $0.01 per share (the
"COMMON STOCK"). The Notes and the Common Stock issuable upon conversion
thereof are herein collectively referred to as the "SECURITIES". The
Securities and the Indenture are more fully described in the Offering
Memorandum (as hereinafter defined). Capitalized terms used but not defined
herein shall have the meanings given to such terms in the Indenture.
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1. OFFERING MEMORANDUM. The Notes will be offered and sold to the
Initial Purchasers pursuant to one or more exemptions from the registration
requirements under the Securities Act of 1933, as amended (the "ACT"). The
Company has prepared a preliminary offering memorandum, dated February 15, 2000
(the "PRELIMINARY OFFERING MEMORANDUM") and a final offering memorandum, dated
February 25, 2000 (the "OFFERING MEMORANDUM"), relating to the Notes.
Upon original issuance thereof, and until such time as the same is no
longer required pursuant to the Indenture, the Notes (and all securities issued
in exchange therefor, in substitution thereof or upon conversion thereof) shall
bear the following legend:
"THIS NOTE (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED
UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED OR
OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OR TO, OR FOR THE
ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH IN THE
NEXT SENTENCE HEREOF. BY ITS ACQUISITION HEREOF OR OF A
BENEFICIAL INTEREST HEREIN, THE HOLDER:
(1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT)(A "QIB"), (B) IT HAS
ACQUIRED THIS NOTE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH
REGULATION S UNDER THE SECURITIES ACT OR (C) IT IS AN INSTITUTIONAL
"ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A)(1), (2), (3) OR
(7) OF REGULATION D UNDER THE SECURITIES ACT (AN "IAI"),
(2) AGREES THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER THIS NOTE
EXCEPT (A) TO THE COMPANY OR ANY OF ITS SUBSIDIARIES, (B) TO A
PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QIB PURCHASING FOR
ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QIB IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144A, (C) IN AN OFFSHORE
TRANSACTION MEETING THE REQUIREMENTS OF RULE 903 OR 904 OF THE
SECURITIES ACT, (D) IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144 UNDER THE SECURITIES ACT, (E) TO AN IAI THAT, PRIOR TO
SUCH TRANSFER, FURNISHES THE TRUSTEE A SIGNED LETTER CONTAINING
CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE TRANSFER OF
THIS NOTE (THE FORM OF WHICH CAN BE OBTAINED FROM THE TRUSTEE) AND,
IF THE COMPANY SO REQUESTS AN OPINION OF COUNSEL ACCEPTABLE TO THE
COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES
ACT, (F) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF
COUNSEL ACCEPTABLE TO THE COMPANY) OR (G) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE
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WITH THE APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES OR ANY OTHER APPLICABLE JURISDICTION AND
(3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS NOTE OR
AN INTEREST HEREIN IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE
EFFECT OF THIS LEGEND.
AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION" AND "UNITED
STATES" HAVE THE MEANINGS GIVEN TO THEM BY RULE 902 OF REGULATION
S UNDER THE SECURITIES ACT. THE INDENTURE CONTAINS A PROVISION
REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS
NOTE IN VIOLATION OF THE FOREGOING."
2. AGREEMENTS TO SELL AND PURCHASE. (a) On the basis of the
representations, warranties and covenants contained in this Agreement, and
subject to the terms and conditions contained herein, the Company agrees to
issue and sell to the Initial Purchasers, and the Initial Purchasers agree,
severally and not jointly, to purchase from the Company, the principal amount of
Firm Notes set forth opposite its name as set forth on Schedule A hereto at a
purchase price equal to 97.0% of the principal amount thereof (the "PURCHASE
PRICE").
(b) 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 the Additional Notes and
(ii) the Initial Purchasers shall have a right, but not the obligation, to
purchase, severally and not jointly, the Additional Notes, from the Company
at the Purchase Price. Additional Notes may be purchased solely for the
purpose of covering over-allotments made in connections with the offering of
the Firm Notes. The Initial Purchasers may exercise their right to purchase
Additional Notes in whole or in part from time to time by giving written
notice thereof to the Company at any time within 30 days after the date of
this Agreement. DLJ shall give any such notice on behalf of the Initial
Purchasers and such notice shall specify the aggregate principal amount of
Additional Notes to be purchased pursuant to such exercise and the date for
payment and delivery thereof. The date specified in any such notice shall be
a business day (i) no earlier than the Closing Date (as hereinafter defined),
(ii) no later than ten business days after such notice has been given and
(iii) no earlier than two business days after such notice has been given. If
any Additional Notes are to be purchased, each Initial Purchaser, severally
and not jointly, agrees to purchase from the Company the principal amount of
Additional Notes which bears the same proportion to the total principal
amount of Additional Notes to be purchased from the Company as the principal
amount of Firm Notes set forth opposite the name of such Initial Purchaser in
Schedule A bears to the total principal amount of Firm Notes.
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3. TERMS OF OFFERING. The Initial Purchasers have advised the
Company that the Initial Purchasers will make offers (the "EXEMPT RESALES") of
the Notes purchased hereunder on the terms set forth in the Offering Memorandum,
as amended or supplemented, solely to persons whom the Initial Purchaser
reasonably believe to be "qualified institutional buyers" as defined in Rule
144A under the Act ("QIBS") (such persons being referred to herein as the
"ELIGIBLE PURCHASERS"). The Initial Purchasers will offer the Notes to Eligible
Purchasers initially at a price equal to 100% of the principal amount thereof.
Such price may be changed at any time without notice.
Holders (including subsequent transferees) of the Securities will have
the registration rights set forth in the registration rights agreement (the
"REGISTRATION RIGHTS AGREEMENT"), to be dated the Closing Date, in substantially
the form of Exhibit A hereto, for so long as such Securities constitute
"TRANSFER RESTRICTED SECURITIES" (as defined in the Registration Rights
Agreement). Pursuant to the Registration Rights Agreement, the Company will
agree to file with the Securities and Exchange Commission (the "COMMISSION")
under the circumstances set forth therein, a shelf registration statement
pursuant to Rule 415 under the Act (the "REGISTRATION STATEMENT") relating to
the resale by certain holders of the Securities and to use its best efforts to
cause such Registration Statements to be declared and remain effective and
usable for the periods specified in the Registration Rights Agreement. This
Agreement, the Indenture, the Notes, and the Registration Rights Agreement are
hereinafter sometimes referred to collectively as the "OPERATIVE DOCUMENTS"
4. DELIVERY AND PAYMENT.
(a) Delivery of, and payment of the Purchase Price for,
the Firm Notes shall be made at the offices of Gray Cary Ware & Freidenrich LLP,
4365 Executive Drive, Suite 1600, San Diego, California 92121-2189 or such other
location as may be mutually acceptable. Such delivery and payment shall be made
at 9:00 a.m. New York City time, on March 1, 2000 or at such other time on the
same date or such other date as shall be agreed upon by the Initial Purchasers
and the Company shall agree in writing. The time and date of such delivery and
the payment for the Firm Notes are herein called the "CLOSING DATE".
(b) Delivery of, and payment for, any Additional Notes
to be purchased by the Initial Purchasers shall be made at the offices of Gray
Cary Ware & Freidenrich LLP, 4365 Executive Drive, Suite 1600, San Diego,
California 92121-2189 at 9:00 a.m. New York City time, on the date specified in
the exercise notice given by DLJ pursuant to Section 2(b) or such other time on
the same or such other date as the Initial Purchasers and the Company shall
agree in writing. The time and date of delivery and payment for any Additional
Notes are hereinafter referred to as an "OPTION CLOSING DATE".
(c) One or more of the Notes in definitive global form,
registered in the name of Cede & Co., as nominee of the Depository Trust Company
("DTC"), having an aggregate principal amount corresponding to the aggregate
principal amount of the Notes (collectively, the "GLOBAL NOTE"), shall be
delivered by the Company to the Initial Purchasers (or as the Initial Purchasers
direct) in each case with any transfer taxes thereon duly paid by the Company
against payment by the Initial Purchasers of the Purchase Price thereof by wire
transfer in same day funds
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to the order of the Company. The Global Note shall be made available to the
Initial Purchasers for inspection not later than 9:30 a.m., New York City
time, on the business day immediately preceding the Closing Date.
5. AGREEMENTS OF THE COMPANY The Company hereby agrees with the
Initial Purchasers as follows:
(a) To advise the Initial Purchasers promptly and, if
requested by the Initial Purchasers, confirm such advice in writing, (i) of the
issuance by any state securities commission of any stop order suspending the
qualification or exemption from qualification of any Notes for offering or sale
in any jurisdiction designated by the Initial Purchasers pursuant to Section
5(e) hereof, or the initiation of any proceeding by any state securities
commission or any other federal or state regulatory authority for such purpose
and (ii) of the happening of any event during the period referred to in Section
5(c) below that makes any statement of a material fact made in the Preliminary
Offering Memorandum or the Offering Memorandum untrue or that requires any
additions to or changes in the Preliminary Offering Memorandum or the Offering
Memorandum in order to make the statements therein not misleading. The Company
shall use its best efforts to prevent the issuance of any stop order or order
suspending the qualification or exemption of any Notes under any state
securities or Blue Sky laws and, if at any time any state securities commission
or other federal or state regulatory authority shall issue an order suspending
the qualification or exemption of any Notes under any state securities or Blue
Sky laws, the Company shall use its best efforts to obtain the withdrawal or
lifting of such order at the earliest possible time.
(b) To furnish the Initial Purchasers and those persons
identified by the Initial Purchasers to the Company as many copies of the
Preliminary Offering Memorandum and the Offering Memorandum, any documents
incorporated by reference therein, and any amendments or supplements thereto, as
the Initial Purchasers may reasonably request for the time period specified in
Section 5(c). Subject to the Initial Purchasers' compliance with its
representations and warranties and agreements set forth in Section 7 hereof, the
Company consents to the use of the Preliminary Offering Memorandum and the
Offering Memorandum, any documents incorporated by reference therein, and any
amendments and supplements thereto required pursuant hereto, by the Initial
Purchasers in connection with Exempt Resales.
(c) During such period as in the opinion of counsel for
the Initial Purchasers an Offering Memorandum is required by law to be delivered
in connection with Exempt Resales by the Initial Purchasers (i) not to make any
amendment or supplement to the Offering Memorandum of which the Initial
Purchasers shall not previously have been advised or to which the Initial
Purchasers shall reasonably object after being so advised and (ii) to prepare
promptly upon the Initial Purchasers' reasonable request, any amendment or
supplement to the Offering Memorandum which may be necessary or advisable in
connection with such Exempt Resales.
(d) If, during the period referred to in Section 5(c)
above, any event shall occur or condition shall exist as a result of which, in
the opinion of counsel to the Initial Purchasers, it
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becomes necessary to amend or supplement the Offering Memorandum in order to
make the statements therein, in the light of the circumstances when such
Offering Memorandum is delivered to an Eligible Purchaser, not misleading, or
if, in the opinion of counsel to the Initial Purchasers, it is necessary to
amend or supplement the Offering Memorandum to comply with any applicable
law, forthwith to prepare an appropriate amendment or supplement to such
Offering Memorandum so that the statements therein, as so amended or
supplemented, will not, in the light of the circumstances when it is so
delivered, be misleading, or so that such Offering Memorandum will comply
with applicable law, and to furnish to the Initial Purchasers and such other
persons as the Initial Purchasers may designate such number of copies thereof
as the Initial Purchasers may reasonably request.
(e) Prior to the sale of all Notes pursuant to Exempt
Resales as contemplated hereby, to cooperate with the Initial Purchasers and
counsel to the Initial Purchasers in connection with the registration or
qualification of the Notes for offer and sale to the Initial Purchasers and
pursuant to Exempt Resales under the securities or Blue Sky laws of such
jurisdictions as the Initial Purchasers may request and to continue such
registration or qualification in effect so long as required for Exempt Resales
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 Preliminary Offering Memorandum, the Offering Memorandum or
Exempt Resales, in any jurisdiction in which it is not now so subject.
(f) So long as the Notes are outstanding, (i) to mail
and make generally available as soon as practicable after the end of each fiscal
year to the record holders of the Notes a financial report of the Company and
its subsidiaries on a consolidated basis (and a similar financial report of all
unconsolidated subsidiaries, if any), all such financial reports to include a
consolidated balance sheet, a consolidated statement of operations, a
consolidated statement of cash flows and a consolidated statement of
shareholders' equity as of the end of and for such fiscal year, together with
comparable information as of the end of and for the preceding year, certified by
the Company's independent public accountants and (ii) to mail and make generally
available as soon as practicable after the end of each quarterly period (except
for the last quarterly period of each fiscal year) to such holders, a
consolidated balance sheet, a consolidated statement of operations and a
consolidated statement of cash flows (and similar financial reports of all
unconsolidated subsidiaries, if any) as of the end of and for such period, and
for the period from the beginning of such year to the close of such quarterly
period, together with comparable information for the corresponding periods of
the preceding year.
(g) So long as the Notes are outstanding, to furnish to
the Initial Purchasers as soon as available, copies of all reports or other
communications furnished by the Company to its security holders 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/or its subsidiaries as the Initial
Purchasers may reasonably request.
(h) So long as any of the Notes remain outstanding and
during any period in which the Company is not subject to Section 13 or 15(d) of
the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), to make
available to any holder of Securities in
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connection with any sale thereof and any prospective purchaser of such
Securities from such holder, the information ("RULE 144A INFORMATION")
required by Rule 144A(d)(4) under the Act.
(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 obligations of
the Company under this Agreement, including: (i) the reasonable fees,
disbursements and expenses of counsel to the Company and accountants of the
Company in connection with the sale and delivery of the Notes to the Initial
Purchasers and pursuant to Exempt Resales, and all other fees and expenses in
connection with the preparation, printing, filing and distribution of the
Preliminary Offering Memorandum, the Offering Memorandum and all amendments and
supplements to any of the foregoing (including financial statements), including
the mailing and delivering of copies thereof to the Initial Purchasers and
persons designated by them in the quantities specified herein, (ii) all costs
and expenses related to the transfer and delivery of the Notes to the Initial
Purchasers and pursuant to Exempt Resales, including any transfer or other taxes
payable thereon, (iii) all costs of printing or producing this Agreement, the
other Operative Documents and any other agreements or documents in connection
with the offering, purchase, sale or delivery of the Securities (other than the
fees, disbursements and expenses of counsel to the Initial Purchasers, except as
provided in clause (iv) below), (iv) all expenses in connection with the
registration or qualification of the Securities 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 Initial Purchasers in connection with such registration or qualification and
memoranda relating thereto), (v) the cost of printing certificates representing
the Securities, (vi) all expenses and listing fees in connection with the
application for quotation of the Notes in the Nationl Association of Securities
Dealers, Inc. ("NASD") Automated Quotation System - PORTAL ("PORTAL"), (vii) the
fees and expenses of the Trustee and the Trustee's counsel in connection with
the Indenture and the Notes, (viii) the costs and charges of any transfer agent,
registrar and/or depositary (including DTC), (ix) any fees charged by rating
agencies for the rating of the Notes, (x) all costs and expenses of the
Registration Statement, as set forth in the Registration Rights Agreement, (xi)
all expenses and listing fees in connection with the application for listing the
Common Stock on the NASDAQ National Market and (xii) and all other costs and
expenses incident to the performance of the obligations of the Company hereunder
for which provision is not otherwise made in this Section.
(j) To use its best efforts to effect the inclusion of
the Notes in PORTAL and to maintain the listing of the Notes on PORTAL for so
long as the Notes are outstanding.
(k) To obtain the approval of DTC for "book-entry"
transfer of the Notes, and to comply with all of its agreements set forth in the
representation letters of the Company to DTC relating to the approval of the
Notes by DTC for "book-entry" transfer.
(l) To cause the Common Stock issuable upon conversion
of the Notes to be duly included for quotation on the Nasdaq Stock Market's
National Market (the "NASDAQ NATIONAL MARKET") prior to the Firm Closing Date
subject to notice of official issuance. The Company will ensure that such
Common Stock remain included for quotation on the Nasdaq
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National Market or any other national securities exchange following the Firm
Closing Date for so long as any shares of Common Stock remain registered under
the Exchange Act.
(m) The Company shall not (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 Initial Purchasers pursuant to
this Agreement, for a period of 90 days after the Closing Date without the prior
written consent of DLJ. Notwithstanding the foregoing, during such period (i)
the Company may grant stock options pursuant to the Company's existing stock
option plans or other employee benefit plans and (ii) the Company may issue
shares of Common Stock upon the exercise of an option or warrant or the
conversion of a security outstanding on the date hereof. Other than pursuant to
the Registration Rights Agreement, 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 90 days after the Closing Date without the prior written consent of
DLJ. The Company shall, prior to or concurrently with the execution of this
Agreement, deliver an agreement executed by each of the directors and officers
of the Company to the effect that such person will not, during the period
commencing on the date such person signs such agreement and ending 90 days after
the Closing Date without the prior written consent of DLJ, (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.
(n) Not to sell, offer for sale or solicit offers to buy
or otherwise negotiate in respect of any security (as defined in the Act) that
would be integrated with the sale of the Notes to the Initial Purchasers or
pursuant to Exempt Resales in a manner that would require the registration of
any such sale of the Notes under the Act.
(o) Not to voluntarily claim, and to actively resist any
attempts to claim, the benefit of any usury laws against the holders of any
Notes.
(p) To comply with all of its agreements set forth in
the Registration Rights Agreement.
(q) To use its best efforts to do and perform all things
required or necessary to be done and performed under this Agreement by it prior
to the Closing Date and to satisfy all conditions precedent to the delivery of
the Notes.
6. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE COMPANY. As of
the date hereof, the Company represents and warrants to, and agrees with, the
Initial Purchasers that:
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(a) The Preliminary Offering Memorandum and the
Offering Memorandum do not, and any supplement or amendment to them will not,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, except that the representations and warranties contained in this
paragraph (a) shall not apply to statements in or omissions from the
Preliminary Offering Memorandum or the Offering Memorandum (or any supplement
or amendment thereto) based upon information relating to the Initial
Purchasers furnished to the Company in writing by the Initial Purchasers
expressly for use therein. The Company acknowledges for all purposes of this
Agreement (including Section 8 hereof) that the statements with respect to
price and underwriting discounts and commissions and the last paragraph all
as set forth on the cover page and in paragraphs four and eight under the
caption "Plan of Distribution" in the Offering Memorandum (the "INITIAL
PURCHASER INFORMATION") constitute the only written information furnished to
the Company by or on behalf of the Initial Purchasers expressly for use in
the Preliminary Offering Memorandum or Offering Memorandum (or any amendment
or supplement to any of them) and that the Initial Purchasers shall not be
deemed to have provided any other information (and therefore are not
responsible for any such statements or omissions). No stop order preventing
the use of the Preliminary Offering Memorandum or the Offering Memorandum, or
any amendment or supplement thereto, or any order asserting that any of the
transactions contemplated by this Agreement are subject to the registration
requirements of the Act, has been issued.
(b) 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 Preliminary
Offering Memorandum and the Offering Memorandum 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 (a "MATERIAL ADVERSE EFFECT").
(c) All outstanding shares of capital stock of the
Company have been duly authorized and validly issued and are fully paid,
non-assessable and not subject to any preemptive or similar rights.
(d) The entities listed on Schedule B hereto are the
only subsidiaries, direct or indirect, of the Company. 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 (each, a "LIEN").
(e) This Agreement has been duly authorized, executed
and delivered by the Company.
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(f) The Indenture has been duly authorized by the
Company and, on the Closing Date, will have been validly executed and
delivered by the Company. When the Indenture has been duly executed and
delivered by the Company, the Indenture will be a valid and binding agreement
of the Company, enforceable against the Company in accordance with its terms
except as (i) the enforceability thereof may be limited by bankruptcy,
insolvency or similar laws affecting creditors' rights generally and (ii)
rights of acceleration and the availability of equitable remedies may be
limited by equitable principles of general applicability. On the Closing
Date, the Indenture will conform in all material respects to the requirements
of the Trust Indenture Act of 1939, as amended (the "TIA" or "TRUST INDENTURE
ACT"), and the rules and regulations of the Commission applicable to an
indenture which is qualified thereunder.
(g) The Notes have been duly authorized and, on the
Closing Date, will have been validly executed and delivered by the Company.
When the Notes have been issued, executed and authenticated in accordance
with the provisions of the Indenture and delivered to and paid for by the
Initial Purchasers in accordance with the terms of this Agreement, the Notes
will be entitled to the benefits of the Indenture and will be valid and
binding obligations of the Company, enforceable in accordance with their
terms except as (i) the enforceability thereof may be limited by bankruptcy,
insolvency or similar laws affecting creditors' rights generally and (ii)
rights of acceleration and the availability of equitable remedies may be
limited by equitable principles of general applicability. On the Closing
Date, the Notes will conform as to legal matters to the description thereof
contained in the Offering Memorandum.
(h) The Notes are convertible into Common Stock in
accordance with the terms of the Indenture; the shares of Common Stock
initially issuable upon conversion of the Notes have been duly authorized and
reserved for issuance upon such conversion and, when issued upon such
conversion, will be validly issued, fully paid and nonassessable, will
conform to the description thereof contained in the Offering Memorandum and
will be duly authorized for listing on the NASDAQ National Market, subject to
notice of official issuance; the Company has the authorized and outstanding
capital stock as set forth in the Offering Memorandum; and the stockholders
of the Company or other holders of the Company's securities have no
pre-emptive or similar rights with respect to the Notes or the Common Stock
issuable upon the Notes.
(i) The Registration Rights Agreement has been duly
authorized by the Company and, on the Closing Date, will have been duly
executed and delivered by the Company. When the Registration Rights
Agreement has been duly executed and delivered, the Registration Rights
agreement will be a valid and binding agreement of the Company, enforceable
against the Company in accordance with its terms except as (i) the
enforceability thereof may be limited by bankruptcy, insolvency or similar
laws affecting creditors' rights generally and (ii) rights of acceleration
and the availability of equitable remedies may be limited by equitable
principles of general applicability. On the Closing Date, the Registration
Rights Agreement will conform as to legal matters to the description thereof
in the Offering Memorandum.
(j) The authorized capital stock of the Company
conforms as to legal matters to the description thereof contained in the
Offering Memorandum.
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(k) 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 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 and that is material to the Company and its subsidiaries, taken as a
whole, except for such violations or defaults which, singly or in the
aggregate, would not have a Material Adverse Effect.
(l) The execution, delivery and performance the
Operative Documents by the Company, compliance by the Company with all
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 charter or by-laws of the Company or any of its subsidiaries or any
indenture, loan agreement, mortgage, lease or other agreement or instrument
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 and
that is material to the Company and its subsidiaries, taken as a whole, (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, (iv) result in the imposition or creation of (or the
obligation to create or impose) a Lien under, any agreement or instrument 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, or
(v) result in the termination, suspension or revocation of any Material
Authorization (as defined below) of the Company or any of its subsidiaries or
result in any other impairment of the rights of the holder of any such
Material Authorization, except for such breaches, violations, terminations,
suspensions, revocations or defaults which, singly or in the aggregate, would
not have a Material Adverse Effect.
(m) There are no legal or governmental proceedings
pending or, to the Company's knowledge, 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, which might result, singly or in
the aggregate, in a Material Adverse Effect.
(n) The Company and its subsidiaries have good and
marketable title in fee simple to all real property and good and marketable
title to all personal property owned by them which is material to the
business of the Company and its subsidiaries, in each case free and clear of
all liens, encumbrances and defects except such as are described in the
Offering Memorandum 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 Offering Memorandum.
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(o) 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; 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.
(p) 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.
(q) Except as disclosed in the Offering Memorandum,
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 would be required by the Act to be
described in the Offering Memorandum if the Offering Memorandum were a
prospectus included in a registration statement on Form S-1 file with the
Commission.
(r) 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.
(s) 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.
(t) 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
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("ENVIRONMENTAL LAWS"), any provisions of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), 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.
(u) Each of the Company and its subsidiaries has such
permits, licenses, consents, exemptions, franchises, authorizations and other
approvals (each, a "MATERIAL AUTHORIZATION") of, and has made all filings
with and notices to, all governmental or regulatory authorities and
self-regulatory organizations and all courts and other tribunals, including
without limitation, under any applicable Environmental Laws, as are necessary
to own, lease, license and operate its respective properties and to conduct
its business, except where the failure to have any such Material
Authorization or to make any such filing or notice would not, singly or in
the aggregate, have a Material Adverse Effect. 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 held by the Company or its subsidiaries; and such
Material Authorizations held by the Company or its subsidiaries 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.
(v) 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.
(w) The accountants, Arthur Andersen LLP, that have
certified the financial statements and supporting schedules included in the
Preliminary Offering Memorandum and the Offering Memorandum are independent
public accountants with respect to the Company, as required by the Act and
the Exchange Act. The historical financial statements, together with related
schedules and notes, set forth in the Preliminary Offering Memorandum and the
Offering Memorandum comply as to form in all material respects with the
requirements applicable to registration statements on Form S-1 under the Act.
(x) The historical financial statements, together
with related schedules and notes forming part of the Offering Memorandum (and
any amendment or supplement thereto), present fairly the consolidated
financial position, results of operations and changes in financial position
of the Company and its subsidiaries on the basis stated or incorporated by
reference in the Offering Memorandum 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
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accepted accounting principles consistently applied throughout the periods
involved, except as disclosed therein; and the other financial and
statistical information and data set forth or incorporated by reference in
the Offering Memorandum (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.
(y) The PRO FORMA financial statements included in
the Preliminary Offering Memorandum and the Offering Memorandum have been
prepared on a basis consistent with the historical financial statements of
the Company and its subsidiaries and give effect to assumptions used in the
preparation thereof on a reasonable basis and in good faith and present
fairly the historical and proposed transactions contemplated by the
Preliminary Offering Memorandum and the Offering Memorandum; and such PRO
FORMA financial statements comply as to form in all material respects with
the requirements applicable to PRO FORMA financial statements included in
registration statements on Form S-1 under the Act. The other PRO FORMA
financial and statistical information and data included in the Offering
Memorandum are, in all material respects, accurately presented and prepared
on a basis consistent with the PRO FORMA financial statements.
(z) The Company is not and, after giving effect to
the offering and sale of the Notes and the application of the net proceeds
thereof as described in the Offering Memorandum, will not be, an "investment
company," as such term is defined in the Investment Company Act of 1940, as
amended.
(aa) Except as set forth in the Offering Memorandum,
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 Notes
registered pursuant to any Registration Statement.
(bb) Neither the Company nor any of its subsidiaries
nor any agent thereof acting on the behalf of them has taken, and none of
them will take, any action that might cause this Agreement or the issuance or
sale of the Notes to violate Regulation G (12 C.F.R. Part 207), Regulation T
(12 C.F.R. Part 220), Regulation U (12 C.F.R. Part 221) or Regulation X (12
C.F.R. Part 224) of the Board of Governors of the Federal Reserve System.
(cc) No "nationally recognized statistical rating
organization" as such term is defined for purposes of Rule 436(g)(2) under
the Act (i) has imposed (or has informed the Company that it is considering
imposing) any condition (financial or otherwise) on the Company's retaining
any rating assigned to the Company, any securities of the Company or (ii) has
indicated to the Company that it is considering (a) the downgrading,
suspension, or withdrawal of, or any review for a possible change that does
not indicate the direction of the possible change in, any rating so assigned
or (b) any change in the outlook for any rating of the Company, or any
securities of the Company.
(dd) Since the respective dates as of which
information is given in the Offering Memorandum other than as set forth in
the Offering Memorandum (exclusive of any amendments or supplements thereto
subsequent to the date of this Agreement), (i) there has not
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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.
(ee) Each of the Preliminary Offering Memorandum and
the Offering Memorandum, as of its date, contains all the information
specified in, and meeting the requirements of, Rule 144A(d)(4) under the Act.
(ff) When the Notes are issued and delivered pursuant
to this Agreement, the Notes will not be of the same class (within the
meaning of Rule 144A under the Act) as any security of the Company that is
listed on a national securities exchange registered under Section 6 of the
Exchange Act or that is quoted in a United States automated inter-dealer
quotation system.
(gg) No form of general solicitation or general
advertising (as defined in Regulation D under the Act) was used by the
Company, or any of its representatives (other than the Initial Purchasers, as
to whom the Company makes no representation) in connection with the offer and
sale of the Notes contemplated hereby, including, but not limited to,
articles, notices or other communications published in any newspaper,
magazine, or similar medium or broadcast over television or radio, or any
seminar or meeting whose attendees have been invited by any general
solicitation or general advertising. No securities of the same class as the
Securities have been issued and sold by the Company within the six-month
period immediately prior to the date hereof.
(hh) Prior to the effectiveness of any Registration
Statement, the Indenture is not required to be qualified under the TIA.
(ii) No registration under the Act of the Securities
is required for the sale of the Securities to the Initial Purchasers as
contemplated hereby or for the Exempt Resales assuming the accuracy of the
Initial Purchasers' representations and warranties and agreements set forth
in Section 7 hereof.
(jj) Each certificate signed by any officer of the
Company and delivered to the Initial Purchasers or counsel for the Initial
Purchasers pursuant to the terms hereof shall be deemed to be a
representation and warranty by the Company to the Initial Purchasers as to
the matters covered thereby.
The Company acknowledges that the Initial Purchasers
and, for purposes of the opinions to be delivered to the Initial Purchasers
pursuant to Section 9 hereof, counsel to the Company and counsel to the
Initial Purchasers will rely upon the accuracy and truth of the foregoing
representations and hereby consents to such reliance.
7. INITIAL PURCHASERS' REPRESENTATIONS AND WARRANTIES. Each
Initial Purchaser, severally and not jointly, represents and warrants to, and
agrees with, the Company:
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(a) Such Initial Purchaser is either a QIB or an IAI,
in either case, with such knowledge and experience in financial and business
matters as is necessary in order to evaluate the merits and risks of an
investment in the Notes.
(b) Such Initial Purchaser (A) is not acquiring the
Securities with a view to any distribution thereof or with any present
intention of offering or selling any of the Securities in a transaction that
would violate the Act or the securities laws of any state of the United
States or any other applicable jurisdiction and (B) will be reoffering and
reselling the Securities only to QIBs in reliance on the exemption from the
registration requirements of the Act provided by Rule 144A.
(c) Such Initial Purchaser agrees that no form of
general solicitation or general advertising (within the meaning of Regulation
D under the Act) has been or will be used by such Initial Purchaser or any of
its representatives in connection with the offer and sale of the Securities
pursuant hereto, including, but not limited to, articles, notices or other
communications published in any newspaper, magazine or similar medium or
broadcast over television or radio, or any seminar or meeting whose attendees
have been invited by any general solicitation or general advertising.
(d) Such Initial Purchaser agrees that, in connection
with Exempt Resales, such Initial Purchaser will solicit offers to buy the
Securities only from, and will offer to sell the Securities only to, Eligible
Purchasers. Each Initial Purchaser further agrees that it will offer to sell
the Securities only to, and will solicit offers to buy the Securities only
from (A) Eligible Purchasers that Such Initial Purchaser reasonably believes
are QIBs that agree that (x) the Securities purchased by them may be resold,
pledged or otherwise transferred within the time period referred to under
Rule 144(k) (taking into account the provisions of Rule 144(d) under the Act,
if applicable) under the Act, as in effect on the date of the transfer of
such Securities, only (I) to the Company or any of its subsidiaries, (II) to
a person whom the seller reasonably believes is a QIB purchasing for its own
account or for the account of a QIB in a transaction meeting the requirements
of Rule 144A under the Act, (III) in an offshore transaction (as defined in
Rule 902 under the Act) meeting the requirements of Rule 904 of the Act, (IV)
in a transaction meeting the requirements of Rule 144 under the Act, (V) to
an Accredited Institution that, prior to such transfer, furnishes the Trustee
a signed letter containing certain representations and agreements relating to
the registration of transfer of such Securities and, if requested by the
Company, an opinion of counsel acceptable to the Company that such transfer
is in compliance with the Act, (VI) in accordance with another exemption from
the registration requirements of the Act (and based upon an opinion of
counsel acceptable to the Company) or (VII) pursuant to an effective
registration statement and, in each case, in accordance with the applicable
securities laws of any state of the United States or any other applicable
jurisdiction and (y) they will deliver to each person to whom such Securities
or an interest therein is transferred a notice substantially to the effect of
the foregoing.
(e) Such Initial Purchaser agrees that it will not
offer, sell or deliver any of the Securities in any jurisdiction outside the
United States except under circumstances that will result in compliance with
the applicable laws thereof, and that it will take at its own expense
whatever action is required to permit its purchase and resale of the
Securities in such jurisdictions.
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Such Initial Purchaser understands that no action has been taken to permit a
public offering in any jurisdiction outside the United States where action
would be required for such purpose.
Each Initial Purchaser acknowledges that the Company,
for purposes of the opinions to be delivered to each Initial Purchaser
pursuant to Section 9 hereof, counsel to the Company and counsel to the
Initial Purchasers will rely upon the accuracy and truth of the foregoing
representations and each Initial Purchaser hereby consents to such reliance.
8. INDEMNIFICATION.
(a) The Company agrees to indemnify and hold harmless
each Initial Purchaser, its directors, its officers and each person, if any,
who controls such Initial Purchaser (within the meaning of Section 15 of the
Act or Section 20 of the Exchange Act), from and against any and all losses,
claims, damages, liabilities and judgments (including, without limitation,
any legal or other expenses incurred in connection with investigating or
defending any matter, including any action, that could give rise to any such
losses, claims, damages, liabilities or judgments) caused by any untrue
statement or alleged untrue statement of a material fact contained in the
Offering Memorandum (or any amendment or supplement thereto), the Preliminary
Offering Memorandum or any Rule 144A Information provided by the Company to
any holder or prospective purchaser of Securities pursuant to Section 5(h) 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 Initial
Purchaser furnished in writing to the Company by such Initial Purchaser;
provided, however, that the foregoing indemnity agreement with respect to any
Preliminary Offering Memorandum shall not inure to the benefit of any Initial
Purchaser, its directors, its officers and each person, if any, who controls
such Initial Purchaser (within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act), who failed to deliver an Offering Memorandum
(as then amended or supplemented, so long as the Offering Memorandum and any
amendment or supplement thereto was provided by the Company to the several
Initial Purchasers 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 ad liabilities and judgments caused by any untrue
statement or alleged untrue statement of a material fact contained in any
Preliminary Offering Memorandum, 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 Offering Memorandum.
(b) Each Initial Purchaser, severally and not
jointly, agrees to indemnify and hold harmless the Company and its directors
and officers and each person, if any, who controls (within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act) the Company to the
same extent as the foregoing indemnity from the Company to the Initial
Purchasers but only with reference to information relating to such Initial
Purchaser furnished in writing to the Company by such Initial Purchaser
expressly for use in the Preliminary Offering Memorandum or the Offering
Memorandum.
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(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 Initial Purchasers 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 expenses of such
counsel, except as provided below, shall be at the expense of the Initial
Purchasers). Any indemnified party shall have the right to employ separate
counsel in any such action and participate in the defense thereof, but the
fees and expenses of such counsel shall be at the expense of the indemnified
party unless (i) the employment of such counsel shall have been specifically
authorized in writing by the indemnifying party, (ii) the indemnifying party
shall have failed to assume the defense of such action or employ counsel
reasonably satisfactory to the indemnified party or (iii) the named parties
to any such action (including any impleaded parties) include both the
indemnified party and the indemnifying party, and the indemnified party shall
have been advised by such counsel that there may be one or more legal
defenses available to it which are different from or additional to those
available to the indemnifying party (in which case the indemnifying party
shall not have the right to assume the defense of such action on behalf of
the indemnified party). In any such case, the indemnifying party shall not,
in connection with any one action or separate but substantially similar or
related actions in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the fees and expenses of more
than one separate firm of attorneys (in addition to any local counsel) for
all indemnified parties and all such fees and expeses shall be reimbursed as
they are incurred. Such firm shall be designated in writing by Donaldson,
Lufkin & Jenrette Securities Corporation, in the case of the parties
indemnified pursuant to Section 8(a), and by the Company, in the case of
parties indemnified pursuant to Section 8(b). The indemnifying party shall
indemnify and hold harmless the indemnified party from and against any and
all losses, claims, damages, liabilities and judgments by reason of any
settlement of any action (i) effected with 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 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.
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(d) To the extent the indemnification provided for in
this Section 8 is unavailable to an indemnified party or insufficient in
respect of any losses, claims, damages, liabilities or judgments referred to
therein, then each indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages, liabilities
and judgments (i) in such proportion as is appropriate to reflect the
relative benefits received by the Company, on the one hand, and the Initial
Purchasers, on the other hand, from the offering of the Securities 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 Company, on the one hand, and the Initial Purchasers, on the
other hand, in connection with the statements or omissions which resulted in
such losses, claims, damages, liabilities or judgments, as well as any other
relevant equitable considerations. The relative benefits received by the
Company, on the one hand, and the Initial Purchasers, on the other hand,
shall be deemed to be in the same proportion as the total net proceeds from
the offering of the Securities (after Initial Purchaser's discounts or
commissions, but before deducting expenses) received by the Company, and the
total discounts and commissions received by the Initial Purchasers bear to
the total price to investors of the Securities, in each case as set forth in
the table on the cover page of the Offering Memorandum. The relative fault
of the Company, on the one hand, and the Initial Purchasers, 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, on the one hand, or the Initial Purchasers, on the other hand,
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
The Company and the Initial Purchasers 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 Initial Purchasers were
treated as one entity for such purpose) or by any other method of allocation
which does not take account of the equitable considerations referred to in
the immediately preceding paragraph. The amount paid or payable by an
indemnified party as a result of the losses, claims, damages, liabilities or
judgments referred to in the immediately preceding paragraph shall be deemed
to include, subject to the limitations set forth above, any legal or other
expenses incurred by such indemnified party in connection with investigating
or defending any matter, including any action, that could have given rise to
such losses, claims, damages, liabilities or judgments. Notwithstanding the
provisions of this Section 8, no Initial Purchaser shall be required to
contribute any amount in excess of the amount by which the total discounts
and commissions received by such Initial Purchaser exceeds the amount of any
damages which such Initial Purchaser has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. The
Initial Purchasers' obligations to contribute pursuant to this Section 8(d)
are several in proportion to the respective principal amount of Securities
purchased by each of the Initial Purchasers 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.
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9. CONDITIONS OF INITIAL PURCHASER'S OBLIGATIONS. The several
obligations of the Initial Purchasers to purchase the Firm Notes under this
Agreement on the Closing Date and the Additional Notes, if any, on any Option
Closing Date 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, or on each Option Closing Date, if any, with the same force and effect
as if made on and as of the Closing Date or on each Option Closing Date, if
any.
(b) On or after the date hereof, (i) there shall not
have occurred any downgrading, suspension or withdrawal of, nor shall any
notice have been given of any potential or intended downgrading, suspension
or withdrawal of, or of any review (or of any potential or intended review)
for a possible change that does not indicate the direction of the possible
change in, any rating of the Company or any securities of the Company
(including, without limitation, the placing of any of the foregoing ratings
on credit watch with negative or developing implications or under review with
an uncertain direction) by any "nationally recognized statistical rating
organization" as such term is defined for purposes of Rule 436(g)(2) under
the Act, (ii) there shall not have occurred any change, nor shall any notice
have been given of any potential or intended change, in the outlook for any
rating of the Company or any securities of the Company by any such rating
organization and (iii) no such rating organization shall have given notice
that it has assigned (or is considering assigning) a lower rating to the
Notes than that on which the Notes were marketed.
(c) Since the respective dates as of which
information is given in the Offering Memorandum other than as set forth in
the Offering Memorandum (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(c)(i), 9(c)(ii) or
9(c)(iii), in your judgment, is material and adverse and, in your judgment,
makes it impracticable to market the Securities on the terms and in the
manner contemplated in the Offering Memorandum.
(d) You shall have received on the Closing Date a
certificate, dated the Closing Date, and on an Option Closing Date, if any,
dated such Option Closing Date, signed by Lyle C. Turner and James R. Glynn,
in their capacities as President and Chief Executive Officer, and Executive
Vice President and Chief Financial Officer, respectively, of the Company,
confirming the matters set forth in Sections 6(dd), 9(a) and 9(b) and stating
that the Company has complied with all the agreements and satisfied all of
the conditions herein contained and required to be complied with or satisfied
on or prior to the Closing Date or Option Closing Date, as the case may be.
20
<PAGE>
(e) You shall have received on the Closing Date and
each Option Closing Date, if any, an opinion (satisfactory to you and counsel
for the Initial Purchasers), dated the Closing Date or such Option Closing
Date, as the case may be, of Gray Cary Ware & Freidenrich LLP, counsel for
the Company, or of foreign counsel to the Company with respect to certain
foreign subsidiaries, to the effect that:
(i) each of the Company and its subsidiaries has
been duly incorporated, is validly existing as a corporation in good
standing under the laws of its jurisdiction of incorporation and has the
corporate power and authority to carry on its business as described in
the Offering Memorandum 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 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, to such
counsel's knowledge, are owned of record by the Company, free and clear
of any Lien;
(iv) the Notes have been duly authorized and, when
executed and authenticated in accordance with the provisions of the
Indenture and delivered to and paid for by the Initial Purchasers in
accordance with the terms of this Agreement, will be entitled to the
benefits of the Indenture and will be valid and binding obligations of
the Company, enforceable in accordance with their terms except as (x) the
enforceability thereof may be limited by bankruptcy, insolvency or
similar laws affecting creditors' rights generally and (y) rights of
acceleration and availability of equitable remedies may be limited by
equitable principles of general applicability;
(v) the Indenture has been duly authorized,
executed and delivered by the Company and is a valid and binding
agreement of the Company, enforceable against the Company in accordance
with its terms except as (x) the enforceability thereof may be limited by
bankruptcy, insolvency or similar laws affecting creditors' rights
generally and (y) rights of acceleration and the availability of
equitable remedies may be limited by equitable principles of general
applicability;
(vi) the Notes are convertible into Common Stock
in accordance with the terms of the Indenture; the shares of Common Stock
initially issuable upon conversion of the Notes have been duly authorized
and reserved for issuance upon such conversion and, when issued upon such
conversion, will be validly issued, fully paid and nonassessable, will
conform to the description thereof contained in the Offering Memorandum
and will be duly authorized for listing on the NASDAQ National Market,
21
<PAGE>
subject to notice of official issuance; the Company has the authorized
capital stock as set forth in the Offering Memorandum; and the
stockholders of the Company have no pre-emptive or, to the knowledge of
such counsel, similar rights with respect to the Notes or the Common
Stock issuable upon the conversion of the Notes;
(vii) this Agreement has been duly authorized,
executed and delivered by the Company;
(viii) The Registration Rights Agreement has been
duly authorized, executed and delivered by the Company and is a valid and
binding agreement of the Company enforceable against the Company in
accordance with its terms, except as (x) the enforceability thereof may
be limited by bankruptcy, insolvency or similar laws affecting creditors'
rights generally and (y) rights of acceleration and the availability of
equitable remedies may be limited by equitable principles of general
applicability;
(ix) the statements under the captions
"Business Technology Licensing", "Business Patents and Proprietary
Technologies", "Management Limitations on Liability and Indemnification
Matters," "Management Stock Option Plans", "Management Employee Stock
Ownership Plan", "Management 1998 Employee Stock Purchase Plan",
"Management Section 401(k) Plan," "Description of Notes," "Description of
Capital Stock" and "Summary of Certain Federal Income Tax Considerations"
in the Offering Memorandum, insofar as such statements constitute a
summary of the legal matters, documents or proceedings referred to
therein, fairly present in all material respects such legal matters,
documents and proceedings;
(x) to such counsel's knowledge, except as set
forth in Exhibit A to such counsel's opinion, neither the Company nor any
of its subsidiaries is in violation of its respective charter or by-laws
and 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 and the other Operative Documents by the Company, the
compliance by the Company with all provisions hereof and thereof and the
consummation of the transactions contemplated hereby and thereby will not
(i) require any consent, approval, Material 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 or for filings required by the Registration Rights
Agreement), (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 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 and that is material
to the Company and its subsidiaries, taken as a whole, (iii) violate or
conflict
22
<PAGE>
with any applicable law or any rule or regulation, or, to such
counsel's knowledge, any 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, (iv) result in the
imposition or creation of (or the obligation to create or impose) a Lien
under, any agreement or instrument 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, or (v) to such
counsel's knowledge, result in the termination, suspension or revocation
of any Material Authorization of the Company or any of its subsidiaries;
(xii) except as set forth on Exhibit B to such
counsel's opinion or in the Offering Memorandum, 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, which
might result, singly or in the aggregate, in a material adverse effect on
the business, prospects, financial condition or results of operations of
the Company and its subsidiaries, taken as a whole;
(xiii) the Company is not and, after giving effect
to the offering and sale of the Notes and the application of the net
proceeds thereof as described in the Offering Memorandum, will not be, an
"investment company" as such term is defined in the Investment Company
Act of 1940, as amended;
(xiv) except as set forth in the Offering
Memorandum, to such counsel's knowledge, 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 Notes
registered pursuant to any Registration Statement;
(xv) to such counsel's knowledge, 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 the Company's patent 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 which has not been resolved and
which, singly or in the aggregate, might result in a material adverse
effect on the business, prospects, financial condition or results of
operations of the Company and its subsidiaries, taken as a whole;
(xvi) the Indenture complies as to form in all
material respects with the requirements of the TIA, and the rules and
regulations of the Commission applicable to an indenture which is
qualified thereunder. It is not necessary in connection with the offer,
sale and delivery of the Notes to the Initial Purchasers in the manner
contemplated by this Agreement or in connection with the Exempt Resales
to qualify the Indenture under the TIA; and
23
<PAGE>
(xvii) no registration under the Act of the
Securities is required for the sale of the Securities to the Initial
Purchasers as contemplated by this Agreement or for the Exempt Resales
assuming that (i) each Initial Purchaser is a QIB, (ii) the accuracy of,
and compliance with, the Initial Purchasers' representations and
agreements contained in Section 7 of this Agreement, (iii) the accuracy
of the representations of the Company set forth in Sections 5(h) and 6(z)
of this Agreement.
Such opinion shall also include a statement that such
counsel has no reason to believe that, as of the date of the Offering
Memorandum or as of the Closing Date or the Option Closing Date, as the case
may be, the Offering Memorandum, as amended or supplemented, if applicable
(except for the financial statements and other financial data included
therein, as to which such counsel need not express any belief) contains any
untrue statement of a material fact or omits to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
The opinion of Gray Cary Ware Freidenrich LLP and of the
foreign counsel to the Company described in Section 9(e) above shall be
rendered to you at the request of the Company and shall so state therein. In
giving such statement, Gray Cary Ware Freidenrich LLP may state that their
opinion and belief are based upon their participation in the preparation of
the Offering Memorandum and any amendments or supplements thereto and review
and discussion of the contents thereof, but are without independent check or
verification except as specified.
(f) The Initial Purchasers shall have received on the
Closing Date and on each Option Closing Date, an opinion, dated the Closing
Date, of Latham & Watkins, counsel for the Initial Purchasers, in form and
substance reasonably satisfactory to the Initial Purchasers.
(g) The Initial Purchasers shall have received, at
the time this Agreement is executed and at the Closing Date and each Option
Closing Date, letters dated the date hereof or the Closing Date or an Option
Closing Date, as the case may be, in the form and substance satisfactory to
the Initial Purchasers from Arthur Andersen LLP, independent public
accountants, containing the information and statements of the type ordinarily
included in accountants' "comfort letters" to the Initial Purchasers with
respect to the financial statements and certain financial information
contained in the Offering Memorandum.
(h) The Notes shall have been approved by the NASD
for trading and duly listed in PORTAL.
(i) The Initial Purchasers shall have received a
counterpart, conformed as executed, of the Indenture which shall have been
entered into by the Company and the Trustee.
(j) The Company shall have executed the Registration
Rights Agreement and the Initial Purchasers shall have received an original
copy thereof, duly executed by the Company.
(k) The Company shall not have failed at or prior to
the Closing Date or any Option Closing Date, as the case may be, to perform
or comply with any of the agreements
24
<PAGE>
herein contained and required to be performed or complied with by the Company
at or prior to the Closing Date or Option Closing Date, as the case may be.
10. EFFECTIVENESS OF AGREEMENT AND TERMINATION. This Agreement may
be terminated at any time on or prior to the Closing Date by the Initial
Purchasers by written notice to the Company if any of the following has
occurred: (i) any outbreak or escalation of hostilities or other national or
international calamity or crisis or change in economic conditions or in the
financial markets of the United States or elsewhere that, in the Initial
Purchasers' judgment, is material and adverse and, in the Initial Purchasers'
judgment, makes it impracticable to market the Securities on the terms and in
the manner contemplated in the Offering Memorandum, (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 an Option Closing Date, as the case may be,
any one or more of the Initial Purchasers shall fail or refuse to purchase
the Notes which it or they have agreed to purchase hereunder on such date and
the aggregate principal amount of the Notes which such defaulting Initial
Purchaser or Initial Purchasers, as the case may be, agreed but failed or
refused to purchase is not more than one-tenth of the aggregate principal
amount of the Notes to be purchased on such date by all Initial Purchasers,
each non-defaulting Initial Purchaser shall be obligated severally, in the
proportion which the principal amount of the Notes set forth opposite its
name in Schedule A bears to the aggregate principal amount of the Notes which
all the non-defaulting Initial Purchasers, as the case may be, have agreed to
purchase, or in such other proportion as you may specify, to purchase the
Notes which such defaulting Initial Purchaser or Initial Purchasers, as the
case may be, agreed but failed or refused to purchase on such date; PROVIDED
that in no event shall the aggregate principal amount of the Notes which any
Initial Purchaser has agreed to purchase pursuant to Section 2 hereof be
increased pursuant to this Section 10 by an amount in excess of one-tenth of
such principal amount of the Notes without the written consent of such
Initial Purchaser. If on the Closing Date, or an Option Closing Date, as the
case may be, any Initial Purchaser or Initial Purchasers shall fail or refuse
to purchase the Notes and the aggregate principal amount of the Notes with
respect to which such default occurs is more than one-tenth of the aggregate
principal amount of the Notes to be purchased by all Initial Purchasers and
arrangements satisfactory to the Initial Purchasers and the Company for
purchase of such the Notes are not made within 48 hours after such default,
this Agreement will terminate without liability on the part of any
non-defaulting Initial Purchaser and the Company. In any such case which
does not result in termination of this Agreement, either you or the Company
shall have the right to postpone the
25
<PAGE>
Closing Date, or such Option Closing Date, as the case may be, but in no
event for longer than seven days, in order that the required changes, if any,
in the Offering Memorandum or any other documents or arrangements may be
effected. Any action taken under this paragraph shall not relieve any
defaulting Initial Purchaser from liability in respect of any default of any
such Initial Purchaser under this Agreement.
11. 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, California, 92008, and (ii) if to
the Initial Purchasers, Donaldson, Lufkin & Jenrette Securities Corporation,
277 Park Avenue, New York, New York 10172, Attention: Syndicate Department,
or in any case to such other address as the person to be notified may have
requested in writing
The respective indemnities, contribution agreements, representations,
warranties and other statements of the Company and the Initial Purchasers 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
Securities regardless of (i) any investigation, or statement as to the
results thereof, made by or on behalf of the Initial Purchasers; the officers
or directors of the Initial Purchasers, any person controlling the Initial
Purchasers, the Company, the officers or directors of the Company, or any
person controlling the Company, (ii) acceptance of the Securities and payment
for them hereunder and (iii) termination of the Agreement.
If for any reason the Notes are not delivered by or on behalf of the
Company as provided herein (other than as a result of any termination of this
Agreement pursuant to Section 10), the Company agrees to reimburse the
Initial Purchasers 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 Company also agrees to
reimburse the Initial Purchasers and its officers, directors and each person,
if any, who controls such Initial Purchasers within the meaning of Section 15
of the Act or Section 20 of the Exchange Act for any and all fees and
expenses (including without limitation the fees and expenses of counsel)
incurred by them in connection with enforcing their rights under this
Agreement (including without limitation its rights under Section 8).
Except as otherwise provided, this Agreement has been and is made
solely for the benefit of and shall be binding upon the Company, the Initial
Purchasers, the Initial Purchasers' directors and officers, any controlling
persons referred to herein, the directors of the Company 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 Securities from the Initial Purchasers 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.
26
<PAGE>
Please confirm that the foregoing correctly sets forth the agreement
among the Company, and the Initial Purchasers.
Very truly yours,
INVITROGEN CORPORATION
By: /s/ Lyle C. Turner
----------------------------------
Name: Lyle C. Turner
Title: President and Chief Executive Officer
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
BEAR, STEARNS & CO. INC.
CHASE SECURITIES INC.
DAIN RAUSCHER INCORPORATED
U.S. BANCORP PIPER JAFFRAY INC.
By: DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ Edward M. Brown
--------------------------
Name: Edward M. Brown
Title: Managing Director
27
<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
Principal Amount
Initial Purchaser of Notes
- ----------------- -----------------------
<S> <C>
Donaldson, Lufkin & Jenrette
Securities Corporation........................ $105,000,000
Bear, Stearns & Co. Inc............................ 11,250,000
Chase Securities Inc............................... 11,250,000
Dain Rauscher Incorporated......................... 11,250,000
U.S. Bancorp Piper Jaffray Inc..................... 11,250,000
Total.................................... $150,000,000
============
</TABLE>
28
<PAGE>
SCHEDULE B
SUBSIDIARIES
Invitrogen Export Company, Ltd.
Invitrogen B.V.
NOVEX
NOVEX International Sales Corporation
NOVEX Electrophoresis GmbH
Serva GmbH
Research Genetics, Inc.
29
<PAGE>
EXHIBIT A
FORM OF REGISTRATION RIGHTS AGREEMENT
30
<PAGE>
EXECUTION COPY
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
INVITROGEN CORPORATION
$172,500,000
5 1/2% CONVERTIBLE SUBORDINATED NOTES DUE 2007
________________________
INDENTURE
Dated as of March 1, 2000
________________________
____________________
STATE STREET BANK AND TRUST COMPANY OF CALIFORNIA, N.A.
Trustee
____________________
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
<PAGE>
<TABLE>
TABLE OF CONTENTS
<S> <C>
ARTICLE I. DEFINITIONS; TRUST INDENTURE ACT. . . . . . . . . . . . . . . . 1
Section 1.01. Definitions . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.02. Other Definitions.. . . . . . . . . . . . . . . . . . . 5
Section 1.03. Incorporation by Reference of Trust Indenture Act.. . . 6
Section 1.04. Rules of Construction.. . . . . . . . . . . . . . . . . 6
ARTICLE II. THE NOTES. . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 2.01. Form and Dating.. . . . . . . . . . . . . . . . . . . . 6
Section 2.02. Execution and Authentication. . . . . . . . . . . . . . 8
Section 2.03. Registrar and Paying Agent. . . . . . . . . . . . . . . 9
Section 2.04. Paying Agent to Hold Money in Trust.. . . . . . . . . . 9
Section 2.05. Holder Lists. . . . . . . . . . . . . . . . . . . . . . 9
Section 2.06. Transfer and Exchange.. . . . . . . . . . . . . . . . . 9
Section 2.07. Replacement Notes.. . . . . . . . . . . . . . . . . . .14
Section 2.08. Outstanding Notes.. . . . . . . . . . . . . . . . . . .14
Section 2.09. Treasury Notes. . . . . . . . . . . . . . . . . . . . .14
Section 2.10. Temporary Notes; Global Notes.. . . . . . . . . . . . .15
Section 2.11. Cancellation. . . . . . . . . . . . . . . . . . . . . .15
Section 2.12. Defaulted Interest. . . . . . . . . . . . . . . . . . .16
ARTICLE III. REDEMPTION. . . . . . . . . . . . . . . . . . . . . . . . . .16
Section 3.01. Notices to Trustee. . . . . . . . . . . . . . . . . . .16
Section 3.02. Selection of Notes to Be Redeemed.. . . . . . . . . . .16
Section 3.03. Notice of Redemption. . . . . . . . . . . . . . . . . .17
Section 3.04. Effect of Notice of Redemption. . . . . . . . . . . . .17
Section 3.05. Deposit of Redemption Price.. . . . . . . . . . . . . .18
Section 3.06. Notes Redeemed in Part. . . . . . . . . . . . . . . . .18
Section 3.07. Optional Redemption.. . . . . . . . . . . . . . . . . .18
Section 3.08. Mandatory Redemption. . . . . . . . . . . . . . . . . .18
Section 3.09. Purchase Offer. . . . . . . . . . . . . . . . . . . . .18
ARTICLE IV. COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . .20
Section 4.01. Payment of Notes. . . . . . . . . . . . . . . . . . . .20
Section 4.02. Reports.. . . . . . . . . . . . . . . . . . . . . . . .20
Section 4.03. Compliance Certificate. . . . . . . . . . . . . . . . .20
Section 4.04. Stay, Extension and Usury Laws. . . . . . . . . . . . .21
Section 4.05. Corporate Existence.. . . . . . . . . . . . . . . . . .21
Section 4.06. Taxes.. . . . . . . . . . . . . . . . . . . . . . . . .21
Section 4.07. Change of Control.. . . . . . . . . . . . . . . . . . .22
Section 4.08. Limitation on Status As Investment Company. . . . . . .22
ARTICLE V. CONVERSION. . . . . . . . . . . . . . . . . . . . . . . . . . .22
Section 5.01. Conversion Privilege. . . . . . . . . . . . . . . . . .22
Section 5.02. Conversion Procedure. . . . . . . . . . . . . . . . . .23
Section 5.03. Fractional Shares.. . . . . . . . . . . . . . . . . . .23
Section 5.04. Taxes on Conversion.. . . . . . . . . . . . . . . . . .23
Section 5.05. Company to Provide Stock. . . . . . . . . . . . . . . .24
Section 5.06. Adjustment of Conversion Price. . . . . . . . . . . . .24
Section 5.07. No Adjustment.. . . . . . . . . . . . . . . . . . . . .27
Section 5.08. Other Adjustments.. . . . . . . . . . . . . . . . . . .27
Section 5.09. Adjustments for Tax Purposes. . . . . . . . . . . . . .27
i
<PAGE>
Section 5.10. Notice of Adjustment. . . . . . . . . . . . . . . . . .27
Section 5.11. Notice of Certain Transactions. . . . . . . . . . . . .28
Section 5.12. Effect of Reclassifications, Consolidations, Mergers
or Sales on Conversion Privilege.. . . . . . . . . . .28
Section 5.13. Trustee's Disclaimer. . . . . . . . . . . . . . . . . .29
ARTICLE VI. SUBORDINATION. . . . . . . . . . . . . . . . . . . . . . . . .29
Section 6.01. Agreement to Subordinate and Ranking. . . . . . . . . .29
Section 6.02. No Payment on Notes if Senior Debt in Default.. . . . .29
Section 6.03. Distribution on Acceleration of Notes; Dissolution and
Reorganization; Subrogation of Notes.. . . . . . . . .30
Section 6.04. Reliance by Senior Debt on Subordination Provisions.. .33
Section 6.05. No Waiver of Subordination Provisions.. . . . . . . . .33
Section 6.06. Trustee's Relation to Senior Debt.. . . . . . . . . . .34
Section 6.07. Other Provisions Subject Hereto.. . . . . . . . . . . .34
ARTICLE VII. SUCCESSORS. . . . . . . . . . . . . . . . . . . . . . . . . .34
Section 7.01. limitation on Merger, Sale or consolidation.. . . . . .34
Section 7.02. Successor Corporation Substituted.. . . . . . . . . . .35
ARTICLE VIII. DEFAULTS AND REMEDIES. . . . . . . . . . . . . . . . . . . .35
Section 8.01. Events of Default.. . . . . . . . . . . . . . . . . . .35
Section 8.02. Acceleration. . . . . . . . . . . . . . . . . . . . . .37
Section 8.03. Other Remedies. . . . . . . . . . . . . . . . . . . . .37
Section 8.04. Waiver of Past Defaults.. . . . . . . . . . . . . . . .38
Section 8.05. Control by majority.. . . . . . . . . . . . . . . . . .38
Section 8.06. Limitation on Suits.. . . . . . . . . . . . . . . . . .38
Section 8.07. Rights of Holders to Receive Payment. . . . . . . . . .38
Section 8.08. Collection Suit by Trustee. . . . . . . . . . . . . . .39
Section 8.09. Trustee May File Proofs of Claim. . . . . . . . . . . .39
Section 8.10. Priorities. . . . . . . . . . . . . . . . . . . . . . .39
Section 8.11. Undertaking for Costs.. . . . . . . . . . . . . . . . .39
ARTICLE IX. TRUSTEE . . . . . . . . . . . . . . . . . . . . . . . . . . .40
Section 9.01. Duties of Trustee.. . . . . . . . . . . . . . . . . . .40
Section 9.02. Rights of Trustee.. . . . . . . . . . . . . . . . . . .40
Section 9.03. Individual Rights of Trustee. . . . . . . . . . . . . .41
Section 9.04. Trustee's Disclaimer. . . . . . . . . . . . . . . . . .41
Section 9.05. Notice of Defaults. . . . . . . . . . . . . . . . . . .41
Section 9.06. Reports by Trustee to Holders.. . . . . . . . . . . . .41
Section 9.07. Compensation and Indemnity. . . . . . . . . . . . . . .41
Section 9.08. Replacement of Trustee. . . . . . . . . . . . . . . . .42
Section 9.09. Successor Trustee by Merger, Etc. . . . . . . . . . . .43
Section 9.10. Eligibility; Disqualification.. . . . . . . . . . . . .43
Section 9.11. Preferential Collection of Claims Against Company.. . .43
ARTICLE X. DISCHARGE OF INDENTURE. . . . . . . . . . . . . . . . . . . . .43
Section 10.01. Termination of Company's Obligations.. . . . . . . . .43
Section 10.02. Repayment to Company.. . . . . . . . . . . . . . . . .44
ARTICLE XI. AMENDMENTS, SUPPLEMENTS AND WAIVERS. . . . . . . . . . . . . .44
Section 11.01. Without Consent of Holders.. . . . . . . . . . . . . .44
Section 11.02. With Consent of Holders. . . . . . . . . . . . . . . .44
Section 11.03. Compliance with Trust Indenture Act. . . . . . . . . .45
Section 11.04. Revocation and Effect of Consents. . . . . . . . . . .45
Section 11.05. Notation on or Exchange of Notes.. . . . . . . . . . .46
ii
<PAGE>
Section 11.06. Trustee Protected. . . . . . . . . . . . . . . . . . .46
ARTICLE XII. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . .46
Section 12.01. Trust Indenture Act Controls.. . . . . . . . . . . . .46
Section 12.02. Notices. . . . . . . . . . . . . . . . . . . . . . . .46
Section 12.03. Communication by Holders with Other Holders. . . . . .47
Section 12.04. Certificate and Opinion as to Conditions Precedent.. .47
Section 12.05. Statements Required in Certificate or Opinion. . . . .47
Section 12.06. Rules by Trustee and Agents. . . . . . . . . . . . . .47
Section 12.07. Legal Holidays.. . . . . . . . . . . . . . . . . . . .48
Section 12.08. No Recourse Against Others.. . . . . . . . . . . . . .48
Section 12.09. Counterparts and Facsimile Signatures. . . . . . . . .48
Section 12.10. Variable Provisions. . . . . . . . . . . . . . . . . .48
Section 12.11. Governing Law, submission to jurisdiction. . . . . . .49
Section 12.12. No Adverse Interpretation of Other Agreements. . . . .49
Section 12.13. Successors.. . . . . . . . . . . . . . . . . . . . . .49
Section 12.14. Severability.. . . . . . . . . . . . . . . . . . . . .50
Section 12.15. Table of Contents, Headings, Etc.. . . . . . . . . . .50
</TABLE>
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<PAGE>
INDENTURE, dated as of March 1, 2000, between Invitrogen Corporation, a
Delaware corporation (the "COMPANY"), and State Street Bank and Trust Company of
California, N.A., a national banking association, as trustee (the "TRUSTEE").
Each party agrees as follows for the benefit of the other party and for
the equal and ratable benefit of the Holders (as defined in Section 1.01 hereof)
of the Company's 5 1/2% Convertible Subordinated Notes due 2007 (the "NOTES"):
ARTICLE I.
DEFINITIONS; TRUST INDENTURE ACT
SECTION 1.01. DEFINITIONS.
"AFFILIATE" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise.
"AGENT" means any Registrar, Paying Agent or Conversion Agent.
"BOARD OF DIRECTORS" means the Board of Directors of the Company or any
authorized committee of the Board of Directors.
"BOARD RESOLUTION" means a duly authorized resolution of the Board of
Directors.
"BUSINESS DAY" means any day that is not a Legal Holiday.
"CAPITAL STOCK" means any and all shares, interests, participations,
rights or other equivalents, however designated, of corporate stock, including,
without limitation, partnership interests.
"CHANGE OF CONTROL" means (i) the sale, lease, transfer, conveyance or
other disposition, in one or a series of related transactions, of all or
substantially all of the properties or assets of the Company to any "Person" or
"group," within the meaning of Sections 13(d)(3) and 14(d)(2) of the Exchange
Act or any successor provision to either of the foregoing, including any group
acting for the purpose of acquiring, holding or disposing of securities within
the meaning of Rule 13d-5(b)(1) under the Exchange Act; (ii) the approval by the
requisite stockholders of the Company of a plan of liquidation or dissolution of
the Company; (iii) any "Person" or "group," within the meaning of Sections
13(d) and 14(d)(2) of the Exchange Act or any successor provision to either of
the foregoing, including any group acting for the purpose of acquiring, holding
or disposing of securities within the meaning of Rule 13d-5(b)(1) under the
Exchange Act, becomes the "beneficial owner", as defined in Rule 13d-3 under the
Exchange Act, of more than 50% of the total voting power of all classes of the
Company's voting stock and/or warrants or options to acquire such voting stock,
calculated on a fully diluted basis, unless, as a result of such transaction,
the Company's ultimate direct or indirect ownership is substantially the same
immediately after such transaction as it was immediately prior to such
transaction; or (iv) the first day on which a majority of the members of the
Company's Board of Directors are not Continuing Directors.
"CHANGE OF CONTROL OFFER" means a Purchase Offer.
<PAGE>
"COMMON STOCK" means the common stock, par value $0.01 per share, of the
Company as the same exists at the date of the execution of this Indenture or as
such stock may be constituted from time to time.
"COMPANY" means the party named as such above until a successor replaces
it in accordance with Article VII and thereafter means the successor.
"CONTINUING DIRECTOR" means, at any date of determination, any member of
the Company's Board of Directors (i) who was a member of the Company's Board of
Directors on the Issuance Date, or (ii) who was nominated for election or
elected to the Company's Board of Directors by at least a majority of the
directors who were such Continuing Directors at the time of such nomination or
election or whose election to the Company's Board of Directors was recommended
or endorsed by at least a majority of the directors who were such Continuing
Directors at the time of such nomination or election.
"DAILY MARKET PRICE" means the price of a share of Common Stock on the
relevant date, determined (a) on the basis of the last reported sale price
regular way of the Common Stock as reported on the Nasdaq Stock Market's
National Market (the "NNM"), or if the Common Stock is not then listed on the
NNM, as reported on such national securities exchange upon which the Common
Stock is listed, or (b) if there is no such reported sale on the day in
question, on the basis of the average of the closing bid and asked quotations
regular way as so reported, or (c) if the Common Stock is not listed on the
NNM or on any national securities exchange, on the basis of the average of
the high bid and low asked quotations regular way on the day in question in
the over-the-counter market as reported by the National Association of
Securities Dealers Automated Quotation System, or if not so quoted, as
reported by National Quotation Bureau, Incorporated, or a similar
organization.
"DEFAULT" means any event that is, or with the passage of time or the
giving of notice or both would be, an Event of Default.
"DEPOSITARY" shall mean The Depository Trust Company, its nominees and
their respective successors.
"EQUITY INTERESTS" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock, but excluding any Indebtedness that is
convertible into, or exchangeable for, Capital Stock.
"EXCESS PAYMENT" means the excess of (A) the aggregate of the cash and
value of other consideration paid by the Company or any of its Subsidiaries with
respect to shares acquired in a tender offer or other negotiated transaction
over (B) the market value of such acquired shares after giving effect to the
completion of a tender offer or other negotiated transaction.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXCHANGE RATE CONTRACT" means, with respect to any Person, any currency
swap agreements, forward exchange rate agreements, foreign currency futures or
options, exchange rate collar agreements, exchange rate insurance and other
agreements or arrangements, or combination thereof, the principal purpose of
which is to provide protection against fluctuations in currency exchange rates.
An Exchange Rate Contract may also include an Interest Rate Agreement.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public
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<PAGE>
Accountants and statements and pronouncements of the Financial Accounting
Standards Board or in such other statements by such other entity as approved
by a significant segment of the accounting profession, which are in effect on
the Issuance Date and are applied on a consistent basis.
"GUARANTEE" means a guarantee, other than by endorsement of negotiable
instruments for collection in the ordinary course of business, direct or
indirect, in any manner, including, without limitation, letters of credit and
reimbursement agreements in respect thereof, of all or any part of any
Indebtedness.
"HOLDER" means a Person in whose name a Note is registered in the
register referred to in Section 2.03.
"INDEBTEDNESS" means, with respect to any Person, any indebtedness of
such Person, whether or not contingent, in respect of borrowed money or
evidenced by bonds, notes, debentures or similar instruments or letters of
credit, or reimbursement agreements in respect thereof, or representing the
balance deferred and unpaid of the purchase price of any property (which
purchase price is due more than six months after the placing into service or
delivery of such property) including pursuant to capital leases and
sale-and-leaseback transactions, or representing any hedging obligations
under an Exchange Rate Contract or an Interest Rate Agreement, except any
such balance that constitutes an accrued expense or trade payable, if and to
the extent any of the foregoing indebtedness, other than obligations under an
Exchange Rate Contract or an Interest Rate Agreement, would appear as a
liability upon a balance sheet of such Person prepared in accordance with
GAAP, and also includes, to the extent not otherwise included, the Guarantee
of items which would be included within this definition. The amount of any
Indebtedness outstanding as of any date shall be the accreted value thereof,
in the case of any Indebtedness issued with original issue discount.
Indebtedness shall not include liabilities for taxes of any kind.
"INDENTURE" means this Indenture, as amended from time to time.
"INITIAL PURCHASERS" means Donaldson, Lufkin & Jenrette Securities
Corporation, Bear, Stearns & Co. Inc., Chase Securities Inc., Dain Rauscher
Incorporated and U.S. Bancorp Piper Jaffray Inc.
"INTEREST RATE AGREEMENT" means, with respect to any Person, any interest
rate swap agreement, interest rate cap agreement, interest rate collar agreement
or other similar agreement the principal purpose of which is to protect the
party indicated therein against fluctuations in interest rates.
"ISSUANCE DATE" means the date on which the Notes are first authenticated
and issued.
"NOTES" has the meaning set forth in the preamble hereto.
"OBLIGATIONS" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"OFFICERS' CERTIFICATE" means a certificate of the Company signed by two
Officers, one of whom must be the Chairman of the Board, the President, the
Treasurer or a Vice President of the Company.
"OPINION OF COUNSEL" means a written opinion from legal counsel who is
reasonably acceptable to the Trustee. The counsel may be an employee of or
counsel to the Company or the Trustee.
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<PAGE>
"PERSON" means any individual, corporation, partnership, joint venture,
association, joint stock company, trust, unincorporated organization, limited
liability company or government or any agency or political subdivision thereof.
"PURCHASE AGREEMENT" means the Purchase Agreement, dated as of February
25, 2000, among the Company and the Initial Purchasers.
"REGISTRATION DEFAULT" has the meaning set forth in Section 2 of the
Notes.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights Agreement
relating to the Notes and the underlying Common Stock, dated March 1, 2000,
among the Company and the Initial Purchasers party thereto.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SENIOR DEBT" means the principal of, interest on and other amounts due
on (i) Indebtedness of the Company, whether outstanding on the date hereof or
thereafter created, incurred, assumed or guaranteed by the Company, for money
borrowed from banks or other financial institutions; (ii) Indebtedness of the
Company, whether outstanding on the date hereof or thereafter created, incurred,
assumed or guaranteed by the Company; and (iii) Indebtedness of the Company
under interest rate swaps, caps or similar hedging agreements and foreign
exchange contracts, currency swaps or similar agreements: unless, in the
instrument creating or evidencing or pursuant to which Indebtedness under (i) or
(ii) is outstanding, it is expressly provided that such Indebtedness is not
senior in right of payment to the Notes. Senior Debt includes, with respect to
the obligations described in clauses (i) and (ii) above, interest accruing,
pursuant to the terms of such Senior Debt, on or after the filing of any
petition in bankruptcy or for reorganization relating to the Company, whether or
not post-filing interest is allowed in such proceeding, at the rate specified in
the instrument governing the relevant obligation. Notwithstanding anything to
the contrary in the foregoing, Senior Debt shall not include: (a) Indebtedness
of or amounts owed by the Company for compensation to employees, or for goods or
materials purchased in the ordinary course of business, or for services; and (b)
Indebtedness of the Company to any Subsidiary of the Company.
"SHELF REGISTRATION STATEMENT" shall have the meaning set forth in the
Registration Rights Agreement.
"SIGNIFICANT SUBSIDIARY" means any Subsidiary of the Company which is a
"significant subsidiary" as defined in Rule 1-02(w) of Regulation S-X under the
Securities Act and the Exchange Act, as such Regulation is in effect on the date
hereof.
"SPECIAL INTEREST" has the meaning set forth in Section 2 of the Notes.
"SUBSIDIARY" means any corporation, association or other business entity
of which more than 50% of the total voting power of shares of Capital Stock
entitled, without regard to the occurrence of any contingency, to vote in the
election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by any Person or one or more of the other
Subsidiaries of that Person or a combination thereof.
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<PAGE>
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code Sections
77aaa-77bbbb) as in effect on the date of execution of this Indenture.
"TRUSTEE" means the party named as such above until a successor replaces
it in accordance with the applicable provisions of this Indenture and thereafter
means the successor.
"TRUST OFFICER" means any officer or assistant officer of the Trustee
assigned by the Trustee to administer its corporate trust matters.
"WHOLLY-OWNED SUBSIDIARY" of any specified Person means a Subsidiary of
such Person all of the outstanding Capital Stock or other ownership interests of
which (other than directors' qualifying shares) shall at the time be owned by
such Person or by one or more Wholly-Owned Subsidiaries of such Person and one
or more Wholly-Owned Subsidiaries of such Person.
SECTION 1.02. OTHER DEFINITIONS.
<TABLE>
<CAPTION>
DEFINED
TERM IN SECTION
---- ----------
<S> <C>
"ACCREDITED INVESTOR RESTRICTED NOTES"... 2.01
"AGENT MEMBER"........................... 2.01
"BANKRUPTCY LAW"......................... 8.01
"CEDEL".................................. 2.01
"CHANGE OF CONTROL PAYMENT".............. 4.07
"COMMENCEMENT DATE"...................... 3.09
"CONVERSION AGENT"....................... 2.03
"CONVERSION DATE"........................ 5.02
"CONVERSION PRICE"....................... 5.01
"CONVERSION SHARES"...................... 5.06
"CUSTODIAN".............................. 8.01
"DISTRIBUTION DATE"...................... 5.06
"DISTRIBUTION RECORD DATE"............... 5.06
"EUROCLEAR".............................. 2.01
"EVENT OF DEFAULT"....................... 8.01
"GLOBAL NOTE"............................ 2.01
"LEGAL HOLIDAY".......................... 12.08
"OFFER AMOUNT"........................... 3.09
"OFFICER"................................ 12.11
"PAYING AGENT"........................... 2.03
"PAYMENT BLOCKAGE NOTICE"................ 6.02
"PAYMENT BLOCKAGE PERIOD"................ 6.02
"PAYMENT DEFAULT"........................ 8.01
"PURCHASE DATE".......................... 3.09
"PURCHASE OFFER"......................... 3.09
"QIBs"................................... 2.01
"REGULATION S"........................... 2.01
"REGULATION S GLOBAL NOTE" .............. 2.01
"REGISTRAR".............................. 2.03
"RESTRICTED NOTES"....................... 2.01
"RIGHTS"................................. 5.06
"RULE 144A".............................. 2.01
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<PAGE>
"RULE 144A GLOBAL NOTE".................. 2.01
"TENDER PERIOD".......................... 3.09
</TABLE>
SECTION 1.03. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT.
Whenever this Indenture refers to a provision of the TIA, the provision
is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following
meanings:
"INDENTURE SECURITIES" means the Notes;
"INDENTURE SECURITY HOLDER" means a Holder of a Note;
"INDENTURE TO BE QUALIFIED" means this Indenture;
"INDENTURE TRUSTEE" or "INSTITUTIONAL TRUSTEE" means the Trustee; and
"OBLIGOR" on the Notes means the Company or any other obligor on the
Notes.
All other terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule under the TIA
have the meanings so assigned to them.
SECTION 1.04. RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(a) a term has the meaning assigned to it;
(b) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP consistently applied;
(c) "OR" is not exclusive;
(d) words in the singular include the plural, and in the plural
include the singular;
(e) provisions apply to successive events and transactions;
(f) references to sections of or rules under the Securities Act
shall be deemed to include substitute, replacement or successor sections
or rules adopted by the SEC from time to time; and
(g) a reference to "$" or U.S. Dollars is to United States
dollars.
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<PAGE>
ARTICLE II.
THE NOTES
SECTION 2.01. FORM AND DATING.
(a) GENERAL.
The Notes and the Trustee's certificate of authentication shall be
substantially in the form of Exhibit A hereto, which is hereby incorporated by
reference and expressly made a part of this Indenture. The Notes may have
notations, legends or endorsements required by law, stock exchange rule,
agreements to which the Company is subject, if any, or usage (provided that any
such notation, legend or endorsement is in a form acceptable to the Company).
The Company shall furnish any such legend not contained in Exhibit A to the
Trustee in writing. Each Note shall be dated the date of its authentication.
The Notes shall be in denominations of $1,000 and integral multiples thereof.
The terms and provisions of the Notes set forth in Exhibit A are part of this
Indenture and to the extent applicable, the Company and the Trustee, by their
execution and delivery of this Indenture, expressly agree to such terms and
provisions and to be bound thereby. However, to the extent any provision of any
Note conflicts with the express provisions of this Indenture, the provisions of
this Indenture shall govern and be controlling.
(b) GLOBAL NOTES.
The Notes are being offered and sold by the Company pursuant to the
Purchase Agreement.
Notes transferred in reliance on Regulation S under the Securities Act
("REGULATION S"), as provided in Section 2.06(a)(ii) hereof, shall be issued in
the form of one or more permanent Global Notes in definitive, fully registered
form without interest coupons with the Global Notes Legend and Restricted Notes
Legend set forth in Exhibit A hereto (the "REGULATION S GLOBAL NOTE"), which
shall be deposited on behalf of the transferee of the Notes represented thereby
with the Trustee, as custodian, for the Depositary, and registered in the name
of the Depositary or the nominee of the Depositary for the accounts of
designated agents holding on behalf of the Euroclear System ("EUROCLEAR") or
Cedelbank ("CEDEL"), duly executed by the Company and authenticated by the
Trustee as hereinafter provided. The aggregate principal amount of the
Regulation S Global Note may from time to time be increased or decreased by
adjustments made on the records of the Trustee and the Depositary or its nominee
as hereinafter provided.
Notes offered and sold to Qualified Institutional Buyers ("QIBs") in
reliance on Rule 144A under the Securities Act ("RULE 144A"), as provided in the
Purchase Agreement, shall be issued initially in the form of one or more
permanent Global Notes in definitive, fully registered form without interest
coupons with the Global Notes Legend and Restricted Notes Legend set forth in
Exhibit A hereto ("RULE 144A GLOBAL NOTE"), which shall be deposited on behalf
of the purchasers of the Notes represented thereby with the Trustee, as
custodian for the Depositary, and registered in the name of the Depositary or a
nominee of the Depositary, duly executed by the Company and authenticated by the
Trustee as hereinafter provided. The aggregate principal amount of the Rule
144A Global Note may from time to time be increased or decreased by adjustments
made on the records of the Trustee and the Depositary or its nominee as
hereinafter provided.
(c) BOOK-ENTRY PROVISIONS.
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<PAGE>
This Section 2.01(c) shall apply only to the Regulation S Global Note and
the Rule 144A Global Note issued in the form of one or more permanent Global
Notes (collectively, the "GLOBAL NOTES") deposited with or on behalf of the
Depositary.
The Company shall execute and the Trustee shall, in accordance with this
Section 2.01(c), authenticate and deliver initially one or more Global Notes
that (a) shall be registered in the name of the Depositary for such Global Note
or Global Notes or the nominee of such Depositary and (b) shall be delivered by
the Trustee to such Depositary or pursuant to such Depositary's instructions or
held by the Trustee as custodian for the Depositary.
Members of, or participants in, the Depositary ("AGENT MEMBERS") shall
have no rights under this Indenture with respect to any Global Note held on
their behalf by the Depositary or by the Trustee as the custodian of the
Depositary or under such Global Note, and the Depositary may be treated by the
Company, the Trustee and any agent of the Company or the Trustee as the absolute
owner of such Global Note for all purposes whatsoever. Notwithstanding the
foregoing, nothing herein shall prevent the Company, the Trustee or any agent of
the Company or the Trustee from giving effect to any written certification,
proxy or other authorization furnished by the Depositary or impair, as between
the Depositary and its Agent Members, the operation of customary practices of
such Depositary governing the exercise of the rights of an owner of a beneficial
interest in any Global Note.
(d) CERTIFICATED NOTES.
Notes offered and sold to "accredited investors" (as defined in Rule 501
(a) (1), (2), (3), (4), (5), (6) and (7) of Regulation D under the Securities
Act) shall be issued in the form of one or more certificated Notes (subject to a
minimum initial purchase amount of $100,000) in definitive, fully registered
form without interest coupons with the Restricted Notes Legend set forth in
Exhibit A hereto ("ACCREDITED INVESTOR RESTRICTED NOTES"), which shall be
registered in the name of such Accredited Investor or its nominee, duly executed
by the Company and authenticated by the Trustee as hereinafter provided. Such
Accredited Investor Restricted Notes may only be transferred in reliance on
Regulation S or to QIBs in reliance on Rule 144A.
In addition to the provisions of Section 2.10, owners of beneficial
interests in Global Notes may, if the Company, at its option, notifies the
Trustee in writing that it elects to cause the issuance of certificated Notes,
receive a certificated Note, which certificated Note shall bear the Restricted
Notes Legend set forth in Exhibit A hereto (the "RESTRICTED NOTES") unless
otherwise provided in this Section 2.01(d) and Section 2.06(b) hereof.
After a transfer of any Notes during the period of the effectiveness of a
Shelf Registration Statement with respect to the Notes and pursuant thereto, all
requirements for Restricted Notes Legends on such Note will cease to apply, and
a certificated Note without a Restricted Notes Legend will be available to the
Holder of such Notes.
SECTION 2.02. EXECUTION AND AUTHENTICATION.
One Officer shall sign the Notes for the Company by manual or facsimile
signature.
If an Officer whose signature is on a Note no longer holds that office at
the time the Note is authenticated, the Note shall nevertheless be valid.
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<PAGE>
A Note shall not be valid until authenticated by the manual signature of
an authorized officer of the Trustee. The signature shall be conclusive
evidence that the Note has been authenticated under this Indenture.
The Trustee shall, upon a written order of the Company signed by an
Officer, authenticate (1) Notes for original issue up to an aggregate principal
amount stated in Section 6 of the Notes. The aggregate principal amount of
Notes outstanding at any time may not exceed $172,500,000 except as provided in
Section 2.07.
The Trustee may appoint an authenticating agent acceptable to the Company
to authenticate Notes. An authenticating agent may authenticate Notes whenever
the Trustee may do so. Each reference in this Indenture to authentication by
the Trustee includes authentication by such agent. An authenticating agent has
the same rights as an Agent to deal with Holders, the Company or an Affiliate.
SECTION 2.03. REGISTRAR AND PAYING AGENT.
The Company shall maintain in the Borough of Manhattan, City of New
York, State of New York, (i) offices or agencies where the Notes may be
presented for registration of transfer or for exchange ("REGISTRAR") (ii)
offices or agencies where the Notes may be presented for payment ("PAYING
AGENT") and (iii) offices or agencies where the Notes may be presented for
conversion ("CONVERSION AGENT"). The Company initially designates State
Street Bank and Trust Company, N.A., an affiliate of the Trustee, at its
corporate trust offices in the Borough of Manhattan, City of New York, State
of New York to act as Registrar, Paying Agent and Conversion Agent. The
Registrar shall keep a register of the Notes and of their transfer and
exchange. The Company may appoint one or more co-registrars, one or more
additional paying agents and one or more additional Conversion Agents in such
other locations as it shall determine. The term "Registrar" includes any
co-registrar, the term "Paying Agent" includes any additional paying agent
and the term "Conversion Agent" includes any additional conversion agent.
The Company may change any Paying Agent, Registrar or Conversion Agent
without prior notice to any Holder. The Company shall notify the Trustee of
the name and address of any Agent not a party to this Indenture. If the
Company fails to appoint or maintain another entity as Registrar, Paying
Agent or Conversion Agent, the Trustee shall act as such. The Company or any
of its Affiliates may act as Paying Agent, Registrar or Conversion Agent.
SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST.
The Company shall require each Paying Agent other than the Trustee to
agree in writing that the Paying Agent will hold in trust for the benefit of
Holders or the Trustee all money held by the Paying Agent for the payment of
principal or interest on the Notes, and will notify the Trustee of any default
by the Company in making any such payment. While any such default continues,
the Trustee may require a Paying Agent to pay all money held by it to the
Trustee and to account for any money disbursed by it. The Company at any time
may require a Paying Agent to pay all money held by it to the Trustee. Upon
payment over to the Trustee, the Paying Agent (if other than the Company or an
Affiliate of the Company) shall have no further liability for the money. If the
Company or an Affiliate of the Company acts as Paying Agent, it shall segregate
and hold in a separate trust fund for the benefit of the Holders all money held
by it as Paying Agent.
SECTION 2.05. HOLDER LISTS.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
Holders. If the Trustee is not the Registrar, the Company
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<PAGE>
shall furnish to the Trustee on or before each interest payment date and at
such other times as the Trustee may request in writing a list in such form
and as of such date as the Trustee may reasonably require of the names and
addresses of Holders.
SECTION 2.06. TRANSFER AND EXCHANGE.
Where Notes are presented to the Registrar or a co-registrar with a
request to register a transfer or to exchange them for an equal principal amount
of Notes of other denominations, the Registrar shall register the transfer or
make the exchange if its requirements for such transactions are met. To permit
registrations of transfers and exchanges, the Company shall issue and the
Trustee shall authenticate Notes at the Registrar's request. No service charge
shall be made to a Holder for any registration of transfer or exchange (except
as otherwise expressly permitted herein), but the Company may require payment of
a sum sufficient to cover any transfer tax or similar governmental charge
payable in connection therewith (other than any such transfer tax or similar
governmental charge payable upon exchanges pursuant to Sections 2.10, 3.06 or
11.05 hereof).
The Company shall not be required (i) to issue, register the transfer of
or exchange any Note for a period beginning at the opening of business 15 days
before the day of any selection of Notes to be redeemed under Section 3.02
hereof and ending at the close of business on the day of selection, or (ii) to
register the transfer, or exchange, of any Note so selected for redemption in
whole or in part, except the unredeemed portion of any Note being redeemed in
part.
(a) Notwithstanding any provision to the contrary herein, so
long as a Global Note remains outstanding and is held by or on behalf of
the Depositary, transfers of a Global Note, in whole or in part, or of
any beneficial interest therein, shall only be made in accordance with
Section 2.01(b) and this Section 2.06(a); PROVIDED, HOWEVER, that
beneficial interests in a Global Note may be transferred to Persons who
take delivery thereof in the form of a beneficial interest in the same
Global Note in accordance with the transfer restrictions set forth in the
Restricted Notes Legend and under the heading "Notice to Investors" in
the Company's Offering Memorandum dated February 25, 2000.
(i) Except for transfers or exchanges made in
accordance with clauses (ii) through (iv) of this Section
2.06(a), transfers of a Global Note shall be limited to
transfers of such Global Note in whole, but not in part, to
nominees of the Depositary or to a successor of the
Depositary or such successor's nominee.
(ii) RULE 144A GLOBAL NOTE TO REGULATION S GLOBAL
NOTE. If an owner of a beneficial interest in the Rule 144A
Global Note deposited with the Depositary or the Trustee as
custodian for the Depositary wishes at any time to transfer
its interest in such Rule 144A Global Note to a Person who is
required to take delivery thereof in the form of an interest
in the Regulation S Global Note, such owner may, subject to
the rules and procedures of the Depositary, exchange or cause
the exchange of such interest for an equivalent beneficial
interest in the Regulation S Global Note. Upon receipt by
the principal Registrar of (1) instructions given in
accordance with the Depositary's procedures from an Agent
Member directing the principal Registrar to credit or cause
to be credited a beneficial interest in the Regulation S
Global Note in an amount equal to the beneficial interest in
the Rule 144A Global Note to be exchanged, (2) a written
order given in accordance with the Depositary's procedures
containing information regarding the participant account of
the Depositary and the Euroclear or Cedel
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account to be credited with such increase and (3) a certificate
in the form of Exhibit B attached hereto given by the Holder of
such beneficial interest, then the principal Registrar shall
instruct the Depositary to reduce or cause to be reduced the
principal amount of the Rule 144A Global Note and to increase
or cause to be increased the principal amount of the
Regulation S Global Note by the aggregate principal amount of
the beneficial interest in the Rule 144A Global Note equal to
the beneficial interest in the Regulation S Global Note to be
exchanged or transferred, to credit or cause to be credited
to the account of the Person specified in such instructions a
beneficial interest in the Regulation S Global Note equal to
the reduction in the principal amount of the Rule 144A Global
Note and to debit or cause to be debited from the account of
the Person making such exchange or transfer the beneficial
interest in the Rule 144A Global Note that is being exchanged
or transferred.
(iii) REGULATION S GLOBAL NOTE TO RULE 144A GLOBAL
NOTE. If an owner of a beneficial interest in the Regulation
S Global Note deposited with the Depositary or with the
Trustee as custodian for the Depositary wishes at any time to
transfer its interest in such Regulation S Global Note to a
Person who is required to take delivery thereof in the form
of an interest in the Rule 144A Global Note, such Holder may,
subject to the rules and procedures of Euroclear or Cedel, as
the case may be, and the Depositary, exchange or cause the
exchange of such interest for an equivalent beneficial
interest in the Rule 144A Global Note. Upon receipt by the
principal Registrar of (1) instructions from Euroclear or
Cedel, if applicable, and the Depositary, directing the
principal Registrar to credit or cause to be credited a
beneficial interest in the Rule 144A Global Note equal to the
beneficial interest in the Regulation S Global Note to be
exchanged or transferred, (2) a written order given in
accordance with the Depositary's procedures containing
information regarding the participant account of the
Depositary and (3) a certificate in the form of Exhibit C
attached hereto given by the owner of such beneficial
interest, then Euroclear or Cedel or the principal Registrar,
as the case may be, will instruct the Depositary to reduce or
cause to be reduced the Regulation S Global Note and to
increase or cause to be increased the principal amount of the
Rule 144A Global Note by the aggregate principal amount of
the beneficial interest in the Regulation S Global Note to be
exchanged or transferred, and the principal Registrar shall
instruct the Depositary, concurrently with such reduction, to
credit or cause to be credited to the account of the Person
specified in such instructions a beneficial interest in the
Rule 144A Global Note equal to the reduction in the principal
amount of the Regulation S Global Note and to debit or cause
to be debited from the account of the Person making such
exchange or transfer the beneficial interest in the
Regulation S Global Note that is being exchanged or
transferred.
(iv) GLOBAL NOTE TO RESTRICTED NOTE. If an owner of
a beneficial interest in a Global Note deposited with the
Depositary or with the Trustee as custodian for the
Depositary wishes at any time to transfer its interest in
such Global Note to a Person who is required to take delivery
thereof in the form of a Restricted Note, such owner may,
subject to the rules and procedures of Euroclear or Cedel, if
applicable, and the Depositary, cause the exchange of such
interest for one or more Restricted Notes of any authorized
denomination or denominations and of the same aggregate
principal amount. Upon receipt by the principal Registrar of
(1) instructions from Euroclear or Cedel, if applicable, and
the Depositary directing
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the principal Registrar to authenticate and deliver one or more
Restricted Notes of the same aggregate principal amount as the
beneficial interest in the Global Note to be exchanged, such
instructions to contain the name or names of the designated
transferee or transferees, the authorized denomination or
denominations of the Restricted Notes to be so issued and
appropriate delivery instructions, (2) a certificate in the form
of Exhibit D attached hereto given by the owner of such
beneficial interest to the effect set forth therein, (3) a
certificate in the form of Exhibit E attached hereto given by the
Person acquiring the Restricted Notes for which such interest is
being exchanged, to the effect set forth therein, and (4)
such other certifications, legal opinions or other
information as the Company may reasonably require to confirm
that such transfer is being made pursuant to an exemption
from, or in a transaction not subject to, the registration
requirements of the Securities Act, then Euroclear or Cedel,
if applicable, or the principal Registrar, as the case may
be, will instruct the Depositary to reduce or cause to be
reduced such Global Note by the aggregate principal amount of
the beneficial interest therein to be exchanged and to debit
or cause to be debited from the account of the Person making
such transfer the beneficial interest in the Global Note that
is being transferred, and concurrently with such reduction
and debit the Company shall execute, and the Trustee shall
authenticate and deliver, one or more Restricted Notes of the
same aggregate principal amount in accordance with the
instructions referred to above.
(v) RESTRICTED NOTE TO RESTRICTED NOTE. If a Holder
of a Restricted Note wishes at any time to transfer such
Restricted Note to a Person who is required to take delivery
thereof in the form of a Restricted Note, such Holder may,
subject to the restrictions on transfer set forth herein and
in such Restricted Note, cause the exchange of such
Restricted Note for one or more Restricted Notes of any
authorized denomination or denominations and of the same
aggregate principal amount. Upon receipt by the principal
Registrar of (1) such Restricted Note, duly endorsed as
provided herein, (2) instructions from such Holder directing
the principal Registrar to authenticate and deliver one or
more Restricted Notes of the same aggregate principal amount
as the Restricted Note to be exchanged, such instructions to
contain the name or authorized denomination or denominations
of the Restricted Notes to be so issued and appropriate
delivery instructions, (3) a certificate from the Holder of
the Restricted Note to be exchanged in the form of Exhibit D
attached hereto, (4) a certificate in the form of Exhibit E
attached hereto given by the Person acquiring the Restricted
Notes for which such interest is being exchanged, to the
effect set forth therein, and (5) such other certifications,
legal opinions or other information as the Company may
reasonably require to confirm that such transfer is being
made pursuant to an exemption from, or in a transaction not
subject to, the registration requirements of the Securities
Act, then the Registrar shall cancel or cause to be canceled
such Restricted Note and concurrently therewith, the Company
shall execute, and the Trustee shall authenticate and
deliver, one or more Restricted Notes of the same aggregate
principal amount, in accordance with the instructions
referred to above.
(vi) RESTRICTED NOTE TO RULE 144A GLOBAL NOTE. If an
owner of a Restricted Note registered in the name of such
owner wishes at any time to transfer such Restricted Note to a
Person who is required to take delivery thereof in the form of
an interest in the Rule 144A Global Note, such Holder may,
subject to the
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rules and procedures of the Depositary, exchange or cause the
exchange of such Restricted Note for an equivalent beneficial
interest in the Rule 144A Global Note. Upon receipt by the
principal Registrar of (1) instructions from the Company,
directing the principal Registrar (A) to credit or cause to be
credited a beneficial interest in the Rule 144A Global Note equal
to the principal amount of the Restricted Note to be exchanged or
transferred and (B) to cancel such Restricted Note to be
exchanged or transferred, (2) a written order given in accordance
with the Depositary's procedures containing information regarding
the participant account of the Depositary and (3) a certificate
in the form of Exhibit C attached hereto given by the owner of
such Restricted Note, then the principal Registrar will instruct
the Trustee to cancel such Restricted Note and will instruct
the Depositary to increase or cause to be increased the
principal amount of the Rule 144A Global Note by the principal
amount of the Restricted Note to be exchanged or transferred,
and the principal Registrar shall instruct the Depositary,
concurrently with such cancellation of the Restricted Note, to
credit or cause to be credited to the account of the Person
specified in such instructions a beneficial interest in the
Rule 144A Global Note equal to the principal amount of the
Restricted Note to be canceled by the Trustee.
(vii) RESTRICTED NOTE TO REGULATION S GLOBAL NOTE. If
an owner of a Restricted Note registered in the name of such
owner wishes at any time to transfer such Restricted Note to
a Person who is required to take delivery thereof in the form
of an interest in the Regulation S Global Note, such owner
may, subject to the rules and procedures of the Euroclear or
Cedel, as the case may be, exchange or cause the exchange of
such Restricted Note for an equivalent beneficial interest in
the Regulation S Global Note. Upon receipt by the principal
Registrar of (1) instructions from the Company, directing the
principal Registrar (A) to credit or cause to be credited a
beneficial interest in the Regulation S Global Note equal to
the principal amount of the Restricted Note to be exchanged
or transferred and (B) to cancel such Restricted Note to be
exchanged or transferred, (2) a written order given in
accordance with the Depositary's procedures containing
information regarding the participant account of the
Euroclear or Cedel account to be credited with such increase
and (3) a certificate in the form of Exhibit B attached
hereto given by the Holder of such Restricted Note, then the
principal Registrar will instruct the Trustee to cancel such
Restricted Note and will instruct the Depositary to increase
or cause to be increased the principal amount of the
Regulation S Global Note by the principal amount of the
Restricted Note to be exchanged or transferred, and the
principal Registrar shall instruct the Depositary,
concurrently with such cancellation of the Restricted Note,
to credit or cause to be credited to the account of the
Person specified in such instructions a beneficial interest
in the Regulation S Global Note equal to the principal amount
of the Restricted Note to be canceled by the Trustee.
(viii) OTHER EXCHANGES. In the event that a beneficial
interest in a Global Note is exchanged for a certificated
Note in definitive registered form pursuant to Section 2.10,
prior to the effectiveness of a Shelf Registration Statement
with respect to such Notes, such Notes may be exchanged only
in accordance with such procedures as are substantially
consistent with the provisions of clauses (ii) through (v)
above (including the certification requirements intended to
ensure that such transfers comply with Rule 144A, Rule 144,
Regulation S or any other
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available exemption from registration, as the case may be)
and such other procedures as may from time to time be adopted
by the Company.
(b) Except in connection with a Shelf Registration Statement
contemplated by and in accordance with the terms of the Registration
Rights Agreement, if Notes are issued upon the transfer, exchange or
replacement of Notes bearing the Restricted Notes Legend set forth in
Exhibit A hereto, or if a request is made to remove such Restricted Notes
Legend on Notes, the Notes so issued shall bear the Restricted Notes
Legend, or the Restricted Notes Legend shall not be removed, as the case
may be, unless there is delivered to the Company such satisfactory
evidence, which may include an opinion of counsel licensed to practice
law in the State of New York, as may be reasonably required by the
Company, that neither the legend nor the restrictions on transfer set
forth therein are required to ensure that transfers thereof comply with
the provisions of Rule 144A, Rule 144, Regulation S or any other
available exemption from registration under the Securities Act or, with
respect to Restricted Notes, that such Notes are not "restricted" within
the meaning of Rule 144 under the Securities Act. Upon provision of such
satisfactory evidence, the Trustee, at the direction of the Company,
shall authenticate and deliver Notes that do not bear the legend.
(c) Neither the Company nor the Trustee shall have any
responsibility for any actions taken or not taken by the Depositary and
the Company shall have no responsibility for any actions taken or not
taken by the Trustee as agent or custodian of the Depositary.
SECTION 2.07. REPLACEMENT NOTES.
If the Holder of a Note claims that the Note has been lost, destroyed or
wrongfully taken or if such Note is mutilated and is surrendered to the Trustee,
the Company shall issue and the Trustee shall authenticate a replacement Note if
the Trustee's and the Company's requirements are met. If required by the
Trustee or the Company, an indemnity bond must be supplied by the Holder that is
sufficient in the judgment of both to protect the Company, the Trustee, any
Agent or any authenticating agent from any loss which any of them may suffer if
a Note is replaced. The Company may charge for its expenses in replacing a
Note.
In case any such mutilated, destroyed, lost or stolen Note has become or
is about to become due and payable, or is about to be purchased by the Company
pursuant to Article III hereof, the Company in its discretion may, instead of
issuing a new Note, pay or purchase such Note, as the case may be.
Every replacement Note is an additional obligation of the Company and
shall be entitled to all of the benefits of this Indenture equally and
proportionately with all other Notes duly issued hereunder.
SECTION 2.08. OUTSTANDING NOTES.
The Notes outstanding at any time are all the Notes authenticated by the
Trustee except for those canceled by it, those delivered to it for cancellation,
and those described in this Section as not outstanding.
If a Note is replaced, paid or purchased pursuant to Section 2.07 hereof,
it ceases to be outstanding unless the Trustee receives proof satisfactory to it
that the replaced, paid or purchased Note is held by a bona fide purchaser.
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If the principal amount of any Note is considered paid under Section 4.01
hereof, it ceases to be outstanding and interest on it ceases to accrue.
Except as set forth in Section 2.09 hereof, a Note does not cease to be
outstanding because the Company or an Affiliate of the Company holds the Note.
SECTION 2.09. TREASURY NOTES.
In determining whether the Holders of the required principal amount of
Notes have concurred in any direction, waiver or consent, Notes owned by the
Company or an Affiliate of the Company shall be considered as though they are
not outstanding, except that for the purposes of determining whether the Trustee
shall be protected in relying on any such direction, waiver or consent, only
Notes that the Trustee knows are so owned shall be so disregarded.
SECTION 2.10. TEMPORARY NOTES; GLOBAL NOTES.
(a) Until definitive Notes are ready for delivery, the Company
may prepare and the Trustee shall authenticate temporary Notes.
Temporary Notes shall be substantially in the form of definitive Notes
but may have variations that the Company considers appropriate for
temporary Notes. Without unreasonable delay, the Company shall prepare
and the Trustee shall authenticate definitive Notes in exchange for
temporary Notes. Holders of temporary Notes shall be entitled to all of
the benefits of this Indenture.
(b) A Global Note deposited with the Depositary or with the
Trustee as custodian for the Depositary pursuant to Section 2.01 shall be
transferred to the beneficial owners thereof in the form of certificated
Notes only (i) in accordance with Section 2.01(d), or (ii) if such
transfer complies with Section 2.06 and (A) the Depositary notifies the
Company that it is unwilling or unable to continue as Depositary for such
Global Note or if at any time such Depositary ceases to be a "clearing
agency" registered under the Exchange Act and a successor Depositary is
not appointed by the Company within 90 days after receipt of such notice
or after it becomes aware of such cessation or (B) an Event of Default
has occurred and is continuing.
(c) Any Global Note that is transferable to the beneficial
owners thereof in the form of certificated Notes pursuant to Section
2.01(d) or to this Section 2.10 shall be surrendered by the Depositary to
the Trustee to be so transferred, in whole or from time to time in part,
without charge, and the Trustee shall authenticate and deliver, upon such
transfer of each portion of such Global Note, an equal aggregate
principal amount of Notes of authorized denominations in the form of
certificated Notes. Any portion of a Global Note transferred pursuant to
this Section 2.10 shall be executed, authenticated and delivered only in
denominations of $1,000 and any integral multiple thereof and registered
in such names as the Depositary shall direct. Any Note in the form of
certificated Notes delivered in exchange for an interest in the Global
Notes shall, except as otherwise provided by Section 2.06(b) bear the
Restricted Notes Legend set forth in Exhibit A hereto.
(d) The registered Holder of a Global Note may grant proxies
and otherwise authorize any Person, including Agent Members and Persons
that may hold interests through Agent Members, to take any action which a
Holder is entitled to take under this Indenture or the Notes.
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(e) In the event of the occurrence of either of the events
specified in Section 2.10(b), the Company will promptly make available to
the Trustee a reasonable supply of certificated Notes in definitive,
fully registered form without interest coupons.
SECTION 2.11. CANCELLATION.
The Company at any time may deliver Notes to the Trustee for
cancellation. The Registrar, Paying Agent and Conversion Agent shall forward to
the Trustee any Notes surrendered to them for registration of transfer, exchange
or payment. The Trustee shall promptly cancel all Notes surrendered for
registration of transfer, exchange, payment, conversion, replacement or
cancellation and shall dispose of canceled Notes as the Company directs. The
Company may not issue new Notes to replace Notes that it has paid or that have
been delivered to the Trustee for cancellation.
SECTION 2.12. DEFAULTED INTEREST.
If the Company fails to make a payment of interest on the Notes, it shall
pay such defaulted interest plus any interest payable on the defaulted interest,
in any lawful manner. It may pay such defaulted interest, plus any such
interest payable on it, to the Persons who are Holders on a subsequent special
record date. The Company shall fix any such record date and payment date,
PROVIDED that no such record date shall be less than 10 days prior to the
related payment date for such defaulted interest. At least 15 days before any
such record date, the Company shall mail to Holders a notice that states the
special record date, the related payment date and amount of such interest to be
paid.
Section 2.13. CUSIP NUMBERS.
The Company in issuing the Notes may use "CUSIP" numbers (if then
generally in use), and, if so, the Trustee shall use "CUSIP" numbers in notices
of redemption and other notices as a convenience to holders of Notes; PROVIDED,
that any such notice may state that no representation is made as to the
correctness of such numbers either as printed on the Notes or as contained in
any notice of a redemption or notice of a Purchase Offer and that reliance may
be placed only on the other identification numbers printed on the Notes, and any
redemption or Purchase Offer shall not be affected by any defect in or omission
of such numbers. The Company will promptly notify the Trustee of any change in
the "CUSIP" numbers.
ARTICLE III.
REDEMPTION
SECTION 3.01. NOTICES TO TRUSTEE.
If the Company elects to redeem Notes pursuant to the optional redemption
provisions of the Notes and Section 3.07 hereof, it shall notify the Trustee of
the redemption date and the principal amount of Notes to be redeemed. The
Company shall give the notice provided for in this Section 3.01 at least 30 days
before the redemption date, unless a shorter notice period shall be satisfactory
to the Trustee. The Company may not give notice of any redemption if the
Company has defaulted in payment of interest and the default is continuing.
SECTION 3.02. SELECTION OF NOTES TO BE REDEEMED.
If less than all of the Notes are to be redeemed at any time, selection
of Notes shall be made by the Trustee on a PRO RATA basis or by lot or by a
method that complies with the requirements of any
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exchange on which the Notes are listed and that the Trustee considers fair
and appropriate, provided that no Notes of $1,000 or less shall be redeemed
in part. The Trustee shall make the selection not more than 60 days and not
less than 30 days before the redemption date from Notes outstanding not
previously called for redemption. Notes and portions of Notes selected shall
be in amounts of $1,000 or integral multiples of $1,000. Provisions of this
Indenture that apply to Notes called for redemption also apply to portions of
Notes called for redemption. The Trustee shall notify the Company promptly
of the Notes or portions of Notes to be called for redemption.
If any Note selected for partial redemption is converted in part after
such selection, the converted portion of such Note shall be deemed (so far as
may be) to be the portion to be selected for redemption. The Notes (or portions
thereof) so selected shall be deemed duly selected for redemption for all
purposes hereunder, notwithstanding that any such Note is converted in whole or
in part before the mailing of the notice of redemption. Upon any redemption of
less than all the Notes, the Company and the Trustee may treat as outstanding
any Notes surrendered for conversion during the period 15 days next preceding
the mailing of a notice of redemption and need not treat as outstanding any Note
authenticated and delivered during such period in exchange for the unconverted
portion of any Note converted in part during such period.
SECTION 3.03. NOTICE OF REDEMPTION.
At least 30 days but not more than 60 days before a redemption date, the
Company shall mail, by first class mail, a notice of redemption to each Holder
whose Notes are to be redeemed at its registered address. The notice shall
identify the Notes to be redeemed and shall state:
(a) the redemption date;
(b) the redemption price;
(c) if any Note is to be redeemed in part only, the portion of
the principal amount thereof redeemed, and that, after the redemption
date, upon surrender of such Note, a new Note in principal amount equal
to the unredeemed portion thereof shall be issued in the name of the
Holder thereof upon cancellation of the original Note;
(d) the name and address of the Paying Agent;
(e) that Notes called for redemption must be surrendered to the
Paying Agent to collect the redemption price plus accrued interest, if
any;
(f) that interest on Notes called for redemption ceases to
accrue on and after the redemption date;
(g) the paragraph of the Notes pursuant to which the Notes
called for redemption are being redeemed; and
(h) the "CUSIP" number of the Notes to be redeemed.
Such notice shall also state the current Conversion Price and the date on
which the right to convert such Notes or portions thereof into Common Stock of
the Company will expire.
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At the Company's request, the Trustee shall give notice of redemption in
the Company's name and at the Company's expense; PROVIDED that the Company shall
have delivered to the Trustee, at least 45 days prior to the redemption date, an
Officers' Certificate requesting that the Trustee give such notice and setting
forth the information to be stated in such notice, as provided in the preceding
paragraph.
SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION.
Once notice of redemption is mailed in accordance with Section 3.03
hereof, Notes called for redemption become due and payable on the redemption
date at the price set forth in the Note. A notice of redemption may not be
conditional.
SECTION 3.05. DEPOSIT OF REDEMPTION PRICE.
On or before the redemption date, the Company shall deposit with the
Trustee or with the Paying Agent money sufficient to pay the redemption price of
and accrued interest on all Notes to be redeemed on that date unless theretofore
converted into Common Stock pursuant to the provisions hereof. The Trustee or
the Paying Agent shall return to the Company any money not required for that
purpose.
SECTION 3.06. NOTES REDEEMED IN PART.
Upon surrender of a Note that is redeemed in part, the Company shall
issue and the Trustee shall authenticate for the Holder at the expense of the
Company a new Note equal in principal amount to the unredeemed portion of the
Note surrendered.
SECTION 3.07. OPTIONAL REDEMPTION.
The Company may redeem all or any portion of the Notes, upon the terms
and at the redemption prices set forth in the Notes. Any redemption pursuant to
this Section 3.07 shall be made pursuant to the provisions of Section 3.01
through 3.06 hereof.
SECTION 3.08. MANDATORY REDEMPTION
The Company shall not be required to make mandatory redemption payments
or sinking fund payments with respect to the Notes.
SECTION 3.09. PURCHASE OFFER.
(a) In the event that, pursuant to Section 4.07 hereof, the
Company shall commence an offer to all Holders of the Notes to purchase
Notes (the "PURCHASE OFFER"), the Company shall follow the procedures in
this Section 3.09.
(b) The Purchase Offer shall remain open for a period specified
by the Company which shall be no less than 30 calendar days and no more
than 45 calendar days following its commencement (the "COMMENCEMENT
DATE") (as determined in accordance with Section 4.07 hereof), except to
the extent that a longer period is required by applicable law (the
"TENDER PERIOD"). Upon the expiration of the Tender Period (the
"PURCHASE DATE"), the Company shall purchase the principal amount of all
of the Notes required to be purchased pursuant to Section 4.07 hereof
(the "OFFER AMOUNT").
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(c) If the Purchase Date is on or after an interest payment
record date and on or before the related interest payment date, any
accrued interest shall be paid to the Person in whose name a Note is
registered at the close of business on such record date, and no
additional interest will be payable to Holders who tender Notes pursuant
to the Purchase Offer.
(d) The Company shall provide the Trustee with notice of the
Purchase Offer at least 10 days before the Commencement Date.
(e) On or before the Commencement Date, the Company or the
Trustee (at the expense of the Company) shall send, by first class mail,
a notice to each of the Holders, which shall govern the terms of the
Purchase Offer and shall state:
(i) that the Purchase Offer is being made pursuant
to this Section 3.09 and Section 4.07 hereof, that all Notes
validly tendered will be accepted for payment and the length
of time the Purchase Offer will remain open;
(ii) the purchase price (as determined in accordance
with Section 4.07 hereof) and the Purchase Date, and that all
Notes tendered will be accepted for payment;
(iii) that any Note or portion thereof not tendered or
accepted for payment will continue to accrue interest;
(iv) that, unless the Company defaults in the payment
of the purchase price, any Note or portion thereof accepted
for payment pursuant to the Purchase Offer will cease to
accrue interest after the Purchase Date;
(v) that Holders electing to have a Note or portion
thereof purchased pursuant to any Purchase Offer will be
required to surrender the Note, with the form entitled
"Option of Holder to Elect Purchase" on the reverse of the
Note completed, to the Company, a depositary, if appointed by
the Company, or a Paying Agent at the address specified in
the notice prior to the close of business on the third
Business Day preceding the Purchase Date;
(vi) that Holders will be entitled to withdraw their
election if the Company, depositary or Paying Agent, as the
case may be, receives, not later than the close of business
on the second Business Day preceding the Purchase Date, or
such longer period as may be required by law, a letter or a
telegram, telex or facsimile transmission (receipt of which
is confirmed and promptly followed by a letter) setting forth
the name of the Holder, the principal amount of the Note or
portion thereof the Holder delivered for purchase and a
statement that such Holder is withdrawing his election to
have the Note or portion thereof purchased;
(vii) that Holders whose Notes were purchased only in
part will be issued new Notes equal in principal amount to
the unpurchased portion of the Notes surrendered and
(viii) the "CUSIP" number of the Notes to be purchased.
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(f) On or prior to the Purchase Date, the Company shall
irrevocably deposit with the Trustee or a Paying Agent in immediately
available funds an amount equal to the Offer Amount to be held for
payment in accordance with the terms of this Section 3.09. On the
Purchase Date, the Company shall, to the extent lawful, (i) accept for
payment the Notes or portions thereof properly tendered pursuant to the
Purchase Offer, (ii) deliver or cause the Depositary or Paying Agent to
deliver to the Trustee Notes so accepted and (iii) deliver to the Trustee
an Officers' Certificate stating such Notes or portions thereof have been
accepted for payment by the Company in accordance with the terms of this
Section 3.09. The Depositary, the Paying Agent or the Company, as the
case may be, shall promptly (but in any case not later than ten (10)
calendar days after the Purchase Date) mail or deliver to each tendering
Holder an amount equal to the purchase price of the Notes tendered by
such Holder and accepted by the Company for purchase, and the Trustee
shall promptly authenticate and mail or deliver to such Holders a new
Note equal in principal amount to any unpurchased portion of the Note
surrendered. Any Notes not so accepted shall be promptly mailed or
delivered by or on behalf of the Company to the Holder thereof. The
Company will publicly announce in a newspaper of general circulation the
results of the Purchase Offer on or as soon as practicable after the
Purchase Date.
(g) The Purchase Offer shall be made by the Company in
compliance with all applicable provisions of the Exchange Act, and all
applicable tender offer rules promulgated thereunder, and shall include
all instructions and materials necessary to enable such Holders to tender
their Notes.
ARTICLE IV.
COVENANTS
SECTION 4.01. PAYMENT OF NOTES.
The Company shall pay the principal of, and premium, if any, and interest
on, the Notes on the dates and in the manner provided in the Notes. Principal,
premium, if any, and interest shall be considered paid on the date due if the
Paying Agent (other than the Company or an Affiliate of the Company) holds on
that date money designated for and sufficient to pay all principal, premium, if
any, and interest then due. To the extent lawful, the Company shall pay
interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on (i) overdue principal and premium, if any, at the rate borne
by the Notes, compounded semiannually; and (ii) overdue installments of interest
(without regard to any applicable grace period) at the same rate, compounded
semiannually.
Whenever in this Indenture or the Notes there is mentioned, in any
context, the payment of principal (and premium, if any), Offer Amount, interest
or any other amount payable under or with respect to any Note, such mention
shall be deemed to include mention of the payment of Special Interest provided
for in Section 2 of the Notes to the extent that, in such context, Special
Interest is, was or would be payable in respect thereof pursuant to the
provisions of Section 2 of the Notes, and express mention of the payment of
Special Interest (if applicable) in any provisions hereof shall not be construed
as excluding Special Interest in those provisions hereof where such express
mention is not made (if applicable).
SECTION 4.02. REPORTS.
Whether or not required by the rules and regulations of the SEC, so long
as any Notes are outstanding, the Company shall file with the SEC and furnish to
the Trustee and to the Holders of Notes, all quarterly and annual financial
information required to be contained in a filing with the SEC on Forms
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10-Q and 10-K, including a "Management's Discussion and Analysis of Results
of Operations and Financial Condition" and, with respect to the annual
information only, a report thereon by the Company's certified independent
accountants, in each case, as required by the rules and regulations of the
SEC as in effect on the Issuance Date.
SECTION 4.03. COMPLIANCE CERTIFICATE.
The Company shall deliver to the Trustee, within 90 days after the end of
each fiscal year of the Company, an Officers' Certificate stating that a review
of the activities of the Company and its subsidiaries during the preceding
fiscal year has been made under the supervision of the signing Officers with a
view to determining whether the Company has kept, observed, performed and
fulfilled its obligations under, and complied with the covenants and conditions
contained in, this Indenture, and further stating, as to each such Officer
signing such certificate, that to the best of his knowledge the Company has
kept, observed, performed and fulfilled each and every covenant, and complied
with the covenants and conditions contained in this Indenture and is not in
default in the performance or observance of any of the terms, provisions and
conditions hereof (or, if a Default or Event of Default shall have occurred,
describing all such Defaults or Events of Default of which he may have
knowledge) and that to the best of his knowledge no event has occurred and
remains in existence by reason of which payments on account of the principal or
of interest, if any, on the Notes are prohibited.
One of the Officers signing such Officers' Certificate shall be either
the Company's principal executive officer, principal financial officer or
principal accounting officer.
The Company will, so long as any of the Notes are outstanding, deliver to
the Trustee forthwith upon becoming aware of any Default or Event of Default, an
Officers' Certificate specifying such Default or Event of Default.
Immediately upon the occurrence of any Registration Default giving rise
to Special Interest or the cure of any such Registration Default, the Company
shall give the Trustee notice thereof and of the event giving rise to such
Registration Default or the cure of any such Registration Default (such notice
to be contained in an Officers' Certificate) and prior to receipt of such
Officers' Certificate the Trustee shall be entitled to assume that no such
Registration Default has occurred or been cured, as the case may be.
SECTION 4.04. STAY, EXTENSION AND USURY LAWS.
The Company covenants (to the extent that it may lawfully do so) that it
will not at any time insist upon, plead, or in any manner whatsoever claim or
take the benefit or advantage of, any stay, extension or usury law wherever
enacted, now or at any time hereafter in force, which may affect the covenants
or the performance of this Indenture; and the Company (to the extent it may
lawfully do so) hereby expressly waives all benefit or advantage of any such
law, and covenants that it will not, by resort to any such law, hinder, delay or
impede the execution of any power herein granted to the Trustee, but will suffer
and permit the execution of every such power as though no such law had been
enacted.
SECTION 4.05. CORPORATE EXISTENCE.
Subject to Article VII hereof, to the extent permitted by law the Company
will do or cause to be done all things necessary to preserve and keep in full
force and effect its corporate existence and the corporate, partnership or other
existence of each subsidiary of the Company in accordance with the respective
organizational documents of each subsidiary and the rights (charter and
statutory), licenses and franchises of the Company; provided, however, that the
Company shall not be required to preserve
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any such right, license or franchise, or the corporate, partnership or other
existence of any subsidiary, if the preservation thereof is no longer
desirable in the conduct of the business of the Company and its subsidiaries
taken as a whole.
SECTION 4.06. TAXES.
The Company shall, and shall cause each of its subsidiaries to, pay prior
to delinquency all material taxes, assessments and governmental levies, except
as contested in good faith and by appropriate proceedings.
SECTION 4.07. CHANGE OF CONTROL.
(a) Upon the occurrence of a Change of Control, each Holder of
Notes shall have the right to require the Company to repurchase all or
any part (equal to $1,000 or an integral multiple thereof) of such
Holder's Notes pursuant to the Purchase Offer at a purchase price equal
to 100% of the principal amount thereof plus accrued and unpaid interest
to the date of purchase (the "CHANGE OF CONTROL PAYMENT").
(b) Within 25 days following any Change of Control, the Company
shall mail to each Holder the notice provided by Section 3.09(e).
SECTION 4.08. LIMITATION ON STATUS AS INVESTMENT COMPANY.
The Company shall not, and shall not permit any Subsidiary to, conduct
its business in a fashion that would cause the Company to be required to be
registered as an "investment company" (as that term is defined in the Investment
Company Act of 1940, as amended.
SECTION 4.09. SPECIAL INTEREST.
If Special Interest is payable by the Company pursuant to Section 2 of
the Notes, the Company shall deliver to the Trustee a certificate to that effect
stating (i) the amount of such Special Interest that is payable and (ii) the
date on which such Special Interest is payable. Unless and until a Trust Officer
of the Trustee receives such a certificate, the Trustee may assume without
inquiry that no such Special Interest is payable. If the Company has paid
Special Interest directly to the persons entitled to it, the Company shall
deliver to the Trustee a certificate setting forth the particulars of such
payment.
ARTICLE V.
CONVERSION
SECTION 5.01. CONVERSION PRIVILEGE.
A Holder of a Note may convert it into fully paid and nonassessable
shares of Common Stock at any time following the Issuance Date and prior to
maturity at the Conversion Price then in effect, except that, with respect to
any Note called for redemption, such conversion right shall terminate at the
close of business on the Business Day immediately preceding the redemption date
(unless the Company shall default in making the redemption payment when it
becomes due, in which case the conversion right shall terminate on the date such
default is cured). The number of shares of Common Stock issuable upon
conversion of a Note is determined by dividing the principal amount of such Note
by the conversion price in effect on the Conversion Date (the "CONVERSION
PRICE").
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The initial Conversion Price is stated in Section 12 of the Notes and is
subject to adjustment as provided in this Article V.
A holder may convert a portion of a Note equal to any integral multiple
of $1,000. Provisions of this Indenture that apply to conversion of all of a
Note also apply to conversion of a portion of it.
SECTION 5.02. CONVERSION PROCEDURE.
To convert a Note, a holder must satisfy the requirements in Section 12
of the Notes. The date on which the holder satisfies all of those requirements
is the conversion date (the "CONVERSION DATE"). As soon as practicable after
the Conversion Date, the Company shall deliver to the Holder through the
Conversion Agent a certificate for the number of whole shares of Common Stock
issuable upon the conversion and a check for any fractional share determined
pursuant to Section 5.03 hereof. The Person in whose name the certificate is
registered shall become the stockholder of record on the Conversion Date and, as
of such date, such Person's rights as a Holder shall cease; PROVIDED, HOWEVER,
that no surrender of a Note on any date when the stock transfer books of the
Company shall be closed shall be effective to constitute the Person entitled to
receive the shares of Common Stock upon such conversion as the stockholder of
record of such shares of Common Stock on such date, but such surrender shall be
effective to constitute the Person entitled to receive such shares of Common
Stock as the stockholder of record thereof for all purposes at the close of
business on the next succeeding day on which such stock transfer books are open;
PROVIDED FURTHER, HOWEVER, that such conversion shall be at the Conversion Price
in effect on the date that such Note shall have been surrendered for conversion,
as if the stock transfer books of the Company had not been closed.
No payment or adjustment will be made for accrued and unpaid interest on
a converted Note, but if any holder surrenders a Note for conversion after the
close of business on the record date for the payment of an installment of
interest and prior to the opening of business on the next interest payment date,
then, notwithstanding such conversion, the interest payable on such interest
payment date shall be paid to the holder of such Note on such record date. Any
Notes that are, however, delivered to the Company for conversion after any
record date but before the next interest payment date must, except as described
in the next sentence, be accompanied by a payment equal to the interest payable
on such interest payment date on the principal amount of convertible notes being
converted. The payment to the Company described in the preceding sentence shall
not be required if, during that period between a record date and the next
interest payment date, a conversion occurs on or after the date that the Company
has issued a redemption notice and prior to the date of redemption stated in
such notice. If any Notes are converted after an interest payment date but on
or before the next record date, no interest will be paid on those Notes. No
fractional shares will be issued upon conversion, but a cash adjustment will be
made for any fractional shares.
If a holder converts more than one Note at the same time, the number of
whole shares of Common Stock issuable upon the conversion shall be based on the
total principal amount of Notes converted.
Upon surrender of a Note that is converted in part, the Trustee shall
authenticate for the holder a new Note equal in principal amount to the
unconverted portion of the Note surrendered.
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SECTION 5.03. FRACTIONAL SHARES.
The Company will not issue fractional shares of Common Stock upon
conversion of a Note. In lieu thereof, the Company will pay an amount in cash
based upon the Daily Market Price of the Common Stock on the trading day prior
to the date of conversion.
SECTION 5.04. TAXES ON CONVERSION.
The issuance of certificates for shares of Common Stock upon the
conversion of any Note shall be made without charge to the converting Holder for
such certificates or for any tax in respect of the issuance of such
certificates, and such certificates shall be issued in the respective names of,
or in such names as may be directed by, the Holder or Holders of the converted
Note; PROVIDED, HOWEVER, that in the event that certificates for shares of
Common Stock are to be issued in a name other than the name of the holder of the
Note converted, such Note, when surrendered for conversion, shall be accompanied
by an instrument of transfer, in form satisfactory to the Company, duly executed
by the registered holder thereof or his duly authorized attorney; and PROVIDED
FURTHER, HOWEVER, that the Company shall not be required to pay any tax which
may be payable in respect of any transfer involved in the issuance and delivery
of any such certificates in a name other than that of the holder of the
converted Note, and the Company shall not be required to issue or deliver such
certificates unless or until the Person or Persons requesting the issuance
thereof shall have paid to the Company the amount of such tax or shall have
established to the satisfaction of the Company that such tax has been paid or is
not applicable.
SECTION 5.05. COMPANY TO PROVIDE STOCK.
The Company shall at all times reserve and keep available, free from
preemptive rights, out of its authorized but unissued Common Stock, solely for
the purpose of issuance upon conversion of Notes as herein provided, a
sufficient number of shares of Common Stock to permit the conversion of all
outstanding Notes for shares of Common Stock. All shares of Common Stock which
may be issued upon conversion of the Notes shall be duly authorized, validly
issued, fully paid and nonassessable when so issued. Shares of Common Stock
issuable upon conversion of a Restricted Note shall bear such restrictive
legends as the Company shall provide in accordance with applicable law. If
shares of Common Stock are to be issued upon conversion of a Restricted Note and
they are to be registered in a name other than that of the holder of such
Restricted Note, then the Person in whose name such shares of Common Stock are
to be registered must deliver to the Trustee a certificate satisfactory to the
Company and signed by such Person as to compliance with the restrictions on
transfer contained in such restrictive legends.
SECTION 5.06. ADJUSTMENT OF CONVERSION PRICE.
The Conversion Price shall be subject to adjustment from time to time as
follows:
(a) In case the Company shall (1) pay a dividend in shares of
Common Stock to holders of Common Stock, (2) make a distribution in
shares of Common Stock to holders of Common Stock, (3) subdivide its
outstanding shares of Common Stock into a greater number of shares of
Common Stock or (4) combine its outstanding shares of Common Stock into a
smaller number of shares of Common Stock, the Conversion Price in effect
immediately prior to such action shall be adjusted so that the holder of
any Note thereafter surrendered for conversion shall be entitled to
receive the number of shares of Common Stock which he would have owned
immediately following such action had such Notes been converted
immediately prior thereto. Any adjustment made pursuant to this
subsection (a) shall become effective immediately after the
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record date in the case of a dividend or distribution and shall become
effective immediately after the effective date in the case of a
subdivision or combination.
(b) In case the Company shall issue rights or warrants to
substantially all holders of Common Stock entitling them (for a period
commencing no earlier than the record date for the determination of
holders of Common Stock entitled to receive such rights or warrants and
expiring not more than 45 days after such record date) to subscribe for
or purchase shares of Common Stock (or securities convertible into Common
Stock) at a price per share less than the current market price (as
determined pursuant to subsection (f) below) of the Common Stock on such
record date, the Conversion Price shall be adjusted so that the same
shall equal the price determined by multiplying the Conversion Price in
effect immediately prior to such record date by a fraction of which the
numerator shall be the number of shares of Common Stock outstanding on
such record date, plus the number of shares of Common Stock which the
aggregate offering price of the offered shares of Common Stock (or the
aggregate conversion price of the convertible securities so offered)
would purchase at such current market price, and of which the denominator
shall be the number of shares of Common Stock outstanding on such record
date plus the number of additional shares of Common Stock offered (or
into which the convertible securities so offered are convertible). Such
adjustments shall become effective immediately after such record date.
(c) In case the Company shall distribute to all holders of
Common Stock shares of capital stock of the Company other than Common
Stock, evidences of indebtedness or other assets (other than cash
dividends out of current or retained earnings), or shall distribute to
substantially all holders of Common Stock rights or warrants to subscribe
for securities (other than those referred to in subsection (b) above),
then in each such case the Conversion Price shall be adjusted so that the
same shall equal the price determined by multiplying the Conversion Price
in effect immediately prior to the date of such distribution by a
fraction of which the numerator shall be the current market price
(determined as provided in subsection (f) below) of the Common Stock on
the record date mentioned below less the then fair market value (as
determined by the Board of Directors, whose determination shall be
conclusive evidence of such fair market value and described in a Board
Resolution) of the portion of the assets so distributed or of such
subscription rights or warrants applicable to one share of Common Stock,
and of which the denominator shall be such current market price of the
Common Stock. Such adjustment shall become effective immediately after
the record date for the determination of the holders of Common Stock
entitled to receive such distribution. Notwithstanding the foregoing, in
the event that the Company shall distribute rights or warrants (other
than those referred to in subsection (b) above) ("RIGHTS") PRO RATA to
holders of Common Stock, the Company may, in lieu of making any
adjustment pursuant to this Section 5.06, make proper provision so that
each holder of a Note who converts such Note (or any portion thereof)
after the record date for such distribution and prior to the expiration
or redemption of the Rights shall be entitled to receive upon such
conversion, in addition to the shares of Common Stock issuable upon
such conversion (the "CONVERSION SHARES"), a number of Rights to be
determined as follows: (i) if such conversion occurs on or prior to the
date for the distribution to the holders of Rights of separate
certificates evidencing such Rights (the "DISTRIBUTION DATE"), the same
number of Rights to which a holder of a number of shares of Common Stock
equal to the number of Conversion Shares is entitled at the time of such
conversion in accordance with the terms and provisions of and applicable
to the Rights; and (ii) if such conversion occurs after the Distribution
Date, the same number of Rights to which a holder of the number of shares
of Common Stock into which the principal amount of the Note so converted
was convertible immediately prior to the
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Distribution Date would have been entitled on the Distribution Date in
accordance with the terms and provisions of and applicable to the Rights.
(d) In case the Company shall, by dividend or otherwise, at any
time distribute to all holders of its Common Stock cash (including any
distributions of cash out of current or retained earnings of the Company
but excluding any cash that is distributed as part of a distribution
requiring a Conversion Price adjustment pursuant to paragraph (c) of this
Section 5.06) in an aggregate amount that, together with the sum of (x)
the aggregate amount of any other distributions to all holders of its
Common Stock made in cash plus (y) all Excess Payments, in each case made
within the 12 months preceding the date fixed for determining the
stockholders entitled to such distribution (the "DISTRIBUTION RECORD
DATE") and in respect of which no Conversion Price adjustment pursuant to
paragraphs (c) or (e) of this Section 5.06 or this paragraph (d) has been
made, exceeds 15% of the product of the current market price per share
(determined as provided in paragraph (f) of this Section 5.06) of the
Common Stock on the Distribution Record Date times the number of shares
of Common Stock outstanding on the Distribution Record Date (excluding
shares held in the treasury of the Company), the Conversion Price shall
be reduced so that the same shall equal the price determined by
multiplying such Conversion Price in effect immediately prior to the
effectiveness of the Conversion Price reduction contemplated by this
paragraph (d) by a fraction of which the numerator shall be the current
market price per share (determined as provided in paragraph (f) of this
Section 5.06) of the Common Stock on the Distribution Record Date less
the amount of such cash and other consideration (including any Excess
Payments) so distributed applicable to one share (based on the pro rata
portion of the aggregate amount of such cash and other consideration
(including any Excess Payments), divided by the shares of Common Stock
outstanding on the Distribution Record Date) of Common Stock and the
denominator shall be such current market price per share (determined as
provided in paragraph (f) of this Section 5.06) of the Common Stock on
the Distribution Record Date, such reduction to become effective
immediately prior to the opening of business on the day following the
Distribution Record Date.
(e) In case a tender offer or other negotiated transaction made
by the Company or any Subsidiary for all or any portion of the Common
Stock shall be consummated, if an Excess Payment is made in respect of
such tender offer or other negotiated transaction and the amount of such
Excess Payment, together with the sum of (x) the aggregate amount of all
Excess Payments plus (y) the aggregate amount of all distributions to all
holders of the Common Stock made in cash (specifically including
distributions of cash out of retained earnings), in each case made within
the 12 months preceding the date of payment of such current negotiated
transaction consideration or expiration of such current tender offer, as
the case may be (the "PURCHASE DATE"), and as to which no adjustment
pursuant to paragraph (c) or paragraph (d) of this Section 5.06 or this
paragraph (e) has been made, exceeds 15% of the product of the current
market price per share (determined as provided in paragraph (f) of this
Section 5.06) of the Common Stock on the Purchase Date times the number
of shares of Common Stock outstanding (including any tendered shares but
excluding any shares held in the treasury of the Company) on the Purchase
Date, the Conversion Price shall be reduced so that the same shall equal
the price determined by multiplying such Conversion Price in effect
immediately prior to the effectiveness of the Conversion Price reduction
contemplated by this paragraph (e) by a fraction of which the numerator
shall be the current market price per share (determined as provided in
paragraph (f) of this Section 5.06) of the Common Stock on the Purchase
Date less the amount of such Excess Payments and such cash distributions,
if any, applicable to one share (based on the PRO RATA portion of the
aggregate amount of such Excess Payments and such cash distributions,
divided by the shares of Common Stock outstanding on the Purchase Date)
of Common Stock and the
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denominator shall be such current market price per share (determined as
provided in paragraph (f) of this Section 5.06) of the Common Stock on
the Purchase Date, such reduction to become effective immediately prior
to the opening of business on the day following the Purchase Date.
(f) The current market price per share of Common Stock on any
date shall be deemed to be the average of the Daily Market Prices for the
shorter of (i) ten consecutive business days ending on the last full
trading day on the exchange or market referred to in determining such
Daily Market Prices prior to the time of determination or (ii) the period
commencing on the date next succeeding the first public announcement of
the issuance of such rights or such warrants or such other distribution
or such negotiated transaction through such last full trading day on the
exchange or market referred to in determining such Daily Market Prices
prior to the time of determination.
(g) In any case in which this Section 5.06 shall require that
an adjustment be made immediately following a record date, the Company
may elect to defer (but only until five Business Days following the
filing by the Company with the Trustee of the certificate described in
Section 5.10 hereof) issuing to the holder of any Note converted after
such record date the shares of Common Stock and other Capital Stock of
the Company issuable upon such conversion over and above the shares of
Common Stock and other Capital Stock of the Company issuable upon such
conversion only on the basis of the Conversion Price prior to adjustment;
and, in lieu of the shares the issuance of which is so deferred, the
Company shall issue or cause its transfer agents to issue due bills or
other appropriate evidence of the right to receive such shares.
SECTION 5.07. NO ADJUSTMENT.
No adjustment in the Conversion Price shall be required until
cumulative adjustments amount to 1% or more of the Conversion Price as last
adjusted; PROVIDED, HOWEVER, that any adjustments which by reason of this
Section 5.07 are not required to be made shall be carried forward and taken
into account in any subsequent adjustment. All calculations under this
Article V shall be made to the nearest cent or to the nearest one-hundredth
of a share, as the case may be. No adjustment need be made for rights to
purchase Common Stock pursuant to a Company plan for reinvestment of
dividends or interest. No adjustment need be made for a change in the par
value or no par value of the Common Stock.
SECTION 5.08. OTHER ADJUSTMENTS.
(a) In the event that, as a result of an adjustment made pursuant to
Section 5.06 hereof, the holder of any Note thereafter surrendered for
conversion shall become entitled to receive any shares of Capital Stock of the
Company other than shares of its Common Stock, thereafter the Conversion Price
of such other shares so receivable upon conversion of any Note shall be subject
to adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to Common Stock contained in this
Article V.
(b) In the event that shares of Common Stock are not delivered after
the expiration of any of the rights or warrants referred to in Section 5.06(b)
and Section 5.06(c) hereof, the Conversion Price shall be readjusted to the
Conversion Price which would otherwise be in effect had the adjustment made upon
the issuance of such rights or warrants been made on the basis of delivery of
only the number of shares of Common Stock actually delivered.
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SECTION 5.09. ADJUSTMENTS FOR TAX PURPOSES.
The Company may make such reductions in the Conversion Price, in addition
to those required by Section 5.06 hereof, as it determines to be advisable in
order that any stock dividend, subdivision of shares, distribution or rights to
purchase stock or securities or distribution of securities convertible into or
exchangeable for stock made by the Company to its stockholders will not be
taxable to the recipients thereof.
SECTION 5.10. NOTICE OF ADJUSTMENT.
Whenever the Conversion Price is adjusted, the Company shall promptly
mail to Holders at the addresses appearing on the Registrar's books a notice of
the adjustment and file with the Trustee an Officers' Certificate briefly
stating the facts requiring the adjustment and the manner of computing it. The
certificate shall be conclusive evidence of the correctness of such adjustment.
Unless and until a Trust Officer of the Trustee shall receive written notice of
an adjustment of the Conversion Price, the Trustee may assume without inquiry
that the Conversion Price has not been adjusted and that the last Conversion
Price of which it has knowledge remains in effect.
SECTION 5.11. NOTICE OF CERTAIN TRANSACTIONS.
In the event that:
(1) the Company takes any action which would require an adjustment in
the Conversion Price;
(2) the Company takes any action that would require a supplemental
indenture pursuant to Section 5.12; or
(3) there is a dissolution or liquidation of the Company;
the Company shall mail to Holders at the addresses appearing on the Registrar's
books and the Trustee a notice stating the proposed record or effective date, as
the case may be, to permit a Holder of a Note to convert such Note into shares
of Common Stock prior to the record date for or the effective date of the
transaction in order to receive the rights, warrants, securities or assets which
a holder of shares of Common Stock on that date may receive. The Company shall
mail the notice at least 15 days before such date; however, failure to mail such
notice or any defect therein shall not affect the validity of any transaction
referred to in clause (1), (2) or (3) of this Section 5.11.
SECTION 5.12. EFFECT OF RECLASSIFICATIONS, CONSOLIDATIONS, MERGERS OR SALES ON
CONVERSION PRIVILEGE.
If any of the following shall occur, namely: (i) any reclassification or
change of outstanding shares of Common Stock issuable upon conversion of Notes
(other than a change in par value, or from par value to no par value, or from no
par value to par value, or as a result of a subdivision or combination), (ii)
any consolidation or merger to which the Company is a party other than a merger
in which the Company is the continuing corporation and which does not result in
any reclassification of, or change (other than a change in name, or par value,
or from par value to no par value, or from no par value to par value or as a
result of a subdivision or combination) in, outstanding shares of Common Stock
or (iii) any sale or conveyance of all or substantially all of the property or
business of the Company as an entirety, then the Company, or such successor or
purchasing corporation, as the case may be, shall, as a condition precedent to
such reclassification, change, consolidation, merger, sale or conveyance,
execute
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and deliver to the Trustee a supplemental indenture in form reasonably
satisfactory to the Trustee providing that the holder of each Note then
outstanding shall have the right to convert such Note into the kind and amount
of shares of stock and other securities and property (including cash) receivable
upon such reclassification, change, consolidation, merger, sale or conveyance by
a holder of the number of shares of Common Stock deliverable upon conversion of
such Note immediately prior to such reclassification, change, consolidation,
merger, sale or conveyance. Such supplemental indenture shall provide for
adjustments of the Conversion Price which shall be as nearly equivalent as may
be practicable to the adjustments of the Conversion Price provided for in this
Article V. The foregoing, however, shall not in any way affect the right a
holder of a Note may otherwise have, pursuant to clause (ii) of the last
sentence of subsection (c) of Section 5.06 hereof, to receive Rights upon
conversion of a Note. If,in the case of any such consolidation, merger, sale or
conveyance, the stock or other securities and property (including cash)
receivable thereupon by a holder of Common Stock includes shares of stock or
other securities and property of a corporation other than the successor or
purchasing corporation, as the case may be, in such consolidation, merger, sale
or conveyance, then such supplemental indenture shall also be executed by such
other corporation and shall contain such additional provisions to protect the
interests of the holders of the Notes as the Board of Directors of the Company
shall reasonably consider necessary by reason of the foregoing. The provision
of this Section 5.12 shall similarly apply to successive consolidations,
mergers, sales or conveyances.
In the event the Company shall execute a supplemental indenture pursuant
to this Section 5.12, the Company shall promptly file with the Trustee an
Officers' Certificate briefly stating the reasons therefor, the kind or amount
of shares of stock or securities or property (including cash) receivable by
holders of the Notes upon the conversion of their Notes after any such
reclassification, change, consolidation, merger, sale or conveyance and any
adjustment to be made with respect thereto.
SECTION 5.13. TRUSTEE'S DISCLAIMER.
The Trustee has no duty to determine when an adjustment under this
Article V should be made, how it should be made or what such adjustment should
be, but may accept as conclusive evidence of the correctness of any such
adjustment, and shall be protected in relying upon the Officers' Certificate
with respect thereto which the Company is obligated to file with the Trustee
pursuant to Section 5.10 hereof. The Trustee makes no representation as to the
validity or value of any securities or assets issued upon conversion of Notes,
and the Trustee shall not be responsible for the Company's failure to comply
with any provisions of this Article V.
The Trustee shall not be under any responsibility to determine the
correctness of any provisions contained in any supplemental indenture executed
pursuant to Section 5.12, but may accept as conclusive evidence of the
correctness thereof, and shall be protected in relying upon, the Officers'
Certificate with respect thereto which the Company is obligated to file with the
Trustee pursuant to Section 5.12 hereof.
ARTICLE VI.
SUBORDINATION
SECTION 6.01. AGREEMENT TO SUBORDINATE AND RANKING.
The Company, for itself and its successors, and each Holder, by its
acceptance of Notes, agree that the payment of the principal of or interest on
or any other amounts due on the Notes is subordinated in right of payment, to
the extent and in the manner stated in this Article VI, to the prior payment in
full of all existing and future Senior Debt. The Notes shall rank PARI PASSU
with, and shall not be senior in right of payment to such other Indebtedness of
the Company whether outstanding on the date of this
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Indenture or hereafter created, incurred, issued or guaranteed by the
Company, where the instrument creating or evidencing such Indebtedness
expressly provides that such Indebtedness ranks PARI PASSU with the Notes.
SECTION 6.02. NO PAYMENT ON NOTES IF SENIOR DEBT IN DEFAULT.
Anything in this Indenture to the contrary notwithstanding, no payment on
account of principal of or redemption of, interest on or other amounts due on
the Notes, and no redemption, purchase, or other acquisition of the Notes, shall
be made by or on behalf of the Company (i) unless full payment of amounts then
due for principal and interest and of all other amounts then due on all Senior
Debt has been made or duly provided for pursuant to the terms of the instrument
governing such Senior Debt, (ii) if, at the time of such payment, redemption,
purchase or other acquisition, or immediately after giving effect thereto, there
shall exist under any Senior Debt, or any agreement pursuant to which any Senior
Debt is issued, any Default, which Default shall not have been cured or waived
and which Default shall have resulted in the full amount of such Senior Debt
being declared due and payable or (iii) if, at the time of such payment,
redemption, purchase or other acquisition, the Trustee shall have received
written notice from any of the holders of Senior Debt or such holder's
representative (a "PAYMENT BLOCKAGE NOTICE") that there exists under such Senior
Debt, or any agreement pursuant to which such Senior Debt is issued, any
Default, which Default shall not have been cured or waived, permitting the
holders thereof to declare any amounts of such Senior Debt due and payable, but
only for the period (the "PAYMENT BLOCKAGE PERIOD") commencing on the date of
receipt of the Payment Blockage Notice and ending (unless earlier terminated by
notice given to the Trustee by the holders of such Senior Debt) on the earlier
of (a) the date on which such Event of Default shall have been cured or waived
or (b)180 days from the receipt of the Payment Blockage Notice. Upon
termination of the Payment Blockage Period, payments on account of principal of
or interest on the Notes (other than, subject to Section 6.03 hereof, amounts
due and payable by reason of the acceleration of the maturity of the Notes) and
redemptions, purchases or other acquisitions may be made by or on behalf of the
Company. Notwithstanding anything herein to the contrary, (a) only one Payment
Blockage Notice may be given during any period of 360 consecutive days with
respect to the same Event of Default or any other Events of Default on the same
issue of Senior Debt existing or continuing at the time of such notice unless
such Event of Default or such other Events of Default have been cured or waived
for a period of not less than 90 consecutive days and (b) no new Payment
Blockage Period may be commenced by the holder or holders of Senior Debt or
their representative or representatives during any period of 360 consecutive
days unless all Events of Default which were the object of the immediately
preceding Payment Blockage Notice, and any other Event of Default on Senior Debt
existing or continuing at the time of such notice, have been cured or waived.
In the event that, notwithstanding the provisions of this Section 6.02,
payments are made by or on behalf of the Company in contravention of the
provisions of this Section 6.02, such payments shall be held by the Trustee, any
Paying Agent or the holders, as applicable, in trust for the benefit of, and
shall be paid over to and delivered to, the holders of Senior Debt or their
representative or the trustee under the indenture or other agreement (if any),
pursuant to which any instruments evidencing any Senior Debt may have been
issued for application to the payment of all Senior Debt ratably according to
the aggregate amounts remaining unpaid to the extent necessary to pay all Senior
Debt in full in accordance with the terms of such Senior Debt, after giving
effect to any concurrent payment or distribution to or for the holders of Senior
Debt.
The Company shall give prompt written notice to the Trustee and any
Paying Agent of any default or event of default under any Senior Debt or under
any agreement pursuant to which any Senior Debt may have been issued.
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SECTION 6.03. DISTRIBUTION ON ACCELERATION OF NOTES; DISSOLUTION AND
REORGANIZATION; SUBROGATION OF NOTES.
(a) If the Notes are declared due and payable because of the
occurrence of an Event of Default, the Company or the Trustee shall give prompt
written notice to the holders of all Senior Debt or to the trustee(s) for such
Senior Debt of such acceleration. The Company may not pay the principal of or
interest on or any other amounts due on the Notes until five days after such
holders or trustee(s) of Senior Debt receive such notice and, thereafter, the
Company may pay the principal of or interest on or any other amounts due on the
Notes only if the provisions of this Article VI permit such payment.
(b) Upon (i) any acceleration of the principal amount due on the
Notes because of an Event of Default or (ii) any distribution of assets of the
Company upon any dissolution, winding up, liquidation or reorganization of the
Company (whether in bankruptcy, insolvency or receivership proceedings or upon
an assignment for the benefit of creditors or any other dissolution, winding up,
liquidation or reorganization of the Company):
(1) the holders of all Senior Debt shall first be entitled to
receive payment in full of the principal thereof, the interest thereon
and any other amounts due thereon before the holders are entitled to
receive payment on account of the principal of or interest on or any
other amounts due on the Notes;
(2) any payment or distribution of assets of the Company of any
kind or character, whether in cash, property or securities (other than
securities of the Company as reorganized or readjusted or securities of
the Company or any other corporation provided for by a plan of
reorganization or readjustment the payment of which is subordinate, at
least to the extent provided in this Article VI with respect to the
Notes, to the payment in full without diminution or modification by such
plan of all Senior Debt), to which the holders or the Trustee would be
entitled except for the provisions of this Article VI, shall be paid by
the liquidating trustee or agent or other Person making such a payment or
distribution, directly to the holders of Senior Debt (or their
representatives(s) or trustee(s) acting on their behalf), ratably
according to the aggregate amounts remaining unpaid on account of the
principal of or interest on and other amounts due on the Senior Debt held
or represented by each, to the extent necessary to make payment in full
of all Senior Debt remaining unpaid, after giving effect to any
concurrent payment or distribution to the holders of such Senior Debt;
and
(3) in the event that, notwithstanding the foregoing, any
payment or distribution of assets of the Company of any kind or
character, whether in cash, property or securities (other than securities
of the Company as reorganized or readjusted, or securities of the Company
or any other corporation provided for by a plan of reorganization or
readjustment the payment of which is subordinate, at least to the extent
provided in this Article VI with respect to the Notes, to the payment in
full without diminution or modification by such plan of Senior Debt),
shall be received by the Trustee or the holders before all Senior Debt is
paid in full, such payment or distribution shall be held in trust for the
benefit of, and be paid over to upon request by a holder of the Senior
Debt, the holders of the Senior Debt remaining unpaid (or their
representatives) or trustee(s) acting on their behalf, ratably as
aforesaid, for application to the payment of such Senior Debt until all
such Senior Debt shall have been paid in full, after giving effect to any
concurrent payment or distribution to the holders of such Senior Debt.
Subject to the payment in full of all Senior Debt, the Holders shall be
subrogated to the rights of the holders of Senior Debt to receive payments or
distributions of cash, property or securities of the
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Company applicable to the Senior Debt until the principal of and interest on
the Notes shall be paid in full and, for purposes of such subrogation, no
such payments or distributions to the holders of Senior Debt of cash,
property or securities which otherwise would have been payable or
distributable to Holders shall, as between the Company, its creditors other
than the holders of Senior Debt, and the Holders, be deemed to be a payment
by the Company to or on account of the Senior Debt, it being understood that
the provisions of this Article VI are and are intended solely for the purpose
of defining the relative rights of the Holders, on the one hand, and the
holders of Senior Debt, on the other hand.
Nothing contained in this Article VI or elsewhere in this Indenture or in
the Notes is intended to or shall (i) impair, as between the Company and its
creditors other than the holders of Senior Debt, the obligation of the Company,
which is absolute and unconditional, to pay to the Holders the principal of and
interest on the Notes as and when the same shall become due and payable in
accordance with the terms of the Notes or is intended to or (ii) affect the
relative rights of the Holders and creditors of the Company other than holders
of Senior Debt or, as between the Company and the Trustee, the obligations of
the Company to the Trustee, or (iii) prevent the Trustee or the Holders from
exercising all remedies otherwise permitted by applicable law upon default under
this Indenture, subject to the rights, if any, under this Article VI of the
holders of Senior Debt in respect of cash, property and securities of the
Company received upon the exercise of any such remedy.
Upon distribution of assets of the Company referred to in this Article
VI, the Trustee, subject to the provisions of Section 9.01 hereof, and the
Holders shall be entitled to rely upon a certificate of the liquidating
trustee or agent or other Person making any distribution to the Trustee or to
the Holders for the purpose of ascertaining the Persons entitled to
participate in such distribution, the holders of the Senior Debt and other
indebtedness of the Company, the amount thereof or payable thereon, the
amount or amounts paid or distributed thereon and all other facts pertinent
thereto or to this Article VI. The Trustee, however, shall not be deemed to
owe any fiduciary duty to the holders of Senior Debt. Nothing contained in
this Article VI or elsewhere in this Indenture, or in any of the Notes, shall
prevent the good faith application by the Trustee of any moneys which were
deposited with it hereunder, prior to its receipt of written notice of facts
which would prohibit such application, for the purpose of the payment of or
on account of the principal of or interest on, the Notes unless, prior to the
date on which such application is made by the Trustee, the Trustee shall be
charged with notice under Section 6.03(d) hereof of the facts which would
prohibit the making of such application.
(c) The provisions of this Article VI shall not be applicable to any
cash, properties or securities received by the Trustee or by any Holder when
received as a holder of Senior Debt and nothing in Section 9.11 hereof or
elsewhere in this Indenture shall deprive the Trustee or such Holder of any of
its rights as such holder.
(d) The Company shall give prompt written notice to the Trustee of
any fact known to the Company which would prohibit the making of any payment of
money to or by the Trustee in respect of the Notes pursuant to the provisions of
this Article VI. The Trustee, subject to the provisions of Section 9.01 hereof,
shall be entitled to assume that no such fact exists unless the Company or any
holder of Senior Debt or any trustee therefor has given such notice to the
Trustee. Notwithstanding the provisions of this Article VI or any other
provisions of this Indenture, the Trustee shall not be charged with knowledge of
the existence of any fact which would prohibit the making of any payment of
monies to or by the Trustee in respect of the Notes pursuant to the provisions
in this Article VI, unless, and until three Business Days after, the Trustee
shall have received written notice thereof from the Company or any Holder or
holders of Senior Debt or from any trustee therefor; and, prior to the receipt
of any such written notice, the Trustee, subject to the provisions of Section
9.01 hereof, shall be entitled in all respects conclusively to assume that no
such facts exist; PROVIDED that if on a date not less than three
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Business Days immediately preceding the date upon which by the terms hereof
any such monies may become payable for any purpose (including, without
limitation, the principal of or interest on any Note), the Trustee shall not
have received with respect to such monies the notice provided for in this
Section 6.03(d), than anything herein contained to the contrary
notwithstanding, the Trustee shall have full power and authority to receive
such monies and to apply the same to the purpose for which they were
received, and shall not be affected by any notice to the contrary which may
be received by it on or after such prior date.
The Trustee shall be entitled to rely on the delivery to it of a written
notice by a Person representing himself to be a holder of Senior Debt (or a
trustee on behalf of such holder) to establish that such notice has been given
by a holder of Senior Debt (or a trustee on behalf of any such holder or
holders). In the event that the Trustee determines in good faith that further
evidence is required with respect to the right of any Person as a holder of
Senior Debt to participate in any payment or distribution pursuant to this
Article VI, the Trustee may request such Person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amount of Senior Debt held by
such Person, the extent to which such Person is entitled to participate in such
payment or distribution and any other facts pertinent to the rights of such
Person under this Article VI, and, if such evidence is not furnished, the
Trustee may defer any payment to such Person pending judicial determination as
to the right of such Person to receive such payment; nor shall the Trustee be
charged with knowledge of the curing or waiving of any default of the character
specified in Section 6.02 hereof or that any event or any condition preventing
any payment in respect of the Notes shall have ceased to exist, unless and until
the Trustee shall have received an Officers' Certificate to such effect.
(e) The provisions of this Section 6.03 applicable to the Trustee
shall also apply to any Paying Agent for the Company.
SECTION 6.04. RELIANCE BY SENIOR DEBT ON SUBORDINATION PROVISIONS.
Each Holder of any Note by his acceptance thereof acknowledges and agrees
that the foregoing subordination provisions are, and are intended to be, an
inducement and a consideration for each holder of any Senior Debt, whether such
Senior Debt was created or acquired before or after the issuance of the Notes,
to acquire and continue to hold, or to continue to hold, such Senior Debt, and
such holder of Senior Debt shall be deemed conclusively to have relied on such
subordination provisions in acquiring and continuing to hold, or in continuing
to hold, such Senior Debt. Notice of any default in the payment of any Senior
Debt, except as expressly stated in this Article VI, and notice of acceptance of
the provisions hereof are hereby expressly waived. Except as otherwise
expressly provided herein, no waiver, forbearance or release by any holder of
Senior Debt under such Senior Debt or under this Article VI shall constitute a
release of any of the obligations or liabilities of the Trustee or Holders of
the Notes provided in this Article VI.
SECTION 6.05. NO WAIVER OF SUBORDINATION PROVISIONS.
Except as otherwise expressly provided herein, no right of any present or
future holder of any Senior Debt to enforce subordination as herein provided
shall at any time in any way be prejudiced or impaired by any act or failure to
act on the part of the Company or by any act or failure to act, in good faith,
by any such holder, or by any noncompliance by the Company with the terms,
provisions and covenants of this Indenture, regardless of any knowledge thereof
any such holder may have or be otherwise charged with.
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Without in any way limiting the generality of the foregoing paragraph,
the holders of Senior Debt may, at any time and from time to time, without the
consent of, or notice to, the Trustee or the Holders of the Notes, without
incurring responsibility to the Holders of the Notes and without impairing or
releasing the subordination provided in this Article VI or the obligations
hereunder of the Holders of the Notes to the holders of Senior Debt, do any one
or more of the following: (i) change the manner, place or terms of payment of,
or renew or alter, Senior Debt, or otherwise amend or supplement in any manner
Senior Debt or any instrument evidencing the same or any agreement under which
Senior Debt is outstanding; (ii) sell, exchange, release or otherwise dispose of
any property pledged, mortgaged or otherwise securing Senior Debt; (iii) release
any Person liable in any manner for the collection of Senior Debt; and (iv)
exercise or refrain from exercising any rights against the Company or any other
Person.
SECTION 6.06. TRUSTEE'S RELATION TO SENIOR DEBT.
The Trustee in its individual capacity shall be entitled to all the
rights set forth in this Article VI in respect of any Senior Debt at any time
held by it, to the same extent as any holder of Senior Debt, and nothing in
Section 9.11 hereof or elsewhere in this Indenture shall deprive the Trustee of
any of its rights as such holder.
With respect to the holders of Senior Debt, the Trustee undertakes to
perform or to observe only such of its covenants and obligation, as are
specifically set forth in this Article VI, and no implied covenants or
obligations with respect to the holders of Senior Debt shall be read into this
Indenture against the Trustee. The Trustee shall not owe any fiduciary duty to
the holders of Senior Debt but shall have only such obligations to such holders
as are expressly set forth in this Article VI.
Each Holder of a Note by his acceptance thereof authorizes and directs
the Trustee on his behalf to take such action as may be necessary or appropriate
to effectuate the subordination provided in this Article VI and appoints the
Trustee his attorney-in-fact for any and all such purposes, including, in the
event of any dissolution, winding up or liquidation or reorganization under any
applicable bankruptcy law of the Company (whether in bankruptcy, insolvency or
receivership proceedings or otherwise), the timely filing of a claim for the
unpaid balance of such Holder's Notes in the form required in such proceedings
and the causing of such claim to be approved. If the Trustee does not file a
claim or proof of debt in the form required in such proceedings prior to 30 days
before the expiration of the time to file such claims or proofs, then any Holder
or holders of Senior Debt or their representative or representatives shall have
the right to demand, sue for, collect, receive and receipt for the payments and
distributions in respect of the Notes which are required to be paid or delivered
to the holders of Senior Debt as provided in this Article VI and to file and
prove all claims therefore and to take all such other action in the name of the
holders or otherwise, as such holders of Senior Debt or representative thereof
may determine to be necessary or appropriate for the enforcement of the
provisions of this Article VI.
SECTION 6.07. OTHER PROVISIONS SUBJECT HERETO.
Expect as expressly stated in this Article VI, notwithstanding anything
contained in this Indenture to the contrary, all the provisions of this
Indenture and the Notes are subject to the provisions of this Article VI.
However, nothing in this Article VI shall apply to or adversely affect the
claims of, or payment, to, the Trustee pursuant to Section 9.07 hereof.
Notwithstanding the foregoing, the failure to make a payment on account of
principal of or interest on the Notes by reason of any provision of this Article
VI shall not be construed as preventing the occurrence of an Event of Default
under Section 8.01 hereof.
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ARTICLE VII.
SUCCESSORS
SECTION 7.01. LIMITATION ON MERGER, SALE OR CONSOLIDATION.
The Company may not, directly or indirectly, consolidate with or merge
with or into, or sell, lease or otherwise dispose of all or substantially all of
its assets, on a consolidated basis, whether in a single transaction or a series
of related transactions, to another person or group of affiliated persons, other
than to its Wholly-Owned Subsidiaries, unless:
(a) either: (i) in the case of a merger or consolidation, the Company
is the surviving entity; or (ii) the resulting, surviving or transferee
entity is a corporation organized under the laws of the United States, any
state thereof or the District of Columbia and expressly assumes by
supplemental indenture all of the Company's obligations in connection with
the Notes and the Indenture; and
(b) no Default or Event of Default shall exist immediately before or
after giving effect on a pro forma basis to such transaction.
Upon any permitted consolidation or merger or any permitted sale,
lease or other disposition of all or substantially all of the assets of the
Company in accordance with the foregoing, the successor corporation formed by
such consolidation or into which the Company is merged or to which such sale,
lease or other disposition is made, shall succeed to, and be substituted for,
and may exercise every right and power of, the Company under the Indenture
with the same effect as if such successor corporation had been named therein
in the same manner as the Company is named, and when a successor corporation
duly assumes all of the obligations of the Company pursuant hereto and
pursuant to the Notes, the Company will be released from its obligations
under the Indenture and the Notes, except as to any obligations that arise
from or as a result of such transaction.
For purposes of the foregoing, the transfer, by lease, assignment, sale
or otherwise, of all or substantially all of the properties and assets of one or
more Subsidiaries, which properties and assets, if held by the Company instead
of such Subsidiary, would constitute all or substantially all of the Company's
properties and assets, shall be deemed to be the transfer of all or
substantially all of the Company's properties and assets. This Section 7.01
will not apply to a sale, assignment, transfer, conveyance or other disposition
of assets between or among the Company and any of its Wholly-Owned Subsidiaries.
SECTION 7.02. SUCCESSOR CORPORATION SUBSTITUTED.
Upon any consolidation or merger, or any sale, assignment, transfer,
lease, conveyance or other disposition of all or substantially all of the assets
of the Company in accordance with Section 7.01 hereof, the successor corporation
formed by such consolidation or into or with which the Company is merged or to
which such sale, assignment, transfer, lease, conveyance or other disposition is
made shall succeed to, and be substituted for and may exercise every right and
power of, the Company under this Indenture with the same effect as if such
successor Person has been named as the Company herein; PROVIDED, HOWEVER, that
the predecessor Company in the case of a sale, assignment, transfer, lease,
conveyance or other disposition shall not be released from the obligation to pay
the principal of and interest on the Notes.
ARTICLE VIII.
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DEFAULTS AND REMEDIES
SECTION 8.01. EVENTS OF DEFAULT.
An "EVENT OF DEFAULT" occurs if:
(a) the Company defaults in the payment of interest on any Note
when the same becomes due and payable and the Default continues for a
period of 30 days after the date due and payable;
(b) the Company defaults in the payment of the principal of any
Note when the same becomes due and payable at maturity, upon optional
redemption, in connection with a Purchase Offer, upon declaration or
otherwise;
(c) the Company fails to observe or perform for a period of 30
days after notice any covenant or agreement contained in Sections 4.07
and 7.01 hereof (other than, in the case of Section 4.07, a failure to
purchase Notes in connection with a Purchase Offer) hereof;
(d) the Company fails to observe or perform any other covenant
or agreement contained in this Indenture or the Notes, required by it to
be performed and the Default continues for a period of 60 days after
notice from the Trustee to the Company or from the Holders of 25% in
aggregate principal amount of the then outstanding Notes to the Company
and the Trustee stating that such notice is a "Notice of Default";
(e) default under any mortgage, indenture or instrument under
which there may be issued or by which there may be secured or evidenced
any Indebtedness for money borrowed by the Company or any of its
Subsidiaries that is a Significant Subsidiary or any group of two or more
Subsidiaries that, taken as a whole, would constitute a Significant
Subsidiary, or the payment of which is guaranteed by the Company or any
of its Subsidiaries that is a Significant Subsidiary or any group of two
or more Subsidiaries that, taken as a whole, would constitute a
Significant Subsidiary, whether such Indebtedness or guarantee now exists
or is created after the Issuance Date, which default:
(i) is caused by a failure to pay when due
principal of or interest on such Indebtedness within the
grace period provided for in such Indebtedness, which
failure continues beyond any applicable grace period (a
"PAYMENT DEFAULT"); or
(ii) results in the acceleration of such
Indebtedness prior to its express maturity and, in each
case, the principal amount of any such Indebtedness,
together with the principal amount of any other such
Indebtedness under which there is a Payment Default or the
maturity of which has been so accelerated, aggregates
$10.0 million or more;
(f) failure by the Company or any of its Subsidiaries that is a
Significant Subsidiary or any group of two or more Subsidiaries that,
taken as a whole, would constitute a Significant Subsidiary to pay final
judgments for the payment of money (other than any judgment as to which a
reputable insurance company has accepted liability subject to customary
terms) aggregating in excess of $5.0 million, which judgments are not
paid, discharged or stayed within 60 days after their entry;
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(g) the Company or any of its Subsidiaries that is a
Significant Subsidiary or any group of two or more Subsidiaries that,
taken as a whole, would constitute a Significant Subsidiary pursuant to
or within the meaning of any Bankruptcy Law:
(i) commences a voluntary case;
(ii) consents to the entry of an order for relief
against it in an involuntary case in which it is the
debtor;
(iii) consents to the appointment of a Custodian of
it or for all or substantially all of its property;
(iv) makes a general assignment for the benefit of
its creditors; or
(v) generally is unable to pay its debts as the
same become due; or
(h) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that:
(i) is for relief against the Company or any of
its Subsidiaries that is a Significant Subsidiary or any
group of two or more Subsidiaries that, taken as a whole,
would constitute a Significant Subsidiary in an
involuntary case;
(ii) appoints a Custodian of the Company or any of
its Subsidiaries that is a Significant Subsidiary or any
group of two or more Subsidiaries that, taken as a whole,
would constitute a Significant Subsidiary or for all or
substantially all of its property;
(iii) orders the liquidation of the Company or any
of its Subsidiaries that is a Significant Subsidiary or
any group of two or more Subsidiaries that, taken as a
whole, would constitute a Significant Subsidiary, and the
order or decree remains unstayed and in effect for 60
days.
The term "BANKRUPTCY LAW" means Title 11, U.S. Code or any similar Federal,
state or foreign law for the relief of debtors or the protection of creditors.
The term "CUSTODIAN" means any receiver, trustee, assignee, liquidator or
similar official under any Bankruptcy Law.
SECTION 8.02. ACCELERATION.
If an Event of Default (other than an Event of Default specified in
clauses (g) or (h) of Section 8.01 hereof) occurs and is continuing, the
Trustee by notice to the Company, or the Holders of at least 25% in principal
amount of the then outstanding Notes by notice to the Company and the
Trustee, may declare all the Notes to be due and payable. Upon such
declaration, the principal of, premium, if any, and interest on the Notes
shall be due and payable immediately. If an Event of Default specified in
clause (g) or (h) of Section 8.01 hereof occurs, such an amount shall IPSO
FACTO become and be immediately due and payable without any declaration or
other act on the part of the Trustee or any Holder.
If the Notes have been declared due and payable as a result of the
acceleration of Indebtedness prior to its express maturity pursuant to Section
8.01(e)(ii), such declaration shall be automatically
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rescinded if the acceleration of such indebtedness has been rescinded or
annulled within 30 days after such acceleration in accordance with the
mortgage, indenture or instrument under which it was issued and the
conditions set forth in clauses (i) and (ii) in the next paragraph are
satisfied.
Except as otherwise provided in the immediately preceding paragraph, the
Holders of a majority in principal amount of the then outstanding Notes by
notice to the Trustee may rescind an acceleration and its consequences (i) if
the recission would not conflict with any judgment or decree of a court of
competent jurisdiction and (ii) if all existing Events of Default have been
cured or waived except nonpayment of principal or interest on the Notes that has
become due solely because of the acceleration of the Notes.
SECTION 8.03. OTHER REMEDIES.
If an Event of Default occurs and is continuing, the Trustee may pursue
any available remedy to collect the payment of principal or interest on the
Notes or to enforce the performance of any provision of the Notes or this
Indenture.
The Trustee may maintain a proceeding even if it does not possess any of
the Notes or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Holder in exercising any right or remedy accruing
upon an Event of Default shall not impair the right or remedy or constitute a
waiver of or acquiescence in the Event of Default. All remedies are cumulative
to the extent permitted by law.
SECTION 8.04. WAIVER OF PAST DEFAULTS.
The Holders of a majority in principal amount of the then outstanding
Notes by notice to the Trustee may on behalf of all of the Holders of the Notes
waive an existing Default or Event of Default and its consequences except a
continuing Default or Event of Default in the payment of the principal of or
interest on any Note. When a Default or Event of Default is waived, it is cured
and ceases; but no such waiver shall extend to any subsequent or other Default
or impair any right consequent thereon.
SECTION 8.05. CONTROL BY MAJORITY.
The Holders of a majority in principal amount of the then outstanding
Notes may direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee or exercising any trust or power conferred on
it. However, the Trustee may refuse to follow any direction that conflicts with
law or this Indenture, is unduly prejudicial to the rights of other Holders, or
would involve the Trustee in personal liability.
SECTION 8.06. LIMITATION ON SUITS.
A Holder may pursue a remedy with respect to this Indenture or the Notes
only if:
(a) the Holder gives to the Trustee notice of a continuing
Event of Default;
(b) the Holders of at least 25% in principal amount of the then
outstanding Notes make a request to the Trustee to pursue the remedy;
(c) such Holder or Holders offer to the Trustee indemnity
satisfactory to the Trustee against any loss, liability or expense;
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(d) the Trustee does not comply with the request within 60 days
after receipt of the request and the offer of indemnity; and
(e) during such 60-day period the Holders of a majority in
principal amount of the then outstanding Notes do not give the Trustee a
direction inconsistent with the request.
A Holder may not use this Indenture to prejudice the rights of another
Holder or to obtain a preference or priority over another Holder.
SECTION 8.07. RIGHTS OF HOLDERS TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, the right of any
Holder of a Note to receive payment of principal, and interest on the Note, on
or after the respective due dates expressed in the Note, or to bring suit for
the enforcement of any such payment on or after such respective dates, shall not
be impaired or affected without the consent of the Holder made pursuant to this
Section 8.07.
SECTION 8.08. COLLECTION SUIT BY TRUSTEE.
If an Event of Default specified in Section 8.01(a) or (b), hereof occurs
and is continuing, the Trustee may recover judgment in its own name and as
trustee of an express trust against the Company for the whole amount of
principal and interest remaining unpaid on the Notes and interest on overdue
principal and interest and such further amount as shall be sufficient to cover
the costs and, to the extent lawful, expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel.
SECTION 8.09. TRUSTEE MAY FILE PROOFS OF CLAIM.
The Trustee may file such proofs of claim and other papers or documents
as may be necessary or advisable in order to have the claims of the Trustee and
the Holders allowed in any judicial proceedings relative to the Company, its
creditors or its property. Nothing contained herein shall be deemed to
authorize the Trustee to authorize or consent to or accept or adopt on behalf of
any Holder any plan of reorganization, arrangement, adjustment or composition
affecting the Notes or the rights of any Holder thereof, or to authorize the
Trustee to vote in respect of the claim of any Holder in any such proceeding.
SECTION 8.10. PRIORITIES.
If the Trustee collects any money pursuant to this Article, it shall pay
out the money in the following order:
First: to the Trustee for amounts due under Section 9.07 hereof;
Second: to the holders of Senior Debt to the extent required by
Article VI;
Third: to Holders for amounts due and unpaid on the Notes for principal
and interest (and Special Interest, if applicable), ratably, without preference
or priority of any kind, according to the amounts due and payable on the Notes
for principal and interest, respectively; and
Fourth: to the Company.
The Trustee may fix a record date and payment date for any payment to
Holders made pursuant to this Section 8.10.
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SECTION 8.11. UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as a Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section 8.11 does not apply to a suit by the Trustee, a suit by a Holder
pursuant to Section 8.07 hereof, or a suit by Holders of more than 10% in
principal amount of the then outstanding Notes.
ARTICLE IX.
TRUSTEE
SECTION 9.01. DUTIES OF TRUSTEE.
(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in their exercise, as a
prudent man would exercise or use under the circumstances in the conduct of his
own affairs.
(b) Except during the continuance of an Event of Default: (i) the
Trustee need perform only those duties that are specifically set forth in this
Indenture and no others and (ii) in the absence of bad faith on its part, the
Trustee may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or opinions
furnished to the Trustee and conforming to the requirements of this Indenture.
However, the Trustee shall examine the certificates and opinions to determine
whether or not they conform to the requirements of this Indenture and to confirm
the correctness of all mathematical computations.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that: (i) this paragraph does not limit the effect of
paragraph (b) of this Section 9.01; (ii) the Trustee shall not be liable for any
error of judgment made in good faith by a Trust Officer, unless it is proved
that the Trustee was negligent in ascertaining the pertinent facts and (iii) the
Trustee shall not be liable with respect to any action it takes or omits to take
in good faith in accordance with a direction received by it pursuant to Section
8.05 hereof.
(d) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b) and (c) of this Section 9.01.
(e) The Trustee may refuse to perform any duty or exercise any right
or power unless it receives indemnity satisfactory to it against any loss,
liability or expense.
(f) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Company.
Money held in trust by the Trustee need not be segregated from other funds
except to the extent required by law.
SECTION 9.02. RIGHTS OF TRUSTEE.
(a) The Trustee may rely on any document believed by it to be genuine
and to have been signed or presented by the proper Person. The Trustee need not
investigate any fact or matter stated in the document.
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(b) Before the Trustee acts or refrains from acting, it may require
an Officers' Certificate or an Opinion of Counsel, or both. The Trustee shall
not be liable for any action it takes or omits to take in good faith in reliance
on such Officers' Certificate or Opinion of Counsel.
(c) The Trustee may act through agents and shall not be responsible
for the misconduct or negligence of any agent appointed with due care.
(d) The Trustee shall not be liable for any action it takes or omits
to take in good faith which it believes to be authorized or within its rights or
powers.
(e) The Trustee shall not be charged with knowledge of any Event of
Default under subsection (c), (d), (e) or (f) (and subsection (a) or (b) if the
Trustee does not act as Paying Agent) of Section 8.01 or of the identity of any
Significant Subsidiary or of any group of two or more Subsidiaries that, taken
as a whole, would constitute a Significant Subsidiary unless either (1) a Trust
Officer of the Trustee assigned to its corporate trust department shall have
actual knowledge thereof, or (2) the Trustee shall have received notice thereof
in accordance with Section 12.02 hereof from the Company or any Holder.
SECTION 9.03. INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may become the owner
or pledgee of Notes and may otherwise deal with the Company or an Affiliate with
the same rights it would have if it were not Trustee. Any Agent may do the same
with like rights. However, the Trustee is subject to Sections 9.10 and 9.11
hereof.
SECTION 9.04. TRUSTEE'S DISCLAIMER.
The Trustee makes no representation as to the validity or adequacy of
this Indenture or the Notes, it shall not be accountable for the Company's use
of the proceeds from the Notes, and it shall not be responsible for any
statement of the Company in the Indenture or any statement in the Notes other
than its authentication or for compliance by the Company with the Registration
Rights Agreement.
SECTION 9.05. NOTICE OF DEFAULTS.
If a Default or Event of Default occurs and is continuing and if it is
known to the Trustee, the Trustee shall mail to Holders a notice of the Default
or Event of Default within 90 days after it occurs. Except in the case of a
Default or Event of Default in payment on any Note, the Trustee may withhold the
notice if and so long as a committee of its Trust Officers in good faith
determines that withholding the notice is in the interests of Holders.
SECTION 9.06. REPORTS BY TRUSTEE TO HOLDERS.
Within 60 days after the reporting date stated in Section 12.10, the
Trustee shall mail to Holders a brief report dated as of such reporting date
that complies with TIA Section 313(a) if and to the extent required by such
Section 313(a). The Trustee also shall comply with TIA Section 313(b)(2). The
Trustee shall also transmit by mail all reports as required by TIA Section
313(c).
A copy of each report at the time of its mailing to Holders shall be
filed with the SEC and each stock exchange on which the Notes are listed. The
Company shall notify the Trustee when the Notes are listed on any stock
exchange.
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SECTION 9.07. COMPENSATION AND INDEMNITY.
The Company shall pay to the Trustee from time to time reasonable
compensation for its services hereunder. The Trustee's compensation shall not
be limited by any law on compensation of a trustee of an express trust. The
Company shall reimburse the Trustee upon request for all reasonable
disbursements, expenses and advances incurred or made by it. Such disbursements
and expenses may include the reasonable disbursements, compensation and expenses
of the Trustee's agents and counsel.
The Company shall indemnify the Trustee against any claims, demands,
expenses (including but not limited to reasonable compensation, fees,
disbursements and expenses of the Trustee's agents and counsel), losses, damages
or liabilities incurred by it, except as set forth in the next paragraph,
arising out of, related to, or in connection with the acceptance or
administration of this trust and its rights or duties hereunder, including the
reasonable costs and expenses, and the costs and expenses of enforcing this
Indenture (including this Section 9.07) against the Company and of defending
itself against any claim (whether asserted by the Company, or any Holder or any
other person) or liability in connection with the exercise or performance of any
of its powers or duties hereunder. The Trustee shall notify the Company
promptly of any claim for which it may seek indemnity. The Company shall defend
the claim and the Trustee shall cooperate in the defense. The Trustee may have
separate counsel and the Company shall pay the reasonable fees, disbursements
and expenses of such counsel. The Company need not pay for any settlement made
without its consent, which consent shall not be unreasonably withheld.
The Company need not reimburse any expense or indemnify against any loss
or liability incurred by the Trustee through negligence or bad faith.
To secure the Company's payment obligations in this Section 9.07, the
Trustee shall have a lien prior to the Notes on all money or property held or
collected by the Trustee, except money or property held in trust to pay
principal and interest on particular Notes.
Without prejudice to any other rights available to the Trustee under
applicable law, when the Trustee incurs expenses or renders services after an
Event of Default specified in Section 8.01(g) or (h) hereof occurs, the expenses
and the compensation for the services are intended to constitute expenses of
administration under any Bankruptcy Law.
All amounts owing to the Trustee under this Section 9.07 shall be payable
by the Company in United States dollars.
SECTION 9.08. REPLACEMENT OF TRUSTEE.
A resignation or removal of the Trustee and appointment of a successor
Trustee shall become effective only upon the successor Trustee's acceptance of
appointment as provided in this Section 9.08.
The Trustee may resign by so notifying the Company. The Holders of a
majority in principal amount of the then outstanding Notes may remove the
Trustee by so notifying the Trustee and the Company. The Company may remove the
Trustee if:
(a) the Trustee fails to comply with Section 9.10 hereof,
unless the Trustee's duty to resign is stayed as provided in TIA Section
310(b);
(b) the Trustee is adjudged a bankrupt or an insolvent or an
order for relief is entered with respect to the Trustee under any
Bankruptcy Law;
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(c) a Custodian or public officer takes charge of the Trustee
or its property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the office
of Trustee for any reason, the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in principal amount of the then outstanding Notes may appoint a
successor Trustee to replace the successor Trustee appointed by the Company.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Holders of at least 10% in principal amount of the then outstanding Notes may
petition any court of competent jurisdiction for the appointment of a successor
Trustee.
If the Trustee fails to comply with Section 9.10 hereof, unless the
Trustee's duty to resign is stayed as provided in TIA Section 310(b), any Holder
who has been a bona fide Holder of a Note for at least six months may petition
any court of competent jurisdiction for the removal of the Trustee and the
appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its appointment
to the retiring Trustee and to the Company. Thereupon the resignation or
removal of the retiring Trustee shall become effective, and the successor
Trustee shall have all the rights, powers and duties of the Trustee under this
Indenture. The successor Trustee shall mail a notice of its succession to
Holders. The retiring Trustee shall promptly transfer all property held by it
as Trustee to the successor Trustee, subject to the lien provided for in Section
9.07 hereof. Notwithstanding replacement of the Trustee pursuant to this
Section 9.08 hereof, the Company's obligations under Section 9.07 hereof shall
continue for the benefit of the retiring trustee with respect to expenses and
liabilities incurred by it prior to such replacement.
SECTION 9.09. SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates, merges or converts into, or transfers all or
substantially all of its corporate trust business (including the administration
of this Indenture) to, another corporation, the successor corporation without
any further act shall be the successor Trustee.
SECTION 9.10. ELIGIBILITY; DISQUALIFICATION.
This Indenture shall always have a Trustee who satisfies the requirements
of TIA Section 310(a)(1) and (5). The Trustee shall always have a combined
capital and surplus as stated in Section 12.10 hereof. The Trustee is subject
to TIA Section 310(b).
SECTION 9.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.
The Trustee is subject to TIA Section 311(a), excluding any creditor
relationship listed in TIA Section 311(b). A Trustee who has resigned or been
removed shall be subject to TIA Section 311(a) to the extent indicated therein.
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ARTICLE X.
DISCHARGE OF INDENTURE
SECTION 10.01. TERMINATION OF COMPANY'S OBLIGATIONS.
This Indenture shall cease to be of further effect (except that the
Company's obligations under Sections 9.07 and 10.02 hereof shall survive) when
all outstanding Notes theretofore authenticated and issued have been delivered
to the Trustee for cancellation and the Company has paid all sums payable
hereunder.
SECTION 10.02. REPAYMENT TO COMPANY.
The Trustee and the Paying Agent shall promptly pay to the Company upon
request any excess money or securities held by them at any time.
The Trustee and the Paying Agent shall pay to the Company upon request
any money held by them for the payment of principal or interest that remains
unclaimed for two years after the date upon which such payment shall have become
due; PROVIDED, HOWEVER, that the Company shall have first caused notice of such
payment to the Company to be mailed to each Holder entitled thereto no less than
30 days prior to such payment. After payment to the Company, the Trustee and
the Paying Agent shall have no further liability with respect to such money and
Holders entitled to the money must look to the Company for payment as general
creditors unless any applicable abandoned property law designates another
Person.
ARTICLE XI.
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 11.01. WITHOUT CONSENT OF HOLDERS.
The Company and the Trustee may amend or supplement this Indenture or the
Notes without the consent of any Holder:
(a) to cure any ambiguity, defect or inconsistency;
(b) to comply with Sections 5.12 and 7.01 hereof;
(c) to provide for uncertificated Notes in addition to or in
place of certificated Notes;
(d) to make any change that provides additional rights or
benefits to the Holders of the Notes;
(e) to make any change that does not adversely affect the
interests hereunder of any Holder; or
(f) to qualify the Indenture under the TIA or to comply with
the requirements of the SEC in order to maintain the qualification of the
Indenture under the TIA.
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SECTION 11.02. WITH CONSENT OF HOLDERS.
Subject to Section 8.07 hereof, the Company and the Trustee may amend or
supplement this Indenture or the Notes with the written consent of the Holders
of at least a majority in principal amount of the then outstanding Notes.
Subject to Sections 8.04 and 8.07 hereof, the Holders of a majority in principal
amount of the Notes then outstanding may also waive compliance in a particular
instance by the Company with any provision of this Indenture or the Notes.
However, without the consent of each Holder affected, an amendment, supplement
or waiver under this Section 11.02 may not:
(a) reduce the principal amount of Notes whose Holders must
consent to an amendment, supplement or waiver;
(b) reduce the principal of or change the fixed maturity of any
Note or alter the provisions of Section 7 of the Notes;
(c) reduce the rate of or change the time for payment or
accrual of interest on any Note;
(d) waive a default in the payment of the principal of or
interest on any Note, except a rescission of acceleration of the Notes by
the Holders of at least a majority in aggregate principal amount of the
Notes and a waiver of the payment default that resulted from such
acceleration;
(e) make any Note payable in money other than that stated in
the Note;
(f) make any change in Section 8.04 or 8.07 hereof;
(g) waive a redemption payment with respect to any Note;
(h) impair the right to convert the Notes into Common Stock;
(i) modify Article V or VI in a manner adverse to the Holders
of Notes; and
(j) make any change in the foregoing amendment and waiver
provisions of this Article XI.
To secure a consent of the Holders under this Section 11.02, it shall not
be necessary for the Holders to approve the particular form of any proposed
amendment, supplement or waiver, but it shall be sufficient if such consent
approves the substance thereof.
After an amendment, supplement or waiver under this Section 11.02 becomes
effective, the Company shall mail to Holders a notice briefly describing the
amendment or waiver.
SECTION 11.03. COMPLIANCE WITH TRUST INDENTURE ACT.
Every amendment to this Indenture or the Notes shall be set forth in a
supplemental indenture that complies with the TIA as then in effect.
SECTION 11.04. REVOCATION AND EFFECT OF CONSENTS.
Until an amendment, supplement or waiver becomes effective, a consent to
it by a Holder of a Note is a continuing consent by the Holder and every
subsequent Holder of a Note or portion of a Note
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that evidences the same debt as the consenting Holder's Note, even if
notation of the consent is not made on any Note. However, any such Holder or
subsequent Holder may revoke the consent as to his Note or portion of a Note
if the Trustee receives the notice of revocation before the date on which the
Trustee receives an Officers' Certificate certifying that the Holders of the
requisite principal amount of Notes have consented to the amendment,
supplement or waiver.
The Company may, but shall not be obligated to, fix a record date for the
purpose of determining the Holders entitled to consent to any amendment,
supplement or waiver. If a record date is fixed, then notwithstanding the
provisions of the immediately preceding paragraph, those Persons who were
Holders at such record date (or their duly designated proxies), and only those
Persons, shall be entitled to consent to such amendment, supplement or waiver or
to revoke any consent previously given, whether or not such Persons continue to
be Holders after such record date. No consent shall be valid or effective for
more than 90 days after such record date unless consents from Holders of the
principal amount of Notes required hereunder for such amendment or waiver to be
effective shall have also been given and not revoked within such 90-day period.
After an amendment, supplement or waiver becomes effective it shall bind
every Holder, unless it is of the type described in any of clauses (a) through
(j) of Section 11.02 hereof. In such case, the amendment or waiver shall bind
each Holder who has consented to it and every subsequent Holder that evidences
the same debt as the consenting Holder's Note.
SECTION 11.05. NOTATION ON OR EXCHANGE OF NOTES.
The Trustee may place an appropriate notation about an amendment or
waiver on any Note thereafter authenticated. The Company in exchange for all
Notes may issue and the Trustee shall authenticate new Notes that reflect the
amendment or waiver.
Failure to make such notation on a Note or to issue a new Note as
aforesaid shall not affect the validity and effect of such amendment or waiver.
SECTION 11.06. TRUSTEE PROTECTED.
The Trustee shall sign all supplemental indentures, except that the
Trustee may, but need not, sign any supplemental indenture that adversely
affects its rights.
ARTICLE XII.
MISCELLANEOUS
SECTION 12.01. TRUST INDENTURE ACT CONTROLS.
This Indenture is subject to the provisions of the TIA that are required
to be incorporated into this Indenture (or, prior to the registration of the
Notes pursuant to the Registration Rights Agreement, would be required to be
incorporated into this Indenture if it were qualified under the TIA), and shall,
to the extent applicable, be governed by such provisions. If any provision of
this Indenture limits, qualifies, or conflicts with another provision which is
required (or would be so required) to be incorporated in this Indenture by the
TIA, the incorporated provision shall control.
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SECTION 12.02. NOTICES.
Any notice or communication by the Company or the Trustee to the other is
duly given if in writing and delivered in Person or mailed by first class mail
to the other's address stated in Section 12.10 hereof. The Company or the
Trustee by notice to the other may designate additional or different addresses
for subsequent notices or communications.
Any notice or communication to a Holder shall be mailed by first class
mail to his address shown on the register kept by the Registrar. Failure to
mail a notice or communication to a Holder or any defect in it shall not affect
its sufficiency with respect to other Holders.
If a notice or communication is mailed in the manner provided above
within the time prescribed, it is duly given, whether or not the addressee
receives it.
If the Company mails a notice or communication to Holders, it shall mail
a copy to the Trustee and each Agent at the same time.
All other notices or communications shall be in writing.
In case by reason of the suspension of regular mail service, or by reason
of any other cause, it shall be impossible to mail any notice as required by the
Indenture, then such method of notification as shall be made with the approval
of the Trustee shall constitute a sufficient mailing of such notice.
SECTION 12.03. COMMUNICATION BY HOLDERS WITH OTHER HOLDERS.
Holders may communicate pursuant to TIA Section 312(b) with other Holders
with respect to their rights under this Indenture or the Notes. The Company,
the Trustee, the Registrar and anyone else shall have the protection of TIA
Section 312(c).
SECTION 12.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by the Company to the Trustee to take any
action under this Indenture, the Company shall furnish to the Trustee:
(a) an Officers' Certificate stating that, in the opinion of
the signers, all conditions precedent, if any, provided for in this
Indenture relating to the proposed action have been complied with; and
(b) an Opinion of Counsel stating that, in the opinion of such
counsel, all such conditions precedent have been complied with.
SECTION 12.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
Each certificate or opinion with respect to compliance with a condition
or covenant provided for in this Indenture (other than pursuant to Section 4.03)
shall include:
(a) a statement that the Person signing such certificate or
rendering such opinion has read such covenant or condition;
(b) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
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(c) a statement that, in the opinion of such Person, such
Person has made such examination or investigation as is necessary to
enable such Person to express an informed opinion as to whether or not
such covenant or condition has been complied with; and
(d) a statement as to whether or not, in the opinion of such
Person, such condition or covenant has been complied with.
SECTION 12.06. RULES BY TRUSTEE AND AGENTS.
The Trustee may make reasonable rules for action by, or a meeting of,
Holders. The Registrar or Paying Agent may make reasonable rules and set
reasonable requirements for its functions.
SECTION 12.07. LEGAL HOLIDAYS.
A "LEGAL HOLIDAY" is a Saturday, a Sunday or a day on which banking
institutions in the State of New York are not required to be open. If a payment
date is a Legal Holiday at a place of payment, payment may be made at that place
on the next succeeding day that is not a Legal Holiday, and no interest shall
accrue for the intervening period. If any other operative date for purposes of
this Indenture shall occur on a Legal Holiday then for all purposes the next
succeeding day that is not a Legal Holiday shall be such operative date.
SECTION 12.08. NO RECOURSE AGAINST OTHERS.
A director, officer, employee, incorporator or shareholder of the
Company, as such, shall not have any liability for any Obligations of the
Company under the Notes or this Indenture or for any claim based on, in respect
of or by reason of such Obligations or their creation. Each Holder by accepting
a Note waives and releases all such liability. The waiver and release are part
of the consideration for the issue of the Notes.
SECTION 12.09. COUNTERPARTS AND FACSIMILE SIGNATURES.
This Indenture may be executed by manual or facsimile signature in any
number of counterparts and by the parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.
SECTION 12.10. VARIABLE PROVISIONS.
"OFFICER" means the Chairman of the Board, the President, any Vice
President, the Treasurer, the Secretary, any Assistant Treasurer or any
Assistant Secretary of the Company.
The first certificate pursuant to Section 4.03 hereof shall be for the
fiscal year ended on December 31, 1999.
The reporting date for Section 9.06 hereof is September 15, of each year.
The first reporting date is September 15, 2000.
The Trustee shall always have a combined capital and surplus of at least
$100,000,000 as set forth in its most recent published annual report of
condition.
The Company's address is:
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Invitrogen Corporation
1600 Faraday Avenue
Carlsbad, California 92008
Attention: James R. Glynn
Executive Vice President
The Trustee's address is:
State Street Bank and Trust Company of California, N.A.
633 West 5th Street, 12th Floor
Los Angeles, California 90071
Attention: Corporate Trust Administration
(Invitrogen Corporation 5 1/2 Convertible
Subordinated Notes due 2007)
SECTION 12.11. GOVERNING LAW, SUBMISSION TO JURISDICTION.
THE INTERNAL LAWS OF THE STATE OF NEW YORK SHALL GOVERN THIS INDENTURE
AND THE NOTES, WITHOUT REGARD TO THE CONFLICT OF LAWS PROVISIONS THEREOF.
To the extent permitted by applicable law, the Company irrevocably
submits to the nonexclusive jurisdiction of any federal or state court in the
Borough of Manhattan, City and State of New York, United States of America, in
any suit or proceeding based on or arising under this Indenture and the Notes
and irrevocably agrees that all claims in respect of such suit or proceeding may
be determined in any such court. The Company irrevocably and fully waives the
defense of an inconvenient forum to the maintenance of such suit or proceeding.
The Company hereby irrevocably designates and appoints CT Corporation System as
the authorized agent of the Company upon whom process may be served in any such
suit or proceeding (the "PROCESS AGENT"), it being understood that the
designation and appointment of the Process Agent as such authorized agent shall
become effective immediately without any further action on the part of the
Company. The Company represents to the Trustee that it has notified the Process
Agent of such designation and appointment and that the Process Agent has
accepted the same. The Company hereby irrevocably authorizes and directs the
Process Agent to accept such service. The Company further agrees that service
of process upon the Process Agent shall be deemed in every respect effective
service of process upon the Company in any such suit or proceeding. Nothing
herein shall affect the right of the Trustee or any Holder to serve process in
any other manner permitted by law. In the event that CT Corporation System
ceases to be the Process Agent, the Company agrees that it will take any and all
action, including the execution and filing of any and all such documents and
instruments as may be necessary to validly designate and appoint an alternate
agent as Process Agent, and to maintain such designation and appointment in full
force and effect so long as the Company has any outstanding obligations under
this Indenture or the Notes, on terms that are reasonably acceptable to the
Trustee. To the extent that the Company has or hereafter may acquire any
immunity from jurisdiction of any court or from any legal process (whether
through service of notice, attachment prior to judgment, attachment in aid of
execution, execution or otherwise) with respect to itself or its property, the
Company hereby irrevocably waives such immunity in respect of its obligations
hereunder and thereunder, to the extent permitted by law.
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SECTION 12.12. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret another indenture, loan or
debt agreement of the Company or an Affiliate. Any such indenture, loan or debt
agreement may not be used to interpret this Indenture.
SECTION 12.13. SUCCESSORS.
All agreements of the Company in this Indenture and the Notes shall bind
its successor. All agreements of the Trustee in this Indenture shall bind its
successor.
SECTION 12.14. SEVERABILITY.
In case any provision in this Indenture or in the Notes shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
SECTION 12.15. TABLE OF CONTENTS, HEADINGS, ETC.
The Table of Contents, Cross-Reference Table, and headings of the
Articles and Sections of this Indenture have been inserted for convenience of
reference only, are not to be considered a part hereof, and shall in no way
modify or restrict any of the terms or provisions hereof.
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SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, all as of the date first written above.
INVITROGEN CORPORATION, as Company
By: /s/ James R. Glynn
--------------------------------------
Name: James R. Glynn
Title: Executive Vice President & CFO
STATE STREET BANK AND TRUST COMPANY OF
CALIFORNIA, N.A., as Trustee
By: /s/ Mark Henson
--------------------------------------
Name: Mark Henson
Title: Assistant Vice President
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EXECUTION COPY
===============================================================================
$172,500,000
5 1/2% CONVERTIBLE SUBORDINATED NOTES DUE 2007
REGISTRATION RIGHTS AGREEMENT
Dated as of March 1, 2000
by and among
INVITROGEN CORPORATION
and
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
BEAR, STEARNS & CO. INC.
CHASE SECURITIES INC.
DAIN RAUSCHER INCORPORATED
U.S. BANCORP PIPER JAFFRAY INC.
===============================================================================
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This Registration Rights Agreement (this "AGREEMENT") is made and entered
into as of March 1, 2000 by and among Invitrogen Corporation, a Delaware
corporation (the "COMPANY"), and Donaldson, Lufkin & Jenrette Securities
Corporation, Bear, Stearns & Co. Inc., Chase Securities Inc., Dain Rauscher
Incorporated and U.S. Bancorp Piper Jaffray Inc. (each an "INITIAL PURCHASER"
and collectively, the "INITIAL PURCHASERS"). The Company proposes to issue and
sell to the Initial Purchasers (the "INITIAL PLACEMENT") $150,000,000 in
aggregate principal amount of its 5 1/2% Convertible Notes due 2007 (the "FIRM
CONVERTIBLE NOTES"). The Company also proposes to issue and sell to the Initial
Purchasers not more than $22,500,000 in agregate principal amount of its 5 1/2%
Convertible Subordinated Notes due 2007 (the "ADDITIONAL CONVERTIBLE NOTES" and,
together with the Firm Convertible Notes, the "NOTES"). As an inducement to the
Initial Purchasers to enter into the purchase agreement, dated as of February
25, 2000 (the "PURCHASE AGREEMENT"), and in satisfaction of a condition to the
Initial Purchasers' obligations thereunder, the Company agrees with the Initial
Purchasers, (i) for the benefit of the Initial Purchasers and (ii) for the
benefit of the holders from time to time of the Notes whose names appear in the
register maintained by the Registrar in accordance with the provisions of the
Indenture (as defined in Section 1 hereof) (including the Initial Purchasers),
as follows:
SECTION 1. DEFINITIONS
Capitalized terms used herein without definition shall have their
respective meanings set forth in the Purchase Agreement. As used in this
Agreement, the following capitalized defined terms shall have the following
meanings:
"ACT" means the Securities Act of 1933, as amended, and the rules and
regulations of the Commission promulgated thereunder.
"AFFILIATE" of any specified person means any other person which,
directly or indirectly, is in control of, is controlled by, or is under common
control with, such specified person. For purposes of this definition, control
of a person means the power, direct or indirect, to direct or cause the
direction of the management and policies of such person whether by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"AGREEMENT" means this Registration Rights Agreement.
"CLOSING DATE" has the meaning set forth in the Purchase Agreement.
"COMMISSION" means the Securities and Exchange Commission.
"COMMON STOCK" means the common stock of the Company, par value $0.01 per
share, issuable upon the conversion of the Notes.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations of the Commission promulgated thereunder.
"HOLDER" has the meaning set forth in Section 2 hereof.
"INDENTURE" means the Indenture, dated as of February March 1, 2000,
between the Company and the Trustee, relating to the Notes, as the same may be
amended from time to time in accordance with the terms thereof.
"INITIAL PLACEMENT" has the meaning set forth in the preamble hereto.
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"LOSSES" has the meaning set forth in Section 7(d) hereof.
"MAJORITY HOLDERS" means the Holders of a majority of the aggregate
principal amount of securities registered under a Shelf Registration Statement.
"PROSPECTUS" means the prospectus included in any Shelf Registration
Statement (including, without limitation, a prospectus that discloses
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A under the Act), as amended or
supplemented by any prospectus supplement, with respect to the terms of the
offering of any portion of Transfer Restricted Securities covered by such Shelf
Registration Statement, and all amendments and supplements to the Prospectus,
including post-effective amendments.
"SHELF REGISTRATION" means a registration effected pursuant to Section 3
hereof.
"SHELF REGISTRATION PERIOD" has the meaning set forth in Section 3
hereof.
"SHELF REGISTRATION STATEMENT" means a "shelf" registration statement of
the Company pursuant to the provisions of Section 3 hereof that covers some or
all of the Transfer Restricted Securities as applicable, on an appropriate form
under Rule 415 under the Act, or any similar rule that may be adopted by the
Commission, amendments and supplements to such registration statement, including
post-effective amendments, and in each case, including the Prospectus contained
therein, all exhibits thereto and all material incorporated therein by
reference.
"SUPPLEMENTAL DELAY PERIOD" means any period commencing on the date of
receipt by a Holder of Transfer Restricted Securities of any notice from the
Company of the existence of any fact or event of the kind described in Section
4(b)(2) hereof and ending on the date of receipt by such Holder of an amended or
supplemented Shelf Registration Statement or Prospectus, as contemplated by
Section 4(h) hereof, or the receipt by such Holder of written notice from the
Company (the "ADVICE") that the use of the Prospectus may be resumed, and the
receipt of copies of any additional or supplemental filings that are
incorporated by reference in the Prospectus.
"TRANSFER RESTRICTED SECURITIES" means each Note and the Common Stock
issuable upon conversion thereof until (i) the date on which such Note or the
Common Stock issuable upon conversion thereof has been effectively registered
under the Act and disposed of in accordance with the Shelf Registration
Statement, (ii) the date on which such Note or Common Stock issuable upon
conversion thereof is distributed to the public pursuant to Rule 144 under the
Act (or any similar provision then in effect) or is salable pursuant to Rule
144(k) under the Act or (iii) the date on which such Note or the Common Stock
issuable upon conversion thereof ceases to be outstanding.
"TRUSTEE" means the trustee with respect to the Notes under the
Indenture.
"UNDERWRITER" means any underwriter of Notes in connection with an
offering thereof under a Shelf Registration Statement.
SECTION 2. HOLDERS
A person is deemed to be a holder of Transfer Restricted Securities
(each, a "HOLDER") whenever such person becomes the registered holder of such
Transfer Restricted Securities under the Indenture and includes broker-dealers
that hold Transfer Restricted Securities (i) as a result of market making
activities
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and other trading activities and (ii) which were acquired directly from the
Company or an Affiliate of the Company.
SECTION 3. SHELF REGISTRATION
The Company shall within 90 days of the date of original issuance of the
Notes, file with the Commission and thereafter shall use its reasonable best
efforts to cause to be declared effective under the Act on or prior to 180 days
(plus any additional days allowed as a result of a Supplemental Delay Period)
after the date of original issuance of the Notes, a Shelf Registration Statement
relating to the offer and sale of the Transfer Restricted Securities by the
Holders from time to time in accordance with the methods of distribution elected
by such Holders and set forth in such Shelf Registration Statement.
The Company shall use its best efforts to keep the Shelf Registration
Statement continuously effective in order to permit the Prospectus forming part
thereof to be usable by Holders for a period of two years from the date of
original issuance of the Notes or such shorter period that will terminate when
(i) all the Transfer Restricted Securities covered by the Shelf Registration
Statement have been sold pursuant to the Shelf Registration Statement, (ii) the
date on which, in the opinion of counsel to the Company, all of the Transfer
Restricted Securities then held by the Holders may be sold by such Holders in
the public United States securities markets in the absence of a registration
statement covering such sales or (iii) the date on which there ceases to be
outstanding any Transfer Restricted Securities (in any such case, such period
being called the "SHELF REGISTRATION PERIOD"). The Company shall be deemed not
to have used its reasonable best efforts to keep the Shelf Registration
Statement effective during the requisite period if it voluntarily takes any
action that would result in Holders of Transfer Restricted Securities covered
thereby not being able to offer and sell such securities during that period,
unless (i) such action is required by applicable law, (ii) such action is taken
by the Company in good faith and for valid business reasons (not including
avoidance of the Company's obligations hereunder), including the acquisition or
divestiture of assets, so long as the Company promptly thereafter complies with
the requirements of Section 4(h) hereof, if applicable or (iii) such action is
taken because of any fact or circumstance giving rise to a Supplemental Delay
Period.
SECTION 4. REGISTRATION PROCEDURES
In connection with any Shelf Registration Statement, the following
provisions shall apply:
(a) The Company shall ensure that (i) any Shelf Registration Statement
and any amendment thereto and any Prospectus forming part thereof and any
amendment or supplement thereto complies in all material respects with the Act
and the rules and regulations thereunder, (ii) any Shelf Registration Statement
and any amendment thereto does not, when it becomes effective, 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 not misleading and
(iii) any Prospectus forming part of any Shelf Registration Statement, and any
amendment or supplement to such Prospectus, does not include an untrue statement
of a material fact or omit to state a material fact necessary in order to make
the statements, in the light of the circumstances under which they were made,
not misleading.
(b) (1) The Company shall advise the Initial Purchasers and the
Holders of Transfer Restricted Securities named in any Shelf Registration
Statement that have provided in writing to the Company a telephone or facsimile
number and address for notices, and, if requested by the Initial Purchasers or
any such Holder, confirm such advice in writing when a Shelf Registration
Statement and any amendment thereto has been filed with the Commission and when
the Shelf Registration Statement or any post-effective amendment thereto has
become effective.
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(2) The Company shall advise the Initial Purchasers and the
Holders of Transfer Restricted Securities named in any Shelf Registration
Statement, which have provided in writing to the Company a telephone or
facsimile number and address for notices, and, if requested by the Initial
Purchasers or any such Holder, confirm such advice in writing:
(i) of any request by the Commission for amendments or
supplements to the Shelf Registration Statement or the Prospectus
included therein or for additional information;
(ii) of the initiation by the Commission of proceedings relating
to a stop order suspending the effectiveness of the Shelf Registration
Statement;
(iii) of the issuance by the Commission of any stop order
suspending the effectiveness of the Shelf Registration Statement;
(iv) of the receipt by the Company of any notification with
respect to the suspension of the qualification of the securities included
therein for sale in any jurisdiction or the initiation or threatening of
any proceeding for such purpose; and
(v) of the existence of any fact and the happening of any event
(including, without limitation, pending negotiations relating to, or the
consummation of, a transaction or the occurrence of any event which would
require additional disclosure of material non-public information by the
Company in the Shelf Registration Statement as to which the Company has a
bona fide business purpose for preserving confidential or which renders
the Company unable to comply with Commission requirements) that, in the
opinion of the Company, makes untrue any statement of a material fact
made in its Shelf Registration Statement, the Prospectus or any amendment
or supplement thereto or any document incorporated by reference therein
or requires the making of any changes in the Shelf Registration Statement
or the Prospectus so that, as of such date, the statements therein are
not misleading and do not omit to state a material fact required to be
stated therein or necessary to make the statements therein (in the case
of the Prospectus, in light of the circumstances under which they were
made) not misleading.
Such advice may be accompanied by an instruction to suspend the use of
the Prospectus until the requisite changes have been made.
(c) The Company shall use its best efforts to obtain the withdrawal of
any order suspending the effectiveness of any Shelf Registration Statement at
the earliest possible time.
(d) The Company shall use its best efforts to furnish to each selling
Holder named in any Shelf Registration Statement who so requests in writing and
who has provided to the Company an address for notices, without charge, at least
one conformed copy of such Shelf Registration Statement and any post-effective
amendment thereto, including financial statements and, if the Holder so requests
in writing, all exhibits and schedules (including those incorporated by
reference).
(e) The Company shall, during the Shelf Registration Period, deliver
to each Holder of Transfer Restricted Securities named in any Shelf Registration
Statement and who has provided to the Company an address for notices, without
charge, as many copies of the Prospectus (including each preliminary Prospectus)
contained in such Shelf Registration Statement and any amendment or supplement
thereto as such Holder may reasonably request; subject to any notice by the
Company in accordance with Section 5(b) hereof, the Company consents to the use
of the Prospectus or any amendment or supplement thereto by each of the selling
Holders for the purposes of offering and resale
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of the Transfer Restricted Securities covered by the Prospectus in accordance
with the applicable regulations promulgated under the Act.
(f) Prior to any offering of Transfer Restricted Securities pursuant
to any Shelf Registration Statement, the Company shall register or qualify or
cooperate with the Holders of Transfer Restricted Securities named therein and
their respective counsel in connection with the registration or qualification of
such Transfer Restricted Securities for offer and sale under the securities or
blue sky laws of such jurisdictions of the United States as any such Holders
reasonably request in writing not later than the date that is five business days
prior to the date upon which this Agreement specifies that the Shelf
Registration Statement shall become effective; PROVIDED, HOWEVER, that the
Company will not be required to qualify generally to do business in any
jurisdiction where it is not then so qualified or to take any action which would
subject it to general or unlimited service of process or to taxation in any such
jurisdiction where it is not then so subject.
(g) The Company shall endeavor to cooperate with the Holders of
Transfer Restricted Securities to facilitate the timely preparation and delivery
of certificates representing Transfer Restricted Securities to be sold pursuant
to any Shelf Registration Statement free of any restrictive legends and in such
denominations and registered in such names as Holders may request in writing at
least two business days prior to sales of securities pursuant to such Shelf
Registration Statement.
(h) Upon the occurrence of any event contemplated by paragraph
4(b)(2)(v) hereof, the Company shall promptly prepare a post-effective amendment
to any Shelf Registration Statement or an amendment or supplement to the related
Prospectus or file any other required document so that as thereafter delivered
to purchasers of the Transfer Restricted Securities covered thereby, the
Prospectus will not include an untrue statement of a material fact or omit to
state any material fact necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading; PROVIDED that
in the event of a material business transaction (including, without limitation,
pending negotiations relating to such a transaction) which would, in the opinion
of counsel to the Company, require disclosure by the Company in the Shelf
Registration Statement of material non-public information for which the Company
has a bona fide business purpose for not disclosing, then for so long as such
circumstances exist, the Company shall not be required to prepare and file a
supplement or post-effective amendment hereunder.
(i) Not later than the effective date of any such Shelf Registration
Statement hereunder, the Company shall cause to be provided a CUSIP number for
the Notes registered under such Shelf Registration Statement, and provide the
applicable trustee with certificates for such Notes in a form eligible for
deposit with The Depository Trust Company.
(j) The Company shall make generally available to its security holders
in a regular filing on Form 10-Q or 10-K an earnings statement satisfying the
provisions of Rule 158 (which need not be audited) for the twelve-month period
commencing after effectiveness of the Shelf Registration Statement.
(k) The Company shall cause the Indenture to be qualified under the
Trust Indenture Act in a timely manner.
(l) The Company may require each Holder of Transfer Restricted
Securities, which are to be sold pursuant to any Shelf Registration Statement,
to furnish to the Company within 20 business days after written request for such
information has been made by the Company, such information regarding the Holder
and the distribution of such securities as the Company may from time to time
reasonably require for inclusion in such Shelf Registration Statement and such
other information as may be
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necessary or advisable in the reasonable opinion of the Company and its
counsel, in connection with such Shelf Registration Statement. No Holder of
Transfer Restricted Securities shall be entitled to the benefit of any
Special Interest (as set forth in the Notes) under the Indenture and the
Notes or be entitled to use the Prospectus unless and until such Holder shall
have furnished the information required by this Section 4(l) and all such
information required to be disclosed in order to make the information
previously furnished to the Company by such Holder not materially misleading.
(m) The Company shall, if requested, promptly incorporate in a
Prospectus supplement or post-effective amendment to a Shelf Registration
Statement, such information as the Majority Holders reasonably agree should be
included therein in order to effect their distribution of the Notes and shall
make all required filings of such Prospectus supplement or post-effective
amendment as soon as notified of the matters to be incorporated in such
Prospectus supplement or post-effective amendment; PROVIDED, HOWEVER, that the
Company shall not be required to take any action pursuant to this Section 4(m)
that would, in the opinion of counsel for the Company, violate applicable law or
to include information the disclosure of which at the time would have a material
adverse effect on the business or operations of the Company and/or its
subsidiaries, as determined in good faith by the Company.
(n) The Company shall enter into such agreements and take all other
reasonably appropriate actions in order to expedite or facilitate the
registration or the disposition of the Transfer Restricted Securities, and in
connection therewith, if an underwriting agreement is entered into, cause the
same to contain indemnification and contribution provisions and procedures no
less favorable than those set forth in Section 7 (or such other provisions and
procedures acceptable to the Majority Holders), with respect to all parties to
be indemnified pursuant to Section 7.
(o) The Company shall upon receipt of a reasonable request in writing
therefor:
(i) make reasonably available at reasonable times prior to the
effectiveness of the related Shelf Registration Statement for inspection
by representatives of the Holders of Transfer Restricted Securities to be
registered thereunder and any attorney, accountant or other agent
retained by such Holders, at the office where normally kept during normal
business hours, all financial and other records, pertinent corporate
documents and properties of the Company and its subsidiaries, and cause
the Company's officers, directors and employees to supply all relevant
information reasonably requested by the Holders' attorneys, accountants
or other agents in connection with any such Shelf Registration Statement
as is customary for similar due diligence examinations; PROVIDED,
HOWEVER, that the foregoing inspection and information gathering shall be
coordinated by one counsel designated by the Holders and that such
persons shall first agree in writing with the Company that any
information that is designated in writing by the Company, in good faith,
as confidential at the time of delivery of such information shall be kept
confidential by such person, unless such disclosure is made in connection
with a court proceeding or required by law, or such information becomes
available to the public generally or through a third party without an
accompanying obligation of confidentiality;
(ii) obtain opinions of counsel to the Company and updates
thereof (which counsel and opinions (in form, scope and substance) shall
be reasonably satisfactory to the Majority Holders), addressed to each
selling Holder named in the Shelf Registration Statement covering such
matters (in form, scope and substance) as those matters set forth in
Section 9(e) of the Purchase Agreement;
(iii) obtain "cold comfort" letters (or, in the case of any
person that does not satisfy the conditions for receipt of a "cold
comfort" letter specified in Statement on Auditing Standards
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No. 72, an "agreed-upon procedures letter") and updates thereof from
the independent certified public accountants of the Company (and, if
necessary, any other independent certified public accountants of any
subsidiary of the Company or of any business acquired by the Company
for which financial statements and financial data are, or are required
to be, included in the Shelf Registration Statement), addressed to
each selling Holder of Transfer Restricted Securities registered
thereunder and the underwriters, if any, in customary form and covering
matters of the type customarily covered in "cold comfort" letters in
connection with primary underwritten offerings; and
(iv) deliver such documents and certificates as may be
reasonably requested by the Majority Holders, including those to evidence
compliance with Section 4(h).
The foregoing actions set forth in clauses (ii), (iii) and (iv) of
this Section 4(o) shall be performed upon the effectiveness of such Shelf
Registration Statement and the effectiveness of each post-effective
amendment thereto.
(v) The Company may offer securities of the Company other than
the Notes under the Shelf Registration Statement, except where such offer
would conflict with the terms of the Purchase Agreement.
SECTION 5. HOLDERS' AGREEMENTS
Each Holder of Transfer Restricted Securities severally but not jointly,
by the acquisition of such Transfer Restricted Securities, agrees:
(a) To furnish the information required to be furnished pursuant to
Section 4(l) hereof within the time period set forth therein.
(b) That upon receipt of a notice of the commencement of a
Supplemental Delay Period, it will keep the fact of such notice confidential,
forthwith discontinue disposition of its Transfer Restricted Securities pursuant
to the Shelf Registration Statement, and will not deliver any Prospectus forming
a part thereof until receipt of the amended or supplemented Shelf Registration
Statement or Prospectus, as applicable, as contemplated by Section 4(h) hereof,
or until receipt of the Advice. If a Supplemental Delay Period should occur, the
Shelf Registration Period shall be extended by the number of days of which the
Supplemental Delay Period is comprised; PROVIDED that the Shelf Registration
Period shall not be extended if the Company has received an opinion of counsel
(which counsel, if different from counsel to the Company referred to in Section
9(e) of the Purchase Agreement, shall be reasonably satisfactory to the Majority
Holders of the Transfer Restricted Securities named in the Shelf Registration
Period and which opinion shall be in writing) to the effect that the Transfer
Restricted Securities can be freely tradable without the continued effectiveness
of the Shelf Registration Statement.
(c) If so directed by the Company in a notice of the commencement of a
Supplemental Delay Period, each Holder of Transfer Restricted Securities will
deliver to the Company (at the Company's expense) all copies, other than
permanent file copies then in such Holder's possession, of the Prospectus
covering the Transfer Restricted Securities.
(d) Sales of such Transfer Restricted Securities pursuant to a Shelf
Registration Statement shall only be made in the manner set forth in such
currently effective Shelf Registration Statement.
SECTION 6. REGISTRATION EXPENSES
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The Company shall bear all expenses incurred in connection with the
performance of its obligations under Sections 3 and 4 hereof and will reimburse
the Holders for the reasonable fees and disbursements of one firm or counsel
designated by the Majority Holders to act as counsel for the Holders in
connection with any Shelf Registration Statement. Notwithstanding the foregoing
or anything in this Agreement to the contrary, each Holder shall pay all
underwriting discounts and commission of any underwriters with respect to any
Transfer Restricted Securities sold by it.
SECTION 7. INDEMNIFICATION AND CONTRIBUTION
(a) In connection with the Shelf Registration Statement and to the
extent permitted by law, the Company agrees to indemnify and hold harmless each
Holder of Transfer Restricted Securities covered thereby (including each Initial
Purchaser), the directors, officers, employees, partners, representatives and
agents of each such Holder and each person who controls any such Holder within
the meaning of either Section 15 of the Act or Section 20 of the Exchange Act
(each such person being sometimes hereinafter referred to as an "indemnified
party") against any and all losses, claims, damages, judgments or liabilities,
joint or several, to which they or any of them may become subject under the Act,
the Exchange Act or other Federal or state statutory law or regulation, at
common law or otherwise, insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of, or are based upon, any untrue
statement or alleged untrue statement of a material fact contained in the Shelf
Registration Statement as originally filed or in any amendment thereof, or in
any Prospectus, or in any amendment thereof or supplement thereto, or arise out
of, or are based upon, the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and to reimburse each such indemnified party, as
incurred, for any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, damage,
judgment, liability or action; PROVIDED, HOWEVER, that (i) the Company will not
be liable in any case to the extent that any such loss, claim, damage or
liability arises out of, or is based upon, any such untrue statement or alleged
untrue statement or omission or alleged omission made therein in reliance upon
and in conformity with written information furnished to the Company by or on
behalf of any such Holder specifically for inclusion therein and (ii) the
Company will not be liable to any indemnified party under this indemnity
agreement with respect to the Shelf Registration Statement or Prospectus to the
extent that any such loss, claim, damage or liability of such indemnified party
results solely from an untrue statement of a material fact contained in, or the
omission of a material fact from, the Shelf Registration Statement or
Prospectus, which untrue statement or omission was corrected in an amended or
supplemented Shelf Registration Statement or Prospectus, if the person alleging
such loss, claim, damage or liability was not sent or given, at or prior to the
written confirmation of such sale, a copy of the amended or supplemented Shelf
Registration Statement or Prospectus if the Company had previously furnished
copies thereof to such indemnified party and if delivery of a prospectus is
required by the Act and was not so made. This indemnity agreement will be in
addition to any liability which the Company may otherwise have.
(b) Each Holder of Transfer Restricted Securities covered by a Shelf
Registration Statement (including each Initial Purchaser) severally agrees to
indemnify and hold harmless (i) the Company, (ii) each of its directors, (iii)
each of its officers who signs such Shelf Registration Statement and (iv) each
person who controls the Company within the meaning of either the Act or the
Exchange Act to the same extent as the foregoing indemnity from the Company to
each such Holder, but only with reference to written information relating to
such Holder furnished to the Company by or on behalf of such Holder specifically
for inclusion in the documents referred to in the foregoing indemnity. This
indemnity agreement will be in addition to any liability which any such Holder
may otherwise have. In no event shall any Holder, its directors, officers or
any person who controls such Holder be liable or responsible for any amount in
excess of the amount by which the total amount received by such Holder with
respect
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to its sale of Transfer Restricted Securities pursuant to a Shelf
Registration Statement exceeds (i) the amount paid by such Holder for such
Transfer Restricted Securities and (ii) the amount of any damages that such
Holder, its directors, officers or any person who controls such Holder has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission.
(c) Promptly after receipt by an indemnified party under this Section
7 or notice of the commencement of any action, the indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under this
Section 7, notify the indemnifying party in writing of the commencement thereof;
but the failure to so notify the indemnifying party (i) will not relieve it from
liability under paragraph (a) or (b) above unless and to the extent it did not
otherwise learn of such action and such failure results in the forfeiture by the
indemnifying party of substantial rights and defenses and (ii) will not, in any
event, relieve the indemnifying party from any obligations to any indemnified
party other than the indemnification obligation provided in paragraph (a) or (b)
above. The indemnifying party shall be entitled to assume the defense of any
such claim and to appoint counsel of the indemnifying party's choice at the
indemnifying party's expense to represent the indemnified party in any action
for which indemnification is sought (in which case the indemnifying party shall
not thereafter be responsible for the fees and expenses of any separate counsel
retained by the indemnified party or parties except as set forth below);
PROVIDED, HOWEVER, that such counsel shall be reasonably satisfactory to the
indemnified party. Notwithstanding the indemnifying party's election to appoint
counsel to represent the indemnified party in an action, the indemnified party
shall have the right to employ separate counsel (including local counsel), and
the indemnifying party shall bear the reasonable fees, costs and expenses of
such separate counsel (and local counsel) if (i) the use of counsel chosen by
the indemnifying party to represent the indemnified party would present such
counsel with a conflict of interest, (ii) the actual or potential defendants in,
or targets of, any such action include both the indemnified party and the
indemnifying party, and the indemnified party reasonably concluded that there
may be legal defenses available to it and/or other indemnified parties that are
different from or additional to those available to the indemnifying party, (iii)
the indemnifying party did not employ counsel satisfactory to the indemnified
party to represent the indemnified party within a reasonable time after notice
of the institution of such action or (iv) the indemnifying party authorized the
indemnified party to employ separate counsel at the expense of the indemnifying
party. The indemnifying party shall indemnify and hold harmless the indemnified
party from and against all losses, claims, damages and liabilities by reason of
any settlement of any action (i) effected with its written consent or (ii)
effected without its written consent if the settlement is entered into more than
twenty business days after the indemnifying party shall have received a request
from the indemnified party for reimbursement for the fees and expenses of
counsel (in any case where such fees and expenses are at the expense of the
indemnifying party) and, prior to the date of such settlement, the indemnifying
party shall have failed to comply with such reimbursement request.
Notwithstanding the immediately preceding sentence, if at any time an
indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel, an indemnifying party shall
not be liable for any settlement of the nature contemplated by the immediately
preceding sentence effected without its consent if such indemnifying party (i)
reimburses such indemnified party in accordance with such request to the extent
that it considers such request to be reasonable and (ii) provides written notice
to the indemnified party substantiating the unpaid balance as unreasonable, in
each case, prior to the date of settlement. An indemnifying party shall not,
without the prior written consent of the indemnified parties, settle or
compromise or consent to the entry of any judgment with respect to any pending
or threatened claim, action, suit or proceeding for which indemnification or
contribution may be sought hereunder (whether or not the indemnified parties are
actual or potential parties to such claim or action), unless such settlement,
compromise or consent
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includes an unconditional release of each indemnified party from all
liability arising out of such claim, action, suit or proceeding and 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) In the event that the indemnity provided in paragraph (a) or (b)
of this Section 7 is unavailable or insufficient to hold harmless an indemnified
party for any reason, then each applicable indemnifying party, in lieu of
indemnifying such indemnified party, shall to the extent permitted by law have a
joint and several obligation to contribute to the aggregate losses, claims,
damages and liabilities (including legal or other expenses reasonably incurred
in connection with investigating or defending same) (collectively "LOSSES") to
which such indemnified party may be subject in such proportion as is appropriate
to reflect the relative benefits received by such indemnifying party, on the one
hand, and such indemnified party, on the other hand, from the Initial Placement
and the Shelf Registration Statement that resulted in such Losses; PROVIDED,
HOWEVER, that in no case shall any Initial Purchaser be responsible, in the
aggregate, for any amount in excess of the purchase discount or commission
applicable to such Note, as set forth in Section 2 of the Purchase Agreement.
If the allocation provided by the immediately preceding sentence is unavailable
for any reason, the indemnifying party and the indemnified party shall
contribute in such proportion as is appropriate to reflect not only such
relative benefits, but also the relative fault of such indemnifying party, on
the one hand, and such indemnified party, on the other hand, in connection with
the statements or omissions which resulted in such Losses, as well as any other
relevant equitable considerations. Benefits received by the Company shall be
deemed to be equal to the sum of (x) the total net proceeds from the Initial
Placement (before deducting expenses) as set forth in Section 2 of the Purchase
Agreement and (y) the total amount of additional interest that the Company was
not required to pay as a result of registering the securities covered by the
Shelf Registration Statement that resulted in such Losses. Benefits received by
the Initial Purchasers shall be deemed to be equal to the total purchase
discounts and commissions as set forth in Section 2 of the Purchase Agreement,
and benefits received by any other Holders shall be deemed to be equal to the
value of the Transfer Restricted Securities sold by such Holders under the Shelf
Registration Statement. Relative fault shall be determined by reference to
whether any alleged untrue statement or omission relates to information provided
by the indemnifying party, on the one hand, or by the indemnified party, on the
other hand. The parties agree that it would not be just and equitable if
contribution were determined by pro rata allocation or any other method of
allocation that does not take account of the equitable considerations referred
to above. Notwithstanding the provisions of this paragraph (d), 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 guilty of such
fraudulent misrepresentation. For purposes of this Section 7, each person who
controls a Holder within the meaning of either the Act or the Exchange Act and
each director, officer, employee and agent of such Holder shall have the same
rights to contribution as such Holder, and each person who controls the Company
within the meaning of either the Act or the Exchange Act, each officer of the
Company who shall have signed the Shelf Registration Statement and each director
of the Company shall have the same rights to contribution as the Company,
subject in each case to the applicable terms and conditions of this paragraph
(d). The obligations of each Holder and each Initial Purchaser hereunder are
several and not joint.
(e) The provisions of this Section 7 shall remain in full force and
effect, regardless of any investigation made by or on behalf of any Holder or
the Company or any of the officers, directors or controlling persons referred to
in Section 7 hereof, and will survive the sale by a Holder of Transfer
Restricted Securities or Exchange Notes.
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SECTION 8. RULE 144A and RULE 144
The Company agrees with each Holder, for so long as any Transfer
Restricted Securities remain outstanding and during any period in which the
Company (i) is not subject to Section 13 or 15(d) of the Exchange Act, to make
available, upon request of any Holder, to such Holder or beneficial owner of
Transfer Restricted Securities in connection with any sale thereof and any
prospective purchaser of such Transfer Restricted Securities designated by such
Holder or beneficial owner, the information required by Rule 144A(d)(4) under
the Act in order to permit resales of such Transfer Restricted Securities
pursuant to Rule 144A, and (ii) is subject to Section 13 or 15 (d) of the
Exchange Act, to make all filings required thereby in a timely manner in order
to permit resales of such Transfer Restricted Securities pursuant to Rule 144.
SECTION 9. MISCELLANEOUS
(a) NO INCONSISTENT AGREEMENTS. The Company has not, as of the date
hereof, entered into, nor shall it, on or after the date hereof, enter into, any
agreement with respect to its securities that is inconsistent with the rights
granted to the Holders herein or otherwise conflicts with the provisions hereof.
(b) AMENDMENTS AND WAIVERS. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, qualified,
modified or supplemented, and waivers or consents to departures from the
provisions hereof may not be given, unless the Company has obtained the written
consent of the Holders of at least a majority of the then outstanding aggregate
principal amount of Notes; PROVIDED, HOWEVER, that with respect to any matter
that directly or indirectly affects the rights of any Initial Purchaser
hereunder, the Company shall obtain the written consent of each such Initial
Purchaser against which such amendment, qualification, supplement, waiver or
consent is to be effective. Notwithstanding the foregoing (except the foregoing
proviso), a waiver or consent to depart from the provisions hereof, with respect
to a matter, which relates exclusively to the rights of Holders whose securities
are being sold pursuant to a Shelf Registration Statement and does not directly
or indirectly affect the rights of other Holders, may be given by the Majority
Holders, determined on the basis of Notes being sold rather than registered
under such Shelf Registration Statement.
(c) NOTICES. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail,
telex, telecopier, or air courier guaranteeing overnight delivery:
(i) if to a Holder, at the most current address given by such
holder to the Company in accordance with the provisions of this Section
9(c), which address initially is, with respect to each Holder, the
address of such Holder maintained by the registrar under the Indenture
(ii) with a copy in like manner to Donaldson, Lufkin & Jenrette
Securities Corporation;
(iii) if to the Initial Purchasers, initially at the respective
addresses set forth in the Purchase Agreement; and
(iv) if to the Company, initially at its address set forth in
the Purchase Agreement.
All such notices and communications shall be deemed to have been duly
given when received.
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Upon the date of filing of a Shelf Registration Statement notice shall be
delivered to Donaldson, Lufkin & Jenrette Securities Corporation, on behalf of
the Initial Purchasers (in the form attached hereto as Exhibit A) and shall be
addressed to: Attention: Louise Guarneri ( Compliance Department), 277 Park
Avenue, New York, New York 10172.
The Initial Purchasers or the Company by notice to the other may
designate additional or different addresses for subsequent notices or
communications.
(d) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit
of, and be binding upon, the successors and assigns of each of the parties
hereto, including, without the need for an express assignment or any consent by
the Company thereto, subsequent Holders of Notes. The Company hereby agrees to
extend the benefits of this Agreement to any Holder of Notes and any such Holder
may specifically enforce the provisions of this Agreement as if an original
party hereto.
(e) COUNTERPARTS. This agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original, and all of which taken
together shall constitute one and the same agreement.
(f) HEADINGS. The headings in this agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(g) GOVERNING LAW. This agreement shall be governed by and construed
in accordance with the internal laws of the State of New York applicable to
agreements made and to be performed in said State (without reference to the
conflict of law rules thereof).
(h) SEVERABILITY. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstances, is held
invalid, illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect and the
remaining provisions hereof shall not be in any way impaired or affected
thereby, it being intended that all of the rights and privileges of the parties
shall be enforceable to the fullest extent permitted by law.
(i) NOTES HELD BY THE COMPANY, ETC. Whenever the consent or approval
of Holders of a specified percentage of principal amount of Notes is required
hereunder, Notes held by the Company or its Affiliates (other than subsequent
Holders of Notes if such subsequent Holders are deemed to be Affiliates solely
by reason of their holdings of such Notes) shall not be counted in determining
whether such consent or approval was given by the Holders of such required
percentage.
(j) ENTIRE AGREEMENT. This Agreement is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto with respect
to the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein
with respect to the registration rights granted with respect to the Transfer
Restricted Securities. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
INVITROGEN CORPORATION
By: /s/ James R. Glynn
-------------------------------
Name: James R. Glynn
Title: Executive Vice President & CFO
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DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
BEAR, STEARNS & CO. INC.
CHASE SECURITIES INC.
DAIN RAUSCHER INCORPORATED
U.S. BANCORP PIPER JAFFRAY INC.
BY: DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
By: /s/ Edward M. Brown
------------------------------------
Name: Edward M. Brown
Title: Managing Director
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EXHIBIT A
NOTICE OF FILING OF
SHELF REGISTRATION STATEMENT
To: Donaldson, Lufkin & Jenrette Securities Corporation
277 Park Avenue
New York, New York 10172
Attention: Louise Guarneri (Compliance Department)
Fax: (212) 892-7272
From: Invitrogen Corporation
__% Convertible Subordinated Notes due 2007
Date: _________________, 2000
For your information only (NO ACTION REQUIRED):
Today, _______________, 2000, we filed a Shelf Registration Statement with the
Securities and Exchange Commission.
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EXHIBIT 10.26
INVITROGEN CORPORATION
2000 NONSTATUTORY STOCK OPTION PLAN
1. ESTABLISHMENT, PURPOSE AND TERM OF PLAN.
1.1 ESTABLISHMENT. The Invitrogen Corporation 2000 Nonstatutory
Stock Option Plan (the "PLAN") is hereby established effective as of January 21,
2000.
1.2 PURPOSE. The purpose of the Plan is to advance the
interests of the Participating Company Group and its stockholders by providing
an incentive to attract and retain 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.
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 Delaware
corporation, or any successor corporation thereto.
(e) "CONSULTANT" means any person, including an
advisor, engaged by a Participating Company to render services other than as an
Employee or a Director.
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(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; 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) "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.
(i) "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. Options are intended to be nonstatutory stock options and shall
not be treated as incentive stock options within the meaning of Section 422(b)
of the Code.
(j) "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.
(k) "OPTIONEE" means a person who has been granted one
or more Options.
(l) "PARENT CORPORATION" means any present or future
"parent corporation" of the Company, as defined in Section 424(e) of the Code.
(m) "PARTICIPATING COMPANY" means the Company or any
Parent Corporation or Subsidiary Corporation.
(n) "PARTICIPATING COMPANY GROUP" means, at any point
in time, all corporations collectively which are then Participating Companies.
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(o) "STOCK" means the common stock of the Company, as
adjusted from time to time in accordance with Section 4.2.
(p) "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 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 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 determine the Fair Market Value of shares of
Stock or other property;
(c) 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;
(d) to approve one or more forms of Option Agreement;
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(e) 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;
(f) 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;
(g) 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
(h) 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 800,000 and shall consist of authorized
but unissued or reacquired shares of Stock or any combination thereof. 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 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
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adjustments determined by the Board pursuant to this Section 4.2 shall be
final, binding and conclusive.
5. ELIGIBILITY. Options may be granted only to Employees and
Consultants; provided, however, that no Option shall be granted to any person
whose eligibility to receive an Option at the time of grant would require the
approval of the Company's stockholders pursuant to any applicable law,
regulation or rule, including, without limitation, the rules applicable to the
listing of the Company's securities on the Nasdaq National Market. For purposes
of the foregoing sentence, "Employees" and "Consultants" shall include
prospective Employees and prospective Consultants 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.
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 the
exercise price per share for an Option shall be not less than the Fair Market
Value of a share of Stock on the effective date of grant of the Option.
Notwithstanding the foregoing, an 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 no Option granted to a prospective Employee or prospective Consultant 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, PROVIDED THAT IF THE COMPANY IS
INCORPORATED IN THE STATE OF DELAWARE AT THE TIME OF EXERCISE, THE OPTIONEE
SHALL PAY IN CASH THAT PORTION OF THE EXERCISE PRICE NOT LESS THAN THE PAR
VALUE OF THE SHARES BEING ACQUIRED], (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 FORM OF OPTION AGREEMENT.
7.1 GENERAL. Unless otherwise provided by the Board at the time
the Option is granted, an 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.
7.2 STANDARD TERM OF OPTIONS. Except as otherwise provided 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.
7.3 AUTHORITY TO VARY TERMS. The Board shall have the authority
from time to time to vary the terms of any standard form 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 stockholders of the Company
of more than fifty percent (50%) of the voting stock of the Company;
(ii) a merger or consolidation in which the
Company is a party;
(iii) the sale, exchange, or transfer of all or
substantially all of the assets of the Company; or
(iv) a liquidation or dissolution of the
Company.
(b) A "TRANSFER OF CONTROL" shall mean an Ownership
Change Event or a series of related Ownership Change Events (collectively, the
"TRANSACTION") wherein the 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
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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 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."
9. 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.
10. 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
8
<PAGE>
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.
11. TERMINATION OR AMENDMENT OF PLAN. The Board may terminate or
amend the Plan at any time. However, 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 necessary to comply with any applicable law, regulation or rule.
9
<PAGE>
INVITROGEN 1999 ANNUAL REPORT
[PHOTO]
Scientist at work with DNA molecule, DNA sequence and a One Shot Kit
Accelerating
Gene Discovery
and Analysis
[LOGO]
Invitrogen
<PAGE>
CORPORATE PROFILE
As the Human Genome Project and other genome sequencing efforts are
completed, Invitrogen believes that the focus of research will shift toward
discovering the specific functions of genes and their encoded proteins. This
knowledge will lead to the development of new drugs, diagnostic techniques,
disease therapies, and useful crop and livestock variations. Many of the
conventional molecular biology research methods being used to accomplish
these goals are time consuming and require considerable scientific training
and experience to generate accurate, reproducible results. Invitrogen's
diverse lines of kits and services are designed to address these limitations
and make molecular biology research techniques faster, easier, more
cost-effective, and more accessible to researchers working in a broad range
of disciplines.
ALL AMOUNTS BELOW ARE UNAUDITED ON A PRO FORMA COMBINED BASIS TO INCLUDE
RESEARCH GENETICS-Registered Trademark-, ACQUIRED IN FEBRUARY 2000.
REVENUE GROWTH NET EARNINGS GROWTH
[GRAPH] [GRAPH]
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31 1999 1998 1997 1996 1995
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
REVENUES $ 92,880 $70,567 $ 55,334 $44,606 $33,705
Net income 9,060(1) 5,519 3,417 2,924 2,106
Net income (loss) applicable
to common shares 9,808(1) 4,415 (12,223) 2,753 1,996
Earnings (loss) per share:
Basic $ 0.51(1) $ 0.29 $ (0.83) $ 0.20 $ 0.13
Diluted $ 0.45(1) $ 0.26 $ (0.83) $ 0.17 $ 0.13
Cash, cash equivalents and
short-term investments 102,221 6,543 9,333 1,820 875
Total assets 156,675 45,622 34,192 22,432 18,258
Working capital 108,720 8,349 8,533 4,139 -
Long-term obligations 7,256 8,033 5,656 5,797 6,026
Redeemable preferred stock issues - 17,740 16,537 1,306 1,143
Stockholders' equity (deficit) 127,363 4,390 (139) 4,788 1,745
</TABLE>
(1) Includes non-recurring merger-related costs net of tax of $3.1
million
<PAGE>
[PHOTO]
Lyle Turner
Chairman, President and
Chief Executive Officer
TO OUR STOCKHOLDERS, EMPLOYEES, AND CUSTOMERS:
I am pleased to present to you the first annual report of Invitrogen Corporation
as a publicly held company. Invitrogen develops, manufactures, and markets
research tools in kit form and provides other research products and services to
corporate, academic, and government entities. Our products increase the speed,
accuracy, and consistency of various molecular biology research activities,
reducing our customers' research and development times and costs. Founded in
1987, we have been growing profitably and steadily, one of the few biotechnology
companies able to make that claim. Our successful initial public offering in
February 1999, followed by an equally successful secondary offering in October
1999, will help fuel our continued expansion. At the end of 1999 we had over
$100 million available to use in obtaining new technologies. In March 2000 we
added over $167 million in net proceeds from the issuance of seven-year
convertible subordinate notes. We have also used our stock as a valuable
currency to make two strategic acquisitions. By becoming a larger, more
diversified company, we have increased our ability to serve the genetic research
marketplace and dramatically improved our ability to deliver value for our
customers and stockholders.
REVENUE AND NET INCOME GROWTH CONTINUES
Our revenue and net income increased to record levels in 1999 due to the
continued growth of our markets, our introduction of new products, increasing
market acceptance of our products, and the expansion of our direct sales and
marketing efforts. Indications of our accelerated performance include revenue of
$68.3 million in 1999, a 27 percent increase over revenue of $53.7 million in
1998. Net income, excluding merger-related costs net of tax, was $9.8 million,
up 131% compared with $4.2 million for 1998. Earnings per share, excluding
merger-related costs, were $0.57 per share in 1999 compared with $0.23 per share
for 1998. (The results of Research Genetics, which was acquired in February
2000, are not included in our reported results for last year. However, unaudited
pro forma combined results for 1995-1999 including Research Genetics are
provided for your information on the inside front cover of this report.)
ACQUISITIONS BROADEN OUR INNOVATIVE PRODUCT LINE Our products are designed to
enhance various gene discovery methods, with an emphasis on gene
identification, cloning, expression, and analysis. Historically, we have been
a market and technology leader in gene cloning and expression. In August 1999
we expanded our leadership position to protein analysis through the
acquisition of NOVEX-Registered Trademark-, a foremost supplier of pre-cast
electrophoresis gels. NOVEX's product lines dovetail extremely well with
Invitrogen's, as researchers expressing proteins usually analyze them with
electrophoresis gels. This merger enables us to cross-sell products to both
companies' existing customers and to address new markets utilizing our
combined expertise.
We completed a second merger in February 2000 with Research Genetics, a leading
supplier of products and services for functional genomics and gene-based drug
discovery research. Research Genetics' product lines include DNA microarrays and
custom software for microarray data analysis, one of the world's largest
collections of commercially available, sequence-validated clones, PCR primers
that amplify all or a specific portion of selected genes, genetic markers that
are used to locate disease genes, and custom-made DNA. Gaining this product and
technology platform gives us a significant presence in the gene identification
and analysis fields, as well as greatly increasing our service capabilities.
By expanding our product lines into new areas of genomics, the NOVEX and
Research Genetics acquisitions enable us to serve our customers from the
earliest phases of gene identification through the various stages of gene
cloning, expression, and analysis.
-1-
<PAGE>
IN-LICENSING DRIVES GROWTH
Invitrogen has grown rapidly, in part by employing a strategy that emphasizes
aggressive in-licensing of late-stage, innovative technologies. This
approach, combined with the fact that our products do not require FDA or
equivalent approvals in the United States or other countries, shortens our
product development cycles and accelerates our time to market. During 1999,
we launched 65 new or enhanced products and obtained 18 new technology
licenses. In addition, we acquired sole ownership of the patents that cover
the TA Cloning-Registered Trademark- method and materials, giving us
exclusive, worldwide, royalty-free rights to the technology that has become
the dominant PCR cloning technique. At the end of 1999, we held more than 85
technology licensing agreements covering approximately 200 patents. We
believe that the combination of our revenue growth, established name, strong
sales and marketing organization, and global presence will continue to make
Invitrogen a preferred technology partner among researchers and technology
licensors.
SALES FORCE EXPANSION
A strong sales component, utilizing both a direct sales force and distributors,
has contributed greatly to our increased sales. The NOVEX acquisition further
strengthened our sales force, especially in the commercial research market. I am
particularly excited at our prospects for increasing the sales of Research
Genetics' products. To date they have achieved sales growth of over 30% a year
without a sales force, an international presence, or any venture capital
support. Joining with Invitrogen will significantly increase the marketing,
sales, and financial resources available to drive sales of their products and
services.
Today, we operate offices in the United States and Europe and are in the process
of opening an office in Japan. The Japanese are beginning to spend heavily on
genomics and we believe this market will become a larger source of revenues. We
plan to expand our sales and marketing efforts in all three regions during the
next year.
MARKET DRIVERS PROVIDE PROMISING OUTLOOK
On a global basis, the genomics supply market has been one of the
fastest-growing life science markets. We believe the markets for our kits and
services will continue to grow due to several factors. These include increasing
levels of government funding for the study of genetic material, accelerated
investment in commercial research activities, increasing availability of new
data for study from the Human Genome Project, and the proliferation of
high-throughput molecular biology research techniques.
STRATEGY FITS THE OPPORTUNITY
I am extremely proud of our accomplishments this past year. They demonstrate our
ability to maintain our leadership position, successfully in-license key
technologies, make accretive acquisitions, and position the company to capture
added value on our expanding technology portfolio. We expect continued growth in
the genomics supply sector and believe we have the abilities, strategies,
financial strength, and momentum to further penetrate this expanding market. Our
molecular biology products have become an integral part of nearly every aspect
of the gene discovery and analysis process. By offering a growing supply of
valuable research tools and services and developing collaborative efforts with
leading researchers, Invitrogen is poised to benefit immensely from the emerging
drug discovery revolution.
Lyle C. Turner
/s/ Lyle C. Turner
Chairman, President, and Chief Executive Officer
-2-
<PAGE>
[DIAGRAM]
DISCOVERY CYCLE
FOUR STEPS TO DISCOVERY
Projects to sequence the human genome, as well as the genomes of other species,
are now in their final stages. The rapid influx of sequence information has led
to a need for products and services that will enable life science researchers to
analyze the millions of sequences uncovered. The goal of this research is to
determine which sequences define genes and then discover the functions and
interactions within a cell of the proteins encoded by the genes. This process of
discovery is a continuous cycle that involves four main steps: Gene
Identification, Gene Cloning, Gene Expression, and Gene Analysis, each of which
requires a unique set of tools and techniques.
THE GENOME
The total genetic information carried by an organism is called its genome.
The genome is a linear sequence of nucleotide bases.
GENE IDENTIFICATION
Nucleotide sequences are analyzed to determine which stretches are genes. A gene
is a specific sequence that codes for a particular protein.
GENE CLONING
Genes are inserted into vectors so that they can be replicated in cells and used
for studies such as gene expression.
GENE EXPRESSION
Cloned genes are used to express proteins in a variety of host organisms.
GENE ANALYSIS
Expressed proteins are studied to determine their function and discover how they
interact with proteins and other molecules within the cell. This analysis helps
identify other genes that need to be cloned and expressed to understand cellular
function.
ACCELERATING THE DISCOVERY PROCESS
By supplying researchers with the tools they need to successfully undertake each
step of the discovery cycle, Invitrogen is helping to accelerate the discovery
process. Invitrogen's products and services are designed to decrease the time
and effort researchers expend on the path to discovery. This can ultimately lead
to the development of new drugs, diagnostic techniques, and disease therapies as
well as applications that will benefit agriculture.
-3-
<PAGE>
[PICTURE]
Microarrays can be used to identify differential gene expression in one cell
type versus another.
GENE IDENTIFICATION
While genome sequencing projects can resolve the entire nucleotide sequence of
an organism, they do not reveal which portions of the sequence are genes that
code for proteins. Gene identification techniques are used to find the
individual coding sequences that lie within a genome. These techniques enable
researchers to isolate a specific gene from a large collection of cloned genes
or to learn enough about the sequence of a specific gene so that it can be
cloned individually. The individual gene and its expressed protein can then be
studied to determine their function.
MICROARRAYS HELP SPEED IDENTIFICATION
A relatively recent advance in gene identification involves the use of
microarrays, which are nylon membranes or glass slides containing hundreds to
thousands of partial or full-length genes. Microarrays can be used to identify
differential gene expression in one cell type versus another For example,
researchers can study how healthy and diseased cells differ at the genetic
level. Genes identified by this technique are then cloned and studied to further
understand their role in the health or disease of a cell. Ultimately, this
knowledge leads to the development of drugs and therapies to treat or prevent
the disease.
EXPANDED OFFERINGS
Our recent acquisition of Research Genetics greatly augments our gene
identification product line. Through collaborations with various leaders in
genomics research, Research Genetics has developed an impressive collection of
DNA microarrays and custom software for microarray data analysis, PCR primers
that amplify all or a specific portion of selected genes, and various genomic
and cDNA libraries. Research Genetics currently offers microarrays of over
30,000 different human genes and the world's largest collection of commercially
available, sequence-validated clones. Researchers purchase these microarrays and
libraries and screen them to identify specific genes. Individual genes or PCR
primers that can be used to amplify and clone specific genes can then be
purchased. By making the means for both identifying and obtaining genes readily
available, these products accelerate the gene discovery and analysis process.
<TABLE>
<CAPTION>
1987 1988 1990 1991 1993 1994
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Invitrogen First year of Human TA Cloning European Sponsored first
founded profitability Genome Kiclaunched subsidiary opened Current Topics
Project started in The Netherlands in Gene
Expression
</TABLE>
-4-
<PAGE>
GENE CLONING
Once a specific DNA sequence has been identified as being a gene, the next step
in the discovery cycle is to clone the gene. Cloning involves inserting a gene
into a vector--a circular piece of DNA that carries sequences for manipulating
the cloned gene. This gives researchers the ability to produce sufficient
quantities of the gene for use in further studies such as gene expression and
gene analysis.
TA CLONING KIT INTRODUCED
1980 was the dawn of a new era in molecular biology. in that year the polymerase
chain reaction (PCR), a technique that allows small amounts of DNA to be
amplified exponentially, was developed. To take advantage of the growing
popularity of PCR, Invitrogen introduced the TA Cloning Kit in 1991. The TA
Cloning method simplifies cloning by allowing PCR products to be inserted
directly into specially-designed vectors without any modification. This
accelerates the process of PCR cloning and makes it more efficient, more
reliable, and more accessible than previously-used methods.
A REVOLUTION IN CLONING
Our outstanding success with the TA Cloning Kit led to the development of
TOPO-Registered Trademark- Cloning and Echo-TM- Cloning, two techniques that
have revolutionized the cloning process. Both techniques build on the foundation
of TA Cloning. TOPO Cloning saves researchers hours of time by reducing an
overnight incubation step to only five minutes. Echo Cloning makes it possible
to insert a single gene into multiple expression vectors quickly and reliably,
enabling researchers to express their protein of interest in more than one host
organism without performing multiple, time-consuming subcloning tasks. TA
Cloning, TOPO Cloning, and Echo Cloning accelerate the discovery process by
allowing researchers to clone their genes rapidly and efficiently.
TOPO CLONING IN ACTION
Because of the speed at which PCR products can be cloned using the TOPO Cloning
technique, this method has been used to clone thousands of human, mouse, and
yeast genes in our laboratories. The result is the GeneStorm-Registered
Trademark- product line, an extensive collection of over 5,000 cloned,
ready-to-express genes.
<TABLE>
<CAPTION>
1996 1997 1998 1999 2000 2003
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
First TA Cloning Relocated U.S. Invitrogenomics-TM- $60.4 million IPO, Research Genetics Projected
patent issued Headquarters to program initiated NOVEX-Registered merger, completion of
new 60,000 sq. Trademark- merger, $173 million debt the Human
ft. building in $147.5 million placement Genome Project
Carlsbad secondary offering
</TABLE>
[GRAPH]
TIME REQUIRED TO CLONE INTO
MULTIPLE EXPRESSION VECTORS
Graph compares the hours required for Traditional Cloning (Traditional
methods require these genes to be cloned individually into each expression
vector) at 80 hours vs. Echo Cloning (5 minute TOPO Cloning plus 25 minute
incubation into vectors A,B,C & D).
Echo-TM- Cloning makes it possible to insert a single gene into multiple
expression vectors quickly and reliably.
-5-
<PAGE>
[PHOTOS]
The photographs above demonstrate expression of the green fluorescent protein
when it is targeted to specific regions of the cell. Clockwise from the upper
left, these regions are the nucleus, mitochondria, endoplasmic reticulum, and
cytoplasm.
GENE EXPRESSION
Expression experiments enable researchers to move from studying genes to
studying the proteins they encode. A gene is cloned into an expression vector
and then introduced into a foreign host such as bacterial, yeast, insect, or
mammalian cells. Each host offers different advantages such as fast growth, high
yield, and production of properly formed protein. By studying the expressed
protein in various host organisms, researchers can develop an understanding of
how that protein affects the cell.
Expression of a gene in a foreign organism requires the use of an expression
vector. A vector is a DNA sequence that carries various elements for expression
of the protein encoded by a cloned gene. These elements differ depending on the
intended host organism and the goal of the experiment. Continual advances in
gene expression technology have made producing proteins faster, easier and more
reliable.
TOOLS FOR EXPRESSION
Invitrogen believes that one of our strengths is our ability to take
technological developments in gene expression and turn them into user-friendly
products. This enables researchers to easily take advantage of these new
technologies, further accelerating the discovery cycle. In fact, Invitrogen
offers one of the largest collections of expression vectors and systems
available. Customers are able to choose the system that is most suitable for
their protein and functional studies. Whether researchers are interested in
large-scale protein production, targeting a protein to a specific subcellular
location, or evaluating a specific cellular response to a protein, Invitrogen
provides the tools needed to meet each goal.
EXPRESSION SUCCESS
Invitrogen's expression vectors and systems have been cited over one thousand
times in various journals and scientific publications. Each successful
experiment furthers researchers' understanding of how genes and proteins
function. In addition, every 18 months Invitrogen hosts the Current Topics in
Gene Expression Systems Meeting where researchers from all over the world come
to present their work and learn about the latest expression technologies being
developed.
-6-
<PAGE>
[PHOTO]
Pre-cast gels eliminate the time and effort researchers spend preparing their
own gels.
GENE ANALYSIS
Once a protein is expressed, it is analyzed to reveal its identity, function,
and interactions with other proteins and/or DNA sequences. Determining these
characteristics gives clues to understanding a protein's role in cellular
processes and pathways. This knowledge is then used to further drug discovery.
The analysis process allows characterization of proteins on two levels:
functional properties such as its molecular interactions and physical properties
such as size and amino acid composition. Gel electrophoresis is a commonly used
method that allows the separation of proteins on a solid support. Researchers
use it to determine the size and charge of various proteins. It can also be used
to identify the occurrence of a molecular interaction.
SIMPLIFIED PROTEIN ANALYSIS
In 1999, Invitrogen expanded its presence in the electrophoresis market by
acquiring NOVEX, a leading supplier of pre-cast electrophoresis gels. Pre-cast
gels eliminate the time and effort researchers spend preparing their own gels
and provide more reliable results. In addition, NOVEX holds several patents on
proprietary electrophoresis technologies. These patents are now part of the
Invitrogen portfolio.
[PHOTOS]
Photos represent the results of different methods for analyzing protein
expression
TRUSTWORTHY RESULTS
Large pharmaceutical companies typically spend millions of dollars on drug
discovery research. Analysis is a critical part of this process. To ensure that
they get accurate results, many of these companies trust only the NOVEX line of
pre-cast gels. These gels save time and effort while providing reliable results.
-7-
<PAGE>
[PHOTO]
Contract services have become increasingly attractive to companies needing
rapid, large-scale analysis of the growing number of gene targets.
SERVICE CAPABILITIES
Pharmaceutical, biotechnology, and agricultural firms wishing to develop
gene-based therapeutic and diagnostic products must rapidly analyze the large
amounts of data being generated by government and private-sector genome
sequencing initiatives. These companies are competing to be the first to
identify, clone, express, and validate the finite number of gene targets
thought to be of commercial importance. In addition, they will need to
establish and protect intellectual property rights by obtaining patents or
licenses covering these full-length genes and their encoded proteins. The
desire to secure proprietary positions increasingly leads companies to seek a
competitive advantage by adopting methods that can accelerate their research,
including outsourcing research tasks to companies with demonstrated
expertise. Contract services have become increasingly attractive to companies
needing rapid, large-scale analysis of the growing number of gene targets.
INVITROGENOMICS
Invitrogen has long been a market and technology leader in gene cloning and
expression. In 1998 we created Invitrogenomics to capitalize on our strengths by
providing high-throughput gene identification, cloning, expression, and
validation services for corporate partners on a contract basis. We believe that
Invitrogenomics and our recent acquisition of Research Genetics gives us
significant opportunities to provide services and to enter into collaborations
that will lead to the development of new proprietary technologies and products.
COLLABORATIONS
An excellent example of the type of business we expect to generate through
Invitrogenomics is a research collaboration we signed in December 1999 with the
Novartis Institute for Functional Genomics (NIFG), one of the largest research
institutes devoted entirely to functional genomics. The partnership will provide
NIFG with the technology necessary to set up a high-throughput cloning facility
that will employ Invitrogen's cloning technologies. In return, we receive the
rights to sell clones and reagents generated by these collaborative efforts to
the research community, significantly accelerating the expansion of our
functional genomics product line.
SERVICES
A good example of our service capabilities are those recently provided to
EntreMed, Inc. EntreMed is engaged in studies to determine if its
Angiostatin-TM- and Endostatin-TM- proteins can inhibit tumor growth. They
contracted with Invitrogen to develop a large-scale fermentation process using
the yeast PICHIA PASTORIS that would produce adequate amounts of functional
protein for their studies.
-8-
<PAGE>
[PHOTO]
Thinking Globally, Acting Locally
Invitrogen and it's employees are committed to serving their community.
Employees have dedicated their time and effort to a variety of causes
including cleaning the local beaches, delivering lunches through the Meals on
Wheels program, raising money for local and national foundations that benefit
children in need, and sponsoring food drives.
[PHOTO]
Helping Endangered Species
The San Diego Zoo is a major player in the fight for the survival of
endangered species. Invitrogen supports the Zoo's effort by providing both
monetary and product contributions to CRES (Center for the Reproduction of
Endangered Species). We have also contributed our time by producing a giant
panda cDNA library to study the panda genome. This library will be used by
researchers worldwide.
Echo-TM- Cloning is a trademark of Invitrogen. GeneStorm-Registered Trademark-,
TA Cloning-Registered Trademark-, and TOPO-Registered Trademark- are Invitrogen
trademarks which have been registered with the United States Patent and
Trademark Office. The Invitrogen logo and Invitrogenomics-TM- are trademarks
of Invitrogen for which registration applications have been filed with the
United States Patent and Trademark Office.
Research Genetics-Registered Trademark- is a trademark of Research Genetics
which has been registered with the United States Patent and Trademark Office.
All other trademarks or trade names referred to in this annual report are the
property of their respective owners.
OFFICERS
- --------------------------------------------------------------------
LYLE C. TURNER JAMES R. GLYNN
Chairman, President, and Executive Vice President and
Chief Executive Officer Chief Financial Officer
LEWIS J. SHUSTER
Chief Operating Officer
DIRECTORS
- --------------------------------------------------------------------
LYLE C. TURNER JAMES R. GLYNN
Chairman, President, and Executive Vice President and
Chief Executive Officer Chief Financial Officer
Invitrogen Corporation Invitrogen Corporation
DONALD W. GRIMM KURT R. JAGGERS (1,2)
Founder, Chairman, and President Marketing Director
Strategic Design T.A. Associates, Inc.
BRADLEY G. LORIMIER (1,2) DAVID E. MCCARTY
Former Senior Vice President Former Executive Vice President
Business Development Invitrogen Corporation
Human Genome Sciences, Inc. Former President and Chief
Executive officer
NOVEX
JAY M. SHORT, PH.D. (2) LEWIS SHUSTER (1)
President and CEO Chief Operating Officer
Diversa Corporation Invitrogen Corporation
1. Audit Committee Member
2. Compensation Committee Member
STOCKHOLDER INFORMATION
- ---------------------------------------------------------------------
Stockholders may obtain copies of new releases, product information,
Securities and Exchange Commission filings, including Forms 10-K, 10-Q,
and 8-K, and other company information by accessing our web site at
www.invitrogen.com. Stockholders may also reach Invitrogen's Investor
Relations group by calling 760-603-7200 between the hours of 8:00 a.m.
and 5:00 pm (PST), by telefax at 760-603-7201, by e-mail at
[email protected], or by writing to Investor Relations at
Invitrogen Corporation, 1600 Faraday Avenue, Carlsbad, CA 92008.
Invitrogen Corporation's Annual Stockholder meeting will be held at
10:00 a.m., Thursday, April 27, 2000, at Invitrogen's headquarters,
1600 Faraday Avenue, Carlsbad, California. All stockholders are
cordially invited to attend.
For address changes, transfer of stock, or replacement of lost stock
certificates, please contact Invitrogen's Registrar and Transfer Agent,
EquiServe at EquiServe, Boston EquiServe Division, Stockholder Services,
150 Royall Street, Canton, MA 01021, 781-575-3400.
<PAGE>
EXHIBIT 23.1
CONSENT OF ARTHUR ANDERSEN LLP, INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
report on Invitrogen Corporation dated March 1, 2000, into this Form 10-K
ARTHUR ANDERSEN LLP
San Diego, California
March 10, 2000
