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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 3, 2000
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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CELLOMICS, INC.
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
DELAWARE 8733 25-17638831
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
635 WILLIAM PITT WAY
PITTSBURGH, PENNSYLVANIA 15238
(412) 826-3600
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
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D. LANSING TAYLOR, PH.D.
PRESIDENT AND CHIEF EXECUTIVE OFFICER
635 WILLIAM PITT WAY
PITTSBURGH, PENNSYLVANIA 15238
(412) 826-3600
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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COPIES TO:
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<S> <C>
WILLIAM R. NEWLIN RODD M. SCHREIBER
LEWIS U. DAVIS, JR. SKADDEN, ARPS, SLATE, MEAGHER & FLOM (ILLINOIS)
RONALD W. SCHULER 333 WEST WACKER DRIVE
BUCHANAN INGERSOLL PROFESSIONAL CORPORATION SUITE 2100
ONE OXFORD CENTRE CHICAGO, ILLINOIS 60606
301 GRANT STREET
PITTSBURGH, PENNSYLVANIA 15219
</TABLE>
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: AS SOON AS
PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED PRICE(1) REGISTRATION FEE
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<S> <C> <C>
Common Stock, $.01 par value per share...................... $100,000,000 $26,400
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(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(o) under the Securities Act.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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THE INFORMATION IN THIS PRELIMINARY PROSPECTUS IS NOT COMPLETE AND MAY
BE CHANGED. CELLOMICS MAY NOT SELL THESE SECURITIES UNTIL THE
REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES
AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE
WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION -- MARCH 3, 2000
PROSPECTUS
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Shares
CELLOMICS, INC.
Common Stock
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Cellomics, Inc. is offering shares of its common stock in an initial
public offering. Prior to this offering, there has been no public market for our
common stock.
Cellomics is developing and commercializing products in the emerging field of
cellomics in an effort to extend the recent advances in genomics, the study of
genes, and proteomics, the study of proteins.
It is anticipated that the public offering price will be between $ and
$ per share. We have applied to have the shares of Cellomics quoted in the
Nasdaq National Market under the symbol "CLMX".
<TABLE>
<CAPTION>
Per Share Total
<S> <C> <C>
Public offering price........................... $ $
Underwriting discounts and commissions.......... $ $
Proceeds, before expenses, to Cellomics......... $ $
</TABLE>
SEE "RISK FACTORS" ON PAGES 7 TO 19 FOR FACTORS THAT SHOULD BE CONSIDERED BEFORE
INVESTING IN THE SHARES OF CELLOMICS.
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Neither the Securities and Exchange Commission nor any state securities
commission has
approved or disapproved of these securities or passed upon the accuracy or
adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
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The underwriters may, under certain circumstances, purchase up to
additional shares from Cellomics at the public offering price, less
underwriting discounts and commissions. Delivery and payment for the shares will
be on , 2000.
PRUDENTIAL VECTOR HEALTHCARE
A UNIT OF PRUDENTIAL SECURITIES
ING BARINGS
DAIN RAUSCHER WESSELS
, 2000
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[FOLD-OUT FRONT COVER]
[1st page: Diagrams depicting our complete solution in applying cellomics
products and technologies to the life sciences markets, including products that
generate data, extract information and create cellular knowledge.]
[2nd and 3rd pages: Graphics and photographs of our current products and
products in development, under the headings "Products that generate data,"
"Products that extract information" and "Products that create cellular
knowledge."]
<PAGE> 4
TABLE OF CONTENTS
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PAGE
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Prospectus Summary.................. 3
Risk Factors........................ 7
Forward-Looking Statements.......... 20
Use of Proceeds..................... 21
Dividend Policy..................... 21
Capitalization...................... 22
Dilution............................ 23
Selected Financial Data............. 24
Management's Discussion and Analysis
of Financial Condition and Results
of Operations..................... 26
Business............................ 31
Management.......................... 46
Certain Transactions................ 55
Principal Stockholders.............. 58
Description of Capital Stock........ 61
Shares Eligible for Future Sale..... 65
Underwriting........................ 67
Legal Matters....................... 68
Experts............................. 68
Where You Can Find More
Information....................... 69
Index to Financial Statements....... F-1
</TABLE>
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ArrayScan(R) is our registered trademark. We have applied for
registration of the following trademarks: Cellomics, the Cellomics logo,
ArrayScan, CellChip, HitKit, and PharmacoCellomics. This prospectus also
includes trademarks and tradenames of other companies.
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You should rely only on the information contained in this prospectus. We
have not authorized anyone to provide you with different information. We are not
making an offer of these securities in any jurisdiction where the offer or sale
is not permitted. You should not assume that the information contained in this
prospectus is accurate as of any date other than the date on the front cover of
this prospectus.
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PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus.
This summary does not contain all the information that you should consider
before investing in our common stock. You should read the entire prospectus
carefully.
OUR COMPANY
We are pioneering the emerging field of cellomics in an effort to extend
the recent advances in genomics, the study of genes, and proteomics, the study
of proteins. Cellomics is the study of all the molecules comprising a cell, as
well as their interactions in space and over time, that bring about cellular
functions. It is at the level of the cell where normal genes and proteins
coordinate and perform life functions and where abnormal genes and proteins
cause disease. We design our technologies and products to make drug discovery,
basic biomedical research and clinical diagnostics, more productive and cost
effective by providing in-depth knowledge about cells and cellular functions. We
are developing and commercializing an integrated product platform, including:
- high content screening products to measure the physical position and
activity over time of cells and cellular components;
- informatics products to extract information about cells, cellular
components and their functions; and
- cellular bioinformatics products to create new knowledge about cells.
We began commercializing our high content screening and informatics
products to the drug discovery market in late 1999. The pharmaceutical industry
spent more than $24 billion in 1999 for products intended to improve the
productivity of the drug discovery process. We developed our initial products
through early technology access programs with Johnson & Johnson, Merck & Co.,
Inc. and Warner-Lambert Company. We are developing a number of high content
screening systems in collaboration with Carl Zeiss Jena GmbH, one of the world's
leading optical engineering and manufacturing companies. We are also developing
the CellChip System, our minaturized high content screening platform. In
addition, we are designing our Cellomics Knowledgebase to capture proprietary
and public domain cellular information, thereby creating a "virtual cell." We
believe that, in the same way the introduction of automated DNA sequencers and
searchable genomics databases created a substantial market opportunity for
genomics companies, the development of high content screening and our searchable
Cellomics Knowledgebase has the potential to create a substantial market
opportunity for us.
OUR PRODUCTS
We believe we are the first company to commercialize products in the field
of cellomics. In the area of high content screening, we introduced our initial
automated system, the ArrayScan II, in late 1999. We have additional automated
high content screening products in development, including working prototypes of
our ArrayScan Kinetics Workstation and ArrayScan Kinetics Reader, both of which
are designed to study the changes in cells over time. We are also marketing our
HitKit Reagents and Assay Software Modules, from our growing portfolio of
proprietary classes of assays. These products are designed to enable our
ArrayScan customers to expand their high content screening capabilities through
follow-on purchases. We have also entered into custom assay development
contracts with several pharmaceutical customers. We are designing our CellChip
System to be a miniaturized, microfluidic chip-based platform for drug
discovery, diagnostics and basic biomedical research. We believe our CellChip
System will permit researchers to perform complex cell assays simply, quickly
and at lower cost than now possible.
In the area of informatics, our first product is Cellomics Store, which we
began commercializing in late 1999. Cellomics Store is our proprietary software
package for managing, archiving and viewing massive volumes of cell data. Our
informatics products in development include the Cellomics Screen process
management and data analysis software, which we are beta-testing, and the
Cellomics Discover data visualization and mining software. In the area of
cellular bioinformatics, we are developing searchable databases of cellular
information. We are developing our Cellomics Knowledgebase to enable researchers
to discover new knowledge about cells and cellular functions. We are also
developing our PharmacoCellomics Profiling database, which we believe has the
potential to personalize drug discovery based on the response of an individual's
cells to drugs in much the same way that pharmacogenomics has begun to
personalize drug discovery based on the genetic make-up of individual patients.
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Our core competencies include cell and molecular biology, imaging science,
information management software, cellular bioinformatics and cellular
patterning. We have formed strategic collaborations with several leading
companies in order to complement our expertise and reduce our product
development risks and costs. We have entered into collaborative agreements with
Zeiss relating to optical instrumentation. We also have collaborative agreements
with ACLARA BioSciences, Inc., relating to microfluidics array technology for
our CellChip System and with Molecular Probes, Inc. in the area of
fluorescence-based reagents used in high content screening. In addition, under
an agreement with Zeiss, we are exclusively marketing, in North America, their
ultra high throughput screening system, which complements our high content
screening systems.
OUR INITIAL TARGET MARKETS
Our products are designed to address a number of multi-billion dollar
markets. We are initially targeting our products to the drug discovery market
segment. We believe this segment provides the most immediate opportunities due
to the large investment in drug discovery research and a need to improve
productivity in the drug discovery process. Industry sources estimate that only
20% of new drug candidates ever become marketed drugs, and only about 30% of
drugs ever recoup their development costs. We estimate that the drug discovery
market for our products includes approximately 140 pharmaceutical companies,
2,000 biotechnology companies and over 1,000 academic and government
laboratories.
We believe that, because diseases occur and drugs have their effect at the
cellular level, researchers must understand how cells work, in order to develop
effective drugs or therapies. Present drug discovery techniques, however, do not
provide information about the physical position and activity over time of cells
and cellular components. The current drug discovery process therefore makes
assumptions about the specificity, effectiveness and toxicity of potential drug
candidates. These assumptions must then be validated through expensive and time
consuming pre-clinical and human clinical trials. In addition, advances in some
aspects of the drug discovery process, such as genomics, proteomics and high
throughput screening, have led to a proliferation in the number of potential
drug candidates and a corresponding bottleneck in selecting candidates for
further development. We believe there is a need for automated systems that can
efficiently provide comprehensive cellular information. We further believe this
cellular information has the potential to enable drug companies to improve the
probability that the drug candidates they select for pre-clinical and clinical
development will become successfully marketed drugs.
OUR STRATEGY
Our objective is to lead the emerging field of cellomics. Key elements of
our strategy are as follows:
- establish high content screening as the standard for drug discovery;
- offer a broad menu of high content screening software modules and reagent
kits to generate recurring revenues;
- expand into additional segments of the life sciences market, including
basic biomedical research, clinical diagnostics and agriculture;
- migrate our high content screening system into a miniaturized, more
versatile and higher throughput product platform called the CellChip
System;
- construct a powerful predictive tool by creating the leading searchable
repository of cellomics information, our Cellomics Knowledgebase, and by
linking this information to existing genomics and proteomics databases;
and
- combine our strengths with the strengths of strategic corporate partners
to access complementary technologies and strengthen our commercialization
capabilities.
ABOUT US
We were originally formed in Pennsylvania in 1995, and reincorporated in
Delaware in 1998. Our principal offices and manufacturing facilities are located
at 635 William Pitt Way, Pittsburgh, Pennsylvania 15238 and our telephone number
is (412) 826-3600.
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THE OFFERING
Shares offered by Cellomics......... shares
Total shares outstanding after this
offering............................ shares(1)
Use of proceeds..................... We expect to use the net proceeds from
this offering for technology research
and product and services development,
scale-up of sales and marketing,
capital expenditures, working capital
and general corporate purposes.
Proposed Nasdaq National Market
symbol.............................. CLMX
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(1) The number of shares of common stock to be outstanding after this
offering is based on the number of shares outstanding on February 26,
2000. This number includes 2,660,293 shares of common stock that will
be issued on the conversion of all of our outstanding shares of
convertible preferred stock and excludes:
- 742,900 shares of common stock reserved for issuance under our stock
option plans, of which 412,900 shares were subject to outstanding options
as of February 26, 2000, at a weighted average exercise price of $0.56;
- 445,970 shares of common stock issuable upon exercise of outstanding
warrants as of February 26, 2000, at a weighted average exercise price of
$7.69; and
- up to shares that the underwriters may purchase if they
exercise their over-allotment option in full.
ASSUMPTIONS USED IN THIS PROSPECTUS
Unless otherwise indicated, information in this prospectus assumes the
following:
- the conversion of all of our outstanding shares of convertible preferred
stock into shares of common stock upon the closing of this offering;
- a for stock split that has been completed;
- the filing of our amended and restated certificate of incorporation; and
- no exercise of the underwriters' over-allotment option.
RISK FACTORS
You should consider the risk factors and the impact from various events
which could adversely affect our business before investing in our common stock.
See "Risk Factors."
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SUMMARY FINANCIAL DATA
The following summary statement of operations data for the years ended
December 31, 1997, 1998 and 1999 are derived from our audited financial
statements.
The pro forma loss per share presented below for the year ended December
31, 1999 assumes conversion of the Series A preferred stock outstanding at
December 31, 1999 into common stock on a one-for-one basis on January 1, 1999,
or the date of issuance if later. The Series A preferred stock will
automatically convert into common stock upon the closing of this offering.
The pro forma balance sheet data presented below give effect to the sale of
our Series B preferred stock completed after December 31, 1999 for aggregate
proceeds of approximately $6.5 million, the conversion of $1.8 million in demand
notes, plus accrued interest, into our Series B preferred stock, and the
conversion of our Series A and Series B preferred stock into common stock upon
the closing of this offering, as if such conversion had occurred at December 31,
1999. The pro forma as adjusted balance sheet data reflect the sale of
shares of common stock in this offering at an assumed initial public
offering price of $ per share, after deducting underwriting discounts and
commissions and estimated offering expenses. You should read the summary
financial data together with our financial statements and the related notes and
the sections of this prospectus entitled "Capitalization" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
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1997 1998 1999
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(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues.................................................... $ 395 $2,273 $3,390
Operating costs and expenses................................ 2,820 5,782 13,365
Loss from operations........................................ (2,425) (3,509) (9,975)
Net loss.................................................... (2,438) (3,495) (10,135)
Net loss attributable to common stockholders................ (2,438) (4,013) (11,068)
Net loss per share--basic and diluted....................... $(2.16) $(3.48) $(9.36)
Shares used to compute basic and diluted net loss per
share..................................................... 1,129 1,152 1,182
Pro forma net loss per share................................ $(3.26)
Shares used to compute pro forma net loss per share......... 3,112
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1999
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PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
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(IN THOUSANDS)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 1,341 $ 7,872
Working capital (deficit)................................... (1,223) 3,984
Total assets................................................ 5,860 12,379
Total long-term debt less current maturities................ 3,745 2,036
Mandatorily redeemable convertible preferred stock.......... 12,153 --
Total stockholders' equity (deficit)........................ (15,734) 3,334
</TABLE>
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RISK FACTORS
This investment involves a high degree of risk. You should carefully
consider the following risk factors, in addition to other information set forth
in this prospectus, before purchasing shares of our common stock. Each of these
risk factors could adversely affect our business, financial condition and
operating results, as well as the value of an investment in our common stock.
RISKS RELATED TO OUR BUSINESS
WE ARE AN EARLY STAGE COMPANY. WE HAVE ONLY RECENTLY BEGUN TO COMMERCIALIZE
SOME OF OUR PRODUCTS AND YOU MUST EVALUATE US IN LIGHT OF THE UNCERTAINTIES
AND COMPLEXITIES THAT AFFECT A COMPANY IN ITS EARLY STAGES. IF WE ARE
UNABLE TO SUCCESSFULLY COMMERCIALIZE OUR PRODUCTS, OUR BUSINESS WILL BE
MATERIALLY HARMED.
We are subject to the risks inherent in the operation of a new business,
such as:
- difficulties and delays often encountered in the development, production
and commercialization of new, complex technologies;
- developing the markets for our high content screening, informatics and
cellular bioinformatics products and technologies;
- transitioning our research and development efforts to the
commercialization of technologies; and
- attracting and retaining qualified management, sales, technical and
scientific staff.
We cannot assure you that we will be able to address these risks
effectively. Therefore, the extent of our future losses and the time required to
achieve and maintain profitability is uncertain and we cannot assure you that we
will ever be able to achieve or maintain profitability.
Our products and technologies are new and in the early stages of
development. We have only recently begun to sell our first commercial product,
the ArrayScan II, along with our initial software and reagent products. The
commercial success of our products will depend on market acceptance of the
merits of our technologies by pharmaceutical and biotechnology companies,
academic and government research centers and other companies that engage in drug
discovery, as well as other life sciences markets. Market acceptance of our
products depends on many factors, including our ability to demonstrate that our
products and services and their underlying technologies work effectively and
generate substantial benefit during the drug discovery process. Moreover, the
success of our future products will require significant development and
investments prior to commercialization to demonstrate their cost-effectiveness.
Problems frequently encountered in connection with the development and
utilization of new and unproven technologies and the competitive environment in
which we operate may limit our ability to develop commercially successful
products. We cannot assure you that we will be able to commercialize any of our
products under development. If we are unable to successfully commercialize our
products, our business will be materially harmed.
WE HAVE HAD A LIMITED OPERATING HISTORY AND HAVE INCURRED SIGNIFICANT
LOSSES TO DATE. WE EXPECT TO CONTINUE TO INCUR LOSSES IN THE FORESEEABLE
FUTURE AND WE MAY NEVER ACHIEVE OR MAINTAIN PROFITABILITY.
We have incurred operating losses in each of the years since our inception.
As of December 31, 1999, we had an accumulated deficit of approximately $16.6
million. Our losses have primarily been the result of research and development
and selling, general and administrative expenses associated with our operations.
Since our inception, we have recognized limited revenue from the sale of our
products, technology and services. We have financed our operations principally
from private placements of our common and preferred stock, collaboration
agreements and grants. We expect to continue to experience significant operating
losses in the foreseeable future as we continue to expand our research and
development efforts and our marketing and sales force in an effort to
commercialize more of our products. We expect that losses will continue until
such
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time, if ever, that we are able to generate sufficient revenues from the sale of
our products, technologies and services to cover our expenses. Our ability to
achieve and maintain long-term profitability is dependent on successfully
commercializing our products and technologies. We cannot assure you that we will
be able to achieve any of the foregoing or that we will be profitable even if we
successfully commercialize our products.
OUR PRODUCTS AND TECHNOLOGIES ARE NOVEL AND THEY MAY NOT ACHIEVE MARKET
ACCEPTANCE. IF OUR PRODUCTS ARE NOT ACCEPTED OR EMBRACED BY OUR CUSTOMERS,
OUR BUSINESS WILL SUFFER MATERIALLY.
Our products and technologies represent novel tools for drug discovery.
Historically, because of the highly competitive and proprietary nature of the
drug discovery process, pharmaceutical and biotechnology companies have
conducted compound identification within their own internal research
departments. Market acceptance of our products will depend on many factors,
including our ability to demonstrate the advantages and potential economic value
of high content screening, informatics and cellular bioinformatics products and
technologies over well-established alternative products and technologies.
The market for high content screening, informatics and cellular
bioinformatics products and technologies is new and undefined, and the use of
these technologies by pharmaceutical and biotechnology companies and academic
and government laboratories is currently very limited. Because our products have
been in operation for only a limited period of time, their ease of use and
commercial value have not been fully established. In addition, operators using
these systems may require substantial new technical skills and training. If our
customers do not accept our products and technologies because these systems fail
to generate the expected quantities and quality of data and knowledge regarding
cellular functions, are too difficult or costly to use or are otherwise
deficient, market acceptance of our products will suffer and we may not be able
to generate further sales.
To date, our technologies have never been utilized in the discovery of any
compound that has ultimately become a commercialized drug. If our products and
technologies are not successful or are perceived as ineffective in assisting
others in discovering commercially viable drug compounds, our business will be
materially harmed and our stock price may decline. The drug discovery process is
highly uncertain, and we cannot assure you that our products and technologies
will assist others in discovering any commercially successful compounds. If our
high content screening, informatics and cellular bioinformatics products and
technologies do not become widely accepted methods in drug discovery, demand for
our products will be limited or may not develop at all. The lack of demand for
our high content screening and informatics and cellular bioinformatics products
and technologies would materially harm our business, financial condition and
operating results.
OUR OPERATING RESULTS MAY FLUCTUATE SIGNIFICANTLY, AND ANY FAILURE TO MEET
FINANCIAL EXPECTATIONS MAY DISAPPOINT SECURITIES ANALYSTS OR INVESTORS AND
RESULT IN A DECLINE IN OUR STOCK PRICE, CAUSING INVESTOR LOSSES.
Our operating results may fluctuate in the future. These fluctuations could
cause our stock price to decline. Some of the factors that could cause our
operating results to fluctuate include:
- the length and unpredictability of our sales cycles;
- the relatively high purchase price of many of our products;
- Zeiss' performance under our development, manufacturing and supply and
sales and marketing agreements;
- our ability to commercialize our products;
- the timing, release and competitiveness of our products;
- general and industry-specific economic conditions that may affect our
customers' research and development expenditures and demand for our
products;
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- market acceptance of our technologies and products; and
- expiration or termination of collaborative research contracts or
government research grants, which may not be renewed or replaced.
If revenues decline in a quarter, whether due to a delay in recognizing
expected revenues or otherwise, our earnings, if any, will decline. In
particular, research and development and a majority of selling, general and
administrative expenses are fixed costs and will continue to be so regardless of
variations in revenues. Due to fluctuations in our revenues and operating
expenses, we believe that period-to-period comparisons of our results of
operations are not a good indication of our future performance. It is possible
that in some future quarter or quarters, our operating results will be below the
expectations of securities analysts or investors, which may result in stock
price fluctuations or declines.
WE RELY HEAVILY ON ZEISS TO MANUFACTURE SOME OF OUR KEY PRODUCTS. IN
ADDITION, WE EXPECT TO GENERATE A SIGNIFICANT PORTION OF OUR NEAR-TERM
REVENUES FROM SALES OF ZEISS' ULTRA HIGH THROUGHPUT SCREENING PRODUCTS. IF
EITHER WE OR ZEISS FAIL TO PERFORM UNDER OUR AGREEMENTS, OR WE CANNOT
SUCCESSFULLY COMMERCIALIZE THE ZEISS PRODUCTS, OUR ABILITY TO GENERATE
REVENUES WOULD BE SIGNIFICANTLY IMPAIRED AND OUR BUSINESS WOULD BE
MATERIALLY HARMED.
In February 2000, we entered into a development, manufacturing and supply
agreement with Zeiss that supersedes an agreement that we entered into in 1998.
Under the new agreement, we agreed that Zeiss will be the sole developer and
manufacturer of our ArrayScan Kinetics Workstation and ArrayScan Kinetics Reader
until September 30, 2002. Our ability to develop, manufacture and obtain a
sufficient supply of these products will depend significantly on Zeiss'
performance under this agreement. If Zeiss experiences manufacturing or
development difficulties, or does not otherwise perform under this agreement,
our ability to generate revenues from sales of our ArrayScan Kinetics
Workstation and ArrayScan Kinetics Reader will be dramatically reduced.
Our development, manufacturing and supply agreement with Zeiss terminates
by its terms in December 2005. However, either party may terminate this
agreement on an occurrence of a material breach by the other party or for any
reason upon eighteen months notice to the other party. If Zeiss terminates or is
unable to perform its obligations under this agreement, we will be required to
find one or more other collaborators for the development and commercialization
of our products or experience increased capital requirements to undertake
development and manufacturing at our own expense. We cannot assure you that we
would be able to find an alternative source to develop or manufacture our
products on a timely basis or on terms acceptable to us, if at all. We also
cannot assure you that we would be able to develop or manufacture these
instruments or any of our other products on our own. Additionally, if the
agreement is terminated for any reason, it is possible that Zeiss could begin to
develop its own competing technologies or seek other collaborators that develop
products that are competitive with our products.
In February 2000, we also entered into a sales and marketing agreement with
Zeiss under which we agreed to sell and market Zeiss' Ultra High Throughput
Screening System. Under the terms of the agreement, we are the exclusive
distributor of these Zeiss products in North America. We expect to generate a
significant portion of our near-term revenues from these products. If either we
or Zeiss fail to perform under our agreement, or we cannot successfully
commercialize these products, our revenues and business would be materially
harmed. This agreement terminates by its terms on December 31, 2005. However,
either party may terminate this agreement on the occurrence of a material breach
by the other party or for any reason upon twelve months' notice to the other
party. If this agreement is terminated, our near-term and future revenues would
be materially harmed.
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MANY OF OUR PRODUCTS AND TECHNOLOGIES ARE STILL UNDER DEVELOPMENT AND THEY
MAY NOT BE SUCCESSFULLY COMMERCIALIZED. IF OUR PRODUCTS ARE NOT
COMMERCIALIZED, OUR BUSINESS WOULD BE MATERIALLY HARMED.
Complex instrumentation systems that appear to be promising at early stages
of product development may ultimately not work for a number of reasons. These
systems may be ineffective, difficult or uneconomical to produce, or fail to
achieve expected performance levels or industry acceptance. The
commercialization of our systems may be hindered or prevented by the existence
or assertion of proprietary rights of third parties. Some of the instrumentation
and software that comprise our high content screening, informatics and cellular
bioinformatics products and technologies are not presently and have not
previously been used in commercial applications. The commercialization of our
high content screening, informatics and cellular bioinformatics products and
technologies is a complex process, in some cases requiring the combination of
instrumentation, assays, software and databases. As we integrate new high
content screening, informatics and cellular bioinformatics products and
technologies, it is possible that previously unanticipated problems may emerge.
We cannot assure you that we will be able to successfully develop our high
content screening, informatics and cellular bioinformatics products and
technologies, achieve anticipated throughputs, or develop a sustainable and
profitable business. Unforeseen complications may arise which could cause
product development delays and increased development costs, or render our
systems unable to perform at the quality and capacity levels required for
commercial success. Any such complications or delays could materially harm our
business, financial condition and operating results.
We expect in the future that a substantial portion of our revenues will be
derived from the sale and licensing of consumables, such as reagents, assays and
assay kits. We have limited experience in the development, manufacture and
marketing of these products. We intend to continue to license assay technologies
from third parties and to use these licenses to develop reagents and assay kits
internally. We cannot guarantee that we will succeed in licensing any additional
assay technologies on acceptable terms, if at all, or that we will successfully
commercialize any reagents that we license or develop. In addition, as sales
volume increases, we may not be able to manufacture sufficient quantities of
reagents, assays and assay kits either on our own or through third parties.
OUR DEPENDENCE ON COLLABORATION PARTNERS TO DEVELOP, MANUFACTURE, MARKET
AND DISTRIBUTE OUR PRODUCTS MAY DELAY OR IMPAIR OUR ABILITY TO GENERATE
SIGNIFICANT REVENUES OR OTHERWISE MATERIALLY HARM OUR BUSINESS.
We will rely on existing and future collaboration partners for developing,
manufacturing, commercializing and marketing our products. Many of our
competitors are similarly seeking to develop or expand their collaboration and
license agreements with pharmaceutical companies. The success of these efforts
by our competitors could have an adverse impact on our ability to form future
collaboration arrangements. We cannot assure you that we will be able to
negotiate acceptable collaboration agreements in the future or that efforts
under any current or future collaboration agreements will be successful. To the
extent that we choose not to or are unable to enter into future collaboration
agreements or maintain existing collaborations, we would experience increased
capital requirements to undertake development, manufacturing, marketing and
distribution at our own expense. In addition, we may encounter significant
delays in commercializing our products or find that the development, manufacture
or sale of our products is adversely affected by the absence of such
collaboration agreements.
Our reliance on collaboration partners poses the following additional
risks:
- disputes with our partners may arise, leading to delays in or termination
of the research, development or commercialization of our products or
resulting in significant litigation or arbitration;
- contracts with our partners may fail to provide significant protection or
may become unenforceable if one of these partners fails to perform;
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- our partners could independently develop, or develop with third parties,
products or technologies that compete with our products;
- our partners may not commit enough capital or other resources to
successfully develop our products or technologies;
- our partners may not pursue further development and commercialization of
products resulting from their collaboration with us;
- our partners with marketing and distribution rights to one or more of our
products may not commit enough resources to the marketing and
distribution of our products;
- our contracts with collaboration partners may expire or be terminated and
we may not be able to replace them; and
- the terms of our contracts with our partners may not be favorable to us
in the future.
If any of these risks occur, our product development, manufacturing,
marketing and distribution may suffer, and our business, financial condition and
results of operations may be materially harmed.
WE DEPEND ON THIRD PARTY PRODUCTS AND SERVICES AND, IN SOME CASES, SOLE OR
LIMITED SOURCES OF SUPPLIES TO DEVELOP AND MANUFACTURE COMPONENTS OF OUR
PRODUCTS.
We rely substantially on outside vendors to manufacture many of the
components, subassemblies, software and reagents used in our products, some of
which are obtained from a single supplier or a limited group of suppliers. For
example, we purchase a key component for the ArrayScan II from Zeiss, the loss
of which would result in significant production delays and increased
expenditures.
Our reliance on outside vendors, and a sole or a limited group of suppliers
in particular, involves several risks, including:
- the inability to obtain an adequate supply of required components due to
manufacturing capacity constraints, a discontinuance of a product by a
third-party manufacturer or other supply constraints;
- reduced control over quality and pricing of components; and
- delays and long lead times in receiving materials from vendors.
Any shortage of supplies would limit our ability to produce our products
and materially harm our business.
WE HAVE LIMITED COMMERCIAL MANUFACTURING CAPABILITY AND EXPERIENCE AND MAY
ENCOUNTER MANUFACTURING PROBLEMS OR DELAYS WHICH COULD RESULT IN LOWER
REVENUES.
In order to be successfully commercialized, our products must be
manufactured in commercial quantities at an acceptable cost, either by us or by
our collaboration partners. To date, we have produced only a limited number of
our products and we have no experience in manufacturing commercial quantities of
our products. Our customers expect that we comply with standard manufacturing
practices that we may not be able to meet. We have one manufacturing facility
located in Pittsburgh, Pennsylvania. To achieve the production levels necessary
for successful commercialization of our products, we will need to scale-up our
manufacturing facilities, establish more automated manufacturing capabilities
and maintain adequate levels of inventory. We cannot assure you that we can
develop the necessary manufacturing capability or that we will be able to fund
or build an adequate commercial manufacturing facility to provide adequate
commercial supplies of our products on a timely basis. Moreover, we may not be
able to manufacture sufficient quantities to meet market demand or may not be
able to maintain acceptable quality standards while producing commercial
quantities. If we cannot achieve the required level and quality of production,
we may need to outsource production or rely on licensing and other arrangements
with third parties who possess sufficient manufacturing facilities and
capabilities. This could reduce our gross margins and expose us to the risks
inherent in relying on others. We
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may not be able to successfully outsource our production or enter into licensing
or other arrangements with these third parties, which could adversely affect our
business. We cannot assure you that we, acting alone or with the assistance of
others, will be able to successfully make the transition to commercial
production.
WE HAVE A LIMITED SALES FORCE AND LIMITED EXPERIENCE IN SELLING, MARKETING,
SERVICING AND SUPPORTING OUR PRODUCTS. AS A RESULT, WE MAY ENCOUNTER
SIGNIFICANT DIFFICULTIES IN COMMERCIALIZING OUR PRODUCTS ON A MASS SCALE.
Our direct sales force may not be sufficiently large to successfully
penetrate our target markets. We may not be able to expand our direct sales
force to meet our commercial objectives. In addition, our sales force may not be
able to address complex scientific and technical issues raised by our customers.
Our customer support personnel may also lack the broad range of technical
expertise required to adequately train our customers and service and support our
products in the field.
OUR INDUSTRY IS HIGHLY COMPETITIVE AND IS SUBJECT TO RAPID CHANGE. OUR
SUCCESS WILL DEPEND ON HAVING THE RESOURCES REQUIRED TO SUCCESSFULLY
COMPETE AND OUR ABILITY TO DEVELOP AND COMMERCIALIZE NEW PRODUCTS IN A VERY
RAPIDLY CHANGING MARKET.
The biotechnology industry is highly competitive. We compete with companies
in the United States and abroad that are engaged in the development and
production of products that assist pharmaceutical companies and other
researchers in developing commercial drugs. Our competitors include
biotechnology, pharmaceutical, chemical and other companies, academic and
scientific institutions, government agencies and public and private research
organizations. We have begun to encounter competition from companies that offer
one or more components of high content screening, including integrated reagents,
kits, applications, instrumentation and informatics.
Many of our competitors have much greater financial, technical, research,
marketing, sales, distribution, service and other resources than we do.
Moreover, our competitors may offer broader product lines and have greater name
recognition than we do, and may offer discounts as a competitive tactic. Our
competitors may develop or market technologies or products that are more
effective or commercially attractive than our current or future products, or
that may render our technologies and products obsolete. Significant factors in
determining whether we will be able to compete successfully include:
- price and cost-effectiveness of our high content screening, informatics
and cellular bioinformatics products and technologies;
- potential advantages over alternative methods of drug discovery;
- ease of use;
- product availability;
- ability to respond to rapidly changing technologies and evolving industry
standards;
- development, marketing, distribution and manufacturing capabilities as
well as the support of collaborators; and
- patent protection.
If our products are not competitive based on these or other factors, our
business, financial condition and operating results will be materially harmed.
The field of pharmaceutical and biotechnology instrumentation and reagents is
also characterized by rapid technological change and frequent introduction of
new products. Our success will depend on our ability to enhance our current and
planned high content screening, informatics and cellular bioinformatics products
and technologies and to develop and introduce on a timely basis new products
that address the evolving needs of our customers. We anticipate that production
for our new products may not be available for several months or years, if at
all. We may experience difficulties that could delay or prevent the successful
development, introduction and marketing of new products or product
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enhancements. Any failure to develop and introduce products in a timely manner
in response to changing market demands or customer requirements could have a
material adverse effect on our business, financial condition and operating
results.
OUR REVENUES ARE DERIVED PRIMARILY FROM, AND ARE SUBJECT TO RISKS FACED BY,
THE PHARMACEUTICAL AND BIOTECHNOLOGY INDUSTRIES.
We expect that our revenues in the foreseeable future will be derived
primarily from products provided to the pharmaceutical and biotechnology
industries. Accordingly, our success will depend directly upon their demand for
our products. Our operating results may fluctuate substantially due to
reductions and delays in research and development expenditures by companies in
these industries. These reductions and delays may result from factors that are
outside of our control, such as:
- changes in economic conditions;
- changes in the regulatory environment affecting health care and health
care providers;
- pricing pressures and reimbursement policies;
- market-driven pressures on companies to consolidate and reduce costs; and
- other factors affecting research and development spending.
WE MAY NEED ADDITIONAL FINANCING, BUT OUR ACCESS TO CAPITAL FUNDING IS
UNCERTAIN.
Our current and anticipated development projects require substantial
additional capital. We expect that the net proceeds from this offering, together
with our existing assets and revenues from operations, will be sufficient to
fund our operations through 2001. However, our future capital needs will be
dependent on many factors, including the status of our product development and
commercialization efforts, the amount of proceeds actually raised in this
offering, the amount of cash generated by our operations, competitive factors,
sales and marketing activities, changes in or termination of existing
collaboration and licensing arrangements and our need for manufacturing
capacity. We do not have committed external sources of funding and cannot assure
you that we will be able to obtain additional funds on acceptable terms, if at
all. If adequate funds are not available, we may be required to:
- delay, reduce the scope of, or eliminate one or more of our development
programs;
- obtain funds through arrangements with collaboration partners or others
that may require us to relinquish rights to technologies or products that
we would otherwise seek to develop or commercialize ourselves; or
- license rights to technologies or products on terms that are less
favorable to us than might otherwise be available.
If we proceed with raising additional funds by issuing additional stock,
further dilution to our stockholders may result, and new investors could have
rights superior to existing stockholders. If funding is insufficient at any time
in the future, we may be unable to develop or commercialize our products, take
advantage of business opportunities or respond to competitive pressures.
THE RIGHTS WE RELY ON TO PROTECT OUR INTELLECTUAL PROPERTY UNDERLYING OUR
PRODUCTS MAY NOT BE ADEQUATE, WHICH COULD ENABLE THIRD PARTIES TO USE OUR
TECHNOLOGIES AND WOULD REDUCE OUR ABILITY TO COMPETE IN THE MARKET.
Our success will depend in part on our ability to obtain patents, maintain
trade secret protection and operate our business without infringing the
proprietary rights of others. We are dependent, in part, on the patent rights
licensed from third parties with respect to our technologies. There can be no
assurance that patent applications filed by us or our licensors will result in
patents being issued, that the claims of such
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<PAGE> 16
patents will offer significant protection for our technology, or that any
patents issued to or licensed by us, will not be challenged, narrowed,
invalidated or circumvented.
Our patent positions and those of other biotechnology product companies are
uncertain and involve complex legal and factual questions. In addition, the
coverage sought to be claimed in a patent application can be significantly
reduced before the patent is issued. Consequently, we cannot assure you that our
patent applications or those of our licensors will result in patents being
issued or that any issued patents will provide protection against competitive
technologies or will be held valid if challenged or circumvented. Others may
independently develop products similar to ours or design around or otherwise
circumvent patents issued to us. In the event that any relevant claims of third
party patents are upheld as valid and enforceable, we could be prevented from
practicing the subject matter claimed in such patents, or may be required to
obtain licenses from the patent owners of each of such patents or to redesign
our products or processes to avoid infringement. We cannot assure you that such
licenses would be available or, if available, would be on terms acceptable to us
or that we would be successful in any attempt to redesign our products or
processes to avoid infringement.
We also rely on trade secret and copyright law and employee and third party
nondisclosure agreements to protect our intellectual property rights in our
products and technology. We cannot assure you that these agreements and measures
will provide meaningful protection of our trade secrets, copyrights, know-how or
other proprietary information in the event of any unauthorized use,
misappropriation or disclosure or that others will not independently develop
substantially equivalent proprietary technologies. Litigation to protect our
trade secrets or copyrights would result in significant costs to us as well as
diversion of management time. Adverse determinations in any such proceedings or
unauthorized disclosure of our trade secrets could have a material adverse
effect on our business, financial condition and operating results. In addition,
the laws of certain foreign countries do not protect our intellectual property
rights to the same extent as the laws of the United States. We cannot assure you
that we will be able to protect our intellectual property in these markets.
WE MAY BE INVOLVED IN LAWSUITS TO PROTECT OR ENFORCE OUR PATENTS. THIS
WOULD BE EXPENSIVE AND, IF WE LOSE SUCH A LAWSUIT, WE MAY IN TURN LOSE SOME
OF OUR INTELLECTUAL PROPERTY RIGHTS, WHICH WOULD REDUCE OUR ABILITY TO
COMPETE.
We may be subject to legal proceedings that result in the revocation of
patent rights owned by or licensed to us, and as a result, competitors may
practice the patent or licensed technology. We are aware of third party patents
that contain issued claims that could be construed to cover certain aspects of
our technologies. We cannot assure you that we will not be required to license
any such patents to produce products or that such licenses would be available on
commercially reasonable terms, if at all. Any action against us claiming damages
and seeking to enjoin commercial activities relating to the affected
technologies could subject us to potential liability for damages. We could incur
substantial costs in defending patent infringement claims, obtaining patent
licenses, engaging in interference and opposition proceedings or other
challenges to our patent rights or intellectual property rights made by third
parties, or in bringing such proceedings or enforcing any of our patent rights.
Any of these proceedings would be expensive and time-consuming and divert
management's time and attention from other concerns.
The patent protection of biotechnology companies is highly uncertain,
involves complex legal and factual questions, and has been the subject of much
litigation. No consistent policy has emerged from the U.S. Patent and Trademark
Office or the courts regarding the breach of claims allowed or the degree of
protection offered under biotechnology patents. In addition, there is a
substantial backlog of biotechnology patent applications at the U.S. Patent and
Trademark Office and the approval or rejection of a patent application could
take several years.
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OUR SUCCESS WILL DEPEND PARTLY ON OUR ABILITY TO OPERATE WITHOUT INFRINGING
ON OR UTILIZING THE PROPRIETARY RIGHTS OF OTHERS.
We may be sued for infringing on the patent rights of others. Intellectual
property litigation is costly, and, even if we prevail, the cost of such
litigation could adversely affect our business, financial condition and
operating results. In addition, litigation is time consuming and could divert
management attention and resources away from our business. If we do not prevail
in any litigation, in addition to any damages we might have to pay, we could be
required to stop the infringing activity or obtain a license. Any required
license may not be available to us on acceptable terms, if at all. In addition,
some licenses may be non-exclusive, and therefore, our competitors may have
access to the same technology licensed to us. If we fail to obtain a required
license or are unable to design around a patent, we may be unable to sell some
of our products, which would materially harm our business, financial condition
and operating results.
WE MAY ENCOUNTER DIFFICULTIES IN MANAGING GROWTH THAT COULD MATERIALLY HARM
OUR BUSINESS.
Our success will depend on the expansion of our operations and the
effective management of growth, which will place a significant strain on our
management, operational and financial resources. To manage such growth, we must
expand our facilities, augment our operational, financial and management systems
and hire and train additional qualified personnel. Our failure to manage growth
effectively could materially harm our business, financial condition and
operating results.
WE DEPEND ON OUR KEY PERSONNEL, THE LOSS OF WHOM WOULD ADVERSELY AFFECT OUR
OPERATIONS. FAILURE TO ATTRACT AND RETAIN THE TALENT REQUIRED FOR OUR
BUSINESS WOULD MATERIALLY HARM OUR BUSINESS, FINANCIAL CONDITION AND
OPERATING RESULTS.
We are highly dependent on principal members of our management and
scientific staff, including Dr. D. Lansing Taylor, President and Chief Executive
Officer, the loss of whose services would impede product introduction and
achievement of our strategic objectives. Our success will depend on our ability
to retain key employees and our scientific staff and our continuing ability to
attract and retain highly qualified scientific, technical and managerial
personnel. There is intense competition for qualified staff and we cannot assure
you that we will be able to retain existing personnel or attract and retain
qualified staff in the future. If we are unable to hire and retain personnel in
key positions, our business, financial condition and operating results would be
materially harmed. We do not maintain, and do not currently intend to obtain,
key employee global life insurance on any of our personnel other than on the
life of Dr. Taylor.
WE ARE EXPOSED TO POTENTIAL PRODUCT LIABILITY CLAIMS, AND IT IS UNCERTAIN
THAT INSURANCE AGAINST THESE CLAIMS WILL BE AVAILABLE TO US AT A REASONABLE
RATE IN THE FUTURE.
Our business exposes us to potential product liability claims that are
inherent in the life sciences field. We may be held liable if any product we
develop, or any product that is made with the use of or incorporation of any of
our technologies, causes injury or is found otherwise unsuitable during
manufacturing, marketing or sale. We cannot assure you that we will be able to
avoid product liability exposure. We have obtained product liability insurance
coverage in the amount of $6.0 million. However, we cannot assure you that our
present insurance coverage is or will continue to be adequate. Any product
liability claim in excess of our insurance coverage would have to be paid out of
our cash reserves, which would have a detrimental effect on our financial
condition. Also, we cannot assure you that we can or will maintain our insurance
policies on commercially acceptable terms, if at all.
SOME OF OUR PROGRAMS DEPEND ON GOVERNMENT GRANTS, WHICH MAY BE WITHDRAWN.
We have received and expect to continue to receive funds from various U.S.
government research and technology development programs. The government may
significantly reduce funding in the future for a number of reasons that are
beyond our control. For example, some programs are subject to a yearly
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appropriation process in Congress, and may be eliminated due to budget
reductions. Additionally, we may not receive funds under existing or future
grants because of budget constraints of the agency administering the program.
The loss of our current or future government grants would result in the decrease
of our near-term revenues.
FLUCTUATIONS IN THE CURRENCY EXCHANGE RATE BETWEEN U.S. DOLLARS AND
DEUTSCHE MARKS COULD ADVERSELY AFFECT OUR OPERATING RESULTS AND FINANCIAL
CONDITION.
We expect that a significant portion of our revenue over the next few years
will be derived from our sale in North America of Zeiss' Ultra High Throughput
Screening Systems. We will be paying for this Zeiss equipment in Deutsche marks,
and we will be selling the equipment to our customers in U.S. dollars.
Fluctuations in the currency exchange rate between the U.S. dollar and the
Deutsche mark could have a material adverse effect on the results of our
operations and financial condition by resulting in disadvantageous pricing
compared to competitive products that are priced only in dollars. In addition,
we buy components from Zeiss for our ArrayScan II, ArrayScan Kinetics
Workstation and ArrayScan Kinetics Reader in Deutsche marks. Fluctuations in the
currency exchange rate between the U.S. dollar and the Deutsche mark could
increase our costs and have a material adverse effect on the results of our
operations by increasing the cost of these products. We will recognize foreign
currency gains or losses arising from our operations in the period incurred. As
a result, currency fluctuations between the U.S. dollar and the currencies in
which we do business will cause foreign currency translation gains and losses.
We cannot predict the effects of exchange rate fluctuations upon our future
operating results because of the variability of currency exposure and the
potential volatility of currency exchange rates. We may use hedging instruments,
including forward contracts, to minimize any foreign currency rate fluctuation
exposure. We cannot assure you that any hedging transaction will adequately
protect us against currency rate fluctuations or that these transactions will
not result in losses to us.
RISKS RELATED TO THIS OFFERING
CONCENTRATION OF OWNERSHIP AMONG OUR EXISTING EXECUTIVE OFFICERS, DIRECTORS
AND PRINCIPAL STOCKHOLDERS MAY PREVENT NEW INVESTORS FROM INFLUENCING
SIGNIFICANT CORPORATE DECISIONS.
Immediately following this offering, our directors and executive officers
and their affiliates will beneficially own, in the aggregate, approximately
% of our outstanding common stock, or % if the underwriters
over-allotment option is exercised in full. As a result, these stockholders as a
group will be able to substantially influence our management and affairs and, if
acting together, on all matters submitted to our stockholders for approval,
including the election of directors, any merger, consolidation or sale of all or
substantially all of our assets and any other significant corporate transaction.
The concentration of ownership may also delay or prevent a change of control of
Cellomics. As a result, the market price of our common stock could be adversely
affected.
YOU MAY NOT BE ABLE TO TRADE OUR COMMON STOCK IF AN ACTIVE, LIQUID TRADING
MARKET DOES NOT DEVELOP.
Prior to this offering, there has been no public market for our common
stock. We cannot assure you that an active trading market for our common stock
will develop following this offering. You may not be able to sell your shares
quickly or at or above our initial public offering price. The initial public
offering price for our shares will be determined by negotiations between us and
the representatives of the underwriters based on a number of factors. The
initial public offering price may not be indicative of prices that will prevail
in any future trading market.
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MARKET VOLATILITY MAY AFFECT OUR STOCK PRICE AND THE VALUE OF YOUR
INVESTMENT MAY BE SUBJECT TO SUDDEN DECREASES.
The trading price for our common stock is likely to be highly volatile.
Prices for our common stock will be determined in the marketplace and may be
influenced by many factors, including, among other things:
- variations in our financial results;
- changes in earnings estimates by industry research analysts;
- investors' perceptions of our business and financial prospects;
- changes in government regulations;
- developments in our relationships with our collaboration and licensing
partners;
- announcements of new products or technologies by us or our competitors;
and
- general economic, industry and market conditions.
In addition, historically the stock markets have experienced extreme price
and volume fluctuations. In particular, the market prices of the securities of
life sciences companies have been especially volatile, and often these
fluctuations have been unrelated to operating performance. These broad
fluctuations may adversely affect the trading price of our common stock,
regardless of our actual operating performance.
In the past, following periods of market volatility, security holders have
instituted class action litigation. If the market value of our stock experiences
adverse fluctuations and we become involved in this type of litigation, we could
incur substantial legal costs and management's attention could be diverted,
which could materially harm our business or cause the market price of our stock
to further decline.
THERE IS A LARGE NUMBER OF SHARES THAT MAY BE SOLD IN THE MARKET FOLLOWING
THIS OFFERING, WHICH MAY DEPRESS THE MARKET PRICE OF OUR COMMON STOCK.
Sales of a substantial number of shares of our common stock in the public
market following this offering or the perception that such sales could occur
could cause the market price of our common stock to decline or adversely affect
our future ability to raise capital through an offering of equity securities.
The number of shares of common stock available for sale in the public market is
limited by restrictions under federal securities law and under lock-up
agreements that our stockholders have entered into with the underwriters and
with us. Those lock-up agreements restrict our stockholders from selling,
pledging or otherwise disposing of their shares for a period of 180 days after
the date of this prospectus without the prior written consent of Prudential
Securities Incorporated. However, Prudential Securities may, at its sole
discretion, release all or any portion of the common stock from the restrictions
of the lock-up agreements.
Directors, officers and stockholders who together own shares of common
stock will be subject to lock-up agreements providing that they will not offer,
sell or otherwise dispose of common stock owned by them for a period of 180 days
after the date of this prospectus. Prudential Securities, however, may in its
sole discretion, at any time, without notice, release all or any portion of the
shares subject to lock-up agreements.
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The following table indicates approximately when the shares of
our common stock that are not being sold in the offering but which were
outstanding as of , 2000 will be eligible for sale into the
public market:
<TABLE>
<CAPTION>
DAYS AFTER THE SHARES ELIGIBLE
EFFECTIVE DATE FOR SALE COMMENT
-------------- --------------- ---------------------------------------------------
<S> <C> <C>
On Effectiveness............... Shares not locked-up and saleable under Rule 144(k)
Shares not locked-up and saleable under Rules 144,
90 days........................ 144(k) and 701
Lock-up released; shares saleable under Rules 144,
180 days....................... 144(k) and 701
</TABLE>
OUR MANAGEMENT WILL HAVE BROAD DISCRETION TO ALLOCATE THE NET PROCEEDS OF
THIS OFFERING AND THE PROCEEDS MAY NOT BE USED APPROPRIATELY.
Our management will retain broad discretion allocating the proceeds of this
offering. We estimate the net proceeds from this offering to be approximately
$ million, or $ if the underwriters over-allotment option is
exercised in full, after deducting discounts, commissions and estimated offering
expenses. We plan to use these proceeds to enhance our technology research and
product and services development programs, scale-up our sales and marketing
efforts, capital expenditures, increase our working capital and for general
corporate purposes. We may also use a portion of the net proceeds of this
offering for the acquisition of or investment in companies, technologies or
assets that complement our business. We have no specific allocations for any
other net proceeds of this offering. The amount of proceeds we will actually
expend on general corporate purposes will vary depending on a number of factors,
including the successful commercialization of our products, progress in and
scope of our research and development activities, changes in or termination of
our existing collaboration and licensing arrangements, costs and magnitude of
product or technology acquisitions and our need for manufacturing capacity.
Consequently, management will retain a significant amount of discretion over the
allocation of these proceeds. Because of the number and variability of factors
that will determine the use of the net proceeds of this offering, how we spend
these proceeds may vary substantially from our current intentions.
AS A NEW INVESTOR IN OUR COMMON STOCK, YOU WILL EXPERIENCE IMMEDIATE AND
SUBSTANTIAL DILUTION IN THE BOOK VALUE OF YOUR SHARES.
The initial public offering price will be substantially higher than the net
tangible book value per share of our common stock which, as of December 31, 1999
on a pro forma basis for our issuance of Series B preferred stock in February
2000, was $0.87 per share. If you purchase our common stock in this offering you
will incur immediate substantial net tangible book value dilution of $ per
share, or $ per share if the underwriters exercise their over-allotment
option in full. You will incur additional dilution upon the exercise of
outstanding stock options and warrants. See "Dilution" on page 23 for a more
detailed discussion of dilution.
SOME PROVISIONS OF OUR CERTIFICATE OF INCORPORATION AND BYLAWS AND DELAWARE
LAW MAY DELAY OR PREVENT A TAKEOVER AND SUPPRESS OUR STOCK PRICE.
Some provisions in our certificate of incorporation and bylaws may have the
effect of delaying, deferring or preventing an acquisition, merger or other
change of control of Cellomics, despite the possible benefits to our
stockholders, or otherwise adversely affect the price of our common stock. These
provisions include the following:
- the ability of our board of directors to issue shares of preferred stock
and to determine the price and other terms, including preferences and
voting rights, of those shares without stockholder approval;
- a staggered board of directors;
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- a limitation on who may call special meetings of stockholders; and
- advance notice requirements for nomination for election to the board of
directors or for proposing matters that can be acted on by stockholders
at stockholder meetings.
In addition to these provisions, we are subject to certain Delaware laws,
including one that prohibits us from engaging in a business combination with any
interested stockholder for a period of three years from the date the person
became an interested stockholder unless certain conditions are met. The
provisions of our certificate of incorporation and bylaws and Delaware law may
discourage potential takeover attempts, discourage bids for our common stock at
a premium over market price or could adversely affect the market price of, and
the voting and other rights of the holders of, our common stock. As a result,
the market price of our common stock could be adversely affected.
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FORWARD-LOOKING STATEMENTS
This prospectus includes forward-looking statements. We have based these
forward-looking statements largely on our current expectations and projections
about future events and financial trends affecting the financial condition of
our business. These forward-looking statements are subject to a number of
factors, including, among other things:
- failure to successfully commercialize our products and technologies;
- market acceptance of our products and technologies;
- relationships with our collaboration partners;
- ability to enter into future collaboration agreements;
- general economic and business conditions, both nationally and in our
markets;
- our expectations and estimates concerning future financial performance
and financing plans;
- competition and technological change;
- future regulations that may affect our business; and
- other factors set forth under "Risk Factors" in this prospectus.
In addition, in this prospectus, the words "believe", "may", "will",
"estimate", "continue", "anticipate", "intend", "expect" and similar
expressions, as they relate to Cellomics, Inc., our business and our management,
are intended to identify forward-looking statements.
We undertake no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
In light of these risks and uncertainties, the forward-looking events and
circumstances discussed in this prospectus may not occur and actual results
could differ materially from those anticipated or implied in the forward-looking
statements.
20
<PAGE> 23
USE OF PROCEEDS
We estimate that our net proceeds from the sale of the shares of common
stock in this offering will be approximately $ , or $ if the
underwriters exercise their over-allotment option in full. "Net proceeds" are
what we expect to receive after paying the underwriters' discounts and
commissions and other expenses of the offering. For the purposes of estimating
net proceeds, we are assuming an initial public offering price of $ per
share.
We intend to use these net proceeds primarily for:
- technology research and product and services development;
- scale-up of sales and marketing;
- capital expenditures;
- working capital; and
- general corporate purposes.
We expect to use approximately $1.7 million for the payment of dividend
arrearages to all of our preferred stockholders in accordance with the terms of
our preferred stock. We may also use a portion of the net proceeds for the
acquisition of, or investment in, companies, technologies, products or assets
that complement our business. The amounts and timing of our actual expenditures
will depend upon numerous factors, including the status of our product
development and commercialization efforts, the amount of proceeds actually
raised in this offering, the amount of cash generated by our operations,
competitive forces, sales and marketing activities, changes in or termination of
existing collaboration and licensing arrangements and our need for manufacturing
capacity. However, we have no present understandings, commitments or agreements
to enter into any potential acquisitions or investments. Other than the
approximately $1.7 million for the payment of dividend arrearages, we have not
determined the amounts we plan to spend on any of the areas listed above or the
timing of these expenditures. As a result, our management will have broad
discretion to allocate the net proceeds of this offering. Pending such uses, we
intend to invest the net proceeds of this offering in short-term,
investment-grade interest-bearing securities or guaranteed obligations of the
U.S. government.
DIVIDEND POLICY
We have never declared or paid and do not anticipate declaring or paying
any cash dividends on our common stock in the near future. Any future
determination as to the declaration and payment of dividends, if any, will be at
the discretion of our board of directors and will depend on then existing
conditions, including our financial condition, operating results, contractual
restrictions, capital requirements, business prospects and other factors our
board of directors may deem relevant.
21
<PAGE> 24
CAPITALIZATION
The following table shows:
- our capitalization and short-term debt on December 31, 1999;
- our capitalization and short-term debt on December 31, 1999, on a pro
forma basis giving effect to the sale of our Series B preferred stock
completed after December 31, 1999 for aggregate proceeds of $6.5 million,
the conversion of $1.8 million in demand notes, plus accrued interest,
into our Series B preferred stock, and the conversion of our Series A and
Series B preferred stock into common stock; and
- our capitalization and short-term debt on December 31, 1999, on a pro
forma as adjusted basis, giving further effect to the sale of
shares of our common stock in this offering, assuming an initial public
offering price of $ per share, after deducting underwriting
discounts, commissions and estimated offering expenses.
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1999
-----------------------------------------------
PRO PRO FORMA
ACTUAL FORMA AS ADJUSTED (1)
---------- ---------- -----------------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C>
Cash and cash equivalents............................. $ 1,341 $ 7,872
======== ======== ========
Current maturities of long-term debt.................. $ 911 $ 911
======== ======== ========
Long-term debt less current maturities................ $ 3,745 $ 2,036
-------- -------- --------
Mandatorily redeemable convertible preferred stock,
$.01 par value; 2,024,500 shares authorized,
1,966,618 shares issued and outstanding, actual; no
shares authorized, issued, or outstanding pro forma
and pro forma as adjusted........................... 12,153 --
-------- -------- --------
Stockholders' equity (deficit):
Preferred stock, $.01 par value; no shares
authorized, issued or outstanding, actual and pro
forma; 5,000,000 shares authorized, no shares
issued and outstanding, pro forma as adjusted.... -- --
Common stock, $.01 par value, 5,000,000 shares
authorized, 1,184,319 shares issued and
outstanding, actual, 3,844,612 shares issued and
outstanding pro forma; 50,000,000 shares
authorized, shares issued and outstanding,
pro forma as adjusted............................ 12 39
Additional paid-in capital.......................... 1,203 20,244
Deferred compensation............................... (299) (299)
Accumulated deficit................................. (16,650) (16,650)
-------- -------- --------
Total stockholders' equity (deficit).................. (15,734) 3,334
-------- -------- --------
Total capitalization.................................. $ 164 $ 5,370 $
======== ======== ========
</TABLE>
- ---------------
(1) The number of shares pro forma as adjusted for this offering excludes:
- 742,900 shares of common stock reserved for issuance under our stock
option plans, of which 412,900 shares were subject to outstanding
options as of February 26, 2000, at a weighted average exercise price
of $0.56; and
- 445,970 shares of common stock issuable on exercise of outstanding
warrants as of February 26, 2000, at a weighted average exercise
price of $7.69.
22
<PAGE> 25
DILUTION
"Net tangible book value" is our total assets minus the sum of our total
liabilities, mandatorily redeemable convertible preferred stock and intangible
assets. "Net tangible book value per share" is net tangible book value divided
by the number of shares of common stock outstanding. At December 31, 1999, we
had a pro forma net tangible book value of $3.3 million, or $0.87 per share, of
common stock after giving effect to the sale of shares of Series B preferred
stock completed after December 31, 1999 for aggregate proceeds of approximately
$6.5 million, the conversion of $1.8 million in demand notes, plus accrued
interest, into Series B preferred stock, and the conversion of our Series A and
Series B preferred stock into common stock upon closing of this offering, as if
such conversion had occurred on December 31, 1999. After giving effect to the
sale of shares of common stock in this offering at an assumed initial public
offering price of $ per share after deducting underwriting discounts and
commissions and estimated offering expenses, our pro forma net tangible book
value at December 31, 1999 would have been $ million, or $ per share.
This represents an immediate increase in net tangible book value of $ per
share to existing stockholders and an immediate and substantial dilution of
$ per share to new investors purchasing our common stock in this offering.
The following table illustrates this per share dilution.
<TABLE>
<S> <C> <C>
Assumed initial public offering price..................... $
-------
Pro forma net tangible book value as of December 31,
1999.................................................. $ 0.87
Increase in net tangible book value attributable to new
investors.............................................
-------
Pro forma net tangible book value as of December 31, 1999,
after giving effect to this offering...................
------- -------
Dilution to new investors................................. $
======= =======
</TABLE>
The following table shows the difference between existing stockholders and
new investors in this offering with respect to the number of shares of common
stock purchased from us, the total consideration paid and the average price paid
per share. The table assumes that the initial public offering price will be
$ per share.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
------------------- ------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
-------- ------- -------- ------- --------------
<S> <C> <C> <C> <C> <C>
Existing stockholders............. % $ % $
New investors.....................
-------- ----- -------- ----- --------
Total...................... 100.0% $ 100.0%
======== ===== ======== ===== ========
</TABLE>
The discussion and tables above assume no exercise of outstanding options
or warrants to purchase shares of common stock. As of December 31, 1999, there
were 430,000 shares of common stock authorized for issuance under our stock
option plans, of which 355,400 shares were subject to outstanding options, at a
weighted average exercise price of $0.56, and 445,970 shares of common stock
issuable upon exercise of outstanding warrants as of December 31, 1999, at a
weighted average exercise price of $7.69. To the extent that any outstanding
options or warrants are exercised, there will be further dilution to new
investors.
23
<PAGE> 26
SELECTED FINANCIAL DATA
The statement of operations data for each of the years ended December 31,
1997, 1998 and 1999 and the balance sheet data as of December 31, 1998 and 1999
have been derived from our financial statements included elsewhere in this
prospectus which have been audited by PricewaterhouseCoopers LLP, independent
accountants. The statements of operations data for the period from May 3, 1995,
the date of inception, to December 31, 1995 and the year ended December 31,
1996, and the balance sheet data as of December 31, 1995, 1996 and 1997 have
been derived from our audited financial statements not included in this
prospectus. Our historical results are not necessarily indicative of results to
be expected for any future period. The data presented below have been derived
from financial statements that have been prepared in accordance with accounting
principles generally accepted in the United States and should be read with our
financial statements, including the notes, and with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" included elsewhere in
this prospectus.
The pro forma net loss per share for the year ended December 31, 1999
assumes conversion of the Series A preferred stock outstanding at December 31,
1999 into common stock on a one for one basis on January 1, 1999, or the date of
issuance if later. The Series A preferred stock will automatically convert into
common stock upon the closing of this offering.
The pro forma balance sheet data presented below give effect to the sale of
shares of our Series B preferred stock after December 31, 1999 for aggregate
proceeds of approximately $6.5 million, the conversion of $1.8 million in demand
notes, plus accrued interest, into Series B preferred stock, and the conversion
of our Series A and Series B preferred stock into common stock upon the closing
of this offering, as if such conversion had occurred at December 31, 1999. The
pro forma as adjusted balance sheet data reflect the sale of shares of
common stock in this offering at an assumed initial public offering price of
$ per share, after deducting underwriting discounts and commissions and
estimated offering expenses. You should read the selected financial data
together with our financial statements and the sections of this prospectus
entitled "Capitalization" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
<TABLE>
<CAPTION>
FROM DATE
OF INCEPTION YEAR ENDED DECEMBER 31,
(MAY 3, 1995) TO -------------------------------------------------
DECEMBER 31, 1995 1996 1997 1998 1999
----------------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues................................ $ 36 $ 363 $ 395 $ 2,273 $ 3,390
Operating costs and expenses:
Costs of product sales................ -- -- -- -- 405
Research and development.............. 57 257 1,486 3,909 9,130
Selling, general and administrative... 83 578 1,334 1,802 3,623
Amortization of deferred
compensation........................ -- -- -- 71 207
-------- ---------- ---------- ---------- ----------
Total operating costs and
expenses.......................... 140 835 2,820 5,782 13,365
Loss from operations.................... (104) (472) (2,425) (3,509) (9,975)
Interest income (expense), net.......... (1) (5) (13) 14 (160)
-------- ---------- ---------- ---------- ----------
Net loss................................ $ (105) $ (477) $ (2,438) $ (3,495) $ (10,135)
Accrued dividends and accretion on
mandatorily redeemable convertible
preferred stock (1)................... -- -- -- (518) (933)
-------- ---------- ---------- ---------- ----------
Net loss attributable to common
stockholders.......................... $ (105) $ (477) $ (2,438) $ (4,013) $ (11,068)
======== ========== ========== ========== ==========
Net loss per share-basic and diluted.... $ (0.19) $ (0.47) $ (2.16) $ (3.48) $ (9.36)
======== ========== ========== ========== ==========
Shares used to compute basic and diluted
net loss per share.................... 542,857 1,015,738 1,128,650 1,152,244 1,182,003
======== ========== ========== ========== ==========
Pro forma net loss per share (2)........ $ (3.26)
==========
Shares used to compute pro forma net
loss per share (2).................... 3,111,551
==========
</TABLE>
- ---------------
(1) The increase in net loss attributable to common stockholders due to
accretion on mandatorily redeemable convertible preferred stock will not occur
after this offering because all of the outstanding preferred stock will be
converted to common stock upon the closing of this offering.
(2) See Note 9 to our financial statements for an explanation of the number
of shares used in computing pro forma net loss per share and the pro forma net
loss attributable to common stockholders.
24
<PAGE> 27
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-----------------------------------------------------------------------
1995 1996 1997 1998 1999
---- ------- ------- ------- ----------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............. $ 3 $ 1,389 $ 319 $ 662 $ 1,341 $ 7,872
Working capital (deficit)............. (8) 1,375 (806) 409 (1,223) 3,984
Total assets.......................... 72 1,679 745 3,963 5,860 12,379
Total long-term debt less current
maturities.......................... -- -- 500 653 3,745 2,036
Mandatorily redeemable convertible
preferred stock..................... -- -- -- 6,252 12,153 --
Total stockholders' equity
(deficit)........................... 36 1,385 (1,053) (4,994) (15,734) 3,334
</TABLE>
25
<PAGE> 28
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
the "Selected Financial Data," and the accompanying financial statements and
related notes included elsewhere in this prospectus. This discussion and other
parts of this prospectus contain forward-looking statements which involve risks
and uncertainties. Our actual results may differ materially from the results
discussed in these forward-looking statements. Factors that might cause such a
difference include those discussed in "Risk Factors" and elsewhere in the
prospectus.
OVERVIEW
Since inception, we have been devoted primarily to the development of high
content screening products consisting of instrumentation, fluorescence-based
reagents and assays, data and information management software and cellular
bioinformatics. We are producing technologies and products that are designed to
extend the power of genomics by defining the cellular functions of genes and
proteins. Our initial commercialization focus is the pharmaceutical and
biotechnology industries. To fund and validate our product development, we
entered into collaboration agreements with Johnson & Johnson, Merck & Co. and
Warner Lambert. Under these agreements, we received funding for the development
of prototype instrumentation and assays for beta testing. To date, our revenues
have been principally derived from these collaboration agreements and from
grants. In November 1999, we sold our first commercial products, the ArrayScan
II and Cellomics Store. We are now selling these products as well as our
HitKits, custom assays and assay development contracts and we expect to generate
additional revenue from the release of new products.
Since our inception, we have incurred losses each year. Through December
31, 1999, we had an accumulated deficit of approximately $16.6 million. Our
losses have resulted principally from costs incurred in research and
development, and from selling, general and administrative costs associated with
our operations. We expect to make significant expenditures in further
commercializing our products and in the research and development of future
products. Therefore, we expect to incur additional losses for the foreseeable
future.
RESULTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1999 AND 1998
Revenues. We recognize revenues from product sales upon shipment of the
product to the customer. We recognize development and collaboration agreement
and grant revenues on a straight-line basis over the contract period or as work
is performed. Where prototype instruments are delivered under collaboration
agreements, we recognize revenues when the prototype is shipped to the customer.
When payment for revenues under maintenance, support or assay development
contracts is received in advance of the services performed, we record deferred
revenue related to these agreements. Revenues increased to $3.4 million for the
year ended December 31, 1999 compared to $2.3 million for 1998. The increase was
attributable to our sales of ArrayScan II and Cellomics Store products beginning
in November 1999. In addition, we recognized increased revenues associated with
a grant awarded in September 1998 by the Defense Advanced Research Project
Agency, or DARPA, due to a full year of activity during 1999.
Costs of Product Sales. Costs of product sales consist primarily of labor
and material costs. Costs of product sales were $405,000 for the year ended
December 31, 1999 due to the sale of commercial products beginning in November
1999. There were no commercial product sales or costs related to product sales
in 1998.
Research and Development Expenses. Research and development expenses
consist primarily of salaries and related personnel costs, materials costs,
amounts paid to consultants and contractors and other expenses related to the
design, development, testing and enhancement of our products. We expense
research and development costs as they are incurred. Research and development
expenses increased to $9.1 million for the year ended December 31, 1999 compared
to $3.9 million for 1998. The increase was primarily attributable to
26
<PAGE> 29
increased costs associated with the development of prototype instrument products
under a development and manufacturing agreement with Zeiss, hiring of additional
personnel in product development and a full year of costs associated with the
DARPA grant. We expect our research and development costs to increase over the
next several years as we expand our research and development efforts.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses consist of salaries and related personnel costs for
executive, sales, marketing, finance and other administrative personnel,
marketing expenses, recruiting expenses, professional fees, facility costs,
legal expenses associated with intellectual property and other corporate
expenses including business development. Selling, general and administrative
expenses increased to $3.6 million for the year ended December 31, 1999 compared
to $1.8 million for 1998. The increase was attributable primarily to the hiring
of senior management and sales personnel, marketing costs associated with the
commercialization of our initial products and other general costs necessary to
support the expansion of our business. We expect selling, general and
administrative expenses to continue to increase over the next several years to
support the commercialization of our products and our growing business
activities.
Amortization of Deferred Compensation. Deferred compensation for options
granted to employees represents the difference between the fair value of our
common stock and the exercise price of the options at the date of grant. We
account for stock-based employee compensation arrangements in accordance with
provisions of Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees" ("APB 25") and comply with disclosure provisions of
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("SFAS 123"). Deferred compensation for options granted to
consultants has been determined in accordance with SFAS 123 as the fair value of
the equity instruments issued. For the years ended December 31, 1998 and 1999,
we recorded deferred stock compensation of $259,000 and $318,000, respectively.
This amount is initially recorded as a reduction of stockholders' equity and is
being amortized over the vesting period of the options, generally four years,
using an accelerated method. We recorded amortization of deferred compensation
of $71,000 and $207,000 for the years ended December 31, 1998 and 1999,
respectively. The amortization expense relates to options awarded to employees
in all operating categories.
Interest Income (Expense), Net. Interest expense for the year ended
December 31, 1999 increased to $302,000 from $44,000 in 1998, due primarily to
additional borrowing under equipment financing lines of credit and a senior term
note. Interest and other income for the year ended December 31, 1999 increased
to $141,000 from $59,000 in 1998. The increase is due to higher average cash
balances in 1999.
Provision for Income Taxes. We incurred net operating losses for the year
ended December 31, 1999 and 1998 and consequently, we did not pay any federal,
state or foreign income taxes. As of December 31, 1999, we had federal and state
net operating loss carryforwards of approximately $15.5 million. We also had
federal research and development tax credit carryforwards of approximately
$725,000. If not fully utilized, the net operating losses and credit
carryforwards will expire at various dates beginning in 2015 through 2019. If
not fully utilized, the state of Pennsylvania net operating losses will expire
at various dates beginning in 2005 through 2009. Utilization of net operating
losses and credit carryforwards will be subject to an annual limitation due to
the change in ownership provisions of the Internal Revenue Code of 1986 and
similar state provisions. The annual limitation will likely result in the
expiration of net operating losses and credits before utilization. Management
believes that there is sufficient uncertainty regarding the realization of
deferred tax assets such that a full valuation allowance is appropriate.
YEARS ENDED DECEMBER 31, 1998 AND 1997
Revenues. Revenues increased to $2.3 million for the year ended December
31, 1998 compared to $394,935 for 1997. The increase was primarily derived from
revenues from collaboration agreements with Johnson & Johnson, Merck and Warner
Lambert and from work performed under the DARPA grant awarded to us in September
1998.
Research and Development Expenses. Research and development expenses
totaled $3.9 million for the year ended December 31, 1998 compared to $1.5
million for 1997. The increase was primarily attributable to
27
<PAGE> 30
increased costs associated with the collaboration agreements as well as
additional costs associated with the DARPA project.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses totaled $1.8 million for the year ended December 31,
1998 compared to $1.3 million for 1997. The increase was primarily due to
increased personnel and facility costs to support our growth, increased legal
expenses associated with intellectual property and increased corporate expenses
associated with business development.
Amortization of Deferred Compensation. We recorded deferred compensation of
$259,344 and amortization of deferred compensation of $71,242 for the year ended
December 31, 1998. For the year ended December 31, 1997, we recorded no deferred
compensation or amortization of deferred compensation.
Interest Income (Expense), Net. Interest expense for the year ended
December 31, 1998 increased to $43,944 from $37,950 in 1997 due primarily to the
interest expense associated with our equipment financing line of credit.
Interest and other income for the year ended December 31, 1998 increased to
$58,555 from $25,309 in 1997. The increase was due to higher average cash
balances in 1998.
Provision for Income Taxes. We incurred net operating losses for the year
ended December 31, 1998, and consequently we did not pay any federal, state or
foreign income taxes. As of December 31, 1998, we had federal and state net
operating loss carryforwards of $6.2 million. We also had federal research and
development tax credit carryforwards of approximately $283,000.
LIQUIDITY AND CAPITAL RESOURCES
We have financed our operations from inception primarily from the sale of
common and preferred stock, collaboration agreements and grants, equipment
financing arrangements, a senior term loan and recently from revenues from
initial product sales. Through December 31, 1999, we had received proceeds of
$13.0 million from the issuances of equity securities and $6.4 million from
product sales, collaboration agreements and grants. In addition, we received
$5.1 million from debt financings.
As of December 31, 1999, we had cash and cash equivalents of $1.3 million
and borrowing availability of $2.8 million under an equipment financing
arrangement. Cash used in operating activities increased to $7.2 million for
1999 compared to $4.3 million in 1998. The increase was primarily due to
increased losses associated with the expansion of the business partially offset
by revenues from product sales and collaboration agreements and grants.
Capital expenditures for property and equipment were $205,421, $1.4 million
and $1.1 million in 1997, 1998 and 1999, respectively. We expect to continue to
make significant investments in the purchase of property and equipment to
support our expanding operations.
We received $6.1 million and $9.2 million from financing activities in 1998
and 1999, respectively, which consisted principally of net proceeds of $10.2
million from the sale of preferred stock and $5.6 million from proceeds from
debt financings. In September 1998, we entered into a $1.5 million non-revolving
equipment financing line of credit. At December 31, 1999, we had borrowed
approximately $1.5 million under the line of credit and, net of repayments,
approximately $1.2 million was outstanding with interest rates at 12.7% to
12.9%. In June 1999, we entered into a $1.5 million senior term loan payable in
thirty equal monthly installments commencing after a six-month interest-only
period. The term loan is secured by our assets including all of our intellectual
property but excluding $5.0 million in equipment acquired under separate
equipment financing facilities. Upon the closing of this offering, the liens on
our intellectual property will be released. At December 31, 1999, $1.5 million
was outstanding under the term loan at an interest rate of 12.5%. In July 1999,
we entered into a $3.0 million non-revolving equipment financing facility. At
December 31, 1999, we had borrowed approximately $227,000 under that facility
with interest rates at 11.0% to 12.0%. As of December 31, 1999, we had
approximately $52,000 in capitalized lease obligations outstanding.
28
<PAGE> 31
On February 23, 2000, we issued Series B preferred stock for gross proceeds
of $6.5 million. In addition, $1.8 million of demand notes, plus accrued
interest, converted by their original terms and conditions into Series B
preferred stock.
On February 3, 2000, we entered into a development, manufacturing and
supply agreement with Zeiss which supercedes an agreement we entered into in
April 1998. Additionally, we have capital expenditure commitments to Zeiss of
$1.2 million during 2000. In connection with this agreement, we agreed to
reimburse Zeiss for an additional $2.0 million for development costs incurred by
Zeiss through December 31, 1999. These amounts are to be repaid during 2000 and
2001 in equal installments of $1.0 million.
Our capital requirements depend on numerous factors, including the status
of our product development and commercialization efforts, the amount of proceeds
actually raised in this offering, the amount of cash generated by our
operations, competitive factors, sales and marketing activities, changes in, or
termination of, existing licensing arrangements and our need for manufacturing
capacity. We expect to devote substantial capital resources to continue our
research and development efforts, to expand our support and product development
activities and for other general corporate activities. We believe that the net
proceeds of this offering, together with existing cash and marketable
securities, borrowings under equipment financing arrangements and anticipated
cash generated from product sales, will be sufficient to support our operations
through 2001. We could require additional financing in the future which may not
be available when needed or under favorable terms and conditions. Our failure to
raise capital when needed may harm our business and operating results. To the
extent that we raise additional capital by issuing equity securities,
stockholders will experience dilution.
IMPACT OF INFLATION
The effect of inflation and changing prices on our operations was not
significant during the periods presented.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement No.
133 (SFAS 133), "Accounting for Derivative Instruments and Hedging Activities,"
which provides a comprehensive and consistent standard for the recognition and
measurement of derivatives and hedging activities. Under the statement, every
derivative is recorded in the balance sheet as either an asset or a liability
measured at its fair value. The statement requires that changes in the fair
value of a derivative be recognized currently in earnings unless specific hedge
accounting criteria are met. SFAS 133 is effective for fiscal years beginning
after June 15, 2000 and is not anticipated to have a material impact on our
results of operations or financial condition.
DISCLOSURE ABOUT MARKET RISK
INTEREST RATE RISK
We currently maintain an investment portfolio of primarily money market
investments and certificates of deposits with maturities of less than 90 days.
The securities in our investment portfolio are not leveraged and, due to their
short-term nature, are subject to minimal interest rate risk. Therefore, we
currently do not hedge interest rate exposure. Due to the short term maturities
of these investments, we do not believe that an increase in market rates would
have any significant negative impact on the realized value of our investment
portfolio. However, an increase in interest rates may negatively impact the
interest expense on undrawn equipment financing.
FOREIGN CURRENCY RATE FLUCTUATIONS
Our commitments to Zeiss described above are denominated in Deutsche Marks.
Also, under our agreement with Zeiss, the ArrayScan Kinetics Workstation,
ArrayScan Kinetics Reader and Zeiss' Ultra High Throughput System will be sold
to us at a transfer price denominated in Deutsche Marks. This will create an
29
<PAGE> 32
exposure to foreign currency rate fluctuations. Any foreign currency revenues
and expenses are translated using monthly average exchange rates prevailing
during the year and any transaction gains and losses are included in net income.
We may use hedging instruments including forward contracts to minimize any
foreign currency rate fluctuation exposure. We cannot assure you that any
hedging transaction will adequately protect us against currency rate
fluctuations or that these transactions will not result in losses to us.
YEAR 2000 COMPLIANCE
The Year 2000 issue refers generally to the problems that some software may
have in distinguishing whether "00" means 1900 or 2000 and the potential for the
creation of erroneous data or systems failures which could disrupt normal
business activities. Due to the fact that we are a relatively new company and
have planned for Year 2000 effects, we have not incurred material expenses
associated with Year 2000 compliance.
Many of our products contain our software or third party software programs.
Our software programs were designed to be Year 2000 compliant and as of March 3,
2000, we have not experienced any material difficulties. Nevertheless, we do use
and rely on a wide variety of information technologies, computer systems and
scientific and manufacturing equipment containing computer-related components
(such as programmable logic controllers and other embedded systems). As a
result, time-sensitive functions of those software programs and equipment may
yet misinterpret dates after January 1, 2000 to refer to the twentieth century
rather than the twenty-first century. Although we do not anticipate any material
problems, we could suffer system or equipment shutdowns, failures or
miscalculations. Such conditions could result in inaccuracies in computer output
or disruptions of operations, including, among other things, inaccurate
processing of financial information and/or temporary inabilities to process
transactions, manufacture products, or engage in similar normal business
activities.
In addition, although all of our significant suppliers and our significant
service providers indicated that they were or expected to be Year 2000 compliant
by December 31, 1999, and although as of the date of this prospectus we are not
aware of any material Year 2000 compliance problems with these third parties'
systems, we cannot be certain that the representations of these third parties
were accurate or that their systems are or will continue to be Year 2000
compliant. If any of our significant suppliers or significant service providers
experience Year 2000 compliance problems and we are unable to replace them with
alternate sources, our business would be harmed.
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BUSINESS
OVERVIEW
We are pioneering the emerging field of cellomics in an effort to extend
the recent advances in genomics, the study of genes, and proteomics, the study
of proteins. Cellomics is the study of all the molecules comprising a cell, as
well as their interactions in space and over time, that bring about cellular
functions. It is at the level of the cell where normal genes and proteins
coordinate and perform life functions and where abnormal genes and proteins
cause disease. We design our technologies and products to make drug discovery,
basic biomedical research and clinical diagnostics, more productive and cost
effective by providing in-depth knowledge about cells and cellular functions. We
are developing and commercializing an integrated product platform, including:
- high content screening products to measure the physical position and
activity over time of cells and cellular components;
- informatics products to extract information about cells, cellular
components and their functions; and
- cellular bioinformatics products to create new knowledge about cells.
We began commercializing our high content screening and informatics
products to the drug discovery market in late 1999. The pharmaceutical industry
spent more than $24 billion in 1999 for products intended to improve the
productivity of the drug discovery process. We developed our initial products
through early technology access programs with Johnson & Johnson, Merck & Co.,
Inc. and Warner-Lambert Company. We are also developing a number of high content
screening systems in collaboration with Zeiss. We are also developing our
minaturized high content screening platform, called the CellChip System. In
addition, we are designing our Cellomics Knowledgebase to capture proprietary
and public domain cellular information, thereby creating a "virtual cell." We
believe that, in the same way the introduction of automated DNA sequencers and
searchable genomics databases created a substantial market opportunity for
genomics companies, the development of high content screening and our searchable
Cellomics Knowledgebase has the potential to create a substantial market
opportunity for us.
INDUSTRY BACKGROUND
THE CELL
The cell is the fundamental unit of life and the building block of all
living organisms. The components of cells, such as genes and proteins, are
incapable of independently reproducing themselves or responding to changes in
their environment, and are not, themselves, alive. Thus, the cell is the most
basic biological unit with these abilities. In the adult human, there are
trillions of cells of approximately 200 types, each with a different function,
but all with similar structures and internal workings. Every cell contains a
copy of an organism's genetic blueprint, as well as the machinery required to
turn the blueprint into proteins. These proteins perform the majority of
cellular functions. In addition to proteins, cells also contain a variety of
other molecules that are also vital for cellular function.
All diseases, such as cancer and heart disease, are caused by the breakdown
of normal cellular function as a result of abnormalities in genes and the
expression of proteins. Research aimed at understanding how cells work may lead
to the development of new drugs or therapies addressing disease at the cellular
level. In addition, this understanding may lead to advances in other areas of
life sciences including basic biomedical research, diagnostics and agriculture
markets. A detailed knowledge of the workings of the cell builds on our present
understanding of genomics and proteomics.
GENOMICS AND PROTEOMICS
Genomics is the study of deoxyribonucleic acid, or DNA, and messenger
ribonucleic acid, or mRNA, which are the biomolecules that contain and convey
the information required for protein production and for all cellular functions.
DNA contains the genetic blueprint of all organisms. The complete sequence of an
organism's DNA is called the genome. Interest in understanding the relationships
between genes and disease
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has generated a worldwide effort to identify and sequence genes, leading to the
identification of new targets for drug discovery and gene therapy.
Proteomics is the study of the structures, chemical modifications and
functions of an organism's complete collection of proteins, the major targets
for drug discovery. Proteins are the molecular machines of the cell that are
responsible for performing the majority of cellular functions. The complete set
of proteins within an organism is called the proteome. Interest in understanding
the relationships between protein functions and disease has generated a global
initiative to define the structure and function of every protein. This task is
challenging because any given cell type expresses only ten to twenty percent of
all genes. Furthermore, selected proteins are present only during a portion of
the life cycle of a cell.
Both genomics and proteomics provide important components of understanding
cellular function and disease, but they do not provide a complete understanding
of cellular function. Understanding how different genes and proteins act in
tandem to perform functions at the cellular level is critical to improving
productivity in drug discovery and other life sciences applications. It is at
the cellular level that drugs affect target proteins involved in disease and
where novel therapies should be directed.
THE EMERGING FIELD OF CELLOMICS
Cellomics is the study of all the molecules comprising a cell, as well as a
complete description of their spatial and temporal distributions and activities
that produce cellular function. The cellome is the complete collection of an
organism's cells and cellular components, including genes and proteins. Unlike
genomics and proteomics, cellomics is directed towards developing a complete
description of all the characteristics, actions and interactions of cellular
components. We believe that more fully understanding cellular function through
cellomics will enable the more efficient, productive and cost-effective
discovery and development of novel drugs and therapies, and improve the
diagnosis and management of disease. The following diagram illustrates the cell
as a functional machine which includes a number of components that are
responsible for performing cellular functions:
THE GENE-TO-CELL CONTINUUM
[GRAPHIC SHOWING HOW DNA, RNA AND PROTEINS ARE PART OF THE CELLULAR FUNCTIONAL
MACHINE]
THE CURRENT DRUG DISCOVERY PROCESS AND ITS LIMITATIONS
Drug development has historically been fueled by growing research and
development investments by the pharmaceutical and biotechnology industries. Drug
discovery and development is an expensive, time-consuming and risky process. The
Pharmaceutical Research and Manufacturing Association estimates that
pharmaceutical companies spent approximately $24 billion, or 20% of sales, in
research and development during 1999. This represented a 14.1% increase from
1998. Of the potentially hundreds of thousands of compounds screened in a drug
discovery program, less than 1 in 1,000 will become new drug candidates and
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only about 20% of these will complete human clinical trials and receive
regulatory approval. Only about 30% of drugs that are commercialized ever
recover their development costs. Pharmaceutical and biotechnology companies have
realized that, to stay competitive and meet their goals for growth, they will
have to significantly increase the number of new drugs introduced each year.
Because government agencies rigidly define and highly regulate the pre-clinical
and clinical trial phases of the development of new drugs, companies can impose
little control over the costs of these phases. As a result, drug companies are
increasing their focus on the drug discovery stage to enhance productivity and
reduce costs.
The drug discovery process is composed of four steps: target
identification, target validation, primary screening and lead optimization.
- Target identification characterizes the role a particular protein plays
in cellular function in order to determine whether it might be a target
for drug discovery. While target identification has historically been a
bottleneck in drug discovery, this step has been minimized by the
dramatic increase in gene discovery, largely due to the emergence of
genomics technology.
- Target validation demonstrates that affecting the function of a
particular target has a potential effect on the course of a disease.
Traditional target validation depends primarily upon manual, benchtop
biological research, which is expensive and slow. Target validation has
not kept pace with increased productivity in target identification.
- Primary screening tests a large collection of chemical compounds, or
libraries, against validated targets to find "hits" or members of the
library that affect the function of a particular target. During primary
screening, hundreds of thousands of compounds may be screened for a
single, simple measure of a target's biological activity. Over the last
decade, automated high throughput and ultra high throughput screening
systems have been introduced. These systems are capable of performing
over 100,000 assays per day.
- Lead optimization is the process of sorting through hits that emerge from
primary screening to find compounds likely to have appropriate drug
properties, including efficacy and low toxicity. Because of the improved
efficiency in primary screening, lead optimization is now the major
bottleneck in the drug discovery process. Traditionally, lead
optimization has been based on manual, benchtop biological research that
includes secondary screens, studies of the relationship between the
structure and activity of compounds and cellular toxicity assays. This
process is slow and expensive, usually employing single measurements of
biological activity without capturing both time and space data from
cells. This time and space data, which we call high content data, is
important to the understanding of complex cell functions. In the absence
of assay systems which provide high content data on cell functions, the
pharmaceutical and biotechnology industries have historically been
focused on a narrow range of targets, primarily the receptors on the
surface of cells. However, cell functions involve not only the number and
distribution of specific receptors localized on the surface of cells, but
also the distribution and activity of other molecules on and within the
cells. For example, the cycle of internalization of receptors to the
inside of cells and back to the surface that regulates the responsiveness
of many cells, involves numerous proteins in different locations within
cells and exhibiting different activities. The ability to measure the
time and space activities of these proteins in relationship to specific
cell functions, such as receptor-based stimulation, is an important
challenge for lead optimization.
Pharmaceutical and biotechnology companies are striving to improve
productivity in all four steps of the drug discovery process. To date,
substantial improvements have been made at the target identification and the
primary screening steps through significant investments in genomics and high
throughput screening technologies. We believe that the key to relieving the
bottleneck at lead optimization will be the development of products and
technologies that produce high content data, information and ultimately
knowledge of cellular functions. We also believe that the application of
cellomics will make target validation more efficient. In addition, we believe
that the large amount of time and space data that will be produced in high
content, cell-based assays will require automation of the process from the level
of instrumentation, management and
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mining of data, to the identification of lead compounds based on knowledge of
the role of targets in cellular functions.
OUR SOLUTION
We have pioneered an approach to the field of cellomics in an effort to
increase the productivity of the drug discovery process. Our product platform is
designed as an integrated solution to address the current bottlenecks in drug
discovery. We believe that our products and technologies will provide the
pharmaceutical and biotechnology industries with extensive information about
cellular structure and function, in an automated fashion. Our platform
seamlessly links the generation of data, the extraction of information and the
creation of knowledge of the workings of the cell. We believe our products will
allow researchers to narrow the focus of their discovery effort to more
accurately identify and select compounds that have a higher chance of
successfully completing the drug development process. Our solution involves the
following elements:
Create High Content Screening Technologies and Products. We have developed
a high content screening technology which consists of instrumentation, reagents,
protocols, and data and information management software. Together, this
integrated platform provides high content biological information about time,
space and activity of cells and cellular components, as it relates to a drug
candidate's physiological impact on specific cellular targets within, on and
between cells. Our high content screening platform is designed to provide
insights into the potential efficacy and toxicity of a drug candidate on cells
prior to initiating expensive pre-clinical testing and human clinical trials, in
order to enable pharmaceutical companies to increase productivity. We believe
that we are the first company to develop and deliver high content screening
products to the pharmaceutical industry. For example, we have developed a high
content screen that measures the internalization of specific receptors from the
surface of the cell and defines their dynamic re-distribution within the cell,
including their return to the cell surface. We believe our products and
technologies will enable our customers to define the specific role that proteins
play in cell functions such as receptor cycling. Furthermore, we believe our
high content screening platform has broad applications across many segments of
the life sciences industry.
We believe the use of high content screening during lead optimization will
significantly enhance the process of further qualifying hits resulting from high
throughput screening. High throughput screening products for cell-based assays
presently used in the primary screening step of drug discovery cannot produce
time and space activity information required for high content screening. Our
high content screening products directly measure the time and space activity of
fluorescently labeled targets and other cellular components on, in and even
between cells.
Automate High Content Screening. Our high content screening products and
technologies are designed to automate the instrumentation, assays and
information management tools required to analyze cells. Just as the
proliferation of automated DNA sequencing instruments led to a dramatic increase
in the generation of vast amounts of genomic data and information, we believe
that automation of high content screening systems will lead to a dramatic
increase in cell-based data and information, thereby improving the productivity
of the drug discovery process. Until now, most cell analysis methods used manual
experimentation that did not keep pace with the automation of primary screening.
In addition, due to the large volume of data generated in high throughput
screening and high content screening, we believe it is essential to use an
automated system to identify the compounds that have the most desirable effects
on targets within cells. Our products are designed to automatically link
together all of the results from the discovery process with the compounds,
biological targets and cellular processes that are part of the screen. We
believe this enables all of the higher level linkages to chemical informatics
systems and bioinformatics tools that will permit the creation of new knowledge.
Access, Manage and Mine Data for Decision Support. We believe that we are
the leader in developing software tools and products to archive data from high
content screens, perform data analysis, manage large numbers of assays in the
total screening process and perform data mining on large data sets. The
effective management and use of the massive volume of data being generated by
both high throughput screening and by our high content screening systems are
among the life sciences industry's most pressing issues. In
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addition, to fully exploit the potential of our high content screening systems,
researchers need innovative informatics tools to manage, analyze and mine the
large volume of data being generated. We are designing our informatics products
to provide an integrated informatics solution. To this end, our products are
designed to offer a unique, user-friendly visualization environment, a robust
object-oriented architecture built on top of industry standard database tools,
powerful data and pattern analysis tools, and open interfaces for easy data
exchange with a customer's existing information systems. In addition, our
informatics products are designed to take advantage of a web browser-based
interface that enables seamless access and integration of proprietary and public
domain databases, including genomics, proteomics and the Cellomics
Knowledgebase. We believe our informatics tools provide a platform for
developing a more effective understanding of the cell, and increasing
productivity in the drug discovery process.
Create a Database which Leads to a Better Understanding of the Cellome. We
believe that we are a leader in developing a searchable database of the
molecular components and their interactions that occur in the cell. We are
developing the Cellomics Knowledgebase, a proprietary, web-based, searchable
database of the biochemical and molecular interactions that produce normal and
abnormal cell functions. Our Cellomics Knowledgebase consists of a densely
populated database of public domain "prior knowledge" in cell biology that can
be abstracted using our proprietary search software, and proprietary knowledge
generated from our high content screening systems.
We are working to create a digital virtual cell through the integration of
the Cellomics Knowledgebase with the continuum of our data-generating and
information-extracting products. Our growing Cellomics Knowledgebase is designed
to become a powerful predictive tool to permit better decisions on what targets
to screen, what cell functions to measure and what types of chemical compounds
to screen, as well as define potentially new cellular pathways. We believe the
Cellomics Knowledgebase will become to the cellome what the genomics databases
have become to the genome.
STRATEGY
Our mission is to lead the emerging field of cellomics in order to extend
the power of genomics and proteomics by defining the cellular functions of genes
and proteins. We believe the field of cellomics will make life sciences
research, including drug discovery, more productive and cost effective. Key
elements of our strategy are as follows:
Establish High Content Screening as the Standard for Drug Discovery. We
are currently marketing our high content screening systems primarily to the
pharmaceutical and biotechnology industries. It is our strategy to make high
content screening an indispensable tool for drug discovery by broadly
penetrating pharmaceutical, biotechnology and other research laboratories
engaged in drug discovery. We have designed our instruments, assays and
informatics products to meet the immediate needs and current standards of this
market segment. We believe this segment provides the most immediate opportunity
due to the large investment in research and development and the urgent need to
improve the productivity of drug discovery.
Broaden Our Assay Menu. We are developing a series of new classes of high
content screening assays, including both the software modules and reagent kits,
that will be used on our high content screening platforms. Each major cellular
process will require a new class of assay including its own software module and
will utilize multiple reagent kits. For example, the receptor internalization
class of assay includes many different types of receptors, each requiring their
own kit. We believe there are dozens of classes of assays each requiring
multiple reagent kits that have the potential to generate follow-on sales.
Expand into New Market Segments. We intend to use our proprietary assay
technologies to expand high content screening into multiple markets. These
markets include target validation in drug discovery, basic biomedical research,
clinical diagnostics and agriculture. We also intend to use our high content
screening platform to study the physiological impact of drugs on cells
collected, or derived, from humans with individual genetic make-ups. In
addition, we believe this approach, which we call PharmacoCellomics Profiling,
will allow for pre-testing the response of a patient's cells to an accepted
protocol or drug candidate, and better focus clinical trials on the optimal
population of patients.
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Migrate to the CellChip System. We are currently developing the CellChip
System. We believe the CellChip System is a revolutionary platform,
incorporating the precision of high content screening into a miniaturized, more
versatile product. We are designing the CellChip System to increase the
productivity of the drug discovery process by combining high throughput
screening and high content screening onto the same miniaturized platform. We
believe that our CellChip System will permit pre-packaged, complex cell assays
to be performed simply, quickly and at less cost per assay than presently
performed using microplates and will accelerate the use of cell-based assays in
all fields of life sciences.
Create the Leading Searchable Repository of Cellomics Knowledge. We are
striving to create the leading searchable repository of knowledge of the cellome
by populating our Cellomics Knowledgebase with high content screening
information and information obtained from the public domain. We intend to
continually edit and refine our Cellomics Knowledgebase through reviews by a
panel of scientists in the field of cell biology. We believe our Cellomics
Knowledgebase will add significant value to researchers' understanding of the
cellome, thereby increasing the productivity of the drug discovery process. We
intend to commercialize the Cellomics Knowledgebase through the sale of
subscriptions.
Combine Our Strengths with the Strengths of Strategic Corporate
Partners. We intend to continue to enter into strategic partnerships to combine
our core expertise in cell and molecular biology, imaging science, information
management software, cellular, bioinformatics and cell patterning, with the
strengths of corporate partners. Through these collaborations, we intend to
access complementary technologies and strengthen our commercialization
capabilities. We believe that strategic relationships with partners who have
strong, existing market positions and development track records will speed
market introduction, maintain high barriers to entry and reduce our research and
development risk and capital outlay. For example, we have established a
strategic relationship with Zeiss relating to our ArrayScan products and Zeiss'
Ultra High Throughput Screening System. In addition, we have entered into a
collaboration with ACLARA to incorporate their microfluidics technologies into
our CellChip System. We also have exclusively licensed some key fluorescence
technologies from Molecular Probes to incorporate into our reagent kits for the
high content screening market.
OUR PRODUCTS
Our products initially target a market segment consisting of approximately
140 pharmaceutical companies, nearly 2,000 biotechnology companies and over
1,000 academic and government laboratories. We believe our products have
potential application in other life sciences markets. Our products are designed
to seamlessly integrate the generation of data to the extraction of information,
and ultimately create cellular knowledge. We generate cellular data using our
proprietary portfolio of instruments, assays and reagents. The data generated is
then stored, managed, analyzed and mined using our proprietary informatics
products. Our cellular bioinformatics products, coupled with internally and
externally generated information, are designed to build a virtual cell which
maps the complex network of cellular components and their interactions. Our
knowledge products aim to systematize, in a searchable, electronic format, our
continuously evolving understanding of cellular biology. Our products and
products in development are highlighted on the following page.
HIGH CONTENT SCREENING PRODUCTS TO GENERATE DATA
ArrayScan II. The ArrayScan II is an automated, high content screening
instrument comprised of optics, automation hardware and software that scans
standard microplates and analyzes fields of cells based on multi-color
fluorescence imaging. Our ArrayScan II analyzes drug candidate interactions
within, on and between cells with multi-color fluorescence assays measured at a
single point in time. The system contains microplate scanning hardware,
fluorescence excitation and emission optics, a solid state camera, a
Pentium-based PC with powerful software-based analyses, a plate stacker for
automated screens and database management capabilities. The system can control
the temperature, humidity and other environmental parameters for simple live
cell assays. We offer a number of versions of the ArrayScan II which have
different software modules for various levels of assay analysis.
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ArrayScan Kinetics Workstation. We are developing our ArrayScan Kinetics
Workstation to allow researchers to perform complete, automated high content
screening on multiple plates of living cells. We have working prototypes of our
ArrayScan Kinetics Workstation. The ArrayScan Kinetics Workstation is designed
to operate under controlled growth conditions with random access compound
delivery where time, or kinetic, information is critical. Random access compound
delivery is designed to enable researchers to test the effects of drug
candidates in cells at multiple points in time and under various growth
conditions to assess interaction between drugs and cells or cell components,
which may be useful in understanding toxicity and efficacy. The proprietary
workstation includes many of the features of the ArrayScan II, as well as an
advanced plate reader, 30-plate incubator stacker, on-board fluidic addition,
compound storage, and automatic plate handling. Zeiss manufactures our ArrayScan
Kinetics Workstation to our specifications under the terms of our collaboration.
The ArrayScan Kinetics Workstation is designed to operate as a standalone
screening workstation or in connection with Zeiss' Ultra High Throughput
Screening System.
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OUR PRODUCTS AND PRODUCTS IN DEVELOPMENT
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRODUCT CATEGORIES PRODUCT DESCRIPTION STATUS
- ------------------------ ---------------------------- --------------------------------- --------------
<S> <C> <C> <C>
HIGH CONTENT SCREENING ArrayScan II Automated, high content screening Commercialized
PRODUCTS TO GENERATE instrument and software for
DATA single point-in-time assays
ArrayScan Kinetics Automated, fully integrated high In development
Workstation content screening system with
reader, fluidic addition station,
and environmental control for
multiple point-in-time assays
ArrayScan Kinetics Reader Automated high content screening In development
instrument and software designed
for use with existing high
throughput screening automation
systems, to allow them to perform
multiple point-in-time-assays
Assay Software Modules and Software modules and reagent kits Commercialized
HitKit Reagents optimized for high content
screening on our ArrayScan
systems
Custom Assay Development Assay development services for Commercialized
customers
CellChip System Miniaturized cell analysis In development
platform utilizing microfluidics
technology in collaboration with
ACLARA
INFORMATICS PRODUCTS TO Cellomics Store Data management software for Commercialized
EXTRACT INFORMATION managing, archiving and viewing
massive volumes of cell data
Cellomics Screen Process management and data In development
analysis software intended to
allow hits and leads to be easily
identified and verified
Cellomics Discover Data visualization and mining In development
software incorporating a web
browser-based interface and
seamless drill-down to examine
data in Cellomics Screen and
Cellomics Store, as well as
retrieve data from both
proprietary and public databases
CELLULAR BIOINFORMATICS Cellomics Knowledgebase Web-based, searchable database of In development
PRODUCTS TO CREATE cellular biochemical and
KNOWLEDGE molecular interactions designed
to create a digital virtual cell
PharmacoCellomics Profiling Searchable database that contains In development
individual patient's cell
responses to lead compounds and
complements pharmacogenomics to
personalize drug discovery
</TABLE>
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ArrayScan Kinetics Reader. We have designed our ArrayScan Kinetics Reader
to allow researchers to integrate our high content screening system into the
existing installed base of high throughput screening systems. We have working
prototypes of our ArrayScan Kinetics Reader. The proprietary ArrayScan Kinetics
Reader includes proprietary optics, hardware, environmental controls and
software that have been optimized for kinetic measurements. As part of our
collaboration with Zeiss, Zeiss is also responsible for manufacturing our
ArrayScan Kinetics Reader according to our specifications.
Assay Software Modules and HitKit Reagents. We have a growing portfolio of
proprietary classes of assays, including software modules and reagent kits
optimized for our ArrayScan systems. Our assays are designed to be used to
monitor drug effects in a variety of therapeutic settings such as cancer,
diabetes and infectious disease, as well as toxicity testing at the cellular
level. The process of developing a new assay includes the selection of cell
types, targets, fluorescence-based reagents, protocols and software programs.
The complete kit incorporates the necessary reagents and protocols to run the
assay. We are developing new Assay Software Modules for the new classes of
assays being developed. We anticipate selling the Assay Software Modules as
software plug-ins to our ArrayScan systems.
Our HitKits include cells, multi-color fluorescence-based reagents and
other consumables such as validated microplates, in order to understand a drug
candidate's effect on a cell. Our first commercialized HitKits are designed for
transcription factor activation, cell viability and receptor internalization. We
are expanding our portfolio of assays to include, among others:
<TABLE>
<S> <C>
- - cytotoxicity assays - cell viability
- - apoptosis - cell cycle indicators
- - kinase enzyme activation - cell movements
- - neurite outgrowth - protease enzyme activities
</TABLE>
Custom Assay Development. We provide screen development services on a
contractual basis to support customers in the design, development and
implementation of high content screening assays that are not already offered as
finished HitKits and software modules. We offer custom assays through screen
development support services, including the development of specific
fluorescence-based reagents, software tools for analysis, and sample preparation
and screening protocols.
CellChip System. We are developing our CellChip System as a miniaturized,
next-generation platform for combining high content screening and high
throughput screening. Our CellChip System combines microarrays of cells with
microfluidics, which we believe will represent a significant advance over the
industry standard microplates. We are collaborating with ACLARA to develop our
CellChip System by incorporating their microfluidic technologies. Our CellChip
System utilizes small wafers of glass or plastic that are patterned with
chemical and molecular domains that organize specific cells in microarrays. Our
CellChip System is being designed to permit more rapid, sophisticated and
cost-effective cell analyses than presently permitted by the current microplate
format.
INFORMATICS PRODUCTS TO EXTRACT INFORMATION
Cellomics Store. We are currently marketing Cellomics Store, a software
package that manages and archives the large volume of cell data and images that
can be generated during screening. Cellomics Store allows for the visualization
of biologically rich data generated from our ArrayScan instrument line, as well
as existing high throughput screening instruments.
Cellomics Screen. We are developing Cellomics Screen, a software package
designed to manage the screening process and data analysis. Cellomics Screen
analyzes screening runs, allowing hits and leads to be easily identified and
verified. We are currently beta-testing this product.
Cellomics Discover. We are developing Cellomics Discover, a software
package that includes a web browser-based interface. Cellomics Discover provides
data visualization and mining capabilities, and information retrieval from both
proprietary and public databases. Cellomics Discover also provides seamless
drill-down to examine data in Cellomics Screen and Cellomics Store. We are
designing Cellomics Discover to automate quality assessment of screening data,
and correlate high content screening and high throughput
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screening data with data from other databases such as genomics, proteomics and
our Cellomics Knowledgebase.
CELLULAR BIOINFORMATICS PRODUCTS TO CREATE KNOWLEDGE
Cellomics Knowledgebase. We are developing our Cellomics Knowledgebase as a
web browser-based product designed to facilitate the discovery of cellular
knowledge about new targets, the interaction of targets within cellular pathways
and cellular functions. Our Cellomics Knowledgebase is intended to be for the
cell what searchable genomics databases have been with respect to the discovery
of new genes from DNA sequences. The core of the Cellomics Knowledgebase is the
biochemical and molecular wiring diagram of cells, which is the complex,
interactive network of cellular components. We believe queries of the Cellomics
Knowledgebase will allow new knowledge to be discovered concerning molecular
interactions, pathway connections, cell functions and relationships among cell
components across cell types and species. The complex results of queries can be
displayed using our virtual cell visualization tool. In addition, proprietary
databases derived from the Cellomics Knowledgebase are intended to contain
profiling information on the impact of classes of compounds on targets,
pathways, cell functions and cytotoxicity. The Cellomics Knowledgebase is also
intended to integrate information from genomics, proteomics and gene expression
profiles. The first volume of the Cellomics Knowledgebase is designed to
organize around human cell types, but is expandable and searchable across
species, cell functions, cell pathways and specific proteins and other cellular
components. The Cellomics Knowledgebase is designed to systematize, in a
searchable, electronic format, our continuously evolving understanding of
cellular biology, encompassing not only cellular components, but also their
complex interactions and interdependencies.
PharmacoCellomics Profiling. We are developing a searchable database that
will combine our high content screening products, informatics software and
Cellomics Knowledgebase, to create a total platform to profile cells of specific
patients. PharmacoCellomics complements pharmacogenomics, which is the profiling
of the human population to define genetic subsets of the population that would
be likely candidates for specific drugs. Our PharmacoCellomics product will
contain the individual patient's cell responses to lead compounds, which we
believe will significantly increase the potential of personalizing drug
discovery. The first area we are exploring is cancer, where patient tumor cells
can be accessed and used in high content screening to define the effect of
experimental compounds.
PRODUCTS WE MARKET FOR ZEISS
As part of our strategic relationship with Zeiss, we have entered into an
agreement to sell and market their Ultra High Throughput Screening System in
North America. Zeiss' Ultra High Throughput Screening System is a fully
automated platform capable of screening over 100,000 compounds per day in the
primary screening step of drug discovery. The system optimizes all process steps
using advanced technologies for optical detection and automation to achieve high
speed, flexibility and reliability. The system is modular and can be rapidly
reconfigured for distinct types of screens. Our ArrayScan Kinetics Workstation
can be directly coupled to Zeiss' system to shorten the drug discovery process
by running primary cell-based screens and lead optimization screens in series.
SALES AND MARKETING
We are initially selling our products to pharmaceutical and biotechnology
companies. We believe our products are applicable to a broader range of life
sciences markets. We sell our products in North America and Europe through a
direct sales force experienced in selling capital equipment, reagents and
development contracts to the pharmaceutical, biotechnology and other life
sciences markets. The pre-sale and post-sale processes are supported by an
executive business development team and a scientific and applications support
staff. In addition we sell access to our future products through technology
access programs. In addition to our own products, we provide exclusive
marketing, sales, service and support for Zeiss' Ultra High Throughput Screening
System in North America.
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We identify potential customers through a comprehensive marketing program
coupled with personal lead development by our field sales force, executive
management and scientists, as well as our scientific advisors. Led by an
experienced marketing and product management staff, our marketing program
includes direct mail programs, advertisements in market-specific journals,
production of detailed product and technology literature, trade show exhibits,
speaking engagements at scientific meetings, seminars, public relations and
internet-based website marketing.
CORPORATE COLLABORATIONS AND TECHNOLOGY ACCESS PROGRAMS
Carl Zeiss Jena, GmbH. In April 1998, we formed a collaboration with Zeiss,
one of our early stockholders, relating to the development, manufacture and
supply of the ArrayScan Kinetics Reader and the ArrayScan Kinetics Workstation.
In February 2000, we entered into a new agreement with Zeiss that supersedes our
1998 agreement. Under the new agreement, Zeiss is responsible for the exclusive
manufacture of our ArrayScan Kinetics Workstation and ArrayScan Kinetics Reader.
Under the terms of our agreement, Zeiss will manufacture these products to our
specifications. The arrangement also provides that both we and Zeiss
cooperatively develop software interfaces designed to make Zeiss' Ultra High
Throughput Screening System compatible with our data analysis and management
software. Under the terms of the agreement, we are responsible for marketing,
selling and servicing our products. The agreement sets forth the prices we will
pay Zeiss for products they manufacture subject to renegotiation every two
years. The agreement expires in January 2005, subject to early termination by
either party after January 2002. In connection with entering into the February
2000 agreement, we agreed to reimburse Zeiss for certain development costs
incurred through December 1999. We have agreed to pay Zeiss development costs
under the terms of the February 2000 agreement.
In February 2000, we also entered into a sales and marketing agreement with
Zeiss. Under the terms of the agreement, we are responsible for the exclusive
sale and marketing of Zeiss' Ultra High Throughput Screening System and related
products in North America. We are also responsible for providing shipping,
installation and other support activities, at our expense, for products sold in
North America. During the term of the agreement, we may not sell in North
America any products that compete with Zeiss' Ultra High Throughput Screening
System or other related products developed by Zeiss. In the event that we do not
comply with this provision of the agreement, Zeiss is entitled to terminate our
exclusivity immediately. Under the terms of the agreement, we have agreed to
purchase a minimum number of Zeiss products pursuant to the terms of the
agreement. If we do not fulfill our requirements specified in the agreement,
Zeiss has the right to either terminate our exclusivity or terminate the
agreement in its entirety. We are free, under the terms of the agreement, to
sell the Zeiss products in North America at a sales price we establish. We will
retain all revenues from our sales of Zeiss' products in North America. The
agreement expires in December 2005; however, either party may terminate the
agreement on the occurrence of material breach by the other party or if the
other party comes under control of a competitor of the terminating party.
ACLARA Biosciences, Inc. In October 1999, we entered into an exclusive
collaboration with ACLARA for the development of our CellChip System utilizing
our cell patterning technologies and ACLARA's proprietary microfluidics
technology. During the term of the agreement, we may not seek out another
microfluidics partner and ACLARA may not partner with another entity to build
microarrays of cells using its microfluidics technologies. We have established
development budgets with ACLARA for the first year of the agreement and have
agreed to develop budgets for succeeding years in good faith. In the event that
we receive revenues from early access programs or commercialization of our
products, we will enter into good-faith negotiations to determine division of
those revenues. In the event the CellChip System is commercialized, we are
responsible for manufacturing commercialized CellChip Systems. Further, ACLARA
has agreed to enter into a supply agreement in the event the CellChip System is
ultimately commercialized. Either party may terminate this agreement on the
material breach of the other party. Under some circumstances, licenses that were
granted between the parties during the term of the agreement may survive any
termination of the agreement. Further, each party has the right to license from
the other party additional technology related to the CellChip if requested
within two years of termination.
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<PAGE> 44
Molecular Probes, Inc. In April 1999, we entered into a license and supply
agreement with Molecular Probes under which it licensed to us select proprietary
fluorescence-based reagents on an exclusive worldwide basis for use in high
content screening. We also obtained a non-exclusive worldwide license to sell
these proprietary fluorescence-based reagents for use in ultra high throughput
screening. Under the terms of the agreement, we are required to meet certain
conditions to maintain exclusivity. We will also purchase all of our
requirements for particular fluorescence-based reagents for use in high content
screening and ultra high throughput screening from Molecular Probes, unless
Molecular Probes is unable to meet our requirements. We paid Molecular Probes a
license fee and agreed to pay continuing royalties based on specified annual
sales revenues.
Pharmaceutical Company Collaborations. We enter into technology access
programs through which we give customers early access to our new products, along
with technical support, training and individualized services. Through our
technology access programs, we collaborate with our customers during the product
development process in order to create products that closely meet the needs of
the market. Our technology access programs assist us in focusing our technology
and development efforts on areas that we believe will have the most impact on
the market. To date, Johnson & Johnson, Merck and Warner Lambert have
participated in our technology access programs. Typically, for the term of a
technology access agreement, our customers will have non-exclusive or
limited-time exclusive access to particular products in development.
MANUFACTURING
We currently maintain a manufacturing facility for instrumentation,
software products, and reagent kit production. Our manufacturing of the
ArrayScan II predominantly involves a final assembly and testing activity using
commercially available optical, mechanical and computer components combined with
custom mounting assemblies and proprietary software. The ArrayScan Kinetics
Workstation and ArrayScan Kinetics Reader manufacturing will involve software
integration and testing of the electromechanical and optical system manufactured
for us by Zeiss. We manufacture HitKits in our facility with a combination of
our proprietary reagents and those we have exclusively licensed from Molecular
Probes. We dispense, finish and test our products on site using our processes
and to our specifications. Similarly, we manufacture our informatics and
bioinformatics software products using industry standard procedures.
COMPETITION
The biotechnology and pharmaceutical industries are characterized by
rapidly evolving technology and intense competition. Currently, we compete with
many companies, including major pharmaceutical, chemical and biotechnology
companies that perform drug discovery and development and related tasks using
alternative technologies. We have begun to encounter competition from companies
which offer one or more components of high content screening, including
integrated reagents, kits, applications, instrumentation and informatics. We
expect to encounter intense competition from companies providing conventional
drug discovery and development products based on established technologies and
companies developing their own cellular analysis technologies.
In order to compete against vendors of conventional products, we will need
to demonstrate the advantages of our products and technologies over
well-established alternative products and technologies. Moreover, we will need
to demonstrate the potential economic value of our products relative to these
conventional technologies and products. We will also need to compete effectively
with companies developing their own cellular analysis technologies and products.
Our future success will depend in large part on our ability to establish and
maintain a competitive position in these and future technologies which we may
not be able to do. Rapid technological development may result in our products or
technologies becoming obsolete. Products offered by us could be made obsolete
either by less expensive or more effective products based on similar or other
technologies.
Many of our competitors have or will have greater corporate, financial,
operational, sales and marketing resources, and more experience in research and
development than we have. Moreover, competitors may have greater name
recognition than we do, and may offer discounts as a competitive tactic. We
cannot assure you
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<PAGE> 45
that our competitors will not succeed in developing or marketing technologies or
products that are more effective or commercially attractive than our products or
that would render our technologies and products obsolete. Also, we may not have
the financial resources, technical expertise or marketing, distribution or
support capabilities to compete successfully in the future. Our success will
depend in large part on our ability to maintain a competitive position with our
technologies.
Our competitive position also depends on our ability to:
- attract and retain qualified personnel;
- obtain patent protection or otherwise develop proprietary products or
processes;
- discover new technologies that improve the productivity of the drug
discovery process; and
- secure sufficient capital resources to complete product development and
commercialization processes.
INTELLECTUAL PROPERTY RIGHTS
We seek patent protection on cell-based screening assays and kits, cell
array technologies, reagents, instrumentation, informatics technologies and
bioinformatics. We currently own one issued U.S. patent and one allowed U.S.
patent, and have over 40 U.S. patent applications pending, of which over 30 are
provisional patent applications. In addition, we have patents pending in other
countries and jurisdictions.
Our patents and applications are directed at various technological areas
which we believe are valuable to our business, including:
- a wide variety of cell screening assays;
- fluorescence-based reagents for cell screening;
- cell array platforms;
- microfluidic devices;
- informatics software;
- bioinformatics software; and
- cell screening instrumentation, devices, and operating software.
We hold one exclusive license covering nine issued U.S. patents for
fluorescence-based reagents for high content screening, as well as two
non-exclusive licenses for such reagents.
We also rely upon trade secrets, know-how, trademarks, copyright
protection, and continuing technological and licensing opportunities to develop
and maintain our competitive position. Our practice is to require our employees,
consultants, and outside scientific collaborators and consultants to execute
confidentiality agreements upon the commencement of employment or consulting
relationships with us. In the case of employees, the agreement provides that all
inventions conceived by the individual while employed by us will be our
exclusive property. These agreements also provide that all confidential
information developed by or made known to the individual during the course of
the individual's relationship with us is to be kept confidential and not
disclosed to third parties, subject to limited exceptions.
Patents may 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 patentability and the scope of patent coverage continue to evolve,
particularly in the areas of technology of interest to us. 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 patent or patents licensed to us may be successfully challenged,
invalidated, circumvented or unenforceable so that our patent rights would not
create an effective competitive barrier. Moreover, the laws of some foreign
countries may not protect our
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<PAGE> 46
proprietary rights to the same extents as do the laws of the United States. In
view of these factors, our intellectual property positions bear some degree of
uncertainty.
Although we are not currently a party to any legal proceedings relating to
our intellectual property, in the future, third parties may file claims
asserting that our technologies or products infringe on their intellectual
property. We cannot predict whether third parties will assert such claims
against us or against the licensors of technology licensed to us, or whether
those claims will harm our business. If we are forced to defend against such
claims, whether they are with or without any merit, whether they are resolved in
favor of or against us or our licensors, we may face costly litigation and
diversion of management's attention and resources. As a result of such disputes,
we may have to develop costly non-infringing technology, or enter into licensing
agreements. These agreements, if necessary, may be unavailable on terms
acceptable to us, or at all, which could seriously harm our business or
financial condition.
EMPLOYEES
As of December 31, 1999, we had 85 full-time employees, eight in sales and
marketing, 21 in informatics/bioinformatics, 26 in assay/kit
development/manufacturing, 19 in research and development and 11 in
administration. None of our employees are covered by collective bargaining
agreements, nor have we experienced any work stoppage. We consider our relations
with our employees to be good.
SCIENTIFIC ADVISORY BOARD
An important component of our scientific strategy is to establish
collaborative relationships with researchers in our fields of interest. Our
scientific advisors attend periodic meetings of our Scientific Advisory Board.
None of our scientific advisors is employed by us, and they may have commitments
to or consulting or advisory agreements with other entities that may limit their
availability to us. These companies may also compete with us. In general, our
scientific advisors hold stock options, own our stock and/or receive financial
remuneration for their services. The following are the members of our scientific
advisory board:
Alan S. Waggoner, Ph.D. is the Director, Science and Technology Center at
Carnegie Mellon University. He is a founder of Cellomics.
Harold Craighead, Ph.D. is Director of the Nanobiotechnology Center and a
Professor of Applied and Engineering Physics at Cornell University where he also
served as Director of the National Nanofabrication Facility from 1989 to 1995.
Richard Haugland, Ph.D. is the founder and since 1975 has been the
President of Molecular Probes, Inc.
Susan Henry, Ph.D. has been the Dean-Mellon College of Science of Carnegie
Mellon University since 1991 and is also a Professor-Department of Biological
Sciences at Carnegie Mellon University since 1987.
Takeo Kanade, Ph.D. is a computer scientist/electrical engineer, a member
of the National Academy of Sciences, and the Director of the Robotics Institute
at Carnegie Mellon University.
John S. Lazo, Ph.D. is a Professor and Chairman of Pharmacology at the
University of Pittsburgh School of Medicine. He is also Co-Director of the
Experimental Therapeutics Program at the Pittsburgh Cancer Institute and
Visiting Scientist, Imperial Cancer Research Fund, University of Oxford, Oxford,
U.K.
Milan Mrksich, Ph.D. is Assistant Professor of Chemistry at the University
of Chicago.
Franklyn Prendergast, MD, Ph.D. is the Edmond and Marion Guggenheim
Professor of Biochemistry and Molecular Biology and Director of the Mayo Clinic
Cancer Center where he has also served as the Chairman of the Biochemistry
Department and a member of the Board of Governors of the Mayo Clinic and
Foundation.
Felix de la Iglesia, MD is the Vice President, Pathology and Experimental
Toxicology at Warner Lambert/Parke-Davis Pharmaceutical Research since 1983.
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George N. Pavlakis, MD, Ph.D. is the Head of the Human Retrovirus Section
at the National Cancer Institute.
FACILITIES
Our research and development, manufacturing and administrative facilities
are currently located in approximately 27,000 square feet of leased space in
Pittsburgh, Pennsylvania. The lease for this space will expire in June 2001. We
believe that our current facilities are adequate to meet our immediate needs.
However, additional space may be required as we expand our research and
development activities and production capability. We do not anticipate any
significant difficulties in obtaining additional facilities, as necessary.
LEGAL PROCEEDINGS
We are not currently party to any legal proceedings. However, we may from
time to time become a party to various legal proceedings arising in the ordinary
course of our business.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
Our directors and executive officers, their ages and positions as of March
2, 2000 are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
D. Lansing Taylor, Ph.D. .......................... 53 President and Chief Executive Officer, Director
R. Terry Dunlay.................................... 41 Executive Vice President and Chief Information Officer
L. Robert Johnston, Jr. ........................... 39 Vice President and Chief Financial Officer
Michael A. Nemzek.................................. 40 Chief Business Officer
Alan W. Seadler, Ph.D. ............................ 51 Chief Operating Officer
William Busa, Ph.D. ............................... 48 Vice President, Bioinformatics
Jeff W. Paslay, Ph.D. ............................. 53 Senior Vice President, Pharmaceutical Technology
Albert H. Gough, Ph.D. ............................ 47 Vice President, Research and Development
John M. Boles...................................... 63 Chairman of the Board and Director
Alan Mendelson..................................... 52 Director
James A. Sharp..................................... 45 Director
Arnold L. Oronsky, Ph.D. .......................... 59 Director
</TABLE>
D. Lansing Taylor, Ph.D. has served as our President and Chief Executive
Officer since October 1996. Dr. Taylor is a founder of Cellomics. Dr. Taylor was
a Professor of Biological Sciences and Vice-Dean of the Division of Molecular
Sciences at Carnegie Mellon University from 1982 to 1998. He was also the
Director of the Center for Fluorescence Research and Director of the National
Science Foundation Center for Light Microscope Imaging and Biotechnology. Dr.
Taylor previously co-founded Biological Detection Systems, Inc., a reagents and
instruments company, in 1990 where he served as a director and a consultant.
Prior to Carnegie Mellon University, Dr. Taylor was a Professor of Biology at
Harvard University, where he pioneered fluorescence ratio imaging techniques.
Dr. Taylor received his B.S. degree in Zoology from the University of Maryland
and his Ph.D. in Cell Biology from the State University of New York, Albany.
R. Terry Dunlay has served as our Executive Vice President and Chief
Information Officer since February 2000. From October 1996 to February 2000, he
served as our Executive Vice President. Mr. Dunlay is a founder of Cellomics.
Mr. Dunlay held various positions, including President and Chief Executive
Officer at Biological Detection, Inc., a software company, from 1996 to 1997 and
Vice President of Engineering/ Director of Engineering at Biological Detection
Systems, Inc., a reagents and instrumentation company, from 1992 to 1996. Mr.
Dunlay received his B.S. degree in Electrical Engineering from the University of
Pittsburgh and his M.S. degree in Electrical Engineering from Arizona State
University.
L. Robert Johnston, Jr. has served as our Vice President and Chief
Financial Officer since November 1998. Prior to joining our company, Mr.
Johnston was Senior Vice President, Finance and Chief Financial Officer at
Oncormed, Inc., a cancer genetics/pharmacogenomics biotech company, from 1994 to
1998. Prior to Oncormed, Mr. Johnston held various positions including Assistant
Treasurer at American Mobile Satellite Corporation, a telecommunications company
in Reston, Virginia from 1990 to 1994. Mr. Johnston received his B.A. degree
from the University of Virginia and his M.B.A. from the Darden Graduate School
of Business at the University of Virginia.
Michael A. Nemzek has served as our Chief Business Officer since February
2000. From December 1998 to February 2000, he was our Senior Vice President of
Sales and Marketing. Prior to joining our company, Mr. Nemzek was previously
Vice President, Marketing - Tropix Center of Excellence, PE Biosystems Division
of Perkin Elmer Corporation, a life sciences company, from 1996 to 1998. Prior
to Perkin Elmer, Mr. Nemzek was Vice President of Sales and Marketing at Genosys
Biotechnologies, Inc., a manufacturer of custom synthetic DNA, peptides, genes
and kit products from 1994 to 1996 and Vice President of Sales and
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Marketing for Tropix, Inc., a manufacturer of non-isotopic reagents from 1991 to
1994. Mr. Nemzek received his B.A. degree in Chemistry from the University of
North Carolina at Charlotte, his M.Sc. degree in Analytical Chemistry from North
Carolina State University and his Master of General Administration in Marketing
Management from the University of Maryland.
Alan W. Seadler, Ph.D. has served as our Chief Operating Officer since
February 2000. From January 1999 to February 2000, Dr. Seadler was our Vice
President, Manufacturing and Operations. Dr. Seadler was Vice President for
Technology Development and Reagent Manufacturing at Visible Genetics, Inc., a
reagent/kit diagnostic company, from 1996 to 1999. Prior to Visible Genetics, he
was a Site Manager for Amersham Life Science, Inc., a biomedical research and
manufacturing firm, from 1995 to 1996. Dr. Seadler was the Vice President,
Operations, General Manager at Biological Detection Systems, Inc., a reagents
company, from 1991 to 1995. Dr. Seadler received his B.A. degree in Biology and
Chemistry from Case Western Reserve University and his Ph.D. in Biology from the
Case Western Reserve University.
William Busa, Ph.D. has served as our Vice President of Bioinformatics
since September 1999. Prior to joining our company, Dr. Busa was the consulting
editor for the American Association for the Advancement of Science, Knowledge
Environment Development Program from 1998 to 1999. Dr. Busa was also President
of Memex Press, Inc., a technical publisher, from 1996 to 1999. Dr. Busa also
served on the faculty of Johns Hopkins University for eleven years. Dr. Busa
received his B.S. degree in the fields of Biological, Information and Computer
Sciences at the University of California at Irvine and his Ph.D. in Zoology from
the University of California at Davis.
Jefferson W. Paslay, Ph.D. has served as our Senior Vice President
Pharmaceutical Technologies since September 1998. Prior to joining our company,
Dr. Paslay held various positions including General Manager at MDS-Panlabs, a
screening services organization, from 1994 to 1998. Prior to MDS-Panlabs, he
held various positions including Director, Chemical and Biological Screening at
the Upjohn Company from 1981 to 1994. Dr. Paslay received his B.Sc. degree in
Biology from the University of Mississippi, his M.Sc. degree in Microbiology
(Immunology) from the University of Mississippi and his Ph.D. in Molecular Cell
Biology (Immunology) from the University of Alabama, Birmingham.
Albert Gough, Ph.D. has served as our Vice President Research and
Development since May 1999. From December 1998 to May 1999, he served as our
Vice President of Systems Engineering and from November 1996 to December 1998,
he served as our Director of Drug Discovery Systems. Prior to joining our
company, Dr. Gough was the Director of Imaging Technology at Carnegie Mellon
University where he directed a project in the development of automated imaging
systems for scientific research applications from 1993 to 1996. Dr. Gough
received his B.S. degree in Biology from the University of Michigan and his
Ph.D. in Biophysics from Carnegie Mellon University.
John M. Boles has served as a director and the Chairman of our Board since
our inception in 1995. Mr. Boles is a founder of our company. Mr. Boles has been
engaged in the investment banking business since 1972 and has served for the
last five years as Managing Partner of Boles Knop & Company LLC, an investment
banking firm. Mr. Boles received his undergraduate degree from Lake Forest
College, his M.S. from the University of Toronto and his M.B.A. from the
University of Michigan.
Alan Mendelson has served as a director since 1998. He is a co-founder and
partner of Axiom Ventures, a venture capital firm which focuses on investing in
biotech/hi-tech companies, for more than the past five years. Mr. Mendelson
received his B.A. degree in Economics from Trinity College and his law degree
from the University of Connecticut. Mr. Mendelson is a director of Ziplink Inc.,
a publicly traded company.
Arnold L. Oronsky, Ph.D. has served as a director since 1998. He has been a
general partner in InterWest Partners, a venture capital firm investing in the
medical technology sector, since 1994. Dr. Oronsky received his B.A. degree from
New York University and his Ph.D. from Columbia University, College of
Physicians & Surgeons. Dr. Oronsky is a director of Corita Corporation, a
publicly traded company and Coulter Pharmaceutical, Inc., a publicly traded
company.
James Sharp has served as a director since 1996. He has been the President,
Microscopy Division of Carl Zeiss, Inc., a subsidiary of Carl Zeiss Jena, GmbH,
since October 1999. From 1995 to 1999, Mr. Sharp
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was a Senior Vice President of Carl Zeiss Jena, GmbH, a manufacturer of optical,
scientific and industrial instruments. Mr. Sharp received a degree from The
DeVry Institute of Technology.
COMPOSITION OF THE BOARD
Our amended and restated certificate of incorporation and bylaws provide
that the board of directors be divided into three classes of nearly equal
number: Classes A, B and C. The term of office of directors comprising Class A
expires at the next annual meeting of stockholders; the term of office of
directors comprising Class B expires at the second annual meeting of
stockholders; and the term of office of directors comprising Class C expires at
the third annual meeting of stockholders. At each annual meeting of stockholders
thereafter, the successors to directors whose terms will then expire will be
elected to serve from the time of election and qualification until the third
annual meeting of stockholders following election and until a successor will
have been duly elected and will have qualified.
Our bylaws authorize the board of directors to fix the number of directors
at not less than one. The board of directors currently has five members. The
board of directors has no present plans to increase the number of directors.
There are no family relationships among any of our directors or executive
officers.
Our amended and restated certificate of incorporation requires the
affirmative vote of holders of 80% of the issued and outstanding shares of
common stock entitled to vote for the election of directors to remove any
director or the entire board of directors. Under Delaware law, our directors can
only be removed for "cause."
BOARD COMMITTEES
Our board of directors currently has two committees: an audit committee and
a compensation committee.
The audit committee was established on March 18, 1998, and reviews, acts on
and reports to our Board of Directors with respect to various auditing and
accounting matters, including the recommendation of our independent accountants,
the scope of the annual audits, the fees to be paid to the independent
accountants, the performance of our independent accountants and our accounting
practices. The members of the audit committee are Messrs. Boles and Mendelson
and Dr. Oronsky.
The compensation committee was established on March 18, 1998, and
recommends, reviews and oversees the salaries, benefits granting of options and
stock plans for our employees, consultants and directors. The compensation
committee also administers our compensation plans. The members of the
compensation committee are Messrs. Boles and Mendelson and Dr. Oronsky.
DIRECTOR COMPENSATION
All of our directors are reimbursed for the reasonable expenses of
attending the meetings of the board of directors or committees. Under our 2000
Stock Option Plan, each non-employee member of our Board of Directors, will
receive an option to purchase 3,333 shares of our common stock in March 2000.
That option will vest in two installments commencing in March 2000 and the first
yearly anniversary of that date respectively for our then current non-employee
directors. In the case of first time directors, vesting will occur in three
installments beginning on the date that he or she joins our board and on the
first and second yearly anniversaries of that date. Other than the forgoing, the
directors receive no other compensation for their services as directors.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Our compensation committee currently consists of Messrs. Boles and
Mendelson and Dr. Oronsky. No member of the compensation committee has been an
officer or employee of ours at any time. No interlocking relationship exists
between any member of our board of directors or our compensation committee and
any member of the board of directors or compensation committee of any other
corporation. Prior to the formation
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of the compensation committee on March 18, 1998, our board of directors as a
whole made decisions relating to compensation of our executive officers.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the annual compensation earned during 1999
by our chief executive officer and the four highest paid executive officers
whose total annual salary and bonus exceeded $100,000. These individuals are
referred to as the "named executive officers" here and elsewhere in this
prospectus.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
------------------------------------
OTHER ANNUAL
NAME AND PRINCIPAL POSITION SALARY BONUS COMPENSATION
--------------------------- -------- ------- -------------
<S> <C> <C> <C>
D. Lansing Taylor, Ph.D................................. $255,000 $40,000 $ --
President and Chief Executive Officer
R. Terry Dunlay......................................... 135,000 22,950 --
Executive Vice President and Chief Information Officer
L. Robert Johnston, Jr.................................. 173,147 29,240 53,837(1)
Vice President and Chief Financial Officer
Michael Nemzek.......................................... 170,567 47,600 73,457(2)
Senior Vice President of Sales and Marketing
Alan Seadler............................................ 100,000 35,000 --
Chief Operating Officer
</TABLE>
- ---------------
(1) Mr. Johnston's other annual compensation for 1999 reflects a relocation
allowance.
(2) Mr. Nemzek's other annual compensation for 1999 reflects a relocation
allowance.
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1999 OPTION GRANTS
The following table sets forth information regarding options granted to
each of our named executive officers during the year 1999. The percentage of
options granted is based on an aggregate of 128,750 options granted by us during
1999. The amounts shown as potential realizable value are based on assumed 5%
and 10% annual rates of stock price appreciation from the date of grant to the
end of the option term and are provided in accordance with rules of the
Securities and Exchange Commission. They do not represent our estimate or
projections of the future common stock price. Actual gains, if any, on stock
option exercise are dependent on the future performance of our common stock,
overall market conditions and the option holder's continued employment during
the vesting period. All options in this table were granted under our Cellomics,
Inc. Stock Plan, have ten year terms, will terminate before their expiration
dates if the optionee leaves his employment with us, and, unless otherwise
noted, vest over a period of four years. We have not granted any stock
appreciation rights. In estimating the gain realized by these option holders, we
have deducted the option exercise price, but have not deducted taxes or any
other expenses payable upon the exercise of the option or the sale of the common
stock underlying the option.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
------------------------------------------------------------- VALUE AT ASSUMED
NUMBER OF ANNUAL RATES OF STOCK
SECURITIES PERCENT OF TOTAL PRICE APPRECIATION FOR
UNDERLYING OPTIONS GRANTED TO OPTION TERM
OPTIONS EMPLOYEES IN EXERCISE PRICE EXPIRATION -----------------------
NAME GRANTED FISCAL YEAR 1999 PER SHARE DATE 5% 10%
---- ---------- ------------------ -------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
D. Lansing Taylor,
Ph.D. ................ -- -- $ -- -- $ -- $ --
R. Terry Dunlay......... 10,000(1) 8% 0.56 1/1/09
L. Robert Johnston,
Jr.................... 5,000(2) 4% 0.56 11/9/09
Michael Nemzek.......... 5,000(3) 4% 0.56 12/9/09
Alan Seadler............ 15,000(4) 12% 0.56 1/18/09
5,000(5) 4% 0.56 6/25/09
</TABLE>
- ---------------
(1) The vesting start date for the options to purchase 10,000 shares of common
stock granted to Mr. Dunlay is January 15, 1998.
(2) The vesting start date for the options to purchase 5,000 shares of common
stock granted to Mr. Johnston is November 9, 1998.
(3) The vesting start date for the options to purchase 5,000 shares of common
stock granted to Mr. Nemzek is December 2, 1998.
(4) The vesting start date for options granted to Mr. Seadler to purchase 15,000
shares of common stock is January 18, 1999.
(5) The vesting start date for the options to purchase 5,000 shares of common
stock granted to Mr. Seadler is June 25, 1999.
1999 OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS
DECEMBER 31, 1999 AT DECEMBER 31, 1999
---------------------------- ----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
D. Lansing Taylor, Ph.D.................. 30,000 20,000 $ $
R. Terry Dunlay.......................... 2,500 7,500
L. Robert Johnston, Jr................... 8,750 26,250
Michael Nemzek........................... 8,750 26,250
Alan Seadler............................. - 20,000
</TABLE>
There were no options exercised during the year ended December 31, 1999.
50
<PAGE> 53
1998 STOCK PLAN
Our stock plan was adopted by our board of directors on April 2, 1998. As
of March 1, 2000, there were options to purchase 412,900 shares of common stock
granted under this plan. The board of directors adopted a resolution prohibiting
further grants under this plan.
The stock plan provides for the grant of incentive stock options to
employees, non-qualified stock options, stock awards, stock appreciation rights
and stock purchases. The stock plan provides that it will be administered by the
board of directors, or a committee appointed by the board, which determines
recipients and types of awards to be granted, including number of shares under
the award and the vesting of the award. As of the date of this prospectus, all
awards granted under the stock plan have been made to our employees, directors
and consultants and have been in the form of non-qualified stock options. All
awards under the stock plan terminate not more than 10 years from the date of
grant, subject to the earlier termination upon or after a fixed period following
an optionee's death or termination of employment with us. The vesting provisions
of each outstanding option was determined by the board of directors and those
options are not generally assignable or otherwise transferable except by will or
the laws of descent and distribution. In the event of a change in control and in
other circumstances described in the stock plan, the board of directors can
substitute on an equitable basis our securities with securities of the successor
or surviving entity in the change of control, require that the unexercised
awards be exercised within a certain period of time, or allow the unexercised
portions of the awards to be purchased by the successor entity at the then fair
market value.
As of December 31, 1999, under the stock plan, options to purchase 355,400
shares of common stock had been granted and no options had been exercised.
2000 STOCK PLAN
We have adopted a new stock plan known as the 2000 Stock Plan. We have
reserved 330,000 shares of our common stock for issuance upon exercise of awards
under the 2000 Stock Plan. The following is a description of the material
features and provisions of the 2000 Stock Plan.
Awards
Under the 2000 Stock Plan, we may grant incentive stock options intended to
qualify for special tax treatment, non-qualified stock options, stock grants,
stock appreciation rights and stock purchase rights. Each option or appreciation
right will expire within 10 years of the original grant date, unless the grantee
owns more than 10% of our stock, in which case the option or appreciation rights
will expire within 5 years of the original grant date. Incentive options may not
have exercise prices less than the fair market value at the time of grant. If
the grantee owns more than 10% of our stock, the option may not have an exercise
price less than 110% of the fair market value at the time of grant. Upon
exercise, an option grantee may pay for the shares with cash, other shares,
shares deducted from the total granted under the option or other compensation
acceptable to the administrator of the plan.
If a grantee's employment is terminated, the grantee may within 90 days
after termination exercise his or her option or appreciation right to the extent
that the option has vested by the date of termination. If a grantee is disabled,
the grantee may within 12 months after becoming disabled exercise his or her
option or appreciation right to the extent that the option has vested by the
date of becoming disabled. If a grantee dies, the grantee's estate may within 12
months of the grantee's death exercise the grantee's option or appreciation
right to the extent that the option has vested by the date of the grantee's
death. In each case, the option terminates with respect to the shares that had
not vested. Other than by will or other transfer on death, options and
appreciation rights are not transferrable.
Administration
The 2000 Stock Plan may be administered either by our board of directors,
or by a committee appointed by the board. The administrator, whether the board
or a committee, will have the authority to determine the fair market value of
the common stock for the purposes of making an award; select the eligible
persons to
51
<PAGE> 54
whom awards may be granted; make the awards; determine the number of shares to
be covered by each award; offer to buy out for cash or shares a granted option
or appreciation right and determine the form, terms and conditions of any
agreement by which any award is made. The administrator may also determine
whether an option or appreciation right will be paid in cash rather than stock,
whether and to what extent payment of an award may be deferred, whether under
certain circumstances to reduce the exercise price of an award and the
restrictions applicable to any stock grants or purchase rights. The 2000 Stock
Plan will expire on March 1, 2010.
Eligibility
Under the terms of the 2000 Stock Plan, nonstatutory options may be granted
to our employees, non-employee directors and consultants. Incentive stock
options may be granted only to our employees. Incentive stock options may not
exceed $100,000 to any one person in one year. If an incentive stock option does
exceed $100,000, the excess is considered to be a nonstatutory option.
Adjustments
If a reorganization, recapitalization, stock dividend, merger,
consolidation or other change in corporate structure affecting the number of
issued shares of our common stock occurs, then the administrator of the plan can
make equitable adjustments to the terms of the 2000 Stock Plan. In particular,
the administrator can make an equitable adjustment in the number and type of
shares authorized by the plan, the number and type of shares covered by
outstanding awards under the plan, the exercise prices of the awards and, in the
case of a merger or consolidation, the date of exercisability if the award is
not assumed by the other entity. After the adjustments, any incentive stock
options granted under the plan must continue to qualify as incentive stock
options. The board of directors can amend or terminate this plan any time,
although certain amendments require stockholder approval and an amendment or
termination cannot adversely affect any rights under an outstanding grant
without the grantee's consent.
Change in Control
The 2000 Stock Plan includes change in control provisions which may result
in the accelerated vesting of outstanding option grants and stock issuances. If
we are acquired by merger or asset sale, each outstanding option under the
discretionary option grant program which is not to be assumed by the successor
corporation will immediately become exercisable for all the option shares, and
all outstanding unvested shares will immediately vest, except to the extent our
repurchase rights with respect to those shares are to be assigned to the
successor corporation. Our compensation committee has the discretion to, on a
change in control, vest and make exercisable any option granted under the plan.
In addition, our compensation committee may grant options and structure
repurchase rights so that the shares subject to those options or repurchase
rights will immediately vest in connection with a successful tender offer for
more than 50% of our outstanding voting stock or a change in control of our
board through one or more contested elections. Such accelerated vesting may
occur either at the time of such transaction or upon the subsequent termination
of the individual's service.
EMPLOYEE STOCK PURCHASE PLAN
Our board of directors intends to adopt a new employee stock purchase plan
to present to our stockholders for approval prior to the completion of this
offering. If adopted, our Employee Stock Purchase Plan will provide our
employees with an opportunity to purchase our common stock through accumulated
payroll deductions and at a discount from fair market value. The total number of
shares of common stock with respect to which purchases may be made under the
plan will be 300,000, which amount shall be adjusted in accordance with the
terms of the plan. The Employee Stock Purchase Plan will be administered by our
compensation committee. Eligible employees may purchase up to a maximum fair
market value of $25,000 for all purchases ending within the same calendar year
under this plan. Our employees will be eligible to participate if they are
employed by us for at least 20 hours per week, for more than five months in any
calendar year and do not own 5% or more of our voting stock. The initial
offering period under the plan
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<PAGE> 55
will commence on the date that the registration statement with respect to this
offering is declared effective by the SEC, and will end on or about December 31,
2000. We intend that new offering periods will commence every six months after
the ending date of the initial period. The purchase price per share for our
common stock under the plan will be equal to the lower of 85% of the fair market
value of our common stock on the first or last day of each purchase period.
Employees may end their participation under the plan at any time prior to the
exercise date of any one purchase period and, generally, such participation will
be automatically terminated on termination of employment. In the event we are
the surviving corporation in a merger, reorganization or other business
combination, options to purchase shares issued under the plan will be assumed. A
dissolution or liquidation or a merger or consolidation in which we are not the
surviving entity will cause each option then outstanding to terminate.
Generally, our board of directors will have the power to amend, modify or
terminate the plan at any time, provided the rights of plan participants are not
impaired. The plan will terminate on December 31, 2005, unless earlier
terminated by our board of directors.
EMPLOYMENT AND SEVERANCE AGREEMENTS
All of our current employees have entered into agreements with us that
contain restrictions and covenants. These provisions include covenants relating
to the protection of our confidential information, assignment of inventions,
restrictions on competition and soliciting our customers, employees or
independent contractors. We also have employment agreements with each of chief
executive officer and each of the named executive officers.
Dr. Taylor's agreement provides that he serves as our President and Chief
Executive Officer. Dr. Taylor's agreement is for a period of three years ending
September 30, 2001. If Dr. Taylor is terminated without cause, as that term is
defined in the agreement, he is entitled to receive all earned salary, bonuses
and fringe benefits through the date of notice of termination, 12 months' salary
following the date of notice, and automatic acceleration of all options held at
that date. At the discretion of the board Dr. Taylor's base salary is subject to
annual adjustment increases of $5,000 and $10,000 in each of the last two years,
respectively, of this agreement. In each year of the agreement, Dr. Taylor is
also entitled to receive an incentive bonus up to a maximum of twenty percent of
his base salary in that year, based on a formula agreed to with the board of
directors. However, the board of directors subsequently approved an increase in
Dr. Taylor's potential annual performance bonus for 2000 from twenty percent to
thirty percent, and may award other bonuses in its discretion. In addition,
options held by Dr. Taylor as of December 31, 1999 vest on October 1, of each
year of his continued employment.
Under an agreement with us dated February 2, 1999, Mr. Dunlay serves as our
Executive Vice-President of Development. He is entitled to receive an initial
annual salary of $135,000 and annual performance bonuses up to twenty percent of
his salary subject to review and approval by our board of directors. The options
held by Mr. Dunlay as of December 31, 1999 vest in four equal installments on
the anniversary of grant. The term of Mr. Dunlay's agreement is for a one year
period that automatically renews unless we terminate the agreement prior to
ninety days before the beginning of the next term. If we terminate Mr. Dunlay,
unless that termination is for cause, as defined in the agreement, we are
obligated to pay him an amount equal to six months of his base salary.
Under an agreement with us dated October 15, 1998, Mr. Johnston serves as
our Vice-President and Chief Financial Officer. He is entitled to an annual
salary of $171,996, subject to adjustment by the Board of Directors. He is also
eligible to receive annual performance bonuses up to twenty percent of his
salary subject to review and approval by our board of directors. However, the
board of directors subsequently approved an increase in Mr. Johnston's potential
annual performance for 2000 from twenty percent to twenty-five percent and may
award other bonuses in its discretion. Mr. Johnston was also provided with a
relocation allowance up to a maximum of $65,000. The options held by Mr.
Johnston as of December 31, 1999 vest in four equal installments on the
anniversary of grant. Mr. Johnston may also be granted an option to purchase
5,000 shares as part of his performance bonus. All Mr. Johnston's unvested
options will vest on a change of control and if Mr. Johnston is terminated by
constructive termination, as defined in the agreement, fifty percent of his
unvested option will vest on the date of termination. If we terminate Mr.
Johnston, unless that termination is
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<PAGE> 56
for cause, as defined in the agreement, we are obligated to pay him an amount
equal to six months of his base salary.
Under an agreement with us dated November 9, 1998, Mr. Nemzek serves as our
Senior Vice-President for Sales and Marketing. He is entitled to an annual
salary of $170,004, subject to adjustment by the Board of Directors. He is also
eligible to receive annual performance bonuses up to thirty-five percent of his
salary subject to review and approval by our board of directors. Mr. Nemzek was
also provided with a relocation allowance of up to a maximum of $50,000. The
options held by Mr. Nemzek as of December 31, 1999 vest in four equal
installments on the anniversary of grant. As part of his performance bonus, Mr.
Nemzek may be provided an additional option to purchase 5,000 shares of common
stock as part of his performance bonus. If we terminate Mr. Nemzek, unless that
termination is for cause, as defined in the agreement, we are obligated to pay
him an amount equal to six months of his base salary.
Under an agreement with us dated October 12, 1998, Mr. Seadler serves as
our Chief Operating Officer. He is entitled to receive an initial annual salary
of $100,008 and annual performance bonuses up to twenty percent of his salary
subject to review and approval by our board of directors. Mr. Seadler was also
provided an additional $10,000 signing bonus upon his start date. The options
held by Mr. Seadler as of December 31, 1999 vests in four equal installments on
the anniversary of grant. If we terminate Mr. Seadler, unless that termination
is for cause, as defined in the agreement, we are obligated to pay him an amount
equal to six months of his base salary.
LIMITATION OF LIABILITY AND INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law authorizes a
corporation's board of directors to grant indemnity to directors and officers in
terms sufficiently broad to permit such indemnification under certain
circumstances for liabilities arising under the Securities Act, including
reimbursement for expenses incurred.
As permitted by Delaware law, our amended and restated certificate of
incorporation limits the liability of directors for monetary damages for breach
of their fiduciary duties as directors, except liability for:
- any breach of their duty of loyalty to us or our stockholders;
- acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
- unlawful payments of dividends or unlawful stock repurchases or
redemptions; or
- any transaction from which the director derived an improper personal
benefit.
Our amended and restated certificate of incorporation and bylaws provide
that we shall indemnify our directors, officers, employees and agents to the
fullest extent permitted by law, and that we will advance expenses to our
directors and officers in connection with a legal proceeding, subject to an
undertaking to repay our costs, should the indemnified person lose the
proceeding.
Prior to the completion of this offering, we intend to enter into
indemnification agreements with each of our officers and directors to give them
additional contractual assurances regarding the scope of the indemnification
provided in our amended and restated certificate of incorporation and bylaws and
to provide additional procedural protections.
There is currently no pending litigation or proceeding involving any of our
directors, officers, employees or agents where indemnification will be required
or permitted. We are not aware of any pending or threatened litigation or
proceeding that might result in a claim for such indemnification.
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<PAGE> 57
CERTAIN TRANSACTIONS
REGISTRATION RIGHTS
Some of our stockholders, some of whom own more than 10% of our common
stock, have certain registration rights which they may exercise after this
offering. They may request that we register their shares for sale with the
Securities and Exchange Commission, and, if all of the conditions that are
contained in our agreements with them are met, we must register their shares. We
would be required to bear all the expenses of a registration. For a more
detailed description see also "Description of Capital Stock -- Registration
Rights."
PRIOR FINANCINGS
January 1998 and 1999 Series A Preferred Financing
In January 1998 we sold an aggregate of 935,581 shares of our Series A
preferred stock at a price of $5.62 per share and issued warrants to purchase an
aggregate of 266,904 shares of common stock with exercise prices ranging from
$5.62 to $6.60.
In that private placement we sold:
- 323,488 and 10,142 shares of Series A preferred stock and issued warrants
to purchase 64,698 and 2,028 shares of our common stock to InterWest
Partners VI, L.P. and InterWest Investors VI, L.P., respectively;
- 244,662 shares of Series A preferred stock and issued warrants to
purchase an additional 48,932 shares of our common stock to Axiom Venture
Partners II Limited Partnership;
- 218,486 and 3,934 shares of Series A preferred stock and issued warrants
to purchase 43,697 and 787 shares of our common stock to Delphi Ventures
III, L.P. and Delphi BioInvestments III, L.P., respectively;
- 50,856 and 38,112 shares of our Series A preferred stock and issued
warrants to purchase 10,171 and 7,623 shares of our common stock to
Oxford Bioscience Partners II, L.P. and Oxford Bioscience Partners
(Bermuda) II Limited Partnership, respectively;
- 88,968 shares of Series A preferred stock, to Komasta Properties, Ltd.
In addition, we converted a $450,000 note plus accrued interest into 88,968
shares of Series A preferred stock and issued warrants to purchase an aggregate
of 53,381 shares of our preferred stock with an exercise price of $8.43 to
Komasta Properties, Ltd.
In January 1999 as a subsequent closing we sold an aggregate of 889,680
shares of our Series A preferred stock at a price of $5.62 per share.
In that private placement we sold:
- 323,488 and 10,142 shares of Series A preferred stock to InterWest
Partners VI, L.P. and InterWest Investors VI, L.P., respectively;
- 244,662 shares of Series A preferred stock to Axiom Venture Partners II
Limited Partnership;
- 218,486 and 3,934 shares of Series A preferred stock to Delphi Ventures
III, L.P. and Delphi BioInvestments III, L.P., respectively; and
- 50,856 and 38,112 shares of our Series A preferred stock to Oxford
Bioscience Partners II, L.P. and Oxford Bioscience Partners (Bermuda) II
Limited Partnership, respectively.
NOVEMBER 1999 CONVERTIBLE DEBT FINANCING
In November 1999, we issued convertible promissory notes in the aggregate
principal amount of $1.8 million. These notes carried an interest rate of 10%
per year. On February 24, 2000, the outstanding
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<PAGE> 58
principal and interest on each of these convertible notes converted into 152,593
shares of our Series B preferred stock at a price of $12.07 per share, and we
issued warrants to purchase an aggregate of 82,000 shares of our common stock.
These warrants were issued at an exercise price of $12.07.
In this transaction the demand notes were converted into:
- 61,651 and 1,932 shares of our Series B preferred stock and warrants to
purchase 33,130 and 1,038 shares of common stock to InterWest Partners
VI, L.P. and InterWest Investors VI, L.P., respectively;
- 24,983 and 449 shares of our Series B preferred stock and warrants to
purchase 13,425 and 248 shares of common stock to Delphi Ventures III,
L.P. and Delphi BioInvestments III, L.P., respectively;
- 46,621 shares of our Series B preferred stock and warrants to purchase
25,057 shares of common stock to Axiom Venture Partners II Limited
Partnership; and
- 6,207, 4,651 and 6,092 shares of our Series B preferred stock and
warrants to purchase 3,336, 2,499 and 3,274 shares of common stock to
Oxford Biosciences Partners II, L.P., Oxford Biosciences Partners
(Bermuda) II Limited Partnership and Oxford Biosciences Partners
(GS-Adjunct) II, L.P., respectively.
February 2000 Series B Preferred Financing
In February 2000, we sold an aggregate of 541,082 shares of our Series B
preferred stock at a price of $12.07 per share.
In that private placement we sold:
- 242,336 and 80,779 shares of our Series B preferred stock to Vector
Later-Stage Equity Fund II (QP), L.P. and Vector Later-Stage Equity Fund
II, L.P., respectively;
- 44,711 and 1,402 shares of Series B preferred stock to InterWest Partners
VI, L.P. and InterWest Investors VI, L.P., respectively;
- 41,512 shares of our Series B preferred stock and warrants to purchase
5,280 shares of common stock to Komasta Properties, Ltd.;
- 32,554 and 586 shares of our Series B preferred stock to Delphi Ventures
III, L.P. and Delphi BioInvestments III, L.P., respectively;
- 27,104, 20,312 and 26,603 shares of our Series B preferred stock to
Oxford Bioscience Partners II, L.P., Oxford Bioscience Partners (Bermuda)
II Limited Partnership and Oxford Biosciences Partners (GS-Adjunct) II,
L.P., respectively; and
- 20,713 shares of Series B preferred stock to Axiom Venture Partners.
Conversion of Preferred Stock
Our preferred stock will convert into common stock upon the closing of this
offering. We must pay to the holders of the preferred stock the dividend
arrearages on their shares which presently aggregate approximately $1.7 million
as a result of the conversion of the preferred stock. Thus, we will be paying
the following amounts to the indicated preferred stockholder:
- InterWest Partners VI, L.P. and InterWest Investors VI, L.P. will be paid
approximately $ ;
- Axiom Venture Partners II Limited Partnership will be paid approximately
$ ;
- Delphi Ventures III, L.P. and Delphi BioInvestments III, L.P. will be
paid approximately $ ;
- Oxford Bioscience Partners II, L.P., Oxford Bioscience Partners (Bermuda)
II Limited Partnership, Oxford Biosciences Partners (GS-Adjunct) II, L.P.
will be paid approximately $ ;
- Komasta Properties, Ltd. will be paid approximately $ ; and
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<PAGE> 59
- Vector Later-Stage Equity Fund II (QP), L.P. and Vector Later-Stage
Equity Fund II, L.P. will be paid approximately $ .
Arnold L. Oronsky, Ph.D., a member of our board of directors, is a general
partner of InterWest Partners, an affiliate of InterWest Partners VI, L.P. and
InterWest Investors VI, L.P. Mr. Mendelson, a member of our board of directors,
is general partner of Axiom Ventures, an affiliate of Axiom Venture Partners.
ZEISS AGREEMENTS
As part of our manufacturing and supply agreements with Zeiss, we have
capital expenditure commitments to Zeiss of $1.2 million during 2000 and have
agreed to reimburse Zeiss for an additional $2.0 million for development costs
incurred by Zeiss through December 31, 1999. These amounts are to be repaid
during 2000 and 2001 in equal installments of $1.0 million. We purchased
approximately $317,000 and $160,500 of components from Zeiss for our products in
1999 and 1998. In addition in February 2000 we entered into a sales and
marketing agreement with Zeiss under which we will be the exclusive dealer for
their ultra-high throughput screening products in the United States and Canada
through December 31, 2005.
TRANSACTIONS WITH DIRECTORS
Mr. Boles, a member of our board, entered into a consulting agreement with
us in December, 1996. Under this agreement Mr. Boles was paid $5,000 per month.
The term of the agreement was for a period of two years from the date of its
execution. Under the agreement, Mr. Boles agreed to refrain from competing with
us in the full field of luminescence-based tools for drug discovery or
toxicology for a period of five years from the date of the agreement.
In each transaction set forth above where executive officers, directors,
five percent or greater stockholders or affiliates of any of these persons
purchased shares, these shares were purchased at the same price, and on the same
terms, as share purchased by other investors at those times.
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<PAGE> 60
PRINCIPAL STOCKHOLDERS
The following table sets forth as of March 3, 2000, as adjusted to give
effect to the sale of common stock offered hereby, certain information regarding
beneficial ownership of our common stock by:
- each person or group of affiliated persons known by us to be the
beneficial owner of more than 5% of the outstanding shares of common
stock;
- each director;
- each named executive officer; and
- all directors and named executive officers as a group.
Beneficial ownership is determined according to the rules of the Securities
and Exchange Commission, and generally means that a person has beneficial
ownership of a security if he or she possesses sole or shared voting or
investment power of that security, and includes options that are currently
exercisable or exercisable within 60 days. Information with respect to
beneficial ownership has been furnished to us by each director, officer or 5% or
more stockholder, as the case may be. Except as otherwise indicated, we believe
that the beneficial owners of the common stock listed below, based on the
information each of them has given to us, have sole investment and voting power
with respect to their shares, except where community property laws may apply.
This table lists applicable percentage ownership based on 3,844,612 shares
of common stock outstanding as of March 3, 2000, and also lists applicable
percentage ownership based on shares of common stock outstanding
after the completion of this offering. Options to purchase shares of our common
stock that are exercisable within 60 days of March 3, 2000 are deemed to be
beneficially owned by the persons holding these options for the purpose of
computing any other person's ownership percentage.
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<PAGE> 61
The address for each officer who is a 5% holder is c/o Cellomics, Inc., 635
William Pitt Way, Pittsburgh, Pennsylvania 15238.
<TABLE>
<CAPTION>
PERCENTAGE
OF COMMON STOCK
-------------------------------
SHARES SUBJECT PERCENT BEFORE PERCENT AFTER
NAME AND ADDRESS OF BENEFICIAL OWNER TOTAL NUMBER TO OPTIONS OFFERING OFFERING
------------------------------------ ------------ -------------- -------------- -------------
<S> <C> <C> <C> <C>
DIRECTORS AND NAMED OFFICERS
D. Lansing Taylor, Ph.D. ............... 235,000 30,000 6.1% %
R. Terry Dunlay......................... 133,500 6,000 3.5%
L. Robert Johnston, Jr. ................ 8,750 8,750 *
Michael A. Nemzek....................... 8,750 8,750 *
Alan W. Seadler, Ph.D. ................. 3,750 3,750 *
John M. Boles........................... 207,222 2,222 5.4%
Alan Mendelson.......................... 632,876(1) 2,222 16.1%
James A. Sharp.......................... 2,222 2,222 *
Arnold Oronsky, Ph.D. .................. 880,072(2) 2,222 22.3%
All executive officers and directors as
a group (9 persons)................... 2,112,142 61,638 51.7%
5% STOCKHOLDERS
InterWest Management VI LLC............. 877,850(3) 22.2%
Axiom Venture Partners II Limited
Partnership........................... 630,654(4) 16.1%
Delphi Management III, L.L.C. .......... 561,562(5) 14.4%
Vector Fund Management, L.P. ........... 323,115(6) 8.4%
OBP Management II L.P. ................. 184,499(7) 4.8%
OBP Management (Bermuda) II Limited
Partnership........................... 111,309(8) 2.9%
Komasta Properties, Ltd. ............... 278,109(9) 7.1%
Carl Zeiss Holding Co., Inc. ........... 199,319(10) 5.2%
Alan S. Waggoner........................ 195,000(11) 5.1% %
</TABLE>
- ---------------
* Less than 1%.
(1) Includes 556,665 shares of common stock that are held by Axiom Venture
Partners II Limited Partnership and immediately exercisable warrants to
purchase 48,932 and 25,057 shares of common stock at exercise prices of
$6.60 and $12.07 per share, respectively. Axiom Venture Associates II
Limited Liability Company is the general partner of Axiom Venture Partners
II Limited Partnership. Mr. Mendelson is a general partner of Axiom Venture
Associates II Limited Liability Company. Mr. Mendelson's address is c/o
Axiom Venture Partners II Limited Partnership, City Place II, 185 Asylum
Street, 17th Floor, Hartford, Connecticut 06103.
(2) Includes 753,338 shares of common stock held InterWest Partners VI, L.P.
and 23,618 held by InterWest Investors VI, L.P. Also includes immediately
exercisable warrants to purchase 64,698 and 33,130 shares of common stock
at exercise prices of $6.60 and $12.07 per share, respectively, held by
InterWest Partners VI, L.P. and immediately exercisable warrants to
purchase for 2,028 and 1,038 shares of common stock at exercise prices of
$6.60 and $12.07, respectively held by InterWest Investors VI, L.P.
InterWest Management Partners IV, LLC is the general partner of both
InterWest Partners, L.P. and InterWest Investors, VI. Dr. Oronsky is a
managing director of InterWest Management Partners VI, LLC. Dr. Oronsky has
shared voting control over securities held by InterWest Partners, VI L.P.
and InterWest Investor, VI, L.P. Dr. Oronsky disclaims beneficial ownership
of these shares, except to the extent he has a pro rata interest in them.
Dr. Oronsky's address is c/o InterWest Partners, 3000 Sand Hill Road, Menlo
Park, California 94025.
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(3) Includes 753,338 shares of common stock held InterWest Partners VI, L.P. and
23,618 held by InterWest Investors VI, L.P. Also includes immediately
exercisable warrants to purchase 64,698 and 33,130 shares of common stock at
exercise prices of $6.60 and $12.07 per share, respectively held by
InterWest Partners VI, L.P. and immediately exercisable warrants to purchase
for 2,028 and 1,038 shares of common stock at exercise prices of $6.60 and
$12.07, respectively held by InterWest Investors VI, L.P. InterWest
Management Partners IV, LLC is the general partner of InterWest Partners,
L.P. and InterWest Investors, VI. Dr. Oronsky is a managing director of
InterWest Management Partners VI, LLC. This address of the various InterWest
partnerships is 3000 Sand Hill Road, Menlo Park, California 94025.
(4) Includes 556,665 shares of common stock that are held by Axiom Venture
Partners II Limited Partnership and immediately exercisable warrants to
purchase 48,932 and 25,057 shares of common stock at exercise prices of
$6.60 and $12.07 per share, respectively. Axiom Venture Associates II
Limited Liability Company is the general partner of Axiom Venture Partners
II Limited Partnership. Mr. Mendelson is a general partner of Axiom Venture
Associates II Limited Liability Company. This stockholder's address is c/o
Axiom Venture Partners II Limited Partnership, City Place II, 185 Asylum
Street, 17th Floor, Hartford, Connecticut 06103.
(5) Includes 494,509 shares of common stock held by Delphi Ventures III, L.P.
and 8,903 shares of common stock held by Delphi BioInvestments III, L.P.
Also includes immediately exercisable warrants to purchase 43,697 and 13,425
shares of common stock of exercise prices of $6.60 and $12.07 per share,
respectively, held by Delphi Ventures III, L.P. and immediately exercisable
warrants to purchase 787 and 241 shares of common stock at exercise prices
of $6.60 and $12.07, respectively, held by Delphi BioInvestments III, L.P.
Delphi Management Partners III, L.L.C. is the general partner of Delphi
Ventures III, L.P. and Delphi BioInvestments III, L.P. The managing members
of Delphi Management Partners III, L.L.C. disclaim beneficial ownership
except to the extent their pecuniary interest arises from their partnership
interests. The address of the various Delphi partnerships is 3000 Sand Hill
Road, Bldg. 3, 135, Menlo Park, CA 94025.
(6) Includes 242,336 shares of common stock held by Vector Later-Stage Equity
Fund II (QP), L.P. and 80,779 shares of common stock held by Vector
Later-Stage Equity Fund II, L.P. The address of Vector Fund Management, L.P.
and the Vector equity funds is 1751 Lake Cook Road, Deerfield, IL 60015.
(7) Includes 135,023 and 32,695 shares of common stock held by Oxford BioScience
Partners II, L.P. and Oxford BioScience Partners (GS-Adjunct) II, L.P.,
respectively. Also includes warrants to purchase 10,171 and 3,336 shares of
common stock at exercise prices of $6.60 and $12.07, respectively held by
Oxford BioScience Partners II, L.P. and a warrant to purchase 3,274 shares
of common stock at an exercise price of $12.07 held by Oxford BioSciences
Partners (GS-Adjunct) II, L.P. OBP - Management II L.P. is the general
partner of Oxford BioScience Partners II, L.P. and Oxford BioScience
Partners (GS-Adjunct) II, L.P. OBP - Management II L.P. and OBP Management
(Bermuda) II Limited Partnership are controlled by the same individuals. The
address of the Oxford partnerships is 315 Post Rd West, Suite 2, Westport,
CT 06880-4739.
(8) Includes 101,187 shares of common stock held by Oxford Bioscience Partners
(Bermuda) Limited Partnership, warrants to purchase 7,623 and 2,499 shares
of common stock at exercise prices of $6.60 and $12.07, respectively held by
Oxford Biosciences Partners (Bermuda) II Limited Partnership. OBP Management
(Bermuda) II Limited Partnership. OBP - Management II L.P. is the general
partner of Oxford BioScience Partners II, L.P. and Oxford BioScience
Partners (GS-Adjunct) II, L.P. OBP - Management II L.P. and OBP Management
(Bermuda) II Limited Partnership are controlled by the same individuals. The
address of the Oxford partnerships is 315 Post Rd West, Suite 2, Westport,
CT 06880-4739.
(9) Includes 219,448 shares of common stock and immediately exercisable,
warrants to purchase 53,381 shares of Series A preferred stock and 5,280
shares of common stock at exercise prices per share of $8.43 and $12.07,
respectively. Komasta Properties, Ltd.'s address is 111 Alozorov Street, Tel
Aviv, Israel.
(10) Zeiss' address is 1 Zeiss Drive, Thornwood, New York 10594.
(11) Mr. Waggoner's address is 234 Lytton Avenue, Pittsburgh, Pennsylvania
15213.
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<PAGE> 63
DESCRIPTION OF CAPITAL STOCK
GENERAL
In accordance with our amended and restated certificate of incorporation,
we are authorized to issue up to 50,000,000 shares of common stock, par value
$.01 per share, and 5,000,000 shares of undesignated preferred stock, par value
$.01 per share. As of , 2000 there were 3,844,612 shares of common
stock outstanding held by 23 stockholders of record, and no shares of preferred
stock were outstanding.
The following summary description of our capital stock is not intended to
be complete and is qualified by reference to the provisions of applicable law
and to our amended and restated certificate of incorporation and our bylaws,
filed as exhibits to the registration statement of which this prospectus is a
part.
COMMON STOCK
Based on the number of shares outstanding as of March 3, 2000, and giving
effect to the issuance of the shares of common stock offered pursuant
to this prospectus, there will be shares of common stock outstanding upon
completion of this offering. This includes the conversion of all outstanding
shares of Series A preferred stock and Series B preferred stock upon the
consummation of this offering. In addition, as of March 3, 2000, there were
outstanding stock options to purchase 412,900 shares of common stock.
The holders of our common stock are entitled to one vote for each share
held of record upon such matters and in such manner as may be provided by law.
Subject to preferences applicable to any outstanding shares of preferred stock,
the holders of common stock are entitled to receive ratably dividends, if any,
as may be declared by the board of directors out of funds legally available for
dividend payments. In the event we liquidate, dissolve or wind up, the holders
of common stock are entitled to share ratably in all assets remaining after
payment of liabilities and liquidation preferences of any outstanding shares of
the preferred stock. Holders of common stock have no preemptive rights, or
rights to convert, their common stock into any other securities. There are no
redemption or sinking fund provisions applicable to the common stock. All
outstanding shares of common stock are fully paid and nonassessable.
PREFERRED STOCK
We have no present plans to issue any shares of preferred stock. However,
the preferred stock is issuable from time to time in one or more series and with
such designations, preferences and other rights for each series as shall be
stated in the resolutions providing for the designation and issue of each such
series adopted by our board of directors. The board of directors is authorized
by our amended and restated certificate of Incorporation to determine, among
other things, the voting, dividend, redemption, conversion, exchange and
liquidation powers, rights and preferences and the limitations thereon
pertaining to such series. The board of directors, without stockholder approval,
may issue preferred stock with voting and other rights that could adversely
affect the voting power of the holders of the common stock and that could have
certain anti-takeover effects. The ability of the board of directors to issue
preferred stock without stockholder approval could have the effect of delaying,
deferring or preventing a change in control of us or the removal of existing
management.
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<PAGE> 64
WARRANTS
As of December 31, 1999 the following warrants for the purchase of equity
securities were outstanding:
<TABLE>
<CAPTION>
NUMBER OF SHARES
OF COMMON STOCK
FOR WHICH PER SHARE
WARRANT IS EXERCISE
EXPIRATION DATE EXERCISABLE PRICE
----------------- ---------------- ---------
<S> <C> <C> <C>
Common stock warrants issued January 21, 1998..... January 21, 2002 177,936 $ 6.60
Common stock warrants issued January 21, 1998..... January 20, 2003 88,968 5.62
Series A preferred stock purchase warrant issued
January 21, 1998................................ June 18, 2002 4,448 5.62
Series A preferred stock purchase warrant issued
January 21, 1998................................ July 31, 2002 53,381 8.43
Common stock subscription warrant issued June 30,
1999(1)......................................... June 30, 2004 32,500 6.60
Common stock subscription warrant issued August
30, 1999(1)..................................... August 30, 2004 429 6.60
Common stock subscription warrant issued October
4, 1999(1)...................................... October 4, 2004 378 6.60
Common stock subscription warrant issued December
14, 1999(1)..................................... December 14, 2004 336 6.60
</TABLE>
- ---------------
(1) These warrants may be exercised for a reduced number of shares without
making a cash payment.
Each warrant provides for adjustment of the exercise price and the number
of securities issuable upon exercise of the warrant in the event of a
reorganization of our capital structure or a stock split. In addition, the
exercise price and number of shares issuable upon exercise of the warrants for
the purchase of 445,970 shares of common stock will be adjusted if we issue
stock at prices below the exercise price of such warrants. These rights for
readjustment will terminate on the closing of this offering. Finally, we have
granted the holders of the warrants for the purchase of 57,829 shares of common
stock rights to register the common stock issuable upon exercise of the
warrants.
ANTI-TAKEOVER EFFECTS OF VARIOUS PROVISIONS OF DELAWARE LAW AND OUR AMENDED AND
RESTATED CERTIFICATE OF INCORPORATION AND BYLAWS
Section 203 of the Delaware General Corporation Law. We are subject to
Section 203 of the Delaware General Corporation Law, which regulates corporate
acquisitions. In general, Section 203 prohibits a publicly-held Delaware
corporation from engaging in a "business combination" with an "interested
stockholder" for a period of three years following the date the person became an
interested stockholder, unless:
- before the date of the business combination, the transaction is approved
by the board of directors of the corporation;
- upon consummation of the transaction that resulted in the stockholder's
becoming an interested stockholder, he or she owned at least 85% of the
voting stock of the corporation outstanding at the time the transaction
commenced; or
- on or subsequent to such date the business combination is approved by the
board of directors and authorized at an annual or special meeting of
stockholders by the affirmative vote of at least 66 2/3% of the
corporation's voting stock not owned by the interested stockholder.
A "business combination" includes a merger, sale of assets or stock, or
other transaction resulting in a financial benefit to the interested
stockholder. In general, an "interested stockholder" is a person who, together
with affiliates and associates, owns, or within three years prior to the
determination of interested
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<PAGE> 65
stockholder status, did own, 15% or more of a corporation's voting stock. This
statute could prohibit or delay the accomplishment of mergers or other takeover
or change of control attempts with respect to us and, accordingly, may
discourage attempts to acquire us.
In addition, various provisions of our amended and restated certificate of
incorporation, our bylaws and our 2000 Stock Plan, which provisions will be in
effect immediately after the completion of this offering and are summarized in
the following paragraphs, may be deemed to have an anti-takeover effect and may
delay, defer or prevent a tender offer or takeover attempt that a stockholder
might consider in its best interest, including those attempts that might result
in a premium over the market price for the shares held by stockholders.
Classified Board of Directors. Our bylaws provide that, effective upon the
closing of this offering, the terms of office of the members of the board of
directors will be divided into three classes: Class A, whose term will expire at
the annual meeting of stockholders to be held in 2001, Class B, whose term will
expire at the annual meeting of stockholders to be held in 2002, and Class C,
whose term will expire at the annual meeting of stockholders to be held in 2003.
At each annual meeting of stockholders after the initial classification, the
successors to directors whose term will then expire will be elected to serve
from the time of election and qualification until the third annual meeting
following election. Our bylaws permit the board of directors to increase or
decrease the size of the board of directors. Any additional directorships
resulting from an increase in the number of directors will be distributed among
the three classes so that, as nearly as possible, each class will consist of
one-third of the total number of directors. This classification of the board of
directors may have the effect of delaying or preventing changes in control or
our management.
Amendment of Bylaws. Under our amended and restated certificate of
incorporation, the affirmative vote of the holders of at least 80% of the voting
power of all outstanding shares of our capital stock of Cellomics shall be
required to adopt, amend or repeal any provision of our bylaws.
Prohibition on Written Consents. Under our amended and restated certificate
of incorporation, upon the closing of this offering, our stockholders may not
take action by written consent.
Limitations on Special Meetings. Under our amended and restated certificate
of incorporation, upon the closing of this offering, special meetings of
stockholders may be called only by our president, the chairman of our board of
directors or a majority of our board of directors. Also, business transacted at
any special meeting must be limited to matters relating to the purposes set
forth in the notice of such special meeting.
Board Discretion in Decision Making. Under our amended and restated
certificate of incorporation, our board of directors, when evaluating an offer
related to a tender offer or other business combination, is authorized to give
due consideration to any relevant factors, including the social, legal and
economic effects upon employees, suppliers, customers, creditors, the community
in which we conduct business, and the economy of the state, region and nation.
Limitations on Amending Director Liability Limitation. Under our amended
and restated certificate of incorporation, the affirmative vote of at least 80%
of the voting power of all outstanding shares of our capital stock shall be
required to amend the limitations on liability of directors contained in our
amended and restated certificate of incorporation.
Acceleration of Options on Change of Control. Under our 2000 Stock Plan in
the event of certain mergers, a reorganization or consolidation of Cellomics
with or into another corporation or the sale of all or substantially all of our
assets or all of our capital stock wherein the successor corporation does not
assume outstanding options or issue equivalent options, our board of directors
is required to accelerate vesting of options outstanding.
REGISTRATION RIGHTS
After the completion of this offering, the holders of approximately
2,859,612 shares of common stock held by purchasers of our preferred stock and
approximately 324,502 shares of common stock issuable upon conversion of
outstanding warrants will be entitled to rights to register these shares under
the Securities Act
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<PAGE> 66
of 1933. Under the terms of the Series A Preferred Stock and Warrant Purchase
Agreement dated January 31, 1998, and the Series B Preferred Stock Purchase
Agreement dated February 23, 2000, whenever we propose to file a registration
statement under the Securities Act, the holders of registrable securities are
entitled to notice of the registration and have the right, subject to
limitations that the underwriters may impose on the number of shares included in
the registration, to include their registrable shares in the registration.
Additionally, beginning after January 1, 2001, stockholders who acquired
their shares of common stock upon conversion of our Series A preferred stock and
warrants issued in connection with our Series A financing have the right, upon
request by more than 50% of them, to require us to file a registration statement
covering their registrable securities on Forms S-1 or S-2 or any other
applicable form. Also, stockholders who acquired their shares upon conversion of
our Series B preferred stock or the exercise of warrants issued in connection
with our Series B financing have the right, upon request by more than 50% of
them, to require us to file a registration statement covering their registrable
shares on Forms S-1 or S-2 or any other applicable form. Under these rights,
each series of registrable shares can require us to register their shares if the
proposed public offering price of the shares held by those requesting
registration is at least $10,000,000. These registration rights are exercisable
only once per series if all registered securities are sold. We have also
provided that each of Series A and Series B stockholders have two additional
demand registration rights to register their shares on Form S-3 for each series.
These rights are limited to shares having an excess market value of $500,000. We
have also provided both of these series of holders incidental registration
rights which apply when our company or other stockholders register shares. We
will pay expenses for the demand registration and the two registrations on Form
S-3 for each registrable series, and for the incidental registrations for each
series.
The agreement provides that in connection with our initial public offering,
each stockholder agrees not to sell or otherwise dispose of any securities
without the prior written consent of us or the underwriters for a period of up
to 180 days if all other parties having registration rights and all members of
our board and our officers agree to be similarly restricted. The rights of the
holders of registrable shares terminate upon the earlier of five years from the
date of the closing of this offering or as to any single holder on the date when
all of that holder's registrable securities may be sold within a three month
period under Rule 144 of the Securities Act.
LISTING
We have applied to have our common stock approved for quotation on the
Nasdaq National Market under the symbol "CLMX."
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the common stock is American Stock
Transfer & Trust Company.
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<PAGE> 67
SHARES ELIGIBLE FOR FUTURE SALE
Immediately prior to this offering, there was no public market for our
common stock. Future sales of substantial amounts of common stock in the public
market, or the perception that sales could occur, could adversely affect the
market price of our common stock and our ability to sell equity securities.
Upon completion of this offering, we will have a total of
shares of common stock outstanding. Of these shares, the
shares sold in the offering, plus any additional shares sold upon
exercise of the underwriters' over-allotment option, will be freely tradable
unless they are purchased by our "affiliates," under the Securities Act. The
remaining outstanding shares are "restricted," which means they were
originally sold in offerings that were not subject to a registration statement
filed with the Securities and Exchange Commission. These restricted shares may
be resold only through registration under the Securities Act unless an exemption
from registration is available, such as the exemption afforded by Rule 144.
Directors and officers and stockholders who together own shares
of common stock will be subject to lock-up agreements providing that they will
not offer, sell or otherwise dispose of common stock owned by them for a period
of 180 days after the date of this prospectus. Prudential Securities
Incorporated, however, may in its sole discretion, at any time, without notice,
release all or any portion of the shares subject to lock-up agreements.
The following table indicates approximately when the shares of
our common stock that are not being sold in the offering but which were
outstanding as of , 2000 will be eligible for sale into the
public market:
<TABLE>
<CAPTION>
DAYS AFTER THE SHARES ELIGIBLE
EFFECTIVE DATE FOR SALE COMMENT
-------------- --------------- ---------------------------------------------------
<S> <C> <C>
On Effectiveness............... Shares not locked-up and saleable under Rule 144(k)
Shares not locked-up and saleable under Rules 144 ,
90 days........................ 144(k) and 701
Lock-up released; shares saleable under Rules 144,
180 days....................... 144(k) and 701
</TABLE>
RULE 144
Generally, Rule 144 as currently in effect provides that, beginning 90 days
after the first date of this prospectus, a person who has beneficially owned
shares of our common stock for at least one year would be entitled to sell
within any three-month period, a number of shares that does not exceed the
greater of:
- 1% of the number of shares of common stock then outstanding, which, based
on the shares of outstanding as of , 2000 will equal
approximately shares; or
- the average weekly trading volume of the common stock on the Nasdaq
National Market during the four calendar weeks preceding the filing of
the notice on Form 144 with respect to the sale.
Rule 144 provides limitations in the manner of sales and imposes
requirements as to notice and the availability of current public information
about us.
RULE 144(K)
Under Rule 144(k), a person who has not been one of our affiliates at any
time during the 90 days preceding a sale, and who has beneficially owned the
shares proposed to be sold for at least two years, may sell his or her shares
without complying with the manner of the sale, public information, volume
limitation or notice provisions of Rule 144. Therefore, unless otherwise
restricted, a person who has been a non-affiliate for at least two years may
sell his or her shares in the open market immediately after the lock-up
agreements expire.
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<PAGE> 68
RULE 701
Rule 701 permits any of our employees, officers, directors or consultants
who purchased their shares under a compensatory stock or option plan or other
written agreement prior to the effective date of this offering to sell such
shares under Rule 144 without complying with the holding period, public
information, volume limitation or notice requirements of Rule 144. All holders
of Rule 701 shares may not sell their Rule 701 shares until 90 days after the
date of this prospectus. However, substantially all shares of our common stock
issued under Rule 701 are subject to lock-up agreements described above.
Shortly following the date of this prospectus, we intend to file a
registration statement on Form S-8 under the Securities Act covering shares of
our common stock reserved for issuance under our stock option plans. Shares
registered under this registration statement will, subject to Rule 144 volume
limitations applicable to our affiliates, be available for sale in the open
market immediately after the lock-up agreements expire. As of February 26, 2000,
an aggregate of 412,700 shares of common stock were subject to outstanding
options.
REGISTRATION RIGHTS
As of the close of this offering, holders of 2,859,612 shares of common
stock and warrants exercisable to purchase 323,359 shares of common stock will
be entitled to certain rights with respect to the registration of those shares
under the Securities Act. After these shares are registered, they will be freely
tradable. For a description of these rights, see "Description of Capital Stock."
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<PAGE> 69
UNDERWRITING
We have entered into an underwriting agreement with the underwriters named
below for whom Prudential Securities Incorporated, ING Barings LLC and Dain
Rauscher Incorporated are acting as representatives. We are obligated to sell,
and the underwriters are obligated to purchase, all of the shares offered on the
cover page of this prospectus, if any are purchased. Subject to certain
conditions of the underwriting agreement, each underwriter has severally agreed
to purchase the shares indicated opposite its name:
<TABLE>
<CAPTION>
NUMBER
OF SHARES
UNDERWRITERS ---------
<S> <C>
Prudential Securities Incorporated..........................
ING Barings LLC.............................................
Dain Rauscher Incorporated..................................
--------
Total..................................................
========
</TABLE>
The underwriters may sell more shares than the total number of shares
offered on the cover page of this prospectus and they have, for a period of 30
days from the date of this prospectus, an over-allotment option to purchase up
to additional shares from us. If any additional shares are
purchased, the underwriters will severally purchase the shares in the same
proportion as per the table above.
The representatives of the underwriters have advised us that the shares
will be offered to the public at the offering price indicated on the cover page
of this prospectus. The underwriters may allow to selected dealers a concession
not in excess of $ per share and such dealers may reallow a concession not
in excess of $ per share to certain other dealers. After the shares are
released for sale to the public, the representatives may change the offering
price and the concessions.
We have agreed to pay to the underwriters the following fees, assuming both
no exercise and full exercise of the underwriters' over-allotment option to
purchase additional shares.
<TABLE>
<CAPTION>
TOTAL FEES
-------------------------------------------------
FEE WITHOUT EXERCISE OF FULL EXERCISE OF
PER SHARE OVER-ALLOTMENT OPTION OVER-ALLOTMENT OPTION
--------- --------------------- ------------------------
<S> <C> <C> <C>
Fees paid by us......................... $ $ $
</TABLE>
In addition, we estimate that we will spend approximately $ in
expenses for this offering. We have agreed to indemnify the underwriters against
certain liabilities, including liabilities under the Securities Act, or
contribute to payments that the underwriters may be required to make in respect
of these liabilities.
We, our officers and directors and substantially all of our stockholders
have entered into lock-up agreements under which we and they have agreed not to
offer or sell any shares of common stock or securities convertible into or
exchangeable or exercisable for shares of common stock for a period of 180 days
from the date of this prospectus without the prior written consent of Prudential
Securities Incorporated, on behalf of the underwriters. Prudential Securities
Incorporated may, at any time and without notice, waive the term of these
lock-up agreements specified in the underwriting agreement.
Prior to this offering, there has been no public market for the common
stock of Cellomics. The public offering price, negotiated among us and the
representatives, is based upon various factors such as our financial and
operating history and condition, our prospects, the prospects for the industry
we are in and prevailing market conditions.
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<PAGE> 70
Prudential Securities Incorporated, on behalf of the underwriters, may
engage in the following activities in accordance with applicable securities
rules:
- Over-allotments involving sales in excess of the offering size, creating
a short position. Prudential Securities may elect to reduce this short
position by exercising some or all of the over-allotment option.
- Stabilizing and short covering: stabilizing bids to purchase the shares
are permitted if they do not exceed a specified maximum price. After the
distribution of shares has been completed, short covering purchases in
the open market may also reduce the short position. These activities may
cause the price of the shares to be higher than would otherwise exist in
the open market.
- Penalty bids permitting the representatives to reclaim concessions from a
syndicate member for the shares purchased in the stabilizing or short
covering transactions.
Such activities, which may be commenced and discontinued at any time, may
be effected on the Nasdaq National Market, in the over-the-counter market or
otherwise.
Each underwriter has represented that it has complied and will comply with
all applicable laws and regulations in connection with the offer, sale or
delivery of the shares and related offering materials in the United Kingdom,
including:
- the Public Offers of Securities Regulations 1995,
- the Financial Services Act 1986, and
- the Financial Services Act 1986, (Investment Advertisements) (Exemptions)
Order 1996 (as amended).
We have asked the underwriters to reserve shares for sale at the same
offering price directly to our officers, directors, employees and other business
affiliates or related third parties. The number of shares available for sale to
the general public in the offering will be reduced to the extent such persons
purchase the reserved shares.
Prudential Securities Incorporated facilitates the marketing of new issues
online through its Prudential Securities.com division. Clients of Prudential
Advisor(sm), a full service brokerage firm program, may view offering terms and
a prospectus online and place orders through their financial advisors.
LEGAL MATTERS
Certain legal matters with respect to the legality of the issuance of the
shares of the common stock offered by this prospectus will be passed upon for us
by Buchanan Ingersoll Professional Corporation, Pittsburgh, Pennsylvania.
Certain legal matters in connection with this offering will be passed upon for
the underwriters by Skadden, Arps, Slate, Meagher & Flom (Illinois), Chicago,
Illinois.
EXPERTS
The financial statements as of December 31, 1998 and 1999 and for each of
the three years in the period ended December 31, 1999 included in this
Prospectus and the financial statement schedule included in the Registration
Statement have been so included in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
Certain legal matters with respect to the statements in this prospectus
under the captions "Risk Factors-The rights we rely on to protect our
intellectual property underlying our products may not be adequate, which could
enable third parties to use our technology and would reduce our ability to
compete in the market," "-We may be involved in lawsuits to protect or enforce
our patents. This would be expensive and, if we lose such a lawsuit, we may in
turn lose some of our intellectual property rights, which would reduce our
ability to compete," "-Our success will depend partly on our ability to operate
without infringing on or utilizing the proprietary rights of others" and
"Business -Intellectual Property Rights" have been reviewed and approved
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<PAGE> 71
by McDonnell Boehnen Hulbert & Berghoff, our patent counsel who are experts in
these matters and are subject to an opinion to be rendered to the underwriters.
We are including this information relying on their review and approval.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement on Form S-1 in connection with this offering. This prospectus does not
contain all the information in the registration statement. In addition, upon
completion of the offering, we will be required to file annual, quarterly and
current reports, proxy statements and other information with the Securities and
Exchange Commission. Whenever a reference is made in this prospectus to any
contract or other document of ours, the reference may not be complete and you
should refer to the exhibits that are a part of the registration statement for a
copy of the contract or document.
The registration statement and the exhibits and schedules thereto may be
inspected without charge at the Public Reference Room of the Commission at Room
1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the regional
offices of the Commission located at Seven World Trade Center, Suite 1300, New
York, New York 10048 and Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511. Copies of these documents may be obtained from the
Public Reference Room of the Commission at prescribed rates. This material also
may be obtained on the Commission's website at "http://www.sec.gov." Information
regarding the operation of the Public Reference Room may be obtained by calling
the Commission at 1(800) SEC-0330.
We intend to furnish our stockholders with annual reports containing our
audited financial statements and make available quarterly reports containing
unaudited financial information for the first three quarters of each year.
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<PAGE> 72
CELLOMICS, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Independent Accountants........................... F-2
Balance Sheets as of December 31, 1998 and 1999............. F-3
Statement of Operations for the years ended December 31,
1997, 1998 and 1999....................................... F-4
Statement of Stockholders' Equity for the years ended
December 31, 1997, 1998 and 1999.......................... F-5
Statement of Cash Flows for the years ended December 31,
1997, 1998 and 1999....................................... F-6
Notes to Financial Statements............................... F-7
</TABLE>
F-1
<PAGE> 73
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Stockholders of
Cellomics, Inc.
In our opinion, the accompanying balance sheets and the related statements
of operations, of stockholders' equity, and of cash flows present fairly, in all
material respects, the financial position of Cellomics, Inc. at December 31,
1998 and 1999, and the results of its operations and its cash flows for each of
the three years in the period ended December 31, 1999, in conformity with
accounting principles generally accepted in the United States. These financial
statements are the responsibility of the company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with auditing standards generally accepted in the United States which require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.
PricewaterhouseCoopers LLP
Pittsburgh, Pennsylvania
March 3, 2000
F-2
<PAGE> 74
CELLOMICS, INC.
BALANCE SHEETS
AS OF DECEMBER 31, 1998 AND 1999
<TABLE>
<CAPTION>
DECEMBER 31, 1999
DECEMBER 31, PRO FORMA
----------------------------- STOCKHOLDERS'
1998 1999 EQUITY (NOTE 1)
----------- ------------ -----------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................. $ 662,454 $ 1,341,333
Accounts receivable....................... 1,357,733 1,572,282
Inventories............................... 335,500 224,536
Prepaid expenses and other current
assets.................................. 105,267 335,221
----------- ------------
Total current assets........................... 2,460,954 3,473,372
Property and equipment, net (Note 3)........... 1,501,790 2,386,555
----------- ------------
Total assets................................... $ 3,962,744 $ 5,859,927
=========== ============
LIABILITIES, MANDATORILY REDEEMABLE
PREFERRED STOCK AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................... $ 644,429 $ 1,341,520
Accrued expenses (Note 4)................. 1,067,099 915,339
Deferred revenue.......................... 182,393 528,480
Payable to related party (Note 10)........ -- 1,000,000
Current maturities of long-term debt (Note
5)...................................... 157,626 911,035
----------- ------------
Total current liabilities...................... 2,051,547 4,696,374
Long-term debt less current maturities (Note
5)........................................... 653,180 3,744,546
Payable to related party (Note 10)............. -- 1,000,000
----------- ------------
Total liabilities.............................. 2,704,727 9,440,920
----------- ------------
Commitments and contingencies (Notes 6 and
10).......................................... -- --
Mandatorily redeemable convertible preferred
stock (Note 8)............................... 6,252,356 12,152,654
----------- ------------
Stockholders' equity (deficit):
Common stock, $.01 par value; 5,000,000
shares authorized in 1998 and 1999;
6,000,000 shares authorized, pro forma;
1,154,210 and 1,184,319 shares issued
and outstanding in 1998 and 1999;
3,150,937 shares issued and outstanding
pro forma............................... 11,542 11,843 31,509
Additional paid-in capital................ 1,696,762 1,203,001 12,017,197
Deferred compensation (Note 8)............ (188,102) (298,780) (298,780)
Accumulated deficit....................... (6,514,541) (16,649,711) (16,649,711)
----------- ------------ -----------
Total stockholders' equity (deficit)........... (4,994,339) (15,733,647) (4,899,785)
----------- ------------ ===========
Total liabilities, mandatorily redeemable
preferred stock and stockholders' equity..... $ 3,962,744 $ 5,859,927
=========== ============
</TABLE>
The accompanying notes are an integral part of these financial statements
F-3
<PAGE> 75
CELLOMICS, INC.
STATEMENT OF OPERATIONS
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
<TABLE>
<CAPTION>
1997 1998 1999
----------- ----------- ------------
<S> <C> <C> <C>
Revenues:
Product sales............................ $ -- $ -- $ 1,350,041
Development and collaboration agreement
and grant revenues.................... 394,935 2,273,082 2,040,410
----------- ----------- ------------
Total revenues 394,935 2,273,082 3,390,451
----------- ----------- ------------
Operating costs and expenses:
Costs of product sales................... -- -- 404,785
Research and development................. 1,486,156 3,909,126 9,129,743
Selling, general and administrative...... 1,334,014 1,801,985 3,623,241
Amortization of deferred compensation.... -- 71,242 207,247
----------- ----------- ------------
Total operating costs and
expenses.......................... 2,820,170 5,782,353 13,365,016
----------- ----------- ------------
Loss from operations......................... (2,425,235) (3,509,271) (9,974,565)
Interest income (expense):
Interest expense......................... (37,950) (43,944) (302,040)
Interest income.......................... 25,309 58,555 141,435
----------- ----------- ------------
Loss before income taxes..................... (2,437,876) (3,494,660) (10,135,170)
Provision for income taxes (Note 7).......... -- -- --
----------- ----------- ------------
Net loss..................................... (2,437,876) (3,494,660) (10,135,170)
Accrued dividends and accretion on
mandatorily redeemable convertible
preferred stock............................ -- (518,017) (933,232)
----------- ----------- ------------
Net loss attributable to common
stockholders............................... $(2,437,876) $(4,012,677) $(11,068,402)
=========== =========== ============
Net loss per share - basic and diluted (Note
9)......................................... $ (2.16) $ (3.48) $ (9.36)
=========== =========== ============
Shares used to compute basic and diluted net
loss per share............................. 1,128,650 1,152,244 1,182,003
=========== =========== ============
Pro forma net loss per share (Note 9)........ $ (3.26)
============
Shares used to compute pro forma net loss per
share...................................... 3,111,551
============
</TABLE>
The accompanying notes are an integral part of these financial statements
F-4
<PAGE> 76
CELLOMICS, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL DEFERRED TOTAL
------------------- PAID-IN STOCK ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT CAPITAL COMPENSATION DEFICIT EQUITY
--------- ------- ---------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1997..... 1,128,650 $11,287 $1,955,690 $ -- $ (582,005) $ 1,384,972
Net loss......................... -- -- -- -- (2,437,876) (2,437,876)
--------- ------- ---------- --------- ------------ ------------
Balance at December 31, 1997... 1,128,650 11,287 1,955,690 -- (3,019,881) (1,052,904)
Issuance of common stock for
anti-dilution rights........... 25,560 255 (255) -- -- --
Issuance of stock options to
employees...................... -- -- 259,344 (259,344) -- --
Amortization of deferred
compensation................... -- -- -- 71,242 -- 71,242
Dividends and accretion accrued
on mandatorily redeemable
convertible preferred stock.... -- -- (518,017) -- -- (518,017)
Net loss......................... -- -- -- -- (3,494,660) (3,494,660)
--------- ------- ---------- --------- ------------ ------------
Balance at December 31, 1998... 1,154,210 11,542 1,696,762 (188,102) (6,514,541) (4,994,339)
Issuance of common stock for
anti-dilution rights........... 30,109 301 (301) -- -- --
Issuance of stock purchase
warrants....................... -- -- 121,847 -- -- 121,847
Issuance of stock options to
employees...................... -- -- 317,925 (317,925) -- --
Amortization of deferred
compensation................... -- -- -- 207,247 -- 207,247
Dividends and accretion accrued
on mandatorily redeemable
convertible preferred stock.... -- -- (933,232) -- -- (933,232)
Net loss......................... -- -- -- -- (10,135,170) (10,135,170)
--------- ------- ---------- --------- ------------ ------------
Balance at December 31, 1999... 1,184,319 $11,843 $1,203,001 $(298,780) $(16,649,711) $(15,733,647)
========= ======= ========== ========= ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements
F-5
<PAGE> 77
CELLOMICS, INC.
STATEMENT OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
<TABLE>
<CAPTION>
1997 1998 1999
----------- ----------- ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss......................................... $(2,437,876) $(3,494,660) $(10,135,170)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization............... 79,475 143,487 486,008
Amortization of deferred compensation....... -- 71,242 207,247
Increase (decrease) in cash from changes in:
Accounts receivable......................... 158,722 (1,357,733) (214,549)
Inventories................................. (119,770) (215,730) (147,036)
Prepaid expenses and other current assets... (33,045) (67,473) (241,711)
Accounts payable and accrued expenses....... 538,644 883,600 545,331
Payable to related party.................... -- -- 2,000,000
Deferred revenue............................ 450,000 (267,607) 346,087
----------- ----------- ------------
Net cash used in operating activities.... (1,363,850) (4,304,874) (7,153,793)
----------- ----------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures.......................... (205,421) (1,377,681) (1,070,554)
----------- ----------- ------------
Net cash used in investing activities.... (205,421) (1,377,681) (1,070,554)
----------- ----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of mandatorily redeemable
convertible preferred stock................. -- 5,214,788 4,967,066
Proceeds from issuance of convertible notes
and stock purchase warrants................. 500,000 -- 1,800,000
Borrowings under term note and equipment
financing facilities........................ -- 879,762 2,415,952
Repayment of term note and equipment financing
facilities borrowings....................... -- (68,956) (279,792)
----------- ----------- ------------
Net cash provided by financing
activities............................. 500,000 6,025,594 8,903,226
----------- ----------- ------------
Net increase (decrease) in cash and cash
equivalents...................................... (1,069,271) 343,039 678,879
CASH AND CASH EQUIVALENTS:
Beginning of year............................. 1,388,686 319,415 662,454
----------- ----------- ------------
End of year................................... $ 319,415 $ 662,454 $ 1,341,333
=========== =========== ============
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest........................ $ -- $ 17,487 $ 252,794
=========== =========== ============
NON-CASH FINANCING ACTIVITIES:
Conversion of notes to mandatorily redeemable
convertible preferred stock................. $ -- $ 519,550 $ --
=========== =========== ============
Dividends and accretion on mandatorily
redeemable convertible preferred stock...... $ -- $ 518,017 $ 933,232
=========== =========== ============
</TABLE>
The accompanying notes are an integral part of these financial statements
F-6
<PAGE> 78
CELLOMICS, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
1. ORGANIZATION AND BASIS OF PRESENTATION
Organization
Cellomics, Inc. (the "Company" or "Cellomics") was incorporated in Delaware
on January 16, 1998 as the successor company to BioDx Inc. which was formed
on May 3, 1995. Cellomics is in the business of extending the power of
genomics and proteomics by defining the cellular functions of genes and
proteins in order to make life sciences research, including drug discovery,
more productive and cost effective. Cellomics offers an array of products
designed to seamlessly integrate the generation of data to the extraction of
information, and ultimately create cellular knowledge. Cellomics generates
cellular data using its proprietary portfolio of instruments, assays and
reagents. The data generated is then stored, managed and analyzed using its
proprietary information products. Cellomics uses its information products,
coupled with internally and externally generated informatics, to build a
virtual cell which maps the complex interactive network of cellular
components and their interactions, thereby generating knowledge. Cellomics
knowledge products aim to systematize, in a searchable, electronic format,
our continuously evolving understanding of cellular biology.
The Company will require additional financing to fund currently planned
operating levels in 2000. On February 23, 2000, the Company received $6.5
million in cash from the sale of Series B Mandatorily Redeemable Convertible
Preferred Stock ("Series B Preferred Stock") and exchanged $1.8 million of
convertible notes, plus accrued interest, for Series B Preferred Stock (see
Note 13). In the event an initial public offering of common stock is not
completed as planned (see Note 13), management will pursue a number of
alternative sources to secure their funding. These alternatives include
additional private placements of equity or debt securities or strategic
equity investments. In addition, certain Series A preferred stockholders
have committed to provide funding of up to $2.0 million. In the event that
these sources are not sufficient or available when needed, management will
curtail certain activities, including various research and development
programs.
Unaudited Pro Forma Balance Sheet
As described in Note 13, the Company plans to complete an initial public
offering of common stock during the second quarter of 2000. If the initial
public offering is consummated as presently anticipated, all shares of
Series A and Series B preferred stock (see Notes 8 and 13) will
automatically convert into an equal number of shares of common stock. The
unaudited pro forma balance sheet reflects the subsequent conversion of
Series A preferred stock into common stock as if such conversion had
occurred as of December 31, 1999. The unaudited pro forma balance sheet does
not include the sale of Series B preferred stock in February 2000 for gross
proceeds of $6.5 million or the simultaneous conversion of $1.8 million of
convertible demand notes, plus accrued interest, into Series B preferred
stock.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash and Cash Equivalents
Highly liquid investments with an original maturity of 90 days or less are
classified as cash equivalents. The Company's cash and cash equivalents are
maintained in deposit accounts, certificates of deposit and money market
accounts.
Concentrations of Credit Risks
Substantially all of the Company's cash and cash equivalents are maintained
at one financial institution.
F-7
<PAGE> 79
CELLOMICS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
The Company's accounts receivable are primarily from the United States
government and pharmaceutical customers located in the United States and the
United Kingdom. During fiscal years 1997, 1998 and 1999, approximately 97%,
60% and 93%, respectively, of revenues was concentrated with three customers
in 1997 and 1998 and four customers in 1999. At December 31, 1999, amounts
due from three customers represented 95% of gross trade receivables.
Inventories
Inventories, which consist primarily of microscope and camera components
used in the Company's high content screening instrumentation platform, are
stated at the lower of average cost or market.
Income Taxes
Deferred income taxes are recorded using the liability method. Under this
method, deferred tax assets and liabilities are determined based on the
differences between the financial statement and tax bases of assets and
liabilities using enacted tax rates in effect in the years 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.
Property and Equipment
Property and equipment is carried at cost. Depreciation is computed using
the straight-line method over the estimated useful lives of the assets,
generally ranging from three years for software and up to seven years for
furniture and fixtures. Repairs and maintenance are charged to expense as
incurred.
Certain laboratory and computer equipment used by the Company could be
subject to technological obsolescence in the event that significant
advancement is made in competing or developing equipment technologies.
Management continually reviews the estimated useful lives of technologically
sensitive equipment and believes that those estimates appropriately reflect
the current useful life of its assets. In the event that a currently unknown
significantly advanced technology became commercially available, the Company
would re-evaluate the value and estimated useful lives of its existing
equipment, possibly having a material impact on the financial statements.
The Company periodically reviews all long-lived assets for impairment.
Assets are written down to the net realizable value when the carrying costs
exceed the gross undiscounted cash flows expected to be generated by such
assets. To date, there have been no asset impairments that would warrant a
write-down.
Revenue Recognition
Revenue from product sales is recognized upon shipment of the product to the
customer. The Company recognizes development and collaboration agreement and
grant revenues on a straight-line basis over the contract period or as work
is performed. Where prototype instruments are delivered under collaboration
agreements, revenue is recognized when the prototype is shipped to the
customer. When payment for revenues under maintenance, support or assay
development contracts is received in advance of the services performed, the
company records deferred revenue related to these agreements.
Advertising
Media placement costs are expensed in the month that the advertising
appears. Total advertising expenses were $118,616 in 1999. No advertising
costs were incurred in 1997 and 1998.
F-8
<PAGE> 80
CELLOMICS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
Research and Development
Research and development costs are expensed as incurred.
Stock-Based Compensation
As permitted by the provisions of SFAS No. 123, "Accounting for Stock-Based
Compensation" (SFAS No. 123), the Company has elected to measure stock-based
compensation under the provisions of Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" (APB No. 25), and to adopt
the disclosure-only alternative described in SFAS No. 123. For stock options
granted at exercise prices less than fair value, the Company records
deferred stock-based compensation. Such deferred stock-based compensation is
amortized over the vesting period of each individual award using the
accelerated basis in accordance with Financial Accounting Standards Board
("FASB") Interpretation No. 28.
Foreign Currency
Foreign currency transaction gains and losses are included in other income
in the statement of operations during the period in which they arise.
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
the disclosure of contingent assets and liabilities at the date of the
financial statements. Estimates also affect the amounts of revenues and
expenses during the reported periods. Actual results could differ from the
estimates.
Comprehensive Income (Loss)
During 1997, 1998, and 1999, the Company had no other comprehensive income
items. Accordingly, the comprehensive loss for each of these periods is
equal to the net loss.
Recent Accounting Pronouncements
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which provides a comprehensive and
consistent standard for the recognition and measurement of derivatives and
hedging activities. 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 fair value of a derivative be
recognized currently in earnings unless specific hedge accounting criteria
are met. SFAS No. 133 is effective for fiscal years beginning after June 15,
2000 and is not anticipated to have a material impact on our results of
operations or financial position.
F-9
<PAGE> 81
CELLOMICS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
3. PROPERTY AND EQUIPMENT
Property and equipment consisted of:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1998 1999
---------- ----------
<S> <C> <C>
Computer equipment and software............................. $ 471,672 $ 930,930
Laboratory equipment........................................ 1,172,083 1,894,762
Furniture and fixtures...................................... 137,152 208,820
Leased assets and leasehold improvements.................... -- 74,950
---------- ----------
Property and equipment, cost........................... 1,780,907 3,109,462
Less: accumulated depreciation.............................. 279,117 722,907
---------- ----------
Net property and equipment............................. $1,501,790 $2,386,555
========== ==========
</TABLE>
During 1999, $258,000 of inventory was transferred to property and
equipment.
4. ACCRUED EXPENSES
Accrued expenses consisted of:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1998 1999
---------- --------
<S> <C> <C>
Incentive compensation and other employee costs............. $ 275,000 $422,081
Professional services....................................... 420,634 98,500
Due to subcontractors....................................... 158,986 191,119
Other....................................................... 212,479 203,639
---------- --------
$1,067,099 $915,339
========== ========
</TABLE>
5. LONG-TERM DEBT
Long-term debt consisted of:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1998 1999
-------- ----------
<S> <C> <C>
Equipment financing line of credit - 1998................... $810,806 $1,185,975
Equipment financing line of credit - 1999................... -- 209,277
Senior term loan............................................ -- 1,499,523
Convertible notes payable to related parties................ -- 1,708,615
Capital lease obligations................................... -- 52,191
-------- ----------
Total long-term debt and capital lease obligations..... 810,806 4,655,581
Less: current maturities............................... 157,626 911,035
-------- ----------
Long-term debt less current maturities...................... $653,180 $3,744,546
======== ==========
</TABLE>
On September 11, 1998, the Company entered into a $1.5 million non-revolving
equipment financing line of credit agreement (the "1998 Equipment Financing
Line"). Borrowings against the 1998 Equipment Financing Line can be in
increments of not less than $75,000 in the form of a note and are
collateralized by the equipment purchased. The notes are payable in 48 equal
monthly installments with a 10% balloon payment at the end of the term and
bear interest ranging from 12.7% to 12.9%. Borrowings under this facility
are fully utilized.
F-10
<PAGE> 82
CELLOMICS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
On June 30, 1999, the Company entered into a $1.5 million Senior Term Debt
Financing Facility (the "Term Debt Agreement") that is collateralized by all
of the Company's assets except for $5.0 million of existing or future
financed equipment. The borrowings may be used for working capital purposes
and have a six-month interest-only period followed by 30 equal monthly
installments of principal and interest. The note bears interest at 12.5%.
On July 21, 1999, the Company entered into a $3.0 million non-revolving
equipment financing line of credit agreement (the "1999 Equipment Financing
Line"). Borrowings against the 1999 Equipment Financing Line are
collateralized by the equipment purchased. The notes are payable in 48 equal
monthly installments. Available borrowings remaining under this facility at
December 31, 1999 are $2,773,345. The notes bear interest ranging from 11.0%
to 12.0%.
The scheduled maturities of the lines of credit, the senior term loan and
the capital leases during each of the next five years are $911,035 in 2000,
$1,036,262 in 2001, $839,623 in 2002, $160,046 in 2003 and $0 in 2004.
On November 30, 1999, certain Series A preferred stockholders loaned $1.8
million in convertible demand notes ("Convertible Demand Notes") to the
Company. The Convertible Demand Notes bear interest at 10% per annum. In the
event the Company completes a Qualified Financing (defined as the sale by
the Company of $1,000,000 or more in convertible debt or equity securities),
the Convertible Demand Notes plus any accrued interest convert into
preferred stock at the price of the Qualified Financing. The Convertible
Demand Notes are payable upon demand in the event the Company has not
completed a Qualified Financing by April 1, 2000. In connection with the
Convertible Demand Notes, the holders received common stock purchase
warrants. The total proceeds of $1.8 million were allocated between the
notes and the warrants based upon their relative fair values at the date of
issuance. The resulting discount on the convertible notes is being amortized
to interest expense over the original term of the notes. The convertible
demand notes have been classified as long-term debt on the basis that they
have been converted to Series B Preferred Stock on February 23, 2000 (see
Note 13).
6. COMMITMENTS
The Company leases office space and office equipment under operating leases
expiring through 2001. Total rent expense amounted to $95,758, $176,998 and
$292,655 for 1997, 1998 and 1999, respectively. Minimum lease commitments
for facilities and equipment at December 31, 1999 are as follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
YEAR LEASES LEASES
- ---- -------- ---------
<S> <C> <C>
2000........................................................ $ 20,405 $342,099
2001........................................................ 20,329 173,981
2002........................................................ 14,375 --
2003........................................................ 9,176 --
2004........................................................ -- --
-------- --------
Total minimum lease payments........................... $ 64,285 $516,080
========
Less: amounts representing interest.................... (12,094)
--------
Present value of minimum capital lease payments........ $ 52,191
========
</TABLE>
The Company has other commitments in the ordinary course of business
totaling approximately $375,000 during 2000.
F-11
<PAGE> 83
CELLOMICS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
7. INCOME TAXES
As of December 31, 1999, the Company had federal and state net operating
loss carryforwards totaling approximately $15.5 million. The Company also
had research and development tax credit carryforwards of approximately
$725,000. The federal net operating loss and credit carryforwards will
expire at various dates beginning in the year 2015 through 2019, if not
utilized. The Commonwealth of Pennsylvania net operating losses will expire
at various dates beginning in 2005 through 2009, if not utilized.
Utilization of the Company's net operating loss carryforwards and credits
may be subject to an annual limitation due to the change in ownership
provisions of the Internal Revenue Code of 1986 and similar state
provisions. The annual limitation may result in the expiration of net
operating losses and credits before utilization.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets for financial reporting and the amount
used for income tax purposes. Significant components of the Company's
deferred taxes for federal and state income taxes are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1998 1999
----------- -----------
<S> <C> <C>
Deferred tax assets (liabilities):
Net operating loss carryforwards..................... $ 2,719,358 $ 6,309,067
Research and development credits..................... 282,995 725,060
Other, net........................................... (10,021) 72,534
----------- -----------
Total deferred tax assets................................. 2,992,332 7,106,661
Valuation allowance....................................... (2,992,332) (7,106,661)
----------- -----------
Net deferred tax assets................................... $ -- $ --
=========== ===========
</TABLE>
The net valuation allowance increased by $1,918,332 and $4,114,329 for the
fiscal years ended December 31, 1998 and 1999, respectively, principally due
to the Company's operating losses. Management believes that there is
sufficient uncertainty regarding the realization of deferred tax assets such
that a full valuation allowance is appropriate.
8. MANDATORILY REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY
Mandatorily Redeemable Convertible Preferred Stock
On January 8, 1998, the Company's board of directors authorized 2,024,500
shares of $.01 par value preferred stock.
On January 21, 1998, through a private placement offering, the Company,
issued 984,491 shares of Series A Mandatorily Redeemable Convertible
Preferred Stock ("Series A Preferred Stock") for gross proceeds of
$5,532,839. Additionally, the holders of $500,000 of outstanding convertible
notes converted the notes plus accrued interest of $19,550 for 92,447 shares
of Series A Preferred Stock. On January 15, 1999, the Company received a
second investment related to the January 21, 1998 private placement
offering. The second investment resulted in the issuance of an additional
889,680 shares of Series A Preferred Stock for gross proceeds of $5,000,000.
At December 31, 1998 and 1999, 1,076,938 and 1,966,618 shares, respectively,
were outstanding.
Series A Preferred Stock is convertible into common stock on a one for one
basis. Shares of Series A Preferred Stock have voting rights equal to common
stock on an as-if-converted basis. Shares of Series A Preferred Stock are
automatically converted into shares of common stock at the closing of an
initial public offering at a price per share to the public of at least three
times the original Series A Preferred
F-12
<PAGE> 84
CELLOMICS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
Stock conversion price per share, as defined, and which results in gross
proceeds to the Company of at least $15.0 million.
The Series A preferred stockholders are entitled to receive annual dividends
at a rate equal to $0.45 per annum per share. Dividends shall accrue on each
share beginning on the date of issuance and shall be payable each January 1
for the period then ended. Dividends, which to date have not been declared
or paid, may be settled either in cash, or in common stock at the option of
the Company. At December 31, 1998 and 1999, cumulative dividends due Series
A preferred stockholders were equal to $458,067 and $1,327,689,
respectively. In addition, costs related to the issuance of the Series A
Preferred Stock were recorded as a discount from the redemption value and
are being accreted through periodic charges in a manner similar to the
accrued dividends over the period up to the date of redemption. The
cumulative dividends and the accreted redemption value are included in the
carrying amount of mandatorily redeemable convertible preferred stock.
Series A preferred stockholders are entitled to receive, upon liquidation, a
distribution of $5.62 per share, the issuance price, plus any accrued
dividends in preference to the Common stockholders. Thereafter, the
remaining assets and funds, if any, shall be distributed ratably on a per
share basis among all preferred and common stockholders.
At any time subsequent to January 21, 2003, the Company is required to
redeem, upon written request from the holders of a majority of the then
outstanding shares of Series A Preferred Stock, all of the outstanding
shares of Series A Preferred Stock by paying in cash the sum of $5.62 per
share, the issuance price, plus any accrued and unpaid dividends. Redemption
occurs in four equal installments beginning on the initial date of
redemption and three successive anniversary dates thereafter.
The Series A preferred stockholders have anti-dilution price protection and
certain preemptive rights to participate in the issuance of new securities.
These rights terminate upon conversion.
Common Stock
On January 8, 1998, the number of authorized shares of common stock was
decreased from 100,000,000 to 5,000,000. On February 23, 2000, the number of
authorized shares of common stock was increased to 6,000,000.
Carl Zeiss, Inc. ("Carl Zeiss"), an existing stockholder, received a total
of 55,669 shares of common stock in 1998 and 1999 under anti-dilution rights
acquired from a previous investment. Carl Zeiss has certain anti-dilution
and registration rights similar to the Series A preferred stockholders.
Stock Purchase Warrants
In connection with the Series A private placement offering in 1998, the
Company issued 177,936 common stock purchase warrants to the investors. The
warrants are exercisable by the holders at any time at an exercise price of
$6.60 per share. The warrants terminate at the earlier of January 21, 2002
or, under certain conditions, at the date of a qualified public offering. In
addition, the Company issued 88,960 common stock purchase warrants to the
private placement advisors, which may be exercised any time prior to the
termination date of January 20, 2003 at an exercise price of $5.62 per
share. The holders of the $500,000 convertible notes also received warrants
to purchase 57,829 of preferred stock prior to the termination date of June
18, 2002 at exercise prices ranging from $6.62 to $8.43 per share,
respectively. Based on the fair value of the underlying common stock
compared to the exercise price of the related warrants, these warrants were
determined to have no value.
F-13
<PAGE> 85
CELLOMICS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
In connection with the Convertible Demand Notes, the holders received
warrants to purchase 82,000 shares of common stock. The warrants are
exercisable by the holders at any time prior to the earlier of November 30,
2003, or, under certain conditions, at the date of a public offering of
common stock. See Notes 5 and 13 for additional discussion of these
warrants.
Stock Option Plan
On April 2, 1998, the Company adopted the Stock Plan (the "1998 Plan") under
which 150,000 shares of the Company's common stock were reserved for
issuance to directors, officers, consultants or employees of the Company, as
approved by the board of directors. On July 17, 1998, February 15, 1999 and
February 4, 2000, the 1998 Plan was amended and approved by the board of
directors (and subsequently the stockholders) and the number of shares
reserved for issuance was increased to 300,000, 430,000 and 730,000,
respectively. The 1998 Plan, which expires in March 2003, provides for the
grant of nonstatutory stock options, stock bonuses, stock appreciation
rights and restricted stock purchase rights.
Options granted under the 1998 Plan are for ten-year terms. Exercise prices
of the nonstatutory stock options are determined by the board of directors.
Options under the 1998 Plan are generally subject to vesting in installments
over a four-year period commencing on the grant date.
The following table summarizes activity under the Plan:
<TABLE>
<CAPTION>
SHARES UNDER WEIGHTED AVERAGE
OPTION EXERCISE PRICE
------------ ----------------
<S> <C> <C>
Outstanding at December 31, 1997.......................... -- --
Granted................................................. 226,450 $0.56
Exercised............................................... -- --
Canceled................................................ -- --
-------
Outstanding at December 31, 1998.......................... 226,450 0.56
Granted................................................. 128,750 0.56
Exercised............................................... -- --
Canceled................................................ -- --
-------
Outstanding at December 31, 1999.......................... 355,200 0.56
=======
</TABLE>
Deferred compensation for options granted to employees is recorded when the
exercise price of an option is less than the fair value of the underlying
stock on the date of grant. Deferred compensation of $259,344 and $317,925
was recorded on these options in 1998 and 1999, respectively. Deferred
compensation is amortized to compensation expense on an accelerated basis.
In addition, in April 1998, the Company granted options to non-employees to
purchase a total of 12,000 shares of common stock at an exercise price of
$0.56 per share. Deferred compensation of $14,871 was recorded on these
options, based on the estimated fair value of the options granted using the
Black-Scholes model.
The Company has adopted the disclosure-only provisions of SFAS No. 123.
Accordingly, compensation expense has been determined based on the intrinsic
value of the options at the date of award. Had compensation cost for the
1998 Plan been determined based on the fair value of the options at the
dates
F-14
<PAGE> 86
CELLOMICS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
of grant, the impact on the Company's net loss for the years ended December
31, 1997, 1998 and 1999 would have been as follows:
<TABLE>
<CAPTION>
1997 1998 1999
----------- ----------- ------------
<S> <C> <C> <C>
Net loss:
As reported............................... $(2,437,876) $(3,494,660) $(10,135,170)
Pro forma................................. (2,437,876) (3,500,368) (10,149,883)
Earnings per share - basic and diluted:
As reported............................... $ (2.16) $ (3.48) $ (9.36)
Pro forma................................. (2.16) (3.49) (9.37)
</TABLE>
The value of these options has been estimated on the date of grant using the
Black-Scholes model under the minimum value method. The assumptions used in
computing the minimum value of options granted during 1998 and 1999 were a
risk-free interest rate of 5% and a weighted average expected life of each
option of four years.
The weighted average fair value of the options granted, determined using the
minimum value method, in 1998 and 1999 was $1.24 and $1.73, respectively.
The weighted average remaining term of the options outstanding at December
31, 1999 was 8.8 years.
9. NET LOSS PER SHARE
The following table sets forth the computation of basic and diluted net loss
per share:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------
1999
1997 1998 1999 PRO FORMA
----------- ----------- ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Numerator:
Net loss....................... $(2,437,876) $(3,494,660) $(10,135,170) $(10,135,170)
Less: preferred stock
dividends.................... -- (518,017) (933,232) --
----------- ----------- ------------ ------------
Net loss attributable to common
stockholders................. $(2,437,876) $(4,012,677) $(11,068,402) $(10,135,170)
=========== =========== ============ ============
Denominator:
Weighted average shares -
basic........................ 1,128,650 1,152,244 1,182,003 1,182,003
Dilutive potential common stock
- Series A preferred stock... -- -- -- 1,929,548
Dilutive potential common stock
- options and warrants....... -- -- -- --
----------- ----------- ------------ ------------
Weighted average shares -
diluted...................... 1,128,650 1,152,244 1,182,003 3,111,551
=========== =========== ============ ============
Basic and diluted net loss per
share.......................... $ (2.16) $ (3.48) $ (9.36) $ (3.26)
=========== =========== ============ ============
</TABLE>
Pro forma loss per share is computed assuming conversion of the Series A
Preferred Stock outstanding at December 31, 1999 into common stock on a one
for one basis on January 1, 1999 or the date of issuance if later. The
Series A Preferred Stock will automatically convert to common stock upon the
completion of an initial public offering (see Note 13).
For 1997, 1998 and 1999, 0, 1,063,148, and 2,121,105 shares, respectively,
of potential common stock were excluded because their effect was
anti-dilutive.
F-15
<PAGE> 87
CELLOMICS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
10. RELATED PARTY TRANSACTIONS
Zeiss
On April 14, 1998, the Company entered into an exclusive, worldwide,
Co-Marketing, Manufacturing, Sales and Support and Development Agreement
(the "Original Zeiss Agreement") with Carl Zeiss Jena GmbH ("Zeiss"), a
stockholder, to deliver integrated screening systems and services for the
optimization of the drug discovery process. As part of the Original Zeiss
Agreement, Zeiss will manufacture a high content screening kinetics system
exclusively for the Company using the Company's proprietary software. The
Company is responsible for marketing, selling and servicing this high
content screening system.
On February 3, 2000, a Development, Manufacturing and Supply Agreement (the
"New Zeiss Agreement") was entered into between the Company and Zeiss which
supersedes the Original Zeiss Agreement. This agreement principally
provides for the manufacture and supply of products as described above for
a five-year term, and includes provisions whereby the Company agrees to
reimburse Zeiss for an additional $2.0 million for development costs
incurred by Zeiss through December 31, 1999. These amounts are to be repaid
during 2000 and 2001 in equal installments of $1.0 million. The total of
$2.0 million has been reflected in the balance sheet as a payable to
related party. Additionally, the Company has capital expenditure
commitments to Zeiss of $1.2 million during 2000.
On February 21, 2000 the Company and Zeiss entered into a sales and
marketing agreement for ultra-high throughput screening products whereby
the Company will be the exclusive dealer and distributor for high
throughput and ultra-high throughput screening systems and related products
in the United States and Canada through December 31, 2005.
The Company also purchases components from Zeiss for other products
assembled by the Company. Total purchases for 1999 and 1998 approximated
$317,000 and $160,500, respectively.
QED Imaging
On May 1, 1999, the Company entered into an agreement with QED Imaging
("QED"). The term of this agreement is one year. The agreement provides for
monthly payments by the Company based upon services performed with the
potential for a bonus, subject to satisfactory performance and completion
of the milestones. Costs incurred under this contract which have been
charged to research and development expense, amounted to $165,334 in 1999.
A QED principal is a stockholder of the Company.
Other
A stockholder of the Company is a partner of a law firm that provides
services to the Company. During 1997, 1998 and 1999, the services provided
by his firm were $10,809, $168,998 and $110,617, respectively.
11. GRANTS
On March 9, 1998, the Company received a component of a five-year program
project grant entitled Combinatorial Approaches for Novel Anticancer
Agents. The Company, working as a subcontractor, will receive approximately
$1.0 million of an approximately $4.2 million, five-year program project
grant that is being funded by the National Cancer Institute Special
Emphasis Panel.
On April 28, 1998, the Company received a Small Business Information
Research grant for $700,000 over a two-year period from the National
Institutes of Health to develop a cytotoxicity assay. Lawrence Livermore
National Laboratory is a subcontractor.
F-16
<PAGE> 88
CELLOMICS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
On September 16, 1998, the Company entered into a $16.4 million Defense
Advanced Research Project Agency ("DARPA") cost-sharing contract for the
development of the CellChip System and the Fluorotox Database to detect
toxins. During the first phase (September 13, 1998 through September 12,
2000) of the contract, the Company will receive $2.4 million from the
government and provide matching funds of in-kind costs of $5.2 million. The
government has an option for a second phase (September 13, 2000 through
September 13, 2002) of the contract. If the option is exercised, the
Company will receive an additional $4.6 million during phase II and will
provide matching funds of in-kind costs of $4.2 million. The matching funds
of in-kind costs are primarily costs associated with other Company
projects, which indirectly benefit the DARPA project. The Company has hired
subcontractors to perform services under this contract totaling $758,000 in
phase I and, subject to the government exercising its option, $1.9 million
in phase II.
Total grant revenues were $584,000 and $1.8 million in 1998 and 1999,
respectively. There were no grant revenues in 1997. Included in research
and development expenses in the statement of operations are direct costs of
$545,646 and $1.7 million in 1998 and 1999, respectively.
12. EMPLOYEE BENEFITS
The Company maintains a defined contribution retirement savings plan
covering substantially all employees and permits participants to make
contributions by salary deduction pursuant to Section 401(k) of the
Internal Revenue Code. Such amounts may be matched by the Company under
certain conditions. Also, the Company may make, at its discretion,
additional contributions to the plan. The Company did not make any
contributions to the plan during 1997, 1998 or 1999.
13. SUBSEQUENT EVENTS
Series B Mandatorily Redeemable Convertible Preferred Stock Offering
On February 23, 2000, the Company issued 541,082 shares of Series B
mandatorily redeemable convertible preferred stock for gross proceeds of
$6.5 million. In addition, $1.8 million of Convertible Demand Notes, plus
accrued interest of $41,868, converted by their original terms and
conditions into 152,593 shares of Series B Preferred Stock. The holders of
Series B Preferred Stock are entitled to receive annual dividends at a rate
of 8.0%. The Series B Preferred Stock has substantially the same provisions
as the Series A Preferred Stock, including the automatic conversion upon a
qualified public offering (see Note 8). These securities contain a
beneficial conversion feature which will be recorded as a deemed dividend
to the Series B preferred stockholders and will result in a significant
increase to net loss per share in the first quarter of 2000.
Also, in connection with the sale of the Series B Preferred Stock, the
Company issued additional common stock purchase warrants to the convertible
demand noteholders. The issuance of these warrants will result in a
significant additional non-cash interest charge related to the Convertible
Demand Notes during the first quarter of 2000.
Initial Public Offering
On March 1, 2000, the Company's board of directors approved management's
plans to file a registration statement for its initial public offering
with the Securities and Exchange Commission in March 2000 and to complete
its initial public offering during the second quarter of 2000. Anticipated
proceeds from the initial public offering will be used to continue to fund
the growth of the business. There is no assurance that the planned initial
public offering will be successfully completed.
F-17
<PAGE> 89
CELLOMICS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
Supplemental Pro Forma Balance Sheet Data (unaudited)
The following summary pro forma balance sheet data illustrates the effect
of the Series B Preferred Stock transactions and the conversion of the
Series A and Series B preferred stock to common stock upon the closing of
the initial public offering as if these transactions had occurred on
December 31, 1999:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, 1999
1999 PRO FORMA
------------ -----------------
(UNAUDITED)
<S> <C> <C>
Cash................................................ $ 1,341,333 $ 7,872,196
Long-term debt less current maturities.............. 3,744,546 2,035,931
Mandatorily redeemable convertible preferred
stock............................................. 12,152,654 --
Common stock........................................ 11,843 38,446
Additional paid-in capital.......................... 1,203,001 20,243,998
</TABLE>
2000 Stock Plan
On March 1, 2000, the board of directors approved the 2000 Stock Plan (the
"2000 Plan"). All options outstanding under the 1998 Plan continue in
effect. The 2000 Plan provides for issuance of stock options to employees,
directors and consultants. The total options authorized under the 1998 Plan
and the 2000 Plan increased to 742,900. Under the 1998 Plan and the 2000
Plan, options to purchase 71,032 shares have been granted from January 1,
2000 through March 1, 2000. The issuance of these options will create a
significant charge to deferred compensation in the first quarter of 2000.
F-18
<PAGE> 90
[INSIDE BACK COVER]
[Two examples of High Content Screening Assays showing actual image of fields of
cells.]
<PAGE> 91
- --------------------------------------------------------------------------------
Until all dealers effecting transactions in these securities,
whether or not participating in this offering, may be required to deliver a
prospectus. This is in addition to the obligation of dealers to deliver a
prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
- --------------------------------------------------------------------------------
CELLOMICS, INC.
PRUDENTIAL VECTOR HEALTHCARE
A UNIT OF PRUDENTIAL SECURITIES
ING BARINGS
DAIN RAUSCHER WESSELS
- --------------------------------------------------------------------------------
<PAGE> 92
PART II
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth all expenses, other than underwriting
discounts and commissions, payable by the Registrant in connection with the sale
of the common stock being registered. All amounts are estimated except the
Securities and Exchange Commission registration fee and the NASD filing fee.
<TABLE>
<S> <C>
Registration fee............................................ $ 26,400
NASD filing fee.............................................
Nasdaq National Market listing fee..........................
Blue Sky fees and expenses..................................
Printing and engraving expenses.............................
Legal fees and expenses.....................................
Accounting fees and expenses................................
Transfer Agent and registrar fees...........................
Premium for directors and officers insurance................
Miscellaneous...............................................
--------
Total.................................................. $
========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Our Amended and Restated Certificate of Incorporation requires us to
indemnify our directors and officers against liabilities they may incur in these
capacities, including liabilities under the Securities Act, to the maximum
extent permitted by Section 145 of the Delaware General Corporation Law.
Our bylaws require that we indemnify each of our directors and officers for
the judgments, fines and amounts paid in settlement, and the expenses reasonably
incurred, in connection with any type of threatened, pending or completed
action, suit or proceeding, whether or not bought by us or on our behalf. We
must also advance all expenses incurred once we have received a commitment from
the indemnified person to repay the amount if they should lose the action. We
may, and have, purchased and maintained insurance on behalf of our directors and
officers to the extent permitted by Delaware law.
Our Amended and Restated Certificate of Incorporation provides that our
directors shall not be personally liable either to us or to any stockholder for
monetary damages for breach of fiduciary duty as a director, except (i) for any
breach of the director's duty of loyalty to us or our stockholders, or (ii) for
acts or omissions which are not in good faith or which involve intentional
misconduct or knowing violation of the law, or (iii) for any matter in respect
of which such director shall be liable under Section 174 of Title 8 of the
Delaware General Corporation Law or any amendment thereto or successor provision
thereto, or (iv) for any transaction from which the director shall have derived
an improper personal benefit.
Reference is also made to Section [ ] of the underwriting agreement
contained in Exhibit 1.1 hereto, indemnifying our officers and directors against
certain liabilities.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Since March 1, 1997, the Company has made sales of the following
unregistered securities:
Common Stock. (i) On January 21, 1998, in connection with the sale of
Series A Preferred Stock as described below (see "Preferred Stock," (i)), the
Company issued 25,560 shares of common stock to an existing stockholder pursuant
to anti-dilution rights held by such stockholder in accordance with its previous
investment. No underwriters were involved and no commission was paid. The shares
were issued in reliance on the exemption from registration contained in Section
4(2) of the Securities Act for transactions not involving a public offering.
II-1
<PAGE> 93
(ii) On January 15, 1999, in connection with the sale of Series A Preferred
Stock as described below (see "Preferred Stock," (ii)), the Company issued
30,109 shares of common stock to an existing stockholder pursuant to
anti-dilution rights held by such stockholder in accordance with its previous
investment. No underwriters were involved and no commission was paid. The shares
were issued in reliance on the exemption from registration contained in Section
4(2) of the Securities Act for transactions not involving a public offering.
Options. (i) From March 1, 1997 to the present, the Company has issued
employee stock options to purchase a total of 480,000 shares of common stock to
97 employees of the Company at an exercise prices ranging from $.56 to $7.50
which represents a discount from fair market value. The grants of such options
were exempt from registration pursuant to Rule 701 of the Securities Act.
Warrants. (i) On June 18, 1997, in connection with the sales of convertible
notes as described below (see "Convertible Notes," (i)), the Company issued a
warrant to one entity with certain concomitant rights to purchase shares of
preferred stock of the Company for the exercise price of $25,000. On January 8,
1998, these warrants were canceled and replaced with the warrants dated January
21, 1998 to purchase 4,448 shares of preferred stock of the Company as described
in (iv) below. No underwriters were involved and no commission was paid. The
warrants were sold in reliance on the exemption from registration contained in
Section 4(2) of the Securities Act for transactions not involving a public
offering.
(ii) On August 1, 1997, in connection with the sales of convertible notes
as described below (see "Convertible Notes," (ii)), the Company issued a warrant
to one entity for the purchase of 53,381 shares of preferred stock of the
Company at an exercise price of $8.43. On January 16, 1998, this warrant was
canceled and replaced with the warrant issued on January 21, 1998 to purchase
53,381 shares of preferred stock of the Company as described in (v) below. No
underwriters were involved and no commission was paid. The warrants were sold in
reliance on the exemption from registration contained in Section 4(2) of the
Securities Act for transactions not involving a public offering.
(iii) On January 21, 1998, in connection with the sale of Series A
Preferred Stock as described below (see "Preferred Stock," (i)), the Company
issued warrants to 7 persons or entities for the purchase of 177,936 shares of
common stock of the Company at an exercise price of $6.60. The warrants were
issued with the shares of Series A Preferred Stock for an aggregate purchase
price of $5,532,839. The Company also issued warrants to purchase 88,968 shares
of common stock to 2 persons or entities with an exercise price of $5.62, as
compensation for financial and advisory services performed in connection with
the transaction. The warrants were sold in reliance on the exemption from
registration contained in Section 4(2) of the Securities Act for transactions
not involving a public offering.
(iv) On January 21, 1998, in connection with the sales of convertible notes
as described below (see "Convertible Notes," (i)), the Company issued a warrant
to one entity for the purchase of 4,448 shares of Series A Preferred Stock of
the Company at an exercise price of $5.62. The warrants were issued in reliance
on the exemption from registration contained in Section 4(2) of the Securities
Act for transactions not involving a public offering.
(v) On January 21, 1998, in connection with the sales of convertible notes
as described below (see "Convertible Notes," (ii)), the Company issued a warrant
to one entity for the purchase of 53,381 shares of Series A Preferred Stock of
the Company at an exercise price of $8.43. The warrants were issued in reliance
on the exemption from registration contained in Section 4(2) of the Securities
Act for transactions not involving a public offering.
(vi) On June 30, 1999, the Company issued a warrant for the purchase of
32,500 shares of common stock at an exercise price of $6.60 to one financial
institution as partial consideration for the issuance of a $1.5 million senior
term loan to the Company. The warrants were sold in reliance on the exemption
from registration contained in Section 4(2) of the Securities Act for
transactions not involving a public offering.
(vii) On August 30, 1999, October 4, 1999 and December 14, 1999, the
Company issued warrants for the purchase of 429, 378 and 336 shares of common
stock at an exercise price of $6.60, respectively, to one financial institution
as partial consideration for extending a $3 million equipment financing line of
credit to
II-2
<PAGE> 94
the Company. No underwriters were involved and no commission was paid. The
warrants were sold in reliance on the exemption from registration contained in
Section 4(2) of the Securities Act for transactions not involving a public
offering.
(viii) On February 23, 2000, the Company issued warrants to purchase 82,000
shares of common stock with an exercise price of $12.07 to 8 persons or entities
in connection with the sale of convertible demand notes as described below (see
"Convertible Notes" (iii)). No underwriters were involved and no commission was
paid. The warrants were sold in reliance on the exemption from registration
contained in Section 4(2) of the Securities Act for transactions not involving a
public offering.
(iv) On February 23, 2000, in connection with the sale of convertible notes
as described below (see "Convertible Notes" (iii)), the Company issued warrants
to purchase 5,594 shares of common stock with an exercise price of $12.07 to 2
persons or entities pursuant to pre-emptive rights held by such persons or
entities. No underwriters were involved and no commission was paid. The warrants
were sold in reliance on the exemption from registration contained in Section
4(2) of the Securities Act for transactions not involving a public offering.
Convertible Notes: (i) On June 18, 1997, the Company issued to one entity a
convertible note for $50,000. No underwriters were involved and no commission
was paid. The note was sold in reliance on the exemption from registration
contained in Section 4(2) of the Securities Act for transactions not involving a
public offering.
(ii) On August 1, 1997, the Company issued to one entity a convertible note
for $450,000. No underwriters were involved and no commission was paid. The note
was sold in reliance on the exemption from registration contained in Section
4(2) of the Securities Act for transactions not involving a public offering.
(iii) On November 30, 1999, the Company issued to 8 persons or entities
$1.8 million of convertible demand notes. No underwriters were involved and no
commission was paid. The notes were sold in reliance on the exemption from
registration contained in Section 4(2) of the Securities Act for transactions
not involving a public offering.
Preferred Stock: (i) On January 21, 1998, the Company sold 984,491 shares
of Series A Preferred Stock to 8 persons or entities, along with the warrants
described above (see "Warrants" (iii)) for an aggregate purchase price of
$5,532,839. As noted above in "Warrants," the Company also issued 88,968
warrants to purchase common stock to 2 entities or persons, with an exercise
price of $5.62 as compensation for financial and advisory services performed in
connection with the transaction. In addition, 2 entities converted $500,000 of
notes plus accrued interest of $19,550 into 92,447 shares of Series A Preferred
Stock. The shares were issued in reliance on the exemption from registration
contained in Section 4(2) of the Securities Act for transactions not involving a
public offering, and in accordance with Regulation D.
(ii) On January 15, 1999, 7 entities purchased 889,680 shares of Series A
Preferred Stock for an aggregate purchase price of $5,000,000. No underwriters
were involved and no commission was paid. The notes were sold in reliance on the
exemption from registration contained in Section 4(2) of the Securities Act for
transactions not involving a public offering, and in accordance with Regulation
D.
(iv) On February 23, 2000, 11 persons or entities purchased 541,082 shares
of Series B Preferred Stock from the Company for an aggregate purchase price of
$6,530,863. In addition, $1.8 million of convertible demand notes, issued to 8
persons or entities on November 30, 1999 as described above (see "Convertible
Notes," (iii) above)), plus accrued interest of $41,863, were converted into
152,593 shares of Series B Preferred Stock. No underwriters were involved and no
commission was paid. The shares were sold in reliance on the exemption from
registration contained in Section 4(2) of the Securities Act for transactions
not involving a public offering, and in accordance with Regulation D.
All sales of common stock made pursuant to the exercise of stock options
were made in reliance on Rule 701 under the Securities Act or Section 4(2) of
the Securities Act. All other sales were made in reliance on Section 4(2) of the
Securities Act and/or Regulation D promulgated under the Securities Act. These
sales
II-3
<PAGE> 95
were made without general solicitation or advertising, to investors who were
sophisticated and who had access to all relevant information necessary to
evaluate the investment, and who represented the Registrant that they were
acquiring the Securities for investment and appropriate legends were affixed to
the share certificates in such transactions.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENTS
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ----------- ----------------------
<S> <C>
1.1 Form of Underwriting Agreement*
3.1 Amended and Restated Certificate of Incorporation of
Cellomics
3.2 Bylaws of Cellomics
4.1 Loan and Security Agreement with Transamerica Business
Credit Corporation, including warrant, dated June 30, 1999
4.2 Master Loan and Security Agreement with Oxford Venture
Finance, LLC, including warrant, dated July 21, 1999
4.3 Series A Preferred Stock and Warrant Purchase Agreement by
and among certain purchasers listed and Cellomics, Inc.,
dated January 21, 1998
4.4 Series B Preferred Stock Purchase Agreement by and among
certain purchasers listed and Cellomics, Inc., dated
February 23, 2000
5.1 Form of Opinion of Buchanan Ingersoll Professional
Corporation*
10.1 Lease Agreement with University of Pittsburgh, dated July 1,
1996, for lease of office and laboratory space
10.2 Form of Proprietary Information and Property Agreement
10.3 License and Supply Agreement with Molecular Probes, Inc.,
dated April 5, 1999
10.4 Employment Agreement between Biological Detection, Inc. and
D. Lansing Taylor, dated October 1, 1998
10.5 Employment Offer Letter for R. Terry Dunlay, dated February
2, 1999
10.6 Employment Offer Letter for L. Robert Johnston, dated
October 15, 1998
10.7 Employment Offer Letter for Michael A. Nemzek, dated
November 9, 1998
10.8 Employment Offer Letter for Alan W. Seadler, dated October
12, 1998
10.9 Form of Key Employee Non-Compete Agreement
10.10 Development, Manufacturing and Supply Agreement with Carl
Zeiss Jena GmbH, dated February 3, 2000
10.11 Award/Contract issued by the Office of Naval Research, dated
September 14, 1998
10.12 Alliance Agreement with ACLARA BioSciences, Inc., dated
October 26, 1999
10.13 Subcontract with University of Pittsburgh, dated May 5, 1998
10.14 Patent License Agreement with Public Health Service (NIH),
dated September 26, 1997
10.15 Sales and Marketing Agreement with Carl Zeiss Jena GmbH,
dated February 21, 2000
10.16 Cellomics, Inc. 2000 Stock Plan
21.1 List of subsidiaries of Cellomics
23.1 Consent of PricewaterhouseCoopers LLP
</TABLE>
II-4
<PAGE> 96
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ----------- ----------------------
<S> <C>
23.2 Consent of Buchanan Ingersoll Professional Corporation
(contained in the opinion filed as Exhibit 5 to the
Registration Statement)*
24 Powers of Attorney of certain officers and directors of
Cellomics (contained on the signature page of this
Registration Statement)
27 Financial Data Schedule
</TABLE>
- ---------------
* To be filed by amendment.
(b) Financial Statement Schedules
The following financial statement schedule is filed herewith--Schedule
II--Valuation and Qualifying Accounts.
ITEM 17. UNDERTAKINGS
We hereby undertake that:
(1) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted as to directors, officers and controlling persons of
Cellomics pursuant to the provisions described in Item 14, or otherwise, we have
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by Cellomics of expenses
incurred or paid by a director, officer or controlling person of Cellomics in
the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, we will, unless in the opinion of our counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
(2) For purposes of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by Cellomics pursuant to Rule 424(b)(1) or (4) or 497(h) under
the Securities Act shall be deemed to be part of this registration statement as
of the time it was declared effective.
(3) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(4) At the closing, specified in the underwriting agreement, we shall
provide the underwriters certificates in such denominations and registered in
such names as required by the underwriters to permit prompt delivery to each
purchaser.
II-5
<PAGE> 97
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Company has duly caused this Registration Statement on Form S-1 to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Pittsburgh, Commonwealth of Pennsylvania, on the 3rd day of March, 2000.
CELLOMICS, INC.
By: /s/ D. LANSING TAYLOR
------------------------------------
D. Lansing Taylor, Ph.D.
President and Chief Executive
Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints D. Lansing Taylor and L. Robert Johnston,
and each of them, as his true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement and to sign any
registration statement for the same offering covered by the Registration
Statement that is to be effective upon filing pursuant to Rule 462 promulgated
under the Securities Act of 1933, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform each and every act and thing
requisite and necessary to be done in connection therewith and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or any of them, or their or his substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ D. LANSING TAYLOR President and Chief Executive February 29, 2000
- --------------------------------------------- Officer and Director (Principal
D. Lansing Taylor, Ph.D. Executive Officer)
/s/ L. ROBERT JOHNSTON, JR. Vice President Chief Financial March 2, 2000
- --------------------------------------------- Officer (Principal Financial and
L. Robert Johnston, Jr. Accounting Officer)
/s/ JOHN M. BOLES Chairman of the Board of Directors February 29, 2000
- ---------------------------------------------
John M. Boles
/s/ ALAN MENDELSON Director February 29, 2000
- ---------------------------------------------
Alan Mendelson
/s/ JAMES A. SHARP Director February 29, 2000
- ---------------------------------------------
James A. Sharp
/s/ ARNOLD ORONSKY Director February 29, 2000
- ---------------------------------------------
Arnold Oronsky, Ph.D.
</TABLE>
II-6
<PAGE> 98
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
To the Board of Directors
and Stockholders of Cellomics, Inc.:
Our audits of the financial statements referred to in our report dated March 3,
2000, appearing in this Registration Statement on Form S-1 for Cellomics, Inc.
also included an audit of the financial statement schedule listed in Item 16(b)
of this Registration Statement on Form S-1. In our opinion, this financial
statement schedule presents fairly, in all material respects, the information
set forth therein when read in conjunction with the related financial
statements.
PricewaterhouseCoopers LLP
Pittsburgh, Pennsylvania
March 3, 2000
II-7
<PAGE> 99
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
ADDITIONS
-----------------------
BALANCE AT CHARGED TO CHARGED BALANCE
BEGINNING COSTS AND TO OTHER AT END
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS OF PERIOD
----------- ---------- ---------- -------- ---------- ---------
<S> <C> <C> <C> <C> <C>
For the year ending December 31, 1997
Deferred tax valuation allowance.... $ 234,000 $ 840,000 $-- $-- $1,074,000
========== ========== === === ==========
For the year ending December 31, 1998
Deferred tax valuation allowance.... $1,074,000 $1,918,332 $-- $-- $2,992,332
========== ========== === === ==========
For the year ending December 31, 1999
Deferred tax valuation allowance.... $2,992,332 $4,114,329 $-- $-- $7,106,661
========== ========== === === ==========
</TABLE>
II-8
<PAGE> 100
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ----------- ----------------------
<S> <C>
1.1 Form of Underwriting Agreement*
3.1 Amended and Restated Certificate of Incorporation of
Cellomics
3.2 Bylaws of Cellomics
4.1 Loan and Security Agreement with Transamerica Business
Credit Corporation, including warrant, dated June 30, 1999
4.2 Master Loan and Security Agreement with Oxford Venture
Finance, LLC, including warrant, dated July 21, 1999
4.3 Series A Preferred Stock and Warrant Purchase Agreement by
and among certain purchasers listed and Cellomics, Inc.,
dated January 21, 1998
4.4 Series B Preferred Stock Purchase Agreement by and among
certain purchasers listed and Cellomics, Inc., dated
February 23, 2000
5.1 Form of Opinion of Buchanan Ingersoll Professional
Corporation*
10.1 Lease Agreement with University of Pittsburgh, dated July 1,
1996, for lease of office and laboratory space
10.2 Form of Proprietary Information and Property Agreement
10.3 License and Supply Agreement with Molecular Probes, Inc.,
dated April 5, 1999
10.4 Employment Agreement between Biological Detection, Inc. and
D. Lansing Taylor, dated October 1, 1998
10.5 Employment Offer Letter for R. Terry Dunlay, dated February
2, 1999
10.6 Employment Offer Letter for L. Robert Johnston, dated
October 15, 1998
10.7 Employment Offer Letter for Michael A. Nemzek, dated
November 9, 1998
10.8 Employment Offer Letter for Alan W. Seadler, dated October
12, 1998
10.9 Form of Key Employee Non-Compete Agreement
10.10 Development, Manufacturing and Supply Agreement with Carl
Zeiss Jena GmbH, dated February 3, 2000
10.11 Award/Contract issued by the Office of Naval Research, dated
September 14, 1998
10.12 Alliance Agreement with ACLARA BioSciences, Inc., dated
October 26, 1999
10.13 Subcontract with University of Pittsburgh, dated May 5, 1998
10.14 Patent License Agreement with Public Health Service (NIH),
dated September 26, 1997
10.15 Sales and Marketing Agreement with Carl Zeiss Jena GmbH,
dated February 21, 2000
10.16 Cellomics, Inc. 2000 Stock Plan
21.1 List of subsidiaries of Cellomics
23.1 Consent of PricewaterhouseCoopers LLP
23.2 Consent of Buchanan Ingersoll Professional Corporation
(contained in the opinion filed as Exhibit 5 to the
Registration Statement)*
24 Powers of Attorney of certain officers and directors of
Cellomics (contained on the signature page of this
Registration Statement)
27 Financial Data Schedule
</TABLE>
- ---------------
* To be filed by amendment.
+ The schedules or exhibits to this document are not being filed herewith
because we believe that the information contained therein should not be
considered material to an investment decision in Cellomics or such information
is otherwise adequately disclosed in this Registration Statement on Form S-1.
We agree to furnish supplementally a copy of any schedule or exhibit to the
Commission upon request.
<PAGE> 1
Exhibit 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
CELLOMICS, INC.
CELLOMICS, INC. (the "Corporation"), a corporation organized under the
laws of the State of Delaware, hereby amends and restates its Certificate of
Incorporation, which was originally filed with the Secretary of State on January
8, 1998 and previously restated and filed with the Secretary of State on January
20, 1998 and February 23, 2000, so that the same shall read, in its entirety,
as follows:
FIRST: The name of the Corporation is Cellomics, Inc.
SECOND: The Corporation's registered office in the State of Delaware is
located at Corporation Service Corporation, 1013 Centre Road, City of Wilmington
County of New Castle, Delaware 19805. The name of its registered agent at such
address is Corporation Service Corporation.
THIRD: The purpose for which the Corporation is organized is to engage
in any lawful act or activity for which corporations may be organized under the
General Corporation Law of the State of Delaware.
FOURTH: (a) The total number of shares of capital stock which the
Corporation shall have the authority to issue is fifty-five million shares,
consisting of: (i) fifty million (50,000,000) shares of Common Stock, par value
$0.01 per share (the "Common Stock") and (ii) five million (5,000,000) shares of
Preferred Stock, par value $0.01 per share (the "Preferred Stock").
(b) The authorized Preferred Stock may be issued from time to time in
one or more series. The Board of Directors is authorized, subject to limitations
prescribed by law and the provisions of subsection (a) above, to provide for the
issuance of the shares of Preferred Stock in series, and by filing a certificate
pursuant to the applicable law of the State of Delaware, to establish from time
to time the number of shares to be included in each such series, and to fix the
designation, powers, preferences and rights of the shares of each such series
and the qualification, limitations or restrictions thereof.
The authority of the Board of Directors with respect to each series
shall include, but not be limited to, determination of the following:
(i) The number of shares constituting that series and the distinctive
designation of that series;
(ii) The dividend rate on the shares of that series, whether dividends
shall be cumulative, and if so, from which date or dates, and the relative
rights of priority, if any, of payment of dividends on shares of that series;
<PAGE> 2
(iii) Whether that series shall have voting rights, in addition to the
voting rights provided by law, and, if so, the terms of such voting rights;
(iv) Whether that series shall have conversion privileges, and, if so,
the terms and conditions of such conversion, including provision for adjustment
of the conversion rate in such events as the Board of Directors shall determine;
(v) Whether or not the shares of that series shall be redeemable, and,
if so, the terms and conditions of such redemption, including the date or dates
upon or after which they shall be redeemable, and the amount per share payable
in case of redemption, which amount may vary under different conditions and at
different redemption dates;
(vi) The rights of the shares of that series in the event of voluntary
or involuntary liquidation, dissolution or winding up of the Corporation, and
the relative rights of priority, if any, of payment of shares of that series;
and
(vii) Any other relative rights, preferences and limitations of that
series.
FIFTH: Upon the effectiveness of this Amended and Restated Certificate
of Incorporation, the initial Directors and the Directors thereafter elected by
the holders of voting stock shall, in accordance with the Corporation's By-laws,
be classified in respect to the time for which they shall severally serve on the
Board of Directors by dividing them into three staggered classes which shall be
as nearly equal in number as possible. Each member of each class shall serve for
three-year terms. At each annual meeting of the stockholders, the stockholders
shall elect Directors of the class which term then expires, to serve until the
third succeeding annual meeting. Except as otherwise provided in this
Certificate of Incorporation, each Director shall serve for the term for which
elected and until his or her successor shall be duly elected and shall qualify.
SIXTH: The Corporation is to have perpetual existence.
SEVENTH: The following provisions are included for the management of
the business and the conduct of the affairs of the Corporation, and for further
definition, limitation and regulation of the powers of the Corporation and of
its Board of Directors and stockholders:
(i) The Board of Directors of the Corporation is expressly authorized
to adopt, amend or repeal the Bylaws of the Corporation, subject to any
limitation thereof contained in the Bylaws. The stockholders also shall
have the power to adopt, amend or repeal the Bylaws of the Corporation;
provided, however, that, in addition to any vote of the holders of any
class or series of stock of the Corporation required by law or by this
Certificate of Incorporation, the affirmative vote of the holders of at
least eighty percent (80%) of the voting power of all of the then
outstanding shares of the capital stock of the Corporation entitled to
vote generally in the election of directors, voting together as a
single class, shall be required to adopt, amend or repeal any provision
of the Bylaws of the Corporation.
-2-
<PAGE> 3
(ii) Upon the effectiveness of this Amended and Restated Certificate of
Incorporation, stockholders of the Corporation may not take any action
by written consent in lieu of a meeting.
(iii) Special meetings of stockholders may be called at any time only
by the President, the Chairman of the Board of Directors of the
Corporation (if any) or a majority of the Board of Directors of the
Corporation. Business transacted at any special meeting of stockholders
shall be limited to matters relating to the purpose or purposes set
forth in the notice of such special meeting.
(iv) The Board of Directors of the Corporation, when evaluating any
offer of another party (a) to make a tender or exchange offer for any
equity security of the Corporation or (b) to effect a business
combination, shall, in connection with the exercise of its judgment in
determining what is in the best interests of the Corporation as a
whole, be authorized to give due consideration to any such factors as
the Board of Directors of the Corporation determines to be relevant,
including, without limitation:
(1) the interests of the Corporation's stockholders, including
the possibility that these interests might be best served by
the continued independence of the Corporation;
(2) whether the proposed transaction might violate federal or
state laws;
(3) not only the consideration being offered in the proposed
transaction, in relation to the then current market price for
the outstanding capital stock of the Corporation, but also to
the market price for the capital stock of the Corporation over
a period of years, the estimated price that might be achieved
in a negotiated sale of the Corporation as a whole or in part
or through orderly liquidation, the premiums over market price
for the securities of other corporations in similar
transactions, current political, economic and other factors
bearing on securities prices and the Corporation's financial
condition and future prospects; and
(4) the social, legal and economic effects upon employees,
suppliers, customers, creditors and others having similar
relationships with the Corporation, upon the communities in
which the Corporation conducts its business and upon the
economy of the state, region and nation.
In connection with any such evaluation, the Board of Directors of the
Corporation is authorized to conduct such investigations and engage in
such legal proceedings as the Board of Directors of the Corporation may
determine.
(v) in addition to any vote of the holders of any class or series of
stock of the Corporation required by law or by this Certificate of
Incorporation, the affirmative vote of the holders of at least eighty
percent (80%) of the voting power of all of the then outstanding shares
of the capital stock of the Corporation entitled to vote
-3-
<PAGE> 4
generally in the election of directors, voting together as a single
class, shall be required to remove a Director or the entire Board of
Directors or a class thereof or to amend any provision of Articles
SEVENTH or EIGHTH of this Certificate of Incorporation.
EIGHTH: A director of the Corporation shall not be personally liable
either to the Corporation or to any stockholder for monetary damages for breach
of fiduciary duty as a director, except (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, or (ii) for acts or
omissions which are not in good faith or which involve intentional misconduct or
knowing violation of the law, or (iii) for any matter in respect of which such
director shall be liable under Section 174 of Title 8 of the General Corporation
Law of the State of Delaware or any amendment thereto or successor provision
thereto, or (iv) for any transaction from which the director shall have derived
an improper personal benefit. Neither amendment nor repeal of this paragraph nor
the adoption of any provision of the Certificate of Incorporation inconsistent
with this paragraph shall eliminate or reduce the effect of this paragraph in
respect of any matter occurring, or any cause of action, suit or claim that, but
for this paragraph of this Article, would accrue or arise, prior to such
amendment, repeal or adoption of an inconsistent provision.
NINTH: Election of directors need not be by written ballot.
-4-
<PAGE> 5
IN WITNESS WHEREOF, CELLOMICS, INC., has caused this certificate to be
signed by its President as of this ____ day of __________, 2000.
CELLOMICS, INC.
By:
----------------------------------
Name: D. Lansing Taylor
Title: Chief Executive Officer and
President
-5-
<PAGE> 1
Exhibit 3.2
BY-LAWS
OF
CELLOMICS, INC.
(a Delaware corporation)
ARTICLE I
Stockholders
SECTION 1. Annual Meetings. The annual meeting of stockholders
for the election of directors and for the transaction of such other business as
may properly come before the meeting shall be held each year at such date and
time, within or without the State of Delaware, as the Board of Directors shall
determine.
SECTION 2. Special Meetings. (a) Special meetings of
stockholders for the transaction of such business as may properly come before
the meeting may be called by order of the Board of Directors or by stockholders
holding together at least a majority of all the shares of the Corporation
entitled to vote at the meeting.
(b) Notwithstanding the provisions of Section 2(a),
immediately following the consummation of a public offering by the Corporation
of any of its capital stock, special meetings of stockholders may be called only
by the President, the Chairman of the Board of Directors (if any) or by order of
a majority of the Board of Directors.
(c) Any such meeting held pursuant to this Section 2 shall be
held at such date and time, within or without the State of Delaware, as may be
specified by such order. Whenever the directors shall fail to fix such place,
the meeting shall be held at the principal executive office of the Corporation.
SECTION 3. Notice of Meetings. Written notice of all meetings
of the stockholders, stating the place, date and hour of the meeting and the
place within the city or other municipality or community at which the list of
stockholders may be examined, shall be mailed or delivered to each stockholder
not less than 10 nor more than 60 days prior to the meeting. Notice of any
special meeting shall state in general terms the purpose or purposes for which
the meeting is to be held and the business transacted at any such meeting shall
be limited to matters relating to the purpose or purposes set forth in the
notice of meeting.
SECTION 4. Fixing Date for Determination of Stockholders of
Record. In order that the Corporation may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders or any adjournment thereof,
or to express consent to corporate action in writing without a meeting, or
entitled to receive payment of any dividend or other distribution or
<PAGE> 2
allotment of any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of stock or for the purpose of any other lawful
action, the Board of Directors may fix a record date, which record date shall
not precede the date upon which the resolution fixing the record date is adopted
by the Board of Directors and which record date: (1) in the case of
determination of stockholders entitled to vote at any meeting of stockholders or
adjournment thereof, shall, unless otherwise required by law, not be more than
sixty nor less than ten days before the date of such meeting; (2) in the case of
determination of stockholders entitled to express consent to corporate action in
writing without a meeting, shall not be more than ten days after the date upon
which the resolution fixing the record date is adopted by the Board of
Directors; and (3) in the case of any other action, shall not be more than sixty
days prior to such other action. If no record date is fixed: (1) the record date
for determining stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the day next preceding the day
on which notice is given, or, if notice is waived, at the close of business on
the day next preceding the day on which the meeting is held; (2) the record date
for determining stockholders entitled to express consent to corporate action in
writing without a meeting, when no prior action of the Board of Directors is
required by law, shall be the first date on which a signed written consent
setting forth the action taken or proposed to be taken is delivered to the
corporation in accordance with applicable law, or, if prior action by the Board
of Directors is required by law, shall be at the close of business on the day on
which the Board of Directors adopts the resolution taking such prior action; and
(3) the record date for determining stockholders for any other purpose shall be
at the close of business on the day on which the Board of Directors adopts the
resolution relating thereto. A determination of stockholders of record entitled
to notice of or to vote at a meeting of stockholders shall apply to any
adjournment of the meeting; provided, however, that the Board of Directors may
fix a new record date for the adjourned meeting.
SECTION 5. Stockholder Lists. The officer who has charge of
the stock ledger of the Corporation shall prepare and make, at least 10 days
before every meeting of stockholders, a complete list of the stockholders
entitled to vote at the meeting, arranged in alphabetical order, and showing the
address of each stockholder and the number of shares registered in the name of
each stockholder. Such list shall be open to the examination of any stockholder,
for any purpose germane to the meeting, either at a place within the city where
the meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.
The stock ledger shall be the only evidence as to who are the
stockholders entitled to examine the stock ledger, the list required by this
section or the books of the Corporation, or to vote in person or by proxy at any
meeting of stockholders.
SECTION 6. Quorum. Except as otherwise provided by law or the
Corporation's Certificate of Incorporation, a quorum for the transaction of
business at any meeting of stockholders shall consist of the holders of record
of a majority of the issued and outstanding shares of the capital stock of the
Corporation entitled to vote at the meeting, present in person or by proxy. At
all meetings of the stockholders at which a quorum is present, all matters,
except as otherwise provided by law or the Certificate of Incorporation, shall
be decided by the vote of the
2
<PAGE> 3
holders of a majority of the shares entitled to vote thereat present in person
or by proxy. If there be no such quorum, the holders of a majority of such
shares so present or represented may adjourn the meeting from time to time,
without further notice, until a quorum shall have been obtained. When a quorum
is once present it is not broken by the subsequent withdrawal of any
stockholder.
SECTION 7. Organization. Meetings of stockholders shall be
presided over by the Chairman, if any, or if none or in the Chairman's absence
the Vice-Chairman, if any, or if none or in the Vice-Chairman's absence the
President, if any, or if none or in the President's absence a Vice-President,
or, if none of the foregoing is present, by a chairman to be chosen by the
stockholders entitled to vote who are present in person or by proxy at the
meeting. The Secretary of the Corporation, or in the Secretary's absence an
Assistant Secretary, shall act as secretary of every meeting, but if neither the
Secretary nor an Assistant Secretary is present, the presiding officer of the
meeting shall appoint any person present to act as secretary of the meeting.
SECTION 8. Voting; Proxies; Required Vote. (a) At each meeting
of stockholders, every stockholder shall be entitled to vote in person or by
proxy appointed by instrument in writing, subscribed by such stockholder or by
such stockholder's duly authorized attorney-in-fact (but no such proxy shall be
voted or acted upon after three years from its date, unless the proxy provides
for a longer period), and, unless the Certificate of Incorporation provides
otherwise, shall have one vote for each share of stock entitled to vote
registered in the name of such stockholder on the books of the Corporation on
the applicable record date fixed pursuant to these By-laws. At all elections of
directors the voting may but need not be by ballot and a plurality of the votes
cast there shall elect. Except as otherwise required by law or the Certificate
of Incorporation, any other action shall be authorized by a majority of the
votes cast.
(b) Any action required or permitted to be taken at any
meeting of stockholders may, except as otherwise required by law or the
Certificate of Incorporation, be taken without a meeting, without prior notice
and without a vote, if a consent in writing, setting forth the action so taken,
shall be signed by the holders of record of the issued and outstanding capital
stock of the Corporation having a majority of votes that would be necessary to
authorize or take such action at a meeting at which all shares entitled to vote
thereon were present and voted, and the writing or writings are filed with the
permanent records of the Corporation. Prompt notice of the taking of corporate
action without a meeting by less than unanimous written consent shall be given
to those stockholders who have not consented in writing. Notwithstanding the
provisions of this Section 8(b), immediately following the consummation of a
public offering by the Corporation of any of its capital stock, stockholders of
the Corporation may not take any action by written consent in lieu of a meeting.
Notwithstanding any other provision of law, the Certificate of Incorporation or
these By-laws, and notwithstanding the fact that a lesser percentage may be
specified by law, the affirmative vote of the holders of at least eighty percent
(80%) of the voting power of all the then outstanding shares of the capital
stock of the Corporation entitled to vote generally in the election of
directors, voting together as a single class, shall be required to amend or
repeal, or to adopt any provision inconsistent with, this Section 8(b).
3
<PAGE> 4
(c) Where a separate vote by a class or classes, present in
person or represented by proxy, shall constitute a quorum entitled to vote on
that matter, the affirmative vote of the majority of shares of such class or
classes present in person or represented by proxy at the meeting shall be the
act of such class, unless otherwise provided in the Corporation's Certificate of
Incorporation.
SECTION 9. Inspectors. Unless otherwise required by law, the
Board of Directors, in advance of any meeting, may, but need not, appoint one or
more inspectors of election to act at the meeting or any adjournment thereof. If
an inspector or inspectors are not so appointed, the person presiding at the
meeting may, but need not, appoint one or more inspectors. In case any person
who may be appointed as an inspector fails to appear or act, the vacancy may be
filled by appointment made by the directors in advance of the meeting or at the
meeting by the person presiding thereat. Each inspector, if any, before entering
upon the discharge of his or her duties, shall take and sign an oath faithfully
to execute the duties of inspector at such meeting with strict impartiality and
according to the best of his ability. The inspectors, if any, shall determine
the number of shares of stock outstanding and the voting power of each, the
shares of stock represented at the meeting, the existence of a quorum, and the
validity and effect of proxies, and shall receive votes, ballot or consents,
hear and determine all challenges and questions arising in connection with the
right to vote, count and tabulate all votes, ballots or consents, determine the
result, and do such acts as are proper to conduct the election or vote with
fairness to all stockholders. On request of the person presiding at the meeting,
the inspector or inspectors, if any, shall make a report in writing of any
challenge, question or matter determined by such inspector or inspectors and
execute a certificate of any fact found by such inspector or inspectors.
SECTION 10. Nominating and Proposal Procedures. Without
limiting any other notice requirements imposed by law, the Certificate of
Incorporation or these By-laws, any nomination for election to the Board of
Directors or other proposal to be presented by any stockholder at a
stockholders' meeting (the "Proponent") will be properly presented only if
written notice of the Proponent's intent to make such nomination or proposal has
been personally delivered to and otherwise in fact received by the Secretary of
the Corporation not later than (i) for the annual meeting, at least 150 days
prior to the anniversary date of the prior year's annual meeting, or (ii) for
any special meeting, the close of business on the tenth day after notice of such
meeting is first given to stockholders; provided, however, that nothing
contained herein shall limit or restrict the right of any stockholder to present
at a stockholders' meeting any proposal made by such stockholder in accordance
with Rule 14a-8 promulgated pursuant to the Securities Exchange Act of 1934, as
amended, as it may hereafter be amended, or any successor rule. Such notice by
the Proponent to the Corporation shall set forth in reasonable detail
information concerning the nominee (in the case of a nomination for election to
the Board of Directors) or the substance of the proposal (in the case of any
other stockholder proposal), and shall include: (a) the name and residence
address and business address of the stockholder who intends to present the
nomination or other proposal or of any person who participates or is expected to
participate in making such nomination and of the person or persons, if any, to
be nominated and the principal occupation or employment and the name, type of
business and address of the business, corporation or other organization in which
such employment is carried
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on of each such stockholder, participant and nominee; (b) a representation that
the Proponent is a holder of record of stock of the Corporation entitled to vote
at such meeting and intends to appear in person or by proxy at the meeting to
present the nomination or other proposal specified in the notice; (c) a
description of all arrangements or understandings between the Proponent and any
other person or persons (naming such person or persons) pursuant to which the
nomination or other proposal is to be made by the Proponent; (d) such other
information regarding each proposal and each nominee as would have been required
to be included in a proxy statement filed pursuant to the proxy rules of the
Securities and Exchange Commission had the nomination or other proposal been
made by the Board of Directors; and (e) the consent of each nominee, if any, to
serve as a director of the Corporation if elected. Within fifteen (15) days
following the receipt by the Secretary of a notice of nomination or proposal
pursuant hereto, the Secretary shall advise the Proponent in writing of any
deficiencies in the notice and of any additional information the Corporation is
requiring to determine the eligibility of the proposed nominee or the substance
of the proposal. A Proponent who has been notified of deficiencies in the notice
of nomination or proposal and/or of the need for additional information shall
cure such deficiencies and/or provide such additional information within fifteen
(15) days after receipt of the notice of such deficiencies and/or the need for
additional information. The presiding officer of a meeting of stockholders may,
in his or her sole discretion, refuse to acknowledge a nomination or other
proposal presented by any person that does not comply with the foregoing
procedure and, upon his or her instructions, all votes cast for such nominee or
with respect to such proposal may be disregarded.
ARTICLE II
Board of Directors
SECTION 1. General Powers. The business, property and affairs
of the Corporation shall be managed by, or under the direction of, the Board of
Directors.
SECTION 2. Qualification; Number; Term; Remuneration. (a) Each
director shall be at least 18 years of age. A director need not be a
stockholder, a citizen of the United States, or a resident of the State of
Delaware. The number of directors constituting the entire Board shall be such
number as may be fixed from time to time by action of the Board of Directors,
but in no event less than one, one of whom may be selected by the Board of
Directors to be its Chairman, and absent action by the Board of Directors the
number of directors constituting the entire Board shall be set at five. The use
of the phrase "entire Board" herein refers to the total number of directors
which the Corporation would have if there were no vacancies.
(b) Directors who are elected at an annual meeting of
stockholders, and directors who are elected in the interim to fill vacancies and
newly created directorships, shall hold office until the next annual meeting of
stockholders and until their successors are duly elected and qualified or until
their earlier resignation or removal; provided, however, that, immediately
following the consummation of a public offering by the Corporation of any of its
capital stock, the Board of Directors of the Company shall be divided into three
classes (as nearly
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equal in number as possible), which are hereby designated Class A, Class B and
Class C, respectively. The term of office of the initial Class A Directors shall
expire at the first annual meeting of stockholders or any special meeting in
lieu thereof following such public offering, the term of office of the initial
Class B Directors shall expire at the second annual meeting of stockholders or
any special meeting in lieu thereof following such public offering, and the term
of office of the initial Class C Directors shall expire at the third annual
meeting of stockholders or any special meeting in lieu thereof following such
public offering. At each annual meeting of stockholders or special meeting in
lieu thereof after the initial classification of Directors, Directors elected to
succeed those Directors whose terms expire shall be elected for a term of office
to expire at the third succeeding annual meeting of stockholders or special
meeting in lieu thereof after their election and until their successors are duly
elected and qualified. Upon the addition of any one or more new Directors to the
Board of Directors, which new Director is not a successor to any then current
Director, each such new Director shall be added in turn first to Class A, then
to Class B, then to Class C, provided, however, that the addition of any new
Director to one particular class may be modified if such modification serves to
more evenly distribute the number of Directors in all such classes.
(c) Directors may be paid their expenses, if any, of
attendance at each meeting of the Board of Directors and may be paid a fixed sum
for attendance at each meeting of the Board of Directors or a stated salary as
director. No such payment shall preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for attending
committee meetings.
SECTION 3. Quorum and Manner of Voting. Except as otherwise
provided by law, a majority of the entire Board shall constitute a quorum. A
majority of the directors present, whether or not a quorum is present, may
adjourn a meeting from time to time to another time and place without notice.
The vote of the majority of the directors present at a meeting at which a quorum
is present shall be the act of the Board of Directors.
SECTION 4. Places of Meetings. Meetings of the Board of
Directors may be held at any place within or without the State of Delaware, as
may from time to time be fixed by resolution of the Board of Directors, or as
may be specified in the notice of meeting.
SECTION 5. Annual Meeting. Following the annual meeting of
stockholders, the newly elected Board of Directors shall meet for the purpose of
the election of officers and the transaction of such other business as may
properly come before the meeting. Such meeting may be held without notice
immediately after the annual meeting of stockholders at the same place at which
such stockholders' meeting is held.
SECTION 6. Regular Meetings. Regular meetings of the Board of
Directors shall be held at such times and places as the Board of Directors shall
from time to time by resolution determine. Notice need not be given of regular
meetings of the Board of Directors held at times and places fixed by resolution
of the Board of Directors. Where appropriate communication facilities are
reasonably available, any or all Directors shall have the right to participate
in all or any part of a meeting of the Board of Directors, or any Committee
thereof, by
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means of conference telephone or any means of communication by which all persons
participating in the meeting are able to hear each other.
SECTION 7. Special Meetings. Special meetings of the Board of
Directors shall be held whenever called by the Chairman of the Board, President,
Vice-Chairman or by a majority of the directors then in office.
SECTION 8. Notice of Special Meetings. A notice of the place,
date and time and the purpose or purposes of each special meeting of the Board
of Directors shall be given to each director by mailing the same at least two
days before the special meeting, or by telegraphing or telephoning the same or
by delivering the same personally not later than the day before the day of the
meeting.
SECTION 9. Organization. At all meetings of the Board of
Directors, the Chairman, if any, or if none or in the Chairman's absence or
inability to act the President, or in the President's absence or inability to
act any Vice-President who is a member of the Board of Directors, or in such
Vice-President's absence or inability to act a chairman chosen by the directors,
shall preside. The Secretary of the Corporation shall act as secretary at all
meetings of the Board of Directors when present, and, in the Secretary's
absence, the presiding officer may appoint any person to act as secretary.
SECTION 10. Resignation; Removal. Any director may resign at
any time upon written notice to the Corporation and such resignation shall take
effect upon receipt thereof by the President or Secretary, unless otherwise
specified in the resignation.
SECTION 11. Vacancies. Unless otherwise provided in these
By-laws, vacancies on the Board of Directors, whether caused by resignation,
death, disqualification, removal, an increase in the authorized number of
directors or otherwise, may be filled by the affirmative vote of a majority of
the remaining directors, although less than a quorum, or by a sole remaining
director, or at a special meeting of the stockholders, by the holders of shares
entitled to vote for the election of directors.
SECTION 12. Action by Written Consent. Any action required or
permitted to be taken at any meeting of the Board of Directors may be taken
without a meeting if all the directors consent thereto in writing, and the
writing or writings are filed with the minutes of proceedings of the Board of
Directors.
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ARTICLE III
Committees
SECTION 1. Appointment. From time to time the Board of
Directors by a resolution adopted by a majority of the entire Board may appoint
any committee or committees for any purpose or purposes, to the extent lawful,
which shall have powers as shall be determined and specified by the Board of
Directors in the resolution of appointment.
SECTION 2. Procedures, Quorum and Manner of Acting. Each
committee shall fix its own rules of procedure, and shall meet where and as
provided by such rules or by resolution of the Board of Directors. Except as
otherwise provided by law, the presence of a majority of the then appointed
members of a committee shall constitute a quorum for the transaction of business
by that committee, and in every case where a quorum is present the affirmative
vote of a majority of the members of the committee present shall be the act of
the committee. Each committee shall keep minutes of its proceedings, and actions
taken by a committee shall be reported to the Board of Directors.
SECTION 3. Action by Written Consent. Any action required or
permitted to be taken at any meeting of any committee of the Board of Directors
may be taken without a meeting if all the members of the committee consent
thereto in writing, and the writing or writings are filed with the minutes of
proceedings of the committee.
SECTION 4. Term; Termination. In the event any person shall
cease to be a director of the Corporation, such person shall simultaneously
therewith cease to be a member of any committee appointed by the Board of
Directors.
ARTICLE IV
Officers
SECTION 1. Officers. The Corporation shall have as officers, a
Chairman of the Board, a President, a Chief Financial Officer, a Secretary and a
Treasurer. The Corporation may also have, at the discretion of the Board of
Directors, one or more Vice Presidents, one or more assistant secretaries, one
or more assistant treasurers and such other officers as the Board may from time
to time deem proper. Any two or more offices may be held by the same person
except the offices of the President and Secretary.
SECTION 2. Election of Officers. The officers of the
Corporation shall be chosen by the Board of Directors.
SECTION 3. Term of Office and Remuneration. The term of office
of all officers shall be one year and until their respective successors have
been elected and qualified, but any officer may be removed from office, either
with or without cause, at any time by the Board of Directors. Any vacancy in any
office arising from any cause may be filled for the unexpired portion of the
term by the Board of Directors. The remuneration of all officers of the
Corporation may be fixed by the Board of Directors or in such manner as the
Board of Directors shall provide.
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SECTION 4. Resignation; Removal. Any officer may resign at any
time upon written notice to the Corporation and such resignation shall take
effect upon receipt thereof by the President or Secretary, unless otherwise
specified in the resignation. Any officer shall be subject to removal, with or
without cause, at any time by vote of a majority of the entire Board.
SECTION 5. Chairman of the Board. The Chairman of the Board of
Directors, if there be one, shall preside at all meetings of the Board of
Directors and shall have such other powers and duties as may from time to time
be assigned by the Board of Directors.
SECTION 6. President and Chief Executive Officer. The
President and Chief Executive Officer shall have general management and
supervision of the property, business and affairs of the Corporation and over
its other officers; may appoint and remove assistant officers and other agents
and employees, other than officers referred to in Section 1 of this Article IV;
and may execute and deliver in the name of the Corporation powers of attorney,
contracts, bonds and other obligations and instruments.
SECTION 7. Vice-President. A Vice-President may execute and
deliver in the name of the Corporation contracts and other obligations and
instruments pertaining to the regular course of the duties of said office, and
shall have such other authority as from time to time may be assigned by the
Board of Directors or the President.
SECTION 8. Chief Financial Officer.
(a) The Chief Financial Officer shall keep, or cause to be
kept, the books and records of account of the Corporation.
(b) The Chief Financial Officer shall deposit all monies and
other valuables in the name and to the credit of the Corporation with such
depositories as may be designated from time to time by resolution of the Board
of Directors. He or she shall disburse the funds of the Corporation as may be
ordered by the Board of Directors, shall render to the President and the Board,
whenever they request it, an account of all of his transactions as Chief
Financial Officer and of the financial condition of the Corporation, and shall
have such other powers and perform such other duties as may be prescribed from
time to time by the Board or as the President may from time to time delegate.
SECTION 9. Treasurer. The Treasurer shall in general have all
duties incident to the position of Treasurer and such other duties as may be
assigned by the Board of Directors or the President.
SECTION 10. Secretary. The Secretary shall in general have all
the duties incident to the office of Secretary and such other duties as may be
assigned by the Board of Directors or the President.
SECTION 11. Assistant Officers. Any assistant officer shall
have such powers and duties of the officer such assistant officer assists as
such officer or the Board of Directors shall from time to time prescribe.
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ARTICLE V
Books and Records
SECTION 1. Location. The books and records of the Corporation
may be kept at such place or places within or outside the State of Delaware as
the Board of Directors or the respective officers in charge thereof may from
time to time determine. The record books containing the names and addresses of
all stockholders, the number and class of shares of stock held by each and the
dates when they respectively became the owners of record thereof shall be kept
by the Secretary as prescribed in the By-laws and by such officer or agent as
shall be designated by the Board of Directors.
SECTION 2. Addresses of Stockholders. Notices of meetings and
all other corporate notices may be delivered personally or mailed to each
stockholder at the stockholder's address as it appears on the records of the
Corporation.
ARTICLE VI
Certificates Representing Stock
SECTION 1. Certificates; Signatures. The shares of the
Corporation shall be represented by certificates, provided that the Board of
Directors of the Corporation may provide by resolution or resolutions that some
or all of any or all classes or series of its stock shall be uncertificated
shares. Any such resolution shall not apply to shares represented by a
certificate until such certificate is surrendered to the Corporation.
Notwithstanding the adoption of such a resolution by the Board of Directors,
every holder of stock represented by certificates and upon request every holder
of uncertificated shares shall be entitled to have a certificate, signed by or
in the name of the Corporation by the Chairman or Vice-Chairman of the Board of
Directors, or the President or Vice-President, and by the Treasurer or an
Assistant Treasurer, or the Secretary or an Assistant Secretary of the
Corporation, representing the number of shares registered in certificate form.
Any and all signatures on any such certificate may be facsimiles. In case any
officer, transfer agent or registrar who has signed or whose facsimile signature
has been placed upon a certificate shall have ceased to be such officer,
transfer agent or registrar before such certificate is issued, it may be issued
by the Corporation with the same effect as if he were such officer, transfer
agent or registrar at the date of issue. The name of the holder of record of the
shares represented thereby, with the number of such shares and the date of
issue, shall be entered on the books of the Corporation.
SECTION 2. Transfers of Stock. Upon compliance with provisions
restricting the transfer or registration of transfer of shares of stock, if any,
shares of capital stock shall be transferable on the books of the Corporation
only by the holder of record thereof in person, or by duly authorized attorney,
upon surrender and cancellation of certificates for a like number of shares,
properly endorsed, and the payment of all taxes due thereon.
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SECTION 3. Fractional Shares. The Corporation may, but shall
not be required to, issue certificates for fractions of a share where necessary
to effect authorized transactions, or the Corporation may pay in cash the fair
value of fractions of a share as of the time when those entitled to receive such
fractions are determined, or it may issue scrip in registered or bearer form
over the manual or facsimile signature of an officer of the Corporation or of
its agent, exchangeable as therein provided for full shares, but such scrip
shall not entitle the holder to any rights of a stockholder except as therein
provided.
The Board of Directors shall have power and authority to make
all such rules and regulations as it may deem expedient concerning the issue,
transfer and registration of certificates representing shares of the
Corporation.
SECTION 4. Lost, Stolen or Destroyed Certificates. The
Corporation may issue a new certificate of stock in place of any certificate,
theretofore issued by it, alleged to have been lost, stolen or destroyed, and
the Board of Directors may require the owner of any lost, stolen or destroyed
certificate, or his legal representative, to give the Corporation a bond
sufficient to indemnify the Corporation against any claim that may be made
against it on account of the alleged loss, theft or destruction of any such
certificate or the issuance of any such new certificate.
ARTICLE VII
Dividends
Subject always to the provisions of law and the Certificate of
Incorporation, the Board of Directors shall have full power to determine whether
any, and, if any, what part of any, funds legally available for the payment of
dividends shall be declared as dividends and paid to stockholders; the division
of the whole or any part of such funds of the Corporation shall rest wholly
within the lawful discretion of the Board of Directors, and it shall not be
required at any time, against such discretion, to divide or pay any part of such
funds among or to the stockholders as dividends or otherwise; and before payment
of any dividend, there may be set aside out of any funds of the Corporation
available for dividends such sum or sums as the Board of Directors from time to
time, in its absolute discretion, thinks proper as a reserve or reserves to meet
contingencies, or for repairing or maintaining any property of the Corporation,
or for such other purpose as the Board of Directors shall think conducive to the
interest of the Corporation, and the Board of Directors may modify or abolish
any such reserve in the manner in which it was created.
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ARTICLE VIII
Ratification
Any transaction, questioned in any law suit on the ground of
lack of authority, defective or irregular execution, adverse interest of
director, officer or stockholder, non-disclosure, miscomputation, or the
application of improper principles of practices of accounting, may be ratified
before or after judgment, by the Board of Directors or by the stockholders, and
if so ratified shall have the same force and effect as if the questioned
transaction had been originally duly authorized. Such ratification shall be
binding upon the Corporation and its stockholders and shall constitute a bar to
any claim or execution of any judgment in respect of such questioned
transaction.
ARTICLE IX
Indemnification
SECTION 1. Right to Indemnification. The Corporation shall
indemnify and hold harmless, to the fullest extent permitted by law as it
presently exists or may hereafter be amended, any person who was or is made or
is threatened to be made a party or is otherwise involved in any action or suit,
whether or not by or in the right of the Corporation, or proceeding, whether
civil, criminal, administrative or investigative (collectively, a "proceeding")
by reason of the fact that he, or a person for whom he is the legal
representative, is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation or of a partnership,
joint venture, trust, enterprise or nonprofit entity, including service with
respect to employee benefit plans, against all liability and loss, including
judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid
in settlement, incurred, suffered or paid by or on behalf of such person, and
expenses (including attorneys' fees) reasonably incurred by such person.
SECTION 2. Prepayment of Expenses. The Corporation shall pay
the expenses (including attorneys' fees) incurred in defending any proceeding in
advance of its final disposition, provided, however, that the payment of
expenses incurred by a director or officer in advance of the final disposition
of the proceeding shall be made only upon receipt of an undertaking by the
director or officer to repay all amounts advanced if it should be ultimately
determined that the director or officer is not entitled to be indemnified under
this Article or otherwise.
SECTION 3. Claims. The right to indemnification and payment of
expenses under the Certificate of Incorporation, these By-laws or otherwise
shall be a contract right. If a claim for indemnification or payment of expenses
under this Article is not paid in full within sixty days after a written claim
therefor has been received by the Corporation, the claimant may file suit to
recover the unpaid amount of such claim and, if successful in whole or in part,
shall be entitled to be paid the expense of prosecuting such claim. In any such
action the Corporation
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shall have the burden of proving that the claimant was not entitled to the
requested indemnification or payment of expenses under applicable law.
SECTION 4. Non-Exclusivity of Rights. The rights conferred on
any person by this Article shall not be exclusive of any other rights which such
person may have or hereafter acquire under any statute, provision of the
Certificate of Incorporation, these By-laws, agreement, vote of stockholders or
disinterested directors or otherwise.
SECTION 5. Other Indemnification. The Corporation's
obligation, if any, to indemnify any person who was or is serving at its request
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust, enterprise or nonprofit entity shall be reduced by any
amount such person may collect as indemnification from such other corporation,
partnership, joint venture, trust, enterprise or nonprofit enterprise.
SECTION 6. Amendment or Repeal. Any repeal or modification of
the foregoing provisions of this Article IX shall not adversely affect any right
or protection hereunder of any person in respect of any act or omission
occurring prior to the time of such repeal or modification.
ARTICLE X
Corporate Seal
The corporate seal shall have inscribed thereon the name of
the Corporation and the year of its incorporation, and shall be in such form and
contain such other words and/or figures as the Board of Directors shall
determine. The corporate seal may be used by printing, engraving, lithographing,
stamping or otherwise making, placing or affixing, or causing to be printed,
engraved, lithographed, stamped or otherwise made, placed or affixed, upon any
paper or document, by any process whatsoever, an impression, facsimile or other
reproduction of said corporate seal.
ARTICLE XI
Fiscal Year
The fiscal year of the Corporation shall be that which is
determined by the Board of Directors, and is subject to change by the Board of
Directors.
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ARTICLE XII
Waiver of Notice
Whenever notice is required to be given by these By-laws or by
the Certificate of Incorporation or by law, a written waiver thereof, signed by
the person or persons entitled to said notice, whether before or after the time
stated therein, shall be deemed equivalent to notice.
ARTICLE XIII
Bank Accounts, Drafts, Contracts, Etc.
SECTION 1. Bank Accounts and Drafts. In addition to such bank
accounts as may be authorized by the Board of Directors, the primary financial
officer or any person designated by said primary financial officer, whether or
not an employee of the Corporation, may authorize such bank accounts to be
opened or maintained in the name and on behalf of the Corporation as he may deem
necessary or appropriate, payments from such bank accounts to be made upon and
according to the check of the Corporation in accordance with the written
instructions of said primary financial officer, or other person so designated by
the Treasurer.
SECTION 2. Contracts. The Board of Directors may authorize any
person or persons, in the name and on behalf of the Corporation, to enter into
or execute and deliver any and all deeds, bonds, mortgages, contracts and other
obligations or instruments, and such authority may be general or confined to
specific instances.
SECTION 3. Proxies; Powers of Attorney; Other Instruments. The
Chairman, the President or any other person designated by either of them shall
have the power and authority to execute and deliver proxies, powers of attorney
and other instruments on behalf of the Corporation in connection with the rights
and powers incident to the ownership of stock by the Corporation. The Chairman,
the President or any other person authorized by proxy or power of attorney
executed and delivered by either of them on behalf of the Corporation may attend
and vote at any meeting of stockholders of any company in which the Corporation
may hold stock, and may exercise on behalf of the Corporation any and all of the
rights and powers incident to the ownership of such stock at any such meeting,
or otherwise as specified in the proxy or power of attorney so authorizing any
such person. The Board of Directors, from time to time, may confer like powers
upon any other person.
SECTION 4. Financial Reports. The Board of Directors may
appoint the primary financial officer or other fiscal officer and/or the
Secretary or any other officer to cause to be prepared and furnished to
stockholders entitled thereto any special financial notice and/or financial
statement, as the case may be, which may be required by any provision of law.
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ARTICLE XIV
Amendments
The Board of Directors of the Corporation is expressly
authorized to adopt, amend or repeal the By-laws of the Corporation, subject,
however, to any limitation thereof contained in these By-laws. By-laws adopted
by the Board of Directors may be repealed or changed, and new By-laws made, by
the stockholders, and the stockholders may prescribe that any By-law made by
them shall not be altered, amended or repealed by the Board of Directors. The
stockholders also shall have the power to adopt, amend or repeal the By-laws of
the Corporation; provided, however, that, immediately following the consummation
of a public offering by the Corporation of any of its capital stock, in addition
to any vote of the holders of any class or series of stock of the Corporation
required by law or by the Certificate of Incorporation, the affirmative vote of
the holders of at least eighty percent (80%) of the voting power of all of the
then outstanding shares of the capital stock of the Corporation entitled to vote
generally in the election of directors, voting together as a single class, shall
be required to adopt, amend or repeal any provision of the By-laws of the
Corporation.
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Exhibit 4.1
Customer No. 1177
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT dated as of June 30, 1999, is made by
Cellomics, Inc. (the "Borrower"), a Delaware corporation having its principal
place of business and chief executive office at 635 William Pitt Way,
Pittsburgh, Pennsylvania, 15238, in favor of Transamerica Business Credit
Corporation, a Delaware corporation (the "Lender"), having its principal office
at 9399 West Higgins Road, Suite 600, Rosemont, Illinois 60018 and having an
office at 76 Batterson Park Road, Farmington, Connecticut 06032.
WHEREAS, the Borrower has requested that the Lender make a Loan to the
Borrower; and
WHEREAS, the Lender has agreed to make such Loan on the terms and
conditions of this Agreement.
NOW, THEREFORE, in consideration of the premises and to induce the
Lender to extend credit, the Borrower hereby agrees with the Lender as follows:
SECTION 1. DEFINITIONS.
As used herein, the following terms shall have the following meanings,
and shall be equally applicable to both the singular and plural forms of the
terms defined:
Agreement shall mean this Loan and Security Agreement together with all
schedules and exhibits hereto, as amended, supplemented, or otherwise modified
from time to time.
Applicable Law shall mean the laws of the State of Illinois (or any
other jurisdiction whose laws are mandatorily applicable notwithstanding the
parties' choice of Illinois law) or the laws of the United States of America,
whichever laws allow the greater interest, as such laws now exist or may be
changed or amended or come into effect in the future.
Business Day shall mean any day other than a Saturday, Sunday, or
public holiday or the equivalent for banks in New York City.
Cash Equivalents means (i) securities issued, guaranteed or insured by
the United States or any of its agencies with maturities of not more than one
year from the date acquired; (ii) certificates of deposit with maturities of not
more than one year from the date acquired, issued by any U.S. federal or state
chartered commercial bank of recognized standing which has capital and
unimpaired surplus in excess of $100,000,000; (iii) investments in money market
funds registered under the Investment Company Act of 1940; (iv) mutual funds, at
least 90% of the assets of which constitute Cash Equivalents of the kinds
described in clauses (i) - (iii) of this definition; (v) other instruments,
commercial paper or investments acceptable to the Lender in its sole discretion
(vi) receivables owing to Borrower or its Subsidiaries by any Person, and
advances to customers or suppliers, in each case, if created, acquired or made
in the ordinary course of business; provided that this paragraph shall not apply
to investments owing by Subsidiaries to Borrower; (vii) compensation to
employees, officers or directors of Borrower or its Subsidiaries so long as the
board of directors of Borrower determines that such compensation is in the best
interest of Borrower, and travel advances, employee relocation loans and other
employee loans and advances in the ordinary course of business not exceeding
$100,000 in the aggregate; (viii) investments (not including debt obligations)
received in connection with the bankruptcy or reorganization of customers or
suppliers and in settlement of delinquent obligations of, and other disputes
with, customer or suppliers arising in the ordinary course of business; (ix)
investments pursuant to or arising under currency agreement or interest rate
agreements entered or other investments made in the ordinary course of business,
provided such investments in the aggregate do not exceed $100,000; (x)
investments consisting of prepaid royalties and other credit extensions to,
customers and
<PAGE> 2
suppliers who are not affiliates, in the ordinary course of business of
Borrower's business.
Closing Date means the date first set forth above.
Code shall have the meaning specified in Section 8(d).
Collateral shall have the meaning specified in Section 2.
Collateral Access Agreement shall mean any landlord waiver, mortgagee
waiver, bailee letter, or similar acknowledgement of any warehouseman or
processor in possession of any Collateral.
Contingent Obligation means any direct, indirect, contingent or
non-contingent guaranty or obligation for the indebtedness of another Person,
except endorsements in the ordinary course of business.
Effective Date shall mean the date on which all of the conditions
specified in Section 3.3 shall have been satisfied.
Event of Default shall mean any event specified in Section 7.
Financial Statements shall have the meaning specified in Section 6.1.
GAAP shall mean generally accepted accounting principles in the United
States of America, as in effect from time to time.
Intellectual Property shall mean all patents, patent applications,
patent rights, trademarks, trademark applications, trademark rights, trade
names, trade name rights, service marks and copyrights (whether registered or
not) owned or possessed by the Borrower.
Loans shall mean the loans and financial accommodations made by the
Lender to the Borrower in accordance with the terms of this Agreement and any
Note delivered hereunder.
Loan Documents shall mean, collectively, this Agreement, the Notes, and
all other present and future documents, agreements, certificates, instruments,
and opinions delivered by the Borrower under, in connection with or relating to
this Agreement, or any other present or future instrument or agreement between
Lender and Borrower, as each of the same may be amended, modified, extended,
restated or supplemented from time to time including but not limited to a Master
Loan and Security Agreement dated September 9, 1998 between Lender and Borrower.
Material Adverse Change shall mean, with respect to any Person, a
material adverse change in the business, operations, results of operations,
assets, liabilities, or financial condition of such Person taken as a whole.
Material Adverse Effect shall mean, with respect to any Person, a
material adverse effect on the business, operations, results of operations,
assets, liabilities, or financial condition of such Person taken as a whole.
Note shall mean each Promissory Note, in substantially the form
attached hereto, made by the Borrower in favor of the Lender, as amended,
supplemented, or otherwise modified from time to time.
Obligations shall mean and include all loans (including the Loans),
advances, debts, liabilities, obligations, covenants and duties owing by
Borrower to Lender of any kind or nature, present or future, whether or not
evidenced by the Note or any note, guaranty or other instrument, whether or not
arising under or in connection with, this Agreement, any other Loan Document or
any other present or future instrument or agreement, whether or not for the
payment of money, whether arising by reason of an extension of credit, opening,
guaranteeing or confirming of a letter of credit, loan, guaranty,
indemnification or in any other manner, whether direct or indirect (including
those acquired by assignment, purchase, discount or otherwise), whether absolute
or contingent, due or to
2
<PAGE> 3
become due, now due or hereafter arising and however acquired (including without
limitation all loans previously made by Lender to Borrower). The term includes,
without limitation, all interest (including interest accruing on or after an
bankruptcy, whether or not an allowed claim), charges, expenses, commitment,
facility, closing and collateral management fees, letter of credit fees,
reasonable attorneys' fees, taxes and any other sum properly chargeable to
Borrower under this Agreement, the other Loan Documents or any other present or
future agreement between Lender and Borrower including but not limited to sums
chargeable to Borrower pursuant to a Master Loan and Security Agreement dated
September 9, 1998 between Lender and Borrower.
Permitted Indebtedness shall mean: (a) indebtedness under this
Agreement and the other Loan Documents; (b) trade or other similar indebtedness
incurred in the ordinary course of business (but not for borrowed money), not
more than 90 days past due.
Permitted Liens shall mean such of the following as to which no
enforcement, collection, execution, levy, or foreclosure proceeding shall have
been commenced: (a) liens for taxes, assessments, and other governmental charges
or levies or the claims or demands of landlords, carriers, warehousemen,
mechanics, laborers, materialmen, and other like Persons arising by operation of
law in the ordinary course of business for sums which are not yet due and
payable, or liens which are being contested in good faith by appropriate
proceedings diligently conducted and with respect to which adequate reserves are
maintained to the extent required by GAAP; (b) deposits or pledges to secure the
payment of worker's compensation, unemployment insurance, or other social
security benefits or obligations, public or statutory obligations, surety or
appeal bonds, bid or performance bonds, or other obligations of a like nature
incurred in the ordinary course of business; (c) licenses, restrictions, or
covenants for or on the use of the Collateral which do not materially impair
either the use of the Collateral in the operation of the business of the
Borrower or the value of the Collateral and which are granted in Borrower's
normal course of business; (d) attachment or judgment liens that do not
constitute an Event of Default; (e) a lien on any item of equipment created
substantially simultaneously with the acquisition of such equipment for the
purpose of financing such acquisition (not to exceed sixty days from
acquisition), provided (1) that such lien shall attach only to the equipment
acquired, and (2) such lien does not secure sums due in excess of $5,000,000 and
(3) such equipment shall not be any equipment purchased with any proceeds
advanced by Lender to Borrower; and (4) that such equipment is acquired after
the May 31, 1999; (f) leases or subleases and licenses or sublicenses granted to
others not interfering in any material respect with the business of the Borrower
and entered into in the normal course of business; (g) liens in existence on the
date hereof relating to equipment purchased under the Master Loan and Security
Agreement dated September 9, 1998 between Lender and Borrower; (h) liens
incurred in connection with the extension renewal or refinancing of the
indebtedness secured by liens of the type described above in clauses (a) - (h)
above, provided that any extension, renewal or replacement lien is limited to
the property encumbered by the existing lien and the principal amount of the
indebtedness being extended, renewed or refinanced does not increase.
Person shall mean any individual, sole proprietorship, partnership,
limited liability partnership, joint venture, trust, unincorporated
organization, association, corporation, limited liability company, institution,
entity, party, or government (including any division, agency, or department
thereof), and the successors, heirs, and assigns of each.
Receivable shall have the meaning set forth in Section 8(e).
Schedule shall mean Schedule A hereto containing certain information
pertaining to the Borrower.
Solvent means, with respect to any Person, that as of the date as to
which such Person's solvency is measured, it is able generally to meet its debts
as they mature.
Taxes shall have the meaning specified in Section 5.5.
SECTION 2. CREATION OF SECURITY INTEREST; COLLATERAL. The Borrower
hereby grants and sets over to the Lender a continuing general, lien on, and
security interest in, all the Borrower's right, title, and interest in and to
the collateral described in the next sentence (the "Collateral") to secure the
payment and performance of all the Obligations, subject only to Permitted Liens.
Collateral means Receivables,
3
<PAGE> 4
Investment Property, Inventory, Equipment, and Other Property and all additions
and accessions thereto and substitutions and replacements therefor and
improvements thereon, and all proceeds (whether cash or other property) and
products thereof, including, without limitation, all proceeds of insurance
covering the same and all tort claims in connection therewith, and all records,
files, computer programs and files, data and writings relating to the foregoing,
and all equipment containing the foregoing.
Equipment means all machinery, equipment, furniture, fixtures,
conveyors, tools, materials, storage and handling equipment, hydraulic presses,
cutting equipment, computer equipment and hardware, including central processing
units, terminals, drives, memory units, printers, keyboards, screens,
peripherals and input or output devices, molds, dies, stamps, vehicles, and
other equipment of every kind and nature and wherever situated now or hereafter
owned by Borrower or in which Borrower may have any interest as lessee or
otherwise (to the extent of such interest), together with all additions and
accessions thereto, all replacements and all accessories and parts therefor, all
manuals, blueprints, know-how, warranties and records in connection therewith,
all rights against suppliers, warrantors, manufacturers, sellers or others in
connection therewith, and together with all substitutes for any of the
foregoing; and
Inventory means all present and future goods intended for sale, lease
or other disposition by Borrower including, without limitation, all raw
materials, work in process, finished goods and other retail inventory, goods in
the possession of outside processors or other third parties, goods consigned to
Borrower to the extent of its interest therein as consignee, materials and
supplies of any kind, nature or description which are or might be used in
connection with the manufacture, packing, shipping, advertising, selling or
finishing of any such goods, and all documents of title or documents
representing the same; and
Investment Property means any and all investment property of Borrower,
including all securities, whether certificated or uncertificated, security
entitlements, securities accounts, commodity contracts and commodity accounts,
and all financial assets held in any securities account or otherwise, wherever
located, and whether now existing or hereafter acquired or arising; and
Other Property means all present and future instruments, documents,
documents of title, securities, bonds, notes, promissory notes, drafts,
acceptances, letters of credit and rights to receive proceeds of letters of
credit, deposit accounts, chattel paper, certificates, insurance proceeds,
leases, computer tapes, causes of action, judgments, claims against third
parties, leasehold rights in any personal property, books, ledgers, files and
records, general intangibles (including without limitation, all contract rights,
tax refunds, rights to receive tax refunds, patents, patent applications,
copyrights (registered and unregistered), royalties, licenses, permits,
franchise rights, authorizations, customer lists, rights of indemnification,
contribution and subrogation, computer programs, discs and software, trade
secrets, computer service contracts, trademarks, trade names, service marks and
names, logos, goodwill, deposits, choses in action, designs, blueprints, plans,
know-how, telephone numbers and rights thereto, credits, reserves, and all forms
of obligations whatsoever now or hereafter owing to Borrower), all property at
any time in the possession or under the control of Lender, and all security
given by Borrower to Lender pursuant to any other loan document or agreement;
and
Receivables means all present and future accounts and accounts
receivable, together with all security therefor and guaranties thereof and all
rights and remedies relating thereto, including any right of stoppage in
transit.
Notwithstanding the foregoing, the security interest granted herein shall not
extend to and the term "Collateral" shall not include any property, rights or
licenses to the extent the granting of a security interest therein (i) would be
contrary to applicable law or (ii) is prohibited by or would constitute a
default under any agreement or document governing such property, rights or
licenses (but only to the extent such prohibition is enforceable under
applicable law).
SECTION 3. THE CREDIT FACILITY.
SECTION 3.1. BORROWINGS. The Lender, subject to the terms and
conditions of this Agreement, agrees to make a Loan to Borrower in a single
drawdown, at Borrower's request, in a principal amount not to exceed $1,500,000.
Notwithstanding anything herein to the contrary, the Lender shall be obligated
to make such Loan only after the Lender, in its sole discretion, determines that
the applicable conditions for borrowing contained in Sections 3.3 and 3.4 are
satisfied. The timing and financial scope of Lender's obligation to make Loans
hereunder are limited as set forth in a commitment letter executed by Lender and
Borrower, dated as of May 27, 1999 and attached hereto as Exhibit A (the
"Commitment Letter").
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<PAGE> 5
SECTION 3.2. APPLICATION OF PROCEEDS. The Borrower shall use the
proceeds of the Loans for its general working capital purposes.
SECTION 3.3. CONDITIONS TO LOAN.
(a) The obligation of the Lender to make the Loan is subject
to the Lender's receipt of the following, on or before the Closing Date, each
dated the date of the Loan or as of an earlier date acceptable to the Lender, in
form and substance satisfactory to the Lender and its counsel:
(i) completed requests for information (Form UCC-11)
listing all effective Uniform Commercial Code financing
statements naming the Borrower as debtor and all tax lien,
judgment, and litigation searches for the Borrower as the
Lender shall deem necessary or desirable;
(ii) acknowledgment copies of Uniform Commercial Code
financing statements (naming the Lender as secured party and
the Borrower as debtor), duly filed in all jurisdictions that
the Lender deems necessary or desirable to perfect and protect
the security interests created hereunder, and evidence that
all other filings, registrations and recordings have been made
in the appropriate governmental offices, and all other action
has been taken, which shall be necessary to create, in favor
of the Lender, a perfected first priority Lien on the
Collateral;
(iii) a Note duly executed by the Borrower evidencing
the amount of such Loan;
(iv) an Intellectual Property Security Agreement, in
form and substance satisfactory to the Lender and its counsel,
duly executed by the Borrower, specifically identifying and
granting to the Lender a security interest in all of the
Borrower's intellectual property;
(v) if requested by the Lender, a Collateral Access
Agreement duly executed by the lessor or mortgagee, as the
case may be, of each premises where the equipment Collateral
is located;
(vi) a Notice of Security Interest, in form and
substance satisfactory to the Lender and its counsel, to each
financial institution at which any deposit accounts of
Borrower are maintained;
(vii) the warrants described in the Commitment
Letter, if any;
(viii) certificates of insurance required under
Section 5.4 of this Agreement together with loss payee
endorsements for all such policies naming the Lender as lender
loss payee and as an additional insured;
(ix) a certificate of the Secretary or an Assistant
Secretary of the Borrower ("Secretary's Certificate")
certifying (A) that attached to the Secretary's Certificate is
a true, complete, and accurate copy of the resolutions of the
Board of Directors of the Borrower (or a unanimous consent of
directors in lieu thereof) authorizing the execution,
delivery, and performance of this Agreement, the other Loan
Documents, and the transactions contemplated hereby and
thereby, and that such resolutions have not been amended or
modified since the date of such certification and are in full
force and effect; (B) the incumbency, names, and true
signatures of the officers of the Borrower authorized to sign
the Loan Documents to which it is a party; (C) that attached
to the Secretary's Certificate is a true and correct copy of
the Articles or Certificate of Incorporation of the Company,
as amended, which Articles or Certificate of Incorporation
have not been further modified, repealed or rescinded and are
in full force and effect; (D) that attached to the Secretary's
Certificate of the Borrower is a true and correct copy of the
Bylaws, as amended, which Bylaws of the Company have not been
further modified, repealed or rescinded and are in full force
and effect; and (E) that attached to the Secretary's
Certificate is a valid
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<PAGE> 6
Certificate of Good Standing issued by the Secretary of the
State of the Borrower's state of incorporation;
(xi) the opinion of counsel for the Borrower covering
such matters incident to the transactions contemplated by this
Agreement as the Lender may reasonably require;
(xii) evidence of the consent or authorization of,
filing with or other act by or in respect of any governmental
agency or authority or any other Person required in connection
with the execution, delivery, performance, validity or
enforceability of this Agreement, or the other Loan Documents
or the consummation of the transactions contemplated hereby or
thereby; and
(xiii) such other documents, agreements and
instruments as the Lender deems necessary in its sole and
absolute discretion in connection with the transactions
contemplated hereby.
(b) The security interests in the Collateral granted in favor
of the Lender under this Agreement shall have been duly perfected and shall
constitute first priority liens, except for Permitted Liens.
SECTION 3.4. ADDITIONAL CONDITIONS PRECEDENT. The obligation of the
Lender to make the Loan is subject to the satisfaction of the following
additional conditions precedent:
(a) There shall be no pending or, to the knowledge of the
Borrower after due inquiry, threatened litigation, proceeding, inquiry, or other
action (i) seeking an injunction or other restraining order, damages, or other
relief with respect to the transactions contemplated by this Agreement or the
other Loan Documents or thereby or (ii) which affects or could reasonably be
expected to affect the business, prospects, operations, assets, liabilities, or
condition (financial or otherwise) of the Borrower, except, in the case of
clause (ii), where such litigation, proceeding, inquiry, or other action could
not be reasonably expected to have a Material Adverse Effect in the judgment of
the Lender;
(b) all representations and warranties contained in this
Agreement and the other Loan Documents shall be true and correct on and as of
the date of such Loan as if then made, other than representations and warranties
that expressly relate solely to an earlier date, in which case they shall have
been true and correct as of such earlier date;
(c) no Event of Default or event which with the giving of
notice or the passage of time, or both, would constitute an Event of Default
shall have occurred and be continuing or would result from the making of the
requested Loan as of the date of such request; and
(d) the Borrower shall be deemed to have hereby reaffirmed and
ratified all security interests, liens, and other encumbrances heretofore
granted by the Borrower to the Lender.
SECTION 3.5. INTEREST RATE; REPAYMENT. The interest rate applicable to
the Loan made by the Lender hereunder, and the repayment date for such Loan, are
as set forth in the Note evidencing such Loan.
SECTION 4. REPRESENTATIONS AND WARRANTIES.
SECTION 4.1. GOOD STANDING; QUALIFIED TO DO BUSINESS. The Borrower (a)
is duly organized, validly existing, and in good standing under the laws of the
State of its organization, (b) has the power and authority to own its properties
and assets and to transact the businesses in which it is presently, or proposes
to be, engaged, and (c) is duly qualified and authorized to do business and is
in good standing in every jurisdiction in which the failure to be so qualified
could reasonably be expected to have a Material Adverse Effect on (i) the
Borrower, (ii) the Borrower's ability to perform its obligations under the Loan
Documents, or (iii) the rights of the Lender hereunder.
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<PAGE> 7
SECTION 4.2. DUE EXECUTION, ETC. The execution, delivery, and
performance by the Borrower of each of the Loan Documents to which it is a party
are within the powers of the Borrower, do not contravene the organizational
documents, if any, of the Borrower, and do not (a) violate any law or
regulation, or any order or decree of any court or governmental authority, (b)
conflict with or result in a breach of, or constitute a default under, any
material indenture, mortgage, or deed of trust or any material lease, agreement,
or other instrument binding on the Borrower or any of its properties, or (c)
require the consent, authorization by, or approval of or notice to or filing or
registration with any governmental authority or other Person, except as may be
set forth in the Schedule. This Agreement is, and each of the other Loan
Documents to which the Borrower is or will be a party, when delivered hereunder
or thereunder, will be, the legal, valid, and binding obligation of the Borrower
enforceable against the Borrower in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, or similar laws
affecting creditors' rights generally and by general principles of equity.
SECTION 4.3. SOLVENCY; NO LIENS. The Borrower is Solvent and will be
Solvent upon the completion of all transactions contemplated to occur hereunder
(including, without limitation, the Loan to be made on the Effective Date); the
security interests granted herein constitute and shall at all times constitute
the first and only liens on the Collateral other than Permitted Liens; and the
Borrower is, or will be at the time additional Collateral is acquired by it, the
absolute owner of the Collateral with full right to pledge, sell, consign,
transfer, and create a security interest therein, free and clear of any and all
claims or liens in favor of any other Person other than Permitted Liens.
SECTION 4.4. NO JUDGMENTS, LITIGATION. No judgments are outstanding
against the Borrower nor is there now pending or, to the best of the Borrower's
knowledge, threatened any litigation, contested claim, or governmental
proceeding by or against the Borrower except judgments and pending or threatened
litigation, contested claims, and governmental proceedings which would not
reasonably be expected to, in the aggregate, have a Material Adverse Effect on
the Borrower.
SECTION 4.5. NO DEFAULTS. The Borrower is not in default or has not
received a notice of default under any material contract, lease, or commitment
to which it is a party or by which it is bound. The Borrower knows of no dispute
regarding any contract, lease, or commitment which could reasonably be expected
to have a Material Adverse Effect on the Borrower.
SECTION 4.6. COLLATERAL LOCATIONS. The address of the principal place
of business and chief executive office of Borrower is, and the books and records
of Borrower and all of its chattel paper and records relating to Collateral are
maintained exclusively in the possession of Borrower at, the address of Borrower
specified in the heading of this Agreement. Borrower has places of business, and
Collateral is located, only at such address and at the addresses set forth in
the Schedule and at any additional locations reported to the Lender as provided
in Section 5.7 as to which the Lender has taken all necessary action to perfect
and protect its security interests in the Collateral at any such locations.
SECTION 4.7. CORPORATE AND TRADE NAMES; FEDERAL TAX ID. During the past
five years, Borrower has not been known by or used any other corporate, trade or
fictitious name except for its name as set forth on the signature page of this
Agreement and the other names specified in the Schedule. The Borrower's Federal
Tax ID number is as set forth in the Schedule.
SECTION 4.8. NO EVENTS OF DEFAULT. No Event of Default has occurred and
is continuing nor has any event occurred which, with the giving of notice or the
passage of time, or both, would constitute an Event of Default.
SECTION 4.9. NO LIMITATION ON LENDER'S RIGHTS. Except as permitted
herein, none of the Collateral is subject to contractual obligations that may
restrict or inhibit the Lender's rights or abilities to sell or dispose of the
Collateral or any part thereof after the occurrence of an Event of Default.
SECTION 4.10. PERFECTION AND PRIORITY OF SECURITY INTEREST. This
Agreement
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<PAGE> 8
creates a valid and, upon completion of all required filings of financing
statements, perfected, and first priority and exclusive, security interest in
the Collateral, except for any Permitted Liens, securing the payment of all the
Obligations.
SECTION 4.11. INTELLECTUAL PROPERTY. Set forth in the Schedule is a
complete and accurate list of all patents, trademarks, trade names, service
marks and copyrights (registered and which Borrower believes to be in its best
interest unregistered), and all applications therefor and licenses thereof, of
Borrower. Borrower owns or licenses all material patents, trademarks,
service-marks, logos, tradenames, trade secrets, know-how, copyrights, or
licenses and other rights with respect to any of the foregoing, which are
necessary or advisable for the operation of its business as presently conducted
or proposed to be conducted. To the best of its knowledge, Borrower has not
infringed any patent, trademark, service-mark, tradename, copyright, license or
other right owned by any other Person by the sale or use of any product,
process, method, substance, part or other material presently contemplated to be
sold or used, where such sale or use could reasonably be expected to have a
Material Adverse Effect and no claim or litigation is pending, or to the best of
Borrower's knowledge, threatened against or affecting Borrower that contests its
right to sell or use any such product, process, method, substance, part or other
material.
SECTION 4.12. CONSENTS AND FILINGS. No consent, authorization or
approval of, or filing with or other act by, any shareholders of Borrower or any
governmental authority or other Person is required in connection with the
execution, delivery, performance, validity or enforceability of this Agreement
or any other Loan Document, the consummation of the transactions contemplated
hereby or thereby or the continuing operations of Borrower following such
consummation, except (i) those that have been obtained or made, (ii) the filing
of financing statements under the Code and (iii) any necessary filings with U.S.
Copyright Office and the U.S. Patent and Trademark Office.
SECTION 4.13. YEAR 2000 COMPLIANCE. The Borrower has (i) initiated a
review and assessment of all areas within its business and operations (including
those affected by suppliers and vendors) that could be adversely affected by the
"Year 2000 Problem" (that is, the risk that computer applications used by the
Borrower (or its suppliers and vendors) may be unable to recognize and perform
properly date-sensitive functions involving certain dates prior to and any date
after December 31, 1999), (ii) developed a plan and timeline for addressing the
Year 2000 Problem on a timely basis, and (iii) to date, implemented that plan in
accordance with that timetable. The Borrower reasonably believes that all
computer applications (including those of its suppliers and vendors) that are
material to its business and operations will on a timely basis be able to
perform properly date-sensitive functions for all dates before and after
January 1, 2000 (that is, be "Year 2000 compliant"), except to the extent that a
failure to do so could not reasonably be expected to have Material Adverse
Effect.
SECTION 4.14. TAXES. Borrower has properly completed and timely filed
all income tax returns it is required to file, and all Taxes, assessments, fees
and other governmental charges for periods beginning prior to the date of this
Agreement have been timely paid (or, if not yet due or being disputed in good
faith, adequate reserves therefor have been established in accordance with GAAP)
and Borrower has no liability for Taxes in excess of the amounts so paid or
reserves so established. No deficiencies for Taxes have been claimed, proposed
or assessed by any taxing or other governmental agency or authority against
Borrower and no notice of any tax lien has been filed. There are no pending or
(to the best knowledge of Borrower) threatened audits, investigations or claims
for or relating to any liability for Taxes and there are no matters under
discussion with any governmental agency or authority which could result in an
additional material liability for Taxes.
SECTION 4.15. FINANCIAL STATEMENTS. Borrower has provided to the Lender
complete and accurate Financial Statements, which have been prepared in
accordance with GAAP (except for the absence of footnotes and subject to normal
year-end adjustments with respect to unaudited financial statements)
consistently applied throughout the periods involved and fairly present the
financial position and results of operations of Borrower for each of the periods
covered, subject, in the case of any quarterly financial statements, to normal
year-end adjustments and the absence of notes. Borrower has no Contingent
Obligation or liability for Taxes, unrealized losses, unusual forward or
long-term commitments or long-term leases, which is not reflected in such
Financial Statements or the footnotes thereto. Since the last date covered by
such Financial Statements, there has been no sale, transfer or other disposition
by Borrower of any material part of its business or property and no
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<PAGE> 9
purchase or other acquisition of any business or property (including any capital
stock of any other Person) material in relation to the financial condition of
Borrower at said date. Since said date, (i) there has been no change,
occurrence, development or event which has had or could reasonably be expected
to have a Material Adverse Effect and (ii) none of the capital stock of Borrower
has been redeemed, retired, purchased or otherwise acquired for value by
Borrower other than repurchases of stock from terminated employees or other
service providers, and except as set forth in Schedule 4.15.
SECTION 4.16. ACCURACY AND COMPLETENESS OF INFORMATION. All data,
reports, and information heretofore, contemporaneously, or hereafter furnished
by or on behalf of the Borrower in writing to the Lender or for purposes of or
in connection with this Agreement or any other Loan Document, or any transaction
contemplated hereby or thereby, are or will be true and accurate in all material
respects on the date as of which such data, reports, and information are dated
or certified and not incomplete by omitting to state any material fact necessary
to make such data, reports, and information not misleading at such time. There
are no facts now known to the Borrower which individually or in the aggregate
could reasonably be expected to have a Material Adverse Effect and which have
not been specified herein, in the Financial Statements, or in any certificate,
opinion, or other written statement previously furnished by the Borrower to the
Lender.
SECTION 5. COVENANTS OF THE BORROWER.
SECTION 5.1. EXISTENCE, ETC. The Borrower shall: (a) retain its
existence and its current yearly accounting cycle, (b) maintain in full force
and effect all licenses, bonds, franchises, leases, trademarks, patents,
contracts, and other rights necessary to the profitable conduct of its business
unless the failure to do so could not reasonably be expected to have a Material
Adverse Effect on the Borrower, (c) continue in, and limit its operations to,
the same general lines of business as those presently conducted by it, and (d)
comply with all applicable laws and regulations of any federal, state, or local
governmental authority, except for such laws and regulations the violations of
which would not, in the aggregate, have a Material Adverse Effect on the
Borrower.
SECTION 5.2. NOTICE TO THE LENDER. As soon as possible, and in any
event within five days after the Borrower learns of the following, the Borrower
will give written notice to the Lender of the following:
(a) any proceeding instituted or threatened to be instituted
by or against the Borrower in any federal, state, local, or foreign court or
before any commission or other regulatory body (federal, state, local, or
foreign) involving a sum, together with the sum involved in all other similar
proceedings, in excess of $100,000 in the aggregate,
(b) any contract that is terminated or amended and which has
had or could reasonably be expected to have a Material Adverse Effect on the
Borrower,
(c) the occurrence of any Material Adverse Change with respect
to the Borrower;
(d) the occurrence of any Event of Default or event or
condition which, with notice or lapse of time or both, would constitute an Event
of Default, together with a statement of the action which the Borrower has taken
or proposes to take with respect thereto;
(e) of any discovery or determination by Borrower that any
computer application (including those of its suppliers and vendors) that is
material to its business and operations will not be Year 2000 compliant on a
timely basis, except to the extent that such failure could not reasonably be
expected to have a Material Adverse Effect;
(f) of any material damage to, the destruction of or any other
material loss to any Collateral owned or used by Borrower other than any such
Collateral with a net book value (individually or in the aggregate) less than
$50,000 or any condemnation, confiscation or other taking, in whole or in part,
or any event
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that otherwise diminishes so as to render impracticable or unreasonable the use
of such Collateral owned or used by Borrower together with the amount of the
damage, destruction, loss or diminution in value;
(g) of any copyright registration made by it, any rights
Borrower may obtain to any copyrightable works, new trademarks or any new
patentable inventions, and of any renewal or extension of any trademark
registration, or if it shall otherwise become entitled to the benefit of any
patent or patent application or trademark or trademark application; and
(h) of the opening of any new bank account or other deposit
account, and any new securities account.
SECTION 5.3. MAINTENANCE OF BOOKS AND RECORDS. Borrower shall (i)
maintain books and records (including computer records) pertaining to the
Collateral in such detail, form and scope as is customary for companies in
similar businesses in similar situations and (ii) provide the Lender and its
agents access to the premises of Borrower at any time and from time to time,
during normal business hours and upon reasonable notice under the circumstances
but not more than two times per year prior to an Event of Default, and at any
time on and after the occurrence and during the existence of an Event of
Default, or event or condition which, with notice or lapse of time or both,
would constitute an Event of Default, for the purposes of (A) inspecting and
verifying the Collateral, (B) inspecting and copying (at Borrower's expense) any
and all records pertaining thereto, and (C) discussing the affairs, finances and
business of Borrower with any officer, employee or director of Borrower or with
Borrower's accountants. Borrower shall reimburse the Lender for the reasonable
travel and related expenses of the Lender's employees or, at the Lender's
option, of such outside accountants or examiners as may be retained by the
Lender to verify or inspect Collateral, records or documents of Borrower on a
regular basis or for a special inspection if the Lender deems the same
appropriate. If the Lender's own employees are used, Borrower shall also pay
therefor $600 per person per day (or such other amount as shall represent the
Lender's then current standard charge for the same), or, if outside examiners or
accountants are used, Borrower shall also pay the Lender such reasonable sum as
the Lender may be obligated to pay as fees therefor.
SECTION 5.4. INSURANCE. Borrower shall maintain public liability
insurance, business interruption insurance, third party property damage
insurance and replacement value insurance on its assets (including the
Collateral) under such policies of insurance, with such insurance companies, in
such amounts and covering such risks as are at all times reasonably satisfactory
to the Lender in its commercially reasonable judgment, all of which policies
covering the Collateral shall name the Lender as an additional insured and
lender loss payee in case of loss, and contain other provisions as the Lender
may reasonably require to protect fully the Lender's interest in the Collateral
and any payments to be made under such policies.
SECTION 5.5. TAXES. The Borrower will pay, when due, all taxes,
assessments, claims, and other charges ("Taxes") lawfully levied or assessed
against the Borrower or the Collateral other than taxes that are being
diligently contested in good faith by the Borrower by appropriate proceedings
promptly instituted and for which an adequate reserve is being maintained by the
Borrower in accordance with GAAP. If any Taxes remain unpaid after the date
fixed for the payment thereof, or if any lien shall be claimed therefor, then,
without notice to the Borrower, but on the Borrower's behalf, the Lender may pay
such Taxes, and the amount thereof shall be included in the Obligations.
SECTION 5.6. BORROWER TO DEFEND COLLATERAL AGAINST CLAIMS; FEES ON
COLLATERAL. The Borrower will defend the Collateral against all claims and
demands of all Persons at any time claiming the same or any interest therein.
The Borrower will not permit any notice creating or otherwise relating to liens
on the Collateral or any portion thereof to exist or be on file in any public
office other than Permitted Liens. The Borrower shall promptly pay, when
payable, all transportation, storage, and warehousing charges and license fees,
registration fees, assessments, charges, permit fees, and taxes (municipal,
state, and federal) which may now or hereafter be imposed upon the ownership,
leasing, renting, possession, sale, or use of the Collateral, other than taxes
on or measured by the Lender's income and fees, assessments, charges, and taxes
which are being contested in good faith by appropriate proceedings diligently
conducted and with respect to which adequate reserves are maintained to the
extent required by GAAP.
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SECTION 5.7. CHANGE OF LOCATION, STRUCTURE, OR IDENTITY. The Borrower
will give Lender at least 30 days prior written notice of any change of
Borrower's chief executive office or of the opening of any additional place of
business. The Borrower will not move or permit the movement of any item of
Collateral from the locations specified in the Schedule, except that the
Borrower keep Collateral at other locations within the United States provided
that the Borrower has delivered to the Lender (i) prior written notice thereof
and (ii) duly executed financing statements and other agreements and instruments
(all in form and substance satisfactory to the Lender) necessary or, in the
opinion of the Lender, desirable to perfect and maintain in favor of the Lender
a first priority security interest in the Collateral. Notwithstanding anything
to the contrary in the immediately preceding sentence, the Borrower may keep any
Collateral consisting of motor vehicles, rolling stock, or other Mobile Goods
(as defined in the UCC), including but not limited to laptop computers, at any
location in the United States provided that the Lender's security interest in
any such Collateral is conspicuously marked on the certificate of title thereof
and the Borrower has complied with the provisions of Section 5.9.
SECTION 5.8. USE OF COLLATERAL; LICENSES; REPAIR. The Collateral shall
be operated by competent, qualified personnel in connection with the Borrower's
business purposes, for the purpose for which the Collateral was designed and in
accordance with applicable operating instructions, laws, and government
regulations, and the Borrower shall use every reasonable precaution to prevent
loss or damage to the Collateral from fire and other hazards. The Borrower shall
procure and maintain in effect all orders, licenses, certificates, permits,
approvals, and consents required by federal, state, or local laws or by any
governmental body, agency, or authority in connection with the delivery,
installation, use, and operation of the Collateral.
SECTION 5.9. FURTHER ASSURANCES. The Borrower will, promptly upon
request by the Lender, execute and deliver or use its best efforts to obtain any
document required by the Lender (including, without limitation, warehouseman or
processor disclaimers, mortgagee waivers, landlord disclaimers, or subordination
agreements with respect to the Obligations and the Collateral), give any
notices, execute and file any financing statements, mortgages, or other
documents (all in form and substance satisfactory to the Lender), mark any
chattel paper, deliver any chattel paper or instruments to the Lender, and take
any other actions that are necessary or, in the opinion of the Lender, desirable
to perfect or continue the perfection and the first priority of the Lender's
security interest in the Collateral, to protect the Collateral against the
rights, claims, or interests of any Persons, or to effect the purposes of this
Agreement. The Borrower hereby authorizes the Lender to file one or more
financing or continuation statements, and amendments thereto, relating to all or
any part of the Collateral without the signature of the Borrower where permitted
by law. A carbon, photographic, or other reproduction of this Agreement or any
financing statement covering the Collateral or any part thereof shall be
sufficient as a financing statement where permitted by law. To the extent
required under this Agreement, the Borrower will pay all costs incurred in
connection with any or the foregoing.
SECTION 5.10. NO DISPOSITION OF COLLATERAL. The Borrower will not in
any way hypothecate or create or permit to exist any lien, security interest,
charge, or encumbrance on or other interest in any of the Collateral, except for
the lien and security interest granted hereby and permitted Liens. In the event
the Collateral, or any part thereof, is sold, transferred, assigned, exchanged,
or otherwise disposed of in violation of this Agreement, the security interest
of the Lender shall continue in such Collateral or part thereof notwithstanding
such sale, transfer, assignment, exchange, or other disposition, and the
Borrower will hold the proceeds thereof in a separate account for the benefit of
the Lender. Following such a sale, the Borrower will transfer such proceeds to
the Lender in kind.
SECTION 5.11. NO LIMITATION ON LENDER'S RIGHTS. The Borrower will not
enter into any contractual obligations which may restrict or inhibit the
Lender's rights or ability to sell or otherwise dispose of the Collateral or any
part thereof.
SECTION 5.12. PROTECTION OF COLLATERAL. Upon notice to the Borrower
(provided that if an Event of Default has occurred and is continuing the Lender
need not give any notice). the Lender shall have the right at any time to make
any payments and do any other acts the Lender may deem necessary to protect its
security interests in the Collateral, including, without limitation, the rights
to satisfy, purchase, contest, or
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compromise any encumbrance, charge, or lien which, in the reasonable judgment of
the Lender, appears to be prior to or superior to the security interests granted
hereunder, and appear in, and defend any action or proceeding purporting to
affect its security interests in, or the value of, any of the Collateral. The
Borrower hereby agrees to reimburse the Lender for all payments made and
expenses incurred under this Agreement including reasonable fees, expenses, and
disbursements of attorneys and paralegals (including the allocated costs of
in-house counsel) acting for the Lender, including any of the foregoing payments
under, or acts taken to protect its security interests in, any of the
Collateral, which amounts shall be secured under this Agreement, and agrees it
shall be bound by any payment made or act taken by the Lender hereunder absent
the Lender's gross negligence or willful misconduct. The Lender shall have no
obligation to make any of the foregoing payments or perform any of the foregoing
acts.
SECTION 5.13. DELIVERY OF ITEMS. The Borrower will (a) promptly (but in
no event later than three Business Days) after its receipt thereof, deliver to
the Lender any documents or certificates of title issued with respect to any
property included in the Collateral, and any promissory notes, letters of credit
or instruments related to or otherwise in connection with any property included
in the Collateral, which in any such case come into the possession of the
Borrower, or shall cause the issuer thereof to deliver any of the same directly
to the Lender, in each case with any necessary endorsements in favor of the
Lender and (b) deliver to the Lender as soon as available copies of any and all
press releases and other similar communications issued by the Borrower.
SECTION 5.14. SOLVENCY. The Borrower shall be and remain Solvent at all
times.
SECTION 5.15. INTELLECTUAL PROPERTY. Borrower shall do and cause to be
done all things necessary to preserve, maintain and keep in full force and
effect all of its registrations of trademarks, service marks and other marks,
trade names and other trade rights, patents, copyrights and other intellectual
property in accordance with prudent business practices, except to the extent
that the failure to preserve or maintain any of the foregoing could not
reasonably be expected to have a Material Adverse Effect. Without limiting the
generality of the foregoing, Borrower agrees promptly, and in any event not
later than 30 days after the date hereof, to have any of its currently
unregistered copyrightable software, computer programs and other materials,
which Borrower determines to be in its best interest or as Lender shall request
in its good faith business judgment registered with the U.S. Copyright Office in
Washington, D.C. (the "Copyright Office") and to promptly provide TBCC with
evidence of such registration. Borrower will, on an ongoing basis, when it is in
the best interest of the Corporation or as Lender shall request in its good
faith business judgment, promptly register any future unregistered copyrightable
software, computer programs and other materials with the Copyright Office.
SECTION 5.16. FUNDAMENTAL CHANGES. The Borrower shall not (a) amend or
modify its name, unless the Borrower delivers to the Lender thirty days prior to
any such proposed amendment or modification written notice of such amendment or
modification and within ten days before such amendment or modification delivers
executed Uniform Commercial Code financing statements (in form and substance
satisfactory to the Lender) or (b) merge or consolidate with any other entity or
make any material change in its capital structure, in each case without the
Lender's prior written consent which shall not be unreasonably withheld, except
not from the sale of newly issued securities to investors.
SECTION 5.17. CONTINGENT OBLIGATIONS. Borrower will not, directly or
indirectly, incur, assume, or stiffer to exist any Contingent Obligation,
excluding indemnities given in connection with this Agreement or the other Loan
Documents in favor of the Lender or in connection with the sale of inventory or
other asset dispositions permitted hereunder, except Contingent Obligations and
other similar third party credit support relating to obligations of vendors and
suppliers of Borrower in respect of transactions entered into in the normal
course of business, provided that the aggregate amount of any such guarantees
and other similar third party credit support shall not exceed $100,000 at any
time outstanding, and provided further that no Default or Event of Default shall
exist either immediately prior to or after giving effect to the making of the
foregoing guarantees or the entering into any third party credit support
transactions.
SECTION 5.18. CHANGE IN NATURE OF BUSINESS. Borrower will not at any
time make any material change in the lines of its business as carried on at the
date of this Agreement or enter into any new line of business; provided that
Borrower may enter businesses reasonably related or incidental to its current
lines of business.
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SECTION 5.19. SALES OF ASSETS. Borrower will not, directly or
indirectly, in any fiscal year, sell, transfer or otherwise dispose of any
assets, or grant any option or other right to purchase or otherwise acquire any
assets other than (i) equipment with on aggregate value of less than $25,000 the
proceeds of which shall be paid to the Lender and applied to the Obligations or
equipment subject to Permitted Liens having priority over Lender's security
interest in the Collateral, (ii) sales of inventory in the ordinary course of
business and (iii) licenses or sublicenses of intellectual property in the
ordinary course of Borrower's business, provided adequate consideration is
received and it is in the best interest of the Borrower.
SECTION 5.20. LOANS TO OTHER PERSONS. Borrower will not at any time
make loans or advance any credit (except to trade debtors in the ordinary course
of business) to any Person in excess of $50,000 in the aggregate at any time for
all such loans, except that Borrower may make cashless advances of credit to
senior members of Borrower's management team to purchase restricted stock of
Borrower.
SECTION 5.21. DIVIDENDS, STOCK REDEMPTIONS. Borrower will not, directly
or indirectly, pay any dividends or distributions on, purchase, redeem or retire
any shares of any class of its capital stock or any warrants, options or rights
to purchase any such capital stock, whether now or hereafter outstanding
("Stock"), or make any payment on account of or set apart assets for a sinking
or other analogous fund for, the purchase, redemption, defeasance, retirement or
other acquisition of its Stock, or make any other distribution in respect
thereof, either directly or indirectly, whether in cash or property or in
obligations of Borrower, except for dividends paid solely in stock of the
Borrower and repurchases of stock owned by employees, directors and consultants
of Borrower pursuant to terms of employment, consulting or other stock
restrictions agreements at such time as any such employee, director or
consultant terminates his or her affiliations with the Borrower, provided that
no Default or Event of Default shall exist either immediately prior to or after
giving effect to such repurchase, and provided further that the total amount
paid in connection therewith by Borrower shall not exceed $100,000 in any
consecutive 12-month period.
SECTION 5.22. INVESTMENTS IN OTHER PERSONS. Borrower will not,
directly or indirectly, at any time make or hold any Investment in any Person
(whether in cash, securities or other property of any kind) other than
investments in Cash Equivalents.
SECTION 5.23. ACQUISITION OF STOCK OR ASSETS. Without the prior written
consent of Lender, which consent shall not be unreasonably withheld, Borrower
will not acquire or commit or agree to acquire all or any stock, securities or
assets of any other Person other than inventory and equipment acquired in the
ordinary course of business.
SECTION 5.24. PARTNERSHIPS; SUBSIDIARIES; JOINT VENTURES; MANAGEMENT
CONTRACTS. Borrower will not at any time create any direct or indirect
Subsidiary unless the Subsidiary executes a subsidiary guarantee in form and
substance satisfactory to Lender, enter into any joint venture or similar
arrangement (other than joint ventures or strategic partnerships consisting of
licensing of technology or the providing of technical support, provided adequate
consideration is received and it is in the best interest of the Borrower) or
become a partner in any general or limited partnership or enter into any
management contract (other than an employment contract for the employment of an
officer or employee entered into in the regular course of Borrower's business)
permitting third party management rights with respect to Borrower's business.
SECTION 5.25. RIGHT OF FIRST REFUSAL. In connection with any proposed
line of credit hereafter to be obtained by Borrower, Borrower agrees that the
Lender shall have a right of first refusal to provide such financing to
Borrower, except for $5,000,000 in equipment financing. Accordingly, the Lender
shall have the right (but not the obligation) to make a financing proposal for a
line of credit for Borrower upon receiving notice from Borrower of Borrower's
intent to obtain such financing. Borrower shall provide the Lender with advance
notice of its intent to obtain such financing. Thereafter, Borrower shall afford
the Lender the opportunity to make a financing proposal to Borrower, which
Borrower agrees to evaluate in Good Faith. If the Lender and Borrower shall not
mutually agree upon the terms and conditions of such financing within 45 days
following
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Borrower's receipt of notice, Borrower may obtain such financing from
alternative sources.
SECTION 5.26. LIMITATION ON ADDITIONAL INDEBTEDNESS. Borrower shall not
incur additional indebtedness other than Permitted Indebtedness without the
prior consent of the Lender, which will not be unreasonably withheld.
SECTION 5.27. RELEASE OF INTELLECTUAL PROPERTY. Lender will release its
first priority security interest in the Intellectual Property of the Borrower
(the "Release") upon the Borrower completing by November 30, 1999 the following:
(1) a corporate collaboration with an up-front payment of not less than ten
million dollars, and (2) an equity financing of not less than six million
dollars in net proceeds going to the Borrower.
In the event that the Borrower completes and obtains the proceeds as described
above and Lender releases the Intellectual Property security interest, the
Borrower will not in any way hypothecate or create or permit to exist any lien,
security interest, charge, or encumbrance on or other interest in any of its
Intellectual Property in connection with any indebtedness of the Borrower, and
the Borrower will not sell, transfer, assign, pledge, collaterally assign,
exchange, or otherwise dispose of any of its Intellectual Property.
Notwithstanding the foregoing, Borrower shall not be prohibited from (i)
pledging or otherwise committing its Intellectual Property in order to engage in
a joint venture or in connection with a merger or acquisition which has been
consented to by the Lender or (ii) granting licenses or sub-licenses to use its
Intellectual Property to third parties in the ordinary course of business.
SECTION 5.28. ADDITIONAL REQUIREMENTS. The Borrower shall take all such
further actions and execute all such further documents and instruments as the
Lender may reasonably request.
SECTION 6. FINANCIAL STATEMENTS. Until the payment and satisfaction in
full of all Obligations, the Borrower shall deliver to the Lender the following
financial information:
SECTION 6.1. ANNUAL FINANCIAL STATEMENTS. As soon as available, but not
later than 180 days after the end of each fiscal year of the Borrower and its
consolidated subsidiaries, the consolidated balance sheet, income statement, and
statements of cash flows and shareholders equity for the Borrower and its
consolidated subsidiaries (the "Financial Statements") for such year, reported
on by independent certified public accountants without an adverse qualification,
except for going concern qualification typically given for development stage
companies; and
SECTION 6.2. QUARTERLY FINANCIAL STATEMENTS. As soon as available, but
not later than 60 days after the end of each of the first three fiscal quarters
in any fiscal year of the Borrower and its consolidated subsidiaries, the
Financial Statements for such fiscal quarter, together with a certification duly
executed by a responsible officer of the Borrower that such Financial Statements
have been prepared in accordance with GAAP and are fairly stated in all material
respects (subject to normal year-end audit adjustments).
SECTION 7. EVENTS OF DEFAULT. The occurrence of any of the following
events shall constitute an Event of Default hereunder:
(a) the Borrower shall fail to pay when due any principal,
interest, fee or other amount required to be paid by the Borrower under or in
connection with any Note and this Agreement;
(b) any representation or warranty made or deemed made by the
Borrower under or in connection with any Loan Document or any Financial
Statement shall prove to have been false or incorrect in any material respect
when made or deemed made;
(c) the Borrower shall fail to perform or observe (i) any of
the terms, covenants or agreements contained in Sections 5.4, 5.7, 5.10, 5.14 or
5.16 through 5.25 hereof or (ii) any other term, covenant, or agreement
contained in any Loan Document (other than the other Events of Default specified
in this Section 7) and such failure remains unremedied for the earlier of twenty
days from (A) the date on which the Lender has given the
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Borrower written notice of such failure and (B) the date on which the Borrower
knew or should have known of such failure;
(d) any defined "Event of Default" shall occur under any
other Loan Document except that the definition of Solvency for purposes of
Lender calling a default shall be determined based on the definition in this
Agreement; or Borrower or any Person shall deny or disaffirm its obligations
under any of the Loan Documents or any Liens granted in connection therewith or
shall otherwise challenge any of its obligations under any of the Loan
Documents; or any Liens granted in any material portion of the Collateral shall
be determined to be void, voidable or invalid, are subordinated or are not given
the priority contemplated by this Agreement; or any Loan Document shall for any
reason cease to create a valid and perfected Lien on the Collateral purported to
be covered thereby, of first priority (except for Permitted Liens);
(e) dissolution, liquidation, winding up, or cessation of the
Borrower's business, failure of the Borrower generally to pay its debts as they
mature, admission in writing by the Borrower of its inability generally to pay
its debts as they mature, or calling of a meeting of the Borrower's creditors
for purposes of compromising any of the Borrower's debts;
(f) the commencement by or against the Borrower of any
bankruptcy, insolvency, arrangement, reorganization, receivership, or similar
proceedings under any federal or state law and, in the case of any such
involuntary proceeding, such proceeding remains undismissed or unstayed for
sixty days following the commencement thereof, or any action by the Borrower is
taken authorizing any such proceedings;
(g) an assignment for the benefit of creditors is made by the
Borrower, whether voluntary or involuntary, the appointment of a trustee,
custodian, receiver, or similar official for the Borrower or for any substantial
property of the Borrower, or any action by the Borrower authorizing any such
proceeding;
(h) the Borrower shall default in (i) the payment of principal
or interest on any indebtedness in excess of $100,000 (other than the
Obligations) beyond the period of grace, if any, provided in the instrument or
agreement under which such indebtedness was created, and such payment default
has not been cured within any applicable grace period unless such default has
been waived by such Person; or (ii) the observance or performance of any other
agreement or condition relating to any such indebtedness or contained in any
instrument or agreement relating thereto, or any other event shall occur or
condition exist, the effect of which default or other event or condition is to
cause, or to permit the holder or holders of such indebtedness to cause, with
the giving of notice if required, such indebtedness to become due prior to its
stated maturity, and such default has not been cured within any applicable grace
period unless such default has been waived by such Person, except that the
definition of Solvency for purposes of Lender calling a default shall be
determined based on the definition in this Agreement; or (iii) any loan or other
agreement under which the Borrower has received financing from Transamerica
Corporation or any of its affiliates, except that the definition of Solvency for
purposes of Lender calling a default shall be determined based on the definition
in this Agreement;
(i) the Borrower suffers or sustains a Material Adverse
Change;
(j) any tax lien, other than a Permitted Lien, is filed of
record against the Borrower and is not bonded or discharged within ten Business
Days;
(k) any judgment or order for the payment of money in excess
of $100,000 and not otherwise covered by applicable insurance shall be rendered
against the Borrower and such judgment or order shall not be stayed, vacated,
bonded, or discharged within thirty days;
(l) any material covenant, agreement, or obligation, as
determined in the sole discretion of the Lender, made by the Borrower and
contained in or evidenced by any of the Loan Documents shall cease to be
enforceable, or shall be determined to be unenforceable, in accordance with its
terms; the Borrower shall deny or disaffirm the Obligations under any of the
Loan Documents or any liens granted in connection therewith; or any liens
granted on any of the Collateral in favor of the Lender shall be determined to
be void, voidable, or invalid,
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or shall not be given the priority contemplated by this Agreement; or
(m) there is a change in more than 35% of the ownership of any
equity interests of the Borrower on the date hereof or more than 35% of such
interests become subject to any contractual, judicial, or statutory lien,
charge, security interest, or encumbrance.
SECTION 8. REMEDIES. If any Event of Default shall have occurred and be
continuing:
(a) The Lender may, without prejudice to any of its other
rights under any Loan Document or Applicable Law, declare all Obligations to be
immediately due and payable (except with respect to any Event of Default set
forth in Section 7(f) hereof, in which case all Obligations shall automatically
become immediately due and payable without necessity of any declaration) without
presentment, representation, demand of payment, or protest, which are hereby
expressly waived.
(b) The Lender may take possession of the Collateral and, for
that purpose may enter, with the aid and assistance of any person or persons,
any premises where the Collateral or any part hereof is, or may be placed, and
remove the same.
(c) The obligation of the Lender, if any, to make additional
Loans or financial accommodations of any kind to the Borrower shall immediately
terminate.
(d) The Lender may exercise in respect of the Collateral, in
addition to other rights and remedies provided for herein (or in any Loan
Document) or otherwise available to it, all the rights and remedies of a
secured party under the applicable Uniform Commercial Code (the "Code") whether
or not the Code applies to the affected Collateral and also may (i) require the
Borrower to, and the Borrower hereby agrees that it will at its expense and upon
request of the Lender forthwith, assemble all or part of the Collateral as
directed by the Lender and make it available to the Lender at a place to be
designated by the Lender that is reasonably convenient to both parties and (ii)
without notice except as specified below, sell the Collateral or any part
thereof in one or more parcels at public or private sale, at any of the Lender's
offices or elsewhere, for cash, on credit, or for future delivery, and upon such
other terms as the Lender may deem commercially reasonable.
(e) The Lender may accelerate or extend the time of payment,
compromise, issue credits, or bring suit on all accounts receivable
("Receivables") and other Collateral (in the name of Borrower or the Lender) and
otherwise administer and collect the Receivables and other Collateral.
(f) The Lender may collect, receive, dispose of and realize
upon any investment property Collateral, including withdrawal of any and all
funds from any securities accounts.
(g) The Lender may (i) settle or adjust disputes or claims
directly with account debtors for amounts and upon terms which it considers
advisable, and (ii) notify account debtors on the Receivables and other
Collateral that the Receivables and Collateral have been assigned to the Lender,
and that payments in respect thereof shall be made directly to the Lender. If an
Event of Default has occurred and is continuing, Borrower hereby irrevocably
authorizes and appoints the Lender, or any Person the Lender may designate, as
its attorney-in-fact, at Borrower's sole cost and expense, to exercise, all of
the following powers, which are coupled with an interest and are irrevocable,
until all of the Obligations have been indefeasibly paid and satisfied in full
in cash: (A) to receive, take, endorse, sign, assign and deliver, all in the
name of the Lender or Borrower, any and all checks, notes, drafts, and other
documents or instruments relating to the Collateral; (B) to receive, open and
dispose of all mail addressed to Borrower and to notify postal authorities to
change the address for delivery thereof to such address as the Lender may
designate; and (C) to take or bring, in the name of the Lender or Borrower, all
steps, actions, suits or proceedings deemed by the Lender necessary or desirable
to enforce or effect collection of Receivables and other Collateral or file and
sign Borrower's name on a proof of claim in bankruptcy or similar document
against any obligor of Borrower.
(h) The Borrower agrees that, to the extent notice of sale
shall be required by law, at
16
<PAGE> 17
least ten days' notice to the Borrower of the time and place of any public sale
or the time after which any private sale is to be made shall constitute
reasonable notification. The Lender shall not be obligated to make any sale of
Collateral regardless of notice of sale having been given. The Lender may
adjourn any public or private sale from time to time by announcement at the time
and place fixed therefor, and such sale may, without further notice, be made at
the time and place to which it was so adjourned. Borrower recognizes that the
Lender may be unable to make a public sale of any or all of any investment
property Collateral, by reason of prohibitions contained in applicable
securities laws or otherwise, and expressly agrees that a private sale to a
restricted group of purchasers for investment and not with a view to any
distribution thereof shall be considered a commercially reasonable sale.
(i) Unless expressly prohibited by any licensor thereof, the
Lender is hereby granted a license to use all computer software programs, data
bases, processes, trademarks, tradenames and materials used by Borrower in
connection with its businesses or in connection with the Collateral.
(j) All cash proceeds received by the Lender in respect of any
sale of, collection from, or other realization upon all or any part of the
Collateral may, in the discretion of the Lender, be held by the Lender as
collateral for, or then or at any time thereafter applied in whole or in part by
the Lender against, all or any part of the Obligations in such order as the
Lender shall elect. Any surplus of such cash or cash proceeds held by the Lender
and remaining after the full and final payment of all the Obligations shall be
paid over to the Borrower or to such other Person to which the Lender may be
required under applicable law, or directed by a court of competent jurisdiction,
to make payment of such surplus.
SECTION 9. MISCELLANEOUS PROVISIONS.
SECTION 9.1. NOTICES. Except as otherwise provided herein, all notices,
approvals, consents, correspondence, or other communications required or desired
to be given hereunder shall be given in writing and shall be delivered by
overnight courier, facsimile, hand delivery, or certified or registered mail,
postage prepaid, if to the Lender, then to at 76 Batterson Park Road,
Farmington, Connecticut 06032, with a copy to the Lender at Riverway II, West
Office Tower, 9399 West Higgins Road, Rosemont, Illinois 60018, and if to the
Borrower, then to 635 William Pitt Way, Pittsburgh, Pennsylvania, 15238, or such
other address as shall be designated by the Borrower or the Lender to the other
party in accordance herewith. All such notices and correspondence shall be
effective when received.
SECTION 9.2. HEADINGS. The headings in this Agreement are for purposes
of reference only and shall not affect the meaning or construction of any
provision of this Agreement.
SECTION 9.3. ASSIGNMENTS AND PARTICIPATIONS. The Borrower shall not
have the right to assign any Note or this Agreement or any interest therein
unless the Lender shall have given the Borrower prior written consent and the
Borrower and its assignee shall have delivered assignment documentation in form
and substance satisfactory to the Lender in its sole discretion. The Lender may
assign (without the consent of Borrower) to one or more Persons all or a portion
of its rights and obligations under this Agreement and the other Loan Documents
(provided that such Person shall not be a direct or indirect competitor of the
Borrower). The Lender may sell participations in or to all or a portion of its
rights and obligations under this Agreement (including, without limitation, all
or a portion of any Loans); provided, however, that the Lender's obligations
under this Agreement shall remain unchanged. The Lender may, in connection with
any permitted assignment or participation or proposed assignment or
participation pursuant to this Agreement, disclose to the assignee or
participant or proposed assignee or participant any information relating to
Borrower furnished to the Lender by or on behalf of Borrower, provided such
participant executes a confidentiality agreement similar to the one that Lender
executed with Borrower.
SECTION 9.4. AMENDMENTS, WAIVERS, AND CONSENTS. Any amendment or waiver
of any provision of this Agreement and any consent to any departure by the
Borrower from any provision of this Agreement shall be effective only by a
writing signed by the Lender and shall bind and benefit the Borrower and the
Lender and their respective successors and assigns, subject, in the case of the
Borrower, to the first sentence of Section 9.3.
17
<PAGE> 18
SECTION 9.5. INTERPRETATION OF AGREEMENT. Time is of the essence in
each provision of this Agreement of which time is an element. All terms not
defined herein or in a Note shall have the meaning set forth in the applicable
Code, except where the context otherwise requires. To the extent a term or
provision of this Agreement conflicts with any Note, or any term or provision
thereof, and is not dealt with herein with more specificity, this Agreement
shall control with respect to the subject matter of such term or provision.
Acceptance of or acquiescence in a course of performance rendered under this
Agreement shall not be relevant in determining the meaning of this Agreement
even though the accepting or acquiescing party had knowledge of the nature of
the performance and opportunity for objection.
SECTION 9.6. CONTINUING SECURITY INTEREST. This Agreement shall create
a continuing security interest in the Collateral and shall (i) remain in full
force and effect until the indefeasible payment in full of the Obligations, (ii)
be binding upon the Borrower and its successors and assigns and (iii) inure,
together with the rights and remedies of the Lender hereunder, to the benefit of
the Lender and its successors, transferees, and assigns.
SECTION 9.7. REINSTATEMENT. To the extent permitted by law, this
Agreement and the rights and powers granted to the Lender hereunder and under
the Loan Documents shall continue to be effective or be reinstated if at any
time any amount received by the Lender in respect of the Obligations is
rescinded or must otherwise be restored or returned by the Lender upon the
insolvency, bankruptcy, dissolution, liquidation, or reorganization of the
Borrower or upon the appointment of any receiver, intervenor, conservator,
trustee, or similar official for the Borrower or any substantial part of its
assets, or otherwise, all as though such payments had not been made.
SECTION 9.8. SURVIVAL OF PROVISIONS. All representations, warranties,
and covenants of the Borrower contained herein shall survive the execution and
delivery of this Agreement, and shall terminate only upon the full and final
payment and performance by the Borrower of the Obligations secured hereby.
SECTION 9.9. INDEMNIFICATION. The Borrower agrees to indemnify and
hold harmless the Lender and its directors, officers, agents, employees, and
counsel from and against any and all costs, expenses, claims, or liability
incurred by the Lender or such Person hereunder and under any other Loan
Document or in connection herewith or therewith, unless such claim or liability
shall be due to willful misconduct or gross negligence on the part of the Lender
or such Person. In addition and without limiting the generality of the
foregoing, Borrower shall, upon demand, pay to the Lender all reasonable costs
and expenses incurred by the Lender (including the reasonable fees and
disbursements of counsel and other professionals) in connection with the
preparation, execution, delivery, administration, modification and amendment of
the Loan Documents, and pay to the Lender all reasonable costs and expenses
(including the reasonable fees and disbursements of counsel and other
professionals) paid or incurred by the Lender in order to enforce or defend any
of its rights under or in respect of this Agreement, any other Loan Document or
any other document or instrument now or hereafter executed and delivered in
connection herewith, collect the Obligations or otherwise administer this
Agreement, foreclose or otherwise realize upon the Collateral or any part
thereof, prosecute actions against, or defend actions by, account debtors;
commence, intervene in, or defend any action or proceeding; initiate any
complaint to be relieved of the automatic stay in bankruptcy; file or prosecute
any probate claim, bankruptcy claim, third-party claim, or other claim; examine,
audit, copy, and inspect any of the Collateral or any of Borrower's books and
records; protect, obtain possession of, lease, dispose of. or otherwise enforce
the Lender's security interest in, the Collateral; and otherwise represent the
Lender in any litigation relating to Borrower.
SECTION 9.10. COUNTERPARTS; SIGNATURES BY FACSIMILE. This Agreement may
be executed in counterparts, each of which when so executed and delivered shall
be an original, but both of which shall together constitute one and the same
instrument. This Agreement and each of the other Loan Documents and any notices
given in connection herewith or therewith may be executed and delivered by
facsimile transmission all with the same force and effect as if the same was a
fully executed and delivered original manual counterpart.
SECTION 9.11. SEVERABILITY. In case any provision in or obligation
under this
18
<PAGE> 19
Agreement or any Note or any other Loan Document shall be invalid, illegal, or
unenforceable in any jurisdiction, the validity, legality, and enforceability of
the remaining provisions or obligations, or of such provision or obligation in
any other jurisdiction, shall not in any way be affected or impaired thereby.
SECTION 9.12. DELAYS; PARTIAL EXERCISE OR REMEDIES. No delay or
omission of the Lender to exercise any right or remedy hereunder, whether before
or after the happening of any Event of Default, shall impair any such right or
shall operate as a waiver thereof or as a waiver of any such Event of Default.
No single or partial exercise by the Lender of any right or remedy shall
preclude any other or further exercise thereof, or preclude any other right or
remedy.
SECTION 9.13. ENTIRE AGREEMENT. The Borrower and the Lender agree that
this Agreement, the Schedule hereto, and the Commitment Letter are the complete
and exclusive statement and agreement between the parties with respect to the
subject matter hereof, superseding all proposals and prior agreements, oral or
written, and all other communications between the parties with respect to the
subject matter hereof. Should there exist any inconsistency between the terms of
the Commitment Letter and this Agreement, the terms of this Agreement shall
prevail.
SECTION 9.14. SETOFF. In addition to and not in limitation of all
rights of offset that the Lender may have under Applicable Law, and whether or
not the Lender has made any demand or the Obligations of the Borrower have
matured, the Lender shall have the right to appropriate and apply to the payment
of the Obligations of the Borrower all deposits and other obligations then or
thereafter owing by the Lender to or for the credit or the account of the
Borrower.
SECTION 9.15 JOINT AND SEVERAL LIABILITY. If Borrower consists of more
than one Person, their liability shall be joint and several, and the compromise
of any claim with, or the release of, any Borrower shall not constitute a
compromise with, or a release of, any other Borrower.
SECTION 9.16 MAXIMUM RATE. Notwithstanding anything to the contrary
contained elsewhere in this Agreement or in any other Loan Document, the parties
hereto hereby agree that all agreements between them under this Agreement and
the other Loan Documents, whether now existing or hereafter arising and whether
written or oral, are expressly limited so that in no contingency or event
whatsoever shall the amount paid, or agreed to be paid, to the Lender for the
use, forbearance, or detention of the money loaned to Borrower and evidenced
hereby or thereby or for the performance or payment of any covenant or
obligation contained herein or therein, exceed the maximum non-usurious interest
rate, if any, that at any time or from time to time may be contracted for,
taken, reserved, charged or received on the Obligations, under the laws of the
State of Illinois (or the laws of any other jurisdiction whose laws may be
mandatorily applicable notwithstanding other provisions of this Agreement and
the other Loan Documents), or under applicable federal laws which may presently
or hereafter be in effect and which allow a higher maximum non-usurious interest
rate than under the laws of the State of Illinois (or such other jurisdiction),
in any case after taking into account, to the extent permitted by applicable
law, any and all relevant payments or charges tinder this Agreement and the
other Loan Documents executed in connection herewith, and any available
exemptions, exceptions and exclusions (the "Highest Lawful Rate"). If due to any
circumstance whatsoever, fulfillment of any provisions of this Agreement or any
of the other Loan Documents at the time performance of such provision shall be
due shall exceed the Highest Lawful Rate, then, automatically, the obligation to
be fulfilled shall be modified or reduced to the extent necessary to limit such
interest to the Highest Lawful Rate, and if from any such circumstance the
Lender should ever receive anything of value deemed interest by applicable law
which would exceed the Highest Lawful Rate, such excessive interest shall be
applied to the reduction of the principal amount then outstanding hereunder or
on account of any other then outstanding Obligations and not to the payment of
interest, or if such excessive interest exceeds the principal unpaid balance
then outstanding hereunder and such other then outstanding Obligations, such
excess shall be refunded to Borrower. All sums paid or agreed to be paid to the
Lender for the use, forbearance, or detention of the Obligations and other
indebtedness of Borrower to the Lender shall, to the extent permitted by
applicable law, be amortized, prorated, allocated and spread throughout the full
term of such indebtedness, until payment in full thereof, so that the actual
rate of interest on account of all such indebtedness does not exceed the Highest
Lawful Rate throughout the entire term of such indebtedness. The terms and
provisions of this Section shall control every other provision of
19
<PAGE> 20
this Agreement, the other Loan Documents and all other agreements between the
parties hereto.
SECTION 9.17. WAIVER OF JURY TRIAL. THE BORROWER AND THE LENDER
IRREVOCABLY WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR
COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OTHER LOAN
DOCUMENT, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
SECTION 9.18. GOVERNING LAW. THE VALIDITY, INTERPRETATION, AND
ENFORCEMENT OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF ILLINOIS WITHOUT GIVING EFFECT TO THE CONFLICT OF
LAW PRINCIPLES THEREOF.
SECTION 9.19. VENUE; SERVICE OF PROCESS. ANY LEGAL ACTION OR PROCEEDING
WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE BROUGHT IN THE
COURTS OF THE STATE OF ILLINOIS SITUATED IN COOK COUNTY, OR OF THE UNITED STATES
OF AMERICA FOR THE NORTHERN DISTRICT OF ILLINOIS, AND, BY EXECUTION AND DELIVERY
OF THIS AGREEMENT, THE BORROWER HEREBY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS
PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID
COURTS. THE BORROWER HEREBY IRREVOCABLY WAIVES, IN CONNECTION WITH ANY SUCH
ACTION OR PROCEEDING, (a) ANY OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY
OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON
CONVENIENS, THAT IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION
OR PROCEEDING IN SUCH RESPECTIVE JURISDICTIONS. THE BORROWER IRREVOCABLY
CONSENTS TO THE SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY
SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR
CERTIFIED MAIL, POSTAGE PREPAID, TO THE BORROWER AT THE ADDRESS FOR IT SPECIFIED
IN SECTION 9.1 HEREOF. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE LENDER TO
SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL
PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE BORROWER IN ANY OTHER JURISDICTION,
SUBJECT IN EACH INSTANCE TO THE PROVISIONS HEREOF WITH RESPECT TO RIGHTS AND
REMEDIES.
IN WITNESS WHEREOF, the undersigned Borrower has caused this Agreement
to be duly executed and delivered by its proper and duly authorized officer as
of the date first set forth above.
CELLOMICS, INC.
By: /s/ D. Lansing Taylor
----------------------------------------
Name: D. Lansing Taylor
Title: President; CEO
Accepted as of the
____ day of ____, 1999
TRANSAMERICA BUSINESS CREDIT CORPORATION
By:
----------------------------------------
Name:
Title:
20
<PAGE> 21
SCHEDULE A
TO
LOAN AND SECURITY AGREEMENT
Consents and Approvals (Section 4.2): None
Other Places of Business and Locations of Collateral (Section 4.16): None
Prior Names of Obligor (Section 4.7): See Attached
Prior Trade Names of Obligor (Section 4.7): None
Existing Trade Names of Obligor (Section 4.7): None
Federal Tax ID (Section 4.7): See Attached
Registered and Unregistered Patents (Section 4.11): See Attached
Registered and Unregistered Trademarks (Section 4.11): See Attached
Registered Copyrights (Section 4.11): See Attached
<PAGE> 22
SCHEDULE 4.7
Biological Detection, Inc.
BioDx, Inc.
Federal Tax ID No.25-1763831
<PAGE> 23
Schedule 4.11
TRADEMARKS AND TRADEMARK APPLICATIONS
<TABLE>
<CAPTION>
Serial No. Mark
- ---------- ----
<S> <C>
75/085,458 CELLCHIP
75/085,152 ARRAYSCAN
75/601,472 FLUOROTOX
75/223,185 CELLOMICS
75/607,889 CELLOMICS LOGO
75/625,145 CELLECTIVE
75/653,697 CELL EXPLORER
75/668,845 PHARMACOCELLOMICS
To be assigned VITAL KNOWLEDGE
</TABLE>
<PAGE> 24
Schedule 4.11
COPYRIGHT REGISTRATIONS
NONE
<PAGE> 25
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD OR OFFERED FOR SALE
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER
SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR THE AVAILABILITY OF AN
EXEMPTION FROM REGISTRATION UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES
LAWS.
NO.1
STOCK SUBSCRIPTION WARRANT
TO PURCHASE COMMON STOCK OF
CELLOMICS, INC. (the "Company")
DATE OF INITIAL ISSUANCE: June 30,1999
THIS CERTIFIES THAT for value received, TBCC FUNDING TRUST II or its
registered assigns (hereinafter called the "Holder") is entitled to purchase
from the Company, at any time during the Term of this Warrant, Thirty-Two
Thousand Five Hundred (32,500) shares of common stock, $0.01 par value, of the
Company (the "Common Stock"), at the Warrant Price, payable as provided herein.
The exercise of this Warrant shall be subject to the provisions, limitations and
restrictions herein contained, and may be exercised in whole or in part.
SECTION 1. DEFINITIONS.
For all purposes of this Warrant, the following terms shall have the
meanings indicated:
COMMON STOCK - shall mean and include the Company's authorized Common
Stock, 50.01 par value, as constituted at the date hereof.
EXCHANGE ACT - shall mean the Securities Exchange Act of 1934, as
amended from time to time.
SECURITIES ACT - the Securities Act of 1933, as amended.
TERM OF THIS WARRANT - shall mean the period beginning on the date of
initial issuance hereof and ending on June 30, 2004 unless otherwise terminated
by Holder in accordance with the provisions of this warrant.
WARRANT PRICE - $6.60 per share, subject to adjustment in accordance
with Section 5 hereof.
WARRANTS - this Warrant and any other Warrant or Warrants issued in
connection with a Commitment Letter dated May 27, 1999 executed by the Company
and Transamerica Business Credit Corporation (the "Commitment Letter") to the
original holder of this Warrant, or any transferees from such original holder or
this Holder.
WARRANT SHARES - shares of Common Stock purchased or purchasable by the
Holder of this Warrant upon the exercise hereof.
<PAGE> 26
SECTION 2. EXERCISE OF WARRANT.
2.1. PROCEDURE FOR EXERCISE OF WARRANT. To exercise this Warrant in
whole or in part (but not as to any fractional share of Common Stock), the
Holder shall deliver to the Company at its office referred to in Section 12
hereof at any time and from time to time during the Term of this Warrant: (i)
the Notice of Exercise in the form attached hereto, (ii) cash, certified or
official bank check payable to the order of the Company, wire transfer of funds
to the Company's account, or evidence of any indebtedness of the Company to the
Holder (or any combination of any of the foregoing) in the amount of the Warrant
Price for each share being purchased, and (iii) this Warrant. Notwithstanding
any provisions herein to the contrary, if the Current Market Price (as defined
in Section 5) is greater than the Warrant Price (at the date of calculation, as
set forth below), in lieu of exercising this Warrant as hereinabove permitted,
the Holder may elect to receive shares of Common Stock equal to the value (as
determined below) of this Warrant (or the portion thereof being canceled) by
surrender of this Warrant at the office of the Company referred to in Section 12
hereof, together with the Notice of Exercise, in which event the Company shall
issue to the Holder that number of shares of Common Stock computed using the
following formula:
CS = WCS x (CMP-WP)
--------------
CMP
Where
CS equals the number of shares of Common Stock to be issued to
the Holder
WCS equal the number of shares of Common Stock purchasable under
the Warrant or, if only a portion of the Warrant is being
exercised, the portion of the Warrant being exercised (at
the date of such calculation)
CMP equals the Current Market Price (at the date of such
calculation)
WP equals the Warrant Price (as adjusted to the date of such
calculation)
In the event of any exercise of the rights represented by this Warrant, a
certificate or certificates for the shares of Common Stock so purchased,
registered in the name of the Holder or such other name or names as may be
designated by the Holder, shall be delivered to the Holder hereof within a
reasonable time, not exceeding fifteen (15) days, after the rights represented
by this Warrant shall have been so exercised; and, unless this Warrant has
expired, a new Warrant representing the number of shares (except a remaining
fractional share), if any, with respect to which this Warrant shall not then
have been exercised shall also be issued to the Holder hereof within such time.
The person in whose name any certificate for shares of Common Stock is issued
upon exercise of this Warrant shall for all purposes be deemed to have become
the holder of record of such shares on the date on which the Warrant was
surrendered and payment of the Warrant Price and any applicable taxes was made,
irrespective of the date of delivery of such certificate, except that, if the
date of such surrender and payment is a date when the stock transfer books of
the Company are closed, such person shall be deemed to have become the holder of
such shares at the close of business on the next succeeding date on which the
stock transfer books are open.
2.2. TRANSFER RESTRICTION LEGEND. Each certificate for Warrant Shares
shall bear the following legend (and any additional legend required by (i) any
applicable state securities laws and (ii) any securities exchange upon which
such Warrant Shares may, at the time of such exercise, be listed) on the face
thereof unless at the time of exercise such Warrant Shares shall be registered
under the Securities Act:
-2-
<PAGE> 27
"The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended, and may not be sold or
transferred in the absence of such registration or an exemption
therefrom under said Act."
Any certificate issued at any time in exchange or substitution for any
certificate bearing such legend (except a new certificate issued upon completion
of a public distribution under a registration statement of the securities
represented thereby) shall also bear such legend unless, in the opinion of
counsel for the holder thereof (which counsel shall be reasonably satisfactory
to counsel for the Company) the securities represented thereby are not, at such
time, required by law to bear such legend.
SECTION 3. COVENANTS AS TO COMMON STOCK. The Company covenants and agrees that
all shares of Common Stock that may be issued upon the exercise of the rights
represented by this Warrant will, upon issuance, be validly issued, fully paid
and nonassessable, and free from all taxes, liens and charges with respect to
the issue thereof. The Company further covenants and agrees that it will pay
when due and payable any and all federal and state taxes which may be payable in
respect of the issue of this Warrant or any Common Stock or certificates
therefor issuable upon the exercise of this Warrant. The Company further
covenants and agrees that the Company will at all times have authorized and
reserved, free from preemptive rights, a sufficient number of shares of Common
Stock to provide for the exercise of the rights represented by this Warrant. The
Company further covenants and agrees that if any shares of capital stock to be
reserved for the purpose of the issuance of shares upon the exercise of this
Warrant require registration with or approval of any governmental authority
under any federal or state law before such shares may be validly issued or
delivered upon exercise, then the Company will in good faith and as
expeditiously as possible endeavor to secure such registration or approval, as
the case may be. If and so long as the Common Stock issuable upon the exercise
of this Warrant is listed on any national securities exchange, the Company will,
if permitted by the rules of such exchange, list and keep listed on such
exchange, upon official notice of issuance, all shares of such Common Stock
issuable upon exercise of this Warrant.
SECTION 4. ADJUSTMENT OF NUMBER OF SHARES. Upon each adjustment of the Warrant
Price as provided in Section 5, the Holder shall thereafter be entitled to
purchase, at the Warrant Price resulting from such adjustment, the number of
shares (calculated to the nearest tenth of a share) obtained by multiplying the
Warrant Price in effect immediately prior to such adjustment by the number of
shares purchasable pursuant hereto immediately prior to such adjustment and
dividing the product thereof by the Warrant Price resulting from such
adjustment.
SECTION 5. ADJUSTMENT OF WARRANT PRICE. The Warrant Price shall be subject to
adjustment from time to time as follows:
(i) If, at any time during the Term of this Warrant, the number of
shares of Common Stock outstanding is increased by a stock dividend payable in
shares of Common Stock (other than dividend payable on the Series A Preferred
Stock) or by a subdivision or split-up of shares of Common Stock, then,
following the record date fixed for the determination of holders of Common Stock
entitled to receive such stock dividend, subdivision or split-up, the Warrant
Price shall be appropriately decreased so that the number of shares of Common
Stock issuable upon the exercise hereof shall be increased in proportion to such
increase in outstanding shares.
(ii) If, at any time during the Term of this Warrant, the number of
shares of Common Stock outstanding is decreased by a combination of the
outstanding shares of Common Stock, then, following the record date for such
combination, the Warrant Price shall appropriately increase so that the number
of
-3-
<PAGE> 28
shares of Common Stock issuable upon the exercise hereof shall be decreased in
proportion to such decrease in outstanding shares.
(iii) In case, at any time during the Term of this Warrant, the Company
shall declare a cash dividend upon its Common Stock payable otherwise than out
of earnings or earned surplus or shall distribute to holders of its Common Stock
shares of its capital stock (other than Common Stock), stock or other securities
of other persons, evidences of indebtedness issued by the Company by other
persons, assets (excluding cash dividends and distributions) or options or
rights (excluding options to purchase and rights to subscribe for Common Stock
or other securities of the Company convertible into or exchangeable for Common
Stock), then, in each such case, immediately following the record date fixed for
the determination of the holders of Common Stock entitled to receive such
dividend or distribution, the Warrant Price in effect thereafter shall be
determined by multiplying the Warrant Price in effect immediately prior to such
record date by a fraction of which the numerator shall be an amount equal to the
difference of (x) the Current Market Price of one share of Common Stock minus
(y) the fair market value (as determined by the Board of Directors of the
Company, whose determination shall be conclusive) of the stock, securities,
evidences of indebtedness, assets, options or rights so distributed in respect
of one share of Common Stock, and of which the denominator shall be such Current
Market Price.
(iv) All calculations under this Section 5 shall be made to the nearest
cent or to the nearest one-tenth (1/1 0) of a share, as the case may be.
(v) For the purpose of any computation pursuant to this Section 5, the
Current Market Price at any date of one share of Common Stock shall be deemed to
be the average of the daily closing prices for the 15 consecutive business days
ending on the last business day before the day in question (as adjusted for any
stock dividend, split, combination or reclassification that took effect during
such 15 business day period). The closing price for each day shall be the last
reported sales price regular way or, in case no such reported sales took place
on such day, the average of the last reported bid and asked prices regular way,
in either case on the principal national securities exchange on which the Common
Stock is listed or admitted to trading or as reported by Nasdaq (or if the
Common Stock is not at the time listed or admitted for trading on any such
exchange or if prices of the Common Stock are not reported by Nasdaq then such
price shall be equal to the average of the last reported bid and asked prices on
such day as reported by The National Quotation Bureau Incorporated or any
similar reputable quotation and reporting service, if such quotation is not
reported by The National Quotation Bureau Incorporated); provided, however, that
if the Common Stock is not traded in such manner that the quotations referred to
in this clause (v) are available for the period required hereunder, the Current
Market Price shall be determined in good faith by the Board of Directors of the
Company or, if such determination cannot be made, by a nationally recognized
independent investment banking firm selected by the Board of Directors of the
Company (or if such selection cannot be made, by a nationally recognized
independent investment banking firm selected by the American Arbitration
Association in accordance with its rules).
(vi) Whenever the Warrant Price shall be adjusted as provided in
Section 5, the Company shall prepare a statement showing the facts requiring
such adjustment and the Warrant Price that shall be in effect after such
adjustment. The Company shall cause a copy of such statement to be sent by mail,
first class postage prepaid, to each Holder of this Warrant at its, his or her
address appearing on the Company's records. Where appropriate, such copy may be
given in advance and may be included as part of the notice required to be mailed
under the provisions of subsection (viii) of this Section 5.
(vii) Adjustments made pursuant to clauses (i), (ii) and (iii) above
shall be made on the date such dividend, subdivision, split-up, combination or
distribution, as the case may be, is made, and shall
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<PAGE> 29
become effective at the opening of business on the business day next following
the record date for the determination of stockholders entitled to such dividend,
subdivision, split-up, combination or distribution.
(viii) In the event the Company shall propose to take any action of the
types described in clauses (i), (ii), or (iii) of this Section 5, the Company
shall forward, at the same time and in the same manner, to the Holder of this
Warrant such notice, if any, which the Company shall give to the holders of
capital stock of the Company.
(ix) In any case in which the provisions of this Section 5 shall
require that an adjustment shall become effective immediately after a record
date for an event, the Company may defer until the occurrence of such event
issuing to the Holder of all or any part of this Warrant which is exercised
after such record date and before the occurrence of such event the additional
shares of capital stock issuable upon such exercise by reason of the adjustment
required by such event over and above the shares of capital stock issuable upon
such exercise before giving effect to such adjustment exercise; provided,
however, that the Company shall deliver to such Holder a due bill or other
appropriate instrument evidencing such Holder's right to receive such additional
shares upon the occurrence of the event requiring such adjustment.
SECTION 6. OWNERSHIP.
6.1. OWNERSHIP OF THIS WARRANT. The Company may deem and treat the
person in whose name this Warrant is registered as the holder and owner hereof
(notwithstanding any notations of ownership or writing hereon made by anyone
other than the Company) for all purposes and shall not be affected by any notice
to the contrary until presentation of this Warrant for registration of transfer
as provided in this Section 6.
6.2. TRANSFER AND REPLACEMENT. This Warrant and all rights hereunder
are transferable in whole or in part upon the books of the Company by the Holder
hereof in person or by duly authorized attorney, and a new Warrant or Warrants,
of the same tenor as this Warrant but registered in the name of the transferee
or transferees (and in the name of the Holder, if a partial transfer is
effected) shall be made and delivered by the Company upon surrender of this
Warrant duly endorsed, at the office of the Company referred to in Section 12
hereof. Upon receipt by the Company of evidence reasonably satisfactory to it of
the loss, theft or destruction, and, in such case, of indemnity or security
reasonably satisfactory to it, and upon surrender of this Warrant if mutilated,
the Company will make and deliver a new Warrant of like tenor, in lieu of this
Warrant; provided that if the Holder hereof is an instrumentality of a state or
local government or an institutional holder or a nominee for such an
instrumentality or institutional holder an irrevocable agreement of indemnity by
such Holder shall be sufficient for all purposes of this Section 6, and no
evidence of loss or theft or destruction shall be necessary. This Warrant shall
be promptly cancelled by the Company upon the surrender hereof in connection
with any transfer or replacement. Except as otherwise provided above, in the
case of the loss, theft or destruction of a Warrant, the Company shall pay all
expenses, taxes and other charges payable in connection with any transfer or
replacement of this Warrant, other than stock transfer taxes (if any) payable in
connection with a transfer of this Warrant, which shall be payable by the
Holder. Holder will not transfer this Warrant and the rights hereunder except in
compliance with federal and state securities laws.
SECTION 7. MERGERS, CONSOLIDATION, SALES. In the case of any proposed
consolidation or merger of the Company with another entity, or the proposed sale
of all or substantially all of its assets to another person or entity, or any
proposed reorganization or reclassification of the capital stock of the Company,
then, as a condition of such consolidation, merger, sale, reorganization or
reclassification, lawful and adequate provision shall be made whereby the Holder
of this Warrant shall thereafter have the right to
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<PAGE> 30
receive upon the basis and upon the terms and conditions specified herein, in
lieu of the shares of the Common Stock of the Company immediately theretofore
purchasable hereunder, such shares of stock, securities or assets as may (by
virtue of such consolidation, merger, sale, reorganization or reclassification)
be issued or payable with respect to or in exchange for the number of shares of
such Common Stock purchasable hereunder immediately before such consolidation,
merger, sale, reorganization or reclassification. In any such case appropriate
provision shall be made with respect to the rights and interests of the Holder
of this Warrant to the end that the provisions hereof shall thereafter be
applicable as nearly as may be, in relation to any shares of stock, securities
or assets thereafter deliverable upon the exercise of this Warrant.
SECTION 8. NOTICE OF DISSOLUTION OR LIQUIDATION. In case of any distribution of
the assets of the Company in dissolution or liquidation (except under
circumstances when the foregoing Section 7 shall be applicable), the Company
shall give notice thereof to the Holder hereof and shall make no distribution to
shareholders until the expiration of thirty (30) days from the date of mailing
of the aforesaid notice and, in any case, the Holder hereof may exercise this
Warrant within thirty (30) days from the date of the giving of such notice, and
all rights herein granted not so exercised within such thirty-day period shall
thereafter become null and void.
SECTION 9. NOTICE OF EXTRAORDINARY DIVIDENDS. If the Board of Directors of the
Company shall declare any dividend or other distribution on its Common Stock
except out of earned surplus or by way of a stock dividend payable in shares of
its Common Stock, the Company shall mail notice thereof to the Holder hereof not
less than thirty (30) days prior to the record date fixed for determining
shareholders entitled to participate in such dividend or other distribution, and
the Holder hereof shall not participate in such dividend or other distribution
unless this Warrant is exercised prior to such record date. The provisions of
this Section 9 shall not apply to distributions made in connection with
transactions covered by Section 7.
SECTION 10. FRACTIONAL SHARES. Fractional shares shall not be issued upon the
exercise of this Warrant but in any case where the Holder would, except for the
provisions of this Section 10, be entitled under the terms hereof to receive a
fractional share upon the complete exercise of this Warrant, the Company shall,
upon the exercise of this Warrant for the largest number of whole shares then
called for, pay a sum in cash equal to the excess of the value of such
fractional share (determined in such reasonable manner as may be prescribed in
good faith by the Board of Directors of the Company) over the Warrant Price for
such fractional share.
SECTION 11. SPECIAL ARRANGEMENTS OF THE COMPANY. The Company covenants and
agrees that during the Term of this Warrant, unless otherwise approved by the
Holder of this Warrant:
11.1. WILL RESERVE SHARES. The Company will reserve and set apart and
have available for issuance at all times, free from preemptive or other
preferential rights, the number of shares of authorized but unissued Common
Stock deliverable upon the exercise of this Warrant.
11.2. WILL NOT AMEND CERTIFICATE. The Company will not amend its
Certificate of Incorporation to eliminate as an authorized class of capital
stock that class denominated as "Common Stock" on the date hereof.
11.3. WILL BIND SUCCESSORS. This Warrant shall be binding upon any
corporation or other person or entity succeeding to the Company by merger,
consolidation or acquisition of all or substantially all of the Company's
assets.
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<PAGE> 31
SECTION 12. NOTICES. Any notice or other document required or permitted to be
given or delivered to the Holder shall be delivered at, or sent by certified or
registered mail to, the Holder at Transamerica Technology Finance Division, 76
Batterson Park Road, Farmington, Connecticut 06032, Attention: Assistant Vice
President, Lease Administration, with a copy to the Lender at Riverway II, West
Office Tower, 9399 West Higgins Road, Rosemont, Illinois 60018, Attention: Legal
Department or to such other address as shall have been furnished to the Company
in writing by the Holder. Any notice or other document required or permitted to
be given or delivered to the Company shall be delivered at, or sent by certified
or registered mail to, the Company at 635 William Pitt Way, Pittsburgh,
Pennsylvania, 15238, or to such other address as shall have been furnished in
writing to the Holder by the Company. Any notice so addressed and mailed by
registered or certified mail shall be deemed to be given when so mailed. Any
notice so addressed and otherwise delivered shall be deemed to be given when
actually received by the addressee.
SECTION 13. NO RIGHTS AS STOCKHOLDER; LIMITATION OF LIABILITY. This Warrant
shall not entitle the Holder to any of the rights of a shareholder of the
Company except upon exercise in accordance with the terms hereof. No provision
hereof, in the absence of affirmative action by the Holder to purchase shares of
Common Stock, and no mere enumeration herein of the rights or privileges of the
Holder, shall give rise to any liability of the Holder for the Warrant Price
hereunder or as a shareholder of the Company, whether such liability is asserted
by the Company or by creditors of the Company.
SECTION 14. LAW GOVERNING. THE VALIDITY, INTERPRETATION, AND ENFORCEMENT OF THIS
WARRANT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF ILLINOIS WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW PRINCIPLES
THEREOF.
SECTION 15. MISCELLANEOUS.
(a) This Warrant and any provision hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by both parties
(or any respective predecessor in interest thereof). The headings in this
Warrant are for purposes of reference only and shall not affect the meaning or
construction of any of the provisions hereof
(b) All capitalized terms used herein and not otherwise defined herein
shall have the meanings ascribed to them in the Loan and Security Agreement.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officer this ________ day of ____, 1999.
CELLOMICS, INC.
[CORPORATE SEAL]
By: /s/ D. Lansing Taylor
----------------------------------------
Title: President; CEO
-------------------------------------
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<PAGE> 32
FORM OF NOTICE OF EXERCISE
[TO BE SIGNED ONLY UPON EXERCISE OF THE WARRANT]
TO BE EXECUTED BY THE REGISTERED HOLDER
TO EXERCISE THE WITHIN WARRANT
The undersigned hereby exercises the right to purchase __________
shares of Common Stock which the undersigned is entitled to purchase by the
terms of the within Warrant according to the conditions thereof, and herewith
[check one]
[ ] makes payment of $___________ therefor; or
[ ] directs the Company to issue _______ shares, and to
withhold _____ shares in lieu of payment of the Warrant
Price, as described in Section 2.1 of the Warrant.
All shares to be issued pursuant hereto shall be issued in the name of and the
initial address of such person to be entered on the books of the Company shall
be:
The shares are to be issued in certificates of the following
denominations:
-------------------------------------------
[Type Name of Holder]
By:
----------------------------------------
Title:
-------------------------------------
Dated:
------------------------------
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<PAGE> 33
FORM OF ASSIGNMENT
(ENTIRE)
[TO BE SIGNED ONLY UPON TRANSFER OF ENTIRE WARRANT].
TO BE EXECUTED BY THE REGISTERED HOLDER
TO TRANSFER THE WITHIN WARRANT
FOR VALUE RECEIVED _______________________________ hereby sells,
assigns and transfers unto __________________________________ all rights of the
undersigned under and pursuant to the within Warrant, and the undersigned does
hereby irrevocably constitute and appoint ____________________________________
Attorney to transfer the said Warrant on the books of the Company, with full
power of substitution.
-------------------------------------------
[Type Name of Holder]
By:
----------------------------------------
Title:
-------------------------------------
Dated:
------------------------------
NOTICE
The signature to the foregoing Assignment must correspond to the name
as written upon the face of the within Warrant in every particular, without
alteration or enlargement or any change whatsoever.
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<PAGE> 34
FORM OF ASSIGNMENT
(PARTIAL)
[TO BE SIGNED ONLY UPON PARTIAL TRANSFER OF WARRANT]
TO BE EXECUTED BY THE REGISTERED HOLDER
TO TRANSFER THE WITHIN WARRANT
FOR VALUE RECEIVED __________________________ hereby sells, assigns and
transfers unto ____________________________________ (i) the rights of the
undersigned to purchase ____ shares of Common Stock under and pursuant to the
within Warrant, and (ii) on a non-exclusive basis, all other rights of the
undersigned under and pursuant to the within Warrant, it being understood that
the undersigned shall retain, severally (and not jointly) with the transferee(s)
named herein, all rights assigned on such non-exclusive basis. The undersigned
does hereby irrevocably constitute and appoint ______________________________
Attorney to transfer the said Warrant on the books of the Company, with full
power of substitution.
-------------------------------------------
[Type Name of Holder]
By:
----------------------------------------
Title:
-------------------------------------
Dated:
------------------------------
NOTICE
The signature to the foregoing Assignment must correspond to the name
as written upon the face of the within Warrant in every particular, without
alteration or enlargement or any change whatsoever.
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<PAGE> 1
Exhibit 4.2
MASTER LOAN AND SECURITY AGREEMENT
No.7691 Dated July 21, 1999
LENDER: CUSTOMER:
OXFORD VENTURE FINANCE, LLC CELLOMICS, INC.
a Virginia limited liability corporation a Delaware corporation
Address: Address:
133 North Fairfax Street 635 William Pitt Way
Alexandria, Virginia 22314 Pittsburgh, PA 15238
In consideration of each Loan Agreement, Customer hereby agrees with
Lender that, whenever Customer shall be at any time or times directly or
contingently indebted, liable or obligated to Lender in any manner whatsoever,
Lender shall have the following rights:
1. DEFINITIONS. To the extent not otherwise specifically defined in
this Agreement, unless the context otherwise requires, all other terms contained
in this Agreement shall have the meanings assigned or referred to them in the
UCC. The following terms shall have the following meanings:
"Acceptance Date" with respect to each item of Equipment shall have the
meaning assigned to such term in Section 3 of this Agreement.
"Affiliate" shall mean, with respect to any person, firm or entity, any
other person, firm or entity controlling, controlled by, or under common control
with such person, firm or entity; for the purposes hereof "control" shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of any such person, firm or entity,
whether through the legal or beneficial ownership of voting securities, by
contract or otherwise.
"Agreement" shall mean this Master Loan and Security Agreement, as
amended or modified from time to time.
"Attorneys' Fees and Expenses" shall mean all reasonable attorneys'
fees and legal costs and expenses (including, without limitation, those fees,
costs and expenses incurred in connection with bankruptcy proceedings, including
Relief from Stay Motions, Cash Collateral Motions and disputes concerning any
proposed disclosure statement and/or bankruptcy plan).
"Collateral" shall mean all Equipment and any licenses, trademarks or
other tangible or intangible property ancillary to the Equipment and all
products, proceeds, rents and profits therefrom or thereof including proceeds in
the form or goods, accounts, chattel paper, documents, instruments and insurance
proceeds.
"Default" shall have the meaning ascribed to such term in Section 8 of
this Agreement.
"Equipment" shall mean one or more items or units of personal property
now owned or hereafter acquired by Customer, as described in each Equipment
Schedule, wherever the same may be located, including all present and future
additions, attachments, accessions and accessories thereto and all replacements,
substitutions and a right to use license for any software related to any of the
foregoing and proceeds thereof, including all proceeds of insurance thereon.
"Equipment Schedule" shall mean each Equipment Schedule, which
incorporates by reference the terms and conditions of this Agreement and
describes one or more items of Equipment and specific terms and conditions with
respect thereto.
"Event of Default" shall have the meaning ascribed to such term in
Section 8 of this Agreement.
"Loan Agreement" shall mean the applicable Equipment Schedule
incorporating the terms and conditions of this Agreement, including all
exhibits, addenda, schedules, certificates, riders and all other documents and
instruments executed and delivered in connection with the applicable Equipment
Schedule or this Master Loan and Security Agreement.
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<PAGE> 2
"Note" shall mean a promissory note of Customer in favor of Lender
evidencing Customer's obligations to lender with respect to a Loan Agreement.
"Obligations" shall mean all liabilities, absolute or contingent,
joint, several or independent, of Customer or any Affiliate of Customer now or
hereafter existing, due or to become due to, or held or to be held by, Lender
for its own account or as agent for another or others, whether created directly
or acquired by assignment or otherwise and howsoever evidenced, including,
without limitation, the Loan Agreement, and all interest, taxes, fees, charges,
expenses and Attorneys' Fees and Expenses chargeable to Customer or incurred by
Lender under the Loan Agreement, or any other document or instrument delivered
in connection herewith.
"Person" shall mean any individual, partnership, joint venture, firm,
corporation, association, trust, or other enterprise or any government or
political subdivision or any agency, department or instrumentality thereof.
"Security Deposit" with respect to each item of Equipment shall have
the meaning assigned to such term in the Equipment Schedule applicable to such
item of Equipment.
"UCC" shall mean the Uniform Commercial Code as enacted in the State of
Connecticut.
2. INDEPENDENT LOAN; CROSS-COLLATERALIZATION; SECURITY INTEREST. Each
Equipment Schedule shall constitute a separate, distinct and independent Loan
Agreement and contractual obligation of Customer. As security for the due and
punctual payment of any and all of the present and future Obligations of
Customer to Lender, Customer hereby (i) grants to Lender with respect to each
Loan Agreement and for the full amount of all Obligations, a security interest
in all of the Collateral and all collateral securing any other lease or security
agreement between Customer and Lender, whether now in existence or hereafter
entered into and (ii) assigns to Lender all of its rights, title and interest in
surplus money to which Customer may be entitled upon the sale of all such
Collateral. The extent to which Lender's security interest in any item of
Collateral shall be entitled to purchase money priority shall be determined by
reference to the unpaid principal balance of any Note evidencing the financing
of the purchase price of such item of Equipment.
3. ACCEPTANCE OF EQUIPMENT. The Equipment is to be delivered and
installed at the location specified or referred to in the applicable Equipment
Schedule. The Equipment shall be deemed to have been accepted by Customer for
all purposes under this Agreement upon Customer's execution of an Equipment
Schedule (the "Acceptance Date"). Customer shall not be liable or responsible
for any failure or delay in the delivery of the Equipment to Customer for
whatever reason.
4. TERM; PRINCIPAL AND INTEREST; NO PREPAYMENT; LATE CHARGES. The term
for any Loan Agreement shall be as specified in the applicable Equipment
Schedule. No Loan Agreement is prepayable by Customer, in whole or in part,
without the express written consent of Lender in its sole discretion. Principal
and interest payments shall be in the amounts and shall be due and payable as
set forth in the applicable Equipment Schedule. If any payment of principal or
interest or other amount payable hereunder shall not be paid within 10 days of
the date when due, Customer shall pay as an administrative and late charge an
amount equal to 5% of the amount of any such overdue payment. In addition,
Customer shall pay overdue interest on any delinquent payment or other amounts
due under any Loan Agreement (by reason of acceleration or otherwise) from the
due date until paid at the rate of one and one-half percent (1.5%) per month or
the maximum amount permitted by applicable law, whichever is lower. All payments
to be made to Lender shall be made to Lender in immediately available funds at
the address shown above, or at such other place as Lender shall specify in
writing.
5. REPRESENTATIONS, WARRANTIES AND COVENANTS. Customer hereby
represents and warrants to and covenants with Lender (provided that if Customer
is an individual or sole proprietorship, the representations, warranties and
covenants relating to corporate status shall not apply) that, as of the date
hereof and for so long as any Obligations shall remain outstanding:
(a) Customer is duly organized and is existing in good standing under
the laws of its jurisdiction of organization and is duly qualified and in good
standing in those jurisdictions where the conduct of its business or the
ownership of its properties requires qualification;
(b) Customer has the power and authority to own the Collateral, to
enter into and perform this Agreement and any other document or instrument
delivered in connection herewith and to incur the Obligations;
(c) Customer's chief executive office is located at the address set
forth above;
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<PAGE> 3
(d) Customer does not utilize, and has not in the last five years
utilized, any trade names in the conduct of business except as set forth on
Schedule 1 hereto;
(e) Customer has not changed its name, been the surviving entity in a
merger, acquired any business or changed the location of its chief executive
office within the previous five years, except as set forth on Schedule 2 hereto;
(f) Neither the execution, delivery or performance by Customer of the
Loan Agreement nor compliance by it with the terms and provisions hereof, nor
the consummation of the transactions contemplated herein, (i) will contravene
any applicable provision of any law, statute, rule or regulation, or any order,
writ, injunction or decree of any court or governmental instrumentality, (ii)
will conflict or be inconsistent with or result in any breach of any of the
terms, covenants, conditions or provisions of, or constitute a default under, or
result in any lien upon any property, pursuant to the terms of any indenture,
mortgage, deed of trust, loan agreement or any other material agreement or
instrument to which Customer is a party or by which it or any of its property or
assets are bound or to which it may be subject or (iii) will violate any
provision of its Certificate of Incorporation or By-Laws, or other governance
documents;
(g) The Loan Agreement, the Note and any document or instrument
delivered in connection herewith and the transactions contemplated hereby or
thereby are duly authorized, executed and delivered, and the Loan Agreement, the
Note and such other documents and instruments constitute valid and legally
binding obligations of Customer and are enforceable against Customer in
accordance with their respective terms;
(h) No order, consent, approval, license, authorization, or validation
of, or filing, recording or registration with, or exemption by any governmental
or public body or authority, or any subdivision thereof, is required to
authorize or required in connection with (i) the grant by Customer of the
security interest in connection with the Loan Agreement, (ii) the execution,
delivery and performance of the Loan Agreement, (iii) the legality, validity,
binding effect or enforceability of the Loan Agreement or (iv) the perfection or
maintenance of the aforementioned lien and security interest;
(i) Customer has filed all federal, state and local tax returns and
other reports it is required to file, has paid or made adequate provision for
payment of all such taxes, assessments and other governmental charges, and shall
pay or deposit promptly when due all sales, use, excise, personal property,
income, withholding, corporate, franchise and other taxes, assessments and
governmental charges upon or relating to the manufacture, purchase, ownership,
maintenance, modification, delivery, installation, possession, condition, use,
acceptance, rejection, operation or return of the Equipment and, upon request by
Lender, Customer will submit to Lender proof satisfactory to Lender that such
payments and/or deposits have been made;
(j) There are no pending or threatened actions or proceedings before
any court or administrative agency, an unfavorable resolution of which could
have a material adverse effect on Customer's financial condition or operations;
(k) No representation, warranty or statement by Customer contained in
the Loan Agreement or in any certificate or other document furnished or to be
furnished by Customer pursuant to the Loan Agreement contains or at the time of
delivery shall contain any untrue statement of material fact, or omits, or shall
omit at the time of delivery, to state a material fact necessary to make it not
misleading;
(l) All financial statements delivered and to be delivered by Customer
to Lender in connection with the execution and delivery of the Loan Agreement
are true and correct in all material respects and have been prepared in
accordance with generally accepted accounting principles, and at all times since
the date of the most recent financial statements, there has been no material
change in Customer's financial affairs or business operations. Customer shall
furnish Lender: (i) within 120 days after the last day of each fiscal year of
Customer, a financial statement including a balance sheet, income statement,
statement of retained earnings and statement of cash flows, each prepared in
accordance with generally accepted accounting principles consistently applied
with a report signed by an independent certified public accountant satisfactory.
to Lender: (ii) upon the request of Lender, within 60 days after the close of
each quarter of each fiscal year of Customer, financial statements similar to
those described in the immediately preceding clause, prepared by Customer and
certified by the chief financial officer of Customer; (iii) promptly upon the
request of Lender, such tax returns or financial statements regarding any
guarantor of the Obligations or any Affiliate of Customer as Lender may
reasonably request from time to time; (iv) promptly upon request of Lender, in
form satisfactory to Lender, such other and additional information as Lender may
reasonably request from time to time, and; (v) promptly inform Lender of any
Defaults (defined below) or any events or changes in the financial condition of
Customer occurring since the date of the last financial statements of Customer
delivered to Lender which, individually or cumulatively, when viewed in light of
prior financial statements, may result in a material adverse change in the
financial condition of Customer;
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<PAGE> 4
(m) Customer shall permit Lender, through its authorized attorneys,
accountants and representatives, to inspect and examine the Equipment and the
books, accounts, records, ledgers and assets of every kind and description of
Customer with respect thereto at all reasonable times; provided, however, that
the failure of Lender to inspect the Equipment or to inform Customer of any
noncompliance shall not relieve Customer of any of its Obligations hereunder;
(n) Customer is the owner of the Equipment free and clear of all
rights, title, security interests, encumbrances or liens of any other party,
will defend the Equipment against all claims and demands of all persons at any
time claiming any interest therein and shall deliver to Lender any and all
evidence of ownership of, and certificates of title to, any and all of the
Equipment;
(o) The Equipment is personal property and not a fixture under the law
of the jurisdiction in which the Equipment is located even though the Equipment
may hereafter become attached or affixed to real property;
(p) Each site where Equipment is located, if not owned by Customer, is
leased by Customer pursuant to a valid lease or rental agreement which permits
the possession, use and operation of the Equipment at such location;
(q) Customer shall provide Lender with disclaimers and waivers from
landlords, mortgagees and other persons holding any interest or claim in and to
any premises where Equipment is located, acceptable in all respects to Lender,
which may be necessary or advisable in the sole discretion of Lender to confirm
that the first priority security interest and rights of Lender in the Equipment
are and will remain valid and superior against all other parties;
(r) The Equipment is in the possession of Customer at the location(s)
specified in the applicable Equipment Schedule, and shall not be removed from
such location without the prior written consent of Lender, which consent shall
in any event be conditioned upon Customer having completed all notifications,
filings, recordings, and other actions in such new location as Lender may
require to protect and perfect Lender's interests in the Collateral;
(s) Customer shall not, without the prior written consent of Lender,
sell, offer to sell, lease, rent, hire or in any other manner dispose, transfer
or surrender use and possession of any Equipment;
(t) Customer will not, directly or indirectly, create, incur or permit
to exist any lien, encumbrance, mortgage, pledge, attachment or security
interest on or with respect to the Equipment other than in connection with the
execution and delivery of the Loan Agreement;
(u) Customer shall permit each item of Equipment to be used only within
the continental United States by qualified personnel solely for business
purposes and the purpose for which it was designed and, at its sole expense,
shall service, repair, overhaul and maintain each item of Equipment in the same
condition as when received, ordinary wear and tear excepted, in good operating
order, consistent with prudent industry practice (but, in no event less than the
same extent to which Customer maintains other similar equipment in the prudent
management of its assets and properties) and in compliance with all applicable
laws, ordinances, regulations, and conditions of all insurance policies required
to be maintained by Customer under the Loan Agreement and all manuals, orders,
recommendations, instructions and other written requirements as to the repair
and maintenance of such item of Equipment issued at any time by the vendor
and/or manufacturer thereof;
(v) If any item of Equipment does not comply with the requirements of
the Loan Agreement, Customer shall bring such Equipment into compliance with the
provisions hereof; and Customer shall not use any Equipment, nor allow the same
to be used, for any unlawful purpose;
(w) Customer acknowledges that Lender has not selected, manufactured or
supplied the Equipment to Customer and has acquired any Equipment subject hereto
solely in connection with this Loan Agreement and Customer has received and
approved the terms of any purchase order or agreement with respect to the
Equipment; and
(x) Customer has all permits, licenses and other authorizations which
are required with respect to its business under Environmental Laws (as defined
below) and is in compliance with all terms and conditions of such permits,
licenses and other authorizations, including all limitations, restrictions,
standards, prohibitions, requirements, obligations, schedules and timetables.
The Customer is not presently in violation of any Environmental Laws.
"Environmental Laws" shall mean any Federal, state or local law relating to
releases or threatened releases of Hazardous Substances; the manufacture,
handling, transport, use, treatment, storage or disposal of Hazardous Substances
or materials containing Hazardous Substances; or otherwise relating to pollution
of the environment or the protection of human health "Hazardous Substances"
shall mean substances or materials which contain substances defined in or
regulated as toxic or hazardous materials, chemicals, substances,
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waste or pollutants under any present or future Federal statutes and their state
counterparts, as well as any implementing regulations as amended from time to
time and as interpreted by administering agencies.
6. DISCLAIMER OF WARRANTIES; LIMITATION OF REMEDY; LIMITATION OF
LIABILITY. (Customer has selected both the Equipment and the supplier
(identified in the Equipment Schedule, herein ("Supplier") from whom Customer
agrees to purchase the Equipment.) CUSTOMER ACKNOWLEDGES THAT LENDER HAS NO
SPECIAL FAMILIARITY OR EXPERTISE WITH RESPECT TO THE EQUIPMENT. CUSTOMER AGREES
THAT THE EQUIPMENT IS "AS IS" AND IS OF A SIZE, DESIGN AND CAPACITY SELECTED BY
CUSTOMER AND THAT CUSTOMER IS SATISFIED THAT THE SAME IS SUITABLE FOR CUSTOMER'S
PURPOSES, AND THAT EXCEPT AS MAY OTHERWISE BE SPECIFICALLY PROVIDED HEREIN OR IN
THE EQUIPMENT SCHEDULE, LENDER HAS MADE NO REPRESENTATION OR WARRANTY AS TO ANY
MATTER WHATSOEVER. LENDER DISCLAIMS, AND CUSTOMER HEREBY EXPRESSLY WAIVES AS TO
LENDER, ALL WARRANTIES WITH RESPECT TO THE EQUIPMENT INCLUDING BUT NOT LIMITED
TO ALL EXPRESS OR IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE, QUALITY, CAPACITY, OR WORKMANSHIP, ALL EXPRESS OR IMPLIED
WARRANTIES AGAINST PATENT INFRINGEMENTS OR DEFECTS, WHETHER HIDDEN OR APPARENT,
AND ALL EXPRESS OR IMPLIED WARRANTIES WITH RESPECT TO COMPLIANCE OF THE
EQUIPMENT WITH THE REQUIREMENTS OF ANY LAW, REGULATION, SPECIFICATION OR
CONTRACT RELATIVE THERETO. IN NO EVENT SHALL LENDER BE LIABLE (INCLUDING WITHOUT
LIMITATION, UNDER ANY THEORY IN TORTS) FOR ANY LOSS OF USE, REVENUE, ANTICIPATED
PROFITS OR SPECIAL, INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES ARISING OUT OF
OR IN CONNECTION WITH THE LOAN OR THE USE, PERFORMANCE OR MAINTENANCE OF THE
EQUIPMENT. If the Equipment is not properly installed, does not operate as
represented or warranted by the Supplier, manufacturer and/or service company or
is unsatisfactory for any reason, Customer shall make any claim on account
thereof solely against the Supplier, manufacturer and/or service company and
shall, nevertheless, pay Lender all amounts payable under the Loan Agreement and
any such claims shall not act as a defense, counterclaim, deduction, setoff or
otherwise limit Customer's Obligations under the Loan Agreement.
7. RISK OF LOSS AND DAMAGE; INSURANCE. Customer assumes all risk of
loss, damage or destruction to the Equipment from whatever cause and for
whatever reason. If all or a portion of an item of Equipment shall become lost,
stolen, destroyed, damaged beyond repair or rendered permanently unfit for use
for any reason, or in the event of any condemnation, confiscation, theft or
seizure or requisition of title to or use of such item of Equipment, Customer
shall immediately pay to Lender an amount equal to the outstanding principal
balance of and accrued and unpaid interest on any Note with respect to such
Equipment, less the net amount of the recovery, if any, received by Lender from
insurance on the Equipment. For so long as any Obligations shall remain
outstanding, Customer shall procure and maintain insurance in such amounts and
with such coverages, and upon such terms and with such companies, as Lender may
approve, at Customer's expense; provided, however, that in no event shall such
insurance be less than the following coverages and amounts: (a) Worker's
Compensation and Employer's Liability Insurance, in the full statutory amounts
provided by law; (b) Comprehensive General Liability Insurance including
product/completed operations and contractual liability coverage, with minimum
limits on a per occurrence basis, as reasonably required by Lender, and Combined
Single Limit Bodily Injury and Property Damage on an aggregate basis, as
reasonably required by Lender or, in either case, as otherwise specified in any
Equipment Schedule hereto; and (c) All Risk Physical Damage Insurance, excluding
earthquake and flood, on each item of Equipment, in an amount not less than the
greater of (i) the outstanding principal balance owing under any Note with
respect to such Equipment; or (ii) its full replacement value. Customer shall
cause Lender to be included as an additional insured on each such Comprehensive
General Liability Insurance policy. On each such All Risk Physical Damage
Insurance policy Lender shall be named as loss payee. Such policies shall be
endorsed to provide that the coverage afforded to Lender shall not be rescinded,
impaired or invalidated by any act or neglect of Customer. Customer agrees to
waive Customer's rights and its insurance carrier's rights of subrogation
against Lender for any and all loss or damage. In addition to the foregoing
minimum insurance coverage, Customer shall procure and maintain such other
insurance coverage as Lender may require. All policies shall be endorsed or
contain a clause requiring the insurer to furnish Lender with at least 30 days
prior written notice of any material change, cancellation or non-renewal of
coverage. Upon execution of this Agreement, and thereafter, 30 days prior to the
expiration of each insurance policy required hereunder, Customer shall furnish
Lender with a certificate of insurance or other evidence satisfactory to Lender
that the insurance coverages required under such policy are and will continue in
effect, provided, however, that Lender shall be under no duty either to
ascertain the existence of or to examine such insurance coverage or to advise
Customer in the event such insurance coverage should not comply with the
requirements hereof. If Customer shall at any time or times hereafter fail to
obtain and/or maintain any of the policies of insurance required herein, or fail
to pay any premium in whole or in part relating to any such policies, Lender
may, but shall not be obligated to, obtain and/or cause to be maintained
insurance coverage with respect to the Collateral, including, at Lender's
option, the coverage provided by all or any of the policies of Customer and pay
all or any part of the premium therefor, without waiving any Event of Default by
Customer, and any sums so disbursed by Lender shall be additional Obligations of
Customer to Lender payable
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on demand. Lender shall have the right to settle and compromise any and all
claims under any of the All Risk Physical damage policies required to be
maintained by Customer hereunder and Customer hereby appoints Lender as its
attorney-in-fact, with power to demand, receive and receipt for all monies
payable thereunder, to execute in the name of Customer or Lender or both any
proof of loss, notice, draft or other instruments in connection with such
policies or any loss thereunder and generally to do and perform any and all acts
as Customer, but for this appointment, might or could perform.
8. EVENTS OF DEFAULT. An "Event of Default" under this Agreement shall
be deemed to have occurred upon the occurrence or existence of any one or more
of the following events or conditions (each a "Default") and after the giving of
any required notice or the passage of any required period of time (or both)
specified below with respect to such Default: (a) Customer shall fail to make
any payment due under any Note or as required under the Loan Agreement within 10
days of its due date; or (b) Customer shall fail to obtain or maintain any of
the insurance required under the Loan Agreement; or (c) Customer shall remove,
sell, transfer, encumber, or part with possession of any Equipment; (d) Customer
shall fail to perform or observe any other covenant, condition or agreement
under the Loan Agreement, and such failure shall continue for 20 days after
notice thereof to Customer; or (e) Customer or any of its Affiliates shall
default in the payment or performance of any Obligation owing to Lender, and
such default shall continue for 20 days after notice thereof to Customer; or (f)
any representation or warranty made by Customer herein or in any certificate,
agreement, statement or document heretofore or hereafter furnished Lender,
including without limitation any financial information, except projections,
disclosed to Lender, shall prove to be false or incorrect in any material
respect; or (g) death or judicial declaration of incompetence of Customer, if an
individual; or (h) the commencement of any bankruptcy, insolvency, arrangement,
reorganization, receivership, liquidation or other similar proceeding by or
against Customer or any of its properties or businesses, or the appointment of a
trustee, receiver, liquidator or custodian for Customer or any of its properties
or businesses, or if Customer suffers the entry of an order for relief under
Title 11 of the United States Code; or (i) the making by Customer of a general
assignment or deed of trust for the benefit of creditors; or (j) Customer shall
default in any payment or other material obligation to any other lender and such
lender has accelerated the debt in accordance with its terms; or (k) Customer
shall merge with or consolidate into any other entity or sell all or
substantially all of its assets or in any manner terminate its existence; or (l)
if Customer is a privately held corporation, more than 50% of Customer's voting
capital stock, or effective control of Customer's voting capital stock, issued
and outstanding from time to time, is not retained by the holders of such stock
on the date the Loan Agreement is executed; or (m) if Customer is a publicly
held corporation, there shall be a change in the ownership of Customer's stock
such that Customer is no longer subject to the reporting requirements of the
Securities Exchange Act of 1934 or no longer has a class of equity securities
registered under Section 12 of the Securities Act of 1933; or (n) Lender shall
determine that there has been a material adverse change in the financial
condition or business operations of Customer since the date of the execution of
the Loan Agreement, or that Customer's ability to perform its obligations is
materially impaired; or (o) if Customer leases the premises where any Equipment
is located, a breach by Customer of any such lease and the commencement of an
action by the landlord to evict Customer or to repossess the premises; or (p)
any event or condition set forth in subsections (e) through (o) of this Section
8 shall occur with respect to any guarantor or other person liable or
responsible, in whole or in part, for payment or performance of any Obligations;
or (q) any event or condition set forth in subsections (e) through (o) shall
occur with respect to any Affiliate of Customer. Customer shall promptly notify
Lender of the occurrence of any Event of Default or the occurrence or existence
of any event or condition which, upon the giving of notice or lapse of time, or
both, would constitute an Event of Default.
9. RIGHTS AND REMEDIES; ACCELERATION. (a) Upon the occurrence of an
Event of Default, Lender shall have all of the rights and remedies enumerated
herein (all of which are cumulative and not exclusive of any other right or
remedy available to Lender) and Lender may, at its sole option and discretion,
exercise one or more of the following remedies with respect to any or all of the
Collateral: (i) by written notice to Customer, terminate any or all Loan
Agreements as such notice shall specify, and, with respect to such terminated
Loan Agreements, declare immediately due and payable and recover from Customer,
as liquidated damages for loss of Lender's bargain and not as a penalty, an
amount equal to the aggregate of all unpaid periodic installment payments and
other sums due under Loan Agreements to the date of default plus the charges set
forth in Section 4 hereof, if any, plus an amount equal to the outstanding
principal balances of and accrued and unpaid interest on any of the Notes with
respect to the Loan Agreements, (ii) Lender may declare, at its option, all or
any part of the Obligations immediately due and payable, without demand, notice
of intention to accelerate, notice of acceleration, notice of nonpayment,
presentment, protest, notice of dishonor, or any other notice whatsoever, all of
which are hereby waived by Customer and any endorser, guarantor, surety or other
party liable in any capacity for any of the Obligations; (iii) cause Customer to
promptly ship, with insurance and freight prepaid by Customer, any or all
Equipment to such location as Lender may designate, or Lender, at its option,
may enter upon the premises where the Equipment is located and take immediate
possession of and remove the same by summary proceedings or otherwise, all
without liability to Lender for or by reason of damage to property or such entry
or taking possession except for Lender's gross negligence or willful misconduct;
(iv) sell any or all Collateral at public or private sale or otherwise dispose
of, hold, use, operate, lease to others or keep idle the Equipment, all as
Lender in its sole discretion may determine and all free and clear of any rights
of Customer; (v) remedy such default, including making repairs or modifications
to the Equipment, for the account and expense of Customer, and Customer agrees
to
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reimburse Lender for all of Lender's costs and expenses; (vi) apply any Security
Deposit or other cash collateral or sale or remarketing proceeds of the
Equipment at any time to reduce any amounts due to Lender, or (vii) exercise any
other right or remedy which may be available to Lender under applicable law, or
proceed by appropriate court action to enforce the terms hereof or to recover
damages for the breach hereof; including Attorneys' Fees and Expenses. Any
notice required to be given by Lender of a sale or other disposition or other
intended action which is made in accordance with the terms of the Loan Agreement
at least seven (7) days prior to such proposed action, shall constitute fair and
reasonable notice to Customer of any such action. Lender shall be liable to
Customer only for its gross negligence or willful misconduct in failing to
comply with any applicable law imposing duties upon Lender; Lender's liability
for any such failure shall be limited to the actual loss suffered by Customer
directly resulting from such failure; and in no event shall Lender have any
liability to Customer for incidental, consequential, punitive or exemplary
damages. No remedy referred to in this Section 9 shall be exclusive, but each
shall be cumulative and in addition to any other remedy referred to above or
otherwise available to Lender at law or in equity.
(b) The exercise or pursuit by Lender of any one or more of such
remedies shall not preclude the simultaneous or later exercise or pursuit by
Lender of any or all such other remedies, and all remedies hereunder shall
survive termination of the Loan Agreement. In the event Lender takes possession
and disposes of the Collateral, the proceeds of any such disposition shall be
applied in the following order: (l) to all of Lender's costs, charges and
expenses incurred in taking, removing, holding, repairing and selling or leasing
the Equipment; (2) to pay the Lender the remaining amount of any Obligations
owed to Lender and (3) the balance, if any, to Customer. A termination shall
occur only upon written notice by Lender and only with respect to such Equipment
as Lender shall specify in such notice. Termination under this Section 9 shall
not affect Customer's duty to perform Customer's Obligations under the Loan
Agreement in full. Customer agrees to reimburse Lender on demand for any and all
costs and expenses incurred by Lender in enforcing its rights and remedies
hereunder following the occurrence of an Event of Default, including, without
limitation, Attorneys' Fees and Expenses, and the costs of repossession,
storage, insuring, reletting, selling and disposing of any and all Equipment.
10. INDEMNITY. (a) Customer agrees to indemnify, reimburse and hold
Lender and its successors, Affiliates, assigns, officers, directors, employees,
agents and servants (hereinafter in this Section 10 referred to individually as
"Indemnitee", and collectively as "Indemnitees") harmless from any and all
liabilities, obligations, damages, injuries, penalties, claims, demands,
actions, suits, judgments and any and all costs, expenses or disbursements,
including Attorneys' Fees and Expenses of whatsoever kind and nature imposed on,
asserted against or incurred by any of the Indemnitees in any way relating to or
arising out of the Loan Agreement or any other document executed in connection
herewith or therewith or in any other way connected with the administration of
the transactions contemplated hereby or thereby or the enforcement of any of the
terms of, or the preservation of any rights under any thereof, or in any way
relating to or arising out of the manufacture, ownership, ordering, purchase,
delivery, control, acceptance, lease, financing, possession, operation,
condition, sale, return or other disposition, or use of the Equipment
(including, without limitation, latent or other defects, whether or not
discoverable), the violation of the laws of any country, state or other
governmental body or unit, any tort (including, without limitation, claims
arising or imposed under the doctrine of strict liability, or for or on account
of injury to or the death of any Person (including any Indemnitee), or property
damage), or contract claim, or any claim based on patent, trademark or copyright
infringement or any obligation or liability to the manufacturer or supplier of
the Equipment under any Supply Contracts (referenced in the Equipment Schedule),
including purchase orders issued by Customer or Lender or assigned to Lender;
provided, however, that no Indemnitee shall be indemnified pursuant to this
Section 10 for losses, damages or liabilities to the extent caused solely by the
gross negligence or willful misconduct of such Indemnitee. Customer agrees that
upon written notice by any Indemnitee of the assertion of such a liability,
obligation, damage, injury, penalty, claim, demand, action, suit or judgment,
Customer shall assume full responsibility for the defense thereof. Each
Indemnitee agrees to use its best efforts to promptly notify Customer of any
such assertion of which such Indemnitee has knowledge.
(b) Without limiting the application of Section 10(a) hereof, Customer
agrees to pay, or reimburse Lender for any and all reasonable fees, costs and
expenses (including Attorneys' Fees and Expenses) of whatever kind or nature
incurred in connection with the creation, preservation or protection of Lender's
liens on, and security interest in, the Collateral, including, without
limitation, all fees and taxes in connection with the recording or filing of
instruments and documents in public offices, payment or discharge of any taxes
or liens upon or in respect of the Collateral, premiums for insurance with
respect to the Collateral and all other fees, costs and expenses in connection
with protecting, maintaining or preserving the Collateral and Lender's interest
therein, whether through judicial proceedings or otherwise, or in defending or
prosecuting any actions, suits or proceedings arising out of or relating to the
Collateral.
(c) Customer shall, at its sole cost and expense, protect, defend,
indemnify, release and hold harmless the Indemnitees from and against any and
all Losses imposed upon or incurred by or asserted against any Indemnitees, and
arising out of or in any way relating to any one or more of the following,
unless caused solely by the gross negligence or willful misconduct of any
Indemnitee: (i) any presence of any Hazardous Substances in, on, above or under
Customer's leased or owned real property (the "Property"); (ii) any past,
present or threatened Release of Hazardous Substances
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in, on, above, under or from the Property; or (iii) any past or present
violation of any Environmental Laws. The term "Release" of any Hazardous
Substance includes, but is not limited to, any release, deposit, discharge,
emission, leaking, spilling, seeping, migrating, injecting, pumping, pouring,
emptying, escaping, dumping, disposing or other movement of Hazardous
Substances. The term "Losses" includes any and all claims, suits, liabilities
(including, without limitation, strict liabilities), actions, proceedings,
obligations, debts, damages, losses, costs, expenses, diminutions in value,
fines, penalties, charges, fees, expenses, judgments, awards, amounts paid in
settlement, costs of remediating a Hazardous Substance (whether or not performed
voluntarily), engineers' fees, environmental consultants' fees, and costs of
investigation (including, but not limited to sampling, testing and analysis of
soil, water, air, building materials and other materials and substances whether
solid, liquid or gas) or punitive damages, of whatever kind or nature
(including, but not limited to Attorneys' Fees and Expenses).
(d) Without limiting the application of Section 10(a) or (b), or (c)
hereof, Customer agrees to pay, indemnify and hold each Indemnitee harmless from
and against any loss, costs, damages and expenses (including Attorneys Fees and
Expenses) which such Indemnitee may suffer, expend or incur in consequence of or
growing out of any misrepresentation or omission of a material fact by Customer
in the Loan Agreement or in any writing contemplated by or made or delivered
pursuant to or in connection with the Loan Agreement.
(e) If and to the extent that the obligations of Customer under this
Section 10 are unenforceable for any reason, Customer hereby agrees to make the
maximum contribution to the payment and satisfaction of such obligations which
is permissible under applicable law.
11. MAINTENANCE; INSPECTION. During the term of the Loan Agreement,
Customer shall, unless Lender shall otherwise consent in writing: (a) maintain
conspicuously on any Equipment such labels, plates, decals or other markings as
Lender may reasonably require, stating that Lender has a security interest in
such Equipment; (b) furnish to Lender such information concerning the condition,
location, use and operation of the Equipment as Lender may request; (c) permit
any person designated by Lender to visit and inspect any Equipment and any
records maintained in connection therewith, provided, however, that the failure
of Lender to inspect the Equipment or to inform Customer of any noncompliance
shall not relieve Customer of any of its obligations hereunder; and (d) make no
additions, alterations, modifications or improvements (collectively,
"Improvements") to any item of Equipment that are not readily removable without
causing material damage to such item of Equipment or which will cause the value,
utility or useful life of such item of Equipment to materially decline. If any
such Improvement is made and cannot be removed without causing material damage
or decline in value, utility or useful life (a "Non-Severable Improvement"),
then Customer warrants that such Non-Severable Improvement shall immediately
become subject to Lender's security interest upon being installed and shall be
free and clear of all liens and encumbrances and shall become Equipment subject
to all of the terms and conditions of the Loan Agreement.
12. FURTHER ASSURANCES. Customer shall promptly execute and deliver to
Lender such further documents and take such further action as Lender may require
in order to more effectively carry out the intent and purpose of the Loan
Agreement. Customer shall execute and deliver to Lender upon Lender's request
any and all schedules, forms and other reports and information as Lender may
deem necessary or appropriate to respond to requirements or regulations imposed
by any governmental authorities or to comply with the provisions of the law of
any jurisdiction in which Customer may then be conducting business or in which
any of the Equipment may be located. Customer shall execute and deliver to
Lender upon Lender's request such further and additional documents, instruments
and assurances as Lender deems necessary to acknowledge and confirm, for the
benefit of Lender or any assignee or transferee of any of Lender's rights, title
and interests hereunder in accordance with Section 13 hereof (an "Assignee"),
all of the terms and conditions of all or any part of the Loan Agreement and
Lender's or Assignee's rights with respect thereto, and Customer's compliance
with all of the terms and provisions thereof.
13. ASSIGNMENT. The provisions of the Loan Agreement shall be binding
upon and shall inure to the benefit of the heirs, administrators, successors and
assigns of Lender and Customer, provided, however, Customer may not assign any
of its rights, transfer any interest in the Equipment or delegate any of its
obligations under the Loan Agreement without the prior written consent of Lender
in its sole discretion. Lender may, from time to time, absolutely or as
security, without notice to Customer, sell, assign, transfer, participate,
pledge or otherwise dispose of all or any part of a Loan Agreement, the
Obligations and/or the Collateral therefor, subject to the rights of Customer
under the Loan Agreement for the use and possession of the Equipment. In such
event, each and every immediate and successive Assignee shall have the right to
enforce the Loan Agreement with respect to those Obligations and/or Collateral
transferred to the Assignee, by legal action or otherwise, for its own benefit
as fully as if such Assignee were herein by name specifically given such rights.
Customer agrees that the rights of any such Assignee hereunder or with respect
to the related Obligations, shall not be subject to any defense, set off or
counterclaim that Customer may assert or claim against Lender, and that any such
Assignee shall have all of Lender's rights hereunder but none of Lender's
obligations. Lender shall have an unimpaired right to enforce the Loan Agreement
for its
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benefit with respect to that portion of any Loan Agreement, Obligations and/or
Collateral that Lender has not sold, assigned, edged or otherwise transferred.
14. GOVERNING LAW; MEDIATION OF THE LOAN AGREEMENT. THE LOAN AGREEMENT
AND THE LEGAL RELATIONS OF THE PARTIES HERETO SHALL IN ALL RESPECTS BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CONNECTICUT,
WITHOUT REGARD TO PRINCIPLES REGARDING THE CHOICE OF LAW. CUSTOMER HEREBY
CONSENTS AND SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF THE COURTS OF THE
STATE OF CONNECTICUT AND THE FEDERAL DISTRICT COURT FOR THE DISTRICT OF
CONNECTICUT FOR THE PURPOSES OF ANY SUIT, ACTION OR OTHER PROCEEDING ARISING OUT
OF ITS OBLIGATIONS UNDER THE LOAN AGREEMENT, AND EXPRESSLY WAIVES ANY OBJECTIONS
THAT IT MAY HAVE TO THE VENUE OF SUCH COURTS. CUSTOMER HEREBY EXPRESSLY WAIVES
ANY RIGHT TO TRIAL BY JURY IN ANY ACTION BROUGHT ON OR WITH RESPECT TO THE LOAN
AGREEMENT. Any action by Customer against Lender for any cause of action under
the Loan Agreement shall be brought within one year after any such cause of
action first arises. If requested by Lender, Customer agrees that prior to the
commencement of any litigation regarding the terms and conditions of the Loan
Agreement, the parties hereto shall subject themselves to non-binding mediation
with a qualified mediator mutually satisfactory to both parties.
15. NOTICES. Any demand or notice required or permitted to be given
hereunder shall be deemed effective (a) when deposited in the United States
mail, and sent by certified mail, return receipt requested, postage prepaid,
addressed to Lender or to Customer at the addresses set forth herein, or to such
other address as may be hereafter provided by the party to be notified by
written notice complying with the provisions hereof or (b) when transmitted to
Lender or Customer by facsimile at the respective numbers provided for such
purpose; provided, that such facsimile notice is promptly followed by notice
given in accordance with the immediately preceding subsection (a).
16. SECURITY DEPOSIT. Lender may, at its option, apply the Security
Deposit, if any is indicated in an Equipment Schedule, to cure any default of
Customer, whereupon Customer shall promptly restore such Security Deposit to its
original amount. Lender shall return to Customer any unapplied Security Deposit,
without interest, upon full payment and performance of Customer's Obligations
under the Loan Agreement.
17. MISCELLANEOUS; GENERAL PROVISIONS. The Loan Agreement will not be
binding on Lender until accepted and executed by Lender at its executive office
in South Norwalk, Connecticut. All options, powers and rights granted to Lender
hereunder or under any promissory note, guaranty, letter of credit agreement,
depository agreement, instrument, document or other writing delivered to Lender
shall be cumulative and shall be in addition to any other options, powers or
rights which Lender may now or hereafter have under any applicable law or
otherwise. Time is of the essence in the payment and performance of all of
Customer's obligations under the Loan Agreement. The captions in the Loan
Agreement are for convenience only and shall not define or limit any of the
terms thereof.
Any provisions of the Loan Agreement which are unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such unenforceability without invalidating the remaining provisions hereof, and
any such unenforceability in any jurisdiction shall not render unenforceable
such provisions in any other jurisdiction. To the extent permitted by applicable
law, Customer hereby waives any provisions of law which render any provision of
the Loan Agreement unenforceable in any respect.
CUSTOMER ACKNOWLEDGES THAT THE TRANSACTION OF WHICH THIS LOAN AGREEMENT
IS A PART IS A COMMERCIAL TRANSACTION AND EXCEPT AS OTHERWISE PROVIDED IN THE
LOAN AGREEMENT CUSTOMER HEREBY WAIVES, TO THE EXTENT PERMITTED BY APPLICABLE
LAW, NOTICE AND JUDICIAL HEARING IN CONNECTION WITH LENDER'S TAKING POSSESSION
OR LENDER'S DISPOSITION OF ANY OF THE COLLATERAL, INCLUDING, WITHOUT LIMITATION,
ANY AND ALL PRIOR NOTICE AND HEARING FOR ANY PREJUDGMENT REMEDY OR REMEDIES AND
ANY SUCH RIGHT WHICH CUSTOMER WOULD OTHERWISE HAVE UNDER THE CONSTITUTION OR ANY
STATUTE OF THE UNITED STATES OR OF ANY STATE, INCLUDING, WITHOUT LIMITATION, ITS
RIGHTS TO NOTICE AND HEARING UNDER CHAPTER 903A OF THE CONNECTICUT GENERAL
STATUTES.
THE LOAN AGREEMENT AND ANY OTHER WRITTEN AGREEMENT(S) BETWEEN THE
PARTIES EXECUTED SIMULTANEOUSLY HEREWITH, REPRESENT THE FINAL AGREEMENT BETWEEN
THE PARTIES CONCERNING THE SUBJECT MATTER HEREOF, AND SUPERSEDE AND MAY NOT BE
CONTRADICTED BY ANY PRIOR WRITTEN AGREEMENTS BETWEEN THE PARTIES, INCLUDING,
WITHOUT LIMITATION, PROPOSALS, LETTERS, COMMITMENT LETTERS OR BY ANY PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS BETWEEN THE PARTIES. CUSTOMER
ACKNOWLEDGES AND CERTIFIES
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THAT NO SUCH ORAL AGREEMENTS EXIST. THE LOAN AGREEMENT MAY NOT BE AMENDED, NOR
MAY ANY RIGHTS UNDER THE LOAN AGREEMENT BE WAIVED, EXCEPT BY AN INSTRUMENT IN
WRITING SIGNED BY THE PARTY AGAINST WHOM SUCH AGREEMENT OR WAIVER IS ASSERTED.
The failure of Lender at any time or times hereafter to require strict
performance by Customer of any of the provisions, warranties, terms and
conditions contained in the Loan Agreement or in any other agreement, guaranty,
note, depository agreement, letter of credit, instrument or document now or at
any time or times hereafter executed by Customer or an Affiliate of Customer and
delivered to Lender shall not waive, affect or diminish any right of Lender at
any time or times hereafter to demand strict performance thereof. The Loan
Agreement may be executed in any number of counterparts, each of which shall be
deemed to be an original, but all of which together shall constitute but one and
the same instrument. Each reference herein to "Lender" shall be deemed to
include its successors and assigns, and each reference to "Customer" and any
pronouns referring thereto as used herein shall be construed in the masculine,
feminine, neuter, singular or plural, as the context may require, and shall be
deemed to include the legal representatives, successors and assigns of Customer,
all of whom shall be bound by the provisions hereof. EACH REFERENCE HEREIN TO
"CUSTOMER" SHALL MEAN AND INCLUDE ANY AND ALL CUSTOMERS WHO SIGN BELOW, EACH OF
WHOM SHALL BE JOINTLY AND SEVERALLY LIABLE UNDER THIS LOAN AGREEMENT.
The Loan Agreement and all related documents, including (a) amendments,
addenda, consents, waivers and modifications which may be executed
contemporaneously or subsequently herewith, (b) documents received by Lender
from the Customer, and (c) financial statements, certificates and other
information previously or subsequently furnished to Lender, may be reproduced by
Lender by any photographic, photostatic, microfilm, micro-card, miniature
photographic, compact disk reproduction or other similar process and Lender may
destroy any original document so reproduced. Customer agrees, herein waives all
right to object to the admissibility of such reproduction and stipulates that
any such reproduction shall, to the extent permitted by law, be admissible in
evidence as the original itself in any judicial or administrative proceeding
(whether or not the original itself is in existence and whether or not the
reproduction was made by Lender in the regular course of business) and that any
enlargement, facsimile or further reproduction of the reproduction shall
likewise be admissible in evidence.
18. SURVIVAL. Sections 6, 7, 9, 10, 11, 13, 15, 16 and 17 shall survive
and continue in full force and effect without regard to the payment in full of
all Obligations under the Loan Agreement.
Executed and delivered by duly authorized representatives of the
parties hereto as of the date set forth below.
LENDER: CUSTOMER:
OXFORD VENTURE FINANCE, LLC CELLOMICS, INC.
By: /s/ J. Alden Philbrick, IV By: /s/ D. Lansing Taylor
------------------------------ -------------------------
Name: J. Alden Philbrick, IV Name: D. Lansing Taylor
---------------------------- -----------------------
Title: President Title: CEO
--------------------------- ----------------------
Date: 7-21-99 Date: 8/16/99
---------------------------- -----------------------
Page 10
<PAGE> 11
SCHEDULE I
TRADE NAMES
Page 11
<PAGE> 12
SCHEDULE 2
NAME CHANGES; CHANGES IN CHIEF EXECUTIVE OFFICE
BioDx, Inc.
Biological Detection, Inc.
Page 12
<PAGE> 13
NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. NO SALE OR
DISPOSITION MAY BE EFFECTED EXCEPT IN COMPLIANCE WITH RULE 144 UNDER SAID ACT OR
WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF
COUNSEL FOR THE HOLDER, SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS
NOT REQUIRED UNDER THE ACT OR RECEIPT OF A NO-ACTION LETTER FROM THE SECURITIES
AND EXCHANGE COMMISSION.
WARRANT TO PURCHASE 429 SHARES OF COMMON STOCK
August 30, 1999
THIS CERTIFIES THAT, for value received, Phoenixcor, Inc., ("Holder") is
entitled to subscribe for and purchase Four Hundred Twenty-nine (429) shares of
the fully paid and nonassessable Common Stock ("the Shares") of Cellomics, Inc.,
a Delaware corporation (the "Company"), at the Warrant Price (as hereinafter
defined), subject to the provisions and upon the terms and conditions
hereinafter set forth. As used herein, the term "Common Stock" shall mean the
Company's presently authorized Common Stock, and any stock into which such
Common Stock may hereafter be exchanged.
1. Warrant Price. The Warrant Price shall initially be six and 60/100 dollars
($6.60) per share, subject to adjustment as provided in Section 7 below.
2. Conditions to Exercise. The purchase right represented by this Warrant may be
exercised at any time, or from time to time, in whole or in part during the term
commencing on the date hereof and ending on the earlier of:
(a) 5:00 P.M. Eastern Standard time on the fifth annual
anniversary of this Warrant Agreement; or
(b) the closing of the initial public offering of the Company's
Common Stock pursuant to a registration statement under the
Securities Act of 1933, as amended (the "Initial Public
Offering"). The Company shall provide notice of the Initial
Public Offering to the Holder at least 30 days prior to the
closing thereof; or
(c) the effective date of the merger of the Company with or into,
the consolidation of the Company with, or the sale by the
Company of all or substantially all of its assets or all or
substantially all of its shares to another corporation or
other entity (other than such a transaction wherein the
shareholders of the Company retain or obtain a majority of the
voting capital stock of the surviving, resulting, or
purchasing corporation); provided that the Company shall
notify the registered Holder of this Warrant of the proposed
effective date of the merger, consolidation, or sale at least
30 days prior to the effectiveness thereof.
In the event that, although the Company shall have given notice of a transaction
pursuant to subparagraph (b) or subparagraph (c) hereof, the transaction does
not close within 60 days of the day specified by the Company, unless otherwise
elected by the Holder any exercise of the Warrant subsequent to the giving of
such notice shall be rescinded and the Warrant shall again be exercisable until
terminated in accordance with this Paragraph 2.
3. Method of Exercise; Payment; Issuance of Shares; Issuance of New Warrant.
(a) Cash Exercise. Subject to Section 2 hereof, the purchase right represented
by this Warrant may be exercised by the Holder hereof, in whole or in part, by
the surrender of this Warrant (with a duly executed Notice of Exercise in the
form attached hereto) at the principal office of the Company (as set forth in
Section 18 below) and by payment to the Company, by check, of an amount equal to
the then applicable Warrant Price per share multiplied by the number of shares
then being purchased. In the event of any exercise of the rights represented by
this Warrant, certificates for the shares of stock so purchased shall be in the
name of, and delivered to, the Holder hereof, or as such Holder may direct
(subject to the terms of transfer contained herein and upon payment by such
Holder hereof of any applicable transfer taxes). Such delivery shall be made
within 10 days after exercise of the Warrant and at the Company's expense and,
unless this Warrant has been fully exercised or expired, a new Warrant having
terms and conditions
Page 1
<PAGE> 14
substantially identical to this Warrant and representing the portion of the
Shares, if any, with respect to which this Warrant shall not have been
exercised, shall also be issued to the Holder hereof within 10 days after
exercise of the Warrant.
(b) Net Issue Exercise. In lieu of exercising this Warrant pursuant to Section
3(a), Holder may elect to receive shares equal to the value of this Warrant (or
of any portion thereof remaining unexercised) by surrender of this Warrant at
the principal office of the Company together with notice of such election, in
which event the Company shall issue to Holder the number of shares of the
Company's Common Stock computed using the following formula:
X = Y (A-B)
--------
A
Where X = the number of shares of Common Stock to be issued to Holder.
Y = the number of shares of Common Stock purchasable under this Warrant
(at the date of such calculation).
A = the Fair Market Value of one share of the Company's Common Stock
(at the date of such calculation).
B = Warrant Price (as adjusted to the date of such calculation).
(c) Fair Market Value. For purposes of this Section 3, Fair Market Value of one
share of the Company's Common Stock shall mean:
(i) In the event of an exercise in connection with an Initial Public
Offering, the per share Fair Market Value for the Common Stock shall be
the Offering Price at which the underwriters initially sell Common
Stock to the public; or
(ii) The average of the closing bid and asked prices of the Common
Stock quoted in the Over-The-Counter Market Summary, or the average
of, the last reported sale price of the Common Stock or the closing
price quoted on the Nasdaq National Market System ("NMS") or on any
exchange on which the Common Stock is listed, whichever is applicable,
as published in The Wall Street Journal over the ten (10) trading days
prior to the date of determination of fair market value; or
(iii) In the event of an exercise in connection with a merger,
acquisition or other consolidation in which the Company is not the
surviving entity, as described in Section 2(c), the per share Fair
Market Value for the Common Stock shall be the value to be received per
share of Common Stock by all holders of the Common Stock in such
transaction as determined by the Board of Directors; or
(iv) If the Common Stock is not publicly traded, the per share fair
market value of the Common Stock shall be as determined in good faith
by the Company's Board of Directors unless Holder elects to have such
fair market value determined by an appraiser, which election must be
made by Holder within ten (10) business days of the date the Company
notifies Holder of the fair market value as determined by its Board of
Directors. In the event of such an appraisal, the cost thereof shall be
borne by the Holder unless such appraisal results in a fair market
value in excess of 115% of that determined by the Company's Board of
Directors, in which event the Company shall bear the cost of such
appraisal.
In the event of 3(c)(iii) or 3(c)(iv), above, the Company's Board of Directors
shall prepare a certificate, to be signed by an authorized Officer of the
Company, setting forth in reasonable detail the basis for and method of
determination of the per share Fair Market Value of the Common Stock. The Board
will also certify to the Holder that this per share Fair Market Value will be
applicable to all holders of the Company's Common Stock. Such certification must
be made to Holder at least thirty (30) business days prior to the proposed
effective date of the merger, consolidation, sale, or other triggering event as
defined in 3(c)(iii) and 3(c)(iv).
Page 2
<PAGE> 15
(d) Automatic Exercise. To the extent this Warrant is not previously exercised,
it shall be automatically exercised in accordance with Sections 3(b) and 3(c)
hereof (even if not surrendered) immediately before: (i) its expiration, or (ii)
the consummation of any consolidation or merger of the Company, or any sale or
transfer of a majority of the Company's assets or stock pursuant to Section
2(b).
4. Representations and Warranties of Holder and Restrictions on Transfer Imposed
by the Securities Act of 1933.
(a) Representations and Warranties by Holder. The Holder represents and warrants
to the Company with respect to this purchase as follows:
(i) The Holder has substantial experience in evaluating and investing
in private placement transactions of securities of companies similar to
the Company so that the Holder is capable of evaluating the merits and
risks of its investment in the Company and has the capacity to protect
its interests.
(ii) The Holder is acquiring the Warrant and the Shares of Common Stock
issuable upon exercise of the Warrant (collectively the "Securities")
for investment for its own account and not with a view to, or for
resale in connection with, any distribution thereof. The Holder
understands that the Securities have not been registered under the
Securities Act of 1933, as amended (the "Act") by reason of a specific
exemption from the registration provisions of the Act which depends
upon, among other things, the bona fide nature of the investment intent
as expressed herein. In this connection, the Holder understands that,
in the view of the Securities and Exchange Commission (the "SEC"), the
statutory basis for such exemption may be unavailable if this
representation was predicated solely upon a present intention to hold
the Securities for the minimum capital gains period specified under tax
statutes, for a deferred sale, for or until an increase or decrease in
the market price of the Securities or for a period of one year or any
other fixed period in the future.
(iii) The Holder acknowledges that the Securities must be held
indefinitely unless subsequently registered under the Act or an
exemption from such registration is available. The Holder is aware of
the provisions of Rule 144 promulgated under the Act ("Rule 144") which
permits limited resale of securities purchased in a private placement
subject to the satisfaction of certain conditions, including, in case
the securities have been held for more than one but less than two
years, the existence of a public market for the shares, the
availability of certain public information about the Company, the
resale occurring not less than one years after a party has purchased
and paid for the security to be sold, the sale being through a
"broker's transaction" or in a transaction directly with a "market
maker" (as provided by Rule 144(f)) and the number of shares or other
securities being sold during any three-month period not exceeding
specified limitations.
(iv) The Holder further understands that at the time the Holder wishes
to sell the Securities there may be no public market upon which such a
sale may be effected, and that even if such a public market exists, the
Company may not be satisfying the current public information
requirements of Rule 144, and that in such event, the Holder may be
precluded from selling the Securities under Rule 144 unless a) a
one-year minimum holding period has been satisfied and b) the Holder
was not at the time of the sale nor at any time during the three-month
period prior to such sale an affiliate of the Company.
(v) The Holder has had an opportunity to discuss the Company's
business, management and financial affairs with its management and an
opportunity to review the Company's facilities. The Holder understands
that such discussions, as well as the written information issued by the
Company, were intended to describe the aspects of the Company's
business and prospects which it believes to be material but were not
necessarily a thorough or exhaustive description.
(b) Legends. Each certificate representing the Securities shall be endorsed with
the following legend:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 AND MAY NOT BE TRANSFERRED UNLESS COVERED BY AN EFFECTIVE
REGISTRATION STATEMENT UNDER SAID ACT, A "NO ACTION" LETTER FROM THE
SECURITIES AND EXCHANGE COMMISSION WITH RESPECT TO SUCH TRANSFER, A
TRANSFER MEETING THE REQUIREMENTS OF RULE 144
Page 3
<PAGE> 16
OF THE SECURITIES AND EXCHANGE COMMISSION, OR (IF REASONABLY REQUIRED
BY THE COMPANY) AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER TO THE
EFFECT THAT ANY SUCH TRANSFER IS EXEMPT FROM SUCH REGISTRATION.
The Company need not enter into its stock register a transfer of Securities
unless the conditions specified in the foregoing legend are satisfied. The
Company may also instruct its transfer agent not to register the transfer of any
of the Shares unless the conditions specified in the foregoing legend are
satisfied.
(c) Removal of Legend and Transfer Restrictions. The legend relating to the Act
endorsed on a certificate pursuant to paragraph 4(b) of this Warrant and the
stop transfer instructions with respect to the Securities represented by such
certificate shall be removed and the Company shall issue a certificate without
such legend to the Holder of the Securities if (i) the Securities are registered
under the Act and a prospectus meeting the requirements of Section 10 of the Act
is available or (ii) the Holder provides to the Company an opinion of counsel
for the Holder reasonably satisfactory to the Company, or a no-action letter or
interpretive opinion of the staff of the SEC reasonably satisfactory to the
Company, to the effect that public sale, transfer or assignment of the
Securities may be, to the effect that public sale, transfer or assignment of the
Securities may be made without registration and without compliance with any
restriction such as Rule 144.
5. Condition of Transfer or Exercise of Warrant. It shall be a condition to any
transfer or exercise of this Warrant that at the time of such transfer or
exercise, the Holder shall provide the Company with a representation in writing
that the Holder or transferee is acquiring this Warrant and the shares of Common
Stock to be issued upon exercise, for investment purposes only and not with a
view to any sale or distribution, or will provide the Company with a statement
of pertinent facts covering any proposed distribution. As a further condition to
any transfer of this Warrant or any or all of the shares of Common Stock
issuable upon exercise of this Warrant, other than a transfer registered under
the Act, the Company must have received a legal opinion, in form and substance
satisfactory to the Company and its counsel, reciting the pertinent
circumstances surrounding the proposed transfer and stating that such transfer
is exempt from the registration and prospectus delivery requirements of the Act.
Each certificate evidencing the shares issued upon exercise of the Warrant or
upon any transfer of the shares (other than a transfer registered under the Act
or any subsequent transfer of shares so registered) shall, at the Company's
option, contain a legend in form and substance satisfactory to the Company and
its counsel, restricting the transfer of the shares to sales or other
dispositions exempt from the requirements of the Act.
As further condition to each transfer, the Holder shall surrender this Warrant
to the Company and the transferee shall receive and accept a Warrant, of like
tenor and date, executed by the Company.
6. Stock Fully Paid: Reservation of Shares. All Shares which may be issued upon
the exercise of the rights represented by this Warrant will, upon issuance, be
fully paid and nonassessable, and free from all taxes, liens, and charges with
respect to the issue thereof. During the period within which the rights
represented by this Warrant may be exercised, the Company will at all times have
authorized, and reserved for issuance upon exercise of the purchase rights
evidenced by this Warrant, a sufficient number of shares of its Common Stock to
provide for the exercise of the rights represented by this Warrant.
7. Adjustment for Certain Events. In the event of changes in the outstanding
Common Stock by reason of stock dividends (other than previously established
dividends payable in association with the Preferred Series A annual coupon rate
compensation), split-ups, recapitalizations, reclassifications, mergers,
consolidations, combinations or exchanges of shares, separations,
reorganizations, liquidations, or the like, the number and class of shares
available under the Warrant in the aggregate and the Warrant Price shall be
correspondingly adjusted, as appropriate, by the Board of Directors of the
Company. The adjustment shall be such as will give the Holder of this Warrant
upon exercise for the same aggregate Warrant Price the total number, class and
kind of shares as he would have owned had the Warrant been exercised prior to
the event and had he continued to hold such shares until after the event
requiring adjustment.
8. Notice of Adjustments. Whenever any Warrant Price shall be adjusted pursuant
to Section 7 hereof, the Company shall prepare a certificate signed by an
officer of the Company's chief financial officer setting forth, in reasonable
detail, the event requiring the adjustment, the amount of the adjustment, the
method by which such adjustment was calculated, and the Warrant Price and number
of shares issuable upon exercise of the Warrant after giving effect to such
adjustment, and shall cause copies of such certificate to
Page 4
<PAGE> 17
be mailed (by certified or registered mail, return receipt required, postage
prepaid) within thirty (30) days of such adjustment to the Holder of this
Warrant as set forth in Section 18 hereof.
9. "Market Stand-Off" Agreement. Holder hereby agrees that for a period of up to
180 days following the effective date of the first registration statement of the
Company covering common stock (or other securities) to be sold on its behalf of
the Company in an underwritten public offering, it will not, to the extent
requested by the Company and any underwriter, sell or otherwise transfer or
dispose of (other than to donees or transferees who agree to be similarly
bound) any of the Shares at any time during such period except common stock
included in such registration; provided, however, that all officers and
directors of the Company who hold securities of the Company or options to
acquire securities of the Company and all other persons with registration rights
enter into similar agreements.
10. Transferability of Warrant. This Warrant is transferable on the books of the
Company at its principal office by the registered Holder hereof upon surrender
of this Warrant properly endorsed, subject to compliance with Section 5 and
applicable federal and state securities laws. The Company shall issue and
deliver to the transferee a new Warrant representing the Warrant so transferred.
Upon any partial transfer, the Company will issue and deliver to Holder a new
Warrant with respect to the Warrant not so transferred. Holder shall not have
any right to transfer any portion of this Warrant to any direct competitor of
the Company.
11. No Fractional Shares. No fractional share of Common Stock will be issued in
connection with any exercise hereunder, but in lieu of such fractional share the
Company shall make a cash payment therefor upon the basis of the Warrant Price
then in effect.
12. Charges, Taxes and Expenses. Issuance of certificates for shares of Common
Stock upon the exercise of this Warrant shall be made without charge to the
Holder for any United States or state of the United States documentary stamp tax
or other incidental expense within respect to of the issuance of such
certificate, all of which taxes and expenses shall be paid by the Company, and
such certificates shall he issued in the name of the Holder.
13. No Shareholder Rights Until Exercise. This Warrant does not entitle the
Holder hereof to any voting rights or other rights as a shareholder of the
Company prior to the exercise hereof.
14. Registry of Warrant. The Company shall maintain a registry showing the name
and address of the registered Holder of this Warrant. This Warrant may be
surrendered for exchange or exercise, in accordance with its terms, at such
office or agency of the Company, and the Company and Holder shall be entitled to
rely in all respects, prior to written notice to the contrary, upon such
registry.
15. Loss, Theft, Destruction or Mutilation of Warrant. Upon receipt by the
Company of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant, and, in the case of loss, theft, or
destruction, of indemnity reasonably satisfactory to it, and, if mutilated, upon
surrender and cancellation of this Warrant, the Company will execute and deliver
a new Warrant, having terms and conditions substantially identical to this
Warrant, in lieu hereof.
16. Miscellaneous.
(a) Issue Date. The provisions of this Warrant shall be construed and
shall be given effect in all respect as if it had been issued and
delivered by the Company on the date hereof.
(b) Successors. This Warrant shall be binding upon any successors or
assigns of the Company.
(c) Governing Law. This Warrant shall be governed by and construed in
accordance with the laws of the State of Connecticut.
(d) Headings. The headings used in this Warrant are used for
convenience only and are not to be considered in construing or
interpreting this Warrant.
(e) Saturdays, Sundays, Holidays. If the last or appointed day for the
taking of any action or the expiration of any right required or granted
herein shall be a Saturday or a Sunday or shall be a
Page 5
<PAGE> 18
legal holiday in the State of Connecticut, then such action may be
taken or such right may be exercised on the next succeeding day not a
legal holiday.
17. No Impairment. The Company will not, by amendment of its Articles of
Incorporation or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Warrant, but will at all
times in good faith assist in the carrying out of all such terms and in the
taking of all such action as may be necessary or appropriate in order to protect
the rights of the Holder hereof against impairment.
18. Addresses. Any notice required or permitted hereunder shall be in writing
and shall be mailed by overnight courier, registered or certified mail, return
receipt required, and postage pre-paid, or otherwise delivered by hand or by
messenger, addressed as set forth below, or at such other address as the Company
or the Holder hereof shall have furnished to the other party.
If to the Company: CELLOMICS, INC.
635 WILLIAM PITT WAY
PITTSBURGH, PA 15238
Attn: MR. JEFFREY KOMATZ
If to the Holder: Phoenixcor, Inc.
65 Water Street
South Norwalk, CT 06854
Attn: Ms. Joan Kossoff
IN WITNESS WHEREOF, CELLOMICS, INC, has caused this Warrant to be executed by
its officers thereunto duly authorized.
Dated as of August 30, 1999.
By: /s/ Lee Robert Johnston, Jr.
------------------------------
Name: Lee Robert Johnston, Jr.
----------------------------
Title:
---------------------------
Page 6
<PAGE> 19
NOTICE OF EXERCISE
TO: CELLOMICS, INC.
635 WILLIAM PITT WAY
PITTSBURGH, PA 15238
l. The undersigned, Phoenixcor, Inc. ("Holder") elects to acquire shares of
the Common Stock of CELLOMICS, INC. (the "Company"), pursuant to the terms of
the Stock Purchase Warrant dated August 30, 1999, (the "Warrant").
2. The Holder exercises its rights under the Warrant as set forth below:
( ) The Holder elects to purchase 429 shares of Common Stock as
provided in Section 3(a), (c) and tenders herewith a check in
the amount of $2,831.40 as payment of the purchase price.
( ) The Holder elects to convert the purchase rights into shares
of Common Stock as provided in Section 3(b), (c) of the
Warrant.
3. The Holder surrenders the Warrant with this Notice of Exercise.
4. The Holder represents that it is acquiring the aforesaid shares of Common
Stock for investment and not with a view to, or for resale in connection with,
distribution and that the Holder has no present intention of distributing or
reselling the shares.
5. Please issue a certificate representing the shares of Common Stock in the
name of the Holder or in such other name as is specified below:
Name:
-------------------------
Address:
-------------------------
-------------------------
Taxpayer I.D.:
-------------------
----------------------------
(Holder)
By:
-------------------------
Name:
-----------------------
Title:
----------------------
Date:
-----------------------
Page 7
<PAGE> 1
Exhibit 4.3
================================================================================
SERIES A PREFERRED STOCK AND WARRANT
PURCHASE AGREEMENT
by and among
THE PURCHASERS LISTED ON EXHIBIT A HERETO
and
CELLOMICS, INC.
Dated as of January 21, 1998
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE NO.
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<S> <C> <C>
SECTION 1 - AUTHORIZATION, PURCHASE AND SALE OF SHARES
AND WARRANTS
1.1 Authorization of the Shares .............................................. 1
1.2 Sale and Purchase of the Shares and Warrants.............................. 1
1.3 Certain Defined Terms .................................................... 2
SECTION 2 - CLOSINGS, PAYMENT AND DELIVERY
2.1 Closing Dates ............................................................ 2
2.2 Place of Closings ........................................................ 3
2.3 Closing Payment and Delivery ............................................. 4
SECTION 3 - REPRESENTATIONS AND WARRANTIES OF THE
COMPANY
3.1 Organization and Standing; Articles and By-Laws........................... 4
3.2 Corporate Power .......................................................... 5
3.3 Subsidiaries ............................................................. 5
3.4 Capitalization ........................................................... 5
3.5 Authorization ............................................................ 5
3.6 Contracts; Insurance ..................................................... 6
3.7 Financial Information .................................................... 7
3.8 Absence of Undisclosed Liabilities ....................................... 8
3.9 Absence of Certain Changes ............................................... 8
3.10 Taxes .................................................................... 9
3.11 Transactions with Affiliates ............................................. 9
3.12 Litigation ............................................................... 9
3.13 Consents ................................................................. 10
3.14 Title to Properties; Liens and Encumbrances .............................. 10
3.15 Leases ................................................................... 10
3.16 Franchises, Licenses, Trademarks, Patents and Other Rights................ 10
3.17 Issuance Taxes ........................................................... 11
3.18 Offering ................................................................. 11
3.19 Compliance with Other Instruments ........................................ 12
3.20 Employees ................................................................ 12
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
PAGE NO.
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<S> <C> <C>
3.21 Business of the Company .................................................. 13
3.22 Use of Proceeds .......................................................... 14
3.23 Applicability of, and Compliance With, Other Laws ........................ 14
3.24 Indebtedness ............................................................. 16
3.25 Condition of Properties .................................................. 16
3.26 Insurance Coverage ....................................................... 16
3.27 Registration Rights ...................................................... 17
3.28 SEC Reports .............................................................. 17
3.29 Illegal or Unauthorized Payments; Political Contributions ................ 17
3.30 Qualified Small Business Stock ........................................... 17
3.31 Effectiveness of Merger .................................................. 17
3.32 Disclosure ............................................................... 18
SECTION 4 - REPRESENTATIONS AND WARRANTIES OF PURCHASERS;
CERTAIN AGREEMENTS OF THE BRIDGE INVESTORS
4.1 Representation and Warranties of the Purchasers .......................... 18
4.2 Certain Agreements of the Bridge Investors ............................... 19
SECTION 5 - CONDITIONS TO CLOSING OF PURCHASERS
5.1 Representations and Warranties Correct ................................... 20
5.2 Performance .............................................................. 20
5.3 Compliance Certificate ................................................... 20
5.4 Opinion of Company's Counsel ............................................. 21
5.5 Good Standing Certificates ............................................... 21
5.6 Legal Investment ......................................................... 21
5.7 Qualifications ........................................................... 21
5.8 Filing of Restated Certificate ........................................... 21
5.9 Proceedings and Documents ................................................ 21
5.10 Provisions of By-Laws .................................................... 21
5.11 Shareholders' Agreement .................................................. 21
5.12 Management Rights Letters ................................................ 22
5.13 Board of Directors; Indemnification ...................................... 22
5.14 Key Person Life Insurance ................................................ 22
5.15 Annual Plan .............................................................. 22
5.16 Merck Beta Site .......................................................... 22
5.17 Conversion of Bridge Notes ............................................... 22
5.18 Compensation of Gerard Klauer Mattison & Co., LLC and Barry Bloom......... 22
</TABLE>
- ii -
<PAGE> 4
<TABLE>
<CAPTION>
PAGE NO.
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<S> <C> <C>
SECTION 6 - CONDITIONS TO CLOSING OF COMPANY
6.1 Representations .......................................................... 23
6.2 Legal Investment ......................................................... 23
6.3 Restated Certificate ..................................................... 23
6.4 Shareholders' Agreement .................................................. 23
SECTION 7 - COVENANTS OF THE COMPANY
7.1 Basic Financial Information .............................................. 23
7.2 Additional Information and Rights ........................................ 25
7.3 Prompt Payment of Taxes, etc ............................................. 26
7.4 Maintenance of Properties and Leases ..................................... 26
7.5 Insurance ................................................................ 27
7.6 Accounts and Records ..................................................... 27
7.7 Compliance with Requirements of Governmental Authorities ................. 27
7.8 Maintenance of Corporate Existence, etc .................................. 28
7.9 Availability of Common Stock for Conversion of Series A Preferred
and Exercise of Warrants ................................................ 28
7.10 Proprietary Information Agreement and Key Employee Agreement ............. 28
7.11 Officer and Director Indemnity ........................................... 28
7.12 Qualified Small Business Stock ........................................... 29
7.13 Chief Executive Officer .................................................. 29
7.14 Use of Proceeds .......................................................... 29
7.15 Expenses of Board Members ................................................ 29
7.16 Securities Law Filings ................................................... 29
7.17 Audited Financial Statements ............................................. 29
7.18 Compliance by Subsidiaries ............................................... 29
7.19 Stock Option Plan ........................................................ 30
SECTION 8 - NEGATIVE COVENANTS
8.1 Changes in Type of Business .............................................. 30
8.2 Conflicting Agreements ................................................... 30
8.3 Employee Stock Plans ..................................................... 30
8.4 Indebtedness ............................................................. 30
8.5 Capital Expenditure ...................................................... 30
8.6 Related Party Transactions ............................................... 31
</TABLE>
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<PAGE> 5
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C> <C>
SECTION 9 - RESTRICTIONS ON TRANSFERABILITY OF
SECURITIES; COMPLIANCE WITH SECURITIES ACT;
REGISTRATION RIGHTS
9.1 Restrictions on Transferability .......................................... 31
9.2 Certain Definitions ...................................................... 31
9.3 Restrictive Legend ....................................................... 32
9.4 Notice of Proposed Transfers and Securities Act Compliance ............... 33
9.5 Requested Registration ................................................... 34
9.6 Company Registration ..................................................... 36
9.7 Registration on Form S-3 ................................................. 37
9.8 Expenses of Registration ................................................. 38
9.9 Registration Procedures .................................................. 39
9.10 Indemnification and Contribution ......................................... 39
9.11 Information by Holder .................................................... 41
9.12 Limitations on Registration of Issues of Securities ...................... 42
9.13 Rule 144 Reporting ....................................................... 42
9.14 Transfer of Registration Rights .......................................... 43
9.15 "Market Stand-Off" Agreement ............................................. 43
SECTION 10 - DEFINITIONS .......................................................... 43
SECTION 11 - MISCELLANEOUS
11.1 Governing Law ............................................................ 49
11.2 Survival ................................................................. 49
11.3 Successors and Assigns ................................................... 49
11.4 Entire Agreement ......................................................... 49
11.5 Notices, etc ............................................................. 50
11.6 Delays or Omissions ...................................................... 50
11.7 Rights; Separability ..................................................... 50
11.8 Agent's Fees and Services ................................................ 50
11.9 Legal Fees and Expenses .................................................. 51
11.10 Titles and Subtitles ..................................................... 51
11.11 Counterparts ............................................................. 51
</TABLE>
- iv -
<PAGE> 6
LIST OF EXHIBITS
Exhibit A - Schedule of Purchasers
Exhibit B - Restated Certificate of Incorporation (4)
Exhibit C - Form of Common Warrant (5)
Exhibit D - Form of Preferred Warrant (6)
Exhibit E - Milestones for Second Closing
Exhibit F - Schedule of Exceptions (2)
Exhibit G - Form of Proprietary Information Agreement (10)
Exhibit H - Form of Key Employee Agreement (11)
Exhibit I - Form of Opinion of Counsel (13)
Exhibit J - Shareholders' Agreement (7)
Exhibit K - Form of Management Rights Letter (8)
-v-
<PAGE> 7
SERIES A PREFERRED STOCK
AND WARRANT PURCHASE AGREEMENT
THIS SERIES A PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT (this
"Agreement") is made and entered into as of the 21st day of January, 1998, by
and among CELLOMICS, INC. (the "Company"), a Delaware corporation having offices
at 635 William Pitt Way, Pittsburgh, Pennsylvania 15328 and each of the parties
listed on the Schedule of Purchasers attached hereto as Exhibit A (the "Schedule
of Purchasers"). The parties listed on the Schedule of Purchasers are
hereinafter referred to collectively as the "Purchasers".
WHEREAS, the Company desires to issue and sell, and the Purchasers
desire to purchase, certain securities of the Company;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and conditions herein contained, the Company and the Purchasers,
severally and not jointly, hereby agree as follows:
SECTION 1
AUTHORIZATION, PURCHASE AND SALE OF SHARES AND WARRANTS
1.1 AUTHORIZATION OF THE SHARES. The Company has, or before the First
Closing (as defined in Section 2.1 hereof) will have, authorized the issuance
and sale of (i) up to One Million Nine Hundred Sixty-Six Thousand Six Hundred
Eighteen (1,966,618) shares of Series A Preferred Stock, par value $.01 per
share of the Company (the "Series A Preferred"), having the rights,
restrictions, privileges and preferences as set forth in the Restated
Certificate of Incorporation of the Company (he "Restated Certificate"), the
form of which is attached to this Agreement as Exhibit B, (ii) Common Stock
Subscription Warrants, substantially in the form of Exhibit C attached hereto
(each a "Common Warrant" and, collectively, the "Common Warrants") to purchase
up to an aggregate of One Hundred Seventy-Seven Thousand Nine Hundred Thirty-Six
(177,936) shares of Common Stock, par value $.01 per share of the Company (the
"Common Stock"), subject to adjustment as provided in the Common Warrants, and
(iii) Series A Preferred Stock Purchase Warrants, substantially in the form of
Exhibit D attached hereto (each a "Preferred Warrant" and, collectively, the
"Preferred Warrants"), to purchase up to an aggregate of Fifty-Seven Thousand
Eight Hundred Twenty-Nine (57,829) shares of Series A Preferred, subject to
adjustment as provided in the Preferred Warrants.
1.2 SALE AND PURCHASE OF THE SHARES AND WARRANTS. Upon and subject to
the terms and conditions of this Agreement and in reliance upon the
representations, warranties and agreements contained herein, at each Closing (as
defined in Section 2.1 hereof) the Company will issue and sell to each
Purchaser, and each Purchaser will purchase from the
<PAGE> 8
Company at such Closing, (i) that number of shares of Series A Preferred set
forth opposite such Purchaser's name on the Schedule of Purchasers for such
Closing (all such shares being collectively referred to as the "Shares"), (ii)
Common Warrants to purchase the number of shares of Common Stock set forth
opposite such Purchaser's name on the Schedule of Purchasers for such Closing,
if any, and (iii) Preferred Warrants to purchase the number of shares of Series
A Preferred set forth opposite such Purchaser's name on the Schedule of
Purchasers for such Closing, if any.
1.3 CERTAIN DEFINED TERMS. Certain capitalized terms used in this
Agreement shall have the respective meanings ascribed to them in Section 10
hereof.
SECTION 2
CLOSINGS, PAYMENT AND DELIVERY
2.1 CLOSING DATES.
(a) Subject to the terms and provisions of this Agreement, the initial
closing (the "First Closing") of the purchase and sale of Shares and Warrants
hereunder shall be in the amounts set forth under the columns entitled "First
Closing" on the Schedule of Purchasers. Warrants are issuable to the Purchasers
in connection with the First Closing, but not in connection with the Second
Closing (as defined below). The First Closing shall be by and among the Company
and the Purchasers specified on the Schedule of Purchasers and shall be held on
the date (the "First Closing Date") of, and immediately following, the final
execution and delivery of at least one counterpart of this Agreement by the
Company and the Purchasers, or such other date as shall have been agreed to by
the Company and the Purchasers.
(b) Subject to the terms and provisions of this Agreement, an
additional closing (the "Second Closing") of the purchase and sale of Shares
hereunder shall be in the amounts set forth under the column entitled "Second
Closing" on the Schedule of Purchasers, subject to the provisions of Sections
2.1(c). The Second Closing shall be by and to the Purchasers specified in the
Schedule of Purchasers and shall be held on such date (the "Second Closing
Date") as shall have been agreed to by the Company and such Purchasers after the
following conditions have been met; provided, however, that the Second Closing
shall occur no later than sixty (60) days after the conditions set forth below
are satisfied unless the Company and the Purchasers who are to participate in
the Second Closing mutually agree otherwise:
(i) The First Closing shall have been completed;
(ii) The directors of the Company elected by the Purchasers as
holders of the Series A Preferred shall have determined that the Company has
achieved milestones numbered 1, 2 and 3 on Exhibit E attached hereto and at
least two of the other three milestones set forth on Exhibit E attached hereto,
and written evidence of such
- 2 -
<PAGE> 9
determination shall have been provided to the Purchasers who are to
participate in the Second Closing; and
(iii) The Company shall have satisfactorily complied with the
provisions of Section 5 hereof.
The First Closing and the Second Closing are sometimes hereinafter
referred to together as the "Closings" and each as a "Closing," and the First
Closing Date and the Second Closing Date are sometimes hereinafter referred to
together as the "Closing Dates" and each as a "Closing Date."
(c) Notwithstanding the provisions of Section 2.1(b) or any other
provision of this Agreement to the contrary:
(i) In the event that, prior to the satisfaction of the
conditions to the Second Closing set forth in Section 2.1(b), the
Company closes a Subsequent Financing, then the Company may, by written
notice delivered to the Purchasers within ten (10) days of the closing
of such Subsequent Financing, elect to reduce the number of Shares to
be purchased at the Second Closing by One Hundred Seventy-Seven
Thousand Nine Hundred Thirty-Six (177,936) Shares and the amount
payable by the Purchasers at the Second Closing shall thereupon be
reduced by $1,000,000. In such event, the reduction in the number of
Shares to be issued to the Purchasers at the Second Closing, and the
reduction in the amount to be paid by each Purchaser upon the Second
Closing, shall be allocated among the Purchasers participating in the
Second Closing pro rata based upon the number of Shares and the
purchase price originally allocated to such Purchaser with respect to
the Second Closing, as set forth on the Schedule of Purchasers; and
(ii) In the event that prior to the satisfaction of the
conditions to the Second Closing set forth in Section 2.1(b), the Board
approves the consummation of a Qualified Public Offering and authorizes
the officers of the Company to take actions in furtherance of such an
offering, then the Company may, by written notice delivered to the
Purchasers within three (3) days of such approval, elect to terminate
the Company's rights and obligations and the Purchasers' rights and
obligations with respect to the Second Closing, whereupon neither the
Company nor the Purchasers shall have any further right or obligation
to consummate the Second Closing.
2.2 PLACE OF CLOSINGS. The place of each Closing (including the place
of delivery to the Purchasers by the Company of the certificates evidencing all
Shares and Warrants, if any, being purchased at such Closing and the place of
payment to the Company by the Purchasers of the purchase price therefor) shall
be at the offices of Shipman & Goodwin LLP, One American Row, Hartford,
Connecticut 06103-2819, or such other place as shall have been agreed to by the
Company and the Purchasers.
- 3 -
<PAGE> 10
2.3 CLOSING PAYMENT AND DELIVERY. Subject to Section 2.1(c), at each of
the First Closing and the Second Closing, each Purchaser will pay to the Company
by wire transfer or, in the case of the First Closing, by conversion of a Bridge
Note as set forth on the Schedule of Purchasers, the amount set forth opposite
such Purchaser's name under the appropriate column for such Closing in the
column labeled "Total Investment" on the Schedule of Purchasers; and the Company
will deliver to each Purchaser a certificate or certificates registered in the
Purchaser's name (or in such name or names as otherwise designated by such
Purchaser) representing the number of Shares and a Common Warrant or a Preferred
Warrant, as the case may be, for the number of shares of Common Stock or Series
A Preferred, as the case may be, to be purchased at such Closing, if any, in
each case, as set forth opposite such Purchaser's name under the appropriate
column for such Closing on the Schedule of Purchasers.
SECTION 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as expressly set forth (with reference to a paragraph in this
Section 3) on the Schedule of Exceptions attached hereto as Exhibit F (the
"Schedule of Exceptions"), the Company hereby represents and warrants to the
Purchasers as follows:
3.1 ORGANIZATION AND STANDING; ARTICLES AND BY-LAWS.
(a) The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware and is qualified,
licensed or domesticated as a foreign corporation in each jurisdiction wherein
the nature of its activities or properties owned or leased by it makes such
qualification, licensing or domestication necessary. The Schedule of Exceptions
sets forth the jurisdictions in which the Company is qualified, licensed or
domesticated as a foreign corporation. The Company has all requisite power,
governmental licenses, authorization consents and approvals to own the
properties owned by it and to conduct the business as it is being conducted by
it and as contemplated by the Company's business plan (the "Business Plan"), a
true and correct copy of which has been given to the Purchasers and special
counsel for the Purchasers. The Schedule of Exceptions sets forth all
jurisdictions in which the Company owns or leases property or engages in
material activity.
(b) The Company has furnished special counsel for the Purchasers with
true, correct and complete copies of the Company's Certificate of Incorporation
and By-Laws, and all amendments thereto through and including the First Closing
Date or the Second Closing Date, as applicable, and copies of the minutes of all
Board of Directors, Committees of the Board of Directors and shareholders
meetings of the Company. Prior to the First Closing, the Company shall have
properly filed and recorded the Restated Certificate with the Secretary of the
State of Delaware. The Company is not in breach of any of the provisions of the
Restated Certificate or its By-Laws.
- 4 -
<PAGE> 11
3.2 CORPORATE POWER. The Company has all requisite corporate power to
enter into this Agreement and each of the Financing Documents and will have on
each Closing Date all requisite corporate power to sell the Shares and the
Warrants to be sold on such Closing Date and to carry out and perform its
obligations under the terms of this Agreement and each of the Financing
Documents.
3.3 SUBSIDIARIES. The Company has no Subsidiaries and, except as set
forth in the Schedule of Exceptions, does not own of record or beneficially any
capital stock or equity interest or investment in any corporation, partnership,
association or business entity.
3.4 CAPITALIZATION. The Schedule of Exceptions contains a true and
correct list of all securities of the Company (including the amounts thereof)
outstanding immediately prior to the First Closing, and the holders of any
interest in such securities. Immediately prior to the First Closing, the
Company's authorized capital stock will consist of (a) Five Million shares of
Common Stock, of which One Million One Hundred Twenty-Eight Thousand Six Hundred
Fifty (1,128,650) shares will be issued and outstanding, and (b) Two Million
Twenty-Four Thousand Five Hundred (2,024,500) shares of Series A Preferred, none
of which will be issued and outstanding. Upon consummation of each Closing, all
issued and outstanding shares of capital stock of the Company will have been
duly authorized and validly issued, will be fully paid and nonassessable, will
be owned of record and beneficially by the shareholders and in the amounts set
forth in the Schedule of Exceptions, and will have been offered, issued, sold
and delivered by the Company in compliance with applicable federal and state
securities laws. Except as set forth in the Schedule of Exceptions and the
Shareholders' Agreement, there are no outstanding pre-emptive or other
preferential rights, conversion rights or other rights, options, warrants or
agreements granted or issued by or binding upon the Company for the purchase or
acquisition of any shares of its capital stock. No holder of Common Stock has
granted (to the best of the Company's belief) any option or other right to
purchase from such shareholder any interest in any share of Common Stock. The
Company holds no shares of its capital stock in its treasury.
3.5 AUTHORIZATION. All action on the part of the Company and its
directors and shareholders necessary for the authorization, execution, delivery
and performance by the Company of this Agreement and each of the Financing
Documents and for the consummation of the transactions contemplated herein and
therein, and for the authorization, issuance and delivery of the Shares, the
Warrants, the Conversion Shares and the Warrant Shares has been taken or will be
taken prior to the First Closing. This Agreement and each of the Financing
Documents is, or upon execution will be, a valid and binding obligation of the
Company, enforceable in accordance with their respective terms, subject to
applicable bankruptcy, insolvency, reorganization and moratorium laws and other
laws of general application affecting enforcement of creditors' rights
generally. The execution and delivery by the Company of this Agreement and each
of the Financing Document, and compliance herewith and therewith, and the offer,
issuance and sale of the Shares, the Warrants, the Conversion Shares and the
Warrant Shares will not, with or without notice or the passage of time or both,
result in any violation of and will not conflict with, or result in a breach of
any of the terms of, or
- 5 -
<PAGE> 12
constitute a default under any provision of, (i) any state or federal law to
which the Company is subject, (ii) the Restated Certificate or By-Laws, as
amended, or (iii) any mortgage, indenture, agreement, instrument, judgment,
decree, order, rule or regulation or other restriction to which the Company is a
party or, by which it or any of its property is bound, or may be affected, or
result in the creation of any mortgage, pledge, lien, encumbrance or charge upon
any of the properties or assets of the Company pursuant to any such term or give
any other person or entity the right to accelerate the time for performance of
any obligation of the Company, except, with respect to clause (iii) only, for
any such violations, conflicts, breaches, defaults or other occurrences which
would not have a material adverse effect upon the condition, financial or
otherwise, or the operations of the Company. No shareholder has any pre-emptive
rights or rights of first refusal by reason of or in connection with the
issuance of the Shares, the Warrants, the Conversion Shares or the Warrant
Shares. The Shares, when issued in compliance with the provisions of this
Agreement, will be validly issued, fully paid and nonassessable, and will be
free of any liens or encumbrances. The Conversion Shares and the Warrant Shares
have been duly and validly reserved (and are in addition to any other shares
reserved for any other purpose) and are not subject to any pre-emptive rights or
rights of first refusal and, upon issuance, will be validly issued, fully paid
and nonassessable.
3.6 CONTRACTS; INSURANCE. The Schedule of Exceptions sets forth a true
and correct list of all contracts, obligations, commitments, agreements, plans
and the like, whether written or oral, and all administrative, judicial and
similar orders to which the Company is a party or by which it or any of its
properties is bound, including, without limitation, the following:
(a) Any employment, bonus or consulting agreement, pension,
profit sharing, deferred compensation, stock bonus, retirement, stock
option, stock purchase, phantom stock or similar plan, or agreement
evidencing rights to purchase securities or phantom stock of the
Company or any agreement among shareholders of the Company;
(b) Any loan or other agreement, note, indenture or instrument
relating to, or evidencing, indebtedness for borrowed money, or
mortgaging, pledging or granting or creating a lien or security
interest or other encumbrance on any property of the Company or any
agreement or instrument evidencing any guaranty by the Company of
payment or performance by any other parry;
(c) Any agreement with any dealer, sales representative,
broker or other distributor, jobber, advertiser or sales agency;
(d) Any agreement with any labor union or collective
bargaining organization or any other labor agreement;
(e) Any contract for the furnishing, purchase or lease of
machinery, equipment, goods or services (including, without limitation,
any agreement with processors and subcontractors);
- 6 -
<PAGE> 13
(f) Any indenture, agreement or other document (including
private placement brochures) relating to the future sale or repurchase
of securities, excluding, however, this Agreement and the Financing
Documents;
(g) Any agreement to register under the Securities Act any of
the securities of the Company;
(h) Any joint venture contract or arrangement or other
agreement involving a sharing of profits or expenses;
(i) Any agreement (other than distributorship agreements or
similar agreements providing for the distribution of Company's products
with dealers, distributors and sales representatives of the Company)
limiting the freedom of the Company to compete in any line of business
or in any geographic area or with any party; and
(j) Any agreement providing for disposition of any line of
business, assets or securities of the Company, or any agreement with
respect to the acquisition of any line of business, assets or shares of
any other business, any agreement of merger or consolidation or letter
of intent with respect to the foregoing.
Notwithstanding anything to the contrary herein, the Schedule of
Exceptions may exclude any contract which (i) the Company and/or each Subsidiary
has entered into in the ordinary course of business, and (ii) obligates the
Company and/or each Subsidiary to make payments only, which payments in the
aggregate do not exceed $20,000. A copy of each contract and commitment listed
on the Schedule of Exceptions has been delivered to special counsel for the
Purchasers. The Company has complied with all material provisions of each such
contract and commitment. No event has occurred and no condition exists which
with notice or the passage of time or both would constitute a default by the
Company or, to the Company's knowledge, by any other party thereto, under any
such contract or commitment. To the Company's knowledge, no party to such
contract or commitment has threatened to terminate or has any intention of
terminating its obligations thereunder.
3.7 FINANCIAL INFORMATION. Copies of the unaudited balance sheets of
the Company dated December 31, 1995 and December 31, 1996, respectively (the
unaudited balance sheet dated December 31, 1996 being referred to herein as the
"Balance Sheet") and the related statements of operations and accumulated
deficit and cash flows for the years then ended (collectively, the "Financial
Statements") have been delivered to the Purchasers and special counsel for the
Purchasers, present fairly, in all material respects, the financial position of
the Company as of such dates, have been prepared in accordance with U.S.
generally accepted accounting principles, consistently applied, except for those
changes promulgated and required by accounting authority, and show all material
liabilities, absolute or contingent, of the Company required to be recorded
thereon in accordance with U.S. generally accepted accounting principles as of
the dates thereof. Copies of the unaudited balance sheet of the
- 7 -
<PAGE> 14
Company dated November 30, 1997 and the related statements of operations and
accumulated deficit and cash flows for the eleven months then ended have been
delivered to the Purchasers and special counsel for the Purchasers, are accurate
and complete, and present fairly, in all material respects, the financial
position of the Company as of such date.
3.8 ABSENCE OF UNDISCLOSED LIABILITIES. The Company does not have, and
does not know of, any liabilities (fixed or contingent, including without
limitation any tax liabilities due or to become due), which, either individually
or in the aggregate, are material and not disclosed on the Balance Sheet.
3.9 ABSENCE OF CERTAIN CHANGES. Since the date of the Balance Sheet,
there has not been:
(a) Any change in the condition, assets, liabilities,
prospects or business of the Company from that shown on the Balance
Sheet or as described in the Business Plan which, either individually
or in the aggregate, has been or is reasonably likely to be a material
adverse change;
(b) Any damage to, or destruction or loss of, any of the
properties or assets of the Company (whether or not covered by
insurance) materially adversely affecting the business or plans of the
Company or the Technology;
(c) Any declaration, setting aside or payment or other
distribution in respect of any of the Company's capital stock, or any
direct or indirect redemption, purchase or other acquisition of any of
such stock (or any warrant, option or other right with respect to such
stock) by the Company or any repayment of Company debt held by any
Related Party or by an Affiliate;
(d) Any labor organizational activity, collective bargaining
activity, labor dispute or labor trouble;
(e) Any event or condition of any character, which, either
individually or in the aggregate, materially adversely affects the
business, operations or plans of the Company;
(f) Any action taken or entered into by the Company involving
any transaction other than in the usual and ordinary course of
business, except this Agreement;
(g) Any wage or salary increase made or granted, or entered
into by the Company involving any employment agreement;
- 8 -
<PAGE> 15
(h) Any disclosure to any person of any material trade
secrets, except for disclosures made to persons subject to valid and
enforceable confidentiality agreements; or
(i) Any disposition of assets, except for sales of inventory
in the ordinary course of business.
3.10 TAXES. The Company has filed or will file within the time
prescribed by law (including extensions of time approved by any appropriate
taxing authority) all tax returns and reports required to be filed with the
United States Internal Revenue Service and with the Commonwealth of
Pennsylvania, and (except to the extent that the failure to file would not have
a material adverse effect on the condition or operations of the Company) with
all other jurisdictions where such filing is required by law; and the Company
has paid, or made adequate provision in the Balance Sheet for the payment of,
all taxes, interest, penalties, assessments or deficiencies due in connection
therewith. The Company has never had any tax deficiency proposed or assessed
against it and the Company has executed no waiver of any statute of limitations
on the assessment or collection of any tax or governmental charge. None of the
Company's federal income tax returns nor any state income, sales or franchise
tax returns has ever been audited by governmental authorities. No tax audit,
action, suit, proceeding, investigation or claim is now pending nor, to the best
of the Company's knowledge, threatened against the Company, and no issue or
question has been raised (and is currently pending) by any taxing authority in
connection with any of the Company's tax returns or reports.
The Company has withheld or collected from each payment made to each of
its employees, the amount of all taxes (including, but not limited to, federal
income taxes, Federal Insurance Contribution Act taxes and Federal Unemployment
Tax Act taxes) required to be withheld or collected therefrom, and has paid the
same to the proper tax receiving officers or authorized depositaries.
3.11 TRANSACTIONS WITH AFFILIATES. Except as set forth in the Schedule
of Exceptions, there is no loan, lease or other continuing transaction between
the Company, any Related Party and/or any Affiliate.
3.12 LITIGATION. There is neither pending nor, to the Company's
knowledge and belief, threatened any action, suit, proceeding or claim, whether
or not purportedly on behalf of the Company, to which the Company or any
employee of the Company, in such capacity, is or may be named as a party or to
which the Company's property is or may be subject. To the best of the Company's
knowledge and belief, there is no basis for any such action, suit, proceeding or
claim, in which an unfavorable outcome, ruling or finding in any such matter or
for all such matters, taken as a whole, might have a material adverse effect on
the condition, financial or otherwise, operations or prospects of the Company or
on the Technology. The Company has no knowledge of any unasserted claim, the
assertion of which is likely and which, if asserted, will seek damages, an
injunction or other legal, equitable, monetary or
- 9 -
<PAGE> 16
nonmonetary relief which if granted would have a material adverse effect on the
condition, financial or otherwise, operations or prospects of the Company.
3.13 CONSENTS. Except as set forth in the Schedule of Exceptions, no
consent, approval or authorization of, or designation, declaration or filing
with, any governmental authority on the part of the Company, including
qualification under applicable state securities laws of the offer and sale of
the Shares and the Warrants and of the issuance of the Conversion Shares and the
Warrant Shares, is required in connection with the valid execution and delivery
of this Agreement, the offer, sale or issuance of the Shares and the Warrants,
the conversion of the Shares into Common Stock, the exercise of the Warrants or
the issuance of the Conversion Shares or the Warrant Shares, or the consummation
of any other transaction contemplated on any Closing Date by this Agreement or
any of the Financing Documents, except the filing of the Restated Certificate
with the Secretary of the State of Delaware, which filing has been made and is
effective as of the date hereof. Any such consent, approval, authorization,
declaration or filing set forth in the Schedule of Exceptions has been obtained
or made and is effective as of each Closing Date.
3.14 TITLE TO PROPERTIES; LIENS AND ENCUMBRANCES. The Company has good
and marketable title to all its properties and assets, free from all mortgages,
pledges, liens, security interests, conditional sale agreements, encumbrances or
charges.
3.15 LEASES. Set forth on the Schedule of Exceptions is a correct and
complete list of all leases (including, with respect to each lease, the material
provisions of such lease, including the term, the amount of rent called for and
a description of the leased property) under which the Company is a lessee, other
than personal property requiring rental payments of less than $2,500 per year.
The Company enjoys peaceful and undisturbed possession under all such leases,
all of such leases are valid and subsisting and none of them is in default in
any respect, and no event has occurred and no condition exists which with notice
or the passage of time or both would constitute such a default.
3.16 FRANCHISES, LICENSES, TRADEMARKS, PATENTS AND OTHER RIGHTS.
(a) All (i) franchises, permits, licenses and other similar
authority, (ii) patents, patent applications, patent rights, service
marks, trademarks, trademark applications, trademark rights, trade
names, trade name rights and copyrights (whether registered or not),
and (iii) know-how, technology and trade secrets, which are or may be
usable now or in the future for the conduct of the Company's business
as now conducted or as planned to be conducted are owned by the Company
or the Company has all rights to use such technology set forth in (i),
(ii) or (iii) above. The documents and instruments evidencing such
ownership and rights are listed in the Schedule of Exceptions, and a
copy thereof has been delivered to special counsel for the Purchasers.
- 10 -
<PAGE> 17
(b) The Company has all franchises, permits, licenses and
other similar authority, necessary for the conduct of its business as
now being conducted by it and believes it can obtain any similar
authority necessary for the conduct of its business as planned to be
conducted, and it is not in violation, nor will the transactions
contemplated by this Agreement cause a violation of the terms or
provisions of any such franchise, permit, license or other similar
authority.
(c) The Schedule of Exceptions lists all patents, patent
applications, patent rights, trademarks, trademark applications,
trademark rights, trade names, trade name rights, service marks and
copyrights (whether registered or not) owned or possessed by the
Company (collectively, the "Listed Rights"). The Listed Rights comprise
all the patents, patent applications, patent rights, trademarks,
trademark applications, trademark rights, trade names, trade name
rights, service marks and copyrights (whether registered or not)
necessary to the conduct of the Company's business as now being
conducted, and the Company believes that the Company can obtain any
such rights necessary for the conduct of its business as planned to be
conducted. The Company has and possesses the know-how, technology and
trade secrets not included in the Listed Rights (such know-how,
technology and trade secrets being collectively called the
"Intellectual Property") which they believe to be necessary (i) to
conduct the Company's business as now being conducted and (ii) with
additional know-how, technology and trade secrets which the Company
plans to develop, for the conduct of its business as planned to be
conducted. (The Listed Rights and the Intellectual Property
collectively constitute the "Technology".) There is neither pending,
nor, to the best of the Company's knowledge and belief, threatened, any
claim or litigation against the Company contesting the validity or
right to use any of the Listed Rights or any of the Intellectual
Property, nor is the Company aware of any basis therefor, and the
Company has not received any notice of infringement upon or conflict
with any asserted right of others. To the best of the Company's
knowledge and belief, no person, corporation or other entity is
infringing or violating the Listed Rights or any of the Intellectual
Property. Except as described in the Schedule of Exceptions, the
Company does not have any obligation to compensate others for the use
of any Listed Right or any Intellectual Property, nor has the Company,
granted any license or other right to use, in any manner, any of the
Listed Rights or Intellectual Property, whether or not requiring the
payment of royalties.
3.17 ISSUANCE TAXES. All taxes imposed by any state in connection with
the issuance, sale and delivery of the Shares and the Warrants shall have been
fully paid, and all laws imposing such taxes shall have been fully complied
with, prior to each Closing Date.
3.18 OFFERING. Within the past six (6) months, the Company has not,
either directly or through any agent, offered any of the Shares or the Warrants
or any security or securities similar to the Shares or the Warrants for sale to,
or solicited any offers to buy the Shares or the Warrants or any part thereof or
any such similar security or securities from, or otherwise approached or
negotiated in respect thereof with, any party or parties other than the
Purchasers
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or institutional or other sophisticated investors, each of which was offered all
or a portion of the Shares or the Warrants at private sale for investment. Each
offer described on the Schedule of Exceptions with respect to this Section 3.18
was an offer to an institutional or sophisticated investor relating to a private
sale for investment, and such offers do not, individually or collectively,
affect the exemption of the offer, sale and issuance of the Shares, the
Warrants, the Conversion Shares and the Warrant Shares from the registration
requirements of the Securities Act and all state securities laws.
Subject in part to the truth and accuracy of the Purchasers'
representations set forth in this Agreement, the offer, sale and issuance of the
Shares, the Warrants, the Conversion Shares and the Warrant Shares as
contemplated by this Agreement are exempt from the registration requirements of
the Securities Act, and all applicable state securities laws, and neither the
Company nor anyone acting on its behalf will take any action hereafter that
would cause the loss of such exemption.
3.19 COMPLIANCE WITH OTHER INSTRUMENTS. The Company is not in violation
of any term of the Restated Certificate or By-Laws. Neither the Company nor any
of its property is in violation of any term of any mortgage, indenture,
contract, agreement, instrument, judgment, decree, order, statute, rule or
regulation to which the Company or any of such property is subject, a violation
of which would materially adversely affect the Company's condition, financial or
otherwise, or operations or the Technology.
3.20 EMPLOYEES.
(a) No employee of the Company and no Related Party is, or is
now expected to be, in violation of any term of any employment
contract, patent disclosure agreement, non-competition agreement, or
any other contract or agreement with any prior employer or any other
person, corporation, or other entity or any restrictive covenant in
such an agreement, or any obligation imposed by common law or
otherwise, relating to the right of any such employee or Related Party
to be employed by the Company because of the nature of the business
conducted or to be conducted by the Company or relating to the use of
trade secrets or proprietary information of others because of the
nature of the business conducted or to be conducted by the Company, and
the continued employment of the Company's employees and/or Related
Parties does not subject the Company or Purchaser to any liability for
any such violation.
(b) Each of the Company's present or former employees who has
had access to proprietary information of the Company has executed a
Proprietary Information and Property Agreement substantially in the
form attached as Exhibit G hereto (each a "Proprietary Information
Agreement"). The Schedule of Exceptions sets forth a complete list of
the name and position of each person who has executed a Proprietary
Information Agreement. To the best of the Company's knowledge and
belief, no employee or former employee of the Company is, or to the
best of the Company's knowledge and belief now is expected to be, in
violation of the terms of the Proprietary
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Information Agreement entered into by such employee or former employee,
or of any other obligation relating to the use of confidential or
proprietary information of the Company. Each of such Proprietary
Information Agreements remains in full force and effect.
(c) Section 3.20(c) of the Schedule of Exceptions describes
all employment agreements to which the Company is a party. Each of such
employment agreements remains in full force and effect.
(d) The Schedule of Exceptions sets forth the current
compensation of each officer, director or employee of the Company being
paid (or to whom the Company has agreed to pay) compensation at a rate
of $65,000 per year or more.
(e) To the best knowledge of the Company, no officer or key
employee of the Company has any present intent of terminating such
officer's or key employee's employment with the Company.
(f) The Company is in material compliance with all laws
regarding employment, wages, hours, equal opportunity, collective
bargaining and payment of Social Security and other taxes. The Company
is in material compliance with all applicable foreign, federal, state
and local laws and regulations regarding occupational safety and health
standards and has received no complaints from any foreign, federal,
state or local agency or regulatory body alleging violations of any
such laws and regulations.
(g) Except as set forth on the Schedule of Exceptions hereto,
the employment of all persons and officers employed by the Company is
terminable at will without any penalty or severance obligation of any
kind on the part of the employer. All sums due for employee
compensation and benefits and all vacation time owing to any employees
of the Company have been duly and adequately accrued on the accounting
records of the Company. All employees of the Company are either United
States citizens or resident aliens specifically authorized to engage in
employment in the United States in accordance with all applicable laws.
(h) The Company has not experienced, nor does it know of any
basis for, any strike, labor troubles or strife, work stoppages or slow
downs. The Company has not experienced, nor does it know or have
reasonable grounds to know of, any union or collective bargaining
organization efforts or negotiations, or requests for negotiations, for
any representation or any labor contract relating to any employees of
the Company.
3.21 BUSINESS OF THE COMPANY. The Company has no knowledge and does not
believe that (i) there is pending or threatened any claim or litigation against
or affecting the Company contesting its right to manufacture, sell or use any
product or service presently manufactured, sold or used or planned to be
manufactured, sold or used by the Company, (ii)
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there exists, or there is pending or planned, any statute, rule, law,
regulation, standard or code which would materially adversely affect the
condition, financial or otherwise, or the operations of the Company, or (iii)
there is any other existing fact which in the future could reasonably be
expected to materially adversely affect the Company's condition, financial or
otherwise, or operations. The Company currently intends to engage in the
business of the general type described in the Business Plan (the "Business").
3.22 USE OF PROCEEDS. The Company will use the proceeds of the offering
for expenses incurred in connection with the transactions contemplated hereby,
capital expenditures, working capital, sales expenditures and product research
and development costs, as more fully set forth in the Statement of Sources and
Uses set forth in the Schedule of Exceptions. The Company will not use the
proceeds of the offering for any other purpose. None of the transactions
contemplated in this Agreement (including, without limitation, the use of the
proceeds from the sale of the Shares, the Warrants, the Warrant Shares or the
Conversion Shares) will violate or result in a violation of Section 7 of the
Exchange Act, including, without limitation, Regulations G, T and X of the Board
of Governors of the Federal Reserve System, 12 C.F.R., Chapter 11. The Company
does not own or intend to carry or purchase any "margin security" within the
meaning of said Regulation G, including margin securities originally issued by
it. None of the proceeds from the sale of the Shares, the Warrants, the Warrant
Shares or the Conversion Shares will be used to purchase or carry (or refinance
any borrowing the proceeds of which were used to purchase or carry) any
"security" within the meaning of the Securities Act.
3.23 APPLICABILITY OF, AND COMPLIANCE WITH, OTHER LAWS.
(a) The Company does not have or make contributions to any
pension plans, defined benefit plans or defined contribution plans for
its employees which are subject to the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"). With respect to such plans,
if any, listed on the Schedule of Exceptions, the Company is in
compliance with the applicable provisions of ERISA. The Company has not
incurred any unremedied accumulated funding deficiency within the
meaning of ERISA or any unsatisfied liability to the Pension Benefit
Guaranty Corporation established under ERISA in connection with any
employee pension plan established or maintained by the Company under
the jurisdiction of ERISA. No Reportable Event or Prohibited
Transaction (as defined in Section 4043 of ERISA) has occurred with
respect to any plan administered by the Company.
(b) The Company's employment practices and policies are in
full compliance with (i) all applicable laws of the United States and
each applicable jurisdiction relating to equal employment opportunity,
and any rules, regulations, administrative orders and Executive Orders
relating thereto; and (ii) the applicable terms, relating to equal
opportunity, of any contract, agreement or grant the Company has with,
from or relating (by way of subcontract or otherwise) to any other
contract, agreement or grant of, any federal or state governmental
unit, except, with respect to
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<PAGE> 21
each of clause (i) and (ii), for any failures to be in compliance which
would not have a material adverse effect on the condition, financial or
otherwise, or the operations of the Company. The Company, has not been
the subject of any charge of unfair labor practices, employment
discrimination made against it by the National Labor Relations Board,
the United States Equal Employment Opportunity Commission or any other
governmental unit, nor is it presently subject to any formal or
informal proceedings before, or investigations by, such Commission or
governmental unit. To the Company's knowledge, neither the Company, nor
any employees of the Company, nor any Related Parties are presently
under investigation by any commission or governmental agency for
purposes of security clearance or otherwise.
(c) Neither the Company nor any property owned or occupied by
the Company is in violation of any Federal or State Environmental Law
of any sort or in violation of any Federal or State "OSHA" law, except
for such violations which, either individually or in the aggregate,
would not have a material adverse effect on the condition, financial or
otherwise, or the operations of the Company. The Schedule of Exceptions
contains a list of all environmental permits held by the Company.
Without limiting the generality of the foregoing:
(i) Environmental Permits. The Company has obtained
all environmental, health and safety permits and governmental
authorizations (collectively, the "Environmental Permits")
necessary for the construction of their facilities or the
conduct of their operations, and all such Environmental
Permits are in good standing and the Company is in compliance
with all terms and conditions of the Environmental Permits,
except for such failures to be in compliance which, either
individually or in the aggregate, would not have a material
adverse effect on the condition, financial or otherwise, or
the operations of the Company. No notice to, approval of or
authorization or consent from any governmental or regulatory
authority is necessary for the transfer of or modification to
any Environmental Permit and the consummation of the
transactions contemplated by this Agreement will not violate,
alter, impair or invalidate, in any respect, any Environmental
Permit.
(ii) Environmental Claims. There is no Environmental
Claim pending, threatened or, to the best of the Company's
knowledge, likely to be threatened (i) against the Company,
(ii) against any person or entity whose liability for any
Environmental Claim the Company has or may have retained or
assumed either contractually or by operation of law, or (iii)
against any real or personal property or operations which are
now or have been previously owned, leased, operated or
managed, in whole or in part, by the Company.
(iii) Releases. There have been no Releases of any
Hazardous Materials that would be likely to form the basis of
any Environmental Claim against the Company or against any
person or entity whose liability for any
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<PAGE> 22
Environmental Claim the Company has or may have retained or
assumed either contractually or by operation of law.
(iv) Environmental Assessments. There are no
environmental reports, audits, investigations or assessments
of the Company, or any real or personal property or operations
which are now or have been previously owned, leased, operated
or managed, in whole or in part, by the Company.
(v) Environmental Disclosure. To the best knowledge
of the Company upon diligent review, the Company has disclosed
to the Purchasers all relevant facts with respect to potential
or actual environmental liabilities of the Company.
(d) The Company has not violated any law or any governmental
law, rule, order or regulation or requirement which violation through
the date hereof has had or would reasonably be expected to have a
material adverse effect upon the financial condition, operating
results, assets, operations or business prospects of the Company or the
Technology and the Company has not received notice of any such
violation.
3.24 INDEBTEDNESS. The Schedule of Exceptions contains a true and
complete list, including the names of the parties thereto and summary
description of the terms thereof, of all debt instruments, loan agreements,
indentures or guaranties, whether written or oral, other than obligations which
may be terminated without payment or penalty by the Company upon not more than
thirty (30) days' notice and obligations which are otherwise disclosed in this
Agreement. All of the aforesaid items were entered into in the ordinary course
of business, are valid and binding, in full force and effect and are enforceable
in accordance with their respective terms and there exists no breach or default,
or any event which with notice or lapse of time or both, would constitute a
breach or default by any party thereto, except for such breaches or defaults
which, either individually or in the aggregate, would not have a material
adverse effect on the condition, financial or otherwise, or the operations of
the Company. All of the Company's Indebtedness is disclosed on the Balance
Sheet.
3.25 CONDITION OF PROPERTIES. All facilities, machinery, equipment,
fixtures, vehicles and other properties owned, leased or used by the Company are
in good operating condition and repair, are reasonably fit and usable for the
purposes for which they are being used, are adequate and sufficient for the
Company's business and conform in all material respects with all applicable
ordinances, regulations and laws.
3.26 INSURANCE COVERAGE. The Company has not been refused any insurance
coverage sought or applied for, and the Company has no reason to believe that it
will be unable to obtain one or more policies of insurance issued by insurers of
recognized responsibility, insuring the Company and its properties and business
against such losses and risks, and in such amounts, as are customary in the case
of corporations of established reputation engaged in the same or similar
business and similarly situated. The Schedule of
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<PAGE> 23
Exceptions sets forth each insurance policy (specifying the insurer, the amount
of coverage, the type of insurance, the policy number, the expiration date, the
annual premium, loss payees and any pending claims thereunder) maintained by the
Company relating to its respective properties, assets, business or personnel,
and each inspection report or recommendation, if any, during the last three
years as to the conditions of the properties and assets owned, leased, occupied
or operated by it or the conduct of its business. The Company is not in default
with respect to any provision contained in any insurance policy, and the Company
has not failed to give any notice or present any presently existing claims under
any insurance policy in due and timely fashion, except for such defaults or
failures to give notice as would not result in termination or denial of coverage
under such policy.
3.27 REGISTRATION RIGHTS. Other than under this Agreement or as listed
in the Schedule of Exceptions, the Company has not agreed to register under the
Securities Act any of its authorized or outstanding securities.
3.28 SEC REPORTS. The Company has never filed, has never been required
to file and is not currently required to file any reports, statements, forms or
documents with the Commission.
3.29 ILLEGAL OR UNAUTHORIZED PAYMENTS; POLITICAL CONTRIBUTIONS. Neither
the Company, nor, to the best knowledge and belief of the Company, any of its
respective officers, directors, employees, agents or other representatives of
the Company or any other business entity or enterprise with which the Company is
or has been affiliated or associated, has, directly or indirectly, made or
authorized any payment, contribution or gift of money, property, or services,
whether or not in contravention of applicable law, (a) as a kickback or bribe to
any person or (b) to any political organization, or the holder of or any
aspirant to any elective or appointive public office except for personal
political contributions not involving the direct or indirect use of funds of the
Company.
3.30 QUALIFIED SMALL BUSINESS STOCK. The Company qualifies as a
"Qualified Small Business" within the meaning of Section 1202(d) of Internal
Revenue Code of 1986, as amended (the "Code"). Upon issuance, the Shares will
qualify as "qualified small business stock" within the meaning of Section 1202
of the Code. Without limiting the generality of the foregoing: (i) the Company
is a domestic C corporation, (ii) the Company has not made any purchases of its
own stock described in Code Section 1202(c)(3)(B), and (iii) the Company's (or
any predecessor's) aggregate gross assets, as defined by Code Section
1202(d)(2), at no time between August 10, 1993 and through each Closing have
exceeded or will exceed $50,000,000, taking into account the assets of any
corporation required to be aggregated with the Company in accordance with Code
Section 1202(d)(3).
3.31 EFFECTIVENESS OF MERGER. The merger of BioDx, Inc., a Pennsylvania
corporation and the predecessor-in-interest to the Company ("BioDx"), with and
into the Company (the "Reincorporation Merger") was duly and validly authorized
by all requisite corporate action and has been validly effected in accordance
with applicable law. The
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<PAGE> 24
Company has succeeded to all of BioDx's rights and obligations pursuant to the
provisions of applicable law as a result of the Reincorporation Merger. Without
limiting the generality of the foregoing, the Company has succeeded to all of
BioDx's rights as against third parties under the contracts to which BioDx was a
party at the time of the Reincorporation Merger, and the Reincorporation Merger
has not, and will not, with or without notice or the passage of time or both,
result in any violation of, conflict with, breach any terms of, constitute a
default under, or give any third party any right to terminate or modify, any
such contract.
3.32 DISCLOSURE. This Agreement, the Schedule of Exceptions, the
Balance Sheet, the Financial Statements, the factual statements contained in the
Business Plan, and any other written statement furnished to the Purchasers or
their counsel in connection with the offer and sale of the Shares and the
Warrants (other than the Company's offering memorandum, as to which the Company
makes no representations and warranties and as to which the Company undertakes
no obligation to update or otherwise revise the information contained therein),
taken as a whole, do not contain any untrue statement of a material fact or omit
to state a material fact necessary in order to make the statements contained
therein or herein not misleading in the light of the circumstances under which
they were made. There is no fact which the Company has not disclosed to the
Purchasers in writing that materially adversely affects or, so far as the
Company can now foresee, will materially adversely affect the properties,
business, prospects, profits or condition (financial or otherwise) of the
Company or the ability of the Company to perform this Agreement and the
Financing Documents or the other actions contemplated hereby. The forecasts,
projections, estimates and other forward-looking matters furnished to the
Purchasers (including those set forth in the Business Plan) were prepared on the
basis of the Company's best estimates, which include certain assumptions. The
Company does not have any reason to believe that any assumptions or statements
of opinion contained in such forecasts, projections, estimates or other forward-
looking matters are unreasonable or false.
SECTION 4
REPRESENTATIONS AND WARRANTIES OF PURCHASERS;
CERTAIN AGREEMENTS OF THE BRIDGE INVESTORS
4.1 REPRESENTATION AND WARRANTIES OF THE PURCHASERS. Each of the
Purchasers represents and warrants to the Company, as to itself only, as
follows:
(a) Authorization. It has full power and authority to enter into this
Agreement, the Financing Documents and all other documents and instruments
executed by it in connection with the transactions contemplated hereby and
thereby, and each such agreement, document or instrument constitutes its valid
and legally binding obligation, enforceable against it in accordance with its
terms, subject to applicable bankruptcy, insolvency, reorganization and
moratorium laws and other laws of general application affecting enforcement of
creditors' rights generally.
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<PAGE> 25
(b) Accredited Investor. It is an "accredited investor" within the
meaning of Commission Rule 501 of Regulation D, as presently in effect.
(c) Experience. It is experienced in evaluating and investing in
companies such as the Company.
(d) Investment. It is acquiring the Shares and the Warrants for
investment for its own account and not with the view to, or for resale in
connection with, any distribution thereof. It understands that the Shares, the
Conversion Shares, the Warrants and the Warrant Shares have not been registered
under the Securities Act by reason of an exemption from the registration
provisions of the Securities Act which depends upon, among other things, the
bona fide nature of its investment intent as expressed herein.
(e) Rule 144. It understands that the Shares it is purchasing are
characterized as "restricted securities" under the federal securities laws
inasmuch as they are being acquired from the Company in a transaction not
involving a public offering and that under such laws and applicable regulations
such securities may be resold without registration under the Securities Act only
in certain limited circumstances. It acknowledges that the Shares, the
Conversion Shares, the Warrants and the Warrant Shares must be held indefinitely
unless they are subsequently registered under the Securities Act or an exemption
from such registration is available. It has been advised or is aware of the
provisions of Rule 144 promulgated under the Securities Act, which permits
limited resale of shares purchased in a private placement subject to the
satisfaction of certain conditions (which conditions cannot presently be
satisfied).
(f) Access to Data. It has had an opportunity to discuss the Company's
business, management and financial affairs with the Company's management, and it
has been furnished with copies of documents which it has requested.
(g) No Reliance on Certain Types of Advice. It is not relying on the
Company for advice with respect to tax considerations, the suitability of his,
her or its investment in the Company or legal or economic considerations.
(h) Marketability. It understands that the Company is closely held and
that there is no public market for resale of the Shares. It understands that it
is possible that a market for the Shares will not ever develop. As a
consequence, it understands that it may not be able to liquidate its investment
in the Shares, even in the event of an emergency. It also understands that, for
the foregoing reasons, the Shares may not be readily accepted as collateral for
a loan.
(i) Addresses. The address set forth in Exhibit A attached hereto is
the Purchaser's true and correct residence and/or principal place of business as
of the date hereof.
4.2 CERTAIN AGREEMENTS OF THE BRIDGE INVESTORS. By their execution of
this Agreement, the Bridge Investors acknowledge and confirm that at and upon
the First Closing,
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<PAGE> 26
the principal of and interest accrued on the Bridge Notes through the First
Closing Date will convert into Shares. In addition, the Bridge Investors agree
that effective upon such conversion of the Bridge Notes into Shares (a) the
Bridge Loan Financing Agreements shall terminate and be of no further force and
effect, (b) the Bridge Notes shall be deemed cancelled and shall be of no
further force and effect, (c) the Komasta Bridge Warrant shall be surrendered
for cancellation in exchange for a Preferred Warrant for the number of shares of
Series A Preferred set forth opposite Komasta's name on the Schedule of
Purchasers, (d) the Tycho Bridge Warrant shall be surrendered for cancellation
in exchange for a Preferred Warrant for the number of shares of Series A
Preferred set forth opposite Tycho's name on the Schedule of Purchasers, and (e)
neither the Bridge Investors nor the Company shall have any further rights,
obligations or liabilities under the Bridge Loan Financing Agreements, the
Bridge Notes or the Bridge Warrants. The Bridge Investors hereby waive any
rights to receive notice of, and any rights of first refusal, pre-emptive rights
and other similar rights that they may have under the Bridge Notes, the Bridge
Loan Financing Agreements or the Bridge Warrants with respect to, the issuance
of the Shares and the Warrants to the Purchasers pursuant to this Agreement. The
Company acknowledges and agrees to the provisions of this Section 4.2.
SECTION 5
CONDITIONS TO CLOSING OF PURCHASERS
The obligation of the Purchasers to purchase the Shares and Warrants to
be purchased by them at each Closing is subject to the fulfillment to their
satisfaction on or prior to each Closing Date of each of the following
conditions:
5.1 REPRESENTATIONS AND WARRANTIES CORRECT. The representations and
warranties made by the Company in Section 3 hereof shall be true and correct in
all respects when made, and shall be true and correct in all respects on each
Closing Date (except on the Second Closing Date for changes contemplated by this
Agreement or incurred in the ordinary course of business which do not have a
material adverse effect, individually or in the aggregate, on the Company) and
with respect thereto, after giving effect to the sale and issuance of the Shares
and the Warrants at each Closing. Prior to the Second Closing Date, the Company
shall be permitted to make such revisions to the Schedule of Exceptions to
reflect changes contemplated by this Agreement or incurred in the ordinary
course of business since the date hereof which do not have a material adverse
effects, individually or in the aggregate, on the Company.
5.2 PERFORMANCE. All covenants, agreements and conditions contained in
this Agreement (including those in Section 2.1) to be performed or complied with
by the Company on or prior to each Closing Date shall have been so performed or
complied with in all material respects.
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<PAGE> 27
5.3 COMPLIANCE CERTIFICATE. The Company shall have executed and
delivered to the Purchasers a certificate of the President of the Company, dated
the Closing Date, certifying to the fulfillment of the conditions specified in
Sections 5.1 and 5.2 of this Agreement and such other matters as the Purchasers
may reasonably request.
5.4 OPINION OF COMPANY'S COUNSEL. The Purchasers shall have received an
opinion of counsel from Dickie, McCarney & Chilcote, counsel to the Company,
addressed to them, dated the Closing Date, to the effect and in substantially
the form set forth in Exhibit I.
5.5 GOOD STANDING CERTIFICATES. The Company shall have delivered to the
Purchasers a certificate of recent date from the Secretary of State of the State
of Delaware with respect to the Company's due incorporation, good standing,
legal corporate existence, due authorization to conduct business and the payment
of all franchise taxes, and, certificates from the Secretary of State in each
jurisdiction in which the Company is required to be qualified to do business
with respect to the Company's good standing and due authorization to conduct
business therein and payment of all qualification fees.
5.6 LEGAL INVESTMENT. At the time of the Closing, the purchase of the
Shares and the Warrants to be purchased by the Purchasers hereunder shall be
legally permitted by all laws and regulations to which it and the Company are
subject.
5.7 QUALIFICATIONS. All authorizations, approvals, or permits of any
governmental authority or regulatory body that are required in connection with
the lawful issuance and sale of the Shares and the Warrants pursuant to this
Agreement, the conversion of the Shares and the Preferred Warrant Shares into
Common Stock and the issuance of such Common Stock upon such conversion, the
exercise of the Warrants and the issuance of Warrant Shares upon such exercise
shall have been duly obtained and shall be effective on and as of each Closing
Date, including, if necessary, permits from applicable state securities
authorities, qualifying the offer and sale of the Shares, the Conversion Shares,
the Warrants and the Warrant Shares.
5.8 FILING OF RESTATED CERTIFICATE. The Restated Certificate shall have
been filed with the Secretary of the State of Delaware, duly amending the
Certificate of Incorporation of the Company.
5.9 PROCEEDINGS AND DOCUMENTS. All corporate and other proceedings in
connection with the transactions contemplated hereby and all documents and
instruments incident to such transactions shall be reasonably satisfactory in
substance and form to the Purchasers and special counsel for the Purchasers.
5.10 PROVISIONS OF BY-LAWS. The By-Laws of the Company shall provide
that (a) a majority of the Directors constituting the Board shall constitute a
quorum for the transaction of any business at a meeting of the Board, and (b)
the Board of Directors shall meet at least four (4) times per year.
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<PAGE> 28
5.11 SHAREHOLDERS' AGREEMENT. The Company, the Purchasers, the Common
Shareholders and the other parties named therein shall have executed and
delivered a Shareholders' Agreement (as amended from time to time, the
"Shareholders' Agreement") to the effect and in substantially the form set forth
in Exhibit J hereto.
5.12 MANAGEMENT RIGHTS LETTERS. The Company shall have executed and
delivered to each Purchaser who requests the same a Management Rights Letter
(collectively, the "Management Rights Letters") to the effect and in
substantially the form set forth in Exhibit K hereto .
5.13 BOARD OF DIRECTORS; INDEMNIFICATION. Alan Mendelson, Dr. Arnold
Oronsky, Dr. Lansing Taylor, John Boles and James Sharp shall have been elected
to the Board of Directors, and the Company shall have agreed and obligated
itself, either in the Restated Certificate or in the Company's Bylaws, to
indemnify its officers and directors to the fullest extent permitted by Delaware
law.
5.14 KEY PERSON LIFE INSURANCE. The Company shall have delivered to the
Purchasers evidence of insurance on the life of Lans Taylor in the amount of
$2,000,000; naming the Company as the owner and beneficiary thereof.
5.15 ANNUAL PLAN. The Company and the Purchasers shall have agreed to a
final budget and operating plan for the Company for the twelve (12) month period
following the First Closing.
5.16 MERCK BETA SITE. The Purchasers shall have received confirmation
from Merck & Co., Inc. that the Company is a current beta site for Arrayscan
testing and that the Arrayscan system installed at the Company is functional.
5.17 CONVERSION OF BRIDGE NOTES. The Bridge Notes shall have been
surrendered to the Company for conversion into Shares at the First Closing, the
Komasta Bridge Warrant and the Tycho Bridge Warrant shall have been surrendered
to the Company for cancellation upon the First Closing, and the Company shall
have issued to Tycho, simultaneous with the First Closing, the New Tycho
Warrant, in form satisfactory to the Purchasers and their counsel, all as
further described in Section 4.2.
5.18 COMPENSATION OF GERARD KLAUER MATTISON & CO., LLC AND BARRY BLOOM.
At or prior to the First Closing, the Company shall have (a) paid to Gerard
Klauer Mattison & Co., LLC ("GKM") up to $250,000 for services rendered in
connection with the transactions contemplated by this Agreement (b) issued to
such entity warrants to purchase up to 83,968 shares of Common Stock at an
exercise price of $5.62 per share and having a term of five (5) years, and (c)
issued to Barry Bloom ("Mr. Bloom") warrants to purchase up to 5,000 shares of
Common Stock at an exercise price of $5.62 per share and having a term of five
(5) years.
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SECTION 6
CONDITIONS TO CLOSING OF COMPANY
The Company's obligation to sell the Shares and the Warrants to be
purchased at each Closing is subject to the fulfillment to its satisfaction on
or prior to each Closing Date of each of the following conditions:
6.1 REPRESENTATIONS. The representations made by the Purchasers
pursuant to Section 4.1 hereof shall be true and correct when made and shall be
true and correct on each Closing Date.
6.2 LEGAL INVESTMENT. At the time of each Closing, the conditions set
forth in Sections 5.6 and 5.7 shall have occurred and the purchase of the Shares
and Warrants to be purchased by the Purchasers hereunder shall be legally
permitted by all laws and regulations to which the Purchasers and the Company
are subject.
6.3 RESTATED CERTIFICATE. The Restated Certificate shall have been
accepted for filing by the Secretary of State of the State of Delaware.
6.4 SHAREHOLDERS' AGREEMENT. The Company, the Purchasers, the Common
Shareholders and the other parties named therein shall have executed and
delivered the Shareholders' Agreement.
SECTION 7
COVENANTS OF THE COMPANY
The Company hereby covenants and agrees, so long as any Shares, any
Conversion Shares, any Warrants or any Warrant Shares remain outstanding, or as
otherwise provided in this Article 7:
7.1 BASIC FINANCIAL INFORMATION. The Company will furnish the following
reports to the Purchasers:
(a) As soon as practicable after the end of each fiscal year
of the Company, and in any event within ninety (90) days thereafter, a
consolidated (and consolidating) balance sheet of the Company and its
Subsidiaries, if any, as at the end of such fiscal year, and
consolidated (and consolidating) statements of operations, accumulated
earnings and cash flows of the Company and its Subsidiaries, if any,
for such year, prepared in accordance with generally accepted
accounting principles consistently applied and setting forth in each
case in comparative form the figures for the previous fiscal year, all
in reasonable detail audited (without scope limitations imposed by the
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Company) and certified by independent public accountants of recognized
national standing selected by the Company and satisfactory to the
Purchasers.
(b) As soon as practicable, after the end of the first, second
and third quarterly accounting periods in each fiscal year of the
Company, and in any event within forty-five (45) days thereafter, a
consolidated (and consolidating) balance sheet of the Company and its
Subsidiaries, if any, as of the end of each such quarterly period, and
consolidated (and consolidating) statements of operations, accumulated
earnings and cash flows of the Company and its Subsidiaries, if any,
for such period and for the current fiscal year to date, prepared in
accordance with generally accepted accounting principles consistently
applied and setting forth in comparative form the figures for the
corresponding periods of the previous fiscal year, subject to changes
resulting from year-end audit adjustments, and setting forth any events
which could reasonably be expected to have an adverse effect upon the
Company's or any Subsidiary's finances or the results of its
operations, all in reasonable detail and certified by the principal
financial or accounting officer of the Company.
(c) From the date the Company becomes subject to the reporting
requirements of the Exchange Act, and in lieu of the financial
information required pursuant to Sections 7.1(a) and (b), but within
the time periods required for the furnishing thereof, copies of its
reports filed on Form 10-K, Form 10-Q, Form 8-K or any successor form
or forms.
(d) Each set of financial statements delivered to the
Purchasers pursuant to this Section 7.1 will be accompanied by a
certificate of the Chairman, President or a Vice President and the
Treasurer or an Assistant Treasurer of the Company setting forth:
(i) Covenant Compliance - any information required in
order to establish whether the Company and its Subsidiaries
were in compliance with the requirements of this Section 7
during the period covered by the income statement then being
furnished; and
(ii) Event of Default - that the signers have
reviewed the relevant terms of this Agreement and have made,
or caused to be made, under their supervision, a review of the
transactions and conditions of the Company and its
Subsidiaries, if any, from the beginning of the accounting
period covered by the income statements being delivered
therewith to the date of the certificate and that such review
has not disclosed the existence during such period of any
condition or event which constitutes a breach or default under
this Agreement, the Restated Certificate or any of the
Financing Documents or, if any such condition or event existed
or exists, specifying the nature and period of existence
thereof and what action the Company has taken or proposes to
take with respect thereto.
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(e) As soon as available (but in any event sixty (60) days or
more before the commencement of each fiscal year) the Company's budget
and its operating plan for such fiscal year (the "Annual Plan") as
approved by the Board indicating, among other things, quarterly income
statements, balance sheets and cash flow statements for the next fiscal
year, plans for incurring indebtedness and projections regarding other
sources of funds; any material changes in such financial plan shall be
submitted as promptly as practicable after such changes have been
approved by the Board.
7.2 ADDITIONAL INFORMATION AND RIGHTS.
The Company will, for any Purchaser who (together with members of such
Purchaser's Group) agrees pursuant to this Agreement to purchase in the
aggregate, at the First Closing and the Second Closing (and whether or not the
Second Closing is actually consummated), 177,936 or more Shares (such amount to
be adjusted for stock splits, combinations and other similar events affecting
the Series A Preferred):
(a) Permit such Purchaser (or its designated representative),
at its own expense, to visit and inspect any of the properties of the
Company, including its books of account, and to discuss its affairs,
finances and accounts with the Company's officers and its independent
public accountants, all at such reasonable times and as often as any
such party may reasonably request. Any such Purchaser shall give not
less than two (2) business days' notice of any such visitation or
inspection and such visitation or inspection shall be performed in a
reasonable manner and with due regard to the proprietary and
confidential nature of any information received by it.
(b) Deliver the reports and data described below to such
Purchaser:
(i) As soon as practicable after the end of each fiscal
month and in any event within thirty (30) days
thereafter, a consolidated balance sheet of the
Company and its Subsidiaries, if any, as at the end
of such month, and consolidated statements of
operations, accumulated earnings and cash flows of
the Company and its Subsidiaries, if any, for each
month, prepared in accordance with generally accepted
accounting principles consistently applied, together
with comparison of such statements to the Annual Plan
then in effect and to the financial statements for
the comparable period in the prior fiscal year, and
certified, subject to changes resulting from year-end
audit adjustments, by the principal financial or
accounting officer of the Company;
(ii) As soon as available, information and data on any
material adverse changes in or any event or condition
which materially
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adversely affects or could materially adversely
affect the business, operations, properties or plans
of the Company;
(iii) Immediately upon becoming aware of any condition or
event which constitutes a breach or violation of this
Agreement, the Restated Certificate, the Financing
Documents or any agreement contemplated hereby or
thereby, written notice specifying the nature and
period of existence thereof and what action the
Company is taking or proposes to take with respect
thereto; and
(iv) With reasonable promptness, such other information
and data with respect to the Company as any such
party may from time to time reasonably request.
(c) Hold meetings of its Directors at least quarterly and, if
such Purchaser does not have a representative on the Board of
Directors, permit such Purchaser to send a representative (without
voting rights) to each meeting of the Board of Directors of the Company
and all committees of such Board; provided, however, that the
Purchasers shall receive notice no less favorable than notice given to
outside directors and the presence of any of the Purchasers'
representatives shall not be necessary to conduct any meeting of the
Board. The Company shall give such Purchaser notice of each such
meeting in the form and manner such notice is given to the Company's
directors.
(d) The Company's obligations under this Section 7.2 shall
terminate at such time as a Qualified Public Offering has closed and
any agreement of the type described in Section 9.15 hereof is no longer
in effect with respect to any Purchaser or when the Company first
becomes subject to the periodic reporting requirements of the Exchange
Act, whichever event shall first occur.
7.3 PROMPT PAYMENT OF TAXES, ETC. The Company will promptly pay and
discharge, or cause to be paid and discharged, when due and payable, all lawful
taxes, assessments and governmental charges or levies imposed upon the income,
profits, property or business of the Company, provided, however, that any such
tax, assessment, charge or levy need not be paid if the validity thereof shall
at the time be contested in good faith by appropriate proceedings, and provided,
further, that unless otherwise approved by the Board, the Company will pay all
such taxes, assessments, charges or levies forthwith upon the commencement of
proceedings to foreclose any lien which may have attached as security therefor.
Unless otherwise approved by the Board, the Company will promptly pay or cause
to be paid when due, or in conformance with customary trade terms, all other
obligations incident to its operations.
7.4 MAINTENANCE OF PROPERTIES AND LEASES. The Company will keep its
properties in good repair, working order and condition, reasonable wear and tear
excepted, and from time to time make all needful and proper, or legally
required, repairs, renewals, replacements,
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additions and improvements thereto; and the Company will at all times comply
with each provision of all leases to which it is a party or under which it
occupies, or has possession of, property if the breach of such provision might
have a material adverse effect on the condition, financial or otherwise, or
operations of the Company.
7.5 INSURANCE. The Company will keep its assets which are of an
insurable character insured by financially sound and reputable insurers against
loss or damage by fire, extended coverage and explosion in amounts sufficient to
prevent the Company from becoming a co-insurer and not in any event less than
80% of the insurable value of the property insured. The Company will maintain
for itself, with financially sound and reputable insurers, insurance against
other hazards and risks and liability to persons and property to the extent and
in the manner customary for companies in similar businesses similarly situated.
Promptly after the First Closing Date, the Company will use its best efforts to
obtain directors' and officers' liability insurance in the amount of at least
$1,000,000, if such coverage is available at commercially reasonable rates, and
thereafter the Company shall use its best efforts to maintain such insurance in
full force and effect at all times. If any such policy of insurance shall be an
occurrence policy, it shall include "tail coverage" respecting any prior "claims
made" policies. The Company shall give immediate written notice to insurers of
loss or damage to the property and shall promptly file proof of loss with
insurers.
7.6 ACCOUNTS AND RECORDS. The Company will keep true records and books
of account in which full, true and correct entries will be made of all dealings
or transactions in relation to its business and affairs in accordance with
generally accepted accounting principles applied on a consistent basis.
7.7 COMPLIANCE WITH REQUIREMENTS OF GOVERNMENTAL AUTHORITIES. The
Company shall duly observe and conform to all valid requirements of governmental
authorities relating to the conduct of its businesses or to its property or
assets. Without limiting the generality of the foregoing, the Company will:
(a) Comply with all minimum funding requirements applicable to
any pension plans, employee benefit plans or employee contribution
plans which are subject to ERISA or to the Code, and comply in all
other respects with the provisions of ERISA and the provisions of the
Code applicable to such plans; and
(b) Comply with all applicable material laws of the United
States and of each applicable jurisdiction relating to equal employment
opportunity, any rules, regulations, administrative orders and
Executive Orders relating thereto and the applicable material terms,
relating to equal employment opportunity, of any contract, agreement or
grant the Company has with, from or relating (by way of subcontract or
otherwise) to any other contract, agreement or grant of, any federal or
state governmental unit; and keep all records required to be kept, and
file all reports, affirmative action plans and forms required to be
filed, pursuant to any such applicable law or the terms of any such
government contract.
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<PAGE> 34
(c) So conduct its business that neither the Company nor any
property owned or occupied by the Company is in violation of any
Federal or State Environmental Law of any sort or in violation of any
Federal or State "OSHA" Law.
7.8 MAINTENANCE OF CORPORATE EXISTENCE, ETC. The Company shall maintain
in full force and effect its corporate existence, rights, government approvals
and franchises and all licenses and other rights to use patents, processes,
licenses, trademarks, trade names or copyrights owned or possessed by it and
deemed by the Company to be necessary to the conduct of its business.
7.9 AVAILABILITY OF COMMON STOCK FOR CONVERSION OF SERIES A PREFERRED
AND EXERCISE OF WARRANTS. The Company will, from time to time, in accordance
with the laws of the state of its incorporation, increase the authorized amount
of Common Stock if at any time the number of shares of Common Stock remaining
unissued and available for issuance shall be insufficient to permit the payment
of dividends on the Series A Preferred for a period of five (5) years in the
form of Common Stock, the conversion to Common Stock of all the then outstanding
Shares and the exercise of all other outstanding Warrants.
7.10 PROPRIETARY INFORMATION AGREEMENT AND KEY EMPLOYEE AGREEMENT.
(a) The Company and each person hereafter employed by it with
access to confidential information will enter into a Proprietary
Information Agreement to the effect and in substantially the form of
Exhibit G hereto or as otherwise approved by the Board.
(b) The Company will require all persons now or hereafter
employed by the Company and designated as a "key person" by the
Company's Board of Directors to execute an Employment Agreement in
favor of the Company to the effect and in substantially the form of
Exhibit H hereto or as otherwise approved by the Board, as a condition
precedent to the employment of such individuals.
(c) The Company will cause all technological developments,
inventions, discoveries or improvements made by employees of the
Company to be fully documented in engineering notebooks in accordance
with the prevailing industrial professional standards, and where
possible and appropriate, cause all employees to file and prosecute
United States and foreign patent applications relating to and
protecting such developments.
7.11 OFFICER AND DIRECTOR INDEMNITY. So long as the holders of the
Series A Preferred retain the right to elect one or more directors to the Board,
the Company will maintain and preserve in full force and effect the
indemnification provisions described in Section 5.13.
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<PAGE> 35
7.12 QUALIFIED SMALL BUSINESS STOCK. So long as any Shares, Warrants,
Conversion Shares or Warrant Shares are held by any Purchaser or any transferee
who is not a corporation, the Company will use its best efforts to cause the
Shares, and, upon issuance, the Conversion Shares and the Warrant Shares to
qualify as qualified small business stock within the meaning of Section 1202 of
the Code, provided that this Section 7.12 shall not require the Company to
limit its gross assets (within the meanings of Code Section 1202(d)(3)) to an
amount that does not exceed $50,000,000.
7.13 CHIEF EXECUTIVE OFFICER. The Company will diligently and in good
faith after the First Closing conduct an executive search for and recruit a
Chief Executive Officer, the hiring of such person to be subject to approval of
the Board.
7.14 USE OF PROCEEDS. The Company will use the proceeds from the sale
of the Shares, the Warrants, the Conversion Shares and the Warrant Shares for
the purposes described in Section 3.22 hereof.
7.15 EXPENSES OF BOARD MEMBERS. The Company agrees to reimburse each of
the directors elected to the Company's Board of Directors for their reasonable
out-of-pocket travel and lodging expenses in connection with attending Board of
Directors' meetings and performing their respective obligations and
responsibilities as directors of the Company.
7.16 SECURITIES LAW FILINGS. The Company will make any filings
necessary to perfect in a timely fashion exemptions from (i) the registration
and prospectus delivery requirements of the Securities Act and (ii) the
registration or qualification requirements of all applicable securities or blue
sky laws of any state or other jurisdiction, for the issuance of the Shares, the
Warrants, the Conversion Shares and the Warrant Shares to the Purchasers.
7.17 AUDITED FINANCIAL STATEMENTS. Not later than ten (10) days after
the First Closing Date, the Company will deliver to the Purchasers audited
balance sheets of the Company dated December 31, 1995 and December 31, 1996,
respectively, and the related statements of operations and accumulated deficit
and cash flows for the years then ended, together with the unqualified report
thereon of Coopers & Lybrand. Such financial statements shall (i) present
fairly, in all material respects, the financial position of the Company as of
such dates, (ii) have been prepared in accordance with U.S. generally accepted
accounting principles, consistently-applied, except for those changes
promulgated by accounting authority, and (iii) show all material liabilities,
absolute or contingent, of the Company required to be recorded thereon in
accordance with U.S. generally accepted accounting principles as of the dates
thereof.
7.18 COMPLIANCE BY SUBSIDIARIES. The Company will cause any Subsidiary
which it may now have and/or which it may organize or acquire in the future and
which the Company controls to comply fully with all the terms and provisions of
Sections 7.3, 7.4, 7.5, 7.6, 7.7, 7.8 and 7.10 to the same extent as if such
Subsidiary or Subsidiaries were the "Company" herein.
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7.19 STOCK OPTION PLAN. Promptly after the First Closing Date, the
Company will use its best efforts to cause the Board and the Company's
stockholders to adopt a stock option plan that is acceptable to the Board, a
majority of the holders of the Series A Preferred and a majority of the holders
of Common Stock and that provides for the granting of options to purchase up to
150,000 shares of Common Stock.
SECTION 8
NEGATIVE COVENANTS
The Company agrees that, so long as any Shares remain outstanding, the
Company (and each of its Subsidiaries, if any, unless the context otherwise
requires) will not do any of the following after the First Closing Date without
the approval of a majority of the Board, which approval must include the
approval of each director elected to the Board by the holders of Series A
Preferred:
8.1 CHANGES IN TYPE OF BUSINESS. Make any substantial change in the
character of its business.
8.2 CONFLICTING AGREEMENTS. Become subject to, or permit any of its
Subsidiaries which it controls to become subject to, any agreement or
instrument, which by its terms would (under any circumstances) restrict the
Company's right to perform any of its obligations pursuant to the terms of this
Agreement or any agreement contemplated hereby, the Restated Certificate, the
Financing Documents, or the Company's By-laws (including, without limitation,
all obligations relating to payment of dividends on and making redemptions of
the Series A Preferred and conversions of the Series A Preferred).
8.3 EMPLOYEE STOCK PLANS. Hereafter issue, sell, grant or award any
Equity Security or any option to acquire any Equity Security to directors,
officers, employees, consultants or advisors to the Company, except for Equity
Securities which are "Reserved Employee Shares" within the meaning of Section
3(d)(i)(4)(C) of Article III, Part B of the Restated Certificate.
8.4 INDEBTEDNESS. Create, incur, issue, assume, guarantee or otherwise
become or remain directly or indirectly liable for, or permit any Subsidiary to
create, incur, issue, assume, guarantee or otherwise become or remain directly
or indirectly liable for, any Indebtedness for borrowed money in excess of
$200,000 in any one fiscal year.
8.5 CAPITAL EXPENDITURE. Make capital expenditures in excess of
$400,000 in any one fiscal year.
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8.6 RELATED PARTY TRANSACTIONS. Enter into, or permit any Subsidiary
which it controls to enter into, any transaction with any Related Party or any
of its or any Subsidiary's Affiliates, except as otherwise expressly
contemplated by this Agreement or referred to in Section 3.11 hereto.
SECTION 9
RESTRICTIONS ON TRANSFERABILITY OF SECURITIES;
COMPLIANCE WITH SECURITIES ACT; REGISTRATION RIGHTS
9.1 RESTRICTIONS ON TRANSFERABILITY. Neither the Shares, the Warrants,
the Conversion Shares nor the Warrant Shares shall be transferable, except upon
the conditions specified in this Section 9, which conditions are intended to
insure compliance with the provisions of the Securities Act or, in the case of
Section 9.15 hereof, to assist in an orderly distribution of the Company's
securities. Each Purchaser will cause any proposed transferee of Shares,
Warrants, Conversion Shares or Warrant Shares held by such Purchaser to agree to
take and hold those securities subject to the provisions and upon the conditions
specified in this Section 9.
9.2 CERTAIN DEFINITIONS. As used in this Section 9, the following terms
shall have the following respective meanings:
"RESTRICTED SECURITIES" shall mean the securities of the Company
required to bear or bearing the legend set forth in Section 9.3 hereof.
"REGISTRABLE SECURITIES" shall mean, from time to time, (i) the
Conversion Shares and the Common Warrant Shares, less any Conversion Shares and
Common Warrant Shares theretofore sold to the public, and (ii) any shares of
Common Stock issued as dividends on the Shares.
The terms "REGISTER," "REGISTERED" and "REGISTRATION" shall refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act and applicable rules and regulations
thereunder, and the effectiveness of such registration statement.
"REGISTRATION EXPENSES" shall mean all expenses incurred by the Company
in compliance with Sections 9.5, 9.6 and 9.7 hereof, including, without
limitation, all registration and filing fees, printing expenses, fees and
disbursements of counsel for the Company, fees and expenses (not to exceed
$20,000) of one special counsel for all Holders chosen by the Holders of a
majority of the securities included in such registration, blue sky fees and
expenses, and the expense of any special audits incident to or required by any
such registration (but excluding the compensation of regular employees of the
Company, which shall be paid in any event by the Company).
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"SELLING EXPENSES" shall mean all underwriting discounts and selling
commissions applicable to the sale of Registrable Securities, and all fees and
disbursements of counsel for any Holder (other than the fees and expenses of one
special counsel for all Holders included within the definition of Registration
Expenses).
"HOLDER" shall mean any holder of outstanding Shares, Warrants, Warrant
Shares, Conversion Shares or Registrable Securities which have not been sold to
the public.
"INITIATING HOLDERS" shall mean any Purchaser (or their assignees under
Section 9.14 hereof) who in the aggregate are Holders of more than fifty percent
(50%) of the Registrable Securities, and, after any other Holder or Holders have
joined in a request by Initiating Holders, shall include such other Holder or
Holders.
"TERMINATION DATE" shall mean, as to all Holders, the date that is five
(5) years after the closing of an Initial Public Offering, provided that as of
such date the Company is subject to and is in compliance with the periodic
reporting requirements of the Exchange Act and shares of the Common Stock are
actively traded on the Nasdaq National Market or other national securities
exchange. In addition, "Termination Date" as to a particular Holder shall mean
such date as of which (i) the Company is subject to and in compliance with the
periodic reporting requirements of the Exchange Act, (ii) shares of the Common
Stock are traded as described above, and (iii) such Holder is able, within the
ninety (90) day period immediately following such date, to transfer all of such
Holder's Registrable Securities in compliance with Rule 144 promulgated by the
Commission under the Securities Act.
"OTHER SHAREHOLDERS" shall have the meaning set forth in
Section 9.5(b).
9.3 RESTRICTIVE LEGEND. Each certificate representing (i) the Shares,
or (ii) the Warrants, or (iii) the Warrant Shares, or (iv) the Conversion
Shares, or (v) any other securities issued in respect of the Shares, the
Warrants, the Conversion Shares or the Warrant Shares, upon any stock split,
stock dividend, recapitalization, merger, consolidation or similar event, shall
(unless otherwise permitted or unless the securities evidenced by such
certificate shall have been registered under the Securities Act) be stamped or
otherwise imprinted with a legend substantially in the following form (in
addition to any legend required under applicable state securities laws):
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS. THEY MAY NOT BE SOLD OR OFFERED FOR
SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT AS TO THE SECURITIES UNDER SAID ACT AND ANY
APPLICABLE STATE SECURITIES LAW OR THE AVAILABILITY
OF AN EXEMPTION FROM REGISTRATION UNDER SAID ACT AND
ANY APPLICABLE STATE SECURITIES LAWS.
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Upon request of a holder of such a certificate, the Company shall
remove the foregoing legend from the certificate or issue to such holder a new
certificate therefor free of any transfer legend, if with such request, the
Company shall have received either the opinion referred to in Section 9.4(a)(i)
or the "no-action" letter referred to in Section 9.4(a)(ii), to the effect that
any transfer by such holder of the securities evidenced by such certificate will
not violate the Securities Act and applicable state securities laws.
9.4 NOTICE OF PROPOSED TRANSFERS AND SECURITIES ACT COMPLIANCE.
(a) The holder of Restricted Securities by acceptance thereof
agrees to comply in all respects with the provisions of this Section
9.4. Prior to any proposed transfer of any Restricted Securities (other
than under circumstances described in Sections 9.5, 9.6 and 9.7 hereof
and other than to a member of such holder's Group, as defined below),
the holder thereof shall give written notice (or oral notice in the
case of transactions in compliance with Rule 144) to the Company of
such holder's intention to effect such transfer. Each such notice shall
describe the manner and circumstances of the proposed transfer in
sufficient detail, and shall be accompanied (except in transactions in
compliance with Rule 144) by either (i) a written opinion of Shipman &
Goodwin LLP or other legal counsel (including counsel for the holder
who also may be an employee of the holder) who shall be reasonably
satisfactory to the Company, addressed to the Company and reasonably
satisfactory in form and substance to the Company's counsel, to the
effect that the proposed transfer of the Restricted Securities may be
effected without registration under the Securities Act and applicable
state securities laws, or (ii) a "no-action" letter from the Commission
to the effect that the distribution of such securities without
registration will not result in a recommendation by the staff of the
Commission that action be taken with respect thereto, provided, that in
the case of a transfer of Restricted Securities to a member of a
holder's Group (as such term is defined in the Shareholders'
Agreement), no such opinion of counsel or no-action letter shall be
necessary, provided that the transferee agrees in writing to be subject
to the restrictions on transfer of the Restricted Securities to the
same extent as if such transferee were originally a party signatory to
this Agreement. Upon receipt by the Company of such notices and
accompanying opinion or "no-action" letter, if required, the holder of
such Restricted Securities shall be entitled to transfer such
Restricted Securities in accordance with the terms of the notice
delivered by the holder to the Company. Each certificate evidencing the
Restricted Securities transferred as above provided shall bear the
appropriate restrictive legend set forth in Section 9.3 above, except
that such certificate need not bear such restrictive legend if such
legend is no longer required if the opinion of counsel or "no-action"
letter referred to above is to the further effect that such legend is
not required in order to establish compliance with any provisions of
the Securities Act or applicable state securities laws or if the
transaction is made, to the Company's reasonable satisfaction, in
compliance with Rule 144.
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(b) With a view to making available the benefits of certain
rules and regulations of the Commission and applicable state securities
laws which may permit the sale of the Restricted Securities without
registration, the Company agrees to (i) make available to the holder of
Restricted Securities and any proposed transferee current financial and
other information about the Company and an adequate opportunity for the
proposed transferee to visit the Company's offices and discuss its
affairs with management and (ii) use its best efforts to otherwise
cooperate with such holder and such transferee, all as may be
reasonably required by such holder or proposed transferee.
9.5 REQUESTED REGISTRATION.
(A) REQUEST FOR REGISTRATION. If at any time after January 1,
2001, the Company shall receive from Initiating Holders a written
request that the Company effect a registration with respect to all or a
part of the Registrable Securities, the Company will, without limiting
any other rights under this Section 9:
(i) promptly give written notice of the proposed
registration to all other Holders; and
(ii) as soon as practicable, use its diligent best efforts
to effect such registration (including, without
limitation, the execution of an undertaking to file
post-effective amendments, appropriate qualification
under applicable blue sky or other state securities
laws and appropriate compliance with applicable
regulations issued under the Securities Act) as may
be so requested and as would permit or facilitate the
sale and distribution of all or such portion of such
Registrable Securities as are specified in such
request, together with all or such portion of the
Registrable Securities of any Holder or Holders
joining in such request as are specified in a written
request given by such Holder or Holders within
fifteen (15) days after receipt of such written
notice from the Company; provided that the Company
shall not be obligated to effect, or to take any
action to effect, any such registration pursuant to
this Section 9.5:
(A) after the Company has effected one (1) such
registration pursuant to this Section 9.5(a)
and such registration has been declared or
ordered effective and the sales of such
Registrable Securities shall have closed; or
(B) if the request for registration does not
request the registration of Registrable
Securities with a proposed public offering
price of $10,000,000 or more.
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Subject to Section 9.5(a)(ii), the Company shall file a
registration statement covering the Registrable Securities so requested
to be registered as soon as practicable after receipt of the request or
requests of the Initiating Holders.
The registration statement filed pursuant to the request of
the Initiating Holders may, subject to the provisions of Section 9.5(b)
below, include other securities of the Company which are held by
officers or directors of the Company or which are held by parties who,
by virtue of agreements with the Company, are entitled to include their
securities in any such registration.
(B) UNDERWRITING. If the Initiating Holders intend to
distribute the Registrable Securities covered by their request by means
of an underwriting, they shall so advise the Company as a part of their
request made pursuant to this Section 9.5 and the Company shall include
such information in the written notice referred to in subsection
9.5(a)(i) above. The right of any Holder to registration pursuant to
this Section 9.5 shall be conditioned upon such Holder's participation
in such underwriting and the inclusion of such Holder's Registrable
Securities in the underwriting (unless otherwise mutually agreed by a
majority in interest of the Initiating Holders and such Holder) to the
extent provided herein.
If officers or directors of the Company holding other
securities of the Company shall request inclusion in any registration
pursuant to this Section 9.5, or if holders of securities of the
Company who are entitled, by contract with the Company, to have
securities included in such registration (the "Other Shareholders")
request such inclusion, the Initiating Holders shall, on behalf of all
Holders, offer to include the securities of such officers, directors
and Other Shareholders in the underwriting and may condition such offer
on their acceptance of all applicable provisions of this Section 9. The
Company shall (together with all Holders, officers, directors and Other
Shareholders proposing to distribute their securities through such
underwriting) enter into an underwriting agreement in customary form
with the representative of the underwriter or underwriters selected for
such underwriting by a majority in interest of the Initiating Holders
and reasonably acceptable to the Company.
Notwithstanding any other provision of this Section 9.5, if
the representative of the underwriter or underwriters advises the
Initiating Holders in writing that marketing factors make it advisable
to impose a limitation on the number of shares to be underwritten, the
securities of the Company (other than Registrable Securities) held by
officers or directors of the Company and by Other Shareholders shall be
excluded from such registration to the extent so required by such
limitation and if a limitation of the number of shares is still
required, the Initiating Holders shall so advise all Holders of
Registrable Securities whose securities would otherwise be underwritten
pursuant hereto, and the number of shares of Registrable Securities
that may be included in the registration and underwriting shall be
allocated among all such Holders in proportion, as nearly as
practicable, to the respective amounts of Registrable Securities or any
other
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<PAGE> 42
securities excluded from the underwriting by reason of the
underwriter's marketing limitation shall be included in such
registration.
If any Holder of Registrable Securities, officer, director or
Other Shareholder above disapproves of the terms of the underwriting,
such party may elect to withdraw therefrom by written notice to the
Company, the underwriter and the Initiating Holders. The securities so
withdrawn shall also be withdrawn from registration.
If the underwriter has not limited the number of Registrable
Securities or other securities to be underwritten, the Company may
include its securities for its own account in such registration if the
underwriter so agrees and if the number of Registrable Securities and
other securities which would otherwise have been included in such
registration and underwriting will not thereby be limited.
(C) TERMINATION. The Company's obligations under this Section
9.5 shall terminate, as to any Holder, on the first Termination Date
applicable to such Holder.
9.6 COMPANY REGISTRATION.
(A) NOTICE OF REGISTRATION. If the Company shall determine to
register any of its securities either for its own account or the
account of a security holder or holders exercising their respective
demand registration rights, other than a registration relating solely
to employee benefit plans, or a registration relating solely to a
Commission Rule 145 transaction, or a registration on any registration
form which does not permit secondary sales, the Company will:
(i) promptly give to each Holder written notice thereof (which
shall include a list of the jurisdictions in which the Company
intends to attempt to qualify such securities under the
applicable blue sky or other state securities laws); and
(ii) include in such registration (and any related qualification
under blue sky laws or other compliance), and in any
underwriting involved therein, all the Registrable Securities
specified in a written request or requests, made by any Holder
within fifteen (15) days after receipt of the written notice
from the Company described in clause (i) above, except as set
forth in subsection 9.6(b) below:
(B) UNDERWRITING. If the registration of which the Company
gives notice is for a registered public offering involving an
underwriting, the Company shall so advise the Holders as part of the
written notice given pursuant to subsection 9.6(a)(i). In such event,
the right of any Holder to registration pursuant to Section 9.6 shall
be conditioned upon such Holder's participation in such underwriting
and the inclusion of such Holder's Registrable Securities in the
underwriting to the extent provided herein.
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<PAGE> 43
All Holders proposing to distribute their securities through such
underwriting shall (together with the Company, directors and officers
and the Other Shareholders distributing their securities through such
underwriting) enter into an underwriting agreement in customary form
with the underwriter or underwriters selected for underwriting by the
Company.
Notwithstanding any other provision of this Section 9.6, if
the underwriter determines that marketing factors require a limitation
on the number of shares to be underwritten, the underwriter may
(subject to the allocation priority set forth below) exclude from such
registration and underwriting some or all of the Registrable Securities
which would otherwise be underwritten pursuant hereto. The Company
shall so advise all holders of securities requesting registration, and
the number of shares of securities that are entitled to be included in
the registration and underwriting shall be allocated in the following
manner: (i) securities (other than Registrable Securities) held by
officers or directors of the Company and by Other Shareholders shall be
excluded from such registration to the extent so required by such
limitation, and (ii) if a limitation of the number of shares to be
underwritten is still required, the Company shall so advise all Holders
of Registrable Securities requesting registration, and the number of
shares of Registrable Securities that may be included in the
registration and underwriting on behalf of such Holders shall be
reduced as required, such reduction to be allocated among such Holders
in proportion, as nearly as practicable, to the respective amounts of
Registrable Securities held by such persons at the time of filing the
registration statement.
If any Holder of Registrable Securities or any officer,
director or Other Shareholder disapproves of the terms of any such
underwriting, such party may elect to withdraw therefrom by written
notice to the Company and the underwriter. Any Registrable Securities
or other securities excluded or withdrawn from such underwriting shall
be withdrawn from such registration.
(C) TERMINATION. The Company's obligations under this Section
9.6 shall terminate, as to any Holder, on the first Termination Date
applicable to such Holder.
9.7 REGISTRATION ON FORM S-3. The Company shall use its reasonable best
efforts to qualify for the use of Form S-3 or any comparable or successor form
or forms of the Commission; and to that end the Company shall register (whether
or not required by law to do so) the Common Stock under the Exchange Act, in
accordance with the provisions of the Exchange Act following the effective date
of the first registration, if any, of any securities of the Company on Form S-1.
After the Company has qualified for the use of Form S-3, in addition to the
rights contained in the foregoing provisions of this Section 9, the Holders of
Registrable Securities shall have the right to request registrations on Form S-3
(by written request stating the number of shares of Registrable Securities to be
disposed of and the intended method of disposition of such shares by such Holder
or Holders), subject only to the following:
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<PAGE> 44
(i) No request made under this Section 9.7 shall require a
registration statement requested therein to become effective
(a) prior to ninety (90) days after the effective date of a
registration statement filed by the Company covering a firm
commitment underwritten public offering of Common Stock or (b)
prior to the effective date of a registration statement
referred to in (a) above if the Company shall theretofore have
given written notice of such registration statement to the
Holders of Registrable Securities pursuant to subsection
9.5(a) or 9.6(a) and shall have thereafter pursued the
preparation, filing and effectiveness of such registration
statement with diligence;
(ii) The Company shall not be required to effect a registration
pursuant to this Section 9.7 unless the Registrable Securities
requested to be registered pursuant to this Section 9.7 have a
proposed public offering price of $500,000 or more; and
(iii) The Company shall not be required to effect more than two (2)
registrations pursuant to this Section 9.7.
The Company shall give notice to all Holders of Registrable Securities
of the receipt of a request for registration pursuant to this Section 9.7 and
shall provide a reasonable opportunity for other Holders to participate in the
registration, and, if the intended method of disposition specified as aforesaid
is an underwritten public offering, participation by the Company and other
holders of Common Stock shall be on the basis set forth in Section 9.5(b) above.
Subject to the foregoing, the Company will use its best efforts to effect
promptly the registration of all shares of Registrable Securities on Form S-3 to
the extent requested by the Holder or Holders thereof for purposes of
disposition.
The Company's Obligations under this Section 9.7 shall terminate, as to
any Holder, on the first Termination Date applicable to such Holder.
9.8 EXPENSES OF REGISTRATION. The Company shall bear all Registration
Expenses incurred in connection with any registration qualification and
compliance by the Company pursuant to Sections 9.5, 9.6 and 9.7 hereof.
Notwithstanding the foregoing, the Company shall not be required to pay for any
expenses of any registration proceeding begun pursuant to Section 9.5 if the
registration request is subsequently withdrawn at the request of the Holders of
a majority of the Registrable Securities to be registered (in which case all
participating holders shall bear such expenses pro rata on the basis of the
number of their shares so registered); provided, however, that (i) the Company
shall be required to pay for any expenses of any registration proceeding begun
pursuant to Section 9.5 if the registration request is subsequently withdrawn at
the request of the Holders of a majority of the Registrable Securities to be
registered, if at or prior to the time of such withdrawal, the Holders shall
have learned of a material adverse change in the condition, business, or
prospects of the Company that was not known to the Holders at the time of their
request and have withdrawn the request with reasonable promptness following
disclosure
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<PAGE> 45
to the Holders by the Company of such material adverse change, and (ii) in
addition to its obligations under clause (i) of this provision, the Company
shall be required to pay for the expenses of not more than one additional
registration proceeding begun pursuant to Section 9.5 if the registration
request is subsequently withdrawn, at the request of the Holders of a majority
of the Registrable Securities to be registered, for any other reason. All
Selling Expenses shall be borne by the holders of the securities so registered
pro rata on the basis of the number of their shares so registered.
9.9 REGISTRATION PROCEDURES. In the case of each registration effected
by the Company pursuant to this Section 9, the Company will keep each Holder
advised in writing as to the initiation of each registration and as to the
completion thereof. Except as provided in Section 9.7, at its expense, the
Company will:
(a) keep such registration effective for a period of one
hundred twenty (120) days or until the Holder or Holders have completed
the distribution described in the registration statement relating
thereto, whichever first occurs, provided, however, that such one
hundred twenty (120) day period shall be extended for a period of time
equal to the period the Holder refrains from selling any securities
included in such registration in accordance with the provisions of
Section 9.15 hereof;
(b) furnish such number of prospectuses and other documents
incident thereto as a Holder from time to time may reasonably request;
(c) Use its best efforts to register or qualify the
Registrable Securities under the securities or blue-sky laws of such
jurisdictions as any Holder may request; provided, however, that the
Company shall not be obligated to register or qualify such Registrable
Securities in any particular jurisdiction in which the Company would be
required to execute a general consent to service of process in order to
effect such registration, qualification or compliance, unless the
Company is already subject to service in such jurisdiction and except
as may be required by the Securities Act or applicable rules or
regulations thereunder; and
(d) Use its best efforts to cause the Common Stock to be
listed on a national securities exchange or the Nasdaq National Market.
9.10 INDEMNIFICATION AND CONTRIBUTION.
(a) The Company, with respect to each registration,
qualification and compliance effected pursuant to this Section 9, will
indemnify and hold harmless each Holder, each of its officers,
directors and partners, and each party controlling such Holder, and
each underwriter, if any, and each party who controls any underwriter,
against all claims, losses, damages and liabilities (or actions in
respect thereof) arising out of or based on any untrue statement (or
alleged untrue statement) of a material fact contained in any
prospectus, offering circular or other document (including any related
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<PAGE> 46
registration statement, notification or the like) incident to any such
registration, qualification or compliance, or based on 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, or any violation by the Company of the Securities Act or
any rule or regulation thereunder applicable to the Company and
relating to action or inaction required of the Company in connection
with any such registration, qualification or compliance, and will
reimburse each such Holder, each of its officers, directors and
partners, and each party controlling such Holder, each such underwriter
and each party who controls any such underwriter, for any legal and any
other expenses incurred in connection with investigating or defending
any such claim, loss, damage, liability or action, provided that the
Company will not be liable in any such case to the extent that any such
claim, loss, damage, liability or expense arises out of or is based on
any untrue statement or omission based solely upon written information
furnished to the Company by such Holder or underwriter, as the case may
be, and stated to be specifically for use therein.
(b) Each Holder and Other Shareholder will, if Registrable
Securities held by such party are included in the securities as to
which such registration, qualification or compliance is being effected,
indemnify and hold harmless the Company, each of its directors and
officers and each underwriter, if any, of the Company's securities
covered by such a registration statement, each party who controls the
Company or such underwriter, each other such Holder and Other
Shareholder and each of their respective officers, directors and
partners, and each party controlling such Holder or Other Shareholder,
against all claims, losses, damages and liabilities (or actions in
respect thereof) arising out of or based on any untrue statement (or
alleged untrue statement) of a material fact contained in any such
registration statement, prospectus, offering circular or other
document, or any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse the Company and
such Holders, Other Shareholders, directors, officers, partners,
parties, underwriters or control persons for any legal or any other
expenses reasonably incurred in connection with investigating or
defending any such claim, loss, damage, liability or action, in each
case to the extent, but only to the extent, that such untrue statement
(or alleged untrue statement) or omission (or alleged omission) is made
in such registration statement, prospectus, offering circular or other
document solely in reliance upon and in conformity with written
information furnished to the Company by such Holder or Other
Shareholder and stated to be specifically for use therein; provided,
however, that the obligations of such Holders and Other Shareholders
hereunder shall be limited to an amount equal to the proceeds to each
such Holder or Other Shareholder of securities sold as contemplated
herein.
(c) Each party entitled to indemnification under this Section
9.10 (the "Indemnified Party") shall give notice to the party required
to provide indemnification (the "Indemnifying Party") promptly after
such Indemnified Party has actual knowledge
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<PAGE> 47
of any claim as to which indemnity may be sought, and shall permit the
Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or any
litigation resulting therefrom, shall be approved by the Indemnified
Party (whose approval shall not unreasonably be withheld), and the
Indemnified Party may participate in such defense at such party's
expense (unless the Indemnified Party shall have been advised by
counsel that actual or potential differing interests or defenses exist
or may exist between the Indemnifying Party and the Indemnified Party,
in which case such expense shall be paid by the Indemnifying Party),
and provided further that the failure of any Indemnified Party to give
notice as provided herein shall not relieve the Indemnifying Party of
its obligations under this Section 9. No Indemnifying Party, in the
defense of any such claim or litigation, shall, except with the consent
of each Indemnified Party, consent to entry of any judgment or enter
into any settlement which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such Indemnified
Party of a release from all liability in respect to such claim or
litigation.
(d) In order to provide for just and equitable contribution to
joint liability under the Securities Act in any case in which either
(i) any holder of Restricted Securities exercising rights under this
Agreement, or any controlling person of any such holder, makes a claim
for indemnification pursuant to this Section 9.10 but it is judicially
determined (by the entry of a final judgment or decree by a court of
competent jurisdiction and the expiration of time to appeal or the
denial of the last right of appeal) that such indemnification may not
be enforced in such case notwithstanding the fact that this Section
9.10 provides for indemnification in such case, or (ii) contribution
under the Securities Act may be required on the part of any such
selling holder or any such controlling person in circumstances for
which indemnification is provided under this Section 9.10; then, and in
each such case, the Company and such holder will contribute to the
aggregate losses, claims, damages or liabilities to which they may be
subject (after contribution from others) in such proportion so that
such holder is responsible for the portion represented by the
percentage that the public offering price of its Restricted Securities
offered by the registration statement bears to the public offering
price of all securities offered by such registration statement, and the
Company is responsible for the remaining portion; provided, however,
that, in any such case, (A) no such holder will be required to
contribute any amount in excess of the public offering price of all
such Restricted Securities offered by it pursuant to such registration
statement; and (B) no person or entity guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the
Securities Act) will be entitled to contribution from any person or
entity who was not guilty of such fraudulent misrepresentation.
9.11 INFORMATION BY HOLDER. Each Holder of Registrable Securities, and
each Other Shareholder holding securities included in any registration, shall
furnish to the Company such information regarding such Holder or Other
Shareholder as the Company may reasonably
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request in writing and as shall be reasonably required in connection with any
registration, qualification or compliance referred to in this Section 9.
9.12 LIMITATIONS ON REGISTRATION OF ISSUES OF SECURITIES. From and
after the date of this Agreement, the Company shall not enter into any agreement
with any holder or prospective holder of any securities of the Company giving
such holder or prospective holder the right to require the Company to initiate
any registration of any securities of the Company; provided that this Section
9.12 shall not limit the right of the Company to enter into any agreements with
any holder or prospective holder of any securities of the Company giving such
holder or prospective holder the right to require the Company, upon any
registration of any of its securities, to include, among the securities which
the Company is then registering, securities owned by such holder and provided
further that the Board may waive the requirement that the Company not enter into
any agreement giving a holder of any securities of the Company the right to
require the Company to initiate registration of any securities of the Company,
provided that, if such registration rights are more favorable than those granted
to the Holders pursuant to this Section 9, then the terms of this Section 9
shall simultaneously be amended so as to include herein for the benefit of the
Holders such more favorable terms. In addition, any right given by the Company
to any holder or prospective holder of the Company's securities in connection
with the registration of securities shall be conditioned such that it shall be
(i) consistent with the provisions of this Section 9 and with the rights of the
Holders provided in this Agreement, and (ii) require the inclusion of
Registrable Securities (within the meaning of this Agreement) in any
registration required by any such holder or prospective holder on the same basis
as securities of Other Shareholders are required to be included in registrations
effected pursuant to Sections 9.5 and 9.6 of this Agreement.
9.13 RULE 144 REPORTING. With a view to making available the benefits
of certain rules and regulations of the Commission which may permit the sale of
the Restricted Securities to the public without registration, the Company agrees
to:
(a) Make and keep public information available, as those terms
are understood and defined in Rule 144 under the Securities Act, at all
times from and after ninety (90) days following the effective date of
the first registration under the Securities Act filed by the Company
for an offering of its securities to the general public;
(b) Use its best efforts to file with the Commission in a
timely manner all reports and other documents required of the Company
under the Securities Act and the Exchange Act at any time after it has
become subject to such reporting requirements; and
(c) So long as a Purchaser owns any Restricted Securities,
furnish to the Purchasers forthwith upon request a written statement by
the Company as to its compliance with the reporting requirements of
Rule 144 (at any time from and after ninety (90) days following the
effective date of the first registration statement in connection with
an offering of its Securities to the general public), and of the
Securities
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Act and the Exchange Act (at any time after it has become subject to
such reporting requirements), a copy of the most recent annual or
quarterly report of the Company, and such other reports and documents
so filed as a Purchaser may reasonably request in availing itself of
any rule or regulation of the Commission allowing a Purchaser to sell
any such securities without registration.
9.14 TRANSFER OF REGISTRATION RIGHTS. The rights to cause the Company
to register securities granted by the Company under this Section 9 may be
assigned by any Holder to a transferee or assignee of at least 177,000 shares of
Registrable Securities (as adjusted for stock splits, combinations and other
similar events affecting the Registrable Securities), provided that the Company
is given written notice at the time of or within a reasonable time after said
transfer, stating the name and address of said transferee or assignee and
identifying the securities with respect to which such registration rights are
being assigned, and provided further that the transferee or assignee of such
rights agrees to be bound by the provision of this Section 9. No Holder of
Registrable Securities shall have any rights under this Section 9 unless such
Holder shall have executed this Agreement or an instrument in which it agrees to
be bound by the terms of this Section 9.
9.15 "MARKET STAND-OFF" AGREEMENT. Each Purchaser agrees, if requested
by the Company and an underwriter of the Company's Common Stock (or other
securities), not to sell or otherwise transfer or dispose of any Common Stock
(or other securities) of the Company held by it during the one hundred eighty
(180) day period following the effective date of a registration statement of the
Company filed under the Securities Act, provided that:
(a) such agreement only applies to the first such registration
statement of the Company including securities to be sold on its behalf
to the public in an underwritten offering; and
(b) all Holders, Other Shareholders and officers and directors
of the Company enter into similar agreements.
Such agreement shall be in writing in a form satisfactory to the
Company and such underwriter. The Company may impose stop-transfer instructions
with respect to the shares (or securities) subject to the foregoing restriction
until the end of said one hundred eighty (180) day period.
SECTION 10
DEFINITIONS
As used in this Agreement or in the Financing Documents, capitalized
terms shall have the respective meanings set forth in this Agreement (including,
without limitation, in Section 9.2 hereof) or set forth below or in the Section
of this Agreement referred to below:
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AFFILIATE shall mean, as to any entity or person, any natural person,
corporation, business trust, association, company, partnership, joint venture or
other entity or government agency or political subdivision which directly or
indirectly controls, is controlled by or is under common control with such
entity or person.
ANNUAL PLAN - SECTION 7.1(E).
BALANCE SHEET - SECTION 3.7.
BRIDGE INVESTORS shall mean Komasta and Tycho, together. Each of the
Bridge Investors is also a Purchaser for purposes of this Agreement.
BRIDGE LOAN FINANCING AGREEMENTS shall mean that certain Bridge Loan
Financing Agreement dated as of June 18, 1997 between the Company and Tycho and
that certain Bridge Loan Financing Agreement dated as of August 1, 1997 between
the Company and Komasta, as the same may have been amended from time to time.
BRIDGE NOTES shall mean, collectively, (i) that certain convertible
promissory note dated June 18, 1997, in the original principal amount of
$50,000, from the Company to Tycho and (ii) that certain convertible promissory
note dated August 1, 1997, in the original principal amount of $450,000, from
the Company to Komasta.
BRIDGE WARRANTS shall mean the Komasta Bridge Warrant and the Tycho
Bridge Warrant, together.
BUSINESS - Section 3.21.
BUSINESS PLAN - Section 3.1.
BOARD shall mean the entire Board of Directors of the Company.
CLOSING DATE and CLOSING DATES - Section 2.1.
CODE - Section 3.30.
COMMISSION shall mean the Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act.
COMMON STOCK - Section 1.1.
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COMMON WARRANT SHARES shall mean, at any time, shares of Common Stock
(i) issued and then outstanding upon exercise of the Common Warrants, (ii)
issuable upon exercise of the Common Warrants, and (iii) issued and then
outstanding or issuable in respect of the Common Stock referred to in clauses
(i) and (ii) of this definition upon any stock split, stock dividend,
recapitalization or similar event.
CONVERSION SHARES shall mean at any time, shares of Common Stock (i)
issued and then outstanding upon the conversion of the Series A Preferred
purchased under this Agreement or upon the conversion of the Series A Preferred
issued upon the exercise of the Preferred Warrants, (ii) issuable upon the
conversion of the Series A Preferred purchased under this Agreement or upon the
conversion of the Series A Preferred issuable upon the exercise of the Preferred
Warrants, and (iii) issued and then outstanding or issuable in respect of the
Common Stock referred to in clause (i) of this definition upon any stock split,
stock dividend, recapitalization or similar event.
EMPLOYMENT AGREEMENT - Section 3.20.
ENVIRONMENTAL CLAIM shall mean any and all administrative, regulatory
or judicial actions, suits, demands, demand letters, directives, claims, liens,
investigations, proceedings or notices of compliance or violation (written or
oral) by any person or entity (including any governmental authority) alleging
potential liability (including, without limitation, potential liability for
enforcement, investigatory costs, cleanup costs, governmental response costs,
removal costs, remedial costs, natural resources damages, property damages,
personal injuries, or penalties) arising out of, based on or resulting from (a)
the presence, or Release or threatened Release into the environment, of any
Hazardous Material at any location, whether owned, operated, leased or managed
by the Company or its Subsidiaries; or (b) circumstances forming the basis of
any violation, or alleged violation, of any Environmental Law; or (c) any and
all claims by any third party seeking damages, contribution, indemnification,
cost recovery, compensation or injunctive relief resulting from the presence or
Release of any Hazardous Materials.
ENVIRONMENTAL LAWS shall mean all laws or orders relating to the
regulation or protection of human health, safety or the environmental
(including, without limitation, ambient air, soil, surface water, ground water,
wetlands, land or subsurface strata), including, without limitation, laws and
regulations relating to Releases or threatened Releases of Hazardous Materials,
or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, recycling or handling of Hazardous
Materials.
ENVIRONMENTAL PERMITS - Section 3.23.
EQUITY SECURITIES shall mean any stock or similar security, including
without limitation securities containing equity features and securities
containing profit participation features, or any security convertible or
exchangeable, with our without consideration, into any stock or
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similar security, or any security carrying any warrant or right to subscribe to
or purchase any stock or similar security, or any such warrant or right.
EXCHANGE ACT shall mean the Securities Exchange Act of 1934, as
amended, and any regulations issued pursuant thereto.
FINANCING DOCUMENTS shall mean collectively, the Shareholders'
Agreement, the Management Rights Letters, the Warrants, and all other documents
set forth in any other schedules or exhibits hereto, under which, upon its
execution thereof, the Company, any Subsidiary, or any Related Party shall have
an obligation to any Purchaser, all in the respective forms thereof as executed
and as amended from time to time.
FINANCIAL STATEMENTS - Section 3.7.
FIRST CLOSING - Section 2.1.
First Closing Date - Section 2.1.
GKM - Section 5.18.
GROUP shall mean:
(i) in the case of any Purchaser who is an individual, such
Purchaser or any Affiliate of such Purchaser;
(ii) in the case of any Purchaser which is a pass-through
entity, (A) such pass-through entity and any of its partners, members
or other equity owners, (B) any corporation or other business
organization to which such pass-through entity shall sell all or
substantially all of its assets or with which it shall be merged or
consolidated and (C) any Affiliate of such pass-through entity; and
(iii) in the case of any Purchaser which is a corporation, (A)
any such corporation, its parent and any of such corporation's or
parent's subsidiaries, (B) any corporation or other business
organization to which such corporation shall sell all or substantially
all of its assets or with which it shall be merged, and (C) any
Affiliate of such corporation.
HAZARDOUS MATERIALS shall mean (a) any petroleum or petroleum products,
radioactive materials, asbestos in any form that is or could become friable,
above ground or underground storage tanks and compressors or other equipment
that contain polychlorinated biphenyls ("PCBs"); and (b) any chemicals,
materials or substances which are now defined as or included in the definition
of "hazardous substances," "hazardous wastes," "hazardous materials," "extremely
hazardous wastes," "restricted hazardous wastes," "toxic substances, " "toxic
pollutants," "pollutants", "contaminants" or words of similar import, under any
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<PAGE> 53
Environmental Law; and (c) any other chemical, material, substance or waste,
exposure to which is now prohibited, limited or regulated under any
Environmental Law.
HOLDER - Section 9.2.
INDEBTEDNESS shall mean any obligation of the Company, contingent or
otherwise, which under generally accepted accounting principles is required to
be shown on the balance sheet of the Company as a liability. Any obligation
secured by a lien or security interest on, or payable out of the proceeds of or
production from, property of the Company shall be deemed to be Indebtedness even
though such obligation is not assumed by the Company.
INITIAL PUBLIC OFFERING shall mean the first underwritten public
offering pursuant to an effective registration statement under the Securities
Act covering the offering and sale of Common Stock for the account of the
Company, on a firm commitment basis.
KOMASTA shall mean Komasta Properties, Ltd., having a business address
at 111 Alozorov Street, Tel Aviv, Israel.
KOMASTA BRIDGE WARRANT shall mean that certain Series A Preferred Stock
Purchase Warrant dated August 1, 1997 and issued by the Company to Komasta.
MANAGEMENT RIGHTS LETTERS - Section 5.12.
MR. BLOOM - Section 5.18.
PERSON shall include all natural persons, corporations, business
trusts, associations, companies, partnerships, joint ventures and other entities
and governments and agencies and political subdivisions.
PREFERRED WARRANTS - Section 1.1.
PREFERRED WARRANT SHARES shall mean, at any time, shares of Series A
Preferred (i) issued and then outstanding upon exercise of the Preferred
Warrants, (ii) issuable upon exercise of the Preferred Warrants, and (iii)
issued and then outstanding or issuable in respect of the Series A Preferred
referred to in clauses (i) and (ii) of this definition upon any stock split,
stock dividend, recapitalization or similar event.
PROPRIETARY INFORMATION AGREEMENT - Section 3.20.
QUALIFIED PUBLIC OFFERING - shall mean the first underwritten public
offering following the date hereof pursuant to an effective registration
statement under the Securities Act covering the offering and sale of Common
Stock for the account of the Company, on a firm commitment basis in which (i)
the aggregate gross proceeds to Company equal or exceed Fifteen Million Dollars
($15,000,000), and (ii) the public offering price equals or exceeds an
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<PAGE> 54
amount equal to three (3) times the initial Conversion Price (as defined in the
Restated Certificate) of the Series A Preferred.
REINCORPORATION MERGER - Section 3.31
RELATED PARTY shall mean any officer, director, employee or consultant
of the Company or any Subsidiary or any holder of 5% or more of any class of
capital stock of the Company or any Subsidiary or any member of the immediate
family of any such officer, director, employee, consultant or shareholder or any
entity controlled by any such officer, director, employee, consultant or
shareholder or a member of the immediate family of any such officer, director,
employee, consultant or shareholder.
RELEASE shall mean any release, spill, emission, leaking, injection,
deposit, disposal, discharge, dispersal, leaching or migration into the
atmosphere, soil, surface water, ground water or property.
RESTATED CERTIFICATE - Section 1.1.
RESTRICTED SECURITIES - Section 9.2.
SECOND CLOSING - Section 2.1.
SECOND CLOSING DATE - Section 2.1.
SECURITIES ACT shall mean the Securities Act of 1933, as amended, and
regulations issued pursuant thereto.
SERIES A PREFERRED - Section 1.1
SHAREHOLDERS' AGREEMENT - Section 5.11.
SHARES - Section 1.2.
SUBSEQUENT FINANCING shall mean the closing by the Company of a sale of
Equity Securities to a third party who is not a Related Party, resulting in
gross proceeds to the Company of at least $1,000,000 and at a price per share
that is more than $5.62, on an as-converted to Common Stock basis.
SUBSIDIARY shall mean any corporation, partnership, joint venture,
association or other business entity at least 50% of the outstanding voting
stock or voting interests of which is at the time owned or controlled, directly
or indirectly, by the Company or by one or more of such Subsidiary entities or
both.
TECHNOLOGY - Section 3.16.
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<PAGE> 55
TYCHO shall mean Tycho Investors LP, having a business address at 300
Hyerda Court, Goshen, Connecticut.
TYCHO BRIDGE WARRANT shall mean that certain Series A Preferred Stock
Purchase Warrant dated June 18, 1997 and issued by the Company to Tycho.
WARRANTS shall mean the Common Warrants and the Preferred Warrants,
together.
WARRANT SHARES shall mean the Common Warrant Shares and the Preferred
Warrant Shares, together.
SECTION 11
MISCELLANEOUS
11.1 GOVERNING LAW. This Agreement shall be governed by, and construed
and enforced in accordance with, the laws of the State of Delaware.
11.2 SURVIVAL. The representations, warranties, covenants and
agreements made herein shall survive any investigation made by any Purchaser and
shall survive each Closing.
11.3 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto; provided, however, that the Company may not assign its rights
hereunder. Without limiting the generality of the foregoing, all
representations, covenants and agreements benefiting the Purchasers shall inure
to the benefit of any and all subsequent holders from time to time of the
Shares, the Conversion Shares, the Warrants or the Warrant Shares.
11.4 ENTIRE AGREEMENT. This Agreement (including the Schedules and
Exhibits hereto, which are an integral part of this Agreement) and the other
documents delivered pursuant hereto constitute the full and entire understanding
and agreement between the parties with regard to the subjects hereof and
thereof. Except as otherwise expressly provided herein, neither this Agreement
nor any term hereof may be amended, waived, discharged or terminated, except by
a written instrument signed by the Company and the holders of greater than fifty
percent (50%) of the Conversion Shares which have not been sold to the public,
but in no event shall this paragraph be amended without the approval of the
holders of at least seventy-five percent (75%) of such Conversion Shares, nor
shall any other provision of this Agreement that specifies a requirement for a
consent, vote or approval of the Purchasers or of the holders of Shares,
Warrants, Warrants Shares or Conversion Shares be amended without the approval
of the percentage of Purchasers or holders specified in such provision, or the
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<PAGE> 56
obligation of any Purchaser hereunder increased except upon the written consent
of such Purchaser.
11.5 NOTICES, ETC.
(a) All notices and other communications required or permitted
hereunder shall be in writing and shall be mailed by first-class,
registered or certified mail, postage prepaid, or delivered either by
hand or by messenger, or sent via telex, telecopier, computer mail or
other electronic means, addressed (a) if to a Purchaser, at the address
shown on the Schedule of Purchasers, or at such other address as such
Purchaser shall have furnished to the Company in writing, or (b) if to
any other holder of any Shares, any Warrants, any Conversion Shares or
any Warrant Shares, at such address as such holder shall have furnished
to the Company in writing, or, until any such holder so furnishes an
address to the Company, then to and at the address of the last holder
thereof who has so furnished an address to the Company, or (c) if to
the Company, 635 William Pitt Way, Pittsburgh, Pennsylvania 15328,
Attn: President or at such other address as the Company shall have
furnished to the Purchasers and each such other holder in writing.
(b) Any notice or other communications so addressed and
mailed, postage prepaid, by registered or certified mail (in each case,
with return receipt requested) shall be deemed to be given when so
mailed. Any notice so addressed and otherwise delivered shall be deemed
to be given when actually received by the addressee.
11.6 DELAYS OR OMISSIONS. No delay or omission to exercise any right,
power or remedy accruing to any of the parties hereto, upon any breach or
default of any of the other parties hereto under this Agreement, shall impair
any such right, power or remedy of such party nor shall it be construed to be a
waiver of any such breach or default, or an acquiescence therein, or of or in
any similar breach or default thereafter occurring; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
theretofore or thereafter occurring. Any waiver, permit, consent or approval of
any kind or character on the part of any party hereto of any breach or default
under this Agreement, or any waiver on the part of any party hereto of any
provisions or conditions of this Agreement must be made in writing and shall be
effective only to the extent specifically set forth in such writing. All
remedies, either under this Agreement or by law or otherwise afforded to any
party hereto, shall be cumulative and not alternative.
11.7 RIGHTS; SEPARABILITY. In case any provision of this Agreement
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.
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<PAGE> 57
11.8 AGENT'S FEES AND SERVICES.
(a) The Company represents and warrants that it has retained
no finder or broker or other person or firm in connection with the
transactions contemplated by this Agreement, other than GKM as
contemplated by Section 5.18. The Company agrees to pay compensation to
GKM and Mr. Bloom as contemplated by Section 5.18, and accepts sole
responsibility for and agrees to pay all agent's fees to any broker,
finder or other person or firm in connection with the transactions
contemplated herein, other than those which a Purchaser has agreed to
pay pursuant to Section 11.8(b). In addition, the Company hereby agrees
to indemnify and to hold the Purchasers harmless of and from any
liability for any commission or compensation in the nature of an
agent's fee to any broker, finder or other person or firm (and the
costs and expenses of defending against such liability or asserted
liability) arising from any act by the Company or any of its employees
or representatives.
(b) Each Purchaser represents and warrants as to itself only
that it has retained no finder or broker in connection with the
transactions contemplated by this Agreement. Each Purchaser accepts
sole responsibility for and agrees to pay all agent's fees to any
broker, finder or other person or firm hired by such Purchaser in
connection with the transactions contemplated herein, other than those
which the Company has agreed to pay pursuant to Section 5.18 and
Section 11.8(a). In addition, each Purchaser hereby agrees to indemnify
and to hold the Company harmless of and from any liability for any
commission or compensation in the nature of an agent's fee to any
broker, finder or other person or firm (and the costs and expenses of
defending against such liability or asserted liability) arising from
any act by such Purchaser or any of its employees or representatives,
other than those which the Company has agreed to pay pursuant to
Section 5.18 and Section 11.8(a).
11.9 LEGAL FEES AND EXPENSES. The Company shall bear its own expenses
and legal fees incurred on its behalf with respect to this Agreement and the
transactions contemplated hereby. On each Closing Date (or if no closing shall
take place, within thirty (30) days of receiving any statement or invoice
therefor), the Company will pay the reasonable legal fees and out-of-pocket
expenses of Shipman, Goodwin LLP, special counsel to the Purchasers, up to an
aggregate of $25,000. with respect to this Agreement and the transactions
contemplated hereby.
11.10 TITLES AND SUBTITLES. The titles of the Sections and subsections
of this Agreement are for convenience or reference only and are not to be
considered in construing this Agreement.
11.11 COUNTERPARTS. This Agreement may be executed in counterparts,
each of which when so executed and delivered shall constitute a complete and
original instrument but all of which together shall constitute one and the same
agreement, and it shall not be necessary
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<PAGE> 58
when making proof of this Agreement or any counterpart thereof to account for
any other counterpart.
[The remainder of this page is intentionally left blank;
signature page follows.]
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<PAGE> 59
Exhibit A
<TABLE>
<CAPTION>
SCHEDULE OF PURCHASERS
Name and Address First Closing Second Closing
- ---------------- ------------- --------------
Total Series A Common Preferred Total Series A
Investment Preferred Shares Warrants Warrants Investment Preferred Shares
---------- ---------------- -------- -------- ---------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Axiom Venture Partners II $1,375,000 244,662 48,932 None $1,375,000 244,662
Limited Partnership
CityPlace II - 17th Floor
Hartford, CT 06103
InterWest Partners VI, LP $1,818,000 323,488 64,698 None $1,818,000 323,488
3000 Sand Hill Road
Bldg 3, Suite 255
Menlo Park, CA 94025-7112
InterWest Investors VI, LP $57,000 10,142 2,028 None $57,000 10,142
3000 Sand Hill Road
Bldg 3, Suite 255
Menlo Park, CA 94025-7112
Delphi Ventures III, L.P. $1,227,891.32 218,486 43,697 None $1,227,891 218,486
300 Sand Hill Road
Bldg 1, Suite 135
Menlo Park, CA 94025
Delphi BioInvestments III, L.P. $22,109.08 3,934 787 None $22,109 3,934
3000 Sand Hill Road
Bldg 1, Suite 135
Menlo Park, CA 94025
Oxford Bioscience Partners II, L.P. $285,810 50,856 10,171 None $285,810 50,856
315 Post Rd. West, Suite 2
Westport, CT 06880-4739
</TABLE>
<PAGE> 60
<TABLE>
<CAPTION>
SCHEDULE OF PURCHASERS (cont.)
Name and Address First Closing Second Closing
- ---------------- ------------- --------------
Total Series A Common Preferred Total Series A
Investment Preferred Shares Warrants Warrants Investment Preferred Shares
---------- ---------------- -------- -------- ---------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Oxford Bioscience Partners $214,190 38,112 7,623 None $214,190 38,112
(Bermuda) II Limited
Partnership
315 Post Rd. West, Suite 2
Westport, CT 06880-4739
Tycho Investors, LP $52,389.04* 9,322 None 4,448 None None
300 Hyerda Court
Goshen, CT 06756
Komasta Properties, Ltd. $1,000,000** 177,936 None 53,381 None None
111 Alozorov Street
Tel Aviv, Israel
TOTALS $6,052,389.04 1,076,938 177,936 57,829 $5,000,000 889,680
</TABLE>
* By conversion of Bridge Note.
** $467,161.64 by conversion of Bridge Note and $532,838.36 in cash.
<PAGE> 61
EXHIBIT C
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD OR OFFERED FOR SALE
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER
SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR THE AVAILABILITY OF AN
EXEMPTION FROM REGISTRATION UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES
LAWS.
NO. __
STOCK SUBSCRIPTION WARRANT
TO PURCHASE COMMON STOCK OF
CELLOMICS, INC. (THE "COMPANY")
DATE OF INITIAL ISSUANCE: JANUARY __, 1998
THIS CERTIFIES THAT for value received, [PURCHASER] or its registered
assigns (hereinafter called the "Holder") is entitled to purchase from the
Company, at any time during the Term of this Warrant, ________________________
(_________) shares of common stock, $.01 par value, of the Company (the "Common
Stock"), at the Warrant Price, payable in lawful money of the United States of
America to be paid upon the exercise hereof. The exercise of this Warrant shall
be subject to the provisions, limitations and restrictions herein contained, and
may be exercised in whole or in part.
SECTION 1. DEFINITIONS.
For all purposes of this Warrant, the following terms shall have the
meanings indicated:
COMMON STOCK - shall mean and include the Company's authorized Common
Stock, $.01 par value, as constituted at the date hereof, and shall also include
any capital stock of any class or series of the Company hereafter authorized
which shall not be limited to a fixed sum or percentage of par value or of the
purchase price of such stock in respect of the rights of the holders thereof to
participate in dividends and/or in the distribution of assets upon the voluntary
or involuntary liquidation, dissolution or winding up of the Company.
Notwithstanding the foregoing, for purposes of determining the class or series
of the Company's capital stock which the Holder is entitled to purchase pursuant
hereto, the term
<PAGE> 62
"common stock" shall mean the Company's authorized Common Stock, $.01 par value,
as constituted at the date hereof.
EXCHANGE ACT - shall mean the Securities Exchange Act of 1934, as
amended from time to time.
SECURITIES ACT - the Securities Act of 1933, as amended from time to
time.
TERM OF THIS WARRANT - shall mean the period beginning on the date of
initial issuance hereof and ending on the Termination Date.
TERMINATION DATE - shall mean the earlier of (i) January ___, 2002 and
(ii) the date on which a Qualified Public Offering, as defined in the Purchase
Agreement, closes, if the managing underwriter certifies to the Company in
writing that it has determined that marketing factors make it advisable for the
Warrants to expire upon the closing of such offering if not exercised prior to
or upon the closing of such offering, provided that the Holder is given written
notice of such determination at least thirty (30) days prior to the closing of
such Offering.
WARRANT PRICE - $6.60 per share, subject to adjustment in accordance
with Section 5 hereof.
WARRANTS - this Warrant and any other Warrant or Warrants issued
pursuant to the Series A Preferred Stock and Warrant Purchase Agreement among
the Company and the Purchasers named therein dated January ___, 1998 (the
"Purchase Agreement") to such Purchasers, or to any transferees of such
Purchasers.
WARRANT SHARES - shares of Common Stock purchased or purchasable by the
Holder of this Warrant upon the exercise hereof.
SECTION 2. EXERCISE OF WARRANT.
2.1. PROCEDURE FOR EXERCISE OF WARRANT. To exercise this Warrant in
whole or in part (but not as to any fractional share of Common Stock), the
Holder shall deliver to the Company at its office referred to in Section 13
hereof at any time and from time to time during the Term of this Warrant: (i)
the Notice of Exercise in the form attached hereto, (ii) cash, certified or
official bank check payable to the order of the Company, wire transfer of funds
to the Company's account, or evidence of any indebtedness of the Company to the
Holder (or any combination of any of the foregoing) in the amount of the Warrant
Price for each share being purchased, and (iii) this Warrant.
In the event of any exercise of the rights represented by this Warrant, a
certificate or certificates for the shares of Common Stock so purchased,
registered in the name of the Holder or such other name or names as may be
designated by the Holder, shall be delivered to the Holder hereof within a
reasonable time, not exceeding fifteen (15) days, after the rights
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<PAGE> 63
represented by this Warrant shall have been so exercised; and, unless this
Warrant has expired, a new Warrant representing the number of shares (except a
remaining fractional share), if any, with respect to which this Warrant shall
not then have been exercised shall also be issued to the Holder hereof within
such time. The person in whose name any certificate for shares of Common Stock
is issued upon exercise of this Warrant shall for all purposes be deemed to have
become the holder of record of such shares on the date on which the Warrant was
surrendered and payment of the Warrant Price and any applicable taxes was made,
irrespective of the date of delivery of such certificate, except that, if the
date of such surrender and payment is a date when the stock transfer books of
the Company are closed, such person shall be deemed to have become the holder of
such shares at the close of business on the next succeeding date on which the
stock transfer books are open.
2.2. TRANSFER RESTRICTION LEGEND. Each certificate for Warrant Shares
shall bear the following legend (and any additional legend required by (i) any
applicable state securities laws and (ii) any securities exchange upon which
such Warrant Shares may, at the time of such exercise, be listed) on the face
thereof unless at the time of exercise such Warrant Shares shall be registered
under the Securities Act:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended, and may not be sold or
transferred in the absence of such registration or an exemption
therefrom under said Act."
Any certificate issued at any time in exchange or substitution for any
certificate bearing such legend (except a new certificate issued upon completion
of a public distribution under a registration statement of the securities
represented thereby) shall also bear such legend unless, in the opinion of
counsel for the holder thereof (which counsel shall be reasonably satisfactory
to counsel for the Company) the securities represented thereby are not, at such
time, required by law to bear such legend.
SECTION 3. COVENANTS AS TO COMMON STOCK. The Company covenants and
agrees that all shares of Common Stock that may be issued upon the exercise of
the rights represented by this Warrant will, upon issuance, be validly issued,
fully paid and nonassessable, and free from all taxes, liens and charges with
respect to the issue thereof. The Company further covenants and agrees that it
will pay when due and payable any and all federal and state taxes which may be
payable in respect of the issue of this Warrant or any Common Stock or
certificates therefor issuable upon the exercise of this Warrant. The Company
further covenants and agrees that the Company will at all times have authorized
and reserved, free from preemptive rights, a sufficient number of shares of
Common Stock to provide for the exercise of the rights represented by this
Warrant. The Company further covenants and agrees that if any shares of capital
stock to be reserved for the purpose of the issuance of shares upon the exercise
of this Warrant require registration with or approval of any governmental
authority under any federal or state law before such shares may be validly
issued or delivered upon exercise, then the Company will in good faith and as
expeditiously as possible endeavor to secure such registration or approval, as
the case may be. If and so long as the Common Stock issuable upon the exercise
of this Warrant is listed on any national securities exchange, the Company
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<PAGE> 64
will, if permitted by the rules of such exchange, list and keep listed on such
exchange, upon official notice of issuance, all shares of such Common Stock
issuable upon exercise of this Warrant.
SECTION 4. ADJUSTMENT OF NUMBER OF SHARES. Upon each adjustment of the Warrant
Price as provided in Section 5, the Holder shall thereafter be entitled to
purchase, at the Warrant Price resulting from such adjustment, the number of
shares (calculated to the nearest tenth of a share) obtained by multiplying the
Warrant Price in effect immediately prior to such adjustment by the number of
shares purchasable pursuant hereto immediately prior to such adjustment and
dividing the product thereof by the Warrant Price resulting from such
adjustment.
SECTION 5. ADJUSTMENT OF WARRANT PRICE. The Warrant Price shall be subject to
adjustment from time to time as follows:
(i) If the Company shall at any time or from time to time during the
Term of this Warrant issue shares of Common Stock other than Excluded Stock (as
hereinafter defined) without consideration or for a consideration per share less
than the Warrant Price in effect immediately prior to the issuance of such
Common Stock, the Warrant Price in effect immediately prior to each such
issuance or adjustment shall forthwith (except as provided in this clause (i))
be adjusted to a price equal to the quotient obtained by dividing:
(A) an amount equal to the sum of
(x) the total number of shares of Common Stock outstanding
(including any shares of Common Stock deemed to have been issued
pursuant to subdivision (3) of this clause (i) and to clause (ii)
below) immediately prior to such issuance multiplied by the Warrant
Price in effect immediately prior to such issuance, plus
(y) the consideration received by the Company upon such
issuance, by
(B) the total number of shares of Common Stock outstanding
(including any shares of Common Stock deemed to have been issued
pursuant to subdivision (3) of this clause (i) and to clause (ii)
below) immediately after the issuance of such Common Stock.
For the purposes of any adjustment of the Warrant Price pursuant to
this clause (i), the following provisions shall be applicable:
1. In the case of the issuance of Common Stock for cash, the
consideration shall be deemed to be the amount of cash paid
therefor after deducting therefrom any
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<PAGE> 65
discounts, commissions or other expenses allowed, paid or
incurred by the Company for any underwriting or otherwise in
connection with the issuance and sale thereof.
2. In the case of the issuance of Common Stock for a
consideration in whole or in part other than cash, the
consideration other than cash shall be deemed to be the fair
market value thereof as determined by the Board of Directors
of the Company, irrespective of any accounting treatment;
provided, however, that such fair market value as determined
by the Board of Directors, together with any cash
consideration being paid, shall not exceed the aggregate
Current Market Price (as hereinafter defined) of the shares of
Common Stock being issued.
3. In the case of the issuance of (i) options to purchase or
rights to subscribe for Common Stock, (ii) securities by their
terms convertible into or exchangeable for Common Stock or
(iii) options to purchase or rights to subscribe for such
convertible or exchangeable securities:
(A) the aggregate maximum number of shares of Common
Stock deliverable upon exercise of such options to
purchase or rights to subscribe for Common Stock
shall be deemed to have been issued at the time such
options or rights were issued and for a consideration
equal to the consideration (determined in the manner
provided in subdivisions (1) and (2) above with the
proviso in subdivision (2) being applied to the
number of shares of Common Stock deliverable upon
such exercise), if any, received by the Company upon
the issuance of such options or rights plus the
minimum purchase price provided in such options or
rights for the Common Stock covered thereby;
(B) the aggregate maximum number of shares of Common
Stock deliverable upon conversion of or in exchange
for any such convertible or exchangeable securities
or upon the exercise of options to purchase or rights
to subscribe for such convertible or exchangeable
securities and subsequent conversions or exchanges
thereof shall be deemed to have been issued at the
time such securities were issued or such options or
rights were issued and for a consideration equal to
the consideration received by the Company for any
such securities and related options or rights
(excluding any cash received on account of accrued
interest or accrued dividends), plus the additional
consideration, if any, to be received by the Company
upon the conversion or exchange of such securities or
the exercise of any related options or rights (the
consideration in each case to be determined in the
manner provided in subdivisions (1) and (2) above
with the proviso in subdivision (2) being applied to
the number of shares of Common Stock deliverable upon
such conversion, exchange or exercise);
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<PAGE> 66
(C) on any change in the number of shares of Common Stock
deliverable upon exercise of any such options or
rights or conversion of or exchange for such
convertible or exchangeable securities, other than a
change resulting from the antidilution provisions
thereof, the Warrant Price shall forthwith be
readjusted to such Warrant Price as would have
obtained had the adjustment made upon the issuance of
such options, rights or securities not converted
prior to such change or options or rights related to
such securities not converted prior to such change
being made upon the basis of such change; and
(D) on the expiration of any such options or rights, the
termination of any such rights to convert or exchange
or the expiration of any options or rights related to
such convertible or exchangeable securities, the
Warrant Price shall forthwith be readjusted to such
Warrant Price as would have obtained had the
adjustment made upon the issuance of such options,
rights, securities or options or rights related to
such securities being made upon the basis of the
issuance of only the number of shares of Common Stock
actually issued upon the conversion or exchange of
such securities or upon the exercise of the options
or rights related to such securities.
(ii) "Excluded Stock" shall mean shares of Common Stock excluded from
the definition of "Additional Shares of Common Stock" set forth in Article III,
Part B, Section 3(d)(i)(4) of the Company's Restated Certificate of
Incorporation as in effect on January __, 1998.
(iii) If, at any time during the Term of this Warrant, the number of
shares of Common Stock outstanding is increased by a stock dividend payable in
shares of Common Stock or by a subdivision or split-up of shares of Common
Stock, then, following the record date fixed for the determination of holders of
Common Stock entitled to receive such stock dividend, subdivision or split-up,
the Warrant Price shall be appropriately decreased so that the number of shares
of Common Stock issuable upon the exercise hereof shall be increased in
proportion to such increase in outstanding shares.
(iv) If, at any time during the Term of this Warrant, the number of
shares of Common Stock outstanding is decreased by a combination of the
outstanding shares of Common Stock, then, following the record date for such
combination, the Warrant Price shall appropriately increase so that the number
of shares of Common Stock issuable upon the exercise hereof shall be decreased
in proportion to such decrease in outstanding shares.
(v) In case, at any time during the Term of this Warrant, the Company
shall declare a cash dividend upon its Common Stock payable otherwise than out
of earnings or earned surplus or shall distribute to holders of its Common Stock
shares of its capital stock (other than Common Stock), stock or other securities
of other persons, evidences of indebtedness issued
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<PAGE> 67
by the Company or other persons, assets (excluding cash dividends and
distributions) or options or rights (excluding options to purchase and rights to
subscribe for Common Stock or other securities of the Company convertible into
or exchangeable for Common Stock), then, in each such case, immediately
following the record date fixed for the determination of the holders of Common
Stock entitled to receive such dividend or distribution, the Warrant Price in
effect thereafter shall be determined by multiplying the Warrant Price in effect
immediately prior to such record date by a fraction of which the numerator shall
be an amount equal to the difference of (x) the Current Market Price of one
share of Common Stock minus (y) the fair market value (as determined by the
Board of Directors of the Company, whose determination shall be conclusive) of
the stock, securities, evidences of indebtedness, assets, options or rights so
distributed in respect of one share of Common Stock, and of which the
denominator shall be such Current Market Price.
(vi) All calculations under this Section 5 shall be made to the nearest
cent or to the nearest one-tenth (1/10) of a share, as the case may be.
(vii) For the purpose of any computation pursuant to this Section 5,
the Current Market Price at any date of one (1) share of Common Stock shall be
deemed to be the average of the daily closing prices for the thirty (30)
consecutive business days ending no more than fifteen (15) business days before
the day in question (as adjusted for any stock dividend, split, combination or
reclassification that took effect during such thirty (30) business day period).
The closing price for each day shall be the last reported sales price regular
way or, in case no such reported sales took place on such day, the average of
the last reported bid and asked prices regular way, in either case on the
principal national securities exchange on which the Common Stock is listed or
admitted to trading or as reported by Nasdaq (or if the Common Stock is not at
the time listed or admitted for trading on any such exchange or if prices of the
Common Stock are not reported by Nasdaq then such price shall be equal to the
average of the last reported bid and asked prices on such day as reported by The
National Quotation Bureau Incorporated or any similar reputable quotation and
reporting service, if such quotation is not reported by The National Quotation
Bureau Incorporated); provided, however, that if the Common Stock is not traded
in such manner that the quotations referred to in this clause (vii) are
available for the period required hereunder, the Current Market Price shall be
determined in good faith by the Board of Directors of the Company or, if such
determination cannot be made, by a nationally recognized independent investment
banking firm selected by the Board of Directors of the Company (or if such
selection cannot be made, by a nationally recognized independent investment
banking firm selected by the American Arbitration Association in accordance with
its rules).
(viii) Whenever the Warrant Price shall be adjusted as provided in
Section 5, the Company shall prepare a statement showing the facts requiring
such adjustment and the Warrant Price that shall be in effect after such
adjustment. The Company shall cause a copy of such statement to be sent by mail,
first class postage prepaid, to each Holder of this Warrant at its, his or her
address appearing on the Company's records. Where appropriate, such copy may be
given in advance and may be included as part of the notice required to be mailed
under the provisions of subsection (x) of this Section 5.
- 7 -
<PAGE> 68
(ix) Adjustments made pursuant to clauses (iii), (iv) and (v) above
shall be made on the date such dividend, subdivision, split-up, combination or
distribution, as the case may be, is made, and shall become effective at the
opening of business on the business day next following the record date for the
determination of stockholders entitled to such dividend, subdivision, split-up,
combination or distribution.
(x) In the event the Company shall propose to take any action of the
types described in clauses (iii), (iv), or (v) of this Section 5, the Company
shall forward, at the same time and in the same manner, to the Holder of this
Warrant such notice, if any, which the Company shall give to the holders of
capital stock of the Company.
(xi) In any case in which the provisions of this Section 5 shall
require that an adjustment shall become effective immediately after a record
date for an event, the Company may defer until the occurrence of such event
issuing to the Holder of all or any part of this Warrant which is exercised
after such record date and before the occurrence of such event the additional
shares of capital stock issuable upon such exercise by reason of the adjustment
required by such event over and above the shares of capital stock issuable upon
such exercise before giving effect to such adjustment exercise; provided,
however, that the Company shall deliver to such Holder a due bill or other
appropriate instrument evidencing such Holder's right to receive such additional
shares upon the occurrence of the event requiring such adjustment.
(xii) The sale or other disposition of any Common Stock theretofore
held in the treasury of the Company shall be deemed to be an issuance thereof.
SECTION 6. OWNERSHIP.
6.1. OWNERSHIP OF THIS WARRANT. The Company may deem and treat the
person in whose name this Warrant is registered as the holder and owner hereof
(notwithstanding any notations of ownership or writing hereon made by anyone
other than the Company) for all purposes and shall not be affected by any notice
to the contrary until presentation of this Warrant for registration of transfer
as provided in this Section 6.
6.2. TRANSFER AND REPLACEMENT. This Warrant and all rights hereunder
are transferable in whole or in part upon the books of the Company by the Holder
hereof in person or by duly authorized attorney, and a new Warrant or Warrants,
of the same tenor as this Warrant but registered in the name of the transferee
or transferees (and in the name of the Holder, if a partial transfer is
effected) shall be made and delivered by the Company upon surrender of this
Warrant duly endorsed, at the office of the Company referred to in Section 13
hereof. Upon receipt by the Company of evidence reasonably satisfactory to it of
the loss, theft or destruction, and, in such case, of indemnity or security
reasonably satisfactory to it, and upon surrender of this Warrant if mutilated,
the Company will make and deliver a new Warrant of like tenor, in lieu of this
Warrant; provided that if the Holder hereof is an instrumentality of a state or
local government or an institutional holder or a nominee for such
- 8 -
<PAGE> 69
an instrumentality or institutional holder an irrevocable agreement of indemnity
by such Holder shall be sufficient for all purposes of this Section 6, and no
evidence of loss or theft or destruction shall be necessary. This Warrant shall
he promptly cancelled by the Company upon the surrender hereof in connection
with any transfer or replacement. Except as otherwise provided above, in the
case of the loss, theft or destruction of a Warrant, the Company shall pay all
expenses, taxes and other charges payable in connection with any transfer or
replacement of this Warrant, other than stock transfer taxes (if any) payable in
connection with a transfer of this Warrant, which shall be payable by the
Holder. Holder will not transfer this Warrant and the rights hereunder except in
compliance with federal and state securities laws.
SECTION 7. MERGERS, CONSOLIDATION, SALES. In the case of any proposed
consolidation or merger of the Company with another entity, or the proposed sale
of all or substantially all of its assets to another person or entity, or any
proposed reorganization or reclassification of the capital stock of the Company,
then, as a condition of such consolidation, merger, sale, reorganization or
reclassification, lawful and adequate provision shall be made whereby the Holder
of this Warrant shall thereafter have the right to receive upon the basis and
upon the terms and conditions specified herein, in lieu of the shares of the
Common Stock of the Company immediately theretofore purchasable hereunder, such
shares of stock, securities or assets as may (by virtue of such consolidation,
merger, sale, reorganization or reclassification) be issued or payable with
respect to or in exchange for the number of shares of such Common Stock
purchasable hereunder immediately before such consolidation, merger, sale,
reorganization or reclassification. In any such case appropriate provision shall
be made with respect to the rights and interests of the Holder of this Warrant
to the end that the provisions hereof shall thereafter be applicable as nearly
as may be, in relation to any shares of stock, securities or assets thereafter
deliverable upon the exercise of this Warrant. The Company shall not effect any
such consolidation, merger or sale unless (i) either (A) the Holder shall have
given its written consent thereto, or (B) the other party to the consolidation,
merger or sale is not controlled by, does not control, and is not under common
control with, the Company and the transaction is not being undertaken with the
purpose of diminishing, defeating or avoiding the Holder's rights hereunder, and
(ii) prior to or simultaneously with the consummation thereof the successor
corporation or purchaser, as the case may be, shall assume by written instrument
the obligation to deliver to the Holder such shares of stock, securities or
assets as, in accordance with the foregoing provisions, the Holder is entitled
to receive.
SECTION 8. NOTICE OF DISSOLUTION OR LIQUIDATION. In case of any distribution of
the assets of the Company in dissolution or liquidation (except under
circumstances when the foregoing Section 7 shall be applicable), the Company
shall give notice thereof to the Holder hereof and shall make no distribution to
shareholders until the expiration of thirty (30) days from the date of mailing
of the aforesaid notice and, in any case, the Holder hereof may exercise this
Warrant within thirty (30) days from the date of the giving of such notice, and
all rights herein granted not so exercised within such thirty-day period shall
thereafter become null and void.
SECTION 9. NOTICE OF EXTRAORDINARY DIVIDENDS. If the Board of Directors of the
Company shall declare any dividend or other distribution on its Common Stock
except out of
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<PAGE> 70
earned surplus or by way of a stock dividend payable in shares of its Common
Stock, the Company shall mail notice thereof to the Holder hereof not less than
thirty (30) days prior to the record date fixed for determining shareholders
entitled to participate in such dividend or other distribution, and the Holder
hereof shall not participate in such dividend or other distribution unless this
Warrant is exercised prior to such record date. The provisions of this Section 9
shall not apply to distributions made in connection with transactions covered by
Section 7.
SECTION 10. FRACTIONAL SHARES. Fractional shares shall not be issued upon the
exercise of this Warrant but in any case where the Holder would, except for the
provisions of this Section 10, be entitled under the terms hereof to receive a
fractional share upon the complete exercise of this Warrant, the Company shall,
upon the exercise of this Warrant for the largest number of whole shares then
called for, pay a sum in cash equal to the excess of the value of such
fractional share (determined in such reasonable manner as may be prescribed in
good faith by the Board of Directors of the Company) over the Warrant Price for
such fractional share.
SECTION 11. SPECIAL ARRANGEMENTS OF THE COMPANY. The Company covenants and
agrees that during the Term of this Warrant, unless otherwise approved by the
Holder of this Warrant:
11.1. WILL RESERVE SHARES. The Company will reserve and set apart and
have available for issuance at all times, free from preemptive or other
preferential rights, the number of shares of authorized but unissued Common
Stock deliverable upon the exercise of this Warrant.
11.2. WILL NOT AMEND CERTIFICATE. The Company will not amend its
Certificate of Incorporation to eliminate as an authorized class of capital
stock that class denominated as "Common Stock" on the date hereof.
11.3. WILL BIND SUCCESSORS. This Warrant shall be binding upon any
corporation or other person or entity succeeding to the Company by merger,
consolidation or acquisition of all or substantially all of the Company's
assets.
SECTION 12. REGISTRATION RIGHTS; ETC. The holder of the Warrant Shares is
entitled to certain registration rights with respect to the Warrant Shares, as
set forth in the Purchase Agreement.
SECTION 13. NOTICES. Any notice or other document required or permitted to be
given or delivered to the Holder shall be delivered at, or sent by certified or
registered mail to, the Holder at ______________________ or to such other
address as shall have been furnished to the Company in writing by the Holder.
Any notice or other document required or permitted to be given or delivered to
the Company shall be delivered at, or sent by certified or registered mail to,
the Company at 635 William Pitt Way, Pittsburgh, Pennsylvania 15328, Attn:
President or to such other address as shall have been furnished in writing to
the Holder by the Company. Any notice so addressed and mailed by registered or
certified mail shall be deemed to be given
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<PAGE> 71
when so mailed. Any notice so addressed and otherwise delivered shall be deemed
to be given when actually received by the addressee.
SECTION 14. NO RIGHTS AS STOCKHOLDER: LIMITATION OF LIABILITY. This Warrant
shall not entitle the Holder to any of the rights of a shareholder of the
Company. No provision hereof, in the absence of affirmative action by the Holder
to purchase shares of Common Stock, and no mere enumeration herein of the
rights or privileges of the Holder, shall give rise to any liability of the
Holder for the Warrant Price hereunder or as a shareholder of the Company,
whether such liability is asserted by the Company or by creditors of the
Company.
SECTION 15. LAW GOVERNING. This Warrant shall be governed by, and construed and
enforced in accordance with, the laws of the State of Connecticut.
SECTION 16. MISCELLANEOUS.
(a) This Warrant and any provision hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
(or any predecessor in interest thereof) against which enforcement of the same
is sought. The headings in this Warrant are for purposes of reference only and
shall not affect the meaning or construction of any of the provisions hereof.
(b) All capitalized terms used herein and not otherwise defined herein
shall have the meanings ascribed to them in the Purchase Agreement.
[The remainder of this page is intentionally left blank;
signature page follows.]
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<PAGE> 72
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officer this _______ day of January, 1998.
CELLOMICS, INC.
By:
--------------------------------
Name:
Title:
<PAGE> 73
EXHIBIT D
THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS AND MAY NOT
BE SOLD, PLEDGED, TRANSFERRED OR ASSIGNED EXCEPT IN A TRANSACTION WHICH IS
EXEMPT UNDER PROVISIONS OF THE SECURITIES ACT AND APPLICABLE STATE SECURITIES
LAWS OR PURSUANT TO AN EFFECTIVE REGISTRATION THEREUNDER.
CELLOMICS, INC. SERIES A PREFERRED STOCK PURCHASE WARRANT
CELLOMICS, INC. (the "Company"), a Pennsylvania corporation, with its
principal place of business at 635 William Pitt Way, Pittsburgh, PA 15238,
hereby certifies that for value received KOMASTA PROPERTIES LTD ("KOMASTA")
having its business address at 111 Alozorov Street, Tel Aviv, Israel (the
"Holder") is entitled at any time and from time to time beginning on the date of
this Warrant and ending at 5:00 P.M. Eastern Standard Time on the 31st day of
July, 2002, to purchase 53,381 shares of the Company's Series A Preferred Stock
at the Warrant Price Per Share, each as adjusted pursuant to the terms of this
Warrant. The exercise of this Warrant shall be subject to the terms, conditions
and limitations set forth herein.
1. DEFINITIONS.
As used herein the following terms, unless the context otherwise
requires, have the following respective meanings:
A. SERIES A PREFERRED STOCK means and includes the Company's authorized
Series A Preferred Stock, as constituted at the date hereof.
B. COMPANY means and includes any corporation which shall succeed to or
assume the obligations of the Company hereunder, by assignment or merger or
consolidation or otherwise.
C. CURRENT VALUE means such value as shall be determined in good faith
by the Board of Directors of the Company.
D. TERMINATION DATE means July 31, 2002.
E. WARRANT PRICE PER SHARE means Eight Dollars and Forty-Three Cents
($8.43) per share, subject to adjustment in accordance with Section 4 hereof.
F. WARRANT RIGHTS means the Holder's right to purchase that 53,381
shares of Series A Preferred Stock as adjusted at the Warrant Price Per Share in
accordance with the terms and conditions of this Warrant.
G. WARRANT SHARES means shares of Series A Preferred Stock purchased or
purchasable by the Holder upon exercise hereof.
<PAGE> 74
H. TERMINATION DATE means June 18, 2002.
2. WARRANTIES AND REPRESENTATIONS OF HOLDER. Holder represents,
warrants and acknowledges that: (i) the Holder has adequate means of providing
for its current needs and possible contingencies, and anticipates no need now or
in the foreseeable future to sell its shares of Series A Preferred Stock, (ii)
the Holder has had an opportunity to ask questions of and receive answers from
the Company concerning its investment in the Company, and all such questions
have been answered to its full satisfaction, (iii) the Holder intends to hold
shares of the Series A Preferred Stock for its own account for investment, and
not with a view toward any resale or other distribution of such Series A
Preferred Stock, (iv) investment in the Company involves a high degree of risk,
no tax advantages will result from an investment in the Company, and the Holder
must be able to bear the economic risk of complete loss of its investment in the
Company, (v) the Holder has received no representations and warranties from
Company other than those otherwise set forth herein, (vi) the Holder has the
knowledge and experience in financial and business matters and is capable of
evaluating the merits and risks of this investment, provided, however, if the
Holder does not have such knowledge and experience, the Holder has consulted
with an attorney, accountant or other financial consultant or advisor, as its
purchaser representative, and such person is capable of evaluating the risk of
this investment and of so advising the Holder thereof, and (vii) the Holder
acknowledges that the Company's Series A Preferred Stock has not been registered
under the Securities Act of 1933, the Pennsylvania Securities Act or any other
state securities act, and agrees that any shares of Series A Preferred Stock in
the Company acquired by the Holder may not be transferred during the period
ending twelve months from the date of acquisition.
3. EXERCISE OF WARRANT.
A. CONDITIONS OF EXERCISE. The Holder is entitled to exercise this
Warrant on only one occasion. In the event this Warrant is exercised as to less
than all the Warrant Shares purchasable hereunder, the Holder shall be deemed to
have forfeited the Holder's rights to such unexercised shares. To exercise this
Warrant, the Holder shall deliver to the Company at its office referred to
herein, or at such office as the Company may from time to time so designate, at
any time and from time to time during the Term of this Warrant: (i) the Notice
of Exercise in the form attached hereto, (ii) cash, certified or official bank
check payable to the order of the Company, wire transfer of funds to the
Company's account, or evidence of any indebtedness of the Company to the Holder
(or any combination of any of the foregoing) in the amount of the Warrant Price
Per Share for each share of Series A Preferred Stock covered by such Notice of
Exercise, and (iii) this Warrant.
B. TRANSFER RESTRICTION LEGEND. The certificate for Warrant Shares
shall bear the following legend (and any additional legend required by (i) any
applicable state securities laws and (ii) any securities exchange upon which
such Warrant Shares may, at the time of such exercise, be listed) on the face
thereof unless at the time of exercise such Warrant Shares shall be registered
under the Securities Act:
2
<PAGE> 75
"The shares represented by this certificate have not
been registered under the Securities Act of 1933, as
amended, and may not be sold or transferred in the
absence of such registration or an exemption
therefrom under said Act."
Any certificate issued at any time in exchange or substitution for any
certificate bearing such legend (except a new certificate issued upon completion
of a public distribution under a registration statement of the securities
represented thereby) shall also bear such legend unless, in the opinion of
counsel for the holder thereof (which counsel shall be reasonably satisfactory
to counsel for the Company) the securities represented thereby are not, at such
time, required by law to bear such legend.
4. ADJUSTMENTS TO WARRANT PRICE PER SHARE.
(i) In the case of any proposed consolidation or merger of the Company
with another entity, or the proposed sale of all or substantially all of its
assets to another person or entity or any proposed reorganization or
reclassification of the capital stock of the Company, then, as a condition of
such consolidation, merger, sale, reorganization or reclassification, lawful and
adequate provision shall be made whereby the Holder of this Warrant shall
thereafter have the right to receive upon the basis and upon the terms and
conditions specified herein, in lieu of the shares of Series A Preferred Stock
immediately theretofore purchasable hereunder, such shares of stock, securities
or assets as may (by virtue of such consolidation, merger, sale, reorganization
or reclassification) be issued or payable with respect to or in exchange for the
number of shares of such Series A Preferred Stock purchasable hereunder
immediately before such consolidation, merger, sale, reorganization or
reclassification. In any such case, appropriate provision shall be made with
respect to the rights and interests of the Holder of this Warrant to the end
that the provisions hereof shall thereafter be applicable as nearly as may be,
in relation to any shares to stock, securities or assets thereafter deliverable
upon the exercise of this Warrant.
(ii) If, at any time during the term of this Warrant, the number of
shares of Series A Preferred Stock outstanding is increased by a stock dividend
payable in shares of Series A Preferred Stock or by a subdivision or split-up of
shares of Series A Preferred Stock, then, following the record date fixed for
the determination of holders of Series A Preferred Stock entitled to receive
such stock dividend, subdivision or split-up, the Warrant Price Per Share shall
be proportionately decreased and the number of shares of Series A Preferred
Stock issuable upon the exercise hereof shall be increased in proportion to such
increase in outstanding shares.
(iii) If, at any time during the term of this Warrant, the number of
shares of Series A Preferred Stock outstanding is decreased by a combination of
the outstanding shares of Series A Preferred Stock, then, following the record
date for such combination, the Warrant Price Per Share shall be proportionately
increased and the number of shares of Series A Preferred Stock issuable upon the
exercise hereof shall be decreased in proportion to such decrease in outstanding
shares.
(iv) In case, at any time during the term of this Warrant, the Company
shall declare a cash dividend upon its Series A Preferred Stock payable
otherwise than out of earnings or earned surplus or shall distribute to holders
of its Series A Preferred Stock shares of its capital stock (other than Series A
Preferred Stock), stock or other securities of other persons, evidences of
indebtedness issued by the Company or other persons, assets (excluding cash
dividends and
3
<PAGE> 76
for Series A Preferred Stock), then, in each such case, immediately following
the record date fixed for the determination of the holders of Series A Preferred
Stock entitled to receive such dividend or distribution, the Warrant Price Per
Share in effect thereafter shall be determined by multiplying the Warrant Price
Per Share in effect immediately prior to such record date by a fraction of which
the numerator shall be an amount equal to the difference of (x) the Current
Value of one share of Series A Preferred Stock minus (y) the fair market value
(as determined by the Board of Directors of the Company, whose determination
shall be conclusive) of the stock, securities, evidences of indebtedness,
assets, options or rights so distributed in respect of one share of Series A
Preferred Stock, and of which the denominator shall be such Current Value. Upon
each adjustment of the Warrant Price Per Share as provided in this Section
4(iv), the Holder shall thereafter be entitled to purchase, at the Warrant Price
Per Share resulting from such adjustment, the number of shares (calculated to
the nearest tenth of a share), obtained by multiplying the Warrant Price Per
Share in effect immediately prior to such adjustment by the number of shares
purchasable pursuant hereto immediately prior to such adjustment and dividing
the product thereof by the Warrant Price Per Share resulting from such
adjustment.
5. NOTICE OF DISSOLUTION OR LIQUIDATION. In case of any distribution of
assets of the Company in dissolution or liquidation (except under circumstances
when the foregoing Section 4 shall be applicable), the Company shall give notice
thereof to the Holder hereof and shall make no distribution to shareholders
until the expiration of fifteen (15) days from the date of mailing of the
aforesaid notice and, in any case, the Holder hereof may exercise the Warrant
Rights within fifteen (15) days from the date of the giving of such notice, and
all rights herein granted not so exercised within such fifteen-day period shall
thereafter become null and void.
6. FURTHER ASSURANCES. The Company will take all such action as may be
necessary or appropriate in order that the Company may validly and legally issue
fully paid and non-assessable shares of stock upon the exercise of this Warrant
from time to time outstanding.
7. RESERVATION OF STOCK ISSUABLE ON EXERCISE OF WARRANT. The Company
will at all times reserve and keep available, solely for issuance and delivery
upon the exercise of this Warrant, all shares of Series A Preferred Stock (or
other Securities) from time to time issuable upon the exercise of this Warrant.
8. NOTICES. All Notices required or permitted to be given hereunder
shall be given in writing and shall be deemed to be sufficiently given when
either (a) personally delivered or (b) when deposited in the U.S. mail with
postage prepaid and duly addressed to the party at its address set forth above,
provided that such notice shall also be sent by mail return receipt requested or
by overnight mail by a nationally recognized carrier or by telecopier or
facsimile.
9. WARRANT RIGHTS; ETC. The holder of the Warrant Shares is entitled to
those rights that are set forth in the Company's Restated Certificate of
Incorporation, as amended form time to time, and in that certain Series A
Preferred Stock and Warrant Purchase Agreement dated January 20, 1998 by and
between the Company and certain Purchasers, including but not limited to
registration rights, liquidation rights, conversion rights and redemption
rights.
4
<PAGE> 77
10. NO RIGHTS AS STOCKHOLDER; LIMITATION OF LIABILITY AND RIGHTS. This
Warrant shall not entitle the Holder to any of the rights of a shareholder of
the Company. No provision hereof, in the absence of affirmative action by the
Holder to purchase shares of Series A Preferred Stock, and no mere enumeration
herein of the rights or privileges of the Holder, shall give rise to any
liability of the Holder for the Warrant Price hereunder or as a shareholder of
the Company, whether such liability is asserted by the Company or by creditors
of the Company. Nothing in this Warrant shall be construed to give any person or
corporation other than the Company and the Holder any legal or equitable right,
remedy or claim under this Warrant and this Warrant shall be for the sole and
exclusive benefit of the Company and the Holder.
11. MISCELLANEOUS. This Warrant and any term hereof may be changed.
waived, discharged or terminated by agreement between the Company and the
Holder. This Warrant shall be construed and enforced in accordance with and
governed by the laws of the Commonwealth of Pennsylvania. The headings in this
Warrant are for reference only, and shall not limit or otherwise affect any of
the terms hereof. For the purposes of this Warrant terms appearing in the
singular include the plural and terms appearing in the masculine gender include
the feminine gender.
12. AUTOMATIC CONVERSION. If, at any time during the term of this
Warrant, all of the outstanding shares of Series A Preferred Stock are
automatically converted into Common Stock pursuant to Article III-B, Section
3(b) of the Company's Restated Certificate of Incorporation, then, upon the
exercise of this Warrant, the Company shall issue to the Holder, in lieu of
shares of Series A Preferred Stock, shares of Common Stock in an amount equal to
the number of shares of Common Stock into which the shares of Series A Preferred
Stock would have been converted upon such automatic conversion of all
outstanding Series A Preferred Stock.
5
<PAGE> 78
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officer this 21 day of January, 1998.
Dated:
WITNESS/ATTEST: CELLOMICS, INC., Issuer
By:
- ----------------------------- ------------------------------
President
6
<PAGE> 79
FORM OF NOTICE OF EXERCISE
(To be signed only upon exercise of Warrant).
TO: Cellomics, Inc.
635 William Pitt Way
Pittsburgh, PA 15238
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise the purchase right represented by such Warrant for, and to
purchase thereunder, 53,381 shares of Cellomics, Inc.'s Series A Preferred Stock
and herewith makes payment of the Warrant Price Per Share for each share of
Series A Preferred Stock and requests that the certificates for such shares be
issued in the name of, and delivered to, Komasta Properties Ltd, 111 Alozorov
Street, Tel Aviv, Israel.
Dated:
Komasta Properties, Ltd.
By:
-------------------------------
Title:
----------------------------
<PAGE> 1
Exhibit 4.4
SERIES B PREFERRED STOCK
PURCHASE AGREEMENT
BY AND AMONG
THE PURCHASERS LISTED ON EXHIBIT A HERETO
AND
CELLOMICS, INC.
DATED AS OF FEBRUARY 23, 2000
1
<PAGE> 2
TABLE OF CONTENTS
2
<PAGE> 3
LIST OF EXHIBITS
PAGE NO.
-------
EXHIBIT A - Schedule of Purchasers
EXHIBIT B - Amended and Restated Certificate of Incorporation
EXHIBIT C - Schedule of Exceptions
EXHIBIT D - Form of Proprietary Information Agreement
EXHIBIT E - Form of Opinion of Counsel
EXHIBIT F - Amended and Restated Shareholders' Agreement
EXHIBIT G - Form of Management Rights Letter
EXHIBIT H - Form of Key Employee Agreement
3
<PAGE> 4
SERIES B PREFERRED STOCK
PURCHASE AGREEMENT
THIS SERIES B PREFERRED STOCK PURCHASE AGREEMENT (this "Agreement") is
made and entered into as of the 23rd day of February, 2000, by and among
CELLOMICS, INC. (the "Company"), a Delaware corporation having offices at 635
William Pitt Way, Pittsburgh, Pennsylvania 15238, and EACH OF THE PARTIES LISTED
ON THE SCHEDULE OF PURCHASERS ATTACHED HERETO AS EXHIBIT A (the "Schedule of
Purchasers"). The parties listed on the Schedule of Purchasers are hereinafter
referred to collectively as the "Purchasers".
WHEREAS, the Company desires to issue and sell, and the Purchasers
desire to purchase, certain securities of the Company;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and conditions herein contained, the Company and the Purchasers,
severally and not jointly, hereby agree as follows:
The Company has, or before the Closing (as defined in Section 2.1
hereof) will have, authorized the issuance and sale of up to Seven Hundred
Thousand (700,000) shares of Series B Preferred Stock, par value $.01 per share
of the Company (the "Series B Preferred"), having the rights, restrictions,
privileges and preferences as set forth in the Amended and Restated Certificate
of Incorporation of the Company (the "Amended and Restated Certificate"), the
form of which is attached to this Agreement as Exhibit B.
Upon and subject to the terms and conditions of this Agreement and in
reliance upon the representations, warranties and agreements contained herein,
at the Closing the Company will issue and sell to each Purchaser, and each
Purchaser will purchase from the Company at the Closing, that number of shares
of Series B Preferred set forth opposite such Purchaser's name on the Schedule
of Purchasers for the Closing (all such shares being collectively referred to as
the "Shares").
Certain capitalized terms used in this Agreement shall have the
respective meanings ascribed to them in Section 10 hereof.
Subject to the terms and provisions of this Agreement, the closing (the
"Closing") of the purchase and sale of Shares hereunder shall be in the amounts
set forth on the Schedule of Purchasers. The Closing shall be by and among the
Company and the Purchasers specified on the Schedule of Purchasers and shall be
held on the date (the "Closing Date") of, and immediately following, (a) the
final execution and delivery of at least one counterpart of this Agreement by
the Company and each of the Purchasers and (b) the satisfaction or waiver of all
conditions to the obligations of the parties to consummate the transactions
contemplated hereby, or such other date as shall have been agreed to by the
Company and the Purchasers.
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The place of the Closing (including the place of delivery to the
Purchasers by the Company of the certificates evidencing all Shares being
purchased at the Closing and the place of payment to the Company by the
Purchasers of the purchase price therefor) shall be at the offices of Kirkland &
Ellis, 200 East Randolph Drive, Chicago, Illinois 60601, or such other place as
shall have been agreed to by the Company and the Purchasers.
At the Closing, each Purchaser will pay to the Company by wire transfer
or by conversion of a Bridge Note as set forth on the Schedule of Purchasers,
the amount set forth opposite such Purchaser's name under the column labeled
"Total Investment" on the Schedule of Purchasers; and the Company will deliver
to each Purchaser a certificate or certificates registered in the Purchaser's
name (or in such name or names as otherwise designated by such Purchaser)
representing the number of Shares to be purchased at the Closing as set forth
opposite such Purchaser's name under the column labeled "Series B Preferred
Shares" on the Schedule of Purchasers.
Except as expressly set forth (with reference to a paragraph in this
Section 3) on the Schedule of Exceptions attached hereto as Exhibit C (the
"Schedule of Exceptions"), the Company hereby represents and warrants to the
Purchasers as follows:
(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware
and is qualified, licensed or domesticated as a foreign corporation in
each jurisdiction wherein the nature of its activities or properties
owned or leased by it makes such qualification, licensing or
domestication necessary. The Schedule of Exceptions sets forth the
jurisdictions in which the Company is qualified, licensed or
domesticated as a foreign corporation. The Company has all requisite
power, governmental licenses, authorization consents and approvals to
own the properties owned by it and to conduct the business as it is
being conducted by it and as contemplated by the Company's business
plan (the "Business Plan"), a true and correct copy of which has been
given to the Purchasers. The Schedule of Exceptions sets forth all
jurisdictions in which the Company owns or leases property or engages
in material activity.
(b) Prior to the Closing, the Company shall have properly
filed and recorded the Amended and Restated Certificate with the
Secretary of the State of Delaware. The Company is not in material
breach of any of the provisions of the Amended and Restated Certificate
or its By-Laws.
The Company has all requisite corporate power to enter into this
Agreement and each of the Financing Documents and will have on the Closing Date
all requisite corporate power to sell the Shares to be sold on the Closing Date
and to carry out and perform its obligations under the terms of this Agreement
and each of the Financing Documents.
The Company has no Subsidiaries and, except as set forth in the
Schedule of Exceptions, does not own of record or beneficially any capital stock
or equity interest or investment in any corporation, partnership, association or
business entity.
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The Schedule of Exceptions contains a true and correct list of all
securities of the Company (including the amounts thereof) outstanding
immediately prior to the Closing, and the holders of any interest in such
securities. Immediately prior to the Closing, the Company's authorized capital
stock will consist of (a) Six Million (6,000,000) shares of Common Stock, par
value $.01 per share of the Company (the "Common Stock"), of which One Million
One Hundred Eighty-Four Thousand Three Hundred Nineteen (1,184,319) shares will
be issued and outstanding, (b) Two Million Twenty-Four Thousand Five Hundred
(2,024,500) shares of Series A Preferred Stock, par value $.01 per share of the
Company (the "Series A Preferred"), of which One Million Nine Hundred Sixty-Six
Thousand Six Hundred Eighteen (1,966,618) shares will be issued and outstanding,
and (c) Seven Hundred Thousand (700,000) shares of Series B Preferred, none of
which will be issued and outstanding. Upon consummation of the Closing, all
issued and outstanding shares of capital stock of the Company will have been
duly authorized and validly issued, will be fully paid and nonassessable, will
be owned of record and beneficially by the shareholders and in the amounts set
forth in the Schedule of Exceptions, and will have been offered, issued, sold
and delivered by the Company in compliance with applicable federal and state
securities laws. Except as set forth in the Schedule of Exceptions, the Amended
and Restated Certificate and the Shareholders' Agreement, there are no
outstanding pre-emptive or other preferential rights, conversion rights or other
rights, options, warrants or agreements granted or issued by or binding upon the
Company for the purchase or acquisition of any shares of its capital stock. No
holder of Common Stock or Series A Preferred has granted (to the best of the
Company's belief) any option or other right to purchase from such shareholder
any interest in any share of Common Stock or Series A Preferred. The Company
holds no shares of its capital stock in its treasury.
All action on the part of the Company and its directors and
shareholders necessary for the authorization, execution, delivery and
performance by the Company of this Agreement and each of the Financing Documents
and for the consummation of the transactions contemplated herein and therein,
and for the authorization, issuance and delivery of the Shares and the
Conversion Shares has been taken or will be taken prior to the Closing. This
Agreement and each of the Financing Documents is, or upon execution will be, a
valid and binding obligation of the Company, enforceable in accordance with
their respective terms, subject to applicable bankruptcy, insolvency,
reorganization and moratorium laws and other laws of general application
affecting enforcement of creditors' rights generally. The execution and delivery
by the Company of this Agreement and each of the Financing Documents, and
compliance herewith and therewith, and the offer, issuance and sale of the
Shares and the Conversion Shares will not, with or without notice or the passage
of time or both, result in any violation of and will not conflict with, or
result in a breach of any of the terms of, or constitute a default under any
provision of, (i) any state or federal law to which the Company is subject, (ii)
the Amended and Restated Certificate or By-Laws, as amended, or (iii) any
mortgage, indenture, agreement, instrument, judgment, decree, order, rule or
regulation or other restriction to which the Company is a party or by which it
or any of its property is bound, or may be affected, or result in the creation
of any mortgage, pledge, lien, encumbrance or charge upon any of the properties
or assets of the Company pursuant to any such term or give any other person or
entity the right to accelerate the time for performance of any obligation of the
Company, except, with respect to clause (iii) only, for any such violations,
conflicts, breaches, defaults or other occurrences which would not have a
material adverse effect upon the condition, financial or otherwise, or the
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operations of the Company. No shareholder has any pre-emptive rights or rights
of first refusal by reason of or in connection with the issuance of the Shares
or the Conversion Shares. The Shares, when issued in compliance with the
provisions of this Agreement, will be validly issued, fully paid and
nonassessable, and will be free of any liens or encumbrances. The Conversion
Shares have been duly and validly reserved (and are in addition to any other
shares reserved for any other purpose) and are not subject to any pre-emptive
rights or rights of first refusal and, upon issuance, will be validly issued,
fully paid and nonassessable.
The Schedule of Exceptions sets forth a true and correct list of all
contracts, obligations, commitments, agreements, plans and the like, whether
written or oral, and all administrative, judicial and similar orders to which
the Company is a party or by which it or any of its properties is bound,
including, without limitation, the following:
(a) Any employment, bonus or consulting agreement, pension,
profit sharing, deferred compensation, stock bonus, retirement, stock
option, stock purchase, phantom stock or similar plan, or agreement
evidencing rights to purchase securities or phantom stock of the
Company or any agreement among shareholders of the Company;
(b) Any loan or other agreement, note, indenture or instrument
relating to, or evidencing, indebtedness for borrowed money, or
mortgaging, pledging or granting or creating a lien or security
interest or other encumbrance on any property of the Company or any
agreement or instrument evidencing any guaranty by the Company of
payment or performance by any other party;
(c) Any agreement with any dealer, sales representative,
broker or other distributor, jobber, advertiser or sales agency;
(d) Any agreement with any labor union or collective
bargaining organization or any other labor agreement;
(e) Any contract for the furnishing, purchase or lease of
machinery, equipment, goods or services (including, without limitation,
any agreement with processors and subcontractors);
(f) Any indenture, agreement or other document (including
private placement brochures) relating to the future sale or repurchase
of securities, excluding, however, this Agreement and the Financing
Documents;
(g) Any agreement to register under the Securities Act any of
the securities of the Company;
(h) Any joint venture contract or arrangement or other
agreement involving a sharing of profits or expenses;
(i) Any agreement (other than distributorship agreements or
similar agreements providing for the distribution of Company's products
with dealers,
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<PAGE> 8
distributors and sales representatives of the Company) limiting the
freedom of the Company to compete in any line of business or in any
geographic area or with any party; and
(j) Any agreement providing for disposition of any line of
business, assets or securities of the Company, or any agreement with
respect to the acquisition of any line of business, assets or shares of
any other business, any agreement of merger or consolidation or letter
of intent with respect to the foregoing.
Notwithstanding anything to the contrary herein, the Schedule of
Exceptions may exclude any contract which (i) the Company and/or each Subsidiary
has entered into in the ordinary course of business and (ii) either (1)
obligates the Company and/or each Subsidiary to make payments only, which
payments in the aggregate do not exceed $50,000 or (2) relates only to the
non-disclosure of confidential information. The Company has complied with all
material provisions of each such contract and commitment. No event has occurred
and no condition exists which with notice or the passage of time or both would
constitute a default by the Company or, to the Company's knowledge, by any other
party thereto, under any such contract or commitment. To the Company's
knowledge, no party to such contract or commitment has threatened to terminate
or has any intention of terminating its obligations thereunder.
Copies of the audited balance sheet of the Company dated December 31,
1997 and copies of the unaudited balance sheets of the Company dated December
31, 1998 and December 31, 1999 (the unaudited balance sheet dated December 31,
1999 being referred to herein as the "Balance Sheet") and the related statements
of operations and accumulated deficit and cash flows for the years then ended
(collectively, the "Financial Statements") attached as annexes to the Schedule
of Exceptions present fairly, in all material respects, the financial position
of the Company as of such dates, have been prepared in accordance with U.S.
generally accepted accounting principles, consistently applied, except for those
changes promulgated and required by accounting authority, and show all material
liabilities, absolute or contingent, of the Company required to be recorded
thereon in accordance with U.S. generally accepted accounting principles as of
the dates thereof.
The Company does not have, and does not know of, any liabilities (fixed
or contingent, including without limitation any tax liabilities due or to become
due), which, either individually or in the aggregate, are material and not
disclosed on the Balance Sheet.
Since the date of the Balance Sheet, there has not been:
(a) Any change in the condition, assets, liabilities,
prospects or business of the Company from that shown on the Balance
Sheet or as described in the Business Plan which, either individually
or in the aggregate, has been or is reasonably likely to be a material
adverse change;
(b) Any damage to, or destruction or loss of, any of the
properties or assets of the Company (whether or not covered by
insurance) materially adversely affecting the business or plans of the
Company or the Technology;
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(c) Any declaration, setting aside or payment or other
distribution in respect of any of the Company's capital stock, or any
direct or indirect redemption, purchase or other acquisition of any of
such stock (or any warrant, option or other right with respect to such
stock) by the Company or any repayment of Company debt held by any
Related Party or by an Affiliate;
(d) Any labor organizational activity, collective bargaining
activity, labor dispute or labor trouble;
(e) Any event or condition of any character, which, either
individually or in the aggregate, materially adversely affects the
business, operations or plans of the Company;
(f) Any action taken or entered into by the Company involving
any transaction other than in the usual and ordinary course of
business, except this Agreement;
(g) Any disclosure to any person of any material trade
secrets, except for disclosures made to persons subject to valid and
enforceable confidentiality agreements; or
(h) Any disposition of assets, except for sales of inventory
in the ordinary course of business.
The Company has filed or will file within the time prescribed by law (including
extensions of time approved by any appropriate taxing authority) all tax returns
and reports required to be filed with the United States Internal Revenue Service
and with the Commonwealth of Pennsylvania, and (except to the extent that the
failure to file would not have a material adverse effect on the condition or
operations of the Company) with all other jurisdictions where such filing is
required by law; and the Company has paid, or made adequate provision in the
Balance Sheet for the payment of, all taxes, interest, penalties, assessments or
deficiencies due in connection therewith. The Company has never had any tax
deficiency proposed or assessed against it and the Company has executed no
waiver of any statute of limitations on the assessment or collection of any tax
or governmental charge. None of the Company's federal income tax returns nor any
state income, sales or franchise tax returns has ever been audited by
governmental authorities. No tax audit, action, suit, proceeding, investigation
or claim is now pending nor, to the best of the Company's knowledge, threatened
against the Company, and no issue or question has been raised (and is currently
pending) by any taxing authority in connection with any of the Company's tax
returns or reports.
The Company has withheld or collected from each payment made to each of
its employees, the amount of all taxes (including, but not limited to, federal
income taxes, Federal Insurance Contribution Act taxes and Federal Unemployment
Tax Act taxes) required to be withheld or collected therefrom, and has paid the
same to the proper tax receiving officers or authorized depositories.
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<PAGE> 10
Except as set forth in the Schedule of Exceptions, there is no loan,
lease or other continuing transaction between the Company, any Related Party
and/or any Affiliate.
There is neither pending nor, to the Company's knowledge and belief,
threatened any action, suit, proceeding or claim, whether or not purportedly on
behalf of the Company, to which the Company or any employee of the Company, in
such capacity, is or may be named as a party or to which the Company's property
is or may be subject. To the best of the Company's knowledge and belief, there
is no basis for any such action, suit, proceeding or claim, in which an
unfavorable outcome, ruling or finding in any such matter or for all such
matters, taken as a whole, might have a material adverse effect on the
condition, financial or otherwise, operations or prospects of the Company or on
the Technology. The Company has no knowledge of any unasserted claim, the
assertion of which is likely and which, if asserted, will seek damages, an
injunction or other legal, equitable, monetary or nonmonetary relief which if
granted would have a material adverse effect on the condition, financial or
otherwise, operations or prospects of the Company.
Except as set forth in the Schedule of Exceptions, no consent, approval
or authorization of, or designation, declaration or filing with, any
governmental authority on the part of the Company, including qualification under
applicable state securities laws of the offer and sale of the Shares and of the
issuance of the Conversion Shares is required in connection with the valid
execution and delivery of this Agreement, the offer, sale or issuance of the
Shares, the conversion of the Shares into Common Stock or the issuance of the
Conversion Shares, or the consummation of any other transaction contemplated on
the Closing Date by this Agreement or any of the Financing Documents, except the
filing of the Amended and Restated Certificate with the Secretary of the State
of Delaware, which filing has been made and is effective as of the date hereof.
Any such consent, approval, authorization, declaration or filing set forth in
the Schedule of Exceptions has been obtained or made and is effective as of the
Closing Date.
The Company has good and marketable title to all its properties and
assets, free from all mortgages, pledges, liens, security interests, conditional
sale agreements, encumbrances or charges.
Set forth on the Schedule of Exceptions is a correct and complete list
of all leases (including, with respect to each lease, the material provisions of
such lease, including the term, the amount of rent called for and a description
of the leased property) under which the Company is a lessee, other than personal
property requiring rental payments of less than $25,000 per year. The Company
enjoys peaceful and undisturbed possession under all such leases, all of such
leases are valid and subsisting and none of them is in default in any respect,
and no event has occurred and no condition exists which with notice or the
passage of time or both would constitute such a default.
(a) All (i) franchises, permits, licenses and other similar
authority, (ii) patents, patent applications, patent rights, service
marks, trademarks, trademark applications, trademark rights, trade
names, trade name rights and copyrights (whether registered or not),
and (iii) know-how, technology and trade secrets, which are or may be
usable now
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or in the future for the conduct of the Company's business as now
conducted or as planned to be conducted are owned by the Company or the
Company has all rights to use such technology set forth in (i), (ii) or
(iii) above. The documents and instruments evidencing such ownership
and rights are listed in the Schedule of Exceptions.
(b) The Company has all franchises, permits, licenses and
other similar authority, necessary for the conduct of its business as
now being conducted by it and believes it can obtain any similar
authority necessary for the conduct of its business as planned to be
conducted, and it is not in violation, nor will the transactions
contemplated by this Agreement cause a violation of the terms or
provisions of any such franchise, permit, license or other similar
authority.
(c) Section 3.16(c) of the Schedule of Exceptions lists all
patents, patent applications, patent rights, trademarks, trademark
applications, trademark rights, trade names, trade name rights, service
marks and copyrights (whether registered or not) owned or possessed by
the Company (collectively, the "Listed Rights"). The Listed Rights
comprise all the patents, patent applications, patent rights,
trademarks, trademark applications, trademark rights, trade names,
trade name rights, service marks and copyrights (whether registered or
not) necessary to the conduct of the Company's business as now being
conducted, and the Company believes that the Company can obtain any
such rights necessary for the conduct of its business as planned to be
conducted. The Company has and possesses the know-how, technology and
trade secrets not included in the Listed Rights (such know-how,
technology and trade secrets being collectively called the
"Intellectual Property") which they believe to be necessary (i) to
conduct the Company's business as now being conducted and (ii) with
additional know-how, technology and trade secrets which the Company
plans to develop, for the conduct of its business as planned to be
conducted. (The Listed Rights and the Intellectual Property
collectively constitute the "Technology".) There is neither pending,
nor, to the best of the Company's knowledge and belief, threatened, any
claim or litigation against the Company contesting the validity or
right to use any of the Listed Rights or any of the Intellectual
Property, nor is the Company aware of any basis therefor, and the
Company has not received any notice of infringement upon or conflict
with any asserted right of others. To the best of the Company's
knowledge and belief, no person, corporation or other entity is
infringing or violating the Listed Rights or any of the Intellectual
Property. Except as described in the Schedule of Exceptions, the
Company does not have any obligation to compensate others for the use
of any Listed Right or any Intellectual Property, nor has the Company
granted any license or other right to use, in any manner, any of the
Listed Rights or Intellectual Property, whether or not requiring the
payment of royalties.
All taxes imposed by any state in connection with the issuance, sale
and delivery of the Shares shall have been fully paid, and all laws imposing
such taxes shall have been fully complied with, prior to the Closing Date.
Within the past six (6) months, the Company has not, either directly or
through any agent, offered any of the Shares or any security or securities
similar to the Shares for sale to, or
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solicited any offers to buy the Shares or any part thereof or any such similar
security or securities from, or otherwise approached or negotiated in respect
thereof with, any party or parties other than the Purchasers or institutional or
other sophisticated investors, each of which was offered all or a portion of the
Shares at a private sale for investment. Each offer described on the Schedule of
Exceptions with respect to this Section 3.18 was an offer to an institutional or
sophisticated investor relating to a private sale for investment, and such
offers do not, individually or collectively, affect the exemption of the offer,
sale and issuance of the Shares and the Conversion Shares from the registration
requirements of the Securities Act and all state securities laws.
Subject in part to the truth and accuracy of the Purchasers'
representations set forth in this Agreement, the offer, sale and issuance of the
Shares and the Conversion Shares as contemplated by this Agreement are exempt
from the registration requirements of the Securities Act, and all applicable
state securities laws, and neither the Company nor anyone acting on its behalf
will take any action hereafter that would cause the loss of such exemption.
The Company is not in violation of any term of the Amended and Restated
Certificate or By-Laws. Neither the Company nor any of its property is in
violation of any term of any mortgage, indenture, contract, agreement,
instrument, judgment, decree, order, statute, rule or regulation to which the
Company or any of such property is subject, a violation of which would
materially adversely affect the Company's condition, financial or otherwise, or
operations or the Technology.
(a) No employee of the Company and no Related Party is, or is
now expected to be, in violation of any term of any employment
contract, patent disclosure agreement, non-competition agreement, or
any other contract or agreement with any prior employer or any other
person, corporation, or other entity or any restrictive covenant in
such an agreement, or any obligation imposed by common law or
otherwise, relating to the right of any such employee or Related Party
to be employed by the Company because of the nature of the business
conducted or to be conducted by the Company or relating to the use of
trade secrets or proprietary information of others because of the
nature of the business conducted or to be conducted by the Company, and
the continued employment of the Company's employees and/or Related
Parties does not subject the Company or the Purchasers to any liability
for any such violation.
(b) Each of the Company's present or former employees who has
had access to proprietary information of the Company has executed a
Proprietary Information and Property Agreement substantially in the
form attached as Exhibit D hereto (each a "Proprietary Information
Agreement"). To the best of the Company's knowledge and belief, no
employee or former employee of the Company is, or to the best of the
Company's knowledge and belief now is expected to be, in violation of
the terms of the Proprietary Information Agreement entered into by such
employee or former employee, or of any other obligation relating to the
use of confidential or proprietary information of the Company. Each of
such Proprietary Information Agreements remains in full force and
effect.
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(c) Section 3.20(c) of the Schedule of Exceptions describes
all employment agreements to which the Company is a party. Each of such
employment agreements remains in full force and effect.
(d) To the best knowledge of the Company, no officer or key
employee of the Company has any present intent of terminating such
officer's or key employee's employment with the Company.
(e) The Company is in material compliance with all laws
regarding employment, wages, hours, equal opportunity, collective
bargaining and payment of Social Security and other taxes. The Company
is in material compliance with all applicable foreign, federal, state
and local laws and regulations regarding occupational safety and health
standards and has received no complaints from any foreign, federal,
state or local agency or regulatory body alleging violations of any
such laws and regulations.
(f) Except as set forth on the Schedule of Exceptions hereto,
the employment of all persons and officers employed by the Company is
terminable at will without any penalty or severance obligation of any
kind on the part of the employer. All sums due for employee
compensation and benefits and all vacation time owing to any employees
of the Company have been duly and adequately accrued on the accounting
records of the Company. All employees of the Company are either United
States citizens or resident aliens specifically authorized to engage in
employment in the United States in accordance with all applicable laws.
(g) The Company has not experienced, nor does it know of any
basis for, any strike, labor troubles or strife, work stoppages or slow
downs. The Company has not experienced, nor does it know or have
reasonable grounds to know of, any union or collective bargaining
organization efforts or negotiations, or requests for negotiations, for
any representation or any labor contract relating to any employees of
the Company.
The Company has no knowledge and does not believe that (i) there is
pending or threatened any claim or litigation against or affecting the Company
contesting its right to manufacture, sell or use any product or service
presently manufactured, sold or used or planned to be manufactured, sold or used
by the Company, (ii) there exists, or there is pending or planned, any statute,
rule, law, regulation, standard or code which would materially adversely affect
the condition, financial or otherwise, or the operations of the Company, or
(iii) there is any other existing fact which in the future could reasonably be
expected to materially adversely affect the Company's condition, financial or
otherwise, or operations. The Company currently intends to engage in the
business of the general type described in the Business Plan (the "Business").
The Company will use the proceeds of the offering (a) as set forth in
the Statement of Sources and Uses contained in the Schedule of Exceptions and
(b) for expenses incurred in connection with the transactions contemplated
hereby. The Company will not use the proceeds of the offering for any other
purpose. None of the transactions contemplated in this Agreement
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(including, without limitation, the use of the proceeds from the sale of the
Shares or the Conversion Shares) will violate or result in a violation of
Section 7 of the Exchange Act, including, without limitation, Regulations G, T
and X of the Board of Governors of the Federal Reserve System, 12 C.F.R.,
Chapter 11. The Company does not own or intend to carry or purchase any "margin
security" within the meaning of said Regulation G, including margin securities
originally issued by it. None of the proceeds from the sale of the Shares or the
Conversion Shares will be used to purchase or carry (or refinance any borrowing
the proceeds of which were used to purchase or carry) any "security" within the
meaning of the Securities Act.
(a) The Company does not have or make contributions to any
pension plans, defined benefit plans or defined contribution plans for
its employees which are subject to the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"). With respect to such plans,
if any, listed on the Schedule of Exceptions, the Company is in
compliance with the applicable provisions of ERISA. The Company has not
incurred any unremedied accumulated funding deficiency within the
meaning of ERISA or any unsatisfied liability to the Pension Benefit
Guaranty Corporation established under ERISA in connection with any
employee pension plan established or maintained by the Company under
the jurisdiction of ERISA. No Reportable Event or Prohibited
Transaction (as defined in Section 4043 of ERISA) has occurred with
respect to any plan administered by the Company.
(b) The Company's employment practices and policies are in
full compliance with (i) all applicable laws of the United States and
each applicable jurisdiction relating to equal employment opportunity,
and any rules, regulations, administrative orders and Executive Orders
relating thereto; and (ii) the applicable terms, relating to equal
opportunity, of any contract, agreement or grant the Company has with,
from or relating (by way of subcontract or otherwise) to any other
contract, agreement or grant of, any federal or state governmental
unit, except, with respect to each of clause (i) and (ii), for any
failures to be in compliance which would not have a material adverse
effect on the condition, financial or otherwise, or the operations of
the Company. The Company has not been the subject of any charge of
unfair labor practices, employment discrimination made against it by
the National Labor Relations Board, the United States Equal Employment
Opportunity Commission or any other governmental unit, nor is it
presently subject to any formal or informal proceedings before, or
investigations by, such Commission or governmental unit. To the
Company's knowledge, neither the Company, nor any employees of the
Company, nor any Related Parties are presently under investigation by
any commission or governmental agency for purposes of security
clearance or otherwise.
(c) Neither the Company nor any property owned or occupied by
the Company is in violation of any Federal or State Environmental Law
of any sort or in violation of any Federal or State "OSHA" law, except
for such violations which, either individually or in the aggregate,
would not have a material adverse effect on the condition, financial or
otherwise, or the operations of the Company. The Schedule of Exceptions
contains a list of all environmental permits held by the Company.
Without limiting the generality of the foregoing:
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<PAGE> 15
(i) ENVIRONMENTAL PERMITS. The Company has obtained
all environmental, health and safety permits and governmental
authorizations (collectively, the "Environmental Permits")
necessary for the construction of their facilities or the
conduct of their operations, and all such Environmental
Permits are in good standing and the Company is in compliance
with all terms and conditions of the Environmental Permits,
except for such failures to be in compliance which, either
individually or in the aggregate, would not have a material
adverse effect on the condition, financial or otherwise, or
the operations of the Company. No notice to, approval of or
authorization or consent from any governmental or regulatory
authority is necessary for the transfer of or modification to
any Environmental Permit and the consummation of the
transactions contemplated by this Agreement will not violate,
alter, impair or invalidate, in any respect, any Environmental
Permit.
(ii) ENVIRONMENTAL CLAIMS. There is no Environmental
Claim pending, threatened or, to the best of the Company's
knowledge, likely to be threatened (i) against the Company,
(ii) against any person or entity whose liability for any
Environmental Claim the Company has or may have retained or
assumed either contractually or by operation of law, or (iii)
against any real or personal property or operations which are
now or have been previously owned, leased, operated or
managed, in whole or in part, by the Company.
(iii) RELEASES. There have been no Releases of any
Hazardous Materials that would be likely to form the basis of
any Environmental Claim against the Company or against any
person or entity whose liability for any Environmental Claim
the Company has or may have retained or assumed either
contractually or by operation of law.
(iv) ENVIRONMENTAL ASSESSMENTS. There are no
environmental reports, audits, investigations or assessments
of the Company, or any real or personal property or operations
which are now or have been previously owned, leased, operated
or managed, in whole or in part, by the Company.
(v) ENVIRONMENTAL DISCLOSURE. To the best knowledge
of the Company upon diligent review, the Company has disclosed
to the Purchasers all relevant facts with respect to potential
or actual environmental liabilities of the Company.
(d) The Company has not violated any law or any governmental
law, rule, order or regulation or requirement which violation through
the date hereof has had or would reasonably be expected to have a
material adverse effect upon the financial condition, operating
results, assets, operations or business prospects of the Company or the
Technology and the Company has not received notice of any such
violation.
15
<PAGE> 16
The Schedule of Exceptions contains a true and complete list, including
the names of the parties thereto and summary description of the terms thereof,
of all debt instruments, loan agreements, indentures or guaranties, whether
written or oral, other than obligations which may be terminated without payment
or penalty by the Company upon not more than thirty (30) days' notice and
obligations which are otherwise disclosed in this Agreement. All of the
aforesaid items were entered into in the ordinary course of business, are valid
and binding, in full force and effect and are enforceable in accordance with
their respective terms and there exists no breach or default, or any event which
with notice or lapse of time or both, would constitute a breach or default by
any party thereto, except for such breaches or defaults which, either
individually or in the aggregate, would not have a material adverse effect on
the condition, financial or otherwise, or the operations of the Company. All of
the Company's Indebtedness is disclosed on the Balance Sheet.
All facilities, machinery, equipment, fixtures, vehicles and other
properties owned, leased or used by the Company are in good operating condition
and repair, are reasonably fit and usable for the purposes for which they are
being used, are adequate and sufficient for the Company's business and conform
in all material respects with all applicable ordinances, regulations and laws.
The Company has not been refused any insurance coverage sought or
applied for, and the Company has no reason to believe that it will be unable to
obtain one or more policies of insurance issued by insurers of recognized
responsibility, insuring the Company and its properties and business against
such losses and risks, and in such amounts, as are customary in the case of
corporations of established reputation engaged in the same or similar business
and similarly situated. The Schedule of Exceptions sets forth each insurance
policy (specifying the insurer, the amount of coverage, the type of insurance,
the policy number, the expiration date, the annual premium, loss payees and any
pending claims thereunder) maintained by the Company relating to its respective
properties, assets, business or personnel (which policies include directors' and
officers' liability insurance in the amount of at least $1,000,000), and each
inspection report or recommendation, if any, during the last three years as to
the conditions of the properties and assets owned, leased, occupied or operated
by it or the conduct of its business. The Company is not in default with respect
to any provision contained in any insurance policy, and the Company has not
failed to give any notice or present any presently existing claims under any
insurance policy in due and timely fashion, except for such defaults or failures
to give notice as would not result in termination or denial of coverage under
such policy.
Other than under this Agreement or as listed in the Schedule of
Exceptions, the Company has not agreed to register under the Securities Act any
of its authorized or outstanding securities.
The Company has never filed, has never been required to file and is not
currently required to file any reports, statements, forms or documents with the
Commission.
Neither the Company, nor, to the best knowledge and belief of the
Company, any of its respective officers, directors, employees, agents or other
representatives of the Company or any other business entity or enterprise with
which the Company is or has been affiliated or associated, has, directly or
indirectly, made or authorized any payment, contribution or gift of
16
<PAGE> 17
money, property, or services, whether or not in contravention of applicable law,
(a) as a kickback or bribe to any person or (b) to any political organization,
or the holder of or any aspirant to any elective or appointive public office
except for personal political contributions not involving the direct or indirect
use of funds of the Company.
The Company qualifies as a "Qualified Small Business" within the
meaning of Section 1202(d) of Internal Revenue Code of 1986, as amended (the
"Code"). Upon issuance, the Shares will qualify as "qualified small business
stock" within the meaning of Section 1202 of the Code. Without limiting the
generality of the foregoing: (i) the Company is a domestic C corporation, (ii)
the Company has not made any purchases of its own stock described in Code
Section 1202(c)(3)(B), and (iii) the Company's (or any predecessor's) aggregate
gross assets, as defined by Code Section 1202(d)(2), at no time between August
10, 1993 and through the Closing have exceeded or will exceed $50,000,000,
taking into account the assets of any corporation required to be aggregated with
the Company in accordance with Code Section 1202(d)(3).
The merger of BioDx, Inc., a Pennsylvania corporation and the
predecessor-in-interest to the Company ("BioDx"), with and into the Company (the
"Reincorporation Merger") was duly and validly authorized by all requisite
corporate action and has been validly effected in accordance with applicable
law. The Company has succeeded to all of BioDx's rights and obligations pursuant
to the provisions of applicable law as a result of the Reincorporation Merger.
Without limiting the generality of the foregoing, the Company has succeeded to
all of BioDx's rights as against third parties under the contracts to which
BioDx was a party at the time of the Reincorporation Merger, and the
Reincorporation Merger has not, and will not, with or without notice or the
passage of time or both, result in any violation of, conflict with, breach any
terms of, constitute a default under, or give any third party any right to
terminate or modify, any such contract.
This Agreement, the Schedule of Exceptions, the Balance Sheet, the
Financial Statements, the factual statements contained in the Business Plan, and
any other written statement furnished to the Purchasers or their counsel in
connection with the offer and sale of the Shares (other than the Company's
offering memorandum, as to which the Company makes no representations and
warranties and as to which the Company undertakes no obligation to update or
otherwise revise the information contained therein), taken as a whole, do not
contain any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements contained therein or herein not
misleading in the light of the circumstances under which they were made. There
is no fact which the Company has not disclosed to the Purchasers in writing that
materially adversely affects or, so far as the Company can now reasonably
foresee, will materially adversely affect the properties, business, prospects,
profits or condition (financial or otherwise) of the Company or the ability of
the Company to perform this Agreement and the Financing Documents or the other
actions contemplated hereby. The forecasts, projections, estimates and other
forward-looking matters furnished to the Purchasers (including those set forth
in the Business Plan) were prepared on the basis of the Company's best
estimates, which include certain assumptions. The Company does not have any
reason to believe that any assumptions or statements of opinion contained in
such forecasts, projections, estimates or other forward-looking matters are
unreasonable or false.
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<PAGE> 18
Each of the Purchasers represents and warrants to the Company, as to
itself only, as follows:
(a) AUTHORIZATION. It has full power and authority to enter
into this Agreement, the Financing Documents and all other documents
and instruments executed by it in connection with the transactions
contemplated hereby and thereby, and each such agreement, document or
instrument constitutes its valid and legally binding obligation,
enforceable against it in accordance with its terms, subject to
applicable bankruptcy, insolvency, reorganization and moratorium laws
and other laws of general application affecting enforcement of
creditors' rights generally.
(b) ACCREDITED INVESTOR. It is an "accredited investor" within
the meaning of Commission Rule 501 of Regulation D, as presently in
effect.
(c) EXPERIENCE. It is experienced in evaluating and investing
in companies such as the Company.
(d) INVESTMENT. It is acquiring the Shares for investment for
its own account and not with the view to, or for resale in connection
with, any distribution thereof. It understands that the Shares and the
Conversion Shares have not been registered under the Securities Act by
reason of an exemption from the registration provisions of the
Securities Act which depends upon, among other things, the bona fide
nature of its investment intent as expressed herein.
(e) RULE 144. It understands that the Shares it is purchasing
are characterized as "restricted securities" under the federal
securities laws inasmuch as they are being acquired from the Company in
a transaction not involving a public offering and that under such laws
and applicable regulations such securities may be resold without
registration under the Securities Act only in certain limited
circumstances. It acknowledges that the Shares and the Conversion
Shares must be held indefinitely unless they are subsequently
registered under the Securities Act or an exemption from such
registration is available. It has been advised or is aware of the
provisions of Rule 144 promulgated under the Securities Act, which
permits limited resale of shares purchased in a private placement
subject to the satisfaction of certain conditions (which conditions
cannot presently be satisfied).
(f) ACCESS TO DATA. It has had an opportunity to discuss the
Company's business, management and financial affairs with the Company's
management, and it has been furnished with copies of documents which it
has requested.
(g) NO RELIANCE ON CERTAIN TYPES OF ADVICE. It is not relying
on the Company for advice with respect to tax considerations, the
suitability of his, her or its investment in the Company or legal or
economic considerations.
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<PAGE> 19
(h) MARKETABILITY. It understands that the Company is closely
held and that there is no public market for resale of the Shares. It
understands that it is possible that a market for the Shares will not
ever develop. As a consequence, it understands that it may not be able
to liquidate its investment in the Shares, even in the event of an
emergency. It also understands that, for the foregoing reasons, the
Shares may not be readily accepted as collateral for a loan.
(i) ADDRESSES. The address set forth in Exhibit A attached
hereto is the Purchaser's true and correct residence and/or principal
place of business as of the date hereof.
By their execution of this Agreement, the Bridge Investors acknowledge
and confirm that at and upon the Closing, the principal of and interest accrued
on the Bridge Notes through the Closing Date will convert into Shares and the
Bridge Warrants will be issued. In addition, the Bridge Investors agree that
effective upon such conversion of the Bridge Notes into Shares and such issuance
of the Bridge Warrants (a) the Bridge Loan Subscription Agreements shall
terminate and be of no further force and effect, (b) the Bridge Notes shall be
deemed canceled and shall be of no further force and effect, and (c) neither the
Bridge Investors nor the Company shall have any further rights, obligations or
liabilities under the Bridge Loan Subscription Agreements or the Bridge Notes.
The Bridge Investors hereby waive any rights to receive notice of, and any
rights of first refusal, pre-emptive rights and other similar rights that they
may have under the Bridge Notes or the Bridge Loan Subscription Agreements with
respect to, the issuance of the Shares to the Purchasers pursuant to this
Agreement. The Company acknowledges and agrees to the provisions of this Section
4.2.
The obligation of the Purchasers to purchase the Shares to be purchased
by them at the Closing is subject to the fulfillment to their satisfaction on or
prior to the Closing Date of each of the following conditions:
The representations and warranties made by the Company in Section 3
hereof shall be true and correct in all respects when made, and shall be true
and correct in all respects on the Closing Date and with respect thereto, after
giving effect to the sale and issuance of the Shares at the Closing.
All covenants, agreements and conditions contained in this Agreement
(including those in Section 2.1) to be performed or complied with by the Company
on or prior to the Closing Date shall have been so performed or complied with in
all material respects.
The Company shall have executed and delivered to the Purchasers a
certificate of the President of the Company, dated the Closing Date, certifying
to the fulfillment of the conditions specified in Sections 5.1 and 5.2 of this
Agreement and such other matters as the Purchasers may reasonably request.
The Purchasers shall have received an opinion of counsel from Sweeney
Metz Fox McGrann & Schermer, L.L.C., counsel to the Company, addressed to them,
dated the Closing Date, to the effect and in substantially the form set forth in
Exhibit E.
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<PAGE> 20
The Company shall have delivered to the Purchasers a certificate of
recent date from the Secretary of State of the State of Delaware with respect to
the Company's due incorporation, good standing, legal corporate existence, due
authorization to conduct business and the payment of all franchise taxes, and,
certificates from the Secretary of State in each jurisdiction in which the
Company is required to be qualified to do business with respect to the Company's
good standing and due authorization to conduct business therein and payment of
all qualification fees.
At the time of the Closing, the purchase of the Shares to be purchased
by the Purchasers hereunder shall be legally permitted by all laws and
regulations to which it and the Company are subject.
All authorizations, approvals, or permits of any governmental authority
or regulatory body that are required in connection with the lawful issuance and
sale of the Shares pursuant to this Agreement, the conversion of the Shares into
Common Stock and the issuance of such Common Stock upon such conversion shall
have been duly obtained and shall be effective on and as of the Closing Date,
including, if necessary, permits from applicable state securities authorities,
qualifying the offer and sale of the Shares and the Conversion Shares.
The Amended and Restated Certificate shall have been filed with the
Secretary of the State of Delaware, duly amending the Certificate of
Incorporation of the Company.
All corporate and other proceedings in connection with the transactions
contemplated hereby and all documents and instruments incident to such
transactions shall be reasonably satisfactory in substance and form to the
Purchasers and special counsel for the Purchasers.
The By-Laws of the Company shall provide that (a) a majority of the
Directors constituting the Board shall constitute a quorum for the transaction
of any business at a meeting of the Board, and (b) the Board of Directors shall
meet at least four (4) times per year.
The Company, the Purchasers, the holders of the Company's shares of
Common Stock (the "Common Shareholders"), the holders of the Company's shares of
Series A Preferred (the "Series A Preferred Shareholders"), and the other
parties named therein shall have executed and delivered an Amended and Restated
Shareholders' Agreement (as further amended from time to time, the
"Shareholders' Agreement") to the effect and in substantially the form set forth
in Exhibit F hereto.
The Company shall have executed and delivered to each Purchaser who
requests the same a Management Rights Letter (collectively, the "Management
Rights Letters") to the effect and in substantially the form set forth in
Exhibit G hereto.
Alan Mendelson, Dr. Arnold Oronsky, Dr. Lansing Taylor, John Boles and
James Sharp shall have been elected to the Board of Directors, and the Company
shall have agreed and obligated itself, either in the Amended and Restated
Certificate or in the Company's Bylaws, to indemnify its officers and directors
to the fullest extent permitted by Delaware law.
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<PAGE> 21
The Bridge Notes shall have been surrendered to the Company for
conversion into Shares at the Closing, as further described in Section 4.2.
The Bridge Warrants shall have been issued at the Closing, as further
described in Section 4.2.
The Company shall have delivered to the Purchaser certified copies of
the resolutions of the Common Shareholders and Series A Preferred Shareholders
and the Company's Board of Directors approving the transactions contemplated by
this Agreement.
Each Purchaser shall be satisfied in its sole discretion with the
results of its legal, accounting, business, environmental and other due
diligence review of the Business.
The Company's obligation to sell the Shares to be purchased at the
Closing is subject to the fulfillment to its satisfaction on or prior to the
Closing Date of each of the following conditions:
The representations made by the Purchasers pursuant to Section 4.1
hereof shall be true and correct when made and shall be true and correct on the
Closing Date.
All covenants, agreements and conditions contained in this Agreement to
be performed or complied with by each and every Purchaser on or prior to the
Closing Date shall have been so performed or complied with in all material
respects.
At the time of the Closing, the conditions set forth in Sections 5.6
and 5.7 shall have occurred and the purchase of the Shares to be purchased by
the Purchasers hereunder shall be legally permitted by all laws and regulations
to which the Purchasers and the Company are subject.
The Amended and Restated Certificate shall have been accepted for
filing by the Secretary of State of the State of Delaware.
The Company, the Purchasers, the Common Shareholders, the Series A
Preferred Shareholders and the other parties named therein shall have executed
and delivered the Shareholders' Agreement.
The Company hereby covenants and agrees, so long as any Shares or any
Conversion Shares remain outstanding, or as otherwise provided in this Article
7:
The Company will furnish the following reports to the Purchasers:
(a) As soon as practicable after the end of each fiscal year
of the Company, and in any event within ninety (90) days thereafter, a
consolidated (and consolidating) balance sheet of the Company and its
Subsidiaries, if any, as at the end of such fiscal year, and
consolidated (and consolidating) statements of operations, accumulated
earnings and cash flows of the Company and its Subsidiaries, if any,
for such year,
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<PAGE> 22
prepared in accordance with generally accepted accounting principles
consistently applied and setting forth in each case in comparative form
the figures for the previous fiscal year, all in reasonable detail
audited (without scope limitations imposed by the Company) and
certified by independent public accountants of recognized national
standing selected by the Company and satisfactory to the Purchasers.
(b) As soon as practicable after the end of the first, second
and third quarterly accounting periods in each fiscal year of the
Company, and in any event within forty-five (45) days thereafter, a
consolidated (and consolidating) balance sheet of the Company and its
Subsidiaries, if any, as of the end of each such quarterly period, and
consolidated (and consolidating) statements of operations, accumulated
earnings and cash flows of the Company and its Subsidiaries, if any,
for such period and for the current fiscal year to date, prepared in
accordance with generally accepted accounting principles consistently
applied and setting forth in comparative form the figures for the
corresponding periods of the previous fiscal year, subject to changes
resulting from year-end audit adjustments, and setting forth any events
which could reasonably be expected to have an adverse effect upon the
Company's or any Subsidiary's finances or the results of its
operations, all in reasonable detail and certified by the principal
financial or accounting officer of the Company.
(c) From the date the Company becomes subject to the reporting
requirements of the Exchange Act, and in lieu of the financial
information and certificate required pursuant to Sections 7.1(a), (b),
(d) and (e), respectively, but within the time periods required for the
furnishing thereof, copies of its reports filed on Form 10-K, Form
10-Q, Form 8-K or any successor form or forms.
(d) Subject to Section 7.1(c), each set of financial
statements delivered to the Purchasers pursuant to this Section 7.1
will be accompanied by a certificate of the Chief Financial Officer of
the Company setting forth:
(i) Covenant Compliance - any information required in
order to establish whether the Company and its Subsidiaries
were in compliance with the requirements of this Section 7
during the period covered by the income statement then being
furnished; and
(ii) Event of Default - that the signers have
reviewed the relevant terms of this Agreement and have made,
or caused to be made, under their supervision, a review of the
transactions and conditions of the Company and its
Subsidiaries, if any, from the beginning of the accounting
period covered by the income statements being delivered
therewith to the date of the certificate and that such review
has not disclosed the existence during such period of any
condition or event which constitutes a breach or default under
this Agreement, the Amended and Restated Certificate or any of
the Financing Documents or, if any such condition or event
existed or exists, specifying the nature and period of
existence thereof and what action the Company has taken or
proposes to take with respect thereto.
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<PAGE> 23
(e) Subject to Section 7.1(c), as soon as available (but in
any event sixty (60) days or more before the commencement of each
fiscal year) the Company's budget and its operating plan for such
fiscal year (the "Annual Plan") as approved by the Board indicating,
among other things, quarterly income statements, balance sheets and
cash flow statements for the next fiscal year, plans for incurring
indebtedness and projections regarding other sources of funds; any
material changes in such financial plan shall be submitted as promptly
as practicable after such changes have been approved by the Board.
The Company will, for any Purchaser who (together with members of such
Purchaser's Group) agrees pursuant to this Agreement to purchase in the
aggregate, at the Closing, 200,000 or more Shares (such amount to be adjusted
for stock splits, combinations and other similar events affecting the Series B
Preferred):
(a) Permit such Purchaser (or its designated representative),
at its own expense, to visit and inspect any of the properties of the
Company, including its books of account, and to discuss its affairs,
finances and accounts with the Company's officers and its independent
public accountants, all at such reasonable times and as often as any
such party may reasonably request. Any such Purchaser shall give not
less than two (2) business days' notice of any such visitation or
inspection and such visitation or inspection shall be performed in a
reasonable manner and with due regard to the proprietary and
confidential nature of any information received by it.
(b) Deliver the reports and data described below to such
Purchaser:
(i) As soon as practicable after the end of each
fiscal month and in any event within thirty (30) days
thereafter, a consolidated balance sheet of the Company and
its Subsidiaries, if any, as at the end of such month, and
consolidated statements of operations, accumulated earnings
and cash flows of the Company and its Subsidiaries, if any,
for each month, prepared in accordance with generally accepted
accounting principles consistently applied, together with
comparison of such statements to the Annual Plan then in
effect and to the financial statements for the comparable
period in the prior fiscal year, and certified, subject to
changes resulting from year-end audit adjustments, by the
principal financial or accounting officer of the Company;
(ii) As soon as available, information and data on
any material adverse changes in or any event or condition
which materially adversely affects or could materially
adversely affect the business, operations, properties or plans
of the Company;
(iii) Immediately upon becoming aware of any
condition or event which constitutes a breach or violation of
this Agreement, the Amended and Restated Certificate, the
Financing Documents or any agreement contemplated hereby or
thereby, written notice specifying the nature and period of
existence
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<PAGE> 24
thereof and what action the Company is taking or proposes to
take with respect thereto; and
(iv) With reasonable promptness, such other
information and data with respect to the Company as any such
party may from time to time reasonably request.
(c) Hold meetings of its Directors at least quarterly and, if
such Purchaser does not have a representative affiliated with such
Purchaser on the Board of Directors, permit such Purchaser to send a
representative (without voting rights) to each meeting of the Board of
Directors of the Company and all committees of such Board; provided,
however, that the Purchasers shall receive notice no less favorable
than notice given to outside directors and the presence of any of the
Purchasers' representatives shall not be necessary to conduct any
meeting of the Board. The Company shall give such Purchaser notice of
each such meeting in the form and manner such notice is given to the
Company's directors.
(d) The Company's obligations under this Section 7.2 shall
terminate at such time as a Qualified Public Offering has closed and
any agreement of the type described in Section 9.15 hereof is no longer
in effect with respect to any Purchaser or when the Company first
becomes subject to the periodic reporting requirements of the Exchange
Act, whichever event shall first occur.
The Company will promptly pay and discharge, or cause to be paid and
discharged, when due and payable, all lawful taxes, assessments and governmental
charges or levies imposed upon the income, profits, property or business of the
Company, provided, however, that any such tax, assessment, charge or levy need
not be paid if the validity thereof shall at the time be contested in good faith
by appropriate proceedings, and provided, further, that unless otherwise
approved by the Board, the Company will pay all such taxes, assessments, charges
or levies forthwith upon the commencement of proceedings to foreclose any lien
which may have attached as security therefor. Unless otherwise approved by the
Board, the Company will promptly pay or cause to be paid when due, or in
conformance with customary trade terms, all other obligations incident to its
operations.
The Company will keep its properties in good repair, working order and
condition, reasonable wear and tear excepted, and from time to time make all
needful and proper, or legally required, repairs, renewals, replacements,
additions and improvements thereto; and the Company will at all times comply
with each provision of all leases to which it is a party or under which it
occupies, or has possession of, property if the breach of such provision might
have a material adverse effect on the condition, financial or otherwise, or
operations of the Company.
The Company will keep its assets which are of an insurable character
insured by financially sound and reputable insurers against loss or damage by
fire, extended coverage and explosion in amounts sufficient to prevent the
Company from becoming a co-insurer and not in any event less than 80% of the
insurable value of the property insured. The Company will maintain for itself,
with financially sound and reputable insurers, insurance against other hazards
24
<PAGE> 25
and risks and liability to persons and property to the extent and in the manner
customary for companies in similar businesses similarly situated. After the
Closing Date, the Company will continue to maintain directors' and officers'
liability insurance in the amount of at least $1,000,000, if such coverage is
available at commercially reasonable rates, at all times after the Closing Date.
After the Closing Date, the Company will continue to maintain insurance on the
life of Dr. Lansing Taylor in the amount of $2,000,000, naming the Company as
the owner and beneficiary thereof, at all times after the Closing Date. The
Company shall give immediate written notice to insurers of loss or damage to the
property and shall promptly file proof of loss with insurers.
The Company will keep true records and books of account in which full,
true and correct entries will be made of all dealings or transactions in
relation to its business and affairs in accordance with generally accepted
accounting principles applied on a consistent basis.
The Company shall duly observe and conform to all valid requirements of
governmental authorities relating to the conduct of its businesses or to its
property or assets. Without limiting the generality of the foregoing, the
Company will:
(a) Comply with all minimum funding requirements applicable to
any pension plans, employee benefit plans or employee contribution
plans which are subject to ERISA or to the Code, and comply in all
other respects with the provisions of ERISA and the provisions of the
Code applicable to such plans;
(b) Comply with all applicable material laws of the United
States and of each applicable jurisdiction relating to equal employment
opportunity, any rules, regulations, administrative orders and
Executive Orders relating thereto and the applicable material terms,
relating to equal employment opportunity, of any contract, agreement or
grant the Company has with, from or relating (by way of subcontract or
otherwise) to any other contract, agreement or grant of, any federal or
state governmental unit; and keep all records required to be kept, and
file all reports, affirmative action plans and forms required to be
filed, pursuant to any such applicable law or the terms of any such
government contract; and
(c) So conduct its business that neither the Company nor any
property owned or occupied by the Company is in violation of any
Federal or State Environmental Law of any sort or in violation of any
Federal or State "OSHA" Law.
The Company shall maintain in full force and effect its corporate
existence, rights, government approvals and franchises and all licenses and
other rights to use patents, processes, licenses, trademarks, trade names or
copyrights owned or possessed by it and deemed by the Company to be necessary to
the conduct of its business.
The Company will, from time to time, in accordance with the laws of the
state of its incorporation, increase the authorized amount of Common Stock if at
any time the number of shares of Common Stock remaining unissued and available
for issuance shall be insufficient to
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<PAGE> 26
permit the payment of dividends on the Series B Preferred for a period of five
(5) years in the form of Common Stock and the conversion to Common Stock of all
the then outstanding Shares.
(a) The Company and each person hereafter employed by it with
access to confidential information will enter into a Proprietary
Information Agreement to the effect and in substantially the form of
Exhibit D hereto or as otherwise approved by the Board.
(b) The Company will require all persons now or hereafter
employed by the Company and designated as a "key person" by the
Company's Board of Directors to execute an Employment Agreement in
favor of the Company to the effect and in substantially the form of
Exhibit H hereto or as otherwise approved by the Board, as a condition
precedent to the employment of such individuals.
(c) The Company will cause all technological developments,
inventions, discoveries or improvements made by employees of the
Company to be fully documented in engineering notebooks in accordance
with the prevailing industrial professional standards, and where
possible and appropriate, cause all employees to file and prosecute
United States and foreign patent applications relating to and
protecting such developments.
So long as the holders of the Series B Preferred retain the right to
elect one or more directors to the Board, the Company will maintain and preserve
in full force and effect the indemnification provisions described in Section
5.13.
So long as any Shares or Conversion Shares are held by any Purchaser or
any transferee who is not a corporation, the Company will use its best efforts
to cause the Shares and, upon issuance, the Conversion Shares to qualify as
qualified small business stock within the meaning of Section 1202 of the Code,
provided that this Section 7.12 shall not require the Company to limit its gross
assets (within the meanings of Code Section 1202(d)(3)) to an amount that does
not exceed $50,000,000.
The Company will use the proceeds from the sale of the Shares and the
Conversion Shares for the purposes described in Section 3.22 hereof.
The Company agrees to reimburse each of the directors elected to the
Company's Board of Directors and, if an affiliate of a Purchaser is not serving
as a director on the Board of Directors, a representative of such Purchaser
entitled to attend meetings of the Board of Directors and committees thereof
pursuant to Section 7.2(c) hereof for their reasonable out-of-pocket travel and
lodging expenses in connection with attending Board of Directors' meetings and
performing their respective obligations and responsibilities as directors of the
Company.
The Company will make any filings necessary to perfect in a timely
fashion exemptions from (i) the registration and prospectus delivery
requirements of the Securities Act and (ii) the registration or qualification
requirements of all applicable securities or blue sky laws of any state or other
jurisdiction, for the issuance of the Shares and the Conversion Shares to the
Purchasers.
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Not later than thirty (30) days after the Closing Date, the Company
will deliver to the Purchasers audited balance sheets of the Company dated
December 31, 1998 and December 31, 1999, respectively, and the related
statements of operations and accumulated deficit and cash flows for the years
then ended, together with the unqualified report thereon of
PricewaterhouseCoopers LLP. Such financial statements shall (i) present fairly,
in all material respects, the financial position of the Company as of such
dates, (ii) have been prepared in accordance with U.S. generally accepted
accounting principles, consistently-applied, except for those changes
promulgated by accounting authority, and (iii) show all material liabilities,
absolute or contingent, of the Company required to be recorded thereon in
accordance with U.S. generally accepted accounting principles as of the dates
thereof.
The Company will cause any Subsidiary which it may now have and/or
which it may organize or acquire in the future and which the Company controls to
comply fully with all the terms and provisions of Sections 7.3, 7.4, 7.5, 7.6,
7.7, 7.8 and 7.10 to the same extent as if such Subsidiary or Subsidiaries were
the "Company" herein.
The Company will use its reasonable best efforts to negotiate and
deliver to the Purchasers a side letter agreement with Carl Zeiss Holding Co.,
Inc. ("Zeiss"), a Delaware corporation, pursuant to which Zeiss will agree to
the special registration provisions set forth in Section 9.16 hereof with
respect to the securities owned by Zeiss as to which Zeiss is entitled to
registration rights pursuant to that certain Letter Agreement dated January 15,
1998 by and among the Company and Zeiss.
The Company agrees that, so long as any Shares remain outstanding, the
Company (and each of its Subsidiaries, if any, unless the context otherwise
requires) will not do any of the following after the Closing Date without the
approval of a majority of the Board, which approval must include the approval of
each director elected to the Board by the holders of Series B Preferred (and, if
the holders of Series B Preferred have not designated their representative to be
elected to the Board, such approval must also include the approval of the
holders of a majority of the Series B Preferred outstanding):
Make any substantial change in the character of its business.
Become subject to, or permit any of its Subsidiaries which it controls
to become subject to, any agreement or instrument, which by its terms would
(under any circumstances) restrict the Company's right to perform any of its
obligations pursuant to the terms of this Agreement or any agreement
contemplated hereby, the Amended and Restated Certificate, the Financing
Documents, or the Company's By-laws (including, without limitation, all
obligations relating to payment of dividends on and making redemptions of the
Series B Preferred and conversions of the Series B Preferred).
Hereafter issue, sell, grant or award any Equity Security or any option
to acquire any Equity Security to directors, officers, employees, consultants or
advisors to the Company, except for Equity Securities which are "Reserved
Employee Shares" within the meaning of Section 3(d)(i)(5)(C) of Article III,
Part B of the Amended and Restated Certificate.
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Create, incur, issue, assume, guarantee or otherwise become or remain
directly or indirectly liable for, or permit any Subsidiary to create, incur,
issue, assume, guarantee or otherwise become or remain directly or indirectly
liable for, any Indebtedness for borrowed money in excess of $1,000,000 in any
one fiscal year; provided that this Section 8.4 shall not apply to any
Indebtedness incurred pursuant to the Backstop Letter referred to in Section
3.11 of the Schedule of Exceptions.
Enter into, or permit any Subsidiary which it controls to enter into,
any transaction with any Related Party or any of its or any Subsidiary's
Affiliates, except as otherwise expressly contemplated by this Agreement or
referred to in Section 3.11 hereto.
Neither the Shares nor the Conversion Shares shall be transferable,
except upon the conditions specified in this Section 9, which conditions are
intended to insure compliance with the provisions of the Securities Act or, in
the case of Section 9.15 hereof, to assist in an orderly distribution of the
Company's securities. Each Purchaser will cause any proposed transferee of
Shares or Conversion Shares held by such Purchaser to agree to take and hold
those securities subject to the provisions and upon the conditions specified in
this Section 9.
As used in this Section 9, the following terms shall have the following
respective meanings:
"RESTRICTED SECURITIES" shall mean the securities of the Company
required to bear or bearing the legend set forth in Section 9.3 hereof.
"REGISTRABLE SECURITIES" shall mean, from time to time, (i) the
Conversion Shares, less any Conversion Shares theretofore sold to the public,
and (ii) any shares of Common Stock issued as dividends on the Shares.
The terms "REGISTER," "REGISTERED" and "REGISTRATION" shall refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act and applicable rules and regulations
thereunder, and the effectiveness of such registration statement.
"REGISTRATION EXPENSES" shall mean all expenses incurred by the Company
in compliance with Sections 9.5, 9.6 and 9.7 hereof, including, without
limitation, all registration and filing fees, printing expenses, fees and
disbursements of counsel for the Company, fees and expenses (not to exceed
$20,000) of one special counsel for all Holders chosen by the Holders of a
majority of the securities included in such registration, blue sky fees and
expenses, and the expense of any special audits incident to or required by any
such registration (but excluding the compensation of regular employees of the
Company, which shall be paid in any event by the Company).
"SELLING EXPENSES" shall mean all underwriting discounts and selling
commissions applicable to the sale of Registrable Securities, and all fees and
disbursements of counsel for any Holder (other than the fees and expenses of one
special counsel for all Holders included within the definition of Registration
Expenses).
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"HOLDER" shall mean any holder of outstanding Shares, Conversion Shares
or Registrable Securities which have not been sold to the public.
"INITIATING HOLDERS" shall mean any Purchaser (or their assignees under
Section 9.14 hereof) who in the aggregate are Holders of more than fifty percent
(50%) of the Registrable Securities, and, after any other Holder or Holders have
joined in a request by Initiating Holders, shall include such other Holder or
Holders.
"TERMINATION DATE" shall mean, as to all Holders, the date that is five
(5) years after the closing of an Initial Public Offering, provided that as of
such date the Company is subject to and is in compliance with the periodic
reporting requirements of the Exchange Act and shares of the Common Stock are
actively traded on the Nasdaq National Market or other national securities
exchange. In addition, "Termination Date" as to a particular Holder shall mean
such date as of which (i) the Company is subject to and in compliance with the
periodic reporting requirements of the Exchange Act, (ii) shares of the Common
Stock are traded as described above, and (iii) such Holder is able, within the
ninety (90) day period immediately following such date, to transfer all of such
Holder's Registrable Securities in compliance with Rule 144 promulgated by the
Commission under the Securities Act.
"OTHER SHAREHOLDERS" shall have the meaning set forth in Section
9.5(b).
Each certificate representing (i) the Shares, or (ii) the Conversion
Shares, or (iii) any other securities issued in respect of the Shares or the
Conversion Shares upon any stock split, stock dividend, recapitalization,
merger, consolidation or similar event, shall (unless otherwise permitted or
unless the securities evidenced by such certificate shall have been registered
under the Securities Act) be stamped or otherwise imprinted with a legend
substantially in the following form (in addition to any legend required under
applicable state securities laws):
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD OR OFFERED FOR SALE
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER
SAID ACT AND ANY APPLICABLE STATE SECURITIES LAW OR THE AVAILABILITY OF AN
EXEMPTION FROM REGISTRATION UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES
LAWS.
Upon request of a holder of such a certificate, the Company shall
remove the foregoing legend from the certificate or issue to such holder a new
certificate therefor free of any transfer legend, if with such request, the
Company shall have received either the opinion referred to in Section 9.4(a)(i)
or the "no-action" letter referred to in Section 9.4(a)(ii), to the effect that
any transfer by such holder of the securities evidenced by such certificate will
not violate the Securities Act and applicable state securities laws.
(a) The holder of Restricted Securities by acceptance thereof
agrees to comply in all respects with the provisions of this Section
9.4. Prior to any proposed transfer of
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<PAGE> 30
any Restricted Securities (other than under circumstances described in
Sections 9.5, 9.6 and 9.7 hereof and other than to a member of such
holder's Group, as defined below), the holder thereof shall give
written notice (or oral notice in the case of transactions in
compliance with Rule 144) to the Company of such holder's intention to
effect such transfer. Each such notice shall describe the manner and
circumstances of the proposed transfer in sufficient detail, and shall
be accompanied (except in transactions in compliance with Rule 144) by
either (i) a written opinion of Kirkland & Ellis or other legal counsel
(including counsel for the holder who also may be an employee of the
holder) who shall be reasonably satisfactory to the Company, addressed
to the Company and reasonably satisfactory in form and substance to the
Company's counsel, to the effect that the proposed transfer of the
Restricted Securities may be effected without registration under the
Securities Act and applicable state securities laws, or (ii) a
"no-action" letter from the Commission to the effect that the
distribution of such securities without registration will not result in
a recommendation by the staff of the Commission that action be taken
with respect thereto, provided, that in the case of a transfer of
Restricted Securities to a member of a holder's Group (as such term is
defined in the Shareholders' Agreement), no such opinion of counsel or
no-action letter shall be necessary, provided that the transferee
agrees in writing to be subject to the restrictions on transfer of the
Restricted Securities to the same extent as if such transferee were
originally a party signatory to this Agreement. Upon receipt by the
Company of such notices and accompanying opinion or "no-action" letter,
if required, the holder of such Restricted Securities shall be entitled
to transfer such Restricted Securities in accordance with the terms of
the notice delivered by the holder to the Company. Each certificate
evidencing the Restricted Securities transferred as above provided
shall bear the appropriate restrictive legend set forth in Section 9.3
above, except that such certificate need not bear such restrictive
legend if such legend is no longer required if the opinion of counsel
or "no-action" letter referred to above is to the further effect that
such legend is not required in order to establish compliance with any
provisions of the Securities Act or applicable state securities laws or
if the transaction is made, to the Company's reasonable satisfaction,
in compliance with Rule 144. Notwithstanding anything to the contrary
contained in this Section 9.4(a), no holder of Restricted Securities
will transfer any of such Restricted Securities to any member of such
holder's Group that is not an "accredited investor" (within the meaning
of Commission Rule 501 of Regulation D) at the time of such transfer,
except under the circumstances described in Sections 9.5, 9.6 and 9.7
hereof and except in transactions in compliance with Rule 144.
(b) With a view to making available the benefits of certain
rules and regulations of the Commission and applicable state securities
laws which may permit the sale of the Restricted Securities without
registration, the Company agrees to (i) make available to the holder of
Restricted Securities and any proposed transferee current financial and
other information about the Company and an adequate opportunity for the
proposed transferee to visit the Company's offices and discuss its
affairs with management and (ii) use its best efforts to otherwise
cooperate with such holder and such transferee, all as may be
reasonably required by such holder or proposed transferee.
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(a) REQUEST FOR REGISTRATION. If at any time after January 1,
2001, the Company shall receive from Initiating Holders a written
request that the Company effect a registration with respect to all or a
part of the Registrable Securities, the Company will, without limiting
any other rights under this Section 9:
(i) promptly give written notice of the proposed
registration to all other Holders; and
(ii) as soon as practicable, use its diligent best
efforts to effect such registration (including, without
limitation, the execution of an undertaking to file
post-effective amendments, appropriate qualification under
applicable blue sky or other state securities laws and
appropriate compliance with applicable regulations issued
under the Securities Act) as may be so requested and as would
permit or facilitate the sale and distribution of all or such
portion of such Registrable Securities as are specified in
such request, together with all or such portion of the
Registrable Securities of any Holder or Holders joining in
such request as are specified in a written request given by
such Holder or Holders within fifteen (15) days after receipt
of such written notice from the Company; provided that the
Company shall not be obligated to effect, or to take any
action to effect, any such registration pursuant to this
Section 9.5:
(A) after the Company has effected one (1)
such registration pursuant to this Section 9.5(a) and
such registration has been declared or ordered
effective and the sales of such Registrable
Securities shall have closed; or
(B) if the request for registration does not
request the registration of Registrable Securities
with a proposed public offering price of $10,000,000
or more.
Subject to Section 9.5(a)(ii), the Company shall file a registration
statement covering the Registrable Securities so requested to be registered as
soon as practicable after receipt of the request or requests of the Initiating
Holders.
The registration statement filed pursuant to the request of the
Initiating Holders may, subject to the provisions of Section 9.5(b) below,
include other securities of the Company which are held by officers or directors
of the Company or which are held by parties who, by virtue of agreements with
the Company, are entitled to include their securities in any such registration.
(b) UNDERWRITING. If the Initiating Holders intend to distribute the
Registrable Securities covered by their request by means of an underwriting,
they shall so advise the Company as a part of their request made pursuant to
this Section 9.5 and the Company shall include such information in the written
notice referred to in subsection 9.5(a)(i) above. The right of any Holder to
registration pursuant to this Section 9.5 shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the
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underwriting (unless otherwise mutually agreed by a majority in interest of the
Initiating Holders and such Holder) to the extent provided herein.
If officers or directors of the Company holding other securities of the
Company shall request inclusion in any registration pursuant to this Section
9.5, or if holders of securities of the Company who are entitled, by contract
with the Company, to have securities included in such registration (the "Other
Shareholders") request such inclusion, the Initiating Holders shall, on behalf
of all Holders, offer to include the securities of such officers, directors and
Other Shareholders in the underwriting and may condition such offer on their
acceptance of all applicable provisions of this Section 9. The Company shall
(together with all Holders, officers, directors and Other Shareholders proposing
to distribute their securities through such underwriting) enter into an
underwriting agreement in customary form with the representative of the
underwriter or underwriters selected for such underwriting by a majority in
interest of the Initiating Holders and reasonably acceptable to the Company.
Notwithstanding any other provision of this Section 9.5, if the
representative of the underwriter or underwriters advises the Initiating Holders
in writing that marketing factors make it advisable to impose a limitation on
the number of shares to be underwritten, the securities of the Company (other
than Registrable Securities) held by officers or directors of the Company and by
Other Shareholders shall be excluded from such registration to the extent so
required by such limitation and if a limitation of the number of shares is still
required, the Initiating Holders shall so advise all Holders of Registrable
Securities requesting registration, and the number of shares of Registrable
Securities that may be included in the registration and underwriting on behalf
of such Holders shall be reduced as required, such reduction to be allocated
among such Holders in proportion, as nearly as practicable, to the respective
amounts of Registrable Securities held by such persons at the time of filing the
Registration Statement.
If any Holder of Registrable Securities, officer, director or Other
Shareholder above disapproves of the terms of the underwriting, such party may
elect to withdraw therefrom by written notice to the Company, the underwriter
and the Initiating Holders. The securities so withdrawn shall also be withdrawn
from registration.
If the underwriter has not limited the number of Registrable Securities
or other securities to be underwritten, the Company may include its securities
for its own account in such registration if the underwriter so agrees and if the
number of Registrable Securities and other securities which would otherwise have
been included in such registration and underwriting will not thereby be limited.
(c) TERMINATION. The Company's obligations under this Section 9.5 shall
terminate, as to any Holder, on the first Termination Date applicable to such
Holder.
(a) NOTICE OF REGISTRATION. If the Company shall determine to
register any of its securities either for its own account or the
account of a security holder or holders exercising their respective
demand registration rights, other than a registration relating solely
to employee benefit plans, or a registration relating solely to a
Commission Rule
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145 transaction, or a registration on any registration form which does
not permit secondary sales, the Company will:
(i) promptly give to each Holder written notice
thereof (which shall include a list of the jurisdictions in
which the Company intends to attempt to qualify such
securities under the applicable blue sky or other state
securities laws); and
(ii) include in such registration (and any related
qualification under blue sky laws or other compliance), and in
any underwriting involved therein, all the Registrable
Securities specified in a written request or requests, made by
any Holder within fifteen (15) days after receipt of the
written notice from the Company described in clause (i) above,
except as set forth in subsection 9.6(b) below.
(b) UNDERWRITING. If the registration of which the Company
gives notice is for a registered public offering involving an
underwriting, the Company shall so advise the Holders as part of the
written notice given pursuant to subsection 9.6(a)(i). In such event,
the right of any Holder to registration pursuant to Section 9.6 shall
be conditioned upon such Holder's participation in such underwriting
and the inclusion of such Holder's Registrable Securities in the
underwriting to the extent provided herein. All Holders proposing to
distribute their securities through such underwriting shall (together
with the Company, directors and officers and the Other Shareholders
distributing their securities through such underwriting) enter into an
underwriting agreement in customary form with the underwriter or
underwriters selected for underwriting by the Company.
Notwithstanding any other provision of this Section 9.6, if the
underwriter determines that marketing factors require a limitation on the number
of shares to be underwritten, the underwriter may (subject to the allocation
priority set forth below) exclude from such registration and underwriting some
or all of the Registrable Securities which would otherwise be underwritten
pursuant hereto. The Company shall so advise all holders of securities
requesting registration, and the number of shares of securities that are
entitled to be included in the registration and underwriting shall be allocated
in the following manner: (i) securities (other than Registrable Securities) held
by officers or directors of the Company and by Other Shareholders shall be
excluded from such registration to the extent so required by such limitation,
and (ii) if a limitation of the number of shares to be underwritten is still
required, the Company shall so advise all Holders of Registrable Securities
requesting registration, and the number of shares of Registrable Securities that
may be included in the registration and underwriting on behalf of such Holders
shall be reduced as required, such reduction to be allocated among such Holders
in proportion, as nearly as practicable, to the respective amounts of
Registrable Securities held by such persons at the time of filing the
registration statement.
If any Holder of Registrable Securities or any officer, director or
Other Shareholder disapproves of the terms of any such underwriting, such party
may elect to withdraw therefrom by written notice to the Company and the
underwriter. Any Registrable Securities or other
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<PAGE> 34
securities excluded or withdrawn from such underwriting shall be withdrawn from
such registration.
(c) TERMINATION. The Company's obligations under this Section 9.6 shall
terminate, as to any Holder, on the first Termination Date applicable to such
Holder.
The Company shall use its reasonable best efforts to qualify for the
use of Form S-3 or any comparable or successor form or forms of the Commission;
and to that end the Company shall register (whether or not required by law to do
so) the Common Stock under the Exchange Act, in accordance with the provisions
of the Exchange Act following the effective date of the first registration, if
any, of any securities of the Company on Form S-1. After the Company has
qualified for the use of Form S-3, in addition to the rights contained in the
foregoing provisions of this Section 9, the Holders of Registrable Securities
shall have the right to request registrations on Form S-3 (by written request
stating the number of shares of Registrable Securities to be disposed of and the
intended method of disposition of such shares by such Holder or Holders),
subject only to the following:
(i) No request made under this Section 9.7 shall
require a registration statement requested therein to become
effective (a) prior to ninety (90) days after the effective
date of a registration statement filed by the Company covering
a firm commitment underwritten public offering of Common Stock
or (b) prior to the effective date of a registration statement
referred to in (a) above if the Company shall theretofore have
given written notice of such registration statement to the
Holders of Registrable Securities pursuant to subsection
9.5(a) or 9.6(a) and shall have thereafter pursued the
preparation, filing and effectiveness of such registration
statement with diligence;
(ii) The Company shall not be required to effect a
registration pursuant to this Section 9.7 unless the
Registrable Securities requested to be registered pursuant to
this Section 9.7 have a proposed public offering price of
$500,000 or more; and
(iii) The Company shall not be required to effect
more than two (2) registrations pursuant to this Section 9.7.
The Company shall give notice to all Holders of Registrable Securities
of the receipt of a request for registration pursuant to this Section 9.7 and
shall provide a reasonable opportunity for other Holders to participate in the
registration, and, if the intended method of disposition specified as aforesaid
is an underwritten public offering, participation by the Company and other
holders of Common Stock shall be on the basis set forth in Section 9.5(b) above.
Subject to the foregoing, the Company will use its best efforts to effect
promptly the registration of all shares of Registrable Securities on Form S-3 to
the extent requested by the Holder or Holders thereof for purposes of
disposition.
The Company's Obligations under this Section 9.7 shall terminate, as to
any Holder, on the first Termination Date applicable to such Holder.
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The Company shall bear all Registration Expenses incurred in connection
with any registration, qualification and compliance by the Company pursuant to
Sections 9.5, 9.6 and 9.7 hereof. Notwithstanding the foregoing, the Company
shall not be required to pay for any expenses of any registration proceeding
begun pursuant to Section 9.5 if the registration request is subsequently
withdrawn at the request of the Holders of a majority of the Registrable
Securities to be registered (in which case all participating holders shall bear
such expenses pro rata on the basis of the number of their shares so
registered); provided, however, that (i) the Company shall be required to pay
for any expenses of any registration proceeding begun pursuant to Section 9.5 if
the registration request is subsequently withdrawn at the request of the Holders
of a majority of the Registrable Securities to be registered, if at or prior to
the time of such withdrawal, the Holders shall have learned of a material
adverse change in the condition, business, or prospects of the Company that was
not known to the Holders at the time of their request and have withdrawn the
request with reasonable promptness following disclosure to the Holders by the
Company of such material adverse change, and (ii) in addition to its obligations
under clause (i) of this provision, the Company shall be required to pay for the
expenses of not more than one additional registration proceeding begun pursuant
to Section 9.5 if the registration request is subsequently withdrawn, at the
request of the Holders of a majority of the Registrable Securities to be
registered, for any other reason. All Selling Expenses shall be borne by the
holders of the securities so registered pro rata on the basis of the number of
their shares so registered.
In the case of each registration effected by the Company pursuant to
this Section 9, the Company will keep each Holder advised in writing as to the
initiation of each registration and as to the completion thereof. Except as
provided in Section 9.7, at its expense, the Company will:
(a) keep such registration effective for a period of one
hundred twenty (120) days or until the Holder or Holders have completed
the distribution described in the registration statement relating
thereto, whichever first occurs, provided, however, that such one
hundred twenty (120) day period shall be extended for a period of time
equal to the period the Holder refrains from selling any securities
included in such registration in accordance with the provisions of
Section 9.15 hereof;
(b) furnish such number of prospectuses and other documents
incident thereto as a Holder from time to time may reasonably request;
(c) Use its best efforts to register or qualify the
Registrable Securities under the securities or blue-sky laws of such
jurisdictions as any Holder may request; provided, however, that the
Company shall not be obligated to register or qualify such Registrable
Securities in any particular jurisdiction in which the Company would be
required to execute a general consent to service of process in order to
effect such registration, qualification or compliance, unless the
Company is already subject to service in such jurisdiction and except
as may be required by the Securities Act or applicable rules or
regulations thereunder; and
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(d) Use its best efforts to cause the Common Stock to be
listed on a national securities exchange or the Nasdaq National Market.
(a) The Company, with respect to each registration,
qualification and compliance effected pursuant to this Section 9, will
indemnify and hold harmless each Holder, each of its officers,
directors and partners, and each party controlling such Holder, and
each underwriter, if any, and each party who controls any underwriter,
against all claims, losses, damages and liabilities (or actions in
respect thereof) arising out of or based on any untrue statement (or
alleged untrue statement) of a material fact contained in any
prospectus, offering circular or other document (including any related
registration statement, notification or the like) incident to any such
registration, qualification or compliance, or based on 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, or any violation by the Company of the Securities Act or
any rule or regulation thereunder applicable to the Company and
relating to action or inaction required of the Company in connection
with any such registration, qualification or compliance, and will
reimburse each such Holder, each of its officers, directors and
partners, and each party controlling such Holder, each such underwriter
and each party who controls any such underwriter, for any legal and any
other expenses incurred in connection with investigating or defending
any such claim, loss, damage, liability or action, provided that the
Company will not be liable in any such case to the extent that any such
claim, loss, damage, liability or expense arises out of or is based on
any untrue statement or omission based solely upon written information
furnished to the Company by such Holder or underwriter, as the case may
be, and stated to be specifically for use therein.
(b) Each Holder and Other Shareholder will, if Registrable
Securities held by such party are included in the securities as to
which such registration, qualification or compliance is being effected,
indemnify and hold harmless the Company, each of its directors and
officers and each underwriter, if any, of the Company's securities
covered by such a registration statement, each party who controls the
Company or such underwriter, each other such Holder and Other
Shareholder and each of their respective officers, directors and
partners, and each party controlling such Holder or Other Shareholder,
against all claims, losses, damages and liabilities (or actions in
respect thereof) arising out of or based on any untrue statement (or
alleged untrue statement) of a material fact contained in any such
registration statement, prospectus, offering circular or other
document, or any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse the Company and
such Holders, Other Shareholders, directors, officers, partners,
parties, underwriters or control persons for any legal or any other
expenses reasonably incurred in connection with investigating or
defending any such claim, loss, damage, liability or action, in each
case to the extent, but only to the extent, that such untrue statement
(or alleged untrue statement) or omission (or alleged omission) is made
in such registration statement, prospectus, offering circular or other
document solely in reliance upon and in conformity with written
information furnished to the Company by such Holder or Other
Shareholder and stated to be specifically for use
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therein; provided, however, that the obligations of such Holders and
Other Shareholders hereunder shall be limited to an amount equal to the
proceeds to each such Holder or Other Shareholder of securities sold as
contemplated herein.
(c) Each party entitled to indemnification under this Section
9.10 (the "Indemnified Party") shall give notice to the party required
to provide indemnification (the "Indemnifying Party") promptly after
such Indemnified Party has actual knowledge of any claim as to which
indemnity may be sought, and shall permit the Indemnifying Party to
assume the defense of any such claim or any litigation resulting
therefrom, provided that counsel for the Indemnifying Party, who shall
conduct the defense of such claim or any litigation resulting
therefrom, shall be approved by the Indemnified Party (whose approval
shall not unreasonably be withheld), and the Indemnified Party may
participate in such defense at such party's expense (unless the
Indemnified Party shall have been advised by counsel that actual or
potential differing interests or defenses exist or may exist between
the Indemnifying Party and the Indemnified Party, in which case such
expense shall be paid by the Indemnifying Party), and provided further
that the failure of any Indemnified Party to give notice as provided
herein shall not relieve the Indemnifying Party of its obligations
under this Section 9. No Indemnifying Party, in the defense of any such
claim or litigation, shall, except with the consent of each Indemnified
Party, consent to entry of any judgment or enter into any settlement
which (i) does not include as an unconditional term thereof the giving
by the claimant or plaintiff to such Indemnified Party of a release
from all liability in respect to such claim or litigation, (ii)
includes equitable or other non-monetary relief, (iii) involves
admission of criminal or quasi-criminal activity, or (iv) any admission
or implication of bad faith, unfair dealing, self-dealing, dishonesty
or any similar claim which could reasonably be expected to be
detrimental to or injure such Indemnified Party's reputation or future
business prospects.
(d) In order to provide for just and equitable contribution to
joint liability under the Securities Act in any case in which either
(i) any holder of Restricted Securities exercising rights under this
Agreement, or any controlling person of any such holder, makes a claim
for indemnification pursuant to this Section 9.10 but it is judicially
determined (by the entry of a final judgment or decree by a court of
competent jurisdiction and the expiration of time to appeal or the
denial of the last right of appeal) that such indemnification may not
be enforced in such case notwithstanding the fact that this Section
9.10 provides for indemnification in such case, or (ii) contribution
under the Securities Act may be required on the part of any such
selling holder or any such controlling person in circumstances for
which indemnification is provided under this Section 9.10; then, and in
each such case, the Company and such holder will contribute to the
aggregate losses, claims, damages or liabilities to which they may be
subject (after contribution from others) in such proportion so that
such holder is responsible for the portion represented by the
percentage that the public offering price of its Restricted Securities
offered by the registration statement bears to the public offering
price of all securities offered by such registration statement, and the
Company is responsible for the remaining portion; provided, however,
that, in any such case, (A) no such holder will be required to
contribute any amount in excess of the public offering price of all
such Restricted Securities offered by it pursuant to such registration
statement; and (B) no
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<PAGE> 38
person or entity guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) will be entitled to
contribution from any person or entity who was not guilty of such
fraudulent misrepresentation.
Each Holder of Registrable Securities, and each Other Shareholder
holding securities included in any registration, shall furnish to the Company
such information regarding such Holder or Other Shareholder as the Company may
reasonably request in writing and as shall be reasonably required in connection
with any registration, qualification or compliance referred to in this Section
9.
From and after the date of this Agreement, the Company shall not enter
into any agreement, or amend any existing agreement, with any holder or
prospective holder of any securities of the Company giving such holder or
prospective holder the right to require the Company to initiate any registration
of any securities of the Company; provided that this Section 9.12 shall not
limit the right of the Company to enter into any agreements, or amend any
existing agreement, with any holder or prospective holder of any securities of
the Company giving such holder or prospective holder the right to require the
Company, upon any registration of any of its securities, to include, among the
securities which the Company is then registering, securities owned by such
holder and provided further that the Board may waive the requirement that the
Company not enter into any agreement, or amend any existing agreement, giving a
holder of any securities of the Company the right to require the Company to
initiate registration of any securities of the Company, provided that, if such
registration rights are more favorable than those granted to the Holders
pursuant to this Section 9, then the terms of this Section 9 shall
simultaneously be amended so as to include herein for the benefit of the Holders
such more favorable terms. In addition, any right given by the Company to any
holder or prospective holder of the Company's securities in connection with the
registration of securities shall be conditioned such that it shall be (i)
consistent with the provisions of this Section 9 and with the rights of the
Holders provided in this Agreement, and (ii) require the inclusion of
Registrable Securities (within the meaning of this Agreement) in any
registration required by any such holder or prospective holder on the same basis
as securities of Other Shareholders are required to be included in registrations
effected pursuant to Sections 9.5 and 9.6 of this Agreement.
With a view to making available the benefits of certain rules and
regulations of the Commission which may permit the sale of the Restricted
Securities to the public without registration, the Company agrees to:
(a) Make and keep public information available, as those terms
are understood and defined in Rule 144 under the Securities Act, at all
times from and after ninety (90) days following the effective date of
the first registration under the Securities Act filed by the Company
for an offering of its securities to the general public;
(b) Use its best efforts to file with the Commission in a
timely manner all reports and other documents required of the Company
under the Securities Act and the Exchange Act at any time after it has
become subject to such reporting requirements; and
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(c) So long as a Purchaser owns any Restricted Securities,
furnish to the Purchasers forthwith upon request a written statement by
the Company as to its compliance with the reporting requirements of
Rule 144 (at any time from and after ninety (90) days following the
effective date of the first registration statement in connection with
an offering of its Securities to the general public), and of the
Securities Act and the Exchange Act (at any time after it has become
subject to such reporting requirements), a copy of the most recent
annual or quarterly report of the Company, and such other reports and
documents so filed as a Purchaser may reasonably request in availing
itself of any rule or regulation of the Commission allowing a Purchaser
to sell any such securities without registration.
The rights to cause the Company to register securities granted by the
Company under this Section 9 may be assigned by any Holder to a transferee or
assignee of at least 50,000 shares of Registrable Securities (as adjusted for
stock splits, combinations and other similar events affecting the Registrable
Securities), provided that the Company is given written notice at the time of or
within a reasonable time after said transfer, stating the name and address of
said transferee or assignee and identifying the securities with respect to which
such registration rights are being assigned, and provided further that the
transferee or assignee of such rights agrees to be bound by the provision of
this Section 9. No Holder of Registrable Securities shall have any rights under
this Section 9 unless such Holder shall have executed this Agreement or an
instrument in which it agrees to be bound by the terms of this Section 9.
Each Purchaser agrees, if requested by the Company and an underwriter
of the Company's Common Stock (or other securities), not to sell or otherwise
transfer or dispose of any Common Stock (or other securities) of the Company
held by it during the one hundred eighty (180) day period following the
effective date of a registration statement of the Company filed under the
Securities Act, provided that:
(a) such agreement only applies to the first such registration
statement of the Company including securities to be sold on its behalf
to the public in an underwritten offering; and
(b) all Holders, Other Shareholders and officers and directors
of the Company enter into similar agreements.
Such agreement shall be in writing in a form satisfactory to the
Company and such underwriter. The Company may impose stop-transfer instructions
with respect to the shares (or securities) subject to the foregoing restriction
until the end of said one hundred eighty (180) day period.
The Company, each Purchaser that has registration rights under the
Series A Purchase Agreement (in its capacity as a holder of Series A Preferred)
and each Purchaser (in its capacity as a holder of Series B Preferred) hereby
agree that in the event the Company shall determine to register any of its
securities for its own account, the second paragraph of Section 9.6(b) hereof
and the second paragraph of Section 9.6(b) of the Series A Purchase Agreement
shall each be interpreted such that:
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(a) the words "Registrable Securities" in each such paragraph
shall include Registrable Securities (as defined in the Series A
Purchase Agreement) and Registrable Securities (as defined herein); and
(b) the words "Holders" in each such paragraph shall include
Holders (as defined in the Series A Purchase Agreement) and Holders (as
defined herein).
The intent of this Section 9.16 is to provide and ensure that in the event of a
Company-initiated registration under Section 9.6 in which the underwriters
advise the Company that marketing factors make it advisable to impose a
limitation on the number of shares underwritten, any cutbacks on the number of
shares held by the holders of Series A Preferred and the holders of Series B
Preferred included in the offering shall be pro rata among such persons.
As used in this Agreement or in the Financing Documents, capitalized
terms shall have the respective meanings set forth in this Agreement (including,
without limitation, in Section 9.2 hereof) or set forth below or in the Section
of this Agreement referred to below:
AFFILIATE shall mean, as to any entity or person, any natural person,
corporation, business trust, association, company, partnership, joint venture or
other entity or government agency or political subdivision which directly or
indirectly controls, is controlled by or is under common control with such
entity or person.
AMENDED AND RESTATED CERTIFICATE - Section 1.1.
ANNUAL PLAN - Section 7.1(e).
BALANCE SHEET - Section 3.7.
BRIDGE INVESTORS shall mean Axiom Venture Partners II Limited
Partnership, InterWest Partners VI, LP, InterWest Investors VI, LP, Delphi
Ventures III, L.P., Delphi BioInvestments III, L.P., Oxford Bioscience Partners
II, L.P., Oxford Bioscience Partners (Bermuda) II Limited Partnership and Oxford
Bioscience Partners (GS-Adjunct) II, L.P., together. Each of the Bridge
Investors is also a Purchaser for purposes of this Agreement.
BRIDGE LOAN SUBSCRIPTION AGREEMENTS shall mean the several Subscription
Agreements dated as of November 29, 1999 and November 30, 1999 between the
Company and each Bridge Investor, as any of the same may have been amended from
time to time.
BRIDGE NOTES shall mean, collectively,
(i) that certain convertible demand note dated November 30,
1999, in the original principal amount of $550,000.00, from the Company
to Axiom Venture Partners II Limited Partnership,
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<PAGE> 41
(ii) that certain convertible demand note dated November 30,
1999, in the original principal amount of $22,799.00, from the Company
to InterWest Investors VI, LP,
(iii) that certain convertible demand note dated November 30,
1999, in the original principal amount of $727,201.00, from the Company
to InterWest Partners VI, LP,
(iv) that certain convertible demand note dated November 30,
1999, in the original principal amount of $294,694.00, from the Company
to Delphi Ventures III, L.P.,
(v) that certain convertible demand note dated November 30,
1999, in the original principal amount of $5,306.00, from the Company
to Delphi BioInvestments III, L.P.,
(vi) that certain convertible demand note dated December 1,
1999, in the original principal amount of $73,235.00, from the Company
to Oxford Bioscience Partners II, L.P.,
(vii) that certain convertible demand note dated December 1,
1999, in the original principal amount of $54,883.40, from the Company
to Oxford Bioscience Partners (Bermuda) II Limited Partnership, and
(viii) that certain convertible demand note dated December 1,
1999, in the original principal amount of $71,881.60, from the Company
to Oxford Bioscience Partners (GS-Adjunct) II, L.P.
BRIDGE WARRANTS shall mean the warrants to be issued to the Bridge
Investors upon consummation of the transactions contemplated by this Agreement,
which warrants will entitle each Bridge Investor to purchase the number of
shares of Common Stock set forth opposite its name below for a price per share
equal to $12.07:
Axiom Venture Partners II Limited Partnership 25,056
----------------------------------------------------------------------
InterWest Investors VI, LP 1,039
----------------------------------------------------------------------
InterWest Partners VI, LP 33,129
----------------------------------------------------------------------
Delphi Ventures III, L.P. 13,425
----------------------------------------------------------------------
Delphi BioInvestments III, L.P. 242
----------------------------------------------------------------------
Oxford Bioscience Partners II, L.P. 3,335
----------------------------------------------------------------------
Oxford Bioscience Partners (Bermuda) II, Limited Partnership 2,500
----------------------------------------------------------------------
Oxford Bioscience Partners (GS-Adjunct) II, L.P. 3,274
BUSINESS - Section 3.21.
BUSINESS PLAN - Section 3.1.
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BOARD shall mean the entire Board of Directors of the Company.
CLOSING - Section 2.1.
CLOSING DATE - Section 2.1.
CODE - Section 3.30.
COMMISSION shall mean the Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act.
COMMON SHAREHOLDERS - Section 5.11.
COMMON STOCK - Section 3.4.
CONVERSION SHARES shall mean at any time, shares of Common Stock (i)
issued and then outstanding upon the conversion of the Series B Preferred
purchased under this Agreement, (ii) issuable upon the conversion of the Series
B Preferred purchased under this Agreement, and (iii) issued and then
outstanding or issuable in respect of the Common Stock referred to in clause (i)
of this definition upon any stock split, stock dividend, recapitalization or
similar event.
EMPLOYMENT AGREEMENT - Section 3.20.
ENVIRONMENTAL CLAIM shall mean any and all administrative, regulatory
or judicial actions, suits, demands, demand letters, directives, claims, liens,
investigations, proceedings or notices of compliance or violation (written or
oral) by any person or entity (including any governmental authority) alleging
potential liability (including, without limitation, potential liability for
enforcement, investigatory costs, cleanup costs, governmental response costs,
removal costs, remedial costs, natural resources damages, property damages,
personal injuries, or penalties) arising out of, based on or resulting from (a)
the presence, or Release or threatened Release into the environment, of any
Hazardous Material at any location, whether owned, operated, leased or managed
by the Company or its Subsidiaries; or (b) circumstances forming the basis of
any violation, or alleged violation, of any Environmental Law; or (c) any and
all claims by any third party seeking damages, contribution, indemnification,
cost recovery, compensation or injunctive relief resulting from the presence or
Release of any Hazardous Materials.
ENVIRONMENTAL LAWS shall mean all laws or orders relating to the
regulation or protection of human health, safety or the environment (including,
without limitation, ambient air, soil, surface water, ground water, wetlands,
land or subsurface strata), including, without limitation, laws and regulations
relating to Releases or threatened Releases of Hazardous Materials, or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport, recycling or handling of Hazardous Materials.
ENVIRONMENTAL PERMITS - Section 3.23.
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EQUITY SECURITIES shall mean any stock or similar security, including
without limitation securities containing equity features and securities
containing profit participation features, or any security convertible or
exchangeable, with or without consideration, into any stock or similar security,
or any security carrying any warrant or right to subscribe to or purchase any
stock or similar security, or any such warrant or right.
ERISA - Section 3.23.
EXCHANGE ACT shall mean the Securities Exchange Act of 1934, as
amended, and any regulations issued pursuant thereto.
FINANCING DOCUMENTS shall mean collectively, the Shareholders'
Agreement, the Management Rights Letters and all other documents set forth in
any other schedules or exhibits hereto, under which, upon its execution thereof,
the Company or any Subsidiary shall have an obligation to any Purchaser, all in
the respective forms thereof as executed and as amended from time to time.
FINANCIAL STATEMENTS - Section 3.7.
GROUP shall mean:
(i) in the case of any Purchaser who is an
individual, such Purchaser or any Affiliate of such Purchaser;
(ii) in the case of any Purchaser which is a
pass-through entity, (A) such pass-through entity and any of
its partners, members or other equity owners, (B) any
corporation or other business organization to which such
pass-through entity shall sell all or substantially all of its
assets or with which it shall be merged or consolidated and
(C) any Affiliate of such pass-through entity; and
(iii) in the case of any Purchaser which is a
corporation, (A) any such corporation, its parent and any of
such corporation's or parent's subsidiaries, (B) any
corporation or other business organization to which such
corporation shall sell all or substantially all of its assets
or with which it shall be merged, and (C) any Affiliate of
such corporation.
HAZARDOUS MATERIALS shall mean (a) any petroleum or petroleum products,
radioactive materials, asbestos in any form that is or could become friable,
above ground or underground storage tanks and compressors or other equipment
that contain polychlorinated biphenyls ("PCBs"); and (b) any chemicals,
materials or substances which are now defined as or included in the definition
of "hazardous substances," "hazardous wastes," "hazardous materials," "extremely
hazardous wastes," "restricted hazardous wastes," "toxic substances," "toxic
pollutants," "pollutants," "contaminants" or words of similar import, under any
Environmental Law; and (c) any other chemical, material, substance or waste,
exposure to which is now prohibited, limited or regulated under any
Environmental Law.
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HOLDER - Section 9.2.
INDEBTEDNESS shall mean any obligation of the Company, contingent or
otherwise, which under generally accepted accounting principles is required to
be shown on the balance sheet of the Company as a liability. Any obligation
secured by a lien or security interest on, or payable out of the proceeds of or
production from, property of the Company shall be deemed to be Indebtedness even
though such obligation is not assumed by the Company.
INITIAL PUBLIC OFFERING shall mean the first underwritten public
offering pursuant to an effective registration statement under the Securities
Act covering the offering and sale of Common Stock for the account of the
Company, on a firm commitment basis.
MANAGEMENT RIGHTS LETTERS - Section 5.12.
PERSON shall include all natural persons, corporations, business
trusts, associations, companies, partnerships, joint ventures and other entities
and governments and agencies and political subdivisions.
PROPRIETARY INFORMATION AGREEMENT - Section 3.20.
QUALIFIED PUBLIC OFFERING - shall mean the first underwritten public
offering following the date hereof pursuant to an effective registration
statement under the Securities Act covering the offering and sale of Common
Stock for the account of the Company, on a firm commitment basis in which (i)
the aggregate gross proceeds to Company equal or exceed Twenty Million Dollars
($20,000,000), and (ii) the public offering price per share of Common Stock
equals or exceeds an amount equal to two and one-half (2.5) times the initial
Series B Conversion Price (as defined in the Amended and Restated Certificate)
of the Series B Preferred.
REINCORPORATION MERGER - Section 3.31
RELATED PARTY shall mean any officer, director, employee or consultant
of the Company or any Subsidiary or any holder of 5% or more of any class of
capital stock of the Company or any Subsidiary or any member of the immediate
family of any such officer, director, employee, consultant or shareholder or any
entity controlled by any such officer, director, employee, consultant or
shareholder or a member of the immediate family of any such officer, director,
employee, consultant or shareholder.
RELEASE shall mean any release, spill, emission, leaking, injection,
deposit, disposal, discharge, dispersal, leaching or migration into the
atmosphere, soil, surface water, ground water or property.
RESTRICTED SECURITIES - Section 9.2.
SECURITIES ACT shall mean the Securities Act of 1933, as amended, and
regulations issued pursuant thereto.
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SERIES A PREFERRED - Section 3.4.
SERIES A PREFERRED SHAREHOLDERS - 5.11.
SERIES A PURCHASE AGREEMENT shall mean the Series A Preferred Stock and
Warrant Purchase Agreement dated as of January 21, 1998 by and among the Company
and each of the parties listed on the Schedule of Purchasers attached thereto.
SERIES B PREFERRED - Section 1.1
SHAREHOLDERS' AGREEMENT - Section 5.11.
SHARES - Section 1.2.
SUBSIDIARY shall mean any corporation, partnership, joint venture,
association or other business entity at least 50% of the outstanding voting
stock or voting interests of which is at the time owned or controlled, directly
or indirectly, by the Company or by one or more of such Subsidiary entities or
both.
TECHNOLOGY - Section 3.16.
This Agreement shall be governed by, and construed and enforced in
accordance with, the laws of the State of Delaware.
The representations, warranties, covenants and agreements made herein
shall survive any investigation made by any Purchaser and shall survive the
Closing for the periods set forth in this Section 11.2. The covenants and
agreements made herein and all claims and causes of actions with respect thereto
shall survive forever. The representations and warranties made herein and all
claims and causes of action with respect thereto shall terminate upon the
earlier to occur of (a) the three (3) year anniversary of the Closing Date and
(b) the one (1) year anniversary of the date the Company completes a Qualified
Public Offering; provided that the representations and warranties of the Company
set forth in Section 3.1 (Organization and Standing; Articles and By-Laws),
Section 3.2 (Corporate Power), Section 3.4 (Capitalization), Section 3.5
(Authorization), Section 3.18 (Offering), 3.19 (Compliance with other
Instruments), Section 3.27 (Registration Rights) and Section 11.8 and the
representations and warranties of each Purchaser set forth in Section 4.1 shall
survive forever; it being understood that in the event notice of any claim for
breach of any representation or warranty shall have been given within the
applicable survival period, the representations and warranties that are the
subject of such claim shall survive until the time as such claim is finally
resolved.
Except as otherwise expressly provided herein, the provisions hereof
shall inure to the benefit of, and be binding upon, the successors, assigns,
heirs, executors and administrators of the parties hereto; provided, however,
that the Company may not assign its rights hereunder. Without limiting the
generality of the foregoing, all representations, covenants and agreements
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benefitting the Purchasers shall inure to the benefit of any and all subsequent
holders from time to time of the Shares or the Conversion Shares.
This Agreement (including the Schedules and Exhibits hereto, which are
an integral part of this Agreement) and the other documents delivered pursuant
hereto constitute the full and entire understanding and agreement between the
parties with regard to the subjects hereof and thereof. Except as otherwise
expressly provided herein, neither this Agreement nor any term hereof may be
amended, waived, discharged or terminated, except by a written instrument signed
by the Company and the holders of greater than fifty percent (50%) of the
Conversion Shares which have not been sold to the public, but in no event shall
this paragraph be amended without the approval of the holders of at least
seventy-five percent (75%) of such Conversion Shares, nor shall any other
provision of this Agreement that specifies a requirement for a consent, vote or
approval of the Purchasers or of the holders of Shares or Conversion Shares be
amended without the approval of the percentage of Purchasers or holders
specified in such provision, or the obligation of any Purchaser hereunder
increased except upon the written consent of such Purchaser.
(a) All notices and other communications required or permitted
hereunder shall be in writing and shall be mailed by first-class,
registered or certified mail, postage prepaid, or delivered either by
hand or by messenger, or sent via telex, telecopier, computer mail or
other electronic means, addressed (a) if to a Purchaser, at the address
shown on the Schedule of Purchasers, or at such other address as such
Purchaser shall have furnished to the Company in writing, or (b) if to
any other holder of any Shares or any Conversion Shares at such address
as such holder shall have furnished to the Company in writing, or,
until any such holder so furnishes an address to the Company, then to
and at the address of the last holder thereof who has so furnished an
address to the Company, or (c) if to the Company, 635 William Pitt Way,
Pittsburgh, Pennsylvania 15328, Attn: President or at such other
address as the Company shall have furnished to the Purchasers and each
such other holder in writing.
(b) Any notice or other communications so addressed and
mailed, postage prepaid, by registered or certified mail (in each case,
with return receipt requested) shall be deemed to be given when so
mailed. Any notice so addressed and otherwise delivered shall be deemed
to be given when actually received by the addressee.
No delay or omission to exercise any right, power or remedy accruing to
any of the parties hereto, upon any breach or default of any of the other
parties hereto under this Agreement, shall impair any such right, power or
remedy of such party nor shall it be construed to be a waiver of any such breach
or default, or an acquiescence therein, or of or in any similar breach or
default thereafter occurring; nor shall any waiver of any single breach or
default be deemed a waiver of any other breach or default theretofore or
thereafter occurring. Any waiver, permit, consent or approval of any kind or
character on the part of any party hereto of any breach or default under this
Agreement, or any waiver on the part of any party hereto of any provisions or
conditions of this Agreement must be made in writing and shall be effective only
to the extent specifically set forth in such writing. All remedies, either under
this Agreement or by law or otherwise afforded to any party hereto, shall be
cumulative and not alternative.
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In case any provision of this Agreement 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.
(a) The Company represents and warrants that it has retained
no finder or broker or other person or firm in connection with the
transactions contemplated by this Agreement. The Company accepts sole
responsibility for and agrees to pay all agent's fees to any broker,
finder or other person or firm in connection with the transactions
contemplated herein, other than those which a Purchaser has agreed to
pay pursuant to Section 11.8(b). In addition, the Company hereby agrees
to indemnify and to hold the Purchasers harmless of and from any
liability for any commission or compensation in the nature of an
agent's fee to any broker, finder or other person or firm (and the
costs and expenses of defending against such liability or asserted
liability) arising from any act by the Company or any of its employees
or representatives.
(b) Each Purchaser represents and warrants as to itself only
that it has retained no finder or broker in connection with the
transactions contemplated by this Agreement. Each Purchaser accepts
sole responsibility for and agrees to pay all agent's fees to any
broker, finder or other person or firm hired by such Purchaser in
connection with the transactions contemplated herein, other than those
which the Company has agreed to pay pursuant to Section 11.8(a). In
addition, each Purchaser hereby agrees to indemnify and to hold the
Company harmless of and from any liability for any commission or
compensation in the nature of an agent's fee to any broker, finder or
other person or firm (and the costs and expenses of defending against
such liability or asserted liability) arising from any act by such
Purchaser or any of its employees or representatives, other than those
which the Company has agreed to pay pursuant to Section 11.8(a).
The Company shall bear its own expenses and legal fees incurred on its
behalf with respect to this Agreement and the transactions contemplated hereby.
On the Closing Date (or if no closing shall take place, within thirty (30) days
of receiving any statement or invoice therefor), the Company will pay the
reasonable legal fees and out-of-pocket expenses of Kirkland & Ellis, special
counsel to the Purchasers, up to an aggregate of $40,000 with respect to this
Agreement and the transactions contemplated hereby.
The titles of the Sections and subsections of this Agreement are for
convenience or reference only and are not to be considered in construing this
Agreement.
This Agreement may be executed in counterparts, each of which when so
executed and delivered shall constitute a complete and original instrument but
all of which together shall constitute one and the same agreement, and it shall
not be necessary when making proof of this Agreement or any counterpart thereof
to account for any other counterpart.
[The remainder of this page is intentionally left blank;
signature page follows.]
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered by their proper and duly authorized officers as of the
day and year first written above.
CELLOMICS, INC.
By:__________________________________
Name:________________________________
Title:_______________________________
AXIOM VENTURE PARTNERS II
LIMITED PARTNERSHIP
By:__________________________________
Axiom Venture Associates II Limited
Liability Company, its General Partner
By:__________________________________
A General Partner
HAROLD N. CHEFITZ
_____________________________________
DELPHI VENTURES III, L.P.
By: Delphi Management Partners III, L.L.C.,
General Partner
By:__________________________________
Managing Member
48
<PAGE> 49
DELPHI BIOINVESTMENTS III, L.P.
By: Delphi Management Partners III, L.L.C.,
General Partner
By:__________________________________
Managing Member
INTERWEST INVESTORS VI, L.P.
By: InterWest Management Partners VI, LLC
By:__________________________________
Name:________________________________
Title:_______________________________
INTERWEST PARTNERS VI, LP
By: InterWest Management Partners VI, LLC
By:__________________________________
Name:________________________________
Title:_______________________________
KOMASTA PROPERTIES, LTD.
By:__________________________________
Name:________________________________
Title:_______________________________
OXFORD BIOSCIENCE PARTNERS II L.P.
By: OBP Management II L.P.
Its General Partner
By:__________________________________
Alan G. Walton - General Partner
49
<PAGE> 50
OXFORD BIOSCIENCE PARTNERS
(BERMUDA) II LIMITED PARTNERSHIP
By: OBP Management (Bermuda) II Limited
Partnership
By:__________________________________
Alan G. Walton - General Partner
OXFORD BIOSCIENCE PARTNERS
(GS-ADJUNCT) II, L.P.
By: OBP Management II L.P.
By:__________________________________
Alan G. Walton - General Partner
VECTOR LATER-STAGE EQUITY FUND II
(QP), L.P.
By: Vector Fund Management II, L.L.C.
Its General Partner
By:__________________________________
Its Managing Director
VECTOR LATER-STAGE EQUITY FUND II, L.P.
By: Vector Fund Management II, L.L.C.
Its General Partner
By:__________________________________
Its Managing Director
50
<PAGE> 51
EXHIBIT A
SCHEDULE OF PURCHASERS
<TABLE>
<CAPTION>
NAME AND ADDRESS TOTAL SERIES B
---------------- INVESTMENT PREFERRED SHARES
---------- ----------------
<S> <C> <C>
Axiom Venture Partners II Limited Partnership $812,805.92(1) 67,341
CityPlace II - 17th Floor
Hartford, CT 06103
Harold N. Chefitz $29,812.90(2) 2,470
Boles Knop & Company
The Windsor House
Two West Washington Street
Middleburg, VA 20118
InterWest Partners VI, LP $1,283,789.42(3) 106,362
3000 Sand Hill Road
Bldg 3, Suite 255
Menlo Park, CA 94025-7112
InterWest Investors VI, LP $40,241.33(4) 3,334
3000 Sand Hill Road
Bldg 3, Suite 255
Menlo Park, CA 94025-7112
Delphi Ventures III, L.P. $694,471.57(5) 57,537
3000 Sand Hill Road
Bldg 1, Suite 135
Menlo Park, CA 94025
Delphi BioInvestments III, L.P. $12,492.44(6) 1,035
300 Sand Hill Road
Bldg 1, Suite 135
Menlo Park, CA 94025
Komasta Properties, Ltd. $501,049.84(7) 41,512
111 Alozorov Street
Tel Aviv, Israel
Oxford Bioscience II, L.P. $402,063.76(8) 33,311
315 Post Rd West, Suite 2
Westport, CT 06880-4739
Oxford Bioscience Partners (Bermuda) II Limited $301,303.38(9) 24,963
Partnership
315 Post Rd West, Suite 2
Westport, CT 06880-4739
Oxford Bioscience Partners (GS-Adjunct) II, L.P. $394,628.64(10) 32,695
315 Post Rd West, Suite 2
Westport, CT 06880-4739
Vector Later-Stage Equity Fund II (QP), L.P. $2,924,995.50(11) 242,336
c/o Vector Fund Management, L.P.
1751 Lake Cook Road
Deerfield, IL 60015
Vector Later-Stage Equity Fund II, L.P. $975,002.55(12) 80,779
c/o Vector Fund Management, L.P.
1751 Lake Cook Road
Deerfield, IL 60015
TOTALS $8,372,657.25 693,675
</TABLE>
- ----------------------
Notes:
(1) $562,800.01 conversion of Bridge Note and $250,005.91 in cash.
(2) All in cash.
(3) $744,127.65 by conversion of Bridge Note and $539,661.77 in cash.
(4) $23,319.19 by conversion of Bridge Note and $16,922.14 in cash.
(5) $301,544.79 by conversion of Bridge Note and $392,926.78 in cash.
(6) $5,419.42 by conversion of Bridge Note and $7,073.02 in cash.
(7) All in cash.
(8) $74,918.48 by conversion of Bridge Note and $327,145.28 in cash.
(9) $56,137.54 by conversion of Bridge Note and $245,165.84 in cash.
(10) $73,530.43 by conversion of Bridge Note and $321,098.21 in cash.
(11) All in cash.
(12) All in cash.
51
<PAGE> 1
Exhibit 10.1
LEASE AGREEMENT
by and between
The University of Pittsburgh
of the Commonwealth System of Higher Education
and
Biological Detection, Inc.
Dated as of July 1,1996
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
1. LEASED PREMISES .................................................... 1
2. LEASE TERM ......................................................... 2
(A) TERM ...................................................... 2
(B) SURRENDER AT END OF TERM; WAIVER .......................... 2
(C) HOLDING OVER; NOTICE BY LESSEE ............................ 2
3. RENTAL ............................................................. 2
(A) BASIC RENTAL .............................................. 2
(B) LESS THAN A MONTH ......................................... 3
(C) ADDITIONAL RENTAL ......................................... 3
(D) LATE CHARGE; INTEREST ..................................... 3
4. SECURITY DEPOSIT ................................................... 3
5. USE ................................................................ 3
6. CONDITION OF PREMISES .............................................. 4
7. RULES AND REGULATIONS .............................................. 4
8. LESSEE'S OBLIGATIONS ............................................... 4
9. UTILITIES AND SERVICES ............................................. 5
(A) BASIC SERVICES ............................................ 5
(B) SPECIAL SERVICES AND UTILITIES ............................ 6
(C) INTERRUPTION OF SERVICE ................................... 6
(D) LABOR DISPUTE ............................................. 6
(E) TELEPHONE SERVICE ......................................... 7
10. MAINTENANCE AND REPAIRS ............................................ 7
(A) BY LESSOR ................................................. 7
(B) BY LESSEE ................................................. 7
(C) FAILURE BY LESSEE ......................................... 7
(D) NON-LIABILITY; NOTICE ..................................... 7
(E) MECHANICS' LIENS .......................................... 8
(F) REPAIRS ................................................... 8
11. ALTERATIONS; ADDITIONS
(A) APPROVAL; STANDARDS ....................................... 8
(B) LIENS ..................................................... 8
(C) PROPERTY OF LESSOR ........................................ 8
(D) REPAIR FOLLOWING REMOVAL .................................. 8
(E) PLANS TO BE FURNISHED ..................................... 8
12. INDEMNIFICATION AND INSURANCE ...................................... 9
(A) INDEMNIFICATION BY LESSEE ................................. 9
(B) PUBLIC LIABILITY INSURANCE TO BE CARRIED BY LESSEE ........ 9
(C) PROPERTY INSURANCE TO BE CARRIED BY LESSEE ................ 9
(D) WAIVER OF SUBROGATION; RELEASE ............................ 10
(E) INCREASE IN LESSOR'S PREMIUMS ............................. 10
13. FIRE OR OTHER CASUALTY ............................................. 10
</TABLE>
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
(A) PARTIAL DAMAGE ............................................ 10
(B) SUBSTANTIAL DAMAGE ........................................ 10
(C) TEMPORARY RELOCATION ...................................... 10
(D) NOTICE .................................................... 11
14. CONDEMNATION ....................................................... 11
15. ACCESS ............................................................. 11
16. ASSIGNMENT; SUBLETTING ............................................. 11
17. SIGNS .............................................................. 11
18. SUBORDINATION AND ATTORNMENT ....................................... 12
19. ESTOPPEL CERTIFICATES .............................................. 12
(A) BY LESSEE ................................................. 12
(B) BY LESSOR ................................................. 12
20. DEFAULT ............................................................ 12
21. REMEDIES ........................................................... 13
22. WAIVER ............................................................. 15
23. COMPLIANCE WITH LAWS ............................................... 16
(A) USE AND OCCUPANCY OF LEASED PREMISES ...................... 16
(B) BUILDING PERMITS .......................................... 16
24. LESSOR'S RELOCATION RIGHTS ......................................... 16
25. LIMITATION OF LIABILITY AND EXCULPATION ............................ 16
26. QUIET ENJOYMENT .................................................... 16
27. ENTIRE CONTRACT .................................................... 17
28. APPLICABLE LAW ..................................................... 17
29. SEVERABILITY ....................................................... 17
30. NOTICES ............................................................ 17
31. BINDING EFFECT ..................................................... 17
32. ACKNOWLEDGMENT ..................................................... 18
</TABLE>
<PAGE> 4
Lease No. 2947
LEASE AGREEMENT
---------------
MADE as of the 1st day of July 1996, by and between The University of
Pittsburgh of the Commonwealth System of Higher Education, of Pittsburgh,
Allegheny County, Pennsylvania (herein called "Lessor"), and Biological
Detection, Inc. of the Borough of Cheswick, Allegheny County, Pennsylvania
(herein called "Lessee").
RECITALS:
1. Lessor owns the premises hereinafter defined (herein called "Leased
Premises").
2. Lessee desires to lease and accept the Leased Premises from Lessor
herein, and Lessor herein is willing and desires to demise and lease the Leased
Premises to Lessee in accordance with the provisions of this Lease Agreement.
WITNESSETH THAT:
1. LEASED PREMISES: Lessor hereby demises and leases to Lessee, and
Lessee hereby accepts and hires from Lessor that certain space as follows:
Room 337
(herein called "Leased Premises"), situate on the third floor of Building Number
B4 (9) (herein called "Building") in the University of Pittsburgh Applied
Research Center (herein called "U-PARC") located on approximately 85 acres of
land at Harmarville, Harmar Township, Allegheny County, Pennsylvania. A floor
plan of the Leased Premises is attached hereto as Exhibit A and by this
reference is made a part of this Lease Agreement.
Lessee shall also have a nonexclusive license for the benefit of Lessee
and Lessee's employees, agents and invitees (a) for access to and from the
Leased Premises through the Building (and over the property of Lessor
appurtenant thereto), and (b) to use those portions of the Building (and other
property of Lessor appurtenant thereto) which may from time to time be
reasonably designated by Lessor for use by lessees of the Building, including
but not limited to toilet rooms designated from time to time for Lessee's use,
and parking areas from time to time designated by Lessor. This license shall be
subject to such reasonable Rules and Regulations as Lessor may establish from
time to time, so long as such Rules and Regulations shall not unreasonably
interfere with Lessee's use and enjoyment of the Leased Premises.
<PAGE> 5
-2-
2. LEASE TERM:
(A) TERM: The Term of this Lease Agreement shall commence on
the 1st day of July 1996, and said Term shall end at 5:00 P.M. on the 30th day
of June 1999, unless sooner terminated under the provisions hereof.
(B) SURRENDER AT END OF TERM; WAIVER: Lessee shall immediately
surrender possession of the Leased Premises at the expiration of the Term of
this Lease Agreement, or upon its sooner termination. Lessee shall leave the
Leased Premises broom clean and free of debris, and in good order and condition,
reasonable wear and tear excepted. In addition, Lessee shall deliver to Lessor
all keys, plastic cards or other entry devices for the Leased Premises, the
Building and U-PARC furnished by Lessor.
LESSEE WAIVES ALL RIGHT TO ANY NOTICE WHICH MAY BE REQUIRED
UNDER ANY LAWS NOW OR HEREAFTER ENACTED AND IN FORCE IN PENNSYLVANIA, INCLUDING
THE LANDLORD AND TENANT ACT OF 1951, ACT OF APRIL 6, 1951, AS AMENDED. LESSEE
AGREES TO GIVE UP QUIET AND PEACEABLE POSSESSION OF THE LEASED PREMISES AT THE
END OF THE TERM WITHOUT FURTHER NOTICE FROM LESSOR.
(C) HOLDING OVER; NOTICE BY LESSEE: Lessee shall not hold over
after the Term hereof or of any renewal term without the express written consent
of Lessor. Any holding over with the consent of Lessor shall be on a
month-to-month basis (and in no event from year to year or term to term) and may
be terminated at the end of any month on one (1) calendar month's prior written
notice from Lessor. Failure to surrender possession at the end of a month after
receiving such notice shall constitute an act of default under this Lease
Agreement.
Should Lessee continue to hold and occupy the Leased Premises
after the termination of this Lease Agreement by the expiration of this Lease
Agreement or other termination in accordance with the provisions of this Lease
Agreement, then and in such event the rent herein reserved for such wrongful
holdover shall be double the amount of the monthly installment of rent for each
month or a portion of a month that such holdover continues, and Lessee shall
promptly pay the same to Lessor who may accept the same without in any way
waiving its right of termination above set forth or any other rights and
remedies under this Lease Agreement.
3. RENTAL: Lessee agrees to pay unto Lessor by check made payable to
"University of Pittsburgh/Baker Young, Agent," and addressed to Baker Young
Corporation, Agent, 438 Division Street, Sewickley, PA 15143 (or at such other
place as Lessor may from time to time designate in writing) rental as follows:
(A) BASIC RENTAL: Lessee agrees to pay to Lessor as Basic
Rental, all in lawful money of the United States of America, in advance and
without notice, demand, set off or counterclaim on the first day of each
calendar month until the expiration of the term hereof:
<TABLE>
<CAPTION>
Rentable
Term Square Feet $/Year $/Month
---------------- ----------- --------- -------
<S> <C> <C> <C>
7/1/96 - 6/30/97 191 $1,910.00 $159.17
7/1/97 - 6/30/98 191 $1,967.30 $163.94
7/1/98 - 6/30/99 191 $2,026.51 $168.88
</TABLE>
<PAGE> 6
-3-
(B) LESS THAN A MONTH: In the event that this Lease Agreement
terminates on a day other than the last day of the month, the Basic Rental for
such partial month shall be prorated based upon the amount of the monthly
installment last due and shall be payable on the first day of the last month of
the Term of this Lease Agreement.
(C) ADDITIONAL RENTAL: Lessee shall promptly pay to Lessor on
the date the next monthly rental installment is due or ten (10) days after
billing, whichever is later, any other charges due under this Lease Agreement
and denominated as Additional Rental herein. Except as provided in this
paragraph 3(C), such Additional Rental shall be paid in the same manner as the
Basic Rental provided for hereinabove in paragraph 3(A).
(D) LATE CHARGE; INTEREST: If said monthly installment of
Basic Rental or payment of Additional Rental is not paid on or before the tenth
(10th) day after it is due, at Lessor's option, a monthly late charge of five
percent (5%) of the amount due (or such lesser amount as represents the maximum
amount that may be charged by Lessor for the purpose of handling such delinquent
payment) shall be due and payable by Lessee as Additional Rental for each and
every month that said installment or payment is delinquent. In addition, Lessee
agrees to pay interest to Lessor on any Basic Rental, Additional Rental or other
sum due Lessor from the date the same is due at the rate of eighteen percent
(18%) per year compounded.
4. SECURITY DEPOSIT: Lessee shall, upon the execution hereof, pay to
Lessor and shall keep on deposit with Lessor the sum of ONE HUNDRED SEVENTY-FIVE
AND NO/100 DOLLARS ($175.00) as a Security Deposit for the payment of damages to
the Leased Premises or default in rent.
If there shall be damages to and about the Leased Premises for
which Lessee is responsible hereunder, or if there shall be default in the
payment of rental, Lessor may apply or retain the whole or any part of the
Security Deposit to the extent required to reimburse Lessor for the said damages
to the Leased Premises and/or default in payment of rental. However, Lessor
shall not be limited to or required to so apply or retain the whole or any
portion of said Security Deposit, but on the contrary, may look to Lessee
directly and independently for reimbursement for any such damages by Lessee or
for payment of delinquent rentals.
Should Lessor apply the Security Deposit as aforesaid, Lessee
shall, immediately upon written notice from Lessor, restore, as Additional
Rental due hereunder, said Security Deposit to its original amount.
5. USE: Lessee shall use the Leased Premises for office purposes only.
Lessee shall occupy the Leased Premises during the full Term hereof and shall
conduct Lessee's business continuously in the Leased Premises. Lessee shall not
use the Leased Premises for any illegal or improper purpose, nor do anything
which shall constitute a nuisance nor do or suffer anything to be done in or
about the Leased Premises which will violate any laws, rules, regulations or
ordinances of any government authority having jurisdiction or increase the rate
of fire or other insurance or jeopardize the coverage of the same.
Lessee shall not bring, use, generate, accumulate, store,
treat, release or dispose of any hazardous, toxic or other regulated material,
including but not limited to, any solid or hazardous waste or substance as
defined in or regulated by the Resource Conservation and Recovery Act, 42 U.S.C.
Sections 6901 et seg., as amended, the Pennsylvania Solid Waste Management Act,
35 P.S. Sections 6018.101 et seg., as amended, the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, 42 U.S.C. Sections 9601 et
seg., as amended, by the Superfund Amendments and Reauthorization Act of 1986,
H.R. Rep. No. 2005, 99th Cong., 2d Sess. (1986), the Pennsylvania Worker and
Community Right To Know Act 35 P.S.
<PAGE> 7
-4-
Sections 7301 et seg., the Toxic Substances Control Act, 15 U.S.C. Sections 2601
et seg., or any other applicable laws, rules or regulations whether common law
or statutory (hereinafter "environmental laws, rules or regulations"), without
the express prior written consent of Lessor, which consent may be qualified in
any manner or subject to such limitations and conditions as Lessor may in its
sole discretion determine. A request for such consent shall contain a
description including, but not limited to, the following: (1) the material(s) to
be brought on the Leased Premises; (2) the proposed methods of treatment,
storage and handling thereof; (3) the proposed processes to be applied thereto,
with a detailed description including any applicable regulatory designations
(such as listed hazardous waste number or CAS number) of the likely products,
by-products and effects to be produced thereby; and (4) methods and procedures
for disposal, whether on or off the Leased Premises, the Building and/or U-PARC
of the hazardous, toxic or other regulated materials, including but not limited
to any substances subject to any environmental laws, rules or regulations, and
the products and by-products thereof.
6. CONDITION OF PREMISES: Lessee acknowledges and agrees that, except
as expressly set forth in this Lease Agreement, there have been no
representations, promises or warranties made by or on behalf of Lessor with
respect to the Leased Premises, the Building or U-PARC or any common areas or
with respect to the suitability of the same for the conduct of Lessee's
business. The taking of possession of the Leased Premises by Lessee shall
establish that the Leased Premises and those common areas of the Building used
by Lessee were at such time in satisfactory condition, order and repair. Except
as otherwise expressly set forth herein, the Leased Premises are demised to
Lessee in an "as is" condition.
7. RULES AND REGULATIONS: Lessee, its employees, agents and invitees,
shall comply with all Rules and Regulations adopted by Lessor, including those
appended hereto as Exhibit B, and with such reasonable changes or additions
thereto as Lessor may from time to time adopt for the general care, proper
maintenance, operation, cleanliness, safety and security of the Leased Premises,
the Building and U-PARC, from the time Lessor gives Lessee notice of the same.
Copies of the Rules and Regulations will be submitted to Lessee from time to
time as the same are modified or amended, and said Rules and Regulations shall
be a part of this Lease Agreement. All such Rules and Regulations shall be
applied by Lessor in a nondiscriminatory manner to lessees and invitees. The
fact that certain Rules and Regulations may apply to different portions of
U-PARC on operations which are similarly situated shall not cause the same to be
interpreted as discriminatory.
8. LESSEE'S OBLIGATIONS: Lessee shall:
(A) Use in a reasonable manner all utilities for which Lessor
is responsible and all electrical, plumbing, sanitary, heating, ventilating, air
conditioning and other facilities, appliances and services in the Leased
Premises or made available to Lessee or the Leased Premises by Lessor, and
Lessee shall take all reasonable measures to prevent waste and unnecessary use
of the same.
(B) Not permit any person on the Leased Premises with Lessee's
permission to willfully or wantonly destroy, deface, damage, impair or remove
any part of the Leased Premises, the structure of the Building containing the
Leased Premises or U-PARC or the facilities, equipment or appurtenances thereto
or used in common therewith, nor shall Lessee do any such thing.
(C) Conduct its business in a manner that will not be
reasonably objectionable to other lessees in the Building, including but not
limited to noise, vibration, odor or fumes. In the event Lessor receives
complaints from other lessees in the Building and determines in its sole
judgment that Lessee's use and
<PAGE> 8
-5-
occupancy is objectionable to other lessees, Lessee agrees, upon notice from
Lessor, to promptly modify its use so as to eliminate such objections.
(D) Inform Lessor as early as possible, but in any event,
prior to access, when any outside contractor hired by Lessee, for any purpose,
requires access to any area, other than public areas, that is not designated as
part of Lessee's Leased Premises.
(E) Depending upon the nature of Lessee's operations, Lessor
may require Lessee to install and maintain, at Lessee's expense, certain
safety-related equipment monitors and alarms, including, but not limited to,
those for combustible gasses and carbon monoxide.
9. UTILITIES AND SERVICES:
(A) BASIC SERVICES: Lessor shall provide the following
services and facilities:
(1) Heat, ventilating and air conditioning ("HVAC"),
through the system of the Building, Monday through Friday excepting holidays
(for this purpose, "holidays" shall only mean and include New Year's Day,
Memorial Day, July 4, Labor Day, Thanksgiving and Christmas) from 8:00 A.M. to
6:00 P.M. at reasonable comfort levels. Such times may on occasion be altered at
the sole discretion of the Lessor due to weather conditions, fuel emergencies or
other factors beyond the control of Lessor without prior notice to Lessee.
Additional HVAC will be provided (on request by Lessee giving at least
forty-eight (48) hours notice) by Lessor to Lessee at an hourly rate equal to
Lessor's actual cost. Lessee agrees to cooperate fully with Lessor and to abide
by all the regulations and requirements which Lessor may reasonably prescribe
for the proper functioning and protection of the HVAC system;
(2) Electric current for general illumination using
standard fixtures for initial lamping and all materials necessary therefor, and
replacement of light globes and/or fluorescent tubes in the Leased Premises and
electricity for desktop type office equipment (including computers) and small
lab equipment approved in advance and in writing by Lessor. Additional
electrical service will be furnished, if reasonably available and subject to a
reasonable charge for the use of such electricity which shall be paid by Lessee
to Lessor as Additional Rental, upon Lessee's reimbursing Lessor all actual
costs of any necessary installation, including wiring;
(3) Maintenance and service of the public toilet
rooms in the Building made available to the Leased Premises:
(4) Maintenance of standard hardware installed in the
Leased Premises;
(5) Maintenance of any floor coverings in the common
areas of the Building;
(6) Periodic cleaning of outside and inside of
windows except the inside of windows shall not be cleaned by Lessor in any room
designated "Restricted Access" on Exhibit A;
(7) Cleaning and maintenance of common areas;
(8) Freight elevator service;
<PAGE> 9
-6-
(9) Janitor service, including cleaning of space,
collection of trash every other day except weekends and holidays (other than
hazardous or toxic material, the disposition of which shall be the
responsibility and obligation of Lessee) and vacuuming or sweeping and mopping
of floors except in any room designated "Restricted Access" on Exhibit A;
(10) Hot and cold water for lavatory and any
laboratory space included in the Leased Premises and water for drinking
purposes; if Lessee requires water for any additional purposes, Lessee shall pay
the actual cost thereof as shown on a meter to be installed and maintained at
Lessee's expense to measure such consumption;
(11) Building and U-PARC security, including
reasonable control of access; Lessee agrees to comply with all reasonable rules
adopted by Lessor for the security of the Leased Premises, the Building and the
U-PARC.
(B) SPECIAL SERVICES AND UTILITIES: Lessor may but shall not
be obligated to provide the following special services and utilities at those
laboratory locations where the same are currently available on the premises:
NONE
Said special services and utilities shall only be provided during the times set
forth in Paragraph 9(A), above. Should Lessee require said special services and
utilities at other times, Lessee shall make written request of Lessor therefor
not less than forty-eight (48) hours in advance. Lessor reserves the right to
review Lessee's usage thereof, and at anytime, and from time to time, bill
Lessee for Lessee's usage thereof, at a rate based upon Lessor's estimated cost
(including overhead) for providing said special services and utilities. Said
charges shall be due and payable as Additional Rental hereunder.
(C) INTERRUPTION OF SERVICE: Lessor does not warrant that the
services provided for in Sections (A) and (B) hereof shall be free from any
slowdown, interruption or stoppage pursuant to voluntary agreement by and
between Lessor and governmental bodies and regulatory agencies, or caused by the
maintenance, repair, substitution, renewal, replacement or improvement of any of
the equipment involved in the furnishing of any such services, or caused by
changes of services, alterations, strikes, lockouts, labor controversies, fuel
shortages, accidents, Acts of God or the elements or any other cause not due to
the willful misconduct or negligence of Lessor, or otherwise beyond the
reasonable control of Lessor; and specifically, no such slowdown, interruption
or stoppage of any of such services shall ever be construed as an eviction,
actual or constructive, of Lessee, nor shall same cause any abatement of Basic
Rental or Additional Rental payable hereunder of in any manner or for any
purpose relieve Lessee from any of its obligations hereunder, excepting,
however, Basic Rental shall abate in the event of total stoppage of heating,
ventilation and air conditioning or electric service for a period in excess of
five (5) consecutive business days, in which event the abatement shall extend
from the date of the stoppage until the date service is restored. In no event
shall Lessor be liable for damage to persons or property or be in default
hereunder as a result of any slowdown, interruption or stoppage except in the
case of gross negligence or willful or wanton misconduct of Lessor, its
officers, employees, guests or business invitees. Lessor agrees to use
reasonable diligence to resume the service upon any such slowdown, interruption
or stoppage.
(D) LABOR DISPUTE: In the event of a labor dispute, the Lessor
may designate any entrance, passageway or elevator that employees, guests,
invitees, licensees of Lessee or similar persons must utilize for the purpose of
ingress to and egress from the Leased Premises, the Building and any route or
means of moving furniture, equipment or supplies into or out of U-PARC, the
Building or the Leased Premises.
<PAGE> 10
-7-
(E) TELEPHONE SERVICE: Lessee shall have the option of
utilizing the Centrex System already in place at U-PARC, which is provided by
Bell of Pennsylvania. If Lessee elects to use the Centrex System: (1) provision
of dial tone, wiring charges and equipment purchases are the responsibility of
Lessee, (2) services will be coordinated by Lessor, and (3) monthly invoices
shall be provided by Lessor; Lessor reserves the right to discontinue service
for nonpayment ninety (90) days from date of invoice.
10. MAINTENANCE AND REPAIRS:
(A) BY LESSOR: Lessor shall, at all times, maintain in good
order, condition and repair the Building and all of its structural and
mechanical elements, including heating, plumbing, air conditioning and
electrical systems, windows and elevators (if any), except for those portions of
the Building which are the responsibility of Lessee pursuant to subparagraph
(B), below. In addition, Lessor shall be responsible for the maintenance and
repair of all common areas of the Building and appurtenances (including
sidewalks, parking areas and landscaped areas). In no event shall Lessor be
obligated to repair any damage caused by any willful act or gross negligence of
the Lessee or its employees, agents, invitees, licensees, sublessees or
contractors. Lessor shall have no liability to Lessee on account of damages to
Lessee's property occasioned by plumbing, electrical, gas, water, steam or other
utility pipes, systems or facilities or by the bursting, stopping, breaking or
running of any tank, sprinkler, washstand, water closet or pipes in or about the
Leased Premises or the Building; nor for any damage occasioned by water being
upon or coming through or around the roof or any flashing, window, sky light,
vent, door or the like; nor for any damage arising out of any acts of neglect of
any other lessees of the Building, other occupants of the Building, occupants of
adjacent property or the public.
(B) BY LESSEE: At its sole cost and expense, Lessee shall, at
all times, maintain the Leased Premises (excepting janitorial services that are
the obligation of Lessor pursuant to Paragraph 9(A)(9), above, in good order,
condition and repair, including the interior surfaces of the ceilings, walls and
floors, carpeting, doors and all fixtures, equipment, appliances, furnishings
and special facilities installed by or for Lessee; provided, however, that
Lessor shall be responsible for repairing any damage to the Leased Premises
(excluding property of Lessee) which is caused by leakage of pipes, windows,
roofs or exterior walls or which is caused by Lessor, its employees, agents or
invitees. In no event shall Lessee be obligated to repair any damage to Leased
Premises caused by any willful act or gross negligence of the Lessor or its
employees, agents, invitees, licensees or contractors. All maintenance and
repairs by Lessee shall be made in a first-class, workmanlike manner by
personnel or contractors previously approved in writing by Lessor. Lessee shall
require its personnel or contractors to comply with all building standards or
other reasonable requirements of Lessor. In addition, Lessee shall be
responsible for any damages to U-PARC, the Building, the Leased Premises,
services, or any appurtenant facilities, equipment or appliances which are
caused by Lessee, its employees, agents or invitees, and shall reimburse Lessor
(as Additional Rental) for any costs incurred by Lessor for repairing or
replacing any such damage.
(C) FAILURE BY LESSEE: In the event that Lessee fails in any
material obligation it may have under this paragraph to maintain the Leased
Premises in good order, condition and repair, Lessor may give written notice to
Lessee to perform the work which is reasonably required to remedy the situation.
If Lessee fails to promptly commence such work within ten (10) days following
the receipt of the notice and to diligently prosecute the same to completion,
then Lessor shall have the right (but shall not be obligated or required) to
enter the Leased Premises and to perform such work at the expense of Lessee and
such expense shall be collectible as Additional Rental hereunder.
(D) NON-LIABILITY; NOTICE: Lessor shall not be liable for any
injury to or interference with Lessee's business arising from the performance of
any repairs, maintenance or improvements in or to U-PARC,
<PAGE> 11
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the Building, the Leased Premises or to any appurtenances or equipment therein;
provided, however, that Lessor shall perform any such work with due diligence
and in a manner so as to minimize interference with Lessee's, business. Lessee
shall also promptly notify Lessor as to the need for any such repairs which are
the responsibility of Lessor.
(E) MECHANICS' LIENS: Lessee shall not cause liens of any kind
(whether for materials, wages, labor or services) to be placed against U-PARC,
the Building or the Leased Premises. If any such liens are filed, with or
without Lessee's knowledge, Lessee shall immediately, at Lessee's sole cost and
expense, take whatever action is necessary to cause such liens to be satisfied
and discharged.
(F) REPAIRS: Whenever used in this paragraph the term
"repairs" shall include all necessary replacements and renewals.
11. ALTERATIONS; ADDITIONS:
(A) APPROVAL; STANDARDS: Lessee shall not make any
alterations, additions or improvements to the Leased Premises without the prior
written approval of Lessor (which approval shall not unreasonably be withheld or
delayed). All such work shall be carried on, at Lessee's cost, and in a
first-class, workmanlike manner in accordance with Building standards and other
reasonable requirements of Lessor and in compliance with all governmental
orders, regulations and permits. Such work shall be carried on by responsible
contractors approved by Lessor who will, prior to commencement of work, submit
satisfactory proof of insurance coverage, naming Lessor as an additional
insured.
(B) LIENS: Lessee shall not cause liens of any kind to be
placed against U-PARC, the Building, or the Leased Premises and shall obtain and
record appropriate lien waivers prior to the commencement of any such work.
(C) PROPERTY OF LESSOR: Unless otherwise agreed to in writing,
all alterations, additions or improvements made by Lessee which become part of
the structure and/or systems of the Leased Premises or the Building shall become
the property of Lessor at the end of the Term hereof or any extension or upon
prior termination and shall remain in and be surrendered with the Leased
Premises, without disturbance or injury. Lessee, however, if not in default, may
remove any other alterations, additions, improvements, appliances or equipment
owned by Lessee which can be removed without damage or leaving incomplete the
Leased Premises; provided, however, (and anything herein to the contrary
notwithstanding) Lessee agrees to remove any and all alterations, additions,
improvements, trade fixtures, appliances or equipment (including but not limited
to: partitions, cabinets, shelving, drapes, shades, furniture, wiring, plumbing
and other personal property in and about the Leased Premises) unless otherwise
agreed in writing by Lessor at or before the construction and installation of
the same.
(D) REPAIR FOLLOWING REMOVAL: Lessee shall repair all damage
resulting from the removal of any of the foregoing items and make proper
restoration of the Leased Premises, and, in default thereof, Lessor may effect
said removals and repairs at Lessee's expense, and collect the same as
Additional Rental hereunder.
(E) PLANS TO BE FURNISHED: Following completion of all such
alterations, additions or improvements, Lessee shall furnish Lessor with current
"as built" plans and specifications reflecting such alterations, additions and
improvements.
<PAGE> 12
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12. INDEMNIFICATION AND INSURANCE:
(A) INDEMNIFICATION BY LESSEE: Lessee shall indemnify and hold
Lessor harmless from and against any and all costs, expenses (including
reasonable counsel fees), liabilities, losses, damages, suits, actions, fines,
penalties, claims or demands of any kind and asserted against Lessor by or on
behalf of any person, governmental authority or other party, arising out of or
in any way connected with, and Lessor shall not be liable to Lessee on account
of, (1) any failure by Lessee to perform any of the agreements, terms, covenants
or conditions of this Lease Agreement required to be performed by Lessee, (2)
any failure by Lessee to comply with any law, rule, regulation, ordinance or
order of any governmental authority including but not limited to any
environmental law, rule or regulation (see definition in Paragraph 5), (3) any
accident, death or personal injury, or damage to or loss or theft of property,
which shall occur in or about the Leased Premises, the Building or U-PARC,
occasioned by reason of any act or omission of Lessee, its agents, contractors,
licensees, invitees or employees, or (4) Lessee's use and occupancy of the
Leased Premises, or any activity of Lessee, its employees, agents, invitees,
licensees or contractors, which shall occur in or about the Leased Premises, the
Building or U-PARC occasioned by reason of any act or omission of Lessee, its
agents, contractors, licensees, invitees or employees. Nothing herein contained
shall make Lessee liable for the negligence of Lessor.
(B) PUBLIC LIABILITY INSURANCE TO BE CARRIED BY LESSEE: During
the Term of this Lease Agreement or any renewal thereof, Lessee shall obtain and
promptly pay all premiums for Comprehensive General/Public Liability Insurance
including but not limited to Premises-Operations, Contractual, Broad Form
Property Damage, Independent Contractor, Personal Injury and Fire Legal
Liability and Comprehensive Automobile Liability Insurance (including hired and
non-owned vehicles) against claims for personal injury, death or property damage
occurring upon, on or about the Leased Premises with carriers and in amounts
reasonably satisfactory to Lessor but with minimum limits of not less than Five
Hundred Thousand Dollars ($500,000.00) on account of bodily injuries to or death
of one person and One Million Dollars ($1,000,000.00) on account of bodily
injuries to or death of more than one person as a result of any one accident or
disaster, and Five Hundred Thousand Dollars ($500,000.00) on account of damage
to property (or in an amount of not less than One Million Dollars
($1,000,000.00) combined single limit for bodily injury and property damage).
All such policies and renewals thereof shall (1) name the Lessor as an
additional insured and loss payee; provided, however, that Lessor shall not, by
reason of its inclusion as an additional insured or loss payee, incur any
liability to any insurance company for the payment of any premium for such
insurance; (2) provide that any loss shall be payable notwithstanding any act or
negligence of the Lessee or the Lessor which might otherwise result in the
forfeiture of said insurance; (3) provide that such insurance shall not be
canceled, modified or amended without first giving Lessor thirty (30) days'
written notice; (4) provide that all policies for comprehensive automobile
liability insurance shall include coverage for owned, hired and non-owned
automobiles; and (5) provide that all such policies are primary policies and
that any policies which may be carried by Lessor shall provide excess coverage
only. On or before the date hereof, and thereafter not less than fifteen (15)
days prior to the expiration dates of said policy or policies, Lessee shall
provide Lessor certificates of insurance addressed to: Baker Young Corporation,
Agent, 3170 William Pitt Way, Pittsburgh, PA 15238 (or such other address as
Lessor may from time to time by notice direct), evidencing coverages required by
this Lease Agreement. All the insurance required under this Lease Agreement
shall be issued by insurance companies authorized to do business in the
Commonwealth of Pennsylvania. The aforesaid insurance limits may be reasonably
increased from time to time by Lessor, provided that Lessor shall have first
obtained and furnished to Lessee an insurance analysis from an impartial
insurance adviser setting forth in reasonable detail (1) the advice and
recommendations of the adviser as to the continuance, increase or decrease of
insurance limits then in effect, and (2) the adviser's basis for that advice and
those recommendations, and provided further, that the. insurance limits shall
not be increased above those recommended by the adviser.
(C) PROPERTY INSURANCE TO BE CARRIED BY LESSEE: Lessor shall
not be responsible for insurance coverage on Lessee's contents, personal
property and improvements in and about the Leased
<PAGE> 13
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Premises. Should Lessee obtain such property insurance, such insurance shall
provide that the Lessee may waive the right of subrogation under any fire and
extended coverage without loss of coverage.
(D) WAIVER OF SUBROGATION; RELEASE: Each party hereto, on
behalf of itself and any insurer or other party claiming by way of subrogation
through or under such party, does hereby release the other party with respect to
any loss, claim or damage to property which is, or may be, covered by the
Pennsylvania Standard Form of Fire Insurance Policy with extended coverage
endorsement and other property insurance which a prudent party would carry on
its property. Lessee further releases in like manner and to the same extent any
other lessee, licensee and occupant of the Building and U-PARC who, on behalf of
itself and any party claiming by way of subrogation through or under it gives a
like release to Lessee.
(E) INCREASE IN LESSOR'S PREMIUMS: Should Lessee's activities
in the Leased Premises including but not limited to any activity subject to any
environmental law, rule or regulation cause an increase in the property and
public liability insurance premiums paid by Lessor or require Lessor to obtain
additional insurance coverage in connection with the Leased Premises, the
Building or U-PARC, Lessee shall pay said increase as Additional Rental
hereunder.
13. FIRE OR OTHER CASUALTY:
(A) PARTIAL DAMAGE: Except as hereinafter provided, if the
Leased Premises are damaged by fire or other casualty, the damages (excepting,
however, damages to the Lessee's Improvements) shall be repaired by and at the
expense of Lessor and until such repairs shall be completed, the Basic Rental
shall be abated proportionately from the date of such fire or other casualty
according to the part of the Leased Premises which remains usable by Lessee.
Lessor agrees to repair such damage within a reasonable period of time after
receipt from Lessee of written notice of such damage, subject to any delays
caused by Acts of God, labor strikes or events beyond Lessor's control. Lessee
acknowledges notice (1) that Lessor need not obtain insurance of any kind on
Lessee's furniture, furnishings or any equipment, fixtures, alterations,
improvements and additions installed at Lessee's request, (2) that it is
Lessee's obligation to obtain all such insurance at Lessee's sole cost and
expense and (3) that Lessor shall not be obligated to repair any damage thereto
or replace the same.
(B) SUBSTANTIAL DAMAGE: If the Leased Premises or the Building
are rendered substantially untenantable by reason of such fire or other
casualty, Lessor shall advise Lessee within sixty (60) days of such occurrence
whether the Leased Premises can be repaired using reasonable diligence within
one hundred eighty (180) days or less. If the damage cannot be repaired within
one hundred eighty (180) days, Lessee and Lessor shall each have the right, to
be exercised by notice in writing delivered to the other within ninety (90) days
from and after said occurrence, to elect to terminate this Lease Agreement and,
in such event, this Lease Agreement and the tenancy hereby created shall cease
as of the date of said occurrence, the rent to be adjusted as of such date
notwithstanding the foregoing. If less than one (1) year would remain of the
Lease term upon completion of the repairs or reconstruction, Lessor may at its
sole option elect not to rebuild and may upon the giving of written notice
terminate this Lease Agreement as of the date of said occurrence and the Basic
Rental shall be adjusted as of such date.
(C) TEMPORARY RELOCATION: In the event that Lessee shall be
dislocated by reason of damages caused by fire or other casualty which is not
the result of the act or neglect of Lessee or Lessee's officers, employees or
agents and Lessee shall request Lessor, in writing, to attempt to make other
space at U-PARC available for the use of the dislocated portion of Lessee's
operations, then Lessor shall make reasonable efforts to locate other
uncommitted reasonably comparable space at U-PARC for such use until such time
as the Leased Premises shall be restored or this Lease Agreement shall be
terminated. To the extent that and for so
<PAGE> 14
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long as Lessor shall make available to Lessee such reasonably comparable space
and Lessee uses the same, the rent hereunder shall not abate. Lessor shall not
be obligated to bear any expense to prepare such space so as to make it
comparable for Lessee's interim use hereunder. Further, Lessor shall have no
liability to Lessee hereunder for failure to make any specific space available
to Lessee to the extent that such space shall be made available by Lessor to
another occupant of U-PARC that is dislocated by fire or other casualty. Any
space that shall be subject to any option, right of first refusal or other
agreement or which is then the subject of active negotiations with another party
shall be deemed committed for purposes of this paragraph and Lessor shall not be
obligated to make the same available to Lessee.
(D) NOTICE: Lessee shall give prompt notice to Lessor in case
of fire or other damage to the Leased Premises or the Building.
14. CONDEMNATION: It is mutually agreed that any condemnation which
affects parking or access only shall not change this Lease Agreement in any
respect so long as reasonably equivalent parking and access are provided.
In any event Lessee waives all claims against Lessor by reason
of the complete or partial taking of the Leased Premises; provided, however,
that Lessee shall nevertheless be entitled to relocation damages and other
payments lawfully due lessees as such, without diminution of the sums due Lessor
by reason of such condemnation.
15. ACCESS: Lessor hereby reserves the right on behalf of itself, its
employees, agents and invitees, to enter the Leased Premises at all reasonable
times for the purposes of inspection, making repairs, decorations or
improvements or to exhibit the Leased Premises to prospective lessees,
purchasers, insurers, mortgagees, appraisers, insurers, contractors or workmen
without liability to Lessee for any loss of quiet enjoyment of the Leased
Premises. In those portions of its Leased Premises designated "Restricted
Access" on Exhibit A hereto Lessor shall, except in case of emergency, give
Lessee reasonable oral or written notice at the Leased Premises or as provided
in paragraph 30, in order that Lessee may provide for personnel of Lessee to
accompany such entry and afford reasonable safeguards for such entry. In other
areas of the Leased Premises, when conveniently possible, Lessor shall give
prior notice (oral or written) before any such entry. Lessor shall not abuse the
right of access or use it to harass Lessee.
16. ASSIGNMENT; SUBLETTING: Lessee shall not assign, sublet, rent or
otherwise transfer the Leased Premises or any part thereof, nor transfer
possession or occupancy thereof to any person, corporation, partnership or
association, nor advertise the same in any newspaper or other place, nor
transfer or encumber this Lease Agreement without the prior written consent of
Lessor; nor shall any assignment hereof be effected by operation of law or
otherwise without such consent. Any such consent, if given by Lessor, shall not
release Lessee from any of Lessee's obligations under this Lease Agreement
(unless so specified), nor shall it serve as a waiver of the need for written
consent in all future cases.
17. SIGNS: No sign, placard, picture, advertisement, name or notice
shall be displayed, printed or affixed to the outside or inside of the Building
containing the Leased Premises or in the vicinity thereof without the prior
written consent of Lessor. Any sign erected or displayed in violation of this
provision shall be removed by Lessee upon ten (10) days written notice from
Lessor. Failing such removal, Lessor hereby reserves the right
<PAGE> 15
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to remove such offending sign at the cost and expense of Lessee and collect the
same as Additional Rental hereunder.
18. SUBORDINATION AND ATTORNMENT: Without limitation of any of the
provisions of this Lease Agreement, this Lease Agreement is subject and
subordinate to all mortgages which may now or hereafter affect the real property
of which the Leased Premises form a part, and to all renewals, modifications,
consolidations, replacements and extensions thereof provided that the mortgagee
under any such mortgage shall agree that Lessee's possession of the Leased
Premises shall not be disturbed so long as Lessee is not in default hereunder.
Upon the written request of any owner, purchaser, lessor, lessee or mortgagee,
Lessee will execute an instrument whereby Lessee will attorn to such owner,
purchaser, lessor, lessee or mortgagee upon all the terms, covenants, conditions
and agreements set forth in this Lease Agreement. The provisions of this Section
18 shall be self-operative and no further instrument of subordination shall be
required by the holders of any interest to which this Lease Agreement is
subordinate. Lessee agrees, however, whenever requested so to do upon reasonable
notice to it by Lessor or any such owner, purchaser, lessor, lessee or
mortgagee, to execute such instruments confirmatory of the provisions of this
Section 18 as the party requesting the same may require, without expense to
Lessee.
19. ESTOPPEL CERTIFICATES:
(A) BY LESSEE: Lessee shall, at any time and from time to
time, within fifteen (15) days following written request from Lessor, execute,
acknowledge and deliver to Lessor, a written statement certifying that this
Lease Agreement is in full force and effect and unmodified (or, if modified,
stating the nature of such modification), certifying the date to which the
rental reserved hereunder has been paid, and certifying that there are not, to
Lessee's knowledge, any uncured defaults an the part of Lessor hereunder, or
specifying such defaults if any are claimed. Any such statement may be relied
upon by any prospective purchaser or mortgagee of all or any part of the
Building or U-PARC. Lessee's failure to deliver such statement within said
fifteen (15) day period shall be conclusive upon Lessee that this Lease
Agreement is in full force and effect and unmodified, and that there are no
uncured defaults in Lessor's performance hereunder.
(B) BY LESSOR: Lessor shall, at any time and from time to
time, within fifteen (15) days following written request from Lessee, execute,
acknowledge and deliver to Lessee a written statement certifying that this Lease
Agreement is in full force and effect and unmodified (or, if modified, stating
the nature of such modification), certifying the date to which the rental
reserved hereunder has been paid, and certifying that there are not, to Lessor's
knowledge, any uncured defaults on the part of Lessee hereunder, or specifying
such defaults if any are claimed. Any such statement may be relied upon by any
prospective purchaser of a material interest in the Lessee or any institutional
creditor of Lessee.
20. DEFAULT: The occurrence of any of the following shall constitute a
material default and breach of this Lease Agreement by Lessee:
(A) The vacation or abandonment of the Leased Premises by
Lessee;
(B) A failure by Lessee to pay any installment of Basic Rental
or Additional Rental hereunder or any such other sum herein required to be paid
by Lessee within ten (10) days after notice from Lessor that Lessee is in
default in the payment of the same:
<PAGE> 16
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(C) A failure by Lessee to observe and perform any other
terms or conditions of this Lease Agreement to be observed or performed by
Lessee, where such failure continues for thirty (30) days after written notice
thereof from Lessor to Lessee; provided, however, that if the nature of the
default is such that the same cannot reasonably be cured within such period,
Lessee shall not be deemed to be in default if within such period Lessee shall
commence such cure and thereafter diligently prosecute the same to completion;
(D) The making by Lessee of any assignment for the benefit of
creditors; the adjudication that Lessee is bankrupt, insolvent or unable to pay
its debts; the filing by or against Lessee of a petition to have Lessee adjudged
a bankrupt or a petition for reorganization or arrangement under any law
relating to bankruptcy (unless Lessee cures such default by reaffirming the
indebtedness to Lessor pursuant to the terms of this Lease Agreement and the
Bankruptcy Reform Act of 1978 as it may be amended from time to time, and/or, in
the case of a petition filed against Lessee, the same is dismissed within sixty
(60) days after the filing thereof); the appointment of a trustee or receiver to
take possession of substantially all of Lessee's assets located in the Leased
Premises or of Lessee's interest in this Lease Agreement (unless possession is
restored to Lessee within thirty (30) days after such appointment); or the
attachment, execution or levy against, or other judicial seizure of,
substantially all of Lessee's assets located in the Leased Premises or of
Lessee's interest in this Lease Agreement (unless the same is discharged within
thirty (30) days after issuance thereof); and
(E) The willful or persistent violation of Rules and
Regulations adopted by Lessee, even though Lessee may cure such violations
within the thirty (30) day period allowed at subparagraph (C), above.
21. REMEDIES: Upon the occurrence of any event of default set forth
above:
(A) Lessor may perform for the account of Lessee any such
default of Lessee and immediately recover as Additional Rental any expenditures
made and the amount of any obligations incurred in connection therewith, plus
interest at the Default Interest Rate from the date of any such expenditure;
(B) Lessor may accelerate all Basic Rental and Additional
Rental due for the balance of the term of this Lease Agreement and declare the
same to be immediately due and payable;
(C) Lessor, at its option, may serve notice upon Lessee that
this Lease Agreement and the then unexpired term hereof shall cease and expire
and become absolutely void on the date specified in such notice, to be not less
than five (5) days after the date of such notice without any right on the part
of the Lessee to save the forfeiture by payment of any sum due or by the
performance of any term or condition broken; and, thereupon and at the
expiration of the time limit in such notice, this Lease Agreement and the term
hereof, as well as the right, title and interest of the Lessee hereunder, shall
wholly cease and expire and become void in the same manner and with the same
force and effect (except as to Lessee's liability) as if the date fixed in such
notice were the date herein stated for expiration of the term of this Lease
Agreement. Thereupon, Lessee shall immediately quit and surrender to Lessor the
Leased Premises, and Lessor may enter into and repossess the Leased Premises by
summary proceedings, detainer, ejectment or otherwise and remove all occupants
thereof and, at Lessor's option, any property thereon without being liable to
indictment, prosecution or damages therefor. No such expiration or termination
of this Lease Agreement shall relieve Lessee of its liability and obligations
under this Lease Agreement, whether or not the Leased Premises shall be relet;
(D) Lessor may, at any time after the occurrence of any event
of default, reenter and repossess the Leased Premises and any part thereof and
attempt in its own name, as agent for Lessee if this Lease Agreement is not
terminated or in its own behalf if this Lease Agreement is terminated, to relet
all or any part of such Leased Premises for and upon such terms and to such
persons and for such period or periods as
<PAGE> 17
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Lessor, in its sole discretion, shall determine, including the term beyond the
termination of this Lease Agreement; and Lessor shall not be required to accept
any lessee offered by Lessee or observe any instruction given by Lessee about
such reletting or do any act or exercise any care or diligence with respect to
such reletting or to the mitigation of damages. For the purpose of such
reletting, Lessor may decorate or make repairs, changes, alterations or
additions in or to the Leased Premises to the extent deemed by Lessor desirable
or convenient; and the cost of such decoration, repairs, changes, alterations or
additions shall be charged to and be payable by Lessee as Additional Rental
hereunder, as well as any reasonable brokerage and attorney fees expended by
Lessor, and any sums collected by Lessor from any new lessees obtained on
account of the Lessee shall be credited against the balance of the rent due
hereunder as aforesaid. Lessee shall pay to lessor monthly, on the days when the
rent would have been payable under this Lease Agreement, the amount due
hereunder less the amount obtained by Lessor from such new lessee;
(E) For value received and in the event of the occurrence of
an event of default as hereinabove defined, Lessee does hereby empower any
prothonotary or any attorney of any court of record within the United States or
elsewhere to appear for Lessee and with or without declaration filed, confess
judgment against Lessee and in favor of Lessor, its successors or assigns, as of
any term for the sums due by reason of such default in payment of Basic Rental
and/or Additional Rental, including unpaid rental for the balance of the Term if
the same shall become due and payable under the provisions hereof and/or for the
sums due by the reasons of any breach of covenant by Lessee herein, with costs
of suit and attorney's commission of ten percent (10%) for collection, and may
forthwith issue a writ or writs of execution thereon, with release of all errors
and without stay of execution and extension upon any levy on real estate is
hereby expressly waived. Such authority shall not be exhausted by one exercise
thereof, but judgment may be confessed as aforesaid from time to time as often
as any installment of Basic Rental or Additional Rental or other sums required
to be paid by Lessee hereunder may fall due or be in arrears, and such powers
may be exercised as well after the expiration of the original term or during any
renewal or extension thereof,
At the termination of the term of this Lease
Agreement, whether at the end of the term hereof or upon determination of the
term by an event of default hereunder, and for the consideration aforesaid and
in addition to the foregoing remedy or in lieu thereof, Lessee does also hereby
empower any attorney of any court of record within the United States or
elsewhere to sign an agreement for entering in any court of competent
jurisdiction an amicable action and judgment in ejectment for possession and all
costs and other charges in connection therewith against Lessee and all persons
claiming under Lessee for the recovery by Lessor of
<PAGE> 18
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possession of the Leased Premises, for which this shall be a sufficient warrant.
Whereupon, at the option of Lessor, a Writ of Possession may forthwith issue,
without any prior writ or proceeding whatever, and Lessee hereby releases Lessor
from any and all errors whatsoever, in entering such action of judgment and
agrees that no writ of error, objection or exception shall be made or taken
thereto.
In any actions commenced under the provisions of this
paragraph (E), Lessor shall file in such action an affidavit made by Lessor or
an authorized representative of Lessor, setting forth the act or acts
authorizing the entry of such judgment according to the terms of this Lease
Agreement, of which act or acts such affidavit shall be sufficient evidence, and
if a true excerpt of this paragraph shall be annexed to said affidavit, it shall
not be necessary to file the original Lease Agreement to support such warrant of
attorney, any rule of court to the contrary notwithstanding; and
(F) Lessor shall have the right of injunction, in the event of
a breach or threatened breach by Lessee of any of the terms and conditions
hereof, to restrain the same and the right to invoke any remedy allowed by law
or in equity, whether or not other remedies, indemnity or reimbursements are
herein provided.
The rights and remedies given to Lessor in this Lease
Agreement are distinct, separate and cumulative remedies; and no one of them,
whether or not exercised by Lessor, shall be deemed to be in exclusion of any of
the others.
22. WAIVER: The failure or delay on the part of either party to enforce
or exercise at any time any of the terms and conditions of this Lease Agreement
shall in no way be construed to be a waiver thereof, nor in any way to affect
the validity of this Lease Agreement or any part hereof, or the right of the
party to thereafter enforce each and every such term or condition. No waiver of
any breach of this Lease Agreement shall be held to be a waiver of any other or
subsequent breach. The receipt by Lessor of rent at a time when the rent is in
default under this Lease Agreement shall not be construed as a waiver of such
default. The receipt by Lessor of a lesser amount than the rent due shall not be
construed to be other than a payment on account of the rent then due, nor shall
any statement on Lessee's check or any letter accompanying Lessee's check be
deemed an accord and satisfaction, and Lessor may accept such payment without
prejudice to Lessors right to recover the balance of the rent due or to pursue
any other remedies provided in this Lease Agreement. No act or thing done by
Lessor or Lessors agents or employees during the term of this Lease Agreement
shall be deemed an acceptance of a surrender of the Leased Premises, and no
agreement to accept such a surrender shall be valid unless in writing and signed
by Lessor.
<PAGE> 19
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23. COMPLIANCE WITH LAWS:
(A) USE AND OCCUPANCY OF LEASED PREMISES: Lessee at its sole
expense shall comply with all laws, orders and regulations of federal, state and
municipal authorities and agencies, and with all lawful direction of any public
officer including without limitation compliance with any applicable
environmental law, rule or regulation which shall impose any duty upon Lessee
with respect to activities conducted at U-PARC, including without limitation:
the Leased Premises; the use and/or occupancy of the Leased Premises by Lessee;
the conduct of Lessee's business on the Leased Premises; Lessee's use of any
chemical or other substances, regardless of physical state, whether or not
defined as "hazardous" or "toxic" or otherwise regulated by any government
agency or other regulatory or insuring body, used by Lessee in Lessee's business
operations; or the health and safety of Lessee's employees, agents, contractors
and invitees. Lessee shall not do anything which shall constitute a public
nuisance. Lessee shall conduct its business in such a manner as to eliminate all
hazardous conditions and effects with respect to all materials used in its
operations, whether solid, liquid or gaseous, and whether physical, chemical or
biological, or any combination thereof. Lessee at its sole expense shall obtain
all required licenses, permits or authorizations for the conduct of any and all
business conducted by it on the Leased Premises.
(B) BUILDING PERMITS: Lessee shall, at its sole expense,
obtain all required licenses or permits required for the making of repairs,
alterations, improvements or additions authorized or required pursuant hereto;
provided, however, that Lessee shall not be required to obtain any licenses or
permits necessary for the construction undertaken by Lessor.
24. LESSOR'S RELOCATION RIGHTS: Lessor reserves the right to relocate
Lessee to other quarters in the Building and/or U-PARC if, in Lessor's sole
discretion, Lessor determines that the same is necessary to the proper and
efficient utilization of the facilities of U-PARC. Any such relocation will be
(1) on at least sixty (60) days written notice to Lessee; (2) to comparable
facilities (taking into consideration the size of the space and the overall
configuration) at a rental no higher than that then in effect for the Leased
Premises and (3) at Lessor's expense, including reasonably required ancillary
expenses for telephone installation and business announcements as to change of
address.
25. LIMITATION OF LIABILITY AND EXCULPATION: It is agreed by Lessor and
Lessee that no personal liability or responsibility is assumed by nor shall it
at any time be asserted or enforceable against Lessor or any trustee,
beneficiary, partner, affiliate, parent corporation, or any officer, director or
shareholder thereof, or the successors or assigns of the foregoing, on account
of any covenant, undertaking or agreement contained in this Lease Agreement, all
such personal liability and responsibility, if any, being expressly waived and
released, it being understood that Lessee shall look solely to the equity of
Lessor in U-PARC for satisfaction of any proven damage of Lessee in the event of
a breach by Lessor hereunder. It is further covenanted and agreed by Lessor and
Lessee that no personal liability or responsibility is assumed by nor shall it
at any time be asserted or enforceable against any individual partner who is a
member of the general partnership which is Lessee hereunder, all such personal
liability and responsibility, if any, being expressly waived and released, it
being understood that the Lessor shall look solely to the assets of the
partnership comprising the Lessee hereunder for satisfaction of any damage to
Lessor in the event of a breach by Lessee hereunder.
26. QUIET ENJOYMENT: Lessor represents and warrants that it is the true
and lawful owner of the Leased Premises and is empowered to enter into this
Lease Agreement and that so long as Lessee shall perform
<PAGE> 20
-17-
all of Lessee's covenants and obligations hereunder, Lessee shall have and enjoy
quiet and peaceable possession of the Leased Premises.
27. ENTIRE CONTRACT: This Lease Agreement constitutes the entire
contract between the parties hereto and there are no other understandings,
promises, representations or warranties, oral or written, relating to the
subject matter of this Lease Agreement, which exist or bind any of the parties
hereto, their respective heirs, executors, administrators, successors or
assigns, except as set forth herein. No amendment, change or addition to this
Lease Agreement shall be binding upon Lessor or Lessee unless reduced to writing
and signed by both parties.
28. APPLICABLE LAW: It is mutually understood and agreed that this
Lease Agreement shall be interpreted in accordance with the laws of the
Commonwealth of Pennsylvania and that no presumption shall be deemed to exist in
favor of or against either party hereto as a result of the preparation or
negotiation of the same.
29. SEVERABILITY: If any particular term, covenant or provision of this
Lease Agreement shall be determined to be invalid and unenforceable, the same
shall not affect the remaining provisions of this Lease Agreement which shall
nevertheless remain in full force and effect.
30. NOTICES: Whenever in this Lease Agreement it shall be required or
permitted that notice or demand be given or served by either party to or on the
other party, such notice or demand shall be deemed to have been duly given or
served if in writing and either personally served or forwarded by Registered or
Certified mail, return receipt request, postage prepaid, arid addressed as
follows:
To Lessor: Baker Young Corporation
U-PARC
3170 William Pitt Way
Pittsburgh, PA 15238
To Lessee: Ms. Karen Skurcenski
Biological Detection, Inc.
635 William Pitt Way
Pittsburgh, PA 15238
Each such mailed notice shall be deemed to have been given to
or served upon the party to which addressed on the date the same is received,
except when the U.S. Postal Service returns the same marked "Refused" or
"Unclaimed," in which case service shall be deemed to have been made on the
first business day following the date of mailing the same. Either party hereto
may change its address to which said notice shall be delivered or mailed by
giving written notice of such change to the other party hereto, as herein
provided.
31. BINDING EFFECT: After this Lease Agreement shall have been fully
executed and delivered by all parties, the same shall be binding upon the said
parties and upon their respective heirs, executors, administrators, successors
and assigns (subject to the restriction on transfer at paragraph 16).
<PAGE> 21
-18-
32. ACKNOWLEDGMENT: Lessee represents that it has read and understands
its obligations under this Lease Agreement and that Lessee has familiarized
itself with the Rules and Regulations adopted by Lessor, including those
appended hereto as Exhibit B. Lessee further represents that it is familiar with
the federal, state and local laws, rules and regulations, including
environmental laws, rules and regulations which are or may be applicable to
Lessee's activities at the Leased Premises, including but not limited to
possible application of the Resource Conservation and Recovery Act, 42 U.S.C.
Sections 6901 et seq., as amended, the Pennsylvania Solid Waste Management Act,
35 P.S. Sections 6018.101 et seq., as amended, the Pennsylvania Worker and
Community Right To Know Act 35 P.S. Sections 7301 et seq., the Toxic Substances
Control Act, 15 U.S.C. Sections 2601 et seq., The Comprehensive Environmental
Response, Compensation and Liability Act of 1980, 42 U.S.C. Sections 9601 et
seq., as amended by the Superfund Amendments and Reauthorization Act of 1986,
H.R. Rep. No. 2005, 99th Cong., 2d Sess. (1986), and any regulations promulgated
thereunder, and further represents that it understands and is fully capable of
satisfying its obligations with respect to said laws, rules and regulations.
WITNESS the due execution of these presents as of the day and year
first above written.
LESSOR:
The University of Pittsburgh of the
WITNESS: Commonwealth System of Higher Education
/s/ /s/
- ----------------------------- ----------------------------------------
The University of Pittsburgh of the
Commonwealth System of Higher Education,
by and through its agent for U-PARC Real
WITNESS Estate Baker Young Corporation
/s/ /s/
- ----------------------------- ----------------------------------------
LESSEE
WITNESS Biological Detection, Inc.
/s/ KAREN L. SKURCENSKI /s/
- ----------------------------- ----------------------------------------
Date 7/26/96
------------------------------------
<PAGE> 1
Exhibit 10.2
PROPRIETARY INFORMATION & PROPERTY AGREEMENT
THIS PROPRIETARY INFORMATION & PROPERTY AGREEMENT IS MADE AS OF
_____________, between Cellomics, Inc., ("Cellomics") and ___________________ an
individual residing in ___________________________, _________________________.
WHEREAS, Employee will be engaged by Cellomics, in a position of trust
and confidence in which Employee will learn of, have access to, and develop
confidential trade secret and other proprietary Information of Cellomics; and
WHEREAS, Cellomics desires to protect its rights in such confidential,
trade secret and other proprietary Information and to obtain the ownership of
certain inventions, programs, and other creations made or developed by Employee;
NOW THEREFORE, Cellomics and Employee, in consideration for Cellomics' offer of
employment to Employee, intending to be legally bound, agree as follows:
1. Nondisclosure of Information. (a) Employee acknowledges that
Cellomics has invested and will continue to invest considerable resources in the
research, development and advancement of Cellomics' business and certain
technology, which investment has and will continue to result in the generation
of proprietary, confidential and/or trade secret Information (including data,
techniques and materials, tangible and intangible), which properly belong to
Cellomics or in respect of which Cellomics owes an obligation of confidentiality
to a third party. Employee acknowledges and agrees that it would be unlawful for
Employee to appropriate, to attempt to appropriate, or to disclose to anyone or
use for his own benefit or for a third party's benefit such data, information,
techniques or materials relating to the business of Cellomics as conducted by
Cellomics.
(b) For purposes of this Agreement all confidential, proprietary or
trade secret Information enumerated or mentioned in Section 1(a) is hereinafter
referred to as "Information." Any restrictions on disclosure and use of the
Information will apply to all copies of the Information, whether in whole or in
part and irrespective of the media by or in which the Information is recorded or
evidenced.
(c) During the term of Employee's service with Cellomics and thereafter
termination of such employment, unless authorized in writing by Cellomics,
Employee will not:
(i) use for Employee's benefit or advantage the Information,
or
(ii) use the Information for the benefit or advantage of any
third party, or
(iii) improperly disclose or cause to be disclosed the
Information or authorize or permit such disclosure of the Information
to any third party, or
Page 1 of 5
<PAGE> 2
(iv) deliberately or with gross negligence, use the
Information in any manner which may injure or cause loss to Cellomics
directly or indirectly.
(d) Employee will not be liable for the disclosure of Information
which:
(i) is in the public domain, or
(ii) is received rightfully by Employee from a third party
having a lawful right to possess, or
(iii) is ordered by a court of law or other governmental
entity and Employee takes such reasonable steps available to Employee
to protect the confidentiality of the Information while complying with
such order; provided however, that Employee shall maintain a detailed
written record, available for Cellomics' inspection, of all disclosures
pursuant to this provision, or
(iv) was known to Employee prior to entering into this
Agreement.
(e) Employee will surrender to Cellomics at any time upon request, and
upon termination of Employee's service with Cellomics for any reason, all
written or otherwise tangible documentation representing or embodying the
Information, in whatever form, whether or not copyrighted, patented, or
protected as a mask work or otherwise protectable, and any copies or imitations
of the Information, whether or not made by the Employee.
(f) Employee agrees to provide additional services upon reasonable
request for consultation for a period of up to six (6) months after termination
of employment to provide Information and details with respect to any work or
activity performed or materials created by Employee alone or with others during
service with Cellomics. Employee will be reimbursed for these services.
(g) Employee agrees to comply with all security regulations established
by the United States government and by Cellomics, its customers, Employees and
other third parties for the purpose of protecting the Developments or
Information as those terms are herein defined. Employee further agrees to comply
with United States laws and regulations governing the export and re-export of
commodities and technical data.
(h) Employee agrees not to disclose Information to any person
affiliated with any third party who has not executed a non-disclosure agreement
with Cellomics and to disclose Information only in the course of performing
her/his duties for Cellomics.
Page 2 of 5
<PAGE> 3
(i) Employee agrees to refrain from making any copies of written
material or tangible objects embodying Information, except as such copies are
required in the performance of his duties for Cellomics.
(j) Upon termination of employment with Cellomics for any reason
whatsoever (including by retirement, by resignation, or for cause), Employee
agrees to deliver to Cellomics all written and/or tangible materials, including
all copies thereof, all magnetic and other types of Information storage media
and all models, machines, mechanisms, prototypes and the like embodying any
Information which he obtained in the course of service with Cellomics, whether
or not he is the author, maker or inventor of same. Employee recognizes that
this obligation requires him to deliver to Cellomics upon termination of service
all such written and tangible materials, including but not limited to letters,
memoranda, reports, notes, notebooks, books of accounts, data, disks, drawings,
prints, plans, specifications, tapes and other data storage media and the like
which he has in his possession or control.
2. Ownership of Programs and Inventions. Any and all creations,
developments, discoveries, inventions, works of authorship, enhancements,
modifications and improvements, including without limitation computer programs,
data bases, data files and the like, (hereinafter collectively referred to as
"Development" or "Developments"), whether or not the Developments are
copyrightable, patentable, protectable as mask works or otherwise protectable
(such as by employment, contract, or implied duty), and whether published or
unpublished, conceived, invented, developed, created or produced by Employee
alone or with others during the term of his employment with Cellomics, will be
the sole and exclusive property of Cellomics if the Development is:
(a) within the scope of Employee's duties assigned with his position,
or
(b) in whole or in part, the result of Employee's use of Cellomics'
resources, including without limitation personnel, computers, data bases,
communications facilities, laboratory facilities, word processing systems,
programs, or office facilities.
Employee hereby acknowledges that Cellomics will have principal
supervisions and control of the development of all products or services, such
that all Developments subject to Copyright will become "works made for hire"
under Section 101 of the Copyright Act of 1976, as amended. Employee will
disclose promptly to Cellomics any and all Developments and will reduce such
disclosures to a detailed writing upon request by Cellomics.
During the term of Employee's service with Cellomics, Employee agrees
to assign and does hereby assign to Cellomics all rights in the Developments
created by Employee alone or with others as part of his duties of employment at
Cellomics, and all rights in any trademarks, copyrights, mask works, patents,
trade secrets and intellectual property rights and any applications for
registration for same, in the United States and such foreign countries as
Cellomics may designate, which are related to the Developments, including
without limitation all accompanying misappropriations and to receive all
proceeds as related to any judgment or settlement of same. Employee agrees to
execute and deliver to Cellomics all instruments and papers Cellomics reasonably
deems necessary to vest in Cellomics sole title to and all exclusive rights in
the Developments created by Employee alone or with others as part of his
Page 3 of 5
<PAGE> 4
duties of employment with Cellomics and in all related trademarks, copyrights,
mask work protection rights, and/or patent rights so created during the term of
service if related to and/or dependent upon Information and/or work done by or
Information learned by Employee during his service with Cellomics. Employee
agrees to execute and deliver to Cellomics all instruments and papers which
Cellomics reasonably deems necessary for use in applying for trademarks,
copyrights, mask work protections, patents or such other legal protections as
Cellomics may reasonably desire. While employed by Cellomics, Employee further
agrees to assist fully Cellomics or its nominees as is reasonably required in
the preparation and prosecution of any trademark, copyright, mask work
protection, patent, or trade secret arbitration or litigation.
3. Government Contracts. If performance of Employee's services involves
work under government contracts, grants, or Cooperative Research and Development
Agreements ("CRADAS"), Employee agrees to be bound by the obligations, terms,
and conditions associated with such contracts, grants, or CRADAS, all of which
are incorporated herein by reference as if fully set forth. If services
performed include receiving, handling or developing any government classified
material, Employee shall comply with all applicable security regulations and
requirements, and immediately submit a confidential report to Cellomics if
Employee has any cause to believe there is any danger of espionage, improper
disclosure or misuse of funds affecting work under a government contract.
4. Prior Obligations of Employee. Employee warrants and represents that
Employee's performance of his duties will not violate any other obligations of
Employee including any other agreements to which Employee is a party. Employee
will not bring any materials which are proprietary to a third party to Cellomics
without the prior written consent of such third party.
5. Miscellaneous. The failure of Cellomics to object to any conduct or
violation of any of the covenants made by Employee under this Agreement will not
be deemed a waiver by Cellomics of any rights or remedies Cellomics may have
under this Agreement.
This Agreement is binding upon the parties hereto. Employee agrees that
the obligations of this Agreement will survive the termination of Employee's
employment with Cellomics.
No alterations, amendments, changes or additions to this Agreement will
be binding upon either Cellomics or Employee unless reduced to writing and
signed by both parties.
No waiver of any right arising under this Agreement made by either
party will be valid unless given in an appropriate writing signed by that party.
Employee is fully aware of Employee's right to discuss any and all
aspects of this Agreement with an attorney chosen by Employee, and Employee
further acknowledges that he has carefully read and fully understands all of the
provisions of this Agreement and that Employee, in all consideration for
Cellomics' offer of employment, is voluntarily entering into this Agreement.
Page 4 of 5
<PAGE> 5
This Agreement may be executed in counterparts, each of which shall be
deemed an original, but which together shall constitute one and the same
instrument.
The headings used in this Agreement are for convenience only and are
not to be considered in construing or interpreting this Agreement.
This Agreement shall be interpreted and enforced pursuant to the laws
of the Commonwealth of Pennsylvania.
WITNESS the execution hereof as of the date first above written.
Employee: Cellomics, Inc. (Cellomics):
___________________________________ _____________________________
Employee Signature Signature
___________________________________ _____________________________
Employee Name Name and Title
___________________________________ _____________________________
Date Date
Page 5 of 5
<PAGE> 1
Exhibit 10.3
LICENSE AND SUPPLY AGREEMENT
This License and Supply Agreement (the "Agreement"), effective as of
April 5, 1999 (the "Effective Date"), is made by and between Molecular Probes,
Inc., an Oregon corporation, ("MPI") and Cellomics(TM), Inc., a Delaware
corporation ("CI").
BACKGROUND
A. CI has developed a cell based screening system for the
analysis of cellular biochemical and molecular parameters
through combinatorial cell biology; and
B. MPI has expertise in the development and manufacture of
certain proprietary and non-proprietary fluorescence based
reagents; and
C. CI desires to obtain from MPI and MPI desires to grant CI
certain licenses to use MPI's proprietary fluorescence based
reagents; and
D. The parties desire that CI purchase and MPI supply certain
proprietary and non-proprietary products on the terms and
conditions set forth below.
NOW, THEREFORE, for and in consideration of the mutual covenants and promises
herein contained, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
1.1 "CI Specifications" shall mean collectively (i) the quality control
standards, as amended from time to time, that materials supplied to CI must meet
for use under this Agreement; and (ii) the packaging protocols required by CI,
as amended from time to time, for materials supplied for use under this
Agreement.
1.2 "Confidential Information" shall have the meaning as set forth in
Section 8.1 below.
1.3 "Custom Product" shall mean a Licensed Material or a
Non-Proprietary Material that is not available from MPI as a Stock Item, but is
available by special request, e.g. to obtain a material that has the same
chemical formula as a Stock Item but has different quality control
specifications or special packaging requirements, or a material with a chemical
composition that is not offered as a Stock Item. For purposes of this Agreement,
consolidated packaging of bulk amounts of Stock Items are not Custom Products.
1.4 "Field" shall mean [*] .
1.5 "Finished Product(s)" shall mean any kit incorporating Licensed
Materials that is transferred by CI, in return for compensation, to a third
party for use in the Field, where the kit, or the Licensed Materials in such
kit, or the use thereof, is covered by a Valid Claim.
"CONFIDENTIAL [*] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS
DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT
OF 1933, AS AMENDED."
1
<PAGE> 2
1.6 "High Content Screening" or ("HCS") shall mean [*] .
1.7 "Licensed Material(s)" shall mean (i) any chemical or biochemical
composition(s), including Proprietary Material(s), that are covered by a Valid
Claim or, (ii) where the composition itself is not covered by a Valid Claim, its
use is covered by a Valid Claim and its manufacture is a trade secret of MPI.
Licensed Materials include, but are not limited to, [*] . Not all Licensed
Materials are Proprietary Materials [*] .
1.8 "MPI Technology Package" shall mean the groupings of MPI Patents
that are designated in Exhibits A and B, and the corresponding MPI Technical
Information.
1.8.1 "MPI Patents" shall mean any issued patents or patent
applications that are identified as "Licensed Patents" on Exhibits A and B, as
amended from time to time, and all corresponding patents issuing from such
applications, and all reissues, renewals, re-examinations, and extensions
thereof, and any divisions or continuations (in whole or in part) thereof, and
any foreign equivalents thereof, as amended from time to time by the agreement
of the parties, [*] .
1.8.2 "MPI Technical Information" shall mean confidential
information, tangible or intangible, and materials, including but not limited
to: pharmaceutical, chemical, biological, genetic and biochemical compositions;
and technical and non-technical data and information, and/or the results of
tests, assays, methods and processes; and plans, specifications and/or other
documents containing said information and data; in each case that is possessed
by MPI as of the Effective Date or during the Term, to the extent such relates
to the manufacture of Licensed Materials, including Proprietary Materials, of a
given MPI Technology Package.
1.9 "Net Sales" shall mean the gross amounts received by CI for the
Sale of Finished Products or Services, less the following amounts directly
chargeable to such Finished Products or
"CONFIDENTIAL [*] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS
DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT
OF 1933, AS AMENDED."
2
<PAGE> 3
Services: (a) customary trade, quantity or cash discounts and rebates, actually
allowed and taken; (b) amounts repaid or credited to customers on account of
rejections; (c) freight and other transportation costs, including insurance
charges, and duties, tariffs, sales and excise taxes and other governmental
charges based directly on Sales, turnover or delivery of such Finished Products
or Services and actually paid or allowed by CI; and (d) amounts allowed or
credited due to returns or uncollectible amounts. Where Finished Materials or
Services are Sold to third parties for compensation other than cash, Net Sales
shall mean the cash equivalent of the fair market value of such other
compensation.
1.10 "Non-Proprietary Materials" shall mean any non-proprietary
materials set forth on Exhibit C attached hereto produced by MPI and purchased
by CI pursuant to this Agreement.
1.11 "Proprietary Materials" shall mean those materials set forth in
Exhibits A and B attached hereto, as amended from time to time, under the column
entitled "Proprietary Materials".
1.12 "Sell", including any variations of the verb "to Sell" or the noun
"Sale" means to transfer to a third party in return for compensation, whether
such compensation is in the form of cash payment or in the form of a transfer of
a non-cash, tangible or intangible asset.
1.13 "Services" shall mean any services conducted by CI in the Field
and covered by a Valid Claim.
1.14 "Stock Item(s)" shall mean any material that is commercially
available from MPI and is identified with a specific product number on MPI's
website (www.probes.com) or in MPI's publications.
1.15 "Ultra High-Throughput Screening" or ("UHTS") shall mean [*] .
1.16 "Valid Claim" shall mean a written claim filed as part of any
unexpired patent application or issued patent within the MPI Patents that has
not been held unenforceable, unpatentable or invalid by a decision of a court or
governmental body of competent jurisdiction in a ruling that is unappealable or
unappealed within the time allowed for appeal, and that has not been rendered
unenforceable through disclaimer or otherwise, and that has not been lost
through an interference proceeding. In the event that the relevant MPI Patent is
a provisional patent application that does not include any claims, any specific
embodiment that is described in such provisional application shall be deemed to
be covered by a Valid Claim until such time as a corresponding utility
application is filed that contains one or more claims or such provisional
application expires without the filing of a corresponding utility application
that contains one or more claims, whichever is sooner.
"CONFIDENTIAL [*] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS
DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT
OF 1933, AS AMENDED."
3
<PAGE> 4
ARTICLE 2
LICENSES
2.1 Non-exclusive License to CI to Make or Have Made Licensed
Materials. Subject to the terms and conditions of this Agreement, MPI hereby
grants to CI a non-exclusive license under the MPI Technology Packages, to make
or have made Licensed Materials in accordance with the provisions of Article 5
below. CI is not authorized to Sell Licensed Materials except in Finished
Product(s) or in Services.
2.2 Exclusive License to CI for Use with HCS. Subject to the terms and
conditions of this Agreement, and in accordance with the specific limitations of
this Section 2.2 (including the subsections below), MPI hereby grants to CI
certain worldwide, exclusive rights under each MPI Technology Package listed in
Exhibit A, for use in the Field, where such rights are exclusive solely for use
with HCS.
2.2.1 MPI hereby grants to CI an exclusive, world-wide,
royalty bearing license under the MPI Technology Packages to Sell or offer for
Sale Licensed Materials as part of Finished Products to third parties for use
with HCS.
2.2.2 MPI hereby grants to CI an exclusive, world-wide,
royalty bearing license under the MPI Technology Packages to import or export
Finished Products for use with HCS.
2.2.3 MPI hereby grants to CI an exclusive, world-wide,
royalty bearing license under the MPI Technology Packages to use Licensed
Materials with HCS in Services that are Sold or offered for Sale to third
parties.
2.2.4 In the event that CI is unable to (i) commercialize the
use of a given MPI Technology Package within three years after the Effective
Date, and (ii) generate royalties of [*] per year from such MPI Technology
Package within five years after the Effective Date, the exclusive license
granted to CI pursuant to this Section 2.2 shall become non-exclusive with
respect to that MPI Technology Package only, and the provisions of Sections
3.2.2 and 3.5 shall apply.
2.3 Non-Exclusive License to CI for Use with UHTS. Subject to the terms
and conditions of this Agreement, and in accordance with the specific
limitations of this Section 2.3 (including the subsections below), MPI hereby
grants to CI certain worldwide, non-exclusive rights under each MPI Technology
Package listed in Exhibit A, for use in the Field, where such rights are solely
for use in UHTS.
2.3.1 MPI hereby grants to CI a non-exclusive, world-wide,
royalty bearing license under the MPI Technology Packages to Sell or offer for
Sale Licensed Materials as part of Finished Products to third parties for use
with UHTS.
2.3.2 MPI hereby grants to CI a non-exclusive, world-wide,
royalty bearing license under the MPI Technology Packages to import or export
Finished Products for use with UHTS.
"CONFIDENTIAL [*] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS
DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT
OF 1933, AS AMENDED."
4
<PAGE> 5
2.3.3 MPI hereby grants to CI a non-exclusive, world-wide,
royalty bearing license under the MPI Technology Packages to use Licensed
Materials with UHTS in Services that are Sold or offered for Sale to third
parties.
2.4 Right of First Refusal to Obtain an Exclusive License for Use in
HCS. MPI hereby grants to CI a right of first refusal ("Option"), commencing on
the Effective Date and expiring on the first anniversary thereafter ("Option
Period"), to obtain an exclusive, worldwide, royalty-bearing license under the
MPI Technology Packages listed in Exhibit B to make, have made, Sell, offer for
Sale, import, export or use Licensed Materials solely for use in HCS, in
accordance with the rights and limitations in Sections 2.1 and 2.2 above; and a
non-exclusive, worldwide, royalty-bearing license under the MPI Technology
Packages listed in Exhibit B to make, have made, Sell, offer for Sale, import,
export or use Licensed Materials solely for use in UHTS, in accordance with the
rights and limitations in Sections 2.1 and 2.3 above. Whether to exercise such
Option is solely at the discretion of CI, but CI must exercise its Option by
payment of the license fee, as described in Section 3.8, for the desired
additional MPI Technology Packages before the expiration of the Option Period.
Upon payment of the corresponding license fee(s) set forth in Section 3.8, the
same rights granted in Sections 2.1 through 2.3 covering the use of the MPI
Technology Packages in Exhibit A shall be extended automatically to cover the
use of the corresponding MPI Technology Package(s) in Exhibit B.
2.5 Option to Add Subsequent MPI Technology Packages to Exhibit A and
Exhibit B. CI and MPI agree to negotiate in good faith the terms under which CI
shall, from time to time, add subsequent MPI Technology Packages to Exhibit A
and Exhibit B. In particular, CI shall have a right of first refusal for use and
Sale in the Field [*] . The parties anticipate the annual license fees for
each individual MPI Technology Package added hereunder shall approximate the
license fee (described in Section 3.8) for the addition of MPI Technology
Packages pursuant to Section 2.4 above.
2.6 Termination of Rights Under Technology Packages. CI may terminate
its obligations to pay to MPI any Annual Minimum Royalty payments and royalties
under any particular MPI Technology Package by notifying MPI in writing of such
intent before the next Annual Minimum Royalty payment is due pursuant to Section
3.2, and concurrently terminating all activities described under Sections 2.1,
2.2 and 2.3 above, with respect to such MPI Technology Package.
2.7 Exchange of Exclusive License for Non-Exclusive License. CI may
elect to change the exclusive license under a given MPI Technology Package
granted pursuant to Section 2.2, to a non-exclusive license under such MPI
Technology Package by notifying MPI in writing of such intent before the next
Annual Minimum Royalty payment is due pursuant to Section 3.2. In the event of
such an election by CI, the provisions of Section 3.2.2 and 3.5 shall apply.
2.8 No Implied Licenses. Nothing herein shall be construed as granting
to either party, by implication, estoppel or otherwise, any license or other
right to any intellectual property of the other party other than those expressly
granted herein.
"CONFIDENTIAL [*] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS
DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT
OF 1933, AS AMENDED."
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<PAGE> 6
ARTICLE 3
COMPENSATION AND ROYALTIES
3.1 License Fee. In consideration of rights granted under Sections 2.1
through 2.3, and Section 2.5, CI shall pay to MPI a total license fee ("License
Fee") of $90,000 for the six MPI Technology Packages set forth on Exhibit A
hereto.
3.1.1 The License Fee shall be paid pursuant to the following
payment schedule:
[*]
3.1.2 From the License Fee paid to MPI pursuant to this
Section 3.1, [*] per MPI Technology Package shall be creditable against any
royalty payments for that MPI Technology Package that become due from the
Effective Date until April 1, 2000.
3.2 Annual Minimum Royalty Payment. Beginning on April 1 of 2000 and
each subsequent anniversary thereof, CI shall pay to MPI an annual minimum
royalty ("Annual Minimum Royalty") for each MPI Technology Package in the
amounts described below, which Annual Minimum Royalty shall be creditable
against any royalties due on the corresponding MPI Technology Package during the
subsequent twelve month period following the previous Annual Minimum Royalty
payment:
3.2.1 For each MPI Technology Package under which CI wishes to
maintain exclusive rights pursuant to Section 2.2, as well as non-exclusive
rights pursuant to Sections 2.1 and 2.3, CI shall pay MPI an Annual Minimum
Royalty of [*] ;
3.2.2 For each MPI Technology Package in which CI wishes to
maintain non-exclusive rights pursuant to Sections 2.2.4 or 2.7, as well as
non-exclusive rights pursuant to Sections 2.1 and 2.3, the Annual Minimum
Royalty for that MPI Technology Package due to MPI by CI shall be reduced to
[*] .
3.3 Royalties on Services. Subject to the provisions of Section 3.5, CI
shall pay to MPI the following royalty rates for Services:
3.3.1 For Services licensed under 2.2.3, a royalty of [*] in which
Licensed Material from any MPI Technology Package is used. If more than one
Licensed Material is simultaneously used [*] for such Services, whether from
the same MPI Technology Package or a different MPI Technology Package, CI would
pay an additional royalty of [*] for each additional Licensed Material used;
and
"CONFIDENTIAL [*] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS
DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT
OF 1933, AS AMENDED."
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<PAGE> 7
3.3.2 For Services licensed under 2.3.3, a royalty of [*] received by
CI for Services in which any Licensed Material from any MPI Technology Package
is used for UHTS.
3.4 Royalties on Finished Products. Subject to the provisions of
Section 3.5, CI shall pay to MPI the following royalty rates for Finished
Products:
3.4.1 a royalty of [*] of Net Sales of Finished Products sold for use
with HCS; and
3.4.2 a royalty of [*] of Net Sales of Finished Products sold for use
with UHTS.
3.5 Reduced Royalties from Change in Exclusivity. In the event that
exclusive rights under a given MPI Technology Package for use with HCS become
non-exclusive rights pursuant to Section 2.2.4 or 2.7, CI shall pay to MPI, in
lieu of any other royalty payments, the following royalty rates:
3.5.1 a royalty of [*] of Net Sales of Finished Products sold for use
with HCS; and
3.5.2 a royalty for Services utilizing HCS that shall be
negotiated in good faith.
3.6 Additional Royalties from Manufacture of Licensed Materials. In the
event that CI shall make or have made Licensed Materials for use in Services or
Finished Products pursuant to Sections 5.1.6, 5.1.8 or 5.1.9, instead of
obtaining such Licensed Materials from MPI, then CI shall pay to MPI the
following royalty rates, in addition to the royalty rates under Sections 3.2,
3.3, 3.4 or 3.5:
3.6.1 for Services licensed under 2.2.3, an additional royalty of [*]
for each such Licensed Material used for HCS;
3.6.2 for Services licensed under 2.3.3, an additional royalty of [*]
received by CI for Services in which any Licensed Material from any MPI
Technology Package is used for UHTS;
3.6.3 for Finished Products sold for use with HCS or UHTS and that
incorporate such Licensed Materials, an additional royalty of [*] of Net Sales
of such Finished Products.
3.7 Option Fee. CI shall pay to MPI a non-refundable option fee of [*]
for each MPI Technology Package set forth on Exhibit B ("Option Fee"), which
Option Fee shall be due upon the Effective Date and shall be fully creditable
against any subsequent license fee (as described in Section 3.8) for such MPI
Technology Package upon exercise of the Option.
3.8 License Fee for Additional MPI Technology Packages. To exercise its
Option pursuant to Section 2.4 above, CI shall pay MPI a license fee for each
individual MPI Technology Package added hereunder that approximates [*] for
the first year (subject to the credit applied under Section 3.7 above), after
which time the Annual Minimum Royalty of Section 3.2 would apply.
"CONFIDENTIAL [*] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS
DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT
OF 1933, AS AMENDED."
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<PAGE> 8
ARTICLE 4
PAYMENTS; BOOKS AND RECORDS
4.1 Payment Terms and Method. Unless otherwise specified herein, all
payments hereunder shall be calculated on a quarterly basis from the Effective
Date and shall be due and payable sixty (60) days after. All dollar amounts
specified in this Agreement, and all payments made hereunder, are and shall be
made in U.S. dollars. If any payments are based on Net Sales denominated in
other than U.S. dollars, the conversion to U.S. dollars shall be the same
internal method CI uses to convert any other Sales denominations to U.S.
dollars, which internal method shall be in accordance with generally accepted
accounting principles.
4.2 Any payments due under this Agreement which are not paid by the
date such payments are due under this Agreement shall bear interest to the
extent permitted by applicable law at the U.S. prime rate per annum quoted in
the "Money Rates" column of The Wall Street Journal (U.S., Western Edition) on
the first business day after such payment is due. This Section 4.2 shall in no
way limit any other remedies available to either party.
4.3 Records. CI shall keep, complete, true and accurate books of
accounts and records for the purpose of determining the amounts payable pursuant
to this Agreement. Such books and records shall be kept for at least three (3)
years following the end of the calendar quarter to which they pertain. Such
records will be open for inspection at CI's principal place of business during
such three (3)-year period by an independent auditor chosen by MPI and
reasonably acceptable to CI for the purpose of verifying the amounts payable by
CI hereunder. Such inspections may be made no more than once each calendar year,
at reasonable times and on reasonable notice. The independent auditor shall be
obligated to execute a reasonable confidentiality agreement prior to commencing
any such inspection. Inspections conducted under this Section 4.3 shall be at
the expense of MPI, unless a variation or error producing an underpayment in
amounts payable exceeding ten percent (10%) of the amount paid for the period
covered by the inspection is established in the course of any such inspection,
whereupon all costs relating to the inspection for such period and any unpaid
amounts that are discovered shall be paid by CI, together with interest on such
unpaid amounts at the rate set forth in Section 4.2 above. The parties will
endeavor to minimize disruption of CI's normal business activities to the extent
reasonably practicable.
ARTICLE 5
MANUFACTURE AND SUPPLY
5.1 Exclusive Supplier of Licensed Materials. Except as expressly
provided in Sections 5.1.6, 5.1.8 or 5.1.9, MPI shall be the exclusive supplier
of all Licensed Materials.
5.1.1 Licensed Materials that are available from MPI as Stock
Items shall be manufactured to conform to MPI's internal specifications for
research grade reagents and packaged according MPI's internal packaging
protocols.
5.1.2 In the event that CI believes that such Stock Items do
not meet CI Specifications (including, e.g. where CI desires a chemical
composition that is not available as a Stock Item) CI shall notify MPI of such
CI Specifications. If such Licensed Materials are dye
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<PAGE> 9
conjugates of biomolecules, and the biomolecule is the basis for such Licensed
Materials not meeting CI Specifications (e.g. because CI desires a biomolecule
of a different class, or a different purity, etc.), then CI shall also identify
the nature of the desired biomolecule.
5.1.3 If CI desires to keep the identity of the desired
Licensed Material secret, CI shall indicate the confidential nature of its
communication, and MPI shall indicate the terms and conditions, if any, under
which such Licensed Material could be made available exclusively to CI as a
Custom Product and such Custom Product would not be made a Stock Item.
5.1.4 Within fifteen (15) days of CI's notification that
original Stock Items do not meet CI Specifications, MPI shall notify CI whether
or not MPI waives its right under Section 5.1 to exclusively manufacture a
Licensed Material that meets such CI Specifications.
5.1.5 If MPI does not waive its exclusive manufacturing right
for such specified Licensed Material at issue, MPI shall (concurrently with
MPI's notification to CI pursuant to Section 5.1.4) provide CI with a firm
quotation (including both price and delivery schedule) for such Licensed
Materials meeting such CI Specifications, and addressing all concerns under
Sections 5.1.3 and 5.2.5.
5.1.6 If the Licensed Material is not a Proprietary Material
and CI elects not to accept MPI's quotation, CI may make or have made the
Licensed Material for use in accordance with Article 2, subject to the
provisions of Sections 3.6, 6.2 and 6.5.
5.1.7 In the event that such Stock Items that do not meet CI
Specifications pursuant to this Section 5.1 are Proprietary Materials, CI may
request that such Proprietary Materials be supplied as a Custom Product, which
will be supplied at prices to be negotiated in good faith, and taking into
account all concerns under Sections 5.1.3 and 5.2.5.
5.1.8 In the event that MPI waives its rights to exclusively
manufacture a specific Licensed Material, CI shall have the right to make or
have made such Licensed Material for use in accordance with Article 2, subject
to the provisions of Sections 3.6, 6.2 and 6.5.
5.1.9 Notwithstanding the provisions of Section 11.2, CI shall
have the right to make or have made a given Proprietary Material, subject to the
provisions of Section 3.6, 6.2 and 6.5 in the event that:
(i) MPI fails to deliver such Proprietary Material as
stated on any CI firm purchase order, where such order for Proprietary
Material(s) conforms to the terms and conditions of this Agreement with respect
to:
(a) the price to be paid for such
Proprietary Material;
(b) the amount of Proprietary Material
to be delivered;
(c) the time frame for delivery of the
Proprietary Material;
(d) the time frame for delivery of
payment for Proprietary Material;
(e) the specifications for the
Proprietary Material; and
(f) the location of the delivery of
Proprietary Material;
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<PAGE> 10
and MPI fails to correct such failure within sixty (60) days of a written notice
of deficiency from CI, provided CI is not in default under any other provision
of this Agreement; or
(ii) MPI is declared insolvent pursuant to Section
365(n)(1) of the Bankruptcy Code or any similar provision of any controlling
state insolvency law(s);
until such time as MPI resumes manufacturing of such Proprietary Materials in
quantities sufficient to supply CI with Proprietary Materials consistent with
the terms and conditions set forth in this Agreement, and MPI notifies CI that
MPI is prepared to resume exclusive manufacture of such Proprietary Materials.
5.1.10 In the event that the provisions of Section 5.1.9
apply, MPI shall transfer to CI that documentation possessed by MPI that would
be reasonably necessary for a person with a Bachelor of Science degree in
organic chemistry and reasonably skilled in the relevant manufacturing and/or
analytical processes, to reproduce and manufacture the Proprietary Material(s)
previously available from MPI under the terms of this Agreement, including
without limitation, lists of raw materials, and their commercial sources,
synthesis and purification protocols, and methods and procedures for the
characterization and quality control. To the extent such documentation contains
Confidential Information of MPI, CI shall institute reasonable measures to
prevent its unauthorized use and/or disclosure.
5.2 Supply. Subject to the terms and conditions of Section 5.1 and this
Section 5.2, MPI shall manufacture Licensed Materials in accordance with CI
Specifications, and shall supply CI with CI's requirements for Licensed
Materials. At CI's request, MPI shall also supply CI with Non-Proprietary
Material(s) subject to Sections 5.2.4, 5.2.5 and 5.5 (i) non-exclusively as
Stock Item(s) or (ii) exclusively as a Custom Product(s) or non-exclusively,
pursuant to Section 5.2.5, at CI's option. CI shall have the right to repackage
Licensed Materials (subject to the terms and conditions of Sections 2.1-2.3, 6.2
and 6.5), and Non-Proprietary Materials supplied by MPI hereunder
5.2.1 Forecasts. For so long as MPI is supplying Licensed
Materials to CI hereunder, at least thirty (30) days prior to the start of any
calendar quarter ("Q1"), CI shall provide MPI with a rolling written forecast of
the quantities of Licensed Materials (on a product-by-product basis) estimated
to be required on a quarter-by-quarter basis for four (4) consecutive quarters
("Q1" to "Q4", respectively). Each forecast shall indicate the estimated
quantities of Licensed Materials. CI will provide such forecasts as a means of
production planning only and such forecasts shall not constitute a binding
obligation upon MPI or CI. CI may also provide forecasts of its estimated
requirements for Non-Proprietary Materials, at its option, if CI desires such
estimates to be included in MPI's production planning for the purposes of
extending the provisions of Sections 5.2.3 to such Non-Proprietary Materials.
5.2.2 Form of Order. CI's orders shall be made pursuant to a
written purchase order which is in a form mutually acceptable to the parties.
MPI shall use reasonable efforts to notify CI within ten (10) days from receipt
of an order of its ability to fill quantities ordered thereunder, subject to
Section 5.2.3 below.
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<PAGE> 11
5.2.3 Shipping. All Licensed Materials and Non-Proprietary
Materials delivered pursuant to the terms of this Section 5.2 shall be suitably
packed for shipment by MPI, marked for shipment to the destination point
indicated in CI's purchase order. Unless otherwise agreed between the parties in
writing, orders for less than twenty-five (25) units of the same Stock Item for
which MPI has previously received a forecast pursuant to Section 5.2.1 shall be
shipped to CI within five (5) business days of receipt of the order; orders for
twenty-five (25) units or more of the same Stock Item shall be shipped within
thirty (30) days of receipt of the order. The shipment schedules for orders of
Custom Products will be determined at the time such order is placed, in
accordance with MPI's standard completion schedules for custom synthesis. All
Licensed Materials and Non-Proprietary Materials shipped to CI will be
delivered FOB (U.C.C.) the shipping point. All shipping and insurance costs, as
well as any special packaging expenses, shall be paid by CI.
5.2.4 Prices. MPI shall provide to CI all Licensed Materials
and Non-Proprietary Materials to CI for use in Finished Products and Services as
follows:
(i) MPI shall provide Stock Items at MPI's standard
retail rates as set forth in MPI's website for the period in which the purchase
order was submitted. CI shall be entitled to any standard quantity discounts MPI
offers to industry customers [*] .
(ii) In addition to the discount set forth above, CI
shall receive an additional discount rebate within thirty (30) days after the
conclusion of a semi-annual period, for aggregate purchases of Licensed
Materials and Non-Proprietary Materials that are Stock Items from the attached
MPI Technology Packages according to the following schedule:
(1) for aggregate annual purchases of less
than [*] no discount rebate, regardless of the amount purchased;
(2) for aggregate annual purchases of at
least [*] ; a discount rebate that is [*] of such annual aggregate purchases
within the specified range;
(3) for aggregate annual purchases of at
least [*] a discount rebate that is [*] of such annual aggregate purchases
within the specified range;
(4) for aggregate annual purchases of at
least [*] ; a discount rebate that is [*] of such annual aggregate purchases
within the specified range.
(iii) MPI shall provide Custom Products at prices to
be negotiated in good faith, subject to Sections 5.1.3, 5.1.5, 5.1.7 and 5.2.5.
Prior to determination of the price to be paid for such Custom Product, MPI and
CI shall agree on the degree of exclusivity (pursuant to Section 5.2.5) as well
as the quality control specifications and packaging specifications for such
Custom Product, which agreed specifications shall become the CI Specifications
for such Custom Product, and in the event such Custom Product shall become a
Stock Item, subject to Sections 5.1.3 and 5.2.5, for such Stock Item. Such
Custom Products shall not be included in the annual aggregate purchases
"CONFIDENTIAL [*] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS
DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT
OF 1933, AS AMENDED."
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<PAGE> 12
that qualify for the discount rebate, unless and until such Custom Products
shall become available as Stock Items.
5.2.5 Prior to MPI accepting an order for a Custom Product, CI
and MPI shall agree in writing whether MPI may convert such Custom Product into
a Stock Item or produce it as a custom product for other party/ies, without
further approval from CI, to address CI's concerns about preserving CI's trade
secrets and MPI's concerns about maintaining flexibility in offering MPI's
technology to third parties for uses other than those exclusively licensed to
CI.
5.2.6 Invoicing and Payment. MPI shall submit an invoice to CI
upon shipment of Licensed Materials and Non-Proprietary Materials ordered by CI.
All invoices shall be sent to CI's address for notices hereunder and marked
"Attention: Accounting Department." Each such invoice shall state CI's aggregate
price therefor in a given shipment, plus any insurance, taxes or other costs
incident to the purchase or shipment initially paid by MPI but to be borne by CI
hereunder. Payment shall be made within thirty (30) days after the invoice is
sent to CI.
5.3 Product Acceptance/Returns.
5.3.1 Unless agreed otherwise in writing prior to or
concurrently with acceptance of an order in accordance with Section 5.2.2, any
Licensed Materials and Non-Proprietary Materials supplied hereunder shall
conform at the time of shipment to MPI's internal specifications for research
grade reagents and packaged according MPI's internal packaging protocols.
5.3.2 Unless agreed otherwise in writing prior to or
concurrently with acceptance of an order in accordance with Section 5.2.2, any
Custom Products supplied hereunder shall conform at the time of shipment to CI
Specifications.
5.3.3 The parameters for evaluating the performance of
Licensed Materials in a particular application undertaken by CI are beyond the
control of MPI and, while such parameters may determine the suitability of
materials for such application, such parameters shall not be used to determine
acceptance of materials. Only written specifications agreed to between the
parties shall be used to determine acceptance of materials supplied by MPI.
5.3.4 Each shipment of Licensed Materials and Non-Proprietary
Materials hereunder shall be accompanied by a certificate of analysis for each
lot therein as well as such customs and other documentation as is necessary or
appropriate for shipment of materials from MPI to CI.
5.3.5 MPI will provide, upon CI's request, those test
procedures and test data that are the basis for the certificate of analysis
pertaining to Licensed Materials and Non-Proprietary Materials.
5.3.6 Without limiting the foregoing, if any Licensed
Materials or Non-Proprietary Materials supplied hereunder fail to conform to the
applicable CI Specifications or certificate of analysis, then CI shall promptly
notify MPI and present reasonable evidence to MPI of such nonconformity, if
requested to do so. Subject to the limitations in Sections 5.1, 5.2.4, 5.3.1,
5.3.2 and 5.3.3, MPI agrees to replace, at no additional expense to CI, such
nonconforming Licensed
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Materials or Non-Proprietary Materials with conforming product within thirty
(30) days after receipt of CI's notification under this Section 5.3.
5.3.7 In the event that MPI disputes CI's evidence of
nonconformity, MPI may, at its own expense, request that an independent third
party tester selected by the parties analyze any unit of Licensed Materials or
Non-Proprietary Materials rejected by or on behalf of CI for nonconformity and,
if the independent third party tester determines that any such unit of Licensed
Materials or Non-Proprietary Materials was conforming, then CI shall be
responsible for payment of such units and for such analysis.
5.3.8 All returns of Licensed Materials and Non-Proprietary
Materials shall be in accordance with a mutually agreeable product return
protocol.
5.4 Allocation. In the event that MPI is unable (due to force majeure
or otherwise) to supply both MPI's worldwide requirements of Licensed Materials
or Non-Proprietary Materials, and quantities of such Materials forecast pursuant
to Section 5.2.1 and ordered by CI under Section 5.2.2 above, MPI shall allocate
the quantities of such Licensed Materials or Non-Proprietary that MPI has in
inventory, and that MPI is able to produce, so that CI receives at least its
proportional share of available supplies as determined based on reasonable
forecasts of the requirements of CI, MPI and other third parties (taking into
consideration past requirements for such Materials relative to past forecasts).
5.5 Compliance with Regulatory Agency Requirements. MPI shall comply
with all laws and regulations applicable to the manufacture of Licensed
Materials and Non-Proprietary Materials. Upon CI's prior written approval, such
approval not to be unreasonably withheld, CI shall reimburse MPI up to $400 for
each low volume exemption ("LVE") filing required for non-research use, in
performance of MPI's obligations hereunder. Non-Proprietary Materials for which
such non-research use is intended shall be identified by CI prior to such
non-research use, for determination of such LVE filing requirement and for
inclusion in Exhibit C attached hereto.
ARTICLE 6
OWNERSHIP OF INTELLECTUAL PROPERTY AND PATENT RIGHTS
6.1 Patent Prosecution. MPI shall control, at its sole expense, the
prosecution and maintenance activities pertaining to MPI Patents, using counsel
of its choice and in such countries as it deems appropriate.
6.2 Patent Marking. CI shall use reasonable efforts to mark
advertisements, labels, and product literature that pertain to Finished Products
to mention the patent number of MPI Patents or a statement of pending patent
status, and a statement to the effect that Licensed Materials are limited to use
in the Field only.
6.3 Patent Enforcement. If either party reasonably believes that any
MPI Technology Package is infringed or misappropriated by a third party or is
subject to a declaratory judgement action arising from such infringement, such
party shall promptly notify the other party. Both parties shall use their best
efforts in cooperating with each other to terminate such infringement or
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<PAGE> 14
misappropriation without litigation. If such efforts without litigation are
unsuccessful, prosecution of a third party for the infringing use of MPI's
Technology Package may be undertaken.
6.3.1 MPI Initiating Enforcement Actions. MPI shall have the
initial right (but not the obligation) to enjoin such misappropriation, to
enforce the MPI Patents with respect to such infringement, or to defend any
declaratory judgment with respect to the MPI Technology Package (for purposes of
this Section 6.3, any such action is herein after referred to as an "Enforcement
Action"). MPI shall keep CI reasonably informed of the progress of any such
Enforcement Action, and CI shall have the right to participate with counsel of
its own choice at its own expense.
6.3.2 CI Initiating Enforcement Actions. In the event that MPI
fails to initiate an Enforcement Action to protect MPI Technical Information or
to enforce the MPI Patents against a commercially significant infringement by a
third party, which infringement or misappropriation consists of the manufacture,
Sale or use of a product in the Field, within one hundred twenty (120) days of a
request by CI to initiate such Enforcement Action, CI may initiate an
Enforcement Action against such infringement with MPI's prior written approval,
which approval shall not be unreasonably withheld or delayed, and at CI's
expense. MPI's approval for initiation of an Enforcement Action notwithstanding,
CI shall not enter into any settlement of an Enforcement Action initiated by CI,
if such settlement admits the unpatentability, invalidity or unenforceability of
any MPI Patent without the written consent of MPI.
6.3.3 Recoveries. If a party undertakes an Enforcement Action
at its own expense, it shall be entitled to 100% of the recoveries therefrom. If
the other party chooses to join such Enforcement Action at its own expense, the
parties shall agree in advance what the apportionment of expenses and recoveries
shall be.
6.4 Defensive Actions. If a claim, suit or proceeding (any for purposes
of this Section 6.4, an "Action") is brought against CI or MPI (the "Subject
Party") and such Action is directed to the subject of a patent or patent
application within the MPI Patents, the Subject Party shall promptly notify the
other party. As between the parties to this Agreement, the Subject Party shall
be entitled to control the defense in any such action(s); provided that the
other party shall have the right to participate in the defense or settlement
thereof at its own expense with counsel of its own choosing. Except as agreed in
writing by the other party, the Subject Party shall not enter into any
settlement of an Action, if such settlement admits the unpatentability,
invalidity or unenforceability of any MPI Patent. The Subject Party agrees to
keep the other party hereto reasonably informed of all material developments in
connection with any Action.
6.5 MPI Trademarks. CI shall use trademarks of MPI to identify Licensed
Materials that are supplied by MPI. CI shall not use MPI's trademarks to
identify Licensed Materials if such Licensed Materials contain no components
that are supplied by MPI and CI shall not use any other of MPI's trademarks,
trade names, slogans, logos, or packaging designs (or any similar trademarks,
trade names, slogans, logos, or packaging designs), except where such use is
specifically authorized in writing by MPI in advance.
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<PAGE> 15
6.5.1 CI shall properly use all such trademarks and shall
acknowledge MPI's ownership of such trademark(s) in advertisements,
publications, and product literature. Where space is available, product labels
shall acknowledge MPI's ownership of such trademarks.
6.5.2 CI shall not register nor assist a third party to
register any of MPI's trademarks, trade names, slogans, logos, or packaging
designs (or any similar trademarks, trade names, slogans, logos, or packaging
designs) except as specifically authorized in writing by MPI in advance.
6.6 Reservation. Other provisions of this Article 6 notwithstanding, in
the event that any third party shall file an infringement suit against either
party, where the suit alleges that a Finished Product or Service, only when used
as offered for Sale by CI, infringes the patent of such third party, (i.e. it is
the particular method of use offered by CI that is the issue, rather than the
materials furnished by MPI); then CI shall have the option to discontinue such
use or to indemnify and hold MPI harmless from and against all proceedings and
claims by third parties arising out of the use or sale of Finished Products or
Services in the allegedly infringing manner. Where the suit alleges that it is a
Licensed Material that infringes the patent of such third party, MPI shall have
the option to waive its exclusive right to the manufacture of such Licensed
Material in accordance with Section 5.1.8 above, but not to otherwise limit the
access of CI to such Licensed Material.
ARTICLE 7
REPRESENTATIONS AND WARRANTIES
7.1 MPI Warranties. MPI hereby represents, warrants and covenants to CI
that (i) it has the full right and authority to enter into this Agreement and
grant the rights and licenses granted herein; (ii) it has not previously granted
and will not grant any rights in conflict with the rights and licenses granted
herein; (iii) to MPI's knowledge and belief, MPI is not aware of any third party
intellectual property rights that are infringed by Licensed Materials, and there
are no existing or threatened actions, suits or claims pending against it with
respect to its right to enter into and perform its obligations under this
Agreement; and (iv) to MPI's knowledge and belief, the Licensed Materials are
useful for the methods described or claimed in MPI Patents, but MPI MAKES NO
WARRANTIES OR REPRESENTATIONS OF MERCHANTABILITY OR SUITABILITY FOR A PARTICULAR
PURPOSE.
7.2 CI Warranties. CI hereby represents, warrants and covenants that it
has the full right and authority to enter into this Agreement.
ARTICLE 8
CONFIDENTIALITY
8.1 Confidential Information. Except as expressly provided herein, the
parties agree that, for the term of this Agreement and for five (5) years
thereafter, the receiving party shall not publish or otherwise disclose and
shall not use for any purpose any information furnished to it by the other party
hereto pursuant to this Agreement which if disclosed in tangible form is marked
"confidential" or with other similar designation to indicate its confidential or
proprietary nature, or if disclosed
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orally is confirmed as confidential (any oral disclosures must be identified in
writing as confidential within (30) thirty days of such disclosure) or
proprietary by the party disclosing such information at the time of such
disclosure (collectively, "Confidential Information"). Notwithstanding the
foregoing, it is understood and agreed that Confidential Information shall not
include information that, in each case as demonstrated by written documentation:
8.1.1 was already known to the receiving party, other than
under an obligation of confidentiality, at the time of disclosure;
8.1.2 was generally available to the public or otherwise part
of the public domain at the time of its disclosure to the receiving party;
8.1.3 became generally available to the public or otherwise
part of the public domain after its disclosure and other than through any act or
omission of the receiving party in breach of this Agreement; or
8.1.4 was subsequently lawfully disclosed to the receiving
party by a person other than a party hereto or developed by the receiving party
without reference to any information or materials disclosed by the disclosing
party.
8.1.5 Sections 8.1.1 through 8.1.4 notwithstanding,
information disclosed by one party to another shall still be deemed Confidential
Information of the disclosing party subject to the protection of this Section
8.1 if such disclosed information is
(i) a specific embodiment that is only generally
described by information in the public domain or the receiving party's
possession or
(ii) a combination that can be pieced together and
reconstructed from multiple sources, none of which shows the whole combination
of materials, its principle of operation, and method of use.
8.2 Permitted Disclosures. Notwithstanding the provisions of Section
8.1 above, each party hereto may use and disclose the other's Confidential
Information to the extent such use and disclosure is reasonably necessary, in
defending litigation, complying with applicable governmental regulations,
submitting information to tax or other governmental authorities or in exercising
its rights hereunder, provided that if a party is legally required to make any
such disclosure of the other party's Confidential Information, to the extent it
may legally do so, it will give reasonable advance written notice to the latter
party of such disclosure and, save to the extent inappropriate in the case of
patent applications, will use its reasonable efforts to secure confidential
treatment of such Confidential Information prior to its disclosure (whether
through protective orders or otherwise).
ARTICLE 9
INDEMNIFICATION
9.1 Indemnification of CI. MPI shall indemnify each of CI and its
directors, officers and employees and the successors and assigns (only as
authorized under Section 11.7) of the foregoing
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<PAGE> 17
(collectively, the "CI Indemnitees"), and hold each CI Indemnitee harmless from
and against any and all liabilities, damages, settlements, claims, actions,
suits, penalties, fines, costs or expenses (including, without limitation,
reasonable attorneys' fees and other expenses of litigation) incurred by any CI
Indemnitee arising from or occurring as a result of any claim, action, suit, or
other proceeding brought by third parties against a CI Indemnitee arising from
or occurring as a result of the gross negligence or willful tortious misconduct
of a MPI Indemnitee.
9.2 Indemnification of MPI. CI shall indemnify each of MPI and its
directors, officers and employees and the successors and assigns of the
foregoing (collectively, the "MPI Indemnitees"), and hold each MPI Indemnitee
harmless from and against any and all liabilities, damages, settlements, claims,
actions, suits, penalties, fines, costs or expenses (including, without
limitation, reasonable attorneys' fees and other expenses of litigation)
incurred by any MPI Indemnitee arising from or occurring as a result any claim,
action, suit, or other proceeding brought by third parties against a MPI
Indemnitee arising from or occurring as a result of the gross negligence or
willful tortious misconduct of a CI Indemnitee.
9.3 Procedure. A party (for purposes of this Section 9.3, the
"Indemnitee") that intends to claim indemnification under any provision of this
Agreement shall: (i) promptly notify the indemnifying party (the "Indemnitor")
in writing of any claim, action, suit, or other proceeding brought by third
parties in respect of which the Indemnitee, or their directors, officers,
employees, successors or assigns intend to claim such indemnification hereunder;
(ii) provide the Indemnitor sole control of the defense and/or settlement
thereof, and (iii) provide the Indemnitor, at the Indemnitor's request and
expense, with reasonable assistance and full information with respect thereto.
Notwithstanding the foregoing, the indemnity obligation in this Article 9 shall
not apply to amounts paid in settlement of any loss, claim, damage, liability or
action if such settlement is effected without the consent of the Indemnitor, to
the extent such consent is not withheld unreasonably or delayed. Without
limiting the foregoing provisions of this Section 9.3, the Indemnitor shall keep
the Indemnitee reasonably informed of the progress of any claim, suit or
proceeding under this Section 9.3 and the Indemnitee shall have the right to
participate in any such claim, suit or proceeding with counsel of its choosing
at its own expense.
ARTICLE 10
TERM AND TERMINATION
10.1 Agreement Term. This Agreement shall become effective as of the
Effective Date and shall continue in full force and effect until the expiration,
revocation or invalidation of the last issued patent within the MPI Patents
("Term").
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10.2 Effect of Expiration.
10.2.1 Accrued Obligations. Expiration of this Agreement for
any reason shall not release either party hereto from any liability which, at
the time of such expiration, has already accrued to the other party or which is
attributable to a period prior to such expiration nor preclude either party from
pursuing all rights and remedies it may have hereunder or at law or in equity
with respect to any breach of this Agreement.
10.3 Termination.
10.3.1 In the event of a material breach of a party of its
obligations hereunder, the nonbreaching party shall be entitled to terminate
this Agreement upon written notice to the breaching party, if such breach is not
cured within thirty (30) days after written notice is given by the nonbreaching
party to the breaching party specifying the breach.
10.3.2 In the event that CI terminates its rights to all MPI
Technology Packages pursuant to Section 2.6, CI may terminate this Agreement
upon sixty (60) days written notice to MPI.
10.4 Effect of Termination.
10.4.1 Accrued Obligations. Termination of this Agreement for
any reason shall not release either party hereto from any liability which, at
the time of such termination, has already accrued to the other party or which is
attributable to a period prior to such termination nor preclude either party
from pursuing all rights and remedies it may have available hereunder or at law
or equity with respect to any breach hereunder.
10.4.2 Return of Materials. Upon any termination of this
Agreement, CI and MPI shall promptly return to the other party all Confidential
Information received from the other party (except one copy which may be retained
for archival purposes only).
10.5 Survival. Sections 5.3, 10.2, 10.4, 11.1 and 11.6, and Articles
6,7,8 and 9 shall survive the expiration or termination of this Agreement for
any reason.
ARTICLE 11
MISCELLANEOUS
11.1 Governing Law. This Agreement and any dispute arising from the
performance or breach hereof shall be governed by and construed and enforced in
accordance with, the laws of the State of New York, without reference to
conflicts of laws principles.
11.2 Force Majeure. Nonperformance of any party (except for payment of
amounts due hereunder, and as provided in Section 5.1.9) shall be excused to the
extent that performance is rendered impossible by strike, fire, earthquake,
flood, governmental acts or orders or restrictions, or any other reason,
including failure of suppliers, where failure to perform is beyond the
reasonable
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<PAGE> 19
control of the nonperforming party. Without limiting the foregoing, the party
subject to such inability shall use reasonable efforts to minimize the duration
of any force majeure event.
11.3 No Implied Waivers; Rights Cumulative. No failure on the part of
MPI or CI to exercise and no delay in exercising any right under this Agreement,
or provided by statute or at law or in equity or otherwise, shall impair,
prejudice or constitute a waiver of any such right, nor shall any partial
exercise of any such right preclude any other or further exercise thereof or the
exercise of any other right.
11.4 Independent Contractors. Nothing contained in this Agreement is
intended implicitly, or is to be construed, to constitute MPI or CI as partners
in the legal sense. No party hereto shall have any express or implied right or
authority to assume or create any obligations on behalf of or in the name of any
other party or to bind any other party to any contract, agreement or undertaking
with any third party.
11.5 Notices. All notices, requests and other communications hereunder
shall be in writing and shall be personally delivered or sent by registered or
certified mail, return receipt requested, postage prepaid; facsimile
transmission (receipt verified); or express courier service (signature
required), in each case to the respective address or fax number specified below,
or such other address or fax number as may be specified in writing to the other
parties hereto:
CI: Cellomics, Inc.
635 William Pitt Way
Pittsburgh, PA 15238
Attn: Intellectual Property Manager
Fax: (412) 826-3895
MPI: Molecular Probes, Inc.
P.O. Box 22010
Eugene, OR 97402-0469
Attn: Legal Department
Fax: (541) 344-6504
11.6 Limitation of Liability. NEITHER PARTY SHALL BE LIABLE TO THE
OTHER PARTY FOR ANY SPECIAL, CONSEQUENTIAL, EXEMPLARY OR INCIDENTAL DAMAGES
(INCLUDING LOST OR ANTICIPATED REVENUES OR PROFITS RELATING TO THE SAME),
ARISING FROM ANY CLAIM RELATING TO THIS AGREEMENT, WHETHER SUCH CLAIM IS BASED
ON CONTRACT, TORT (INCLUDING NEGLIGENCE) OR OTHERWISE, EVEN IF AN AUTHORIZED
REPRESENTATIVE OF SUCH PARTY IS ADVISED OF THE POSSIBILITY OR LIKELIHOOD OF
SAME.
11.7 Assignment. This Agreement shall not be assignable by either party
to any third party except that CI may assign this Agreement to an entity that
acquires substantially all of its business or assets, whether by merger,
transfer of assets, or otherwise ("Acquisition"); [*]
"CONFIDENTIAL [*] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS
DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT
OF 1933, AS AMENDED."
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<PAGE> 20
11.8 Modification. No amendment or modification of any provision of
this Agreement shall be effective unless in writing signed by both parties
hereto. No provision of this Agreement shall be varied, contradicted or
explained by any oral agreement, course of dealing or performance or any other
matter not set forth in an agreement in writing and signed by both parties
hereto.
11.9 Severability. If any provision hereof should be held invalid,
illegal or unenforceable in any jurisdiction, the parties shall negotiate in
good faith a valid, legal and enforceable substitute provision that most nearly
reflects the original intent of the parties and all other provisions hereof
shall remain in full force and effect in such jurisdiction and shall be
liberally construed in order to carry out the intentions of the parties hereto
as nearly as may be possible. Such invalidity, illegality or unenforceability
shall not affect the validity, legality or enforceability of such provision in
any other jurisdiction.
11.10 Confidential Terms. Except as expressly provided herein, each
party agrees not to disclose any terms of this Agreement to any third party
without the consent of the other party, except as required by securities or
other applicable laws, to prospective and other investors and such party's
accountants, attorneys and other professional advisors.
11.11 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, and all of which
together, shall constitute one and the same instrument.
11.12 Headings. Headings used herein are for convenience only and shall
not in any way affect the construction of or be taken into consideration in
interpreting this Agreement.
11.13 Entire Agreement. This Agreement (including the Exhibits hereto,
incorporated herein by reference) constitute the entire agreement, both written
or oral, with respect to the subject matter hereof, and supersede all prior or
contemporaneous understandings or agreements, whether written or oral, between
MPI and CI with respect to such subject matter.
[signature block next page]
###
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed and delivered in duplicate originals as of the date first above
written.
MOLECULAR PROBES, INC.
By: /s/ Rosaria P. Haugland
---------------------------
Name: Rosaria P. Haugland
------------------------
Title: Vice President
------------------------
CELLOMICS, INC.
By: /s/ D. Lansing Taylor
---------------------------
Name: D. Lansing Taylor
------------------------
Title: President & CEO
------------------------
<PAGE> 1
Exhibit 10.4
AGREEMENT
THIS AGREEMENT is made as of the 1st day of October, 1998, by and
between CELLOMICS, INC., a Pennsylvania corporation (hereinafter called
"Company") and D. LANSING TAYLOR (hereinafter "Executive").
Company is engaged in the business of creating and selling products for
multicolor fluorescence microscopy applications and drug discovery (hereinafter
called "Company's Business").
Executive has extensive experience in the Company's Business and
related fields.
Company desires to employ Executive and Executive desires to remain an
employee of the Company on the terms hereinafter set forth.
Now, therefore, intending to be legally bound hereby, the parties
covenant, promise and agree as follows:
EMPLOYMENT
1.01 Executive currently occupies and hereby agrees to remain in the
position of President and Chief Executive Officer of the Company and shall
report to the Company's Board of Directors ("Board"). Executive shall render
such business and professional services in the performance of his duties as
shall be assigned to him by the Board and which are reasonably consistent with
the position held by Executive.
1.02 Executive shall execute his duties effectively and faithfully on a
full-time basis. Executive shall not serve as a director, employee, consultant
or advisor to any other corporation or other business enterprise without prior
written consent of the Board. Notwithstanding the foregoing, Executive shall be
permitted reasonable time to serve on scientific advisory boards for other
businesses not in competition with the Company and to honor commitments to
Carnegie Mellon University ("CMU"), the National Academy of Sciences, and
similar entities, such time not to exceed eight (8) hours per month, subject
always to the non-disclosure of information and non-competition provisions of
Article 4 hereof.
<PAGE> 2
TERM
2.01 Executive shall be employed for a period of three (3) years
commencing October 1, 1998 and ending September 30, 2001.
2.02 Executive may terminate this Agreement without cause, upon six (6)
months written notice to the company.
2.03 Company may immediately terminate this Agreement for "cause", upon
written notice to Executive. For the purposes of this Agreement, "cause" means
that (i) Executive has been found guilty of a felony by a court of competent
jurisdiction, (ii) Executive has committed an act of embezzlement, fraud or
theft with respect to the property of the Company, or (iii) Executive has
materially breached his obligations hereunder or has engaged in a consistent
pattern of material neglect of his duties to the Company. In such event his
compensation shall cease on the date of termination.
2.04 Company may terminate this Agreement at any time without cause
upon written notice to Executive. In the event of such termination, Executive,
in addition to receiving all salary, bonuses and fringe benefits through the
date of notice, shall receive twelve (12) months' salary, payable monthly
following the effective date of his termination, plus full and immediate vesting
of all stock options set forth in Section 3.06 below, except those options
contingent upon the occurrence of a Transaction.
2.05 Death or permanent total disability of Executive shall be treated
as a termination by the Company without cause.
COMPENSATION
3.01 Executive's salary shall be set for the first year of this
Agreement and may be increased during the term of this Agreement based upon
annual reviews, as determined by the Board in its sole discretion.
3.02 Executive shall be paid a salary of Two Hundred Fifty-Five
Thousand ($255,000) Dollars per year for the first year of this Agreement, which
shall be paid to him at the company's normal payroll intervals, subject to
normal payroll deductions.
3.03 Dependent upon his first year annual review, it is contemplated
that Executive will be paid a salary of Two Hundred Sixty Thousand ($260,000)
Dollars per year for the
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<PAGE> 3
second year of this Agreement, which shall be paid to him at the company's
normal payroll intervals, subject to normal payroll deductions.
3.04 Dependent upon his second year annual review, it is contemplated
that Executive will be paid a salary of Two Hundred Seventy Thousand ($270,000)
Dollars per year for the third year of this Agreement, which shall be paid to
him at the company's normal payroll intervals, subject to normal payroll
deductions.
3.05 In addition to the annual base salaries payable to Executive
pursuant to Sections 3.01, 3.02 and 3.03 hereof, Executive shall be entitled to
incentive compensation, up to a maximum amount of twenty (20%) percent of his
salary, in accordance with a formula as agreed upon in each year of this
Agreement with the Board of Directors. Executive and the Board of Directors will
mutually agree upon the formula for attainment of the incentive compensation no
later than November 30 in each year of the Agreement. The formula for the first
year of this Agreement is attached hereto as Exhibit "A".
3.06 In addition to the annual base salaries payable to Executive
pursuant to Sections 3.01, 3.02 and 3.03 hereof and the incentive compensation
pursuant to Section 3.05 hereof, Executive shall be entitled to non-qualified
stock options pursuant to the provisions of the Cellomics, Inc. Stock Plan.
Executive shall be entitled to purchase twenty thousand (20,000) shares of the
Company's common capital stock immediately at its current option price of
56 cents per share. Thirty thousand (30,000) additional Stock Options shall be
granted hereunder subject to a three (3) year vesting period that commences on
the date of this Agreement. Ten thousand (10,0000) options shall vest on each
anniversary of the date of this Agreement, such that the final 10,000 options
shall vest on October 1, 2002. Any such exercise may be made only to the extent
of the number of shares which were purchasable on the date of such termination
of employment. If Executive dies during such three (3) month period, any
unexercised options shall be exercisable by Executive's personal
representatives, heirs or legatees to the same extent and during the same period
that Executive could have exercised such options on the date of his death.
In the event of a reorganization, merger or consolidation in which the
Company is not the surviving entity, or the liquidation, dissolution or sale of
substantially all of the assets of the Company (each a "Transaction"), during
the calendar year 1999, Executive shall be granted additional options fully
vested at the current option price of 56 cents. If the cash or stock
consideration paid in the Transaction exceeds $75,000,000 dollars Executive will
be entitled to an additional 20,000 options for a total of 40,000 options. If
the cash or stock consideration paid in the Transaction exceeds $95,000,000
dollars Executive shall be entitled to 15,000 additional options or a total of
65,000 options.
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<PAGE> 4
In the event of a transaction after calendar year 1999, the Company, or
the entity assuming the obligations of the Company, shall, as to any Stock
Options granted but not yet exercised under this Agreement, either (i) make
appropriate provision for the protection of such Stock Options by the
substitution on an equitable basis of appropriate securities of the Company or
of the merged, consolidated, reorganized, or other successor entity which will
be issuable in respect of the shares of Common Stock of the Company, provided
that the excess of the aggregate Fair Market Value of the securities subject to
the Stock Options immediately after such substitution over the purchase price
thereof is not more than the excess of the aggregate Fair Market Value of the
shares subject to such Stock Options immediately before such substitution over
the purchase price thereof, (ii) upon written notice to the Optionee, provide
that all unexercised Stock Options (including, without limitation, those which
would, but for this Section 6.1, not yet be exercisable) must be exercised
within a specified number of days from the date of such notice or such Stock
Options will be terminated, or (iii) upon written notice to the Optionee,
provide that the Company or the merged, consolidated, reorganized, or other
successor entity shall have the right, upon the effective date of any such
Transaction, to purchase all unexercised Stock Options at an amount equal to the
aggregate Fair Market Value on such date of the shares subject to such Stock
Options less the aggregate purchase price therefor, such amount to be paid in
cash or, if securities of the merged, consolidated, reorganized, or other
successor entity are issuable in respect of the shares of the Common Stock or
assets of the Company, then, in the discretion of the Company, in securities of
such merged, consolidated, reorganized, or other successor entity equal in Fair
Market Value to the aforesaid amount. In any such case the Company shall, in
good faith, determine Fair Market Value and may, in its discretion, advance the
lapse of any installment periods and exercise dates.
3.07 In addition to the annual base salaries pursuant to Sections 3.02,
3.03 and 3.04, the incentive compensation pursuant to Section 3.05, and the
stock options pursuant to Section 3.06, Company will provide Executive with
fringe benefits in the aggregate not less favorable than those provided to other
executives of Company who hold comparable positions.
CONFIDENTIAL INFORMATION, NON-COMPETITION,
AND ASSIGNMENT OF INVENTIONS
4.01 Executive acknowledges that the Company's business is a
specialized business which has the potential to be marketed worldwide, and which
will involve proprietary research, product and marketing information and that
his agreement to the terms of this Section is an important consideration in the
Company's decision to continue to employ him.
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<PAGE> 5
4.02 The Company recognizes that Executive brings with him a great deal
of knowledge in the field of the Company's Business which is not the subject of
any restrictions imposed by this Agreement except the non-competition provision
hereafter set forth.
4.03 Executive agrees to keep secret all confidential information
relating to the Company's business or that of any present or future affiliated
company, including without limitation, proprietary research and development
information, marketing studies and plans, cost information, customer lists and
other confidential business affairs, developed by or for the Company before or
after the commencement of the term of this Agreement, and not to disclose the
same to anyone inside or outside of the Company who has not executed a non-
disclosure agreement with the Company, and to disclose in the course of
performing his duties for the Company.
Upon request by the Company, Executive agrees to promptly return to the
company at the termination of his employment or any time thereafter upon
request, all Company or affiliated organizations' documents and information, in
any and all media, and all copies thereof which he may have acquired during his
term of employment with the Company or which he thereafter acquired without
authorization from the Company.
4.04 (a) Executive agrees that he will promptly make full written
disclosure to the Company, will hold in trust for the sole right and benefit of
the Company, and hereby assigns to the Company, or its designee, all of his
right, title and interest in and to any and all inventions, original works of
authorship, developments, concepts, improvements or trade secrets, whether or
not patentable or registerable under copyright or similar laws, which he may
solely or jointly conceive or develop or reduce to practice, or cause to be
conceived or developed or reduced to practice, during the period of time he is
in the employ of the Company (collectively referred to as "Inventions").
Executive further acknowledges that all original works of authorship which are
made by him (solely or jointly with others) within the scope of and during the
period of his employment with the Company and which are protectable by copyright
are "works made for hire" as that term is defined in the United States Copyright
Act.
(b) Executive agrees to assign to the United States government all of
his right, title and interest in and to any and all Inventions whenever such
full title is required to be in the United States by a contract between the
Company and the United States or any of its agencies.
(c) Executive agrees to keep and maintain adequate and current written
records of all Inventions made by him (solely or jointly with others) during the
term of his employment with the Company. The records will be in the form of
notes, sketches, drawings
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<PAGE> 6
and any other format that may be specified by the Company. The records will be
available to and remain the sole property of the Company at all times.
(d) Executive agrees to assist the Company, or its designee, at the
Company's expense, in every proper way to secure the Company's rights in the
Inventions and any copyrights, patents, mask work rights or other intellectual
property rights relating thereto in any and all countries, including the
disclosure to the Company of all pertinent information and data with respect
thereto, the execution of all applications, specifications, oaths, assignments
and all other instruments which the Company shall deem necessary in order to
apply for and obtain such rights and in order to assign and convey to the
Company, its successors, assigns and nominees, the sole and exclusive rights,
title and interest in and to such Inventions, and any copyrights, patents, mask
work rights or other intellectual property rights relating thereto. Executive
further agrees that his obligation to execute or cause to be executed, when it
is in his power to do so, any such instrument or papers shall continue after the
termination of this Agreement. If the Company is unable, because of Executive's
mental or physical incapacity or for any other reason, to secure his signature
to apply for or to pursue any application for any United States or foreign
patents or copyright registrations covering Inventions or original works of
authorship assigned to the Company as above, then Executive hereby irrevocably
designates and appoints the Company and its duly authorized officers and agents
as his agent and attorney-in-fact, to act for and in his behalf and stead to
execute and file any such applications and to do all other lawfully permitted
acts to further the prosecution and issuance of letters patent or copyright
registrations thereon with the same legal force and effect as if executed by
Executive.
4.05 (a) Executive agrees that during his employment by the Company and
for a period of eighteen (18) months after the termination thereof regardless of
the basis upon which it is terminated, he will not in any place in the world,
directly or indirectly, (a) engage in any of the businesses actively conducted
by the Company on the date of the termination of his employment, or (b) any
business which, to his knowledge, had been under development by the Company as a
potential future business for the Company.
(b) In the event Executive leaves the employ of the Company, he hereby
grants consent to notification by the Company to his new employer about his
rights and obligations under this Agreement.
(c) Executive agrees that for a period of twelve (12) months
immediately following the termination of his relationship with the Company for
any reason, he shall not either directly or indirectly solicit, induce, recruit
or encourage any of the Company's employees to leave their employment, or take
away such employees, or attempt to solicit,
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<PAGE> 7
induce, recruit, encourage or take away employees of the Company, either for
himself or for any other person or entity.
4.06 If Executive commits a material breach of this Article 4, he shall
forfeit all rights to receive any future amounts of any nature whatsoever from
the Company under this Agreement, excluding vested stock options. Executive
further agrees that the provisions of this Article 4 may be specifically
enforced by a court of competent jurisdiction, it being acknowledged by
Executive that any such material breach will cause irreparable harm to the
Company, and that money damages will not provide an adequate remedy to the
Company. Such rights and remedies shall be in addition to and not in lieu of any
other rights that the Company may have in law or in equity.
CONFLICT OF INTEREST
5.01 Executive agrees to diligently adhere to the Conflict of Interest
Guidelines attached hereto as Exhibit "B".
MISCELLANEOUS
6.01 All notices in connection with this Agreement shall be in writing
and shall be deemed to have been given:
i. at the time delivered to the recipient;
ii. with respect to telecopies, at the time of electronic
confirmation by the recipient; or
iii. four (4) days after deposit at any general or branch
United States Post Office, enclosed in an envelope
marked Certified or Registered Mail, Return Receipt
Requested, postage prepaid, addressed to the party at
the following address:
To the Company:
Cellomics, Inc.
635 William Pitt Way
Pittsburgh, PA 15238
Att: CFO
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<PAGE> 8
To Executive:
D. Lansing Taylor
910 Notre Dame Place
Pittsburgh, PA 15215
or at such other address as the parties provide to
each other by written notice.
6.02 This Agreement may be modified only in writing signed by Executive
and the Chairman of the Board of Directors of the Company. No waiver by either
party of any breach by the other or any condition or provision of this Agreement
to be performed by the other party shall be a waiver of similar or dissimilar
performance, provisions or conditions at the same or at any future time.
6.03 This Agreement constitutes the entire Agreement relating to the
employment of Executive by the Company, and supersedes all prior agreements and
understandings, whether written or oral, related thereto.
6.04 The parties represent to each other that this Agreement is not
contrary to any other agreement or understanding that applies to them and that
this will be a valid and binding obligation. The parties agree to execute such
documents and take such further action as may be necessary to implement the
intent of this Agreement.
6.05 This Agreement may not be assigned by Executive to any other
person or entity. The Company's rights and obligations hereunder shall inure to
and be binding upon the successors and assigns of the Company, but may not be
assigned by the Company without Executive's consent, except in connection with
the sale or other transfer of substantially all of the Company's business.
6.06 The validity, interpretation, construction, performance and
enforcement of this Agreement shall be governed by the internal laws of the
Commonwealth of Pennsylvania without application of conflicts of law.
6.07 The invalidity or unenforceability of any term of this Agreement
shall not invalidate or affect any other term of this Agreement.
6.08 Any and all disputes arising from this Agreement or from
Executive's employment relationship, with the exception of the equitable
remedies set forth in Section 4.05 hereof, with Company shall be resolved by
binding arbitration in Pittsburgh,
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<PAGE> 9
Pennsylvania, in accordance with the Employment Dispute Resolution Rules of the
American Arbitration Association.
6.09 This Agreement may be executed in counterparts, each of which
shall be deemed to be an original.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
this 8 day of M, 1999.
Attest: CELLOMICS, INC.
/s/ YVONNE PATRICIA CLARKE CHANCE By: /s/ ???
- --------------------------------- -------------------------------
Title: NOTARY PUBLIC Title: DIRECTOR
-------------------------- ----------------------------
MY COMMISSION EXPIRES
OCTOBER 31, 1999
Witness: EXECUTIVE
/s/ ISAURA GONZALEZ /s/ D. Lansing Taylor
- -------------------------------- ----------------------------------
ISAURA GONZALEZ D. Lansing Taylor
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<PAGE> 10
EXHIBIT "A"
OBJECTIVES FOR CEO BONUS
1. Hire 4 VPs and a COO 30%
2. Meet milestones for 2nd takedown 30%
3. Meet 80% of revenue forecast and not exceed 25%
105% of costs in plan
4. Complete 1 major corporate partnering deal 15%
----
100%
====
<PAGE> 11
EXHIBIT "B"
CONFLICT OF INTEREST GUIDELINES
It is the policy of Cellomics, Inc. to conduct its affairs in strict
compliance with the letter and spirit of the law and to adhere to the highest
principles of business ethics. Accordingly, all officers, employees and
independent contractors must avoid activities which are in conflict, or give the
appearance of being in conflict, with these principles and with the interests of
the Company. The following are potentially compromising situations which must be
avoided. Any exceptions must be reported to the President and written approval
for continuation must be obtained.
Revealing confidential information to outsiders or misusing
confidential information. Unauthorized divulging of information is a violation
of this policy whether or not for personal gain and whether or not harm to the
Company is intended. (The Employment Confidential Information and Invention
Assignment Agreement elaborates on this principle and is a binding agreement.)
Accepting or offering substantial gifts, excessive entertainment,
favors or payments may be deemed to constitute undue influence or otherwise be
improper or embarrassing to the Company.
Participating in civic or professional organizations that might involve
divulging confidential information of the Company.
Initiating or approving personnel actions attaching reward or
punishment of employees or applicants where there is a family relationship or is
or appears to be a personal or social involvement.
Initiating or approving any form of personal or social harassment of
employees.
Investing or holding outside directorships in suppliers, customers or
competing companies, including financial speculation, where such investment or
directorship might influence in any manner a decision or course of action of the
Company.
Borrowing from or lending to employees, customers or suppliers.
Acquiring real estate of interest to the Company.
<PAGE> 12
Improperly using or disclosing to the Company any proprietary
information or trade secrets or any former or concurrent employer or other
person or entity with whom obligations of confidentiality exist.
Unlawfully discussing prices, costs, customers, sales or markets with
competing companies or their employees.
Making any unlawful agreements with distributors with respect to
prices.
Improperly using or authorizing the use of any inventions which are the
subject of patent claims or any other person or entity.
<PAGE> 1
Exhibit 10.5
February 2, 1999
R. Terry Dunlay
433 Lynn Ann Drive
Plum Boro, PA 15068
Dear Terry:
We are pleased to offer you the following adjustments to your employment as
Executive Vice-President of Development with Cellomics, Inc. In this capacity,
you will continue your supervision and development of our Software Division
supervising all activity relating to database and software development, product
management/planning, project development, business development and proposal
generation for our instrumentation for cell-based drug discovery.
Your salary will be $11,250.00 per month. In addition to your salary, you will
be eligible to receive a performance bonus of up to 20 percent of your base
salary subject to the review and approval of the Board of Directors. The
performance bonus will be based on attaining the following goals during 1999:
(a) ArrayScan(TM) II Software release versions 1.0, 2.0 and 3.0 by
June 30, 1999 within budget;
(b) ArrayScan(TM) 1.0 Kinetics Software released by October 30,
1999 within budget;
(c) Cellomics(TM) Store sold to second customer;
(d) Cellomics(TM) Screen V 1.0 including Momentum HealthCare
component completed by June 1, 1999 within budget.
In connection with your employment, you will be granted an option to purchase
10,000 shares of Common Stock of the Company dated January 15, 1998 at an
exercise price of $0.56 per share. Twenty-five percent (25%) of the shares
subject to such option will vest on the anniversary date of the grant on an
annual basis over four years from the date of the grant. An additional option to
purchase 4,000 shares of Common Stock will be available as part of the
performance bonus described above.
<PAGE> 2
All other terms and conditions offered in your letter dated January 16, 1998
remain the same.
I am personally enthusiastic about your continued employment with the Cellomics'
team and continuing to help us build an exciting company.
Sincerely,
D. Lansing Taylor, Ph.D.
President & CEO
Accepted:
__________________________________
R. Terry Dunlay
__________________________________
Dated
<PAGE> 1
Exhibit 10.6
[CELLOMICS LOGO]
October 15, 1998
Lee Robert Johnston, Jr.
5364 Thunder Hill Road
Columbia, MD 21405
Dear Bob:
We are pleased to offer you the position of Vice President and Chief Financial
Officer for Cellomics, Inc. This offer supercedes any other communication. This
position is an officer of the corporation. In this capacity, you will be
reporting to the CEO and will assume responsibility for:
(a) All financial operations of the company including setting-up,
where necessary, and supervision of budgeting process, accounting,
finance, purchasing, treasury, contracts, legal, billing, MIS,
human resources, facilities, risk management and investor
relations;
(b) Working with the CEO and other senior management in negotiating
business deals with pharmaceutical companies and strategic business
allies.
(c) Working with CEO and other senior management in development of the
business plans and strategies;
(d) Developing financing options for company growth; and
(e) Developing business projections and company valuations.
Your starting salary will be $14,333.00 per month, subject to annual increases
as approved by the Board of Directors. In addition to your salary, you will be
eligible to receive an annual performance bonus of up to 20 percent of your
base salary, subject to the review and approval of the Board of Directors. The
performance bonus will be based on attaining the following goals during your
first year of employment:
635 William Pitt Way o Pittsburgh, PA 15238
Phone (412) 826-3600 o Fax (412) 826-3850
1
<PAGE> 2
(a) Completing the signing of two alliances for High Throughput
Screening and four alliances for High Content Screening, as well as
the signing of at least one Cellomics(TM) Database alliance
independent of the size of the alliances;
(b) The signing of at least two strategic business alliances, with no
limit on the financial value, to access enabling and/or broadening
technologies/products that enhance the value of our product
offerings;
(c) The signing of at least one strategic corporate deal that yields
either a strategic investment which has been approved by the board
and/or R&D funding of at least $1M per year for three years; and
(d) Meeting the mutually agreed-upon 1999 financial goals on time and
on budget.
To the extent that the above goals are attained in part, a pro rata bonus will
be paid. In subsequent years, the annual bonus will be subject to mutually
agreed-upon goals.
In addition, your employment will include the standard benefits package
available to all Cellomics full-time employees, including full coverage of
company-paid health care (medical and dental), three weeks paid-time-off per
year, paid holidays, and participation in the 401k retirement plan.
In connection with your employment, you will be granted an option to purchase
30,000 shares of Common Stock of the Company at an exercise price of $0.56 per
share. Twenty-five percent (25%) of the shares subject to such option will vest
on the anniversary date of the grant on an annual basis over four years from
the date of grant. An additional option to purchase 5,000 shares of Common
Stock will be available as part of the performance bonus described above.
Successful completion of the performance goals will result in the granting of an
option to purchase these shares at an exercise price of $0.56. These additional
shares will vest under the same terms as the original options starting with the
date of hire.
Accelerated vesting: In the event of the change in control of Cellomics, all
unvested options would vest on the date of change of control. If you are
terminated without cause or by constructive termination, but not termination
for cause, at least fifty percent (50%) of unvested options would vest on the
date of termination. These accelerated vesting provisions are subject to board
approval.
The Company is prepared to offer you assistance for relocation expenses
realized to a maximum of $65,000.00 as outlined in the attachment to this
letter (Cellomics Relocation Assistance Summary).
Cellomics, Inc. o 635 William Pitt Way o Pittsburgh, PA 15238
Phone: (412) 826-3600 o Fax: (412)826-3850
2
<PAGE> 3
This offer is subject to submission of an I-9 form and satisfactory
documentation with respect to your identification and right to work in the
United States no later than three days after your employment begins.
As a Cellomics employee, you will be expected to abide by company rules and
regulations. You will specifically be required to sign an acknowledgment that
you have read and understand the company rules of conduct, which will be
included in a handbook which the company will soon complete and distribute. You
will be expected to sign and comply with a proprietary information and
nondisclosure agreement which requires, among other provisions, the assignment
of patent rights to any invention made during your employment at Cellomics,
Inc. and nondisclosure of proprietary information.
As an employee, you may terminate your employment at any time and for any
reason whatsoever with notice to Cellomics, Inc. We request that, in the event
of resignation, you give the company at least two weeks notice. Similarly,
Cellomics, Inc. may terminate your employment at anytime and for any reason
whatsoever, with or without cause. Furthermore, this mutual termination of
employment arrangement supercedes all our prior written and oral communication
with you and can only be modified by written agreement signed by you and
Cellomics, Inc. In the event your employment with the Company is terminated for
any reason other than for cause*, you will receive salary continuation and
benefits for a period of time ending on the earlier of six months from
termination or until you begin other equivalent full time employment.
If you wish to accept employment with Cellomics, Inc. under the terms set out
above, please sign and date this letter, and return it to me by October 19,
1998. If you accept our offer, we would like you to start on or before November
9, 1998.
I am personally enthusiastic about you joining Cellomics and helping to build
an exciting company. I look forward to a favorable reply.
Sincerely,
/s/ D. Lansing Taylor
D. Lansing Taylor, Ph.D.
President and CEO
Enclosure(s)
Cellomics, Inc. o 635 William Pitt Way o Pittsburgh, PA 15238
Phone: (412) 826-3600 o Fax: (412) 826-3850
3
<PAGE> 4
Accepted:
/s/ Lee Robert Johnston, Jr.
- ----------------------------------
Lee Robert Johnston, Jr.
10/19/98
- ----------------------------------
Dated
*For purposes of this agreement, "for cause" means that you have: (1) refused or
willfully failed to perform a material part of your obligations under this
Agreement after written demand to perform such obligation and a period of twenty
(20) business days within which to substantially comply; (2) acted in a
fraudulent or dishonest manner in your relations with Cellomics that has served
to adversely and materially harm Cellomics; (3) committed larceny, embezzlement,
conversion or any act involving the misappropriation of funds in the course of
your performance of services under this agreement; or (4) been convicted of any
crime involving an act of moral turpitude.
**For purposes of this agreement, "constructive termination" shall be limited to
those circumstances where (i)(A) the Company creates or permits working
conditions that a reasonable person in the Executive's position would deem
intended to encourage or to force the Executive to resign or would consider
professionally or personally demeaning, unreasonable or intolerable which are
not remedied by the Company within sixty (60) days after notice thereof given by
the Executive; and (B) such working conditions are not generally applicable to
other executives or key managers of the Company.
Cellomics, Inc. o 635 William Pitt Way o Pittsburgh, PA 15238
Phone: (412) 826-3600 o Fax: (412)826-3850
4
<PAGE> 5
CELLOMICS, INC.
RELOCATION ASSISTANCE SUMMARY
Our relocation assistance program is offered to minimize the expense and
inconvenience of moving.
NEW HOME SEARCH:
- ----------------
o Professional assistance in identifying and finding housing in the area.
o Reimbursement of expenses up to seven days for employee and family.
o Reimbursement of reasonable and customary closing costs on the new home.
HOME SALE:
- ----------
o Reimbursement for customary broker's commission and seller's closing costs.
TEMPORARY LIVING:
- -----------------
o Lodging and meals for employees for up to six months of starting new job
before family is able to relocate.
TRAVEL TO AND FROM HOME:
- ------------------------
o During the temporary living period, travel to home state will be reimbursed.
TEMPORARY LIVING FOR FAMILY:
- ----------------------------
o Lodging and meals for employee and family if one must move out of old home
before able to move into new home.
MOVEMENT OF HOUSEHOLD GOODS:
- ----------------------------
o Payment of cost associated with the shipment of normal household goods,
including 1 car.
o Storage of up to 30 days.
TAX ALLOWANCE:
- --------------
o Paid on employee's behalf by the company to offset the estimated tax liability
of reimbursements made to employee.
GENERAL:
- --------
o Payment of eligible relocation expenses is made through a reimbursement
procedure.
o It is expected that relocation activity will be completed within one year of
hire or transfer.
Cellomics, Inc. o 635 William Pitt Way o Pittsburgh, PA 15238
Phone: (412) 826-3600 o Fax: (412) 826-3850
<PAGE> 1
Exhibit 10.7
[CELLOMICS LOGO]
November 9, 1998
Michael A. Nemzek
70 Lake View Ave.
Cambridge, MA 02138
Dear Mike:
We are pleased to offer you the position of Senior Vice President for Sales and
Marketing for Cellomics, Inc. This position is an officer of the corporation. In
this capacity, you will be reporting to the CEO and will assume responsibility
for:
(a) Developing a sales and marketing plan for all Cellomics, Inc.
products based on the strategic business plan developed with
the CEO and other senior management;
(b) Working with the CEO and other senior management in
negotiating business deals with pharmaceutical companies;
(c) Preparing revenue projections based on business plan;
(d) Coordinating the strategic marketing and sales plan with Carl
Zeiss, worldwide; and
(e) Managing the sales and marketing program including the
relationship with Carl Zeiss.
Your starting salary will be $14,167.00 per month, subject to annual increases
as approved by the Board of Directors. In addition to your salary, you will be
eligible to receive an annual performance bonus of up to 35 percent of your base
salary, subject to the review and approval of the Board of Directors. The
performance bonus will be based on attaining the following goals during your
first year of employment:
(a) Meeting revenue projections that are mutually defined by
January 15, 1999;
(b) Successfully launching the ArrayScan(TM) II System for broad
sales;
635 William Pitt Way o Pittsburgh, PA 15238
Phone (412) 826-3600 o Fax (412) 826-3850
<PAGE> 2
(c) Successfully launching 4 screening kits;
(d) Successfully launching the ArrayScan(TM) III (ArrayScan
Kinetic Module) manufactured by Carl Zeiss for Cellomics, Inc.
as an OEM product;
(e) Successfully launching the Integrated Drug Discovery Platform
manufactured by Carl Zeiss in North America;
(f) Successfully launching the initial version of the
Cellomics(TM) Database and the Cellomics Screen and Cellomics
Discovery informatics products.
To the extent that the above goals are attained in part, a pro rata bonus will
be paid. In subsequent years, the annual bonus will be subject to mutually
agreed-upon goals.
In addition, your employment will include the standard benefits package
available to all Cellomics full-time employees, including full coverage of
company-paid health care (medical and dental), three weeks paid-time-off per
year, paid holidays, and participation in the 401k retirement plan.
In connection with your employment, you will be granted an option to purchase
30,000 shares of Common Stock of the Company at an exercise price of $0.56 per
share. Twenty-five percent (25%) of the shares subject to such option will vest
on the anniversary date of the grant on an annual basis over four years from the
date of grant. An additional option to purchase 5,000 share of Common Stock will
be available as part of the performance bonus described above. Successful
completion of the performance goals will result in the granting of an option to
purchase these shares at an exercise price of $0.56. These additional shares
will vest under the same terms as the original options starting with the date of
hire.
The Company is prepared to offer you assistance for expenses related to your
move at an amount of $50,000.00. This will be in the form of a lump sum. This
lump sum payment is based on your employment for at least one year. You will be
required to repay the Company the total amount if you leave on your own accord
before the end of one year. In addition, the Company will pay for up to 2 round
trips for you and your spouse to visit the Pittsburgh area. This offer is
subject to submission of an I-9 form and satisfactory documentation with respect
to your identification and right to work in the United States no later than
three Pittsburgh days after your employment begins.
As a Cellomics employee, you will be expected to abide by company rules and
regulations. You will specifically be required to sign an acknowledgment that
you have read and understand the company rules of conduct, which will be
included in a handbook which the company will soon complete and distribute. You
will be expected to sign and comply with a proprietary information and
nondisclosure agreement which requires,
Cellomics, Inc. o 635 William Pitt Way o Pittsburgh, PA 15238
Phone (412) 826-3600 o Fax (412) 826-3850
<PAGE> 3
among other provisions, the assignment of patent rights to any invention made
during your employment at Cellomics, Inc. and nondisclosure of proprietary
information.
As an employee, you may terminate your employment at any time and for any reason
whatsoever with notice to Cellomics, Inc. We request that, in the event of
resignation, you give the company at least two weeks notice. Similarly,
Cellomics, Inc. may terminate your employment at anytime and for any reason
whatsoever, with or without cause. In the event your employment with the Company
is terminated for any reason other than for cause, you will receive salary
continuation and benefits for a period of time ending on the earlier of six
months from termination or until you begin other full time employment. This
severance payment will be contingent on your agreement to not be employed by a
company competing with Cellomics, Inc. within one year of your termination date.
If you wish to accept employment with Cellomics, Inc. under the terms set out
above, please sign and date this letter, and return it to me by November 23,
1998. If you accept our offer, we would like you to start on or before December
7, 1998.
I am personally enthusiastic about you joining Cellomics and helping to build an
exciting company. I look forward to a favorable reply.
Sincerely,
/s/ D. Lansing Taylor
- ------------------------------
D. Lansing Taylor, Ph.D.
President & CEO
Enclosure(s)
Accepted:
/s/ Michael A. Nemzek
- ------------------------------
Michael A. Nemzek
November 12, 1998
- ------------------------------
Dated
Celomics, Inc. o 635 William Pitt Way o Pittsburgh, PA 15238
Phone (412) 826-3600 o Fax (412) 826-3850
<PAGE> 1
Exhibit 10.8
[CELLOMICS LOGO]
October 12, 1998
Alan W. Seadler, Ph.D.
RD2 Box 159
Export, PA 15632
Dear Alan:
We are pleased to offer you the position of Vice President of Screening Kit
Manufacturing for Cellomics, Inc. In this capacity, you will assume
responsibility for:
(a) Operations of the screening kit manufacturing program;
(b) Development of new screening kit prototypes working in
collaboration with the VP of Biomolecular Assay Technologies;
(c) Identification of screening kit components and negotiations
for access in collaboration with the Director of Reagent and
Screen Business Development;
(d) Commercial release of screening kits in collaboration with the
VP of Sales and marketing; and
(e) Working with the senior management to build the strategic
position and value of the Company; and
Your starting salary will be $8,334.00 per month. In addition to your salary,
you will be eligible to receive a performance bonus of up to 20 percent of your
base salary, subject to the review and approval of the Board of Directors. The
performance bonus will be based on attaining the following goals during your
first year of employment:
(a) Completing 6 validated screening kits for High Throughput
Screens (HTS), High Content Screens (HCS), or a combination of
HTS and HCS.
(b) Design and implementation of the board approved screening kit
manufacturing plan and facilities;
(c) Commercial release of at least 4 screening kits
<PAGE> 2
In addition, your employment will include the standard benefits package
available to all Cellomics full-time employees, including full coverage of
health care (medical and dental), three weeks paid-time-off per year, paid
holidays, and participation in the 401k retirement plan.
In connection with your employment, you will be granted an option to purchase
15,000 shares of Common Stock of the Company at an exercise price of $0.56 per
share. Twenty-five percent (25%) of the shares subject to such option will vest
on the anniversary date of the grant on an annual basis over four years from the
date of grant.
The Company will offer you $10,000.00 for use in any way that you deem
appropriate for your transition to Cellomics, Inc.
This offer is subject to submission of an I-9 form and satisfactory
documentation with respect to your identification and right to work in the
United States no later than three days after your employment begins.
As a Cellomics employee, you will be expected to abide by company rules and
regulations. You will specifically be required to sign an acknowledgment that
you have read and understand the company rules of conduct, which will be
included in a handbook which the company will soon complete and distribute. You
will be expected to sign and comply with a proprietary information and
nondisclosure agreement which requires, among other provisions, the assignment
of patent rights to any invention made during your employment at Cellomics, Inc.
and nondisclosure of proprietary information.
As an employee, you may terminate your employment at any time and for any reason
whatsoever with notice to Cellomics, Inc. We request that, in the event of
resignation, you give the company at least one month notice. Similarly,
Cellomics, Inc. may terminate your employment at anytime and for any reason
whatsoever, with or without cause. Furthermore, this mutual termination of
employment arrangement supersedes all our prior written and oral communication
with you and can only be modified by written agreement signed by you and
Cellomics, Inc. In the event your employment with the Company is terminated for
any reason other than for cause in the first two years of employment, you will
receive salary continuation and benefits for a period of time ending on the
earlier of six months from termination or until you begin other full time
employment. This severance payment will be contingent on your agreement to not
be employed by a competing company within one year of your termination date.
<PAGE> 3
If you wish to accept employment with Cellomics, Inc. under the terms set out
above, please sign and date both copies of this letter, and return one to me by
October 15, 1998. If you accept our offer, we would like you to start on or
before November 15, 1998
I am personally enthusiastic about you joining Cellomics and helping to build an
exciting company. I look forward to a favorable reply.
Sincerely,
D. Lansing Taylor, Ph.D.
President & CEO
Enclosure(s)
Accepted:
/s/ Alan W. Seadler, Ph.D.
- --------------------------
Alan W. Seadler, Ph.D.
10-14-98
- --------------------------
Dated
<PAGE> 1
Exhibit 10.9
KEY EMPLOYEE NON-COMPETE AGREEMENT
THIS KEY EMPLOYEE NON-COMPETE AGREEMENT IS MADE AS OF THE ___________
between Cellomics, Inc., ("Cellomics") and _________________ ("Employee") an
individual residing in ___________________, _______________________________.
WHEREAS, Employee will be engaged by Cellomics, in a position of trust
and confidence in which Employee will learn of, have access to, and develop
confidential trade secret and other proprietary Information of Cellomics; and
WHEREAS, Cellomics desires to protect its rights in such confidential,
trade secret and other proprietary Information and to impose certain
restrictions upon Employee's ability to compete with the business of the
Company;
NOW THEREFORE, Cellomics and Employee, in consideration for Cellomics' offer of
employment to Employee, intending to be legally bound, agree as follows:
1. POSITION AND RESPONSIBILITIES
1.1. Employee shall serve and shall perform such duties at such
place or places as the Company shall designate,
1.2. Employee will, to the best of Employee's ability, devote
Employee's full time and best efforts to the performance of
Employee's duties hereunder and to the business and affairs of
the Company.
1.3. Employee will duly, punctually and faithfully perform and
observe any and all rules and regulations that the Company may
now or shall hereafter establish governing the conduct of its
business.
2. TERM OF EMPLOYMENT
2.1 The initial term of Employee's employment shall be one (1)
year, commencing with the date hereof. Thereafter, this
agreement will be extended automatically for one (1)
additional year from the date hereof, unless the Company
notifies Employee in writing, not later than ninety days (90)
preceding the end of the first year, that the agreement will
not be extended.
2.2 The Company shall have the right, on written notice to
Employee, to terminate Employee's employment:
(a) immediately for cause, or
(b) at any time without cause provided the Company shall
be obligated to pay to Employee as severance pay an
amount equal to 3 months' basic salary, less
applicable taxes and other required withholdings and
any amount
<PAGE> 2
Employee may owe to the Company, payable in equal
monthly installments on the last day of each month
commencing the last day of the month following the
date of termination.
2.3 For purposes of Section 2.2, the term "cause" shall include
(i) Employee's failure or refusal to render services to the
Company in accordance with Employee's obligations under this
Agreement, including Employee's voluntary termination of
employment; (ii) the commission by Employee of an act of fraud
or embezzlement against the Company or the commission by
Employee of any other action with the intent to injure the
Company; or (iii) an act of moral turpitude by Employee which
is materially detrimental to the business of the Company; or
(iv) Employee's having been convicted of a felony other than
traffic offenses which do not bring Employee or the Company
into disgrace or disrepute.
3. COMPENSATION. The Company shall pay to Employee for the service to be
rendered hereunder a basic salary at an annual rate of $___________,
subject to increase in accordance with the policies of the Company, as
determined by its Board of Directors, from time to time, payable in
installments in accordance with Company policy. Employee shall also be
entitled to all rights and benefits for which Employee shall be
eligible under deferred bonus, pension, group insurance, profit-sharing
or other company benefits which may be in force from time to time and
provided to Employee or for the Company's employees generally.
4. OTHER ACTIVITIES DURING EMPLOYMENT
4.1 Except with the prior written consent of the Company's Board
of Directors or as described on Exhibit A hereto, Employee
will not during the term of this Agreement undertake or engage
in any other employment, occupation or business enterprise
other than one in which Employee is an inactive investor. This
provision shall not be deemed to preclude membership in
professional societies, lecturing or the acceptance of
honorary positions, that are in any case incidental to
Employee's employment by the Company and which are not adverse
or antagonistic to the Company, its business or prospects,
financial or otherwise.
4.2 Except as permitted by Section 4.3, Employee will not acquire,
assume or participate in, directly or indirectly, any
position, investment or interest adverse or antagonistic to
the Company, its business or prospects, financial or
otherwise, or take any action towards any of the foregoing.
4.3 During the term of Employee's employment by the Company,
except on behalf of the Company or its subsidiaries, Employee
will not directly or indirectly, whether as an officer,
director, Employee, stockholder, partner, proprietor,
associate, representative, or otherwise, become or be
interested in any other person, corporation, firm, partnership
or other entity whatsoever which directly competes with the
Company, in any part of the world, in any line of business
engaged in (or which the Company has made plans to be engaged
in) by the Company; provided however, that anything above to
the contrary notwithstanding, Employee may
Page 2 of 7
<PAGE> 3
own, as an inactive investor, securities of any competitor
corporation, so long as Employee's holdings in any one such
corporation shall not in the aggregate constitute more than
one percent (1%) of the voting stock of such corporation.
5. FORMER EMPLOYMENT
5.1 Employee represents and warrants that Employee's employment by
the Company will not conflict with and will not be constrained
by any prior employment or consulting agreement or
relationship. Subject to Section 5.2, Employee represents and
warrants that Employee does not possess confidential
information arising out of prior employment which, in
Employee's best judgment, would be utilized in connection with
Employee's employment by the Company in the absence of Section
5.2.
5.2 If, in spite of the second sentence of Section 5.1, Employee
should find that confidential information belonging to any
former employer might be usable in connection with the
Company's business, you will not intentionally disclose to the
Company or use on its behalf any confidential information
belonging to any of Employee's former employers; but during
Employee's employment by the Company Employee will use in the
performance of Employee's duties all information which is
generally known and used by persons with training and
experience comparable to Employee's own and all information
which is common knowledge in the industry or otherwise legally
in the public domain.
6. EMPLOYEE INNOVATION AND PROPRIETARY INFORMATION. Employee agrees to be
bound by the provisions of the Proprietary Information and Property
Agreement made as of _________________________ by and between Employee
and the Company (the "Proprietary Information and Property Agreement").
7. POST-EMPLOYMENT ACTIVITIES
7.1 As a result of Employee's position with the Company, Employee
will have access to significant confidential and proprietary
information of the Company. In addition, the Company has
agreed to impose certain restrictions upon Employee's ability
to compete with the business of the Company. Employee
understands and acknowledges that these restrictions are fair
and reasonable given, among other things, the worldwide market
for the Company's products and technologies. Based on the
foregoing, and in consideration thereof and of the payments to
be made to Employee by the Company pursuant to this Agreement,
until twelve (12) months after the termination of Employee's
employment with the Company, absent the Company's prior
written approval, Employee will not directly or indirectly:
(a) engage in activities for, nor render services to, any
firm or business organization which directly competes
with the Company or any Subsidiary in any line of
business engaged in by the Company or any Subsidiary
(or which the Company or any Subsidiary has made
plans to be engaged in), whether now existing or
hereafter established, nor shall Employee engage
Page 3 of 7
<PAGE> 4
in such activities nor render such services to any
other person or entity engaged or about to become
engaged in such activities to, for, or on behalf of,
any such firm or business organization;
(b) solicit Employees of the Company or any Subsidiary to
leave its employ;
(c) offer or cause to be offered employment to any person
who is employed by the Company or any Subsidiary at
any time during the six months prior to the
termination of Employee's employment with the
Company;
(d) entice, induce or encourage any of the Company's or
any Subsidiary's other Employees to engage in any
activity which, were it done by you, would violate
any provision of this Section 7; or
(e) otherwise attempt to interfere with or disrupt the
business or activities of the Company or any
Subsidiary.
7.2 Upon Employee's written request to the Company specifying the
activities proposed to be conducted by you, the Company may in
its discretion give Employee written approval(s) to personally
engage in any activity or render services referred to in
Section 7.1 upon receipt of written assurances (satisfactory
to the Company and its counsel) from Employee and from
Employee's prospective employer(s) that the integrity of the
Proprietary Information Agreement and the provisions of
Section 7.1 will not in any way be jeopardized or violated by
such activities, provided the burden of so establishing the
foregoing to the satisfaction of the Company and said counsel
shall be upon Employee and Employee's prospective employer(s).
8. REMEDIES. Employee's duties under the Proprietary Information Agreement
and Section 7 shall survive termination of Employee's employment with
the Company. Employee acknowledges that a remedy at law for any breach
or threatened breach by Employee of the provisions of the Proprietary
Information Agreement or Section 7 would be inadequate and Employee
therefore agrees that the Company shall be entitled to injunctive
relief in case of any such breach or threatened breach.
9. POST EMPLOYMENT EARNINGS
9.1 If after conscientious effort (which the Company may ask
Employee to establish to its reasonable satisfaction), during
any period in which Employee is subject to the restrictions of
Section 7.1, Employee is unable primarily due to such
restrictions to obtain a position comparable to that last held
by Employee with the Company, and which, together with any
consulting fees then being paid to Employee by the Company,
shall be as remunerative as Employee's monthly remuneration
with the Company when Employee's employment terminated
(hereinafter Employee's "Remuneration"), then, the Company
shall (subject to Section 9.3) pay to Employee monthly, as an
additional consulting fee or otherwise, a sum (the
"Guarantee") such that Employee's then monthly remuneration
shall be equal to Employee's Remuneration. No payment shall be
Page 4 of 7
<PAGE> 5
made pursuant to this Section 9.1 with respect to any period
for which Employee is receiving severance pay pursuant to
Section 2.2(b).
9.2 Employee shall notify the Company in writing within 15 days
after any calendar month as to whether Employee seeks payment
of the Guarantee under Section 9.1. Employee must establish
the amount of such Guarantee sought to the Company's
reasonable satisfaction, whereupon the Company shall promptly
(and, in any event, within 15 days of receipt of Employee's
notification) pay to Employee the amount of the Guarantee so
established.
9.3 The Company at any time may, upon 90 days' written notice,
notify Employee that it prospectively shall not make any
further payments of the Guarantee, whereupon Employee shall
thenceforth cease to be bound by any of the restrictions of
Sections 7.1 or 7.2. All prohibitions of the Proprietary
Information Agreement shall survive the Company's decision
under this Section 9.3 not to continue the Guarantee.
10. ASSIGNMENT. This Agreement and the rights and obligations of the
parties hereto shall bind and inure to the benefit of any successor or
successors of the Company by reorganization, merger or consolidation
and any assignee of all or substantially all of its business and
properties, but, except as to any such successor or assignee of the
Company, neither this Agreement nor any rights or benefits hereunder
may be assigned by the Company or you.
11. INTERPRETATION. In case any one or more of the provisions contained in
this Agreement shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect the other provisions of this
Agreement, and this Agreement shall be construed as if such invalid,
illegal or unenforceable provision had never been contained herein. If,
moreover, any one or more of the provisions contained in this Agreement
shall for any reason be held to be excessively broad as to duration,
geographical scope, activity or subject, it shall be construed by
limiting and reducing it, so as to be enforceable to the extent
compatible with the applicable law as it shall then appear.
12. NOTICES. Any notice which the Company is required or may desire to give
to Employee shall be given to Employee by personal delivery or
registered or certified mail, return receipt requested, addressed to
Employee at the address of record with the Company, or at such other
place as Employee may from time to time designate in writing. Any
notice which Employee is required or may desire to give to the Company
hereunder shall be given by personal delivery or by registered
certified mail, return receipt requested, addressed to the Company at
its principal office, or at such other office as the Company may from
time to time designate in writing. The date of personal delivery or the
dates of mailing any such notice shall be deemed to be the date of
delivery thereof.
13. WAIVERS. If either party shall waive any breach of any provision of
this Agreement, he or it shall not thereby be deemed to have waived any
preceding or succeeding breach of the same or any other provision of
this Agreement.
Page 5 of 7
<PAGE> 6
14. HEADINGS. The headings of the sections hereof are inserted for
convenience only and shall not be deemed to constitute a part hereof
nor to affect the meaning hereof.
15. GOVERNING LAW. This Agreement shall be governed by, and construed and
enforced in accordance with, the laws of the Commonwealth of
Pennsylvania.
16. COMPLETE AGREEMENT; AMENDMENTS; PRIOR AGREEMENTS. The foregoing is the
entire Agreement of the parties with respect to the subject matter
hereof and may not be amended, supplemented, cancelled or discharged
except by written instrument executed by both parties hereto. This
Agreement supersedes any and all prior agreements between the Company
and Employee with respect to the matters covered hereby.
Employee is fully aware of Employee's right to discuss any and all aspects of
this Agreement with an attorney chosen by Employee, and Employee further
acknowledges that she/he has carefully read and fully understands all of the
provisions of this Agreement and that Employee, in all consideration for
Cellomics' offer of employment, is voluntarily entering into this Agreement.
This Agreement may be executed in counterparts, each of which shall be
deemed an original, but which together shall constitute one and the same
instrument.
The headings used in this Agreement are for convenience only and are
not to be considered in construing or interpreting this Agreement.
This Agreement shall be interpreted and enforced pursuant to the laws
of the Commonwealth of Pennsylvania.
WITNESS the execution hereof as of the date first above written.
Employee: Cellomics, Inc. (Cellomics):
------------------------------ ----------------------------------
Employee Signature Signature
------------------------------ ----------------------------------
Employee Name Name and Title
------------------------------ ----------------------------------
Date Date
Page 6 of 7
<PAGE> 1
Exhibit 10.10
DEVELOPMENT, MANUFACTURING AND SUPPLY AGREEMENT
This is an Agreement, effective this 3rd day of February, 2000, between
Carl Zeiss Jena GmbH, 07740 Jena, Germany (hereinafter ZEISS) and Cellomics,
Inc., 635 William Pitt Way, Pittsburgh, PA 15238 (hereinafter CELLOMICS);
WHEREAS, ZEISS has expertise and intellectual property in optical
detection systems, systems integration, control software, HTS/UHTS systems and
manufacturing;
WHEREAS, CELLOMICS has expertise and intellectual property in
technologies related to High Content Screening ("HSC");
WHEREAS, CELLOMICS desires to have ZEISS cooperatively develop,
manufacture and supply an ArrayScan Kinetics Reader and an ArrayScan Kinetics
Workstation to CELLOMICS' specifications;
WHEREAS, the parties have heretofore entered into a joint
"Co-Marketing, Manufacturing, Sales and Support Agreement" (the "Former
Agreement"), effective April 14, 1998;
WHEREAS, the parties are independently negotiating an agreement (the
"Sales Agreement") providing for the distribution of ZEISS' UHTS Systems in
North America by CELLOMICS;
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<PAGE> 2
WHEREAS, the parties are determined to update and supersede the Former
Agreement.
NOW, THEREFORE, in consideration of the covenants and conditions
contained herein, the parties, intending to be legally bound, agree as follows:
ARTICLE I
DEFINITIONS
1. Specific Definitions. For purposes of this Agreement, the following
definitions shall apply:
1.1 "Microplate" shall mean the plastic and/or glass plate having 96
wells or multiples (e.g. 384, 1536, 3456 or more wells) or divisions
(e.g. 12, 24, 48 or more wells) and dimensions ca. 12.5 and 8.5 cm.
1.2 "HTS" shall mean optics, fluidics, robotics, storage, computers,
software and other peripheral devices used to conduct intensity
measurements of molecular interactions in microplates, excludes spatial
measurements within cells.
1.3 "FCS" shall mean single molecule detection of stimulated
fluorescence in optical volume elements smaller than one nanolitre for
correlation analysis of molecule movements.
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<PAGE> 3
1.4 High Content Screening ("HCS") shall mean image [*] This excludes
any other applications, and specifically excludes HTS and FCS.
1.5 ArrayScan Kinetics Reader ("ASK Reader") shall mean the combination
of optical, mechanical, environmental control components and device
control software constituting an instrument as defined in Exhibits 1.0
and 4.0 which performs the following combination of functions:
[*]
The ASK Reader is the same unit as that intended for use in the ASK
Workstation (defined below).
1.6 ArrayScan Kinetics Workstation ("ASK Workstation") shall mean an
instrument which integrates the ASK Reader and other peripheral devices
as specified herein on Exhibits 1.0 and 4.0.
"CONFIDENTIAL [*] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS
DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT
OF 1933, AS AMENDED."
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<PAGE> 4
1.7 "Sales Agreement" shall mean the Sales and Marketing Agreement with
regard to ZEISS' UHTS Systems being independently negotiated between
the parties at this time, as the same may be amended from time to time.
1.8 "Former Agreement" shall mean the "Co-Marketing, Manufacturing,
Sales and Support Agreement and development of OEM Array Scan for
Cellomics by Zeiss" between the parties, effective April 14, 1998.
1.9 "Intellectual Property" shall be defined as any invention,
discovery, improvements, device, design, apparatus, practice, process,
method, product, program, database, or compound, whether patentable or
copyrightable or not. Intellectual Property rights on the ASK
Workstation and ASK Reader are defined and categorized on Exhibit 4.0.
1.10 "OEM Development" shall be defined as any Intellectual Property
made by either party or a third party employed thereby specified as
such in Exhibit 4.0 and which relates to HCS and which was developed
and manufactured specifically for the ASK Project (defined in Article
2.1 below).
1.11 "ZEISS Technology" shall be defined as Intellectual Property which
is the property of ZEISS.
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<PAGE> 5
1.12 "CELLOMICS Technology" shall be defined as Intellectual Property
which is property of CELLOMICS.
1.13 "Third Party OEM Developments" shall be defined as all OEM
Developments made specifically for the ASK Project by third parties
employed by either ZEISS or CELLOMICS.
1.14 "Third Party Technology" shall be defined as Intellectual Property
which is the property of a third party.
ARTICLE II
OEM DEVELOPMENT AND MANUFACTURING
2.1 ZEISS is in the process of cooperatively designing and
manufacturing to CELLOMICS specifications as set forth on Exhibits 1.0 and 2.0
(which are attached hereto and made a part hereof) two OEM products to be known
as the ArrayScan Kinetics Reader ("ASK Reader") and the ArrayScan Kinetics
Workstation ("ASK Workstation") in accordance with the development schedule set
forth on Exhibit 3.0 parts A and B (which is attached hereto and made a part
hereof) (the "ASK Project").
2.2 CELLOMICS will, on an ongoing basis, as necessary, advise and
consult with ZEISS on design and performance parameters for the ASK Project.
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<PAGE> 6
2.3 ASK Readers and ASK Workstations manufactured by ZEISS will be sold
under the CELLOMICS label, but the ZEISS label will he affixed to the ASK
Readers and ASK Workstations in such manner as will in a commercially reasonable
manner acknowledge the use therein of ZEISS Technology as categorized on Exhibit
4.0.
2.4 The parties hereby establish a Management Committee for the ASK
Project including coordination and development of the ASK Reader and ASK
Workstation and to recommend other products and services to be explored and
developed by the parties, jointly or severally.
ARTICLE III
SOFTWARE DEVELOPMENT
3.1 CELLOMICS has developed data analysis and data management software
for the ASK Project, while ZEISS has developed instrument device control
software as part of the ASK Project. Software development responsibilities for
ZEISS are as set forth in Exhibit 2.0 (which is attached hereto and is made a
part hereof); those responsibilities include all software components not
specifically assigned to CELLOMICS.
3.2 Software interface specifications have been jointly defined to make
software compatible between ZEISS systems and the ASK Reader and the ASK
Workstation and are included in Exhibit 2.0.
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<PAGE> 7
ARTICLE IV
ARRAYSCAN KINETICS READER AND ARRAYSCAN KINETICS
WORKSTATION DEVELOPMENT AND MANUFACTURING
4.1 ZEISS has designed and is manufacturing, in accordance with
CELLOMICS' specifications, the ASK Reader and ASK Workstation as part of the ASK
Project. The parties agree that the device control software and hardware
currently embodied in the ASK Reader is partly based on ZEISS Technology and is
partly an OEM Development to the specifications of CELLOMICS specifically for
the ASK Project. The ASK Workstation includes the ASK Reader and various
components manufactured by third parties as well as components developed by
ZEISS to CELLOMICS' specification needed to integrate and coordinate an
efficient, effective flow through the ASK Workstation. All parts of the ASK
Reader, the ASK Workstation and the other components mentioned above are
categorized on Exhibit 4.0 (which is attached hereto and made a part hereof).
Milestones for the development and production of the ASK Reader and ASK
Workstation are set forth in Exhibit 3.0 (which is attached hereto and made a
part hereof).
4.2 ZEISS and CELLOMICS agree that the OEM development cost ("Agreed
Sum") to meet CELLOMICS' specifications incurred by ZEISS to date and to be
incurred through completion of development is [*], which includes the
costs to [*]. ZEISS agrees to provide documentation of the Agreed Sum within
thirty (30) days of the date first above written. ZEISS agrees to ship to
CELLOMICS one of the prototype ASK Workstations on or before February 18, 2000,
if for any reason this Agreement has not been executed by February 28, 2000,
said
"CONFIDENTIAL [*] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS
DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT
OF 1933, AS AMENDED."
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<PAGE> 8
prototype ASK Workstation shall be returned to ZEISS at CELLOMICS' expense.
ZEISS shall temporarily retain the second prototype ASK Workstation to
facilitate the full acceptance testing being performed by CELLOMICS. The second
prototype ASK Workstation shall be delivered to CELLOMICS within thirty (30)
days following the completion of the first production unit and CELLOMICS'
request for delivery. CELLOMICS agrees to pay the Agreed Sum in two (2) equal
installments as follows:
A. [*] shall be paid to ZEISS within thirty (30) days after
the execution of this Agreement, completion of the FACT (= Factory
Acceptance Test) of the first prototype (already performed and passed)
and installation and proof of identical functioning at CELLOMICS' site
compared to the FACT of the first prototype.
B. [*] shall be paid to ZEISS within six (6) months after
acceptance of the first production unit of the ASK Workstation which is
that furnished unit ready for sale and shipment to CELLOMICS' Customers
following acceptance (defined in Paragraph 4.4 below).
4.3 At all times prior to, upon and after the execution of this
Agreement, CELLOMICS was, is and shall be and be deemed to be the owner of all
OEM Developments embodied in all components categorized in Exhibit 4.0 (which is
attached hereto and made a part hereof) as OEM Developments, Third Party OEM
Developments or CELLOMICS Technology including both Intellectual Property
generated and extant on
"CONFIDENTIAL [*] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS
DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT
OF 1933, AS AMENDED."
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<PAGE> 9
the date first above written and any Intellectual Property involved in such
components which is applied thereafter at any time and from time to time,
excluding the components categorized as ZEISS Technology or Third Party
Technology. Further, ZEISS shall deliver to CELLOMICS within sixty (60) days of
the acceptance of the first prototype in Pittsburgh, all existing development
designs, drawings, prints, materials, documents and specifications pertaining
to the ASK Reader and ASK Workstation both as whole integrated instruments and
the components of the ASK Reader and ASK Workstation excluding only the detailed
design of that part of such components which embody ZEISS Technology and Third
Party Technology as categorized in Exhibit 4.0 (which is attached hereto and
made a part hereof). ZEISS will provide drawings showing overall dimensions and
mounting requirements for all ZEISS Technology and/or Third Party Technology.
Notwithstanding the foregoing, ZEISS will provide the production designs,
drawings, prints, materials, documents and specifications pertaining to the ASK
Reader and ASK Workstation within ninety (90) days prior to the end of the
Exclusive Supply Period (defined in Article 5.1 below).
4.4 The working prototypes and/or series production units of the ASK
Reader and ASK Workstation shall be deemed to be accepted by CELLOMICS at such
time as CELLOMICS certifies in writing the successful execution on the prototype
and/or a series production unit in Jena of the applicable acceptance test
protocol set forth in Exhibit 5.0 ("Acceptance") (which is attached hereto and
made a part hereof).
4.5 Any design changes or modifications in the ASK Reader and/or ASK
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<PAGE> 10
Workstation desired by CELLOMICS shall be implemented if mutually agreed by
ZEISS and CELLOMICS. In the event that such design changes or modifications
result in costs that cause the Agreed Sum to be exceeded or delays that extend
the development and/or production schedule, ZEISS will provide to CELLOMICS a
written proposal that includes the reasonable cost and changes to the time
schedule. Such design changes will be implemented by ZEISS upon written
acceptance of the proposal. Following Acceptance of the ASK Reader and ASK
Workstation by CELLOMICS, the costs of any system upgrades (hardware or
software), if technically feasible, will be paid by CELLOMICS in accordance with
specific development-cost proposals to be prepared by ZEISS and approved in
writing by CELLOMICS.
ARTICLE V
EXCLUSIVE SUPPLY
5.1 From the date first above written, extending to that time which ends on
[*] ("Exclusive Supply Period"), CELLOMICS agrees that it shall purchase any
and all ASK Readers and ASK Workstations exclusively from ZEISS, and during the
Exclusive Supply Period, ZEISS agrees that it will not utilize, license, sell,
offer to sell, or develop devices or systems for HCS which embody the OEM
Developments or ASK Workstation and ASK Reader according to Exhibit 4.0 and
which are competitive with those developed pursuant to the ASK Project, ("NEW
PRODUCTS") and will cooperate in developing NEW PRODUCTS for HCS exclusively in
conjunction with CELLOMICS. In the event CELLOMICS does not affirmatively agree
to the mutual and prompt development and
"CONFIDENTIAL [*] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS
DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT
OF 1933, AS AMENDED."
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<PAGE> 11
manufacture by CELLOMICS and ZEISS of such NEW PRODUCTS, within two months from
ZEISS' written request, ZEISS shall be free to develop competitive products on
its own or together with third parties. Nothing in this Agreement shall
constitute any right or license granted to ZEISS for the use of OEM
Developments, CELLOMICS Technology or Third Party OEM Developments or any
obligation to grant the same in the future. ZEISS may request such license at
any time in writing, the approval of which shall be solely with the discretion
of CELLOMICS. The term of the Exclusive Supply Period will be extended for an
additional one (1) year period if mutually agreed upon in writing by both
parties at least ninety (90) days prior to the expiration of the Exclusive
Supply Period or any extension thereof. Competitive products are not any
components or products for HTS.
5.2 Exhibit 7.0 outlines the two year projections for ASK Workstations
and ASK Readers. [*] of the Exclusive Supply Period, [*] , CELLOMICS and
ZEISS will have a review meeting in order to review purchase orders and delivery
processes. By [*] , a minimum purchase of [*] and [*] is required by
CELLOMICS. In case these quantities will not be met, either party hereto has
the option of terminating the Exclusive Supply Period with ninety days prior
written notice to the other party.
"CONFIDENTIAL [*] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS
DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT
OF 1933, AS AMENDED."
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<PAGE> 12
ARTICLE VI
PRICING
6.1 The parties agree that during calendar year 2000 the price at which
CELLOMICS may purchase ASK Readers shall be [*] and the price at which
CELLOMICS may purchase ASK Workstations shall be [*]. Prices are further
detailed on Exhibit 8 which is attached hereto and made a part hereof.
6.2 CELLOMICS agrees to supply ZEISS with a purchase forecast, on a
rolling six months basis, beginning March 1, 2000, of the number of ASK Readers
and ASK Workstations CELLOMICS intends to order in the quarter ended on the last
day of such six months. [*] With regard to subsequent orders, CELLOMICS agrees
to submit written purchase orders six (6) months prior to the expected delivery
date of ASK Readers and ASK Workstations. CELLOMICS understands that prices set
forth in paragraph 6.1 will be recalculated by ZEISS at the end of the first
year after Acceptance of the first ASK Workstation production unit and each year
thereafter. Recalculated prices will be limited to a maximum of 110% of the
previous year's price, with expectation that prices will actually be reduced.
Upon the purchase of twenty five ASK Workstations and fifteen ASK Readers, the
parties agree to negotiate
"CONFIDENTIAL [*] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS
DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT
OF 1933, AS AMENDED."
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<PAGE> 13
volume discounts in good faith. In the event the pricing as indicated in Section
6.1 is further reduced by at least [*], CELLOMICS agrees to pay to ZEISS, as a
royalty, [*] of the reagent revenue derived from ASK Workstations and ASK
Readers during the initial Exclusive Supply Period. Upon renewal of the
Exclusive Supply Period the parties agree to negotiate in good faith discounts
and royalties. CELLOMICS shell submit to ZEISS a quarterly report on the value
of reagent sales derived from ASK Workstations and ASK Readers.
6.3 ZEISS agrees to supply at least [*] and at least [*] during
the period [*] and following Acceptance of the first [*] ASK Workstation
series production units that the delivery time to CELLOMICS will not exceed
six (6) months after receipt of orders by ZEISS.
ARTICLE VII
PRODUCT WARRANTY
7.1 ZEISS warrants (1) that the ASK Reader and ASK Workstation
(sometimes herein referred to as Product or Products) will conform in all
material respects to CELLOMICS' specifications according to Exhibit 1.0 and 2.0;
(2) that CELLOMICS and/or the end user shall receive good and marketable title
to the Products upon shipment, free of any liens or claims; and (3) that the
Products will be free of defects in workmanship and materials for the lesser of
twelve (12) months after delivery to CELLOMICS or twelve (12) months after
purchase and opening of the Products by end-user customers. The
"CONFIDENTIAL [*] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS
DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT
OF 1933, AS AMENDED."
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<PAGE> 14
foregoing warranty shall not apply if the Products or component parts have been
subjected to abuse, misuse, accident or neglect. The aforementioned warranties
shall inure to CELLOMICS, its successors and assigns, and those who purchase or
use each Product from CELLOMICS.
7.2 CELLOMICS will be responsible for providing Product support. For
any claim based on the foregoing warranties, CELLOMICS shall be responsible for
processing repairs or replacements. Defective Products shall be delivered to
ZEISS DDP (Incoterms 1990). ZEISS, at its option, will either repair or replace,
any defective Products with new or functionally equivalent and compatible parts
within thirty (30) days of receipt of said defective Product(s). ZEISS will
return the repaired Product or the replacement DDP (Incoterms 1990).
Alternatively, ZEISS agrees to provide end user warranty repairs at the request
of CELLOMICS. In this case, any costs incurring in processing end user warranty
repairs or replacements (except for replacement parts themselves) shall be
reimbursed by CELLOMICS to ZEISS. To facilitate their mutual responsibilities to
support the Products, the parties will agree to a minimum inventory of spare
parts to be purchased by CELLOMICS at discount prices negotiated between
CELLOMICS and ZEISS and which will be delivered to CELLOMICS by ZEISS no later
than August 15, 2000.
7.3 The warranty provided in this Article VII shall be subject to
CELLOMICS' or the Products' end-user's satisfaction of the following conditions:
(1) a description of the failure of the Products alleged or found to be
defective shall be furnished to ZEISS in writing within a reasonable time of
discovery by CELLOMICS or the end-user of such
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<PAGE> 15
defect; (2) the defects so described shall be subject to ZEISS' reasonable
verification; (3) no Products alleged or found to be defective shall be disposed
of by CELLOMICS or the end-user for at least thirty (30) days after ZEISS
receives such description in writing; and (4) such defective Products or
applicable component(s) thereof shall forthwith be returned to ZEISS, freight
payable at destination, if ZEISS so requests.
7.4 THIS LIMITED WARRANTY IS IN LIEU OF AND EXCLUDES ALL OTHER
WARRANTIES; EXPRESS OR IMPLIED; BY OPERATION OF LAW OR OTHERWISE, INCLUDING ANY
IMPLIED WARRANTY OF MERCHANTIBILITY OR FITNESS FOR A PARTICULAR PURPOSE: THE
SOLE AND EXCLUSIVE REMEDY AGAINST ZEISS WITH RESPECT TO ANY CLAIMED DEFECT IN
THE PRODUCT SHALL BE AS PROVIDED HEREIN AND SHALL IN NO CASE EXCEED THE COST OF
REPLACEMENT AND/OR REPAIR AT ZEISS' SITE IN JENA. ZEISS SHALL NOT BE LIABLE IN
CONTRACT OR IN TORT TO CELLOMICS OR ANY END USER OF THE PRODUCT FOR ANY SPECIAL
INCIDENTAL OR CONSEQUENTIAL DAMAGES WITH RESPECT TO THE PRODUCT OR WITH RESPECT
TO ZEISS' OBLIGATIONS WITH RESPECT TO THE PRODUCT SUCH AS, BUT NOT LIMITED TO
DAMAGE TO; LOSS OF OR LOSS OF THE USE OF OTHER PROPERTY OR EQUIPMENT, LOSS OF
PROFITS OR REVENUES OR CLAIMS OF CELLOMICS OR ANY END USER FOR LOSSES OF ANY
KIND, UNLESS CAUSED BY ZEISS' INTENT OR GROSS NEGLIGENCE.
ZEISS gives no warranty whatsoever with respect to parts with a limited
technical lifetime, such as, but not limited to bulbs and tubings. Components or
Products produced by other
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<PAGE> 16
manufacturers are warranted by ZEISS only to the extent that such are warranted
by the manufacturer supplying such components and to the extent that such
warranties may be assignable by ZEISS. ZEISS' warranty with respect to any
software included in the Products is limited to a warranty that such a software,
when properly installed, will not fail to execute its programming instructions
due to defects in materials and workmanship. If ZEISS receives notice of a
software defect during the applicable warranty period, ZEISS will replace
software media which do not execute programming instructions due to any defect.
ZEISS does not warrant that the operation of software will be uninterrupted or
error-free.
7.5 CELLOMICS is providing a service organization capable of supporting
the Products at end users' sites. In order to be able to provide such support,
ZEISS will, at the request of CELLOMICS, offer training in Jena or in Pittsburgh
at CELLOMICS' cost. ZEISS will not charge any hourly rates for training and
traveling time.
7.6 ZEISS will be able to supply spare parts or equivalent replacement
components for hardware and electronic components for ASK Reader or ASK
Workstation which are manufactured by ZEISS for five years after the end of
series production. With regard to third party components ZEISS agrees to use any
commercially reasonable efforts to maintain these third party components
operational for five years after end of series production of the ASK Reader and
the ASK Workstation. This may include replacement by other components providing
similar functions.
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ARTICLE VIII
TERM AND TERMINATION
8.1 The parties agree that this Agreement supersedes, in its entirety,
the Former Agreement. The parties agree that the Agreement shall, unless sooner
terminated, continue in effect until December 31, 2005. Notwithstanding the
foregoing, the parties agree that the Agreement may be terminated by either
party on or after December 31, 2002 on not less than eighteen (18) months prior
written notice to the other. Upon notice by ZEISS to CELLOMICS that ZEISS
intends to terminate this Agreement, further payments of the Agreed Sum,
otherwise due pursuant to the terms of Paragraph 4.2 above, shall he canceled
and the unpaid balance of the Agreed Sum shall be forgiven.
8.2 After termination, the parties agree to continue cooperating with
each other and to carry out an orderly termination of their relations.
8.3 After termination of this Agreement, ZEISS shall cease to develop
or manufacture ASK Workstations and ASK Readers in any way, except ZEISS may
sell to CELLOMICS inventory on hand, and each party shall deliver to the other
all materials and documents belonging to the other which have come into its
possession as a result of this Agreement.
8.4 For and during the eighteen (18) months following termination,
ZEISS shall offer to sell ZEISS components listed under ZEISS Technology on
Exhibit 4.0 to CELLOMICS, at such prices as would be proportional to the price
of such components had
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<PAGE> 18
such components been included in completed ASK Readers and ASK Workstations.
ZEISS will use commercially reasonable efforts to deliver all such ZEISS
components ordered by CELLOMICS within ninety (90) days of its receipt of any
such order.
8.5 Notwithstanding anything to the contrary contained in this Article
VIII all the provisions of Paragraph 4.3 and Articles IX, X, XI, XII and XIII of
this Agreement shall continue in full force and effect after termination of this
Agreement for any reason.
ARTICLE IX
PATENTS, INVENTIONS AND ENFORCEMENT OF INTELLECTUAL
PROPERTY RIGHTS
9.1 Either party may, from time to time, discover potential or actual
infringers of the intellectual property of the other, or other proprietary
information of the other party which forms the basis of this Agreement. The
party discovering such infringement shall promptly inform the other of such
activity in writing. The party owning such intellectual property or proprietary
information shall take such steps as are, in such party's discretion,
economically feasible in order to enforce its ownership rights against the
infringer. Should ZEISS fail to enforce its ownership rights against the
infringers within a reasonable time, CELLOMICS shall have an independent right
of enforcement of these rights. In that event, CELLOMICS shall name ZEISS as a
party to such enforcement, and shall have sole discretion as to the action taken
against such potential or actual infringers, including, but not limited to the
identification of counsel and the settlement of all claims without
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<PAGE> 19
consultation with ZEISS. ZEISS shall also provide any or all reasonable
assistance to CELLOMICS, as deemed necessary by CELLOMICS or its counsel.
9.2 Each party to this Agreement owning intellectual property hereby
agrees to indemnify the other party and to hold it harmless against any claim of
infringement from third parties with respect to any intellectual property
claimed to be owned by the owner party and used by the other party in the
performance of this Agreement, provided that the using party notifies the owner
party, in writing, on a timely basis, of any such claim of infringement, and
provided that the owner party stall have the control of the defense against any
such claim at its own expense, and provided, further, that no compromise thereof
shall be entered into without consent of the owner party.
9.3 The parties agree that they will, by their officers, employees,
legal representatives or other persons duly authorized, communicate promptly to
each other or the representatives thereof, all facts known to them respecting
the products and services contemplated by this Agreement, or any other
proprietary information concerning the same, and will, upon request, testify in
any legal proceedings, sign all lawful papers, make all rightful oaths, and
generally do all other and further lawful acts, deemed necessary or expedient by
the other party or its counsel, to assist or enable that party to obtain and
enforce full benefits of this Agreement and the business relationship between
the parties.
9.4 Each of the parties shall render its full cooperation to the other
in fulfilling and performing the terms of this Agreement.
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<PAGE> 20
9.5 Neither party will hire personnel employed by the other party for a
period of twelve (12) months after the personnel in question has left employ of
the other party. The undertakings of this Article shall survive the termination
or expiration of this Agreement for twelve (12) months.
ARTICLE X
CONFIDENTIALITY
10.1 Before and during the term of this Agreement, the parties will
disclose to each other certain confidential or proprietary information
("INFORMATION"), the disclosure of which to third parties could be commercially
injurious to the owner of the INFORMATION.
10.2 The disclosure of the INFORMATION is solely for the purpose of the
furtherance of the development, marketing and sale of the contemplated products
and services described herein.
10.3 Each party understands that the disclosing party considers the
INFORMATION to be confidential and a trade secret.
10.4 Each party will not disclose to any third party, or utilize for
its own or another's benefit, the INFORMATION obtained from the disclosing
party.
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<PAGE> 21
10.5 The term "INFORMATION" shall not include, and the parties shall
not have any obligations of confidence or non-disclosure with respect to:
A. information that is in the public domain at the time of its
transmittal or which subsequently comes into the public domain without
violation of any obligation of confidence assumed hereunder;
B. information received from a third party without violation of an
obligation of confidence to the transmitting party; or
C. information which the recipient party can show to have been in its
possession at the time of transmittal; or
D. information which the recipient party can show to have been
independently developed by employees of the recipient party who have
not had access to proprietary information received hereunder; or
E. information which the recipient party is compelled to disclose
pursuant to judicial action or the legal and enforceable request of a
U.S. government agency, provided that the transmitting party is
notified at the time such action or request is initiated, and further
provided that the recipient party cooperates with the
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<PAGE> 22
transmitting party in the event that the transmitting party seeks a
protective order or other appropriate remedy to prevent disclosure of
such information.
10.6 If either party believes it essential to disclose any INFORMATION
to a third party, the party wishing to disclose will first advise the other
party what INFORMATION is to be disclosed, to whom it is to be disclosed and the
purpose therefor. The party wishing to disclose will first obtain the other
party's written permission to make the disclosure before making such disclosure,
which permission may not be unreasonably withheld. The requesting party also
agrees to require the third party recipient of the INFORMATION to acknowledge
that such INFORMATION is confidential, to hold the INFORMATION confidential for
the benefit of the disclosing party, and to sign a copy of a protective
agreement, naming the disclosing party as a third-party beneficiary having the
right to enforce the Agreement against the third party.
10.7 All INFORMATION, where possible, shall be transferred from each
party to the other in written form, and shall bear a conspicuous mark
designating such INFORMATION to be confidential. Additionally, any INFORMATION
transferred from each party to the other in an oral or other non-permanent or
non-readable form, such as in a computer communication, shall be summarized in a
brief memorandum which shall also bear a conspicuous mark designating such
INFORMATION to be confidential. Furthermore, all INFORMATION transferred in
tangible form shall be returned to the disclosing party upon request and/or at
the termination of this Agreement.
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<PAGE> 23
10.8 It is understood that this Agreement will neither obligate either
party, nor grant to either party or any employees, partners or other business
associate thereof, any rights in the INFORMATION, or any protectable interest
stemming therefrom, except as specifically provided herein.
10.9 Each party agrees that if it or any of its employees, partners or
other business associates breaches any condition of this Agreement relating to
the protection of proprietary or confidential rights or information, the owner
of such right or information will be entitled to, in addition to all other
remedies available, an immediate injunction prohibiting the party in breach of
its obligations, or its employees, partners or other business associates, from
committing any further breach of the Agreement.
ARTICLE XI
WARRANTIES AND DISCLAIMERS
11.1 Each party represents and warrants to the other party that it has
no pre-existing contractual or other obligations to any third party which
preclude it from entering into this Agreement and meeting its obligations
hereunder, or which conflict with any provision of this Agreement.
11.2 ZEISS warrants to CELLOMICS that the transfer price, as indicated
in Section 6.1 of ASK Workstation and ASK Reader does not include any research
and development costs.
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<PAGE> 24
11.3 Each party represents and warrants to the other party that it
shall use reasonable efforts to achieve the objectives of the Agreement.
ARTICLE XII
TRADEMARKS, SERVICE MARKS AND TRADE NAMES
12.1 ZEISS Property
The parties acknowledge that ZEISS has an exclusive and
proprietary right to its names and marks (hereafter the "ZEISS MARKS"). ZEISS
and CELLOMICS contemplate the use of some or all of the ZEISS MARKS in the
manufacture and sale of the products and services identified herein as indicated
by paragraph 2.3 hereof. Nothing in this Agreement shall be construed to grant
any right or license in and to the ZEISS MARKS to CELLOMICS except pursuant to
written licensure.
12.2 CELLOMICS Property
The parties acknowledge that CELLOMICS has an exclusive and
proprietary right to its names and marks including those identified in Exhibit
6.0 hereto (hereafter the "CELLOMICS MARKS"). CELLOMICS and ZEISS contemplate
the use of some or all of the CELLOMICS MARKS in the manufacture and sale of the
products and services identified herein. Nothing in this Agreement shall be
construed to grant any right or license in and to the CELLOMICS MARKS to ZEISS
except pursuant to written licensure.
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<PAGE> 25
ARTICLE XIII
MISCELLANEOUS
13.1 Governing Law
This Agreement shall be deemed made in Pittsburgh, Pennsylvania,
but shall be construed in accordance with the laws of the State of New York
applicable to contracts made and to be performed in New York. Notwithstanding
the foregoing, it is understood that no part of the performance by ZEISS of its
obligations under this Agreement shall take place in the United States, and
title to all personal property shipped to CELLOMICS or to end users shall pass
in the Federal Republic of Germany, and all risk of loss shall be borne by the
recipient of any such shipment following passage of title in Germany.
13.2 Actions Survive
All causes of action accruing to either party under this Agreement
shall survive termination for any reason, as shall provisions which expressly
state such survival unless such survival is conditional and the requisite
condition(s) has been fulfilled prior to or on such termination.
13.3 Entire Agreement; Superseder; Section Headings, Construction
This Agreement constitutes the only and entire understanding
between the parties concerning its subject matter and all other prior
negotiations, representations, agreements and understandings are superseded
hereby. No agreements altering or supplementing the terms hereof may be made
except by means of a written document signed by the duly
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<PAGE> 26
authorized representatives of the parties. The parties agree that this Agreement
supersedes, in its entirety, the Former Agreement.
The headings of Sections in this Agreement are provided for convenience only and
will not affect its construction or interpretation.
13.4 Amendments
This Agreement may be amended or modified only in writing, signed
by both parties.
13.5 Independent Contractor
Each party shall have the status of an independent contractor
without the authority to bind the other to any obligation.
13.6 Arbitration
All disputes which arise out of this Agreement shall be settled by
arbitration in Westchester County, New York in accordance with the conciliation
and arbitration rules and regulations of the American Arbitration Association,
to which the parties hereto submit including the AAA Optional Rules for
Emergency Measures of Protection to preserve the status quo ante of the parties.
The arbitrator shall have background and expertise relating to the issue(s)
involved. The arbitration shall be in English. The arbitration hearing shall be
held within sixty days of an arbitration demand. The arbitrator's decision shall
be submitted within thirty (30) days of the conclusion of the arbitration
hearing. The arbitrator's decision shall be binding, final and non-appealable.
The parties shall share
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<PAGE> 27
equally the cost of such arbitration. Any and all actions necessary to compel
arbitration or to enforce the decision of the arbitrator or any aspect thereof
shall be brought in the state or federal courts of Westchester County, New York
and the parties specifically agree that the state and federal courts of or
pertaining to Westchester County, New York shall have and the parties submit to
the exclusive jurisdiction and venue of such courts.
13.7 Force Majeure
If either party is prevented from performing any obligation
hereunder by reason of fire, explosion, strike, labor dispute, casualty,
accident, lack or failure of transportation facilities, flood, war, civil
commotion, acts of God, or any law, order or decree of any government or
subdivision thereof, then such party shall be excused from performance hereunder
to the extent and for the duration of such prevention, provided that such party
first notifies the other party in writing of such prevention.
13.8 Publicity
Except as required by law or applicable stock exchange rule, no
public statements shall be made by either party concerning this Agreement, its
subject matter or its existence without prior consultation with and the approval
of the other party, which approval shall not be unreasonably withheld. In the
event CELLOMICS undertakes an initial or subsequent public offering of its
stock, ZEISS agrees to review and give its approval to necessary statements
regarding the existence and/or subject matter of this Agreement within twenty
four (24) hours (but not less than one business day) of its receipt
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<PAGE> 28
of a draft of the proposed language regarding this Agreement and ZEISS shall not
unreasonably withhold such approval.
13.9 Severability
In the event that any provision of this Agreement shall be found
to be illegal, invalid or unenforceable for any reason, such shall not affect
the validity of the remainder of this Agreement, which shall be construed and
interpreted as though such provision was not present.
13.10 Notices
Notices may be given to an officer of a party by:
A. personal delivery,
B. fax
C. certified or registered mail addressed as follows:
D. overnight delivery by an internationally recognized courier
service
All notices, demands, requests, consents, approvals and other
communications required or permitted hereunder must be in writing and will be
effective upon receipt if delivered personally to such party, or if sent by
facsimile transmission upon electronic confirmation of delivery, or if sent by
certified or registered mail upon receipt or if by internationally recognized
overnight courier service upon receipt at the address set forth below or at such
other address as any party may give to the other in writing for such purpose:
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<PAGE> 29
If to ZEISS: Dr. Norbert Gorny and Dr. Robert Grub
Carl Zeiss Jena, GmbH Microscopy Division
Carl-Zeiss-Promenade 10 Carl Zeiss Jena, GmbH
07740 Jena, Germany 07740 Jena, Germany
with a copy to: Carl Zeiss Inc.
James Kelly
One Zeiss Drive
Thornwood, NY 10594
If to CELLOMICS: D. Lansing Taylor, Ph.D.
President & Chief Executive Officer
635 William Pitt Way
Pittsburgh, PA 15238
with a copy to: Sweeney Metz Fox McGrann & Schermer
The Westinghouse Building - 18th Floor
11 Stanwix Street
Pittsburgh, PA 15222
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<PAGE> 30
13.11 Binding Effect
This Agreement shall inure to the benefit of and be binding on
each party's successors in interest and assigns.
13.12 Assignment
Either party may assign this Agreement only in connection with
the sale or disposition of the entire business of such party or that portion to
which this Agreement pertains.
IN WITNESS WHEREOF, this Agreement has been executed in multiple
counterparts, each of which shall constitute an original Agreement, on behalf of
the parties by their authorized officers as of the date first written above.
CARL ZEISS JENA GmbH
By I.V. By I.V.
------------------------------------- ---------------------------
Its EVP Its VP
------------------------------------- ---------------------------
Date February 3, 2000 Date February 3, 2000
------------------------------------ --------------------------
CELLOMICS, INC.
By /s/ D. LANSING TAYLOR
-------------------------------------
Its President & CEO
-------------------------------------
Date February 3, 2000
-----------------------------------
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<PAGE> 1
Exhibit 10.11
<TABLE>
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
AWARD/CONTRACT | 1. THIS CONTRACT IS A RATED ORDER UNDER DPAS (15 CFR 350) | RATING | PAGE | OF PAGES
| | D0-C9 | 1 | 19
- ------------------------------------------------------------------------------------------------------------------------------------
CONTRACT (PROC. INST. IDENT.) NO. | 3. EFFECTIVE DATE | 4. REQUISITION/PURCHASE REQUEST/PROJECT NO.
N00014-98-C-0326 | SEE BLOCK 20C | 98PR06587-00 12 MAY 1998
- ------------------------------------------------------------------------------------------------------------------------------------
5. ISSUED BY CODE| N00014 | 6. ADMINISTERED BY (If other than Item 5) CODE | S3911A
|----------------------------------| ------------
OFFICE OF NAVAL RESEARCH | DCMC PITTSBURGH
ONR 254 BRIAN BRADLEY (703) 606-8372 | FEDERAL BLDG ROOM 1612
800 NORTH QUINCY STREET | 1000 LIBERTY AVE
ARLINGTON, VA 22217-5660 | PITTSBURGH, PA 15222-4190
- ------------------------------------------------------------------------------------------------------------------------------------
7. NAME AND ADDRESS OF CONTRACTOR (No., street, city, county, State and ZIP Code.) | 8. DELIVERY
|
| SEE SECTION F OF SCHEDULE
CELLOMICS, INC. | [ ] FOB ORIGIN [ ] OTHER (SEE BELOW)
635 WILLIAM PITT WAY |---------------------------------------------
PITTSBURGH, PA 15238 | 9. DISCOUNT FOR PROMPT PAYMENT
| N.A.
|---------------------------------------------
| 10. SUBMIT INVOICES (4 COPIES |ITEM
- --------------------------------------------------------------------------------------| UNLESS OTHERWISE SPECIFIED TO |SEE SEC G.1.
CODE 1GOV3 |FACILITY CODE | THE ADDRESS SHOWN IN |
- ------------------------------------------------------------------------------------------------------------------------------------
11. SHIP TO/MARK FOR CODE| N00014 | 12. PAYMENT WILL BE MADE BY CODE| HQ0339
|----------------------------------| |------------
| DFAS COLUMBUS CENTER
SEE SEC F.5. | DFAS CO DFAS CO--JNC/UNC/MINUTEMAN DIVISION
| PO BOX 182266
| COLUMBUS, OH 43218-2266
- ------------------------------------------------------------------------------------------------------------------------------------
13. AUTHORITY FOR USING OTHER THAN FULL AND OPEN COMPETITION: | 14. ACCOUNTING AND APPROPRIATION DATA
[ ] 10 U.S.C. 2304(c)( ) [ ] 41 U.S.C. 253(c)( ) | SEE ATTACHED FINANCIAL ACCOUNTING DATA SHEET(S)
- ------------------------------------------------------------------------------------------------------------------------------------
15A. ITEM NO. | 15B. SUPPLIES/SERVICES | 15C. QUANTITY | 15D. UNIT | 15E. UNIT PRICE | 15F. AMOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
| | | | |
| | | | |
| SEE SECTION B OF SCHEDULE | | | |
- ------------------------------------------------------------------------------------------------------------------------------------
| $ SEE
15G. TOTAL AMOUNT OF CONTRACT | SECTION B
| OF SCHEDULE
- ------------------------------------------------------------------------------------------------------------------------------------
16. TABLE OF CONTENTS
- ------------------------------------------------------------------------------------------------------------------------------------
(X) | SEC.| DESCRIPTION |PAGE(S)|(X)| SEC.| DESCRIPTION |PAGE(S)
- ------------------------------------------------------------------------------------------------------------------------------------
PART I -- THE SCHEDULE | PART II -- CONTRACT CLAUSES
- ------------------------------------------------------------------------------------------------------------------------------------
X | A | SOLICITATION/CONTRACT FORM | 1 | X | I | CONTRACT CLAUSES | 8
- ------------------------------------------------------------------------------------------------------------------------------------
X | B | SUPPLIES OR SERVICES AND PRICES/COSTS | 2 | PART III - LIST OF DOCUMENTS, EXHIBITS AND OTHER ATTACH.
- ------------------------------------------------------------------------------------------------------------------------------------
X | C | DESCRIPTION/SPECS./WORK STATEMENT | 2 | X | J | LIST OF ATTACHMENTS | 19
- ------------------------------------------------------------------------------------------------------------------------------------
X | D | PACKAGING AND MARKING | 2 | PART IV - REPRESENTATIONS AND INSTRUCTIONS
- ------------------------------------------------------------------------------------------------------------------------------------
X | E | INSPECTION AND ACCEPTANCE | 2 | | | |
- ---------------------------------------------------------------- X | K | REPRESENTATIONS, CERTIFICATIONS AND | 19
X | F | DELIVERIES OR PERFORMANCE | 3 | | | OTHER STATEMENTS OF OFFERORS |
- ------------------------------------------------------------------------------------------------------------------------------------
X | G | CONTRACT ADMINISTRATION DATA | 3 | | L | INSTRS., CONDS., AND NOTICES TO OFFERORS |
- ------------------------------------------------------------------------------------------------------------------------------------
X | H | SPECIAL CONTRACT REQUIREMENTS | 6 | | M | EVALUATION FACTORS FOR AWARD |
- ------------------------------------------------------------------------------------------------------------------------------------
CONTRACTING OFFICER WILL COMPLETE ITEM 17 OR 18 AS APPLICABLE
- ------------------------------------------------------------------------------------------------------------------------------------
17. [XX] CONTRACTOR'S NEGOTIATED AGREEMENT (Contractor is | 18. [ ] AWARD (Contractor is not required to sign this
required to sign this document and return two copies to | document.) Your offer on Solicitation Number ___________,
issuing office.) Contractor agrees to furnish and deliver all | including the additions or changes made by you which additions
items or perform all the services set forth or otherwise | or changes are set forth in full above, is hereby accepted
identified above and on any continuation sheets for the | as to the items listed above and on any continuation sheets.
consideration stated herein. The rights and obligations of | This award consummates the contract which consists of the
the parties to this contract shall be subject to and | following documents: (a) the Government's solicitation and
governed by the following documents: (a) this award/ | your offer, and (b) this award/contract. No further
contract, (b) the solicitation, if any, and (c) such | contractual document is necessary.
provisions, representations, certifications, and |
specifications, as are attached or incorporated by reference |
herein. (Attachments are listed herein.) |
- ------------------------------------------------------------------------------------------------------------------------------------
19A. NAME AND TITLE OF SIGNER (Type or print) | 20A. NAME OF CONTRACTING OFFICER
D. Lansing Taylor | R. Brian Bradley
| Contracting Officer
- ------------------------------------------------------------------------------------------------------------------------------------
19B. NAME OF CONTRACTOR | 19C. DATE SIGNED | 20B. UNITED STATES OF AMERICA | 20C. DATE SIGNED
/s/ D. Lansing Taylor | 9/10/98 | By R. Brian Bradley | SEP 14 1998
- ---------------------------------------- | | --------------------------------- |
(Signature of person authorized to sign) | | (Signature of Contracting Officer) |
- ------------------------------------------------------------------------------------------------------------------------------------
NSN 7540-01-152-8069 STANDARD FORM 26 (REV. 4-85)
PREVIOUS EDITION UNUSABLE Prescribed by GSA
NAVONR OVERPRINT (4-85) FAR (48 CFR) 53.214(a)
</TABLE>
<PAGE> 2
SECTION B - SUPPLIES OR SERVICES AND PRICES/COSTS
<TABLE>
<CAPTION>
ITEM SUPPLIES/SERVICES CONTRACTOR'S GOVERNMENT'S TOTAL
NO. SHARE OF SHARE OF ESTIMATED
ESTIMATED ESTIMATED COST OF THIS
COST COST CONTRACT
================================================================================================================================
<C> <S> <C> <C> <C>
0001 The Contractor shall furnish $5,166,628.00 $2,450,729.00 $ 7,617,357.00
the necessary personnel and
facilities to conduct research as Through Sept. 13, 2000
described in Section C.2.
- --------------------------------------------------------------------------------------------------------------------------------
0002 OPTION The Contractor $4,228,491.00 $4,602,932.00 $ 8,831,423.00
shall furnish the necessary ------------- -------------- --------------
personnel and facilities to $9,395,119.00 $7,053,661.00 $16,448,780.00
conduct research as described
in Section C.3. Through Sept. 13, 2002
- --------------------------------------------------------------------------------------------------------------------------------
0003 Reports and Data in NSP
accordance with Exhibit A
(DD Form 1423)
================================================================================================================================
TOTAL ESTIMATED CONTRACT $5,166,628.00 $2,450,729.00 $7,617,357.00
CONSIDERATION:
================================================================================================================================
</TABLE>
SECTION C - DESCRIPTION/SPECIFICATIONS/WORK STATEMENT
1. The work and services to be performed hereunder shall be subject to the
requirements and standards contained in Exhibit A and the following paragraphs.
2. The Contractor shall conduct the work in general accordance with the
Technical Plan - Phase I section of its proposal entitled "Fluorescent
Biosensor Toxin Identification System (The FluoroTox System)", dated 30 APR 1998
which section, pages 4-15, is incorporated herein by reference.
3. The Contractor shall conduct the work in general accordance with the
Technical Plan - Phase II section of its proposal entitled "Fluorescent
Biosensor Toxin Identification System (The FluoroTox System)", dated 30 APR 1998
which section, pages 15-16, is incorporated herein by reference.
SECTION D - PACKAGING AND MARKING
Preservation, packaging, packing and marking of all deliverable contract line
items shall conform to normal commercial packing standards to assure safe
delivery at destination.
SECTION E - INSPECTION AND ACCEPTANCE
Inspection and acceptance of the final delivery under this contract will be
accomplished by the Program Officer designated in Section F of this contract,
who shall have at least thirty (30) days after contractual delivery for
acceptance.
CONTRACT NUMBER: N00014-98-C-0326 Page 2
<PAGE> 3
SECTION F - DELIVERIES OR PERFORMANCE
1. The research work under this contract shall be conducted during the
period from date of award through 13 SEP 2000.
2. If the Option (CLIN 0002) is exercised, the research work under this
contract shall be conducted during the period from date of award through 13 SEP
2002.
3. A final report will be prepared, submitted, reproduced and distributed
by sixty days thereafter unless the contract is extended, in which case, the
final report will be prepared in accordance with the terms of such extension.
4. Item No. 0003 of Section B (Reports and Data) shall be delivered within
the time periods stated in Exhibit A, F.O.B. Destination.
5. Distribution, consignment and marking instructions for all contract
line items shall be in accordance with the following:
Item No. 0003 shall be shipped F.O.B. Office of Naval Research,
Arlington, Virginia 22217-5660, consigned to:
Program Officer
Office of Naval Research
Ballston Tower One
800 North Quincy Street
Arlington, Virginia 22217-5660
Attn: Eric Eisenstadt
Ref: Contract N00014-98-C-0326
SECTION G - CONTRACT ADMINISTRATION DATA
1. NAPS 5252.232-9001 SUBMISSION OF INVOICES (COST REIMBURSEMENT,
TIME-AND-MATERIALS, LABOR-HOUR, OR FIXED PRICE INCENTIVE)
(JUL 1992)
(a) "Invoice" as used in this clause includes contractor requests for
interim payments using public vouchers (SF 1034) but does not include contractor
requests for progress payments under fixed price incentive contracts.
(b) The Contractor shall submit invoices and any necessary supporting
documentation, in an original and 4 copies, to the contract auditor at the
following address:
-----------------------------------------------
DCAA, Pittsburgh Branch Office
William S. Moorhead Federal Building, Suite 412
1000 Liberty Avenue
Pittsburgh, PA 15222-4003
-----------------------------------------------
CONTRACT NUMBER: N00014-98-C-0326 Page 3
<PAGE> 4
unless delivery orders are applicable, in which case invoices will be segregated
by individual order and submitted to the address specified in the order. In
addition, an information copy shall be submitted to the Program Officer
identified in Section F.2a of this contract. Following verification, the
contract auditor* will forward the invoice to the designated payment office for
payment in the amount determined to be owing, in accordance with the applicable
payment (and fee) clause(s) of this contract.
(c) Invoices requesting interim payments shall be submitted no more
than once every two weeks, unless another time period is specified in the
Payments clause of this contract. For indefinite delivery type contracts,
interim payment invoices shall be submitted no more than once every two weeks
for each delivery order. There shall be a lapse of no more than 30 calendar days
between performance and submission of an interim payment invoice.
(d) In addition to the information identified in the Prompt Payment
clause herein, each invoice shall contain the following information, as
applicable:
(1) Contract line item number (CLIN)
(2) Subline item number (SLIN)
(3) Accounting Classification Reference Number (ACRN)
(4) Payment terms
(5) Procuring activity
(6) Date supplies provided or services performed
(7) Costs incurred and allowable under the contract
(8) Vessel (e.g., ship, submarine or other craft) or system for
which supply/service is provided.
(e) A Certificate of Performance shall be provided with each invoice
submittal.
(f) The Contractor's final invoice shall be identified as such, and
shall list all other invoices (if any) previously tendered under this contract.
(g) Costs of performance shall be segregated, accumulated and invoiced
to the appropriate ACRN categories to the extent possible. When such segregation
of costs by ACRN is not possible for invoices submitted with CLINS/SLINS with
more than one ACRN, an allocation ratio shall be established in the same ratio
as the obligations cited in the accounting data so that costs are allocated on a
proportional basis.
2. Submission of Invoices Direct to Payment Office
a. Pursuant to DFARS 242.803(b)i)(C), if the cognizant Government
auditor has notified the contractor of its authorization to do so, the
contractor may submit interim vouchers under this contract direct to the payment
office shown in Block 12 of SF-26 instead of to the address shown in
subparagraph (b) of section G.1 above.
b. Such authorization does not extend to the first and final vouchers.
The contractor shall continue to submit first vouchers to the cognizant auditor
shown in subparagraph (b) of
CONTRACT NUMBER: N00014-98-C-0326 Page 4
<PAGE> 5
section G.1. above. The final voucher shall be submitted to the Administrative
Contracting Officer (SF-26 block 6) with a copy to the cognizant auditor.
3. Method of Payment
As consideration for the proper performance of the work and services required
under this contract, the Contractor shall be paid as follows:
Costs, as provided for under the contract clause entitled "Allowable Cost and
Payment," not to exceed the amount set forth as "Estimated Cost" in Section B,
subject to the contract clause entitled "Limitation of Cost" or "Limitation of
Funds" whichever is applicable.
4. Procuring Office Representatives
a. In order to expedite administration of this contract, the
Administrative Contracting Officer should direct inquiries to the appropriate
office listed below. Please do not direct routine inquiries to the person listed
in Item 20A on Standard Form 26.
Contract Negotiator - Brian Bradley, ONR 254, (703) 696-8373 DSN
426-8373, E-Mail Address [email protected]
Inspection and Acceptance - Eric Eisenstadt, ONR 335, (703) 696-4596,
DSN 426-4596
Security Matters - Ms. Jennifer Ramsey, ONR 93, (703) 696-4618,
DSN 426-4618
Patent Matters - Mr. Frank Nieman, ONR 00CC, (703) 696-4007,
DSN 426-4007
b. The Administrative Contracting Officer will forward invention
disclosures and reports directly to Patent Counsel (ONR 00CC), Office of Naval
Research, Department of the Navy, Arlington, Virginia 22217-5660. The Patent
Counsel will return the reports along with a recommendation to the
Administrative Contracting Officer. The Patent Counsel will represent the
Contracting Officer with regard to invention reporting matters arising under
this contract.
5. Explanation of Limitation of Funds
It is hereby understood and agreed that the Government's share of this contract
will not exceed the estimated cost of $2,450,729.00. The total amount presently
available for payment and allotted to this contract is $600,000.00. It is
estimated that the amount allotted of $600,000.00 will cover the period from the
date of contract award to date ending 01 MAR 1999.
6. Explanation of Cost Sharing
The total estimated cost of the research effort under this contract, includes
both the Contractor's share and the Government's share as set forth in Section
B.
7. Type of Contract
This is a cost share completion contract.
CONTRACT NUMBER: N00014-98-C-0326 Page 5
<PAGE> 6
8. Individual Compensation Caps
As required by Congressional enactment, individual compensation at a
rate in excess of $200,000 a year for contracts funded with Fiscal Year 1996
appropriations and individual compensation at a rate in excess of $250,000 a
year for contracts funded with Fiscal Year 1997 appropriations are unallowable
costs under this contract and may not be reimbursed from Government funds
obligated hereto.
For purposes of applying the FY 96 compensation limitation,
compensation is as defined in FAR 31.205-6(a). For purposes of applying the FY
97 compensation limitation, compensation is as defined in DFARS
231.205-6(a)(2)(ii).
SECTION H - SPECIAL CONTRACT REQUIREMENTS
1. ONR 5252.235-9714 REPORT PREPARATION (DEC 1988)
Scientific or technical reports prepared by the Contractor and deliverable under
the terms of this contract will be prepared in accordance with format
requirements contained in ANSI Z39.18, Scientific and Technical Reports:
Organization, Preparation and Production.
[NOTE: ANSI Z39.18 may be obtained from NISO Press Fulfillment Center, P.O. Box
338, Oxon Hill, MD 20750-0338. Telephone: 1-800-282-6476]
2. ONR 5252.210-9708 METRICATION REQUIREMENTS (DEC 1988)
(a) All scientific and technical reports delivered pursuant to the
terms of this contract shall identify units of measurement in accordance with
the International System of Units (SI) commonly referred to as the "Metric
System". Conversion to U.S. customary units may also be given where additional
clarity is deemed necessary. Guidance for application of the metric system is
contained in the American Society of Testing Materials document entitled
"Standard Practice for Use of the International System of Units (The Modernized
Metric System)" (ASTM Designation E 380-89A)
(b) This provision also applies to journal article preprints, reprints,
commercially published books or chapters of books, theses or dissertations
submitted in lieu of a scientific and/or technical report.
3. Invention Disclosures and Reports
The Contractor shall submit all invention disclosures and reports required by
the Patent Rights clause of this contract to the Administrative Contracting
Officer.
4. ONR 5252.242-9718 TECHNICAL DIRECTION (DEC 1988)
(a) Performance of the work hereunder is subject to the technical
direction of the Program Officer/COTR designated in this contract, or duly
authorized representative. For the purposes of this clause, technical direction
includes the following:
CONTRACT NUMBER: N00014-98-C-0326 Page 6
<PAGE> 7
(1) Direction to the Contractor which shifts work emphasis between
work areas or tasks, requires pursuit of certain lines of inquiry, fills in
details or otherwise serves to accomplish the objectives described in the
statement of work;
(2) Guidelines to the Contractor which assist in the interpretation
of drawings, specifications or technical portions of work description.
(b) Technical direction must be within the general scope of work stated
in the contract. Technical direction may not be used to:
(1) Assign additional work under the contract;
(2) Direct a change as defined in the contract clause entitled
"Changes";
(3) Increase or decrease the estimated contract cost, the fixed
fee, or the time required for contract performance; or
(4) Change any of the terms, conditions or specifications of the
contract.
(c) The only individual authorized to in any way amend or modify any of
the terms of this contract shall be the Contracting Officer. When, in the
opinion of the Contractor, any technical direction calls for effort outside the
scope of the contract or inconsistent with this special provision, the
Contractor shall notify the Contracting Officer in writing within ten working
days after its receipt. The Contractor shall not proceed with the work affected
by the technical direction until the Contractor is notified by the Contracting
Officer that the technical direction is within the scope of the contract.
(d) Nothing in the foregoing paragraphs may be construed to excuse the
Contractor from performing that portion of the work statement which is not
affected by the disputed technical direction.
5. Contractor-Acquired Property
(a) The Contractor is authorized to acquire the following equipment
needed to accomplish this contract:
<TABLE>
<CAPTION>
====================================================================================================
Equipment to be Acquired Unit Price Quantity Estimated cost
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Super speed centrifuge plus rotors $8,000.00 1 $8,000.00
- ----------------------------------------------------------------------------------------------------
Ultracentrifuge plus rotors $10,000.00 1 $10,000.00
- ----------------------------------------------------------------------------------------------------
UV-VIS Spectrophotometer $5,000.00 1 $5,000.00
- ----------------------------------------------------------------------------------------------------
Spectrofluormeter with lifetime capability $140,000.00 1 $25,000.00
- ----------------------------------------------------------------------------------------------------
Fast protein liquid chromatography system $12,000.00 1 $12,000.00
- ----------------------------------------------------------------------------------------------------
Sun Enterprise 450 Server in deskside tower,
four CPU slots $11,345.00 1 $11,345.00
- ----------------------------------------------------------------------------------------------------
300MHz UItraSPARC2 CPU w/2MB E-cache & dc-dc
converter $6,500.00 4 $26,000.00
- ----------------------------------------------------------------------------------------------------
Factory installed 8 bay internal storage
expansion kit for SUN $1,135.00 1 $1,135.00
- ----------------------------------------------------------------------------------------------------
512-Mbyte Memory Expansion $8,500.00 3 $25,500.00
- ----------------------------------------------------------------------------------------------------
Video Connector Adapter HD 15F to 13W3M $35.00 1 $35.00
- ----------------------------------------------------------------------------------------------------
PGX Color Frame Buffer, and Cable $435.00 1 $435.00
- ----------------------------------------------------------------------------------------------------
Dual-channel differential UltraSCSI host
adapter, PCI $1,440.00 1 $1,440.00
- ----------------------------------------------------------------------------------------------------
Internial 9.1 Gbyte 7200 RPM UltraSCSI
disk drive, 1' high $1,350.00 18 $24,300.00
- ----------------------------------------------------------------------------------------------------
</TABLE>
CONTRACT NUMBER: N00014-98-C-0326 Page 7
<PAGE> 8
<TABLE>
<CAPTION>
====================================================================================================
Equipment to be Acquired Unit Price Quantity Estimated Cost
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
560W power supply for Sun Enterprise 450 server $1,135.00 2 $2,270.00
- ----------------------------------------------------------------------------------------------------
56-inch Enterprise Expansion Cabinet $8,000.00 1 $8,000.00
- ----------------------------------------------------------------------------------------------------
Serial Port Splitter Cable $50.00 1 $50.00
- ----------------------------------------------------------------------------------------------------
17 inch Entry Color Monitor $710.00 1 $710.00
- ----------------------------------------------------------------------------------------------------
Optical Jukebox HP 160 EX 160 GB $15,000.00 1 $15,000.00
- ----------------------------------------------------------------------------------------------------
Optical Media 32 5.2 GB Optical Drives $656.00 5 $3,280.00
- ----------------------------------------------------------------------------------------------------
Sun STOREDGE L140 14OGB/8MM Tower $8,200.00 1 $8,200.00
- ----------------------------------------------------------------------------------------------------
8 bay internal storage expansion kit for Sun $836.00 1 $836.00
- ----------------------------------------------------------------------------------------------------
Optical Media 32 5.2 GB Optical Drives $732.00 2 $1,464.00
- ----------------------------------------------------------------------------------------------------
Basic Biochemical & Molecular Biology
equipment (lot) $551,370.00 1 $551,370.00
- ----------------------------------------------------------------------------------------------------
Array Scan System (lot) $100,000.00 1 $100,000.00
- ----------------------------------------------------------------------------------------------------
Computer Hardware (lot) $50,000.00 1 $50,000.00
- ----------------------------------------------------------------------------------------------------
Clean Room Equipment (lot) $195,000.00 1 $195,000.00
- ----------------------------------------------------------------------------------------------------
Modified Ink-Jet Printer (lot) $50,000.00 1 $50,000.00
- ----------------------------------------------------------------------------------------------------
Microfluidics Systems & Controls (lot) $97,746.00 1 $97,746.00
- ----------------------------------------------------------------------------------------------------
Computers (lot) $20,000.00 1 $20,000.00
- ----------------------------------------------------------------------------------------------------
Design/Prototypes (lot) $140,000.00 1 $140,000.00
- ----------------------------------------------------------------------------------------------------
Optical Breadboard (lot) $30,000.00 1 $30,000.00
- ----------------------------------------------------------------------------------------------------
Eltronics Testing (lot) $60,000.00 1 $60,000.00
- ----------------------------------------------------------------------------------------------------
Optical Mechanical Parts (lot) $32,188.00 1 $32,188.00
- ----------------------------------------------------------------------------------------------------
Computers (lot) $60,000.00 1 $60,000.00
- ----------------------------------------------------------------------------------------------------
Software (lot) $100,000.00 1 $100,000.00
- ----------------------------------------------------------------------------------------------------
Renovation of Laboratory Space (lot) $242,633.00 1 $242,633.00
- ----------------------------------------------------------------------------------------------------
LAN in new building (lot) $100,000.00 1 $100,000.00
- ----------------------------------------------------------------------------------------------------
T-1 Line for High Speed Communication (lot) $299,315.00 1 $299,315.00
- ----------------------------------------------------------------------------------------------------
TOTAL $2,318,252.00
====================================================================================================
</TABLE>
(b) The costs associated with the above items are considered to be part
of Cellomics' contribution to the project and as such, no government funds will
be used to acquire these items. Title of the above mentioned items shall remain
with the Cellomics, Inc.
SECTION I - CONTRACT CLAUSES
Cost Sharing Research and Development (AUG 1998) (No Fee)
* Applies when contract action exceeds $10,000.
** Applies when contract action exceeds $100,000.
+ Applies when contract action exceeds $500,000.
++ Applies when contract action exceeds $500,000 and subcontracting
possibilities exist.
(|) Small Business Exempt
x (DD 250).
(A) FAR 52.252-2 CLAUSES INCORPORATED BY REFERENCE (AUG 1998)
CONTRACT NUMBER: N00014-98-C-0326 Page 8
<PAGE> 9
This contract incorporates one or more clauses by reference, with the same force
and effect as if they were given in full text. Upon request, the Contracting
Officer will make their full text available. Also, the full text of a clause may
be accessed electronically at this address: http://www.arnet.gov/far/
I. FEDERAL ACQUISITION REGULATION (FAR) (48 CFR CHAPTER 1) CLAUSES: -
<TABLE>
======================================================================================================
<S> <C> <C>
** FAR 52.202-1 Definitions (OCT 1995)
- ------------------------------------------------------------------------------------------------------
** FAR 52.203-3 Gratuities (APR 1984)
- ------------------------------------------------------------------------------------------------------
FAR 52.203-5 Covenant Against Contingent Fees (APR 1984)
- ------------------------------------------------------------------------------------------------------
** FAR 52.203-6 Restrictions on Subcontractor Sales to the Government
(JUL 1995)
- ------------------------------------------------------------------------------------------------------
FAR 52.203-7 Anti-Kickback Procedures (JUL 1995)
- ------------------------------------------------------------------------------------------------------
** FAR 52.203-8 Cancellation, Rescission, and Recovery of Funds for Illegal
or Improper Activity (JAN 1997)
- ------------------------------------------------------------------------------------------------------
** FAR 52.203.10 Price or Fee Adjustment for Illegal or Improper Activity
(JAN 1997)
- ------------------------------------------------------------------------------------------------------
** FAR 52.203-12 Limitation on Payments to Influence Certain Federal
Transactions (JUN 1997)
- ------------------------------------------------------------------------------------------------------
** FAR 52.204-4 Printing/Copying Double-Sided on Recycled Paper (JUN 1996)
- ------------------------------------------------------------------------------------------------------
FAR 52.204-5 Women-Owned Business (OCT 1995)
- ------------------------------------------------------------------------------------------------------
FAR 52.211-15 Defense Priority and Allocation Requirements (SEP 1990)
- ------------------------------------------------------------------------------------------------------
FAR 52.215-2 Audit and Records - Negotiation (AUG 1996) and Alternate II
(JAN 1997)
- ------------------------------------------------------------------------------------------------------
FAR 52.215-8 Order of Precedence - Uniform Contract Format (OCT 1997)
- ------------------------------------------------------------------------------------------------------
+ FAR 52.215-10 Price Reduction for Defective Cost or Pricing Data (OCT 1997)
(The provisions of this Clause have been waived by a joint
Determination and Findings for the prime contractor only. The
clause is applicable to subcontracts over $500,000).
- ------------------------------------------------------------------------------------------------------
+ FAR 52.215-12 Subcontractor Cost or Pricing Data (OCT 1997) (Applicable
to subcontracts over $500,000 only)
- ------------------------------------------------------------------------------------------------------
FAR 52.215-14 Integrity of Unit Prices (OCT 1997)
- ------------------------------------------------------------------------------------------------------
FAR 52.215-14 Alternate I (OCT 1997) (Applicable if action contracted
under Other Than Full and Open Competition)
- ------------------------------------------------------------------------------------------------------
FAR 52.215-15 Termination of Defined Benefit Pension Plans (OCT 1997)
- ------------------------------------------------------------------------------------------------------
</TABLE>
CONTRACT NUMBER: N00014-98-C-0326 Page 9
<PAGE> 10
<TABLE>
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
FAR 52.215-18 Reversion or Adjustment of Plans for Postretirement Benefits Other
than Pensions (PRB) (OCT 1997)
- ------------------------------------------------------------------------------------------------------
FAR 52.215-19 Notification of Ownership Changes (OCT 1997) (Applicable when Cost
or Pricing Data is required)
- ------------------------------------------------------------------------------------------------------
FAR 52.216-7 Allowable Cost and Payment (APR 1998) (In paragraph (a), delete
the words "Subpart 31.2" and substitute "Subpart 31.7") 21. FAR
52.216-11 Cost Contract - No Fee (APR 1984)
- ------------------------------------------------------------------------------------------------------
FAR-52.216-12 Cost-Sharing Contract - Ne Fee (APR 1984)
- ------------------------------------------------------------------------------------------------------
** FAR 52.219-8 Utilization of Small, Small Disadvantaged, and Women-Owned Small
Business Concerns (JUN 1997)
- ------------------------------------------------------------------------------------------------------
++(|) FAR 52-219-9 Small, Small Disadvantaged, and Women-Owned Small Business
Subcontracting Plan (AUG 1996)
- ------------------------------------------------------------------------------------------------------
++(|) FAR 52.219-16 Liquidated Damages -- Subcontracting Plan (OCT 1995)
- ------------------------------------------------------------------------------------------------------
FAR 52.222-1 Notice to the Government of Labor Disputes (FEB 1997)
- ------------------------------------------------------------------------------------------------------
** FAR 52.222-2 Payment for Overtime Premiums (JUL 1990) (Note: The word "zero"
is inserted in the blank space indicated by an asterisk)
- ------------------------------------------------------------------------------------------------------
FAR 52.222-3 Convict Labor (AUG 1996) (Reserved when FAR 52.222-20
Walsh Healy Public Contracts Act is applicable)
- ------------------------------------------------------------------------------------------------------
FAR 52.222-4 Contract Work Hours and Safety Standards Act - Overtime
Compensation (JUL 1995)
- ------------------------------------------------------------------------------------------------------
FAR 52.222-26 Equal Opportunity (APR 1984)
- ------------------------------------------------------------------------------------------------------
* FAR 52.222-35 Affirmative Action for Disabled Veterans and Veterans of the
Vietnam Era (APR 1998)
- ------------------------------------------------------------------------------------------------------
FAR 52.222-36 Affirmative Action for Workers with Disabilities (JUN 1998)
- ------------------------------------------------------------------------------------------------------
* FAR 52.222-37 Employment Reports on Disabled Veterans and Veterans of the
Vietnam Era (APR 1998)
- ------------------------------------------------------------------------------------------------------
** FAR 52.223-2 Clean Air and Water (APR 1984)
- ------------------------------------------------------------------------------------------------------
** FAR 52.223-14 Toxic Chemical Release Reporting (OCT 1996)
- ------------------------------------------------------------------------------------------------------
FAR 52.225-3 Buy American Act - Supplies (JAN 1994)
- ------------------------------------------------------------------------------------------------------
FAR 52.225-11 Restrictions on Certain Foreign Purchases (AUG 1998)
- ------------------------------------------------------------------------------------------------------
FAR 52.227-1 Authorization and Consent (JUL 1995) and Alternate 1 (APR 1984)
- ------------------------------------------------------------------------------------------------------
** FAR 52.227-2 Notice and Assistance Regarding Patent and Copyright
Infringement (AUG 1996)
- ------------------------------------------------------------------------------------------------------
</TABLE>
CONTRACT NUMBER: N00014-98-C-0326 Page 10
<PAGE> 11
<TABLE>
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
FAR 52.232-9 Limitation on Withholding of Payments (APR 1984)
- ------------------------------------------------------------------------------------------------------
** FAR 52.232-17 Interest (JUN 1996)
- ------------------------------------------------------------------------------------------------------
FAR 52.232-23 Assignment of Claims (JAN 1986) and Alternate I (APR 1984)
- ------------------------------------------------------------------------------------------------------
FAR 52.232-25 Prompt Payment (JUN 1997)
- ------------------------------------------------------------------------------------------------------
FAR 52.232-33 Mandatory Information for Electronic Funds Transfer Payment
(AUG 1996)
- ------------------------------------------------------------------------------------------------------
FAR 52.233-1 Disputes (OCT 1995)
- ------------------------------------------------------------------------------------------------------
FAR 52.233-3 Protest After Award (AUG 1996) and Alternate I (JUN 1985)
- ------------------------------------------------------------------------------------------------------
FAR 52.242-1 Notice of Intent to Disallow Costs (APR 1984)
- ------------------------------------------------------------------------------------------------------
+ FAR 52.242-3 Penalties for Unallowable Costs (OCT 1995)
- ------------------------------------------------------------------------------------------------------
FAR 52.242-4 Certification of Indirect Costs (JAN 1997)
- ------------------------------------------------------------------------------------------------------
** FAR 52.242-13 Bankruptcy (JUL 1995)
- ------------------------------------------------------------------------------------------------------
FAR 52.242-15 Stop Work Order (AUG 1989) and Alternate I (APR 1984)
- ------------------------------------------------------------------------------------------------------
FAR 52.243-2 Changes Cost-Reimbursement (AUG 1987) and Alternate V (APR 1984)
- ------------------------------------------------------------------------------------------------------
FAR 52.244-2 Subcontracts (Cost Reimbursement and Letter Contracts (OCT 1997)
and Alternate 1 (AUG 1996)
- ------------------------------------------------------------------------------------------------------
** FAR 52.244-5 Competition in Subcontracting (DEC 1996)
- ------------------------------------------------------------------------------------------------------
FAR 52.244-6 Subcontracts for Commercial Items and Commercial Components
(OCT 1995)
- ------------------------------------------------------------------------------------------------------
FAR 52.245-5 Government Property (Cost Reimbursement, Time and Material or
Labor-Hour Contracts) (JAN 1986) (As modified by DoD Class
Deviation 98-00007 dated 30 June 1998)
- ------------------------------------------------------------------------------------------------------
FAR 52.245-9 Use and Charges (APR 1984) (Deviation) (DoD Class Deviation
96-00007, dated 6 September 1996)
- ------------------------------------------------------------------------------------------------------
FAR 52.246-9 Inspection of Research and Development (Short Form) (APR 1984)
- ------------------------------------------------------------------------------------------------------
FAR 52.247-63 Preference for U.S. Flag Air Carriers (JAN 1997)
- ------------------------------------------------------------------------------------------------------
FAR 52.249-6 Termination (Cost-Reimbursement) (SEP 1996)
- ------------------------------------------------------------------------------------------------------
FAR 52.249-14 Excusable Delays (APR 1984)
- ------------------------------------------------------------------------------------------------------
FAR 52.251-1 Government Supply Sources (APR 1984)
- ------------------------------------------------------------------------------------------------------
FAR 52.253-1 Computer Generated Forms (JAN 1991)
======================================================================================================
</TABLE>
CONTRACT NUMBER: N00014-98-C-0326 Page 11
<PAGE> 12
II. DEPARTMENT OF DEFENSE FAR SUPPLEMENT (DFARS) (48 CFR CHAPTER 2) CLAUSES:
<TABLE>
======================================================================================================
<S> <C> <C>
DFARS 252.203-7001 Special Prohibition on Employment (JUN 1997)
- ------------------------------------------------------------------------------------------------------
DFARS 252.204-7003 Control of Government Personnel Work Product (APR 1992)
- ------------------------------------------------------------------------------------------------------
** DFARS 252.209-7000 Acquisition from Subcontractors subject to On-Site
Inspection under the Intermediate Range Nuclear Forces
(INF) Treaty (NOV 1995)
- ------------------------------------------------------------------------------------------------------
+ DFARS 252.215-7000 Pricing Adjustments (DEC 1991)
- ------------------------------------------------------------------------------------------------------
++(/) DFARS 252.219-7003 Small, Small Disadvantaged and Women-owned Small Business
Subcontracting Plan (DoD Contracts) (APR 1996)
- ------------------------------------------------------------------------------------------------------
DFARS 252.225-7012 Preference for Certain Domestic Commodities (SEP 1997)
- ------------------------------------------------------------------------------------------------------
DFARS 252.225-7031 Secondary Arab Boycott of Israel (JUN 1992)
- ------------------------------------------------------------------------------------------------------
DFARS 252.227-7013 Rights in Technical Data - Noncommercial Items
(NOV 1995), and Alternate 1 (JUN 1995)
- ------------------------------------------------------------------------------------------------------
DFARS 252.227-7014 Rights in Noncommercial Computer Software and
Noncommercial Computer Software Documentation (JUN 1995)
- ------------------------------------------------------------------------------------------------------
DFARS 252.227-7016 Rights in Bid or Proposal Information (JUN 1995)
- ------------------------------------------------------------------------------------------------------
DFARS 252.227-7018 Rights in Noncommercial Technical Data and Computer
Software -- Small Business Innovation Research (SBIR)
Program (JUN 1995)
- ------------------------------------------------------------------------------------------------------
DFARS 252.227-7019 Validation of Asserted Restrictions -- Computer Software
(JUN 1995)
- ------------------------------------------------------------------------------------------------------
DFARS 252.227-7025 Limitations on the Use or Disclosure of Government-
Furnished Information Marked with Restrictive Legends
(JUN 1995)
- ------------------------------------------------------------------------------------------------------
DFARS 252.227-7028 Technical Data or Computer Software Previously Delivered
to the Government (JUN 1995)
- ------------------------------------------------------------------------------------------------------
DFARS 252.227-7030 Technical Data - Withholding of Payment (OCT 1988)
- ------------------------------------------------------------------------------------------------------
DFARS 252.227-7036 Certification of Technical Data Conformity (JAN 1997)
- ------------------------------------------------------------------------------------------------------
DFARS 252.227-7037 Validation of Restrictive Markings on Technical Data
(NOV 1995)
- ------------------------------------------------------------------------------------------------------
DFARS 252.231-7000 Supplemental Cost Principles (DEC 1991)
======================================================================================================
</TABLE>
CONTRACT NUMBER: N00014-98-C-0326 Page 12
<PAGE> 13
<TABLE>
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
DFARS 252.232-7009 Payment by Electronic Funds Transfer (CCR) (JUN 1998)
- ------------------------------------------------------------------------------------------------------
DFARS 252.235-7002 Animal Welfare (DEC 1991)
- ------------------------------------------------------------------------------------------------------
DFARS 252.242-7000 Post-Award Conference (DEC 1991)
- ------------------------------------------------------------------------------------------------------
** DFARS 252.243-7002 Requests for Equitable Adjustment (MAR 1998)
- ------------------------------------------------------------------------------------------------------
DFARS 252.245-7001 Reports of Government Property (MAY 1994)
- ------------------------------------------------------------------------------------------------------
X DFARS 252.246-7000 Material Inspection and Receiving Report (DEC 1991)
- ------------------------------------------------------------------------------------------------------
DFARS 252.251-7000 Ordering from Government Supply Sources (MAY 1995)
======================================================================================================
</TABLE>
(B) RESERVED
(C) ADDITIONAL FAR AND DFARS CLAUSES
This contract incorporates one or more clauses by reference, with the
same force and effect as if they were given in full text. Upon request, the
Contracting Officer will make their full text available. Also, the full text of
a clause may be accessed electronically at this address:
http://www.arnet.gov/far/
<TABLE>
==========================================================================================================
<S> <C>
FAR 52.204-2 Security Requirements (AUG 1996) (Applicable if contract will generate
or require access to classified information and DD Form 254, Contract
Security Classification Specification, is issued to the contractor)
- ----------------------------------------------------------------------------------------------------------
X FAR 52.209-6 Protecting the Government's Interest when Subcontracting with
Contractors Debarred, Suspended, or Proposed for Debarment (JUL 1995)
(Applicable to contracts exceeding $25,000 in value)
- ----------------------------------------------------------------------------------------------------------
X FAR 52.215-17 Waiver of Facilities Capital Cost of Money (OCT 1997) (Applicable if
the Contractor did not propose facilities capital cost of money in the
offer)
- ----------------------------------------------------------------------------------------------------------
X FAR 52.215-20 Requirements for Cost or Pricing Data or Information Other Than Cost or
Pricing Data (OCT 1997) (Applicable if cost or pricing data or
information other than cost or pricing data are required.)
- ----------------------------------------------------------------------------------------------------------
X FAR 52.215-21 Requirements for Cost or Pricing Data or Information Other Than Cost or
Pricing Data - Modifications (OCT 1997) (Applicable if cost or pricing
data or information other than cost or pricing data will be required
for modifications.)
- ----------------------------------------------------------------------------------------------------------
</TABLE>
CONTRACT NUMBER: N00014-98-C-0326 Page 13
<PAGE> 14
<TABLE>
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
X FAR 52.217-9 Option to Extend the Term of the Contract (MAR 1989) (In paragraph
(a), insert "01 OCT 1998 through 13 SEP 2000", and in paragraph (c),
insert "48 months"). (Applicable if contract contains line item(s)
for option(s)). (Complete the spaces in parentheses).
- -------------------------------------------------------------------------------------------------------
FAR 52.219-6 Notice of Total Small Business Set-Aside (JUL 1996), and Alternate
I (OCT 1995) (Applicable to total small business set-asides,
including SBIR)
- -------------------------------------------------------------------------------------------------------
FAR 52.222-20 Walsh Healy Public Contracts Act (DEC 1996) (Applicable if the
contract includes deliverable materials, supplies, articles or
equipment in an amount that exceeds or may exceed $10,000)
- -------------------------------------------------------------------------------------------------------
X FAR 52.222-28 Equal Opportunity Preaward Clearance of Subcontracts (APR 1984)
(Applicable only when contract action exceeds $1,000,000 or when
any modification increases contract amount to more than $1,000,000)
- -------------------------------------------------------------------------------------------------------
FAR 52.223-5 Pollution Prevention and Right-to-Know Information (APR 1998)
(Applicable if contract provides for performance, in whole or in
part, on a Federal facility.
- -------------------------------------------------------------------------------------------------------
X FAR 52.223-6 Drug-Free Workplace (JAN 1997) (Applies when contract action
exceeds $100,000 or at any value when the contract is awarded to an
individual)
- -------------------------------------------------------------------------------------------------------
FAR 52.226-1 Utilization of Indian Organizations and Indian-Owned Economic
Enterprises (SEP 1996) (Applicable when FAR 52,219-09 Small Business
and Small Disadvantaged Business Subcontracting Plan, applies)
- -------------------------------------------------------------------------------------------------------
FAR 52.227-10 Filing of Patent Applications - Classified Subject Matter (APR
1984) (Applicable if contract is subject to FAR clauses 52.204-02
and either FAR 52.227-11 or FAR 52.227-12)
- -------------------------------------------------------------------------------------------------------
X FAR 52.227-11 Patent Rights - Retention by the Contractor (Short Form) (JUN 1997)
(Applicable if contractor is a small business or nonprofit
organization)
- -------------------------------------------------------------------------------------------------------
OR
- -------------------------------------------------------------------------------------------------------
FAR 52.227-12 Patent Rights - Retention by the Contractor (Long Form) (JAN 1997)
(Applicable if contractor is a large business)
- -------------------------------------------------------------------------------------------------------
FAR 52.230-2 Cost Accounting Standards (APR 1998) (Applicable when contract
amount is over $500,000, if contractor is subject to full CAS
coverage, as set forth in 48 CFR Chapter 99, Subpart 9903.201-2(a)
(FAR Appendix B)
- -------------------------------------------------------------------------------------------------------
</TABLE>
CONTRACT NUMBER: N00014-98-C-0326 Page 14
<PAGE> 15
<TABLE>
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
FAR 52.230-3 Disclosure and Consistency of Cost Accounting Practices
(APR 1998) (Applicable when contract amount is over
$500,000 but less than $25 million, and the offeror
certifies it is eligible for and elects to use modified
CAS coverage as set forth in 48 CFR Chapter 99, Subpart
9903.201-2 (FAR Appendix B)
- -------------------------------------------------------------------------------------------------------
FAR 52.230-6 Administration of Cost Accounting Standards (APR 1996)
(Applicable if contract is subject to either clause at
FAR 52.230-02 or the clause at FAR 52.230-03)
- -------------------------------------------------------------------------------------------------------
FAR 52.232-20 Limitation of Cost (APR 1984) (Applicable only when
contract action is fully funded)
- -------------------------------------------------------------------------------------------------------
X FAR 52.232-22 Limitation of Funds (APR 1984) (Applicable only when
contract action is incrementally funded)
- -------------------------------------------------------------------------------------------------------
FAR 52.239-1 Privacy or Security Safeguards (AUG 1996) (Applicable to
contracts for information technology which require
security of information technology, and/or are for the
design, development, or operation of a system of records
using commercial information technology services or
support services)
- -------------------------------------------------------------------------------------------------------
X DFARS 252.203-7002 Display of DoD Hotline Poster (DEC 1991) (Applicable only
when contract action exceeds $5 million or when any
modification increases contract amount to more than $5
million)
- -------------------------------------------------------------------------------------------------------
Disclosure of Information (DEC 1991) (Applies when
Contractor will have access to or generate unclassified
information that may be sensitive and inappropriate for
release to the public).
- -------------------------------------------------------------------------------------------------------
X DFARS 252.205-7000 Provision of Information to Cooperative Agreement Holders
(DEC 1991) (Applicable only when contract action exceeds
$500,000 or when any modification increases total contract
amount to more than $500,000)
- -------------------------------------------------------------------------------------------------------
X DFARS 252.215-7002 Cost Estimating System Requirements (JUL 1997) (Applicable
only to contract actions awarded on the basis of certified
cost or pricing data)
- -------------------------------------------------------------------------------------------------------
DFARS 252.223-7004 Drug-Free Work Force (SEP 1988) (Applicable (a) if
contract involves access to classified information; or (b)
when the Contracting Officer determines that the clause is
necessary for reasons of national security or for the
purpose of protecting the health or safety of those using
or affected by the product of, or performance of the
contract)
- -------------------------------------------------------------------------------------------------------
DFARS 252.223-7006 Prohibition on Storage and Disposal of Toxic and Hazardous
Materials (APR 1993) (Applicable if work requires, may
require, or permits contractor performance on a DoD
installation).
- -------------------------------------------------------------------------------------------------------
</TABLE>
CONTRACT NUMBER: N00014-98-C-0326 Page 15
<PAGE> 16
<TABLE>
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
DFARS 252.225-7001 Buy American Act and Balance of Payments Program (MAR
1998) (Applicable if the contract includes deliverable
supplies)
- ------------------------------------------------------------------------------------------------------
DFARS 252.225-7002 Qualifying Country Sources as Subcontractors (DEC 1991)
(Applicable when clause at DFARS 252.225-7001 applies)
- ------------------------------------------------------------------------------------------------------
DFARS 252.225-7008 Supplies to be Accorded Duty-Free Entry (MAR 1998)
(Applicable when clause at DFARS 252.225-7009 applies)
- ------------------------------------------------------------------------------------------------------
DFARS 252.225-7009 Duty-Free Entry - Qualifying Country Supplies (End
Products and Components) (MAR 1998) (Applicable if
contract includes deliverable supplies)
- ------------------------------------------------------------------------------------------------------
DFARS 252.225-7010 Duty Free Entry - Additional Provisions (MAR 1998)
(Applicable when clause at DFARS 252.225-7009 applies)
- ------------------------------------------------------------------------------------------------------
DFARS 252.225-7016 Restriction on Acquisition of Ball and Roller Bearings
(JUN 1997) (Applicable if contract includes deliverable
supplies, unless Contracting Officer knows that items
being acquired do not contain ball or roller bearings)
- ------------------------------------------------------------------------------------------------------
X DFARS 252.225-7026 Reporting of Contractor Performance Outside the United
States (MAR 1998) (Applicable only when contract value
exceeds $500,000 or when any modification increases
contract value to more than $500,000)
- ------------------------------------------------------------------------------------------------------
X DFARS 252.227-7034 Patents - Subcontracts (APR 1984) (Applicable when clause
at FAR 52.227-11 applies)
- ------------------------------------------------------------------------------------------------------
X DFARS 252.227-7039 Patents - Reporting of Subject Inventions (APR 1990)
(Applies when clause at FAR 52.227-11 applies)
- ------------------------------------------------------------------------------------------------------
X DFARS 252.242-7004 Material Management and Accounting System (SEP 1996)
(Applicable to contract actions exceeding $100,000) (Not
applicable to contracts set aside for exclusive
participation by small business and small disadvantaged
business concerns)
======================================================================================================
</TABLE>
(D) THE FOLLOWING CLAUSE IS APPLICABLE TO CONTRACT ACTIONS WITH A VALUE OF
$100,000 OR MORE:
DFARS 252.247-7023 TRANSPORTATION OF SUPPLIES BY SEA (NOV 1995)
(a) As used in this clause:
(1) "Components" means articles, materials, and supplies
incorporated directly into end products at any level of manufacture, fabrication
or assembly by the Contractor or any subcontractor.
(2) "Department of Defense" (DoD) means the Army, Navy, Air
Force, Marine Corps, and Defense agencies.
(3) "Foreign flag vessel" means any vessel that is not a
U.S.-flag vessel.
(4) "Ocean transportation" means any transportation aboard a
ship, vessel, boat, barge, or ferry through international waters.
CONTRACT NUMBER: N00014-98-C-0326 Page 16
<PAGE> 17
(5) "Subcontractor" means a supplier, materialman, distributor
or vendor at any level below the prime contractor whose contractual obligation
to perform results from, or is conditioned upon, award of the prime contract and
who is performing any part of the work or other requirement of the prime
contract. However, effective May 1, 1996, the term does not include a supplier,
materialman, distributor or vendor of commercial items or commercial components.
(6) "Supplies" means all property, except land and interests
in land, that is clearly Identifiable for eventual use by or owned by the DoD at
the time of transportation by sea.
(i) An item is clearly identifiable for eventual use
by the DoD if, for example, the contract documentation contains a reference to a
DoD contract number or a military destination.
(ii) "Supplies" includes (but is not limited to)
public works; buildings and facilities; ships; floating equipment and vessels of
every character, type and description, with parts, subassemblies, accessories
and equipment; machine tools; material; equipment; stores of all kinds; end
items; construction materials; and components of the foregoing.
(7) "U.S.-flag vessel" means a vessel of the United States or
belonging to the United States, including any vessel registered or having
national status under the laws of the United States.
(b) The Contractor shall employ United States-flag vessels in the
transportation by sea of any supplies to be furnished in the performance of this
contract. The Contractor and its subcontractors may request that the Contracting
Officer authorize shipment in foreign-flag vessels, or designate U.S.-flag
vessels, if the Contractor or a subcontractor believes that -
(1) U.S.-flag vessels are not available for timely shipment;
(2) The freight charges are inordinately excessive or
unreasonable; or
(3) Freight charges are higher than charges to private persons
for transportation of like goods.
(c) The Contractor must submit any request for use of other than
U.S.-flag vessels in writing to the Contracting Officer at least 45 days prior
to the sailing date necessary to meet its delivery schedules. The Contracting
Officer will process requests submitted after such date(s) as expeditiously as
possible, but the Contracting Officer's failure to grant approvals to meet the
shipper's sailing date will not of itself constitute a compensable delay under
this or any other clause of this contract. Requests shall contain at a
minimum --
(1) Type, weight, and cube of cargo.
(2) Required shipping date.
(3) Special handling and discharge requirements.
(4) Loading and discharge points.
(5) Name of shipper and consignee.
(6) Prime contract number; and
(7) A documented description of efforts made to secure
U.S.-flag vessels, including points of contact (with names and telephone
numbers) of at least two (2) U.S.-flag carriers contacted. Copies of telephone
notes, telegraphic and facsimile messages or letters will be sufficient for this
purpose.
(d) The Contractor shall, within thirty (30) days after each shipment
covered by this clause, provide the Contracting Officer and the Division of
National Cargo, Office of Market Development, Maritime Administration, U.S.
Department of Transportation, Washington, DC
CONTRACT NUMBER: N00014-98-C-0326 Page 17
<PAGE> 18
20590, one copy of the rated on board vessel operating carrier's
ocean-bill-of-lading, which shall contain the following information:
(1) Prime contract number;
(2) Name of vessel;
(3) Vessel flag of registry;
(4) Date of loading;
(5) Port of loading;
(6) Port of final discharge;
(7) Description of commodity;
(8) Gross weight in pounds and cubic feet if available;
(9) Total ocean freight in U.S. dollars; and
(10) Name of the steamship company.
(e) The Contractor agrees to provide with its final invoice under this
contract a representation that to the best of its knowledge and belief:
(1) No ocean transportation was used in the performance of
this contract;
(2) Ocean transportation was used and only United States-flag
vessels were used for all ocean shipments under the contract.
(3) Ocean transportation was used, and the Contractor had the
written consent of the Contracting Officer for all non-U.S.-flag ocean
transportation; or
(4) Ocean transportation was used and some or all of the
shipments were made on non-U.S.-flag vessels without the written consent of the
Contracting Officer. The Contractor shall describe these shipments in the
following format:
================================================================================
ITEM CONTRACT
DESCRIPTION LINE ITEMS QUANTITY
- --------------------------------------------------------------------------------
Total
================================================================================
(f) If the final invoice does not include the required representation,
the Government will reject it and return it to the Contractor as an improper
invoice for the purposes of Prompt Payment clause of this contract. In the event
there has been unauthorized use of non-U.S.-flag vessels in the performance of
this contract, the Contracting Officer is entitled to equitably adjust the
contract, based on the unauthorized use.
(g) The Contractor shall include this clause, including this paragraph
(g), in all subcontracts under this contract, which exceed the simplified
acquisition threshold in Part 13 of the Federal Acquisition Regulations.
(E) THE FOLLOWING CLAUSE IS APPLICABLE WHEN THE CONTRACTOR HAS MADE A NEGATIVE
RESPONSE TO THE INQUIRY IN THE REPRESENTATION AT DFARS 252.247-7022 AND THE
CONTRACT ACTION IS FOR $100,000 OR MORE.
DFARS 252.247-7024 NOTIFICATION OF TRANSPORTATION OF SUPPLIES BY SEA
(NOV 1995)
(a) The Contractor has indicated by the response to the solicitation
provision, Representation of Extent of Transportation by Sea, that it did not
anticipate transporting by sea any supplies. If, however, after the award of
this contract, the Contractor learns that supplies,
CONTRACT NUMBER: N00014-98-C-0326 Page 18
<PAGE> 19
as defined in the Transportation of Supplies by Sea clause of this contract,
will be transported by sea, the Contractor --
(1) Shall notify the Contracting Officer of that fact; and
(2) Hereby agrees to comply with all the terms and conditions
of the Transportation of Supplies by Sea clause of this contract.
(b) The Contractor shall include this clause, including this paragraph
(b), revised as necessary to reflect the relationship of the contracting
parties, in all subcontracts hereunder, except (effective May 1, 1996)
subcontracts for the acquisition of commercial items or components.
SECTION J - LIST OF ATTACHMENTS
1. Exhibit A, entitled "Contract Data Requirements List" (DD Form 1423) - one
page with Enclosures 1-4.
2. Exhibit B, entitled, "Financial Accounting Data Sheet."
SECTION K - REPRESENTATIONS, CERTIFICATIONS AND OTHER STATEMENTS OF OFFEROR
1. The Contractor's Representations and Certifications, dated 02 JUN 1998, are
hereby incorporated into this contract by reference.
CONTRACT NUMBER: N00014-98-C-0326 Page 19
<PAGE> 1
Exhibit 10.12
AGREEMENT FOR AN EXCLUSIVE ALLIANCE TO DEVELOP, MANUFACTURE AND
MARKET A CHIP-BASED SCREENING SYSTEM FOR CELL ANALYSIS
This is an agreement executed this Twenty-sixth day of October, 1999,
hereinafter the "Effective Date") between Cellomics, Inc., 635 William Pitt
Way, Pittsburgh, PA. 15238 (hereinafter CELLOMICS) and ACLARA BioSciences Inc.
1288 Pear Avenue, Mountain View, CA 94043-1432 (hereinafter ACLARA).
RECITALS
Whereas CELLOMICS has expertise in drug discovery, patterning cells on
substrates, cell analyses, luminescence detection, imaging science and
informatics;
Whereas ACLARA has expertise in microfluidics, design and engineering of
microdevices in plastic, and process engineering;
Whereas CELLOMICS and ACLARA desire to form a development, manufacturing and
marketing alliance to produce a Screening System for the life sciences to
perform Cell-based Assays.
Now, therefore, in consideration of the covenants and conditions contained
herein, the Parties, intending to be legally bound, agree as follows:
1. Definitions
1.1 "Cassette" means an assembled unit comprising an operable combination of a
Cell Plate and Microfluidic Plate.
1.2 "Cell-based Array" means any assay in which a biological target molecule or
organelle is analyzed in, on and [*]. The cells can be from any life form
including but not limited to bacteria, animals and plants.
1.3 "Cell Plate" means a glass or plastic plate material having a modified
surface that supports selective adhesion of cells in discrete regions.
1.4 "EAP" shall mean an Early Access Partner. This is a third party that has
executed a TAP Agreement approved by the JSC pursuant to which such third
party (i) is provided access to Prototypes during the Development Phase and
(ii) pays a fee for having early access under the applicable TAP.
1.5 "High Content Screening (HCS)" means the activity or status of cells in the
Cassette [*].
1.6 "High Throughput Screening (HTS)" means the measurement of single values
that represent the average or total of a signal obtained from a single well
in a Cassette,
CONFIDENTIAL
[*] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
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regardless of whether the signal is produced intra- or extracellularly. The
single values will be obtained as a group of values as to different
candidate compounds or different indications resulting from the same
compound.
1.7 "Intellectual Property Milestone" shall be when the Parties complete a
Prototype and the aggregate commitment from the TAP shall be [*] based on
individual EAP fees of at least [*].
1.8 "JSC" shall mean the Joint Steering Committee, which will be composed of
equal numbers of members from both CELLOMICS and ACLARA, not to exceed a
total of eight, which members may be changed from time to time by the Party
whom they represent, and to be chaired by the Project Leaders for the
Parties.
1.9 "Liquid Transfer System" means any system used for transferring materials
to the Cassette.
1.10 "Luminescence-based Reagents" are reagents that result in light emission
for use in Cell-based Assays.
1.11 "Microfluidic Plate" means microfluidic device of an electrically
non-conducting material designed to mate with the Cell Plate to [*].
1.12 "Microplate" means a standard multiwell plate most commonly of 96 or 384
wells, but also available in 6, 12, 24, 48, 1536 and other formats with
overall dimensions of about 3.5 x 4.5 cm.
1.13 "Program" shall mean a research program to develop a Screening System as
set forth in the Workplan.
CONFIDENTIAL
[*] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
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1.14 "Prototype" shall mean a development stage Screening System meeting all or
most of the specifications set forth in the applicable Workplan, however,
not in a format useful for general sale and commercial distribution. A
Prototype is typically suitable for delivery to an EAP.
1.15 "Reader" shall mean the optical system and accompanying software developed
for reading the Luminescence signals from the cells.
1.16 "Revenue Source" is any source of revenues to support the Program other
than internal sources, including but not limited to government grants, EAP
fees, funds from the other Party and funds from collaborators other than a
Party.
1.17 "Robotics" means the mechanical units for assembling and moving the
components necessary for performing a Cell-based Assay with a Cassette.
1.18 "Screening System" shall mean the Cassette, Robotics, Reader, Liquid
Transfer System, software and such other integrated peripheral devices to
conduct High Throughput and/or High Content Screening, including
disposables. The Screening System shall be all of the hardware and
software to provide a complete system for performing Cell-based Assays
(except for the Luminescence-based Reagents and such other reagents as may
be used for Cell-based Assays).
1.19 "TAP" shall mean Technology Access Program between ACLARA and CELLOMICS
with companies which shall serve as EAPs.
1.20 "Workplan" shall list goals and tasks detailing the actual work expected
to be done, with timelines, budget and a delineation of responsibilities.
2. Development
2.1 The "Field" of this collaboration is the development of an automated
system for [*]. It is an essential term of this agreement that
CELLOMICS agrees to work exclusively with ACLARA on any and all
matters involving microfluids in Cell-based Assays and ACLARA agrees
to work exclusively with CELLOMICS on any and all matters involving
Cell-based Assays during the Program.
2.2 This Agreement will become effective on the Effective Date.
2.3 CELLOMICS is attempting to obtain [*] to be permitted to utilize [*]
to support ACLARA's research effort for the [*] of the Program.
Whether or not CELLOMICS ever obtains such approval from [*],
CELLOMICS is obligated to and hereby commits to pay [*] to support
ACLARA's said research for the [*] of the
CONFIDENTIAL
[*] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
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Program in [*]. During the period in which CELLOMICS is paying
ACLARA, ACLARA shall provide CELLOMICS with a statement of the cost
allocated to the Program as determined in accordance with reasonable
accounting procedures used internally by ACLARA within thirty (30)
days of receipt of the quarterly check due ACLARA. The dates on which
such payments are due may be changed in accordance with the date of
initiation of work by ACLARA and the rate at which employees are
hired by ACLARA to perform the Program.
2.4 During the first year of the term of this agreement ("First Year"),
the Parties agree to work in accordance with the Workplan set forth
in Appendix A, with the goal to have a Prototype of the Cassette by
the first anniversary of the Effective Date. The goal during the [*]
is to optimize the Cell Plate and Microfluidic Plate design and
interfacing to enable fabrication of a functional Cassette. This
Cassette is intended to have the specifications for and serve as a
testbed for a [*]. In addition, it is intended that the Parties will
use this Cassette as a working Prototype in a TAP program.
Development of the Cassette Prototype will be directed to enable:
[*]. During the First Year and thereafter, each Party will provide
written reports with thirty (30) days of the end of each calendar
quarter of the progress it has made during such quarter and the work
to be performed in the next quarter and a written summation of the
work accomplished at the end of each calendar year within thirty (30)
days of the end of such calendar year.
2.5. Notwithstanding the intention to achieve the goals of the Workplan
for the First Year, it is understood that in order to staff the
Program, ACLARA and CELLOMICS will be required to hire new personnel
or transfer existing personnel as they may become available. While
each Party will act diligently to staff the Program in accordance
with the Program's needs and available funding, the timing of such
hires or transfers is not completely within the control of the
Parties and the schedule of the Workplan may be delayed. At each
quarterly meeting of the JSC, the accomplishment of the previous
quarter, and the available funding, committed or to be committed,
will be evaluated and the Workplan modified, if necessary, in light
of the circumstances then pertaining.
2.5.i. If prior to the occurrence of the Intellectual Property
Milestone there appears to either Party to be an insufficient
Revenue Source at that time or in the reasonably foreseeable
future to support the Program in the amounts required by each
Party for its performance, the JSC shall review the situation
and report to the respective CEO's its recommendation as to
how to proceed within sixty (60) days of notification by
either Party that such Party believes there is an
insufficient Revenue Source to support the Program. If the
CEOs cannot agree within sixty (60) days of receiving
CONFIDENTIAL
[*] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
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notification from the JSC as to how to proceed, either Party
may terminate this Agreement upon giving prompt notice of
termination to the other Party without obligation to license
the other party under the terminating Party's intellectual
property. If the Program is terminated for other than material
breach prior to the completion of the Intellectual Property
Milestone, the parties will negotiate in good faith to allow a
continuing party to continue the Program.
2.5.ii. Notwithstanding Paragraph 2.5.i, after the Intellectual
Property Milestone has been achieved, the terminating Party
will be obligated to license the continuing Party under the
terminating Party's intellectual property to continue to
develop and commercialize the Prototype and Screening System
as hereinafter provided. Upon termination by one Party for
other than material breach, with the Intellectual Property
Milestone having been achieved, the other Party may continue
the Program and the terminating Party agrees to enter into
negotiations within thirty (30) days of such termination with
the other Party over the terms of such license which the
terminating Party is obligated to license to the continuing
Party under its intellectual property, both background and
foreground, on reasonable terms and conditions to make, use
and sell Screening Systems substantially conforming to the
Screening System which was to be jointly developed.
2.6 Assuming financing is obtained as required to support the Program
for the second and third years of the term of this Agreement, or
such other periods in which the goals of these years are to be
fulfilled as determined by the JSC, a Screening System will be
developed, which is intended to offer a complete solution to the
need for flexibility in Cell-based Assays starting with an initial
focus on [*]. The Screening System will be designed to have the
ability to provide a complete portfolio of assays including [*].
The Screening System will offer a ready-to-use and easy-to-use
solution for the life scientist and further will promote
penetration of sophisticated Cell-based Assays HCS in drug
discovery. The target pharmaceutical customer for the Screening
System is an entity with significant biological expertise in
primary screening, a therapeutic group or a specialty such as [*].
2.7 The development program for [*] of the term of this agreement is
set forth in Appendix B with the intention of developing a
Screening System. The 3D Cassette will have a high density plumbing
architecture for selective addressing of a high density of
micro-arrayed cells on the Cell Plate. The initial design and
prototypes will focus on multiples of 96 well patterns in a
footprint ranging from [*].
2.8 CELLOMICS shall be responsible for identifying sources for the
Robotics, Reader and such other equipment, which is not available
from or to be developed
CONFIDENTIAL
[*] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
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by the Parties to this agreement. Selection of one or more sources
for providing the additional equipment will begin not later than
four (4) months after a Cassette Prototype has been shown to be
satisfactory to the Parties. CELLOMICS shall submit to ACLARA a list
of potential sources of producing the components of the Screening
System not already being produced by either ACLARA or CELLOMICS.
ACLARA and CELLOMICS shall mutually agree on the priority in which
these sources are to be approached, and additional candidates added,
neither party shall unreasonably withhold such agreement. Such third
party(s) and the terms upon which they agree to participate in
developing the Screening System shall be proposed and negotiated by
CELLOMICS and shall be subject to the review, but not the approval
of the JSC.
2.9 In [*] of the term of this Agreement, the Parties will direct their
efforts to the development of a Screening System commercial product.
The Prototype developed in [*] is to be taken through the final
phase of the product development cycle and to establish
manufacturing, marketing and sales.
2.10 A complete Screening System will include all the components required
by a user to take a library of compounds stored in a Microplate
format and screen the library of compounds against a target,
producing a data set in a standard database format for ease of
access. The responsibilities of the Parties as to the following
components that are required to accomplish this goal are:
- CELLOMICS
[*]
- ACLARA
[*]
3. Funding
3.1 A budget is set forth for the First Year in Appendix B. Promptly
after execution of this Agreement, the Parties will submit a
proposed budget for [*], which budget shall be subject to review,
modification, and approval by the JSC. These budgets will be the
basis for [*] and provide for the division of money received from
[*] between the Parties.
CONFIDENTIAL
[*] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
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3.2. Not later than three (3) months after initiation of the
Workplan, the JSC will prepare and submit a budget to [*]
based on the budgets submitted by the Parties requesting an
increase in the total funding for both companies to accelerate
the development of the Screening System. Not later than [*],
the Parties will prepare and submit a [*] grant. The budget
may reflect provision for sources of components of the
Screening System, which the Parties do not intend to develop
or supply.
3.3 CELLOMICS and ACLARA will jointly prepare a TAP to attract
companies as EAPs that will fund the Program. CELLOMICS and
ACLARA will jointly make presentations to the pharmaceutical
industry. The Parties will develop jointly the basic terms for
a TAP, which shall be the basis for entering into agreements
with EAPs. The TAP will be developed not later than one (1)
month from the completion of a satisfactory Cassette
Prototype.
4. Commercialization plan
4.1. Final product development and component manufacturing: The
Prototype completed in [*] and delivered as a beta test system
to at least [*] EAPs in [*] will be developed into a Screening
System component for manufacturing. ACLARA will be responsible
for final engineering and establishment of manufacturing
capability for the Microfluidic Plate. ACLARA is developing a
[*], and if applicable, ACLARA will contribute this to the
Screening System. If incremental development is required to
render this [*] applicable to the Screening System, the JSC
may adjust the Workplan accordingly. CELLOMICS will be
responsible for Cell Plates, all reagents, assays, and
protocols. CELLOMICS will work to ensure that the components
which neither Party intends to produce are made available from
a third party and are available for commercialization of the
Screening System. CELLOMICS will be responsible for the final
development and manufacturing of the remaining components of
the Screening System.
4.2. Manufacturing of the integrated system: The final
manufacturing, packaging and delivery of [*] and other
Cell-based Assay reagents, Cassettes and Screening Systems to
customers will be the responsibility of CELLOMICS. Prior to
the initiation of manufacturing of a Cassette, the Parties
will enter into a supply agreement in which ACLARA will be
responsible for delivering to CELLOMICS, or a third party
designated by CELLOMICS, sufficient quantities of Microfluidic
Plates for packaging with Cell Plates. Such supply agreement
will provide for indemnification of the other Party on
conventional terms for the intentional, willful, or negligent
act or failure to act of one Party, giving rise to a claim
against the other Party. The supply terms for ACLARA's
delivery to CELLOMICS shall be conventional, giving due regard
to
CONFIDENTIAL
[*] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
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the size of the batches required, the effect of volume on price,
agreements with third parties for manufacture of the Microfluidic
Plates and the time required for initiating a run of Microfluidic
Plates. CELLOMICS will provide ACLARA with sales projections on a
rolling basis. Inventory shall be the responsibility of CELLOMICS.
4.3. Deliver Production Systems: For all life science applications,
CELLOMICS will have full responsibility for ensuring that all
components of the Screening System are available for marketing,
marketing of the Screening System, and providing support for the
Screening Systems and its components. The target markets for these
systems will include, but not be limited to pharmaceutical discovery
and development, clinical diagnostics, agriculture biotech, and basic
biomedical research.
4.4. Product Designation: ACLARA's name and trademark shall appear
prominently on the Microfluidic Plate and CELLOMICS shall give due
credit for ACLARA's contributions in its labeling, advertising and
promotion. Statements made by CELLOMICS concerning ACLARA shall be
subject to review and approval by ACLARA, which approval shall not be
unreasonably withheld.
4.5. Reader Designation: CELLOMICS's name and trademark shall be use din a
primary capacity and ACLARA's name and trademark shall be use din a
secondary capacity on the Reader and CELLOMICS shall give due credit
for ACLARA's contributions in its labeling, advertising and promotion.
Statements made by CELLOMICS concerning ACLARA shall be subject to
review and approval by ACLARA, which approval shall not be
unreasonably withheld.
5. Revenue Sharing
5.1 During the development and commercialization phase, the money obtained
from third parties from a Revenue Source shall be divided to ensure
that each Party's expenditure of its own money on a JSC approved
Workplan is minimized. The exact division of [*] will be decided at
the time of [*]. The division of TAP fees will be defined by the JCS,
and approved by the CEO of both Parties, and written into a separate
agreement between CELLOMICS and ACLARA before a TAP agreement is
consummated. Funding from a collaborator other than the other Party
will primarily be used for the purposes of the collaboration.
5.2 Not later than the end of [*] the Parties shall initiate negotiations
as to the division of income resulting from the sales of Screening
Systems and its components. The division of the income will first be
considered by the JSC with final approval of the CEO's from CELLOMICS
and ACLARA. ACLARA shall receive from CELLOMICS [*] and a reasonable
profit margin for items manufactured or supplied by ACLARA;
Considerations in determining the division of remaining
CONFIDENTIAL
[*] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
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income shall be the financial contribution of each of the Parties,
except to the extent the Parties have been reimbursed any portion of
their contribution by a Revenue Source, the novelty of their
contributions, the value of the intellectual property that protects
components of the Screening Systems, the competitive advantages
provided by the contributions of the two Parties, the responsibilities
of the two Parties in manufacturing, marketing and supporting the
ongoing expenditures, the risks involved with the continuing
investments, and the like. The income to ACLARA shall not be less than
a reasonable royalty on patents and know-how contributed by ACLARA
with the base being Screening Systems and components, where the
royalty may vary as to whole Screening Systems and as to individual
disposable Screening System components. Royalty shall not be paid
twice for the same component of the Screening System. If there is no
agreement between the Parties, the matter shall be given to mediation
as provided for hereinafter. The exact mechanism for delivering the
value to the Parties will be defined as the program proceeds toward
commercialization. It may involve strict revenue sharing, licensing,
royalties or some combination that will be defined by the JSC.
6. Public Relations
6.1 All press releases created by an originating Party shall be submitted
to the other Party for approval and shall not be released without the
prior written approval of the other Party. In the event of a dispute,
the matter shall be submitted to the CEOs of the Parties and if the
issue cannot be reconciled, there shall be no press release containing
disputed subject matter.
6.2 Prior to commercial introduction of a Screening System, all public
presentation relating to this Program, not already made public,
including Web postings, corporate presentations, investor relations,
and marketing collateral, must be approved by the other Party, such
approval not to be unreasonably withheld.
7. Intellectual Property
7.1 Ownership. Each of the Parties will own all intellectual property and
inventions made by individuals who have a duty to assign to that Party
and will jointly own all inventions co-invented by at least one
inventor having a duty to assign to each Party. The Party owning the
invention shall have the exclusive right to file worldwide for patent
applications covering the invention.
7.2 Joint Intellectual Property. CELLOMICS and ACLARA will jointly
determine the advisability of filing a patent application. The JSC
will appoint one of the Parties to be responsible to prepare, file,
prosecute diligently and maintain such application(s). The Parties
will share equally all reasonable costs incurred in
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connection with such activities (i.e., the non-prosecuting Party will
promptly reimburse the prosecuting Party), provided, however, that
either Party may avoid its responsibility for such costs by assigning
its rights in such Joint Intellectual Property to the other Party. In
such an event, the other Party may decide at its sole discretion
whether or not to file or continue prosecution of such applications.
Also, the assigning Party will provide reasonable assistance to the
assignee to facilitate the filing and prosecution of all such
applications. Joint Intellectual Property will be jointly owned, and
either Party is free to use such Joint Intellectual Property as it
sees fit, outside the Field of this Agreement. CELLOMICS shall have
the exclusive right to use such Joint Intellectual Property within the
Field of this Agreement for the lessor of i) a period of five (5)
years from the first commercial release of the Screening System, or
ii) eight years (8) from the Effective Date. Thereafter, either Party
may use such Joint Intellectual Property without accounting to the
other Party.
7.3 Rights. All inventions owned by ACLARA developed as part of the
program having application to the Cell Plate shall be licensed to
CELLOMICS on reasonable terms and conditions, if at the time of filing
of a patent application for such invention, CELLOMICS agrees to pay
[*] of the out-of-pocket costs of the filing, prosecution and
maintenance of such application, continuing applications, foreign
analogs, and Letters Patent issuing thereon. All inventions owned by
CELLOMICS developed as part of the collaboration having application to
the Microfluidic Plate shall be licensed to ACLARA on reasonable terms
and conditions, if at the time of filing of a patent application for
such invention, ACLARA agrees to pay [*] of the out-of-pocket costs of
the filing, prosecution and maintenance of such application,
continuing applications, foreign analogs, and Letters Patent issuing
thereon.
7.4 Licensing of Foreground technology. Technical know-how and patent
rights developed as part of the Program shall be available on
reasonable terms and conditions after termination of this Agreement in
the event that one Party wishes to continue the Program.
7.5 Licenses of Background Technology. Technical know-how and patent
rights developed prior to initiation of the Program or outside of the
Program may be licensed for a Screening System developed in the
Program as set forth in Section 2.5.
7.6 Label License. All products supplied by ACLARA to CELLOMICS will
include a label license, granting CELLOMICS a license under ACLARA's
intellectual property to use, offer to sell, and sell any such
products for use in the Field, such label license being transferable
to the purchasers of such products.
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BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS
AMENDED.
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7.7. Confidentiality. All technical and business information given the
recipient Party by the disclosing Party shall be assumed to be in
confidence and if disclosed orally, shall be reduced to writing and
delivered to the recipient within thirty (30) days of disclosure.
Information received in confidence shall be used solely for the
purposes of this Agreement and shall be disclosed to others who assume
like duties of confidentiality. The restrictions on use and disclosure
shall not apply where the information is or becomes generally known
without failure on the part of the recipient; was known to the
recipient prior to receipt from the discloser; or is given to the
recipient by a third party who has the right to disclose the
information, without restriction on use or disclosure. The obligations
on use and disclosure shall terminate five (5) years from the
termination of the Program.
8. Surviving Rights/Termination
8.1 Surviving Rights and Duties. The right to obtain licenses to
intellectual property rights covering technology employed in the
Program as provided for in this Agreement shall survive termination of
this Agreement. Either Party shall have the right to a license from
the other Party if such license is requested within two (2) years
after termination of this Agreement.
8.2 Termination. This Agreement may be terminated by either Party in the
event of material breach by the other Party, upon giving sixty (60)
days prior written notice of the intent to terminate, which
termination will be effective if the breaching Party has not taken
reasonable steps to correct the material breach. The right to
terminate is in addition to all other rights the non-breaching Party
may have against the breaching Party.
8.3 Permissive termination. Either Party may terminate this Agreement,
with the acceptance of the other.
9. Governance
9.1 Joint Steering Committee. The Program will be governed by the JSC. The
JSC shall consist of at least one senior executive, one business
director, and one technical director from each Party. The JSC will
meet at least once per quarter, alternating between locations selected
by ACLARA and CELLOMICS, to oversee activities under a Workplan. In
particular, the JSC will monitor and support collaboration and/or
supply relationships existing between ACLARA and CELLOMICS, review,
recommend modifications to, and oversee the implementation of active
Workplans, define deliverables for TAPs, approve EAPs, review the
commercial feasibility of Screening Systems being developed under a
Workplan, review the progress of the Workplan and funding, offer
modifications to the Workplan in light of changed circumstances,
discuss new commercial opportunities and develop the objectives and
terms for additional Programs between the Parties that may be pursued.
The JSC shall have the authority to make reasonable alterations or
amendments to the Workplan, which
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will be considered final after reduction to writing and
attachment to the Agreement. Significant alterations to the
Workplan must be approved by the CEO of both Parties. The JSC
shall have the authority to recommend alterations or amendments
to this Agreement, which shall not become final until reduced to
writing and signed by the CEO of each of the Parties. Except as
otherwise expressly provided herein, decisions of the JSC will be
made by consensus.
9.2 Dispute resolution. Should disputes arise, the Parties agree to
negotiate in good faith to resolve the disputes. Disputes that
cannot be resolved by the JSC within a reasonable period shall be
submitted to the CEOs of the Parties. If agreement is still not
reached, the Parties agree to submit disputes to mediation in
accordance with the section 9.3, "Mediation", prior to seeking
any other remedy.
9.3 Mediation. If the Parties are unable to resolve by negotiation
within forty-five days of the disputing Party's written request
for dispute resolution (or such other time period expressly set
forth in this Agreement), or if the Parties fail to meet within
twenty (20) days after such notice, the Parties shall endeavor to
settle the dispute by mediation administered by the American
Arbitration Association ("AAA") pursuant to the Commercial
Mediation Rules of the AAA the time of submission prior to
resorting to any other remedy. Mediation shall be held in a
location to be decided later. The mediator appointed to assist
the Parties must possess such credentials as qualify said
mediator as (1) either an expert in the field being mediated or
(2) at a minimum as reasonably familiar with the industries and
specific applications as will enable the mediator to quickly
understand and assist the Parties in dealing with the issues that
are in dispute. Notwithstanding the foregoing, to the extent that
any controversy or claim hereunder gives rise to a prayer for
injunctive relief, equitable action or specific performance, the
aggrieved Party shall have the right to commence such an action
in any court of competent jurisdiction.
10. Representations and Warranties
10.1 Authority. Each Party hereby represents and warrants to the other that it
has full power and authority to enter into this agreement and to consummate
the transactions contemplated hereby. This agreement has been duly executed
and delivered and constitutes a valid and binding obligation of the Party,
enforceable against it in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
fraudulent conveyance, moratorium or similar laws affecting creditors'
rights generally from time to time in effect or by general equitable
principles.
10.2 Corporate Organization and Authority. Each Party hereby represents and
warrants to the other that it is a corporation duly organized, validly
existing and in good standing under the laws of Delaware as to CELLOMICS
and California as to ACLARA and has all corporate power and authority to
carry on its business as
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now being conducted and to own its properties, is duly qualified and in
good standing to do business in every jurisdiction in which such
qualification is necessary because of the nature of the property owned,
leased or operated by it or the nature of the business conducted by it
except where the failure to be so qualified would not have a material
adverse effect.
10.3 Ability to Carry Out the Agreement: Consents and Waivers. Each Party
hereby represents and warrants to the other that the execution and
delivery of this agreement does not, and the consummation of the
transactions contemplated hereby will not, conflict with, or result in
any violation of or default (with or without notice or lapse of time, or
both) under, or give rise to a right of termination under, or accelerate
the performance required by, or result in the creation of any lien,
security interest, charge, increase in liability or other encumbrance
upon any of its assets under, any provision of:
(i) any law, statute, rule, regulation or judicial or
administrative decision;
(ii) any certificate of incorporation or by-laws;
(iii) any mortgage, deed of trust, lease, note, shareholders'
agreement, bond, indenture, contract or other instrument
or agreement; or
(iv) any judgment, order, writ, injunction or decree of any
court, governmental body, administrative agency or
arbitrator relating to it;
(v) other than conflicts, violations, defaults, right of
termination or encumbrances which could not reasonably be
expected to have a material adverse effect on the
enforceability or validity or the agreement.
10.4 Litigation. Each Party hereby represents and warrants to the other that
there is no action, suit, or governmental, administrative or regulatory
proceeding or investigation pending or, to the knowledge of the Party,
threatened against it at law, in equity or otherwise, in, before, or by
any court or governmental agency or authority which could reasonably be
expected to have a material adverse effect on this agreement or the
transactions contemplated therein. ACLARA is presently involved solely
in two pieces of litigation; being sued for misappropriation of trade
secrets; and suing for patent infringement.
10.5 Year 2000. Each Party hereby represents and warrants to the other that
software, hardware, equipment and systems owned, leased or licensed by
it and used in the conduct of its business are Year 2000 Compliant.
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10.6 Regulatory Filings. Each of the Parties hereto will furnish to the other
Party hereto such necessary information and reasonable assistance as
such other Party may reasonably request in connection with its
preparation of necessary filings or submissions to any governmental
entity.
10.7 Announcement. Neither Party nor their respective affiliates will issue
any press release or other public announcement with respect to this
agreement or the transactions contemplated hereby without the prior
written approval of the other Party hereto (such approval not to be
unreasonably withheld, conditioned or delayed).
10.8 Indemnification. Each Party agrees to defend, indemnify and hold
harmless the other and its respective successors and assigns against and
in respect of:
(a) any and all losses, damages, deficiencies or liabilities ("Damages")
caused by, resulting or arising from or otherwise relating to any
material failure by a Party to perform or otherwise fulfill or
comply with any undertaking or other agreement or obligation to be
performed, fulfilled or complied with by the Party resulting from
its gross negligence, willful misconduct or arising from or
otherwise relating to any material breach of any representation or
warranty of the Party contained in this agreement.
10.9 Entire Agreement. The Agreement (including the appendices attached
hereto, all of which are part hereof) contain the entire understanding
of the Parties hereto with respect to the subject matter contained
herein, and supersede and cancel all prior agreements, negotiations,
correspondence, undertakings and communications of the Parties, oral or
written, respecting such subject matter. There are no restrictions,
promises, representations, warranties, agreements or undertakings of any
Party hereto with respect to the transactions under this Agreement other
than those set forth herein or therein or made hereunder or thereunder.
10.10 Amendments. This agreement may be amended only by a written instrument
executed by the Parties or their respective successors or assigns.
10.11 Headings; References. The article and section headings contained in this
agreement are for reference purposes only and shall not affect in any
way the meaning or interpretation of this agreement. All references
herein to "Articles," "Sections," "Schedules," or "Appendices" shall be
deemed to be references to Articles or Sections hereof or Schedules or
Appendices hereto unless otherwise indicated.
11. Notices
11.1. Notices may be given to an officer of a Party by;
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personal delivery, fax or registered mail addressed as follows:
overnight delivery by an internationally recognized courier service
If to ACLARA Biosciences Inc.:
Joseph M. Limber
President and CEO
ACLARA Biosciences, Inc.
1288 Pear Avenue
Mountain View, CA 94043-1432
FAX (650) 210-1210
If to CELLOMICS, Inc.:
D. Lansing Taylor
President and CEO
CELLOMICS, Inc.
635 William Pitt Way
Pittsburgh, PA 15238
FAX (412) 826-3896
12. Binding Effect
12.1 This agreement shall inure to the benefit of and be binding on each Party's
successors in interest and assigns.
13. Assignment
13.1 Either Party may assign this agreement only in connection with the sale or
disposition of the entire business of such Party or that portion to which
this agreement pertains. Either Party may assign this Agreement to an
Affiliate(s) without permission of the other Party. Affiliate shall mean an
entity controlling, controlled by, or under common control with a Party to
this Agreement.
14. Governing Law
14.1 This Agreement shall be interpreted in accordance with the local laws of
the Party defending any action brought under this Agreement.
[Signature page Follows]
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Signature Page for Agreement For An Exclusive Alliance To Develop, Manufacture
And Market A Chip-Based Screening System For Cell Analysis
In Witness Whereof, this Agreement has been executed in multiple counterparts,
each of which shall constitute an original Agreement, on behalf of the Parties
by their authorized officers as of the date first written above:
CELLOMICS, INC.
Signature /s/ D. LANSING TAYLOR
------------------------------
Print D. Lansing Taylor
----------------------------------
Title President & CEO
----------------------------------
Date 10/26/99
-----------------------------------
ACLARA BIOSCIENCES INC.
Signature /s/ JOSEPH M. LIMBER
------------------------------
Print Joseph M. Limber
----------------------------------
Title President & CEO
----------------------------------
Date October 26, 1999
-----------------------------------
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APPENDIX A
WORKPLAN
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AMENDED.
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[*]
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APPENDIX B
FUNDING PLAN
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[*]
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AMENDED.
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Exhibit 10.13
[LOGO] UNIVERSITY OF PITTSBURGH
Office of Research
350 Thackeray Hall
Pittsburgh, Pennsylvania 15260
412-624-7400
Fax: 412-624-7409
PREAMBLE
THIS AGREEMENT entered into on this the 5th day of May 1998, by and between the
University of Pittsburgh (hereinafter referred to as University) with a
principal office at 350 Thackeray Hall, Pittsburgh, PA 15260 and Cellomics, Inc.
(hereinafter referred to as Subcontractor); and constituting Agreement Number
100552 under (agency name) NIH Prime Agreement (or Contract depending upon
award) No. 1 P01 CA78039-01 between the Government and University, which
Agreement provides for the project entitled: "Combinatorial Approaches for Novel
Anticancer Agents".
WITNESSETH THAT:
WHEREAS, the University is desirous of obtaining the services of the
Subcontractor;
WHEREAS, the Subcontractor represents that Subcontractor has the knowledge,
skill and ability to perform the desired services for the University;
NOW, THEREFORE, the parties hereto, intending to be legally bound, covenant and
agree as follows:
SCHEDULE
ARTICLE 1. Statement of Work
1.1 The Subcontractor shall provide the necessary personnel, supplies,
equipment and facilities to perform the services specified in the
Statement of Work attached as Exhibit A, which by this reference is made
a part hereof.
1.2 For the period of this Agreement, the Subcontractor will utilize
personnel for the approximate time indicated:
Personnel Percent of Effort
--------- -----------------
D. Lansing Taylor, Ph.D. (Principal Investigator) 5%
Kenneth A. Giuliano (Senior Scientist) 30%
Joanne Volosky (Research Scientist) 30%
Robbin Debiasio (Laboratory Director) 30%
<PAGE> 2
1.3 The Subcontractor agrees to use its best efforts to accomplish all the
services specified in the Statement of Work referenced above. Its
obligation will be deemed complete if the services are performed in
accordance with high standards of scientific and professional skill and
the approximate time has been substantially applied, except, however, all
other requirements must be met including delivery of reports and
materials as may be required under the Agreement. (See ARTICLE 3)
1.4 The University Principal Investigator for the project will advise the
Subcontractor in the performance of the required services. The designated
Principal Investigator for the University is Dr. John S. Lazu.
ARTICLE 2. Key Personnel
2.1 The Subcontractor will assign Dr. D. Lansing Taylor to perform services
under this Agreement and shall not replace said key personnel without the
prior written approval of the University Principal Investigator and an
authorized official of the University.
ARTICLE 3. Delivery or Performance Schedule
3.1 The Subcontractor shall furnish and deliver the material and/or perform
the services required by Exhibit A, Statement of Work.
3.2 The period of performance under this Agreement is specified as May 15,
1998 through February 28, 1999, for which period funds are available and
allotted.
ARTICLE 4. Allowable Costs and Payment
4.1 Estimated Cost
The estimated cost of the performance of this Agreement is $190,000.
4.2 Budget
A budget which is agreed to by the parties to this Agreement is
hereby attached as Exhibit B and made a part of this Agreement.
4.3 Allowable Costs
For the purpose of determining the amounts payable to the Subcontractor
under this Agreement, allowable costs shall be determined in accordance
with (a) the cost principles applicable to the Subcontractor, and (b)
the terms of this Agreement.
a. Direct Costs: $130,000
b. Indirect Costs (Overhead): $ 60,000
The indirect cost rates established for the performance period of
this Agreement are 50% of Direct Costs minus equipment.
However, any amount to be recovered as indirect cost may not exceed
the total indirect cost budget unless provided for in the University
Prior Approval System of the funding agency.
c. Payment
(1) The Subcontractor shall submit invoices, at approximately thirty
(30) day intervals following commencement of services, in the form
attached hereto as Exhibit C, to the University for
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payment of costs incurred during the preceding calendar month.
Invoices should be sent to the following address:
Jim Kaczynski
University of Pittsburgh
Department of Pharmacology
W1340 BSTWR
200 Lothrop Street
Pittsburgh, PA 15213
(2) Payment for performance under this Agreement shall be made by the
University to the Subcontractor on a cost reimbursable basis when
invoiced. Any payments so made shall be in accordance with the
approved budget referenced above and attached as Exhibit B.
If required under the Prime Agreement, final Contractor's Release
and Assignment or Rebates, Refunds and Credits per FAR, Section
52.232-7(g) documents must be submitted to the University with
the Final Invoice.
The Federal government requires a recipient of Federal funds of
$300,000 or more to provide the University with a copy of its
most recent annual audit report within thirty (30) days after
termination date of the Agreement. Accompanying the audit report
must be a statement or other evidence that corrective action has
been taken in instances of non-compliance with Federal laws and
regulations which bear directly on the performance of this
Agreement.
Payment of the final invoice will be withheld until the audit
report is received and all progress payments will be subject to
return to the University if the audit report and other required
documentation is not provided or action to correct non-compliance
with Federal laws and regulations is not taken within six (6)
months from date of submission of audit report. Subcontractor is
required to complete Exhibit F, Subcontractor's Compliance with
A-133, which is attached and made a part hereof.
(3) Subcontractor shall reimburse the University a sum of money
equivalent to the amount of any expenditures disallowed should
the funding agency or the cognizant audit agency rule through
audit exception or some other appropriate means, that
expenditures from funds allocated to the Subcontractor for direct
and/or indirect costs were not made in compliance with the
regulations of the funding agency or the provisions of this
Agreement.
(4) A non-profit recipient of Federal funds that receives $300,000 or
more under this Agreement is subject to compliance with Office of
Management and Budget (OMB) Circular A-133 and must meet the
audit requirements of that circular.
ARTICLE 5. General Provisions
5.1 Independent Contractor
Nothing contained in this Agreement is to be construed to constitute
Subcontractor and University as partners or joint venturers of each
other, or to constitute the employees, agents or representatives of
either party as the employees, agents or representatives of the other
party, it being intended that the relationship between Subcontractor and
University shall at all times be that of independent contractors. Neither
party hereto shall have any express or implied right or authority to
assume or create any obligations on behalf of, or in the name of, the
other party; or to bind the other party to any contract agreement, or
undertaking of any third party. Subcontractor agrees, warrants and
represents to University, with the intention that University may rely
thereon, that University does not now exercise, and will not be permitted
during the terms of this Agreement to exercise any significant degree of
control over Subcontractor's method of operation.
3
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5.2 Records/Reports
The books of account, documents, papers, files and other records of
the Subcontractor which are applicable to this Agreement shall at all
reasonable times be available for inspection, review and audit, if
required, to determine the proper application and use of all funds paid to
or for the account or for the benefit of the Subcontractor; in addition,
the Subcontractor shall provide such special reports as requested by the
University to permit evaluation of progress of the project.
5.3 Termination
This Agreement may be terminated by either party upon thirty (30) days
written notice to the other party, or in accordance with the Prime
Agreement. In the event of a conflict, the terms of the Prime Agreement
shall govern.
5.4 Liability
The University shall not be responsible or liable for any injuries or
losses which may result from the implementation or use by Subcontractor or
others of the results from the project or research data generated by
Subcontractor.
The Subcontractor shall indemnify, defend and hold harmless University,
its trustees, officers, agents and employees with respect to any expense,
claim, liability, loss, damage or costs (including attorneys' fees) in
connection with or in any way arising out of the negligent acts of the
Subcontractor's officers, employees, agents and/or contractors involved in
the Statement of Work.
The Subcontractor shall be solely responsible for any and all third party
liability incurred by it in connection with the performance of this
Agreement.
This obligation to defend and indemnify University shall survive the
termination of this Agreement.
5.5 Severability
If any provision of this Agreement as applied to either party shall be
adjudged by a court to be void or unenforceable, the same shall not have
any effect on any other provision of this Agreement or the validity or
enforceability of this Agreement.
5.6 Insurance
The Subcontractor shall provide the necessary employment related insurance
coverage, including but not limited to, Worker's Compensation and
Employer's Liability insurance, for its employees involved in this project
in amounts consistent with the laws of its place of business or the
jurisdiction where the Work will be performed.
5.7 Taxes
The Subcontractor agrees that it is responsible for withholding and paying
to appropriate taxing bodies, all taxes that are applicable to
Subcontractor's personnel to be supported under this Agreement.
5.8 Governing Law
This Agreement shall be deemed to be a contract under, and shall be
governed by, construed and enforced in accordance with the laws of the
COMMONWEALTH OF PENNSYLVANIA.
5.9 Forum/Jurisdiction
The parties agree that all claims, disputes, and controversies arising out
of or relating to this Agreement shall be litigated in and before a court
in Pittsburgh, Pennsylvania and hereby consent and submit to jurisdiction
therein.
4
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5.10 Assignment
This Agreement may not be assigned in whole or in part without the
prior consent of the University.
5.11 Changes
This Agreement may not be and shall not be construed to have been
modified, amended, rescinded, canceled or waived, in whole or in part,
except in writing signed by the parties hereto and making specific
reference to this Agreement.
ARTICLE 6. Special Provisions
6.1 Equipment
The University shall retain title to equipment purchased by the
Subcontractor pursuant to the terms of this Agreement, and the equipment
shall be returned to the University upon the termination of this
Agreement, unless other disposition is mutually agreed upon and
permitted under terms of the Prime Agreement. If requested under the
Prime Agreement, property inventory listings must be submitted to the
University.
6.2 Patents and Inventions
If required under the Prime Agreement, Patent and Invention Reports must
be submitted to the University within thirty (30) days after the
termination date of the Agreement.
6.3 Subcontractor Certifications
The Subcontractor is required to complete and mail to the appropriate
address Exhibit F, Subcontractor Certifications, which is attached and
made a part hereof.
6.4 Cost Accounting Standards
This Agreement is subject to the Cost Accounting Standards as they apply
to Educational Institutions (FAR 52.230-5) and OMB Circular A-21.
Alternatively, if the Subcontractor is subject to other Cost Accounting
Standards as set forth in FAR 52.230-2, those standards will take
precedence.
ARTICLE 7. Incorporation of Applicable Provisions of Prime Agreement
7.1 All applicable provisions contained in the Prime Agreement between the
University and the funding agency shall be binding upon the
Subcontractor, and the Subcontractor hereby agrees to comply with same.
A copy of the Prime Agreement is attached to this Agreement as Exhibit
D and made a part hereof by this reference.
7.2 As used in the aforesaid applicable provisions as modified and
supplemented, the term "Contracting Officer" and "Government" shall mean
either the "University or the Government Contracting Officer" who has
cognizance over the University's Prime Agreement and either the
"University or Government" as may be applicable and determined by the
University. Copies of all notices or reports required to be furnished
shall be furnished to the University.
ARTICLE 8. Entire Understanding
8.1 This Agreement contains the entire understanding with respect to the
subject matter hereof and supersedes all prior agreements or
understandings, written or oral, prior to the execution of this
Agreement.
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IN WITNESS WHEREOF, the parties hereto execute this Agreement.
UNIVERSITY OF PITTSBURGH CELLOMICS, INC.
By By
------------------------------- -------------------------------
Typed Name Michael M. Crouch Typed Name
----------------------- -----------------------
Title Director, Office of Research Title
---------------------------- ----------------------------
Date Date
----------------------------- -----------------------------
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Exhibit 10.14
PHS PATENT LICENSE AGREEMENT - NONEXCLUSIVE
PHS and LICENSEE agree as follows:
1. BACKGROUND
1.01 In the course of conducting biomedical and behavioral
research, PHS investigators made inventions that may have
commercial applicability.
1.02 By assignment of rights from PHS employees and other
inventors, DHHS, on behalf of the United States Government,
owns intellectual property rights claimed in any United
States and foreign patent applications or patents
corresponding to the assigned inventions. DHHS also owns any
tangible embodiments of these inventions actually reduced to
practice by PHS.
1.03 The Assistant Secretary for Health of DHHS has delegated to
PHS the authority to enter into this AGREEMENT for the
licensing of the rights to these inventions under 35 U.S.C.
Sections 200-212, the Federal Technology Transfer Act of 1986,
15 U.S.C. Section 3710a, and/or the regulations governing the
licensing of Government-owned inventions, 37 CFR Part 404.
1.04 PHS desires to transfer these inventions to the private sector
through commercialization licenses to facilitate the
commercial development of products and processes for public
use and benefit.
1.05 LICENSEE desires to acquire commercialization rights to
certain of these inventions in order to develop processes,
methods, or marketable products for public use and benefit.
2. DEFINITIONS
2.01 "LICENSED PATENT RIGHTS" shall mean:
a) U.S. patent applications and patents listed in
Appendix A, all divisions and continuations of these
applications, all patents issuing from such
applications, divisions, and continuations, and any
reissues, reexaminations, and extensions of all such
patents;
b) to the extent that the following contain one or more
claims directed to the invention or inventions
claimed in a) above: i) continuations-in-part of a)
above; ii) all divisions and continuations of these
continuations-in-part; iii) all patents issuing from
such continuations-in-part, divisions, and
continuations; and iv) any reissues, reexaminations,
and extensions of all such patents;
c) to the extent that the following contain one or more
claims directed to the invention
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or inventions claimed in a) above: all counterpart
foreign applications and patents to a) and b) above,
including those listed in Appendix A.
LICENSED PATENT RIGHTS shall not include b) or c)
above to the extent that they contain one or more
claims directed to new matter which is not the
subject matter of a claim in a) above.
2.02 "LICENSED PRODUCT(S)" means tangible materials which, in the
course of manufacture, use, or sale would, in the absence of
this AGREEMENT, infringe one or more claims of the LICENSED
PATENT RIGHTS that have not been held invalid or unenforceable
by an unappealed or unappealable judgment of a court of
competent jurisdiction.
2.03 "LICENSED PROCESS(ES)" means processes which, in the course of
being practiced would, in the absence of this AGREEMENT,
infringe one or more claims of the LICENSED PATENT RIGHTS that
have not been held invalid or unenforceable by an unappealed
or unappealable judgment of a court of competent jurisdiction.
2.04 "LICENSED TERRITORY" means the geographical area identified in
Appendix B.
2.05 "NET SALES" means the total gross receipts for sales of
LICENSED PRODUCTS or practice of LICENSED PROCESSES by or on
behalf of LICENSEE and from leasing, renting, or otherwise
making LICENSED PRODUCTS available to others without sale or
other dispositions, whether invoiced or not, less returns and
allowances actually granted, packing costs, insurance costs,
freight out, taxes or excise duties imposed on the transaction
(if separately invoiced), and wholesaler and cash discounts in
amounts customary in the trade. No deductions shall be made
for commissions paid to individuals, whether they be with
independent sales agencies or regularly employed by LICENSEE
and on its payroll, or for the cost of collections.
2.06 "FIRST COMMERCIAL SALE" means the initial transfer by or on
behalf of LICENSEE of LICENSED PRODUCTS or the initial
practice of a LICENSED PROCESS in exchange for cash or some
equivalent to which value can be assigned for the purpose of
determining NET SALES.
2.07 "GOVERNMENT" means the government of the United States of
America.
2.08 "LICENSED FIELDS OF USE" means the fields of use identified in
Appendix B.
3. GRANT OF RIGHTS
3.01 PHS hereby grants and LICENSEE accepts, subject to the terms
and conditions of this AGREEMENT, a nonexclusive license to
LICENSEE under the LICENSED PATENT RIGHTS in the LICENSED
TERRITORY to make and have made, to use and have used, and to
sell and have sold any LICENSED PRODUCTS in the LICENSED
FIELDS OF USE and to practice and have practiced any LICENSED
PROCESSES in the LICENSED FIELDS OF USE.
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3.02 LICENSEE has no right to grant sublicenses.
3.03 This AGREEMENT confers no license or rights by implication,
estoppel, or otherwise under any patent applications or
patents of PHS other than the LICENSED PATENT RIGHTS
regardless of whether such patents are dominant or subordinate
to LICENSED PATENT RIGHTS.
4. STATUTORY AND PHS REQUIREMENTS AND RESERVED GOVERNMENT RIGHTS
4.01 LICENSEE agrees that products used or sold in the United
States embodying LICENSED PRODUCTS or produced through use of
LICENSED PROCESSES shall be manufactured substantially in the
United States, unless a written waiver is obtained in advance
from PHS.
5. ROYALTIES AND REIMBURSEMENT
5.01 LICENSEE agrees to pay to PHS a noncreditable, nonrefundable
license issue royalty as set forth in Appendix C within thirty
(30) days from the date that this AGREEMENT becomes effective.
5.02 LICENSEE agrees to pay to PHS a nonrefundable minimum annual
royalty as set forth in Appendix C. The minimum annual royalty
is due and payable on January 1 of each calendar year and may
be credited against any earned royalties due for sales made in
that year. The minimum annual royalty for the first calendar
year of this AGREEMENT is due and payable within thirty (30)
days from the effective date of this AGREEMENT and may be
prorated according to the fraction of the calendar year
remaining between the effective date of this AGREEMENT and the
next subsequent January 1.
5.03 LICENSEE agrees to pay PHS benchmark royalties as set forth in
Appendix C.
5.04 LICENSEE agrees to pay PHS earned royalties as set forth in
Appendix C.
5.05 A claim of a patent licensed under this AGREEMENT shall cease
to fall within the LICENSED PATENT RIGHTS for the purpose of
computing the minimum annual royalty and earned royalty
payments in any given country on the earliest of the dates
that a) the claim has been abandoned but not continued, b) the
patent expires, c) the patent is no longer maintained by the
Government, or d) all claims of the LICENSED PATENT RIGHTS
have been held to be invalid or unenforceable by an unappealed
or unappealable decision of a court of competent jurisdiction
or administrative agency.
5.06 No multiple royalties shall be payable because any LICENSED
PRODUCTS or LICENSED PROCESSES are covered by more than one of
the LICENSED PATENT RIGHTS.
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5.07 On sales of LICENSED PRODUCTS by LICENSEE in other than an
arm's-length transaction, the value of the NET SALES
attributed under this Article 5 to such a transaction shall be
that which would have been received in an arm's-length
transaction, based on sales of like quantity and quality
products on or about the time of such transaction.
5.08 As an additional royalty, LICENSEE agrees to pay PHS, within
(60) days of PHS's submission of a statement and request for
payment, an amount equivalent to all patent expenses
previously incurred by PHS in the preparation, filing,
prosecution, and maintenance of LICENSED PATENT RIGHTS, to be
divided equally among all nonexclusive commercialization
licensees of record as of the date the statement and request
for payment is sent by PHS to LICENSEE. LICENSEE further
agrees to pay PHS annually, within sixty (60) days of PHS's
submission of a statement and request for payment, a royalty
amount equivalent to all such future patent expenses incurred
during the previous calendar year divided equally among all
nonexclusive commercialization licensees of record as of the
date the statement and request for payment are sent by PHS to
LICENSEE. Fifty percent (50%) of the cumulative amount of the
payments due under this Paragraph 5.08 may be credited against
royalties due under Paragraph 5.04; however, the net royalty
payment in any calendar year may not be lower than the minimum
annual royalty specified in Appendix C. LICENSEE may elect to
surrender its rights in any country of the LICENSED
TERRITORY under any LICENSED PATENT RIGHTS upon sixty (60)
days' written notice to PHS and owe no payment obligation
under this Paragraph for subsequent patent-related expenses
incurred in that country.
6. RECORD KEEPING
6.01 LICENSEE agrees to keep accurate and correct records of
LICENSED PRODUCTS made, used, or sold and LICENSED PROCESSES
practiced under this AGREEMENT appropriate to determine the
amount of royalties due PHS. Such records shall be retained
for at least five (5) years following a given reporting
period. They shall be available during normal business hours
for inspection at the expense of PHS by an accountant or other
designated auditor selected by PHS for the sole purpose of
verifying reports and payments hereunder. The accountant or
auditor shall only disclose to PHS information relating to the
accuracy of reports and payments made under this AGREEMENT. If
an inspection shows an underreporting or underpayment in
excess of five percent (5%) for any twelve (12) month period,
then LICENSEE shall reimburse PHS for the cost of the
inspection at the time LICENSEE pays the unreported royalties,
including any late charges as required by Paragraph 7.06 of
this AGREEMENT. All payments required under this Paragraph
shall be due within thirty (30) days of the date PHS
provides LICENSEE notice of the payment due.
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7. REPORTS ON PROGRESS, SALES, AND PAYMENTS
7.01 Prior to signing this AGREEMENT, LICENSEE has provided to PHS
a written commercialization plan ("COMMERCIAL DEVELOPMENT
PLAN") under which LICENSEE intends to bring the subject
matter of the LICENSED PATENT RIGHTS into commercial use. The
COMMERCIAL DEVELOPMENT PLAN is hereby incorporated by
reference into this AGREEMENT.
7.02 LICENSEE shall provide written annual reports on its product
development progress or efforts to commercialize under the
COMMERCIAL DEVELOPMENT PLAN for each of the LICENSED FIELDS OF
USE within sixty (60) days after December 31 of each calendar
year. These progress reports shall include, but not be limited
to: progress on research and development, status of
applications for regulatory approvals, manufacturing,
marketing, and sales during the preceding calendar year, as
well as plans for the present calendar year. LICENSEE agrees
to provide any additional data reasonably required by PHS to
evaluate LICENSEE'S performance.
7.03 LICENSEE shall report to PHS the date of the FIRST COMMERCIAL
SALE in each country in the LICENSED TERRITORY within thirty
(30) days of such occurrence.
7.04 LICENSEE shall submit to PHS within sixty (60) days after each
calendar half-year ending June 30 and December 31 a royalty
report setting forth for the preceding half-year period the
amount of the LICENSED PRODUCTS sold or LICENSED PROCESSES
practiced by or on behalf of LICENSEE in each country within
the LICENSED TERRITORY, the NET SALES, and the amount of
royalty accordingly due. With each such royalty report,
LICENSEE shall submit payment of the earned royalties due. If
no earned royalties are due to PHS for any reporting period,
the written report shall so state. The royalty report shall
be certified as correct by an authorized officer of LICENSEE
and shall include a detailed listing of all deductions made
under Paragraph 2.05 to determine NET SALES made under Article
5 to determine royalties due.
7.05 Royalties due under Article 5 shall be paid in U.S. dollars.
For conversion of foreign currency to U.S. dollars, the
conversion rate shall be the rate quoted in The Wall Street
Journal on the day that the payment is due. All checks and
bank drafts shall be drawn on United States banks and shall be
payable to NIH/Patent Licensing at the address shown on the
Signature Page below. Any loss of exchange, value, taxes, or
other expenses incurred in the transfer or conversion to U.S.
dollars shall be paid entirely by LICENSEE. All royalty
payments due under this AGREEMENT shall be mailed to the
following address: NIH, P.O. Box 360120, Pittsburgh,
Pennsylvania 15251-6120. The royalty report required by
paragraph 7.04 of this AGREEMENT shall accompany each such
payment and a copy of such report shall also be mailed to PHS
at its address for notices indicated on the Signature Page of
this AGREEMENT.
7.06 Late charges will be applied to any overdue payments as
required by the U.S. Department of Treasury in the Treasury
Fiscal Requirements Manual, Section 8025.40. The payment
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of such late charges shall not prevent PHS from exercising any
other rights it may have as a consequence of the lateness of
any payment.
7.07 All plans and reports required by this Article 7 and marked
"confidential" by LICENSEE shall be treated by PHS as
commercial and financial information obtained from a person,
and as privileged and confidential and, to the extent
permitted by law, shall not be subject to disclosure under the
Freedom of Information Act, 5 U.S.C. Section 552.
8. PERFORMANCE
8.01 LICENSEE shall use its reasonable best efforts to introduce
the LICENSED PRODUCTS into the commercial market or apply the
LICENSED PROCESSES to commercial use as soon as practicable.
"Reasonable best efforts" for the purpose of this provision
shall include, but not be limited to, adherence to the
COMMERCIAL DEVELOPMENT PLAN.
8.02 Upon the FIRST COMMERCIAL SALE, until the expiration of this
AGREEMENT, LICENSEE shall use its reasonable best efforts to
keep LICENSED PRODUCTS and LICENSED PROCESSES reasonably
accessible to the public.
9. INFRINGEMENT AND PATENT ENFORCEMENT
9.01 PHS and LICENSEE agree to notify each other promptly of each
infringement or possible infringement, as well as any facts
which may affect the validity, scope, or enforceability of the
LICENSED PATENT RIGHTS of which either Party becomes aware.
9.02 If PHS has been unable to eliminate a substantial infringement
within one (1) year of written notification to the Office of
Technology Transfer from LICENSEE of the existence of a
substantial infringement and has not instituted infringement
litigation, LICENSEE shall be excused from the payment of the
minimum annual royalty and earned royalties in any country in
which the substantial infringement continues to occur.
Thereafter, when the substantial infringement has ceased or an
infringement suit has been initiated, PHS shall so notify the
LICENSEE in writing, at which time LICENSEE'S obligation to
pay such royalties shall resume as of the date of such
notification.
9.03 In the event that a declaratory judgment action alleging
invalidity of any of the LICENSED PATENT RIGHTS shall be
brought against PHS, PHS agrees to notify LICENSEE that an
action alleging invalidity has been brought. PHS does not
represent that it will commence legal action to defend against
a declaratory action alleging invalidity. LICENSEE shall take
no action to compel the GOVERNMENT either to initiate or to
join in any such declaratory judgment action. Should the
GOVERNMENT be made a party to any such suit by motion or any
other action of LICENSEE, LICENSEE shall reimburse the
GOVERNMENT for any costs, expenses, or fees which the
GOVERNMENT incurs as a result of its defending against such
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motion or other action taken in response to the motion. Upon
LICENSEE'S payment of all costs incurred by the GOVERNMENT as
a result of LICENSEE'S joinder motion or other action, these
actions by LICENSEE will not be considered a default in the
performance of any material obligation under this AGREEMENT.
10. NEGATION OF WARRANTIES AND INDEMNIFICATION
10.01 PHS offers no warranties other than those specified in
Article 1.
10.02 PHS does not warrant the validity of the LICENSED PATENT
RIGHTS and makes no representations whatsoever with regard to
the scope of the LICENSED PATENT RIGHTS, or that the LICENSED
PATENT RIGHTS may be exploited without infringing other
patents or other intellectual property rights of third
parties.
10.03 PHS MAKES NO WARRANTIES, EXPRESSED OR IMPLIED, OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OF ANY
SUBJECT MATTER DEFINED BY THE CLAIMS OF THE LICENSED PATENT
RIGHTS.
10.04 PHS does not represent that it will commence legal actions
against third parties infringing the LICENSED PATENT RIGHTS.
10.05 LICENSEE shall indemnify and hold PHS, its employees,
students, fellows, agents, and consultants harmless from and
against all liability, demands, damages, expenses, and losses,
including but not limited to death, personal injury, illness,
or property damage in connection with or arising out of a) the
use by or on behalf of LICENSEE or its directors, employees,
or third parties of any LICENSED PATENT RIGHTS, or b) the
design, manufacture, distribution, or use of any LICENSED
PRODUCTS, LICENSED PROCESSES, or other products or processes
developed in connection with or arising out of the LICENSED
PATENT RIGHTS. LICENSEE agrees to maintain a liability
insurance program consistent with sound business practice.
11. TERMINATION AND MODIFICATION OF RIGHTS
11.01 This AGREEMENT is effective when signed by all parties and
shall extend to the expiration of the last to expire of the
LICENSED PATENT RIGHTS unless sooner terminated as provided in
this Article 11.
11.02 In the event that Licensee is in default in the performance of
any material obligations under this AGREEMENT, and if the
default has not been remedied within ninety (90) days after
the date of notice in writing of such default, PHS may
terminate this AGREEMENT by written notice.
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11.03 At least thirty (30) days prior to filing a petition in
bankruptcy, LICENSEE must inform PHS in writing of its
intention to file the petition in bankruptcy or of a third
party's intention to file an involuntary petition in
bankruptcy.
11.04 In the event that LICENSEE becomes insolvent, files a petition
in bankruptcy, has such a petition filed against it,
determines to file a petition in bankruptcy, or receives
notice of a third party's intention to file an involuntary
petition in bankruptcy, LICENSEE shall immediately notify PHS
in writing. Furthermore, PHS shall have the right to terminate
this AGREEMENT by giving LICENSEE written notice. Termination
of this AGREEMENT is effective upon LICENSEE'S receipt of the
written notice.
11.05 LICENSEE shall have a unilateral right to terminate this
AGREEMENT and/or its rights in any country by giving PHS sixty
(60) days' written notice to that effect.
11.06 PHS shall specifically have the right to terminate or modify,
at its option, this AGREEMENT, if PHS determines that the
LICENSEE: 1) is not executing the COMMERCIAL DEVELOPMENT PLAN
submitted with its request for a license and the LICENSEE
cannot otherwise demonstrate to PHS's satisfaction that the
LICENSEE has taken, or can be expected to take within a
reasonable time, effective steps to achieve practical
application of the LICENSED PRODUCTS or LICENSED PROCESSES; 2)
has willfully made a false statement of, or willfully omitted,
a material fact in the license application or in any report
required by the license agreement; 3) has committed a
substantial breach of a covenant or agreement contained in the
license; 4) is not keeping LICENSED PRODUCTS or LICENSED
PROCESSES reasonably available to the public after commercial
use commences; 5) cannot reasonably satisfy unmet health and
safety needs; or 6) cannot reasonably justify a failure to
comply with the domestic production requirement of Paragraph
4.01 unless waived. In making this determination, PHS will
take into account the normal course of such commercial
development programs conducted with sound and reasonable
business practices and judgment and the annual reports
submitted by LICENSEE under Paragraph 7.02. Prior to invoking
this right, PHS shall give written notice to LICENSEE
providing LICENSEE specific notice of, and a ninety (90) day
opportunity to respond to, PHS's concerns as to the previous
items 1) to 6). If LICENSEE fails to alleviate PHS's concerns
as to the previous items I) to 6) or fails to initiate
corrective action to PHS's satisfaction, PHS may terminate
this AGREEMENT.
11.07 PHS reserves the right according to 35 U.S.C. Section
209(f)(4) to terminate or modify this AGREEMENT if it is
determined that such action is necessary to meet requirements
for public use specified by Federal regulations issued after
the date of the license and such requirements are not
reasonably satisfied by LICENSEE.
11.08 Within thirty (30) days of receipt of written notice of PHS's
unilateral decision to terminate this AGREEMENT, LICENSEE
may, consistent with the provisions of 37 CFR Section 404.11,
appeal the decision by written submission to the Director of
NIH or designee. The
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decision of the NIH Director or designee shall be the final
agency decision. LICENSEE may thereafter exercise any and all
administrative or judicial remedies that may be available.
11.09 Within ninety (90) days of termination of this AGREEMENT under
this Article 11 or expiration under Paragraph 11.01, a final
report shall be submitted by LICENSEE. Any royalty payments
and unreimbursed patent expenses due to PHS become immediately
due and payable upon termination or expiration of this
AGREEMENT, and LICENSEE shall return all LICENSED PRODUCTS or
other materials included within the LICENSED PATENT RIGHTS to
PHS or provide PHS with certification of their destruction.
11.10 Paragraphs 6.01, 7.05-7.07, 10.01, 10.03, 10.05, and 11.08 of
this AGREEMENT shall survive termination of this AGREEMENT.
12. GENERAL PROVISIONS
12.01 Neither Party may waive or release any of its rights or
interests in this AGREEMENT except in writing. The failure of
the GOVERNMENT to assert a right hereunder or to insist upon
compliance with any term or condition of this AGREEMENT shall
not constitute a waiver of that right by the GOVERNMENT or
excuse a similar subsequent failure to perform any such term
or condition by LICENSEE.
12.02 This AGREEMENT constitutes the entire agreement between the
Parties relating to the subject matter of the LICENSED PATENT
RIGHTS, and all prior negotiations, representations,
agreements, and understandings are merged into, extinguished
by, and completely expressed by this AGREEMENT.
12.03 The provisions of this AGREEMENT are severable, and in the
event that any provision of this AGREEMENT shall be determined
to be invalid or unenforceable under any controlling body of
law, such determination shall not in any way affect the
validity or enforceability of the remaining provisions of this
AGREEMENT.
12.04 If either Party desires a modification to this AGREEMENT, the
Parties shall, upon reasonable notice of the proposed
modification by the Party desiring the change, confer in good
faith to determine the desirability of such modification. No
modification will be effective until a written amendment is
signed by the signatories to this AGREEMENT or their
designees.
12.05 The construction, validity, performance, and effect of this
AGREEMENT shall be governed by Federal law as applied by the
Federal courts in the District of Columbia.
12.06 All notices required or permitted by this AGREEMENT shall be
given by prepaid, first class, registered or certified mail
properly addressed to the other Party at the address
designated on the following Signature Page, or to such other
address as may be designated in writing by such other Party,
and shall be effective as of the date of the postmark of such
notice.
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12.07 This AGREEMENT shall not be assigned by LICENSEE except a)
with the prior written consent of PHS; or b) as part of a sale
or transfer of substantially the entire business of LICENSEE
relating to operations which concern this AGREEMENT. LICENSEE
shall notify PHS within ten (10) days of any assignment of
this AGREEMENT by LICENSEE.
12.08 LICENSEE agrees in its use of any PHS-supplied materials to
comply with all applicable statutes, regulations, and
guidelines, including Public Health Service and National
Institutes of Health regulations and guidelines. LICENSEE
agrees not to use the materials for research involving human
subjects or clinical trials in the United States without
complying with 21 CFR Part 50 and 45 CFR Part 46. LICENSEE
agrees not to use the materials for research involving human
subjects or clinical trials outside of the United States
without notifying PHS, in writing, of such research or trials
and complying with the applicable regulations of the
appropriate national control authorities. Written notification
to PHS of research involving human subjects or clinical trials
outside of the United States shall be given no later than
sixty (60) days prior to commencement of such research or
trials.
12.09 LICENSEE acknowledges that it is subject to and agrees to
abide by the United States laws and regulations (including the
Export Administration Act of 1979 and Arms Export Control Act)
controlling the export of technical data, computer software,
laboratory prototypes, biological material, and other
commodities. The transfer of such items may require a license
from the cognizant agency of the U.S. GOVERNMENT or written
assurances by LICENSEE that it shall not export such items to
certain foreign countries without prior approval of such
agency. PHS neither represents that a license is or is not
required or that, if required, it shall be issued.
12.10 LICENSEE agrees to mark the LICENSED PRODUCTS or their
packaging sold in the United States with all applicable U.S.
patent numbers and similarly to indicate "Patent Pending"
status. All LICENSED PRODUCTS manufactured in, shipped to, or
sold in other countries shall be marked in such a manner as to
preserve PHS patent rights in such countries.
12.11 By entering into this AGREEMENT, PHS does not directly or
indirectly endorse any product or service provided, or to be
provided, by LICENSEE whether directly or indirectly related
to this AGREEMENT. LICENSEE shall not state or imply that this
AGREEMENT is an endorsement by the GOVERNMENT, PHS, any other
GOVERNMENT organizational unit, or any GOVERNMENT employee.
Additionally; LICENSEE shall not use the names of PHS NIH, or
CDC or their employees in any advertising, promotional, or
sales literature without the prior written consent of PHS.
12.12 The Parties agree to attempt to settle amicably any
controversy or claim arising under this AGREEMENT or a breach
of this AGREEMENT, except for appeals of modification or
termination decisions provided for in Article 11. LICENSEE
agrees first to appeal any such unsettled claims or
controversies to the Director of NIH, or designee, whose
decision shall
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be considered the final agency decision. Thereafter, LICENSEE
may exercise any administrative or judicial remedies that may
be available.
12.13 Nothing relating to the grant of a license, nor the grant
itself, shall be construed to confer upon any person any
immunity from or defenses under the antitrust laws or from a
charge of patent misuse, and the acquisition and use of rights
pursuant to 37 CFR Part 404 shall not be immunized from the
operation of state or Federal law by reason of the source of
the grant.
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Exhibit 10.15
SALES AND MARKETING AGREEMENT FOR UHTS PRODUCTS
-----------------------------------------------
This is an Agreement, effective this 21st day of February, 2000, between Carl
Zeiss Jena GmbH, Carl-Zeiss-Promenade 10, 07745 Jena, Germany (hereinafter
ZEISS) and Cellomics, Inc., 635 William Pitt Way, Pittsburgh, PA 15238, USA
(hereinafter CELLOMICS);
WHEREAS, ZEISS has expertise and intellectual property in developing and
manufacturing of "HTS/UHTS Readers" and "HTS/UHTS Systems" for the market of
drug discovery.
WHEREAS, CELLOMICS has expertise in application and marketing of assays
and instrumentation in the area of High Content Screening which is a part of the
drug discovery process.
NOW, THEREFORE, in consideration of the covenants and conditions
contained herein, the parties, intending to be legally bound, agree as follows:
ARTICLE I
DEFINITIONS
Specific Definitions. For purposes of this Agreement, the following
definitions shall apply:
1.1 "HTS" and "UHTS" shall mean [*]
"CONFIDENTIAL [*] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS
DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT
OF 1933, AS AMENDED."
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<PAGE> 2
1.2 "North America" shall mean the countries of: USA, Canada.
1.3 "Net Sales Value" shall mean the amount invoiced to the customer.
1.4 "Rule of Sixths" shall mean that method of calculation of
compensation for out-of-territory sales by either party as set forth on Exhibit
1.0.
ARTICLE II
MARKETING AND SALES
2.1 ZEISS hereby appoints CELLOMICS to be ZEISS' exclusive dealer and
distributor within North America for the items listed in Exhibit 2.0 and for
accessories for such items (such items and accessories being hereinafter
referred to as "Products"); and CELLOMICS hereby accepts such appointment.
2.2 ZEISS and CELLOMICS will use their best efforts to convince
customers to place orders with CELLOMICS for Products to be installed in North
America and with ZEISS for Products to be installed outside North America. [*]
"CONFIDENTIAL [*] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS
DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT
OF 1933, AS AMENDED."
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<PAGE> 3
2.3 [*]
2.4 Production of literature, production of advertising and
presentation materials for the Products shall be the sole responsibility of
ZEISS with input from CELLOMICS.
2.5 CELLOMICS shall have the sole responsibility for advertising
placements, shows, and other promotional activities regarding the Products in
North America. Therefore, CELLOMICS shall participate at shows such as but not
limited to LabAutomation, Drug Discovery, and SBS. In the case of advertising
placement and exhibitions which address the international community of the drug
development market (such as advertisements in the Journal of Biomolecular
Screening and presentations at exhibitions such as mentioned above) ZEISS will
provide a proposal which CELLOMICS shall not unreasonably refuse to implement.
In addition, ZEISS reimburses Cellomics a percentage of the total costs incurred
by CELLOMICS. Such percentage shall be negotiated prior to such activity. It is
understood that the ZEISS logo and name shall be shown at these activities.
"CONFIDENTIAL [*] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS
DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT
OF 1933, AS AMENDED."
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<PAGE> 4
2.6 Training of CELLOMICS personnel for Product application and
software support will be provided by ZEISS in Jena. Each party will bear its own
cost with respect to such training and support. If requested by CELLOMICS, ZEISS
will provide training for any new products added to Exhibit 2.0 by mutual
written agreement of the parties.
2.7 Leads for potential customers obtained by CELLOMICS for potential
sales outside North America will be passed directly to ZEISS. Leads for
potential customers obtained by ZEISS for potential sales in North America will
be passed directly to CELLOMICS. CELLOMICS agrees to provide ZEISS with
exhibition and conference reports. Additionally, CELLOMICS agrees to provide
ZEISS with the minutes of customer contacts with regard to the Products if they
relate to potential leads outside North America, on a timely basis. ZEISS agrees
to provide such reports of customer contacts with regard to the Products if they
relate to potential leads in North America on a timely basis.
2.8 CELLOMICS shall purchase within the measurement periods described
in Exhibit 3.0 a minimum Deutsche Mark volume based on transfer prices equal to
the sum described in Exhibit 3.0. In the event CELLOMICS fails to purchase such
minimum volume in accordance with this Article and Exhibit 3.0, ZEISS shall
review with CELLOMICS in a management meeting the purchases, open orders, and
deliveries, within a period beginning at the end of such measurement period and
ending thirty (30) days thereafter. After this meeting, ZEISS shall be entitled
to terminate CELLOMICS exclusivity under Section 2.1 of this Agreement or, at
ZEISS's option, to terminate this Agreement in its entirety as a material breach
under Section 5.2 hereof. Any such election by ZEISS shall be by written notice
to CELLOMICS . In the event of such termination of the Agreement in its
entirety, CELLOMICS will receive compensation in the amount of 10% of the Net
Sales Value for sales occurring in North America within six (6) months of
termination and with regard to which CELLOMICS can prove the acquisition of the
sale by CELLOMICS (e.g. by proof that CELLOMICS has
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<PAGE> 5
made an offer to such customer). Such compensation shall be due after full
payment by the customer to ZEISS.
The parties shall agree upon further annual measuring periods and
minimum volumes not later than six (6) months prior to the expiration of the
last measuring period according to Exhibit 3.0.
2.9 CELLOMICS will present its non binding sales projection for the
Products in North America for the next business year (October 1 - September 30)
6 months prior to such business year.
2.10 During the term of this Agreement CELLOMICS shall not sell within
North America any merchandise which is competitive with any of the Products.
CELLOMICS will promptly notify ZEISS whenever it sells any merchandise of a
business which is in competition with ZEISS. In the event CELLOMICS fails to
comply with Section 2.10, ZEISS shall be entitled to terminate CELLOMICS
exclusivity under Section 2.1 of this Agreement immediately. The ArrayScan II,
ArrayScan Kinetics Workstation, ArrayScan Kinetics Reader, CellChip system, and
any and all Cellomics reagents are acknowledged to be not competitive with any
of the Products.
2.11 ZEISS will deliver any Products FCA Frankfurt (Incoterms 1990).
The parties hereto agree that title to the Products ordered by CELLOMICS will
pass to CELLOMICS at Frankfurt, Germany.
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<PAGE> 6
ARTICLE III
CUSTOMER SUPPORT
3.1 The parties recognize that the marketing and sales of the Products
will require certain support activities and agree to allocate those support
activities in accordance with this Article.
3.2 CELLOMICS will be responsible for providing Product support in
North America. Product support will include shipping, installation, warranty in
accordance with Exhibit 4.0 and service of the Products at its expense.
3.3 CELLOMICS shall inform ZEISS prior to the installation of Products
of the basic customer data enabling ZEISS to provide remote service support.
3.4 ZEISS will train a reasonable number of CELLOMICS' skilled service
personnel in order to be qualified to provide advice to customers in the
operation of the Products and to provide Product support. Each party will bear
its own costs with respect to such training and support.
3.5 CELLOMICS shall provide Product support to [*] by establishing a
service team consisting of at least two skilled service technicians. The service
requirements for the [*] are defined in Exhibit 5.0 and CELLOMICS agrees to
fulfill all obligations in accordance with Exhibit 5.0 except installation as
described in section 2 of Exhibit 5.0 and except that ZEISS shall retain
responsibility for replacement of defective parts as described in sections 3 and
4 in Exhibit 5.0 and that except that ZEISS retains responsibility for the terms
of section 5.0 and 10.0 of Exhibit 5.0. At least one service technician shall
take over the responsibility for [*] before the end of [*] and shall
participate in a systems training in Jena [*] to [*] by ZEISS in accordance with
Section 3.4. A second service technician shall be assigned to the [*] site
before the end of [*].
"CONFIDENTIAL [*] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS
DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT
OF 1933, AS AMENDED."
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<PAGE> 7
ZEISS shall pay to CELLOMICS the amount of [*] in two equal
installments. The first installment shall be due 30 days after the signing of
this Agreement. The second installment shall be due 30 days after CELLOMICS has
notified ZEISS in writing that it has named both service persons and assigned
him/her to the two tasks. If either [*] installations require more than [*]
of service time per year, including travel, ZEISS shall reimburse CELLOMICS for
service beyond [*] per system per year at a rate of $75.00 per hour,
plus travel expenses.
The parties agree that CELLOMICS shall have no further claims against
ZEISS resulting from the fulfillment of CELLOMICS' obligations according to
Exhibit 5.0. CELLOMICS shall not bill any services according to Exhibit 5.0 to
[*] except for the services described in Section 6 of Exhibit 5.0. In the event
CELLOMICS fails to fulfill its obligations under Exhibit 5.0, ZEISS will notify
CELLOMICS of such failure in writing and CELLOMICS will be given reasonable
opportunity to remedy the notification of failure. CELLOMICS shall reimburse
ZEISS for any costs incurred at ZEISS resulting from such failure at a rate of
$75.00 per hour, plus travel expenses up to a maximum of USD 100,000. Any
obligation resulting from Section 3.5 becomes only effective if confirmed in
writing by ZEISS within 60 days separately from this Agreement.
ARTICLE IV
PRICING
4.1 The prices for the Products sold by ZEISS to CELLOMICS are the
transfer prices listed on Exhibit 2.0. CELLOMICS understands that prices set
forth in Exhibit 2.0 will be recalculated by ZEISS at the beginning of each
measurement period after the first measurement period. Recalculated prices will
be limited to a maximum of 110% of the previous year's price. The invoices will
be issued in the currency of Deutsche Mark.
4.2 It is understood that CELLOMICS is free to set its own sales price
in the marketplace.
4.3 All revenues from sales of the Products by CELLOMICS in North
America will be retained by CELLOMICS.
"CONFIDENTIAL [*] CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS
DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 406 OF THE SECURITIES ACT
OF 1933, AS AMENDED."
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<PAGE> 8
4.4 The payment terms are: forty-five (45) days net for the "HTS/UHTS
Reader" and for a "HTS/UHTS System" 70% of its transfer price within forty-five
(45) days net after the date of shipment to either CELLOMICS or the customer and
30% forty five (45) days net after installation at the customer.
4.5 ZEISS shall provide demonstration equipment at the request of
CELLOMICS and after mutual agreement as to the choice of equipment and
accessories. ZEISS will issue a quarterly invoice for the loaned equipment based
on a monthly rate of one percent (1%) of the transfer price. After 12 months
CELLOMICS shall either return the equipment to ZEISS or purchase it at the
transfer price minus all amounts paid pursuant to the terms of the preceding
sentence including an extra discount of five percent (5%) on the transfer price.
ZEISS will send the loan equipment DDP whereas CELLOMICS will return the
equipment DDP (Incoterms 1990).
CELLOMICS shall accept the loan at any time during this Agreement for at least
two (2) "UHTS/HTS" Readers for demonstration purposes.
ARTICLE V
TERM AND TERMINATION
5.1 The parties agree that this Agreement shall, unless sooner
terminated, continue in effect until December 31, 2005. Notwithstanding the
foregoing, the parties agree that this Agreement may be terminated by either
party on not less than twelve months written prior notice to the other.
5.2 Either party may terminate this Agreement upon material breach by
the other party. The party intending to terminate shall give the other party
written notice, and the party receiving the notice shall have thirty (30) days
from the date such notice is received to cure any breach.
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<PAGE> 9
In the event such breach is not cured, termination of this Agreement shall
become effective one hundred twenty (120) days after the date of the receipt of
the termination notice. Failure by CELLOMICS to purchase minimum volumes as
described in Section 2.8 and Exhibit 3.0 shall constitute a material breach
unless such failure is a result of ZEISS inability to fulfill orders submitted
by CELLOMICS and, provided that, in order to exercise its right of termination
pursuant to this sentence, ZEISS must give CELLOMICS written notice of such
election within a thirty (30) day period immediately following the close of the
measurement period according to Exhibit 3.0 in which CELLOMICS shall have failed
to meet such minimum volumes. Either party may terminate this Agreement with
immediate effect in the event the other party comes under control of a
competitor of the terminating party.
5.3 After termination, the parties agree to continue cooperating with
each other and to carry out an orderly termination of their relations. After
termination, the parties shall account to each other for all revenues and
expenses realized, due or owing pursuant to the terms of this Agreement.
5.4 After termination of this Agreement, CELLOMICS shall cease to
market the Products in North America in any way, except for inventory on hand,
and the parties shall deliver to each other all materials and documents
belonging to the other which have come into their possession as a result of this
Agreement, and CELLOMICS shall cease all and any use of the commercial
trademarks and/or names of ZEISS, except as permitted under other contracts.
5.5 CELLOMICS shall have the right to liquidate its stock of software
and hardware, and any promotional material relating thereto, in the event of
termination. In the event CELLOMICS terminates this Agreement without cause or
ZEISS terminates this Agreement due to a material breach by CELLOMICS then ZEISS
may accept but shall not be obligated to repurchase spare parts purchased by
CELLOMICS. In the event ZEISS terminates this Agreement without cause or
CELLOMICS terminates this Agreement due to a material breach by ZEISS then
CELLOMICS may return any spare parts within thirty (30) days after
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<PAGE> 10
termination to ZEISS in the original packing. ZEISS shall then pay to CELLOMICS
an amount equivalent to the price paid by CELLOMICS before minus 15% restocking
fee.
5.6 In the event of termination, all CELLOMICS' held customer related
information will remain the sole property of CELLOMICS except as specified in
Section 3.3.
ARTICLE VI
CONFIDENTIALITY
6.1 Prior to and during the term of this Agreement, the parties will
disclose to each other certain confidential or proprietary information
("INFORMATION"), the disclosure of which to third parties could be commercially
injurious to the owner of the INFORMATION.
6.2 The disclosure of the INFORMATION is solely for the purpose of the
furtherance of the marketing and sale of the Products and services described
herein.
6.3 Each party understands that the disclosing party considers the
INFORMATION to be confidential and a trade secret.
6.4 Each party will not disclose to any third party, or utilize for its
own or another's benefit, the INFORMATION obtained from the disclosing party.
6.5 The term "INFORMATION" shall not include, and the parties shall not
have any obligations of confidence or non-disclosure with respect to:
6.5.1 information that is in the public domain at the time of
its transmittal or which subsequently comes into the public
domain without violation of any obligation of confidence
assumed hereunder; or
6.5.2 information received from a third party without
violation of an obligation of confidence to the transmitting
party; or
6.5.3 information which the recipient party can show to have
been in its possession at the time of transmittal; or
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<PAGE> 11
6.5.4 information which the recipient party can show to have
been independently developed by employees of the recipient
party who have not had access to proprietary information
received hereunder; or
6.5.5 information which the recipient party is compelled to
disclose pursuant to judicial action or the legal and
enforceable request of a U.S. government agency, provided that
the transmitting party is notified at the time such action or
request is initiated, and further provided that the recipient
party cooperates with the transmitting party in the event that
the transmitting party seeks a protective order or other
appropriate remedy to prevent disclosure of such information.
6.6 If either party believes it essential to disclose any INFORMATION
to a third party, the party wishing to disclose will first advise the other
party what INFORMATION is to be disclosed, to whom it is to be disclosed and the
purpose therefore. The party wishing to disclose will first obtain the other
party's written permission to make the disclosure before making such disclosure,
which permission may be withheld for any reason. The requesting party also
agrees to require the third party recipient of the INFORMATION to acknowledge
that such INFORMATION is confidential, to hold the INFORMATION confidential for
the benefit of the disclosing party, and to sign a copy of a protective
agreement, naming the disclosing party as a third-party beneficiary having the
right to enforce the Agreement against the third party.
6.7 All INFORMATION, where possible, shall be transferred from each
party to the other in written form, and shall bear a conspicuous mark
designating such INFORMATION to be confidential. Additionally, any INFORMATION
transferred from each party to the other in an oral or other non-permanent or
non-readable form, such as in a computer communication, shall be summarized in a
brief memorandum which shall also bear a conspicuous mark designating such
INFORMATION to be confidential. Furthermore, all INFORMATION transferred in
tangible form shall be returned to the disclosing party upon request and/or at
the termination of this Agreement.
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<PAGE> 12
6.8 It is understood that this Agreement will neither obligate either
party, nor grant to either party or any employees thereof, any rights in the
INFORMATION, or any protectable interest stemming therefrom, during the term of
the Agreement, except as specifically provided herein.
6.9 Each party agrees that if it or any of its employees breaches any
condition of this Agreement relating to the protection of proprietary or
confidential rights or information, the owner of such right or information will
be entitled to, in addition to all other remedies available, an immediate
injunction prohibiting the party in breach of its obligations, or its employees,
partners or other business associates, from committing any further breach of the
Agreement.
ARTICLE VII
WARRANTIES AND DISCLAIMERS
7.1 Each party represents and warrants to the other party that it has
no pre-existing contractual or other obligations to any third party which
preclude it from entering into this Agreement and meeting its obligations
hereunder, or which conflict with any Provision of this Agreement.
7.2 Each party represents and warrants to the other party that it shall
use any commercially reasonable efforts to achieve the objectives of the
Agreement.
ARTICLE VIII
TRADEMARKS, SERVICE MARKS AND TRADE NAMES
8.1 CELLOMICS must obtain ZEISS's prior written approval for the design
of CELLOMICS's sales materials, letterheads forms, etc. bearing the name or the
trademarks of
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<PAGE> 13
ZEISS. CELLOMICS shall have the right to use the ZEISS's name and trademarks
solely in the manner for which it has obtained ZEISS's approval and only during
the term of this Agreement and such approvals will be made in a timely manner
and not unreasonably withheld, except as provided in other contracts.
ARTICLE IX
MISCELLANEOUS
9.1 Governing Law
This Agreement shall be construed in accordance with the laws of the
State of New York applicable to contracts made and performed in New York.
9.2 Actions Survive
All causes of action accruing to either party under this Agreement
shall survive termination for any reason, as shall provisions which expressly
state such survival unless such survival is conditional and the requisite
condition(s) has been fulfilled prior to or on such termination.
9.3 Entire Agreement; Superseder; Section Headings, Construction
This Agreement constitutes the only and entire understanding between
the parties concerning its subject matter and all other prior negotiations,
representations, agreements and understandings are superseded hereby. No
agreements altering or supplementing the terms hereof may be made except by
means of a written document signed by the duly authorized representatives of the
parties. The headings of Sections in this Agreement are provided for convenience
only and will not affect its construction or interpretation.
9.4 Amendments
This Agreement may be amended or modified only in writing, signed by
both parties.
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<PAGE> 14
9.5 Independent Contractor
Each party shall have the status of an independent contractor without
the authority to bind the other to any obligation.
9.6 Arbitration
All disputes which arise out of this Agreement shall be settled by
arbitration in Westchester County, New York in accordance with the conciliation
and arbitration rules and regulations of the American Arbitration Association,
to which the parties hereto submit including the AAA Optional Rules for
Emergency Measures of Protection to preserve the status quo ante of the parties.
The arbitrator shall have background and expertise relating to the issue(s)
involved. The arbitration shall be in English. The arbitration hearing shall be
held within sixty days of an arbitration demand. The arbitrator's decision shall
be submitted within thirty (30) days of the conclusion of the arbitration
hearing. The arbitrator's decision shall be binding, final and non-appealable.
The parties shall share equally the cost of such arbitration. Any and all
actions necessary to compel arbitration or to enforce the decision of the
arbitrator or any aspect thereof shall be brought in the state or federal courts
of Westchester County, New York and the parties specifically agree that the
state and federal courts of or pertaining to Westchester County, New York shall
have and the parties submit to the exclusive jurisdiction and venue of such
courts.
9.7 Force Majeure
If either party is prevented from performing any obligation hereunder
by reason of fire, explosion, strike, labor dispute, casualty, accident, lack or
failure of transportation facilities, flood, war, civil commotion, acts of God,
or any law, order or decree of any government or subdivision thereof, then such
party shall be excused from performance hereunder to the extent
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<PAGE> 15
and for the duration of such prevention, provided that such party notifies the
other party in writing of such prevention in a manner which is timely under the
circumstances.
9.8 Publicity
Except as required by law or applicable stock exchange rule, no public
statements shall be made by either party concerning this Agreement, its subject
matter or its existence without prior consultation with and the approval of the
other party, which approval shall not be unreasonably withheld. In the event
CELLOMICS undertakes an initial or subsequent public offering of its stock,
ZEISS agrees to review and give its approval to necessary statements regarding
the existence and/or subject matter of this Agreement within twenty four (24)
hours (but not less than one business day) of its receipt of a draft of the
proposed language regarding this Agreement and ZEISS shall not unreasonably
withhold such approval.
9.9 Severability
In the event that any Provision of this Agreement shall be found to be
illegal, invalid or unenforceable for any reason, such shall not affect the
validity of the remainder of this Agreement, which shall be construed and
interpreted as though such Provision was not present.
9.10 Notices
Notices may be given to an officer of a party by:
A. personal delivery,
B. telex or telecopy or
C. certified or registered mail addressed or
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<PAGE> 16
D. overnight delivery by an internationally recognized courier
service as follows:
If to ZEISS: Dr. Norbert Gorny and Dr. Robert A. Grub
Carl Zeiss Jena, GmbH Microscopy Division
Carl-Zeiss-Promenade 10 Carl Zeiss Jena, GmbH
07740 Jena, Germany 07740 Jena, Germany
with a copy to: Carl Zeiss Inc.
James Kelly
One Zeiss Drive
Thornwood, NY 10594
If to CELLOMICS: D. Lansing Taylor, Ph.D.
President & Chief Executive Officer
635 William Pitt Way
Pittsburgh, PA 15238
with a copy to: Sweeney Metz Fox McGrann & Schermer
The Westinghouse Building - 18th Floor
11 Stanwix Street
Pittsburgh, PA 15222
9.11 Binding Effect
This Agreement shall inure to the benefit of and be binding on each
party's successors in interest and assigns.
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<PAGE> 17
9.12 Assignment
The parties understand and agree that as soon as practicable after
execution of this Agreement CELLOMICS will assign all benefits, rights,
responsibilities and obligations of this Agreement to a soon to be formed wholly
owned subsidiary of CELLOMICS, which the parties anticipate will be incorporated
in the Cayman Islands, the European Economic Community or other jurisdiction
outside of the United States of America; such assignment shall be specifically
required and permitted. Except as provided in the preceding sentence, either
party may assign this Agreement only in connection with the sale or disposition
of the entire business of such party or that portion to which this Agreement
pertains. Either party may assign this Agreement to an Affiliate(s) without
permission of the other party. Affiliate shall mean an entity controlling,
controlled by, or under common control with a party to this Agreement. ZEISS
shall be entitled to refuse ist consent to an assignment in the event the
Affiliate of CELLOMICS is a competitor of ZEISS.
9.13 Exhibits
The following Exhibits form an integral part of this Agreement:
Exhibit 1.0: Rule of Sixths
Exhibit 2.0: Products and Transfer Prices
Exhibit 3.0: Minimum Volumes.
Exhibit 4.0: Limited Warranty
Exhibit 5.0: [*]
IN WITNESS WHEREOF, this Agreement has been executed in multiple
counterparts, each of which shall constitute an original Agreement, on behalf of
the parties by their authorized officers as of the date first written above.
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<PAGE> 18
CARL ZEISS JENA GMBH
By
Its
Date
CELLOMICS , INC.
By
Its
Date
18
<PAGE> 1
Exhibit 10.16
CELLOMICS, INC.
2000 STOCK PLAN
1. Purposes of the Plan. The purposes of this Stock Plan are to attract
and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees, non-Employee
members of the Board and Consultants of the Company and its Parent and
Subsidiaries and to promote the success of the Company's business. Options
granted under the Plan may be incentive stock options (as defined under Section
422 of the Code) or non-statutory stock options, as determined by the
Administrator at the time of grant of an option and subject to the applicable
provisions of Section 422 of the Code, as amended, and the regulations
promulgated thereunder. Stock purchase rights, stock grants and stock
appreciation rights may also be granted under the Plan.
2. Certain Definitions. As used herein, the following definitions shall
apply:
(a) "Administrator" means the Board or any of its Committees
appointed pursuant to Section 4 of the Plan.
(b) "Award" means any option, stock purchase right, stock
grant or stock appreciation right granted to a Participant under the Plan.
(c) "Board" means the Board of Directors of the Company.
(d) "Change in Control" means (i) any "person" (as such term
is used in Sections 13(d) and 14(d) of the Exchange Act) through a tender offer,
open market purchases and/or other purchases is or becomes a beneficiary owner,
directly or indirectly, of securities of the Company representing more than
fifty percent (50%) of the combined voting power of the Company's then
outstanding securities or (ii) a majority of the Board shall be comprised of
persons who (x) were elected in one or more contested elections for the Board
and (y) had not been nominated by the then existing Board when they were first
elected to the Board.
(e) "Code" means the Internal Revenue Code of 1986, as
amended.
(f) "Committee" means the Committee appointed by the Board of
Directors in accordance with paragraph (a) of Section 4 of the Plan.
(g) "Common Stock" means the Common Stock of the Company.
(h) "Company" means Cellomics, Inc., a Delaware corporation.
<PAGE> 2
(i) "Consultant" means any person, including an advisor, who
is engaged by the Company or any Parent or Subsidiary to render services and is
compensated for such services, and any director of the Company whether
compensated for such services or not.
(j) "Continuous Status as an Employee" means the absence of
any interruption or termination of the employment relationship by the Company or
any Parent or Subsidiary. Continuous Status as an Employee shall not be
considered interrupted in the case of: (i) sick leave; (ii) military leave;
(iii) any other leave of absence approved by the Board, provided that such leave
is for a period of not more than ninety (90) days, unless reemployment upon the
expiration of such leave is guaranteed by contract or statute, or unless
provided otherwise pursuant to Company policy adopted from time to time; or (iv)
transfers between locations of the Company or between the Company, its Parent,
its Subsidiaries or its successor.
(k) "Employee" means any person, including officers and
directors, employed by the Company or any Parent or Subsidiary of the Company.
The payment of a director's fee by the Company shall not be sufficient to
constitute "employment" by the Company.
(l) "Exchange Act" means the Securities Exchange Act of 1934,
as amended.
(m) "Fair Market Value" means, as of any date, the value of
Common Stock determined as follows:
(i) If the Common Stock is listed on any established
stock exchange or a national market system including, without
limitation, the National Market System of the National Association of
Securities Dealers, Inc. Automated Quotation ("Nasdaq") System, its
Fair Market Value shall be the closing sales price for such stock (or
the closing bid, if no sales were reported) as quoted on such system or
exchange for the last market trading day prior to the time of
determination as reported in the Wall Street Journal or such other
source as the Administrator deems reliable or;
(ii) If the Common Stock is quoted on Nasdaq (but not
on the National Market System thereof) or regularly quoted by a
recognized securities dealer but selling prices are not reported, its
Fair Market Value shall be the mean between the high and low asked
prices for the Common Stock or;
(iii) In the absence of an established market for the
Common Stock, the Fair Market Value thereof shall be determined in good
faith by the Administrator.
(n) "Incentive Stock Option" means an Option intended to
qualify as an incentive stock option within the meaning of Section 422 of the
Code.
(o) "Nonstatutory Stock Option" means an Option not intended
to qualify as an Incentive Stock Option.
-2-
<PAGE> 3
(p) "Option" means a stock option granted pursuant to the
Plan.
(q) "Optioned Stock" means the Common Stock subject to an
Option.
(r) "Optionee" means an Employee or Consultant who receives an
Option.
(s) "Parent" means a "parent corporation", whether now or
hereafter existing, as defined in Section 424(e) of the Code.
(t) "Participant" means an Employee, non-Employee Member of
the Board or Consultant who receives an Award under the Plan.
(u) "Plan" means this 2000 Stock Plan.
(v) "Restricted Stock" means shares of Common Stock acquired
pursuant to a grant of stock or stock purchase rights under Section 11 below.
(w) "SAR" means a stock appreciation right, which is the right
to receive an amount equal to the appreciation, if any, in the Fair Market Value
of a Share from the date of the grant of the right to the date of its payment,
as adjusted in accordance with Section 13 of the Plan.
(x) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 13 of the Plan.
(y) "Subsidiary" means a "subsidiary corporation", whether now
or hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 13
of the Plan, the maximum aggregate number of Shares which may be optioned,
issued or sold under the Plan is 330,000 Shares of Common Stock. The Shares may
be authorized, but unissued Shares, reacquired Shares, Shares acquired on the
open market specifically for distribution under this Plan, or any combination
thereof.
If an Option or SAR should expire or become unexercisable for
any reason without having been exercised in full, or if shares of Restricted
Stock are forfeited, the unused Shares which were subject thereto shall, unless
the Plan shall have been terminated, become available for future grant under the
Plan.
4. Administration of the Plan.
(a) Procedure.
(i) Administration With Respect to Directors and
Officers. With respect to grants of Awards to Employees who
are also officers or directors of the
-3-
<PAGE> 4
Company, the Plan shall be administered by (A) the Board, if
the Board may administer the Plan in compliance with Rule
16b-3 promulgated under the Exchange Act or any successor
thereto ("Rule 16b-3") with respect to a plan intended to
qualify thereunder as a discretionary plan, or (B) a Committee
designated by the Board to administer the Plan, which
Committee shall be constituted in such a manner as to permit
the Plan to comply with Rule 16b-3 with respect to a plan
intended to qualify thereunder as a discretionary plan. Once
appointed, such Committee shall continue to serve in its
designated capacity until otherwise directed by the Board.
From time to time the Board may increase the size of the
Committee and appoint additional members thereof, remove
members (with or without cause) and appoint new members in
substitution therefor, fill vacancies, however caused, and
remove all members of the Committee and thereafter directly
administer the Plan, all to the extent permitted by Rule 16b-3
with respect to a plan intended to qualify thereunder as a
discretionary plan.
(ii) Multiple Administrative Bodies. If permitted by
Rule 16b-3, the Plan may be administered by different bodies
with respect to directors, non-director officers and Employees
who are neither directors nor officers.
(iii) Administration With Respect to Consultants and
Other Employees. With respect to grants of Awards to Employees
who are neither directors nor officers of the Company or to
Consultants, the Plan shall be administered by (A) the Board,
if the Board may administer the Plan in compliance with Rule
16b-3, or (B) a Committee designated by the Board, which
Committee shall be constituted in such a manner as to satisfy
the legal requirements relating to the administration of
incentive stock option plans, if any, of applicable securities
laws and of the Code (the "Applicable Laws"). Once appointed,
such Committee shall continue to serve in its designated
capacity until otherwise directed by the Board. From time to
time the Board may increase the size of the Committee and
appoint additional members thereof, remove members (with or
without cause) and appoint new members in substitution
therefor, fill vacancies, however caused, and remove all
members of the Committee and thereafter directly administer
the Plan, all to the extent permitted by the Applicable Laws.
(b) Powers of the Administrator. Subject to the provisions of
the Plan and in the case of a Committee, the specific duties delegated by the
Board to such Committee, the Administrator shall have the authority, in its
discretion:
(i) to determine the Fair Market Value of the Common
Stock, in accordance with Section 2(l) of the Plan;
(ii) to select the officers, Consultants and
Employees to whom Awards may from time to time be granted
hereunder;
(iii) to determine whether and to what extent
Options, stock grants, stock purchase rights or SARs, or any
combination thereof, are granted hereunder;
-4-
<PAGE> 5
(iv) to determine the number of shares of Common
Stock to be covered by each such Award granted hereunder;
(v) to approve forms of agreement for use under the
Plan;
(vi) to determine the terms and conditions, not
inconsistent with the terms of the Plan, of any Award granted
hereunder (including, but not limited to, the share price and
any restriction or limitation or waiver of forfeiture
restrictions regarding any Option or other Award and/or the
shares of Common Stock relating thereto, based in each case on
such factors as the Administrator shall determine, in its sole
discretion);
(vii) to determine whether and under what
circumstances an Option or SAR may be settled in cash under
subsection 9(f) instead of Common Stock;
(viii) to determine whether, to what extent and under
what circumstances Common Stock and other amounts payable with
respect to an Award under this Plan shall be deferred either
automatically or at the election of the participant (including
providing for and determining the amount, if any, of any
deemed earnings on any deferred amount during any deferral
period);
(ix) to reduce the exercise price of any Option or
SAR to the then current Fair Market Value if the Fair Market
Value of the Common Stock covered by such Option or SAR shall
have declined since the date the Option or SAR was granted;
(x) to determine the terms and restrictions
applicable to stock grants, stock purchase rights and the
Restricted Stock granted by such stock grant or purchased by
exercising such stock purchase rights; and
(xi) in its discretion, upon a Change in Control to
vest and make exerciseable any Award granted hereunder which
is not fully vested or exercisable and to remove any
restrictions on Restricted Stock effective upon the occurrence
of a Change in Control or the termination of a Participant's
service to the Company.
(c) Effect of Committee's Decision. All decisions,
determinations and interpretations of the Administrator shall be final and
binding on all Participants and any other holders of any Awards granted
hereunder.
5. Eligibility.
(a) Nonstatutory Stock Options and SARs may be granted to
Employees, non-Employee Members of the Board and Consultants. Incentive Stock
Options may be granted only to Employees. An Employee or Consultant who has been
granted an Option or SAR may, if he is otherwise eligible, be granted additional
Options or SARs.
-5-
<PAGE> 6
(b) Each Option shall be designated in the written option
agreement as either an Incentive Stock Option or a Nonstatutory Stock Option.
However, notwithstanding such designations, to the extent that the aggregate
Fair Market Value of the Shares with respect to which Options designated as
Incentive Stock Options are exercisable for the first time by any optionee
during any calendar year (under all plans of the Company or any Parent or
Subsidiary) exceeds $100,000, such excess Options shall be treated as
Nonstatutory Stock Options.
(c) For purposes of Section 5(b), Incentive Stock Options
shall be taken into account in the order in which they were granted, and the
Fair Market Value of the Shares shall be determined as of the time the Option
with respect to such Shares is granted.
(d) The Plan shall not confer upon any Participant any right
with respect to continuation of employment or consulting relationship with the
Company, nor shall it interfere in any way with his right or the Company's right
to terminate his employment or consulting relationship at any time, with or
without cause.
6. Term of Plan. The Plan shall become effective upon the earlier to
occur of its adoption by the Board of Directors or its approval by the
shareholders of the Company as described in Section 19 of the Plan. It shall
continue in effect for a term of ten (10) years unless sooner terminated under
Section 15 of the Plan.
7. Terms of Options and SARs. The term of each Option or SAR shall be
the term stated in the written agreement evidencing such Option or SAR;
provided, however, that in the case of an Incentive Stock Option, the term shall
be no more than ten (10) years from the date of grant thereof or such shorter
term as may be provided in the Option Agreement. However, in the case of an
Option granted to an Optionee who, at the time the Option is granted, owns stock
representing more than ten percent (10%) of the voting power of all classes of
stock of the Company or any Parent or Subsidiary, the term of the Option shall
be five (5) years from the date of grant thereof or such shorter term as may be
provided in the written agreement evidencing such Option.
8. Option Exercise Price and Consideration.
(a) The per share exercise price for the Shares to be issued
pursuant to exercise of an Option shall be such price as is determined by the
Board, but shall be subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time of the
grant of such Incentive Stock Option, owns stock representing
more than ten percent (10%) of the voting power of all classes
of stock of the Company or any Parent or Subsidiary, the per
Share exercise price shall be no less than 110% of the Fair
Market Value per Share on the date of grant.
-6-
<PAGE> 7
(B) granted to any Employee, the per Share exercise
price shall be no less than 100% of the Fair Market Value per
Share on the date of grant.
(ii) In the case of a Nonstatutory Stock Option
granted to any person, the per Share exercise price may be
less than the Fair Market Value per Share on the date of
grant.
(b) The consideration to be paid for the Shares to be issued
upon exercise of an Option, including the method of payment, shall be determined
by the Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant) and may consist entirely of (1) cash, (2)
check, (3) promissory note, (4) other Shares which (x) in the case of Shares
acquired upon exercise of an Option either have been owned by the Optionee for
more than six months on the date of surrender or were not acquired, directly or
indirectly, from the Company, and (y) have a Fair Market Value on the date of
surrender equal to the aggregate exercise price of the Shares as to which said
Option shall be exercised, (5) authorization from the Company to retain from the
total number of Shares as to which the Option is exercised that number of Shares
having a Fair Market Value on the date of exercise equal to the exercise price
for the total number of Shares as to which the option is exercised, (6) delivery
of a properly executed exercise notice together with irrevocable instructions to
a broker to promptly deliver to the Company the amount of sale or loan proceeds
required to pay the exercise price, (7) by delivering an irrevocable
subscription agreement for the Shares which irrevocably obligates the option
holder to take and pay for the Shares not more than twelve months after the date
of delivery of the subscription agreement, (8) any combination of the foregoing
methods of payment, or (9) such other consideration and method of payment for
the issuance of Shares to the extent permitted under Applicable Laws. In making
its determination as to the type of consideration to accept, the Administrator
shall consider if acceptance of such consideration may be reasonably expected to
benefit the Company.
9. Exercise of Options or SARs.
(a) Procedure for Exercise; Rights as a Shareholder. Any
Option or SAR granted hereunder shall be exercisable at such times and under
such conditions as determined by the Administrator, including performance
criteria with respect to the Company and/or the Participant, and as shall be
permissible under the terms of the Plan.
An Option or SAR may not be exercised for a fraction of a
Share.
An Option or SAR shall be deemed to be exercised when written
notice of such exercise has been given to the Company in accordance with the
terms of the Option or SAR by the person entitled to exercise such Option or SAR
and, if an Option is to be exercised, full payment for the Shares with respect
to which the Option is exercised has been received by the Company. Full payment
may, as authorized by the Administrator, consist of any consideration and method
of payment allowable under Section 8(b) of the Plan. Until the issuance (as
evidenced by the appropriate entry on the books of the Company or of a duly
authorized transfer
-7-
<PAGE> 8
agent of the Company) of the stock certificate evidencing such Shares, no right
to vote or receive dividends or any other rights as a shareholder shall exist
with respect to the Optioned Stock, notwithstanding the exercise of the Option.
The Company shall issue (or cause to be issued) such stock certificate promptly
upon exercise of the Option. No adjustment will be made for a dividend or other
right for which the record date is prior to the date the stock certificate is
issued, except as provided in Section 13 of the Plan.
Exercise of an Option or SAR in any manner shall result in a
decrease in the number of Shares which thereafter may be available, both for
purposes of the Plan and for sale under the Option or SAR, by the number of
Shares as to which the Option or SAR is exercised.
(b) Termination of Employment. In the event of termination of
a Participant's consulting relationship or Continuous Status as an Employee with
the Company (as the case may be), such Participant may, but only within ninety
(90) days (or such other period of time as is determined by the Board, with such
determination in the case of an Incentive Stock Option being made at the time of
grant of the Option and not exceeding ninety (90) days) after the date of such
termination (but in no event later than the expiration date of the term of such
Option or SAR as set forth in the written agreement evidencing such Option or
SAR), exercise his Option or SAR to the extent that such Participant was
entitled to exercise it at the date of such termination. To the extent that such
Participant was not entitled to exercise the Option or SAR at the date of such
termination, or if such Participant does not exercise such Option or SAR to the
extent so entitled within the time specified herein, the Option or SAR shall
terminate.
(c) Disability of Optionee. Notwithstanding the provisions of
Section 9(b) above, in the event of termination of a Participant's consulting
relationship or Continuous Status as an Employee as a result of his total and
permanent disability (as defined in Section 22(e)(3) of the Code), such
Participant may, but only within twelve (12) months (or such other period of
time as is determined by the Board, with such determination in the case of an
Incentive Stock Option being made at the time of grant of the Options and not
exceeding twelve (12) months) from the date of such termination (but in no event
later than the expiration date of the term of such Option or SAR as set forth in
the written agreement evidencing such Option or SAR), exercise the Option or SAR
to the extent otherwise entitled to exercise it at the date of such termination.
To the extent that such Participant was not entitled to exercise the Option or
SAR at the date of termination, or if such Participant does not exercise such
Option or SAR to the extent so entitled within the time specified herein, the
Option or SAR shall terminate.
(d) Death of Optionee. In the event of the death of a
Participant, the Option or SAR may be exercised, at any time within twelve (12)
months following the date of death (but in no event later than the expiration
date of the term of such Option or SAR as set forth in the written agreement
evidencing such Option or SAR), by the Participant's estate or by a person who
acquired the right to exercise the Option or SAR by bequest or inheritance, but
only to the extent the Participant was entitled to exercise the Option or SAR at
the date of death. To the
-8-
<PAGE> 9
extent that such Participant was not entitled to exercise the Option or SAR at
the date of death, or if such Participant's estate or any person who acquired
the right to exercise the Option or SAR by bequest or inheritance does not
exercise such Option or SAR to the extent so entitled within the time specified
herein, the Option or SAR shall terminate.
(e) Rule 16b-3. Options or SARs granted to persons subject to
Section 16(b) of the Exchange Act must comply with Rule 16b-3 and shall contain
such additional conditions or restrictions as may be required thereunder to
qualify for the maximum exemption from Section 16 of the Exchange Act with
respect to Plan transactions.
(f) Buyout Provisions. The Administrator may at any time offer
to buy out for a payment in cash or Shares, an Option or SAR previously granted,
based on such terms and conditions as the Administrator shall establish and
communicate to the Participant at the time that such offer is made.
(g) Payout Provisions. At the discretion of the Company, the
payment to a Participant upon exercise of a SAR, may be in cash, in Shares of
equivalent value, or in some combination thereof, subject to the availability of
Shares to the Company under the Plan.
10. Non-Transferability of Options or SARs. The Option or SAR may not
be sold, pledged, assigned, hypothecated, transferred, or disposed of in any
manner other than by will or by the laws of descent or distribution and may be
exercised, during the lifetime of the Participant, only by the Participant. The
terms of the Option or SAR shall be binding upon the executors, administrators,
heirs, successors and assigns of the Participant.
11. Stock Grants and Stock Purchase Rights.
(a) Awards and Rights to Purchase. Stock grants and stock
purchase rights may be issued to Employees, non-Employee Members of the Board
and Consultants, either alone, in addition to, or in tandem with other Awards
granted under the Plan and/or cash awards made outside of the Plan. After the
Administrator determines that it will make a stock grant or offer stock purchase
rights under the Plan, it shall advise the offeree in writing of the terms,
conditions and restrictions related to the grant or offer, including the number
of Shares that such person shall be granted or entitled to purchase, any
repurchase rights of the Company and the terms thereof and, in the case of a
right to purchase (i) the price to be paid, and (ii) the time within which such
person must accept such offer. The offer shall be accepted by execution of a
Restricted Stock purchase agreement, as the case may be, in the form determined
by the Administrator.
(b) Other Provisions. The Restricted Stock grant agreement and
purchase agreement shall contain such other terms, provisions and conditions not
inconsistent with the Plan as may be determined by the Administrator in its sole
discretion. In addition, the provisions of Restricted Stock grant agreements or
purchase agreements need not be the same with respect to each purchaser.
-9-
<PAGE> 10
(c) Rights as a Shareholder. Once the stock grant is completed
or a stock purchase right is exercised, the grantee or purchaser shall have the
rights equivalent to those of a shareholder, and shall be a shareholder when his
or her grant or purchase is entered upon the records of the duly authorized
transfer agent of the Company. No adjustment will be made for a dividend or
other right for which the record date is prior to the date the stock grant is
completed or the stock purchase right is exercised, except as provided in
Section 13 of the Plan.
12. Stock Withholding to Satisfy Withholding Tax Obligations. At the
discretion of the Administrator, Participants may satisfy withholding
obligations as provided in this paragraph. When a Participant incurs tax
liability in connection with an Option, stock grant, stock purchase right or
SAR, which tax liability is subject to tax withholding under applicable tax
laws, and the Participant is obligated to pay the Company an amount required to
be withheld under applicable tax laws, the Participant may satisfy the
withholding tax obligation by electing to have the Company withhold from the
Shares to be issued upon exercise of the Option or SAR, or the Shares to be
issued in connection with the stock grant or stock purchase right, if any, that
number of Shares having a Fair Market Value equal to the amount required to be
withheld. The Fair Market Value of the Shares to be withheld shall be determined
on the date that the amount of tax to be withheld is to be determined (the "Tax
Date").
In the event that the Company elects to make a payment to the
Participant in cash upon the exercise of a SAR, the Participant may satisfy the
withholding tax obligation by electing to have the Company withhold from such
payment the amount required to satisfy such withholding tax obligation.
All elections by a Participant to have Shares or cash withheld
for this purpose, as the case may be, shall be made in writing in a form
acceptable to the Administrator and shall be subject to the following
restrictions:
(a) the election must be made on or prior to the applicable
Tax Date;
(b) once made, the election shall be irrevocable as to the
particular Shares of the Option, stock purchase right or SAR, as to which the
election is made;
(c) all elections shall be subject to the consent or
disapproval of the Administrator;
(d) if the Participant is subject to Rule 16b-3, the election
must comply with the applicable provisions of Rule 16b-3 and shall be subject to
such additional conditions or restrictions as may be required thereunder to
qualify for the maximum exemption from Section 16 of the Exchange Act with
respect to Plan transactions.
In the event the election to have Shares or cash withheld is
made by a Participant and the Tax Date is deferred under Section 83 of the Code
because no election is filed under Section 83(b) of the Code, the Participant
shall receive the full number of Shares or full amount
-10-
<PAGE> 11
of cash, as the case may be, with respect to which the Option, stock grant,
stock purchase right or SAR is exercised but such Participant shall be
unconditionally obligated to tender back to the Company the proper number of
Shares, or the proper amount of cash, as the case may be, on the Tax Date.
13. Adjustments Upon Changes in Capitalization or Merger. Subject to
any required action by the shareholders of the Company, the number of shares of
Common Stock covered by each outstanding Option or SAR, and the number of shares
of Common Stock which have been authorized for issuance under the Plan but as to
which no Options or SARs have yet been granted or which have been returned to
the Plan upon cancellation or expiration of an Option or SAR, as well as the
price per share of Common Stock covered by each such outstanding Option or SAR,
shall be proportionately adjusted for any increase or decrease in the number of
issued shares of Common Stock resulting from a stock split, reverse stock split,
stock dividend, combination or reclassification of the Common Stock, or any
other increase or decrease in the number of issued shares of Common Stock
effected without receipt of consideration by the Company; provided, however,
that conversion of any convertible securities of the Company shall not be deemed
to have been "effected without receipt of consideration." Such adjustment shall
be made by the Board, whose determination in that respect shall be final,
binding and conclusive. Except as expressly provided herein, no issuance by the
Company of shares of stock of any class, or securities convertible into shares
of stock of any class, shall affect, and no adjustment by reason thereof shall
be made with respect to, the number or price of shares of Common Stock subject
to an Option or SAR.
In the event of the proposed dissolution or liquidation of the
Company, the Board shall notify the Participant at least fifteen (15) days prior
to such proposed action. To the extent it has not been previously exercised, any
Option or SAR will terminate immediately prior to the consummation of such
proposed action and any restrictions on Restricted Stock shall expire
immediately prior to the consummation of such proposed action. In the event of a
merger or consolidation of the Company with or into another corporation or the
sale of all or substantially all of the Company's assets (each hereinafter, a
"merger"), the Board may authorize outstanding Options or SARs to be assumed or
an equivalent option or stock appreciation right to be substituted by such
successor corporation or a parent or subsidiary of such successor corporation
and may assign any restrictions on Restricted Stock to the successor
corporation. In the event that such successor corporation does not agree to
assume the Option or SAR, or to substitute an equivalent option or stock
appreciation right, the Board shall, in lieu of such assumption or substitution,
provide for the Participant to have the right to exercise all Options or SARs
previously granted to such Participant, including Options or SARs which would
not otherwise be exercisable. If the Board makes an Option or SAR fully
exercisable in lieu of assumption or substitution in the event of a merger, the
Board shall notify the Participant that the Option or SAR shall be fully
exercisable for a period of fifteen (15) days from the date of such notice, and
the Option or SAR will terminate upon the expiration of such period. For the
purposes of this paragraph, the Option or SAR shall be considered assumed if,
following the merger, the Option or SAR, confers the right to purchase, or
receive the appreciation in Fair Market Value, as the
-11-
<PAGE> 12
case may be, for each Share of stock subject to the Option or SAR immediately
prior to the merger, the consideration (whether stock, cash, or other securities
or property) received in the merger by holders of Common Stock for each Share
held on the effective date of the transaction (and if holders were offered a
choice of consideration, the type of consideration chosen by the holders of a
majority of the outstanding Shares); provided, however, that if such
consideration received in the merger was not solely common stock of the
successor corporation or its Parent, the Board may, with the consent of the
successor corporation and the participant, provide for the consideration to be
received upon the exercise of the Option or SAR, for each Share of stock subject
to the Option or SAR, to be solely common stock of the successor corporation or
its Parent equal in Fair Market Value to the per share consideration received by
holders of Common Stock in the merger or sale of assets.
14. Time of Granting Options. The date of grant of an Option or SAR
shall, for all purposes, be the date on which the Administrator makes the
determination granting such Option or SAR, or such other date as is determined
by the Board. Notice of the determination shall be given to each Employee or
Consultant to whom an Option or SAR is so granted within a reasonable time after
the date of such grant.
15. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time
amend, alter, suspend or discontinue the Plan, but no amendment, alteration,
suspension or discontinuation shall be made which would impair the rights of any
Participant under any grant theretofore made, without his or her consent. In
addition, to the extent necessary and desirable to comply with Rule 16b-3 under
the Exchange Act or with Section 422 of the Code (or any other applicable law or
regulation, including the requirements of the NASD or an established stock
exchange), the Company shall obtain shareholder approval of any Plan amendment
in such a manner and to such a degree as required.
(b) Effect of Amendment or Termination. Any such amendment or
termination of the Plan shall not affect Options or SARs already granted and
such Options or SARs shall remain in full force and effect as if this Plan had
not been amended or terminated, unless mutually agreed otherwise between the
Participant and the Board, which agreement must be in writing and signed by the
Participant and the Company.
16. Conditions Upon Issuance of Shares. Shares shall not be issued
pursuant to the exercise of an Option or SAR unless the exercise of such Option
or SAR and the issuance and delivery of such Shares pursuant thereto shall
comply with all relevant provisions of law, including, without limitation, the
Securities Act of 1933, as amended, the Exchange Act, the rules and regulations
promulgated thereunder, and the requirements of any stock exchange upon which
the Shares may then be listed, and shall be further subject to the approval of
counsel for the Company with respect to such compliance.
-12-
<PAGE> 13
As a condition to the exercise of an Option or SAR, the
Company may require the person exercising such Option or SAR to represent and
warrant at the time of any such exercise that the Shares are being purchased
only for investment and without any present intention to sell or distribute such
Shares if, in the opinion of counsel for the Company, such a representation is
required by any of the aforementioned relevant provisions of law.
17. Reservation of Shares. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
The inability of the Company to obtain authority from any
regulatory body having jurisdiction, which authority is deemed by the Company's
counsel to be necessary to the lawful issuance and sale of any Shares hereunder,
shall relieve the Company of any liability in respect of the failure to issue or
sell such Shares as to which such requisite authority shall not have been
obtained.
18. Agreements. Options, stock grants, stock purchase rights and SARs
shall be evidenced by written agreements in such form as the Administrator shall
approve from time to time.
19. Shareholder Approval. Continuance of the Plan shall be subject to
approval by the shareholders of the Company within twelve (12) months before or
after the date the Plan is adopted. Such shareholder approval shall be obtained
in the degree and manner required under applicable state and federal law.
20. Information to Participants. The Company shall provide to each
Participant, during the period for which such Participant has one or more
Options or SARs outstanding, copies of all annual reports and other information
which are provided to all shareholders of the Company. The Company shall not be
required to provide such information if the issuance of Options or SARs under
the Plan is limited to key employees whose duties in connection with the Company
assure their access to equivalent information.
21. Governing Law. The validity, constrictions and effect of the Plan,
agreements entered into pursuant to the Plan, and of any rules, regulations,
determinations or decisions made by the Administrator relating to the Plan or
such agreements, and the rights of any and all persons having or claiming to
have any interest therein or thereunder, shall be determined exclusively in
accordance with applicable federal laws and the laws of the state of Delaware,
without regard to its conflict of laws principles.
-13-
<PAGE> 1
Exhibit 21.1
Subsidiaries of Cellomics
-------------------------
None
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Form S-1 of our
reports dated March 3, 2000 relating to the financial statements and financial
statement schedule of Cellomics, Inc., which appear in such Registration
Statement. We also consent to the references to us under the headings "Experts"
and "Selected Financial Data" in such Registration Statement.
PricewaterhouseCoopers LLP
Pittsburgh, Pennsylvania
March 3, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM OUR
FINANCIAL STATEMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 1999 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 1,341
<SECURITIES> 0
<RECEIVABLES> 1,572
<ALLOWANCES> 0
<INVENTORY> 224
<CURRENT-ASSETS> 3,473
<PP&E> 3,109
<DEPRECIATION> 723
<TOTAL-ASSETS> 5,860
<CURRENT-LIABILITIES> 4,696
<BONDS> 0
12,153
0
<COMMON> 12
<OTHER-SE> (15,746)
<TOTAL-LIABILITY-AND-EQUITY> 5,860
<SALES> 1,350
<TOTAL-REVENUES> 3,390
<CGS> 405
<TOTAL-COSTS> 13,656
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 302
<INCOME-PRETAX> (10,135)
<INCOME-TAX> 0
<INCOME-CONTINUING> (10,135)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (10,135)
<EPS-BASIC> (9.36)
<EPS-DILUTED> (9.36)
</TABLE>
