<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 22, 2000
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
VIROLOGIC, INC.
(NAME OF ISSUER IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 8734 94-3234479
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (IRS EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
270 EAST GRAND AVENUE
SOUTH SAN FRANCISCO, CA 94080
(650) 635-1100
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
WILLIAM D. YOUNG
CHIEF EXECUTIVE OFFICER
VIROLOGIC, INC.
270 EAST GRAND AVENUE
SOUTH SAN FRANCISCO, CA 94080
(650) 635-1100
(NAME, ADDRESS, TELEPHONE NUMBER OF AGENT FOR SERVICE)
------------------------
COPIES TO:
<TABLE>
<S> <C>
FREDERICK T. MUTO, ESQ. MARK J. MIHANOVIC, ESQ.
CHRISTOPHER J. KEARNS, ESQ. MARC A. JONES, ESQ.
DANIEL P. DILLON, ESQ. MCDERMOTT, WILL & EMERY
COOLEY GODWARD LLP 2049 CENTURY PARK EAST
4365 EXECUTIVE DRIVE, SUITE 1100 SUITE 3400
SAN DIEGO, CALIFORNIA 92121 LOS ANGELES, CA 90067
(858) 550-6000 (310) 277-4110
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the Registration Statement becomes effective.
------------------------
If any of the securities being registered on this Form are being 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, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ] ______
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] ______
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] ______
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<S> <C> <C>
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- ---------------------------------------------------------------------------------------------------------------------
PROPOSED MAXIMUM AMOUNT OF
TITLE OF SECURITIES TO BE REGISTERED AGGREGATE OFFERING PRICE(1) REGISTRATION FEE
- ---------------------------------------------------------------------------------------------------------------------
Common Stock, $0.001 par value........................... $75,000,000 $19,800
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</TABLE>
(1) Includes shares that the Underwriters will have the option to purchase
solely to cover over-allotments, if any. Estimated solely for the purpose of
calculating the amount of the registration fee in accordance with Rule
457(o) under the Securities Act of 1933.
------------------------
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 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON
SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
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<PAGE> 2
SUBJECT TO COMPLETION, DATED FEBRUARY 22, 2000
THE INFORMATION CONTAINED IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED.
THESE SECURITIES MAY NOT BE SOLD 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.
SHARES
[VIROLOGIC LOGO]
COMMON STOCK
$ PER SHARE
- --------------------------------------------------------------------------------
This is an initial public offering of common stock of ViroLogic, Inc.
We expect that the price to the public in the offering will be between $ and
$ per share. The market price of the shares after the offering may be higher
or lower than the offering price.
We have applied to include the common stock on the Nasdaq National Market under
the symbol "VLGC."
INVESTING IN THE COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON
PAGE 5.
<TABLE>
<CAPTION>
PER SHARE TOTAL
--------- -----------
<S> <C> <C>
Price to the public.................................. $ $
Underwriting discount................................
Proceeds to ViroLogic................................
</TABLE>
We have granted an over-allotment option to the underwriters. Under this option,
the underwriters may elect to purchase a maximum of additional shares from
us within 30 days following the date of this prospectus to cover
over-allotments.
- --------------------------------------------------------------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
CIBC WORLD MARKETS
ING BARINGS
PRUDENTIAL VECTOR HEALTHCARE
A UNIT OF PRUDENTIAL SECURITIES
The date of this prospectus is , 2000.
<PAGE> 3
<TABLE>
<S> <C> <C>
PhenoSense HIV is a test that directly TEXT: To perform our PhenoSense HIV TEXT: Test results are reported using
measures the resistance of HIV to anti- test, we: curve diagrams for each drug
viral drugs. When making HIV treatment
decisions, PhenoSense HIV provides TEXT: 1. Obtain a blood sample from TEXT: Red curves represent patient's virus.
direction and guidance toward the most patient Blue curves represent drug-sensitive control
effective drugs. It is: virus.
ARTWORK: Picture of blooddrop
DIRECT: detects drug resistance of HIV ARTWORK: Picture of print-out report of
without complex interpretation of TEXT: 2. Isolate the HIV virus test results
genetic mutations
ARTWORK: Picture of virus
QUANTITATIVE: measures the degree of
drug resistance and susceptibility TEXT: 3. Copy of viral genes corres-
ponding to drug targets
RELIABLE: results are accurate and
reproducible ARTWORK: Picture representing vector
with indicator
COMPREHENSIVE: evaluates drug resis-
tance to all currently available TEXT: 4. Insert genes into vector
HIV drugs
ARTWORK: Picture of resistance test
VERSATILE: can be modified to vector
evaluate new classes of HIV drugs
TEXT: 5. Introduce assembled vector
USER-FRIENDLY: results are easy to read into living cells
and understand
ARTWORK: Picture of assembled vector
RAPID: can be performed in eight to inserted into cell
ten days
TEXT: 6. Add anti-viral drugs to cells
ARTWORK: Small compass in a human hand
TEXT: 7. Allow vector to complete
TEXT: PhenoSense HIV Assay a single round of replication
TEXT: Choosing the path of least TEXT: 8. Measure production of
resistance indicator to evaluate drug resistance
TEXT: 9. Analyze data and generate
patient report
</TABLE>
PN: 26
ARTWORK: Two charts with curves, one labeled "susceptible" and one labeled
"resistant."
TEXT: Drug Susceptibility Curves.
Test results are reported using curve diagrams. Solid curves represent
the patient's virus and dotted curves represent a drug-sensitive control
virus.
When the patient virus curve closely aligns with the control virus curve
(above left), the patient's virus is sensitive to the drug.
When the patient curve shifts to the right of the control curve (above
right), the patient's virus is demonstrating increased resistance. The
greater the curve shift to the right, the greater is the degree of
resistance.
PN: 27
ARTWORK: Diagram of resistance test vector with labels.
TEXT: Resistance Test Vector.
Construction of a resistance test vector for use in PhenoSense tests
involves:
o the insertion of the specific genes from a patient's virus that
correspond to the targets of anti-viral drugs.
o the inclusion of an indicator, like luciferase, to allow measurement of
replication.
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.......................................... 6
Risk Factors................................................ 10
Forward-Looking Statements.................................. 17
Use of Proceeds............................................. 18
Dividend Policy............................................. 18
Capitalization.............................................. 19
Dilution.................................................... 20
Selected Financial Data..................................... 21
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 22
Business.................................................... 26
Management.................................................. 38
Principal Stockholders...................................... 46
Related Party Transactions.................................. 48
Description of Capital Stock................................ 49
Shares Eligible for Future Sale............................. 52
Underwriting................................................ 54
Legal Matters............................................... 56
Experts..................................................... 56
Where You Can Find More Information......................... 56
Index to Financial Statements............................... F-1
</TABLE>
------------------------------------
ViroLogic, the ViroLogic logo, PhenoSense, GeneSeq, Therapy Guidance System, TGS
and Choosing the Path of Least Resistance are trademarks of ViroLogic. All other
product names, trade names and trademarks included in this prospectus are the
property of their respective owners. As used in this prospectus, the terms "we,"
"us," "our," the "Company" and "ViroLogic" mean ViroLogic, Inc. (unless the
context indicates a different meaning).
Unless otherwise stated, all information contained in this prospectus assumes:
- - no exercise of the over-allotment option granted to the underwriters
- - a one for two reverse stock split of our common stock
- - the conversion of all outstanding shares of our preferred stock into shares of
common stock
The underwriters are offering the shares subject to various conditions and may
reject all or part of any order.
5
<PAGE> 5
PROSPECTUS SUMMARY
This summary highlights information contained in other parts of this
prospectus. Because it is a summary, it does not contain all of the
information that you should consider before investing in the shares. You
should read the entire prospectus carefully.
THE COMPANY
We are a biotechnology company developing and marketing innovative products to
guide and improve treatment of viral diseases. We have developed a practical way
of directly measuring the impact of genetic mutations on drug resistance and
using this information to guide therapy. We have a proprietary technology,
called PhenoSense, for testing drug resistance in viruses that cause serious
diseases such as AIDS, hepatitis B and hepatitis C. We believe our products have
the potential to revolutionize the way physicians treat these diseases.
Our first product, PhenoSense HIV, is a test that directly and quantitatively
measures resistance of a patient's HIV to anti-viral drugs. The results help
physicians select appropriate drugs for their HIV patients. We began actively
marketing PhenoSense HIV to physicians in November 1999.
We are also developing PhenoSense products for other viral diseases.
Additionally, we are developing an interactive database built from the results
of our PhenoSense tests and other clinical data, which we call the Therapy
Guidance System, or TGS. We intend to make TGS available to physicians via the
Internet as a tool to guide patient therapy.
VIRAL DRUG RESISTANCE
Viruses like HIV are treated with drugs that inhibit the virus' reproduction and
therefore slow the progression of disease. However, during reproduction, viruses
often change slightly, or mutate. As a result, anti-viral drugs are typically
effective for only a limited time because viruses develop resistance through
mutation. To address this problem, anti-viral drugs must be used in combination,
to simultaneously attack different targets within a virus and slow the
development of drug resistance. However, even the most potent drug combinations
eventually fail in the majority of patients. To achieve long term clinical
benefit, it is desirable to select drugs that maximally suppress viral
reproduction and to avoid drugs to which a patient's virus is resistant. As a
result, there is a critical need for products that can directly measure viral
drug resistance.
The need for resistance tests is well illustrated in HIV, where resistance is a
serious crisis despite the availability of 14 approved drugs. HIV infection
cannot be cured with these drugs, requiring lifelong treatment with complex drug
combinations. When these combinations fail, which can occur multiple times per
year for many patients, physicians must make difficult treatment decisions to
select effective alternative drugs. A panel led by the Department of Health and
Human Services has recently issued guidelines that recommend routine use of
resistance tests for HIV patients.
OUR SOLUTION
PhenoSense is our proprietary phenotypic drug resistance testing technology.
Phenotypic drug resistance tests directly measure the susceptibility of a
patient's virus to anti-viral drugs by adding a drug to a virus sample and
determining whether the virus reproduces. We believe that we are revolutionizing
phenotypic testing by avoiding the need to grow, or "culture," viruses during
testing, thereby dramatically shortening the time required to perform the tests
and improving the consistency and accuracy of the tests. Also, our tests can be
performed in large numbers, making them practical for routine use in managing
patient care.
6
<PAGE> 6
OUR PRODUCTS
PhenoSense HIV. PhenoSense HIV is a patented phenotypic drug resistance test
that measures the resistance of HIV to all approved HIV drugs. Nearly one
million people in the United States are infected with HIV, of whom approximately
300,000 are currently receiving anti-viral therapy. Assuming resistance testing
becomes widely accepted, we believe these treated patients would require a total
of at least 500,000 tests per year. We are marketing the product to physicians
in the United States through our own sales force, initially focusing on the
1,000 leading physicians who treat 80% of the total HIV/AIDS patient population.
Overcoming resistance to existing drugs is a critical objective when developing
new drugs. In November 1999, the FDA Antiviral Drugs Advisory Committee
emphatically recommended that resistance tests should be utilized in the
development of new anti-viral drugs for HIV. To date, we have signed testing
agreements with six major pharmaceutical companies involved in AIDS drug
development. In addition to increasing the use of PhenoSense HIV in clinical
trials, we intend to form collaborations with pharmaceutical companies for the
application of our viral resistance technology to the discovery and development
of new anti-viral drugs.
PhenoSense HBV. We are currently developing PhenoSense HBV for hepatitis B
virus. Over one million people in the United States are infected with HBV, and
it is estimated that approximately half of those infected would benefit from
anti-viral drug therapy. More than 15 drugs for treatment of HBV infection are
in preclinical or clinical development. Just as with HIV, we believe our
PhenoSense HBV drug resistance testing will play a significant role in guiding
HBV treatment and in clinical trials for new HBV drugs.
PhenoSense HCV. We have designed and intend to develop PhenoSense HCV, for
hepatitis C virus. Approximately four million people in the United States are
infected with HCV of whom approximately 75% we believe could benefit from
anti-viral drug therapy. Many drugs for treatment of HCV are in preclinical or
clinical development. We expect PhenoSense HCV will be used to assist in the
discovery and development of HCV drugs and, in the longer term, the assessment
of drug resistance in HCV patients.
Other Products. We are developing and marketing a number of additional products.
We sell GeneSeq HIV, a genotypic test that identifies mutations associated with
drug resistance. We are also developing a test to measure viral fitness, a
measure of a virus' ability to reproduce and infect new cells.
Therapy Guidance System. We are building a proprietary database of test results
and other patient information that we expect to combine with sophisticated data
mining and outcome modeling software to build our Therapy Guidance System. TGS
will be a computer tool designed to help physicians select optimal therapies for
each patient. We expect to provide TGS as a fee-based service over the Internet.
GENERAL INFORMATION
We were incorporated in Delaware in November 1995. Our principal executive
offices are located at 270 East Grand Avenue, South San Francisco, CA 94080. Our
telephone number is (650) 635-1100. Our website is located at
"www.virologic.com." Our website is not part of this prospectus.
7
<PAGE> 7
THE OFFERING
Common stock offered...................... shares
Common stock to be outstanding after the
offering.................................. shares (1)
Use of proceeds........................... We intend to use the net proceeds
from this offering for sales and
marketing, capital expenditures
including the expansion of our
clinical laboratory capabilities,
research and development, and
general corporate purposes.
Proposed Nasdaq National Market symbol.... VLGC
- ---------------------------
(1) The number of shares of common stock to be outstanding after the offering is
based on the number of shares outstanding as of December 31, 1999, and
includes 4,230,816 shares of common stock from a private placement of $15.7
million of Series C preferred stock in January and February 2000. The number
excludes:
- 1,468,810 shares of common stock issuable upon exercise of options
outstanding as of February 22, 2000, at a weighted average exercise price
of $3.47 per share
- 745,082 shares of common stock issuable upon exercise of warrants to
purchase our common stock or preferred stock outstanding as of February
22, 2000, at a weighted average exercise price of $4.83 per share
8
<PAGE> 8
SUMMARY FINANCIAL DATA
(in thousands, except per share data)
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
(NOVEMBER 14,
1995) TO YEAR ENDED DECEMBER 31,
DECEMBER 31, ----------------------------
1996 1997 1998 1999
------------- ------- ------- --------
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue...................................... $ -- $ -- $ 102 $ 1,069
Operating costs and expenses:
Cost of revenue............................ -- -- 17 627
Research and development................... 867 2,458 5,977 9,588
General and administrative................. 510 858 1,782 5,622
Sales and marketing........................ -- -- 484 1,196
------- ------- ------- --------
Total costs and operating expenses........... 1,377 3,316 8,260 17,033
------- ------- ------- --------
Operating loss............................... (1,377) (3,316) (8,158) (15,964)
Interest income.............................. 116 262 302 249
Interest expense............................. (13) (83) (198) (243)
------- ------- ------- --------
Net loss..................................... $(1,274) $(3,137) $(8,054) $(15,958)
======= ======= ======= ========
Net loss per share(1)........................ $ (0.74) $ (1.21) $ (1.71) $ (3.34)
======= ======= ======= ========
Shares used in computing net loss per
share(1)................................... 1,720 2,591 4,700 4,772
Pro forma net loss per share(1).............. $ (1.99)
========
Shares used in computing pro forma net loss
per share(1)............................... 8,015
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1999
----------------------------------------
PRO FORMA
ACTUAL PRO FORMA(2) AS ADJUSTED(3)
-------- ------------ --------------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents........................ $ 2,208 $17,862 $
Restricted cash.................................. 950 950 950
Working capital.................................. 522 16,176
Total assets..................................... 9,777 25,431
Long term obligations, less current portion...... 1,051 1,051 1,051
Total stockholders' equity....................... 4,698 20,352
</TABLE>
- ---------------------------
(1) See notes to the financial statements for a description of the number of
shares used in the computation of net loss per share and pro forma net loss
per share.
(2) Pro forma to reflect the January and February 2000 sale of Series C
preferred stock for proceeds of approximately $15.7 million.
(3) Pro forma as adjusted to give effect to our sale of shares to be
sold in the initial public offering at an assumed offering price of $ per
share, less underwriters' discounts and offering expenses.
9
<PAGE> 9
RISK FACTORS
You should carefully consider the following factors and other information in
this prospectus before deciding to invest in the shares.
WE EXPECT TO INCUR FUTURE OPERATING LOSSES AND MAY NOT ACHIEVE PROFITABILITY,
WHICH MAY CAUSE OUR STOCK PRICE TO FALL.
We have experienced significant and increasing operating losses each year since
our inception and expect to incur substantial additional operating losses for at
least the next two years. We experienced net losses of approximately $3.1
million in 1997, $8.1 million in 1998 and $16.0 million in 1999. As of December
31, 1999, we had an accumulated deficit of approximately $28.4 million. We
expect to continue to incur substantial operating losses for the foreseeable
future primarily as a result of expected increases in expenses for:
- sales and marketing
- expanding patient sample processing capabilities
- research and product development costs
- acquisition of additional office space and other necessary facilities
- general and administrative costs
If our history of operating losses continues, our stock price may fall and you
may lose part or all of your investment.
THE MARKET FOR PHENOTYPIC RESISTANCE TESTING PRODUCTS FOR VIRUSES IS NEW AND IT
MAY NOT BECOME AN ACCEPTED METHOD OF MANAGING ANTI-VIRAL DRUG TREATMENT.
An important part of our business strategy is to establish phenotypic resistance
testing as the standard of care to guide and improve the treatment of viral
diseases. Our ability to do so will depend on the widespread acceptance and use
by physicians and clinicians of phenotypic resistance testing. Phenotypic
resistance testing is new. We cannot predict the extent to which physicians and
clinicians will accept and use phenotypic resistance testing. They may prefer
competing technologies and products such as genotypic testing. The commercial
success of phenotypic resistance testing will require demonstrations of its
advantages and potential economic value in relation to the current standard of
care, as well as to genotypic testing. If phenotypic resistance testing is not
accepted, our business, financial condition and results of operations will be
harmed.
OUR PHENOSENSE TESTING PRODUCTS MAY NOT ACHIEVE MARKET ACCEPTANCE, WHICH COULD
LIMIT OUR FUTURE REVENUE.
We have introduced only one product using our proprietary PhenoSense technology,
PhenoSense HIV, which we began actively marketing in November 1999. Because
PhenoSense HIV has been available for a limited period of time, its commercial
value has not been established and has not been widely accepted among physicians
and their patients. We are still in the early stages of development of new
testing products applying our PhenoSense technology to other viral diseases. If
PhenoSense HIV is not accepted in the marketplace, our ability to sell other
PhenoSense products would be undermined. If PhenoSense HIV or other applications
of our proprietary PhenoSense technology do not gain market acceptance, we will
be unable to generate sales. Market acceptance will depend on:
- our marketing efforts and continued ability to demonstrate the utility of
PhenoSense in guiding anti-viral drug therapy
- our ability to demonstrate the advantages and potential economic value of
our PhenoSense testing products over current treatment methods and other
resistance tests
If the market does not accept our products, our ability to generate revenue will
be limited.
OUR REVENUES WILL BE DIMINISHED IF PAYORS DO NOT AUTHORIZE REIMBURSEMENT FOR OUR
PRODUCTS.
There are continuing efforts by government and third-party payors, that
reimburse patients and healthcare providers for medical expenses, to contain or
reduce the costs of healthcare. This
10
<PAGE> 10
could limit the price that we can charge for our products and hurt our ability
to generate revenues.
In the United States, there has been and will continue to be significant efforts
on both the federal and state levels to reduce costs in government healthcare
programs and otherwise implement government control of healthcare costs. In
addition, increasing emphasis on managed care in the United States will continue
to put pressure on the pricing of healthcare products. Significant uncertainty
exists as to the reimbursement status of new medical products like PhenoSense
HIV. Third-party payors, including state payors and Medicare, are challenging
the prices charged for medical products and services. Government and other
third-party payors increasingly are limiting both coverage and the level of
reimbursement for new diagnostic services and other products. Third-party
insurance coverage may not be available to patients for any of our existing
products or products we discover and develop. If government and other
third-party payors do not provide adequate coverage and reimbursement for
PhenoSense HIV or other phenotypic testing products, our revenues will be
reduced.
IF WE ARE UNABLE TO EXPAND OUR SALES AND MARKETING CAPABILITIES, WE MAY NOT BE
ABLE TO EFFECTIVELY COMMERCIALIZE OUR PRODUCTS.
We currently have only five sales people and limited marketing capability. In
order to commercialize our products effectively, we must expand our sales and
marketing capabilities or arrange with a third party to perform these services.
We may not be able to do this successfully. To market our products, we must
further develop our marketing and sales force. If we enter into co-promotion or
other marketing arrangements, our share of product revenues is likely to be
lower than if we directly marketed and sold our products through our own sales
force. If we fail to effectively commercialize our products our revenue will be
reduced.
WE HAVE LIMITED EXPERIENCE PROCESSING PATIENT SAMPLES FOR OUR PHENOSENSE HIV
TEST AND MAY ENCOUNTER PROBLEMS OR DELAYS IN EXPANDING OUR AUTOMATED TESTING
SYSTEMS, WHICH COULD RESULT IN LOST SALES REVENUE.
We currently have only one clinical laboratory facility, which has been
operating since April 1998. We have only recently begun to process a significant
number of patient samples and are continuing to develop our quality-control
procedures. In order to meet the projected demand for PhenoSense HIV and other
future phenotypic resistance testing products, we will have to process many more
patient samples than we are currently processing. Thus, we need to develop and
implement additional automated systems to perform our tests. We also need to
develop more sophisticated software to support the automated tests, analyze the
data generated by our tests, and report the results. We may not be able to do
this. Further, as we attempt to scale up our processing of patient samples,
processing or quality-control problems may arise.
If we are unable to consistently process patient samples on a timely basis
because of these or other factors, or if we encounter problems with our
automated processes, our revenues will be limited.
WE FACE INTENSE COMPETITION, AND IF OUR COMPETITORS' EXISTING PRODUCTS OR NEW
PRODUCTS ARE MORE EFFECTIVE THAN OUR PRODUCTS, THE COMMERCIAL OPPORTUNITY FOR
OUR PRODUCTS WILL BE REDUCED OR ELIMINATED.
The biotechnology industry evolves at a rapid pace and is highly competitive.
The commercial opportunity for our products will be reduced or eliminated if our
competitors develop and market new testing products that are superior to, or are
less expensive than, PhenoSense HIV or other phenotypic resistance testing
products we develop using our proprietary PhenoSense technology.
Our major competitors include manufacturers and distributors of phenotypic drug
resistance technology, such as Virco N.V. We also compete with makers of
genotypic tests such as PE Biosystems Group of PE Corporation and Visible
Genetics Inc. Each of these competitors is attempting to establish its test as
the standard of care. Virco's phenotypic test and genotypic tests have been
commercially available for a longer time than has PhenoSense HIV. Genotypic
tests are cheaper and generally faster than our phenotypic resistance tests.
Our competitors may successfully develop and market other testing products that
are either superior to those that we may develop or that are marketed prior to
marketing of our testing
11
<PAGE> 11
products. Some of our competitors have substantially greater financial resources
and research and development staffs than we do. In addition, some of our
competitors have significantly greater experience in developing products, and in
obtaining the necessary regulatory approvals of products and processing and
marketing products.
THE INTELLECTUAL PROPERTY UNDERLYING OUR PHENOSENSE TECHNOLOGY AND TRADE SECRETS
MAY NOT BE ADEQUATE, ALLOWING THIRD PARTIES TO USE OUR PHENOSENSE TECHNOLOGY OR
SIMILAR TECHNOLOGIES, AND THUS REDUCING OUR ABILITY TO COMPETE IN THE MARKET.
We rely on a patent to protect our intellectual property rights related to our
first product, PhenoSense HIV. We have filed nine U.S. patent applications and
their foreign counterparts covering our PhenoSense technology. The strength of
this protection, however, is uncertain. In particular, we cannot ensure that:
- we were the first to invent the technologies covered by our patent or
pending patent applications
- we were the first to file patent applications for these inventions
- others will not independently develop similar or alternative technologies or
duplicate any of our technologies
- any of our pending patent applications will result in issued patents
- any patents issued to us will provide a basis for commercially viable
products or will provide us with any competitive advantages or will not be
challenged by third parties
Other companies may have patents or patent applications relating to products or
processes similar to, competitive with or otherwise related to our products.
These products and processes include technologies relating to hepatitis C virus.
Patents covering these technologies may adversely impact our ability to
commercialize one or more of our PhenoSense products.
Costly litigation might be necessary to protect our patent position. Patent law
relating to the scope of claims in the technology fields in which we operate
(including biotechnology and information technology) is still evolving and,
consequently, patent positions in our industry are generally uncertain. We
cannot assure you that we will prevail in any of these lawsuits or that, if
successful, we will be awarded commercially valuable remedies. In addition, it
is possible that we will not have the required resources to pursue such
litigation or to otherwise protect our patent rights. Failure to pursue and
prevail in litigation to protect our patent rights could materially harm our
business and financial condition.
We also rely on unpatented trade secrets to protect our proprietary technology.
Other companies may independently develop or otherwise acquire equivalent
technology or gain access to our proprietary technology.
OUR PRODUCTS COULD INFRINGE ON THE INTELLECTUAL PROPERTY RIGHTS OF OTHERS, WHICH
MAY CAUSE US TO ENGAGE IN COSTLY LITIGATION AND, IF WE ARE NOT SUCCESSFUL, COULD
CAUSE US TO PAY SUBSTANTIAL DAMAGES AND PROHIBIT US FROM SELLING OUR PRODUCTS.
Third parties may assert infringement or other intellectual property claims
against us based on their patents or other intellectual property claims. We may
have to pay substantial damages, possibly including treble damages, for past
infringement if it is ultimately determined that our products infringe a third
party's patents. Further, we may be prohibited from selling our products before
we obtain a license, which, if available at all, may require us to pay
substantial royalties. Even if infringement claims against us are without merit,
defending a lawsuit takes significant time, may be expensive and may divert
management attention from other business concerns.
WE MAY BE UNABLE TO BUILD BRAND LOYALTY BECAUSE OUR TRADEMARKS AND TRADE NAMES
MAY NOT BE PROTECTED.
Our registered or unregistered trademarks or trade names such as the name
PhenoSense, may be challenged, canceled, infringed, circumvented or declared
generic or determined to be infringing on other marks. We may not be able to
protect our rights to these trademarks and trade names, which we need to build
brand loyalty. Brand recognition is critical to our short-term and long term
marketing strategies especially as we commercialize future enhancements to our
products.
12
<PAGE> 12
WE ARE DEPENDENT ON A LICENSE FOR TECHNOLOGY WE USE IN OUR PHENOSENSE TESTING,
AND OUR BUSINESS WOULD SUFFER IF THE LICENSE WAS TERMINATED OR NOT RENEWED.
We license technology that we use in our PhenoSense testing products from a
third party. This license is not exclusive and, therefore, may be granted to our
competitors and others. The termination of this license would hurt our ability
to perform our PhenoSense testing, which would significantly harm our business.
IF WE DO NOT SUCCESSFULLY INTRODUCE NEW PRODUCTS USING OUR PHENOSENSE
TECHNOLOGY, WE MAY NOT ACHIEVE PROFITABILITY.
We intend to develop and market phenotypic resistance testing products for viral
diseases other than HIV, including hepatitis B and hepatitis C. We may not be
able to do so.
Demand for these products will depend in part on the development by others of
additional anti-viral drugs to fight these diseases. Physicians will likely use
our resistance tests to determine which drug is best for a particular patient
only if there are multiple drug treatment options. Several anti-viral drugs are
in development but we cannot assure you that they will be approved for
marketing, or if these drugs are approved that there will be a need for our
resistance tests.
If we are unable to develop and market phenotypic resistance test products for
other viral diseases, or if an insufficient number of anti-viral drug products
are approved for marketing, we may not achieve profitability.
OUR BUSINESS OPERATIONS AND THE OPERATION OF OUR CLINICAL LABORATORY FACILITY
ARE SUBJECT TO STRINGENT REGULATIONS AND IF WE ARE UNABLE TO COMPLY WITH THEM,
OUR BUSINESS MAY BE SIGNIFICANTLY HARMED.
The operation of our clinical laboratory facility is subject to a stringent
level of regulation under the Clinical Laboratory Improvement Amendments of
1988, or CLIA. For certification under CLIA, laboratories must meet various
requirements, including requirements relating to quality assurance, quality
control and personnel standards. Our laboratory is also subject to regulation by
the State of California and various other states. We have sought accreditation
by the College of American Pathologists, or CAP, and therefore are subject to
their requirements and evaluation. Our failure to comply with CLIA, state, or
other applicable requirements could result in various penalties, including loss
of certification or accreditation.
We are subject to various other federal, state and local laws and regulations,
and are unable to predict the extent of future government regulations.
Substantial expenditures are required on an ongoing basis to ensure that we
comply with existing regulations and to bring us into compliance with newly
instituted regulations.
We believe that the FDA will not at this time seek to fully regulate our
PhenoSense products under our current labeling and marketing plans. However, we
cannot predict the extent of future FDA regulation, and we might be subject in
the future to greater regulation, or different regulations, that could have a
material effect on our finances and operations.
We also believe that the FDA will not consider phenotypic testing conducted at a
clinical laboratory to require premarketing clearance. Although the FDA has
stated in the past that it believes that its jurisdiction extends to tests
generated in a clinical laboratory, the agency has said it will allow the home
brewed tests to be run and the results commercialized without FDA premarket
approval. We cannot be sure, however, that the FDA will not in the future
require premarket clearance, and clinical data demonstrating the sensitivity and
specificity, of our PhenoSense products.
Existing federal laws governing Medicare and Medicaid and other similar state
laws impose a variety of broadly described fraud and abuse prohibitions on
healthcare providers, including clinical laboratories; including federal anti-
kickback laws which prohibit clinical laboratories from, among other things,
making payments or furnishing other benefits intended to induce the referral of
patients for tests billed to Medicare, Medicaid or certain other federally
funded programs. Sanctions for violations of these laws may include exclusion
from participation in Medicare, Medicaid and other federal healthcare programs,
criminal and civil fines and penalties.
If we do not comply with existing or additional regulations, or if we incur
penalties, it could increase our expenses, prevent us from increasing
13
<PAGE> 13
revenues, or hinder our ability to conduct our business. In addition, changes in
existing regulations or new regulations may delay or prevent us from marketing
our products.
OUR LACK OF OPERATING EXPERIENCE MAY CAUSE US DIFFICULTY IN MANAGING OUR GROWTH.
We have limited experience selling our products and processing patient samples.
To grow, we will need to improve and expand our management and our operational
and financial systems. If our management is unable to manage our growth
effectively, our business and financial condition will be harmed.
CLINICIANS OR PATIENTS USING OUR PRODUCTS OR SERVICES MAY SUE US AND OUR
INSURANCE MAY NOT SUFFICIENTLY COVER ALL CLAIMS BROUGHT AGAINST US WHICH WILL
INCREASE OUR EXPENSES.
Clinicians, patients and others may at times seek damages from us if drugs are
incorrectly prescribed for a patient based on testing errors or similar claims.
Although we have obtained liability insurance coverage, we cannot guarantee that
liability insurance will continue to be available to us on acceptable terms or
that our coverage will be sufficient to protect us against all claims that may
be brought against us. A liability claim, even one without merit or for which we
have coverage, could result in significant legal defense costs, thereby
increasing our expenses.
FAILURE TO ATTRACT AND RETAIN SKILLED PERSONNEL COULD HINDER OUR RESEARCH AND
DEVELOPMENT EFFORTS AND IMPAIR OUR ABILITY TO COMPETE.
Our success depends on our continued ability to attract and retain highly
qualified management and scientific personnel. Competition for personnel is
intense. We believe stock options are a critical component of motivating and
retaining our key employees. Stock options granted shortly after the completion
of the offering may be less attractive to potential candidates for our
management and scientific positions, and, therefore, it may be more difficult to
fill those positions. If we cannot successfully attract and retain qualified
personnel, our research and development efforts could be hindered and our
ability to run our business effectively and compete with others in our industry
will be harmed.
IF WE NEED TO RAISE ADDITIONAL CAPITAL TO BUILD OUR BUSINESS AND IT IS NOT
AVAILABLE ON COMMERCIALLY REASONABLE TERMS, OUR ABILITY TO COMPETE MAY BE
DIMINISHED.
We anticipate that our existing capital resources and the net proceeds from this
offering will enable us to maintain currently planned operations for at least
two years. However, we may need additional funding sooner than anticipated. Our
inability to raise capital would seriously harm our business and product
development efforts. In addition, we may choose to raise additional capital due
to market conditions or strategic considerations even if we believe we have
sufficient funds for our current or future operating plans. To the extent that
additional capital is raised through the sale of equity or convertible debt
securities, the issuance of these securities could result in dilution to our
stockholders.
We currently have no credit facility or committed sources of capital. To the
extent operating and capital resources are insufficient to meet future
requirements, we will have to raise additional funds to continue the development
and commercialization of our technologies. These funds may not be available on
favorable terms, or at all. If adequate funds are not available on attractive
terms, we may be required to curtail operations significantly or to obtain funds
by entering into financing, supply or collaboration agreements on unattractive
terms.
WE MAY BE SUBJECT TO LITIGATION, WHICH WOULD BE TIME CONSUMING AND DIVERT OUR
RESOURCES AND THE ATTENTION OF OUR MANAGEMENT.
We have been involved in a dispute with a significant stockholder and former
employee. We had to allocate significant monetary and management resources to
resolve that dispute. In the future, our stockholders or former employees may
bring further claims and we may have to spend significant additional resources
and time. Even if we are eventually successful in our defense of any such claim,
the time and money spent may prevent us from operating our business effectively
or profitably or may distract our management.
14
<PAGE> 14
OUR OPERATING RESULTS MAY FLUCTUATE FROM QUARTER TO QUARTER, MAKING IT LIKELY
THAT, IN SOME FUTURE QUARTER OR QUARTERS, WE WILL FAIL TO MEET ANALYSTS'
ESTIMATES OF OPERATING RESULTS OR FINANCIAL PERFORMANCE, CAUSING OUR STOCK PRICE
TO FALL.
If revenue declines in a quarter, our earnings will decline because many of our
expenses are relatively fixed. In particular, research and development, sales
and marketing and general and administrative expenses are not affected directly
by variations in revenue.
It is likely that in some future quarter or quarters, our operating results will
be below the expectations of securities analysts or investors. In this event,
the market price of our common stock may fall abruptly and significantly.
Because our revenue and operating results are difficult to predict, we believe
that period-to-period comparisons of our results of operations are not a good
indication of our future performance.
IF A NATURAL DISASTER STRIKES OUR CLINICAL LABORATORY FACILITY WE WOULD BE
UNABLE TO PROCESS OUR CUSTOMERS' SAMPLES FOR A SUBSTANTIAL AMOUNT OF TIME AND WE
WOULD LOSE REVENUE.
We rely on a single clinical laboratory facility to process patient samples for
our PhenoSense HIV test and have no alternative facilities. We will also use
this facility for conducting other tests we develop, and even if we move into
different or additional facilities they will likely be in close proximity to our
current clinical laboratory. Our clinical laboratory and some pieces of
processing equipment are difficult to replace and could require substantial
replacement lead-time. Our processing facility may be affected by natural
disasters such as earthquakes and floods. Earthquakes are of particular
significance since our clinical laboratory is located in South San Francisco,
California, an earthquake-prone area. In the event our existing clinical
laboratory facility or equipment is affected by man-made or natural disasters,
we would be unable to process patient samples and meet customer demands or sales
projections. If our patient sample processing operations were curtailed or
ceased, we would not be able to perform our tests and we would lose revenue.
NEW INVESTORS IN OUR COMMON STOCK WILL EXPERIENCE IMMEDIATE AND SUBSTANTIAL
DILUTION.
The initial public offering price is substantially higher than the book value
per share of our common stock. Investors purchasing common stock in this
offering will, therefore, incur immediate dilution of $ in net
tangible book value per share of common stock, based on the initial public
offering price of $ per share. Investors will incur additional dilution upon
the exercise of outstanding stock options and warrants.
WE HAVE BROAD DISCRETION OVER THE USE OF THE NET PROCEEDS FROM THE OFFERING.
We have broad discretion to allocate the net proceeds of the offering. The
timing and amount of our actual expenditures are subject to change and will be
based on many factors, including:
- success of our sales and marketing efforts
- competitive market developments
- progress in and scope of our research and development activities
Our management will determine, in its sole discretion without the need for
stockholder approval, how to allocate these proceeds. If we do not wisely
allocate the proceeds, our ability to carry out our business plan will be
harmed.
CONCENTRATION OF OWNERSHIP AMONG OUR EXISTING EXECUTIVE OFFICERS, DIRECTORS AND
PRINCIPAL STOCKHOLDERS MAY PREVENT NEW INVESTORS FROM INFLUENCING SIGNIFICANT
CORPORATE DECISIONS.
Following this offering our directors, entities affiliated with our directors
and our executive officers will beneficially own, in the aggregate,
approximately % of our outstanding common stock. These stockholders as a
group will be able to substantially influence our management and affairs. If
acting together, they would be able to influence most matters requiring the
approval by our stockholders, 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 in our control at a premium price if these stockholders
oppose it.
15
<PAGE> 15
OUR STOCK PRICE MAY BE VOLATILE, AND YOUR INVESTMENT IN OUR STOCK COULD DECLINE
IN VALUE.
Prior to this offering, there has been no public market for our common stock. An
active public market for our common stock may not develop or be sustained after
the offering. The initial public offering price will be determined by
negotiation between the representatives of the underwriters and us and may not
be indicative of future market prices. Among the factors to be considered in
determining the initial public offering price of the common stock, in addition
to prevailing market conditions, will be:
- estimates of our business potential and earnings prospects
- an assessment of our management
- the consideration of the above factors in relation to market valuations of
companies in related businesses
The market prices for securities of biotechnology companies in general have been
highly volatile and may continue to be highly volatile in the future. The
following factors, in addition to other risk factors described in this section,
may have a significant adverse impact on the market price of our common stock:
- announcements of technological innovations or new commercial products by our
competitors
- developments concerning proprietary rights, including patents
- publicity regarding actual or potential medical results relating to products
under development by our competitors
- regulatory developments in the United States and foreign countries
- litigation
- economic and other external factors or other disaster or crisis
- period-to-period fluctuations in financial results
IF OUR STOCKHOLDERS SELL SUBSTANTIAL AMOUNTS OF OUR COMMON STOCK AFTER THE
OFFERING, THE MARKET PRICE OF OUR COMMON STOCK MAY FALL.
If our stockholders sell substantial amounts of our common stock, including
shares issued upon the exercise of outstanding options and warrants, the market
price of our common stock may fall. These sales also might make it more
difficult for us to sell equity or equity-related securities in the future at a
time and price that we deem appropriate.
At February 22, 2000, approximately 14,684,390 shares of common stock,
representing % of our common stock outstanding after the offering, were
unregistered and eligible for sale, subject to compliance with Rule 144 or Rule
701 under the Securities Act.
While the holders of all of these shares are subject to lock-up agreements with
the underwriters in this offering for 180 days after this offering, CIBC World
Markets Corp., in its sole discretion, may release any portion or all of these
shares from the lock-up restrictions. In addition, sales of a substantial number
of shares could occur at any time after the expiration of the 180-day period.
This may have an adverse effect on the price of our common stock and may impair
our ability to raise capital in the future.
PROVISIONS OF OUR CHARTER DOCUMENTS AND DELAWARE LAW MAY INHIBIT A TAKEOVER,
WHICH COULD LIMIT THE PRICE INVESTORS MIGHT BE WILLING TO PAY IN THE FUTURE FOR
OUR COMMON STOCK.
Provisions in our certificate of incorporation and bylaws may have the effect of
delaying or preventing an acquisition, or merger in which we are not the
surviving company or changes in our management. In addition, because we are
incorporated in Delaware, we are governed by the provisions of Section 203 of
the Delaware General Corporation Law. These provisions could discharge
acquisitions or other changes in our control (including those in which our
stockholders might otherwise receive a premium for their shares over
then-current market prices) and otherwise limit the price that investors might
be willing to pay in the future for our common stock.
16
<PAGE> 16
FORWARD-LOOKING STATEMENTS
Some of the information in this prospectus contains forward-looking statements
within the meaning of the federal securities laws. These statements may be found
under "Prospectus Summary," "Risk Factors," "Use of Proceeds," "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
"Business" and elsewhere in this prospectus.
Forward-looking statements typically are identified by use of terms such as
"may," "will," "should," "could," "expect," "plan," "anticipate," "believe,"
"estimate," "predict," "potential," "continue" and similar words, although some
forward-looking statements are expressed differently. You should be aware that
our actual results could differ materially from those contained in the
forward-looking statements due to a number of factors, including:
- failure to successfully commercialize our products
- competitive factors
- general economic conditions
- uncertainty regarding our patents and patent rights (including the risk that
we may be forced to engage in costly litigation to protect such patent
rights and the material harm to us if there were an unfavorable outcome of
any such litigation)
- technological change
- government regulation
- changes in industry practice
- one-time events
You should also consider carefully the statements under "Risk Factors" and other
sections of this prospectus, which address additional factors that could cause
our actual results to differ from those set forth in the forward-looking
statements. All subsequent written and oral forward-looking statements
attributed to us or persons acting on our behalf are expressly qualified in
their entirety by the applicable cautionary statements. We have no plans to
update these forward-looking statements.
17
<PAGE> 17
USE OF PROCEEDS
We estimate that our net proceeds from the sale of the shares of common stock we
are offering will be approximately $ . If the underwriters fully exercise
their over-allotment option, the net proceeds of the shares sold by us will be
$ . "Net proceeds" are what we expect to receive after paying the
underwriting discount and other expenses of the offering. For the purpose of
estimating net proceeds, we are assuming that the initial public offering price
will be $ per share.
We intend to use the net proceeds of this offering primarily for:
- expanding our sales and marketing activities
- capital expenditures, including the expansion of our clinical laboratory
capabilities
- research and development
- general corporate purposes
The timing and amount of our actual expenditures are subject to change and will
be based on many factors, including:
- success of our sales and marketing efforts
- competitive market developments
- progress in and scope of our research and development activities
These or other factors may result in our making changes in the use of these
proceeds. Our management has broad discretion as to the allocation of the net
proceeds of this offering.
Until we use the net proceeds of the offering, we will invest the funds in
short-term, investment grade, interest-bearing securities.
DIVIDEND POLICY
We have never paid any cash dividends on our capital stock. We anticipate that
we will retain earnings to support operations and to finance the growth and
development of our business. Therefore, we do not expect to pay cash dividends
in the foreseeable future.
18
<PAGE> 18
CAPITALIZATION
The following table shows:
- our actual capitalization on December 31, 1999
- our as adjusted capitalization on December 31, 1999, assuming the conversion
of all outstanding convertible preferred stock into 5,356,946 shares of our
common stock and the completion of the offering at an assumed initial public
offering price of $ per share
<TABLE>
<CAPTION>
DECEMBER 31, 1999
-----------------------
ACTUAL AS ADJUSTED
-------- -----------
(IN THOUSANDS)
<S> <C> <C>
Long term loan, less current portion........................ $ 1,051 $ 1,051
-------- --------
Stockholders' equity:
Preferred stock; $0.001 par value; 13,959,459 shares
authorized, 9,749,265 shares issued and outstanding
(5,356,946 common shares on an as-if converted basis),
actual; 5,000,000 shares authorized, no shares issued
and outstanding, as adjusted........................... 10 --
Common stock; $0.001 par value; 30,000,000, shares
authorized, 5,096,628 shares issued and outstanding,
actual; 60,000,000 shares authorized, shares
issued and outstanding, as adjusted.................... 10
Additional paid-in capital................................ 33,566
Deferred compensation..................................... (414) (414)
Notes receivable from officers and employees.............. (46) (46)
Accumulated deficit....................................... (28,423) (28,423)
-------- --------
Total stockholders' equity........................... 4,698
-------- --------
Total capitalization.............................. $ 5,749 $
======== ========
</TABLE>
The number of shares of common stock to be outstanding after the offering is
based on the number of shares outstanding as of December 31, 1999 and excludes:
- 1,468,810 shares issuable upon exercise of options outstanding as of
February 22, 2000, at a weighted average exercise price of $3.47 per share
- 745,082 shares of common stock issuable upon exercise of warrants to
purchase our common or preferred stock outstanding as of February 22, 2000,
at a weighted average exercise price of $4.83 per share
- 4,230,816 shares of common stock from a private placement of $15.7 million
of Series C preferred stock in January and February 2000
19
<PAGE> 19
DILUTION
The pro forma net tangible book value of our common stock as of December 31,
1999 was $4.7 million, or approximately $0.45 per share. Pro forma net tangible
book value per share represents the amount of our stockholders' equity, less
intangible assets, divided by 10,453,574 shares of common stock outstanding
after giving effect to the conversion of all outstanding shares of preferred
stock into shares of common stock upon completion of this offering.
Net tangible book value dilution per share to new investors represents the
difference between the amount per share paid by purchasers of shares of common
stock in this offering made hereby and the pro forma net tangible book value per
share of common stock immediately after completion of this offering. After
giving effect to the sale by us of shares of common stock in this offering,
after deducting the underwriting discounts and offering expenses and the
application of the estimated net proceeds, our pro forma net tangible book value
as of December 31, 1999 would have been $ per share to existing stockholders
and an immediate dilution in net tangible book value of $ per share to
purchasers of common stock in this offering, as illustrated in the following
table:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $
--------
Pro forma net tangible book value per share as of December
31, 1999.................................................. $ 0.45
Increase in net tangible book value per share attributable
to the offering...........................................
--------
Pro forma net tangible book value per share as of December
31, 1999 after giving effect to the offering..............
--------
Dilution per share to new investors in the offering......... $
========
</TABLE>
The following table shows the total consideration paid and the average price per
share paid by the existing stockholders and by new investors, after deducting
underwriting discounts and offering expenses payable by us at an assumed initial
public offering price of $ per share.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
--------------------- ---------------------- PRICE PER
NUMBER PERCENT AMOUNT PERCENT SHARE
---------- ------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders......... 10,453,574 % $33,177,790 % $3.17
New investors.................
---------- --- ----------- ---
Total.................... 100% $ 100%
========== === =========== ===
</TABLE>
The number of shares of common stock to be outstanding after the offering is
based on the number of shares outstanding as of December 31, 1999 and excludes:
- 1,468,810 shares of common stock issuable upon exercise of options
outstanding as of February 22, 2000, at a weighted average exercise price of
$3.47 per share
- 745,082 shares of common stock issuable upon the exercise of warrants to
purchase our common or preferred stock, outstanding as of February 22, 2000,
at a weighted average exercise price of $4.83 per share
- 4,230,816 shares of common stock from a private placement of $15.7 million
of Series C preferred stock in January and February 2000
20
<PAGE> 20
SELECTED FINANCIAL DATA
This section presents our historical financial data. You should read carefully
the financial statements included in this prospectus, including the notes to the
financial statements. The selected data in this section is not intended to
replace the financial statements.
We derived the statement of operations data for the years ended December 31,
1997, 1998 and 1999 and the balance sheet data as of December 31, 1998 and 1999
from the audited financial statements in this prospectus. Those financial
statements were audited by Ernst & Young LLP, independent auditors. We derived
the statement of operations data for the period from our inception to December
31, 1996 and the balance sheet data as of December 31, 1996 and 1997 from
audited financial statements that are not included in this prospectus.
Historical results are not necessarily indicative of results that may be
expected in the future.
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
(NOVEMBER 14,
1995) TO YEAR ENDED DECEMBER 31,
DECEMBER 31, ------------------------------
1996 1997 1998 1999
------------- ------- ------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue....................................... $ -- $ -- $ 102 $ 1,069
Operating costs and expenses:
Cost of revenue............................. -- -- 17 627
Research and development.................... 867 2,458 5,977 9,588
General and administrative.................. 510 858 1,782 5,622
Sales and marketing......................... -- -- 484 1,196
------- ------- ------- --------
Total costs and operating expenses............ 1,377 3,316 8,260 17,033
------- ------- ------- --------
Operating loss................................ (1,377) (3,316) (8,158) (15,964)
Interest income............................... 116 262 302 249
Interest expense.............................. (13) (83) (198) (243)
------- ------- ------- --------
Net loss...................................... $(1,274) $(3,137) $(8,054) $(15,958)
======= ======= ======= ========
Net loss per share(1)......................... $ (0.74) $ (1.21) $ (1.71) $ (3.34)
======= ======= ======= ========
Shares used in computing net loss
per share(1)................................ 1,720 2,591 4,700 4,772
Pro forma net loss per share(1)............... $ (1.99)
========
Shares used in computing pro forma
net loss per share(1)....................... 8,015
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------------
1996 1997 1998 1999
------- ------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents..................... $ 3,141 $ 3,986 $ 9,564 $ 2,208
Restricted cash............................... -- -- -- 950
Working capital............................... 2,966 3,315 7,398 522
Total assets.................................. 3,911 5,598 13,275 9,777
Long term loan, less current portion.......... 488 470 1,948 1,051
Accumulated deficit........................... (1,274) (4,411) (12,465) (28,423)
Total stockholders' equity.................... 3,191 4,336 8,830 4,698
</TABLE>
- ---------------------------
(1) See notes to the financial statements for a description of the number of
shares used in the computation of net loss per share and pro forma net loss
per share.
21
<PAGE> 21
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read this discussion together with the financial statements and other
financial information included in this prospectus.
OVERVIEW
We are a biotechnology company developing and marketing innovative products to
guide and improve treatment of viral diseases. We have a proprietary technology,
called PhenoSense, for testing drug resistance in viruses that cause serious
diseases such as AIDS, hepatitis B and hepatitis C. Our first product,
PhenoSense HIV, is a test that directly and quantitatively measures resistance
of a patient's HIV to anti-viral drugs. We believe our products have the
potential to revolutionize the way physicians treat many serious viral diseases.
Historically our revenues have consisted primarily of sales of PhenoSense HIV to
pharmaceutical companies utilizing our tests in their clinical trials and
preclinical studies. Recently we began generating revenue from PhenoSense HIV
tests sold for use in the normal course of patient care. We expect sales of
PhenoSense HIV for patient care to grow due to increased sales and marketing
activity, increasing awareness of the benefits of phenotypic testing, and the
recent publication of guidelines recommending the use of resistance testing in
treating HIV patients. We also expect these revenues to increase substantially
relative to revenues from test sales for clinical trials.
Since our inception, we have incurred significant losses. As of December 31,
1999, our accumulated deficit was $28.4 million. Our losses have resulted
principally from costs incurred in research and development, clinical laboratory
scale-up, and from general and administrative costs associated with our
operations. We expect to continue to incur substantial costs in these areas, as
well as in sales and marketing.
RESULTS OF OPERATIONS
Year Ended December 31, 1999 Compared to Year Ended December 31, 1998
Revenue. Revenue increased to $1.1 million in 1999 from $102,000 in 1998, an
increase of $967,000. This increase was primarily attributable to revenue
recognized from sales in the second half of 1999 to major pharmaceutical
companies.
Cost of revenue. Cost of revenue increased to $627,000 in 1999 from $17,000 in
1998. The increase was due to the higher volume of test sales in 1999. Included
in these costs are materials, supplies, and labor and overhead related to the
tests.
Research and development. Research and development expense increased to $9.6
million in 1999 from $6.0 million in 1998, an increase of $3.6 million. The
increase was primarily the result of increasing capacity and automation for our
PhenoSense HIV test. We also increased our spending on clinical trials of
PhenoSense HIV. We expect research and development spending to increase
significantly over the next several years as we expand our research, product
development and automation efforts.
General and administrative. General and administrative expense increased to $5.6
million in 1999 from $1.8 million in 1998, an increase of $3.8 million. The
increase was related primarily to expanding our executive team, as well as
consulting expense and the settlement of litigation. Non-cash compensation
expense related to granting stock and options increased to $661,000 in 1999, as
discussed below, from no charge in 1998. We recorded legal expenses in 1999 of
approximately $1.2 million for settlement and other costs arising from a lawsuit
brought by a former officer and stockholder, which was settled in November 1999.
22
<PAGE> 22
Stock Based Compensation. Deferred compensation for options granted to employees
is the difference between the exercise price and the deemed fair value for
financial reporting purposes of our common stock on the date options were
granted. In connection with the grant of stock options to employees, we recorded
deferred stock compensation of approximately $424,000 during the year ended
December 31, 1999, of which $10,000 was amortized as an expense in 1999. We also
granted an employee a stock award of 150,000 shares of fully vested common stock
in November 1999. The deemed fair value of these shares, $555,000, was reflected
as a compensation charge in general and administrative expense in the quarter
ended December 31, 1999.
Compensation for options granted to non-employees has been determined in
accordance with Statement of Financial Accounting Standards No. 123 and the
Emerging Issues Task Force Consensus No. 96-18 as the fair value of the equity
instruments issued. Compensation for options granted to non-employees is
recorded as the related services are rendered, and the value of the compensation
may be periodically remeasured as the underlying options vest. An aggregate of
$26,000 was recorded in the year ended December 31, 1999 for non-employee stock
based compensation.
In January and February 2000, we granted employees additional stock options to
purchase 199,193 shares of common stock at $3.70 per share. We will record
additional deferred stock compensation of approximately $1.6 million in the
quarter ending March 31, 2000 to account for the difference between the exercise
price of these employee grants and the deemed fair value for financial reporting
purposes of our common stock on the date of grant. Amortization of deferred
compensation of approximately $1.1 million is expected to be recorded in 2000
related to the employee stock options granted in 1999 and February 2000.
In January and February 2000 we also granted non-employees options to purchase
45,000 common shares at $3.70 per share. Consulting expense related to
non-employee stock options will be recognized over the respective consultants'
service periods and will be based on the fair value of the stock option using
the Black Scholes option valuation model.
Sales and marketing. Sales and marketing expense increased to $1.2 million in
1999 from $484,000 in 1998, an increase of $712,000. This increase was primarily
attributable to hiring our sales force and commencing sales and marketing
activities. In addition, we increased spending on public relations and marketing
materials.
Interest income. Interest income decreased to $249,000 in 1999 from $302,000 in
1998, a decrease of $53,000. This decrease was due to lower average cash and
investment balances in 1999.
Interest expense. Interest expense increased to $243,000 in 1999 from $198,000
in 1998, an increase of $45,000. This increase was due to additional debt
incurred in the second half of 1998 resulting in additional interest expense for
only six months of 1998 compared to the entire year in 1999.
Year Ended December 31, 1998 Compared to Year Ended December 31, 1997
Revenue. Revenue increased to $102,000 in 1998 while no revenue were recognized
in 1997. The 1998 revenue was from the sale of PhenoSense HIV tests to one
pharmaceutical company.
Cost of revenue. Cost of revenue was $17,000 in 1998. There was no cost of
revenue in 1997.
Research and development. Research and development expense increased to $6.0
million in 1998 from $2.5 million in 1997, an increase of $3.5 million. The
increase was due primarily to increased staffing and other personnel-related
costs.
General and administrative. General and administrative expense increased to $1.8
million in 1998 from $858,000 in 1997, an increase of $924,000. The increase was
primarily due to increasing our staff in support of our expanding operations. We
recorded legal expenses of approximately $162,000 in 1998 for litigation related
costs.
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Sales and marketing. Sales and marketing expense increased to $484,000 in 1998
from no costs incurred in 1997. The cost was related to establishing a sales and
marketing effort as well as incurring market research and promotional expenses
in connection with marketing PhenoSense HIV to pharmaceutical companies which
commenced in late 1998.
Interest income. Interest income increased to $302,000 in 1998 from $262,000 in
1997, an increase of $40,000. This increase was due to higher average cash and
investment balances in 1998.
Interest expense. Interest expense increased to $198,000 in 1998 from $83,000 in
1997, an increase of $115,000. This increase was due to higher average debt
outstanding during 1998.
LIQUIDITY AND CAPITAL RESOURCES
We have financed our operations since inception primarily through private sales
of preferred stock and equipment financing arrangements. As of December 31,
1999, we had received net proceeds of $31.8 million from issuance of preferred
stock. Through December 31, 1999, we financed equipment purchases and leasehold
improvements totaling approximately $3.5 million. As of December 31, 1999, we
had approximately $3.2 million in cash, cash equivalents and restricted cash. In
January and February 2000, we sold Series C preferred stock for aggregate
proceeds of $15.7 million. On a pro forma basis, accounting for the Series C
preferred stock proceeds received in January and February 2000, we had cash,
cash equivalents and restricted cash of $18.8 million as of December 31, 1999.
Our cash balance decreased from $9.6 million as of December 31, 1998 to $2.2
million as of December 31, 1999. This $7.4 million net decrease resulted from
the combination of $13.4 million used in operating activities, $3.9 million used
in investing activities including $2.6 million in capital expenditures, and
$10.0 million provided by financing 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 flow from operations, will be sufficient to support our
operations for at least the next two years. Our actual future capital
requirements will depend on many factors, including the following:
- success of our sales and marketing efforts
- competitive market developments
- progress in and scope of our research and development activities
Future capital requirements will also depend on the extent to which we acquire
or invest in businesses, products and technologies. If we should require
additional financing due to unanticipated developments, additional financing may
not be available when needed or, if available, we may not be able to obtain this
financing on terms favorable to us or to our stockholders. Insufficient funds
may require us to delay, scale back or eliminate some or all of our research and
development programs, or may adversely affect our ability to operate as a going
concern. If additional funds are raised by issuing equity securities,
substantial dilution to existing stockholders may result.
Subsequent to the commencement of our initial public offering process, we
re-evaluated the deemed fair value of our common stock as of January and
February 2000 and determined it to be $11.90 per share. The difference between
the fair value and the price at which the preferred stock was sold is deemed to
be the equivalent of a preferred stock dividend. Accordingly, for Series C
preferred stock sold for $1.85 per share ($3.70 on an as-if converted basis) in
January and February 2000, we will record a deemed dividend of $15.7 million in
the quarter ended March 31, 2000. This represents 100% of the proceeds received
for issuing the beneficially convertible preferred stock, the limit established
under the Emerging Issues Task Force Consenses No. 98-5. The deemed dividend
will increase the loss attributed to common stockholders in the quarter ended
March 31, 2000 and will have no impact on our balance sheet.
Income taxes. We incurred net operating losses in 1997, 1998 and 1999 and
consequently we did not pay any federal, state or foreign income taxes. At
December 31, 1999, we had federal and state net operating
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loss carryforwards of approximately $27.3 million and $13.8 million,
respectively. The federal net operating loss and credit carryforwards will
expire at various dates during 2010 through 2019, if not utilized. The state of
California net operating losses will begin to expire in 2003.
RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities," as amended,
which will be effective for our fiscal year 2001. SFAS 133 establishes
accounting and reporting standards requiring that every derivative instrument,
including certain derivative instruments embedded in other contracts, be
recorded in the balance sheet as either an asset or liability measured at its
fair value. SFAS 133 also requires that changes in the derivative's fair value
be recognized in earnings unless specific hedge accounting criteria are met. We
believe the adoption of SFAS 133 will not have a material effect on our
financial statements, since we currently do not hold derivative instruments or
engage in hedging activities.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The primary objective of our investment activities is to preserve principal
while at the same time maximizing the income we receive from our investments
without significantly increasing risk. Some of the securities that we invest in
may have market risk. This means that a change in prevailing interest rates may
cause the principal amount of the investment to fluctuate. For example, if we
hold a security that was issued with a fixed interest rate at the
then-prevailing rate and the prevailing interest rate later rises, the principal
amount of our investment will probably decline. To minimize this risk in the
future, we intend to maintain our portfolio of cash equivalents and short-term
investments in a variety of securities, including commercial paper, money market
funds, government and non-government debt securities. The average duration of
all of our investments in 1999 was less than one year. Due to the short-term
nature of these investments, we believe we have no material exposure to interest
rate risk arising from our investments. Therefore, no quantitative tabular
disclosure is included in this prospectus.
We have operated primarily in the United States and all sales to date have been
made in U.S. dollars. Accordingly, we have not had any material exposure to
foreign currency rate fluctuations.
THE YEAR 2000
During 1998 and 1999, we had a Year 2000 Project in place to address the
potential exposures related to the impact on our computer systems and scientific
and automation equipment containing computer-related components for the Year
2000 and beyond. As of December 31, 1999, all scheduled Year 2000 work was
completed. As of the date hereof, we have encountered no material Year 2000
system problems and no impact on operations has occurred. If any problems do
develop we could suffer system or equipment shutdowns, failures or
miscalculations.
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
We are a biotechnology company developing and marketing innovative products to
guide and improve treatment of viral diseases. We have developed a practical way
of directly measuring the impact of genetic mutations on drug resistance and
using this information to guide therapy. We have a proprietary technology,
called PhenoSense, for testing drug resistance in viruses that cause serious
diseases such as AIDS, hepatitis B and hepatitis C. Our first product,
PhenoSense HIV, is a test that directly and quantitatively measures resistance
of a patient's HIV to anti-viral drugs. The results help physicians select
appropriate drugs for their HIV patients. We are also developing PhenoSense
products for other serious viral diseases and are collecting PhenoSense test
results and related clinical data in an interactive database that we plan to
make available to physicians for use in therapy guidance. We believe our
products have the potential to revolutionize the way physicians treat many
serious viral diseases.
BACKGROUND
Viruses
Viruses are microorganisms that must infect living cells to reproduce, or
replicate. Many viruses cause disease in people. These viruses infect human
cells and replicate, making new viruses that can infect other cells. There are
many different types of viruses, but all viruses share structural and functional
characteristics associated with their ability to replicate. During the
replication cycle, viruses often change slightly, or mutate. For example, in an
untreated HIV patient, as many as ten billion new viruses are produced each day,
and at least one quarter of the new viruses have errors, or mutations, in their
genes. At any given time there can be many different variants of the virus
present within the body, each with a slightly different genetic sequence.
The Viral Drug Resistance Crisis
Viruses are so adaptive that the drugs used to fight them can become
ineffective, making many serious viral diseases almost impossible to cure.
Currently available anti-viral drugs interfere with key viral functions to
prevent viruses from replicating, and therefore slow the progression of disease.
However, these drugs are typically effective for only a limited time because
viruses develop resistance to them through mutation, making the therapy less
effective. A resistant virus is one that is less sensitive to the drug being
administered. Mutant viruses resistant to a particular drug therapy continue to
replicate while the others are eliminated. Over time the mutant, resistant virus
predominates, and the drug therapy fails. In response to this effect, anti-viral
drugs are now used in combination, attacking different targets within a virus
simultaneously. Combination therapy slows replication more effectively than a
single drug, further delaying the development of drug resistance. In the short
term, combination therapy has helped many patients. However, even combination
drug therapy eventually fails in a great majority of patients, due in large part
to the fact that the virus becomes resistant to some or all of the drugs used in
combination.
This drug resistance crisis is most serious in HIV/AIDS. There are currently 14
FDA-approved drugs used in various combinations to treat HIV infections.
Combination therapy requires each drug in the combination to be active for
therapy to be most effective. If any of the drugs are not active, the therapy
will likely fail more quickly. To make matters worse, each treatment failure
increases the risk that the next drug combination will not work, and leaves the
patient with fewer future treatment options. And, not surprisingly, drug
resistant viruses are being transmitted to newly infected individuals,
increasing the risk that initial treatment will not work. New drugs with
increased potency and activity against drug resistant viruses are not being made
available in time to overcome this crisis. Consequently, physicians are faced
with the challenge of tailoring therapy to individual patients without the tools
necessary to assess drug resistance. In fact, physicians face this challenge
numerous times per year for many patients.
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Resistance Testing
When anti-viral therapy does not completely suppress viral replication, drug
resistant variants can emerge rapidly, within days to weeks. If left unchecked,
patients may be at greater risk of becoming more seriously ill unless effective
drugs are promptly administered. Until recently, a physician's choice of drugs
was based on a patient's treatment history and assumptions regarding drug
resistance of the patient's virus. Without drug resistance tests, physicians
select drugs not knowing which drugs the patient's virus is resistant to, and
frequently change all drugs in a treatment regimen even when some may still be
effective. When ineffective drugs are selected, patients become more seriously
ill, suffer toxic side effects, and unnecessarily bear the costs of the drugs.
To achieve long term clinical benefit, physicians must select drugs that
maximally suppress viral replication and avoid drugs to which a patient's virus
is resistant. We believe that long term solutions will rely on drug resistance
tests and information systems that can guide physicians in selecting the most
effective drugs against the patient's virus and avoiding drugs to which the
patient's virus is resistant. The need for resistance testing was affirmed in
recent guidelines from a panel led by the U.S. Department of Health and Human
Services recommending that resistance tests be routinely used when treating HIV
patients. Resistance tests can also assist pharmaceutical companies in the
development of drugs to target resistant viruses. In fact, a recent FDA advisory
committee recommended emphatically that resistance testing be used in the
development of all new anti-viral drugs for HIV.
Phenotypic tests determine "phenotype," which refers to an organism's outward
appearance or functional characteristics. For example, eye color is a phenotype.
One viral phenotype is the ability to replicate in the presence of anti-viral
drugs, also referred to as "drug resistance." Phenotypic drug resistance tests
directly measure the sensitivity of a patient's virus to anti-viral drugs by
adding a drug to a virus sample and determining whether the virus is able to
replicate in the presence of the drug. These tests eliminate much of the
guesswork in making treatment decisions by providing the physician with
information about drug resistance of a patient's virus.
Early phenotypic tests required culturing, or growing viruses in the laboratory.
These tests were slow, labor intensive and not easily automated. Since viruses
mutate while growing in culture, the process could produce inaccurate results
since the virus in culture may be different from the virus in the patient. As a
result, early phenotypic testing was impractical for patient management. In the
absence of practical phenotypic drug resistance tests, clinicians began to use
genotypic tests in an attempt to predict drug resistance indirectly. Genotypic
tests detect mutations in the underlying gene sequence, or genotype, and attempt
to correlate these mutations with drug resistance. However, the relationship
between genotype and phenotype is complex and not easily interpreted.
OUR SOLUTION
Our PhenoSense technology has revolutionized viral drug resistance testing. Our
technology uses a genetically engineered virus that replicates only once. As a
result, we avoid the need to culture viruses during testing, which makes the
tests more consistent and accurate and dramatically shortens the time required
to complete them. Also, our tests can be automated and performed in large
numbers, making them practical for routine use in clinical management of
patients. We believe that our tests and the information that we collect from
these tests have the potential to significantly change the way physicians treat
viral diseases.
Our PhenoSense technology meets the needs of physicians and patients because it
is:
- DIRECT: detects drug resistance of viruses without need for complex
interpretation of mutations
- QUANTITATIVE: measures the degree of drug resistance and susceptibility
(provides more than a "yes" or "no" answer)
- RELIABLE: results are accurate and reproducible
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- COMPREHENSIVE: can evaluate drug resistance to all currently available
anti-viral drugs
- VERSATILE: can be modified to evaluate new classes of anti-viral drugs
- USER-FRIENDLY: results are easy to read and understand
- RAPID: can be performed in eight to ten days, much faster than other
phenotypic resistance tests
The cornerstone of our PhenoSense technology is a proprietary vector, which we
call the "resistance test vector." This vector is a strand of viral genes that
replicates when introduced into a living cell. Our vector includes two key
elements. The first is a gene that produces a protein that can be easily
detected, which we call an "indicator." An example of an indicator we use is
luciferase, which is responsible for the glow of fireflies. The second key
element is one or more specific genes derived from the patient's virus. These
genes correspond to the targets of the antiviral drugs being tested. For
example, many HIV drugs target an enzyme called protease that is needed for HIV
to replicate. We incorporate the gene that makes protease into the vector for
our HIV drug resistance test.
[RESISTANCE TEST VECTOR DIAGRAM]
To perform our PhenoSense tests, we:
- obtain a blood sample from the patient
- isolate and inactivate the virus
- copy the viral genes corresponding to the drug targets
- insert these genes into the vector
- introduce the assembled vector into living cells in a test tube
- add anti-viral drugs to the cells
- allow the vector to complete a single round of replication
- measure the replication of the vector using the indicator
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The amount of indicator we detect is used to measure drug resistance. For
example, we measure the amount of light produced by luciferase in our PhenoSense
HIV test. If the virus is sensitive to the drug being tested, less light is
detected. If the virus is resistant to the drug, more light is detected.
We report our resistance test results using curve diagrams, as shown below. We
plot the amount of luciferase (which corresponds to the amount of virus
replication) on the vertical axis against the amount of drug tested on the
horizontal axis. We generate curves for both a patient's virus and a
drug-sensitive control virus, and compare the two curves to quantitatively
measure drug resistance. Viruses with increased resistance require more drug to
inhibit replication. We produce curves for each available drug.
[DRUG SUSCEPTIBILITY CURVES DIAGRAM]
OUR STRATEGY
Our objective is to be the leader in developing and commercializing products and
information systems to guide anti-viral therapy. Key elements of our strategy
are to:
- Establish PhenoSense HIV as the Standard of Care. We plan to aggressively
market PhenoSense HIV to physicians directly and through scientific
publications, clinical trials and scientific meetings, and to patients
through direct-to-patient advertising. We intend to rapidly expand our
physician customer base by marketing the product directly to physicians in
the United States through our own sales force, initially focusing on the
1,000 leading physicians who treat 80% of the total HIV/AIDS
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patient population. Numerous pharmaceutical companies are already using
PhenoSense HIV in their clinical trials, which we expect will further
establish the value of our product in treating HIV patients. We also plan to
expand the use of our tests by pharmaceutical companies in their clinical
trials.
- Expand Our PhenoSense Technology to Other Serious Viral Diseases. Using our
proprietary PhenoSense technology, we intend to develop phenotypic drug
resistance testing products for other viral diseases. We are developing a
resistance test for hepatitis B and intend to develop one for hepatitis C.
- Apply Our PhenoSense Technology to Drug Discovery and Development. We are
developing our PhenoSense technology for use in high throughput screening
applications and other drug discovery efforts. We are also assembling a
library of resistance test vectors for testing of drug compounds and
candidates. We intend to enter into corporate partnerships to jointly
discover and develop drug candidates for the treatment of viral diseases.
- Develop Computer-Based Therapy Guidance Tools. We believe that the data
generated from our resistance tests and related patient information will be
useful in guiding treatment decisions. We are assembling a proprietary
database and developing software to enable the use of this information by
physicians and other healthcare providers to guide individual therapy.
- Maintain a Strong Intellectual Property Portfolio. We have patent coverage
for our PhenoSense HIV product and patent applications directed to our other
PhenoSense products. As we expand into new areas and diversify our business,
we intend to build strong intellectual property positions to maintain our
competitive advantage.
PRODUCTS
PHENOSENSE HIV
PhenoSense HIV is a phenotypic drug resistance test that measures the resistance
of HIV to all available anti-viral drugs. When a PhenoSense HIV test is ordered,
a blood sample is drawn from the patient. This sample is sent to us to perform
the test in our clinical laboratory located in South San Francisco, California.
We then send a report detailing the results of the test to the physician,
typically within two weeks. We began sales and marketing activity for PhenoSense
HIV in November 1999.
HIV now affects nearly one million people in the United States and over 33
million people worldwide. Fourteen anti-viral drugs are FDA-approved for
treatment of HIV infection and more than 20 additional drugs are currently being
tested in clinical trials. Despite the availability of anti-viral drugs, HIV is
difficult to treat effectively because it replicates rapidly and becomes
resistant to individual anti-viral drugs. Selecting the right drugs when
treating HIV patients is often difficult because physicians have limited
information about the susceptibility to specific anti-viral drugs of the HIV
infecting an individual patient. We estimate that the 300,000 HIV/AIDS patients
in the United States currently receiving anti-viral therapy will require an
aggregate of at least 500,000 resistance tests per year.
Because drug resistance in HIV/AIDS treatment has become such a serious crisis,
resistance testing is increasingly being adopted. New guidelines for the
management of patients with HIV, issued by a panel led by the DHHS, recommend
that resistance tests be routinely used for HIV patients. The guidelines also
state that it is reasonable to use resistance testing when selecting an initial
anti-viral drug regimen because transmission of drug resistant strains of HIV
has now been documented. In addition, the FDA Antiviral Drugs Advisory Committee
in November 1999 emphatically recommended that resistance tests should be
utilized in the development of new anti-viral drugs for HIV.
All currently FDA-approved HIV drugs target one of two important steps in the
replication cycle of HIV. One group of drugs, called "reverse transcriptase
inhibitors," blocks the virus from copying its genetic material. Another group,
called "protease inhibitors," blocks the formation of viral proteins that are
necessary for the virus to infect other cells. The vectors used in our
PhenoSense HIV test incorporate the protease and reverse transcriptase gene
segments from the virus of the patient being tested. Based on our
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knowledge of the mechanism of action of all of the HIV drugs currently in
development, we believe we will be able to incorporate appropriate genes
corresponding to the targets of the new drugs into our PhenoSense HIV vector.
Three prospective clinical trials have demonstrated that the use of resistance
testing to guide selection of anti-viral drug treatment regimens leads to
significantly better treatment outcomes than therapy selection without
resistance testing. These trials included patients who had failed a standard
combination therapy regimen. Patients in these trials who had their therapy
guided by resistance tests had, on average, significantly lower amounts of virus
in their blood; and a significantly higher percentage of those patients had
undetectable levels of virus in their blood after therapy.
We have, with our collaborators, performed numerous retrospective clinical
studies that support the conclusion that resistance testing of HIV patients
improves their treatment outcomes. A retrospective study of 20 patients who were
treated with a new drug combination after failing a previous combination regimen
found that those patients whose new regimen included a greater number of
susceptible drugs, as determined using PhenoSense HIV, had a significantly
greater reduction in viral load for a longer period of time than those patients
whose new regimen included fewer susceptible drugs. Another retrospective study
of 71 HIV-infected patients found that PhenoSense HIV was a significantly better
predictor of treatment outcome after failure of multiple treatment regimens than
patient treatment history or other clinical factors. Two additional studies
using PhenoSense HIV detected reduced drug susceptibility in the virus strains
infecting approximately 25% of newly infected and untreated patients,
demonstrating the value of resistance testing for these patients.
We are conducting a prospective clinical trial to reaffirm the usefulness of
PhenoSense HIV. The trial involves 256 patients who are not responding to their
current combination therapy and is measuring treatment outcomes, in the form of
viral suppression, after their treatment regimen changes. One group of patients
is tested using PhenoSense HIV prior to treatment changes. The control group is
not tested. Patient enrollment for the trial is complete. Additional clinical
trials are evaluating the role of PhenoSense HIV in guiding treatment decisions
in newly infected adult patients, in patients treated previously with one
treatment regimen and in patients treated previously with multiple treatment
regimens. We expect these trials to demonstrate the potential benefits of using
PhenoSense HIV at different stages of HIV therapy.
PHENOSENSE HBV
We are currently developing our PhenoSense technology to analyze drug resistance
of hepatitis B virus, or HBV. HBV infection is a leading cause of liver disease
and liver cancer, and leads to more than one million deaths worldwide each year.
It is estimated that there are over one million people in the United States
chronically infected with HBV, and over 350 million people chronically infected
worldwide, mostly in Asia. It is estimated that approximately half of those
chronically infected would benefit from anti-viral drug therapy.
As in the case of HIV, drug resistance is a problem when treating HBV. Similar
to the treatment of HIV infection, effective therapy of chronic HBV infection
will likely require complex combinations of anti-viral drugs. As more drugs
become available, physicians will face increasing difficulty selecting the most
appropriate drug combinations for HBV patients. Therefore, we believe drug
resistance testing will play a significant role in guiding HBV treatment.
Two drugs have been approved for the treatment of HBV infection and more than 15
drugs are in preclinical or clinical stages of development. Many of these drugs
target HBV reverse transcriptase, which acts in a manner similar to HIV reverse
transcriptase, to prevent the virus from copying its genes. Research efforts are
ongoing to discover drugs that target other aspects of HBV's life cycle, such as
the assembly of HBV viruses, or the entry of HBV into liver cells. Based on our
knowledge of the mechanism of action of these drugs in research, we believe that
we will be able to incorporate genes corresponding to the targets of these drugs
into our PhenoSense HBV vectors.
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As the use of HBV drugs increases, we expect the demand for PhenoSense HBV to
grow dramatically. Prior to that time, we expect PhenoSense HBV will be used in
discovery and development of new HBV drugs.
PHENOSENSE HCV
We have designed and intend to develop our PhenoSense technology to analyze drug
resistance of hepatitis C virus, or HCV. HCV infection causes liver disease and
liver cancer, similar to HBV. It is estimated that four million people in the
United States and more than 170 million people worldwide are infected with HCV.
According to a recent published study, 74% of patients infected with HCV have
active virus. We believe that those patients may benefit from anti-viral drug
therapy.
HCV replicates and mutates at extremely high rates inside an infected patient,
similar to HIV and HBV. The virus is likely to develop resistance to drugs being
developed for treatment. Complex combinations of drugs may then be required to
increase the success of treatment. As a result, a number of major pharmaceutical
companies are discovering and developing new drugs for HCV.
HCV drugs are being developed that target many different aspects of HCV's life
cycle. Similar to HIV drugs, there are efforts to develop HCV protease
inhibitors as well as drugs that block the replication of the genetic material
of HCV or the production of HCV proteins. Based on our knowledge of the
mechanism of action of these drugs in research, we believe we will be able to
incorporate appropriate genes that correspond to the targets of these drugs into
our PhenoSense HCV vector.
We expect PhenoSense HCV to be utilized to assist in the discovery and
development of HCV drugs and the assessment of drug resistance in HCV patients.
As effective treatments for HCV become more widely available, we intend to offer
PhenoSense HCV to assist physicians in drug treatment decisions.
OTHER PRODUCTS
GeneSeq HIV. We have developed a genotypic test, GeneSeq HIV. Genotypic tests
identify gene sequence mutations that may be associated with resistance to
certain drugs. We have developed GeneSeq HIV as a tool to examine and evaluate
the genetic sequences of patients' HIV. We intend to use this genetic sequence
information as a component of the database supporting our Therapy Guidance
System described below. In addition, we also sell GeneSeq HIV to physicians who
request genotypic testing and pharmaceutical companies that are developing new
drugs.
Viral Fitness Test. We are developing a modified version of our PhenoSense
technology to measure viral fitness. Viral fitness is a measure of a virus'
ability to replicate and infect new cells. It is different from resistance in
that it is a measure of ability to replicate, rather than of activity relative
to a particular drug. While this technology is new, we believe that there will
be numerous applications for this test. For example, in a heavily treated
patient infected with a resistant strain of virus with low viral fitness, a
physician may choose to maintain that patient on the regimen even though it does
not fully suppress the virus. We also believe that viral fitness will be an
important data category in our Therapy Guidance System.
THERAPY GUIDANCE SYSTEM
We are developing a proprietary database derived from the results of the
PhenoSense HIV and other tests that we perform, as well as from data we obtain
from other sources. We expect to combine this database with highly sophisticated
data mining and outcome modeling software to build our Therapy Guidance System.
The TGS database will include genetic and physical characteristics of viruses,
including their drug resistance patterns and genetic mutations. In addition, we
will incorporate other clinical data including viral load, drug interactions,
patient demographic data, drug side effects and cost-benefit data. We expect TGS
to give doctors an interactive computer tool that can be used to help them
select optimal therapies based on both virus and patient characteristics. We
expect to provide TGS as a fee-based service over the Internet.
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DRUG DISCOVERY AND DEVELOPMENT
Drug and Vaccine Screening. We are developing our PhenoSense technology for use
in high throughput screening applications to evaluate large libraries of
potential drugs or vaccines. We believe our drug resistance screening technology
can provide more extensive information about the activity of chemical compounds
than conventional assays. We expect to enter into corporate partnerships to
jointly discover and develop drug candidates for the treatment of viral diseases
as well as potential vaccines. We will evaluate the activity of compounds or
vaccines against viruses selected from our extensive collection of patient
samples.
Clinical Trials. Because clinical trials are the most expensive part of drug
development, pharmaceutical companies are trying to improve the outcomes of
clinical trials by using the methods of "pharmacogenomics," the scientific
discipline focused on how genetic differences among patients determine or
predict responsiveness or adverse reactions to particular drugs. In a similar
way, pharmaceutical companies are applying our PhenoSense technology to help
select patients for clinical trials. This selection process may allow companies
to guide important drug development decisions before large resource commitments
are made. To date, we have signed testing agreements with the following
pharmaceutical companies involved in AIDS drug development: Agouron, Abbott,
Bristol-Myers Squibb, Gilead Sciences, GlaxoWellcome and Merck. We intend to
grow our clinical research business by applying our technology and expertise to
other serious viral diseases.
We are also involved in more than 30 trials with leading government and academic
organizations evaluating a number of HIV drugs and drug regimens including: the
NIH/AIDS Clinical Trials Group, the University of California, San Francisco, the
University of California, San Diego, the Aaron Diamond AIDS Research Center, and
the University of Colorado. We expect these trials will further support the
utility of PhenoSense HIV resistance testing.
SALES AND MARKETING
We commenced sales and marketing activity for PhenoSense HIV in November 1999.
We currently have five experienced sales representatives promoting PhenoSense
HIV and focus on several major U.S. markets -- New York, San Francisco, Los
Angeles, Chicago, Washington, D.C. and Miami. Within these regions, we are
initially targeting the 1,000 leading HIV physicians who treat 80% of the
HIV/AIDS patients in the United States. We plan to aggressively expand our
direct sales force over the coming months. Outside the United States, we intend
to enter into relationships with other companies to serve these markets.
We employ a wide range of public relations and communications channels to
promote our products. Our marketing strategies focus on physician, patient and
payor education in order to increase market awareness of PhenoSense HIV and
resistance testing. We are sponsoring and participating in conferences and
scientific meetings, advertising in relevant journals and publications, and
continuing to develop literature and sales support tools. Additionally we target
patients directly through advertising.
We have implemented a reimbursement strategy relating to PhenoSense HIV. We have
a toll free hotline to assist customers in obtaining reimbursement or
pre-approval for testing services from healthcare payors. We are also actively
educating both private and public payors about ongoing clinical research in drug
resistance testing to maximize reimbursement.
In addition, we plan to make PhenoSense HIV more broadly available through
multiple national and regional reference laboratories and hospitals. We
currently have distribution agreements with national reference laboratories
including Quest Diagnostics, Specialty Laboratories and American Medical
Laboratories. Under these agreements, these entities perform numerous services
for us including collection of samples, shipping the samples to us, billing and
reporting the results to doctors.
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<PAGE> 33
PATENTS AND PROPRIETARY RIGHTS
We will be able to protect our technology from unauthorized use by third parties
only to the extent that our proprietary rights are covered by valid and
enforceable patents or are effectively maintained as trade secrets. Patents and
other proprietary rights are an essential element of our business. We have an
issued U.S. patent, with claims to the method of carrying out our PhenoSense HIV
test and composition of matter claims for our HIV resistance test vector. As of
December 1999, we have filed nine patent applications in the United States and
corresponding foreign patent applications. Our policy is to file patent
applications and to protect technology, inventions and improvements to
inventions that are commercially important to the development of our business.
Our commercial success will depend in part on obtaining this patent protection.
We also seek protection, through confidentiality and proprietary information
agreements. Some of the intellectual property we use is owned by a third party.
We license it on a non-exclusive basis. Other companies may have patents or
patent applications relating to products or processes similar to, competitive
with or otherwise related to our products. These products and processes include
technologies relating to hepatitis C virus. Patents covering these technologies
may adversely impact our ability to commercialize one or more of our PhenoSense
products.
COMPETITION
We face, and will continue to face, competition from organizations such as other
biotechnology companies and commercial laboratories, as well as academic and
research institutions.
Our major competitors include manufacturers and distributors of phenotypic drug
resistance technology, such as Virco, and makers of genotypic tests and
instrumentation, such as PE Biosystems and Visible Genetics. Each of these
competitors is attempting to establish its test as the standard of care among
opinion leaders. Although genotypic tests are currently cheaper and faster, we
believe that PhenoSense HIV is superior because it eliminates guesswork when
evaluating test results by providing:
- a direct measure which does not rely on correlation between genetic
mutations and drug resistance
- a quantitative measure of the degree of drug resistance
Some of our competitors have substantially greater financial resources and
larger research and development staffs than we do. In addition, they may have
significantly greater experience in developing products, obtaining the necessary
regulatory approvals of products, and the processing and marketing of products.
Our ability to compete successfully will depend, in part, on our ability to:
- demonstrate the degree of clinical benefit of our products relative to their
costs
- develop proprietary products
- develop and maintain products that reach the market first
- develop products that are technologically superior to other products in the
market
- obtain patent or other proprietary protection for our products and
technologies
- obtain reimbursement coverage from payors
- attract and retain scientific and product development personnel
REGULATION AND REIMBURSEMENT
Regulation of Clinical Laboratory Operations
The Clinical Laboratory Improvement Amendments of 1988, or CLIA, extends federal
oversight to virtually all clinical laboratories by requiring that laboratories
be certified by the federal government, by a federally-approved accreditation
agency or by a state that has been deemed exempt from CLIA
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<PAGE> 34
requirements. Pursuant to CLIA, clinical laboratories must meet quality
assurance, quality control and personnel standards. Labs also must undergo
proficiency testing and inspections. Standards are based on the complexity of
the method of testing performed by the laboratory.
Our laboratory is categorized as high complexity, and we believe we are in
compliance with the more stringent standards applicable to high complexity
testing for personnel, quality control, quality assurance and patient test
management. Our clinical laboratory holds a CLIA Certificate of Registration,
which allows us to conduct testing pending determination of compliance through a
survey. Our laboratory recently was surveyed by the College of American
Pathologists, or CAP, which is a federally-approved accreditation agency. A
final determination regarding accreditation has not yet been issued, and we
cannot guarantee that a CLIA or CAP certificate or accreditation will be
granted.
In addition to CLIA, states may require laboratory licensure and may adopt
regulations that are more stringent than federal law. We believe we are in
material compliance with applicable state laws and regulations.
The sanctions for failure to comply with CLIA regulations or accredidation
requirements of federally-approved agencies may be suspension, revocation or
limitation of a laboratory's CLIA or CAP certificate or accredidation. There
also could be fines and criminal penalties. The suspension or loss of a license,
failure to achieve or loss of accredidation, imposition of a fine, or future
changes in applicable federal or state laws or regulations or in the
interpretation of current laws and regulations, could have a material adverse
effect on our business.
Medical Waste and Radioactive Materials
We are subject to licensing and regulation under federal, state and local laws
relating to the handling and disposal of medical specimens and hazardous waste
and radioactive materials as well as to the safety and health of laboratory
employees. Our clinical laboratory is operated in material compliance with
applicable federal and state laws and regulations relating to disposal of all
laboratory specimens. We utilize the outside vendors for disposal of specimens.
Although we believe that we are currently in compliance in all material respects
with such federal, state and local laws, failure to comply could subject us to
denial of the right to conduct business, fines, criminal penalties and other
enforcement actions.
Occupational Safety
In addition to its comprehensive regulation of safety in the workplace, the
federal Occupational Safety and Health Administration, or OSHA, has established
extensive requirements relating to workplace safety for healthcare employers,
including clinical laboratories, whose workers may be exposed to blood-borne
pathogens such as HIV and the hepatitis B virus. These regulations, among other
things, require work practice controls, protective clothing and equipment,
training, medical follow-up, vaccinations and other measures designed to
minimize exposure to chemicals and transmission of the blood-borne and airborne
pathogens.
Specimen Transportation
Regulations of the Department of Transportation, the Public Health Service and
the Postal Service apply to the surface and air transportation of clinical
laboratory specimens.
Regulation of Coverage and Reimbursement
Revenues for clinical laboratory testing services come from a variety of
sources, including Medicare and Medicaid programs; other third-party payors,
including commercial insurers, Blue Cross Blue Shield plans, health maintenance
and other managed care organizations; and patients, physicians, hospitals and
other laboratories. We have applied to become a Medicare laboratory services
provider. We have submitted Medicaid provider applications in certain key
states. Medicare, Medicaid and most other third party payors
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<PAGE> 35
do not cover services they deem to be still investigational or otherwise not
reasonable and necessary for diagnosis or treatment. While recently issued
guidelines of the Department of Health and Human Services recommend drug
resistance testing for HIV patients, this does not assure coverage by Medicare
or any other payors.
We are unable to predict whether and under what circumstances Medicare, Medicaid
and other payors will cover resistance testing services. Denial of such coverage
by payors would have a material adverse impact on our business.
Since 1984, Congress has periodically lowered the ceilings on Medicare
reimbursement for clinical laboratory services from previously authorized
levels. In addition, state Medicaid programs are prohibited from paying more
(and in most instances, pay significantly less) than Medicare for clinical
laboratory tests. Similarly, other payors, including managed care organizations,
have sought on an ongoing basis to reduce the costs of healthcare by limiting
utilization and payment rates. Actions by Medicare or other payors to reduce
reimbursement rates or limit coverage or utilization of resistance testing will
have a direct adverse impact on our revenues and cash flows. We cannot predict
whether reductions or limitations will occur, though we feel some reductions are
likely.
Fraud and Abuse Regulation
Existing federal laws governing Medicare and Medicaid and other federal
healthcare programs, as well as similar state laws, impose a variety of broadly
described fraud and abuse prohibitions on healthcare providers, including
clinical laboratories. These laws are enforced by multiple government agencies.
The Health Insurance Portability and Accountability Act of 1996 provides for the
establishment of a program to coordinate federal, state and local law
enforcement programs. Over the last several years, the clinical laboratory
industry has also been the focus of major government enforcement actions.
One set of fraud and abuse laws, the federal anti-kickback laws, prohibits
clinical laboratories from, among other things, making payments or furnishing
other benefits intended to induce the referral of patients for tests billed to
Medicare, Medicaid, or certain other federally funded programs. California also
has its own Medicaid anti-kickback law, as well as an anti-kickback law that
prohibits payments made to physicians to influence the referral of any patients.
California laws also limit the ability to use a non-employee sales force.
Under another federal provision, known as the "Stark" law or "self-referral"
prohibition, physicians who have an investment or compensation relationship with
a clinical laboratory may not, unless a statutory exception applies, refer
Medicare or Medicaid patients for testing to the laboratory. In addition, a
laboratory may not bill Medicare, Medicaid or any other party for testing
furnished pursuant to a prohibited referral. There is a California self-referral
law, as well, which applies to all patient referrals.
Currently, we have a financial relationship with one referring physician, who
serves as part-time medical director at our clinical laboratory. Very few of
this physician's patients, if any, are federal healthcare program patients. In
addition, we do not bill for services furnished to any patients referred by this
physician. The California anti-kickback law may have exceptions applicable to
our relationship with this physician. We plan to seek a written opinion from
California officials to determine whether this relationship is not
inappropriate.
There are a variety of other types of federal and state anti-fraud and abuse
laws, including laws prohibiting submission of false or otherwise improper
claims to federal healthcare programs, and laws limiting the extent of any
differences between charges to Medicare and Medicaid and charges to other
parties. We seek to structure our business to comply with the federal and state
anti-fraud and abuse laws. We cannot predict, however, how these laws will be
applied in the future, and we cannot be sure arrangements will not be found in
violation of them. Sanctions for violations of these laws may include exclusion
from participation in Medicare, Medicaid and other federal healthcare programs,
criminal and civil fines and penalties, and loss of license. Any of these could
have a material adverse effect on us.
Company, whose stock is traded on a public exchange and which has stockholders'
equity exceeding $75 million even if the physician owns stock of that company.
An amendment to the Stark law in August
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<PAGE> 36
1993 makes it clear that ordinary day-to-day transactions between laboratories
and their customers, including, but not limited to, discounts granted by
laboratories to their customers, are not covered by the compensation arrangement
provisions of the Medicare statute. Sanctions for laboratory violations of the
prohibition include denial of Medicare payments, refunds, civil money penalties
of up to $15,000 for each service billed in violation of the prohibition and
exclusion from the Medicare and Medicaid programs.
EMPLOYEES
As of February 22, 2000, we had 99 employees, of whom 10 hold PhD or MD degrees
and 17 hold other advanced degrees. Approximately 41 employees are engaged in
clinical laboratory operations, including 15 licensed healthcare professionals.
There are 25 employees in research and development, and 33 in sales, marketing,
information systems, finance and other administrative functions. We believe we
maintain excellent relations with our employees.
FACILITIES
We currently lease 27,000 square feet of office and laboratory space in South
San Francisco, California. In May 2000, we will begin leasing an additional
40,000 square feet of office and laboratory space at a South San Francisco
location. In July 2001 we will begin leasing a building adjacent to this space,
adding 54,000 square feet of space. We believe these facilities will meet our
space requirements for clinical reference laboratory operations, research and
development, and administration for the next several years. Our lease on our
current and future facilities expire in the years 2004 and 2010, respectively.
All leases provide options to extend.
LEGAL PROCEEDINGS
We are not a party to any legal proceedings.
SCIENTIFIC ADVISORY BOARD
We have established an internationally renowned Scientific Advisory Board to
provide specific expertise in areas of research and development relevant to our
business. Our Scientific Advisory Board meets periodically with our scientific
and development personnel and management to discuss our present and long-term
research and development activities. Scientific Advisory Board members include
the following leaders in scientific and clinical HIV research:
STEPHEN P. GOFF, PHD -- Higgens Professor of Biochemistry and Molecular
Biophysics at the College of Physicians and Surgeons of Columbia University, and
an Investigator of the Howard Hughes Medical Institute
DAVID D. HO, MD -- Scientific Director and Chief Executive Officer of the Aaron
Diamond AIDS Research Center, and a Professor of The Rockefeller University.
STEPHEN H. HUGHES, PHD -- Chief, Retrovirus Replication Laboratory and Head,
Vector Design and Replication Section of the HIV Drug Resistance Program at the
National Cancer Institute -- Frederick Cancer Research and Development Center
DOUGLAS D. RICHMAN, MD -- Professor of Pathology and Medicine (Infectious
Diseases) at the University of California, San Diego School of Medicine
ROBERT T. SCHOOLEY, MD -- Gill Professor of Medicine and Head of the Infectious
Disease Division at the University of Colorado Health Sciences Center
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<PAGE> 37
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth, as of February 22, 2000, certain information
concerning our executive officers and directors:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
William D. Young................ 55 Chairman, Chief Executive Officer and Director
Martin H. Goldstein............. 50 President and Director
Frank Barker.................... 57 Vice President, Information Technology and
Chief Information Officer
Nicholas S. Hellmann, MD........ 41 Vice President, Clinical Research
Christos J. Petropoulos, PhD.... 46 Vice President, Research and Development
Robin M. Toft................... 39 Vice President, Sales and Marketing
Patricia A. Wray................ 43 Vice President, Human Resources
Richard M. Beleson(1)(2)........ 46 Director
Anders Hove, MD(1).............. 34 Director
Cristina H. Kepner(2)........... 53 Director
Albert L. Zesiger(1)(2)......... 70 Director
</TABLE>
- -------------------------
(1) Member of the compensation committee.
(2) Member of the audit committee.
WILLIAM D. YOUNG has served as our Chief Executive Officer since November 1999
and has served as the Chairman of the Board since May 1999. From March 1997 to
October 1999, Mr. Young was Chief Operating Officer at Genentech, Inc., a
biotechnology company. As COO at Genentech, Mr. Young was responsible for all of
the company's development, operations and commercial functions. Mr. Young joined
Genentech in 1980 as Director of Manufacturing and Process Sciences and held
various positions prior to becoming COO. Prior to joining Genentech, Mr. Young
was employed by Eli Lilly and Company for 14 years. Mr. Young is a member of the
board of directors of IDEC Pharmaceuticals, Inc., VaxGen, Inc. and Energy
Biosystems, Inc. He received his BS in chemical engineering from Purdue
University and his MBA from Indiana University.
MARTIN H. GOLDSTEIN has served as our President since May 1996 and as a director
since November 1995. Mr. Goldstein was one of our co-founders in 1995 and has
served in other executive officer positions, including Chief Executive Officer
and Chief Operating Officer, since that time. From 1993 to May 1996, Mr.
Goldstein was a consultant to privately held biotechnology companies in the
areas of patents and licensing. From 1991 to 1993, Mr. Goldstein was Vice
President, General Counsel and Secretary of Epimmune, Inc., a biotechnology
company. From 1989 to 1991, Mr. Goldstein was Vice President, General Counsel
and Secretary of Xoma Corporation, a biotechnology company. From 1985 to 1989,
Mr. Goldstein was Patent Counsel at Genentech. From 1983 to 1985, he was a
patent attorney at Hoffmann-LaRoche, a pharmaceutical company. He received his
MS in physiology from the University of Florida School of Medicine and a JD from
Cardozo School of Law of Yeshiva University.
FRANK BARKER has served as our Vice President, Information Technology and Chief
Information Officer since November 1999. From 1996 until January 2000, Mr.
Barker was Senior Vice President and Chief Information Officer for HealthCor,
Inc., a home healthcare provider. From 1993 to 1996, Mr. Barker was Vice
President of Client Services for Antrim, Corp., a laboratory information systems
vendor. From 1993 to 1996, he was Chief Operating Officer for CHC, Inc., a
hospital and laboratory information systems vendor.
NICHOLAS S. HELLMANN, MD has served as our Vice President, Clinical Research
since September 1997. From 1995 to 1997, Dr. Hellmann was Director of Clinical
Research at Gilead Sciences, Inc., a biopharmaceutical company. In 1995 he was
employed as a clinical scientist at Genentech From 1993 to
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<PAGE> 38
1995, he was Associate Director of Antiviral Clinical Research at Bristol-Myers
Squibb, a pharmaceutical company. Dr. Hellmann has been involved with clinical
care of patients with infectious diseases, especially HIV infection, and
infectious disease research since 1982. He received his MD degree from the
University of Kentucky and completed his internal medicine residency and
infectious diseases fellowship training at the University of California, San
Francisco.
CHRISTOS J. PETROPOULOS, PHD has served as our Director of Research and
Development since August 1996, became Senior Director of Research and
Development in September 1997 and was named our Vice President, Research and
Development in November 1999. From 1992 to 1996, Dr. Petropoulos was a scientist
at Genentech where he headed the Molecular Virology Laboratory and the Research
Virology and Molecular Detection Laboratories from 1994 to 1996. Dr. Petropoulos
received his PhD in molecular and cell biology from Brown University.
ROBIN M. TOFT has served as our Vice President, Sales and Marketing since May
1998. From 1996 to May 1998 Ms. Toft was employed with Laboratory Corporation of
America, or LabCorp, a national clinical laboratory, first as national sales
director and then as Associate Vice President of Business Development. From 1991
through 1996, Ms. Toft worked in sales for National Health Laboratories, a
clinical laboratory, which merged with Roche Biomedical Laboratories to form
LabCorp in 1995. Ms. Toft received her BS in medical technology from Michigan
State University.
PATRICIA A. WRAY has served as our Senior Director of Human Resources since
September 1998 and was named our Vice President of Human Resources in November
1999. From 1997 until September 1998, Ms. Wray operated her own human resources
consulting business. From 1989 to 1997, Ms. Wray was an internal consultant and
director with Genentech. She received her MS from Michigan State University.
RICHARD M. BELESON has served on our board of directors since May 1996. Mr.
Beleson is Senior Vice President for Capital Research Company, an investment
company. Prior to joining Capital Research in 1984, he was a research analyst
for Boettcher & Company.
ANDERS HOVE, MD has served on our board of directors since August 1998. Dr. Hove
has been a member of the Bellevue Group in Zurich, Switzerland since 1996, which
focuses on investing in public and private biotechnology companies in the United
States and in Europe. Dr. Hove is also a director of The Medicines Company. From
1992 to 1996, Dr. Hove held various corporate positions in clinical development
and marketing at Ciba-Geigy Pharmaceuticals Division, Basel, Switzerland.
CRISTINA H. KEPNER has served on our board of directors since May 1996. Ms.
Kepner is Director, Executive Vice President and Corporate Finance Director at
Invemed Associates LLC, an investment banking firm which she joined in 1978. Ms.
Kepner serves on the board of directors of Quipp, Inc.
ALBERT L. ZESIGER has served on our board of directors since August 1999. Mr.
Zesiger is a founding Principal of Zesiger Capital Group LLC, an investment
advisory firm. He has been in the money management business for over 30 years.
He also serves on the board of directors of Durect Corporation, Eos
Biotechnology, Inc., Hayes Medical Inc., and Praecis Pharmaceuticals Inc. and is
Co-Chair of Asphalt Green, Inc., a non-profit corporation.
BOARD COMPOSITION
Upon the closing of this offering, in accordance with the terms of our restated
certificate of incorporation, the terms of office of the board of directors will
be divided into three classes:
- Class I directors, whose term will expire at the annual meeting of
stockholders to be held in 2001
- Class II directors, whose term will expire at the annual meeting of
stockholders to be held in 2002
- Class III directors, whose term will expire at the annual meeting of
stockholders to be held in 2003
Our Class I directors will be Messrs. Beleson and Young, our Class II directors
will be Mr. Goldstein and Ms. Kepner, and our Class III directors will be Dr.
Hove and Mr. Zesiger. At each annual meeting of
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<PAGE> 39
stockholders after the initial classification, the successors to directors whose
terms will then expire will be elected to serve from the time of election and
qualification until the third annual meeting following election. Any additional
directorships resulting from an increase in the number of directors will be
distributed among the three classes so that, as nearly as possible, each class
will consist of one-third of the directors. This classification of the board of
directors may have the effect of delaying or preventing changes in control or
management of our company.
COMMITTEES OF THE BOARD OF DIRECTORS
The audit committee of the board of directors reviews our internal accounting
procedures and consults with and reviews the services provided by our
independent accountants.
Our compensation committee reviews and makes recommendations to the board
concerning compensation and benefits of all of our executive officers,
administers our stock option plan and establishes and reviews general policies
relating to compensation and benefits of our employees.
DIRECTOR COMPENSATION
Our directors do not currently receive any cash compensation for services on the
board of directors or any committee thereof, but directors may be reimbursed for
certain expenses in connection with attendance at board and committee meetings.
In addition, all directors are eligible to participate in our 2000 Equity
Incentive Plan.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the fiscal year ended December 31, 1999, Messrs. Beleson, Hove and Young
served as members of our compensation committee. None of our executive officers
serves as a member of the board of directors or compensation committee of any
entity that has one or more executive officers serving on our board of directors
or compensation committee.
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<PAGE> 40
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation awarded or paid to, or earned or
accrued for services rendered to us in all capacities during 1999 by our chief
executive officer, and the four other most highly compensated officers whose
total compensation exceeded $100,000 during 1999. The compensation described in
the table does not include medical, group life insurance or other benefits
which, in the aggregate, are available generally to all our salaried employees
and perquisites and other personal benefits which do not exceed the lesser of
$50,000 or 10% of the executive officer's salary disclosed in this table. We
refer to these executive officers as our "named executive officers" in other
parts of this prospectus.
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION --------------------
------------------------------- NUMBER OF SECURITIES
NAME AND PRINCIPAL POSITION SALARY BONUS OTHER UNDERLYING OPTIONS
--------------------------- -------- -------- ------- --------------------
<S> <C> <C> <C> <C>
William D. Young................. $ 51,868 $825,000(1) -- 650,000(2)
Chairman of the Board and
Chief Executive Officer
Martin H. Goldstein.............. $258,310 -- -- 13,612(3)
President and Director
Nicholas S. Hellmann............. $182,676 $ 45,000 -- --
Vice President, Clinical
Research
Christos J. Petropoulos.......... $130,912 $ 7,421 -- 5,775(3)
Vice President, Research and
Development
Robin M. Toft.................... $158,339 -- $48,084(4) --
Vice President, Sales and
Marketing
</TABLE>
- ---------------------------
(1) Consists of a stock bonus granted to Mr. Young prior to his employment with
us in consideration of his service as our Chairman of the Board. At the time
of grant, these shares had an aggregate fair value of $555,000. For a more
detailed discussion of this grant, see "Employment Agreements -- William D.
Young." Also includes $270,000 in cash bonuses accrued in 1999 that will be
paid in 2000.
(2) For a detailed description of these option grants, see "-- Employment
Agreements -- William D. Young."
(3) This option is intended to be an incentive stock option. The shares
underlying this option vest monthly over 48 months beginning on April 30,
1999. The exercise price of this option is $5.40 per share.
(4) Includes a housing allowance of $20,074 and forgiveness of $28,010 owed to
us by Ms. Toft.
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<PAGE> 41
1999 OPTION GRANTS
The following table sets forth information concerning stock options granted to
each of our named executive officers during 1999:
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
PERCENTAGE VALUE AT
OF TOTAL ASSUMED ANNUAL
NUMBER OF OPTIONS RATES OF STOCK
SECURITIES GRANTED TO PRICE APPRECIATION
UNDERLYING EMPLOYEES EXERCISE FOR OPTION TERM
OPTIONS IN PRICE EXPIRATION ---------------------
NAME GRANTED YEAR 1999 PER SHARE DATE 5% 10%
---- ---------- ---------- --------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
William D. Young....... 250,000(1)(2) 24.5% $3.14 11/11/09
250,000(1)(2) 24.5 3.14 11/11/09
150,000(2) 14.7 3.14 11/11/09
Martin H. Goldstein.... 13,612(3) 1.3 5.40 3/30/09
Christos J.
Petropoulos.......... 5,775(3) 0.6 5.40 3/30/09
</TABLE>
- ---------------------------
(1) These options were granted outside of our equity incentive plans.
(2) For a description of the vesting of these options, see "-- Employment
Agreements -- William D. Young."
(3) One forty-eighth of the underlying shares vest each month beginning on April
30, 1999.
Except where noted, the figures in the table above represent options granted
under our 2000 Equity Incentive Plan. We granted options to purchase 1,019,675
shares of our common stock in 1999. All options were granted at an exercise
price equal to the fair value of the common stock on the date of grant as
determined by our board of directors.
The potential realizable value represents amounts, net of exercise price before
taxes, that may be realized upon exercise of the options immediately prior to
the expiration of their terms assuming appreciation of 5% and 10% over the
option term. The 5% and 10% are calculated based on rules promulgated by the
Securities and Exchange Commission and an assumed initial public offering price
of $ per share and do not reflect our estimate of future stock price growth.
The actual value realized may be greater or less than the potential realizable
value set forth in the table.
1999 OPTION VALUES
The following table sets forth information concerning the number and value of
exercisable and unexercisable options held by each of the named executive
officers as of December 31, 1999. The value of unexercised in-the-money options
at December 31, 1999 represents an amount equal to the difference between the
assumed initial public offering price of $ per share and the option exercise
price, multiplied by the number of unexercised in-the-money options. An option
is in-the-money if the fair market value of the underlying shares exceeds the
exercise price of the options.
<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>
William D. Young................... 653,125(1) 9,375 $ $
Martin H. Goldstein................ 2,552 11,060
Christos J. Petropoulos............ 5,925 7,350
Robin M. Toft...................... 19,791 42,709
</TABLE>
- ---------------------------
(1) As of December 31, 1999, 620,000 of these shares were subject to a
repurchase right in our favor that lapses over time as described in
"-- Employment Agreements -- William D. Young."
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EMPLOYEE BENEFIT PLAN
2000 Equity Incentive Plan
In November 1995, our board of directors adopted our 1996 Stock Plan, and the
plan was approved by our stockholders on May 1996. In February 2000, we approved
an amendment and restatement of the plan, and re-named the plan the "2000 Equity
Incentive Plan." As amended, a total of 4,200,000 shares of common stock are
authorized for issuance under the plan. Shares subject to stock awards that have
expired or otherwise terminated without having been exercised in full again
become available for grant.
The plan permits the grant of options to our directors, executive officers, key
employees and consultants and certain of our advisors. Options may be either
incentive stock options to employees within the meaning of Section 422 of the
Internal Revenue Code or non-statutory stock options. In addition, the plan
permits the grant of stock bonuses and rights to purchase restricted stock.
Except in specified circumstances, no person may be granted options covering
more than 1,000,000 shares of common stock in any calendar year.
The plan is administered by the board of directors or a committee appointed by
the board. The board has delegated the authority to administer the plan to our
compensation committee. Subject to the limitations set forth in the plan, the
compensation committee and the administrator have the authority to select the
eligible persons to whom award grants are to be made, to designate the number of
shares to be covered by each award, to determine whether an option is to be an
incentive stock option or a non-statutory stock option, to establish vesting
schedules, to specify the exercise price of options and the type of
consideration to be paid upon exercise and, subject to specified restrictions,
to specify other terms of awards.
The maximum term of options granted under the plan is ten years. Incentive stock
options granted under the plan generally are non-transferable. Non-statutory
stock options generally are non-transferable, although the applicable option
agreement may permit some transfers. Options generally expire from one to three
months after the termination of an optionholder's service. However, if an
optionholder is permanently disabled or dies during his or her service, that
person's options generally may be exercised up to 12 months following disability
or death.
The exercise price of options granted under the plan is determined by the board
of directors or committee in accordance with the guidelines set forth in the
plan. The exercise price of an incentive stock option cannot be less than 100%
of the fair value of the common stock on the date of grant. The exercise price
of a non-statutory stock option cannot be less than 85% of the fair market value
of the common stock on the date of grant.
Options granted under the plan vest at the rate determined by the board of
directors or committee and specified in the option agreement. The terms of any
stock bonuses or restricted stock purchase awards granted under the plan will be
determined by the board of directors or committee. The purchase price of
restricted stock under any restricted stock purchase agreement will be
determined by the board of directors or committee and will not be less than 85%
of the fair value of our common stock on the date of grant. Stock bonuses and
restricted stock purchase agreements awarded under the plan are generally non-
transferable, although the applicable award agreement may permit some transfers.
In the event of a change in control in our ownership as defined in our plan, all
outstanding stock awards under the plan must either be assumed or substituted by
the surviving entity. In the event the surviving entity does not assume or
substitute such stock awards, then the vesting and exercisability of outstanding
awards will accelerate prior to the change in control and such awards will
terminate to the extent not exercised prior to the change in control. The board
of directors may amend or terminate the plan at any time. Amendments will
generally be submitted for stockholder approval to the extent required by
applicable law.
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As of December 31, 1999, we had issued and outstanding under the plan options to
purchase 728,913 shares of common stock and 394,253 shares had been purchased
upon the exercise of options. The per share exercise prices of these outstanding
options range from $0.32 to $5.40.
2000 Employee Stock Purchase Plan
In February 2000, we adopted the 2000 Employee Stock Purchase Plan. A total of
500,000 shares of common stock has been reserved for issuance under the purchase
plan. The purchase plan is intended to qualify as an employee stock purchase
plan within the meaning of Section 423 of the Internal Revenue Code. Under the
purchase plan, the board of directors may authorize participation by eligible
employees, including executive officers, in periodic offering following the
commencement of the purchase plan. The initial offering under the purchase plan
will commence on the effective date of this offering and terminate on January
31, 2002.
Unless otherwise determined by the board of directors, employees are eligible to
participate in the purchase plan only if they are employed by us or one of our
subsidiaries designated by the board of directors for at least 20 hours per week
and are customarily employed for at least five months per calendar year.
Employees who participate in an offering may have up to 15% of their earnings
withheld pursuant to the purchase plan. The amount withheld is then used to
purchase shares of common stock on specified dates determined by the board of
directors. The price of common stock purchased under the purchase plan will be
equal to 85% of the lower of the fair value of the common stock at the
commencement date of each offering period or the relevant purchase date.
Employees may end their participation in the offering at any time during the
offering period, and participation ends automatically on termination of
employment.
In the event of a merger, reorganization, consolidation or liquidation, the
board of directors has discretion to provide that each right to purchase common
stock will be assumed or an equivalent right substituted by the successor
corporation or the board of directors may provide for all sums collected by
payroll deductions to be applied to purchase stock immediately prior to such
merger or other transaction. The board of directors has the authority to amend
or terminate the purchase plan, provided, however, that no such action may
adversely affect any outstanding rights to purchase common stock.
EMPLOYMENT AGREEMENTS
William D. Young
We have an agreement with William D. Young governing his employment as our Chief
Executive Officer. Our employment agreement provides for a base salary of
$300,000 per year, plus a yearly incentive bonus as part of our bonus program
based on objectives established by the board of directors after consultation
with Mr. Young, plus a yearly special bonus of between $50,000 and $100,000,
grossed up for tax purposes. In addition, the agreement contains a
non-solicitation agreement.
As required by the agreement, prior to the commencement of Mr. Young's
employment, we also granted him a stock bonus award of 150,000 fully vested
shares of our common stock, in consideration of his past service as our Chairman
of the Board prior to becoming our chief executive officer. The agreement also
provides for the following:
- a cash bonus in the gross amount of $180,000, granted on January 15, 2000,
and an additional cash bonus in the gross amount of $180,000, to be granted
on April 15, 2000
- an incentive stock option under our 2000 Equity Incentive Plan covering
150,000 shares of our common stock, to vest as to 30,000 shares on December
31, 1999 and as to an additional 2,500 shares at the end of each month
thereafter
- a non-statutory stock option, granted outside of our 2000 Equity Incentive
Plan, covering 250,000 shares of our common stock, to vest as to 25% after
the first year of employment and the remaining 75% in equal installments
over the next three years. This option may be exercised prior to
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<PAGE> 44
vesting, but unvested portions acquired will be subject to a repurchase
right by us that will expire gradually consistent with the vesting schedule
- a non-statutory stock option, granted outside of our 2000 Equity Incentive
Plan, covering 250,000 shares of our common stock. This option vests 100%
after the five years of employment, unless either one of the following
occurs before that date:
- a merger or acquisition or initial public offering where the per share
valuation of our common stock is imputed to be more than $18.50, in which
case 125,000 shares shall immediately vest
- our product revenue for any fiscal year exceeds $20.0 million, in which
case 125,000 shares shall immediately vest
This option may also be exercised prior to vesting, subject to our repurchase
right.
Any of these options may be exercised by delivery of a promissory note, and each
of the options immediately becomes fully vested if, within one year of a change
in our control or liquidation, Mr. Young is terminated without cause or resigns
for good reason.
Our agreement with Mr. Young specifies that Mr. Young's employment is at-will.
If we terminate his employment for any reason other than for cause, however, or
if his employment is terminated as a result of death or permanent disability, we
have also agreed to continue to pay him, or his estate, his base salary, at the
level in effect at the time of termination, for an additional 12 months. Also,
we have agreed that in any of these events the vesting of his options shall
accelerate, either for an additional 12 months or, after he has been employed
for more than two years, in full.
Martin H. Goldstein
We have an agreement with Martin H. Goldstein governing his employment as our
President. The agreement provides that Mr. Goldstein's current stock options
vest over four years, unless there is a merger or consolidation of the Company,
in which case they vest immediately.
The options immediately become fully vested if, within two years of a change in
control or liquidation, Mr. Goldstein is terminated without cause.
Our agreement with Mr. Goldstein specifies that Mr. Goldstein's employment is
at-will. If we terminate his employment for any reason other than for cause,
however, or if his employment is terminated as a result of death or permanent
disability, we have also agreed to continue to pay him, or his estate, his base
salary, at the level in effect at the time of termination, for an additional six
months. Also, we have agreed that in any of these events the vesting of his
options accelerates for an additional six months.
LIMITATION ON LIABILITY AND INDEMNIFICATION MATTERS
Our certificate of incorporation limits the liability of directors to the
maximum extent permitted by Delaware law. In addition, our bylaws require us to
indemnify our directors and executive officers, and allow us to indemnify our
other employees and agents, to the fullest extent permitted by law. We have also
entered into agreements to indemnify some of our directors and executive
officers. We believe that these provisions and agreements are necessary to
attract and retain qualified directors and executive officers. At present, there
is no pending litigation or proceeding involving any director, executive
officer, employee or agent where indemnification will be required or permitted.
We are not aware of any threatened litigation or proceeding that might result in
a claim for such indemnification. Insofar as indemnification for liabilities
arising under the Securities Act may be permitted to directors, executive
officers or persons controlling our company pursuant to the foregoing
provisions, we have been informed 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.
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<PAGE> 45
PRINCIPAL STOCKHOLDERS
The following table sets forth information regarding beneficial ownership of our
common stock as of February 22, 2000, by:
- each of our directors
- each of our named executive officers
- each person who beneficially owns more than five percent of the outstanding
shares of common stock
- all of our directors and 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 and warrants if he or she possesses sole or shared voting or
investment power of that security, and includes options and warrants 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 14,684,390 shares of
common stock outstanding as of February 22, 2000, and also lists applicable
percentage ownership based on shares of common stock outstanding after
completion of this offering. Options and warrants to purchase shares of our
common stock that are exercisable within 60 days of February 22, 2000, are
deemed to be beneficially owned by the persons holding these options and
warrants for the purpose of computing percentage ownership of that person, but
are not treated as outstanding for the purpose of computing any other person's
ownership percentage. Shares underlying options and warrants that are deemed
beneficially owned are listed in this table separately in the column labeled
"Shares Subject to Options." These shares are included in the number of shares
listed in the column labeled "Total Number."
Unless otherwise indicated, the address for each person or entity named below is
ViroLogic, Inc., 270 East Grand Avenue, South San Francisco, California 94080.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
---------------------------------------------------------------
SHARES SUBJECT
TOTAL TO OPTIONS PERCENT BEFORE PERCENT AFTER
NAME OF BENEFICIAL OWNER NUMBER AND WARRANTS OFFERING OFFERING
------------------------ ---------- -------------- -------------- -------------
<S> <C> <C> <C> <C>
Anders Hove(1)......................... 3,804,703 199,705 25.6% %
Biotech Growth S.A.
Albert L. Zesiger(2)................... 2,676,598 -- 18.2
Zesiger Capital Group
Richard M. Beleson(3).................. 955,157 631 6.5
Capital Management Services, Inc.
Martin H. Goldstein(4)................. 464,317 3,828 3.2
Cristina H. Kepner(5).................. 360,937 59,445 2.4
Invemed Associates, Inc.
William D. Young....................... 190,625 40,625 1.3
Christos J. Petropoulos................ 82,091 7,091 *
Nicholas S. Hellmann................... 75,195 195 *
Robin M. Toft.......................... 23,958 23,958 *
Daniel Capon(6)........................ 1,769,920 -- 12.1
All directors and executive officers as
a group (11 persons)(7).............. 8,643,136 345,033
</TABLE>
(footnotes on next page)
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<PAGE> 46
- ---------------------------
* Represents beneficial ownership of less than 1%.
(1) Includes 3,604,998 shares held by Biotech Growth S.A., a fully owned
subsidiary of BB Biotech A.G., and 199,705 shares that Biotech Growth may
acquire on or before April 22, 2000 by exercising warrants that it holds.
Mr. Hove shares voting and investment power over the shares and warrants
held by Biotech Growth and disclaims beneficial ownership of these shares
and warrants. Mr. Hove's business address is c/o Bellevue Research, 1
Cambridge Center, 9th Floor, Cambridge, MA 02142.
(2) Includes 2,614,098 shares held by entities for whom Zesiger Capital Group
acts as an investment advisor. The largest of these entities is the State of
Oregon Public Employee Retirement system which owns 968,750 shares,
representing approximately 6.6% and % of the total number of shares
outstanding before and after the offering, respectively. Mr. Zesiger shares
voting and investment power over shares held by these entities and disclaims
beneficial ownership of these shares except to the extent of his pecuniary
interest therein. Mr. Zesiger's business address is c/o Zesiger Capital
Group, 320 Park Avenue, New York, NY 10022.
(3) Includes 941,026 shares held by Capital Management Services, Inc. and 631
shares that Capital Management Services may acquire on or before April 15,
2000 by exercising warrants that it holds. Mr. Beleson shares voting and
investment power over the shares and warrants held by Capital Management
Services and disclaims beneficial ownership of these shares and warrants
except to the extent of his pecuniary interest therein. Mr. Beleson's
business address is c/o Capital Group, One Market, Stewart Tower, Suite
1800, San Francisco, CA 94105.
(4) Includes 50,000 shares held in trust by Mr. Goldstein for his children. Also
includes 8,239 shares held in our 401(k) plan of which Mr. Goldstein serves
as a trustee. Mr. Goldstein disclaims beneficial ownership of these shares.
(5) Includes 267,060 shares held by Invemed Associates, Inc. Ms. Kepner shares
voting and investment power over the shares held by Invemed and disclaims
beneficial ownership of these shares except to the extent of her pecuniary
interest therein. Ms. Kepner's business address is c/o Invemed Associates,
375 Park Avenue, Suite 2205, New York, NY 10152.
(6) The business address of Dr. Capon, our Chairman Emeritus, is 90 Woodridge
Road, Hillsborough, CA 94010.
(7) Includes:
- shares listed in footnotes 1 through 5
- 9,555 shares acquirable by an executive officer not listed separately in
the table above on or before April 22, 2000 by exercising vested stock
options
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RELATED-PARTY TRANSACTIONS
The following is a description of transactions since inception to which we have
been a party, in which the amount involved exceeds $60,000 and in which any
director, executive officer or holder of more than 5% of our capital stock had
or will have a direct or indirect material interest, other than compensation
arrangements which are described under "Management."
The following persons or entities purchased securities in the amounts set forth,
on an as-converted to common basis, in the chart below. We sold shares of our
Series A preferred stock between May 1996 and May 1997. We sold shares of our
Series B preferred stock in August 1998. We sold shares of our Series C
preferred stock between August 1999 and February 2000.
<TABLE>
<CAPTION>
COMMON SERIES A SERIES B SERIES C
PURCHASER(1) STOCK FINANCING FINANCING FINANCING WARRANTS
------------ --------------- ----------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C>
DIRECTORS AND PRINCIPAL STOCKHOLDERS
Richard M. Beleson..................... -- 843,750 97,276 13,500 631
Capital Management Services, Inc.
Cristina H. Kepner..................... -- 101,562 4,864 195,066 59,445
Invemed Associates, Inc.
Anders Hove............................ -- -- 2,237,354 1,756,749 241,748
Biotech Growth S.A.
Albert L. Zesiger...................... -- 1,124,998 -- 1,676,600 --
Zesiger Capital Group,
Daniel Capon........................... 1,387,500(2) -- -- 892,920
EXECUTIVE OFFICERS
William D. Young....................... 150,000 -- -- -- --
Martin H. Goldstein.................... 402,250 -- -- 50,000 --
Nicholas S. Hellmann................... 75,000 -- -- -- --
Christos J. Petropoulos................ 75,000 -- -- -- --
OTHER TRANSACTION INFORMATION
Price per share........................ $0.002 to $3.70 $3.20 $6.40 $3.70
</TABLE>
- -------------------------
(1) See "Principal Stockholders" for more detail on shares held by these
purchasers.
(2) These shares were purchased pursuant to a stock purchase agreement that
provided for a right of repurchase held by us. In August 1998, in connection
with the termination of Dr. Capon's employment with us, Dr. Capon brought a
lawsuit which was settled in November 1999. As part of the settlement Dr.
Capon was named our Chairman Emeritus and we repurchased 162,500 shares of
common stock held by him for $225,000 in cash. We also allowed Dr. Capon to
retain 100,000 shares of our common stock that we had the right to
repurchase.
We have entered into an Amended and Restated Investor Rights Agreement with each
of the purchasers of our preferred stock pursuant to which these and other
stockholders will have registration rights following this offering with respect
to their shares of common stock issued upon conversion of their preferred stock.
We have entered into, or prior to this offering will enter into, indemnification
agreements with our directors and executive officers for the indemnification of
and advancement of expenses to these persons to the fullest extent permitted by
law. We also intend to enter into these agreements with our future directors and
executive officers.
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<PAGE> 48
DESCRIPTION OF CAPITAL STOCK
GENERAL
Immediately following the closing of this offering, our authorized capital stock
will consist of 60,000,000 shares of common stock, $0.001 par value per share,
and 5,000,000 shares of preferred stock, $0.001 par value per share.
This summary does not purport to be complete and is subject to, and qualified in
its entirety by: the provisions of our certificate of incorporation, as amended
and restated; various documents and agreements evidencing warrants and
registration rights, all of which are included as exhibits to the registration
statement which this prospectus is a part; and applicable provisions of Delaware
law.
COMMON STOCK
As of February 22, 2000, and assuming the conversion of all outstanding
preferred stock into common stock upon the closing of this offering, there were
outstanding 14,684,390 shares of common stock held of record by 142
stockholders, options to purchase 1,468,810 shares of common stock and warrants
to purchase 745,082 shares of common stock. The holders of common stock are
entitled to one vote per share on all matters to be voted on by the
stockholders. Subject to preferences that may be applicable to any outstanding
shares of preferred stock, holders of common stock are entitled to receive
ratably such dividends as may be declared by the board of directors out of funds
legally available therefor. In the event of our liquidation, dissolution or
winding up, holders of common stock are entitled to share ratably in all assets
remaining after payment of liabilities and the liquidation preferences of any
outstanding shares of preferred stock. Holders of common stock have no
preemptive, conversion, subscription or other rights. There are no redemption or
sinking fund provisions applicable to the common stock. All outstanding shares
of common stock are, and all shares of common stock to be outstanding upon
completion of this offering will be, fully paid and nonassessable.
PREFERRED STOCK
As of February 22, 2000, assuming the closing of this offering, all outstanding
shares of preferred stock would have been converted into 9,587,762 shares of
common stock. See Note 5 to financial statements for a description of the
currently outstanding preferred stock. Following the conversion, our certificate
of incorporation will be amended and restated to delete all references to such
shares of preferred stock. The certificate of incorporation, as restated, gives
to the board of directors the authority, without further action by stockholders,
to issue up to 5,000,000 shares of preferred stock in one or more series and to
fix the rights, preferences, privileges, qualifications and restrictions granted
to or imposed upon such preferred stock, including dividend rights, conversion
rights, voting rights, rights and terms of redemption, liquidation preference
and sinking fund terms, any or all of which may be greater than the rights of
the common stock. The issuance of preferred stock could:
- adversely affect the voting power of holders of common stock and reduce the
likelihood that such holders will receive dividend payments and payments
upon liquidation
- decrease the market price of our common stock
- delay, deter or prevent a change in our control
We have no present plans to issue any shares of preferred stock.
In November 1997, all of our outstanding shares of Series A preferred stock were
converted into shares of common stock. No shares of Series A preferred stock
remain outstanding.
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<PAGE> 49
WARRANTS
In connection with the private placement of our Series A preferred stock, in May
1996, we issued warrants which are now exercisable for up to 396,094 shares of
common stock, all of which remain unexercised as of February 22, 2000. The
exercise price of these warrants is $3.68 per share.
In connection with the private placement of our Series B preferred stock in
August, 1998, we issued warrants to purchase shares of our common stock and
preferred stock which, after the offering, will be exercisable for 243,122
shares of common stock, of which 243,106 remain unexercised as of February 22,
2000. The exercise prices of these warrants range from $0.02 to $5.91 per share
of common stock.
In connection with leases for our facilities and financing agreements between
May 1998 and August 1998, we issued warrants to purchase 105,883 shares of our
common stock, all of which remain unexercised as of February 22, 2000. The
exercise prices of these warrants range from $3.68 to $8.00 per share.
The exercise price of each of our outstanding warrants is subject to customary
adjustments upon stock splits, stock dividends or subdivisions. Additionally,
the warrants are subject to customary adjustments upon a sale of all or
substantially all of our assets or upon our reorganization, reclassification,
consolidation or merger. The exercise prices of the warrants are also subject to
adjustment in the event of our subsequent issuance of common stock at a price
per share less than their respective exercise prices. None of our warrants
confer upon the holder any voting or any other rights of our stockholders, and
are subject to certain registration rights agreements described below.
REGISTRATION RIGHTS
Pursuant to the Amended and Restated Investor Rights Agreement, as amended, and
individual warrant agreements between us and some of our investors, the
investors, holding an aggregate of 12,965,683 shares of our common stock issued
or issuable upon conversion of our outstanding preferred stock and upon exercise
of outstanding warrants to purchase common stock, have registration rights
pertaining to the securities they hold, exercisable any time following 180 days
after the effective date of this offering. If we propose to register any of our
securities under the Securities Act for our own account or the account of any of
our stockholders other than these holders of registrable shares, holders of such
registrable shares are entitled to notice of the registration and are entitled
to include registrable shares therein, provided, among other conditions, that
the underwriters of any such offering have the right to limit the number of
shares included in such registration. In addition, commencing 180 days after the
effective date of the registration statement of which this prospectus is a part,
we may be required to prepare and file a registration statement under the
Securities Act at our expense if requested to do so by the holders of at least
30% of the registrable shares, or by holders who propose to register securities,
the aggregate offering price of which, net of underwriting discounts and
commissions, equals or exceeds $10.0 million. We are required to use our best
efforts to effect such registration. We are not obligated to effect more than
three of such stockholder-initiated registrations. Further, holders of
registrable securities may require us to file additional registration statements
on Form S-3.
We are required to bear substantially all costs incurred in connection with any
such registrations, other than underwriting discounts and commissions. The
foregoing registration rights could result in substantial future expenses for us
and adversely affect any future equity offerings.
ANTI-TAKEOVER PROVISIONS
Delaware Law
We are governed by the provisions of Section 203 of the Delaware General
Corporation Law. In general, Section 203 prohibits a public Delaware corporation
from engaging in a "business combination" with an "interested stockholder" for a
period of three years after the date of the transaction in which the person
became an interested stockholder, unless the business combination is approved in
a prescribed manner. A
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<PAGE> 50
"business combination" includes mergers, asset sale or other transactions
resulting in a financial benefit to the stockholder. An "interested stockholder"
is a person who, together with affiliates and associates, owns (or within three
years, did own) 15% or more of the corporation's voting stock. The statute could
have the effect of delaying, deferring or preventing a change in our control.
Certificate of Incorporation and Bylaw Provisions
Our certificate of incorporation, which will become effective shortly following
the closing of this offering, provides that our board of directors will be
divided into three classes of directors, with each class serving a staggered
three-year term. The classification system of electing directors may tend to
discourage a third party from making a tender offer or otherwise attempting to
obtain control of us and may maintain the composition of our current board of
directors, as the classification of the board of directors generally increases
the difficulty of replacing a majority of directors. Our certificate of
incorporation provides that any action required or permitted to be taken by our
stockholders must be effected at a duly called annual or special meeting of
stockholders and may not be effected by any consent in writing. In addition, our
bylaws provide that special meetings of our stockholders may be called only by
the chairman of the board, our president, our chief executive officer, or by the
board of directors pursuant to a resolution adopted by a majority of the total
number of authorized directors.
Our certificate of incorporation also specifies that the authorized number of
directors may be changed only by resolution of the board of directors and does
not include a provision for cumulative voting for directors. Under cumulative
voting, a minority stockholder holding a sufficient percentage of a class of
shares may be able to ensure the election of one or more directors. These and
other provisions contained in our certificate of incorporation and bylaws could
delay or discourage certain types of transactions involving an actual or
potential change in our control or change in our management (including
transactions in which stockholders might otherwise receive a premium for their
shares over then current prices) and may limit the ability of stockholders to
remove current management or approve transactions that stockholders may deem to
be in their best interests and, therefore, could adversely affect the price of
our common stock.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common stock is .
LISTING
We have applied to list our common stock on the Nasdaq National Market under the
symbol "VLGC."
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SHARES ELIGIBLE FOR FUTURE SALE
When the offering is completed, we will have a total of shares of
common stock outstanding. The shares offered by this prospectus
will be freely tradeable unless they are purchased by our "affiliates," as
defined in Rule 144 under the Securities Act. Shares purchased by affiliates may
generally only be sold pursuant to an effective registration statement under the
Securities Act or in compliance with Rule 144. The remaining 14,684,390 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 or under an available exemption from registration, such
as provided through Rule 144.
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:
- one percent of the number of shares of common stock then outstanding, which
based on the shares outstanding as of February 22, 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 preceeding the filing of the notice on
Form 144 with respect to the sale.
Rule 144 provides limitation as the manner of sales and imposes requirements as
to notice and the availability of current public information about us.
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 sale, public information, volume limitation or
notice provisions of Rule 144. Therefore, unless otherwise restricted (including
by a lock-up agreement), a person who has been a non-affiliate for at least two
years may sell his or her shares in the open market.
One hundred eighty days after the date of this prospectus 7,546,525 shares of
our common stock will be eligible for sale under Rule 144 (including 2,595,214
shares under Rule 144(k)) and 2,355,239 will be eligible for sale under Rule
701. The remaining shares will be eligible for sale within 180 days thereafter.
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 requirement 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.
REGISTRATION RIGHTS
The holders of 12,291,651 shares of common stock and of warrants exercisable for
674,032 shares of common stock will be entitled to certain rights with respect
to the registration of these shares under the Securities Act. After these shares
are registered, they will be freely tradable.
LOCK-UP AGREEMENTS
All of our stockholders have entered into lock-up agreements with us prohibiting
them from offering, selling, pledging or otherwise disposing of their shares for
a period of 180 days after the date of this
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<PAGE> 52
prospectus. In addition, our directors and officers and other stockholders who
together own shares of common stock have agreed to similar
lock-up agreements with the underwriters prohibiting them from offering,
selling, pledging or otherwise disposing of these shares for the same 180-day
period. This generally means that the stockholders cannot sell these shares
during the 180 days following the date of this prospectus. See "Underwriting"
for additional details.
After the 180-day lock-up period, 9,615,770 shares will become eligible for sale
under Rule 144 (including 2,595,214 shares pursuant to Rule 144(k)) and
2,355,239 shares will become eligible for sale under Rule 701.
53
<PAGE> 53
UNDERWRITING
We have entered into an underwriting agreement with the underwriters named
below. CIBC World Markets Corp., ING Barings LLC and Prudential Securities
Incorporated are acting as representatives of the underwriters.
The underwriting agreement provides for the purchase of a specific number of
shares of common stock by each of the underwriters. The underwriters'
obligations are several, which means that each underwriter is required to
purchase a specified number of shares, but is not responsible for the commitment
of any other underwriter to purchase shares. Subject to the terms and conditions
of the underwriting agreement, each underwriter has severally agreed to purchase
the number of shares of common stock set forth opposite its name below:
<TABLE>
<CAPTION>
UNDERWRITER NUMBER OF SHARES
----------- ----------------
<S> <C>
CIBC World Markets Corp. ...................................
ING Barings LLC.............................................
Prudential Securities Incorporated..........................
--------------
Total.....................................................
==============
</TABLE>
The underwriters have agreed to purchase all of the shares offered by this
prospectus (other than those covered by the over-allotment option described
below) if any are purchased. Under the underwriting agreement, if an underwriter
defaults in its commitment to purchase shares, the commitments of non-
defaulting underwriters may be increased or the underwriting agreement may be
terminated, depending on the circumstances.
The shares should be ready for delivery on or about , 2000 against
payment in immediately available funds. The representatives have advised us that
the underwriters propose to offer the shares directly to the public at the
public offering price that appears on the cover page of this prospectus. In
addition, the representatives may offer some of the shares to other securities
dealers at such price less a concession of $ per share. The underwriters may
also allow, and such dealers may reallow, a concession not in excess of
$ per share to other dealers. After the shares are released for sale to the
public, the representatives may change the offering price and other selling
terms at various times.
We have granted the underwriters an over-allotment option. This option, which is
exercisable for up to 30 days after the date of this prospectus, permits the
underwriters to purchase a maximum of additional shares from us
to cover over-allotments. If the underwriters exercise all or part of this
option, they will purchase shares covered by the option at the initial public
offering price that appears on the cover page of this prospectus, less the
underwriting discount. If this option is exercised in full, the total price to
public will be $ , and the total proceeds to us will be $ .
The underwriters have severally agreed that, to the extent the over-allotment
option is exercised, they will each purchase a number of additional shares
proportionate to the underwriter's initial amount reflected in the foregoing
table.
The following table provides information regarding the amount of the discount to
be paid to the underwriters by us.
<TABLE>
<CAPTION>
TOTAL WITHOUT EXERCISE TOTAL WITH FULL EXERCISE
PER SHARE OF OVER-ALLOTMENT OPTION OF OVER-ALLOTMENT OPTION
--------- ------------------------ ------------------------
<S> <C> <C> <C>
ViroLogic.......................... $ $ $
</TABLE>
We estimate that our total expenses of the offering, excluding the underwriting
discount, will be approximately $ .
We have agreed to indemnify the underwriters against certain liabilities,
including liabilities under the Securities Act.
54
<PAGE> 54
We, our officers and directors and substantially all other stockholders have
agreed to a 180-day "lock up" with respect to shares of common
stock and other securities that they beneficially own, including securities that
are convertible into shares of common stock and securities that are exchangeable
or exercisable for shares of common stock. This means that for a period of 180
days following the date of this prospectus, we and such persons may not offer,
sell, pledge or otherwise dispose of these securities without the prior written
consent of CIBC World Markets Corp.
The representatives have informed us that they do not expect discretionary sales
by the underwriters to exceed five percent of the shares offered by this
prospectus.
The underwriters have reserved for sale up to shares for
employees, directors and other persons associated with us. These reserved shares
will be sold at the initial public offering price that appears on the cover page
of this prospectus. The number of shares available for sale to the general
public in the offering will be reduced to the extent reserved shares are
purchased by such persons. The underwriters will offer to the general public, on
the same terms as other shares offered by this prospectus, any reserved shares
that are not purchased by such persons.
There is no established trading market for the shares. The offering price for
the shares has been determined by us and the representatives, based on the
following factors:
- estimates of our business potential and earnings prospects
- an assessment of our management
- consideration of the above factors in relation to market valuations of
companies in related businesses
Rules of the Securities and Exchange Commission may limit the ability of the
underwriters to bid for or purchase shares before the distribution of the shares
is completed. The underwriters may, however, engage in the following activities
in accordance with the rules:
- Stabilizing transactions -- The representatives may make bids or purchases
for the purpose of pegging, fixing or maintaining the price of the shares,
so long as stabilizing bids do not exceed a specified maximum.
- Over-allotments and syndicate covering transactions -- The underwriters may
create a short position in the shares by selling more shares than are set
forth on the cover page of this prospectus. If a short position is created
in connection with the offering, the representatives may engage in syndicate
covering transactions by purchasing shares in the open market. The
representatives may also elect to reduce any short position by exercising
all or part of the over-allotment option.
- Penalty bids -- If the representatives purchase shares in the open market in
a stabilizing transaction or syndicate covering transaction, they may
reclaim a selling concession from the underwriters and selling group members
who sold those shares as part of this offering.
Stabilization and syndicate covering transactions may cause the price of the
shares to be higher than it would be in the absence of such transactions. The
imposition of a penalty bid might also have an effect on the price of the shares
if it discourages resales of the shares.
Neither we nor the underwriters makes any representation or prediction as to the
effect that the transactions described above may have on the price of the
shares. These transactions may occur on the Nasdaq National Market or otherwise.
If such transactions are commenced, they may be discontinued without notice at
any time.
55
<PAGE> 55
LEGAL MATTERS
Certain legal matters with respect to the legality of the issuance of shares of
common stock offered by this prospectus will be passed upon for us by Cooley
Godward LLP, San Diego, California. Certain legal matters will be passed upon
for the underwriters by McDermott, Will & Emery.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our financial statements
at December 31, 1998 and 1999, and for each of the three years in the period
ended December 31, 1999, as set forth in their report. We have included our
financial statements in the prospectus and elsewhere in the registration
statement in reliance on Ernst & Young LLP's report, given on their authority as
experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed a registration statement on Form S-1 with the Securities and
Exchange Commission in connection with this offering. 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. You may read and copy the registration statement and any
other documents filed by us at the Securities and Exchange Commission's Public
Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call
the Securities and Exchange Commission at 1-800-SEC-0330 for further information
on the Public Reference Room. Our Securities and Exchange Commission filings are
also available to the public at the Securities and Exchange Commission's
Internet site at "http://www.sec.gov."
This prospectus is part of the registration statement and does not contain all
of the information included in the registration statement. Whenever a reference
is made in this prospectus to any contract or other document of ViroLogic, 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.
After the offering, we expect to provide annual reports to our stockholders that
include financial statements examined and reported on by our independent
auditors.
56
<PAGE> 56
INDEX OF FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Ernst & Young LLP, Independent Auditors........... F-2
Balance Sheets.............................................. F-3
Statements of Operations.................................... F-4
Statement of Stockholders' Equity........................... F-5
Statements of Cash Flows.................................... F-6
Notes to Financial Statements............................... F-7
</TABLE>
F-1
<PAGE> 57
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Board of Directors and Stockholders
ViroLogic, Inc.
We have audited the accompanying balance sheets of ViroLogic, Inc. as of
December 31, 1998 and 1999 and the related statements of operations,
stockholders' equity, and cash flows for each of the three years in the period
ended December 31, 1999. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of ViroLogic, 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.
Palo Alto, California
February 4, 2000, except as to Notes 1 and 9
for which the date is February , 2000
- --------------------------------------------------------------------------------
The foregoing report is in the form that will be signed upon the completion of
the one for two reverse stock split described in Notes 1 and 9 to the financial
statements.
/s/ ERNST & YOUNG LLP
Palo Alto, California
February 22, 2000
F-2
<PAGE> 58
VIROLOGIC, INC.
BALANCE SHEETS
(in thousands, except par value per share)
<TABLE>
<CAPTION>
PRO FORMA
STOCKHOLDERS'
DECEMBER 31, EQUITY AT
-------------------- DECEMBER 31,
1998 1999 1999
-------- -------- -------------
(Unaudited)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................... $ 9,564 $ 2,208
Accounts receivable, net of allowance for bad debts of
$63.................................................. -- 550
Inventory............................................... -- 287
Restricted cash......................................... -- 950
Other current assets.................................... 100 310
-------- --------
Total current assets................................. 9,664 4,305
Property and equipment, net............................... 3,538 5,028
Other assets.............................................. 73 444
-------- --------
Total assets......................................... $ 13,275 $ 9,777
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable........................................ $ 586 $ 1,457
Accrued compensation.................................... 163 560
Other accrued liabilities............................... 568 788
Deferred revenue........................................ 148 81
Current portion of loan................................. 801 897
-------- --------
Total current liabilities............................ 2,266 3,783
Long term portion of loan................................. 1,948 1,051
Long term deferred rent................................... 231 245
Commitments and contingencies
Stockholders' equity:
Preferred stock, $0.001 par value, 13,959 shares
authorized; issuable in series; 3,935 and 9,749
shares issued and outstanding at December 31, 1998
and 1999, respectively, (2,450 and 5,357,
respectively, on an as-if converted basis) (none-pro
forma); aggregate liquidation preference of $23,349
at December 31, 1999 (none -- pro forma)............. 4 10 $ --
Common stock, $0.001 par value, 30,000 shares
authorized; 4,810 and 5,097 shares issued and
outstanding at December 31, 1998 and 1999,
respectively (10,454 shares -- pro forma)............ 5 5 10
Additional paid-in capital.............................. 21,381 33,566 33,571
Notes receivable from officers and employees............ (95) (46) (46)
Deferred compensation................................... -- (414) (414)
Accumulated deficit..................................... (12,465) (28,423) (28,423)
-------- -------- --------
Total stockholders' equity........................... 8,830 4,698 $ 4,698
======== ======== ========
Total liabilities and stockholders' equity........... $ 13,275 $ 9,777
======== ========
</TABLE>
See accompanying notes.
F-3
<PAGE> 59
VIROLOGIC, INC.
STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1997 1998 1999
------- ------- --------
<S> <C> <C> <C>
Revenue..................................................... $ -- $ 102 $ 1,069
Operating costs and expenses:
Cost of revenue........................................... -- 17 627
Research and development.................................. 2,458 5,977 9,588
General and administrative................................ 858 1,782 5,622
Sales and marketing....................................... -- 484 1,196
------- ------- --------
Total costs and operating expenses..................... 3,316 8,260 17,033
------- ------- --------
Operating loss.............................................. (3,316) (8,158) (15,964)
Interest income............................................. 262 302 249
Interest expense............................................ (83) (198) (243)
------- ------- --------
Net loss.................................................... $(3,137) $(8,054) $(15,958)
======= ======= ========
Net loss per share.......................................... $ (1.21) $ (1.71) $ (3.34)
======= ======= ========
Shares used in computing net loss per share................. 2,591 4,700 4,772
======= ======= ========
Pro forma net loss per share (unaudited).................... $ (1.99)
========
Shares used in computing pro forma net loss per share
(unaudited)............................................... 8,015
========
</TABLE>
See accompanying notes.
F-4
<PAGE> 60
VIROLOGIC, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
(in thousands, except shares and per share data)
<TABLE>
<CAPTION>
NOTES
CONVERTIBLE RECEIVABLE
PREFERRED STOCK COMMON STOCK ADDITIONAL FROM
------------------- ------------------- PAID-IN OFFICERS & DEFERRED
SHARES AMOUNT SHARES AMOUNT CAPITAL EMPLOYEES COMPENSATION
---------- ------ ---------- ------ ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance as of December 31, 1996.... 2,733,596 $ 3 2,287,500 $ 2 $ 4,531 $ (71) $ --
Issuance of Series A convertible
preferred stock.................. 2,674,216 2 -- -- 4,275 -- --
Conversion of Series A preferred
stock to common stock............ (5,407,812) (5) 2,703,906 3 -- -- --
Repurchase of common stock......... -- -- (265,625) -- 2 -- --
Issuance of common stock in
exchange for notes............... -- -- 106,750 -- 72 (72) --
Exercise of stock options.......... -- -- 3,749 -- 1 -- --
Repayment of notes receivable...... -- -- -- -- -- 4 --
Net loss........................... -- -- -- -- -- -- --
---------- --- ---------- --- ------- ----- -----
Balance as of December 31, 1997.... -- -- 4,836,280 5 8,881 (139) --
Issuance of Series B convertible
preferred stock.................. 3,935,158 4 -- -- 12,508 -- --
Repurchase of common stock......... -- -- (6,666) -- (2) -- --
Exercise of common stock options... -- -- 15,000 -- 5 (4) --
Repurchase of restricted common
shares........................... -- -- (34,375) -- (11) 11 --
Exercise of common stock warrant... -- -- 12 -- -- -- --
Repayment of note receivable....... -- -- -- -- -- 37 --
Net loss........................... -- -- -- -- -- -- --
---------- --- ---------- --- ------- ----- -----
Balance as of December 31, 1998.... 3,935,158 4 4,810,251 5 21,381 (95) --
Exercise of stock options, net of
repurchases...................... -- -- 25,004 -- 44 -- --
Issuance of Series C convertible
preferred stock.................. 5,814,107 6 -- -- 10,729 -- --
Issuance of common stock........... -- -- 261,373 -- 988 -- --
Repayment of note receivable....... -- -- -- -- -- 16 --
Forgiveness of note receivable..... -- -- -- -- -- 33 --
Deferred compensation.............. -- -- -- -- 424 -- (424)
Amortization of deferred
compensation..................... -- -- -- -- -- -- 10
Net loss........................... -- -- -- -- -- -- --
---------- --- ---------- --- ------- ----- -----
Balance as of December 31, 1999.... 9,749,265 $10 5,096,628 $ 5 $33,566 $ (46) $(414)
========== === ========== === ======= ===== =====
<CAPTION>
TOTAL
ACCUMULATED STOCKHOLDERS'
DEFICIT EQUITY
----------- -------------
<S> <C> <C>
Balance as of December 31, 1996.... $ (1,274) $ 3,191
Issuance of Series A convertible
preferred stock.................. -- 4,277
Conversion of Series A preferred
stock to common stock............ -- (2)
Repurchase of common stock......... -- 2
Issuance of common stock in
exchange for notes............... -- --
Exercise of stock options.......... -- 1
Repayment of notes receivable...... -- 4
Net loss........................... (3,137) (3,137)
-------- --------
Balance as of December 31, 1997.... (4,411) 4,336
Issuance of Series B convertible
preferred stock.................. -- 12,512
Repurchase of common stock......... -- (2)
Exercise of common stock options... -- 1
Repurchase of restricted common
shares........................... -- --
Exercise of common stock warrant... -- --
Repayment of note receivable....... -- 37
Net loss........................... (8,054) (8,054)
-------- --------
Balance as of December 31, 1998.... (12,465) 8,830
Exercise of stock options, net of
repurchases...................... -- 44
Issuance of Series C convertible
preferred stock.................. -- 10,735
Issuance of common stock........... -- 988
Repayment of note receivable....... -- 16
Forgiveness of note receivable..... -- 33
Deferred compensation.............. -- --
Amortization of deferred
compensation..................... -- 10
Net loss........................... (15,958) (15,958)
-------- --------
Balance as of December 31, 1999.... $(28,423) $ 4,698
======== ========
</TABLE>
See accompanying notes.
F-5
<PAGE> 61
VIROLOGIC, INC.
STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1997 1998 1999
------- -------- --------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss.................................................. $(3,137) $ (8,054) $(15,958)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization.......................... 173 517 1,135
Non-cash stock-based compensation...................... -- -- 1,045
Changes in assets and liabilities:
Accounts receivable.................................. -- -- (550)
Inventory............................................ -- -- (287)
Other current assets................................. (64) 21 (210)
Accounts payable..................................... 394 151 871
Accrued compensation................................. 57 62 397
Other accrued liabilities............................ 30 502 223
Deferred rent........................................ 20 222 11
Deferred revenue..................................... -- 148 (67)
------- -------- --------
Net cash used in operating activities............. $(2,527) $ (6,431) $(13,390)
------- -------- --------
INVESTING ACTIVITIES
Purchases of short-term investments......................... (6,534) (14,500) --
Maturities and sales of short-term investments.............. 5,254 18,423 --
Other assets................................................ 19 (52) (371)
Restricted cash............................................. -- -- (950)
Capital expenditures........................................ (969) (2,585) (2,625)
------- -------- --------
Net cash (used in) provided by investing
activities...................................... $(2,230) $ 1,286 $ (3,946)
------- -------- --------
FINANCING ACTIVITIES
Principal payments on long term debt........................ (164) (540) (801)
Borrowings under long term debt............................. 204 2,639 --
Proceeds from issuance of common stock, net of common stock
repurchases............................................... 1 (1) 30
Repayments of notes receivable.............................. 4 37 16
Net proceeds from issuance of preferred stock............... 4,277 12,512 10,735
------- -------- --------
Net cash provided by financing activities......... $ 4,322 $ 14,647 $ 9,980
------- -------- --------
Net increase (decrease) in cash and cash
equivalents..................................... (435) 9,502 (7,356)
Cash and cash equivalents at beginning of year.............. 497 62 9,564
------- -------- --------
Cash and cash equivalents at end of year.................... $ 62 $ 9,564 $ 2,208
======= ======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest...................................... $ 83 $ 198 $ 243
======= ======== ========
SCHEDULE OF NONCASH FINANCING AND INVESTING ACTIVITIES
Notes receivable issued to officers and employees for common
stock purchase............................................ $ 72 $ 4 $ --
======= ======== ========
Deferred stock compensation................................. $ -- $ -- $ 424
======= ======== ========
</TABLE>
See accompanying notes.
F-6
<PAGE> 62
VIROLOGIC, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Basis of Presentation
ViroLogic, Inc. ("ViroLogic" or the "Company"), a biotechnology company, was
incorporated in the state of Delaware on November 14, 1995. Virologic is
developing and marketing innovative products to guide and improve treatment of
viral diseases. It has developed a way of directly measuring the impact of
genetic mutations on drug resistance and using this information to guide
therapy. It has a proprietary technology, called PhenoSense, for testing drug
resistance in viruses that cause serious viral diseases such as AIDS, hepatitis
B and hepatitis C. Through December 31, 1998, the Company was in the development
stage. The Company commenced commercial operations in 1999, and therefore it
ceased to be in the development stage during 1999 for financial reporting
purposes.
Management's Plans
As of December 31, 1999, the Company had an accumulated deficit of approximately
$28.4 million. Management expects to continue to incur substantial operating
losses for the foreseeable future primarily as a result of expected increases in
expenses for:
- Sales and marketing
- Expanding patient sample processing capabilities
- Research and product development costs
- Acquisition of additional office space and other necessary facilities
- General and administrative costs
In January and February 2000, the Company consummated the sale of an additional
8,461,630 shares of Series C convertible preferred stock (4,230,816 shares of
common stock on an as-if converted basis), from which the Company received
proceeds of approximately $15.7 million. The Company may need additional
funding.
The Company currently does not have a credit facility or committed sources of
capital. To the extent operating and capital resources are insufficient to meet
future requirements, the Company will have to raise additional funds to continue
the development and commercialization of future technologies. These funds may
not be available on favorable terms, or at all. If adequate funds are not
available on attractive terms, the Company may be required to curtail operations
significantly or to obtain funds by entering into financing, supply or
collaboration agreements on unattractive terms. In addition, the Company may
choose to raise additional capital due to market conditions or strategic
considerations even if it has sufficient funds for current or future operating
plans.
The Company believes that its available cash, cash equivalents and restricted
cash of $3.2 million as of December 31, 1999 along with the $15.7 million net
proceeds of its January and February 2000 sales of Series C convertible
preferred stock and available borrowing capacity under existing equipment
financing arrangements will be adequate to fund its operations through December
31, 2000.
Unaudited Pro Forma Stockholders' Equity
If the Company's initial public offering as described in Note 9 is consummated,
all of the convertible preferred stock outstanding will automatically be
converted into common stock. The unaudited pro forma
F-7
<PAGE> 63
VIROLOGIC, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
stockholders' equity at December 31, 1999 has been adjusted for the assumed
conversion of preferred stock based on the shares of preferred stock outstanding
at December 31, 1999.
Reverse Stock Split
On February 21, 2000, the Company's board of directors approved a one for two
reverse split of its common stock. The accompanying financial statements have
been adjusted retroactively to reflect the reverse split. The conversion ratios
of the respective series of convertible preferred stock were automatically
adjusted to reflect the reverse split.
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 amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
Cash Equivalents
ViroLogic considers all highly liquid investments with original maturities of
three months or less from the date of purchase to be cash equivalents.
Management determines the appropriate classification of its cash equivalents and
investment securities at the time of purchase and reevaluates such determination
as of each balance sheet date. Management has classified ViroLogic's marketable
securities as available-for-sale securities in the accompanying financial
statements. Available-for-sale securities are carried at fair value, with
unrealized gains and losses reported in a separate component of stockholders'
equity, when material. Realized gains and losses are included in interest
income. The cost of securities sold is based on the specific identification
method.
ViroLogic invests its excess cash in U.S. government and agency securities, debt
instruments of financial institutions and corporations, and money market funds
with strong credit ratings. ViroLogic has established guidelines regarding
diversification of its investments and their maturities which should maintain
safety and liquidity.
Inventory
Inventory is stated at the lower of standard cost (which approximates actual
cost) or market. At December 31, 1999, inventories consisted mainly of raw
materials used in the performance of the tests.
Property and Equipment
Property and equipment are recorded at cost and are depreciated using the
straight-line method over the estimated useful lives of the assets, generally
five years. Computer hardware and software are generally depreciated over three
years. Furniture and equipment acquired under equipment financing is amortized
over the shorter of the useful lives or the financing period. Leasehold
improvements are amortized over the shorter of the estimated useful life of the
assets or lease term.
Impairment of Long-Lived Assets
In accordance with the provisions of Statement of Financial Accounting Standards
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of" ("SFAS 121"),
F-8
<PAGE> 64
VIROLOGIC, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
ViroLogic reviews long-lived assets, including property and equipment, for
impairment whenever events or changes in business circumstances indicate that
the carrying amount of the assets may not be fully recoverable. Under SFAS 121,
an impairment loss would be recognized when estimated undiscounted future cash
flows expected to result from the use of the asset and its eventual disposition
is less than its carrying amount. Impairment, if any, is assessed using
discounted cash flows. Through December 31, 1999, there have been no such
losses.
Revenue Recognition
The Company recognizes revenue from sales of its tests upon the delivery of test
results to those customers. Deferred revenue relates to cash received in advance
of performing the tests.
Research and Development
The Company expenses research and development costs as incurred. Research and
development expenses consist primarily of salaries and related personnel costs,
material, supply costs for prototypes and expenses related to clinical trials to
validate the Company's testing processes and procedures and related overhead
expenses.
Stock-Based Compensation
The Company accounts for employee stock option grants using the intrinsic value
method in accordance with Accounting Principles Board Opinion No. 25 ("APB 25"),
which does not require the recognition of compensation expense for options
granted to employees with exercise prices equal to the fair value of the common
stock at the date of grant. The fair value disclosures required by Statement of
Financial Accounting Standards Board Statement No. 123, "Accounting for
Stock-Based Compensation" ("SFAS 123") are included in Note 5. SFAS No. 123
requires the disclosure of pro forma information regarding net loss and net loss
per share as if the Company had accounted for its stock options under the fair
value method.
Stock option grants to non-employees are accounted for in accordance with the
Emerging Issues Task Force Consensus No. 96-18, "Accounting for Equity
Instruments That Are Issued to Other Than Employees for Acquiring, or in
Conjunction with Selling, Goods or Services" which requires such options subject
to vesting to be periodically re-valued and expensed over their vesting periods.
Comprehensive Income (Loss)
As of January 1, 1998, ViroLogic adopted Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income" ("SFAS 130"). SFAS 130
requires unrealized gains or losses on ViroLogic's available-for-sale securities
to be included in other comprehensive income. For the years ended December 31,
1997, 1998, and 1999, comprehensive loss equalled net loss.
Segment Reporting
Effective in January 1998, ViroLogic adopted Statement of Financial Accounting
Standards No. 131, "Disclosure about Segments of an Enterprise and Related
Information" ("SFAS 131"). SFAS 131 establishes annual and interim reporting
standards for an enterprise's operating segments and related disclosures about
its products, services, geographic areas and major customers. ViroLogic has
determined
F-9
<PAGE> 65
VIROLOGIC, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
that it operates in only one segment. Accordingly, the adoption of SFAS 131 had
no impact on ViroLogic's financial statements.
Net Loss Per Share
Basic earnings per share is calculated based on the weighted-average number of
common shares outstanding during the periods presented, less the
weighted-average shares outstanding which are subject to the Company's right of
repurchase. Diluted earnings per share would give effect to the dilutive effect
of common stock equivalents consisting of convertible preferred stock and stock
options and warrants (calculated using the treasury stock method). Potentially
dilutive securities have been excluded from the diluted earnings per share
computations as they have an antidilutive effect due to ViroLogic's net loss.
The computation of pro forma net loss per share includes shares issuable upon
the conversion of outstanding shares of convertible preferred stock (using the
as-if converted method) from the original date of issuance.
A reconciliation of shares used in the calculations is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------
1997 1998 1999
---------- ---------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Actual:
Net loss............................................. $(3,137) $(8,054) $(15,958)
======= ======= ========
Weighted-average shares of common stock
outstanding........................................ 2,671 4,826 4,856
Less: weighted-average shares subject to
repurchase......................................... (80) (126) (84)
------- ------- --------
Weighted-average shares used in net loss per share... 2,591 4,700 4,772
======= ======= ========
Net loss per share................................... $ (1.21) $ (1.71) $ (3.34)
======= ======= ========
Pro forma:
Net loss........................................... $(15,958)
========
Shares used above.................................... 4,772
Adjusted to reflect weighted-average effect of
assumed conversion of preferred stock
(unaudited)........................................ 3,243
--------
Weighted-average shares used in pro forma net loss
per share (unaudited).............................. 8,015
========
Pro forma net loss per share (unaudited)............. $ (1.99)
========
</TABLE>
F-10
<PAGE> 66
VIROLOGIC, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
The following outstanding options and warrants (prior to the application of the
treasury stock method), and convertible preferred stock (on an as-converted
basis) were excluded from the computation of diluted net loss per share as they
had an antidilutive effect:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1997 1998 1999
----- ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
Convertible preferred stock (as-if converted basis)......... -- 2,450 5,357
Stock options............................................... 210 351 1,229
Warrants to purchase common stock........................... 457 518 518
Warrants to purchase preferred stock (as-if converted
basis).................................................... -- 227 227
</TABLE>
Significant Concentrations
Financial instruments that potentially subject ViroLogic to concentrations of
credit risk primarily consist of cash equivalents and marketable securities (see
Note 2).
In 1998, one company represented 100% of total revenues. In 1999, two customers
represented 41% and 33% of total revenues, respectively. The accounts receivable
balances as of December 31, 1999 were $196,289 and $159,825, for these two
customers, respectively.
ViroLogic relies on a few companies as the sole source of various materials in
its testing process. Any extended interruption in the supply of these materials
could result in the failure to meet customer demand.
Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Financial
Instruments and for Hedging Activities" ("SFAS 133") which provides a
comprehensive and consistent standard for the recognition and measurement of
derivatives and hedging activities. SFAS 133 is effective for fiscal years
beginning after June 15, 2000 and is not anticipated to have an impact on
ViroLogic's results of operations or financial condition when adopted as
ViroLogic holds no derivative financial instruments and does not currently
engage in hedging activities.
In March 1998, the AICPA issued Statement of Position 98-1, "Accounting for the
Costs of Computer Software Developed or Obtained for Internal Use" ("SOP 98-1").
SOP 98-1 requires that entities capitalize certain costs related to internal use
software once certain criteria have been met. The Company adopted the provisions
of SOP 98-1 on January 1, 1999. The Company capitalized costs totaling $222,000
related to laboratory information software placed in service during 1999 in
accordance with SOP 98-1. The expected asset life is 17 months and accumulated
amortization of $104,000 was recorded in 1999.
F-11
<PAGE> 67
VIROLOGIC, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
2. CASH EQUIVALENTS
The following is a summary of cash equivalents at December 31, 1998 and 1999:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1998 1999
------ ------
(IN THOUSANDS)
<S> <C> <C>
Money market fund........................................... $1,985 $2,111
Corporate notes............................................. 7,538 --
------ ------
$9,523 $2,111
====== ======
</TABLE>
As of December 31, 1998 and 1999, the fair value approximated the amortized cost
of available-for-sale securities. As of December 31, 1998 and 1999, the average
portfolio duration was less than 90 days.
There were no material gross realized gains or losses from sales of securities
or material unrealized gains and losses on investments at December 31, 1998 and
1999.
3. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1998 1999
------- -------
(IN THOUSANDS)
<S> <C> <C>
Machinery, equipment and furniture.......................... $ 4,266 $ 6,489
Leasehold improvements...................................... 45 447
------- -------
4,311 6,936
Accumulated depreciation and amortization................... (773) (1,908)
------- -------
Property and equipment, net................................. $ 3,538 $ 5,028
======= =======
</TABLE>
4. EQUIPMENT FINANCING AND RENTAL COMMITMENTS
The Company executed an operating lease agreement in December 1997 for its
laboratory and office space. The operating lease provides for two successive
extensions of three and four years respectively. The lease term expires in
November 2004.
In January 1998, the Company executed a tenant improvement agreement for the
construction of laboratory and office improvements of up to $1.0 million. An
additional obligation of approximately $18,300 per month for 83 months
commencing February 1998 has been added to the operating lease commitment.
In May and November 1999, the Company entered into two operating lease
agreements for two additional facilities. Each lease has a term of 10 years from
the lease commencement date of March 2000 and July 2001, respectively. Each of
the leases provide for two additional successive five year extensions at the
then prevailing rate.
F-12
<PAGE> 68
VIROLOGIC, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
In connection with the facility lease executed in May 1999, the Company has a
$950,000 deposit which secures a standby letter of credit which expires in
August 2000. This balance has been recorded in the balance sheet as "restricted
cash".
As of December 31, 1999, ViroLogic had $3.5 million of property and equipment
financed through long term equipment financing obligations. The obligations
under the equipment financings are secured by the equipment financed, bear
interest at a weighted-average fixed rate of approximately 10.4%, and are due in
monthly installments through November 2002. Some of these equipment financing
agreements require a balloon payment at the end of their respective loan terms.
As of December 31, 1999, future minimum lease payments under operating and
capital leases and principal payments on equipment loans are as follows:
<TABLE>
<CAPTION>
OPERATING EQUIPMENT
LEASES LOANS
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Year ending December 31:
2000...................................................... $ 1,308 $1,054
2001...................................................... 2,247 823
2002...................................................... 2,961 303
2003...................................................... 3,042 --
2004...................................................... 3,068 --
Thereafter................................................ 15,391 --
------- ------
Total minimum lease and principal payments........ $28,017 2,180
=======
Amount representing interest................................ (232)
------
Present value of future payments............................ 1,948
Current portion of equipment financing...................... (897)
------
Noncurrent portion of equipment financing................... $1,051
======
</TABLE>
Rental expense was approximately $207,000, $827,000 and $851,000 for the years
ended December 31, 1997, 1998, and 1999, respectively.
5. STOCKHOLDERS' EQUITY
Convertible Preferred Stock
Convertible preferred stock is issuable in series, with rights and preferences
designated by series. The shares designated and outstanding are as follows (in
thousands, except per share amounts):
<TABLE>
<CAPTION>
"AS-IF"
CONVERTED
ISSUED AND COMMON DIVIDEND CONVERSION LIQUIDATION
AUTHORIZED OUTSTANDING SHARES RATE RATIO VALUE
---------- ----------- --------- -------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Series B.............................. 4,500 3,935 2,450 $0.256 0.623 $12,593
Series C.............................. 9,459 5,814 2,907 0.148 0.500 10,756
------ ----- ------ -------
Total............................... 13,959 9,749 5,357 $23,349
====== ===== ====== =======
</TABLE>
F-13
<PAGE> 69
VIROLOGIC, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
The holders of Series B and C preferred stock are entitled to receive
noncumulative dividends, when and if declared, at a rate of $0.256 per share
($0.411 per common share on an as-if converted basis) and $0.148 per share
($0.296 per common share on an as-if converted basis) per year, respectively, if
declared, prior to and in preference to the payment of dividends to holders of
common stock. At December 31, 1999, no such dividends had been declared.
Each share of Series B and C preferred stock is convertible into common stock at
the option of the holder subject to adjustments for antidilution purposes.
Series B and C preferred shares are automatically converted into common stock at
the earlier of (i) the closing of ViroLogic's initial underwritten public
offering which is at a price to the public of at least $14.00 per share and
which results in aggregate proceeds to ViroLogic of at least $15.0 million, or
(ii) a vote or written consent of a majority of the shares of preferred stock
then outstanding, voting together as a single class. All preferred shares have
voting rights equal to common stock on an as-if-converted basis.
As long as 2,000,000 shares of Series B preferred stock remain outstanding, the
holders of Series B preferred stock, voting as a separate class, are entitled to
elect two members of the board of directors. The holders of the common stock,
voting together as a separate class, shall be entitled to elect three members of
the board of directors. The holders of Series B and C preferred stock and common
stock, voting together as a class, are entitled to elect the remaining members
to the board of directors.
Series B and C preferred stockholders are entitled to receive, upon liquidation,
a distribution of $3.20 per share and $1.85 per share, respectively (subject to
adjustment for a recapitalization) plus all declared but unpaid dividends, in
preference to common stockholders. Thereafter, the remaining assets and funds,
if any, shall be distributed among common stockholders.
Warrants
In connection with the May 1996 sale of Series A preferred stock, ViroLogic
issued to four investors warrants to purchase an aggregate of 792,188 shares of
Series A preferred stock at a price of $1.84 per share. The warrants expire on
May 30, 2001. Pursuant to the conversion of all Series A preferred stock in
November 1997, these warrants are now exercisable for 396,094 shares of common
stock at an exercise price of $3.68 per share. The value of the warrant was
deemed to be insignificant, therefore, no value was recorded.
In connection with the loan agreement signed in October 1996, the Company issued
the lender a warrant to purchase an aggregate of 11,050 shares of ViroLogic's
common stock for $3.68 per share. The warrant expires on October 16, 2002. The
value of the warrant was deemed to be insignificant, therefore, no value was
recorded.
Pursuant to the operating lease, the Company issued the landlord a warrant to
purchase an aggregate of 100,000 shares of Series A preferred stock (converted
into 50,000 shares of common stock) for $8.00 per share. The warrant expires on
August 2002. The value of the warrant was deemed to be insignificant, therefore,
no value was recorded.
In connection with the loan agreement signed in January 1998, ViroLogic issued
the lender a warrant to purchase an aggregate of 34,833 shares of common stock
at a price of $8.00 per share. The warrant is exercisable immediately and
expires on the later of January 2008 or five years subsequent to an initial
public offering. The value of the warrant was deemed to be insignificant,
therefore, no value was recorded.
F-14
<PAGE> 70
VIROLOGIC, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
In connection with the tenant improvement financing entered into in August 1998,
ViroLogic issued the landlord a warrant to purchase up to an aggregate of 10,000
shares of common stock at a price of $8.00 per share. The warrant term is five
years. The value of the warrant was deemed to be insignificant, therefore, no
value was recorded.
In connection with the Series B preferred stock issuance in August 1998,
ViroLogic issued to Series B investors warrants to purchase up to 15,890 shares
of common stock at a price of $0.02 per share. The warrant term is 10 years and
was valued at $85,000. ViroLogic issued warrants to purchase 365,000 shares of
Series B preferred stock (227,232 shares of common stock on an as-if converted
basis) at a price of $3.68 per share ($5.91 per common share on an as-if
converted basis). The warrant term is 10 years and was valued at $139,000.
Common Stock Subject to Repurchase
Common stock issued to certain of ViroLogic's employees vest over varying
periods. From inception through December 31, 1999, certain employees have
purchased 344,250 shares of common stock, of which 66,417 shares are unvested
and remain subject to repurchase. ViroLogic has repurchased 41,040 shares in
accordance with these rights.
Stock Option and Stock Award to Chief Executive Officer
Pursuant to the employment agreement with the chief executive officer executed
in November 1999, the Company granted the chief executive officer:
- A stock award of 150,000 shares of fully-vested common stock. The Company
recorded compensation expense of $555,000 for this award in 1999
representing the fair value of the common stock on the grant date.
- An incentive stock option under the Plan covering 150,000 shares of common
stock at an exercise price of $3.14. This option vested as to 30,000 shares
on December 31, 1999 and as to an additional 2,500 shares at the end of each
month thereafter. Deferred compensation of $84,000 was recorded on the date
of grant. The amount will be recognized ratably over the vesting period.
- A non-statutory stock option, granted outside of the Plan, covering 250,000
shares of common stock at an exercise price of $3.14 per share. This option
vests 25% after the first year of employment and the remaining 75% in equal
monthly installments over the next three years, and may be exercised prior
to vesting. Deferred compensation of $140,000 was recorded on the date of
grant. The amount will be recognized ratably over the vesting period.
- A non-statutory stock option, granted outside of the Plan, covering 250,000
shares of common stock at an exercise price of $3.14 per share. Deferred
compensation of $140,000 was recorded on the date of grant and such amount
will be amortized over the five year period unless the milestones below are
achieved. This option vests 100% after five years of employment, unless
either one of the following occurs before that date:
- A merger or acquisition or initial public offering where the per share
valuation of common stock is imputed to be more than $18.50, in which
case 125,000 shares shall immediately vest, or
- When product revenue for any fiscal year exceeds $20.0 million, in which
case 125,000 shares shall immediately vest.
F-15
<PAGE> 71
VIROLOGIC, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
Any of these option may be exercised prior to vesting by either cash or by
delivery of a promissory note, and each of the options immediately becomes fully
vested if, within one year of a change in our control or liquidation, the chief
executive officer is terminated without cause or resigns for good reason.
Stock Option Plans
On May 20, 1996, ViroLogic's board of directors and stockholders adopted the
1996 Stock Plan which was amended and restated and renamed the 2000 Equity
Incentive Plan in February 2000 (the "Plan"). This Plan provides for the
granting of options to purchase common stock and other stock awards to
employees, officers, directors, and consultants of the Company. ViroLogic
generally grants shares of common stock for issuance under the Plan at no less
than the fair value of the stock on the grant date, however, management is
permitted to grant non-statutory stock options at a price not lower than 85% of
the fair value of common stock on the date of grant. Options granted under the
Plan generally vest over 4 years at a rate of 25% one year from the grant date
and ratably monthly thereafter.
A summary of activity under the Plan is as follows:
<TABLE>
<CAPTION>
OUTSTANDING STOCK OPTIONS/STOCK RIGHTS
--------------------------------------
WEIGHTED-AVERAGE
SHARES AVAILABLE NUMBER OF SHARES PRICE PER SHARE
---------------- ----------------- -----------------
<S> <C> <C> <C>
Balances at December 31, 1996........ 190,000 22,500 $0.32
Additional shares authorized....... 375,000 -- --
Options/rights granted............. (300,800) 300,800 1.34
Options/rights exercised........... -- (110,499) 0.66
Options/rights forfeited........... 2,501 (2,501) 0.32
-------- --------
Balances at December 31, 1997........ 266,701 210,300 1.58
Options/rights granted............. (170,880) 170,880 3.98
Options/rights exercised........... -- (15,000) 0.38
Options/rights forfeited........... 14,250 (14,250) 0.98
Options/rights repurchased......... 41,040 -- 0.32
-------- --------
Balances at December 31, 1998........ 151,111 351,930 2.82
Additional shares authorized....... 375,000 -- --
Options/rights granted............. (519,675) 519,675 3.98
Options/rights exercised........... -- (31,254) 2.04
Options/rights forfeited........... 111,438 (111,438) 2.70
Options/rights repurchased......... 6,250 -- 3.20
-------- --------
Balances at December 31, 1999........ 124,124 728,913 3.70
======== ========
</TABLE>
In connection with options granted in 1999, the Company has recorded deferred
stock-based compensation of $424,000, representing the difference between the
exercise price and the deemed fair value of the Company's common stock at the
date of grant. The amount is being amortized over the vesting period for the
individual options. Amortization of deferred stock-based compensation of $10,000
was recognized during 1999. In addition, stock-based compensation of $26,000 was
recorded in 1999 for services rendered by non-employees.
F-16
<PAGE> 72
VIROLOGIC, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
Options were exercisable to purchase 67,048 shares (at a weighted-average
exercise price of $1.56 per share) and 277,767 shares (at a weighted-average
exercise price of $3.10 per share) at December 31, 1998 and 1999, respectively.
The following table summarizes information about the stock options outstanding
under the Plan at December 31, 1999:
<TABLE>
<CAPTION>
OUTSTANDING OPTIONS
------------------------------------------------------------
NUMBER OF WEIGHTED-AVERAGE REMAINING NUMBER OF OPTIONS
EXERCISE PRICE OPTIONS CONTRACTUAL LIFE EXERCISABLE
-------------- --------- -------------------------- -----------------
<S> <C> <C> <C>
$0.32............................ 5,000 6.75 5,000
0.64............................ 39,000 7.30 25,186
0.80............................ 8,906 7.57 8,906
3.14............................ 326,050 9.84 151,430
3.20............................ 113,780 8.27 49,409
5.40............................ 236,177 9.19 37,836
------- -------
728,913 9.20 277,767
======= =======
</TABLE>
Pro Forma Information
Pro forma information regarding net loss is required by SFAS 123 and has been
determined as if the Company accounted for its employee stock options under the
fair value method of SFAS 123. The fair value of these options was estimated at
the date of grant using the minimum value method with the following
weighted-average assumptions: risk-free interest rate of 5.5% for grants made in
1998 and 1999; a weighted-average expected life of the option from grant date of
four years; volatility factor of the expected market price of the Company's
common stock of 0% and 0.65% in 1998 and 1999, respectively; and a dividend
yield of zero in 1998 and 1999. The weighted-average fair value of stock options
granted in 1998 and 1999 was $4.34 and $3.98, respectively.
For pro forma purposes, the estimated fair value of the Company's stock-based
awards to its employees is amortized ratably over the options vesting period.
The Company's pro forma information is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------
1997 1998 1999
-------- -------- ---------
(IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C> <C>
As reported:
Net loss........................................... $(3,137) $(8,054) $(15,958)
======= ======= ========
Net loss per share................................. $ (1.21) $ (1.71) $ (3.34)
======= ======= ========
Proforma:
Net loss........................................... $(3,162) $(8,153) $(16,421)
======= ======= ========
Net loss per share................................. $ (1.22) $ (1.73) $ (3.44)
======= ======= ========
</TABLE>
Because the SFAS No. 123 method of accounting has not been applied to options
granted prior to 1996 and the vesting period of option grants is four years, the
above pro forma effect may not be representative of that to be expected in
future years.
F-17
<PAGE> 73
VIROLOGIC, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
Reserved Shares
As of December 31, 1999, ViroLogic had reserved shares of common stock for
future issuance as follows:
<TABLE>
<CAPTION>
SHARES RESERVED
---------------
(IN THOUSANDS)
<S> <C>
Stock options............................................... 1,353
Warrants.................................................... 745
Preferred stock............................................. 5,357
---------------
7,455
===============
</TABLE>
6. 401(K) PLAN
During 1996, the Company adopted a 401(k) Plan, matching contributions in the
form of ViroLogic common shares equaling 2.5% of the employee's contributions to
the 401(k) Plan were made by the Company in both 1996 and 1997. The Plan was
amended in 1998 to increase the matching percentage to 5%. The matching
contribution vests ratably over 4 years. Compensation expense of $37,000 was
recorded in 1999. An aggregate of 8,254 shares have been issued under the 401(k)
Plan through December 31, 1999.
7. INCOME TAXES
As of December 31, 1999 and 1998, the Company had federal and state net
operating loss carryforwards of approximately $27.3 million and $13.8 million,
respectively. The Company also had research and other tax credit carryforwards
of approximately $1.0 million. The federal net operating loss and credit
carryforwards will expire at various dates beginning in the year 2010 through
2019, if not utilized. The State of California net operating losses will start
to expire in the year 2003, if not utilized.
Utilization of the federal and state net operating loss and credit carryforwards
may be subject to a substantial annual limitation due to the "change in
ownership" provisions of the Internal Revenue Code of 1986. The annual
limitation may result in the expiration of net operating losses and credits
before utilization.
F-18
<PAGE> 74
VIROLOGIC, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
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
tax assets for federal and state income taxes are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1998 1999
------- --------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards.......................... $ 4,700 $ 10,100
Research and other credits................................ 300 1,000
Capitalized research and development...................... 100 400
Other..................................................... 300 200
------- --------
Total deferred tax assets................................... 5,400 11,700
Valuation allowance......................................... (5,400) (11,700)
------- --------
Net deferred taxes.......................................... $ -- $ --
======= ========
</TABLE>
Due to the Company's lack of earnings history, the net deferred tax assets have
been fully offset by a valuation allowance. The valuation allowance increased by
$2.0 million, $3.4 million and $6.3 million during the years ended December 31,
1997, 1998 and 1999, respectively.
8. LEGAL MATTER
On August 12, 1998, a complaint was filed by a former officer and stockholder.
In November 1999, ViroLogic settled the claim. The settlement included a cash
payment of $225,000 and the right to retain 100,000 shares of the Company's
common stock that the Company previously had a right to repurchase. The right to
retain the shares triggered a new measurement date for accounting purposes.
Legal fees and settlement related costs, including the non-cash charge related
to the retained common stock, of $1.2 million were recorded in 1999.
9. SUBSEQUENT EVENTS (UNAUDITED)
In January 2000, ViroLogic's board of directors authorized management to file a
registration statement with the Securities and Exchange Commission to permit
ViroLogic to sell its common stock to the public.
In January and February 2000, the Company consummated the sale of an additional
8,461,630 shares of Series C convertible preferred stock (4,230,816 shares of
common stock on an as-if converted basis), from which the Company received
proceeds of approximately $15.7 million or $1.85 per share ($3.70 per share on
an as-if converted basis).
At the date of issuance, the Company believed the per share price of $1.85
represented the fair value of the preferred stock ($3.70 per share on an as if
converted basis). Subsequent to the commencement of the Company's initial public
offering process, the Company re-evaluated the deemed fair value of its common
stock as of January and February 2000 and determined it to be $11.90 per share.
Accordingly, the incremental fair value is deemed to be equivalent to a
preferred stock dividend. The Company will record that deemed dividend of $15.7
million in the quarter ending March 31, 2000. The amount will increase the loss
allocable to common stockholders in the quarter ending March 31, 2000 by the
amount of the dividend, and the dividend will have no impact on the balance
sheet as of March 31, 2000. The amount of
F-19
<PAGE> 75
VIROLOGIC, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1999
the deemed dividend is limited to the amount of the proceeds of the related
financing pursuant to the guidelines set forth in the Emerging Issues Task Force
Consensus No. 98-5.
In February 2000, the board of directors amended, and restated the 1996 Stock
Plan (renamed the 2000 Equity Incentive Plan) and increased the shares reserved
for issuance by an additional 3,000,000 shares, which share are subject to
stockholder approval. In February 2000, the Company granted stock options to
employees and non-employees to purchase 244,193 shares of common stock at an
exercise price of $3.70 per share. Additional deferred compensation of $1.6
million will be recorded in the quarter ending March 31, 2000 related to the
employee stock option grants.
In February 2000, the board of directors adopted, subject to stockholder
approval, the 2000 Employee Stock Purchase Plan ("2000 Purchase Plan"). A total
of 500,000 shares of common stock have been reserved for issuance under the 2000
Purchase Plan. The 2000 Purchase Plan permits eligible employees to acquire
shares of ViroLogic's common stock through payroll deductions of up to 15% of
their base compensation. The initial offering period will begin on the effective
date of the initial public offering.
In February 2000, the board of directors approved a one for two reverse split of
its common stock. All common stock, options and warrants to purchase common
stock and per share amounts in the accompanying financial statements have been
adjusted retroactively to reflect the reverse split. The conversion ratios of
the respective series of convertible preferred stock were automatically adjusted
to reflect the reverse split.
F-20
<PAGE> 76
<TABLE>
<S> <C> <C>
PhenoSense HIV is a test that directly TEXT: To perform our PhenoSense HIV TEXT: Test results are reported using
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viral drugs. When making HIV treatment
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direction and guidance toward the most patient Blue curves represent drug-sensitive control
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ARTWORK: Picture of blooddrop
DIRECT: detects drug resistance of HIV ARTWORK: Picture of print-out report of
without complex interpretation of TEXT: 2. Isolate the HIV virus test results
genetic mutations
ARTWORK: Picture of virus
QUANTITATIVE: measures the degree of
drug resistance and susceptibility TEXT: 3. Copy of viral genes corres-
ponding to drug targets
RELIABLE: results are accurate and
reproducible ARTWORK: Picture representing vector
with indicator
COMPREHENSIVE: evaluates drug resis-
tance to all currently available TEXT: 4. Insert genes into vector
HIV drugs
ARTWORK: Picture of resistance test
VERSATILE: can be modified to vector
evaluate new classes of HIV drugs
TEXT: 5. Introduce assembled vector
USER-FRIENDLY: results are easy to read into living cells
and understand
ARTWORK: Picture of assembled vector
RAPID: can be performed in eight to inserted into cell
ten days
TEXT: 6. Add anti-viral drugs to cells
ARTWORK: Small compass in a human hand
TEXT: 7. Allow vector to complete
TEXT: PhenoSense HIV Assay a single round of replication
TEXT: Choosing the path of least TEXT: 8. Measure production of
resistance indicator to evaluate drug resistance
TEXT: 9. Analyze data and generate
patient report
</TABLE>
PN: 26
ARTWORK: Two charts with curves, one labeled "susceptible" and one labeled
"resistant."
TEXT: Drug Susceptibility Curves.
Test results are reported using curve diagrams. Solid curves represent
the patient's virus and dotted curves represent a drug-sensitive control
virus.
When the patient virus curve closely aligns with the control virus curve
(above left), the patient's virus is sensitive to the drug.
When the patient curve shifts to the right of the control curve (above
right), the patient's virus is demonstrating increased resistance. The
greater the curve shift to the right, the greater is the degree of
resistance.
PN: 27
ARTWORK: Diagram of resistance test vector with labels.
TEXT: Resistance Test Vector.
Construction of a resistance test vector for use in PhenoSense tests
involves:
o the insertion of the specific genes from a patient's virus that
correspond to the targets of anti-viral drugs.
o the inclusion of an indicator, like luciferase, to allow measurement of
replication.
<PAGE> 77
- --------------------------------------------------------------------------------
[ViroLogic LOGO]
VIROLOGIC, INC.
SHARES
COMMON STOCK
---------------------------
PROSPECTUS
---------------------------
, 2000
CIBC WORLD MARKETS
ING BARINGS
PRUDENTIAL VECTOR HEALTHCARE
A UNIT OF PRUDENTIAL SECURITIES
- --------------------------------------------------------------------------------
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. NO DEALER,
SALESPERSON OR OTHER PERSON IS AUTHORIZED TO GIVE INFORMATION THAT IS NOT
CONTAINED IN THIS PROSPECTUS. THIS PROSPECTUS IS NOT AN OFFER TO SELL NOR IS IT
SEEKING AN OFFER TO BUY THESE SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR
SALE IS NOT PERMITTED. THE INFORMATION CONTAINED IN THIS PROSPECTUS IS CORRECT
ONLY AS OF THE DATE OF THIS PROSPECTUS, REGARDLESS OF THE TIME OF THE DELIVERY
OF THIS PROSPECTUS OR ANY SALE OF THESE SECURITIES.
UNTIL , 2000 (25 DAYS AFTER THE COMMENCEMENT OF THE OFFERING), ALL
DEALERS THAT EFFECT TRANSACTIONS IN THESE SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS
IN ADDITION TO THE DEALER'S OBLIGATION TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
<PAGE> 78
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth all expenses payable by the Registrant in
connection with the sale of the common stock being registered. All the amounts
shown are estimates except for the SEC registration fee and the NASD filing fee.
<TABLE>
<S> <C>
Registration fee............................................
NASD filing fee.............................................
Nasdaq National Market listing fee.......................... *
Printing and engraving expenses............................. *
Legal fees and expenses..................................... *
Accounting fees and expenses................................ *
Blue Sky fees and expenses.................................. *
Transfer agent and registrar fees........................... *
Premium for directors' and officers' insurance.............. *
Miscellaneous............................................... *
---
Total.................................................. *
===
</TABLE>
- ---------------------------
* Estimated.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Under Section 145 of the General Corporation Law of Delaware (the "Delaware
Law"), we have broad powers to indemnify our directors and officers against
liabilities they may incur in such capacities, including liabilities under the
Securities Act of 1933, as amended (the "Securities Act").
Our certificate of incorporation and bylaws include provisions to (i) eliminate
the personal liability of its directors for monetary damages resulting from
breaches of their fiduciary duty to the extent permitted by Section 102(b)(7) of
the Delaware Law and (ii) require us to indemnify its directors and officers to
the fullest extent permitted by Section 145 of the Delaware Law, including
circumstances in which indemnification is otherwise discretionary. Pursuant to
Section 145 of the Delaware Law, a corporation generally has the power to
indemnify its present and former directors, officers, employees and agents
against expenses incurred by them in connection with any suit to which they are,
or are threatened to be made, a party by reason of their serving in such
positions so long as they acted in good faith and in a manner they reasonably
believed to be in or not opposed to, the best interests of the corporation and,
with respect to any criminal action, had no reasonable cause to believe their
conduct was unlawful. We believe that these provisions are necessary to attract
and retain qualified persons as directors and officers. These provisions do not
eliminate the directors' duty of care, and, in appropriate circumstances,
equitable remedies such as injunctive or other forms of non-monetary relief will
remain available under Delaware Law. In addition, each director will continue to
be subject to liability for breach of the director's duty of loyalty to us, for
acts or omissions not in good faith or involving intentional misconduct, for
knowing violations of law, for acts or omissions that the director believes to
be contrary to our best interests or the best interests of our stockholders, for
any transaction from which the director derived an improper personal benefit,
for acts or omissions involving a reckless disregard for the director's duty to
us or our stockholders when the director was aware or should have been aware of
a risk of serious injury to us or its stockholders, for acts or omissions that
constitute an unexcused pattern of inattention that amounts to an abdication of
the director's duty to us or our stockholders, for improper transactions between
the director and us and for improper distributions to stockholders and loans to
directors and officers. The provision also does not affect a director's
responsibilities under any other law, such as the federal securities law or
state or federal environmental laws.
II-1
<PAGE> 79
We have entered into indemnity agreements with each of our directors and
executive officers that require us to indemnify such persons against expenses,
judgments, fines, settlements and other amounts incurred (including expenses of
a derivative action) in connection with any proceeding, whether actual or
threatened, to which any such person may be made a party by reason of the fact
that such person is or was one of our directors or executive officers or any of
our affiliated enterprises, provided that such person acted in good faith and in
a manner such person reasonably believed to be in or not opposed to our best
interests and, with respect to any criminal proceeding, had no reasonable cause
to believe his conduct was unlawful. The indemnification agreements also set
forth certain procedures that will apply in the event of a claim for
indemnification thereunder.
At present, there is no pending litigation or proceeding involving any of our
directors or officers as to which indemnification is being sought nor are we
aware of any threatened litigation that may result in claims for indemnification
by any officer or director.
We have an insurance policy covering our officers and directors with respect to
certain liabilities, including liabilities arising under the Securities Act or
otherwise.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Since inception, we have sold and issued the following unregistered securities:
(a) On February 7, 1996 we issued and sold 2,037,500 shares of common
stock for an aggregate purchase price of $4,075.00 to three of our
founders, four consultants and three accredited investors. For these
issuances we relied on the exemptions provided by Section 4(2) of the
Securities Act and Rule 701 promulgated thereunder.
(b) On May 9, 1996 we issued and sold 12,500 shares of common stock
for an aggregate purchase price of $25.00 to one of our consultants. For
these issuances we relied on the exemption provided by Section 4(2) of the
Securities Act and Rule 701 promulgated thereunder.
(c) On May 23, 1996 we issued and sold 2,689,846 shares of Series A
preferred stock for an aggregate purchase price of $4,303,753.60 to 36
accredited investors. For these issuances we relied on the exemption
provided by Section 4(2) of the Securities Act.
(d) On May 23, 1996 we issued warrants to purchase 792,188 shares of
Series A preferred stock at an exercise price purchase price of $1.84 per
share to four accredited investors. For these issuances we relied on the
exemption provided by Section 4(2) of the Securities Act.
(e) On August 26, 1996 we issued and sold 92,500 shares of common
stock to three of our employees for an aggregate purchase price of
$29,600.00. For these issuances we relied on the exemption provided by
Section 4(2) of the Securities Act and Rule 701 promulgated thereunder.
(f) On September 17, 1996 we issued and sold 43,750 shares of Series A
preferred stock for a purchase price of $70,000.00 to the Notkin Living
Trust, an accredited investor. For these issuances we relied on the
exemption provided by Section 4(2) of the Securities Act.
(g) In September and October 1996 we issued and sold 145,000 shares of
common stock to six of our employees for an aggregate purchase price of
$46,400.00. For these issuances we relied on the exemption provided by
Section 4(2) of the Securities Act and Rule 701 promulgated thereunder.
(h) On October 16, 1996 we issued a warrant to purchase 11,050 shares
of common stock at an exercise price of $3.68 per share to Lease Management
Services, Inc. For these issuances we relied on the exemption provided by
Section 4(2) of the Securities Act.
(i) On December 31, 1996 we issued 2,206 shares of common stock to the
ViroLogic, Inc. 401(k) Profit Sharing Plan for an aggregate of $706.08. For
these issuances we relied on the exemption provided by Section 4(2) of the
Securities Act.
II-2
<PAGE> 80
(j) On March 3, 1997 we issued and sold 25,000 shares of common stock
to one of our employees for an aggregate purchase price of $8,000.00. For
these issuances we relied on the exemption provided by Section 4(2) of the
Securities Act and Rule 701 promulgated thereunder.
(k) On May 2, 1997 we issued and sold 2,674,216 shares of Series A
preferred stock for an aggregate purchase price of $4,278,745.60 to 35
accredited investors. For these issuances we relied on the exemption
provided by Section 4(2) of the Securities Act.
(l) In August and September 1997 we issued and sold 81,750 shares of
common stock to one of our employees for a purchase price of $64,320.00.
For these issuances we relied on the exemption provided by Section 4(2) of
the Securities Act and Rule 701 promulgated thereunder.
(m) On August 22, 1997 we issued a warrant to purchase 100,000 shares
of Series A preferred stock at an exercise price of $4.00 per share to
Britannia Pointe Grand Limited Partnership. For these issuances we relied
on the exemption provided by Section 4(2) of the Securities Act.
(n) On December 31, 1997 we issued and sold 625 shares of common stock
to the ViroLogic, Inc. 401(k) Profit Sharing Plan for an aggregate of
$2,001.60. For these issuances we relied on the exemption provided by
Section 4(2) of the Securities Act.
(o) On January 30, 1998 we issued a warrant to purchase 34,833 shares
of common stock at an exercise price of $8.00 per share to MMC/GATX
Partnership No. 1. For these issuances we relied on the exemption provided
by Section 4(2) of the Securities Act.
(p) In August 1998, we issued a warrant to purchase 10,000 shares of
common stock at an exercise price of $8.00 per share to Britannia Pointe
Grand Limited Partnership. For these issuances we relied on the exemption
provided by Section 4(2) of the Securities Act.
(q) On August 25, 1998 we issued warrants to purchase 15,890 shares of
common stock at an exercise price purchase price of $0.02 per share to 19
accredited investors. For these issuances we relied on the exemption
provided by Section 4(2) of the Securities Act.
(r) On August 25, 1998 we issued and sold 3,935,158 shares of Series B
preferred stock for an aggregate purchase price of $12,592,505.60 to 13
accredited investors. For these issuances we relied on the exemption
provided by Section 4(2) of the Securities Act.
(s) On August 25, 1998 we issued warrants to purchase 365,000 shares
of Series B preferred stock at an exercise price purchase price of $3.68
per share to two accredited investors. For these issuances we relied on the
exemption provided by Section 4(2) of the Securities Act.
(t) On December 31, 1998 we issued and sold 1,376 shares of common
stock to the ViroLogic, Inc. 401(k) Profit Sharing Plan for an aggregate of
$7,430.40. For these issuances we relied on the exemption provided by
Section 4(2) of the Securities Act.
(u) On August 23, 1999 we issued and sold 4,138,486 shares of Series C
preferred stock for an aggregate purchase price of $7,656,199.10 to 21
accredited investors. For these issuances we relied on the exemption
provided by Section 4(2) of the Securities Act and Regulation D promulgated
thereunder.
(v) On September 29, 1999 we issued and sold 150,000 shares of our
common stock as a stock bonus award to William D. Young. For these
issuances we relied on the exemption provided by Section 4(2) of the
Securities Act and Rule 701 promulgated thereunder.
(w) In November and December 1999 we issued and sold 1,675,621 shares
of Series C preferred stock for an aggregate purchase price of
$3,099,898.85 to four accredited investors. For these issuances we relied
on the exemption provided by Section 4(2) of the Securities Act and
Regulation D promulgated thereunder.
II-3
<PAGE> 81
(x) On December 31, 1999 we issued and sold 4,046 shares of common
stock to the ViroLogic, Inc. 401(k) Profit Sharing Plan for an aggregate of
$12,704.44. For these issuances we relied on the exemption provided by
Section 4(2) of the Securities Act.
(y) In January and February 2000 we issued and sold 8,461,630 shares
of Series C preferred stock for an aggregate purchase price of $15,654,015
to 42 accredited investors. For these issuances we relied on the exemption
provided by Section 4(2) of the Securities Act and Regulation D promulgated
thereunder.
(z) We have a program of granting a single share of our common stock
to children born to our employees. Under this program we have granted one
share to each of five children of our employees. For these issuances we
rely on the exemption provided by Section 4(2) of the Securities Act.
(aa) From time to time since inception, we have issued and sold shares
of our common stock to employees and consultants upon exercise of stock
options held by them. As of January 31, 1999, we had issued a total of
43,753 shares of common stock as a result of these exercises for an
aggregate exercise price of $47,616.28. For these issuances we relied on
the exemption provided by Section 4(2) of the Securities Act and Rule 701
promulgated thereunder.
The recipients of the above-mentioned securities represented their intention to
acquire the securities for investment only and not with a view to distribution
thereof. Appropriate legends were affixed to the stock certificates in such
transactions. All recipients had adequate access, through employment or other
relationships, to information about us.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -----------------------
<C> <S>
1.1 Form of Underwriting Agreement.(1)
3.1 Amended and Restated Certificate of Incorporation, as
currently in effect.
3.2 Bylaws, as currently in effect.
3.3 Amended and Restated Certificate of Incorporation, to be
filed and become effective prior to the closing of this
offering.
3.4 Bylaws, to become effective prior to the closing of this
offering.
3.5 Amended and Restated Certificate of Incorporation, to be
filed and become effective after the closing of this
offering.
4.1 Reference is made to Exhibits 3.1, 3.2, 3.3, 3.4 and 3.5.
4.2 Specimen Stock Certificate.(1)
4.3 Amended and Restated Investors Rights Agreement by and among
the Company and certain stockholders of the Company dated
August 23, 1999.
4.4 Form of Indemnity Agreement between the Company and its
directors and officers.
4.5 Warrant Agreement by and between ViroLogic and Lease
Management Services, Inc. dated as of October 16, 1996.
4.6 Warrant Agreement by and between ViroLogic and MMC/GATX
Partnership No. 1 dated as of January 30, 1998.
4.7 Form of Warrant to purchase Common Stock.
4.8 Form of Warrant to purchase Common Stock.
4.9 Form of Warrant to Series A Preferred Stock.
4.10 Form of Warrant to Series A Preferred Stock.
4.11 Form of Warrant to Series B Preferred Stock.
4.12 2000 Equity Incentive Plan.
4.13 Form of Stock Option Agreement under the 2000 Equity
Incentive Plan for options granted prior to the
effectiveness of this Registration Statement.
4.14 Form of Stock Option Agreement Pursuant to the 2000 Equity
Incentive Plan for options granted after the effectiveness
of this Registration Statement.
</TABLE>
II-4
<PAGE> 82
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -----------------------
<C> <S>
4.15 2000 Employee Stock Purchase Plan and related offering
documents.
5.1 Opinion of Cooley Godward LLP.(1)
10.1+ Agreement with Roche Molecular Systems, Inc. dated July 29,
1997.
10.2 Office Lease by and between ViroLogic and Oyster Point Tech
Center LLC dated as of May 25, 1999.
10.3 Office Lease by and between ViroLogic and Trammell Crow
Northern California Development, Inc. dated as of November
23, 1999.
10.4 Equipment Financing Agreement by and between ViroLogic and
Lease Management Services, Inc. dated as of October 16,
1996.
10.5 Loan and Security Agreement by and between ViroLogic and
MMC/GATX Partnership No. 1 dated as of January 30, 1998.
10.6 Employment Agreement by and between ViroLogic and William D.
Young dated September 29, 1999.
10.7 Employment Agreement by and between ViroLogic and Martin H.
Goldstein dated , 1996.(1)
23.1 Consent of Ernst & Young LLP, Independent Auditors.
23.3 Consent of Cooley Godward LLP. Reference is made to Exhibit
5.1(1)
24.1 Power of Attorney. Reference is made to page II-6.
27 Financial Data Schedule.
</TABLE>
- ---------------------------
(1) To be filed by amendment.
+ Confidential treatment has been requested with respect to certain portions
of this exhibit. Omitted portions have been filed separately with the
Securities and Exchange Commission.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes to provide to the underwriters at
the closing specified in the underwriting agreement certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the registrant
pursuant to provisions described in Item 14 or otherwise, the registrant has
been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes:
(1) That, for purposes of determining any liability under the Act, the
information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497 (h) under the Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Act, each
post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
II-5
<PAGE> 83
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of South San
Francisco, County of San Mateo, State of California, on February 22, 2000.
By: /s/ WILLIAM D. YOUNG
------------------------------------
William D. Young
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints William D. Young and Martin H. Goldstein 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, exhibits thereto and other documents in connection therewith) to
this Registration Statement and any subsequent registration statement filed by
the registrant pursuant to Rule 462(b) of the Securities Act of 1933, as
amended, which relates to this Registration Statement, 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,
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
--------- ----- ----
<S> <C> <C>
/s/ WILLIAM D. YOUNG Chief Executive Officer February 22, 2000
- ----------------------------------------------------- and Chairman
William D. Young (Principal Executive Officer;
Principal Financial and
Accounting Officer)
/s/ MARTIN H. GOLDSTEIN President and Director February 22, 2000
- -----------------------------------------------------
Martin H. Goldstein
/s/ RICHARD M. BELESON Director February 22, 2000
- -----------------------------------------------------
Richard M. Beleson
/s/ ANDERS HOVE Director February 22, 2000
- -----------------------------------------------------
Anders Hove
/s/ CRISTINA KEPNER Director February 22, 2000
- -----------------------------------------------------
Cristina Kepner
/s/ ALBERT L. ZESIGER Director February 22, 2000
- -----------------------------------------------------
Albert L. Zesiger
</TABLE>
II-6
<PAGE> 84
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -----------------------
<C> <S>
1.1 Form of Underwriting Agreement.(1)
3.1 Amended and Restated Certificate of Incorporation, as
currently in effect.
3.2 Bylaws, as currently in effect.
3.3 Amended and Restated Certificate of Incorporation, to be
filed and become effective prior to the closing of this
offering.
3.4 Bylaws, to become effective prior to the closing of this
offering.
3.5 Amended and Restated Certificate of Incorporation, to be
filed and become effective after the closing of this
offering.
4.1 Reference is made to Exhibits 3.1, 3.2, 3.3, 3.4 and 3.5.
4.2 Specimen Stock Certificate.(1)
4.3 Amended and Restated Investors Rights Agreement by and among
the Company and certain stockholders of the Company dated
August 23, 1999.
4.4 Form of Indemnity Agreement between the Company and its
directors and officers.
4.5 Warrant Agreement by and between ViroLogic and Lease
Management Services, Inc. dated as of October 16, 1996.
4.6 Warrant Agreement by and between ViroLogic and MMC/GATX
Partnership No. 1 dated as of January 30, 1998.
4.7 Form of Warrant to purchase Common Stock.
4.8 Form of Warrant to purchase Common Stock.
4.9 Form of Warrant to Series A Preferred Stock.
4.10 Form of Warrant to Series A Preferred Stock.
4.11 Form of Warrant to Series B Preferred Stock.
4.12 2000 Equity Incentive Plan.
4.13 Form of Stock Option Agreement under the 2000 Equity
Incentive Plan for options granted prior to the
effectiveness of this Registration Statement.
4.14 Form of Stock Option Agreement Pursuant to the 2000 Equity
Incentive Plan for options granted after the effectiveness
of this Registration Statement.
4.15 2000 Employee Stock Purchase Plan and related offering
documents.
5.1 Opinion of Cooley Godward LLP.(1)
10.1+ Agreement with Roche Molecular Systems, Inc. dated July 29,
1997.
10.2 Office Lease by and between ViroLogic and Oyster Point Tech
Center LLC dated as of May 25, 1999.
10.3 Office Lease by and between ViroLogic and Trammell Crow
Northern California Development, Inc. dated as of November
23, 1999.
10.4 Equipment Financing Agreement by and between ViroLogic and
Lease Management Services, Inc. dated as of October 16,
1996.
10.5 Loan and Security Agreement by and between ViroLogic and
MMC/GATX Partnership No. 1 dated as of January 30, 1998.
10.6 Employment Agreement by and between ViroLogic and William D.
Young dated September 29, 1999.
10.7 Employment Agreement by and between ViroLogic and Martin H.
Goldstein dated , 1996.(1)
23.1 Consent of Ernst & Young LLP, Independent Auditors.
23.3 Consent of Cooley Godward LLP. Reference is made to Exhibit
5.1(1)
24.1 Power of Attorney. Reference is made to page II-6.
27 Financial Data Schedule.
</TABLE>
- ---------------------------
(1) To be filed by amendment.
+ Confidential treatment has been requested with respect to certain portions
of this exhibit. Omitted portions have been filed separately with the
Securities and Exchange Commission.
<PAGE> 1
EXHIBIT 3.1
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
VIROLOGIC, INC.
ViroLogic, Inc., a corporation organized and existing under the General
Corporation Law of the State of Delaware (the "CORPORATION"), does hereby
certify:
FIRST: The name of this corporation is ViroLogic, Inc. The original
Certificate of Incorporation of the Corporation was filed with the Secretary of
State of Delaware on November 14, 1995.
SECOND: The Amended and Restated Certificate of Incorporation of the
Corporation in the form attached hereto as Exhibit A has been duly adopted in
accordance with the provisions of Sections 245 and 242 of the General
Corporation Law of the State of Delaware by the directors and stockholders of
the Corporation.
THIRD: The text of the Certificate of Incorporation as heretofore
amended or supplemented is hereby amended and restated by the Amended and
Restated Certificate of Incorporation as set forth in Exhibit A attached hereto.
The Amended and Restated Certificate of Incorporation is hereby incorporated
herein by this reference.
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
signed by the President this 18th day of February, 2000.
VIROLOGIC, INC.
By: /s/ Martin H. Goldstein
-------------------------------
Martin H. Goldstein, President
<PAGE> 2
EXHIBIT A
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
VIROLOGIC, INC.
FIRST: The name of the corporation (hereinafter called the
"CORPORATION") is Virologic, Inc.
SECOND: The address of the registered office of the Corporation in the
State of Delaware is 1209 Orange Street, City of Wilmington, County of New
Castle, and the name of the registered agent of the Corporation in the State of
Delaware at such address is The Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
FOURTH:
A. This Corporation is authorized to issue two classes of shares to be
designated respectively Preferred Stock ("PREFERRED STOCK") and Common Stock
("COMMON STOCK"). The total number of shares of capital stock that the
Corporation is authorized to issue is 59,094,095. The total number of shares of
Common Stock, par value $0.001, this Corporation shall have authority to issue
is 40,000,000. The total number of shares of Preferred Stock, par value $0.001,
this Corporation shall have authority to issue is 19,094,095, of which 4,500,000
is designated Series B Preferred Stock (the "SERIES B PREFERRED STOCK") and
14,594,595 is designated Series C Preferred Stock (the "SERIES C PREFERRED
STOCK").
B. The powers, preferences, rights, restrictions, and other matters
relating to the Series B Preferred Stock and Series C Preferred Stock are as
follows:
1. DIVIDENDS.
a. The holders of the Series B Preferred Stock and Series C
Preferred Stock shall be entitled to receive dividends, on a pari passu basis,
at the rate of $0.256 per share and $0.148 per share (as adjusted for any stock
dividends, combinations or splits with respect to such shares) per annum,
respectively, payable out of funds legally available therefor. Such dividends
shall be payable only when, as, and if declared by the Board of Directors and
shall be noncumulative.
No dividends (other than those payable solely in the Common Stock of the
Corporation) shall be paid on any Common Stock of the Corporation during any
fiscal year of the Corporation until dividends in the total amount of $0.256 per
share and $0.148 per share (as adjusted for any stock dividends, combinations or
splits with respect to such shares) on the Series B Preferred Stock and Series C
Preferred Stock, respectively, shall have been paid or declared and set apart
1.
<PAGE> 3
during that fiscal year and any prior year in which dividends were declared but
remain unpaid, and no dividends shall be paid on any share of Common Stock
unless a dividend (including the amount of any dividends paid pursuant to the
above provisions of this Section B.1) is paid with respect to all outstanding
shares of Series B Preferred Stock and Series C Preferred Stock in an amount for
each such share equal to or greater than the aggregate amount of such dividends
for all shares of Common Stock into which each such share of Series B Preferred
Stock or Series C Preferred Stock could then be converted.
Except as otherwise provided herein, no right shall accrue to holders of
shares of Series B Preferred Stock or Series C Preferred Stock by reason of the
fact that dividends on said shares are not declared in any prior year, nor shall
any undeclared or unpaid dividend bear or accrue any interest.
b. In the event the Corporation shall declare a distribution
(other than any distribution described in Section B.2) payable in securities of
other persons (including, but not limited to, a spin-off from the corporation),
evidences of indebtedness issued by the Corporation or other persons, assets
(excluding cash dividends) or options or rights to purchase any such securities
or evidences of indebtedness, then, in each such case the holders of the Series
B Preferred Stock and Series C Preferred Stock shall be entitled to a
proportionate share of any such distribution as though the holders of the Series
B Preferred Stock and Series C Preferred Stock were the holders of the number of
shares of Common Stock of the Corporation into which their respective shares of
Series B Preferred Stock or Series C Preferred Stock, as applicable, are
convertible as of the record date fixed for the determination of the holders of
Common Stock of the Corporation entitled to receive such distribution.
2. LIQUIDATION PREFERENCE.
a. In the event of any liquidation, dissolution or winding up of
the Corporation, whether voluntary or involuntary, the holders of the Series B
Preferred Stock and Series C Preferred Stock shall be entitled to receive, prior
and in preference to any distribution of any of the assets or surplus funds of
the Corporation to the holders of the Common Stock by reason of their ownership
thereof, the amount of $3.20 per share and $1.85 per share, respectively (as
adjusted for any stock dividends, combinations or splits with respect to such
shares), plus all declared but unpaid dividends on such shares for each share of
Series B Preferred Stock and Series C Preferred Stock then held by them (the
"SERIES B PREFERENCE" and "SERIES C PREFERENCE," respectively). If upon the
occurrence of such event, the assets and funds thus distributed among the
holders of the Series B Preferred Stock and Series C Preferred Stock shall be
insufficient to permit the payment to such holders of the full Series B
Preference and Series C Preference then the entire assets and funds of the
Corporation legally available for distribution shall be distributed ratably
among the holders of the Series B Preferred Stock and Series C Preferred Stock
based on the aggregate amount of the full Series B Preference and full Series C
Preference payable to each such holder pursuant to this paragraph.
b. After payment to the holders of the Series B Preferred Stock
and Series C Stock of the amounts set forth in Section B.2(a) above, the entire
remaining assets and funds of the Corporation legally available for
distribution, if any, shall be distributed among the holders of the Common
Stock.
2.
<PAGE> 4
c. For purposes of this Section B.2, (i) any acquisition of the
Corporation by means of merger or other form of corporate reorganization in
which outstanding shares of the Corporation are exchanged for securities or
other consideration issued, or caused to be issued, by the acquiring corporation
or its subsidiary in which the stockholders of the Corporation immediately prior
to the transaction possess less than 50% of the voting power of the acquiring
entity (or its parent), (ii) a sale of all or substantially all of the assets of
the Corporation in which the stockholders of the Corporation immediately prior
to the transaction possess less than 50% of the voting power of the acquiring
entity (or its parent), or (iii) a transaction or series of related transactions
in which more than fifty percent (50%) of the voting power of the Company is
disposed, shall be treated as a liquidation, dissolution or winding up of the
Corporation. In the event the consideration payable to the Corporation or to the
holders of its outstanding stock in connection with any such sale, merger or
consolidation (the "TRANSACTION CONSIDERATION") does not consist entirely of
cash, then the Corporation may satisfy its obligations under this Section B.2 by
paying to the holders of Preferred Stock a portion of the Transaction
Consideration with a fair market value equal to the amount required to be
distributed pursuant to this Section B.2. The fair market value of the
Transaction Consideration shall be determined by mutual agreement of the
Corporation and the holders of a majority of the outstanding shares of Preferred
Stock. If the Transaction Consideration consists of more than one type of
consideration, then each type of consideration shall be distributed to each
holder of Preferred in the same proportions as such type of consideration
represents of the total Transaction Consideration.
3. VOTING RIGHTS; DIRECTORS.
a. Each holder of shares of the Preferred Stock shall be entitled
to the number of votes equal to the number of shares of Common Stock into which
such shares of Preferred Stock could be converted and shall have voting rights
and powers equal to the voting rights and powers of the Common Stock (except as
otherwise expressly provided herein or as required by law, voting together with
the Common Stock as a single class) and shall be entitled to notice of any
stockholders' meeting in accordance with the Bylaws of the Corporation.
Fractional votes shall not, however, be permitted and any fractional voting
rights resulting from the above formula (after aggregating all shares into which
shares of Preferred Stock held by each holder could be converted) shall be
rounded to the nearest whole number (with one-half being rounded upward). Each
holder of Common Stock shall be entitled to one (1) vote for each share of
Common Stock held.
b. So long as 2,000,000 shares of Series B Preferred Stock remain
outstanding, the holders of Series B Preferred Stock, voting together as a
separate class, shall be entitled to elect two (2) members of the Board of
Directors. The holders of the Common Stock, voting together as a separate class,
shall be entitled to elect three (3) members of the Board of Directors. All
remaining members, if any, shall be elected by the holders of Common Stock and
Preferred Stock voting together as a single class.
c. In the case of any vacancy in the office of a director
occurring among the directors elected solely by the holders of the Series B
Preferred Stock or Common Stock pursuant to the first and second sentences of
Section B.3(b) hereof, the remaining director or directors so elected by the
holders of the Series B Preferred Stock or Common Stock may (or if
3.
<PAGE> 5
there are no remaining directors, by the affirmative vote of the holders of a
majority of the shares of that class) elect a successor or successors to hold
the office for the unexpired term of the director whose place shall be vacant.
Any director who shall have been elected solely by the holders of the Series B
Preferred Stock or Common Stock or any director so elected as provided in the
preceding sentence hereof, may be removed during the aforesaid term of office,
whether with or without cause, only by the affirmative vote of the holders of a
majority of the Series B Preferred Stock or Common Stock, as the case may be.
4. CONVERSION. The holders of the Preferred Stock shall have
conversion rights as follows (the "CONVERSION RIGHTS"):
a. RIGHT TO CONVERT. Each share of Series B Preferred Stock and
Series C Preferred Stock shall be convertible, at the option of the holder
thereof, at any time after the date of issuance of such share, at the office of
the Corporation or any transfer agent for such stock, into such number of fully
paid and nonassessable shares of Common Stock as is determined by dividing
$3.20, in the case of the Series B Preferred Stock, or $1.85, in the case of the
Series C Preferred Stock, by the Conversion Price applicable to such share,
determined as hereinafter provided, in effect on the date the certificate is
surrendered for conversion. The price at which shares of Common Stock shall be
deliverable upon conversion of shares of the Series B Preferred Stock (the
"SERIES B CONVERSION PRICE") shall initially be $3.20 per share of Common Stock.
The price at which shares of Common Stock shall be deliverable upon conversion
of shares of the Series C Preferred Stock (the "SERIES C CONVERSION PRICE")
shall initially be $1.85 per share of Common Stock. Such initial Series B
Conversion Price and Series C Conversion Price shall be subject to adjustment as
hereinafter provided.
b. AUTOMATIC CONVERSION. Each share of Preferred Stock shall
automatically be converted into shares of Common Stock at the then-effective
Conversion Price applicable to such share upon the earlier of (i) the date
specified by vote or written consent or agreement of holders of a majority of
the shares of Preferred Stock then outstanding or (ii) immediately upon the
closing of the sale of the Corporation's Common Stock in a firm commitment,
underwritten public offering registered under the Securities Act of 1933, as
amended (the "SECURITIES ACT"), other than a registration relating solely to a
transaction under Rule 145 under such Act (or any successor thereto) or to an
employee benefit plan of the Corporation, at a public offering price (prior to
underwriters' discounts and expenses) equal to or exceeding $7.00 per share of
Common Stock (as adjusted for any stock dividends, combinations or splits with
respect to such shares) and the aggregate gross proceeds to the Corporation
and/or any selling stockholders (before deduction for underwriters' discounts
and expenses relating to the issuance) of which exceed $15,000,000.
c. MECHANICS OF CONVERSION.
(i) Before any holder of Preferred Stock shall be entitled
voluntarily to convert the same into shares of Common Stock, he shall surrender
the certificate or certificates therefor, duly endorsed, at the office of the
Corporation or of any transfer agent for such stock, and shall give written
notice to the Corporation at such office that he elects to convert the same and
shall state therein the number of shares to be converted and the name or names
in which he wishes the certificate or certificates for shares of Common Stock to
be issued. The Corporation
4.
<PAGE> 6
shall, as soon as practicable thereafter, issue and deliver at such office to
such holder of Preferred Stock, a certificate or certificates for the number of
shares of Common Stock to which he shall be entitled. Such conversion shall be
deemed to have been made immediately prior to the close of business on the date
of surrender of the shares of Preferred Stock to be converted, and the person or
persons entitled to receive the shares of Common Stock issuable upon such
conversion shall be treated for all purposes as the record holder or holders of
such shares of Common Stock on such date.
(ii) If the conversion is in connection with an
underwritten offering of securities pursuant to the Securities Act, the
conversion may, at the option of any holder tendering shares of Preferred Stock
for conversion, be conditioned upon the closing with the underwriters of the
sale of securities pursuant to such offering, in which event the person(s)
entitled to receive the Common Stock upon conversion of the Preferred Stock
shall not be deemed to have converted such Preferred Stock until immediately
prior to the closing of such sale of securities.
d. ADJUSTMENTS TO CONVERSION PRICE FOR CERTAIN DILUTING ISSUES.
(i) SPECIAL DEFINITIONS. For purposes of this Section
B.4(d), the following definitions apply:
(1) "OPTIONS" shall mean rights, options, or warrants
to subscribe for, purchase or otherwise acquire either Common Stock or
Convertible Securities (defined below).
(2) "ORIGINAL ISSUE DATE" for a series of Preferred
Stock shall mean the date on which the first share of such series of Preferred
Stock was first issued.
(3) "CONVERTIBLE SECURITIES" shall mean any evidences
of indebtedness, shares (other than Common Stock) or other securities
convertible into or exchangeable for Common Stock.
(4) "ADDITIONAL SHARES OF COMMON STOCK" shall mean
all shares of Common Stock issued (or, pursuant to Section B.4(d)(iii), deemed
to be issued) by the Corporation after the applicable Original Issue Date, other
than shares of Common Stock issued or issuable:
(A) upon conversion of shares of Preferred
Stock;
(B) to employees, officers, directors,
consultants, or advisors under stock option, stock bonus or stock purchase plans
or agreements or similar plans or agreements approved by the Board of Directors
or an authorized committee thereof;
(C) pursuant to agreements to license technology
or to lending or leasing institutions upon approval by the Board of Directors;
(D) as a dividend or distribution on Preferred
Stock; or
5.
<PAGE> 7
(E) for which adjustment of the Conversion Price
is made pursuant to Section B.4(e); or
(F) upon exercise of warrants that were issued
pursuant to approval of the Board of Directors prior to the such Original Issue
Date.
(ii) NO ADJUSTMENT OF CONVERSION PRICE. Any provision
herein to the contrary notwithstanding, no adjustment in the Conversion Price
for any series of Preferred Stock shall be made in respect of the issuance of
Additional Shares of Common Stock unless the consideration per share (determined
pursuant to Section B.4(d)(v) hereof) for an Additional Share of Common Stock
issued or deemed to be issued by the Corporation is less than the Conversion
Price for such series of Preferred Stock in effect on the date of, and
immediately prior to, such issue.
(iii) DEEMED ISSUE OF ADDITIONAL SHARES OF COMMON
STOCK. In the event the Corporation, at any time or from time to time after the
Original Issue Date for a series of Preferred Stock, shall issue any Options or
Convertible Securities or shall fix a record date for the determination of
holders of any class of securities then entitled to receive any such Options or
Convertible Securities, then the maximum number of shares (as set forth in the
instrument relating thereto without regard to any provisions contained therein
designed to protect against dilution) of Common Stock issuable upon the exercise
of such Options or, in the case of Convertible Securities and Options therefor,
the conversion or exchange of such Convertible Securities, shall be deemed to be
Additional Shares of Common Stock issued as of the time of such issue or, in
case such a record date shall have been fixed, as of the close of business on
such record date, provided that in any such case in which Additional Shares of
Common Stock are deemed to be issued:
(1) no further adjustments in the Conversion Price
for such series of Preferred Stock shall be made upon the subsequent issue of
Convertible Securities or shares of Common Stock upon the exercise of such
Options or conversion or exchange of such Convertible Securities;
(2) if such Options or Convertible Securities by
their terms provide, with the passage of time or otherwise, for any increase or
decrease in the consideration payable to the Corporation, or decrease or
increase in the number of shares of Common Stock issuable, upon the exercise,
conversion or exchange thereof, the Conversion Price for such series of
Preferred Stock computed upon the original issue thereof (or upon the occurrence
of a record date with respect thereto), and any subsequent adjustments based
thereon, shall, upon any such increase or decrease becoming effective, be
recomputed to reflect such increase or decrease insofar as it affects such
Options or the rights of conversion or exchange under such Convertible
Securities (provided, however, that no such adjustment of the Conversion Price
for such series of Preferred Stock shall affect Common Stock previously issued
upon conversion of shares of such series of Preferred Stock);
(3) upon the expiration of any such Options or any
rights of conversion or exchange under such Convertible Securities which shall
not have been exercised, the Conversion Price for such series of Preferred Stock
computed upon the original issue thereof
6.
<PAGE> 8
(or upon the occurrence of a record date with respect thereto), and any
subsequent adjustments based thereon, shall, upon such expiration, be recomputed
as if:
(A) in the case of Convertible Securities or
Options for Common Stock, the only Additional Shares of Common Stock issued were
the shares of Common Stock, if any, actually issued upon the exercise of such
Options or the conversion or exchange of such Convertible Securities and the
consideration received therefor was the consideration actually received by the
Corporation for the issue of all such Options, whether or not exercised, plus
the consideration actually received by the Corporation upon such exercise, or
for the issue of all such Convertible Securities, whether or not converted or
exchanged, plus the additional consideration, if any, actually received by the
Corporation upon such conversion or exchange and
(B) in the case of Options for Convertible
Securities only the Convertible Securities, if any, actually issued upon the
exercise thereof were issued at the time of issue of such Options, and the
consideration received by the Corporation for the Additional Shares of Common
Stock deemed to have been then issued was the consideration actually received by
the Corporation for the issue of all such Options, whether or not exercised,
plus the consideration deemed to have been received by the Corporation
(determined pursuant to Section B.4(d)) upon the issue of the Convertible
Securities with respect to which such Options were actually exercised;
(4) no readjustment pursuant to clause (2) or (3)
above shall have the effect of increasing the Conversion Price for such series
of Preferred Stock to an amount which exceeds the lower of (a) the Conversion
Price for such series of Preferred Stock on the original adjustment date or (b)
the Conversion Price for such series of Preferred Stock that would have resulted
from any issuance of Additional Shares of Common Stock between the original
adjustment date and such readjustment date.
(5) in the case of any Options which expire by their
terms not more than thirty (30) days after the date of issue thereof, no
adjustment of the Conversion Price for such series of Preferred Stock shall be
made until the earlier of the expiration or exercise of all such Options or
immediately prior to the automatic conversion of shares of such series of
Preferred Stock into Common Stock pursuant to Section B.4(a), whereupon such
adjustment shall be made in the same manner provided in clause (3) above.
(iv) ADJUSTMENT OF CONVERSION PRICE UPON ISSUANCE OF
ADDITIONAL SHARES OF COMMON STOCK. In the event this Corporation, at any time
after the Original Issue Date for any series of Preferred Stock, shall issue
Additional Shares of Common Stock (including Additional Shares of Common Stock
deemed to be issued pursuant to Section B.4(d)(iii)) without consideration or
for a consideration per share less than the Conversion Price with respect to
such series of Preferred Stock in effect on the date of and immediately prior to
such issue, then and in such event, the Conversion Price for such series of
Preferred Stock shall be reduced, concurrently with such issue, to a price
(calculated to the nearest cent) determined by multiplying such Conversion Price
by a fraction, the numerator of which shall be the number of shares of Common
Stock outstanding immediately prior to such issue plus the number of shares of
Common Stock which the aggregate consideration received by
7.
<PAGE> 9
the Corporation for the total number of Additional Shares of Common Stock so
issued would purchase at such Conversion Price in effect immediately prior to
such issuance, and the denominator of which shall be the number of shares of
Common Stock outstanding immediately prior to such issue plus the number of such
Additional Shares of Common Stock so issued. For the purpose of the above
calculation, the number of shares of Common Stock outstanding immediately prior
to such issue shall include the outstanding shares of Common Stock, the shares
of Common Stock issuable upon conversion of the outstanding shares of Preferred
Stock and all outstanding Convertible Securities and Options.
(v) DETERMINATION OF CONSIDERATION. For purposes of this
Section B.4(d), the consideration received by the Corporation for the issue of
any Additional Shares of Common Stock shall be computed as follows:
(1) CASH AND PROPERTY. Such consideration shall:
(A) insofar as it consists of cash, be computed
at the aggregate amount of cash received by the Corporation excluding amounts
paid or payable for accrued interest or accrued dividends;
(B) insofar as it consists of property other
than cash, be computed at the fair value thereof at the time of such issue, as
mutually determined in good faith by the Board and the holders of a majority of
the Preferred Stock; and
(C) in the event Additional Shares of Common
Stock are issued together with other shares or securities or other assets of the
Corporation for consideration which covers both, be the proportion of such
consideration so received, computed as provided in clauses (A) and (B) above, as
mutually determined in good faith by the Board and the holders of a majority of
the Preferred Stock.
(2) OPTIONS AND CONVERTIBLE SECURITIES. The
consideration per share received by the Corporation for Additional Shares of
Common Stock deemed to have been issued pursuant to Section B.4(d)(iii),
relating to Options and Convertible Securities shall be determined by dividing:
(A) the total amount, if any, received or
receivable by the Corporation as consideration for the issue of such Options or
Convertible Securities, plus the minimum aggregate amount of additional
consideration (as set forth in the instruments relating thereto, without regard
to any provision contained therein designed to protect against dilution) payable
to the Corporation upon the exercise of such Options or the conversion or
exchange of such Convertible Securities, or in the case of Options for
Convertible Securities, the exercise of such Options for Convertible Securities
and the conversion or exchange of such Convertible Securities by
(B) the maximum number of shares of Common Stock
(as set forth in the instruments relating thereto, without regard to any
provision contained therein designed to protect against the dilution) issuable
upon the exercise of such Options or conversion or exchange of such Convertible
Securities.
8.
<PAGE> 10
e. ADJUSTMENTS TO CONVERSION PRICES FOR STOCK DIVIDENDS AND FOR
COMBINATIONS OR SUBDIVISIONS OF COMMON STOCK. In the event that this Corporation
at any time or from time to time after the Original Issue Date for any series of
Preferred Stock shall declare or pay, without consideration, any dividend on the
Common Stock payable in Common Stock or in any right to acquire Common Stock for
no consideration, or shall effect a subdivision of the outstanding shares of
Common Stock into a greater number of shares of Common Stock (by stock split,
reclassification or otherwise than by payment of a dividend in Common Stock or
in any right to acquire Common Stock), or in the event the outstanding shares of
Common Stock shall be combined or consolidated, by reclassification or
otherwise, into a lesser number of shares of Common Stock, then the Conversion
Price for such series of Preferred Stock in effect immediately prior to such
event shall, concurrently with the effectiveness of such event, be
proportionately decreased or increased, as appropriate. In the event that this
Corporation shall declare or pay, without consideration, any dividend on the
Common Stock payable in any right to acquire Common Stock for no consideration,
then the Corporation shall be deemed to have made a dividend payable in Common
Stock in an amount of shares equal to the maximum number of shares issuable upon
exercise of such rights to acquire Common Stock.
f. ADJUSTMENTS FOR RECLASSIFICATION AND REORGANIZATION. If the
Common Stock issuable upon conversion of any series of Preferred Stock shall be
changed into the same or a different number of shares of any other class or
classes of stock, whether by capital reorganization, reclassification or
otherwise (other than a subdivision or combination of shares provided for in
Section B.4(e) above or a sale, merger or other reorganization referred to in
Section B.2(d) above), the applicable Conversion Price then in effect for such
series of Preferred Stock shall, concurrently with the effectiveness of such
reorganization or reclassification, be proportionately adjusted so that shares
of such series of Preferred Stock shall be convertible into, in lieu of the
number of shares of Common Stock which the holders would otherwise have been
entitled to receive, a number of shares of such other class or classes of stock
equivalent to the number of shares of Common Stock that would have been subject
to receipt by the holders upon conversion of shares of such series of Preferred
Stock immediately before that change.
g. NO IMPAIRMENT. The Corporation will not, by amendment of its
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Corporation, but will at
all times in good faith assist in the carrying out of all the provisions of this
Section B.4 and in the taking of all such action as may be necessary or
appropriate in order to protect the Conversion Rights of the holders of the
Preferred Stock against impairment.
h. CERTIFICATES AS TO ADJUSTMENTS. Upon the occurrence of each
adjustment or readjustment of any Conversion Price pursuant to this Section B.4,
the Corporation at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and prepare and furnish to each
holder of Preferred Stock a certificate executed by the Corporation's President
or Chief Financial Officer setting forth such adjustment or readjustment and
showing in detail the facts upon which such adjustment or readjustment is based.
The Corporation shall, upon the written request at any time of any holder of
shares of any series of Preferred Stock, furnish or cause to be furnished to
such holder a like certificate setting forth
9.
<PAGE> 11
(i) such adjustments and readjustments, (ii) the Conversion Price for such
series of Preferred Stock at the time in effect, and (iii) the number of shares
of Common Stock and the amount, if any, of other property which at the time
would be received upon the conversion shares of such series of Preferred Stock.
i. NOTICES OF RECORD DATE. In the event that the Corporation
shall propose at any time: (i) to declare any dividend or distribution upon its
Common Stock, whether in cash, property, stock or other securities, whether or
not a regular cash dividend and whether or not out of earnings or earned
surplus; (ii) to offer for subscription pro rata to the holders of any class or
series of its stock any additional shares of stock of any class or series or
other rights; (iii) to effect any reclassification or recapitalization of its
Common Stock outstanding involving a change in the Common Stock; or (iv) to
merge or consolidate with or into any other corporation, or sell, lease or
convey all or substantially all of its assets, or to liquidate, dissolve or wind
up; then, in connection with each such event, the Corporation shall send to the
holders of Preferred Stock:
(1) at least twenty (20) days' prior written notice of the
date on which a record shall be taken for such dividend, distribution or
subscription rights (and specifying the date on which the holders of Common
Stock shall be entitled thereto) or for determining rights to vote, if any, in
respect of the matters referred to in (iii) and (iv) above; and
(2) in the case of the matters referred to in (iii) and
(iv) above, at least twenty (20) days' prior written notice of the date when the
same shall take place (and specifying the date on which the holders of Common
Stock shall be entitled to exchange their Common Stock for securities or other
property deliverable upon the occurrence of such event).
j. ISSUE TAXES. The Corporation shall pay any and all issue and
other taxes that may be payable in respect of any issue or delivery of shares of
Common Stock on conversion of Preferred Stock pursuant hereto; provided,
however, that the Corporation shall not be obligated to pay any transfer taxes
resulting from any transfer requested by any holder in connection with any such
conversion.
k. RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The Corporation
shall at all times reserve and keep available out of its authorized but unissued
shares of Common Stock, solely for the purpose of effecting the conversion of
the shares of the Preferred Stock, such number of its shares of Common Stock as
shall from time to time be sufficient to effect the conversion of all
outstanding shares of the Preferred Stock; and if at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect
the conversion of all then outstanding shares of the Preferred Stock, the
Corporation will take such corporate action as may, in the opinion of its
counsel, be necessary to increase its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient for such purpose,
including, without limitation, engaging in best efforts to obtain the requisite
stockholder approval of any necessary amendment to this Certificate.
l. FRACTIONAL SHARES. No fractional share shall be issued upon
the conversion of any share or shares of Preferred Stock. All shares of Common
Stock (including fractions thereof) issuable upon conversion of more than one
share of Preferred Stock by a
10.
<PAGE> 12
holder thereof shall be aggregated for purposes of determining whether the
conversion would result in the issuance of any fractional share. If, after the
aforementioned aggregation, the conversion would result in the issuance of a
fraction of a share of Common Stock, the Corporation shall, in lieu of issuing
any fractional share, either (i) pay the holder otherwise entitled to such
fraction a sum in cash equal to the fair market value of such fraction on the
date of conversion (as determined in good faith by the Board of Directors) or
(ii) round such fractional share up to a whole share.
m. NOTICES. Any notice required by the provisions of this Section
B.4 to be given to the holders of shares of Preferred Stock shall be deemed
given if deposited in the United States mail, postage prepaid, and addressed to
each holder of record at his address appearing on the books of the Corporation.
5. RESTRICTIONS AND LIMITATIONS. So long as 2,000,000 shares of
Preferred Stock remain outstanding, the Corporation shall not, without the vote
or written consent by the holders of a majority of the then outstanding shares
of the Preferred Stock:
a. alter or change the rights, preferences or privileges of the
Preferred Stock materially or adversely;
b. authorize, create or issue a new class or series of shares
having rights, preferences or privileges senior to or on parity with any series
of outstanding Preferred Stock, or increase the number of authorized shares of
any class or series having rights, preferences or privileges senior to or on
parity any series of outstanding Preferred Stock;
c. sell, convey or otherwise dispose of all or a substantially
all of its property or business, or merge into or effect a reorganization with
any other corporation or effect any transfer or series of related transfers
(other than to a wholly owned subsidiary corporation) in which the stockholders
of the corporation immediately prior to the transaction possess less than 50% of
the voting power of the surviving entity (or its parent) immediately after the
transaction;
d. pay or declare any dividend or make any other distribution on
shares of Common Stock or Preferred Stock (payable other than in Common Stock or
other securities and rights convertible into or entitling the holder thereof to
receive, directly or indirectly, additional shares of Common Stock of this
corporation);
e. redeem, purchase or otherwise acquire any shares or shares of
the corporation's Preferred Stock or Common Stock; provided, however, that this
restriction shall not apply to the repurchase of shares of Common Stock from
employees, officers, directors, consultants or other persons performing services
for the corporation pursuant to agreements under which the corporation has the
option to repurchase such shares at cost or at cost upon the occurrence of
certain events, such as the termination of employment;
f. liquidate or dissolve the corporation; or
g. issue third party debt, whether or not secured, including,
without limitation, off balance sheet financings, capital leases or operating
leases which, in aggregate, would exceed $10,000,000 subsequent to the Original
Issue Date.
11.
<PAGE> 13
6. NO REISSUANCE OF PREFERRED STOCK. No share or shares of
Preferred Stock acquired by the Corporation by reason of redemption, purchase,
conversion or otherwise shall be reissued, and all such shares shall be
cancelled, retired and eliminated from the shares which the Corporation shall be
authorized to issue.
FIFTH: In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors shall have the power, both before and after
receipt of any payment for any of the Corporation's capital stock, to adopt,
amend, repeal or otherwise alter the Bylaws of the Corporation without any
action on the part of the stockholders; provided, however, that the grant of
such power to the Board of Directors shall not divest the stockholders of nor
limit their power to adopt, amend, repeal or otherwise alter the Bylaws.
SIXTH: The exact number of directors shall be determined in accordance
with the Bylaws of the corporation.
SEVENTH: Elections of directors need not be by written ballot unless the
Bylaws of the Corporation shall so provide.
EIGHTH: Meetings of stockholders may be held within or without the State
of Delaware, as the Bylaws may provide. The books of the corporation may be kept
(subject to any provisions contained in the statutes) outside the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the Bylaws of the corporation.
NINTH: The Corporation reserves the right to adopt, repeal, rescind or
amend in any respect any provisions contained in this Restated Certificate of
Incorporation in the manner now or hereafter prescribed by applicable law, and
all rights conferred on stockholders herein are granted subject to this
reservation.
TENTH: A director of the Corporation shall, to the full extent permitted
by the Delaware General Corporation Law as it now exists or as it may hereafter
be amended, not be liable to the Corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director. Neither any amendment nor
repeal of this Article TENTH nor the adoption of any provision of this Restated
Certificate of Incorporation inconsistent with this Article TENTH, shall
eliminate or reduce the effect of this Article TENTH in respect of any matter
occurring, or any cause of action, suit or claim that, but for this Article
TENTH, would accrue or arise, prior to such amendment, repeal or adoption of an
inconsistent provision.
12.
<PAGE> 1
EXHIBIT 3.2
BYLAWS
OF
VIROLOGIC, INC.
(as amended May 20, 1996)
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
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<S> <C>
ARTICLE I - CORPORATE OFFICES............................................ 1
1.1 REGISTERED OFFICE.............................................. 1
1.2 OTHER OFFICES.................................................. 1
ARTICLE II - MEETINGS OF STOCKHOLDERS.................................... 1
2.1 PLACE OF MEETINGS.............................................. 1
2.2 ANNUAL MEETING................................................. 1
2.3 SPECIAL MEETING................................................ 1
2.4 NOTICE OF STOCKHOLDERS' MEETINGS............................... 2
2.5 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE................... 2
2.6 QUORUM......................................................... 2
2.7 ADJOURNED MEETING; NOTICE...................................... 3
2.8 CONDUCT OF BUSINESS............................................ 3
2.9 VOTING......................................................... 3
2.10 WAIVER OF NOTICE............................................... 4
2.11 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING........ 4
2.12 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS.... 5
2.13 PROXIES........................................................ 5
2.14 LIST OF STOCKHOLDERS ENTITLED TO VOTE.......................... 6
ARTICLE III - DIRECTORS.................................................. 6
3.1 POWERS......................................................... 6
3.2 NUMBER OF DIRECTORS............................................ 6
3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS........ 6
3.4 RESIGNATION AND VACANCIES...................................... 7
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE....................... 8
3.6 REGULAR MEETINGS............................................... 8
3.7 SPECIAL MEETINGS; NOTICE....................................... 8
3.8 QUORUM......................................................... 9
3.9 WAIVER OF NOTICE............................................... 9
3.10 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING.............. 9
3.11 FEES AND COMPENSATION OF DIRECTORS............................. 10
3.12 APPROVAL OF LOANS TO OFFICERS.................................. 10
3.13 REMOVAL OF DIRECTORS........................................... 10
ARTICLE IV - COMMITTEES.................................................. 10
</TABLE>
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<PAGE> 3
TABLE OF CONTENTS
(continued)
<TABLE>
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4.1 COMMITTEES OF DIRECTORS........................................ 10
4.2 COMMITTEE MINUTES.............................................. 11
4.3 MEETINGS AND ACTION OF COMMITTEES.............................. 11
ARTICLE V - OFFICERS..................................................... 12
5.1 OFFICERS....................................................... 12
5.2 APPOINTMENT OF OFFICERS........................................ 12
5.3 SUBORDINATE OFFICERS........................................... 12
5.4 REMOVAL AND RESIGNATION OF OFFICERS............................ 12
5.5 VACANCIES IN OFFICES........................................... 13
5.6 CHAIRMAN OF THE BOARD.......................................... 13
5.7 PRESIDENT...................................................... 13
5.8 VICE PRESIDENTS................................................ 13
5.9 SECRETARY...................................................... 14
5.10 CHIEF FINANCIAL OFFICER........................................ 14
5.11 ASSISTANT SECRETARY............................................ 15
5.12 ASSISTANT TREASURER............................................ 15
5.13 REPRESENTATION OF SHARES OF OTHER CORPORATIONS................. 15
5.14 AUTHORITY AND DUTIES OF OFFICERS............................... 15
ARTICLE VI - INDEMNITY................................................... 16
6.1 THIRD PARTY ACTIONS............................................ 16
6.2 ACTIONS BY OR IN THE RIGHT OF THE CORPORATION.................. 16
6.3 SUCCESSFUL DEFENSE............................................. 17
6.4 DETERMINATION OF CONDUCT....................................... 17
6.5 PAYMENT OF EXPENSES IN ADVANCE................................. 17
6.6 INDEMNITY NOT EXCLUSIVE........................................ 18
6.7 INSURANCE INDEMNIFICATION...................................... 18
6.8 THE CORPORATION................................................ 18
6.9 EMPLOYEE BENEFIT PLANS......................................... 19
6.10 CONTINUATION OF INDEMNIFICATION AND ADVANCEMENT OF EXPENSES.... 19
ARTICLE VII - RECORDS AND REPORTS........................................ 19
7.1 MAINTENANCE AND INSPECTION OF RECORDS.......................... 19
7.2 INSPECTION BY DIRECTORS........................................ 20
7.3 ANNUAL STATEMENT TO STOCKHOLDERS............................... 20
ARTICLE VIII - GENERAL MATTERS........................................... 21
8.1 CHECKS......................................................... 21
8.2 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS............... 21
8.3 STOCK CERTIFICATES; PARTY PAID SHARES.......................... 21
8.4 SPECIAL DESIGNATION ON CERTIFICATES............................ 22
</TABLE>
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TABLE OF CONTENTS
(continued)
<TABLE>
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8.5 LOST CERTIFICATES.............................................. 22
8.6 CONSTRUCTION; DEFINITIONS...................................... 23
8.7 DIVIDENDS...................................................... 23
8.8 FISCAL YEAR.................................................... 23
8.9 SEAL........................................................... 23
8.10 TRANSFER OF STOCK.............................................. 23
8.11 STOCK TRANSFER AGREEMENTS...................................... 24
8.12 REGISTERED STOCKHOLDERS........................................ 24
ARTICLE IX - AMENDMENTS.................................................. 24
</TABLE>
<PAGE> 5
BYLAWS
OF
VIROLOGIC, INC.
ARTICLE I
CORPORATE OFFICES
1.1 REGISTERED OFFICE
The registered office of the corporation shall be in the City of
Wilmington, County of New Castle, State of Delaware. The name of the registered
agent of the corporation at such location is The Corporation Trust Company.
1.2 OTHER OFFICES
The board of directors may at any time establish other offices at any
place or places where the corporation is qualified to do business.
ARTICLE II
MEETINGS OF STOCKHOLDERS
2.1 PLACE OF MEETINGS
Meetings of stockholders shall be held at any place, within or outside
the State of Delaware, designated by the board of directors. In the absence of
any such designation, stockholders' meetings shall be held at the registered
office of the corporation.
2.2 ANNUAL MEETING
The annual meeting of stockholders shall be held each year on a date and
at a time designated by the board of directors. In the absence of such
designation the annual meeting of shareholders shall be held on the second
Monday of May of each year at 10:00 a.m. However, if such day falls on a legal
holiday, then the meeting shall be held at the same time and place on the next
succeeding business day. At the meeting, directors shall be elected and any
other proper business may be transacted.
<PAGE> 6
2.3 SPECIAL MEETING
A special meeting of the stockholders may be called at any time by the
board of directors, or by the chairman of the board, or by the president, or by
one or more stockholders holding shares in the aggregate entitled to cast not
less than ten percent of the votes at that meeting.
If a special meeting is called by any person or persons other than the
board of directors, the request shall be in writing, specifying the time of
such meeting and the general nature of the business proposed to be transacted,
and shall be delivered personally or sent by registered mail or by telegraphic
or other facsimile transmission to the chairman of the board, the president or
the secretary of the corporation. No business may be transacted at such special
meeting otherwise than specified in such notice. The officer receiving the
request shall cause notice to be promptly given to the stockholders entitled to
vote, in accordance with the provisions of Sections 2.4 and 2.5 of this Article
II, that a meeting will be held at the time requested by the person or persons
calling the meeting, not less than ten (10) nor more than sixty (60) days after
the receipt of the request. Nothing contained in this paragraph of this Section
2.3 shall be construed as limiting, fixing, or affecting the time when a
meeting of stockholders called by action of the board of directors may be held.
2.4 NOTICE OF STOCKHOLDERS' MEETING
All notices of meetings with stockholders shall be in writing and shall be
sent or otherwise given in accordance with Section 2.5 of these bylaws not less
than ten (10) nor more than sixty (60) days before the date of the meeting to
each stockholder entitled to vote at such meeting. The notice shall specify the
place, date, and hour of the meeting, and, in the case of a special meeting,
the purpose or purposes for which the meeting is called.
2.5 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE
Written notice of any meeting of stockholders, if mailed, is given when
deposited in the United States mail, postage prepaid, directed to the
stockholder at his address as it appears on the records of the corporation. An
affidavit of the Secretary or an Assistant Secretary or of the transfer agent
of the corporation that the notice has been given shall, in the absence of
fraud, be prima facie evidence of the facts stated therein.
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<PAGE> 7
2.6 QUORUM
The holders of a majority of the stock issued and outstanding and entitled
to vote thereat, present in person or represented by proxy, shall constitute a
quorum at all meetings of the stockholders for the transaction of business
except as otherwise provided by statute or by the certificate of incorporation.
If, however, such quorum is not present or represented at any meeting of the
stockholders, then either (i) the Chairman of the meeting or (ii) the
stockholders entitled to vote thereat, present in person or represented by
proxy, shall have power to adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum is present or
represented. At such adjourned meeting at which a quorum is present or
represented, any business may be transacted that might have been transacted at
the meeting as originally noticed.
2.7 ADJOURNED MEETING; NOTICE
When a meeting is adjourned to another time or place, unless these bylaws
otherwise require, notice need not be given of the adjourned meeting if the
time and place thereof are announced at the meeting at which the adjournment is
taken. At the adjourned meeting the corporation may transact any business that
might have been transacted at the original meeting. If the adjournment is for
more than thirty (30) days, or if after the adjournment a new record date is
fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote at the meeting.
2.8 CONDUCT OF BUSINESS
The chairman of any meeting of stockholders shall determine the order of
business and the procedure at the meeting, including such regulation of the
manner of voting and the conduct of business.
2.9 VOTING
The stockholders entitled to vote at any meeting of stockholders shall be
determined in accordance with the provisions of Section 2.12 of these bylaws,
subject to the provisions of Sections 217 and 218 of the General Corporation
Law of Delaware (relating to voting rights of fiduciaries, pledgors and joint
owners of stock and to voting trusts and other voting agreements).
Except as provided in the last paragraph of this Section 2.9, or as may be
otherwise provided in the certificate of incorpora-
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<PAGE> 8
tion, each stockholder shall be entitled to one vote for each share of capital
stock held by such stockholder.
At a stockholders' meeting at which directors are to be elected, each
stockholder shall be entitled to cumulate votes (i.e., cast for any candidate a
number of votes greater than the number of votes which such stockholder
normally is entitled to cast) if the candidates' names have been properly
placed in nomination (in accordance with these bylaws) prior to commencement of
the voting and the stockholder requesting cumulative voting or any other
stockholder voting at the meeting in person or by proxy has given notice prior
to commencement of the voting of the stockholder's intention to cumulate votes.
If cumulative voting is properly requested, each holder of stock, or of any
class or classes or of a series or series thereof, who elects to cumulate votes
shall be entitled to as many votes as equals the number of votes which (absent
this provision as to cumulative voting) he would be entitled to cast for the
election of directors with respect to his shares of stock multiplied by the
number of directors to be elected by him, and he may cast all of such votes for
a single director or may distribute them among the number to be voted for, or
for any two or more of them, as he may see fit.
2.10 WAIVER OF NOTICE
Whenever notice is required to be given under any provision of the General
Corporation Law of Delaware or of the certificate of incorporation or these
bylaws, a written waiver thereof, signed by the person entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent to
notice. Attendance of a person at a meeting shall constitute a waiver of notice
of such meeting, except when the person attends a meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of
any business because the meeting is not lawfully called or convened. Neither
the business to be transacted at, nor the purpose of, any regular or special
meeting of the stockholders need be specified in any written waiver of notice
unless so required by the certificate of incorporation or these bylaws.
2.11 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Unless otherwise provided in the certificate of incorporation, any action
required by this chapter to be taken at any annual or special meeting of
stockholders of a corporation, or any action that may be taken at any annual or
special meeting of such stockholders, may be taken without a meeting, without
prior notice, and without a vote if a consent in writing, setting forth the
action so taken, is signed by the holders of outstanding stock having not
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<PAGE> 9
less than the minimum number of votes that would be necessary to authorize or
take such action at a meeting at which all shares entitled to vote thereon were
present and voted.
Prompt notice of the taking of the corporate action without a meeting by
less than unanimous written consent shall be given to those stockholders who
have not consented in writing. If the action which is consented to is such as
would have required the filing of a certificate under any section of the
General Corporation Law of Delaware if such action had been voted on by
stockholders at a meeting thereof, then the certificate filed under such
section shall state, in lieu of any statement required by such section
concerning any vote of stockholders, that written notice and written consent
have been given as provided in Section 228 of the General Corporation Law of
Delaware.
2.12 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS
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 entitled to express consent to corporate action in writing without a
meeting, or entitled to receive payment of any dividend or other distribution
or allotment of any rights, or entitled to exercise any rights in respect of
any change, conversion or exchange of stock or for the purpose of any other
lawful action, the board of directors may fix, in advance, a record date, which
shall not be more than sixty (60) nor less than ten (10) days before the date
of such meeting, nor more than sixty (60) days prior to any other action.
If the board of directors does not so fix a record date:
(i) The record date for determining stockholders entitled to notice
of or to vote at a meeting of stockholders shall be at the close of business on
the day next preceding the day on which notice is given, or, if notice is
waived, at the close of business on the day next preceding the day on which the
meeting is held.
(ii) The record date for determining stockholders entitled to
express consent to corporate action in writing without a meeting, when no prior
action by the board of directors is necessary, shall be the day on which the
first written consent is expressed.
(iii) The record date for determining stockholders for any other
purpose shall be at the close of business on the day on which the board of
directors adopts the resolution relating thereto.
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<PAGE> 10
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.
2.13 PROXIES
Each stockholder entitled to vote at a meeting of stockholders or to
express consent or dissent to corporate action in writing without a meeting may
authorize another person or persons to act for him by a written proxy, signed
by the stockholder and filed with the secretary of the corporation, but no such
proxy shall be voted or acted upon after three (3) years from its date, unless
the proxy provides for a longer period. A proxy shall be deemed signed if the
stockholder's name is placed on the proxy (whether by mutual signature,
typewriting, telegraphic transmission or otherwise) by the stockholder or the
stockholder's attorney-in-fact. The revocability of a proxy that states on its
face that it is irrevocable shall be governed by the provisions of Section
212(c) of the General Corporation Law of Delaware.
2.14 LIST OF STOCKHOLDERS ENTITLED TO VOTE
The officer who has charge of the stock ledger of a corporation shall
prepare and make, at least ten (10) days before every meeting of stockholders,
a complete list of the stockholders entitled to vote at the meeting, arranged
in alphabetical order, and showing the address of each stockholder and the
number of shares registered in the name of each stockholder. Such list shall be
pen to the examination of any stockholder, for any purpose germane to the
meeting, during ordinary business hours, for a period of at least ten (10) days
prior to the meeting, either at a place within the city where the meeting is 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. Such list
shall presumptively determine the identity of the stockholders entitled to vote
at the meeting and the number of shares held by each of them.
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<PAGE> 11
ARTICLE III
DIRECTORS
3.1 POWERS
Subject to the provisions of the General Corporation Law of Delaware and
any limitations in the certificate of incorporation or these bylaws relating to
action required to be approved by the stockholders or by the outstanding
shares, the business and affairs of the corporation shall be managed and all
corporate powers shall be exercised by or under the direction of the board of
directors.
3.2 NUMBER OF DIRECTORS
The number of directors of the corporation shall be six (6). This Section
3.2 may only be amended as provided in the Company's Certificate of
Incorporation, as amended.
No reduction of the authorized number of directors shall have the effect
of removing any director before that director's term of office expires.
3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS
Except as provided in Section 3.4 of these bylaws, directors shall be
elected at each annual meeting of stockholders to hold office until the next
annual meeting. Directors need not be stockholders unless so required by the
certificate of incorporation or these bylaws, wherein other qualifications for
directors may be prescribed. Each director, including a director elected to
fill a vacancy, shall hold office until his successor is elected and qualified
or until his earlier resignation or removal.
Elections of directors need not be by written ballot.
3.4 RESIGNATION AND VACANCIES
Any director may resign at any time upon written notice to the attention
of the Secretary of the corporation. When one or more directors so resigns and
the resignation is effective at a future date, a majority of the directors then
in office, including those who have so resigned, shall have power to fill such
vacancy or vacancies, the vote thereon to take effect when such resignation or
resignations shall become effective, and each director so chosen
-7-
<PAGE> 12
shall hold office as provided in this section in the filling of other vacancies.
Unless otherwise provided in the certificate of incorporation of these
bylaws:
(i) Vacancies and newly created directorships resulting from
any increase in the authorized number of directors elected by all of the
stockholders having the right to vote as a single class may be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director.
(ii) Whenever the holders of any class or classes of stock or
series thereof are entitled to elect one or more directors by the provisions of
the certificate of incorporation, vacancies and newly created directorships of
such class or classes or series may be filled by a majority of the directors
elected by such class or classes or series thereof then in office, or by a sole
remaining director so elected.
If at any time, by reason of death or resignation or other cause, the
corporation should have no directors in office, then any officer or any
stockholder or an executor, administrator, trustee or guardian of a
stockholder, or other fiduciary entrusted with like responsibility for the
person or estate of a stockholder, may call a special meeting of stockholders
in accordance with the provisions of the certificate of incorporation or these
bylaws, or may apply to the Court of Chancery for a decree summarily ordering
an election as provided in Section 211 of the General Corporation Law of
Delaware.
If, at the time of filling any vacancy or any newly created
directorship, the directors then in office constitute less than a majority of
the whole board (as constituted immediately prior to any such increase), then
the court of chancery may, upon application of any stockholder or stockholders
holding at least ten (10) percent of the total number of the shares at the time
outstanding having the right to vote for such directors, summarily order an
election to be held to fill any such vacancies or newly created directorships,
or to replace the directors chosen by the directors then in office as aforesaid,
which election shall be governed by the provisions of Section 211 of the General
Corporation Law of Delaware as far as applicable.
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<PAGE> 13
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE
The board of directors of the corporation may hold meetings, both regular
and special, either within or outside the State of Delaware.
Unless otherwise restricted by the certificate of incorporation or these
bylaws, members of the board of directors, or any committee designated by the
board of directors, may participate in a meeting of the board of directors, or
any committee, by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and such participation in a meeting shall constitute presence in
person at the meeting.
3.6 REGULAR MEETINGS
Regular meetings of the board of directors may be held without notice at
such time and at such place as shall from time to time be determined by the
board.
3.7 SPECIAL MEETINGS; NOTICE
Special meetings of the board of directors for any purpose or purposes may
be called at any time by the chairman of the board, the president, any vice
president, the secretary or any two (2) directors.
Notice of the time and place of special meetings shall be delivered
personally or by telephone to each director or sent by first-class mail or
telegram, charges prepaid, addressed to each director at that director's
address as it is shown on the records of the corporation. If the notice is
mailed, it shall be deposited in the United States mail at least four (4) days
before the time of the holding of the meeting. If the notice is delivered
personally or by telephone or by telegram, it shall be delivered personally or
by telephone or to the telegraph company at least forty-eight (48) hours before
the time of the holding of the meeting. Any oral notice given personally or by
telephone may be communicated either to the director or to a person at the
office of the director who the person giving the notice has reason to believe
will promptly communicate it to the director. The notice need not specify the
purpose or the place of the meeting, if the meeting is to be held at the
principal executive office of the corporation.
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<PAGE> 14
3.8 QUORUM
At all meetings of the board of directors, a majority of the authorized
number of directors shall constitute a quorum for the transaction of business
and the act of a majority of the directors present at any meeting at which
there is a quorum shall be the act of the board of directors, except as may be
otherwise specifically provided by statute or by the certificate of
incorporation. If a quorum is not present at any meeting of the board of
directors, then the directors present thereat may adjourn the meeting from time
to time, without notice other than announcement at the meeting, until a quorum
is present.
A meeting at which a quorum is initially present may continue to transact
business notwithstanding the withdrawal of directors, if any action taken is
approved by at least a majority of the required quorum for that meeting.
3.9 WAIVER OF NOTICE
Whenever notice is required to be given under any provision of the General
Corporation Law of Delaware or of the certificate of incorporation or these
bylaws, a written waiver thereof, signed by the person entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent to
notice. Attendance of a person at a meeting shall constitute a waiver of notice
of such meeting, except when the person attends a meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of
any business because the meeting is not lawfully called or convened. Neither
the business to be transacted at, nor the purpose of, any regular or special
meeting of the directors, or members of the committee of directors, need be
specified in any written waiver of notice unless so required by the certificate
of incorporation or these bylaws.
3.10 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Unless otherwise restricted by the certificate of incorporation or these
bylaws, any action required or permitted to be taken at any meeting of the
board of directors, or of any committee thereof, may be taken without a meeting
if all members of the board or committee, as the case may be, consent thereto
in writing and the writing or writings are filed with the minutes of
proceedings of the board or committee.
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<PAGE> 15
3.11 FEES AND COMPENSATION OF DIRECTORS
Unless otherwise restricted by the certificate of incorporation or these
bylaws, the board of directors shall have the authority to fix the compensation
of directors.
3.12 APPROVAL OF LOANS TO OFFICERS
The corporation may lend money to, or guarantee any obligation of, or
otherwise assist any officer or other employee of the corporation or of its
subsidiary, including any officer or employee who is a director of the
corporation or its subsidiary, whenever, in the judgment of the directors, such
loan, guaranty or assistance may reasonably be expected to benefit the
corporation. The loan, guaranty or other assistance may be with or without
interest and may be unsecured, or secured in such manner as the board of
directors shall approve, including, without limitation, a pledge of shares of
stock of the corporation. Nothing in this section contained shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the corporation
at common law or under any statute.
3.13 REMOVAL OF DIRECTORS
Unless otherwise restricted by statute, by the certificate of
incorporation or by these bylaws, any director or the entire board of directors
may be removed, with or without cause, by the holders of a majority of the
shares then entitled to vote at an election of directors; provided, however,
that, so long as shareholders of the corporation are entitled to cumulative
voting, if less than the entire board is to be removed, no director may be
removed without cause if the votes cast against his removal would be sufficient
to elect him if then cumulatively voted at an election of the entire board of
directors.
No reduction of the authorized number of directors shall have the effect
of removing any director prior to the expiration of such director's term of
office.
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<PAGE> 16
ARTICLE IV
COMMITTEES
4.1 COMMITTEES OF DIRECTORS
The board of directors may, by resolution passed by a majority of the
whole board, designate one or more committees, with each committee to consist of
one or more of the directors of the corporation. The board may designate one or
more directors as alternate members of any committee, who may replace any
absent or disqualified member at any meeting of the committee. In the absence
or disqualification of a member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another member of the board
of directors to act at the meeting in the place of any such absent or
disqualified member. Any such committee, to the extent provided in the
resolution of the board of directors or in the bylaws of the corporation, shall
have and may exercise all the powers and authority of the board of directors in
the management of the business and affairs of the corporation, and may
authorize the seal of the corporation to be affixed to all papers that may
require it; but no such committee shall have the power or authority to (i)
amend the certificate of incorporation (except that a committee may, to the
extent authorized in the resolution or resolutions providing for the issuance
of shares of stock adopted by the board of directors as provided in Section
151(a) of the General Corporation Law of Delaware, fix the designations and any
of the preferences or rights of such shares relating to dividends, redemption,
dissolution, any distribution of assets of the corporation or the conversion
into, or the exchange of such shares for, shares of any other class or classes
or any other series of the same or any other class or classes of stock of the
corporation or fix the number of shares of any series of stock or authorize the
increase or decrease of the shares of any series), (ii) adopt an agreement of
merger or consolidation under Sections 251 or 252 of the General Corporation
Law of Delaware, (iii) recommend to the stockholders the sale, lease or
exchange of all or substantially all of the corporation's property and assets,
(iv) recommend to the stockholders a dissolution of the corporation or a
revocation of a dissolution, or (v) amend the bylaws of the corporation; and,
unless the board resolution establishing the committee, the bylaws or the
certificate of incorporation expressly so provide, no such committee shall have
the power or authority to declare a dividend, to authorize the issuance of
stock, or to adopt a certificate of ownership and merger pursuant to Section
253 of the General Corporation Law of Delaware.
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4.2 COMMITTEE MINUTES
Each committee shall keep regular minutes of its meetings and report the
same to the board of directors when required.
4.3 MEETINGS AND ACTION OF COMMITTEES
Meetings and actions of committees shall be governed by, and held and
taken in accordance with, the provisions of Article III of these bylaws,
Section 3.5 (place of meetings and meetings by telephone), Section 3.6 (regular
meetings), Section 3.7 (special meetings and notice), Section 3.8 (quorum),
Section 3.9 (waiver of notice), and Section 3.10 (action without a meeting),
with such changes in the context of those bylaws as are necessary to substitute
the committee and its members for the board of directors and its members;
provided, however, that the time of regular meetings of committees may be
determined either by resolution of the board of directors or by resolution of
the committee, that special meetings of committees may also be called by
resolution of the board of directors and that notice of special meetings of
committees shall also be given to all alternate members, who shall have the
right to attend all meetings of the committee. The board of directors may adopt
rules for the government of any committee not inconsistent with the provisions
of these bylaws.
ARTICLE V
OFFICERS
5.1 OFFICERS
The officers of the corporation shall be a president, a secretary, and a
chief financial officer. The corporation may also have, at the discretion of
the board of directors, a chairman of the board, one or more vice presidents,
one or more assistant vice presidents, one or more assistant secretaries, one
or more assistant treasurers, and any such other officers as may be appointed
in accordance with the provisions of Section 5.3 of these bylaws. Any number of
offices may be held by the same person.
5.2 APPOINTMENT OF OFFICERS
The officers of the corporation, except such officers as may be appointed
in accordance with the provisions of Sections 5.3 or 5.5 of these bylaws, shall
be appointed by the board of directors,
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subject to the rights, if any, of an officer under any contract of employment.
5.3 SUBORDINATE OFFICERS
The board of directors may appoint, or empower the president to appoint,
such other officers and agents as the business of the corporation may require,
each of whom shall hold officer for such period, have such authority, and
perform such duties as are provided in these bylaws or as the board of
directors may from time to time determine.
5.4 REMOVAL AND RESIGNATION OF OFFICERS
Subject to the rights, if any, of an officer under any contract of
employment, any officer may be removed, either with or without cause, by an
affirmative vote of the majority of the board of directors at any regular or
special meeting of the board or, except in the case of any officer chosen by
the board of directors, by any officer upon whom such power of removal may be
conferred by the board of directors.
Any officer may resign at any time by giving written notice to the
corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice; and, unless
otherwise specified in that notice, the acceptance of the resignation shall not
be necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the corporation under any contract to which the officer is a
party.
5.5 VACANCIES IN OFFICES
Any vacancy occurring in any office of the corporation shall be filled
by the board of directors.
5.6 CHAIRMAN OF THE BOARD
The chairman of the board, if such an officer be elected, shall, if
present, preside at meetings of the board of directors and exercise and perform
such other powers and duties as may from time to time be assigned to him by the
board of directors or as may be prescribed by these bylaws. If there is no
president, then the chairman of the board shall also be the chief executive
officer of the corporation and shall have the powers and duties prescribed in
Section 5.7 of these bylaws.
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5.7 PRESIDENT
Subject to such supervisory powers, if any, as may be given by the board
of directors to the chairman of the board, if there be such an officer, the
president shall be the chief executive officer of the corporation and shall,
subject to the control of the board of directors, have general supervision,
direction, and control of the business and the officers of the corporation. He
shall preside at all meetings of the stockholders and, in the absence of
nonexistence of a chairman of the board, at all meetings of the board of
directors. He shall have the general powers and duties of management usually
vested in the office of president of a corporation and shall have such other
powers and duties as may be prescribed by the board of directors or these
bylaws.
5.8 VICE PRESIDENTS
In the absence or disability of the president, the vice presidents, if
any, in order of their rank as fixed by the board of directors or, if not
ranked, a vice president designated by the board of directors, shall perform
all the duties of the president and when so acting shall have all the powers
of, and be subject to all the restrictions upon, the president. The vice
presidents shall have such other powers and perform such other duties as from
time to time may be prescribed for them respectively by the board of directors,
these bylaws, the president or the chairman of the board.
5.9 SECRETARY
The secretary shall keep or cause to be kept, at the principal executive
office of the corporation or such other place as the board of directors may
direct, a book of minutes of all meetings and actions of directors, committees
of directors, and stockholders. The minutes shall show the time and place of
each meeting, whether regular or special (and, if special, how authorized and
the notice given), the names of those present at directors' meetings or
committee meetings, the number of shares present or represented at
stockholders' meetings, and the proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal executive
office of the corporation or at the office of the corporation's transfer agent
or registrar, as determined by resolution of the board of directors, a share
register, or a duplicate share register, showing the names of all stockholders
and their addresses, the number and classes of shares held by each, the number
and date of certificates evidencing such shares, and the
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number and date of cancellation of every certificate surrendered for
cancellation.
The secretary shall give, or cause to be given, notice of all meetings of
the stockholders and of the board of directors required to be given by law or
by these bylaws. He shall keep the seal of the corporation, if one be adopted,
in safe custody and shall have such other powers and perform such other duties
as may be prescribed by the board of directors or by these bylaws.
5.10 CHIEF FINANCIAL OFFICER
The chief financial officer shall keep and maintain, or cause to be kept
and maintained, adequate and correct books and records of accounts of the
properties and business transactions of the corporation, including accounts of
its assets, liabilities, receipts, disbursements, gains, losses, capital
retained earnings, and shares. The books of account shall at all reasonable
times be open to inspection by any director.
The chief financial officer shall deposit all moneys and other valuables
in the name and to the credit of the corporation with such depositories as may
be designated by the board of directors. He shall disburse the funds of the
corporation as may be ordered by the board of directors, shall render to the
president and directors, whenever they request it, an account of all his
transactions as chief financial officer and of the financial condition of the
corporation, and shall have other powers and perform such other duties as may
be prescribed by the board of directors or these bylaws.
The chief financial officer shall be the treasurer of the corporation.
5.11 ASSISTANT SECRETARY
The assistant secretary, or, if there is more than one, the assistant
secretaries in the order determined by the stockholders or board of directors
(or if there be no such determination, then in the order of their election)
shall, in the absence of the secretary or in the event of his or her inability
or refusal to act, perform the duties and exercise the powers of the secretary
and shall perform such other duties and have such other powers as may be
prescribed by the board of directors or these bylaws.
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5.12 ASSISTANT TREASURER
The assistant treasurer, or, if there is more than one, the
assistant treasurers, in the order determined by the stockholders or board of
directors (or if there be no such determination, then in the order of their
election), shall, in the absence of the chief financial officer or in the event
of his or her inability or refusal to act, perform the duties and exercise the
powers of the chief financial officer and shall perform such other duties and
have such other powers as may be prescribed by the board of directors or these
bylaws.
5.13 REPRESENTATION OF SHARES OF OTHER CORPORATIONS
The chairman of the board, the president, any vice president, the chief
financial officer, the secretary or assistant secretary of this corporation, or
any other person authorized by the board of directors or the president or a
vice president, is authorized to vote, represent, and exercise on behalf of
this corporation all rights incident to any and all shares of any other
corporation or corporations standing in the name of this corporation. The
authority granted herein may be exercised either by such person directly or by
any other person authorized to do so by proxy or power of attorney duly
executed by such person having the authority.
5.14 AUTHORITY AND DUTIES OF OFFICERS
In addition to the foregoing authority and duties, all officers of the
corporation shall respectively have such authority and perform such duties in
the management of the business of the corporation as may be designated from
time to time by the board of directors or the stockholders.
ARTICLE VI
INDEMNITY
6.1 THIRD PARTY ACTIONS
The corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending, or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that he 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
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director, officer, employee or agent of another corporation, partnership, joint
venture trust or other enterprise, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement (if such settlement is approved
in advance by the corporation, which approval shall not be unreasonably
withheld) actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonable believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interest of the
corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
6.2 ACTIONS BY OR IN THE RIGHT OF THE CORPORATION
The corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that he is or was a director, officer, employee or agent of
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses (including attorneys' fees)
and amounts paid in settlement (if such settlement is approved in advance by the
corporation, which approval shall not be unreasonably withheld) actually and
reasonably incurred by him in connection with the defense or settlement of such
action or suit if he acted in good faith and in manner he reasonably believed to
be in or not opposed to the best interests of the corporation, except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the Delaware Court of Chancery or the court
in which such action or suit was brought shall determine upon application that,
despite the adjudication of liability but in view of all the circumstances of
the case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Delaware Court of Chancery or such other court shall deem
proper. Notwithstanding any other provision of this Article VI, no person shall
be indemnified hereunder for any expenses or amounts paid in settlement with
respect to any action to recover short-
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swing profits under Section 16(b) of the Securities Exchange Act of 1934, as
amended.
6.3 SUCCESSFUL DEFENSE
To the extent that a director, officer, employee or agent of the
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in Sections 6.1 and 6.2, or in defense
of any claim, issue or matter therein, he shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith.
6.4 DETERMINATION OF CONDUCT
Any indemnification under Sections 6.1 and 6.2 (unless ordered by a
court) shall be made by the corporation only as authorized in the specific case
upon determination that the indemnification of the director, officer, employee
or agent is proper in the circumstances because he has met the applicable
standard of conduct set forth in Sections 6.1 and 6.2. Such determination shall
be made (1) by the Board of Directors or the Executive Committee by a majority
vote of a quorum consisting of directors who were not parties to such action,
suit or proceeding or (2) or if such quorum is not obtainable or, even if
obtainable, a quorum of disinterested directors so directs, by independent
legal counsel in a written opinion, or (3) by the stockholders. Notwithstanding
the foregoing, a director, officer, employee or agent of the Corporation shall
be entitled to contest any determination that the director, officer, employee
or agent has not met the applicable standard of conduct set forth in Sections
6.1 and 6.2 by petitioning a court of competent jurisdiction.
6.5 PAYMENT OF EXPENSES IN ADVANCE
Expenses incurred in defending a civil or criminal action, suit or
proceeding, by an individual who may be entitled to indemnification pursuant to
Section 6.1 or 6.2, shall be paid by the corporation in advance of the final
disposition of such action, suit or proceeding upon receipt of an undertaking
by or on behalf of the director, officer, employee or agent to repay such
amount if it shall ultimately be determined that he is not entitled to be
indemnified by the corporation as authorized in this Article VI.
6.6 INDEMNITY NOT EXCLUSIVE
The indemnification and advancement of expenses provided by or granted
pursuant to the other sections of this Article VI shall not
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be deemed exclusive of any other rights to which those seeking indemnification
or advancement of expenses may be entitled under any by-law, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office.
6.7 INSURANCE INDEMNIFICATION
The corporation shall have the power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, against any liability asserted against him and
incurred by him in any such capacity or arising out of his status as such,
whether or not the corporation would have the power to indemnify him against
such liability under the provisions of this Article VI.
6.8 THE CORPORATION
For purposes of this Article VI, references to "the corporation" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, and employees or agents, so
that any person who is or was a director, officer, employee or agent of such
constituent corporation, or is or was serving at the request of such
constituent corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, shall stand
in the same position under and subject to the provisions of this Article VI
(including, without limitation the provisions of Section 6.4) with respect to
the resulting or surviving corporation as he would have with respect to such
constituent corporation if its separate existence had continued.
6.9 EMPLOYEE BENEFIT PLANS
For purposes of this Article VI, references to "other enterprises" shall
include employee benefit plans; references to "fines" shall include any excise
taxes assessed on a person with respect to an employee benefit plan; and
references to "serving at the request of the corporation" shall include any
service as a director, officer, employee or agent of the corporation which
imposes duties on, or involves services by, such director, officer, employee,
or agent with respect to an employee benefit plan, its participants, or
beneficiaries; and a person who acted in good faith and in a
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manner he reasonably believed to be in the interest of the participants and
beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interests of the corporation" as referred to
in this Article VI.
6.10 CONTINUATION OF INDEMNIFICATION AND ADVANCEMENT OF EXPENSES
The indemnification and advancement of expenses provided by, or granted
pursuant to, this Article VI shall, unless otherwise provided when authorized or
ratified, continue as to a person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of the heirs, executors and
administrators of such a person.
ARTICLE VII
RECORDS AND REPORTS
7.1 MAINTENANCE AND INSPECTION OF RECORDS
The corporation shall, either at its principal executive officer or at
such place or places as designated by the board of directors, keep a record of
its stockholders listing their names and addresses and the number and class of
shares held by each stockholder, a copy of these bylaws as amended to date,
accounting books, and other records.
Any stockholder of record, in person or by attorney or other agent, shall,
upon written demand under oath stating the purpose thereof, have the right
during the usual hours for business to inspect for any proper purpose the
corporation's stock ledger, a list of its stockholders, and its other books and
records and to make copies or extracts therefrom. A proper purpose shall mean a
purpose reasonably related to such person's interest as a stockholder. In every
instance where an attorney or other agency is the person who seeks the right to
inspection, the demand under oath shall be accompanied by a power of attorney
or such other writing that authorizes the attorney or other agent so to act on
behalf of the stockholder. The demand under oath shall be directed to the
corporation at its registered office in Delaware or at its principal place of
business.
The officer who has charge of the stock ledger of the corporation shall
prepare and make, at least ten (10) days before every meeting of stockholders,
a complete list of the stockholders
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entitled to vote at the meeting, arranged in alphabetical order, showing the
address of each stockholder and the number of shares registered in the name of
each stockholder. Such list shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during ordinary business
hours, for a period of at least ten (10) days prior to the meeting, either at a
place within the city where the meeting is to be held, which place shall be
specified in the notice of the meeting, or, if not so specified, at the place
where the meeting is to be held. The list shall also be produced and kept at
the time and place of the meeting during the whole time thereof, and may be
inspected by any stockholder who is present.
7.2 INSPECTION BY DIRECTORS
Any director shall have the right to examine the corporation's stock
ledger, a list of its stockholders, and its other books and records for a
purpose reasonably related to his position as a director. The Court of Chancery
is hereby vested with the exclusive jurisdiction to determine whether a
director is entitled to the inspection sought. The Court may summarily order
the corporation to permit the director to inspect any and all books and
records, the stock ledger, and the stock list and to make copies or extracts
therefrom. The Court may, in its discretion, prescribe any limitations or
conditions with reference to the inspection, or award such other and further
relief as the Court may deem just and proper.
7.3 ANNUAL STATEMENT TO STOCKHOLDERS
The board of directors shall present at each annual meeting, and at any
special meeting of the stockholders when called for by vote of the
stockholders, a full and clear statement of the business and condition of the
corporation.
ARTICLE VIII
GENERAL MATTERS
8.1 CHECKS
From time to time, the board of directors shall determine by resolution
which person or persons may sign or endorse all checks, drafts, other orders
for payment of money, notes or other evidences of indebtedness that are issued
in the name of or payable to the
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corporation, and only the persons so authorized shall sign or endorse those
instruments.
8.2 EXECUTION OR CORPORATE CONTRACTS AND INSTRUMENTS
The board of directors, except as otherwise provided in these bylaws,
may authorize any officer of officers, or agent or agents, to enter into any
contract or execute any instrument in the name of and on behalf of the
corporation; such authority may be general or confined to specific instances.
Unless so authorized or ratified by the board of directors or within the agency
power of an officer, no officer, agent or employee shall have any power or
authority to bind the corporation by any contract or engagement or to pledge
its credit or to render it liable for any purpose or for any amount.
8.3 STOCK CERTIFICATES; PARTLY PAID SHARES
The shares of 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 chief financial officer or an assistant treasurer, or the secretary
or an assistant secretary of such corporation representing the number of shares
registered in certificate form. Any or all of the signatures on the certificate
may be a facsimile. In case any officer, transfer agent or registrar who has
signed or whose facsimile signature has been placed upon a certificate has
ceased to be such officer, transfer agent or registrar before such certificate
is issued, it may be issued by the corporation with the same effect as if he
were such officer, transfer agent or registrar at the date of issue.
The corporation may issue the whole or any part of its shares as partly
paid and subject to call for the remainder of the consideration to be paid
therefor. Upon the face or back of each stock certificate issued to represent
any such partly paid shares, upon the books and records of the corporation in
the case of uncertificated partly paid shares, the total amount of the
consideration to be paid therefor and the amount paid thereon shall be stated.
Upon the declaration of any dividend on fully paid shares, the corporation
shall declare a dividend upon partly paid shares of the same
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class, but only upon the basis of the percentage of the consideration actually
paid thereon.
8.4 SPECIAL DESIGNATION ON CERTIFICATES
If the corporation is authorized to issue more than one class of stock or
more than one series of any class, then the powers, the designations, the
preferences, and the relative, participating, optional or other special rights
of each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate that the corporation shall
issue to represent such class or series of stock; provided, however, that,
except as otherwise provided in Section 202 of the General Corporation Law of
Delaware, in lieu of the foregoing requirements there may be set forth on the
face or back of the certificate that the corporation shall issue to represent
such class or series of stock a statement that the corporation will furnish
without charge to each stockholder who so requests the powers, the
designations, the preferences, and the relative, participating, optional or
other special rights of each class of stock or series thereof and the
qualifications, limitations or restrictions of such preferences and/or rights.
8.5 LOST CERTIFICATES
Except as provided in this Section 8.5, no new certificates for shares
shall be issued to replace a previously issued certificate unless the latter is
surrendered to the corporation and cancelled at the same time. The corporation
may issue a new certificate of stock or uncertificated shares in the place of
any certificate theretofore issued by it, alleged to have been lost, stolen or
destroyed, and the corporation may require the owner of the lost, stolen or
destroyed certificate, or his legal representative, to give the corporation a
bond sufficient to indemnify it against any claim that may be made against it
on account of the alleged loss, theft or destruction of any such certificate or
the issuance of such new certificate or uncertificated shares.
8.6 CONSTRUCTION, DEFINITIONS
Unless the context requires otherwise, the general provisions, rules of
construction, and definitions in the Delaware General Corporation Law shall
govern the construction of these bylaws. Without limiting the generality of this
provision, the singular number includes the plural, the plural number includes
the singular, and the term "person" includes both a corporation and a natural
person.
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8.7 DIVIDENDS
The directors of the corporation, subject to any restrictions contained in
(i) the General Corporation Law of Delaware or (ii) the certificate of
incorporation, may declare and pay dividends upon the shares of its capital
stock. Dividends may be paid in cash, in property, or in shares of the
corporation's capital stock.
The directors of the corporation may set apart out of any of the funds of
the corporation available for dividends a reserve or reserves for any proper
purpose and may abolish any such reserve. Such purposes shall include but not
be limited to equalizing dividends, repairing or maintaining any property of
the corporation, and meeting contingencies.
8.8 FISCAL YEAR
The fiscal year of the corporation shall be fixed by resolution of the
board of directors and may be changed by the board of directors.
8.9 SEAL
The corporation may adopt a corporate seal, which shall be adopted and
which may be altered by the board of directors, and may use the same by causing
it or a facsimile thereof to be impressed or affixed or in any other manner
reproduced.
8.10 TRANSFER OF STOCK
Upon surrender to the corporation or the transfer agent of the corporation
of a certificate for shares duly endorsed or accompanied by proper evidence of
succession, assignation or authority to transfer, it shall be the duty of the
corporation to issue a new certificate to the person entitled thereto, cancel
the old certificate, and record the transaction in its books.
8.11 STOCK TRANSFER AGREEMENTS
The corporation shall have power to enter into and perform any agreement
with any number of stockholders of any one or more classes of stock of the
corporation to restrict the transfer of shares of stock of the corporation of
any one or more classes owned by such stockholders in any manner not prohibited
by the General Corporation Law of Delaware.
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8.12 REGISTERED STOCKHOLDERS
The corporation shall be entitled to recognize the exclusive right of a
person registered on its books as the owner of shares to receive dividends and
to vote as such owner, shall be entitled to hold liable for calls and
assessments the person registered on its books as the owner of shares, and
shall not be bound to recognize any equitable or other claim to or interest in
such share or shares on the part of another person, whether or not it shall
have express or other notice thereof, except as otherwise provided by the laws
of Delaware.
ARTICLE IX
AMENDMENTS
The bylaws of the corporation may be adopted, amended or repealed by the
stockholders entitled to vote; provided, however, that the corporation may, in
its certificate of incorporation, confer the power to adopt, amend or repeal
bylaws upon the directors. The fact that such power has been so conferred upon
the directors shall not divest the stockholders of the power, nor limit their
power to adopt, amend or repeal bylaws.
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CERTIFICATE OF ADOPTION OF BYLAWS
OF
VIROLOGIC, INC.
Adoption by Incorporator
The undersigned person appointed in the Certificate of Incorporation to
act as the Incorporator of ViroLogic, Inc. hereby adopts the foregoing Bylaws,
comprising twenty-seven (27) pages, as the Bylaws of the corporation.
Executed this 14th day of November, 1995.
/s/ DANIEL CAPON
------------------------------
Daniel Capon, Incorporator
Certificate by Secretary of Adoption by Incorporator
The undersigned hereby certifies that he is the duly elected, qualified,
and acting Secretary of ViroLogic, Inc. and that the foregoing Bylaws,
comprising twenty-seven (27) pages, were adopted as the Bylaws of the
corporation on November 14, 1995, by the person appointed in the Certificate of
Incorporation to act as the Incorporator of the corporation.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and affixed
the corporate seal this 14th day of November, 1995.
/s/ MARIO ROSATI,
------------------------------
Mario Rosati, Secretary
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EXHIBIT 3.3
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
VIROLOGIC, INC.
ViroLogic, Inc., a corporation organized and existing under the General
Corporation Law of the State of Delaware (the "CORPORATION"), does hereby
certify:
FIRST: The name of this corporation is ViroLogic, Inc. The original
Certificate of Incorporation of the Corporation was filed with the Secretary of
State of Delaware on November 14, 1995.
SECOND: The Amended and Restated Certificate of Incorporation of the
Corporation in the form attached hereto as Exhibit A has been duly adopted in
accordance with the provisions of Sections 245 and 242 of the General
Corporation Law of the State of Delaware by the directors and stockholders of
the Corporation.
THIRD: The text of the Certificate of Incorporation as heretofore
amended or supplemented is hereby amended and restated by the Amended and
Restated Certificate of Incorporation as set forth in Exhibit A attached hereto.
The Amended and Restated Certificate of Incorporation is hereby incorporated
herein by this reference.
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
signed by the President this ______ day of February, 2000.
VIROLOGIC, INC.
By:
-------------------------------------
Martin H. Goldstein, President
<PAGE> 2
EXHIBIT A
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
VIROLOGIC, INC.
FIRST: The name of the corporation (hereinafter called the
"CORPORATION") is Virologic, Inc.
SECOND: The address of the registered office of the Corporation in the
State of Delaware is 1209 Orange Street, City of Wilmington, County of New
Castle, and the name of the registered agent of the Corporation in the State of
Delaware at such address is The Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware (the "DGCL").
FOURTH:
A. This Corporation is authorized to issue two classes of shares to be
designated respectively Preferred Stock ("PREFERRED STOCK") and Common Stock
("COMMON STOCK"). The total number of shares of capital stock that the
Corporation is authorized to issue is 59,094,095. The total number of shares of
Common Stock, par value $0.001, this Corporation shall have authority to issue
is 40,000,000. The total number of shares of Preferred Stock, par value $0.001,
this Corporation shall have authority to issue is 19,094,095, of which 4,500,000
is designated Series B Preferred Stock (the "SERIES B PREFERRED STOCK") and
14,594,595 is designated Series C Preferred Stock (the "SERIES C PREFERRED
STOCK"). Effective at the time of filing with the Secretary of State of the
State of Delaware of this Amended and Restated Certificate of Incorporation (the
"EFFECTIVE TIME"), each two shares of the Corporation's Common Stock, par value
$0.001 per share, issued and outstanding shall, automatically and without any
action on the part of the respective holders thereof, be split into one share of
Common Stock, par value $0.001 per share, of the Corporation.
B. The powers, preferences, rights, restrictions, and other matters
relating to the Series B Preferred Stock and Series C Preferred Stock are as
follows:
1. DIVIDENDS.
a. The holders of the Series B Preferred Stock and Series C
Preferred Stock shall be entitled to receive dividends, on a pari passu basis,
at the rate of $0.256 per share and $0.148 per share (as adjusted for any stock
dividends, combinations or splits with respect to such shares) per annum,
respectively, payable out of funds legally available therefor. Such dividends
shall be payable only when, as, and if declared by the Board of Directors and
shall be noncumulative.
1.
<PAGE> 3
No dividends (other than those payable solely in the Common Stock of the
Corporation) shall be paid on any Common Stock of the Corporation during any
fiscal year of the Corporation until dividends in the total amount of $0.256 per
share and $0.148 per share (as adjusted for any stock dividends, combinations or
splits with respect to such shares) on the Series B Preferred Stock and Series C
Preferred Stock, respectively, shall have been paid or declared and set apart
during that fiscal year and any prior year in which dividends were declared but
remain unpaid, and no dividends shall be paid on any share of Common Stock
unless a dividend (including the amount of any dividends paid pursuant to the
above provisions of this Section B.1) is paid with respect to all outstanding
shares of Series B Preferred Stock and Series C Preferred Stock in an amount for
each such share equal to or greater than the aggregate amount of such dividends
for all shares of Common Stock into which each such share of Series B Preferred
Stock or Series C Preferred Stock could then be converted.
Except as otherwise provided herein, no right shall accrue to holders of
shares of Series B Preferred Stock or Series C Preferred Stock by reason of the
fact that dividends on said shares are not declared in any prior year, nor shall
any undeclared or unpaid dividend bear or accrue any interest.
b. In the event the Corporation shall declare a distribution
(other than any distribution described in Section B.2) payable in securities of
other persons (including, but not limited to, a spin-off from the Corporation),
evidences of indebtedness issued by the Corporation or other persons, assets
(excluding cash dividends) or options or rights to purchase any such securities
or evidences of indebtedness, then, in each such case the holders of the Series
B Preferred Stock and Series C Preferred Stock shall be entitled to a
proportionate share of any such distribution as though the holders of the Series
B Preferred Stock and Series C Preferred Stock were the holders of the number of
shares of Common Stock of the Corporation into which their respective shares of
Series B Preferred Stock or Series C Preferred Stock, as applicable, are
convertible as of the record date fixed for the determination of the holders of
Common Stock of the Corporation entitled to receive such distribution.
2. LIQUIDATION PREFERENCE.
a. In the event of any liquidation, dissolution or winding up of
the Corporation, whether voluntary or involuntary, the holders of the Series B
Preferred Stock and Series C Preferred Stock shall be entitled to receive, prior
and in preference to any distribution of any of the assets or surplus funds of
the Corporation to the holders of the Common Stock by reason of their ownership
thereof, the amount of $3.20 per share and $1.85 per share, respectively (as
adjusted for any stock dividends, combinations or splits with respect to such
shares), plus all declared but unpaid dividends on such shares for each share of
Series B Preferred Stock and Series C Preferred Stock then held by them (the
"SERIES B PREFERENCE" and "SERIES C PREFERENCE," respectively). If upon the
occurrence of such event, the assets and funds thus distributed among the
holders of the Series B Preferred Stock and Series C Preferred Stock shall be
insufficient to permit the payment to such holders of the full Series B
Preference and Series C Preference then the entire assets and funds of the
Corporation legally available for distribution shall be distributed ratably
among the holders of the Series B Preferred Stock and Series C Preferred Stock
based on the aggregate amount of the full Series B Preference and full Series C
Preference payable to each such holder pursuant to this paragraph.
2.
<PAGE> 4
b. After payment to the holders of the Series B Preferred Stock
and Series C Stock of the amounts set forth in Section B.2(a) above, the entire
remaining assets and funds of the Corporation legally available for
distribution, if any, shall be distributed among the holders of the Common
Stock.
c. For purposes of this Section B.2, (i) any acquisition of the
Corporation by means of merger or other form of corporate reorganization in
which outstanding shares of the Corporation are exchanged for securities or
other consideration issued, or caused to be issued, by the acquiring corporation
or its subsidiary in which the stockholders of the Corporation immediately prior
to the transaction possess less than 50% of the voting power of the acquiring
entity (or its parent), (ii) a sale of all or substantially all of the assets of
the Corporation in which the stockholders of the Corporation immediately prior
to the transaction possess less than 50% of the voting power of the acquiring
entity (or its parent), or (iii) a transaction or series of related transactions
in which more than fifty percent (50%) of the voting power of the Company is
disposed, shall be treated as a liquidation, dissolution or winding up of the
Corporation. In the event the consideration payable to the Corporation or to the
holders of its outstanding stock in connection with any such sale, merger or
consolidation (the "TRANSACTION CONSIDERATION") does not consist entirely of
cash, then the Corporation may satisfy its obligations under this Section B.2 by
paying to the holders of Preferred Stock a portion of the Transaction
Consideration with a fair market value equal to the amount required to be
distributed pursuant to this Section B.2. The fair market value of the
Transaction Consideration shall be determined by mutual agreement of the
Corporation and the holders of a majority of the outstanding shares of Preferred
Stock. If the Transaction Consideration consists of more than one type of
consideration, then each type of consideration shall be distributed to each
holder of Preferred in the same proportions as such type of consideration
represents of the total Transaction Consideration.
3. VOTING RIGHTS; DIRECTORS.
a. Each holder of shares of the Preferred Stock shall be entitled
to the number of votes equal to the number of shares of Common Stock into which
such shares of Preferred Stock could be converted and shall have voting rights
and powers equal to the voting rights and powers of the Common Stock (except as
otherwise expressly provided herein or as required by law, voting together with
the Common Stock as a single class) and shall be entitled to notice of any
stockholders' meeting in accordance with the Bylaws of the Corporation.
Fractional votes shall not, however, be permitted and any fractional voting
rights resulting from the above formula (after aggregating all shares into which
shares of Preferred Stock held by each holder could be converted) shall be
rounded to the nearest whole number (with one-half being rounded upward). Each
holder of Common Stock shall be entitled to one (1) vote for each share of
Common Stock held.
b. So long as 2,000,000 shares of Series B Preferred Stock remain
outstanding, the holders of Series B Preferred Stock, voting together as a
separate class, shall be entitled to elect two (2) members of the Board of
Directors. The holders of the Common Stock, voting together as a separate class,
shall be entitled to elect three (3) members of the Board of Directors. All
remaining members, if any, shall be elected by the holders of Common Stock and
Preferred Stock voting together as a single class.
3.
<PAGE> 5
c. In the case of any vacancy in the office of a director
occurring among the directors elected solely by the holders of the Series B
Preferred Stock or Common Stock pursuant to the first and second sentences of
Section B.3(b) hereof, the remaining director or directors so elected by the
holders of the Series B Preferred Stock or Common Stock may (or if there are no
remaining directors, by the affirmative vote of the holders of a majority of the
shares of that class) elect a successor or successors to hold the office for the
unexpired term of the director whose place shall be vacant. Any director who
shall have been elected solely by the holders of the Series B Preferred Stock or
Common Stock or any director so elected as provided in the preceding sentence
hereof, may be removed during the aforesaid term of office, whether with or
without cause, only by the affirmative vote of the holders of a majority of the
Series B Preferred Stock or Common Stock, as the case may be.
4. CONVERSION. The holders of the Preferred Stock shall have conversion
rights as follows (the "CONVERSION RIGHTS"):
a. RIGHT TO CONVERT. Each share of Series B Preferred Stock and
Series C Preferred Stock shall be convertible, at the option of the holder
thereof, at any time after the date of issuance of such share, at the office of
the Corporation or any transfer agent for such stock, into such number of fully
paid and nonassessable shares of Common Stock as is determined by dividing
$3.20, in the case of the Series B Preferred Stock, or $1.85, in the case of the
Series C Preferred Stock, by the Conversion Price applicable to such share,
determined as hereinafter provided, in effect on the date the certificate is
surrendered for conversion. The price at which shares of Common Stock shall be
deliverable upon conversion of shares of the Series B Preferred Stock (the
"SERIES B CONVERSION PRICE") shall initially be $3.20 per share of Common Stock.
The price at which shares of Common Stock shall be deliverable upon conversion
of shares of the Series C Preferred Stock (the "SERIES C CONVERSION PRICE")
shall initially be $1.85 per share of Common Stock. Such initial Series B
Conversion Price and Series C Conversion Price shall be subject to adjustment as
hereinafter provided.
b. AUTOMATIC CONVERSION. Each share of Preferred Stock shall
automatically be converted into shares of Common Stock at the then-effective
Conversion Price applicable to such share upon the earlier of (i) the date
specified by vote or written consent or agreement of holders of a majority of
the shares of Preferred Stock then outstanding or (ii) immediately upon the
closing of the sale of the Corporation's Common Stock in a firm commitment,
underwritten public offering registered under the Securities Act of 1933, as
amended (the "SECURITIES ACT"), other than a registration relating solely to a
transaction under Rule 145 under such Act (or any successor thereto) or to an
employee benefit plan of the Corporation, at a public offering price (prior to
underwriters' discounts and expenses) equal to or exceeding $7.00 per share of
Common Stock (as adjusted for any stock dividends, combinations or splits with
respect to such shares) and the aggregate gross proceeds to the Corporation
and/or any selling stockholders (before deduction for underwriters' discounts
and expenses relating to the issuance) of which exceed $15,000,000.
C. MECHANICS OF CONVERSION.
(i) Before any holder of Preferred Stock shall be entitled
voluntarily to convert the same into shares of Common Stock, he shall surrender
the certificate or certificates
4.
<PAGE> 6
therefor, duly endorsed, at the office of the Corporation or of any transfer
agent for such stock, and shall give written notice to the Corporation at such
office that he elects to convert the same and shall state therein the number of
shares to be converted and the name or names in which he wishes the certificate
or certificates for shares of Common Stock to be issued. The Corporation shall,
as soon as practicable thereafter, issue and deliver at such office to such
holder of Preferred Stock, a certificate or certificates for the number of
shares of Common Stock to which he shall be entitled. Such conversion shall be
deemed to have been made immediately prior to the close of business on the date
of surrender of the shares of Preferred Stock to be converted, and the person or
persons entitled to receive the shares of Common Stock issuable upon such
conversion shall be treated for all purposes as the record holder or holders of
such shares of Common Stock on such date.
(ii) If the conversion is in connection with an
underwritten offering of securities pursuant to the Securities Act, the
conversion may, at the option of any holder tendering shares of Preferred Stock
for conversion, be conditioned upon the closing with the underwriters of the
sale of securities pursuant to such offering, in which event the person(s)
entitled to receive the Common Stock upon conversion of the Preferred Stock
shall not be deemed to have converted such Preferred Stock until immediately
prior to the closing of such sale of securities.
d. ADJUSTMENTS TO CONVERSION PRICE FOR CERTAIN DILUTING ISSUES.
(i) SPECIAL DEFINITIONS. For purposes of this Section
B.4(d), the following definitions apply:
(1) "OPTIONS" shall mean rights, options, or
warrants to subscribe for, purchase or otherwise acquire either Common Stock or
Convertible Securities (defined below).
(2) "ORIGINAL ISSUE DATE" for a series of Preferred
Stock shall mean the date on which the first share of such series of Preferred
Stock was first issued.
(3) "CONVERTIBLE SECURITIES" shall mean any
evidences of indebtedness, shares (other than Common Stock) or other securities
convertible into or exchangeable for Common Stock.
(4) "ADDITIONAL SHARES OF COMMON STOCK" shall mean
all shares of Common Stock issued (or, pursuant to Section B.4(d)(iii), deemed
to be issued) by the Corporation after the applicable Original Issue Date, other
than shares of Common Stock issued or issuable:
(A) upon conversion of shares of Preferred
Stock;
(B) to employees, officers, directors,
consultants, or advisors under stock option, stock bonus or stock purchase plans
or agreements or similar plans or agreements approved by the Board of Directors
or an authorized committee thereof;
5.
<PAGE> 7
(C) pursuant to agreements to license
technology or to lending or leasing institutions upon approval by the Board of
Directors;
(D) as a dividend or distribution on
Preferred Stock; or
(E) for which adjustment of the Conversion
Price is made pursuant to Section B.4(e); or
(F) upon exercise of warrants that were
issued pursuant to approval of the Board of Directors prior to the such Original
Issue Date.
(ii) NO ADJUSTMENT OF CONVERSION PRICE. Any provision
herein to the contrary notwithstanding, no adjustment in the Conversion Price
for any series of Preferred Stock shall be made in respect of the issuance of
Additional Shares of Common Stock unless the consideration per share (determined
pursuant to Section B.4(d)(v) hereof) for an Additional Share of Common Stock
issued or deemed to be issued by the Corporation is less than the Conversion
Price for such series of Preferred Stock in effect on the date of, and
immediately prior to, such issue.
(iii) DEEMED ISSUE OF ADDITIONAL SHARES OF COMMON STOCK.
In the event the Corporation, at any time or from time to time after the
Original Issue Date for a series of Preferred Stock, shall issue any Options or
Convertible Securities or shall fix a record date for the determination of
holders of any class of securities then entitled to receive any such Options or
Convertible Securities, then the maximum number of shares (as set forth in the
instrument relating thereto without regard to any provisions contained therein
designed to protect against dilution) of Common Stock issuable upon the exercise
of such Options or, in the case of Convertible Securities and Options therefor,
the conversion or exchange of such Convertible Securities, shall be deemed to be
Additional Shares of Common Stock issued as of the time of such issue or, in
case such a record date shall have been fixed, as of the close of business on
such record date, provided that in any such case in which Additional Shares of
Common Stock are deemed to be issued:
(1) no further adjustments in the Conversion Price
for such series of Preferred Stock shall be made upon the subsequent issue of
Convertible Securities or shares of Common Stock upon the exercise of such
Options or conversion or exchange of such Convertible Securities;
(2) if such Options or Convertible Securities by
their terms provide, with the passage of time or otherwise, for any increase or
decrease in the consideration payable to the Corporation, or decrease or
increase in the number of shares of Common Stock issuable, upon the exercise,
conversion or exchange thereof, the Conversion Price for such series of
Preferred Stock computed upon the original issue thereof (or upon the occurrence
of a record date with respect thereto), and any subsequent adjustments based
thereon, shall, upon any such increase or decrease becoming effective, be
recomputed to reflect such increase or decrease insofar as it affects such
Options or the rights of conversion or exchange under such Convertible
Securities (provided, however, that no such adjustment of the Conversion Price
for such series of
6.
<PAGE> 8
Preferred Stock shall affect Common Stock previously issued upon conversion of
shares of such series of Preferred Stock);
(3) upon the expiration of any such Options or any
rights of conversion or exchange under such Convertible Securities which shall
not have been exercised, the Conversion Price for such series of Preferred Stock
computed upon the original issue thereof (or upon the occurrence of a record
date with respect thereto), and any subsequent adjustments based thereon, shall,
upon such expiration, be recomputed as if:
(A) in the case of Convertible Securities or
Options for Common Stock, the only Additional Shares of Common Stock issued were
the shares of Common Stock, if any, actually issued upon the exercise of such
Options or the conversion or exchange of such Convertible Securities and the
consideration received therefor was the consideration actually received by the
Corporation for the issue of all such Options, whether or not exercised, plus
the consideration actually received by the Corporation upon such exercise, or
for the issue of all such Convertible Securities, whether or not converted or
exchanged, plus the additional consideration, if any, actually received by the
Corporation upon such conversion or exchange and
(B) in the case of Options for Convertible
Securities only the Convertible Securities, if any, actually issued upon the
exercise thereof were issued at the time of issue of such Options, and the
consideration received by the Corporation for the Additional Shares of Common
Stock deemed to have been then issued was the consideration actually received by
the Corporation for the issue of all such Options, whether or not exercised,
plus the consideration deemed to have been received by the Corporation
(determined pursuant to Section B.4(d)) upon the issue of the Convertible
Securities with respect to which such Options were actually exercised;
(4) no readjustment pursuant to clause (2) or (3)
above shall have the effect of increasing the Conversion Price for such series
of Preferred Stock to an amount which exceeds the lower of (a) the Conversion
Price for such series of Preferred Stock on the original adjustment date or (b)
the Conversion Price for such series of Preferred Stock that would have resulted
from any issuance of Additional Shares of Common Stock between the original
adjustment date and such readjustment date.
(5) in the case of any Options which expire by
their terms not more than thirty (30) days after the date of issue thereof, no
adjustment of the Conversion Price for such series of Preferred Stock shall be
made until the earlier of the expiration or exercise of all such Options or
immediately prior to the automatic conversion of shares of such series of
Preferred Stock into Common Stock pursuant to Section B.4(a), whereupon such
adjustment shall be made in the same manner provided in clause (3) above.
(iv) ADJUSTMENT OF CONVERSION PRICE UPON ISSUANCE OF
ADDITIONAL SHARES OF COMMON STOCK. In the event this Corporation, at any time
after the Original Issue Date for any series of Preferred Stock, shall issue
Additional Shares of Common Stock (including Additional Shares of Common Stock
deemed to be issued pursuant to Section B.4(d)(iii)) without consideration or
for a consideration per share less than the
7.
<PAGE> 9
Conversion Price with respect to such series of Preferred Stock in effect on the
date of and immediately prior to such issue, then and in such event, the
Conversion Price for such series of Preferred Stock shall be reduced,
concurrently with such issue, to a price (calculated to the nearest cent)
determined by multiplying such Conversion Price by a fraction, the numerator of
which shall be the number of shares of Common Stock outstanding immediately
prior to such issue plus the number of shares of Common Stock which the
aggregate consideration received by the Corporation for the total number of
Additional Shares of Common Stock so issued would purchase at such Conversion
Price in effect immediately prior to such issuance, and the denominator of which
shall be the number of shares of Common Stock outstanding immediately prior to
such issue plus the number of such Additional Shares of Common Stock so issued.
For the purpose of the above calculation, the number of shares of Common Stock
outstanding immediately prior to such issue shall include the outstanding shares
of Common Stock, the shares of Common Stock issuable upon conversion of the
outstanding shares of Preferred Stock and all outstanding Convertible Securities
and Options.
(v) DETERMINATION OF CONSIDERATION. For purposes of this
Section B.4(d), the consideration received by the Corporation for the issue of
any Additional Shares of Common Stock shall be computed as follows:
(1) CASH AND PROPERTY. Such consideration shall:
(A) insofar as it consists of cash, be
computed at the aggregate amount of cash received by the Corporation excluding
amounts paid or payable for accrued interest or accrued dividends;
(B) insofar as it consists of property other
than cash, be computed at the fair value thereof at the time of such issue, as
mutually determined in good faith by the Board and the holders of a majority of
the Preferred Stock; and
(C) in the event Additional Shares of Common
Stock are issued together with other shares or securities or other assets of the
Corporation for consideration which covers both, be the proportion of such
consideration so received, computed as provided in clauses (A) and (B) above, as
mutually determined in good faith by the Board and the holders of a majority of
the Preferred Stock.
(2) OPTIONS AND CONVERTIBLE SECURITIES. The
consideration per share received by the Corporation for Additional Shares of
Common Stock deemed to have been issued pursuant to Section B.4(d)(iii),
relating to Options and Convertible Securities shall be determined by dividing:
(A) the total amount, if any, received or
receivable by the Corporation as consideration for the issue of such Options or
Convertible Securities, plus the minimum aggregate amount of additional
consideration (as set forth in the instruments relating thereto, without regard
to any provision contained therein designed to protect against dilution) payable
to the Corporation upon the exercise of such Options or the conversion or
exchange of such Convertible Securities, or in the case of Options for
Convertible Securities, the exercise of
8.
<PAGE> 10
such Options for Convertible Securities and the conversion or exchange of such
Convertible Securities by
(B) the maximum number of shares of Common
Stock (as set forth in the instruments relating thereto, without regard to any
provision contained therein designed to protect against the dilution) issuable
upon the exercise of such Options or conversion or exchange of such Convertible
Securities.
e. ADJUSTMENTS TO CONVERSION PRICES FOR STOCK DIVIDENDS AND FOR
COMBINATIONS OR SUBDIVISIONS OF COMMON STOCK. In the event that this Corporation
at any time or from time to time after the Original Issue Date for any series of
Preferred Stock shall declare or pay, without consideration, any dividend on the
Common Stock payable in Common Stock or in any right to acquire Common Stock for
no consideration, or shall effect a subdivision of the outstanding shares of
Common Stock into a greater number of shares of Common Stock (by stock split,
reclassification or otherwise than by payment of a dividend in Common Stock or
in any right to acquire Common Stock), or in the event the outstanding shares of
Common Stock shall be combined or consolidated, by reclassification or
otherwise, into a lesser number of shares of Common Stock, then the Conversion
Price for such series of Preferred Stock in effect immediately prior to such
event shall, concurrently with the effectiveness of such event, be
proportionately decreased or increased, as appropriate. In the event that this
Corporation shall declare or pay, without consideration, any dividend on the
Common Stock payable in any right to acquire Common Stock for no consideration,
then the Corporation shall be deemed to have made a dividend payable in Common
Stock in an amount of shares equal to the maximum number of shares issuable upon
exercise of such rights to acquire Common Stock.
f. ADJUSTMENTS FOR RECLASSIFICATION AND REORGANIZATION. If the
Common Stock issuable upon conversion of any series of Preferred Stock shall be
changed into the same or a different number of shares of any other class or
classes of stock, whether by capital reorganization, reclassification or
otherwise (other than a subdivision or combination of shares provided for in
Section B.4(e) above or a sale, merger or other reorganization referred to in
Section B.2(d) above), the applicable Conversion Price then in effect for such
series of Preferred Stock shall, concurrently with the effectiveness of such
reorganization or reclassification, be proportionately adjusted so that shares
of such series of Preferred Stock shall be convertible into, in lieu of the
number of shares of Common Stock which the holders would otherwise have been
entitled to receive, a number of shares of such other class or classes of stock
equivalent to the number of shares of Common Stock that would have been subject
to receipt by the holders upon conversion of shares of such series of Preferred
Stock immediately before that change.
g. NO IMPAIRMENT. The Corporation will not, by amendment of its
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Corporation, but will at
all times in good faith assist in the carrying out of all the provisions of this
Section B.4 and in the taking of all such action as may be necessary or
appropriate in order to protect the Conversion Rights of the holders of the
Preferred Stock against impairment.
9.
<PAGE> 11
h. CERTIFICATES AS TO ADJUSTMENTS. Upon the occurrence of each
adjustment or readjustment of any Conversion Price pursuant to this Section B.4,
the Corporation at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and prepare and furnish to each
holder of Preferred Stock a certificate executed by the Corporation's President
or Chief Financial Officer setting forth such adjustment or readjustment and
showing in detail the facts upon which such adjustment or readjustment is based.
The Corporation shall, upon the written request at any time of any holder of
shares of any series of Preferred Stock, furnish or cause to be furnished to
such holder a like certificate setting forth (i) such adjustments and
readjustments, (ii) the Conversion Price for such series of Preferred Stock at
the time in effect, and (iii) the number of shares of Common Stock and the
amount, if any, of other property which at the time would be received upon the
conversion shares of such series of Preferred Stock.
i. NOTICES OF RECORD DATE. In the event that the Corporation
shall propose at any time: (i) to declare any dividend or distribution upon its
Common Stock, whether in cash, property, stock or other securities, whether or
not a regular cash dividend and whether or not out of earnings or earned
surplus; (ii) to offer for subscription pro rata to the holders of any class or
series of its stock any additional shares of stock of any class or series or
other rights; (iii) to effect any reclassification or recapitalization of its
Common Stock outstanding involving a change in the Common Stock; or (iv) to
merge or consolidate with or into any other corporation, or sell, lease or
convey all or substantially all of its assets, or to liquidate, dissolve or wind
up; then, in connection with each such event, the Corporation shall send to the
holders of Preferred Stock:
(1) at least twenty (20) days' prior written notice
of the date on which a record shall be taken for such dividend, distribution or
subscription rights (and specifying the date on which the holders of Common
Stock shall be entitled thereto) or for determining rights to vote, if any, in
respect of the matters referred to in (iii) and (iv) above; and
(2) in the case of the matters referred to in (iii)
and (iv) above, at least twenty (20) days' prior written notice of the date when
the same shall take place (and specifying the date on which the holders of
Common Stock shall be entitled to exchange their Common Stock for securities or
other property deliverable upon the occurrence of such event).
j. ISSUE TAXES. The Corporation shall pay any and all issue and
other taxes that may be payable in respect of any issue or delivery of shares of
Common Stock on conversion of Preferred Stock pursuant hereto; provided,
however, that the Corporation shall not be obligated to pay any transfer taxes
resulting from any transfer requested by any holder in connection with any such
conversion.
k. RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The Corporation
shall at all times reserve and keep available out of its authorized but unissued
shares of Common Stock, solely for the purpose of effecting the conversion of
the shares of the Preferred Stock, such number of its shares of Common Stock as
shall from time to time be sufficient to effect the conversion of all
outstanding shares of the Preferred Stock; and if at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect
the conversion of all then outstanding shares of the Preferred Stock, the
Corporation will take such corporate
10.
<PAGE> 12
action as may, in the opinion of its counsel, be necessary to increase its
authorized but unissued shares of Common Stock to such number of shares as shall
be sufficient for such purpose, including, without limitation, engaging in best
efforts to obtain the requisite stockholder approval of any necessary amendment
to this Certificate.
l. FRACTIONAL SHARES. No fractional share shall be issued upon
the conversion of any share or shares of Preferred Stock. All shares of Common
Stock (including fractions thereof) issuable upon conversion of more than one
share of Preferred Stock by a holder thereof shall be aggregated for purposes of
determining whether the conversion would result in the issuance of any
fractional share. If, after the aforementioned aggregation, the conversion would
result in the issuance of a fraction of a share of Common Stock, the Corporation
shall, in lieu of issuing any fractional share, either (i) pay the holder
otherwise entitled to such fraction a sum in cash equal to the fair market value
of such fraction on the date of conversion (as determined in good faith by the
Board of Directors) or (ii) round such fractional share up to a whole share.
m. NOTICES. Any notice required by the provisions of this Section
B.4 to be given to the holders of shares of Preferred Stock shall be deemed
given if deposited in the United States mail, postage prepaid, and addressed to
each holder of record at his address appearing on the books of the Corporation.
5. RESTRICTIONS AND LIMITATIONS. So long as 2,000,000 shares of
Preferred Stock remain outstanding, the Corporation shall not, without the vote
or written consent by the holders of a majority of the then outstanding shares
of the Preferred Stock:
a. alter or change the rights, preferences or privileges of the
Preferred Stock materially or adversely;
b. authorize, create or issue a new class or series of shares
having rights, preferences or privileges senior to or on parity with any series
of outstanding Preferred Stock, or increase the number of authorized shares of
any class or series having rights, preferences or privileges senior to or on
parity any series of outstanding Preferred Stock;
c. sell, convey or otherwise dispose of all or a substantially
all of its property or business, or merge into or effect a reorganization with
any other corporation or effect any transfer or series of related transfers
(other than to a wholly owned subsidiary corporation) in which the stockholders
of the Corporation immediately prior to the transaction possess less than 50% of
the voting power of the surviving entity (or its parent) immediately after the
transaction;
d. pay or declare any dividend or make any other distribution on
shares of Common Stock or Preferred Stock (payable other than in Common Stock or
other securities and rights convertible into or entitling the holder thereof to
receive, directly or indirectly, additional shares of Common Stock of this
Corporation);
e. redeem, purchase or otherwise acquire any shares or shares of
the Corporation's Preferred Stock or Common Stock; provided, however, that this
restriction shall not apply to the repurchase of shares of Common Stock from
employees, officers, directors, consultants or other persons performing services
for the Corporation pursuant to agreements
11.
<PAGE> 13
under which the Corporation has the option to repurchase such shares at cost or
at cost upon the occurrence of certain events, such as the termination of
employment;
f. liquidate or dissolve the Corporation; or
g. issue third party debt, whether or not secured, including,
without limitation, off balance sheet financings, capital leases or operating
leases which, in aggregate, would exceed $10,000,000 subsequent to the Original
Issue Date.
6. NO REISSUANCE OF PREFERRED STOCK. No share or shares of Preferred
Stock acquired by the Corporation by reason of redemption, purchase, conversion
or otherwise shall be reissued, and all such shares shall be cancelled, retired
and eliminated from the shares which the Corporation shall be authorized to
issue.
FIFTH: For the management of the business and for the conduct of the
affairs of the Corporation, and in further definition, limitation and regulation
of the powers of the Corporation, of its directors and of its stockholders or
any class thereof, as the case may be, it is further provided that:
A. BOARD OF DIRECTORS.
1. CONDUCT OF BUSINESS; NUMBER OF DIRECTORS. The management of the
business and the conduct of the affairs of the Corporation shall be vested in
its Board of Directors. The number of directors which shall constitute the whole
Board of Directors shall be fixed exclusively by one or more resolutions adopted
by the Board of Directors.
2. CLASSIFIED BOARD. Subject to the rights of the holders of any series
of Preferred Stock to elect additional directors under specified circumstances,
following the closing of the initial public offering pursuant to an effective
registration statement under the Securities Act of 1933, as amended (the "1933
ACT"), covering the offer and sale of Common Stock to the public (the "INITIAL
PUBLIC OFFERING"), the directors shall be divided into three classes designated
as Class I, Class II and Class III, respectively. Directors shall be assigned to
each class in accordance with a resolution or resolutions adopted by the Board
of Directors. At the first annual meeting of stockholders following the closing
of the Initial Public Offering, the term of office of the Class I directors
shall expire and Class I directors shall be elected for a full term of three
years. At the second annual meeting of stockholders following the closing of the
Initial Public Offering, the term of office of the Class II directors shall
expire and Class II directors shall be elected for a full term of three years.
At the third annual meeting of stockholders following the closing of the Initial
Public Offering, the term of office of the Class III directors shall expire and
Class III directors shall be elected for a full term of three years. At each
succeeding annual meeting of stockholders, directors shall be elected for a full
term of three years to succeed the directors of the class whose terms expire at
such annual meeting.
Notwithstanding the foregoing provisions of this section, each director
shall serve until his successor is duly elected and qualified or until his
death, resignation or removal. No decrease in the number of directors
constituting the Board of Directors shall shorten the term of any incumbent
director.
12.
<PAGE> 14
3. VACANCIES
a. Subject to the rights of the holders of any series of
Preferred Stock, any vacancies on the Board of Directors resulting from death,
resignation, disqualification, removal or other causes and any newly created
directorships resulting from any increase in the number of directors, shall,
unless the Board of Directors determines by resolution that any such vacancies
or newly created directorships shall be filled by the stockholders, except as
otherwise provided by law, be filled only by the affirmative vote of a majority
of the directors then in office, even though less than a quorum of the Board of
Directors, and not by the stockholders. Any director elected in accordance with
the preceding sentence shall hold office for the remainder of the full term of
the director for which the vacancy was created or occurred and until such
director's successor shall have been elected and qualified.
b. If at the time of filling any vacancy or any newly created
directorship, the directors then in office shall constitute less than a majority
of the whole board (as constituted immediately prior to any such increase), the
Delaware Court of Chancery may, upon application of any stockholder or
stockholders holding at least ten percent (10%) of the total number of the
shares at the time outstanding having the right to vote for such directors,
summarily order an election to be held to fill any such vacancies or newly
created directorships, or to replace the directors chosen by the directors then
in offices as aforesaid, which election shall be governed by Section 211 of the
DGCL.
c. At any time or times that the Corporation is subject to
Section 2115(b) of the California General Corporation Law (the "CGCL"), if,
after the filling of any vacancy by the directors then in office who have been
elected by stockholders shall constitute less than a majority of the directors
then in office, then
(i) Any holder or holders of an aggregate of five percent
(5%) or more of the total number of shares at the time outstanding having the
right to vote for those directors may call a special meeting of stockholders; or
(ii) The Superior Court of the proper county shall, upon
application of such stockholder or stockholders, summarily order a special
meeting of stockholders, to be held to elect the entire board, all in accordance
with Section 305(c) of the CGCL. The term of office of any director shall
terminate upon that election of a successor.
B. BYLAWS
1. Subject to paragraph (h) of Section 42 of the Bylaws, the Bylaws may
be altered or amended or new Bylaws adopted by the affirmative vote of at least
sixty-six and two-thirds percent (66-2/3%) of the voting power of all of the
then-outstanding shares of the voting stock of the Corporation entitled to vote.
The Board of Directors shall also have the power to adopt, amend, or repeal
Bylaws.
2. The directors of the Corporation need not be elected by written
ballot unless the Bylaws so provide.
13.
<PAGE> 15
3. No action shall be taken by the stockholders of the Corporation
except at an annual or special meeting of stockholders called in accordance with
the Bylaws or by written consent of stockholders in accordance with the Bylaws
prior to the closing of the Initial Public Offering and following the closing of
the Initial Public Offering no action shall be taken by the stockholders by
written consent.
4. Advance notice of stockholder nominations for the election of
directors and of business to be brought by stockholders before any meeting of
the stockholders of the Corporation shall be given in the manner provided in the
Bylaws of the Corporation.
SIXTH:
1. The liability of the directors for monetary damages shall be
eliminated to the fullest extent under applicable law.
2. This Corporation is authorized to provide indemnification of agents
(as defined in Section 317 of the CGCL) for breach of duty to the Corporation
and its shareholders through bylaw provisions or through agreements with the
agents, or through shareholder resolutions, or otherwise, in excess of the
indemnification otherwise permitted by Section 317 of the CGCL, subject, at any
time or times the Corporation is subject to Section 2115(b) to the limits on
such excess indemnification set forth in Section 204 of the CGCL.
3. Any repeal or modification of this Article Sixth shall be prospective
and shall not affect the rights under this Article Sixth in effect at the time
of the alleged occurrence of any act or omission to act giving rise to liability
or indemnification.
SEVENTH:
1. The Corporation reserves the right to amend, alter, change or repeal
any provision contained in this Certificate of Incorporation, in the manner now
or hereafter prescribed by statute, except as provided herein, and all rights
conferred upon the stockholders herein are granted subject to this reservation.
2. Notwithstanding any other provisions of this Certificate of
Incorporation or any provision of law which might otherwise permit a lesser vote
or no vote, but in addition to any affirmative vote of the holders of any
particular class or series of the voting stock required by law, this Certificate
of Incorporation or any Preferred Stock Designation, the affirmative vote of the
holders of at least sixty-six and two-thirds percent (66-2/3%) of the voting
power of all of the then-outstanding shares of the voting stock, voting together
as a single class, shall be required to alter, amend or repeal Articles Fifth,
Sixth and Seventh.
3. Meetings of stockholders may be held within or without the State of
Delaware, as the Bylaws may provide. The books of the Corporation may be kept
(subject to any provisions contained in the statutes) outside the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the Bylaws of the Corporation.
14.
<PAGE> 1
EXHIBIT 3.4
BYLAWS
OF
VIROLOGIC, INC.
(A DELAWARE CORPORATION)
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE I OFFICES................................................................1
Section 1. Registered Office......................................................1
Section 2. Other Offices..........................................................1
ARTICLE II CORPORATE SEAL.........................................................1
Section 3. Corporate Seal.........................................................1
ARTICLE III STOCKHOLDERS' MEETINGS.................................................1
Section 4. Place Of Meetings......................................................1
Section 5. Annual Meetings........................................................1
Section 6. Special Meetings.......................................................3
Section 7. Notice Of Meetings.....................................................4
Section 8. Quorum.................................................................5
Section 9. Adjournment And Notice Of Adjourned Meetings...........................5
Section 10. Voting Rights..........................................................5
Section 11. Joint Owners Of Stock..................................................6
Section 12. List Of Stockholders...................................................6
Section 13. Action Without Meeting.................................................6
Section 14. Organization...........................................................7
ARTICLE IV DIRECTORS..............................................................7
Section 15. Number And Term Of Office..............................................7
Section 16. Powers.................................................................8
Section 17. Classes of Directors...................................................8
Section 18. Vacancies..............................................................8
Section 19. Resignation............................................................9
Section 20. Meetings...............................................................9
Section 21. Quorum And Voting.....................................................10
Section 22. Action Without Meeting................................................10
Section 23. Fees And Compensation.................................................11
Section 24. Committees............................................................11
Section 25. Organization..........................................................12
ARTICLE V OFFICERS..............................................................12
</TABLE>
i.
<PAGE> 3
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C>
Section 26. Officers Designated...................................................12
Section 27. Tenure And Duties Of Officers.........................................12
Section 28. Delegation Of Authority...............................................14
Section 29. Resignations..........................................................14
Section 30. Removal...............................................................14
ARTICLE VI EXECUTION OF CORPORATE INSTRUMENTS AND VOTING OF SECURITIES OWNED
BY THE CORPORATION....................................................14
Section 31. Execution Of Corporate Instruments....................................14
Section 32. Voting Of Securities Owned By The Corporation.........................14
ARTICLE VII SHARES OF STOCK.......................................................15
Section 33. Form And Execution Of Certificates....................................15
Section 34. Lost Certificates.....................................................15
Section 35. Transfers.............................................................15
Section 36. Fixing Record Dates...................................................16
Section 37. Registered Stockholders...............................................17
ARTICLE VIII OTHER SECURITIES OF THE CORPORATION...................................17
Section 38. Execution Of Other Securities.........................................17
ARTICLE IX DIVIDENDS.............................................................17
Section 39. Declaration Of Dividends..............................................17
Section 40. Dividend Reserve......................................................18
ARTICLE X FISCAL YEAR...........................................................18
Section 41. Fiscal Year...........................................................18
ARTICLE XI INDEMNIFICATION.......................................................18
Section 42. Indemnification Of Directors, Executive Officers, Other
Officers, Employees And Other Agents..................................18
ARTICLE XII NOTICES...............................................................21
Section 43. Notices...............................................................21
ARTICLE XIII AMENDMENTS............................................................23
Section 44. Amendments............................................................23
ARTICLE XIV LOANS TO OFFICERS.....................................................23
Section 45. Loans To Officers.....................................................23
</TABLE>
ii.
<PAGE> 4
BYLAWS
OF
VIROLOGIC, INC.
(A DELAWARE CORPORATION)
ARTICLE I
OFFICES
SECTION 1. REGISTERED OFFICE. The registered office of the corporation
in the State of Delaware shall be in the City of Wilmington County of New
Castle.
SECTION 2. OTHER OFFICES. The corporation shall also have and maintain
an office or principal place of business at such place as may be fixed by the
Board of Directors, and may also have offices at such other places, both within
and without the State of Delaware as the Board of Directors may from time to
time determine or the business of the corporation may require.
ARTICLE II
CORPORATE SEAL
SECTION 3. CORPORATE SEAL. The corporate seal shall consist of a die
bearing the name of the corporation and the inscription, "Corporate
Seal-Delaware." Said seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
ARTICLE III
STOCKHOLDERS' MEETINGS
SECTION 4. PLACE OF MEETINGS. Meetings of the stockholders of the
corporation shall be held at such place, either within or without the State of
Delaware, as may be designated from time to time by the Board of Directors, or,
if not so designated, then at the office of the corporation required to be
maintained pursuant to Section 2 hereof.
SECTION 5. ANNUAL MEETINGS.
(a) The annual meeting of the stockholders of the corporation,
for the purpose of election of directors and for such other business as may
lawfully come before it, shall be held on such date and at such time as may be
designated from time to time by the Board of Directors. Nominations of persons
for election to the Board of Directors of the corporation and the proposal of
business to be considered by the stockholders may be made at an annual meeting
of stockholders: (i) pursuant to the corporation's notice of meeting of
stockholders; (ii) by or at the direction of the Board of Directors; or (iii) by
any stockholder of the corporation who was a stockholder of record at the time
of giving of notice provided for in the following paragraph,
1.
<PAGE> 5
who is entitled to vote at the meeting and who complied with the notice
procedures set forth in Section 5.
(b) At an annual meeting of the stockholders, only such business
shall be conducted as shall have been properly brought before the meeting. For
nominations or other business to be properly brought before an annual meeting by
a stockholder pursuant to clause (c) of Section 5(a) of these Bylaws, (i) the
stockholder must have given timely notice thereof in writing to the Secretary of
the corporation, (ii) such other business must be a proper matter for
stockholder action under the Delaware General Corporation Law ("DGCL"), (iii) if
the stockholder, or the beneficial owner on whose behalf any such proposal or
nomination is made, has provided the corporation with a Solicitation Notice (as
defined in this Section 5(b)), such stockholder or beneficial owner must, in the
case of a proposal, have delivered a proxy statement and form of proxy to
holders of at least the percentage of the corporation's voting shares required
under applicable law to carry any such proposal, or, in the case of a nomination
or nominations, have delivered a proxy statement and form of proxy to holders of
a percentage of the corporation's voting shares reasonably believed by such
stockholder or beneficial owner to be sufficient to elect the nominee or
nominees proposed to be nominated by such stockholder, and must, in either case,
have included in such materials the Solicitation Notice, and (iv) if no
Solicitation Notice relating thereto has been timely provided pursuant to this
section, the stockholder or beneficial owner proposing such business or
nomination must not have solicited a number of proxies sufficient to have
required the delivery of such a Solicitation Notice under this Section 5. To be
timely, a stockholder's notice shall be delivered to the Secretary at the
principal executive offices of the Corporation not later than the close of
business on the ninetieth (90th) day nor earlier than the close of business on
the one hundred twentieth (120th) day prior to the first anniversary of the
preceding year's annual meeting; provided, however, that in the event that the
date of the annual meeting is advanced more than thirty (30) days prior to or
delayed by more than thirty (30) days after the anniversary of the preceding
year's annual meeting, notice by the stockholder to be timely must be so
delivered not earlier than the close of business on the one hundred twentieth
(120th) day prior to such annual meeting and not later than the close of
business on the later of the ninetieth (90th) day prior to such annual meeting
or the tenth (10th) day following the day on which public announcement of the
date of such meeting is first made. In no event shall the public announcement of
an adjournment of an annual meeting commence a new time period for the giving of
a stockholder's notice as described above. Such stockholder's notice shall set
forth: (A) as to each person whom the stockholder proposed to nominate for
election or reelection as a director all information relating to such person
that is required to be disclosed in solicitations of proxies for election of
directors in an election contest, or is otherwise required, in each case
pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended
(the "1934 Act") and Rule 14a-11 thereunder (including such person's written
consent to being named in the proxy statement as a nominee and to serving as a
director if elected); (B) as to any other business that the stockholder proposes
to bring before the meeting, a brief description of the business desired to be
brought before the meeting, the reasons for conducting such business at the
meeting and any material interest in such business of such stockholder and the
beneficial owner, if any, on whose behalf the proposal is made; and (C) as to
the stockholder giving the notice and the beneficial owner, if any, on whose
behalf the nomination or proposal is made (i) the name and address of such
stockholder, as they appear on the corporation's books, and of such beneficial
owner, (ii) the class and number of shares of the corporation which are owned
beneficially and of record by such stockholder and such beneficial owner, and
(iii)
2.
<PAGE> 6
whether either such stockholder or beneficial owner intends to deliver a proxy
statement and form of proxy to holders of, in the case of the proposal, at least
the percentage of the corporation's voting shares required under applicable law
to carry the proposal or, in the case of a nomination or nominations, a
sufficient number of holders of the corporation's voting shares to elect such
nominee or nominees (an affirmative statement of such intent, a "Solicitation
Notice").
(c) Notwithstanding anything in the second sentence of Section
5(b) of these Bylaws to the contrary, in the event that the number of directors
to be elected to the Board of Directors of the Corporation is increased and
there is no public announcement naming all of the nominees for director or
specifying the size of the increased Board of Directors made by the corporation
at least one hundred (100) days prior to the first anniversary of the preceding
year's annual meeting, a stockholder's notice required by this Section 5 shall
also be considered timely, but only with respect to nominees for any new
positions created by such increase, if it shall be delivered to the Secretary at
the principal executive offices of the corporation not later than the close of
business on the tenth (10th) day following the day on which such public
announcement is first made by the corporation.
(d) Only such persons who are nominated in accordance with the
procedures set forth in this Section 5 shall be eligible to serve as directors
and only such business shall be conducted at a meeting of stockholders as shall
have been brought before the meeting in accordance with the procedures set forth
in this Section 5. Except as otherwise provided by law, the Chairman of the
meeting shall have the power and duty to determine whether a nomination or any
business proposed to be brought before the meeting was made, or proposed, as the
case may be, in accordance with the procedures set forth in these Bylaws and, if
any proposed nomination or business is not in compliance with these Bylaws, to
declare that such defective proposal or nomination shall not be presented for
stockholder action at the meeting and shall be disregarded.
(e) Notwithstanding the foregoing provisions of this Section 5,
in order to include information with respect to a stockholder proposal in the
proxy statement and form of proxy for a stockholders' meeting, stockholders must
provide notice as required by the regulations promulgated under the 1934 Act.
Nothing in these Bylaws shall be deemed to affect any rights of stockholders to
request inclusion of proposals in the corporation proxy statement pursuant to
Rule 14a-8 under the 1934 Act.
(f) For purposes of this Section 5, "public announcement" shall
mean disclosure in a press release reported by the Dow Jones News Service,
Associated Press or comparable national news service or in a document publicly
filed by the corporation with the Securities and Exchange Commission pursuant to
Section 13, 14 or 15(d) of the 1934 Act.
SECTION 6. SPECIAL MEETINGS.
(a) Special meetings of the stockholders of the corporation may
be called, for any purpose or purposes, by (i) the Chairman of the Board of
Directors, (ii) the Chief Executive Officer, or (iii) the Board of Directors
pursuant to a resolution adopted by a majority of the total number of authorized
directors (whether or not there exist any vacancies in previously authorized
directorships at the time any such resolution is presented to the Board of
Directors for adoption).
3.
<PAGE> 7
At any time or times that the corporation is subject to Section 2115(b) of the
California General Corporation Law ("CGCL"), stockholders holding five percent
(5%) or more of the outstanding shares shall have the right to call a special
meeting of stockholders only as set forth in Section 18(c) herein.
(b) If a special meeting is properly called by any person or
persons other than the Board of Directors, the request shall be in writing,
specifying the general nature of the business proposed to be transacted, and
shall be delivered personally or sent by registered mail or by telegraphic or
other facsimile transmission to the Chairman of the Board of Directors, the
Chief Executive Officer, or the Secretary of the corporation. No business may be
transacted at such special meeting otherwise than specified in such notice. The
Board of Directors shall determine the time and place of such special meeting,
which shall be held not less than thirty-five (35) nor more than one hundred
twenty (120) days after the date of the receipt of the request. Upon
determination of the time and place of the meeting, the officer receiving the
request shall cause notice to be given to the stockholders entitled to vote, in
accordance with the provisions of Section 7 of these Bylaws. If the notice is
not given within one hundred (100) days after the receipt of the request, the
person or persons properly requesting the meeting may set the time and place of
the meeting and give the notice. Nothing contained in this paragraph (b) shall
be construed as limiting, fixing, or affecting the time when a meeting of
stockholders called by action of the Board of Directors may be held.
(c) Nominations of persons for election to the Board of Directors
may be made at a special meeting of stockholders at which directors are to be
elected pursuant to the corporation's notice of meeting (i) by or at the
direction of the Board of Directors or (ii) by any stockholder of the
corporation who is a stockholder of record at the time of giving notice provided
for in these Bylaws who shall be entitled to vote at the meeting and who
complies with the notice procedures set forth in this Section 6(c). In the event
the corporation calls a special meeting of stockholders for the purpose of
electing one or more directors to the Board of Directors, any such stockholder
may nominate a person or persons (as the case may be), for election to such
position(s) as specified in the corporation's notice of meeting, if the
stockholder's notice required by Section 5(b) of these Bylaws shall be delivered
to the Secretary at the principal executive offices of the corporation not
earlier than the close of business on the one hundred twentieth (120th) day
prior to such special meeting and not later than the close of business on the
later of the ninetieth (90th) day prior to such meeting or the tenth (10th) day
following the day on which public announcement is first made of the date of the
special meeting and of the nominees proposed by the Board of Directors to be
elected at such meeting. In no event shall the public announcement of an
adjournment of a special meeting commence a new time period for the giving of a
stockholder's notice as described above.
SECTION 7. NOTICE OF MEETINGS. Except as otherwise provided by law or
the Certificate of Incorporation, written notice of each meeting of stockholders
shall be given not less than ten (10) nor more than sixty (60) days before the
date of the meeting to each stockholder entitled to vote at such meeting, such
notice to specify the place, date and hour and purpose or purposes of the
meeting. Notice of the time, place and purpose of any meeting of stockholders
may be waived in writing, signed by the person entitled to notice thereof,
either before or after such meeting, and will be waived by any stockholder by
his attendance thereat in person or by proxy, except when the stockholder
attends a meeting for the express purpose of
4.
<PAGE> 8
objecting, at the beginning of the meeting, to the transaction of any business
because the meeting is not lawfully called or convened. Any stockholder so
waiving notice of such meeting shall be bound by the proceedings of any such
meeting in all respects as if due notice thereof had been given.
SECTION 8. QUORUM. At all meetings of stockholders, except where
otherwise provided by statute or by the Certificate of Incorporation, or by
these Bylaws, the presence, in person or by proxy duly authorized, of the
holders of a majority of the outstanding shares of stock entitled to vote shall
constitute a quorum for the transaction of business. In the absence of a quorum,
any meeting of stockholders may be adjourned, from time to time, either by the
chairman of the meeting or by vote of the holders of a majority of the shares
represented thereat, but no other business shall be transacted at such meeting.
The stockholders present at a duly called or convened meeting, at which a quorum
is present, may continue to transact business until adjournment, notwithstanding
the withdrawal of enough stockholders to leave less than a quorum. Except as
otherwise provided by statute, the Certificate of Incorporation or these Bylaws,
in all matters other than the election of directors, the affirmative vote of the
majority of shares present in person or represented by proxy at the meeting and
entitled to vote on the subject matter shall be the act of the stockholders.
Except as otherwise provided by statute, the Certificate of Incorporation or
these Bylaws, directors shall be elected by a plurality of the votes of the
shares present in person or represented by proxy at the meeting and entitled to
vote on the election of directors. Where a separate vote by a class or classes
or series is required, except where otherwise provided by the statute or by the
Certificate of Incorporation or these Bylaws, a majority of the outstanding
shares of such class or classes or series, present in person or represented by
proxy, shall constitute a quorum entitled to take action with respect to that
vote on that matter and, except where otherwise provided by the statute or by
the Certificate of Incorporation or these Bylaws, the affirmative vote of the
majority (plurality, in the case of the election of directors) of the votes cast
by the holders of shares of such class or classes or series shall be the act of
such class or classes or series.
SECTION 9. ADJOURNMENT AND NOTICE OF ADJOURNED MEETINGS. Any meeting of
stockholders, whether annual or special, may be adjourned from time to time
either by the chairman of the meeting or by the vote of a majority of the shares
casting votes. When a meeting is adjourned to another time or place, notice need
not be given of the adjourned meeting if the time and place thereof are
announced at the meeting at which the adjournment is taken. At the adjourned
meeting, the corporation may transact any business which might have been
transacted at the original meeting. If the adjournment is for more than thirty
(30) days or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
SECTION 10. VOTING RIGHTS. For the purpose of determining those
stockholders entitled to vote at any meeting of the stockholders, except as
otherwise provided by law, only persons in whose names shares stand on the stock
records of the corporation on the record date, as provided in Section 12 of
these Bylaws, shall be entitled to vote at any meeting of stockholders. Every
person entitled to vote shall have the right to do so either in person or by an
agent or agents authorized by a proxy granted in accordance with Delaware law.
An agent so appointed need not be a stockholder. No proxy shall be voted after
three (3) years from its date of creation unless the proxy provides for a longer
period.
5.
<PAGE> 9
SECTION 11. JOINT OWNERS OF STOCK. If shares or other securities having
voting power stand of record in the names of two (2) or more persons, whether
fiduciaries, members of a partnership, joint tenants, tenants in common, tenants
by the entirety, or otherwise, or if two (2) or more persons have the same
fiduciary relationship respecting the same shares, unless the Secretary is given
written notice to the contrary and is furnished with a copy of the instrument or
order appointing them or creating the relationship wherein it is so provided,
their acts with respect to voting shall have the following effect: (a) if only
one (1) votes, his act binds all; (b) if more than one (1) votes, the act of the
majority so voting binds all; (c) if more than one (1) votes, but the vote is
evenly split on any particular matter, each faction may vote the securities in
question proportionally, or may apply to the Delaware Court of Chancery for
relief as provided in the DGCL, Section 217(b). If the instrument filed with the
Secretary shows that any such tenancy is held in unequal interests, a majority
or even-split for the purpose of subsection (c) shall be a majority or
even-split in interest.
SECTION 12. LIST OF STOCKHOLDERS. The Secretary shall prepare and make,
at least ten (10) days before every meeting of stockholders, a complete list of
the stockholders entitled to vote at said meeting, arranged in alphabetical
order, showing the address of each stockholder and the number of shares
registered in the name of each stockholder. Such list shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten (10) days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not
specified, at the place where the meeting is to be held. The list shall be
produced and kept at the time and place of meeting during the whole time thereof
and may be inspected by any stockholder who is present.
SECTION 13. ACTION WITHOUT MEETING.
(a) Unless otherwise provided in the Certificate of
Incorporation, any action required by statute to be taken at any annual or
special meeting of the stockholders, or any action which may be taken at any
annual or special meeting of the stockholders, may 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 outstanding stock having
not less than the minimum number of votes that would be necessary to authorize
or take such action at a meeting at which all shares entitled to vote thereon
were present and voted.
(b) Every written consent shall bear the date of signature of
each stockholder who signs the consent, and no written consent shall be
effective to take the corporate action referred to therein unless, within sixty
(60) days of the earliest dated consent delivered to the corporation in the
manner herein required, written consents signed by a sufficient number of
stockholders to take action are delivered to the corporation by delivery to its
registered office in the State of Delaware, its principal place of business or
an officer or agent of the corporation having custody of the book in which
proceedings of meetings of stockholders are recorded. Delivery made to a
corporation's registered office shall be by hand or by certified or registered
mail, return receipt requested.
(c) Prompt notice of the taking of the corporate action without a
meeting by less than unanimous written consent shall be given to those
stockholders who have not consented
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in writing and who, if the action had been taken at a meeting, would have been
entitled to notice of the meeting if the record date for such meeting had been
the date that written consents signed by a sufficient number of stockholders to
take action were delivered to the corporation as provided in Section 228 (c) of
the DGCL. If the action which is consented to is such as would have required the
filing of a certificate under any section of the DGCL if such action had been
voted on by stockholders at a meeting thereof, then the certificate filed under
such section shall state, in lieu of any statement required by such section
concerning any vote of stockholders, that written consent has been given in
accordance with Section 228 of the DGCL.
(d) Notwithstanding the foregoing, no such action by written
consent may be taken following the closing of the initial public offering
pursuant to an effective registration statement under the Securities Act of
1933, as amended (the "1933 Act"), covering the offer and sale of Common Stock
of the corporation (the "Initial Public Offering").
SECTION 14. ORGANIZATION.
(a) At every meeting of stockholders, the Chairman of the Board
of Directors, or, if a Chairman has not been appointed or is absent, the
President, or, if the President is absent, a chairman of the meeting chosen by a
majority in interest of the stockholders entitled to vote, present in person or
by proxy, shall act as chairman. The Secretary, or, in his absence, an Assistant
Secretary directed to do so by the President, shall act as secretary of the
meeting.
(b) The Board of Directors of the corporation shall be entitled
to make such rules or regulations for the conduct of meetings of stockholders as
it shall deem necessary, appropriate or convenient. Subject to such rules and
regulations of the Board of Directors, if any, the chairman of the meeting shall
have the right and authority to prescribe such rules, regulations and procedures
and to do all such acts as, in the judgment of such chairman, are necessary,
appropriate or convenient for the proper conduct of the meeting, including,
without limitation, establishing an agenda or order of business for the meeting,
rules and procedures for maintaining order at the meeting and the safety of
those present, limitations on participation in such meeting to stockholders of
record of the corporation and their duly authorized and constituted proxies and
such other persons as the chairman shall permit, restrictions on entry to the
meeting after the time fixed for the commencement thereof, limitations on the
time allotted to questions or comments by participants and regulation of the
opening and closing of the polls for balloting on matters which are to be voted
on by ballot. Unless and to the extent determined by the Board of Directors or
the chairman of the meeting, meetings of stockholders shall not be required to
be held in accordance with rules of parliamentary procedure.
ARTICLE IV
DIRECTORS
SECTION 15. NUMBER AND TERM OF OFFICE. The authorized number of
directors of the corporation shall be fixed in accordance with the Certificate
of Incorporation. Directors need not be stockholders unless so required by the
Certificate of Incorporation. If for any cause, the directors shall not have
been elected at an annual meeting, they may be elected as soon thereafter
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as convenient at a special meeting of the stockholders called for that purpose
in the manner provided in these Bylaws.
SECTION 16. POWERS. The powers of the corporation shall be exercised,
its business conducted and its property controlled by the Board of Directors,
except as may be otherwise provided by statute or by the Certificate of
Incorporation.
SECTION 17. CLASSES OF DIRECTORS. Subject to the rights of the holders
of any series of Preferred Stock to elect additional directors under specified
circumstances, following the closing of the Initial Public Offering, the
directors shall be divided into three classes designated as Class I, Class II
and Class III, respectively. Directors shall be assigned to each class in
accordance with a resolution or resolutions adopted by the Board of Directors.
At the first annual meeting of stockholders following the closing of the Initial
Public Offering, the term of office of the Class I directors shall expire and
Class I directors shall be elected for a full term of three years. At the second
annual meeting of stockholders following the closing of the Initial Public
Offering, the term of office of the Class II directors shall expire and Class II
directors shall be elected for a full term of three years. At the third annual
meeting of stockholders following the closing of the Initial Public Offering,
the term of office of the Class III directors shall expire and Class III
directors shall be elected for a full term of three years. At each succeeding
annual meeting of stockholders, directors shall be elected for a full term of
three years to succeed the directors of the class whose terms expire at such
annual meeting.
Notwithstanding the foregoing provisions of this section, each director
shall serve until his successor is duly elected and qualified or until his
death, resignation or removal. No decrease in the number of directors
constituting the Board of Directors shall shorten the term of any incumbent
director.
SECTION 18. VACANCIES.
(a) Unless otherwise provided in the Certificate of
Incorporation, any vacancies on the Board of Directors resulting from death,
resignation, disqualification, removal or other causes and any newly created
directorships resulting from any increase in the number of directors shall,
unless the Board of Directors determines by resolution that any such vacancies
or newly created directorships shall be filled by stockholders, be filled only
by the affirmative vote of a majority of the directors then in office, even
though less than a quorum of the Board of Directors. Any director elected in
accordance with the preceding sentence shall hold office for the remainder of
the full term of the director for which the vacancy was created or occurred and
until such director's successor shall have been elected and qualified. A vacancy
in the Board of Directors shall be deemed to exist under this Section 18 in the
case of the death, removal or resignation of any director.
(b) If at the time of filling any vacancy or any newly created
directorship, the directors then in office shall constitute less than a majority
of the whole board (as constituted immediately prior to any such increase), the
Delaware Court of Chancery may, upon application of any stockholder or
stockholders holding at least ten percent (10%) of the total number of the
shares at the time outstanding having the right to vote for such directors,
summarily order an election to be held to fill any such vacancies or newly
created directorships, or to replace the
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directors chosen by the directors then in offices as aforesaid, which election
shall be governed by Section 211 of the DGCL.
(c) At any time or times that the corporation is subject to
Section 2115(b) of the CGCL, if, after the filling of any vacancy, the directors
then in office who have been elected by stockholders shall constitute less than
a majority of the directors then in office, then
(1) Any holder or holders of an aggregate of five percent
(5%) or more of the total number of shares at the time outstanding having the
right to vote for those directors may call a special meeting of stockholders; or
(2) The Superior Court of the proper county shall, upon
application of such stockholder or stockholders, summarily order a special
meeting of stockholders, to be held to elect the entire board, all in accordance
with Section 305(c) of the CGCL. The term of office of any director shall
terminate upon that election of a successor.
SECTION 19. RESIGNATION. Any director may resign at any time by
delivering his written resignation to the Secretary, such resignation to specify
whether it will be effective at a particular time, upon receipt by the Secretary
or at the pleasure of the Board of Directors. If no such specification is made,
it shall be deemed effective at the pleasure of the Board of Directors. When one
or more directors shall resign from the Board of Directors, effective at a
future date, a majority of the directors then in office, including those who
have so resigned, shall have power to fill such vacancy or vacancies, the vote
thereon to take effect when such resignation or resignations shall become
effective, and each Director so chosen shall hold office for the unexpired
portion of the term of the Director whose place shall be vacated and until his
successor shall have been duly elected and qualified.
SECTION 20. MEETINGS.
(a) ANNUAL MEETINGS. The annual meeting of the Board of Directors
shall be held immediately before or after the annual meeting of stockholders and
at the place where such meeting is held. No notice of an annual meeting of the
Board of Directors shall be necessary and such meeting shall be held for the
purpose of electing officers and transacting such other business as may lawfully
come before it.
(b) REGULAR MEETINGS. Unless otherwise restricted by the
Certificate of Incorporation, regular meetings of the Board of Directors may be
held at any time or date and at any place within or without the State of
Delaware which has been designated by the Board of Directors and publicized
among all directors. No formal notice shall be required for regular meetings of
the Board of Directors.
(c) SPECIAL MEETINGS. Unless otherwise restricted by the
Certificate of Incorporation, special meetings of the Board of Directors may be
held at any time and place within or without the State of Delaware whenever
called by the Chairman of the Board, the President or any two of the directors.
(d) TELEPHONE MEETINGS. Any member of the Board of Directors, or
of any committee thereof, may participate in a meeting by means of conference
telephone or similar
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communications equipment by means of which all persons participating in the
meeting can hear each other, and participation in a meeting by such means shall
constitute presence in person at such meeting.
(e) NOTICE OF MEETINGS. Notice of the time and place of all
meetings of the Board of Directors shall be orally or in writing, by telephone,
including a voice messaging system or other system or technology designed to
record and communicate messages, facsimile, telegraph or telex, or by electronic
mail or other electronic means, during normal business hours, at least
twenty-four (24) hours before the date and time of the meeting, or sent in
writing to each director by first class mail, charges prepaid, at least three
(3) days before the date of the meeting. Notice of any meeting may be waived in
writing at any time before or after the meeting and will be waived by any
director by attendance thereat, except when the director attends the meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened.
(f) WAIVER OF NOTICE. The transaction of all business at any
meeting of the Board of Directors, or any committee thereof, however called or
noticed, or wherever held, shall be as valid as though had at a meeting duly
held after regular call and notice, if a quorum be present and if, either before
or after the meeting, each of the directors not present shall sign a written
waiver of notice. All such waivers shall be filed with the corporate records or
made a part of the minutes of the meeting.
SECTION 21. QUORUM AND VOTING.
(a) Unless the Certificate of Incorporation requires a greater
number and except with respect to indemnification questions arising under
Section 42 hereof, for which a quorum shall be one-third of the exact number of
directors fixed from time to time in accordance with the Certificate of
Incorporation, a quorum of the Board of Directors shall consist of a majority of
the exact number of directors fixed from time to time by the Board of Directors
in accordance with the Certificate of Incorporation; provided, however, at any
meeting whether a quorum be present or otherwise, a majority of the directors
present may adjourn from time to time until the time fixed for the next regular
meeting of the Board of Directors, without notice other than by announcement at
the meeting.
(b) At each meeting of the Board of Directors at which a quorum
is present, all questions and business shall be determined by the affirmative
vote of a majority of the directors present, unless a different vote be required
by law, the Certificate of Incorporation or these Bylaws.
SECTION 22. ACTION WITHOUT MEETING. Unless otherwise restricted by the
Certificate of Incorporation or these Bylaws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all members of the Board of Directors or
committee, as the case may be, consent thereto in writing, and such writing or
writings are filed with the minutes of proceedings of the Board of Directors or
committee.
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SECTION 23. FEES AND COMPENSATION. Directors shall be entitled to such
compensation for their services as may be approved by the Board of Directors,
including, if so approved, by resolution of the Board of Directors, a fixed sum
and expenses of attendance, if any, for attendance at each regular or special
meeting of the Board of Directors and at any meeting of a committee of the Board
of Directors. Nothing herein contained shall be construed to preclude any
director from serving the corporation in any other capacity as an officer,
agent, employee, or otherwise and receiving compensation therefor.
SECTION 24. COMMITTEES.
(a) EXECUTIVE COMMITTEE. The Board of Directors may appoint an
Executive Committee to consist of one (1) or more members of the Board of
Directors. The Executive Committee, to the extent permitted by law and provided
in the resolution of the Board of Directors shall have and may exercise all the
powers and authority of the Board of Directors in the management of the business
and affairs of the corporation, and may authorize the seal of the corporation to
be affixed to all papers which may require it; but no such committee shall have
the power or authority in reference to (i) approving or adopting, or
recommending to the stockholders, any action or matter expressly required by the
DGCL to be submitted to stockholders for approval, or (ii) adopting, amending or
repealing any bylaw of the corporation.
(b) OTHER COMMITTEES. The Board of Directors may, from time to
time, appoint such other committees as may be permitted by law. Such other
committees appointed by the Board of Directors shall consist of one (1) or more
members of the Board of Directors and shall have such powers and perform such
duties as may be prescribed by the resolution or resolutions creating such
committees, but in no event shall any such committee have the powers denied to
the Executive Committee in these Bylaws.
(c) TERM. Each member of a committee of the Board of Directors
shall serve a term on the committee coexistent with such member's term on the
Board of Directors. The Board of Directors, subject to any requirements of any
outstanding series of preferred Stock and the provisions of subsections (a) or
(b) of this Bylaw, may at any time increase or decrease the number of members of
a committee or terminate the existence of a committee. The membership of a
committee member shall terminate on the date of his death or voluntary
resignation from the committee or from the Board of Directors. The Board of
Directors may at any time for any reason remove any individual committee member
and the Board of Directors may fill any committee vacancy created by death,
resignation, removal or increase in the number of members of the committee. The
Board of Directors may designate one or more directors as alternate members of
any committee, who may replace any absent or disqualified member at any meeting
of the committee, and, in addition, in the absence or disqualification of any
member of a committee, the member or members thereof present at any meeting and
not disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member.
(d) MEETINGS. Unless the Board of Directors shall otherwise
provide, regular meetings of the Executive Committee or any other committee
appointed pursuant to this Section 24 shall be held at such times and places as
are determined by the Board of Directors, or
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by any such committee, and when notice thereof has been given to each member of
such committee, no further notice of such regular meetings need be given
thereafter. Special meetings of any such committee may be held at any place
which has been determined from time to time by such committee, and may be called
by any director who is a member of such committee, upon written notice to the
members of such committee of the time and place of such special meeting given in
the manner provided for the giving of written notice to members of the Board of
Directors of the time and place of special meetings of the Board of Directors.
Notice of any special meeting of any committee may be waived in writing at any
time before or after the meeting and will be waived by any director by
attendance thereat, except when the director attends such special meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. A majority of the authorized number of members of any such committee
shall constitute a quorum for the transaction of business, and the act of a
majority of those present at any meeting at which a quorum is present shall be
the act of such committee.
SECTION 25. ORGANIZATION. At every meeting of the directors, the
Chairman of the Board of Directors, or, if a Chairman has not been appointed or
is absent, the President (if a director), or if the President is absent, the
most senior Vice President (if a director), or, in the absence of any such
person, a chairman of the meeting chosen by a majority of the directors present,
shall preside over the meeting. The Secretary, or in his absence, any Assistant
Secretary directed to do so by the President, shall act as secretary of the
meeting.
ARTICLE V
OFFICERS
SECTION 26. OFFICERS DESIGNATED. The officers of the corporation shall
include, if and when designated by the Board of Directors, the Chairman of the
Board of Directors, the Chief Executive Officer, the President, one or more Vice
Presidents, the Secretary, the Chief Financial Officer, the Treasurer and the
Controller, all of whom shall be elected at the annual organizational meeting of
the Board of Directors. The Board of Directors may also appoint one or more
Assistant Secretaries, Assistant Treasurers, Assistant Controllers and such
other officers and agents with such powers and duties as it shall deem
necessary. The Board of Directors may assign such additional titles to one or
more of the officers as it shall deem appropriate. Any one person may hold any
number of offices of the corporation at any one time unless specifically
prohibited therefrom by law. The salaries and other compensation of the officers
of the corporation shall be fixed by or in the manner designated by the Board of
Directors.
SECTION 27. TENURE AND DUTIES OF OFFICERS.
(a) GENERAL. All officers shall hold office at the pleasure of
the Board of Directors and until their successors shall have been duly elected
and qualified, unless sooner removed. Any officer elected or appointed by the
Board of Directors may be removed at any time by the Board of Directors. If the
office of any officer becomes vacant for any reason, the vacancy may be filled
by the Board of Directors.
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(b) DUTIES OF CHAIRMAN OF THE BOARD OF DIRECTORS. The Chairman of
the Board of Directors, when present, shall preside at all meetings of the
stockholders and the Board of Directors. The Chairman of the Board of Directors
shall perform other duties commonly incident to his office and shall also
perform such other duties and have such other powers, as the Board of Directors
shall designate from time to time. If there is no President, then the Chairman
of the Board of Directors shall also serve as the Chief Executive Officer of the
corporation and shall have the powers and duties prescribed in paragraph (c) of
this Section 27.
(c) DUTIES OF PRESIDENT. The President shall preside at all
meetings of the stockholders and at all meetings of the Board of Directors,
unless the Chairman of the Board of Directors has been appointed and is present.
Unless some other officer has been elected Chief Executive Officer of the
corporation, the President shall be the chief executive officer of the
corporation and shall, subject to the control of the Board of Directors, have
general supervision, direction and control of the business and officers of the
corporation. The President shall perform other duties commonly incident to his
office and shall also perform such other duties and have such other powers, as
the Board of Directors shall designate from time to time.
(d) DUTIES OF VICE PRESIDENTS. The Vice Presidents may assume and
perform the duties of the President in the absence or disability of the
President or whenever the office of President is vacant. The Vice Presidents
shall perform other duties commonly incident to their office and shall also
perform such other duties and have such other powers as the Board of Directors
or the President shall designate from time to time.
(e) DUTIES OF SECRETARY. The Secretary shall attend all meetings
of the stockholders and of the Board of Directors and shall record all acts and
proceedings thereof in the minute book of the corporation. The Secretary shall
give notice in conformity with these Bylaws of all meetings of the stockholders
and of all meetings of the Board of Directors and any committee thereof
requiring notice. The Secretary shall perform all other duties given him in
these Bylaws and other duties commonly incident to his office and shall also
perform such other duties and have such other powers, as the Board of Directors
shall designate from time to time. The President may direct any Assistant
Secretary to assume and perform the duties of the Secretary in the absence or
disability of the Secretary, and each Assistant Secretary shall perform other
duties commonly incident to his office and shall also perform such other duties
and have such other powers as the Board of Directors or the President shall
designate from time to time.
(f) DUTIES OF CHIEF FINANCIAL OFFICER. The Chief Financial
Officer shall keep or cause to be kept the books of account of the corporation
in a thorough and proper manner and shall render statements of the financial
affairs of the corporation in such form and as often as required by the Board of
Directors or the President. The Chief Financial Officer, subject to the order of
the Board of Directors, shall have the custody of all funds and securities of
the corporation. The Chief Financial Officer shall perform other duties commonly
incident to his office and shall also perform such other duties and have such
other powers as the Board of Directors or the President shall designate from
time to time. The President may direct the Treasurer or any Assistant Treasurer,
or the Controller or any Assistant Controller to assume and perform the duties
of the Chief Financial Officer in the absence or disability of the Chief
Financial Officer, and each Treasurer and Assistant Treasurer and each
Controller and Assistant Controller shall perform other duties commonly incident
to his office and shall also perform such
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other duties and have such other powers as the Board of Directors or the
President shall designate from time to time.
SECTION 28. DELEGATION OF AUTHORITY. The Board of Directors may from
time to time delegate the powers or duties of any officer to any other officer
or agent, notwithstanding any provision hereof.
SECTION 29. RESIGNATIONS. Any officer may resign at any time by giving
written notice to the Board of Directors or to the President or to the
Secretary. Any such resignation shall be effective when received by the person
or persons to whom such notice is given, unless a later time is specified
therein, in which event the resignation shall become effective at such later
time. Unless otherwise specified in such notice, the acceptance of any such
resignation shall not be necessary to make it effective. Any resignation shall
be without prejudice to the rights, if any, of the corporation under any
contract with the resigning officer.
SECTION 30. REMOVAL. Any officer may be removed from office at any time,
either with or without cause, by the affirmative vote of a majority of the
directors in office at the time, or by the unanimous written consent of the
directors in office at the time, or by any committee or superior officers upon
whom such power of removal may have been conferred by the Board of Directors.
ARTICLE VI
EXECUTION OF CORPORATE INSTRUMENTS AND VOTING OF SECURITIES
OWNED BY THE CORPORATION
SECTION 31. EXECUTION OF CORPORATE INSTRUMENTS. The Board of Directors
may, in its discretion, determine the method and designate the signatory officer
or officers, or other person or persons, to execute on behalf of the corporation
any corporate instrument or document, or to sign on behalf of the corporation
the corporate name without limitation, or to enter into contracts on behalf of
the corporation, except where otherwise provided by law or these Bylaws, and
such execution or signature shall be binding upon the corporation.
All checks and drafts drawn on banks or other depositaries on funds to
the credit of the corporation or in special accounts of the corporation shall be
signed by such person or persons as the Board of Directors shall authorize so to
do.
Unless authorized or ratified by the Board of Directors or within the
agency power of an officer, no officer, agent or employee shall have any power
or authority to bind the corporation by any contract or engagement or to pledge
its credit or to render it liable for any purpose or for any amount.
SECTION 32. VOTING OF SECURITIES OWNED BY THE CORPORATION. All stock and
other securities of other corporations owned or held by the corporation for
itself, or for other parties in any capacity, shall be voted, and all proxies
with respect thereto shall be executed, by the person authorized so to do by
resolution of the Board of Directors, or, in the absence of such authorization,
by the Chairman of the Board of Directors, the Chief Executive Officer, the
President, or any Vice President.
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ARTICLE VII
SHARES OF STOCK
SECTION 33. FORM AND EXECUTION OF CERTIFICATES. Certificates for the
shares of stock of the corporation shall be in such form as is consistent with
the Certificate of Incorporation and applicable law. Every holder of stock in
the corporation shall be entitled to have a certificate signed by or in the name
of the corporation by the Chairman of the Board of Directors, or the President
or any Vice President and by the Treasurer or Assistant Treasurer or the
Secretary or Assistant Secretary, certifying the number of shares owned by him
in the corporation. Any or all of the signatures on the 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 with the same effect as if he were such officer,
transfer agent, or registrar at the date of issue. Each certificate shall state
upon the face or back thereof, in full or in summary, all of the powers,
designations, preferences, and rights, and the limitations or restrictions of
the shares authorized to be issued or shall, except as otherwise required by
law, set forth on the face or back a statement that the corporation will furnish
without charge to each stockholder who so requests the powers, designations,
preferences and relative, participating, optional, or other special rights of
each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights. Within a reasonable time after
the issuance or transfer of uncertificated stock, the corporation shall send to
the registered owner thereof a written notice containing the information
required to be set forth or stated on certificates pursuant to this section or
otherwise required by law or with respect to this section a statement that the
corporation will furnish without charge to each stockholder who so requests the
powers, designations, preferences and relative participating, optional or other
special rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights. Except as
otherwise expressly provided by law, the rights and obligations of the holders
of certificates representing stock of the same class and series shall be
identical.
SECTION 34. LOST CERTIFICATES. A new certificate or certificates shall
be issued in place of any certificate or certificates theretofore issued by the
corporation alleged to have been lost, stolen, or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen, or destroyed. The corporation may require, as a condition
precedent to the issuance of a new certificate or certificates, the owner of
such lost, stolen, or destroyed certificate or certificates, or his legal
representative, to agree to indemnify the corporation in such manner as it shall
require or to give the corporation a surety bond in such form and amount as it
may direct as indemnity against any claim that may be made against the
corporation with respect to the certificate alleged to have been lost, stolen,
or destroyed.
SECTION 35. TRANSFERS.
(a) Transfers of record of shares of stock of the corporation
shall be made only upon its books by the holders thereof, in person or by
attorney duly authorized, and upon the surrender of a properly endorsed
certificate or certificates for a like number of shares.
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(b) The corporation shall have power to enter into and perform
any agreement with any number of stockholders of any one or more classes of
stock of the corporation to restrict the transfer of shares of stock of the
corporation of any one or more classes owned by such stockholders in any manner
not prohibited by the DGCL.
SECTION 36. FIXING RECORD DATES.
(a) 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, the Board of Directors may fix, in advance, 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
shall, subject to applicable law, not be more than sixty (60) nor less than ten
(10) days before the date of such meeting. If no record date is fixed by the
Board of Directors, 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. 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.
(b) Prior to the Initial Public Offering, in order that the
corporation may determine the stockholders entitled to consent to corporate
action in writing without a meeting, 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 date
shall not be more than ten (10) days after the date upon which the resolution
fixing the record date is adopted by the Board of Directors. Any stockholder of
record seeking to have the stockholders authorize or take corporate action by
written consent shall, by written notice to the Secretary, request the Board of
Directors to fix a record date. The Board of Directors shall promptly, but in
all events within ten (10) days after the date on which such a request is
received, adopt a resolution fixing the record date. If no record date has been
fixed by the Board of Directors within ten (10) days of the date on which such a
request is received, the record date for determining stockholders entitled to
consent to corporate action in writing without a meeting, when no prior action
by the Board of Directors is required by applicable 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 by delivery to its registered office in
the State of Delaware, its principal place of business or an officer or agent of
the corporation having custody of the book in which proceedings of meetings of
stockholders are recorded. Delivery made to the corporation's registered office
shall be by hand or by certified or registered mail, return receipt requested.
If no record date has been fixed by the Board of Directors and prior action by
the Board of Directors is required by law, the record date for determining
stockholders entitled to consent to corporate action in writing without a
meeting shall be at the close of business on the day on which the Board of
Directors adopts the resolution taking such prior action.
(c) In order that the corporation may determine the stockholders
entitled to receive payment of any dividend or other distribution or allotment
of any rights or the stockholders entitled to exercise any rights in respect of
any change, conversion or exchange of stock, or for the purpose of any other
lawful action, the Board of Directors may fix, in advance, a
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record date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted, and which record date shall be not
more than sixty (60) days prior to such action. If no record date is fixed, the
record date for determining stockholders for any such purpose shall be at the
close of business on the day on which the Board of Directors adopts the
resolution relating thereto.
SECTION 37. REGISTERED STOCKHOLDERS. The corporation shall be entitled
to recognize the exclusive right of a person registered on its books as the
owner of shares to receive dividends, and to vote as such owner, and shall not
be bound to recognize any equitable or other claim to or interest in such share
or shares on the part of any other person whether or not it shall have express
or other notice thereof, except as otherwise provided by the laws of Delaware.
ARTICLE VIII
OTHER SECURITIES OF THE CORPORATION
SECTION 38. EXECUTION OF OTHER SECURITIES. All bonds, debentures and
other corporate securities of the corporation, other than stock certificates
(covered in Section 33), may be signed by the Chairman of the Board of
Directors, the President or any Vice President, or such other person as may be
authorized by the Board of Directors, and the corporate seal impressed thereon
or a facsimile of such seal imprinted thereon and attested by the signature of
the Secretary or an Assistant Secretary, or the Chief Financial Officer or
Treasurer or an Assistant Treasurer; provided, however, that where any such
bond, debenture or other corporate security shall be authenticated by the manual
signature, or where permissible facsimile signature, of a trustee under an
indenture pursuant to which such bond, debenture or other corporate security
shall be issued, the signatures of the persons signing and attesting the
corporate seal on such bond, debenture or other corporate security may be the
imprinted facsimile of the signatures of such persons. Interest coupons
appertaining to any such bond, debenture or other corporate security,
authenticated by a trustee as aforesaid, shall be signed by the Treasurer or an
Assistant Treasurer of the corporation or such other person as may be authorized
by the Board of Directors, or bear imprinted thereon the facsimile signature of
such person. In case any officer who shall have signed or attested any bond,
debenture or other corporate security, or whose facsimile signature shall appear
thereon or on any such interest coupon, shall have ceased to be such officer
before the bond, debenture or other corporate security so signed or attested
shall have been delivered, such bond, debenture or other corporate security
nevertheless may be adopted by the corporation and issued and delivered as
though the person who signed the same or whose facsimile signature shall have
been used thereon had not ceased to be such officer of the corporation.
ARTICLE IX
DIVIDENDS
SECTION 39. DECLARATION OF DIVIDENDS. Dividends upon the capital stock
of the corporation, subject to the provisions of the Certificate of
Incorporation and applicable law, if any, may be declared by the Board of
Directors pursuant to law at any regular or special meeting.
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Dividends may be paid in cash, in property, or in shares of the capital stock,
subject to the provisions of the Certificate of Incorporation and applicable
law.
SECTION 40. DIVIDEND RESERVE. 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 their absolute
discretion, think proper as a reserve or reserves to meet contingencies, or for
equalizing dividends, 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 interests of the corporation, and the Board of Directors may
modify or abolish any such reserve in the manner in which it was created.
ARTICLE X
FISCAL YEAR
SECTION 41. FISCAL YEAR. The fiscal year of the corporation shall be
fixed by resolution of the Board of Directors.
ARTICLE XI
INDEMNIFICATION
SECTION 42. INDEMNIFICATION OF DIRECTORS, EXECUTIVE OFFICERS, OTHER
OFFICERS, EMPLOYEES AND OTHER AGENTS.
(a) DIRECTORS AND EXECUTIVE OFFICERS. The corporation shall
indemnify its directors and executive officers (for the purposes of this Article
XI, "executive officers" shall have the meaning defined in Rule 3b-7 promulgated
under the 1934 Act) to the fullest extent not prohibited by the DGCL or any
other applicable law; provided, however, that the corporation may modify the
extent of such indemnification by individual contracts with its directors and
executive officers; and, provided, further, that the corporation shall not be
required to indemnify any director or executive officer in connection with any
proceeding (or part thereof) initiated by such person unless (i) such
indemnification is expressly required to be made by law, (ii) the proceeding was
authorized by the Board of Directors of the corporation, (iii) such
indemnification is provided by the corporation, in its sole discretion, pursuant
to the powers vested in the corporation under the DGCL or any other applicable
law or (iv) such indemnification is required to be made under subsection (d).
(b) OTHER OFFICERS, EMPLOYEES AND OTHER AGENTS. The corporation
shall have power to indemnify its other officers, employees and other agents as
set forth in the DGCL or any other applicable law. The Board of Directors shall
have the power to delegate the determination of whether indemnification shall be
given to any such person except executive officers to such officers or other
persons as the Board of Directors shall determine.
(c) EXPENSES. The corporation shall advance to any person who was
or is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he is or was a director or executive
officer, of the corporation, or is or was serving at the request of
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the corporation as a director or executive officer of another corporation,
partnership, joint venture, trust or other enterprise, prior to the final
disposition of the proceeding, promptly following request therefor, all expenses
incurred by any director or executive officer in connection with such proceeding
upon receipt of an undertaking by or on behalf of such person to repay said
amounts if it should be determined ultimately that such person is not entitled
to be indemnified under this Section 42 or otherwise.
Notwithstanding the foregoing, unless otherwise determined pursuant to
paragraph (e) of this Section 42, no advance shall be made by the corporation to
an executive officer of the corporation (except by reason of the fact that such
executive officer is or was a director of the corporation in which event this
paragraph shall not apply) in any action, suit or proceeding, whether civil,
criminal, administrative or investigative, if a determination is reasonably and
promptly made (i) by the Board of Directors by a majority vote of a quorum
consisting of directors who were not parties to the proceeding, or (ii) if such
quorum is not obtainable, or, even if obtainable, a quorum of disinterested
directors so directs, by independent legal counsel in a written opinion, that
the facts known to the decision-making party at the time such determination is
made demonstrate clearly and convincingly that such person acted in bad faith or
in a manner that such person did not believe to be in or not opposed to the best
interests of the corporation.
(d) ENFORCEMENT. Without the necessity of entering into an
express contract, all rights to indemnification and advances to directors and
executive officers under this Bylaw shall be deemed to be contractual rights and
be effective to the same extent and as if provided for in a contract between the
corporation and the director or executive officer. Any right to indemnification
or advances granted by this Section 42 to a director or executive officer shall
be enforceable by or on behalf of the person holding such right in any court of
competent jurisdiction if (i) the claim for indemnification or advances is
denied, in whole or in part, or (ii) no disposition of such claim is made within
ninety (90) days of request therefor. The claimant in such enforcement action,
if successful in whole or in part, shall be entitled to be paid also the expense
of prosecuting his claim. In connection with any claim for indemnification, the
corporation shall be entitled to raise as a defense to any such action that the
claimant has not met the standards of conduct that make it permissible under the
DGCL or any other applicable law for the corporation to indemnify the claimant
for the amount claimed. In connection with any claim by an executive officer of
the corporation (except in any action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that such
executive officer is or was a director of the corporation) for advances, the
corporation shall be entitled to raise a defense as to any such action clear and
convincing evidence that such person acted in bad faith or in a manner that such
person did not believe to be in or not opposed to the best interests of the
corporation, or with respect to any criminal action or proceeding that such
person acted without reasonable cause to believe that his conduct was lawful.
Neither the failure of the corporation (including its Board of Directors,
independent legal counsel or its stockholders) to have made a determination
prior to the commencement of such action that indemnification of the claimant is
proper in the circumstances because he has met the applicable standard of
conduct set forth in the DGCL or any other applicable law, nor an actual
determination by the corporation (including its Board of Directors, independent
legal counsel or its stockholders) that the claimant has not met such applicable
standard of conduct, shall be a defense to the action or create a presumption
that claimant has not met the applicable standard of conduct. In any suit
brought by a director or executive officer to enforce a right to indemnification
or to an advancement of
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expenses hereunder, the burden of proving that the director or executive officer
is not entitled to be indemnified, or to such advancement of expenses, under
this Section 42 or otherwise shall be on the corporation.
(e) NON-EXCLUSIVITY OF RIGHTS. The rights conferred on any person
by this Bylaw shall not be exclusive of any other right which such person may
have or hereafter acquire under any applicable statute, provision of the
Certificate of Incorporation, Bylaws, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in his official capacity
and as to action in another capacity while holding office. The corporation is
specifically authorized to enter into individual contracts with any or all of
its directors, officers, employees or agents respecting indemnification and
advances, to the fullest extent not prohibited by the Delaware General
Corporation Law, or by any other applicable law.
(f) SURVIVAL OF RIGHTS. The rights conferred on any person by
this Bylaw shall continue as to a person who has ceased to be a director,
officer, employee or other agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
(g) INSURANCE. To the fullest extent permitted by the DGCL or any
other applicable law, the corporation, upon approval by the Board of Directors,
may purchase insurance on behalf of any person required or permitted to be
indemnified pursuant to this Section 42.
(h) AMENDMENTS. Any repeal or modification of this Section 42
shall only be prospective and shall not affect the rights under this Bylaw in
effect at the time of the alleged occurrence of any action or omission to act
that is the cause of any proceeding against any agent of the corporation.
(i) SAVING CLAUSE. If this Bylaw or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
corporation shall nevertheless indemnify each director and executive officer to
the full extent not prohibited by any applicable portion of this Section 42 that
shall not have been invalidated, or by any other applicable law. If this Section
42 shall be invalid due to the application of the indemnification provisions of
another jurisdiction, then the corporation shall indemnify each director and
executive officer to the full extent under any other applicable law.
(j) CERTAIN DEFINITIONS. For the purposes of this Bylaw, the
following definitions shall apply:
(1) The term "proceeding" shall be broadly construed and
shall include, without limitation, the investigation, preparation, prosecution,
defense, settlement, arbitration and appeal of, and the giving of testimony in,
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative.
(2) The term "expenses" shall be broadly construed and
shall include, without limitation, court costs, attorneys' fees, witness fees,
fines, amounts paid in settlement or judgment and any other costs and expenses
of any nature or kind incurred in connection with any proceeding.
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(3) The term the "corporation" shall include, in addition
to the resulting corporation, any constituent corporation (including any
constituent of a constituent) absorbed in a consolidation or merger which, if
its separate existence had continued, would have had power and authority to
indemnify its directors, officers, and employees or agents, so that any person
who is or was a director, officer, employee or agent of such constituent
corporation, or is or was serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, shall stand in the same position under
the provisions of this Section 42 with respect to the resulting or surviving
corporation as he would have with respect to such constituent corporation if its
separate existence had continued.
(4) References to a "director," "executive officer,"
"officer," "employee," or "agent" of the corporation shall include, without
limitation, situations where such person is serving at the request of the
corporation as, respectively, a director, executive officer, officer, employee,
trustee or agent of another corporation, partnership, joint venture, trust or
other enterprise.
(5) References to "other enterprises" shall include
employee benefit plans; references to "fines" shall include any excise taxes
assessed on a person with respect to an employee benefit plan; and references to
"serving at the request of the corporation" shall include any service as a
director, officer, employee or agent of the corporation which imposes duties on,
or involves services by, such director, officer, employee, or agent with respect
to an employee benefit plan, its participants, or beneficiaries; and a person
who acted in good faith and in a manner he reasonably believed to be in the
interest of the participants and beneficiaries of an employee benefit plan shall
be deemed to have acted in a manner "not opposed to the best interests of the
corporation" as referred to in this Section 42.
ARTICLE XII
NOTICES
SECTION 43. NOTICES.
(a) NOTICE TO STOCKHOLDERS. Whenever, under any provisions of
these Bylaws, notice is required to be given to any stockholder, it shall be
given in writing, timely and duly deposited in the United States mail, postage
prepaid, and addressed to his last known post office address as shown by the
stock record of the corporation or its transfer agent.
(b) NOTICE TO DIRECTORS. Any notice required to be given to any
director may be given by the method stated in subsection (a), or by overnight
delivery service, facsimile, telex or telegram, except that such notice other
than one which is delivered personally shall be sent to such address as such
director shall have filed in writing with the Secretary, or, in the absence of
such filing, to the last known post office address of such director.
(c) AFFIDAVIT OF MAILING. An affidavit of mailing, executed by a
duly authorized and competent employee of the corporation or its transfer agent
appointed with respect to the class of stock affected, specifying the name and
address or the names and
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addresses of the stockholder or stockholders, or director or directors, to whom
any such notice or notices was or were given, and the time and method of giving
the same, shall in the absence of fraud, be prima facie evidence of the facts
therein contained.
(d) TIME NOTICES DEEMED GIVEN. All notices given by mail or by
overnight delivery service, as above provided, shall be deemed to have been
given as at the time of mailing, and all notices given by facsimile, telex or
telegram shall be deemed to have been given as of the sending time recorded at
time of transmission.
(e) METHODS OF NOTICE. It shall not be necessary that the same
method of giving notice be employed in respect of all directors, but one
permissible method may be employed in respect of any one or more, and any other
permissible method or methods may be employed in respect of any other or others.
(f) FAILURE TO RECEIVE NOTICE. The period or limitation of time
within which any stockholder may exercise any option or right, or enjoy any
privilege or benefit, or be required to act, or within which any director may
exercise any power or right, or enjoy any privilege, pursuant to any notice sent
him in the manner above provided, shall not be affected or extended in any
manner by the failure of such stockholder or such director to receive such
notice.
(g) NOTICE TO PERSON WITH WHOM COMMUNICATION IS UNLAWFUL.
Whenever notice is required to be given, under any provision of law or of the
Certificate of Incorporation or Bylaws of the corporation, to any person with
whom communication is unlawful, the giving of such notice to such person shall
not be required and there shall be no duty to apply to any governmental
authority or agency for a license or permit to give such notice to such person.
Any action or meeting which shall be taken or held without notice to any such
person with whom communication is unlawful shall have the same force and effect
as if such notice had been duly given. In the event that the action taken by the
corporation is such as to require the filing of a certificate under any
provision of the DGCL, the certificate shall state, if such is the fact and if
notice is required, that notice was given to all persons entitled to receive
notice except such persons with whom communication is unlawful.
(h) NOTICE TO PERSON WITH UNDELIVERABLE ADDRESS. Whenever notice
is required to be given, under any provision of law or the Certificate of
Incorporation or Bylaws of the corporation, to any stockholder to whom (i)
notice of two consecutive annual meetings, and all notices of meetings or of the
taking of action by written consent without a meeting to such person during the
period between such two consecutive annual meetings, or (ii) all, and at least
two, payments (if sent by first class mail) of dividends or interest on
securities during a twelve-month period, have been mailed addressed to such
person at his address as shown on the records of the corporation and have been
returned undeliverable, the giving of such notice to such person shall not be
required. Any action or meeting which shall be taken or held without notice to
such person shall have the same force and effect as if such notice had been duly
given. If any such person shall deliver to the corporation a written notice
setting forth his then current address, the requirement that notice be given to
such person shall be reinstated. In the event that the action taken by the
corporation is such as to require the filing of a certificate under any
provision of the DGCL, the certificate need not state that notice was not given
to persons to whom notice was not required to be given pursuant to this
paragraph.
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ARTICLE XIII
AMENDMENTS
SECTION 44. AMENDMENTS. Subject to paragraph (h) of Section 42 of the
Bylaws, the Bylaws may be altered or amended or new Bylaws adopted by the
affirmative vote of at least sixty-six and two-thirds percent (66-2/3%) of the
voting power of all of the then-outstanding shares of the voting stock of the
corporation entitled to vote. The Board of Directors shall also have the power
to adopt, amend, or repeal Bylaws.
ARTICLE XIV
LOANS TO OFFICERS
SECTION 45. LOANS TO OFFICERS. The corporation may lend money to, or
guarantee any obligation of, or otherwise assist any officer or other employee
of the corporation or of its subsidiaries, including any officer or employee who
is a Director of the corporation or its subsidiaries, whenever, in the judgment
of the Board of Directors, such loan, guarantee or assistance may reasonably be
expected to benefit the corporation. The loan, guarantee or other assistance may
be with or without interest and may be unsecured, or secured in such manner as
the Board of Directors shall approve, including, without limitation, a pledge of
shares of stock of the corporation. Nothing in these Bylaws shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the corporation at
common law or under any statute.
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EXHIBIT 3.5
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
VIROLOGIC, INC.
ViroLogic, Inc., a corporation organized and existing under the General
Corporation Law of the State of Delaware (the "CORPORATION"), does hereby
certify:
FIRST: The name of this corporation is ViroLogic, Inc. The original
Certificate of Incorporation of the Corporation was filed with the Secretary of
State of Delaware on November 14, 1995.
SECOND: The Restated Certificate of Incorporation of the Corporation in
the form attached hereto as Exhibit A has been duly adopted in accordance with
the provisions of Sections 245 and 242 of the General Corporation Law of the
State of Delaware by the directors and stockholders of the Corporation.
THIRD: The text of the Certificate of Incorporation as heretofore
amended or supplemented is hereby amended and restated by the Restated
Certificate of Incorporation as set forth in Exhibit A attached hereto. The
Restated Certificate of Incorporation is hereby incorporated herein by this
reference.
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
signed by the President this ____ day of ________, 2000.
VIROLOGIC, INC.
By:
-------------------------------------
Martin H. Goldstein, President
<PAGE> 2
EXHIBIT A
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
VIROLOGIC, INC.
I.
The name of the corporation (hereinafter called the "CORPORATION") is
Virologic, Inc.
II.
The address of the registered office of the Corporation in the State of
Delaware is 1209 Orange Street, City of Wilmington, County of New Castle, and
the name of the registered agent of the Corporation in the State of Delaware at
such address is The Corporation Trust Company.
III.
The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
IV.
A. This Corporation is authorized to issue two classes of stock to be
designated, respectively, "Common Stock" and "Preferred Stock." The total number
of shares of Common Stock which the Corporation is authorized to issue is sixty
million (60,000,000) shares, each having a par value of one-tenth of one cent
($.001). The total number of shares of Preferred Stock which the Corporation is
authorized to issue is five million (5,000,000) shares, each having a par value
of one-tenth of one cent ($.001).
B. The Preferred Stock may be issued from time to time in one or more
series. The Board of Directors is hereby authorized, by filing a certificate (a
"PREFERRED STOCK DESIGNATION") pursuant to the Delaware General Corporation Law
("DGCL"), to fix or alter from time to time the designation, powers, preferences
and rights of the shares of each such series and the qualifications, limitations
or restrictions of any wholly unissued series of Preferred Stock, and to
establish from time to time the number of shares constituting any such series or
any of them; and to increase or decrease the number of shares of any series
subsequent to the issuance of shares of that series, but not below the number of
shares of such series then outstanding. In case the number of shares of any
series shall be decreased in accordance with the foregoing sentence, the shares
constituting such decrease shall resume the status that they had prior to the
adoption of the resolution originally fixing the number of shares of such
series.
V.
For the management of the business and for the conduct of the affairs of
the Corporation, and in further definition, limitation and regulation of the
powers of the Corporation, of its
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directors and of its stockholders or any class thereof, as the case may be, it
is further provided that:
A. BOARD OF DIRECTORS
1. CONDUCT OF BUSINESS; NUMBER OF DIRECTORS. The management of
the business and the conduct of the affairs of the Corporation shall be vested
in its Board of Directors. The number of directors which shall constitute the
whole Board of Directors shall be fixed exclusively by one or more resolutions
adopted by the Board of Directors.
2. CLASSIFIED BOARD. Subject to the rights of the holders of any
series of Preferred Stock to elect additional directors under specified
circumstances, the directors shall be divided into three classes designated as
Class I, Class II and Class III, respectively. Directors shall be assigned to
each class in accordance with a resolution or resolutions adopted by the Board
of Directors. At the first annual meeting of stockholders following the adoption
and filing of this Certificate of Incorporation, the term of office of the Class
I directors shall expire and Class I directors shall be elected for a full term
of three years. At the second annual meeting of stockholders following the
adoption and filing of this Certificate of Incorporation, the term of office of
the Class II directors shall expire and Class II directors shall be elected for
a full term of three years. At the third annual meeting of stockholders
following the adoption and filing of this Certificate of Incorporation, the term
of office of the Class III directors shall expire and Class III directors shall
be elected for a full term of three years. At each succeeding annual meeting of
stockholders, directors shall be elected for a full term of three years to
succeed the directors of the class whose terms expire at such annual meeting.
Notwithstanding the foregoing provisions of this section, each director
shall serve until his successor is duly elected and qualified or until his
death, resignation or removal. No decrease in the number of directors
constituting the Board of Directors shall shorten the term of any incumbent
director.
3. VACANCIES.
a. Subject to the rights of the holders of any series of
Preferred Stock, any vacancies on the Board of Directors resulting from death,
resignation, disqualification, removal or other causes and any newly created
directorships resulting from any increase in the number of directors, shall,
unless the Board of Directors determines by resolution that any such vacancies
or newly created directorships shall be filled by the stockholders, except as
otherwise provided by law, be filled only by the affirmative vote of a majority
of the directors then in office, even though less than a quorum of the Board of
Directors, and not by the stockholders. Any director elected in accordance with
the preceding sentence shall hold office for the remainder of the full term of
the director for which the vacancy was created or occurred and until such
director's successor shall have been elected and qualified.
b. If at the time of filling any vacancy or any newly
created directorship, the directors then in office shall constitute less than a
majority of the whole board (as constituted immediately prior to any such
increase), the Delaware Court of Chancery may, upon application of any
stockholder or stockholders holding at least ten percent (10%) of the
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total number of the shares at the time outstanding having the right to vote for
such directors, summarily order an election to be held to fill any such
vacancies or newly created directorships, or to replace the directors chosen by
the directors then in offices as aforesaid, which election shall be governed by
Section 211 of the DGCL.
4. At any time or times that the Corporation is subject to
Section 2115(b) of the California General Corporation Law (the "CGCL"), if,
after the filling of any vacancy by the directors then in office who have been
elected by stockholders shall constitute less than a majority of the directors
then in office, then
a. Any holder or holders of an aggregate of five percent
(5%) or more of the total number of shares at the time outstanding having the
right to vote for those directors may call a special meeting of stockholders; or
b. The Superior Court of the proper county shall, upon
application of such stockholder or stockholders, summarily order a special
meeting of stockholders, to be held to elect the entire board, all in accordance
with Section 305(c) of the CGCL. The term of office of any director shall
terminate upon that election of a successor.
B. BYLAWS
1. Subject to paragraph (h) of Section 42 of the Bylaws, the
Bylaws may be altered or amended or new Bylaws adopted by the affirmative vote
of at least sixty-six and two-thirds percent (66-2/3%) of the voting power of
all of the then-outstanding shares of the voting stock of the Corporation
entitled to vote. The Board of Directors shall also have the power to adopt,
amend, or repeal Bylaws.
2. The directors of the Corporation need not be elected by
written ballot unless the Bylaws so provide.
3. No action shall be taken by the stockholders of the
Corporation except at an annual or special meeting of stockholders called in
accordance with the Bylaws and no action shall be taken by the stockholders by
written consent.
4. Advance notice of stockholder nominations for the election of
directors and of business to be brought by stockholders before any meeting of
the stockholders of the Corporation shall be given in the manner provided in the
Bylaws of the Corporation.
VI.
A. The liability of the directors for monetary damages shall be
eliminated to the fullest extent under applicable law.
B. This Corporation is authorized to provide indemnification of agents
(as defined in Section 317 of the CGCL) for breach of duty to the Corporation
and its shareholders through bylaw provisions or through agreements with the
agents, or through shareholder resolutions, or otherwise, in excess of the
indemnification otherwise permitted by Section 317 of the CGCL,
3.
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subject, at any time or times the Corporation is subject to Section 2115(b) to
the limits on such excess indemnification set forth in Section 204 of the CGCL.
C. Any repeal or modification of this Article VI shall be prospective
and shall not affect the rights under this Article VI in effect at the time of
the alleged occurrence of any act or omission to act giving rise to liability or
indemnification.
VII.
A. The Corporation reserves the right to amend, alter, change or repeal
any provision contained in this Certificate of Incorporation, in the manner now
or hereafter prescribed by statute, except as provided in paragraph B. of this
Article VII, and all rights conferred upon the stockholders herein are granted
subject to this reservation.
B. Notwithstanding any other provisions of this Certificate of
Incorporation or any provision of law which might otherwise permit a lesser vote
or no vote, but in addition to any affirmative vote of the holders of any
particular class or series of the Voting Stock required by law, this Certificate
of Incorporation or any Preferred Stock Designation, the affirmative vote of the
holders of at least sixty-six and two-thirds percent (66-2/3%) of the voting
power of all of the then-outstanding shares of the voting stock, voting together
as a single class, shall be required to alter, amend or repeal Articles V, VI,
and VII.
4.
<PAGE> 1
EXHIBIT 4.3
VIROLOGIC, INC.
SECOND AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT
THIS INVESTORS' RIGHTS AGREEMENT (the "AGREEMENT") is made and entered
into as of the 23rd day of August, 1999 by and among VIROLOGIC, INC., a Delaware
corporation (the "Company"), and the persons and entities identified on Schedule
1 attached hereto (the "HOLDERS"). This Agreement supersedes and replaces the
Company's Amended and Restated Investors' Rights Agreement dated August 25, 1998
(the "PRIOR INVESTORS' RIGHTS AGREEMENT").
RECITALS
WHEREAS, on May 23, 1996, the Company entered into a Series A Preferred
Stock Purchase Agreement (the "SERIES A AGREEMENT") and issued shares of Series
A Preferred Stock to the persons and entities on Exhibit A thereto;
WHEREAS, simultaneously with the Series A Agreement, the Company entered
into an Investors' Rights Agreement with the persons and entities listed on
Exhibit A to the Investors' Rights Agreement;
WHEREAS, on November 13, 1997, the holders of the Company's Series A
Preferred Stock elected to convert their Series A Preferred Stock to Common
Stock;
WHEREAS, on August 25, 1998, the Company entered into a Series B
Preferred Stock Purchase Agreement (the "SERIES B AGREEMENT") and issued shares
of Series B Preferred Stock to the persons and entities on Exhibit A thereto;
WHEREAS, simultaneously with the Series B Agreement, the Company entered
into an the Prior Investors' Rights Agreement with the persons and entities
listed on Exhibit A to the Prior Investors' Rights Agreement;
WHEREAS, simultaneously herewith, the Company is entering into a Series
C Preferred Stock Purchase Agreement (the "SERIES C AGREEMENT") and issuing
shares of Series C Preferred Stock to the Investors named in Exhibit A to the
Series C Agreement; and
WHEREAS, the Holders intend to waive the rights set forth in Section 3.4
of the Prior Investors' Rights Agreement in connection with the issuance of
shares of Series C Preferred Stock pursuant to the Series C Agreement.
NOW, THEREFORE, it is hereby agreed as follows:
SECTION 1.
1.1 CERTAIN DEFINITIONS. As used in this Agreement, the following terms
shall have the meanings set forth below:
1.
<PAGE> 2
(a) "COMMISSION" shall mean the Securities and Exchange
Commission or any other federal agency at the time administering the Securities
Act.
(b) "EXCHANGE ACT" shall mean the Securities Exchange Act of
1934, as amended, or any similar successor federal statute and the rules and
regulations thereunder, all as the same shall be in effect from time to time.
(c) "HOLDER" shall mean any Investor who holds Registrable
Securities and any holder of Registrable Securities to whom the registration
rights conferred by this Agreement have been transferred in compliance with
Section 2.11 hereof.
(d) "INITIATING HOLDERS" shall mean any Holder or Holders who in
the aggregate hold not less than (i) thirty percent (30%) of the outstanding
Registrable Securities or (ii) any lesser number of Registrable Securities if
the anticipated aggregate offering price thereof would exceed ten million
dollars ($10,000,000).
(e) "INVESTORS" shall mean persons who purchased Shares pursuant
to the Series A Agreement, the Series B Agreement or the Series C Agreement.
(f) "OTHER STOCKHOLDERS" shall mean persons other than Holders
who, by virtue of agreements with the Company, are entitled to include their
securities in certain registrations hereunder.
(g) "PREFERRED STOCK" shall mean the Company's Series B Preferred
Stock and the Company's Series C Preferred Stock.
(h) "REGISTRABLE SECURITIES" shall mean (i) shares of Common
Stock issued or issuable pursuant to the conversion of the Shares and (ii) any
Common Stock issued as a dividend or other distribution with respect to or in
exchange for or in replacement of the shares referenced in (i) above, provided,
however, that Registrable Securities shall not include any shares of Common
Stock which have previously been registered or which have been sold to the
public.
(i) 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 declaration or ordering of the effectiveness of
such registration statement.
(j) "REGISTRATION EXPENSES" shall mean all expenses incurred in
effecting any registration pursuant to this Agreement, including, without
limitation, all registration, qualification, and filing fees, printing expenses,
escrow fees, fees and disbursements of counsel for the Company, blue sky fees
and expenses, and expenses of any regular or special audits incident to or
required by any such registration, but shall not include Selling Expenses and
fees and disbursements of counsel for the Holders (but excluding the
compensation of regular employees of the Company, which shall be paid in any
event by the Company).
2.
<PAGE> 3
(k) "RULE 144" shall mean Rule 144 as promulgated by the
Commission under the Securities Act, as such Rule may be amended from time to
time, or any similar successor rule that may be promulgated by the Commission.
(l) "RULE 145" shall mean Rule 145 as promulgated by the
Commission under the Securities Act, as such Rule may be amended from time to
time, or any similar successor rule that may be promulgated by the Commission.
(m) "SECURITIES ACT" shall mean the Securities Act of 1933, as
amended, or any similar successor federal statute and the rules and regulations
thereunder, all as the same shall be in effect from time to time.
(n) "SELLING EXPENSES" shall mean all underwriting discounts and
selling commissions applicable to the sale of Registrable Securities and fees
and disbursements of counsel for any Holder (other than the fees and
disbursements of counsel included in Registration Expenses).
(o) "SERIES A AGREEMENT" shall mean the Series A Preferred Stock
Purchase Agreement, dated May 23, 1996 between the Company and the investors
listed on Exhibit A thereto.
(p) "SERIES B AGREEMENT" shall mean the Series B Preferred Stock
Purchase Agreement dated August 25, 1999 between the Company and the investors
listed on Exhibit A thereto.
(q) "SERIES C AGREEMENT" shall mean the Series C Preferred Stock
Purchase Agreement dated the date hereof between the Company and the investors
listed on Exhibit A thereto.
(r) "SHARES" shall mean the Company's Series A Preferred Stock,
Series B Preferred Stock and Series C Preferred Stock.
SECTION 2. REQUESTED REGISTRATION.
2.1 REQUEST FOR REGISTRATION. If the Company shall receive from
Initiating Holders at any time or times not earlier than the earlier of (i)
December 31, 2000 or (ii) six months after the effective date of the first
registration statement filed by the Company covering an underwritten offering of
any of its securities to the general public, a written request that the Company
effect any registration with respect to all or a part of the Registrable
Securities, the Company will (X) promptly give written notice of the proposed
registration to all other Holders and (Y) as soon as practicable, use its best
efforts to effect such registration (including, without limitation, filing
post-effective amendments, appropriate qualifications under applicable blue sky
or other state securities laws, and appropriate compliance with the Securities
Act) 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 received
by the Company within twenty (20) days after such written notice from the
Company is mailed or
3.
<PAGE> 4
delivered. Notwithstanding the foregoing, the Company shall not be obligated to
effect, or to take any action to effect, any such registration pursuant to this
Section 2.1:
(i) In any particular jurisdiction in which the Company
would be required to execute a general consent to service of process in
effecting such registration, qualification, or compliance, unless the Company is
already subject to service in such jurisdiction and except as may be required by
the Securities Act;
(ii) After the Company has either (x) in the event that
the Company is eligible for registration of Registrable Securities on Form S-3,
initiated two such registrations pursuant to this Section 2.1(a) (counting for
these purposes only registrations which have been declared or ordered effective
and pursuant to which securities have been sold and registrations which have
been withdrawn by the Holders as to which the Holders have not elected to bear
the Registration Expenses pursuant to Section 2.3 hereof and would, absent such
election, have been required to bear such expenses) or (y) in the event that the
Company is not eligible for registration of Registrable Securities on Form S-3,
initiated four such registrations pursuant to this Section 2.1(a) (counting for
these purposes only registrations which have been declared or ordered effective
and pursuant to which securities have been sold and registrations which have
been withdrawn by Holders as to which Holders have not elected to bear the
Registration Expenses pursuant to Section 2.3 hereof and would, absent such
election, have been required to bear such expenses), provided, however, that the
third and fourth registration pursuant to this Section 2.1(a) may not be made
within twelve months of each other; or
(iii) During the period starting with the date thirty (30)
days prior to the Company's good faith estimate of the date of filing of, and
ending on a date one hundred eighty (180) days after the effective date of, a
Company-initiated registration; provided that the Company is actively employing
in good faith all reasonable efforts to cause such registration statement to
become effective.
(b) Subject to the foregoing clauses (i) through (iii), 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; provided, however, that if (i) in
the good faith judgment of the Board of Directors of the Company, such
registration would be seriously detrimental (excluding any consideration of
market price fluctuation due to the sale of the Registrable Securities) to the
Company and the Board of Directors of the Company concludes, as a result, that
it is essential to defer the filing of such registration statement at such time,
and (ii) the Company shall furnish to such Holders a certificate signed by the
President of the Company stating that in the good faith judgment of the Board of
Directors of the Company, it would be seriously detrimental (excluding any
consideration of market price fluctuation due to the sale of the Registrable
Securities) to the Company for such registration statement to be filed in the
near future and that it is, therefore, essential to defer the filing of such
registration statement, then the Company shall have the right to defer such
filing for the period during which such disclosure would be seriously
detrimental (excluding any consideration of market price fluctuation due to the
sale of the Registrable Securities), provided that (except as provided in clause
(iii) above) the Company may not defer the filing for a period of more than
ninety (90) days after receipt of the request of the Initiating Holders, and,
provided further, that
4.
<PAGE> 5
the Company shall not defer its obligation in this manner more than once in any
twelve-month period.
(c) UNDERWRITING. The right of any Holder to registration
pursuant to Section 2.1 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 with respect to such participation and
inclusion) to the extent provided herein. A Holder may elect to include in such
underwriting all or a part of the Registrable Securities he holds.
(d) PROCEDURES. The Company shall (together with all Holders and
other persons 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, which underwriters are
reasonably acceptable to the Company. Notwithstanding any other provision of
this Section 2.1, if the representative of the underwriters advises the
Initiating Holders in writing that marketing factors require a limitation on the
number of shares to be underwritten, the number of shares to be included in the
underwriting or registration shall be allocated as set forth in Section 2.12
hereof. If a person who has requested inclusion in such registration as provided
above does not agree to the terms of any such underwriting, such person shall be
excluded therefrom by written notice from the Company, the underwriter or the
Initiating Holders. The securities so excluded shall also be withdrawn from
registration. Any Registrable Securities or other securities excluded shall also
be withdrawn from such registration. If shares are so withdrawn from the
registration and if the number of shares to be included in such registration was
previously reduced as a result of marketing factors pursuant to this Section
2.1(d), then the Company shall offer to all Holders who have retained rights to
include securities in the registration the right to include additional
securities in the registration in an aggregate amount equal to the number of
shares so withdrawn, with such shares to be allocated among such Holders
requesting additional inclusion in accordance with Section 2.12.
2.2 COMPANY REGISTRATION.
(a) 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
pursuant to Section 2.1 or 2.4 hereof), other than a registration relating
solely to employee benefit plans, or a registration relating solely to a Rule
145 transaction, or a registration on any registration form that does not permit
secondary sales, the Company will (X) promptly give to each Holder written
notice thereof and (Y) use its best efforts to include in such registration (and
any related qualification under blue sky laws or other compliance), except as
set forth in Section 2.2(b) below, and in any underwriting involved therein, all
the Registrable Securities specified in a written request or requests, made by
any Holder and received by the Company within twenty (20) days after the written
notice from the Company described in clause (i) above is mailed or delivered by
the Company. Such written request may specify all or a part of a Holder's
Registrable Securities.
(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
5.
<PAGE> 6
a part of the written notice given pursuant to Section 2.2(a)(i). In such event,
the right of any Holder to registration pursuant to this Section 2.2 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 and the other holders
of securities of the Company with registration rights to participate therein
distributing their securities through such underwriting) enter into an
underwriting agreement in customary form with the representative of the
underwriter or underwriters selected by the Company.
Notwithstanding any other provision of this Section 2.2, if the
representative of the underwriters advises the Company in writing that marketing
factors require a limitation on the number of shares to be underwritten, the
representative may (subject to the limitations set forth below) exclude all
Registrable Securities (other than pursuant to Section 2.1 or 2.4 hereof) from,
or limit the number of Registrable Securities to be included in, the
registration and underwriting. If the registration is the first
Company-initiated registered offering of the Company's securities to the general
public, the Company may limit, to the extent so advised by the underwriters, the
amount of securities (including Registrable Securities) to be included in the
registration by the Company's stockholders (including the Holders), or may
exclude, to the extent so advised by the underwriters, such underwritten
securities entirely from such registration; provided, however, that any such
limitation or cut back shall be first applied to all shares proposed to be sold
in such offering other than for the account of the Company which are not
Registrable Securities. If such registration is the second or any subsequent
Company-initiated registered offering of the Company's securities to the general
public, the Company may limit, to the extent so advised by the underwriters, the
amount of securities to be included in the registration by the Company's
stockholders (including the Holders); provided, however, that any such
limitation or cutback shall first be applied to all shares proposed to be sold
in such offering other than for the account of the Company which are not
Registrable Securities; provided, further, that the aggregate value of
Registrable Securities to be included in such registration by the Holders may
not be so reduced to less than twenty-five percent (25%) of the total value of
all securities included in such registration. 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 first to the Company for securities being sold for its own
account and thereafter as set forth in Section 2.12. If any person does not
agree to the terms of any such underwriting, he shall be excluded therefrom by
written notice from the Company or the underwriter. Any Registrable Securities
or other securities excluded or withdrawn from such underwriting shall be
withdrawn from such registration.
If shares are so withdrawn from the registration and if the number of
shares of Registrable Securities to be included in such registration was
previously reduced as a result of marketing factors, the Company shall then
offer to all persons who have retained the right to include securities in the
registration the right to include additional securities in the registration in
an aggregate amount equal to the number of shares so withdrawn, with such shares
to be allocated among the persons requesting additional inclusion in accordance
with Section 2.12 hereof.
2.3 EXPENSES OF REGISTRATION. All Registration Expenses incurred in
connection with any registration, qualification or compliance pursuant to
Sections 2.2 and 2.4 hereof, and the first
6.
<PAGE> 7
two registrations pursuant to Section 2.1 hereof and reasonable fees of one
counsel for the Holders in the case of registrations pursuant to Section 2.1
shall be borne by the Company; provided, however, that if the Holders bear the
Registration Expenses for any registration proceeding begun pursuant to Section
2.1 and subsequently withdrawn by the Holders registering shares therein, such
registration proceeding shall not be counted as a requested registration
pursuant to Section 2.1 hereof, except in the event that such withdrawal is
based upon material adverse information relating to the Company that is
different from the information known or available (upon request from the Company
or otherwise) to the Holders requesting registration at the time of their
request for registration under Section 2.1, in which event such registration
shall not be treated as a counted registration for purposes of Section 2.1
hereof, even though the Holders do not bear the Registration Expenses for such
registration. All Selling Expenses relating to securities so registered shall be
borne by the holders of such securities pro rata on the basis of the number of
shares of securities so registered on their behalf.
2.4 REGISTRATION ON FORM S-3.
(a) After its initial public offering, the Company shall use its
best efforts to qualify for registration on Form S-3 or any comparable or
successor form or forms. After the Company has qualified for the use of Form
S-3, the Holders of Registrable Securities shall have the right to request
registrations on Form S-3 (such requests shall be in writing and shall state the
number of shares of Registrable Securities to be disposed of and the intended
methods of disposition of such shares by such Holder or Holders), provided,
however, that the Company shall not be obligated to effect any such registration
if (i) the Holders, together with the holders of any other securities of the
Company entitled to inclusion in such registration, propose to sell Registrable
Securities and such other securities (if any) on Form S-3 at an aggregate price
to the public of less than $1,000,000, (ii) in the event that the Company shall
furnish the certification described in Section 2.1(b) (but subject to the
limitations set forth therein), (iii) in a given twelve-month period, after the
Company has effected one (1) such registration in any such period or (iv) it is
to be effected more than five (5) years after the Company's initial public
offering.
(b) If a request complying with the requirements of Section
2.4(a) hereof is delivered to the Company, the provisions of Sections 2.1(a) and
(b) shall apply to such registration. If the registration is for an underwritten
offering, the provisions of Sections 2.1(c) and (d) shall apply to such
registration.
2.5 REGISTRATION PROCEDURES. In the case of each registration effected
by the Company pursuant to Section 2, the Company will keep each Holder advised
in writing as to the initiation of each registration and as to the completion
thereof. At its expense, the Company will use its best efforts to:
(a) Keep (i) a registration on Form S-1 effective for a period of
ninety (90) days or until the Holder or Holders have completed the distribution
described in the registration statement relating thereto, whichever first occurs
and (ii) a registration on Form S-3 effective for a period of 180 days or until
the Holder or Holders have completed the distribution described in the
registration statement related thereto, whichever first occurs (each an
"EFFECTIVENESS PERIOD"); provided, however, that the Effectiveness Period shall
be extended for a period of time equal to the period the Holder refrains from
selling any securities included in such registration at
7.
<PAGE> 8
the request of the Company or of an underwriter of Common Stock (or other
securities) of the Company.
(b) Prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement;
(c) Furnish such number of prospectuses and other documents
incident thereto, including any amendment of or supplement to the prospectus, as
a Holder from time to time may reasonably request;
(d) Notify each seller of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading or incomplete in the light of the
circumstances then existing, and at the request of any such seller, prepare and
furnish to such seller a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such shares, such prospectus shall not include an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading or
incomplete in the light of the circumstances then existing;
(e) Cause all such Registrable Securities registered pursuant
hereunder to be listed on each securities exchange on which similar securities
issued by the Company are then listed;
(f) Provide a transfer agent and registrar for all Registrable
Securities registered pursuant to such registration statement and a CUSIP number
for all such Registrable Securities, in each case not later than the effective
date of such registration;
(g) Otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission, and make available to its security
holders, as soon as reasonably practicable, an earnings statement covering the
period of at least twelve months, but not more than eighteen months, beginning
with the first month after the effective date of the Registration Statement,
which earnings statement shall satisfy the provisions of Section 11(a) of the
Securities Act; and
(h) In connection with any underwritten offering pursuant to a
registration statement filed pursuant to Section 2.1 hereof, the Company will
enter into an underwriting agreement reasonably necessary to effect the offer
and sale of Common Stock, provided such underwriting agreement contains
customary underwriting provisions and provided further that if the underwriter
so requests the underwriting agreement will contain customary contribution
provisions.
8.
<PAGE> 9
2.6 INDEMNIFICATION.
(a) The Company will indemnify each Holder, each of its officers,
directors and partners, legal counsel, and accountants and each person
controlling such Holder within the meaning of Section 15 of the Securities Act,
with respect to which registration, qualification, or compliance has been
effected pursuant to this Section 2, and each underwriter, if any, and each
person who controls within the meaning of Section 15 of the Securities Act any
underwriter, against all expenses, claims, losses, damages, and liabilities (or
actions, proceedings, or settlements 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 with this Section 2, 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, partners, legal counsel, and accountants and each person controlling
such Holder, each such underwriter, and each person who controls any such
underwriter, for any legal and any other expenses reasonably incurred in
connection with investigating and defending or settling 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 upon
written information furnished to the Company by such Holder or underwriter and
stated to be specifically for use therein; unless such information was
subsequently corrected in a writing specifically noting the correction furnished
to the Company prior to the filing of the registration statement. It is agreed
that the indemnity agreement contained in this Section 2.6(a) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability, or action
if such settlement is effected without the consent of the Company (which consent
has not been unreasonably withheld).
(b) Each Holder will, if Registrable Securities held by him are
included in the securities as to which such registration, qualification, or
compliance is being effected, indemnify the Company, each of its directors,
officers, partners, legal counsel, and accountants and each underwriter, if any,
of the Company's securities covered by such a registration statement, each
person who controls the Company or such underwriter within the meaning of
Section 15 of the Securities Act, each other such Holder and Other Stockholder,
and each of their officers, directors, and partners, and each person controlling
such Holder or Other Stockholder, 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 Stockholders,
directors, officers, partners, legal counsel, and accountants, persons,
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,
9.
<PAGE> 10
offering circular, or other document in reliance upon and in conformity with
written information furnished to the Company by such Holder and stated to be
specifically for use therein provided, however, that the obligations of such
Holder hereunder shall not apply to amounts paid in settlement of any such
claims, losses, damages, or liabilities (or actions in respect thereof) if such
settlement is effected without the consent of such Holder (which consent shall
not be unreasonably withheld).
(c) Each party entitled to indemnification under this Section 2.6
(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 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, 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 1, to the extent such
failure is not prejudicial. No Indemnifying Party, in the defense of any such
claim or litigation, shall, except with the consent of each Indemnified Party,
consent to entry of any judgment or enter into any settlement that does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such Indemnified Party of a release from all liability in respect to such
claim or litigation. Each Indemnified Party shall furnish such information
regarding itself or the claim in question as an Indemnifying Party may
reasonably request in writing and as shall be reasonably required in connection
with defense of such claim and litigation resulting therefrom.
(d) If the indemnification provided for in this Section 2.6 is
held by a court of competent jurisdiction to be unavailable to an Indemnified
Party with respect to any loss, liability, claim, damage, or expense referred to
therein, then the Indemnifying Party, in lieu of indemnifying such Indemnified
Party hereunder, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such loss, liability, claim, damage, or expense
in such proportion as is appropriate to reflect the relative fault of the
Indemnifying Party on the one hand and of the Indemnified Party on the other in
connection with the statements or omissions that resulted in such loss,
liability, claim, damage, or expense as well as any other relevant equitable
considerations. The relative fault of the Indemnifying Party and of the
Indemnified Party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
Indemnifying Party or by the Indemnified Party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission.
(e) Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained in the underwriting
agreement entered into in connection with the underwritten public offering are
in conflict with the foregoing provisions, the provisions in the underwriting
agreement shall control.
2.7 INFORMATION BY HOLDER. Each Holder of Registrable Securities shall
furnish to the Company such information regarding such Holder and the
distribution proposed by such Holder
10.
<PAGE> 11
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 2.
2.8 LIMITATIONS ON REGISTRATION OF ISSUES OF SECURITIES. From and after
the date of this Agreement, the Company shall not, without the prior written
consent of a majority in interest of the Holders, enter into any agreement with
any holder or prospective holder of any securities of the Company giving such
holder or prospective holder any registration rights the terms of which are more
favorable than the registration rights granted to the Holders hereunder.
2.9 RULE 144 REPORTING. With a view to making available the benefits of
certain rules and regulations of the Commission that may permit the sale of the
Restricted Securities to the public without registration, the Company agrees to
use its best efforts to:
(a) Make and keep public information regarding the Company
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) 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;
(c) So long as a Holder owns any Restricted Securities, furnish
to the Holder forthwith upon written 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 filed by the Company for 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 Holder may reasonably request in availing itself of any
rule or regulation of the Commission allowing a Holder to sell any such
securities without registration.
2.10 TRANSFER OR ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause
the Company to register securities granted to a Holder by the Company under this
Section 1 may be transferred or assigned by a Holder only to a transferee or
assignee of not less than 100,000 shares of Registrable Securities (as presently
constituted and subject to subsequent adjustments for stock splits, stock
dividends, reverse stock splits, and the like), provided that the Company is
given written notice at the time of or within a reasonable time after such
transfer or assignment, stating the name and address of the transferee or
assignee and identifying the securities with respect to which such registration
rights are being transferred or assigned, and, provided further, that the
transferee or assignee of such rights assumes the obligations of such Holder
under this Section 2.
2.11 "MARKET STAND-OFF" AGREEMENT. If requested by the Company and an
underwriter of Common Stock (or other securities) of the Company, an Investor
shall not sell or otherwise transfer or dispose of any Common Stock (or other
securities) of the Company held by such Investor (other than those included in
the registration) during a period of up to one hundred
11.
<PAGE> 12
eighty (180) days following the effective date of a registration statement of
the Company filed under the Securities Act, provided that such agreement shall
only apply to the first such registration statement of the Company, including
securities to be sold on its behalf to the public in an underwritten offering.
The obligations described in this Section 2.11 shall not apply to a
registration relating solely to employee benefit plans on Form S-1 or Form S-8
or similar forms that may be promulgated in the future, or a registration
relating solely to a Commission Rule 145 transaction on Form S-4 or similar
forms that may be promulgated in the future. The Company may impose
stop-transfer instructions with respect to the shares (or securities) subject to
the foregoing restriction until the end of such one hundred eighty (180) day
period.
2.12 ALLOCATION OF REGISTRATION OPPORTUNITIES. In any circumstance in
which all of the Registrable Securities and other shares of Common Stock of the
Company (including shares of Common Stock issued or issuable upon conversion of
shares of any currently unissued series of Preferred Stock of the Company) with
registration rights (the "OTHER SHARES") requested to be included in a
registration on behalf of the Holders or other selling stockholders cannot be so
included as a result of limitations of the aggregate number of shares of
Registrable Securities and Other Shares that may be so included, the number of
shares of Registrable Securities and Other Shares that may be so included shall
be allocated among the Holders and other selling stockholders requesting
inclusion of shares pro rata on the basis of the number of shares of Registrable
Securities and Other Shares that would be held by such Holders and other selling
stockholders, assuming conversion; provided, however, so that such allocation
shall not operate to reduce the aggregate number of Registrable Securities and
Other Shares to be included in such registration, if any Holder or other selling
stockholder does not request inclusion of the maximum number of shares of
Registrable Securities and Other Shares allocated to him pursuant to the
above-described procedure, the remaining portion of his allocation shall be
reallocated among those requesting Holders and other selling stockholders whose
allocations did not satisfy their requests pro rata on the basis of the number
of shares of Registrable Securities and Other Shares which would be held by such
Holders and other selling stockholders, assuming conversion, and this procedure
shall be repeated until all of the shares of Registrable Securities and Other
Shares which may be included in the registration on behalf of the Holders and
other selling stockholders have been so allocated. The Company shall not limit
the number of Registrable Securities to be included in a registration pursuant
to this Agreement in order to include shares held by stockholders with no
registration rights existing on the date hereof or to include founder's stock or
any other shares of stock issued to employees, officers, directors, or
consultants pursuant to incentive stock plans of the Company, or, with respect
to registrations under Sections 2.1 or 2.4 hereof, in order to include in such
registration securities registered for the Company's own account.
2.13 DELAY OF REGISTRATION. No Holder shall have any right to take any
action to restrain, enjoin, or otherwise delay any registration as the result of
any controversy that might arise with respect to the interpretation or
implementation of this Section 2.
2.14 TERMINATION. This Section 2 shall terminate five years after the
initial public offering of the Company or earlier as to a particular Holder if
such Holder can sell all of the Holder's Registrable Securities in a 90-day
period pursuant to Rule 144.
12.
<PAGE> 13
SECTION 3.
The Company hereby covenants and agrees, so long as any Holder owns any
Registrable Securities, as follows:
3.1 BASIC FINANCIAL INFORMATION. The Company will furnish the following
reports to each Holder, which owns at least 200,000 Shares, or such number of
shares of Common Stock issued upon conversion of 200,000 or more Shares, or any
combination thereof (as presently constituted and subject to subsequent
adjustment for stock splits, stock dividends, reverse stock splits,
recapitalizations and the like), and to each Holder which represents that it is
a "venture capital operating company" for purposes of Department of Labor
Regulation Section 2510.3-101 (a "SIGNIFICANT HOLDER"):
(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
balance sheet of the Company and its subsidiaries, if any, as at the end of such
fiscal year, and consolidated statements of income 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 and certified by independent public accountants of
recognized national standing selected by the Company, and a Company prepared
comparison to the Company's operating plan for such year.
(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 balance
sheet of the Company and its subsidiaries, if any, as of the end of each such
quarterly period, and consolidated statements of income and cash flows of the
Company and its subsidiaries 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 and to the Company's operating
plan then in effect and approved by its Board of Directors, subject to changes
resulting from normal year-end audit adjustments, all in reasonable detail and
certified by the principal financial or accounting officer of the Company,
except that such financial statements need not contain the notes required by
generally accepted accounting principles.
(c) Annually (but in any event at least thirty (30) days prior to
the commencement of each fiscal year of the Company) the financial plan of the
Company, in such manner and form as approved by the Board of Directors of the
Company, which financial plan shall include a projection of income and a
projected cash flow statement for such fiscal year and a projected balance sheet
as of the end of such fiscal year. Any material changes in such business plan
shall be submitted as promptly as practicable after such changes have been
approved by the Board of Directors of the Company.
3.2 OBSERVER RIGHTS. So long as two (2) million shares of Preferred
Stock remain outstanding, the Company will permit a representative of the
holders of the Preferred Stock (the "OBSERVER") to attend all meetings of the
Company's Board of Directors (the "BOARD") and all committees thereof (whether
in person, telephonic or other) in a non-voting, observer capacity
13.
<PAGE> 14
and shall provide to the Observer, concurrently with the members of the Board,
and in the same manner, notice of such meeting and a copy of all materials
provided to such members; provided, however, that the Observer shall agree to
hold in confidence and trust and to act in a fiduciary manner with respect to
all information so provided; and, provided further, that the Company reserves
the rights to withhold any information and to exclude the Observer from any
meeting or portion thereof if access to such information or attendance at such
meeting could adversely affect the attorney-client privilege between the Company
and its counsel or would result in disclosure of trade secrets to the Observer.
3.3 VISITATION AND INSPECTION RIGHTS.
(a) The Company will permit any Holder (or a representative of
any Significant Holder) to visit and inspect any of the properties of the
Company, including its books of account and other records (and make copies
thereof and take extracts therefrom), 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 person may reasonably request.
(b) The provisions of Section 3.1 and this Section 3.3 shall not
be in limitation of any rights which any Holder or Significant Holder may have
with respect to the books and records of the Company and its subsidiaries, or to
inspect their properties or discuss their affairs, finances and accounts, under
the laws of the jurisdictions in which they are incorporated.
(c) Anything in Section 3 to the contrary notwithstanding, no
Holder or Significant Holder by reason of this Agreement shall have access to
any trade secrets or classified information of the Company. Each Significant
Holder hereby agrees to hold in confidence and trust and not to misuse or
disclose any confidential information provided pursuant to this Section 2.2. A
Significant Holder may disclose confidential information to employees and
consultants provided that they are bound by confidentiality provisions and use
restrictions at least as restrictive as those imposed on the Significant Holder
pursuant to this Section 3.3(c). The Company shall not be required to comply
with this Section 3.3 in respect of any Holder whom the Company reasonably
determines to be a competitor or an officer, employee, director or greater than
5% stockholder of a competitor.
(d) As soon as practicable after transmission or occurrence and
in any event within ten days thereof, copies of any reports or communications
delivered to any class of the Company's security holders or broadly to the
financial community.
(e) Each Holder who represents to the Company that it is a
"venture capital operating company" for purposes of Department of Labor
Regulation Section 2510.3-101 shall in addition have the right to consult with
and advise the officers of the Company as to the management of the Company.
3.4 RIGHT OF FIRST REFUSAL. The Company hereby grants to each Holder who
owns any Shares or any shares of Common Stock issued upon conversion of the
Shares the right of first refusal to purchase a pro rata share of New Securities
(as defined in this Section 3.4) which the Company may, from time to time,
propose to sell and issue. A Holder's pro rata share, for
14.
<PAGE> 15
purposes of this right of first refusal, is the ratio of the number of shares of
Common Stock owned by such Holder immediately prior to the issuance of New
Securities, assuming full conversion of the Shares and exercise of an option or
warrant held by such Holder, to the total number of shares of Common Stock
outstanding immediately prior to the issuance of New Securities, assuming full
conversion of the Shares and exercise of all outstanding rights, options and
warrants to acquire Common Stock of the Company. Each Holder shall have a right
of over-allotment such that if any Holder fails to exercise its right hereunder
to purchase its pro rata share of New Securities, the other Holders may purchase
the non-purchasing Holder's portion on a pro rata basis within ten (10) days
from the date such non-purchasing Holder fails to exercise its right hereunder
to purchase its pro rata share of New Securities. This right of first refusal
shall be subject to the following provisions:
(a) "NEW SECURITIES" shall mean any capital stock (including
Common Stock and/or Preferred Stock) of the Company whether now authorized or
not, and rights, options or warrants to purchase such capital stock, and
securities of any type whatsoever that are, or may become, convertible into
capital stock; provided that New Securities does not include (i) securities
purchased under the Series A Agreement, Series B Agreement or Series C
Agreement; (ii) securities issued upon conversion of the Shares; (iii)
securities issued pursuant to the acquisition of another business entity or
business segment of any such entity by the Company by merger, purchase of
substantially all the assets or other reorganization, if such acquisition is
approved by the Board of Directors; (iv) any borrowings, direct or indirect,
from financial institutions or other persons by the Company, whether or not
presently authorized, including any type of loan or payment evidenced by any
type of debt instrument, provided that if such borrowing has any equity features
including warrants, options or other rights to purchase capital stock or is not
convertible into capital stock of the Company, then such borrowing shall have
been approved by the Board of Directors; (v) securities issued to employees,
consultants, officers or directors of the Company pursuant to any stock option,
stock purchase or stock bonus plan, agreement or arrangement approved by the
Board of Directors; (vi) securities issued upon exercise of the warrants
outstanding as of the date hereof; (vii) securities issued in connection with
obtaining lease financing, whether issued to a lessor, guarantor or other
person, if such financing is approved by the Board of Directors; (viii)
securities issued in a public offering pursuant to a registration under the
Securities Act; (ix) securities issued in connection with any stock split, stock
dividend or recapitalization of the Company; and (x) any right, option or
warrant to acquire any security convertible into the securities excluded from
the definition of New Securities pursuant to subsections (i) through (ix) above.
(b) In the event the Company proposes to undertake an issuance of
New Securities, it shall give each Holder written notice of its intention,
describing the type of New Securities, and their price and the general terms
upon which the Company proposes to issue the same. Each Holder shall have twenty
(20) days after any such notice is mailed or delivered to agree to purchase such
Holder's pro rata share of such New Securities for the price and upon the terms
specified in the notice by giving written notice to the Company and stating
therein the quantity of New Securities to be purchased.
(c) In the event the Holders fail to exercise fully the right of
first refusal within such twenty (20) day period and after the expiration of the
ten-day period for the exercise of the over-allotment provisions of this Section
3.4, the Company shall have one hundred twenty (120)
15.
<PAGE> 16
days thereafter to sell or enter into an agreement (pursuant to which the sale
of New Securities covered thereby shall be closed, if at all, within one hundred
twenty (120) days from the date of such agreement) to sell the New Securities
respecting which the Holders' right of first refusal option set forth in this
Section 3.4 was not exercised, at a price and upon terms no more favorable to
the purchasers thereof than specified in the Company's notice to Holders
pursuant to Section 3.4(b). In the event the Company has not sold within such
120-day period or entered into an agreement to sell the New Securities in
accordance with the foregoing within one hundred twenty (120) days from the date
of such agreement, the Company shall not thereafter issue or sell any New
Securities, without first again offering such securities to the Holders in the
manner provided in Section 3.4(b) above.
(d) The right of first refusal set forth in this Section 3.4 may
not be assigned or transferred, except that (i) such right is assignable by each
Holder to any partner, wholly owned subsidiary or parent of, or to any
corporation or entity that is, within the meaning of the Securities Act,
controlling, controlled by or under common control with, any such Holder, and
(ii) such right is assignable between and among any of the Holders.
3.5 TERMINATION OF RIGHTS. The rights granted under Section 3.1 shall
expire upon the first sale of Common Stock of the Company to the public effected
pursuant to a registration statement filed with, and declared effective by, the
Securities and Exchange Commission (the "Commission") under the Securities Act.
The rights granted under Sections 3.2, 3.3 and 3.4 shall expire upon the first
sale of Common Stock of the Company to the public effected pursuant to a
registration statement filed with, and declared effective by, the Commission
under the Securities Act.
SECTION 4.
4.1 GOVERNING LAW. This Agreement shall be governed in all respects by
the laws of the State of California, as if entered into by and between
California residents exclusively for performance entirely within California.
4.2 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.
4.3 ENTIRE AGREEMENT; AMENDMENT; WAIVER. This Agreement (including the
Exhibits hereto) constitutes the full and entire understanding and agreement
between the parties with regard to the subjects hereof and thereof. 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 at least
a majority of the Registrable Securities and any such amendment, waiver,
discharge or termination shall be binding on all the Holders, but in no event
shall the obligation of any Holder hereunder be materially increased, except
upon the written consent of such Holder.
4.4 WAIVER OF RIGHT OF FIRST REFUSAL. The Company and holders of a
majority of the Registerable Securities, as that term is defined in the Prior
Investors' Rights Agreement, hereby agree, as evidenced by their signatures
hereto, that all rights granted and covenants made under
16.
<PAGE> 17
Section 3.4 of the Prior Investors' Rights Agreement are hereby waived and
released with respect to the sale and issuance by the Company of its Series C
Preferred Stock pursuant to the Series C Agreement.
4.5 NOTICES, ETC. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by United States
first-class mail, postage prepaid, or delivered personally by hand or nationally
recognized courier addressed (a) if to a Holder, as indicated on the list of
Holders attached hereto as Schedule 1, or at such other address as such holder
or permitted assignee shall have furnished to the Company in writing, or (b) if
to the Company, at 270 East Grand Avenue, South San Francisco, California, or at
such other address as the Company shall have furnished to each holder in
writing. All such notices and other written communications shall be effective
(i) if mailed, five (5) days after mailing and (ii) if delivered, upon delivery.
4.6 DELAYS OR OMISSIONS. No delay or omission to exercise any right,
power or remedy accruing to any Holder, upon any breach or default of the
Company under this Agreement shall impair any such right, power or remedy of
such Holder 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 therefore or thereafter
occurring. Any waiver, permit, consent or approval of any kind or character on
the part of any Holder of any breach or default under this Agreement or any
waiver on the part of any Holder 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 Holder, shall be cumulative and
not alternative.
4.7 RIGHTS; SEPARABILITY. Unless otherwise expressly provided herein, a
Holder's rights hereunder are several rights, not rights jointly held with any
of the other Holders. In case any provision of the 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.
4.8 INFORMATION CONFIDENTIAL. Each Holder acknowledges that the
information received by them pursuant hereto may be confidential and for its use
only, and it will not use such confidential information in violation of the
Exchange Act or reproduce, disclose or disseminate such information to any other
person (other than its employees or agents having a need to know the contents of
such information, and its attorneys), except in connection with the exercise of
rights under this Agreement, unless the Company has made such information
available to the public generally or such Holder is required to disclose such
information by a governmental body.
4.9 TITLES AND SUBTITLES. The titles of the paragraphs and subparagraphs
of this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
4.10 ADDITIONAL INVESTORS. Notwithstanding anything to the contrary
contained herein, if the Company shall issue additional shares of its Series C
Preferred Stock pursuant to the Series C Agreement, any purchaser of such shares
of Series C Preferred Stock may become a
17.
<PAGE> 18
party to this Agreement by executing and delivering an additional counterpart
signature page to this Agreement and shall be deemed an "HOLDER" hereunder.
4.11 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
[Remainder of Page Intentionally Left Blank]
18.
<PAGE> 19
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
COMPANY:
VIROLOGIC, INC.
By:
-------------------------------------
Martin Goldstein, President
[Signature Page to Investor Rights Agreement]
<PAGE> 20
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
HOLDERS:
BIOTECH GROWTH S.A.
By:
--------------------------------------
Its: Authorized Signatory
By:
--------------------------------------
Its: Authorized Signatory
[Signature Page to Investor Rights Agreement]
<PAGE> 21
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
INVESTORS:
-----------------------------------------
AEOW 96, LLC
By: Will K. Weinstein Revoc Trst
Dtd 2/27/90
Its: Member Manager
By: Will K. Weinstein
Its: Trustee
[Signature Page to Investor Rights Agreement]
<PAGE> 22
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
INVEMED ASSOCIATES LLC
By:
--------------------------------------
Name: Cristina H. Kepner
Title:
-----------------------------------
-----------------------------------------
CRISTINA H. KEPNER
[Signature Page to Investor Rights Agreement]
<PAGE> 23
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
-----------------------------------------
Richard Beleson
[Signature Page to Investor Rights Agreement]
<PAGE> 24
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
CAPITAL MANAGEMENT SERVICES, INC.
By:
-------------------------------------
Title:
-----------------------------------
-----------------------------------------
STANLEY DRUCKENMILLER
-----------------------------------------
ARMINIO FRAGA
-----------------------------------------
GARY GLADSTEIN
-----------------------------------------
ELIZABETH LARSON
-----------------------------------------
PAUL McNULTY
-----------------------------------------
GABRIEL NECHAMKIN
-----------------------------------------
FILIBERTO VERTICELLI
-----------------------------------------
SEAN WARREN
-----------------------------------------
JOHN ZWAANSTRA
[Signature Page to Investor Rights Agreement]
<PAGE> 25
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
ZESIGER CAPITAL GROUP LLC,
Attorney-In-Fact for each Investor
set forth below
By:
--------------------------------------
Lisa Hess,
Principal
City of Milford Pension and
Retirement Plan
Norwalk Employee Pension Plan
City of Stamford Firemen's
Pension Plan
State of Oregon PERS/ZCG
Dean Witter Foundation
Roanoke College
HBL Charitable Unitrust
Jeanne Morency
Murray Capital, LLC
Morgan Trust Co. of the Bahamas Ltd.
as Trustee U/A/D 11/30/93
William B. Lazar
Wells Family LLC
Harold and Grace Willens JTWROS
Barrie Ramsay Zesiger
Wolfson Investment Partners LP
Alza Corporation Retirement Plan
Tab Products Co. Pension Plan
Planned Parenthood Of NY
Van Loben Sels Charitable Foundation
Public Employee Retirement System Of
Idaho
Albert L. Zesiger
[Signature Page to Investor Rights Agreement]
<PAGE> 26
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
AURORA VENTURES LLC
By:
--------------------------------------
Title:
-----------------------------------
[Signature Page to Investor Rights Agreement]
<PAGE> 27
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
THE RAISER MARITAL TRUST
By:
--------------------------------------
Title:
-----------------------------------
[Signature Page to Investor Rights Agreement]
<PAGE> 28
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
NOTKIN LIVING TRUST, DTD 4/8/92
By:
--------------------------------------
Title:
-----------------------------------
[Signature Page to Investor Rights Agreement]
<PAGE> 29
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
-----------------------------------------
LEWIS C. PELL
[Signature Page to Investor Rights Agreement]
<PAGE> 30
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
-----------------------------------------
GEORGE SOROS
-----------------------------------------
MARK PEARSON
-----------------------------------------
ROBERT D. BROWNELL
[Signature Page to Investor Rights Agreement]
<PAGE> 31
SCHEDULE 1
LIST OF HOLDERS
The Aurora Funds, Inc.
2 Davis Drive
Research Triangle Park, NC 27709
Attn: Mr. Scott Albert
Capital Management Services, Inc.
11100 Santa Monica Blvd., 15th Floor
Los Angeles, CA 90025
Invemed Associates, Inc.
375 Park Avenue
Suite 2205
New York, NY 10152
Cristina H. Kepner
c/o Invemed Associates, Inc.
375 Park Avenue
Suite 2205
New York, NY 10152
Notkin Living Trust
Capital Guardian Trust & Co.
Four Embarcadero Center
Suite 1800
San Francisco, CA 94111
Attn: Shelby Notkin
Stanley Druckenmiller
c/o Soros Fund Management
888 7th Avenue,
Suite 3300
New York, NY 10106
Arminio Fraga
c/o Soros Fund Management
888 7th Avenue,
Suite 3300
New York, NY 10106
Gary Gladstein
c/o Soros Fund Management
888 7th Avenue,
1.
<PAGE> 32
Suite 3300
New York, NY 10106
Elizabeth Larson
c/o Soros Fund Management
888 7th Avenue,
Suite 3300
New York, NY 10106
Paul McNulty
c/o Soros Fund Management
888 7th Avenue,
Suite 3300
New York, NY 10106
Gabriel Nechamkin
c/o Soros Fund Management
888 7th Avenue,
Suite 3300
New York, NY 10106
Filiberto Verticelli
c/o Soros Fund Management
888 7th Avenue,
Suite 3300
New York, NY 10106
Sean Warren
c/o Soros Fund Management
888 7th Avenue,
Suite 3300
New York, NY 10106
John Zwaanstra
c/o Soros Fund Management
888 7th Avenue,
Suite 3300
New York, NY 10106
George Soros
c/o Soros Fund Management
888 7th Avenue,
Suite 3300
New York, NY 10106
WS Investments
c/o Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
2.
<PAGE> 33
Palo Alto, CA 94304
Robert D. Brownell
c/o Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, CA 94304
Alza Corporation Retirement Plan
c/o Zesiger Capital Group LLC
320 Park Avenue
New York, NY 10022
Arthur D. Little Employee Investment Plan
c/o Zesiger Capital Group LLC
320 Park Avenue
New York, NY 10022
City of Milford Pension & Retirement Plan
c/o Zesiger Capital Group LLC
320 Park Avenue
New York, NY 10022
Norwalk Employee Pension Plan
c/o Zesiger Capital Group LLC
320 Park Avenue
New York, NY 10022
City of Stamford Firemen's Pension Fund
c/o Zesiger Capital Group LLC
320 Park Avenue
New York, NY 10022
State of Oregon PERS/ZCG
c/o Zesiger Capital Group LLC
320 Park Avenue
New York, NY 10022
Roanoke College
c/o Zesiger Capital Group LLC
320 Park Avenue
New York, NY 10022
Tab Products Co. Pension Plan
c/o Zesiger Capital Group LLC
320 Park Avenue
New York, NY 10022
Planned Parenthood of NY
3.
<PAGE> 34
c/o Zesiger Capital Group LLC
320 Park Avenue
New York, NY 10022
Dean Witter Foundation
c/o Zesiger Capital Group LLC
320 Park Avenue
New York, NY 10022
Van Loben Sels Charitable Foundation
c/o Zesiger Capital Group LLC
320 Park Avenue
New York, NY 10022
William B. Lazar
c/o Zesiger Capital Group LLC
320 Park Avenue
New York, NY 10022
Jeanne Morency
c/o Zesiger Capital Group LLC
320 Park Avenue
New York, NY 10022
HBL Charitable Unitrust
c/o Zesiger Capital Group LLC
320 Park Avenue
New York, NY 10022
Morgan Trust Co. of the Bahamas Ltd.
c/o Zesiger Capital Group LLC
320 Park Avenue
New York, NY 10022
Wells Family LLC
c/o Zesiger Capital Group LLC
320 Park Avenue
New York, NY 10022
Harold & Grace Willens JTWROS
c/o Zesiger Capital Group LLC
320 Park Avenue
New York, NY 10022
Murray Capital
c/o Zesiger Capital Group LLC
320 Park Avenue
New York, NY 10022
4.
<PAGE> 35
Barrie Ramsay Zesiger
c/o Zesiger Capital Group LLC
320 Park Avenue
New York, NY 10022
Wolfson Investment Partners
c/o Zesiger Capital Group LLC
320 Park Avenue
New York, NY 10022
The Raiser Marital Trust
c/o Alex Brown Capital Advisory & Trust Co.
19 South Street
Attn: Venedia Andrews
Baltimore, MD 21202
Public Employee Retirement System of Idaho
c/o Zesiger Capital Group LLC
320 Park Avenue
New York, NY 10022
Albert L. Zesiger
c/o Zesiger Capital Group LLC
320 Park Avenue
New York, NY 10022
BioTech Growth S.A.
Swiss Bank Tower
Panama 1
Republic of Panama
Asset Management BAB N.V.
6 Plasa Smeets
Curacao
Netherlands Antilles
Mark Pearson
Catalyst Real Estate Group
2483 Bayshore Rd,
Suite 102
Palo Alto, CA 94303
Louis Pell
11 Carpentedr Way
Armonk NY 10504
5.
<PAGE> 36
AEOW 96, LLC
909 Montgomery, Suite 600
San Francisco, CA 94133
Attn: Will K. Weinstein
6.
<PAGE> 1
EXHIBIT 4.4
INDEMNITY AGREEMENT
THIS AGREEMENT is made and entered into this 21st day of February, 2000
by and between ViroLogic, Inc., a Delaware corporation (the "Corporation"), and
<<FirstName>> <<LastName>> ("Agent").
RECITALS
WHEREAS, Agent performs a valuable service to the Corporation in
<<Title>> capacity as
<<JobTitle>> of the Corporation;
WHEREAS, the stockholders of the Corporation have adopted bylaws (the
"Bylaws") providing for the indemnification of the directors, officers,
employees and other agents of the Corporation, including persons serving at the
request of the Corporation in such capacities with other corporations or
enterprises, as authorized by the Delaware General Corporation Law, as amended
(the "Code");
WHEREAS, the Bylaws and the Code, by their non-exclusive nature, permit
contracts between the Corporation and its agents, officers, employees and other
agents with respect to indemnification of such persons; and
WHEREAS, in order to induce Agent to continue to serve as <<JobTitle>>
of the Corporation, the Corporation has determined and agreed to enter into this
Agreement with Agent;
NOW, THEREFORE, in consideration of Agent's continued service as
<<JobTitle>> after the date hereof, the parties hereto agree as follows:
AGREEMENT
1. SERVICES TO THE CORPORATION. Agent will serve, at the will of
the Corporation or under separate contract, if any such contract exists, as
<<JobTitle>> of the Corporation or as a director, officer or other fiduciary of
an affiliate of the Corporation (including any employee benefit plan of the
Corporation) faithfully and to the best of <<Title>> ability so long as he is
duly elected and qualified in accordance with the provisions of the Bylaws or
other applicable charter documents of the Corporation or such affiliate;
provided, however, that Agent may at any time and for any reason resign from
such position (subject to any contractual obligation that Agent may have assumed
apart from this Agreement) and that the Corporation or any affiliate shall have
no obligation under this Agreement to continue Agent in any such position.
2. INDEMNITY OF AGENT. The Corporation hereby agrees to hold
harmless and indemnify Agent to the fullest extent authorized or permitted by
the provisions of the Bylaws and the Code, as the same may be amended from time
to time (but, only to the extent that such amendment permits the Corporation to
provide broader indemnification rights than the Bylaws or the Code permitted
prior to adoption of such amendment).
1.
<PAGE> 2
3. ADDITIONAL INDEMNITY. In addition to and not in limitation of
the indemnification otherwise provided for herein, and subject only to the
exclusions set forth in Section 4 hereof, the Corporation hereby further agrees
to hold harmless and indemnify Agent:
(a) against any and all expenses (including attorneys' fees),
witness fees, damages, judgments, fines and amounts paid in settlement and any
other amounts that Agent becomes legally obligated to pay because of any claim
or claims made against or by him in connection with any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, arbitrational,
administrative or investigative (including an action by or in the right of the
Corporation) to which Agent is, was or at any time becomes a party, or is
threatened to be made a party, by reason of the fact that Agent is, was or at
any time becomes a director, officer, employee or other agent of Corporation, or
is or was serving or at any time serves at the request of the Corporation as a
director, officer, employee or other agent of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise; and
(b) otherwise to the fullest extent as may be provided to Agent
by the Corporation under the non-exclusivity provisions of the Code and Section
41 of the Bylaws.
4. LIMITATIONS ON ADDITIONAL INDEMNITY. No indemnity pursuant to
Section 3 hereof shall be paid by the Corporation:
(a) on account of any claim against Agent solely for an
accounting of profits made from the purchase or sale by Agent of securities of
the Corporation pursuant to the provisions of Section 16(b) of the Securities
Exchange Act of 1934 and amendments thereto or similar provisions of any
federal, state or local statutory law;
(b) on account of Agent's conduct that is established by a final
judgment as knowingly fraudulent or deliberately dishonest or that constituted
willful misconduct;
(c) on account of Agent's conduct that is established by a final
judgment as constituting a breach of Agent's duty of loyalty to the Corporation
or resulting in any personal profit or advantage to which Agent was not legally
entitled;
(d) for which payment is actually made to Agent under a valid and
collectible insurance policy or under a valid and enforceable indemnity clause,
bylaw or agreement, except in respect of any excess beyond payment under such
insurance, clause, bylaw or agreement;
(e) if indemnification is not lawful (and, in this respect, both
the Corporation and Agent have been advised that the Securities and Exchange
Commission believes that indemnification for liabilities arising under the
federal securities laws is against public policy and is, therefore,
unenforceable and that claims for indemnification should be submitted to
appropriate courts for adjudication); or
(f) in connection with any proceeding (or part thereof) initiated
by Agent, or any proceeding by Agent against the Corporation or its directors,
officers, employees or other agents, unless (i) such indemnification is
expressly required to be made by law, (ii) the proceeding was authorized by the
Board of Directors of the Corporation, (iii) such indemnification is provided by
the Corporation, in its sole discretion, pursuant to the powers
2.
<PAGE> 3
vested in the Corporation under the Code, or (iv) the proceeding is initiated
pursuant to Section 9 hereof.
5. CONTINUATION OF INDEMNITY. All agreements and obligations of the
Corporation contained herein shall continue during the period Agent is a
director, officer, employee or other agent of the Corporation (or is or was
serving at the request of the Corporation as a director, officer, employee or
other agent of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise) and shall continue thereafter so long as Agent
shall be subject to any possible claim or threatened, pending or completed
action, suit or proceeding, whether civil, criminal, arbitrational,
administrative or investigative, by reason of the fact that Agent was serving in
the capacity referred to herein.
6. PARTIAL INDEMNIFICATION. Agent shall be entitled under this
Agreement to indemnification by the Corporation for a portion of the expenses
(including attorneys' fees), witness fees, damages, judgments, fines and amounts
paid in settlement and any other amounts that Agent becomes legally obligated to
pay in connection with any action, suit or proceeding referred to in Section 3
hereof even if not entitled hereunder to indemnification for the total amount
thereof, and the Corporation shall indemnify Agent for the portion thereof to
which Agent is entitled.
7. NOTIFICATION AND DEFENSE OF CLAIM. Not later than thirty (30)
days after receipt by Agent of notice of the commencement of any action, suit or
proceeding, Agent will, if a claim in respect thereof is to be made against the
Corporation under this Agreement, notify the Corporation of the commencement
thereof; but the omission so to notify the Corporation will not relieve it from
any liability which it may have to Agent otherwise than under this Agreement.
With respect to any such action, suit or proceeding as to which Agent notifies
the Corporation of the commencement thereof:
(a) the Corporation will be entitled to participate therein at
its own expense;
(b) except as otherwise provided below, the Corporation may, at
its option and jointly with any other indemnifying party similarly notified and
electing to assume such defense, assume the defense thereof, with counsel
reasonably satisfactory to Agent. After notice from the Corporation to Agent of
its election to assume the defense thereof, the Corporation will not be liable
to Agent under this Agreement for any legal or other expenses subsequently
incurred by Agent in connection with the defense thereof except for reasonable
costs of investigation or otherwise as provided below. Agent shall have the
right to employ separate counsel in such action, suit or proceeding but the fees
and expenses of such counsel incurred after notice from the Corporation of its
assumption of the defense thereof shall be at the expense of Agent unless (i)
the employment of counsel by Agent has been authorized by the Corporation, (ii)
Agent shall have reasonably concluded, and so notified the Corporation, that
there is an actual conflict of interest between the Corporation and Agent in the
conduct of the defense of such action or (iii) the Corporation shall not in fact
have employed counsel to assume the defense of such action, in each of which
cases the fees and expenses of Agent's separate counsel shall be at the expense
of the Corporation. The Corporation shall not be entitled to assume the defense
of any action, suit or proceeding brought by or on behalf of the Corporation or
as to which Agent shall have made the conclusion provided for in clause (ii)
above; and
3.
<PAGE> 4
(c) the Corporation shall not be liable to indemnify Agent under
this Agreement for any amounts paid in settlement of any action or claim
effected without its written consent, which shall not be unreasonably withheld.
The Corporation shall be permitted to settle any action except that it shall not
settle any action or claim in any manner which would impose any penalty or
limitation on Agent without Agent's written consent, which may be given or
withheld in Agent's sole discretion.
8. EXPENSES. The Corporation shall advance, prior to the final
disposition of any proceeding, promptly following request therefor, all expenses
incurred by Agent in connection with such proceeding upon receipt of an
undertaking by or on behalf of Agent to repay said amounts if it shall be
determined ultimately that Agent is not entitled to be indemnified under the
provisions of this Agreement, the Bylaws, the Code or otherwise.
9. ENFORCEMENT. Any right to indemnification or advances granted by
this Agreement to Agent shall be enforceable by or on behalf of Agent in any
court of competent jurisdiction if (i) the claim for indemnification or advances
is denied, in whole or in part, or (ii) no disposition of such claim is made
within ninety (90) days of request therefor. Agent, in such enforcement action,
if successful in whole or in part, shall be entitled to be paid also the expense
of prosecuting <<Title>> claim. It shall be a defense to any action for which a
claim for indemnification is made under Section 3 hereof (other than an action
brought to enforce a claim for expenses pursuant to Section 8 hereof, provided
that the required undertaking has been tendered to the Corporation) that Agent
is not entitled to indemnification because of the limitations set forth in
Section 4 hereof. Neither the failure of the Corporation (including its Board of
Directors or its stockholders) to have made a determination prior to the
commencement of such enforcement action that indemnification of Agent is proper
in the circumstances, nor an actual determination by the Corporation (including
its Board of Directors or its stockholders) that such indemnification is
improper shall be a defense to the action or create a presumption that Agent is
not entitled to indemnification under this Agreement or otherwise.
10. SUBROGATION. In the event of payment under this Agreement, the
Corporation shall be subrogated to the extent of such payment to all of the
rights of recovery of Agent, who shall execute all documents required and shall
do all acts that may be necessary to secure such rights and to enable the
Corporation effectively to bring suit to enforce such rights.
11. NON-EXCLUSIVITY OF RIGHTS. The rights conferred on Agent by this
Agreement shall not be exclusive of any other right which Agent may have or
hereafter acquire under any statute, provision of the Corporation's Certificate
of Incorporation or Bylaws, agreement, vote of stockholders or directors, or
otherwise, both as to action in <<Title>> official capacity and as to action in
another capacity while holding office.
12. SURVIVAL OF RIGHTS.
(a) The rights conferred on Agent by this Agreement shall
continue after Agent has ceased to be a director, officer, employee or other
agent of the Corporation or to serve at the request of the Corporation as a
director, officer, employee or other agent of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise and shall inure
to the benefit of Agent's heirs, executors and administrators.
4.
<PAGE> 5
(b) The Corporation shall require any successor (whether direct
or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of the Corporation, expressly to
assume and agree to perform this Agreement in the same manner and to the same
extent that the Corporation would be required to perform if no such succession
had taken place.
13. SEPARABILITY. Each of the provisions of this Agreement is a
separate and distinct agreement and independent of the others, so that if any
provision hereof shall be held to be invalid for any reason, such invalidity or
unenforceability shall not affect the validity or enforceability of the other
provisions hereof. Furthermore, if this Agreement shall be invalidated in its
entirety on any ground, then the Corporation shall nevertheless indemnify Agent
to the fullest extent provided by the Bylaws, the Code or any other applicable
law.
14. GOVERNING LAW. This Agreement shall be interpreted and enforced
in accordance with the laws of the State of Delaware.
15. AMENDMENT AND TERMINATION. No amendment, modification,
termination or cancellation of this Agreement shall be effective unless in
writing signed by both parties hereto.
16. IDENTICAL COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall for all purposes be deemed to be an
original but all of which together shall constitute but one and the same
Agreement. Only one such counterpart need be produced to evidence the existence
of this Agreement.
17. HEADINGS. The headings of the sections of this Agreement are
inserted for convenience only and shall not be deemed to constitute part of this
Agreement or to affect the construction hereof.
18. NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given (i)
upon delivery if delivered by hand to the party to whom such communication was
directed or (ii) upon the third business day after the date on which such
communication was mailed if mailed by certified or registered mail with postage
prepaid:
(a) If to Agent, at the address indicated on the signature page
hereof.
(b) If to the Corporation, to:
VIROLOGIC, INC.
270 East Grand Avenue
South San Francisco, CA 94080
or to such other address as may have been furnished to Agent by the Corporation.
5.
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
and as of the day and year first above written.
VIROLOGIC, INC.
By:
-------------------------------
Title:
----------------------------
AGENT
----------------------------------
<<FirstName>> <<LastName>>
Address:
----------------------------------
----------------------------------
6.
<PAGE> 1
EXHIBIT 4.5
THIS WARRANT HAS NOT 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 22,100 SHARES OF COMMON STOCK
October 16, 1996
THIS CERTIFIES THAT, for value received, Lease Management Services, Inc.,
("Holder") is entitled to subscribe for and purchase twenty-two thousand one
hundred (22,100) shares of the fully paid and nonassessable Common Stock ("the
Shares") of ViroLogic, 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 one and 84/100 dollars
($1.84) 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. California time on the sixth annual anniversary of this
Warrant Agreement; or
(b) 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 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) hereof, the transaction does
not close on approximately 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
<PAGE> 2
LMSI/VIROLOGIC Warrant
Page 2 of 8
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
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 the event that the Company's common stock is
publicly traded or the Company is to be subject to a merger, acquisition, or
other consolidation in which the Company is not the surviving entity, then 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 exercise 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 Initial Public Offering, the per share Fair Market
Value for the Common Stock shall be the Offering Price at which the
underwriters 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, 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 Western Edition of The
Wall Street Journal for the ten (10) trading days prior to the date of
determination of fair market value; or
(iii) If the Company shall be subject to a merger, acquisition or other
consolidation in which the Company is not the surviving entity, pursuant to
Section 2(b), the per share Fair Market Value for the Common Stock shall be
the value received per share of Common Stock by all holders of the Common
Stock as determined by the Board of Directors; or
2
<PAGE> 3
LMSI/VIROLOGIC Warrant
Page 3 of 8
(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), 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).
(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 a company's assets 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 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
predicted 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
3
<PAGE> 4
LMSI/VIROLOGIC Warrant
Page 4 of 8
placement subject to the satisfaction of certain conditions, including, in
case the securities have been held for less than three 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
two 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 three-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 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 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 issues 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 without registration and without compliance
with any restrictions such as Rule 144.
4
<PAGE> 5
LMSI/VIROLOGIC Warrant
Page 5 of 8
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 of 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 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 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. Adjustments, Etc.
7.1 Adjustment for Stock Splits and Combinations. If the Company, at any
time or from time to time, effects a subdivision of, or combines, the
outstanding shares of Common Stock, by stock split or stock dividend or by
reverse stock split, respectively, then, and in each such event, the
Warrant Price in effect immediately prior thereto shall immediately be
proportionately decreased or increased, as the case may be, and the number
of shares of Common Stock issuable at that time upon exercise of this
warrant shall be proportionately increased or decreased, as the case may
be.
7.2 Adjustment for Recapitalization, Reclassification, or Exchange. If, at
any time or from time to time, the Common Stock issuable upon exercise of
this Warrant is changed into the same or a different number of shares of
any other class or classes of stock of the Company, whether by
recapitalization, reclassification or other exchange (other than as
provided for elsewhere in this Section 7), then, and in each such event,
the Holder shall have the right thereafter to purchase the kind and amount
of stock and other securities and property receivable upon such
recapitalization, reclassification or other exchange, by holders of the
number of shares of Common Stock with respect to which this Warrant might
have been exercised immediately prior to such recapitalization,
reclassification or other exchange, all subject to further adjustment as
provided herein.
7.3 Reorganization, Mergers, Consolidations or Transfers of Assets. If, at
any time or from time to time, there is a capital reorganization of the
Common Stock (other than as provided for elsewhere in this Section 7) or a
merger or consolidation of the Company
5
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LMSI/VIROLOGIC Warrant
Page 6 of 8
with or into another corporation, or a transfer of all or substantially
all of the Company's assets to any other person, then, and in, and as a
part of, each such event, provision shall be made so that the Holder
shall thereafter be entitled to receive upon exercise of this Warrant the
number of shares of stock or other securities or property of the Company,
or, if applicable, of the resulting successor corporation, to which a
holder of the number of shares of Common Stock issuable upon exercise of
this Warrant would have been entitled on such capital reorganization,
merger, consolidation or transfer, all subject to further adjustment as
provided herein.
7.4 Notices of Record Date. In the event of (a) any taking by the Company
of a record of the holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive any dividend
or other distribution, or (b) any capital reorganization of the Company,
any reclassification, recapitalization or exchange of the capital stock
of the Company, or any merger or consolidation of the Company with or
into another corporation, or any transfer of all or substantially all of
the assets of the Company to any other person, or any voluntary or
involuntary dissolution, liquidation or winding up of the Company, the
Company shall mail to the Holder, at least 10 days prior to the record
date specified therein, a notice specifying (x) the date on which any
such record is to be taken for the purpose of such dividend or
distribution, (y) the date on which any such reorganization,
recapitalization, reclassification, exchange, consolidation, merger,
transfer, dissolution, liquidation or winding up is expected to become
effective, and (z) the time, if any, that is to be fixed, as to when the
holders of record of Common Stock (or other securities) shall be entitled
to exchange their shares of Common Stock (or other securities) for
securities or other property deliverable upon such reorganization,
recapitalization, reclassification, exchange, consolidation, merger,
transfer, dissolution, liquidation or winding up.
7.5 Reservation of Stock Issuable Upon Exercise. The Company at all times
reserve and keep available out of its authorized but unissued shares of
Common Stock such number of its shares of Common Stock as shall from time
to time be sufficient to effect the exercise of this Warrant and all
other rights or options to purchase Common Stock, and to permit the
conversion of all stock or other securities convertible into Common
Stock, as may be outstanding from time to time. If at any time the number
of authorized but unissued shares of Common Stock shall not be sufficient
for such purposes, the Company will take such corporate action as may, in
the opinion of its counsel, be necessary to increase its authorized but
unissued shares of Common Stock to such number of shares as shall be
sufficient for such purposes.
8. Notice of Adjustments. Whenever any Warrant Price shall be adjusted pursuant
to Section 7 hereof, the Company shall prepare a certificate signed by its 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 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 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
6
<PAGE> 7
LMSI/VIROLOGIC Warrant
Page 7 of 8
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
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 in respect of the issuance of such certificate,
all of which taxes and expenses shall be paid by the Company, and such
certificates shall be 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, or 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 California.
(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
7
<PAGE> 8
LMSI/VIROLOGIC Warrant
Page 8 of 8
Sunday or shall be a legal holiday in the State of California, 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 see 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: ViroLogic, Inc.
270 East Grand Avenue
South San Francisco, CA 94080
Attn:
If to the Holder: Lease Management Services, Inc.
2500 Sand Hill Road, Ste. 101
Menlo Park, CA 94025
Attn: Barbara B Kaiser, EVP/GM
IN WITNESS WHEREOF, ______________ has caused this Warrant to be executed by
its officers thereunto duly authorized.
Dated as of October 16, 1996
VIROLOGIC, INC.
BY: MARTIN H. GOLDSTEIN
---------------------
Martin H. Goldstein
TITLE: President & CFO
------------------
8
<PAGE> 9
NOTICE OF EXERCISE
TO:
1. The undersigned Warrantholder ("Holder") elects to acquire shares of the
Common Stock of __________________ )(the "Company), pursuant to the terms
of the Stock Purchase Warrant dated _____________ , 199_ (the "Warrant").
2. The Holder exercises its rights under the Warrant as set forth below:
( ) The Holder elects to purchase______ shares of Common Stock
as provided in Section 3(a), (c) and tenders herewith a
check in the amount of $____ as payment of the purchase
price.
( ) The Holder elects to convert the purchase rights into shares
of Common Stock as provided in Section 43(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:
----------------------------
Title:
-------------------------
Date:
-------------------------
<PAGE> 1
EXHIBIT 4.6
NEITHER THIS WARRANT NOR THE SHARES OF STOCK ISSUABLE UPON EXERCISE HEREOF
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR ANY
STATE SECURITIES LAWS. NO SALE, TRANSFER OR DISPOSITION OF THIS WARRANT OR
SAID SHARES MAY BE EFFECTED WITHOUT (i) EFFECTIVE REGISTRATION STATEMENTS
RELATED THERETO, (ii) AN OPINION OF COUNSEL OR OTHER EVIDENCE, REASONABLY
SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATIONS ARE NOT REQUIRED (iii)
RECEIPT OF NO-ACTION LETTERS FROM THE SECURITIES AND EXCHANGE COMMISSION TO
THE EFFECT THAT REGISTRATION UNDER THE ACT IS NOT REQUIRED OR (iv)
OTHERWISE COMPLYING WITH THE PROVISIONS OF SECTION 7 OF THIS WARRANT.
VIROLOGIC, INC.
WARRANT TO PURCHASE 69,667 SHARES
OF CAPITAL STOCK
THIS CERTIFIES THAT, pursuant to that certain Loan and Security Agreement
between VIROLOGIC, INC., a Delaware Corporation (the "Company") and MMC/GATX
Partnership No. 1 (the "Holder") and upon the terms and subject to the
conditions hereinafter set forth, the Holder may at any time on or after the
date of this Warrant and on or prior to expiration, subscribe for and purchase
from the Company up to 69,667 shares (the "Shares") of either Preferred Stock
or Common Stock (the capital stock acquirable hereunder, the "Capital Stock).
In the event that the Company completes a sale of Preferred Stock (an
"Offering") on or before March 31, 1998, this Warrant shall be exercisable for
such Preferred Stock and the purchase price per Share shall be the price paid
by investors in the Offering. In the event that the Company completes an
Offering after March 31, 1998 and on or before June 30, 1998, this Warrant
shall be exercisable for Common Stock and the purchase price per share shall
be the price paid by investors in the Offering, provided the price per share is
not less than $2.75 and not greater than $4.00. If an Offering does not occur
on or before June 30, 1998, this Warrant shall be exercisable for Common Stock
and the purchase price per Share shall be $4.00. As used herein, (a) the term
"Date of Grant" shall mean January 30, 1998, and (b) the term "Other Warrants"
shall mean any other warrants issued by the Company in connection with the
transaction with respect to which this Warrant was issued, and any warrant
issued upon transfer or partial exercise of this Warrant. The term "Warrant" as
used herein shall be deemed to include Other Warrants unless the context
clearly requires otherwise.
1. Term. The purchase right represented by this Warrant is exercisable,
in whole or in part, at any time and from time to time from the Date of Grant
through the later of (i) ten (10) years after the Date of Grant or (ii) five
(5) years after the closing of the Company's initial public offering of its
Common Stock effected pursuant to a Registration Statement on Form S-1 (or its
successor) filed under the Securities Act of 1933, as amended (the "Act"). Upon
request of the Company, the holder of this Warrant agrees to exercise the
purchase right under this Warrant (including without limitation by way of net
issuance as provided in paragraph 10.3) upon the sale of all of the assets or
stock of the Company, or the merger of the Company if the net proceeds per
share to the holder of this Warrant upon such exercise would equal at least the
product of the Warrant Price multiplied by 2.0. The Company agrees to provide
the holder of this Warrant not less than thirty (30) days' prior written notice
of the Company's request that the holder exercise its purchase right hereunder
in accordance with the provisions of Section 14 hereof.
2. Method of Exercise; Payment; Issuance of New Warrant. Subject to
Section 1 hereof, the purchase right represented by this Warrant may be
exercised by the holder hereof, in whole or in part and from time to time, at
the election of the holder hereof, by (a) the surrender of this Warrant (with
the notice of exercise substantially in the form attached hereto as Exhibit A
duly completed and executed) at the principal office of the Company and by the
payment to the Company, by cash, certified or bank check, or by wire
1
<PAGE> 2
transfer to an account designated by the Company (a "Wire Transfer") of an
amount equal to the then applicable Warrant Price multiplied by the number of
Shares then being purchased, or (b) if in connection with a registered public
offering of the Company's securities, the surrender of this Warrant (with the
notice of exercise form attached hereto as Exhibit A-1 duly completed and
executed) at the principal office of the Company together with notice of
arrangements reasonably satisfactory to the Company for payment to the Company
either by cash, certified or bank check or by Wire Transfer from the proceeds of
the sale of shares to be sold by the holder in such public offering of an amount
equal to the then applicable Warrant Price per share multiplied by the number of
Shares then being purchased or (c) exercise of the right provided for in Section
10.3 hereof. The person or persons in whose name(s) any certificate(s)
representing the Shares shall be issuable upon exercise of tie Warrant shall be
deemed to have become the holder(s) of record of, and shall be treated for all
purposes as the record holder(s) of, the shares represented thereby (and such
shares shall be deemed to have been issued) immediately prior to the close of
business on the date or dates upon which this Warrant is exercised. In the event
of any exercise of the rights represented by this Warrant, certificates for the
shares of stock so purchased shall be delivered to the holder hereof as soon as
possible and in any event within thirty (30) days after such exercise and,
unless this Warrant has been fully exercised or expired, a new Warrant
representing the portion of the Shares, if any, with respect to which this
Warrant shall not then have been exercised shall also be issued to the holder
hereof as soon as possible and in any event within such thirty-day period.
3. Stock Fully Paid; Reservation of Shares. All Shares that may be
issued upon the exercise of this Warrant will, upon issuance pursuant to the
terms and conditions herein, be fully paid and nonassessable, and free from all
taxes, liens and charges with respect to the issue thereof. During the period
within which this Warrant may be exercised, the Company will at all times have
authorized and reserved, for the purpose of this issuance upon exercise of this
Warrant, a sufficient number of shares of its Capital Stock to provide for the
exercise of this Warrant, and, if this Warrant is for the acquisition of
Preferred Stock, a sufficient number of shares of its Common Stock to provide
for the conversion of Preferred Stock into Common Stock.
4. Adjustment of Warrant Price and Number of Shares. The number and
kind of securities purchasable upon the exercise of this Warrant and the
Warrant Price shall be subject to adjustment from time to time upon the
occurrence of certain events, as follows:
(a) Reclassification or Merger. In case of any reclassification or
change of securities of the class issuable upon exercise of this Warrant (other
than a change in par value, or from par value to no par value, or from no par
value to par value, or as a result of a subdivision or combination), or in case
of any merger of the Company with or into another corporation (other than a
merger with another corporation in which the Company is the acquiring and the
surviving corporation and which does not result in any reclassification or
change of outstanding securities issuable upon exercise of this Warrant), or in
case any sale of all or substantially all of the assets of the Company, the
Company, or such successor or purchasing corporation, as the case may be, shall
duly execute and deliver to the holder of this Warrant a new Warrant (in form
and substance satisfactory to the holder of the Warrant), so that (1) the
holder of this Warrant shall have the right to receive at a total purchase
price not to exceed that payable upon the exercise of the unexercised portion
of this Warrant and (2) upon such exercise to receive, in lieu of the shares of
Capital Stock, theretofore issuable upon exercise of this Warrant, the kind and
amount of shares of stock, other securities, money and property receivable upon
such reclassification, change or merger by a holder of the number of shares of
Capital Stock then purchasable under this Warrant. Such new Warrant shall
provide for adjustments that shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Section 4. The provisions of
this subparagraph (a) shall similarly apply to successive reclassifications,
changes, mergers and transfers.
(b) Subdivision or Combination of Shares. If the Company at any
time while this Warrant remains outstanding and unexpired shall subdivide or
combine its Capital Stock, the Warrant Price
2
<PAGE> 3
shall be proportionately decreased in the case of a subdivision or increased in
the case of a combination, effective at the close of business on the date the
subdivision or combination becomes effective.
(c) Stock Dividends and Other Distributions. If the Company at
any time while this Warrant is outstanding and unexpired shall (i) pay a
dividend with respect to Capital Stock payable in Capital Stock, or (ii) make
any other distribution of Capital Stock (except any distribution specifically
provided for in Sections 4(a) and 4(b)), then the Warrant Price shall be
adjusted, from and after the date of determination of shareholders entitled to
receive such dividend or distribution, to that price determined by multiplying
the Warrant Price in effect immediately prior to such date of determination by
a fraction (i) the numerator of which shall be the total number of shares of
Capital Stock outstanding immediately prior to such dividend or distribution,
and (ii) the denominator of which shall be the total number of shares of
Capital Stock outstanding immediately after such dividend or distribution.
(d) Adjustment of Number of Shares. Upon each adjustment in the
Warrant Price, the number of Shares purchasable hereunder shall be adjusted,
to the nearest whole share, to the product obtained by multiplying the number
of Shares purchasable immediately prior to such adjustment in the Warrant
Price by a fraction, the numerator of which shall be the Warrant Price
immediately prior to such adjustment and the denominator of which shall be the
Warrant Price immediately thereafter.
5. Notice of Adjustments. Whenever the Warrant Price or the number of
Shares purchasable hereunder shall be adjusted pursuant to Section 4 hereof,
the Company shall make a certificate signed by its 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 the number of Shares purchasable hereunder after
giving effect to such adjustment, and shall cause copies of such certificate to
be mailed (without regard to Section 13 hereof, by first class mail, postage
prepaid) to the holder of this Warrant at such holder's last known address.
6. Fractional Shares. No fractional Shares of Capital Stock will be
issued in connection with any exercise hereunder, but in lieu of such
fractional shares the Company shall make a cash payment therefor equal to the
product of such fraction multiplied by the fair market value of one share of
Capital Stock on the date of exercise, as reasonably determined in good faith
by the Company's Board of Directors.
7. Compliance with Securities Act; Disposition of Warrant or Shares of
Common Stock.
(a) Compliance with Securities Act. The holder of this Warrant,
by acceptance hereof, agrees that this Warrant and the Shares to be issued upon
exercise hereof are being acquired for investment and that such holder will not
offer, sell or otherwise dispose of this Warrant or any Shares to be issued
upon exercise hereof except under circumstances which will not result in a
violation of the Securities Act of 1933, as amended (the "Act") or any
applicable state securities laws. Upon exercise of this Warrant, unless the
Shares being acquired are registered under the Act and any applicable state
securities laws or an exemption from such registration is available, the holder
hereof shall confirm in writing, in a form reasonably satisfactory to the
Company, the Shares so purchased are being acquired for investment and not
with a view toward distribution or resale in violation of the Act and shall
confirm such other matters related thereto as may be reasonably requested by
the Company. This Warrant and all Shares issued upon exercise of this Warrant
(unless registered under the Act and any applicable state securities laws)
shall be stamped or imprinted with a legend in substantially the following form:
"THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. NO SALE OR DISPOSITION
MAY BE AFFECTED WITHOUT (i) AN EFFECTIVE REGISTRATION STATEMENT RELATED
THERETO, (ii) AN OPINION OF COUNSEL FOR THE HOLDER, REASONABLY
3
<PAGE> 4
SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS NOT REQUIRED, (iii)
RECEIPT OF A NO-ACTION LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION TO
THE EFFECT THAT REGISTRATION UNDER THE ACT IS NOT REQUIRED, OR (iv) OTHERWISE
COMPLYING WITH THE PROVISIONS OF SECTION 7 OF THE WARRANT UNDER WHICH THESE
SECURITIES WERE ISSUED, DIRECTLY OR INDIRECTLY."
Said legend shall be removed by the Company, upon the request of a holder,
at such time as the restrictions on the transfer of the applicable security
shall have terminated. In addition, in connection with the issuance of this
Warrant, the holder specifically represents to the Company by acceptance of
this Warrant as follows:
(1) The holder is aware of the Company's business affairs and financial
condition, and has acquired information about the Company sufficient to reach
an informed and knowledgeable decision to acquire this Warrant. The holder is
acquiring this Warrant for its own account for investment purposes only and not
with a view to, or for the resale in connection with, any "distribution"
thereof in violation of the Act.
(2) The holder understands that this Warrant has not been registered under
the Act and that the shares of stock acquired pursuant to the exercise of this
Warrant will be "restricted securities" within the meaning of Rule 144 under
the Act.
(3) The holder further understands that this Warrant must be held
indefinitely unless subsequently registered under the Act and qualified under
any applicable state securities laws, or unless exemptions from registration
and qualification are otherwise available. The holder is aware of the
provisions of Rule 144, promulgated under the Act.
(b) Disposition of Warrant or Shares. With respect to any offer, sale
or other disposition of this Warrant or any Shares acquired pursuant to the
exercise of this Warrant prior to registration thereof, the holder hereof and
each subsequent holder agrees to give written notice to the Company prior
thereto, describing briefly the manner thereof, together with a written opinion
of such holder's counsel, if reasonably requested by the Company, to the effect
that such offer, sale or other disposition may be effected without registration
or qualification (under the Act as then in effect or any federal or state
securities law then in effect) of this Warrant or the Shares and indicating
whether or not under the Act certificates for this Warrant or the Shares to be
sold or otherwise disposed of require any restrictive legend as to applicable
restrictions on transferability in order to ensure compliance with the Act.
Promptly upon receiving such written notice and reasonably satisfactory
opinion, if so requested, the Company, as promptly as practicable but no later
than fifteen (15) days after receipt of the written notice, shall notify such
holder that such holder may sell or otherwise dispose of this Warrant or such
Shares, all in accordance with the terms of the notice delivered to the
Company. If a determination has been made pursuant to this Section 7(b) that
the opinion of counsel for the holder or other evidence is not reasonably
satisfactory to the Company, the Company shall so notify the holder promptly
with details thereof after such determination has been made. Notwithstanding
the foregoing, this Warrant or such Shares may be offered, sold or otherwise
disposed of in accordance with Rule 144 or 144A under the Act, provided that
the Company shall have been furnished with such information as the Company may
reasonably request to provide a reasonable assurance that the provisions of
Rule 144 or 144A have been satisfied. Each certificate representing this
Warrant or the Shares thus transferred (except a transfer pursuant to Rule 144
or 144A) shall bear a legend as to the applicable restrictions on
transferability in order to ensure compliance with the Act, unless, in the
aforesaid opinion of counsel for the holder, such legend is not required in
order to ensure compliance with the Act. The Company may issue stop transfer
instructions to its transfer agent in connection with such restrictions. This
Warrant may not be transferred or assigned without the prior consent of the
Company.
(c) Applicability of Restrictions. The restrictions set forth in
Section 7(c) hereto shall
4
<PAGE> 5
not restrict up to two (2) transfers of this Warrant or any part hereof by the
initial holder (i) to any partnership affiliated with the initial holder, (ii)
to any partner of any such partnership, (iii) to any affiliate of any such
parties, or (iv) to any investment bank, for purposes of liquidating the
investment represented by this Warrant, provided such transfer may be made in
compliance with applicable federal and state securities laws; provided, however,
in any such transfer, if applicable, the transferee shall on the Company's
request agree in writing to be bound by the terms of this Warrant as if an
original signatory hereto.
8. Rights as Shareholders; Information. No holder of this Warrant, as
such, shall be entitled to vote or receive dividends or be deemed the holder of
Shares, nor shall anything contained herein be construed to confer upon the
holder of this Warrant, as such, any of the rights of a shareholder of the
Company or any right to vote for the election of directors or upon any matter
submitted to shareholders at any meeting thereof, or to give or withhold consent
to any corporate action (whether upon any recapitalization, issuance of stock,
reclassification of stock, change of par value or change of stock to no par
value, consolidation, merger, conveyance or otherwise), or to receive notice of
meetings, or to receive dividends or subscription rights or otherwise until this
Warrant shall have been exercised and the Shares purchasable upon the exercise
hereof shall have become deliverable, as provided herein. Notwithstanding the
foregoing, the Company will transmit to the holder of this Warrant such
information, documents and reports as are generally distributed to the holders
of any class or series of the securities of the Company concurrently with the
distribution thereof to the shareholders.
9. Registration Rights. The Company grants registration rights to the
holder of this Warrant for any Common Stock of the Company obtained upon
exercise hereof, comparable to the registration rights granted to the investors
in that certain ViroLogic, Inc. Investors' Rights Agreement dated as of May 23,
1996, (the "Registration Rights Agreement"), with the following exceptions:
(1) The holder will have no demand registration rights.
(2) The holder will be subject to the same provisions regarding
indemnification as contained in the Registration Rights
Agreement.
(3) The registration rights are freely assignable by the holder of
this Warrant.
10. Additional Rights.
10.1 Secondary Sales. The Company agrees that it will not interfere with
the holder of this Warrant in obtaining liquidity if opportunities to make
secondary sales of the Company's securities become available. To this end, the
Company will promptly provide the holder of this Warrant with notice of any
offer (of which it has knowledge) to acquire from the Company's security holders
more than five percent (5%) of the total voting power of the Company and will
not interfere with any attempt by the holder in arranging the sale of this
Warrant to the person or persons making such offer.
10.2 Mergers. The Company shall provide the holder of this Warrant with at
least thirty (30) days' notice of the terms and conditions of any of the
following potential transactions: (i) the sale, lease, exchange, conveyance or
other disposition of all or substantially all of the Company's property or
business, or (ii) its merger into or consolidation with any other corporation
(other than a wholly-owned subsidiary of the Company), or any transaction
(including a merger or other reorganization) or series of related transactions,
in which more than 50% of the voting power of the Company is disposed of. The
Company will cooperate with the holder in arranging the sale of this Warrant in
connection with any such transaction.
10.3 Right to Convert Warrant into Stock; Net Issuance.
5
<PAGE> 6
(a) Right to Convert. In addition to and without limiting the rights
of the holder under the terms of this Warrant, the holder shall have the right
to convert this Warrant or any portion thereof (the "Conversion Right") into
shares of Capital Stock as provided in this Section 10.3 at any time or from
time to time during the term of this Warrant. Upon exercise of the Conversion
Right with respect to a particular number of shares subject to this Warrant
(the "Converted Warrant Shares"), the Company shall deliver to the holder
(without payment by the holder of any exercise price or any cash or other
consideration) (X) that number of shares of fully paid and nonassessable
Capital Stock equal to the quotient obtained by dividing the value of this
Warrant (or the specified portion hereof) on the Conversion Date (as defined in
subsection (b) hereof), which value shall be determined by subtracting (A) the
aggregate Warrant Price of the Converted Warrant Shares immediately prior to
the exercise of the Conversion Right from (B) the aggregate fair market value
of the Converted Warrant Shares issuable upon exercise of this Warrant (or the
specified portion hereof) on the Conversion Date (as herein defined) by (Y)
the fair market value of one share of Capital Stock on the Conversion Date (as
herein defined).
Expressed as a formula, such conversion shall be computed as follows:
X = B - A
-----
Y
Where: X = the number of shares of Capital Stock that may be issued to
holder
Y = the fair market value (FMV) of one share of Capital Stock
A = the aggregate Warrant Price (i.e., Converted Warrant Shares
x Warrant Price)
B = the aggregate FMV (i.e., FMV x Converted Warrant Shares)
No fractional shares shall be issuable upon exercise of the Conversion
Right, and, if the number of shares to be issued determined in accordance with
the foregoing formula is other than a whole number, the Company shall pay to
the holder an amount in cash equal to the fair market value of the resulting
fractional share on the Conversion Date (as hereinafter defined). For purposes
of Section 9 of this Warrant, shares issued pursuant to the Conversion Right
shall be treated as if they were issued upon the exercise of this Warrant.
(b) Method of Exercise. The Conversion Right may be exercised by the
holder by the surrender of this Warrant at the principal office of the Company
together with a written statement specifying that the holder thereby intends to
exercise the Conversion Right and indicating the number of shares subject to
this Warrant which are being surrendered (referred to in Section 10.3(a) hereof
as the Converted Warrant Shares) in exercise of the Conversion Right. Such
conversion shall be effective upon receipt by the Company of this Warrant
together with the aforesaid written statement, or on such later date as is
specified therein (the "Conversion Date"), and, at the election of the holder
hereof, may be made contingent upon the closing of the sale of the Company's
Common Stock to the public in a public offering pursuant to a Registration
Statement under the Act (a "Public Offering"). Certificates for the shares
issuable upon exercise of the Conversion Right and, if applicable, a new
warrant evidencing the balance of the shares remaining subject to this Warrant,
shall be issued as of the Conversion Date and shall be delivered to the holder
within thirty (30) days following the Conversion Date.
6
<PAGE> 7
(c) Determination of Fair Market Value. For purposes of this Section
10.3, "fair market value" of a share of Capital Stock as of a particular date
(the "Determination Date") shall mean:
(i) If the Conversion Right is exercised in connection with and
contingent upon a Public Offering, and if the Company's Registration Statement
relating to such Public Offering ("Registration Statement") has been declared
effective by the SEC, then the initial "Price to Public" specified in the final
prospectus with respect to such offering.
(ii) If the Conversion Right is not exercised in connection with
and contingent upon a Public Offering, then as follows:
(A) If traded on a securities exchange or the Nasdaq National Market,
the fair market value of the Capital Stock shall be deemed to be the
average of the closing prices of the Common Stock on such exchange or
market over the 20-day period ending five business days ending immediately
prior to the applicable Determination Date;
(B) If traded over-the-counter, the fair market value of the Capital
Stock shall be deemed to be the average of the closing bid prices of the
Common Stock over the 20-day period ending five days ending immediately
prior to the applicable Determination Date; and
(C) If there is no public market for the Common Stock, then fair
market value shall be determined in good faith by the board of directors of
the Company.
11. "Market Stand-Off" Agreement. Each holder by acceptance of this
Warrant agrees that, during a period not to exceed 180 days, following the
effective date of a registration of the Company filed under the Act, it
shall not, to the extent requested by the Company or the underwriters
managing such underwritten public offering of the Company's securities,
sell or otherwise transfer or dispose of any securities of the Company held
by it at any time during such period except securities included in such
registration; provided, however, that all officers and directors of the
Company and all stockholders of the Company enter into similar agreements.
12. Representations and Warranties. The Company represents and
warrants to the holder of this Warrant as follows:
(a) This Warrant has been duly authorized and executed by the Company
and is a valid and binding obligation of the Company enforceable in
accordance with its terms, subject to laws of general application relating
to bankruptcy, insolvency and the relief of debtors and the rules of law or
principles at equity governing specific performance, injunctive relief and
other equitable remedies;
(b) The Shares have been duly authorized and reserved for issuance by
the Company and, when issued in accordance with the terms hereof will be
validly issued, fully paid and non-assessable;
(c) The rights, preferences, privileges and restrictions granted to
or imposed upon the Shares and the holders thereof are as set forth in the
Company's Restated Certificate of Incorporation, as amended to the Date of
the Grant, a true and complete copy of which has been delivered to the
original holder of this Warrant and is attached hereto as Exhibit B (the
"Charter");
(d) The execution and delivery of this Warrant are not, and the
issuance of the Shares upon exercise of this Warrant in accordance with the
terms hereof will not be, inconsistent with the Company's Charter or
by-laws, do not and will not contravene any law, governmental rule or
7
<PAGE> 8
regulation, judgment or order applicable to the Company, and do not and will
not conflict with or contravene any provision of, or constitute a default
under, any indenture, mortgage, contract or other instrument of which the
Company is a party or by which it is bound or require the consent or approval
of, the giving of notice to, the registration or filing with or the taking of
any action in respect of or by, any Federal, state or local government
authority or agency or other person, except for the filing of notices pursuant
to federal and state securities laws, which filings will be effected by the
time required thereby; and
(e) There are no actions, suits, audits, investigations or
proceedings pending or, to the knowledge of the Company, threatened against the
Company in any court or before any governmental commission, board or authority
which, if adversely determined, will have a material adverse effect on the
ability of the Company to perform its obligations under this Warrant.
13. Modification and Waiver. This Warrant and any provision hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of the same is sought.
14. Notices. Any notice, request, communication or other document
required or permitted to be given or delivered to the holder hereof or the
Company shall be delivered, or shall be sent by certified or registered mail,
postage prepaid, to each such holder at its address as shown on the books of
the Company or to the Company at the address indicated therefor on the
signature page of this Warrant.
15. Binding Effect on Successors. This Warrant shall be binding upon any
corporation succeeding the Company by merger, consolidation or acquisition of
all or substantially all of the Company's assets, and all of the obligations of
the Company relating to the Shares issuable upon the exercise or conversion of
this Warrant shall survive the exercise, conversion and termination of this
Warrant and all of the covenants and agreements of the Company shall inure to
the benefit of the successors and assigns of the holder hereof. The Company
will, at the time of the exercise or conversion of this Warrant, in whole or in
part, upon request of the holder hereof but at the Company's expense,
acknowledge in writing its continuing obligation to the holder hereof in respect
of any rights (including, without limitation, any right to registration of the
Shares) to which the holder hereof shall continue to be entitled after such
exercise or conversion in accordance with this Warrant; provided, that the
failure of the holder hereof to make any such request shall not affect the
continuing obligation of the Company to the holder in respect of such rights.
16. Lost Warrants or Stock Certificates. The Company covenants to the
holder hereof that, upon receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant or any
stock certificate and, in the case of any such loss, theft or destruction, upon
receipt of an indemnity reasonably satisfactory to the Company, or in the case
of any such mutilation upon surrender and cancellation of such Warrant or
stock certificate, the Company will make and deliver a new Warrant or stock
certificate, or like tenor, in lieu of the lost, stolen, destroyed or mutilated
Warrant or stock certificate.
17. Descriptive Headings. The descriptive headings of the several
paragraphs of this Warrant are inserted for convenience only and do not
constitute a part of this Warrant. The language in this Warrant shall be
construed as to its fair meaning without regard to which party drafted this
Warrant.
18. Governing Law. This Warrant shall be construed and enforced in
accordance with, and the rights of the parties shall be governed by, the laws
of the State of California.
8
<PAGE> 9
19. Survival of Representations, Warranties and Agreements. All
representations and warranties of the Company and the holder hereof contained
herein shall survive the Date of Grant, the exercise or conversion of this
Warrant (or any part hereof) or the termination or expiration of rights
hereunder. All agreements of the Company and the holder hereof contained herein
shall survive indefinitely until, by their respective terms, they are no longer
operative.
20. Remedies. In case any one or more of the covenants and agreements
contained in this Warrant shall have been breached, the holders hereof (in the
case of a breach by the Company), or the Company (in the case of a breach by
a holder), may proceed to protect and enforce their or its rights either by
suit in equity and/or by action at law, including, but not limited to, an
action for damages as a result of any such breach and/or action for specific
performance of any such covenant or agreement contained in this Warrant.
21. No Impairment of Rights. The Company will not, by amendment of its
Charter or through any other means, 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 actions as may be necessary or appropriate in order to protect the rights
of the holder of this Warrant against impairment.
22. Severability. The invalidity or unenforceability of any provision of
this Warrant in any jurisdiction shall not affect the validity or
enforceability of such provision in any other jurisdiction, or affect any other
provision of this Warrant, which shall remain in full force and effect.
23. Recovery of Litigation Costs. If any legal action or other proceeding
is brought for the enforcement of this Warrant, or because of an alleged
dispute, breach, default, or misrepresentation in connection with any of the
provisions of this Warrant, the successful or prevailing party or parties shall
be entitled to recover reasonable attorneys' fees and other costs incurred in
that action or proceeding, in addition to any other relief to which it or they
may be entitled.
9
<PAGE> 10
24. Entire Agreement; Modification. This Warrant constitutes the entire
agreement between the parties pertaining to the subject matter contained in it
and supersedes all prior and contemporaneous agreements, representations, and
undertakings of the parties, whether oral or written, with respect to such
subject matter.
Date of Grant: January 30, 1998
VIROLOGIC, INC.
By: /s/ MARTIN H. GOLDSTEIN
-----------------------------------
Title: Pres & CEO
--------------------------------
Address:
------------------------------
270 E. Grand Avenue
South San Francisco, CA 94080
AGREED AND ACCEPTED:
MMC/GATX PARTNERSHIP NO. 1
By: Meier Mitchell & Company
as General Partner
By:
--------------------------------
Title:
-----------------------------
10
<PAGE> 11
24. Entire Agreement; Modification. This Warrant constitutes the entire
agreement between the parties pertaining to the subject matter contained in it
and supersedes all prior and contemporaneous agreements, representations, and
undertakings of the parties, whether oral or written, with respect to such
subject matter.
Date of Grant: January 30, 1998
VIROLOGIC, INC.
By:
-----------------------------------
Title:
--------------------------------
Address:
------------------------------
270 E. Grand Avenue
South San Francisco, CA 94080
AGREED AND ACCEPTED:
MMC/GATX PARTNERSHIP NO. 1
By: Meier Mitchell & Company
as General Partner
By: /s/ [Signature Illegible]
--------------------------------
Title: Secretary
-----------------------------
10
<PAGE> 12
EXHIBIT A
NOTICE OF EXERCISE
To: VIROLOGIC, INC. (the "Company")
1. The undersigned hereby:
- elects to purchase ______ shares of Common Stock of the Company
pursuant to the terms of the attached Warrant, and tenders herewith
payment of the purchase price of such shares in full, or
- elects to exercise its net issuance rights pursuant to Section 10.3
of the attached Warrant with respect to ______ shares of Common
Stock.
2. Please issue a certificate or certificates representing said shares in
the name of the undersigned or in such other name or names as are specified
below:
-----------------------------------
(Name)
-----------------------------------
-----------------------------------
(Address)
3. The undersigned represents that the aforesaid shares are being acquired
for the account of the undersigned for investment and not with a view to, or
for resale in connection with, the distribution thereof and that the
undersigned has no present intention of distributing or reselling such shares,
all except as in compliance with applicable securities laws.
-------------------------------
(Signature)
- ----------------
(Date)
11
<PAGE> 13
EXHIBIT A-1
NOTICE OF EXERCISE
To: VIROLOGIC, INC. (the "Company")
1. Contingent upon and effective immediately prior to the closing (the
"Closing") of the Company's public offering contemplated by the Registration
Statement on Form S___, filed ________, 19___, the undersigned hereby:
o elects to purchase ______ shares of Common Stock of the Company (or
such lesser number of shares as may be sold on behalf of the
undersigned at the Closing) pursuant to the terms of the attached
Warrant, or
o elects to exercise its net issuance rights pursuant to Section 10.3
of the attached Warrant with respect to ______ shares of Common
Stock.
2. Please deliver to the custodian for the selling shareholders a stock
certificate representing such ______ shares.
3. The undersigned has instructed the custodian for the selling
shareholders to deliver to the Company $______ or, if less, the net proceeds due
the undersigned from the sale of shares in the aforesaid public offering. If
such net proceeds are less than the purchase price for such shares, the
undersigned agrees to deliver the difference to the Company prior to the
Closing.
-------------------------------
(Signature)
- ----------------
(Date)
12
<PAGE> 14
EXHIBIT B
CHARTER DOCUMENTS
13
<PAGE> 1
EXHIBIT 4.7
THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE BEEN ACQUIRED FOR INVESTMENT
AND NOT WITH VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF.
NO SUCH SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO THE
COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.
No. W-__
STOCK PURCHASE WARRANT
To Purchase Shares of Common Stock of
VIROLOGIC, INC.
THIS CERTIFIES that pursuant to the First Amendment dated December 17,
1997, to that certain lease (the "Lease") between Virologic, Inc. (the
"Company") and Britannia Developments, Inc. ("Landlord") dated August 27, 1997,
and upon the terms and subject to the conditions hereinafter set forth,
________________________________________ ("Holder") may at any time or on or
after the date of this Warrant and on or prior to August 10, 2003, but not
thereafter, to subscribe for and purchase, from the Company, up to ___ shares of
Common Stock. The purchase price of one share of Common Stock issuable under
this Warrant shall be $4.00. The purchase price and the number of shares for
which the Warrant is exercisable shall be subject to adjustment as provided
herein.
1. Exercise of Warrant.
(a) Cash Exercise. Unless earlier terminated under Section 7, the
purchase rights represented by this Warrant are exercisable by Holder, in whole
or in part, at any time after the date hereof and before the close of business
on August 10, 2003 by the surrender of this Warrant and the Notice of Exercise
annexed hereto duly executed at the office of the Company, in South San
Francisco, California (or such other office or agency of the Company as it may
designate by notice in writing to the registered holder hereof at the address
of such holder appearing on the books of the Company), and upon payment of the
purchase price of the shares of Common Sock thereby purchased (by cash or by
check or bank draft payable to the order of the Company in an amount equal to
the purchase price of the shares thereby purchased); whereupon the holder of
this Warrant shall be entitled to receive a certificate for the number of
shares of Common Stock so purchased. The Company agrees that if at the time of
the surrender of this Warrant and purchase of the shares, the holder hereof
shall be entitled to exercise this Warrant, and the shares so purchased shall
be and be deemed to be issued to such holder as the record owner of such shares
as of the close of business on the date on which this Warrant shall have been
exercised as aforesaid.
Certificates for shares of Common Stock purchased hereunder shall be
delivered to the holder hereof within a reasonable time after the date on which
this Warrant shall have been exercised as aforesaid.
<PAGE> 2
(b) Net Exercise. In lieu of the cash payment set forth in Section
1(a) above and provided that the Company has effected a public offering of its
Common Stock, the Holder shall have the right, to convert this Warrant in its
entirety (without payment of any kind) into that number of shares of Common
Stock equal to the quotient obtained by dividing the Net Value (as defined
below) of the shares of Common Stock then exercisable under this Warrant by the
Fair Market Value (as defined below) of one share of Common Stock. For purposes
of this Section 1(b), (i) the Fair Market Value of Common Stock means the
average of the closing prices quoted on the National Association of Securities
Dealers Automated Quotation System ("NASDAQ") National Market System ("NMS")
(or, if then traded on a national securities exchange, the closing prices on the
principal national securities exchange on which it is listed or, if quoted on
NASDAQ, the average of the closing bid and asked prices) on each of the twenty
(20) trading days immediately preceding the date of exercise; and (ii) the Net
Value of the shares means the aggregate Fair Market Value of the shares of
Common Stock then exercisable under this Warrant minus the aggregate purchase
price for the shares of Common Stock then exercisable under this Warrant.
2. No Fractional Shares or Scrip. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of this
Warrant. With respect to any fraction of a share called for upon the exercise of
this Warrant, an amount equal to such fraction multiplied by the then current
price at which each share may be purchased hereunder shall be paid in cash to
the holder of this Warrant.
3. Charges, Taxes and Expenses. Issuance of certificates for shares to be
received upon the exercise of this Warrant shall be made without charge to the
holder hereof for any issue or transfer tax or other incidental expense in
respect of the issuance of such certificate, all of which taxes and expenses
shall be paid by the Company, and such certificates shall be issued in the name
of the holder of this Warrant.
4. No Rights as Stockholders. This Warrant does not entitle the holder
hereof to any voting rights or other rights as a stockholder of the Company
prior to the exercise thereof.
5. 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 case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to it, and upon
reimbursement to the Company of all reasonable expenses incidental thereto, and
upon surrender and cancellation of this Warrant, if mutilated, the Company will
make and deliver a new Warrant of like tenor and dated as of such cancellation,
in lieu of this Warrant.
6. Saturdays, Sundays, Holidays, etc. 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 legal holiday, then such
action may be taken or such right may be exercised on the next succeeding day
not a legal holiday.
7. Early Termination and Dilution.
-2-
<PAGE> 3
(a) Early Termination on Merger, etc. If at any time the Company
proposes to merge with or into any other corporation, effect a reorganization,
or sell or convey all or substantially all of its assets to any other entity in
a transaction in which the stockholders of the Company immediately before the
transaction own immediately after the transaction less than a majority of the
outstanding voting securities of the surviving entity (or its parent), then the
Company shall give the undersigned at least thirty (30) days notice of the
proposed effective date of the transaction and, if the Warrant has not been
exercised by the effective date of the transaction, the Warrant shall terminate.
The exercise of this Warrant may be conditioned upon the effectiveness of the
transaction.
(b) Reclassification, etc. If the Company at any time shall, by
subdivision, conversion, combination or reclassification of securities or
otherwise, change any of the securities to which purchase rights under this
Warrant exist into the same or a different number of securities of any class or
classes, this Warrant shall thereafter be to acquire such number and kind of
securities as would have been issuable as the result of such change with respect
to the securities which were subject to the purchase rights under this Warrant
immediately prior to such subdivision, combination, reclassification or other
change. If shares of the Company's Common Stock are subdivided or combined into
a greater or smaller number of shares of Common Stock, the purchase price under
this Warrant shall be proportionately reduced in case of subdivision of shares
of proportionately increased in the case of combination of shares, in both cases
by the ratio which the total number of shares of Common Stock to be outstanding
immediately after such event bears to the total number of shares of Common Stock
outstanding immediately prior to such event.
(c) Cash Distributions. No adjustment on account of cash dividends or
interest on the Company's Common Stock or other securities purchasable hereunder
will be made to the purchase price under this Warrant.
(d) Authorized Shares. The Company covenants that during the period
the Warrant is outstanding, it will reserve from its authorized and unissued
Common Stock a sufficient number of shares to provide for the issuance of Common
Stock upon the exercise of any purchase rights under this Warrant. The Company
further covenants that its issuance of this Warrant shall constitute full
authority to its officers who are charged with the duty of executing stock
certificates to execute and issue the necessary certificates for shares of the
Company's Common Stock upon the exercise of the purchase rights under this
Warrant.
8. 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. This Warrant shall be binding upon any
successors or assigns of the Company. This Warrant shall constitute a contract
under the laws of the State of California and for all purposes shall be
construed in accordance with and governed by the laws of said state.
-3-
<PAGE> 4
(b) Restrictions. The holder hereof acknowledges that the shares acquired
upon the exercise of this Warrant may have restrictions upon its resale imposed
by state and federal securities laws.
(c) Waivers and Amendments. This Warrant and any provisions hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of the same is sought.
(d) Assignment and Transferability. This Warrant may not be assigned or
transferred without the prior written approval of the Company. Following an
assignment, the Company shall, without charge, execute and deliver a new
Warrant or Warrants dated as of the date hereof and registered in the name of
the assignee or assignees named in such instrument of assignment (any such
assignee will then be a "holder" for purposes of this Warrant) and, if holder's
entire interest is not being assigned, in the name of holder, and this Warrant
shall promptly be canceled.
(e) Market Stand Off. The undersigned holder of this Warrant hereby
agrees that, for a period of 180 days following the effective date of a
registration statement of the Company for its initial public offering filed
pursuant to the Securities act of 1933, it shall not to the extent requested by
the Company and its underwriter sell or otherwise transfer or dispose of (other
than to donees who agree to be similarly bound) any Common Stock received upon
exercise of this Warrant. The undersigned holder of this Warrant further agrees
to enter into an agreement with the Company's underwriter for its initial
public offering which evidences the foregoing covenant. In order to enforce the
foregoing covenants, the Company may impose stop-transfer instructions with its
transfer agent.
IN WITNESS WHEREOF, the undersigned have caused this Warrant to be
executed by its officers thereunto duly authorized.
Dated: August __, 1998
VIROLOGIC, INC.
By: /s/ MARTIN H. GOLDSTEIN
---------------------------------
Title: Pres & CEO
------------------------------
Holder: Address: 220 E. Grand Ave.
----------------------------
By: S. San Francisco, CA
---------------------------------
-4-
<PAGE> 5
NOTICE OF EXERCISE
To: ___________________________________
(1) The undersigned hereby elects to purchase ________ shares of Common
Stock of Virologic, Inc. pursuant to the terms of the attached Warrant, and
tenders herewith payment of the purchase price in full, together with all
applicable transfer taxes, if any.
(2) Please issue a certificate of certificates representing said shares
of Common Stock in the name of the undersigned as is specified below:
_____________________________
(Name)
_____________________________
(Address)
(3) The undersigned represents that the aforesaid shares of Common Stock
are being acquired for the account of the undersigned for investment and not
with a view to, or for resale in connection with, the distribution thereof and
that the undersigned has no present intention of distributing or reselling such
shares.
_____________________________ ________________________________________
(Date) (Signature)
<PAGE> 1
EXHIBIT 4.8
WARRANT
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933. SUCH SECURITIES AND ANY SECURITIES OR SHARES ISSUED HEREUNDER MAY
NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION
THEREFROM UNDER SAID ACT. COPIES OF THE AGREEMENT COVERING THE PURCHASE OF THESE
SECURITIES AND RESTRICTING THEIR TRANSFER OR SALE MAY BE OBTAINED AT NO COST BY
WRITTEN REQUEST MADE BY THE HOLDER OF RECORD HEREOF TO THE SECRETARY OF THE
COMPANY AT ITS PRINCIPAL EXECUTIVE OFFICES.
No. __ B Warrant to Purchase __ Shares
Common Stock (subject to adjustment)
WARRANT TO PURCHASE COMMON STOCK
OF
VIROLOGIC, INC.
VOID AFTER AUGUST 30, 2003
This certifies that, for value received, ____________, or registered
assigns ("Holder") is entitled, subject to the terms set forth below, to
purchase from VIROLOGIC, INC. (the "Company"), a Delaware corporation, up to 57
shares of the Common Stock of the Company, as constituted on August 25, 1998
(the "Warrant Issue Date"), upon surrender hereof, at the principal office of
the Company referred to below, with the subscription form attached hereto duly
executed, and simultaneous payment therefor in lawful money of the United States
or otherwise as hereinafter provided, at the Exercise Price as set forth, in
Section 2 below. The number, character and Exercise Price of such shares of
Common Stock are subject to adjustment as provided below. The term "Warrant" as
used herein shall include this Warrant, which is one of a series of warrants
issued for the Common Stock of the Company, and any warrants delivered in
substitution or exchange therefor as provided herein.
This Warrant is issued in connection with the transactions described in
that certain Series B Preferred Stock Purchase Agreement between the Company and
the investors described therein, dated as of August 25, 1998 (the "Purchase
Agreement").
1. Term of Warrant. Subject to the terms and conditions set forth
herein, this warrant shall be exercisable, in whole or in part, during the term
commencing on the Warrant Issue Date and ending at 5:00 p.m., Pacific standard
time, on August 30, 2003, and shall be void thereafter.
2. Exercise Price. The Exercise Price at which this Warrant may be
exercised shall be $0.01 per share of Common Stock, as adjusted from time to
time pursuant to Section 11 hereof.
1.
<PAGE> 2
3. Vesting of Warrant. Effective as of the Warrant Issue Date, this
Warrant is exercisable with respect to __ shares of Common Stock of the Company.
4. Exercise of Warrant.
(a) The purchase rights represented by this Warrant are
exercisable by the Holder in whole or in part, at any time, or from time to
time, during the term hereof as described in Section 1 above, by the surrender
of this Warrant and the Notice of Exercise annexed hereto duly completed and
executed on behalf of the Holder, at the office of the Company (or such other
office or agency of the Company as it may designate by notice in writing to the
Holder at the address of the Holder appearing on the books of the Company), upon
payment (i) in cash or by check acceptable to the Company, (ii) by cancellation
by the Holder of indebtedness of the Company to the Holder, or (iii) by a
combination of (i) and (ii), of the purchase price of the shares to be
purchased.
(b) This Warrant shall be deemed to have been exercised
immediately prior to the close of business on the date of its surrender for
exercise as provided above, and the person entitled to receive the shares of
Common Stock issuable upon such exercise shall be treated for all purposes as
the holder of record of such shares as of the close of business on such date. As
promptly as practicable on or after such date and in any event within ten (10)
days thereafter, the Company at its expense shall issue and deliver to the
person or persons entitled to receive the same a certificate or certificates for
the number of shares issuable upon such exercise. In the event that this Warrant
is exercised in part, the Company at its expense will execute and deliver a new
Warrant of like tenor exercisable for the number of shares for which this
Warrant may then be exercised.
(c) Notwithstanding any provisions herein to the contrary, if the
fair market value of one share of Common Stock is greater than the Exercise
Price (at the date of calculation as set forth below), in lieu of exercising
this Warrant for cash, the Holder may elect to receive shares equal to the value
(as determined below) of this Warrant (or the portion thereof being cancelled)
by surrender of this Warrant at the principal office of the Company together
with the properly endorsed Notice of Exercise and notice of such election in
which event the Company shall issue to the Holder a number of shares of Common
Stock computed using the following formula:
Y (A - B)
X = -------
A
Where X = the number of shares of Common Stock to be issued to the Holder
Y = 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 canceled (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 = Exercise Price (as adjusted to the date of such calculation)
2.
<PAGE> 3
For purposes of the above calculation, fair market value of one share of Common
Stock shall be determined by the Company's Board of Directors in good faith;
provided, however, that where there exists a public market for the Company's
Common Stock at the time of such exercise, the fair market value per share shall
be the average of the closing bid and asked prices of the Common Stock quoted in
the Over-The-Counter Market Summary or the last reported sale price of the
common Stock or the closing price quoted on The Nasdaq National Market or on any
exchange on which the Common Stock is listed, whichever is applicable, as
published in the Western Edition of The Wall Street Journal for the five (5)
trading days prior to the date of determination of fair market value.
Notwithstanding the foregoing, in the event the Warrant is exercised in
connection with the Company's initial public offering of Common Stock, the fair
market value per share shall be the per share offering price to the public of
the Company's initial public offering.
(d) No fractional shares or scrip representing fractional shares
shall be issued upon the exercise of this Warrant. In lieu of any fractional
share to which the Holder would otherwise be entitled, the Company shall make a
cash payment equal to the Exercise Price multiplied by such fraction.
5. Replacement of Warrant. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this warrant and, in the case of loss, theft or destruction, on delivery of an
indemnity agreement reasonably satisfactory in form and substance to the Company
or, in the case of mutilation, on surrender and cancellation of this Warrant,
the Company at its expense shall execute and deliver, in lieu of this Warrant, a
new warrant of like tenor and amount.
6. Rights of Stockholders. Subject to Sections 9 and 11 of this Warrant,
the Holder shall not be entitled to vote or receive dividends or be deemed the
holder of the Common Stock to which this Warrant relates or any other securities
of the Company that may at any time be issuable on the exercise hereof for any
purpose.
7. Transfer of Warrant.
(a) Warrant Register. The Company will maintain a register (the
"Warrant Register") containing the names and addresses of the Holder or Holders.
Any Holder of this Warrant or any portion thereof may change his/her address as
shown on the Warrant Register by written notice to the Company requesting such
change. Any notice or written communication required or permitted to be given to
the Holder may be delivered or given by mail to such Holder as shown on the
Warrant Register and at the address shown on the Warrant Register. Until this
Warrant is transferred on the Warrant Register of the Company, the Company may
treat the Holder as shown on the Warrant Register as the absolute owner of this
Warrant for all purposes, notwithstanding any notice to the contrary.
(b) Warrant Agent. The Company may, by written notice to the
Holder, appoint an agent for the purpose of maintaining the Warrant Register
referred to in Section 7(a) above, issuing the Common Stock or other securities
then issuable upon the exercise of this Warrant, exchanging this Warrant,
replacing this Warrant, or any or all of the foregoing.
3.
<PAGE> 4
Thereafter, any such registration, issuance, exchange, or replacement, as the
case may be, shall be made at the office of such agent.
(c) Transferability and Nonnegotiability of Warrant. This Warrant
may not be transferred or assigned (i) except in its entirety and (ii) without
compliance with all applicable federal and state securities laws by the
transferor and the transferee (including the delivery of investment
representation letters reasonably satisfactory to the Company, if such are
requested by the Company), and then only against receipt of an agreement of the
transferee to comply with the provisions of this Section 7(c) with respect to
any resale or other disposition of this Warrant. Subject to the provisions of
this warrant with respect to compliance with the Securities Act of 1933, as
amended (the "Act"), title to this Warrant may be transferred by endorsement (by
the Holder executing the Assignment Form annexed hereto) and delivery in the
same manner as a negotiable instrument transferable by endorsement and delivery.
(d) Exchange of Warrant upon a Transfer. On surrender of this
Warrant for exchange, properly endorsed on the Assignment Form and subject to
the provisions of this warrant with respect to compliance with the Act and with
the limitations on assignments and transfers and contained in this Section 7,
the Company at its expense shall issue to or on the order of the Holder a new
warrant or warrants of like tenor, in the name of the Holder or as the Holder
(on payment by the Holder of any applicable transfer taxes) may direct, for the
number of shares issuable upon exercise hereof.
(e) Compliance with Securities Laws.
(i) The Holder of this Warrant by acceptance hereof,
acknowledges that this Warrant and the shares of Common Stock to be issued upon
exercise hereof are being acquired solely for the Holder's own account and not
as a nominee for any other party, and for investment, and that the Holder will
not offer, sell or otherwise dispose of this Warrant or any shares of Common
Stock to be issued upon exercise hereof except under circumstances that will not
result in a violation of the Act or any state securities laws. Upon exercise of
this Warrant, the Holder shall, if requested by the Company, confirm in writing,
in a form satisfactory to the Company, that the shares of Common Stock so
purchased are being acquired solely for the Holder's own account and not as a
nominee for any other party, for investment, and not with a view toward
distribution or resale.
(ii) This Warrant and all shares of Common Stock issued
upon exercise hereof shall be stamped or imprinted with a legend in
substantially the following form (in addition to any legend required by state
securities laws):
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933. SUCH SECURITIES AND ANY SECURITIES OR SHARES
ISSUED HEREUNDER MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT. COPIES OF THE
AGREEMENT COVERING THE PURCHASE OF THESE SECURITIES AND RESTRICTING
THEIR TRANSFER OR SALE MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST
MADE BY THE
4.
<PAGE> 5
HOLDER OF RECORD HEREOF TO THE SECRETARY OF THE COMPANY AT ITS PRINCIPAL
EXECUTIVE OFFICES.
8. Reservation of Stock. The Company covenants that during the term this
Warrant is exercisable, the Company will reserve from. its authorized and
unissued Common Stock a sufficient number of shares to provide for the issuance
of Common Stock upon the exercise of this warrant and, from time to time, will
take all steps necessary to amend its Certificate of Incorporation (the
"Certificate") to provide sufficient reserves of shares of Common Stock. The
Company further covenants that all shares that may be issued upon the exercise
of rights represented by this Warrant, upon exercise of the rights represented
by this Warrant and payment of the Exercise Price, all as set forth herein, will
be free from all taxes, liens and charges in respect of the issue thereof (other
than taxes in respect of any transfer occurring contemporaneously or otherwise
specified herein). The Company agrees that its issuance of this Warrant shall
constitute full authority to its officers who are charged with the duty of
executing stock certificates to execute and issue the necessary certificates for
shares of Common Stock upon the exercise of this Warrant.
9. Notices.
(a) Whenever the Exercise Price or number of shares purchasable
hereunder shall be adjusted pursuant to Section 11 hereof, the Company shall
issue a certificate signed by its 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 Exercise
Price and number of shares purchasable hereunder after giving effect to such
adjustment, and shall cause a copy of such certificate to be mailed (by
first-class mail, postage prepaid) to the Holder of this Warrant.
(b) In case:
(i) the Company shall take a record of the holders of its
Common Stock (or other stock or securities at the time receivable upon the
exercise or conversion of this Warrant) for the purpose of entitling them to
receive any dividend or other distribution, or any right to subscribe for or
purchase any shares of stock of any class or any other securities, or to receive
any other right, or
(ii) of any public offering of the Company's Common Stock,
any capital reorganization of the Company, any reclassification of the capital
stock of the Company, any consolidation or merger of the Company with or into
another corporation, or any conveyance of all or substantially all of the assets
of the Company to another corporation, or
(iii) of any voluntary dissolution, liquidation or
winding-up of the Company,
then, and in each such case, the Company will mail or cause to be mailed to the
Holder or Holders a notice specifying, as the case may be, (A) the date on which
a record is to be taken for the purpose of such dividend, distribution or right,
and stating the amount and character of such dividend, distribution or right, or
(B) the date on which such reorganization, reclassification, consolidation,
merger, conveyance, dissolution, liquidation or winding-up is to take place, and
5.
<PAGE> 6
the time, if any is to be fixed, as of which the holders of record of Common
Stock (or such stock or securities at the time receivable upon the exercise of
this Warrant) shall be entitled to exchange their shares of Common Stock (or
such other stock or securities) for securities or other property deliverable
upon such reorganization, reclassification, consolidation, merger, conveyance,
dissolution, liquidation or winding-up. Such notice shall be mailed at least
fifteen (15) days prior to the date therein specified.
(c) All such notices, advices and communications shall be deemed
to have been received (i) in the case of personal delivery, on the date of such
delivery and (ii) in the case of mailing, on the third business day following
the date of such mailing.
10. Amendments. This Warrant and any term hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought.
11. Adjustments. The Exercise Price and the number of shares purchasable
hereunder are subject to adjustment from time to time as follows:
11.1 Merger, Sale of Assets, etc.. If at any time while this
Warrant, or any portion thereof, is outstanding and unexpired there shall be (a)
a reorganization (other than a combination, reclassification, exchange or
subdivision of shares otherwise provided for herein), (b) a merger or
consolidation of the Company with or into another corporation in which the
Company is not the surviving entity, or a reverse triangular merger in which the
Company is the surviving entity but the shares of the Company's capital stock
outstanding immediately prior to the merger are converted by virtue of the
merger into other property, whether in the form of securities, cash or
otherwise, or (c) a sale or transfer of the Company's properties and assets as,
or substantially as, an entirety to any other person, then the Company shall
provide the holder of this Warrant with not less than thirty (30) days, prior
written notice of such event and an opportunity to exercise this Warrant
effective upon the consummation of such event, so that, as a part of such
reorganization, merger, consolidation, sale or transfer, the holder of this
Warrant shall be entitled to receive upon exercise of this Warrant the number of
shares of stock or other securities or property of the successor corporation
resulting from such reorganization, merger, consolidation, sale or transfer that
a holder of the shares deliverable upon exercise of this Warrant would have been
entitled to receive in such reorganization, consolidation, merger, sale or
transfer. The Company shall not effect any such consolidation, merger, sale,
transfer or other disposition unless prior to or simultaneously with the
consummation thereof the successor corporation (if other than the Company)
resulting from such consolidation or merger, or the corporation purchasing or
otherwise acquiring such assets or other appropriate corporation or entity shall
agree to deliver to the holder of the Warrant, upon its exercise and payment of
the Exercise Price then in effect, such shares of stock, securities or assets
as, in accordance with the foregoing provisions, such holder may be entitled to
purchase.
11.2 Reclassification, etc.. If the Company, at any time while
this Warrant, or any portion thereof, remains outstanding and unexpired, by
reclassification of securities or otherwise, shall change any of the securities
as to which purchase rights under this Warrant exist into the same or a
different number of securities of any other class or classes, this Warrant shall
thereafter represent the right to acquire such number and kind of securities as
would have been
6.
<PAGE> 7
issuable as the result of such change with respect to the securities that were
subject to the purchase rights under this Warrant immediately prior to such
reclassification or other change and the Exercise Price therefor shall be
appropriately adjusted, all subject to further adjustment as provided in this
Section 11.
11.3 Split, Subdivision or Combination of Shares. If the Company
at any time while this Warrant, or any portion thereof, remains outstanding and
unexpired shall split, subdivide or combine the securities as to which purchase
rights under this warrant exist, into a different number of securities of the
same class, the Exercise Price for such securities shall be proportionately
decreased in the case of a split or subdivision or proportionately increased in
the case of a combination.
11.4 Adjustments for Dividends in Stock or Other Securities or
Property. If while this Warrant, or any portion hereof, remains outstanding and
unexpired the holders of the securities as to which purchase rights under this
Warrant exist at the time shall have received, or, on or after the record date
fixed for the determination of eligible Stockholders, shall have become entitled
to receive, without payment therefor, other or additional stock or other
securities or property (other than cash) of the Company by way of dividend, then
and in each case, this Warrant shall represent the right to acquire, in addition
to the number of shares of the security receivable upon exercise of this
Warrant, and without payment of any additional consideration therefor, the
amount of such other or additional stock or other securities or property (other
than cash) of the Company that such holder would hold on the date of such
exercise had it been the holder of record of the security receivable upon
exercise of this Warrant on the date hereof and had thereafter, during the
period from the date hereof to and including the date of such exercise, retained
such shares and/or all other additional stock available by it as aforesaid
during such period, giving effect to all adjustments called for during such
period by the provisions of this Section 11.
11.5 Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment pursuant to this Section 11, the Company at its
expense shall promptly compute such adjustment or readjustment in accordance
with the terms hereof and furnish to each Holder of this Warrant a certificate
setting forth such adjustment or readjustment and showing in detail the facts
upon which such adjustment or readjustment is based. The Company shall, upon the
written request, at any time, of any such Holder, furnish or cause to be
furnished to such Holder a like certificate setting forth: (a) such adjustments
and readjustments; (b) the Exercise Price at the time in effect; and (c) the
number of shares and the amount, if any, of other property that at the time
would be received upon the exercise of the Warrant.
11.6 No Impairment. The Company will not, by any voluntary
action, avoid or seek to avoid the observance or performance of any of the terms
to be observed or performed hereunder by the Company, but will at all times in
good faith assist in the carrying out of ail the provisions of this Section 11
and in the taking of all such action as may be necessary or appropriate in order
to protect the right of the Holders of this Warrant against impairment.
12. Registration Rights. Upon exercise of this Warrant, the Holder shall
have and be entitled to exercise, together with all other holders of Registrable
Securities possessing registration rights under that certain Investors' Rights
Agreement, of even date herewith, between
7.
<PAGE> 8
the Company and the parties who have executed the counterpart signature pages
thereto or are otherwise bound thereby (the "Investors' Rights Agreement"), the
rights of registration granted under the Investors' Rights Agreement to
Registrable Securities (with respect to the Shares issued on exercise of this
Warrant). By its receipt of this Warrant, Holder agrees to be bound by the
Investors' Rights Agreement upon exercise of this warrant as a party thereto.
13. Miscellaneous.
(a) Successors. All the covenants and provisions hereof by or for
the benefit of the Company or the Holder shall bind and inure to the benefit of
their respective successors and assigns hereunder.
(b) Governing Law. This Warrant shall be deemed to be a contract
made under the laws of the State of California and for all purposes shall be
construed in accordance with the laws of said State.
(c) Attorneys Fees in the Event of a Dispute. In the event of any
action at law, suit in equity or arbitration proceeding in relation to this
Warrant or any Common Stock issued or to be issued hereunder, the prevailing
party or parties, shall be paid by the other party or parties a reasonable sum
for attorneys, fees and expenses of such prevailing party or parties.
(d) 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 legal holiday in the State
of California, then such action may be taken or such right may be exercised on
the next succeeding day not a legal holiday.
IN WITNESS WHEREOF, VIROLOGIC, INC. has caused this Warrant to be
executed by its officers thereunto duly authorized.
Dated: August 25, 1998.
VIROLOGIC, INC.
By
---------------------------------------
President and CEO
8.
<PAGE> 9
NOTICE OF EXERCISE
To: VIROLOGIC, INC.
(1) The undersigned hereby elects to purchase shares of Common Stock of
VIROLOGIC, INC., pursuant to the terms of the attached Warrant, and tenders
herewith payment of the purchase price for such shares in full.
(2) In exercising this Warrant, the undersigned hereby confirms and
acknowledges that the shares of Common Stock are being acquired solely for the
account of the undersigned and not as a nominee for any other party, or for
investment,. and that the undersigned will not offer, sell or otherwise dispose
of any such shares of Common Stock except under circumstances that will not
result in a violation of the Securities Act of 1933, as amended, or any state
securities laws.
(3) Please issue a certificate or certificates representing said shares
of Common Stock in the name of the undersigned or in such other name as is
specified below:
-----------------------------------------
(Name)
-----------------------------------------
(Name)
(4) Please issue a new Warrant for the unexercised portion of the
attached Warrant in the name of the undersigned or in such other name as is
specified below:
-----------------------------------------
(Name)
- ----------------------------- -----------------------------------------
(Date) (Signature)
9.
<PAGE> 10
ASSIGNMENT FORM
FOR VALUE RECEIVED, the undersigned registered owner of this Warrant
hereby sells, assigns and transfers unto the Assignee named below all of the
rights of the undersigned under the within Warrant, with respect to the number
of shares of Common Stock set forth below:
<TABLE>
<CAPTION>
Name of Assignee Address No. of Shares
---------------- ------- -------------
<S> <C> <C>
</TABLE>
and does hereby irrevocably constitute and appoint Attorney to make such
transfer on the books of VIROLOGIC, INC., maintained for the purpose, with full
power of substitution in the premises.
The undersigned also represents that by assignment hereof, the Assignee
acknowledges that this warrant and the shares of stock to be issued upon
exercise hereof or conversion thereof are being acquired for investment and that
the Assignee will not offer, sell or otherwise dispose of this warrant or any
shares of stock to be issued upon exercise hereof or conversion thereof except
under circumstances which will not result in a violation of the Securities Act
of 1933, as amended, or any state securities laws. Further, the Assignee has
acknowledged that upon exercise of this Warrant, the Assignee shall, if
requested by the Company, confirm in writing, in a form satisfactory to the
Company, that the shares of stock so purchased are being acquired for investment
and not with a view toward distribution or resale.
Dated:
------------------------------------------
Signature of Holder
10.
<PAGE> 1
EXHIBIT 4.9
WARRANT
THE SECURITIES PRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933. SUCH SECURITIES AND ANY SECURITIES OR SHARES ISSUED HEREUNDER MAY
NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION
THEREFROM UNDER SAID ACT. COPIES OF THE AGREEMENT COVERING THE PURCHASE OF
THESE SECURITIES AND RESTRICTING THEIR TRANSFER OR SALE MAY BE OBTAINED AT NO
COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD HEREOF TO THE SECRETARY OF
THE COMPANY AT ITS PRINCIPAL EXECUTIVE OFFICES.
No. WA-__ Warrant to Purchase ______ Shares
Series A Preferred Stock (subject
to adjustment)
WARRANT TO PURCHASE SERIES A PREFERRED STOCK
OF
VIROLOGIC, INC.
VOID AFTER MAY 30, 2001
This certifies that, for value received, ______________, or registered
assigns ("Holder") is entitled, subject to the terms set forth below, to
purchase from VIROLOGIC, INC. (the "Company"), a Delaware corporation, up to
______ shares of the Series A Preferred Stock of the Company, as constituted on
May 23, 1996 (the "Warrant Issue Date"), upon surrender hereof, at the principal
office of the Company referred to below, with the subscription form attached
hereto duly executed, and simultaneous payment therefor in lawful money of the
Unites States or otherwise as hereinafter provided, at the Exercise Price as set
forth in Section 2 below. The number, character and Exercise Price of such
shares of Series A Preferred Stock are subject to adjustment as provided below.
The term "Warrant" as used herein shall include this Warrant, which is one of a
series of warrants issued for the Series A Preferred Stock of the Company, and
any warrants delivered in substitution or exchange therefor as provided herein.
This Warrant is issued in connection with the transactions described in
that certain Series A Preferred Stock Purchase Agreement between the Company and
the Investors described therein, dated as of May 23, 1996 (the "Purchase
Agreement").
1. Term of Warrant. Subject to the terms and conditions set forth
herein, this Warrant shall be exercisable, in whole or in part, during the term
commencing on the Warrant Issue Date
-1-
<PAGE> 2
and ending at 5:00 p.m., Pacific standard time, on May 30, 2001, and shall be
void thereafter.
2. Exercise Price. The Exercise Price at which this Warrant may be
exercised shall be $1.84 per share of Series A Preferred Stock, as adjusted from
time to time pursuant to Section 11 hereof.
3. Vesting of Warrant. Effective as of the Warrant Issue Date, this
Warrant is exercisable with respect to ______ shares of Series A Preferred Stock
of the Company. Thereafter, this Warrant shall automatically become exercisable,
effective upon the Second Closing and each Option Closing (as such terms are
defined in Section 1 of the Purchase Agreement), if any, with respect to an
additional number of shares of Series A Preferred Stock equal to fifteen percent
(15%) of the Series A Preferred Stock sold and issued at the Second Closing and
each Option Closing, if any; provided, however, that this Warrant shall in no
event be exercisable for more than an aggregate of _______ shares of Series A
Preferred Stock of the Company (subject to adjustment as hereinafter provided).
4. Exercise of Warrant.
(a) The purchase rights represented by this Warrant are exercisable by the
Holder in whole or in part, at any time, or from time to time, during the term
hereof as described in Section 1 above, by the surrender of this Warrant and the
Notice of Exercise annexed hereto duly completed and executed on behalf of the
Holder, at the office of the Company (or such other office or agency of the
Company as it may designate by notice in writing to the Holder at the address of
the Holder appearing on the books of the Company), upon payment (i) in cash or
by check acceptable to the Company, (ii) by cancellation by the Holder of
indebtedness of the Company to the Holder, or (iii) by a combination of (i) and
(ii), of the purchase price of the shares to be purchased.
(b) This Warrant shall be deemed to have been exercised immediately prior
to the close of business on the date of its surrender for exercise as provided
above, and the person entitled to receive the shares of Series A Preferred Stock
issuable upon such exercise shall be treated for all purposes as the holder of
record of such shares as of the close of business on such date. As promptly as
practicable on or after such date and in any event within ten (10) days
thereafter, the Company at its expense shall issue and deliver to the person or
persons entitled to receive the same a certificate or certificates for the
number of shares issuable upon such exercise. In the event that this Warrant is
exercised in part, the Company at its expense will execute and deliver a new
Warrant of like tenor exercisable for the number of shares for which this
Warrant may then be exercised.
-2-
<PAGE> 3
(c) Notwithstanding any provisions herein to the contrary, if the fair
market value of one share of Series A Preferred Stock is greater than the
Exercise Price (at the date of calculation as set forth below), in lieu of
exercising this Warrant for cash, the Holder may elect to receive shares equal
to the value (as determined below) of this Warrant (or the portion thereof
being cancelled) by surrender of this Warrant at the principal office of the
Company together with the properly endorsed Notice of Exercise and notice of
such election in which event the Company shall issue to the Holder a number of
shares of Series A Preferred Stock computed using the following formula:
Y (A-B)
----------
X = A
Where X = the number of shares of Series A Preferred Stock to be
issued to the Holder
Y = the number of shares of Series A Preferred Stock purchasable
under the Warrant or, if only a portion of the Warrant is
being exercised, the portion of the Warrant being canceled
(at the date of such calculation)
A = the fair market value of one share of the Company's Series A
Preferred Stock (at the date of such calculation)
B = Exercise Price (as adjusted to the date of such calculation)
For purposes of the above calculation, fair market value of one share of Series
A Preferred Stock shall be determined by the Company's Board of Directors in
good faith; provided, however, that where there exists a public market for the
Company's Common Stock at the time of such exercise, the fair market value per
share shall be the product of (i) the average of the closing bid and asked
prices of the Common Stock quoted in the Over-The-Counter Market Summary or the
last reported sale price of the common Stock or the closing price quoted on The
Nasdaq National Market or on any exchange on which the Common Stock is listed,
whichever is applicable, as published in the Western Edition of The Wall Street
Journal for the five (5) trading days prior to the date of determination of
fair market value and (ii) the number of shares of Common Stock into which each
share of Series A Preferred Stock is convertible at the time of such exercise.
Notwithstanding the foregoing, in the event the Warrant is exercised in
connection with the Company's initial public offering of Common Stock, the fair
market value per share shall be the product of (i) the per share offering price
to the public of the Company's initial public offering, and (ii) the
-3-
<PAGE> 4
number of shares of Common Stock into which each share of Series A Preferred
Stock is convertible at the time of such exercise.
(d) No fractional shares or scrip representing fractional shares shall
be issued upon the exercise of this Warrant. In lieu of any fractional share to
which the Holder would otherwise be entitled, the Company shall make a cash
payment equal to the Exercise Price multiplied by such fraction.
5. Replacement of Warrant. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of loss, theft or destruction, on delivery of an
indemnity agreement reasonably satisfactory in form and substance to the
Company or, in case of mutilation, on surrender and cancellation of this
Warrant, the Company at its expense shall execute and deliver, in lieu of this
Warrant, a new warrant of like tenor and amount.
6. Rights of Stockholders. Subject to Sections 9 and 11 of this
Warrant, the Holder shall not be entitled to vote or receive dividends or be
deemed the holder of the Series A Preferred Stock to which this Warrant relates
or any other securities of the Company that may at any time be issuable on the
exercise hereof for any purpose.
7. Transfer of Warrant.
(a) Warrant Register. The Company will maintain a register (the "Warrant
Register") containing the names and addresses of the Holder or Holders. Any
Holder of this Warrant or any portion thereof may change his/her address as
shown on the Warrant Register by written notice to the Company requesting such
change. Any notice or written communication required or permitted to be given
to the Holder may be delivered or given my mail to such Holder as shown on the
Warrant Register and at the address shown on the Warrant Register. Until this
Warrant is transferred on the Warrant Register of the Company, the Company may
treat the Holder as shown on the Warrant Register as the absolute owner of
this Warrant for all purposes, notwithstanding any notice to the contrary.
(b) Warrant Agent. The Company may, by written notice to the Holder,
appoint an agent for the purpose of maintaining the Warrant Register referred to
in Section 7(a) above, issuing the Series A Preferred Stock or other securities
then issuable upon the exercise of this Warrant, exchanging this Warrant,
replacing this Warrant, or any or all of the foregoing. Thereafter, any such
registration, issuance, exchange, or replacement, as the case may be, shall be
made at the office of such agent.
(c) Transferability and Nonnegotiability of Warrant. This Warrant may
not be transferred or assigned (i) except in its
-4-
<PAGE> 5
entirety and (ii) without compliance with all applicable federal and state
securities laws by the transferor and the transferee (including the delivery of
investment representation letters reasonably satisfactory to the Company, if
such are requested by the Company), and then only against receipt of an
agreement of the transferee to comply with the provisions of this Section 7(c)
with respect to any resale or other disposition of this Warrant. Subject to the
provisions of this Warrant with respect to compliance with the Securities Act of
1933, as amended (the "Act"), title to this Warrant may be transferred by
endorsement (by the Holder executing the Assignment Form annexed hereto) and
delivery in the same manner as a negotiable instrument transferable by
endorsement and delivery.
(d) Exchange of Warrant Upon a Transfer. On surrender of this Warrant
for exchange, properly endorsed on the Assignment Form and subject to the
provisions of this Warrant with respect to compliance with the Act and with the
limitations on assignments and transfers and contained in this Section 7, the
Company at its expense shall issue to or on the order of the Holder a new
warrant or warrants of like tenor, in the name of the Holder or as the Holder
(on payment by the Holder of any applicable transfer taxes) may direct, for the
number of shares issuable upon exercise hereof.
(e) Compliance with Securities Laws.
(i) The Holder of this Warrant, by acceptance hereof, acknowledges that
this Warrant and the shares of Series A Preferred Stock or Common Stock to be
issued upon exercise hereof or conversion thereof are being acquired solely for
the Holder's own account and not as a nominee for any other party, and for
investment, and that the Holder will not offer, sell or otherwise dispose of
this Warrant or any shares of Series A Preferred Stock or Common Stock to be
issued upon exercise hereof or conversion thereof except under circumstances
that will not result in a violation of the Act or any state securities laws.
Upon exercise of this Warrant, the Holder shall, if requested by the Company,
confirm in writing, in a form satisfactory to the Company, that the shares of
Series A Preferred Stock or Common Stock so purchased are being acquired solely
for the Holder's own account and not as a nominee for any other party, for
investment, and not with a view toward distribution or resale.
(ii) This Warrant and all shares of Series A Preferred Stock or Common
Stock issued upon exercise hereof or conversion thereof shall be stamped or
imprinted with a legend in substantially the following form (in addition to any
legend required by state securities laws):
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933. SUCH SECURITIES AND ANY SECURITIES OR SHARES
ISSUED HEREUNDER
-5-
<PAGE> 6
MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
EXEMPTION THEREFROM UNDER SAID ACT. COPIES OF THE AGREEMENT COVERING THE
PURCHASE OF THESE SECURITIES AND RESTRICTING THEIR TRANSFER OR SALE MAY BE
OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD HEREOF TO
THE SECRETARY OF THE COMPANY AT ITS PRINCIPAL EXECUTIVE OFFICES.
8. Reservation of Stock. The Company covenants that during the term this
Warrant is exercisable, the Company will reserve from its authorized and
unissued Series A Preferred Stock a sufficient number of shares to provide for
the issuance of Series A Preferred Stock upon the exercise of this Warrant (and
shares of its Common Stock for issuance on conversion of such Series A
Preferred Stock) and, from time to time, will take all steps necessary to amend
its Certificate of Incorporation (the "Certificate") to provide sufficient
reserves of shares of Series A Preferred Stock issuable upon exercise of the
Warrant (and shares of its Common Stock for issuance on conversion of such
Series A Preferred Stock). The Company further covenants that all shares that
may be issued upon the exercise of rights represented by this Warrant, upon
exercise of the rights represented by this Warrant and payment of the Exercise
Price, all as set forth herein, will be free from all taxes, liens and charges
in respect of the issue thereof (other than taxes in respect of any transfer
occurring contemporaneously or otherwise specified herein). The Company agrees
that its issuance of this Warrant shall constitute full authority to its
officers who are charged with the duty of executing stock certificates to
execute and issue the necessary certificates for shares of Series A Preferred
Stock upon the exercise of this Warrant.
9. Notices.
(a) Whenever the Exercise Price or number of shares purchasable hereunder
shall be adjusted pursuant to Section 11 hereof, the Company shall issue a
certificate signed by its 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 Exercise Price and
number of shares purchasable hereunder after giving effect to such adjustment,
and shall cause a copy of such certificate to be mailed (by first-class mail,
postage prepaid) to the Holder of this Warrant.
(b) In case:
(i) the Company shall take a record of the holders of its Series A
Preferred Stock or Common Stock (or other stock or securities at the time
receivable upon the exercise or conversion of this Warrant) for the purpose of
entitling them to receive any dividend or other distribution, or any right to
subscribe for or purchase any shares of stock of any
-6-
<PAGE> 7
class or any other securities, or to receive any other right, or
(ii) of any capital reorganization of the Company, any
reclassification of the capital stock of the Company, any consolidation or
merger of the Company with or into another corporation, or any conveyance
of all or substantially all of the assets of the Company to another
corporation, or
(iii) of any voluntary dissolution, liquidation or winding-up of the
Company.
then, and in each such case, the Company will mail or cause to be mailed to the
Holder or Holders a notice specifying, as the case may be, (A) the date on
which a record is to be taken for the purpose of such dividend, distribution or
right, and stating the amount and character of such dividend, distribution or
right, or (B) the date on which such reorganization, reclassification,
consolidation, merger, conveyance, dissolution, liquidation or winding-up is to
take place, and the time, if any is to be fixed, as of which the holders of
record of Series A Preferred stock or Common Stock (or such stock or securities
at the time receivable upon the exercise of this Warrant) shall be entitled to
exchange their shares of Series A Preferred Stock or Common Stock (or such
other stock or securities) for securities or other property deliverable upon
such reorganization, reclassification, consolidation, merger, conveyance,
dissolution, liquidation or winding up. Such notice shall be mailed at least
fifteen (15) days prior to the date therein specified.
(c) All such notices, advices and communications shall be deemed to have
been received (i) in the case of personal delivery, on the date of such
delivery and (ii) in the case of mailing, on the third business day following
the date of such mailing.
10. Amendments. This Warrant and any term hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought.
11. Adjustments. The Exercise Price and the number of shares purchasable
hereunder are subject to adjustment from time to time as follows:
11.1 Conversion or Redemption of Series a Preferred Stock. Should all of
the Company's Series A Preferred Stock be, or if outstanding would be, at any
time prior to the expiration of this Warrant or any portion thereof, redeemed
or converted into shares of the Company's Common Stock in accordance with
Section 4(b) of the Certificate, then this Warrant shall immediately become
exercisable for that number of shares of the Company's Common Stock equal to
the number of shares of the
-7-
<PAGE> 8
Common Stock that would have been received if this Warrant had been exercised
in full and the Series A Preferred Stock received thereupon and been
simultaneously converted immediately prior to such event, and the Exercise
Price shall be immediately adjusted to equal the quotient obtained by dividing
(x) the aggregate Exercise Price of the maximum number of shares of Series A
Preferred Stock for which this Warrant was exercisable immediately prior to
such conversion or redemption, by (y) the number of shares of Common Stock for
which this Warrant is exercisable immediately after such conversion or
redemption. For purposes of the foregoing, the "Certificate" shall mean the
Certificate of Incorporation of the Company as amended and/or restated and
effective immediately prior to the redemption or conversion of all of the
Company's Series A Preferred Stock.
11.2 Merger, Sale of Assets, etc. If at any time while this Warrant, or
any portion thereof, is outstanding and unexpired there shall be (a) a
reorganization (other than a combination, reclassification, exchange or
subdivision of shares otherwise provided for herein), (b) a merger or
consolidation of the Company with or into another corporation in which the
Company is not the surviving entity, or a reverse triangular merger in which
the Company is the surviving entity but the shares of the Company's capital
stock outstanding immediately prior to the merger are converted by virtue of
the merger into other property, whether in the form of securities, cash or
otherwise, or (c) a sale or transfer of the Company's properties and assets as,
or substantially as, an entirety to any other person, then the Company shall
provide the holder of this Warrant with not less than thirty (30) days' prior
written notice of such event and an opportunity to exercise this Warrant
effective upon the consummation of such event, so that, as a part of such
reorganization, merger, consolidation, sale or transfer, the holder of this
Warrant shall be entitled to receive upon exercise of this Warrant the number
of shares of stock or other securities or property of the successor corporation
resulting from such reorganization, merger, consolidation, sale or transfer that
a holder of the shares deliverable upon exercise of this Warrant would have
been entitled to receive in such reorganization, consolidation, merger, sale or
transfer. The Company shall not effect any such consolidation, merger, sale,
transfer or other disposition unless prior to or simultaneously with the
consummation thereof the successor corporation (if other than the Company)
resulting from such consolidation or merger, or the corporation purchasing or
otherwise acquiring such assets or other appropriate corporation or entity
shall agree to deliver to the holder of the Warrant, upon its exercise and
payment of the Exercise Price then in effect, such shares of stock, securities
or assets as, in accordance with the foregoing provisions, such holder may be
entitled to purchase.
11.3 Reclassification, etc. If the Company, at any time while this
Warrant, or any portion thereof, remains outstanding
-8-
<PAGE> 9
and unexpired, by reclassification of securities or otherwise, shall change any
of the securities as to which purchase rights under this Warrant exist into the
same or a different number of securities of any other class or classes, this
Warrant shall thereafter represent the right to acquire such number and kind of
securities as would have been issuable as the result of such change with
respect to the securities that were subject to the purchase rights under this
Warrant immediately prior to such reclassification or other change and the
Exercise Price therefor shall be appropriately adjusted, all subject to further
adjustment as provided in this Section 11. No adjustment shall be made pursuant
to this Section 11.3, upon any conversion or redemption of the Series A
Preferred Stock which is the subject of Section 11.1.
11.4 Split, Subdivision or Combination of Shares. If the Company at any
time while this Warrant, or any portion thereof, remains outstanding and
unexpired shall split, subdivide or combine the securities as to which purchase
rights under this Warrant exist, into a different number of securities of the
same class, the Exercise Price for such securities shall be proportionately
decreased in the case of a split or subdivision or appropriately increased in
the case of a combination.
11.5 Adjustments for Dividends in Stock or Other Securities or Property. If
while this Warrant, or any portion hereof, remains outstanding and unexpired the
holders of the securities as to which purchase rights under this Warrant exist
at the time shall have received, or, on or after the record date fixed for the
determination of eligible Stockholders, shall have become entitled to receive,
without payment therefor, other or additional stock or other securities or
property (other than cash) of the Company by way of dividend, then and in each
case, this Warrant shall represent the right to acquire, in addition to the
number of shares of the security receivable upon exercise of this Warrant, and
without payment of any additional consideration therefor, the amount of such
other or additional stock or other securities or property (other than cash) of
the Company that such holder would hold on the date of such exercise had it been
the holder of record of the security receivable upon exercise of this Warrant on
the date hereof and had thereafter, during the period from the date hereof to
and including the date of such exercise, retained such shares and/or all other
additional stock available by it as aforesaid during such period, giving effect
to all adjustments called for during such period by the provisions of this
Section 11.
11.6 Certificate as to Adjustments. Upon the occurrence of each adjustment
or readjustment pursuant to this Section 11, the Company at its expense shall
promptly compute such adjustment or readjustment in accordance with the terms
hereof and furnish to each Holder of this Warrant a certificate setting forth
such adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based. The
-9-
<PAGE> 10
Company shall, upon the written request, at any time, of any such Holder,
furnish or cause to be furnished to such Holder a like certificate setting
forth: (a) such adjustments and readjustments; (b) the Exercise Price at the
time in effect; and (c) the number of shares and the amount, if any, of other
property that at the time would be received upon the exercise of the Warrant.
11.7 No Impairment. The Company will not, by any voluntary action, avoid
or seek to avoid the observance or performance of any of the terms to be
observed or performed hereunder by the Company, but will at all times in good
faith assist in the carrying out of all the provisions of this Section 11 and
in the taking of all such action as may be necessary or appropriate in order to
protect the rights of the Holders of this Warrant against impairment.
12. Registration Rights. Upon exercise of this Warrant, the Holder shall
have and be entitled to exercise, together with all other holders of
Registrable Securities possessing registration rights under that certain
Investors' Rights Agreement, of even date herewith, between the Company and the
parties who have executed the counterpart signature pages thereto or are
otherwise bound thereby (the "Investors' Rights Agreement"), the rights of
registration granted under the Investors' Rights Agreement to Registrable
Securities (with respect to the Shares issued on exercise of this Warrant). By
its receipt of this Warrant, Holder agrees to be bound by the Investors' Rights
Agreement upon exercise of this Warrant as a party thereto.
13. Miscellaneous.
(a) Successors. All the covenants and provisions hereof by or for the
benefit of the Company or the Holder shall bind and inure to the benefit of
their respective successors and assigns hereunder.
(b) Governing Law. This Warrant shall be deemed to be a contract made
under the laws of the State of California and for all purposes shall be
construed in accordance with the laws of said State.
(c) Attorneys Fees in the Event of a Dispute. In the event of any action
at law, suit in equity or arbitration proceeding in relation to this Warrant or
any Series A Preferred Stock issued or to be issued hereunder, the prevailing
party or parties, shall be paid by the other party or parties a reasonable sum
for attorneys' fees and expenses of such prevailing party or parties.
(d) 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 legal holiday in the State of
California,
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<PAGE> 11
then such actions may be taken or such right may be exercised on the next
succeeding day not a legal holiday.
IN WITNESS WHEREOF, VIROLOGIC, INC. has caused this Warrant to be executed
by its officers thereunto duly authorized.
Dated: May 24, 1996.
VIROLOGIC, INC.
By /s/ [SIGNATURE ILLEGIBLE]
------------------------------------
HOLDER:
- -------------------------------------
<PAGE> 12
NOTICE OF EXERCISE
To: VIROLOGIC, INC.
(1) The undersigned hereby elects to purchase ______ shares of Series A
Preferred Stock of VIROLOGIC, INC., pursuant to the terms of the attached
Warrant, and tenders herewith payment of the purchase price for such shares in
full.
(2) In exercising this Warrant, the undersigned hereby confirms and
acknowledges that the shares of Series A Preferred Stock or the Common Stock to
be issued upon conversion thereof are being acquired solely for the account of
the undersigned and not as a nominee for any other party, or for investment,
and that the undersigned will not offer, sell or otherwise dispose of any such
shares of Series A Preferred Stock or Common Stock except under circumstances
that will not result in a violation of the Securities Act of 1933, as amended,
or any state securities laws.
(3) Please issue a certificate or certificates representing said shares
of Series A Preferred Stock in the name of the undersigned or in such other
name as is specified below:
----------------------------
(Name)
----------------------------
(Name)
(4) Please issue a new Warrant for the unexercised portion of the
attached Warrant in the name of the undersigned or in such other name as is
specified below:
----------------------------
(Name)
- -------------------- ----------------------------
(Date) (Signature)
<PAGE> 13
ASSIGNMENT FORM
FOR VALUE RECEIVED, the undersigned registered owner of this Warrant
hereby sells, assigns and transfers unto the Assignee named below all of the
rights of the undersigned under the within Warrant, with respect to the number
of shares of Series A Preferred Stock (or Common Stock) set forth below:
<TABLE>
<CAPTION>
Name of Assignee Address No. of Shares
- ---------------- ------- -------------
<S> <C> <C>
</TABLE>
and does hereby irrevocably constitute and appoint Attorney __________________
to make such transfer on the books of VIROLOGIC, INC., maintained for the
purpose, with full power of substitution in the premises.
The undersigned also represents that, by assignment hereof, the Assignee
acknowledges that this Warrant and the shares of stock to be issued upon
exercise hereof or conversion thereof are being acquired for investment and
that the Assignee will not offer, sell or otherwise dispose of this Warrant or
any shares of stock to be issued upon exercise hereof or conversion thereof
except under circumstances which will not result in a violation of the
Securities Act of 1933, as amended, or any state securities laws. Further, the
Assignee has acknowledged that upon exercise of this Warrant, the Assignee
shall, if requested by the Company, confirm in writing, in a form satisfactory
to the Company, that the shares of stock so purchased are being acquired for
investment and not with a view toward distribution or resale.
Dated:
------------------
----------------------------
(Signature of Holder)
<PAGE> 1
EXHIBIT 4.10
THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE BEEN ACQUIRED FOR INVESTMENT
AND NOT WITH VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF.
NO SUCH SALE OR DISPOSITION MAY BE AFFECTED WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO THE
COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.
No. WA-__
STOCK PURCHASE WARRANT
To Purchase Shares of Series A Preferred Stock of
VIROLOGIC, INC.
THIS CERTIFIES that pursuant to that certain lease (the "Lease") between
Virologic, Inc. (the "Company") and Britannia Developments, Inc. ("Landlord")
and upon the terms and subject to the conditions hereinafter set forth,
________________, a Delaware corporation ("Holder") may at any time on or after
the date of this Warrant and on or prior to August 22, 2002, but not thereafter,
subscribe for and purchase, from the Company, up to _______ shares of Series A
Preferred Stock. The purchase price of one share of Series A Preferred Stock
issuable under this Warrant shall be $4.00. The purchase price and the number of
shares for which the Warrant is exercisable shall be subject to adjustment as
provided herein.
1. EXERCISE OF WARRANT.
(a) EFFECTIVENESS OF WARRANT. This Warrant shall not be
exercisable for any shares of Series A Preferred Stock until the Commencement
Date (as defined in the Lease) has occurred with respect to all of the Premises
(as defined in the Lease) and the Premises have been delivered in the condition
required by Section 2.4 of the Lease.
(b) CASH EXERCISE. Unless earlier terminated under Section 7 and
only to the extent then exercisable pursuant to Sections 1 (a) above, the
purchase rights represented by this Warrant are exercisable by Holder, in whole
or in part, at any time after the date hereof and before the close of business
on August 22, 2002 by the surrender of this Warrant and the Notice of Exercise
annexed hereto duly executed at the office of the Company, in South San
Francisco, California (or such other office or agency of the Company as it may
designate by notice in writing to the registered holder hereof at the address
of such holder appearing on the books of the Company), and upon payment of the
purchase price of the shares of Series A Preferred Stock thereby purchased (by
cash or by check or bank draft payable to the order of the Company in an amount
equal to the purchase price of the shares thereby purchased); whereupon the
holder of this Warrant shall be entitled to receive a certificate for the
number of shares of Series A Preferred Stock so purchased. The Company agrees
that if at the time of the surrender of this Warrant and purchase of the
shares, the holder hereof shall be entitled to exercise this Warrant, and the
shares so purchased shall be and be deemed to be issued to such holder as the
record owner of such shares as of the close of business on the date on which
this Warrant shall have been exercised as aforesaid.
1.
<PAGE> 2
Certificates for shares of Series A Preferred Stock purchased hereunder
shall be delivered to the holder hereof within a reasonable time after the date
on which this Warrant shall have been exercised as aforesaid.
(c) NET EXERCISE. In lieu of the cash payment set forth in
Section 1(b) above and provided that the Company's Series A Preferred Stock has
converted to Common Stock pursuant to a public offering, the Holder shall have
the right, to convert this Warrant in its entirety (without payment of any
kind) into that number of shares of Common Stock equal to the quotient obtained
by dividing the Net Value (as defined below) of the shares of Common Stock then
exercisable under this Warrant by the Fair Market Value (as defined below) of
one share of Common Stock. For purposes of this Section 1(c), (i) the Fair
Market Value of Common Stock means the average of the closing prices quoted on
the National Association of Securities Dealers Automated Quotation System
("NASDAQ") National Market System ("NMS") (or, if then traded on a national
securities exchange, the closing prices on the principal national securities
exchange on which it is listed, or, if quoted on NASDAQ, the average of the
closing bid and asked prices) on each of the twenty (20) trading days
immediately preceding the date of exercise; and (ii) the Net Value of the
shares means the aggregate Fair Market Value of the shares of Common Stock then
exercisable under this Warrant minus the aggregate purchase price for the
shares of Common Stock then exercisable under this Warrant.
2. NO FRACTIONAL SHARES OR SCRIP. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of this
Warrant. With respect to any fraction of a share called for upon the exercise
of this Warrant, an amount equal to such fraction multiplied by the then
current price at which each share may be purchased hereunder shall be paid in
cash to the holder of this Warrant.
3. CHARGES, TAXES AND EXPENSES. Issuance of certificates for shares to
be received upon the exercise of this Warrant shall be made without charge to
the holder hereof for any issue or transfer tax or other incidental expense in
respect of the issuance of such certificate, all of which taxes and expenses
shall be paid by the Company, and such certificates shall be issued in the name
of the holder of this Warrant.
4. NO RIGHTS AS STOCKHOLDERS. This Warrant does not entitle the holder
hereof to any voting rights or other rights as a stockholder of the Company
prior to the exercise thereof.
5. 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 case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to it, and upon
reimbursement to the Company of all reasonable expenses incidental thereto, and
upon surrender and cancellation of this Warrant, if mutilated, the Company will
make and deliver a new Warrant of like tenor and dated as of such cancellation,
in lieu of this Warrant.
6. SATURDAYS, SUNDAYS, HOLIDAYS, ETC. 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 legal holiday, then such
action may be taken or such right may be exercised on the next succeeding day
not a legal holiday.
2.
<PAGE> 3
7. EARLY TERMINATION AND DILUTION.
(a) EARLY TERMINATION ON MERGER, ETC. If at any time the Company
proposes to merge with or into any other corporation, effect a reorganization,
or sell or convey all or substantially all of its assets to any other entity in
a transaction in which the stockholders of the Company immediately before the
transaction own immediately after the transaction less than a majority of the
outstanding voting securities of the surveying entity (or its parent), then the
Company shall give the undersigned at least thirty (30) days notice of the
proposed effective date of the transaction and, if the Warrant has not been
exercised by the effective date of the transaction, the Warrant shall
terminate. The exercise of this Warrant may be conditioned upon the
effectiveness of the transaction.
(b) RECLASSIFICATION, ETC. If the Company at any time shall, by
subdivision, conversion, combination or reclassification of securities or
otherwise, change any of the securities to which purchase rights under this
Warrant exist into the same or a different number of securities of any class or
classes, this Warrant shall thereafter be to acquire such number and kind of
securities as would have been issuable as the result of such change with
respect to the securities which were subject to the purchase rights under this
Warrant immediately prior to such subdivision, combination, reclassification or
other change. If shares of the Company's Series A Preferred Stock are
subdivided or combined into a greater or smaller number of shares of Series A
Preferred Stock, the purchase price under this Warrant shall be proportionately
reduced in case of subdivision of shares or proportionately increased in the
case of combination of shares, in both cases by the ratio which the total
number of shares of Series A Preferred Stock to be outstanding immediately after
such event bears to the total number of shares of Series A Preferred Stock
outstanding immediately prior to such event.
(c) CASH DISTRIBUTIONS. No adjustment on account of cash dividends
or interest on the Company's Series A Preferred Stock or other securities
purchasable hereunder will be made to the purchase price under this Warrant.
(d) AUTHORIZED SHARES. The Company covenants that during the period
the Warrant is outstanding, it will reserve from its authorized and unissued
Series A Preferred Stock a sufficient number of shares to provide for the
issuance of Series A Preferred Stock upon the exercise of any purchase rights
under this Warrant. The Company further covenants that its issuance of this
Warrant shall constitute full authority to its officers who are charged with
the duty of executing stock certificates to execute and issue the necessary
certificates for shares of the Company's Series A Preferred Stock upon the
exercise of the purchase rights under this Warrant.
8. 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.
3.
<PAGE> 4
This Warrant shall be binding upon any successors or assigns of the Company.
This Warrant shall constitute a contract under the laws of the State of
California and for all purposes shall be construed in accordance with and
governed by the laws of said state.
(b) RESTRICTIONS. The holder hereof acknowledges that the shares acquired
upon the exercise of this Warrant may have restrictions upon its resale imposed
by state and federal securities laws.
(c) WAIVERS AND AMENDMENTS. This Warrant and any provisions hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of the same is sought.
(d) ASSIGNMENT AND TRANSFERABILITY. This Warrant may not be assigned or
transferred without the prior written approval of the Company. Following an
assignment, the Company shall, without charge, execute and deliver a new
Warrant or Warrants dated as of the date hereof and registered in the name of
the assignee or assignees named in such instrument of assignment (any such
assignee will then be a "holder" for purposes of this Warrant) and, if holder's
entire interest is not being assigned, in the name of holder, and this Warrant
shall promptly be canceled.
(e) MARKET STAND OFF. The undersigned holder of this Warrant hereby
agrees that,for a period of 180 days following the effective date of a
registration statement of the Company for its initial public offering filed
pursuant to the Securities Act of 1933, it shall not to the extent requested by
the Company and its underwriter sell or otherwise transfer or dispose of (other
than to donees who agree to be similarly bound) any Common Stock received upon
exercise of this Warrant. The undersigned holder of this Warrant further agrees
to enter into an agreement with the Company's underwriter for its initial
public offering which evidences the foregoing covenant. In order to enforce the
foregoing covenants, the Company may impose stop-transfer instructions with its
transfer agent.
4.
<PAGE> 5
IN WITNESS WHEREOF, the undersigned have caused this Warrant to be executed
by its officers thereunto duly authorized.
Originally dated: October 30, 1997
Re-issued: September 1, 1999
VIROLOGIC, INC.
- --------------------------
By: By: /s/ MARTIN H. GOLDSTEIN
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Title: Title: Pres & CEO
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Address: Address: 270 E. Grand Ave.
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S. San Francisco, CA 94080
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5.
<PAGE> 6
NOTICE OF EXERCISE
To:
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1. The undersigned hereby elects to purchase ________ shares of Series A
Preferred Stock of Virologic, Inc. pursuant to the terms of the attached
Warrant, and tenders herewith payment of the purchase price in full, together
with all applicable transfer taxes, if any.
2. Please issue a certificate of certificates representing said shares
of Series A Preferred Stock in the name of the undersigned as is specified
below:
-----------------------------
(Name)
-----------------------------
(Address)
3. The undersigned represents that the aforesaid shares are being
acquired for the account of the undersigned for investment and not with a view
to, or for resale in connection with, the distribution thereof and that the
undersigned has no present intention of distributing or reselling such shares.
- ------------------------------------- ------------------------------------
(Date) (Signature)
1.
<PAGE> 1
EXHIBIT 4.11
WARRANT
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933. SUCH SECURITIES AND ANY SECURITIES OR SHARES ISSUED HEREUNDER MAY
NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION
THEREFROM UNDER SAID ACT. COPIES OF THE AGREEMENT COVERING THE PURCHASE OF THESE
SECURITIES AND RESTRICTING THEIR TRANSFER OR SALE MAY BE OBTAINED AT NO COST BY
WRITTEN REQUEST MADE BY THE HOLDER OF RECORD HEREOF TO THE SECRETARY OF THE
COMPANY AT ITS PRINCIPAL EXECUTIVE OFFICES.
No. WB-__ Warrant to Purchase 301,522 Shares
Series B Preferred Stock (subject
to adjustment)
WARRANT TO PURCHASE SERIES B PREFERRED STOCK
OF
VIROLOGIC, INC.
VOID AFTER AUGUST 30, 2003
This certifies that, for value received, ___________________, or
registered assigns ("Holder") is entitled, subject to the terms set forth below,
to purchase from VIROLOGIC, INC. (the "Company"), a Delaware corporation, up to
_______ of the Series B Preferred Stock of the Company, as constituted on August
25, 1998 (the "Warrant Issue Date"), upon surrender hereof, at the principal
office of the Company referred to below, with the subscription form attached
hereto duly executed, and simultaneous payment therefor in lawful money of the
United States or otherwise as hereinafter provided, at the Exercise Price as set
forth in Section 2 below. The number, character and Exercise Price of such
shares of Series B Preferred Stock are subject to adjustment as provided below.
The term "Warrant" as used herein shall include this Warrant, which is one of a
series of warrants issued for the Series B Preferred Stock of the Company, and
any warrants delivered in substitution or exchange therefor as provided herein.
This Warrant is issued in connection with the transactions described in
that certain Series B Preferred Stock Purchase Agreement between the Company and
the investors described therein, dated as of August 25, 1998 (the "Purchase
Agreement").
1. TERM OF WARRANT. Subject to the terms and conditions set forth
herein, this warrant shall be exercisable, in whole or in part, during the term
commencing on the Warrant Issue Date and ending at 5:00 p.m., Pacific standard
time, on August 30, 2003, and shall be void thereafter.
2. EXERCISE PRICE. The Exercise Price at which this Warrant may be
exercised shall be $3.68 per share of Series B Preferred Stock, as adjusted from
time to time pursuant to Section 11 hereof.
3. VESTING OF WARRANT. Effective as of the Warrant Issue Date, this
Warrant is exercisable with respect to ______ shares of Series B Preferred Stock
of the Company.
1.
<PAGE> 2
4. EXERCISE OF WARRANT.
(a) The purchase rights represented by this Warrant are
exercisable by the Holder in whole or in part, at any time, or from time to
time, during the term hereof as described in Section I above, by the surrender
of this Warrant and the Notice of Exercise annexed hereto duly completed and
executed on behalf of the Holder, at the office of the Company (or such other
office or agency of the Company as it may designate by notice in writing to the
Holder at the address of the Holder appearing on the books of the Company), upon
payment (i) in cash or by check acceptable to the Company, (ii) by cancellation
by the Holder of indebtedness of the Company to the Holder, or (iii) by a
combination of (i) and (ii) of the purchase price of the shares to be purchased.
(b) This Warrant shall be deemed to have been exercised
immediately prior to the close of business on the date of its surrender for
exercise as provided above, and the person entitled to receive the shares of
Series B Preferred Stock issuable upon such exercise shall be treated for all
purposes as the holder of record of such shares as of the close of business on
such date. As promptly as practicable on or after such date and in any event
within ten (10) days thereafter, the Company at its expense shall issue and
deliver to the person or persons entitled to receive the same a certificate or
certificates for the number of shares issuable upon such exercise. In the event
that this Warrant is exercised in part, the Company at its expense will execute
and deliver a new Warrant of like tenor exercisable for the number of shares for
which this Warrant may then be exercised.
(c) Notwithstanding any provisions herein to the contrary, if the
fair market value of one share of Series B Preferred Stock is greater than the
Exercise Price (at the date of calculation as set forth below), in lieu of
exercising this Warrant for cash, the Holder may elect to receive shares equal
to the value (as determined below) of this Warrant (or the portion thereof being
cancelled) by surrender of this Warrant at the principal office of the Company
together with the properly endorsed Notice of Exercise and notice of such
election in which event the Company shall issue to the Holder a number of shares
of Series B Preferred Stock computed using the following formula:
Y (A - B)
---------
X = A
Where X = the number of shares of Series B Preferred Stock to be issued
to the Holder
Y = the number of shares of Series B Preferred Stock purchasable
under the Warrant or, if only a portion of the Warrant is being
exercised, the portion of the Warrant being canceled (at the
date of such calculation)
A = the fair market value of one share of the Company's Series B
Preferred Stock (at the date of such calculation)
B = Exercise Price (as adjusted to the date of such calculation)
2.
<PAGE> 3
For purposes of the above calculation, fair market value of one share of Series
B Preferred Stock shall be determined by the Company's Board of Directors in
good faith; provided, however, that where there exists a public market for the
Company's Common Stock at the time of such exercise, the fair market value per
share shall be the product of (i) the average of the closing bid and asked
prices of the Common Stock quoted in the Over-The-Counter Market Summary or the
last reported sale price of the common Stock or the closing price quoted on The
Nasdaq National Market or on any exchange on which the Common Stock is fisted,
whichever is applicable, as published in the Western Edition of The Wall Street
Journal for the five (5) trading days prior to the date of determination of fair
market value and (ii) the number of shares of Common Stock into which each share
of Series B Preferred Stock is convertible at the time of such exercise.
Notwithstanding the foregoing, in the event the Warrant is exercised in
connection with the Company's initial public offering of Common Stock, the fair
market value per share shall be the product of (i) the per share offering price
to the public of the Company's initial public offering, and (ii) the number of
shares of Common Stock into which each share of Series B Preferred Stock is
convertible at the time of such exercise.
(d) No fractional shares or scrip representing fractional shares
shall be issued upon the exercise of this Warrant. In lieu of any fractional
share to which the Holder would otherwise be entitled, the Company shall make a
cash payment equal to the Exercise Price multiplied by such fraction.
5. REPLACEMENT OF WARRANT
6. RIGHTS OF STOCKHOLDERS. Subject to Sections 9 and 11 of this Warrant,
the Holder shall not be entitled to vote or receive dividends or be deemed the
holder of the Series B Preferred Stock to which this Warrant relates or any
other securities of the Company that may at any time be issuable on the exercise
hereof for any purpose.
7. TRANSFER OF WARRANT.
(a) WARRANT REGISTER. The Company will maintain a register (the
"Warrant Register") containing the names' and addresses of the Holder or
Holders. Any Holder of this Warrant or any portion thereof may change his/her
address as shown on the Warrant Register by written notice to the Company
requesting such change. Any notice or written communication required or
permitted to be given to the Holder may be delivered or given by mail to such
Holder as shown on the Warrant Register and at the address shown on the Warrant
Register. Until this Warrant is transferred on the Warrant Register of the
Company, the Company may treat the Holder as shown on the Warrant Register as
the absolute owner of this Warrant for all purposes, notwithstanding any notice
to the contrary.
(b) WARRANT AGENT. The Company may, by written notice to the
Holder, appoint an agent for the purpose of maintaining the Warrant Register
referred to in Section 7(a) above, issuing the Series B Preferred Stock or other
securities then issuable upon the exercise of this Warrant, exchanging this
Warrant, replacing this Warrant, or any or all of the foregoing. Thereafter, any
such registration, issuance, exchange, or replacement, as the case may be, shall
be made at the office of such agent.
(c) TRANSFERABILITY AND NONNEGOTIABILITY OF WARRANT. This Warrant
may not be transferred or assigned (i) except in its entirety (other than
transfers to BB Biotech and its
3.
<PAGE> 4
affiliates) and (ii) without compliance with all applicable federal and state
securities laws by the transferor and the transferee (including the delivery of
investment representation letters reasonably satisfactory to the Company, if
such are requested by the Company), and then only against receipt of an
agreement of the transferee to comply with the provisions of this Section 7(c)
with respect to any resale or other disposition of this Warrant. Subject to the
provisions of this warrant with respect to compliance with the Securities Act of
1933 " as amended (the "Act"), title to this Warrant may be transferred by
endorsement (by the Holder executing the Assignment Form annexed hereto) and
delivery in the same manner as a negotiable instrument transferable by
endorsement and delivery.
(d) EXCHANGE OF WARRANT UPON A TRANSFER. On surrender of this
Warrant for exchange, properly endorsed on the Assignment Form and subject to
the provisions of this warrant with respect to compliance with the Act and with
the limitations on assignments and transfers and contained in this Section 7,
the Company at its expense shall issue to or on the order of the Holder a new
warrant or warrants of like tenor, in the name of the Holder or as the Holder
(on payment by the Holder of any applicable transfer taxes) may direct, for the
number of shares issuable upon exercise hereof
(e) COMPLIANCE WITH SECURITIES LAWS.
(i) The Holder of this Warrant, by acceptance hereof,
acknowledges that this Warrant and the shares of Series B Preferred Stock or
Common Stock to be issued upon exercise hereof or conversion thereof are being
acquired solely for the Holder's own account and not as a nominee for any other
party, and for investment, and that the Holder will not offer, sell or otherwise
dispose of this Warrant or any shares of Series B Preferred Stock or Common
Stock to be issued upon exercise hereof or conversion thereof except under
circumstances that will not result in a violation of the Act or any state
securities laws. Upon exercise of this Warrant, the Holder shall, if requested
by the Company, confirm in writing, in a form satisfactory to the Company, that
the shares of Series B Preferred Stock or Common Stock so purchased are being
acquired solely for the Holder's own account and not as a nominee for any other
party, for investment, and not with a view toward distribution or resale.
(ii) This Warrant and all shares of Series B Preferred
Stock or Common Stock issued upon exercise hereof or conversion thereof shall be
stamped or imprinted with a legend in substantially the following form (in
addition to any legend required by state securities laws):
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933. SUCH SECURITIES AND ANY SECURITIES OR SHARES
ISSUED HEREUNDER MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT. COPIES OF THE
AGREEMENT COVERING THE PURCHASE OF THESE SECURITIES AND RESTRICTING
THEIR TRANSFER OR SALE MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST
MADE BY THE HOLDER OF RECORD HEREOF TO THE SECRETARY OF THE COMPANY AT
ITS PRINCIPAL EXECUTIVE OFFICES.
4.
<PAGE> 5
8. RESERVATION OF STOCK. The Company covenants that during the term this
Warrant is exercisable, the Company will reserve from its authorized and
unissued Series B Preferred Stock a sufficient number of shares to provide for
the issuance of Series B Preferred Stock upon the exercise of this warrant (and
shares of its Common Stock for issuance on conversion of such Series B Preferred
Stock) and, from time to time, will take all steps necessary to amend its
Certificate of Incorporation (the "Certificate") to provide sufficient reserves
of shares of Series B Preferred Stock issuable upon exercise of the Warrant (and
shares of its Common Stock for issuance on conversion of such Series B Preferred
Stock). The Company further covenants that all shares that may be issued upon
the exercise of rights represented by this Warrant, upon exercise of the rights
represented by this Warrant and payment of the Exercise Price, all as set forth
herein, will be free from all taxes, liens and charges in respect of the issue
thereof (other than taxes in respect of any transfer occurring contemporaneously
or otherwise specified herein). The Company agrees that its issuance of this
Warrant shall constitute full authority to its officers who are charged with the
duty of executing stock certificates to execute and issue the necessary
certificates for shares of Series B Preferred Stock upon the exercise of this
Warrant.
9. NOTICES.
(a) Whenever the Exercise Price or number of shares purchasable
hereunder shall be adjusted pursuant to Section 11 hereof, the Company shall
issue a certificate signed by its 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 Exercise
Price and number of shares purchasable hereunder after giving effect to such
adjustment, and shall cause a copy of such certificate to be mailed (by
first-class mail, postage prepaid) to the Holder of this Warrant.
(b) In case:
(i) the Company shall take a record of the holders of its
Series B Preferred Stock or Common Stock (or other stock or securities at the
time receivable upon the exercise or conversion of this Warrant) for the purpose
of entitling them to receive any dividend or other distribution, or any right to
subscribe for or purchase any shares of stock of any class or any other
securities, or to receive any other right, or
(ii) of any public offering of the Company's Common Stock,
any capital reorganization of the Company, any reclassification of the capital
stock of the Company, any consolidation or merger of the Company with or into
another corporation, or any conveyance of all or substantially all of the assets
of the Company to another corporation, or
(iii) of any voluntary dissolution, liquidation or
winding-up of the Company, then, and in each such case, the Company will mail or
cause to be mailed to the Holder or Holders a notice specifying, as the case may
be, (A) the date on which a record is to be taken for the purpose of such
dividend, distribution or right, and stating the amount and character of such
dividend, distribution or right, or (B) the date on which such reorganization,
reclassification, consolidation, merger, conveyance, dissolution, liquidation or
winding up is to take place, and the time, if any is to be fixed, as of which
the holders of record of Series B
5.
<PAGE> 6
Preferred Stock or Common Stock (or such stock or securities at the time
receivable upon the exercise of this Warrant) shall be entitled to exchange
their shares of Series B Preferred Stock or Common Stock (or such other stock or
securities) for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, conveyance,
dissolution, liquidation or winding up. Such notice shall be mailed at least
fifteen (15) days prior to the date therein specified.
(c) All such notices, advices and communications shall be deemed
to have been received (i) in the case of personal delivery, on the date of such
delivery and (ii) in the case of mailing, on the third business day following
the date of such mailing.
10. AMENDMENTS. This Warrant and any term hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought.
11. ADJUSTMENTS. The Exercise Price and the number of shares purchasable
hereunder are subject to adjustment from time to time as follows:
11.1 CONVERSION OR REDEMPTION OF SERIES B PREFERRED STOCK. Should
all of the Company's Series B Preferred Stock be, or if outstanding would be, at
any time prior to the expiration of this warrant or any portion thereof,
redeemed or converted into shares of the Company's Common Stock in accordance
with Section 4(b) of the Certificate, then this Warrant shall immediately become
exercisable for that number of shares of the Company's Common Stock equal to the
number of shares of the Common Stock that would have been received if this
Warrant had been exercised in full and the Series B Preferred Stock received
thereupon had been simultaneously converted immediately prior to such event, and
the Exercise Price shall be immediately adjusted to equal the quotient obtained
by dividing (x) the aggregate Exercise Price of the maximum number of shares of
Series B Preferred Stock for which this Warrant was exercisable immediately
prior to such conversion or redemption, by (y) the number of shares of Common
Stock for which this Warrant is exercisable immediately after such conversion or
redemption. For purposes of the foregoing, the "Certificate" shall mean the
Certificate of Incorporation of the Company as amended and/or restated and
effective immediately prior to the redemption or conversion of all of the
Company's Series B Preferred Stock.
11.2 MERGER, SALE OF ASSETS, ETC. If at any time while this
Warrant, or any portion thereof, is outstanding and unexpired there shall be (a)
a reorganization (other than a combination, reclassification, exchange or
subdivision of shares otherwise provided for herein), (b) a merger or
consolidation of the Company with or into another corporation in which the
Company is not the surviving entity, or a reverse triangular merger in which the
Company is the surviving entity but the shares of the Company's capital stock
outstanding immediately prior to the merger are converted by virtue of the
merger into other property, whether in the form of securities, cash or
otherwise, or (c) a sale or transfer of the Company's properties and assets as,
or substantially as, an entirety to any other person, then the Company shall
provide the holder of this Warrant with not less than thirty (30) days, prior
written notice of such event and an opportunity to exercise this Warrant
effective upon the consummation of such event, so that, as a part of such
reorganization, merger, consolidation, sale or transfer, the holder of this
Warrant shall be entitled to receive upon exercise of this Warrant the number of
shares of stock or other
6.
<PAGE> 7
securities or property of the successor corporation resulting from such
reorganization, merger, consolidation, sale or transfer that a holder of the
shares deliverable upon exercise of this Warrant would have been entitled to
receive in such reorganization, consolidation, merger, sale or transfer. The
Company shall not effect any such consolidation, merger, sale, transfer or other
disposition unless prior to or simultaneously with the consummation thereof the
successor corporation (if other than the Company) resulting from such
consolidation or merger, or the corporation purchasing or otherwise acquiring
such assets or other appropriate corporation or entity shall agree to deliver to
the holder of the Warrant, upon its exercise and payment of the Exercise Price
then in effect, such shares of stock, securities or assets as, in accordance
with the foregoing provisions, such holder may be entitled to purchase.
11.3 RECLASSIFICATION, ETC. If the Company, at any time while
this Warrant, or any portion thereof, remains outstanding and unexpired, by
reclassification of securities or otherwise, shall change any of the securities
as to which purchase rights under this Warrant exist into the same or a
different number of securities of any other class or classes, this Warrant shall
thereafter represent the right to acquire such number and kind of securities as
would have been issuable as the result of such change with respect to the
securities that were subject to the purchase rights under this Warrant
immediately prior to such reclassification or other change and the Exercise
Price therefor shall be appropriately adjusted, all subject to further
adjustments as provided in this Section 11. No adjustment shall be made pursuant
to this Section 11.3, upon any conversion or redemption of the Series B
Preferred Stock which is the subject of Section 11.1.
11.4 SPLIT, SUBDIVISION OR COMBINATION OF SHARES. If the Company
at any time while this Warrant, or any portion thereof, remains outstanding and
unexpired shall split, subdivide or combine the securities as to which purchase
rights under this warrant exist, into a different number of securities of the
same class, the Exercise Price for such securities shall be proportionately
decreased in the case of a split or subdivision or proportionately increased in
the case of a combination.
11.5 ADJUSTMENTS FOR DIVIDENDS IN STOCK OR OTHER SECURITIES OR
PROPERTY. If while this Warrant, or any portion hereof, remains outstanding and
unexpired the holders of the securities as to which purchase rights under this
Warrant exist at the time shall have received, or, on or after the record date
fixed for the determination of eligible Stockholders, shall have become entitled
to receive, without payment therefor, other or additional stock or other
securities or property (other than cash) of the Company by way of dividend, then
and in each case, this Warrant shall represent the right to acquire, in addition
to the number of shares of the security receivable upon exercise of this
Warrant, and without payment of any additional consideration therefor, the
amount of such other or additional stock or other securities or property (other
than cash) of the Company that such holder would hold on the date of such
exercise had it been the holder of record of the security receivable upon
exercise of this Warrant on the date hereof and had thereafter, during the
period from the date hereof to and including the date of such exercise, retained
such shares and/or all other additional stock available by it as aforesaid
during such period, giving effect to all adjustments called for during such
period by the provisions of this Section 11.
11.6 CERTIFICATE AS TO ADJUSTMENTS. Upon the occurrence of each
adjustment or readjustment pursuant to this Section 11, the Company at its
expense shall promptly compute
7.
<PAGE> 8
such adjustment or readjustment in accordance with the terms hereof and furnish
to each Holder of this Warrant a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. The Company shall, upon the written request, at any time,
of any such Holder, furnish or cause to be furnished to such Holder a like
certificate setting forth: (a) such adjustments and readjustments; (b) the
Exercise Price at the time in effect; and (c) the number of shares and the
amount, if any, of other property that at the time would be received upon the
exercise of the Warrant.
11.7 NO IMPAIRMENT. The Company will not, by any voluntary
action, avoid or seek to avoid the observance or performance of any of the terms
to be observed or performed hereunder by the Company, but will at all times in
good faith assist in the carrying out of ail the provisions of this Section 11
and in the taking of all such action as may be necessary or appropriate in order
to protect the rights of the Holders of this Warrant against impairment.
12. REGISTRATION RIGHTS. Upon exercise of this Warrant, the Holder shall
have and be entitled to exercise, together with all other holders of Registrable
Securities possessing registration rights under that certain Investors" Rights
Agreement, of even date herewith, between the Company and the parties who have
executed the counterpart signature pages thereto or are otherwise bound thereby
(the "Investors' Rights Agreement"), the rights of registration granted under
the Investors' Rights Agreement to Registrable Securities (with respect to the
Shares issued on exercise of this Warrant). By its receipt of this Warrant,
Holder agrees to be bound by the Investors' Rights Agreement upon exercise of
this warrant as a party thereto.
13. MISCELLANEOUS.
(a) SUCCESSORS. All the covenants and provisions hereof by or for
the benefit of the Company or the Holder shall bind and inure to the benefit of
their respective successors and assigns hereunder.
(b) GOVERNING LAW. This Warrant shall be deemed to be a contract
made under the laws of the State of California and for all purposes shall be
construed in accordance with the laws of said State.
(c) ATTORNEYS FEES IN THE EVENT OF A DISPUTE. In the event of any
action at law, suit in equity or arbitration proceeding in relation to this
Warrant or any Series B Preferred Stock issued or to be issued hereunder, the
prevailing party or parties, shall be paid by the other party or parties a
reasonable sum for attorneys, fees and expenses of such prevailing party or
parties.
(d) 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 legal holiday in the State
of California, then such action may be taken or such right may be exercised on
the next succeeding day not a legal holiday.
8.
<PAGE> 9
IN WITNESS WHEREOF, Virologic, Inc. has caused this Warrant to be
executed by its officers thereunto duly authorized.
Dated: August 25, 1998.
VIROLOGIC, INC.
By
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President and CEO
HOLDER:
- ---------------------------------
9.
<PAGE> 10
NOTICE OF EXERCISE
TO: VIROLOGIC, INC.
(1) The undersigned hereby elects to purchase shares of Series B
Preferred Stock of VIROLOGIC INC., pursuant to the terms of the attached
Warrant, and tenders herewith payment of the purchase price for such shares in
full.
(2) In exercising this Warrant, the undersigned hereby confirms and
acknowledges that the shares of Series B Preferred Stock or the Common Stock to
be issued upon conversion thereof are being acquired solely for the account of
the undersigned and not as a nominee for any other party, or for investment, and
that the undersigned will not offer, sell or otherwise dispose of any such
shares of Series B Preferred Stock or Common Stock except under circumstances
that will not result in a violation of the Securities Act of 1933, as amended,
or any state securities laws.
(3) Please issue a certificate or certificates representing said shares
of Series B Preferred Stock in the name of the undersigned or in such other name
as is specified below:
-----------------------------------------
(Name)
-----------------------------------------
(Name)
(4) Please issue a new Warrant for the unexercised portion of the
attached Warrant in the name of the undersigned or in such other name as is
specified below:
-----------------------------------------
(Name)
- --------------------------------- -----------------------------------------
Date (Signature)
10.
<PAGE> 11
ASSIGNMENT FORM
FOR VALUE RECEIVED, the undersigned registered owner of this Warrant
hereby sells, assigns and transfers unto the Assignee named below all of the
rights of the undersigned under the within Warrant, with respect to the number
of shares of Series B Preferred Stock (or Common Stock) set forth below:
<TABLE>
<CAPTION>
Name of Assignee Address No. of Shares
---------------- ------- -------------
<S> <C> <C>
</TABLE>
and does hereby irrevocably constitute and appoint Attorney to make such
transfer on the books of VIROLOGIC, INC., maintained for the purpose, with full
power of substitution in the premises.
The undersigned also represents that, by assignment hereof, the Assignee
acknowledges that this warrant and the shares of stock to be issued upon
exercise hereof or conversion thereof are being acquired for investment and that
the Assignee will not offer, sell or otherwise dispose of this warrant or any
shares of stock to be issued upon exercise hereof or conversion thereof except
under circumstances which will not result in a violation of the Securities Act
of 1933, as amended, or any state securities laws. Further, the Assignee has
acknowledged that upon exercise of this Warrant, the Assignee shall, if
requested by the Company, confirm in writing, in a form satisfactory to the
Company, that the shares of stock so purchased are being acquired for investment
and not with a view toward distribution or resale.
Dated:
-----------------------------------------
Signature of Holder
11.
<PAGE> 1
EXHIBIT 4.12
VIROLOGIC, INC.
2000 EQUITY INCENTIVE PLAN
ADOPTED FEBRUARY 21, 2000
APPROVED BY STOCKHOLDERS _______________, 2000
TERMINATION DATE: _______________, 2010
1. PURPOSES.
(a) ELIGIBLE STOCK AWARD RECIPIENTS. The persons eligible to receive
Stock Awards are the Employees, Directors and Consultants of the Company and its
Affiliates.
(b) AVAILABLE STOCK AWARDS. The purpose of the Plan is to provide a
means by which eligible recipients of Stock Awards may be given an opportunity
to benefit from increases in value of the Common Stock through the granting of
the following Stock Awards: (i) Incentive Stock Options, (ii) Nonstatutory Stock
Options, (iii) stock bonuses and (iv) rights to acquire restricted stock.
(c) GENERAL PURPOSE. The Company, by means of the Plan, seeks to retain
the services of the group of persons eligible to receive Stock Awards, to secure
and retain the services of new members of this group and to provide incentives
for such persons to exert maximum efforts for the success of the Company and its
Affiliates.
2. DEFINITIONS.
(a) "AFFILIATE" means any parent corporation or subsidiary corporation
of the Company, whether now or hereafter existing, as those terms are defined in
Sections 424(e) and (f), respectively, of the Code.
(b) "BOARD" means the Board of Directors of the Company.
(c) "CODE" means the Internal Revenue Code of 1986, as amended.
(d) "COMMITTEE" means a committee of one or more members of the Board
appointed by the Board in accordance with subsection 3(c).
(e) "COMMON STOCK" means the common stock of the Company.
(f) "COMPANY" means VIROLOGIC, INC., a Delaware corporation.
(g) "CONSULTANT" means any person, including an advisor, (i) engaged by
the Company or an Affiliate to render consulting or advisory services and who is
compensated for such services or (ii) who is a member of the Board of Directors
of an Affiliate. However, the term "Consultant" shall not include either
Directors who are not compensated by the Company
1.
<PAGE> 2
for their services as Directors or Directors who are merely paid a director's
fee by the Company for their services as Directors.
(h) "CONTINUOUS SERVICE" means that the Participant's service with the
Company or an Affiliate, whether as an Employee, Director or Consultant, is not
interrupted or terminated. The Participant's Continuous Service shall not be
deemed to have terminated merely because of a change in the capacity in which
the Participant renders service to the Company or an Affiliate as an Employee,
Consultant or Director or a change in the entity for which the Participant
renders such service, provided that there is no interruption or termination of
the Participant's Continuous Service. For example, a change in status from an
Employee of the Company to a Consultant of an Affiliate or a Director will not
constitute an interruption of Continuous Service. The Board or the chief
executive officer of the Company, in that party's sole discretion, may determine
whether Continuous Service shall be considered interrupted in the case of any
leave of absence approved by that party, including sick leave, military leave or
any other personal leave. For purposes of Incentive Stock Options, no such leave
may exceed 90 days, unless reemployment upon expiration of such leave is
guaranteed by statute or contract, including Company policies. If reemployment
upon expiration of a leave of absence approved by the Company is not so
guaranteed, on the 91st day of such leave any Incentive Stock Option held by an
Optionholder shall be treated for tax purposes as a Nonstatutory Stock Option.
(i) "COVERED EMPLOYEE" means the chief executive officer and the four
(4) other highest compensated officers of the Company for whom total
compensation is required to be reported to stockholders under the Exchange Act,
as determined for purposes of Section 162(m) of the Code.
(j) "DIRECTOR" means a member of the Board of Directors of the Company.
(k) "DISABILITY" means the permanent and total disability of a person
within the meaning of Section 22(e)(3) of the Code.
(l) "EMPLOYEE" means any person employed by the Company or an Affiliate.
Mere service as a Director or payment of a director's fee by the Company or an
Affiliate shall not be sufficient to constitute "employment" by the Company or
an Affiliate.
(m) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
(n) "FAIR MARKET VALUE" means, as of any date, the value of the Common
Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or traded on the Nasdaq National Market or the Nasdaq SmallCap Market,
the Fair Market Value of a share of Common Stock shall be the closing sales
price for such stock (or the closing bid, if no sales were reported) as quoted
on such exchange or market (or the exchange or market with the greatest volume
of trading in the Common Stock) on the last market trading day prior to the day
of determination, as reported in The Wall Street Journal or such other source as
the Board deems reliable.
2.
<PAGE> 3
(ii) In the absence of such markets for the Common Stock, the
Fair Market Value shall be determined in good faith by the Board.
(o) "INCENTIVE STOCK OPTION" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
(p) "NON-EMPLOYEE DIRECTOR" means a Director who either (i) is not a
current Employee or Officer of the Company or its parent or a subsidiary, does
not receive compensation (directly or indirectly) from the Company or its parent
or a subsidiary for services rendered as a consultant or in any capacity other
than as a Director (except for an amount as to which disclosure would not be
required under Item 404(a) of Regulation S-K promulgated pursuant to the
Securities Act ("Regulation S-K")), does not possess an interest in any other
transaction as to which disclosure would be required under Item 404(a) of
Regulation S-K and is not engaged in a business relationship as to which
disclosure would be required under Item 404(b) of Regulation S-K; or (ii) is
otherwise considered a "non-employee director" for purposes of Rule 16b-3.
(q) "NONSTATUTORY STOCK OPTION" means an Option not intended to qualify
as an Incentive Stock Option.
(r) "OFFICER" means a person who is an officer of the Company within the
meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(s) "OPTION" means an Incentive Stock Option or a Nonstatutory Stock
Option granted pursuant to the Plan.
(t) "OPTION AGREEMENT" means a written agreement between the Company and
an Optionholder evidencing the terms and conditions of an individual Option
grant. Each Option Agreement shall be subject to the terms and conditions of the
Plan.
(u) "OPTIONHOLDER" means a person to whom an Option is granted pursuant
to the Plan or, if applicable, such other person who holds an outstanding
Option.
(v) "OUTSIDE DIRECTOR" means a Director who either (i) is not a current
employee of the Company or an "affiliated corporation" (within the meaning of
Treasury Regulations promulgated under Section 162(m) of the Code), is not a
former employee of the Company or an "affiliated corporation" receiving
compensation for prior services (other than benefits under a tax qualified
pension plan), was not an officer of the Company or an "affiliated corporation"
at any time and is not currently receiving direct or indirect remuneration from
the Company or an "affiliated corporation" for services in any capacity other
than as a Director or (ii) is otherwise considered an "outside director" for
purposes of Section 162(m) of the Code.
(w) "PARTICIPANT" means a person to whom a Stock Award is granted
pursuant to the Plan or, if applicable, such other person who holds an
outstanding Stock Award.
(x) "PLAN" means this VIROLOGIC, INC. 2000 Equity Incentive Plan.
3.
<PAGE> 4
(y) "RULE 16b-3" means Rule 16b-3 promulgated under the Exchange Act or
any successor to Rule 16b-3, as in effect from time to time.
(z) "SECURITIES ACT" means the Securities Act of 1933, as amended.
(aa) "STOCK AWARD" means any right granted under the Plan, including an
Option, a stock bonus and a right to acquire restricted stock.
(bb) "STOCK AWARD AGREEMENT" means a written agreement between the
Company and a holder of a Stock Award evidencing the terms and conditions of an
individual Stock Award grant. Each Stock Award Agreement shall be subject to the
terms and conditions of the Plan.
(cc) "TEN PERCENT STOCKHOLDER" means a person who owns (or is deemed to
own pursuant to Section 424(d) of the Code) stock possessing more than ten
percent (10%) of the total combined voting power of all classes of stock of the
Company or of any of its Affiliates.
3. ADMINISTRATION.
(a) ADMINISTRATION BY BOARD. The Board shall administer the Plan unless
and until the Board delegates administration to a Committee, as provided in
subsection 3(c).
(b) POWERS OF BOARD. The Board shall have the power, subject to, and
within the limitations of, the express provisions of the Plan:
(i) To determine from time to time which of the persons eligible
under the Plan shall be granted Stock Awards; when and how each Stock Award
shall be granted; what type or combination of types of Stock Award shall be
granted; the provisions of each Stock Award granted (which need not be
identical), including the time or times when a person shall be permitted to
receive Common Stock pursuant to a Stock Award; and the number of shares of
Common Stock with respect to which a Stock Award shall be granted to each such
person.
(ii) To construe and interpret the Plan and Stock Awards granted
under it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan or in any Stock Award Agreement,
in a manner and to the extent it shall deem necessary or expedient to make the
Plan fully effective.
(iii) To amend the Plan or a Stock Award as provided in Section
12.
(iv) Generally, to exercise such powers and to perform such acts
as the Board deems necessary or expedient to promote the best interests of the
Company which are not in conflict with the provisions of the Plan.
(c) DELEGATION TO COMMITTEE.
(i) GENERAL. The Board may delegate administration of the Plan to
a Committee or Committees of one (1) or more members of the Board, and the term
"Committee" shall apply to any person or persons to whom such authority has been
delegated. If
4.
<PAGE> 5
administration is delegated to a Committee, the Committee shall have, in
connection with the administration of the Plan, the powers theretofore possessed
by the Board, including the power to delegate to a subcommittee any of the
administrative powers the Committee is authorized to exercise (and references in
this Plan to the Board shall thereafter be to the Committee or subcommittee),
subject, however, to such resolutions, not inconsistent with the provisions of
the Plan, as may be adopted from time to time by the Board. The Board may
abolish the Committee at any time and revest in the Board the administration of
the Plan.
(ii) COMMITTEE COMPOSITION WHEN COMMON STOCK IS PUBLICLY TRADED.
At such time as the Common Stock is publicly traded, in the discretion of the
Board, a Committee may consist solely of two or more Outside Directors, in
accordance with Section 162(m) of the Code, and/or solely of two or more
Non-Employee Directors, in accordance with Rule 16b-3. Within the scope of such
authority, the Board or the Committee may (1) delegate to a committee of one or
more members of the Board who are not Outside Directors the authority to grant
Stock Awards to eligible persons who are either (a) not then Covered Employees
and are not expected to be Covered Employees at the time of recognition of
income resulting from such Stock Award or (b) not persons with respect to whom
the Company wishes to comply with Section 162(m) of the Code and/or) (2)
delegate to a committee of one or more members of the Board who are not
Non-Employee Directors the authority to grant Stock Awards to eligible persons
who are not then subject to Section 16 of the Exchange Act.
(d) EFFECT OF BOARD'S DECISION. All determinations, interpretations and
constructions made by the Board in good faith shall not be subject to review by
any person and shall be final, binding and conclusive on all persons.
4. SHARES SUBJECT TO THE PLAN.
(a) SHARE RESERVE. Subject to the provisions of Section 11 relating to
adjustments upon changes in Common Stock, the Common Stock that may be issued
pursuant to Stock Awards shall not exceed in the aggregate four million two
hundred thousand (4,200,000) shares of Common Stock (post-split).
(b) REVERSION OF SHARES TO THE SHARE RESERVE. If any Stock Award shall
for any reason expire or otherwise terminate, in whole or in part, without
having been exercised in full, the shares of Common Stock not acquired under
such Stock Award shall revert to and again become available for issuance under
the Plan.
(c) SOURCE OF SHARES. The shares of Common Stock subject to the Plan may
be unissued shares or reacquired shares, bought on the market or otherwise.
5. ELIGIBILITY.
(a) ELIGIBILITY FOR SPECIFIC STOCK AWARDS. Incentive Stock Options may
be granted only to Employees. Stock Awards other than Incentive Stock Options
may be granted to Employees, Directors and Consultants.
(b) TEN PERCENT STOCKHOLDERS. A Ten Percent Stockholder shall not be
granted an Incentive Stock Option unless the exercise price of such Option is at
least one hundred ten
5.
<PAGE> 6
percent (110%) of the Fair Market Value of the Common Stock at the date of grant
and the Option is not exercisable after the expiration of five (5) years from
the date of grant.
(c) SECTION 162(m) LIMITATION. Subject to the provisions of Section 11
relating to adjustments upon changes in the shares of Common Stock, no Employee
shall be eligible to be granted Options covering more than one million
(1,000,000) shares of Common Stock during any calendar year.
(d) CONSULTANTS.
(i) A Consultant shall not be eligible for the grant of a Stock
Award if, at the time of grant, a Form S-8 Registration Statement under the
Securities Act ("Form S-8") is not available to register either the offer or the
sale of the Company's securities to such Consultant because of the nature of the
services that the Consultant is providing to the Company, or because the
Consultant is not a natural person, or as otherwise provided by the rules
governing the use of Form S-8, unless the Company determines both (i) that such
grant (A) shall be registered in another manner under the Securities Act (e.g.,
on a Form S-3 Registration Statement) or (B) does not require registration under
the Securities Act in order to comply with the requirements of the Securities
Act, if applicable, and (ii) that such grant complies with the securities laws
of all other relevant jurisdictions.
(ii) Form S-8 generally is available to consultants and advisors
only if (i) they are natural persons; (ii) they provide bona fide services to
the issuer, its parents, its majority-owned subsidiaries or majority-owned
subsidiaries of the issuer's parent; and (iii) the services are not in
connection with the offer or sale of securities in a capital-raising
transaction, and do not directly or indirectly promote or maintain a market for
the issuer's securities.
6. OPTION PROVISIONS.
Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. All Options shall be separately
designated Incentive Stock Options or Nonstatutory Stock Options at the time of
grant, and, if certificates are issued, a separate certificate or certificates
will be issued for shares of Common Stock purchased on exercise of each type of
Option. The provisions of separate Options need not be identical, but each
Option shall include (through incorporation of provisions hereof by reference in
the Option or otherwise) the substance of each of the following provisions:
(a) TERM. Subject to the provisions of subsection 5(b) regarding Ten
Percent Stockholders, no Incentive Stock Option shall be exercisable after the
expiration of ten (10) years from the date it was granted.
(b) EXERCISE PRICE OF AN INCENTIVE STOCK OPTION. Subject to the
provisions of subsection 5(b) regarding Ten Percent Stockholders, the exercise
price of each Incentive Stock Option shall be not less than one hundred percent
(100%) of the Fair Market Value of the Common Stock subject to the Option on the
date the Option is granted. Notwithstanding the foregoing, an Incentive Stock
Option may be granted with an exercise price lower than that set forth in the
preceding sentence if such Option is granted pursuant to an assumption or
6.
<PAGE> 7
substitution for another option in a manner satisfying the provisions of Section
424(a) of the Code.
(c) EXERCISE PRICE OF A NONSTATUTORY STOCK OPTION. The exercise price of
each Nonstatutory Stock Option shall be not less than eighty-five percent (85%)
of the Fair Market Value of the Common Stock subject to the Option on the date
the Option is granted. Notwithstanding the foregoing, a Nonstatutory Stock
Option may be granted with an exercise price lower than that set forth in the
preceding sentence if such Option is granted pursuant to an assumption or
substitution for another option in a manner satisfying the provisions of Section
424(a) of the Code.
(d) CONSIDERATION. The purchase price of Common Stock acquired pursuant
to an Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (i) in cash at the time the Option is exercised or (ii) at
the discretion of the Board at the time of the grant of the Option (or
subsequently in the case of a Nonstatutory Stock Option) (1) by delivery to the
Company of other Common Stock, (2) according to a deferred payment or other
similar arrangement with the Optionholder or (3) in any other form of legal
consideration that may be acceptable to the Board. Unless otherwise specifically
provided in the Option, the purchase price of Common Stock acquired pursuant to
an Option that is paid by delivery to the Company of other Common Stock
acquired, directly or indirectly from the Company, shall be paid only by shares
of the Common Stock of the Company that have been held for more than six (6)
months (or such longer or shorter period of time required to avoid a charge to
earnings for financial accounting purposes). At any time that the Company is
incorporated in Delaware, payment of the Common Stock's "par value," as defined
in the Delaware General Corporation Law, shall not be made by deferred payment.
In the case of any deferred payment arrangement, interest shall be
compounded at least annually and shall be charged at the minimum rate of
interest necessary to avoid the treatment as interest, under any applicable
provisions of the Code, of any amounts other than amounts stated to be interest
under the deferred payment arrangement.
(e) TRANSFERABILITY OF AN INCENTIVE STOCK OPTION. An Incentive Stock
Option shall not be transferable except by will or by the laws of descent and
distribution and shall be exercisable during the lifetime of the Optionholder
only by the Optionholder. Notwithstanding the foregoing, the Optionholder may,
by delivering written notice to the Company, in a form satisfactory to the
Company, designate a third party who, in the event of the death of the
Optionholder, shall thereafter be entitled to exercise the Option.
(f) TRANSFERABILITY OF A NONSTATUTORY STOCK OPTION. A Nonstatutory Stock
Option shall be transferable to the extent provided in the Option Agreement. If
the Nonstatutory Stock Option does not provide for transferability, then the
Nonstatutory Stock Option shall not be transferable except by will or by the
laws of descent and distribution and shall be exercisable during the lifetime of
the Optionholder only by the Optionholder. Notwithstanding the foregoing, the
Optionholder may, by delivering written notice to the Company, in a form
satisfactory to the Company, designate a third party who, in the event of the
death of the Optionholder, shall thereafter be entitled to exercise the Option.
7.
<PAGE> 8
(g) VESTING GENERALLY. The total number of shares of Common Stock
subject to an Option may, but need not, vest and therefore become exercisable in
periodic installments that may, but need not, be equal. The Option may be
subject to such other terms and conditions on the time or times when it may be
exercised (which may be based on performance or other criteria) as the Board may
deem appropriate. The vesting provisions of individual Options may vary. The
provisions of this subsection 6(g) are subject to any Option provisions
governing the minimum number of shares of Common Stock as to which an Option may
be exercised.
(h) TERMINATION OF CONTINUOUS SERVICE. In the event an Optionholder's
Continuous Service terminates (other than upon the Optionholder's death or
Disability), the Optionholder may exercise his or her Option (to the extent that
the Optionholder was entitled to exercise such Option as of the date of
termination) but only within such period of time ending on the earlier of (i)
the date three (3) months following the termination of the Optionholder's
Continuous Service (or such longer or shorter period specified in the Option
Agreement), or (ii) the expiration of the term of the Option as set forth in the
Option Agreement. If, after termination, the Optionholder does not exercise his
or her Option within the time specified in the Option Agreement, the Option
shall terminate.
(i) EXTENSION OF TERMINATION DATE. An Optionholder's Option Agreement
may also provide that if the exercise of the Option following the termination of
the Optionholder's Continuous Service (other than upon the Optionholder's death
or Disability) would be prohibited at any time solely because the issuance of
shares of Common Stock would violate the registration requirements under the
Securities Act, then the Option shall terminate on the earlier of (i) the
expiration of the term of the Option set forth in subsection 6(a) or (ii) the
expiration of a period of three (3) months after the termination of the
Optionholder's Continuous Service during which the exercise of the Option would
not be in violation of such registration requirements.
(j) DISABILITY OF OPTIONHOLDER. In the event that an Optionholder's
Continuous Service terminates as a result of the Optionholder's Disability, the
Optionholder may exercise his or her Option (to the extent that the Optionholder
was entitled to exercise such Option as of the date of termination), but only
within such period of time ending on the earlier of (i) the date twelve (12)
months following such termination (or such longer or shorter period specified in
the Option Agreement) or (ii) the expiration of the term of the Option as set
forth in the Option Agreement. If, after termination, the Optionholder does not
exercise his or her Option within the time specified herein, the Option shall
terminate.
(k) DEATH OF OPTIONHOLDER. In the event (i) an Optionholder's Continuous
Service terminates as a result of the Optionholder's death or (ii) the
Optionholder dies within the period (if any) specified in the Option Agreement
after the termination of the Optionholder's Continuous Service for a reason
other than death, then the Option may be exercised (to the extent the
Optionholder was entitled to exercise such Option as of the date of death) by
the Optionholder's estate, by a person who acquired the right to exercise the
Option by bequest or inheritance or by a person designated to exercise the
Option upon the Optionholder's death pursuant to subsection 6(e) or 6(f), but
only within the period ending on the earlier of (1) the date twelve (12) months
following the date of death (or such longer or shorter period specified in the
Option Agreement) or (2) the expiration of the term of such Option as set forth
in the Option
8.
<PAGE> 9
Agreement. If, after death, the Option is not exercised within the time
specified herein, the Option shall terminate.
(l) EARLY EXERCISE. The Option may, but need not, include a provision
whereby the Optionholder may elect at any time before the Optionholder's
Continuous Service terminates to exercise the Option as to any part or all of
the shares of Common Stock subject to the Option prior to the full vesting of
the Option. Any unvested shares of Common Stock so purchased may be subject to a
repurchase option in favor of the Company or to any other restriction the Board
determines to be appropriate. The Company will not exercise its repurchase
option until at least six (6) months (or such longer or shorter period of time
required to avoid a charge to earnings for financial accounting purposes) have
elapsed following exercise of the Option unless the Board otherwise specifically
provides in the Option.
(m) RE-LOAD OPTIONS.
(i) Without in any way limiting the authority of the Board to
make or not to make grants of Options hereunder, the Board shall have the
authority (but not an obligation) to include as part of any Option Agreement a
provision entitling the Optionholder to a further Option (a "Re-Load Option") in
the event the Optionholder exercises the Option evidenced by the Option
Agreement, in whole or in part, by surrendering other shares of Common Stock in
accordance with this Plan and the terms and conditions of the Option Agreement.
Unless otherwise specifically provided in the Option, the Optionholder shall not
surrender shares of Common Stock acquired, directly or indirectly from the
Company, unless such shares have been held for more than six (6) months (or such
longer or shorter period of time required to avoid a charge to earnings for
financial accounting purposes).
(ii) Any such Re-Load Option shall (1) provide for a number of
shares of Common Stock equal to the number of shares of Common Stock surrendered
as part or all of the exercise price of such Option; (2) have an expiration date
which is the same as the expiration date of the Option the exercise of which
gave rise to such Re-Load Option; and (3) have an exercise price which is equal
to one hundred percent (100%) of the Fair Market Value of the Common Stock
subject to the Re-Load Option on the date of exercise of the original Option.
Notwithstanding the foregoing, a Re-Load Option shall be subject to the same
exercise price and term provisions heretofore described for Options under the
Plan.
(iii) Any such Re-Load Option may be an Incentive Stock Option or
a Nonstatutory Stock Option, as the Board may designate at the time of the grant
of the original Option; provided, however, that the designation of any Re-Load
Option as an Incentive Stock Option shall be subject to the one hundred thousand
dollar ($100,000) annual limitation on the exercisability of Incentive Stock
Options described in subsection 9(d) and in Section 422(d) of the Code. There
shall be no Re-Load Options on a Re-Load Option. Any such Re-Load Option shall
be subject to the availability of sufficient shares of Common Stock under
subsection 4(a) and the "Section 162(m) Limitation" on the grants of Options
under subsection 5(c) and shall be subject to such other terms and conditions as
the Board may determine which are not inconsistent with the express provisions
of the Plan regarding the terms of Options.
7. PROVISIONS OF STOCK AWARDS OTHER THAN OPTIONS.
9.
<PAGE> 10
(a) STOCK BONUS AWARDS. Each stock bonus agreement shall be in such form
and shall contain such terms and conditions as the Board shall deem appropriate.
The terms and conditions of stock bonus agreements may change from time to time,
and the terms and conditions of separate stock bonus agreements need not be
identical, but each stock bonus agreement shall include (through incorporation
of provisions hereof by reference in the agreement or otherwise) the substance
of each of the following provisions:
(i) CONSIDERATION. A stock bonus may be awarded in consideration
for past services actually rendered to the Company or an Affiliate for its
benefit.
(ii) VESTING. Shares of Common Stock awarded under the stock
bonus agreement may, but need not, be subject to a share repurchase option in
favor of the Company in accordance with a vesting schedule to be determined by
the Board.
(iii) TERMINATION OF PARTICIPANT'S CONTINUOUS SERVICE. In the
event a Participant's Continuous Service terminates, the Company may reacquire
any or all of the shares of Common Stock held by the Participant which have not
vested as of the date of termination under the terms of the stock bonus
agreement.
(iv) TRANSFERABILITY. Rights to acquire shares of Common Stock
under the stock bonus agreement shall be transferable by the Participant only
upon such terms and conditions as are set forth in the stock bonus agreement, as
the Board shall determine in its discretion, so long as Common Stock awarded
under the stock bonus agreement remains subject to the terms of the stock bonus
agreement.
(b) RESTRICTED STOCK AWARDS. Each restricted stock purchase agreement
shall be in such form and shall contain such terms and conditions as the Board
shall deem appropriate. The terms and conditions of the restricted stock
purchase agreements may change from time to time, and the terms and conditions
of separate restricted stock purchase agreements need not be identical, but each
restricted stock purchase agreement shall include (through incorporation of
provisions hereof by reference in the agreement or otherwise) the substance of
each of the following provisions:
(i) PURCHASE PRICE. The purchase price under each restricted
stock purchase agreement shall be such amount as the Board shall determine and
designate in such restricted stock purchase agreement. The purchase price shall
not be less than eighty-five percent (85%) of the Common Stock's Fair Market
Value on the date such award is made or at the time the purchase is consummated.
(ii) CONSIDERATION. The purchase price of Common Stock acquired
pursuant to the restricted stock purchase agreement shall be paid either: (i) in
cash at the time of purchase; (ii) at the discretion of the Board, according to
a deferred payment or other similar arrangement with the Participant; or (iii)
in any other form of legal consideration that may be acceptable to the Board in
its discretion; provided, however, that at any time that the Company is
incorporated in Delaware, then payment of the Common Stock's "par value," as
defined in the Delaware General Corporation Law, shall not be made by deferred
payment.
10.
<PAGE> 11
(iii) VESTING. Shares of Common Stock acquired under the
restricted stock purchase agreement may, but need not, be subject to a share
repurchase option in favor of the Company in accordance with a vesting schedule
to be determined by the Board.
(iv) TERMINATION OF PARTICIPANT'S CONTINUOUS SERVICE. In the
event a Participant's Continuous Service terminates, the Company may repurchase
or otherwise reacquire any or all of the shares of Common Stock held by the
Participant which have not vested as of the date of termination under the terms
of the restricted stock purchase agreement.
(v) TRANSFERABILITY. Rights to acquire shares of Common Stock
under the restricted stock purchase agreement shall be transferable by the
Participant only upon such terms and conditions as are set forth in the
restricted stock purchase agreement, as the Board shall determine in its
discretion, so long as Common Stock awarded under the restricted stock purchase
agreement remains subject to the terms of the restricted stock purchase
agreement.
8. COVENANTS OF THE COMPANY.
(a) AVAILABILITY OF SHARES. During the terms of the Stock Awards, the
Company shall keep available at all times the number of shares of Common Stock
required to satisfy such Stock Awards.
(b) SECURITIES LAW COMPLIANCE. The Company shall seek to obtain from
each regulatory commission or agency having jurisdiction over the Plan such
authority as may be required to grant Stock Awards and to issue and sell shares
of Common Stock upon exercise of the Stock Awards; provided, however, that this
undertaking shall not require the Company to register under the Securities Act
the Plan, any Stock Award or any Common Stock issued or issuable pursuant to any
such Stock Award. If, after reasonable efforts, the Company is unable to obtain
from any such regulatory commission or agency the authority which counsel for
the Company deems necessary for the lawful issuance and sale of Common Stock
under the Plan, the Company shall be relieved from any liability for failure to
issue and sell Common Stock upon exercise of such Stock Awards unless and until
such authority is obtained.
9. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of Common Stock pursuant to Stock Awards shall
constitute general funds of the Company.
10. MISCELLANEOUS.
(a) ACCELERATION OF EXERCISABILITY AND VESTING. The Board shall have the
power to accelerate the time at which a Stock Award may first be exercised or
the time during which a Stock Award or any part thereof will vest in accordance
with the Plan, notwithstanding the provisions in the Stock Award stating the
time at which it may first be exercised or the time during which it will vest.
(b) STOCKHOLDER RIGHTS. No Participant shall be deemed to be the holder
of, or to have any of the rights of a holder with respect to, any shares of
Common Stock subject to such
11.
<PAGE> 12
Stock Award unless and until such Participant has satisfied all requirements for
exercise of the Stock Award pursuant to its terms.
(c) NO EMPLOYMENT OR OTHER SERVICE RIGHTS. Nothing in the Plan or any
instrument executed or Stock Award granted pursuant thereto shall confer upon
any Participant any right to continue to serve the Company or an Affiliate in
the capacity in effect at the time the Stock Award was granted or shall affect
the right of the Company or an Affiliate to terminate (i) the employment of an
Employee with or without notice and with or without cause, (ii) the service of a
Consultant pursuant to the terms of such Consultant's agreement with the Company
or an Affiliate or (iii) the service of a Director pursuant to the Bylaws of the
Company or an Affiliate, and any applicable provisions of the corporate law of
the state in which the Company or the Affiliate is incorporated, as the case may
be.
(d) INCENTIVE STOCK OPTION $100,000 LIMITATION. To the extent that the
aggregate Fair Market Value (determined at the time of grant) of Common Stock
with respect to which Incentive Stock Options are exercisable for the first time
by any Optionholder during any calendar year (under all plans of the Company and
its Affiliates) exceeds one hundred thousand dollars ($100,000), the Options or
portions thereof which exceed such limit (according to the order in which they
were granted) shall be treated as Nonstatutory Stock Options.
(e) INVESTMENT ASSURANCES. The Company may require a Participant, as a
condition of exercising or acquiring Common Stock under any Stock Award, (i) to
give written assurances satisfactory to the Company as to the Participant's
knowledge and experience in financial and business matters and/or to employ a
purchaser representative reasonably satisfactory to the Company who is
knowledgeable and experienced in financial and business matters and that he or
she is capable of evaluating, alone or together with the purchaser
representative, the merits and risks of exercising the Stock Award; and (ii) to
give written assurances satisfactory to the Company stating that the Participant
is acquiring Common Stock subject to the Stock Award for the Participant's own
account and not with any present intention of selling or otherwise distributing
the Common Stock. The foregoing requirements, and any assurances given pursuant
to such requirements, shall be inoperative if (1) the issuance of the shares of
Common Stock upon the exercise or acquisition of Common Stock under the Stock
Award has been registered under a then currently effective registration
statement under the Securities Act or (2) as to any particular requirement, a
determination is made by counsel for the Company that such requirement need not
be met in the circumstances under the then applicable securities laws. The
Company may, upon advice of counsel to the Company, place legends on stock
certificates issued under the Plan as such counsel deems necessary or
appropriate in order to comply with applicable securities laws, including, but
not limited to, legends restricting the transfer of the Common Stock.
(f) WITHHOLDING OBLIGATIONS. To the extent provided by the terms of a
Stock Award Agreement, the Participant may satisfy any federal, state or local
tax withholding obligation relating to the exercise or acquisition of Common
Stock under a Stock Award by any of the following means (in addition to the
Company's right to withhold from any compensation paid to the Participant by the
Company) or by a combination of such means: (i) tendering a cash payment; (ii)
authorizing the Company to withhold shares of Common Stock from the shares of
Common Stock otherwise issuable to the Participant as a result of the exercise
or acquisition of
12.
<PAGE> 13
Common Stock under the Stock Award, provided, however, that no shares of Common
Stock are withheld with a value exceeding the minimum amount of tax required to
be withheld by law; or (iii) delivering to the Company owned and unencumbered
shares of Common Stock.
11. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) CAPITALIZATION ADJUSTMENTS. If any change is made in the Common
Stock subject to the Plan, or subject to any Stock Award, without the receipt of
consideration by the Company (through merger, consolidation, reorganization,
recapitalization, reincorporation, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or other transaction not involving the
receipt of consideration by the Company), the Plan will be appropriately
adjusted in the class(es) and maximum number of securities subject to the Plan
pursuant to subsection 4(a) and the maximum number of securities subject to
award to any person pursuant to subsection 5(c), and the outstanding Stock
Awards will be appropriately adjusted in the class(es) and number of securities
and price per share of Common Stock subject to such outstanding Stock Awards.
The Board shall make such adjustments, and its determination shall be final,
binding and conclusive. (The conversion of any convertible securities of the
Company shall not be treated as a transaction "without receipt of consideration"
by the Company.)
(b) CHANGE IN CONTROL--DISSOLUTION OR LIQUIDATION. In the event of a
dissolution or liquidation of the Company, then all outstanding Stock Awards
shall terminate immediately prior to such event.
(c) CHANGE IN CONTROL--ASSET SALE, MERGER, CONSOLIDATION OR REVERSE
MERGER. In the event of (i) a sale, lease or other disposition of all or
substantially all of the assets of the Company, (ii) a merger or consolidation
in which the Company is not the surviving corporation or (iii) a reverse merger
in which the Company is the surviving corporation but the shares of Common Stock
outstanding immediately preceding the merger are converted by virtue of the
merger into other property, whether in the form of securities, cash or
otherwise, then any surviving corporation or acquiring corporation shall assume
any Stock Awards outstanding under the Plan or shall substitute similar stock
awards (including an award to acquire the same consideration paid to the
stockholders in the transaction described in this subsection 11(c) for those
outstanding under the Plan). In the event any surviving corporation or acquiring
corporation refuses to assume such Stock Awards or to substitute similar stock
awards for those outstanding under the Plan, then with respect to Stock Awards
held by Participants whose Continuous Service has not terminated, the vesting of
such Stock Awards (and, if applicable, the time during which such Stock Awards
may be exercised) shall be accelerated in full, and the Stock Awards shall
terminate if not exercised (if applicable) at or prior to such event. With
respect to any other Stock Awards outstanding under the Plan, such Stock Awards
shall terminate if not exercised (if applicable) prior to such event.
12. AMENDMENT OF THE PLAN AND STOCK AWARDS.
(a) AMENDMENT OF PLAN. The Board at any time, and from time to time, may
amend the Plan. However, except as provided in Section 11 relating to
adjustments upon changes in Common Stock, no amendment shall be effective unless
approved by the stockholders of the
13.
<PAGE> 14
Company to the extent stockholder approval is necessary to satisfy the
requirements of Section 422 of the Code, Rule 16b-3 or any Nasdaq or securities
exchange listing requirements.
(b) STOCKHOLDER APPROVAL. The Board may, in its sole discretion, submit
any other amendment to the Plan for stockholder approval, including, but not
limited to, amendments to the Plan intended to satisfy the requirements of
Section 162(m) of the Code and the regulations thereunder regarding the
exclusion of performance-based compensation from the limit on corporate
deductibility of compensation paid to certain executive officers.
(c) CONTEMPLATED AMENDMENTS. It is expressly contemplated that the Board
may amend the Plan in any respect the Board deems necessary or advisable to
provide eligible Employees with the maximum benefits provided or to be provided
under the provisions of the Code and the regulations promulgated thereunder
relating to Incentive Stock Options and/or to bring the Plan and/or Incentive
Stock Options granted under it into compliance therewith.
(d) NO IMPAIRMENT OF RIGHTS. Rights under any Stock Award granted before
amendment of the Plan shall not be impaired by any amendment of the Plan unless
(i) the Company requests the consent of the Participant and (ii) the Participant
consents in writing.
(e) AMENDMENT OF STOCK AWARDS. The Board at any time, and from time to
time, may amend the terms of any one or more Stock Awards; provided, however,
that the rights under any Stock Award shall not be impaired by any such
amendment unless (i) the Company requests the consent of the Participant and
(ii) the Participant consents in writing.
13. TERMINATION OR SUSPENSION OF THE PLAN.
(a) PLAN TERM. The Board may suspend or terminate the Plan at any time.
Unless sooner terminated, the Plan shall terminate on the day before the tenth
(10th) anniversary of the date the Plan is adopted by the Board or approved by
the stockholders of the Company, whichever is earlier. No Stock Awards may be
granted under the Plan while the Plan is suspended or after it is terminated.
(b) NO IMPAIRMENT OF RIGHTS. Suspension or termination of the Plan shall
not impair rights and obligations under any Stock Award granted while the Plan
is in effect except with the written consent of the Participant.
14. EFFECTIVE DATE OF PLAN.
The Plan shall become effective as determined by the Board, but no Stock
Award shall be exercised (or, in the case of a stock bonus, shall be granted)
unless and until the Plan has been approved by the stockholders of the Company,
which approval shall be within twelve (12) months before or after the date the
Plan is adopted by the Board.
15. CHOICE OF LAW.
The law of the State of California shall govern all questions concerning
the construction, validity and interpretation of this Plan, without regard to
such state's conflict of laws rules.
14.
<PAGE> 1
EXHIBIT 4.13
VIROLOGIC, INC.
1996 STOCK PLAN
STOCK OPTION AGREEMENT
- --------------------------------------------------------------------------------
Unless otherwise defined herein, the terms defined in the Plan shall
have the same defined meanings in this Option Agreement.
I. NOTICE OF STOCK OPTION GRANT
[Name]
[Address]
You have been granted an option to purchase Common Stock of the Company,
subject to the terms and conditions of the Plan and this Option Agreement, as
follows:
Date of Grant
Vesting Commencement Date
Exercise Price per Share
Total Number of Shares Granted
Total Exercise Price
Type of Option: ___Incentive Stock Option
___Nonstatutory Stock Option
Term/Expiration Date:
1.
<PAGE> 2
VESTING SCHEDULE:
This Option may be exercised, in whole or in part, in accordance with
the following schedule:
[Vesting Schdule]
TERMINATION PERIOD:
This Option may be exercised for 30 days after termination of
employment or consulting relationship, or such longer period as may be
applicable upon death or disability of Optionee as provided in the Plan, but in
no event later than the Term/Expiration Date as provided above.
II. AGREEMENT
1. GRANT OF OPTION. ViroLogic, Inc., a Delaware corporation (the
"Company"), hereby grants to the Optionee named in the Notice of Grant (the
"Optionee"), an option (the "Option") to purchase the total number of shares of
Common Stock (the "Shares") set forth in the Notice of Grant, at the exercise
price per share set forth in the Notice of Grant (the "Exercise Price") subject
to the terms, definitions and provisions of the 1996 Stock Plan (the "Plan")
adopted by the Company, which is incorporated herein by reference. Unless
otherwise defined herein, the terms defined in the Plan shall have the same
defined meanings in this Option.
If designated in the Notice of Grant as an Incentive Stock Option
("ISO"), this Option is intended to qualify as an Incentive Stock Option as
defined in Section 422 of the Code. However, if this Option is intended to be an
Incentive Stock Option, to the extent that it exceeds the $100,000 rule of Code
Section 422(d) it shall be treated as a Nonstatutory Stock Option ("NSO").
2. EXERCISE OF OPTION. This Option shall be exercisable during
its term in accordance with the Vesting Schedule set out in the Notice of Grant
and with the provisions of Section 9 of the Plan as follows:
a. RIGHT TO EXERCISE.
(i) This Option may not be exercised for a fraction
of a Share.
(ii) In the event of Optionee's death, disability
or other termination of the employment or consulting relationship, the
exercisability of the Option is governed by Sections 5, 6 and 7 below, subject
to the limitation contained in subsection 2(a)(iii).
(iii) In no event may this Option be exercised
after the date of expiration of the term of this Option as set forth in the
Notice of Grant.
b. METHOD OF EXERCISE. This Option shall be exercisable by
written notice (in the form attached as Exhibit A) which shall state the
election to exercise the Option, the number of Shares in respect of which option
is being exercised, and such other
2.
<PAGE> 3
representations and agreements as to the holder's investment intent with respect
to such shares of Common Stock as may be required by the Company pursuant to the
provisions of the Plan. Such written notice shall be signed by the Optionee and
shall be delivered in person or by certified mail to the Secretary of the
Company. The written notice shall be accompanied by payment of the Exercise
Price. This Option shall be deemed to be exercised upon receipt by the Company
of such written notice accompanied by the Exercise Price.
No Shares will be issued pursuant to the exercise of an Option
unless such issuance and such exercise shall comply with all relevant provisions
of law and the requirements of any stock exchange upon which the Shares may then
be listed. Assuming such compliance, for income tax purposes the Shares shall be
considered transferred to the Optionee on the date on which the Option is
exercised with respect to such Shares.
3. OPTIONEE'S REPRESENTATIONS. In the event the Shares
purchasable pursuant to the exercise of this Option have not been registered
under the Securities Act of 1933, as amended, at the time this Option is
exercised, Optionee shall, if required by the Company, concurrently with the
exercise of all or any portion of this Option, deliver to the Company his or her
Investment Representation Statement in the form attached hereto as Exhibit B,
and shall read the applicable rules of the Commissioner of Corporations attached
to such Investment Representation Statement.
4. METHOD OF PAYMENT. Payment of the Exercise Price shall be by
any of the following, or a combination thereof, at the election of the Optionee:
a. cash; or
b. check; or
c. surrender of other shares of Common Stock of the
Company which (A) in the case of Shares acquired pursuant to the exercise of a
Company option, have been owned by the Optionee for more than six (6) months on
the date of surrender, and (B) have a Fair Market Value on the date of surrender
equal to the Exercise Price of the Shares as to which the Option is being
exercised; or
d. delivery of a properly executed exercise notice
together with such other documentation as the Administrator and the broker, if
applicable, shall require to effect an exercise of the Option and delivery to
the Company of the sale or loan proceeds required to pay the Exercise Price.
5. TERMINATION OF RELATIONSHIP. In the event an Optionee's
Continuous Status as an Employee or Consultant terminates, Optionee may, to the
extent otherwise so entitled at the date of such termination (the "Termination
Date"), exercise this Option during the Termination Period set out in the Notice
of Grant. To the extent that Optionee was not entitled to exercise this Option
at the date of such termination, or if Optionee does not exercise this Option
within the time specified herein, the Option shall terminate.
6. DISABILITY OF OPTIONEE. Notwithstanding the provisions of
Section 5 above, in the event of termination of an Optionee's consulting
relationship or Continuous Status
3.
<PAGE> 4
as an Employee as a result of his or her disability, Optionee may, but only
within six (6) months from the date of such termination (and in no event later
than the expiration date of the term of such Option as set forth in the Option
Agreement), exercise the Option to the extent otherwise entitled to exercise it
at the date of such termination; provided, however, that if such disability is
not a "disability" as such term is defined in Section 22(e)(3) of the Code, in
the case of an Incentive Stock Option such Incentive Stock Option shall
automatically convert to a Nonstatutory Stock Option on the day three months and
one day following such termination. To the extent that Optionee was not entitled
to exercise the Option at the date of termination, or if Optionee does not
exercise such Option to the extent so entitled within the time specified herein,
the Option shall terminate, and the Shares covered by such Option shall revert
to the Plan.
7. DEATH OF OPTIONEE. In the event of termination of Optionee's
Continuous Status as an Employee or Consultant as a result of the death of
Optionee, the Option may be exercised at any time within twelve (12) months
following the date of death (but in no event later than the date of expiration
of the term of this Option as set forth in Section 9 below), by Optionee's
estate or by a person who acquired the right to exercise the Option by bequest
or inheritance, but only to the extent the Optionee could exercise the Option at
the date of death.
8. NON-TRANSFERABILITY OF OPTION. This Option may not be
transferred in any manner otherwise than by will or by the laws of descent or
distribution and may be exercised during the lifetime of Optionee only by
Optionee. The terms of this Option shall be binding upon the executors,
administrators, heirs, successors and assigns of the Optionee.
9. TERM OF OPTION. This Option may be exercised only within the
term set out in the Notice of Grant, and may be exercised during such term only
in accordance with the Plan and the terms of this Option. The limitations set
out in Section 7 of the Plan regarding Options designated as Incentive Stock
Options and Options granted to more than ten percent (10%) shareholders shall
apply to this Option.
10. TAXATION UPON EXERCISE OF OPTION. Optionee understands that,
upon exercising a Nonstatutory Option, he or she will recognize income for tax
purposes in an amount equal to the excess of the then Fair Market Value of the
Shares over the exercise price. However, the timing of this income recognition
may be deferred for up to six months if Optionee is subject to Section 16 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). If the
Optionee is an Employee, the Company will be required to withhold from
Optionee's compensation, or collect from Optionee and pay to the applicable
taxing authorities an amount equal to a percentage of this compensation income.
Additionally, the Optionee may at some point be required to satisfy tax
withholding obligations with respect to the disqualifying disposition of an
Incentive Stock Option. The Optionee shall satisfy his or her tax withholding
obligation arising upon the exercise of this Option out of Optionee's
compensation or by payment to the Company.
11. TAX CONSEQUENCES. Set forth below is a brief summary as of
the date of this Option of some of the federal and California tax consequences
of exercise of this Option and disposition of the Shares. THIS SUMMARY IS
NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE.
OPTIONEE SHOULD
4.
<PAGE> 5
CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.
a. EXERCISE OF ISO. If this Option qualifies as an ISO,
there will be no regular federal income tax liability or California income tax
liability upon the exercise of the Option, although the excess, if any, of the
Fair Market Value of the Shares on the date of exercise over the Exercise Price
will be treated as an adjustment to the alternative minimum tax for federal tax
purposes and may subject the Optionee to the alternative minimum tax in the year
of exercise.
b. EXERCISE OF ISO FOLLOWING DISABILITY. If the Optionee's
Continuous Status as an Employee or Consultant terminates as a result of
disability that is not total and permanent disability as defined in Section
22(e)(3) of the Code, to the extent permitted on the date of termination, the
Optionee must exercise an ISO within 90 days of such termination for the ISO to
be qualified as an ISO.
c. EXERCISE OF NONSTATUTORY STOCK OPTION. There may be a
regular federal income tax liability and California income tax liability upon
the exercise of a Nonstatutory Stock Option. The Optionee will be treated as
having received compensation income (taxable at ordinary income tax rates) equal
to the excess, if any, of the Fair Market Value of the Shares on the date of
exercise over the Exercise Price. If Optionee is an Employee or a former
Employee, the Company will be required to withhold from Optionee's compensation
or collect from Optionee and pay to the applicable taxing authorities an amount
in cash equal to a percentage of this compensation income at the time of
exercise, and may refuse to honor the exercise and refuse to deliver Shares if
such withholding amounts are not delivered at the time of exercise.
d. DISPOSITION OF SHARES. In the case of an NSO, if Shares
are held for at least one year, any gain realized on disposition of the Shares
will be treated as long-term capital gain for federal and California income tax
purposes. In the case of an ISO, if Shares transferred pursuant to the Option
are held for at least one year after exercise and are disposed of at least two
years after the Date of Grant, any gain realized on disposition of the Shares
will also be treated as long-term capital gain for federal and California income
tax purposes. If Shares purchased under an ISO are disposed of within such
one-year period or within two years after the Date of Grant, any gain realized
on such disposition will be treated as compensation income (taxable at ordinary
income rates) to the extent of the difference between the Exercise Price and the
lesser of (1) the Fair Market Value of the Shares on the date of exercise, or
(2) the sale price of the Shares.
e. NOTICE OF DISQUALIFYING DISPOSITION OF ISO SHARES. If
the Option granted to Optionee herein is an ISO, and if Optionee sells or
otherwise disposes of any of the Shares acquired pursuant to the ISO on or
before the later of (1) the date two years after the Date of Grant, or (2) the
date one year after the date of exercise, the Optionee shall immediately notify
the Company in writing of such disposition. Optionee agrees that Optionee may be
subject to income tax withholding by the Company on the compensation income
recognized by the Optionee.
5.
<PAGE> 6
12. ENTIRE AGREEMENTS GOVERNING LAW. The Plan is incorporated
herein by reference. The Plan and this Option Agreement constitute the entire
agreement of the parties with respect to the subject matter hereof and supersede
in their entirety all prior undertakings and agreements of the Company and
Optionee with respect to the subject matter hereof, and may not be modified
adversely to the Optionee's interest except by means of a writing signed by the
Company and Optionee. This agreement is governed by California law except for
that body of law pertaining to conflict of laws.
VIROLOGIC, INC.
a Delaware corporation
By:
--------------------------------------
Its:
-------------------------------------
6.
<PAGE> 7
OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO
THE OPTION HEREOF IS EARNED ONLY BY CONTINUING CONSULTANCY OR EMPLOYMENT AT THE
WILL OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS
OPTION OR ACQUIRING SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES
THAT NOTHING IN THIS AGREEMENT, NOR IN THE COMPANY'S STOCK OPTION PLAN WHICH IS
INCORPORATED HEREIN BY REFERENCE, SHALL CONFER UPON OPTIONEE ANY RIGHT WITH
RESPECT TO CONTINUATION OF EMPLOYMENT OR CONSULTANCY BY THE COMPANY, NOR SHALL
IT INTERFERE IN ANY WAY WITH OPTIONEE'S RIGHT OR THE COMPANY'S RIGHT TO
TERMINATE OPTIONEE'S EMPLOYMENT OR CONSULTANCY AT ANY TIME, WITH OR WITHOUT
CAUSE.
Optionee acknowledges receipt of a copy of the Plan and represents
that he is familiar with the terms and provisions thereof, and hereby accepts
this Option subject to all of the terms and provisions thereof. Optionee has
reviewed the Plan and this Option in their entirety, has had an opportunity
to obtain the advice of counsel prior to executing this Option and fully
understands all provisions of the Option. Optionee hereby agrees to accept as
binding, conclusive and final all decisions or interpretations of the
Administrator upon any questions arising under the Plan or this Option.
Optionee further agrees to notify the Company upon any change in the
residence address indicated below.
Dated: ---------------------------------
------------------------ Optionee
Residence Address:
---------------------------------
---------------------------------
7.
<PAGE> 8
EXHIBIT A
1996 STOCK PLAN
EXERCISE NOTICE
ViroLogic, Inc.
270 E. Grand Avenue
South San Francisco, CA 94080
Attention: Secretary
1. EXERCISE OF OPTION. Effective as of today, _______, 20___, the
undersigned ("Optionee") hereby elects to exercise Optionee's option to purchase
________ shares of the Common Stock (the "Shares") of ViroLogic, Inc. (the
"Company") under and pursuant to the 1996 Stock Plan, as amended (the "Plan")
and the [ ] Incentive [X] Nonstatutory Stock Option Agreement dated ________,
20__ (the "Option Agreement").
2. REPRESENTATIONS OF OPTIONEE. Optionee acknowledges that
Optionee has received, read and understood the Plan and the Option Agreement and
agrees to abide by and be bound by their terms and conditions.
3. RIGHTS AS SHAREHOLDER. Until the stock certificate evidencing
such Shares is issued (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company), no right to vote
or receive dividends or any other rights as a shareholder shall exist with
respect to the Optioned Stock, notwithstanding the exercise of the Option. The
Company shall issue (or cause to be issued) such stock certificate promptly
after the Option is exercised. No adjustment will be made for a dividend or
other right for which the record date is prior to the date the stock certificate
is issued, except as provided in Section 12 of the Plan.
Optionee shall enjoy rights as a shareholder until such time as
Optionee disposes of the Shares or the Company and/or its assignee(s) exercises
the Right of First Refusal hereunder. Upon such exercise, Optionee shall have no
further rights as a holder of the Shares so purchased except the right to
receive payment for the Shares so purchased in accordance with the provisions of
this Agreement, and Optionee shall forthwith cause the certificate(s) evidencing
the Shares so purchased to be surrendered to the Company for transfer or
cancellation.
4. COMPANY'S RIGHT OF FIRST REFUSAL. Before any Shares held by
Optionee or any transferee (either being sometimes referred to herein as the
"Holder") may be sold or otherwise transferred (including transfer by gift or
operation of law), the Company or its assignee(s) shall have a right of first
refusal to purchase the Shares on the terms and conditions set forth in this
Section (the "Right of First Refusal").
a. NOTICE OF PROPOSED TRANSFER. The Holder of the Shares
shall deliver to the Company a written notice (the "Notice") stating: (i) the
Holder's bona fide intention to sell or otherwise transfer such Shares; (ii) the
name of each proposed purchaser or other transferee ("Proposed Transferee");
(iii) the number of Shares to be transferred to each Proposed Transferee; and
(iv) the bona fide cash price or other consideration for which the
<PAGE> 9
Holder proposes to transfer the Shares (the "Offered Price"), and the Holder
shall offer the Shares at the Offered Price to the Company or its assignee(s).
b. EXERCISE OF RIGHT OF FIRST REFUSAL. At any time within
thirty (30) days after receipt of the Notice, the Company and/or its assignee(s)
may, by giving written notice to the Holder, elect to purchase all, but not less
than all, of the Shares proposed to be transferred to any one or more of the
Proposed Transferees, at the purchase price determined in accordance with
subsection (c) below.
c. PURCHASE PRICE. The purchase price ("Purchase Price")
for the Shares purchased by the Company or its assignee(s) under this Section
shall be the Offered Price. If the Offered Price includes consideration other
than cash, the cash equivalent value of the non-cash consideration shall be
determined by the Board of Directors of the Company in good faith.
d. PAYMENT. Payment of the Purchase Price shall be made,
at the option of the Company or its assignee(s), in cash (by check), by
cancellation of all or a portion of any outstanding indebtedness of the Holder
to the Company (or, in the case of repurchase by an assignee, to the assignee),
or by any combination thereof within 30 days after receipt of the Notice or in
the manner and at the times set forth in the Notice.
e. HOLDER'S RIGHT TO TRANSFER. If all of the Shares
proposed in the Notice to be transferred to a given Proposed Transferee are not
purchased by the Company and/or its assignee(s) as provided in this Section,
then the Holder may sell or otherwise transfer such Shares to that Proposed
Transferee at the Offered Price or at a higher price, provided that such sale or
other transfer is consummated within 120 days after the date of the Notice and
provided further that any such sale or other transfer is effected in accordance
with any applicable securities laws and the Proposed Transferee agrees in
writing that the provisions of this Section shall continue to apply to the
Shares in the hands of such Proposed Transferee. If the Shares described in the
Notice are not transferred to the Proposed Transferee within such period, a new
Notice shall be given to the Company, and the Company and/or its assignees shall
again be offered the Right of First Refusal before any Shares held by the Holder
may be sold or otherwise transferred.
f. EXCEPTION FOR CERTAIN FAMILY TRANSFERS. Anything to the
contrary contained in this Section notwithstanding, the transfer of any or all
of the Shares during the Optionee's lifetime or on the Optionee's death by will
or intestacy to the Optionee's immediate family or a trust for the benefit of
the Optionee's immediate family shall be exempt from the provisions of this
Section. "Immediate Family" as used herein shall mean spouse, lineal descendant
or antecedent, father, mother, brother or sister. In such case, the transferee
or other recipient shall receive and hold the Shares so transferred subject to
the provisions of this Section, and there shall be no further transfer of such
Shares except in accordance with the terms of this Section.
g. TERMINATION OF RIGHT OF FIRST REFUSAL. The Right of
First Refusal shall terminate as to any Shares 90 days after the first sale of
Common Stock of the Company to the general public pursuant to a registration
statement filed with and declared
2.
<PAGE> 10
effective by the Securities and Exchange Commission under the Securities Act of
1933, as amended.
5. TAX CONSULTATION. Optionee understands that Optionee may
suffer adverse consequences as a result of Optionee's purchase or disposition of
the Shares. Optionee represents that Optionee has consulted with any tax
consultants Optionee deems advisable in connection with the purchase or
disposition of the Shares and that Optionee is not relying on the Company for
any tax advice.
6. RESTRICTIVE LEGENDS AND STOP TRANSFER ORDERS.
a. LEGENDS. optionee understands and agrees that the
Company shall cause the legends set forth below or legends substantially
equivalent thereto, to be placed upon any certificate(s) evidencing ownership of
the Shares together with any other legends that may be required by the Company
or by state or federal securities laws:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED,
SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND
UNTIL REGISTERED UNDER THE ACT OR, IN THE OPINION OF COUNSEL
SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE
OR TRANSFER, PLEDGE OR HYPOTHECATION IS IN COMPLIANCE THEREWITH.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS ON TRANSFER AND A RIGHT OF FIRST REFUSAL HELD BY THE
ISSUER OR ITS ASSIGNEE(S) AS SET FORTH IN THE EXERCISE NOTICE
BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF THESE SHARES, A
COPY OF WHICH MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE
ISSUER SUCH TRANSFER RESTRICTIONS AND RIGHT OF FIRST REFUSAL ARE
BINDING ON TRANSFEREES OF THESE SHARES.
IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY,
OR ANY INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION
THEREFOR, WITHOUT THE PRIOR WRITTEN CONSENT OF THE COMMISSIONER
OF CORPORATIONS OF THE STATE OF CALIFORNIA, EXCEPT AS PERMITTED
IN THE COMMISSIONERS RULES.
Optionee understands that transfer of the Shares may be
restricted by Section 260.141.11 of the Rules of the California Corporations
Commissioner, a copy of which
3.
<PAGE> 11
is attached to Exhibit B, the Investment Representation Statement.
b. STOP-TRANSFER NOTICES. Optionee agrees that, in order
to ensure compliance with the restrictions referred to herein, the Company may
issue appropriate "stop transfer" instructions to its transfer agent, if any,
and that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.
c. REFUSAL TO TRANSFER. The Company shall not be required
(i) to transfer on its books any Shares that have been sold or otherwise
transferred in violation of any of the provisions of this Agreement or (ii) to
treat as owner of such Shares or to accord the right to vote or pay dividends to
any purchaser or other transferee to whom such Shares shall have been so
transferred.
7. SUCCESSORS AND ASSIGNS. The Company may assign any of its
rights under this Agreement to single or multiple assignees, and this Agreement
shall inure to the benefit of the successors and assigns of the Company. Subject
to the restrictions on transfer herein set forth, this Agreement shall be
binding upon Optionee and his or her heirs, executors, administrators,
successors and assigns.
8. INTERPRETATION. Any dispute regarding the interpretation of
this Agreement shall be submitted by Optionee or by the Company forthwith to the
Company's Board of Directors or the committee thereof that administers the Plan,
which shall review such dispute at its next regular meeting. The resolution of
such a dispute by the Board or committee shall be final and binding on the
Company and on Optionee.
9. GOVERNING LAW; SEVERABILITY. This Agreement shall be governed
by and construed in accordance with the laws of the State of California
excluding that body of law pertaining to conflicts of law. Should any provision
of this Agreement be determined by a court of law to be illegal or
unenforceable, the other provisions shall nevertheless remain effective and
shall remain enforceable.
10. NOTICE. Any notice required or permitted hereunder shall be
given in writing and shall be deemed effectively given upon personal delivery or
upon deposit in the United States mail by certified mail, with postage and fees
prepaid, addressed to the other party at its address as shown below beneath its
signature, or to such other address as such party may designate in writing from
time to time to the other party.
11. FURTHER INSTRUMENTS. The parties agree to execute such
further instruments and to take such further action as may be reasonably
necessary to carry out the purposes and intent of this Agreement.
12. DELIVERY OF PAYMENT. Optionee herewith delivers to the
Company the full Exercise Price for the Shares.
13. ENTIRE AGREEMENT. The Plan and Notice of Grant/Option
Agreement are incorporated herein by reference. This Agreement, the Plan, the
Option Agreement and the Investment Representation Statement constitute the
entire agreement of the parties with respect to the subject matter hereof and
supersede in their entirety all prior undertakings and agreements
4.
<PAGE> 12
of the Company and Purchaser with respect to the subject matter hereof, and may
not be modified adversely to the Purchaser's interest except by means of a
writing signed by the Company and Purchaser.
Submitted by: Accepted by:
OPTIONEE: VIROLOGIC, INC.
By:
---------------------------------
Its:
--------------------------------
- -------------------------------
(Signature)
Address: Address:
- -------------------------------- ------------------------------------
- -------------------------------- ------------------------------------
5.
<PAGE> 13
(TO BE COMPLETED AT TIME OF EXERCISE)
EXHIBIT B
INVESTMENT REPRESENTATION STATEMENT
OPTIONEE:
Company: VIROLOGIC, INC.
SECURITY: COMMON STOCK
AMOUNT:
DATE:
In connection with the purchase of the above-listed Securities, the undersigned
Optionee represents to the Company the following:
a. Optionee is aware of the Company's business affairs and
financial condition and has acquired sufficient information about the Company to
reach an informed and knowledgeable decision to acquire the Securities. Optionee
is acquiring these Securities for investment for Optionee's own account only and
not with a view to, or for resale in connection with, any "distribution" thereof
within the meaning of the Securities Act of 1933, as amended (the "Securities
Act").
b. Optionee acknowledges and understands that the
Securities constitute "restricted securities" under the Securities Act and have
not been registered under the Securities Act in reliance upon a specific
exemption therefrom, which exemption depends upon, among other things, the bona
fide nature of Optionee's investment intent as expressed herein. In this
connection, Optionee understands that, in the view of the Securities and
Exchange Commission, the statutory basis for such exemption may be unavailable
if Optionee's representation was predicated solely upon a present intention to
hold these 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. Optionee further understands that the Securities must be
held indefinitely unless they are subsequently registered under the Securities
Act or an exemption from such registration is available. Optionee further
acknowledges and understands that the Company is under no obligation to register
the Securities. Optionee understands that the certificate evidencing the
Securities will be imprinted with a legend which prohibits the transfer of the
Securities unless they are registered or such registration is not required in
the opinion of counsel satisfactory to the Company, a legend prohibiting their
transfer without the consent of the Commissioner of Corporations of the State of
California and any other legend required under applicable state securities laws.
c. Optionee is familiar with the provisions of Rule 701
and Rule 144, each promulgated under the Securities Act, which, in substance,
permit limited public resale of "restricted securities" acquired, directly or
indirectly from the issuer thereof, in a nonpublic
<PAGE> 14
offering subject to the satisfaction of certain conditions. Rule 701 provides
that if the issuer qualifies under Rule 701 at the time of the grant of the
Option to the Optionee, the exercise will be exempt from registration under the
Securities Act. In the event the Company becomes subject to the reporting
requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934,
ninety (90) days thereafter (or such longer period as any market stand-off
agreement may require) the Securities exempt under Rule 701 may be resold,
subject to the satisfaction of certain of the conditions specified by Rule 144,
including: (1) the resale being made through a broker in an unsolicited
"broker's transaction" or in transactions directly with a market maker (as said
term is defined under the Securities Exchange Act of 1934); and, in the case of
an affiliate, (2) the availability of certain public information about the
Company, (3) the amount of Securities being sold during any three month period
not exceeding the limitations specified in Rule 144(e), and (4) the timely
filing of a Form 144, if applicable.
In the event that the Company does not qualify under Rule 701 at
the time of grant of the Option, then the Securities may be resold in certain
limited circumstances subject to the provisions of Rule 144, which requires the
resale to occur not less than two years after the later of the date the
Securities were sold by the Company or the date the Securities were sold by an
affiliate of the Company, within the meaning of Rule 144; and, in the case of
acquisition of the Securities by an affiliate, or by a non-affiliate who
subsequently holds the Securities less than three years, the satisfaction of the
conditions set forth in sections (1), (2), (3) and (4) of the paragraph
immediately above.
d. Optionee hereby agrees that if so requested by the
Company or any representative of the underwriters in connection with any
registration of the offering of any securities of the Company under the
Securities Act, Optionee shall not sell or otherwise transfer any Shares or
other securities of the Company during the 180-day period following the
effective date of a registration statement of the Company filed under the
Securities Act; provided, however, that such restriction shall only apply to the
first registration statement of the Company to become effective under the
Securities Act which include securities to be sold on behalf of the Company to
the public in an underwritten public offering under the Securities Act. The
Company may impose stop-transfer instructions with respect to securities subject
to the foregoing restrictions until the end of such 180-day period.
e. Optionee further understands that in the event all of
the applicable requirements of Rule 701 or 144 are not satisfied, registration
under the Securities Act, compliance with Regulation A, or some other
registration exemption will be required; and that, notwithstanding the fact that
Rules 144 and 701 are not exclusive, the Staff of the Securities and Exchange
Commission has expressed its opinion that persons proposing to sell private
placement securities other than in a registered offering and otherwise than
pursuant to Rules 144 or 701 will have a substantial burden of proof in
establishing that an exemption from registration is available for such offers or
sales, and that such persons and their respective brokers who participate in
such transactions do so at their own risk. Optionee understands that no
assurances can be given that any such other registration exemption will be
available in such event.
f. Optionee understands that the certificate evidencing
the Securities will be imprinted with a legend which prohibits the transfer of
the Securities without the consent
2.
<PAGE> 15
of the Commissioner of Corporations of California. Optionee has read the
applicable Commissioner's Rules with respect to such restriction, a copy of
which is attached.
Signature of Optionee:
---------------------------------
Date: , 19
-------------- --
3.
<PAGE> 16
ATTACHMENT 1
STATE OF CALIFORNIA - CALIFORNIA ADMINISTRATIVE CODE
Title 10. Investment - Chapter 3. Commissioner of Corporations
260.141.11: Restriction on Transfer. (a) The issuer of any security upon which
a restriction on transfer has been imposed pursuant to Sections 260.102.6,
260.141.10 or 260.534 shall cause a copy of this section to be delivered to each
issuee or transferee of such security at the time the certificate evidencing the
security is delivered to the issuee or transferee.
(b) It is unlawful for the holder of any such security to consummate a sale or
transfer of such security, or any interest therein, without the prior written
consent of the Commissioner (until this condition is removed pursuant to Section
260.141.12 of these rules), except:
(1) to the issuer;
(2) pursuant to the order or process of any court;
(3) to any person described in Subdivision (i) of Section 25102 of the
Code or Section 260.105.14 of these rules;
(4) to the transferor's ancestors, descendants or spouse, or any
custodian or trustee for the account of the transferor or the transferor's
ancestors, descendants, or spouse; or to a transferee by a trustee or custodian
for the account of the transferee or the transferee's ancestors, descendants or
spouse;
(5) to holders of securities of the same class of the same issuer;
(6) by way of gift or donation inter vivos or on death;
(7) by or through a broker-dealer licensed under the Code (either acting
as such or as a finder) to a resident of a foreign state, territory or country
who is neither domiciled in this state to the knowledge of the broker-dealer,
nor actually present in this state if the sale of such securities is not in
violation of any securities law of the foreign state, territory or country
concerned;
(8) to a broker-dealer licensed under the Code in a principal
transaction, or as an underwriter or member of an underwriting syndicate or
selling group;
(9) if the interest sold or transferred is a pledge or other lien given
by the purchaser to the seller upon a sale of the security for which the
Commissioner's written consent is obtained or under this rule not required;
(10) by way of a sale qualified under Sections 25111, 25112, 25113 or
25121 of the Code, of the securities to be transferred, provided that no order
under Section 25140 or subdivision (a) of Section 25143 is in effect with
respect to such qualification;
(11) by a corporation to a wholly owned subsidiary of such corporation,
or by a wholly owned subsidiary of a corporation to such corporation;
(12) by way of an exchange qualified under Section 25111, 25112 or 25113
of the Code, provided that no order under Section 25140 or subdivision (a) of
Section 25143 is in effect with respect to such qualification;
(13) between residents of foreign states, territories or countries who
are neither domiciled nor actually present in this state;
(14) to the State Controller pursuant to the Unclaimed Property Law or
to the administrator of the unclaimed property law of another state; or
(15) by the State Controller pursuant to the Unclaimed Property Law or
by the administrator of the unclaimed property law of another state if, in
either such case, such person (i) discloses to potential purchasers at the sale
that transfer of the securities is restricted under this rule, (ii) delivers to
each purchaser a copy of this rule, and (iii) advises the Commissioner of the
name of each purchaser;
(16) by a trustee to a successor trustee when such transfer does not
involve a change in the beneficial ownership of the securities;
(17) by way of an offer and sale of outstanding securities in an issuer
transaction that is subject to the qualification requirement of Section 25110 of
the Code but exempt from that qualification requirement by subdivision (f) of
Section 25102; provided that any such transfer is on the condition that any
certificate evidencing the security issued to such transferee shall contain the
legend required by this section.
(c) The certificates representing all such securities subject to such a
restriction on transfer, whether upon initial issuance or upon any transfer
thereof, shall bear on their face a legend, prominently stamped or printed
thereon in capital letters of not less than 10-point size, reading as follows:
"IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY, OR ANY
INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT THE
PRIOR WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE STATE OF
CALIFORNIA EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES."
<PAGE> 1
EXHIBIT 4.14
VIROLOGIC, INC.
STOCK OPTION GRANT NOTICE
(2000 EQUITY INCENTIVE PLAN)
VIROLOGIC, INC. (the "Company"), pursuant to its 2000 Equity Incentive Plan (the
"Plan"), hereby grants to Optionholder an option to purchase the number of
shares of the Company's Common Stock set forth below. This option is subject to
all of the terms and conditions as set forth herein and in the Stock Option
Agreement, the Plan and the Notice of Exercise, all of which are attached hereto
and incorporated herein in their entirety.
Optionholder:
Date of Grant:
---------------------------
Vesting Commencement Date:
---------------------------
Number of Shares Subject to Option:
---------------------------
Exercise Price (Per Share):
---------------------------
Total Exercise Price:
---------------------------
Expiration Date:
---------------------------
TYPE OF GRANT: [ ] Incentive Stock Option(1) [ ] Nonstatutory Stock Option
EXERCISE SCHEDULE: [ ] Same as Vesting Schedule [ ] Early Exercise Permitted
VESTING SCHEDULE: 1/24th of the shares vest each month after the Vesting
Commencement Date.
PAYMENT: By one or a combination of the following items (described in
the Stock Option Agreement):
By cash or check
Pursuant to a Regulation T Program if the Shares are
publicly traded By delivery of already-owned shares if
the Shares are publicly traded
ADDITIONAL TERMS/ACKNOWLEDGEMENTS: The undersigned Optionholder acknowledges
receipt of, and understands and agrees to, this Grant Notice, the Stock Option
Agreement and the Plan. Optionholder further acknowledges that as of the Date of
Grant, this Grant Notice, the Stock Option Agreement and the Plan set forth the
entire understanding between Optionholder and the Company regarding the
acquisition of stock in the Company and supersede all prior oral and written
agreements on that subject with the exception of (i) options previously granted
and delivered to Optionholder under the Plan, and (ii) the following agreements
only:
OTHER AGREEMENTS:
---------------------------------------
---------------------------------------
VIROLOGIC, INC. OPTIONHOLDER:
By:
------------------------------- -------------------------------
Signature Signature
Title: Date:
---------------------------- --------------------------
Date:
-----------------------------
ATTACHMENTS: Stock Option Agreement, 2000 Equity Incentive Plan and Notice of
Exercise
- --------
(1) If this is an incentive stock option, it (plus your other outstanding
incentive stock options) cannot be first exercisable for more than $100,000 in
any calendar year. Any excess over $100,000 is a nonstatutory stock option.
<PAGE> 2
ATTACHMENT I
STOCK OPTION AGREEMENT
<PAGE> 3
EXHIBIT __
VIROLOGIC, INC.
2000 EQUITY INCENTIVE PLAN
STOCK OPTION AGREEMENT
(INCENTIVE AND NONSTATUTORY STOCK OPTIONS)
Pursuant to your Stock Option Grant Notice ("Grant Notice") and this
Stock Option Agreement, ViroLogic, Inc. (the "Company") has granted you an
option under its 2000 Equity Incentive Plan (the "Plan") to purchase the number
of shares of the Company's Common Stock indicated in your Grant Notice at the
exercise price indicated in your Grant Notice. Defined terms not explicitly
defined in this Stock Option Agreement but defined in the Plan shall have the
same definitions as in the Plan.
The details of your option are as follows:
1. VESTING. Subject to the limitations contained herein, your
option will vest as provided in your Grant Notice, provided that vesting will
cease upon the termination of your Continuous Service.
2. NUMBER OF SHARES AND EXERCISE PRICE. The number of shares of
Common Stock subject to your option and your exercise price per share referenced
in your Grant Notice may be adjusted from time to time for Capitalization
Adjustments, as provided in the Plan.
3. EXERCISE PRIOR TO VESTING ("EARLY EXERCISE"). If permitted in
your Grant Notice (i.e., the "Exercise Schedule" indicates that "Early Exercise"
of your option is permitted) and subject to the provisions of your option, you
may elect at any time that is both (i) during the period of your Continuous
Service and (ii) during the term of your option, to exercise all or part of your
option, including the nonvested portion of your option; provided, however, that:
(a) a partial exercise of your option shall be deemed to cover
first vested shares of Common Stock and then the earliest vesting installment of
unvested shares of Common Stock;
(b) any shares of Common Stock so purchased from installments
that have not vested as of the date of exercise shall be subject to the purchase
option in favor of the Company as described in the Company's form of Early
Exercise Stock Purchase Agreement;
(c) you shall enter into the Company's form of Early Exercise
Stock Purchase Agreement with a vesting schedule that will result in the same
vesting as if no early exercise had occurred; and
(d) if your option is an incentive stock option, then, as
provided in the Plan, to the extent that the aggregate Fair Market Value
(determined at the time of grant) of the shares of Common Stock with respect to
which your option plus all other incentive stock options you hold are
exercisable for the first time by you during any calendar year (under all plans
of the Company and its Affiliates) exceeds one hundred thousand dollars
($100,000), your option(s) or
1.
<PAGE> 4
portions thereof that exceed such limit (according to the order in which they
were granted) shall be treated as nonstatutory stock options.
4. METHOD OF PAYMENT. Payment of the exercise price is due in full
upon exercise of all or any part of your option. You may elect to make payment
of the exercise price in cash or by check or in any other manner PERMITTED BY
YOUR GRANT NOTICE, which may include one or more of the following:
(a) In the Company's sole discretion at the time your option is
exercised and provided that at the time of exercise the Common Stock is publicly
traded and quoted regularly in The Wall Street Journal, pursuant to a program
developed under Regulation T as promulgated by the Federal Reserve Board that,
prior to the issuance of Common Stock, results in either the receipt of cash (or
check) by the Company or the receipt of irrevocable instructions to pay the
aggregate exercise price to the Company from the sales proceeds.
(b) Provided that at the time of exercise the Common Stock is
publicly traded and quoted regularly in The Wall Street Journal, by delivery of
already-owned shares of Common Stock either that you have held for the period
required to avoid a charge to the Company's reported earnings (generally six
months) or that you did not acquire, directly or indirectly from the Company,
that are owned free and clear of any liens, claims, encumbrances or security
interests, and that are valued at Fair Market Value on the date of exercise.
"Delivery" for these purposes, in the sole discretion of the Company at the time
you exercise your option, shall include delivery to the Company of your
attestation of ownership of such shares of Common Stock in a form approved by
the Company. Notwithstanding the foregoing, you may not exercise your option by
tender to the Company of Common Stock to the extent such tender would violate
the provisions of any law, regulation or agreement restricting the redemption of
the Company's stock.
5. WHOLE SHARES. You may exercise your option only for whole shares
of Common Stock.
6. SECURITIES LAW COMPLIANCE. Notwithstanding anything to the
contrary contained herein, you may not exercise your option unless the shares of
Common Stock issuable upon such exercise are then registered under the
Securities Act or, if such shares of Common Stock are not then so registered,
the Company has determined that such exercise and issuance would be exempt from
the registration requirements of the Securities Act. The exercise of your option
must also comply with other applicable laws and regulations governing your
option, and you may not exercise your option if the Company determines that such
exercise would not be in material compliance with such laws and regulations.
7. TERM. You may not exercise your option before the commencement
of its term or after its term expires. The term of your option commences on the
Date of Grant and expires upon the EARLIEST of the following:
(a) three (3) months after the termination of your Continuous
Service for any reason other than your Disability or death, provided that if
during any part of such three- (3-) month period your option is not exercisable
solely because of the condition set forth in the
2.
<PAGE> 5
preceding paragraph relating to "Securities Law Compliance," your option shall
not expire until the earlier of the Expiration Date or until it shall have been
exercisable for an aggregate period of three (3) months after the termination of
your Continuous Service;
(b) twelve (12) months after the termination of your Continuous
Service due to your Disability;
(c) twelve (12) months after your death if you die either during
your Continuous Service or within three (3) months after your Continuous Service
terminates;
(d) the Expiration Date indicated in your Grant Notice; or
(e) the day before the tenth (10th) anniversary of the Date of
Grant.
If your option is an incentive stock option, note that, to obtain the
federal income tax advantages associated with an "incentive stock option," the
Code requires that at all times beginning on the date of grant of your option
and ending on the day three (3) months before the date of your option's
exercise, you must be an employee of the Company or an Affiliate, except in the
event of your death or Disability. The Company has provided for extended
exercisability of your option under certain circumstances for your benefit but
cannot guarantee that your option will necessarily be treated as an "incentive
stock option" if you continue to provide services to the Company or an Affiliate
as a Consultant or Director after your employment terminates or if you otherwise
exercise your option more than three (3) months after the date your employment
terminates.
8. EXERCISE.
(a) You may exercise the vested portion of your option (and the
unvested portion of your option if your Grant Notice so permits) during its term
by delivering a Notice of Exercise (in a form designated by the Company)
together with the exercise price to the Secretary of the Company, or to such
other person as the Company may designate, during regular business hours,
together with such additional documents as the Company may then require.
(b) By exercising your option you agree that, as a condition to
any exercise of your option, the Company may require you to enter into an
arrangement providing for the payment by you to the Company of any tax
withholding obligation of the Company arising by reason of (1) the exercise of
your option, (2) the lapse of any substantial risk of forfeiture to which the
shares of Common Stock are subject at the time of exercise, or (3) the
disposition of shares of Common Stock acquired upon such exercise.
(c) If your option is an incentive stock option, by exercising
your option you agree that you will notify the Company in writing within fifteen
(15) days after the date of any disposition of any of the shares of the Common
Stock issued upon exercise of your option that occurs within two (2) years after
the date of your option grant or within one (1) year after such shares of Common
Stock are transferred upon exercise of your option.
9. TRANSFERABILITY. Your option is not transferable, except by will
or by the laws of descent and distribution, and is exercisable during your life
only by you. Notwithstanding the
3.
<PAGE> 6
foregoing, by delivering written notice to the Company, in a form satisfactory
to the Company, you may designate a third party who, in the event of your death,
shall thereafter be entitled to exercise your option.
10. OPTION NOT A SERVICE CONTRACT. Your option is not an employment
or service contract, and nothing in your option shall be deemed to create in any
way whatsoever any obligation on your part to continue in the employ of the
Company or an Affiliate, or of the Company or an Affiliate to continue your
employment. In addition, nothing in your option shall obligate the Company or an
Affiliate, their respective shareholders, Boards of Directors, Officers or
Employees to continue any relationship that you might have as a Director or
Consultant for the Company or an Affiliate.
11. WITHHOLDING OBLIGATIONS.
(a) At the time you exercise your option, in whole or in part, or
at any time thereafter as requested by the Company, you hereby authorize
withholding from payroll and any other amounts payable to you, and otherwise
agree to make adequate provision for (including by means of a "cashless
exercise" pursuant to a program developed under Regulation T as promulgated by
the Federal Reserve Board to the extent permitted by the Company), any sums
required to satisfy the federal, state, local and foreign tax withholding
obligations of the Company or an Affiliate, if any, which arise in connection
with your option.
(b) Upon your request and subject to approval by the Company, in
its sole discretion, and compliance with any applicable conditions or
restrictions of law, the Company may withhold from fully vested shares of Common
Stock otherwise issuable to you upon the exercise of your option a number of
whole shares of Common Stock having a Fair Market Value, determined by the
Company as of the date of exercise, not in excess of the minimum amount of tax
required to be withheld by law. If the date of determination of any tax
withholding obligation is deferred to a date later than the date of exercise of
your option, share withholding pursuant to the preceding sentence shall not be
permitted unless you make a proper and timely election under Section 83(b) of
the Code, covering the aggregate number of shares of Common Stock acquired upon
such exercise with respect to which such determination is otherwise deferred, to
accelerate the determination of such tax withholding obligation to the date of
exercise of your option. Notwithstanding the filing of such election, shares of
Common Stock shall be withheld solely from fully vested shares of Common Stock
determined as of the date of exercise of your option that are otherwise issuable
to you upon such exercise. Any adverse consequences to you arising in connection
with such share withholding procedure shall be your sole responsibility.
(c) You may not exercise your option unless the tax withholding
obligations of the Company and/or any Affiliate are satisfied. Accordingly, you
may not be able to exercise your option when desired even though your option is
vested, and the Company shall have no obligation to issue a certificate for such
shares of Common Stock or release such shares of Common Stock from any escrow
provided for herein.
12. NOTICES. Any notices provided for in your option or the Plan
shall be given in writing and shall be deemed effectively given upon receipt or,
in the case of notices delivered by
4.
<PAGE> 7
mail by the Company to you, five (5) days after deposit in the United States
mail, postage prepaid, addressed to you at the last address you provided to the
Company.
13. GOVERNING PLAN DOCUMENT. Your option is subject to all the
provisions of the Plan, the provisions of which are hereby made a part of your
option, and is further subject to all interpretations, amendments, rules and
regulations which may from time to time be promulgated and adopted pursuant to
the Plan. In the event of any conflict between the provisions of your option and
those of the Plan, the provisions of the Plan shall control.
5.
<PAGE> 8
ATTACHMENT II
2000 EQUITY INCENTIVE PLAN
<PAGE> 9
ATTACHMENT III
NOTICE OF EXERCISE
<PAGE> 10
NOTICE OF EXERCISE
VIROLOGIC, INC.
270 EAST GRAND AVE.
SOUTH SAN FRANCISCO, CA 94080 Date of Exercise: _______________
Ladies and Gentlemen:
This constitutes notice under my stock option that I elect to purchase
the number of shares for the price set forth below.
<TABLE>
<S> <C> <C>
Type of option (check one): Incentive [ ] Nonstatutory [ ]
Stock option dated: _______________
Number of shares as
to which option is
exercised: _______________
Certificates to be
issued in name of: _______________
Total exercise price: $______________
Cash payment delivered
herewith: $______________
Value of ________ shares of
ViroLogic, Inc. common
stock delivered herewith(1): $______________
</TABLE>
By this exercise, I agree (i) to provide such additional documents as
you may require pursuant to the terms of the 2000 Equity Incentive Plan, (ii) to
provide for the payment by me to you (in the manner designated by you) of your
withholding obligation, if any, relating to the exercise of this option, and
(iii) if this exercise relates to an incentive stock option, to notify you in
writing within fifteen (15) days after the date of any disposition of any of the
shares of Common Stock issued upon exercise of this option that occurs within
two (2) years after the date of grant of this option or within one (1) year
after such shares of Common Stock are issued upon exercise of this option.
- --------
(1) Shares must meet the public trading requirements set forth in the
option. Shares must be valued in accordance with the terms of the option being
exercised, must have been owned for the minimum period required in the option,
and must be owned free and clear of any liens, claims, encumbrances or security
interests. Certificates must be endorsed or accompanied by an executed
assignment separate from certificate.
1.
<PAGE> 11
I further agree that, if required by the Company (or a representative of
the underwriters) in connection with the first underwritten registration of the
offering of any securities of the Company under the Securities Act, I will not
sell or otherwise transfer or dispose of any shares of Common Stock or other
securities of the Company during such period (not to exceed one hundred eighty
(180) days) following the effective date of the registration statement of the
Company filed under the Securities Act as may be requested by the Company or the
representative of the underwriters. I further agree that the Company may impose
stop-transfer instructions with respect to securities subject to the foregoing
restrictions until the end of such period.
Very truly yours,
-------------------------------
2.
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EXHIBIT 4.15
VIROLOGIC, INC.
2000 EMPLOYEE STOCK PURCHASE PLAN
ADOPTED BY BOARD OF DIRECTORS FEBRUARY 21 , 2000
APPROVED BY STOCKHOLDERS _______________ , 2000
TERMINATION DATE: NONE
1. PURPOSE.
(a) The purpose of the Plan is to provide a means by which Employees of
the Company and certain designated Affiliates may be given an opportunity to
purchase Shares of the Company.
(b) The Company, by means of the Plan, seeks to retain the services of
such Employees, to secure and retain the services of new Employees and to
provide incentives for such persons to exert maximum efforts for the success of
the Company and its Affiliates.
(c) The Company intends that the Rights to purchase Shares granted under
the Plan be considered options issued under an "employee stock purchase plan,"
as that term is defined in Section 423(b) of the Code.
2. DEFINITIONS.
(a) "AFFILIATE" means any parent corporation or subsidiary corporation,
whether now or hereafter existing, as those terms are defined in Sections 424(e)
and (f), respectively, of the Code.
(b) "BOARD" means the Board of Directors of the Company.
(c) "CODE" means the United States Internal Revenue Code of 1986, as
amended.
(d) "COMMITTEE" means a Committee appointed by the Board in accordance
with subparagraph 3(c) of the Plan.
(e) "COMPANY" means ViroLogic, Inc., a Delaware corporation.
(f) "DIRECTOR" means a member of the Board.
(g) "ELIGIBLE EMPLOYEE" means an Employee who meets the requirements set
forth in the Offering for eligibility to participate in the Offering.
(h) "EMPLOYEE" means any person, including Officers and Directors,
employed by the Company or an Affiliate of the Company. Neither service as a
Director nor payment of a director's fee shall be sufficient to constitute
"employment" by the Company or the Affiliate.
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(i) "EMPLOYEE STOCK PURCHASE PLAN" means a plan that grants rights
intended to be options issued under an "employee stock purchase plan," as that
term is defined in Section 423(b) of the Code.
(j) "EXCHANGE ACT" means the United States Securities Exchange Act of
1934, as amended.
(k) "FAIR MARKET VALUE" means the value of a security, as determined in
good faith by the Board. If the security is listed on any established stock
exchange or traded on the Nasdaq National Market or the Nasdaq SmallCap Market,
then, except as otherwise provided in the Offering, the Fair Market Value of the
security shall be the closing sales price (rounded up where necessary to the
nearest whole cent) for such security (or the closing bid, if no sales were
reported) as quoted on such exchange or market (or the exchange or market with
the greatest volume of trading in the relevant security of the Company) on the
trading day prior to the relevant determination date, as reported in The Wall
Street Journal or such other source as the Board deems reliable.
(l) "NON-EMPLOYEE DIRECTOR" means a Director who either (i) is not a
current Employee or Officer of the Company or its parent or subsidiary, does not
receive compensation (directly or indirectly) from the Company or its parent or
subsidiary for services rendered as a consultant or in any capacity other than
as a Director (except for an amount as to which disclosure would not be required
under Item 404(a) of Regulation S-K promulgated pursuant to the Securities Act
("Regulation S-K")), does not possess an interest in any other transaction as to
which disclosure would be required under Item 404(a) of Regulation S-K, and is
not engaged in a business relationship as to which disclosure would be required
under Item 404(b) of Regulation S-K; or (ii) is otherwise considered a
"non-employee director" for purposes of Rule 16b-3.
(m) "OFFERING" means the grant of Rights to purchase Shares under the
Plan to Eligible Employees.
(n) "OFFERING DATE" means a date selected by the Board for an Offering
to commence.
(o) "OUTSIDE DIRECTOR" means a Director who either (i) is not a current
employee of the Company or an "affiliated corporation" (within the meaning of
the Treasury regulations promulgated under Section 162(m) of the Code), is not a
former employee of the Company or an "affiliated corporation" receiving
compensation for prior services (other than benefits under a tax qualified
pension plan), was not an officer of the Company or an "affiliated corporation"
at any time, and is not currently receiving direct or indirect remuneration from
the Company or an "affiliated corporation" for services in any capacity other
than as a Director, or (ii) is otherwise considered an "outside director" for
purposes of Section 162(m) of the Code.
(p) "PARTICIPANT" means an Eligible Employee who holds an outstanding
Right granted pursuant to the Plan or, if applicable, such other person who
holds an outstanding Right granted under the Plan.
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(q) "PLAN" means this 2000 Employee Stock Purchase Plan.
(r) "PURCHASE DATE" means one or more dates established by the Board
during an Offering on which Rights granted under the Plan shall be exercised and
purchases of Shares carried out in accordance with such Offering.
(s) "RIGHT" means an option to purchase Shares granted pursuant to the
Plan.
(t) "RULE 16b-3" means Rule 16b-3 of the Exchange Act or any successor
to Rule 16b-3 as in effect with respect to the Company at the time discretion is
being exercised regarding the Plan.
(u) "SECURITIES ACT" means the United States Securities Act of 1933, as
amended.
(v) "SHARE" means a share of the common stock of the Company.
3. ADMINISTRATION.
(a) The Board shall administer the Plan unless and until the Board
delegates administration to a Committee, as provided in subparagraph 3(c).
Whether or not the Board has delegated administration, the Board shall have the
final power to determine all questions of policy and expediency that may arise
in the administration of the Plan.
(b) The Board (or the Committee) shall have the power, subject to, and
within the limitations of, the express provisions of the Plan:
(i) To determine when and how Rights to purchase Shares shall be
granted and the provisions of each Offering of such Rights (which need not be
identical).
(ii) To designate from time to time which Affiliates of the
Company shall be eligible to participate in the Plan.
(iii) To construe and interpret the Plan and Rights granted under
it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan, in a manner and to the extent it
shall deem necessary or expedient to make the Plan fully effective.
(iv) To amend the Plan as provided in paragraph 14.
(v) Generally, to exercise such powers and to perform such acts
as it deems necessary or expedient to promote the best interests of the Company
and its Affiliates and to carry out the intent that the Plan be treated as an
Employee Stock Purchase Plan.
(c) The Board may delegate administration of the Plan to a Committee of
the Board composed of two (2) or more members, all of the members of which
Committee may be, in the discretion of the Board, Non-Employee Directors and/or
Outside Directors. If administration is delegated to a Committee, the Committee
shall have, in connection with the administration of the
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Plan, the powers theretofore possessed by the Board, including the power to
delegate to a subcommittee of two (2) or more Outside Directors any of the
administrative powers the Committee is authorized to exercise (and references in
this Plan to the Board shall thereafter be to the Committee or such a
subcommittee), subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board. The
Board may abolish the Committee at any time and revest in the Board the
administration of the Plan.
4. SHARES SUBJECT TO THE PLAN.
(a) Subject to the provisions of paragraph 13 relating to adjustments
upon changes in securities, the Shares that may be sold pursuant to Rights
granted under the Plan shall not exceed in the aggregate five hundred thousand
(500,000) Shares. If any Right granted under the Plan shall for any reason
terminate without having been exercised, the Shares not purchased under such
Right shall again become available for the Plan.
(b) The Shares subject to the Plan may be unissued Shares or Shares that
have been bought on the open market at prevailing market prices or otherwise.
5. GRANT OF RIGHTS; OFFERING.
(a) The Board may from time to time grant or provide for the grant of
Rights to purchase Shares of the Company under the Plan to Eligible Employees in
an Offering on an Offering Date or Dates selected by the Board. Each Offering
shall be in such form and shall contain such terms and conditions as the Board
shall deem appropriate, which shall comply with the requirements of Section
423(b)(5) of the Code that all Employees granted Rights to purchase Shares under
the Plan shall have the same rights and privileges. The terms and conditions of
an Offering shall be incorporated by reference into the Plan and treated as part
of the Plan. The provisions of separate Offerings need not be identical, but
each Offering shall include (through incorporation of the provisions of this
Plan by reference in the document comprising the Offering or otherwise) the
period during which the Offering shall be effective, which period shall not
exceed twenty-seven (27) months beginning with the Offering Date, and the
substance of the provisions contained in paragraphs 6 through 9, inclusive.
(b) If a Participant has more than one Right outstanding under the Plan,
unless he or she otherwise indicates in agreements or notices delivered
hereunder: (i) each agreement or notice delivered by that Participant will be
deemed to apply to all of his or her Rights under the Plan, and (ii) an
earlier-granted Right (or a Right with a lower exercise price, if two Rights
have identical grant dates) will be exercised to the fullest possible extent
before a later-granted Right (or a Right with a higher exercise price if two
Rights have identical grant dates) will be exercised.
6. ELIGIBILITY.
(a) Rights may be granted only to Employees of the Company or, as the
Board may designated as provided in subparagraph 3(b), to Employees of an
Affiliate.
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(i) Except as provided in subparagraph 6(b), an Employee shall
not be eligible to be granted Rights under the Plan unless, on the Offering
Date, such Employee has been in the employ of the Company or the Affiliate, as
the case may be, for such continuous period preceding such grant as the Board
may require in the Offering, but in no event shall the required period of
continuous employment be equal to or greater than two (2) years.
(ii) The Board may provide in an Offering that Employees whose
customary employment is twenty (20) hours or less per week shall not be eligible
to participate.
(iii) The Board may provide in an Offering that Employees whose
customary employment is for not more than five (5) months in any calendar year
shall not be eligible to participate.
(iv) The Board may provide in an Offering that Employees who are
highly compensated Employees within the meaning of Section 423(b)(4)(D) of the
Code shall not be eligible to participate.
(b) The Board may provide that each person who, during the course of an
Offering, first becomes an Eligible Employee will, on a date or dates specified
in the Offering which coincides with the day on which such person becomes an
Eligible Employee or which occurs thereafter, receive a Right under that
Offering, which Right shall thereafter be deemed to be a part of that Offering.
Such Right shall have the same characteristics as any Rights originally granted
under that Offering, as described herein, except that:
(i) the date on which such Right is granted shall be the
"Offering Date" of such Right for all purposes, including determination of the
exercise price of such Right;
(ii) the period of the Offering with respect to such Right shall
begin on its Offering Date and end coincident with the end of such Offering; and
(iii) the Board may provide that if such person first becomes an
Eligible Employee within a specified period of time before the end of the
Offering, he or she will not receive any Right under that Offering.
(c) No Employee shall be eligible for the grant of any Rights under the
Plan if, immediately after any such Rights are granted, such Employee owns stock
possessing five percent (5%) or more of the total combined voting power or value
of all classes of stock of the Company or of any Affiliate. For purposes of this
subparagraph 6(c), the rules of Section 424(d) of the Code shall apply in
determining the stock ownership of any Employee, and stock which such Employee
may purchase under all outstanding rights and options shall be treated as stock
owned by such Employee.
(d) An Eligible Employee may be granted Rights under the Plan only if
such Rights, together with any other Rights granted under all Employee Stock
Purchase Plans of the Company and any Affiliates, as specified by Section
423(b)(8) of the Code, do not permit such Eligible Employee's rights to purchase
Shares of the Company or any Affiliate to accrue at a rate which
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exceeds twenty five thousand dollars ($25,000) of the fair market value of such
Shares (determined at the time such Rights are granted) for each calendar year
in which such Rights are outstanding at any time.
7. RIGHTS; PURCHASE PRICE.
(a) On each Offering Date, each Eligible Employee, pursuant to an
Offering made under the Plan, shall be granted the Right to purchase up to the
number of Shares purchasable either:
(i) with a percentage designated by the Board not exceeding
fifteen percent (15%) of such Employee's Earnings (as defined by the Board in
each Offering) during the period which begins on the Offering Date (or such
later date as the Board determines for a particular Offering) and ends on the
date stated in the Offering, which date shall be no later than the end of the
Offering; or
(ii) with a maximum dollar amount designated by the Board that,
as the Board determines for a particular Offering, (1) shall be withheld, in
whole or in part, from such Employee's Earnings (as defined by the Board in each
Offering) during the period which begins on the Offering Date (or such later
date as the Board determines for a particular Offering) and ends on the date
stated in the Offering, which date shall be no later than the end of the
Offering and/or (2) shall be contributed, in whole or in part, by such Employee
during such period.
(b) The Board shall establish one or more Purchase Dates during an
Offering on which Rights granted under the Plan shall be exercised and purchases
of Shares carried out in accordance with such Offering.
(c) In connection with each Offering made under the Plan, the Board may
specify a maximum amount of Shares that may be purchased by any Participant as
well as a maximum aggregate amount of Shares that may be purchased by all
Participants pursuant to such Offering. In addition, in connection with each
Offering that contains more than one Purchase Date, the Board may specify a
maximum aggregate amount of Shares which may be purchased by all Participants on
any given Purchase Date under the Offering. If the aggregate purchase of Shares
upon exercise of Rights granted under the Offering would exceed any such maximum
aggregate amount, the Board shall make a pro rata allocation of the Shares
available in as nearly a uniform manner as shall be practicable and as it shall
deem to be equitable.
(d) The purchase price of Shares acquired pursuant to Rights granted
under the Plan shall be not less than the lesser of:
(i) an amount equal to eighty-five percent (85%) of the fair
market value of the Shares on the Offering Date; or
(ii) an amount equal to eighty-five percent (85%) of the fair
market value of the Shares on the Purchase Date.
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8. PARTICIPATION; WITHDRAWAL; TERMINATION.
(a) An Eligible Employee may become a Participant in the Plan pursuant
to an Offering by delivering a participation agreement to the Company within the
time specified in the Offering, in such form as the Company provides. Each such
agreement shall authorize payroll deductions of up to the maximum percentage
specified by the Board of such Employee's Earnings during the Offering (as
defined in each Offering). The payroll deductions made for each Participant
shall be credited to a bookkeeping account for such Participant under the Plan
and either may be deposited with the general funds of the Company or may be
deposited in a separate account in the name of, and for the benefit of, such
Participant with a financial institution designated by the Company. To the
extent provided in the Offering, a Participant may reduce (including to zero) or
increase such payroll deductions. To the extent provided in the Offering, a
Participant may begin such payroll deductions after the beginning of the
Offering. A Participant may make additional payments into his or her account
only if specifically provided for in the Offering and only if the Participant
has not already had the maximum permitted amount withheld during the Offering.
(b) At any time during an Offering, a Participant may terminate his or
her payroll deductions under the Plan and withdraw from the Offering by
delivering to the Company a notice of withdrawal in such form as the Company
provides. Such withdrawal may be elected at any time prior to the end of the
Offering except as provided by the Board in the Offering. Upon such withdrawal
from the Offering by a Participant, the Company shall distribute to such
Participant all of his or her accumulated payroll deductions (reduced to the
extent, if any, such deductions have been used to acquire Shares for the
Participant) under the Offering, without interest unless otherwise specified in
the Offering, and such Participant's interest in that Offering shall be
automatically terminated. A Participant's withdrawal from an Offering will have
no effect upon such Participant's eligibility to participate in any other
Offerings under the Plan but such Participant will be required to deliver a new
participation agreement in order to participate in subsequent Offerings under
the Plan.
(c) Rights granted pursuant to any Offering under the Plan shall
terminate immediately upon cessation of any participating Employee's employment
with the Company or a designated Affiliate for any reason (subject to any
post-employment participation period required by law) or other lack of
eligibility. The Company shall distribute to such terminated Employee all of his
or her accumulated payroll deductions (reduced to the extent, if any, such
deductions have been used to acquire Shares for the terminated Employee) under
the Offering, without interest unless otherwise specified in the Offering. If
the accumulated payroll deductions have been deposited with the Company's
general funds, then the distribution shall be made from the general funds of the
Company, without interest. If the accumulated payroll deductions have been
deposited in a separate account with a financial institution as provided in
subparagraph 8(a), then the distribution shall be made from the separate
account, without interest unless otherwise specified in the Offering.
(d) Rights granted under the Plan shall not be transferable by a
Participant otherwise than by will or the laws of descent and distribution, or
by a beneficiary designation as provided
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in paragraph 15 and, otherwise during his or her lifetime, shall be exercisable
only by the person to whom such Rights are granted.
9. EXERCISE.
(a) On each Purchase Date specified therefor in the relevant Offering,
each Participant's accumulated payroll deductions and other additional payments
specifically provided for in the Offering (without any increase for interest)
will be applied to the purchase of Shares up to the maximum amount of Shares
permitted pursuant to the terms of the Plan and the applicable Offering, at the
purchase price specified in the Offering. No fractional Shares shall be issued
upon the exercise of Rights granted under the Plan unless specifically provided
for in the Offering.
(b) Unless otherwise specifically provided in the Offering, the amount,
if any, of accumulated payroll deductions remaining in any Participant's account
after the purchase of Shares that is equal to the amount required to purchase
one or more whole Shares on the final Purchase Date of the Offering shall be
distributed in full to the Participant at the end of the Offering, without
interest. If the accumulated payroll deductions have been deposited with the
Company's general funds, then the distribution shall be made from the general
funds of the Company, without interest. If the accumulated payroll deductions
have been deposited in a separate account with a financial institution as
provided in subparagraph 8(a), then the distribution shall be made from the
separate account, without interest unless otherwise specified in the Offering.
(c) No Rights granted under the Plan may be exercised to any extent
unless the Shares to be issued upon such exercise under the Plan (including
Rights granted thereunder) are covered by an effective registration statement
pursuant to the Securities Act and the Plan is in material compliance with all
applicable state, foreign and other securities and other laws applicable to the
Plan. If on a Purchase Date in any Offering hereunder the Plan is not so
registered or in such compliance, no Rights granted under the Plan or any
Offering shall be exercised on such Purchase Date, and the Purchase Date shall
be delayed until the Plan is subject to such an effective registration statement
and such compliance, except that the Purchase Date shall not be delayed more
than twelve (12) months and the Purchase Date shall in no event be more than
twenty-seven (27) months from the Offering Date. If, on the Purchase Date of any
Offering hereunder, as delayed to the maximum extent permissible, the Plan is
not registered and in such compliance, no Rights granted under the Plan or any
Offering shall be exercised and all payroll deductions accumulated during the
Offering (reduced to the extent, if any, such deductions have been used to
acquire Shares) shall be distributed to the Participants, without interest
unless otherwise specified in the Offering. If the accumulated payroll
deductions have been deposited with the Company's general funds, then the
distribution shall be made from the general funds of the Company, without
interest. If the accumulated payroll deductions have been deposited in a
separate account with a financial institution as provided in subparagraph 8(a),
then the distribution shall be made from the separate account, without interest
unless otherwise specified in the Offering.
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10. COVENANTS OF THE COMPANY.
(a) During the terms of the Rights granted under the Plan, the Company
shall ensure that the amount of Shares required to satisfy such Rights are
available.
(b) The Company shall seek to obtain from each federal, state, foreign
or other regulatory commission or agency having jurisdiction over the Plan such
authority as may be required to issue and sell Shares upon exercise of the
Rights granted under the Plan. If, after reasonable efforts, the Company is
unable to obtain from any such regulatory commission or agency the authority
which counsel for the Company deems necessary for the lawful issuance and sale
of Shares under the Plan, the Company shall be relieved from any liability for
failure to issue and sell Shares upon exercise of such Rights unless and until
such authority is obtained.
11. USE OF PROCEEDS FROM SHARES.
Proceeds from the sale of Shares pursuant to Rights granted under the
Plan shall constitute general funds of the Company.
12. RIGHTS AS A STOCKHOLDER.
A Participant shall not be deemed to be the holder of, or to have any of
the rights of a holder with respect to, Shares subject to Rights granted under
the Plan unless and until the Participant's Shares acquired upon exercise of
Rights under the Plan are recorded in the books of the Company.
13. ADJUSTMENTS UPON CHANGES IN SECURITIES.
(a) If any change is made in the Shares subject to the Plan, or subject
to any Right, without the receipt of consideration by the Company (through
merger, consolidation, reorganization, recapitalization, reincorporation, stock
dividend, dividend in property other than cash, stock split, liquidating
dividend, combination of shares, exchange of shares, change in corporate
structure or other transaction not involving the receipt of consideration by the
Company), the Plan will be appropriately adjusted in the class(es) and maximum
number of Shares subject to the Plan pursuant to subparagraph 4(a), and the
outstanding Rights will be appropriately adjusted in the class(es), number of
Shares and purchase limits of such outstanding Rights. The Board shall make such
adjustments, and its determination shall be final, binding and conclusive. (The
conversion of any convertible securities of the Company shall not be treated as
a transaction that does not involve the receipt of consideration by the
Company.)
(b) In the event of: (i) a dissolution, liquidation, or sale of all or
substantially all of the assets of the Company; (ii) a merger or consolidation
in which the Company is not the surviving corporation; or (iii) a reverse merger
in which the Company is the surviving corporation but the Shares outstanding
immediately preceding the merger are converted by virtue of the merger into
other property, whether in the form of securities, cash or otherwise, then: (1)
any surviving or acquiring corporation shall assume Rights outstanding under the
Plan or shall substitute similar rights (including a right to acquire the same
consideration paid to Stockholders
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in the transaction described in this subparagraph 13(b)) for those outstanding
under the Plan, or (2) in the event any surviving or acquiring corporation
refuses to assume such Rights or to substitute similar rights for those
outstanding under the Plan, then, as determined by the Board in its sole
discretion such Rights may continue in full force and effect or the
Participants' accumulated payroll deductions (exclusive of any accumulated
interest which cannot be applied toward the purchase of Shares under the terms
of the Offering) may be used to purchase Shares immediately prior to the
transaction described above under the ongoing Offering and the Participants'
Rights under the ongoing Offering thereafter terminated.
14. AMENDMENT OF THE PLAN.
(a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in paragraph 13 relating to adjustments upon changes
in securities and except as to minor amendments to benefit the administration of
the Plan, to take account of a change in legislation or to obtain or maintain
favorable tax, exchange control or regulatory treatment for Participants or the
Company or any Affiliate, no amendment shall be effective unless approved by the
stockholders of the Company to the extent stockholder approval is necessary for
the Plan to satisfy the requirements of Section 423 of the Code, Rule 16b-3
under the Exchange Act and any Nasdaq or other securities exchange listing
requirements. Currently under the Code, stockholder approval within twelve (12)
months before or after the adoption of the amendment is required where the
amendment will:
(i) Increase the amount of Shares reserved for Rights under the
Plan;
(ii) Modify the provisions as to eligibility for participation in
the Plan to the extent such modification requires stockholder approval in order
for the Plan to obtain employee stock purchase plan treatment under Section 423
of the Code or to comply with the requirements of Rule 16b-3; or
(iii) Modify the Plan in any other way if such modification
requires stockholder approval in order for the Plan to obtain employee stock
purchase plan treatment under Section 423 of the Code or to comply with the
requirements of Rule 16b-3.
(b) It is expressly contemplated that the Board may amend the Plan in
any respect the Board deems necessary or advisable to provide Employees with the
maximum benefits provided or to be provided under the provisions of the Code and
the regulations promulgated thereunder relating to Employee Stock Purchase Plans
and/or to bring the Plan and/or Rights granted under it into compliance
therewith.
(c) Rights and obligations under any Rights granted before amendment of
the Plan shall not be impaired by any amendment of the Plan, except with the
consent of the person to whom such Rights were granted, or except as necessary
to comply with any laws or governmental regulations, or except as necessary to
ensure that the Plan and/or Rights granted under the Plan comply with the
requirements of Section 423 of the Code.
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15. DESIGNATION OF BENEFICIARY.
(a) A Participant may file a written designation of a beneficiary who is
to receive any Shares and/or cash, if any, from the Participant's account under
the Plan in the event of such Participant's death subsequent to the end of an
Offering but prior to delivery to the Participant of such Shares and cash. In
addition, a Participant may file a written designation of a beneficiary who is
to receive any cash from the Participant's account under the Plan in the event
of such Participant's death during an Offering.
(b) The Participant may change such designation of beneficiary at any
time by written notice. In the event of the death of a Participant and in the
absence of a beneficiary validly designated under the Plan who is living at the
time of such Participant's death, the Company shall deliver such Shares and/or
cash to the executor or administrator of the estate of the Participant, or if no
such executor or administrator has been appointed (to the knowledge of the
Company), the Company, in its sole discretion, may deliver such Shares and/or
cash to the spouse or to any one or more dependents or relatives of the
Participant, or if no spouse, dependent or relative is known to the Company,
then to such other person as the Company may designate.
16. TERMINATION OR SUSPENSION OF THE PLAN.
(a) The Board in its discretion may suspend or terminate the Plan at any
time. Unless sooner terminated, the Plan shall terminate at the time that all of
the Shares subject to the Plan's reserve, as increased and/or adjusted from time
to time, have been issued under the terms of the Plan. No Rights may be granted
under the Plan while the Plan is suspended or after it is terminated.
(b) Rights and obligations under any Rights granted while the Plan is in
effect shall not be impaired by suspension or termination of the Plan, except as
expressly provided in the Plan or with the consent of the person to whom such
Rights were granted, or except as necessary to comply with any laws or
governmental regulation, or except as necessary to ensure that the Plan and/or
Rights granted under the Plan comply with the requirements of Section 423 of the
Code.
17. EFFECTIVE DATE OF PLAN.
The Plan shall become effective as determined by the Board, but no
Rights granted under the Plan shall be exercised unless and until the Plan has
been approved by the stockholders of the Company within twelve (12) months
before or after the date the Plan is adopted by the Board, which date may be
prior to the effective date set by the Board.
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VIROLOGIC, INC.
2000 EMPLOYEE STOCK PURCHASE PLAN
OFFERING
ADOPTED FEBRUARY 21, 2000
1. GRANT OF RIGHTS.
(a) The Board of Directors ("Board") of ViroLogic, Inc., a Delaware
corporation (the "Company"), pursuant to the Company's 2000 Employee Stock
Purchase Plan (the "Plan"), hereby authorizes the grant of Rights to purchase
Shares of the Company to all Eligible Employees (an "Offering"). Defined terms
not explicitly defined in this Offering but defined in the Plan shall have the
same definitions as in the Plan. In the event of any conflict between the
provisions of an Offering and those of the Plan (including interpretations,
amendments, rules and regulations that may from time to time be promulgated and
adopted pursuant to the Plan), the provisions of the Plan shall control.
(b) An "Offering Date" is the first day of an Offering. An Offering may
consist of one purchase period or may be divided into shorter purchase periods
("Purchase Periods"). A "Purchase Date" is the last day of a Purchase Period or
the Offering, as the case may be.
(c) Except as otherwise provided, each Offering hereunder shall be
twenty-four (24) months long and shall be divided into four (4) shorter Purchase
Periods approximately six (6) months in length. Offerings shall be consecutive.
A new Offering shall start the day after the current Offering ends.
(d) The first Offering shall begin on the effective date of the initial
public offering of the Shares and end on January 31, 2002 (the "Initial
Offering"); provided, however, that the Initial Offering cannot exceed
twenty-seven (27) months. The Initial Offering will be divided into four (4)
shorter Purchase Periods, with the initial Purchase Period ending on July 31,
2000, the second Purchase Period ending on January 31, 2001, the third Purchase
Period ending on July 31, 2001 and the fourth Purchase Period ending on January
31, 2002.
(e) Thereafter consecutive 24-month Offerings shall begin on February 1,
2002 and on each subsequent second anniversary of the most recent Offering Date;
provided, however, that if on the first day of a new Purchase Period during the
Offering the fair market value of the Shares is less than it was on the Offering
Date for that Offering, that day shall become the next Offering Date, and the
Offering that would otherwise have continued in effect shall immediately
terminate. Each Offering after the Initial Offering shall end on the day prior
to the second anniversary of its Offering Date unless sooner terminated as
provided above.
(f) Prior to the commencement of any Offering, the Board may change any
or all terms of such Offering and any subsequent Offerings. The granting of
Rights pursuant to each Offering hereunder shall occur on each respective
Offering Date unless, prior to such date (i) the
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Board (or such Committee) determines that such Offering shall not occur, or (ii)
no Shares remain available for issuance under the Plan in connection with the
Offering.
(g) Notwithstanding any other provisions of an Offering, if the terms of
an Offering as previously established by the Board of Directors of the Company
would, as a result of a change to applicable accounting standards, generate a
charge to earnings, such Offering shall terminate effective as of the day prior
to the date such change to accounting standards would otherwise first apply to
the Offering (the "Offering Termination Date"), and such Offering Termination
Date shall be the final Purchase Date of such Offering. A subsequent Offering
shall commence on such date and on such terms as shall be provided by the Board
of Directors of the Company.
2. ELIGIBLE EMPLOYEES.
(a) All employees of the Company and each of its Affiliates incorporated
in the United States shall be granted Rights to purchase Shares under each
Offering on the Offering Date of such Offering, provided that each such employee
otherwise meets the employment requirements of subparagraph 6(a) of the Plan and
has been continuously employed for at least ten (10) days on the Offering Date
of such Offering (an "Eligible Employee"); however, the ten- (10-) day
eligibility requirement shall be waived with respect to the Initial Offering
only.
(b) Notwithstanding the foregoing, the following employees shall not be
Eligible Employees or be granted Rights under an Offering: (i) part-time or
seasonal employees whose customary employment is twenty (20) hours or less per
week or five (5) months or less per calendar year or (ii) 5% stockholders
(including ownership through unexercised options) described in subparagraph 6(c)
of the Plan.
(c) Notwithstanding the foregoing, each person who first becomes an
Eligible Employee during any Offering will, on the next August 1 or February 1
during that Offering, receive a Right under such Offering, which Right shall
thereafter be deemed to be a part of the Offering. Such Right shall have the
same characteristics as any Rights originally granted under the Offering except
that:
(i) the date on which such Right is granted shall be the
"Offering Date" of such Right for all purposes, including determination of the
exercise price of such Right; and
(ii) the Offering for such Right shall begin on its Offering Date
and end coincident with the end of the ongoing Offering.
3. RIGHTS.
(a) Subject to the limitations contained herein and in the Plan, on each
Offering Date each Eligible Employee shall be granted the Right to purchase the
number of Shares purchasable with up to fifteen percent (15%) of such Eligible
Employee's Earnings paid during such Offering after the Eligible Employee first
commences participation; provided, however, that no employee may purchase Shares
on a particular Purchase Date that would result in more than fifteen percent
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<PAGE> 14
(15%) of such employee's Earnings in the period from the Offering Date to such
Purchase Date having been applied to purchase Shares under all ongoing Offerings
under the Plan and all other Company plans intended to qualify as "employee
stock purchase plans" under Section 423 of the Internal Revenue Code of 1986, as
amended (the "Code").
(b) For this Offering, "Earnings" means the total compensation paid to
an employee, including all salary, wages (including amounts elected to be
deferred by the employee, that would otherwise have been paid, under any cash or
deferred arrangement established by the Company), overtime pay, commissions,
bonuses, and other remuneration paid directly to the employee, but excluding
profit sharing, the cost of employee benefits paid for by the Company, education
or tuition reimbursements, imputed income arising under any Company group
insurance or benefit program, traveling expenses, business and moving expense
reimbursements, income received in connection with stock options, contributions
made by the Company under any employee benefit plan, and similar items of
compensation.
(c) Notwithstanding the foregoing, the maximum number of Shares an
Eligible Employee may purchase on any Purchase Date in an Offering shall be such
number of Shares as has a fair market value (determined as of the Offering Date
for such Offering) equal to (x) $25,000 multiplied by the number of calendar
years in which the Right under such Offering has been outstanding at any time,
minus (y) the fair market value of any other Shares (determined as of the
relevant Offering Date with respect to such Shares) which, for purposes of the
limitation of Section 423(b)(8) of the Code, are attributed to any of such
calendar years in which the Right is outstanding. The amount in clause (y) of
the previous sentence shall be determined in accordance with regulations
applicable under Section 423(b)(8) of the Code based on (i) the number of Shares
previously purchased with respect to such calendar years pursuant to such
Offering or any other Offering under the Plan, or pursuant to any other Company
plans intended to qualify as "employee stock purchase plans" under Section 423
of the Code, and (ii) the number of Shares subject to other Rights outstanding
on the Offering Date for such Offering pursuant to the Plan or any other such
Company plan.
(d) The maximum aggregate number of Shares available to be purchased by
all Eligible Employees under an Offering shall be the number of Shares remaining
available under the Plan on the Offering Date. If the aggregate purchase of
Shares upon exercise of Rights granted under the Offering would exceed the
maximum aggregate number of Shares available, the Board shall make a pro rata
allocation of the Shares available in a uniform and equitable manner.
4. PURCHASE PRICE.
(a) The purchase price of the Shares under the Offering shall be the
lesser of eighty-five percent (85%) of the fair market value of the Shares on
the Offering Date or eighty-five percent (85%) of the fair market value of the
Shares on the Purchase Date, in each case rounded up to the nearest whole cent
per Share.
(b) For the Initial Offering, the fair market value of the Shares at the
time when the Offering commences shall be the price per Share at which Shares
are first sold to the public in
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<PAGE> 15
the Company's initial public offering as specified in the final prospectus with
respect to that offering.
5. PARTICIPATION.
(a) An Eligible Employee may elect to participate in an Offering only at
the beginning of the Offering or such later date specified in subparagraph 2(c).
(b) A Participant who is enrolled in an Offering automatically will be
enrolled in the next Offering that commences after the current Offering ends.
(c) An Eligible Employee shall become a Participant in an Offering by
delivering an agreement authorizing payroll deductions. Such deductions must be
in whole percentages, with a minimum percentage of one percent (1%) and a
maximum percentage of fifteen percent (15%) of Earnings. A Participant may not
make additional payments into his or her account. The agreement shall be made on
such enrollment form as the Company provides, and must be delivered to the
Company at least ten (10) days before the Offering Date, or before such later
date specified in subparagraph 2(c), in advance of the date of participation to
be effective, unless a later time for filing the enrollment form is set by the
Board for all Eligible Employees with respect to a given Offering Date. For the
Initial Offering, the time for filing an enrollment form and commencing
participation for individuals who are Eligible Employees on the Offering Date
for the Initial Offering may be after the Offering Date, as determined by the
Company and communicated to such Eligible Employees.
(d) If the agreement authorizing payroll deductions is required to be
delivered to the Company or designated Affiliate a specified number of days
before the Offering Date to be effective, then an employee who becomes eligible
during the required delivery period shall not be considered to be an Eligible
Employee at the beginning of the Offering but may elect to participate during
the Offering as provided in subparagraph 2(c).
6. CHANGING PARTICIPATION LEVEL DURING OFFERING; WITHDRAWAL FROM OFFERING.
(a) A Participant may not increase his or her deductions during the
course of a Purchase Period. A Participant may increase or decrease his or her
deductions prior to the beginning of a new Purchase Period or a new Offering, to
be effective at the beginning of such new Purchase Period or new Offering. A
Participant shall make a change in the his or her participation level by
delivering a notice to the Company in such form as the Company provides and up
to ten (10) days before the start of such new Purchase Period or new Offering
(or such shorter period of time determined by the Company and communicated to
Participants).
(b) A Participant may reduce (including to zero) his or her deductions
once (and only once) during a Purchase Period, effective as soon as
administratively practicable. A Participant shall make a change in the his or
her participation level by delivering a notice to the Company in such form as
the Company provides up to ten (10) days before the end of such Purchase Period
(or such shorter period of time determined by the Company and communicated to
Participants).
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<PAGE> 16
(c) Except as otherwise specifically provided herein, a Participant may
not increase or decrease his or her participation level during the course of an
Offering.
(d) Notwithstanding the foregoing, a Participant may withdraw from an
Offering and receive his or her accumulated payroll deductions from the Offering
(reduced to the extent, if any, such deductions have been used to acquire Shares
for the Participant on any prior Purchase Dates), without interest, or reduce
his or her participation percentage to zero (0), at any time prior to the end of
the Offering, excluding only each ten (10) day period immediately preceding a
Purchase Date (or such shorter period of time determined by the Company and
communicated to Participants) by delivering a withdrawal notice to the Company
in such form as the Company provides.
7. PURCHASES.
Subject to the limitations contained herein, on each Purchase Date, each
Participant's accumulated payroll deductions (without any increase for interest)
shall be applied to the purchase of whole Shares, up to the maximum number of
Shares permitted under the Plan and the Offering.
8. NOTICES AND AGREEMENTS.
Any notices or agreements provided for in an Offering or the Plan shall
be given in writing, in a form provided by the Company, and unless specifically
provided for in the Plan or this Offering shall be deemed effectively given upon
receipt or, in the case of notices and agreements delivered by the Company, five
(5) days after deposit in the United States mail, postage prepaid.
9. EXERCISE CONTINGENT ON STOCKHOLDER APPROVAL.
The Rights granted under an Offering are subject to the approval of the
Plan by the Shareholders as required for the Plan to obtain treatment as a
tax-qualified employee stock purchase plan under Section 423 of the Code.
10. OFFERING SUBJECT TO PLAN.
Each Offering is subject to all the provisions of the Plan, and its
provisions are hereby made a part of the Offering, and is further subject to all
interpretations, amendments, rules and regulations which may from time to time
be promulgated and adopted pursuant to the Plan.
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<PAGE> 1
EXHIBIT 10.1
[***] CONFIDENTIAL TREATMENT REQUESTED UNDER 17 C.F.R. SECTIONS 200.80(b)(4),
200.83 AND 230.406. CONFIDENTIAL PORTIONS HAVE BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
AGREEMENT
This Agreement is made by and between Roche Molecular Systems, Inc.
("RMS"), having an office at 1080 U.S. Highway 202, Branchburg Township,
Somerville, New Jersey 08876-3771 and Virologic, Inc. ("VLI"), South San
Francisco, California, hereafter collectively referred to as "The Parties".
BACKGROUND
A. RMS has the right to grant immunities from suit under certain United
States Patents describing and claiming, inter alia, a nucleic acid
amplification process known as the polymerase chain reaction ("PCR") technology.
B. VLI has attained substantial expertise in developing, validating,
documenting and performing sophisticated in vitro susceptibility/resistance
diagnostic procedures.
C. VLI desires to obtain an immunity from suit from RMS to practice PCR
Technology to perform human in vitro clinical laboratory services, and RMS is
willing to grant such an immunity, on the terms and subject to the conditions
provided exclusively in this Agreement.
NOW, THEREFORE, for and in consideration of the mutual covenants contained
herein, RMS and VLI agree as follows:
1. Definitions
For the purpose of this Agreement, and solely for that purpose, the
terms set forth hereinafter shall be defined as follows:
1.1 The term "Affiliate" of a designated party to this Agreement
shall mean:
a) an organization of which fifty percent (50%) or more of the
voting stock is controlled or owned directly or indirectly
by either party to this Agreement;
b) an organization which directly or indirectly owns or
controls fifty percent (50%) or more of the voting stock of
either party to this Agreement;
c) an organization, the majority ownership of which is directly
or indirectly common to the majority ownership of either
party to this Agreement; and
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d) an organization under (a), (b), or (c) above in which the
amount of said ownership is less than fifty percent (50%)
and that amount is the maximum amount permitted pursuant to
the law governing the ownership of said organization.
It is understood and agreed, however, that the term "AFFILIATE" shall not
include Genentech Inc., a Delaware Corporation.
1.2 "COMBINATION SERVICE" shall mean a LICENSED SERVICE offered in
combination with [***] as part of a package, where the LICENSED SERVICE is not
separately billed.
1.3 "DIAGNOSTIC PRODUCT" shall mean an assemblage of reagents, including
but not limited to reagents packaged in the form of a kit, useful in
performing a LICENSED SERVICE.
1.4 "EFFECTIVE DATE" shall mean the date on which the last signatory to
this Agreement signs the Agreement.
1.5 "LICENSED FIELD" shall mean the field of human in vitro diagnostics
solely for the detection of genetic diseases, genetic pre-disposition to
disease, cancer, tissue transplant typing, Parentage, and microorganisms
associated with infectious diseases.
1.6 "LICENSED SERVICES" shall mean the performance by VLI of an in vitro
diagnostic procedure utilizing PCR TECHNOLOGY to detect the presence, absence
or quantity of a nucleic acid sequence associated with a specific human disease
or condition within the LICENSED FIELD. LICENSED SERVICES include but are not
limited to, any combination of the steps of collecting a sample for analysis,
isolating nucleic acid sequences therein, amplifying one or more desired
sequences, analyzing the amplified material and reporting the results.
1.7 "NET SERVICE REVENUES" shall mean gross invoice price for the
LICENSED SERVICES performed by VLI (or the fair market value for any
nonmonetary consideration which VLI agree to receive in exchange for LICENSED
SERVICES), less the following deductions where they are factually applicable
and are not already reflected in the gross invoice price:
i) discounts allowed and taken, in amounts customary in the
trade (which shall include the difference between the dollar
amount charged by VLI for a LICENSED SERVICE and the
Medicare and/or Medicaid Limits of Allowance and/or
reimbursement limitations of a THIRD PARTY insurance
program); and
[***] CONFIDENTIAL TREATMENT REQUESTED.
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<PAGE> 3
ii) government imposed transportation taxes, sales taxes and
other taxes to the extent they are separately identified on
the invoice; and
iii) actual bad debt, up to 2% of gross invoice price for
LICENSED SERVICES, which bad debt VLI can prove and document
that it was reasonable and diligent in its efforts to
collect payment.
No allowance or deduction shall be made for commissions or collections, by
whatever name known.
It is hereby understood and agreed that LICENSED SERVICES and COMBINATION
SERVICES shall at all times be invoiced, listed and billed by VLI as a separate
item in VLI's invoices, bills and reports to customers. NET SERVICE REVENUES for
determining royalties on a LICENSED SERVICE which is part of a COMBINATION
SERVICE shall be determined by [***] in Attachment I hereto. The [***] specified
in Attachment I for a particular LICENSED SERVICE shall be set my RMS after
consultation with VLI, [***] by the LICENSED SERVICE to the [***] of the
COMBINATION SERVICE as offered by VLI. Attachment I hereto shall be modified as
new COMBINATION SERVICES are identified and new royalty-bearing fractions set.
The NET SERVICE REVENUES of the LICENSED SERVICES that are performed
by VLI for any person, firm or corporation controlling, controlled by, or under
common control with VLI, or enjoying a special course of dealing with VLI,
shall be determined by reference to the NET SERVICE REVENUES which would be
applicable under this Section in an arm's length transaction by VLI to a THIRD
PARTY other than such person, firm or corporation.
1.8 "PARENTAGE" shall mean analysis of human genetic material to
ascertain whether two or more individuals are biologically related, but
specifically excludes analysis of forensic evidence for a sexual assault
investigation.
1.9 "PCR TECHNOLOGY" shall mean polymerase chain reaction technology
covered by United States Patent Nos. B2 4,683,195, B1 4,683,202 and 4,965,188
and any reissue or reexamination patents thereof.
1.10 "THIRD PARTY" shall mean a party other than an AFFILIATE of The
Parties to this Agreement.
2. Grant
2.1 Upon the terms and subject to the conditions of this Agreement,
RMS hereby grants to VLI, and VLI hereby accepts from RMS, a royalty-bearing,
non-exclusive immunity from suit under PCR TECHNOLOGY solely to perform LICENSED
SERVICES within the United States and its possessions and the Commonwealth of
Puerto Rico.
[***] CONFIDENTIAL TREATMENT REQUESTED.
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2.2 PCR Technology hereunder may be practiced solely for the
performance of Licensed Services and for no other purpose whatsoever, and no
other right, immunity or license is granted expressly, impliedly or by estoppel.
2.3 VLI expressly acknowledges and agrees that the immunity from
suit pursuant to this Agreement is personal to VLI alone and VLI shall have no
right to sublicense, assign or otherwise transfer or share its rights under the
foregoing immunity from suit and further agrees that LICENSED SERVICES will be
performed, offered, marketed and sold only by VLI and VLI shall not authorize
any other party, including AFFILIATES, to practice the PCR TECHNOLOGY, nor
shall it practice the PCR TECHNOLOGY in conjunction with any other party.
2.4 For each COMBINATION SERVICE that VLI offers pursuant to this
immunity from suit, VLI agrees that it will notify RMS at least [***] days
before it commences offering said COMBINATION SERVICE. COMBINATION SERVICES
claimed by VLI on royalty reports which have not met the [***] day notice
requirement and for which RMS has not set an appropriate royalty bearing
fraction, shall be royalty bearing at [***] of the package price, less
applicable deductions. As to all other LICENSED SERVICES offered by VLI which
are not part of a COMBINATION SERVICE, VLI agrees to inform RMS of the
availability from VLI of each such LICENSED SERVICE within 30 days after VLI
commences offering the LICENSED SERVICE.
2.5 RMS hereby grants to VLI the right and VLI accepts and agrees to
credit RMS as the source of PCR TECHNOLOGY rights in VLI's promotional
materials and any other materials intended for distribution to THIRD PARTIES as
follows:
"This PCR portion of this test is performed pursuant to a license agreement
with Roche Molecular Systems, Inc."
3. Acknowledgement and Agreement on Diagnostic Products
3.1 VLI acknowledges and agrees that the immunity from suit granted
hereunder is for the performance of LICENSED SERVICES only and does not include
any right to make, have made, import, offer or sell any products, including
devices, PCR reagents, kits or DIAGNOSTIC PRODUCTS. VLI specifically
acknowledges that it does not by virtue of this agreement acquire any rights
under RMS' U.S. Patent Nos. 4,889,818, 5,079,352 or any other polymerase
patent. VLI further acknowledges and agrees that RMS Affiliates are in the
business of providing clinical laboratory testing services and the commercial
sale of diagnostic testing systems and therefore may compete directly with
VLI's business.
4. Royalties, Records and Reports
4.1 Royalties. For the rights and privileges granted under this
Agreement, VLI shall pay to RMS earned royalties equal to [***] percent [***] of
VLI's NET SERVICE REVENUES for each LICENSED SERVICE performed.
[***] CONFIDENTIAL TREATMENT REQUESTED.
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<PAGE> 5
4.2 VLI shall keep full, true and accurate books of account containing all
particulars which may be necessary for the purpose of showing the amount
payable to RMS by way of royalty or by way of any other provision under this
Agreement. Such books and the supporting data shall be open at all reasonable
times, for three (3) years following the end of the calendar year to which they
pertain (and access shall not be denied thereafter, if reasonably available),
to the inspection of RMS or an independent certified public accountant retained
by RMS for the purpose of verifying VLI's royalty statements or VLI's
compliance in other respects with this Agreement. If in dispute, such records
shall be kept until the dispute is settled. The inspection of records shall be
at RMS' sole cost and expense, unless the inspector concludes that royalties
reported by VLI for the period being audited are understated by five percent
(5%) or more from actual royalties, in which case the costs and expenses of
such inspection shall be paid by VLI.
4.3 VLI shall within sixty (60) days after the first day of January and
July of each year deliver to RMS a true and accurate royalty report. Such
report shall cover the preceding six (6) calendar months; and shall be
submitted either i) on the "Summary Royalty Report", a copy of which is
attached hereto as Attachment II, or ii) on a form generated by VLI which
duplicates the format of the Summary Royalty Report; and shall include at least
the following:
a) the name of each LICENSED SERVICE and COMBINATION SERVICE and the
number performed during those six (6) months;
b) compilation of billings thereon and the allowable deductions
therefrom;
c) NET SERVICE REVENUES and the calculation of total royalties
thereon; and
d) the calculation of the net royalty payable to RMS. If no royalties
are due, its shall be so reported.
The correctness and completeness of each such report shall be attested to
in writing by the responsible financial officer of VLI's organization or by
VLI's external auditor or by the chair or other head of VLI's internal audit
committee.
Simultaneously with the delivery of each such report, VLI shall pay to RMS
the royalty due under this Agreement for the period covered by such report. All
payments due RMS hereunder shall be sent together with the royalty report by the
due date to the following address:
Roche Molecular Systems, Inc.
P.O. Box 18139
Newark, New Jersey 07191
or to any address that RMS may advise in writing.
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<PAGE> 6
4.4 All amounts payable hereunder by VLI to RMS shall be
payable in United States currency.
4.5 VLI's obligation to pay royalties pursuant to this
Agreement shall terminate upon a final holding of invalidity or
unenforceability of all of the patents identified in Section 1.9, supra, by a
court of appellate jurisdiction or by a trial court from which no appeal is or
can be taken.
4.6 If VLI shall fail to pay any amount specified under this
Agreement after the due date thereof, the amount owed shall bear interest at the
Citibank NA base lending rate ("prime rate") plus [***] % from the due date
until paid, provided, however, that if this interest rate is held to be
unenforceable for any reason, the interest rate shall be the maximum rate
allowed by law at the time the payment is due.
5. Performance of Licensed Services
5.1 The Parties agree that quality assurance is of utmost
importance in the performance of LICENSED SERVICES. To that end, VLI agrees
that it will:
a) participate in at least one independent proficiency
testing program for each LICENSED SERVICE when such
program(s) becomes available; and
b) comply with all Medicare, Medicaid and/or CLIA standards
for diagnostic testing as well as all other applicable
federal, state and local regulations applicable to human
diagnostic testing.
6. Technology Notification
6.1 With respect to any invention, improvement or discovery
(hereinafter referred to as "Discoveries" in this Article) of VLI made after
entering into this Agreement, resulting from work conducted under this
Agreement and being applicable to PCR, if VLI decides to license that Discovery
to THIRD PARTIES, then VLI agrees to provide to RMS, unless not possible due to
VLI's previous commitments to THIRD PARTIES relating to said Discoveries, a
reasonable opportunity to negotiate a license to use said Discoveries in
PCR-based DIAGNOSTIC PRODUCTS and services. Such Discoveries include, but are
not limited to, improvements of the PCR process or in the performance of
LICENSED SERVICES, modifications to or new methods of performing the LICENSED
SERVICES, including the automation of the PCR process or of the LICENSED
SERVICES.
6.2 Any agreement reached between The Parties as a result
of VLI's notification to RMS of a Discovery pursuant to Section 6.1 hereto
shall be upon terms and conditions negotiated in good faith by The Parties.
[***] CONFIDENTIAL TREATMENT REQUESTED.
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<PAGE> 7
7. Diligence
VLI shall exercise reasonable diligence in developing, testing,
validating, documenting, promoting and selling the LICENSED SERVICES. In the
course of such diligence, VLI shall take appropriate steps including, upon
reasonable written request of RMS, furnish RMS with representative copies of
all promotional material relating to the LICENSED SERVICES.
8. TERM AND TERMINATION
8.1 The immunity from suit granted to VLI herein shall commence on
the EFFECTIVE DATE and terminate on the date of expiration of the last to expire
of the patents included within the PCR TECHNOLOGY, which patent contains at
least one claim covering the performance of LICENSED SERVICES.
8.2 If in the course of performing and offering LICENSED SERVICES,
VLI fails to comply with the quality assurance provisions of Article 5, VLI
shall so notify RMS immediately upon such failure and shall have thirty (30)
days from receipt of such notice to cure all defects of which it is notified.
If VLI does not cure all such defects within the designated thirty (30) days,
RMS may then in its sole discretion terminate this Agreement in its entirety,
or any portion thereof immediately. For the purposes of this Section and this
Agreement, VLI's failure to provide an accurate and correct test result when
participating in an independent proficiency testing program pursuant to Section
5.1 (a), on two consecutive evaluations, shall automatically be deemed a
failure to comply with Article 5 and shall be a material breach of this
Agreement.
8.3 Notwithstanding any other Section of this Agreement, VLI may
terminate this Agreement for any reason on thirty (30) days' written notice to
RMS.
8.4 The decision of a court or administrative body finding RMS
liable for culpable due to VLI's performance of LICENSED SERVICES shall give
RMS the right to terminate this Agreement immediately upon notification to RMS
of said decision.
8.5 The immunity granted hereunder to VLI shall automatically
terminate upon (i) adjudication of VLI as bankrupt or insolvent, or VLI's
admission in writing of its inability to pay its obligations as they mature;
(ii) or an assignment by VLI for the benefit of creditors; (iii) or VLI's
applying for or consenting to the appointment of a receiver, trustee or similar
officer for any substantial part of its property; (iv) such receiver, trustee
or similar officers appointment without the application or consent of VLI, if
such appointment shall continue undischarged for a period of ninety (90) days;
or VLI's instituting (by petition, application, answer, consent or otherwise)
any bankruptcy, insolvency arrangement, or similar proceeding relating to VLI
under the laws of any jurisdiction; (v) or the institution of any such
proceeding (by petition, application or otherwise) against VLI, if such
proceeding shall remain undismissed for a period of ninety (90) days or the
issuance or levy of any judgment, writ, warrant of attachment or execution or
similar process against a substantial part of the property of VLI, if such
judgment, writ, or similar process shall not
7
<PAGE> 8
be released, vacated or fully bonded within ninety (90) days after its issue or
levy; (vi) loss of VLI's federal or state licenses permits or accreditation
necessary for operation of VLI as a health care institution.
8.6 RMS shall have the right to terminate this Agreement by written
notice to VLI upon any change in the ownership or control of VLI or of its
assets. Termination under this Section shall be effective immediately upon
receipt by VLI of RMS' notice of termination. For such purposes, a "change in
ownership or control" shall mean that 30% or more of the voting stock of VLI
become subject to the control of a person or entity, or any related group of
persons or entities acting in concert, which person(s) or entity(ies) did not
control such proportion of voting stock as of the EFFECTIVE DATE of the
Agreement. Analogously, RMS shall have the right to terminate this Agreement
upon any transfer or sale of 30% or more of the assets of VLI to another party.
8.7 BREACH. Upon any breach of or default of a material term under this
Agreement by VLI, RMS may terminate this Agreement upon thirty (30) days'
written notice to VLI. Said notice shall become effective at the end of the
thirty-day (30) period, unless during said period VLI fully cures such breach
or default and notifies RMS of such a cure.
8.8 Upon termination of this Agreement as provided herein, all immunities
and rights granted to VLI hereunder shall revert to or be retained by RMS. To
the extent RMS has LICENSED TECHNOLOGY or know-how of VLI pursuant to Article 6
hereto, those licenses shall remain in force according to their terms.
8.9 VLI's obligations to report to RMS and to pay royalties to RMS as to
the LICENSED SERVICES performed under the Agreement prior to termination or
expiration of the Agreement shall survive such termination or expiration.
9. Confidentiality-Publicity
9.1 Except as otherwise specifically provided in Section 2.5, VLI agrees
to obtain RMS' approval before distributing any written information, including
but not limited to promotional and sales materials, to THIRD PARTIES which
contains references to RMS or this Agreement. RMS' approval shall not be
unreasonably withheld or delayed and, in any event, RMS' decision shall be
rendered within three (3) weeks of receipt of the written information. Once
approved, such materials, or abstracts of such materials, which do not
materially alter the context of the material originally approved may be
reprinted during the term of the Agreement without further approval by RMS
unless RMS has notified VLI in writing of its decision to withdraw permission
for such use.
9.2 Each Party agrees that any financial, legal or business information
or any technical information disclosed to it (the "Receiving Party") by the
other (the "Disclosing Party") in connection with this Agreement shall be
considered confidential and proprietary and the Receiving
8
<PAGE> 9
Party shall not disclose same to any THIRD PARTY and shall hold it in
confidence for a period of five (5) years and will not use it other than as
permitted under this Agreement provided, however, that any information,
know-how or data which is orally disclosed to the Receiving Party shall not be
considered confidential and proprietary unless such oral disclosure is reduced
to writing and given to the Receiving Party in written form within thirty (30)
days after oral disclosure thereof. Such confidential and proprietary
information shall include, without limitation, marketing and sales information,
commercialization plans and strategies, research and development work plans,
and technical information such as patent applications, inventions, trade
secrets, systems, methods, apparatus, designs, tangible material, organisms and
products and derivatives thereof.
9.3 The above obligations of confidentiality shall not be applicable
to the extent:
a. such information is general public knowledge or, after
disclosure hereunder, becomes general or public
knowledge through no fault of the Receiving Party; or
b) such information can be shown by the Receiving Party by
its written records to have been in its possession prior
to receipt thereof hereunder; or
c) such information is received by the Receiving Party from
any THIRD PARTY for use or disclosure by the Receiving
Party without any obligation to the Disclosing Party
provided, however, that information received by the
Receiving Party from any THIRD PARTY funded by the
Disclosing Party (e.g. consultants, subcontractors,
etc.) shall not be released from confidentiality under
this exception; or
d) the disclosure of such information is reasonably needed
for use in connection with performing, offering and
selling LICENSED SERVICES; or
e) the disclosure of such information is required or
desirable to comply with or fulfill governmental
requirements, submissions to governmental bodies, or the
securing of regulatory approvals.
9.4 With the exception of Section 2.5, each party shall, to the
extent reasonably practicable, maintain the confidentiality of the provisions
of this Agreement and shall refrain from making any public announcement or
disclosure of the terms of this Agreement without the prior consent of the
other party, except to the extent a party concludes in good faith that such
disclosure is required under applicable law or regulations, in which case the
other party shall be notified in advance.
9
<PAGE> 10
10. Compliance
In exercising any and all rights and in performing its obligations
hereunder, VLI shall comply fully with any and all applicable laws, regulations
and ordinances and shall obtain and keep in effect licenses, permits and other
governmental approvals, whether at the federal, state or local levels, necessary
or appropriate to carry on its activities hereunder. VLI further agrees to
refrain from any activities that would have an adverse effect on the business
reputation of RMS. RMS will advise VLI of any such activities and VLI will have
thirty (30) days to correct such activity.
11. Assignment
This Agreement shall not be assigned or transfered by VLI (including
without limitation any purported assignment or transfer that would arise from a
sale or transfer of VLI's business) without the express written consent of RMS.
RMS may assign all or any part of its rights and obligations under this
Agreement at any time without the consent of VLI. VLI agrees to execute such
further acknowledgements or other instruments as RMS may reasonably request in
connection with such assignment.
12. Negation of Warranties and Indemnity
12.1 Nothing in this Agreement shall be construed as:
a) a warranty or representation by RMS as to the validity or
scope of any PCR TECHNOLOGY;
b) a warranty or representation that the practice of the PCR
TECHNOLOGY is or will be free from infringement of patents
of THIRD PARTIES;
c) an obligation to bring or prosecute actions or suits against
THIRD PARTIES for infringement;
d) except as expressly set forth herein, conferring the right
to use in advertising, publicity or otherwise any trademark,
trade name, or names, or any contraction, abbreviation,
simulation or adaptation thereof, of RMS;
e) conferring by implication, estoppel or otherwise any
license, right or immunity under any patents or patent
applications of RMS other than those specified in PCR
TECHNOLOGY, regardless of whether
10
<PAGE> 11
such patents and patent applications are dominant or
subordinate to those in PCR TECHNOLOGY;
f) an obligation to furnish any know-how not provided in PCR
TECHNOLOGY; or
g) creating any agency, partnership, joint venture or similar
relationship between RMS and VLI.
12.2 RMS MAKES NO EXPRESS OR IMPLIED WARRANTIES OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE
12.3 VLI acknowledges that the technology licensed hereby is newly
developed, and agrees to take all reasonable precautions to prevent death,
personal injury, illness and property damage from the use of such technology.
VLI shall assume full responsibility for its use of the PCR TECHNOLOGY and shall
defend, indemnify and hold RMS harmless from and against all liability,
demands, damages, expenses (including attorneys' fees) and losses for death,
personal injury, illness, property damage or any other injury or damage,
including any damages or expenses arising in connection with state or federal
regulatory action (collectively "Damages"), resulting from the use by VLI,
including its officers, directors, agents and employees, of the PCR TECHNOLOGY
except, and to the extent that such Damages are caused by the negligence or
willful misconduct of RMS.
13. GENERAL
13.1 This Agreement constitutes the entire agreement between The
Parties as to the subject matter hereof, and all prior negotiations,
representations, agreements and understandings are merged into, extinguished by
and completely expressed by it. This Agreement may be modified or amended only
by a writing executed by authorized officers of each of The Parties.
13.2 Any notice required or permitted to be given by this Agreement
shall be given by postpaid, first class, registered or certified mail, or by
courier, properly addressed to the other party at the respective address as
shown below:
If to RMS: Roche Molecular Systems, Inc.
340 Kingsland Street
Nutley, New Jersey 07110
Attn: Corporate Secretary
with a copy to: Roche Molecular Systems, Inc.
1145 Atlantic Avenue, Suite 100
Alameda, California 94501
Attn: Licensing Manager
11
<PAGE> 12
If to VLI: ViroLogic, Inc.
270 East Grand Avenue
South San Francisco, CA 94080
Attn: Martin H. Goldstein, President & COO
Either party may change its address by providing notice to the other
party. Unless otherwise specified herein, any notice given in accordance with
the foregoing shall be deemed given within four (4) full business days after
the day of mailing, or one full day after the date of delivery to the courier,
as the case will be.
13.3 Governing Law and Venue. This Agreement and its effect are subject to
and shall be construed and enforced in accordance with the law of the State of
New Jersey, U.S.A., except as to any issue which by the law of New Jersey
depends upon the validity, scope or enforceability of any patent within the PCR
TECHNOLOGY, which issue shall be determined in accordance with the applicable
patent laws of the United States. The Parties agree that the exclusive
jurisdiction and venue for any dispute or controversy arising from this
Agreement shall be in the United States District Court for the District of New
Jersey if federal jurisdiction exists, and if no federal jurisdiction exists,
then in the Superior Court of New Jersey.
13.4 Arbitration. Notwithstanding the provisions of Section 13.3 above, any
dispute concerning solely the determination of facts such as, but not limited
to, (i) the value of a COMBINATION SERVICE and a LICENSED SERVICE pursuant to
Section 1.7; (ii) a determination of royalty rate payments owed pursuant to
Section 4.1; (iii) compliance with quality assurance pursuant to Article 5; or
(iv) good faith compliance with Article 6; and which dispute does not involve a
question of law, shall be settled by final and binding arbitration at a mutually
convenient location in the State of New Jersey pursuant to the commercial
arbitration rules of the American Arbitration Association, in accordance with
the following procedural process:
a) The arbitration tribunal shall consist of three arbitrators. In
the request for arbitration and the answer thereto, each party
shall nominate one arbitrator and the two arbitrators so named
will then jointly appoint the third arbitrator as chairman of the
arbitration tribunal.
b) The decision of the arbitration tribunal shall be final and
judgment upon such decision may be entered in any competent court
for juridical acceptance of such an award and order of
enforcement. Each party hereby submits itself to the jurisdiction
of the courts of the place of arbitration, but only for the entry
of judgment with respect to the decision of the arbitrators
hereunder.
12
<PAGE> 13
13.5 Nothing in this Agreement shall be construed so as to require
the commission of any act contrary to law, and wherever there is any conflict
between any provision of this Agreement or concerning the legal right of The
Parties to enter into this contract and any statute, law, ordinance or treaty,
the latter shall prevail, but in such event the affected provisions of the
Agreement shall be curtailed and limited only to the extent necessary to bring
it within the applicable legal requirements.
13.6 If any provision of this Agreement is held to be unenforceable
for any reason, it shall be adjusted rather than voided, if possible, in order
to achieve the intent of the parties to the extent possible. In any event, all
other provisions of this Agreement shall be deemed valid and enforceable to the
full extent possible.
IN WITNESS WHEREOF, The Parties hereto have set their hands and seals and
duly executed this Agreement on the date(s) indicated below, to be effective on
EFFECTIVE DATE as defined herein.
ROCHE MOLECULAR SYSTEMS, INC. VIROLOGIC, INC.
By: /s/ KATHY ORDONEZ By: /s/ MARTIN H. GOLDSTEIN
-------------------------------- --------------------------------
Name: Kathy Ordonez Name: Martin H. Goldstein
Title: President Title: President & CEO
Date: July 21, 1997 Date: Aug. 4, 1997
------------------------------ ------------------------------
Apprv'd As To Form
LAW DEPT.
By [initials]
----------------
13
<PAGE> 14
ATTACHMENT I
COMBINATION SERVICES
<TABLE>
<CAPTION>
PERCENT OF NET SERVICE
REVENUES FOR COMBINATION
SERVICES WHICH IS
ATTRIBUTABLE TO LICENSED
LICENSED SERVICES SERVICES
- ----------------- ------------------------
<S> <C>
Drug Susceptibility and Resistance Test [***]
</TABLE>
[TO BE DETERMINED]
[***] CONFIDENTIAL TREATMENT REQUESTED.
<PAGE> 15
ATTACHMENT II
SUMMARY ROYALTY REPORT
for the Period _________ to __________
Licensee: Virologic, Inc. Field of Use: In Vitro Human Diagnostic Services
Effective Date: Royalty Rate: 18%
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
AMOUNT NUMBER OF COMPILATION COMBINATION
BILLED PER Lic. SERVICES OF DEDUCTION SERVICE % NEW SERVICE EARNED
LICENSED SERVICE Lic. SERVICE PERFORMED BILLINGS ALLOWED (FROM ATT. I) REVENUES ROYALTY
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------
ROYALTY PAYMENT DUE
--------------------------------------------------------------------------------
</TABLE>
* Please attach, to this form, documentation or supplemental data for
"Deductions Allowed."
** Combination Service %'s must be previously agreed upon. To confirm that a
Combination Service % has been established or to propose this status, please
contact Roche Licensing Dept. @ (510) 814-2984.
CHECK HERE IF THERE WERE NO LICENSED SERVICES PERFORMED FOR THIS REPORT
PERIOD: ____
I hereby certify the information set forth above is correct and complete with
respect to the amounts due under the applicable license agreement.
By:____________________________ Title: _____________________ Date: _____________
(authorized signature)
Name (please print):__________________________________
________________________________________________________________________________
Mail completed form to: Roche Molecular Systems, Inc., P.O. Box 18139, Newark,
New Jersey 07191
<PAGE> 16
RIDER CONCERNING SUPPLEMENTAL PATENT RIGHTS TO
DIAGNOSTIC SERVICES AGREEMENT
The purpose of this rider is to set forth the agreement of Virologic, Inc.
("VLI") and Roche Molecular Systems, Inc. ("RMS") concerning the supplemental
rights to additional patents relating to PCR technology which RMS offers and
the parties agree to add the rights granted to VLI by the Agreement between the
parties, dated ________________ (the "Diagnostic Services Agreement").
1. It is understood by the parties that RMS may, from time to time, come into
possession or control of additional patents or claims of patents relating
to PCR technology rights to which RMS may decide to offer to add to the
Diagnostic Services Agreement and which VLI may desire to accept.
Accordingly, appended hereto as APPENDIX A is a list of such additional
patents or claims of patents as RMS is currently offering to which VLI, by
its authorized representative, has indicated its acceptance thereof in
accordance with the rights of use and all other pertinent obligations,
restrictions and limitations as set forth in the Diagnostic Services
Agreement.
2. APPENDIX A may be amended by mutual agreement of the parties in writing so
as to add additional patent rights being offered by RMS. Accordingly, a new
APPENDIX A signed and dated by both parties shall supersede any prior
APPENDIX A and shall become a part of this rider.
3. It is expressly understood and agreed by the parties that the grant of
additional patent rights herein does not in any way otherwise modify the
Diagnostic Services Agreement and that all provisions of that Agreement
shall remain in full force and effect as originally set forth therein. The
term of the Diagnostic Services Agreement shall control the enjoyment of
rights hereunder and is not extended by the rights granted hereby nor shall
there be any additional royalty obligation to RMS beyond that set forth in
said Agreement.
4. In consideration of the further rights being granted hereunder, VLI agrees
to remain in good faith compliance with the applicable terms of the
Diagnostic Services Agreement, including reporting and payment of royalties
and the limitation on use of PCR technology strictly for the performance of
licensed services and not to make products.
5. In the event that VLI's obligation to pay royalties under the Diagnostic
Services Agreement for its rights to use the PCR technology shall cease for
any reason, whether by termination, expiry, invalidation or otherwise, then
the parties agree that this rider shall become null and void and the rights
granted hereunder terminated without notice and the parties shall be free
to negotiate a new agreement with respect to the patent rights listed on
APPENDIX A.
Accepted and Agreed,
ROCHE MOLECULAR SYSTEMS, INC. VIROLOGIC, INC.
By: /s/ KATHY ORDONEZ By: /s/ MARTIN H. GOLDSTEIN
-------------------------------- --------------------------------
Kathy Ordonez Martin H. Goldstein
Title: President Title: President & CEO
Date: July 21, 1997 Date: Aug. 4, 1997
------------------------------ ------------------------------
Apprv'd As To Form
LAW DEPT.
By: [initials]
-----------
<PAGE> 17
APPENDIX A TO RIDER
Additional Patents
U.S. Patent Number 5,008,182
U.S. Patent Number 5,176,995
U.S. Patent Number 5,219,727
U.S. Patent Number 5,110,920
ROCHE MOLECULAR SYSTEMS, INC. VIROLOGIC, INC.
By: /s/ KATHY ORDONEZ By: /s/ MARTIN H. GOLDSTEIN
------------------------- -------------------------
Name: Kathy Ordonez Name: Martin H. Goldstein
Title: President Title: President and CFO
Date: July 21, 1997 Date: Aug. 4, 1997
----------------------- -----------------------
Apprv'd As To Form
LAW DEPT.
By [INITIALS]
-------------
<PAGE> 1
EXHIBIT 10.2
BASIC LEASE INFORMATION
LEASE DATE May 25, 1999
TENANT: VIROLOGIC, INC., a California corporation
TENANT'S ADDRESS: Until the Term Commencement Date:
270 East Grand Avenue
South San Francisco, CA 94080
After the Term Commencement Date:
345 Oyster Point Boulevard
South San Francisco, CA 94080
LANDLORD: Oyster Point Tech Center LLC, a Delaware Limited
Liability Company
LANDLORD'S ADDRESS: c/o Riggs & Company
808-17th Street NW
Washington DC 20006
Attn: Mr. Patrick O. Mayberry
Phone: (202) 835-4965
Fax: (202) 835-6887
with copy to:
Trammell Crow NW, Inc.
1241 East Hillsdale Blvd., St. 200
Foster City, CA 94404
Phone: (650) 578-8100
Fax: (650) 345-2506
PROJECT: A three (3) building project totaling
approximately 145,446 square feet to be
constructed on approximately 7.56 acres of land
to be known as 345-349 Oyster Point Blvd., South
San Francisco, California 94080 which legal
description is contained herein in Exhibit A-1.
BUILDING: That approximately 40,316 square foot two story
building to be constructed as part of the Project
and to be known as 346 Oyster Point Boulevard,
South San Francisco, California 94080, as
approximately depicted on the site plan attached
as Exhibit A-2.
PREMISES: The Building to be known as 345 Oyster Point
Boulevard, South San Francisco, California 94080
as shown herein in Exhibit A-3.
PERMITTED USE: Office, laboratory and warehouse, and other
related legal uses subject to Landlord's approval
which shall not be unreasonably withheld.
PARKING DENSITY: 3.3 non-designated spaces per 1000 square feet of
rentable area.
ESTIMATED TERM COMMENCEMENT March 1, 2000
DATE:
LENGTH OF TERM: One Hundred Twenty (120) months
RENT:
Base Rent Months of Term Rent Per Square Foot Monthly Rent
-------------- -------------------- ------------
Months 1-24 $1.74 psf per month $70,150
Months 25-48 $1.85 psf per month $74,585
Months 49-72 $1.98 psf per month $79,019
Months 73-96 $2.08 psf per month $83,857
Months 97-120 $2.20 psf per month $88,695
Estimated First Year Basic $.40 psf per month, estimated at $16,126/mo.
Operating Cost
SECURITY DEPOSIT: $86,276
TENANT'S PROPORTIONATE SHARE: Subject to change, but based on the rentable
square feet of the Premises divided by the total
rentable square feet of the Building and the
Project, respectively, estimated as follows:
Of Building: 100%
Of Project 27.72%
BROKER: Cress Partners, LLC
Trammell Crow NW, Inc.
The foregoing Basic Lease Information is incorporated into and made a part of
this Lease. Defined terms in the Lease shall have the meanings ascribed to them
in the Basic Lease Information unless otherwise stated. Each reference in this
Lease to any of the Basic Lease Information shall mean the respective
information above and shall be construed to incorporate all of the terms
provided under the particular Lease paragraph pertaining to such information.
In the event of any conflict between the Basic Lease Information and the Lease,
the latter shall control. The term "days" as used in this Lease means "calendar
days" unless the specific term "business days" is used.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Basic Lease Information............................................... (i)
Table of Contents..................................................... (ii)
1. Premises.............................................................. 1
2. Term.................................................................. 1
3. Possession............................................................ 1
4. Use................................................................... 1
5. Rules and Regulations................................................. 3
6. Rent.................................................................. 3
7. Basic Operating Cost.................................................. 3
8. Insurance and Indemnification......................................... 5
9. Waiver of Subrogation................................................. 6
10. Landlord's Repairs.................................................... 6
11. Tenant's Repairs...................................................... 7
12. Alterations........................................................... 7
13. Signs................................................................. 7
14. Inspection/Posting Notices............................................ 7
15. Utilities............................................................. 8
16. Subordination......................................................... 8
17. Financial Statements.................................................. 8
18. Estoppel Certificate.................................................. 8
19. Security Deposit...................................................... 9
20. Tenant's Remedies..................................................... 9
21. Assignment and Subletting............................................. 9
22. Authority of Parties.................................................. 10
23. Condemnation.......................................................... 10
24. Casualty Damage....................................................... 11
25. Holding Over.......................................................... 12
26. Default............................................................... 12
27. Liens................................................................. 13
28. Transfers By Landlord................................................. 13
29. Right of Landlord to Perform Tenant's Covenants....................... 13
30. Waiver................................................................ 13
31. Notices............................................................... 14
32. Attorneys' Fees....................................................... 14
33. Successors and Assigns................................................ 14
34. Force Majeure......................................................... 14
35. Brokerage Commission.................................................. 14
36. Miscellaneous......................................................... 14
37. Additional Provisions................................................. 15
Signatures................................................................. 17
</TABLE>
<PAGE> 3
EXHIBITS:
<TABLE>
<CAPTION>
<S> <C>
Exhibit A-1....................................................Legal Description
Exhibit A-2............................................................Site Plan
Exhibit A-3.......................................................Phase III Plan
Exhibit B-1.....................................Initial Improvements of Premises
Exhibit B-2..................................Interior Improvement Specifications
Exhibit B-3................................Moveable Equipment and Trade Fixtures
Exhibit C.........................................Initial Project Specifications
Exhibit D............................................Tenant Estoppel Certificate
Exhibit E..........................Rules and Regulations for Tenants' Contractor
Exhibit F.....................................Disclosed Hazardous Materials List
Exhibit G................................Agreement Regarding Shell Modifications
</TABLE>
<PAGE> 4
LEASE
THIS LEASE is made as of this 25th day of May, 1999, by and between Oyster Point
Tech Center LLC, a Delaware limited liability company, (hereinafter called
"Landlord") and ViroLogic, Inc., a California corporation (hereinafter called
"Tenant").
PREMISES
1. Landlord hereby leases to Tenant, and Tenant leases from Landlord, the
Premises, for the Term, at the rental, and upon all of the terms and
conditions set forth in this Lease. The Premises is comprised of the building
which is commonly known and designated as 345 Oyster Point Boulevard, South
San Francisco, CA (sometimes referred to herein as the "Building") and is
depicted on Exhibit A-3. The Premises comprises one hundred percent (100%) of
the rentable area of the Building. The Building is part of the Project. The
Building is crosshatched on Exhibit A-2. Landlord shall, at its sole cost and
expense, construct the Building shell, parking lot, exterior common areas,
and landscaping approximately in the manner depicted on Exhibit C hereto
("Initial Project Specifications"). The Initial Project Specifications shall
include, without limitation, the Building shell, roof, all exterior windows
and doors, fire sprinklers at the roof line, and utilities and services to
the Building exterior. Upon Landlord's delivery of Early Possession (as
provided in Section 3 hereof), Tenant shall perform Tenant's Work (as defined
in Exhibit B-1 hereto) for the Premises. Tenant's Work shall be performed in
the manner described in Exhibit B-1 hereto.
TERM
2. The Term of this Lease ("Term") shall commence on the term commencement date
("Term Commencement Date") and continue in full force and effect for the
number of months specified as the Length of Term in the Basic Lease
Information or until this Lease is terminated as otherwise provided herein.
If the Term Commencement Date is a date other than the first day of the
calendar month, the Term shall be the number of months of the Length of Term
in addition to the remainder of the calendar month following the Term
Commencement Date. The Term Commencement Date shall be the date of
Substantial Completion of Tenant's Work as provided in Exhibit B-1 hereto
(which is estimated to be March 1, 2000) but in no event later than May 1,
2000 (the "Outside Term Commencement Date"); provided, however, that the
Outside Term Commencement Date may be adjusted as provided in Section 3
below. Within ten (10) days after requested by Landlord, Landlord and Tenant
shall execute an amendment to this Lease stating and confirming the Term
Commencement Date and Tenant's acceptance of the Premises.
POSSESSION
3. Landlord shall permit Tenant, or Tenant's agents, to enter the Premises
("Early Possession") immediately after the concrete floor for the second deck
of the Building has been poured for the purpose of performing Tenant's Work
and installing Tenant's equipment, Fixtures, Trade Fixtures and furniture. If
Landlord is unable for any reason other than Tenant Delay or Force Majeure to
deliver to Tenant Early Possession of the Premises on or before November 29,
1999, the Outside Term Commencement Date shall be extended one (1) day for
each day elapsing after November 29, 1999 to, but not including, the date on
which Landlord delivers to Tenant Early Possession of the Premises; provided,
however, that the number of such elapsed days shall be reduced by one (1) day
for each day of Tenant Delay and one (1) day for each day of delay (not to
exceed, however, forty-five (45) days) caused by a Force Majeure. If Landlord
is unable by May 15, 2000 for any reason other than Tenant Delay or Force
Majeure (subject, in the case of Force Majeure to the forty-five (45) day
limit stated in the immediately preceding sentence) to deliver to Tenant
Early Possession, Tenant may by written notice to Landlord given not later
than May 25, 2000, terminate this Lease in which case this Lease shall
terminate upon Landlord's receipt of such notice and Landlord shall promptly
refund to Tenant the first month's Base Rent and Security Deposit and cancel
the Letter of Credit. For purposes of this Section 3 only "Tenant Delay"
shall mean (i) any default by Tenant under this Lease, including, but not
limited to any failure to pay when due any monetary sum due hereunder; (ii)
any failure by Tenant to deliver any required insurance, or other document or
instrument required hereunder; (iii) any failure by Tenant to respond within
the time required hereunder to any request by Landlord for information or
approval required hereunder; (iv) any construction delay caused by Tenant's
request for changes in the Initial Project specifications or other
modifications to the Building shell unless such changes were a result of an
error or omission in the Initial Project Specifications which was caused by
Landlord or its agents and is not related to Tenant's particular proposed use
of the Premises; or (v) any construction delay caused by interference with
the performance of Landlord's Work caused by Tenant or Tenant's agents.
Landlord shall deliver, and Tenant shall accept delivery and take immediate
possession of, the Premises on the Term Commencement Date. The terms
"Fixture" or "Trade Fixture" as used herein shall be defined as anything
attached in any manner to Landlord's property, except that equipment shall
not be deemed a Fixture merely because of the manner in which such equipment
is connected to the electrical supply of the Building. All portable,
unattached items are Tenant's property. Tenant and Landlord agree that Tenant
does not own any Trade Fixtures in the Premises except those items listed in
Exhibit B-3 or otherwise agreed to in a separate writing between Landlord and
Tenant. Landlord owns all remaining Trade Fixtures. In connection with
Tenant's Early Possession, from and after the date on which Tenant or its
agent first enters the Premises therefor, all of the terms and conditions of
this Lease (including, but not limited to, insurance and indemnity
provisions) shall be applicable to Tenant's occupancy save and except for the
requirement to pay Base Rent and Basic Operating Costs.
USE
4. A. GENERAL. Tenant shall use the Premises for the Permitted Use and for no
other use or purpose. Tenant shall control Tenant's employees, agents,
customers, visitors, invitees, licensees, contractors, assignees and
subtenants (collectively, "Tenant's Parties") in such a manner that Tenant
and Tenant's Parties cumulatively do not exceed the Parking Density at any
time. Tenant and Tenant's Parties shall have the nonexclusive right to use,
in common with other parties occupying the Building or the Project, the
parking areas and driveways of the Project subject to such rules and
regulations as Landlord may from time to time prescribe.
B. LIMITATIONS. Tenant shall not permit any odors, smoke, dust, gas, substances,
noise or vibrations to emanate from the Premises, nor take any action which
would constitute a nuisance or would disturb, obstruct or endanger any other
tenants of the Building or the Project or interfere with their use of their
respective premises. Storage outside the Premises of materials, vehicles or
any other items is prohibited. Tenant shall not use or allow the Premises to
be used for any improper or unlawful purpose, nor shall Tenant cause or
maintain or permit any nuisance in, on or about the Premises or the Project.
Tenant shall not commit or suffer
1
<PAGE> 5
the commission of any waste in, on or about the Premises or the Project. Tenant
shall not allow any sale by auction upon the Premises or the Project, or place
any loads upon the floors, walls or ceilings which endanger the structure, or
place any harmful liquids in the drainage system of the Building or the
Project. No waste, materials or refuse shall be dumped upon or permitted to
remain outside the Premises except in trash containers placed inside exterior
enclosures designated for that purpose by Landlord. Landlord shall not be
responsible to Tenant for the non-compliance by any other tenant or occupant of
the Building or the Project with any of the above-referenced rules or any other
terms or provisions of such tenant's or occupant's lease or other contract.
C. COMPLIANCE WITH REGULATIONS. By entering the Premises, Tenant accepts the
Premises in the condition existing as of the date of such entry, subject to
Landlord's representations and warranties set forth in this Lease and subject
to all existing or future applicable municipal, state and federal and other
governmental statues, regulations, laws and ordinances, including zoning
ordinances and regulations governing and relating to the use, occupancy and
possession of the Premises and the use, storage, generation and disposal of
Hazardous Materials (hereinafter defined) in, or and under the Premises
(collectively "Regulations"). Except for matters which occurred prior to the
Term Commencement Date and were not caused directly or indirectly by Tenant or
by any of Tenant's Parties, Tenant shall, at Tenant's sole expense, strictly
comply with all Regulations now in force or which may hereafter be in force
relating to the Premises and the use of the Premises and/or Tenant's and
Tenant's Parties' use, storage, generation of Hazardous Materials in, on and
under the Premises. Tenant shall at its sole cost and expense obtain any and
all licenses or permits necessary for Tenant's use of the Premises. Tenant
shall promptly comply with the requirements of any board of fire underwriters
or other similar body now or hereafter constituted. Tenant shall not do or
permit anything to be done in, on, or about the Premises or bring or keep
anything which will in any way increase the rate of any insurance upon the
Premises, the Building or the Project, or upon any contents therein or cause a
cancellation of said insurance or otherwise affect said insurance in any
manner. Tenant shall indemnify, defend, protect and hold Landlord harmless from
and against any loss, cost, expense, damage, attorneys' fees or liability
arising out of the failure of Tenant to comply with any Regulation or comply
with the requirements as set forth herein. Notwithstanding the foregoing or
anything to the contrary contained in this Lease, Tenant shall not be
responsible for compliance with any laws, codes, ordinances or other
governmental directives where such compliance is caused by Landlord's failure
to cause the Building Shell to be constructed in compliance with all then
applicable laws. Landlord warrants that on the Commencement Date the Building
Shell shall comply with all laws, codes, ordinances, and other governmental
requirements applicable to the Premises and/or the Project as of the date the
building permit was issued.
D. HAZARDOUS MATERIALS. Tenant shall not cause, or allow any of Tenant's
Parties to cause, any Hazardous Materials to be generated, stored, used,
treated, removed, transported, handled and disposed of on or about the Premises,
the Building or the Project without Landlord's prior written approval, provided
that, Tenant shall be permitted to use the Disclosed Hazardous Materials in the
ordinary course of this business subject to the conditions and requirements of
this Lease. Landlord's conditional authorization of the Disclosed Hazardous
Materials shall be strictly limited to the types and quantities described in
Exhibit F, and shall not be construed as an authorization for Tenant to
generate, store, use, treat, remove, transport, handle or dispose of any
additional quantities of Disclosed Hazardous Materials or any other Hazardous
Materials in, on, about or under the Premises, Building or the Project. Tenant
acknowledges that any change in the types or quantities or Disclosed Hazardous
Materials described in Exhibit F, or any material change in the means and
methods of generating, storing, treating, removing, transporting, handling or
disposing of such Disclosed Hazardous Materials, shall require the prior written
approval of Landlord in each instance. Tenant represents and warrants to
Landlord that (a) prior to its use of Hazardous Materials on the Premises, it
will have received or obtained issuance of, and will maintain in effect, all
permits, approvals, licenses, or other authorizations necessary for Tenant's
activities with respect to the Disclosed Hazardous Materials, and (b) Tenant has
not been cited, fined, or otherwise found to be in violation of any governmental
requirement or fire, safety and insurance requirements or regulations applicable
to any Disclosed Hazardous Materials or any other Hazardous Materials in any
other leased premises. At least once during each twelve (12) month of the Lease
Term, Tenant shall provide Landlord with an inventory list describing the
minimum and maximum quantities of each of the Disclosed Hazardous Materials
generated, stored, used, treated, removed, transported, handled and disposed of
on or about the Premises, the Building or the Project the succeeding twelve (12)
months, and a copy of its Hazardous Materials Management Plan ("HHMP") in the
form submitted by Tenant to the fire department. Tenant agrees to notify
Landlord immediately if Tenant receives notification or otherwise becomes aware
of: (a) any threatened or actual release, spill or discharge of any Disclosed
Hazardous Materials in, on, about or under the Premises, the Building or the
Project, or (b) any threatened or actual lien, action, or proceeding or notice
that any Disclosed Hazardous Materials or any other Hazardous Materials is not
being generated, stored, used, treated, removed, transported, placed,
manufactured, handled, or disposed of in strict compliance with any and all
governmental requirements and regulations or applicable fire, safety or
insurance requirements and regulations. If Tenant or any of Tenant's Parties is
partially or wholly responsible or potentially responsible for such condition,
situation, lien, action or notice, Tenant's notice to Landlord shall include a
statement as to the actions Tenant proposes to take in response to such
condition, situation, lien, action or notice. As used in this Lease, "Hazardous
Materials" shall include, but not be limited to, hazardous, toxic and
radioactive materials and those substances defined as "hazardous substances,"
"hazardous materials," "hazardous wastes," "toxic substances," or other similar
designations in any federal, state, or local law, regulation, or ordinance.
Landlord shall have the right at all reasonable times to inspect the Premises
and to conduct tests and investigations to determine whether Tenant is in
compliance with the foregoing provisions, the costs of all such inspections,
tests and investigations to be borne by Tenant. Tenant shall indemnify, defend
(by counsel selected by Landlord), protect and hold Landlord harmless from and
against all liabilities, losses, costs and expenses, demands, causes of action,
claims or judgments directly or indirectly arising out of the use, generation,
storage or disposal of Hazardous Materials by Tenant or any of Tenant's Parties,
which indemnity shall include, without limitation, attorneys' and consultants'
fees, the cost of any required or necessary repair, cleanup or detoxification,
and the preparation of any closure or other required plans, whether such action
is required or necessary prior to or following the termination of this Lease.
Neither the written consent by Landlord to the use, generation, storage or
disposal of Hazardous Materials nor the strict compliance by Tenant with all
laws pertaining to Hazardous Materials shall excuse Tenant from Tenant's
obligation of indemnification pursuant to this Paragraph 4.D. Tenant's
obligations pursuant to the foregoing indemnity shall survive the termination of
this Lease. Notwithstanding anything to the contrary in this Lease, Landlord
warrants that on the Commencement Date to the best of Landlord's knowledge the
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Premises and the Project, and the land and groundwater thereunder, are free
of contamination in excess of allowable limits by any Hazardous Materials
introduced by Landlord or its employees, officers, or directors or, except
for substances and materials within allowable limits used in the ordinary
course of construction by Landlord's contractors. In the event of any
breach of the foregoing warranty, Landlord shall promptly rectify the same
as its sole cost and expense and shall indemnify, defend, and hold Tenant
harmless from and against any actual damages, liability, suits, losses,
claims, actions, costs or expenses (including attorneys' and consultants'
fees and costs) suffered by Tenant in connection with any such breach.
RULES AND REGULATIONS
5. Tenant shall faithfully observe and comply with any rules and regulations
Landlord may from time to time prescribe in writing for the purpose of
maintaining the proper care, cleanliness, safety, traffic flow and general
order of the Premises, the Building, or the Project. Tenant shall cause
Tenant's Parties to comply with all such rules and regulations. Landlord
shall not be responsible to Tenant for the non-compliance by any other
tenant or occupant of the Building or the Project with any of the rules and
regulations.
RENT
6. A. BASE RENT. Base Rent for the Premises shall be calculated on the basis
of the rentable square feet of the Premises at the rates specified in the
Basic Lease Information. Rentable square feet shall include all areas
inside the Building as determined by Landlord's architect. Tenant's
obligation to pay Base Rent for the Premises shall commence on the Term
Commencement Date. Upon completion of Landlord's Work (as defined in
Exhibit B-1 hereto), Landlord's architect shall certify to Landlord the
rentable square feet of the Premises, measured from the outside of exterior
walls, but including areas below the "dripline" in the exterior entrances
and exits and including all areas within the Building such as, but not
limited to, utility rooms and shafts for mechanical equipment. Landlord's
architect shall also certify the rentable square feet of the Project,
Landlord's architect's certification of rentable square feet for the
Premises, the Building and the Project shall be binding upon both Landlord
and Tenant for all purposes under this Lease. Landlord and Tenant currently
estimate that the rentable square feet of the Premises and the Base Rent
for the Premises will be as stated in the Basic Lease Information. Upon
receipt of the architect's certification of rentable square feet, the
actual Base Rent shall be determined and, if requested by Landlord,
Landlord and Tenant shall enter into an amendment by this Lease which
states the actual Base Rent as so determined. Upon determination of the
actual Base Rent for the Premises, Landlord and Tenant shall adjust, if
necessary, the Base Rent deposited by Tenant for the first full month of
the Term as provided in Paragraph 6.B. below.
B. PAYMENTS. Tenant shall pay to Landlord, without demand throughout the
Term, Base Rent as specified in the Basic Lease Information and finally
determined as provided in Paragraph 6.A., payable in monthly installments
in advance on or before the first day of each calendar month, in lawful
money of the United States, without deduction or offset whatsoever, at the
address specified in the Basic Lease Information or to such other place as
Landlord may from time to time designate in writing. Base Rent and
Estimated Basic Operating Costs as defined in Paragraph 7.A. for the first
full month of the Term (based upon the estimated rentable area as
hereinabove provided) shall be paid by Tenant upon Tenant's execution of
this Lease. If the obligation for payment of Base Rent commences on other
than the first day of a month, then Base Rent (calculated at the rate
applicable to the second full month of the Term) for the partial month
shall be prorated on the basis of the actual number of days in the month.
C. ADDITIONAL RENT. All monies other than Base Rent required to be paid by
Tenant hereunder, including, but not limited to, the interest and late
charges described in Paragraph 26.D., any monies spent by Landlord pursuant
to Paragraph 29., and Tenant's Proportionate Share of Basic Operating
Costs, as specified in Paragraph 7. of this Lease, shall be considered
additional rent ("Additional Rent"). "Rent" shall mean Base Rent and
Additional Rent.
BASIC OPERATING COST
7. A. BASIC OPERATING COST. In addition to the Base Rent required to be paid
hereunder, Tenant shall pay as Additional Rent, Basic Operating Costs in
the manner set forth below. The Basic Operating Costs shall be calculated
on the basis of Landlord's architect's certification of the rentable square
feet of the Building and the Project. The certification by Landlord's
architect of the rentable square feet of the Building and the Project shall
be conclusive and binding upon both Landlord and Tenant for all purposes of
this Lease. Tenant's obligation to pay Basic Operating Costs with respect
to the Building and the Project shall commence on the Term Commencement
Date. Landlord shall account for each item of Basic Operating Costs
attributable to the Building and the Project, in a commercially reasonable
and customary manner, and unless provided to the contrary in this Lease,
Tenant shall pay the Basic Operating Costs, as set forth in the Basic Lease
Information. "Basic Operating Costs" shall mean all commercially reasonable
and customary expenses and costs of every kind and nature which Landlord
shall pay or become obligated to pay because of or in connection with the
management, maintenance, preservation and operation of the Building and the
Project (determined in accordance with generally accepted accounting
principles, consistently applied) including but not limited to the
following:
(1) TAXES. All real property taxes, possessory interest rates, business or
license taxes or fees, service payments in lieu of such taxes or fees,
annual or periodic license or use fees, excise, transit charges, housing
fund assessments, open space charges, assessments, levies, fees or charges
general and special, ordinary and extraordinary, unforeseen as well as
foreseen, of any kind (including fees "in-lieu" of any such tax or
assessment) which are assessed, levied, charged, confirmed, or imposed by
any public authority upon the Project, its operations or the Rent (or any
portion or component thereof) (all of the foregoing being hereinafter
collectively referred to as "real property taxes"), or any tax imposed in
substitution, partially or totally, of any tax previously included within
the definition of real property taxes, or any additional tax the nature of
which was previously included within the definition of real property taxes,
except (a) inheritance or estate taxes imposed upon or assessed against the
Project, or any part thereof or interest therein, and (b) taxes computed
upon the basis of net income of Landlord or the owner of any interest
therein, except as otherwise provided in the following sentence. Basic
Operating Costs shall also include any taxes, assessments, or any other
fees imposed by any public authority upon or measured by the monthly rental
or other charges payable hereunder, including, without limitation, any
gross income tax or excise tax levied by the local governmental authority
in which the Project is located, the federal government, or any other
governmental body with respect to receipt of such rental, or upon, with
respect to or by reason of the development, possession, leasing, operation,
management, maintenance, alteration, repair, use or occupancy by Tenant of
the Premises or any portion thereof, or upon this transaction or any
document to which Tenant is a party creating or transferring an interest or
an estate in the Premises. In the event that it shall not be lawful
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for Tenant to reimburse Landlord for all or any part of such taxes, the Base
Rent payable to Landlord under this Lease shall be revised to net to Landlord
the same net rental after imposition of any such taxes on Landlord as would
have been payable to Landlord prior to the payment of any such taxes.
(2) INSURANCE. All insurance premiums and costs, including but not limited to,
any deductible amounts, premiums and costs of insurance incurred by Landlord,
as more fully set forth in Paragraph 8.A. herein.
(3) REPAIRS AND IMPROVEMENTS. The cost of all repairs, replacements and general
maintenance for the Premises, the Building and the Project (except for those
repairs expressly made the financial responsibility of Landlord pursuant to the
terms of this Lease, repairs to the extent paid for by proceeds of insurance or
by Tenant or other third parties, and alterations attributable solely to
tenants of the Project other than Tenant). Such repairs, replacements, and
general maintenance shall include the cost of any capital improvements made to
or capital assets acquired for the Project or the Building after the Term
Commencement Date which reduce any other Basic Operating Cost but only to the
extent of such reduction as reasonably determined by Landlord, are reasonably
necessary for the health and safety of the occupants of the Project, or are
made to the Building by Landlord after the date of this Lease and are required
under any governmental law or regulation, such costs or allocable portions
thereof to be amortized over the useful life thereof, together with interest on
the unamortized balance at the "prime rate" charged at the time such
improvements or capital assets are constructed or acquired by Wells Fargo Bank,
N.A. (San Francisco) plus two (2) percentage points, but in no event more than
the maximum rate permitted by law.
(4) SERVICES. To the extent such expenses are not the obligation of Tenant
under other provisions of this Lease, all expenses relating to maintenance,
janitorial and service agreements and services, and costs of supplies and
equipment used in operating and maintaining the Building and the Project and
the equipment therein and the adjacent sidewalks, driveways, parking and
service areas, including, without limitation, alarm service, window cleaning,
elevator maintenance, the Building exterior maintenance and Project landscaping.
(5) UTILITIES. To the extent such expenses are not the obligation of Tenant
under other provisions of this Lease, the cost of all utilities which benefit
all or a portion of the Building or the Project.
(6) MANAGEMENT FEE. A management and accounting cost recovery fee equal to
three (3%) percent of the sum of Base Rent and Basic Operating Cost.
(7) LEGAL AND ACCOUNTING. Reasonable legal and accounting expenses relating to
the Project, including the cost of audits by certified public accountants.
In the event that the Building is not fully occupied during any fiscal year of
the Term as determined by Landlord, an adjustment shall be made in computing
the Basic Operating Costs for such year so that Tenant pays an equitable
portion of all variable items of Basic Operating Costs, as reasonably
determined by Landlord; provided, however, that in no event shall Landlord be
entitled to collect in excess of one hundred (100%) percent of the total Basic
Operating Costs from all of the tenants in the Building including Tenant.
Basic Operating Costs shall not include the following: specific costs incurred
for the account of, separately billed to and paid by specific tenants; the cost
of redecorating or special cleaning or similar services to individual tenant
spaces, not provided on a regular basis to other tenants of the Building; wages
or salaries paid to executive personnel higher than the property management
level of Landlord not providing full-time service at the Building; the cost of
any new item (not replacement or upgrading of an existing item) which, by
standard accounting principles, should be capitalized (except as provided
above); any charge for depreciation or interest paid or incurred by Landlord;
leasing commissions, finders fees and all other leasing expenses incurred in
procuring tenants in the Building; any costs incurred in the ownership of the
Building, as opposed to the operation and maintenance of the Building,
including Landlord's income taxes, excess profit taxes, franchise taxes or
similar taxes on Landlord's business; preparation of income tax returns;
corporation, partnership or other business form organization expenses;
franchise taxes, filing fees; or other such expenses; or any costs incurred in
cleaning up any environment hazard or condition in violation of any
environmental law (except to the extent caused by Tenant); legal fees for the
negotiation or enforcement of leases; expenses in connection with services or
other benefits of a type which are not Building standard and which are provided
to a single tenant of the Project; any items to the extent such items are
required to be reimbursed to Landlord by Tenant (other than through Tenant's
Additional Rent), or by other tenants or occupants of the Building or by third
parties; the cost of constructing tenant improvements or installations for
any tenant in the Project, including any relocation costs; brokerage
commissions, origination fees, points, mortgage recording taxes, title charges
and other costs or fees incurred in connection with any financing or
refinancing or transfer of the Building and/or any portion of the Project;
attorneys' fees and disbursements, incurred in connection with the leasing of
space in the project (including without limitation the enforcement of any
lease or the surrender, termination or modification of any lease of space in
the Project); advertising and promotional expenses, brochures with respect to
the Project; cost of repairs or replacements occasioned by fire, windstorm or
other casualty, which are paid by insurance or reimbursed by governmental
authorities in eminent domain; overhead and profit increment paid to
subsidiaries or affiliates of Landlord for services on or to the Project, to the
extent that the costs of such services exceed market-based costs for such
services rendered by unaffiliated persons or entities of similar skill,
competence and experience; penalties, fines, legal expense, or late payment
interest incurred by Landlord due to violation by Landlord or Landlord's
agents, contractors or employees, of either the payment terms and conditions of
any lease or service contract covering space in the Project or Landlord's
obligations as owner of the Building (such as late payment penalties and
interest on real estate taxes, late payment of utility bills), except to the
extent caused by Tenant's failure to timely pay or perform pursuant to this
Lease; any compensation paid to clerks, attendants or other persons in any
commercial concession operated by Landlord in the Project from which Landlord
receives any form of income whatsoever, whether or not Landlord actually makes
a profit from such concession; or costs incurred in connection with correcting
latent defects in any portion of the Building and/or Project or remediating
Hazardous Materials contamination in the Building and/or Project, or in
repairing or replacing Building and/or Project equipment, where such repair or
replacement results from original defects in design, manufacture or
installation rather than from ordinary wear and tear or use. Notwithstanding
anything herein to the contrary, in any instance wherein Landlord, in
Landlord's sole discretion, deems Tenant to be
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responsible for any amounts greater than Tenant's Proportionate Share,
Landlord shall have the right to allocate costs in any manner Landlord
reasonably deems appropriate.
B. PAYMENT OF ESTIMATED BASIC OPERATING COST. "Estimated Basic Operating
Costs" for any particular year shall mean Landlord's estimate of the Basic
Operating Cost for such fiscal year made prior to commencement of such
fiscal year as hereinafter provided. Landlord shall have the right from
time to time to revise its fiscal year and interim accounting periods so
long as the periods as so revised are reconciled with prior periods in
accordance with generally accepted accounting principles applied in a
consistent manner. During the last month of each fiscal year during the
Term, or as soon thereafter as practicable, Landlord shall give Tenant
written notice of the Estimated Basic Operating Costs for the ensuing
fiscal year. Tenant shall pay Tenant's Proportionate Share of the
Estimated Basic Operating Cost with installments of Base Rent for the
fiscal year to which the Estimated Basic Operating Cost applies in monthly
installments on the first day of each calendar month during such year, in
advance. If at any time during the course of the fiscal year, Landlord
determines that Basic Operating Cost is projected to vary from the then
Estimated Basic Operating Cost by more than ten (10%) percent, Landlord
may, by written notice to Tenant, revise the Estimated Basic Operating Cost
for the balance of such fiscal year, and Tenant's monthly installments for
the remainder of such year shall be adjusted so that by the end of such
fiscal year Tenant has paid to Landlord Tenant's Proportionate Share of
the revised Estimated Basic Operating Cost for such year. Upon execution
of this Lease, Tenant shall pay to Landlord the Estimated Basic Operating
Cost for the Premises (calculated on the estimated rentable square feet)
for the first full month of the Term. Upon final determination of the
rentable square feet, Landlord and Tenant shall adjust such estimated
payment.
C. COMPUTATION OF BASIC OPERATING COST ADJUSTMENT. "Basic Operating Cost
Adjustment" shall mean the difference between Estimated Basic Operating
Cost and Basic Operating Cost for any fiscal year determined as
hereinafter provided. Within one hundred twenty (120) days after the end
of each fiscal year, as determined by Landlord, or as soon thereafter as
practicable, Landlord shall deliver to Tenant a statement of Basic
Operating Cost for the fiscal year just ended, accompanied by a
computation of Basic Operating Cost Adjustment. If such statement shows
that Tenant's payment based upon Estimated Basic Operating Cost is less
than Tenant's Proportionate Share of Basic Operating Cost, then Tenant
shall pay to Landlord the difference within thirty (30) days after receipt
of such statement. If such statement shows that Tenant's payments of
Estimated Basic Operating Cost exceed Tenant's Proportionate Share of
Basic Operating Cost, then (provided that Tenant is not in Default under
this Lease) Landlord shall credit the difference against the Estimated
Basic Operating Cost payment next due. If this Lease has been terminated
or the Term hereof has expired prior to the date of such statement, then
the Basic Operating Cost Adjustment shall be paid by the appropriate party
within thirty (30) days after the date of delivery of the statement and
this obligation shall survive termination of the Lease. Should this Lease
commence or terminate at any time other than the first day of the fiscal
year, Tenant's Proportionate Share of the Basic Operating Cost adjustment
shall be prorated by reference to the exact number of calendar days during
such fiscal year that this Lease is in effect.
D. NET LEASE. This shall be a net Lease and Base Rent shall be paid to
Landlord net of all costs and expenses, except as specifically provided to
the contrary in this Lease. The provisions for payment of Basic Operating
Cost and the Basic Operating Cost Adjustment are intended to pass on to
Tenant and reimburse Landlord for all costs and expenses of the nature
described in Paragraph 7.A. incurred in connection with the management,
maintenance, preservation and operation of the Building or the Project and
such additional facilities now and in subsequent years as may be reasonably
determined by Landlord to be necessary to the Building or the Project.
E. TENANT AUDIT. In the event that Tenant shall dispute the amount set
forth in any statement provided by Landlord under Paragraph 7.B. or 7.C.
above, Tenant shall have the right, not later than sixty (60) days
following the receipt of such statement and upon the condition that Tenant
shall first deposit with Landlord the full amount in dispute within sixty
(60) days of receipt of such statement, to cause Landlord's books and
records with respect to Basic Operating Cost for such fiscal year to be
audited by certified public accountants selected by Tenant and subject to
Landlord's reasonable right of approval. The Basic Operating Cost
Adjustment shall be appropriately adjusted on the basis of such audit. If
such audit discloses a liability for a refund in excess of ten (10%)
percent of Tenant's Proportionate Share of the Basic Operating Cost
Adjustment previously reported, the cost of such audit shall be borne by
Landlord; otherwise the cost of such audit shall be paid by Tenant. If
Tenant shall not request an audit in accordance with the provisions of this
Paragraph 7.E. within sixty (60) days after receipt of Landlord's statement
provided pursuant to Paragraph 7.B. or 7.C., such statement shall be final
and binding for all purposes hereof.
INSURANCE AND INDEMNIFICATION
8. A. LANDLORD'S INSURANCE. Landlord agrees to maintain insurance insuring
the Building against fire, lightning, vandalism and malicious mischief
(including, if Landlord elects, "All Risk" coverage, earthquake and/or
flood insurance), in an amount of not less than one hundred (100%) percent
of the current replacement cost thereof, except where commercially
unreasonable, with deductibles and the form and endorsements of such
coverage as selected by Landlord. Such insurance may also include, at
Landlord's option, insurance against loss of Base Rent and Additional
Rent, in an amount equal to the amount of Base Rent and Additional Rent
payable by Tenant for a period of at least twelve (12) months commencing on
the date of loss. Such insurance shall be for the sole benefit of Landlord
and under Landlord's sole control. Landlord shall not be obligated to
insure any furniture, equipment, machinery, goods or supplies which Tenant
may keep or maintain in the Premises, or any leasehold improvements,
additions or alterations within the Premises. Landlord may also carry such
other insurance as Landlord may deem prudent or advisable, including,
without limitation, liability insurance in such amounts and on such terms
as Landlord shall determine.
B. TENANT'S INSURANCE.
(1) PROPERTY INSURANCE. Tenant shall procure at Tenant's sole cost and
expense and keep in effect from the date of this Lease and at all times
until the end of the Term, insurance on all personal property, and Fixtures
of Tenant and all improvements made by or for Tenant to the Premises,
insuring such property for the full replacement value of such property.
(2) LIABILITY INSURANCE. Tenant shall procure at Tenant's sole cost and
expense and keep in effect from the date of this Lease and at all times
until the end of the Term either Comprehensive General Liability Insurance
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or Commercial General Liability Insurance applying to the use and occupancy
to the of the Premises and the Building, and any part of either, and any
areas adjacent thereto, and the business operated by Tenant, or by any
other occupant on the Premises. Such insurance shall include Broad Form
Contractual Liability insurance coverage insuring all of Tenant's indemnity
obligations under this Lease. Such coverage shall have a minimum combined
single limit of liability of at least two million dollars ($2,000,000.00),
and a general aggregate limit of five million dollars ($5,000,000.00). All
such policies shall be written to apply to all bodily injury, property
damage or loss, personal injury and other covered loss, however occasioned,
occurring during the policy term, shall be endorsed to add Landlord, Riggs
Bank N.A., as trustee of Multi-Employer Trust, the Multi-Employer Trust,
Kennedy Associates Real Estate Counsel, Inc., and the officers, agents and
employees of each of the foregoing entities, and any party holding an
interest to which this Lease may be subordinated as an additional insured,
and shall provide that such coverage shall be primary and that any
insurance maintained by Landlord shall be excess insurance only. Such
coverage shall also contain endorsements: (i) deleting any employee
exclusion on personal injury coverage; (ii) including employees as
additional insureds; (iii) deleting any liquor liability exclusion; and
(iv) providing for coverage of employer's automobile non-ownership
liability. All such insurance shall provide for severability of interests;
shall provide that an act or omission of one of the named insureds shall
not reduce or avoid coverage to the other named insureds; and shall afford
coverage for all claims based on acts, omissions, injury and damage, which
claims occurred or arose (or the onset of which occurred or arose) in whole
or in part during the policy period. Said coverage shall be written on an
"occurrence" basis, if available. If an "occurrence" basis form is not
available, Tenant must purchase "tail" coverage for the most number of
years available, and tenant must also purchase "tail" coverage if the
retroactive date of an "occurrence" basis form is changed so as to leave a
gap in coverage for occurrences that might have occurred in prior years. If
a "claims made" policy is ever used, the policy must be endorsed so that
Landlord is given the right to purchase "tail" coverage should Tenant for
any reason not do so or if the policy is to be canceled for nonpayment of
premium.
(3) GENERAL INSURANCE REQUIREMENTS. All coverages described in this Paragraph
8.B. shall be endorsed to provide Landlord with thirty (30) days' notice of
cancellation or change in terms. If at any time during the Term the amount
or coverage of insurance which Tenant is required to carry under this
Paragraph 8.B. is, in Landlord's reasonable judgment, materially less than
the amount or type of insurance coverage typically carried by owners or
tenants of properties located in the general area in which the Premises are
located which are similar to and operated for similar purposes as the
Premises, Landlord shall have the right to require Tenant to increase the
amount or change the types of insurance coverage required under this
Paragraph 8.B. All insurance policies required to be carried under this
Lease shall be written by companies rated A+XII or better in "Best's
Insurance Guide" and authorized to do business in California. Any
deductible amounts under any insurance policies required hereunder shall be
subject to Landlord's prior written approval. In any event deductible
amounts shall not exceed one thousand dollars ($1,000.00). Tenant shall
deliver to Landlord on or before the Term Commencement Date, and thereafter
at least thirty (30) days before the expiration dates of the expiring
policies, certified copies of Tenant's insurance policies, or a certificate
evidencing the same issued by the insurer thereunder, showing that all
premiums have been paid for the full policy period; and, in the event
Tenant shall fail to procure such insurance, or to deliver such policies or
certificates, Landlord may, at Landlord's option and in addition to
Landlord's other remedies in the event of a Default by Tenant hereunder,
procure the same for the account of Tenant, and the cost thereof shall be
paid to Landlord as Additional Rent.
C. INDEMNIFICATION. Landlord shall not be liable to Tenant for any loss or
damage to person or property caused by theft, fire, acts of God, acts of a
public enemy, riot, strike, insurrection, war, court order, requisition or
order of governmental body or authority or for any damage or inconvenience
which may arise through repair or alteration of any part of the Building or
the Project or failure to make any such repair, except as expressly
otherwise provided in Paragraph 10. Tenant shall indemnify, defend by
counsel acceptable to Landlord, protect and hold Landlord harmless from and
against any and all liabilities, losses, costs, damages. Injuries or
expenses, including reasonable attorneys' fees and court costs, arising out
of or related to: (1) claims of injury to or death of persons or damage to
property occurring or resulting directly or indirectly from the use or
occupancy of the Premises, or from activities of Tenant, Tenant's Parties
or anyone in or about the Premises or Project, or from any cause
whatsoever; (2) claims for work or labor performed, or for materials or
supplies furnished to or at the request of Tenant in connection with
performance of any work done for the account of Tenant within the Premises
or Project; and (3) claims arising from any breach or Default on the part
of Tenant in the performance of any covenant contained in this Lease. The
foregoing indemnity shall not be applicable to claims arising from the
gross negligence or willful misconduct of Landlord. The provisions of this
Paragraph shall survive the expiration or termination of this Lease with
respect to any claims or liability occurring prior to such expiration or
termination.
WAIVER OF SUBROGATION
9. To the extent permitted by law and without affecting the coverage provided
by insurance to be maintained hereunder, Landlord and Tenant each waive any
right to recover against the other for; (a) damages for injury to or death
of persons; (b) damages to property; (c) damages to the Premises or any
part thereof, and (d) claims arising by reason of the foregoing due to
hazards covered by insurance to the extent of proceeds recovered therefrom.
This provision is intended to waive fully, and for the benefit of each
party, any rights and/or claims which might give rise to a right of
subrogation in favor of any insurance carrier. The coverage obtained by
each party pursuant to this Lease shall include, without limitation, a
waiver of subrogation by the carrier which conforms to the provisions of
this Paragraph.
LANDLORD'S REPAIRS
10. Landlord shall at Landlord's expense maintain the structural soundness of
the roof, the foundations and exterior walls of the Building in good
repair, reasonable wear and tear excepted; provided that, Landlord shall
not be responsible for the cost of any repairs resulting from damage,
destruction or deterioration which is caused by Tenant, Tenant's Parties,
or by an act or event which is not fully insured. The term "exterior walls"
as used herein shall not include windows, glass or plate glass, doors,
special store fronts or office entries. Landlord shall perform on behalf of
Tenant and other tenants of the Project, as an item of Basic Operating
Cost, the exterior maintenance of the Building, the Project, and public and
common areas of the Project, including but not limited to the roof, pest
extermination, the landscaped areas, parking areas, driveways, the truck
staging areas, fire sprinkler systems, sanitary and storm sewer lines,
utility services, electric and telephone equipment servicing the
Building(s), exterior lighting, and anything which affects the operation
and exterior appearance of the Project, which determination shall be at
Landlord's sole discretion. Except for the expenses directly involving the
items specifically described in the first sentence of this Paragraph 10.,
Tenant
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shall reimburse Landlord for all such costs in accordance with Paragraph
7. Any damage caused by or repairs necessitated by any act of Tenant or
Tenant's Parties may be repaired by Landlord at Landlord's option and at
Tenant's expense. Tenant shall immediately give Landlord written notice
of any defect or need of repairs after which Landlord shall have a
reasonable opportunity to repair same. Landlord's liability with respect
to any defects, repairs, or maintenance for which Landlord is
responsible under any of the provisions of this Lease shall be limited
to the cost of such repairs or maintenance unless caused by Landlord's
gross negligence or willful misconduct.
TENANT'S REPAIRS
11. Tenant shall at Tenant's expense throughout the Term of this Lease
maintain all parts of the Premises in a good, clean and secure condition
and promptly make all necessary repairs and replacements, including but
not limited to all windows, glass, doors, walls and wall finishes, floor
covering, heating, ventilating and air conditioning systems, truck
doors, dock bumpers, dock plates and levelers, plumbing work and
Fixtures, roof (exclusive of structural beams), downspouts, electrical
and lighting systems, and fire sprinklers. Tenant shall at Tenant's
expense also perform regular removal of trash and debris. Tenant shall,
at Tenant's own expense, enter into a regularly scheduled preventive
maintenance/service contract with a maintenance contractor for servicing
all hot water, heating and air conditioning systems and equipment within
or serving the Premises. The maintenance contractor and the contract
must be approved by Landlord which approval shall not be unreasonably
withheld or delayed. The service contract must include all services
suggested by the equipment manufacturer within the operation/maintenance
manual and must become effective and a copy thereof delivered to
Landlord within thirty (30) days after the Term Commencement Date.
ALTERATIONS
12. Tenant shall not make, or allow to be made, any Alterations or physical
additions in, about or to the Premises without obtaining the prior
written consent of Landlord, which consent shall not be unreasonably
withheld with respect to proposed alterations and additions which: (a)
comply with all applicable laws, ordinances, rules and regulations; (b)
are in Landlord's opinion, compatible with the Project and its
mechanical, plumbing, electrical, heating/ventilation/air conditioning
systems, (c) are constructed utilizing Union Labor as set forth in
Section 2.4. of Exhibit B-1; (d) will not interfere with the use and
occupancy of any other portion of the Project by any other tenant or its
invitees; (e) are performed promptly and in a workmanlike manner; (f)
the Project remains lien free as a result of the construction; and (g)
are constructed using all new materials. Notwithstanding the foregoing,
Tenant may, without the prior consent of Landlord, perform alterations
which do not in the aggregate cost more than (A) in the case of clinical
laboratories, $200,000 per annum, and (B) in all other cases, $50,000
per annum provided that (i) Tenant gives Landlord not less than thirty
(30) days prior written notice thereof containing a description of the
work to be performed and the estimated cost thereof, and (ii) the work
to be performed does not impair the structural integrity of the
Building, is not visible from the exterior of the Building, and does not
involve or affect any life safety or Building systems, and (iii) the
work to be performed complies in all respects with the requirements of
subsections (a), (c), (d), (e), (f) and (g) of this Section 12. The term
"Alteration" as used herein is defined as alterations, additions,
substitutions, installations, changes and improvements, but excludes
minor decorations. Specifically, but without limiting the generality of
the foregoing, Landlord shall have the right of written consent for all
plans and specifications for the proposed Alterations or additions,
construction means and methods, all appropriate permits and licenses,
any contractor or subcontractor to be employed on the work of Alteration
or additions, and the time for performance of such work. Tenant shall
also supply to Landlord any documents and information reasonably
requested by Landlord in connection with Landlord's consideration of a
request for approval hereunder. Tenant shall reimburse Landlord for all
costs which Landlord may reasonably incur in connection with granting
approval to Tenant for any such Alterations and additions, including any
costs or expenses which Landlord may reasonably incur in electing to
have outside architects and engineers review said plans and
specifications. All such Alterations, physical additions or improvements
shall remain the property of Tenant until termination of this Lease, at
which time they shall be and become the property of Landlord if Landlord
so elects; provided, however, that Landlord may, at Landlord's option,
(provided that, at the time Landlord grants its consent to such
Alterations, Landlord notifies Tenant in writing that removal will be
required), require that Tenant, at Tenant's expense, remove any or all
Alterations, additions, improvements and partitions made by Tenant and
restore the Premises by the termination of this Lease, whether by lapse
of time, or otherwise, to their condition existing prior to the
construction of any such alterations, additions, partitions or leasehold
improvements. All such removals and restoration shall be accomplished in
a good and workmanlike manner so as not to cause any damage to the
Premises or Project whatsoever. If Tenant fails to so remove such
alterations, additions, improvements and partitions or Tenant's Trade
Fixtures or furniture, Landlord may keep and use them or remove any of
them and cause them to be stored or sold in accordance with applicable
law, at Tenant's sole expense. In addition to and wholly apart from
Tenant's obligation to pay Tenant's Proportionate Share of Basic
Operating Cost, Tenant shall be responsible for and shall pay prior to
delinquency any taxes or governmental service fees, possessory interest
taxes, fees or charges in lieu of any such taxes, capital levies, or
other charges imposed upon, levied with respect to or assessed against
its personal property, on the value of the alterations, additions or
improvements within the Premises, and on Tenant's interest pursuant to
this Lease. To the extent that any such taxes are not separately
assessed or billed to Tenant, Tenant shall pay the amount thereof as
invoiced to Tenant by Landlord.
SIGNS
13. All signs, notices, graphics and advertising balloons of every kind or
character, visible in or from public view or corridors, the common areas
or the exterior of the Premises, shall be subject to Landlord's prior
written approval. Landlord shall provide, at Landlord's cost,
directional signage on the Project identifying the location of the
Building. Tenant shall not place or maintain any banners whatsoever or
any window decor in or on any exterior window or window fronting upon
any common areas or service area or upon any truck doors or man doors
without Landlord's prior written approval. Any installation of signs or
graphics on or about the Premises and Project shall be subject to any
applicable governmental laws, CC&Rs, ordinances, regulations and to any
other requirements imposed by Landlord. Tenant shall remove all such
signs and graphics prior to the termination of this Lease. Such
installations and removals shall be made in such manner as to avoid
injury or defacement of the Premises, the Building or the Project and
any other improvements contained therein, and Tenant shall repair any
injury or defacement, including without limitation, discoloration caused
by such installation or removal.
INSPECTION/POSTING NOTICES
14. After reasonably notice, except in emergencies where no such notice
shall be required, Landlord, and Landlord's agents and representatives,
shall have the right to enter the Premises to inspect the same, to
clean, to perform such work as may be permitted or required hereunder,
to make repairs or alterations to the Premises or Project or to other
tenant spaces therein, to deal with emergencies, to post such notices as
may
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be permitted or required by law to prevent the perfection of liens against
Landlord's interest in the Project or to exhibit the Premises to prospective
tenants, purchasers, encumbrances or others, or for any other purpose as
Landlord may deem necessary or desirable; provided, however, that Landlord
shall use reasonable efforts not to unreasonably interfere with Tenant's
business operations and shall not, except in the case of an emergency, enter
areas of the Premises marked by Tenant as "sensitive" unless accompanied by
Tenant's representative which Tenant shall make available to Landlord for such
inspections. Tenant shall not be entitled to any abatement of Rent by reason of
the exercise of any such right of entry. At any time within six (6) months prior
to the end of the Term, Landlord shall have the right to erect on the Premises
and/or Project a suitable sign indicating that the Premises are available for
lease. Tenant shall give written notice to Landlord at least thirty (30) days
prior to vacating the Premises and shall meet with Landlord for a joint
inspection of the Premises at the time of vacating. In the event of Tenant's
failure to give such notice or participate in such joint inspection, Landlord's
inspection at or after Tenant's vacating the Premises shall conclusively be
deemed correct for purposes of determining Tenant's responsibility for repairs
and restoration.
UTILITIES
15. Tenant shall pay directly for all water, gas, heat, air conditioning,
light, power, telephone, sewer, sprinkler charges and other utilities and
services used on or from the Premises, together with any taxes, penalties,
surcharges or the like pertaining thereto, and maintenance charges for
utilities and shall furnish all electric light bulbs, ballasts and tubes. If
any such services are not separately metered to Tenant, Tenant shall pay a
reasonable proportion, as determined by Landlord, of all charges jointly
serving other premises. Landlord shall not be liable for any damages (unless
caused by Landlord's gross negligence or willful misconduct) directly or
indirectly resulting from nor shall the Rent or any monies owed Landlord under
this Lease herein reserved be abated by reason of: (a) the installation, use or
interruption of use of any equipment used in connection with the furnishing of
any such utilities or services; (b) the failure to furnish or delay in
furnishing any such utilities or services when such failure or delay is caused
by acts of God or the elements, labor disturbances of any character, or any
other accidents or other conditions beyond the reasonable control of Landlord;
or (c) the limitation, curtailment, rationing or restriction on use of water,
electricity, gas or any other form of energy or any other service or utility
whatsoever serving the Premises or Project. Landlord shall be entitled to
cooperate voluntarily and in a reasonable manner with the efforts of national,
state or local governmental agencies or utility suppliers in reducing energy or
other resource consumption. The obligation to make services available hereunder
shall be subject to the limitations of any such voluntary, reasonable program.
SUBORDINATION
16. Without the necessity of any additional document being executed by
Tenant for the purpose of effecting a subordination, this Lease shall be
subject and subordinate at all times to: (a) all ground leases or underlying
leases which may now exist or hereafter be executed affecting the Premises
and/or the land upon which the Premises and Project are situated, or both; and
(b) conditioned upon Tenant's receipt of a nondisturbance agreement in the
lender's customary form, any mortgage or deed of trust which may now exist or
be placed upon said Project, land, ground leases or underlying leases, or
Landlord's interest or estate in any of said items which is specified as
security. Notwithstanding the foregoing, Landlord shall have the right to
subordinate or cause to be subordinated any such ground leases or underlying
leases or any such liens to this Lease. In the event that any ground lease or
underlying lease terminates for any reason or any mortgage or deed of trust is
foreclosed or a conveyance in lieu of foreclosure is made for any reason, Tenant
shall, notwithstanding any subordination, attorn to and become the Tenant of
the successor in interest to Landlord at the option of such successor in
interest. Within ten (10) days after request by Landlord, and conditioned upon
Tenant's receipt of a nondisturbance agreement in the lender's customary form,
Tenant shall execute and deliver any additional documents evidencing Tenant's
attornment or the subordination of this Lease with respect to any such ground
leases or underlying leases or any such mortgage or deed of trust, in the form
requested by Landlord or by any ground landlord, mortgagee, or beneficiary
under a deed of trust.
FINANCIAL STATEMENTS
17. At the request of Landlord, Tenant shall provide to Landlord Tenant's
current financial statement or other information discussing financial worth of
Tenant within thirty (30) days after the date of Landlord's request, which
Landlord shall use solely for purposes of this Lease and in connection with the
ownership, management and disposition of the Project.
ESTOPPEL CERTIFICATE
18. Tenant agrees from time to time, within ten (10) days after request of
Landlord, to deliver to Landlord, or Landlord's designee, an estoppel
certificate per Exhibit D or in an alternate form that the requesting party may
require stating that this Lease is in full force and effect, the date to which
Rent has been paid, the unexpired portion of this Lease, and such other matters
pertaining to this Lease as may be reasonably requested by Landlord. Landlord
and Tenant intend that any statement delivered pursuant to this Paragraph may be
relied upon by any mortgagee, beneficiary, purchaser or prospective purchaser of
the Project or any interest therein. The parties agree that Tenant's obligation
to furnish such estoppel certificates in a timely fashion is a material
inducement for Landlord's execution of the Lease, and shall be an Event of
Default if Tenant fails to fully comply. Tenant acknowledges that failure to
provide the Estoppel Certificate to Landlord or Landlord's designee within the
time provided above may cause Landlord to incur substantial damages. Tenant
hereby agrees to indemnify Landlord for any liabilities, losses, costs, damages
(including, without limitation, compensatory, incidental and consequential
damages), injuries or expenses arising from the failure of Tenant to deliver the
Estoppel certificate in the time and manner provided in this Paragraph. In
addition to any other remedies Landlord may have at law and equity, Landlord
shall be entitled to specific performance of this Paragraph. The provisions of
this Paragraph shall survive the expiration or termination of this Lease with
respect to any claims or liability occurring prior to such expiration or
termination. Landlord shall execute (and acknowledge if required by any lender)
and deliver to Tenant, within ten (10) business days after Tenant provides such
to Landlord, a statement in writing certifying that, to the best of Landlord's
actual knowledge this Lease is unmodified and in full force and effect (or, if
modified, stating the nature of such modification), the date to which the Base
Rent and other charges are paid in advance, if any, and acknowledging that there
are not, to Landlord's actual knowledge, any uncured defaults on the part of
Tenant hereunder or specifying such defaults as are claimed. Landlord's failure
to deliver such statement within such time shall be conclusive upon the Landlord
that (a) this Lease is in full force and effect, without modification except as
may be represented by Tenant; (b) there are no uncured defaults in Tenant's
performance; and (c) not more than one month's Rent has been paid in advance.
SECURITY DEPOSIT
19. Tenant agrees to deposit with Landlord upon execution of this Lease, a
Security Deposit as stated in the Basic Lease Information, which sum shall be
held by Landlord, without obligation for interest, as security for
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SECURITY DEPOSIT (continued)
the performance of Tenant's covenants and obligations under this Lease. The
Security Deposit is not an advance rental deposit or a measure of damages
incurred by Landlord in case of Tenant's Default. Landlord is not required to
keep all or any part of the Security Deposit separate from its general
accounts. Upon the occurrence of any Event of Default by Tenant Landlord may,
from time to time, without prejudice to any other remedy provided herein or
provided by law, use such fund to the extent necessary to make good any arrears
of Rent or other payments due to Landlord hereunder, and any other damage,
injury, expense or liability caused by such Event of Default, and Tenant shall
pay to Landlord, on demand, the amount so applied in order to restore the
Security Deposit to its original amount. Although the Security Deposit shall be
deemed the property of Landlord, any remaining balance of such deposit shall be
returned by Landlord to Tenant at such time after termination of this Lease
that all of Tenant's obligations under this Lease have been fulfilled. Landlord
may use and commingle the Security Deposit with other funds of Landlord. Upon
execution of this Lease, as collateral for the full and faithful performance by
Tenant of all of its obligations under this Lease and for all losses and
damages Landlord may suffer as a result of any default by Tenant under this
Lease, Tenant shall deliver to Landlord an unconditional irrevocable negotiable
Letter of Credit in the amount of $950,000.00 meeting the requirements of this
paragraph (the "Letter of Credit"). The Letter of Credit shall (a) designate
Landlord or its assignees as beneficiary, (b) be issued by a financial
institution approved by Landlord, (c) subject to the remaining provisions
hereof, remain in full force and effect during the entire term of this Lease
and any extension or holdover period, plus an additional period of three (3)
months, and (d) be in form satisfactory to Landlord. The Letter of Credit may
be for an initial term of fifteen (15) months so long as it provides that
Landlord may immediately draw the full amount of the letter of Credit if the
issuer does not give Landlord written notice of renewal for additional
successive periods of twelve (12) months at least sixty (60) days prior to the
expiration date. Landlord is authorized to draw on the Letter of Credit from
time to time in the event that (i) Landlord advises the issuer of the Letter of
Credit that there is an Event of Default by Tenant under this Lease, or (ii)
the issuer gives Landlord noticed that the Letter of Credit will be terminated
or will expire prior to the initial term of fifteen (15) months, or (iii) the
issuer does not give Landlord a written notice of renewal of the term of the
Letter of Credit as required by the preceding sentence. In the event Landlord
shall draw on the Letter of Credit in the circumstances described in clause (i)
of this paragraph, Landlord shall be permitted to draw an amount necessary in
Landlord's good faith estimation to fully cure any such Event of Default,
including any damage, injury, expense or liability caused or projected to be
caused by such Event of Default, and Tenant shall, on demand from Landlord,
increase the letter of Credit up to its full original amount. In the event
Landlord shall draw on the Letter of Credit in the circumstances described in
clause (ii) or (iii) of this paragraph, Landlord shall be permitted to draw the
entire amount of the Letter of Credit, in which case such sum shall be held by
Landlord as an additional Security Deposit and administered as such. Landlord
may draw on the Letter of Credit regardless of whether or not Tenant disputes
that an Event of Default has occurred and regardless of any other disputes or
claims between the parties. Landlord shall not be required to deliver any
certifications or documentation of any kind to the issuer in order to make a
draw, other than Landlord's written demand certifying that an Event of Default
has occurred. The issuer shall not be required to conduct any inquiry or
investigation before paying Landlord the requested amount of the draw. Landlord
may assign, transfer or pledge the Letter of Credit to any lender or purchaser
in connection with any financing or sale of the Premises. Provided that at no
time during the initial thirty-six (36) months of the Lease Term Tenant has
been in material default under this Lease beyond any applicable cure period,
Landlord shall authorize and consent to a reduction by $100,000 of the then
required amount of the Letter of Credit as of the thirty-seventh (37th) month of
the Lease Term. Provided that at no time during the initial forty-eight (48)
months of the Lease Term Tenant has been in default under this Lease beyond any
applicable cure period, Landlord shall authorize and consent to a reduction by
$100,000 of the then required amount of the Letter of Credit as of the
forty-ninth (49th) month of the lease Term. Provided that at no time during the
initial sixty (60) months of the Lease Term Tenant has been in material default
under this Lease beyond any applicable cure period, Landlord shall authorize
and consent to a reduction by $300,000 of the then required amount of the
Letter of Credit as of the sixty-first (61st) month of the Lease Term. Prior to
the commencement of any of Tenant's Work, and as a condition to Tenant's right
to Early Possession and to commence Tenant's Work, Tenant shall provide Landlord
with proof of Tenant's financial ability to complete and pay fully the cost of
the Tenant's Work. Such proof shall consist of (i) an unconditional guaranty to
Landlord from Tenant's third party lender (acceptable to Landlord), in the form
acceptable to Landlord, that such lender shall pay as and when due all of
Tenant's monetary obligations under this Lease with respect to the performance
of Tenant's Work, or (ii) payment and completion bonds, in form and from
issuers reasonably acceptable to Landlord, bonding the full lien-free
completion of all of Tenant's Work, or (iii) Tenant's deposit into an escrow,
with instructions for disbursement thereof which are acceptable to Landlord, of
all sums reasonably estimated to be payable by Tenant to fulfill its monetary
obligations under this Lease with respect to the performance of Tenant's Work,
or (iv) Tenant maintaining until lien-free completion of Tenant's Work a
minimum unrestricted cash balance of immediately payable funds in the sum of
$10,000,000. Upon Landlord's acceptance of Tenant's proof of financial ability
as set forth herein and upon commencement of the construction of the Tenant
Improvements, Landlord shall authorize and consent to the reduction of the
Letter of Credit to a total sum of $500,000. If, upon lien-free completion of
the Tenant's Work, (A) Tenant's third party lender (acceptable to Landlord)
agrees irrevocably and unconditionally in writing for the benefit of Landlord to
either (i) in case of an Event of Default under the Lease, release its lien or
other security interest in all of Tenant's equipment which is listed on Exhibit
B-3 hereto or (ii) perform (as guarantor) all of Tenant's obligations under the
Lease throughout the remaining Term of the Lease and (B) the total sum actually
expended for Tenant's Work, including the Tenant Improvement Allowance, was not
less than $85.00 per rentable square foot of the Premises, then Landlord shall
authorize and consent to cancellation of the Letter of Credit.
TENANT'S REMEDIES
20. The liability of Landlord to Tenant for any default by Landlord under
the terms of this Lease are not personal obligations of the Landlord or other
trustees, advisors, partners, directors, officers and shareholders of Landlord,
and Tenant agrees to look solely to Landlord's interest in the Project for the
recovery of any amount from Landlord, and shall not look to other assets of
Landlord nor seek recourse against the assets of the Landlord or other
trustees, advisors, partners, directors, officers and shareholders of Landlord.
Any lien obtained to enforce any such judgment and any levy of execution thereon
shall be subject and subordinate to any lien, mortgage or deed of trust on the
Project.
ASSIGNMENT AND SUBLETTING
21. A. GENERAL. Except in connection with a Permitted Assignee, Tenant
shall not assign this Lease or sublet the Premises or any part thereof without
Landlord's prior written approval which shall not be unreasonably withheld or
delayed. Except in connection with a Permitted Assignee, if Tenant desires to
assign this Lease.
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or sublet any or all of the Premises,it must present the Landlord with an
ERISA Certificate in compliance with the provisions of Paragraph 37, of
this Lease signed by the potential assignee or subtenant, demonstrate that
the potential assignee or subtenant has adequate credit and demonstrate to
the Landlord's satisfaction that the potential assignee's or subtenant's
proposed use of the Premises is compatible with the Project and complies
with all applicable laws, ordinances, rules and regulations. Except in
connection with a Permitted Assignee, if Tenant desires to assign this
Lease or sublet any or all of the Premises, Tenant shall give Landlord
written notice sixty(60) days prior to the anticipated effective date of
the assignment or sublease. Landlord shall then have a period of fifteen
(15) days following receipt of such notice to notify Tenant in writing
that Landlord elects either: (1) to permit Tenant to assign this Lease or
sublet such space, subject, however, to Landlord's prior written approval
of the proposed assignee or subtenant and of any related documents or
agreements associated with the assignment or sublease or (2) refuse to
consent. If Landlord should fail to notify Tenant in writing of such
election within said period, Landlord shall be deemed to have refused to
consent to the proposed assignment or subletting. Without limiting the
other instances in which it may be reasonable for Landlord to withhold
Landlord's consent to an assignment or subletting, Landlord and Tenant
acknowledge that it shall be reasonable for Landlord to withhold
Landlord's consent in the following instances: The use of the Premises by
such proposed assignee or subtenant would not be a permitted use or would
increase the Parking Density of the Project; the proposed assignee or
subtenant is not of sound financial condition, as reasonably determined by
Landlord after receipt of the proposed assignee's or subtenant's financial
statements in form satisfactory to Landlord; the proposed assignee or
subtenant is a governmental agency; the proposed assignee or subtenant
does not have a good reputation as a tenant of property; the proposed
assignee or subtenant is a person with whom Landlord is negotiating to
lease comparable space in the Project; the assignment or subletting would
entail any alterations which would lessen the value of the leasehold
improvements in the Premises; or if Tenant is in Default of any obligation
of Tenant under this Lease. Failure by Landlord to approve a proposed
assignee or subtenant shall not cause a termination of this Lease.
Notwithstanding anything in this Section 21A to the contrary, Tenant may,
without the consent of Landlord, assign this Lease or sublet the Premises
or any portion thereof to any entity with a demonstrated net worth which
is greater than $10,000,000 which (i) controls, is controlled by or is
under common control with Tenant or which (ii) results from a merger or
reorganization or a consolidation with Tenant, or which (iii) acquires all
of the stock or assets of Tenant, as a going concern, with respect to the
business that is being conducted on the Premises ("Permitted Assignees").
Any assignment or subletting to a Permitted Assignee shall be subject to
and conditioned upon the following: (a) Tenant shall not be in Default of
any of its obligations under this Lease, (b) Tenant shall give Landlord at
least sixty (60) days prior written notice of any such proposed
transaction, (c) the Permitted Assignee shall have a net equity of at
least Ten Million Dollars ($10,000,000) which has been demonstrated in
appropriate documentation delivered to Landlord prior to the occurrence of
such transaction, (d) the Permitted Assignee shall execute an ERISA
Certificate as set forth in Paragraph 38, and (e) Tenant shall provide
Landlord with full and complete copies of all documents executed by Tenant
and the Permitted Assignee in connection with such assignment or
subletting. The right to assign and/or sublet the Premises is personal to
the Tenant and any Permitted Assignee and shall not inure to the benefit
of any other assignee, subtenant or successor of Tenant.
B. BONUS RENT. Any Rent or other consideration realized by Tenant under
any approved sublease or assignment in excess of the Base Rent payable
hereunder, after amortization of a reasonable brokerage commission,
reasonable attorneys' fees related to the subletting, and the cost of
tenant improvements, if any, paid for by Tenant in excess of Tenant's
Work, shall be divided and paid sixty (60%) percent to Tenant, forty (40%)
percent to Landlord; provided, however, that if Tenant expends $70.00 per
rentable square foot in excess of the Tenant improvement Allowance for
Tenant's Work, exclusive of soft costs, the aforesaid division shall be
seventy-five percent (75%) to Tenant and twenty-five percent (25%) to
Landlord. In any subletting or assignment undertaken by Tenant, Tenant
shall diligently seek to obtain the maximum rental amount available in the
marketplace for such subletting or assignment.
C. CORPORATION. If Tenant is a corporation, a transfer of corporate shares
by sale, assignment, bequest, inheritance, operation of law or other
disposition (including such a transfer to or by a receiver or trustee in
federal or state bankruptcy, insolvency or other proceedings), so as to
result in a change in the present control of such corporation or any of
its parent corporations by the person or persons owning a majority of said
corporate shares, shall constitute an assignment for purposes of this
Lease, provided, however, that this Section 21C shall not apply to any
transfer in connection with a bonafide financing or capitalization of
Tenant, or if Tenant is or becomes a public company.
D. PARTNERSHIP. If Tenant is a partnership, joint venture or other
incorporated business form, a transfer of the interest of persons, firms
or entities responsible for managerial control of Tenant by sale,
assignment, bequest, inheritance, operation of law or other disposition,
so as to result in a change in the present control of said entity and/or a
change in the identity of the persons responsible for the general credit
obligations of said entity shall constitute an assignment for all purposes
of this Lease, provided that this Section shall not apply to a transfer in
connection with a bonafide financing or capitalization of Tenant.
E. LIABILITY. No assignment or subletting by Tenant shall relieve Tenant
of any obligation under this Lease. Any assignment or subletting which
conflicts with the provisions hereof shall be void.
F. OPTIONS. Except in connection with a Permitted Assignee, in the event
of assignment or subletting by Tenant, any and all options to renew and
expand shall terminate automatically.
AUTHORITY OF PARTIES
22. Landlord represents and warrants that it has full right and authority to
enter into this Lease and to perform all of Landlord's obligations hereunder.
Tenant represents and warrants that it has full right and authority to enter
into this Lease and to perform all of Tenant's obligations hereunder.
CONDEMNATION
23. A. CONDEMNATION RESULTING IN TERMINATION. If the whole or any
substantial part of the Project of which the Premises are a part should be
taken or condemned for any public use under governmental law, ordinance or
regulation, or by right of eminent domain, or by private purchase in lieu
thereof, and the taking would prevent or materially interfere with the
Permitted Use of the Premises, this Lease shall terminate and the Rent shall be
abated during the unexpired portion of this Lease, effective when the physical
taking of said Premises shall have occurred.
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<PAGE> 14
B. CONDEMNATION NOT RESULTING IN TERMINATION. If a portion of the
Project of which the Premises are a part should be taken or condemned for
any public use under any governmental law, ordinance, or regulation, or by
right of eminent domain, or by private purchase in lieu thereof, and this
Lease is not terminated as provided in Paragraph 23.A. above, this Lease
shall not terminate, but the Rent payable hereunder during the unexpired
portion of the Lease shall be reduced, beginning on the date when the
physical taking shall have occurred, to such amount as may be fair and
reasonable under all of the circumstances.
C. AWARD. Landlord shall be entitled to any and all payment, income,
rent, award, or any interest therein whatsoever which may be paid or made
in connection with such taking or conveyance and Tenant shall have no
claim against Landlord or otherwise for the value of any unexpired
portion of this Lease. Notwithstanding the foregoing, any compensation
specifically awarded Tenant for loss of business, Tenant's personal
property, moving costs or loss of goodwill, shall be and remain the
property of Tenant.
CASUALTY DAMAGE
24. A. GENERAL. If the Premises or the Building should be damaged or
destroyed by fire, tornado, earthquake or other casualty, Tenant shall
give immediate written notice thereof to Landlord. Within thirty (30)
days after Landlord's receipt of such notice, Landlord shall notify
Tenant whether in Landlord's opinion such repairs can reasonably be made
either: (1) within ninety (90) days; (2) in more than ninety (90) days
but in less than one hundred eighty (180) days; or (3) in more than one
hundred eighty (180) days from the date of such notice. Landlord's
determination shall be binding on Tenant.
B. LESS THAN 90 DAYS. If the Premises or the Building should be
damaged by fire, tornado, earthquake or other casualty but only to such
extent that rebuilding or repairs can in Landlord's estimation be
reasonably completed within ninety (90) days after the date of such
damage, this Lease shall not terminate, and provided that insurance
proceeds are available to fully repair the damage, Landlord shall proceed
to rebuild and repair the Premises in the manner determined by Landlord,
except that Landlord shall not be required to rebuild, repair or replace
any part of the partitions, Fixtures, additions and other leasehold
improvements which may have been placed in, on or about the Premises. If
the Premises are untenantable in whole or in part following such damage,
the Rent payable hereunder during the period in which they are
untenantable shall be abated proportionately, but only to the extent of
rental abatement insurance proceeds received by the Landlord during the
time and to the extent the Premises are unfit for occupancy. In the event
that Landlord should fail to complete such repairs and rebuilding within
one hundred eighty days (180) days after the date upon which Landlord is
notified by Tenant of such damage, such period of time to be extended for
delays caused by the fault or neglect of Tenant or for delays (but not by
more than forty-five (45) days for such delays) because of acts of God,
acts of public agencies, labor disputes, strikes, fires, freight
embargoes, rainy or stormy weather, inability to obtain materials,
supplies or fuels, or delays of the contractors or subcontractors or any
other causes or contingencies beyond the reasonable control of Landlord,
Tenant may at Tenant's option within ten (10) days after the expiration
of such one hundred eighty (180) day period (as such may be extended),
terminate this Lease by delivering written notice of termination to
Landlord as Tenant's exclusive remedy, whereupon all rights hereunder
shall cease and terminate thirty (30) days after Landlord's receipt of
such termination notice.
C. GREATER THAN 90 DAYS. If the Premises or the Building should be
damaged by fire, tornado, earthquake or other casualty but only to such
extent that rebuilding or repairs can in Landlord's estimation be
reasonably completed in more than ninety (90) days but in less than one
hundred eighty (180) days, then Landlord shall have the option of either:
(1) terminating the Lease effective upon the date of the occurrence of
such damage, in which event the Rent shall be abated during the unexpired
portion of the Lease; or (2) electing to rebuild or repair the Premises to
substantially the condition in which they existed prior to such damage,
provided that insurance proceeds are available, to fully repair the
damage, except that Landlord shall not be required to rebuild, repair or
replace any part of the partitions, Fixtures, additions and other
improvements which may have been placed in, on or about the Premises. If
the Premises are untenantable in whole or in part following such damage,
the Rent payable hereunder during the period in which they are
untenantable shall be abated proportionately, but only to the extent of
rental abatement insurance proceeds received by the Landlord during the
time and to the extent the Premises are unfit for occupancy. In the event
that Landlord should fail to complete such repairs and rebuilding within
one hundred eighty days (180) days after the date upon which Landlord is
notified by Tenant of such damage, such period of time to be extended for
delays caused by the fault or neglect of Tenant or for delays (but not by
more than forty-five (45) days for such delays) because of acts of God,
acts of public agencies, labor disputes, strikes, fires, freight
embargoes, rainy or stormy weather, inability to obtain materials,
supplies or fuels, or delays of the contractors or subcontractors or any
other causes or contingencies beyond the reasonable control of Landlord,
Tenant may at Tenant's option within ten (10) days after the expiration
of such one hundred eighty (180) day period (as such may be extended),
terminate this Lease by delivering written notice of termination to
Landlord as Tenant's exclusive remedy, whereupon all rights hereunder
shall cease and terminate thirty (30) days after Landlord's receipt of
such termination notice.
D. GREATER THAN 180 DAYS. If the Premises or the Building should be so
damaged by fire, tornado, earthquake or other casualty that rebuilding or
repairs cannot in Landlord's estimation be completed within one hundred
eighty (180) days after such damage, this Lease shall terminate and the
Rent shall be abated during the unexpired portion of this Lease,
effective upon the date of the occurrence of such damage.
E. TENANT'S FAULT. If the Premises or any other portion of the
Building is damaged by fire or other casualty resulting from the fault,
negligence, or breach of this Lease by Tenant or any of Tenant's Parties,
Base Rent and Additional Rent shall not be diminished during the repair
of such damage and Tenant shall be liable to Landlord for the cost and
expense of the repair and restoration of the Building caused thereby to
the extent such cost and expense is not covered by insurance proceeds.
F. UNINSURED CASUALTY. Notwithstanding anything herein to the
contrary, in the event that the Premises or the Building is damaged or
destroyed and are not fully covered by the insurance proceeds received by
Landlord or in the event that the holder of any indebtedness secured by a
mortgage or deed of trust covering the Premises requires that the
insurance proceeds be applied to such indebtedness, then in either case
Landlord shall have the right to terminate this Lease by delivering
written notice of termination to Tenant within thirty (30) days after the
date of notice to Landlord that said damage or destruction is not fully
covered
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<PAGE> 15
by insurance or such requirement is made by any such holder, as the case
may be, whereupon all rights and obligations hereunder shall cease and
terminate.
G. WAIVER. Except as otherwise provided in this Paragraph 24., Tenant
hereby waives the provisions of Sections 1932(a), (1933(4), 1941 and 1942
of the Civil Code of California.
HOLDING OVER
25. If Tenant shall retain possession of the Premises or any portion thereof
without Landlord's consent following the expiration of the Lease or sooner
termination for any reason, then Tenant shall pay to Landlord for each day
of such retention 150% of the amount of the daily rental as of the last
month prior to the date of expiration or termination. Tenant shall also
indemnify, defend, protect and hold Landlord harmless from any loss,
liability or cost, including reasonable attorneys' fees, resulting from
delay by Tenant in surrendering the Premises, including, without
limitation, any claims made by any succeeding tenant founded on such delay.
Acceptance of Rent by Landlord following expiration or termination shall
not constitute a renewal of this Lease, and nothing contained in this
Paragraph 25, shall waive Landlord's right of reentry or any other right.
Unless Landlord consents in writing to Tenant's holding over, Tenant shall
be only a Tenant at sufferance, whether or not Landlord accepts any Rent
from Tenant while Tenant is holding over without Landlord's written
consent. Additionally, in the event that upon termination of the Lease,
Tenant has not fulfilled its obligation with respect to repairs and cleanup
of the Premises or any other Tenant obligations as set forth in this Lease,
then Landlord shall have the right to perform any such obligations as it
deems necessary at Tenant's sole cost and expense.
DEFAULT
26. A. EVENTS OF DEFAULT. The occurrence of any of the following shall
constitute an event of default ("Event of Default" or "Default") on the
part of Tenant:
(1) ABANDONMENT. Abandonment of the Premises for a continuous period in
excess of five (5) days unless Tenant notifies Landlord in writing in
advance of such abandonment keeps the Premises locked and secure at all
times, and timely performs and continues to perform all of the Tenant's
other monetary and non-monetary obligations under this Lease. Tenant waives
any right to notice Tenant may have under Section 1951.3 of the Civil Code
of the State of California, the terms of this Paragraph 26.A, being deemed
such notice to Tenant as required by said Section 1951.3.
(2) NONPAYMENT OF RENT. Failure to pay any installment of Rent or any
other amount due and payable hereunder when said payment is due.
(3) OTHER OBLIGATIONS. Failure to perform any obligation, agreement or
covenant under this Lease other than those matters specified in
subparagraphs (1) and (2) of this Paragraph 26.A., such failure continuing
for fifteen (15) days after written notice of such failure. In the event
Tenant has commenced to cure the failure of performance within the fifteen
(15) day period, but has not completed the cure despite diligent attempts
to do so, Tenant shall have an additional period not to exceed thirty (30)
additional days after such fifteen (15) day period to complete such cure so
long as Tenant continues to diligently pursue the cure to completion during
such additional thirty (30) day period.
(4) GENERAL ASSIGNMENT. A general assignment by Tenant for the benefit of
creditors.
(5) BANKRUPTCY. The filing of any voluntary petition in bankruptcy by
Tenant, or the filing of an involuntary petition by Tenant's creditors,
which involuntary petition remains undischarged for a period of sixty (60)
days. In the event that under applicable law the trustee in bankruptcy or
Tenant has the right to affirm this Lease and continue to perform the
obligations of Tenant hereunder, such trustee or Tenant shall, in such time
period as may be permitted by the bankruptcy court having jurisdiction,
cure all Defaults of Tenant hereunder outstanding as of the date of the
affirmance of this Lease and provide to Landlord such adequate assurances
as may be necessary to ensure Landlord of the continued performance of
Tenant's obligations under this Lease.
(6) RECEIVERSHIP. The employment of a receiver to take possession of
substantially all of Tenant's assets or the Premises, if such appointment
remains undismissed or undischarged for a period of thirty (30) days after
the order thereof.
(7) ATTACHMENT. The attachment, execution or other judicial seizure of all
or substantially all of Tenant's assets or the Premises, if such attachment
or other seizure remains undismissed or undischarged for a period of thirty
(30) days after the levy thereof.
(8) DELAYS. Any delay in the construction of Landlord's Work caused by
Tenant as provided in Exhibit B-1.
B. REMEDIES UPON DEFAULT.
(1) TERMINATION. In the event of the occurrence of any Event of Default,
Landlord shall have the right to give a written termination notice to
Tenant, and on the date specified in such notice, Tenant's right to
possession shall terminate, and this Lease shall terminate unless on or
before such date all arrears of rental and all other sums payable by Tenant
under this Lease and all costs and expenses incurred by or on behalf of
Landlord hereunder shall have been paid by Tenant and all other Events of
Default of this Lease by Tenant at the time existing shall have been fully
remedied to the satisfaction of Landlord. At any time after such
termination, Landlord may recover possession of the Premises or any part
thereof and expel and remove therefrom Tenant and any other person
occupying the same, by any lawful means, and again repossess and enjoy the
Premises without prejudice to any of the remedies that Landlord may have
under this Lease, or at law or equity by reason of Tenant's Default or of
such termination.
(2) CONTINUATION AFTER DEFAULT. Even though an Event of Default may have
occurred, this Lease shall continue in effect for so long as Landlord does
not terminate Tenant's right to possession under Paragraph 26.B.(1) hereof,
and Landlord may enforce all of Landlord's rights and remedies under this
Lease, including without limitation, the right to recover Rent as it
becomes due, and Landlord, without terminating this Lease, may exercise all
of the rights and remedies of a landlord under Section 1951.4 of the Civil
Code of the State of California or any successor code section. Acts of
maintenance, preservation or efforts to lease the
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<PAGE> 16
Premises or the appointment of a receiver upon application of Landlord to
protect Landlord's interest under this Lease shall not constitute an
election to terminate Tenant's right to possession.
C. DAMAGES AFTER DEFAULT. Should Landlord terminate this Lease pursuant
to the provisions of Paragraph 26.B.(1) hereof, Landlord shall have the
rights and remedies of a Landlord provided by Section 1951.2 of the Civil
Code of the State of California, or successor code sections. Upon such
termination, in addition to any other rights and remedies to which
Landlord may be entitled under applicable law, Landlord shall be entitled
to recover from Tenant: (1) the worth at the time of award of the unpaid
Rent and other amounts which had been earned at the time of termination;
(2) the worth at the time of award of the amount by which the unpaid Rent
which would have been earned after termination until the time of award
exceeds the amount of such Rent loss that Tenant proves could have been
reasonably avoided; (3) the worth at the time of award of the amount by
which the unpaid Rent for the balance of the Term after the time of award
exceeds the amount of such Rent loss that the Tenant proves could be
reasonably avoided; and (4) any other amount necessary to compensate
Landlord for all the detriment proximately caused by Tenant's failure to
perform Tenant's obligations under this Lease or which, in the ordinary
course of things, would be likely to result therefrom. The "worth at the
time of award" of the amounts referred to in (1) and (2), above shall be
computed at the lesser of the "prime rate," as announced from time to
time by Wells Fargo, N.A. (San Francisco) plus five (5) percentage
points, or the maximum interest rate allowed by law ("Applicable Interest
Rate"). The "worth at the time of award" of the amount referred to in (3)
above shall be computed by discounting such amount at the Federal
Discount Rate of the Federal Reserve Bank of San Francisco at the time of
the award plus one (1%) percent. If this Lease provides for any periods
during the Term during which Tenant is not required to pay Base Rent or
if Tenant otherwise receives a Rent concession, then upon the occurrence
of an Event of Default, Tenant shall owe to Landlord the full amount of
such Base Rent or value of such Rent concession, plus interest at the
Applicable Interest Rate, calculated from the date that such Base Rent or
Rent concession would have been payable.
D. LATE CHARGE. If any installment of Rent is not paid on the date
when due, such amount shall bear interest at the Applicable Interest Rate
from the date on which said payment shall be due until the date on which
Landlord shall receive said payment. In addition, Tenant shall pay
Landlord a late charge equal to five (5%) percent of the delinquency, to
compensate Landlord for the loss of the use of the amount not paid and
the administrative costs caused by the delinquency, the parties agreeing
that Landlord's damage by virtue of such delinquencies would be difficult
to compute and the amount stated herein represents a reasonable estimate
thereof. This provision shall not relieve Tenant of Tenant's obligation
to pay Rent at the time and in the manner herein specified.
E. REMEDIES CUMULATIVE. All rights, privileges and elections or
remedies of the parties are cumulative and not alternative, to the extent
permitted by law and except as otherwise provided herein.
LIENS
27. Except for the items scheduled on Exhibit B-3, Tenant shall keep the
Premises free from liens arising out of or related to work performed,
materials or supplies furnished or obligations incurred by Tenant or in
connection with work made, suffered or done by or on behalf of Tenant in
or on the Premises or Project. In the event that Tenant shall not, within
ten (10) business days following the imposition of any such lien, cause
the same to be released of record by payment or posting of a proper bond,
Landlord shall have, in addition to all other remedies provided herein
and by law, the right, but not the obligation, to cause the same to be
released by such means as Landlord shall deem proper, including payment
of the claim giving rise to such lien. All sums paid by Landlord on
behalf of Tenant and all expenses incurred by Landlord in connection
therefor shall be payable to Landlord by Tenant on demand with interest
at the Applicable Interest Rate. Landlord shall have the right at all
times to post and keep posted on the Premises any notices permitted or
required by law, or which Landlord shall deem proper, for the protection
of Landlord, the Premises, the Project and any other party having an
interest therein, from mechanics' and materialmen's liens, and Tenant
shall give Landlord not less than ten (10) business days prior written
notice of the commencement of any work in the Premises or Project which
could lawfully give rise to a claim for mechanics' or materialmen's liens.
TRANSFERS BY LANDLORD
28. In the event of a sale or conveyance by Landlord of the Building or the
Project or a foreclosure by any creditor of Landlord, the same shall
operate to release Landlord from any liability upon any of the covenants
or conditions, express or implied, herein contained in favor of Tenant,
to the extent required to be performed after the passing of title to
Landlord's successor-in-interest. In such event, Tenant agrees to look
solely to the responsibility of the successor-in-interest of Landlord
under this Lease with respect to the performance of the covenants and
duties of "Landlord" to be performed after the passing of title to
Landlord's successor-in-interest. This Lease shall not be affected by any
such sale and Tenant agrees to attorn to the purchaser or assignee.
Landlord's successor(s)-in-interest shall not have liability to Tenant
with respect to the failure to perform all of the obligations of
"landlord", to the extent required to be performed prior to the date such
successor(s)-in-interest became the owner of the Building.
RIGHT OF LANDLORD TO PERFORM TENANT'S COVENANTS
29. All covenants and agreements to be performed by Tenant under any of the
terms of this Lease shall be performed by Tenant at Tenant's sole cost
and expense and without any abatement of Rent. If Tenant shall fail to
pay any sum of money, other than Base Rent and Basic Operating Cost,
required to be paid by Tenant hereunder or shall fail to perform any
other act on Tenant's part to be performed hereunder, and such failure
shall continue for five (5) days after notice thereof by Landlord.
Landlord may, but shall not be obligated to do so, and without waiving or
releasing Tenant from any obligations of Tenant, make any such payment or
perform any such act on Tenant's part to be made or performed. All sums,
so paid by Landlord and all necessary incidental costs together with
interest thereon at the Applicable Interest Rate from the date of such
payment by Landlord shall be payable to Landlord on demand, and Tenant
covenants to pay such sums, and Landlord shall have, in addition to any
other right or remedy of Landlord, the same right and remedies in the
event of the non-payment thereof by Tenant as in the case of Default by
Tenant in the payment of Base Rent and Basic Operating Cost.
WAIVER
30. If either Landlord of Tenant waives the performance of any term, covenant
or condition contained in this Lease, such waiver shall not be deemed to
be a waiver of any subsequent breach of the same or any other term,
covenant or condition contained herein. The acceptance of Rent by
Landlord shall not constitute a waiver of any preceding breach by Tenant
of any term, covenant or condition of this Lease, regardless of
Landlord's knowledge of such preceding breach at the time Landlord
accepted such Rent. Failure by
<PAGE> 17
Landlord to enforce any of the terms, covenants or conditions of this Lease for
any length of time shall not be deemed to waive or to decrease the right of
Landlord to insist thereafter upon strict performance by Tenant. Waiver by
Landlord of any term, covenant or condition contained in this Lease may only be
made by a written document signed by Landlord.
NOTICES
31. Each provision of this Lease or of any applicable governmental laws,
ordinances, regulations and other requirements with reference to sending,
mailing or delivery of any notice or the making of any payment by Landlord
or Tenant to the other shall be deemed to be complied with when and if the
following steps are taken:
A. RENT. All Rent and other payments required to be made by Tenant to
Landlord hereunder shall be payable to Landlord at the address set forth in
the Basic Lease Information, or at such other address as Landlord may
specify from time to time by written notice delivered in accordance
herewith. Tenant's obligation to pay Rent and any other amounts to Landlord
under the terms of this Lease shall not be deemed satisfied until such Rent
and other amounts have been actually received by Landlord.
B. OTHER. All notices, demands, consents and approvals which may or are
required to be given by either party to the other hereunder shall be in
writing and either personally delivered, sent by commercial overnight
courier, sent by facsimile, or mailed, certified or registered, postage
prepaid, and addressed to the party to be notified at the address for such
party as specified in the Basic Lease Information or to such other place as
the party to be notified may from time to time designate by at least
fifteen (15) days notice to the notifying party. Notices shall be deemed
served upon receipt or refusal to accept delivery. Tenant appoints as its
agent to receive the service of all default notices and notice of
commencement of unlawful detainer proceedings the person in charge of or
apparently in charge of occupying the Premises at the time, and, if there
is no such person, then such service may be made by attaching the same on
the main entrance of the Premises.
ATTORNEYS' FEES
32. In the event that Landlord places the enforcement of this Lease, or any
part thereof, or the collection of any Rent due, or to become due
hereunder, or recovery of possession of the Premises in the hands of an
attorney, Tenant shall pay to Landlord, upon demand, Landlord's reasonable
attorneys' fees and court costs. In any action which Landlord or Tenant
brings to enforce its respective rights hereunder, the unsuccessful party
shall pay all costs incurred by the prevailing party including reasonable
attorneys' fees, to be fixed by the court, and said costs and attorneys'
fees shall be a part of the judgment in said action.
SUCCESSORS AND ASSIGNS
33. This Lease shall be binding upon and inure to the benefit of Landlord, its
successors and assigns, and shall be binding upon and inure to the benefit
of Tenant, its successors, and to the extent assignment is approved by
Landlord hereunder, Tenant's assigns.
FORCE MAJEURE
34. In the event that Landlord shall be delayed, hindered in or prevented from
the performance of any act or obligation required under this Lease by
reason of acts of God, strikes, lockouts, labor troubles or disputes,
inability to procure or shortage of materials or labor, failure of power or
utilities, delay in transportation, fire, vandalism, accident, flood,
severe weather, other casualty, governmental requirements (including
mandated changes in the plans and specifications of Landlord's Work
resulting from changes in pertinent governmental requirements or
interpretations thereof), riot, insurrection, civil commotion, sabotage,
explosion, war, natural or local emergency, acts or omissions of others,
including Tenant, or other reasons of a similar or dissimilar nature not
solely the fault of, or under the exclusive control of, Landlord
(individually and collectively, "Force Majeure"), then performance of such
act or obligation shall be excused for the period of the delay and the
period for the performance of any such act or obligations shall be extended
for the period equivalent to the period of such delay.
BROKERAGE COMMISSION
35. Landlord shall pay a brokerage commission to Broker in accordance with a
separate agreement between Landlord and Broker. Tenant warrants to Landlord
that Tenant's sole contact with Landlord or with the Premises in connection
with this transaction has been directly with Landlord and Broker, and that
no other broker or finder can properly claim a right to a commission or a
finder's fee based upon contacts between the claimant and Tenant with
respect to Landlord or the Premises. Tenant shall indemnify, defend by
counsel acceptable to Landlord, protect and hold Landlord harmless from and
against any loss, cost or expense, including, but not limited to,
attorneys' fees and costs, resulting from any claim for a fee or commission
by any broker or finder in connection with the Premises and this Lease,
other than Broker, who claims such right based upon contacts between
claimant and Tenant.
Landlord shall indemnify, defend by counsel acceptable to Tenant, protect
and hold Tenant harmless from and against any loss, cost or expense,
including, but not limited to, attorney's fees and costs, resulting from
any claim for a fee or commission by any broker or finder in connection
with the Premises and this Lease, other than Broker, who claims such right
based upon contacts between claimant and Landlord.
MISCELLANEOUS
36. A. GENERAL. The terms "Tenant and/or Landlord" or any pronoun used in place
thereof shall indicate and include the masculine or feminine, the singular
or plural number, individuals, firms or corporations, and their respective
successors, executors, administrators and permitted assigns, according to
the context hereof.
B. TIME. Time is of the essence regarding this Lease and all of its
provisions.
C. CHOICE OF LAW. This Lease shall in all respects be governed by the laws
of the State of California.
D. ENTIRE AGREEMENT. This Lease, together with its exhibits, contains all
the agreements of the parties hereto and supersedes any previous
negotiations. There have been no representations made by the Landlord or
understandings made between the paries other than those set forth in this
Lease and its exhibits.
E. MODIFICATION. This Lease may not be modified except by a written
instrument signed by the parties hereto.
F. SEVERABILITY. If, for any reason whatsoever, any of the provisions
hereof shall be unenforceable or ineffective, all of the other provisions
shall be and remain in full force and effect.
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G. RECORDATION. Tenant shall not record this Lease or a short form
memorandum hereof.
H. EXAMINATION OF LEASE. Submission of this Lease to Tenant does not
constitute an option or offer to lease and this Lease is not effective
otherwise until execution and delivery by both Landlord and Tenant.
I. ACCORD AND SATISFACTION. No payment by Tenant of a lesser amount than
the Rent or any endorsement on any check or letter accompanying any check
or payment of Rent shall be deemed an accord and satisfaction of full
payment of Rent, and Landlord may accept such payment without prejudice to
Landlord's right to recover the balance of such Rent or to pursue other
remedies.
J. EASEMENTS. Landlord may grant easements on the Project and dedicate for
public use portions of the Project without Tenant's consent; provided that
no such grant or dedication shall substantially interfere with Tenant's use
of the Premises. Upon Landlord's demand, Tenant shall execute, acknowledge
and deliver to Landlord documents, instruments, maps and plats necessary to
effectuate Tenant's covenants hereunder.
K. DRAFTING AND DETERMINATION PRESUMPTION. The parties acknowledge that
this Lease has been agreed to by both the parties, that both Landlord and
Tenant have consulted with attorneys with respect to the terms of this
Lease and that no presumption shall be created against Landlord because
Landlord drafted this Lease. Except as otherwise specifically set forth in
this Lease, with respect to any consent, determination or estimation of
Landlord required in this Lease or requested of Landlord, Landlord's
consent, determination or estimation shall be made in Landlord's good faith
opinion, whether objectively reasonable or unreasonable.
L. EXHIBITS. Exhibits A through F attached hereto are hereby incorporated
herein by this reference.
M. NO LIGHT, AIR OR VIEW EASEMENT. Any diminution or shutting off of light,
air or view by any structure which may be erected on lands adjacent to or
in the vicinity of the Building shall in no way affect this Lease or impose
any liability on Landlord.
N. NO THIRD PARTY BENEFIT. This Lease is a contract between Landlord and
Tenant and nothing herein is intended to crate any third party benefit.
O. WAIVER OF JURY TRIAL. IF ANY ACTION OR PROCEEDING BETWEEN LANDLORD AND
TENANT TO ENFORCE THE PROVISIONS OF THIS LEASE (INCLUDING AN ACTION OR
PROCEEDING BETWEEN LANDLORD AND THE TRUSTEE OR DEBTOR IN POSSESSION WHILE
TENANT IS A DEBTOR IN A PROCEEDING UNDER ANY BANKRUPTCY LAW) PROCEEDS TO
TRIAL, LANDLORD AND TENANT HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY
IN SUCH TRIAL. Landlord and Tenant agree that this Paragraph constitutes a
written consent to waiver of trial by jury within the meaning of California
Code of Civil Procedure Section 631(a)(2), and Tenant does hereby authorize
and empower Landlord to file this Paragraph and or this Lease, as required,
with the clerk or judge of any court of competent jurisdiction as a written
consent to waiver of jury trial.
ADDITIONAL PROVISIONS
37. A. ERISA REPRESENTATIONS. Tenant represents to Landlord that with the
exception of this Lease, neither the Tenant nor any affiliate of the Tenant
is a tenant under a lease or any other tenancy arrangement (1) with
(a) Riggs & Company, a division of Riggs Bank N.A., as trustee of the
Multi-Employer Property Trust; (b) Riggs Bank N.A., as trustee of the
Multi-Employer Property Trust; (c) the Multi-Employer Property Trust; (d)
the National Bank of Washington Multi-Employer Property Trust, the previous
name of the Multi-Employer Property Trust; (e) the Riggs National Bank of
Washington, D.C., as trustee of the Multi-Employer Property Trust; (f) the
Corporate Drive Corporation as trustee of the Corporate Drive Nominee
Realty Trust; (g) Arboretum Lakes-I, L.L.C.; (h) Village Green at Seven
Bridges, L.L.C.; (i) Pine Street Development, L.L.C.; (j) MEPT Realty LLC;
(k) MEPT, L.L.C.; (l) Cabrillo Properties LLC; (m) Valencia L.L.C.; (n)
Centrepointe Distribution Center LLC; (o) Mission Trails LLC; (p)
Northridge Business Center LLC; (q) Oyster Point Tech Center LLC (r)
Meadows Office Building LLC; or (s) MEPT West Hills, LLC; (t) MEPT Sea-Tac
Company LLC; (u) Sea-Tac Hotel Venture LLC; (v) MEPT Newark, LLC; or (w)
MEPT Greenspoint, L.L.C.; OR (2) involving any property in which any one or
more of the entities named in clauses (1)(a) through (e) are known by the
Tenant to have an ownership interest.
B. ANTI-DISCRIMINATION. There shall be no discrimination against or
segregation of any person or group of persons, on account of race, color,
creed, religion, sex, marital status, national origin, or ancestry, in the
leasing, subleasing, transferring, use, occupancy, tenure or enjoyment of
the Premises, nor shall the Tenant or any person claiming under or through
the Tenant establish or permit any such practice or practices of
discrimination or segregation with reference to the selection, location,
number, use or occupancy of tenants, sublessees, subtenants, or vendees in
the Premises.
C. RIGHT OF FIRST OFFER. Landlord may acquire and develop a third phase of
the Project ("Phase III") as depicted in Exhibit A-3. In the event that
during the term of this Lease Landlord obtains a controlling interest in
Phase III and provided that as of the date of the First Offer Notice and
the Commencement Date of the Lease Tenant is not in default under this
Lease, Tenant shall have a one-time right of first offer ("Right of First
Offer") to lease all of the space in the approximately 60,000 square foot
building proposed in Phase III ("Phase III, Building. 1) and/or in the
approximately 46,000 square foot building proposed in Phase III ("Phase
III, Building. 2") which Right of First Offer shall be on the terms and
conditions set forth in this Section. Landlord shall provide Tenant with
written notice ("First-Offer Notice") when Landlord determines at
Landlord's sole discretion that Phase III will become available for lease
to third parties. Provided that Tenant is not in Default as of the time of
exercise of the Right of First Offer, if Tenant wishes to exercise its
Right of First Offer, Tenant shall within ten (10) business days after
delivery of the First-Offer Notice to Tenant, deliver written notice to
Landlord of its intention to exercise its Rights of First Offer on either
the Phase III, Building 1 or the Phase III, Building 2, or both. Tenant
must lease all space in either building, or both. If Tenant does not
exercise its Right of First Offer and elect to lease space available in
Phase III within the prescribed response period, the Right of First Offer
shall terminate and the Landlord shall be free to lease the space to anyone
on any terms at any time during the Lease Term, without any obligation to
provide Tenant with a further right to lease that space.
If Tenant timely and validly exercises the Right of First Offer, Tenant and
Landlord shall negotiate in good faith the terms of the lease on the Phase
III space. The lease shall be in substantially the form of this Lease
15
<PAGE> 19
except for economic and credit issues including, but not limited to, Rent,
Tenant Improvement Allowance, Operating Costs, Security Deposit,
Assignment and Subletting rights, and Tenant's right to make repairs and
alterations without Landlord's consent. The lease shall be in substantially
the form of this Lease except for economic and credit issues including,
but not limited to, Rent, Tenant Improvement Allowance, Operating Costs,
Security Deposit, Assignment and Subletting rights, and Tenant's right to
make repairs and alterations without Landlord's consent. If Landlord and
Tenant cannot agree as to the terms of the lease within twenty (20) days
of Tenant's written notice exercising its Right of First Offer, Landlord
shall be free to lease the Phase III space to anyone on any terms it deems
acceptable.
D. OPTION TO EXTEND TERM. Provided that Tenant is not in Default as of the
time of exercise of each option and the commencement date of each Option
Period, Tenant shall have two (2) successive five (5) year options to
extend the Term of the Lease for the Premises in "as is" condition at the
expiration of the original Lease Term and, if the first option is duly
exercised, at the end of the first Option Term. All of the terms and
conditions of this Lease except for Base Rent and the provisions of this
Paragraph shall be applicable to the Option Period.
The Base Rent for the Premises under such option shall be the then current
market rent for comparable facilities in the proximate South San Francisco
market area. The definition of comparable facilities shall incorporate the
parking amenities of the Premises, and the Building's location, age,
quality, amenities, identity, exterior appearance, interior improvements,
and type of construction, excluding Tenant Improvements in excess of
$50.00 per rentable square foot.
Tenant shall give Landlord written notice to exercise its option at least
nine (9) but not more than twelve (12) months prior to the expiration of
the then current Term for the Premises. Within fifteen (15) days after
Tenant exercises its option to extend, Landlord shall provide Tenant with
the Base Rent, as determined by Landlord, for the Option Period. The
parties are obligated to negotiate in good faith to agree on the Base
Rent. If the parties have not mutually agreed on the Base Rent within
thirty (30) days from notification by Landlord to Tenant of Landlord's
determination of Base Rent, each party hereto shall appoint one
representative who shall be a licensed real estate broker experienced in
the leasing of comparable facilities in the County of San Mateo to act as
an arbitrator. The two (2) arbitrators so appointed shall determine the
Base Rent for the relevant Option Period. The determination of said Base
Rent shall be made by said two (2) arbitrators within sixty (60) days from
notification by Landlord to Tenant of Landlord's determination of Base
Rent and they shall submit said determination in writing and signed by
said arbitrators in duplicate. One of the written notifications shall be
delivered to Landlord and the other to Tenant.
In the event the two (2) arbitrators of the parties hereto cannot agree on
the Base Rent for the Premises herein, said two (2) arbitrators shall
appoint a third arbitrator who shall be a licensed real estate broker
experienced in the leasing of comparable facilities in the County of San
Mateo, to act as an arbitrator. The Base Rent for the relevant Option
Period shall be independently determined by the third of said arbitrators,
which said determination shall be made within ninety (90) days from
notification by Landlord to Tenant of Landlord's determination of Base
Rent. The role of the third arbitrator shall then be to immediately select
from the proposed resolution of arbitrators #1 and #2 the one that most
closely approximates the third arbitrator's determination of Base Rent.
The third arbitrator shall have no right to adopt a compromise or middle
ground or any modification of either of the two final proposed
resolutions. The resolution that the third arbitrator chooses as most
closely approximating his determination of the Base Rent shall constitute
the decision of all arbitrators and shall be final and binding upon the
parties.
The parties hereto shall pay the charges of the arbitrator appointed by it
and any expenses incurred by such arbitrator. The charges and expenses of
the third arbitrator, as provided herein, shall be paid by the parties
hereto in equal shares.
In the event either arbitrator #1 or arbitrator #2 fails to present a Base
Rent figure within the thirty (30) day period, the Base Rent presented by
the other arbitrator shall be considered final and binding on both parties.
Notwithstanding anything to the contrary herein contained, Tenant's right
to extend the term by exercise of the foregoing Option shall be
conditioned upon the following: (i) at the time of the exercise of the
Option, and at the time of the commencement of the extended term, Tenant
or a Permitted Assignee shall be in possession of and occupying the
Premises for the conduct of its business therein and the same shall not be
occupied by any other assignee, subtenant or licensee, and (ii) the notice
of exercise shall constitute a representation by Tenant to Landlord
effective as of the date of the exercise and as of the date of
commencement of the extended term, that Tenant does not intend to seek to
assign the lease in whole or in part, or sublet all of any portion of the
Premises, the election to extend the term being for purposes of utilizing
the Premises for Tenant's purposes in the conduct of Tenant's or a
Permitted Assignee's business therein.
E. The Agreement Regarding Shell Modifications attached hereto as Exhibit
G is hereby incorporated into and made a part of this Lease.
16
<PAGE> 20
IN WITNESS WHEREOF, the parties hereto have executed this Lease the day and
year first above written.
"Landlord"
OYSTER POINT TECH CENTER LLC, a Delaware Limited Liability Company
By: RIGGS & COMPANY, a division of Riggs Bank N.A.,
as Trustee of the Multi-Employer Property Trust, a trust
organized under 12 C.F.R. Section 9.18, its sole member
By: /s/ MARY ANN MARTINS
---------------------------------------
Its: Managing Director
---------------------------------------
"Tenant"
VIROLOGIC, INC., a California corporation
By: /s/ MARTIN H. GOLDSTEIN
---------------------------------------
Its: Pres. & CEO
---------------------------------------
By:
---------------------------------------
Its:
---------------------------------------
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EXHIBIT A-1
LEGAL DESCRIPTION OF PROJECT
PARCEL 1:
Parcel B as shown on Parcel Map no. 98-033 filed December 30, 1998, Book 71 of
Parcel Maps, pages 13 and 14, San Mateo County Records.
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<PAGE> 22
EXHIBIT A-2
SITE PLAN
[PLAN DIAGRAM OMITTED]
<PAGE> 23
EXHIBIT A-3
PHASE III PLAN
[PLAN DIAGRAM OMITTED]
<PAGE> 24
EXHIBIT B-12
INITIAL IMPROVEMENTS OF PREMISES
1. LANDLORD'S WORK
1.1 Landlord's work ("Landlord's Work") shall be defined as
the construction of the Building shell more particularly described in Exhibit
C, including ADA facilities, to the extent required by the City. The scope of
the shell construction shall include: The Building shell, roof, all exterior
windows and doors, fire sprinklers at the roof line, utilities and services to
the Building's exterior, an elevator, the parking lot, exterior common areas,
interior stairs (consisting of stair assemblies and metal handrails to be
provided F.O.B.), and landscaping.
1.2 Landlord's work shall be completed through Landlord's
general contractor, South Bay Construction, in compliance with all applicable
codes and regulations.
1.3 Landlord shall pay for all costs involved in shell
construction described in Paragraph 1.1, including, but not limited to, hard
costs and architecture, engineering, consultants, shell building permit and
impact fees, utility fees, loan fees, construction interest, transaction fees
and development fees. Any changes in the Building shell required by Tenant and
agreed to by Landlord shall be at Tenant's sole cost and expense.
2. TENANT'S WORK
2.1 All interior improvements, including installation of
Trade Fixtures, as indicated in Exhibit B-3, furnishings and Building Core
Improvements (collectively referred to herein as "Tenant's Work"), shall be
constructed by Tenant at its sole cost and expense. All of the plans and
specifications for Tenant's Work shall be approved by Landlord in advance of
commencing any construction. Such approval by Landlord, shall not be
unreasonably withheld or delayed. The parties agree that certain items of the
Building Core improvements (specifically, proof loading of the roof structure
and penetrations in the second deck for future mechanical drafts) shall be
completed during shell construction by Landlord and the cost of such items shall
be deducted from the Tenant Improvement Allowance. Tenant shall invest a minimum
of sixty dollars ($60.00) per rentable square foot, including the Tenant
Improvement Allowance supplied by Landlord, excluding soft costs ("Soft Costs"
are those items described in Paragraphs 2.2 (v) through (xi)), and excluding the
items described on Exhibit B-3 hereto, to improve the entire Premises. Tenant
shall, within thirty (30) days following the term Commencement Date, provide
Landlord with an accounting, certified by an officer of Tenant, itemizing all
amounts expended by Tenant to improve the Premises. If the amount expended by
Tenant is less than sixty dollars ($60.00) per rentable square foot of the
Building, (exclusive of Soft Costs), Tenant shall, together with the accounting,
deliver to Landlord an unconditional irrevocable letter of credit (separate from
but for a purpose similar to the Letter of Credit described in paragraph 19 of
this Lease) in an amount equal to the difference between the amount expended by
Tenant and sixty dollars ($60.00) per rentable square foot of the Building
(exclusive of Soft Costs). At any time prior to the twenty-forth month of the
Lease Term (but in no event more frequently than monthly) Tenant may provide
Landlord with an amended accounting, as above, showing additional amounts
expended by Tenant to improve the Premises (exclusive, however, of the costs of
demolition and reconstruction of the Tenant's Work) since the last date shown on
the immediately preceding accounting. If the total amount expended by Tenant is
less than sixty dollars ($60.00) per rentable square foot of the Building
(exclusive of Soft Costs), the amount of the letter of credit may be reduced to
a sum equal to the difference between the amount expended by Tenant and sixty
dollars ($60.00) per rentable square foot of the Building (exclusive of Soft
Costs). On or before the last day of the twenty-forth month of the Lease Term,
with an amended accounting as above showing in addition any amounts expended by
Tenant to improve the Premises since the last date shown on Tenant's most recent
accounting (exclusive, however, of the costs of demolition and reconstruction of
the Tenant's Work), if the total amount expended by Tenant is less than sixty
dollars ($60) per rentable square foot, Landlord shall be immediately entitled
to draw down from the letter of credit an amount equal to the difference between
the amount expended by Tenant and sixty dollars ($60.00) per rentable square
foot. Upon such draw the requirement that this letter of credit be maintained
shall terminate. The letter of credit shall (a) designate Tenant or its
assignees as beneficiary, (b) be issued by a financial institution approved by
Landlord, (c) be in form satisfactory to Landlord, and (d) be for a term of
twenty-six months. Landlord shall not be required to deliver any certifications
or documentation of any kind to the issuer in order to make a draw, other than
Landlord's written demand stating that Landlord is entitled to draw in
accordance with the terms of this Lease. The issuer shall not be required to
conduct any inquiry or investigation before paying Landlord the requested amount
of the draw. Landlord may assign, transfer or pledge the letter of credit to any
lender or purchaser in connection with any financing or sale of the Premises.
Landlord shall provide to Tenant a Tenant Improvement Allowance of up to a
maximum of thirty-five dollars ($35.00) per rentable square foot on the Premises
(Tenant Improvement Allowance") which shall include Soft Costs. The Tenant
Improvement Allowance shall be reduced by the amount Landlord expends on
Building Core Improvements as stated above. Tenant shall promptly pay when due
all costs for Tenant's Work. Landlord shall reimburse Tenant a portion of such
costs not to exceed in the aggregate the amount of the Tenant Improvement
Allowance less amounts expended by Landlord for Building Core Improvements as
provided above. Tenant shall, not more frequently than monthly after
commencement of the construction of Tenant's Work, submit to Landlord requests
for reimbursement of amounts expended by Tenant for Tenant's Work. Each request
shall be certified by an officer of Tenant and shall include, without
limitation, (i) copies of all invoices paid by Tenant for which reimbursement is
sought (ii) proof of payment of each invoice (iii) a fully executed
unconditional lien release from each payee, and (iv) such additional information
as Landlord may reasonably request. After Landlord has received and approved
each request as provided herein, Landlord shall process the approved request for
payment by its lender and upon disbursement by Landlord's Lender reimburse
Tenant promptly for one-half of all amounts shown in the request as expenditures
for costs to which the Tenant Improvement Allowance applies, as hereinbelow
provided, up to the maximum amount set forth above.
2.2 Tenant Improvement Allowance (thirty-five dollars
($35.00) per rentable square foot on the Premises) shall be applied to, but not
limited to the following costs:
(i) Costs paid to general contractors and subcontractors for
labor, material, permits, bonds and the like relating to
the Premises;
(ii) Construction management fee to Landlord in the amount of
two (2%) percent of the Tenant Improvement Allowance;
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<PAGE> 25
(iii) Building core improvements items such as lobbies, restrooms,
locker areas with showers, janitorial room, interior finishes
for the stairs (including framing, lights, etc.), deck
penetrations, structurally reinforcing the roof for Tenant's
HVAC, caulking of interior concrete joints, and screening of
mechanical equipment ("Building Core Improvements");
(iv) Cost of labor, material and overhead for change orders
approved by Landlord in accordance with this Exhibit B-1 and
minor field changes;
(v) Architectural, engineering and other design fees;
(vi) Plans, drawings and printing costs;
(vii) Insurance premiums;
(viii) Cost of any reasonably required reports, surveys or studies;
(ix) The cost of utility connections, installation of utility
facilities and meters and user installation or hook-up fees;
(x) All governmental fees and development impact fees, including
fees for permits, charges and costs of obtaining governmental
approvals;
(xi) Recording costs and filing fees; and
2.3 Tenant's architect, as described in Paragraph 2.4, shall
furnish all architectural and engineering plans and specifications ("Core
Improvement Plans and Specifications") required for the construction of
Building Core Improvements. Core Improvement Plans and Specifications shall be
based on the Interior Improvement Specifications attached as Exhibit B-2
herein, or as otherwise indicated by Landlord. It is understood and agreed by
Tenant that any minor changes from any plans and specifications that may be
reasonably necessary during construction of the Premises shall not affect,
change or invalidate this Lease and shall not require Tenant's consent.
2.4 Tenant shall contract with WHL Architects for Tenant's Work
to furnish architectural plans and specifications ("Tenant's Plans and
Specifications") required for the construction of Tenant's Work. Tenant's Plans
and Specifications shall also be based on the Interior Improvement
Specifications attached hereto as Exhibit B-2.
2.5 Tenant shall contract with South Bay Construction for
completion of Tenant's Work. Tenant's suppliers, contractors, workmen and
mechanics shall be subject to approval by Landlord, which shall not be
unreasonably withheld or delayed, prior to the commencement of work and shall
be subject to Landlord's administrative control while performing their work.
Landlord shall coordinate with Tenant's representative the scheduling of
Tenant's Work. Prior to commencement of Landlord's Work, Tenant shall notify
Landlord with respect to any special scheduling requirements of Tenant in
connection with the installation of Tenant's Work. If at any time any supplier,
contractor, workman or mechanic performing Tenant's Work hinders or delays any
other work in the Building or performs any work which may or does impair the
quality, integrity or performance of any portion of the Building. Tenant shall
take all steps necessary to bring an end to the delay or hindrance, and the
contractor in question shall not recommence Tenant's Work until reasonable
steps have been taken to avoid further delay or hindrance. In performing
Tenant's Work, Tenant shall be required to employ contractors (and
subcontractors) which (a) are parties to, and bound by, a collective bargaining
agreement with a labor organization affiliated with the Building and
Construction Trades Council of the AFL-CIO and (b) employ only members of such
labor organizations to perform work within their respective jurisdictions),
with the exception of labor hired for network cabling for personal and
mainframe computer systems and related items. Tenant shall reimburse Landlord
for any repairs of corrections of Landlord's Work or of Tenant's Work or of any
portion of the Building caused by or resulting from the work of any supplier,
contractor, workman or mechanic with whom Tenant contracts. Landlord shall
provide access to Tenant's suppliers, contractors, workmen and mechanics so as
to achieve timely completion and occupancy of the Premises.
3. COMPLETION DATES
3.1 Tenant shall notify Landlord in advance of the
approximate date on which Tenant's Work will be substantially completed and
will notify Landlord when Tenant's Work is in fact substantially completed
("Substantial Completion"). If any dispute shall arise as to whether the
Premises are substantially completed and ready for Tenant's occupancy, a
certificate furnished by an independent architect mutually agreed to by Landlord
and Tenant certifying the date of Substantial Completion shall be conclusive.
The following shall constitute tenant delays ("Tenant Delays") under the Lease:
(a) Tenant's failure to furnish complete and timely instructions or
approvals;
(b) Tenant's failure to submit conceptual plans for Tenant's Work
to Landlord with forty-five (45) days from execution of lease:
(c) Tenant's failure to submit preliminary Plans and Specifications
for Tenant's Work for approval by Landlord within seventy-five (75) days from
execution of lease unless caused by Landlord's delay in responding to Tenant's
conceptual plans;
(d) Tenant's failure to enter into contracts with WHL Architects
and South Bay Construction for design and construction of Tenant's Work within
ninety (90) days of execution of Lease;
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<PAGE> 26
(e) Tenant's failure to diligently pursue to completion the
construction of Tenant's Work unless caused by Landlord, its agents or
contractors;
(f) Tenant's failure to deliver a Certificate of Occupancy
and a set of as-built plans to Landlord within thirty (30) days after
Substantial Completion of Tenant's Work, unless caused by a delay by Landlord.
Tenant Delays resulting in postponement of the Term Commencement Date shall
cause Tenant to be charged Rent under the terms of the Lease for each day of
such delay. All time periods indicated above shall be computed on a calendar
basis with no allowance for holidays, weekends or other customs.
3.2 Except as otherwise provided in Section 3 of this Lease,
failure of Landlord to deliver possession of the Premises within the time and in
the condition provided for in the Lease will not give rise to any claim for
damages by Tenant against Landlord or Landlord's general contractor. If Landlord
fails to deliver the Premises in the condition as provided for under this Lease,
Landlord shall promptly correct any such deficiencies, excluding any immaterial
deficiencies which do not prevent Tenant from using the Premises for their
intended use. If Landlord fails to correct such deficiencies within a reasonable
time, Tenant may pursue its legal remedies against Landlord.
3
<PAGE> 27
EXHIBIT B-2
INTERIOR IMPROVEMENT SPECIFICATIONS
NOTE: Not all specified items listed herein refer to this project.
1. WALLS
-----
A. All walls receive paint to be properly prepared. Texture to be
medium spray finish with 1 coat of latex paint to cover. Paint to be
Pittsburg Doric white.
B. Demising walls, between tenant spaces to roof height shall be metal
studs with 5/8" gypsum board both sides. Fire tape finish. U.O.N.
See T.I. drawings for size, gauge and spacing.
C. Restroom studs with 5/8" gypsum board to 6" above adjacent ceiling
U.O.N. with friction fit sound batt insulation. Wainscot at wet
walls to be +4' - 0' high with ceramic tile. Texture to be smooth
finish with semi-gloss latex paint U.O.N.
D. Interior Office Walls. Metal studs with 5/8" gypsum board on both
sides to underside of ceiling, U.O.N. Perimeter office walls between
office and warehouse areas to 6" above ceiling, U.O.N. per Title 24
energy calculation requirements.
E. Other. As may be directed by code or tenant purposes for fire
protection, sound or energy insulation, demountability and
aesthetics.
F. See tenant improvements drawings for specifications on size, gauge
and spacing of studs.
2. CEILING
-------
A. General. Finished ceiling height to be 10'.
B. Restrooms. Finished ceiling height to be 9' with metal joist with
5/8" gypsum board. Texture to be smooth finish with semi-gloss latex
paint with friction fit sound batt insulation. See tenant
improvement drawings for specifications on size, gauge and spacing
of joists.
C. Office. 2' x 4' T-bar suspended ceiling system with 2' x 4' Second
Look II acoustical ceiling tile by Armstrong or approved equal.
D. Other. As may be directed by tenant or as may otherwise be required
by tenant or codes. See tenant improvement drawings.
3. FLOOR COVERING
--------------
A. Carpet - 30 oz. cut pile nylon Design Weave "Westbridge"/26 oz. loop
Design Weave "Caravan" or equivalent without pad. Carpet to be glued
down installation. Color to be selected by Tenant.
B. V.C.T. Armstrong "Standard Excelon" - 1/8" gauge: 12" x 12" or
approved equal.
C. Sheet vinyl Congoleum "Forever" or approved equal.
D. Base. 2-1/2" covered base at carpet and resilient floors.
E. Ceramic tile at toilet rooms with 6" ceramic tile base.
F. Sealed Concrete. Sealed with a clear acrylic sealer.
4. DOORS
-----
A. Interior. SP Particleboard Core Oak 3'-0" x 9'-0", Rotary Sawn Red
Oak Veneer door by Weyerhauser or equal. 20 minutes rated at one
hour fire walls.
6. FRAMES (DOORS & WINDOWS)
------------------------
A. Timely Standard prefinished steel door and sidelight frame in
standard white. "Timely II" at rated walls.
B. Other. As may be directed by code.
6. HARDWARE
--------
A. Latch set and lockset - Schlage D Series in brushed stainless steel
with H.C. Levon lever.
B. Butts - 2 pair per door finished to match.
7. RESTROOM ACCESSORIES
--------------------
A. Water closet, white American Standard flush valve #2221.18 with
Olsonite #95 seat and Sloan Ryal #110.3 flush valve. H.C. stalls to
have white #9468.018 water closet with Sloan Royal #115.3 flush
valve.
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B. Urinal, white American Standard "Washbrook" #6501.010 with Sloan
Royal #186 flush valve.
C. Lavatory, American Standard with faucet #0355.027 and drain
#2103.786.
D. Recessed towel dispenser/waste receptacle, Bobrick #B3944.
E. Surface mounted seat cover dispenser, Bobrick.
F. Surface mounted toilet tissue dispenser, Bobrick #B2740.
G. Hook, Bobrick #B682.
H. Grab bars, Bobrick #B6806, 36" and 42".
I. Toilet partitions, Bobrick 108Q series, plastic laminate, or
equivalent. Baked enamel floor-braced with coat hook/bumper.
J. Urinal partitions, Bobrick 1085 "Duraline" series, or equivalent.
K. Recessed toilet room accessories, Bobrick B301, B3570 and B35704, or
equivalent.
8. HVAC
Gas-fired roof-mounted VAV system for cooling, heating and ventilation.
Designed and installed in accordance with the California Energy Act -
Title 24.
1. All cuts in roof to be properly sealed, flashed and hot
mopped.
9. ELECTRICAL
A. Designed and installed in accordance with the California Energy Act
- Title 24.
B. Power distributed as required by tenant for warehouse, assembly and
manufacturing equipment, appliance operation and special office
machinery shall be ceiling hung U.O.N.
C. Warehouse/Manufacturing/Assembly Lighting. High Bay THS 150-watt
high pressure sodium light fixtures by Lithonia or equal in areas
with open ceiling. U.O.N. See tenant improvement drawings, T-bar
dropped ceiling 2' x 4' recessed mounted fluorescent fixtures with
light levels ranging from 15-75 foot candles as specified by Owner.
Fixtures same as for office lighting following.
D. Office lighting is 2' x 4' recessed mounted fluorescent ceiling
fixtures, Lithonia 2PM4G B3 40 18LS 120 or equal, approved by Owner,
with parabolic lens.
E. Downlights, Halo #117-1CT-331-P Coilex Baffle 7" O.D. trim.
F. Wallwashers. Halo #1176-T-425P Coilex Baffle with scoop trim 7" O.D.
G. Track Lights. Halo 120v single circuit power trac with Coilex
Continental lampholdes #L733P.1.
H. Wall-mounted fixture at restroom. Lithonia Wallens #W240-120A.
I. Other lighting as required by tenant or code.
J. Provide plates for all power outlets. Provide pull wires at all
telephone and cable (C.R.T.) pull locations as indicated on plan.
K. Illuminated exit signs as required by tenant or code.
L. Emergency lighting as required by code.
10. FINISHES/SPECIALTIES
A. Special office wall or floor finishes. See tenant improvement
drawings or specifications.
B. Lunch room, conference room, coffee or wet bar cabinetry and
plumbing. See tenant improvement drawings.
2
<PAGE> 29
EXHIBIT B-3
MOVEABLE EQUIPMENT AND TRADE FIXTURES
13. MOVEABLE EQUIPMENT & TRADE FIXTURES INCLUDES:
14.
M. Special Devices used in Research Activities for the Following Processes:
1. Storage
2. Analysis
3. Synthesis
4. Measurement
5. Chemical, Biological, or Physical Manipulation
6. Drug Screening Equipment
7. Clinical Assays
8. Information Systems
H. Computers
I. Computer Terminals and Printers
J. Computer Network
K. Microwave Antennas
L. Telephone Sets, Operator Switchboards
M. Modular Prefabricated Enclosures (Cold & Warm Rooms)
N. Security System Controls
O. Cylinders, Tanks, Batteries and Other Equipment for Generating or Supplying
the Following Services to the Basic Building Systems (Other Than Electrical
and HVAC):
9. Laboratory Compressed Air
10. Nitrogen
11. Carbon Dioxide
12. Oxygen
13. Other Gases
14. Process Steam
15. Vacuum
16. Distilled Water
17. Deionized Water
18. Supplemental Process
J. Refrigeration
K. Heating
2. Emergency Generator
3. Non-Standard Frequency and Voltage Electricity
L. Architectural
10. Window Coverings
11. Lab Casework, Counters, and Shelving
B. Electrical
11. Telephone Terminal Backboard & Cabinet
12. Telephone Conduit, Wiring Outlets and Cover Plates
13. Computer Conduit, Wiring, Outlets and Cover Plates
14. Motor Generator
15. Security System Wiring
16. Critical Conditioning Monitoring Equipment
F. Mechanical-HVAC
12. Hoods
13. Hood Exhaust Duct Work
14. Hepafilters
C. Mechanical-Plumbing
13. Distribution Lines, Connections and Cover Plates for Process Gases and
Fluids such as Carbon Dioxide, Nitrogen, Oxygen, Freon and Distilled
and Deionized Water
14. Sinks and Fixtures
15. Equalization Vault and All Interior Components
16. Vacuum Piping
<PAGE> 30
EXHIBIT C
INITIAL PROJECT SPECIFICATIONS
GENERAL DESCRIPTION
- Two story concrete tilt-up building.
- Clear heights of 13'6" on the top floor and 14'6" on the bottom floor.
- Bay spacing of 34'6" x 33' on the top and bottom floors.
BUILDING STRUCTURE
- All foundations to include footings, foundation walls or other building
foundation components required to support the entire building structure.
- Columns shall be steel box.
- All columns, beams, joists, purlins, headers, or other framing members
to support the roof, roofing membrane and stair openings.
- Ten inch (10") thick structural concrete slab on grade with #4
reinforcing bars at 18" on center and #6 reinforcing bars at 13" on
center.
- Two and a half (2-1/2") thick concrete slab over metal deck supported
by structural open web and columns.
- Exterior walls that enclose the perimeter of the building with steel
reinforcing and structural connections that may be necessary or
required.
- All exterior glass and glazing with pained aluminum frames. Glass to be
tinted as appropriate to the aesthetic design of the building. All
exterior doors, door closer and locking devices necessary for proper
functioning.
- Hybrid Vulcraft panel roof system to support roofing membrane.
- Four (4) ply built-up roofing (including a base sheet, two plys and a
cap sheet) and all flashings by Owens-Corning, Johns Manville, or equal.
- Painting of all concrete walls with Tex-Coat or Kel-Tex textural paint.
All caulking of exterior concrete joint in preparation for painting.
- The foundation and structural framing should be designed to support a
minimum live load of 100 pounds per share foot in all areas on top
floor and 125 pounds on bottom floor.
- The floor-to-floor height of the building shall allow a minimum of
10'0" interior drop ceiling height.
- Roof hatch and ladder within each building.
- One (1) 3,500 lb. capacity elevator.
- Three (3) interior stairs consisting of stair assemblies with metal
handrails to be provided f.o.b. at job site.
PLUMBING
- Underground sanitary sewer laterals connected to the city sewer main
the street and piped into the building and under the concrete slab on
grade for the length of the building. Sewer lines to consist of a four
inch (4") sanitary sewer line and a four inch (4") biowaste sewer line.
Sanitary sewer line under the slabs will be in a close proximity to the
building restroom locations.
- Domestic water mains connected to the city water main in the street and
stubbed to the building. Water main to the building shall be three
inches (3") in size with a three inch (3") supply line.
- Roof drain leaders piped and connected to the site storm drainage
systems. Overflow drains daylight two inches (2") above grade.
<PAGE> 31
ELECTRICAL
- Gas lines connected from the city public utility mains and gas meters
adjacent to, and in close proximity to the building. Meters supplied by
utility company.
- All primary electrical service to the building that is complete
including underground conduit and wire feeders from transformers pads
into the building's main switchgear electrical room. The electrical
characteristics of the secondary side of transformers shall be 277/480
volt, 3 Phase and the rated capacity of the transformers shall be 2,000
amps for each building.
- Underground pull section, meter, and panel(s), for site lighting and
landscaping.
- Underground conduit from the street to the building for telephone trunk
line service by Pacific Telephone. Conduit to the building shall not be
less than 4".
- An electrically operated landscape irrigation controller that is a
complete and functioning system.
- Underground conduit from the building to the main fire protection
system, shut off valve (PIV) for installation for security alarm wiring.
- All parking lot and landscaping lighting to include fixtures,
underground conduit, wire, distribution panel and controller. All
exterior lighting shall be a complete and functioning system.
FIRE PROTECTION
- A complete and fully functional overhead system distributed throughout
the building with a density of 2/3000.
- System shall include all sprinkler heads that may be required by
building codes above the ceiling, when ceilings are installed.
LOADING
- Two (2) grade level 10' x 12' roll-up doors.
SITEWORK
- All work outside the building perimeter walls shall be considered site
work for the building shell and shall include grading, asphalt
concrete, paving, landscaping (hard and soft), landscape and
irrigation, storm drainage, utility service laterals, curbs, butters,
sidewalks, specialty paving (if required), retaining walls, fencing and
gates, trash enclosures, planters, sign monuments, parking lot and
landscape lighting and other exterior lighting per code.
- Paving sections for automobile and truck access shall be according to
the Geological Soils Report.
- All parking lot striping to include handicap signage and spaces.
- Underground site storm drainage system shall be connected to the city
storm system main.
EXCLUSION
The following items are not included in the building shell:
- Roof screen.
- Proof loading roof for mechanical equipment.
- Deck penetrations for mechanical equipment.
- Caulking of interior concrete joints.
- Framing and finishes for interior stairs.
- Electrical panels and distribution.
- Security system.
-3-
<PAGE> 32
10. With the exception of this Lease and except as otherwise disclosed in
writing to Landlord, neither the Tenant nor any affiliate of the Tenant is a
tenant under a lease or any other tenancy arrangement (i) with (a) ___________;
(b) ____________; (c) ____________; or (ii) involving any property in which the
entities named in clauses (___), (___) or (___) are known by the Tenant to have
an ownership interest.
DATED this ____________ day of __________, 19___.
TENANT:
________________________________________
By: ____________________________________
Name: __________________________________
Its: ___________________________________
(Tenant to attach Exhibit A to Tenant Estoppel Certificate, List of
Defects, if necessary.)
2
<PAGE> 33
EXHIBIT D
TENANT ESTOPPEL CERTIFICATE
TO: Oyster Point Tech Center LLC
c/o Trammel Crow NW, Inc.
1241 East Hillsdale Blvd., Ste. 200
Foster City, CA 94404
THIS IS TO CERTIFY:
1. That the undersigned is the Tenant under that certain Lease dated
_______________, and, if applicable, amended on _______________, by and between
_______________ ("Landlord"), and the undersigned ("Tenant") covering those
certain premises located as shown on the drawing made part of the Lease (the
"Premises").
2. That said Lease is in full force and effect and, except as noted in
Paragraph 1, above, has not been modified, changed, altered or amended in any
respect, and is the only lease or agreement between the Tenant and the Landlord
affecting the Premises.
3. To the best of Tenant's knowledge, the information set forth below
is true and correct:
(a) Square footage of the Premises: _____________________________
(b) Annual rent as of the Commencement of Lease: $_______________
(c) Current annual rent (if different than at commencement):
$______________
(d) Commencement date of Lease: _________________________________
(e) Lease termination date: _____________________________________
(f) Rent paid to and including: _________________________________
(g) Security deposit: $__________________________________________
(h) Prepaid rent for and in amount of: $_________________________
(i) Free rent period: ___________________ to ____________________
(j) Amount of current monthly escrow payment obligations with
respect to taxes, insurance, and Common Area Maintenance
charges under the Lease:
Taxes: $________________________
Insurance: $________________________
Common Area Maintenance Charges: $________________________
(k) Dates through which Tenant has paid monthly escrow payments
and Common Area Maintenance charges:
Escrow Payment for Taxes: ________________________
Escrow Payment for Insurance: ________________________
Common Area Maintenance Charges: ________________________
4. DELETE IF TENANT HAS NOT OCCUPIED THE PREMISES: Tenant now occupies
the Premises, accepts the Premises in their current condition subject only to
those punch list items listed in Exhibit A, if any, and is not aware of any
defect in the Premises except as described in Exhibit A, if any.
5. DELETE IF TENANT HAS OCCUPIED THE PREMISES: Tenant does not occupy
the Premises. The status of the plans and specifications for and the
construction of Tenant improvements is described in Exhibit A. Tenant is
familiar with the Tenant improvement work done to date and is not aware of any
defect in such work, except as described in Exhibit A.
6. No rent has been paid in the current month other than as disclosed
in Paragraph 3. No free rent or other concessions, benefits, or inducements
other than as specified in the Lease have been granted to Tenant or undertaken
by the Landlord.
7. Tenant has not been granted any renewal, expansion, purchase options
or any rights of first refusal, except as disclosed in writing in the Lease.
8. Neither tenant nor to the best of Tenant's knowledge, Landlord is
in breach of the Lease and there has not occurred any event, act, omission or
condition which by notice or lapse of time or both or otherwise, will result in
any breach by Tenant or to the best of Tenant's knowledge, by Landlord. As of
the date hereof and except as set forth in the Lease, the undersigned is
entitled to no credit, offset or deduction in rent. Tenant knows of no
liabilities or obligations of Landlord which have accrued but are unsatisfied
under the Lease as of the date of this Certificate.
9. To the best of Tenant's knowledge, there are no actions, whether
voluntary or otherwise, pending against the undersigned under the bankruptcy
laws or other laws for the relief of debtors of the United States or any state
thereof.
<PAGE> 34
EXHIBIT E
RULES AND REGULATIONS
FOR TENANT'S CONTRACTOR(S)
1. Tenant's contractor will be responsible for making arrangements with
Landlord as to time for the use of Building and equipment such as
elevators and loading areas. The delivery of materials, equipment and
supplies to the Building or Premises must be coordinated with Landlord
at least two (2) business days prior to delivery. The Building debris
box is not to be used for waste produced by Tenant's contractor.
2. Tenant's contractor shall not interfere with the Landlord's contractor
and sub-trades in any way and will cooperate fully with same.
3. All Tenant's contractor's waste and debris must be removed from the
Premises and Building regularly and promptly. All combustible waste and
debris must be stored in a covered, fire-proof container prior to
removal.
4. Tenant's contractor and sub-trades shall take all precautions to ensure
the security and the site condition of the Premises and Building in
which the work is being performed, including their own tools, equipment
and materials, and are responsible for any damage caused by employees
and sub-trades to any part of the Building or Premises.
5. Tenant's contractor shall remove and properly replace underfloor duct
access covers as required for Tenant's trades and services. Any damage
to underfloor duct access coverings shall be repaired or replaced by
Tenant's contractor to the satisfaction of Landlord.
6. Tenant's contractor must provide their own fire protection equipment,
have same on premises at all times and conform to any requirements of
Landlord or Landlord's contractor regarding fire protection.
7. Tenant's contractor shall carry out all work in compliance with all
Federal, State, County and City Building Codes and applicable Acts,
Ordinances and Statutes.
8. Tenant's contractor shall provide all their own protective devices and
coverings, so as to protect the Building finishes provided by Landlord
in the Building.
9. No attachments to or use of window frames and mullions, ceiling systems,
glass, ceiling frame or Building frame, will be permitted without the
expressed written consent of Landlord.
10. All Landlord's contractors, employees and trades must be confined to the
area in which work is being performed.
11. Tenant or Tenant's contractor shall carry builder's risk insurance with
limits of not less than the amount requested by Landlord, insurance
covering loss or damage to the work during the course of construction;
worker's compensation/employer's liability insurance covering all
employees of contractor and subcontractor. All such policies shall name
Landlord and Tenant as additional insureds. A certificate of insurance
must be provided to Landlord prior to commencement of work.
12. Any construction, alteration, maintenance, repair, replacement, removal
or decoration undertaken by Tenant's contractor shall be carried out in
a good, workmanlike, and prompt manner, shall comply with applicable
statutes, laws, ordinances, regulations, rules, orders and requirements
of the authorities having jurisdiction thereof, and shall be subject to
supervision by Landlord or its employees, agents, or contractors. All
construction shall be performed in a timely manner without delays or
interruptions.
13. Tenant's contractors shall not use excessive quantities of electricity
or water and shall not shut off any water, electricity, sprinkler
systems or other services without first obtaining Landlord's express
authorization.
1
<PAGE> 35
EXHIBIT F
DISCLOSED HAZARDOUS MATERIALS LIST
2
<PAGE> 36
EXHIBIT G
AGREEMENT REGARDING SHELL MODIFICATIONS
As set forth in Exhibit B-1 to this Lease, Landlord is to complete and pay for
all costs involved in certain construction ("Landlord's Work"). Landlord's Work
includes the construction of a building shell more particularly described in
Exhibit C to the Lease ("Initial Project Specifications"). Landlord's Work is
to be completed through Landlord's general contractor, South Bay Construction
("Contractor"). Tenant desires to have Landlord modify certain items set forth
in the initial Project Specifications ("Modifications"). Regarding such
Modifications, Landlord and Tenant hereby agree to the following terms and
conditions:
1. During Landlord's construction of Landlord's Work Tenant may request in
writing ("Proposal") Modifications to the Initial Project Specifications
which Tenant desires. Landlord shall have the right to approve or to
disapprove each Proposal in Landlord's sole and absolute discretion. In
the event Landlord approves some or all of the proposed Modifications,
Landlord shall have Contractor estimate the cost of such Modifications,
which cost shall be presented in writing to Tenant for Tenant's review
and written approval. Tenant's failure to approve or disapprove the
estimated cost of the approved Modifications within five (5) calendar
days after receipt of the estimate shall be conclusively deemed a
disapproval.
2. Tenant shall be solely responsible for and pay to Landlord: (a) all
costs reasonably incurred by Landlord for Landlord's review of a Tenant
Proposal, including, but not limited to, any architectural, engineering
and consulting costs incurred by Landlord or Contractor to define the
scope and/or estimate the costs of any Modifications proposed by Tenant
(such costs shall be paid by Tenant whether the Proposal is approved or
disapproved by Landlord and regardless of whether Tenant approves or
disapproves the estimated cost of the proposed Modifications); (b) the
actual increase in cost as a result of constructing the approved
Modifications; (c) a fee for the Contractor's overhead and profit per
Landlord's construction contract with Contractor; and (d) all other
costs and expenses reasonably incurred by Landlord in connection with
the review, approval, and construction of the Modifications, including,
but not limited to, permit fees and change order costs (collectively,
the "Modifications Costs"). Tenant shall pay the Modifications Costs
within ten (10) days after Landlord submits to Tenant an invoice
therefor, provided that Landlord shall not submit an invoice for any
Modifications Costs until Landlord has been billed for such Cost.
Landlord may invoice the Modifications Costs for any Proposal in one or
more separate invoices in Landlord's discretion. Tenant's failure to pay
the invoiced Modifications Costs in full within the time prescribed
above shall constitute an Event of Default by Tenant under Section
26A(2) of this Lease and in such case Landlord shall be entitled to all
of its remedies under this Lease in addition to its remedies at law as a
result of such failure to pay.
3. Landlord and Tenant acknowledge that review of Proposals and
construction of proposed Modifications could delay construction of the
Landlord's Work and, consequently, the date ("Early Possession Date")
on which Landlord grants permission to Tenant to commence construction
of Tenant's Work pursuant to Section 3 of this Lease. Landlord and
Tenant hereby agree that any such delay shall be a "Tenant Delay" for
the purposes of this Lease, and, in particular, for purposes of Section
3 of the Lease. For purposes of determining the number of days of such
Tenant Delay, Landlord and Tenant agree that the good faith joint
determination thereof by Dan Kirby (of Dowler Gruman Architects) and
Douglas White (of WHL Architects), Landlord's and Tenant's architects,
respectively, shall be conclusive and binding on both Landlord and
Tenant.
1
<PAGE> 1
EXHIBIT 10.3
BASIC LEASE INFORMATION
<TABLE>
<S> <C>
LEASE DATE: November 23, 1999
TENANT: VIROLOGIC, INC., a California corporation
TENANT'S ADDRESS: Until the Term Commencement Date:
270 East Grand Avenue
South San Francisco, CA 94080
After the Term Commencement Date:
345 Oyster Point Boulevard
South San Francisco, CA 94080
LANDLORD: Trammell Crow Northern California Development, Inc.
LANDLORD'S ADDRESS: 1241 East Hillsdale Blvd., Ste. 200
Foster City, CA 94404
Phone: (650)578-8100
Fax: (650)345-2506
PROJECT: A two (2) building project totaling approximately 107,960 square feet to be constructed on
approximately 13,924 acres of land to be known as 335 Oyster Point Boulevard, South San
Francisco, California 94080 which legal description is contained herein in Exhibit A-1.
BUILDING: That approximately 53,980 square foot two (2) story building to be constructed as part of the
Project and to be known as 335 Oyster Point Boulevard, South San Francisco, California 94080, as
approximately depicted on the site plan attached as Exhibit A-2.
PREMISES: The Building to be known as 335 Oyster Point Boulevard, South San Francisco, California 94080 as
shown herein in Exhibit A-3.
PERMITTED USE:
Office, laboratory and warehouse, and other related legal uses subject to Landlord's approval
which shall not be unreasonably withheld.
PARKING DENSITY: 3.3 non-designated spaces per 1000 square feet of rentable area.
ESTIMATED TERM
COMMENCEMENT DATE: July 20, 2001
LENGTH OF TERM: One Hundred Twenty (120) months
</TABLE>
<TABLE>
<S> <C> <C> <C>
RENT:
Base Rent MONTHS OF TERM RENT PER SQUARE FOOT ESTIMATED MONTHLY RENT
-------------- -------------------- ----------------------
Months 1-12 $1.97 psf per month $106,341
Months 13-24 $2.03 psf per month $109,579
Months 25-36 $2.09 psf per month $112,818
Months 37-48 $2.15 psf per month $116,057
Months 49-60 $2.22 psf per month $119,836
Months 61-72 $2.28 psf per month $123,074
Months 73-84 $2.35 psf per month $126,853
Months 85-96 $2.42 psf per month $130,632
Months 97-108 $2.50 psf per month $134,950
Months 109-120 $2.57 psf per month $138,729
Base Rent is subject to adjustment as provided in Sections 6A and 37E of this Lease
Estimated First Year $.40 psf per month, estimated at $21,592/mo.
Basic Operating Cost
SECURITY DEPOSIT: $127,933
TENANT'S PROPORTIONATE SHARE:
Subject to change, but based on the rentable square feet of the Premises divided by the total
rentable square feet of the Building and the Project, respectively, estimated as follows:
Of Building: 100%
Of Project 50%
BROKER: Cresa Partners, LLC
Trammell Crow NW, Inc.
</TABLE>
The foregoing Basic Lease Information is incorporated into and made a part of
this Lease. Defined terms in the Lease shall have the meanings ascribed to them
in the Basic Lease Information unless otherwise stated. Each reference in this
Lease to any of the Basic Lease Information shall mean the respective
information above and shall be construed to incorporate all of the terms
provided under the particular Lease paragraph pertaining to such information. In
the event of any conflict between the Basic Lease Information and the Lease, the
latter shall control. The term "days" as used in this Lease means "calendar
days" unless the specific term "business days" is used.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Basic Lease Information............................................... (i)
Table of Contents..................................................... (ii)
1. Premises.............................................................. 1
2. Term.................................................................. 1
3. Possession............................................................ 1
4. Use................................................................... 1
5. Rules and Regulations................................................. 3
6. Rent.................................................................. 3
7. Basic Operating Cost.................................................. 3
8. Insurance and Indemnification......................................... 5
9. Waiver of Subrogation................................................. 6
10. Landlord's Repairs.................................................... 6
11. Tenant's Repairs...................................................... 7
12. Alterations........................................................... 7
13. Signs................................................................. 7
14. Inspection/Posting Notices............................................ 7
15. Utilities............................................................. 8
16. Subordination......................................................... 8
17. Financial Statements.................................................. 8
18. Estoppel Certificate.................................................. 8
19. Security Deposit...................................................... 9
20. Tenant's Remedies..................................................... 9
21. Assignment and Subletting............................................. 10
22. Authority of Parties.................................................. 10
23. Condemnation.......................................................... 11
24. Casualty Damage....................................................... 11
25. Holding Over.......................................................... 12
26. Default............................................................... 12
27. Liens................................................................. 13
28. Transfers By Landlord................................................. 13
29. Right of Landlord to Perform Tenant's Covenants....................... 13
30. Waiver................................................................ 14
31. Notices............................................................... 14
32. Attorneys' Fees....................................................... 14
33. Successors and Assigns................................................ 14
34. Force Majeure......................................................... 14
35. Brokerage Commission.................................................. 14
36. Miscellaneous......................................................... 14
37. Additional Provisions................................................. 15
Signatures................................................................. 17
</TABLE>
<PAGE> 3
EXHIBITS:
<TABLE>
<CAPTION>
<S> <C>
Exhibit A-1....................................................Legal Description
Exhibit A-2............................................................Site Plan
Exhibit B-1.....................................Initial Improvements of Premises
Exhibit B-2..................................Interior Improvement Specifications
Exhibit B-3................................Moveable Equipment and Trade Fixtures
Exhibit C.........................................Initial Project Specifications
Exhibit C-1..................Site Plan, Elevations and Preliminary Planting Plan
Exhibit D............................................Tenant Estoppel Certificate
Exhibit E..........................Rules and Regulations for Tenants' Contractor
Exhibit F.....................................Disclosed Hazardous Materials List
Exhibit G................................Agreement Regarding Shell Modifications
</TABLE>
<PAGE> 4
LEASE
THIS LEASE is made as of this 23 day of November, 1999, by and between Trammell
Crow Northern California Development, Inc., a Delaware corporation,
(hereinafter called "Landlord") and ViroLogic, Inc., a California corporation
(hereinafter called "Tenant").
PREMISES
1. Landlord hereby leases to Tenant, and Tenant leases from Landlord, the
Premises, for the Term, at the rental, and upon all of the terms and
conditions set forth in this Lease. The Premises is comprised of the
building which is commonly known and designated as 335 Oyster Point
Boulevard, South San Francisco, CA (sometimes referred to herein as the
"Building") and is depicted on Exhibit A-3. The Premises comprises one
hundred percent (100%) of the rentable area of the Building. The Building
is part of the Project. The Building is crosshatched on Exhibit A-2.
Landlord shall, at its sole cost and expense, construct the Building
shell, parking lot, exterior common areas, and landscaping approximately
in the manner depicted on Exhibit C and Exhibit C-1 hereto ("Initial
Project Specifications"). The Initial Project Specifications shall
include, without limitation, the Building shell, roof, all exterior
windows and doors, fire sprinklers below the roof line and below the
second deck line, and utilities and services to the Building exterior.
Notwithstanding their depiction in the Initial Project Specifications, the
roof screens shall be provided by Tenant at Tenant's sole cost and
expense. Upon Landlord's delivery of Early Possession (as provided in
Section 3 hereof), Tenant shall perform Tenant's Work (as defined in
Exhibit B-1 hereto) for the Premises. Tenant's Work shall be performed in
the manner described in Exhibit B-1 hereto.
TERM
2. The Term of this Lease ("Term") shall commence on the term commencement
date ("Term Commencement Date") and continue in full force and effect for
the number of months specified as the Length of Term in the Basic Lease
Information or until this Lease is terminated as otherwise provided
herein. If the Term Commencement Date is a date other than the first day
of the calendar month, the Term shall be the number of months of the
Length of Term in addition to the remainder of the calendar month
following the Term Commencement Date. The Term Commencement Date shall be
the date which is the one-hundred twentieth (120th) day after the date on
which Landlord tenders Early Possession of the Premises to Tenant in
accordance with the provisions of Section 3 of this Lease. Within ten
(10) days after requested by Landlord, Landlord and Tenant shall execute
an amendment to this Lease stating and confirming the Term Commencement
Date and Tenant's acceptance of the Premises.
POSSESSION
3. Landlord shall permit Tenant, or Tenant's agents, to enter the Premises
("Early Possession") immediately after the concrete floor for the second
deck of the Building has been poured for the purpose of performing
Tenant's Work and installing Tenant's equipment, Fixtures, Trade Fixtures
and furniture. The estimated date for Early Possession is March 20, 2001.
If Landlord is unable by February 3, 2002 for any reason other than
Tenant Delay or Force Majeure to deliver to Tenant Early Possession,
Tenant may by written notice to Landlord given not later than February 8,
2002, terminate this lease in which case this Lease shall terminate upon
Landlord's receipt of such notice and Landlord shall promptly refund to
Tenant the first month's Base Rent and Security Deposit and cancel the
Letter of Credit. For purposes of this Section 3 only "Tenant Delay"
shall mean (i) any default by Tenant under this Lease, including, but not
limited to, any failure to pay when due any monetary sum due hereunder;
(ii) any failure by Tenant to deliver within the time required hereunder
to any request by Landlord for information or approval required
hereunder; (iv) any construction delay caused by Tenant's request for
changes in the Initial Project Specifications or other Project
Specifications which was caused by Landlord or its agents and is not
related to Tenant's particular proposed use of the Premises; or (v) any
construction delay caused by interference with the performance of
Landlord's Work caused by Tenant or Tenant's agents. Landlord shall
deliver, and Tenant shall accept delivery and take immediate possession
of the Premises on the Term Commencement Date. The terms "Fixture" or
"Trade Fixture" as used herein shall be defined as anything attached in
any manner to Landlord's property, except that equipment shall not be
deemed a Fixture merely because of the manner in which such equipment is
connected to the electrical supply of the Building. All portable,
unattached items are Tenant's property. Tenant and Landlord agree that
Tenant does not own any Trade Fixtures in the Premises except those items
listed in Exhibit B-3 or otherwise agreed to in a separate writing
between Landlord and Tenant. Landlord owns all remaining Trade Fixtures.
In connection with Tenant's Early Possession, from and after the date on
which Tenant or its agent first enters the Premises therefor, all of the
terms and conditions of this Lease (including, but not limited to,
insurance and indemnity provisions) shall be applicable to Tenant's
occupancy save and except for the requirement to pay Base Rent and Basic
Operating Costs.
USE
4. A. GENERAL. Tenant shall use the Premises for the Permitted Use and for
no other use or purpose. Tenant shall control Tenant's employees, agents,
customers, visitors, invitees, licensees, contractors, assignees and
subtenants (collectively, "Tenant's Parties") in such a manner that
Tenant and Tenant's Parties cumulatively do not exceed the Parking
Density at any time. Tenant and Tenant's Parties shall have the
nonexclusive right to use, in common with other parties occupying the
Building or the Project, the parking areas and driveways of the Project
subject to such rules and regulations as Landlord may from time to time
prescribe.
B. LIMITATIONS. Tenant shall not permit any odors, smoke, dust, gas,
substances, noise or vibrations to emanate from the Premises, nor take
any action which would constitute a nuisance or would disturb, obstruct
or endanger any other tenants of the Building or the Project or interfere
with their use of their respective premises. Storage outside the Premises
of materials, vehicles or any other items is prohibited. Tenant shall not
use or allow the Premises to be used for any improper or unlawful
purpose, nor shall Tenant cause or maintain or permit any nuisance in, on
or about the Premises or the Project. Tenant shall not commit or suffer
the commission of any waste in, on or about the Premises or the Project.
Tenant shall not allow any sale by auction upon the Premises or the
Project, or place any loads upon the floors, walls or ceilings which
endanger the structure, or place any harmful liquids in the drainage
system of the Building or the Project. No waste, materials or refuse
shall be dumped upon or permitted to remain outside the Premises except
in trash containers placed inside exterior enclosures designated for that
purpose by Landlord. Landlord shall not be responsible to Tenant for the
non-compliance by any other tenant or occupant of the Building or the
Project with any of the above-referenced rules or any other terms or
provisions of such tenant's or occupant's lease or other contract.
C. COMPLIANCE WITH REGULATIONS. By entering the Premises, Tenant accepts
the Premises in the condition existing as of the date of such entry,
subject to Landlord's representations and warranties set forth in this
Lease and subject to all existing or future applicable municipal, state
and federal and other governmental
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statutes, regulations, laws and ordinances, including zoning ordinances and
regulations governing and relating to the use, occupancy and possession of the
Premises and the use, storage, generation and disposal of Hazardous Materials
(hereinafter defined) in, on and under the Premises (collectively
"Regulations"). Except for matters which occurred prior to the Term Commencement
Date and were not caused directly or indirectly by Tenant or by any of Tenant's
Parties, Tenant shall, at Tenant's sole expense, strictly comply with all
Regulations now in force or which may hereafter be in force relating to the
Premises and the use of the Premises and/or Tenant's and Tenant's Parties' use,
storage, generation of Hazardous Materials in, on and under the Premises. Tenant
shall at its sole cost and expense obtain any and all licenses or permits
necessary for Tenant's use of the Premises. Tenant shall promptly comply with
the requirements of any board of fire underwriters or other similar body now or
hereafter constituted. Tenant shall not do or permit anything to be done in, on,
or about the Premises or bring or keep anything which will in any way increase
the rate of any insurance upon the Premises, the Building or the Project, or
upon any contents therein or cause a cancellation of said insurance or otherwise
affect said insurance in any manner. Tenant shall indemnify, defend, protect and
hold Landlord harmless from and against any loss, cost, expense, damage,
attorneys' fees or liability arising out of the failure of Tenant to comply with
any Regulation or comply with the requirements as set forth herein.
Notwithstanding the foregoing or anything to the contrary contained in this
Lease, Tenant shall not be responsible for compliance with any laws, codes,
ordinances or other governmental directives where such compliance is caused by
Landlord's failure to cause the Building Shell to be constructed in compliance
with all then applicable laws. Landlord warrants that on the Commencement Date
the Building Shell shall comply with all laws, codes, ordinances, and other
governmental requirements applicable to the Premises and/or the Project as of
the date the building permit was issued.
D. HAZARDOUS MATERIALS. Tenant shall not cause, or allow any of Tenant's Parties
to cause, any Hazardous Materials to be generated, stored, used, treated,
removed, transported, handled and disposed of on or about the Premises, the
Building or the Project without Landlord's prior written approval, provided
that, Tenant shall be permitted to use the Disclosed Hazardous Materials in the
ordinary course of its business subject to the conditions and requirements of
this Lease. Landlord's conditional authorization of the Disclosed Hazardous
Materials shall be strictly limited to the types and quantities described in
Exhibit F, and shall not be construed as an authorization for Tenant to
generate, store, use, treat, remove, transport, handle or dispose of any
additional quantities of Disclosed Hazardous Materials or any other Hazardous
Materials in, on, about or under the Premises, Building or the Project. Tenant
acknowledges that any change in the types or quantities or Disclosed Hazardous
Materials described in Exhibit F, or any material change in the means and
methods of generating, storing, treating, removing, transporting, handling or
disposing of such Disclosed Hazardous Materials, shall require the prior written
approval of Landlord in each instance. Tenant represents and warrants to
Landlord that (a) prior to its use of Hazardous Materials on the Premises, it
will have received or obtained issuance of, and will maintain in effect, all
permits, approvals, licenses, or other authorizations necessary for Tenant's
activities with respect to the Disclosed Hazardous Materials, and (b) Tenant has
not been cited, fined, or otherwise found to be in violation of any governmental
requirement or fire, safety and insurance requirements or regulations applicable
to any Disclosed Hazardous Materials or any other Hazardous Materials in any
other leased premises. At least once during each twelve (12) month of the Lease
Term, Tenant shall provide Landlord with an inventory list describing the
minimum and maximum quantities of each of the Disclosed Hazardous Materials
generated, stored, used, treated, removed, transported, handled and disposed of
on or about the Premises, the Building or the Project the succeeding twelve (12)
months, and a copy of its Hazardous Materials Management Plan ("HMMP") in the
form submitted by Tenant to the fire department. Tenant agrees to notify
Landlord immediately if Tenant receives notification or otherwise becomes aware
of: (a) any threatened or actual release, spill or discharge of any Disclosed
Hazardous Materials in, on, about or under the Premises, the Building or the
Project, or (b) any threatened or actual lien, action, or proceeding or notice
that any Disclosed Hazardous Materials or any other Hazardous Materials is not
being generated, stored, used, treated, removed, transported, placed,
manufactured, handled, or disposed of in strict compliance with any and all
governmental requirements and regulations or applicable fire, safety or
insurance requirements and regulations. If Tenant or any of Tenant's Parties is
partially or wholly responsible or potentially responsible for such condition,
situation, lien, action or notice, Tenant's notice to Landlord shall include a
statement as to the actions Tenant proposes to take in response to such
condition, situation, lien, action or notice. As used in this Lease, "Hazardous
Materials" shall include, but not be limited to, hazardous, toxic and
radioactive materials and those substances defined as "hazardous substances,"
"hazardous materials," "hazardous wastes," "toxic substances," or other similar
designations in any federal, state, or local law, regulation, or ordinance.
Landlord shall have the right at all reasonable times to inspect the Premises
and to conduct tests and investigations to determine whether Tenant is in
compliance with the foregoing provisions, the costs of all such inspections,
tests and investigations to be borne by Tenant. Tenant shall indemnify, defend
(by counsel selected by Landlord), protect and hold Landlord harmless from and
against all liabilities, losses, costs and expenses, demands, causes of action,
claims or judgments directly or indirectly arising out of the use, generation,
storage or disposal of Hazardous Materials by Tenant or any of Tenant's
Parties, which indemnity shall include, without limitation, attorneys' and
consultants' fees, the cost of any required or necessary repair, cleanup or
detoxification, and the preparation of any closure or other required plans,
whether such action is required or necessary prior to or following the
termination of this Lease. Neither the written consent by Landlord to the use,
generation, storage or disposal of Hazardous Materials nor the strict compliance
by Tenant with all laws pertaining to Hazardous Materials shall excuse Tenant
from Tenant's obligation of indemnification pursuant to this Paragraph 4.D.
Tenant's obligations pursuant to the foregoing indemnity shall survive the
termination of this Lease. Notwithstanding anything to the contrary in this
Lease, Landlord warrants that on the Commencement Date to the best of Landlord's
knowledge the Premises and the Project, and the land and groundwater thereunder,
are free of contamination in excess of allowable limits by any Hazardous
Materials introduced by Landlord or its employees, officers, or directors or,
except for substances and materials within allowable limits used in the ordinary
course of construction, by Landlord's contractors. In the event of any breach of
the foregoing warranty, Landlord shall promptly rectify the same as the sole
costs and expense and shall indemnify, defend, and hold Tenant harmless from and
against any actual damages, liability, suits, losses, claims, actions, costs or
expenses (including attorneys' and consultants' fees and costs) suffered by
Tenant in connection with any such breach.
RULES AND REGULATIONS
5. Tenant shall faithfully observe and comply with any rules an regulations
Landlord may from time to time prescribe in writing for the purpose of
maintaining the proper care, cleanliness, safety, traffic flow and general order
of the Premises, the Building, or the Project. Tenant shall cause Tenant's
Parties to comply with all such rules and regulations. Landlord shall not be
responsible to Tenant for the non-compliance by any other tenant or occupant of
the Building or the Project with any of the rules and regulations.
RENT
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6. A. BASE RENT. Base Rent for the Premises shall be calculated on the basis
of the rentable square feet of the Premises at the rates specified in the
Basic Lease Information and shall be subject to upward adjustment as
provided in Section 37E of this Lease. Rentable square feet shall include
all areas inside the Building as determined by Landlord's architect.
Tenant's obligation to pay Base Rent for the Premises shall commence on
the Term Commencement Date. Upon completion of Landlord's Work (as defined
in Exhibit B-1 hereto), Landlord's architect shall certify to Landlord the
retable square feet of the Premises, measured from the outside of exterior
walls, but including areas below the "dripline" in the exterior entrances
and exits and including all areas within the Building such as, but not
limited to, utility rooms and shafts for mechanical equipment. Landlord's
architect shall also certify the rentable square feet of the Project.
Landlord's architect's certification of rentable square feet for the
Premises, the Building and the Project shall be binding upon both Landlord
and Tenant for all purposes under this Lease. Landlord and Tenant
currently estimate that the rentable square feet of the Premises and the
Base Rent for the Premises will be as stated in the Basic Lease
information. Upon receipt of the architect's certification of rentable
square feet, the actual Base Rent shall be determined and, if requested by
Landlord, Landlord and Tenant shall enter into an amendment of this Lease
which states the actual Base Rent as so determined. Upon determination of
the actual Base Rent for the Premises, Landlord and Tenant shall adjust,
if necessary, the Base Rent deposited by Tenant for the first full month
of the Term as provided in Paragraph 6.B, below.
B. PAYMENTS. Tenant shall pay to Landlord, without demand throughout the
Term, Base Rent as specified in the Basic Lease information and finally
determined as provided in Paragraph 6.A., payable in monthly installments
in advance on or before the first day of each calendar month, in lawful
money of the United States, without deduction or offset whatsoever, at the
address specified in the Basic Lease Information or to such other place as
Landlord may from time to time designate in writing. Base Rent and
Estimated Basic Operating Costs as defined in Paragraph 7.A. for the first
full month of the Term (based upon the estimated rentable area as
hereinabove provided) less the Inducement Deposit shall be paid by Tenant
upon Tenant's execution of this Lease. If the obligation for payment of
Base Rent commences on other than the first day of a month, then Base rent
(calculated at the rate applicable to the second full month of the Term)
for the partial month shall be prorated on the basis of the actual number
of days in the month.
C. ADDITIONAL RENT. All monies other than Base Rent required to be paid by
Tenant hereunder, including, but not limited to, the interest and late
charges described in Paragraph 26.D., any monies spent by Landlord
pursuant to Paragraph 29., and Tenant's Proportionate Share of Basic
Operating Costs, as specified in Paragraph 7. of this Lease, shall be
considered additional rent ("Additional Rent"). "Rent" shall mean Base
Rent and Additional Rent.
BASIC OPERATING COST
7. A. BASIC OPERATING COST. In addition to the Base Rent required to be paid
hereunder, Tenant shall pay as Additional Rent, Basic Operating Costs in
the manner set forth below. The Basic Operating Costs shall be calculated
on the basis of Landlord's architect's certification of the rentable
square feet of the Building and the Project. The certification by
Landlord's architect of the rentable square feet of the Building and the
Project shall be conclusive and binding upon both Landlord and Tenant for
all purposes of this Lease. Tenant's obligation to pay Basic Operating
Costs with respect to the Building and the Project shall commence on the
Term Commencement Date. Landlord shall account for each item of Basic
Operating Costs attributable to the Building and the Project, in a
commercially reasonable and customary manner, and unless provided to the
contrary in this Lease, Tenant shall pay be Basic Operating Costs, as set
forth in the Basic Lease Information. "Basic Operating Costs" shall mean
all commercially reasonable and customary expenses and costs of every kind
and nature which Landlord shall pay or become obligated to pay because of
or in connection with the management, maintenance, preservation and
operation of the Building and the Project (determined in accordance with
generally accepted accounting principles, consistently applied) including
but not limited to the following:
(1) TAXES. All real property taxes, possessory interest taxes,
business or license taxes or fees, service payments in lieu of such
taxes or fees, annual or periodic license or use fees, excises,
transit charges, housing fund assessments, open space charges,
assessments, levies, fees or charges general and special, ordinary
and extraordinary, unforeseen as well as foreseen, of any kind
(including fees "in-lieu" of any such tax or assessment) which are
assessed, levied, charged, confirmed, or imposed by any public
authority upon the Project, its operations or the Rent (or any
portion or component thereof) (all of the foregoing being
hereinafter collectively referred to as "real property taxes"), or
any tax imposed in substitution, partially or totally, of any tax
previously included within the definition of real property taxes,
or any additional tax the nature of which was previously included
within the definition of real property taxes, except (a) inheritance
or estate taxes imposed upon or assessed against the Project, or any
part thereof or interest therein, and (b) taxes computed upon the
basis of net income of Landlord or the owner of any interest
therein, except as otherwise provided in the following sentence.
Basic Operating Costs shall also include any taxes, assessments, or
any other fees imposed by any public authority upon or measured by
the monthly rental or other charges payable hereunder, including,
without limitation, any gross income tax or excise tax levied by the
local governmental authority in which the Project is located, the
federal government, or any other governmental body with respect to
receipt of such rental, or upon, with respect to or by reason of the
development, possession, leasing, operation, management,
maintenance, alteration, repair, use of occupancy by Tenant of the
Premises or any portion thereof, or upon this transaction or ay
document to which Tenant is a party creating or transferring an
interest or an estate in the Premises. In the event that it shall
not be lawful for Tenant to reimburse Landlord for all or any part
of such taxes, the Base Rent payable to Landlord under this Lease
shall be revised to net to Landlord the same net rental after
imposition of any such taxes on Landlord as would have been payable
to Landlord prior to the payment of any such taxes.
(2) INSURANCE. All insurance premiums and costs, including but not
limited to, any deductible amounts, premiums and costs of insurance
incurred by Landlord, as more fully set forth in Paragraph 8.A.
herein.
(3) REPAIRS AND IMPROVEMENTS. The cost of all repairs, replacements
and general maintenance for the Premises, the Building and the
Project (except for those repairs expressly made the financial
responsibility of Landlord pursuant to the terms of this Lease,
repairs to the extent paid for by proceeds of insurance or by Tenant
or other third parties, and alterations attributable solely to
tenants of the Project other than Tenant). Such repairs,
replacements, and general maintenance shall include the cost of any
capital improvements made to or capital assets acquired for the
Project or the Building after the Term Commencement Date which
reduce any other Basic Operating Cost but only to the extent of such
reduction as reasonably determined by Landlord, are reasonably
necessary for the health and safety of other occupants of the
Project, or are made to the Building by Landlord after the date of
this Lease and are
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required under any governmental law or regulation, such costs or allocable
portions thereof to be amortized over the useful life thereof, together
with interest on the unamortized balance at the "prime rate" charged at
the time such improvements or capital assets are constructed or acquired
by Wells Fargo Bank, N.A. (San Francisco) plus two (2) percentage points,
but in no event more than the maximum rate permitted by law.
(4) SERVICES. To the extent such expenses are not the obligation of
Tenant under other provisions of this Lease, all expenses relating to
maintenance, janitorial and service agreements and services, and costs of
supplies and equipment used in operating and maintaining the Building and
the Project and the equipment therein and the adjacent sidewalks,
driveways, parking and service areas, including, without limitation, alarm
service, window cleaning, elevator maintenance, the Building exterior
maintenance and Project landscaping.
(5) UTILITIES. To the extent such expenses are not the obligation of
Tenant under other provisions of this Lease, the cost of all utilities
which benefit all or a portion of the Building or the Project.
(6) MANAGEMENT FEE. A management and accounting cost recovery fee
equal to three (3%) percent of the sum of Base Rent and Basic Operating
Cost.
(7) LEGAL AND ACCOUNTING. Reasonable legal and accounting expenses
relating to the Project, including the cost of adults by certified public
accountants.
In the event that the Building is not fully occupied during any fiscal year of
the Term as determined by Landlord, an adjustment shall be made in computing
the Basic Operating Costs for such year so that Tenant pays an equitable
portion of all variable items of Basic Operating Costs, as reasonably
determined by Landlord; provided, however, that in no event shall Landlord be
entitled to collect in excess of one hundred (100%) percent of the total Basic
Operating Costs from all of the tenants in the Building including Tenant.
Basic Operating Costs shall not include the following: specific costs incurred
for the account of, separately billed to and paid by specific tenants; the cost
of redecorating or special cleaning or similar services to individual tenant
spaces, not provided on a regular basis to other tenants of the Building; wages
or salaries paid to executive personnel higher than the property management
level of Landlord not providing full-time service at the Building; the cost of
any new item (not replacement or upgrading of an existing item) which, by
standard accounting principles, should be capitalized (except as provided
above); any charge for depreciation or interest paid or incurred by Landlord;
leasing commissions, finders fees and all other leasing expenses incurred in
procuring tenants in the Building; any costs incurred in the ownership of the
Building, as opposed to the operation and maintenance of the Building,
including Landlord's income taxes, excess profit taxes, franchise taxes or
similar taxes on Landlord's business; preparation of income tax returns;
corporation, partnership or other business form organization expenses;
franchise taxes, filing fees; or other such expenses; or any costs incurred in
cleaning up any environment hazard or condition in violation of any
environmental law (except to the extent caused by Tenant); legal fees for the
negotiation or enforcement of leases; expenses in connection with services or
other benefits of a type which are not Building standard and which are provided
to a single tenant of the Project; any items to the extent such items are
required to be reimbursed to Landlord by Tenant (other than through Tenant's
Additional Rent), or by other tenants or occupants of the Building or by third
parties; the cost of constructing tenant improvements or installations for any
tenant in the Project, including any relocation costs; brokerage commissions,
origination fees, points, mortgage recording taxes, title charges and other
costs or fees incurred in connection with any financing or refinancing or
transfer of the Building and/or any portion of the Project; attorneys' fees and
disbursements, incurred in connection with the leasing of space in the project
(including without limitation the enforcement of any lease or the surrender,
termination or modification of any lease of space in the Project); advertising
and promotional expenses, brochures with respect to the Project; cost of
repairs or replacements occasioned by fire, windstorm or other casualty, which
are paid by insurance or reimbursed by governmental authorities in eminent
domain; overhead and profit increment paid to subsidiaries or affiliates of
Landlord for services on or to the Project, to the extent that the costs of
such services exceed market-based costs for such services rendered by
unaffiliated persons or entitles of similar skill, competence and experience;
penalties, fines, legal expenses, or late payment interest incurred by Landlord
due to violation by Landlord or Landlord's agents, contractors or employees, of
either the payment terms and conditions of any lease or service contract
covering space in the Project or Landlord's obligations as owner of the Building
(such as late payment penalties and interest on real estate taxes, late payment
of utility bills), except to the extent caused by Tenant's failure to timely pay
or perform pursuant to this Lease; any compensation paid to clerks, attendants
or other persons in any commercial concession operated by Landlord in the
Project from which Landlord receives any form of income whatsoever, whether or
not Landlord actually makes a profit from such concession; or costs incurred in
connection with correcting latent defects in any portion of the Building and/or
Project or, except as provided in Section 37E of this Lease, remediating
Hazardous Materials contamination in the Building and/or Project, or in
repairing or replacing Building and/or Project equipment, where such repair or
replacement results from original defects in design, manufacture or installation
rather than from ordinary wear and tear or use. Notwithstanding anything herein
to the contrary, in any instance wherein Landlord, in Landlord's sole
discretion, deems Tenant to be responsible for any amounts greater than Tenant's
Proportionate Share, Landlord shall have the right to allocate costs in any
manner Landlord reasonably deems appropriate.
B. PAYMENT OF ESTIMATED BASIC OPERATING COST. "Estimated Basic Operating
Costs" for any particular year shall mean Landlord's estimate of the Basic
Operating Cost for such fiscal year made prior to commencement of such fiscal
year as hereinafter provided. Landlord shall have the right from time to time
to revise its fiscal year and interim accounting periods so long as the periods
as so revised are reconciled with prior periods in accordance with generally
accepted accounting principles applied in a consistent manner. During the last
month of each fiscal year during the Term, or as soon thereafter as
practicable, Landlord shall give Tenant written notice of the Estimated Basic
Operating Costs for the ensuing fiscal year. Tenant shall pay Tenant's
Proportionate Share of the Estimated Basic Operating Cost with installments of
Base Rent for the fiscal year to which the Estimated Basic Operating Cost
applies in monthly installments on the first day of each calendar month during
such year, in advance. If at any time during the course of the fiscal year,
Landlord determines that Basic Operating Cost is projected to vary from the
then Estimated Basic Operating Cost by more than ten (10%) percent, Landlord
may, by written notice to Tenant, revise the Estimated Basic Operating Cost for
the balance of such fiscal year, and Tenant's monthly installments for the
remainder of such year shall be adjusted so that by the end of such fiscal year
Tenant has paid to Landlord Tenant's Proportionate Share of the revised
Estimated Basic Operating Cost for such year. Upon execution of this Lease,
Tenant shall pay to Landlord the Estimated Basic Operating Cost for the
Premises (calculated on the
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\ estimated rentable square feet) for the first full month of the Term. Upon
final determination of the rentable square feet, Landlord and Tenant shall
adjust such estimated payment.
C. COMPUTATION OF BASIC OPERATING COST ADJUSTMENT. "Basic Operating Cost
Adjustment" shall mean the difference between Estimated Basic Operating
Cost and Basic Operating Cost for any fiscal year determined as hereinafter
provided. Within one hundred twenty (120) days after the end of each fiscal
year, as determined by Landlord, or as soon thereafter as practicable,
Landlord shall deliver to Tenant a statement of Basic Operating Cost for
the fiscal year just ended, accompanied by a computation of Basic Operating
Cost Adjustment. If such statement shows that Tenant's payment based upon
Estimated Basic Operating Cost is less than Tenant's Proportionate Share of
Basic Operating Cost, then Tenant shall pay to Landlord the difference
within thirty (30) days after receipt of such statement. If such statement
shows that Tenant's payments of Estimated Basic Operating Cost exceed
Tenant's Proportionate Share of Basic Operating Cost, then (provided that
Tenant is not in Default under this Lease) Landlord shall credit the
difference against the Estimated Basic Operating Cost payment next due. If
this Lease has been terminated or the Term hereof has expired prior to the
date of such statement, then the Basic Operating Cost Adjustment shall be
paid by the appropriate party within thirty (30) days after the date of
delivery of the statement and this obligation shall survive termination of
the Lease. Should this Lease commence or terminate at any time other than
the first day of the fiscal year, Tenant's Proportionate Share of the Basic
Operating Cost adjustment shall be prorated by reference to the exact
number of calendar days during such fiscal year that this Lease is in
effect.
D. NET LEASE. This shall be a net Lease and Base Rent shall be paid to
Landlord net of all costs and expenses, except as specifically provided to
the contrary in this Lease. The provisions for payment of Basic Operating
Cost and the Basic Operating Cost Adjustment are intended to pass on to
Tenant and reimburse Landlord for all costs and expenses of the nature
described in Paragraph 7.A. incurred in connection with the management,
maintenance, preservation and operation of the Building or the Project and
such additional facilities now and in subsequent years as may be reasonably
determined by Landlord to be necessary to the Building or the Project.
E. TENANT AUDIT. In the event that Tenant shall dispute the amount set
forth in any statement provided by Landlord under Paragraph 7.B. or 7.C.
above, Tenant shall have the right, not later than sixty (60) days
following the receipt of such statement and upon the condition that Tenant
shall first deposit with Landlord the full amount in dispute within sixty
(60) days of receipt of such statement, to cause Landlord's books and
records with respect to Basic Operating Cost for such fiscal year to be
audited by certified public accountants selected by Tenant and subject to
Landlord's reasonable right of approval. The Basic Operating Cost
Adjustment shall be appropriately adjusted on the basis of such audit. If
such audit discloses a liability for a refund in excess of ten (10%)
percent of Tenant's Proportionate Share of the Basic Operating Cost
Adjustment previously reported, the cost of such audit shall be borne by
Landlord; otherwise the cost of such audit shall be borne by Tenant. If
Tenant shall not request an audit in accordance with the provisions of this
Paragraph 7.E. within sixty (60) days after receipt of Landlord's statement
provided pursuant to Paragraph 7.B. or 7.C., such statement shall be final
and binding for all purposes hereof.
INSURANCE AND INDEMNIFICATION
8. A. LANDLORD'S INSURANCE. Landlord agrees to maintain insurance insuring
the Building against fire, lightning, vandalism and malicious mischief
(including, if Landlord elects, "All Risk" coverage, earthquake, and/or
flood insurance), in an amount of not less than one hundred (100%) percent
of the current replacement cost thereof, except where commercially
unreasonable, with deductibles and the form and endorsements of such
coverage as selected by Landlord. Such insurance may also include, at
Landlord's option, insurance against loss of Base Rent and Additional Rent,
in an amount equal to the amount of Base Rent and Additional Rent payable
by Tenant for a period of at least twelve (12) months commencing on the
date of loss. Such insurance shall be for the sole benefit of Landlord and
under Landlord's sole control. Landlord shall not be obligated to insure
any furniture, equipment, machinery, goods or supplies which Tenant may
keep or maintain in the Premises, or any leasehold improvements, additions
or alterations within the Premises. Landlord may also carry such other
insurance as Landlord may deem prudent or advisable, including, without
limitation, liability insurance in such amounts and on such terms as
Landlord shall determine.
B. TENANT'S INSURANCE.
(1) PROPERTY INSURANCE. Tenant shall procure at Tenant's sole cost and
expense and keep in effect from the date of this Lease and at all
times until the end of the Term, insurance on all personal property,
and Fixtures of Tenant and all improvements made by or for Tenant to
the Premises, insuring such property for the full replacement value of
such property.
(2) LIABILITY INSURANCE. Tenant shall procure at Tenant's sole cost
and expense and keep in effect from the date of this Lease and at all
times until the end of the Term either Comprehensive General Liability
insurance or Commercial General Liability insurance applying to the
use and occupancy of the Premises and the Building, and any part of
either, and any areas adjacent thereto, and the business operated by
Tenant, or by any other occupant on the Premises. Such insurance shall
include Broad Form Contractual Liability insurance coverage insuring
all of Tenant's indemnity obligations under this Lease. Such coverage
shall have a minimum combined single limit of liability of at least
two million dollars ($2,000,000.00), and a general aggregate limit of
five million dollars ($5,000,000.00). All such policies shall be
written to apply to all bodily injury, property damage or loss,
personal injury and other covered loss, however occasioned, occurring
during the policy term, shall be endorsed to add Landlord, and
Landlord's lenders and/or joint venture partners and the officers,
agents and employees of each of the foregoing entities, and any party
holding an interest to which this Lease may be subordinated as an
additional insured, and shall provide that such coverage shall be
primary and that any insurance maintained by Landlord shall be excess
insurance only. Such coverage shall also contain endorsements: (i)
deleting any employee exclusion on personal injury coverage; (ii)
including employees as additional insureds; (iii) deleting any liquor
liability exclusion; and (iv) providing for coverage of employer's
automobile non-ownership liability. All such insurance shall provide
for severability of interests; shall provide that an act or omission
of one of the named insureds shall not reduce or avoid coverage to the
other named insureds; and shall afford coverage for all claims based
on acts, omissions, injury and damage, which claims occurred or arose
(or the onset of which occurred or arose) in whole or in part during
the policy period. Said coverage shall be written on an "occurrence"
basis, if available. If an "occurrence" basis form is not available,
Tenant must purchase "tail" coverage for the most number of years
available, and tenant must also purchase "tail" coverage if the
retroactive date of an "occurrence" basis form is changed so as to
leave a gap in coverage for occurrences that might have occurred in
prior years. If a "claims made" policy is ever used, the policy must
be endorsed so that Landlord is given the
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right to purchase "tail" coverage should Tenant for any reason not do
so or if the policy is to be canceled for nonpayment of premium.
(3) GENERAL INSURANCE REQUIREMENTS. All coverages described in this
Paragraph 8.B. shall be endorsed to provide Landlord with thirty (30)
days' notice of cancellation or change in terms. If at any time
during the Term the amount or coverage of insurance which Tenant is
required to carry under this Paragraph 8.B. is, in Landlord's
reasonable judgment, materially less than the amount or type of
insurance coverage typically carried by owners or tenants of
properties located in the general area in which the Premises are
located which are similar to and operated for similar purposes as the
Premises, Landlord shall have the right to require Tenant to increase
the amount or change the types of insurance coverage required under
this Paragraph 8.B. All insurance policies required to be carried
under this Lease shall be written by companies rated A+XII or better
in "Best's Insurance Guide" and authorized to do business in
California. Any deductible amounts under any insurance policies
required hereunder shall be subject to Landlord's prior written
approval. In any event deductible amounts shall not exceed one
thousand dollars ($1,000.00). Tenant shall deliver to Landlord on or
before the Term Commencement Date, and thereafter at least thirty
(30) days before the expiration dates of the expiring policies,
certified copies of Tenant's insurance policies, or a certificate
evidencing the same issued by the insurer thereunder, showing that
all premiums have been paid for the full policy period; and, in the
event Tenant shall fail to procure such insurance, or to deliver such
policies or certificates, Landlord may, at Landlord's option and in
addition to Landlord's other remedies in the event of a Default by
Tenant hereunder, procure the same for the account of Tenant, and the
cost thereof shall be paid to Landlord as Additional Rent.
C. INDEMNIFICATION. Landlord shall not be liable to Tenant for any loss
or damage to person or property caused by theft, fire, acts of God, acts
of a public enemy, riot, strike, insurrection, war, court order,
requisition or order of governmental body or authority or for any damage
of inconvenience which may arise through repair or alteration of any part
of the Building or the Project or failure to make any such repair, except
as expressly otherwise provided in Paragraph 10. Tenant shall indemnify,
defend by counsel acceptable to Landlord, protect and hold Landlord
harmless from and against any and all liabilities, losses, costs, damages,
injuries or expenses, including reasonable attorneys' fees and court
costs, arising out of or related to: (1) claims of injury to or death of
persons or damage to property occurring or resulting directly or
indirectly from the use or occupancy of the Premises, or from activities
of Tenant, Tenant's Parties or anyone in or about the Premises or Project,
or from any cause whatsoever; (2) claims for work or labor performed, or
for materials or supplies furnished to or at the request of Tenant in
connection with performance of any work done for the account of Tenant
within the Premises or Project; and (3) claims arising from any breach or
Default on the part of Tenant in the performance of any covenant contained
in this Lease. The foregoing indemnity shall not be applicable to claims
arising from the gross negligence or willful misconduct of Landlord. The
provisions of this Paragraph shall survive the expiration or termination
of this Lease with respect to any claims or liability occurring prior to
such expiration or termination.
WAIVER OF SUBROGATION
9. To the extent permitted by law and without affecting the coverage provided
by insurance to be maintained hereunder, Landlord and Tenant each waive
any right to recover against the other for: (a) damages for injury to or
death of persons; (b) damages to property; (c) damages to the Premises or
any part thereof, and (d) claims arising by reason of the foregoing due to
hazards covered by insurance to the extent of proceeds recovered
therefrom. This provision is intended to waive fully, and for the benefit
of each party, any rights and/or claims which might give rise to a right
of subrogation in favor of any insurance carrier. The coverage obtained by
each party pursuant to this Lease shall include, without limitation, a
waiver of subrogation by the carrier which conforms to the provisions of
this Paragraph.
LANDLORD'S REPAIRS
10. Landlord shall at Landlord's expense maintain the structural soundness of
the roof, the foundations and exterior walls of the Building in good
repair, reasonable wear and tear excepted; provided that, Landlord shall
not be responsible for the cost of any repairs resulting from damage,
destruction or deterioration which is caused by Tenant, Tenant's Parties,
or by an act or event which is not fully insured. The term "exterior
walls" as used herein shall not include windows, glass or plate glass,
doors, special store fronts or office entries. Landlord shall perform on
behalf of Tenant and other tenants of the Project, as an item of Basic
Operating Cost, the exterior maintenance of the Building, the Project, and
public and common areas of the Project, including but not limited to the
roof, pest extermination, the landscaped areas, parking areas, driveways,
the truck staging areas, fire sprinkler systems, sanitary and storm sewer
lines, utility services, electric and telephone equipment servicing the
Building(s), exterior lighting, and anything which affects the operation
and exterior appearance of the Project, which determination shall be at
Landlord's sole discretion. Except for the expenses directly involving the
items specifically described in the first sentence of this Paragraph 10.,
Tenant shall reimburse Landlord for all such costs in accordance with
Paragraph 7. Any damage caused by or repairs necessitated by any act of
Tenant or Tenant's Parties may be repaired by Landlord at Landlord's
option and at Tenant's expense. Tenant shall immediately give Landlord
written notice of any defect or need of repairs after which Landlord shall
have a reasonable opportunity to repair same. Landlord's liability with
respect to any defects, repairs, or maintenance for which Landlord is
responsible under any of the provisions of this Lease shall be limited to
the cost of such repairs or maintenance unless caused by Landlord's gross
negligence or willful misconduct.
TENANT'S REPAIRS
11. Tenant shall at Tenant's expense throughout the Term of this Lease
maintain all parts of the Premises in a good, clean and secure condition
and promptly make all necessary repairs and replacements, including but
not limited to all windows, glass, doors, walls and wall finishes, floor
covering, heating, ventilating and air conditioning systems, truck doors,
dock bumpers, dock plates and levelers, plumbing work and Fixtures, roof
(exclusive of structural beams), downspouts, electrical and lighting
systems, and fire sprinklers. Tenant shall at Tenant's expense also
perform regular removal of trash and debris. Tenant shall, at Tenant's own
expense, enter into a regularly scheduled preventive maintenance/service
contract with a maintenance contractor for servicing all hot water,
heating and air conditioning systems and equipment within or serving the
Premises. The maintenance contractor and the contract must be approved by
Landlord which approval shall not be unreasonably withheld or delayed. The
service contract must include all services suggested by the equipment
manufacturer within the operation/maintenance manual and must become
effective and a copy thereof delivered to Landlord within thirty (30) days
after the Term Commencement Date.
ALTERATIONS
12. Tenant shall not make, or allow to be made, any Alterations or physical
additions in, about or to the Premises without obtaining the prior written
consent of Landlord, which consent shall not be unreasonably withheld with
respect to proposed alterations and additions which: (a) comply with all
applicable laws, ordinances, rules and regulations; (b) are in Landlord's
opinion, compatible with the Project and its mechanical, plumbing,
electrical, heating/ventilation/air conditioning systems, (c) are
constructed utilizing Union Labor as set forth in
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Section 2.4. of Exhibit B-1: (d) will not interfere with the use and
occupancy of any other portion of the Project by any other tenant or its
invitees; (e) are performed promptly and in a workman like manner; (f) the
Project remains lien free as a result of the construction; and (g) are
constructed using all new materials. Notwithstanding the foregoing,
Tenant may, without the prior consent of Landlord, perform alterations
which do not in the aggregate cost more than (A) in the case of clinical
laboratories, $200,000 per annum, and (B) in all other cases, $50,000 per
annum provided that (i) Tenant gives Landlord not less than thirty (30)
days prior written notice thereof containing a description of the work to
be performed and the estimated cost thereof, and (ii) the work to be
performed does not impair the structural integrity of the Building, is
not visible from the exterior of the Building, and does not involve or
affect any life safety or Building systems, and (iii) the work to be
performed complies in all respects with the requirements of subsections
(a), (c), (d), (e), (f) and (g) of this Section 12. The term "Alteration"
as used herein is defined as alterations, additions, substitutions,
installations, changes and improvements, but excludes minor decorations.
Specifically, but without limiting the generality of the foregoing,
Landlord shall have the right of written consent for all plans and
specifications for the proposed Alterations or additions, construction
means and methods, all appropriate permits and licenses, any contractor
or subcontractor to be employed on the work of Alteration or additions,
and the time for performance of such work. Tenant shall also supply to
Landlord any documents and information reasonably requested by Landlord
in connection with Landlord's consideration of a request for approval
hereunder. Tenant shall reimburse Landlord for all costs which Landlord
may reasonably incur in connection with granting approval to Tenant for
any such Alterations and additions, including any costs or expenses which
Landlord may reasonably incur in electing to have outside architects and
engineers review said plans and specifications. All such Alterations,
physical additions or improvements shall remain the property of Tenant
until termination of this Lease, at which time they shall be and become
the property of Landlord if Landlord so elects; provided, however, that
Landlord may, at Landlord's option, (provided that, at the time Landlord
grants its consent to such Alterations, Landlord notifies Tenant in
writing that removal will be required), require that Tenant, at Tenant's
expense, remove any or all Alterations, additions, improvements and
partitions made by Tenant and restore the Premises by the termination of
this Lease, whether by lapse of time, or otherwise, to their condition
existing prior to the construction of any such alterations, additions,
partitions or leasehold improvements. All such removals and restoration
shall be accomplished in a good and workmanlike manner so as not to cause
any damage to the Premises or Project whatsoever. If Tenant fails to so
remove such alterations, additions, improvements and partitions or
Tenant's Trade Fixtures or furniture, Landlord may keep and use them or
remove any of them and cause them to be stored or sold in accordance with
applicable law, at Tenant's sole expense. In addition to and wholly apart
from Tenant's obligation to pay Tenant's Proportionate Share of Basic
Operating Cost, Tenant shall be responsible for and shall pay prior to
delinquency any taxes or governmental service fees, possessory interest
taxes, fees or charges in lieu of any such taxes, capital levies, or other
charges imposed upon, levied with respect to or assessed against its
personal property, on the value of the alterations, additions or
improvements within the Premises, and on Tenant's interest pursuant to
this Lease. To the extent that any such taxes are not separately assessed
or billed to Tenant, Tenant shall pay the amount thereof as invoiced to
Tenant by Landlord.
SIGNS
13. All signs, notices, graphics and advertising balloons of every kind or
character, visible in or from public view or corridors, the common areas
or the exterior of the Premises, shall be subject to Landlord's prior
written approval. Landlord shall provide, at Landlord's cost, directional
signage on the Project identifying the location of the Building. Tenant
shall not place or maintain any banners whatsoever or any window decor in
or on any exterior window or window fronting upon any common areas or
service area or upon any truck doors or man doors without Landlord's
prior written approval. Any installation of signs or graphics on or about
the Premises and Project shall be subject to any applicable governmental
laws, CC&Rs, ordinances, regulations and to any other requirements
imposed by Landlord. Tenant shall remove all such signs and graphics
prior to the termination of this Lease. Such installations and removals
shall be made in such manner as to avoid injury or defacement of the
Premises, the Building or the Project and any other improvements
contained therein, and Tenant shall repair any injury or defacement,
including without limitation, discoloration caused by such installation or
removal.
INSPECTION/POSTING NOTICES
14. After reasonable notice, except in emergencies where no such notice shall
be required, Landlord, and Landlord's agents and representatives, shall
have the right to enter the Premises to inspect the same, to clean, to
perform such work as may be permitted or required hereunder, to make
repairs or alterations to the Premises or Project or to other tenant
spaces therein, to deal with emergencies, to post such notices as may be
permitted or required by law to prevent the perfection of liens against
Landlord's interest in the Project or to exhibit the Premises to
prospective tenants, purchasers, encumbrances or others, or for any other
purpose as Landlord may deem necessary or desirable; provided, however,
that landlord shall use reasonable efforts not to unreasonably interfere
with Tenant's business operations and shall not, except in the case of an
emergency, enter areas of the Premises marked by Tenant as "sensitive"
unless accompanied by Tenant's representative which Tenant shall make
available to Landlord for such inspections. Tenant shall not be entitled
to any abatement of Rent by reason of the exercise of any such right of
entry. At any time within six (6) months prior to the end of the Term,
Landlord shall have the right to erect on the Premises and/or Project a
suitable sign indicating that the Premises are available for lease.
Tenant shall give written notice to Landlord at least thirty (30) days
prior to vacating the Premises and shall meet with Landlord for a joint
inspection of the Premises at the time of vacating. In the event of
Tenant's failure to give such notice or participate in such joint
inspection. Landlord's inspection at or after Tenant's vacating the
Premises shall conclusively be deemed correct for purposes of determining
Tenant's responsibility for repairs and restoration.
UTILITIES
15. Tenant shall pay directly for all water, gas, heat, air conditioning,
light, power, telephone, sewer, sprinkler charges and other utilities and
services used on or from the Premiss, together with any taxes, penalties,
surcharges or the like pertaining thereto, and maintenance charges for
utilities and shall furnish all electric light bulbs, ballasts and tubes.
If any such services are not separately metered to Tenant, Tenant shall
pay a reasonable proportion, as determined by Landlord, of all charges
jointly serving other premises. Landlord shall not be liable for any
damages (unless caused by Landlord's gross negligence or willful
misconduct) directly or indirectly resulting from nor shall the Rent or
any monies owed Landlord under this Lease herein reserved be abated by
reason of: (a) the installation, use or interruption of use of any
equipment used in connection with the furnishing of any such utilities or
services; (b) the failure to furnish or delay in furnishing any such
utilities or services when such failure or delay is caused by acts of God
or the elements, labor disturbances of any character, or any other
accidents or other conditions beyond the reasonable control of Landlord;
or (c) the limitation, curtailment, rationing or restriction on use of
water, electricity, gas or any other form of energy or any other service
or utility whatsoever serving the Premises or Project. Landlord shall be
entitled to cooperate voluntarily and in a reasonable manner with the
efforts of national, state or local governmental agencies or utility
suppliers in reducing energy or other resource consumption. The
obligation to make services available hereunder shall be subject to the
limitations of any such voluntary, reasonable program.
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SUBORDINATION
16. Without the necessity of any additional document being executed by Tenant
for the purpose of effecting a subordination, this Lease shall be subject
and subordinate at all times to: (a) all ground leases or underlying leases
which may now exist or hereafter be executed affecting the Premises and/or
the land upon which the Premises and Project are situated, or both; and (b)
conditioned upon Tenant's receipt of a nondisturbance agreement in the
lender's customary form, any mortgage or deed of trust which may now exist
or be placed upon said Project, land, ground leases or underlying leases,
or Landlord's interest or estate in any of said items which is specified as
security. Notwithstanding the foregoing, Landlord shall have the right to
subordinate or cause to be subordinated any such ground leases or
underlying leases or any such liens to this Lease. In the event that any
ground lease or underlying lease terminates for any reason or any mortgage
or deed of trust is foreclosed or a conveyance in lieu of foreclosure is
made for any reason, Tenant shall, notwithstanding any subordination,
attorn to and become the Tenant of the successor in interest to Landlord at
the option of such successor in interest. Within ten (10) days after
request by Landlord, and conditioned upon Tenant's receipt of a
nondisturbance agreement in the lender's customary form, Tenant shall
execute and deliver any additional documents evidencing Tenant's attornment
or the subordination of this Lease with respect to any such ground leases
or underlying leases or any such mortgage or deed of trust, in the form
requested by Landlord or by any ground landlord, mortgagee, or beneficiary
under a deed of trust.
FINANCIAL STATEMENTS
17. At the request of Landlord, Tenant shall provide to Landlord Tenant's
current financial statement or other information discussing financial worth
of Tenant within thirty (30) days after the date of Landlord's request,
which Landlord shall use solely for purposes of this Lease and in
connection with the ownership, management and disposition of the Project.
18. Tenant agrees from time to time, within ten (10) days after request of
Landlord, to deliver to Landlord, or Landlord's designee, an estoppel
certificate per Exhibit D or in an alternate form that the requesting party
may require stating that this Lease is in full force and effect, the date
to which Rent has been paid, the unexpired portion of this Lease, and such
other matters pertaining to this Lease as may be reasonably requested by
Landlord. Landlord and Tenant intend that any statement delivered pursuant
to this Paragraph may be relied upon by any mortgagee, beneficiary,
purchaser or prospective purchaser of the Project or any interest therein.
The parties agree that Tenant's obligation to furnish such estoppel
certificates in a timely fashion is a material inducement for Landlord's
execution of the Lease, and shall be an Event of Default if Tenant fails to
fully comply. Tenant acknowledges that failure to provide the Estoppel
Certificate to Landlord or Landlord's designee within the time provided
above may cause Landlord to incur substantial damages. Tenant hereby agrees
to indemnify Landlord for any liabilities, losses, costs, damages
(including, without limitation, compensatory, incidental and consequential
damages), injuries or expenses arising from the failure of Tenant to
deliver the Estoppel Certificate in the time and manner provided in this
Paragraph. In addition to any other remedies Landlord may have at law and
equity, Landlord shall be entitled to specific performance of this
Paragraph. The provisions of this Paragraph shall survive the expiration or
termination of this Lease with respect to any claims or liability occurring
prior to such expiration or termination. Landlord shall execute (and
acknowledge if required by any lender) and deliver to Tenant, within ten
(10) business days after Tenant provides such to Landlord, a statement in
writing certifying that, to the best of Landlord's actual knowledge this
Lease is unmodified and in full force and effect (or, if modified, stating
the nature of such modification), the date to which the Base Rent and other
charges are paid in advance, if any, and acknowledging that there are not,
to Landlord's actual knowledge, any uncured defaults on the part of Tenant
hereunder or specifying such defaults as are claimed. Landlord's failure to
deliver such statement within such time shall be conclusive upon the
Landlord that (a) this Lease is in full force and effect, without
modification except as may be represented by Tenant; (b) there are no
uncured defaults in Tenant's performance; and (c) not more than one month's
Rent has been paid in advance.
SECURITY DEPOSIT
19. Tenant agrees to deposit with Landlord upon execution of this Lease, a
Security Deposit as stated in the Basic Lease Information, which sum shall
be held by Landlord, without obligation for interest, as security for the
performance of Tenant's covenants and obligations under this Lease. The
Security Deposit is not an advance rental deposit or a measure of damages
incurred by Landlord in case of Tenant's Default. Landlord is not required
to keep all or any part of the Security Deposit separate from its general
accounts. Upon the occurrence of any Event of Default by Tenant, Landlord
may, from time to time, without prejudice to any other remedy provided
herein or provided by law, use such fund to the extent necessary to make
good any arrears of Rent or other payments due to Landlord hereunder, and
any other damage, injury, expense or liability caused by such Event of
Default, and Tenant shall pay to Landlord, on demand, the amount so applied
in order to restore the Security Deposit to its original amount. Although
the Security Deposit shall be deemed the property of Landlord, any
remaining balance of such deposit shall be returned by Landlord to Tenant
at such time after termination of this Lease that all of Tenant's
obligations under this Lease have been fulfilled. Landlord may use and
commingle the Security Deposit with other funds of Landlord. On the
Acquisition Date (as defined in Section 37H of this Lease), as collateral
for the full and faithful performance by Tenant of all of its obligations
under this Lease and for all losses and damages Landlord may suffer as
result of any default by Tenant under this Lease, Tenant shall deliver to
Landlord an unconditional irrevocable negotiable Letter of Credit in the
amount of $550,000.00 meeting the requirements of this paragraph (the
"Letter of Credit"). The Letter of Credit shall (a) designate Landlord or
its assignees as beneficiary, (b) be issued by a financial institution
approved by Landlord, (c) subject to the remaining provisions hereof,
remain in full force and effect during the entire term of this Lease and
any extension or holdover period, plus an additional period of three (3)
months, and (d) be in form satisfactory to Landlord. The Letter of Credit
may be for an initial term of fifteen (15) months so long as it provides
that Landlord may immediately draw the full amount of the Letter of Credit
if the issuer does not give Landlord written notice of renewal for
additional successive periods of twelve (12) months at least sixty (60)
days prior to the expiration date. Landlord is authorized to draw on the
Letter of Credit from time to time in the event that (i) Landlord advises
the issuer of the Letter of Credit that there is an Event of Default by
Tenant under this Lease, or (ii) the issuer gives Landlord notice that the
Letter of Credit will be terminated or will expire prior to the initial
term of fifteen (15) months, or (iii) the issuer does not give Landlord a
written notice of renewal of the term of the Letter of Credit as required
by the preceding sentence. In the event Landlord shall draw on the Letter
of Credit in the circumstances described in clause (i) of this paragraph,
Landlord shall be permitted to draw an amount necessary in Landlord's good
faith estimation to fully cure any such Event of Default, including any
damage, injury, expense or liability caused or projected to be caused by
such Event of Default, and Tenant shall, on demand from Landlord, increase
the Letter of Credit up to its full original amount. In the event Landlord
shall draw on the Letter of Credit in the circumstances described in clause
(ii) and (iii) of this paragraph, Landlord shall be permitted to draw the
entire amount of the Letter of Credit, in which case such sum shall be held
by Landlord as an additional Security Deposit and administered as such.
Landlord may draw on the Letter of Credit regardless of whether or not
Tenant disputes that an Event of Default has occurred and regardless of any
other disputes or claims between the parties. Landlord shall not be
required to deliver any certifications or documentation of any kind to the
issuer
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in order to make a draw, other than Landlord's written demand certifying
that an Event of Default has occurred. The issuer shall not be required to
conduct any inquiry or investigation before paying Landlord the requested
amount of the draw. Landlord may assign, transfer or pledge the Letter of
Credit to any lender or purchaser in connection with any financing or sale
of the Premises. The amount of the Letter of Credit shall be increased by
$100,000 on each thirty (30) day anniversary of the Acquisition Date until
the total outstanding amount of the Letter of Credit is $1,000,000. (For
example: If the Acquisition Date is December 1, 1999, the Letter of Credit
would be increased by $100,000 on each January 1, February 1, March 1 and
April 1, and by $50,000 on May 1). Provided that at no time during the
initial thirty-six (36) months of the Lease Term Tenant has been in
material default under this Lease beyond any applicable cure period,
Landlord shall authorize and consent to a reduction by $125,000 of the then
required amount of the Letter of Credit as of the thirty-seventh (37th)
month of the Lease Term. Provided that at no time during the initial
forty-eight (48) months of the Lease Term Tenant has been in default under
this Lease beyond any applicable cure period, Landlord shall authorize and
consent to a reduction by $125,000 of the then required amount of the
Letter of Credit as of the forty-ninth (49th) month of the Lease Term.
Provided that at no time during the initial sixty (60) months of the Lease
Term Tenant has been in material default under this Lease beyond any
applicable cure period, Landlord shall authorize and consent to a reduction
by $150,000 of the then required amount of the Letter of Credit as of the
sixty-first (61st) month of the Lease Term. Prior to the commencement of
any of Tenant's Work, and as a condition to Tenant's right to Early
Possession and to commence Tenant's Work, Tenant shall provide Landlord
with proof of Tenant's financial ability to complete and pay fully the cost
of the Tenant's Work. Such proof shall consist of (i) an unconditional
guaranty to Landlord from Tenant's third party lender (acceptable to
Landlord), in the form acceptable to Landlord, that such lender shall pay
as and when due all of Tenant's monetary obligations under this Lease with
respect to the performance of Tenant's Work, or (ii) payment and completion
bonds, in form and from issuers reasonably acceptable to Landlord, bonding
the full lien-free completion of all of Tenant's Work, or (iii) Tenant's
deposit into an escrow, with instructions for disbursement thereof which
are acceptable to Landlord, of all sums reasonably estimated to be payable
by Tenant to fulfill its monetary obligations under this Lease with respect
to the performance of Tenant's Work, or (iv) Tenant maintaining until
lien-free completion of Tenant's Work a minimum unrestricted cash balance
of immediately payable funds in the sum of $13,000,000. Upon Landlord's
acceptance of Tenant's proof of financial ability as set forth herein and
upon commencement of the construction of the Tenant Improvements. Landlord
shall authorize and consent to the reduction of the Letter of Credit to a
total sum of $400,000. If, upon lien-free completion of the Tenant's Work,
(A) Tenant's third party lender (acceptable to Landlord) agrees irrevocably
and unconditionally in writing for the benefit of Landlord to either (i) in
case of an Event of default under the Lease, release its lien or other
security interest in all of Tenant's equipment which is listed on Exhibit
B-3 hereto or (ii) perform (as guarantor) all of Tenant's obligations under
the Lease throughout the remaining Term of the Lease and (B) the total sum
actually expended for Tenant's Work, including the Tenant Improvement
Allowance, was not less than $75.00 per rentable square foot of the
Premises, then Landlord shall authorize and consent to cancellation of the
Letter of Credit.
TENANT'S REMEDIES
20. The liability of Landlord to tenant for any default by Landlord under the
terms of this Lease are not personal obligations of the Landlord or other
trustees, advisors, partners, directors, officers and shareholders of
Landlord, and Tenant agrees to look solely to Landlord's interest in the
Project for the recovery of any amount from Landlord, and shall not look to
other assets of Landlord nor seek recourse against the assets of the
Landlord or other trustees, advisors, partners, directors, officers and
shareholders of Landlord. Any lien obtained to enforce any such judgment
any levy of execution thereon shall be subject and subordinate to any lien,
mortgage or deed of trust on the Project.
ASSIGNMENT AND SUBLETTING
21. A. GENERAL. Except in connection with a Permitted Assignee, Tenant shall
not assign this Lease or sublet the Premises or any part thereof without
Landlord's prior written approval which shall not be unreasonably withheld
or delayed. Except in connection with a permitted Assignee, if Tenant
desires to assign this Lease, or sublet any or all of the Premises, it must
present the Landlord, at Landlord's option, with an ERISA Certificate, of
this Lease signed by the potential assignee or subtenant, demonstrate that
the potential assignee or subtenant has adequate credit and demonstrate to
the Landlord's satisfaction that the potential assignee's or subtenant's
proposed use of the Premises is compatible with the Project and complies
with all applicable laws, ordinances, rules and regulations. Except in
connection with a Permitted Assignee, if Tenant desires to assign this
Lease or sublet any or all of the Premises, Tenant shall give Landlord
written notice sixty (60) days prior to the anticipated effective date of
the assignment or sublease. Landlord shall then have a period of fifteen
(15) days following receipt of such notice to notify Tenant in writing that
Landlord elects either: (1) to permit Tenant to assign this Lease or sublet
such space, subject, however, to Landlord's prior written approval of the
proposed assignee or subtenant and of any related documents or agreements
associated with the assignment or sublease or (2) refuse to consent. If
Landlord should fail to notify Tenant in writing of such election within
said period, Landlord shall be deemed to have refused to consent to the
proposed assignment or subletting. Without limiting the other instances in
which it may be reasonable for Landlord to withhold Landlord's consent to
an assignment or subletting, Landlord and Tenant acknowledge that it shall
be reasonable for Landlord to withhold Landlord's consent in the following
instances: The use of the Premises by such proposed assignee or subtenant
would not be a permitted use or would increase the Parking Density of the
Project; the proposed assignee or subtenant is not of sound financial
condition, as reasonably determined by Landlord after receipt of the
proposed assignee's or subtenant's financial statements in form
satisfactory to Landlord; the proposed assignee or subtenant is a
governmental agency; the proposed assignee or subtenant does not have a
good reputation as a tenant of property; the proposed assignee or subtenant
is a person with whom Landlord is negotiating to lease comparable space in
the Project; the assignment or subletting would entail any alterations
which would lessen the value of the Project; the assignment or subletting
would entail any alterations which would lessen the value of the leasehold
improvements in the Premises; or if Tenant is in Default of any obligation
of Tenant under this Lease. Failure by Landlord to approve a proposed
assignee or subtenant shall not cause a termination of this Lease.
Notwithstanding anything in this Section 21A to the contrary, Tenant may,
without the consent of Landlord, assign this Lease or sublet the Premises
or any portion thereof to any entity with a demonstrated net worth which is
greater than $13,000,000 which (i) controls, is controlled by or is under
common control with Tenant or which (ii) results from a merger or
reorganization or a consolidation with Tenant, or which (iii) acquires all
of the stock or assets of Tenant, as a going concern, with respect to the
business that is being conducted on the Premises ("Permitted Assignees").
Any assignment or subletting to a Permitted Assignee shall be subject to
and conditioned upon the following: (a) Tenant shall not be in Default of
any of its obligations under this Lease, (b) Tenant shall give Landlord at
least sixty (60) days prior written notice of any such proposed
transaction, (c) the Permitted Assignee shall have a net equity of at least
Thirteen Million Dollars ($13,000,000) which has been demonstrated in
appropriate documentation delivered to Landlord prior to the occurrence of
such transaction, (d) Tenant shall provide Landlord with full and complete
copies of all documents executed by Tenant and the Permitted Assignee in
connection with such assignment or subletting,
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and (e) Permitted Assignee shall have given Landlord an ERISA Certificate
if required by Landlord. The right to assign and/or sublet the Premises is
personal to the Tenant and any Permitted Assignee and shall not inure to
the benefit of any other assignee, subtenant or successor of Tenant.
B. BONUS RENT. Any Rent or other consideration realized by Tenant under
any approved sublease or assignment in excess of the Base Rent payable
hereunder, after amortization of a reasonable brokerage commission,
reasonable attorneys' fees related to the subletting, and the cost of
tenant improvements, if any, paid for by Tenant in excess of Tenant's Work,
shall be divided and paid, sixty (60%) percent to Tenant, forty (40%)
percent to Landlord; provided, however, that if Tenant expends $70.00 per
rentable square foot in excess of the Tenant Improvement Allowance for
Tenant's Work, exclusive of soft costs, the aforesaid division shall be
seventy-five percent (75%) to Tenant and twenty-five percent (25%) to
Landlord. In any subletting or assignment undertaken by Tenant, Tenant
shall diligently seek to obtain the maximum rental amount available in the
marketplace for such subletting or assignment.
C. CORPORATION. If Tenant is a corporation, a transfer of corporate shares
by sale, assignment, bequest, inheritance, operation of law or other
disposition (including such a transfer to or by a receiver or trustee in
federal or state bankruptcy, insolvency or other proceedings), so as to
result in a change in the present control of such corporation or any of its
parent corporations by the person or persons owning a majority of said
corporate shares, shall constitute an assignment for purposes of this
Lease, provided, however, that this Section 21C shall not apply to any
transfer in connection with a bona fide financing or capitalization of
Tenant, or if Tenant is or becomes a public company.
D. PARTNERSHIP. If Tenant is a partnership, joint venture or other
incorporated business form, a transfer of the interest of persons, firms or
entities responsible for managerial control of Tenant by sale, assignment,
bequest, inheritance, operation of law or other disposition, so as to
result in a change in the present control of said entity and/or a change in
the identity of the persons responsible for the general credit obligations
of said entity shall constitute an assignment for all purposes of this
Lease, provided that this Section shall not apply to a transfer in
connection with a bona fide financing or capitalization of Tenant.
E. LIABILITY. No assignment or subletting by Tenant shall relieve Tenant
of any obligation under this Lease. Any assignment or subletting which
conflicts with the provisions hereof shall be void.
F. OPTIONS. Except in connection with a Permitted Assignee, in the event
of assignment or subletting by Tenant, any and all options to renew and
expand shall terminate automatically.
AUTHORITY OF PARTIES
22. Landlord represents and warrants that it has full right and authority to
enter into this Lease and to perform all of Landlord's obligations
hereunder. Tenant represents and warrants that it has full right and
authority to enter into this Lease and to perform all of Tenant's
obligations hereunder.
CONDEMNATION
23. A. CONDEMNATION RESULTING IN TERMINATION. If the whole or any substantial
part of the Project of which the Premises are a part should be taken or
condemned for any public use under governmental law, ordinance or
regulation, or by right of eminent domain, or by private purchase in lieu
thereof, and the taking would prevent or materially interfere with the
Permitted Use of the Premises, this Lease shall terminate and the Rent
shall be abated during the unexpired portion of this Lease, effective when
the physical taking of said Premises shall have occurred.
B. CONDEMNATION NOT RESULTING IN TERMINATION. If a portion of the Project
of which the Premises are a part should be taken or condemned for any
public use under any governmental law, ordinance, or regulation, or by
right of eminent domain, or by private purchase in lieu thereof, and this
Lease is not terminated as provided in Paragraph 23.A. above, this Lease
shall not terminate, but the Rent payable hereunder during the unexpired
portion of the Lease shall be reduced, beginning on the date when the
physical taking shall have occurred, to such amount as may be fair and
reasonable under all of the circumstances.
C. AWARD. Landlord shall be entitled to any and all payment, income,
rent, award, or any interest therein whatsoever which may be paid or made
in connection with such taking or conveyance and Tenant shall have no
claim against Landlord or otherwise for the value of any unexpired portion
of this Lease. Notwithstanding the foregoing, any compensation
specifically awarded Tenant for loss of business, Tenant's personal
property, moving costs or loss of goodwill, shall be and remain the
property of Tenant.
CASUALTY DAMAGE
24. A. GENERAL. If the Premises or the Building should be damaged or
destroyed by fire, tornado, earthquake or other casualty, Tenant shall give
immediate written notice thereof to Landlord. Within thirty (30) days
after Landlord's receipt of such notice, Landlord shall notify Tenant
whether in Landlord's opinion such repairs can reasonably be made either:
(1) within ninety (90) days; (2) in more than ninety (90) days but in less
than one hundred eighty (180) days; or (3) in more than one hundred eighty
(180) days from the date of such notice. Landlord's determination shall be
binding on Tenant.
B. LESS THAN 90 DAYS. If the Premises or the Building should be damaged
by fire, tornado, earthquake or other casualty but only to such extent
that rebuilding or repairs can in Landlord's estimation be reasonably
completed within ninety (90) days after the date of such damage, this
Lease shall not terminate, and provided that insurance proceeds are
available to fully repair the damage, Landlord shall proceed to rebuild
and repair the Premises in the manner determined by Landlord, except that
Landlord shall not be required to rebuild, repair or replace any part of
the partitions, Fixtures, additions and other leasehold improvements which
may have been placed in, on or about the Premises. If the Premises are
untenantable in whole or in part following such damage, the Rent payable
hereunder during the period in which they are untenantable shall be abated
proportionately, but only to the extent of rental abatement insurance
proceeds received by the Landlord during the time and to the extent the
Premises are unfit for occupancy. In the event that Landlord should fail
to complete such repairs and rebuilding within one hundred eighty days
(180) days after the date upon which Landlord is notified by Tenant of
such damage, such period of time to be extended for delays caused by the
fault or neglect of Tenant or for delays (but not by more than forty-five
(45) days for such delays) because of acts of God, acts of public
agencies, labor disputes, strikes, fires, freight embargoes, rainy or
stormy weather, inability to obtain materials, supplies or fuels, or
delays of the contractors or subcontractors or any other causes or
contingencies beyond the reasonable control of Landlord, Tenant may at
Tenant's option within ten (10) days after the expiration of such one
hundred eighty (180) day period (as such may be extended), terminate this
Lease by delivering written notice of termination to Landlord as Tenant's
exclusive remedy, whereupon all rights hereunder shall cease and terminate
thirty (30) days after Landlord's receipt of such termination notice.
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C. GREATER THAN 90 DAYS. If the Premises or the Building should be
damaged by fire, tornado, earthquake or other casualty but only to such
extent that rebuilding or repairs can in Landlord's estimation be
reasonably completed in more than ninety (90) days but in less than one
hundred eighty (180) days, then Landlord shall have the option of either;
(1) terminating the Lease effective upon the date of the occurrence of such
damage, in which event the Rent shall be abated during the unexpired
portion of the Lease; or (2) electing to rebuild or repair the Premises to
substantially the condition in which they existed prior to such damage,
provided that insurance proceeds are available, to fully repair the damage,
except that Landlord shall not be required to rebuild, repair or replace
any part of the partitions, Fixtures, additions and other improvements
which may have been placed in, on or about the Premises. If the Premises
are untenantable in whole or in part following such damage, the Rent
payable hereunder during the period in which they are untenantable shall be
abated proportionately; but only to the extent of rental abatement
insurance proceeds received by the Landlord during the time and to the
extent the Premises are unfit for occupancy. In the event that Landlord
should fail to complete such repairs and rebuilding within one hundred
eighty days (180) days after the date upon which Landlord is notified by
Tenant of such damage, such period of time to be extended for delays caused
by the fault or neglect of Tenant or for delays (but not by more than
forty-five (45) days for such delays) because of acts of God, acts of
public agencies, labor disputes, strikes, fires, freight embargoes, rainy
or stormy weather, inability to obtain materials, supplies or fuels, or
delays of the contractors or subcontractors or any other causes or
contingencies beyond the reasonable control of Landlord, Tenant may at
Tenant's option within ten (10) days after the expiration of such one
hundred eighty (180) day period (as such may be extended), terminate this
Lease by delivering written notice of termination to Landlord as Tenant's
exclusive remedy, whereupon all rights hereunder shall cease and terminate
thirty (30) days after Landlord's receipt of such termination notice.
D. GREATER THAN 180 DAYS. If the Premises or the Building should be so
damaged by fire, tornado, earthquake or other casualty that rebuilding or
repairs cannot in Landlord's estimation be completed within one hundred
eighty (180) days after such damage, this Lease shall terminate and the
Rent shall be abated during the unexpired portion of this Lease, effective
upon the date of the occurrence of such damage.
E. TENANT'S FAULT. If the Premises or any other portion of the Building is
damaged by fire or other casualty resulting from the fault, negligence, or
breach of this Lease by Tenant or any of Tenant's Parties, Base Rent and
Additional Rent shall not be diminished during the repair of such damage
and Tenant shall be liable to Landlord for the cost and expense of the
repair and restoration of the Building caused thereby to the extent such
cost and expense is not covered by insurance proceeds.
F. UNINSURED CASUALTY. Notwithstanding anything herein to the contrary, in
the event that the Premises or the Building is damaged or destroyed and are
fully covered by the insurance proceeds received by Landlord or in the
event that the holder of any indebtedness secured by a mortgage or deed of
trust covering the Premises requires that the insurance proceeds be applied
to such indebtedness, then in either case Landlord shall have the right to
terminate this Lease by delivering written notice of termination to Tenant
within thirty (30) days after the date of notice to Landlord that said
damage or destruction is not fully covered by insurance or such requirement
is made by any such holder, as the case may be, whereupon all rights and
obligations hereunder shall cease and terminate.
G. WAIVER. Except as otherwise provided in this Paragraph 24., Tenant
hereby waives the provisions of Sections 1932(a), 1933(4), 1941 and 1942 of
the Civil Code of California.
HOLDING OVER
25. If Tenant shall retain possession of the Premises or any portion thereof
without Landlord's consent following the expiration of the Lease or sooner
termination for any reason, then Tenant shall pay to Landlord for each day
of such retention 150% of the amount of the daily rental as of the last
month prior to the date of expiration of termination. Tenant shall also
indemnify, defend, protect and hold Landlord harmless from any loss,
liability or cost, including reasonable attorneys' fees, resulting from
delay by Tenant in surrendering the Premises, including, without
limitation, any claims made by any succeeding tenant founded on such delay.
Acceptance of Rent by Landlord following expiration or termination shall
not constitute a renewal of this Lease, and nothing contained in this
Paragraph 25, shall waive Landlord's right of reentry or any other right.
Unless Landlord consents in writing to Tenant's holding over, Tenant shall
be only a Tenant at sufferance, whether or not Landlord accepts any Rent
from Tenant while Tenant us holding over without Landlord's written
consent. Additionally, in the event that upon termination of the Lease.
Tenant has not fulfilled its obligation with respect to repairs and cleanup
of the Premises or any other Tenant obligations as set forth in this Lease,
then Landlord shall have the right to perform any such obligations as it
deems necessary at Tenant's sole cost and expense.
26. A. EVENTS OF DEFAULT. The occurrence of any of the following shall
constitute an event of default ("Event of Default" or "Default") on the
part of tenant:
(1) ABANDONMENT. Abandonment of the Premises for a continuous period
in excess of five (5) days unless Tenant notifies Landlord in writing
in advance of such abandonment, keeps the Premises locked and secure
at all times, and timely performs and continues to perform all of the
Tenant's other monetary and non-monetary obligations under this
Lease. Tenant waives any right to notice Tenant may have under
Section 1951.3 of the Civil Code of the State of California, the
terms of this Paragraph 26.A. being deemed such notice to Tenant as
required by said Section 1951.3.
(2) NONPAYMENT OF RENT. Failure to pay any installment of Rent or
any other amount due and payable hereunder when said payment is due.
(3) OTHER OBLIGATIONS. Failure to perform any obligation, agreement
or covenant under this Lease other than those matters specified in
subparagraphs (1) and (2) of this Paragraph 26.A., such failure
continuing for fifteen (15) days after written notice of such
failure. In the event Tenant has commenced to cure the failure of
performance within the fifteen (15) day period, but has not completed
the cure despite diligent attempts to do so, Tenant shall have an
additional period not to exceed thirty (30) additional days after
such fifteen (15) day period to complete such cure so long as Tenant
continues to diligently pursue the cure to completion during such
additional thirty (30) day period.
(4) GENERAL ASSIGNMENT. A general assignment by Tenant for the
benefit of creditors.
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(5) BANKRUPTCY. The filing of any voluntary petition in bankruptcy by
Tenant, or the filing of an involuntary petition by Tenant's creditors,
which involuntary petition remains undischarged for a period of sixty (60)
days. In the event that under applicable law the trustee in bankruptcy or
Tenant has the right to affirm this Lease and continue to perform the
obligations of Tenant hereunder, such trustee or Tenant shall, in such
time period as may be permitted by the bankruptcy court having
jurisdiction, cure all Defaults of Tenant hereunder outstanding as of the
date of the affirmance of this Lease and provide to Landlord such adequate
assurances as may be necessary to ensure Landlord of the continued
performance of Tenant's obligations under this Lease.
(6) RECEIVERSHIP. The employment of a receiver to take possession of
substantially all of Tenant's assets or the Premises, if such appointment
remains undismissed or undischarged for a period of thirty (30) days after
the order therefor.
(7) ATTACHMENT. The attachment, execution or other judicial seizure of all
or substantially all of Tenant's assets or the Premises, if such
attachment or other seizure remains undismissed or undischarged for a
period of thirty (30) days after the levy thereof.
(8) DELAYS. Any delay in the construction of Landlord's Work caused by
Tenant as provided in Exhibit B-1.
8. REMEDIES UPON DEFAULT.
(1) TERMINATION. In the event of the occurrence of any Event of Default,
Landlord shall have the right to give a written termination notice to
Tenant, and on the date specified in such notice, Tenant's right to
possession shall terminate, and this Lease shall terminate unless on or
before such date all arrears of rental and all other sums payable by
Tenant under this Lease and all costs and expenses incurred by or on
behalf of Landlord hereunder shall have been paid by Tenant and all other
Events of Default of this Lease by Tenant at the time existing shall have
been fully remedied to the satisfaction of Landlord. At any time after
such termination Landlord may recover possession of the Premises or any
part thereof and expel and remove therefrom Tenant and any other person
occupying the same, by any lawful means, and again repossess and enjoy the
Premises without prejudice to any of the remedies that Landlord may have
under this Lease, or at law or equity by reason of Tenant's Default or of
such termination.
(2) CONTINUATION AFTER DEFAULT. Even though an Event of Default may have
occurred, this Lease shall continue in effect for so long as Landlord
doses not terminate Tenant's right to possession under Paragraph 26.B.(1)
hereof, and Landlord may enforce all of Landlord's rights and remedies
under this Lease, including without limitation, the right to recover Rent
as it becomes due, and Landlord, without terminating this Lease, may
exercise all of the rights and remedies of a landlord under Section 1951.4
of the Civil Code of the State of California or any successor code
section. Acts of maintenance, preservation or efforts to lease the
Premises or the appointment of a receiver upon application of Landlord to
protect Landlord's interest under this Lease shall not constitute an
election to terminate Tenant's right to possession.
C. DAMAGES AFTER DEFAULT. Should Landlord terminate this Lease pursuant to
the provisions of Paragraph 26.B.(1) hereof, Landlord shall have the
rights and remedies of a Landlord provided by Section 1951.2 of the Civil
Code of the State of California, or successor code sections. Upon such
termination, in addition to any other rights and remedies to which
Landlord may be entitled under applicable law, Landlord shall be entitled
to recover from Tenant: (1) the worth at the time of award of the unpaid
Rent and other amounts which had been earned at the time of termination,
(2) the worth at the time of award of the amount by which the unpaid Rent
which would have been earned after termination until the time of award
exceeds the amount of such Rent loss that Tenant proves could have been
reasonably avoided; (3) the worth at the time of award of the amount by
which the unpaid Rent for the balance of the Term after the time of award
exceeds the amount of such Rent loss that the Tenant proves could be
reasonably avoided; and (4) any other amount necessary to compensate
Landlord for all the detriment proximately caused by Tenant's failure to
perform Tenant's obligations under this Lease or which, in the ordinary
course of things, would be likely to result therefrom. The "worth at the
time of award" of the amounts referred to in (1) and (2), above shall be
computed at the lesser of the "prime rate," as announced from time to time
by Wells Fargo, N.A. (San Francisco) plus five (5) percentage points, or
the maximum interest rate allowed by law ("Applicable Interest Rate"). The
"Worth at the time of award" of the amount referred to in (3) above shall
be computed by discounting such amount at the Federal Discount Rate of the
Federal Reserve Bank of San Francisco at the time of the award plus one
(1%) percent. If this Lease provides for any periods during the Term
during which Tenant is not required to pay Base Rent or if Tenant
otherwise receives a Rent concession, then upon the occurrence of an Event
of Default, Tenant shall owe to Landlord the full amount of such Base Rent
or value of such Rent concession, plus interest at the Applicable Interest
Rate, calculated from the date that such Base Rent or Rent concession
would have been payable.
D. LATE CHARGE. If any installment of Rent is not paid on the date when due,
such amount shall bear interest at the Applicable Interest Rate from the date on
which said payment shall be due until the date on which Landlord shall receive
said payment. In addition, Tenant shall pay Landlord a late charge equal to five
(5%) percent of the delinquency, to compensate Landlord for the loss of the use
of the amount not paid and the administrative costs caused by the delinquency,
the parties agreeing that Landlord's damage by virtue of such delinquencies
would be difficult to compute and the amount stated herein represents a
reasonable estimate thereof. This provision shall not relieve Tenant of Tenant's
obligation to pay Rent at the time and in the manner herein specified.
E. REMEDIES CUMULATIVE. All rights, privileges and elections or remedies of
the parties are cumulative and not alternative, to the extent permitted by law
and except as otherwise provided herein.
LIENS
27. Except for the items scheduled on Exhibit B-3, Tenant shall keep the
Premises free from liens arising out of or related to work performed, materials
or supplies furnished or obligations incurred by Tenant or in connection with
work made, suffered or done by or on behalf of Tenant in or on the Premises or
Project. In the event that Tenant shall not, within ten (10) business days
following the imposition of any such lien, cause the same to be released of
record by payment or posting of a proper bond, Landlord shall have, in addition
to all other remedies provided herein and by law, the right, but not the
obligation, to cause the same to be released by such means as Landlord shall
deem proper, including payment of the claim giving rise to such lien. All sums
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paid by Landlord on behalf of Tenant and all expenses incurred by Landlord
in connection therefor shall be payable to Landlord by Tenant on demand
with interest at the Applicable Interest Rate. Landlord shall have the
right at all times to post and keep posted on the Premises any notices
permitted or required by law, or which Landlord shall deem proper, for the
protection of Landlord, the Premises, the Project and any other party
having an interest therein, from mechanics' and materialmen's liens, and
Tenant shall give Landlord not less than ten (10) business days prior
written notice of the commencement of any work in the Premises or Project
which could lawfully give rise to a claim for mechanics' or materialmen's
liens.
TRANSFERS BY LANDLORD
28. In the event of a sale or conveyance by Landlord of the Building or the
Project or a foreclosure by any creditor of Landlord, the same shall
operate to release Landlord from any liability upon any of the covenants or
conditions, express or implied, herein contained in favor of Tenant, to the
extent required to be performed after the passing of title to Landlord's
successor-in-interest. In such event, Tenant agrees to look solely to the
responsibility of the successor-in-interest of Landlord under this Lease
with respect to the performance of the covenants and duties of "Landlord"
to be performed after the passing of title to Landlord's
successor-in-interest. This Lease shall not be affected by any such sale
and Tenant agrees to attorn to the purchaser or assignee. Landlord's
successor(s)-in-interest shall not have liability to Tenant with respect to
the failure to perform all of the obligations of "Landlord", to the extent
required to be performed prior to the date of such successor(s)-in-interest
became the owner of the Building.
RIGHT OF LANDLORD TO PERFORM TENANT'S COVENANTS
29. All covenants and agreements to be performed by Tenant under any of the
terms of this Lease shall be performed by Tenant at Tenant's sole cost and
expense and without any abatement of Rent. If Tenant shall fail to pay any
sum of money, other than Base Rent and Basic Operating Cost, required to be
paid by Tenant hereunder or shall fail to perform any other act on Tenant's
part to be performed hereunder, and such failure shall continue for five
(5) days after notice thereof by Landlord, Landlord may, but shall not be
obligated to do so, and without waiving or releasing Tenant from any
obligations of Tenant, make any such payment of perform any such act on
Tenant's part to be made or performed. All sums, so paid by Landlord and
all necessary incidental costs together with interest thereon at the
Applicable Interest Rate from the date of such payment by Landlord shall be
payable to Landlord on demand, and Tenant covenants to pay such sums, and
Landlord shall have, in addition to any other right or remedy of Landlord,
the same right and remedies in the event of the non-payment thereof by
Tenant as in the case of Default by Tenant in the payment of Base Rent and
Basic Operating Cost.
WAIVER
30. If either Landlord or Tenant waives the performance of any term, covenant
or condition contained in this Lease, such waiver shall not be deemed to be
a waiver of any subsequent breach of the same or any other term, covenant
or condition contained herein. The acceptance of Rent by Landlord shall not
constitute a waiver of any preceding breach by Tenant of any term, covenant
or condition of this Lease, regardless of Landlord's knowledge of such
preceding breach at the time Landlord accepted such Rent. Failure by
Landlord to enforce any of the terms, covenants or conditions of this lease
for any length of time shall not be deemed to waive or to decrease the
right of Landlord to insist thereafter upon strict performance by Tenant.
Waiver by Landlord of any term, covenant or condition contained in this
Lease may only be made by a written document signed by Landlord.
NOTICES
31. Each provision of this Lease or of any applicable governmental laws,
ordinances, regulations and other requirements with reference to sending,
mailing or delivery of any notice or the making of any payment by Landlord
or Tenant to the other shall be deemed to be complied with when and if the
following steps are taken:
A. RENT. All Rent and other payments required to be made by Tenant to
Landlord hereunder shall be payable to Landlord at the address set forth in
the Basic Lease Information, or at such other address as Landlord may
specify from time to time by written notice delivered in accordance
herewith. Tenant's obligation to pay Rent and any other amounts to
Landlord under the terms of this Leases shall not be deemed satisfied until
such Rent and other amounts have been actually received by Landlord.
B. OTHER. All notices, demands, consents and approvals which may or are
required to be given by either party to the other hereunder shall be in
writing and either personally delivered, sent by commercial overnight
courier, sent by facsimile, or mailed, certified or registered, postage
prepaid, and addressed to the party to be notified at the address for such
party as specified in the Basic Lease information or to such other place
as the party to be notified may from time to time designate by at least
fifteen (15) days notice to the notifying party. Notices shall be deemed
serviced upon receipt or refusal to accept delivery. Tenant appoints as its
agent to receive the service of all default notices and notice of
commencement of unlawful detainer proceedings the person in charge of or
apparently in charge of occupying the Premises at the time, and, if there is
no such person, then such service may be made by attaching the same on the
main entrance of the Premises.
ATTORNEY'S FEES
32. In the event that Landlord places the enforcement of this Lease, or any part
thereof, or the collection of any Rent due, or to become due hereunder, or
recovery of possession of the Premises in the hands of an attorney, Tenant
shall pay to Landlord, upon demand, Landlord's reasonable attorneys' fees
and court costs. In any action which Landlord or Tenant brings to enforce
its respective rights hereunder, the unsuccessful party shall pay all costs
incurred by the prevailing party including reasonable attorneys' fees, to be
fixed by the court, and said costs and attorneys' fees shall be a part of
the judgment in said action.
SUCCESSORS AND ASSIGNS
33. This Lease shall be binding upon and inure to the benefit of Landlord, it
successors and assigns, and shall be binding upon and inure to the benefit
of Tenant, its successors, and to the extent assignment is approved by
Landlord hereunder, Tenant's assigns.
FORCE MAJEURE
34. In the event that Landlord shall be delayed, hindered in or prevented from
the performance of any act or obligation required under this Lease by reason of
acts of God, strikes, lockouts, labor troubles or disputes, inability to
procure or shortage of materials or labor, failure of power or utilities, delay
in transportation, fire, vandalism, accident, flood, severe weather, other
casualty, governmental requirements (including mandated changes in the plans
and specifications of Landlord's Work resulting from changes in pertinent
governmental requirements or interpretations thereof), riot, insurrection,
civil commotion, sabotage, explosion, war, natural or local emergency, acts or
omissions of others, including Tenant, or other reasons of a similar or
dissimilar nature not solely the fault of, or under the exclusive control of,
Landlord (individually and collectively, "Force Majeure"), then performance of
such act or obligation shall be excused for the period of the delay and the
period for the performance of any such act or obligations shall be extended for
the period equivalent to the period of such delay.
BROKERAGE COMMISSION
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<PAGE> 17
35. Landlord shall pay a brokerage commission to Broker in accordance with a
separate agreement between Landlord and Broker. Tenant warrants to Landlord
that Tenant's sole contact with Landlord or with the Premises in connection
with this transaction has been directly with Landlord and Broker, and that
no other broker or finder can properly claim a right to a commission or a
finder's fee based upon contacts between the claimant and Tenant with
respect to Landlord or the Premises. Tenant shall indemnify, defend by
counsel acceptable to Landlord, protect and hold Landlord harmless from and
against any loss, cost or expense, including, but not limited to, attorneys'
fees and costs, resulting from any claim for a fee or commission by any
broker or finder in connection with the Premises and this Lease, other than
Broker, who claims such right based upon contacts between claimant and
Tenant.
Landlord shall indemnify, defend by counsel acceptable to Tenant, protect
and hold Tenant harmless from and against any loss, cost or expense,
including, but not limited to, attorneys' fees and costs, resulting from any
claim for a fee or commission by any broker or finder connection with the
Premises and this Lease other than Broker, who claims such right based upon
contacts between claimant and Landlord.
MISCELLANEOUS
36. A. GENERAL. The terms "Tenant and/or Landlord" or any pronoun used in place
thereof shall indicate and include the masculine or feminine, the singular
or plural number, individuals, firms or corporations, and their respective
successors, executors, administrators and permitted assigns, according to
the context hereof.
B. TIME. Time is of the essence regarding this Lease and all of its
provisions.
C. CHOICE OF LAW. This Lease shall in all respect be governed by the laws of
the State of California.
D. ENTIRE AGREEMENT. This Lease, together with its exhibits, contains all
the agreements of the parties hereto and supersedes any previous
negotiations. There have been no representations made by the Landlord or
understandings made between the parties other than those set forth in this
Lease and its exhibits.
E. MODIFICATION. This Lease may not be modified except by a written
instrument signed by the parties hereto.
F. SEVERABILITY. If, for any reason whatsoever, any of the provisions hereof
shall be unenforceable or ineffective, all of the other provisions shall be
and remain in full force and effect.
G. RECORDATION. Tenant shall not record this Lease or a short form
memorandum hereof.
H. EXAMINATION OF LEASE. Submission of this Lease to Tenant does not
constitute an option or offer to lease and this Lease is not effective
otherwise until execution and delivery by both Landlord and Tenant.
I. ACCORD AND SATISFACTION. No payment by Tenant of a lesser amount than the
Rent nor any endorsement on any check or letter accompanying any check or
payment of Rent shall be deemed an accord and satisfaction of full payment
of Rent, and Landlord may accept such payment without prejudice to
Landlord's right to recover the balance of such Rent or to pursue other
remedies.
J. EASEMENTS. Landlord may grant easements on the Project and dedicate for
public use portions of the Project without Tenant's consent; provided that
no such grant or dedication shall substantially interfere with Tenant's use
of the Premises. Upon Landlord's demand, Tenant shall execute, acknowledge
and deliver to Landlord documents, instruments, maps and plats necessary to
effectuate Tenant's covenants hereunder.
K. DRAFTING AND DETERMINATION PRESUMPTION. The parties acknowledge that this
Lease has been agreed to by both the parties, that both Landlord and Tenant
have consulted with attorneys with respect to the terms of this Lease and
that no presumption shall be created against Landlord because Landlord
drafted this Lease. Except as otherwise specifically set forth in this
Lease, with respect to any consent, determination or estimation of Landlord
required in this Lease or requested of Landlord, Landlord's consent,
determination or estimation shall be made in Landlord's good faith opinion,
whether objectively reasonable or unreasonable.
L. EXHIBITS. Exhibits A through G attached hereto are hereby incorporated
herein by this reference.
M. NO LIGHT, AIR OR VIEW EASEMENT. Any diminution or shutting off of light,
air or view by any structure which may be erected on lands adjacent to or in
the vicinity of the Building shall in no way affect this Lease or impose any
liability on Landlord.
N. NO THIRD PARTY BENEFIT. This Lease is a contract between Landlord and
Tenant and nothing herein is intended to create any third party benefit.
O. WAIVER OF JURY TRIAL. IF ANY ACTION OR PROCEEDING BETWEEN LANDLORD AND
TENANT TO ENFORCE THE PROVISIONS OF THIS LEASE (INCLUDING AN ACTION OR
PROCEEDING BETWEEN LANDLORD AND THE TRUSTEE OR DEBTOR IN POSSESSION WHILE
TENANT IS A DEBTOR IN A PROCEEDING UNDER ANY BANKRUPTCY LAW) PROCEEDS TO
TRIAL, LANDLORD AND TENANT HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY IN
SUCH TRIAL. Landlord and Tenant agree that this Paragraph constitutes a
written consent to waiver of trial by jury within the meaning of California
Code of Civil Procedure Section 631(a)(2), and Tenant does hereby authorize
and empower Landlord to file this Paragraph and or this Lease, as required,
with the clerk or judge of any court of competent jurisdiction as a written
consent to waiver of jury trial.
ADDITIONAL PROVISIONS
37. A. INTENTIONALLY OMITTED
B. ANTI-DISCRIMINATION. There shall be no discrimination against or
segregation of any person or group of persons, on account of race, color,
creed, religion, sex, marital status, national origin, or ancestry, in the
leasing, subleasing, transferring, use, occupancy, tenure or enjoyment of
the Premises, nor shall the Tenant or any person claiming under or through
the Tenant establish or permit any such practice or practices of
discrimination or segregation with reference to the selection, location,
number, use or occupancy of tenants, sublessees, subtenants, or vendees in
the Premises.
C. OPTION TO EXTEND TERM. Provided that Tenant is not in Default as of the
time of exercise of each option and the commencement date of each Option
Period, Tenant shall have two (2) successive five (5) year options to
extend the Term of the Lease for the Premises in "as is" condition at the
expiration of the original
14
<PAGE> 18
Lease Term and, if the first option is duly exercised, at the end of the
first Option Term. All of the terms and conditions of this Lease except
for Base Rent and the provisions of this Paragraph shall be applicable to
the Option Period.
The Base Rent for the Premises under such option shall be the then current
market rent for comparable facilities in the proximate South San Francisco
market area. The definition of comparable facilities shall incorporate the
parking amenities of the Premises, and the Building's location, age,
quality, amenities, identity, exterior appearance, interior improvements,
and type of construction, excluding Tenant Improvements in excess of
$50.00 per rentable square foot.
Tenant shall give Landlord written notice to exercise its option at least
nine (9) but not more than twelve (12) months prior to the expiration of
the then current Term for the Premises. Within fifteen (15) days after
Tenant exercises its option to extend, Landlord shall provide Tenant with
the Base Rent, as determined by Landlord, for the Option Period. The
parties are obligated to negotiate in good faith to agree on the Base
Rent. If the parties have not mutually agreed on the Base Rent within
thirty (30) days from notification by Landlord to Tenant of Landlord's
determination of Base Rent, each party hereto shall appoint one
representative who shall be a licensed real estate broker experienced in
the leasing of comparable facilities in the County of San Mateo to act as
an arbitrator. The two (2) arbitrators so appointed shall determine the
Base Rent for the relevant Option Period. The determination of said Base
Rent shall be made by said two (2) arbitrators within sixty (60) days from
notification by Landlord to Tenant of Landlord's determination of Base
Rent and they shall submit said determination in writing and signed by
said arbitrators in duplicate. One of the written notifications shall be
delivered to Landlord and the other to Tenant.
In the event the two (2) arbitrators of the parties hereto cannot agree on
the Base Rent for the Premises herein, said two (2) arbitrators shall
appoint a third arbitrator who shall be a licensed real estate broker
experienced in the leasing of comparable facilities in the County of San
Mateo, to act as an arbitrator. The Base Rent for the relevant Option
Period shall be independently determined by the third of said arbitrators,
which said determination shall be made within ninety (90) days from
notification by Landlord to Tenant of Landlord's determination of Base
Rent. The role of the third arbitrator shall then be to immediately select
from the proposed resolution of arbitrators #1 and #2 the one that most
closely approximates the third arbitrator's determination of Base Rent.
The third arbitrator shall have no right to adopt a compromise or middle
ground or any modification of either of the two final proposed
resolutions. The resolution that the third arbitrator chooses as most
closely approximating his determination of the Base Rent shall constitute
the decision of all arbitrators and shall be final and binding upon the
parties.
The parties hereto shall pay the charges of the arbitrator appointed by it
and any expenses incurred by such arbitrator. The charges and expenses of
the third arbitrator, as provided herein, shall be paid by the parties
hereto in equal shares.
In the event either arbitrator #1 or arbitrator #2 fails to present a Base
Rent figure within the thirty (30) day period, the Base Rent presented by
the other arbitrator shall be considered final and binding on both parties.
Notwithstanding anything to the contrary herein contained, Tenant's right
to extend the term by exercise of the foregoing Option shall be
conditioned upon the following: (i) at the time of the exercise of the
Option, and at the time of the commencement of the extended term, Tenant
or a Permitted Assignee shall be in possession of and occupying the
Premises for the conduct of its business therein and the same shall not be
occupied by any other assignee, subtenant or licensee, and (ii) the notice
of exercise shall constitute a representation by Tenant to Landlord
effective as of the date of the exercise and as of the date of
commencement of the extended term, that Tenant does not intend to seek to
assign the lease in whole or in part, or sublet all of any portion of the
Premises, the election to extend the term being for purposes of utilizing
the Premises for Tenant's purposes in the conduct of Tenant's or a
Permitted Assignee's business therein.
D. SHELL MODIFICATIONS. The Agreement Regarding Shell Modifications
attached hereto as Exhibit G is hereby incorporated into and made a part
of this Lease.
E. ADJUSTMENT TO BASE RENT. Base Rent as stated in the Basic Lease
Information has been calculated on the basis of the following costs to
develop the Project (collectively "Project Costs" and individually a
"Project Cost"):
<TABLE>
<S> <C>
Land $6,675,000
Due Diligence/Closing $208,000
Environmental (including $300,000 ["Remediation Cost"]
remediations and insurance
Shell (including demo) $7,020,000
Permits and Fees $580,000
Architectural and Engineering $175,000
Loan Costs -0-
</TABLE>
Interest carry is projected at 9.25% ("Interest Carry") over a carry period
of 19 months commencing on the Acquisition Date ("Carry Period"). The time
to remediate Hazardous Materials at the Project site is estimated to be 6
months ("Haz Mat Remediation Period").
If (i) an actual Project cost exceeds the amount set forth above, or (ii)
the Interest Carry exceeds the rate set forth above, or (iii) the Haz Mat
Remediation Period exceeds the period set forth above, the Base Rent as
shown on the Basic Lease Information shall be adjusted upwards to achieve
an 11% return ("Yield") to the Landlord on two-thirds (2/3) of the
increased costs adjusted by carry over the Carry Period extended by any
increase in the Haz Mat Remediation Period plus a 5% contingency and a 4%
development fee on Shell Costs. The Base Rent calculation includes a 5%
vacancy factor and a 1% structural reserve.
[For example: If the actual Land Cost increases by $100,000 Base Rent as
shown on the Basic Lease Information would be adjusted upwards as follows:
15
<PAGE> 19
<TABLE>
<S> <C>
$115,708 (cost increased by Interest Carry over Carry Period)
$12,727.88 ($115.708 times 11% Yield)
$8,485.25 2/3 of increased cost, etc.
$.1697 ($8,488.25 divided by 50,000 square feet
[actual size to be used]
$.1714 ($.1697 divided by 1 minus the structural reserve)
$.1804 ($1714 divided by 1 minus the vacancy factor)
*$.015 ($.1804 divided by 12)
-----------
</TABLE>
*Monthly increase in initial Base Rent per square foot.]
Base Rent as shown on the Basic Lease Information shall also be increased if
Landlord's financial or joint venture on or before the Acquisition Date (defined
in Section 37H) requires an investment return in excess of 11%. Not later than
ten (10) days after the Acquisition Date, Landlord shall give Tenant written
notice of the amount of the investment return in excess of 11% required by
Landlord's financial or joint venture partner. In such case, the Base Rent as
shown on the Basic Lease Information shall be adjusted upwards to reflect the
required return; provided, however, that Tenant, by written notice to Landlord
within ten (10) days after receipt of written notice from Landlord of such
requirement, may terminate this lease. Upon termination of this Lease, Landlord
shall refund to Tenant (A) the Base Rent and Estimated Basic Operating Costs for
the first full month of the Lease Term paid by Tenant pursuant to Section 6B of
this Lease, and (B) the Security Deposit paid by Tenant pursuant to Section 19
of this Lease. The Inducement Deposit shall not be refundable to Tenant.
The adjustment(s) to Base Rent, if any, required hereunder shall be applied to
Base Rent for the initial twelve (12) months of the Lease Term. Base Rent for
subsequent twelve (12) month periods shall then be adjusted by an increase of
three percent (3%) per annum over the Base Rent for the prior period. Following
Substantial Completion of Landlord's Work (defined in Exhibit B-1) Landlord
shall notify Tenant in writing of the amount, if any, by which the actual
Project Costs exceed the estimated Project Costs set forth above ("Increased
Project Costs"). If the Increased Project Costs in the aggregate total more than
$1,500,000, Tenant may, by written notice to Landlord within ten (10) days after
receipt of Landlord's notice, terminate this Lease; provided, however, that
Landlord may, by written notice to Tenant within ten (10) days after receipt of
Tenant's termination notice, agree to pay the Increased Project Costs in excess
of $1,500,000 without adjustment of Base Rent for the Increased Project Costs
which are in excess of $15,000,000 in which case this Lease shall remain in full
force and effect and Tenant's termination notice shall be of no effect. If
Landlord does not so elect, this Lease shall immediately terminate and Landlord
shall refund to Tenant (A) the Base Rent and Estimated Basic Operating Costs for
the first full month of the Lease Term paid by Tenant pursuant to Section 6B of
this Lease, and (B) the Security Deposit paid by Tenant pursuant to Section 19
of this Lease. The Inducement Deposit shall not be refundable to Tenant.
F. LANDLORD'S RIGHT TO TERMINATE. A final adjustment to Base Rent based upon the
Remediation Cost shall be made at such time as the Landlord has completed
remediation of the existing environmental conditions on the land on which the
Project is to be developed and has obtained a No Further Action Letter with
respect to such conditions. If the Remediation Cost exceeds $300,000 but does
not exceed $500,000, Base Rent shall be adjusted (in addition to any other
adjustment required hereunder) in the manner described in Section 37E above for
the amount by which the Remediation Cost exceeds $300,000. Notwithstanding
anything in this Lease to the contrary, if the Remediation Cost reasonably
estimated by Landlord to complete remediation of the existing environmental
conditions on the land on which the Project is to be developed (including the
cost of environmental insurance) and to obtain a No Further Action letter
exceeds $500,000, Landlord, by written notice to Tenant, may terminate this
Lease; provided, however, that if the estimated cost is not in excess of
$1,000,000, Tenant may, by written notice to Landlord within ten (10) days after
receipt of Landlord's notice of termination, elect to keep the Lease in full
force and effect by agreeing to pay (i) immediately, the amount of the estimated
remediation cost (including the cost of environmental insurance) in excess of
$750,000 and (ii) as Additional Base Rent, the amount of the estimated
remediation cost (including the cost of environmental insurance) in excess of
$300,000 (not, however, to exceed $450,000) amortized at 11% over the initial
Term of the Lease. If the estimated remediation cost (including the cost of
environmental insurance) is in excess of $1,000,000, Landlord shall have an
absolute right to terminate this Lease. Upon termination of the Lease pursuant
to this Section 37F, Landlord shall refund to Tenant (A) the Base Rent and
Estimated Basic Operating Costs for the first full month of the Lease Term paid
by Tenant pursuant to Section 6B of this Lease, and (B) the Security Deposit
paid by Tenant pursuant to Section 19 of this Lease. The Inducement Deposit
shall not be refundable to Tenant.
G. INDUCEMENT DEPOSIT. As an inducement to Landlord to pursue the acquisition of
the land on which the Project shall be developed, Tenant has paid to Landlord
prior to execution of this Lease the sum of $60,000 ("Inducement Deposit") which
amount shall be non-refundable under all circumstances but shall be applied to
Base Rent first due and payable by Tenant under this Lease if Landlord acquires
the land and develops the Project.
H. CONDITIONS. Tenant understands and acknowledges that Landlord has not as of
the date this Lease is executed acquired the land on which the Project will be
developed. Landlord's obligations under this Lease are expressly conditioned
upon (i) Landlord acquiring the land on which the Project will be developed (the
date of closing of such acquisition being referred to herein as the "Acquisition
Date") and (ii) Landlord obtaining financing for the land acquisition and
development of the Project on terms which are satisfactory to Landlord in its
sole and absolute discretion. If either of said conditions is not satisfied
Landlord shall have no obligations to Tenant under this Lease or with respect to
the Project, the Building or the Premises other than (A) to refund to Tenant the
Base Rent and Estimated Basic Operating Costs for the first full month of the
Lease Term paid by Tenant pursuant to Section 6B of this Lease, and (B) to
refund to Tenant the Security Deposit paid by Tenant pursuant to Section 19 of
this lease. The Inducement Deposit shall not be refundable to Tenant. If either
of said conditions is not satisfied by March 31, 2001, Tenant may terminate this
Lease (regardless of the occurrence of any Force Majeure) by written notice to
Landlord given not later than April 15, 2001.
16
<PAGE> 20
IN WITNESS WHEREOF, the parties hereto have executed this Lease the day and
year first above written.
"Landlord"
TRAMMELL CROW NORTHERN CALIFORNIA DEVELOPMENT, INC., a Delaware
corporation
By: /s/ [Signature Illegible]
-----------------------------
Its: Vice President
----------------------------
"Tenant"
VIROLOGIC, INC., a California corporation
By: /s/ MARTIN H. GOLDSTEIN
-----------------------------
Its: President
----------------------------
By: /s/ [Signature Illegible]
-----------------------------
Its: Vice President of Finance
----------------------------
17
<PAGE> 21
EXHIBIT A-1
LEGAL DESCRIPTION OF PROJECT
Parcel A, as shown on that certain Parcel Map entitled, "PARCEL MAP NO. 98-033"
filed for Record on December 30, 1988 in Book 71 of Parcel Maps at Pages 13 and
14, Series No. 9822035, San Mateo County Records.
APN 015-010-320
1
<PAGE> 22
EXHIBIT A-2
SITE PLAN
1
<PAGE> 23
EXHIBIT A-2
SITE PLAN
[SITE MAP]
<PAGE> 24
EXHIBIT B-1
INITIAL IMPROVEMENTS OF PREMISES
1. LANDLORD'S WORK
1.1 Landlord's work ("Landlord's Work") shall be defined as the
construction of the Building shell more particularly described in Exhibit C and
Exhibit C-1, including ADA facilities, to the extent required by the City. The
scope of the shell construction shall include: The Building shell, roof, all
exterior windows and doors, fire sprinklers below the roof line and below the
second deck line, utilities and services to the Building's exterior, an
elevator, the parking lot, exterior common areas, three (3) sets of interior
stairs (consisting of stair assemblies and metal handrails to be provided
f.o.b.), and landscaping.
1.2 Landlord's work shall be completed through Landlord's general
contractor, South Bay Construction, in compliance with all applicable codes and
regulations.
1.3 Landlord shall pay for all costs involved in shell construction
described in Paragraph 1.1, including, but not limited to, hard costs and
architecture, engineering, consultants, shell building permit and impact fees,
required by Tenant and agreed to by Landlord shall be at Tenant's sole cost and
expense.
2. TENANT'S WORK
2.1 All interior improvements, including installation of Trade
Fixtures, as indicated in Exhibit B-3, furnishings and Building Core
Improvements (collectively referred to herein as "Tenant's Work", shall be
constructed by Tenant at its sole cost and expense. All of the plans and
specifications for Tenant's Work shall be approved by Landlord in advance of
commencing any construction. Such approval by Landlord, shall not be
unreasonably withheld or delayed. The parties agree that certain items of the
Building Core Improvements (specifically, proof loading of the roof structure
and penetrations in the second deck for future mechanical drafts) shall be
completed during shell construction by Landlord and the cost of such items
shall be deducted from the Tenant Improvement Allowance. Tenant shall invest a
minimum of sixty dollars ($60.00) per rentable square foot, including the
Tenant Improvement Allowance supplied by Landlord, excluding soft costs ("Soft
Costs" are those items described in Paragraphs 2.2 (v) through (xi)), and
excluding the items described on Exhibit B-3 hereto, to improve the entire
Premises. Tenant shall, within thirty (30) days following the Term Commencement
Date, provide Landlord with an accounting, certified by an officer of Tenant,
itemizing all amounts expended by Tenant to improve the Premises. If the amount
expended by Tenant is less than sixty dollars ($60.00) per rentable square foot
of the Building, (exclusive of Soft Costs), Tenant shall, together with the
accounting, deliver to Landlord an unconditional irrevocable letter of credit
(separate from but for a purpose similar to the Letter of Credit described in
paragraph 19 of this Lease) in an amount equal to the difference between the
amount expended by Tenant and sixty dollars ($60.00) per rentable square foot
of the Building (exclusive of Soft Costs). At any time prior to the
twenty-fourth month of the Lease Term (but in no event more frequently than
monthly) Tenant may provide Landlord with an amended accounting, as above,
showing additional amounts expended by Tenant to improve the Premises
(exclusive, however, of the costs of demolition and reconstruction of the
Tenants Work) since the last date shown on the immediately preceding
accounting. If the total amount expended by Tenant is less than sixty dollars
($60.00) per rentable square foot of the Building (exclusive of Soft Costs),
the amount of the letter of credit may be reduced to a sum equal to the
difference between the amount expended by Tenant and sixty dollars ($60.00) per
rentable square foot of the Building (exclusive of Soft Costs). On or before
the last day of the twenty-fourth month of the Lease Term, with an amended
accounting as above showing in addition any amounts expended by Tenant to
improve the Premises since the last date shown on Tenant's most recent
accounting (exclusive, however, of the costs of demolition and reconstruction
of the Tenant's Work), if the total amount expended by Tenant is less than
sixty dollars ($60) per rentable square foot, Landlord shall be immediately
entitled to draw down from the letter of credit an amount equal to the
difference between the amount expended by Tenant and sixty dollars ($60.00) per
rentable square foot. Upon such draw the requirement that this letter of credit
be maintained shall terminate. The letter of credit shall (a) designate
Landlord or its assignees as beneficiary, (b) be issued by a financial
institution approved by Landlord, (c) be in form satisfactory to Landlord, and
(d) be for a term of twenty-six months. Landlord shall not be required to
deliver any certifications or documentation of any kind to the issuer in order
to make a draw, other than Landlord's written demand stating that Landlord is
entitled to draw in accordance with the terms of this Lease. The Issuer shall
not be required to conduct any inquiry or investigation before paying Landlord
the requested amount of the draw. Landlord may assign, transfer or pledge the
letter of credit to any lender or purchaser in connection with any financing or
sale of the Premises. Landlord shall provide to Tenant a Tenant Improvement
Allowance of up to a maximum of twenty-five dollars ($25.00) per rentable
square foot on the Premises ("Tenant Improvement Allowance") which shall
include Soft Costs. The Tenant Improvement Allowance shall be reduced by the
amount Landlord expends on Building Core Improvements as stated above. Tenant
shall promptly pay when due all costs for Tenant's Work. Landlord shall
reimburse Tenant a portion of such costs not to exceed in the aggregate the
amount of the Tenant Improvement Allowance less amounts expended by Landlord
for Building Core Improvements as provided above. Tenant shall, not more
frequently than monthly after commencement of the construction of Tenant's
Work, submit to Landlord requests for reimbursement of amounts expended by
Tenant for Tenant's Work. Each request shall be certified by an officer of
Tenant and shall include, without limitation, (i) copies of all invoices paid
by Tenant for which reimbursement is sought (ii) proof of payment of each
invoice (iii) a fully executed unconditional lien release from each payee, and
(iv) such additional information as Landlord may reasonably request. After
Landlord has received and approved each request as provided herein, Landlord
shall process the approved request for payment by its lender and upon
disbursement by Landlord's Lender reimburse Tenant promptly for one-half of
all amounts shown in the request as expenditures for costs to which the Tenant
Improvement Allowance applies, as hereinbelow provided, up to the maximum
amount set forth above.
2.2 Tenant's Improvement Allowance (twenty-five dollars ($25.00) per
rentable square foot on the Premises) shall be applied to, but not limited to
the following costs:
(i) Costs paid to general contractors and subcontractors for labor,
material, permits, bonds and the like relating to the Premises;
(ii) Construction management fee to Landlord in the amount of two
(2%) percent of the Tenant Improvement Allowance;
(iii) Building core improvements items such as lobbies, restrooms,
locker areas with showers, janitorial room, interior finishes
for the stairs (including framing, lights, etc.), deck
1
<PAGE> 25
penetrations, structurally reinforcing the roof for Tenant's
HVAC, caulking of interior concrete joints, and screening of
mechanical equipment ("Building Core Improvements");
(iv) Cost of labor, material and overhead for change orders
approved by Landlord in accordance with this Exhibit B-1 and
minor field changes;
(v) Architectural, engineering and other design fees;
(vi) Plans, drawings and printing costs;
(vii) Insurance premiums;
(viii) Cost of any reasonably required reports, surveys or studies;
(ix) The cost of utility connections, installation of utility
facilities and meters and user installation or hook-up fees;
(x) All governmental fees and development impact fees, including
fees for permits, charges and costs of obtaining governmental
approvals;
(xi) Recording costs and filing fees.
2.3 Tenant's architect, as described in Paragraph 2.4, shall
furnish all architectural and engineering plans and specifications ("Core
Improvement Plans and Specifications") required for the construction of
Building Core Improvements. Core Improvement Plans and Specifications shall be
based on the Interior Improvement Specifications attached as Exhibit B-2
herein, or as otherwise indicated by Landlord. It is understood and agreed by
Tenant that any minor changes from any plans and specifications that may be
reasonably necessary during construction of the Premises shall not affect,
change or invalidate this Lease and shall not require Tenant's consent.
2.4 Tenant shall contract with WHL Architects for Tenant's Work to
furnish architectural plans and specifications ("Tenant's Plans and
Specifications") required for the construction of Tenant's Work. Tenant's Plans
and Specifications shall also be based on the Interior Improvement
Specifications attached hereto as Exhibit B-2.
2.5 Tenant shall contact with South Bay Construction for completion
of Tenant's Work. Tenant's suppliers, contractors, workmen and mechanics shall
be subject to approval by Landlord, which shall not be unreasonably withheld or
delayed, prior to the commencement of work and shall be subject to Landlord's
administrative control while performing their work. Landlord shall coordinate
with Tenant's representative the scheduling of Tenant's Work. Prior to
Commencement of Landlord's Work, Tenant shall notify Landlord with respect to
any special scheduling requirements of Tenant in connection with the
installation of Tenant's Work. If at any time any supplier, contractor, workman
or mechanic performing Tenant's Work hinders or delays any other work in the
Building or performs any work which may or does impair the quality, integrity
or performance of any portion of the Building, Tenant shall take all steps
necessary to bring an end to the delay or hindrance, and the contractor in
question shall not recommence Tenant's Work until reasonable steps have been
taken to avoid further delay or hindrance. In performing Tenant's Work, Tenant
shall be required to employ contractors (and subcontractors) which (a) are
parties to, and bound by, a collective bargaining agreement with a labor
organization affiliated with the Building and Construction Trades Council of
the AFL-CIO and (b) employ only members of such labor organizations to perform
work within their respective jurisdictions), with the exception of labor hired
for network cabling for personal and mainframe computer systems and related
items. Tenant shall reimburse Landlord for any repairs or corrections of
Landlord's Work or of Tenant's Work or of any portion of the Building caused by
or resulting from the work of any supplier, contractor, workman or mechanic
with whom Tenant contracts. Landlord shall provide access to Tenant's
suppliers, contractors, workmen and mechanics so as to achieve timely
completion and occupancy of the Premises.
2.6 Unless the Lease has been terminated pursuant to Paragraph 26 of
the Lease, upon the termination or expiration of the Lease, as such term may be
extended, Tenant shall have the right to remove items listed in Exhibit B-3
which have been installed and paid for by Tenant. Tenant shall repair any
damage to the Premises resulting from such removal, patch and repair the walls,
floor and ceiling and return the Premises in clean condition. Landlord shall
have a security interest in Tenant's Work pursuant to Paragraph 19. of the
Lease.
3. COMPLETION DATES
3.1 Tenant shall notify Landlord in advance of the approximate date
on which tenant's Work will be substantially completed and will notify Landlord
when Tenant's Work is in fact substantially completed ("Substantial
Completion"). If any dispute shall arise as to whether the Premises are
substantially completed and ready for Tenant's occupancy, a certificate
furnished by an independent architect mutually agreed to by Landlord and Tenant
certifying the date of Substantial Completion shall be conclusive. The
following shall constitute tenant delays ("Tenant Delays") under the Lease:
(a) Tenant's failure to furnish complete and timely
instructions or approvals;
(b) Tenant's failure to submit conceptual plans for Tenant's
Work to Landlord within forty-five (45) days from the date on which Landlord
commences Landlord's Work;
(c) Tenant's failure to submit preliminary Plans and
Specifications for Tenant's Work for approval by Landlord within seventy-five
(75) days from the date on which Landlord commences Landlord's Work unless
caused by Landlord's delay in responding to Tenant's conceptual plans;
(d) Tenant's failure to enter into contracts with WHL
Architects and South Bay Construction for design and construction of Tenant's
Work within ninety (90) days from the date on which Landlord commences
Landlord's Work;
(e) Tenant's failure to diligently pursue to completion the
construction of Tenant's Work unless caused by Landlord, its agents or
contractors;
(f) Tenant's failure to deliver a Certificate of Occupancy and
a set of as-built plans to Landlord within thirty (30) days after Substantial
Completion of Tenant's Work, unless caused by a delay by Landlord.
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Tenant Delays resulting in postponement of the Term Commencement Date shall
cause Tenant to be charged Rent under the terms of the Lease for each day of
such delay. All time periods indicated above shall be computed on a calendar
basis with no allowance for holidays, weekends or other customs.
3.2 Except as otherwise provided in Section 3 of this Lease,
failure of Landlord to deliver possession of the Premises within the time and
in the condition provided for in the Lease will not give rise to any claim for
damages by Tenant against Landlord or Landlord's general contractor. If
Landlord fails to deliver the Premises in the condition as provided for under
this Lease, Landlord shall promptly correct any such deficiencies, excluding
any immaterial deficiencies which do not prevent Tenant from using the Premises
for their intended use. If Landlord fails to correct such deficiencies within a
reasonable time, Tenant may pursue its legal remedies against Landlord.
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<PAGE> 27
EXHIBIT B-2
INTERIOR IMPROVEMENT SPECIFICATIONS
NOTE: Not all specified items listed herein refer to this project.
1. WALLS
A. All walls receive paint to be properly prepared. Texture to be medium
spray finish with 1 coat of latex paint to cover. Paint to be
Pittsburg Doric white.
B. Demising walls, between tenant spaces to roof height shall be metal
studs with 5/8" gypsum board both sides. Fire tape finish. U.O.N. See
T.I. drawings for size, gauge and spacing.
C. Restroom studs with 5/8" gypsum board to 6" above adjacent ceiling
U.O.N. with friction fit sound batt insulation. Wainscot at wet walls
to be +4' -0' high with ceramic tile. Texture to be smooth finish with
semi-gloss latex paint U.O.N.
D. Interior Office Walls. Metal studs with 5/8" gypsum board on both
sides to underside of ceiling, U.O.N. Perimeter office walls between
office and warehouse areas to 6" above ceiling, U.O.N. per Title 24
energy calculation requirements.
E. Other. As may be directed by code or tenant purposes for fire
protection, sound or energy insulation, demountability and aesthetics.
F. See tenant improvements drawings for specifications on size, gauge and
spacing of studs.
2. CEILING
A. General. Finished ceiling height to be 10'.
B. Restrooms. Finished ceiling height to be 9' with metal joist with 5/8"
gypsum board. Texture to be smooth finish with semi-gloss latex paint
with friction fit sound batt insulation. See tenant improvement
drawings for specifications on size, gauge and spacing of joists.
C. Office. 2' x 4' T-bar suspended ceiling system with 2' x 4' Second
Look II acoustical ceiling tile by Armstrong or approved equal.
D. Other. As may be directed by tenant or as may otherwise be required by
tenant or codes. See tenant improvement drawings.
3. FLOOR COVERING
A. Carpet - 30 oz. cut pile nylon Design Weave "Westbridge"/26 oz. loop
Design Weave "Caravan" or equivalent without pad. Carpet to be glued
down installation. Color to be selected by Tenant.
B. V.C.T. Armstrong "Standard Excelon" - 1/8" gauge: 12" x 12" or
approved equal.
C. Sheet vinyl Congoleum "Forever" or approved equal.
D. Base. 2-1/2" coved base at carpet and resilient floors.
E. Ceramic tile at toilet rooms with 6" ceramic tile base.
F. Sealed Concrete. Sealed with a clear acrylic sealer.
4. DOORS
A. Interior. SP Particleboard Core Oak 3'-0" x 9'-0", Rotary Sawn Red Oak
Veneer door by Weyerhauser or equal. 20 minute rated at one hour fire
walls.
5. FRAMES (DOORS & WINDOWS)
A. Timely Standard prefinished steel door and sidelight frame in standard
white. "Timely II" at rated walls.
B. Other. As may be directed by code.
6. HARDWARE
A. Latch set and lockset - Schlage D Series in brushed stainless steel
with H.C. Levon lever.
B. Butts - 2 pair per door finished to match.
7. RESTROOM ACCESSORIES
A. Water closet, white American Standard flush valve #2221.18 with
Olsonite #95 seat and Sloan Ryal #110.3 flush valve. H.C. stalls to
have white #9468.018 water closet with Sloan Royal #115.3 flush valve.
B. Urinal, white American Standard "Washbrook" #6501.010 with Sloan Royal
#186 flush valve.
C. Lavatory, American Standard with faucet #0355.027 and drain #2103.786.
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<PAGE> 28
D. Recessed towel dispenser/waste receptacle, Bobrick #B3944.
E. Surface mounted seat cover dispenser, Bobrick.
F. Surface mounted toilet tissue dispenser, Bobrick #B2740.
G. Hook, Bobrick #B8682.
H. Grab bars, Bobrick #B6806, 36" and 42".
I. Toilet partitions, Bobrick 1080 series, plastic laminate, or
equivalent. Baked enamel floor-braced with coat hook/bumper.
J. Urinal partitions, Bobrick 1085 "Duraline" series, or equivalent.
K. Recessed toilet room accessories, Bobrick B301, B3570 and B35704,
or equivalent.
8. HVAC
Gas-fired roof-mounted VAV system for cooling, heating and ventilation.
Designed and installed in accordance with the California Energy Act -
Title 24.
1. All cuts in roof to be properly sealed, flashed and hot
mopped.
9. ELECTRICAL
A. Designed and installed in accordance with the California Energy Act
- Title 24.
B. Power distributed as required by tenant for warehouse, assembly and
manufacturing equipment, appliance operation and special office
machinery shall be ceiling hung U.O.N.
C. Warehouse/Manufacturing/Assembly Lighting. High Bay THS 150-watt
high pressure sodium light fixtures by Lithonia or equal in areas
with open ceiling. U.O.N. See tenant improvement drawings. T-bar
dropped ceilings 2' x 4' recessed mounted fluorescent fixtures with
light levels ranging from 15-75 foot candles as specified by Owner.
Fixtures same as for office lighting following.
D. Office lighting is 2' x 4' recessed mounted fluorescent fixtures,
Lithonia 2PM4G B3 40 18LS 120 or equal, approved by Owner, with
parabolic lens.
E. Downlights. Halo#117-1CT-331-P Coilex Baffle 7" O.D. trim.
F. Wallwashers. Halo#1176-T-425P Coilex Baffle with scoop trim 7" O.D.
G. Track Lights. Halo 120v single circuit power trac with Coilex
Continental lampholdes #L733P.1.
H. Wall-mounted fixture at restroom. Lithonia Wallens #W240-120A.
I. Other lighting as required by tenant or code.
J. Provide plates for all power outlets. Provide pull wires at all
telephone and cable (C.R.T.) pull locations as indicated on plan.
K. Illuminated exit signs as required by tenant or code.
L. Emergency Lighting as required by code.
10. FINISHES/SPECIALTIES
A. Special office wall or floor finishes. See tenant improvement
drawings or specifications.
B. Lunch room, conference room, coffee or wet bar cabinetry and
plumbing. See tenant improvement drawings.
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EXHIBIT B-3
MOVEABLE EQUIPMENT AND TRADE FIXTURES
Moveable Equipment & Trade Fixtures includes:
Lienable and Removable Items
1. Special Devises used in Research Activities for the Following Processes:
a) Storage
b) Analysis
c) Synthesis
d) Measurement
e) Chemical, Biological, or Physical Manipulation
f) Drug Screening Equipment
g) Clinical Assays
h) Information Systems
2. computers
3. Computer Terminals and Printers
4. Computer Network
5. Microwave Antennas
6. Telephone Sets, Operator Switchboards
7. Modular Prefabricated Enclosures (Cole & Warm Rooms)
8. Security System Controls
9. Cylinders, Tanks, Batteries and Other Equipment for Generating or
Supplying the Following Services to the Basic Building Systems (Other Than
Electrical and HVAC);
a) Laboratory Compressed Air
b) Nitrogen
c) Carbon Dioxide Oxygen
d) Other Gases
e) Process Steam
f) Vacuum
g) Distilled Water
h) Deionized Water
i) Supplemental Process
i) Refrigeration
ii) Heating
j) Emergency Generator
k) Non-Standard Frequency and Voltage Electricity
10. Architectural
a) Window Coverings
b) Lab Casework, Counters, and Shelving
11. Electrical
a) Telephone Terminal Backboard & Cabinet
b) Telephone Conduit, Wiring Outlets and Cover Plates
c) Computer Conduit, Wiring Outlets and Cover Plates
d) Motor Generator
e) Security System Wiring
f) Critical Conditioning Monitoring Equipment
12. Mechanical - HVAC
a) Hoods
b) Hood Exhaust Duct Work
c) Hepafilters
13. Mechanical - Plumbing
a) Distribution Lines, Connections and cover Plates for process Gases
and Fluids such as Carbon Dioxide, Nitrogen, Oxygen, Freon and
Distilled and Deionized Water
b) Sinks and Fixtures
c) Equalization Vault and All Interior Components
d) Vacuum Piping
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EXHIBIT C
INITIAL PROJECT SPECIFICATIONS
GENERAL DESCRIPTION
- Two story concrete tilt-up construction.
- Clear heights of approximately 13'6" on the top floor and 14'6" on the
bottom floor.
- Bay spacing of 30' x 30' on the top and bottom floors.
BUILDING STRUCTURE
- All foundations to include footings, foundation walls or other
building foundation components required to support the entire building
structure.
- Columns shall be steel box.
- All columns, beams, joists, purlins, headers, or other framing members
to support the roof, roofing membrane and stair openings.
- Ten inch (10") thick structural concrete slab on grade with #4
reinforcing bars at 18" on center and #6 reinforcing bars at 13" on
center.
- Two and a half (2-1/2") thick concrete slab over metal deck supported
by structural open web and columns.
- Exterior walls that enclose the perimeter of the building with steel
reinforcing and structural connections that may be necessary or
required.
- All exterior glass and glazing with painted aluminum frames. Glass to
be tinted as appropriate to the aesthetic design of the building. All
exterior doors, door closer and locking devices necessary for proper
functioning.
- Hybrid Vulcraft panel roof system to support roofing membrane.
- Four (4) ply built-up roofing (including a base sheet, two plys and a
cap sheet) and all flashings by Owens-Corning, Johns Manville, or
equal.
- Painting of all concrete with Tex-Coat or Kel-Tex textural paint. All
caulking of exterior concrete joint in preparation for painting.
- The foundation and structural framing should be designed to support a
minimum live load of 100 pounds per square foot in all areas on top
floor and 125 pounds on bottom floor.
- The floor-to-floor height of the building shall allow a minimum of
10'0" interior drop ceiling height.
- Roof hatch and ladder within each building.
- One (1) 3,500 lb. capacity elevator.
- Three (3) interior stairs consisting of stair assemblies with metal
handrails to be provided f.o.b. at job site.
PLUMBING
- Underground sanitary sewer laterals connected to the city sewer main,
the street and piped into the building and under the concrete slab on
grade for the length of the building. Sewer lines to consist of a four
inch (4") sanitary sewer line and a four inch (4") biowaste sewer
line. Sanitary sewer line under the slabs will be in a close proximity
to the building restroom locations.
- Domestic water mains connected to the city water main in the street
and stubbed to the building. Water main to the building shall be three
inches (3") in size with a three inch (3") supply line.
- Roof drain leaders piped and connected to the site storm drainage
systems. Overflow drains daylight two inches (2") above grade.
<PAGE> 31
ELECTRICAL
- Gas lines connected from the city public utility mains and gas meters
adjacent to, and in close proximity to the building. Meters supplied
by utility company.
- All primary electrical service to the building that is complete
including underground conduit and wire feeders from transformers pads
into the building's main switchgear electrical room. The electrical
characteristics of the secondary side of the transformers shall be
277/480 volt, 3 Phase and the rated capacity of the transformers shall
be 2,000 amps for each building.
- Underground pull section, meter, and panel(s), for site lighting and
landscaping.
- An electrically operated landscape irrigation controller that is a
complete and functioning system.
- Underground conduit from the building to the main fire protection
system, shut off valve (PIV) for installation for security alarm
wiring.
- All parking lot and landscaping lighting to include fixtures,
underground conduit, wire distribution panel and controller. All
exterior lighting shall be a complete and functioning system.
FIRE PROTECTION
- A complete and fully functional overhead automatic fire sprinkler
system distributed throughout the building with a density of .2/3000.
- System shall include all sprinkler heads that may be required by
building codes above the ceiling, when ceilings are installed.
LOADING
- Two (2) grade level 10' x 12' roll-up doors per building.
SITEWORK
- All work outside the building perimeter walls shall be considered site
work for the building shell and shall include grading, asphalt,
concrete, paving, landscaping (hard and soft), landscape and
irrigation, storm drainage, utility service laterals, curbs, buffers,
sidewalks, specialty paving (if required), retaining walls, fencing
and gates, trash enclosures, planters, parking lot and landscape
lighting and other exterior lighting per code.
- Paving sections for automobile and truck access shall be according to
the Geological Soils Report.
- All parking lot striping to include handicap signage and spaces.
- Underground site storm drainage system shall discharge to the San
Francisco Bay via an existing 24" storm drain connected to the city
storm system main.
EXCLUSIONS
The following items are not included in the building shell:
- Roof screen.
- Proof loading roof for mechanical equipment.
- Deck penetrations for mechanical equipment.
- Caulking of interior concrete joints.
- Framing and finishes for interior stairs.
- Electrical panels and distribution.
- Security system.
- 2 -
<PAGE> 32
EXHIBIT D
TENANT ESTOPPEL CERTIFICATE
TO: Trammell Crow Northern California Development, Inc.
1241 East Hillsdale Blvd., Ste. 200
Foster City, CA 94404
THIS IS TO CERTIFY:
1. That the undersigned is the Tenant under that certain Lease dated
______________, and, if applicable, amended on _____________, by and between
__________________ ("Landlord"), and the undersigned ("Tenant") covering those
certain premises located as shown on the drawing made part of the Lease (the
"Premises").
2. That said Lease is in full force and effect and, except as noted in
Paragraph 1, above, has not been modified, changed, altered or amended in any
respect, and is the only lease or agreement between the Tenant and the Landlord
affecting the Premises.
3. To the best of Tenant's knowledge, the information set forth below is
true and correct:
(a) Square footage of the Premises: __________________________________
(b) Annual rent as of the Commencement of Lease: $____________________
(c) Current annual rent (if different that at commencement): $________
(d) Commencement date of Lease: ______________________________________
(e) Lease termination date: __________________________________________
(f) Rent paid to and including: ______________________________________
(g) Security deposit: $_______________________________________________
(h) Prepaid rent for and in amount of $_______________________________
(i) Free rent period: ______________________ to ______________________
(j) Amount of current monthly escrow payment obligations with respect
to taxes, insurance, and Common Area Maintenance charges under the
Lease:
Taxes: $_____________________________
Insurance: $_____________________________
Common Area Maintenance Charges: $_____________________________
(k) Dates through which Tenant has paid monthly escrow payments and
Common Area Maintenance charges:
Escrow Payment for Taxes: ______________________
Escrow Payment for Insurance: ______________________
Common Area Maintenance Charges: ______________________
4. DELETE IF TENANT HAS NOT OCCUPIED THE PREMISES: Tenant now occupies
the Premises, accepts the Premises in their current condition subject only to
those punch list items listed in Exhibit A, if any, and is not aware of any
defect in the Premises except as described in Exhibit A, if any.
5. DELETE IF TENANT HAS OCCUPIED THE PREMISES: Tenant does not occupy
the Premises. The status of the plans and specifications for and the
construction of Tenant Improvements is described in Exhibit A. Tenant is
familiar with the Tenant Improvement work done to date and is not aware of any
defect in such work, except as described in Exhibit A.
6. No rent has been paid in the current month other than as disclosed in
Paragraph 3. No free rent or other concessions, benefits, or inducements other
than as specified in the Lease have been granted to Tenant or undertaken by the
Landlord.
7. Tenant has not been granted any renewal, expansion, purchase options
or any rights of first refusal, except as disclosed in writing in the Lease.
8. Neither Tenant nor to the best of Tenant's knowledge, Landlord is in
breach of the Lease and there has not occurred any event, act, omission or
condition which by notice or lapse of time or both or otherwise, will result in
any breach by Tenant or to the best of Tenant's knowledge, by Landlord. As of
the date hereof and except as set forth in the Lease, the undersigned is
entitled to no credit, offset or deduction in rent. Tenant knows of no
liabilities or obligations of Landlord which have accrued but are unsatisfied
under the Lease as of the date of this Certificate.
9. To the best of Tenant's knowledge, there are no actions, whether
voluntary or otherwise, pending against the undersigned under the bankruptcy
laws for the relief of debtors of the United States or any state thereof.
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<PAGE> 33
10. With the execution of this Lease and except as otherwise disclosed in
writing to Landlord, neither the Tenant nor any affiliate of the Tenant is a
tenant under a lease or any other tenancy arrangement (i) with (a) ________;
(b)________; (c) ________; or (iii) involving any property in which the
entities named in clauses (___), (___) or (___) are known by the Tenant to have
an ownership interest.
DATED this ___ day of ________, 19___.
TENANT:
----------------------------------------
By:
-------------------------------------
Name:
-----------------------------------
Its:
------------------------------------
(Tenant to attach Exhibit A to Tenant Estoppel Certificate, List of
Defects, if necessary.)
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<PAGE> 34
EXHIBIT E
RULES AND REGULATIONS
FOR TENANT'S CONTRACTOR(S)
1. Tenant's contractor will be responsible for making arrangements with
Landlord as to time for the use of Building and equipment such as
elevators and loading areas. The delivery of materials, equipment and
supplies to the Building or Premises must be coordinated with Landlord at
least two (2) business days prior to delivery. The Building debris box is
not to be used for waste produced by Tenant's contractor.
2. Tenant's contractor shall not interfere with the Landlord's contractor and
sub-trades in any way and will cooperate fully with same.
3. All Tenant's contractor's waste and debris must be removed from the
Premises and Building regularly and promptly. All combustible waste and
debris must be stored in a covered, fire-proof container prior to removal.
4. Tenant's contractor and sub-trades shall take all precautions to ensure
the security and the site condition of the Premises and Building in which
the work is being performed, including their own tools, equipment and
materials, and are responsible for any damage caused by employees and
sub-trades to any part of the Building or Premises.
5. Tenant's contractor shall remove and properly replace underfloor duct
access covers as required for Tenant's trades and services. Any damage to
underfloor duct access coverings shall be repaired or replaced by Tenant's
contractor to the satisfaction of Landlord.
6. Tenant's contractor must provide their own fire protection equipment, have
same on premises at all times and conform to any requirements of
Landlord's contractor regarding fire protection.
7. Tenant's contractor shall carry out all work in compliance with all
Federal, State, County and City Building Codes and applicable Acts,
Ordinances and Statutes.
8. Tenant's contractor shall provide all their own protective devices and
coverings, so as to protect the Building finishes provided by Landlord in
the Building.
9. No attachments to or use of window frames and mullions, ceiling systems,
glass, ceiling frame or Building frame, will be permitted without the
expressed written consent of Landlord.
10. All Tenant's contractors, employees and trades must be confined to the
area in which work is being performed.
11. Tenant or Tenant's contractor shall carry builder's risk insurance with
limits of not less than the amount requested by Landlord, insurance
covering loss or damage to the work during the course of construction;
worker's compensation/employer's liability insurance covering all
employees of contractor and subcontractor. All such policies shall name
Landlord and Tenant as additional insureds. A certificate of insurance
must be provided to Landlord prior to commencement of work.
12. Any construction, alteration, maintenance, repair, replacement, removal
or decoration undertaken by Tenant's contractor shall be carried out in a
good, workmanlike, and prompt manner, shall comply with applicable
statutes, laws, ordinances, regulations, rules, orders and requirements of
the authorities having jurisdiction thereof, and shall be subject to
supervision by Landlord or its employees, agents, or contractors. All
construction shall be performed in a timely manner without delays or
interruptions.
13. Tenant's contractors shall not use excessive quantities of electricity or
water and shall not shut off any water, electricity, sprinkler systems or
other services without first obtaining Landlord's express authorization.
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<PAGE> 35
EXHIBIT F
DISCLOSED HAZARDOUS MATERIALS LIST
2
<PAGE> 36
EXHIBIT G
AGREEMENT REGARDING SHELL MODIFICATIONS
As set forth in Exhibit B-1 to this Lease, Landlord is to complete and pay for
all costs involved in certain construction ("Landlord's Work"). Landlord's Work
includes the construction of a building shell more particularly described in
Exhibit C and Exhibit C-1 to the Lease ("Initial Project Specifications").
Landlord's Work is to be completed through Landlord's general contractor, South
Bay Construction ("Contractor"). Tenant desires to have Landlord modify certain
items set forth in the Initial Project Specifications ("Modifications").
Regarding such Modifications, Landlord and Tenant hereby agree to the following
terms and conditions:
1. During Landlord's construction of Landlord's Work Tenant may request
in writing ("Proposal") Modifications to the Initial Project Specifications
which Tenant desires. Landlord shall have the right to approve or to disapprove
each Proposal in Landlord's sole and absolute discretion. In the event Landlord
approves some or all of the proposed Modifications, Landlord shall have
Contractor estimate the cost of such Modifications, which cost shall be
presented in writing to Tenant for Tenant's review and written approval.
Tenant's failure to approve or disapprove the estimated cost of the approved
Modifications within five (5) calendar days after receipt of the estimate shall
be conclusively deemed a disapproval.
2. Tenant shall be solely responsible for and pay to Landlord: (a) all
costs reasonably incurred by Landlord for Landlord's review of a Tenant
Proposal, including, but not limited to, any architectural, engineering and
consulting costs incurred by Landlord or Contractor to define the scope and/or
estimate the costs of any Modifications proposed by Tenant (such costs shall be
paid by Tenant whether the Proposal is approved or disapproved by Landlord and
regardless of whether Tenant approves or disapproves the estimated cost of the
proposed Modifications); (b) the actual increase in cost as a result of
constructing the approved Modifications; (c) a fee for the Contractor's
overhead and profit per Landlord's construction contract with Contractor; and
(d) all other costs and expenses reasonably incurred by Landlord in connection
with the review, approval, and construction of the Modifications, including,
but not limited to, permit fees and change order costs (collectively, the
Modification Costs"). Tenant shall pay the Modification Costs within ten (10)
days after Landlord submits to Tenant an invoice thereof, provided that
Landlord shall not submit an invoice for any Modifications Costs until Landlord
has been billed for such Cost. Landlord may invoice the Modifications Costs for
any Proposal in one or more separate invoices in Landlord's discretion.
Tenant's failure to pay the invoiced Modifications Costs in full within the
time prescribed above shall constitute an Event of Default by Tenant under
Section 26A(2) of this Lease and in such case Landlord shall be entitled to all
of its remedies under this Lease in addition to its remedies at law as a result
of such failure to pay.
3. Landlord and Tenant acknowledge that review of Proposals and construction
of proposed Modifications could delay construction of the Landlord's Work and,
consequently, the date on which Landlord grants permission to Tenant to
commence construction of Tenant's Work pursuant to Section 3 of this Lease.
Landlord and Tenant hereby agree that any such delay shall be a "Tenant Delay"
for the purposes of this Lease, and, in particular, for purposes of Section 3
of the Lease. For purposes of determining the number of days of such Tenant
Delay, Landlord and Tenant agree that the good faith joint determination
thereof by Dan Kirby (of Dowler Gruman Architects) and Douglas White (of WHL
Architects), Landlord's and Tenant's architects, respectively, shall be
conclusive and binding on both Landlord and Tenant.
1
<PAGE> 1
EXHIBIT 10.4
[LOGO] LEASE MANAGEMENT SERVICES, INC.
EQUIPMENT FINANCING AGREEMENT
(Number 10801)
THIS EQUIPMENT FINANCING AGREEMENT NUMBER 10801 ("Agreement") is dated as of
the date set forth at the foot hereof and is between LEASE MANAGEMENT SERVICES,
INC. ("Secured Part") and VIROLOGIC, INC., ("Debtor").
1. EQUIPMENT; SECURITY INTEREST. The terms and conditions of this Agreement
cover each item of machinery, equipment and other property (individually an
"Item" or "Item of Equipment" and collectively the "Equipment") described in a
schedule now or hereafter executed by the parties hereto and made a part hereof
(individually a "Schedule" and collectively the "Schedules"). Debtor hereby
grants Secured Party a security interest in and to all Debtor's right, title
and interest in and to the Equipment under the Uniform Commercial Code, such
grant with respect to an Item of Equipment to be as of Debtor's execution of a
related Equipment Financing Commitment referencing this Agreement or, if Debtor
then has no interest in such Item, as of such subsequent time as Debtor
acquires an interest in the Item. Such security interest is granted by Debtor
to secure performance by Debtor of Debtor's obligations to Secured Party
hereunder and under any other agreements under which Debtor has or may
hereafter have obligations to Secured Party. Debtor will ensure that such
security interest will be and remain a sole and valid first lien security
interest subject only to the lien of current taxes and assessment not in
default but only if such taxes are entitled to priority as a matter of law.
2. DEBTOR'S OBLIGATIONS. The obligations of Debtor under this Agreement
respecting an Item of Equipment, except the obligation to pay installment
payments with respect thereto which will commence as set forth in Paragraph 3
below, commence upon the grant to Secured Party of a security interest in the
Item. Debtor's obligations hereunder with respect to an Item of Equipment and
Secured Party's security interest therein will continue until payment of all
amounts due, and performance of all terms and conditions required hereunder
provided, however, that if this Agreement is in default said obligations and
security interest will continue during the continuance of said default. Upon
termination of Secured Party's security interest in an Item of Equipment,
Secured Party will execute such release of interest with respect thereto as
Debtor reasonably requests.
3. INSTALLMENT PAYMENTS AND OTHER PAYMENTS. Debtor will repay advances
Secured Party makes on account of the Equipment in installment payments in the
amounts and at the times set forth in the Schedules, whether or not Secured
Party has rendered an invoice therefor, at the office of Secured Party set
forth at the foot hereof, or to such person and/or at such other place as
Secured Party may from time to time designate by notice to Debtor. Any other
amounts required to be paid Secured Party by Debtor hereunder are due upon
Debtor's receipt of Secured Party's invoice therefor and will be payable as
directed in the invoice. Payments under this Agreement may be applied to
Debtor's then accrued obligations to Secured Party in such order as Secured
Party may choose.
4. NET AGREEMENT; NO OFFSET, SURVIVAL. This Agreement is a net agreement, and
Debtor will not be entitled to any abatement of installation payments or other
payments due hereunder or any reduction thereof under any circumstance or for
any reason whatsoever. Debtor hereby waives any and all existing and future
claims, as offsets, against any installment payments or other payments due
hereunder and agrees to pay the installment payments and other amounts due
hereunder as and when due regardless of any offset or claim which may be
asserted by Debtor or on its behalf. The obligations and liabilities of Debtor
hereunder will survive the termination of the Agreement.
5. FINANCING AGREEMENT. THIS AGREEMENT IS SOLELY A FINANCING AGREEMENT.
DEBTOR ACKNOWLEDGES THAT THE EQUIPMENT HAS OR WILL HAVE BEEN SELECTED AND
ACQUIRED SOLELY BY DEBTOR FOR DEBTOR'S PURPOSES, THAT SECURED PARTY IS NOT AND
WILL NOT BE THE VENDOR OF ANY
<PAGE> 2
VIROLOGIC, INC.
EQUIPMENT FINANCING AGREEMENT NUMBER 10801
PAGE 2 OF 8
EQUIPMENT AND THAT SECURED PARTY HAS NOT MADE AND WILL NOT MAKE ANY AGREEMENT,
REPRESENTATION OR WARRANTY WITH RESPECT TO THE MERCHANTABILITY, CONDITION,
QUALIFICATION OR FITNESS FOR A PARTICULAR PURPOSE OR VALUE OF THE EQUIPMENT OR
ANY OTHER MATTER WITH RESPECT THERETO IN ANY RESPECT WHATSOEVER.
6. NO AGENCY. DEBTOR ACKNOWLEDGES THAT NO AGENT OF THE MANUFACTURER OR
OTHER SUPPLIER OF AN ITEM OF EQUIPMENT OR OF ANY FINANCIAL INTERMEDIARY IN
CONNECTION WITH THIS AGREEMENT IS AN AGENT OF SECURED PARTY. SECURED PARTY IS
NOT BOUND BY A REPRESENTATION OF ANY SUCH PARTY AND, AS CONTEMPLATED IN
PARAGRAPH 27 BELOW, THE ENTIRE AGREEMENT OF SECURED PARTY AND DEBTOR CONCERNING
THE FINANCING OF THE EQUIPMENT IS CONTAINED IN THIS AGREEMENT AS IT MAY BE
AMENDED ONLY AS PROVIDED IN THAT PARAGRAPH.
7. ACCEPTANCE. Execution by Debtor and Secured Party of a Schedule covering
the Equipment or any Items thereof will conclusively establish that such
Equipment has been included under and will be subject to all the terms and
conditions of this Agreement. If Debtor has not furnished Secured Party with an
executed Schedule by the earlier of fourteen (14) days after receipt thereof or
expiration of the commitment period set forth in the applicable Equipment
Financing Agreement, Secured Party may terminate its obligation to advance
funds as to the applicable Equipment.
8. LOCATION; INSPECTION; USE. Debtor will keep, or in the case of motor
vehicles, permanently garage and not remove from the United States, as
appropriate, each Item of Equipment in Debtor's possession and control at the
Equipment Location designated in the applicable Schedule, or at such other
location to which such Item may have been moved with the prior written consent
of Secured Party. Whenever requested by Secured Party, Debtor will advise
Secured Party as to the exact location of an Item of Equipment. Secured Party
will have the right to inspect the Equipment and observe its use during normal
business hours, subject to Debtor's security procedures and to enter into and
upon the premises where the Equipment may be located for such purpose. The
Equipment will at all times be used solely for commercial or business purposes
and operated in a careful and proper manner and in compliance with all
applicable laws, ordinances, rules and regulations, all conditions and
requirements of the policy or policies of insurance required to be carried by
Debtor under the terms of this Agreement and all manufacturer's instructions
and warrant requirements. Any modifications or additions to the Equipment
required by any such governmental edict or insurance policy will be promptly
made by Debtor.
9. ALTERATIONS; SECURITY INTEREST COVERAGE. Without the prior written consent
of Secured Party, Debtor will not make any alterations, additions or
improvements to any Item of Equipment which detract from its economic value or
functional utility, except as may be required pursuant to Paragraph 8 above.
Secured Party's security interest in the Equipment will include all
modifications and additions thereto and replacements and substitutions therefor,
in whole or in part. Such reference to replacements and substitutions will not
grant Debtor greater rights to replace or substitute than are provided in
Paragraph 11 below or as may be allowed upon prior written consent of Secured
Party.
10. MAINTENANCE: Debtor will maintain the Equipment in good repair, condition
and working order. Debtor will also cause each Item of Equipment for which a
service contract is generally available to be covered by such a contract which
provides coverage typical to property of the type involved and is issued by a
competent servicing entity.
11. LOSS AND DAMAGE; CASUALTY VALUE. In the event of the loss of, theft of,
requisition of, damage to or destruction of an Item of Equipment ("Casualty
Occurrence"), Debtor will give Secured Party prompt notice thereof and will
thereafter place such Item in good repair,
<PAGE> 3
VIROLOGIC, INC.
EQUIPMENT FINANCING AGREEMENT NUMBER 10801
PAGE 3 OF 8
condition and working order, provided, however, that if such Item is determined
by Secured Party to be lost, stolen, destroyed or damaged beyond repair, is
requisitioned or suffers a constructive total loss as defined in any applicable
insurance policy carried by Debtor in accordance with Paragraph 14 below,
Debtor, at Secured Party's option, will (a) replace such Item with like
Equipment in good repair, condition and working order whereupon such
replacement equipment will be deemed such Item for all purposes hereof or (b)
pay Secured Party the "Casualty Value" of such Item which will equal the total
of (i) all installment payments and other amounts due from Debtor to Secured
Party at the time of such payment and (ii) future installment payments due with
respect to such Item with each such payment including any final uneven payment
discounted at a rate equal to the discount rate of the Federal Reserve Bank of
San Francisco from the date due to the date of such payment.
Upon such replacement or payment, as appropriate, this Agreement and Secured
Party's security interest will terminate with, and only with, respect to the
Item of Equipment so replaced or as to which such payment is made in accordance
with Paragraph 2 above.
12. TITLING; REGISTRATION. Each item of Equipment subject to title
registration laws will at all times be titled and/or registered by Debtor as
Secured Party's agent and attorney-in-fact with full power and authority to
register (but without power to affect title to) the Equipment in such manner
and in such jurisdiction or jurisdictions as Secured Party directs. Debtor will
promptly notify Secured Party of any necessary or advisable retitling and/or
reregistration of an Item of Equipment in a jurisdiction other than the one in
which such Item is then titled and/or registered. Any and all documents of
title will be furnished or caused to be furnished Secured Party by Debtor
within sixty (60) days of the date any titling or registering or restating or
reregistering, as appropriate, is directed by Secured Party.
13. TAXES. Debtor will make all filings as to and pay when due all personal
property and other ad valorem taxes and all other taxes, fees, charges and
assessments based on the ownership or use of the Equipment and will pay as
directed by Secured Party or reimburse Secured Party for all other taxes,
including, but not limited to, gross receipt taxes (exclusive of federal and
state taxes based on Secured Party's net income, unless such net income taxes
are in substitution for or relieve Debtor from any taxes which Debtor would
otherwise be obligated to pay under the terms of this Paragraph 13), fees,
charges and assessments whatsoever, however designated, whether based on the
installment payments or other amounts due hereunder, levied, assessed or
imposed upon the Equipment or otherwise related hereto or to the Equipment, now
or hereafter levied, assessed or imposed under the authority of a federal,
state, or local taxing jurisdiction, regardless of when and by whom payable.
Filings with respect to such other amounts will, at Secured Party's option, be
made by Secured Party or by Debtor as directed by Secured Party.
14. INSURANCE. Debtor will procure and continuously maintain all risk
insurance against loss or damage to the Equipment from any cause whatsoever for
not less than the full replacement value thereof naming Secured Party as Loss
Payee. Such insurance must be in a form and with companies approved by Secured
Party, must provide at least thirty (30) days advance written notice to Secured
Party of cancellation, change or modification in any term, condition, or amount
of protection provided therein, must provide full breach of warranty protection
and must provide that the coverage is "primary coverage" (does not require
contribution from any other applicable coverage). Debtor will provide Secured
Party with an original policy or certificate evidencing such insurance. In the
event of an assignment of this Agreement of which Debtor has notice, Debtor
will cause such insurance to provide the same protection to the assignee as its
interests may appear. The proceeds of such insurance, at the option of the
Secured Party or such assignee, as appropriate, will be applied toward (a)
repair or replacement of the appropriate Item or Items of Equipment, (b)
payment of the Casualty Value thereof and/or (c) payment of, or as provision
for, satisfaction of any other accrued obligations of Debtor hereunder. Debtor
hereby appoints Secured Party as Debtor's attorney-in-fact with full power and
authority to do all things, including, but not limited to, making claims,
receiving payments and endorsing documents, checks or drafts, necessary to
secure payments due under any policy contemplated hereby on account of a
Casualty
<PAGE> 4
VIROLOGIC, INC.
EQUIPMENT FINANCING AGREEMENT NUMBER 10801
PAGE 4 OF 8
Occurrence. Debtor and Secured Party contemplate that the jurisdictions where
the Equipment will be located will not impose any liability upon Secured Party
for personal injury and/or property damage resulting out of the possession, use,
operation or condition of the Equipment. In the event Secured Party determines
that such is not or may not be the case with respect to a given jurisdiction,
Debtor will provide Secured Party with public liability and property damage
coverage applicable to the Equipment in such amounts and in such form as Secured
Party requires.
15. SECURED PARTY'S PAYMENT. If Debtor fails to pay any amounts due hereunder
or to perform any of its other obligations under this Agreement, Secured Party
may, at its option, but without any obligation to do so, pay such amounts or
perform such obligations, and Debtor will reimburse Secured Party the amount of
such payment or cost of such performance, plus interest at 1.5% per month.
16. INDEMNITY. Debtor does hereby assume liability for and does agree to
indemnify, defend, protect, save and keep harmless Secured Party from and
against any and all liabilities, losses, damages, penalties, claims, actions,
suits, costs, expenses and disbursements, including court costs and legal
expenses, of whatever kind and nature, imposed on, incurred by or asserted
against Secured Party (whether or not also indemnified against by any other
person) in any way relating to or arising out of this Agreement or the
manufacture, financing, ownership, delivery, possession, use, operation,
condition or disposition of the Equipment by Secured Party or Debtor, including,
without limitation, any claim alleging latent and other defects, whether or not
discoverable by Secured Party or Debtor, and any other claim arising out of
strict liability in tort, whether or not in either instance relating to an event
occurring while Debtor remains obligated under this Agreement, and any claim for
patent, trademark or copyright infringement. Debtor agrees to give Secured Party
and Secured Party agrees to give Debtor notice of any claim or liability hereby
indemnified against promptly following learning thereof.
17. DEFAULT. Any of the following will constitute an event of default
hereunder: (a) Debtor's failure to pay when due any installment payment or other
amount due hereunder, which failure continues for ten (10) days after the due
date thereof; (b) Debtor's default in performing any other obligation, term or
condition of this Agreement or any other agreement between Debtor and Secured
Party or default under any further agreement providing security for the
performance by Debtor of its obligations hereunder provided such default has
continued for more than twenty (20) days, except as provided in (c) and (d)
hereinbelow, or, without limiting the generality of subparagraph (1)
hereinbelow, default under any lease or any mortgage or other instrument
contemplating the provision of financial accommodation applicable to the real
property where an Item of Equipment is located; (c) any writ or order of
attachment or execution or other legal process being levied on or charged
against any Item of Equipment and not being released or satisfied within ten
(10) days; (d) Debtor's failure to comply with its obligations under Paragraph
14 above or any transfer by Debtor in violation of Paragraph 21 below; (e) a
non-appealable judgment for the payment of money in excess of $100,000 being
rendered by a court of record against Debtor which Debtor does not discharge or
make provision for discharge in accordance with the terms thereof within ninety
(90) days from the date of entry thereof; (f) death or judicial declaration of
incompetency of Debtor, if an individual; (g) the filing by Debtor of a petition
under the Bankruptcy Code or any amendment thereto or under any other insolvency
law or law providing for the relief of debtors, including, without limitation, a
petition for reorganization, arrangement or extension, or the commission by
Debtor of an act of bankruptcy; (h) the filing against Debtor of any such
petition not dismissed or permanently stayed within thirty (30) days of the
filing thereof; (i) the voluntary or involuntary making of an assignment of
substantial portion of its assets by Debtor for the benefit of creditors,
appointment of a receiver or trustee for Debtor or for any of Debtor's assets,
institution by or against Debtor or any other type of insolvency proceeding
(under the Bankruptcy Code or otherwise) or of any formal or informal proceeding
for dissolution, liquidation, settlement of claims against or winding up of the
affairs of Debtor, Debtor's cessation of business activities or the making by
Debtor of a transfer of all or a material portion of Debtor's assets or
inventory not in the ordinary course of business; (j) the occurrence of any
event described in parts (e), (f), (g), (h) or (i) hereinabove with respect to
any guarantor or
<PAGE> 5
VIROLOGIC, INC.
EQUIPMENT FINANCING AGREEMENT NUMBER 10801
PAGE 5 OF 8
other party liable for payment or performance of this Agreement; (k) any
certificate, statement, representation, warranty or audit heretofore or
hereafter furnished with respect hereto by or on behalf of Debtor or any
guarantor or other party liable for payment or performance of this Agreement
proving to have been false in any material respect at the time as of which the
facts therein set forth were stated or certified or having omitted any
substantial contingent or unliquidated liability or claim against Debtor or
any such guarantor or other party; (l) breach by Debtor of any lease or other
agreement providing financial accommodation under which Debtor or its property
is bound; or (m) a transfer of effective control of Debtor, if an organization.
18. REMEDIES. Up the occurrence of an event of default, Secured Party will
have the rights, options, duties and remedies of a Secured Party, and Debtor
will have the rights and duties of a debtor, under the Uniform Commercial Code
(regardless of whether such Code or a law similar thereto has been enacted in a
jurisdiction wherein the rights or remedies are asserted) and, without limiting
the foregoing, Secured Party may exercise one or more of the following
remedies: (a) declare the Casualty Value or such lesser amount as may be set
by law immediately due and payable with respect to any or all Items of
Equipment without notice or demand to Debtor; (b) sue from time to time for and
recover all installment payments and other payments then accrued and which
accrue during the pendency of such action with respect to any or all Items of
Equipment; (c) take possession of and, if deemed appropriate, render unusable
any or all Items of Equipment, without demand or notice, wherever same may be
located, without any court order or other process of law and without liability
for any damages occasioned by such taking of possession and remove, keep and
store the same or use and operate or lease the same until sold; (d) require
Debtor to assemble any or all Items of Equipment at the Equipment Location
therefor, or at such location to which such Equipment may have been moved with
the written consent of Secured Party or such other location in reasonable
proximity to either of the foregoing as Secured Party designates; (e) upon ten
(10) days notice to Debtor or such other notice as may be required by law, sell
or otherwise dispose of any Item of Equipment, whether or not in Secured
Party's possession, in a commercially reasonable manner at public or private
sale at any place deemed appropriate and apply the new proceeds of such sale,
after deducting all costs of such sale, including, but not limited to, costs of
transportation, repossession, storage, refurbishing, advertising and brokers'
fees, to the obligations of Debtor to Secured Party hereunder or otherwise,
with Debtor remaining liable for any deficiency and with any excess being
returned to Debtor; (f) upon thirty (30) days notice to Debtor, retain any
repossessed or assembled Items of Equipment as Secured Party's own property in
full satisfaction of Debtor's liability for the installment payments due
hereunder with respect thereto, provided that Debtor will have the right to
redeem such Items by payment in full of its obligations to Secured Party
hereunder or otherwise or to require Secured Party to sell or otherwise dispose
of such Items in the manner set forth in subparagraph (e) hereinabove upon
notice to Secured Party within such thirty (30) day period; or (g) utilize any
other remedy available to Secured Party under the Uniform Commercial Code or
similar provision of law or otherwise at law or in equity.
No right or remedy conferred herein is exclusive of any other right or remedy
conferred herein or by law; but all such remedies are cumulative of every other
right or remedy conferred hereunder or at law or in equity, by statute or
otherwise, and may be exercised concurrently or separately from time to time.
Any sale contemplated by subparagraph (e) of this Paragraph 18 may be adjourned
from time to time by announcement at the time and place appointed for such
sale, or for any such adjourned sale, without further published notice, Secured
Party may bid and become the purchaser at any such sale. Any sale of an Item of
Equipment, whether under said subparagraph or by virtue of judicial
proceedings, will operate to divest all right, title, interest, claim and
demand whatsoever; either at law or in equity, of Debtor in and to said item
and will be a perpetual bar to any claim against such Item, both at law and in
equity, against Debtor and all persons claiming by, through or under Debtor.
19. DISCONTINUANCE OF REMEDIES. If Secured Party proceeds to enforce any right
under this Agreement and such proceedings are discontinued or abandoned for any
reason or are
<PAGE> 6
VIROLOGIC, INC.
EQUIPMENT FINANCING AGREEMENT NUMBER 10801
PAGE 6 OF 8
determined adversely, then and in every such case Debtor and Secured Party will
be restored to their former positions and rights hereunder.
20. SECURED PARTY'S EXPENSES. Debtor will pay Secured Party all costs and
expenses, including attorneys fees and court costs and sales costs not offset
against sales proceeds under Paragraph 18 above, incurred by Secured Party in
exercising any of its rights or remedies hereunder or enforcing any of the
terms, conditions or provisions hereof. This obligation includes the payment or
reimbursement of all such amounts whether an action is ultimately filed and
whether an action is ultimately dismissed.
21. ASSIGNMENT. Without the prior written consent of Secured Party, Debtor
will not sell, lease, pledge or hypothecate, except as provided in this
Agreement, any Item of Equipment or any interest therein or assign, transfer,
pledge, or hypothecate this Agreement or any interest in this Agreement or
permit the Equipment or be subject to any lien, charge or encumbrance of any
nature except the security interest of Secured Party contemplated hereby.
Debtor's interest herein is not assignable and will not be assigned or
transferred by operation of law. Consent to any of the foregoing prohibited
acts applies only in the given instance and is not a consent to any subsequent
like act by Debtor or any other person.
All rights of Secured Party hereunder may be assigned, pledged, mortgaged,
transferred or otherwise disposed of, either in whole or in part, without
notice to Debtor but always, however, subject to the rights of Debtor under
this Agreement. If Debtor is given notice of any such assignment, Debtor will
acknowledge receipt thereof in writing. In the event Secured Party assigns this
Agreement or the installment payments due or to become due hereunder or any
other interest herein, whether as security for any of its indebtedness or
otherwise, no breach or default by Secured Party hereunder or pursuant to any
other agreement between Secured Party and Debtor, should there be one, will
excuse performance by Debtor of any provision hereof, it being understood that
in the event of such default or breach by Secured Party that Debtor will pursue
any rights on account thereof solely against Secured Party. No such assignee,
unless such assignee agrees in writing, will be obligated to perform any duty,
covenant or condition required to be performed by Secured Party in connection
with this Agreement.
Subject always to the foregoing, this Agreement inures to the benefit of, and
is binding upon, the heirs, legatees, personal representative, successors and
assigns of the parties hereto.
22. MARKINGS; PERSONAL PROPERTY. If Secured Party supplies Debtor with
labels, plates, decals or other markings stating that Secured Party has an
interest in the Equipment, Debtor will affix and keep the same prominently
displayed on the Equipment or will otherwise mark the Equipment or its then
location or locations, as appropriate, at Secured Party's request to indicate
Secured Party's security interest in the Equipment. The Equipment is, and at
all times will remain, personal property notwithstanding that the Equipment or
any Item thereof may now be, or hereafter become, in any manner affixed or
attached to, or embedded in, or permanently resting upon real property or any
improvement thereof or attached in any manner to what is permanent as by means
of cement, plaster, nails, bolts, screws or otherwise. If requested by Secured
Party, Debtor will obtain and deliver to Secured Party waivers of interest or
liens in recordable form satisfactory to Secured Party from all persons claiming
any interest in the real property on which an Item of Equipment is or is to be
installed or located.
23. LATE CHARGES. Time is of the essence in this Agreement and if any
Installment Payment is not paid within ten (10) days after the due date
thereof, Secured Party shall have the right to add and collect, and Debtor
agrees to pay: (a) a late charge on and in addition to, such Installment
Payment equal to five percent (5%) of such Installment Payment or a lesser
amount if established by any state or federal statute applicable thereto, and
(b) interest on such Installment Payment from thirty (30) days after the due
date until paid at the highest contract rate enforceable against Debtor under
applicable law but never to exceed eighteen percent (18%) per annum.
<PAGE> 7
VIROLOGIC, INC.
EQUIPMENT FINANCING AGREEMENT NUMBER 10801
PAGE 7 OF 8
24. NON-WAIVER. No covenant or condition of this Agreement can be waived
except by the written consent of Secured Party. Forbearance or indulgence by
Secured Party in regard to any breach hereunder will not constitute a waiver of
the related covenant or condition to be performed by Debtor.
25. ADDITIONAL DOCUMENTS. In connection with and in order to perfect and
evidence the security interest in the Equipment granted Secured Party hereunder
Debtor will execute and deliver to Secured Party such financing statements and
similar documents as Secured Party requests. Debtor authorizes Secured Party
where permitted by law to make filings of such financing statements without
Debtor's signature. Debtor further will furnish Secured Party (a) on a timely
basis, Debtor's future financial statements, including Debtor's most recent
annual report, balance sheet and income statement, prepared in accordance with
generally accepted accounting principles, which reports, Debtor warrants, shall
fully and fairly represent the true financial condition of Debtor (b) any other
information normally provided by Debtor to the public and (c) such other
financial data or information relative to this Agreement and the Equipment,
including, without limitation, copies of vendor proposals and purchase orders
and agreements, listings of serial numbers or other identification data and
confirmations of such information, as Secured Party may from time to time
reasonably request. Debtor will procure and/or execute, have executed,
acknowledge, have acknowledged, deliver to Secured Party, record and file such
other documents and showings as Secured Party deems necessary or desirable to
protect its interest in and rights under this Agreement and interest in the
Equipment. Debtor will pay as directed by Secured Party or reimburse Secured
Party for all filing, search, title report, legal and other fees incurred by
Secured Party in connection with any documents to be provided by Debtor
pursuant to this Paragraph or Paragraph 22 and any further similar documents
Secured Party may procure.
26. DEBTOR'S WARRANTIES. Debtor certifies and warrants that the financial
data and other information which Debtor has submitted, or will submit, to
Secured Party in connection with this Agreement is, or will be at time of
delivery, as appropriate, a true and complete statement of the matters therein
contained. Debtor further certifies and warrants: (a) this Agreement has been
duly authorized by Debtor and when executed and delivered by the person signing
on behalf of Debtor below will constitute the legal, valid and binding
obligation, contract and agreement of Debtor enforceable against Debtor in
accordance with its respective terms; (b) this Agreement and each and every
showing provided by or on behalf of Debtor in connection herewith may be relied
upon by Secured Party in accordance with the terms thereof notwithstanding the
failure of Debtor or other applicable party to ensure proper attestation
thereto, whether by absence of a seal or acknowledgment or otherwise; (c)
Debtor has the right, power and authority to grant a security interest in the
Equipment to Secured Party for the uses and purposes herein set forth and (d)
each Item of Equipment will at the time such Item becomes subject hereto, be in
good repair, condition and working order.
27. ENTIRE AGREEMENT. This instrument with exhibits and related
documentation constitutes the entire agreement between Secured Party and Debtor
and will not be amended, altered or changed except by a written agreement signed
by the parties.
28. NOTICES. Notices under this Agreement must be in writing and must be
mailed by United States mail, certified mail with return receipt requested,
duly addressed, with postage prepaid, to the party involved at its respective
address set forth at the foot hereof or at such other address as each party may
provide on notice to the other from time to time. Notices will be effective
when deposited. Each party will promptly notify the other of any change in that
party's address.
29. GENDER, NUMBER: JOINT AND SEVERAL LIABILITY. Whenever the context of this
Agreement requires, the neuter gender includes the feminine or masculine and
the singular number includes the plural; and whenever the words "Secured Party"
are used herein, they include all assignees of Secured Party, it being
understood that specific reference to "assignee" in
<PAGE> 8
VIROLOGIC, INC.
EQUIPMENT FINANCING AGREEMENT NOVEMBER 10801
PAGE 8 OF 8
paragraph 14 above is for further emphasis. If there is more than one Debtor
named in this Agreement, the liability of each will be joint and several.
30. TITLES. The titles to the Paragraphs of this Agreement are solely for the
convenience of the parties and are not an aid in the interpretation of the
instrument.
31. GOVERNING LAW; VENUE. This Agreement will be governed by and construed in
accordance with the laws of the State of California. Venue for any action
related to the Agreement will be in an appropriate court in San Mateo County,
California, to which Debtor consents, or in another court selected by Secured
Party which has jurisdiction over the parties. In the event any provision
hereof is declared invalid, such provision will be deemed severable from the
remaining provisions of this Agreement, which will remain in full force and
effect.
32. TIME. Time is of the essence of this Agreement and for each and all of its
provisions.
In WITNESS WHEREOF, the undersigned have executed this Agreement as of October
16, 1996.
DEBTOR:
VIROLOGIC, INC.
270 East Grand Avenue
South San Francisco, CA 94080
By: /s/ MARTIN H. GOLDSTEIN
---------------------------------
Title: President & CFO
-----------------------------
SECURED PARTY:
LEASE MANAGEMENT SERVICES, INC.
2500 Sand Hill Road, Suite 101
Menlo Park, CA 94025
By: /s/ [SIGNATURE ILLEGIBLE]
---------------------------------
Title: EVP/General Manager
-----------------------------
<PAGE> 9
LOGO] LEASE MANAGEMENT SERVICES, INC.
ADDENDUM
TO EQUIPMENT FINANCING AGREEMENT NUMBER 10801
BETWEEN VIROLOGIC, INC. ("DEBTOR")
AND
LEASE MANAGEMENT SERVICES, INC. ("SECURED PARTY")
The printed form of Equipment Financing Agreement #10801 between the parties
date October 16, 1996 is amended as follows:
FIRST: In Section 8, line 5, after "Secured Party," insert "which consent will
not be unreasonably withheld".
SECOND: In Section 8, line 7, before the second occurrence of "Secured Party"
insert "After providing three (3) days notice to Debtor of Secured Party's
desire to inspect,".
THIRD: In Section 9, line 2, after "Secured Party", insert "which consent will
not be unreasonably withheld".
FOURTH: In Section 11, line 4, before "determined" insert "reasonably" and
after "Secured Party" insert "after consultation with Debtor".
FIFTH: In Section 11, line 7, after "will" insert "either".
SIXTH: In Section 14, line 4, after "companies" insert "reasonably".
SEVENTH: In Section 14, line 11, after "insurance" insert "after consultation
with Debtor".
EIGHTH: In Section 14, line 23, after "Secured Party" insert "reasonably".
NINTH: In Section 17, line 7 after "days" insert "after written notice of
non-performance".
TENTH: In Section 17, clause (b), after "performing" insert "(i) under sections
1,8,10,11, and 14 hereunder or (ii)" and in Line 4 after the first occurrence
of the word "other" insert "material".
ELEVENTH: In Section 17, clause (l), between "accommodation" and "under" insert
"in excess of $100,000.00".
TWELFTH: In Section 17, replace clause (m) with "(m) a transfer of effective
control of Debtor, if an organization, except in the case of a transfer of all
or substantially all of the Debtor's business as provided in Section 21 below.".
<PAGE> 10
ADDENDUM TO EQUIPMENT FINANCING AGREEMENT NO. 10801
VIROLOGIC, INC.
PAGE 2 OF 2
THIRTEENTH: In Section 18, clause (c), remove "and, if deemed appropriate
render unusable" and after "liability" insert the parenthetical "(except for
Secured Party's gross negligence or willful misconduct)".
FOURTEENTH: In Section 20, after "all" insert "reasonable".
FIFTEENTH: In Section 21, add the following: "In the event of a proposed
statutory merger of the Debtor into another corporation or a proposed sale or
transfer by the Debtor of all or substantially all of its assets to a third
party business entity, then, provided that (i) the Debtor is not in default
under this Agreement or under any other agreement or Equipment Financing
Agreement between the Debtor and the Secured Party, (ii) the Secured Party or
its assignee has been given sufficient advance written notice of the proposed
merger, sale, or transfer together with the necessary background as to the
legal status, financial and credit worthiness of the third party to the merger
sale or transfer (collectively, a "Transferee") and the Secured Party or its
assignee within ten days of receipt of such written notice has approved such
financial and credit worthiness of the Transferee in accordance with its then
existing credit criteria, the Secured Party agrees that it will not
unreasonable withhold its consent to any such transfer or assignment of this
Agreement (and the transfer of the Equipment to such Transferee), however
should Secured Party reasonably withhold consent then Debtor has the right to
pay off the outstanding debt to Secured Party without penalty, provided,
further, that (a) the said Transferee assumes all of the Debtor's obligations
under this Agreement in form satisfactory to Secured Party or its assignee
(without releasing the Debtor), (b) the Secured party is assured that its first
perfected security interest in the Equipment will continue in full force and
effect and the Transferee executes such UCC Financing Statements as may be
necessary to accomplish the same and (c) the Secured Party is assured that the
Equipment will be adequately covered by insurance during any move thereof.".
SIXTEENTH: In Section 25, line 4, before "request." insert "reasonably".
IN WITNESS WHEREOF the undersigned have executed this addendum the 16th day of
October, 1996.
DEBTOR: SECURED PARTY:
VIROLOGIC, INC. LEASE MANAGEMENT SERVICES, INC.
By: /s/ MARTIN H. GOLDSTEIN By: /s/ BARBARA B. KAISER
----------------------------- ---------------------------------
Name: Martin H. Goldstein Name: Barbara B. Kaiser
--------------------------- -------------------------------
(type or print)
Title: Pres & COO Title: EVP/General Manager
-------------------------- ------------------------------
<PAGE> 11
[LEASE MANAGEMENT SERVICES, INC. LOGO]
LEASE MANAGEMENT SERVICES, INC.
ADDENDUM TO
EQUIPMENT FINANCING AGREEMENT
NUMBER 10801
BY AND BETWEEN
VIROLOGIC, INC., AS DEBTOR,
AND
LEASE MANAGEMENT SERVICES, INC., AS SECURED PARTY
VIROLOGIC, INC., as Debtor, hereby acknowledges its responsibility to pay, and
agrees to pay any taxes which may be due to the State of California or where
applicable, for the collateral covered under the above referenced agreement.
DEBTOR:
VIROLOGIC, INC.
By: /s/ MARTIN H. GOLDSTEIN
-----------------------------
Title: President & CFO
--------------------------
Date: October 16, 1996
---------------------------
<PAGE> 12
EXHIBIT A
ALL EQUIPMENT AND OTHER PERSONAL PROPERTY (THE "EQUIPMENT"), NOW OWNED AND
HEREAFTER ACQUIRED AND FINANCED UNDER EQUIPMENT FINANCING AGREEMENT NUMBER
10801 AND ALL SCHEDULES THEREUNDER, BETWEEN LEASE MANAGEMENT SERVICES, INC., AS
SECURED PARTY AND VIROLOGIC, INC. AS DEBTOR, INCLUDING, BUT NOT LIMITED TO,
LABORATORY EQUIPMENT, LABORATORY FURNITURE, OFFICE FURNITURE, OFFICE EQUIPMENT,
COMPUTER EQUIPMENT AND TEST EQUIPMENT TOGETHER WITH ALL ACCESSORIES, PARTS,
UPGRADES, RENEWALS AND REPLACEMENTS OF, AND REPAIRS, IMPROVEMENTS AND
ACCESSIONS TO THE EQUIPMENT AND ANY INSURANCE PROCEEDS OR PROCEEDS OR REVENUE
DERIVED FROM THE SALE OR OTHER DISPOSITION OF THE EQUIPMENT.
<PAGE> 13
EXHIBIT A
THIS IS A FIXTURE FILING TO BE FILED WITH THE COUNTY RECORDERS OFFICE AS A REAL
ESTATE TRANSACTION:
RECORD OWNER OF PROPERTY: Land Associates
c/o Hillman Properties, Inc.
1 Harrison St, Suite 535
San Francisco, CA 94105
LEGAL DESCRIPTION OF PROPERTY: Parcel 015-042-22, 25,000 square feet of a
building which is one building within a project of four buildings totalling
111,253
FIXTURE FILING TO COVER ALL EQUIPMENT AND OTHER PERSONAL PROPERTY (THE
"EQUIPMENT"), NOW OWNED AND HEREAFTER ACQUIRED AND LEASED OR FINANCED UNDER
EQUIPMENT FINANCING AGREEMENT NUMBER 10801 AND ALL SCHEDULES THEREUNDER,
BETWEEN LEASE MANAGEMENT SERVICES, INC., AS SECURED PARTY AND VIROLOGIC, INC.,
AS DEBTOR, INCLUDING BUT NOT LIMITED TO, LABORATORY EQUIPMENT, LABORATORY
FURNITURE, OFFICE FURNITURE, OFFICE EQUIPMENT, COMPUTER EQUIPMENT AND TEST
EQUIPMENT, TOGETHER WITH ALL ACCESSORIES, PARTS, UPGRADES, RENEWALS AND
REPLACEMENTS OF, AND REPAIRS, IMPROVEMENTS AND ACCESSIONS TO THE EQUIPMENT AND
ANY INSURANCE PROCEEDS OR PROCEEDS OR REVENUE DERIVED FROM THE SALE OR OTHER
DISPOSITION OF THE EQUIPMENT.
<PAGE> 14
LEASE MANAGEMENT SERVICES, INC.
EXHIBIT A
Attached to and forming a part of the following documents: Loan Schedule Number
01 of Equipment Financing Agreement Number 10801, Certificate of Acceptance and
the UCC Financing Statement(s) pertaining to the referenced Loan Schedule, and
any addenda thereto by and between LEASE MANAGEMENT SERVICES, INC., as Secured
Party, and VIROLOGIC, INC., as Debtor. The Loan Schedule referenced above is
incorporated herein by this reference. All Terms used herein shall have the
same meaning as set forth in the Equipment Financing Agreement. Debtor is
hereby directed to contact the Supplier of the Equipment for a description of
any rights Debtor may have under the Supply Contract covering the Equipment.
AS MORE FULLY DESCRIBED ON THE FIVE (5) PAGE EXHIBIT A-1
ATTACHED HERETO AND MADE A PART HEREOF.
TOTAL PURCHASE PRICE $645,107.77
-----------
<PAGE> 15
LEASE MANAGEMENT SERVICES, INC.
SCHEDULE 01 TO
EQUIPMENT FINANCING AGREEMENT NUMBER 10801
BETWEEN
VIROLOGIC, INC., AS DEBTOR
AND
LEASE MANAGEMENT SERVICES, INC., AS SECURED PARTY
ATTACHED TO AND MADE A PART OF EQUIPMENT FINANCING AGREEMENT NUMBER 10801, BY
AND BETWEEN SECURED PARTY AND DEBTOR ("AGREEMENT") WHICH IS INCORPORATED HEREIN
BY THIS REFERENCE. SECURED PARTY AND DEBTOR HEREBY ACKNOWLEDGE THAT THE ITEMS
OR EQUIPMENT DESCRIBED IN THIS SCHEDULE ARE COVERED BY THE AGREEMENT AND THAT
THE FOLLOWING IS A DESCRIPTION OF SAID ITEMS, THE ADVANCE AMOUNT ON ACCOUNT
THEREOF, THE INSTALLMENT PAYMENTS APPLICABLE THERETO, THE EQUIPMENT LOCATION
THEREOF, AND, IF SPECIFIED, CERTAIN FURTHER RELATED INFORMATION.
1. EQUIPMENT DESCRIPTION: See Attached Exhibit "A"
2. PROCEEDS AMOUNT: $645,107.77
3. INSTALLMENT PAYMENTS: Except as otherwise provided in the
Agreement or in this Schedule, the
undersigned Debtor promises to repay the
Advance Amount, with interest as follows:
$15,870.00 per month due on the first day of each month for forty-eight (48)
consecutive months, beginning on October 1, 1996, followed by a payment of
$64,511.00 on October 1, 2000.
4. EQUIPMENT LOCATION: 270 East Grand Avenue
S. San Francisco, CA 94080
5. OTHER PROVISIONS: N/A
Dated: 10/10/96
------------------
DEBTOR: SECURED PARTY:
VIROLOGIC, INC. LEASE MANAGEMENT SERVICES, INC.
By: /s/ MARTIN H. GOLDSTEIN BY: /s/ [Signature Illegible]
------------------------------ ----------------------------------
Title: President & CFO Title: EVP/General Manager
--------------------------- -------------------------------
<PAGE> 16
VIROLOGIC, INC.
EXHIBIT A-1 TO SCHEDULE 10801-01
<TABLE>
<CAPTION>
LMSI
TAG # VENDOR INVOICE # QTY DESCRIPTION SERIAL NUMBER AMOUNT
- ----- ---------------------------- ------------ --- ------------------------------------ -------------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Forma Scientific, Inc. 2565370 1 Laminar Flow Workstation Model 1854 3,698.90
Forma Scientific, Inc. 4146051 1 Exhaust Transition 649.05
Forma Scientific, Inc. 2565360 1 Bio Safety Cabinet 16070-01482 6,864.89
Forma Scientific, Inc. 4146050 2 Exhaust Transition 1,041.60
VWR Scientific Products 53715990 1 Horizontal oven 4,624.92
VWR Scientific Products 53949340 1 Solvant Cabinet 497.95
Fisher Scientific 2473831 1 Incubator Shaker 15,376.41
Fisher Scientific 2473831 2 Incubator Shaker
Millipore Corporation 1656323 1 Milli Q PF 115V w/Press Regulator 5,068.92
Millipore Corporation 1661334 1 Wall Bracket 203.37
Bio-Rad Laboratories 961249 1 Gene Pulser II w/Capacitance 4,514.64
Wallac Inc. 53024 1 Microplate Luminometer 25,487.04
Shuchat Photography 20215 1 3M Overhead 377.12
Perkin Elmer 768780 1 DNA Sequencer 96021253 112,526.63
Perkin Elmer 770406 2 Geneamp PCR System 9600 N15337 & N15411 15,147.42
Sears 014780262067 1 Freezer 2,977.71
Sears 014780262067 1 Freezer
Sears 014780262067 1 Refrigerator
Sears 014780262067 1 Refrigerator
Sears 014780262068 1 Compact Freezer 292.26
Sears 1 Freezer 204.58
Savant Instruments 126962 1 Unversal Speedvac 6,143.47
Business Resource 61265 1 4 Drawer Lateral File 258.93
Perkin Elmer 774770 1 Sequence Detector 7700 9606138 92,165.50
Business Resource Group 60201 1 72"X30/36" Conference Table 19,809.44
Business Resource Group 60201 3 48X72 Whiteboard
Business Resource Group 60201 6 Sled Base Chairs
Business Resource Group 60201 12 Low Back Swivel Conference Chairs
Business Resource Group 60201 6 Patriot Lab Stools
Business Resource Group 60201 6 Patriot Task Chairs
Business Resource Group 60201 6 7-Function Mid-back Chairs
Business Resource Group 60201 3 Double Pedestal Desk 36x72
Business Resource Group 60201 1 120' Boat Shaped Table
Business Resource Group 60201 2 2-Drawer Lateral File
Business Resource Group 60201 1 36X72 Desk Arrowwood
Business Resource Group 60201 1 36X72 Desk Arrowwood
</TABLE>
1 of 5
<PAGE> 17
VIROLOGIC, INC.
EXHIBIT A-1 TO SCHEDULE 10801-01
<TABLE>
<CAPTION>
LMSI
TAG # VENDOR INVOICE # QTY DESCRIPTION SERIAL NUMBER AMOUNT
- ----- ---------------------------- ------------ --- ------------------------------------ -------------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Lancer USA Inc. 10657 1 Washer w/Basic Basket 6E041472 21,590.01
Lancer USA Inc. 10657 1 41 Jet Rack
Lancer USA Inc. 10657 Discount
Forma Scientific, Inc. 2561090 1 Lab Incubator T/C CO2 26238-0334 36,156.79
Forma Scientific, Inc. 2561090 1 Lab Incubator T/C CO2 38682-00570
Forma Scientific, Inc. 2561090 1 Lab Incubator T/C CO2 38682-00572
Forma Scientific, Inc. 2561090 1 Lab Incubator T/C CO2 28687-00576
Forma Scientific, Inc. 2561090 1 Bio Safety Cabinet 16113-01505
Forma Scientific, Inc. 2561090 1 Bio Safety Cabinet 16114-01509
Forma Scientific, Inc. 2561090 1 Bio Safety Cabinet 16114-01512
Forma Scientific, Inc. 2561090 1 Delux CO2 Backup
Forma Scientific, Inc. 2561090 4 Freezer Inv Basket
Forma Scientific, Inc. 2561090 18 Inv Racks
VWR Scientific Products 52219690 1 Transillum Dual Benchtop 920.13
VWR Scientific Products 52219630 1 Ice Maker 3,402.30
VWR Scientific Products 52219760 1 MP-4 Plus Fixed STD Cooler 2,958.49
VWR Scientific Products 52219760 1 Micro Cooler II
VWR Scientific Products 52219700 1 Lenes for MP-4 246.81
VWR Scientific Products 52219680 1 Vacuum Oven 2,002.63
VWR Scientific Products 53008260 2 Storage Case w/Glazed Doors 2,286.48
Beckman Instruments, Inc. 297067FT07 1 Microfuge Lite w/Carrier 6,263.36
Beckman Instruments, Inc. 297067FT07 1 Microfuge Lite w/Carrier
Beckman Instruments, Inc. 297067FT07 1 Microfuge Lite w/Carrier
Beckman Instruments, Inc. 297067FT07 1 Microfuge Lite w/Carrier
Beckman Instruments, Inc. 297067FT07 1 Microplus Arrier Ay
Nortel 412964 & 801 1 Nortel Phone System & Installation 18,850.73
MacWarehouse 975967500011 1 Powermac 7200/75 6,156.00
MacWarehouse 975967500011 1 Powermac 7200/75
MacWarehouse 975967500011 1 Powermac 7200/75
MacWarehouse 975967500011 1 Powermac 7200/75
MacWarehouse 975967500011 1 Powermac 7200/75
MacWarehouse 975967500011 1 Powermac 7200/75
CDW Computer Centers, Inc. 1 Iomega Zip 100MB Mac/PC SCSI Dr. 33,699.60
CDW Computer Centers, Inc. 1 Nec 4X Multiscan Disc Changer
CDW Computer Centers, Inc. 4 Apple Extended Keyboard
CDW Computer Centers, Inc. 1 Symantec Notron Util V3.2 Mac
</TABLE>
2 of 5
<PAGE> 18
VIROLOGIC, INC.
EXHIBIT A-1 TO SCHEDULE 10801-01
<TABLE>
<CAPTION>
LMSI
TAG # VENDOR INVOICE # QTY DESCRIPTION SERIAL NUMBER AMOUNT
- ----- ---------------------------- ------------ --- ------------------------------------ -------------------- ----------
<S> <C> <C> <C> <C> <C> <C>
CDW Computer Centers, Inc. 2 USR Sportster 28.8 EXT Voice Mac
CDW Computer Centers, Inc. 10 Iomega Zip Mac 100MB Disk
CDW Computer Centers, Inc. 1 Casady Conflict Catcher III V1.0
CDW Computer Centers, Inc. 1 MS Office V4.21 Mac
CDW Computer Centers, Inc. 1 Aladdin Stuffit Deluxe V4.0
CDW Computer Centers, Inc. 5 MS Office V4.2 Xplatform
CDW Computer Centers, Inc. 9 Apple Design Keyboard II
CDW Computer Centers, Inc. 8 Apple 256K Cache Card 7200/7500
CDW Computer Centers, Inc. 12 Visiontek 16MB Apple 9500
CDW Computer Centers, Inc. 1 Powermac 7600/120
CDW Computer Centers, Inc. 1 Powermac 7600/120
CDW Computer Centers, Inc. 1 Powermac 7600/120
CDW Computer Centers, Inc. 1 Powermac 7600/120
CDW Computer Centers, Inc. 1 HP Laserjet 5MP 6PPM
CDW Computer Centers, Inc. 1 Powermac 7200/120
CDW Computer Centers, Inc. 1 Powermac 7200/120
CDW Computer Centers, Inc. 1 Apple Laserwriter 16/600 PS
CDW Computer Centers, Inc. 1 Sony 15" Monitor
CDW Computer Centers, Inc. 1 Sony 15" Monitor
CDW Computer Centers, Inc. 1 Sony 15" Monitor
CDW Computer Centers, Inc. 1 Sony 15" Monitor
CDW Computer Centers, Inc. 1 Sony 15" Monitor
CDW Computer Centers, Inc. 1 Sony 15" Monitor
CDW Computer Centers, Inc. 1 Sony 15" Monitor
CDW Computer Centers, Inc. 1 Sony 15" Monitor
CDW Computer Centers, Inc. 1 Sony 15" Monitor
CDW Computer Centers, Inc. 1 Nec Multisync 17" Monitor
CDW Computer Centers, Inc. 1 Nec Multisync 17" Monitor
CDW Computer Centers, Inc. 1 Nec Multisync 17" Monitor
CDW Computer Centers, Inc. 1 Nec Multisync 17" Monitor
Beckman Instruments, Inc. 297067FT01 1 Optima XL-100K COX96F14 87,841.40
Beckman Instruments, Inc. 297067FT01 1 Rotor Package 96U579
Beckman Instruments, Inc. 297067FT01 1 Quickseal Tube Kit
Beckman Instruments, Inc. 297067FT01 1 Avanti J-25I JJY96F03
Beckman Instruments, Inc. 297067FT01 1 Avanti J-25 JHY96F19
Beckman Instruments, Inc. 297067FT01 1 Rotor Assembly 96U2119 & 96U2112
</TABLE>
3 of 5
<PAGE> 19
VIROLOGIC, INC.
EXHIBIT A-1 TO SCHEDULE 10801-01
<TABLE>
<CAPTION>
LMSI
TAG # VENDOR INVOICE # QTY DESCRIPTION SERIAL NUMBER AMOUNT
- ----- ---------------------------- ------------ --- ------------------------------------ -------------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Beckman Instruments, Inc. 297067FT01 1 JA-25.50 F/A Rotor 96U918
Beckman Instruments, Inc. 297067FT01 1 JA-14 Rotor Ay 96U7048
Beckman Instruments, Inc. 297067FT01 1 JLA-10.500 Rotor Ay 96U1182
Beckman Instruments, Inc. 297067FT01 1 Microfuge Lite w/Rotor MSB96E62 / MSB9601
Beckman Instruments, Inc. 297067FT01 1 Microfuge Lite w/Rotor MSB96E64 / MSB9602
Beckman Instruments, Inc. 297067FT01 2 GS-6 Centrifuge 120V GAY96D57 & 65
Beckman Instruments, Inc. 297067FT01 2 GH.3 Rotor Ay w/Alum Buckets 96U21152 / 96U21208
Beckman Instruments, Inc. 297067FT02 1 Tube Topper 1,702.08
Beckman Instruments, Inc. 297067FT02 2 Adapters Yellow
Beckman Instruments, Inc. 297067FT02 2 Green Adapters
Beckman Instruments, Inc. 297067FT02 1 PHI 32 Meter S510A
Beckman Instruments, Inc. 297067FT02 1 Electrode Comb
Beckman Instruments, Inc. 297067FT02 1 Electrode Cable
Beckman Instruments, Inc. 297067FT02 1 AC Adaptor
Beckman Instruments, Inc. 297067FT04 1 DU-640 Color 120V 4320662 13,259.19
Beckman Instruments, Inc. 297067FT04 1 Accesory Option Board
Beckman Instruments, Inc. 297067FT04 1 Single Cell Holder
Beckman Instruments, Inc. 297067FT04 1 Single Cell Holder (50UL Microcell)
Beckman Instruments, Inc. 297067FT04 1 Nucleic Acid Software
Beckman Instruments, Inc. 297067FT04 3 Micro Cell 50 Microliter
Beckman Instruments, Inc. 297067FT04 3 Cuvettes Rect. Quartz
Beckman Instruments, Inc. 297067FT05 1 LS 6500 Mini-Vial, Mono 120V 7068356 17,296.95
VWR Scientific Products 52219770 1 Incubator Model 1925 4,076.70
VWR Scientific Products 52219770 6 Vortex Mixers 9,262.98
VWR Scientific Products 52219770 6 Pipet Aid w/Dual Pump Filter
VWR Scientific Products 52219770 6 Pipet Repeater Eppendorf
VWR Scientific Products 52219770 6 Minicell Power Supply
VWR Scientific Products 52219770 1 Standard Level Balance Model AG104T
VWR Scientific Products 52219770 1 Basic Level Balance
VWR Scientific Products 52219770 1 Water Bath Model 183T
VWR Scientific Products 52219770 1 Water Bath Model 184T
VWR Scientific Products 52219770 1 Orbital Bath
Rainin Instrument Co., Inc. 606600 6 Pipetman 2- 20UL 4,294.04
Rainin Instrument Co., Inc. 606600 6 Pipetman 50- 200UL
Rainin Instrument Co., Inc. 606600 6 Pipetman 100- 1000UL
Reliant Integration Services 1 Mac 7600/132 16/1.2GB 3,648.64
</TABLE>
4 of 5
<PAGE> 20
VIROLOGIC, INC.
EXHIBIT A-1 TO SCHEDULE 10801-01
<TABLE>
<CAPTION>
LMSI
TAG # VENDOR INVOICE # QTY DESCRIPTION SERIAL NUMBER AMOUNT
- ----- ---------------------------- ------------- --- ------------------------------------ -------------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Reliant Integration Services 1 Mac Extended Keyboard 105
Reliant Integration Services 1 Sony Multiscan 15SX1 Display
Sears 014780262753 1 Conpact Refrigerator 1,338.94
APS Technologies 072596-405-15 1 External Hard Drive MS3243,4.3GB,SR2 1,040.76
Marry X-Ray 336085 1 X-Ray Camera SRX201 11.784.58
Rudolph and Sletten Inc. 08271 1 Architect Fees 24,327.00
Rudolph and Sletten Inc. 08271 1 Gas Hook-up
Rudolph and Sletten Inc. 08271 1 Relocate Wall & Paint Existing Doors
MacWarehouse R3473774 1 Filemaker Pro Server 3.0 1,002.95
MacWarehouse R3427234 1 Quarterdeck Mail SVR-5 User 159.00
MacWarehouse R3387230 1 Retrospect Remote 3.0 1,978.95
MacWarehouse R3387230 4 Microsoft Office 4.2
CDW Computer Centers, Inc. 1 Apple AW Server 8550 2GB 7,121.00
CDW Computer Centers, Inc. 6 WEA Video Ansel Adams Screen Saver 144.00
CDW Computer Centers, Inc. 1 Datawatch Virex Mac V5.6 478.00
CDW Computer Centers, Inc. 1 Kensington Mouse Turbo 98.00
CDW Computer Centers, Inc. 1 Simple 16MB Apple 9500 210.00
CDW Computer Centers, Inc. 1 APS 4GB MS 3243 Mac SCSI EXT 1,016.64
CDW Computer Centers, Inc. 1 Now Bundle Up-To-Date Contact 67.02
CDW Computer Centers, Inc. 1 USR Sportster 28.8 EXT Voice Mac 421.14
CDW Computer Centers, Inc. 1 Claris Filemaker Pro V3.0
CDW Computer Centers, Inc. 1 Asante Friendlynet PB Adapter
CDW Computer Centers, Inc. 1 Now Bundle Up-To-Date Contact 73.13
GRAND TOTAL $645,107.77
</TABLE>
5 of 5
<PAGE> 21
[LEASE MANAGEMENT SERVICES LETTERHEAD]
CERTIFICATE OF ACCEPTANCE
Attached to and made an integral part of Schedule 01 to Equipment Financing
Agreement Number 10801.
TO: LEASE MANAGEMENT SERVICES, INC.
2500 Sand Hill Road, Suite 101
Menlo Park, CA 94025
EQUIPMENT DESCRIPTION
SEE ATTACHED EXHIBIT "A"
We hereby acknowledge receipt, in good condition, of the Equipment described
above or on the attached Exhibit "A". The Equipment has been properly installed
and is operating satisfactorily. We hereby accept said Equipment as
satisfactory in all respects for the purposes of the above Equipment Financing
Agreement. Said Equipment has not been delivered or accepted on a trial basis,
and is free and clear of all liens and encumbrances and adverse claims, with
the exception of the security interest created herein.
We will make all payments to Secured Party, as called for in the Equipment
Financing Agreement. We agree that any rights we may have against the supplier
or vendor of said Equipment will not be asserted as an abatement, defense,
counterclaim, or deduction against Secured Party.
All capitalized terms used herein shall have the same meaning as set forth in
the Equipment Financing Agreement referenced above.
DO NOT SIGN OR DATE THIS FORM UNTIL THE EQUIPMENT IS RECEIVED,
PROPERLY INSTALLED AND IS OPERATING SATISFACTORILY.
DEBTOR:
VIROLOGIC, INC.
By: /s/ MARTIN H. GOLDSTEIN
----------------------------------
Title: Pres & COO
-------------------------------
Date: 10/16/96
-------------------------------
<PAGE> 1
EXHIBIT 10.5
LOAN AND SECURITY AGREEMENT
Agreement No. ________
Dated as of January 30, 1998
between
MMC/GATX PARTNERSHIP NO. I
Four Embarcadero Center
Suite 2200
San Francisco, CA 94111
as Lender
and
VIROLOGIC, INC.
a Delaware corporation
270 E. Grand Avenue
South San Francisco, CA 94080
as Borrower
CREDIT AMOUNT: $3,000,000
Repayment Period: 48 months
Treasury Note Maturity: 48 months
Minimum Funding Amount: $100,000
Loan Margin: 450 basis points
Maximum Number of Fundings: Ten (10)
Commitment Termination Date: December 31, 1998
The defined terms and information set forth on this cover page are a part
of the Loan and Security Agreement, dated as of the date first written above
(this "Agreement"), entered into by and between MMC/GATX PARTNERSHIP NO. I
("Lender") and the borrower ("Borrower") set forth above. The terms and
conditions of this Agreement agreed to between Lender and Borrower are as
follows:
<PAGE> 2
1.01. Certain Definitions. Unless otherwise indicated in this Agreement or
any other Operative Document, the following terms, when used in this Agreement
or any other Operative Document, shall have the following respective meanings:
"Borrower's Home State" shall mean the state in which Borrower's principal
place of business is located.
"Business Day" shall mean any day other than a Saturday, Sunday or public
holiday under the laws of California, or other day on which banking
institutions are authorized or obligated to close in California.
"Claim" has the meaning given to that term in Section 10.03.
"Collateral" has the meaning given to that term in Section 5.01(a).
"Commitment Fee" shall mean the fee previously paid by Borrower to Lender
upon the execution and delivery by Lender and Borrower of the "term sheet"
setting out certain principal terms and conditions of the transaction
contemplated by this Agreement.
"Commitment Termination Date" shall mean the date specified on the cover
page of this Agreement.
"Credit Amount" shall mean the maximum amount that Lender is committed to
lend (if the conditions specified in Schedule 3 are satisfied), which amount is
set forth following such term on the cover page of this Agreement.
"Default" shall mean any event which with the passing of time or the
giving of notice or both would become an Event of Default hereunder.
"Default Rate" shall mean the per annum rate of interest equal to the
higher of (i) 18% or (ii) the Prime Rate plus 6%, but such rate shall in no
event be more than the highest rate permitted by applicable law.
"Eligible Equipment" shall mean scientific laboratory, test equipment and
automated processing equipment, reasonably acceptable to Lender.
"Environmental Law" shall mean the Resource Conservation and Recovery Act
of 1987, the Comprehensive Environmental Response, Compensation and Liability
Act, and any other federal, state or local statute, law, ordinance, code, rule,
regulation, order or decree (in each case having the force of law) regulating
or imposing liability or standards of conduct concerning any Hazardous
Material, as now or at any time hereafter in effect.
"Equipment" has the meaning given to that term in Section 5.01(a).
"Event of Default" has the meaning given to that term in Section 9.01.
"Event of Loss" has the meaning given to that term in Section 6.01(e).
"Final Payment" shall mean, with respect to each Loan, a payment (in
addition to the regular monthly payment of principal and accrued interest on
the Note) due on the Maturity Date for such Loan in an amount equal to the Loan
Amount for such Loan multiplied times ten percent (10.0%).
"Funding Date" shall mean any date on which a Loan is made to or on
account of Borrower under this Agreement.
2
<PAGE> 3
"Hazardous Material" means any hazardous, dangerous or toxic constituent
material, pollutant, waste or other substance, whether solid, liquid or
gaseous, which is regulated by any federal, state or local governmental
authority.
"Intellectual Property" shall mean Borrower's interest in any patent
applications, trademarks, copyrights, computer programs, design rights,
license rights, trade secret rights, rights to unpatented inventions,
know-how, operating manuals, claims for damages by way of any past, present
and future infringement of any of the foregoing, and all proceeds thereof.
"Interim Payment" shall mean, with respect to each Loan, an amount equal
to the initial Loan Amount multiplied by the percentage equal to the product of
(i) the quotient derived from dividing the initial Loan Factor with respect to
such Loan by 30, and (ii) the number of days from (and including) the Funding
Date of such Loan to (but not including) the first Payment Date with respect to
such loan.
"Landlord Consent" shall mean a consent in the form of Exhibit B or such
other form as Lender may agree to accept.
"Lien" shall mean any pledge, bailment, lease, mortgage, hypothecation,
conditional sales and title retention agreements, charge, claim, encumbrance or
other lien in favor of any Person.
"Loan" shall mean each advance by Lender to Borrower under this Agreement.
"Loan Amount" shall mean, as of any date, with respect to each Loan, the
original principal amount of such Loan less the aggregate of all Stated Costs
of Equipment with respect to which prepayments of such Loan have been made.
"Loan Factor" shall mean, with respect to each Loan, the amount set forth
as a percentage with respect to such Loan in the applicable Loan Terms
Schedule, calculated using the Loan Rate applicable to such Loan.
"Loan Margin" shall mean the number of basis points set forth following
such term on the cover page of this Agreement.
"Loan Rate" shall mean, with respect to each Loan, the per annum rate of
interest (based on a year of twelve (12) 30-day months) equal to the sum of (a)
the U.S. Treasury note rate of a term equal to the Treasury Note Maturity as
quoted in the Wall Street Journal on the date the Loan Terms Schedule for such
Loan is prepared, plus (b) the applicable Loan Margin.
"Loan Terms Schedule" shall mean, with respect to each Loan, a schedule in
the form of Schedule 1 hereto, duly completed to set forth the terms applicable
to such Loan.
"Loan Value" shall mean, with respect to each Loan, the percentage set
forth in the Loan Terms Schedule applicable to such Loan, determined as of the
Payment Date on which payment of an amount is to be made, or if such date is
not a Payment Date, as of the next Payment Date following such date.
"Make-Whole Premium" means an amount equal to the greater of (i) zero and
(ii) the excess of (x) the sum of the present values, at the date of prepayment
of (1) the amount of all accrued and unpaid Scheduled Payments with respect to
the Loans or portion of such Scheduled Payments, which will not be required to
be made as a result of such prepayment, and (2) the Final Payment with respect
to the Loans (each such payment an "Amount Payable") (each such Amount Payable
discounted separately at the Treasury Rate, determined on the date three (3)
Business Days before the date of prepayment, compounded monthly, from the date
such Amount Payable would be due), over (y) the aggregate principal amount of
the Loans to be prepaid. The "Treasury Rate" shall be the yield (as quoted in
the Western edition of The Wall Street Journal on the date which is three (3)
Business Days prior to the date
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of prepayment) on U.S. Treasury securities adjusted to a constant maturity
equal to the then remaining number of full months to maturity of the Loans.
"Maturity Date" shall mean, with respect to each Loan, the last Business
Day of the Repayment Period applicable to such Loan.
"Maximum Number of Fundings" shall mean the maximum number of fundings
under this Agreement specified on the cover page of this Agreement.
"Minimum Funding Amount" shall mean the dollar amount specified on the
cover page of this Agreement.
"New Equipment" shall have the meaning given to that term in the
applicable Loan Terms Schedule if such term is used in connection with this
Agreement.
"Note" shall mean the promissory note of Borrower, substantially in the
form of Exhibit A.
"Obligations" has the meaning given to that term in Section 5.01.
"Officer's Certificate" has the meaning given to that term in Schedule 3.
"Operative Documents" shall mean this Agreement, the Note, the Warrant,
the Landlord Waiver and Consent(s) and all other documents, instruments and
agreements (including Loan Terms Schedules) executed and delivered in
connection herewith or therewith or in respect of the closing of the
transactions contemplated hereby or thereby.
"Payment Date" has the meaning given to that term in Section 2.04(a).
"Permitted Liens" shall mean (a) the Lien created by this Agreement,
(b) Liens for fees, taxes, levies, imposts, duties or other governmental
charges of any kind which are not yet delinquent or which are being contested
in good faith by appropriate proceedings which suspend the collection thereof
(provided, however, that such proceedings do not involve any substantial danger
of the sale, forfeiture or loss of any item of Equipment and that Borrower has
adequately bonded such Lien or reserves sufficient to discharge such Lien have
been provided on the books of Borrower), (c) Liens identified on Schedule 2,
(d) Liens to secure payment of worker's compensation, employment insurance, old
age pensions or other social security obligations of Borrower in the ordinary
course of business of Borrower, and (e) minor easements, licenses,
reservations, covenants, conditions, waivers, on real property, restrictions on
the use of real property, or minor irregularities of title to real property,
which, in each case, do not in the aggregate materially impair the use thereof
in the operation of the business of Borrower.
"Person" shall mean and include an individual, a partnership, a
corporation, a business trust, a joint stock company, a limited liability
company, an unincorporated association or other entity and any domestic or
foreign national, state or local government, any political subdivision thereof,
and any department, agency, authority or bureau of any of the foregoing.
"Prime Rate" shall mean the interest rate per annum publicly announced
from time to time by Bank of America NT & SA (or its successor) as its
reference rate, but such rate shall in no event be more than the highest
interest rate permitted by applicable law.
"Repayment Period" shall mean the period beginning on the first Payment
Date and continuing for the number of calendar months or quarters set forth
following such term on the cover page of this Agreement.
"Scheduled Payments" has the meaning given to that term in Section 2.04(a).
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"Stated Cost" shall mean, with respect to each item of Equipment, the
dollar amount assigned thereto, as set forth on Annex A to the applicable Loan
Terms Schedule, by Borrower and Lender at the time of the making of the Loan
for which such item of Equipment serves as collateral.
"Subsidiary" shall mean any corporation of which a majority of the
outstanding capital stock entitled to vote for the election of directors
(otherwise than as the result of a default) is owned by Borrower directly or
indirectly through Subsidiaries.
"Term" shall mean the period from and after the date hereof until the
payment or satisfaction in full of all Obligations under this Agreement and the
other Operative Documents.
"Treasury Note Maturity" shall mean the period of months set forth
following such term on the cover page of this Agreement.
"Warrant" shall mean a warrant to purchase securities of Borrower
substantially in the form of Exhibit C.
1.02. Headings. Headings in this Agreement and each of the other Operative
Documents are for convenience of reference only and are not part of the
substance hereof or thereof.
1.03. Plural Terms. All terms defined in this Agreement or any other
Operative Document in the singular form shall have comparable meanings when
used in the plural form and vice versa.
1.04. Construction. This Agreement is the result of negotiations among,
and has been reviewed by, Borrower and Lender and their respective counsel.
Accordingly, this Agreement shall be deemed to be the product of all parties
hereto, and no ambiguity shall be construed in favor of or against Borrower or
Lender.
1.05. Entire Agreement. This Agreement, together with the terms set forth
in each Loan Terms Schedule and each of the other Operative Documents, taken
together, constitute and, contain the entire agreement of Borrower and Lender
and, with regard to their respective subject matters, supersede any and all
prior agreements, term sheets, negotiations, correspondence, understandings and
communications among the parties, whether written or oral, with respect to
their respective subject matters.
1.06. Other Interpretive Provisions. References in this Agreement to
"Articles," "Sections," "Exhibits," "Schedules" and "Annexes" are to recitals,
articles, sections, exhibits, schedules and annexes herein and hereto unless
otherwise indicated. References in this Agreement and each of the other
Operative Documents to any document, instrument or agreement shall include (a)
all exhibits, schedules, annexes and other attachments thereto, (b) all
documents, instruments or agreements issued or executed in replacement thereof,
and (c) such document, instrument or agreement, or replacement or predecessor
thereto, as amended, modified and supplemented from time to time and in effect
at any given time. The words "hereof," "herein" and "hereunder" and words of
similar import when used in this Agreement or any other Operative Document
shall refer to this Agreement or such other Operative Document, as the case
may be, as a whole and not to any particular provision of this Agreement or
such other Operative Document, as the case may be. The words "include" and
"including" and words of similar import when used in this Agreement or any
other Operative Document shall not be construed to be limiting or exclusive.
Unless otherwise indicated in this Agreement or any other Operative Document,
all accounting terms used in this Agreement or any other Operative Document
shall be construed, and all accounting and financial computations hereunder or
thereunder shall be computed, in accordance with generally accepted accounting
principles as in effect in the United States of America from time to time. The
terms and conditions set forth in each Loan Terms Schedule are incorporated
herein by this reference.
2.01. Credit Facility. On the terms and subject to the conditions hereof
and relying upon the representations and warranties herein set forth as and
when made or deemed to be made, Lender agrees to lend to Borrower, from time to
time prior to the Commitment Termination Date, the Loans; provided,
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however, that the aggregate original principal amount of the Loans shall not
exceed the Credit Amount at any time; provided, further, that the aggregate
original principal amount of any Loan shall not exceed the aggregate original
cost of the items of Equipment being financed with such Loan; provided,
further, that the aggregate principal amount of the Loans relating to the
financing of transferable software licenses, freight, installation, software,
leasehold improvements and intangible items shall not exceed forty percent
(40%) of the Credit Amount. If repaid or prepaid, the principal of the Loans
may not be re-borrowed.
2.02. Use of Proceeds; the Loans and the Note.
(a) Use of Proceeds. The proceeds of the Loans shall be used solely
for the purchase of, or reimbursement to Borrower of the Stated Cost of,
Equipment.
(b) The Loans and the Note. The obligation of Borrower to repay the
aggregate unpaid principal amount of and interest on and to make the Final
Payments on the Loans, or to pay the Loan Value of the Loan Amount applicable
to each Loan, shall be evidenced by the Note. Lender may, and is hereby
authorized by Borrower to, endorse on a grid annexed to the Note appropriate
notations regarding the Loans evidenced by the Note; provided, however, that
the failure to make, or an error in making, any such notation shall not limit
or otherwise affect the obligations of Borrower hereunder or under the Note.
2.03 Procedure for Making Loans.
(a) Loan Terms Schedule. Whenever Borrower desires that Lender make a
Loan, Borrower shall deliver to Lender a list of the Equipment proposed to be
financed by such Loan and request that Lender prepare a Loan Terms Schedule for
such Loan. Lender's obligation to make the initial Loan shall be subject to the
satisfaction of the conditions set forth in Sections 8.01 and 8.02. Lender's
obligation to make each subsequent Loan shall be subject to the satisfaction of
the conditions set forth in Section 8.02.
(b) Loan Interest Rate. Borrower shall pay interest on the unpaid
principal amount of each Loan from the first Payment Date for such Loan until
such Loan is paid in full, at a per annum rate of interest equal to the Loan
Rate determined by Lender as of the Funding Date for such Loan in accordance
with the definition of Loan Rate. The Loan Rate applicable to each Loan shall
not be subject to change in the absence of manifest error. All computations of
interest on Loans shall be based on a year of twelve (12) 30-day months. If
Borrower pays interest on any Loan which is determined to be in excess of the
then legal maximum rate, then that portion of each interest payment representing
an amount in excess of the then legal maximum rate shall be deemed a payment of
principal and applied against the principal of the applicable Loan.
(c) Loan Factor and Loan Value Calculation. Each Loan Terms Schedule
shall establish the Loan Factor and Loan Values with respect to such Loan. The
Loan Factor shall be calculated in a manner to fully amortize the Loan over the
Repayment Period applicable to such Loan in equal periodic installments. The
Loan Factor and Loan Values applicable to each Loan shall be conclusive in the
absence of manifest error.
(d) Disbursement. Subject to the receipt by Lender of a Loan Terms
Schedule duly executed by Borrower and the satisfaction of the conditions set
forth in Sections 8.01 and 8.02 with respect to the initial Loan and the
satisfaction of the conditions set forth in Section 8.02 with respect to each
subsequent Loan. Lender shall disburse such Loan by wire transfer to Borrower
unless otherwise directed in writing by Borrower.
(e) Termination of Commitment to Lend. Notwithstanding anything to
the contrary in the Operative Documents, Lender's obligation to lend the
undisbursed portion of the Credit Amount to Borrower hereunder shall terminate
on the earlier of (i) the occurrence of any Event of Default hereunder, and
(ii) the Commitment Termination Date.
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2.04. Other Payment Terms.
(a) Principal and Interest Payments On Payment Dates. Borrower shall
make payments of principal and accrued interest for each Loan (collectively,
"Scheduled Payments"), commencing on the date set forth on the Loan Terms
Schedule applicable to such Loan and continuing thereafter during the Repayment
Period on the first Business Day of each calendar month (each a "Payment
Date"), in an amount equal to the Loan Factor multiplied by the Loan Amount for
such Loan as of such Payment Date. The Loans may not be prepaid except in the
circumstances set forth in Section 6.01(e).
(b) Interim Payment. Unless the Funding Date for a Loan is the last
Business Day of a month or a Payment Date, Borrower shall pay to Lender the
Interim Payment payable with respect to such Loan on the date specified in the
Loan Terms Schedule applicable to such Loan.
(c) Final Payment. Unless a Loan is prepaid in full, on the Maturity
Date with respect to such Loan, Borrower shall pay, in addition to any
remaining unpaid principal and accrued interest and all other amounts
previously due with respect to such Loan, an amount equal to the Final Payment
with respect to such Loan.
(d) Commitment Fee. The Commitment Fee is the fee equal to $10,000
previously paid to Lender by Borrower in consideration of Lender's written
proposal to Borrower dated October 8, 1997, which fee is to be applied as set
forth in the Loan Terms Schedule for each Loan.
(e) Place and Manner. Borrower shall make all payments due to Lender
in lawful money of the United States at the address for payments and in the
manner specified in Section 10.05(b).
(f) Date. Whenever any payment due hereunder shall fall due on a day
other than a Business Day, such payment shall be made on the next succeeding
Business Day, and such extension of time shall be included in the computation
of interest or fees, as the case may be.
(g) Default Rate. If either (i) any amounts required to be paid by
Borrower under this Agreement or the other Operative Documents (including
principal or interest payable on any Loan, any fees or other amounts) remain
unpaid after such amounts are due, or (ii) an Event of Default has occurred and
is continuing, Borrower shall pay interest on the aggregate, outstanding
principal balance hereunder from the date due or from the date of the Event of
Default, as applicable, until such past due amounts are paid in full or until
all Events of Defaults are cured, as applicable, at a per annum rate equal to
the Default Rate, such rate to change from time to time as the Prime Rate shall
change. All computations of such interest shall be based on a year of twelve
(12) 30-day months.
3.01. Representations and Warranties. Except as set forth on Annex C to
Schedule No. 1 hereto, Borrower makes the following representations and
warranties to Lender as of the date hereof and again on each Funding Date:
(a) Organization and Qualification. Borrower is a corporation duly
organized, validly existing and in good standing under the laws of its state of
incorporation and is duly qualified to do business in the state(s) in which the
Equipment will be located.
(b) Authority. Borrower has all necessary corporate power, authority
and legal right and has obtained all approvals and consents and has given all
notices necessary to execute and deliver this Agreement and the other Operative
Documents and to perform the terms hereof and thereof. Borrower has all
requisite corporate power and authority to own or lease and operate its
properties and to carry on its businesses as now conducted.
(c) Conflict with Other Instruments, etc. Neither the execution and
delivery of any Operative Document to which Borrower is a party nor the
consummation of the transactions therein contemplated nor compliance with the
terms, conditions and provisions thereof will conflict with or result in a
breach of
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<PAGE> 8
any of the terms, conditions or provisions of the charter or the bylaws of
Borrower or, to its knowledge, any law or any regulation, order, writ,
injunction or decree of any court or governmental instrumentality or any
material agreement or instrument to which Borrower is a party or by which it or
any of its properties is bound or to which it or any of its properties is
subject, or constitute a default thereunder or result in the creation or
imposition of any Lien, other than Permitted Liens.
(d) Title to Properties. Borrower has good and marketable title to all
Equipment which constitutes or will constitute Collateral, free and clear of all
Liens, other than Permitted Liens.
(e) Authorization, Governmental Approvals, etc. The execution and
delivery by Borrower of each Operative Document, the granting of the security
interest in the Collateral, the issuance of the Warrant, the issuance of the
securities into which the Warrant is exercisable, the issuance of any securities
into which the securities issuable upon exercise of the Warrant are convertible,
and the performance of the obligations herein and therein contemplated have each
been duly authorized by all necessary action on the part of Borrower. No
authorization, consent, approval, license or exemption of, and no registration,
qualification, designation, declaration or filing with, or notice to, any Person
is, was or will be necessary to (i) the valid execution and delivery of any
Operative Document to which Borrower is a party, (ii) the performance of
Borrower's obligations under any Operative Document, or (iii) the granting of
the security interest in the Collateral, except for filings in connection with
the issuance of the Warrant. The Operative Documents have been or will be duly
executed and delivered and constitute or will constitute legal, valid and
binding obligations of Borrower, enforceable in accordance with their respective
terms, except as the enforceability thereof may be limited by bankruptcy,
insolvency or other similar laws of general application relating to or affecting
the enforcement of creditors' rights or by general principles of equity.
(f) Litigation. There are no actions, suits, proceedings or
investigations pending or, to the knowledge of Borrower, threatened against or
affecting Borrower, or the business or any property or asset owned by it, before
any court or governmental department, agency or instrumentality which if
adversely determined might have a material adverse effect on the financial
condition, business or operations of Borrower.
(g) Disclosure. Neither any Operative Document nor any other
agreement, document or certificate furnished by Borrower to Lender, including,
without limitation, historical financial statements, contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements contained herein and therein not misleading in
light of the circumstances in which they were made. There is no fact known to
Borrower which materially adversely affects, or which could in the future
materially adversely affect, its ability to perform its obligations under the
Operative Documents to which it is a party.
(h) Security Interest. Assuming the proper filing of one or more
financing statement(s) identifying the Collateral with the proper state and/or
local authorities, the security interests in the Collateral granted to Lender
pursuant to this Agreement (i) constitute and will continue to constitute first
priority security interests (except to the extent any other Permitted Lien
(other than Permitted Liens identified in clause (e) of the definition thereof)
existing on the date of this Agreement may create any priority to Lender's Lien
under this Agreement) and (ii) are and will continue to be superior and prior
to the rights of all other creditors of Borrower (except to the extent of such
Permitted Liens).
(i) Executive Officers. The principal place of business and chief
executive office of Borrower, and the office where Borrower will keep all
records and files regarding the Collateral, is set forth in Section 10.05(a).
4.01. Furnishing Reports. Borrower shall furnish to Lender:
(a) Financial Statements. So long as Borrower is not subject to the
reporting requirements of Sections 12 or 15 of the Securities and Exchange Act,
as amended, promptly as they are available, unaudited monthly and audited annual
financial statements of Borrower. From and after such time as
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<PAGE> 9
Borrower becomes a publicly reporting company, promptly as they are available
and in any event: (i) within 10 days from the time of filing of Borrower's
Form 10-K with the Securities and Exchange Commission after the end of each
fiscal year of Borrower, the financial statements of Borrower filed with such
Form 10-K; and (ii) within 10 days from the time of filing of Borrower's
Form 10-Q with the Securities and Exchange Commission after the end of each of
the first three fiscal quarters of Borrower, the financial statements of
Borrower filed with such Form 10-Q.
(b) Notice of Event of Loss. As soon as possible, and in any event
within fifteen (15) days thereafter, notice in writing in reasonable detail of
any Event of Loss.
(c) Notice of Defaults. As soon as possible, and in any event within
five (5) Business Days after the discovery of a Default of Event of Default
provide Lender with an Officer's Certificate of Borrower setting forth the
facts relating to or giving rise to such Default or Event of Default and the
action which Borrower proposes to take with respect thereto.
(d) Miscellaneous. Such other information as Lender may reasonably
request from time to time in connection with a Funding Date or otherwise.
5.01. Grant of Security Interest.
(a) Grant. Borrower, in order to secure the payment of the principal,
interest and Final Payment due with respect to the Loans made pursuant to this
Agreement, all other sums due under and in respect hereof and of the other
Operative Documents, including fees, charges, expenses and attorneys' fees and
costs and the performance and observance by Borrower of all other terms,
conditions, covenants and agreements herein and in the other Operative
Documents (all such amounts and obligations being herein sometimes called the
"Obligations"), does hereby grant to Lender and its successors and assigns, a
security interest in and to the following property (collectively, the
"Collateral"):
All right, title, interest, claims and demands of Borrower in and to
each and every item of equipment, fixtures, personal property,
certificates of deposit or treasury notes, which is financed with a Loan
on and after the date of this Agreement by designating such equipment,
fixtures, personal property, certificates of deposit or treasury notes on
Annex A to each Loan Terms Schedule, whether now owned or hereafter
acquired, together with all substitutions, renewals or replacements of and
additions, improvements, accessions, replacement parts and accumulations
to any and all of such equipment, fixtures or personal property
(collectively, the "Equipment"), together with all proceeds thereof,
including, without limitation, insurance, condemnation, requisition or
similar payments, and all proceeds from sales, renewals, releases or other
dispositions thereof.
The security interest herein granted shall constitute a first priority security
interest upon the proper filing of one or more financing statements identifying
the Collateral with the proper state and/or local authorities.
(b) After-Acquired Property. All Equipment which is financed through
Loans shall ipso facto, and without any further conveyance, assignment or act
on the part of Borrower or Lender, become and be subject to the security
interest herein granted as fully and completely as though specifically
described herein. The definition of the term "Equipment" shall be deemed
amended on each Funding Date to incorporate all property financed with, or
which will constitute Collateral for, the Loan advanced on such Funding Date.
Any failure to formally amend such definition shall not affect the grant by
Borrower to Lender of the security interest in such Collateral pursuant to this
Article V. This Agreement and the other documents in connection herewith may be
supplemented and amended from time to time, as required by Lender, to reflect
the additional Collateral subject to the security interest granted pursuant to
this Article V.
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5.02. Duration of Security Interest. Lender's security interest in the
Collateral shall continue until the payment in full and the satisfaction of all
Obligations, whereupon such security interest shall terminate; provided,
however, that if any item of Collateral is subject to an Event of Loss, then
following the prepayment of the Loan with respect to such item pursuant to
Section 6.01(e), Lender shall release its security interest in such item of
Collateral. Lender shall execute such further documents and take such further
actions as may be necessary to effect the release and/or termination
contemplated by this Section 5.02, including duly executing and delivering
termination statements for filing in all relevant jurisdictions.
5.03. Possession of Collateral. So long as no Event of Default has
occurred and is continuing, Borrower shall remain in full possession, enjoyment
and control of the Collateral (except only as may be otherwise required by
Lender for perfection of its security interest therein) and to manage, operate
and use the same and each part thereof with the rights and franchises
appertaining thereto; provided, however, that the possession, enjoyment,
control and use of the Collateral shall at all times be subject to the
observance and performance of the terms of this Agreement.
5.04. Markings on the Collateral. If requested at any time by Lender,
Borrower shall place in a conspicuous location on each item of Collateral a
notice (to be supplied by Lender) which reads as follows:
"MMC/GATX Partnership No. 1
Lienholder"
Such notice shall not be removed (or if removed or damaged such notice shall be
replaced) until the security interest in favor of Lender in such item of
Collateral is terminated pursuant to this Agreement.
6.01. Affirmative Covenants.
(a) Payment of Taxes, etc. Borrower shall pay and discharge all
taxes, assessments and governmental charges or levies imposed upon it or upon
its income or profits, or upon any properties belonging to it, prior to the
date on which penalties attach thereto, and all lawful claims which, if unpaid,
might become a Lien upon any of its properties; provided that there shall be no
requirement to pay any such tax, assessment, charge, levy or claim (i) which is
being contested in good faith and by appropriate proceedings or which presents
no risk of seizure, forfeiture, levy or other event which could jeopardize any
Collateral or (ii) for which payment in full is bonded or reserved in
Borrower's financial statements.
(b) Inspection Rights. Upon 5 Business Days' notice, Borrower shall
permit Lender or any of its agents or representatives to inspect the Equipment,
to examine and make copies of and abstracts from the records and books of
account of, and visit the properties of, Borrower and to discuss the affairs,
finances and accounts of Borrower with any of its officers or directors
relating in each case to Lender's capacity as lender and secured party
hereunder and with respect to the Collateral. Lender shall not conduct such
inspections more than three times per year.
(c) Use; Maintenance.
(i) Borrower shall, at its expense, make all necessary site
preparations and cause the Collateral to be operated in accordance with any
applicable manufacturer's manuals or instructions. So long as no Default or
Event of Default has occurred and is continuing, Borrower shall have the right
to quietly possess and use the Collateral as provided herein without
interference by Lender.
(ii) Borrower shall, at its expense, maintain the Collateral in
good condition, reasonable wear and tear excepted, and comply in all material
respects with all laws, rules and regulations to which the use and operation of
the Collateral may be or become subject. Such obligation shall extend to repair
and replacement of any partial loss or damage to the Collateral, regardless of
the cause. All parts furnished in connection with such maintenance or repair
shall immediately become part of the Collateral. All such maintenance, repair
and replacement services shall be paid for and discharged by
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<PAGE> 11
Borrower with the result that no Lien will attach to the Collateral. All parts
or accessories attached to or made part of the Collateral shall be new,
fabricated or rebuilt and in any case shall be consistent with the applicable
specifications, if any, prescribed by the manufacturer of the affected
Collateral.
(d) Insurance. Unless such provisions are amended pursuant to the terms of
any Loan Terms Schedule:
(i) Borrower shall obtain and maintain for the Term, at its own
expense, (x) "all risk" insurance against loss or damage to the Collateral and
(y) commercial general liability insurance (including contractual lability,
products liability and completed operations coverages) reasonably satisfactory
to Lender; provided that product liability insurance shall not be required
until Borrower conducts prospective human clinical trials of any of its
products or provides clinical laboratory services for a third party. The amount
of the "all risk" insurance shall be the greater of (x) the replacement value
of the Collateral (as new) or (y) the Loan Value of the Loan Amount applicable
to each Loan.
(ii) The deductible with respect to "all-risk" insurance required by
clause (x) above and product liability insurance required by clause (y) above
shall not exceed $25,000; otherwise there shall be no deductible with respect
to any insurance required to be maintained hereunder. The amount of commercial
general liability insurance (other than products liability coverage and
completed operations insurance) required by clause (y) above shall be at least
$5,000,000 per occurrence. The amount of the products liability and complete
operations insurance required by clause (y) above shall be at least $5,000,000
per occurrence. Each "all risk" policy shall: (x) name Lender as sole loss
payee with respect to the Equipment, (y) provide for each insurer's waiver of
its right of subrogation against Lender, and (z) provide that such insurance
(A) shall not be invalidated by any action of, or breach of warranty by,
Borrower of a provision of any of its insurance policies, and (B) shall waive
set-off, counterclaim or offset against Lender. Each liability policy shall (w)
name Lender as an additional insured an (x) provide that such insurance shall
have cross-liability and severability of interest endorsements (which shall not
increase the aggregate policy limits of Borrower's insurance). All insurance
policies shall (y) provide that Borrower's insurance shall be primary without a
right of contribution of Lender's insurance, if any, or any obligation on the
part of Lender to pay premiums of Borrower, and (z) shall contain a clause
requiring the insurer to give Lender at least 30 days' prior written notice of
its cancellation (other than cancellation for non-payment for which 10 days'
notice shall be sufficient). Borrower shall on or prior to the first Funding
Date and prior to each policy renewal, furnish to Lender certificates of
insurance or other evidence satisfactory to Lender that such insurance coverage
is in effect. Upon the expiration or termination of the Term, Lender shall
cease to be the sole payee with respect to the Equipment and shall cease to be
named as an additional insured on each insurance policy relating to the
Collateral.
(e) Loss: Damage; Destruction and Seizure.
(i) Borrower shall bear the risk of the Collateral being lost,
stolen, destroyed, damaged or seized by a governmental authority for any reason
whatsoever at any time until the expiration or termination of the Term.
(ii) Except as set forth in Section 6.01(e)(iii), if during the Term
any item of Equipment is lost, stolen, destroyed, damaged or seized by a
governmental authority for a period equal to at least the remainder of the Term
(an "Event of Loss"), then Lender shall receive from the proceeds of insurance
maintained pursuant to Section 6.01(d), from any award paid by the seizing
governmental authority or, to the extent not received from the proceeds of
insurance or award or both, from Borrower, on or before the Payment Date next
succeeding such Event of Loss, an amount equal to the sum of: (x) all accrued
and unpaid Scheduled Payments with respect to such Loan due prior to the next
such Payment Date, (y) a prepayment in an amount equal to the Loan Value, with
respect to such Loan, multiplied by the Stated Cost of each affected item of
Collateral and (z) all other sums, if any, that shall have become due and
payable hereunder with respect to such Loan, including interest at the Default
Rate with respect to any past due amounts. On the date of receipt by Lender of
the amount specified hereinabove with respect to each such item of Collateral
subject to an Event of Loss, the provisions of this Agreement shall terminate
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<PAGE> 12
as to such Collateral. Any proceeds of insurance maintained by Borrower
pursuant to Section 6.10(d) and received by Borrower shall be paid to Lender
promptly upon their receipt by Borrower. If any proceeds of insurance or awards
received from governmental authorities are in excess of the amount owed under
this Section 6.01(e), Lender shall promptly remit to Borrower the amount
in excess of the amount owed to Lender.
(iii) So long as no Event of Default has occurred and is continuing,
any proceeds of insurance maintained pursuant to Section 6.01(d) received by
Lender or Borrower with respect to an item of Collateral the repair of which is
practicable shall, at the election of Borrower, be applied either to the repair
or replacement of such Collateral or, upon Lender's receipt of evidence of the
repair or replacement of the Collateral reasonably satisfactory to Lender, to
the reimbursement of Borrower for the cost of such repair or replacement. All
replacement parts and equipment acquired by Borrower in replacement of
Collateral pursuant to this Section 6.01(e)(iii) shall immediately become part
of the Collateral upon acquisition by Borrower. Borrower shall take such actions
and provide such documentation as may be reasonably requested by Lender to
protect and preserve Lender's first priority security interest and otherwise to
avoid any impairment of Lender's rights under the Operative Documents, in
connection with such repair or replacement.
7.01. Negative Covenants. So long as the Loans or the Note or other
amounts hereunder remain outstanding, Borrower shall not:
(a) Collateral Control. Subject to its rights under Article V, (i)
terminate, waive or release any material right with respect to any Collateral or
remove any item of Collateral from Borrower's facility located at the address
set forth in Section 10.5(a) or such other address set forth in any Loan Terms
Schedule, or (ii) affix or attach or permit to be affixed or attached to any
item of Collateral any other item of property owned by Borrower or any other
lender, lessor or financing party which is not readily identifiable or separable
without any damage to such item of Collateral, without Lender's prior written
consent, which consent shall not be unreasonably withheld.
(b) Liens. Create, incur, assume or suffer to exist any Lien of any
kind upon any Collateral, whether now owned or hereafter acquired, except
Permitted Liens (other than Permitted Liens identified in clause (e) of the
definition thereof); or create, incur, assume or suffer to exist a Lien upon any
Intellectual Property to secure indebtedness to another lender or otherwise for
borrowed money.
(c) Other Dispositions of Collateral. Convey, sell, lease or otherwise
dispose of all or any part of the Collateral to any Person, except for Equipment
in which Lender shall have released its security interest pursuant to Section
5.02.
8.01. Closing. At the time of execution and delivery of this Agreement,
Borrower shall have duly executed and/or delivered to Lender the items set forth
in Part I of Schedule 3.
8.02. Other Conditions. The obligation of Lender to make each Loan shall be
subject to the execution and/or delivery to Lender of each of the items set
forth in Part I of Schedule 3 and the satisfaction of by Borrower of each
condition set forth in Part II of Schedule 3.
8.03. Covenant to Deliver. Borrower agrees (not as a condition but as a
covenant) to deliver to Lender each item required to be delivered to Lender as
a condition to each Loan, if such Loan is advanced. Borrower expressly agrees
that the extension of such Loan prior to the receipt by Lender of any such item
shall not constitute a waiver by Lender of Borrower's obligation to deliver
such item.
9.01. Events of Default. An "Event of Default" shall mean the occurrence
of one or more of the following described events: (a) Borrower shall (i) default
in the payment of principal of, or interest on, or fail to make the Final
Payment on any Loan when the same is due, or (ii) default in the payment of any
expense or other amount payable hereunder or thereunder for five (5) days after
receipt of written notice from Lender that the same is due; or (b) any
representation or warranty made herein or on a Funding
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<PAGE> 13
Date by Borrower in any Operative Document, or any certificate or financial
statement furnished pursuant to the provisions of any Operative Document, shall
prove to have been false or misleading in any material respect as of the time
made or furnished; or (c) Borrower shall default in the performance of any
covenant, agreement or obligation (other than a covenant, agreement or
obligation referred to in Section 9.01(a) or Section 9.01(e)) contained in any
Operative Document (other than the Warrant) and Borrower shall fail to cure
within thirty (30) days after receipt of written notice from Lender any default
in the performance of any such covenant, agreement or obligation contained
therein; or (d) Borrower shall have breached the terms of the Warrant and the
same has not been cured within five (5) days after notice thereof; or (e)
Borrower fails to maintain the insurance coverage required under Section
6.01(d); or (f) any Operative Document shall in any material respect cease to
be a legal, valid and binding obligation of Borrower enforceable in accordance
with its terms; or (g) a proceeding shall have been instituted in a court of
competent jurisdiction seeking a decree or order for relief in respect of
Borrower in an involuntary case under any applicable bankruptcy, insolvency or
other similar law now or hereafter in effect, or for the appointment of a
receiver, liquidator, assignee, custodian, trustee (or similar official) of
Borrower or for any substantial part of its property, or for the winding-up or
liquidation of its affairs, and such proceeding shall remain undismissed or
unstayed and in effect for a period of sixty (60) consecutive days or such
court shall enter a decree or order granting the relief sought in such
proceeding; or (h) Borrower shall commence a voluntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, shall consent to the entry of an order for relief in an involuntary
case under any such law, or shall consent to the appointment of or taking
possession by a receiver, liquidator, assignee, trustee, custodian (or other
similar official) of Borrower or for any substantial part of its property, or
shall make a general assignment for the benefit of creditors, or shall fail
generally to pay its debts as they become due, or shall take any corporate
action in furtherance of any of the foregoing.
9.02. Consequences of Event of Default. (a) If an Event of Default
specified under clauses (a) through (f) of Section 9.01 shall occur and be
continuing, Lender may (i) declare the Loan Value of the Loan Amount of each
Loan and all other liabilities of Borrower hereunder and under the other
Operative Documents to be immediately due and payable, without presentment,
demand, protest or further notice of any kind, all of which are hereby
expressly waived, and (ii) terminate its commitment to make Loans hereunder
and under the Note and terminate any commitment to advance money or extend
credit to or for the benefit of Borrower pursuant to any other agreement or
commitment extended by Lender to Borrower. (b) If an Event of Default
specified under clause (g) or (h) of Section 9.01 shall occur, then immediately
and without notice (i) the Loan Value of the Loan Amount of each Loan and all
other liabilities of Borrower hereunder and under the other Operative Documents
shall automatically become due and payable, without presentment, demand,
protest or notice of any kind, all of which are hereby expressly waived, and
(ii) Lender's commitment hereunder to make the Loans and any other commitment
of Lender to Borrower to advance money or extend credit pursuant to any other
agreement or commitment shall be terminated.
9.03. Rights Regarding Collateral. Borrower agrees that when any Event of
Default has occurred and is continuing, Lender shall have the rights, options,
duties and remedies of a secured party as permitted by law and, in addition to
and without limiting the foregoing, Lender may exercise any one or more or all,
and in any order, of the remedies herein set forth, including the following:
(a) Lender, personally or by agents or attorneys, shall have the right (subject
to compliance with any applicable mandatory legal requirements) to require
Borrower to assemble the Collateral and make it available to Lender at a place
to be designated by Lender or to take immediate possession of the Collateral,
or any portion thereof, and for that purpose may pursue the same wherever it
may be found, and may enter any of premises of Borrower, with or without
notice, demand, process of law or legal procedure, to the extent permitted by
applicable law, and search for, take possession of, remove, keep and store the
same, or use and operate or lease the same until sold; (b) Lender may, if at
the time such action may be lawful and always subject to compliance with any
mandatory legal requirements, either with or without taking possession and
either before or after taking possession, without instituting any legal
proceedings whatsoever, having first given notice of such sale by registered or
certified mail to Borrower once at least ten (10) days prior to the date of
such sale, and having first given any other notice which may be required by
law, sell and dispose of the Collateral, or any part thereof, at a private sale
or at public auction, to the
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<PAGE> 14
highest bidder, in one lot as an entirety or in separate lots, and either for
cash or on credit and on such terms as Lender may determine, and at any place
(whether or not it be the location of the Collateral or any part thereof)
designated in the notice referred to above. To the extent permitted by
applicable law, any such sale or sales may be adjourned from time to time by
announcement at the time and place appointed for such sale or sales, or for any
such adjourned sale or sales, without further published notice, and Borrower,
Lender or the holder or holders of the Note, or of any interest therein, may
bid and become the purchaser at any such sale; (c) Lender may liquidate any
Collateral pledged pursuant to Section 5.01(c) and apply the proceeds thereof
to any outstanding obligations; and (d) Lender may proceed to protect and
enforce this Agreement and the other Operative Documents by suit or suits or
proceedings in equity, at law or in bankruptcy, and whether for the specific
performance of any covenant or agreement herein contained or in execution or
aid of any power herein granted; or for foreclosure hereunder, or for the
appointment of a receiver or receivers for any real property security or any
part thereof, or for the recovery of judgment for the Obligations or for the
enforcement of any other proper, legal or equitable remedy available under
applicable law.
9.04. Waiver by Borrower. Upon the occurrence of an Event of Default, to
the extent permitted by law, Borrower covenants that it will not at any time
insist upon or plead, or in any manner whatsoever claim or take any benefit or
advantage of, any stay or extension law now or at anytime hereafter in force,
nor claim, take nor insist upon any benefit or advantage of or from any law now
or hereafter in force providing for the valuation or appraisement of the
Collateral or any part thereof prior to any sale or sales thereof to be made
pursuant to any provision herein contained, or to the decree, judgment or order
of any court of competent jurisdiction; nor, after such sale or sales, claim or
exercise any right under any statute now or hereafter made or enacted by any
state or otherwise to redeem the property so sold or any part thereof, and, to
the full extent legally permitted, except as to rights expressly provided
herein, hereby expressly waives for itself and on behalf of each and every
Person, except decree or judgment creditors of Borrower, acquiring any interest
in or title to the Collateral or any part thereof subsequent to the date of
this Agreement, all benefit and advantage of any such law or laws, and
covenants that it will not invoke or utilize any such law or laws or otherwise
hinder, delay or impede the execution of any power herein granted and delegated
to Lender, but will suffer and permit the execution of every such power as
though no such power, law or laws had been made or enacted.
9.05. Effect of Sale. Any sale of Collateral, whether under any power of
sale available to Lender or by virtue of judicial proceedings, shall operate to
divest all right, title, interest, claim and demand whatsoever, either at law
or in equity, of Borrower in and to the property sold, and shall be a perpetual
bar, both at law and in equity, against Borrower, its successors and assigns,
and against any and all persons claiming the property sold or any part thereof
under, by or through Borrower, its successors or assigns.
9.06. Application of Collateral Proceeds. The proceeds and/or avails of
the Collateral, or any part thereof, and the proceeds and the avails of any
remedy hereunder (as well as any other amounts of any kind held by Lender at
the time of, or received by Lender after, the occurrence of an Event of Default
hereunder) shall be paid to and applied as follows: (a) First, to the payment
of reasonable costs and expenses, including all amounts expended to preserve
the value of the Collateral, of foreclosure or suit, if any, and of such sale
and the exercise of any other rights or remedies, and of all proper fees,
expenses, liability and advances, including reasonable legal expenses and
attorneys' fees, incurred or made hereunder by Lender; (b) Second, to the
payment to Lender of the amount then owing or unpaid on the Note for Scheduled
Payments and the Loan Value of the Loan Amount with respect to each Loan, and
in case such proceeds shall be insufficient to pay in full the whole amount so
due, owing or unpaid upon the Note, then first, to the unpaid interest thereon,
second, to unpaid principal thereof and third, to the remaining balance of the
Loan Value of the Loan Amount with respect to each Loan; such application to be
made upon presentation of the Note, and the notation thereon of the payment, if
partially paid, or the surrender and cancellation thereof, if fully paid; (c)
Third, to the payment of other amounts then payable to Lender under any of the
Operative Documents; and (d) Fourth, to the payment of the surplus, if any, to
Borrower, its successors and assigns, or to whomsoever may be lawfully entitled
to receive the same.
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<PAGE> 15
9.07. Reinstatement of Rights. If Lender shall have proceeded to enforce
any right under this Agreement or any other Operative Document by foreclosure,
sale, entry or otherwise, and such proceedings shall have been discontinued or
abandoned for any reason or shall have been determined adversely, then and in
every such case (unless otherwise ordered by a court of competent
jurisdiction), Lender shall be restored to its former position and rights
hereunder with respect to the property subject to the security interest created
under this Agreement.
10.01. Modifications, Amendments or Waivers. The provisions of any
Operative Document may be modified, amended or waived only by a written
instrument signed by the parties thereto.
10.02. No Implied Waivers; Cumulative Remedies; Writing Required. No delay
or failure of Lender in exercising any right, power or remedy hereunder shall
affect or operate as a waiver thereof; nor shall any single or partial exercise
thereof or any abandonment or discontinuance of steps to enforce such a right,
power or remedy preclude any further exercise thereof or of any other right,
power or remedy. The rights and remedies hereunder of Lender are cumulative and
not exclusive of any rights or remedies which it would otherwise have. Any
waiver, permit, consent or approval of any kind or character on the part of
Lender of any breach or default under this Agreement or any such waiver of any
provision or condition of this Agreement must be in writing and shall be
effective only in the specified instance and to the extent specifically set
forth in such writing.
10.03. Expenses; Indemnification. Borrower agrees upon demand to pay or
reimburse Lender for all liabilities, obligations and out-of-pocket expenses,
including reasonable fees and expenses of counsel for Lender, from time to time
arising in connection with the enforcement or collection of sums due under the
Operative Documents. Borrower shall indemnify, reimburse and hold Lender, each
of Lender's partners, and each of their respective successors, assigns, agents,
officers, directors, shareholders, servants, agents and employees harmless from
and against all liabilities, losses, damages, actions, suits, demands, claims
of any kind and nature (including claims relating to environmental discharge,
cleanup or compliance), all costs and expenses whatsoever to the extent they
may be incurred or suffered by such indemnified party in connection therewith
(including reasonable attorneys' fees and expenses), fines, penalties (and
other charges of applicable governmental authorities), licensing fees relating
to any item of Collateral, damage to or loss of use of property (including
consequential or special damages to third parties or damages to Borrower's
property), or bodily injury to or death of any person (including any agent or
employee of Borrower) (each, a "Claim"), directly or indirectly relating to or
arising out of the use of the proceeds of the Loans, including acquisition,
use, ownership, operation, possession, control, storage, return or condition of
any item of Equipment financed by a Loan or constituting Collateral (regardless
of whether such item of Equipment is at the time in the possession of
Borrower), the falsity of any representation or warranty of Borrower or
Borrower's failure to comply with the terms of this Agreement or any other
Operative Document during the Term. The foregoing indemnity shall cover,
without limitation, (i) any Claim in connection with a design or other defect
(latent or patent) in any item of Equipment financed by a Loan or constituting
Collateral, (ii) any Claim resulting from the presence on or under or the
escape, seepage, leakage, spillage, discharge, emission or release of any
Hazardous Materials from any item of Equipment financed by a Loan or
constituting Collateral, including any Claims asserted or arising under any
Environmental Law, or (iii) any Claim for negligence or strict or absolute
liability in tort; provided, however, that Borrower shall not indemnify Lender
for any liability incurred by Lender as a direct and sole result of Lender's
gross negligence or willful misconduct. Such indemnities shall continue in full
force and effect, notwithstanding the expiration or termination of this
Agreement. Upon Lender's written demand, Borrower shall assume and diligently
conduct, at its sole cost and expense, the entire defense of Lender, each of
its partners, and each of their respective, agents, employees, directors,
officers, shareholders, successors and assigns against any indemnified Claim
described in this Section 10.03. Borrower shall not settle or compromise any
Claim against or involving Lender without first obtaining Lender's written
consent thereto, which consent shall not be unreasonably withheld.
10.04. Waivers. (a) Borrower shall give Lender written notice within one
hundred eighty (180) days of obtaining knowledge of the occurrence of any claim
or cause of action it believes it has, or may seek to assert to allege against
Lender whether such claim is based in law or equity, arising under or
15
<PAGE> 16
related to this Agreement or any of the other Operative Documents or to the
transactions contemplated hereby or thereby, or any act or omission to act by
Lender with respect hereto or thereto, and that if it shall fail to give such
notice to Lender with regard to any such claim or cause of action. Borrower
shall be deemed to have waived, and shall be forever barred from bringing or
asserting such claim or cause of action in any suit, action or proceeding in
any court or before any governmental agency or authority or any arbitrator. (b)
NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS AGREEMENT OR
ANYWHERE ELSE, BORROWER AGREES THAT IT SHALL NOT SEEK FROM LENDER UNDER ANY
THEORY OF LIABILITY (INCLUDING ANY THEORY IN TORTS), ANY SPECIAL, INDIRECT,
CONSEQUENTIAL OR PUNITIVE DAMAGES.
10.05. Notices; Payments.
(a) All notices and other communications given to or made upon any
party hereto in connection with this Agreement shall be in writing (including
telexed, telecopied or telegraphic communication) and mailed (by certified or
registered mail), telexed, telegraphed, telecopied or delivered to the
respective parties, as follows:
Borrower: At the address set forth on the signature page of the
applicable Loan Terms Schedule.
Lender: MMC/GATX PARTNERSHIP NO. 1
c/o GATX Capital Corporation
Four Embarcadero Center
Suite 2200
San Francisco, California 94111
Telephone No.: 415-955-3200
Telecopier No.: 415-955-3493
Attention: Contract Administration
with a copy of all financial information to:
MEIER MITCHELL & COMPANY
4 Orinda Way, Suite 200B
Orinda, California 94563
or in accordance with any subsequent written direction from either party to the
other. All such notices and other communications shall, except as otherwise
expressly herein provided, be effective when received; or in the case of
delivery by messenger or overnight delivery service, when left at the
appropriate address.
(b) Unless Lender specifies otherwise in writing, all payments
shall be made to:
GATX Capital Corporation
and mailed to:
NationsBank
P.O. Box 198592
Atlanta, Georgia 30384-8592
Reference: ViroLogic, Inc. and applicable invoice number
10.06. Termination. This Agreement shall terminate on the latest Maturity
Date; provided, however, that the termination of this Agreement shall not
affect any of the rights and remedies of Lender hereunder, it being understood
and agreed that all such rights and remedies shall continue in full force and
effect until payment of all amounts owed to Lender under or in connection with
the Operative Documents, whether on account of principal, interest, fees or
otherwise.
10.07. Severability. If any provision of any Operative Document is held
invalid or unenforceable to any extent or in any application, the remainder of
such Operative Document and all other Operative
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<PAGE> 17
Documents, or the application of such provision to different Persons or
circumstances or in different jurisdictions, shall not be affected thereby.
10.08. Survival. All representations, warranties, covenants and agreements
of Borrower contained herein or made in writing in connection herewith shall
survive the execution and delivery of the Operative Documents, the making of
Loans hereunder, the granting of security and the issuance of the Note.
10.09. Governing Law. This Agreement, the other Operative Documents and the
rights and obligations of the parties hereto and thereto shall be governed by
and construed and enforced in accordance with the laws of the State of
California. Any action to enforce this Agreement against Borrower may be brought
in California or, with regard to Collateral, may also be brought wherever such
Collateral is located.
10.10. Successors and Assigns. This Agreement and the other Operative
Documents shall be binding upon and inure to the benefit of Lender, all future
holders of the Note, Borrower and their respective successors and permitted
assigns. In the event of a proposed statutory merger of the Borrower into
another corporation or a proposed sale or transfer by the Borrower of all or
substantially all of its assets to a third party business entity, then, provided
that (i) the Borrower is not in default under this Agreement or under any other
agreement between Borrower and Lender, (ii) Lender or its assignee has been
given sufficient advance written notice of the proposed merger, sale, or
transfer together with the necessary background as to the legal status,
financial and credit worthiness of the third party to the merger sale or
transfer (collectively, a "Transferee") and the Lender or its assignee within
ten days of receipt of such written notice has approved such financial and
credit worthiness of the Transferee in accordance with its then existing credit
criteria, Lender agrees that it will not unreasonably withhold its consent to
any such transfer or assignment of this Agreement (and the transfer of the
Equipment to such Transferee), provided, that (a) the said Transferee assumes
all of the Borrower's obligations under this Agreement in form satisfactory to
Lender or its assignee (and expressly releasing the Borrower), (b) the Lender is
assured that its first perfected security interest in the Equipment will
continue in full force and effect and the Transferee executes such UCC
Financing Statements as may be necessary to accomplish the same and (c) Lender
is assured that the Equipment will be adequately covered by insurance during any
move thereof, provided, further, that should Lender reasonably withhold consent,
Borrower may prepay the Loans in whole at a prepayment price equal to the
principal amount of the Loans plus interest accrued thereon through and
including the date of such prepayment, plus a premium equal to a Make-Whole
Premium. Lender may sell to any other financial entity (a "Participant")
participation interests in Lender's rights under this Agreement and the other
Operative Documents. Lender may disclose the Operative Documents and any other
financial or other information relating to Borrower or any Subsidiary to any
potential Participant, provided that such Participant agrees to protect the
confidentiality of such documents and information using the same measures that
it uses to protect its own confidential information.
10.11. Counterparts. This Agreement may be executed in any number of
counterparts and by different parties hereto on separate counterparts, each of
which, when so executed and delivered, shall be an original, but all such
counterparts shall together constitute one and the same instrument.
10.12. Further Assurances. Borrower will, at its own expense, from time to
time do, execute, acknowledge and deliver all and every further acts, deeds,
conveyances, transfers and assurances, and all financing and continuation
statements and similar notices, reasonably necessary or proper for the
perfection of the security interest being herein provided for in the Collateral,
whether now owned or hereafter acquired.
10.13. Power of Attorney in Respect of the Collateral. Borrower does
hereby irrevocably appoint Lender (which appointment is coupled with an
interest), the true and lawful attorney-in-fact of Borrower with full power of
substitution, for it and in its name (a) to perform (but Lender shall not be
obligated to and shall incur no liability to Borrower or any third party for
failure to perform) any act which Borrower is obligated by this Agreement to
perform, (b) to ask, demand, collect, receive, receipt for, sue for,
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<PAGE> 18
compound and give acquittance for any and all rents, issues, profits, avails,
distributions, income, payment draws and other sums in which a security
interest is granted under Section 5.01 with full power to settle, adjust or
compromise any claim thereunder as fully as if Lender were Borrower itself, (c)
to receive payment of and to endorse the name of Borrower to any items of
Collateral (including checks, drafts and other orders for the payment of money)
that come into Lender's possession or under Lender's control, (d) to make all
demands, consents and waivers, or take any other action with respect to, the
Collateral, (e) in Lender's discretion, to file any claim or take any other
action or institute proceedings, either in its own name or in the name of
Borrower or otherwise, which Lender may reasonably deem necessary or
appropriate to protect and preserve the right, title and interest of Lender in
and to the Collateral, and (f) to otherwise act with respect thereto as though
Lender were the outright owner of the Collateral; provided, however, that the
power of attorney herein granted shall be exercisable only upon the occurrence
and during the continuation of an Event of Default. Borrower agrees to
reimburse Lender upon demand for all reasonable costs and expenses, including
attorneys' fees and expenses, which Lender may incur while acting as Borrower's
attorney in fact hereunder, all of which costs and expenses are included within
the Obligations.
IN WITNESS WHEREOF, the parties hereto, by their officers thereunto duly
authorized, have executed this Agreement as of the day and year first above
written.
VIROLOGIC, INC.
By: /s/ MARTIN H. GOLDSTEIN
--------------------------
Name: Martin H. Goldstein
------------------------
Title: Pres. & CEO
------------------------
MMC/GATX PARTNERSHIP NO. 1
By: Meier Mitchell & Company,
as General Partner
By:
--------------------------
Name:
------------------------
Title:
-----------------------
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compound and give acquittance for any and all rents, issues, profits, avails,
distributions, income, payment draws and other sums in which a security
interest is granted under Section 5.01 with full power to settle, adjust or
compromise any claim thereunder as fully as if Lender were Borrower itself, (c)
to receive payment of and to endorse the name of Borrower to any items of
Collateral (including checks, drafts and other orders for the payment of money)
that come into Lender's possession or under Lender's control, (d) to make all
demands, consents and waivers, or take any other action with respect to, the
Collateral, (e) in Lender's discretion, to file any claim or take any other
action or institute proceedings, either in its own name or in the name of
Borrower or otherwise, which Lender may reasonably deem necessary or
appropriate to protect and preserve the right, title and interest of Lender in
and to the Collateral, and (f) to otherwise act with respect thereto as though
Lender were the outright owner of the Collateral; provided, however, that the
power of attorney herein granted shall be exercisable only upon the occurrence
and during the continuation of an Event of Default. Borrower agrees to
reimburse Lender upon demand for all reasonable costs and expenses, including
attorneys' fees and expenses, which Lender may incur while acting as Borrower's
attorney in fact hereunder, all of which costs and expenses are included within
the Obligations.
IN WITNESS WHEREOF, the parties hereto, by their officers thereunto duly
authorized, have executed this Agreement as of the day and year first above
written.
VIROLOGIC, INC.
By:
--------------------------
Name:
------------------------
Title:
------------------------
MMC/GATX PARTNERSHIP NO. 1
By: Meier Mitchell & Company,
as General Partner
By: /s/ JAMES V. MITCHELL
--------------------------
Name: James V. Mitchell
------------------------
Title: Secretary
-----------------------
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SCHEDULES
1 Loan Terms Schedule
2 Existing Liens
3 Conditions Precedent
EXHIBITS
A Secured Promissory Note
????
C Warrant
D Form of Opinion of Counsel
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<PAGE> 21
SCHEDULE 1
LOAN TERMS SCHEDULE NO. ___
This Loan Terms Schedule No. __ (this "Schedule"), dated as of __________, 199_
is part of the Loan and Security Agreement, dated as of January 30, 1998 (the
"Loan Agreement"), between MMC/GATX PARTNERSHIP NO. 1 ("Lender") and VIROLOGIC,
INC. ("Borrower") and is incorporated therein by reference. The terms used in
this Schedule shall have the meanings given to them in the Loan Agreement
unless otherwise defined herein.
1. The following terms are applicable to the Loan described by this Schedule:
Loan Funding Date: ____________, 199_
Initial Loan Amount: $_________
Loan Factor: _____%
Original Scheduled Payment Amount(1): $_________
Date of First Scheduled Payment: ____________, 199_
The schedule of Loan Values is attached to this Loan Terms Schedule as
Annex B.
2. Borrower shall pay to Lender an Interim Payment in the amount of $_______.
The Interim Payment is due and payable on ____________, 199_.
3. The Commitment Fee shall be applied first to Lender's expenses, including
the fees and expenses of Lender's counsel in connection with the preparation
and negotiation of the Agreement and the other Operative Documents, such fees
to be capped at $5,000. The balance, if any, of the Commitment Fee shall be
applied on a pro rata basis (using the ratio of each Loan Amount to the total
Credit Amount) toward the first payment due from Borrower on each Loan
hereunder on the respective Funding Dates. If, on or prior to the Commitment
Termination Date, Borrower shall not have borrowed under this Agreement Loans
aggregating in an original principal amount equal to the Credit Amount, then
Lender shall retain any portion of the Commitment Fee not applied as set forth
in this Section 3.
4. Borrower certifies that the proceeds of the Loan requested hereby will be
used for the purposes described in Section 2.02(a) of the Loan Agreement and
that the Equipment being financed with or which serves as Collateral for such
Loan is listed on Annex A hereto, which Annex A shall automatically be deemed
to be included in and amend the definition of "Collateral" under the Loan
Agreement as if such Annex A were set forth in full therein. Borrower hereby
confirms that it has granted and does further grant to Lender a security
interest in such Collateral including the Equipment specifically described on
Annex A hereto.
5. The proceeds of the Loan should be wire transferred to Borrower as follows:
Bank Name: Bank of America
Bank Address: 444 Castro Street, Box 580, Mountain View, CA 94042
Account No.: 0144-8-08321
Routing No. (if any): 121000358
For Account of: ViroLogic, Inc.
Attention: Lucille Young
_______________
(1) The amount of each Scheduled Payment will change if the Loan Amount
changes.
20
<PAGE> 22
6. Borrower certifies that (a) the foregoing information is true and correct
and authorizes Lender to endorse on the grid attached to the Note, the Loan
Rate applicable to the Loan contemplated in this Loan Terms Schedule and the
principal amount set forth as the "Initial Loan Amount" in paragraph 1 above;
(b) except as set forth in the Schedule of Exceptions attached hereto as Annex
C, the representations and warranties made by Borrower in Article III of the
Loan Agreement and in the other Operative Documents are true and correct on the
date hereof; (c) Borrower is in compliance with the covenants and the
requirements contained in Articles IV, VI and VII of the Loan Agreement; and
(d) all conditions contained in Article VIII of the Loan Agreement to the
making of the Loan described in this Loan Terms Schedule have been satisfied.
7. All payments with respect to the Loan described on this Schedule shall be
made to Lender c/o GATX Capital Corporation, as Agent, Box 71316, Chicago,
Illinois 60694 unless otherwise indicated in a writing signed by Lender.
This Loan Terms Schedule is hereby duly executed by the parties hereto as of
the date first written above.
MMC/GATX PARTNERSHIP NO. 1
By Meier Mitchell & Company, as General Partner
By
--------------------------------------------
Name
------------------------------------------
Title
-----------------------------------------
VIROLOGIC, INC.
By
--------------------------------------------
Name
------------------------------------------
Title
-----------------------------------------
Borrower's address for notices:
270 E. Grand Avenue
South San Francisco, CA 94080
Attention: Martin H. Goldstein
21
<PAGE> 23
ANNEX A
TO
LOAN TERMS SCHEDULE
The Equipment being financed with or which serves as collateral for the
Loan described on the Loan Terms Schedule to which this Annex A is attached is
listed below.
Equipment Collateral
22
<PAGE> 24
ANNEX B
TO
LOAN TERMS SCHEDULE
Loan Values
Payment No. Payment Date Loan Value*
1
2
3
4
. . .
[47]
[48]
________________
* Each Loan Value percentage assumes payment of all Scheduled Payments due on
or before the indicated Payment Date.
23
<PAGE> 25
ANNEX C
TO
LOAN TERMS SCHEDULE
Schedule of Exceptions
24
<PAGE> 26
Schedule 2
Existing Liens
<TABLE>
<CAPTION>
File Number Type of Filing Filing Date Secured Party
----------- -------------- ----------- -------------
<S> <C> <C> <C> <C>
1. 9631860550 Original November 8, 1996 Lease Management Services, Inc.
2500 Sand Hill Rd, Ste 101
Menlo Park, CA 94025
96327C0402 Amendment November 22, 1996
97014C0073 Amendment January 13, 1997
97174C0134 Amendment June 19, 1997
97289C0110 Amendment October 14, 1997
2. 9631860578 Original November 8, 1996 Taylor Made Office Systems, Inc.
1550 Parkside Drive
Walnut Creek, CA 94596
3. 9631860592 Original November 8, 1996 Taylor Made Office Systems, Inc.
1550 Parkside Drive
Walnut Creek, CA 94596
</TABLE>
<PAGE> 27
SCHEDULE 3
CONDITIONS PRECEDENT
PART I:
At the time of execution and delivery of this Agreement, there shall also
have been duly executed and delivered to Lender:
(a) The Note;
(b) The Warrant;
(d) A favorable opinion of counsel for Borrower, dated as of the closing
date, in the form attached hereto as Exhibit D;
(e) Copies, certified by the Secretary, Assistant Secretary or Chief
Financial Officer of Borrower as of the closing date, of Borrower's
charter documents and bylaws and of all documents evidencing corporate
action taken by Borrower authorizing the execution, delivery and
performance of the Operative Documents to which Borrower is a party, in
form and substance satisfactory to Lender and its counsel;
(f) Good standing certificate from Borrower's state of incorporation and
the state in which Borrower's principal place of business is located,
together with certificates of the applicable governmental authorities that
Borrower is in compliance with the franchise tax laws of each such state,
each dated as of a recent date;
(g) Evidence of the insurance coverage required by Section 6.01(d) of this
Agreement;
(h) All necessary consents of shareholders and other third parties with
respect to the execution, delivery and performance of this Agreement, the
Warrant, the Note and the other Operative Documents;
(i) An Officer's Certificate in a form reasonably acceptable to Lender
(the "Officer's Certificate"); and
(j) All other documents as Lender shall have reasonably requested.
PART II
On or prior to the Funding Date of each Loan, each of the items set forth
in Part 1 of this Schedule 3 shall have been delivered to Lender and the
following conditions shall have been satisfied or waived by Lender:
(a) Borrower shall have provided to Lender, with respect to the Equipment
which is intended to be financed with the proceeds of the Loan to be made
on such Funding Date, such invoices, bills of sale, receipts, agreements,
canceled checks, and other documents as Lender shall reasonably request to
evidence the ownership by Borrower of, the payment in full of the purchase
price of, and the Original Cost of, such Equipment, each in form and
substance reasonably satisfactory to Lender; and, except with the prior
written consent of Lender which shall not be unreasonably withheld, all
such Equipment shall be Eligible Equipment;
26
<PAGE> 28
(b) Lender shall have received duly executed Form UCC-1 Financing
Statements, pledge agreements or other documents and Borrower shall have
taken such actions, if any, as Lender shall reasonably determine are
necessary or desirable to perfect and protect its security interest in the
Collateral;
(c) Borrower shall have provided to Lender such documents, instruments and
agreements, including amendments to previously filed financing statements
terminating "after acquired property" clauses which encompass the
Equipment, as Lender shall reasonably request to evidence the perfection
and priority of the security interests granted to Lender pursuant to
Article V;
(d) No Event of Default or Default shall have occurred and be continuing;
(e) Borrower shall have duly executed and delivered to Lender a Loan Terms
Schedule prepared by Lender;
(f) In Lender's reasonable, sole discretion, there shall not have occurred
any material adverse change in the general affairs, management, results of
operations, condition (financial or otherwise) of the Borrower, or
prospects of Borrower;
(g) The representations and warranties contained in this Agreement and the
other Operative Documents to which Borrower is a party, as modified by any
Schedule of Exceptions attached to the applicable Loan Terms Schedule as
Annex C, shall be true and correct in all material respects as if made on
such Funding Date and the items listed on such Schedule of Exceptions
shall be reasonably acceptable to Lender;
(h) Each of the Operative Documents remains in full force and effect;
(i) Except with the prior consent of Lender which shall not be unreasonably
withheld, (i) the amount of the requested Loan shall not be less than the
Minimum Funding Amount; (ii) the amount of the requested Loan when
aggregated with the amounts of all Loans previously funded shall not
exceed the Credit Amount; and (iii) the funding of the requested Loan when
aggregated with the number of previous fundings of Loans shall not exceed
the Maximum Number of Fundings; and
(j) The Funding Date of the requested Loan shall not be later than the
Commitment Termination Date.
27
<PAGE> 29
EXHIBIT A
SECURED PROMISSORY NOTE
$3,000,000 Dated: January 30, 1998
FOR VALUE RECEIVED, the undersigned, VIROLOGIC, INC. ("Borrower"), a
Delaware corporation, HEREBY PROMISES TO PAY to the order of MMC/GATX
PARTNERSHIP NO. 1, a California general partnership ("Lender") the principal
amount of Three Million Dollars ($3,000,000) or such lesser amount as shall
equal the aggregate outstanding principal balance of the Loans made by Lender
to Borrower pursuant to the Loan and Security Agreement referred to below (the
"Loan Agreement"), and to pay all other amounts due with respect to each Loan
and the Final Payment amount applicable to each Loan, on the dates and in the
amounts set forth in the Loan Agreement.
Borrower hereby promises to pay interest to Lender on the unpaid principal
amount of each Loan from the date of such Loan until such principal amount is
paid in full, in the manner, on the dates and at such rates as are specified in
the Loan Agreement.
The aggregate amount due on each Loan from time to time under this Note
with respect to unpaid principal, accrued interest and the Final Payment is
sometimes expressed in the Loan Agreement as the "Loan Value of the Loan
Amount".
Principal, interest and all other amounts due with respect to each Loan,
are payable in lawful money of the United States of America to Lender as
follows: GATX Capital Corporation, P.O. Box 71316, Chicago, Illinois 60694, or
upon written notice by Lender to Borrower, Four Embarcadero Center, Suite 2200,
San Francisco, California 94111, in immediately available funds. Each Loan made
by Lender to Borrower and the interest rate applicable thereto, and all
payments made with respect thereto, shall be recorded by Lender and, prior to
any transfer hereof, endorsed on the grid attached hereto which is part of this
Note.
This Note is the Note referred to in, and is entitled to the benefits of,
the Loan and Security Agreement, dated as of January 30, 1998, between Borrower
and Lender. The Loan Agreement, among other things, (a) provides for the making
of secured Loans by Lender to Borrower from time to time in an aggregate
principal amount not to exceed at any time outstanding the U.S. dollar amount
first above mentioned, the indebtedness of Borrower resulting from each Loan
being evidenced by this Note, and (b) contains provisions for acceleration of
the maturity hereof upon the happening of certain stated events and also for
prepayments prior to the Maturity Date with respect to each Loan only upon the
terms and conditions therein specified.
This Note and the obligation of Borrower to repay the unpaid principal
amount of the Loans, interest on the Loans, the Final Payments on the Loans and
all other amounts due Lender under the Loan Agreement is secured under the Loan
Agreement.
Presentment for payment, demand, notice of protest and all other demands
and notices of any kind in connection with the execution, delivery, performance
and enforcement of this Note are hereby waived.
Borrower shall pay all reasonable fees and expenses, including, without
limitation, reasonable attorneys' fees and costs, incurred by Lender in the
enforcement or attempt to enforce any of Borrower's obligations hereunder not
performed when due. This Note shall be governed by, and construed and
interpreted in accordance with, the laws of the State of California.
28
<PAGE> 30
IN WITNESS WHEREOF, Borrower has caused this Note to be duly executed by
one of its officers thereunto duly authorized on the date hereof.
VIROLOGIC, INC.
By: /s/ MARTIN H. GOLDSTEIN
----------------------------
Name: Martin H. Goldstein
--------------------------
Title: President & CFO
-------------------------
29
<PAGE> 31
LOANS, INTEREST RATE AND PAYMENTS OF PRINCIPAL
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Principal Scheduled
Date Amount Interest Rate Payment Amount Notation By
---- --------- ------------- -------------- -----------
</TABLE>
30
<PAGE> 32
EXHIBIT B
LANDLORD'S WAIVER AND CONSENT
31
<PAGE> 33
ATTACHMENT 1
LEGAL DESCRIPTION OF PREMISES
[To Be Provided By Tenant]
34
<PAGE> 34
ATTACHMENT 1
LEGAL DESCRIPTION OF PREMISES
Premises are located in a building which in turn is located, along with other
buildings, on the improved real property in the City of South San Francisco,
County of San Mateo, State of California, more particularly described as
follows:
Lots 1, 2, 3 and 4, inclusive, as shown on Parcel Map No. 91-284, "Being a
resubdivision of the parcels described in the deeds to Metal and Thermit
Corporation, recorded in Book 293, at Page 394 of Deeds; in Book 49, at Page
490, Official Records; in Book 77, at Page 415, Official Records; and, except
that parcel described in Book 1352, at Page 373, Official Records," filed on
February 25, 1992, in Book 65 at pages 52 through 55 inclusive of Parcel Maps,
in the Office of the Recorder of the County of San Mateo, California.
<PAGE> 35
ATTACHMENT 1
LEGAL DESCRIPTION OF PREMISES
Premises are located in a building which in turn is located, along with other
buildings, on the improved real property in the City of South San Francisco,
County of San Mateo, State of California, more particularly described as
follows:
Lots 1, 2, 3 and 4, inclusive, as shown on Parcel Map No. 91-284, "Being a
resubdivision of the parcels described in the deeds to Metal and Thermit
Corporation, recorded in Book 293, at Page 394 of Deeds; in Book 49, at Page
490, Official Records; in Book 77, at Page 415, Official Records; and, except
that parcel described in Book 1352, at Page 373, Official Records," filed on
February 25, 1992, in Book 65 at pages 52 through 55 inclusive of Parcel Maps,
in the Office of the Recorder of the County of San Mateo, California.
<PAGE> 36
State of ______________ )
)
County of______________ )
On _____________________, 199__ before me, the undersigned, personally
appeared ________________________, personally known to me (or proved to me on
the basis of satisfactory evidence) to be the person(s) whose name(s) is/are
subscribed to the within instrument and acknowledged to me that he/she/they
executed the same in his/her/their authorized capacity(ies), and that by
his/her/their signature(s) on the instrument the person(s), or the entity upon
behalf of which the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
Signature (Seal)
-----------------------
State of ______________ )
)
County of______________ )
On _____________________, 199__ before me, the undersigned, personally
appeared ________________________, personally known to me (or proved to me on
the basis of satisfactory evidence) to be the person(s) whose name(s) is/are
subscribed to the within instrument and acknowledged to me that he/she/they
executed the same in his/her/their authorized capacity(ies), and that by
his/her/their signature(s) on the instrument the person(s), or the entity upon
behalf of which the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
Signature (Seal)
-----------------------
35
<PAGE> 37
EXHIBIT C
WARRANT
36
<PAGE> 38
FIRST AMENDMENT TO LEASE AGREEMENT
THIS FIRST AMENDMENT TO LEASE AGREEMENT ("Amendment") is dated as of
February __, 2000, between ARE-Technology Center SSF, LLC, a Delaware limited
liability company ("Landlord"), and Virologic, Inc., a California corporation
("Tenant").
A. Trammell Crow Northern California Development, Inc. ("Original
Landlord") and Tenant entered into that certain Lease Agreement dated as of
November 23, 1999 (the "Lease"), with respect to certain premises to be located
at 335 Oyster Point Boulevard, South San Francisco, California (the
"Premises"). Unless otherwise defined in this Amendment, initially-capitalized
terms used herein shall have the meanings set forth in the Lease.
B. Original Landlord has contracted to acquire the real property upon
which the Premises are to be located (the "Project"), and intends to assign its
rights to acquire the Project to Landlord.
C. In connection with the assignment of its rights to acquire the
Project, Original Landlord intends to assign all of its rights and interest
under the Lease to Landlord.
D. Landlord and Tenant wish to amend the Lease as set forth herein.
NOW THEREFORE, in consideration of the foregoing Recitals, the mutual
covenants and agreements contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Landlord and Tenant agree, and amend the Lease, as follows:
1. Effective Date.
Landlord and Tenant agree that this Amendment shall be effective upon the
assignment of the Lease to Landlord by Original Landlord, and such assignment
shall be a condition precedent to the effectiveness of this Amendment. The date
upon which the assignment is made and this Amendment becomes effective shall be
called the "Effective Date".
2. Transportation Demand Management Program.
The Lease is hereby amended to include the following provision:
Landlord and Tenant acknowledge that in connection with the
development of the Project, the Peninsula Congestion Relief Alliance,
on behalf of the Inter-City and Multi-City TSM Agencies, San Mateo
County, will propose a Transportation
<PAGE> 39
Demand Management ("TDM") program which will focus on reducing traffic
congestion in the vicinity of the Project. The parties further
acknowledge that implementation of the TDM program is expected to be
required by the City of South San Francisco as a condition of approval
of the development of the Project. Tenant agrees to cooperate with
Landlord in the implementation of the TDM program, to participate in
the TDM program, and to pay Tenant's Proportionate Share of the costs
related to the TDM program.
3. Counterparts.
This Amendment may be executed in any number of counterparts, each of
which when so executed and delivered shall be deemed to be an original and all
of which counterparts taken together shall constitute but one and the same
instrument. Signature pages may be detached from the counterparts and attached
to a single copy of this Amendment to physically form one document.
4. Reaffirmation of Obligations.
Tenant hereby acknowledges and reaffirms its obligations under the Lease,
as such Lease has been amended by this Amendment, and agrees that any
reference made in any other document to the Lease shall mean the Lease as
amended pursuant to this Amendment. Except as expressly provided herein, the
Lease remains unmodified and in full force and effect. Any breach by Tenant of
this Amendment, including any exhibit hereto, shall constitute a breach and
default by Tenant under the Lease.
5. Time of Essence.
Time is of the essence with respect to each provision of this Agreement.
2
<PAGE> 40
IN WITNESS WHEREOF, Landlord and Tenant have caused this Amendment to be
duly executed and delivered as of the date first above written.
LANDLORD
ARE-Technology Center SSF, LLC,
a Delaware limited liability company
By: Alexandria Real Estate Equities, L.P.,
a Delaware limited partnership
its managing member
By: ARE-QRS CORP.,
a Maryland corporation,
its general partner
By:
----------------------------
its:
----------------------------
TENANT
VIROLOGIC, INC.,
a California corporation
By: /s/ MARTIN H. GOLDSTEIN
----------------------------
Its: President & CFO
----------------------------
3
<PAGE> 1
EXHIBIT 10.6
EMPLOYMENT AGREEMENT
THIS AGREEMENT is entered into as of September 29, 1999, by and between
WILLIAM D. YOUNG (the "EXECUTIVE") and VIROLOGIC, INC., a Delaware corporation
(the "COMPANY").
1. DUTIES AND SCOPE OF EMPLOYMENT.
(a) POSITION. For the term of his employment under this Agreement
("EMPLOYMENT"), the Company agrees to employ the Executive in the position of
Chairman and Chief Executive Officer. The Executive shall report to the
Company's Board of Directors (the "Board").
(b) OBLIGATIONS TO THE COMPANY. During the term of his
Employment, the Executive shall devote his full business efforts and time to the
Company; provided, however, that this shall not preclude the Executive from
serving as a non-executive member of the board of directors of up to three other
companies to the extent such other companies do not compete with the Company and
that such service does not materially impact the ability of the Executive to
fulfill his obligations to the Company. The Executive shall comply with the
Company's policies and rules, as they may be in effect from time to time during
the term of his Employment.
(c) NO CONFLICTING OBLIGATIONS. The Executive represents and
warrants to the Company that he is under no obligations or commitments, whether
contractual or otherwise, that are inconsistent with his obligations under this
Agreement. The Executive represents and warrants that he will not use or
disclose, in connection with his employment by the Company, any trade secrets or
other proprietary information or intellectual property in which the Executive or
any other person has any right, title or interest and that his employment by the
Company as contemplated by this Agreement will not infringe or violate the
rights of any other person or entity. The Executive represents and warrants to
the Company that he has returned all property and confidential information
belonging to any prior employers.
(d) COMMENCEMENT DATE. The Executive shall commence Employment
with the Company on a part-time basis starting on October 4, 1999 and shall
commence Employment with the Company on a full-time basis starting on November
1, 1999.
2. CASH AND INCENTIVE COMPENSATION.
(a) SALARY. The Company shall pay the Executive as compensation
for his services a base salary at a gross annual rate of $300,000, payable in
accordance with the Company's standard payroll schedule. (The compensation
specified in this Subsection (a), together with any increases in such
compensation that the Company may grant from time to time, is referred to in
this Agreement as "Base Compensation.")
(b) INCENTIVE BONUSES. The Executive shall be eligible to be
considered for an annual incentive bonus as part of the Company's bonus program
based on objective or subjective criteria established by the Board after
consultation with Executive. Such bonus shall be contingent upon Executive's
continued employment through the end of the bonus period and
1.
<PAGE> 2
Executive shall have no right to any pro rata portion of the bonus. The
determinations of the Board with respect to such bonus shall be final and
binding.
(c) STOCK GRANTS.
(i) In consideration of Executive's service to date as a
member of the Board, and subject to the approval of the Board, the Company shall
grant to the Executive a stock bonus award of 300,000 shares of the Company's
Common Stock. Such stock bonus award shall be granted as soon as reasonably
practicable after the date of this Agreement, but in no event later than
September 30, 1999. The shares of stock granted pursuant to such stock bonus
award shall be fully vested and not subject to repurchase by the Company. In
addition, the Company will pay to Executive a cash bonus in the gross amount of
$180,000 on January 15, 2000 and a cash bonus in the gross amount of $180,000 on
April 15, 2000. Such cash bonuses shall be subject to the Company's standard
withholding policies and procedures.
(ii) Subject to the approval of the Board, the Company
shall grant to the Executive an incentive stock option under the Company's 1996
Stock Plan covering 300,000 shares of the Company's Common Stock. Such incentive
stock option shall be granted as soon as reasonably practicable after the date
of this Agreement, but in no event later than October 10, 1999. The per share
exercise price of the option will be equal to the per share fair market value of
the common stock on the date of grant, as determined by the Board of Directors.
The term of such option shall be 10 years, subject to earlier expiration in the
event of the termination of the Executive's Employment. The Executive shall vest
in 60,000 of the option shares on December 31, 1999 and an additional 5,000 of
the option shares on the last day of each month of continuous service
thereafter.
(iii) Subject to the approval of the Board, the Company
shall grant the Executive a non-qualified stock option covering 500,000 shares
of the Company's Common Stock. Such option shall be granted as soon as
reasonably practicable after the date of this Agreement, but in no event later
than October 10, 1999. The per share exercise price of the option will be equal
to the per share fair market value of the common stock on the date of grant, as
determined by the Board of Directors. The term of such option shall be 10 years,
subject to earlier expiration in the event of the termination of the Executive's
Employment. The Executive shall vest in 25% of the option shares after the first
12 months of continuous service and shall vest in the remaining option shares in
equal monthly installments over the next three years of continuous service. Such
option will include an early exercise provision that allows Executive to
exercise the option as to vested and unvested shares, subject to a right of
repurchase with respect to unvested shares.
(iv) Subject to the approval of the Board, the Company
shall grant the Executive an additional non-qualified stock option covering
500,000 shares of the Company's Common Stock. Such option shall be granted as
soon as reasonably practicable after the date of this Agreement, but in no event
later than October 10, 1999. The per share exercise price of the option will be
equal to the per share fair market value of the common stock on the date of
grant, as determined by the Board of Directors. The term of such option shall be
10 years, subject to earlier expiration in the event of the termination of the
Executive's Employment. The option shares shall vest as to 100% of the shares on
the fifth anniversary of the commencement date of
2.
<PAGE> 3
Executive's employment with the Company, provided Executive remains continuously
employed by the Company through that date. Prior to the fifth anniversary of
Executive's employment commencement date, the vesting of the option shares shall
accelerate as to one-half (1/2) of the option shares on the occurrence of (i) a
merger or acquisition of the Company where the value of the merger or
acquisition per share of Common Stock is more than $9.25 (as adjusted for stock
splits, stock dividends, recapitalizations and the like), or (ii) the Company
makes an initial public offering ("IPO") with a per share price to the public of
more than $9.25 (as adjusted for stock splits, stock dividends,
recapitalizations and the like). Prior to the fifth anniversary of Executive's
employment commencement date, the vesting of the option shares shall accelerate
as to an additional one-half (1/2) of the option shares if the Company's product
revenue for any fiscal year exceeds $20,000,000 for such fiscal year before
December 31, 2001. Such option will include an early exercise provision that
allows Executive to exercise the option as to vested and unvested shares,
subject to a right of repurchase with respect to unvested shares.
(v) The grants of options pursuant to subsections (ii),
(iii) and (iv) above shall be subject to the Company's standard form of stock
option agreement, copies of each of which are attached hereto as exhibits and
must be executed as a condition of the grant. While Executive remains employed
by the Company he shall have the right to exercise his options by delivery of a
non-recourse promissory note, provided: (i) the promissory note is secured by
property other than the shares of stock being purchased ("Other Property"), (ii)
the Other Property is not owned by the payee of the promissory note, and (ii)
the Other Property is worth as much as the principal value of the promissory
note on the date of exercise. As an alternative to a non-recourse promissory
note, Executive shall have the right to exercise his options while he remains
employed by the Company by delivering a full recourse promissory note secured by
a pledge of the shares purchased thereunder. If required under the laws of the
Company's state of incorporation, Executive shall pay cash for the par value of
the exercised option shares. Interest on the promissory note shall be repayable
annually at the applicable Federal rate under the Internal Revenue Code to avoid
imputed income and the principal balance and interest shall be due in full on
the earlier of the fourth anniversary of Executive's hire date, 90 days after
the Executive's termination of employment, or the one year anniversary of the
Company's initial public offering. The note shall be subject to such other terms
and conditions as may be agreed to by the Company and Executive. The credit
extended to Executive hereunder shall equal the aggregate option price payable
for the purchased shares. For 90 days following the effective date of the
termination of his employment for any reason, Executive shall have the right to
exercise his vested stock options.
(vi) If the Company terminates Executive's Employment
Without Cause (as defined in section 6(d)) within one year after a Change of
Control or Executive resigns for Good Reason within one year after a Change of
Control, then each of Executive's outstanding options will become fully vested.
"Change of Control" shall mean (i) a merger or consolidation in which securities
possessing more than fifty percent (50%) of the total combined voting power of
the Corporation's outstanding securities are transferred to a person or persons
different from the persons holding those securities immediately prior to such
transaction, or (ii) the sale, transfer or other disposition of all or
substantially all of the Corporation's assets in complete liquidation or
dissolution of the Corporation. "Good Reason" for Executive's resignation will
exist if he resigns within sixty days of any of the following: (i) any reduction
in his base salary, except as generally applicable to all executive officers;
(ii) a change in his
3.
<PAGE> 4
position with the Company which materially reduces his level of responsibility;
or (iii) any requirement that he relocate his place of employment by more than
fifty (50) miles from his then current office, provided such reduction, change
or relocation is effected by the Company without his written consent.
(d) SPECIAL BONUS. Executive will participate in a special bonus
program pursuant to which he will be paid a net cash bonus of at least $50,000
and, subject to the approval of the Board, up to $100,000 each year, which will
be grossed up for tax purposes, provided he is employed as of November 1 of such
year.
3. VACATION AND EXECUTIVE BENEFITS. During the term of his Employment,
the Executive shall be eligible for paid vacations in accordance with the
Company's standard policy for similarly situated employees, as it may be amended
from time to time. During the term of his Employment, the Executive shall be
eligible to participate in any employee benefit plans maintained by the Company
for similarly situated employees, subject in each case to the generally
applicable terms and conditions of the plan in question and to the
determinations of any person or committee administering such plan.
4. BUSINESS EXPENSES. During the term of his Employment, the Executive
shall be authorized to incur necessary and reasonable travel, entertainment and
other business expenses in connection with his duties hereunder. The Company
shall reimburse the Executive for such expenses upon presentation of an itemized
account and appropriate supporting documentation, all in accordance with the
Company's generally applicable policies.
5. TERM OF EMPLOYMENT.
(a) BASIC RULE. Executive will remain employed with the Company
from the commencement date set forth in Section 1(d) until the date when the
Executive's Employment terminates pursuant to Subsection (b) below. The
Executive's Employment with the Company shall be "at will," and either the
Executive or the Company may terminate the Executive's Employment at any time,
for any reason, with or without Cause. Any contrary representations, which may
have been made to the Executive shall be superseded by this Agreement. This
Agreement shall constitute the full and complete agreement between the Executive
and the Company on the "at will" nature of the Executive's Employment, which may
only be changed in an express written agreement signed by the Executive and a
duly authorized officer of the Company.
(b) TERMINATION. The Company may terminate the Executive's
Employment at any time and for any reason (or no reason), and with or without
Cause, by giving the Executive notice in writing. The Executive may terminate
his Employment by giving the Company 14 days' advance notice in writing. The
Executive's Employment shall terminate automatically in the event of his death
or permanent disability.
(c) RIGHTS UPON TERMINATION. Except as expressly provided in
Section 6, upon the termination of the Executive's Employment pursuant to this
Section 5, the Executive shall only be entitled to the compensation, benefits
and reimbursements described in Sections 2,
4.
<PAGE> 5
3 and 4 for the period preceding the effective date of the termination. The
payments under this Agreement shall fully discharge all responsibilities of the
Company to the Executive.
(d) TERMINATION AGREEMENT. This Agreement shall terminate when
all obligations of the parties hereunder have been satisfied. The termination of
this Agreement shall not limit or otherwise affect any of the Executive's
obligations under Section 7.
6. TERMINATION BENEFITS.
(a) SEVERANCE PAY. If the Company terminates the Executive's
Employment for any reason other than for Cause, or if employment is terminated
by the death or permanent disability of the Executive, then the Company shall:
(i) pay the Executive his Base Compensation for a period
of twelve (12) months following the termination of his Employment (the
"Continuation Period"), which Base Compensation shall be paid at the rate in
effect at the time of the termination of Employment and in accordance with the
Company's standard payroll procedures, and
(ii) provide for vesting of the options granted pursuant
to Sections 2(c)(ii) and 2(c)(iii) in an amount equal to an additional twelve
(12) months following the termination of his Employment (if the Executive has
been continuously employed by the Company for less than two years at the time of
the termination) or provide for vesting of the options granted pursuant to
Sections 2(c)(ii), (iii) and (iv) such that they shall become fully vested (if
the Executive has been continuously employed by the Company for two years or
more at the time of the termination).
(b) HEALTH INSURANCE. If Subsection (c) below applies, and if the
Executive elects to continue his health insurance coverage under the
Consolidated Omnibus Budget Reconciliation Act ("COBRA") following the
termination of his Employment, then the Company shall pay the Executive's
monthly premium under COBRA until the earliest of (i) the close of the
Continuation Period or (ii) the expiration of the Executive's continuation
coverage under COBRA.
(c) GENERAL RELEASE. Any other provision of this Agreement
notwithstanding, if the Executive has been continuously employed by the Company
for two years or more at the time of his termination then Subsections (a) and
(b) above shall only apply if the Executive (i) has executed a general release
(in the form attached hereto as Exhibit A) of all known and unknown claims that
he may then have against the Company or persons affiliated with the Company and
(ii) has agreed not to prosecute any legal action or other proceeding based upon
any of such claims.
(d) DEFINITION OF "CAUSE." For all purposes under this Agreement,
"Cause" shall mean:
(i) Unauthorized use or intentional disclosure of the
confidential information or trade secrets of the Company;
5.
<PAGE> 6
(ii) Any material breach of this Agreement or the Employee
Proprietary Information Agreement between the Executive and the Company;
(iii) Conviction of, or a plea of "guilty" or "no contest"
to, a felony under the laws of the United States or any state thereof;
(iv) Misappropriation of the assets of the Company or
other acts of dishonesty;
(v) Engagement in substance abuse which substantially
impairs Executive's ability to perform the duties and obligations of Executive's
employment or causes material harm to the reputation of the Company;
(vi) Personal engagement in any act of moral turpitude
that causes material harm to the reputation of the Company;
(vii) Commencement of employment with another employer
while Executive is an employee of the Company without the prior consent of the
Board of Directors; or
(VIII) Material misconduct or gross negligence in the
performance of duties assigned to the Executive under this Agreement.
7. NON-SOLICITATION AND NON-DISCLOSURE.
(a) NON-SOLICITATION. During the period commencing on the date of
this Agreement and continuing until (i) the date Executive's Employment
terminates if the Company terminates Executive's Employment for any reason other
than Cause, or (ii) the first anniversary of the date Executive's Employment
terminates if Executive resigns for any reason or the Company terminates
Executive's Employment for Cause, the Executive shall not directly or
indirectly, personally or through others, solicit or attempt to solicit (on the
Executive's own behalf or on behalf of any other person or entity) the
employment of any employee of the Company or any of the Company's affiliates.
(b) NON-DISCLOSURE. As a condition of employment the Executive
has entered into a Proprietary Information Agreement with the Company, which is
incorporated herein by reference.
8. SUCCESSORS.
(a) COMPANY'S SUCCESSORS. This Agreement shall be binding upon
any successor (whether direct or indirect and whether by purchase, lease,
merger, consolidation, liquidation or otherwise) to all or substantially all of
the Company's business and/or assets. For all purposes under this Agreement, the
term "Company" shall include any successor to the Company's business and/or
assets which becomes bound by this Agreement.
(b) EXECUTIVE'S SUCCESSORS. This Agreement and all rights of the
Executive hereunder shall inure to the benefit of, and be enforceable by, the
Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees.
6.
<PAGE> 7
9. MISCELLANEOUS PROVISIONS.
(a) NOTICE. Notices and all other communications contemplated by
this Agreement shall be in writing and shall be deemed to have been duly given
when personally delivered or when mailed by overnight courier, U.S. registered
or certified mail, return receipt requested and postage prepaid. In the case of
the Executive, mailed notices shall be addressed to him at the home address
which he most recently communicated to the Company in writing. In the case of
the Company, mailed notices shall be addressed to its corporate headquarters,
and all notices shall be directed to the attention of its Secretary.
(b) MODIFICATIONS AND WAIVERS. No provision of this Agreement
shall be modified, waived or discharged unless the modification, waiver or
discharge is agreed to in writing and signed by the Executive and by an
authorized officer of the Company (other than the Executive), No waiver by
either party of any breach of, or of compliance with, any condition or provision
of this Agreement by the other party shall be considered a waiver of any other
condition or provision or of the same condition or provision at another time.
(c) WHOLE AGREEMENT. No other agreements, representations or
understandings (whether oral or written) which are not expressly set forth in
this Agreement have been made or entered into by either party with respect to
the subject matter of this Agreement. This Agreement and the Proprietary
Information Agreement contain the entire understanding of the parties with
respect to the subject matter hereof.
(d) WITHHOLDING TAXES. All payments made under this Agreement
shall be subject to reduction to reflect taxes or other charges required to be
withheld by law.
(e) CHOICE OF LAW. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
California (except provisions governing the choice of law).
(f) SEVERABILITY. The invalidity or unenforceability of any
provision or provisions of this Agreement shall not affect the validity or
enforceability of any other provision hereof, which shall remain in full force
and effect.
(g) ARBITRATION. Any controversy or claim arising out of or
relating to this Agreement or the breach thereof, or the Executive's Employment
or the termination thereof, shall be settled in South San Francisco, California,
by arbitration in accordance with the National Rules for the Resolution of
Employment Disputes of the American Arbitration Association. The decision of the
arbitrator shall be final and binding on the patties, and judgment on the award
rendered by the arbitrator may be entered in any court having jurisdiction
thereof. The arbitration will be in lieu of a jury trial and Executive and the
Company each waive their right to a jury trial. The parties hereby agree that
the arbitrator shall be empowered to enter an equitable decree mandating
specific enforcement of the terms of this Agreement. The Company and the
Executive shall share equally all fees and expenses of the arbitrator. Both
parties hereby consent to personal jurisdiction of the state and federal courts
located in the State of California for any action or proceeding arising from or
relating to this Agreement or relating to any arbitration in which the parties
are participants.
7.
<PAGE> 8
(h) NO ASSIGNMENT. This Agreement and all rights and obligations
of the Executive hereunder are personal to the Executive and may not be
transferred or assigned by the Executive at any time. The Company may assign its
rights under this Agreement to any entity that assumes the Company's obligations
hereunder in connection with any sale or transfer of all or a substantial
portion of the Company's assets to such entity.
8.
<PAGE> 9
(i) COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, each of the parties has executed this Agreement, in
the case of the Company by its duly authorized officer, as of the day and year
first above written.
WILLIAM D. YOUNG
/s/ WILLIAM D. YOUNG
-----------------------------------------
VIROLOGIC, INC.
By:
--------------------------------------
Title:
-----------------------------------
9.
<PAGE> 10
[Exhibit A - Form of Release]
GENERAL RELEASE OF ALL CLAIMS
In consideration of the severance benefit to be paid to me by Virologic,
Inc. in accordance with the Employment Agreement entered into as of September
__, 1999, I hereby fully and forever release and discharge Virologic, Inc. and
its directors, officers, employees, agents, successors, predecessors,
subsidiaries, shareholders, employee benefit plans and assigns (together the
"Company"), from all claims and causes of action arising out of or relating in
any way to my employment with the Company, including the termination of my
employment.
1. I understand and agree that this RELEASE is a full and complete
waiver of all claims, including (without limitation) claims of wrongful
discharge, breach of contract, breach of the covenant of good faith and fair
dealing, violation of public policy, defamation, personal injury or emotional
distress and claims under Title VII of the Civil Rights Act of 1964, as amended,
the Fair Labor Standards Act, the Equal Pay Act of 1963, the Americans with
Disabilities Act, the Civil Rights Act of 1866, the Age Discrimination in
Employment Act of 1967, as amended (ADEA), the California Fair Employment and
Housing Act, the Family and Medical Leave Act or any federal or state law or
regulation relating to employment or employment discrimination. I further
understand and agree that this RELEASE is a full and complete waiver of all
claims, including (without limitation) claims under the Employee Retirement
Income Security Act of 1974 (ERISA) related to severance benefits. I further
understand that by this RELEASE I agree not to assist, encourage, institute or
cause to be instituted the filing of any administrative charge or legal
proceeding against the Company relating to employment discrimination.
2. I also hereby agree that nothing contained in this RELEASE shall
constitute or be treated as an admission of liability or wrongdoing by me or the
Company. This RELEASE does not relieve the Company of its obligations to comply
with the terms of the Employment Agreement, any stock option agreement or any
employee benefit plan or similar program in which I am a participant or eligible
for benefits.
3. I agree to abide by Company's Proprietary Information and Inventions
Agreement that I previously executed.
4. In addition, I hereby expressly waive any and all rights and benefits
conferred upon me by the provisions of Section 1542 of the Civil Code of the
State of California (or any analogous law of any other state), which states as
follows:
A general release does not extend to claims which the creditor does not
know or suspect to exist in his favor at the time of executing the release,
which, if known by him, must have materially affected his settlement with the
debtor.
5. I hereby acknowledge that I have read and understand the foregoing
RELEASE and that I sign it voluntarily and without coercion. I further
acknowledge that I was given an opportunity to consider and review this RELEASE
and to consult with an attorney of my own choosing concerning the waivers
contained in this RELEASE and that the waivers are knowing,
1.
<PAGE> 11
conscious and with full appreciation that I am forever foreclosed from pursuing
any of the rights that I waived.
6. I understand that I may have up to twenty-one (21) days after receipt
of this letter within which I may review and consider, discuss with an attorney
of my own choosing, and decide to execute or not execute it. I also understand
for a period of seven (7) days after I sign this RELEASE, I may revoke this
RELEASE and that the RELEASE will not become effective until seven (7) days
after I sign it, and only then if I do not revoke it. In order to revoke this
agreement, I must deliver to the Chairman of the Board of Virologic, Inc. within
seven (7) days after I have executed this RELEASE, a letter stating that I am
revoking it.
7. I understand that if I choose to revoke this RELEASE within seven (7)
days after I signed it, I will not receive any severance benefit and the RELEASE
will have no effect.
8. Before signing my name to this RELEASE, I state that:
[ ] I have read it,
[ ] I understand it,
[ ] I know that I am giving up important rights,
[ ] I am aware of my right to consult an attorney before signing it, and
[ ] I have signed it knowingly and voluntarily.
Dated:
--------------------------- -----------------------------------------
Signature
-----------------------------------------
Print Full Name
2.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the references to our firm under the captions "Selected Financial
Data" and "Experts" and to the use of our report dated February 4, 2000, except
as to Notes 1 and 9, for which the date is February _____, 2000, in the
Registration Statement (Form S-1) and related Prospectus of ViroLogic, Inc. for
the registration of ______________shares of its common stock.
Palo Alto, California
February 22, 2000
___________________________
The foregoing consent is in the form that will be signed upon the completion of
the 1-for-2 reverse stock split described in Note 1 and Note 9 to the
financial statements.
/s/ ERNST & YOUNG LLP
Palo Alto, California
February 22, 2000
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