<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 18, 2000
REGISTRATION NO. 333-35782
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
ARGONAUT TECHNOLOGIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<S> <C> <C>
DELAWARE 8731 94-3216714
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
887 INDUSTRIAL ROAD, SUITE G
SAN CARLOS, CALIFORNIA 94070
(650) 598-1350
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
DAVID P. BINKLEY, PH.D.
PRESIDENT AND CHIEF EXECUTIVE OFFICER
ARGONAUT TECHNOLOGIES, INC.
887 INDUSTRIAL ROAD, SUITE G
SAN CARLOS, CALIFORNIA 94070
(650) 598-1350
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
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Copies to:
<TABLE>
<S> <C>
Michael J. O'Donnell Donald J. Murray
Richard L. Picheny Dewey Ballantine LLP
Wilson Sonsini Goodrich & Rosati 1301 Avenue of the Americas
Professional Corporation New York, New York 10019
650 Page Mill Road (212) 259-8000
Palo Alto, California 94304
(650) 493-9300
</TABLE>
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
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If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, 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. [ ]
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS 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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The information in this prospectus is not complete and may be changed. We
may not sell these securities until the registration statement filed with
the Securities and Exchange Commission is effective. This preliminary
prospectus is not an offer to sell these securities and is not soliciting
an offer to buy these securities in any state where the offer or sale is
not permitted.
PRELIMINARY PROSPECTUS Subject to completion dated May 18, 2000
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Shares
[Agronanut Logo]
Common Stock
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This is our initial public offering of shares of our common stock. No public
market currently exists for our common stock. We expect the public offering
price to be between $ and $ per share.
We have applied to have our common stock listed on the Nasdaq National Market
under the symbol "AGNT."
BEFORE BUYING ANY SHARES YOU SHOULD READ THE DISCUSSION OF MATERIAL RISKS OF
INVESTING IN OUR COMMON STOCK IN "RISK FACTORS" BEGINNING ON PAGE 8.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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<CAPTION>
PER SHARE TOTAL
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<S> <C> <C>
Public offering price $ $
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Underwriting discounts and commissions $ $
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Proceeds, before expenses, to Argonaut Technologies, Inc. $ $
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</TABLE>
The underwriters may also purchase up to shares of common stock from
us at the public offering price, less the underwriting discounts and
commissions, within 30 days from the date of this prospectus. The underwriters
may exercise this option only to cover over-allotments, if any. If the
underwriters exercise the option in full, the total underwriting discounts and
commissions will be $ , and the total proceeds, before expenses, to
Argonaut Technologies, Inc. will be $ .
The underwriters are offering the common stock as set forth under
"Underwriting." Delivery of the shares will be made on or about ,
2000.
WARBURG DILLON READ LLC
ING BARINGS
SG COWEN
<PAGE> 3
Base of illustration:
Fold out - pages 2-3
Title: INNOVATIVE TECHNOLOGY THAT ENABLES CHEMISTS TO IMPROVE PRODUCTIVITY AND
ACCELERATE DRUG DEVELOPMENT
Inside Front Cover:
There are a series of five images placed across the page illustrating Argonaut's
product. The products are grouped by product line (from left to right) Trident,
Quest, Surveyor, Endeavor and Reagents.
Caption: Trident Library Synthesis
Sub-header: Trident Library Synthesizer
- Lead optimization
- Automated parallel library synthesis
- Initial commercial shipment: 1998
Sub-header: Trident Workstation
- Lead optimization
- Semi-automated parallel library synthesis
- Initial commercial shipment: 1999
Sub-header: Trident Sample Processing Station
- Lead optimization
- Automated parallel work-up and purification
- Initial commercial shipment: 2000
Caption: Quest, Parallel Organic Synthesis
Sub-header: Quest 210
- Pre-clinical development
- Small-scale, semi-automated parallel synthesis, work-up and
purification
- Initial commercial shipment: 1997
Sub-header: Quest 205
- Pre-clinical development
- Large-scale, semi-automated parallel synthesis, work-up and
purification
- Initial commercial shipment: 1998
Caption: FirstMate, Manual Parallel Organic Synthesis
- Pre-clinical development
- Entry-level, small-scale, manual parallel synthesis
- Initial commercial shipment: 1999
Caption: Surveyor, Parallel Reaction Screening for process development
- Clinical development
- Automated parallel chemistry optimization and analysis
- Initial commercial shipment: 2000
Caption: Endeavor, Parallel Pressurized Gaseous Reactions for Materials
Science
- Clinical development
- Semi-automated parallel high-pressure reaction screening
- Initial commercial shipment: 2000
Caption: Reagents, Accelerated Synthesis & Purification.
Sub-header: ArgoGel
- Lead optimization
- Compound synthesis
- Initial commercial shipment: 1996
Sub-header: ArgoPore
- Reagents used lead optimization
- Compound synthesis
- Initial commercial shipment: 1997
Sub-header: Solution Phase Toolbox & Polymer Reagents
- Pre-clinical development
- Compound synthesis, work-up and purification
- Initial commercial shipment: 1998
<PAGE> 4
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Through and including , 2000 (the 25th day after commencement of
this offering), federal securities law may require all dealers selling shares of
our common stock, whether or not participating in this offering, to deliver a
prospectus. This delivery requirement is in addition to the obligation of
dealers to deliver a prospectus when acting as underwriters and with respect to
their unsold allotments or subscriptions.
TABLE OF CONTENTS
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Prospectus summary.................... 3
The offering.......................... 6
Summary financial data................ 7
Risk factors.......................... 8
Forward-looking information........... 16
Use of proceeds....................... 17
Dividend policy....................... 17
Capitalization........................ 18
Dilution.............................. 19
Selected financial data............... 20
Management's discussion and analysis
of financial condition and results
of operations....................... 22
Business.............................. 28
Management............................ 42
Related party transactions............ 51
Principal stockholders................ 53
Description of capital stock.......... 55
Shares eligible for future sale....... 59
Underwriting.......................... 61
Legal matters......................... 63
Experts............................... 63
Where you can find more information... 63
Index to financial statements......... F-1
</TABLE>
ArgoGel(R), Argonaut Technologies(R), ArgoCaps(R), ArgoPore(R), Nautilus(R),
Trident(R), ArgoScoop(TM), Quest(TM), Reaction Cassette(TM), Surveyor(TM) and
Firstmate(TM) are trademarks of Argonaut Technologies, Inc. This prospectus also
refers to trademarks and trade names of other organizations.
Endeavor(TM) is a trademark of Symyx Technologies, Inc.
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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 you should
consider before investing in our common stock. You should read the entire
prospectus carefully including "Risk factors" and the financial statements and
related notes before making an investment decision.
OUR BUSINESS
We are a pioneer in the development, manufacturing and marketing of innovative
products that enable chemists to use high speed parallel synthesis for the
development of new drugs. Parallel synthesis is a process by which chemists
create multiple compounds. Our products include a variety of parallel chemical
synthesizers and reagents. Our products enable chemists to increase their
productivity, accelerate the drug development process and reduce costs.
Currently, our products are used for chemistry development by chemists in the
pharmaceutical, biotechnology, life sciences and chemical research fields
worldwide.
Advances in the drug discovery process have resulted in a significant increase
in the number of new tools and targets for the development of new drugs, or drug
targets. However, unlike drug discovery, drug development lacks the
technological advances and automation that would allow efficient utilization of
new targets. As a result, many companies are seeking innovative and
cost-effective tools and technologies that would be used to explore the
increasing number of targets for the potential development of new drugs. Our
instruments enable parallel synthesis and automate many of the most
labor-intensive steps of chemistry development. Through automation, chemists are
able to perform multiple experiments under a variety of conditions in a fraction
of the time it would take to perform the same experiments using traditional
chemistry development methods. We believe that our products will enable
companies to develop new drugs in a more productive, faster and more
cost-effective manner than by using traditional chemistry development methods.
Therefore companies, through the use of our products, may capitalize on the
wealth of potential new drug targets being generated by the drug discovery
process.
We began marketing our first product in 1996. Currently, we have eight
instrument product offerings and more than 40 reagent product offerings. Through
March 31, 2000, we have sold our products to more than 545 customers in the
pharmaceutical, biotechnology, life sciences and chemical research industries
and have placed more than 640 instruments worldwide. In addition, we have a
track record of quickly and effectively developing solutions to our customers'
problems. In order to ensure that our products meet the specific needs of
chemists throughout the research community, we have formed formal consortia and
informal relationships with teams of industry leaders and academic institutions
for each of our instruments released to date. Through this process we have
developed innovative products that have extensive customer input, validation and
testing prior to commercial introduction.
OUR MARKET OPPORTUNITY
The life sciences research industry is undergoing fundamental change resulting
principally from the explosive growth in gene discovery and the increasing
demand for greater efficiency in the drug discovery and development process.
Industry experts estimate that in the year 2000 the life sciences research
industry will spend more than $70 billion on drug discovery research and
development. Advances in genomics, combinatorial chemistry and high throughput
screening have significantly enhanced the discovery process. Genomics, the
mapping of the human DNA sequence and the study of the role genes play in
disease, is creating an unprecedented wealth of information concerning potential
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3
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drug targets. Industry sources estimate that sequencing of the human genome will
provide an estimated 3,000 to 10,000 relevant new drug targets over the next ten
years, compared to the approximately 500 targets that have been explored thus
far. Combinatorial chemistry is the rapid synthesis of large collections of
potential drug candidates. Through combinatorial chemistry, chemists can
generate chemical collections, or libraries, consisting of millions of compounds
that researchers can screen against drug targets through the use of high
throughput screening technologies. Chemists have been able to make these
advances in drug discovery by using new tools that simplify, automate and
accelerate the drug discovery process. Through widespread use of these tools
chemists are discovering a large number of new drug candidates that are ready
for the drug development process. However, the pharmaceutical industry does not
have sufficient tools and resources to fully exploit the opportunities presented
by advances in drug discovery due to the technological limitations of
traditional drug development, or chemistry development.
Traditional chemistry development methods have the following limitations:
+ traditional methods are time consuming and inefficient, due to the
labor-intensive nature of this process;
+ traditional methods require compounds to be synthesized one at a time. This
results in long drug development timelines, which delay product
commercialization and reduce the exclusivity period provided by patent
protection;
+ traditional methods are expensive due to the time and labor required of a
chemist to produce a single compound;
+ traditional methods limit the number of compounds synthesized, which can lead
to the selection of sub-optimal drug candidates, often resulting in drug
candidate failures;
+ chemists lack flexible tools and systems necessary to easily perform the wide
variety of complex experiments required for chemistry development; and
+ traditional methods are often difficult to employ and require skilled,
scientific personnel.
THE ARGONAUT SOLUTION
We design, manufacture and market instruments and reagents that increase the
productivity of chemists, thereby accelerating the drug development process. Our
products enable the rapid synthesis of a wide range of compounds at a reduced
cost. We intend to promote our products as the laboratory standard for chemists
and the industry standard for companies seeking more efficient methods of
addressing their increasing drug development needs. We believe our technology
provides the following key benefits compared to traditional chemistry
development methods:
+ increased productivity;
+ reduced drug development timelines;
+ reduced cost;
+ improved intellectual property positions;
+ flexibility; and
+ ease of use.
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Our strategy is to become the leading provider of productivity and quality
enhancing tools for all stages of the drug development process. In order to
achieve this goal, we have implemented the following strategy:
+ focus initially on industry leaders within the pharmaceutical market;
+ expand our high-value reagent business;
+ continue to establish product development consortia and collaborations;
+ leverage global customer relationships through direct sales;
+ acquire complementary businesses; and
+ expand into new markets.
EXECUTIVE OFFICES
Our principal executive offices are located at 887 Industrial Road, Suite G, San
Carlos, California 94070, and our telephone number is (650) 598-1350. Our
corporate website is www.argotech.com. We do not intend the information
contained on our website to be part of this prospectus. We were incorporated in
Delaware in November 1994.
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5
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The offering
The following information assumes that the underwriters do not exercise the
over-allotment option granted to them to purchase additional shares in the
offering.
Common stock we are offering........ shares
Common stock to be outstanding after
the offering........................ shares
Proposed Nasdaq National Market
symbol.............................. AGNT
Use of proceeds..................... To fund our operations, including
continued development and manufacturing
of existing products and research and
development of additional products,
expanding our facilities to be able to
meet the needs of our growing business,
repayment of debt and for other working
capital and general corporate purposes.
See "Use of proceeds."
Unless we indicate otherwise, when analyzing the information in this prospectus,
you should assume that all outstanding shares of our convertible preferred stock
convert into 11,339,268 shares of our common stock upon the closing of this
offering.
The number of shares of common stock to be outstanding after the offering in the
table above is based on the number of shares outstanding as of March 31, 2000,
excluding:
+ 2,005,589 shares issuable upon the exercise of options at a weighted-average
exercise price of $0.67 per share;
+ 141,665 shares issuable upon the exercise of warrants at a weighted-average
exercise price of $4.31 per share; and
+ a total of 3,138,697 shares available for future grant under our 1995
Incentive Stock Plan, 2000 Incentive Stock Plan and 2000 Employee Stock
Purchase Plan.
In addition, we have agreed to issue an additional shares if the
underwriters exercise their over-allotment option in full, which we describe in
"Underwriting." If the underwriters exercise this option in full,
shares of common stock will be outstanding after this offering.
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Summary financial data
The pro forma net loss per share and shares used in computing pro forma net loss
per share are calculated as if all of our convertible preferred stock was
converted into shares of our common stock on the date of their issuance. The pro
forma as adjusted balance sheet below reflects the conversion of each
outstanding share of preferred stock into one share of common stock upon the
closing of this offering and the issuance and sale of shares of our
common stock in this offering at an assumed price to the public of $
per share, after deducting the underwriting discounts and commissions and
estimated offering expenses, and our receipt of the net proceeds from that sale.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31,
YEAR ENDED DECEMBER 31, (UNAUDITED)
STATEMENT OF OPERATIONS DATA 1997 1998 1999 1999 2000
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(In thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Net sales....................................... $ 5,826 $12,076 $10,558 $ 2,981 $ 3,564
Costs and expenses:
Costs of sales................................ 3,155 5,608 4,689 1,241 1,399
Research and development...................... 4,292 4,922 4,180 975 1,261
Selling, general and administrative........... 4,795 7,108 9,125 1,990 2,931
------- ------- ------- -------- --------
Total costs and expenses.................... 12,242 17,638 17,994 4,206 5,591
------- ------- ------- -------- --------
Loss from operations............................ (6,416) (5,562) (7,436) (1,225) (2,027)
Interest and other income (expenses), net....... 216 (94) (167) (172) 10
------- ------- ------- -------- --------
Net loss........................................ $(6,200) $(5,656) $(7,603) $ (1,397) $ (2,017)
======= ======= ======= ======== ========
Net loss per share, basic and diluted........... $ (3.97) $ (2.91) $ (3.12) $ (0.60) $ (0.76)
======= ======= ======= ======== ========
Weighted-average shares used in computing net
loss per share, basic and diluted............. 1,560 1,943 2,434 2,326 2,671
Pro forma net loss per share, basic and
diluted....................................... $ (0.59) $ (0.14)
======= ========
Weighted-average shares used in computing pro
forma net loss per share, basic and diluted... 12,799 14,010
</TABLE>
<TABLE>
<CAPTION>
AS OF MARCH 31, 2000
(UNAUDITED)
PRO FORMA
BALANCE SHEET DATA ACTUAL PRO FORMA AS ADJUSTED
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(In thousands)
<S> <C> <C> <C>
Cash, cash equivalents and short-term investments........... $ 9,137 $ 9,137 $
Working capital............................................. 7,305 7,305
Total assets................................................ 16,510 16,510
Long term obligations, less current portion................. 1,652 1,652 1,652
Accumulated deficit......................................... (28,935) (28,935) (28,935)
Total stockholders' equity.................................. 7,652 7,652
</TABLE>
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Risk factors
You should carefully consider the risks described below together with all of the
other information included in this prospectus before making an investment
decision. If any of the following risks actually occurs, our business, financial
condition or results of operations could be harmed. In such an event, the
trading price of our common stock could decline, and you may lose part or all of
your investment.
RISKS RELATED TO OUR BUSINESS
WE HAVE A HISTORY OF OPERATING LOSSES, AND WE MAY NEVER ACHIEVE OR SUSTAIN
PROFITABILITY.
We have incurred operating losses and negative cash flow from operations since
our inception. As of March 31, 2000, we had an accumulated deficit of $28.9
million. We recorded net losses of $6.2 million in 1997, $5.7 million in 1998,
$7.6 million in 1999 and $2.0 million for the three months ended March 31, 2000.
We expect to continue to incur operating and net losses and negative cash flow
from operations, which may increase, for the foreseeable future due in part to
anticipated increases in expenses for research and development and expansion of
our sales and marketing capabilities. We may never become profitable.
IF OUR PRODUCTS DO NOT BECOME WIDELY USED IN THE LIFE SCIENCES INDUSTRY, IT IS
UNLIKELY THAT WE WILL EVER BECOME PROFITABLE.
Pharmaceutical, biotechnology and life science companies have historically
performed chemistry development using traditional laboratory methods. To date,
our products have not been widely adopted by the life sciences industry. The
commercial success of our products will depend upon the adoption of these
products as a method to develop chemical compounds for the life sciences and
other industries. In order to be successful, our products must meet the
performance and pricing requirements for chemistry development within the life
sciences and other industries. Market acceptance will depend on many factors,
including our ability to:
+ convince prospective customers that our products are a cost-effective
alternative to traditional methods and other technologies that may be
introduced for chemistry development;
+ manufacture products in sufficient quantities with acceptable quality and at
an acceptable cost; and
+ install and service sufficient quantities of our products.
If we cannot achieve these objectives, our products will not gain market
acceptance.
OUR PRODUCT DEVELOPMENT EFFORTS MAY NOT PRODUCE COMMERCIALLY VIABLE PRODUCTS.
We intend to devote significant personnel and financial resources to research
and development activities to develop new products. Such products may not be
successfully developed, and we may never realize any benefits from such research
and development activities. Even if we successfully develop new products, such
products may not be commercially viable within the life sciences industry. Our
ability to increase our revenues and achieve and sustain profitability is
dependent upon our ability to successfully develop new products that will
achieve market acceptance.
BECAUSE WE RECEIVE REVENUES PRINCIPALLY FROM LIFE SCIENCE AND CHEMICAL
COMPANIES, THE CAPITAL SPENDING POLICIES OF THESE ENTITIES HAVE A SIGNIFICANT
EFFECT ON THE DEMAND FOR OUR PRODUCTS.
Our customers include pharmaceutical, biotechnology, life science and other
chemical research companies, and the capital spending policies of these entities
can have a significant effect on the
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RISK FACTORS
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demand for our products. These policies are based on a wide variety of factors,
including the resources available for purchasing research equipment, the
spending priorities among various types of research equipment and the policies
regarding capital expenditures. In particular, the volatility of the public
stock market for biotechnology companies has at certain times significantly
impacted their ability to raise capital, which has directly affected their
capital spending budgets. In addition, continued consolidation within the
pharmaceutical industry will likely delay and may potentially reduce capital
spending by pharmaceutical companies involved in such consolidations. Any
decrease or delay in capital spending by life science companies could cause our
revenues to decline and harm our profitability.
OUR PRODUCTS HAVE LENGTHY SALES CYCLES, WHICH COULD CAUSE OUR OPERATING RESULTS
TO FLUCTUATE SIGNIFICANTLY FROM QUARTER TO QUARTER.
Our ability to obtain customers for our products depends in significant part
upon the perception that our products can help accelerate efforts in drug
development. The sale of many of our products typically involves a significant
technical evaluation and commitment of capital by customers. Accordingly, the
sales cycles of many of our products are lengthy and subject to a number of
significant risks that are beyond our control, including customers' budgetary
constraints and internal acceptance reviews. Due to this lengthy and
unpredictable sales cycle, our revenues could fluctuate significantly from
quarter to quarter. In particular, operating results in the first and third
quarters have historically been depressed. A large portion of our expenses,
including expenses for facilities, equipment and personnel, are relatively
fixed. Accordingly, if revenues decline or do not grow as we anticipate, we
might not be able to correspondingly reduce our operating expenses. Our failure
to achieve our anticipated levels of revenues could significantly harm our
operating results for a particular fiscal period. Due to the possibility of
fluctuations in our operating results, we believe that quarter-to-quarter
comparisons of our operating results are not always a good indication of our
future performance.
OUR DIRECT SALES FORCE MAY NOT BE SUFFICIENTLY LARGE OR KNOWLEDGEABLE TO
SUCCESSFULLY ADDRESS THE MARKET FOR OUR PRODUCTS.
We sell a major portion of our products through our own sales force. Our future
profitability will depend in part on our ability to expand our direct sales and
marketing force, which we may not be able to do. Our products are technical in
nature. As a result, we believe it is necessary that our direct sales force
includes people with scientific backgrounds and expertise. Competition for such
employees is intense. We may not be able to attract and retain qualified sales
people or be able to build an efficient and effective sales and marketing force.
Failure to attract or retain qualified sales people or to build an efficient and
effective sales and marketing force could negatively impact sales of our
products, thus reducing our revenues and profitability.
FAILURE TO EXPAND OUR INTERNATIONAL SALES AS WE INTEND WOULD REDUCE OUR ABILITY
TO BECOME PROFITABLE.
To achieve our sales objectives, we will need to sell a significant number of
our products outside of the United States. A successful international effort
will require us to expand our direct sales force to conduct international
operations and develop relationships with international dealers and
distributors. We may not be able to expand our sales force or identify, attract
or retain suitable international dealers and distributors. As a result, we may
be unsuccessful in our international expansion efforts. Furthermore, expansion
into international markets will require us to continue to establish and expand
foreign operations and hire additional personnel to run these operations.
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RISK FACTORS
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International operations involve a number of risks and burdens not typically
present in domestic operations, including:
+ preferences of certain customers to purchase goods manufactured in their own
country or geographic market;
+ difficulties in staffing and managing foreign operations;
+ costs and risks of deploying systems in foreign countries;
+ licenses, tariffs and other trade barriers;
+ changes in regulatory requirements;
+ potentially adverse tax consequences;
+ the burden of complying with a wide variety of complex foreign laws and
treaties; and
+ political and economic instability.
Our international operations will also be subject to the risks associated with
the imposition of legislation and regulations relating to the import or export
of high technology products. We cannot predict whether tariffs or restrictions
upon the exportation or importation of our products will be implemented by the
United States or other countries.
WE MAY LOSE OUR EXCLUSIVE LICENSE TO PROPRIETARY TECHNOLOGY INCORPORATED INTO
OUR PRODUCTS.
We have developed some of our products based on proprietary technology
originally developed by third parties. We currently have exclusive licenses to
use such technology in our products which are subject to termination in certain
events. In particular, our license to proprietary technology belonging to Symyx
which is incorporated into our Endeavor product is subject to termination at
Symyx's or our option upon six months prior notice at any time after December
31, 2000. If our licenses to any such technology, or any similar licenses we may
enter into in the future, are terminated we may be unable to continue selling
such products and our revenues would decline.
WE MAY HAVE DIFFICULTY MANAGING OUR GROWTH, WHICH COULD DAMAGE OUR ABILITY TO
INCREASE OUR REVENUES AND BECOME PROFITABLE.
Our growth has placed significant demands on our management and other resources.
Our future success will depend on our ability to manage our growth, including:
+ continuing to train, motivate, manage and retain our existing employees and
to attract and assimilate new employees;
+ manufacturing on a timely basis increasing quantities of current products and
new products under development while maintaining product quality;
+ expanding and improving our domestic and international sales and marketing
capabilities; and
+ developing and improving our operational, financial, accounting and other
internal systems and controls consistent with our pace of growth.
If we are unable to manage our growth, our ability to increase our revenues and
become profitable could be damaged.
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RISK FACTORS
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WE ARE HIGHLY DEPENDENT ON THE PRINCIPAL MEMBERS OF OUR MANAGEMENT TEAM AND
OTHER KEY EMPLOYEES AND ON OUR ABILITY TO RECRUIT ADDITIONAL PERSONNEL.
We are highly dependent on the principal members of our management team and
scientific staff. The loss of the services of any of these persons could delay
or reduce our product development and commercialization efforts. None of the
principal members of our management team or our scientific staff have entered
into employment agreements with us. In addition, we will require additional
personnel in the areas of chemistry research, product development, manufacturing
and marketing, and finance and administration. In particular, it is difficult to
attract and retain qualified individuals with the requisite experience in
chemistry. We are currently searching for a Chief Financial Officer. We may not
be able to attract and retain the requisite personnel, which could seriously
harm our ability to manage our business.
IF WE NEED BUT ARE UNABLE TO OBTAIN ADDITIONAL FUNDING TO SUPPORT OUR
OPERATIONS, WE WOULD HAVE TO REDUCE OR CEASE OPERATIONS OR ATTEMPT TO SELL ALL
OR A PART OF OUR OPERATIONS.
We anticipate that our existing cash and cash equivalents, together with the net
proceeds of this offering, will be sufficient to fund our currently planned
operations through at least May 2002. However, this expectation is based on our
current operating plan, which could change as a result of many factors, and we
could require additional funding sooner than anticipated. To the extent our
capital resources are insufficient to meet our future capital requirements, we
will have to raise additional funds to continue the development and
commercialization of our products. Funds may not be available on favorable
terms, if at all. To the extent that we raise additional capital through the
sale of equity, the issuance of those securities could result in dilution to our
stockholders. Moreover, incurring debt financing could result in a substantial
portion of our operating cash flow being dedicated to the payment of principal
and interest on such indebtedness, could render us more vulnerable to
competitive pressures and economic downturns and could impose restrictions on
our operations. If adequate funds are not available, we may be required to
curtail operations significantly.
BECAUSE WE HAVE LIMITED SOURCES OF PRODUCTION AND SUPPLIERS, OUR ABILITY TO
PRODUCE AND SUPPLY OUR PRODUCTS COULD BE IMPAIRED.
We outsource most of the assembly of our products to vendors. Our reliance on
our outside vendors exposes us to risks including:
+ the possibility that one or more of our vendors could terminate their
services at any time without notice;
+ reduced control over pricing, quality and timely delivery, due to the
difficulties in switching to alternative vendors; and
+ the potential delays and expenses of seeking alternative sources of
manufacturing services.
Consequently, in the event that components from our suppliers or work performed
by our vendors are delayed or interrupted for any reason, our ability to produce
and supply our products could be impaired.
IF WE CANNOT PROVIDE QUALITY CUSTOMER SERVICE, WE COULD LOSE CUSTOMERS AND OUR
OPERATING RESULTS COULD SUFFER.
The introduction of our products to new customers and the ongoing customer
support for installed products can be complex. Accordingly, we need highly
trained customer support and technical personnel. Our inability to attract,
train or retain the number of highly qualified customer support and technical
services personnel that our business needs may cause our customer relations to
suffer. We are
- --------------------------------------------------------------------------------
11
<PAGE> 14
RISK FACTORS
- --------------------------------------------------------------------------------
currently expanding these areas and will need to increase our staff further to
support expected growth. Hiring customer support and technical personnel is very
competitive in our industry. There are a limited number of people available with
the necessary technical skills and understanding of our products.
IF WE MAKE ANY ACQUISITIONS, WE WILL INCUR A VARIETY OF COSTS AND MAY NEVER
REALIZE THE ANTICIPATED BENEFITS.
We may attempt to acquire businesses, technologies, services or products that we
believe are a strategic fit with our business. We currently have no commitments
or agreements with respect to any material acquisitions. Integrating any
acquired business, technology, service or product with our existing operations
may result in operating difficulties and expenditures and may absorb significant
management attention that would otherwise be available for ongoing development
of our business. Moreover, we may never realize the anticipated benefits of any
acquisition. Future acquisitions could result in potentially dilutive issuances
of equity securities, the incurrence of debt, contingent liabilities and
amortization expenses related to goodwill and other intangible assets.
WE MAY LOSE MONEY WHEN WE EXCHANGE FOREIGN CURRENCY RECEIVED FROM INTERNATIONAL
SALES INTO U.S. DOLLARS.
A portion of our business is conducted in currencies other than the U.S. dollar.
We recognize foreign currency gains or losses arising from our operations in the
period incurred. As a result, currency fluctuations between the U.S. dollar and
the currencies in which we do business will cause us to incur foreign currency
translation gains and losses. We cannot predict the effects of exchange rate
fluctuations upon our future operating results because of the number of
currencies involved, the variability of currency exposure and the potential
volatility of currency exchange rates. We do not currently engage in foreign
exchange hedging transactions to manage the risk of our foreign currency
exposure.
RISKS RELATED TO OPERATING IN OUR INDUSTRY
THE LIFE SCIENCES INDUSTRY IS HIGHLY COMPETITIVE AND SUBJECT TO RAPID
TECHNOLOGICAL CHANGE, AND WE MAY NOT HAVE THE RESOURCES NECESSARY TO
SUCCESSFULLY COMPETE.
We compete with companies in the United States and abroad that are engaged in
the development and production of similar products. We face competition
primarily from the following three sectors:
+ companies marketing conventional products based on traditional chemistry
methodologies;
+ pharmaceutical companies developing their own instruments; and
+ companies marketing products based upon parallel synthesis and other
innovative technologies.
Many of our competitors have access to greater financial, technical, research,
marketing, sales, distribution, service and other resources than we do. We face,
and will continue to face, intense competition from organizations serving the
life sciences industry that are developing or marketing competing products and
technologies. These organizations may develop products or technologies that are
superior to our products or technologies in terms of performance, cost or both.
We may need to develop new applications for our products to remain competitive.
Our present or future products could be rendered obsolete or uneconomical by
technological advances by one or more of our current or future competitors. In
addition, the introduction or announcement of new products by us or by others
could result in a delay of or decrease in sales of existing products, as
customers
- --------------------------------------------------------------------------------
12
<PAGE> 15
RISK FACTORS
- --------------------------------------------------------------------------------
evaluate these new products. Our future success will depend on our ability to
compete effectively against current technology as well as to respond effectively
to technological advances.
OUR SUCCESS WILL DEPEND PARTLY ON OUR ABILITY TO OPERATE WITHOUT INFRINGING ON
OR MISAPPROPRIATING THE PROPRIETARY RIGHTS OF OTHERS.
We may be sued for infringing on the intellectual property rights of others. In
addition, we may find it necessary, if threatened, to initiate a lawsuit seeking
a declaration from a court that we do not infringe on the proprietary rights of
others or that their rights are invalid or unenforceable. If we do not prevail
in any litigation, in addition to any damages we might have to pay, we could be
required to stop the infringing activity or obtain a license. Any required
license may not be available to us on acceptable terms, or at all. In addition,
some licenses may be nonexclusive, and therefore, our competitors may have
access to the technology licensed to us. If we fail to obtain a required license
or are unable to design around a patent, we may be unable to sell some of our
products, which could harm our ability to compete and result in a decline in our
revenues.
THE INTELLECTUAL PROPERTY RIGHTS WE RELY UPON TO PROTECT THE TECHNOLOGY
UNDERLYING OUR PRODUCTS MAY NOT BE ADEQUATE, WHICH COULD ENABLE THIRD PARTIES TO
USE OUR TECHNOLOGY OR VERY SIMILAR TECHNOLOGY AND COULD REDUCE OUR ABILITY TO
COMPETE IN THE MARKET.
Our success will depend on our ability to obtain and enforce patents on our
technology and to protect our trade secrets. The patent position of companies
like ours generally is highly uncertain and involves complex legal and factual
questions. Any patents we own may not afford meaningful protection for our
technology and products. Others may challenge our patents and, as a result, our
patents could be narrowed, invalidated or rendered unenforceable. In addition,
our current and future patent applications may not result in the issuance of
patents in the United States or foreign countries. There is a substantial
backlog of patent applications at the U.S. Patent and Trademark Office, and the
approval or rejection of patent applications may take several years. Moreover,
competitors may develop products similar to ours that are not covered by our
patents.
We try to protect our unpatented trade secrets by requiring our employees,
consultants and advisors to execute confidentiality agreements. However, we
cannot guarantee that these agreements will provide us with adequate protection
against improper use or disclosure of our trade secrets. In addition, in some
situations, these agreements may conflict with, or be subject to, the rights of
third parties with whom our employees, consultants or advisors have prior
employment or consulting relationships. Further, others may independently
develop substantially equivalent proprietary information and techniques, or
otherwise gain access to our trade secrets. If we are unable to protect our
proprietary information and techniques, our ability to exclude certain
competitors from the market will be limited.
WE MAY BE INVOLVED IN LAWSUITS TO PROTECT OR ENFORCE OUR INTELLECTUAL PROPERTY
RIGHTS, WHICH MAY BE EXPENSIVE. IF WE LOSE SUCH LAWSUITS, WE MAY LOSE THE
BENEFIT OF SOME OF OUR INTELLECTUAL PROPERTY RIGHTS, THE LOSS OF WHICH MAY
INHIBIT OR REMOVE OUR ABILITY TO EXCLUDE CERTAIN COMPETITORS FROM THE MARKET.
In order to protect or enforce our patent rights, we may have to initiate legal
proceedings against third parties, such as infringement suits or interference
proceedings. We may also provoke third parties to assert claims against us,
which could invalidate our patents or result in damages to us. Intellectual
property litigation is costly, and, even if we prevail, the cost of such
litigation could affect our profitability. In addition, litigation is time
consuming and could divert management attention and resources away from our
business.
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13
<PAGE> 16
RISK FACTORS
- --------------------------------------------------------------------------------
RISKS RELATED TO THIS OFFERING
OUR STOCK PRICE COULD BE VOLATILE, AND YOUR INVESTMENT COULD SUFFER A DECLINE IN
VALUE.
The trading price of our common stock is likely to be highly volatile and could
be subject to wide fluctuations in price in response to various factors, many of
which are beyond our control, including:
+ actual or anticipated variations in quarterly operating results;
+ failure to achieve, or changes in, financial estimates by securities
analysts;
+ announcements of new products or services or technological innovations by us
or our competitors;
+ conditions or trends in the pharmaceutical, biotechnology and life science
industries;
+ announcements by us of significant acquisitions, strategic partnerships,
joint ventures or capital commitments;
+ additions or departures of key personnel;
+ sales of our common stock; and
+ developments regarding our patents or other intellectual property or that of
our competitors.
In addition, the stock market in general, and the Nasdaq National Market and the
market for technology companies in particular, have experienced significant
price and volume fluctuations that have often been unrelated or disproportionate
to the operating performance of those companies. Further, there has been
particular volatility in the market prices of securities of life science
companies. These broad market and industry factors may seriously harm the market
price of our common stock, regardless of our operating performance. In the past,
following periods of volatility in the market price of a company's securities,
securities class action litigation has often been instituted. A securities class
action suit against us could result in substantial costs, potential liabilities
and the diversion of management's attention and resources.
THERE MAY NOT BE AN ACTIVE, LIQUID TRADING MARKET FOR OUR COMMON STOCK.
Prior to this offering, there has been no public market for our common stock. An
active trading market for our common stock may not develop following this
offering. You may not be able to sell your shares quickly or at the market price
if trading in our stock is not active. The initial public offering price will be
determined by negotiations between us and representatives of the underwriters
based upon a number of factors. The initial public offering price may not be
indicative of prices that will prevail in the trading market. See "Underwriting"
for more information regarding the factors considered in setting the initial
public offering price.
OUR PRINCIPAL STOCKHOLDERS, DIRECTORS AND EXECUTIVE OFFICERS WILL OWN
APPROXIMATELY % OF OUR COMMON STOCK, WHICH MAY PREVENT NEW INVESTORS FROM
INFLUENCING CORPORATE DECISIONS.
After this offering, our stockholders who currently own over 5% of our common
stock, our directors and executive officers will beneficially own approximately
% of our outstanding common stock or % if the underwriters exercise
their over-allotment option in full. These stockholders will be able to exercise
significant influence over all matters requiring stockholder approval, including
the election of directors and the approval of significant corporate
transactions. This concentration of ownership may also delay or prevent a change
in control of us even if beneficial to our other stockholders. See "Principal
stockholders" for additional information on the concentration of ownership of
our common stock.
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14
<PAGE> 17
RISK FACTORS
- --------------------------------------------------------------------------------
THE LARGE NUMBER OF SHARES OF OUR COMMON STOCK ELIGIBLE FOR PUBLIC SALE AFTER
THIS OFFERING COULD CAUSE OUR STOCK PRICE TO DECLINE.
The market price of our common stock could decline as a result of sales of
substantial amounts of our common stock in the public market after the closing
of this offering, or the perception that these sales could occur. In addition,
these factors could make it more difficult for us to raise funds through future
offerings of common stock. There will be shares of common stock
outstanding immediately after this offering, or shares if the
underwriters exercise their over-allotment option in full, based on the number
of shares outstanding at March 31, 2000. All of the shares sold in the offering
will be freely transferable without restriction or further registration under
the Securities Act, except for any shares purchased by our "affiliates," as
defined in Rule 144 of the Securities Act. The remaining shares of common stock
outstanding will be "restricted securities" as defined in Rule 144. These shares
may be sold in the future without registration under the Securities Act to the
extent permitted by Rule 144 or other exemptions under the Securities Act.
After this offering, we intend to register approximately shares of
common stock that are reserved for issuance upon exercise of options granted
under our stock option plan. Once we register these shares, they can be sold in
the public market upon issuance, subject to restrictions under the securities
laws applicable to resales by affiliates. See "Shares eligible for future sale."
YOU WILL EXPERIENCE IMMEDIATE AND SUBSTANTIAL DILUTION.
The initial public offering price of our common stock is expected to be
substantially higher than the net tangible book value per share of our common
stock. Therefore, if you purchase shares of our common stock in this offering,
you will incur immediate dilution of approximately $ in the pro forma
net tangible book value per share of our common stock from the price per share
that you pay for our common stock (based upon an assumed initial public offering
price of $ per share). If the holders of our outstanding options or warrants
exercise those options or warrants at prices below the initial public offering
price, you will incur further dilution.
BECAUSE IT IS UNLIKELY THAT WE WILL EVER PAY DIVIDENDS, YOU WILL ONLY BE ABLE TO
BENEFIT FROM HOLDING OUR STOCK IF THE STOCK PRICE APPRECIATES.
We have never paid cash dividends on our capital stock and do not anticipate
paying any cash dividends in the foreseeable future. Additionally, under our
outstanding credit agreements we are prohibited from declaring or paying
dividends without the consent of our lender, Comdisco, Inc.
ANTI-TAKEOVER PROVISIONS IN OUR CHARTER AND BYLAWS AND UNDER DELAWARE LAW COULD
MAKE A THIRD-PARTY ACQUISITION OF US DIFFICULT.
Our certificate of incorporation and bylaws contain provisions that could make
it more difficult for a third party to acquire us, even if doing so might be
deemed beneficial by our stockholders. These provisions could limit the price
that investors might be willing to pay in the future for shares of our common
stock. We are also subject to certain provisions of Delaware law that could
delay, deter or prevent a change in control of us. See "Description of capital
stock -- Anti-takeover effects of provisions of the certificate of
incorporation, bylaws and Delaware law."
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15
<PAGE> 18
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Forward-looking information
Some of the statements that we make under "Prospectus summary," "Risk factors,"
"Management's discussion and analysis of financial condition and results of
operations," "Business" and elsewhere in this prospectus constitute
forward-looking statements. These statements relate to future events or our
future financial performance and involve known and unknown risks, uncertainties
and other factors that may cause our or our industry's actual results, levels of
activity, performance or achievements to be materially different from those
expressed or implied by any of our forward-looking statements. Some of these
factors are listed under "Risk factors" and elsewhere in this prospectus. In
some cases, you can identify forward-looking statements by terminology such as
"may," "will," "should," "expects," "plans," "anticipates," "intends,"
"believes," "estimates," "predicts," "potential" or "continue" or the negative
of these terms or other comparable terminology. These statements are only
predictions. Actual events or results may differ materially. Moreover, neither
we nor any other person assumes responsibility for the accuracy and completeness
of those statements. We are under no duty to update any of the forward-looking
statements after the date of this prospectus to conform them to actual results.
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16
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Use of proceeds
We estimate that the net proceeds from the sale of the shares of common stock we
are offering will be approximately $ million at an assumed initial
public offering price of $ per share after deducting the underwriting
discounts and commissions and estimated offering expenses. If the underwriters
exercise their over-allotment option in full, we estimate that the net proceeds
will be approximately $ million.
We currently intend to use the net proceeds of this offering to fund expansion
of our operations, including continued development and manufacturing of existing
products and research and development of additional products, expanding our
facilities to be able to meet the needs of our growing business, repayment of
debt and for other working capital and general corporate purposes. Although we
have no current plans, agreements or commitments with respect to any
acquisition, we may, if the opportunity arises, use a portion of the net
proceeds to acquire or invest in products, technologies or companies. The timing
and amount of our actual expenditures will be based on many factors, including
cash flows from operations and the growth of our business. Our management may
spend the proceeds from this offering in ways that the stockholders may not deem
desirable.
Until we use the net proceeds of this offering for the above purposes, we intend
to invest the funds in short-term, investment grade, interest-bearing
securities. We cannot predict whether the proceeds invested will yield a
favorable return.
Dividend policy
We have never declared or paid any cash dividends on our capital stock. We
anticipate that we will retain any earnings to support operations and to finance
the growth and development of our business. Additionally, under our outstanding
credit agreements we are prohibited from declaring dividends without the consent
of our lender, Comdisco, Inc. Therefore, we do not expect to pay cash dividends
in the foreseeable future. Any future determination relating to our dividend
policy will be made in the discretion of our board of directors and will depend
on a number of factors, including future earnings, capital requirements,
financial conditions and future prospects and other factors the board of
directors may deem relevant.
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17
<PAGE> 20
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Capitalization
The following table sets forth our capitalization as of March 31, 2000:
+ on an actual basis;
+ on a pro forma basis to give effect to the automatic conversion of all of our
outstanding shares of preferred stock into 11,339,268 shares of common stock
upon the closing of this offering; and
+ on a pro forma as adjusted basis to give effect to the sale of the
shares of common stock offered by this prospectus at an assumed
initial public offering price of $ per share and the receipt of the net
proceeds of the offering.
<TABLE>
<CAPTION>
MARCH 31, 2000
(UNAUDITED)
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
- -----------------------------------------------------------------------------------------------
(In thousands, except share and
per share amounts)
<S> <C> <C> <C>
Long-term obligations, less current portion.............. $ 1,652 $ 1,652 $ 1,652
-------- -------- --------
Stockholders' equity:
Convertible preferred stock, $0.0001 par value;
26,200,000 shares authorized, actual;
shares authorized, pro forma and pro forma
as adjusted; 11,339,268 shares issued and
outstanding, actual; none issued and outstanding pro
forma and pro forma as adjusted..................... 1 --
Common stock, $0.0001 par value; 32,200,000 shares
authorized, actual; pro forma and pro
forma as adjusted; 2,746,521 shares issued and
outstanding, actual; 14,085,789 shares issued and
outstanding, pro forma and shares issued
and outstanding, pro forma as adjusted.............. -- 1
Additional paid-in capital............................. 39,759 39,759
Deferred stock compensation............................ (3,147) (3,147) (3,147)
Accumulated deficit.................................... (28,935) (28,935) (28,935)
Accumulated other comprehensive income (loss).......... (26) (26) (26)
-------- -------- --------
Total stockholders' equity..................... 7,652 7,652
-------- -------- --------
Total capitalization........................... $ 9,304 $ 9,304 $
======== ======== ========
</TABLE>
The table above does not include:
+ 2,005,589 shares of common stock issuable upon exercise of options
outstanding at a weighted-average exercise price of $0.67 per share,
+ 141,665 shares issuable upon exercise of warrants at a weighted-average
exercise price of $4.31 per share; and
+ a total of 3,138,697 shares available for future grant under our 1995
Incentive Stock Plan, 2000 Incentive Stock Plan and 2000 Employee Stock
Purchase Plan.
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18
<PAGE> 21
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Dilution
Our pro forma net tangible book value as of March 31, 2000, was approximately
$7.7 million, or $0.54 per share. Pro forma net tangible book value per share
represents the amount of our total tangible assets less total liabilities,
divided by the number of shares of common stock outstanding after giving effect
to the automatic conversion of our preferred stock outstanding as of March 31,
2000, into 11,339,268 shares of our common stock.
Dilution in pro forma net tangible book value per share represents the
difference between the amount per share paid by purchasers of shares of our
common stock in this offering and the pro forma net tangible book value per
share of our common stock immediately afterwards, after giving effect to the
sale of shares in this offering at an assumed initial offering price
of $ per share and after deducting underwriting discounts and commissions
and offering expenses. This represents an immediate increase in pro forma net
tangible book value of $ per share to existing stockholders and an immediate
dilution in pro forma net tangible book value of $ per share to new
investors. The following table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share.............
Pro forma net tangible book value per share as of March
31, 2000...............................................
Increase attributable to new investors....................
Pro forma net tangible book value per share after the
offering..................................................
Dilution per share to new investors......................... $
======
</TABLE>
The following table summarizes, on a pro forma basis as of March 31, 2000, after
giving effect to this offering, the total number of shares of common stock
purchased from us and the total consideration and the average price per share
paid by existing stockholders and by new investors:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------
Existing stockholders.......... % $ % $
New investors..................
---------- --- ----------- ---
Total..................... % $ %
========== === =========== ===
</TABLE>
After this offering and assuming the exercise in full of all options and
warrants outstanding and exercisable as of March 31, 2000, the average price per
share of existing stockholders would be reduced by $ per share to be $
per share.
After this offering and assuming the exercise in full of all options and
warrants outstanding and exercisable as of March 31, 2000, our pro forma net
tangible book value per share as of March 31, 2000 would be $ per share,
representing an immediate increase in net tangible book value of $ per share
to existing stockholders and an immediate dilution in net tangible book value of
$ per share to new investors.
If the underwriters exercise their over-allotment option in full, the following
will occur:
+ the percentage of shares of our common stock held by existing stockholders
will decrease to approximately % of the total number of shares of our
common stock outstanding after this offering;
+ the number of shares of our common stock held by new public investors will
increase to , or approximately % of the total number of shares
of our common stock outstanding after this offering; and
+ our pro forma net tangible book value will increase to $ per share to
existing stockholders and our pro forma net tangible book value will be
diluted by $ per share to new investors.
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19
<PAGE> 22
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Selected financial data
The following selected financial data should be read in conjunction with the
consolidated financial statements and the notes to such statements and
"Management's discussion and analysis of financial condition and results of
operations" included elsewhere in this prospectus. 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, are derived from our consolidated
financial statements which have been audited by Ernst & Young LLP, independent
auditors, and are included elsewhere in this prospectus. The statement of
operations data for the period from inception (November 10, 1994) to December
31, 1995 and the year ended December 31, 1996, and the balance sheet data as of
December 31, 1995, 1996 and 1997 are derived from audited consolidated financial
statements not included in this prospectus. The statement of operations data for
the three months ended March 31, 1999 and 2000 and balance sheet data as of
March 31, 2000 are derived from unaudited consolidated financial statements
included elsewhere in this prospectus. Historical results are not necessarily
indicative of the results to be expected in the future.
The pro forma net loss per share and shares used in computing pro forma net loss
per share are calculated as if all of our convertible preferred stock was
converted into shares of our common stock on the date of their issuance.
<TABLE>
<CAPTION>
PERIOD FROM
INCEPTION
(NOVEMBER 10, THREE MONTHS
1994) TO ENDED
DECEMBER 31, YEAR ENDED DECEMBER 31, MARCH 31,
------------- ------------------------------------- (UNAUDITED)
STATEMENT OF OPERATIONS DATA 1995 1996 1997 1998 1999 1999 2000
- --------------------------------------------------------------------------------------------------------------
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales.......................... $ -- $ 2,305 $ 5,826 $12,076 $10,558 $ 2,981 $ 3,564
Costs and expenses:
Costs of sales................... -- 1,183 3,155 5,608 4,689 1,241 1,399
Research and development......... 1,987 4,056 4,292 4,922 4,180 975 1,261
Selling, general and
administrative................. 847 2,127 4,795 7,108 9,125 1,990 2,931
------- ------- ------- ------- ------- ------- -------
Total costs and expenses........... 2,834 7,366 12,242 17,638 17,994 4,206 5,591
------- ------- ------- ------- ------- ------- -------
Loss from operations............... (2,834) (5,061) (6,416) (5,562) (7,436) (1,225) (2,027)
Interest and other income
(expenses), net.................. 217 219 216 (94) (167) (172) 10
------- ------- ------- ------- ------- ------- -------
Net loss........................... $(2,617) $(4,842) $(6,200) $(5,656) $(7,603) $(1,397) $(2,017)
======= ======= ======= ======= ======= ======= =======
Net loss per share, basic and
diluted.......................... $ (5.09) $ (3.69) $ (3.97) $ (2.91) $ (3.12) $ (0.60) $ (0.76)
======= ======= ======= ======= ======= ======= =======
Weighted-average shares used in
computing net loss per share,
basic and diluted................ 514 1,311 1,560 1,943 2,434 2,326 2,671
Pro forma net loss per share, basic
and diluted...................... $ (0.59) $ (0.14)
======= =======
Weighted-average shares used in
computing pro forma net loss per
share, basic and diluted......... 12,799 14,010
</TABLE>
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20
<PAGE> 23
SELECTED FINANCIAL DATA
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------------------- MARCH 31,
1995 1996 1997 1998 1999 2000
BALANCE SHEET DATA (UNAUDITED)
- -----------------------------------------------------------------------------------------------------------
(In thousands
<S> <C> <C> <C> <C> <C> <C>
Cash, cash equivalents and short-term
investments............................ $ 3,213 $ 6,680 $ 7,664 $ 2,261 $ 11,073 $ 9,137
Working capital.......................... 1,767 5,910 6,559 3,115 9,061 7,305
Total assets............................. 3,999 9,831 11,948 9,363 19,080 16,510
Long-term obligations, less current
portion................................ 511 608 1,844 4,147 1,859 1,652
Accumulated deficit...................... (2,617) (7,459) (13,659) (19,315) (26,918) (28,935)
Total stockholders' equity............... 2,022 6,657 6,364 865 9,048 7,652
</TABLE>
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21
<PAGE> 24
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Management's discussion and analysis of financial condition
and results of operations
The following discussion of our financial condition and results of operations
should be read in conjunction with the financial statements and the notes to
those statements included elsewhere in this prospectus. This discussion may
contain forward-looking statements that involve risks and uncertainties. As a
result of many factors, such as those set forth under "Risk factors" and
elsewhere in this prospectus, our actual results may differ materially from
those anticipated in these forward-looking statements.
Since our inception, we have incurred significant losses and, as of March 31,
2000, we had an accumulated deficit of $28.9 million. We anticipate incurring
additional losses, which may increase, for the foreseeable future.
We derive revenues primarily from the sale of our instrument products. We
commenced commercial shipment of our first generation instrument, the Nautilus,
in 1996, the Quest product line in 1997, the Trident product line in 1998 and
the Surveyor and the Endeavor in 2000. Revenue from sales of our instrument
products is recognized when delivery and installation of the product is
complete. We also derive revenues from the sale of reagents and other instrument
related consumables.
Our expenses have consisted primarily of costs incurred in research and
development, manufacturing and general and administrative costs associated with
our operations, and the expansion of our sales and marketing organization. We
expect our research and development expenses to increase in the future as we
continue to develop our products. Our selling and marketing expenses are
expected to increase as we continue to expand the geographic coverage of our
direct sales and support organization. Our general and administrative expenses
are expected to increase as we expand our facilities and assume the obligations
of a public reporting company.
We have recorded deferred stock compensation in connection with the grant of
stock options to employees. Deferred stock compensation is the difference
between the deemed fair value of our common stock for financial reporting
purposes on the date such options were granted and their exercise price. We have
also recorded stock compensation for options granted to consultants in
accordance with Statement of Financial Accounting Standards No. 123. The options
granted to consultants are periodically remeasured as they vest, in accordance
with Emerging Issues Task Force No. 96-18.
We recorded deferred stock compensation of approximately $3.8 million in the
year ended December 31, 1999 and approximately $540,000 in the period ended
March 31, 2000. These amounts were recorded as a component of stockholders'
equity and are being amortized as charges to operations over the vesting periods
of the options, generally four years, using the graded vesting method. We
recorded amortization of deferred stock compensation of approximately $653,000
in the year ended December 31, 1999 and approximately $499,000 in the period
ended March 31, 2000. For options granted to employees through March 31, 2000,
we expect to record amortization of deferred stock compensation as follows:
approximately $1.2 million for the remainder of 2000; approximately $975,000 in
2001; approximately $563,000 in 2002; approximately $287,000 in 2003;
approximately $80,000 in 2004; and approximately $1,000 in 2005. We may record
additional deferred stock compensation expense if we grant additional options
below the deemed fair value of our common stock.
We have a limited history of operations. We anticipate that our quarterly
results of operations will fluctuate for the foreseeable future due to several
factors, including market evaluation and acceptance
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of our current and new products, which may result in a lengthy sales cycle,
patent conflicts, the introduction of new products by our competitors, the
timing and extent of our research and development efforts, and the timing of
significant orders. Our limited history makes accurate predictions of future
operations difficult.
RESULTS OF OPERATIONS
QUARTERS ENDED MARCH 31, 2000 AND 1999
NET SALES
Net sales in the first quarter of 2000 increased to $3.6 million from $3.0
million in the same period of 1999. The increase was due to slightly higher
sales in both instruments and chemistry products. The increase in instrument
sales was due to higher sales of the Quest product line, a full quarter's impact
of our FirstMate, offset by lower sales of Trident related products. Also in the
first quarter of 2000, we recognized revenue from the sale of our first unit of
our Surveyor product.
COST OF SALES
Cost of sales increased to $1.4 million in the first quarter of 2000 from $1.2
million in the first quarter of 1999. The increase was primarily due to higher
sales volume.
RESEARCH AND DEVELOPMENT EXPENSES
Research and development expenses increased to $1.3 million in the first quarter
of 2000 from $1.0 million in the same period of 1999. These expenses include
salaries and related costs of research and development personnel as well as the
cost of parts and supplies associated with research and development projects.
Personnel levels remained relatively constant in both periods and the increase
of $300,000 was primarily attributable to amortization of the deferred stock
compensation recorded in 1999 and the first quarter of 2000.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses increased to $2.9 million in the
first quarter of 2000 from $2.0 million in the first quarter of 1999. These
expenses consist primarily of salaries and related costs for executive, sales
and marketing, finance and other administrative personnel and the cost of
facilities. The increase was attributable to the further expansion of our direct
sales force in the United States and Europe and also due to amortization of the
deferred stock compensation recorded in 1999 and the first quarter of 2000.
INTEREST AND OTHER INCOME (EXPENSES), NET
Interest and other income (expenses), net, increased to $10,000 in the first
quarter of 2000 from $(172,000) in the same period of 1999. The increase was
primarily due to interest income generated from the investment of proceeds of
our Series D preferred stock financing in May 1999.
YEARS ENDED DECEMBER 31, 1999 AND 1998
NET SALES
Net sales in 1999 were $10.6 million versus $12.1 million in 1998. The decrease
in our net sales is primarily the result of lower Quest sales, the
discontinuation of our first product, the Nautilus, in the first quarter of
1999, and a change in our product sales strategy to include installation in the
selling
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price of certain instrument products, resulting in a delay in revenue
recognition, partially offset by higher sales for the Trident product line.
COST OF SALES
Cost of sales decreased to $4.7 million in 1999 from $5.6 million in 1998. This
decrease was primarily due to lower sales volume.
RESEARCH AND DEVELOPMENT EXPENSES
Research and development expenses decreased to $4.2 million in 1999 from $4.9
million in 1998. These expenses include salaries and related costs of research
and development personnel as well as the costs of parts and supplies associated
with research and development projects. Personnel levels and related expenses
remained relatively constant during both periods. The $700,000 decrease in
research and development expenses is primarily attributable to the timing of the
cost of parts and components associated with specific research and development
projects. During 1998, the major focus of the research and development group was
on the Trident product line. During 1999, the research and development group
focused on several projects which were at earlier stages of development. This
resulted in a decrease in parts and supplies associated with the research.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses increased to $9.1 million in 1999
from $7.1 million in 1998. These expenses consist primarily of salaries and
related costs for executive, sales and marketing, finance and other
administrative personnel and the costs of facilities. The increase was
attributable to further expansion of our direct sales force in the United States
and Europe and the recruitment and placement of a general manager for our
Japanese subsidiary during 1999.
INTEREST AND OTHER INCOME (EXPENSES), NET
Net interest expense increased to $167,000 in 1999 from $94,000 in 1998. The
increase was primarily attributable to the interest expense for the additional
debt incurred on our equipment and accounts receivable financing loans.
INCOME TAXES
As of December 31, 1999, we had federal net operating loss and research credit
carryforwards of approximately $23.0 million and $600,000, respectively, which
expire on various dates between 2010 and 2019. We also had state net operating
loss carryforwards of approximately $7.4 million and research credit
carryforwards of approximately $500,000. The state net operating loss will
expire on various dates between 2003 and 2004. The state research credits will
not expire.
Utilization of the net operating losses may be subject to a substantial annual
limitation due to the ownership change limitations provided by the Internal
Revenue Code of 1986 and similar state provisions. The annual limitation may
result in the expiration of net operating losses and credits before utilization.
YEARS ENDED DECEMBER 31, 1998 AND 1997
NET SALES
Net sales increased to $12.1 million in 1998 from $5.8 million in 1997. The
increase in revenue is primarily attributable to increased U.S. sales of our
Quest product line, which was introduced in the last quarter of 1997.
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COST OF SALES
Cost of sales increased to $5.6 million in 1998 from $3.2 million in 1997. The
increase is attributed to the increase in product sales over the period.
RESEARCH AND DEVELOPMENT EXPENSES
Research and development expenses increased to $4.9 million in 1998 from $4.3
million in 1997. These expenses include salaries and related costs of research
and development personnel as well as the costs of parts and supplies associated
with research and development projects. The increase in research and development
expense is attributable to the timing of the cost of parts and components
associated with specific research and development projects. During 1998 there
was an increase in the parts and supplies associated with the research and
development projects. Personnel levels and related expenses remained constant
during both periods.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses increased to $7.1 million in 1998
from $4.8 million in 1997. These expenses consist primarily of salaries and
related costs for executive, sales and marketing, finance and other
administrative personnel and the costs of facilities. The increase was
attributable to establishment of our wholly owned subsidiary in Japan, a
management change in our European office, and further expansion of our direct
sales force in the United States and Europe. Additionally, we introduced several
new products in 1998, which resulted in an increase in marketing activities such
as industry trade shows, advertising and collateral.
INTEREST AND OTHER INCOME (EXPENSE), NET
Interest income and other income (expense), net, was $(94,000) in 1998 compared
to $216,000 in 1997. This decrease in interest income was primarily attributable
to the utilization of funds for operations in 1998, where previously the funds
were used for investment purposes, and the interest expense associated with the
debt incurred on our equipment and accounts receivable financing.
LIQUIDITY AND CAPITAL RESOURCES
We have funded our operations principally with approximately $35 million of
private equity financings that came from a series of preferred stock offerings
from 1995 through 1999 as follows:
<TABLE>
<CAPTION>
NUMBER
ISSUE YEAR OF SHARES AMOUNT
(In thousands,
except share
amounts)
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Preferred Stock, Series A................................... 1995 4,627,500 $ 4,628
Preferred Stock, Series B................................... 1996 2,923,073 9,500
Preferred Stock, Series C................................... 1997 1,180,000 5,900
Preferred Stock, Series D................................... 1999 2,608,695 15,000
-------
$35,028
=======
</TABLE>
Each share of Series A, B, C and D preferred stock is convertible into one share
of our common stock.
In addition, we have various loan agreements with Comdisco, Inc. for loan
facilities of up to $9.5 million. Through March 31, 2000, we have drawn down
approximately $5.5 million against these facilities and we had approximately
$4.0 million available for future draw downs. The loans are secured by our
assets, subordinated to institutional creditors and bear interest at rates
ranging from 10% to 12.5%. Under the terms of certain of the loan agreements, we
are required to issue to Comdisco, Inc. warrants to purchase shares of our
Series C preferred stock upon signing of the
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agreement and certain draw down limits. At March 31, 2000, we had issued to
Comdisco, Inc. warrants to purchase an aggregate of 91,665 shares of our Series
C preferred stock.
Net cash used in operating activities was $5.9 million in 1997, $7.3 million in
1998, $5.4 million in 1999 and $1.3 million in the three months ended March 31,
2000. Cash used in operating activities was attributable primarily to net
losses, after adjustments for non-cash items, and working capital requirements.
Net cash provided by (used in) investing activities was $(1.3 million) in 1997,
$567,000 in 1998, $(6.8 million) in 1999 and $655,000 in the three months ended
March 31, 2000. Our investing activities consisted principally of capital
expenditures and purchases and sales of our short-term investments.
Net cash provided by (used in) financing activities was $7.2 million in 1997,
$2.3 million in 1998, $14.9 million in 1999 and $(339,000) in the three months
ended March 31, 2000. Our financing activities consisted principally of
draw-downs on our loan facilities to finance our operations, repayments of our
loan and capital lease obligations and proceeds from the sale of our convertible
preferred stock.
We expect to have negative cash flow from operations through at least 2000.
However, we expect to incur increasing development expenses, as well as expenses
for additional personnel for production and commercialization efforts, and we
may never generate positive cash flows. Our future capital requirements depend
on a number of factors, including market acceptance of our products, the
resources we devote to developing and supporting our products, continued
progress of our research and development of potential products, the need to
acquire licenses to new technology and the availability of other financing. We
believe that our current cash balances, together with the net proceeds of this
offering and revenue to be derived from product sales and research and
development collaborations will be sufficient to fund our operations at least
through the next 24 months. To the extent our capital resources are insufficient
to meet future capital requirements, we will need to raise additional capital or
incur indebtedness to fund our operations. There can be no assurance that
additional debt or equity financing will be available on acceptable terms, if at
all. If adequate funds are not available, we may be required to delay, reduce
the scope of, or eliminate, our operations or obtain funds through arrangements
with collaborative partners or others that may require us to relinquish rights
to certain technologies or products that we might otherwise seek to retain.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
INTEREST RATE RISK
Our exposure to interest rate risk is related to our investment portfolio and
our borrowings. Fixed rate investments and borrowings may have their fair market
value adversely impacted from changes in interest rates. Floating rate
investments may produce less income than expected if interest rates fall, and
floating rate borrowings will lead to additional interest expense if interest
rates increase. Due in part to these factors, our future investment income may
fall short of expectations, and our interest expense may be above our
expectations due to changes in U.S. interest rates. Further, we may suffer
losses in investment principal if we are forced to sell securities that have
declined in market value due to changes in interest rates.
We invest our excess cash in debt instruments of the U.S. government and its
agencies, and in debt instruments of high quality corporate issuers. Due to the
short term nature of these investments, we have assessed that there is no
material exposure to interest rate risk arising from our investments.
We enter into loan arrangements with financial institutions when available on
favorable terms. At March 31, 2000, we had institutional borrowings of $4.1
million outstanding, which bear interest at
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rates ranging from 10% to 12.5%. We have determined that there is no material
exposure to interest rate risk arising from these borrowings. Under the terms of
these loan arrangements, the Company is prohibited from declaring dividends
without the consent of the financial institution.
FOREIGN CURRENCY RISK
As we have operations and sales outside of the United States, our financial
results can be affected by changes in foreign currency exchange rates or weak
economic conditions in the foreign markets in which we operate. To date, our
foreign operations and sales have not been significant to our results of
operations and financial condition.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting No. 133, Accounting for Derivative Instruments and
Hedging Activities ("SFAS 133"). SFAS No. 133 requires that all derivative
instruments be recorded on the balance sheet at their fair value. Changes in the
fair value of derivatives are recorded each period in current earnings or other
comprehensive income. In June 1999, FASB issued Statement of Financial
Accounting Standards No. 137, which defers the effective date of SFAS No. 133 to
years beginning after June 15, 2000. We do not expect that the adoption of SFAS
No. 133 will have a material impact on results and operations or financial
condition.
In December 1999, the Securities and Exchange Commission released Staff
Accounting Bulletin No. 101, Revenue Recognition in Financial Statements, which
provides guidance on the revenue recognition. We have adopted this guidance in
our consolidated financial statements.
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Business
OVERVIEW
We are a pioneer in the development, manufacturing and marketing of innovative
products that enable chemists to use high speed parallel synthesis for the
development of new drugs. Parallel synthesis is a process by which chemists
create multiple compounds. Our products include a variety of parallel chemical
synthesizers and reagents. Our products enable chemists to increase their
productivity, accelerate the drug development process and reduce costs.
Currently, our products are used for chemistry development by chemists in the
pharmaceutical, biotechnology, life sciences and chemical research fields
worldwide.
Advances in the drug discovery process have resulted in a significant increase
in the number of new tools and targets for the development of new drugs, or drug
targets. However, unlike drug discovery, drug development lacks the
technological advances and automation that would allow efficient utilization of
new targets. As a result, many companies are seeking innovative and
cost-effective tools and technologies that would be used to explore the
increasing number of targets for the potential development of new drugs. Our
instruments enable parallel synthesis and automate many of the most
labor-intensive steps of chemistry development. Through automation, chemists are
able to perform multiple experiments under a variety of conditions in a fraction
of the time it would take to perform the same experiments using traditional
chemistry development methods. We believe that our products will enable
companies to develop new drugs in a more productive, faster and more
cost-effective manner than by using traditional chemistry development methods.
Therefore companies, through the use of our products, may capitalize on the
wealth of potential new drug targets being generated by the drug discovery
process.
We began marketing our first product in 1996. Currently, we have eight
instrument product offerings and more than 40 reagent product offerings. Through
March 31, 2000, we have sold our products to more than 545 customers in the
pharmaceutical, biotechnology, life sciences and chemical research industries
and have placed more than 640 instruments worldwide. In addition, we have a
track record of quickly and effectively developing solutions to our customers'
problems. In order to ensure that our products meet the specific needs of
chemists throughout the research community, we have formed formal consortia and
informal relationships with teams of industry leaders and academic institutions
for each of our instruments released to date. Through this process we have
developed innovative products that have extensive customer input, validation and
testing prior to commercial introduction.
INDUSTRY
BACKGROUND
The life sciences research industry is undergoing fundamental change resulting
principally from the explosive growth in gene discovery and the increasing
demand for greater efficiency in the drug discovery and development process.
Industry experts estimate that in the year 2000 the life sciences research
industry will spend more than $70 billion on drug discovery research and
development. Advances in genomics, combinatorial chemistry and high throughput
screening have significantly enhanced the discovery process. Genomics, the
mapping of the human DNA sequence and the study of the role genes play in
disease, is creating an unprecedented wealth of information concerning potential
drug targets. Industry sources estimate that sequencing of the human genome will
provide an estimated 3,000 to 10,000 relevant new drug targets over the next ten
years, compared to the approximately 500
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targets that have been explored thus far. Combinatorial chemistry is the rapid
synthesis of large collections of potential drug candidates. Through
combinatorial chemistry, chemists can generate chemical collections, or
libraries, consisting of millions of compounds that researchers can screen
against drug targets through the use of high throughput screening technologies.
Chemists have been able to make these advances in drug discovery by using new
tools that simplify, automate and accelerate the drug discovery process. Through
widespread use of these tools chemists are discovering a large number of new
drug candidates that are ready for the drug development process. However, the
pharmaceutical industry does not have sufficient tools and resources to fully
exploit the opportunities presented by advances in drug discovery due to the
technological limitations of traditional drug development, or chemistry
development.
DRUG DISCOVERY AND DEVELOPMENT
Although the drug discovery and development process involves a number of steps,
it can best be understood in the context of two phases:
+ DISCOVERY PHASE. Discovery is the process by which drug targets identified
through biology, including genomics and proteomics, the study of protein
function, are developed into biological screens by chemists. Then, the
millions of compounds produced by combinatorial chemistry are tested using
high throughput biological screens to identify possible drug candidates.
+ DEVELOPMENT PHASE. Development is the process in which pharmacological,
pharmacokinetic and safety properties of a drug are optimized by chemists for
human testing and approval. Pharmacological properties are the measure of a
drug's potency with respect to a specific drug target. The pharmacokinetic
properties of a drug are the extent to which the drug remains available in
the body for interaction with the target. Safety is a measure of a drug's
toxicity to humans. The development phase can be further broken down into
three stages:
+ LEAD OPTIMIZATION. Lead optimization is the process used by chemists to
evaluate the hundreds of drug candidates that may emerge from the
discovery phase. Chemists perform successive rounds of chemical
syntheses to create numerous variants of the drug candidates to find
compounds likely to have appropriate drug properties. Chemists then
optimize the compounds for their biological potency, thus creating lead
compounds.
+ PRE-CLINICAL DEVELOPMENT. Pre-clinical development is the process by
which chemists further refine a limited number of lead compounds into
clinical drug candidates by application of additional chemistry
methodologies. During this process, chemists make relatively small
changes to the compounds in order to optimize their safety and
pharmacokinetic properties.
+ CLINICAL DEVELOPMENT. Clinical development is the process in which
chemists test clinical candidates in humans to demonstrate their safety
and effectiveness, or efficacy. The successful outcome of clinical
trials may result in regulatory approval to commercialize the new drug
product. During this time period, chemists optimize the method of
compound synthesis prior to commencement of large scale manufacturing of
the drug.
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The following figure illustrates the drug discovery and development timeline:
[GRAPHIC]
TRADITIONAL CHEMISTRY METHODS FOR DRUG DEVELOPMENT
Chemists typically employ traditional methods in their drug development efforts.
Utilizing traditional methods of chemical synthesis, a chemist performs a series
of chemical reactions, or transformations, until the desired compound is
obtained. Each synthetic transformation is generally achieved in a four-part
process:
SET-UP AND EXECUTION OF REACTION
The first step undertaken by a chemist using chemical synthesis is building a
reaction apparatus. Chemists often construct the apparatus using a variety of
traditional laboratory components depending on the type of chemistry they are
performing. The chemist uses the apparatus to combine chemicals, reagents and
solutions, which the chemist will often heat or cool to specified temperatures
under air and moisture-free, or inert, conditions. The chemist then monitors
reactions over time to determine reaction progress. In chemistry development,
the assembly of a specific apparatus and the periodic addition of chemicals can
often be very complicated and time-consuming depending on the complexity of the
desired reaction. In addition, although some reactions occur very quickly,
others can take hours, or even days to complete, and involve frequent
monitoring.
PRODUCT WORK-UP
The second step in chemical synthesis is product work-up by the chemist. Once
the chemist determines that a reaction has proceeded to completion, the chemist
subjects the reaction mixture to an extensive reaction work-up. During the
work-up the chemist stops the reaction and carries out an initial cleanup of the
reaction mixture prior to purification. The chemist performs a series of washes
with a variety of
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solvents, a drying process and a filtration process during the work-up. The
chemist usually takes several hours to complete this labor-intensive work-up
process.
PRODUCT PURIFICATION
The third step in chemical synthesis is product purification by the chemist.
During this step, the chemist isolates the desired product from its starting
materials and various byproducts. Product purification is an integral step in
chemical synthesis due to the fact that impurities may interfere in the next
chemical transformation by masking a drug's potency and toxicity. Chemists
typically utilize large volumes of multiple solvents during the purification
process. This step often takes days to complete.
PRODUCT ANALYSIS
The final step in chemical synthesis is product analysis. In this step, the
chemist confirms that the desired drug has been synthesized and isolated before
submitting the compound for biological testing. Analysis requires a large amount
of data collection and is labor-intensive.
Chemists must repeat this laborious, four-step process until the desired
compound is obtained. The synthesis of a particular compound could take months
and even years to complete before researchers can determine whether the compound
has the desired drug properties.
LIMITATIONS OF EXISTING DRUG DEVELOPMENT TECHNOLOGIES
Traditional chemistry development methods have the following limitations:
+ LIMITED PRODUCTIVITY. Traditional methods are time consuming, inefficient and
labor-intensive. Industry sources estimate that chemists currently synthesize
an average of 100 compounds per year. Since it is not economically feasible
for pharmaceutical companies to increase chemistry headcount to the extent
necessary to take advantage of the thousands of expected drug targets, we
believe that throughput in the development phase must increase dramatically.
+ LONG DRUG DEVELOPMENT TIMELINES. Traditional methods require chemists to
synthesize compounds one at a time in an inefficient, sequential process.
This results in long drug development timelines, which delay product
commercialization and reduce the commercial value of the exclusivity period
provided by patent protection.
+ HIGH COST. Traditional methods are expensive due to the time and labor
required of a chemist to produce a single compound. In addition, companies
utilizing the traditional methods incur the costs associated with the high
volumes of solvents and chemicals utilized and the expense associated with
their disposal.
+ HIGH DRUG CANDIDATE FAILURES. Traditional methods limit the number of
compounds synthesized, which can lead to the selection of sub-optimal drug
candidates, often resulting in drug candidate failures. These failures
greatly increase the average length of time and cost required to bring a
specific drug to market. If a drug candidate fails during clinical trials, a
company must incur the time and expense of repeating all of the development
steps or face abandoning the project altogether. The cost of a failed
candidate increases significantly as it progresses to later stages of the
development process.
+ LACK OF FLEXIBILITY. To date, chemists have lacked flexible tools and systems
to easily perform the wide variety of complex experiments required for
chemistry development. Instead, chemists have had to repeatedly assemble
various components into complicated systems.
+ DIFFICULT TO USE. The steps required to put together an apparatus and perform
the reaction, work-up, purification and data analysis are difficult to
execute. Therefore, many of these complex chemistries require skilled
chemists with many years of training.
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These limitations restrict the ability of pharmaceutical companies to fully
capitalize on the large number of new drug candidates resulting from the
significant technical advances in drug discovery. In order to take advantage of
these advances, we believe that pharmaceutical and life science companies will
need to increase productivity, shorten the drug development process and reduce
costs. We believe that these objectives will only be achieved through advances
and innovations in chemistry development technologies and tools.
THE ARGONAUT SOLUTION
We design, manufacture and market instruments and reagents that increase the
productivity of chemists, thereby accelerating the drug development process. Our
products enable the rapid synthesis of a wide range of compounds at a reduced
cost. We design and develop products using extensive customer assessment,
validation and testing. We intend to promote our products as the laboratory
standard for chemists and the industry standard for companies seeking more
efficient methods of addressing their increasing drug development needs. We
believe our technology provides the following key benefits over current
chemistry development methods:
INCREASED PRODUCTIVITY
Our systems are designed to simultaneously synthesize many distinct compounds by
automating many of the labor-intensive aspects of the experiments. Our systems
allow a chemist to save significant time and effort while performing a greater
number of experiments. A chemist, using the traditional approach of performing
one reaction at a time, can create approximately 100 compounds per year. Using
our products, the same chemist can create up to 192 compounds per day.
REDUCED DRUG DEVELOPMENT TIMELINES
Through parallel synthesis and automation, our products enable faster
optimization of drug candidates by producing a significantly larger number of
compounds in less time than traditional methods. By simultaneously producing
numerous variants of drug candidates, our tools provide more comprehensive
information for the management by chemists of drug development projects. Through
the use of improved data, our customers can identify and accelerate the
development of promising drug candidates, thus significantly reducing drug
development timelines.
REDUCED COSTS
Our products result in significant cost savings due to reduced labor hours and
reduced solvent usage. We believe that reactions performed in our systems versus
those performed out using traditional methods could result in significant cost
savings per compound. In addition, by synthesizing more drug candidates, our
products provide greater amounts of information and enable companies to abandon
poor drug candidates sooner, thereby eliminating the costs associated with later
stage drug failures.
IMPROVED INTELLECTUAL PROPERTY POSITIONS
Our tools can significantly increase the number of chemical compounds
synthesized. As a result, pharmaceutical companies may be able to improve their
patent and intellectual property positions by submitting more detailed claims
with their patent applications covering a wider variety of compounds.
FLEXIBILITY
Our products are flexible and can perform a wide range of chemical reactions,
from simple reactions to complex, multi-step reactions that require inert
environments. As a result, chemists are able to more easily perform complex and
difficult reactions, thereby encouraging innovation on the part of chemists.
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EASE OF USE
Our systems are designed to make the labor-intensive steps of performing the
reaction, work-up, purification and data analysis faster and easier, and can be
operated with minimal training.
OUR STRATEGY
Our objective is to become the leading provider of productivity enhancing tools
for all stages of the chemistry development process. In order to achieve this
goal, we have implemented the following strategy:
FOCUS INITIALLY ON INDUSTRY LEADERS WITHIN THE PHARMACEUTICAL MARKET
We are initially focusing on the large and fast-growing sector of drug
development within the pharmaceutical market. We have targeted leading
pharmaceutical, biotechnology and life science companies as well as academic
institutions for our principal marketing efforts. We believe that these
customers provide the greatest opportunity for maximizing the use of our
products and that early adoption by these industry leaders and academic
institutions will promote wider market acceptance.
EXPAND OUR HIGH-VALUE REAGENT BUSINESS
In addition to our instruments, we develop, manufacture and market reagents and
other consumables for our products. We plan to continue to leverage our
installed base of instrument products through the sale of reagents and other
consumables to our existing customers as well as new customers. We intend to
expand our reagent business by offering additional reagent products.
CONTINUE TO ESTABLISH PRODUCT DEVELOPMENT COLLABORATIONS
We are continuing to pursue collaborations with pharmaceutical and biotechnology
companies in order to further develop and enhance our existing technology
platforms and products, as well as develop new products. For each of our
instruments released to date, we formed a consortium or collaboration with
industry leaders to define product requirements and to perform validation and
testing. We intend to follow this model in order to enhance market acceptance of
our current and future products. In addition, we intend to selectively
in-license and commercialize technology that can enhance our total product
offering.
BUILD GLOBAL CUSTOMER RELATIONSHIPS THROUGH DIRECT SALES
Our marketing approach is based on a thorough understanding of our customers'
specific chemistry needs, which we develop through the close interaction of our
direct sales and applications support personnel with our customers. We intend to
continue to expand our 41 person direct sales and applications support
organization to build long-term relationships with existing customers, gain
access to new accounts and expand into new geographic territories.
ACQUIRE COMPLEMENTARY BUSINESSES
We intend to pursue opportunities to expand our core business by acquiring
businesses that have technologies or capabilities complementary to ours. For
example, we may acquire software development expertise to capitalize on the
chemistry data flow generated by our products. In addition, we intend to explore
acquiring distribution channels in specific geographic regions to speed our
market penetration.
EXPAND INTO NEW MARKETS
We believe that our existing technologies and products can be leveraged into
additional markets. Our capabilities enable us to address the needs of a wide
range of chemistries. As the use of productivity
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tools in drug development becomes more visible, related industries are beginning
to investigate these tools. Other potential markets include cosmetics,
catalysts, and high-margin specialty chemicals.
PRODUCTS
Our products include instruments, reagents and instrument related consumables.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
INITIAL
PRIMARY DRUG COMMERCIAL
PRODUCT PRIMARY APPLICATION DEVELOPMENT PHASE SHIPMENT
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INSTRUMENTS
- ------------------------------------------------------------------------------------------------------------
TRIDENT PRODUCT LINE
Trident Library Synthesizer Automated parallel library Lead optimization 1998
synthesis
Trident Workstation Semi-automated benchtop Lead optimization 1999
parallel synthesis
Trident Sample Processing Automated parallel work-up and Lead optimization 2000
Station purification
- ------------------------------------------------------------------------------------------------------------
QUEST PRODUCT LINE
Quest 210 Small scale, semi-automated Pre-clinical development 1997
parallel synthesis, work-up and
purification
Quest 205 Large scale, semi-automated Pre-clinical development 1998
parallel synthesis, work-up and
purification
FirstMate Entry-level, manual parallel Lead optimization, pre- 1999
synthesis clinical and clinical
development
- ------------------------------------------------------------------------------------------------------------
SURVEYOR Automated parallel chemistry Clinical development 2000
optimization, screening and
analysis
- ------------------------------------------------------------------------------------------------------------
ENDEAVOR Semi-automated parallel, high- Clinical development 2000
pressure reaction screening
- ------------------------------------------------------------------------------------------------------------
REAGENTS
- ------------------------------------------------------------------------------------------------------------
ArgoGel Compound synthesis Lead optimization 1996
ArgoPore Compound synthesis Lead optimization 1997
Polymer Reagents & Solution Compound synthesis, work-up and Pre-clinical development 1998
Phase Toolbox purification
- ------------------------------------------------------------------------------------------------------------
</TABLE>
INSTRUMENTS
We address the broad range of chemistries required in all three stages of the
drug development phase with our current instrument product offerings. Each of
our instrument products has been designed for a specific stage of development,
although chemists often purchase our instruments to perform chemistry activities
in stages other than those for which they were initially designed.
TRIDENT PRODUCT LINE
Our Trident products are typically purchased by chemistry groups performing lead
optimization. These chemists synthesize libraries of between one thousand and
two thousand compounds that are closely related to a drug candidate identified
in the discovery process. Chemistry methodologies performed in lead optimization
are traditionally more difficult to perform than in the drug discovery phase, as
they require more inert synthesis conditions. The automation tools developed for
use in the drug discovery
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phase for combinatorial synthesis are not capable of meeting the requirements of
chemists performing lead optimization. To enable the Trident to meet the
specific needs of lead optimization, we formed a product development consortium
compromised of eight pharmaceutical companies. As a result of this consortium,
we developed three instrument modules, the Trident Library Synthesizer, the
Trident Workstation and the Trident Sample Processing Station, the first of
which we initially commercialized in 1998. All Trident products utilize our
proprietary Reaction Cassette, which enables the automation and manual
manipulation of multi-step inert chemistry methodologies.
TRIDENT LIBRARY SYNTHESIZER
The Trident Library Synthesizer is a fully automated synthesizer that chemists
can use to produce up to 192 individual compounds simultaneously. The Trident
Library Synthesizer integrates up to four Reaction Cassettes with motors,
heaters and liquid dispensers, or fluidics, and software on a WindowsNT
computer. Since its initial commercial shipment in 1998, we have updated the
system periodically to broaden its range of chemistry capabilities. In our most
recent software update, we enhanced the system with the capability of performing
four independent chemistries, one in each of the four Reaction Cassettes, which
allows four chemists to use the instrument simultaneously.
TRIDENT WORKSTATION
The Trident Workstation is a scalable, semi-automated personal bench-top system
that utilizes a single Reaction Cassette. The Trident workstation is well suited
for the development of new chemistry methodologies, which is the most critical
path used by chemists in producing lead optimization libraries. Using the
Trident Workstation, our customers can develop and validate methodologies in the
Reaction Cassette prior to performing them on the Trident Library Synthesizer.
TRIDENT SAMPLE PROCESSING STATION
The Trident Sample Processing Station is an automated robotic platform that
utilizes the Reaction Cassette to perform work-up and purification. Often these
methodologies do not require an inert or temperature controlled environment and
therefore are more efficiently performed by chemists on a different instrument.
Some of our customers have purchased the Trident Sample Processing Station and
the Trident Workstation as an entry-level system to provide their chemists with
a cost effective solution for lead optimization.
QUEST PRODUCT LINE
The Quests are primarily purchased by our customers for pre-clinical
applications, where the goal is to refine drug candidates identified during lead
optimization. Chemists refine lead compounds by synthesizing a small library,
typically consisting of between ten and 20 compounds, testing the compounds for
drug characteristics, and based upon the tests, synthesizing another library of
compounds to start the next iteration. The Quest product line provides a
personal synthesis tool that chemists can use to perform a broad range of
chemistry methodologies, reduces the amount of laboratory space required, and is
cost effective for use by most pre-clinical groups.
The Quest product line is comprised of the Quest 210, Quest 205 and FirstMate,
all of which use our proprietary vertical mixing system. Vertical mixing is a
means chemists can use to efficiently mix reaction solutions by moving a Teflon
encapsulated magnet vertically through a solution. This mixing method offers
chemists several benefits over the traditional means of spinning a magnet in
mixtures: it can mix a broader range of viscosities and more readily mix solid
reagents that must be suspended in order for the reactions to occur. To enable
the Quest 210 to meet the specific needs of pre-clinical development, we
developed it as part of a collaboration. We initially shipped the Quest 210 in
1997.
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In addition, we developed the Quest 205 as part of a consortium. We initially
shipped the Quest 205 in 1998.
QUEST 210 AND QUEST 205
The Quest 210 and Quest 205 are similar systems that utilize our unique Teflon
reactor, which provides an inert reactor environment that allows chemist to view
the reaction mixtures. Each system has automated heating, cooling, mixing and
fluidics. The two systems differ by the number and volume of the reactors; the
Quest 210 has 20 ten-milliliter reactors and the Quest 205 has ten
100-milliliter reactors.
FIRSTMATE
Our most recent addition to the Quest product line is the FirstMate, which we
initially shipped in 1999. FirstMate is an entry-level, manual parallel
synthesizer, which utilizes existing laboratory equipment and glassware.
Chemists use the FirstMate for all three stages of drug development. We
developed the FirstMate for those chemists and academicians who desire a
low-cost, entry-level system.
SURVEYOR AND ENDEAVOR
The Surveyor and Endeavor are instruments we developed specifically for
synthesis requirements in clinical development, where the chemists' goal is to
maximize yield and purity prior to commencement of large scale manufacturing.
This activity is called process optimization and is a form of parallel
synthesis. Process optimization involves the chemist making the same compound in
an iterative manner by varying the synthesis conditions such as the reactants
and/or temperature, and allowing periodic sampling and analysis of the mixture
for yield and purity.
SURVEYOR
The Surveyor is a fully automated ten-reactor synthesizer that allows the
chemist to vary the synthesis conditions in each reactor. In addition, the
Surveyor automates the tedious activity of mixture sampling and analysis. The
Surveyor utilizes the Quest Teflon reactor and vertical mixing system and the
Trident software. We developed the Surveyor as part of a consortium of five
pharmaceutical companies, in order to meet the needs of clinical development. We
initially shipped the Surveyor in 2000.
ENDEAVOR
The Endeavor is a semi-automated, parallel, high pressure reactor system
designed for reactions requiring greater than standard atmospheric pressures and
gas-phase reagents, such as hydrogen. With the Endeavor, a chemist can perform
eight simultaneous reactions. We initially shipped the Endeavor in 2000.
REAGENTS
Our reagents are used by chemists to perform a broad range of chemistry
methodologies in lead optimization and pre-clinical development and can be used
in conjunction with our instruments or independently. The primary benefit of our
reagents is that they allow chemists to perform easy work-up and purification of
the reaction mixture to obtain the desired compounds by a simple filtration
process. Chemists can automate the filtration process using our instruments and
therefore achieve higher productivity by reducing the time spent manually
processing reaction mixtures.
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ARGOGEL AND ARGOPORE
Chemists typically use our ArgoGel and ArgoPore reagent products to perform lead
optimization. To overcome the limitation of traditional reagents, we formed a
product development consortium consisting of four pharmaceutical companies. We
currently offer nine distinct products in each of the ArgoGel and ArgoPore
product lines. In addition we offer nine other basic reagent products. We
initially shipped these reagents in 1996.
POLYMER REAGENTS AND SOLUTION PHASE TOOLBOX
Our Polymer Reagents and Solution Phase Toolbox products are used primarily by
chemists during pre-clinical development. These chemists synthesize much smaller
numbers of compounds than chemists synthesize during lead optimization and these
chemists are more likely to use traditional synthesis methodologies. Both the
Polymer Reagents and Solution Phase Toolbox are new technologies, which allows
chemists to accelerate the synthesis, work-up and purification of traditional
synthesis methods. We tailor our polymer reagents to permit chemists to perform
a wide variety of important synthetic reactions. The Solution Phase Toolbox is a
series of prepackaged polymers that are used by chemists performing traditional
work-ups and purification processes. We currently offer nine distinct Polymer
Reagents and six distinct Solution Phase Toolbox products. We initially shipped
these products in 1998.
PRODUCT DEVELOPMENT STRATEGY
Our product development strategy is to combine our expertise in chemistry and
engineering with an understanding of market needs to rapidly design and launch
products that fulfill these needs. We have a track record of quickly and
effectively developing solutions to our customer's problems. We took fewer than
12 months to develop our last two instruments, from design initiation to
delivery of the first commercial shipment.
To understand market needs, we form product development teams with our
customers. Through this process, we have developed innovative products that have
had extensive customer input, validation and testing prior to our commercially
introducing them. We have formed product development consortia and
collaborations with our customers.
Our consortia are non-exclusive arrangements in which we bring together several
companies, typically five to seven, who share the need to solve a common
problem. We meet with consortium members on a regular basis during the product
development period to review product definition, specifications, progress,
validation and testing. We may give consortium members prototypes for use in
their research programs and we incorporate their feedback into the final
product. Members typically pay a non-refundable participation fee, which may be
credited against future purchases of the product we develop. By participating in
our consortia, and becoming familiar with the performance and operating
characteristics of the product, members can achieve a nine-month to one-year
competitive advantage on using the new technology we develop. Consortium members
often become the initial references during the product development phase and
initial customers upon our commercialization of the product. We have used the
consortium approach to develop the Trident, Quest, Surveyor and reagent
products.
Through our collaborations, we license technology that we believe has
significant potential for commercialization. Typically, our partner will have
developed and tested a concept to the prototype level. We further develop and
enhance the prototype into a commercially viable product. Our contributions
include design for manufacturing, cost reduction, safety and code compliance and
ease of use issues. Our partner is able to purchase the final product at a
substantial discount and may receive royalties on product sales. We used this
approach with the Endeavor product, which we developed in
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collaboration with Symyx. We also used this approach with the Quest 210 product,
which we developed in collaboration with a third party.
The following table lists our product development consortia and collaborations:
<TABLE>
<CAPTION>
TRIDENT QUEST SURVEYOR ENDEAVOR REAGENTS
- ---------------------- -------------------- -------------------- -------------------- --------------------
<S> <C> <C> <C> <C>
Abbott Laboratories, Abbott Laboratories, Aventis S.A. Symyx Technologies, Abbott Laboratories,
Inc. Inc. Inc. Inc.
Agouron
Ariad Pharmaceuticals, Affymax Research Pharmaceuticals, Eli Lilly & Co. Bristol-Myers Squibb
Inc. Institute Inc. Co.
Eli Lilly & Co.
AstraZenaca Alanex Corporation Merck & Co., Inc.
International Research Divisions Rohm & Haas Co.
Pharmacia
Aventis S.A. Aventis S.A. Pfizer, Inc. Corporation
E.I. duPont de Novartis
Nemours & Co. Pharmaceutical, Inc.
Genetics Institute, Parke-Davis,
Inc. Division
of Warner-Lambert
Merck & Co., Inc. & Co.
Merck KgAA Stanford University
</TABLE>
CUSTOMERS
Our customers consist of a broad range of companies in the pharmaceutical, life
sciences and biotechnology industries, as well as academic institutions. Through
March 31, 2000, we have sold our products to more than 545 customers and, we
have placed more than 640 instruments worldwide. Our leading customers are:
<TABLE>
<S> <C> <C>
Abbott Laboratories, Inc. E.I. duPont de Nemours & Co. Pfizer Inc.
Affymax Research Institute Glaxo Wellcome plc Pharmacia Corporation
Astrazeneca International Merck & Company, Inc. Pharmacopeia, Inc.
Aventis S.A. Monsanto Company Proctor & Gamble
Boehringer Ingelheim Novartis International SmithKline Beecham
Pharmaceuticals, Inc. Pharmaceuticals
</TABLE>
SALES AND MARKETING
We base our sales strategy on understanding our customers' needs, recommending
solutions and ensuring successful implementation of that solution in our
customers' research laboratories. Our approach is designed to achieve customer
satisfaction and build a long-term working relationship with our customer.
As of March 31, 2000, our direct sales and marketing organization included 41
full-time employees located in North America, Europe and Japan. Our team of
professionals was comprised of senior account-oriented sales people, application
chemists, service engineers, telesales people and marketing communication
specialists who sell directly to our customers worldwide. We had 13 direct sales
professionals with an average of 12 years of experience in selling high
technology products to the scientific industry and we had ten application
chemists. In addition to their academic expertise, the industrial laboratory
experience of our sales professionals is essential to their ability to
understand our customers needs. We had seven service engineers with expertise in
both chemistry and engineering to support our customers worldwide. We had five
professional marketing communication specialists located in the United States,
Europe and Japan dedicated to providing local marketing programs. In
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North America we had three telesales people to support the direct sales efforts
by providing lead generation, lead qualification, and consumable product sales
and service sales.
We use distributors to provide local sales and marketing in some foreign
countries, including China, Australia, Korea, Eastern Europe, Finland, Sweden,
Denmark, Italy, Spain, Israel and India. In these countries, we seek to maintain
close contact with our customers and potential customers by providing
application chemistry support and service support through our worldwide direct
sales organization. We have developed both scientific seminars and technology
transfer programs to educate and train our customers. We conduct on-site
seminars in the use of our chemistry reagents, referencing important scientific
publications and research that validate their successful usage. Typically 20 to
40 researchers at a given customer site will participate in this type of
scientific seminar.
In addition to seminars, we have developed our "Advanced Implementation
Program," a technology implementation program, designed to accelerate the
adoption of our technology within a laboratory. Our customers leverage our
experience by participating in customized classes that teach how to plan
parallel chemistry synthesis, how to use our instruments, accessories, and
chemistry reagents and how to work-up the resulting chemistry products. We
monitor our participants' success and encourage them to publish their results
internally, thereby increasing our visibility within their company.
Our web site provides technical information regarding the use of our tools for
our customers. In addition, the Internet has the potential to become a
significant distribution channel for our reagents, instrument consumables and
entry level systems. The combination of our telesales with e-commerce makes it
very easy for a customer to make routine purchases of our reagents and
consumables. We have established ArgoStore, our proprietary web site for quick,
easy and routine purchasing of our reagents and consumables. In addition, we
have entered into agreements with Chemdex, a Ventro company, and SciQuest.com to
support the purchasing of our products.
To facilitate the awareness of our products, we have arrangements with leading
academic research institutions to provide them with our products. In return our
products are validated by reputable institutions through published results in
leading scientific journals and the researchers' creation of application notes.
We also work with universities to assist them in creating and implementing
teaching laboratories that promote the scientific advantages associated with the
use of our products.
MANUFACTURING
Most of our instruments and reagents are manufactured to our specifications by a
series of qualified outside vendors. Our vendors then deliver the finished
product to us for final quality assurance testing.
INSTRUMENTS
Our instrument manufacturing staff is comprised of senior level, highly skilled
manufacturing engineers, documentation support, material procurement and
assembly support resources, which are closely integrated within our product
development group. These resources are focused on the rapid development of
manufacturing processes and methods, which are transferred to our outside
subcontractors. Our contractors are responsible for ordering all components from
qualified vendors, inspecting, stocking, assembling and testing the modules
prior to shipment to our facility. We typically qualify multiple manufacturing
subcontractors, and we develop the relevant manufacturing processes internally,
enabling us to maintain control of the manufacturing program.
REAGENTS
Our chemistry organization develops, validates, documents and initially
manufactures our reagents at our facility. During reagent development, we
qualify outside manufacturers, known as toll manufacturers, so that we can begin
outsourcing production when demand and volume increase.
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INTELLECTUAL PROPERTY
As of March 31, 2000, we owned a patent portfolio of eight issued U.S. patents
and two issued foreign patents as well as several pending U.S. patent
applications. Corresponding foreign patent applications have been filed in a
number of countries. Of these issued patents, eight U.S. patents relate to the
reactor and fluidics technology incorporated into our instruments. Several of
our patent applications relate to this technology and others relate to our
reagent technologies. We intend to continue to file patent applications covering
any new inventions incorporated into our products and technologies as
appropriate. In addition, we rely upon copyright protection as well as trade
secrets, know-how and continuing technological innovation to develop and
maintain our competitive position. Our success will depend in part upon our
ability to obtain patent protection for our products and technologies, to
preserve our copyrights and trade secrets, and to operate without infringing on
the proprietary rights of third parties.
Certain of our products incorporate technology subject to patent applications
licensed to us by third parties. The related license agreements require us to
pay royalties and make other payments. These agreements are subject to
termination under certain circumstances, such as breach by us or if we fail to
commercialize the products incorporating the licensed technology. In particular,
we have a license agreement with Symyx Technologies, Inc. relating to technology
incorporated in our Endeavor product. Either party can terminate this agreement
at its discretion at any time after December 31, 2000, upon six months' notice.
If our licenses to any such technology, or any similar licenses we may enter
into in the future, are terminated, we may be unable to continue selling such
products and our revenues would decline.
COMPETITION
We anticipate that competition will come primarily from companies providing
products based on traditional chemistry methods as well as companies that offer
competing products based on alternative technologies. In order to compete
effectively, we will need to demonstrate the advantages of our products over
well established traditional chemistry methods and alternative technologies and
products. We will also need to demonstrate the potential economic value of our
products relative to traditional chemistry methods. Some of the companies that
provide products that compete with ours include Mettler-Toledo AG, PE
Biosystems, Inc. and several smaller instrument and reagent companies. Our
future success will depend in large part on our ability to establish and
maintain a competitive position with respect to these products and future
technologies that may develop.
In many instances, our competitors and potential competitors have or will have
substantially greater financial, technical, research, and other resources and
larger, more established marketing, sales, distribution, and service
organizations than we do. Moreover, competitors may have greater name
recognition than we do, and may offer discounts as a competitive tactic. Our
competitors may succeed in developing or marketing technologies or products that
are more effective or commercially attractive than our products, or that would
render our technologies and products obsolete. Also, we may not have the
financial resources, technical expertise or marketing, distribution or support
capabilities to compete successfully in the future.
GOVERNMENT REGULATION
We are subject to various federal, state and local laws and regulations relating
to the protection of the environment. In the course of our business, we are
involved in the handling, storage and disposal of chemicals. The laws and
regulations applicable to our operations include provisions that regulate the
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discharge of materials into the environment. Usually these environmental laws
and regulations impose "strict liability," rendering a person liable without
regard to negligence or fault on the part of such person. Such environmental
laws and regulations may expose us to liability for the conduct of, or
conditions caused by, others, or for acts that were in compliance with all
applicable laws at the time the checks were performed. We have not been required
to make material expenditures in connection with our efforts to comply with
environmental requirements. We do not believe that compliance with such
requirements will have a material adverse effect upon our capital expenditures,
results of operations or competitive position. Because the requirements imposed
by such laws and regulations are frequently changed, we are unable to predict
the cost of compliance with such requirements in the future, or the effect of
such laws on our capital expenditures, results of operations or competitive
position.
EMPLOYEES
As of March 31, 2000, we had 99 employees. None of our employees are covered by
a collective bargaining agreement. We believe that our relations with our
employees are good.
FACILITIES
We occupy approximately 24,000 combined square feet of leased and sub-leased
office space and other facilities in San Carlos, California. These facilities
serve as the base for our marketing and product support operations, research and
development and manufacturing activities. Substantially all of our space is
leased through early 2001. We intend to use a portion of the proceeds of this
offering to relocate to new facilities. In addition, we lease approximately
2,000 square meters of office space in Muttenz, Switzerland and 2,000 square
meters of office space in Tokyo, Japan. These offices are the base operations
for our sales and support groups in the respective regions.
LEGAL PROCEEDINGS
From time to time, we may be involved in litigation that arises through the
normal course of business. As of the date of this prospectus, we are not a party
to any litigation we believe could reasonably be expected to materially harm our
business or results of operations.
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Management
EXECUTIVE OFFICERS AND DIRECTORS
Set forth below is information with respect to each of our executive officers
and directors.
<TABLE>
<CAPTION>
NAME AGE POSITION
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------
David Binkley, Ph.D. ........................ 46 President, Chief Executive Officer, Chief
Financial Officer and Director
Lissa Goldenstein............................ 44 Vice President, Marketing and Sales
Doug Heigel.................................. 39 Vice President, Manufacturing
Jan Hughes................................... 39 Vice President, Product Development
Laura Lehman, Ph.D. ......................... 42 Vice President, Business Development
Terry Long................................... 38 Vice President, Concept Design
Brook Byers(1)(2)............................ 54 Chairman of the Board
Samuel Colella(2)............................ 60 Director
Hingge Hsu, M.D.(1).......................... 43 Director
William Rastetter, Ph.D.(2).................. 52 Director
James Schlater(1)............................ 63 Director
</TABLE>
- ---------------
(1) Member of the audit committee
(2) Member of the compensation committee
David P. Binkley, Ph.D. Dr. Binkley has served as our President, Chief Executive
Officer, Chief Financial Officer and one of our directors since December 1996.
From June 1993 to November 1996, he served as a Vice President at Perkin-Elmer
Corporation, where he was responsible for its worldwide organic analysis
business including molecular spectroscopy and data analysis. Dr. Binkley has a
B.S. in Chemistry from Elizabethtown College and a Ph.D. in Chemistry from
Virginia Tech.
Lissa A. Goldenstein Ms. Goldenstein has served as our Vice President, Sales
and Marketing since January 1998. From January 1994 to December 1997, Ms.
Goldenstein was Senior Vice President, Worldwide Sales with Molecular
Simulations, a provider of molecular modeling and simulation software for life
and materials science research. While at Molecular Simulation Incorporated, Ms.
Goldenstein was President of Tejin Molecular Simulations, a joint venture in
Tokyo, which managed Molecular Simulation's business in Japan and the Asia
Pacific markets. Ms. Goldenstein has a B.S. in Architectural Engineering from
Pennsylvania State University and received her Professional Engineers license as
a civil engineer in the State of California in 1981.
Doug W. Heigel Mr. Heigel has served as our Vice President, Manufacturing since
October 1995. From February 1995 to October 1995, Mr. Heigel was responsible for
manufacturing at BioMolecular Technologies, a start-up manufacturer of biotech
instrumentation, where he served as their Instrument Manufacturing Manager. From
July 1988 to February 1995, he held various managerial positions in
manufacturing and engineering, including his final position as
Operations/Manufacturing Manager, at MTI Analytical Instruments, a manufacturer
of analytical instrumentation. Mr. Heigel has a B.S. in Mechanical Engineering
from Oregon State University.
Jan K. Hughes Mr. Hughes is one of our founders and has served as our Vice
President, Product Development since November 1994. From June 1985 to November
1994, he served as Engineering Group Leader for New Synthesis Systems at Applied
Biosystems, Inc., where he was responsible for the development of peptide and
DNA synthesis instrumentation. Mr. Hughes has a B.S. in Mechanical Engineering
from California Polytechnic State University, San Luis Obispo.
Laura S. Lehman, Ph.D. Dr. Lehman has served as our Vice President of Business
Development since August 1999. From June 1994 to July of 1999, she was at
RiboGene, Inc., a pharmaceutical discovery and development company, where she
held the positions of Vice President of Drug Discovery
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and Drug Development until January of 1996 and Vice President of Research until
her departure. While at RiboGene, she was responsible for the strategic
management of all preclinical and clinical projects and the coordination of the
projects with their corporate partners. Dr. Lehman has a B.S. degree in
Chemistry and a M.S. degree in Organic Chemistry from Bucknell University and a
Ph.D. degree in Organic Chemistry from Duke University.
Terry Long Mr. Long has served as our Vice President, Concept Design since
April 1996. From December 1991 to March 1996, Mr. Long served as Executive Vice
President for Protein Technologies, Inc., a division of Rainin Instruments, a
manufacturer of pipetting products and services. While at Protein Technologies,
Inc., he was responsible for product development of peptide synthesis and
preparative electrophoresis instrumentation. Mr. Long has a B.S. degree in
Chemical Engineering from the University of Arizona.
Brook H. Byers Mr. Byers has served as our Chairman of the Board of Directors
since January 1995. He is a partner of Kleiner Perkins Caufield & Byers, a
private venture capital firm that he joined in 1977. He also serves as a
director of Ventro, Inc., Drugstore.com, Inc. and a number of privately held
technology companies. Mr. Byers sits on the Board of Directors of the University
of California, San Francisco Foundation and is director of the California
Healthcare Institute.
Samuel D. Colella Mr. Colella has served as one of our directors since 1995.
Since 1984, he has been a general partner of Institutional Venture Partners, a
venture capital firm. Mr. Colella also serves as Chairman of Onyx
Pharmaceuticals and serves as a director of AngioTrax, Inc., Benefit Point.Com,
MedPool.com, Symyx Technologies, SurroMed., Inc., and Thermage, Inc. Mr. Colella
has a B.S. in business and engineering from the University of Pittsburgh and an
M.B.A. from Stanford University.
Hingge Hsu, M.D. Dr. Hsu has served as one of our directors since May 1999. He
is a partner with Schroder Ventures, Boston, a dedicated healthcare and life
sciences private equity fund, where he has had the primary responsibility for
biotechnology and other life sciences investments since September 1998. From
1996 to 1998, Dr. Hsu was a principal in the Investment Banking Department at
Robertson Stephens where he led a variety of equity and merger and acquisition
transactions in the life sciences sector. From 1995 to 1996, and from 1993 to
1995, he held various business development and strategic planning positions at
Chiron Corporation and Gensia, Inc. respectively. Dr. Hsu received a B.A. degree
in chemistry and biology from the University of California, San Diego, an M.D.
degree from Yale University School of Medicine and an M.B.A. from Harvard
Business School.
William H. Rastetter, Ph.D. Dr. Rastetter has served as one of our directors
since 1995. Since December 1986 he has served as the President and Chief
Executive Officer and as a director of IDEC Pharmaceuticals Corporation. In
addition, from 1988 to 1993 he served as its Chief Financial Officer, and in May
1996 was appointed to the position of Chairman of the Board of Directors. Dr.
Rastetter also serves as a director of Spiros Development Corporation II, a Dura
Pharmaceuticals affiliated company formed to conduct research and development on
products and devices to treat respiratory disorders.
James M. Schlater Mr. Schlater has served as one of our directors since 1995.
He was a co-founder of Molecular Dynamics, a manufacturer of imaging
instrumentation for bioanalysis, in July 1987, and served as its Chief Executive
Officer and Chairman of the Board of Directors until Amersham Pharmacia Biotech,
Inc., acquired the company in October 1998.
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BOARD COMPOSITION
We currently have eight authorized directorships, of which two are vacant. In
accordance with the terms of our certificate of incorporation, the terms of
office of the directors are divided into three classes:
+ Class I, whose term will expire at the annual meeting of stockholders to be
held in 2001;
+ Class II, whose term will expire at the annual meeting of stockholders to be
held in 2002; and
+ Class III, whose term will expire at the annual meeting of stockholders to be
held in 2003.
The Class I directors are Mr. James Schlater and Dr. Hingge Hsu, the Class II
directors are Mr. Brook Byers and Mr. Sam Colella, and the Class III director
are Drs. David Binkley and William Rastetter. At each annual meeting of
stockholders after the initial classification or special meeting in lieu
thereof, the successors to directors whose terms will then expire will be
elected to serve from the time of election and qualification until the third
annual meeting following election or special meeting held in lieu thereof. The
authorized number of directors may be changed only by resolution of the board of
directors or a super-majority vote of the stockholders. 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.
BOARD COMMITTEES
The audit committee of the board of directors was established in May 1995. The
audit committee reviews, acts on and reports to the board of directors on
various auditing and accounting matters, including the recommendation of our
independent auditors, the scope of the annual audits, fees to be paid to the
independent auditors, the performance of our independent auditors and our
accounting practices. The members of our audit committee are Mr. Brook Byers,
Dr. Hingge Hsu and Mr. James Schlater, each of whom is an independent director.
The compensation committee of the board of directors was established in May
1995, and determines the salaries and benefits for our employees, directors and
other individuals compensated by us. The compensation committee also administers
our stock option plans, including determining the stock option grants for our
employees, consultants, directors and other individuals. The members of the
compensation committee are Mr. Brook Byers, Dr. William Rastetter and Mr. Samuel
Colella, each of whom is an independent director.
DIRECTOR COMPENSATION
Currently, we do not provide cash compensation to members of our board of
directors for serving on our board or for attendance at committee meetings.
Members of our board of directors are reimbursed for expenses in connection with
attendance at board and committee meetings. In consideration for services as
non-employee directors, we have in the past granted options to purchase our
common stock pursuant to the terms of our stock plans, and our board continues
to have the discretion to grant options to new non-employee directors. Beginning
in 2001 our outside directors will each receive annual nondiscretionary grants
of options to purchase 5,000 shares of our common stock.
- --------------------------------------------------------------------------------
44
<PAGE> 47
MANAGEMENT
- --------------------------------------------------------------------------------
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No member of the compensation committee has been an officer or employee of ours
at any time. None of our executive officers serves as a member of the board of
directors or compensation committee of any other company that has one or more
executive officers serving as a member of our board of directors or compensation
committee.
LIMITATION OF LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS
Our amended and restated certificate of incorporation and our amended and
restated bylaws provide that our directors and officers shall be indemnified by
us to the fullest extent authorized by Delaware law, as it now exists or may in
the future be amended, against all expenses and liabilities reasonably incurred
in connection with their service for or on our behalf. In addition, our amended
and restated certificate of incorporation provides that our directors will not
be personally liable for monetary damages to us for breaches of their fiduciary
duty as directors, unless they violated their duty of loyalty to us or our
stockholders, acted in bad faith, knowingly or intentionally violated the law,
authorized illegal dividends or redemptions or derived an improper personal
benefit from their action as directors. We have obtained insurance that insures
our directors and officers against specified losses and which insures us against
specific obligations to indemnify our directors and officers.
EXECUTIVE COMPENSATION
SUMMARY OF CASH AND OTHER COMPENSATION
The following table shows all compensation received during the year ended
December 31, 1999 by our Chief Executive Officer and our four other highest-paid
executive officers, collectively referred to as the named executive officers.
There was no other compensation paid to the named executive officers in 1999.
SUMMARY COMPENSATION
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
LONG-TERM
COMPENSATION AWARDS
SECURITIES
ANNUAL COMPENSATION OTHER ANNUAL UNDERLYING OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS COMPENSATION OPTIONS COMPENSATION
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
David Binkley......................... $238,818 $53,536 $-- 314,062 $--
President, Chief Executive Officer
and Chief Financial Officer
Lissa Goldenstein..................... 158,048 55,312 -- 100,000 --
Vice President, Marketing and Sales
Doug Heigel........................... 117,843 19,776 -- 100,000 --
Vice President, Manufacturing
Jan Hughes............................ 143,298 24,153 -- 69,875 --
Vice President, Product Development
Terry Long............................ 149,782 25,263 -- 100,000 --
Vice President, Concept Design
</TABLE>
- --------------------------------------------------------------------------------
45
<PAGE> 48
MANAGEMENT
- --------------------------------------------------------------------------------
OPTIONS
The following table shows information regarding options granted to the executive
officers listed in the summary compensation table above during the fiscal year
ended December 31, 1999.
Each option represents the right to purchase one share of our common stock. The
options generally become vested over four years. See "Management -- Employee
benefit plans" for more details regarding these options. In the year ended
December 31, 1999, we granted options to purchase an aggregate of 1,002,325
shares of our common stock to various officers, employees, directors and
consultants.
The potential realizable value at assumed annual rates of stock price
appreciation for the option term represents hypothetical gains that could be
achieved for the respective options if exercised at the end of the option term.
The 5% and 10% assumed annual rates of compounded stock price appreciation are
required by rules of the SEC and do not represent our estimate or projection of
our future common stock prices. These amounts represent assumed rates of
appreciation in the value of our common stock from the initial public offering
price (assuming an initial public offering price of $ per share). Actual
gains, if any, on stock option exercises are dependent on the future performance
of our common stock and overall stock market conditions. The amounts reflected
in the table may not necessarily be achieved.
OPTION GRANTS IN LAST FISCAL YEAR
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
----------------------- VALUE AT ASSUMED
NUMBER OF ANNUAL RATES OF
SECURITIES % OF TOTAL APPRECIATION OF STOCK
UNDERLYING OPTIONS EXERCISE PRICE FOR OPTION TERM
OPTIONS GRANTED TO PRICE PER EXPIRATION ----------------------
NAME GRANTED EMPLOYEES SHARE DATE 5% 10%
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
David Binkley.................... 150,000 15.6% $ 1.00 10/21/09
Lissa Goldenstein................ 35,000 3.7 1.00 10/21/09
Doug Heigel...................... 15,875 1.7 1.00 10/21/09
Jan Hughes....................... 20,000 2.1 1.00 10/21/09
Terry Long....................... 3,375 0.4 1.00 10/21/09
</TABLE>
The following table shows information as of December 31, 1999, concerning the
number and value of unexercised options held by each of the executive officers
listed in the summary compensation table above. Options shown as exercisable in
the table below are immediately exercisable. There was no public trading market
for our common stock as of December 31, 1999. Accordingly, the value of the
unexercised in-the-money options listed below has been calculated on the basis
of the assumed initial public offering price of $ per share, less the
applicable exercise price per share, multiplied by the number of shares
underlying such options.
- --------------------------------------------------------------------------------
46
<PAGE> 49
MANAGEMENT
- --------------------------------------------------------------------------------
AGGREGATED OPTION EXERCISES IN THE YEAR ENDED DECEMBER 31, 1999, AND YEAR-END
OPTION VALUES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
SHARES UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
ACQUIRED DECEMBER 31, 1999 DECEMBER 31, 1999
UPON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
David Binkley............. 152,605 $106,824 42,708 271,354 $ $
Lissa Goldenstein......... -- -- 32,604 67,396
Doug Heigel............... -- -- 65,664 34,336
Jan Hughes................ -- -- 26,810 43,065
Terry Long................ -- -- 79,362 20,638
</TABLE>
EMPLOYMENT AGREEMENTS
By offer letter, dated October 29, 1996, we agreed that we would grant to David
P. Binkley, Ph.D., options to purchase 500,000 shares of our common stock that
would vest over time during the course of his employment. The letter further
provides that if we are acquired or merged with another company and Dr. Binkley
is not offered a position of similar responsibility with the new company and
subsequently leaves employment, any unvested options held by Dr. Binkley at such
time will automatically vest.
EMPLOYEE BENEFIT PLANS
1995 INCENTIVE STOCK PLAN
Our 1995 Incentive Stock Plan was approved by our board of directors in May 1995
and approved by our stockholders in May 1996. The 1995 Plan was subsequently
amended by the board of directors in November 1996, January and September 1997
and July 1999. Our 1995 plan authorizes the issuance of up to 3,935,308 shares
of our common stock as either incentive stock options within the meaning of
Section 422 of the Internal Revenue Code of 1986 or nonstatutory stock options.
As of March 31, 2000, we had 2,005,589 options to purchase common stock under
this plan outstanding to employees, directors and consultants with a weighted
average exercise price of $0.67 per share. After the completion of this
offering, no further options will be granted under this plan, the 1995 Plan will
terminate, and all unissued shares under the 1995 Plan as of the effective date
of this offering and all shares returned to the 1995 Plan shall be reserved for
issuance under the 2000 Incentive Stock Plan.
Our board of directors, or a board committee, has the power to determine the
terms of the options, including the exercise price of the options, the number of
shares subject to each option, the exercisability thereof, and the form of
consideration payable on such exercise, provided that the exercise price for
incentive stock options must be at least 100% of fair market value. Incentive
stock options granted to any holder of 10% or more of the combined voting power
of all classes of our stock must have an exercise price of not less than 110% of
fair market value and be exercisable for a term of no more than five years.
The 1995 Plan provides that in the event of our merger with or into another
corporation, options and stock purchase rights shall be assumed or substituted
for by the successor corporation. In the event the successor corporation refuses
to assume or substitute for our options or stock purchase rights, then the
options and stock purchase rights shall terminate as of the closing of the
merger.
- --------------------------------------------------------------------------------
47
<PAGE> 50
MANAGEMENT
- --------------------------------------------------------------------------------
2000 EMPLOYEE STOCK PURCHASE PLAN
Our 2000 Employee Stock Purchase Plan was adopted by our board of directors in
April 2000 and approved by our shareholders in . A total of
200,000 shares of common stock have been reserved for issuance under our 2000
Employee Stock Purchase Plan, plus annual increases equal to the lesser of
500,000 shares, 2% of the outstanding shares on such date, or a lesser amount
determined by our board of directors.
Our 2000 Employee Stock Purchase Plan, which is intended to qualify under
Section 423 of the United States tax code, contains consecutive twenty-four
month offering period. Each offering period contains four six month purchase
periods. The offering periods generally start on the first trading day on or
after February 1 and August 1 of each year, except for the first such offering
period which commences on the first trading day on or after the effective date
of this offering and ends on the last trading day on or before July 31, 2002.
Employees are eligible to participate if they are customarily employed by us or
any participating subsidiary for at least 20 hours per week and more than five
months in any calendar year. However, any employee who immediately after grant
owns stock possessing 5% or more of the total combined voting power or value of
all classes of our capital stock, or whose rights to purchase stock under all of
our employee stock purchase plans accrues at a rate that exceeds $25,000 worth
of stock for each calendar year may not be granted an option to purchase stock
under this plan. The 2000 Employee Stock Purchase Plan permits participants to
purchase our common stock through payroll deductions of up to 15% of the
participant's "compensation." Compensation is defined as the participant's base
straight time gross earnings, bonuses, commissions, overtime payments, and
cash-based incentive compensation, but exclusive of any non-cash compensation.
The maximum number of shares a participant may purchase during a single purchase
period is 5,000 shares.
Amounts deducted and accumulated by the participant are used to purchase shares
of common stock at the end of each purchase period. The price of stock purchased
under the 2000 Employee Stock Purchase Plan is generally 85% of the lower of the
fair market value of the common stock at the beginning of the offering period or
at the end of the purchase period. Participants may end their participation at
any time during an offering period, and they will be paid their payroll
deductions to date. Participation ends automatically upon termination of
employment with us.
Rights granted under the 2000 Employee Stock Purchase Plan are not transferable
by a participant other than by will, the laws of descent and distribution, or as
otherwise provided under the plan. The 2000 Employee Stock Purchase Plan
provides that, in the event of our merger with or into another corporation or a
sale of substantially all our assets, each outstanding option may be assumed or
substituted for by the successor corporation. If the successor corporation
refuses to assume or substitute for the outstanding options, the offering period
then in progress will be shortened and a new exercise date will be set. The 2000
Employee Stock Purchase Plan will terminate automatically in 2010, unless
terminated earlier. Our board of directors has the authority to amend or
terminate the 2000 Employee Stock Purchase Plan, except that no such action may
adversely affect any outstanding rights to purchase stock under the 2000
Employee Stock Purchase Plan. Our board of directors has the exclusive authority
to interpret and apply the provisions of the 2000 Employee Stock Purchase Plan.
2000 INCENTIVE STOCK PLAN
Our 2000 Stock Plan was adopted by our board of directors in April, 2000, and
our stockholders approved the plan in , 2000. This plan provides
for the grant of incentive stock options to our employees and nonstatutory stock
options and stock purchase rights to our employees, directors and consultants.
As of April , 2000, a total of 2,000,000 shares of our common stock were
reserved
- --------------------------------------------------------------------------------
48
<PAGE> 51
MANAGEMENT
- --------------------------------------------------------------------------------
for issuance pursuant to our 2000 Stock Plan, plus any shares reserved for
issuance under the 1995 Plan as of the effective date of the Company's
registration statement and any shares returned to the 1995 Plan.
No options have yet been issued pursuant to the 2000 Stock Plan. The number of
shares reserved for issuance under our 2000 Stock Plan will increase annually on
the first day of the Company's fiscal year beginning in 2001 by an amount equal
to the lesser of 5% of the outstanding shares of our common stock on the first
day of the year, 1,500,000 shares or such lesser amount as our board of
directors may determine.
Our board of directors or a committee of our board administers the 2000 Stock
Plan. The committee may consist of two or more outside directors to satisfy
certain tax and securities requirements. The administrator has the power to
determine the terms of the options or stock purchase rights granted, including
the exercise price, the number of shares subject to each option or stock
purchase right, the exercisability of the options and the form of consideration
payable upon exercise. The administrator determines the exercise price of
options granted under our stock option plan, but with respect to incentive stock
options, the exercise price must at least be equal to the fair market value of
our common stock on the date of grant. Additionally, the term of an incentive
stock option may not exceed ten years. The administrator determines the term of
all other options. No optionee may be granted an option to purchase more than
500,000 shares in any fiscal year. In connection with his or her initial
service, an optionee may be granted an additional option to purchase up to
500,000 shares of our common stock. After termination of one of our employees,
directors or consultants, he or she may exercise his or her option for the
period of time stated in the option agreement. If termination is due to death or
disability, the option will generally remain exercisable for 12 months following
such termination. In all other cases, the option will generally remain
exercisable for three months. However, an option may never be exercised later
than the expiration of its term.
The administrator determines the exercise price of stock purchase rights granted
under our 2000 Stock Plan. Unless the administrator determines otherwise, the
restricted stock purchase agreement will grant us a repurchase option that we
may exercise upon the voluntary or involuntary termination of the purchaser's
service with us for any reason, including death or disability. The purchase
price for shares we repurchase will generally be the original price paid by the
purchaser. The administrator determines the rate at which our repurchase option
will lapse. Our stock option plan generally does not allow for the transfer of
options or stock purchase rights and only the optionee may exercise an option
and stock purchase right during his or her lifetime.
Our stock option plan provides that in the event of our merger with or into
another corporation or a sale of substantially all of our assets, the successor
corporation will assume or substitute for each option or stock purchase right
outstanding under our 2000 Stock Plan. If the outstanding options or stock
purchase rights are not assumed or substituted for, all outstanding options and
stock purchase rights become fully vested and exercisable. Our 2000 Stock Plan
will automatically terminate in 2010, unless we terminate it sooner. In
addition, our board of directors has the authority to amend, suspend or
terminate the 2000 Stock Plan provided it does not adversely affect any option
previously granted under our 2000 stock Plan.
DIRECTOR OPTION PROGRAM
The Director Option Program is part of our 2000 Stock Plan and provides for the
periodic grant of nonstatutory stock options to those non-employee directors who
are not "beneficial owners" (as defined in Rule 13d-3 of the Securities Act of
1934) of 2.5% or more of the Company's total voting power on the date of any
grant under the 2000 Stock Plan.
- --------------------------------------------------------------------------------
49
<PAGE> 52
MANAGEMENT
- --------------------------------------------------------------------------------
All grants of options to our non-employee directors under the Director Program
are automatic. We will grant to each individual who first become a non-employee
director on or after our initial public offering, an option to purchase 15,000
shares when such person first becomes a non-employee director (except for those
directors who became non-employee directors by ceasing to be employee
directors). The shares subject to the option vest monthly over a three-year
term, provided the individual remains an outside director on such dates.
Each outside director shall automatically be granted an option to purchase 5,000
shares on each annual meeting of the shareholders of the Company occurring after
the end of our fiscal year 2000, if immediately after such meeting, he or she
shall continue to serve on the board and has been a director for at least six
months prior to the annual shareholders meeting. Such shares subject to the
option vest monthly over a one-year term, provided the individual remains an
outside director on such dates.
All options granted under our Director Program have a term of ten years and an
exercise price equal to fair market value on the date of grant. After
termination as a non-employee director with us, an optionee must exercise an
option at the time set forth in his or her option agreement. If termination is
due to death or disability, the option will remain exercisable for 12 months. In
all other cases, the option will remain exercisable for a period of three
months. However, an option may never be exercised later than the expiration of
its term. A non-employee director may not transfer options granted under our
Director Program other than by will or the laws of descent and distribution.
Only the non-employee director may exercise the option during his or her
lifetime.
In the event of a change of control of us, all of our outstanding options
granted pursuant to the Director Option Program become fully vested and
exercisable.
- --------------------------------------------------------------------------------
50
<PAGE> 53
- --------------------------------------------------------------------------------
Related party transactions
SALES OF SECURITIES
From January 1, 1997 through March 31, 2000, we have issued the following
securities in private placement transactions:
+ 1,180,000 shares of our Series C convertible preferred stock, at a purchase
price of $5.00 per share, for an aggregate purchase price of $5,900,000
between March and June of 1997; and
+ 2,608,695 shares of our Series D convertible preferred stock, at a purchase
price of $5.75 per share, for an aggregate purchase price of $15,000,000 in
May 1999.
Each share of preferred stock is immediately convertible into one share of
common stock. All preferred stock was issued to accredited investors in reliance
upon exemption from registration under Regulation D of the Securities Act.
The purchasers of more than $60,000 of these securities include, among others,
the following directors and holders of more than 5% of our outstanding stock and
their affiliates:
<TABLE>
<CAPTION>
SHARES OF PREFERRED STOCK
- ----------------------------------------------------------------------------------------------------------
SERIES C SERIES D TOTAL CONSIDERATION
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------
Kleiner Perkins Caufield & Byers VII(1)..................... -- 304,924 $1,753,313
2750 Sand Hill Road
Menlo Park, CA 94025
Funds associated with Institutional Venture Partners(2)..... -- 262,261 1,508,001
3000 Sand Hill Road
Building 2, Suite 290
Menlo Park, CA 94025
Funds associated with Robertson Stephens & Company(3)....... -- 101,739 584,999
555 California Street, 26th Floor
San Francisco, CA 94104
Funds associated with Schroder Ventures(4).................. -- 1,739,130 9,999,998
P.O. Box HM 1368
Hamilton, HM FX
Bermuda
</TABLE>
- -------------------------
(1) Mr. Brook H. Byers, the chairman of our board of directors, is a partner of
Kleiner Perkins Caufield & Byers VII. Mr. Byers disclaims beneficial
ownership of the shares held by these funds except to the extent of his
pecuniary interest therein.
(2) Includes 257,016 shares of Series D Preferred Stock held by Institutional
Venture Partners VI, L.P. and 5,245 shares of Series D Preferred Stock held
by Institutional Venture Management VI. Mr. Samuel D. Colella, one of our
directors, is a general partner of these funds. Mr. Colella disclaims
beneficial ownership of the shares held by these funds except to the extent
of his pecuniary interest therein.
(3) Includes 86,435 shares of Series D Preferred Stock held by RS & Co. IV, L.P.
and 15,304 shares of Series D Preferred Stock held by Bayview Investors,
Ltd. Robertson Stephens & Company is a holder of more than 5% of our
outstanding Stock.
(4) Includes 1,372,098 shares of Series D Preferred Stock held by Schroder
Ventures International Life Sciences Fund II, LP1 and 367,032 shares of
Series D Preferred Stock held by Schroder Ventures International Life
Sciences Fund II, LP2. Dr. Hingge Hsu, one of our directors, is a partner of
these funds. Dr. Hsu disclaims beneficial ownership of the shares held by
these funds except to the extent of his pecuniary interest therein.
For additional information regarding the ownership of securities by executive
officers, directors and stockholders who beneficially own 5% or more of our
outstanding common stock, please see "Principal stockholders."
- --------------------------------------------------------------------------------
51
<PAGE> 54
RELATED PARTY TRANSACTIONS
- --------------------------------------------------------------------------------
LOAN TO OFFICER
In December 1996, David Binkley, our president, chief executive officer and
chief financial officer borrowed $200,000 from us, evidenced by a promissory
note secured by his residence. The note bears interest at the rate of 6.31% per
annum and is due on the earlier of December 17, 2001, the disposition of his
residence, his separation from us or ten days after the completion of this
offering.
- --------------------------------------------------------------------------------
52
<PAGE> 55
- --------------------------------------------------------------------------------
Principal stockholders
The following table shows information known to us with respect to the beneficial
ownership of our common stock as of March 31, 2000, and as adjusted to reflect
the sale of the shares of common stock offered under this prospectus by:
+ each person or group of affiliated persons who is known by us to own
beneficially 5% or more of our common stock;
+ each of our directors;
+ each executive officer listed in the "Summary compensation" table above; and
+ all of our directors and executive officers as a group.
Except as indicated in the footnotes to this table and subject to community
property laws where applicable, the persons named in the table have sole voting
and investment power with respect to all shares of our common stock shown as
beneficially owned by them. Beneficial ownership and percentage ownership are
determined in accordance with the rules of the SEC. The table below includes the
number of shares underlying options and warrants that are exercisable within 60
days from March 31, 2000, and assumes the conversion of all shares of our
preferred stock into 11,339,268 shares of our common stock prior to this
offering. It is therefore based on 14,085,789 shares of our common stock
outstanding prior to this offering and shares outstanding immediately
after this offering. The address for those individuals for which an address is
not otherwise indicated is: 887 Industrial Road, Suite G, San Carlos, CA 94070.
<TABLE>
<CAPTION>
PERCENT OWNED
PERCENT BEFORE PERCENT AFTER
BENEFICIAL OWNER TOTAL NUMBER OFFERING OFFERING
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
DIRECTORS AND NAMED EXECUTIVE OFFICERS
David Binkley(1)................................ 439,844 3.0
Lissa Goldenstein(2)............................ 43,021 *
Doug Heigel(3).................................. 72,331 *
Jan Hughes(4)................................... 280,243 1.9
Terry Long(5)................................... 88,112 *
Brook Byers..................................... -- --
Samuel Colella.................................. -- --
Hingge Hsu...................................... -- --
William Rastetter(6)............................ 58,718 *
James Schlater(7)............................... 110,000 *
All directors and Named Executive Officers as a
group (10 persons)............................ 1,092,269 7.6
FIVE PERCENT STOCKHOLDERS
Funds associated with Kleiner Perkins Caufield &
Byers(8)...................................... 3,347,230 23.2
2750 Sand Hill Road
Menlo Park, CA 94025
</TABLE>
- --------------------------------------------------------------------------------
53
<PAGE> 56
PRINCIPAL STOCKHOLDERS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERCENT OWNED
PERCENT BEFORE PERCENT AFTER
BENEFICIAL OWNER TOTAL NUMBER OFFERING OFFERING
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Funds associated with Institutional Venture
Partners(9)................................... 2,877,646 20.0
3000 Sand Hill Road
Building 2, Suite 290
Menlo Park, CA 94025
Funds associated with Robertson Stephens &
Company(10)................................... 1,489,430 10.3
555 California Street, 26th Floor
San Francisco, CA 94104
Funds associated with Schroder Ventures(11)..... 1,739,130 12.0
P.O. Box HM 1368
Hamilton, HM FX
Bermuda
</TABLE>
- -------------------------
(1) Includes 103,906 shares subject to options exercisable within 60 days of
March 31, 2000.
(2) Includes 43,021 shares subject to options exercisable within 60 days of
March 31, 2000.
(3) Includes 72,331 shares subject to options exercisable within 60 days of
March 31, 2000.
(4) Includes 4,995 shares subject to options exercisable within 60 days of
March 31, 2000.
(5) Includes 88,112 shares subject to options exercisable within 60 days of
March 31, 2000.
(6) Includes 23,333 shares subject to options exercisable within 60 days of
March 31, 2000.
(7) Includes 8,333 shares subject to options exercisable within 60 days of
March 31, 2000.
(8) Includes 3,312,615 shares held by Kleiner Perkins Caufield & Byers VII and
34,615 shares held by KPCB Life Sciences Zaibatsu Fund II. Mr. Brook Byers,
the chairman of our board of directors, is a partner of these funds. Mr.
Byers disclaims beneficial ownership of the shares held by these funds
except to the extent of his pecuniary interest therein.
(9) Includes 2,795,478 shares held by Institutional Venture Partners VI, L.P.,
57,553 shares held by Institutional Venture Management VI and 24,615 shares
held by IVP Founders Fund I. Mr. Samuel Colella, one of our directors, is a
general partner of these funds. Mr. Colella disclaims beneficial ownership
of the shares held by these funds except to the extent of his pecuniary
interest therein.
(10) Includes 871,050 shares held by RS & Co. IV, L.P., 384,615 shares held by
The Robertson Stephens Orphan Fund, L.P., 153,765 shares held by Bayview
Investors, Ltd. and 80,000 shares held by The Robertson Stephens Orphan
Offshore Fund, L.P.
(11) Includes 1,372,098 shares held by Schroder Ventures International Life
Sciences Fund II, LP1 and 367,032 shares held by Schroder Ventures
International Life Sciences Fund II, LP2. Dr. Hingge Hsu, one of our
directors, is a partner of these funds. Dr. Hsu disclaims beneficial
ownership of the shares held by these funds except to the extent of his
pecuniary interest therein.
- --------------------------------------------------------------------------------
54
<PAGE> 57
- --------------------------------------------------------------------------------
Description of capital stock
The following information describes our common stock and preferred stock, as
well as options and warrants to purchase our common stock, and provisions of our
certificate of incorporation and our bylaws, all as will be in effect upon the
closing of this offering. We intend to amend our certificate of incorporation
and by-laws prior to completion of the offering. This description is only a
summary. You should also refer to our certificate of incorporation and bylaws,
which have been filed with the SEC as exhibits to our registration statement, of
which this prospectus forms a part. The descriptions of our common stock and
preferred stock, as well as options and warrants to purchase our common stock,
reflect changes to our capital structure that will occur upon the closing of
this offering in accordance with the terms of our amended certificate of
incorporation.
Upon completion of this offering, our authorized capital stock will consist of
shares of common stock, par value $0.0001 per share, and
shares of preferred stock, par value $0.0001 per share.
COMMON STOCK
As of March 31, 2000, there were 2,746,521 shares of our common stock
outstanding and held of record by 105 stockholders. There will be
shares of our common stock outstanding upon the closing of this offering, which
gives effect to the issuance of shares of our common stock offered by
us under this prospectus and the conversion of our preferred stock discussed
below.
Each share of our common stock has identical rights and privileges in every
respect. The holders of our common stock are entitled to vote upon all matters
submitted to a vote of our stockholders and are entitled to one vote for each
share of our common stock held.
Subject to the prior rights and preferences, if any, applicable to shares of our
preferred stock or any series of our preferred stock, the holders of our common
stock are entitled to receive dividends, payable in cash, stock or otherwise, as
may be declared by our board out of any funds legally available for the payment
of dividends.
If we voluntarily or involuntarily liquidate, dissolve or wind-up, the holders
of our common stock will be entitled to receive after distribution in full of
the preferential amounts, if any, to be distributed to the holders of our
preferred stock or any series of our preferred stock, all of the remaining
assets available for distribution ratably in proportion to the number of shares
of our common stock held by them. Holders of our common stock have no
preferences or any preemptive conversion or exchange rights.
PREFERRED STOCK
As of March 31, 2000, there were 11,339,268 shares of our convertible preferred
stock outstanding. Upon the closing of this offering, all outstanding shares of
our convertible preferred stock will be automatically converted into 11,339,268
shares of our common stock and will be held of record by 43 stockholders. These
shares of our convertible preferred stock will no longer be authorized, issued
or outstanding. Our amended and restated certificate of incorporation, which
becomes effective upon the closing of this offering, authorizes the issuance of
shares of our preferred stock, par value $0.0001 per share.
Upon completion of this offering our board will be authorized to provide for the
issuance of shares of our preferred stock in one or more series, and to fix for
each series voting rights, if any, designations,
- --------------------------------------------------------------------------------
55
<PAGE> 58
DESCRIPTION OF CAPITAL STOCK
- --------------------------------------------------------------------------------
preferences and relative, participating, optional or other special rights and
such qualifications, limitations or restrictions as provided in a resolution or
resolutions adopted by the board. Our board will have the ability to authorize
the issuance of shares of our preferred stock with terms and conditions that
could discourage a takeover or other transaction that holders of some or a
majority of shares of our common stock might believe to be in their best
interests or in which holders of our common stock might receive a premium for
their shares over the then market price.
WARRANTS
As of March 31, 2000, warrants to purchase a total of 50,000 shares of our
common stock, at an exercise price of $1.20 per share, were outstanding. As of
March 31, 2000, warrants to purchase a total of 91,665 shares of our Series C
preferred stock, at an exercise price of $6.00 per share, were outstanding. The
warrants contain anti-dilution provisions providing for adjustments of the
exercise price and the number of shares underlying the warrants upon the
occurrence of certain events, including any recapitalization, reclassification,
stock dividend, stock split, stock combination or similar transaction. The
warrants expire as follow: warrants to purchase 6,802 shares of Series C
preferred stock, expires on the earlier of July 7, 2004 or the third anniversary
of the current offering; warrants to purchase 28,197 shares of Series C
preferred stock, expires on the earlier of August 12, 2004 or the third
anniversary of the current offering; warrants to purchase 36,666 shares of
Series C preferred stock, expires on the earlier of July 7, 2005 or the third
anniversary of the current offering; warrant to purchase 20,000 Shares of Series
C preferred stock, expires on the earlier of January 19, 2006 or the third
anniversary of the current offering; and warrant to purchase 50,000 shares of
common stock, expires on April 17, 2001. All of these warrants will be
exercisable immediately before this offering.
REGISTRATION RIGHTS
Under the terms of an agreement with some of our stockholders, the holders of
our common and preferred stock representing 12,330,135 shares of common stock,
on an as converted basis, are entitled to demand the registration of their
shares under the Securities Act of 1933. The holders of at least 40% of such
shares or the holders of shares worth the equivalent of $5 million, if lesser,
are entitled to demand that we register their shares under the Securities Act of
1933 subject to limitations described in the relevant agreement. We are not
required to effect more than two registrations for such holders pursuant to
these demand registration rights. These demand rights expire on either the fifth
anniversary of the effective date of this offering or, for an individual holder,
upon a holder's becoming eligible to sell, in accordance with Rule 144 of the
Securities Act of 1933 and within a three month period, all shares with
registration rights held by such holder, whichever is later. In addition, these
holders are entitled to piggyback registration rights with respect to the
registration of their shares of our common stock. If we propose to register any
shares of our common stock either for our account or for the account of other
security holders, the holders of shares having piggyback rights are entitled to
receive notice of the registration and are entitled to include their shares in
the registration, subject to some limitations. Further, at any time after we
become eligible to file a registration statement on Form S-3, a holder or
holders of shares with registration rights may require us to file registration
statements under the Securities Act of 1933 on Form S-3 with respect to their
shares of our common stock if the aggregate offering price of these shares is
expected to exceed $1,000,000. These registration rights are subject to
additional conditions and limitations, among which is the right of the
underwriters of an offering to limit the number of shares of our common stock
held by security holders with registration rights to be included in such
registration. We are generally required to bear all of the expenses of all these
registrations except selling expenses incurred on behalf of holders requesting
registration. We are not required to pay any registration expenses for Form S-3
registrations after the fourth such registration has been requested.
Registration of any of the shares of our common
- --------------------------------------------------------------------------------
56
<PAGE> 59
DESCRIPTION OF CAPITAL STOCK
- --------------------------------------------------------------------------------
stock held by security holders with registration rights would result in such
shares becoming freely tradable without restriction under the Securities Act of
1933.
ANTI-TAKEOVER EFFECTS OF PROVISIONS OF THE CERTIFICATE OF INCORPORATION, BYLAWS
AND DELAWARE LAW
Certain provisions of Delaware law and our certificate of incorporation and
bylaws could make the following transactions more difficult:
+ the acquisition of us by means of a tender offer;
+ the acquisition of us by proxy contest or other means; and
+ the removal of our incumbent officers and directors.
These provisions, summarized below, are expected to discourage certain types of
coercive takeover practices and inadequate takeover bids and to encourage
persons seeking to acquire control of us to first negotiate with us. We believe
that the benefits of increased protection of our potential ability to negotiate
with the proponent of an unfriendly or unsolicited proposal to acquire or
restructure our company outweighs the disadvantages of discouraging such
proposals because, among other things, negotiation of such proposals could
result in an improvement of their terms. The amendment of any of the following
provisions would require approval by holders of at least 66 2/3% of our
outstanding common stock.
ELECTION AND REMOVAL OF DIRECTORS
Effective upon filing of our amended and restated certificate of incorporation
upon completion of this offering, our amended and restated bylaws provide for
the division of our board of directors into three classes, as nearly equal in
number as possible, with the directors in each class serving for three-year
terms, and one class being elected each year by our stockholders. This system of
electing and removing 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 incumbency of our board of directors, as it generally makes it more
difficult for stockholders to replace a majority of the directors. Further, our
amended and restated certificate of incorporation to be filed upon completion of
this offering and restated bylaws do not provide for cumulative voting in the
election of directors.
STOCKHOLDER MEETINGS
Under our amended and restated certificate of incorporation and amended and
restated bylaws, only our board of directors, chairman of the board or chief
executive officer may call special meetings of stockholders. Our restated bylaws
establish advance notice procedures with respect to stockholder proposals and
the nomination of candidates for election as directors, other than nominations
made by or at the direction of the board of directors or a committee thereof. In
addition, our amended and restated certificate of incorporation eliminates the
right of stockholders to act by written consent without a meeting and eliminates
cumulative voting.
UNDESIGNATED PREFERRED STOCK
The authorization of undesignated preferred stock makes it possible for the
board of directors to issue preferred stock with voting or other rights or
preferences that could impede the success of any attempt to change control of
us. These and other provisions may have the effect of deterring or delaying
hostile takeovers or delaying changes in control or management.
- --------------------------------------------------------------------------------
57
<PAGE> 60
DESCRIPTION OF CAPITAL STOCK
- --------------------------------------------------------------------------------
SECTION 203
We are subject to Section 203 of the Delaware General Corporation Law. In
general, the statute prohibits a Delaware corporation from engaging in any
business combination with any interested stockholder for a period of three years
following the date that the stockholder became an interested stockholder unless:
+ prior to the date, the board of directors of the corporation approved either
the business combination or the transaction that resulted in the stockholder
becoming an interested stockholder;
+ upon consummation of the transaction that resulted in the stockholder's
becoming an interested stockholder, the interested stockholder owned at least
85% of the voting stock of the corporation outstanding at the time the
transaction commenced, excluding those shares owned by persons who are
directors or officers, and employee stock plans in which employee
participants do not have the right to determine confidentially whether shares
held subject to the plan will be tendered in a tender or exchange offer; or
+ on or subsequent to the date, the business combination is approved by the
board of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at least
two-thirds of the outstanding voting stock that is not owned by the
interested stockholder.
Section 203 defines "business combination" to include:
+ any merger or consolidation involving the corporation and the interested
stockholder;
+ any sale, transfer, pledge or other disposition involving the interested
stockholder of 10% or more of the assets of the corporation;
+ subject to exceptions, any transaction that results in the issuance or
transfer by the corporation of any stock of the corporation to the interested
stockholder; or
+ the receipt by the interested stockholder of the benefit of any loans,
advances, guarantees, pledges or other financial benefits provided by or
through the corporation.
In general, Section 203 defines an interested stockholder as any entity or
person beneficially owning 15% or more of the outstanding voting stock of the
corporation and any entity or person affiliated with or controlling or
controlled by the entity or person.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common stock is U.S. Stock Transfer.
- --------------------------------------------------------------------------------
58
<PAGE> 61
- --------------------------------------------------------------------------------
Shares eligible for future sale
Prior to this offering, there has been no public market for our common stock.
The market price of our common stock after this offering could decline as a
result of the sale of a large number of shares of our common stock in the
market, or the perception that such sales could occur. Such sales also could
make it more difficult for us to sell equity securities in the future at a time
and price that we deem appropriate.
Upon completion of this offering, shares of our common stock will be
outstanding, based upon the number of shares outstanding as of March 31, 2000.
The shares of our common stock sold in this offering will be immediately
eligible for resale in the public market without restriction under the
Securities Act, except that any shares purchased in this offering by our
"affiliates," as that term is defined in Rule 144 under the Securities Act of
1933, may generally be resold only in compliance with applicable provisions of
Rule 144. The remaining shares of our common stock are "restricted securities,"
as defined under the Securities Act of 1933. After this offering approximately
of these restricted shares will be immediately eligible for sale in the
public market without restriction pursuant to Rule 144(k). Beginning 90 days
after the date of this prospectus, approximately additional restricted
shares, exclusive of the Rule 701 shares described below, will become eligible
for resale in the public market, subject to compliance with applicable
provisions of Rule 144. Substantially all of these shares are subject to the
lock-up agreements described below.
In general, under Rule 144 of the Securities Act of 1933, a person or persons
whose shares are required to be aggregated, including an affiliate, whose shares
have been owned for at least one year is entitled to sell, within any
three-month period after the date of this prospectus, a number of shares that
does not exceed the greater of 1% of the then outstanding shares of common
stock -- approximately shares immediately after this offering -- or the
average weekly trading volume in our common stock during the four calendar weeks
preceding the date on which notice of such sale is filed, subject to certain
restrictions. In addition, a person who is not deemed to have been an affiliate
of ours at any time during the 90 days preceding a sale and whose shares have
been beneficially owned by nonaffiliates for at least two years would be
entitled to sell such shares under Rule 144(k) without regard to the
requirements described above. To the extent that shares were acquired from one
of our affiliates, such person's holding period for the purpose of effecting a
sale under Rule 144 commences on the date of transfer from the affiliate.
The holders of % of our common stock, including all of our directors and
officers, together with the holders of options to purchase shares of
common stock and the holders of warrants to purchase shares of common
stock, have entered into lock-up agreements under which they have agreed with
the underwriters not to offer, sell, contract to sell, hedge or otherwise
dispose of, directly or indirectly, or file with the SEC a registration
statement under the Securities Act relating to, any of its common stock or
securities convertible into or exchangeable for shares of common stock during
the period from the date of this prospectus continuing through the date 180 days
after the date of this prospectus, without the prior written consent of Warburg
Dillon Read LLC.
Rule 701 under the Securities Act of 1933 provides an exemption from
registration for offers and sales of securities issued pursuant to certain
compensatory benefit plans, such as our stock option and stock incentive plans,
by a company not subject to the reporting requirements of the Securities
Exchange Act of 1934. Securities issued pursuant to Rule 701 are defined as
"restricted securities" for purposes of Rule 144. However, 90 days after the
issuer becomes subject to the reporting provisions of the Exchange Act, the Rule
144 resale restrictions, except for the broker's transaction requirement, are
inapplicable for non-affiliates. Affiliates are subject to all Rule 144
restrictions after this 90-day period
- --------------------------------------------------------------------------------
59
<PAGE> 62
SHARES ELIGIBLE FOR FUTURE SALE
- --------------------------------------------------------------------------------
other than the holding period restriction. There are currently outstanding
shares of our common stock that will qualify for sale under Rule 701.
In addition, shares underlying currently outstanding options will
qualify for sale under Rule 701. Of these option shares, we expect approximately
will be vested 90 days after this offering. Substantially all of these
Rule 701 shares are subject to the lock-up agreements described below.
Upon the closing of this offering, we intend to file a registration statement to
register for resale the shares of common stock reserved for issuance
under our stock option plans. We expect the registration statement to become
effective immediately upon filing. Shares issued upon the exercise of stock
options granted under our stock option plans will be eligible for resale in the
public market from time to time subject to vesting and, in the case of certain
options, the expiration of the lock-up agreements referred to above.
Stockholders holding warrants to purchase 91,665 shares of preferred stock and
50,000 shares of common stock have the right, subject to various conditions and
limitations, to include their shares in registration statements relating to our
securities. By exercising their registration rights and causing a large number
of shares to be registered and sold in the public market, these holders may
cause the price of the common stock to fall. In addition, any demand to include
such shares in our registration statement could have a material adverse effect
on our ability to raise needed capital. See "Management -- Benefit plans,"
"Principal stockholders," "Shares eligible for future sale" and "Underwriting."
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60
<PAGE> 63
- --------------------------------------------------------------------------------
Underwriting
We and the underwriters named below have entered into an underwriting agreement
concerning the shares we are offering. Subject to conditions, each underwriter
has severally agreed to purchase the number of shares indicated in the following
table. Warburg Dillon Read LLC, ING Barings LLC and SG Cowen Securities
Corporation are the representatives of the underwriters.
<TABLE>
<CAPTION>
NUMBER
UNDERWRITERS OF SHARES
<S> <C>
- -----------------------------------------------------------------------
Warburg Dillon Read LLC.....................................
ING Barings LLC.............................................
SG Cowen Securities Corporation.............................
--------
Total.............................................
========
</TABLE>
If the underwriters sell more shares than the total number of shares set forth
in the table above, the underwriters have a 30-day option to buy from us up to
an additional shares at the initial public offering price less the
underwriting discounts and commissions to cover these sales. If shares are
purchased under this option, the underwriters will severally purchase the shares
in approximately the same proportion as set forth in the table above.
The following table shows the per share and total underwriting discounts and
commissions we will pay to the underwriters. These amounts are shown assuming
both no exercise and full exercise of the underwriters' option to purchase up to
additional shares.
<TABLE>
<CAPTION>
NO EXERCISE FULL EXERCISE
<S> <C> <C>
- --------------------------------------------------------------------------------------------
Per share................................................... $ $
Total.................................................. $ $
</TABLE>
We estimate that the total expenses of the offering payable by us, excluding
underwriting discounts and commissions, will be approximately $ .
Shares sold by the underwriters to the public will initially be offered at the
initial public offering price set forth on the cover of this prospectus. Any
shares sold by the underwriters to securities dealers may be sold at a discount
of up to $ per share from the initial public offering price. Any of these
securities dealers may resell any shares purchased from the underwriters to
other brokers or dealers at a discount of up to $ per share from the initial
public offering price. If all the shares are not sold at the initial public
offering price, the representatives may change the offering price and the other
selling terms.
The underwriters have informed us that they do not expect discretionary sales to
exceed 5% of the shares of common stock to be offered.
We, our directors, officers and certain of our stockholders have agreed with the
underwriters not to offer, sell, contract to sell, hedge or otherwise dispose
of, directly or indirectly, or file with the SEC a registration statement under
the Securities Act relating to, any of our common stock or securities
convertible into or exchangeable for shares of our common stock during the
period beginning on the date of this prospectus continuing through the date 180
days after the date of this prospectus, without the prior written consent of
Warburg Dillon Read LLC.
The underwriters have reserved for sale, at the initial public offering price,
up to shares of our common stock being offered for sale to our customers
and business partners. At the discretion of our management, other parties,
including our employees, may participate in our reserved share program.
- --------------------------------------------------------------------------------
61
<PAGE> 64
UNDERWRITING
- --------------------------------------------------------------------------------
The number of shares available for sale to the general public in the offering
will be reduced to the extent these persons purchase reserved shares. Any
reserved shares not so purchased will be offered by the underwriters to the
general public on the same terms as the other shares in this offering.
Prior to this offering, there has been no public market for our common stock.
The initial public offering price will be determined by negotiation between us
and the representatives of the underwriters. The principal factors to be
considered by the representatives and us in determining the initial public
offering price include:
+ the information set forth in this prospectus and otherwise available to the
representatives;
+ the history and the prospects for the industry in which we compete;
+ the ability of our management;
+ our prospects for future earnings, the present state of our development, and
our current financial position;
+ the general condition of the securities markets at the time of this offering;
and
+ the recent market prices of, and the demand for, publicly traded common stock
of generally comparable companies.
In connection with the offering, the underwriters may purchase and sell shares
of our common stock in the open market. These transactions by the underwriters
may include short sales, stabilizing transactions and purchases to cover
positions created by short sales. Short sales involve the sale by the
underwriters of a greater number of our shares than they are required to
purchase in the offering. Stabilizing transactions consist of bids or purchases
made for the purpose of preventing or retarding a decline in the market price of
our common stock while our offering is in progress.
The underwriters also may impose a penalty bid. This occurs when a particular
underwriter repays to the underwriters a portion of the underwriting discount
received by it because the representatives have repurchased shares sold by or
for the account of that underwriter in stabilizing or short covering
transactions.
These activities by the underwriters may stabilize, maintain or otherwise affect
the market price of our common stock. As a result, the price of our common stock
may be higher than the price that otherwise might exist in the open market. If
these activities are commenced, they may be discontinued by the underwriters at
any time. These transactions may be effected by the underwriters on the Nasdaq
National Market, in the over-the-counter market or otherwise.
We have agreed to indemnify the several underwriters against some liabilities,
including liabilities under the Securities Act of 1933 and to contribute to
payments that the underwriters may be required to make in respect thereof.
- --------------------------------------------------------------------------------
62
<PAGE> 65
- --------------------------------------------------------------------------------
Legal matters
The validity of our common stock offered hereby will be passed upon for us by
Wilson Sonsini Goodrich and Rosati P.C., Palo Alto, California. As of the date
of this prospectus, an investment partnership composed of certain members of and
persons associated with Wilson Sonsini Goodrich & Rosati P.C., in addition to an
individual member of Wilson Sonsini Goodrich & Rosati P.C., beneficially owns an
aggregate of 3,385 shares of our preferred stock. Dewey Ballantine LLP, New
York, New York, is acting as counsel for the underwriters in connection with
various legal matters relating to the shares of common stock offered by this
prospectus.
Experts
Ernst & Young LLP, independent auditors, have audited our consolidated 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 this prospectus 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 with the SEC a registration statement on Form S-1 (including
exhibits, schedules and amendments) under the Securities Act with respect to the
shares of common stock to be sold in this offering. This prospectus does not
contain all the information set forth in the registration statement. For further
information with respect to us and the shares of common stock to be sold in this
offering, reference is made to the registration statement. Statements contained
in this prospectus as to the contents of any contract, agreement or other
document referred to are not necessarily complete. Whenever a reference is made
in this prospectus to any contract or other document of ours, the reference may
not be complete, and you should refer to the exhibits that are apart of the
registration statement for a copy of the contract or document.
You may read and copy all or any portion of the registration statement or any
other information we file at the SEC's public reference room at 450 Fifth
Street, N.W., Washington, D.C. 20549. You can request copies of these documents,
upon payment of a duplicating fee, by writing to the SEC. Please call the SEC at
1-800-SEC-0330 for further information on the operation of the public reference
rooms. Our SEC filings, including the registration statement, are also available
to you on the SEC's web site http://www.sec.gov.
As a result of this offering, we will become subject to the information and
reporting requirements of the Securities Exchange Act, and, in accordance with
those requirements, will file periodic reports, proxy statements and other
information with the SEC.
This prospectus includes statistical data that were obtained from industry
publications. These industry publications generally indicate that the authors of
these publications have obtained information from sources believed to be
reliable, but do not guarantee the accuracy and completeness of their
information. While we believe these industry publications to be reliable, we
have not independently verified their data.
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63
<PAGE> 66
ARGONAUT TECHNOLOGIES, INC.
- --------------------------------------------------------------------------------
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
- ------------------------------------------------------------------
<S> <C>
Report of Independent Auditors.............................. F-2
Consolidated Balance Sheets................................. F-3
Consolidated Statements of Operations....................... F-4
Consolidated Statement of Stockholders' Equity.............. F-5
Consolidated Statements of Cash Flows....................... F-6
Notes to Consolidated Financial Statements.................. F-7
</TABLE>
- --------------------------------------------------------------------------------
F- 1
<PAGE> 67
ARGONAUT TECHNOLOGIES, INC.
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Argonaut Technologies, Inc.
We have audited the accompanying consolidated balance sheets of Argonaut
Technologies, Inc. as of December 31, 1998 and 1999, and the related
consolidated 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 consolidated financial position of Argonaut
Technologies, Inc. at December 31, 1998 and 1999, and the consolidated 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.
ERNST & YOUNG LLP
Palo Alto, California
April 18, 2000
- --------------------------------------------------------------------------------
F- 2
<PAGE> 68
ARGONAUT TECHNOLOGIES, INC.
- --------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA AT
DECEMBER 31, MARCH 31, MARCH 31,
1998 1999 2000 2000
- ----------------------------------------------------------------------------------------------------
(UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents..................... $ 2,261 $ 4,946 $ 4,000
Short-term investments........................ - 6,127 5,137
Accounts receivable, less allowance for
doubtful accounts of $50 in 1998, 1999, and
2000........................................ 2,601 3,462 2,295
Inventories................................... 2,191 2,110 2,500
Prepaid expenses and other current assets..... 413 589 579
-------- -------- --------
Total current assets............................ 7,466 17,234 14,511
Property and equipment, net..................... 1,651 1,620 1,773
Note receivable from officer.................... 200 200 200
Other assets.................................... 46 26 26
-------- -------- --------
$ 9,363 $ 19,080 $ 16,510
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.............................. $ 615 $ 865 $ 767
Accrued compensation.......................... 703 756 555
Other accrued liabilities..................... 828 657 706
Deferred revenue.............................. 1,046 2,608 2,066
Current portion of capital lease
obligations................................. 491 303 273
Current portion of long-term debt............. 668 2,984 2,839
-------- -------- --------
Total current liabilities....................... 4,351 8,173 7,206
Noncurrent portion of capital lease
obligations................................... 772 468 408
Noncurrent portion of long-term debt............ 3,375 1,391 1,244
Commitments
Stockholders' equity:
Convertible preferred stock -- $0.0001 par
value; 20,800,000 shares authorized at
December 31, 1998 and 26,200,000 shares
authorized at December 31, 1999 and at March
31, 2000, issuable in series; 8,730,573,
11,339,268, and 11,339,268 shares issued and
outstanding at December 31, 1998 and 1999,
and at March 31, 2000, respectively (none
pro forma); aggregate liquidation preference
of $35,027 at December 31, 1999 and at March
31, 2000 (none pro forma)................... 1 1 1 $ --
Common stock -- $0.0001 par value; 26,800,000
shares authorized at December 31, 1998 and
32,200,000 shares authorized at December 31,
1999 and at March 31, 2000 (
shares pro forma); 2,299,937, 2,662,039, and
2,746,521 shares issued and outstanding at
December 31, 1998 and 1999, and at March 31,
2000, respectively (14,085,789 shares pro
forma)...................................... -- -- -- 1
Additional paid-in capital.................... 20,179 39,069 39,759 39,759
Deferred stock compensation................... -- (3,106) (3,147) (3,147)
Accumulated deficit........................... (19,315) (26,918) (28,935) (28,935)
Other comprehensive income (loss)............. -- 2 (26) (26)
-------- -------- -------- --------
Total stockholders' equity...................... 865 9,048 7,652 $ 7,652
-------- -------- -------- ========
$ 9,363 $ 19,080 $ 16,510
======== ======== ========
</TABLE>
See accompanying notes.
- --------------------------------------------------------------------------------
F- 3
<PAGE> 69
ARGONAUT TECHNOLOGIES, INC.
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
1997 1998 1999 1999 2000
- -----------------------------------------------------------------------------------------------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net sales........................................... $ 5,826 $12,076 $10,558 $ 2,981 $ 3,564
Costs and expenses:
Cost of sales..................................... 3,155 5,608 4,689 1,241 1,399
Research and development.......................... 4,292 4,922 4,180 975 1,261
Selling, general and administrative............... 4,795 7,108 9,125 1,990 2,931
------- ------- ------- ------- -------
Total costs and expenses.................. 12,242 17,638 17,994 4,206 5,591
------- ------- ------- ------- -------
Loss from operations................................ (6,416) (5,562) (7,436) (1,225) (2,027)
Other income (expenses):
Interest and other income......................... 406 451 531 12 197
Interest and other expense........................ (190) (545) (698) (184) (187)
------- ------- ------- ------- -------
Net loss............................................ $(6,200) $(5,656) $(7,603) $(1,397) $(2,017)
======= ======= ======= ======= =======
Net loss per share, basic and diluted............... $ (3.97) $ (2.91) $ (3.12) $ (0.60) $ (0.76)
======= ======= ======= ======= =======
Weighted-average shares used in computing net loss
per share, basic and diluted...................... 1,560 1,943 2,434 2,326 2,671
======= ======= ======= ======= =======
Pro forma net loss per share, basic and diluted
(unaudited)....................................... $ (0.59) $ (0.14)
======= =======
Weighted-average shares used in computing pro forma
net loss per share, basic and diluted
(unaudited)....................................... 12,799 14,010
======= =======
</TABLE>
See accompanying notes.
- --------------------------------------------------------------------------------
F- 4
<PAGE> 70
ARGONAUT TECHNOLOGIES, INC.
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
ADDITIONAL DEFERRED OTHER
PREFERRED STOCK COMMON STOCK PAID-IN STOCK ACCUMULATED COMPREHENSIVE
SHARES AMOUNT SHARES AMOUNT CAPITAL COMPENSATION DEFICIT INCOME (LOSS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------------
Balance at December 31,
1996....................... 7,550,573 $1 1,998,708 $-- $14,115 $ -- $ (7,459) $ --
Net loss and comprehensive
loss..................... -- -- -- -- -- -- (6,200) --
Issuance of Series C
convertible preferred
stock.................... 1,180,000 -- -- -- 5,872 -- -- --
Issuance of common stock
upon exercise of stock
options, net of
repurchase............... -- -- 4,798 -- 35 -- -- --
---------- -- ---------- -- ------- ------- -------- ----
Balances at December 31,
1997....................... 8,730,573 1 2,003,506 -- 20,022 -- (13,659) --
Net loss and comprehensive
loss..................... -- -- -- -- -- -- (5,656) --
Issuance of common stock
upon exercise of stock
options, net of
repurchase............... -- -- 296,431 -- 114 -- -- --
Issuance of warrants for
loan arrangement......... -- -- -- -- 41 -- -- --
Compensation expense
related to common stock
and options to
consultants.............. -- -- -- -- 2 -- -- --
---------- -- ---------- -- ------- ------- -------- ----
Balances at December 31,
1998....................... 8,730,573 1 2,299,937 -- 20,179 -- (19,315) --
Net loss................... -- -- -- -- -- -- (7,603) --
Other comprehensive income:
Foreign currency
translation
adjustments............ -- -- -- -- -- -- -- 2
Total comprehensive
loss................... -- -- -- -- -- -- -- --
Issuance of common stock
upon exercise of stock
options, net of
repurchase............... -- -- 327,102 -- 101 -- -- --
Issuance of common stock to
director in exchange for
promissory note.......... -- -- 15,000 -- 15 -- -- --
Issuance of common stock as
charitable donation...... -- -- 20,000 -- 20 -- -- --
Issuance of Series D
convertible preferred
stock.................... 2,608,695 -- -- -- 14,961 -- -- --
Issuance of warrant for
loan arrangement......... -- -- -- -- 22 -- -- --
Compensation expense
related to issuance of
options to consultants... -- -- -- -- 12 -- -- --
Deferred stock
compensation............. -- -- -- -- 3,759 (3,759) -- --
Amortization of deferred
stock compensation....... -- -- -- -- -- 653 -- --
---------- -- ---------- -- ------- ------- -------- ----
Balances at December 31,
1999....................... 11,339,268 1 2,662,039 -- 39,069 (3,106) (26,918) 2
Net loss (unaudited)....... -- -- -- -- -- -- (2,017) --
Other comprehensive income:
Foreign currency
translation adjustments
(unaudited)............ -- -- -- -- -- -- -- (28)
Total comprehensive loss
(unaudited)............ -- -- -- -- -- -- -- --
Issuance of common stock
upon exercise of stock
options (unaudited)...... -- -- 84,482 -- 43 -- -- --
Compensation related to
issuance of options to
consultants
(unaudited).............. -- -- -- -- 107 -- -- --
Deferred stock
compensation............. -- -- -- -- 540 (540) -- --
Amortization of deferred
stock compensation....... -- -- -- -- -- 499 -- --
---------- -- ---------- -- ------- ------- -------- ----
Balances at March 31, 2000
(unaudited)................ 11,339,268 $1 2,746,521 $-- $39,759 $(3,147) $(28,935) $(26)
========== == ========== == ======= ======= ======== ====
<CAPTION>
TOTAL
STOCKHOLDERS'
EQUITY
<S> <C>
- -----------------------------
Balance at December 31,
1996....................... $ 6,657
Net loss and comprehensive
loss..................... (6,200)
Issuance of Series C
convertible preferred
stock.................... 5,872
Issuance of common stock
upon exercise of stock
options, net of
repurchase............... 35
-------
Balances at December 31,
1997....................... 6,364
Net loss and comprehensive
loss..................... (5,656)
Issuance of common stock
upon exercise of stock
options, net of
repurchase............... 114
Issuance of warrants for
loan arrangement......... 41
Compensation expense
related to common stock
and options to
consultants.............. 2
-------
Balances at December 31,
1998....................... 865
Net loss................... (7,603)
Other comprehensive income:
Foreign currency
translation
adjustments............ 2
-------
Total comprehensive
loss................... (7,601)
Issuance of common stock
upon exercise of stock
options, net of
repurchase............... 101
Issuance of common stock to
director in exchange for
promissory note.......... 15
Issuance of common stock as
charitable donation...... 20
Issuance of Series D
convertible preferred
stock.................... 14,961
Issuance of warrant for
loan arrangement......... 22
Compensation expense
related to issuance of
options to consultants... 12
Deferred stock
compensation............. --
Amortization of deferred
stock compensation....... 653
-------
Balances at December 31,
1999....................... 9,048
Net loss (unaudited)....... (2,017)
Other comprehensive income:
Foreign currency
translation adjustments
(unaudited)............ (28)
-------
Total comprehensive loss
(unaudited)............ (2,045)
Issuance of common stock
upon exercise of stock
options (unaudited)...... 43
Compensation related to
issuance of options to
consultants
(unaudited).............. 107
Deferred stock
compensation............. --
Amortization of deferred
stock compensation....... 499
-------
Balances at March 31, 2000
(unaudited)................ $ 7,652
=======
</TABLE>
See accompanying notes.
- --------------------------------------------------------------------------------
F- 5
<PAGE> 71
ARGONAUT TECHNOLOGIES, INC.
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
1997 1998 1999 1999 2000
- -------------------------------------------------------------------------------------------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net loss........................................ $(6,200) $(5,656) $(7,603) $(1,397) $(2,017)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization................. 590 676 714 187 182
Stock compensation............................ -- -- 665 -- 606
Issuance of equity for noncash benefits....... 7 5 42 -- --
Change in cumulative translation adjustment... -- -- 2 (9) (28)
Changes in assets and liabilities:
Accounts receivable........................ (125) (1,420) (861) 471 1,167
Inventories................................ (537) (1,019) 81 (220) (390)
Prepaid expenses and other current
assets................................... (195) (132) (176) 24 10
Other assets............................... (17) (15) 20 -- --
Accounts payable........................... 44 51 250 92 (98)
Accrued compensation....................... 177 221 53 61 (201)
Other accrued liabilities.................. 210 440 (171) (8) 49
Deferred revenue........................... 158 (423) 1,584 188 (542)
------- ------- ------- ------- -------
Net cash used in operating activities........... (5,888) (7,272) (5,400) (611) (1,262)
------- ------- ------- ------- -------
INVESTING ACTIVITIES
Capital expenditures, net....................... (306) (430) (690) (244) (335)
Purchase of short-term investments.............. (974) -- (6,127) -- --
Sale of short-term investments.................. -- 997 -- -- 990
------- ------- ------- ------- -------
Net cash provided by (used in) investing
activities.................................... (1,280) 567 (6,817) (244) 655
------- ------- ------- ------- -------
FINANCING ACTIVITIES
Proceeds from long-term debt.................... 1,500 3,000 1,000 1,000 --
Repayment of long-term debt..................... -- (457) (668) (145) (292)
Principal payments on capital lease
obligations................................... (244) (359) (492) (117) (90)
Net proceeds from issuances of common stock..... 28 114 101 8 43
Net proceeds from issuance of convertible
preferred stock............................... 5,872 -- 14,961 -- --
------- ------- ------- ------- -------
Net cash provided by financing activities....... 7,156 2,298 14,902 746 (339)
------- ------- ------- ------- -------
Net increase (decrease) in cash and cash
equivalents................................... (12) (4,407) 2,685 (109) (946)
Cash and cash equivalents at beginning of
period........................................ 6,680 6,668 2,261 2,261 4,946
------- ------- ------- ------- -------
Cash and cash equivalents at end of period...... $ 6,668 $ 2,261 $ 4,946 $ 2,152 $ 4,000
======= ======= ======= ======= =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid................................... $ 155 $ 325 $ 577 $ 181 $ 135
======= ======= ======= ======= =======
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
FINANCING ACTIVITIES
Equipment acquired under capital leases......... $ 565 $ 481 $ -- $ -- $ --
======= ======= ======= ======= =======
Options and warrants for services............... $ -- $ 43 $ 22 $ 22 $ --
======= ======= ======= ======= =======
Common stock for promissory note................ $ -- $ -- $ 15 $ -- $ --
======= ======= ======= ======= =======
Deferred stock compensation..................... $ -- $ -- $ 3,759 $ -- $ 540
======= ======= ======= ======= =======
</TABLE>
See accompanying notes.
- --------------------------------------------------------------------------------
F- 6
<PAGE> 72
ARGONAUT TECHNOLOGIES, INC.
DECEMBER 31, 1999
(INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 2000 IS UNAUDITED)
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS AND BASIS OF PRESENTATION
Argonaut Technologies, Inc. (the "Company") was incorporated in the state of
Delaware on November 10, 1994. The Company is a pioneer in the development,
manufacturing and marketing of innovative products that enable chemists to use
high speed parallel synthesis for the development of new drugs. Parallel
synthesis is a process by which multiple compounds are created simultaneously.
The Company's products include a variety of parallel chemical synthesizers and
reagents and enable chemists to increase their productivity, accelerate the drug
development process and reduce costs. The Company's products are used for
chemistry development in the pharmaceutical, biotechnology, life sciences, and
chemical research fields worldwide. Its principal markets are in the United
States, Western Europe, and the Far East.
The Company has two wholly owned subsidiaries, Argonaut Technologies KK in Japan
and Argonaut Technologies AG in Switzerland.
The Company's current operating plan anticipates that the Company will require
additional capital to fund its operations, continue its research and development
programs, and build its sales and marketing organization prior to reaching
profitability. To date, the Company has financed its operations with proceeds
from private equity offerings, long-term debt, and from equipment leases and
other financing arrangements. The Company plans to seek additional funding
through public or private financing arrangements with third parties. Should the
Company fail to raise additional funding, it will be required to delay, reduce
the scope of, or eliminate its operations or obtain funds through arrangements
with collaborative partners or others that may require the Company to relinquish
rights to certain technologies or products that the Company may otherwise seek
to retain.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the assets and liabilities of the
Company and its wholly owned subsidiaries, Argonaut Technologies KK and Argonaut
Technologies AG. All significant intercompany accounts and transactions have
been eliminated on consolidation.
INTERIM FINANCIAL INFORMATION
The financial information at March 31, 2000 and for the three months ended March
31, 1999 and 2000 is unaudited but, in the opinion of management, has been
prepared on the same basis as the annual financial statements and includes all
adjustments (consisting only of normal recurring adjustments) that the Company
considers necessary for a fair presentation of the financial position at such
date and the operating results and cash flows for such periods. Results for the
three months ended March 31, 2000 are not necessarily indicative of the results
to be expected for any subsequent period.
UNAUDITED PRO FORMA INFORMATION
If the Company's initial public offering ("IPO") as described in Note 12 is
consummated, all of the preferred stock outstanding will automatically be
converted into common stock. The unaudited pro forma stockholders' equity at
March 31, 2000 has been adjusted for the assumed conversion of preferred stock
based on the shares of preferred stock outstanding at March 31, 2000.
- --------------------------------------------------------------------------------
F- 7
<PAGE> 73
ARGONAUT TECHNOLOGIES, INC.
DECEMBER 31, 1999
(INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 2000 IS UNAUDITED)
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOREIGN CURRENCY TRANSLATION
The Company translates the assets and liabilities of its foreign subsidiaries
stated in local functional currencies to U.S. dollars at the rates of exchange
in effect at the end of the period. Revenues and expenses are translated using
rates of exchange in effect during the period. Gains and losses from translation
of financial statements denominated in foreign currencies, if material, are
included in stockholders' equity.
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 these estimates.
CASH, CASH EQUIVALENTS, AND SHORT-TERM INVESTMENTS
The Company invests its excess cash in deposits, money market accounts, and high
quality marketable debt securities. The Company considers all highly liquid
investments with a maximum original maturity of 90 days or less at the time of
purchase to be cash equivalents.
The Company accounts for its investments in marketable securities in accordance
with Statement of Financial Accounting Standards No. 115, "Accounting for
Certain Investments in Debt and Equity Securities" ("SFAS 115").
Under SFAS 115, all affected debt and equity securities must be stated at fair
value and classified as held-to-maturity, trading, or available-for-sale.
Management determines the appropriate classification of securities at the time
of purchase and reevaluates such designation as of each balance sheet date.
All investments in debt securities have been designated as available-for-sale.
Available-for-sale securities are carried at fair value, with unrealized gains
and losses reported as a separate component of stockholders' equity, if
material. Realized gains and losses and declines in value judged to be other-
than-temporary, if any, on available-for-sale securities are included in other
income. The cost of securities sold is based on the specific identification
method. Interest on securities classified as available-for-sale is included in
interest income.
REVENUE RECOGNITION
The Company recognizes revenue when earned. For products with no future
obligation, revenue is recognized upon shipment. For those products where the
Company has obligations to provide installation services, revenue is recognized
upon installation. Sales which require customer acceptance or have rights of
return are not recognized as revenue until the requirements have been met or
rights of return have expired.
The Company has entered into agreements with certain customers whereby the
customers provide funds for the development of new products or product
enhancements. Generally the amount paid by the customers can be applied toward
the purchase of products from the Company. These amounts have been recorded as
deferred revenue in the accompanying balance sheet and will be recognized when
earned.
- --------------------------------------------------------------------------------
F- 8
<PAGE> 74
ARGONAUT TECHNOLOGIES, INC.
DECEMBER 31, 1999
(INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 2000 IS UNAUDITED)
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
ADVERTISING COSTS
Advertising costs are accounted for as expenses in the period in which they are
incurred. Advertising expense for 1997, 1998, and 1999 was $195,000, $243,000,
and $274,000, respectively, and $122,000 for the three months ended March 31,
2000.
INVENTORIES
Inventories are stated at the lower of standard cost (which approximates actual
costs on a first-in, first-out cost method) or market value.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost less accumulated depreciation and
amortization. Depreciation and amortization are calculated using the
straight-line method over the estimated useful lives of the assets, which range
from two to five years. Leasehold improvements are amortized over the shorter of
the lease term or the estimated useful life.
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"), the Company 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 it carrying amount.
Impairment, if any, is assessed using discounted cash flows. Through March 31,
2000, there have been no such losses.
CONCENTRATIONS OF RISK
The Company outsources part of its manufacturing process to third party
contractors. There are no other third party contractors who could readily assume
this manufacturing function on short notice. Any delay in production could
result in failure to meet customer demand.
ACCOUNTING FOR STOCK-BASED COMPENSATION
As permitted by Statement of Financial Accounting Standards No. 123, "Accounting
for Stock-Based Compensation" ("SFAS 123"), the Company has elected to continue
to account for its 1995 Incentive Stock Plan and issuances of restricted stock
to employees in accordance with the provisions of Accounting Principles Board
No. 25, "Accounting for Stock Issued to Employees" ("APB 25") and related
interpretations. Pro forma disclosures required by SFAS 123 are included in Note
8.
COMPREHENSIVE LOSS
Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive
Income" ("SFAS 130"), requires unrealized gains or losses on the Company's
available-for-sale securities and foreign currency translation adjustments to be
included as part of total comprehensive loss. Total comprehensive loss has been
disclosed in the consolidated statement of stockholders' equity.
NET LOSS PER SHARE
Net loss per share has been computed according to the Financial Accounting
Standards No. 128, "Earnings Per Share," which requires disclosure of basic and
diluted earnings per share. Basic earnings
- --------------------------------------------------------------------------------
F- 9
<PAGE> 75
ARGONAUT TECHNOLOGIES, INC.
DECEMBER 31, 1999
(INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 2000 IS UNAUDITED)
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
per share excludes any dilutive effects of options, shares subject to
repurchase, warrants, and convertible securities. Diluted earnings per share
includes the impact of potentially dilutive securities (calculated using the
treasury stock method). Following the guidance given by the Securities and
Exchange Commission Staff Accounting Bulletin No. 98, common stock and preferred
stock that has been issued or granted for nominal consideration prior to the
anticipated effective date of the initial public offering must be included in
the calculation of basic and diluted net loss per common share as if these
shares had been outstanding for all periods presented. To date, the Company has
not issued or granted shares for nominal consideration.
Pro forma net loss per share includes shares issuable upon the conversion of
outstanding shares of 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 (in
thousands):
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
1997 1998 1999 1999 2000
- -------------------------------------------------------------------------------------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Basic and diluted:
Weighted-average shares of common stock
outstanding.............................. 1,923 2,084 2,434 2,326 2,671
Less weighted-average shares subject to
repurchase............................... (363) (141) -- -- --
----- ----- ------ ----- ------
Weighted-average shares used in net loss per
share, basic and diluted................. 1,560 1,943 2,434 2,326 2,671
===== ===== =====
Adjustment to reflect weighted-average
effect of assumed conversions of
preferred stock (unaudited).............. 10,365 11,339
------ ------
Weighted-average shares used in pro forma
net loss per share, basic and diluted
(unaudited).............................. 12,799 14,010
====== ======
</TABLE>
During all periods presented, the Company had securities outstanding which could
potentially dilute basic earnings per share in the future, but were excluded
from the computation of diluted net loss per share, as their effect would have
been antidilutive. These outstanding securities consist of the following (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1998 1999 1999 2000
- -------------------------------------------------------------------------------------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Convertible preferred stock................... 8,731 8,731 11,339 8,731 11,339
Outstanding options........................... 1,389 1,620 2,017 1,548 2,006
Warrants...................................... 40 122 142 142 142
</TABLE>
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative Financial
Instruments and Hedging
- --------------------------------------------------------------------------------
F- 10
<PAGE> 76
ARGONAUT TECHNOLOGIES, INC.
DECEMBER 31, 1999
(INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 2000 IS UNAUDITED)
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Activities" ("SFAS 133") which provides a comprehensive and consistent standard
for the recognition and measurement of derivatives and hedging activities. In
June 1999, the FASB issued Statement of Financial Accounting Standards No. 137,
which defers the effective date of SFAS 133 to years beginning after June 15,
2000. The Company does not anticipate SFAS 133 will have an impact on its
results of operations or financial condition when adopted.
In December 1999, the Securities and Exchange Commission ("SEC") released Staff
Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements" ("SAB
101"), which provides guidance on revenue recognition based on interpretations
and practices followed by the SEC. The Company has adopted this guidance in its
financial statements.
2. MARKETABLE SECURITIES
Marketable securities consist of the following (in thousands):
<TABLE>
<CAPTION>
AMORTIZED COST AND
FAIR VALUE AT
DECEMBER 31, MARCH 31,
1999 2000
- -----------------------------------------------------------------------------------------
(UNAUDITED)
<S> <C> <C>
Money market funds.......................................... $ 5 $ 4
Corporate commercial paper.................................. 3,692 2,750
Corporate notes............................................. 3,247 3,295
Market auction preferreds................................... 2,114 808
------ ------
$9,058 $6,857
====== ======
Reported as:
Cash equivalents.......................................... $2,931 $1,720
Short-term investments.................................... 6,127 5,137
------ ------
$9,058 $6,857
====== ======
</TABLE>
At December 31, 1998, the Company had no investments in marketable securities.
At December 31, 1999 and March 31, 2000, the average maturity of the investments
was approximately three and two months, respectively.
There were no material gross realized gains or losses from sales of securities
in the periods presented. Unrealized gains and losses on investments were not
material at December 31, 1998 and 1999, or March 31, 2000.
- --------------------------------------------------------------------------------
F- 11
<PAGE> 77
ARGONAUT TECHNOLOGIES, INC.
DECEMBER 31, 1999
(INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 2000 IS UNAUDITED)
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. INVENTORIES
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1998 1999 2000
- ---------------------------------------------------------------------------------------------
(UNAUDITED)
<S> <C> <C> <C>
Raw materials............................................... $1,334 $1,175 $1,447
Work in process............................................. 373 208 413
Finished goods.............................................. 484 727 640
------ ------ ------
$2,191 $2,110 $2,500
====== ====== ======
</TABLE>
4. PROPERTY AND EQUIPMENT
Property and equipment consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1998 1999 2000
- -----------------------------------------------------------------------------------------------
(UNAUDITED)
<S> <C> <C> <C>
Laboratory and office equipment............................ $ 3,058 $ 3,738 $ 4,073
Leasehold improvements..................................... 247 250 250
------- ------- -------
3,305 3,988 4,323
Less accumulated depreciation and amortization............. (1,654) (2,368) (2,550)
------- ------- -------
Property and equipment, net................................ $ 1,651 $ 1,620 $ 1,773
======= ======= =======
</TABLE>
Equipment leased under capital leases is included in laboratory and office
equipment. At December 31, 1998 and 1999 and at March 31, 2000, equipment under
capital leases was approximately $2.2 million, $1.5 million and $1.3 million
with accumulated amortization of approximately $1,219,000, $898,000, and
$797,000, respectively.
5. NOTE RECEIVABLE FROM OFFICER
In December 1996, an officer of the Company borrowed $200,000 in exchange for a
note secured by the officer's residence. The note and accrued interest, at a
rate of 6.31% per annum, are due at the earlier of December 17, 2001,
disposition of the officer's residence, or at the time of separation from the
Company, or ten days after the completion of the offering.
6. LEASES
The Company leases its primary office and research facilities in San Carlos,
California and a research facility in Arizona under operating leases which
expire in January 2001 and April 2002, respectively. The Company has an option
to extend the terms of the leases prior to the expiration date at the current
monthly rate adjusted according to the Consumer Price Index. The Company
finances certain
- --------------------------------------------------------------------------------
F- 12
<PAGE> 78
ARGONAUT TECHNOLOGIES, INC.
DECEMBER 31, 1999
(INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 2000 IS UNAUDITED)
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
laboratory and office equipment under capital leases. Future minimum lease
payments under all noncancelable leases are as follows (in thousands):
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
- ----------------------------------------------------------------------------------
<S> <C> <C>
Year ended December 31,
2000...................................................... $ 375 $388
2001...................................................... 327 14
2002...................................................... 193 5
----- ----
Total minimum payment required.............................. 895 $407
====
Less amount representing interest........................... (124)
-----
Present value of future lease payments...................... 771
Less current portion........................................ (303)
-----
Noncurrent obligations under capital leases................. $ 468
=====
</TABLE>
Rent expense under operating leases was approximately $347,000, $477,000, and
$511,000 in 1997, 1998, and 1999, respectively.
7. LONG-TERM DEBT
In July 1997, the Company entered into a loan agreement for $1.5 million with a
financial institution. The loan has an interest rate of 10.5% and is repayable
in 30 monthly installments after six months of interest-only payments. It is
secured by the assets of the Company and subordinated to institutional
creditors. The annual principal maturity of the debt at December 31, 1999 was
approximately $439,000 in 2000.
In July 1998, the Company entered into a loan agreement (the "Loan") and a
receivables loan agreement (the "Receivables Loan") with a financial institution
for a total of up to $8.0 million ($4.0 million under each loan). The Loan bears
interest at rates of 11.75% to 12.5% and is repayable in 16 quarterly
installments after an initial three quarters of interest-only payments. The
Receivables Loan bears interest at prime plus 1.5% at the time of the draw down
and the average interest rate for 1999 was 10.0%. The Receivables Loan is
repayable two years after the draw down and interest is payable monthly.
Also, under the terms of the Loan agreement, the Company is required to issue
warrants to purchase 20,000 shares of Series C convertible preferred stock for
each draw down of $1.0 million. Under the terms of the Receivables Loan
agreement, the Company is required to issue two warrants each to purchase 16,666
shares of Series C convertible preferred stock, one on signing of the agreement
and the second if the draw down exceeds $2.0 million. Both loans are secured by
the assets of the Company and subordinated to institutional creditors.
At December 31, 1999, the Company had drawn down $2.0 million against the Loan
line and $2.0 million against the Receivables Loan line and issued three
warrants to purchase a total of 56,666 shares of Series C convertible preferred
stock (see Note 8). The aggregate annual principal maturities of the debt at
December 31, 1999 were approximately: $2.5 million in 2000, $612,000 in 2001,
$688,000 in 2002, and $91,000 in 2003.
- --------------------------------------------------------------------------------
F- 13
<PAGE> 79
ARGONAUT TECHNOLOGIES, INC.
DECEMBER 31, 1999
(INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 2000 IS UNAUDITED)
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Under the terms of each of the loan agreements, the Company is prohibited from
declaring dividends without the consent of the financial institution.
8. STOCKHOLDERS' EQUITY
CONVERTIBLE PREFERRED STOCK
All series of preferred stock are convertible at the stockholders' option at any
time into common stock on a one-for-one basis, subject to adjustment for
antidilution. Conversion is automatic upon the closing of an underwritten public
offering with aggregate offering proceeds exceeding $25,000,000 and an offering
price of at least $6.50 per share (appropriately adjusted for any stock splits,
stock dividends, recapitalization, or similar events) or written election of
holders of record or more than 2/3 of the outstanding shares.
Holders of Series A, A-1, B, B-1, C, C-1, D, and D-1 convertible preferred stock
are entitled to noncumulative dividends of $0.08, $0.08, $0.26, $0.26, $0.40,
$0.40, $0.46 and $0.46 per share, respectively, if and when declared by the
board of directors. These dividends are to be paid in advance of any
distributions to common stockholders. No dividends have been declared through
March 31, 2000.
In the event of a liquidation or winding up of the Company, holders of Series A,
A-1, B, B-1, C, C-1, D, and D-1 convertible preferred stock shall have a
liquidation preference of $1.00, $1.00, $3.25, $3.25, $5.00, $5.00, $5.75, and
$5.75 per share, respectively, together with any declared but unpaid dividends,
over holders of common shares.
Preferred stockholders are entitled to the number of votes they would have upon
conversion of their preferred shares into common stock.
The authorized, issued and outstanding Series A, A-1, B, B-1, C, C-1, D, and D-1
shares of convertible preferred stock were as follows:
<TABLE>
<CAPTION>
ISSUANCE
SHARES PRICE AGGREGATE
DESIGNATION SHARES ISSUED AND PER LIQUIDATION
(ALL CONVERTIBLE) AUTHORIZED OUTSTANDING SHARE PREFERENCE
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Series A.............................. 5,000,000 4,627,500 $1.00 $ 4,627,500
Series A-1............................ 5,000,000 -- -- --
Series B.............................. 3,000,000 2,923,073 $3.25 9,499,987
Series B-1............................ 3,000,000 -- -- --
Series C.............................. 1,600,000 1,180,000 $5.00 5,900,000
Series C-1............................ 1,600,000 -- -- --
---------- ---------- -----------
December 31, 1997 and 1998.............. 19,200,000 8,730,573 20,027,487
Series D.............................. 2,700,000 2,608,695 $5.75 14,999,996
Series D-1............................ 2,700,000 -- -- --
---------- ---------- -----------
December 31, 1999 and March 31, 2000
(unaudited)........................... 24,600,000 11,339,268 $35,027,483
========== ========== ===========
</TABLE>
The Company has an additional 1,600,000 authorized shares of preferred stock not
yet designated to any series.
- --------------------------------------------------------------------------------
F- 14
<PAGE> 80
ARGONAUT TECHNOLOGIES, INC.
DECEMBER 31, 1999
(INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 2000 IS UNAUDITED)
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
WARRANTS
In conjunction with a capital lease line executed in April 1995, the Company
issued a warrant to purchase 50,000 shares of common stock at an exercise price
of $1.20 per share. The warrant expires in April 2001.
In 1997, the Company issued a series of warrants to purchase 34,999 shares of
Series C convertible preferred stock at an exercise price of $6.00 per share in
connection with the execution of a capital lease line and a loan and security
agreement. These warrants are exercisable for a period of seven years or three
years from the effective date of the Company's initial public offering,
whichever is longer. However, should the Company accelerate repayment of its
borrowings under this arrangement, the number of shares which may be purchased
in connection with these warrants would be reduced.
In 1998, the Company issued two warrants to purchase a total of 36,666 shares of
Series C convertible preferred stock at an exercise price of $6.00 per share in
connection with two loan agreements entered into in July 1998 (see Note 7).
These warrants are exercisable for a period of seven years or three years from
the effective date of the Company's initial public offering, whichever is
longer. The fair value of these warrants, determined using a Black-Scholes
valuation model, was $40,699 and is being amortized to interest expense over the
term of the loan.
In 1999, the Company issued one warrant to purchase 20,000 shares of Series C
convertible preferred stock at an exercise price of $6.00 per share in
connection with a drawdown on one of their loans (see Note 7). The warrant is
exercisable for a period of seven years or three years from the effective date
of the Company's initial public offering, whichever is longer. The fair value of
the warrant, determined using a Black-Scholes valuation model, was $22,200 and
is being amortized to interest expense over the term of the loan.
1995 INCENTIVE STOCK PLAN
The Company's 1995 Incentive Stock Plan (the "Plan") provides for (i) the grant
of incentive stock options to employees, (ii) the grant of nonstatutory stock
options to employees and consultants, and (iii) the grant of stock purchase
rights. A total of 3,935,308 shares of common stock have been authorized for
issuance under the Plan.
Under the terms of the Plan, the options and purchase rights granted generally
vest at a rate of 25% at the end of the first year with the remaining balance
vesting in equal amounts over the next 36 months.
- --------------------------------------------------------------------------------
F- 15
<PAGE> 81
ARGONAUT TECHNOLOGIES, INC.
DECEMBER 31, 1999
(INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 2000 IS UNAUDITED)
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
A summary of activity under the Plan is as follows:
<TABLE>
<CAPTION>
WEIGHTED-
SHARES AVERAGE
AVAILABLE NUMBER OF EXERCISE
FOR GRANT OPTIONS PRICE
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at December 31, 1996........................ 462,025 1,050,075 $0.22
Additional shares authorized...................... 750,000 -- --
Options granted................................... (535,342) 535,342 $0.46
Options exercised................................. -- (99,798) $0.19
Options canceled.................................. 96,139 (96,139) $0.16
---------- ---------
Balance at December 31, 1997........................ 772,822 1,389,480 $0.30
Options granted................................... (590,625) 590,625 $0.50
Options exercised................................. -- (273,035) $0.27
Options canceled.................................. 87,374 (87,374) $0.36
Shares repurchased................................ 31,604 -- $0.08
---------- ---------
Balance at December 31, 1998........................ 301,175 1,619,696 $0.38
Additional shares authorized...................... 1,500,000 -- --
Common stock granted out of the Plan.............. (15,000) -- --
Options granted................................... (1,002,325) 1,002,325 $0.94
Options exercised................................. -- (328,228) $0.31
Options canceled.................................. 276,722 (276,722) $0.50
Shares repurchased................................ 1,125 -- $0.05
---------- ---------
Balance at December 31, 1999........................ 1,061,697 2,017,071 $0.65
Options granted (unaudited)....................... (93,000) 93,000 $1.00
Options exercised (unaudited)..................... -- (84,482) $0.51
Options canceled (unaudited)...................... 20,000 (20,000) $1.00
---------- ---------
Balance at March 31, 2000 (unaudited)............... 988,697 2,005,589 $0.67
========== =========
</TABLE>
All options and shares were granted with exercise prices equal to the fair value
of the Company's common stock as determined by the Company's board of directors
as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1999
- -----------------------------------------------------------------------------------------
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE
EXERCISE NUMBER REMAINING EXERCISE NUMBER EXERCISE
PRICES OF OPTIONS CONTRACTUAL LIFE PRICE OF OPTIONS PRICE
- -----------------------------------------------------------------------------------------
(IN YEARS)
<S> <C> <C> <C> <C> <C>
$0.05 168,875 6.14 $0.05 160,271 $0.05
$0.30 289,656 6.88 $0.30 135,021 $0.30
$0.50 678,111 8.27 $0.50 331,959 $0.50
$1.00 880,429 9.79 $1.00 24,688 $1.00
--------- -------
2,017,071 8.56 $0.65 651,939 $0.37
========= =======
</TABLE>
- --------------------------------------------------------------------------------
F- 16
<PAGE> 82
ARGONAUT TECHNOLOGIES, INC.
DECEMBER 31, 1999
(INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 2000 IS UNAUDITED)
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
MARCH 31, 2000 (UNAUDITED)
- -----------------------------------------------------------------------------------------
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE
EXERCISE NUMBER REMAINING EXERCISE NUMBER EXERCISE
PRICES OF OPTIONS CONTRACTUAL LIFE PRICE OF OPTIONS PRICE
- -----------------------------------------------------------------------------------------
(IN YEARS)
<S> <C> <C> <C> <C> <C>
$0.05 167,375 5.90 $0.05 165,708 $0.05
$0.30 284,280 6.64 $0.30 164,558 $0.30
$0.50 605,599 8.07 $0.50 306,708 $0.50
$1.00 948,335 9.58 $1.00 59,372 $1.00
--------- -------
2,005,589 8.40 $0.67 696,346 $0.39
========= =======
</TABLE>
Pro forma information regarding net income and net loss per share is required by
SFAS 123, and has been determined as if the Company had accounted for its
employee stock options under the fair value method of that Statement. The fair
value of these options was estimated at the date of grant using the minimum
value method with the following assumptions in 1997, 1998, and 1999: risk-free
interest rate of 6.11%, 5.08%, and 5.32%, respectively; an expected option life
of 6.5 years, 6.5 years, 7 years, respectively; and no dividends. The
weighted-average fair value of the stock options granted were $0.15 in 1997 and
1998, $0.30 in 1999, and $0.31 at March 31, 2000.
For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the vesting period of the options. The Company's
pro forma information follows (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, MARCH 31,
1997 1998 1999 2000
- -----------------------------------------------------------------------------------------------
(UNAUDITED)
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------
Net loss:
As reported.................................... $(6,200) $(5,656) $(7,603) $(2,017)
Pro forma...................................... $(6,249) $(5,740) $(7,894) $(2,046)
Basic and diluted net loss per share:
As reported.................................... $ (3.97) $ (2.91) $ (3.12) $ (0.76)
Pro forma...................................... $ (4.01) $ (2.95) $ (3.24) $ (0.77)
</TABLE>
The pro forma net loss is not necessarily indicative of potential pro forma
effects on results for future years.
The Company has recorded deferred stock compensation with respect to options
granted to employees of approximately $3.8 million for the year ended December
31, 1999 and approximately $540,000 for the three month period ended March 31,
2000, representing the difference between the exercise price of the options and
the deemed fair value of the common stock. These amounts are being amortized to
operations over the four-year vesting periods of the options using the graded
vesting method.
The Company has granted 5,000 options to consultants in exchange for services
for the year ended December 31, 1999 and 20,000 for the three month period ended
March 31, 2000. The Company has recorded compensation expense related to these
options. In accordance with SFAS 123 and EITF 96-18, options granted to
consultants are periodically revalued as they vest.
- --------------------------------------------------------------------------------
F- 17
<PAGE> 83
ARGONAUT TECHNOLOGIES, INC.
DECEMBER 31, 1999
(INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 2000 IS UNAUDITED)
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
RESERVED SHARES
As of December 31, 1999, the Company has reserved shares of common stock for
future issuance as follows:
<TABLE>
<S> <C>
Warrants.................................................... 50,000
Incentive stock plan........................................ 3,078,768
Preferred stock............................................. 11,430,933
----------
14,559,701
==========
</TABLE>
In addition, the Company has reserved 91,665 shares of Series C preferred stock
for future issuance upon exercise of warrants.
9. 401(K) RETIREMENT SAVINGS PLAN
The Company maintains a 401(k) retirement savings plan for its full-time
employees. Each participant in the Plan may elect to contribute from 1% to 20%
of annual compensation to the Plan. The Company, at its discretion, may make
contributions to the Plan. The Company's expenses related to the Plan have been
immaterial.
10. INCOME TAXES
As of December 31, 1999, the Company had federal net operating loss and research
credit carryforwards of approximately $23.0 million and $600,000, respectively,
which expire on various dates between 2010 and 2019. The Company also had state
net operating loss and research credit carryforwards of approximately $7.4
million and $500,000, respectively. The State net operating loss will expire on
various dates between 2003 and 2004. The State research credits do not expire.
Utilization of the net operating losses may be subject to a substantial annual
limitation due to the ownership change limitations provided by the Internal
Revenue Code of 1986 and similar state provisions. The annual limitation may
result in the expiration of net operating losses and credits before utilization.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
and the amounts used for income tax purposes. Significant components of the
Company's deferred tax assets and liabilities for federal income taxes are as
follows (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
1998 1999
- ---------------------------------------------------------------------------------------
<S> <C> <C>
Net operating loss carryforwards............................ $ 6,100 $ 8,200
Research credit carryforwards............................... 900 1,100
Capitalized research and development........................ 700 800
Other....................................................... 300 400
------- --------
Deferred tax assets......................................... 8,000 10,500
Valuation allowance......................................... (8,000) (10,500)
------- --------
$ -- $ --
======= ========
</TABLE>
- --------------------------------------------------------------------------------
F- 18
<PAGE> 84
ARGONAUT TECHNOLOGIES, INC.
DECEMBER 31, 1999
(INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 2000 IS UNAUDITED)
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Because of the Company's lack of earnings history, the deferred tax assets have
been fully offset by a valuation allowance. The valuation allowance increased by
$2.3 million and $2.5 million during the years ended December 31, 1998 and 1999,
respectively.
11. MARKET SALES, EXPORT SALES, AND SIGNIFICANT CUSTOMERS
The Company has determined that it operates in only one segment in accordance
with SFAS 131 as it only reports profit and loss information on an aggregate
basis to its chief operating decision maker.
The Company had net sales by market as follows (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
1997 1998 1999 1999 2000
- ---------------------------------------------------------------------------------------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Instrument............................... $5,248 $10,850 $ 9,030 $2,653 $3,009
Chemistry................................ 578 1,226 1,528 328 555
------ ------- ------- ------ ------
$5,826 $12,076 $10,558 $2,981 $3,564
====== ======= ======= ====== ======
</TABLE>
The Company had net sales by geographical region as follows (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
1997 1998 1999 1999 2000
- ---------------------------------------------------------------------------------------------
(UNAUDITED
<S> <C> <C> <C> <C> <C>
U.S.A.................................... $2,920 $ 7,279 $ 6,472 $1,794 $2,689
Western Europe........................... 1,089 2,649 2,687 802 262
Far East................................. 1,817 2,148 1,399 385 613
------ ------- ------- ------ ------
$5,826 $12,076 $10,558 $2,981 $3,564
====== ======= ======= ====== ======
</TABLE>
An international distributor represented 22% and 13% of total net sales during
the years ended December 31, 1997 and 1998, respectively. No single customer
accounted for more than 10% of total net sales during 1999 and the three month
period ended March 31, 2000.
12. SUBSEQUENT EVENTS (UNAUDITED)
INITIAL PUBLIC OFFERING
In April 2000, the board of directors authorized the filing of a registration
statement with the Securities and Exchange Commission to register shares of its
common stock in connection with a proposed Initial Public Offering. If the
offering contemplated by this prospectus is consummated, the preferred stock
outstanding as of the closing date will automatically be converted into shares
of the Company's common stock.
2000 INCENTIVE STOCK PLAN
In April 2000, subject to stockholder approval, the Company adopted its 2000
Incentive Stock Plan (the "2000 Plan") and initially reserved a total of
2,000,000 shares of common stock for issuance. Under the terms of the 2000 Plan,
the number of shares reserved shall increase annually on the first
- --------------------------------------------------------------------------------
F- 19
<PAGE> 85
ARGONAUT TECHNOLOGIES, INC.
DECEMBER 31, 1999
(INFORMATION FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 2000 IS UNAUDITED)
- --------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
day of the Company's fiscal year beginning 2001 by the lesser of (i) 1,500,000
shares, (ii) 5% of the outstanding shares on such date or (iii) an amount
determined by the Board.
2000 EMPLOYEE STOCK PURCHASE PLAN
In April 2000, subject to stockholder approval, the Company adopted its 2000
Employee Stock Purchase Plan (the "Purchase Plan") and initially reserved a
total of 200,000 shares. Under the terms of the Purchase Plan, the number of
shares reserved shall increase annually on the first day of the Company's fiscal
year beginning in 2001 by the lesser of (i) 500,000 shares, (ii) 2% of the
outstanding shares on such date or (iii) a lesser amount determined by the
board. The Purchase Plan permits eligible employees to purchase common stock at
a discount through payroll during defined offering periods. The price at which
the stock is purchased is equal to the lower of 85% of the fair market value of
the common stock on the first day of the offering or 85% of the fair market
value of the Company's common stock on the purchase date. The initial offering
period will commence on the effective date of the offering.
- --------------------------------------------------------------------------------
F- 20
<PAGE> 86
[Argonaut Logo]
<PAGE> 87
- --------------------------------------------------------------------------------
Part II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following is an itemized statement of the amounts of all expenses payable by
the Registrant in connection with the registration of the common stock offered
hereby estimated except for the Registration Fee, NASD Filing Fee and Nasdaq
National Market listing fee, other than underwriting discounts and commissions:
<TABLE>
<CAPTION>
AMOUNT
TO BE PAID
<S> <C>
- ------------------------------------------------------------------------
Registration Fee -- Securities and Exchange Commission...... $ 22,770
NASD Filing Fee............................................. 9,125
Nasdaq National Market listing fee.......................... 95,000
Blue Sky fees and expenses.................................. 10,000
Accountants' fees and expenses.............................. 300,000
Legal fees and expenses..................................... 400,000
Printing and engraving expenses............................. 300,000
Transfer agent and registrar fees........................... 25,000
Miscellaneous............................................... 38,105
----------
Total............................................. $1,200,000
==========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law permits a corporation to
include in its charter documents, and in agreements between the corporation and
its directors and officers, provisions expanding the scope of indemnification
beyond that specifically provided by the current law.
Article VIII of the Registrant's Amended and Restated Certificate of
Incorporation provides for the indemnification of directors to the fullest
extent permissible under Delaware law.
Article VI(1) of the Registrant's Amended and Restated Bylaws provides for the
indemnification of officers, directors and third parties acting on behalf of the
Registrant if such person acted in good faith and in a manner reasonably
believed to be in and not opposed to the best interest of the Registrant, and,
with respect to any criminal action or proceeding, the indemnified party had no
reason to believe his or her conduct was unlawful.
The Registrant has entered into indemnification agreements with its directors
and executive officers, in addition to indemnification provided for in the
Registrant's Amended and Restated Bylaws, and intends to enter into
indemnification agreements with any new directors and executive officers in the
future.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
A. In the three years preceding the filing of this registration statement, we
from time to time have granted stock options to our employees and consultants in
reliance upon exemption from registration pursuant to either (1) Section 4(2) of
the Securities Act of 1933 or (2) Rule 701 promulgated under the Securities Act
of 1993. The following table sets forth certain information regarding such
grants:
- --------------------------------------------------------------------------------
II- 1
<PAGE> 88
PART II
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF SHARES EXERCISE PRICES
---------------- ---------------
<S> <C> <C>
January 1, 1997 to December 31, 1997 535,342 $0.30 to $0.50
January 1, 1998 to December 31, 1998 590,625 $0.50 to $0.50
January 1, 1999 to December 31, 1999 1,002,325 $0.50 to $1.00
January 1, 2000 to March 31, 2000 93,000 $1.00 to $1.00
</TABLE>
For additional information concerning these transactions, please see "
Management -- Employee Benefit Plans" in the prospectus included in this
registration statement.
B. Set forth in chronological order is information regarding all securities sold
by the Registrant in the three years preceding the filing of this registration
statement.
(1) Since January 1, 1997, we have granted to our employees, directors and
consultants options to purchase an aggregate of 2,221,292 shares of
common stock under our 1995 Incentive Stock Option Plan and 2000
Employee Stock Purchase Plan at exercise prices ranging from $0.30 to
$1.00.
(2) In May 1999, we granted 15,000 shares of common stock to a director in
exchange for a promissory note.
(3) On July 7, 1997, we issued a warrant to purchase 6,802 shares of
Series C preferred stock to Comdisco, Inc. in consideration of
entering into a certain master lease agreement with us.
(4) On August 12, 1997, we issued a warrant to purchase 25,000 shares of
Series C preferred stock to Comdisco, Inc. in consideration of
entering into a certain subordinated loan and rental agreement with
us.
(5) On August 12, 1997, we issued a warrant to purchase 3,197 shares of
Series C preferred stock to Comdisco, Inc. in consideration of
entering into a certain loan and security agreement with us.
(6) July 7, 1998, we issued a warrant to purchase 20,000 shares of Series
C preferred stock to Comdisco, Inc. in consideration of entering into
a certain loan and security agreement with us.
(7) Between March and May 1997, we issued 1,180,000 shares of our Series C
preferred stock to individuals and entities for an aggregate purchase
price of $5.9 million.
(8) On July 7, 1998, we issued a warrant to purchase 16,666 shares of
Series C preferred stock to Comdisco, Inc. in consideration of
entering into a certain receivables loan and security agreement with
us.
(9) On January 19, 1999, we issued a warrant to purchase 20,000 shares of
Series C preferred stock to Comdisco, Inc. in consideration of
entering into a certain loan and security agreement with us.
(10) In May 21, 1999, we issued 2,608,695 shares of its Series D preferred
stock to certain individuals and entities for an aggregate purchase
price of $15 million.
The sale of the above securities were deemed to be exempt from registration
under the Securities Act in reliance on Section 4(2) of the Securities Act,
Regulation D promulgated thereunder, or, with respect to issuances to our
employees, directors and consultants, or Rule 701 promulgated under Section 3(b)
of the Securities Act as transactions by an issuer not involving a public
offering or transactions pursuant to compensatory benefit plans and contracts
relating to compensation as provided under such Rule 701. No underwriters were
involved in the foregoing sales of securities.
- --------------------------------------------------------------------------------
II- 2
<PAGE> 89
PART II
- --------------------------------------------------------------------------------
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) EXHIBITS
<TABLE>
<S> <C>
1.1* Form of Underwriting Agreement.
3.1 Amended and Restated Certificate of Incorporation of the
Registrant.
3.2* Form of Amended and Restated Certificate of Incorporation of
the Registrant to become effective immediately prior to
completion of the Offering.
3.3 Bylaws of Registrant.
3.4* Form of Restated Bylaws of the Registrant to be in effect
upon the completion of the Offering.
4.1* Specimen common stock certificate.
4.2 Reference is made to Exhibits 3.2, 3.4.
5.1* Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation.
10.1 Series D Preferred Stock Purchase Agreement, dated May 21,
1999.
10.2 Warrant Agreement to purchase 6,802 shares of Series C
Preferred Stock between the Registrant and Comdisco, Inc.,
dated July 7, 1997.
10.3 Warrant Agreement to purchase 25,000 shares of Series C
Preferred Stock between the Registrant and Comdisco, Inc.,
dated August 12, 1997.
10.4 Warrant Agreement to purchase 3,197 shares of Series C
Preferred Stock between the Registrant and Comdisco, Inc.,
dated August 12, 1997.
10.5 Warrant Agreement to purchase 20,000 shares of Series C
Preferred Stock between the Registrant and Comdisco, Inc.,
dated July 7, 1998.
10.6 Warrant Agreement to purchase 16,666 shares of Series C
Preferred Stock between the Registrant and Comdisco, Inc.,
dated July 7, 1998.
10.7 Warrant Agreement to purchase 20,000 shares of Series C
Preferred Stock between the Registrant and Comdisco, Inc.,
dated January 19, 1999.
10.8 Warrant Agreement to purchase 50,000 shares of common stock
between the Registrant and Lease Management Services, dated
April 17, 1995.
10.9 Amended and Restated Stockholder Rights Agreement, dated May
21, 1999.
10.10 Offer Letter, dated October 29, 1996, from Registrant to
David P. Binkley, Ph.D.
10.11 Promissory Note Secured by Deed of Trust between the
Registrant and David P. Binkley, dated December 17, 1996.
10.12+ Process Development Consortium Membership Agreement between
the Registrant and Eli Lilly and Company, dated February 28,
1999.
10.13+ Process Development Consortium Membership Agreement between
the Registrant and Agouron Pharmaceuticals, Inc., dated
February 26, 1999.
10.14+ Process Development Consortium Membership Agreement between
the Registrant and Rhone-Poulenc Rorer Pharmaceuticals Inc.,
dated February 25, 1999.
10.15+ Process Development Consortium Membership Agreement between
the Registrant and Rohm and Haas Company, dated February 25,
1999.
10.16+ Research Collaboration Agreement between the Registrant and
University College London, dated September 1, 1999.
10.17+ Purchase and License Agreement between the Registrant and
Zeneca Inc., dated September 30, 1998, as amended.
10.18+ Purchase and License Agreement between the Registrant and
Zeneca Inc., dated September 30, 1998.
10.19 Lease Agreement between the Registrant and Tanklage Family
Partnership, dated
July 9, 1999.
</TABLE>
- --------------------------------------------------------------------------------
II- 3
<PAGE> 90
PART II
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
10.20 Lease Agreement between the Registrant and MK Kojimachi Building Co., Ltd., dated September 16, 1997,
as amended.
10.21 Lease Agreement between the Registrant and Personalvorsorgestiftung Rapp AG, dated April 16, 1997.
10.22 License Agreement between the Registrant and the Jackson Laboratory, dated
June 30, 1999.
10.23 License Agreement between the Registrant and Rohm and Haas Company, dated
June 1, 1997.
10.24 License and Supply Agreement between the Registrant and Symyx Technologies, Inc., dated August 6, 1999.
10.25+ Manufacturing Agreement between the Registrant and [*] dated June 24, 1997, as amended.
10.26* Form of Indemnification Agreement between the Registrant and each of its directors.
10.27* Form of Indemnification Agreement between the Registrant and each of its officers.
10.28 1995 Stock Plan.
10.29* 1995 Stock Plan Form of Stock Option Agreement.
10.30* 2000 Stock Incentive Plan.
10.31* 2000 Employee Stock Purchase Plan.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
23.2* Consent of Wilson Sonsini Goodrich & Rosati, Professional Corporation.
24.1 Powers of Attorney (See Signature Page on Page II-5).
27.1 Financial Data Schedules.
</TABLE>
- -------------------------
* To be filed by amendment.
+ CERTAIN CONFIDENTIAL PORTIONS OF THIS EXHIBIT WERE OMITTED BY MEANS OF
REDACTING A PORTION OF THE TEXT (THE "MARK"). THIS EXHIBIT HAS BEEN FILED
SEPARATELY WITH THE SECRETARY OF THE COMMISSION WITHOUT THE MARK PURSUANT TO
THE COMPANY'S APPLICATION REQUESTING CONFIDENTIAL TREATMENT UNDER RULE 406
UNDER THE SECURITIES ACT.
[*] CONFIDENTIAL TREATMENT REQUESTED.
(b) FINANCIAL STATEMENT SCHEDULES
Schedules have been omitted because the information required to be set forth
therein is not applicable or is shown in the financial statements or notes
thereto.
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes to provide to the underwriters, at
the closing specified in the underwriting agreement, certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the SEC 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 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.
- --------------------------------------------------------------------------------
II- 4
<PAGE> 91
PART II
- --------------------------------------------------------------------------------
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of 1933,
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act of
1933, 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 the time shall be deemed to be
the initial bona fide offering thereof.
- --------------------------------------------------------------------------------
II- 5
<PAGE> 92
PART II
- --------------------------------------------------------------------------------
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in San Carlos, State of California, on
the 18th day of May, 2000.
ARGONAUT TECHNOLOGIES, INC.
By: /s/ DAVID P. BINKLEY, PH.D.
------------------------------------
David P. Binkley, Ph.D.
Chief Executive Officer
Pursuant to the requirements of the Securities Act, this Registration Statement
has been signed by the following persons in the capacities and on the dates
indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ DAVID P. BINKLEY, PH.D.* President, Chief Executive May 18, 2000
- -------------------------------------------------------- Officer and Chief Financial
David P. Binkley, Ph.D. Officer (Principal Financial
and Accounting Officer)
/s/ BROOK BYERS* Director May 18, 2000
- --------------------------------------------------------
Brook Byers
/s/ SAMUEL D. COLELLA* Director May 18, 2000
- --------------------------------------------------------
Samuel D. Colella
/s/ HINGGE HSU, M.D.* Director May 18, 2000
- --------------------------------------------------------
Hingge Hsu, M.D.
/s/ WILLIAM RASTETTER, PH.D.* Director May 18, 2000
- --------------------------------------------------------
William Rastetter, Ph.D.
/s/ JAMES SCHLATER* Director May 18, 2000
- --------------------------------------------------------
James Schlater
*By: /s/ DAVID P. BINKLEY, PH.D. Attorney-In-Fact May 18, 2000
- --------------------------------------------------------
David P. Binkley, Ph.D.
Attorney-In-Fact
</TABLE>
- --------------------------------------------------------------------------------
II- 6
<PAGE> 93
- --------------------------------------------------------------------------------
Exhibit Index
<TABLE>
<S> <C>
1.1* Form of Underwriting Agreement.
3.1 Amended and Restated Certificate of Incorporation of the
Registrant.
3.2* Form of Amended and Restated Certificate of Incorporation of
the Registrant to become effective immediately prior to
completion of the Offering.
3.3 Bylaws of Registrant.
3.4* Form of Restated Bylaws of the Registrant to be in effect
upon the completion of the Offering.
4.1* Specimen common stock certificate.
4.2 Reference is made to Exhibits 3.2, 3.4.
5.1* Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation.
10.1 Series D Preferred Stock Purchase Agreement, dated May 21,
1999.
10.2 Warrant Agreement to purchase 6,802 shares of Series C
Preferred Stock between the Registrant and Comdisco, Inc.,
dated July 7, 1997.
10.3 Warrant Agreement to purchase 25,000 shares of Series C
Preferred Stock between the Registrant and Comdisco, Inc.,
dated August 12, 1997.
10.4 Warrant Agreement to purchase 3,197 shares of Series C
Preferred Stock between the Registrant and Comdisco, Inc.,
dated August 12, 1997.
10.5 Warrant Agreement to purchase 20,000 shares of Series C
Preferred Stock between the Registrant and Comdisco, Inc.,
dated July 7, 1998.
10.6 Warrant Agreement to purchase 16,666 shares of Series C
Preferred Stock between the Registrant and Comdisco, Inc.,
dated July 7, 1998.
10.7 Warrant Agreement to purchase 20,000 shares of Series C
Preferred Stock between the Registrant and Comdisco, Inc.,
dated January 19, 1999.
10.8 Warrant Agreement to purchase 50,000 shares of common stock
between the Registrant and Lease Management Services, dated
April 17, 1995.
10.9 Amended and Restated Stockholder Rights Agreement, dated May
21, 1999.
10.10 Offer Letter, dated October 29, 1996, from Registrant to
David P. Binkley, Ph.D.
10.11 Promissory Note Secured by Deed of Trust between the
Registrant and David P. Binkley, dated December 17, 1996.
10.12+ Process Development Consortium Membership Agreement between
the Registrant and Eli Lilly and Company, dated February 28,
1999.
10.13+ Process Development Consortium Membership Agreement between
the Registrant and Agouron Pharmaceuticals, Inc., dated
February 26, 1999.
10.14+ Process Development Consortium Membership Agreement between
the Registrant and Rhone-Poulenc Rorer Pharmaceuticals Inc.,
dated February 25, 1999.
10.15+ Process Development Consortium Membership Agreement between
the Registrant and Rohm and Haas Company, dated February 25,
1999.
10.16+ Research Collaboration Agreement between the Registrant and
University College London, dated September 1, 1999.
10.17+ Purchase and License Agreement between the Registrant and
Zeneca Inc., dated September 30, 1998, as amended.
10.18+ Purchase and License Agreement between the Registrant and
Zeneca Inc., dated September 30, 1998.
10.19 Lease Agreement between the Registrant and Tanklage Family
Partnership, dated
July 9, 1999.
10.20 Lease Agreement between the Registrant and MK Kojimachi
Building Co., Ltd., dated September 16, 1997, as amended.
</TABLE>
- --------------------------------------------------------------------------------
<PAGE> 94
EXHIBIT INDEX
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
10.21 Lease Agreement between the Registrant and Personalvorsorgestiftung Rapp AG, dated April 16, 1997.
10.22 License Agreement between the Registrant and the Jackson Laboratory, dated
June 30, 1999.
10.23 License Agreement between the Registrant and Rohm and Haas Company, dated
June 1, 1997.
10.24 License and Supply Agreement between the Registrant and Symyx Technologies, Inc., dated August 6, 1999.
10.25+ Manufacturing Agreement between the Registrant and [*] dated June 24, 1997, as amended.
10.26* Form of Indemnification Agreement between the Registrant and each of its directors.
10.27* Form of Indemnification Agreement between the Registrant and each of its officers.
10.28 1995 Stock Plan.
10.29* 1995 Stock Plan Form of Stock Option Agreement.
10.30* 2000 Stock Incentive Plan.
10.31* 2000 Employee Stock Purchase Plan.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
23.2* Consent of Wilson Sonsini Goodrich & Rosati, Professional Corporation.
24.1 Powers of Attorney (See Signature Page on Page II-5).
27.1 Financial Data Schedules.
</TABLE>
- -------------------------
* To be filed by amendment.
+ CERTAIN CONFIDENTIAL PORTIONS OF THIS EXHIBIT WERE OMITTED BY MEANS OF
REDACTING A PORTION OF THE TEXT (THE "MARK"). THIS EXHIBIT HAS BEEN FILED
SEPARATELY WITH THE SECRETARY OF THE COMMISSION WITHOUT THE MARK PURSUANT TO
THE COMPANY'S APPLICATION REQUESTING CONFIDENTIAL TREATMENT UNDER RULE 406
UNDER THE SECURITIES ACT.
[*] CONFIDENTIAL TREATMENT REQUESTED.
- --------------------------------------------------------------------------------
<PAGE> 1
EXHIBIT 3.1
RESTATED CERTIFICATE OF INCORPORATION
OF ARGONAUT TECHNOLOGIES, INC.
Argonaut Technologies, Inc., a corporation organized and existing under
the laws of the State of Delaware, hereby certifies as follows:
A. The name of the corporation is Argonaut Technologies, Inc. The
original Certificate of Incorporation of the corporation was filed with the
Secretary of State of the State of Delaware on November 10, 1994.
B. Pursuant to Sections 228, 242 and 245 of the General Corporation Law
of the State of Delaware, this Restated Certificate of Incorporation restates
and integrates and further amends the provisions of the Certificate of
Incorporation of this corporation.
C. The text of the Certificate of Incorporation as heretofore amended or
supplemented is hereby amended and restated in its entirety to read as follows:
ONE. The name of this corporation is "Argonaut Technologies, Inc."
TWO. The address of the corporation's registered office in the State of
Delaware is Corporation Trust Center, 1209 Orange Street, Wilmington, County of
New Castle, Delaware 19801. The name of its registered agent at such office is
Corporation Trust Company.
THREE. The nature of the business or purposes to be conducted or
promoted is to engage in any lawful act or activity for which corporations may
be organized under the General Corporation Law of Delaware.
FOUR. This corporation is authorized to issue two classes of stock to be
designated Common Stock and Preferred Stock. The total number of shares of
Common Stock which this corporation has authority to issue is thirty-two million
two hundred thousand (32,200,000) with par value of one hundredth of one cent
($.0001) per share. The total number of shares of Preferred Stock which this
corporation has authority to issue is twenty-six million two hundred thousand
(26,200,000) with par value of one hundredth of one cent ($.0001) per share. Of
such Preferred Stock, five million (5,000,000) shares are designated Series A
Preferred Stock ("Series A Preferred"), five million (5,000,000) shares are
designated Series A-1 Preferred Stock ("Series A-1
<PAGE> 2
Preferred"), three million (3,000,000) shares are designated Series B Preferred
Stock ("Series B Preferred"), three million (3,000,000) shares are designated
Series B-1 Preferred Stock ("Series B-1 Preferred"), one million six hundred
thousand (1,600,000) shares are designated Series C Preferred Stock ("Series C
Preferred"), one million six hundred thousand (1,600,000) shares are designated
Series C-1 Preferred Stock ("Series C-1 Preferred"), two million seven hundred
thousand (2,700,000) shares are designated Series D Preferred Stock ("Series D
Preferred"), and two million seven hundred thousand (2,700,000) shares are
designated Series D-1 Preferred Stock ("Series D-1 Preferred").
The corporation shall from time to time in accordance with the laws of
the State of Delaware increase the authorized amount of its Common Stock if at
any time the number of shares of Common Stock remaining unissued and available
for issuance shall not be sufficient to permit conversion of the Preferred
Stock.
The relative powers, preferences, special rights, qualifications,
limitations and restrictions granted to or imposed on the respective classes of
the shares of capital stock or the holders thereof are as follows:
1. Dividends. The holders of the Series A Preferred, Series A-1
Preferred, Series B Preferred, Series B-1 Preferred, Series C Preferred, Series
C-1 Preferred, Series D Preferred, and Series D-1 Preferred shall be entitled on
a pari passu basis, when, as and if declared by the Board of Directors of the
corporation, to dividends out of the corporation's assets legally available
therefor at the rate of $0.08, $0.08, $0.26, $0.26, $0.40, $0.40, $0.46, and
$0.46 respectively, per share per annum. Dividends may be declared and paid upon
the Common Stock in any fiscal year of the corporation only if dividends shall
have been paid to or declared and set apart for payment to all shares of Series
A Preferred, Series A-1 Preferred, Series B Preferred, Series B-1 Preferred,
Series C Preferred, Series C-1 Preferred, Series D Preferred, and Series D-1
Preferred at such annual rate for such fiscal year of the corporation. After the
holders of Series A Preferred, Series A-1 Preferred, Series B Preferred, Series
B-1 Preferred, Series C Preferred, Series C-1 Preferred, Series D Preferred, and
Series D-1 Preferred have received their dividend preference as set forth above,
the holders of Preferred Stock and Common Stock shall be entitled, when, as and
if declared by the Board of Directors, to dividends out of the corporation's
assets legally available therefor; provided, however, that no such dividends may
be declared or paid on any shares of Common Stock or Preferred Stock unless at
the same time an equivalent dividend is declared and paid on all outstanding
shares of Common Stock and Preferred Stock; and provided further that the
dividend on each series of Preferred Stock shall be payable at the same rate per
share as would be payable on the shares of Common Stock or other securities into
which such series of Preferred Stock is convertible immediately prior to the
record date for such dividend. The right to dividends on shares of the Common
Stock or Preferred Stock shall not be cumulative, and no right shall accrue to
holders of Common Stock or Preferred Stock by reason of the fact that dividends
on said shares are not declared in any prior period.
2. Liquidation Preference. In the event of any liquidation, dissolution
or winding up of the corporation (or the deemed occurrence of such event
pursuant to Section 2(e) below), either
-2-
<PAGE> 3
voluntarily or involuntarily (a "Liquidation"), distributions to the
stockholders of the corporation shall be made in the following manner:
(a) Series D Preferred and Series D-1 Preferred. The holders of the
Series D Preferred and Series D-1 Preferred 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 Series A Preferred, Series A-1 Preferred,
Series B Preferred, Series B-1 Preferred, Series C Preferred, Series C-1
Preferred or Common Stock of the corporation, an amount equal to $5.75 per share
for each share of Series D Preferred or Series D-1 Preferred then so held, as
adjusted for stock splits, dividends, or recapitalizations, plus a further
amount equal to any dividends declared but unpaid on such shares. In lieu of
receiving such preferential amounts and the additional preferential amounts set
forth in Section 4(c) below, the holders of Series D Preferred and Series D-1
Preferred may elect to convert such Preferred Stock into Common Stock pursuant
to Section 4(a).
If, upon such Liquidation, the assets of the corporation are
insufficient to provide for the cash payment of the full aforesaid preferential
amount to the holders of Series D Preferred and Series D-1 Preferred, such
assets as are available shall be distributed ratably among the holders of Series
D Preferred and Series D-1 Preferred in the proportion that the full
preferential amount each such holder is otherwise entitled to receive bears to
the full preferential amount all such holders are entitled to receive.
(b) Series A Preferred, Series A-1 Preferred, Series B Preferred,
Series B-1 Preferred, Series C Preferred and Series C-1 Preferred. After payment
has been made to the holders of the Series D Preferred and Series D-1 Preferred
of the full preferential amount set forth in Section 2(a) above, the holders of
Series A Preferred, Series A-1 Preferred, Series B Preferred, Series B-1
Preferred, Series C Preferred and Series C-1 Preferred 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 Common Stock of the
corporation, an amount equal to $1.00 per share for each share of Series A
Preferred or Series A-1 Preferred then so held; an amount equal to $3.25 per
share for each share of Series B Preferred or Series B-1 Preferred then so held;
and an amount equal to $5.00 per share for each share of Series C Preferred or
Series C-1 Preferred then so held, in each case as adjusted for stock splits,
dividends, or recapitalizations, plus a further amount equal to any dividends
declared but unpaid on such shares. In lieu of receiving such preferential
amounts, the holders of Series A Preferred, Series A-1 Preferred, Series B
Preferred, Series B-1 Preferred, Series C Preferred and Series C-1 Preferred may
elect to convert such Preferred Stock into Common Stock pursuant to Section
4(a).
If, upon such Liquidation, the assets of the corporation are
insufficient to provide for the cash payment of the full aforesaid preferential
amount to the holders of Series A Preferred, Series A-1 Preferred, Series B
Preferred, Series B-1 Preferred, Series C Preferred and Series C-1 Preferred,
such assets as are available after payment of the full preferential amount set
forth in Section 2(a) above, if any, shall be distributed ratably among the
holders of Series A Preferred, Series A-1 Preferred, Series B Preferred, Series
B-1 Preferred, Series C Preferred and Series C-1 Preferred in
-3-
<PAGE> 4
the proportion that the full preferential amount each such holder is otherwise
entitled to receive bears to the full preferential amount all such holders are
entitled to receive.
(c) Additional Series D Preferred and Series D-1 Preferred
Liquidation Preference. After payment has been made to the holders of Preferred
Stock of the full preferential amounts set forth in Sections 2(a) and 2(b)
above, the holders of Series D Preferred and Series D-1 Preferred 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 Common Stock of the
corporation, an additional amount equal to (i) $1.4375, plus (ii) $0.359 for the
first full twelve month period and $0.359 for each full three month period
thereafter that shall have elapsed since May 10, 1999 (but in no event shall the
total of (i) and (ii) exceed $5.75) per share for each share of Series D
Preferred or Series D-1 Preferred then so held, as adjusted for stock splits,
dividends, or recapitalizations.
If, upon such Liquidation, the assets of the corporation are
insufficient to provide for the cash payment of the full aforesaid additional
preferential amount to the holders of Series D Preferred and Series D-1
Preferred, such assets as are available after payment of the full preferential
amounts set forth in Sections 2(a) and 2(b) above, if any, shall be distributed
ratably among the holders of Series D Preferred and Series D-1 Preferred in the
proportion that the full preferential amount each such holder is otherwise
entitled to receive bears to the full preferential amount all such holders are
entitled to receive.
(d) Common Stock. All of the preferential amounts to be paid to the
holders of the Preferred Stock under Sections 2(a), 2(b) and 2(c) shall be paid
or set apart for payment before the payment or setting apart for payment of any
amount for, or the distribution of any assets of this corporation to, the
holders of the Common Stock in connection with such Liquidation. After the
payment or the setting apart of payment to the holders of the Preferred Stock of
the preferential amounts so payable to them, the holders of the Common Stock
shall be entitled to receive all remaining assets of the corporation.
(e) Consolidation or Merger. A merger, consolidation or sale of all
or substantially all of the assets of the corporation which will result in the
corporation's stockholders immediately prior to such transaction not holding (by
virtue of such shares or securities issued solely with respect thereto) at least
50% of the voting power of the surviving, continuing or purchasing entity, shall
be deemed to be a Liquidation within the meaning of this Section 2; provided,
however, that any payments made may be made in cash or in securities or other
property received from the acquiring entity or in a combination thereof, on the
closing of such transaction.
(f) Noncash Distributions. If any of the assets of the corporation
are to be distributed other than in cash under this Section 2 or for any
purpose, then the Board of Directors of the corporation shall promptly engage
independent competent appraisers to determine the value of the assets (other
than securities of the corporation) to be distributed to the holders of
Preferred Stock or Common Stock. The corporation shall, upon receipt of such
appraiser's valuation, give prompt written notice to each holder of shares of
Preferred Stock or Common Stock of the appraiser's
-4-
<PAGE> 5
valuation. Notwithstanding the above, any securities to be distributed to the
stockholders shall be valued as follows:
(i) If traded on a securities exchange, the value shall be deemed
to be the average of the closing prices of the securities on such exchange over
the 30-day period ending three (3) business days prior to the closing;
(ii) If actively traded over-the-counter, the value shall be
deemed to be the average of the closing bid prices over the 30-day period ending
three (3) business days prior to the closing; and
(iii) If there is no active public market, the value shall be the
fair market value thereof, as mutually determined by the corporation and the
holders of not less than a majority of the outstanding shares of Preferred
Stock, provided that if the corporation and the holders of a majority of the
outstanding shares of Preferred Stock are unable to reach agreement, then by
independent appraisal by an investment banker hired and paid by the corporation,
but acceptable to the holders of a majority of the outstanding shares of
Preferred Stock
3. Voting Rights.
(a) Preferred Stock. Except as otherwise provided herein or required
by law, the holder of each share of Preferred Stock shall be entitled to vote on
all matters and shall be entitled to the number of votes equal to the number of
shares of Common Stock into which each share of Preferred Stock could be
converted pursuant to Section 4 hereof at the record date for the determination
of the stockholders entitled to vote on such matters or, if no such record date
is established, at the date such vote is taken. Except as otherwise provided
herein or required by law, the Preferred Stock shall have voting rights and
powers equal to the voting rights and powers of the Common Stock. Fractional
votes shall not, however, be permitted and any fractional voting rights
resulting from the above formula shall be rounded to the nearest whole number
(with one-half rounded upward to one).
(b) Common Stock. Each holder of shares of Common Stock shall be
entitled to one vote for each share thereof held.
(c) Election by Ballot. The election of directors need not be by
written ballot unless the Bylaws of the corporation shall so provide.
4. Conversion. The holders of Preferred Stock shall have conversion
rights as follows (the "Conversion Rights"):
(a) Right to Convert. Each share of 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 Preferred Stock. Each share of Preferred Stock shall be
-5-
<PAGE> 6
convertible into the number of shares of Common Stock which results from
dividing the "Conversion Price" per share in effect for such series of Preferred
Stock at the time of conversion into the "Conversion Value" per share of such
series of Preferred Stock. The number of shares of Common Stock into which each
series of Preferred Stock is convertible is hereinafter collectively referred to
as the "Conversion Rate" for such series. The initial Conversion Price per share
of Series A Preferred and Series A-1 Preferred shall be $1.00. The initial
Conversion Price per share of Series B Preferred and Series B-1 Preferred shall
be $3.25. The initial Conversion Price per share of Series C Preferred and
Series C-1 Preferred shall be $5.00. The initial Conversion Price per share of
Series D Preferred and Series D-1 Preferred shall be $5.75. The Conversion Value
per share of Series A Preferred and Series A-1 Preferred shall be $1.00. The
Conversion Value per share of Series B Preferred and Series B-1 Preferred shall
be $3.25. The Conversion Value per share of Series C Preferred and Series C-1
Preferred shall be $5.00. The Conversion Value per share of Series D Preferred
and Series D-1 Preferred shall be $5.75. The Conversion Price of each series of
Preferred Stock 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 Rate immediately upon the closing of a firm commitment underwritten
public offering pursuant to an effective registration statement under the
Securities Act of 1933, as amended, covering any of the corporation's Common
Stock (as that term is defined under the Securities Act of 1933, as then in
effect) with a sales price per share of Common Stock (as adjusted for
combinations, stock dividends, subdivisions or split-ups) of at least $6.50 and
with aggregate gross proceeds to the corporation, at the public offering price,
of at least $25,000,000. Each share of Series A Preferred, Series A-1 Preferred,
Series B Preferred, Series B-1 Preferred, Series C Preferred and Series C-1
Preferred shall automatically be converted into shares of Common Stock at the
then effective Conversion Rate immediately upon the approval (by vote or written
consent) of the holders of more than sixty-six and two-thirds percent (66 2/3%)
of the outstanding shares of such series of Preferred Stock, voting together as
a separate class. Each share of Series D Preferred and Series D-1 Preferred
shall automatically be converted into shares of Common Stock at the then
effective Conversion Rate immediately upon the approval (by vote or written
consent) of the holders of more than sixty-six and two-thirds percent (66 2/3%)
of the outstanding shares of such Series D Preferred and Series D-1 Preferred,
voting together as a separate class.
(c) Mechanics of Conversion. Before any holder of Preferred Stock
shall be entitled to convert the same into shares of Common Stock, such holder
shall surrender the certificate or certificates therefor, duly endorsed, at the
office of the corporation or of any transfer agent for such Preferred Stock and
shall give written notice to the corporation at such office that such holder
elects to convert the same. 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
such holder shall be entitled as aforesaid. Such conversion shall be deemed to
have been made immediately prior to the close of business on the date of such
surrender of the shares of Preferred Stock to be converted, and the person or
persons entitled to receive the
-6-
<PAGE> 7
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.
(d) Adjustments to Conversion Price of the Preferred Stock for
Dilutive Issues; Special Conversion of Series A Preferred, Series B Preferred,
Series C Preferred, and Series D Preferred:
(i) Special Definitions. For purposes of this Section 4(d), the
following definitions shall apply:
(A) "Options" shall mean rights, options or warrants to
subscribe for, purchase or otherwise acquire either Common Stock or Convertible
Securities.
(B) "Original Issue Date" with respect to each series of
Preferred Stock shall mean the date on which the first share of such series of
Preferred Stock was first issued.
(C) "Convertible Securities" shall mean any evidences of
indebtedness, shares (other than the Common Stock) or other securities
convertible into or exchangeable for Common Stock.
(D) "Additional Shares of Common Stock" shall mean all
shares of Common Stock issued (or, pursuant to Section 4(d)(iii), deemed to be
issued) by the corporation, other than:
(1) shares of the corporation's Common Stock issued
upon conversion of the Preferred Stock;
(2) shares issued pursuant to the acquisition of
another corporation by the corporation by merger, purchase of substantially all
of the assets, or other reorganization;
(3) up to 2,500,000 shares (as adjusted for stock
splits, stock dividends, or recapitalization) of the corporation's Common Stock
(or related options) issued to employees, officers, directors, consultants, or
other persons performing services for the corporation (including, but not by way
of limitation, distributors and sales representatives) pursuant to any stock
offering, plan, or arrangement and such additional shares issued to such persons
as approved by the unanimous written consent of the Board of Directors or the
unanimous vote of the members of the corporation's Board of Directors present
and voting at a duly held meeting;
(4) shares issued to financial institutions regularly
engaged in the business of lending money or providing equipment lease financing
in connection with the extension of credit to the corporation for the purpose of
financing equipment, inventory, or accounts
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<PAGE> 8
receivable or in connection with the lease of equipment and in both cases for
other than equity financing purposes; or
(5) shares of the corporation's Common Stock issued in
connection with any stock split, stock dividend, or recapitalization by the
corporation.
(E) "Pro Rata Share" with respect to each holder of
Preferred Stock shall mean that portion of the total dollar amount of the
Dilutive Issuance (as defined below) equal to (i) the amount of the Dilutive
Issuance actually offered to all holders of Preferred Stock by the Board of
Directors of the corporation (ii) multiplied by a fraction, the numerator of
which is the number of shares of Preferred Stock then held by such holder, and
the denominator of which is the total number of shares of Preferred Stock then
outstanding.
(F) "Dilutive Issuance" with respect to each series of
Preferred Stock shall mean an issuance of Additional Shares of Common Stock for
a consideration per share less than the Conversion Price of such series of
Preferred Stock in effect on the date of and immediately prior to such issuance.
(G) "Participating Investor" shall mean any holder of
Preferred Stock that purchases at least its Pro Rata Share of a Dilutive
Issuance.
(H) "Nonparticipating Investor" shall mean any holder of
Preferred Stock that is not a Participating Investor.
(ii) Series A-1 Shadow Preferred.
(A) In the event the corporation proposes to undertake a
Dilutive Issuance, it shall give each holder of Series A Preferred a written
notice (the "Issuance Notice") of its intention, describing the type of new
securities, the price and number of shares and the general terms upon which the
corporation proposes to issue such new securities, at least thirty (30) days
prior to the date of such Dilutive Issuance. Each holder of Series A Preferred
may, within twenty (20) days from the date of the Issuance Notice, provide
written notice to the corporation that such holder agrees to become a
Participating Investor for the price and upon the terms specified in the
Issuance Notice. In the event that such holder fails to give such notice within
the twenty (20) day period, or fails to actually purchase its Pro Rata Share of
the Dilutive Issuance (other than as a result of the corporation refusing to
allow such holder to so purchase its Pro Rata Share), such holder shall be
deemed to be a Nonparticipating Investor.
(B) To the extent of the percentage of the Pro Rata Share
not purchased (the "Refused Percentage") by each Nonparticipating Investor, that
number of outstanding shares of Series A Preferred held by such Nonparticipating
Investor equal to the product of (x) the number of shares of such series held by
the Nonparticipating Investor, times (y) the Refused Percentage, shall be
converted automatically on the date (the "Closing Date") of the applicable
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<PAGE> 9
Dilutive Issuance (provided that the corporation gave the Issuance Notice to
such holder of Series A Preferred) into an equal number of fully-paid and
nonassessable shares of Series A-1 Preferred; provided, however, that prior to
the Closing Date each Nonparticipating Investor shall have the right to convert
such shares of Series A Preferred into shares of Common Stock at the Conversion
Rate in effect for such series as of the date of such conversion.
(C) Upon the conversion of Series A Preferred held by a
Nonparticipating Investor as set forth herein, such shares of Series A Preferred
shall no longer be outstanding on the books of the corporation and may not be
reissued, and the Nonparticipating Investor shall be treated for all purposes as
the record holder of such shares of Series A-1 Preferred on the Closing Date. No
shares of Series A-1 Preferred shall be issued except as set forth in this
Section 4(d)(ii) upon conversion of shares of Series A Preferred.
(D) No adjustment in the Conversion Price of the Series A-1
Preferred shall be made in respect of the issuance of Additional Shares of
Common Stock, regardless of the issuance price of such shares, except for the
issuance of such shares as a stock dividend, stock split, or in connection with
such other transaction as provided in paragraph 4(e) hereof.
(E) In the event that any shares of Series A-1 Preferred are
issued, concurrently with such issuance, the corporation shall take all such
action as may be required, including amending the Certificate of Incorporation,
(1) to cancel all authorized shares of Series A-1 Preferred Stock that remain
unissued after such issuance, (2) to create and reserve for issuance upon any
subsequent Dilutive Issuance a new series of Preferred Stock equal in number to
the number of shares of Series A-1 Preferred so canceled and designated Series
A-2 Preferred, with the designations, powers, preferences and rights and the
qualifications, limitations and restrictions identical to those then applicable
to the Series A Preferred, except that the Conversion Price for such shares of
Series A-2 Preferred once initially issued shall be the Conversion Price in
effect immediately prior to such Dilutive Issuance and shall no longer be
subject to adjustment in respect of the issuance of Additional Shares of Common
Stock, except for the issuance of such shares as a stock dividend, stock split,
or in connection with such other transaction as provided in paragraph 4(e)
hereof, and (3) to amend the provisions of this Section 4 to provide that any
subsequent conversion of Series A Preferred upon a Dilutive Issuance will be
into shares of Series A-2 Preferred rather than Series A-1 Preferred. The
corporation shall take the same actions with respect to the Series A-2 Preferred
and each subsequently authorized series of Preferred Stock upon initial issuance
of shares of the last such series to be authorized.
(iii) Series B-1 Shadow Preferred.
(A) In the event the corporation proposes to undertake a
Dilutive Issuance, it shall give each holder of Series B Preferred an Issuance
Notice, describing the type of new securities, the price and number of shares
and the general terms upon which the corporation proposes to issue such new
securities, at least thirty (30) days prior to the date of such Dilutive
Issuance. Each holder of Series B Preferred may, within twenty (20) days from
the date of the
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<PAGE> 10
Issuance Notice, provide written notice to the corporation that such holder
agrees to become a Participating Investor for the price and upon the terms
specified in the Issuance Notice. In the event that such holder fails to give
such notice within the twenty (20) day period, or fails to actually purchase its
Pro Rata Share of the Dilutive Issuance (other than as a result of the
corporation refusing to allow such holder to so purchase its Pro Rata Share),
such holder shall be deemed to be a Nonparticipating Investor.
(B) To the extent of the Refused Percentage by each
Nonparticipating Investor, that number of outstanding shares of Series B
Preferred held by such Nonparticipating Investor equal to the product of (x) the
number of shares of such series held by the Nonparticipating Investor, times (y)
the Refused Percentage, shall be converted automatically on the Closing Date of
the applicable Dilutive Issuance (provided that the corporation gave the
Issuance Notice to such holder of Series B Preferred) into an equal number of
fully-paid and nonassessable shares of Series B-1 Preferred; provided, however,
that prior to the Closing Date each Nonparticipating Investor shall have the
right to convert such shares of Series B Preferred into shares of Common Stock
at the Conversion Rate in effect for such series as of the date of such
conversion.
(C) Upon the conversion of Series B Preferred held by a
Nonparticipating Investor as set forth herein, such shares of Series B Preferred
shall no longer be outstanding on the books of the corporation and may not be
reissued, and the Nonparticipating Investor shall be treated for all purposes as
the record holder of such shares of Series B-1 Preferred on the Closing Date. No
shares of Series B-1 Preferred shall be issued except as set forth in this
Section 4(d)(iii) upon conversion of shares of Series B Preferred.
(D) No adjustment in the Conversion Price of the Series B-1
Preferred shall be made in respect of the issuance of Additional Shares of
Common Stock, regardless of the issuance price of such shares, except for the
issuance of such shares as a stock dividend, stock split, or in connection with
such other transaction as provided in paragraph 4(e) hereof.
(E) In the event that any shares of Series B-1 Preferred are
issued, concurrently with such issuance, the corporation shall take all such
action as may be required, including amending the Certificate of Incorporation,
(1) to cancel all authorized shares of Series B-1 Preferred Stock that remain
unissued after such issuance, (2) to create and reserve for issuance upon any
subsequent Dilutive Issuance a new series of Preferred Stock equal in number to
the number of shares of Series B-1 Preferred so cancelled and designated Series
B-2 Preferred, with the designations, powers, preferences and rights and the
qualifications, limitations and restrictions identical to those then applicable
to the Series B Preferred, except that the Conversion Price for such shares of
Series B-2 Preferred once initially issued shall be the Conversion Price in
effect immediately prior to such Dilutive Issuance and shall no longer be
subject to adjustment in respect of the issuance of Additional Shares of Common
Stock, except for the issuance of such shares as a stock dividend, stock split,
or in connection with such other transaction as provided in paragraph 4(e)
hereof, and (3) to amend the provisions of this Section 4 to provide that any
subsequent conversion of Series B Preferred upon a Dilutive Issuance will be
into shares of Series B-2 Preferred rather than
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<PAGE> 11
Series B-1 Preferred. The corporation shall take the same actions with respect
to the Series B-2 Preferred and each subsequently authorized series of Preferred
Stock upon initial issuance of shares of the last such series to be authorized.
(iv) Series C-1 Shadow Preferred.
(A) In the event the corporation proposes to undertake a
Dilutive Issuance, it shall give each holder of Series C Preferred an Issuance
Notice, describing the type of new securities, the price and number of shares
and the general terms upon which the corporation proposes to issue such new
securities, at least thirty (30) days prior to the date of such Dilutive
Issuance. Each holder of Series C Preferred may, within twenty (20) days from
the date of the Issuance Notice, provide written notice to the corporation that
such holder agrees to become a Participating Investor for the price and upon the
terms specified in the Issuance Notice. In the event that such holder fails to
give such notice within the twenty (20) day period, or fails to actually
purchase its Pro Rata Share of the Dilutive Issuance (other than as a result of
the corporation refusing to allow such holder to so purchase its Pro Rata
Share), such holder shall be deemed to be a Nonparticipating Investor.
(B) To the extent of the Refused Percentage by each
Nonparticipating Investor, that number of outstanding shares of Series C
Preferred held by such Nonparticipating Investor equal to the product of (x) the
number of shares of such series held by the Nonparticipating Investor, times (y)
the Refused Percentage, shall be converted automatically on the Closing Date of
the applicable Dilutive Issuance (provided that the corporation gave the
Issuance Notice to such holder of Series C Preferred) into an equal number of
fully-paid and nonassessable shares of Series C-1 Preferred; provided, however,
that prior to the Closing Date each Nonparticipating Investor shall have the
right to convert such shares of Series C Preferred into shares of Common Stock
at the Conversion Rate in effect for such series as of the date of such
conversion.
(C) Upon the conversion of Series C Preferred held by a
Nonparticipating Investor as set forth herein, such shares of Series C Preferred
shall no longer be outstanding on the books of the corporation and may not be
reissued, and the Nonparticipating Investor shall be treated for all purposes as
the record holder of such shares of Series C-1 Preferred on the Closing Date. No
shares of Series C-1 Preferred shall be issued except as set forth in this
Section 4(d)(iv) upon conversion of shares of Series C Preferred.
(D) No adjustment in the Conversion Price of the Series C-1
Preferred shall be made in respect of the issuance of Additional Shares of
Common Stock, regardless of the issuance price of such shares, except for the
issuance of such shares as a stock dividend, stock split, recapitalization or in
connection with such other transaction as provided in paragraph 4(e) hereof.
(E) In the event that any shares of Series C-1 Preferred are
issued, concurrently with such issuance, the corporation shall take all such
action as may be required,
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<PAGE> 12
including amending the Certificate of Incorporation, (1) to cancel all
authorized shares of Series C-1 Preferred Stock that remain unissued after such
issuance, (2) to create and reserve for issuance upon any subsequent Dilutive
Issuance a new series of Preferred Stock equal in number to the number of shares
of Series C-1 Preferred so cancelled and designated Series C-2 Preferred, with
the designations, powers, preferences and rights and the qualifications,
limitations and restrictions identical to those then applicable to the Series C
Preferred, except that the Conversion Price for such shares of Series C-2
Preferred once initially issued shall be the Conversion Price in effect
immediately prior to such Subsequent Dilutive Issuance and shall no longer be
subject to adjustment in respect of the issuance of Additional Shares of Common
Stock, except for the issuance of such shares as a stock dividend, stock split,
or in connection with such other transaction as provided in paragraph 4(e)
hereof, and (3) to amend the provisions of this Section 4 to provide that any
subsequent conversion of Series C Preferred upon a Dilutive Issuance will be
into shares of Series C-2 Preferred rather than Series C-1 Preferred. The
corporation shall take the same actions with respect to the Series C-2 Preferred
and each subsequently authorized series of Preferred Stock upon initial issuance
of shares of the last such series to be authorized.
(v) Series D-1 Shadow Preferred.
(A) In the event the corporation proposes to undertake a
Dilutive Issuance, it shall give each holder of Series D Preferred an Issuance
Notice, describing the type of new securities, the price and number of shares
and the general terms upon which the corporation proposes to issue such new
securities, at least thirty (30) days prior to the date of such Dilutive
Issuance. Each holder of Series D Preferred may, within twenty (20) days from
the date of the Issuance Notice, provide written notice to the corporation that
such holder agrees to become a Participating Investor for the price and upon the
terms specified in the Issuance Notice. In the event that such holder fails to
give such notice within the twenty (20) day period, or fails to actually
purchase its Pro Rata Share of the Dilutive Issuance (other than as a result of
the corporation refusing to allow such holder to so purchase its Pro Rata
Share), such holder shall be deemed to be a Nonparticipating Investor.
(B) To the extent of the Refused Percentage by each
Nonparticipating Investor, that number of outstanding shares of Series D
Preferred held by such Nonparticipating Investor equal to the product of (x) the
number of shares of such series held by the Nonparticipating Investor, times (y)
the Refused Percentage, shall be converted automatically on the Closing Date of
the applicable Dilutive Issuance (provided that the corporation gave the
Issuance Notice to such holder of Series D Preferred) into an equal number of
fully-paid and nonassessable shares of Series D-1 Preferred; provided, however,
that prior to the Closing Date each Nonparticipating Investor shall have the
right to convert such shares of Series D Preferred into shares of Common Stock
at the Conversion Rate in effect for such series as of the date of such
conversion.
(C) Upon the conversion of Series D Preferred held by a
Nonparticipating Investor as set forth herein, such shares of Series D Preferred
shall no longer be outstanding on the books of the corporation and may not be
reissued, and the Nonparticipating
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<PAGE> 13
Investor shall be treated for all purposes as the record holder of such shares
of Series D-1 Preferred on the Closing Date. No shares of Series D-1 Preferred
shall be issued except as set forth in this Section 4(d)(v) upon conversion of
shares of Series D Preferred.
(D) No adjustment in the Conversion Price of the Series D-1
Preferred shall be made in respect of the issuance of Additional Shares of
Common Stock, regardless of the issuance price of such shares, except for the
issuance of such shares as a stock dividend, stock split, recapitalization or in
connection with such other transaction as provided in paragraph 4(e) hereof.
(E) In the event that any shares of Series D-1 Preferred are
issued, concurrently with such issuance, the corporation shall take all such
action as may be required, including amending the Certificate of Incorporation,
(1) to cancel all authorized shares of Series D-1 Preferred Stock that remain
unissued after such issuance, (2) to create and reserve for issuance upon any
subsequent Dilutive Issuance a new series of Preferred Stock equal in number to
the number of shares of Series D-1 Preferred so cancelled and designated Series
D-2 Preferred, with the designations, powers, preferences and rights and the
qualifications, limitations and restrictions identical to those then applicable
to the Series D Preferred, except that the Conversion Price for such shares of
Series D-2 Preferred once initially issued shall be the Conversion Price of
Series D-1 Preferred in effect immediately prior to such Subsequent Dilutive
Issuance and shall no longer be subject to adjustment in respect of the issuance
of Additional Shares of Common Stock, except for the issuance of such shares as
a stock dividend, stock split, or in connection with such other transaction as
provided in paragraph 4(e) hereof, and (3) to amend the provisions of this
Section 4 to provide that any subsequent conversion of Series D Preferred upon a
Dilutive Issuance will be into shares of Series D-2 Preferred rather than Series
D-1 Preferred. The corporation shall take the same actions with respect to the
Series D-2 Preferred and each subsequently authorized series of Preferred Stock
upon initial issuance of shares of the last such series to be authorized.
(vi) 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 in respect of 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 entitled to receive any such Options or
Convertible Securities, then the maximum number of shares (as set forth in the
instrument relating thereto assuming the satisfaction of any conditions to
exercisability, including, without limitation, the passage of time and without
regard to any provisions contained therein for a subsequent adjustment of such
number) 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 Additional Shares of Common Stock shall not be deemed to have been issued
with respect to a series of Preferred Stock unless the consideration per share
(determined pursuant to Section 4(d)(viii) hereof) of such Additional Shares of
Common Stock would be less than the Conversion Price for such series of
Preferred Stock in effect on the date of and immediately prior to
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<PAGE> 14
such issue, or such record date, as the case may be, and provided further that
in any such case in which Additional Shares of Common Stock are deemed to be
issued:
(A) no further adjustment in the Conversion Price 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;
(B) 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 in the number of shares of
Common Stock issuable, upon the exercise, conversion or exchange thereof, the
Conversion Price 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;
(C) 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 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:
(1) in the case of Convertible Securities or Options
for Common Stock, the only Additional Shares of Common Stock issued were 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 which were actually converted or exchanged, plus the
additional consideration, if any, actually received by the corporation upon such
conversion or exchange, and
(2) 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 upon the issue of
the Convertible Securities with respect to which such Options were actually
exercised;
(D) no readjustment pursuant to clause (B) or (C) above
shall have the effect of increasing the Conversion Price to an amount which
exceeds the lower of (i) the Conversion Price on the original adjustment date,
or (ii) the Conversion Price that would have
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<PAGE> 15
resulted from any issuance of Additional Shares of Common Stock between the
original adjustment date and such readjustment date; and
(E) in the case of any Options which expire by their terms
not more than 90 days after the date of issue thereof, no adjustment of the
Conversion Price shall be made until the expiration or exercise of all such
Options.
(vii) Adjustment of Conversion Price Upon Issuance of Additional
Shares of Common Stock. In the event this corporation shall issue Additional
Shares of Common Stock (including Additional Shares of Common Stock deemed to be
issued pursuant to Section 4(d)(vi)) after the Original Issue Date without
consideration or for consideration per share less than the Conversion Price for
Series A Preferred, Series B Preferred, Series C Preferred or Series D Preferred
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 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 (including
all shares of Common Stock issuable upon conversion of the outstanding Preferred
Stock) 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; and
the denominator of which shall be the number of shares of Common Stock
outstanding immediately prior to such issue (including all shares of Common
Stock issuable upon conversion of the outstanding Preferred Stock) plus the
number of such Additional Shares of Common Stock so issued.
(viii) Determination of Consideration. For purposes of this
Section 4(d), the consideration received by the corporation for the issue of any
Additional Shares of Common Stock shall be computed as follows:
(A) Cash and Property. Such consideration shall:
(1) 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;
(2) insofar as it consists of property other than cash,
be computed at the fair value thereof at the time of such issue, as determined
in good faith by the Board irrespective of any accounting treatment; and
(3) 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 (1) and (2) above, as
determined in good faith by the Board.
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<PAGE> 16
(B) 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 4(d)(vi), relating to Options and
Convertible Securities, shall be determined by dividing
(x) 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 for a subsequent adjustment of such consideration) 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
(y) the maximum number of shares of Common Stock (as
set forth in the instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such number) issuable upon the
exercise of such Options or the conversion or exchange of such Convertible
Securities.
(e) Adjustment of Conversion Price. The Conversion Price of each
series of Preferred Stock shall be subject to adjustment from time to time as
follows:
(i) If the number of shares of Common Stock outstanding at any
time after the date hereof is increased by a stock dividend payable in shares of
Common Stock or by a subdivision or split-up of shares of Common Stock, then, on
the date such payment is made or such change is effective, the Conversion Price
for each series of Preferred Stock shall be appropriately decreased so that the
number of shares of Common Stock issuable on conversion of shares of such series
of Preferred Stock shall be increased in proportion to such increase of
outstanding shares.
(ii) If the number of shares of Common Stock outstanding at any
time after the date hereof is decreased by a combination or reverse stock split
of the outstanding shares of Common Stock, then, on the effective date of such
combination, the Conversion Price for each series of Preferred Stock shall be
appropriately increased so that the number of shares of Common Stock issuable on
conversion of shares of such series of Preferred Stock shall be decreased in
proportion to such decrease in outstanding shares.
(iii) In case, at any time after the date hereof, of any capital
reorganization or any reclassification of the stock of the corporation (other
than a change in par value or as a result of a stock dividend or subdivision,
split-up, reverse stock split, or combination of shares), the shares of each
series of Preferred Stock shall, after such reorganization or reclassification,
be convertible into the kind and number of shares of stock or other securities
or property of the corporation to which such holder would have been entitled if
immediately prior to such reorganization or reclassification such holder had
converted its shares of such series of Preferred Stock into Common
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<PAGE> 17
Stock. The provisions of this Section 4(e)(iii) shall similarly apply to
successive reorganizations or reclassifications.
(f) Fractional Shares. No fractional shares of Common Stock shall be
issued upon conversion of the Preferred Stock. In lieu of any fractional shares
to which the holder would otherwise be entitled, the corporation shall pay cash
equal to such fraction multiplied by the fair market value for such Common Stock
as determined in accordance with Section 2(c).
(g) Adjustment Threshold and Recording. No adjustment in a
Conversion Price need be made if such adjustment would result in a change in a
Conversion Price of less than $0.01. Any adjustment of less than $0.01 which is
not made shall be carried forward and shall be made at the time of and together
with any subsequent adjustment which, on a cumulative basis, amounts to an
adjustment of $0.01 or more in a Conversion Price. All calculations under this
Section 4 shall be made to the nearest one hundredth of a cent ($0.0001) or to
the nearest one hundredth (1/100) of a share, as the case may be.
(h) Other Distributions. In the event this corporation shall declare
a distribution payable in securities of other persons, evidences of indebtedness
issued by this corporation or other persons, assets excluding cash dividends or
options or rights not referred to in subsection 4(e), then in each such case for
the purpose of this subsection 4(h), the holders of Preferred Stock shall be
entitled to a proportionate share of any such distribution as though they were
the holders of the number of shares of Common Stock of the corporation into
which their shares of Preferred Stock 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.
(i) No Impairment. The corporation will not, through any
reorganization, transfer of assets, consolidation, merger, dissolution,
recapitalization, tender offer, 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 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
Preferred Stock against impairment. This provision shall not restrict the
corporation from amending its Certificate of Incorporation in accordance with
(A) the General Corporation Law of the State of Delaware and (B) the applicable
consent and voting provisions stated herein.
(j) Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment of the Conversion Price pursuant to this Section 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 setting forth such adjustment or
readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. The corporation shall, upon written request at any time
of any holder of 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 at the time in effect for each series of Preferred
Stock, and
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<PAGE> 18
(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 of the
Preferred Stock held by such holder.
(k) Notices of Record Date. In the event of any taking by the
corporation 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 (other than a cash dividend) or other distribution, the corporation
shall mail to each holder of Preferred Stock at least twenty (20) days prior to
the date specified therein, a notice specifying the date on which any such
record is to be taken for the purpose of such dividend or distribution.
(l) 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 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 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 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, subject to such stockholder
approval as may be required.
(m) Status of Converted Stock. In the event any shares of Series A
Preferred, Series A-1 Preferred, Series B Preferred, Series B-1 Preferred,
Series C Preferred, Series C-1 Preferred, Series D Preferred, or Series D-1
Preferred shall be converted pursuant to Section 4 hereof, the shares so
converted shall be canceled and shall not be issuable by the corporation. The
Certificate of Incorporation of this corporation shall be appropriately amended
to effect the corresponding reduction in the corporation's authorized capital
stock.
(n) Notices. Any notice required by the provisions of this Section 4
to be given to the holder 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 its address appearing on the books of the corporation.
5 Protective Provisions.
(a) So long as 500,000 shares of the Series A Preferred or Series
A-1 Preferred shall be outstanding the corporation shall not, without first
obtaining the approval (by vote or written consent, as provided by law) of the
holders of more than fifty percent of the outstanding shares of Series A
Preferred and Series A-1 Preferred:
(i) Authorized Number. Increase the authorized number of shares
of Series A Preferred or Series A-1 Preferred; or
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<PAGE> 19
(ii) No Adverse Change. Directly and adversely alter or change
the rights, preferences or privileges of the outstanding shares of Series A
Preferred or Series A-1 Preferred; or
(iii) Create Any New Class or Series. Create any new class or
series of shares having a dividend or liquidation preference senior to that of
the outstanding Series A Preferred or Series A-1 Preferred; or
(iv) Section 305. Do any act or thing which would result in the
taxation of the holders of the Series A Preferred or Series A-1 Preferred under
Section 305 of the Internal Revenue Code of 1986, as amended (or any successor
provision).
(b) So long as 500,000 shares of the Series B Preferred or Series
B-1 Preferred shall be outstanding the corporation shall not, without first
obtaining the approval (by vote or written consent, as provided by law) of the
holders of more than fifty percent of the outstanding shares of Series B
Preferred and Series B-1 Preferred:
(i) Authorized Number. Increase the authorized number of shares
of Series B Preferred or Series B-1 Preferred; or
(ii) No Adverse Change. Directly and adversely alter or change
the rights, preferences or privileges of the outstanding shares of Series B
Preferred or Series B-1 Preferred; or
(iii) Create Any New Class or Series. Create any new class or
series of shares having a dividend or liquidation preference senior to that of
the outstanding Series B Preferred or Series B-1 Preferred; or
(iv) Section 305. Do any act or thing which would result in the
taxation of the holders of the Series B Preferred or Series B-1 Preferred under
Section 305 of the Internal Revenue Code of 1986, as amended (or any successor
provision); or
(v) Dividends. Pay any dividends on, or redeem any shares of,
Common Stock.
(c) So long as 200,000 shares of the Series C Preferred or Series
C-1 Preferred shall be outstanding the corporation shall not, without first
obtaining the approval (by vote or written consent, as provided by law) of the
holders of more than fifty percent of the outstanding shares of Series C
Preferred and Series C-1 Preferred:
(i) Authorized Number. Increase the authorized number of shares
of Series C Preferred or Series C-1 Preferred; or
(ii) No Adverse Change. Directly and adversely alter or change
the rights, preferences or privileges of the outstanding shares of Series C
Preferred or Series C-1 Preferred; or
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<PAGE> 20
(iii) Create Any New Class or Series. Create any new class or
series of shares having a dividend or liquidation preference senior to that of
the outstanding Series C Preferred or Series C-1 Preferred; or
(iv) Section 305. Do any act or thing which would result in the
taxation of the holders of the Series C Preferred or Series C-1 Preferred under
Section 305 of the Internal Revenue Code of 1986, as amended (or any successor
provision); or
(v) Dividends. Pay any dividends on, or redeem any shares of
Common Stock.
(d) So long as 500,000 shares of the Series D Preferred or Series
D-1 Preferred shall be outstanding the corporation shall not, without first
obtaining the approval (by vote or written consent, as provided by law) of the
holders of more than two-thirds (66-2/3%) of the outstanding shares of Series D
Preferred and Series D-1 Preferred, voting together as a separate class:
(i) Authorized Number. Increase the authorized number of shares
of Series D Preferred or Series D-1 Preferred; or
(ii) No Adverse Change. Directly and adversely alter or change
the rights, preferences or privileges of the outstanding shares of Series D
Preferred or Series D-1 Preferred; or
(iii) Create Any New Class or Series. Create any new class or
series of shares having a dividend or liquidation preference senior to that of
the outstanding Series D Preferred or Series D-1 Preferred; or
(iv) Section 305. Do any act or thing which would result in the
taxation of the holders of the Series D Preferred or Series D-1 Preferred under
Section 305 of the Internal Revenue Code of 1986, as amended (or any successor
provision); or
(v) Dividends. Pay any dividends on, or redeem any shares of
Common Stock.
(e) So long as 500,000 shares of the Preferred Stock shall be
outstanding the corporation shall not, without first obtaining the approval (by
vote or written consent, as provided by law) of the holders of more than 60% of
the outstanding shares of Preferred Stock (voting together as a separate class),
authorize the merger, consolidation or sale of all or substantially all of the
assets of the corporation which will result in the corporation's stockholders
immediately prior to such transaction not holding (by virtue of such shares or
securities issued solely with respect thereto) at least 50% of the voting power
of the surviving, continuing or purchasing entity.
FIVE. The corporation is to have perpetual existence.
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<PAGE> 21
SIX. In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized to make, alter, amend or
repeal the Bylaws of the corporation.
SEVEN. The number of directors which constitute the whole Board of
Directors of the corporation shall be as specified in the Bylaws of the
corporation.
EIGHT. 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.
NINE. (a) The corporation shall indemnify each of the corporation's
directors and officers in each and every situation where, under Section 145 of
the General Corporation Law of the State of Delaware, as amended from time to
time ("Section 145"), the corporation is permitted or empowered to make such
indemnification. The corporation may, in the sole discretion of the Board of
Directors of the corporation, indemnify any other person who may be indemnified
pursuant to Section 145 to the extent the Board of Directors deems advisable, as
permitted by Section 145. The corporation shall promptly make or cause to be
made any determination required to be made pursuant to Section 145.
(b) No person shall be personally liable to the corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director,
provided, however, that the foregoing shall not eliminate or limit the liability
of a director (i) for any breach of the director's duty of loyalty to the
corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the General Corporation Law of the State of Delaware or (iv) for
any transaction from which the director derived an improper personal benefit. If
the General Corporation Law of the State of Delaware is subsequently amended to
further eliminate or limit the liability of a director, then a director of the
corporation, in addition to the circumstances in which a director is not
personally liable as set forth in the preceding sentence, shall not be liable to
the fullest extent permitted by the amended General Corporation Law of the State
of Delaware. For purposes of this Article NINE, "fiduciary duty as a director"
shall include any fiduciary duty arising out of serving at the corporation's
request as a director of another corporation, partnership, joint venture or
other enterprise, and "personal liability to the corporation or its
stockholders" shall include any liability to such other corporation,
partnership, joint venture, trust or other enterprise, and any liability to the
corporation in its capacity as a security holder, joint venturer, partner,
beneficiary, creditor or investor of or in any such other corporation,
partnership, joint venture, trust or other enterprise.
(c) Neither any amendment nor repeal of this Article NINE, nor the
adoption of any provision of this Certificate of Incorporation inconsistent with
this Article NINE, shall eliminate or reduce the effect of this Article NINE in
respect of any matter occurring, or any cause of action,
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<PAGE> 22
suit or claim that, but for this Article NINE, would accrue or arise, prior to
such amendment, repeal or adoption of an inconsistent provision.
TEN. Advance notice of new business and stockholder nominations for the
election of directors shall be given in the manner and to the extent provided in
the Bylaws of the corporation.
ELEVEN. Whenever a compromise or arrangement is proposed between this
corporation and its creditors or any class of them and/or between this
corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this corporation under the provisions of Section 279 of Title 8 of the
Delaware Code, order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of this corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority in
number representing three-fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this corporation as consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this corporation, as the case may be,
and also on this corporation.
TWELVE. Subject to the General Corporation Law of the State of Delaware
and Section 5 hereof, the corporation reserves the right to amend, alter, change
or repeal any provisions contained in this Certificate, in the manner now or
hereafter prescribed by statute, and all rights conferred upon stockholders
herein are granted subject to this reservation.
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<PAGE> 23
IN WITNESS WHEREOF, the corporation has caused this Certificate to be
signed by David P. Binkley, its President, and attested by Michael J. O'Donnell,
its Secretary, this May __, 1999.
ARGONAUT TECHNOLOGIES, INC.
By:
--------------------------
David P. Binkley
President
ATTEST:
- ---------------------------
Michael J. O'Donnell
Secretary
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<PAGE> 1
EXHIBIT 3.3
BYLAWS
OF
ARGONAUT TECHNOLOGIES, INC.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE 1 - CORPORATE OFFICES....................................... 1
1.1 REGISTERED OFFICE....................................... 1
1.2 OTHER OFFICES........................................... 1
ARTICLE 2 - 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 3 - DIRECTORS............................................... 6
3.1 POWERS.................................................. 6
3.2 NUMBER OF DIRECTORS..................................... 6
3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF
DIRECTORS............................................. 7
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 4 - COMMITTEES.............................................. 11
4.1 COMMITTEES OF DIRECTORS................................. 11
4.2 COMMITTEE MINUTES....................................... 12
4.3 MEETINGS AND ACTION OF COMMITTEES....................... 12
</TABLE>
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<PAGE> 3
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Page
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<S> <C>
ARTICLE 5 - OFFICERS................................................ 12
5.1 OFFICERS................................................ 12
5.2 APPOINTMENT OF OFFICERS................................. 12
5.3 SUBORDINATE OFFICERS.................................... 13
5.4 REMOVAL AND RESIGNATION OF OFFICERS..................... 13
5.5 VACANCIES IN OFFICES.................................... 13
5.6 CHAIRMAN OF THE BOARD................................... 13
5.7 PRESIDENT............................................... 13
5.8 VICE PRESIDENTS......................................... 14
5.9 SECRETARY............................................... 14
5.10 CHIEF FINANCIAL OFFICER................................. 15
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........................ 16
ARTICLE 6 - INDEMNITY............................................... 16
6.1 THIRD PARTY ACTIONS..................................... 16
6.2 ACTIONS BY OR IN THE RIGHT OF THE CORPORATION........... 17
6.3 SUCCESSFUL DEFENSE...................................... 17
6.4 DETERMINATION OF CONDUCT................................ 17
6.5 PAYMENT OF EXPENSES IN ADVANCE.......................... 18
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 INDEMNIFICATIONS AND ADVANCEMENT OF
EXPENSES.............................................. 19
ARTICLE 7 - 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 8 - GENERAL MATTERS......................................... 21
8.1 CHECKS.................................................. 21
8.2 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS........ 21
8.3 STOCK CERTIFICATES; PARTLY PAID SHARES.................. 21
8.4 SPECIAL DESIGNATION ON CERTIFICATES..................... 22
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
</TABLE>
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<PAGE> 4
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
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<S> <C>
8.12 REGISTERED STOCKHOLDERS.................................. 24
ARTICLE 9 -- AMENDMENTS.............................................. 24
</TABLE>
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<PAGE> 5
BYLAWS
OF
ARGONAUT TECHNOLOGIES, INC.
ARTICLE 1
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 2
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
Tuesday 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.
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
<PAGE> 6
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' MEETINGS
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.
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
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<PAGE> 7
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 determined 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, pledgers 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 incorporation, 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
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<PAGE> 8
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 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.
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<PAGE> 9
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:
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.
(i) 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.
(ii) The record date for determining stockholders for any other
purpose shall be at the close of business on the day on which the board of
directors adopts the resolution relating thereto.
A determination of stockholders of record entitled to notice of or to vote
at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the board of directors may fix a new record date for
the adjourned meeting.
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 manual 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
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<PAGE> 10
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 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. 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.
ARTICLE 3
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 board of directors shall consist of one (1) or more members, the
number thereof to be determined from time to time by resolution of the board of
directors.
No reduction of the authorized number of directors shall have the effect
of removing any director before that director's term of office expires.
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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 shall hold office as provided in this section in the filling of other
vacancies.
Unless otherwise provided in the certificate of incorporation or 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 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
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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.
3.5 PLACE OR 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
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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
purposes or the place of the meeting, if the meeting is to be held at the
principal executive office of the corporation.
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
transaction 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 a 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
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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.
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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ARTICLE 4
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 5
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, subject to the rights, if any, of an
officer under any contract of employment.
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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 office 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 an 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.
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
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the business and the officers of the corporation. He shall preside at all
meetings of the stockholders and, in the absence or 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 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.
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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.
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
here 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
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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 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.
5.4 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 6
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
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 reasonably 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.
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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-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 a
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
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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 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, officer, 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
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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 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 7
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.
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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 any attorney or other agent 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 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
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<PAGE> 25
vote of the stockholders, a full and clear statement of the business and
condition of the corporation.
ARTICLE 8
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 corporation, and only the persons so
authorized shall sign or endorse those instruments.
8.2 EXECUTION OF CORPORATION CONTRACTS AND INSTRUMENTS
The board of directors, except as otherwise provided in these bylaws,
may authorize any officer or 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
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<PAGE> 26
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 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 canceled 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.
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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.
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.
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<PAGE> 28
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.
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 9
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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<PAGE> 29
CERTIFICATE OF ADOPTION OF BYLAWS
OF
ARGONAUT TECHNOLOGIES, INC.
The undersigned person appointed in the Certificate of Incorporation to
act as the Incorporator of Argonaut Technologies, Inc. hereby adopts the
foregoing Bylaws, comprising twenty-four (24) pages, as the Bylaws of the
corporation.
Executed this 3rd day of January, 1994.
MICHAEL J. O'DONNELL
---------------------------------------
Michael J. O'Donnell, Incorporator
The undersigned hereby certifies that he is the duly elected, qualified,
and acting Secretary of Argonaut Technologies, Inc. and that the foregoing
Bylaws, comprising twenty-four (24) pages, were adopted as the Bylaws of the
corporation on January __, 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 3rd day of January, 1994.
MICHAEL J. O'DONNELL
---------------------------------------
Michael J. O'Donnell, Secretary
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<PAGE> 1
EXHIBIT 10.1
ARGONAUT TECHNOLOGIES, INC.
-------------------------------
SERIES D PREFERRED STOCK PURCHASE AGREEMENT
May 21, 1999
-------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
SECTION 1 Authorization and Sale of Series D Preferred Stock............. 1
1.1 Authorization of Series D Preferred Stock...................... 1
1.2 Sale of Series D Preferred Stock............................... 1
SECTION 2 Closing Date; Delivery......................................... 1
2.1 Closing Date................................................... 1
2.2 Delivery....................................................... 1
SECTION 3 Representations and Warranties of the Company.................. 2
3.1 Organization and Standing; Articles and Bylaws................. 2
3.2 Corporate Power................................................ 2
3.3 Subsidiaries................................................... 2
3.4 Capitalization................................................. 2
3.5 Authorization.................................................. 3
3.6 Validity of Shares............................................. 3
3.7 Title to Properties and Assets; Liens, etc..................... 3
3.8 Material Contracts and Commitments............................. 4
3.9 Patents, Trademarks, etc....................................... 4
3.10 Compliance with Other Instruments.............................. 4
3.11 Litigation, etc................................................ 5
3.12 Employees...................................................... 5
3.13 Insurance...................................................... 5
3.14 Registration Rights............................................ 5
3.15 Governmental Consents, etc..................................... 5
3.16 Offering....................................................... 6
3.17 Disclosure..................................................... 6
3.18 Brokers or Finders............................................. 6
3.19 Permits........................................................ 6
3.20 Financial Statements........................................... 6
3.21 Changes........................................................ 7
3.22 Material Liabilities........................................... 8
3.23 Related Party Transactions..................................... 8
3.24 Taxes.......................................................... 9
3.25 Offering of Shares............................................. 9
3.26 No Violations, etc............................................. 9
3.27 Compliance with Laws........................................... 10
</TABLE>
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<PAGE> 3
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
3.28 ERISA.......................................................... 10
3.29 Environmental.................................................. 10
3.30 Foreign Corrupt Practices Act.................................. 11
3.31 Year 2000...................................................... 11
SECTION 4 Representations, Warranties and Covenants of the Purchasers.... 11
4.1 Experience; Risk............................................... 11
4.2 Investment..................................................... 12
4.3 Restricted Securities; Rule 144................................ 12
4.4 No Public Market............................................... 12
4.5 Access to Data................................................. 12
4.6 Authorization.................................................. 12
4.7 Government Consents............................................ 13
4.8 Further Limitations on Disposition............................. 13
4.9 Legends........................................................ 13
SECTION 5 Conditions to Closing of Purchaser............................. 13
5.1 Representations and Warranties Correct......................... 13
5.2 Covenants...................................................... 14
5.3 Opinion of Company's Counsel................................... 14
5.4 Compliance Certificate......................................... 14
5.5 Blue Sky....................................................... 14
5.6 Stockholder Rights Agreement................................... 14
5.7 Restated Certificate of Incorporation.......................... 14
5.8 Management Rights Agreement.................................... 14
5.9 All Proceedings to be Satisfactory............................. 14
5.10 Supporting Documents........................................... 14
5.11 No Litigation Threatened....................................... 15
5.12 Approvals, Waivers and Consents................................ 15
5.13 Stock Certificates............................................. 15
5.14 No Change in Law............................................... 15
SECTION 6 Conditions to Closing of the Company........................... 15
6.1 Representations................................................ 16
6.2 Stockholder Rights Agreement................................... 16
</TABLE>
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<PAGE> 4
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
SECTION 7 Covenants of the Company....................................... 16
7.1 Reserve for Conversion Shares.................................. 16
7.2 Corporate Existence............................................ 16
7.3 Properties, Business, Insurance................................ 16
7.4 Inspection, Consultation and Advice............................ 17
7.5 Restrictive Agreements Prohibited.............................. 17
7.6 Transactions with Affiliates................................... 17
7.7 Compliance with Laws........................................... 17
7.8 Keeping of Records and Books of Account........................ 17
7.9 Change in Nature of Business................................... 17
7.10 No "Prohibited Transactions" and Employee Benefits............. 17
7.11 Composition of the Board of Directors.......................... 17
7.12 Directors' Expenses............................................ 18
7.13 Payment of Taxes............................................... 18
SECTION 8 Miscellaneous.................................................. 18
8.1 Governing Law.................................................. 18
8.2 Survival....................................................... 18
8.3 Successors and Assigns......................................... 18
8.4 Entire Agreement; Amendment.................................... 19
8.5 Notices, etc................................................... 19
8.6 Delays or Omissions............................................ 19
8.7 California Corporate Securities Law............................ 19
8.8 Counterparts................................................... 19
8.9 Severability................................................... 20
8.10 Expenses....................................................... 20
Exhibits:
A - Schedules of Purchasers
B - Restated Certificate of Incorporation
C - Schedule of Exceptions
D - Amended Stockholder Rights Agreement
E - Legal Opinion of Company Counsel
F - Management Rights Agreement
</TABLE>
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<PAGE> 5
ARGONAUT TECHNOLOGIES, INC.
SERIES D PREFERRED STOCK PURCHASE AGREEMENT
This Agreement is made as of May 21, 1999, between Argonaut Technologies,
Inc., a Delaware corporation (the "COMPANY") and the entities listed on Exhibit
A hereto (individually, a "PURCHASER" and, collectively, the "PURCHASER").
SECTION 1
Authorization and Sale of Series D Preferred Stock
1.1 Authorization of Series D Preferred Stock. The Company has authorized
the sale and issuance of up to Two Million Seven Hundred Thousand (2,700,000)
shares of its Series D Preferred Stock (the "SERIES D PREFERRED"), having the
rights, preferences, privileges and restrictions set forth in the Company's
Restated Certificate of Incorporation in the form attached hereto as Exhibit B
(the "RESTATED CERTIFICATE"). The shares of Series D Preferred to be sold
hereunder are collectively referred to as the "SHARES."
1.2 Sale of Series D Preferred. Subject to the terms and conditions
hereof, on the Closing Date (as defined below) the Company will issue and sell
to each Purchaser, and each Purchaser will purchase severally, and not jointly,
at a purchase price of Five Dollars and Seventy-Five Cents ($5.75) per share
from the Company, the number of shares of Series D Preferred specified opposite
the name of each such Purchaser on Exhibit A.
SECTION 2
Closing Date; Delivery
2.1 Closing Date. The closing of the purchase and sale of shares of the
Series D Preferred hereunder (the "CLOSING") shall be held at the offices of
Wilson, Sonsini, Goodrich & Rosati, 650 Page Mill Road, Palo Alto, California
94304-1050 ("WSGR") on May 21, 1999, or at such other time and place upon which
the Company and the Purchasers shall agree (the date of the Closing is
hereinafter referred to as the "CLOSING DATE").
2.2 Delivery. At the Closing, the Company will issue and deliver to each
Purchaser a stock certificate or certificates in definitive form, registered in
the name of the Purchaser, representing the number of Shares set forth opposite
such Purchaser's name on Exhibit A of this Agreement, as appropriate, against
payment of the purchase price therefor, by check or wire transfer payable to
the Company.
<PAGE> 6
SECTION 3
Representations and Warranties of the Company
Except as set forth on the Schedule of Exceptions attached hereto as
Exhibit C, the Company hereby represents and warrants to the Purchasers as
follows:
3.1 Organization and Standing; Articles and Bylaws. The Company is a
corporation duly organized and validly existing under, and by virtue of, the
laws of the State of Delaware and is in good standing under such laws. The
Company has all requisite corporate power to own and operate its properties and
assets, and to carry on its business as presently conducted and as proposed to
be conducted. The Company is qualified to do business as a foreign corporation
in any jurisdiction in which failure to qualify would have a material adverse
effect on the Company's business. The Company has furnished Purchasers with
true and complete copies of its Restated Certificate and Bylaws in effect as of
the date hereof.
3.2 Corporate Power. The Company will have prior to the Closing Date all
requisite legal and corporate power to execute, deliver and perform this
Agreement and to amend the Amended Stockholder Rights Agreement in the form
attached hereto as Exhibit D (the "STOCKHOLDER RIGHTS AGREEMENT") to execute,
deliver and perform the Stockholder Rights Agreement, to sell and issue and
deliver the Shares hereunder, to issue and deliver the Common Stock issuable
upon conversion of the Shares and to carry out and perform its obligations
under the terms of this Agreement, the Stockholder Rights Agreement and the
transactions contemplated hereby.
3.3 Subsidiaries. The Company has no subsidiaries or affiliated companies
and does not otherwise own or control, directly or indirectly, or have any
ownership interest in, any other corporation, association, joint venture,
business entity or partnership.
3.4 Capitalization. The authorized capital stock of the Company consists
of 32,200,000 shares of Common Stock and 26,200,000 shares of Preferred Stock,
of which 5,000,000 shares are designated as Series A Preferred Stock, 5,000,000
shares are designated Series A-1 Preferred Stock, 3,000,000 shares are
designated Series B Preferred Stock, 3,000,000 shares are designated Series B-1
Preferred Stock, 1,600,000 shares are designated Series C Preferred Stock,
1,600,000 shares are designated Series C-1 Preferred Stock, 2,700,000 shares
are designated Series D Preferred Stock, and 2,700,000 shares are designated
Series D-1 Preferred Stock. Immediately prior to the Closing, the issued and
outstanding stock of the Company shall consist of 2,337,636 shares of Common
Stock, 4,627,500 shares of Series A Preferred Stock, no shares of Series A-1
Preferred Stock, 2,923,073 shares of Series B Preferred Stock, no shares of
Series B-1 Preferred Stock, 1,180,000 shares of Series C Preferred Stock, no
shares of Series C-1 Preferred Stock, no shares of Series D Preferred Stock,
and no shares of Series D-1 Preferred Stock. There are Warrants outstanding for
the purchase of 50,000 shares of Common Stock and 91,665 shares of Series C
Preferred Stock. All such issued and outstanding shares have been duly
authorized and validly issued, and are fully paid and nonassessable. The
Company has reserved shares of Common stock for issuance upon conversion of
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<PAGE> 7
the Preferred Stock and upon exercise of outstanding Warrants. The Company has
reserved 2,435,308 shares of its Common Stock for issuance to officers,
directors, employees, sales representatives and consultants of the Company
pursuant to the Company's 1995 Incentive Stock Plan. There are Stock Options
outstanding for the purchase of 1,598,122 shares of Common Stock. The Series A
Preferred, Series A-1 Preferred, Series B Preferred, Series B-1 Preferred,
Series C Preferred, Series C-1 Preferred, Series D Preferred, and Series D-1
Preferred shall have the rights, preferences, privileges and restrictions set
forth in the Restated Certificate. Except as referenced herein, there are no
options, warrants, conversion privileges or other rights presently outstanding
to purchase or otherwise acquire any authorized but unissued shares of the
capital stock or other securities of the Company, nor any agreements or
understandings with respect thereto. The Company is not a party or subject to
any agreement or understanding, and, to the Company's knowledge, there is no
agreement or understanding between any persons and/or entities, which affects
or relates to the voting or giving of consents with respect to any security or
by a director of the Company. The Company is under no duty to redeem or
repurchase any shares of any class or series of its capital stock. All of the
outstanding shares of the Company were issued in compliance with all applicable
Federal and state securities laws.
3.5 Authorization. All corporate action on the part of the Company, its
officers, directors and stockholders necessary for the authorization,
execution, delivery and performance of this Agreement and the Stockholder
Rights Agreement by the Company, the authorization, sale, issuance and delivery
of the Shares (and the Common Stock issuable upon conversion of the Shares) and
the performance of the Company's obligations hereunder and thereunder has been
taken or will be taken prior to the Closing. This Agreement and the Stockholder
Rights Agreement, when executed and delivered by the Company, shall constitute
the legal, valid and binding obligations of the Company, enforceable against
the Company in accordance with their respective terms, subject to laws of
general application relating to bankruptcy, insolvency and the relief of
debtors and rules of law governing specific performance, injunctive relief or
other equitable remedies.
3.6 Validity of Shares. The Shares, when issued, sold and delivered in
compliance with the provisions of this Agreement, will be duly and validly
issued and will be fully paid and non-assessable and free and clear of all liens
and encumbrances, and the Common Stock issuable upon conversion of the Shares
has been duly and validly reserved and, when issued and delivered in compliance
with the provisions of the Restated Certificate will be duly and validly issued
and will be fully paid and nonassessable and free and clear of all liens and
encumbrances and restrictions on transfer other than as set forth in this
Agreement and the Stockholder Rights Agreement, provided, however, that the
Shares (and the Common Stock issuable upon conversion of the Shares) may be
subject to restrictions on transfer under state and/or federal securities laws.
Except as set forth herein or in the Stockholder Rights Agreement, there are no
outstanding rights of first refusal or preemptive rights applicable to the
Shares or the Common Stock issuable upon conversion of the Shares.
3.7 Title to Properties and Assets; Liens, etc. The Company has good and
marketable title to all its properties and assets, and is in compliance with
the lease of all material properties leased by it, in each case subject to no
mortgage, pledge, lien, lease, encumbrance or charge, other
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<PAGE> 8
than the lien of current taxes not yet due and payable. The Company is not in
default under or in breach of any provision of its leases, and the Company
holds valid leasehold interests in the properties which it leases. No event has
occurred and is continuing which, with due notice or lapse of time or both,
would constitute a default or event of default by the Company under any such
lease or agreement or, to the Company's knowledge, by any party thereto. The
Company's properties and assets are in good condition and repair, ordinary wear
and tear excepted, in all material respects.
3.8 Material Contracts and Commitments. Exhibit C sets forth a list of
all agreements, contracts, indebtedness, liabilities, and other obligations to
which the Company is a party or by which it or its assets are bound that (a)
are material to the conduct and operations of its business and properties; (b)
involve in excess of $10,000 aggregating similar agreements or obligations to
the same party; (c) involve to the Company's knowledge any of the officers,
consultants, directors, employees, or stockholders of the Company or any
members of the immediate family of the foregoing; or (d) obligate the Company
to share, license, or develop any product. Copies of such agreements and
contracts and documentation evidencing such liabilities and other obligations
have been made available by the Company to the Purchasers.
3.9 Patents, Trademarks, etc. To the knowledge of the Company, the Company
owns or has valid right to use all patents, trademarks, service marks, trade
names, copyrights, trade secrets, information, proprietary rights and processes
necessary for its business as now conducted, and as proposed to be conducted,
without conflict with or infringement of the rights of others. The Company has
not received any communications alleging that the Company has violated or, by
conducting its business as proposed, would violate, the proprietary or
intellectual property rights of any other person or entity. To the Company's
knowledge, there is no violation or infringement by a third party of any of the
Company's patents, licenses, trademarks, service marks, trade names,
copyrights, trade secrets or other proprietary rights.
3.10 Compliance with Other Instruments. The Company is not in violation of
any term of its Restated Certificate or Bylaws, or in any material respect of
any term or provision of any mortgage, indenture, contract, agreement,
instrument, judgment or decree, and to its knowledge is not in violation of any
order, statute, rule or regulation applicable to the Company. No want or
failure of performance has occurred which, with the passage of time or giving
of notice, would constitute such a material violation. The execution, delivery
and performance of and compliance with this Agreement and the Stockholder
Rights Agreement and the issuance and delivery of the Shares (and the Common
Stock issuable upon conversion of the Shares), have not resulted and will not
result in any violation of, or conflict with, or constitute a default under any
of the foregoing, or result in the creation of any mortgage, pledge, lien,
restriction, encumbrance or charge upon any of the properties or assets of the
Company; and there is no such violation or default which materially and
adversely affects the business of the Company or any of its properties or
assets.
3.11 Litigation, etc. There are no (i) actions, suits, claims, proceedings
or investigations pending or, to the Company's knowledge, threatened against or
affecting the Company or its properties before any court or governmental
agency, (ii) arbitration proceeding relating to the
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<PAGE> 9
Company pending under collective bargaining agreements or otherwise or (iii)
governmental inquiry pending or, to the Company's knowledge, threatened against
or affecting the Company, which, either in any case or in the aggregate, might
result in any material adverse change in the business, prospects, financial
condition, affairs, operations or equity ownership of the Company or any of
its properties or assets, or in any material impairment of the right or ability
of the Company to carry on its business as now conducted or as proposed to be
conducted, or in any material liability on the part of the Company, and none
which questions the validity of this Agreement, the Stockholder Rights
Agreement or any action taken or to be taken in connection herewith or
therewith. The Company is not a party or subject to the provisions of any court
or governmental agency or instrumentality. There is no action, suit,
proceeding, or investigation by the Company currently pending or that the
Company intends to initiate. The Company is not in default with respect to any
order, writ, injunction or decree known to or served upon the Company of any
court or of any Federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign.
3.12 Employees. To the Company's knowledge, no employee of the Company is
or will be in violation of any judgment, decree or order of any court or
administrative agency, or any term of any employment contract or any other
contract (including without limitation any covenant not to compete) or
agreement relating to the relationship of any such employee with the Company or
any other party because of the nature of the business conducted or to be
conducted by the Company or to the utilization by the employee of such
employee's reasonable efforts with respect to such business. The Company does
not have any collective bargaining agreements covering any of its employees. To
the Company's knowledge after due inquiry, the Company is not using any
inventions of any of its employees, consultants or officers made before their
employment by the Company. To the Company's knowledge, no employee, consultant
or officer has taken, removed, or made use of any proprietary documentation,
manuals, products, materials, or any other tangible items from the employee's
previous employers relating to the Company's business.
3.13 Insurance. The Company has in full force and effect fire, casualty
and liability insurance policies with recognized insurers with such coverages
as are sufficient in amount to allow replacement of the tangible properties of
the Company that might be damaged or destroyed.
3.14 Registration Rights. Except as contemplated by the Stockholder Rights
Agreement, the Company is not under any obligation to register any of its
presently outstanding securities or any of its securities that may hereafter be
issued.
3.15 Governmental Consents, etc. No consent, approval, order or
authorization of or designation, declaration or filing with any state or
federal governmental authority or any other third party on the part of the
Company is required in connection with the valid execution and delivery of this
Agreement, or the offer, sale or issuance of the Shares (and the Common Stock
issuable upon conversion of the Shares), or the consummation of any other
transaction contemplated hereby, except (a) filing of the Restated Certificate
in the office of the Secretary of State of the State of Delaware, and (b)
qualification (or taking such action as may be necessary to secure an exemption
from qualifi-
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<PAGE> 10
cation, if available) under the California Corporate Securities Law and other
applicable Blue Sky laws, of the offer and sale of the Shares (and the Common
Stock issuable upon conversion of the Shares), which filing and qualification,
if required, will be accomplished in a timely manner, prior to or promptly upon
completion of the Closing.
3.16 Offering. Based in part upon the accuracy of the Purchaser's
representations in Section 4 hereof, the offer, sale and issuance of the Shares
to be issued in conformity with the terms of this Agreement (and the issuance
of the Common Stock to be issued upon conversion of the Shares) constitute
transactions exempt from the registration requirements of Section 5 of the
Securities Act of 1933, as amended (the "SECURITIES ACT").
3.17 Disclosure. No statement by the Company contained in this Agreement
and the exhibits attached hereto, or in any certificate furnished or to be
furnished to the Purchasers pursuant hereto, when taken as a whole, contains or
will contain any untrue statement of a material fact or omits or will omit to
state a material fact necessary in order to make the statements contained
herein or therein not misleading in light of circumstances under which they
were made.
3.18 Brokers or Finders. The Company has not incurred, and will not
incur, directly or indirectly, any liability for brokerage or finders' fees or
agents' commissions or any similar charges in connection with this Agreement or
any transaction contemplated hereby.
3.19 Permits. The Company has all franchises, permits, licenses, and any
similar authority necessary for the conduct of its business as now being
conducted, the lack of which could materially and adversely affect the
business, properties, prospects, or financial condition of the Company, and the
Company believes it can obtain, without undue burden or expense, any similar
authority for the conduct of its business as planned to be conducted. The
Company is not in default in any material respect under any of such franchises,
permits, licenses, or other similar authority.
3.20 Financial Statements. The Company has delivered to the Purchasers
its audited financial statements (balance sheet and profit and loss statement)
as of December 31, 1996, 1997 and 1998 and its unaudited financial statements
(balance sheet and profit and loss statement) for the three month period ended
March 31, 1999 (the "FINANCIAL STATEMENTS"). The Financial Statements have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis throughout the periods indicated and with each other,
except that such unaudited Financial Statements may not contain all footnotes
required by generally accepted accounting principles. The Financial Statements
fairly present the financial condition and operating results of the Company as
of the dates, and for the periods, indicated therein, except that such
unaudited Financial Statements are subject to normal non-material year-end
audit adjustments. Except as set forth in the Financial Statements, the Company
has no material liabilities, contingent or otherwise, other than (i)
liabilities incurred in the ordinary course of business subsequent to March 31,
1999 and (ii) obligations under contracts and commitments incurred in the
ordinary course of business and not required under generally accepted
accounting principles to be reflected in the Financial Statements, which, in
both cases, individually or in the aggregate are not material to the financial
condition or operating results
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of the Company. Except as disclosed in the Financial Statements, the Company is
not a guarantor or indemnitor of any indebtedness of any other person, firm or
corporation. The Company maintains and will continue to maintain a standard
system of accounting established and administered in accordance with generally
accepted accounting principles.
3.21 Changes. Since March 31, 1999, there has not been:
(a) any change in the assets, liabilities, financial condition or
operating results of the Company from that reflected in the
Financial Statements, except changes in the ordinary course of
business that have not been, in the aggregate, materially
adverse;
(b) any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the business,
properties, prospects, or financial condition of the Company (as
such business is presently conducted and as it is proposed to be
conducted);
(c) any waiver or compromise by the Company of a valuable right or of
a material debt owed to it;
(d) any satisfaction or discharge of any lien, claim, or encumbrance
or payment of any obligation by the Company, except in the
ordinary course of business and that is not material to the
business, properties, prospects or financial condition of the
Company (as such business is presently conducted and as it is
proposed to be conducted);
(e) any material change to a contract or agreement by which the
Company or any of its assets is bound or subject;
(f) any material change in any compensation arrangement or agreement
with any employee, officer, director or stockholder;
(g) any termination, cancellation or material change with respect to
any material sales or distribution agreement;
(h) any sale, assignment or transfer of any patents, trademarks,
copyrights, trade secrets or other intangible assets;
(i) any resignation or termination of employment of any key officer
of the Company; and the Company, to the best of its knowledge,
does not know of any impending resignation or termination of
employment of any such officers;
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(j) receipt of notice that there has been a loss of, or material
order cancellation by, any material customer of the Company;
(k) any mortgage, pledge, transfer of a security interest in, or
lien, created by the Company, with respect to any of its material
properties or assets, except liens for taxes not yet due or
payable;
(l) any loans or guarantees made by the Company to or for the benefit
of its employees, officers or directors, or any members of their
immediate families, other than travel advances and other advances
made in the ordinary course of its business;
(m) any declaration, setting aside or payment or other distribution
in respect to any of the Company's capital stock, or any direct
or indirect redemption, purchase, or other acquisition of any of
such stock by the Company;
(n) to the best of the Company's knowledge, any other event or
condition of any character that might materially and adversely
affect the business, properties, prospects or financial condition
of the Company (as such business is presently conducted and as it
is proposed to be conducted);
(o) any arrangement or commitment by the Company to do any of the
things described in this Section 3.21; or
(p) any issuance of any stock, warrant, bond, note or other corporate
security of the Company other than stock options issued in the
ordinary course of business.
3.22 Material Liabilities. Except as set forth in the Financial
Statements, the Company has no material liability or obligation, absolute or
contingent (individually or in the aggregate), except (i) obligations and
liabilities incurred after the date of incorporation in the ordinary course of
business that are not material, individually or in the aggregate and (ii)
obligations under contracts made in the ordinary course of business that would
not be required to be reflected in Financial Statements prepared in accordance
with generally accepted accounting principles and which are not material.
3.23 Related Party Transactions. No employee, officer, or director of the
Company or member of his or her immediate family is indebted to the Company,
nor is the Company indebted (or committed to make loans or extend or guarantee
credit) to any of them. To the Company's knowledge, none of such persons has
any direct or indirect ownership interest in any firm or corporation with which
the Company is affiliated or with which the Company has a business
relationship, or any firm or corporation that competes with the Company, except
that employees, officers, or directors of the Company and members of their
immediate families may own stock in
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publicly traded companies that may compete with the Company. No member of the
immediate family of any officer or director of the Company is directly or
indirectly interested in any material contract with the Company.
3.24 Taxes. The Company has filed all tax returns and reports required to
be filed by it, such returns and reports were true, correct and complete, and
the Company has paid all taxes shown to be due by such returns and reports as
well as all other taxes, assessments and governmental charges which have become
due or payable (together with any interest, penalties, additions to tax and
additional amounts with respect thereto), including without limitation all
taxes which the Company is obligated to withhold from amounts owing to
employees, creditors and third parties. The Company has not requested any
extension of time within which to file any tax return or report which return or
report has not been filed. The reserves for taxes in the Financial Statements
are sufficient for the payment of all unpaid taxes (whether or not currently
disputed) which are or may be incurred with respect to the period (or portions
thereof) ended on the date of the Financial Statements and for all years and
periods ended prior thereto. The Federal income tax returns of the Company have
never been audited by the Internal Revenue Service ("IRS") or any other taxing
authority. No (i) deficiency assessment with respect to, (ii) proposed
adjustment of or (iii) examination or other administrative or court proceeding
with respect to, the Company's taxes is pending or, to the best of the Company's
knowledge, threatened. To the best of the Company's knowledge, no state of
facts exists or has existed which would constitute grounds for the assessment
of any liability for taxes with respect to periods which have not been audited
by the IRS or other taxing authority. There is no tax lien outstanding against
the assets, properties or business of the Company. Neither the Company nor any
of its stockholders has ever filed (a) an election pursuant to Section 1362 of
the Internal Revenue Code of 1986, as amended (the "Code"), that the Company be
taxed as an S corporation or (b) consent pursuant to section 341(f) of the
Code, relating to collapsible corporations.
3.25 Offering of Shares. Neither the Company nor any person authorized or
employed by the Company as agent, broker, dealer or otherwise in connection
with the offering or sale of the Shares or any security of the Company similar
to the Shares has offered the Shares or any such similar security for sale to,
or solicited any offer to buy the Shares or any such similar security from, or
otherwise approached or negotiated with respect thereto with, any person or
persons, and neither the Company nor any person acting on its behalf has taken
or will take any other action (including, without limitation, any offer,
issuance or sale of any security of the Company under circumstances which might
require the integration of such security with the Shares under the Securities
Act or the rules and regulations of the Commission thereunder), in either case
so as to subject the offering, issuance or sale of the Shares to the
registration provisions of the Securities Act.
3.26 No Violation, etc. The Company is not (i) in violation of its
Restated Certificate or by-laws, or other organizational documents, or of any
law, ordinance, administrative or governmental rule or regulation applicable to
the Company or of any decree of any court of governmental agency or body having
jurisdiction over the Company, except for such violations that would not have a
material adverse effect, or (ii) in default in the performance of any
obligation or agreement contained in any bond, debenture, note or any other
evidence of indebtedness or in any
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<PAGE> 14
material agreement, indenture, lease or other instrument to which the Company is
party or by which it or any of its properties may be bound, except for such
defaults that would not, individually or in the aggregate, have a material
adverse effect and no event has occurred, and no condition or state of facts
exists of which the Company is aware, which, with the passage of time or the
giving of notice or both, would constitute such a material default.
3.27 Compliance with Laws. The Company has complied in all material
respects with all applicable statutes, regulations, orders, ordinances and other
laws of the United States of America, all state, local and foreign governments
and any other governmental bodies and authorities, and agencies of any of the
foregoing to which they are subject and any undertakings of the Company to any
of the foregoing, to the extent that non compliance would have a material
adverse effect on the Company. The Company has not received any notice to the
effect that, or otherwise been advised that, it is not in compliance with any
such statutes, regulations and orders, ordinances, other laws or undertakings.
Without having conducted any specific research or investigation, to the
Company's knowledge, there is not presently pending any proceeding, hearing or
investigation with respect to the adoption of amendments or modifications to
existing laws or ordinances, regulations or restrictions with respect to such
matters which, if adopted, would materially adversely affect the Company.
3.28 ERISA. Neither the Company nor any ERISA Affiliate maintains,
contributes or has any liability (contingent or otherwise) with respect to a
plan (including a Multiemployer Plan) subject to Title IV of ERISA or Section
412 of the Code. All employee benefit plans and arrangements (regardless of
whether such plans or arrangements are covered by ERISA) maintained by or
contributed to by the Company or any ERISA Affiliate are in material compliance
with all applicable law, including any reporting requirements. The Company does
not have any liability (contingent or otherwise) with respect to retiree or
retiree death benefits. Neither the Company nor any other person, including any
fiduciary, has engaged in any transaction, prohibited by Section 4975 of the
Code or Section 406 of ERISA which could subject the Company, or any entity that
the Company has an obligation to indemnify, to any tax or penalty imposed under
Section 4975 of the Code or Section 502 of ERISA. The transactions contemplated
by this Agreement will not involve any transactions prohibited by Section 406 of
ERISA or in Section 4975 of the Code.
For purposes of this Section and Section 7.9, (a) "ERISA" shall mean the
Employee Retirement Income Security Act of 1974, as amended from time to time;
(b) "ERISA Affiliate" shall mean any entity required to be aggregated with the
Company or any subsidiary under Sections 414(b), (c), (m) or (o) of the Code;
and (c) "Multiemployer Plan" shall mean a plan which is a Multiemployer Plan as
defined in Section 4001(a)(3) of ERISA.
3.29 Environmental.
(a) The Company is in compliance in all material respects with all
Environmental Laws and has obtained all environmental licenses, permits,
approvals, registrations and authorizations (federal, state and local) material
to the Company's business.
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(b) No governmental or private action, suit or proceeding to enforce
or impose liability under any Environmental Law is pending or, to the Company's
knowledge, threatened against the Company and, to the Company's knowledge, no
lien has been created on any real property owned or leased by the Company
relating to the Company's business, under any Environmental Laws.
3.30 Foreign Corrupt Practices Act. The Company has not made nor taken
any action which would cause the Company to be in violation of the Foreign
Corrupt Practices Act of 1977, as amended, and any rules and regulations
thereunder. There is not now, nor has there ever been, any employment of or
beneficial ownership of the Company by any governmental or political official
in any country in the world.
3.31 Year 2000. The Company's current products are "Year 2000 Compliant,"
where "Year 2000 Compliant" means that such products have been designed and
tested so that, when used in accordance with their associated documentation,
are capable upon installation of accurately processing, providing and/or
receiving (i) date-related data from, into and between the Twentieth (20th) and
Twenty-First (21st) centuries, or (ii) date-related data in connection with any
valid date in the Twentieth (20th) and Twenty-First (21st) centuries; provided
that all other products used in combination in any way with the Company's
current products properly exchange date-related data with them. The Company has
commenced efforts to ensure that the information technology systems and
non-information technology systems used by the Company will function properly
beyond 1999. The Company has made inquiries to its key third-party vendors and
providers as to the status of their Year 2000 efforts, and has not uncovered
any problems that would adversely affect the operation of the products or that
are likely to materially disrupt or harm the day-to-day functioning of the
business or operations of the Company.
SECTION 4
Representations, Warranties and Covenants of the Purchasers
Each of the Purchasers hereby represents, warrants and covenants,
severally and not jointly, to the Company with respect to the purchase of the
Shares as follows:
4.1 Experience; Risk. The Purchaser has such knowledge and experience in
financial and business matters that such Purchaser is capable of evaluating the
merits and risks of the purchase of the Shares pursuant to this Agreement and
of protecting the Purchaser's interests in connection therewith. The Purchaser
has the ability to bear the economic risk of the investment, including complete
loss of the investment. The Purchaser is experienced in evaluating and
investing in new companies such as the Company.
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4.2 Investment. The Purchaser is acquiring the Shares for investment for
its own account, not as a nominee or agent, and not with a view to, or for
resale in connection with, any distribution thereof, and the Purchaser has no
present intention of selling, granting any participation in, or otherwise
distributing the same. The Purchaser understands that the Shares to be purchased
have not been registered under the Securities Act by reason of a specific
exemption from the registration provisions of the Securities Act which depends
upon, among other things, the bona fide nature of the investment intent and the
accuracy of such Purchaser's representations as expressed herein.
4.3 Restricted Securities; Rule 144. The Purchaser understands that the
Shares and the shares of Common Stock issuable upon conversion of the Shares,
will be "restricted securities" under the federal securities laws inasmuch as
they are being acquired from the Company in a transaction not involving a public
offering and that under such laws and applicable regulations the Shares may be
resold without registration under the Securities Act only in certain limited
circumstances. The Purchaser acknowledges that the Shares must be held
indefinitely unless subsequently registered under the Securities Act or an
exemption from such registration is available. The Purchaser is aware of the
provisions of Rule 144 promulgated under the Securities Act which permit limited
resale of shares purchased in a private placement subject to the satisfaction of
certain conditions, including, among other things, the existence of a public
market for the shares, the availability of certain current public information
about the Company, the resale occurring not less than one year after a party has
purchased and paid for the Security to be sold, the sale being effected through
a "broker's transaction" or in transactions directly with a "market maker" (as
provided by Rule 144(f)) and the number of shares being sold during any
three-month period not exceeding specified limitations.
4.4 No Public Market. The Purchaser understands that no public market now
exists for any of the securities issued by the Company and that there is no
assurance that a public market will ever exist for the Shares.
4.5 Access to Data. The Purchaser has had an opportunity to discuss the
Company's business, management and financial affairs with the Company's
management and the opportunity to review the Company's facilities and has
received all information requested from the Company regarding the investment in
the Company.
4.6 Authorization. The Purchaser represents that it has the full right,
power and authority to enter into and perform the Purchaser's obligations under
this Agreement and the Stockholder Rights Agreement, and this Agreement and the
Stockholder Rights Agreement when executed and delivered by the Purchaser will
constitute legal, valid and binding obligations of the Purchaser, enforceable in
accordance with their respective terms, subject to the laws of general
application relating to bankruptcy, insolvency and the relief of debtors, rules
of law governing specific performance, injunctive relief or other equitable
remedies.
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4.7 Government Consents. No consent, approval or authorization of or
designation, declaration or filing with any state, federal, or foreign
governmental authority on the part of the Purchaser is required in connection
with the valid execution and delivery of this Agreement by the Purchaser, and
the consummation by the Purchaser of the transactions contemplated hereby.
4.8 Further Limitations on Disposition. Without in any way limiting the
representations set forth above, the Purchaser further agrees not to make any
disposition of all or any portion of the Shares unless and until:
(a) There is then in effect a registration statement under the
Securities Act covering such proposed disposition and such disposition is made
in accordance with such registration statement; or
(b) The Purchaser shall have notified the Company of the proposed
disposition and shall have furnished the Company with a statement of the
proposed disposition, and if reasonably requested by the Company, such
Purchaser shall have furnished the Company with an opinion of counsel,
reasonably satisfactory to the Company, that such disposition will not require
registration under the Securities Act.
4.9 Legends. It is understood that each certificate representing the
Shares, and the shares of Common Stock issuable upon conversion of the Shares,
and any securities issued in respect thereof or exchange therefor shall bear
legends in the following forms (in addition to any legend required under
applicable state securities laws):
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED
IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO
THE SECURITIES UNDER SUCH ACT OR AN OPINION OF COUNSEL SATISFACTORY TO
THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED."
SECTION 5
Conditions to Closing of Purchaser
The Purchasers' obligation to purchase the Shares at the Closing is, at
the option of the Purchasers, subject to the fulfillment on or prior to the
Closing Date of the following conditions:
5.1 Representations and Warranties Correct. The representations and
warranties made by the Company in Section 3 hereof shall be true and correct in
all material respects when made (except those representations and warranties
qualified by materiality, which shall be true and correct in all
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respects), and shall be true and correct on the Closing Date in all material
respects with the same force and effect as if they had been made on and as of
said date.
5.2 Covenants. All covenants, agreements and conditions contained in this
Agreement to be performed by the Company on or prior to the Closing Date shall
have been performed or complied with in all respects.
5.3 Opinion of Company's Counsel. The Purchasers shall have received from
Wilson, Sonsini, Goodrich & Rosati, P.C., counsel to the Company, an opinion
addressed to the Purchasers, dated the Closing Date, substantially in the form
of Exhibit E attached hereto.
5.4 Compliance Certificate. The Company shall have delivered to the
Purchasers a certificate executed by the President of the Company, dated the
Closing Date and certifying to the fulfillment of the conditions specified in
Sections 5.1 and 5.2 of this Agreement.
5.5 Blue Sky. The Company shall have obtained all necessary Blue Sky law
permits and qualifications, or secured an exemption therefrom, required by any
state for the offer and sale of the Shares, and the Common Stock issuable upon
conversion of the Shares.
5.6 Stockholder Rights Agreement. The Company, each Purchaser and holders
of a majority of the Registrable Securities (as defined in the Stockholder
Rights Agreement) shall have executed and delivered the Stockholder Rights
Agreement.
5.7 Restated Certificate of Incorporation. The Restated Certificate shall
have been filed and be effective with the Secretary of State of the State of
Delaware.
5.8 Management Rights Agreement. The Company shall have delivered to
Schroder Ventures executed copies of the Management Rights Agreement attached
hereto as Exhibit F.
5.9 All Proceedings to be Satisfactory. All corporate and other
proceedings to be taken by the Company in connection with the transactions
contemplated hereby and all documents incident thereto shall be reasonably
satisfactory in form and substance to the Purchasers and their counsel, and the
Purchasers and their counsel shall have received all such counterpart originals
or certified or other copies of such documents as they reasonably may request.
5.10 Supporting Documents. The Purchasers and their counsel shall have
received copies of the following documents:
(i) (A) the Restated Certificate and (B) a Certificate of said
Secretary dated as of a recent date as to the due incorporation and good
standing of the Company and listing all documents of the Company on file with
said Secretary;
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(ii) a certificate of the Secretary or an Assistant Secretary of the
Company dated the Closing Date and certifying: (A) that attached thereto is a
true and complete copy of the By-laws of the Company as in effect on the date of
such certification; (B) that attached thereto is a true and complete copy of
all resolutions adopted by the Board of Directors or the stockholders of the
Company authorizing the execution, delivery and performance of this Agreement
and the Stockholder Rights Agreement, the issuance, sale and delivery of the
Shares, and that all such resolutions are in full force and effect and are all
the resolutions adopted in connection with the transactions contemplated by
this Agreement and the Stockholder Rights Agreement; and (C) to the incumbency
and specimen signature of each officer of the Company executing this Agreement,
the Stockholder Rights Agreement, the stock certificates representing the
Shares and any certificate or instrument furnished pursuant hereto, and a
certification by another officer of the Company as to the incumbency and
signature of the officer signing the certificate referred to in this clause
(ii); and
(iii) such additional supporting documents and other information with
respect to the operations and affairs of the Company as the Purchasers or their
counsel may reasonably request.
5.11 No Litigation Threatened. No action, suit or other proceeding shall
be pending before any court, tribunal or governmental authority seeking or
threatening to restrain or prohibit the consummation of the transactions
contemplated by this Agreement, or seeking to obtain substantial damages in
respect thereof, or involving a claim that consummation thereof would result in
the violation of any law, decree or regulation of any governmental authority
having appropriate jurisdiction.
5.12 Approvals, Waivers and Consents. The Company shall have obtained all
necessary and required approvals, waivers and consents from (a) stockholders of
the Company; (b) foreign and domestic (whether federal, state or local)
governmental or regulatory bodies or agencies; and (c) lessors or other third
parties pursuant to leases, mortgages, contracts, agreements, permits or
licenses necessary for the performance of the Company's obligations hereunder.
5.13 Stock Certificates. The Company shall have delivered to each
Purchaser certificates evidencing the Shares, free and clear of any liens or
encumbrances.
5.14 No Change in Law. There shall not have been any action, or any
statute enacted, by any government or agency thereof which would render the
parties unable to consummate the transactions contemplated herein or make the
transactions contemplated herein illegal, or prohibit or restrict the
consummation of the transactions contemplated herein.
SECTION 6
Conditions to Closing of the Company
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The Company's obligation to sell and issue the Shares at the Closing is, at
the option of the Company, subject to the fulfillment of the following
conditions:
6.1 Representations. The representations made by the Purchasers in
Section 4 hereof shall be true and correct in all material respects when made
(except those representations and warranties qualified by materiality, which
shall be true and correct in all respects), and shall be true and correct on the
Closing Date in all material respects with the same force and effect as if they
had been made on and as of said date.
6.2 Stockholder Rights Agreement. The Company, each Purchaser and holders
of a majority of the Registrable Securities (as defined in the Stockholder
Rights Agreement) shall have executed and delivered the Stockholder Rights
Agreement.
SECTION 7
Covenants of the Company
The Company covenants and agrees with each of the Purchasers that so long
as any of the Shares is outstanding:
7.1 Reserve for Conversion Shares. The Company shall at all times reserve
and keep available out of its authorized but unissued shares of Common Stock,
for the purpose of effecting the conversion of the Shares and otherwise
complying with the terms of this Agreement, such number of its duly authorized
shares of Common Stock as shall be sufficient to effect the conversion of the
Shares and the shares of Series D-1 Preferred Stock from time to time
outstanding or otherwise to comply with the terms of this Agreement. If at any
time the number of authorized but unissued shares of Common Stock shall not be
sufficient to effect the conversion of the Shares or otherwise to comply with
the terms of this Agreement, the Company will forthwith take such corporate
action as may be necessary to increase its authorized but unissued shares of
Common Stock to such number of shares as shall be sufficient for such purposes.
The Company will obtain any authorization, consent, approval or other action by
or make any filing with any court or administrative body that may be required
under applicable state securities laws in connection with the issuance of shares
of Common Stock upon conversion of the Shares.
7.2 Corporate Existence. The Company shall maintain its corporate
existence, rights and franchises in full force and effect.
7.3 Properties, Business, Insurance. The Company shall maintain as to its
properties, and business, with financially sound and reputable insurers,
insurance against such casualties and contingencies and of such types and in
such amounts as is customary for companies similarly situated, which insurance
shall be deemed by the Company to be sufficient. The Company shall not
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cause or permit any assignment or change in beneficiary and shall not borrow
against any such policy.
7.4 Inspection, Consultation and Advice. The Company shall permit each
Purchaser and such persons as it may designate, at such Purchaser's expense, to
visit and inspect any of the properties of the Company, discuss the affairs,
finances and accounts of the Company with its officers, employees and public
accountants (and the Company hereby authorizes said accountants to discuss with
such Purchaser and such designees such affairs, finances and accounts), and
consult with and advise the management of the Company as to its affairs,
finances and accounts, all at reasonable times and upon reasonable notice.
7.5 Restrictive Agreements Prohibited. The Company shall not become a
party to any agreement which by its terms restricts the Company's performance
of this Agreement, the Stockholder Rights Agreement or the Restated Certificate.
7.6 Transactions with Affiliates. Except for transactions contemplated by
this Agreement or as otherwise approved by the Board of Directors, the Company
shall not enter into any material transaction with any director, officer,
employee or holder of more than 5% of the outstanding capital stock of any
class or series of capital stock of the Company, member of the family of any
such person, or any corporation, partnership, trust or other entity in which
any such person, or member of the family of any such person, is a director,
officer, trustee, partner or holder of more than 5% of the outstanding capital
stock thereof, except for transactions on customary terms related to such
person's employment.
7.7 Compliance with Laws. The Company shall comply with all applicable
laws, rules, regulations and orders, noncompliance with which could materially
adversely affect its business or condition, financial or otherwise.
7.8 Keeping of Records and Books of Account. The Company shall keep
adequate records and books of account, in which complete entries will be made
in accordance with generally accepted accounting principles consistently
applied, reflecting all financial transactions of the Company, and in which,
for each fiscal year, all proper reserves for depreciation, depletion,
obsolescence, amortization, taxes, bad debts and other purposes in connection
with its business shall be made.
7.9 Change in Nature of Business. The Company shall not, without approval
of the Board of Directors, make any material change in the nature of its
business as set forth in the Business Plan.
7.10 No "Prohibited Transactions" and Employee Benefits. Neither the
Company nor any ERISA Affiliate shall incur any material liability in connection
with any plan (including a Multiemployer Plan) subject to Title IV of ERISA or
Section 412 of the Code. The Company shall not incur any liability with respect
to retiree medical or retiree death benefits. All employee benefit
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plans and arrangements (regardless of whether such plan or arrangements are
covered by ERISA) maintained by or contributed to by the Company or any ERISA
Affiliate shall be maintained in material compliance with all applicable laws,
including any reporting requirements. With respect to any plan maintained by or
contributed to by the Company, the Company shall not fail to make any
contribution due under the terms of such plans or as required by law. The
Company shall not engage in any transaction prohibited by Section 406 of ERISA
or Section 4975 of the Code, which could subject the Company, or any entity that
the Company has an obligation to indemnify, to any tax or penalty imposed under
Section 4975 of the Code, or Section 502 of ERISA.
7.11 Composition of the Board of Directors. Immediately after the Closing
Date, the Company shall use its best efforts to cause one nominee to be
designated by holders of the Series D Preferred to be elected to the Board of
Directors.
7.12 Directors' Expenses. The Company shall reimburse the reasonable
expenses incurred by any non-employee member of the Company's Board of
Directors in connection with the performance of such person's duties as a
Director, including reasonable expenses associated with attending meetings of
the Board of Directors, in accordance with the Company's standard travel policy.
7.13 Payment of Taxes. The Company shall pay and discharge, and cause each
subsidiary to pay and discharge, all taxes, assessments and governmental
charges or levies upon it or upon its income, profits or business, or upon any
properties belonging to it, prior to the date on which penalties attach thereto,
and any lawful claim which, if unpaid, might become a lien or charge upon
any properties of the Company or any subsidiary.
SECTION 8
Miscellaneous
8.1 Governing Law. This Agreement shall be governed in all respects by
the laws of the State of California as applied to contracts made and to be
fully performed entirely within that state between residents of that state.
8.2 Survival. The representations, warranties, covenants and agreements
made herein shall survive any investigation made by any Purchaser and the
closing of the transactions contemplated hereby.
8.3 Successors and Assigns. Except as otherwise provided herein,
the provisions hereof shall inure to the benefit, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto.
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<PAGE> 23
8.4 Entire Agreement Amendment. This Agreement and the other documents
delivered pursuant hereto constitute the full and entire understanding and
agreement between the parties with regard to the subjects hereof and thereof.
This Agreement or any term hereof may be amended, waived, discharged or
terminated solely by a written instrument signed by the Company and the holders
of at least two-thirds (66 2/3%) of the Common Stock issued or issuable upon
conversion of the Shares held by the Purchasers.
8.5 Notices, Etc. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by registered or
certified mail, postage prepaid, or otherwise delivered by hand or by
messenger, addressed (a) if to any Purchaser, at the address set forth beneath
such Purchaser's name on Exhibit A hereto or at such other address as shall
have furnished to the Company upon not less than 10 days notice in writing, or
(b) if to the Company, at the address of its principal office and addressed to
the attention of the President and with a copy to Wilson Sonsini Goodrich &
Rosati, 650 Page Mill Road, Palo Alto, California 94304-1050, Attention:
Michael J. O'Donnell or at such other address as the Company shall have
furnished to the Purchasers upon not less than ten (10) days notice in writing.
8.6 Delays or Omissions. No delay or omission to exercise any right,
power or remedy accuring to any holder of any Shares, 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 theretofore or
thereafter occurring. Any waiver, permit, consent or approval of any kind or
character on the party 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 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.
8.7 California Corporate Securities Law. THE SALE OF THE SECURITIES WHICH
ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER
OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH SECURITIES
OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR PRIOR TO
SUCH QUALIFICATION IS UNLAWFUL UNLESS THE SALE OF SECURITIES IS EXEMPT FROM THE
QUALIFICATION BY SECTION 25100, 25102 or 25105 OF THE CALIFORNIA CORPORATIONS
CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY CONDITIONED
UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO EXEMPT.
8.8 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall constitute one
instrument.
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<PAGE> 24
8.9 Severability. In the event that any provision of this Agreement
becomes or its declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision.
8.10 Expenses. Each party hereto will pay its own expenses in connection
with the transaction contemplated hereby, whether or not such transaction shall
be consummated, provided, however, that upon consummation of such transaction,
the Company shall pay the reasonable fees and disbursements of Testa, Hurwitz &
Thibeault, LLP, counsel to the Purchasers in connection with such transaction,
and shall reimburse the reasonable due diligence expenses incurred by the
Purchasers.
[SIGNATURE PAGES FOLLOW]
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<PAGE> 1
EXHIBIT 10.2
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AS
AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED, OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
RELATED THERETO OR AN OPINION OF COUNSEL (WHICH MAY BE COMPANY COUNSEL)
REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE
SECURITIES LAWS.
WARRANT AGREEMENT
To Purchase Shares of the Series C Preferred Stock of
ARGONAUT TECHNOLOGIES, INC.
Dated as of July 7, 1997 (the "Effective Date")
WHEREAS, Argonaut Technologies, Inc., a Delaware corporation (the
"Company") has entered into a Master Lease Agreement dated as of July 7, 1997,
and Equipment Schedule No. VL-1 dated as of July 7, 1997 and related Summary
Equipment Schedules (collectively, the "Leases") with Comdisco, Inc., a
Delaware corporation (the "Warrantholder"); and
WHEREAS, the Company desires to grant to Warrantholder, in consideration
for such Leases, the right to purchase shares of its Series C Preferred Stock:
NOW THEREFORE, in consideration of the Warrantholder executing and
delivering such Leases and in consideration of mutual covenants and agreements
contained herein, the Company and Warrantholder agree as follows:
1. GRANT OF THE RIGHT TO PURCHASE PREFERRED STOCK.
The Company hereby grants to the Warrantholder, and the Warrantholder is
entitled, upon the terms and subject to the conditions hereinafter set forth,
to subscribe for and purchase, from the Company, 6,802 fully paid and
non-assessable shares of the Company's Series C Preferred Stock ("Preferred
Stock") at a purchase price of $6.00 per share (the "Exercise Price"). The
number and purchase price of such shares are subject to adjustment as provided
in Section 8 hereof.
2. TERM OF THE WARRANT AGREEMENT.
Except as otherwise provided for herein, the term of this Warrant
Agreement and the right to purchase Preferred Stock as granted herein shall
commence on the Effective Date and shall be exercisable for a period of (i)
seven (7) years or (ii) three (3) years from the effective date of the
Company's initial public offering ("IPO"), whichever is longer.
Notwithstanding the foregoing, upon receipt by Warrantholder of a written
request by the Company's underwriters, the Warrantholder shall exercise its
rights to purchase Preferred Stock hereunder as of the effective date of the
IPO so long as the purchase price per share is equal to or greater than the
Exercise Price. The foregoing exercise at IPO is contingent upon the
underwriter's notice being received by Warrantholder a minimum of ten (10)
business days prior to the effective date of the IPO and if the underwriters
fail to deliver such notice within the aforementioned time period, then
notwithstanding anything to the contrary in this Warrant Agreement, the rights
to purchase the Company's Preferred Stock shall not expire until the
underwriters comply with such notice provisions. Such notice shall also contain
such details of the IPO as are reasonable in the circumstances. If the IPO does
not take place, the Company shall promptly notify the Warrantholder and the
Warrantholder may rescind any exercise of its purchase rights promptly after
such notice. In the event of such rescission, the Warrant Agreement will
continue to be exercisable on the same terms and conditions contained herein.
Warrant Lease -1-
<PAGE> 2
3. EXERCISE OF THE PURCHASE RIGHTS.
The purchase rights set forth in this Warrant Agreement are exercisable
by the Warrantholder, in whole or in part, at any time, or from time to time,
prior to the expiration of the term set forth in Section 2 above, by tendering
to the Company at its principal office a notice of exercise in the form
attached hereto as Exhibit 1 (the "Notice of Exercise"), duly completed and
executed, along with this Warrant Agreement. Promptly upon receipt of the
Notice of Exercise, this Warrant Agreement and the payment of the purchase
price in accordance with the terms set forth below, the Company shall issue to
the Warrantholder a certificate for the number of shares of Preferred Stock
purchased.
The Exercise Price may be paid at the Warrantholder's election either (i)
by cash or check, or (ii) by surrender of the right to purchase such number of
shares equal in value (as determined below) to the aggregate exercise price of
the number of shares to be purchased by the Warrantholder ("Net Issuance"). If
the Warrantholder elects the Net Issuance method, the Company will issue
Preferred Stock in accordance with the following formula:
X = Y(A-B)
------
A
Where: X = the number of shares of Preferred Stock to be issued to the
Warrantholder.
Y = the number of shares of Preferred Stock requested to be
exercised under this Warrant Agreement.
A = the fair market value of one (1) share of Preferred
Stock.
B = the Exercise Price.
For purposes of the above calculation, current fair market value of
Preferred Stock shall mean with respect to each share of Preferred Stock:
(i) if the exercise is in connection with an initial public
offering of the Company's Common Stock, and if the Company's Registration
Statement relating to such public offering has been declared effective by
the SEC, then the fair market value per share shall be the product of (x)
the initial "Price to Public" specified in the final prospectus with
respect to the offering and (y) the number of shares of Common Stock into
which each share of Preferred Stock is convertible at the time of such
exercise;
(ii) if this Warrant is exercised after, and not on connection
with the Company's initial public offering, and:
(a) if the Company's Common Stock is traded on a securities
exchange, the fair market value shall be deemed to be the product
of (x) the average of the closing prices over a twenty-one (21) day
period ending three days before the day the current fair market
value of the securities is being determined and (y) the number of
shares of Common Stock into which each share of Preferred Stock is
convertible at the time of such exercise; or
(b) if the Company's Common Stock is actively traded
over-the-counter, the fair market value shall be deemed to be the
product of (x) the average of the closing bid and asked prices
quoted on the Nasdaq National Market System (or similar system)
over the twenty-one (21) day period ending three days before the
day the current fair market value of the securities is being
determined and (y) the number of shares of Common Stock into which
each share of Preferred Stock is convertible at the time of such
exercise;
(iii) if at any time the Common Stock is not listed on any
securities exchange or quoted in the Nasdaq National Market System or the
over-the-counter market, the current fair market value of Preferred Stock
shall be the product of (x) the highest price per share which the Company
could obtain from a willing buyer (not a current employee or director)
for shares of Common Stock sold by the Company, from authorized but
unissued shares, as determined in good faith by its Board of Directors
and (y) the number of shares of Common Stock into which each share of
Preferred Stock is convertible at the time of such
Warrant Lease -2-
<PAGE> 3
exercise, unless the exercise is in connection with a merger, acquisition
or other consolidation of the Company pursuant to which the Company is
not the surviving party, in which case the fair market value of Preferred
Stock shall be deemed to be the value received by the holders of the
Company's Preferred Stock on a common equivalent basis pursuant to such
merger or acquisition.
Upon partial exercise by either cash or Net Issuance, the Company shall
promptly issue an amended Warrant Agreement representing the remaining number
of shares purchasable hereunder. All other terms and conditions of such amended
Warrant Agreement shall be identical to those contained herein, including, but
not limited to the Effective Date hereof.
4. RESERVATION OF SHARES.
(a) Authorization and Reservation of Shares. During the term of this
Warrant Agreement, the Company will at all times have authorized and reserved a
sufficient number of shares of its Preferred Stock to provide for the exercise
of the rights to purchase Preferred Stock as provided for herein.
(b) Registration of Listing. If any shares of Preferred Stock required
to be reserved for purposes of the exercise of this Warrant Agreement hereunder
require registration with or approval of any governmental authority under any
Federal or State law (other than any registration under the Securities Act of
1933, as amended ("1933 Act"), as then in effect, or any similar Federal
statute then enforced, or any state securities law, required by reason of any
transfer involved in such conversion), or listing on any domestic securities
exchange, before such shares may be issued upon conversion, the Company will,
at its expense and as expeditiously as possible, use its best efforts to cause
such shares to be duly registered, listed or approved for listing on such
domestic securities exchange, as the case may be.
5. NO FRACTIONAL SHARES OR SCRIP.
No fractional shares or scrip representing fractional shares shall be
issued upon the exercise of the Warrantholder's rights to purchase Preferred
Stock, but in lieu of such fractional shares the Company shall make a cash
payment therefor upon the basis of the Exercise Price then in effect.
6. NO RIGHTS AS SHAREHOLDER.
This Warrant Agreement does not entitle the Warrantholder to any voting
rights or other rights as a shareholder of the Company prior to the exercise of
the Warrantholder's rights to purchase Preferred Stock as provided for herein.
7. WARRANTHOLDER REGISTRY.
The Company shall maintain a registry showing the name and address of the
registered holder of this Warrant Agreement.
8. ADJUSTMENT RIGHTS.
The purchase price per share and the number of shares of Preferred Stock
purchasable hereunder are subject to adjustment, as follows:
(a) Merger and Sale of Assets. If at any time there shall be a capital
reorganization of the shares of the Company's stock (other than a combination,
reclassification, exchange or subdivision of shares otherwise provided for
herein), or a merger or consolidation of the Company with or into another
corporation when the Company is not the surviving corporation, or the sale of
all or substantially all of the Company's properties and assets to any other
person (hereinafter referred to as a "Merger Event"), then, as a part of such
Merger Event, lawful provision shall be made so that the Warrantholder shall
thereafter be entitled to receive, upon exercise of its rights to purchase
Preferred Stock, the number of shares of Preferred Stock or other securities of
the successor corporation resulting from such Merger Event, to which a holder of
the Preferred Stock deliverable upon exercise of the right to purchase Preferred
Stock hereunder would have been entitled in such Merger Event if the right to
purchase such Preferred Stock hereunder had been exercised immediately prior to
the Merger Event. In any such case, appropriate adjustment (as determined in
good faith by the Company's Board of Directors) shall be made in the application
of the provisions of this Warrant Agreement with respect to the rights and
interest of the Warrantholder after the Merger Event to the end that the
provisions of this Warrant Agreement (including adjustments of the
Warrant Lease -3-
<PAGE> 4
Exercise Price and number of shares of Preferred Stock purchasable) shall be
applicable to the greatest extent reasonably possible.
(b) Reclassification of Shares. If the Company at any time shall, by
combination, reclassification, exchange or subdivision of securities or
otherwise, change any of the securities as to which purchase rights under this
Warrant Agreement exist into the same or a different number of securities of
any other class or classes, this Warrant Agreement 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 which were
subject to the purchase rights under this Warrant Agreement immediately prior
to such combination, reclassification, exchange, subdivision or other change.
(c) Subdivision or Combination of Shares. If the Company at any time
shall combine or subdivide its Preferred Stock, the Exercise Price shall be
proportionately decreased in the case of a subdivision or proportionately
increased in the case of a combination.
(d) Right to Purchase Additional Stock. If, the Warrantholder's total
cost of equipment leased pursuant to the Leases exceeds $1,100,000.00,
Warrantholder shall have the right to purchase from the Company, at the
Exercise Price (adjusted as set forth herein), an additional number of shares,
which number shall be determined by (i) multiplying the amount by which the
Warrantholder's total equipment cost exceeds $1,100,000.00 by 4%, and (ii)
dividing the product thereof by the Exercise Price per share referenced above.
(e) Antidilution Rights. The Preferred Stock purchasable hereunder
shall have the benefit of the same antidilution rights applicable to such
Preferred Stock as designated in the Company's Certificate of Incorporation, as
such may be amended from time to time, and the Company shall provide
Warrantholder with all notices and information at the times and to the extent
it is required to do so to the holders of such Preferred Stock.
(f) Notice of Adjustments. If: (i) the Company shall declare any
dividend or distribution upon its stock, whether in cash, property, stock or
other securities; (ii) the Company shall offer for subscription prorata to the
holders of any class of its Preferred or other convertible stock any additional
shares of stock of any class or other rights; (iii) there shall be any Merger
Event; (iv) there shall be any voluntary dissolution, liquidation or winding up
of the Company; then, in connection with each such event, the Company shall
send to the Warrantholder: (A) at least twenty (20) days' prior written notice
of the date on which the books of the Company shall close or a record shall be
taken for such dividend, distribution, subscription rights (specifying the date
on which the holders of Preferred Stock shall be entitled thereto) or for
determining rights to vote in respect of such Merger Event, dissolution
liquidation or winding up; and (B) in the case of any such Merger Event,
dissolution, liquidation or winding up, 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 Preferred Stock shall be entitled to exchange
their Preferred Stock for securities or other property deliverable upon such
Merger Event, dissolution, liquidation or winding up).
Each such written notice shall set forth, in reasonable detail, (i) the
event requiring the adjustment, (ii) the amount of the adjustment, (iii) the
method by which such adjustment was calculated, (iv) the Exercise Price, and
(v) the number of shares subject to the purchase hereunder after giving effect
to such adjustment, and shall be given by first class mail, postage prepaid,
addressed to the Warrantholder, at the address as shown on the books of the
Company.
(g) Timely Notice. Failure to timely provide such notice required by
subsection (f) above shall entitle Warrantholder to retain the benefit of the
applicable notice period notwithstanding anything to the contrary contained in
any insufficient notice received by Warrantholder.
3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY.
(a) Reservation of Preferred Stock. The Preferred Stock issuable upon
exercise of the Warrantholder's rights has been duly and validly reserved and,
when issued in accordance with the provisions of this Warrant Agreement, will
be validly issued, fully paid and non-assessable, and will be free of any
taxes, liens, charges or encumbrances of any nature whatsoever, provided,
however, that the Preferred Stock issuable pursuant to this Warrant Agreement
may be subject to restrictions on transfer under state and/or Federal
securities laws. The Company has made available to the Warrantholder true,
correct and complete copies of its Certificate of Incorporation (the "Charter")
and Bylaws, as amended. The issuance of certificates for shares of Preferred
Stock upon exercise of the Warrant Agreement shall be made without charge to
the Warrantholder for any issuance tax in respect thereof, or other cost
incurred by the Company in connection with such exercise and the related
issuance of
Warrant Lease -4-
<PAGE> 5
shares of Preferred Stock; provided that the Company shall not be required to
pay any tax which may be payable in respect of any transfer involved and the
issuance and delivery of any certificate in a name other than that of the
Warrantholder.
(b) Due Authority. The execution and delivery by the Company of this
Warrant Agreement and the performance of all obligations of the Company
hereunder, including the issuance to Warrantholder of the right to acquire the
shares of Preferred Stock set forth in Section 1, have been duly authorized by
all necessary corporate action on the part of the Company, and the Leases and
this Warrant Agreement are not inconsistent with the Company's Charter or
Bylaws, do not contravene any law or governmental rule, regulation or order
applicable to it, do not and will not contravene any provision of, or
constitute a default under any indenture, mortgage, contract or other
instrument to which it is a party or by which it is bound, and the Leases and
this Warrant Agreement constitute legal, valid and binding agreements of the
Company, enforceable in accordance with their respective terms subject only to
bankruptcy, insolvency or other similar laws affecting the enforceability to
the rights of creditors generally and the general principles of equity.
(c) Consents and Approvals. No consent or approval of, giving of notice
to, registration with, or taking of any other action in respect of any state,
Federal or other governmental authority or agency is required with respect to
the execution, delivery and performance by the Company of its obligations under
this Warrant Agreement, except for the filing of notices pursuant to Regulation
D under the 1933 Act and any filing required by applicable state securities
law, which filings will be effective by the time required thereby.
(d) Issued Securities. All issued and outstanding shares of Common
Stock, Preferred Stock or any other securities of the Company have been duly
authorized and validly issued and are fully paid and nonassessable. All
outstanding shares of Common Stock, Preferred Stock, and any other securities
were issued in full compliance with all Federal and state securities laws. In
addition:
(i) The authorized capital stock of the Company consists of
28,800,000 shares of Common Stock and 20,800,000 shares of preferred
stock, of which 5,000,000 are designated as Series A Preferred Stock,
5,000,000 shares are designated Series A-1 Preferred Stock, 3,000,000
shares are designated Series B Preferred Stock, 3,000,000 shares are
designated Series B-1 Preferred Stock, 1,600,000 shares are designated
Series C Preferred Stock, and 1,600,000 shares are designated Series C-1
Preferred Stock. The issued and outstanding stock of the Company consists
1,903,708 shares of Common Stock, 4,627,500 shares of Series A Preferred
Stock, no shares of Series A-1 Preferred Stock, 2,923,073 shares of Series
B Preferred Stock, no shares of Series B-1 Preferred Stock, 1,180,000
shares of Series C Preferred Stock and no shares of Series C-1 Preferred
Stock. The Series A Preferred, Series A-1 Preferred, Series B Preferred,
Series B-1 Preferred, Series C Preferred, and Series C-1 Preferred shall
have the rights, preferences, privileges and restrictions set forth in the
Charter.
(ii) The Company has reserved 1,685,308 shares of its Common Stock for
issuance to officers, directors, employees, sales representatives and
consultants of the Company pursuant to the Company's 1995 Incentive Stock
Plan. There are stock options outstanding for the purchase of 1,215,575
shares of Common Stock. There are also warrants outstanding for the
purchase of 55,000 shares of Common Stock. Except as referenced herein,
there are no options, warrants, conversion privileges or other rights
presently outstanding to purchase or otherwise acquire any authorized but
unissued shares of the capital stock or other securities of the Company.
(e) Insurance. The Company has in full force and effect insurance
policies, with extended coverage, insuring the Company and its property and
business against such losses and risks, and in such amounts, as are customary
for corporations engaged in a similar business and similarly situated and as
otherwise may be required pursuant to the terms of any other contract or
agreement.
(f) Exempt Transaction. Subject to the accuracy of the Warrantholder's
representations in Section 10 hereof, the issuance of the Preferred Stock upon
exercise of the Warrantholder's right to purchase such Preferred Stock will
constitute a transaction exempt from (i) the registration requirements of
Section 5 of the 1933 Act, in reliance upon Section 4(2) thereof, and (ii) the
qualification requirements of the applicable state securities laws.
(g) Compliance with Rule 144. At the written request of the
Warrantholder, who proposes to sell Preferred Stock issuable upon the exercise
of the Warrant in compliance with Rule 144 promulgated by the Securities and
Exchange Commission under the 1933 Act, the Company shall furnish to the
Warrantholder, within
Warrant Lease -5-
<PAGE> 6
ten days after receipt of such request, a written statement confirming the
Company's compliance with the filing requirements of the Securities and
Exchange Commission as set forth in such Rule as then applicable to the
Company, as such Rule may be amended from time to time.
10. REPRESENTATIONS AND COVENANTS OF THE WARRANTHOLDER.
This Warrant Agreement has been entered into by the Company in reliance
upon the following representations and covenants of the Warrantholder which by
its execution hereof the Warrantholder hereby confirms:
(a) Investment Purpose. The right to acquire Preferred Stock or the
Preferred Stock issuable upon exercise of the Warrantholder's rights contained
herein will be acquired for investment and not with a view to the sale or
distribution of any part thereof, and the Warrantholder has no present
intention of selling or engaging in any public distribution of the same except
pursuant to a registration or exemption.
(b) Private Issue. The Warrantholder understands (i) that the Preferred
Stock issuable upon exercise of this Warrant is not registered under the 1933
Act or qualified under applicable state securities laws on the ground that the
issuance contemplated by this Warrant Agreement will be exempt from the
registration and qualifications requirements thereof, and (ii) that the
Company's reliance on such exemption is predicated on the representations set
forth in this Section 10.
(c) Disposition of Warrantholder's Rights. In no event will the
Warrantholder make a disposition of any of its rights to acquire Preferred Stock
or Preferred Stock issuable upon exercise of such rights unless and until (i) it
shall have notified the Company of the proposed disposition, and (ii) if
requested by the Company, it shall have furnished the Company with an option of
counsel (which counsel may either be inside or outside counsel to the
Warrantholder) satisfactory to the Company and its counsel to the effect that
(A) appropriate action necessary for compliance with the 1933 Act has been
taken, or (B) an exemption from the registration requirements of the 1933 Act is
available. Notwithstanding the foregoing, the restrictions imposed upon the
transferability of any of its rights to acquire Preferred Stock or Preferred
Stock issuable on the exercise of such rights do not apply to transfers from the
beneficial owner of any of the aforementioned securities to its nominee or from
such nominee to its beneficial owner, and shall terminate as to any particular
share of Preferred Stock when (1) such security shall have been effectively
registered under the 1933 Act and sold by the holder thereof in accordance with
such registration or (2) such security shall have been sold without registration
in compliance with Rule 144 under the 1933 Act, or (3) a letter shall have been
issued to the Warrantholder at its request by the staff of the Securities and
Exchange Commission or a ruling shall have been issued to the Warrantholder at
its request by such Commission stating that no action shall be recommended by
such staff or taken by such Commission, as the case may be, if such security is
transferred without registration under the 1933 Act in accordance with the
conditions set forth in such letter or ruling and such letter or ruling
specifies that no subsequent restrictions on transfer are required. Whenever the
restrictions imposed hereunder shall terminate, as hereinabove provided, the
Warrantholder or holder of a share of Preferred Stock then outstanding as to
which such restrictions have terminated shall be entitled to receive from the
Company, without expense to such holder, one or more new certificates for the
Warrant or for such shares of Preferred Stock not bearing any restrictive
legend.
(d) Financial Risk. The Warrantholder has such knowledge and experience
in financial and business matters as to be capable of evaluating the merits and
risks of its investment, and has the ability to bear the economic risks of its
investment.
(e) Risk of No Registration. The Warrantholder understands that if the
Company does not register with the Securities and Exchange Commission pursuant
to Section 12 of the 1934 Act (the "1934 Act"), or file reports pursuant to
Section 15(d), of the 1934 Act, or if a registration statement covering the
securities under the 1933 Act is not in effect when it desires to sell (i) the
rights to purchase Preferred Stock pursuant to this Warrant Agreement, or (ii)
the Preferred Stock issuable upon exercise of the right to purchase, it may be
required to hold such securities for an indefinite period. The Warrantholder
also understands that any sale of its rights of the Warrantholder to purchase
Preferred Stock or Preferred Stock which might be made by it in reliance upon
Rule 144 under the 1933 Act may be made only in accordance with the terms and
conditions of that Rule.
(f) Accredited Investor. Warrantholder is an "accredited investor"
within the meaning of the Securities and Exchange Rule 501 of Regulation D, as
presently in effect.
Warrant Lease -6-
<PAGE> 7
11. LOCKUP AGREEMENT.
Warrantholder agrees that, if, in connection with the Company's IPO of
the Company's securities, the Company or the underwriters managing the offering
so request, the Warrantholder shall not sell, make any short sale of, loan,
grant any option for the purchase of, or otherwise dispose of any right to
purchase Preferred Stock hereunder or any Preferred Stock issuable upon
exercise of its rights hereunder without the prior written consent of the
Company or such underwriters, as the case may be, for such period of time (not
to exceed one hundred eighty (180) days) from the effective date of the IPO as
may be requested by the Company or the underwriters; provided that each officer
and director of the Company who own stock of the Company also agrees to such
restrictions. This Section 11 shall be binding on all transferees or assignees
of Warrantholder.
12. TRANSFERS.
Subject to the terms and conditions contained in Section 10 hereof, this
Warrant Agreement and all rights hereunder are transferable in whole or in part
by the Warrantholder and any successor transferee, provided, however, in no
event shall the number of transfers of the rights and interests in all of the
Warrants exceed three (3) transfers. The transfer shall be recorded on the
books of the Company upon receipt by the Company of a notice of transfer in the
form attached hereto as Exhibit III (the "Transfer Notice"), at its principal
offices and the payment to the Company of all transfer taxes and other
governmental charges imposed on such transfer.
13. MISCELLANEOUS.
(a) Effective Date. The provisions of this Warrant Agreement shall be
construed and shall be given effect in all respects as if it had been executed
and delivered by the Company on the date hereof. This Warrant Agreement shall
be binding upon any successors or assigns of the Company.
(b) Attorney's Fees. In any litigation, arbitration or court proceeding
between the Company and the Warrantholder relating hereto, the prevailing party
shall be entitled to attorneys' fees and expenses and all costs of proceedings
incurred in enforcing this Warrant Agreement.
(c) Governing Law. This Warrant Agreement shall be governed by and
construed for all purposes under and in accordance with the laws of the State
of Illinois.
(d) Counterparts. This Warrant 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.
(e) Notices. Any notice required or permitted hereunder shall be given
in writing and shall be deemed effectively given upon personal delivery,
facsimile transmission (provided that the original is sent by personal delivery
or mail as hereinafter set forth) or seven (7) days after deposit in the United
States mail, by registered or certified mail, addressed (i) to the
Warrantholder at 6111 North River Road, Rosemont, Illinois 60018, attention:
James Labe, Venture Group, cc: Legal Department, attention: General Counsel,
(and/or, if by facsimile, (847) 518-5465 and (847) 518-5088, and (ii) to the
Company at 887 Industrial Road, Suite G, San Carlos, CA 94070, (and/or if by
facsimile, (415) 598-1359 or at such other address as any such party may
subsequently designate by written notice to the other party.
(f) Remedies. In the event of any default hereunder, the non-defaulting
party may proceed to protect and enforce 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 default, and/or an action for specific performance for any
default where Warrantholder will not have an adequate remedy at law and where
damages will not be readily ascertainable. The Company expressly agrees that it
shall not oppose an application by the Warrantholder or any other person
entitled to the benefit of this Agreement requiring specific performance of any
or all provisions hereof or enjoining the Company from continuing to commit any
such breach of this Agreement.
(g) 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 Warrantholder against impairment.
Warrant Lease -7-
<PAGE> 8
(h) Survival. The representations, warranties, covenants and
conditions of the respective parties contained herein or made pursuant to this
Warrant Agreement shall survive the execution and delivery of this Warrant
Agreement.
(i) Severability. In the event any one or more of the provisions of
this Warrant Agreement shall for any reason be held invalid, illegal or
unenforceable, the remaining provisions of this Warrant Agreement shall be
unimpaired, and the invalid, illegal or unenforceable provision shall be
replaced by a mutually acceptable valid, legal and enforceable provision, which
comes closest to the intention of the parties underlying the invalid, illegal
or unenforceable provision.
(j) Amendments. Any provision of this Warrant Agreement may be amended
by a written instrument signed by the Company and by the Warrantholder.
(k) Additional Documents. The Company, upon execution of this Warrant
Agreement, shall provide the Warrantholder with certified resolutions with
respect to the representations, warranties and covenants set forth in
subparagraphs (a) through (d), (f) and (g) of Section 9 above. The Company shall
also supply such other documents as the Warrantholder may from time to time
reasonably request.
IN WITNESS WHEREOF, the parties hereto have caused this Warrant Agreement
to be executed by its officers thereunto duly authorized as of the Effective
Date.
Company: ARGONAUT TECHNOLOGIES, INC.
By: /s/ D.P. Binkley
-----------------------------
Title: President & CEO
-----------------------------
WARRANTHOLDER: COMDISCO, INC.
By: /s/ JAMES P. LABE
-----------------------------
Title: JAMES P. LABE, PRESIDENT
COMDISCO VENTURES DIVISION
-----------------------------
Warrant Lease -8-
<PAGE> 9
EXHIBIT I
NOTICE OF EXERCISE
To: _____________________________
(1) The undersigned Warrantholder hereby elects to purchase _________ shares
of the Series ___ Preferred Stock of ____________________, pursuant to
the terms of the Warrant Agreement dated the ______ day of _____________,
19__ (the "Warrant Agreement") between _________________________________
and the Warrantholder, and tenders herein with payment of the purchase
price for such shares in full, together with all applicable transfer
taxes, if any, as set forth below:
(a) by cash or check ________________
or
(b) by Net Issuance as defined in the Warrant Agreement
__________________________
(2) In exercising its rights to purchase the Series ___ Preferred Stock of
__________________________________, the undersigned hereby confirms and
acknowledges the investment representations and warranties made in
Section 10 of the Warrant Agreement.
(3) Please issue a certificate or certificates representing said shares of
Series ___ Preferred Stock in the name of the undersigned or in such
other name as is specified below.
________________________________
(Name)
________________________________
(Address)
WARRANTHOLDER: COMDISCO, INC.
By: ____________________________
Title: _________________________
Date: __________________________
Warrant Lease -9-
<PAGE> 10
EXHIBIT II
TRANSFER NOTICE
(To transfer or assign the foregoing Warrant Agreement execute this form and
supply required information. Do not use this form to purchase shares.)
FOR VALUE RECEIVED, the foregoing Warrant Agreement and all rights
evidenced thereby are hereby transferred and assigned to
__________________________________________________
(Please Print)
whose address is _________________________________
__________________________________________________
Dated: _________________________________
Holder's Signature: ____________________
Holder's Address: ______________________
________________________________________
Signature Guaranteed: ____________________________
NOTE: The signature to this Transfer Notice must correspond with the name as it
appears on the face of the Warrant Agreement, without alteration or enlargement
or any change whatever. Officers of corporations and those acting in a fiduciary
or other representative capacity should file proper evidence of authority to
assign the foregoing Warrant Agreement.
<PAGE> 1
EXHIBIT 10.3
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AS
AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED, OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
RELATED THERETO OR AN OPINION OF COUNSEL (WHICH MAY BE COMPANY COUNSEL)
REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE
SECURITIES LAWS.
WARRANT AGREEMENT
To Purchase Shares of the Series C Preferred Stock of
ARGONAUT TECHNOLOGIES, INC.
Dated as of August 12, 1997 (the "Effective Date")
in connection with the Subordinated Loan and Security Agreement
WHEREAS, Argonaut Technologies, Inc., a Delaware corporation (the
"Company") has entered into a Subordinated Loan and Security Agreement dated as
of July 7, 1997, and a Subordinated Promissory Note (collectively, the
"Subordinated Loan") with Comdisco, Inc., a Delaware corporation (the
"Warrantholder"); and
WHEREAS, the Company desires to grant to Warrantholder, in consideration
for such Subordinated Loan, the right to purchase shares of its Series C
Preferred Stock;
NOW, THEREFORE, in consideration of the Warrantholder executing and
delivering such Subordinated Loan and in consideration of mutual covenants and
agreements contained herein, the Company and Warrantholder agree as follows:
1. GRANT OF THE RIGHT TO PURCHASE PREFERRED STOCK.
The Company hereby grants to Warrantholder, and the Warrantholder is
entitled, upon the terms and subject to the conditions hereinafter set forth, to
subscribe for and purchase, from the Company, 25,000 fully paid and
non-assessable shares of the Company's Series C Preferred Stock ("Preferred
Stock") at a purchase price of $6.00 per share (the "Exercise Price").
Notwithstanding the foregoing, in the event the Company has repaid the
Subordinated Loan on or prior to the twelfth (12th) month such is outstanding,
the number of shares which Warrantholder is entitled to subscribe for and
purchase hereunder shall be reduced to 15,000 shares of Preferred Stock at the
Exercise Price. Further, in the event the Company has repaid the Subordinated
Loan on or prior to the twenty-fourth (24th) month such is outstanding, the
number of shares which Warrantholder is entitled to subscribe for and purchase
hereunder shall be reduced to 20,000 shares of Preferred Stock at the Exercise
Price.
The number and purchase price of such shares are subject to adjustment as
provided in Section B hereof.
2. TERM OF THE WARRANT AGREEMENT.
Except as otherwise provided for herein, the term of this Warrant Agreement
and the right to purchase Preferred Stock as granted herein shall commence on
the Effective Date and shall be exercisable for a period of (i) seven (7) years
or (ii) three (3) years from the effective date of the Company's initial public
offering ("IPO"), whichever is longer.
Notwithstanding the foregoing, upon receipt by Warrantholder of a written
request by the Company's underwriters, the Warrantholder shall exercise its
rights to purchase Preferred Stock hereunder as of the effective date of the
IPO so long as the purchase price per share is equal to or greater than the
Exercise Price. The foregoing exercise at IPO is contingent upon the
underwriter's notice being received by Warrantholder a minimum of ten (10)
business days prior to the effective date of the IPO and if the underwriters
fail to deliver such notice within the aforementioned time period, then
notwithstanding anything to the contrary in this Warrant Agreement, the rights
to purchase the Company's Preferred Stock shall not expire until the
underwriters comply with such notice provisions.
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<PAGE> 2
Such notice shall also contain such details of the IPO as are reasonable in the
circumstances. If the IPO does not take place, the Company shall promptly
notify the Warrantholder and the Warrantholder may rescind any exercise of its
purchase rights promptly after such notice. In the event of such rescission,
the Warrant Agreement will continue to be exercisable on the same terms and
conditions contained herein.
3. EXERCISE OF THE PURCHASE RIGHTS.
The purchase rights set forth in this Warrant Agreement are exercisable by
the Warrantholder, in whole or in part, at any time, or from time to time prior
to the expiration of the term set forth in Section 2 above, by tendering to the
Company at its principal office a notice of exercise in the form attached
hereto as Exhibit 1 (the "Notice of Exercise"), duly completed and executed,
along with this Warrant Agreement. Promptly upon receipt of the Notice of
Exercise, this Warrant Agreement and the payment of the purchase price in
accordance with the terms set forth below, the Company shall issue to the
Warrantholder a certificate for the number of shares of Preferred Stock
purchased.
The Exercise Price may be paid at the Warrantholder's election either (i)
by cash or check, (ii) forgiveness of the indebtedness under the Subordinated
Loan, or (iii) by surrender of the right to purchase such number of shares
equal in value (as determined below) to the aggregate exercise price of the
number of shares to be purchased by the Warrantholder ("Net Issuance"). If the
Warrantholder elects the Net Issuance method, the Company will issue Preferred
Stock in accordance with the following formula:
X = Y(A-B)
-------
A
Where: X = the number of shares of Preferred Stock to be issued to the
Warrantholder.
Y = the number of shares of Preferred Stock requested to be
exercised under this Warrant Agreement.
A = the fair market value of one (1) share of Preferred Stock.
B = the Exercise Price.
For purposes of the above calculation, current fair market value of
Preferred Stock shall mean with respect to each share of Preferred Stock:
(i) If the exercise is in connection with an initial public offering of
the Company's Common Stock, and if the Company's Registration Statement
relating to such public offering has been declared effective by the SEC, then
the fair market value per share shall be the product of (x) the initial "Price
to Public" specified in the final prospectus with respect to the offering and
(y) the number of shares of Common Stock into which each share of Preferred
Stock is convertible at the time of such exercise;
(ii) If this Warrant is exercised after, and not in connection with the
Company's initial public offering, and;
(a) If the Company's Common Stock is traded on a securities
exchange, the fair market value shall be deemed to be the product of (x) the
average of the closing prices over a twenty-one (21) day period ending three
days before the day the current fair market value of the securities is being
determined and (y) the number of shares of Common Stock into which each share
of Preferred Stock is convertible at the time of such exercise; or
(b) If the Company's Common Stock is actively traded
over-the-counter, the fair market value shall be deemed to be the product of
(x) the average of the closing bid and asked prices quoted on the Nasdaq
National Market system (or similar system) over the twenty-one (21) day period
ending three days before the day the current fair market value of the
securities is being determined and (y) the number of shares of Common Stock
into which each share of Preferred Stock is convertible at the time of such
exercise;
(iii) If at any time the Common Stock is not listed on any securities
exchange or quoted in the Nasdaq National Market System or the over-the-counter
market, the current fair market value of Preferred
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<PAGE> 3
Stock shall be the product of (x) the highest price per share which the
Company could obtain from a willing buyer (not a current employee or
director) for shares of Common Stock sold by the Company, from authorized
but unissued shares, as determined in good faith by its Board of
Directors and (y) the number of shares of Common Stock into which each
share of Preferred Stock is convertible at the time of such exercise,
unless the exercise is in connection with a merger, acquisition or other
consolidation of the Company pursuant to which the Company is not the
surviving party, in which case the fair market value of Preferred Stock
shall be deemed to be the value received by the holders of the Company's
Preferred Stock on a common equivalent basis pursuant to such merger or
acquisition.
Upon partial exercise by either cash or Net Issuance, the Company shall
promptly issue an amended Warrant Agreement representing the remaining number
of shares purchasable hereunder. All other terms and conditions of such amended
Warrant Agreement shall be identical to those contained herein, including, but
not limited to the Effective Date hereof.
4. RESERVATION OF SHARES.
(a) Authorization and Reservation of Shares. During the term of this
Warrant Agreement, the Company will at all times have authorized and reserved a
sufficient number of shares of its Preferred Stock to provide for the exercise
of the rights to purchase Preferred Stock as provided for herein.
(b) Registration or Listing. If any shares of Preferred Stock required
to be reserved for purposes of the exercise of this Warrant Agreement hereunder
require registration with or approval of any governmental authority under any
Federal or State law (other than any registration under the Securities Act of
1933, as amended ("1933 Act"), as then in effect, or any similar Federal
statute then enforced, or any state securities law, required by reason of any
transfer involved in such conversion), or listing on any domestic securities
exchange, before such shares may be issued upon conversion, the Company will,
at its expense and as expeditiously as possible, use its best efforts to cause
such shares to be duly registered, listed or approved for listing on such
domestic securities exchange, as the case may be.
5. NO FRACTIONAL SHARES OR SCRIP.
No fractional shares or scrip representing fractional shares shall be
issued upon the exercise of the Warrantholder's rights to purchase Preferred
Stock, but in lieu of such fractional shares the Company shall make a cash
payment therefor upon the basis of the Exercise Price then in effect.
6. NO RIGHTS AS SHAREHOLDER.
This Warrant Agreement does not entitle the Warrantholder to any voting
rights or other rights as a shareholder of the Company prior to the exercise of
the Warrantholder's rights to purchase Preferred Stock as provided for herein.
7. WARRANTHOLDER REGISTRY.
The Company shall maintain a registry showing the name and address of the
registered holder of this Warrant Agreement.
8. ADJUSTMENT RIGHTS.
The purchase price per share and the number of shares of Preferred Stock
purchasable hereunder are subject to adjustment, as follows:
(a) Merger and Sale of Assets. If at any time there shall be a capital
reorganization of the shares of the Company's stock (other than a combination,
reclassification, exchange or subdivision of shares otherwise provided for
herein), or a merger of consolidation of the Company with or into another
corporation when the Company is not the surviving corporation, or the sale of
all or substantially all of the Company's properties and assets to any other
person (hereinafter referred to as a "Merger Event"), then, as a part of such
Merger Event, lawful provision shall be made so that the Warrantholder shall
thereafter be entitled to receive, upon exercise of its rights to purchase
Preferred Stock, the number of shares of Preferred Stock or other securities of
the successor corporation resulting from such Merger Event, to which a holder
of the Preferred Stock deliverable upon exercise of the right to purchase
Preferred Stock hereunder would have been entitled in such Merger Event if the
right to purchase such
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<PAGE> 4
Preferred Stock hereunder had been exercised immediately prior to the Merger
Event. In any such case, appropriate adjustment (as determined in good faith by
the Company's Board of Directors) shall be made in the application of the
provisions of this Warrant Agreement with respect to the rights and interest of
the Warrantholder after the Merger Event to the end that the provisions of this
Warrant Agreement (including adjustments of the Exercise Price and number of
shares of Preferred Stock purchasable) shall be applicable to the greatest
extent reasonably possible.
(b) Reclassification of Shares. If the Company at any time shall, by
combination, reclassification, exchange or subdivision of securities or
otherwise, change any of the securities as to which purchase rights under this
Warrant Agreement exist into the same or a different number of securities of
any other class or classes, this Warrant Agreement 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 which were
subject to the purchase rights under this Warrant Agreement immediately prior
to such combination, reclassification, exchange, subdivision or other change.
(c) Subdivision or Combination of Shares. If the Company at any time
shall combine or subdivide its Preferred Stock, the Exercise Price shall be
proportionately decreased in the case of a subdivision, or proportionately
increased in the case of a combination.
(d) Antidilution Rights. The Preferred Stock purchasable hereunder shall
have the benefit of the same antidilution rights applicable to such Preferred
Stock as designed in the Company's Certificate of Incorporation, as such may be
amended from time to time, and the Company shall provide Warrantholder with all
notices and information at the times and to the extent it is required to do so
to the holders of such Preferred Stock.
(e) Notice of Adjustments. If: (i) the Company shall declare any dividend
or distribution upon its stock, whether in cash, property, stock or other
securities; (ii) the Company shall offer for subscription prorata to the
holders of any class of its Preferred or other convertible stock any additional
shares of stock of any class or other rights; (iii) there shall be any Merger
Event: (iv) there shall be any voluntary dissolution, liquidation or winding up
of the Company; then, in connection with each such event, the Company shall
send to the Warrantholder: (A) at least twenty (20) days' prior written notice
of the date on which the books of the Company shall close or a record shall be
taken for such dividend, distribution, subscription rights (specifying the date
on which the holders of Preferred Stock shall be entitled thereto) or for
determining rights to vote in respect of such Merger Event, dissolution,
liquidation or winding up: and (B) in the case of any such Merger Event,
dissolution, liquidation or winding up, 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 Preferred Stock shall be entitled to exchange their
Preferred Stock for securities or other property deliverable upon such Merger
Event, dissolution, liquidation or winding up).
Each such written notice shall set forth, in reasonable detail, (i) the
event requiring the adjustment, (ii) the amount of the adjustment, (iii) the
method by which such adjustment was calculated, (iv) the Exercise Price, and
(v) the number of shares subject to purchase hereunder after giving effect to
such adjustment, and shall be given by first class mail, postage prepaid,
addressed to the Warrantholder, at the address as shown on the books of the
Company.
(f) Timely Notice. Failure to timely provide such notice required by
subsection (e) above shall entitled Warrantholder to retail the benefit of the
applicable notice period notwithstanding anything to the contrary contained in
any insufficient notice received by Warrantholder.
9. REPRESENTATIVES, WARRANTIES AND COVENANTS OF THE COMPANY.
(a) Reservation of Preferred Stock. The Preferred Stock issuable upon
exercise of the Warrantholder's rights has been duly and validly reserved and,
when issued in accordance with the provisions of this Warrant Agreement, will
be validly issued, fully paid and non-assessable, and will be free of any
taxes, liens, charges or encumbrances of any nature whatsoever; provided,
however, that the Preferred Stock issuable pursuant to this Warrant Agreement
may be subject to restrictions on transfer under state and/or Federal
securities laws. The Company has made available to the Warrantholder true,
correct and complete copies of its Certificate of Incorporation (the "Charter")
and Bylaws, as amended. The issuance of certificates for shares of Preferred
Stock upon exercise of the Warrant Agreement shall be made without charge to
the Warrantholder for any issuance tax in respect thereof, or other cost
incurred by the Company in connection with such exercise and the related
issuance of shares of Preferred Stock; provided that the Company shall not be
required to pay any tax which may be payable in
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<PAGE> 5
respect of any transfer involved and the issuance and delivery of any
certificate in a name other than that of the Warrantholder.
(b) Due Authority. The execution and delivery by the Company of this
Warrant Agreement and the performance of all obligations of the Company
hereunder, including the issuance to Warrantholder of the right to acquire the
shares of Preferred Stock set forth in Section 1, have been duly authorized by
all necessary corporate action on the part of the Company, and the Subordinated
Loan and this Warrant Agreement are not inconsistent with the Company's Charter
or Bylaws, do not contravene any law or governmental rule, regulation or order
applicable to it, do not and will not contravene any provision of, or constitute
a default under, any indenture, mortgage, contract or other instrument to which
it is a party or by which it is bound, and the Subordinated Loan and this
Warrant Agreement constitute legal, valid and binding agreements of the Company,
enforceable in accordance with their respective terms subject only to
bankruptcy, insolvency or other similar laws affecting the enforceability of the
rights of creditors generally and the general principles of equity.
(c) Consents and Approvals. No consent or approval of, giving of notice
to, registration with, or taking of any other action in respect of any state,
Federal or other governmental authority or agency is required with respect to
the execution, delivery and performance by the Company of its obligations under
this Warrant Agreement, except for the filing of notices pursuant to Regulation
D under the 1933 Act and any filing required by applicable state securities law,
which filings will be effective by the time required thereby.
(d) Issued Securities. All issued and outstanding shares of Common Stock,
Preferred Stock or any other securities of the Company have been duly authorized
and validly issued and are fully paid and nonassessable. All outstanding shares
of Common Stock, Preferred Stock and any other securities were issued in full
compliance with all Federal and state securities laws. In addition:
(i) The authorized capital stock of the Company consists of
26,800,000 shares of Common Stock and 20,800,000 shares of Preferred Stock, of
which 5,000,000 are designated as Series A Preferred Stock, 5,000,000 shares are
designated Series A-1 Preferred Stock, 3,000,000 shares are designated Series B
Preferred Stock, 3,000,000 shares are designated Series B-1 Preferred Stock,
1,600,000 shares are designated Series C Preferred Stock, and 1,600,000 shares
are designated Series C-1 Preferred Stock. The issued and outstanding stock of
the Company consists of 1,903,708 shares of Common Stock, 4,627,500 shares of
Series A Preferred Stock, no shares of Series A-1 Preferred Stock, 2,923,073
shares of Series B Preferred Stock, no shares of Series B-1 Preferred Stock,
1,180,000 shares of Series C Preferred Stock and no shares of Series C-1
Preferred Stock. The Series A Preferred, Series A-1 Preferred, Series B
Preferred, Series B-1 Preferred, Series C Preferred, and Series C-1 Preferred
shall have the rights, preferences, privileges and restrictions set forth in the
Charter.
(ii) The Company has reserved 1,685,308 shares of its Common Stock for
issuance to officers, directors, employees, sales representatives and
consultants of the Company pursuant to the Company's 1995 Incentive Stock Plan.
There are stock options outstanding for the purchase of 1,215,575 shares of
Common Stock. There are also warrants outstanding for the purchase of 55,000
shares of Common Stock. Except as referenced herein, there are no options,
warrants, conversion privileges or other rights presently outstanding to
purchase or otherwise acquire any authorized but unissued shares of the capital
stock or other securities of the Company.
(e) Insurance. The Company has in full force and effect insurance
policies, with extended coverage, insuring the Company and its property and
business against such losses and risks, and in such amounts, as are customary
for corporations engaged in a similar business and similarly situated and as
otherwise may be required pursuant to the terms of any other contract or
agreement.
(f) Exempt Transaction. Subject to the accuracy of the Warrantholder's
representations in Section 10 hereof, the issuance of the Preferred Stock upon
exercise of the Warrantholder's right to purchase such Preferred Stock will
constitute a transaction exempt from (i) the registration requirements of
Section 5 of the 1933 Act, in reliance upon Section 4(2) thereof, and (ii) the
qualification requirements of the applicable state securities laws.
(g) Compliance with Rule 144. At the written request of the Warrantholder,
who proposes to sell Preferred Stock issuable upon the exercise of the Warrant
in compliance with Rule 144 promulgated by the Securities and Exchange
Commission under the 1933 Act, the Company shall furnish to the Warrantholder,
within ten days after receipt of such request, a written statement confirming
the Company's compliance with the filing
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<PAGE> 6
requirements of the Securities and Exchange Commission as set forth in such Rule
as then applicable to the Company, as such Rule may be amended from time to
time.
10. REPRESENTATIONS AND COVENANTS OF THE WARRANTHOLDER.
This Warrant Agreement has been entered into by the Company in reliance
upon the following representations and covenants of the Warrantholder which by
its execution hereof the Warrantholder hereby confirms:
(a) Investment Purpose. The right to acquire Preferred Stock or the
Preferred Stock issuable upon exercise of the Warrantholder's rights contained
herein will be acquired for investment and not with a view to the sale or
distribution of any part thereof, and the Warrantholder has no present intention
of selling or engaging in any public distribution of the same except pursuant to
a registration or exemption.
(b) Private Issue. The Warrantholder understands (i) that the Preferred
Stock issuable upon exercise of this Warrant is not registered under the 1933
Act or qualified under applicable state securities laws on the ground that the
issuance contemplated by this Warrant Agreement will be exempt from the
registration and qualifications requirements thereof, and (ii) that the
Company's reliance on such exemption is predicated on the representations set
forth in this Section 10.
(c) Disposition of Warrantholder's Rights. In no event will the
Warrantholder make a disposition of any of its rights to acquire Preferred Stock
or Preferred Stock issuable upon exercise of such rights unless and until (i) it
shall have notified the Company of the proposed disposition, and (ii) if
requested by the Company, it shall have furnished the Company with an opinion of
counsel (which counsel may either be inside or outside counsel to the
Warrantholder) satisfactory to the Company and its counsel to the effect that
(A) appropriate action necessary for compliance with the 1933 Act has been
taken, or (B) an exemption from the registration requirements of the 1933 Act is
available. Notwithstanding the foregoing, the restrictions imposed upon the
transferability of any of its rights to acquire Preferred Stock or Preferred
Stock issuable on the exercise of such rights do not apply to transfers from the
beneficial owner of any of the aforementioned securities to its nominee or from
such nominee to its beneficial owner, and shall terminate as to any particular
share of Preferred Stock when (1) such security shall have been effectively
registered under the 1933 Act and sold by the holder thereof in accordance with
such registration or (2) such security shall have been sold without registration
in compliance with Rule 144 under the 1933 Act, or (3) a letter shall have been
issued to the Warrantholder at its request by the staff of the Securities and
Exchange Commission or a ruling shall have been issued to the Warrantholder at
its request by such Commission stating that no action shall be recommended by
such staff or taken by such Commission, as the case may be, if such security is
transferred without registration under the 1933 Act in accordance with the
conditions set forth in such letter or ruling and such letter or ruling
specifies that no subsequent restrictions on transfer are required. Whenever the
restrictions imposed hereunder shall terminate, as hereinabove provided, the
Warrantholder or holder of a share of Preferred Stock then outstanding as to
which such restrictions have terminated shall be entitled to receive from the
Company, without expense to such holder, one or more new certificates for the
Warrant or for such shares of Preferred Stock not bearing any restrictive
legend.
(d) Financial Risk. The Warrantholder has such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risks of its investment, and has the ability to bear the economic risks of its
investment.
(e) Risk of No Registration. The Warrantholder understands that if the
Company does not register with the Securities and Exchange Commission pursuant
to Section 12 of the 1934 Act (the "1934 Act"), or file reports pursuant to
Section 15(d), of the 1934 Act, or if a registration statement covering the
securities under the 1933 Act is not in effect when it desires to sell (i) the
rights to purchase Preferred Stock pursuant to this Warrant Agreement, or (ii)
the Preferred Stock issuable upon exercise of the right to purchase, it may be
required to hold such securities for an indefinite period. The Warrantholder
also understands that any sale of its rights of the Warrantholder to purchase
Preferred Stock or Preferred Stock which might be made by it in reliance upon
Rule 144 under the 1933 Act may be made only in accordance with the terms and
conditions of that Rule.
(f) Accredited Investor. Warrantholder is an "accredited investor" within
the meaning of the Securities and Exchange Rule 501 of Regulation D, as
presently in effect.
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<PAGE> 7
11. ADDITIONAL WARRANTS.
In the event the Company has not repaid the Subordinated Loan in its
entirety by the maturity date as set forth in the Subordinated Promissory Note,
Warrantholder shall have the right to purchase from the Company, at the
Exercise Price (adjusted as set forth herein) an additional number of shares of
Preferred Stock determined by (i) multiplying the outstanding principal amount
of the Subordinated Loan by one percent (1%) for each month such amount is
outstanding, and (ii) dividing the product thereof by the Exercise Price per
share.
12. LOCKUP AGREEMENT.
Warrantholder agrees that, if, in connection with the Company's IPO of the
Company's securities, the Company of the underwriters managing the offering so
request, the Warrantholder shall not sell, make any short sale of, loan, grant
any option for the purchase of, or otherwise dispose of any right to purchase
Preferred Stock hereunder or any Preferred Stock issuable upon exercise of its
rights hereunder without the prior written consent of the Company or such
underwriters, as the case may be, for such period of time (not to exceed one
hundred eighty (180) days) from the effective date of the IPO as may be
requested by the Company or the underwriters; provided that each officer and
director of the Company who own stock of the Company also agrees to such
restrictions. This Section 11 shall be binding on all transferees or assignees
of Warrantholder.
13. TRANSFERS.
Subject to the terms and conditions contained in Section 10 hereof, this
Warrant Agreement and all rights hereunder are transferable in whole or in part
by the Warrantholder and any successor transferee, provided, however, in no
event shall the number of transfers of the rights and interests in all of the
Warrants exceed three (3) transfers. The transfer shall be recorded on the books
of the Company upon receipt by the Company of a notice of transfer in the form
attached hereto as Exhibit III (the "Transfer Notice"), at its principal
offices and the payment to the Company of all transfer taxes and other
governmental charges imposed on such transfer.
14. MISCELLANEOUS.
(a) Effective Date. The provisions of this Warrant Agreement shall be
construed and shall be given effect in all respects as if it had been executed
and delivered by the Company on the date hereof. This Warrant Agreement shall
be binding upon any successors or assigns of the Company.
(b) Attorney's Fees. In any litigation, arbitration or court proceeding
between the Company and the Warrantholder relating hereto, the prevailing party
shall be entitled to attorneys' fees and expenses and all costs of proceedings
incurred in enforcing this Warrant Agreement.
(c) Governing Law. This Warrant Agreement shall be governed by and
construed for all purposes under and in accordance with the laws of the State
of Illinois.
(d) Counterparts. This Warrant 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.
(e) Notices. Any notice required or permitted hereunder shall be given in
writing and shall be deemed effectively given upon personal delivery, facsimile
transmission (provided that the original is sent by personal delivery or mail
as hereinafter set forth) or seven (7) days after deposit in the United States
mail, by registered or certified mail, addressed (1) to the Warrantholder at
6111 North River Road, Rosemont, Illinois 60018, attention: James Labe, Venture
Group, cc: Legal Department, attention: General Counsel, (and/or, if by
facsimile, (847) 518-5465 and (847) 518-5088, and (ii) to the Company at 887
Industrial Road, Suite G, San Carlos, CA. 94070 (and/or if by facsimile, (415)
598-1359 or at such other address as any such party may subsequently designate
by written notice to the other party.
(f) Remedies. In the event of any default hereunder, the non-defaulting
party may proceed to protect and enforce 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 default, and/or an action for specific performance for any
default where Warrantholder will not have an adequate remedy at law and where
damages will not be readily ascertainable. The Company expressly agrees that it
shall not oppose an application by the Warrantholder or any other person
entitled
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<PAGE> 8
to the benefit of this Agreement requiring specific performance of any or all
provisions hereof or enjoining the Company from continuing to commit any such
breach of this Agreement.
(g) 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 Warrantholder against impairment.
(h) Survival. The representations, warranties, covenants and conditions
of the respective parties contained herein or made pursuant to this Warrant
Agreement shall survive the execution and delivery of this Warrant Agreement.
(i) Severability. In the event any one or more of the provisions of this
Warrant Agreement shall for any reason be held invalid, illegal or
unenforceable, the remaining provisions of this Warrant Agreement shall be
unimpaired, and the invalid, illegal or unenforceable provision shall be
replaced by a mutually acceptable valid, legal and enforceable provision, which
comes closest to the intention of the parties underlying the invalid, illegal
or unenforceable provision.
(j) Amendments. Any provision of this Warrant Agreement may be amended by
a written instrument signed by the Company and by the Warrantholder.
(k) Additional Documents. The Company, upon execution of this Warrant
Agreement, shall provide the Warrantholder with certified resolutions with
respect to the representations, warranties and covenants set forth in
subparagraphs (a) through (d), (f) and (g) of Section 9 above. The Company
shall also supply such other documents as the Warrantholder may from time to
time reasonably request.
IN WITNESS WHEREOF, the parties hereto have caused this Warrant Agreement
to be executed by its officers thereunto duly authorized as of the Effective
Date.
COMPANY: ARGONAUT TECHNOLOGIES, INC.
By: /s/ D.P. Binkley
Title: President & CEO
WARRANTHOLDER: COMDISCO, INC.
By: JAMES F. LABE,
Title: PRESIDENT COMDISCO VENTURES
DIVISION
-8-
<PAGE> 9
EXHIBIT I
NOTICE OF EXERCISE
TO: _______________________
(1) The undersigned Warrantholder hereby elects to purchase _______ shares of
the Series _____ Preferred Stock of _______________, pursuant to the terms
of the Warrant Agreement dated the _______ day of ____________, 19__ (the
"Warrant Agreement") between ________________________ and the
Warrantholder, and tenders herewith payment of the purchase price for such
shares in full, together with all applicable transfer taxes, if any, as set
forth below:
(a) by cash or check __________
or
(b) by Net Issuance as defined in the Warrant Agreement __________
(2) In exercising its rights to purchase the Series _____ Preferred Stock of
__________________________, the undersigned hereby confirms and
acknowledges the investment representations and warranties made in Section
10 of the Warrant Agreement.
(3) Please issue a certificate or certificates representing said shares of
Series _____ Preferred Stock in the name of the undersigned or in such
other name as is specified below.
________________________
(Name)
________________________
(Address)
WARRANTHOLDER: COMDISCO, INC.
By: ______________________
Title: ______________________
Date: ______________________
<PAGE> 10
EXHIBIT II
TRANSFER NOTICE
(To transfer or assign the foregoing Warrant Agreement execute this form and
supply required information. Do not use this form to purchase shares.)
FOR VALUE RECEIVED, the foregoing Warrant Agreement and all rights
evidenced thereby are hereby transferred and assigned to
__________________________________________________
(Please Print)
whose address is _________________________________
__________________________________________________
Dated: _________________________________
Holder's Signature: ____________________
Holder's Address: ______________________
________________________________________
Signature Guaranteed: ____________________________
NOTE: The signature to this Transfer Notice must correspond with the name as it
appears on the face of the Warrant Agreement, without alteration or enlargement
or any change whatever. Officers of corporations and those acting in a fiduciary
or other representative capacity should file proper evidence of authority to
assign the foregoing Warrant Agreement.
<PAGE> 1
EXHIBIT 10.4
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AS
AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED, OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
RELATED THERETO OR AN OPINION OF COUNSEL (WHICH MAY BE COMPANY COUNSEL)
REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE
SECURITIES LAWS.
WARRANT AGREEMENT
To Purchase Shares of the Series C Preferred Stock of
ARGONAUT TECHNOLOGIES, INC.
Dated as of August 12, 1997 (the "Effective Date")
in connection with the Loan and Security Agreement
WHEREAS, Argonaut Technologies, Inc., a Delaware corporation (the
"Company") has entered into a Loan and Security Agreement dated as of July 7,
1997, and a Secured Promissory Note (collectively, the "Loan") with Comdisco,
Inc., a Delaware corporation (the "Warrantholder"); and
WHEREAS, the Company desires to grant to Warrantholder, in consideration
for such Loans, the right to purchase shares of its Series C Preferred Stock;
NOW, THEREFORE, in consideration of the Warrantholder executing and
delivering such Loans and in consideration of mutual covenants and agreements
contained herein, the Company and Warrantholder agree as follows:
1. GRANT OF THE RIGHT TO PURCHASE PREFERRED STOCK.
The Company hereby grants to the Warrantholder, and the Warrantholder is
entitled, upon the terms and subject to the conditions hereinafter set forth, to
subscribe for and purchase, from the Company, 3,197 fully paid and
non-assessable shares of the Company's Series C Preferred Stock ("Preferred
Stock") at a purchase price of $6.00 per share (the "Exercise Price"). The
number and purchase price of such shares are subject to adjustment as provided
in Section 8 hereof.
2. TERM OF THE WARRANT AGREEMENT.
Except as otherwise provided for herein, the term of this Warrant Agreement
and the right to purchase Preferred Stock as granted herein shall commence on
the Effective Date and shall be exercisable for a period of (i) seven (7) years
or (ii) three (3) years from the effective date of the Company's initial public
offering ("IPO"), whichever is longer.
Notwithstanding the foregoing, upon receipt by Warrantholder of a written
request by the Company's underwriters, the Warrantholder shall exercise its
rights to purchase Preferred Stock hereunder as of the effective date of the
IPO so long as the purchase price per share is equal to or greater than the
Exercise Price. The foregoing exercise at IPO is contingent upon the
underwriter's notice being received by Warrantholder a minimum of ten (10)
business days prior to the effective date of the IPO and if the underwriters
fail to deliver such notice within the aforementioned time period, then
notwithstanding anything to the contrary in this Warrant Agreement, the rights
to purchase the Company's Preferred Stock shall not expire until the
underwriters comply with such notice provisions. Such notice shall also contain
such details of the IPO as are reasonable in the circumstances. If the IPO does
not take place, the Company shall promptly notify the Warrantholder and the
Warrantholder may rescind any exercise of its purchase rights promptly after
such notice. In the event of such rescission, the Warrant Agreement will
continue to be exercisable on the same terms and conditions contained herein.
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<PAGE> 2
3. EXERCISE OF THE PURCHASE RIGHTS.
The purchase rights set forth in this Warrant Agreement are exercisable by
the Warrantholder, in whole or in part, at any time, or from time to time,
prior to the expiration of the term set forth in Section 2 above, by tendering
to the Company at its principal office a notice of exercise in the form
attached hereto as Exhibit 1 (the "Notice of Exercise"), duly completed and
executed, along with this Warrant Agreement. Promptly upon receipt of the
Notice of Exercise, this Warrant Agreement and the payment of the purchase
price in accordance with the terms set forth below, the Company shall issue to
the Warrantholder a certificate for the number of shares of Preferred Stock
purchased.
The Exercise Price may be paid at the Warrantholder's election either (i)
by cash or check, or (ii) by surrender of the right to purchase such number of
shares equal in value (as determined below) to the aggregate exercise price of
the number of shares to be purchased by the Warrantholder ("Net Issuance"). If
the Warrantholder elects the Net issuance method, the Company will issue
Preferred Stock in accordance with the following formula:
X = Y(A-B)
-------
A
Where: X = the number of shares of Preferred Stock to be issued to
the Warrantholder.
Y = the number of shares of Preferred Stock requested
to be exercised under this Warrant Agreement.
A = the fair market value of one (1) share of Preferred
Stock.
B = the Exercise Price.
For purposes of the above calculation, current fair market value of
Preferred Stock shall mean with respect to each shares of Preferred Stock:
(i) if the exercise is in connection with an initial public offering of
the Company's Common Stock, and if the Company's Registration Statement relating
to such public offering has been declared effective by the SEC, then the fair
market value per share shall be the product of (x) the initial "Price to Public"
specified in the final prospectus with respect to the offering and (y) the
number of shares of Common Stock into which each share of Preferred Stock is
convertible at the time of such exercise;
(ii) if this Warrant is exercised after, and not in connection with the
Company's initial public offering, and:
(a) if the Company's Common Stock is traded on a securities
exchange, the fair market value shall be deemed to be the product of (x) the
average of the closing prices over a twenty-one (21) day period ending three
days before the day the current fair market value of the securities is being
determined and (y) the number of shares of Common Stock into which each share
of Preferred Stock is convertible at the time of such exercise; or
(b) if the Company's Common Stock is actively traded
over-the-counter, the fair market value shall be deemed to be the product of
(x) the average of the closing bid and asked prices quoted on the Nasdaq
National Market system (or similar system) over the twenty-one (21) day period
ending three days before the day the current fair market value of the
securities is being determined and (y) the number of shares of Common Stock
into which each share of Preferred Stock is convertible at the time of such
exercise;
(iii) if at any time the Common Stock is not listed on any securities
exchange or quoted in the Nasdaq National Market System or the over-the-counter
market, the current fair market value of Preferred Stock shall be the product
of (x) the highest price per share which the Company could obtain from a
willing buyer (not a current employee or director) for shares of Common Stock
sold by the Company, from authorized but unissued shares, as determined in good
faith by its Board of Directors and (y) the number of shares of Common Stock
into which each share of Preferred Stock is convertible at the time of such
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<PAGE> 3
exercise, unless the exercise is in connection with a merger, acquisition
or other consolidation of the Company pursuant to which the Company is not
the surviving party, in which case the fair market value of Preferred
Stock shall be deemed to be the value received by the holders of the
Company's Preferred Stock on a common equivalent basis pursuant to such
merger or acquisition.
Upon partial exercise by either cash or Net Issuance, the Company shall
promptly issue an amended Warrant Agreement representing the remaining number
of shares purchasable hereunder. All other terms and conditions of such amended
Warrant Agreement shall be identical to those contained herein, including, but
not limited to the Effective Date hereof.
4. RESERVATION OF SHARES.
(a) Authorization and Reservation of Shares. During the term of this
Warrant Agreement, the Company will at all times have authorized and reserved a
sufficient number of shares of its Preferred Stock to provide for the exercise
of the rights to purchase Preferred Stock as provided for herein.
(b) Registration or Listing. If any shares of Preferred Stock required to
be reserved for purposes of the exercise of this Warrant Agreement hereunder
require registration with or approval of any governmental authority under any
Federal or State law (other than any registration under the Securities Act of
1933, as amended ("1933 Act"), as then in effect, or any similar Federal
statute then enforced, or any state securities law, required by reason of any
transfer involved in such conversion), or listing on any domestic securities
exchange, before such shares may be issued upon conversion, the Company will,
at its expense and as expeditiously as possible, use its best efforts to cause
such shares to be duly registered, listed or approved for listing on such
domestic securities exchange, as the case may be.
5. NO FRACTIONAL SHARES OR SCRIP.
No fractional shares or scrip representing fractional shares shall be
issued upon the exercise of the Warrantholder's rights to purchase Preferred
Stock, but in lieu of such fractional shares the Company shall make a cash
payment therefor upon the basis of the Exercise Price then in effect.
6. NO RIGHTS AS SHAREHOLDER.
This Warrant Agreement does not entitle the Warrantholder to any voting
rights or other rights as a shareholder of the Company prior to the exercise of
the Warrantholder's rights to purchase Preferred Stock as provided for herein.
7. WARRANTHOLDER REGISTRY.
The Company shall maintain a registry showing the name and address of the
registered holder of this Warrant Agreement.
8. ADJUSTMENT RIGHTS.
The purchase price per share and the number of shares of Preferred Stock
purchasable hereunder are subject to adjustment, as follows:
(a) Merger and Sale of Assets. If at any time there shall be a capital
reorganization of the shares of the Company's stock (other than a combination,
reclassification, exchange or subdivision of shares otherwise provided for
herein), or a merger or consolidation of the Company with or into another
corporation when the Company is not the surviving corporation, or the sale of
all or substantially all of the Company's properties and assets to any other
person (hereinafter referred to as a "Merger Event"), then, as a part of such
Merger Event, lawful provision shall be made so that the Warrantholder shall
thereafter be entitled to receive, upon exercise of its rights to purchase
Preferred Stock, the number of shares of Preferred Stock or other securities of
the successor corporation resulting from such Merger Event, to which a holder
of the Preferred Stock deliverable upon exercise of the right to purchase
Preferred Stock hereunder would have been entitled in such Merger Event if the
right to purchase such Preferred Stock hereunder had been exercised immediately
prior to the Merger Event. In any such case, appropriate adjustment (as
determined in good faith by the Company's Board of Directors) shall be made in
the application of the provisions of this Warrant Agreement with respect to the
rights and interest of the Warrantholder after the Merger Event to the end that
the provisions of this Warrant Agreement (including adjustments of the
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<PAGE> 4
Exercise Price and number of shares of Preferred Stock purchasable) shall be
applicable to the greatest extent reasonably possible.
(b) Reclassification of Shares. If the Company at any time shall, by
combination, reclassification, exchange or subdivision of securities or
otherwise, change any of the securities as to which purchase rights under this
Warrant Agreement exist into the same or a different number of securities of
any other class or classes, this Warrant Agreement 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 which were
subject to the purchase rights under this Warrant Agreement immediately prior
to such combination, reclassification, exchange, subdivision or other change.
(c) Subdivision or Combination of Shares. If the Company at any time
shall combine or subdivide its Preferred Stock, the Exercise Price shall be
proportionately decreased in the case of a subdivision, or proportionately
increased in the case of a combination.
(d) Antidilution Rights. The Preferred Stock purchasable hereunder shall
have the benefit of the same antidilution rights applicable to such Preferred
Stock as designated in the Company's Certificate of Incorporation, as such may
be amended from time to time, and the Company shall provide Warrantholder with
all notices and information at the times and to the extent it is required to do
so to the holders of such Preferred Stock.
(e) Notice of Adjustments. If: (i) the Company shall declare any
dividend or distribution upon its stock, whether in cash, property, stock or
other securities; (ii) the Company shall offer for subscription prorata to the
holders of any class of its Preferred or other convertible stock any additional
shares of stock or any class or other rights; (iii) there shall be any Merger
Event; (iv) there shall be any voluntary dissolution, liquidation or winding up
of the Company; then, in connection with each such event, the Company shall
send to the Warrantholder: (A) at least twenty (20) days' prior written notice
of the date on which the books of the Company shall close or a record shall be
taken for such dividend, distribution, subscription rights (specifying the date
on which the holders of Preferred Stock shall be entitled thereto) or for
determining rights to vote in respect of such Merger Event, dissolution,
liquidation or winding up; and (B) in the case of any such Merger Event,
dissolution, liquidation or winding up at least twenty (20) days' prior written
notice of the date when the same shall take place (and specifying the date of
which the holders of Preferred Stock shall be entitled to exchange their
Preferred Stock for securities or other property deliverable upon such Merger
Event, dissolution, liquidation or winding up).
Each such written notice shall set forth, in reasonable detail, (i) the
event requiring the adjustment, (ii) the amount of the adjustment, (iii) the
method by which such adjustment was calculated, (iv) the Exercise Price, and
(v) the number of shares subject to purchase hereunder after giving effect to
such adjustment, and shall be given by first class mail, postage prepaid,
addressed to the Warrantholder, at the address as shown on the books of the
Company.
(f) Timely Notice. Failure to timely provide such notice required by
subsection (e) above shall entitle Warrantholder to retain the benefit of the
applicable notice period notwithstanding anything to the contrary contained in
any insufficient notice received by Warrantholder.
9. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY.
(a) Reservation of Preferred Stock. The Preferred Stock issuable upon
exercise of the Warrantholder's rights has been duly and validly reserved and,
when issued in accordance with the provisions of this Warrant Agreement, will
be validly issued, fully paid and non-assessable, and will be free of any
taxes, liens, charges or encumbrances of any nature whatsoever, provided,
however, that the Preferred Stock issuable pursuant to this Warrant may be
subject to restrictions on transfer under state and/or Federal securities laws.
The Company has made available to the Warrantholder true, correct and complete
copies of its Certificate of Incorporation (the "Charter") and Bylaws, as
amended. The issuance of certificates for shares of Preferred Stock upon
exercise of the Warrant Agreement shall be made without charge to the
Warrantholder for any issuance tax in respect thereof, or other cost incurred
by the Company in connection with such exercise and the related issuance of
shares of Preferred Stock; provided that the Company shall not be required to
pay any tax which may be payable in respect of any transfer involved and the
issuance and delivery of any certificate in a name other than that of the
Warrantholder.
(b) Due Authority. The execution and delivery by the Company of this
Warrant Agreement and the performance of all obligations of the Company
hereunder, including the issuance to Warrantholder of the right to
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<PAGE> 5
acquire the shares of Preferred Stock set forth in Section 1, have been duly
authorized by all necessary corporate action on the part of the Company, and the
Loans Agreement and this Warrant Agreement are not inconsistent with the
Company's Charter or Bylaws, do not contravene any law or governmental rule,
regulation or order applicable to it, do not and will not contravene any
provision of, or constitute a default under, any indenture, mortgage, contract
or other instrument to which it is a party or by which it is bound, and the
Loans and this Warrant Agreement constitute legal, valid and binding agreements
of the Company, enforceable in accordance with their respective terms subject
only to bankruptcy, insolvency or other similar laws affecting the
enforceability of the rights of creditors generally and the general principles
of equity.
(c) Consents and Approvals. No consent or approval of, giving of notice
to, registration with, or taking of any other action in respect of any state,
Federal or other governmental authority or agency is required with respect to
the execution, delivery and performance by the Company of its obligations under
this Warrant Agreement, except for the filing of notices pursuant to Regulation
D under the 1933 Act and any filing required by applicable state securities law,
which filings will be effective by the time required thereby.
(d) Issued Securities. All issued and outstanding shares of Common Stock,
Preferred Stock or any other securities of the Company have been duly authorized
and validly issued and are fully paid and nonassessable. All outstanding shares
of Common Stock, Preferred Stock and any other securities were issued in full
compliance with all Federal and state securities laws. In addition:
(i) The authorized capital stock of the Company consists of
26,800,000 shares of Common Stock and 20,800,000 shares of Preferred Stock, of
which 5,000,000 are designated as Series A Preferred Stock, 5,000,000 shares are
designated Series A-1 Preferred Stock, 3,000,000 shares are designated Series B
Preferred Stock, 3,000,000 shares are designated Series B-1 Preferred Stock,
1,600,000 shares are designated Series C Preferred Stock, and 1,600,000 shares
are designated Series C-1 Preferred Stock. The issued and outstanding stock of
the Company consists of 1,903,708 shares of Common Stock, 4,627,500 shares of
Series A Preferred Stock, no shares of Series A-1 Preferred Stock, 2,923,073
shares of Series B Preferred Stock, no shares of Series B-1 Preferred Stock,
1,180,000 shares of Series C Preferred Stock and no shares of Series C-1
Preferred Stock. The Series A Preferred, Series A-1 Preferred, Series B
Preferred, Series B-1 Preferred, Series C Preferred, and Series C-1 Preferred
shall have the rights, preferences, privileges and restrictions set forth in the
Charter.
(ii) The Company has reserved 1,685,308 shares of its Common Stock for
issuance to officers, directors, employees, sales representatives and
consultants of the Company pursuant to the Company's 1995 Incentive Stock Plan.
There are stock options outstanding for the purchase of 1,215,575 shares of
Common Stock. There are also warrants outstanding for the purchase of 55,000
shares of Common Stock. Except as referenced herein, there are no options,
warrants, conversion privileges or other rights presently outstanding to
purchase or otherwise acquire any authorized but unissued shares of the capital
stock or other securities of the Company.
(e) Insurance. The Company has in full force and effect insurance
policies, with extended coverage, insuring the Company and its property and
business against such losses and risks, and in such amounts, as are customary
for corporations engaged in a similar business and similarly situated and as
otherwise may be required pursuant to the terms of any other contract or
agreement.
(f) Exempt Transaction. Subject to the accuracy of the Warrantholder's
representations in Section 10 hereof, the issuance of the Preferred Stock upon
exercise of the Warrantholder's right to purchase such Preferred Stock will
constitute a transaction exempt from (i) the registration requirements of
Section 5 of the 1933 Act, in reliance upon Section 4(2) thereof, and (ii) the
qualification requirements of the applicable state securities laws.
(g) Compliance with Rule 144. At the written request of the Warrantholder,
who proposes to sell Preferred Stock issuable upon the exercise of the Warrant
in compliance with Rule 144 promulgated by the Securities and Exchange
Commission under the 1933 Act, the Company shall furnish to the Warrantholder,
within ten days after receipt of such request, a written statement confirming
the Company's compliance with the filing requirements of the Securities and
Exchange Commission as set forth in such Rule as then applicable to the Company,
as such Rule may be amended from time to time.
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<PAGE> 6
10. REPRESENTATIONS AND COVENANTS OF THE WARRANTHOLDER.
This Warrant Agreement has been entered into by the Company in reliance
upon the following representations and covenants of the Warrantholder which by
its execution hereof the Warrantholder hereby confirms:
(a) Investment Purpose. The right to acquire Preferred Stock or the
Preferred Stock issuable upon exercise of the Warrantholder's rights contained
herein will be acquired for investment and not with a view to the sale or
distribution of any part thereof, and the Warrantholder has no present intention
of selling or engaging in any public distribution of the same except pursuant to
a registration or exemption.
(b) Private Issue. The Warrantholder understands (i) that the Preferred
Stock issuable upon exercise of this Warrant is not registered under the 1933
Act or qualified under applicable state securities laws on the ground that the
issuance contemplated by this Warrant Agreement will be exempt from the
registration and qualifications requirements thereof, and (ii) that the
Company's reliance on such exemption is predicated on the representations set
forth in this Section 10.
(c) Disposition of Warrantholder's Rights. In no event will the
Warrantholder make a disposition of any of its rights to acquire Preferred Stock
or Preferred Stock issuable upon exercise of such rights unless and until (i) it
shall have notified the Company of the proposed disposition, and (ii) if
requested by the Company, it shall have furnished the Company with an opinion of
counsel (which counsel may either be inside or outside counsel to the
Warrantholder) satisfactory to the Company and its counsel to the effect that
(A) appropriate action necessary for compliance with the 1933 Act has been
taken, or (B) an exemption from the registration requirements of the 1933 Act is
available. Notwithstanding the foregoing, the restrictions imposed upon the
transferability of any of its rights to acquire Preferred Stock or Preferred
Stock issuable on the exercise of such rights do not apply to transfers from the
beneficial owner of any of the aforementioned securities to its nominee or from
such nominee to its beneficial owner, and shall terminate as to any particular
share of Preferred Stock when (1) such security shall have been effectively
registered under the 1933 Act and sold by the holder thereof in accordance with
such registration or (2) such security shall have been sold without registration
in compliance with Rule 144 under the 1933 Act, or (3) a letter shall have been
issued to the Warrantholder at its request by the staff of the Securities and
Exchange Commission or a ruling shall have been issued to the Warrantholder at
its request by such Commission stating that no action shall be recommended by
such staff or taken by such Commission, as the case may be, if such security is
transferred without registration under the 1933 Act in accordance with the
conditions set forth in such letter or ruling and such letter or ruling
specifies that no subsequent restrictions on transfer are required. Whenever the
restrictions imposed hereunder shall terminate, as hereinabove provided, the
Warrantholder or holder of a share of Preferred Stock then outstanding as to
which such restrictions have terminated shall be entitled to receive from the
Company, without expense to such holder, one or more new certificates for the
Warrant or for such shares of Preferred Stock not bearing any restrictive
legend.
(d) Financial Risk. The Warrantholder has such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risks of its investment, and has the ability to bear the economic risks of its
investment.
(e) Risk of No Registration. The Warrantholder understands that if the
Company does not register with the Securities and Exchange Commission pursuant
to Section 12 of the 1934 Act (the "1934 Act"), or file reports pursuant to
Section 15(d), of the 1934 Act, or if a registration statement covering the
securities under the 1933 Act is not in effect when it desires to sell (i) the
rights to purchase Preferred Stock pursuant to this Warrant Agreement, or (ii)
the Preferred Stock issuable upon exercise of the right to purchase, it may be
required to hold such securities for an indefinite period. The Warrantholder
also understands that any sale of its rights of the Warrantholder to purchase
Preferred Stock or Preferred Stock which might be made by it in reliance upon
Rule 144 under the 1933 Act may be made only in accordance with the terms and
conditions of that Rule.
(f) Accredited Investor. Warrantholder is an "accredited investor" within
the meaning of the Securities and Exchange Rule 501 of Regulation D, as
presently in effect.
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<PAGE> 7
11. LOCKUP AGREEMENT.
Warrantholder agrees that, if, in connection with the Company's IPO of the
Company's securities, the Company or the underwriters managing the offering so
request, the Warrantholder shall not sell, make any short sale of, loan, grant
any option for the purchase of, or otherwise dispose of any right to purchase
Preferred Stock hereunder or any Preferred Stock issuable upon exercise of its
rights hereunder without the prior written consent of the Company or such
underwriters, as the case may be, for such period of time (not to exceed one
hundred eighty (180) days) form the effective date of the IPO as may be
requested by the Company or the underwriters; provided that each officer and
director of the Company who own stock of the Company also agrees to such
restrictions. This Section 11 shall be binding on all transferees or assignees
of Warrantholder.
12. TRANSFERS.
Subject to the terms and conditions contained in Section 10 hereof, this
Warrant Agreement and all rights hereunder are transferable in whole or in part
by the Warrantholder and any successor transferee, provided, however, in no
event shall the number of transfers of the rights and interests in all of the
Warrants exceed three (3) transfers. The transfer shall be recorded on the books
of the Company upon receipt by the Company of a notice of transfer in the form
attached hereto as Exhibit III (the "Transfer Notice"), at its principal
offices and the payment to the Company of all transfer taxes and other
governmental charges imposed on such transfer.
13. MISCELLANEOUS.
(a) Effective Date. The provisions of this Warrant Agreement shall be
construed and shall be given effect in all respects as if it had been executed
and delivered by the Company on the date hereof. This Warrant Agreement shall
be binding upon any successors or assigns of the Company.
(b) Attorney's Fees. In any litigation, arbitration or court proceeding
between the Company and the Warrantholder relating hereto, the prevailing party
shall be entitled to attorneys' fees and expenses and all costs of proceedings
incurred in enforcing this Warrant Agreement.
(c) Governing Law. This Warrant Agreement shall be governed by and
construed for all purposes under and in accordance with the laws of the State
of Illinois.
(d) Counterparts. This Warrant 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.
(e) Notices. Any notice required or permitted hereunder shall be given in
writing and shall be deemed effectively given upon personal delivery, facsimile
transmission (provided that the original is sent by personal delivery or mail
as hereinafter set forth) or seven (7) days after deposit in the United States
mail, by registered or certified mail, addressed (i) to the Warrantholder at
6111 North River Road, Rosemont, Illinois 60018, attention: James Labe, Venture
Group, cc: Legal Department, attention: General Counsel, (and/or, if by
facsimile, (847) 518-5465 and (847) 518-5088, and (ii) to the Company at 887
Industrial Road, Suite G, San Carlos, CA. 94070 (and/or if by facsimile, (415)
598-1359 or at such other address as any such party may subsequently designate
by written notice to the other party.
(f) Remedies. In the event of any default hereunder, the non-defaulting
party may proceed to protect and enforce 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 default, and/or an action for specific performance for any
default where Warrantholder will not have an adequate remedy at law and where
damages will not be readily ascertainable. The Company expressly agrees that it
shall not oppose an application by the Warrantholder or any other person
entitled to the benefit of this Agreement requiring specific performance of any
or all provisions hereof or enjoining the Company from continuing to commit any
such breach of this Agreement.
(g) 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 Warrantholder against impairment.
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<PAGE> 8
(h) Survival. The representations, warranties, covenants and conditions
of the respective parties contained herein or made pursuant to this Warrant
Agreement shall survive the execution and delivery of this Warrant Agreement.
(i) Severability. In the event any one or more of the provisions of
this Warrant Agreement shall for any reason be held invalid, illegal or
unenforceable, the remaining provisions of this Warrant Agreement shall be
unimpaired, and the invalid, illegal or unenforceable provision shall be
replaced by a mutually acceptable valid, legal and enforceable provision, which
comes closest to the intention of the parties underlying the invalid, illegal
or unenforceable provision.
(j) Amendments. Any provision of this Warrant Agreement may be amended
by a written instrument signed by the Company and by the Warrantholder.
(k) Additional Documents. The Company, upon execution of this Warrant
Agreement, shall provide the Warrantholder with certified resolutions with
respect to the representations, warranties and covenants set forth in
subparagraphs (a) through (d), (f) and (g) of Section 9 above. The Company
shall also supply such other documents as the Warrantholder may from time to
time reasonably request.
IN WITNESS WHEREOF, the parties hereto have caused this Warrant Agreement
to be executed by its officers thereunto duly authorized as of the Effective
Date.
COMPANY: ARGONAUT TECHNOLOGIES, INC.
By: /s/ D. P. BINKLEY
----------------------------------
Title: President & CEO
-------------------------------
WARRANTHOLDER: COMDISCO, INC.
By: /s/ JAMES P. LABE, President
----------------------------------
Title: COMDISCO VENTURES DIVISION
-------------------------------
-8-
<PAGE> 9
EXHIBIT I
NOTICE OF EXERCISE
TO: _______________________
(1) The undersigned Warrantholder hereby elects to purchase _______ shares of
the Series _____ Preferred Stock of _______________, pursuant to the terms
of the Warrant Agreement dated the _______ day of ____________, 19__ (the
"Warrant Agreement") between ________________________ and the
Warrantholder, and tenders herewith payment of the purchase price for such
shares in full, together with all applicable transfer taxes, if any, as set
forth below:
(a) by cash or check __________
or
(b) by Net Issuance as defined in the Warrant Agreement __________
(2) In exercising its rights to purchase the Series _____ Preferred Stock of
__________________________, the undersigned hereby confirms and
acknowledges the investment representations and warranties made in Section
10 of the Warrant Agreement.
(3) Please issue a certificate or certificates representing said shares of
Series _____ Preferred Stock in the name of the undersigned or in such
other name as is specified below.
________________________
(Name)
________________________
(Address)
WARRANTHOLDER: COMDISCO, INC.
By: ______________________
Title: ______________________
Date: ______________________
<PAGE> 10
EXHIBIT II
TRANSFER NOTICE
(To transfer or assign the foregoing Warrant Agreement execute this form and
supply required information. Do not use this form to purchase shares.)
FOR VALUE RECEIVED, the foregoing Warrant Agreement and all rights
evidenced thereby are hereby transferred and assigned to
__________________________________________________
(Please Print)
whose address is _________________________________
__________________________________________________
Dated: _________________________________
Holder's Signature: ____________________
Holder's Address: ______________________
________________________________________
Signature Guaranteed: ____________________________
NOTE: The signature to this Transfer Notice must correspond with the name as it
appears on the face of the Warrant Agreement, without alteration or enlargement
or any change whatever. Officers of corporations and those acting in a fiduciary
or other representative capacity should file proper evidence of authority to
assign the foregoing Warrant Agreement.
<PAGE> 1
EXHIBIT 10.5
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AS
AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED, OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
RELATED THERETO OR AN OPINION OF COUNSEL (WHICH MAY BE COMPANY COUNSEL)
REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE
SECURITIES LAWS.
WARRANT AGREEMENT
To Purchase Shares of the Series C Preferred Stock of
ARGONAUT TECHNOLOGIES, INC.
Dated as of July 7, 1998 (the "Effective Date")
in connection with the Loan and Security Agreement
WHEREAS, Argonaut Technologies, Inc., a Delaware corporation (the
"Company") has entered into a Loan and Security Agreement dated as of July 7,
1998, (the "Loan Agreement") with Comdisco, Inc., a Delaware corporation (the
"Warrantholder"); and
WHEREAS, the Company desires to grant to Warrantholder, in consideration
for such Loan Agreement, the right to purchase shares of its Series C Preferred
Stock;
NOW, THEREFORE, in consideration of the Warrantholder executing and
delivering such Loan Agreement and in consideration of mutual covenants and
agreements contained herein, the Company and Warrantholder agree as follows:
1. GRANT OF THE RIGHT TO PURCHASE PREFERRED STOCK.
The Company hereby grants to Warrantholder, and the Warrantholder is
entitled, upon the terms and subject to the conditions hereinafter set forth, to
subscribe for and purchase, from the Company, 20,000 fully paid and
non-assessable shares of the Company's Series C Preferred Stock ("Preferred
Stock") at a purchase price of $6.00 per share (the "Exercise Price") which is
equivalent to twelve percent (12%) of $1,000,000 divided by the Exercise Price.
Notwithstanding the foregoing, in the event the Company (a) completes (i) an IPO
which results in net cash proceeds to the Company equivalent to, or greater
than, $20,000,000, on or before April 15, 2000; or (ii) an acquisition of the
Company yielding an acquisition price equivalent to or greater than
$100,000,000, and in the case of (i) or (ii) the Company prepays the outstanding
balance of principal and interest under the Loan Agreement within thirty (30)
days of such event; or (b) prepays the outstanding balance of principal and
interest under the Loan Agreement on or before April 15, 2000 in accordance with
the terms of Section 2.6 of the Loan Agreement, then the number of shares
available hereunder shall be adjusted retroactively to equate to nine percent
(9%) of $1,000,000 divided by the Exercise Price. The number and purchase price
of such shares are subject to further adjustment as provided in Section B
hereof.
2. TERM OF THE WARRANT AGREEMENT.
Except as otherwise provided for herein, the term of this Warrant Agreement
and the right to purchase Preferred Stock as granted herein shall commence on
the Effective Date and shall be exercisable for a period of (i) seven (7) years
or (ii) three (3) years from the effective date of the Company's initial public
offering ("IPO"), whichever is earlier.
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<PAGE> 2
3. EXERCISE OF THE PURCHASE RIGHTS.
The purchase rights set forth in this Warrant Agreement are exercisable by
the Warrantholder, in whole or in part, at any time, or from time to time,
prior to the expiration of the term set forth in Section 2 above, by tendering
to the Company at its principal office a notice of exercise in the form
attached hereto as Exhibit 1 (the "Notice of Exercise"), duly completed and
executed, along with this Warrant Agreement. Promptly upon receipt of the
Notice of Exercise, this Warrant Agreement and the payment of the purchase
price in accordance with the terms set forth below, the Company shall issue to
the Warrantholder a certificate for the number of shares of Preferred Stock
purchased.
The Exercise Price may be paid at the Warrantholder's election either (i)
by cash or check, or (ii) by surrender of the right to purchase such number of
shares equal in value (as determined below) to the aggregate exercise price of
the number of shares to be purchased by the Warrantholder ("Net Issuance"). If
the Warrantholder elects the Net Issuance method, the Company will issue
Preferred Stock in accordance with the following formula:
X = Y(A-B)
------
A
Where X = the number of shares of Preferred Stock to be issued to the
Warrantholder.
Y = the number of shares of Preferred Stock requested to be
exercised under this Warrant Agreement.
A = the fair market value of one (1) share of Preferred
Stock.
B = the Exercise Price.
For purposes of the above calculation, current fair market value of
Preferred Stock shall mean with respect to each share of Preferred Stock:
(i) if the exercise is in connection with an initial public offering
of the Company's Common Stock, and if the Company's Registration Statement
relating to such public offering has been declared effective by the SEC,
then the fair market value per share shall be the product of (x) the
initial "Price to Public" specified in the final prospectus with respect to
the offering and (y) the number of shares of Common Stock into which each
share of Preferred Stock is convertible at the time of such exercise;
(ii) if this Warrant is exercised after, and not in connection with
the Company's initial public offering, and:
(a) if the Company's Common Stock is traded on a securities
exchange, the fair market value shall be deemed to be the product of
(x) the average of the closing prices over a twenty-one (21) day
period ending three days before the day the current fair market value
of the securities is being determined and (y) the number of shares of
Common Stock into which each share of Preferred Stock is convertible
at the time of such exercise; or
(b) If the Company's Common Stock is actively traded
over-the-counter, the fair market value shall be deemed to be the
product of (x) the average of the closing bid and asked prices quoted
on the Nasdaq National Market System (or similar system) over the
twenty-one (21) day period ending three days before the day the
current fair market value of the securities is being determined and
(y) the number of shares of Common Stock into which each share of
Preferred Stock is convertible at the time of such exercise.
(iii) if at any time the Common Stock is not listed on any securities
exchange or quoted in the Nasdaq National Market System or the
over-the-counter market, the current fair market value of Preferred Stock
shall be the product of (x) the highest price per share which the Company
could obtain from a willing buyer (not a current employee or director) for
shares of Common Stock sold by the Company, from authorized but unissued
shares, as determined in good faith by its Board of Directors and (y) the
number os shares of Common Stock into which each share of Preferred Stock
is convertible at the time of such
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<PAGE> 3
exercise, unless the exercise is in connection with a merger, acquisition
or other consolidation of the Company pursuant to which the Company is not
the surviving party, in which case the fair market value of Preferred
Stock shall be deemed to be the value received by the holders of the
Company's Preferred Stock on a common equivalent basis pursuant to such
merger or acquisition.
Upon partial exercise by either cash or Net Issuance, the Company shall
promptly issue an amended Warrant Agreement representing the remaining number of
shares purchasable hereunder. All other terms and conditions of such amended
Warrant Agreement shall be identical to those contained herein, including, but
not limited to the Effective Date hereof.
4. RESERVATION OF SHARES.
(a) Authorization and Reservation of Shares. During the term of this
Warrant Agreement, the Company will at all times have authorized and reserved a
sufficient number of shares of its Preferred Stock to provided for the exercise
of the rights to purchase Preferred Stock as provided for herein.
(b) Registration or Listing. If any shares of Preferred Stock required to
be reserved for purposes of the exercise of this Warrant Agreement hereunder
require registration with or approval of any governmental authority under any
Federal or State law (other than any registration under the Securities Act of
1933, as amended ("1933 Act"), as then in effect, or any similar Federal statute
then enforced, or any state securities law, required by reason of any transfer
involved in such conversion), or listing on any domestic securities exchange,
before such shares may be issued upon conversion, the Company will, at its
expense and as expeditiously as possible, use its best efforts to cause such
shares to be duly registered, listed or approved for listing on such domestic
securities exchange, as the case may be.
5. NO FRACTIONAL SHARES OR SCRIP.
No fractional shares or scrip representing fractional shares shall be
issued upon the exercise of the Warrantholder's rights to purchase Preferred
Stock, but in lieu of such fractional shares the Company shall make a cash
payment therefor upon the basis of the Exercise Price then in effect.
6. NO RIGHTS AS SHAREHOLDER.
This Warrant Agreement does not entitle the Warrantholder to any voting
rights or other rights as a shareholder of the Company prior to the exercise of
the Warrantholder's rights to purchase Preferred Stock as provided herein.
7. WARRANTHOLDER REGISTRY.
The Company shall maintain a registry showing the name and address of the
registered holder of this Warrant Agreement.
8. ADJUSTMENT RIGHTS.
The purchase price per share and the number of shares of Preferred Stock
purchasable hereunder are subject to adjustment, as follows:
(a) Merger and Sale of Assets. If at any time there shall be a capital
reorganization of the shares of the Company's stock (other than a combination,
reclassification, exchange or subdivision of shares otherwise provided for
herein), or a merger or consolidation of the Company with or into another
corporation when the Company is not the surviving corporation, or the sale of
all or substantially all of the Company's properties and assets to any other
person (hereinafter referred to as a "Merger Event"), then, as a part of such
Merger Event, lawful provision shall be made so that the Warrantholder shall
thereafter be entitled to receive, upon exercise of its rights to purchase
Preferred Stock, the number of shares of Preferred Stock or other securities of
the successor corporation resulting from such Merger Event, to which a holder
of the Preferred Stock deliverable upon exercise of the right to purchase
Preferred stock hereunder would have been entitled in such Merger Event if the
right to purchase such Preferred Stock hereunder had been exercised immediately
prior to the Merger Event. In any such case, appropriate adjustment (as
determined in good faith by the Company's Board of Directors) shall be made in
the application of the provision of this Warrant Agreement with respect to the
rights and interest of the Warrantholder after the Merger Event to the end that
the provisions of this Warrant Agreement (including adjustments of the
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<PAGE> 4
Exercise Price and number of shares of Preferred Stock purchasable) shall be
applicable to the greatest extent reasonably possible.
(b) Reclassification of Shares. If the Company at any time shall, by
combination, reclassification, exchange or subdivision of securities or
otherwise, change any of the securities as to which purchase rights under this
Warrant Agreement exist into the same or a different number of securities of
any other class or classes, this Warrant Agreement 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 which were
subject to the purchase rights under this Warrant Agreement immediately prior
to such combination, reclassification, exchange, subdivision or other change.
(c) Subdivision or Combination of Shares. If the Company at any time
shall combine or subdivide its Preferred Stock, the Exercise Price shall be
proportionately decreased in the case of a subdivision, or proportionately
increased in the case of a combination.
(d) Antidilution Rights. The Preferred Stock purchasable hereunder shall
have the benefit of the same antidilution rights applicable to such Preferred
Stock as designated in the Company's Certificate of Incorporation, as such may
be amended from time to time, and the Company shall provide Warrantholder with
all notices and information at the times and to the extent it is required to do
so to the holders of such Preferred Stock.
(e) Notice of Adjustments. If: (i) the Company shall declare any dividend
or distribution upon its stock, whether in cash, property, stock or other
securities; (ii) the Company shall offer for subscription prorata to the
holders of any class of its Preferred or other convertible stock any additional
shares of stock of any class or other rights; (iii) there shall be any Merger
Event; (iv) there shall be any voluntary dissolution, liquidation or winding up
of the Company; then, in connection with each such event, the Company shall
send to the Warrantholder: (A) at least twenty (20) days' prior written notice
of the date on which the books of the Company shall close or a record shall be
taken for such dividend, distribution, subscription rights (specifying the date
on which the holders of Preferred Stock shall be entitled thereto) or for
determining rights to vote in respect of such Merger Event, dissolution,
liquidation or winding up; and (B) in the case of any such Merger Event,
dissolution, liquidation or winding up, 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 Preferred Stock shall be entitled to exchange
their Preferred Stock for securities or other property deliverable upon such
Merger Event, dissolution, liquidation or winding up).
Each such written notice shall set forth, in reasonable detail, (i) the
event requiring the adjustment, (ii) the amount of the adjustment, (iii) the
method by which such adjustment was calculated, (iv) the Exercise Price, and
(v) the number of shares subject to purchase hereunder after giving effect to
such adjustment, and shall be given by first class mail, postage prepaid,
addressed to the Warrantholder, at the address as shown on the books of the
Company.
(f) Timely Notice. Failure to timely provide such notice required by
subsection (e) above shall entitle Warrantholder to retain the benefit of the
applicable notice period notwithstanding anything to the contrary contained in
any insufficient notice received by Warrantholder.
9. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY.
(a) Reservation of Preferred Stock. The Preferred Stock issuable upon
exercise of the Warrantholder's rights has been duly and validly reserved and,
when issued in accordance with the provisions of this Warrant Agreement, will
be validly issued, fully paid and non-assessable, and will be free of any
taxes, liens, charges or encumbrances of any nature whatsoever; provided,
however, that the Preferred Stock issuable pursuant to this Warrant Agreement
may be subject to restrictions on transfer under state and/or Federal
securities laws. The Company has made available to the Warrantholder true,
correct and complete copies of its Certificate of Incorporation (the "Charter")
and Bylaws, as amended. The issuance of certificates for shares of Preferred
Stock upon exercise of the Warrant Agreement shall be made without charge to
the Warrantholder for any issuance tax in respect thereof, or other cost
incurred by the Company in connection with such exercise and the related
issuance of shares of Preferred Stock; provided that the Company shall not be
required to pay any tax which may be payable in respect of any transfer
involved and the issuance and delivery of any certificate in a name other than
that of the Warrantholder.
(b) Due Authority. The execution and delivery by the Company of this
Warrant Agreement and the performance of all obligations of the Company
hereunder, including the issuance to Warrantholder of the right to
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<PAGE> 5
acquire the shares of Preferred Stock set forth in Section 1, have been duly
authorized by all necessary corporate action on the part of the Company, and the
Loan Agreement and this Warrant Agreement are not inconsistent with the
Company's Charter or Bylaws, do not contravene any law or governmental rule,
regulation or order applicable to it, do not and will not contravene any
provision of, or constitute a default under, any indenture, mortgage, contract
or other instrument to which it is a party or by which it is bound, and the Loan
Agreement and this Warrant Agreement constitute legal, valid and binding
agreements of the Company, enforceable in accordance with their respective terms
subject only to bankruptcy, insolvency or other similar laws affecting the
enforceability of the rights of creditors generally and the general principles
of equity.
(c) Consents and Approvals. No consent or approval of, giving of notice
to, registration with, or taking of any other action in respect of any state,
Federal or other governmental authority or agency is required with respect to
the execution, delivery and performance by the Company of its obligations under
this Warrant Agreement, except for the filing of notices pursuant to Regulation
D under the 1933 Act and any filing required by applicable state securities law,
which filings will be effective by the time required thereby.
(d) Issued Securities. All issued and outstanding shares of Common Stock,
Preferred Stock or any other securities of the Company have been duly authorized
and validly issued and are fully paid and nonassessable. All outstanding shares
of Common Stock, Preferred Stock and any other securities were issued in full
compliance with all Federal and state securities laws. In addition:
(i) The authorized capital stock of the Company consists of
26,800,000 shares of Common Stock and 20,800,000 shares of Preferred Stock, of
which 5,000,000 are designated as Series A Preferred Stock, 5,000,000 shares are
designated Series A-1 Preferred Stock, 3,000,000 shares are designated Series B
Preferred Stock, 3,000,000 shares are designated Series B-1 Preferred Stock,
1,600,000 shares are designated Series C Preferred Stock, and 1,600,000 shares
are designated Series C-1 Preferred Stock. The issued and outstanding shares of
the Company consists of 2,050,322 shares of Common Stock, 4,627,500 shares of
Series A Preferred Stock, no shares of Series A-1 Preferred Stock, 2,923,073
shares of Series B Preferred Stock, no shares of Series B-1 Preferred Stock,
1,180,000 shares of Series C Preferred Stock and no shares of Series C-1
Preferred Stock. The Series A Preferred, Series A-1 Preferred, Series B
Preferred, Series B-1 Preferred, Series C Preferred, and Series C-1 Preferred
shall have the rights, preferences, privileges and restrictions set forth in the
Charter.
(ii) The Company has reserved 2,435,308 shares of its Common Stock for
issuance to officers, directors, employees, sales representatives and
consultants of the Company pursuant to the Company's 1995 Incentive Stock Plan.
There are stock options outstanding for the purchase of 1,627,560 shares of
Common Stock. There are also warrants outstanding for the purchase of 55,000
shares of Common Stock and 34,999 of Series C Preferred Stock. Except as
referenced herein, there are no options, warrants, conversion privileges or
other rights presently outstanding to purchase or otherwise acquire any
authorized but unissued shares of the capital stock or other securities of the
Company.
(e) Insurance. The Company has in full force and effect insurance
policies, with extended coverage, insuring the Company and its property and
business against such losses and risks, and in such amounts, as are customary
for corporations engaged in a similar business and similarly situated and as
otherwise may be required pursuant to the terms of any other contract or
agreement.
(f) Exempt Transaction. Subject to the accuracy of the Warrantholder's
representations in Section 10 hereof, the issuance of the Preferred Stock upon
exercise of the Warrantholder's right to purchase such Preferred Stock will
constitute a transaction exempt from (i) the registration requirements of
Section 5 of the 1933 Act, in reliance upon Section 4(2) thereof, and (ii) the
qualification requirements of the applicable state securities laws.
(g) Compliance with Rule 144. At the written request of the Warrantholder,
who proposes to sell Preferred Stock issuable upon the exercise of the Warrant
in compliance with Rule 144 promulgated by the Securities and Exchange
Commission under the 1933 Act, the Company shall furnish to the Warrantholder,
within ten days after receipt of such request, a written statement confirming
the Company's compliance with the filing requirements of the Securities and
Exchange Commission as set forth in such Rule as then applicable to the Company,
as such Rule may be amended from time to time.
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<PAGE> 6
10. REPRESENTATIONS AND COVENANTS OF THE WARRANTHOLDER.
This Warrant Agreement has been entered into by the Company in reliance
upon the following representations and covenants of the Warrantholder which by
its execution hereof the Warrantholder hereby confirms:
(a) Investment Purpose. The right to acquire Preferred Stock or the
Preferred Stock issuable upon exercise of the Warrantholder's rights contained
herein will be acquired for investment and not with a view to the sale or
distribution of any part thereof, and the Warrantholder has no present intention
of selling or engaging in any public distribution of the same except pursuant to
a registration or exemption.
(b) Private Issue. The Warrantholder understands (i) that the Preferred
Stock issuable upon exercise of this Warrant is not registered under the 1933
Act or qualified under applicable state securities laws on the ground that the
issuance contemplated by this Warrant Agreement will be exempt from the
registration and qualifications requirements thereof, and (ii) that the
Company's reliance on such exemption is predicated on the representations set
forth in this Section 10.
(c) Disposition of Warrantholder's Rights. In no event will the
Warrantholder make a disposition of any of its rights to acquire Preferred Stock
or Preferred Stock issuable upon exercise of such rights unless and until (i) it
shall have notified the Company of the proposed disposition and (ii) if
requested by the Company it shall have furnished the Company with an opinion of
counsel (which counsel may either be inside or outside counsel to the
Warrantholder) satisfactory to the Company and its counsel to the effect that
(A) appropriate action necessary for compliance with the 1933 Act has been
taken, or (B) an exemption from the registration requirements of the 1933 Act is
available. Notwithstanding the foregoing, the restrictions imposed upon the
transferability of any of its rights to acquire Preferred Stock or Preferred
Stock issuable on the exercise of such rights do not apply to transfers from the
beneficial owner of any of the aforementioned securities to its nominee or from
such nominee to its beneficial owner, and shall terminate as to any particular
share of Preferred Stock when (1) such security shall have been effectively
registered under the 1933 Act and sold by the holder thereof in accordance with
such registration or (2) such security shall have been sold without registration
in compliance with Rule 144 under the 1933 Act, or (3) a letter shall have been
issued to the Warrantholder at its request by the staff of the Securities and
Exchange Commission or a ruling shall have been issued to the Warrantholder at
its request by such Commission stating that no action shall be recommended by
such staff or taken by such Commission, as the case may be, if such security is
transferred without registration under the 1933 Act in accordance with the
conditions set forth in such letter or ruling and such letter or ruling
specifies that no subsequent restrictions on transfer are required. Whenever the
restrictions imposed hereunder shall terminate, as hereinabove provided, the
Warrantholder or holder of a share of Preferred Stock then outstanding as to
which such restrictions have terminated shall be entitled to receive from the
Company, without expense to such holder, one or more new certificates for the
Warrant or for such shares of Preferred Stock not bearing any restrictive
legend.
(d) Financial Risk. The Warrantholder has such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risks of its investment, and has the ability to bear the economic risks of its
investment.
(e) Risk of No Registration. The Warrantholder understands that if the
Company does not register with the Securities and Exchange Commission pursuant
to Section 12 of the 1934 Act (the "1934 Act"), or file reports pursuant to
Section 15(d), of the 1934 Act, or if a registration statement covering the
securities under the 1933 Act is not in effect when it desires to sell (i) the
rights to purchase Preferred Stock pursuant to this Warrant Agreement, or (ii)
the Preferred Stock issuable upon exercise of the right to purchase, it may be
required to hold such securities for an indefinite period. The Warrantholder
also understands that any sale of its rights of the Warrantholder to purchase
Preferred Stock or Preferred Stock which might be made by it in reliance upon
Rule 144 under the 1933 Act may be made only in accordance with the terms and
conditions of that Rule.
(f) Accredited Investor. Warrantholder is an "accredited investor" within
the meaning of the Securities and Exchange Rule 501 of Regulation D, as
presently in effect.
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<PAGE> 7
11. TRANSFERS.
Subject to the terms and conditions contained in Section 10 hereof, this
Warrant Agreement and all rights hereunder are transferable in whole or in part
by the Warrantholder and any successor transferee, provided, however, in no
event shall the number of transfers of the rights and interests in all of the
Warrants exceed three (3) transfers. The transfer shall be recorded on the books
of the Company upon receipt by the Company of a notice of transfer in the form
attached hereto as Exhibit III (the "Transfer Notice"), at its principal
offices and the payment to the Company of all transfer taxes and other
governmental charges imposed on such transfer.
12. MISCELLANEOUS.
(a) Effective Date. The provision of this Warrant Agreement shall be
construed and shall be given effect in all respects as if it had been executed
and delivered by the Company on the date hereof. This Warrant Agreement shall
be binding upon any successors or assigns of the Company.
(b) Attorney's Fees. In any litigation, arbitration or court proceeding
between the Company and the Warrantholder relating hereto, the prevailing party
shall be entitled to attorneys' fees and expenses and all costs of proceedings
incurred in enforcing this Warrant Agreement.
(c) Governing Law. This Warrant Agreement shall be governed by and
construed for all purposes under and in accordance with the laws of the State
of Illinois.
(d) Counterparts. This Warrant 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.
(e) Notices. Any notice required or permitted hereunder shall be given in
writing and shall be deemed effectively given upon personal delivery, facsimile
transmission (provided that the original is sent by personal delivery or mail
as hereinafter set forth) or seven (7) days after deposit in the United States
mail, by registered or certified mail, addressed (i) to the Warrantholder at
6111 North River Road, Rosemont, Illinois 60018, attention: James Labe, Venture
Group, cc: Legal Department, attention: General Counsel, (and/or, if by
facsimile, (847) 518-5465 and (847) 518-5088, and (ii) to the Company at 887
Industrial Road, Suite G, San Carlos, CA. 94070 (and/or if by facsimile, (650)
598-1358 or at such other address as any such party may subsequently designate
by written notice to the other party.
(f) Remedies. In the event of any default hereunder, the non-defaulting
party may proceed to protect and enforce 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 default, and/or an action for specific performance for any
default where Warrantholder will not have an adequate remedy at law and where
damages will not be readily ascertainable. The Company expressly agrees that it
shall not oppose an application by the Warrantholder or any other person
entitled to the benefit of this Agreement requiring specific performance of any
or all provisions hereof or enjoining the Company from continuing to commit any
such breach of this Agreement.
(g) 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 Warrantholder against impairment.
(h) Survival. The representations, warranties, covenants and conditions
of the respective parties contained herein or made pursuant to this Warrant
Agreement shall survive the execution and delivery of this Warrant Agreement.
(i) Severability. In the event any one or more of the provisions of this
Warrant Agreement shall for any reason be held invalid, illegal or
unenforceable, the remaining provisions of this Warrant Agreement shall be
unimpaired, and the invalid, illegal or unenforceable provision shall be
replaced by a mutually acceptable valid, legal and enforceable provision, which
comes closest to the intention of the parties underlying the invalid, illegal
or unenforceable provision.
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<PAGE> 8
(j) Amendments. Any provision of this Warrant Agreement may be amended by
a written instrument signed by the Company and by the Warrantholder.
(k) Additional Documents. The Company, upon execution of this Warrant
Agreement, shall provide the Warrantholder with certified resolutions with
respect to the representations, warranties and covenants set forth in
subparagraphs (a) through (d), (f) and (g) of Section 9 above. The Company
shall also supply such other documents as the Warrantholder may from time to
time reasonably request.
IN WITNESS WHEREOF, the parties hereto have caused this Warrant Agreement
to be executed by its officers thereunto duly authorized as of the Effective
Date.
COMPANY: ARGONAUT TECHNOLOGIES, INC.
By: /s/ D.P. BINKLEY
---------------------------------
Title:
------------------------------
WARRANTHOLDER: COMDISCO, INC.
By: /s/ JAMES P. LABE
---------------------------------
JAMES P. LABE
PRESIDENT
Title: COMDISCO VENTURES DIVISION
-----------------------------
-8-
<PAGE> 9
EXHIBIT I
NOTICE OF EXERCISE
TO: _______________________
(1) The undersigned Warrantholder hereby elects to purchase _______ shares of
the Series _____ Preferred Stock of _______________, pursuant to the terms
of the Warrant Agreement dated the _______ day of ____________, 19__ (the
"Warrant Agreement") between ________________________ and the
Warrantholder, and tenders herewith payment of the purchase price for such
shares in full, together with all applicable transfer taxes, if any, as set
forth below:
(a) by cash or check __________
or
(b) by Net Issuance as defined in the Warrant Agreement __________
(2) In exercising its rights to purchase the Series _____ Preferred Stock of
__________________________, the undersigned hereby confirms and
acknowledges the investment representations and warranties made in Section
10 of the Warrant Agreement.
(3) Please issue a certificate or certificates representing said shares of
Series _____ Preferred Stock in the name of the undersigned or in such
other name as is specified below.
________________________
(Name)
________________________
(Address)
WARRANTHOLDER: COMDISCO, INC.
By: ______________________
Title: ______________________
Date: ______________________
<PAGE> 1
EXHIBIT 10.6
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AS
AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED, OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
RELATED THERETO OR AN OPINION OF COUNSEL (WHICH MAY BE COMPANY COUNSEL)
REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE
SECURITIES LAWS.
WARRANT AGREEMENT
To Purchase Shares of the Series C Preferred Stock of
ARGONAUT TECHNOLOGIES, INC.
Dated as of July 7, 1998 (the "Effective Date")
in connection with the Receivables Loan and Security Agreement
WHEREAS, Argonaut Technologies, Inc., a Delaware corporation (the
"Company") has entered into a Receivables Loan and Security Agreement dated as
of July 7, 1998, (the "Receivables Agreement") with Comdisco, Inc., a Delaware
corporation (the "Warrantholder"); and
WHEREAS, the Company desires to grant to Warrantholder, in consideration
for such Receivables Agreement, the right to purchase shares of its Series C
Preferred Stock;
NOW, THEREFORE, in consideration of the Warrantholder executing and
delivering such Receivables Agreement and in consideration of mutual covenants
and agreements contained herein, the Company and Warrantholder agree as follows:
1. GRANT OF THE RIGHT TO PURCHASE PREFERRED STOCK.
The Company hereby grants to Warrantholder, and the Warrantholder is
entitled, upon the terms and subject to the conditions hereinafter set forth,
to subscribe for and purchase, from the Company, 16,666 fully paid and
non-assessable shares of the Company's Series C Preferred Stock ("Preferred
Stock") at a purchase price of $6.00 per share (the "Exercise Price") which is
equivalent to five percent (5%) of $2,000,000 divided by the Exercise Price.
The number and purchase price of such shares are subject to adjustment as
provided in Section 8 hereof.
2. TERM OF THE WARRANT AGREEMENT.
Except as otherwise provided for herein, the term of this Warrant
Agreement and the right to purchase Preferred Stock as granted herein shall
commence on the Effective Date and shall be exercised for a period of (i) seven
(7) years or (ii) three (3) years from the effective date of the Company's
initial public offering ("IPO"), whichever is earlier.
3. EXERCISE OF THE PURCHASE RIGHTS.
The purchase rights set forth in this Warrant Agreement are exercisable by
the Warrantholder, in whole or in part, at any time, or from time to time,
prior to the expiration of the term set forth in Section 2 above, by tendering
to the Company at its principal office a notice of exercise in the form
attached hereto as Exhibit I (the "Notice of Exercise"), duly completed and
executed, along with this Warrant Agreement. Promptly upon receipt of the
Notice of Exercise, this Warrant Agreement and the payment of the purchase
price in accordance with the terms set forth below, the Company shall issue to
the Warrantholder a certificate for the number of shares of Preferred Stock
purchased.
The Exercise Price may be paid at the Warrantholder's election either (i)
by cash or check, or (ii) by surrender of the right to purchase such number of
shares equal in value (as determined below) to the aggregate exercise price of
the number of shares to be purchased by the Warrantholder ("Net Issuance"). If
the Warrantholder elects the Net Issuance method, the Company will issue
Preferred Stock in accordance with the following formula:
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<PAGE> 2
X = Y (A-B)
---------
A
Where: X = the number of shares of Preferred Stock to be issued to the
Warrantholder.
Y = the number of shares of Preferred Stock requested to
be exercised under this Warrant Agreement.
A = the fair market value of one (1) share of Preferred
Stock.
B = the Exercise Price.
For purposes of the above calculation, current fair market value of
Preferred Stock shall mean with respect to each share of Preferred Stock:
(i) if the exercise is in connection with an initial public
offering of the Company's Common Stock, and if the Company's Registration
Statement relating to such public offering has been declared effective by
the SEC, then the fair market value per share shall be the product of (x)
the initial "Price to Public" specified in the final prospectus with
respect to the offering and (y) the number of shares of Common Stock into
which each share of Preferred Stock is convertible at the time of such
exercise;
(ii) if this Warrant is exercised after, and not in connection
with the Company's initial public offering, and:
(a) if the Company's Common Stock is traded on a securities
exchange, the fair market value shall be deemed to be the product of
(x) the average of the closing prices over a twenty-one (21) day
period ending three days before the day the current fair market value
of the securities is being determined and (y) the number of shares of
Common Stock into which each share of Preferred Stock is convertible
at the time of such exercise; or
(b) if the Company's Common Stock is actively traded
over-the-counter, the fair market value shall be deemed to be the
product of (x) the average of the closing bid and asked prices quoted
on the Nasdaq National Market System (or similar system) over the
twenty-one (21) day period ending three days before the day the
current fair market value of the securities is being determined and
(y) the number of shares of Common Stock into which each share of
Preferred Stock is convertible at the time of such exercise;
(iii) if at any time the Common Stock is not listed on any
securities exchange or quoted in the Nasdaq National Market System or the
over-the-counter market, the current fair market value of Preferred Stock
shall be the product of (x) the highest price per share which the Company
could obtain from a willing buyer (not a current employee or director) for
shares of Common Stock sold by the Company, from authorized but unissued
shares, as determined in good faith by its Board of Directors and (y) the
number of shares of Common Stock into which each share of Preferred Stock
is convertible at the time of such exercise, unless the exercise is in
connection with a merger, acquisition or other consolidation of the Company
pursuant to which the Company is not the surviving party, in which case the
fair market value of Preferred Stock shall be deemed to be the value
received by the holders of the Company's Preferred Stock on a common
equivalent basis pursuant to such merger or acquisition.
Upon partial exercise by either cash or Net Issuance, the Company shall
promptly issue an amended Warrant Agreement representing the remaining number of
shares purchasable hereunder. All other terms and conditions of such amended
Warrant Agreement shall be identical to those contained herein, including, but
not limited to the Effective Date hereof.
4. RESERVATION OF SHARES.
(a) Authorization and Reservation of Shares. During the term of this
Warrant Agreement, the Company will at all times have authorized and reserved a
sufficient number of shares of its Preferred Stock to provide for the exercise
of the rights to purchase Preferred Stock as provided for herein.
- 2 -
<PAGE> 3
(b) Registration or Listing. If any shares of Preferred Stock required to
be reserved for purposes of the exercise of this Warrant Agreement hereunder
require registration with or approval of any governmental authority under any
Federal or State law (other than any registration under the Securities Act of
1933, as amended ("1933 Act"), as then in effect, or any similar Federal
statute then enforced, or any state securities law, required by reason of any
transfer involved in such conversion), or listing on any domestic securities
exchange, before such shares may be issued upon conversion, the Company will,
at its expense and as expeditiously as possible, use its best efforts to cause
such shares to be duly registered, listed or approved for listing on such
domestic securities exchange, as the case may be.
5. NO FRACTIONAL SHARES OR SCRIP.
No fractional shares or scrip representing fractional shares shall be
issued upon the exercise of the Warrantholder's rights to purchase Preferred
Stock, but in lieu of such fractional shares the Company shall make a cash
payment therefor upon the basis of the Exercise Price then in effect.
6. NO RIGHTS AS SHAREHOLDER.
This Warrant Agreement does not entitle the Warrantholder to any voting
rights or other rights as a shareholder of the Company prior to the exercise of
the Warrantholder's rights to purchase Preferred Stock as provided for herein.
7. WARRANTHOLDER REGISTRY.
The Company shall maintain a registry showing the name and address of the
registered holder of this Warrant Agreement.
8. ADJUSTMENT RIGHTS.
The purchase price per share and the number of shares of Preferred Stock
purchasable hereunder are subject to adjustment, as follows:
(a) Merger and Sale of Assets. If at any time there shall be a capital
reorganization of the shares of the Company's stock (other than a combination,
reclassification, exchange or subdivision of shares otherwise provided for
herein), or a merger or consolidation of the Company with or into another
corporation when the Company is not the surviving corporation, or the sale of
all or substantially all of the Company's properties and assets to any other
person (hereinafter referred to as a "Merger Event"), then, as a part of such
Merger Event, lawful provisions shall be made so that the Warrantholder shall
thereafter be entitled to receive, upon exercise of its rights to purchase
Preferred Stock, the number of shares of Preferred Stock or other securities of
the successor corporation resulting from such Merger Event, to which a holder of
the Preferred Stock deliverable upon exercise of the right to purchase
Preferred Stock hereunder would have been entitled in such Merger Event if the
right to purchase such Preferred Stock hereunder had been exercised immediately
prior to the Merger Event. In any such case, appropriate adjustment (as
determined in good faith by the Company's Board of Directors) shall be made in
the application of the provisions of this Warrant Agreement with respect to the
rights and interest of the Warrantholder after the Merger Event to the end that
the provisions of this Warrant Agreement (including adjustments of the Exercise
Price and number of shares of Preferred Stock purchasable) shall be applicable
to the greatest extent reasonably possible.
(b) Reclassification of Shares. If the Company at any time shall, by
combination, reclassification, exchange or subdivision of securities or
otherwise, change any of the securities as to which purchase rights under this
Warrant Agreement exist into the same or a different number of securities of
any other class or classes, this Warrant Agreement 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 which were
subject to the purchase rights under this Warrant Agreement immediately prior
to such combination, reclassification, exchange, subdivision or other change.
(c) Subdivision or Combination of Shares. If the Company at any time shall
combine or subdivide its Preferred Stock, the Exercise Price shall be
proportionately decreased in the case of a subdivision, or proportionately
increased in the case of a combination.
-3-
<PAGE> 4
(d) Antidilution Rights. The Preferred Stock purchasable hereunder shall
have the benefit of the same antidilution rights applicable to such Preferred
Stock as designated in the Company's Certificate of Incorporation, as such may
be amended from time to time, and the Company shall provide Warrantholder with
all notices and information at the times and to the extent it is required to do
so to the holders of such Preferred Stock.
(e) Notice of Adjustments. If: (i) the Company shall declare any dividend
or distribution upon its stock, whether in cash, property, stock or other
securities; (ii) the Company shall offer for subscription prorata to the holders
of any class of its Preferred or other convertible stock any additional shares
of stock of any class or other rights; (iii) there shall be any Merger Event;
(iv) there shall be any voluntary dissolution, liquidation or winding up of the
Company; then, in connection with each such event, the Company shall send to the
Warrantholder: (A) at least twenty (20) days' prior written notice of the date
on which the books of the Company shall close or a record shall be taken for
such dividend, distribution, subscription rights (specifying the date on which
the holders of Preferred Stock shall be entitled thereto) or for determining
rights to vote in respect of such Merger Event, dissolution, liquidation or
winding up; and (B) in the case of any such Merger Event, dissolution,
liquidation or winding up, 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 Preferred Stock shall be entitled to exchange their Preferred Stock
for securities or other property deliverable upon such Merger Event,
dissolution, liquidation or winding up).
Each such written notice shall set forth, in reasonable detail, (i) the
event requiring the adjustment, (ii) the amount of the adjustment, (iii) the
method by which such adjustment was calculated, (iv) the Exercise Price, and (v)
the number of shares subject to purchase hereunder after giving effect to such
adjustment, and shall be given by first class mail, postage prepaid, addressed
to the Warrantholder, at the address as shown on the books of the Company.
(f) Timely Notice. Failure to timely provide such notice required by
subsection (e) above shall entitle Warrantholder to retain the benefit of the
applicable notice period notwithstanding anything to the contrary contained in
any insufficient notice received by Warrantholder.
(g) Right to Purchase Additional Stock. In the event the Company has not
repaid all principal and interest due under the Receivables Agreement by the
Maturity Date (as defined therein), Warrantholder shall have the right to
purchase from the Company, at the Exercise Price (adjusted as set forth herein),
an additional number of shares equivalent to one percent (1%) of the outstanding
principal amount of the Loan divided by the Exercise Price.
9. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY.
(a) Reservation of Preferred Stock. The Preferred Stock issuable upon
exercise of the Warrantholder's rights has been duly and validly reserved and,
when issued in accordance with the provisions of this Warrant Agreement, will be
validly issued, fully paid and non-assessable, and will be free of any taxes,
liens, charges or encumbrances of any nature whatsoever; provided, however, that
the Preferred Stock issuable pursuant to this Warrant Agreement may be subject
to restrictions on transfer under state and/or Federal securities laws. The
Company has made available to the Warrantholder true, correct and complete
copies of its Certificate of Incorporation (the "Charter") and Bylaws, as
amended. The issuance of certificates for shares of Preferred Stock upon
exercise of the Warrant Agreement shall be made without charge to the
Warrantholder for any issuance tax in respect thereof, or other cost incurred by
the Company in connection with such exercise and the related issuance of shares
of Preferred Stock; provided that the Company shall not be required to pay any
tax which may be payable in respect of any transfer involved and the issuance
and delivery of any certificate in a name other than that of the Warrantholder.
(b) Due Authority. The execution and delivery by the Company of this
Warrant Agreement and the performance of all obligations of the Company
hereunder, including the issuance to Warrantholder of the right to acquire the
shares of Preferred Stock set forth in Section 1, have been duly authorized by
all necessary corporate action on the part of the Company, and the Receivables
Agreement and this Warrant Agreement are not inconsistent with the Company's
Charter or Bylaws, do not contravene any law or governmental rule, regulation or
order applicable to it, do not and will not contravene any provision of, or
constitute a default under, any indenture, mortgage, contract or other
instrument to which it is a party or by which it is bound, and the Receivables
Agreement and this Warrant Agreement constitute legal, valid and binding
agreements of the Company, enforceable in accordance with their respective terms
subject only to bankruptcy, insolvency or other similar laws affecting the
enforceability of the rights of creditors generally and the general principles
of equity.
-4-
<PAGE> 5
(c) Consents and Approvals. No consent or approval of, giving of notice
to, registration with, or taking of any other action in respect of any state,
Federal or other governmental authority or agency is required with respect to
the execution, delivery and performance by the Company of its obligations under
this Warrant Agreement, except for the filing of notices pursuant to Regulation
D under the 1933 Act and any filing required by applicable state securities law,
which filings will be effective by the time required thereby.
(d) Issued Securities. All issued and outstanding shares of Common Stock,
Preferred Stock or any other securities of the Company have been duly authorized
and validly issued and are fully paid and nonassessable. All outstanding shares
of Common Stock, Preferred Stock and any other securities were issued in full
compliance with all Federal and state securities laws. In addition:
(i) The authorized capital stock of the Company consists of
26,800,000 shares of Common Stock and 20,800,000 shares of Preferred Stock, of
which 5,000,000 are designated as Series A Preferred Stock, 5,000,000 shares are
designated Series A-1 Preferred Stock, 3,000,000 shares are designated Series B
Preferred Stock, 3,000,000 shares are designated Series B-1 Preferred Stock,
1,600,000 shares are designated Series C Preferred Stock, and 1,600,000 shares
are designated Series C-1 Preferred Stock. The issued and outstanding stock of
the Company consists of 2,050,322 shares of Common Stock, 4,627,500 shares of
Series A Preferred Stock, no shares of Series A-1 Preferred Stock, 2,923,073
shares of Series B Preferred Stock, no shares of Series B-1 Preferred Stock,
1,180,000 shares of Series C Preferred Stock and no shares of Series C-1
Preferred Stock. The Series A Preferred, Series A-1 Preferred, Series B
Preferred, Series B-1 Preferred, Series C Preferred, and Series C-1 Preferred
shall have the rights, preferences, privileges and restrictions set forth in the
Charter.
(ii) The Company has reserved 2,435,308 shares of its Common Stock for
issuance to officers, directors, employees, sales representatives and
consultants of the Company pursuant to the Company's 1995 Incentive Stock Plan.
There are stock options outstanding for the purchase of 1,627,560 shares of
Common Stock. There are also warrants outstanding for the purchase of 55,000
shares of Common Stock and 34,999 of Series C Preferred Stock. Except as
referenced herein, there are no options, warrants, conversion privileges or
other rights presently outstanding to purchase or otherwise acquire any
authorized but unissued shares of the capital stock or other securities of the
Company.
(e) Insurance. The Company has in full force and effect insurance
policies, with extended coverage, insuring the Company and its property and
business against such losses and risks, and in such amounts, as are customary
for corporations engaged in a similar business and similarly situated and as
otherwise may be required pursuant to the terms of any other contract or
agreement.
(f) Exempt Transaction. Subject to the accuracy of the Warrantholder's
representations in Section 10 hereof, the issuance of the Preferred Stock upon
exercise of the Warrantholder's right to purchase such Preferred Stock will
constitute a transaction exempt from (i) the registration requirements of
Section 5 of the 1933 Act, in reliance upon Section 4(2) thereof, and (ii) the
qualification requirements of the applicable state securities laws.
(g) Compliance with Rule 144. At the written request of the Warrantholder,
who proposes to sell Preferred Stock issuable upon the exercise of the Warrant
in compliance with Rule 144 promulgated by the Securities and Exchange
Commission under the 1933 Act, the Company shall furnish to the Warrantholder,
within ten days after receipt of such request, a written statement confirming
the Company's compliance with the filing requirements of the Securities and
Exchange Commission as set forth in such Rule as then applicable to the Company,
as such Rule may be amended from time to time.
10. REPRESENTATIONS AND COVENANTS OF THE WARRANTHOLDER.
This Warrant Agreement has been entered into by the Company in reliance
upon the following representations and covenants of the Warrantholder which by
its execution hereof the Warrantholder hereby confirms:
(a) Investment Purpose. The right to acquire Preferred Stock or the
Preferred Stock issuable upon exercise of the Warrantholder's rights contained
herein will be acquired for investment and not with a view to the sale or
distribution of any part thereof, and the Warrantholder has no present intention
of selling or engaging in any public distribution of the same except pursuant to
a registration or exemption.
-5-
<PAGE> 6
(b) Private Issue. The Warrantholder understands (i) that the Preferred
Stock issuable upon exercise of this Warrant is not registered under the 1933
Act or qualified under applicable state securities laws on the ground that the
issuance contemplated by this Warrant Agreement will be exempt from the
registration and qualifications requirements thereof, and (ii) that the
Company's reliance on such exemption is predicated on the representations set
forth in this Section 10.
(c) Disposition of Warrantholder's Rights. In no event will the
Warrantholder make a disposition of any of its rights to acquire Preferred
Stock or Preferred Stock issuable upon exercise of such rights unless and until
(i) it shall have notified the Company of the proposed disposition, and (ii) if
requested by the Company, it shall have furnished the Company with an opinion
of counsel (which counsel may either be inside or outside counsel to the
Warrantholder) satisfactory to the Company and its counsel to the effect that
(A) appropriate action necessary for compliance with the 1933 Act has been
taken, or (B) an exemption from the registration requirements of the 1933 Act
is available. Notwithstanding the foregoing, the restrictions imposed upon the
transferability of any of its rights to acquire Preferred Stock or Preferred
Stock issuable on the exercise of such rights do not apply to transfers from
the beneficial owner of any of the aforementioned securities to its nominee or
from such nominee to its beneficial owner, and shall terminate as to any
particular share of Preferred Stock when (1) such security shall have been
effectively registered under the 1933 Act and sold by the holder thereof in
accordance with such registration or (2) such security shall have been sold
without registration in compliance with Rule 144 under the 1933 Act, or (3) a
letter shall have been issued to the Warrantholder at its request by the staff
of the Securities and Exchange Commission or a ruling shall have been issued to
the Warrantholder at its request by such Commission stating that no action
shall be recommended by such staff or taken by such Commission, as the case may
be, if such security is transferred without registration under the 1933 Act in
accordance with the conditions set forth in such letter or ruling and such
letter or ruling specifies that no subsequent restrictions on transfer are
required. Whenever the restrictions imposed hereunder shall terminate, as
hereinabove provided, the Warrantholder or holder of a share of Preferred Stock
then outstanding as to which such restrictions have terminated shall be entitled
to receive from the Company, without expense to such holder, one or more new
certificates for the Warrant or for such shares of Preferred Stock not bearing
any restrictive legend.
(d) Financial Risk. The Warrantholder has such knowledge and experience
in financial and business matters as to be capable of evaluating the merits and
risks of its investment, and has the ability to bear the economic risks of its
investment.
(e) Risk of No Registration. The Warrantholder understands that if the
Company does not register with the Securities and Exchange Commission pursuant
to Section 12 of the 1934 Act (the "1934 Act"), or file reports pursuant to
Section 15(d), of the 1934 Act", or if a registration statement covering the
securities under the 1933 Act is not in effect when it desires to sell (i) the
rights to purchase Preferred Stock pursuant to this Warrant Agreement, or (ii)
the Preferred Stock issuable upon exercise of the right to purchase, it may be
required to hold such securities for an indefinite period. The Warrantholder
also understands that any sale of its rights of the Warrantholder to purchase
Preferred Stock or Preferred Stock which might be made by it in reliance upon
Rule 144 under the 1933 Act may be made only in accordance with the terms and
conditions of that Rule.
(f) Accredited Investor. Warrantholder is an ""accredited investor" within
the meaning of the Securities and Exchange Rule 501 of Regulation D, as
presently in effect.
11. TRANSFERS.
Subject to the terms and conditions contained in Section 10 hereof, this
Warrant Agreement and all rights hereunder are transferable in whole or in part
by the Warrantholder and any successful transferee, provided, however, in no
event shall the number of transfers of the rights and interests in all of the
Warrants exceed three (3) transfers. The transfer shall be recorded on the
books of the Company upon receipt by the Company of a notice of transfer in
the form attached hereto as Exhibit III (the "Transfer Notice"), at its
principal offices and the payment to the Company of all transfer taxes and
other governmental charges imposed on such transfer.
12. MISCELLANEOUS.
(a) Effective Date. The provisions of this Warrant Agreement shall be
construed and shall be given effect in all respects as if it had been executed
and delivered by the Company on the date hereof. This Warrant Agreement shall
be binding upon any successors or assigns of the Company.
-6-
<PAGE> 7
(b) Attorney's Fees. In any litigation, arbitration or court proceeding
between the Company and the Warrantholder relating hereto, the prevailing party
shall be entitled to attorneys' fees and expenses and all costs of proceedings
incurred in enforcing this Warrant Agreement.
(c) Governing Law. This Warrant Agreement shall be governed by and
construed for all purposes under and in accordance with the laws of the State
of Illinois.
(d) Counterparts. This Warrant 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.
(e) Notices. Any notice required or permitted hereunder shall be given in
writing and shall be deemed effectively given upon personal delivery, facsimile
transmission (provided that the original is sent by personal delivery or mail
as hereinafter set forth) or seven (7) days after deposit in the United States
mail, by registered or certified mail, addressed (i) to the Warrantholder at
6111 North River Road, Rosemont, Illinois 60018, attention: James Labe, Venture
Group, cc: Legal Department, attention: General Counsel, (and/or, if by
facsimile, (847) 518-5465 and (847) 518-5088, and (ii) to the Company at 887
Industrial Road, Suite G, San Carlos, CA 94070 (and/or of by facsimile, (650)
598-1358 or at such other address as any such party may subsequently designate
by written notice to the other party.
(f) Remedies. In the event of any default hereunder, the non-defaulting
party may proceed to protect and enforce 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 default, and/or an action for specific performance for any
default where Warrantholder will not have an adequate remedy at law and where
damages will not be readily ascertainable. The Company expressly agrees that
it shall not oppose an application by the Warrantholder or any other person
entitled to the benefit of this Agreement requiring specific performance of any
or all provisions hereof or enjoining the Company from continuing to commit any
such breach of this Agreement.
(g) 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 Warrantholder against impairment.
(h) Survival. The representations, warranties, covenants and conditions
of the respective parties contained herein or made pursuant to this Warrant
Agreement shall survive the execution and delivery of this Warrant Agreement.
(i) Severability. In the event any one or more of the provisions of this
Warrant Agreement shall for any reason be held invalid, illegal or
unenforceable, the remaining provisions of this Warrant Agreement shall be
unimpaired, and the invalid, illegal or unenforceable provision shall be
replaced by a mutually acceptable valid, legal and enforceable provision, which
comes closest to the intention of the parties underlying the invalid, illegal
or unenforceable provision.
(j) Amendments. Any provision of this Warrant Agreement may be amended by
a written instrument signed by the Company and by the Warrantholder.
[REMAINDER OF THIS PAGE INTENTIONALLY BLANK]
-7-
<PAGE> 8
(k) Additional Documents. The Company, upon execution of this Warrant
Agreement, shall provide Warrantholder with certified resolutions with respect
to the representations, warranties and covenants set forth in subparagraphs (a)
through (d), (f) and (g) of Section 9 above. The Company shall also supply such
other documents as the Warrantholder may from time to time reasonably request.
IN WITNESS WHEREOF, the parties hereto have caused this Warrant Agreement
to be executed by its officers thereunto duly authorized as of the Effective
Date.
COMPANY: ARGONAUT TECHNOLOGIES, INC.
By: /s/ D.P. BINKLEY
------------------------------
Title:
----------------------------
WARRANTHOLDER: COMDISCO, INC.
By: /s/ JAMES P. LABE
------------------------------
Title: President,
Comdisco Ventures Division
----------------------------
-8-
<PAGE> 9
EXHIBIT II
TRANSFER NOTICE
(To transfer or assign the foregoing Warrant Agreement execute this form and
supply required information. Do not use this form to purchase shares.)
FOR VALUE RECEIVED, the foregoing Warrant Agreement and all rights
evidenced thereby are hereby transferred and assigned to
__________________________________________________
(Please Print)
whose address is _________________________________
__________________________________________________
Dated: _________________________________
Holder's Signature: ____________________
Holder's Address: ______________________
________________________________________
Signature Guaranteed: ____________________________
NOTE: The signature to this Transfer Notice must correspond with the name as it
appears on the face of the Warrant Agreement, without alteration or enlargement
or any change whatever. Officers of corporations and those acting in a fiduciary
or other representative capacity should file proper evidence of authority to
assign the foregoing Warrant Agreement.
<PAGE> 1
EXHIBIT 10.7
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AS
AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED, OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
RELATED THERETO OR AN OPINION OF COUNSEL (WHICH MAY BE COMPANY COUNSEL)
REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE
SECURITIES LAWS.
WARRANT AGREEMENT
To Purchase Shares of the Series C Preferred Stock of
ARGONAUT TECHNOLOGIES, INC.
Dated as of January 19, 1999 (the "Effective Date")
in connection with the Loan and Security Agreement
WHEREAS, Argonaut Technologies, Inc. a Delaware corporation (the "Company")
has entered into a Loan and Security Agreement dated as of July 7, 1998, (the
"Loan Agreement") with Comdisco, Inc., a Delaware corporation (the
"Warrantholder"); and
WHEREAS, the Company desires to grant to Warrantholder, in consideration
for such Loan Agreement, the right to purchase shares of its Series C Preferred
Stock;
NOW, THEREFORE, in consideration of the Warrantholder executing and
delivering such Loan Agreement and in consideration of mutual covenants and
agreements contained herein, the Company and Warrantholder agree as follows:
1. GRANT OF THE RIGHT TO PURCHASE PREFERRED STOCK.
The Company hereby grants to the Warrantholder, and the Warrantholder is
entitled, upon the terms and subject to the conditions hereinafter set forth,
to subscribe for and purchase, from the Company, 20,000 fully paid and
non-assessable shares of the Company's Series C Preferred Stock ("Preferred
Stock") at a purchase price of $6.00 per share (the "Exercise Price") which is
equivalent to twelve percent (12%) of $1,000,000 divided by the Exercise Price.
Notwithstanding the foregoing, in the event the Company (a) completes (i) an
IPO which results in net cash proceeds to the Company equivalent to, or greater
than, $20,000,000, on or before April 15, 2000; or (ii) an acquisition of the
Company yielding an acquisition price equivalent to or greater than
$100,000,000, and in the case of (i) or (ii) the Company prepays the
outstanding balance of principal and interest under the Loan Agreement within
thirty (30) days of such event; or (b) prepays the outstanding balance of
principal and interest under the Loan Agreement on or before April 15, 2000 in
accordance with the terms of Section 2.6 of the Loan Agreement, then the number
of shares available hereunder shall be adjusted retroactively to equate to nine
percent (9%) of $1,000,000 divided by the Exercise Price. The number and
purchase price of such shares are subject to further adjustment as provided in
Section 8 hereof.
2. TERM OF THE WARRANT AGREEMENT.
Except as otherwise provided for herein, the term of this Warrant Agreement
and the right to purchase Preferred Stock as granted herein shall commence on
the Effective Date and shall be exercisable for a period of (i) seven (7) years
or (ii) three (3) years from the effective date of the Company's initial public
offering ("IPO"), whichever is earlier.
<PAGE> 2
3. EXERCISE OF THE PURCHASE RIGHTS.
The purchase rights set forth in this Warrant Agreement are exercisable by
the Warrantholder, in whole or in part, at any time, or from time to time,
prior to the expiration of the term set forth in Section 2 above, by tendering
to the Company at its principal office a notice of exercise in the form
attached hereto as Exhibit I (the "Notice of Exercise"), duly completed and
executed, along with this Warrant Agreement. Promptly upon receipt of the
Notice of Exercise, this Warrant Agreement and the payment of the purchase
price in accordance with the terms set forth below, the Company shall issue to
the Warrantholder a certificate for the number of shares of Preferred Stock
purchased.
The Exercise Price may be paid at the Warrantholder's election either (i)
by cash or check, or (ii) by surrender of the right to purchase such number of
shares equal in value (as determined below) to the aggregate exercise price of
the number of shares to be purchased by the Warrantholder ("Net Issuance"). If
the Warrantholder elects the Net Issuance method, the Company will issue
Preferred Stock in accordance with the following formula:
X = Y(A-B)
------
A
Where: X= the number of shares of Preferred Stock to be issued to the
Warrantholder.
Y= the number of shares of Preferred Stock requested to
be exercised under this Warrant Agreement.
A= the fair market value of one (1) share of Preferred
Stock.
B= the Exercise Price.
For purposes of the above calculation, current fair market value of
Preferred Stock shall mean with respect to each share of Preferred Stock:
(i) if the exercise is in connection with an initial public offering
of the Company's Common Stock, and if the Company's Registration Statement
relating to such public offering has been declared effective by the SEC,
then the fair market value per share shall be the product of (x) the
Initial "Price to Public" specified in the final prospectus with respect to
the offering and (y) the number of shares of Common Stock into which each
share of Preferred Stock is convertible at the time of such exercise;
(ii) if this Warrant is exercised after, and not in connection with
the Company's initial public offering, and:
(a) if the Company's Common Stock is traded on a securities
exchange, the fair market value shall be deemed to be the product of
(x) the average of the closing prices over a twenty-one (21) day
period ending three days before the day the current fair market value
of the securities is being determined and (y) the number of shares of
Common Stock into which each share of Preferred Stock is convertible
at the time of such exercise; or
(b) if the Company's Common Stock is actively traded
over-the-counter, the fair market value shall be deemed to be the
product of (x) the average of the closing bid and asked prices quoted
on the Nasdaq National Market System (or similar system) over the
twenty-one (21) day period ending three days before the day the
current fair market value of the securities is being determined and
(y) the number of shares of Common Stock into which each share of
Preferred Stock is convertible at the time of such exercise;
(iii) if at any time the Common Stock is not listed on any securities
exchange or quoted in the Nasdaq National Market System or the
over-the-counter market, the current fair market value of Preferred Stock
shall be the product of (x) the highest price per share which the Company
could obtain from a willing buyer (not a current employee or director) for
shares of Common Stock sold by the Company, from authorized but unissued
shares, as determined in good faith by its Board of Directors and (y) the
number of shares of Common Stock into which each share of Preferred Stock
is convertible at the time of such
<PAGE> 3
exercise, unless the exercise is in connection with a merger, acquisition
or other consolidation of the Company pursuant to which the Company is not
the surviving party, in which case the fair market value of Preferred Stock
shall be deemed to be the value received by the holders of the Company's
Preferred Stock on a common equivalent basis pursuant to such merger or
acquisition.
Upon partial exercise by either cash or Net Issuance, the Company shall
promptly issue an amended Warrant Agreement representing the remaining number
of shares purchasable hereunder. All other terms and conditions of such amended
Warrant Agreement shall be identical to those contained herein, including, but
not limited to the Effective Date hereof.
4. RESERVATION OF SHARES.
(a) Authorization and Reservation of Shares. During the term of this
Warrant Agreement, the Company will at all times have authorized and reserved a
sufficient number of shares of its Preferred Stock to provide for the exercise
of the rights to purchase Preferred Stock as provided for herein.
(b) Registration or Listing. If any shares of Preferred Stock required to
be reserved for purposes of the exercise of this Warrant Agreement hereunder
require registration with or approval of any governmental authority under any
Federal or State law (other than any registration under the Securities Act of
1933, as amended ("1933 Act"), as then in effect, or any similar Federal
statute then enforced, or any state securities law, required by reason of any
transfer involved in such conversion), or listing on any domestic securities
exchange, before such shares may be issued upon conversion, the Company will,
at its expense and as expeditiously as possible, use its best efforts to cause
such shares to be duly registered, listed or approved for listing on such
domestic securities exchange, as the case may be.
5. NO FRACTIONAL SHARES OR SCRIP.
No fractional shares or scrip representing fractional shares shall be
issued upon the exercise of the Warrantholder's rights to purchase Preferred
Stock, but in lieu of such fractional shares the Company shall make a cash
payment therefor upon the basis of the Exercise Price then in effect.
6. NO RIGHTS AS SHAREHOLDER.
This Warrant Agreement does not entitle the Warrantholder to any voting
rights or other rights as a shareholder of the Company prior to the exercise of
the Warrantholder's rights to purchase Preferred Stock as provided for herein.
7. WARRANTHOLDER REGISTRY.
The Company shall maintain a registry showing the name and address of the
registered holder of this Warrant Agreement.
8. ADJUSTMENT RIGHTS.
The purchase price per share and the number of shares of Preferred Stock
purchasable hereunder are subject to adjustment, as follows:
(a) Merger and Sale of Assets. If at any time there shall be a capital
reorganization of the shares of the Company's stock (other than a combination,
reclassification, exchange or subdivision of shares otherwise provided for
herein), or a merger or consolidation of the Company with or into another
corporation when the Company is not the surviving corporation, or the sale of
all or substantially all of the Company's properties and assets to any other
person (hereinafter referred to as a "Merger Event"), then, as a part of such
Merger Event, lawful provision shall be made so that the Warrantholder shall
thereafter be entitled to receive, upon exercise of its rights to purchase
Preferred Stock, the number of shares of Preferred Stock or other securities of
the successor corporation resulting from such Merger Event, to which a holder
of the Preferred Stock deliverable upon exercise of the right to purchase
Preferred Stock hereunder would have been entitled in such Merger Event if the
right to purchase such Preferred Stock hereunder had been exercised immediately
prior to the Merger Event. In any such case, appropriate adjustment (as
determined in good faith by the Company's Board of Directors) shall be made in
the application of the provisions of this Warrant Agreement with respect to the
rights and interest of the Warrantholder after the Merger Event to the end that
the provisions of this Warrant Agreement (including adjustments of the
<PAGE> 4
Exercise Price and number of shares of Preferred Stock purchasable) shall be
applicable to the greatest extent reasonably possible.
(b) Reclassification of Shares. If the Company at any time shall, by
combination, reclassification, exchange or subdivision of securities or
otherwise, change any of the securities as to which purchase rights under this
Warrant Agreement exist into the same or a different number of securities of
any other class or classes, this Warrant Agreement 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 which were
subject to the purchase rights under this Warrant Agreement immediately prior
to such combination, reclassification, exchange, subdivision or other change.
(c) Subdivision or Combination of Shares. If the Company at any time
shall combine or subdivide its Preferred Stock, the Exercise Price shall be
proportionately decreased in the case of a subdivision, or proportionately
increased in the case of a combination.
(d) Antidilution Rights. The Preferred Stock purchasable hereunder shall
have the benefit of the same antidilution rights applicable to such Preferred
Stock as designated in the Company's Certificate of Incorporation, as such may
be amended from time to time, and the Company shall provide Warrantholder with
all notices and information at the times and to the extent it is required to do
so to the holders of such Preferred Stock.
(e) Notice of Adjustments. If: (i) the Company shall declare any dividend
or distribution upon its stock, whether in cash, property, stock or other
securities; (ii) the Company shall offer for subscription prorata to the
holders of any class of its Preferred or other convertible stock any additional
shares of stock of any class or other rights; (iii) there shall be any Merger
Event; (iv) there shall be any voluntary dissolution, liquidation or winding up
of the Company; then, in connection with each such event, the Company shall
send to the Warrantholder: (A) at least twenty (20) days' prior written notice
of the date on which the books of the Company shall close or a record shall be
taken for such dividend, distribution, subscription rights (specifying the date
on which the holders of Preferred Stock shall be entitled thereto) or for
determining rights to vote in respect of such Merger Event, dissolution,
liquidation or winding up; and (B) in the case of any such Merger Event,
dissolution, liquidation or winding up, 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 Preferred Stock shall be entitled to exchange
their Preferred Stock for securities or other property deliverable upon such
Merger Event, dissolution, liquidation or winding up).
Each such written notice shall set forth, in reasonable detail, (i) the
event requiring the adjustment, (ii) the amount of the adjustment, (iii) the
method by which such adjustment was calculated, (iv) the Exercise Price, and
(v) the number of shares subject to purchase hereunder after giving effect to
such adjustment, and shall be given by first class mail, postage prepaid,
addressed to the Warrantholder, at the address as shown on the books of the
Company.
(f) Timely Notice. Failure to timely provide such notice required by
subsection (e) above shall entitle Warrantholder to retain the benefit of the
applicable notice period notwithstanding anything to the contrary contained in
any insufficient notice received by Warrantholder.
9. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY.
(a) Reservation of Preferred Stock. The Preferred Stock issuable upon
exercise of the Warrantholder's rights has been duly and validly reserved and,
when issued in accordance with the provisions of this Warrant Agreement, will
be validly issued, fully paid and non-assessable, and will be free of any
taxes, liens, charges or encumbrances of any nature whatsoever; provided,
however, that the Preferred Stock issuable pursuant to this Warrant Agreement
may be subject to restrictions on transfer under state and/or Federal securities
laws. The Company has made available to the Warrantholder true, correct and
complete copies of its Certificate of Incorporation (the "Charter") and Bylaws,
as amended. The issuance of certificates for shares of Preferred Stock upon
exercise of the Warrant Agreement shall be made without charge to the
Warrantholder for any issuance tax in respect thereof, or other cost incurred
by the Company in connection with such exercise and the related issuance of
shares of Preferred Stock; provided that the Company shall not be required to
pay any tax which may be payable in respect of any transfer involved and the
issuance and delivery of any certificate in a name other than that of the
Warrantholder.
(b) Due Authority. The execution and delivery by the Company of this
Warrant Agreement and the performance of all obligations of the Company
hereunder, including the issuance to Warrantholder of the right to
<PAGE> 5
acquire the shares of Preferred Stock set forth in Section 1, have been duly
authorized by all necessary corporate action on the part of the Company, and
the Loan Agreement and this Warrant Agreement are not inconsistent with the
Company's charter or Bylaws, do not contravene any law or governmental rule,
regulation or order applicable to it, do not and will not contravene any
provision of, or constitute a default under, any indenture, mortgage, contract
or other instrument to which it is a party or by which it is bound, and the Loan
Agreement and this Warrant Agreement constitute legal, valid and binding
agreements of the Company, enforceable in accordance with their respective terms
subject only to bankruptcy, insolvency or other similar laws affecting the
enforceability of the rights of creditors generally and the general principles
of equity.
(c) Consents and Approvals. No consent or approval of, giving of notice
to, registration with, or taking of any other action in respect of any state,
Federal or other governmental authority or agency is required with respect to
the execution, delivery and performance by the Company of its obligations under
this Warrant Agreement, except for the filing of notices pursuant to Regulation
D under the 1933 Act and any filing required by applicable state securities
law, which filings will be effective by the time required thereby.
(d) Issued Securities. All issued and outstanding shares of Common Stock,
Preferred stock or any other securities of the Company have been duly authorized
and validly issued and are fully paid and nonassessable. All outstanding shares
of Common Stock, Preferred Stock and any other securities were issued in full
compliance with all Federal and state securities laws. In addition:
(i) The authorized capital stock of the Company consists of
26,800,000 shares of Common Stock and 20,800,000 shares of preferred stock,
of which 5,000,000 are designated as Series A Preferred Stock, 5,000,000
shares are designated Series A-1 Preferred Stock, 3,000,000 shares are
designated Series B Preferred Stock, 3,000,000 shares are designated Series
B-1 Preferred Stock, 1,600,000 shares are designated Series C Preferred
Stock, and 1,600,000 shares are designated Series C-1 Preferred Stock. The
issued and outstanding stock of the Company consists 2,299,937 shares of
Common Stock, 4,627,500 shares of Series A Preferred Stock, no shares of
Series A-1 Preferred Stock, 2,923,073 shares of Series B Preferred Stock,
no shares of Series B-1 Preferred Stock, 1,180,000 shares of Series C
Preferred Stock and no shares of Series C-1 Preferred Stock. The Series A
Preferred, Series A-1 Preferred, Series B Preferred, Series B-1 Preferred,
Series C Preferred, and Series C-1 Preferred shall have the rights,
preferences, privileges and restrictions set forth in the Charter.
(ii) The Company has reserved 2,435,308 shares of its Common Stock for
issuance to officers, directors, employees, sales representatives and
consultants of the Company pursuant to the Company's 1995 Incentive Stock
Plan. There are stock options outstanding for the purchase of 1,668,029
shares of Common Stock. There are also warrants outstanding for the
purchase of 50,000 shares of Common Stock and 71,665 of Series C Preferred
Stock. Except as referenced herein, there are no options, warrants,
conversion privileges or other rights presently outstanding to purchase or
otherwise acquire any authorized but unissued shares of the capital stock
or other securities of the Company.
(e) Insurance. The Company has in full force and effect insurance
policies, with extended coverage insuring the Company and its property and
business against such losses and risks, and in such amounts, as are customary
for corporations engaged in a similar business and similarly situated and as
otherwise may be required pursuant to the terms of any other contract or
agreement.
(f) Exempt Transaction. Subject to the accuracy of the Warrantholder's
representations in Section 10 hereof, the issuance of the Preferred Stock upon
exercise of the Warrantholder's right to purchase such Preferred Stock will
constitute a transaction exempt from (i) the registration requirements of
Section 5 of the 1933 Act, in reliance upon Section 4(2) thereof, and (ii) the
qualification requirements of the applicable state securities laws.
(g) Compliance with Rule 144. At the written request of the Warrantholder,
who proposes to sell Preferred Stock issuable upon the exercise of the Warrant
in compliance with Rule 144 promulgated by the Securities and Exchange
Commission under the 1933 Act, the Company shall furnish to the Warrantholder,
within ten days after receipt of such request, a written statement confirming
the Company's compliance with the filing requirements of the Securities and
Exchange Commission as set forth in such Rule as then applicable to the
Company, as such Rule may be amended from time to time.
<PAGE> 6
10. REPRESENTATIONS AND COVENANTS OF THE WARRANTHOLDER.
This Warrant Agreement has been entered into by the Company in reliance
upon the following representations and covenants of the Warrantholder which by
its execution hereof the Warrantholder hereby confirms:
(a) Investment Purpose. The right to acquire Preferred Stock or the
Preferred Stock issuable upon exercise of the Warrantholder's rights contained
herein will be acquired for investment and not with a view to the sale or
distribution of any part thereof, and the Warrantholder has no present
intention of selling or engaging in any public distribution of the same except
pursuant to a registration or exemption.
(b) Private Issue. The Warrantholder understands (i) that the Preferred
Stock issuable upon exercise of this Warrant is not registered under the 1933
Act or qualified under applicable state securities laws on the ground that the
issuance contemplated by this Warrant Agreement will be exempt from the
registration and qualifications requirements thereof, and (ii) that the
Company's reliance on such exemption is predicated on the representations set
forth in this Section 10.
(c) Disposition of Warrantholder's Rights. In no event will the
Warrantholder make a disposition of any of its rights to acquire Preferred
Stock or Preferred Stock issuable upon exercise of such rights unless and until
(i) it shall have notified the Company of the proposed disposition, and (ii) if
requested by the Company, it shall have furnished the Company with an opinion
of counsel (which counsel may either be inside or outside counsel to the
Warrantholder) satisfactory to the Company and its counsel to the effect that
(A) appropriate action necessary for compliance with the 1933 Act has been
taken, or (B) an exemption from the registration requirements of the 1933 Act
is available. Notwithstanding the foregoing, the restrictions imposed upon the
transferability of any of its rights to acquire Preferred Stock or Preferred
Stock issuable on the exercise of such rights do not apply to transfers from
the beneficial owner of any of the aforementioned securities to its nominee
or from such nominee to its beneficial owner, and shall terminate as to any
particular share of Preferred Stock when (1) such security shall have been
effectively registered under the 1933 Act and sold by the holder thereof in
accordance with such registration or (2) such security shall have been sold
without registration in compliance with Rule 144 under the 1993 Act, or (3) a
letter shall have been issued to the Warrantholder at its request by the staff
of the Securities and Exchange Commission or a ruling shall have been issued to
the Warrantholder at its request by such Commission stating that no action shall
be recommended by such staff or taken by such Commission, as the case may be, if
such security is transferred without registration under the 1933 Act in
accordance with the conditions set forth in such letter or ruling and such
letter or ruling specifics that no subsequent restrictions on transfer are
required. Whenever the restrictions imposed hereunder shall terminate, as
hereinabove provided, the Warrantholder or holder of a share of Preferred Stock
then outstanding as to which such restrictions have terminated shall be
entitled to receive from the Company, without expense to such holder, one or
more new certificates for the Warrant or for such shares of Preferred Stock not
bearing any restrictive legend.
(d) Financial Risk. The Warrantholder has such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risks of its investment, and has the ability to bear the economic risks of its
investment.
(e) Risk of No Registration. The Warrantholder understands that if the
Company does not register with the Securities and Exchange Commission pursuant
to Section 12 of the 1934 Act (the "!934 Act"), or file reports pursuant to
Section 15(d), of the 1934 Act", or if a registration statement covering the
securities under the 1933 Act is not in effect when it desires to sell (i) the
rights to purchase Preferred Stock pursuant to this Warrant Agreement, or (ii)
the Preferred Stock issuable upon exercise of the rights to purchase, it may be
required to hold such securities for an indefinite period. The Warrantholder
also understands that any sale of its rights of the Warrantholder to purchase
Preferred Stock or Preferred Stock which might be made by it in reliance upon
Rule 144 under the 1933 Act may be made only in accordance with the terms and
conditions of that Rule.
(f) Accredited Investor. Warrantholder is an "accredited investor" within
the meaning of the Securities and Exchange Rule 501 of Regulation D, as
presently in effect.
<PAGE> 7
11. TRANSFERS.
Subject to the terms and conditions contained in Section 10 hereof, this
Warrant Agreement and all rights hereunder are transferable in whole or in part
by the Warrantholder and any successor transferee, provided, however, in no
event shall the number of transfers of the rights and interests in all of the
Warrants exceed three (3) transfers. The transfer shall be recorded on the books
of the Company upon receipt by the Company of a notice of transfer in the form
attached hereto as Exhibit III (the "Transfer Notice"), at its principal offices
and the payment to the Company of all transfer taxes and other governmental
charges imposed on such transfer.
12. MISCELLANEOUS.
(a) Effective Date. The provisions of this Warrant Agreement shall be
construed and shall be given effect in all respects as if it had been executed
and delivered by the Company on the date hereof. This Warrant Agreement shall
be binding upon any successors or assigns of the Company.
(b) Attorney's Fees. In any litigation, arbitration or court proceeding
between the Company and the Warrantholder relating hereto, the prevailing party
shall be entitled to attorneys' fees and expenses and all costs of proceedings
incurred in enforcing this Warrant Agreement.
(c) Governing Law. This Warrant Agreement shall be governed by and
construed for all purposes under and in accordance with the laws of the State
of Illinois.
(d) Counterparts. This Warrant 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.
(e) Notices. Any notice required or permitted hereunder shall be given in
writing and shall be deemed effectively given upon personal delivery, facsimile
transmission (provided that the original is sent by personal delivery or mail
as hereinafter set forth) or seven (7) days after deposit in the United States
mail, by registered or certified mail, addressed (i) to the Warrantholder at
6111 North River Road, Rosemont, Illinois 60018, attention: James Labe, Venture
Group, cc: Legal Department, attention: General Counsel, (and/or, if by
facsimile, (847) 518-5465 and (847) 518-5088, an (ii) to the Company at 887
Industrial Road, Suite G, San Carlos, CA 90470 (and/or if by facsimile, (650)
598-1358 or at such other address as any such party may subsequently designate
by written notice to the other party.
(f) Remedies. In the event of any default hereunder, the non-defaulting
party may proceed to protect and enforce 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 default, and/or an action for specific performance for any
default where Warrantholder will not have an adequate remedy at law and where
damages will not be readily ascertainable. The Company expressly agrees that it
shall not oppose an application by the Warrantholder or any other person
entitled to the benefit of this Agreement requiring specific performance of any
or all provisions hereof or enjoining the Company from continuing to commit any
such breach of this Agreement.
(g) 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 Warrantholder against impairment.
(h) Survival. The representations, warranties, covenants and conditions
of the respective parties contained herein or made pursuant to this Warrant
Agreement shall survive the execution and delivery of this Warrant Agreement.
(i) Severability. In the event any one or more of the provisions of this
Warrant Agreement shall for any reason be held invalid, illegal or
unenforceable, the remaining provisions of this Warrant Agreement shall be
unimpaired, and the invalid, illegal or unenforceable provision shall be
replaced by a mutually acceptable valid, legal and enforceable provision, which
comes closest to the intention of the parties underlying the invalid, illegal or
unenforceable provision.
<PAGE> 8
(j) Amendments. Any provision of this Warrant Agreement may be amended by a
written instrument signed by the Company and by the Warrantholder.
(k) Additional Documents. The Company, upon execution of this Warrant
Agreement, shall provide the Warrantholder with certified resolutions with
respect to the representations, warranties and covenants set forth in
subparagraphs (a) through (d), (f) and (g) of Section 9 above. The Company
shall also supply such other documents as the Warrantholder may from time to
time reasonably request.
IN WITNESS WHEREOF, the parties hereto have caused this Warrant Agreement
to be executed by its officers thereunto duly authorized as of the Effective
Date.
COMPANY: ARGONAUT TECHNOLOGIES, INC.
By: /s/ D. P. BINKLEY
--------------------------------
Title:
--------------------------------
WARRANTHOLDER: COMDISCO, INC.
By: /s/ JAMES LABE
--------------------------------
James Labe, President
Title: Comdisco Ventures Division
--------------------------------
<PAGE> 9
EXHIBIT I
NOTICE OF EXERCISE
TO: _______________________
(1) The undersigned Warrantholder hereby elects to purchase _______ shares of
the Series _____ Preferred Stock of _______________, pursuant to the terms
of the Warrant Agreement dated the _______ day of ____________, 19__ (the
"Warrant Agreement") between ________________________ and the
Warrantholder, and tenders herewith payment of the purchase price for such
shares in full, together with all applicable transfer taxes, if any, as set
forth below:
(a) by cash or check __________
or
(b) by Net Issuance as defined in the Warrant Agreement __________
(2) In exercising its rights to purchase the Series _____ Preferred Stock of
__________________________, the undersigned hereby confirms and
acknowledges the investment representations and warranties made in Section
10 of the Warrant Agreement.
(3) Please issue a certificate or certificates representing said shares of
Series _____ Preferred Stock in the name of the undersigned or in such
other name as is specified below.
________________________
(Name)
________________________
(Address)
WARRANTHOLDER: COMDISCO, INC.
By: ______________________
Title: ______________________
Date: ______________________
<PAGE> 10
EXHIBIT II
TRANSFER NOTICE
(To transfer or assign the foregoing Warrant Agreement execute this form and
supply required information. Do not use this form to purchase shares.)
FOR VALUE RECEIVED, the foregoing Warrant Agreement and all rights
evidenced thereby are hereby transferred and assigned to
__________________________________________________
(Please Print)
whose address is _________________________________
__________________________________________________
Dated: _________________________________
Holder's Signature: ____________________
Holder's Address: ______________________
________________________________________
Signature Guaranteed: ____________________________
NOTE: The signature to this Transfer Notice must correspond with the name as it
appears on the face of the Warrant Agreement, without alteration or enlargement
or any change whatever. Officers of corporations and those acting in a fiduciary
or other representative capacity should file proper evidence of authority to
assign the foregoing Warrant Agreement.
<PAGE> 1
EXHIBIT 10.8
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 SHARES OF COMMON STOCK
April 17, 1995
THIS CERTIFIES THAT, for value received, Lease Management Services, Inc.,
("Holder") is entitled to subscribe for and purchase Fifty Thousand (50,000)
shares of the fully paid and nonassessable Common Stock ("the Shares") of
Argonaut Technologies, 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 20/100 dollars
($1.20) 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) 5:00 P.M. California time on the day prior to the effectiveness of a
registration statement filed in a bona fide firm commitment underwriting
under the Securities Act of 1933, as amended, covering any of the
Company's securities (as that term is defined under the Securities Act of
1933, as then in effect) with aggregate gross proceeds to the Company, at
the public offering price, of at least $7,500,000; provided that the
Company shall notify the registered Holder of this Warrant of the proposed
registration of its securities on the date that the registration statement
is filed, but in any event at least 30 days prior to the effectiveness of
such registration, such notice to set forth the proposed date of
effectiveness of the subject registration statement; or
(c) the effective date of the merger of the Company with or into, the
consolidation of the Company with, or the sale by the Company of all or
substantially all of its assets 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 60 days prior to the
effectiveness thereof.
In the event that, although the Company shall have given notice of a
transaction pursuant to subparagraph (b) or (c) hereof, the transaction
does not close on
<PAGE> 2
LMSI/Argonaut Technologies, Inc. Warrant
Page 2 of 7
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 17 below) and by payment to the Company, by check, of an amount equal to
the then applicable Warrant Price per share multiplied by the number of shares
then being purchased. In the event of any exercise of the rights represented by
this Warrant, certificates for the shares of stock so purchased shall be in the
name of, and delivered to, the Holder hereof, or as such Holder may direct
(subject to the terms of transfer contained herein and upon payment by such
Holder hereof of any applicable transfer taxes). Such delivery shall be made
within 10 days after exercise of the Warrant and at the Company's expense and,
unless this Warrant has been fully exercised or expired, a new Warrant having
terms and conditions substantially identical to this Warrant and representing
the portion of the Shares, if any, with respect to which this Warrant shall not
have been exercised, shall also be issued to the Holder hereof within 10 days
after exercise of the Warrant.
(b) Net Issue Exercise. In lieu of exercising this Warrant pursuant to Section
3(a), Holder may elect to receive shares equal to the value of this Warrant (or
of any portion thereof remaining unexercised) by surrender of this Warrant at
the principal office of the Company together with notice of such election, in
which event the Company shall issue to Holder the number of shares of the
Company's Common Stock computed using the following formula:
X = Y(A-B)
------
A
Where X = the number of shares of Common Stock to be issued to Holder.
Y = the number of shares of Common Stock purchasable under this Warrant
(at the date of such calculation).
A = the fair market value of one share of the Company's Common Stock (at
the date of such calculation).
B = Warrant 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 pursuant to Section 2(b),
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) If the Common Stock is traded on NASDAQ or Over-The-Counter or on an
exchange, the per share Fair Market Value for the Common Stock will be the
average of the closing bid and asked prices of the Common Stock quoted in
the Over-The-Counter Market Summary or the closing price quoted on any
exchange on which the Common Stock is listed, whichever is applicable, as
published in the Western Edition
2
<PAGE> 3
LMSI / Argonaut Technologies, Inc. Warrant
Page 3 of 7
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(c), 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
(iv) In any other instance, the per share Fair Market Value for the Common
Stock shall be as determined by the Board of Directors in its reasonable
business judgment.
In the event of 3(c)(iii) or 3(c)(iv), above, the Company's Board of
Directors shall prepare a certificate, to be signed by an authorized
Officer of the Company, setting forth in reasonable detail the basis for
and method of determination of the per share Fair Market Value of the
Common Stock. The Board will also certify to the Holder that this per share
Fair Market Value will be applicable to all holders of the Company's Common
Stock. Such certification must be made to Holder at least thirty (30)
business days prior to the proposed effective date of the merger,
consolidation, sale, or other triggering event as defined in 3(c)(iii) or
3(c)(iv).
(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, (ii) the consummation of a Public Offering of the Company's Common
Stock pursuant to Section 2(b), or (iii) 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(c).
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
predicated solely upon a present intention to hold the Securities for the
minimum capital gains period specified under tax statutes, for a deferred
sale, for or until an increase or decrease in the market price of the
Securities or for a period of one year or any other fixed period in the
future.
3
<PAGE> 4
LMSI / Argonaut Technologies, Inc. Warrant
Page 4 of 7
(iii) The Holder acknowledges that the Securities must be held indefinitely
unless subsequently registered under the Act or an exemption from such
registration is available. The Holder is aware of the provisions of Rule
144 promulgated under the Act ("Rule 144") which permits limited resale of
securities purchased in a private placement subject to the satisfaction of
certain conditions, including, in case the securities have been held for
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 described 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 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 issue a certificate without
such legend to the Holder of the Securities if (i) the Securities are
registered under the Act and a prospectus meeting the requirements of Section
10 of the Act is available or (ii) the Holder provides to the Company an
opinion of counsel for the Holder reasonably satisfactory to the Company, or a
no-action letter or interpretive opinion of the staff of the SEC reasonably
satisfactory to the Company, to the effect that public sale,
4
<PAGE> 5
LMSI / Argonaut Technologies, Inc. Warrant
Page 5 of 7
transfer or assignment of the Securities may be without registration and
without compliance with any restriction such as Rule 144.
5. Condition of Transfer or Exercise of Warrant. It shall be a condition to any
transfer or exercise of this Warrant that at the time of such transfer or
exercise, the Holder shall provide the Company with a representation in writing
that the Holder or transferee is acquiring this Warrant and the shares of Common
Stock to be issued upon exercise, for investment purposes only and not with a
view to any sale or distribution, or 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 conditions 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. Adjustment for Certain Events. In the event of changes in the outstanding
Common Stock by reason of stock dividends, split-ups, recapitalizations,
reclassifications, mergers, consolidations, combinations or exchanges of
shares, separations, reorganizations, liquidations, or the like, the number and
class of shares available under the Warrant in the aggregate and the Warrant
Price shall be correspondingly adjusted, as appropriate, by the Board of
Directors of the Company. The adjustment shall be such as will give the Holder
of this Warrant upon exercise for the aggregate Warrant Price the total number,
class and kind of shares as it would have owned had the Warrant been exercised
prior to the event and had it continued to hold such shares until after the
event requiring adjustment.
8. Notice of Adjustments. Whenever any Warrant Price shall be adjusted pursuant
to Section 7 hereof, the Company shall prepare a certificate signed by 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 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
5
<PAGE> 6
LMSI/Argonaut Technologies, Inc. Warrant
Page 6 of 7
transfer or dispose of (other than to donees or transferees who agree to be
similarly bound) any of the Shares at any time during such period except common
stock included in such registration; provided, however, that all officers and
directors of the Company who hold securities of the Company or options to
acquire securities of the Company and all other persons with registration
rights enter into similar agreements.
10. Transferability of Warrant. This Warrant is transferable on the books of
the Company at its principal office by the registered Holder hereof upon
surrender of this Warrant properly endorsed, subject to compliance with
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, of indemnity reasonably satisfactory to it, and, if mutilated,
upon surrender and cancellation of this Warrant, the Company will execute and
deliver a new Warrant, having terms and conditions substantially identical to
this Warrant, in lieu hereof.
16. Miscellaneous.
(a) Issue Date. The provisions of this Warrant shall be construed and
shall be given effect in all respect as if it had been issued and delivered
by the Company on the date hereof.
(b) Successors. This Warrant shall be binding upon any successors or
assigns of the Company.
(c) Governing Law. This Warrant shall be governed by and construed in
accordance with the laws of the State of 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.
6
<PAGE> 7
[ARGONAUT TECHNOLOGIES LOGO]
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 ______________, 1995 (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 3(b), (c) of the
Warrant.
3. The Holder surrenders the Warrant with this Notice of Exercise.
4. The Holder represents that it is acquiring the aforesaid shares of Common
Stock for investment and not with a view to, or for resale in connection
with, distribution and that the Holder has no present intention of
distributing or reselling the shares.
5. Please issue a certificate representing the shares of Common Stock in the
name of the Holder or in such other name as is specified below:
Name:
Address:
Taxpayer I.D.:
______________________________
(Holder)
By: _______________________
Title: _______________________
Date: _______________________
<PAGE> 1
EXHIBIT 10.9
ARGONAUT TECHNOLOGIES, INC.
-------------------------------
AMENDED AND RESTATED STOCKHOLDER RIGHTS AGREEMENT
Dated as of May 21, 1999
-------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
SECTION 1 Definitions.................................................... 1
SECTION 2 Information Rights............................................. 3
2.1 Financial Information........................................ 3
2.2 Assignment of Rights......................................... 4
SECTION 3 Rights of First Refusal On New Issuances....................... 4
3.1 Rights of First Refusal...................................... 5
3.2 Termination.................................................. 5
SECTION 4 Registration Rights............................................ 5
4.1 Requested Registration....................................... 5
4.2 Company Registration......................................... 8
4.3 Registration on Form S-3..................................... 9
4.4 Limitations on Subsequent Registration Rights................ 10
4.5 Expenses of Registration..................................... 10
4.6 Registration Procedures...................................... 10
4.7 Preparation; Reasonable Investigation........................ 12
4.8 Indemnification.............................................. 13
4.9 Information by Holder........................................ 15
4.10 Rule 144 Reporting........................................... 15
4.11 Transfer of Registration Rights.............................. 16
4.12 Termination.................................................. 16
4.13 Lockup Agreement............................................. 16
4.14 Representations and Warranties of Company.................... 16
SECTION 5 Miscellaneous Covenants........................................ 17
5.1 Proprietary Information Agreement............................ 17
5.2 Stock Vesting................................................ 17
5.3 Changes in Common Stock or Preferred Stock................... 17
5.4 Board of Directors........................................... 17
5.5 Termination.................................................. 18
SECTION 6 Legends........................................................ 18
6.1 Legends...................................................... 18
SECTION 7 Miscellaneous.................................................. 18
7.1 Governing Law................................................ 18
7.2 Entire Agreement; Amendment.................................. 18
7.3 Aggregation.................................................. 19
7.4 Notices, etc................................................. 19
7.5 Severability................................................. 19
7.6 Counterparts................................................. 19
7.7 Prior Agreement.............................................. 19
</TABLE>
-i-
<PAGE> 3
ARGONAUT TECHNOLOGIES, INC.
AMENDED AND RESTATED STOCKHOLDER RIGHTS AGREEMENT
THIS AMENDED AND RESTATED STOCKHOLDER RIGHTS AGREEMENT (the "AGREEMENT")
is made as of the 21st day of May, 1999, by and among Argonaut Technologies,
Inc., a Delaware corporation (the "COMPANY"), and the persons listed on the
Schedule of Stockholders attached hereto as Exhibit A (collectively the
"STOCKHOLDERS" and individually a "STOCKHOLDER").
RECITALS
WHEREAS, the Company and certain of the Stockholders entered into a
Stockholder Rights Agreement dated January 23, 1995 and amended and restated the
Stockholder Rights Agreement on each of April 23, 1996 and March 14, 1997 (the
"STOCKHOLDER RIGHTS AGREEMENT"), and such parties now desire to amend and
restate such agreement to read as set forth herein to provide similar rights to
the purchasers of the Company's Series D Preferred Stock (the "PURCHASERS");
WHEREAS, the Company and the Purchasers have entered into an agreement for
sale by the Company and purchase by the Purchasers of the Company's Series D
Preferred Stock of even date herewith; and
WHEREAS, in connection with the purchase and sale of the Company's
securities, the Company and the Purchasers desire to provide for (i) the rights
of the Purchasers with respect to registration of Common Stock issued upon
conversion of the shares of the Company's stock held by the Purchasers
according to the terms of this Agreement; and (ii) certain other provisions as
set forth below.
For good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the parties agree that the Stockholder Rights Agreement
shall be amended and restated to read as follows:
SECTION 1
Definitions
As used in this Agreement, the following terms shall have the following
respective meanings:
1.1 "Commission" shall mean the Securities and Exchange Commission of the
United States or any other U.S. federal agency at the time administering the
Securities Act of 1933.
1.2 "Common Stock" shall mean shares of the Company's Common Stock.
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1.3 "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any similar Federal statute, and the rules and regulations of the
Commission thereunder, as the same shall be in effect at the time.
1.4 "Holder" shall mean each of the Stockholders (and their transferees
as permitted by Section 4.10) holding Registrable Securities or securities
convertible into Registrable Securities.
1.5 "Initiating Holders" shall mean Holders who in the aggregate hold
greater than forty percent (40%) of the Registrable Securities.
1.6 "Other Holders" shall mean holders of Company securities, other than
the Holders, proposing to distribute their securities pursuant to a
registration under Section 4 of this Agreement.
1.7 "Preferred" shall mean shares of the Company's Series A Preferred
Stock, Series A-1 Preferred Stock, Series B Preferred Stock, Series B-1
Preferred Stock, Series C Preferred Stock, Series C-1 Preferred Stock, Series D
Preferred Stock or Series D-1 Preferred Stock.
1.8 "Registrable Securities" means Common Stock originally purchased or
Common Stock issued or issuable on conversion of the Preferred and any shares of
Common Stock issued or issuable in respect of such Common Stock upon any stock
split, stock dividend, recapitalization, or similar event. Shares of Common
Stock or other securities shall only be treated as Registrable Securities if
they have not been sold to or through a broker or dealer or underwriter in a
public distribution or a public securities transaction.
1.9 The term "register," "registered" and "registration" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.
1.10 "Registration Expenses" shall mean all expenses, except as otherwise
stated below, incurred by the Company in complying with Sections 4.1, 4.2, and
4.3 hereof, including, without limitation, all registration, qualification and
filing fees, printing expenses, escrow fees, fees and disbursements of counsel
and independent public accountants for the Company (and fees and disbursements
of one special counsel for Holders, if any), blue sky fees, transfer taxes, fees
of transfer agents and registrars and expenses and the expense of any special
audits incident to or required by any such registration (but excluding the
compensation of regular employees of the Company which shall be paid in any
event by the Company).
1.11 "Securities" shall mean Common Stock or Preferred.
1.12 "Securities Act" shall mean the Securities Act of 1933, as amended,
or any similar United States federal statute and the rules and regulations of
the Commission thereunder, all as the same shall be in effect at the time.
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1.13 "Selling Expenses" shall mean all underwriting discounts and selling
commissions applicable to the securities registered by the Holders.
SECTION 2
Information Rights
2.1 Financial Information. As soon as practicable after the end of each
fiscal year, and in any event within one hundred twenty (120) days thereafter,
the Company will provide each Stockholder with consolidated balance sheets of
the Company and its subsidiaries, if any, as of the end of such fiscal year,
and consolidated statements of income, stockholders' equity and cash flows of
the Company and its subsidiaries, if any, for such year, prepared in accordance
with generally accepted accounting principles and setting forth in each case in
comparative form the figures for the previous fiscal year, all in reasonable
detail and audited (without qualification as to scope) by independent auditors
of national standing selected by the Company. In addition, the Company will
provide each Stockholder with the following reports for so long as the
Stockholder is a holder of a minimum of one hundred twenty five thousand
(125,000) shares of Preferred or Common Stock, including for purposes of this
Section 2 any such Shares which have been transferred to an affiliate of a
Stockholder:
(a) As soon as practicable after the end of each month and fiscal
quarter, and in any event within thirty (30) days and forty-five (45) days,
respectively, thereafter, a consolidated balance sheet of the Company and its
subsidiaries, if any, as of the end of each such period, consolidated
statements of income, consolidated statements of changes in financial condition,
a consolidated statement of cash flow of the Company and its subsidiaries and a
statement of stockholders' equity for such period and for the current fiscal
year to date, and setting forth in each case in comparative form the figures
for corresponding periods in the previous fiscal year, and setting forth in
comparative form the budgeted figures, prepared in accordance with generally
accepted accounting principles (other than for accompanying notes), subject to
changes resulting from year-end audit adjustments, all in reasonable detail and
signed by the principal financial or accounting officer of the Company.
(b) As soon as practicable after its adoption by the Board of
Directors, a copy of the annual operating plan of the Company for the next
fiscal year and an annual budget for the next fiscal year of the Company
containing profit and loss projections, cash flow projections and capital
expenditures, all on a monthly basis.
2.2 Assignment of Rights. The rights granted pursuant to Section 2.1 may
be assigned or otherwise conveyed by a Stockholder to an affiliate of a
Stockholder or to a transferee who acquires (i) at least one hundred twenty five
thousand (125,000) shares of Preferred or (ii) all shares of Preferred or Common
Stock held by such transferor. Notwithstanding the foregoing, the rights granted
pursuant to Section 2.1 may not be assigned or otherwise conveyed to a
competitor of the
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Company, as reasonably determined by the Board of Directors of the Company
excluding any director with an interest in such transferee. The Stockholder
shall provide the Company with written notice of any assignment or conveyance of
the rights granted pursuant to Section 2.1.
2.3 Termination. The provisions of Sections 2, 3 and 5, including
information rights, rights of first refusal and miscellaneous covenants, shall
terminate upon the closing of a firmly underwritten public offering of the
Common Stock of the Company with a sales price per share (as adjusted for
combinations, stock dividends, subdivisions or split-ups) of at least $6.50 and
with aggregate gross proceeds to the corporation, at the public offering price,
of at least $25,000,000, and the provisions of Section 3 shall not be applicable
to such transaction.
SECTION 3
Rights of First Refusal On New Issuances
3.1 Rights of First Refusal. The Company hereby grants to each Stockholder
the right of first refusal to purchase such Stockholder's pro rata portion of
New Securities (as defined in Section 3.1(a)) that the Company may, from time to
time, propose to sell and issue. Such shares of Common Stock held by such
Stockholder (including Common Stock issuable upon conversion of securities
convertible into Common Stock of the Company held by such Stockholder, including
the Preferred) divided by the total number of shares of Common Stock outstanding
at the time of issuance of such New Securities (including Common Stock issuable
upon conversion of all outstanding securities convertible into Common Stock,
including the Preferred). This right of first refusal shall be subject to the
following provisions:
(a) "NEW SECURITIES" shall mean any Common Stock of the Company,
whether now authorized or not, and any rights, options, or warrants to purchase
said Common Stock, and securities of any type whatsoever that are, or may
become, convertible into Common Stock; provided, however, that "New Securities"
does not include (i) shares of Common Stock issued upon conversion of the
Preferred Stock; (ii) securities issued pursuant to the acquisition of another
corporation by the Company by merger, purchase of substantially all of the
assets, or other reorganization; (iii) up to 2,500,000 shares and such
additional shares as approved by the unanimous written consent of the Board of
Directors or the unanimous vote of the members of the Company's Board of
Directors present and voting at a duly held meeting (as adjusted for stock
splits, stock dividends or recapitalization) of the Company's Common Stock (or
related options) issued to employees, officers, directors, consultants, or other
persons performing services for the Company (including, but not by way of
limitation, distributors and sales representatives) pursuant to any stock
offering, plan, or arrangement; (iv) securities issued to financial institutions
regularly engaged in the business of the lending money or providing equipment
lease financing in connection with the extension of credit to the Company for
the purpose of financing equipment, inventory, or accounts receivable or in
connection with the lease of equipment and in both cases for other than equity
financing.
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purposes; (v) securities issued to customers or potential customers of the
Company in connection with participation in a product development consortium or
other corporate partner transaction with the Company for purposes which are not
primarily equity financing; or (vi) shares of the Company's Common Stock issued
in connection with any stock split, stock dividend, or recapitalization by the
Company.
(b) In the event that the Company proposes to issue New Securities,
it shall give each Stockholder at least thirty (30) days prior written notice of
its intention, describing the type of New Securities, the price, and the general
terms upon which the Company proposes to issue the same. Each Stockholder shall
have twenty (20) days from the date of mailing of any such notice to agree to
purchase its pro rata share of such New Securities for the price and upon the
general 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 that a Stockholder fails to exercise in full the
right of first refusal within said twenty (20) day period, the Company shall
have seventy-five (75) 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 thirty (30) days from the date of said agreement) the New
Securities respecting which the Stockholder's rights were not exercised, at a
price and upon general terms no more favorable to the purchasers thereof than
specified in the Company's notice. In the event the Company has not sold the
New Securities within said seventy-five (75) day period (or sold and issued New
Securities in accordance with the foregoing within thirty (30) days from the
date of said agreement), the Company shall not thereafter issue or sell any New
Securities, without first offering such securities to the Stockholders in the
manner provided above.
(d) The Stockholder's failure to exercise this right of first
refusal on any issuance of New Securities shall not adversely affect the
Stockholder's right of first refusal to purchase subsequent issuances of New
Securities.
(e) The right of first refusal set forth in this Section 3.1 is
nonassignable except to another Stockholder or another entity under common
control with a Stockholder.
3.2 Termination. The provisions of this Section 3 shall terminate in
accordance with the provisions of Section 2.3.
SECTION 4
Registration Rights
4.1 Requested Registration.
(a) Request for Registration. If the Company shall receive from
Initiating Holders a written request that the Company effect any registration,
qualification or compliance with respect
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to not less than forty percent (40%) of the Registrable Securities (or such
lesser percentage of the Registrable Securities if the reasonably anticipated
aggregate price to the public thereof would exceed $5,000,000) the Company will:
(i) promptly give written notice of the proposed registration,
qualification or compliance to all other Holders and afford each Holder the
opportunity of including in the registration such Registrable Securities owned
by such Holder; and
(ii) as soon as practicable, use its best efforts to effect such
registration, qualification or compliance (including, without limitation,
appropriate qualification under applicable blue sky or other state securities
laws and appropriate compliance with applicable regulations issued under the
Securities Act and any other governmental requirements or regulations) as may be
so requested and as would permit or facilitate the sale and distribution of all
or such portion of such Registrable Securities as are specified in such request,
together with all or such portion of the Registrable Securities of any Holder or
Holders joining in such request as are specified in a written request received
by the Company within twenty (20) days after receipt of such written notice from
the Company;
Provided, however, that the Company shall not be obligated to take any
action to effect any such registration, qualification or compliance pursuant to
this Section 4.1:
(A) 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;
(B) Prior to the earlier to occur of (i) six (6) months after the
effective date of the Company's first registered public offering of its stock or
(ii) December 31, 20001;
(C) During the period starting with the sixty (60) days prior to the
Company's estimated date of filing of, and ending on the date six (6) months
immediately following the effective date of, a registration statement in
connection with the initial public offering of securities of the Company,
provided that the Company is actively employing in good faith all reasonable
efforts to cause such registration statement to become effective;
(D) During the period starting with the date thirty (30) days prior
to the Company's estimated date of filing of, and ending on the date three (3)
months immediately following the effective date of, any registration statement
pertaining to securities of the Company sold by the Company (other than a
registration of securities in a Rule 145 transaction or with respect to an
employee benefit plan), provided that the Company is actively employing in good
faith all reasonable efforts to cause such registration statement to become
effective;
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(E) After the Company has effected two registrations pursuant to this
paragraph 4.1, and such registrations have been declared or ordered effective,
provided that all Registrable Securities requested to be included in each such
registration were in fact included in the registration;
(F) If the Company shall furnish to such Holders a certificate signed
by the President of the Company, and concurred to in writing by an underwriter
or other financial advisor of the Company, stating that in the good faith
judgment of the Board of Directors it would be seriously detrimental to the
Company or its stockholders for a registration statement to be filed in the near
future, then the Company's obligation to use its best efforts to register,
qualify or comply under this Section 4 shall be deferred for a period not to
exceed ninety (90) days from the date of receipt of written request from the
Initiating Holders, provided, however, that the Company shall not utilize this
right more than once in any twelve (12) month period.
Subject to the foregoing clauses (A) through (F), 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.
(b) Underwriting. In the event that a registration pursuant to Section 4.1
is for a registered public offering involving an underwriting, the Initiating
Holders will so advise the Company as part of the written request given by such
Initiating Holders pursuant to Section 4.1(a), and the Company shall in turn
advise the Holders as part of the notice given pursuant to Section 4.1(a)(i). In
such event, the right of any Holder to registration pursuant to Section 4.1
shall be conditioned upon such Holder's participation in the underwriting
arrangements required by this Section 4.1, and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent shall be limited to the
extent provided herein.
The Company shall (together with all Holders proposing to distribute their
securities through such underwriting) enter into an underwriting agreement in
customary form with the managing underwriter selected for such underwriting by
the Company, but subject to the reasonable approval of a majority in interest of
the Initiating Holders. Notwithstanding any other provision of this Section 4.1,
if the managing underwriter advises the Initiating Holders in writing that the
number of shares to be underwritten exceeds the number that can be sold in such
offering so as to be likely to have a material adverse effect on the price or
amount at which the Initiating Holders can sell their Shares, then the Company
shall so advise all Holders and Other Holders, and the number of shares that may
be included in the registration and underwriting shall be allocated first among
all Holders in proportion, as nearly as practicable, to the respective amounts
of Registrable Securities held by such Holders at the time of filing the
registration statement and second among the Other Holders in proportion to the
number of shares proposed to be included in such registration by such Other
Holders. No Registrable Securities or other securities excluded from the
underwriting by reason of the underwriter's marketing limitation shall be
included in such registration. To facilitate the allocation of shares in
accordance with the above provisions, the Company or the underwriters may round
the number of shares allocated to any holder to the nearest one hundred (100)
shares.
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If any Holder of Registrable Securities or Other Holder disapproves
of the terms of the underwriting, such person may elect to withdraw therefrom
by written notice to the Company, the managing underwriter and the Initiating
Holders. The Registrable Securities and/or other securities so withdrawn shall
also be withdrawn from registration.
4.2 Company Registration
(a) Notice of Registration. If at any time or from time to time the
Company shall determine to register any of its securities, either for its own
account or the account of a security holder or holders, other than (i) a
registration relating solely to employee benefit plans, or (ii) a registration
relating solely to a Rule 145 transaction, the Company will:
(i) promptly give to each Holder written notice thereof; and
(ii) include in such registration (and any related qualification
under blue sky laws or other compliance), and in any underwriting involved
therein, all the Registrable Securities specified in a written request or
requests, made by any Holder within twenty (20) days after receipt of such
written notice from the Company.
(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 a part of the written notice given
pursuant to Section 4.2(a)(i). In such event the right of any Holder to
registration pursuant to Section 4.2 shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of 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, enter into an underwriting agreement in
customary form with the managing underwriter selected for such underwriting by
the Company. Notwithstanding any other provision of this Section 4.2, if the
managing underwriter determines that marketing factors require a limitation of
the number of shares to be underwritten, the managing underwriter may limit the
number of shares of Registrable Securities to be included in such registration
without requiring any limitation in the number of shares to be registered on
behalf of the Company, provided that if such underwriting is other than an
initial public offering the number of shares of Registrable Securities held by
Holders and Other Holders to be included in such registration shall not be
limited to less than twenty-five percent (25%) of the total number of shares to
be included in such registration. The Company shall so advise all Holders and
Other Holders and the number of shares that may be included in the registration
and underwriting by all Holders and Other Holders shall be allocated among them,
as nearly as practicable, first, to the Company (or, if applicable, to the
holders for whose account the Company is registering the securities), second,
among the Holders of Registrable Securities in proportion to the respective
amounts of Registrable Securities held by such Holders at the time of filing of
the registration statement, and, third, among the Other Holders in proportion
to the number of shares proposed to be included in such registration by such
Other Holders; provided, however, that at all times, such allocation shall be
subject to the twenty-five percent (25%) threshold set forth in the preceding
sentence if such registration and underwriting is
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other than an initial public offering. To facilitate the allocation of shares
in accordance with the above provisions, the Company may round the number of
shares allocated to any Holder or Other Holder to the nearest one hundred (100)
shares. If any Holder or Other Holder disapproves of the terms of any such
underwriting, such holder may elect to withdraw therefrom by written notice
to the Company and the managing underwriter. Any securities excluded or
withdrawn from such underwriting shall be withdrawn from such registration.
(c) Right to Terminate Registration. The Company shall have the
right to terminate or withdraw any registration initiated by it under this
Section 4.2 prior to the effectiveness of such registration whether or not any
Holder has elected to include Registrable Securities in such registration.
4.3 Registration on Form S-3.
(a) Request for Registration. If any Holder or Holders request that
the Company file a registration statement on Form S-3 (or any successor form to
Form S-3) for a public offering of shares of the Registrable Securities held by
such party the reasonably anticipated aggregate price to the public of which
would exceed $1,000,000 and the Company is a registrant entitled to use Form
S-3 to register the Registrable Securities for such an offering, the Company
shall use its best efforts to cause such Registrable Securities to be
registered for the offering on such form and to cause such Registrable
Securities to be qualified in such jurisdictions as the Holder or Holders may
reasonably request. The substantive provisions of Section 4.1(b) shall be
applicable to each registration initiated under this Section 4.3.
(b) Limitations. Notwithstanding the foregoing, the Company shall
not be obligated to take any action pursuant to this Section 4.3: (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)
with respect to Section 4.3 only, for a period of one hundred twenty (120) days
after receipt of the request of the initiating Holders, if the Company, within
ten (10) days after such receipt gives notice of its bona fide intention to
effect the filing of a registration statement with the Commission within ninety
(90) days of receipt of such request (other than with respect to a registration
statement relating to a Rule 145 transaction, an offering solely to employees
or any other registration which is not appropriate for the registration of
Registrable Securities) and the Company shall promptly notify the initiating
Holders in the event it abandons its intention to effect such registration
statement; (iii) during the period starting with the date sixty (60) days prior
to the Company's estimated date of filing of, and ending on the date six (6)
months immediately following, the effective date of any registration statement
pertaining to securities of the Company (other than a registration of
securities in a Rule 145 transaction or with respect to an employee benefit
plan), provided that the Company is actively employing in good faith all
reasonable efforts to cause such registration statement to become effective
and, provided further that the Company shall have the right to defer filing a
registration statement under the Securities Act not more than one in any twelve
month period; or (iv) if the Company shall furnish to such Holder a
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certificate signed by the President of the Company stating that in the good
faith judgment of the Board of Directors it would be seriously detrimental to
the Company or the stockholders as a whole for registration statements to be
filed in the near future, then the Company's obligation to use its best efforts
to file a registration statement shall be deferred for a period not to exceed
ninety (90) days from the receipt of the request to file such registration by
such Holder, provided, however, that the Company shall not utilize this right
more than once in any twelve (12) month period.
4.4 Limitations on Subsequent Registration Rights. From and after the date
hereof, the Company, will not, without the prior written consent of holders of a
majority of the voting power of the then outstanding Registrable Securities,
enter into any agreement with any holder or prospective holder of any securities
of the Company which allows such holder or prospective holder of any securities
of the Company to include such securities in any registration filed under
Sections 4.1, 4.2 or 4.3 hereof, unless, under the terms of such agreement, such
holder or prospective holder may include such securities in any such
registration only to the extent that the inclusion of his securities will not
diminish the amount of Registrable Securities which are included. However, the
Company may by agreement grant such holder or prospective holder a registration
right analogous to that set forth in Section 4.1 provided that (i) such holder
or prospective holder may not demand a registration analogous to that set forth
in Section 4.1 at any time earlier than the Holders first have such right, and
(ii) that the Registrable Securities may be included in any such registration
demanded by such holders to the extent such inclusion will not diminish the
amount of securities of such holders which are included.
4.5 Expenses of Registration.
(a) Registration Expenses. The Company shall bear all Registration
Expenses incurred in connection with all registrations pursuant to Section 4.1
or Section 4.2 and up to four registrations pursuant to Section 4.3.
(b) Selling Expenses. Unless otherwise stated in Section 4.5(a), all
Selling Expenses and Registration Expenses relating to securities registered on
behalf of the Holders shall be borne by the Holders pro rata on the basis of the
number of shares so registered by such Holder.
4.6 Registration Procedures. In the case of each registration,
qualification or compliance effected by the Company pursuant to this Agreement,
the Company will:
(a) keep each Holder advised in writing as to the initiation of each
registration, qualification and compliance and as to the completion thereof;
(b) as soon as practicable, prepare and file with the Commission a
registration statement with respect to such securities and use its best efforts
to cause such registration statement to become and remain effective until the
earlier of (i) one hundred twenty (120) days or (ii) the distribution described
in the Registration Statement has been completed; provided, however, that (i)
such 120-day period shall be extended for a period of time equal to the period
the Holder refrains
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from selling any securities included in such registration at the request of an
underwriter of Common Stock (or other securities) of the Company; and (ii) in
the case of any registration of Registrable Securities on Form S-3 which are
intended to be offered on a continuous or delayed basis, such 120-day period
shall be extended, if necessary, to keep the registration statement effective
until all such Registrable Securities are sold, provided that Rule 145, or any
successor rule under the Securities Act, permits an offering on a continuous or
delayed basis, and, provided further, that applicable rules under the
Securities Act governing the obligation to file a post-effective amendment
permit, in lieu of filing a post-effective amended which (I) includes any
prospectus required by Section 10(a)(3) of the Securities Act or (II) reflects
facts or events representing a material or fundamental change in the
information set forth in the registration statement, the incorporation by
reference of information required to be included in (I) and (II) above to be
contained in periodic reports filed pursuant to Section 13 or 15(d) of the
Exchange Act in the registration statement;
(c) furnish to the Holders participating in such registration and to
the underwriters of the securities being registered such reasonable number of
copies of the registration statement, preliminary prospectus, final prospectus
and such other documents as such underwriters may reasonably request in order
to facilitate the public offering of such securities;
(d) 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;
(e) in the event of an underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and customary
form, with the managing underwriter of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement;
(f) notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating hereto 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 material fact or omits to state
a material fact required to be stated therein or necessary to make the
statements made therein not misleading in the light of the circumstances then
existing;
(g) provide a transfer agent and registrar for all Registrable
Securities registered pursuant hereunder and a CUSIP number for all such
Registrable Securities, in each case not later than the effective date of such
registration;
(h) use its best efforts to register or qualify such Registrable
Securities under such other securities or blue sky laws of such jurisdictions
as any Holder reasonably requests and do any and all other acts and things
which may be necessary or advisable to enable such holder to consummate the
disposition in such jurisdictions of the Registrable Securities owned by such
seller;
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provided, that the Company will not be required to (i) qualify generally to do
business in any jurisdiction where it would not otherwise be required to
qualify but for this paragraph (d), (ii) subject itself to taxation in any such
jurisdiction or (iii) consent to general service or process in any such
jurisdiction, but the Company will be required to consent to service or process
in actions arising out of or in connection with the sale of the Registrable
Securities or any violation of state securities laws;
(i) use its best efforts to cause the Registrable Securities covered
by such registration statement to be registered with or approved by any other
governmental agencies or authorities as may be necessary by virtue of the
business and operations of the Company to enable the seller or sellers thereof
to consummate the disposition of such Registrable Securities;
(j) use its best efforts to obtain a comfort letter from the
Company's independent public accountants in customary form and covering such
matters of the type customarily covered by comfort letters with respect to
offerings of such type as the Holders may reasonably request;
(k) otherwise 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 a period of twelve
months, beginning within three months after the effective date of the
registration statement, which earnings statement shall satisfy the provisions
of Section 11(a) of the Securities Act and rule 158 thereunder; and
(l) cause all such Registrable Securities to be listed on each
securities exchange on which similar securities issued by the Company are then
listed, provided that the applicable listing requirements are satisfied.
The Company may require each holder of Registrable Securities as to
which any registration is being effected to furnish to the Company such
information regarding the distribution of such Registrable Securities as the
Company may from time to time reasonably request in writing.
4.7 Preparation: Reasonable Investigation.
In connection with the preparation and filing of each registration
statement under the Securities Act pursuant to this Agreement, the Company will
give each Holder of Registrable Securities, their underwriters, if any, and
their respective counsel and accountants, the opportunity to participate in the
preparation of such registration statement, each prospectus included therein or
filed with the Commission, and each amendment, thereof or supplement thereto,
and will give each of them such access to its books and records and such
opportunities to discuss the business of the Company with its officers and the
independent public accountants who have certified its financial statements as
shall be necessary, in the opinion of such Holders' and such underwriters'
respective counsel, to conduct a reasonable investigation within the meaning of
the Securities Act.
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<PAGE> 15
4.8 Indemnification.
(a) By Company. The Company will indemnify and hold harmless each
Holder, each of its officers and directors and partners, 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 Agreement, and each underwriter, if any, and each
person who controls any underwriter within the meaning of Section 15 of the
Securities Act and each Stockholder and its officers, directors and partners
and each person controlling such Stockholder within the meaning of Section 15
of the Securities Act, against all expenses, claims, losses, damages or
liabilities, joint or several, (or actions in respect thereof), including any
of the foregoing incurred in settlement of any litigation, commenced or
threatened, arising out of or based on any untrue statement (or alleged untrue
statement) of a material fact contained in any registration statement,
prospectus, offering circular or other document, or any amendment or supplement
thereto, incident to any such registration, qualification or compliance, or
based on any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading, or any
violation by the Company of the Securities Act, the Exchange Act or any state
or federal securities law, or any rule or regulation promulgated under such
Acts or law applicable to the Company in connection with any such registration,
qualification or compliance, and the Company will reimburse each such Holder,
each of its officers, directors and partners, and each person controlling such
Holder, each such underwriter and each person who controls any such
underwriter, each Stockholder, each of its officers, directors and partners and
each person controlling such Stockholder, in advance of the final disposition
of such matter, for any legal and any other expenses reasonably incurred in
connection with investigating, preparing or defending any such claim, loss,
damage, liability or action, provided that the Company will not be liable in
any such case to any such Holder to the extent that any such claim, loss,
damage, liability or expense arises out of or is based on any untrue statement
or omission or alleged untrue statement or omission, made in reliance upon and
in conformity with written information furnished to the Company by an
instrument duly executed by such Holder, controlling person, underwriter or
Stockholder and stated to be specifically for use therein. If the Holders and
Stockholders are represented by counsel other than counsel for the Company, the
Company will not be obligated under this Section 4.7(a) to reimburse legal fees
and expenses of more than one separate counsel for all Holders and Stockholders.
(b) By Holders. Each Holder will, if Registrable Securities held by
such Holder are included in the securities as to which such registration,
qualification or compliance is being effected, indemnify and hold harmless the
Company, each of its directors, each of its officers, 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, and each other such Holder, each of its
officers and directors and each person controlling such Holder within the
meaning of Section 15 of the Securities Act, 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
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<PAGE> 16
fact required to be stated therein or necessary to make the statements therein
not misleading, and will reimburse the Company, such Holders, such directors,
officers, 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, that
only to the extent, that such untrue statement (or alleged untrue statement) or
omission (or alleged omission) is made in such registration statement,
prospectus, offering circular or other document in reliance upon and in
conformity with written information furnished to the Company by an instrument
duly executed by such Holder and stated to be specifically for use therein.
Notwithstanding the foregoing, the liability of each Holder under this
subsection (b) shall be limited in an amount equal to the public offering price
of the Registrable Securities sold by such Holder, unless such liability arises
out of or is based on willful misconduct by such Holder.
(c) Procedures. Each party entitled to indemnification under this Section
4.8 (the "Indemnified Party") shall given written 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 indemnify may
be sought, and shall permit the Indemnifying Party to assume the defense of any
such claim or any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or litigation,
shall be approved by the Indemnified Party (whose approval shall not be
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 Agreement unless the failure
to give such notice is materially prejudicial to an Indemnifying Party's
ability to defend such action and provided further, that the Indemnifying Party
shall not assume the defense for matters as to which there is conflict of
interest or separate and different defenses. No Indemnifying Party, in the
defenses of any such claim or litigation, shall, except with the consent of
each Indemnified Party, consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the giving
by the claimant or plaintiff to such Indemnified Party of a release from all
liability in respect to such claim or litigation.
(d) Contribution. If the indemnification provided for in this Section 4.8
is held by a court of competent jurisdiction to be unavailable to an
Indemnified Party or is insufficient 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 it 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. The amount paid or payable by a party as a result
of any loss, liability, claim, damage or expense referred to above shall
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<PAGE> 17
be deemed to include, subject to the limitations set forth in Section 4.8(c),
any legal or other fees, or expenses reasonably incurred by such party in
connection with any investigation or proceeding. If indemnification is
available under this Section 4.8, the indemnifying parties shall indemnify each
indemnified party to the full extent provided in Section 4.8(a) and (b) without
regard to the relative fault of said indemnifying party or indemnified party or
other equitable consideration provided for in this Section 4.8(d).
(e) Controlling Agreement. 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 of this Section 4.8, the
provisions in the underwriting agreement shall control.
4.9 Information by Holder. The Holder or Holders of Registrable
Securities included in any registration shall furnish to the Company such
information regarding such Holder or Holders, the Registrable Securities held
by them and the distribution proposed by them as the Company may request in
writing and only as shall be necessary to enable the Company to comply with the
provisions hereof in connection with any registration, qualification or
compliance referred to in this Agreement.
4.10 Rule 144 Reporting. With a view to making available the benefits of
certain rules and regulations of the Commission which may at any time permit the
sale of the Registrable Securities to the public without registration, after
such time as a public market exists for the Common Stock of the Company, the
Company agrees to use its best efforts to:
(a) Make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act, at all times after
the effective date that the Company becomes subject to the reporting
requirements of the Securities Act or the Exchange Act.
(b) Use its best efforts to file with the Commission in a timely
manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act (at any time after it has become subject to
such reporting requirements);
(c) Furnish to any Holder forthwith upon request a written statement
by the Company as to its compliance with the reporting requirements of Rule 144
(at any time after 90 days after 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
becomes subject to such reporting requirements), a copy of the most recent
annual or quarterly report of the Company, and such other reports and documents
of the Company and other information in the possession of or reasonably
obtainable by the Company as such Holder may reasonably request in availing
itself of any rule or regulation of the Commission allowing such Holder to sell
any such securities without registration.
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<PAGE> 18
4.11 Transfer of Registration Rights. The rights to cause the Company to
register securities granted Holders under Sections 4.1, 4.2 and 4.3 may be
assigned in connection with any transfer or assignment by a Holder of
Registrable Securities provided that: (i) such transfer may otherwise be
effected in accordance with applicable securities laws, (ii) such transfer is
effected in compliance with the restrictions on transfer contained in this
Agreement and in any other agreement between the Company and the Holder, and
(iii) such assignee or transferee is a constituent partner of a Stockholder or
purchases (a) at least 125,000 shares of Preferred or Common Stock into which
such Preferred has been converted or (b) all shares of Preferred and Common
Stock, into which such Preferred has been converted, held by a Stockholder. No
transfer or assignment will divest a Holder or any subsequent owner of such
rights and powers unless all Registrable Shares are transferred or assigned.
4.12 Termination. The registration rights granted pursuant to this Section
4 shall terminate as to any Holder at the later of (i) five years after the
Company's initial public offering or (ii) after the effective date of the
Company's first registered public offering of its stock, at such time as such
Holder may sell under Rule 144, or a successor rule, in a three month period all
Registrable Securities then held by such Holder.
4.13 Lockup Agreement. Each Holder agrees that, if, in connection with the
Company's initial public offering of the Company's securities, the Company or
the underwriters managing the offering so request, the Holder shall not sell,
make any short sale of, loan, grant any option for the purchase of, or otherwise
dispose of any Registrable Securities (other than those included in the
registration) without the prior written consent of the Company or such
underwriters, as the case may be, for such period of time (not to exceed one
hundred eighty (180) days) from the effective date of such registration as may
be requested by the Company or the underwriters; provided that each officer and
director of the Company who owns stock of the Company also agrees to such
restrictions. This Section 4.13 shall be binding on all transferees or assignees
of Registrable Securities, whether or not such persons are entitled to
registration rights pursuant to Section 4.11.
4.14 Representations and Warranties of the Company. The Company represents
and warrants to each of the Stockholders as follows:
(i) The execution, delivery and performance of this Agreement by the
Company have been duly authorized by all requisite corporate action and will not
violate any provision of law, any order of any court or other agency of
government, the Restated Certificate or By-laws of the Company or any provision
of any indenture, agreement or other instrument to which it or any or its
properties or assets is bound, conflict with, result in a breach of or
constitute (with due notice or lapse of time or both) a default under any such
indenture, agreement or other instrument or result in the creation or imposition
of any lien, charge or encumbrance of any nature whatsoever upon any of the
properties or assets of the Company.
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<PAGE> 19
(ii) This Agreement has been duly executed and delivered by the
Company and constitutes the legal, valid and binding obligation of the Company,
enforceable in accordance with its terms.
SECTION 5
Miscellaneous Covenants
5.1 Proprietary Information Agreement. Unless otherwise determined by
Board of Directors, the Company shall require all future officers, directors
and employees of, and consultants to, the Company and its subsidiaries, if any,
to execute a proprietary information agreement providing for the protection of
the Company's proprietary or confidential information and the assignment of
intellectual property rights to the Company.
5.2 Stock Vesting. The Company shall cause all future recipients of the
Company's Common Stock or options to purchase the Company's Common Stock
receiving such securities in connection with the performance of services for
the Company to execute and deliver agreements providing that such Common Stock
shall be subject to a right of the Company to repurchase such Common Stock at
the original purchase price in the event that the relationship of such person
with the Company is terminated, which right shall lapse over a four-year
period, or providing that such options shall become exercisable over a
four-year period based upon continuing employment, or providing such other
vesting arrangements as determined appropriate by the Company's Board of
Directors.
5.3 Changes in Common Stock or Preferred Stock. If, and as often as,
there is any change in the Common Stock or the Preferred by way of a stock
split, stock dividend, combination or reclassification, or through a merger,
consolidation, reorganization or recapitalization, or by any other means,
appropriate adjustment shall be made in the provisions hereof so that the
rights and privileges granted hereby shall continue with respect to the Common
Stock or the Preferred as so changed.
5.4 Board of Directors. At each election of the Board of Directors of the
Company, each Stockholder agrees to vote a sufficient number of shares of
Preferred and Common Stock to elect one (1) representative of the Series D
Preferred Stock and Series D-1 Preferred Stock to the Board of Directors, which
representative shall be designated by holders of a majority in interest of the
Series D Preferred Stock and Series D-1 Preferred Stock. In the event any
director elected pursuant to the terms of this Section 5.4 ceases to serve as a
member of the Board of Directors, the Company and the Stockholders agree to
take all such action as is reasonable and necessary, including the voting of
shares of capital stock of the Company by the Stockholders as to which they
have beneficial ownership, to cause the election or appointment of such other
substitute person to the Board of Directors as may be designated pursuant to
this Section 5.4.
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<PAGE> 20
5.5 Termination. The provisions of this Section 5 shall terminate in
accordance with the provisions of Section 2.3.
SECTION 6
Legends
6.1 Legends. Each Stockholder understands that the share certificates
evidencing any Registrable Securities shall be endorsed with the following
legends (in addition to any legends required under applicable state securities
laws):
(a) "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN
THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE
SECURITIES UNDER SUCH ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY
THAT SUCH REGISTRATION IS NOT REQUIRED."
(b) "THE SALE, TRANSFER OR ASSIGNMENT OF THE SECURITIES REPRESENTED
BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS OF AN AGREEMENT BETWEEN THE
COMPANY AND THE REGISTERED HOLDER OR HIS PREDECESSOR IN INTEREST. COPIES OF
SUCH AGREEMENT MAY BE OBTAINED BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD
OF THIS CERTIFICATE TO THE SECRETARY OF THE COMPANY.
(c) Any legend required to be placed thereon by the California
Commissioner of Corporations or any other applicable state securities laws.
SECTION 7
Miscellaneous
7.1 Governing Law. This Agreement shall be governed in all respects by the
laws of the State of California as applied to contracts made and to be fully
performed entirely within that state between residents of that state. All
disputes arising out of this Agreement shall be subject to the exclusive
jurisdiction and venue of the California state courts of Santa Clara County,
California, (or, if there is exclusive federal jurisdiction, the United States
District Court for the Northern District of California) and the parties consent
to the personal and exclusive jurisdiction and venue of these courts.
7.2 Entire Agreement: Amendment. This Agreement constitutes the full and
entire understanding and agreement between the parties with regard to the
subjects hereof and thereof. This Agreement or any term hereof may be amended,
waived, discharged or terminated by a written
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<PAGE> 21
instrument signed by the Company and (i) the Holders, or transferees of such
Holders, holding more than fifty percent (50%) of the Registrable Securities,
and (ii) with respect to Section 5.4 hereof, the Holders, or transferees of
such Holders, holding more than fifty percent (50%) of the Series D Preferred
Stock and Series D-1 Preferred Stock, voting together as a separate class;
provided, however, that no such amendment may treat any Holder in a manner
different from the other Holders.
7.3 Aggregation. For the purposes of determining the number of shares of
Registrable Securities held by a transferee or assignee, the holdings of
transferees and assignees of a partnership who are partners or retired partners
of such partnership (including spouses and ancestors, lineal descendants and
siblings of such partners or spouses who acquire Registrable Securities by
gift, will or intestate succession) shall be aggregated together and with the
partnership; provided, that all assignees and transferees who would not qualify
individually for assignment of registration rights shall have a single
attorney-in-fact for the purpose of exercising any rights, receiving notices or
taking any action under Sections 2 and 4.
7.4 Notices, etc. All notices and other communications required or
permitted hereunder shall be deemed given if in writing and mailed by
registered or certified mail, postage prepaid, or otherwise delivered by hand
or by messenger, addressed (a) if to a Holder, at such Holder's address as set
forth on Exhibit A to this Agreement, or at such other address as such Holder
shall have furnished to the Company in writing, or (b) if to any other holder
of any Registrable Securities, at such address as such holder shall have
furnished the Company in writing, or until any such holder so furnishes an
address to the Company, then to and at the address of the last holder of such
Registrable Securities who has so furnished an address to the Company, or (c)
if to the Company, at the address of its principal offices and addressed to the
attention of the Corporate Secretary and with a copy to Wilson, Sonsini,
Goodrich & Rosati, 650 Page Mill Road, Palo Alto, California 94304-1050,
Attention: Michael J. O'Donnell, or at such other address as the Company shall
have furnished to the Purchasers.
7.5 Severability. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision; provided that no such severability shall be effective
if it materially changes the economic benefit of this Agreement to any party.
7.6 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall constitute one
instrument.
7.7 Prior Agreement. This Agreement is intended to supersede and replace
that certain Amended Stockholder Rights Agreement dated as of March 14, 1997,
which prior agreement is hereby canceled.
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<PAGE> 1
EXHIBIT 10.10
October 29, 1996
David P. Binkley, Ph.D.
239 Keeler Drive
Ridgefield, CT 06877
Dear Dave,
This letter supersedes any similar such letters on the same subject of prior
date.
The Board of Directors and employees of ARGONAUT TECHNOLOGIES, INC. are very
excited and pleased about you becoming our President, Chief Executive Officer
and Board member. We are unanimous in the belief that you can lead the Company
in its move forward toward worldwide prominence. This letter is a formal offer
to join the Company.
Your initial salary for the position will be $17,667 per month, an 8% increase
over your current salary. Your salary will be reviewed annually. The first
review will be in January 1998 and adjustments will be based on performance.
You will also receive a bonus plan that will provide you the opportunity of
earning up to 40% of your base salary in additional cash compensation based
upon achieving milestones to be established by you and the Board. You will be
eligible for this bonus annually (to be reviewed and paid in each January for
the prior calendar year) beginning in January 1998.
You will be granted an option to purchase 500,000 shares of common stock at a
price equal to the fair market value on the date of grant, which is currently
$0.30 per share for common stock. We sold preferred stock in our last financing
round at $3.25 per share. This share amount represents more than 50% above any
other officer in the Company. Your shares will vest monthly over 48 months based
upon your continued employment, however the first six months of vesting will be
accelerated so that one eighth (62,500 shares) will be fully vested to you upon
commencement of employment and the remainder will begin vesting after your
initial six months with the Company.
To facilitate your relocation, you may receive reimbursement of moving expenses
(to include transportation, house selling costs, house purchase closing fees)
of up to $100,000. The Company will also make available a loan of up to $300,000
to further assist you in purchasing a home in this area. This loan will be held
as a second mortgage and due in five years or sooner in the event of
termination of your employment. The interest rate on this loan will be the
minimum rate allowable under Internal Revenue Service regulations (currently
approximately 6%), and will be fixed on the date the note is signed. You may
pay off this loan at any time. In the event of the Company's termination of
your employment without cause, you would receive twelve month's base salary as
severance.
<PAGE> 2
David P. Binkley, Ph.D.
October 29, 1996
Page two
The employee benefit package will be sent to you under a separate cover from
the Company. The component parts are medical, dental, long term disability,
life insurance, two weeks paid vacation, and 401K plan that is non-matching
until the Company is profitable.
In the event the Company is acquired by or merged into another company, if you
are not offered a position of similar responsibility and leave, the Board of
Directors will waive its right to repurchase the remaining of your unvested
shares and, therefore, you would be able to keep them.
This is not an employment contract for any specified duration. Accordingly,
your employment may be terminated by you or by us at any time, with or without
cause. This offer is contingent upon your signing of the Argonaut Proprietary
Information and Invention Assignment Agreement which will be sent to you under
separate cover. The terms of this offer are considered confidential information
to ARGONAUT TECHNOLOGIES, INC., and we trust that you will treat it
confidentially as between you and the Board of Directors.
If you have any questions about this offer, please contact me at 415-233-3322.
If you accept the offer, please sign this offer letter where indicated and
return it to me at your earliest convenience.
Dave, I speak for the Board of Directors and employees of the Company when I
say that we are looking forward to building a mutually rewarding business
relationship.
We are looking forward to having you join the ARGONAUT TECHNOLOGIES team.
Sincerely,
/s/ B. H. BYERS
- ---------------------------
Brook H. Byers
Chairman of the Board
ARGONAUT TECHNOLOGIES, INC.
Accepted: /s/ D.P. BINKLEY Date: Oct. 29, 1996
--------------------- ---------------------
David P. Binkley
<PAGE> 1
PROPERTY OF
ARGONAUT TECHNOLOGIES, INC.
EXHIBIT 10.11
PROMISSORY NOTE SECURED BY DEED OF TRUST
$200,000 December 17, 1996
San Carlos, California
FOR VALUE RECEIVED, the undersigned, David P. Binkley ("EMPLOYEE") and
Cecilia Binkley, husband and wife, (collectively the "BORROWER"), promises to
pay to Argonaut Technologies, Inc., a Delaware corporation (the "COMPANY"), or
order, the principal amount of Two Hundred Thousand Dollars ($200,000). The
principal amount hereof plus interest at the rate of 6.31% per annum (compounded
annually) shall be due and payable to the holder hereof at 887 Industrial Road,
Suite G, San Carlos, CA 94070, or such other place as the holder hereof may
designate as follows:
The principal amount and any accrued interest, if not sooner paid, shall be
due and payable upon the earlier of the following dates (collectively,
"MATURITY EVENTS"):
(1) Ninety (90) days following the date of termination of the
employment of Employee with the Company, whether voluntary or
involuntary, and whether with cause or without cause;
(2) The date of any sale, conveyance, assignment, alienation or any
other form of transfer, whether voluntary or involuntary, of that
certain real property commonly known as 11655 Putter Way, Los Altos,
California 94024 (the "PROPERTY"), or any part of interest therein;
except that the following transfers of the Property shall not be
deemed to be a Maturity Event:
(a) A transfer upon the death of Employee to Employee's surviving
spouse (providing the surviving spouse is an obligor hereunder)
or upon the death of Employee's spouse to Employee;
(b) A transfer by an obligor hereof whereby such obligor's spouse
becomes a co-owner of the property transferred;
(c) A transfer resulting from a decree of dissolution of the
marriage or legal separation of Employee and Cecilia Binkley or
from a property settlement agreement incidental to such a decree
which requires the obligor spouse to assume responsibility for
the obligations under this Note and the deed of trust encumbering
the Property and securing this Note (the "DEED OF TRUST") and
pursuant to which Employee or Cecilia Binkley (whoever is the
obligor) becomes the sole owner of the property transferred; or
(d) A transfer by one or both obligors under this note into an
inter vivos trust in which one or both obligors are
beneficiaries; or
<PAGE> 2
(3) Ten (10) days after the date that any common stock of the Company
or any other corporation or entity that owns more than 50% of the
voting stock of the Company is publicly traded including any transfer
of shares in connection with an initial public offering;
or
(4) December 17, 2001.
In the event that any of the following occurs, then unless otherwise
prohibited by law, the holder hereof shall have the option, without demand or
notice, to declare the entire outstanding principal balance of this Note,
together with all accrued and unpaid interest thereon to be immediately due and
payable: (i) Borrower defaults in the payment of principal or interest when due
pursuant to the terms hereof; (ii) Borrower defaults in its performance of any
obligation contained in the Deed of Trust or any other deed of trust, security
agreement or other agreement (including any amendment, modification or extension
thereof) which may hereafter be executed by Borrower for the purpose of securing
this Note; (iii) any representation or warranty contained in this Note or the
Deed of Trust or any other agreement or instrument executed in connection with
the loan evidenced hereby proves to have been false or misleading in any
material respect; (iv) Borrower defaults in its obligation to pay any
indebtedness or to perform any other obligation which is secured by a deed of
trust or other lien on the Property or default under any deed of trust securing
such indebtedness; (v) Borrower defaults in its obligation to pay any
indebtedness evidenced by any promissory note executed by Borrower and payable
to the holder hereof or there occurs any other default under any deed of trust,
mortgage or other document securing repayment of such indebtedness; or (vi) the
amount of the indebtedness secured by any deed of trust, lien or other
encumbrance encumbering the Property that is senior to the Deed of Trust is
increased over the amount of such indebtedness existing as of the date of this
Note.
In the event any amount owed by Borrower pursuant to this Note is not paid
when due, such unpaid amount shall bear interest from the due date until paid at
a rate equal to the lesser of: (i) ten percent (10%) per annum; or (ii) the
maximum rate permitted by law. After such due date, all payments shall be
credited first to accrued interest and then to principal.
If an action is instituted for collection of this Note, Borrower agrees to
pay court costs and reasonable attorneys' fees incurred by the holder hereof.
This Note may be amended or modified, and provisions hereof may be waived,
only by the written agreement of Borrower and the holder hereof. No delay or
failure by the holder hereof in exercising any right, power or remedy hereunder
shall operate as a waiver of such right, power or remedy, and a waiver of any
right, power or remedy on any one occasion shall not operate as a bar or waiver
of any such right, power or remedy on any other occasion. Without limiting the
generality of the forgoing, the delay or failure by the holder hereof for any
period of time to enforce collection of any amounts due hereunder shall not be
deemed to be a waiver of any rights of the holder hereof under contract or under
law. The rights of the holder hereof under this Note are in addition to any
other rights and remedies which the holder hereof may have.
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<PAGE> 3
This Note shall be governed by and construed in accordance with the laws
of the State of California.
This Note may be prepaid at any time without penalty.
BORROWER:
/s/ DAVID P. BINKLEY
----------------
David P. Binkley
/s/ CECILIA BINKLEY
----------------
Cecilia Binkley
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<PAGE> 1
VIII
D
EXHIBIT 10.12
PROCESS DEVELOPMENT CONSORTIUM
MEMBERSHIP AGREEMENT
This Agreement is entered into as of February 28, 1999 (the "Effective
Date") by and between Argonaut Technologies, Inc., a Delaware corporation with
its principal place of business at 887 Industrial Road, Suite G, San Carlos,
California 94070 ("Argonaut"), and Eli Lilly and Company, an Indiana
corporation with its principal place of business at Lilly Corporate Center,
Indianapolis, Indiana 46285 ("Member").
WHEREAS, Argonaut has expertise in the development of instrumentation
utilizing automated organic chemistry for the preparation of small organic
molecules of broad chemical diversity;
WHEREAS, Argonaut has established a Process Development Consortium ("PDC")
to consist of up to ten (10) members which are from the pharmaceutical,
biotechnology, and chemical industries, and Argonaut, for the purpose of
discussing and identifying desirable features, concepts and designs for
instrumentation for automating process development.
WHEREAS, the Member wishes to be a member of the PDC, on the terms and
conditions herein.
NOW THEREFORE, the parties agree as follows:
CONCEPT VALIDATION
Every company who participates in individual meetings regarding the
Process Development Consortium has a high level of interest in the concept and
product. The product to be developed is code named "Process". There was
approval of the overall concept and validation of the primary specifications
and features.
SPECIFICATIONS
The general specifications for the Process Instrument are listed in
Exhibit A.
EXPECTED TIME LINE
The current expected time line is outlined in Exhibit B.
MEMBERSHIP ADVANTAGES
Member companies will benefit from early exposure to and hands on
experience with prototype instruments, interaction with peers from other
companies and most importantly, input into the design and development process
to ensure the development and commercialization of system for process chemistry
research and development needs.
<PAGE> 2
TERMS OF MEMBERSHIP
Term. The term of the Agreement is from the effective date of this
Agreement to the commercial release date of the Process Instrument.
Participation. There will be a minimum of seven (7) and a maximum of ten
(10) members in the Consortium.
Meetings. The Consortium will meet quarterly during the Term at Argonaut's
facilities in San Carlos, California, or another mutually agreed site. In
addition, Argonaut may meet with Member individually, as agreed by Argonaut and
such Member. Each party shall pay its own costs incurred in connection with
such meetings. Argonaut will be responsible for managing the Consortium,
including conducting the quarterly meetings, setting agendas and providing the
format for the discussion and exchange of ideas. Argonaut will bear the cost of
the meeting facilities.
Prototypes. Members will have an opportunity to use the prototype
instruments and software at Argonaut's San Carlos, CA facility on a scheduled
basis during the Term of this Agreement.
Fee. In consideration for its participation in the PDC, Member shall pay to
Argonaut, [*]. The payment is due and payable within 30 days after execution of
this agreement.
Quest 205 Instrument. Upon signing this Agreement, Argonaut shall ship to
Member one (1) unit of Quest 205 (part number 900144). The title to the Quest
205 Instrument shall pass to the Member FOB Shipping Point. The Member will be
responsible for all applicable taxes, duties, VAT and freight charges.
Process Instrument. Argonaut shall ship to Member one (1) unit of the
commercial Process Instrument according to Exhibit B. The title to the Process
Instrument shall pass to the Member FOB Shipping Point. The Member will be
responsible for all applicable taxes, duties, VAT and freight charges.
Failure to Complete Consortium. If Argonaut fails to have at least seven
(7) members join the Consortium by March 31, 1999, Argonaut shall, by April 30,
1999, refund to Member all amounts paid less the price of the Quest 205
Instrument [*].
Priority. In consideration for its participation in the PDC, and provided
that Member timely pays Argonaut the amounts set forth above, Member will be
entitled to priority status and discount with regard to the purchase of
subsequent commercial "Process" Instruments, not including the original Process
Instrument delivered under this Agreement. To implement priority status and take
advantage of the related discount, a purchase order must be received by June 30,
1999 to receive a [*] discount from the commercial, non-academic regional list
price established by Argonaut (the "List Price"). To implement priority status
and take advantage of the related discount, a purchase order must be received by
September 30, 1999 to receive a [*] discount from the commercial, non-academic
regional list price established by Argonaut (the "List Price"). Shipment
priority among Member and other PDC members will be based on the order of
receipt of purchase orders from Member or such other PDC members.
[*] Confidential Treatment Requested
2
<PAGE> 3
Confidential Information. In connection with the performance of this
Agreement, Argonaut or Member may not disclose confidential or proprietary
technical or business information to the other. There shall be no
Confidentiality Agreement in force under this Agreement, except for the
financial terms of this Agreement.
Publicity. In connection with the performance of this Agreement, Argonaut
may use Member names in press release's announcing the formation of the
Consortium and Process Instrument related items.
Purchase Orders. Lilly shall submit to Argonaut its standard form of
purchase order for the equipment to be delivered hereunder, including, but not
limited to, the Process Instrument and Quest 205 Instrument delivered as a
result of Member joining the Consortium, and, notwithstanding anything in this
agreement to the contrary, the terms of such purchase order shall govern
Member's acquisition of such equipment hereunder.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers.
ELI LILLY AND COMPANY ARGONAUT TECHNOLOGIES, INC.
BY: Richard F. Eizenber BY: Mark W. Schwartz, Ph.D
TITLE: Executive Director TITLE: Vice President,
Marketing and Business Development
SIGNATURE: /s/ RICHARD F. EIZENBER SIGNATURE: /s/ MARK W. SCHWARTZ
BY: _______________________________
TITLE: ____________________________
SIGNATURE: ________________________
3
<PAGE> 4
EXHIBIT A
[*]
[*] Confidential Treatment Requested
4
<PAGE> 5
[*]
[*] Confidential Treatment Requested
5
<PAGE> 6
APPENDIX B
ARGONAUT TECHNOLOGIES'
Process Synthesizer Instrument
Consortium Timelines
The timeline detailed below is the current timeline Argonaut believes is
appropriate for the development of the Process Synthesizer. This timeline is
subject to changes based on input from Consortium members, changes to technical,
instrument or software specifications, or unforeseen technical problems. This
timeline should be taken as an indication of the current expectation and current
goals of the Process Development effort, but by no means the unequivocal
timeline for the development of the product.
<TABLE>
<CAPTION>
<S> <C> <C>
1. Consortium Membership Completed: ............................... March 1999
2. First Consortium Meeting: ...................................... March 1999
Features and Specification Review and Justification
Software Discussion
Validation Experiments
3. First Generation Prototype Operational.......................... February 1999
4. Chemistry Performed: ........................................... February 1999
5. Second Consortium Meeting: ..................................... May 1999
Review Prototype
Review Chemistry
Prototype Software Design Review
Prototype Hardware Design Review
6. Prototype Software Distribution: ............................... July 1999
7. Advanced Prototype Instrument Operational: ..................... August 1999
8. Prototype Chemistry: ........................................... September 1999
9. Third Consortium Meeting: ...................................... September 1999
10. Manufactured Pre-production Units Assembled: ................... October 1999
11. Chemistry Validation: .......................................... October 1999
12. First Commercial Unit Shipments to Consortium Members: ......... December 1999
</TABLE>
<PAGE> 1
EXHIBIT 10.13
PROCESS DEVELOPMENT CONSORTIUM
MEMBERSHIP AGREEMENT
This Agreement is entered into as of February 26, 1999 (the "Effective
Date"), by and between Argonaut Technologies, Inc., a Delaware corporation with
its principal place of business at 887 Industrial Road, Suite G, San Carlos,
California 94070 ("Argonaut"), and Agouron Pharmaceuticals, Inc., a California
corporation with its principal place of business at 10350 North Torrey Pines
Road, La Jolla, California 92037-1020 ("Member").
WHEREAS, Argonaut has expertise in the development of instrumentation
utilizing automated, diverse reaction chemistries for the preparation of small
organic molecules;
WHEREAS, Argonaut has established a Process Development Consortium ("PDC")
to consist of Argonaut and up to ten (10) members that are companies in the
pharmaceutical, biotechnology, and chemical industries, for the purpose of
discussing and identifying desirable features, concepts and designs for
automated process development systems to facilitate the development of automated
process development instrumentation;
WHEREAS, the Member wishes to be a member of the PDC, on the terms and
conditions herein.
NOW THEREFORE, the parties agree as follows:
1
DEFINITIONS
1.1 "Affiliate" shall mean any corporation, company or other entity of which a
party directly or indirectly owns or controls stock entitled to at least fifty
percent (50%) of the votes at a shareholders' meeting or is otherwise entitled
to directly or indirectly elect or appoint at least fifty percent (50%) the
governing body.
1.2 "Confidential Information" shall mean any proprietary information of
Member or Argonaut, which shall be kept in strict confidence between them, and
restricted from disclosure to any third party, including any other member of the
PDC, as further defined in Section 8.1.
1.3 "Information" shall mean technical data, business information, designs,
concepts, algorithms, processes, formulae, know-how, drawings, prints,
specifications, and other information.
1.4 "Instrument" shall mean a fully operational, automated process chemistry
development system, including software, that is designed or developed solely by
Argonaut, or jointly by Argonaut and one or more members of the PDC, under this
Agreement. The Instrument shall meet the specifications set forth in Exhibit A,
which may be amended by mutual written agreement of the parties. The
Instrument, including software, shall not incorporate any PDC member's
Confidential Information, except that an Instrument may be customized, solely
for delivery to a particular PDC
<PAGE> 2
member with such PDC member's consent, to incorporate any of such PDC member's
Confidential Information.
1.5 "Patents" shall mean all patent applications filed in any country of the
world, including continuations, divisionals, continuations-in-part, continued
prosecutions, and any patents issuing thereon, including any extensions,
registrations, confirmations, reissues, reexaminations and renewals thereof,
claiming any inventions or discoveries made solely by Argonaut, or jointly by
Argonaut and Member (alone or in conjunction with one or more other members of
the PDC) in connection with the activities of the PDC.
1.6 "Prototype" shall mean any pre-production version of the Instrument,
including, but not limited to, a beta prototype, which is not designated by
Argonaut for commercial release.
2
PURPOSE AND FORMAT
2.1 Objective. The objective of the PDC will be to combine the expertise in
chemistry of accomplished chemistry groups from members with Argonaut's
expertise in automated systems for the purpose of enhancing the development of
Instruments to be delivered to PDC members that will facilitate their
implementation and use of such Instruments for chemical process development.
2.2 Membership. The PDC shall have, in addition to Argonaut, no more than
ten (10) and no less than seven (7) members, including Member.
2.3 Meetings. The PDC will meet quarterly during the term of this Agreement
at Argonaut's facilities in San Carlos, California, or another mutually agreed
site. In addition, Argonaut may meet with Member individually, as agreed by
Argonaut and such Member. Each party shall pay its own costs incurred in
connection with such meetings. Argonaut will be responsible for managing the
PDC, including conducting the quarterly meetings, setting agendas, and
providing the format for the discussion and exchange of ideas. Argonaut will
bear the cost of the meeting facilities.
3
OBLIGATIONS OF ARGONAUT
3.1 PDC Management. Argonaut shall be responsible for the organization and
coordination of the PDC, including the oversight of all aspects of the
day-to-day management of the PDC and control of its overall scientific
direction. Argonaut will appoint an Argonaut employee (the "Director") to
direct and coordinate the work of the PDC. The Director will be the primary
point of communication and coordination between Argonaut and the other members
of the PDC, including Member.
3.2 Use of Payments. Argonaut shall use the payments made by Member
pursuant to Article 9 solely in connection with activities relating to meeting
the objective of the PDC, including, but not limited to, the manufacture,
installation, and support of an Instrument to be delivered to Member.
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<PAGE> 3
Argonaut agrees to maintain Member's payments as a liability on Argonaut's
books consistent with Section 9.3 until such time as these funds may be
recognized as revenue under Generally Accepted Accounting Principles. The price
of the Instrument to the Member shall be at or below the advertised commercial
list price for the Instrument. The Member shall take delivery of one (1)
Instrument once the Instrument is commercially released. Title shall pass to
Member FOB shipping point. The Member shall be responsible for all applicable
taxes, duties, VAT and freight charges in addition to the consideration
referenced in Section 9.1.
3.3 Y2K Compliance. Argonaut represents and warrants that the any and all
computer software components of the Instrument ("software") will be designed to
be used prior to, during, and after the calendar year 2000 A.D., and that the
Software will operate during each such time period without error relating to
date data, specifically including any error relating to, or the product of,
date data which represents different centuries or more than one century.
4
OBLIGATIONS OF MEMBER
4.1 Member Representative. Member shall appoint at least one qualified
scientist to attend PDC meetings on behalf of Member. The salary, benefits
and expenses of any such individual will be borne by Member.
4.2 Member Information. In connection with this Agreement, Member shall
provide Argonaut with such Information relating to process chemistry as Member
in its sole discretion deems appropriate to accomplish the objectives of the
PDC. Any portion of such Information, including without limitation, information
relating to chemical synthesis routes, reagents, linkers and applications
results, may be designated as Confidential Information, subject to Article 8
below. Member's Information marked as "CONFIDENTIAL" or with a similar notation
shall be treated as Confidential Information, and may not be disclosed by
Argonaut to any third party or to any other PDC member without the prior
written consent of Member. Member's Information not marked "CONFIDENTIAL" may
be disclosed by Argonaut to all PDC members.
4.3 Due Diligence. Member shall use reasonable efforts to participate in
PDC meetings and provide advice regarding the design of the Instrument.
5
PROTOTYPES
5.1 Prototypes. Member will have an opportunity to use a Prototype,
including software, at Argonaut's San Carlos, CA facility on a scheduled and
regular basis, in order to test its suitability for Member's use.
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<PAGE> 4
6
LICENSES
6.1 No Implied Licenses. Except as expressly provided in this Agreement, the
disclosures hereunder of any Information, including a Confidential Information,
shall not be construed to grant a license of any type under any patents,
copyrights, trade secrets, trademarks, or know-how owned or controlled by such
contributing PDC member, to Argonaut, Member or any other member of the PDC.
Member and Argonaut each agree that it will not use the other's Confidential
Information disclosed hereunder to file any patent applications or support any
existing patent applications, except that each member of the PDC may file and
prosecute patent applications covering compounds independently discovered by
such member using an Instrument (including any Prototype) or covering chemical
syntheses or processes independently discovered by such member using an
Instrument (including any Prototype).
6.2 Most Favored Member. Argonaut represents and warrants that each PDC
agreement entered by and between Argonaut and each member of the PDC contains
materially the same terms, and that if Argonaut should grant to one or more PDC
members terms substantially better than those of this Agreement, when taken as
a whole, this Agreement shall be considered amended to provide Member the
benefit of said materially better terms.
7
INTELLECTUAL PROPERTY
7.1 Ownership. Except as set forth below, the ownership of intellectual
property rights to any inventions, know-how, or trade secrets discovered or
developed solely by Argonaut in the activities under this Agreement shall be
owned solely by Argonaut; and the ownership of intellectual property rights to
any inventions, know-how, or trade secrets discovered or developed jointly by
two or more PDC member (e.g., Argonaut and Member) in the activities under this
Agreement shall be owned jointly by such PDC members. For any inventions
discovered or developed jointly by two or more PDC members, such PDC members
shall mutually determine how to control, and allocate the expenses for, the
preparation, filing, prosecution, maintenance, defense, and enforcement of any
Patents covering such inventions.
7.2 Rights in Instrument. Notwithstanding Section 7.1, it is agreed that
Argonaut shall have the sole and exclusive right to commercialize any
Instrument, as well as replacement hardware and software components thereof,
discovered or developed in the PDC activities under this Agreement solely by
Argonaut or jointly by Argonaut and one or more of the other PDC members. To
that end, Member hereby grants Argonaut an exclusive, perpetual, royalty-free,
fully paid-up license, with the right to grant sublicenses, under Member's
interest in any jointly owned intellectual property rights of Argonaut and
Member, directly relating to Instrument, to develop, manufacture, sell and
otherwise commercialize Instrument, including replacement hardware and software
components thereof. It is understood and agreed that Member shall retain its
entire right, title and interest in any other jointly owned intellectual
property relating to inventions, trade secrets, or know-how discovered or
developed in the PDC activities under this Agreement, including without
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<PAGE> 5
limitation, inventions, trade secrets, and know-how that do not directly relate
to the Instrument, such as those relating to chemistries discovered or
developed using Instrument. Argonaut may itself or with third parties utilize
its solely owned or jointly owned intellectual property rights under this
Agreement to develop, manufacture and sell Instruments and replacement hardware
and software components thereof, and otherwise commercialize such intellectual
property rights, without obligation or compensation to Member.
7.3 Rights in Chemistries. Argonaut acknowledges that Member shall be the sole
and exclusive owner of all intellectual property rights covering any
chemistries, including, but not limited to, compounds and reaction routes or
synthetic processes, discovered or developed solely by Member using any
Instrument, including any Prototype, under this Agreement or otherwise
discovered or developed solely by Member. The PDC members agree that,
notwithstanding any other provision in this Agreement, no PDC member shall be
entitled to commercialize any chemistries, including compounds and reaction
routes or synthetic processes, discovered or developed in the PDC activities
jointly by such PDC member and one or more other PDC members without each such
other PDC member's written consent. Notwithstanding any other provision of this
Agreement, Argonaut agrees to retain in perpetuity any of Member's Confidential
information relating to proprietary chemistries, such as compounds and/or
reaction routes or synthetic process for preparing compounds.
8
CONFIDENTIALITY
8.1 Confidential Information. In connection with the performance of this
Agreement, Argonaut or Member may disclose confidential or proprietary
technical or business Information to the other. Each party shall use its best
efforts to mark its Confidential Information provided in tangible form
hereunder with a "CONFIDENTIAL" notation or other similar marking. For such
Information disclosed orally, the disclosing party shall use its best efforts,
within thirty (30) days of such oral disclosure, to summarize such Information
in a writing, with such summary bearing appropriate marking(s) as indicated
above to indicate its confidential nature.
8.2 Confidentiality Obligations. Except as expressly provided herein, the
parties agree that, for the term of this Agreement and for five (5) years
thereafter, the receiving party shall keep completely confidential and shall
not publish or otherwise disclose and shall not use for any purpose except for
the purposes expressly permitted by this Agreement any Confidential Information
furnished to it by the disclosing party hereto pursuant to this Agreement,
except that to the extent that it can be established by the receiving party by
competent proof that such Confidential Information:
8.2.1 was already known to the receiving party, other than under an
obligation of confidentiality, at the time of disclosure;
8.2.2 was available to the public or otherwise part of the public
domain at the time of its disclosure to the receiving party;
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<PAGE> 6
8.2.3 became available to the public or otherwise part of the
public domain after its disclosure and other than through any act or omission
of the receiving party in breach of this Agreement;
8.2.4 was independently developed by the receiving party as
demonstrated by documented evidence prepared contemporaneously with such
independent development; or
8.2.5 was subsequently lawfully disclosed to the receiving
party by a third party.
8.3 Notice of Disclosure. Neither party may disclose any Confidential
Information of the other party to any third party, including any other PDC
member, without prior written approval of the party disclosing such
Confidential Information. Should a party be obliged by an authoritative
governmental body to make a disclosure to it of the other party's Confidential
Information, the party will give reasonable advance notice of such legal
obligation to the party who provided such Information and will use its best
efforts, and permit intervention of the disclosing party, to secure
confidential treatment of such Information (whether through protective order or
other means) prior to its disclosure to such governmental body, and such
disclosure shall be limited to Information necessary to comply with such legal
obligations.
8.4 Limitation on Use of Confidential Information by Affiliates. Member
shall not provide Argonaut's Confidential Information to any Affiliate Member
whose significant business is in the selling or commercialization of
instruments for the purpose of automating chemical process development.
Argonaut shall not provide Member's Confidential Information to any Affiliate
of Argonaut whose significant business is in the discovery or development of
drug compounds or in the production of chemical libraries of compounds useful
for such purposes.
9
CONSIDERATION AND PURCHASE CREDITS
9.1 Payment to Argonaut. In consideration for its participation in the PDC,
Member shall pay to Argonaut a total of [*] U.S. Dollars [*], in two
installments. The first installment of [*] shall be due and payable thirty (30)
days after the execution of this Agreement, and the second installment of [*]
shall be due and payable on or before July 15, 1999. Such payment shall be
non-refundable except as set forth below.
9.2 Priority. Argonaut shall notify each PDC member of the date of
commercial release of Instruments and the commercial, non-academic list price
of such Instruments. In consideration for its participation in the PDC, and
provided that Member timely pays Argonaut the amounts set forth in Section 9.1,
Member will receive priority status with regard to the purchase of Instruments
from Argonaut as they become available for delivery. Priority among Member and
other PDC members will be based on the order of receipt of purchase orders from
Member or such other PDC members. Notwithstanding the above, in the event that
Argonaut receives purchase orders for multiple Instruments from two or more PDC
members within any ninety (90) day period, Argonaut will
[*] Confidential Treatment Requested
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<PAGE> 7
prorate deliveries of Instruments among such members based on the relative size
of such orders, but no member of the PDC shall receive a second Instrument
before other PDC members who order one or more Instruments within the ninety
(90) day period shall receive their first Instrument.
9.3 Credit. Member will be entitled to a credit equal to the amount of the
payments actually made to Argonaut as set forth in section 9.1 (the "Credit"),
applicable toward the purchase of one or more Instruments at a price no higher
than the commercial, non-academic list price established and published by
Argonaut (the "List Price"). Any unused portion of the Credit shall expire one
(1) year after the date of commercial release of Instruments.
9.4 Refund. If Argonaut fails to deliver an Instrument to Member by December
31, 2000, Argonaut agrees to refund to Member the payments made by Member to
Argonaut. If Member elects to terminate this Agreement under Section 11.3.1,
Member shall retain the right to the Credit under Section 9.3 above applicable
toward the purchase of one or more Instruments at the List Price.
10
DISCLAIMER OF WARRANTY
10.1 Disclaimer of Warranty. Argonaut expressly disclaims any warranty that the
PDC will lead to or result in the creation of a Prototype or Instrument meeting
Member's requirements or that the PDC will otherwise meet Member's
expectations, or that any Prototypes or Instruments will be error-free or free
from non-correctable defects.
EXCEPT AS EXPRESSLY SET FORTH ELSEWHERE IN THIS AGREEMENT, ARGONAUT DISCLAIMS
ALL WARRANTIES RELATING TO THE PDC OR ANY PROTOTYPES OR INSTRUMENTS, EXPRESS OR
IMPLIED, INCLUDING, BUT NOT LIMITED TO, ANY IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE OR THAT THE PROTOTYPES OR
INSTRUMENTS WILL NOT INFRINGE ANY THIRD PARTY INTELLECTUAL PROPERTY RIGHTS.
10.2 Infringement Notice and Indemnification. Each PDC member shall promptly
notify every other PDC member if it becomes aware that any Prototype or
Instrument directly infringes, contributory infringes or induces the
infringement of any third party's intellectual property rights or raises a
substantial question thereof. Argonaut shall defend and indemnify Member
harmless for any loss, damage or expense arising from any third-party claim of
infringement or other intellectual property right based on Member's use of any
Instrument purchased by Member from Argonaut under this Agreement, or any
hardware or software components thereof.
10.3 Assumption of Risk. Each PDC member understands that any Prototype and
Information provided hereunder may be experimental in nature, and hereby
expressly assumes all liability for any personal injury, death, loss of profit,
and/or property damage arising out of or in connection with such PDC member's
participation in the PDC or the use of any Prototype or any Information under
this Agreement, unless due to the negligence or misconduct of Argonaut.
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<PAGE> 8
11
TERM AND TERMINATION
11.1 Term. This Agreement and the PDC shall terminate upon the commercial
release of the Instrument, unless terminated: (i) earlier as provided in this
Article 11; or (ii) extended due to the fact that the testing period for a
Prototype or replacement Prototype has not yet expired and for the time
necessary to complete such testing period.
11.2 Termination for Material Breach. Either party has the right to terminate
this Agreement for a material breach of this Agreement, provided the breaching
party fails to take reasonable steps towards the remedy of such breach within
sixty (60) days of receipt of written notice of the material breach from the
non-breaching party. In the event of termination by Member under this Section
for material breach by Argonaut, Member shall be entitled to a refund of any
payments made to Argonaut under Section 9.1.
11.3 Permissive Termination.
11.3.1 Member. Member may terminate this Agreement effective at any time
prior to the second consortium meeting, by providing Argonaut with written
notice of its intention to terminate. In such event, Argonaut shall return the
first installment payment of $[*] to Member, and Member shall have no
obligation to pay to Argonaut the installment payment due July 15, 1999.
11.3.2 Argonaut. Argonaut may terminate this Agreement at any time on
sixty (60) days' notice, if at any time there are fewer than seven (7) members
of the PDC other than Argonaut. Argonaut will in such event return to Member all
funds received by Argonaut from Member.
11.4 Effect of Termination. Upon any termination of this Agreement, each party
shall return to the other any Confidential Information received form the other
party (except one copy that may be retained solely for legal archival purposes).
11.5 Survival. Section 6.1 and Articles 1, 7, 8, 9, 10, 11 and 12 of this
Agreement shall survive the termination of expiration of this Agreement for any
reason.
12
GENERAL PROVISIONS
12.1 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California, without reference to
principles of conflicts of laws.
12.2 Independent Contractors. The relationship of the parties hereto is that of
independent contractors. The parties are not deemed to be agents, partners or
joint venturers of the others for any purpose as a result of this Agreement or
the transactions contemplated thereby. Member and
[*] Confidential Treatment Requested
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<PAGE> 9
Argonaut shall have no power to make any commitment binding upon the other party
unless authorized in writing in advance in each particular instance.
12.3 Compliance with Laws. In exercising their rights under this Agreement, the
parties shall fully comply with the requirements of any and all applicable laws,
regulations, rules and orders of any governmental body having jurisdiction over
the exercise of rights under this Agreement.
12.4 Force Majeure. Nonperformance of any party shall be excused to the extent
that performance is rendered impossible by strike, fire, earthquake, flood,
governmental acts or orders or restrictions, failure of suppliers, or any other
reason where failure to perform is beyond the reasonable control and not caused
by the negligence, intentional conduct or misconduct of the nonperforming party.
12.5 No Consequential Damages. IN NO EVENT SHALL ANY PARTY HERETO BE LIABLE FOR
SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES ARISING OUT OF THIS AGREEMENT OR
THE EXERCISE OF RIGHTS HEREUNDER, HOWEVER CAUSED, UNDER ANY THEORY OF LIABILITY.
12.6 Notices. All notices, requests and other communications hereunder shall be
in writing and shall be personally delivered or sent by telecopy or other
electronic facsimile transmission or by registered, certified, or express mail,
or by commercial overnight delivery service, return receipt requested, postage
prepaid, in each case to the respective address specified below, or such other
address as may be specified in writing to the other parties hereto in accordance
with this Section 12.6:
If to Argonaut: Argonaut Technologies, Inc.
887 Industrial Road, Suite G
San Carlos, California 94070
Attn: Elizabeth M. Mitchell
Telephone: (650) 598-1350
Facsimile: (650) 598-1359
If to Member: Gary E. Friedman, Esq.
Agouron Pharmaceuticals, Inc.
10350 North Torrey Pines Road
La Jolla, CA 92037-1020
Telephone: (619) 622-3140
Facsimile: (619) 622-3297
with a cc to: Van Martin, Ph.D.
Agouron Pharmaceuticals, Inc.
10350 North Torrey Pines Road
La Jolla, CA 92037-1020
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<PAGE> 10
12.7 Assignment. Either party may assign this Agreement with the written
consent of the other party, which consent shall not be unreasonably withheld.
Either party may assign this Agreement to an entity that acquires all or
substantially all of the business or assets of such party to which this
Agreement pertains, whether by merger, reorganization, acquisition, sale, or
otherwise. This Agreement shall be binding upon and inure to the benefit of the
successors and permitted assigns of the parties.
12.8 Agreement to Perform Necessary Acts. At either party's request, each
party agrees to perform any further acts and execute and deliver all further
documents, agreements and/or instruments which may be reasonably necessary or
desirable to carry out or effect the provisions of this Agreement, including,
but not limited to, the execution of assignment documents pertaining to Patents
pursuant to the provisions of Article 7.
12.9 Further Agreements. Member and Argonaut may enter into further
agreements with respect to the particular matters outside the scope of this
Agreement, on agreed terms.
12.10 Severability. In the event that any provision of this Agreement becomes
or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision. In such a situation the parties shall promptly
negotiate in good faith with respect to amendments to such provision of this
Agreement that may be necessary to make it fair and equitable to the parties.
12.11 Waiver. Neither party may waive or release any of its rights or
interests in this Agreement except in writing. The failure of either party to
assert a right hereunder or to insist upon compliance with any term or
condition of this Agreement shall not constitute a waiver of that right or
excuse a similar subsequent failure to perform any such term or condition.
12.12 Headings. The captions to the several Sections and Articles hereof are
not a part of this Agreement, but are included merely for convenience of
reference only and shall not affect its meaning or interpretation.
12.13 Complete Agreement. This Agreement constitutes the entire agreement,
both written and oral, between the parties with respect to the subject matter
hereof. All prior agreements respecting the subject matter hereof, either
written or oral, expressed or implied, are merged and canceled, and are null
and void and of no effect. No amendment or change hereof or addition hereto
shall be effective or binding on either of the parties hereto unless reduced to
writing and executed by the respective duly authorized representatives of
Member and Argonaut.
12.14 Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed to be an original, and both together shall be deemed to
be one and the same agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by its duly authorized officers.
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AGOURON PHARMACEUTICALS, INC. ARGONAUT TECHNOLOGIES, INC.
BY: D. Frederick Jay BY: Mark W. Schwartz, Ph.D.
TITLE: Associate General Counsel TITLE: Vice President, Business
Development and Marketing
SIGNATURE: /s/ D. FREDERICK JAY SIGNATURE: /s/ MARK W. SCHWARTZ
------------------------ -----------------------------
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EXHIBIT A
[*]
[*] Confidential Treatment Requested
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[*]
[*] Confidential Treatment Requested
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EXHIBIT 10.14
PROCESS DEVELOPMENT CONSORTIUM
MEMBERSHIP AGREEMENT
This Agreement is entered into as of February 25, 1999 (the "Effective
Date") by and between Argonaut Technologies, Inc., a Delaware corporation with
its principal place of business at 887 Industrial Road, Suite G, San Carlos,
California 94070 ("Argonaut"), and Rhone-Poulenc Rorer Pharmaceuticals Inc., a
Delaware corporation with its principal place of business at 500 Arcola Road,
Collegeville, PA 19426-0107 ("Member").
WHEREAS, Argonaut has expertise in the development of instrumentation
utilizing automated organic chemistry for the preparation of small organic
molecules of broad chemical diversity;
WHEREAS, Argonaut has established a Process Development Consortium
("PDC") to consist of up to ten (10) members which are from the pharmaceutical,
biotechnology, and chemical industries, and Argonaut, for the purpose of
discussing and identifying desirable features, concepts and designs for
instrumentation for automating process development.
WHEREAS, the Member wishes to be a member of the PDC, on the terms and
conditions herein.
NOT THEREFORE, the parties agree as follows:
CONCEPT VALIDATION
Every company who participates in individual meetings regarding the
Process Development Consortium has a high level of interest in the concept and
product. The product to be developed is code named "Process". There was approval
of the overall concept and validation of the primary specifications and
features.
SPECIFICATIONS
The general specifications for the Process Instrument are listed in
Exhibit A.
EXPECTED TIME LINE
The current expected timeline is outlined in Exhibit B.
MEMBERSHIP ADVANTAGES
Member companies will benefit from early exposure to and hands on
experience with prototype instruments, interaction with peers from other
companies and most importantly, input into the design and development process
to ensure the development and commercialization of system for process chemistry
research and development needs.
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TERMS OF MEMBERSHIP
Term. The term of the Agreement is from the effective date of this
Agreement to the commercial release date of the Process Instrument.
Participation. The will be a minimum of seven (7) and a maximum of ten
(10) members in the Consortium.
Meetings. The Consortium will meet three (3) time during the Term at
Argonaut's facilities in San Carlos, California, or another mutually agreed
site. In addition, Argonaut may meet with Member individually, as agreed by
Argonaut and such Member. Each party shall pay its own costs incurred in
connection with such meetings. Argonaut will be responsible for managing the
Consortium, including conducting the quarterly meetings, setting agendas and
providing the format for the discussion and exchange of ideas. Argonaut will
bear the cost of the meeting facilities.
Prototypes. As soon as practicable following the development and
manufacture of Prototypes suitable for distribution, Argonaut shall ship to
Member one (1) unit of the Prototype Process Instrument according the Exhibit
B. The title to the Prototype Process Instrument shall pass to the Member FOB
Shipping Point. The Member will be responsible for all applicable taxes,
duties, VAT and freight charges. Member shall test any Prototype provided by
Argonaut and provide Argonaut with reasonable ongoing feedback as to the
performance of the Prototype. Member may provide Argonaut with information
summarizing the tests and other evaluations performed with respect to the
Prototype and providing specific suggestions for improvements.
Support of Prototypes. Following the delivery of the Prototype to Member,
Argonaut shall provide, at no charge, Member with assistance and support with
regard to the use of such Prototype to the extent reasonably deemed appropriate
by Argonaut. Upon delivery of the commercial Process Instrument as noted below,
Member will return to Argonaut the Prototype Process Instrument.
Acknowledgment. Member acknowledges that any Prototype provided to
Participant hereunder is a product-in-development and will not have the
reliability, ease of use, support, or flexibility of an Instrument ready for
commercial distribution.
Fee. In consideration for its participation in the PDC, Member shall pay
to Argonaut, [*] U.S. Dollars ([*]). In order to support the Prototype, Member
shall receive a computer system and liquid handling system to make the Prototype
operational at a price of [*] U.S. Dollars ($[*]). One half of the total payment
due [*] U.S. Dollars ($[*]) will be due and payable within 30 days after
execution of this Agreement; the remaining payment [*] U.S. Dollars ($[*]) will
be due and payable within 60 days after execution of this Agreement.
Process Instrument. Argonaut shall ship to Member one (1) unit of the
commercial Process Instrument according the Exhibit B. The title to the Process
Instrument shall pass to the Member FOB Shipping Point. The Member will be
responsible for all applicable taxes, duties, VAT and freight charges.
[*] Confidential Treatment Requested
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Failure to Complete Consortium. If Argonaut fails to have at least seven
(7) members join the Consortium by March 31, 1999, Argonaut shall, by April 30,
1999, refund to Member all amounts paid.
Priority. In consideration for its participation in the PDC, and
provided that Member timely pays Argonaut the amounts set forth above, Member
will be entitled to priority status and discount with regard to the purchase of
subsequent commercial "Process" Instruments, not including the original Process
Instrument delivered under this Agreement. To implement priority status and take
advantage of the related discount, a single purchase order for three (3)
additional units must be received November 30, 1999 to receive a [*] discount
from the commercial, non-academic regional list price established by Argonaut
(the "List Price"); a single purchase order for two (2) additional units must be
received November 30, 1999 to receive a [*] discount from the commercial,
non-academic regional list price established by Argonaut (the "List Price"); a
purchase order for one (1) additional unit must be received November 30, 1999 to
receive a [*] discount from the commercial, non-academic regional list price
established by Argonaut (the "List Price"). Shipment priority among Member and
other PDC members will be based on the order of receipt of purchase orders from
Member or such other PDC members.
Confidential Information. In connection with the performance of this
Agreement, Argonaut or Member may not disclose confidential or proprietary
technical or business information to the other. There shall be no
Confidentiality Agreement in force under this Agreement, except for the
financial terms of this Agreement.
Publicity. In connection with the performance of this Agreement,
Argonaut may use Member Company names in press releases announcing the
formation of the Consortium and factual statements regarding membership.
Argonaut may use Member names in press releases related to Process Instrument
items only upon Member's prior consent, which shall not be unduly withheld.
Indemnification. Argonaut shall indemnify and hold harmless Member for
all claims, suits and liabilities relating to Member's participation in this
PDC, except in the case of member's own gross negligence or willful misconduct.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers.
RHONE-POULENC RORER ARGONAUT TECHNOLOGIES, INC.
PHARMACEUTICALS
BY: William L. Studt BY: MARK W. SCHWARTZ, PH.D
TITLE: Senior Director, TITLE: V.P. Marketing & Business
Process Research Developments
SIGNATURE: /s/ WILLIAM L. STUDT SIGNATURE: /s/ MARK W. SCHWARTZ, Ph.D
------------------------ --------------------------
BY: Kenneth R. Pina
TITLE: Vice President, General Counsel &
Secretary
SIGNATURE: /s/ KENNETH R. PINA
------------------------
[*] Confidential Treatment Requested
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EXHIBIT A
[*]
[*] Confidential Treatment Requested
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[*]
[*] Confidential Treatment Requested
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APPENDIX B
ARGONAUT TECHNOLOGIES
Process Synthesizer Instrument
Consortium Timelines
The timeline detailed below is the current timeline Argonaut believes is
appropriate for the development of the Process Synthesizer. This timeline is
subject to changes based on input from Consortium members, changes to technical,
instrument or software specifications, or unforeseen technical problems. This
timeline should be taken as an indication of the current expectation and current
goals of the Process Development effort, but by no means the unequivocal
timeline for the development of the product.
1. Consortium Membership Completed: .......................... February 1999
2. First Consortium Meeting: ................................. February 1999
Features and Specification Review and Justification
Software Discussion
Validation Experiments
3. First Generation Prototype Operational: .................... February 1999
4. Chemistry Performed: ....................................... February 1999
5. Second Consortium Meeting: ................................. May 1999
Review Prototype
Review Chemistry
Prototype Software Design Review
Prototype Hardware Design Review
6. Prototype Shipment: ........................................ May 1999
7. Prototype Software Distribution: ........................... July 1999
8. Advanced Prototype Instrument Operational: ................. August 1999
9. Prototype Chemistry: ....................................... September 1999
10. Third Consortium Meeting: .................................. September 1999
11. Manufactured Pre-production Units Assembled: ............... October 1999
12. Chemistry Validation: ...................................... October 1999
13. First Commercial Unit Shipments to Consortium Members: ..... December 1999
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EXHIBIT 10.15
PROCESS DEVELOPMENT CONSORTIUM
MEMBERSHIP AGREEMENT
This Agreement is entered into as of February 25, 1999 (the "Effective
Date") by and between Argonaut Technologies, Inc., a Delaware corporation with
its principal place of business at 887 Industrial Road, Suite G, San Carlos,
California 94070 ("Argonaut"), and Rohm and Haas Company, a ________________
corporation with its principal place of business at 727 Norristown Road, P.O.
Box 904, Spring House, PA 19477-1629 ("Member").
WHEREAS, Argonaut has expertise in the development of instrumentation
utilizing automated organic chemistry for the preparation of small organic
molecules of broad chemical diversity;
WHEREAS, Argonaut has established a Process Development Consortium ("PDC")
to consist of up to ten (10) members which are from the pharmaceutical,
biotechnology, and chemical industries, and Argonaut, for the purpose of
discussing and identifying desirable features, concepts and designs for
instrumentation for automating process development.
WHEREAS, the Member wishes to be a member of the PDC, on the terms and
conditions herein.
NOW THEREFORE, the parties agree as follows:
CONCEPT VALIDATION
Every company who participates in individual meetings regarding the
Process Development Consortium has a high level of interest in the concept and
product. The product to be developed is code named "Process". There was
approval of the overall concept and validation of the primary specifications
and features.
SPECIFICATIONS
The general specifications for the Process Instrument are listed in Exhibit
A.
EXPECTED TIME LINE
The current expected time line is outlined in Exhibit B.
MEMBERSHIP ADVANTAGES
Member companies will benefit from early exposure to and hands on
experience with prototype instruments, interaction with peers from other
companies and most importantly, input into the design and development process
to ensure the development and commercialization of system for process chemistry
research and development needs.
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TERMS OF MEMBERSHIP
Term. The term of the Agreement is from the effective date of this
Agreement to the commercial release date of the Process Instrument.
Participation. There will be a minimum of seven (7) and a maximum of ten
(10) members in the Consortium.
Meetings. The Consortium will meet quarterly during the Term at Argonaut's
facilities in San Carlos, California, or another mutually agreed site. In
addition, Argonaut may meet with Member individually, as agreed by Argonaut and
such Member. Each party shall pay its own costs incurred in connection with
such meetings. Argonaut will be responsible for managing the Consortium,
including conducting the quarterly meetings, setting agendas and providing the
format for the discussion and exchange of ideas. Argonaut will bear the cost of
the meeting facilities.
Prototypes. Members will have an opportunity to use the prototype
instruments and software at Argonaut's San Carlos, CA facility on a scheduled
basis during the Term of this Agreement.
Fee. In consideration for its participation in the PDC, Member shall pay to
Argonaut, [*] U.S. Dollars [*]. The payment is due and payable within 30 days
after execution of this agreement.
Quest 205 Instrument. Upon signing this Agreement, Argonaut shall ship to
Member one (1) unit of Quest 205 (part number 900144). The title to the Quest
205 Instrument shall pass to the Member FOB Shipping Point. The Member will be
responsible for all applicable taxes, duties, VAT and freight charges.
Process Instrument. Argonaut shall ship to Member one (1) unit of the
commercial Process Instrument according the Exhibit B. The title to the Process
Instrument shall pass to the Member FOB Shipping Point. The Member will be
responsible for all applicable taxes, duties, VAT and freight charges.
Failure to Complete Consortium. If Argonaut fails to have at least seven
(7) members join the Consortium by March 31, 1999, Argonaut shall, by April 30,
1999, refund to Member all amounts paid less the price of the Quest 205
Instrument [*].
Priority. In consideration for its participation in the PDC, and provided
that Member timely pays Argonaut the amounts set forth above, Member will be
entitled to priority status and discount with regard to the purchase of
subsequent commercial "Process" Instruments, not including the original Process
Instrument delivered under this Agreement. To implement priority status and take
advantage of the related discount, a purchase order must be received by June 30,
1999 to receive a [*] discount from the commercial, non-academic regional list
price established by Argonaut (the "List Price"). To implement priority status
and take advantage of the related discount, a purchase order must be received by
September 30, 1999 to receive a [*] discount from the commercial, non-academic
regional list price established by Argonaut (the "List Price"). Shipment
priority among Member and other PDC members will be based on the order of
receipt of purchase orders from Member or such other PDC members.
[*] Confidential Treatment Requested
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Confidential Information. In connection with the performance of this
Agreement, Argonaut or Member may not disclose confidential or proprietary
technical or business information to the other. There shall be no
Confidentiality Agreement in force under this Agreement, except for the
financial terms of this Agreement.
Publicity. In connection with the performance of this Agreement, Argonaut
may use Member names in press release's announcing the formation of the
Consortium and Process Instrument related items.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers.
ROHM AND HAAS COMPANY ARGONAUT TECHNOLOGIES, INC.
BY: James S. Clovis BY: Mark W. Schwartz, Ph.D.
----------------------------
TITLE: Research Director TITLE: Vice President,
------------------------- Marketing and Business Development
SIGNATURE: /s/ JAMES S. CLOVIS SIGNATURE: /s/ Mark W. Schwartz
--------------------- -------------------------------
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EXHIBIT A
[*]
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[*]
[*] Confidential Treatment Requested
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APPENDIX B
ARGONAUT TECHNOLOGIES
Process Synthesizer Instrument
Consortium Timelines
The timeline detailed below is the current timeline Argonaut believes is
appropriate for the development of the Process Synthesizer. This timeline is
subject to changes based on input from Consortium members, changes to technical,
instrument or software specifications, or unforeseen technical problems. This
timeline should be taken as an indication of the current expectation and current
goals of the Process Development effort, but by no means the unequivocal
timeline for the development of the product.
1. Consortium Membership Completed: .......................... March 1999
2. First Consortium Meeting: ................................. March 1999
Features and Specification Review and Justification
Software Discussion
Validation Experiments
3. First Generation Prototype Operational: .................... February 1999
4. Chemistry Performed: ....................................... February 1999
5. Second Consortium Meeting: ................................. May 1999
Review Prototype
Review Chemistry
Prototype Software Design Review
Prototype Hardware Design Review
6. Prototype Software Distribution: ........................... July 1999
7. Advanced Prototype Instrument Operational: ................. August 1999
8. Prototype Chemistry: ....................................... September 1999
9. Third Consortium Meeting: .................................. September 1999
10. Manufactured Pre-production Units Assembled: ............... October 1999
11. Chemistry Validation: ...................................... October 1999
12. First Commercial Unit Shipments to Consortium Members: ..... December 1999
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EXHIBIT 10.16
RESEARCH COLLABORATION AGREEMENT
BETWEEN
ARGONAUT TECHNOLOGIES
AND
UNIVERSITY COLLEGE LONDON
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THIS AGREEMENT is made the 1st day of September 1999
BETWEEN:
ARGONAUT TECHNOLOGIES of 887 Industrial Road, Suite G, San Carlos, California
94070, USA
and
UNIVERSITY COLLEGE LONDON of Gower Street, London, WC1E 6BT, UK
BACKGROUND:
A) Argonaut Technologies ("Argonaut") is a company specialising in the
development of equipment and chemical processes in the field of parallel
organic synthesis.
B) The Wolfson Institute for Biomedical Research ("WIBR") is an Institute of
University College London ("UCL") with expertise in the validation of
potential drug targets and the development of lead molecules based
thereon.
C) Trident(TM) is an automated chemical library synthesis system developed
and marketed by Argonaut.
D) Argonaut and WIBR now wish to enter into a research collaboration whereby
Argonaut places a Trident machine at WIBR laboratories and WIBR will
perform method development and use the machine for its own and
collaborative research projects in accordance with the following terms and
conditions:
NOW IT IS HEREBY AGREED as follows:
1. CONDITIONS AND INTERPRETATION
1.1 In this Agreement the following words and phrases shall have the following
meanings, unless the context requires otherwise:
"Affiliate" means any person, organisation or entity, which is
directly or indirectly controlled by, controlling or
under common control with any Party. The term "control"
(including, with correlative meaning, the terms
"controlled by" and "under common control with") as used
with respect to any person
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or entity means the possession, directly or
indirectly, of the power to direct, or cause the
direction of, the management and policies of such
a person, organisation or entity, the ownership of
voting securities, or by contract, court order,
Statutory Instrument or otherwise. The ownership
of voting securities of a person, organisation or
entity, shall not, in itself, constitute "control"
for the purposes of this definition unless said
ownership is of a majority of the outstanding
securities entitled to vote of such a person,
organisation or entity.
"Agreement" means this agreement, as may be varied or
supplemented from time to time in accordance with
the provisions of this agreement.
"Commencement Date" shall mean the date of the last signature below.
"Dedicated Employee" the UCL employee funded by Argonaut under the
terms of this Agreement.
"Demonstration Visit" shall mean occasions whereby a potential or
existing Argonaut client is brought to WIBR for
the purposes of discussing the Trident.
"Force Majeure" means act of god, war, riot, civil commotion,
malicious damage, explosion, fire, flood, strike,
lock-out, shortage of materials or labour,
accident, breakdown of plant or machinery,
compliance with any law or governmental order,
rule, regulation or direction, or any other cause
beyond a Party's reasonable control.
"Method Development" means any work specifically requested by Argonaut
to be carried out at WIBR to develop and/or
validate chemical processes. An Operating Plan
detailing the work to be undertaken, costs and
timescales will be agreed between the Parties
prior to commencing such Method Development.
"Party" or "Parties" means Argonaut and/or UCL.
"Primary Demonstration means where potential Argonaut client is brought
Visit" to WIBR to see the Trident in operation and
discuss its application with the Dedicated
Employee. Such a visit does not involve the
demonstration of client specified chemistry.
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"Secondary Demonstration Visit" means where a potential Argonaut client is
brought to WIBR to have client specified
chemistry demonstrated on the Trident.
1.2 In this Agreement:
1.2.1 unless the context otherwise requires, all references to a
particular Clause shall be a reference to that clause in this
Agreement, as may be amended from time to time pursuant to the terms
hereof;
1.2.2 the headings are inserted for convenience only and shall be ignored
when construing this Agreement;
1.2.3 unless the contrary intention appears, words importing the masculine
gender shall include the feminine and vice versa and words in the
singular include the plural and vice versa and words importing the
whole shall be treated as including a reference to any part thereof;
1.2.4 unless the contrary intention appears, words denoting persons shall
include any individual, partnership, company, corporation, joint
venture, trust, association, organisation or other entity, in each
case whether or not having separate legal personality;
1.2.5 reference to the words "include" or "including" are to be construed
without limitation to the generality of the preceding words; and
1.2.6 reference to any statute, statutory instrument or regulation
includes any modification or re-enactment of that statute, statutory
instrument or regulation.
2. FUNDING
2.1 Argonaut will upon a date to be agreed between the Parties following the
execution of this Agreement, arrange for delivery of one Trident to WIBR.
Argonaut will be responsible for the costs of delivery and installation of
the Trident;
2.2 Argonaut will pay for the cost of one full-time person, the "Dedicated
Employee", employed at WIBR to operate the Trident and agree to pay an
overhead charge on this UCL salary of [*] as set out in Annex 1;
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2.3 Argonaut will in addition provide and pay for any training required by the
Dedicated Employee in respect of operation and routine maintenance of the
Trident;
2.4 Argonaut will reimburse UCL in full for the initial set-up costs of the
Dedicated Employee up to a maximum of [*] ([*] pounds sterling), with
items over [*] ([*] pounds sterling) itemised;
2.5 Argonaut will reimburse UCL in full for consumables used either during the
setting up and testing of the Trident at WIBR or during any subsequent
Method Development undertaken by WIBR in the course of this collaboration
such costs not to exceed [*] per annum. UCL shall include in its quarterly
invoice the pro rata amount of the [*] per annum consumable budget agreed
as set out in Annex 1. On each anniversary of this Agreement, an audit of
the actual consumable expenses incurred by UCL will be undertaken and any
amount not spent of the annual budget will be deducted from the final
quarter's invoice;
2.6 Argonaut will, at all times retain ownership of the Trident, subject to
Clause 9.3, and will assume responsibility for the servicing and repair of
the Trident throughout the term of this collaboration;
2.7 Where Demonstration Visits are arranged, subject to Clause 3 of this
Agreement, Argonaut will fully reimburse UCL for any expenses incurred as a
result of demonstrating the Trident or entertaining the visiting client;
and
2.8 UCL will issue Argonaut with an invoice covering the payments due to UCL on
a quarterly in arrears basis. Payments to UCL will be due no late than
thirty (30) days from the date of the invoice.
3. DEMONSTRATION VISITS
3.1 From time to time Argonaut, or an affiliate, may request that it is able to
use the Trident situated at WIBR for the purposes of demonstrating the
device to prospective Argonaut clients. Such visits shall be scheduled to
occur between 09.00hrs and 1700hrs and UCL shall not unreasonably refuse
such a request provided that:
3.1.1 in the case of Primary Demonstration Visits, Argonaut shall give at
least one (1) week's prior notice to WIBR staff, the visit shall not
occupy more than 30 (thirty) minutes of the Dedicated Employee's
time and there shall be no more than eight (8) such visits in any
calendar month;
3.1.2 in the case of Secondary Demonstration Visits, Argonaut shall give
at least two (2) weeks' prior notice to WIBR staff, the visit shall
not occupy more
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than one half of a working day on the machine or for the
Dedicated Employee and there shall be no more than two (2) such
visits during any calendar month; and
3.1.3 Secondary Demonstration Visits, shall not be arranged when the
Dedicated Employee plans to be absent from work. In the case of
an unplanned absence, WIBR retains the right to cancel such a
Demonstration Visit without liability.
4. OWNERSHIP OF INTELLECTUAL PROPERTY
4.1 All intellectual property, whether patentable or not, that arises out of
Method Development funded by Argonaut shall be the exclusive property of
Argonaut and Argonaut grants UCL a royalty-free non-exclusive license to
use such intellectual property.
4.1.1 UCL shall notify at Argonaut as soon as practicable of any such
intellectual property that arises whilst performing Method
Development; and
4.1.2 UCL shall, at Argonaut's expense, execute such documents. Powers
of Attorney, grants of authority, assignments and licenses as
Argonaut may request to give full force and effect to the provisions
of this Clause and to enable Argonaut to record its interests in
such property at the appropriate registries (worldwide).
4.1.3 Should Argonaut elect not to seek protection of any such
intellectual property but where UCL believes protection would be
beneficial for UCL's business, UCL may, at its own expense and with
the prior written approval of Argonaut, seek protection of any such
intellectual property. Argonaut shall, at UCL's expense, execute
all such documents, Powers of Attorney, grants of authority,
assignments and licenses as Argonaut may request to give full force
and effect to the provisions of this Clause and to enable UCL to
record its interests in such property at the appropriate registries
(worldwide).
4.1.4 Where UCL proceeds to seek protection of intellectual property
pursuant to Clause 4.1.3, UCL shall grant Argonaut a worldwide,
royalty free license, without the right to sub-license, to use such
technology for the purpose of conduction its own business.
4.2 All intellectual property arising from use of the Trident in WIBR's
research programmes shall be the exclusive property of UCL, subject to the
terms of any agreement governing sponsorship of that research programme.
Argonaut waives
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all right and future claim to any such intellectual property under the
terms of this Agreement.
4. RESTRICTIONS
5.1 During the term of this Agreement, WIBR shall not to enter into any other
research collaboration within the field of development of enabling
technology for parallel organic synthesis without the prior written
permission of Argonaut.
6. CONFIDENTIALITY
6.1 Except as otherwise permitted hereunder, each Party undertakes and agrees
not at any time for any reason whatsoever to disclose or permit to be
disclosed to any third party or otherwise make use of or permit to be made
use of, any trade secrets or confidential information relating to the other
Party's technology or the business affairs or finances of the other Party
or of any affiliates, suppliers, agents, distributors, or customers of the
Party which come into its possession pursuant to this Agreement. Such
information should be clearly marked as "Confidential" and, if disclosed
orally, subsequently reduced to writing within thirty (30) days and marked
"Confidential".
6.2 Each Party shall ensure that all of its agents, employees who have access
to the information referred to in Clause 6.1 are:
6.2.1 made aware that such information is secret and confidential; and
6.2.2 bound by undertakings of confidentiality (whether in their contracts
of employment or otherwise) not to make any disclosure or use of
such information but to keep the same confidential.
6.3 The obligations of confidence set out in this Clause 6 shall not extend to
any information which:
6.3.1 is, or shall become, generally available to the public otherwise
than by reason of a breach of the recipient Party of the provisions
of this Clause 8; or
6.3.2 is known to the recipient Party and is at its free disposal prior to
its receipt from the other Party, as can be shown by written record;
or
6.3.3 is subsequently disclosed to the recipient Party without obligations
of confidence by a third party owing no such obligations in respect
thereof; or
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6.3.4 is required to be disclosed by any applicable law or any
regulatory authority to which a Party is from time to time
subject to; or
6.3.5 is independently developed by a person or person with no access
to the confidential information disclosed by a Party, as
demonstrated by written records; or
6.3.6 disclosed to a third party for whom you have had written
permission from the discloser to pass the information to,
subject to the third party undertaking obligations of
confidence equivalent to those contained in this Agreement.
6.4 The obligations of each Party under this Clause 6 shall survive the
expiration or termination of this Agreement for ten (10) years from the
date of expiry or termination, as the case may be.
7. PUBLICATION
7.1 Where UCL wishes to publish the results of Method Development performed
UCL will be free to do so provided that:
7.1.1 UCL have informed Argonaut in writing of the results to be
disclosed not less than thirty (30) days prior to disclosure in
order for Argonaut to evaluate whether any patent protection
should be sought. Argonaut must inform UCL in writing within
that thirty (30) day period if it wishes to seek such
protection. In the absence of written notification UCL shall be
free to publish;
7.1.2 If Argonaut, at its sole discretion, decides patent protection
is to be applied for, there shall be a further delay not to
exceed forty-five (45) days during which Argonaut, at its own
expense, may file appropriate patent application(s).
7.1.3 Where the Trident has been successfully utilised in a WIBR
research programme, Argonaut may, with the prior written
permission of UCL, disclose statements relating to the generic
use of the Trident in drug discovery for the purposes of
marketing and promoting the Trident.
7.2 On all published articles referring to results involving the use of the
Trident UCL agrees to acknowledge the use of the Trident in the research
programme and the collaborative support of Argonaut.
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8. TERM AND TERMINATION
8.1 This Agreement will commence on the first day of September 1999 and remain
in force for two (2) years from the Commencement Date unless terminated
pursuant to Clause 8, or extended pursuant to Clause 13.
8.2 Either Party (the "Terminating Party") shall have the right to terminate
this Agreement forthwith upon giving written notice of termination to the
other Party (the "Defaulting Party") upon the occurrence of any of the
following events at any time during this Agreement:
8.2.1 the Defaulting Party commits a material breach of this Agreement
which in the case of a breach capable of remedy shall not have
been remedied within sixty (60) days of the receipt by it of a
notice identifying the breach and requiring its remedy;
8.2.2 the Defaulting Party for a period of longer than sixty (60) days
suspends payment of its debts or otherwise ceases or threatens to
cease to carry on its business or becomes bankrupt or insolvent
(including without limitation being deemed to be unable to pay
its debts);
8.2.3 a proposal is made or a nominee or supervisor is appointed for a
composition in satisfaction of the debts of the Defaulting Party
or a scheme or arrangement of its affairs, or the Defaulting
Party enters into any composition or arrangement for the benefit
of its creditors, or proceedings are commenced in relation to the
Defaulting Party under any law, regulation or procedure relating
to the re-construction or re-adjustment of debts (including where
a petition is filed or proceeding commenced seeking any
reorganisation, arrangement, composition, or re-adjustment under
any applicable bankruptcy, insolvency, moratorium, reorganisation
or other similar law affecting creditors rights or where the
Defaulting Party consents to, or acquiesces in, the filing of
such a petition);
8.2.4 the Defaulting Party takes, without the consent of the
Terminating Party (such consent not be unreasonably withheld),
any action, or legal proceedings are started or other steps taken
by a third party, with a view to:
(a) the winding up or dissolution of the Defaulting Party (other
than for the reconstruction of a solvent company for any
purpose, including the inclusion of any part of the share
capital of the Defaulting Party in any official stock
exchange listing or an application by the Defaulting Party
for registration as a public
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company in accordance with the requirements of the Companies
Act 1985); or
(b) the appointment of a liquidator, trustee, receiver,
administrative receiver, receiver manager, interim receiver
custodian, sequestrator or similar officer of the Defaulting
Party against the Defaulting Party or a substantial part of the
assets of the Defaulting Party, or anything analogous to any of
the foregoing occurs under the laws of any country.
8.3 Upon termination or expiry of this Agreement, UCL will have the
option to purchase the Trident at a depreciated value, such
depreciation deemed to be a linear depreciation over a four (4) year
period commencing on the date of delivery of the Trident to WIBR in
the Cruciform Building, thereafter the value of the Trident being
written off.
8.4 Upon termination or expiry of this Agreement, Argonaut will pay to
UCL, within sixty (60) days, all sums owing which have accrued prior
to the date of termination.
8.5 Termination or expiry of this Agreement for whatever reason shall not
affect the accrued rights of the Paries arising in any way out of
this Agreement as at the date of termination and in particular the
right to recover damages and interest, and the provisions of Clauses
4, 6, 8, 11, 14 and 16 shall survive this Agreement and shall remain
in full force and effect.
9. FORCE MAJEURE
9.1 If UCL is unable to carry out any of its obligations under this
Agreement due to Force Majeure this Agreement shall remain in effect
but UCL's obligations under this Agreement and the obligations of
Argonaut under this Agreement shall be suspended for a period equal
to the duration of the circumstance of Force Majeure provided that:
9.1.1 the suspension of UCL's performance is of not greater scope
or duration than is required by Force Majeure:
9.1.2 UCL gives Argonaut as soon as practicable notice describing
the circumstance of the Force Majeure, including the nature
of the occurrence and its expected duration, and continues
to furnish regular reports to Argonaut during the period of
the Force Majeure;
9.1.3 UCL uses all reasonable efforts to remedy its inability to
perform and to mitigate the effects of the circumstances of
Force Majeure; and
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9.1.4 as soon as practicable after the event which constitutes Force
Majeure the Parties shall discuss how best to progress the
collaboration between them, as far as possible in accordance
with this Agreement.
9.2 If Force Majeure continues for more than three (3) months from the
first occurrence of the Force Majeure, either Party may give sixty (60)
days written notice to the other Party to terminate this Agreement and
termination shall occur if Force Majeure is still continuing at the end
of that sixty (60) day notice period.
10. GOVERNING LAW AND JURISDICTION
10.1 The validity, construction and performance of this Agreement shall be
governed by the laws of England and be subject to the exclusive
jurisdiction of the English courts.
11. WAIVER
11.1 Neither Party shall be deemed to have waived any of its rights or
remedies whatsoever unless the waiver is made in writing and signed by
a duly authorised representative of that Party. In particular, no delay
or failure of a Party in exercising or enforcing any of its rights or
remedies whatsoever shall operate as a waiver of those rights or
remedies so as to preclude or impair the exercise or enforcement of
those rights or remedies nor shall any partial exercise or enforcement
of that right or remedy by that Party.
12. SEVERANCE OF TERMS
12.1 If the whole or any part of this Agreement is or becomes or is declared
illegal, invalid or unenforceable in any jurisdiction for any reason
(including both by reason of the provisions of any legislation and also
by reason of any court which either has jurisdiction over this
Agreement or has jurisdiction over any of the Parties):
12.1.1 In the case of illegality, invalidity or un-enforceability of
the whole of this Agreement it shall terminate only in
relation to the jurisdiction in question; or
12.1.2 in the case of the illegality, invalidity or un-enforceability
of part of this Agreement that part shall be severed from this
Agreement in the jurisdiction in question and that illegality,
invalidity or un-enforceability
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shall not in any way whatsoever prejudice or affect the remaining
parts of this Agreement which shall continue in full force and effect.
12.2 If in the reasonable opinion of either Party any severance under this
Clause 12 materially affects the commercial basis of this Agreement, the
Parties shall discuss, in good faith, ways to eliminate the material
effect.
13. ENTIRE AGREEMENT AND VARIATIONS
13.1 This Agreement embodies and sets forth the entire agreement and
understanding of the Parties and supersedes all prior oral or written
agreements, understandings or arrangements relating to the specific
subject matter of this Agreement. Neither Party shall be entitled to rely
on any agreement, understanding or arrangement, which is not expressly set
forth in this Agreement.
13.2 No director, officer, employee or agent of either Party is authorised to
make any representation or warranty to the other Party not contained in
this Agreement, and each party acknowledges that it has not relied on any
such oral or written representation or warranties.
13.3 No variation, amendment, modification or supplement to this Agreement shall
be valid unless made in writing in the English language and signed by a
duly authorised representative of each Party.
14. NOTICES
14.1 Any notice or other document to be given under this Agreement shall be in
writing in the English language and shall be deemed to have been duly given
if sent by fax, recorded mail or registered mail to a Party at the fax
number or address set out below for such Party or such other address as the
Party may from time to time designate by written notice to the other Party.
Address of Argonaut
Argonaut Technologies
887 Industrial Road
Suite G
San Carlos
California 94070
USA
For the attention of the David Binkley Ph.D
Fax No. +1 650 598 1359
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Address of WIBR
Wolfson Institute for Biomedical Research
University College London
Gower Street
London
WC1E 6BT
UK
For the attention of Professor Ken Powell
Fax No. +44 (0) 171 209 0470
Any notices sent to WIBR shall be copied to UCLi, 2-16 Torrington Place,
London, WC1E 7HN, UK (Fax No. 0171 209 0681) and marked for the attention
of Mr I Chater.
14.2 Any notice given pursuant to this Clause 15 shall be deemed to have been
received:
14.2.1 in the case of sending by post, on the day five (5) days after the
day of posting; or
14.2.2 in the case of sending by fax at the time the sender's fax machine
receives a clear transmission report.
15. COSTS
15.1 Each Party shall bear its own legal costs, legal fees and other expenses
incurred in the preparation and execution of this Agreement.
16. PUBLIC STATEMENTS
16.1 Except as provided in Clause 16.2, neither Party shall, without the prior
written consent of the other Party:
16.1.1 use in advertising, publicly or otherwise, any trade name, personal
name, trademark, trade device, symbol, or any abbreviation, contraction or
simulation thereof, owned by that representing Party; or
16.1.2 represent, either directly or indirectly, that any product or
service of the other Party is a product or service of the representing
Party or that it is
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made in accordance with or utilises the information or documents
of the other Party.
16.2 The restrictions in Clause 16.1 shall not apply to the following:
16.2.1 a press release, in a form agreed to by the Parties, publicly
announcing this Agreement; or
16.2.2 use as required by any applicable law or governmental regulation.
17. PARTNERSHIP
17.1 Nothing in this Agreement shall be construed as creating a partnership or
joint venture between the Parties or constituting one Party as the agent
of the other Party for any purpose whatsoever and neither Party shall have
the authority or power to bind the other Party or to contract in the name
of or create a liability against the other Party in any way or for any
purpose.
18. FURTHER ASSURANCE
18.1 Each Party shall do and execute or procure to be done and executed all
necessary acts, deeds, documents and things that give full effect to this
Agreement. Except as otherwise provided herein, the cost and expense of
doing so shall be borne by the Party who is required to take such action.
IN WITNESS whereof this Agreement has been signed by duly authorised officers of
the Parties:
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Signed by: /s/ DAVID P. BINKLEY
--------------------------
For and on behalf of
ARGONAUT TECHNOLOGIES INC.
Name: David P. Binkley
Title: President and CEO
Date: September 1, 1999
Signed by: /s/ DRUSILLA KENNEY
--------------------------
For and on behalf of
UNIVERSITY COLLEGE LONDON
Name: Drusilla Kenney
Title: Contracts Manager, UCL
Date: 2 October 1999
Acknowledged by: /s/ KEN POWELL
--------------------
For and on behalf of
WOLFSON INSTITUTE FOR BIOMEDICAL RESEARCH
Name: Ken Powell
Title: Deputy Director
Date: 12/10/99
Wolfson-Argonaut
09/02/99 15
<PAGE> 16
ANNEX 1
[*]
[*] Confidential Treatment Requested
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EXHIBIT 10.17
PURCHASE AND LICENSE AGREEMENT
THIS IS AN AGREEMENT between Argonaut Technologies, Inc., a Delaware
corporation with an office at 887 Industrial Road, Suite G, San Carlos, CA 94070
("Vendor") and Zeneca Inc., a Delaware corporation with an office at 1800
Concord Pike, Wilmington, Delaware 19850-5437 ("Zeneca").
WHEREAS, Vendor desires to sell Trident Automation Library System products
to Zeneca and license related software to Zeneca, and
WHEREAS, Zeneca offers to purchase said Trident Automation Library System
products and obtain a license for such related software from Vendor.
NOW, THEREFORE, this 30th day of September 1998, in consideration of the
terms and conditions recited herein, the parties hereby agree as follows.
Article 1
Definitions
1.1 "Acceptance Date" means the date on which Vendor receives written notice
from Zeneca that the System meets, and has been demonstrated to meet, the
Specifications and that all Hardware, Software and Documentation have
been received and are installed and operational. Such notice shall be on
the form attached hereto as Exhibit A entitled "Notice of Acceptance
Date", and no other communication of any sort will establish an
Acceptance Date hereunder.
1.2 "Agreement" means this Agreement including any exhibits and amendments
attached hereto.
1.3 "Delivery Date" shall mean the date which Vendor delivers the System to
the Installation Location at Zeneca and all related Hardware, Software
and Documentation, as described in Exhibit B hereto, have been received
by Zeneca.
1.4 "Documentation" means the manuals, instructions and other materials,
including but not limited to those supplied on paper or electric media
(such as CD-ROM based media), related to the System and provided by
Vendor to Zeneca hereunder.
1.5 "Effective Date" means the date upon which this Agreement is executed by
the last party to execute such Agreement.
1.6 "Hardware" means the hardware components of the System listed in Exhibit
B attached hereto and incorporated herein.
1.7 "Installation Location" means Room LW323 on the 3rd floor, Fairfax
Research Center of the Zeneca facility at 1800 Concord Pike, Wilmington,
Delaware, USA.
1.8 "Specifications" means the Specifications for the System, as set forth
in Exhibit C.
1.9 "System" means the Trident Automation Library System comprising the
Hardware, the Software and the Documentation described in Exhibit B
hereto.
1.10 "Maintenance Agreement" means the maintenance agreement between the
parties hereto covering the System, including but not limited to the
Hardware and Software purchased under this
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Agreement. The terms and conditions of said maintenance agreement, if
Zeneca desires to purchase one, shall be determined at a later date.
1.11 "Purchase Price" constitutes payment for Hardware and Documentation and a
license fee for related software.
1.12 "Software" means the software components of the System as listed in
Exhibit B attached hereto and incorporated herein.
1.13 "Zeneca Group" - For purposes of this Agreement, Zeneca Group means
Zeneca Inc., Zeneca Ltd. and Zeneca Group PLC; their respective direct
and indirect parent companies, affiliates, and subsidiaries; their
respective officers, directors, trustees, shareholders, employees and
agents; and their respective predecessors, successors and assigns, heirs,
executors and administrators.
Article 2
Purchase and Sale
2.1 Purchase. Zeneca and Vendor hereby agree that, in return for the payment
by Zeneca to Vendor of the Purchase Price and subject to the terms and
conditions of this Agreement:
(a) Vendor shall sell, deliver and install, and Zeneca shall purchase
and receive, the Hardware and Documentation; and
(b) Vendor hereby grants to Zeneca in conjunction with the sale of the
Hardware, a perpetual, non-exclusive, paid-up, freely assignable
license (the "License") to use and have used the Software, revocable
only upon termination of this Agreement by Vendor or Zeneca. Zeneca
shall notify Vendor in writing prior to any assignment.
2.2 Purchase Price.
(a) Zeneca and Vendor hereby agree that the Purchase Price is reflected
in Exhibit G; and
(b) Vendor will offer Zeneca a discount of [*] if this Agreement is
executed prior to September 30, 1998.
(c) Vendor will offer Zeneca a second discount of [*] if a second
Trident System if ordered prior to September 30, 1998.
2.3 Payment Schedule. This Purchase Price shall be due and owing to Vendor
according to the following schedule:
Delivery Date: [*] due within fifteen (15) days after delivery of
all components of the System.
Acceptance Date: [*] due within fifteen (15) days after Zeneca's
Acceptance of the System. Such acceptance shall not
exceed forty-five (45) days after successful completion
of installation.
[*] Confidential Treatment Requested
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Article 3
Shipment and Delivery
3.1 Shipment. Shipment of the System to the Installation Location shall be at
Vendor's expense. Vendor shall be responsible for all cost, risk and
expense in delivering to and installing the System at the Installation
Location and any damage or harm to the System incurred as a result of
shipment, delivery or installation shall be the responsibility of Vendor,
(FOB Destination). Notwithstanding the foregoing, Vendor shall not be
liable for damage or harm to the System incurred as a result of improper
preparation or functioning of the Installation Location, or negligence or
misconduct of Zeneca or its agents, employees.
3.2 Delivery. Delivery shall be completed on the following schedule:
(a) The System shall be delivered to Zeneca no later than [12] weeks from
the Effective Date.
(b) Installation shall be started at the Installation Location no later
than [2] week(s) after delivery of the System to Zeneca.
Article 4
Installation and Acceptance
4.1 Installation. Zeneca shall prepare the Installation Location in accordance
with the specifications set forth in Exhibit D. Modifications to the Zeneca
facility to accommodate the delivery, installation and acceptance of the
System shall be the responsibility of Zeneca. Such preparation shall be
completed prior to delivery of the System. Vendor shall, at its own
expense, install and take all action necessary to ensure the acceptance of
the System at the Installation Location. Such installation and testing
shall conform to the delivery schedule and acceptance procedures set forth
herein. Zeneca shall reasonably cooperate with Vendor to provide access to
facilities and personnel to ensure a timely installation and acceptance of
the System.
The System shall be installed by a qualified System Engineer to be selected
by Vendor. As used herein, the term "System Engineer" shall mean an
engineer qualified to test and install the System. To be eligible for
Zeneca's installation, the System Engineer must have previous successful
experience in field installations of Vendor's equipment.
All services hereunder shall be performed during Zeneca's normal working
hours between 8:15 am and 4:30 pm, Wilmington, Delaware local time, Monday
through Friday, excluding Zeneca holidays unless otherwise agreed in
writing by the parties. When installation of the System has been started by
Vendor, installation shall proceed continuously during Zeneca's normal
working hours until such installation is completed.
4.2 Delays. Time is of the essence in the Agreement.
Article 5
Warranty
5.1 General. Vendor warrants that the System will conform to the Specifications
set forth in Exhibit C upon the Acceptance Date and for the later of either
twelve (12) months thereafter or December 31, 1999 ("the Initial Warranty
Period").
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5.2 Hardware Warranty.
(a) Vendor represents and warrants the Hardware against defects in
material and workmanship for the Initial Warranty Period under normal
use and service.
(b) Vendor will make the benefits of any other warranty covering the
Hardware available to Zeneca.
(c) In the event that the Hardware displays or develops defects in
material or workmanship during the Initial Warranty Period:
(i) Vendor shall attempt to remedy such defect by telephone. If
Vendor is unable to so remedy such defect within forty-eight
(48) hours of notice to Vendor by Zeneca of such defect, then
Vendor shall ensure that a qualified service engineer shall
arrive at the Installation Location within seventy-two (72)
hours of the end of such forty-eight (48) hour period.
(ii) Vendor shall provide repair or replacement of any defective
parts free of charge.
(iii) Vendor shall provide any necessary engineering services
required in connection with the repair or replacement of any
defective parts free of charge.
(iv) All other applicable rights and remedies shall be available to
Zeneca.
(v) After the Initial Warranty Period, Vendor shall maintain the
System as required by Zeneca through telephone support at no
charge or by on-site repair at installation Location under the
terms of a Maintenance Agreement.
(d) Vendor further agrees that one preventive maintenance visit for the
System shall be scheduled at a time agreed by Zeneca during the
Warranty Period.
(e) Vendor shall not be responsible under this warranty to the extent that
defects with the Hardware are caused by misuse, abuse, or other fault
attributable to Zeneca or its contractors.
5.2 Software Warranty.
(a) Vendor warrants that the Software as originally delivered and
unaltered will, in conjunction with all other components of the
System, materially perform the functions described in and operate in
accordance with the Specifications and Documentation and contain no
viruses or software locks. Vendor further warrants that the Software
shall continue to meet all acceptance tests throughout the term of
this Agreement.
(b) Vendor hereby represents and warrants to Zeneca that the Software
licensed to Zeneca hereunder includes Software designed to insure year
2000 compatibility, which shall specifically include the ability to
correctly recognize, process, manage, manipulate and store millennial
dates without affecting the integrity of data, output (including
reports, screen contents, etc.) or interpretation, without
interruption, and includes calculations that accommodate same century
and multi-century formulas and date values, and date data interface
values that reflect the century, without any errors relating to date,
and that the Software will continue to be year 2000 compatible.
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(c) Vendor further represents and warrants that any modifications made
by Vendor to the Software or services performed by Vendor in order
to bring the Software into compliance with these representations
and warranties does not and will not corrupt any data included in
Zeneca's computer network and does not or will not contain any
computer viruses or introduce a computer virus into Zeneca's
computer network.
(d) In the event the Software does not meet any of the above
representations and warranties, Vendor shall repair or replace
such Software.
(e) Source Code and Source Code Materials. Vendor hereby grants to
Zeneca and the Zeneca Group a fully-paid perpetual, non-exclusive,
worldwide, limited license to use, modify, enhance and upgrade the
Source Code and the Source Code Materials provided, however, that
such license shall be exercisable solely in the event
(i) Vendor is unable, at any time during the Initial Warranty
Period specified in the Purchase and License Agreement to
correct any malfunction, defect or nonconformity in the
Software which prevents the Software from functioning in
accordance with the applicable Specifications.
Documentation, performance criteria and other warranties and
descriptions provided in this Agreement, within seven (7)
business days after Zeneca's notification to Vendor
specifying in reasonable detail in what aspects the Software
fails to conform; or
(ii) that the Vendor becomes insolvent, makes a general
assignment for the benefit of creditors, files a voluntary
petition of bankruptcy, suffers or permits the appointment
of a receiver for its business or assets, becomes subject to
any proceeding under any bankruptcy or insolvency law,
whether domestic or foreign, or has wound up or liquidated
its business voluntarily or otherwise and Zeneca has
compelling reasons to believe that such event(s) will cause
Vendor to fail to meet its warranty and maintenance
obligations in the foreseeable future. If such event should
occur, the source code will be delivered by the Vendor
within fifteen days of written request by Zeneca.
5.3 Third Party Rights. Vendor warrants that the System to (including
Hardware, Software and Documentation), and use thereof by Zeneca, does not
violate any rights of any third party, including without limitation any
patent, trademark, copyright, or service mark or constitute theft or
misuse of a trade secret owned or controlled by a third party. Vendor
warrants that for the Software it has ownership of or the right to
distribute and license such Software. If claim is made with regard to
Zeneca's use of the System. Vendor shall get permission for Zeneca to use
such System.
5.4 Disclaimer. EXCEPT AS SET FORTH IN THIS AGREEMENT, VENDOR MAKES NO
WARRANTIES, WHETHER EXPRESS OR IMPLIED, OR STATUTORY REGARDING TO RELATING
TO THE SYSTEM, HARDWARE, SOFTWARE, OR DOCUMENTATION, OR ANY MATERIALS OR
SERVICES PROVIDED TO ZENECA UNDER THIS AGREEMENT. VENDOR SPECIFICALLY
DISCLAIMS ALL IMPLIED WARRANTIES OF FITNESS FOR A PARTICULAR PURPOSE.
Article 6
Indemnification.
6.1 Third Party Infringement. If notified promptly in writing of any action
brought against Zeneca or the Zeneca Group alleging that Zeneca's sale,
use or other disposition of the System (including
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Hardware and Software components and Documentation) infringes a patent,
trademark, copyright or service mark or constitutes theft or misuse of a
trade secret owned or controlled by a third party, Vendor shall defend that
action at its expense and shall pay any costs and damages awarded against
Zeneca in the action, including external attorney's fees and internal
counsel expenses, provided that Vendor shall have control of the defense of
any such action and all negotiations for its supplement or compromise, and
provided further that no settlement will be made that is contrary to the
best interests of Zeneca, as may reasonably be determined by Zeneca. If a
final injunction is obtained in such action against Zeneca's use of the
System, or any component thereof, or if in Vendor's opinion the System is
likely to become the subject of a claim of infringement, Vendor shall, at
its option and expense, either procure for Zeneca the right to continue
using the System or any component thereof consistent with the purchase and
licensing right accorded Zeneca herein, or replace or modify the System or
any component thereof so that it becomes non-infringing (but is otherwise
substantially identical to the originally provided System and is also
suitable for Zeneca's intended uses), or grant Zeneca a credit for the
infringing System or component thereof. Vendor shall not have any liability
to Zeneca if the alleged infringement is caused by use or sale of the item
in combination with other products or devices which are not furnished by
Vendor.
6.2 Each party agrees to indemnify, defend and hold the other party harmless
from and against any claim, demand, action, penalty, suit or liability
(including the cost of defense, settlement, and external attorneys' fees
and internal counsel expenses), which the other party may hereafter incur,
become responsible for, or pay out as a result of death or bodily injuries
to any person, destruction or damage to any property caused by
(a) the breach of any term, warranty, representation or provision of this
Agreement, or
(b) in the case of Vendor, any failure to warn of damages or defects in
the System or any component thereof.
Notwithstanding the foregoing, either party shall not be obligated to
indemnify or hold harmless the other party against any losses, claims or
suits caused solely by the willful misconduct or negligence of the other
party.
Article 7
---------
Insurance. Vendor shall at its own expense secure and maintain in full force
and effect throughout the term of the Agreement insurance coverage for (a)
Workmen's Compensation. (b) General Liability and (c) Automobile Liability in
amounts listed on Exhibit E. Certificates evidencing such insurance shall be
provided to Zeneca's Insurance Department.
Article 8
---------
Ancillary Obligations
8.1 System Changes. Zeneca is entitled to receive the most current and
complete commercially released version of the System (including
Hardware, Software and Documentation) available at the time of the
Acceptance Date.
Vendor shall promptly furnish to Zeneca any "bug" fixes (a "bug" is
defined as something that prevents the Software from performing or
meeting the Specifications) during the term of the license at no
charge.
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8.2 Software Upgrades/Updates. Commercially released updates to all Zeneca
licensed Software modules shall be provided at no charge without limitation
during the Initial Warranty Period. Vendor shall provide free support
during the Initial Warranty Period. Future updates after the Initial
Warranty Period may be purchased at Vendor's then listed price.
8.3 Computer Upgrades. Hardware required for enhanced performance may be
purchased from Vendor at the time of purchase. Zeneca may choose to upgrade
the original computer hardware equipment after the initial installation;
costs and labor for upgraded equipment and connectivity to the system will
be Zeneca's responsibility.
8.4 Site Inspection. Upon execution of this Agreement, Vendor shall make
available a qualified engineer (at no additional charge) for the purpose of
inspecting the Installation Location. The engineer shall conduct a series
of standard measurements where required. If these measurements and the site
facilities meet Vendor's site requirements, the engineer shall certify in
writing on the form attached hereto as Exhibit F that the Installation
Location is properly designed and equipped, and that the System will
perform according to the Specifications (attached hereto as Exhibit C) and
the Documentation in the environment. If the Installation Location does not
meet Vendor's site requirements, the engineer shall make specific written
recommendations to Zeneca's engineering and building operations staff as to
how the Installation Location can be made to meet Vendor's site
requirements and Zeneca shall promptly implement such recommendations. If
multiple site inspection visits are necessary in order for the Installation
Location to be certified, Vendor shall provide an engineer for such visits
at Zeneca's expense. Installation cannot be started until a completed site
acceptance form (Exhibit F) has been received by Zeneca. Commitment dates
will be adjusted to allow for days lost due to site facilities being
unavailable.
Article 9
Documentation. Vendor shall supply one (1) printed copy and one (1) electronic
media copy of all Documentation for each component of the System as defined
herein.
Article 10
Miscellaneous
10.1 Taxes. The Purchase Price does not include any import duties.
10.2 Termination. Termination of this Agreement shall occur in one of
the following manners:
a. Termination by mutual agreement of the parties.
(b) Zeneca shall have the right to immediately terminate this
Agreement based upon Vendor's willful misconduct in
connection with services performed under this Agreement.
Willful misconduct shall include, but not be limited to,
disparagement of Zeneca or the Zeneca Group, as defined in
Paragraph 10.12 hereof, or their respective products,
services or management; unethical business conduct; unlawful
activities; failure to adhere to security, safety, health,
and environmental laws and regulations while on Zeneca's
premises; or breach of Vendor's obligations under paragraphs
5.1 and 5.2 herein and the Confidentiality Agreement signed
by Zeneca and Vendor dated herein. Such termination shall be
effective upon delivery of written notice to Vendor.
(c) Except as otherwise provided in paragraph 10.2(b), a party
shall have the right to terminate this Agreement based upon
the other party's non-performance or breach of any provision
of this Agreement. In such event, the non-breaching party
shall provide the
7
<PAGE> 8
breaching party with written notice of the reason for the
non-breaching party's intention to terminate this Agreement and
shall provide the breaching party within thirty (30) days to correct
any non-performance or breach to the satisfaction of the
non-breaching party.
Except as otherwise provided herein, it is agreed and understood
that termination of this Agreement for any reason whatsoever will
result in a termination of Vendor's obligation to provide services
to Zeneca pursuant to this Agreement and a termination of Zeneca's
obligations to compensate Vendor pursuant to paragraph 2.2 as of
the effective date of termination. The other terms of this
Agreement shall survive the termination of the Agreement.
10.3 Exercise of Rights. Each party's termination of this Agreement pursuant
to any of the foregoing provisions or exercise of its rights to relief
as otherwise as set forth in this Agreement shall not be construed to
limit such party's ability to pursue any other legal rights or claims it
may have.
10.4 Entire Agreement. This Agreement, including any Exhibits thereto,
constitutes the entire agreement among the parties and supersedes all
understandings whether written or oral. The text of this Agreement shall
control in case of any conflict with an Exhibit. Further modifications
may be made if in writing and signed by all parties.
10.5 Controlling Law. The laws of the United States shall control and in
particular, the internal laws of the State of Delaware without regard to
its conflicts of law provisions.
10.6 Confidentiality.
(a) Each party acknowledges that it may have access to and obtain
knowledge of certain proprietary and confidential information
("Confidential Information") of the other party disclosing such
information (the "Discloser") in the course of its performance
under this Agreement. Confidential Information shall not include
information that: (i) was already in the possession of the party
receiving Confidential Information ("Recipient") before disclosure
thereof by Discloser to Recipient as evidenced by Recipient's
written records, (ii) is independently developed by Recipient as
evidenced by Recipient's written records, (iii) is or becomes
publicly available through no fault of Recipient, or (iv) is
obtained by Recipient from a third party under no obligation to
disclose same.
(b) Recipient agrees to maintain in strictest confidence and to take
all reasonable steps to maintain the confidentiality of the
Confidential Information. Recipient also agrees not to disclose
Confidential Information to any third party, and to use
Confidential Information only to the extent needed to perform under
this Agreement. Recipient recognizes that all documents and records
received by Recipient from Discloser and all copies of such records
and documents shall be Discloser's property exclusively. Recipient
shall at all times keep all such documents, records and copies of
documents and records in the Recipient's custody and subject to the
Recipient's control and shall surrender the same upon request by
Discloser.
10.7 Publications. Vendor agrees that it will not use the name of Zeneca or
the names of any of its personnel for promotional literature,
advertising, or any other reason without the prior written approval of
Zeneca, provided that Vendor shall have the right to use the name of
Zeneca in its customer list for the System and to distribute such list to
third parties.
10.8 Other.
8
<PAGE> 9
(a) Vendor shall supply a written list of factory and U.S. headquarters
contact persons, phone numbers, Internet E-mail addresses and
specialties for the Hardware and the Software at the time of delivery
of the System.
(b) Vendor shall make available to Zeneca a twelve (12) month maintenance
contract. Zeneca shall have the option to purchase this maintenance
agreement at any time during the initial warranty period. See
comments at Section 5.1(3)(e).
(c) Vendor shall provide five (5) consecutive days of training on the
System on-site at Zeneca at the time of installation for up to three
(3) people at no cost to Zeneca.
10.9 Counterparts. This Agreement may be signed in any number of counterparts,
each of which shall be an original, with the same effects as if the
signatures thereto were upon the same instrument.
10.10 Notices. All notices given under this Agreement shall be in writing and
shall be delivered personally, sent by telegram or facsimile with return
confirmation, or by first class United States mail, postage pre-paid to
the parties at the following addresses:
If to Zeneca: Zeneca Inc.
1800 Concord Pike
Wilmington, DE 19850
Attn: Mike Climas
Telephone: (302)886-7975
Fax: (302)886-2909
If to Vendor: Argonaut Technologies, Inc.
887 Industrial Road, Suite G
San Carlos, CA 94070
Attn: Vice President of Sales & Services
Telephone: 650/598-1350
Fax: 650/598-1359
Notices shall be effective when received.
10.11 Assignment. Neither party may assign or in any way make over any of its
rights or duties under this Agreement without the prior written consent of
the other party, except in the event of a sale of company equity or
assets. Zeneca may assign any of its rights to any duties under this
Agreement to any company controlled, controlling or under common control
of Zeneca, in which event this Agreement shall be binding on and inure to
the benefit of any successor or assignee of Zeneca. In the event of
assignment, the assignor shall continue to be fully liable for any
obligations under this Agreement.
10.12 Force Majeure. A party shall be excused from performing its obligations
under this Agreement if its performance is delayed or prevented by any
cause beyond such party's control and is without its fault or negligence,
including but not limited to, acts of God, fire, explosion, weather,
disease, war, insurrection, civil strife, riots, labor disputes,
government action, including change in relevant government laws or
regulations, or power failure. Performance shall be excused only to the
extent of and during the reasonable continuance of such disability. Any
deadline or time for performance specified that falls due during or
subsequent to the occurrence of any of the disabilities referred to herein
shall be automatically extended for a period of time equal to the period
of such disability. Vendor shall immediately notify Zeneca if, by reason
of any of the disabilities referred to herein. Vendor is unable to meet
any deadline or time for performance.
9
<PAGE> 10
IN NO EVENT SHALL EITHER PARTY BE LIABLE FOR ANY INDIRECT, INCIDENTAL, SPECIAL
OR CONSEQUENTIAL DAMAGES, OR DAMAGES FOR LOSS OF PROFITS, REVENUE, DATA OR USE,
INCURRED BY EITHER PARTY OR ANY THIRD PARTY, WHETHER IN AN ACTION IN CONTRACT
OR TORT, EVEN IF THE OTHER PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH
DAMAGES, VENDOR'S LIABILITY FOR DAMAGES HEREUNDER SHALL IN NO EVENT EXCEED THE
AMOUNT OF PAYMENTS PAID BY ZENECA UNDER THIS AGREEMENT EXCLUDING VENDOR'S
OBLIGATIONS UNDER SECTION 10.6. DAMAGES RELATING TO EITHER PARTY'S OBLIGATIONS
UNDER ALL OTHER SECTIONS, INCLUDING 6.1 AND 6.2 SHALL NOT EXCEED THE LIMITS OF
THEIR INSURANCE.
IN WITNESS WHEREOF the parties hereto have executed this Agreement on the day
and year last written below.
ZENECA, INC. ARGONAUT TECHNOLOGIES
By: /s/ A.K. Willard By: /s/ Lissa A. Goldenstein
____________________________ _______________________
Name: A.K. Willard Name: Lissa A. Goldenstein
_________________________
(Print)
Title: V.P. Biomedical Research Title: V.P. Sales & Service
________________________
Date: 9 Nov. 1998 Date: 10/30/98
________________________ _____________________
10
<PAGE> 11
EXHIBIT A
NOTICE OF ACCEPTANCE DATE
_________________________
Date: _______________
Argonaut Technologies, Inc.
887 Industrial Road, Suite G
San Carlos, CA 94070
Attn: VP, Sales & Service
Dear _________:
Zeneca Inc. hereby notifies Argonaut Technologies that it has accepted the
System as that term is defined in the Purchase and License Agreement between
Zeneca Inc. and Argonaut Technologies, Inc. dated ____________, pursuant to the
terms thereof.
Zeneca Inc.
By: _________________
Title: ______________
Date: _______________
<PAGE> 12
EXHIBIT B
DESCRIPTION OF HARDWARE, SOFTWARE & DOCUMENTATION
1) 900132 Trident Automated Library Production Synthesizer
consisting of; Trident main synthesizer system with two precision metered
syringe systems, fluid delivery interface, reagent, solvent, waste
connections, four (4) integrated agitation-thermal units, cabling.
2) Trident Ship Kit consisting of four (4) Trident Reaction Cassettes, 192
Trident Reaction Vessel Assemblies, nine (9) 250 mL Reagent bottles, four (4)
4 L Solvent carriers, two (2) 15 L HDPE waste reservoir, and spare parts.
3) 900136 Gilson 215 Autosampler/Sample Collector Upgrade
4) 900135 Trident Voltage Kit (USA)
5) 900131 Trident Computer System - HP
Consisting of: Pentium 333 MHz processor, 64 Mbytes RAM, 6.4 Gbyte hard
disk, 32x CDROM, microfloppy disk, 17" svga monitor, mouse/keyboard,
Windows NT 4.0 and Microsoft OfficePro 97 supplied with Trident Control
Software. Provided with 3 year HP warranty (1st year on site; 2nd & 3rd
years return to HP.)
6) Trident Control Software provides software routines to define solvents/
reagents and diversity reagents to be used in synthesis, definition of
synthesis program based on fluid movements, program control, reaction times,
and instrument control functions, solvent usage calculations, autosampler and
sample collector control functions, and system monitors of programming,
plumbing, and mechanical status. Provided on CD ROM.
<PAGE> 13
EXHIBIT C
SPECIFICATIONS
TRIDENT AUTOMATED LIBRARY SYNTHESIZER
INSTALLATION VALIDATION
The following document describes validation parameters for installation of the
Trident Automated Library Synthesizer. An instrument which demonstrates
adherence to these parameters is considered by Argonaut Technologies to be a
successfully installed, fully operational instrument capable of meeting all
published specifications, and one which demonstrates no damage in shipment.
SITE REQUIREMENTS
<TABLE>
<CAPTION>
Operational Requirement Specification Actual (Result)
<S> <C> <C>
Lab temp 18 degrees C to 25 degrees C
Lab humidity equal to or greater than
70% RH
Recommended ventilation flow Approx. 40 cfm
(with all doors closed)
Regulated N. pressure 35 to 50 psi
Regulated He pressure 15 psi
Regulated Compressed dry air 50 psi
pressure (or use N. gas) Dryness equal to or less than
0.01% H.O.
Line voltage/current capacity Dedicated circuit, 200 to 240
VAC @ 30 Amps
</TABLE>
ELECTRONIC INTEGRITY
SPECIFICATION:
All circuits working as designed. No connectors loose.
VALIDATION PROCEDURE:
Run pre-programmed automated procedure to exercise all valves and heaters.
Check runfile for valve or heater errors. Attach a copy of the runfile to
installation validation documentation.
RESULT:
(Argonaut Installation Engineer to enter result here and attach supporting
documentation)
PLUMBING INTEGRITY
SPECIFICATION:
All pneumatic and liquid plumbing connects as per plumbing schematics. No loose
or leaking pneumatic fittings.
<PAGE> 14
VALIDATION PROCEDURE:
Check all fittings for tightness. Reconnect and/or tighten as necessary.
RESULT:
(Argonaut Installation Engineer to enter result here and attach supporting
documentation)
INTERNAL LEAK/OBSTRUCTION CHECK
SPECIFICATION:
1. No leaks or obstructions on pressure supply side (low, high and very low
inputs).
2. No leaks or obstructions in delivery/valving RV side.
3. RVs hold pressure in cassette when sealed.
VALIDATION PROCEDURE:
1a) Supply side: Perform a supply side pressure test to validate integrity of
the gas input pneumatics. Verify no appreciable leaks.
1b) Bottle leak test: Perform a bottle pressure test to validate integrity of
bottle sealing and pressure system. Verify no appreciable leaks.
2 Perform a system leak test, checking for leaks or obstructions in all
delivery pathways. Verify no obstructions or appreciable leaks.
3) Perform a leak test on all 192 vessels of 4 cassettes. Verify no
appreciable leaks.
RESULT:
(Argonaut Installation Engineer to enter result here and attach supporting
documentation)
14
<PAGE> 15
AS CALIBRATION
SPECIFICATION:
AutoSampler performs accurate and precise septa puncture and movement to the
needle wash ports.
VALIDATION PROCEDURE:
Perform an AutoSampler calibration verification procedure, utilizing a visual
verification of XYZ alignment with all vial positions and needle wash/waste
positions.
RESULT:
(Argonaut Installation Engineer to enter result here and attach supporting
documentation)
HEATING
SPECIFICATION:
Rate: Ambient - 10 degrees Celsius to 90 degrees Celcius in 30 minutes
Rate: Ambient - 10 degrees Celsius to 150 degrees Celcius in 45 minutes
Accuracy: = 5 degrees Celcius or 5% of setpoint, whichever is greater
VALIDATION PROCEDURE:
Run the preprogrammed "Heating and Cooling Test". Check Runfile for time and
temperature readings in the heating ranges. Verify specifications are met.
Attach runfile to installation validation documentation.
RESULT:
(Argonaut Installation Engineer to enter result here and attach supporting
documentation)
15
<PAGE> 16
COOLING
SPECIFICATION:
Rate: Ambient -40 (degrees)C in 30 minutes
Rate: 150 (degrees)C to -40 (degrees)C in 30 minutes
Accuracy: + or (-) 5 (degrees)C or 5% of setpoint, whichever is greater
VALIDATION PROCEDURE:
Make sure a LN2 cryo tank, with sufficient capacity has been connected before
you run the above "Heating and Cooling test". After the run, check the runfile
for time and temperature readings in the cooling ranges. Verify specifications
are met. Attach runfile to installation validation documentation.
RESULT:
DIVERSITY REAGENT DELIVERY ACCURACY/PRECISION (AUTOSAMPLER)
SPECIFICATION:
Range: minimum 50 nanoliters to 3ml in 5 nanoliter increments
Accuracy: + or (-) 15 nanoliters ((less than)200 nanoliters): + or (-) 5%
((greater than)200 nanoliters)
VALIDATION PROCEDURE:
Run the preprogrammed "Solvent/Reagent Delivery Test" utilizing water or DMP in
the AutoSampler, Reagent and Solvent locations, and a cassette with 48 fully
prepared vials. Measure the volume in the collection vials which correspond to
AutoSampler deliveries using gravemetric determination, or transfer to a
graduated cylinder. All deliveries tested should be within the accuracy range.
RESULT:
(Argonaut Installation Engineer to enter result here and attach supporting
documentation)
16
<PAGE> 17
REAGENT DELIVERY ACCURACY/PRECISION (SMALL AND LARGE SYRINGE)
SPECIFICATION:
Range: minimum 50 nanoliters to 3 ml in 10 nanoliter increments
Accuracy: + or (-) 5%
VALIDATION PROCEDURE:
As above, run the preprogrammed "Solvent/Reagent Delivery Test" utilizing water
or DMF in the AutoSampler. Reagent and Solvent locations, and a cassette with
48 fully prepared vials. Measure the volume in the collection vials which
correspond to syringe deliveries using gravemetric determination, or transfer
to a graduated cylinder. All deliveries tested should be within the accuracy
range.
RESULT:
(Argonaut Installation Engineer to enter result here and attach supporting
documentation)
AGITATION RATE VALIDATION
SPECIFICATION:
Rate: 0 to 400 strokes per minute
Accuracy: + or (-) 10%
VALIDATION PROCEDURE:
Using a tachometer, check the actual frequency of each agitator against the
programmed frequency at max speed (400 strokes per minute). Result should be
within the accuracy range for each agitator tested.
RESULT:
(Argonaut Installation Engineer to enter result here and attach supporting
documentation)
SYSTEM INTEGRATION CHECK
SPECIFICATION:
All relevant modules perform as required in a pre-programmed system wide test
utilizing a typical solvent.
VALIDATION PROCEDURE:
Utilize results of "Solvent/Reagent Delivery Test" to validate system
integration check. Analyze runfile for errors. Attach a copy of the runfile to
the installation validation documentation.
RESULT:
(Argonaut Installation Engineer to enter result here and attach supporting
documentation)
17
<PAGE> 18
EXHIBIT D
SITE/SPACE REQUIREMENTS
INSTRUMENT COMPONENT DIMENSIONS
The following dimensions represent actual component dimensions. This information
will be useful for instrument clearances and weight support during transit.
<TABLE>
Component Height Width Length Weight
<S> <C> <C> <C> <C>
Main Module (free standing on wheels) 57" 50.25" 63" 800 lbs
144.8 cm 76.85 cm 160 cm
AutoSampler (215)
AutoSampler (223)
Syringe Module
</TABLE>
SYSTEM SPACE REQUIREMENTS
The following dimensions represent the requirements for placement of a
Trident(TM) and components in a laboratory, and take into account all
clearances needed for the entire Trident(TM) system.
HEIGHT
With model 215 AutoSampler and Syringe Module on top: 86" - 218.5 cm
With model 223 AutoSampler and Syringe Module on top:
WIDTH
With required rear clearance: 36" - 91.44 cm
With required rear clearance, solvent doors open in front: 55.5" - 141 cm
LENGTH
With side panel access on right side: 80.5" - 204.5 cm
With PC desk on right:
Length, with PC on Right, 230L dewar on left.
Length, with PC on right, 230L dewar and 50L solvent kegs(4) on right:
SPECIAL SPACE CONSIDERATIONS
EXTERNAL SOLVENT KEGS - External solvent kegs (up to 4) will need to be located
within several feet of the main module on the left side.
CRYO DEWAR - External cryo dewar used for chilling reactions will need to be
located within 4 feet of the main module to the left side
PC CONTROLLER - The PC controller can be located to the right or left side of
the Trident(TM) main module within several feet, and on a (user supplied) bench
or table. For each of operation, it is recommended to locate the PC to the right
of the instrument.
<PAGE> 19
EXHIBIT E
INSURANCE
Evidence of Insurance is attached and marked as Exhibit E.
<PAGE> 20
<TABLE>
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
ACORD(TM) CERTIFICATE OF LIABILITY INSURANCE DATE (MM/DD/YY)
09/22/98
- ------------------------------------------------------------------------------------------------------------------------------------
PRODUCER THIS CERTIFICATE IS ISSUED AS A MATTER OF INFORMATION
ABD Technology ONLY AND CONFERS NO RIGHTS UPON THE CERTIFICATE
ALBURGER BASSO de GROSZ INS. HOLDER. THIS CERTIFICATE DOES NOT AMEND, EXTEND OR
301 Island Parkway, Suite 100 ALTER THE COVERAGE AFFORDED BY THE POLICIES BELOW.
Belmont, CA 94002 ---------------------------------------------------------
INSURERS AFFORDING COVERAGE
- ------------------------------------------------------------------------------------------------------------------------------------
INSURED INSURER A: St. Paul Fire & Marine
Argonaut Technologies ---------------------------------------------------------
887 Industrial Road, Ste G INSURER B: Fireman's Fund Insurance
San Carlos, CA 94070 ---------------------------------------------------------
INSURER C:
---------------------------------------------------------
INSURER D:
---------------------------------------------------------
INSURER E:
- ------------------------------------------------------------------------------------------------------------------------------------
COVERAGES
- ------------------------------------------------------------------------------------------------------------------------------------
THE POLICIES OF INSURANCE LISTED BELOW HAVE BEEN ISSUED TO THE INSURED NAMED ABOVE FOR THE POLICY PERIOD
INDICATED, NOTWITHSTANDING ANY REQUIREMENT, TERM OR CONDITION OF ANY CONTRACT OR OTHER DOCUMENT WITH RESPECT TO
WHICH THIS CERTIFICATE MAY BE ISSUED OR MAY PERTAIN. THE INSURANCE AFFORDED BY THE POLICIES DESCRIBED HEREIN IS
SUBJECT TO ALL THE TERMS, EXCLUSIONS AND CONDITIONS OF SUCH POLICIES. AGGREGATE LIMITS SHOWN MAY HAVE BEEN
REDUCED BY PAID CLAIMS.
<CAPTION>
POLICY POLICY
EFFECTIVE EXPIRATION
INSTR POLICY DATE DATE
LTR TYPE OF INSURANCE NUMBER (MM/DD/YY) (MM/DD/YY) LIMITS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
A GENERAL LIABILITY TE01600570 01/01/98 01/01/99 EACH OCCURRENCE $1,000,000
[X] COMMERCIAL GENERAL LIABILITY ----------------------------------------
[ ] [ ] CLAIMS MADE [X] OCCUR FIRE DAMAGE (Any one fire) $1,000,000
[X] EMP. BENEFITS ----------------------------------------
[ ] 1,000,000 LIMIT MED EXP (Any one person) $10,000
GENL AGGREGATE LIMIT APPLIES PER ----------------------------------------
[ ] POLICY [ ] PROJECT [ ] LOC PERSONAL & ADV INJURY $1,000,000
----------------------------------------
GENERAL AGGREGATE $2,000,000
----------------------------------------
PRODUCTS-COMP/OP AGG $2,000,000
- ------------------------------------------------------------------------------------------------------------------------------------
A AUTOMOBILE LIABILITY TE01600570 01/01/98 01/01/99 COMBINED SINGLE LIMIT
[ ] ANY AUTO (as accident) $1,000,000
[ ] ALL OWNED AUTOS ----------------------------------------
[ ] SCHEDULED AUTOS Hired Car Phy BODILY INJURY
[X] HIRED AUTOS Damage (Per person) $
[X] NON-OWNED AUTOS Limit: ACV ----------------------------------------
[X] COMPREHENSIVE $1,000 DED. BODILY INJURY
[X] COLLISION $1,000 DED. (Per accident) $
----------------------------------------
PROPERTY DAMAGE
(Per accident) $
- ------------------------------------------------------------------------------------------------------------------------------------
GARAGE LIABILITY AUTO ONLY - EA ACCIDENT $
[ ] ANY AUTO ----------------------------------------
[ ] OTHER THAN EA ACC $
AUTO ONLY: AGG $
- ------------------------------------------------------------------------------------------------------------------------------------
A EXCESS LIABILITY TE01600570 08/17/98 01/04/99 EACH OCCURRENCE $1,000,000
[X] OCCUR [ ] CLAIMS MADE AGGREGATE $1,000,000
[ ] $
[ ] DEDUCTIBLE $
[X] RETENTION $10,000 $
- ------------------------------------------------------------------------------------------------------------------------------------
B WORKERS COMPENSATION AND WZC80761613 01/04/98 01/04/99 X WC STATU- OTH-
EMPLOYERS' LIABILITY TORY LIMITS ER
E.L. EACH ACCIDENT $1,000,000
E.L. DISEASE EA EMPLOYEE $1,000,000
E.L. DISEASE - POLICY LIMIT $1,000,000
- ------------------------------------------------------------------------------------------------------------------------------------
A OTHER Blanket TE01600570 01/01/98 01/01/99 $1,000 Deductible
Pers. Property $2,700,000 Limit
Blanket EDP $899,800 Limit
- ------------------------------------------------------------------------------------------------------------------------------------
DESCRIPTION OF OPERATIONS/LOCATIONS/VEHICLES/EXCLUSIONS ADDED BY ENDORSEMENT/SPECIAL PROVISIONS
Replacement Cost and Special Form incl Theft applies to Property Coverage.
Transit Limit: $60,000; Exhibition Limit: $60,000; AOL Limit:$71,000
Business Income Limit: $5,590,000; Off Premises Power Limit: $1,000,000
Employee Dishonesty Limit: $60,000 - Deductible $1,000
- ------------------------------------------------------------------------------------------------------------------------------------
CERTIFICATE HOLDER ADDITIONAL INSURED: INSURER LETTER CANCELLATION Ten Day Notice for Non-Payment
- ------------------------------------------------------------------------------------------------------------------------------------
SHOULD ANY OF THE ABOVE DESCRIBED POLICIES BE CANCELLED BEFORE THE
Argonaut Technologies, Inc. EXPIRATION DATE THEREOF, THE ISSUING INSURER WILL ENDEAVOR TO MAIL 30
887 Industrial Road, Suite G DAYS WRITTEN NOTICE TO THE CERTIFICATE HOLDER NAMED TO THE LEFT, BUT
San Carlos, CA 94070 FAILURE TO DO SO SHALL IMPOSE NO OBLIGATION OR LIABILITY OF ANY KIND
UPON THE INSURER, ITS AGENTS OR REPRESENTATIVES.
------------------------------------------------------------------------
AUTHORIZED REPRESENTATIVE
(illegible)
- ------------------------------------------------------------------------------------------------------------------------------------
ACORD 25-5 (7/97) 1 OF 2 #S117584/M117570 MAB (R) ACORD CORPORATION 1985
</TABLE>
<PAGE> 21
<TABLE>
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
ACORD(TM) CERTIFICATE OF LIABILITY INSURANCE DATE (MM/DD/YY)
09/22/98
- ------------------------------------------------------------------------------------------------------------------------------------
PRODUCER THIS CERTIFICATE IS ISSUED AS A MATTER OF INFORMATION
ABD Technology ONLY AND CONFERS NO RIGHTS UPON THE CERTIFICATE
ALBURGER BASSO de GROSZ INS. HOLDER. THIS CERTIFICATE DOES NOT AMEND, EXTEND OR
301 Island Parkway, Suite 100 ALTER THE COVERAGE AFFORDED BY THE POLICIES BELOW.
Belmont, CA 94002 ---------------------------------------------------------
INSURERS AFFORDING COVERAGE
- ------------------------------------------------------------------------------------------------------------------------------------
INSURED INSURER A: St. Paul Fire & Marine
Argonaut Technologies ---------------------------------------------------------
887 Industrial Road, Ste G INSURER B:
San Carlos, CA 94070 ---------------------------------------------------------
INSURER C:
---------------------------------------------------------
INSURER D:
---------------------------------------------------------
INSURER E:
- ------------------------------------------------------------------------------------------------------------------------------------
COVERAGES
- ------------------------------------------------------------------------------------------------------------------------------------
THE POLICIES OF INSURANCE LISTED BELOW HAVE BEEN ISSUED TO THE INSURED NAMED ABOVE FOR THE POLICY PERIOD
INDICATED, NOTWITHSTANDING ANY REQUIREMENT, TERM OR CONDITION OF ANY CONTRACT OR OTHER DOCUMENT WITH RESPECT TO
WHICH THIS CERTIFICATE MAY BE ISSUED OR MAY PERTAIN. THE INSURANCE AFFORDED BY THE POLICIES DESCRIBED HEREIN IS
SUBJECT TO ALL THE TERMS, EXCLUSIONS AND CONDITIONS OF SUCH POLICIES. AGGREGATE LIMITS SHOWN MAY HAVE BEEN
REDUCED BY PAID CLAIMS.
<CAPTION>
POLICY POLICY
EFFECTIVE EXPIRATION
INSTR POLICY DATE DATE
LTR TYPE OF INSURANCE NUMBER (MM/DD/YY) (MM/DD/YY) LIMITS
- ------------------------------------------------------------------------------------------------------------------------------------
A GENERAL LIABILITY TE01600604 01/01/98 01/01/99 EACH OCCURRENCE $1,000,000
[X] COMMERCIAL GENERAL LIABILITY ----------------------------------------
[ ] [ ] CLAIMS MADE [X] OCCUR Foreign FIRE DAMAGE (Any one fire) $1,000,000
[ ] Liability ----------------------------------------
[ ] MED EXP (Any one person) $10,000
GENL AGGREGATE LIMIT APPLIES PER ----------------------------------------
[ ] POLICY [ ] PROJECT [ ] LOC PERSONAL & ADV INJURY $1,000,000
----------------------------------------
GENERAL AGGREGATE $2,000,000
----------------------------------------
PRODUCTS-COMP/OP AGG $2,000,000
- ------------------------------------------------------------------------------------------------------------------------------------
A AUTOMOBILE LIABILITY TE01600604 01/01/98 01/01/99 COMBINED SINGLE LIMIT
[ ] ANY AUTO (as accident) $1,000,000
[ ] ALL OWNED AUTOS ----------------------------------------
[ ] SCHEDULED AUTOS BODILY INJURY
[ ] HIRED AUTOS (Per person) $
[X] NON-OWNED AUTOS ----------------------------------------
[ ] Foreign Auto BODILY INJURY
[ ] DIC/Excess (Per accident) $
----------------------------------------
PROPERTY DAMAGE
(Per accident) $
- ------------------------------------------------------------------------------------------------------------------------------------
GARAGE LIABILITY AUTO ONLY - EA ACCIDENT $
[ ] ANY AUTO ----------------------------------------
[ ] OTHER THAN EA. ACC. $
AUTO ONLY: AGG $
- ------------------------------------------------------------------------------------------------------------------------------------
EXCESS LIABILITY EACH OCCURRENCE $
[ ] OCCUR [ ] CLAIMS MADE AGGREGATE $
[ ] $
[ ] DEDUCTIBLE $
[ ] RETENTION $ $
- ------------------------------------------------------------------------------------------------------------------------------------
A WORKER'S COMPENSATION AND TE01600604 01/01/98 01/01/99 WC STATU- OTH-
EMPLOYERS' LIABILITY Foreign Vol. TORY LIMITS ER
Compensation E.L. EACH ACCIDENT $1,000,000
E.L. DISEASE EA EMPLOYEE $1,000,000
E.L. DISEASE - POLICY LIMIT $1,000,000
- ------------------------------------------------------------------------------------------------------------------------------------
OTHER
- ------------------------------------------------------------------------------------------------------------------------------------
DESCRIPTION OF OPERATIONS/LOCATIONS/VEHICLES/EXCLUSIONS ADDED BY ENDORSEMENT/SPECIAL PROVISIONS
- ------------------------------------------------------------------------------------------------------------------------------------
CERTIFICATE HOLDER ADDITIONAL INSURED: INSURER LETTER CANCELLATION Ten Day Notice for Non-Payment
- ------------------------------------------------------------------------------------------------------------------------------------
SHOULD ANY OF THE ABOVE DESCRIBED POLICIES BE CANCELLED BEFORE THE
Argonaut Technologies, Inc. EXPIRATION DATE THEREOF, THE ISSUING INSURER WILL ENDEAVOR TO MAIL 30
887 Industrial Road, Suite G DAYS WRITTEN NOTICE TO THE CERTIFICATE HOLDER NAMED TO THE LEFT, BUT
San Carlos, CA 94070 FAILURE TO DO SO SHALL IMPOSE NO OBLIGATION OR LIABILITY OF ANY KIND
UPON THE INSURER, ITS AGENTS OR REPRESENTATIVES.
------------------------------------------------------------------------
AUTHORIZED REPRESENTATIVE
(illegible)
- ------------------------------------------------------------------------------------------------------------------------------------
ACORD 25-5 (7/97) 1 OF 2 #S117602/M117598 MAB (R) ACORD CORPORATION 1985
</TABLE>
<PAGE> 22
IMPORTANT
If the certificate holder is an ADDITIONAL INSURED, the policy(ies) must be
endorsed. A statement on this certificate does not confer rights to the
certificate holder in lieu of such endorsement(s).
If SUBROGATION IS WAIVED, subject to the terms and conditions of the policy,
certain policies may require an endorsement. A statement on this certificate
does not confer rights to the certificate holder in lieu of such endorsement(s).
DISCLAIMER
The Certificate of Insurance on the reverse side of this form does not
constitute a contract between the issuing Insurer(s), authorized representative
or producer, and the certificate holder, nor does it affirmatively or
negatively amend, extend or alter the coverage afforded by the policies listed
thereon.
<PAGE> 23
IMPORTANT
If the certificate holder is an ADDITIONAL INSURED, the policy(ies) must be
endorsed. A statement on this certificate does not confer rights to the
certificate holder in lieu of such endorsement(s).
If SUBROGATION IS WAIVED, subject to the terms and conditions of the policy,
certain policies may require an endorsement. A statement on this certificate
does not confer rights to the certificate holder in lieu of such endorsement(s).
DISCLAIMER
The Certificate of Insurance on the reverse side of this form does not
constitute a contract between the issuing Insurer(s), authorized representative
or producer, and the certificate holder, nor does it affirmatively or
negatively amend, extend or alter the coverage afforded by the policies listed
thereon.
<PAGE> 24
EXHIBIT F
SITE ACCEPTANCE FORM
Date: _______________________________
Ms. Heather Corcoran
Logistics and Safety - Purchasing
Zeneca, Inc.
1800 Concord Pike
Wilmington, DE 19850
Dear Heather:
Argonaut Technologies, Inc. hereby notifies Zeneca Inc. that it has accepted the
Installation Location, as that term is defined in the Purchase and License
Agreement between Argonaut and Zeneca Inc., dated _______________________, as
acceptable, in its present condition, for installation of the System, as defined
in the Agreement, pursuant to the terms hereof.
_____________________________________
By: _________________________________
Title: ______________________________
Date: _______________________________
<PAGE> 25
EXHIBIT G
Proposed Price.
(ATTACH FINAL QUOTE FROM ARGONAUT).
21
<PAGE> 26
[ARGONAUT 887 INDUSTRIAL ROAD, SUITE G
TECHNOLOGIES SAN CARLOS, CA 94070
LOGO] (650) 598-1350
FAX (650) 598-1359
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
----------------------------------------------------------------------------------------------
SALES ORDER SALES ORDER ID ORDER DATE ORDER TYPE
004737 09/29/98 NORMAL
----------------------------------------------------------------------------------------------
PAGE CHG NO. CHANGE DATE CHANGE DESCRIPTION CONFIRMED TO
1 1 10/19/98 HEATHER CORCORAN
----------------------------------------------------------------------------------------------
CURRENCY TERMS REFERENCE
USD NET 15 DAYS
- ----------------------------------- ----------------------------------------------------------------------------------------------
CUSTOMER P.O. NO. ATTENTION SHIP VIA FOB FREIGHT TERMS
35047660 MIKE KLIMAS BEST WAY DESTINATION NO CHARGE
- ----------------------------------- ----------------------------------------------------------------------------------------------
SOLD TO PHONE NO. SOLD TO FAX NO. RESALE NO. TAX CODE
302-886-2857 302-886-2909 DE HAS NO STATE TAX T = TAXABLE R = RESALE N = NONTAXABLE
- ----------------------------------- ----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C>
S ZENEC002 S ZENEC002 B ZENEC$02
O ZENECA PHARMACEUTICALS H ZENECA PHARMACEUTICALS I ZENECA PHARMACEUTICALS
L FAIRFAX RESEARCH CENTER I FAIRFAX RESEARCH CENTER L ATTN: ACCOUNTS PAYABLE FOC 2C
D 1800 CONCORD PIKE P 1800 CONCORD PIKE L PO BOX 15437
WILMINGTON DE 19803 WILMINGTON, DE WILMINGTON, DE
T USA T USA 19803 T USA 19850-5437
O O O
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
LINE DESCRIPTION REQUEST/ ORDER QUANTITY U/M UNIT PRICE PRICE TAX CODE
PART ID SCHEDULED BALANCE DUE EXTENDED PRICE CODE DISC % VAT CODE
CUSTOMER PART ID DWD REV ECN SHIP DATE
- ------------------------------------------------------------------------------------------------------------------------------------
1.00 TRIDENT AUTOMATED LIBRARY SYNTHESIZER 10/29/98 1 EA [*] LP N
900132 10/29/98 1 [*]
2.00 TRIDENT AUTOSAMPLER UPGRADE-GILSON 215 10/29/98 1 EA [*] LP N
900136 2 10/29/98 1 [*]
3.00 TRIDENT VOLTAGE KIT, NORTH AMERICA 10/29/98 1 EA [*] LP N
900135 10/29/98 1 [*]
4.00 WORKSTATION, SYS, HEWLETT PACKARD 10/29/98 1 EA [*] LP N
900133 A 10/29/98 1 [*]
Customer will received an HP
computer on this order.
5.00 ONE-TIME PRODUCT DISCOUNT 10/29/98 1 EA [*] LP N
10/29/98 1 [*]
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SUBTOTAL ORDER TAX AMOUNT ORDER TAX AMOUNT 2 ORDER TAX AMOUNT 3 ORDER VAT ORDER TOTAL
- ------------------------------------------------------------------------------------------------------------------------------------
ORDER TAKER SALESMAN REGION
CY SV AMR 3 Customer CONTINUED NEXT PAGE
- --------------------------------------
</TABLE>
[*] Confidential Treatment Requested
<PAGE> 27
[ARGONAUT 887 INDUSTRIAL ROAD, SUITE G
TECHNOLOGIES SAN CARLOS, CA 94070
LOGO] (650) 598-1350
FAX (650) 598-1359
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
----------------------------------------------------------------------------------------------
SALES ORDER SALES ORDER ID ORDER DATE ORDER TYPE
004737 09/29/98 NORMAL
----------------------------------------------------------------------------------------------
PAGE CHG NO. CHANGE DATE CHANGE DESCRIPTION CONFIRMED TO
2 1 10/19/98 HEATHER CORCORAN
----------------------------------------------------------------------------------------------
CURRENCY TERMS REFERENCE
USD NET 15 DAYS
- ----------------------------------- ----------------------------------------------------------------------------------------------
CUSTOMER P.O. NO. ATTENTION SHIP VIA FOB FREIGHT TERMS
35047660 MIKE KLIMAS BEST WAY DESTINATION NO CHARGE
- ----------------------------------- ----------------------------------------------------------------------------------------------
SOLD TO PHONE NO. SOLD TO FAX NO. RESALE NO. TAX CODE
302-886-2857 302-886-2909 DE HAS NO STATE TAX T = TAXABLE R = RESALE N = NONTAXABLE
- ----------------------------------- ----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C>
S ZENEC002 S ZENEC002 B ZENEC$02
O ZENECA PHARMACEUTICALS H ZENECA PHARMACEUTICALS I ZENECA PHARMACEUTICALS
L FAIRFAX RESEARCH CENTER I FAIRFAX RESEARCH CENTER L ATTN: ACCOUNTS PAYABLE FOC 2C
D 1800 CONCORD PIKE P 1800 CONCORD PIKE L PO BOX 15437
WILMINGTON DE 19803 WILMINGTON, DE WILMINGTON, DE
T USA T USA 19803 T USA 19850-5437
O O O
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
LINE DESCRIPTION REQUEST/ ORDER QUANTITY U/M UNIT PRICE PRICE TAX CODE
PART ID SCHEDULED BALANCE DUE EXTENDED PRICE CODE DISC % VAT CODE
CUSTOMER PART ID DWD REV ECN SHIP DATE
- ------------------------------------------------------------------------------------------------------------------------------------
*********BACK ORDERED*********
SEE SCHEDULED SHIP DATE SECTION
*******************************
*******ORDER CONFIRMATION******
Direct all order questions to:
Cinthia Yesitis - Customer Svc.
Phone: 650-598-1350 x220
Fax: 650-598-1359
US Toll Free: 888-598-1350 x220
*DO NOT PAY FROM THIS DOCUMENT*
*******************************
Zeneca Payment Schedule:
[*] due 15 days after
delivery of all components of
the system.
[*] due 15 days after
Zeneca's acceptance of the
system. Such acceptance shall
not exceed forty five (45) days
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SUBTOTAL ORDER TAX AMOUNT ORDER TAX AMOUNT 2 ORDER TAX AMOUNT 3 ORDER VAT ORDER TOTAL
- ------------------------------------------------------------------------------------------------------------------------------------
ORDER TAKER SALESMAN REGION
CY SV AMR 3 Customer CONTINUED NEXT PAGE
- --------------------------------------
</TABLE>
[*] Confidential Treatment Requested
<PAGE> 28
[ARGONAUT 887 INDUSTRIAL ROAD, SUITE G
TECHNOLOGIES SAN CARLOS, CA 94070
LOGO] (650) 598-1350
FAX (650) 598-1359
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
----------------------------------------------------------------------------------------------
SALES ORDER SALES ORDER ID ORDER DATE ORDER TYPE
004737 09/29/98 NORMAL
----------------------------------------------------------------------------------------------
PAGE CHG NO. CHANGE DATE CHANGE DESCRIPTION CONFIRMED TO
3 1 10/19/98 HEATHER CORCORAN
----------------------------------------------------------------------------------------------
CURRENCY TERMS REFERENCE
USD NET 15 DAYS
- ----------------------------------- ----------------------------------------------------------------------------------------------
CUSTOMER P.O. NO. ATTENTION SHIP VIA FOB FREIGHT TERMS
35047660 MIKE KLIMAS BEST WAY DESTINATION NO CHARGE
- ----------------------------------- ----------------------------------------------------------------------------------------------
SOLD TO PHONE NO. SOLD TO FAX NO. RESALE NO. TAX CODE
302-886-2857 302-886-2909 DE HAS NO STATE TAX T = TAXABLE R = RESALE N = NONTAXABLE
- ----------------------------------- ----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C>
S ZENEC002 S ZENEC002 B ZENEC$02
O ZENECA PHARMACEUTICALS H ZENECA PHARMACEUTICALS I ZENECA PHARMACEUTICALS
L FAIRFAX RESEARCH CENTER I FAIRFAX RESEARCH CENTER L ATTN: ACCOUNTS PAYABLE FOC 2C
D 1800 CONCORD PIKE P 1800 CONCORD PIKE L PO BOX 15437
WILMINGTON DE 19803 WILMINGTON, DE WILMINGTON, DE
T USA T USA 19803 T USA 19850-5437
O O O
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
LINE DESCRIPTION REQUEST/ ORDER QUANTITY U/M UNIT PRICE PRICE TAX CODE
PART ID SCHEDULED BALANCE DUE EXTENDED PRICE CODE DISC % VAT CODE
CUSTOMER PART ID DWD REV ECN SHIP DATE
- ------------------------------------------------------------------------------------------------------------------------------------
after successful completion of
installation.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SUBTOTAL ORDER TAX AMOUNT ORDER TAX AMOUNT 2 ORDER TAX AMOUNT 3 ORDER VAT ORDER TOTAL
[*] 0 [*]
- ------------------------------------------------------------------------------------------------------------------------------------
ORDER TAKER SALESMAN REGION
CY SV AMR 3 Customer
- --------------------------------------
</TABLE>
[*] Confidential Treatment Requested
<PAGE> 29
[ARGONAUT TECHNOLOGIES LOGO]
TRIDENT(TM) AUTOMATED LIBRARY SYNTHESIZER SYSTEM
900132 TRIDENT AUTOMATED LIBRARY SYNTHESIZER
-- Operators Manual and Installation Manual
-- Installation and startup assistance provided by
Argonaut service engineer.
-- One year warranty on parts and labor.
-- Trident Ship Kit
(4) Trident Reaction Cassettes(TM)
(192) Trident Reaction Vessel Assemblies
(9) 250 ml Schott Reagent Bottles
(4) 4 L Solvent Carriers
(2) 15 L HDPE Waste Reservoir
(1) Reagent Syringe
(1) Solvent Syringe
(1) Serial Cable
900167 GILSON 223 AUTOSAMPLER/SAMPLE COLLECTOR*: Modified to operate with
Trident; includes valving, cabling, hardware interface, co-axial
needle and autosampler and sample collector trays.
900135 TRIDENT VOLTAGE KIT
900091 TRIDENT COMPUTER SYSTEM (GATEWAY): 333 MHz Celeron CPU with 64 Mbytes
RAM, 3.2 Gbyte hard drive, 13x CDROM, microfloppy disk, 15" svga
monitor, mouse/keyboard, Windows NT 4.0 and Microsoft Office Pro 97
supplied with Trident Control Software. Provided with 3 year Gateway
warranty (1st year on-site; 2nd-3rd years return to Gateway)
SUBSTITUTE OPTIONS:
*900136 GILSON 215 AUTOSAMPLER/SAMPLE COLLECTOR: Modified to operate with
Trident; includes valving, cabling hardware interface, co-axial needle
and autosampler and sample collector trays. Substitute 900136 for
900167.
*900133 TRIDENT COMPUTER SYSTEM (HP). (Substitute for 900091.): 333 MHz
Pentium II CPU with 64 Mbytes RAM, 6.4 Gbyte hard drive, 32x CDROM,
microfloppy disk, 17" svga monitor, mouse/keyboard, Windows NT 4.0 and
Microsoft Office Pro 97 supplied with Trident Control Software.
Provided with 3 year HP warranty (1st year on-site, 2nd-3rd years
return to HP).
SPARE PARTS AND ACCESSORIES:
900168 TRIDENT REACTION CASSETTE WITH 48 REACTION VESSEL ASSEMBLIES
900165 TRIDENT EXTERNAL AGITATION-THERMAL UNIT
[ARGONAUT TECHNOLOGIES LETTERHEAD]
<PAGE> 30
FIRST AMENDMENT
This is the First Amendment to the Purchase and License Agreement between
Argonaut Technologies, Inc., and Zeneca Inc., with an Effective Date of October
30th, 1998. ("the Agreement") relating to the purchase of Trident Automation
Library System products. If any inconsistency exists between the terms of the
Agreement and the terms of this Amendment, then the terms of this Amendment
shall control. The following modifications shall be made to the Agreement.
Article 3
Article 3.2 is hereby amended to read as follows:
3.2(b) Installation shall be started at the Installation Location no
later than February 15, 1998.
All other terms and conditions of the Agreement shall remain unchanged.
Agreed to:
Zeneca Inc. Argonaut Technologies Inc.
By: /s/ A.K. Willard By: /s/ Lissa A. Goldstein
------------------------------- -------------------------------
Date: 4 Jan. 99 Date: 12/6/98
------------------------------ -------------------------------
<PAGE> 31
SECOND AMENDMENT
This is the Second Amendment to the Purchase and License Agreement between
Argonaut Technologies, Inc., and Zeneca Inc., with an Effective Date of October
30th, 1998, ("the Agreement") relating to the purchase of Trident Automation
Library System products. If any inconsistency exists between the terms of the
Agreement and the terms of this Amendment, then the terms of this Amendment
shall control. The following modifications shall be made to the Agreement.
Article 3
Article 3.2 is hereby amended to read as follows:
3.2 (b) Installation shall be started at the Installation Location no
later than April 30, 1999.
Article 5.1
Article 5.1 is hereby amended to read as follows:
5.1 General. Vendor warrants that the System will conform to the
Specifications set forth in Exhibit C upon the completion
of installation and for twelve (12) months thereafter ("the
initial Warranty Period").
All other terms and conditions of the Agreement shall remain unchanged.
Agreed to:
Zeneca Inc. Argonaut Technologies, Inc.
By: /s/ A.K. Willard By: /s/ Lissa A. Goldenstein
------------------------------- -------------------------------
Date: 30 March 99 Date: 3/24/97
-------------------------------- --------------------------------
<PAGE> 1
Exhibit 10.18
PURCHASE AND LICENSE AGREEMENT
THIS IS AN AGREEMENT between Argonaut Technologies, Inc., a Delaware
corporation with an office at 887 Industrial Road, Suite G, San Carlos, CA 94070
("Vendor") and Zeneca Inc., a Delaware corporation with an office at 1800
Concord Pike, Wilmington, Delaware 19850-5437 ("Zeneca").
WHEREAS, Vendor desires to sell Trident Automation Library System products
to Zeneca and license related software to Zeneca, and
WHEREAS, Zeneca offers to purchase said Trident Automation Library System
products and obtain a license for such related software from Vendor.
NOW THEREFORE, this 30th day of September 1998, in consideration of the
terms and conditions recited herein, the parties hereby agree as follows.
Article 1
Definitions
1.1 "Acceptance Date" means the date on which Vendor receives written notice
from Zeneca that the System meets, and has been demonstrated to meet, the
Specifications and that all Hardware, Software and Documentation have been
received and are installed and operational. Such notice shall be on the
form attached hereto as Exhibit A entitled "Notice of Acceptance Date, and
no other communication of any sort will establish an Acceptance Date
hereunder.
1.2 "Agreement" means this Agreement including any exhibits and amendments
attached hereto.
1.3 "Delivery Date" shall mean the date which Vendor delivers the System to
the Installation Location at Zeneca and all related Hardware, Software and
Documentation, as described in Exhibit B hereto, have been received by
Zeneca.
1.4 "Documentation" means the manuals, instructions and other materials,
including but not limited to those supplied on paper or electric media
(such as CD-ROM based media), related to the System and provided by Vendor
to Zeneca hereunder.
1.5 "Effective Date" means the date upon which this Agreement is executed by
the last party to execute such Agreement.
1.6 "Hardware" means the hardware components of the System listed in Exhibit B
attached hereto and incorporated herein.
1.7 "Installation Location" means Room CR&DL 258 on the 2nd floor, Fairfax
Research Center of the Zeneca facility at 1800 Concord Pike, Wilmington,
Delaware, USA.
1.8 "Specifications" means the Specifications for the System, as set forth in
Exhibit C.
1.9 "System" means the Trident Automation Library System comprising the
Hardware, the Software and the Documentation described in Exhibit B
hereto.
1.10 "Maintenance Agreement" means the maintenance agreement between the
parties hereto covering the System, including but not limited to the
Hardware and Software purchased under this
<PAGE> 2
Agreement. The terms and conditions of said maintenance agreement, if
Zeneca desires to purchase one, shall be determined at a later date.
1.11 "Purchase Price" constitutes payment for Hardware and Documentation and a
license fee for related software.
1.12 "Software" means the software components of the System as listed in
Exhibit B attached hereto and incorporated herein.
1.13 "Zeneca Group" - For purposes of this Agreement, Zeneca Group means Zeneca
Inc., Zeneca Ltd. and Zeneca Group PLC; their respective direct and
indirect parent companies, affiliates, and subsidiaries; their respective
officers, directors, trustees, shareholders, employees and agents; and
their respective predecessors, successors and assigns, heirs, executors and
administrators.
Article 2
Purchase and Sale
2.1 Purchase. Zeneca and Vendor hereby agree that, in return for the payment
by Zeneca to Vendor of the Purchase Price and subject to the terms and
conditions of this Agreement;
(a) Vendor shall sell, deliver and install, and Zeneca shall purchase and
receive, the Hardware and Documentation; and
(b) Vendor hereby grants to Zeneca in conjunction with the sale of the
Hardware, a perpetual, non-exclusive, paid-up, freely assignable
license (the "License") to use and have used the Software, revocable
only upon termination of this Agreement by Vendor or Zeneca. Zeneca
shall notify Vendor in writing prior to any assignment.
2.2 Purchase Price.
(a) Zeneca and Vendor hereby agree that the Purchase Price is reflected
in Exhibit G; and
(b) Vendor will offer Zeneca a discount of [*] if this Agreement is
executed prior to September 30, 1998.
(c) Vendor will offer Zeneca a second discount of [*] if a second Trident
System is ordered prior to September 30, 1998.
2.3 Payment Schedule. The Purchase Price shall be due and owing to Vendor
according to the following schedule:
Delivery Date: [*] due within fifteen (15) days after delivery of
all components of the System.
Acceptance Date: [*] due within fifteen (15) days after Zeneca's
Acceptance of the System. Such acceptance shall not
exceed forty-five (45) days after successful
completion of installation.
[*] Confidential Treatment Requested
2
<PAGE> 3
ARTICLE 3
---------
SHIPMENT AND DELIVERY
- ---------------------
3.1 Shipment. Shipment of the System to the Installation Location shall be
at Vendor's expense. Vendor shall be responsible for all cost, risk
and expense in delivering to and installing the System at the
Installation Location and any damage or harm to the System incurred as
a result of shipment, delivery or installation shall be the
responsibility of Vendor (FOB Destination). Notwithstanding the
foregoing, Vendor shall not be liable for damage or harm to the System
incurred as a result of improper preparation or functioning of the
Installation Location or negligence or misconduct of Zeneca or its
agents, employees.
3.2 Delivery. Delivery shall be completed on the following schedule:
(a) The System shall be delivered to Zeneca no later than [12] weeks
from the effective Date.
(b) Installation shall be started at the Installation Location no
later than [2] week(s) after delivery of the System to Zeneca.
ARTICLE 4
---------
INSTALLATION AND ACCEPTANCE
- ---------------------------
4.1 Installation. Zeneca shall prepare the Installation Location in
accordance with the specifications set forth in Exhibit D.
Modifications to the Zeneca facility to accommodate the delivery,
installation and acceptance of the System shall be the responsibility
of Zeneca. Such preparation shall be completed prior to delivery of
the System. Vendor shall, at its own expense, install and take all
action necessary to ensure the acceptance of the System at the
Installation Location. Such installation and testing shall conform to
the delivery schedule and acceptance procedures set forth herein.
Zeneca shall reasonably cooperate with Vendor to provide access to
facilities and personnel to ensure a timely installation and
acceptance of the System.
The System shall be installed by a qualified System Engineer to be
selected by Vendor. As used herein, the term "System Engineer" shall
mean an engineer qualified to test and install the System. To be
eligible for Zeneca's installation, the System Engineer must have
previous successful experience in field installations of Vendor's
equipment.
All services hereunder shall be performed during Zeneca's normal
working hours between 8:15 am and 4:50 pm, Wilmington, Delaware local
time, Monday through Friday, excluding Zeneca holidays unless
otherwise agreed in writing by the parties. When installation of the
System has been started by Vendor, installation shall proceed
continuously during Zeneca's normal working hours until such
installation is completed.
4.2 Delays. Time is of the essence in the Agreement.
Article 5
---------
WARRANTY
- --------
5.1 General. Vendor warrants that the System will conform to the
Specifications set forth in Exhibit C upon the Acceptance Date and for
the later of either twelve (12) months thereafter or December 31, 1999
("the Initial Warranty Period").
3
<PAGE> 4
5.2 HARDWARE WARRANTY.
(a) Vendor represents and warrants the Hardware against defects in
material and workmanship for the Initial Warranty Period under normal
use and service.
(b) Vendor will make the benefits of any other warranty covering the
Hardware available to Zeneca.
(c) In the event that the Hardware displays or develops defects in
material or workmanship during the Initial Warranty Period:
(i) Vendor shall attempt to remedy such defect by telephone. If
Vendor is unable to so remedy such defect within forty-eight
(48) hours of notice to Vendor by Zeneca of such defect, then
Vendor shall ensure that a qualified service engineer shall
arrive at the Installation Location within seventy-two (72)
hours of the end of such forty-eight (48) hour period.
(ii) Vendor shall provide repair or replacement of any defective
parts free of charge.
(iii) Vendor shall provide any necessary engineering services
required in connection with the repair or replacement of any
defective parts free of charge.
(iv) All other applicable rights and remedies shall be available to
Zeneca.
(v) After the Initial Warranty Period. Vendor shall maintain the
System as required by Zeneca through telephone support at no
charge or by on-site repair at Installation Location under the
terms of a Maintenance Agreement.
(d) Vendor further agrees that one preventive maintenance visit for the
System shall be scheduled at a time agreed by Zeneca during the
Warranty Period.
(e) Vendor shall not be responsible under this warranty to the extent that
defects with the Hardware are caused by misuse, abuse, or other fault
attributable to Zeneca or its contractors.
5.3 Software Warranty.
(a) Vendor warrants that the Software as originally delivered and
unaltered will, in conjunction with all other components of the
System, materially perform the functions described in and operate in
accordance with the Specifications and Documentation and contain no
viruses or software locks. Vendor further warrants that the Software
shall continue to meet all acceptance tests throughout the term of
this Agreement.
(b) Vendor hereby represents and warrants to Zeneca that the Software
licensed to Zeneca hereunder includes Software designed to insure year
2000 compatibility, which shall specifically include the ability to
correctly recognize, process, manage, manipulate and store millennial
dates without affecting the integrity of data, output (including
reports, screen contents, etc.) or interpretation, without
interruption, and includes calculations that accommodate same century
and multi-century formulas and date values, and date data interface
values that reflect the century, without any errors relating to date,
and that the Software will continue to be year 2000 compatible.
4
<PAGE> 5
(c) Vendor further represents and warrants that any modifications made by
Vendor to the Software or services performed by Vendor in order to bring
the Software into compliance with these representations and warranties
does not and will not corrupt any data included in Zeneca's computer
network and does not or will not contain any computer viruses or introduce
a computer virus into Zeneca's computer network.
(d) In the event the Software does not meet any of the above representations
and warranties, Vendor shall repair or replace such Software.
(e) Source Code and Source Code Materials. Vendor hereby grants to Zeneca and
the Zeneca Group a fully-paid perpetual, non-exclusive, worldwide, limited
license to use, modify, enhance and upgrade the Source Code and the Source
Code Materials provided, however, that such license shall be exercisable
solely in the event
(i) Vendor is unable, at any time during the Initial Warranty Period
specified in the Purchase and License Agreement, to correct any
malfunction, defect or nonconformity in the Software which prevents
the Software from functioning in accordance with the applicable
Specifications. Documentation, performance criteria and other
warranties and descriptions provided in this Agreement, within seven
(7) business days after Zeneca's notification to Vendor specifying in
reasonable detail in what aspects the Software fails to conform; or
(ii) that the Vendor becomes insolvent, makes a general assignment for
the benefit of creditors, files a voluntary petition of bankruptcy,
suffers or permits the appointment of a receiver for its business or
assets, becomes subject to any proceeding under any bankruptcy or
insolvency law, whether domestic or foreign, or has wound up or
liquidated its business voluntarily or otherwise and Zeneca has
compelling reasons to believe that such event(s) will cause Vendor to
fail to meet its warranty and maintenance obligations in the
foreseeable future. If such event should occur, the source code will
be delivered by the Vendor within fifteen days of written request by
Zeneca.
5.3 Third Party Rights. Vendor warrants that the System to (including
Hardware, Software and Documentation), and use thereof by Zeneca, does not
violate any rights of any third party, including without limitation any
patent, trademark, copyright, or service mark or constitute theft or
misuse of a trade secret owned or controlled by a third party. Vendor
warrants that for the Software it has ownership of or the right to
distribute and license such Software. If claim is made with regard to
Zeneca's use of the System, Vendor shall get permission for Zeneca to use
such System.
5.4 Disclaimer. EXCEPT AS SET FORTH IN THIS AGREEMENT, VENDOR MAKES NO
WARRANTIES, WHETHER EXPRESS OR IMPLIED, OR STATUTORY REGARDING TO RELATING
TO THE SYSTEM, HARDWARE, SOFTWARE, OR DOCUMENTATION, OR ANY MATERIALS OR
SERVICES PROVIDED TO ZENECA UNDER THIS AGREEMENT. VENDOR SPECIFICALLY
DISCLAIMS ALL IMPLIED WARRANTIES OF FITNESS FOR A PARTICULAR PURPOSE.
Article 6
Indemnification.
6.1 Third Party Infringement. If notified promptly in writing of any action
brought against Zeneca or the Zeneca Group alleging that Zeneca's sale,
use or other disposition of the System (including
5
<PAGE> 6
Hardware and Software components and Documentation) infringes a patent,
trademark, copyright or service mark or constitutes theft or misuse of a
trade secret owned or controlled by a third party. Vendor shall defend that
action at its expense and shall pay any costs and damages awarded against
Zeneca in the action, including external attorney's fees and internal
counsel expenses, provided that Vendor shall have control of the defense of
any such action and all negotiations for its supplement or compromise, and
provided further that no settlement will be made that is contrary to the
best interests of Zeneca, as may reasonably be determined by Zeneca. If a
final injunction is obtained in such action against Zeneca's use of the
System, or any component thereof, or if in Vendor's opinion the System is
likely to become the subject of a claim of infringement, Vendor shall, at
its option and expense, either procure for Zeneca the right to continue
using the System or any component thereof consistent with the purchase and
licensing right accorded Zeneca herein, or replace or modify the System or
any component thereof so that it becomes non-infringing (but is otherwise
substantially identical to the originally provided System and is also
suitable for Zeneca's intended uses), or grant Zeneca a credit for the
infringing System or component thereof. Vendor shall not have any liability
to Zeneca if the alleged infringement is caused by use or sale of the item
in combination with other products or devices which are not furnished by
Vendor.
6.2 Each party agrees to indemnify, defend and hold the other party harmless
from and against any claim, demand, action, penalty, suit or liability
(including the cost of defense, settlement, and external attorney's fees
and internal counsel expenses), which the other party may hereafter incur,
become responsible for, or pay out as a result of death or bodily injuries
to any person, destruction or damage to any property caused by
(a) the breach of any term, warranty, representation or provision of this
Agreement, or
(b) in the case of Vendor, any failure to warn of damages or defects in
the System or any component thereof.
Notwithstanding the foregoing, either party shall not be obligated to
indemnify or hold harmless the other party against any losses, claims or
suits caused solely by the willful misconduct or negligence of the other
party.
ARTICLE 7
INSURANCE. Vendor shall at its own expense secure and maintain in full force
and effect throughout the term of the Agreement insurance coverage for (a)
Workmen's Compensation, (b) General Liability, and (c) Automobile Liability in
amounts listed on Exhibit E. Certificates evidencing such insurance shall be
provided to Zeneca's Insurance Department.
ARTICLE 8
ANCILLARY OBLIGATIONS
8.1 SYSTEM CHANGES. Zeneca is entitled to receive the most current and complete
commercially released version of the System (including Hardware, Software
and Documentation) available at the time of the Acceptance Date.
Vendor shall promptly furnish to Zeneca any "bug" fixes (a "bug" is defined
as something that prevents the Software from performing or meeting the
Specifications) during the term of the license at no charge.
6
<PAGE> 7
8.2 SOFTWARE UPGRADES/UPDATES. Commercially released updates to all Zeneca
licensed Software modules shall be provided at no charge without limitation
during the Initial Warranty Period. Vendor shall provide free support
during the Initial Warranty Period. Future updates after the Initial
Warranty Period may be purchased at Vendor's then listed price.
8.3 COMPUTER UPGRADES. Hardware required for enhanced performance may be
purchased from Vendor at the time of purchase. Zeneca may choose to upgrade
the original computer hardware equipment after the initial installation:
costs and labor for upgraded equipment and connectivity to the system will
be Zeneca's responsibility.
8.4 SITE INSPECTION. Upon execution of this Agreement, Vendor shall make
available a qualified engineer (at no additional charge) for the purpose of
inspecting the Installation Location. The engineer shall conduct a series
of standard measurements where required. If these measurements and the site
facilities meet Vendor's site requirements, the engineer shall certify in
writing on the form attached hereto as Exhibit F that the Installation
Location is properly designed and equipped, and that the System will
perform according to the Specifications (attached hereto as Exhibit C) and
the Documentation in the environment. If the Installation Location does not
meet Vendor's site requirements, the engineer shall make specific written
recommendations to Zeneca's engineering and building operations staff as to
how the Installation Location can be made to meet Vendor's site
requirements and Zeneca shall promptly implement such recommendations. If
multiple site inspection visits are necessary in order for the Installation
Location to be certified, Vendor shall provide an engineer for such visits
at Zeneca's expense. Installation cannot be started until a completed site
acceptance form (Exhibit F) has been received by Zeneca. Commitment dates
will be adjusted to allow for days lost due to site facilities being
unavailable.
ARTICLE 9
DOCUMENTATION. Vendor shall supply one (1) printed copy and one (1) electronic
media copy of all Documentation for each component of the System as defined
herein.
ARTICLE 10
MISCELLANEOUS
10.1 TAXES. The Purchase Price does not include any import duties.
10.2 TERMINATION. Termination of this Agreement shall occur in one of the
following manners:
a. Termination by mutual agreement of the parties.
(b) Zeneca shall have the right to immediately terminate this Agreement
based upon Vendor's willful misconduct in connection with services
performed under this Agreement. Willful misconduct shall include, but
not be limited to, disparagement of Zeneca or the Zeneca Group, as
defined in Paragraph 10.12 hereof, or their respective products,
services or management; unethical business conduct; unlawful
activities; failure to adhere to security, safety, health and
environmental laws and regulations while on Zeneca's premises; or
breach of Vendor's obligations under Paragraph 5.1 and 5.2 herein and
the Confidentiality Agreement signed by Zeneca and Vendor dated
herein. Such termination shall be effective upon delivery of written
notice to Vendor.
(c) Except as otherwise provided in paragraph 10.2(b), a party shall have
the right to terminate this Agreement based upon the other party's
non-performance or breach of any provision of this Agreement. In such
event, the non-breaching party shall provide the
7
<PAGE> 8
breaching party with written notice of the reason for the
non-breaching party's intention to terminate this Agreement and shall
provide the breaching party within thirty (30) days to correct any
non-performance or breach to the satisfaction of the non-breaching
party.
Except as otherwise provided herein, it is agreed and understood that
termination of this Agreement for any reason whatsoever will result in
a termination of Vendor's obligation to provide services to Zeneca
pursuant to this Agreement and a termination of Zeneca's obligations
to compensate Vendor pursuant to paragraph 2.2 as of the effective
date of termination. The other terms of this Agreement shall survive
the termination of the Agreement.
10.3 EXERCISE OF RIGHTS. Each party's termination of this Agreement pursuant to
any of the foregoing provisions or exercise of its right to relief as
otherwise as set forth in this Agreement shall not be construed to limit
such party's ability to pursue any other legal rights or claims it may
have.
10.4 ENTIRE AGREEMENT. This Agreement, including any Exhibits thereto,
constitutes the entire agreement among the parties and supersedes all
understandings whether written or oral. The text of this Agreement shall
control in case of any conflict with an Exhibit. Further modifications may
be made if in writing and signed by all parties.
10.5 CONTROLLING LAW. The laws of the United States shall control and in
particular, the internal laws of the State of Delaware without regard to
its conflicts of law provisions.
10.6 CONFIDENTIALITY.
(a) Each party acknowledges that it may have access to and obtain
knowledge of certain proprietary and confidential information
("Confidential Information") of the other party disclosing such
information (the "Discloser") in the course of its performance under
this Agreement, Confidential Information shall not include information
that: (i) was already in the possession of the party receiving
Confidential Information ("Recipient") before disclosure thereof by
Discloser to Recipient as evidenced by Recipient's written records,
(ii) is independently developed by Recipient as evidenced by
Recipient's written records, (iii) is or becomes publicly available
through no fault of Recipient, or (iv) is obtained by Recipient from a
third party under no obligation to disclose same.
(b) Recipient agrees to maintain in strictest confidence and to take all
reasonable steps to maintain the confidentiality of the Confidential
Information. Recipient also agrees not to disclose Confidential
Information to any third party, and to use Confidential Information
only to the extent needed to perform under this Agreement. Recipient
recognizes that all documents and records received by Recipient from
Discloser and all copies of such records and documents shall be
Discloser's property exclusively. Recipient shall at all times keep
all such documents, records and copies of documents and records in the
Recipient's custody and subject to the Recipient's control and shall
surrender the same upon request by Discloser.
10.7 PUBLICATIONS. Vendor agrees that it will not use the name of Zeneca or
the names of any of its personnel for promotional literature, advertising,
or any other reason without the prior written approval of Zeneca, provided
that Vendor shall have the right to use the name of Zeneca in its customer
list for the System and to distribute such list to third parties.
10.8 OTHER.
8
<PAGE> 9
(a) Vendor shall supply a written list of factory and U.S. headquarters
contact persons, phone numbers, Internet E-Mail addresses, and
specialties for the Hardware and the Software at the time of
delivery of the System.
(b) Vendor shall make available to Zeneca a twelve (12) month
maintenance contract. Zeneca shall have the option to purchase this
maintenance agreement at any time during the initial warranty
period. See comments at Section 3.1(3)(e).
(c) Vendor shall provide five (5) consecutive days of training on the
System on-site at Zeneca at the time of installation for up to
three (3) people at no cost to Zeneca.
10.9 Counterparts. This Agreement may be signed in any number of counterparts,
each of which shall be an original, with the same effects as if the
signatures thereto were upon the same instrument.
10.10 Notices. All notices given under this Agreement shall be in writing and
shall be delivered personally, sent by telegram or facsimile with return
confirmation, or by first class United States mail, postage pre-paid to
the parties at the following addresses:
If to Zeneca: Zeneca Inc.
1800 Concord Pike
Wilmington, DE 19850
Attn: Jim Campbell
Telephone: (302) 886-2673
Fax: (302) 886-7409
If to Vendor: Argonaut Technologies, Inc.
887 Industrial Road, Suite G
San Carlos, CA 94070
Attn: Vice President of Sales & Services
Telephone: 650/598-1350
Fax: 650/598-1359
Notices shall be effective when received.
10.11 Assignment. Neither party may assign or in any way make over any of its
rights or duties under this Agreement without the prior written consent
of the other party, except in the event of a sale of company equity or
assets. Zeneca may assign any of its rights to any duties under this
Agreement to any company controlled, controlling or under common control
of Zeneca, in which event this Agreement shall be binding on and inure to
the benefit of any successor or assignee of Zeneca. In the event of
assignment, the assignor shall continue to be fully liable for any
obligations under this Agreement.
10.12 Force Majeure. A party shall be excused from performing its obligations
under this Agreement if its performance is delayed or prevented by any
cause beyond such party's control and is without its fault or negligence,
including but not limited to, acts to God, fire, explosion, weather,
disease, war, insurrection, civil strife, riots, labor disputes,
government action, including change in relevant government laws or
regulations, or power failure. Performance shall be excused only to the
extent of and during the reasonable continuance of such disability. Any
deadline or time for performance specified that falls due during or
subsequent to the occurrence of any of the disabilities referred to
herein shall be automatically extended for a period of time equal to the
period of such disability. Vendor shall immediately notify Zeneca if, by
reason of any of the disabilities referred to herein, Vendor is unable to
meet any deadline or time for performance.
9
<PAGE> 10
IN NO EVENT SHALL EITHER PARTY BE LIABLE FOR ANY INDIRECT, INCIDENTAL, SPECIAL
OR CONSEQUENTIAL DAMAGES, OR DAMAGES FOR LOSS OF PROFITS, REVENUE, DATA OR USE,
INCURRED BY EITHER PARTY OR ANY THIRD PARTY, WHETHER IN AN ACTION IN CONTRACT
OR TORT, EVEN IF THE OTHER PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH
DAMAGES. VENDOR'S LIABILITY FOR DAMAGES HEREUNDER SHALL IN NO EVENT EXCEED THE
AMOUNT OF PAYMENTS PAID BY ZENECA UNDER THIS AGREEMENT EXCLUDING VENDOR'S
OBLIGATIONS UNDER SECTION 10.6. DAMAGES RELATING TO EITHER PARTY'S OBLIGATIONS
UNDER ALL OTHER SECTIONS, INCLUDING 6.1 AND 6.2 SHALL NOT EXCEED THE LIMITS OF
THEIR INSURANCE.
IN WITNESS WHEREOF the parties hereto have executed this Agreement on the day
and year last written below.
ZENECA, INC. ARGONAUT TECHNOLOGIES
By: /s/ Andrew Shaw By: /s/ Lissa A. Goldenstein
------------------- ------------------------
Name: A. Shaw Name: Lissa A. Goldenstein
----------------- --------------------
(Print)
Title: VP, LDD Title: VP, Sales & Service
---------------- -------------------
Date: 11/2/98 Date: 10/30/98
----------------- --------------------
<PAGE> 11
EXHIBIT A
NOTICE OF ACCEPTANCE DATE
Date: ___________________
Argonaut Technologies, Inc.
887 Industrial Road, Suite G
San Carlos, CA 94070
Attn: VP, Sales & Service
Dear __________:
Zeneca Inc. hereby notifies Argonaut Technologies that it has accepted the
System, as that term is defined in the Purchase and License Agreement between
Zeneca Inc. and Argonaut Technologies, Inc. dated __________, pursuant to the
terms thereof.
Zeneca, Inc.
By: ____________________
Title: _________________
Date: __________________
<PAGE> 12
EXHIBIT B
DESCRIPTION OF HARDWARE, SOFTWARE & DOCUMENTATION
1) 900132 Trident Automated Library Production Synthesizer
consisting of: Trident main synthesizer system with two precision metered
syringe systems, fluid delivery interface, reagent, solvent, waste
connections, four (4) integrated agitation-thermal units, cabling.
2) Trident Ship Kit consisting of four (4) Trident Reaction Cassettes, 192
Trident Reaction Vessel Assemblies, nine (9) 250 mL Reagent bottles, four
(4) 4 L Solvent carriers, two (2) 15 L HDPE waste reservoir, and spare
parts.
3) 900136 Gilson 215 Autosampler/Sample Collector Upgrade
4) 900135 Trident Voltage Kit (USA)
5) Trident Laptop Computer System (Gateway Solo 2500)
Consisting of: Pentium 233 MHz processor, 64 Mbytes RAM, 4 Gbyte hard
disk, 20x CDROM, Windows NT.
6) Trident Control Software provides software routines to define
solvents/reagents and diversity reagents to be used in synthesis, definition
of synthesis program based on fluid movements, program control, reaction
times, and instrument control functions, solvent usage calculations,
autosampler and sample collector control functions, and system monitors of
programming, plumbing, and mechanical status. Provided on CD ROM.
<PAGE> 13
EXHIBIT C
SPECIFICATIONS
TRIDENT AUTOMATED LIBRARY SYNTHESIZER
INSTALLATION VALIDATION
The following document describes validation parameters for installation of the
Trident Automated Library Synthesizer. An instrument which demonstrates
adherence to these parameters is considered by Argonaut Technologies to be a
successfully installed, fully operational instrument capable of meeting all
published specifications, and one which demonstrates no damage in shipment.
SITE REQUIREMENTS
<TABLE>
<CAPTION>
Operational Requirement Specification Actual (Result)
- ----------------------- ------------- ---------------
<S> <C> <C>
Lab temp 18(degree)C to 25(degree)C
Lab humidity (less than or equal to) 70% RH
Recommended ventilation flow Approx. 40 cfm
(with all doors closed)
Regulated N(2) pressure 35 to 50 psi
Regulated He pressure 15 psi
Regulated Compressed dry air pressure 50 psi
(or use N(2) gas) Dryness (greater than or equal to) 0.01% H(2)O
Line voltage/current capacity Dedicated circuit 200 to 240
VAC @ 30 Amps
</TABLE>
ELECTRONIC INTEGRITY
SPECIFICATION:
All circuits working as designed. No connectors loose.
VALIDATION PROCEDURE:
Run pre-programmed automated procedure to exercise all valves and heaters.
Check runfile for valve or heater errors. Attach a copy of the runfile to
installation validation documentation.
RESULT:
(Argonaut Installation Engineer to enter result here and attach supporting
documentation)
PLUMBING INTEGRITY
SPECIFICATION:
All pneumatic and liquid plumbing connects as per plumbing schematics. No loose
or leaking pneumaric fittings.
<PAGE> 14
VALIDATION PROCEDURE:
Check all fittings for tightness. Reconnect and/or tighten as necessary.
RESULT:
(Argonaut Installation Engineer to enter result here and attach supporting
documentation)
INTERNAL LEAK/OBSTRUCTION CHECK
SPECIFICATION:
1. No leaks or obstructions on pressure supply side (low, high and very low
inputs).
2. No leaks or obstructions in delivery/valving/RV side.
3. RVs hold pressure in cassette when sealed.
VALIDATION PROCEDURE:
1 a) Supply side: Perform a supply side pressure test to validate integrity of
the gas input pneumatics. Verify no appreciable leaks.
1 b) Bottle leak test: Perform a bottle pressure test to validate integrity of
bottle sealing and pressure system. Verify no appreciable leaks.
2) Perform a system leak test, checking for leaks or obstructions in all
delivery pathways. Verify no obstructions or appreciable leaks.
3) Perform a leak test on all 192 vessels of 4 cassettes. Verify no
appreciable leaks.
RESULT:
(Argonaut Installation Engineer to enter result here and attach supporting
documentation)
14
<PAGE> 15
AS CALIBRATION
SPECIFICATION:
AutoSampler performs accurate and precise septa puncture and movement to the
needle wash ports.
VALIDATION PROCEDURE:
Perform an AutoSampler calibration verification procedure, utilizing a visual
verification of XYZ alignment with all vial positions and needle wash/waste
positions.
RESULT:
(Argonaut Installation Engineer to enter result here and attach supporting
documentation)
HEATING
SPECIFICATION:
Rate: Ambient -10(degree)C to 90(degree)C in 30 minutes
Rate: Ambient -10(degree)C to 150(degree)C in 45 minutes
Accuracy: +/-5(degree)C or 5% of setpoint, whichever is greater
VALIDATION PROCEDURE:
Run the preprogrammed "Heating and Cooling Test". Check Runfile for time and
temperature readings in the heating ranges. Verify specifications are met.
Attach runfile to installation validation documentation.
RESULT:
(Argonaut Installation Engineer to enter result here and attach supporting
documentation)
15
<PAGE> 16
COOLING
SPECIFICATION:
Rate: Ambient -40(degrees)C in 30 minutes
Rate: 150(degrees)C to -40(degrees)C in 30 minutes
Accuracy: + or (-) 5(degrees)C or 5% of setpoint, whichever is greater
VALIDATION PROCEDURE:
Make sure a LN cryo tank, with sufficient capacity has been connected before
you run the above "Heating and Cooling test". After the run, check the runfile
for time and temperature readings in the cooling ranges. Verify specifications
are met. Attach runfile to installation validation documentation.
RESULT:
DIVERSITY REAGENT DELIVERY ACCURACY/PRECISION (AUTOSAMPLER)
SPECIFICATION:
Range: minimum 50 (nanoliters) to 3 ml in 5 (nanoliter) increments
Accuracy: + or (-) 15 (nanoliters) (<200(nanoliters)): + or (-) 5%
(>200 (nanoliters))
VALIDATION PROCEDURE:
Run the preprogrammed "Solvent/Reagent Delivery Test" utilizing water or DMF
in the AutoSampler. Reagent and Solvent locations, and a cassette with 48 fully
prepared vials. Measure the volume in the collection vials which correspond to
AutoSampler deliveries using gravemetric determination, or transfer to a
graduated cylinder. All deliveries tested should be within the accuracy range.
RESULT:
(Argonaut Installation Engineer to enter result here and attach supporting
documentation)
16
<PAGE> 17
REAGENT DELIVERY ACCURACY/PRECISION (SMALL AND LARGE SYRINGE)
SPECIFICATION:
Range: minimum 50 (nanoliter) to 3 ml in 10 (nanoliter) increments
Accuracy: + or (-) 5%
VALIDATION PROCEDURE:
As above, run the preprogrammed "Solvent/Reagent Delivery Test" utilizing water
or DMF in the AutoSampler, Reagent and Solvent locations, and a cassette with
48 fully prepared vials. Measure the volume in the collection vials which
correspond to syringe deliveries using gravemetric determination, or transfer
to a graduated cylinder. All deliveries tested should be within the accuracy
range.
RESULT:
(Argonaut Installation Engineer to enter result here and attach supporting
documentation)
AGITATION RATE VALIDATION
SPECIFICATION:
Rate: 0 to 400 strokes per minute
Accuracy: + or (-) 10%
Validation Procedures:
Using a tachometer, check the actual frequency of each agitator against the
programmed frequency at max speed (400 strokes per minute). Result should be
within the accuracy range for each agitator tested.
Result:
(Argonaut Installation Engineer to enter result here and attach supporting
documentation)
SYSTEM INTEGRATION CHECK
SPECIFICATION:
All relevant modules perform as required in a pre-programmed system wide test
utilizing a typical solvent.
VALIDATION PROCEDURE:
Utilize results of "Solvent/Reagent Delivery Test" to validate system
integration check. Analyze runfile for errors. Attach a copy of the runfile to
the installation validation documentation.
RESULT:
(Argonaut Installation Engineer to enter result here and attach supporting
documentation)
17
<PAGE> 18
EXHIBIT D
SITE/SPACE REQUIREMENTS
INSTRUMENT COMPONENT DIMENSIONS
The following dimensions represent actual component dimensions. This
information will be useful for instrument clearances and weight support
during transit.
<TABLE>
<CAPTION>
Component Height Width Length Weight
- --------------------------------------------------------------------------------
<C> <C> <C> <C> <C>
Main Module (free 57" 30.25" 63" 800 lbs
standing on wheels) 144.8 cm 76.85 cm 160 cm
- --------------------------------------------------------------------------------
AutoSampler (215)
- --------------------------------------------------------------------------------
AutoSampler (223)
- --------------------------------------------------------------------------------
Syringe Module
- --------------------------------------------------------------------------------
</TABLE>
SYSTEM SPACE REQUIREMENTS
The following dimensions represent the requirements for placement of a
Trident(TM) and components in a laboratory, and take into account all
clearances needed for the entire Trident(TM) system.
HEIGHT
With model 215 AutoSampler and Syringe Module on top: 86" - 218.5 cm
With model 223 AutoSampler and Syringe Module on top:
WIDTH
With required rear clearance: 36" - 91.44 cm
With required rear clearance, solvent doors open in front: 55.5" - 141 cm
LENGTH
With side panel access on right side: 80.5" - 204.5 cm
With PC desk on right:
Length, with PC on right, 230L dewar on left.
Length, with PC on right, 230L dewar and 50L solvent kegs(4) on right.
SPECIAL SPACE CONSIDERATIONS
EXTERNAL SOLVENT KEGS - External solvent kegs (up to 4) will need to be located
within several feet of the main module on the left side.
CRYO DEWAR - External cryo dewar used for chilling reactions will need to be
located within 4 feet of the main module to the left side.
PC CONTROLLER - The PC controller can be located to the right or left side of
the Trident(TM) main module within several feet, and on a (user supplied) bench
or table. For ease of operation, it is recommended to locate the PC to the
right of the instrument.
<PAGE> 19
EXHIBIT E
INSURANCE
Evidence of Insurance is attached and marked as Exhibit E.
<PAGE> 20
<TABLE>
<S> <C> <C> <C> <C> <C>
-----------------
DATE (MM/DD/YY)
ACORD(TM) CERTIFICATE OF LIABILITY INSURANCE 09/22/98
- ------------------------------------------------------------------------------------------------------------------------------------
PRODUCER THIS CERTIFICATE IS ISSUED AS A MATTER OF INFORMATION ONLY AND CONFERS
ABD Technology NO RIGHTS UPON THE CERTIFICATE HOLDER. THIS CERTIFICATE DOES NOT AMEND,
ALBURGER BASSO de GROSZ INS. EXTEND OR ALTER THE COVERAGE AFFORDED BY THE POLICIES BELOW.
301 Island Parkway, Suite 100 -----------------------------------------------------------------------
Belmont, CA 94002 INSURERS AFFORDING COVERAGE
- ------------------------------------------------------------------------------------------------------------------------------------
INSURED INSURER A: St. Paul Fire & Marine
Argonaut Technologies -----------------------------------------------------------------------
887 Industrial Road, Ste G INSURER B: Fireman's Fund Insurance
San Carlos, CA 94070 -----------------------------------------------------------------------
INSURER C:
-----------------------------------------------------------------------
INSURER D:
-----------------------------------------------------------------------
INSURER E:
- ------------------------------------------------------------------------------------------------------------------------------------
COVERAGES
- ------------------------------------------------------------------------------------------------------------------------------------
THE POLICIES OF INSURANCE LISTED BELOW HAVE BEEN ISSUED TO THE INSURED NAMED ABOVE FOR THE POLICY PERIOD INDICATED. NOTWITHSTANDING
ANY REQUIREMENT, TERM OR CONDITION OF ANY CONTRACT OR OTHER DOCUMENT WITH RESPECT TO WHICH THIS CERTIFICATE MAY BE ISSUED OR MAY
PERTAIN, THE INSURANCE AFFORDED BY THE POLICIES DESCRIBED HEREIN IS SUBJECT TO ALL THE TERMS, EXCLUSIONS AND CONDITIONS OF SUCH
POLICIES. AGGREGATE LIMITS SHOWN MAY HAVE BEEN REDUCED BY PAID CLAIMS.
- ------------------------------------------------------------------------------------------------------------------------------------
INSR POLICY EFFECTIVE POLICY EXPIRATION
LTR TYPE OF INSURANCE POLICY NUMBER DATE (MM/DD/YY) DATE (MM/DD/YY) LIMITS
- ------------------------------------------------------------------------------------------------------------------------------------
A GENERAL LIABILITY TE01600570 01/01/98 01/01/99 EACH OCCURRENCE $1,000,000
[X] COMMERCIAL GENERAL LIABILITY --------------------------------------
[ ] [ ] CLAIMS MADE [X] OCCUR FIRE DAMAGE (Any one fire) $1,000,000
[X] Emp. Benefits --------------------------------------
[ ] 1,000,000 Limit MED EXP (Any one person) $10,000
GENL AGGREGATE LIMIT APPLIES PER: --------------------------------------
[ ] POLICY [ ] PROJECT [ ] LOC PERSONAL & ADV INJURY $1,000,000
--------------------------------------
GENERAL AGGREGATE $2,000,000
--------------------------------------
PRODUCTS - COMPROP AGG: $2,000,000
- ------------------------------------------------------------------------------------------------------------------------------------
A AUTOMOBILE LIABILITY TE01600570 01/01/98 01/01/99 COMBINED SINGLE LIMIT $1,000,000
[ ] ANY AUTO (Ea accident)
[ ] ALL OWNED AUTOS --------------------------------------
[ ] SCHEDULED AUTOS Hired Car Phy BODILY INJURY $
[X] HIRED AUTOS Damage (Per person)
[X] NON-OWNED AUTOS Limit: ACV --------------------------------------
[X] Comprehensive $1,000 Ded. BODILY INJURY $
[X] collision $1,000 Ded. (Per accident)
--------------------------------------
PROPERTY DAMAGE $
(Per accident)
- ------------------------------------------------------------------------------------------------------------------------------------
GARAGE LIABILITY AUTO ONLY - EA ACCIDENT $
[ ] ANY AUTO --------------------------------------
EA ACC $
OTHER THAN ------------------
AUTO ONLY: AGG $
- ------------------------------------------------------------------------------------------------------------------------------------
A EXCESS LIABILITY TE01600570 08/17/98 01/04/99 EACH OCCURRENCE $1,000,000
[X] OCCUR [ ] CLAIMS MADE --------------------------------------
AGGREGATE $1,000,000
[ ] DEDUCTIBLE --------------------------------------
[X] RETENTION $10,000 $
--------------------------------------
$
--------------------------------------
$
- ------------------------------------------------------------------------------------------------------------------------------------
B WORKERS COMPENSATION AND WZC80761613 01/04/98 01/04/99 [X] WC STATUTORY LIMITS
EMPLOYERS' LIABILITY [ ] OTHER
--------------------------------------
E.L. EACH ACCIDENT $1,000,000
--------------------------------------
E.L. DISEASE - EA EMPLOYEE $1,000,000
--------------------------------------
E.L. DISEASE - POLICY $1,000,000
LIMIT
- ------------------------------------------------------------------------------------------------------------------------------------
A OTHER Blanket TE01600570 01/01/98 01/01/99 $1,000 Deductible
Pers. Property $2,700,000 Limit
Blanket EDP $899,800 Limit
- ------------------------------------------------------------------------------------------------------------------------------------
DESCRIPTION OF OPERATIONS/LOCATIONS/VEHICLES/EXCLUSIONS ADDED BY ENDORSEMENT/SPECIAL PROVISIONS
Replacement Cost and Special Form incl Theft applies to Property Coverage.
Transit Limit: $60,000; Exhibition Limit: $60,000; AOL Limit: $71,000
Business Income Limit: $5,590,000; Off Premises Power Limit: $1,000,000
Employee Dishonesty Limit: $60,000 - Deductible $1,000
- ------------------------------------------------------------------------------------------------------------------------------------
CERTIFICATE HOLDER ADDITIONAL INSURED; INSURER LETTER CANCELLATION Ten Day Notice for Non-Payment
- ------------------------------------------------------------------------------------------------------------------------------------
Argonaut Technologies, Inc. SHOULD ANY OF THE ABOVE DESCRIBED POLICIES BE
887 Industrial Road, Suite G CANCELLED BEFORE THE EXPIRATION DATE THEREOF, THE
San Carlos, CA 94070 ISSUING INSURER WILL ENDEAVOR TO MAIL 30 DAYS
WRITTEN NOTICE TO THE CERTIFICATE HOLDER NAMED TO
THE LEFT, BUT FAILURE TO DO SO SHALL IMPOSE NO
OBLIGATION OR LIABILITY OF ANY KIND UPON THE
INSURER, ITS AGENTS OR REPRESENTATIVES.
-------------------------------------------------
AUTHORIZED REPRESENTATIVE
/s/ [illegible]
- ------------------------------------------------------------------------------------------------------------------------------------
ACORD 25-S (7/97) 1 of 2 #S117584/M117570 MAB (C) ACORD CORPORATION 1988
</TABLE>
<PAGE> 21
IMPORTANT
If the certificate holder is an ADDITIONAL INSURED, the policy(ies) must be
endorsed. A statement on this certificate does not confer rights to the
certificate holder in lieu of such endorsement(s).
If SUBROGATION IS WAIVED, subject to the terms and conditions of the policy,
certain policies may require an endorsement. A statement on this certificate
does not confer rights to the certificate holder in lieu of such
endorsement(s).
DISCLAIMER
The Certificate of Insurance on the reverse side of this form does not
constitute a contract between the issuing insurer(s), authorized representative
or producer, and the certificate holder, nor does it affirmatively or negatively
amend, extend or alter the coverage afforded by the policies listed thereon.
<PAGE> 22
<TABLE>
<S> <C> <C> <C> <C> <C>
-----------------
DATE (MM/DD/YY)
ACORD(TM) CERTIFICATE OF LIABILITY INSURANCE 09/22/98
- ------------------------------------------------------------------------------------------------------------------------------------
PRODUCER THIS CERTIFICATE IS ISSUED AS A MATTER OF INFORMATION ONLY AND CONFERS
ABD Technology NO RIGHTS UPON THE CERTIFICATE HOLDER. THIS CERTIFICATE DOES NOT AMEND,
ALBURGER BASSO de GROSZ INS. EXTEND OR ALTER THE COVERAGE AFFORDED BY THE POLICIES BELOW.
301 Island Parkway, Suite 100 -----------------------------------------------------------------------
Belmont, CA 94002 INSURERS AFFORDING COVERAGE
- ------------------------------------------------------------------------------------------------------------------------------------
INSURED INSURER A: St. Paul Fire & Marine
Argonaut Technologies -----------------------------------------------------------------------
887 Industrial Road, Ste G INSURER B:
San Carlos, CA 94070 -----------------------------------------------------------------------
INSURER C:
-----------------------------------------------------------------------
INSURER D:
-----------------------------------------------------------------------
INSURER E:
- ------------------------------------------------------------------------------------------------------------------------------------
COVERAGES
- ------------------------------------------------------------------------------------------------------------------------------------
THE POLICIES OF INSURANCE LISTED BELOW HAVE BEEN ISSUED TO THE INSURED NAMED ABOVE FOR THE POLICY PERIOD INDICATED. NOTWITHSTANDING
ANY REQUIREMENT, TERM OR CONDITION OF ANY CONTRACT OR OTHER DOCUMENT WITH RESPECT TO WHICH THIS CERTIFICATE MAY BE ISSUED OR MAY
PERTAIN, THE INSURANCE AFFORDED BY THE POLICIES DESCRIBED HEREIN IS SUBJECT TO ALL THE TERMS, EXCLUSIONS AND CONDITIONS OF SUCH
POLICIES. AGGREGATE LIMITS SHOWN MAY HAVE BEEN REDUCED BY PAID CLAIMS.
- ------------------------------------------------------------------------------------------------------------------------------------
INSR POLICY EFFECTIVE POLICY EFFECTIVE
LTR TYPE OF INSURANCE POLICY NUMBER DATE (MM/DD/YY) DATE (MM/DD/YY) LIMITS
- ------------------------------------------------------------------------------------------------------------------------------------
A GENERAL LIABILITY TE01600604 01/01/98 01/01/99 EACH OCCURRENCE $1,000,000
[X] COMMERCIAL GENERAL LIABILITY --------------------------------------
[ ] [ ] CLAIMS MADE [X] OCCUR Foreign FIRE DAMAGE (Any one fire) $1,000,000
[ ] _____________________________ Liability --------------------------------------
[ ] _____________________________ MED EXP (Any one person) $10,000
GENL AGGREGATE LIMIT APPLIES PER: --------------------------------------
[ ] POLICY [ ] PROJECT [ ] LOC PERSONAL & ADV INJURY $1,000,000
--------------------------------------
GENERAL AGGREGATE $2,000,000
--------------------------------------
PRODUCTS - COMPROP AGG $2,000,000
- ------------------------------------------------------------------------------------------------------------------------------------
A AUTOMOBILE LIABILITY TE01600604 01/01/98 01/01/99 COMBINED SINGLE LIMIT $1,000,000
[ ] ANY AUTO (Ea accident)
[ ] ALL OWNED AUTOS --------------------------------------
[ ] SCHEDULED AUTOS BODILY INJURY $
[ ] HIRED AUTOS (Per person)
[X] NON-OWNED AUTOS Foreign Auto --------------------------------------
[ ] ____________________________ DIC/Excess BODILY INJURY $
(Per accident)
--------------------------------------
PROPERTY DAMAGE $
(Per accident)
- ------------------------------------------------------------------------------------------------------------------------------------
GARAGE LIABILITY AUTO ONLY - EA ACCIDENT $
[ ] ANY AUTO --------------------------------------
EA ACC $
OTHER THAN ------------------
AUTO ONLY: AGG $
- ------------------------------------------------------------------------------------------------------------------------------------
EXCESS LIABILITY EACH OCCURRENCE $
[ ] OCCUR [ ] CLAIMS MADE --------------------------------------
AGGREGATE $
[ ] DEDUCTIBLE --------------------------------------
[ ] RETENTION $ $
--------------------------------------
$
--------------------------------------
$
- ------------------------------------------------------------------------------------------------------------------------------------
A WORKERS COMPENSATION AND TE01600604 01/01/98 01/01/99 [X] WC STATUTORY LIMITS
EMPLOYERS' LIABILITY Foreign Vol. [ ] OTHER
Compensation --------------------------------------
E.L. EACH ACCIDENT $1,000,000
--------------------------------------
E.L. DISEASE - EA EMPLOYEE $1,000,000
--------------------------------------
E.L. DISEASE - POLICY $1,000,000
LIMIT
- ------------------------------------------------------------------------------------------------------------------------------------
OTHER
- ------------------------------------------------------------------------------------------------------------------------------------
DESCRIPTION OF OPERATIONS/LOCATIONS/VEHICLES/EXCLUSIONS ADDED BY ENDORSEMENT/SPECIAL PROVISIONS
- ------------------------------------------------------------------------------------------------------------------------------------
CERTIFICATE HOLDER ADDITIONAL INSURED; INSURER LETTER CANCELLATION Ten Day Notice for Non-Payment
- ------------------------------------------------------------------------------------------------------------------------------------
Argonaut Technologies, Inc. SHOULD ANY OF THE ABOVE DESCRIBED POLICIES BE
887 Industrial Road, Suite G CANCELLED BEFORE THE EXPIRATION DATE THEREOF, THE
San Carlos, CA 94070 ISSUING INSURER WILL ENDEAVOR TO MAIL 30 DAYS
WRITTEN NOTICE TO THE CERTIFICATE HOLDER NAMED TO
THE LEFT, BUT FAILURE TO DO SO SHALL IMPOSE NO
OBLIGATION OR LIABILITY OF ANY KIND UPON THE
INSURER, ITS AGENTS OR REPRESENTATIVES.
-------------------------------------------------
AUTHORIZED REPRESENTATIVE
/s/ [illegible]
- ------------------------------------------------------------------------------------------------------------------------------------
ACORD 25-S (7/97) 1 of 2 #S117602/M117598 MAB (C) ACORD CORPORATION 1988
</TABLE>
<PAGE> 23
IMPORTANT
If the certificate holder is an ADDITIONAL INSURED, the policy(ies) must be
endorsed. A statement on this certificate does not confer rights to the
certificate holder in lieu of such endorsement(s).
If SUBROGATION IS WAIVED, subject to the terms and conditions of the policy,
certain policies may require an endorsement. A statement on this certificate
does not confer rights to the certificate holder in lieu of such
endorsement(s).
DISCLAIMER
The Certificate of Insurance on the reverse side of this form does not
constitute a contract between the issuing insurer(s), authorized representative
or producer, and the certificate holder, nor does it affirmatively or negatively
amend, extend or alter the coverage afforded by the policies listed thereon.
<PAGE> 24
EXHIBIT F
SITE ACCEPTANCE FORM
Date: _______________________________
Ms. Heather Corcoran
Logistics and Safety - Purchasing
Zenaca, Inc.
1800 Concord Pike
Wilmington, DE 19850
Dear Heather:
Argonaut Technologies, Inc. hereby notifies Zeneca Inc. that it has accepted the
Installation Location, as that term is defined in the Purchase and License
Agreement between Argonaut and Zeneca Inc., dated _______________________, as
acceptable, in its present condition, for installation of the System, as defined
in the Agreement, pursuant to the terms hereof.
_____________________________________
By: _________________________________
Title: ______________________________
Date: _______________________________
<PAGE> 25
EXHIBIT G
Proposed Price.
(ATTACH FINAL QUOTE FROM ARGONAUT).
21
<PAGE> 26
<TABLE>
<S> <C> <C>
[ARGONAUT 887 INDUSTRIAL ROAD, SUITE G SALES ORDER SALES ORDER ID ORDER DATE ORDER TYPE
TECHNOLOGIES LOGO] SAN CARLOS, CA 94070 004736 09/29/98 NORMAL
(650) 598-1350 ------------------------------------------------------------------------
FAX (650) 598-1359 PAGE CHG NO. CHANGE DATE CHANGE DESCRIPTION CONFIRMED TO
1 1 10/19/98 HEATHER CORCORAN
------------------------------------------------------------------------
CURRENCY TERMS REFERENCE
USD NET 15 DAYS
- ------------------------------------------------- ------------------------------------------------------------------------
CUSTOMER P.O. NO. ATTENTION SHIP VIA FOB FREIGHT TERMS
35047657 R. WILDONGER BEST WAY DESTINATION NO CHARGE
- ------------------------------------------------- ------------------------------------------------------------------------
SOLD TO PHONE NO. SOLD TO FAX NO. RESALE NO. TAX CODE:
302-886-2857 302-886-2909 DE HAS NO STATE TAX T=TAXABLE R=RESALE N=NONTAXABLE
- ------------------------------------------------- ------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C>
SOLD TO SHIP TO BILL TO
ZENEC002 ZENECOO2 ZENEC$02
ZENECA PHARMACEUTICALS ZENECA PHARMACEUTICALS ZENECA PHARMACEUTICALS
FAIRFAX RESEARCH CENTER FAIRFAX RESEARCH CENTER ATTN: ACCOUNTS PAYABLE FOC 2C
1800 CONCORD PIKE 100 CONCORD PIKE PO BOX 15437
WILMINGTON, DE 19803 WILMINGTON, DE WILMINGTON, DE
USA USA 19803 USA 19850-5437
</TABLE>
<TABLE>
<CAPTION>
LINE DESCRIPTION REQUEST/ ORDER QUANTITY U/M UNIT PRICE PRICE TAX CODE
PART ID DWG REV ECN SCHEDULED BALANCE DUE EXTENDED PRICE CODE DISC % VAT CODE
CUSTOMER PART ID SHIP DATE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1.00 TRIDENT AUTOMATED LIBRARY SYNTHESIZER 10/29/98 1 EA [*] LP N
900132 10/29/98 1 [*]
2.00 TRIDENT AUTOSAMPLER UPGRADE-GILSON 215 10/29/98 1 EA [*] LP N
900136 2 10/29/98 1 [*]
3.00 TRIDENT VOLTAGE KIT, NORTH AMERICA 10/29/98 1 EA [*] LP N
900135 10/29/98 1 [*]
4.00 TRIDENT LAPTOP COMPUTER SYSTEM 10/29/98 1 EA [*] LP N
10/29/98 1 [*]
5.00 ONE-TIME PURCHASE DISCOUNT 10/29/98 1 EA [*] LP N
10/29/98 1 [*]
********BACK ORDERED*************
SEE SCHEDULED SHIP DATE SECTION
*********************************
- -----------------------------------------------------------------------------------------------------------------------------------
SUBTOTAL ORDER TAX AMOUNT ORDER TAX AMOUNT 2 ORDER TAX AMOUNT 3 ORDER VAT ORDER TOTAL
- -----------------------------------------------------------------------------------------------------------------------------------
ORDER TAKER SALESMAN REGION
CY SV AMR 3 Customer CONTINUED NEXT PAGE
- ------------------------------------------------
</TABLE>
[*] Confidential Treatment Requested
<PAGE> 27
<TABLE>
<S> <C> <C>
[ARGONAUT 887 INDUSTRIAL ROAD, SUITE G SALES ORDER SALES ORDER ID ORDER DATE ORDER TYPE
TECHNOLOGIES LOGO] SAN CARLOS, CA 94070 004736 09/29/98 NORMAL
(650) 598-1350 ------------------------------------------------------------------------
FAX (650) 598-1359 PAGE CHG NO. CHANGE DATE CHANGE DESCRIPTION CONFIRMED TO
2 1 10/19/98 HEATHER CORCORAN
------------------------------------------------------------------------
CURRENCY TERMS REFERENCE
USD NET 15 DAYS
- ------------------------------------------------- ------------------------------------------------------------------------
CUSTOMER P.O. NO. ATTENTION SHIP VIA FOB FREIGHT TERMS
35047657 R. WILDONGER BEST WAY DESTINATION NO CHARGE
- ------------------------------------------------- ------------------------------------------------------------------------
SOLD TO PHONE NO. SOLD TO FAX NO. RESALE NO. TAX CODE:
302-886-2857 302-886-2909 DE HAS NO STATE TAX T=TAXABLE R=RESALE N=NONTAXABLE
- ------------------------------------------------- ------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C>
SOLD TO SHIP TO BILL TO
ZENEC002 ZENECOO2 ZENEC$02
ZENECA PHARMACEUTICALS ZENECA PHARMACEUTICALS ZENECA PHARMACEUTICALS
FAIRFAX RESEARCH CENTER FAIRFAX RESEARCH CENTER ATTN: ACCOUNTS PAYABLE FOC 2C
1800 CONCORD PIKE 100 CONCORD PIKE PO BOX 15437
WILMINGTON, DE 19803 WILMINGTON, DE WILMINGTON, DE
USA USA 19803 USA 19850-5437
</TABLE>
<TABLE>
<CAPTION>
LINE DESCRIPTION REQUEST/ ORDER QUANTITY U/M UNIT PRICE PRICE TAX CODE
PART ID DWG REV ECN SCHEDULED BALANCE DUE EXTENDED PRICE CODE DISC % VAT CODE
CUSTOMER PART ID SHIP DATE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
********ORDER CONFIRMATION*******
Direct all order questions to:
Cinthia Yesitis - Customer Svc.
Phone: 650-598-1350 x220
Fax: 650-598-1359
US Toll Free: 888-598-1350 x220
*DO NOT PAY FROM THIS DOCUMENT*
*********************************
Zeneca Payment Schedule:
[*] due 15 days after
delivery of all components of
the system.
[*] due 15 days after
Zeneca's acceptance of the
system. Such acceptance shall
not exceed forty five (45) days
after successful completion of
installation.
- -----------------------------------------------------------------------------------------------------------------------------------
SUBTOTAL ORDER TAX AMOUNT ORDER TAX AMOUNT 2 ORDER TAX AMOUNT 3 ORDER VAT ORDER TOTAL
[*] [*]
- -----------------------------------------------------------------------------------------------------------------------------------
ORDER TAKER SALESMAN REGION
CY SV AMR 3 Customer
- ------------------------------------------------
</TABLE>
[*] Confidential Treatment Requested
<PAGE> 28
[ARGONAUT TECHNOLOGIES LOGO]
TRIDENT(TM) AUTOMATED LIBRARY SYNTHESIZER SYSTEM
900132 TRIDENT AUTOMATED LIBRARY SYNTHESIZER
- Operators Manual and Installation Manual
- Installation and startup assistance provided by Argonaut service
engineer.
- One year warranty on parts and labor.
- Trident Ship Kit
(4) Trident Reaction Cassettes(TM)
(192) Trident Reaction Vessel Assemblies
(9) 250 ml Schott Reagent Bottles
(4) 4 L Solvent Carriers
(2) 15 L HDPE Waste Reservoir
(1) Reagent Syringe
(1) Solvent Syringe
(1) Serial Cable
900167 GILSON 223 AUTOSAMPLER/SAMPLE COLLECTOR*: Modified to operate with
Trident; includes valving, cabling, hardware interface, co-axial
needle and autosampler and sample collector trays.
900135 TRIDENT VOLTAGE KIT
900091 TRIDENT COMPUTER SYSTEM (GATEWAY): 333 MHz Celeron CPU with 64 Mbytes
RAM, 3.2 Gbyte hard drive, 13x CDROM, microfloppy disk, 15" svga
monitor, mouse/keyboard. Windows NT 4.0 and Microsoft Office Pro 97
supplied with Trident Control Software. Provided with 3 year Gateway
warranty (1st year on-site; 2nd-3rd years return to Gateway)
SUBSTITUTE OPTIONS:
*900136 GILSON 215 AUTOSAMPLER/SAMPLE COLLECTOR: Modified to operate with
Trident; includes valving, cabling hardware interface, co-axial needle
and autosampler and sample collector trays. Substitute 900136 for
900167.
*900133 TRIDENT COMPUTER SYSTEM (HP). (Substitute for 900091.): 333 MHz
Pentium II CPU with 64 Mbytes RAM, 6.4 Gbyte hard drive, 32x CDROM,
microfloppy disk, 17" svga monitor, mouse/keyboard. Windows NT 4.0 and
Microsoft Office Pro 97 supplied with Trident Control Software.
Provided with 3 year HP warranty (1st year on-site; 2nd-3rd years
return to HP).
*LAPTOP TRIDENT LAPTOP COMPUTER SYSTEM (GATEWAY SOLO 2500): (Special
substitute for 900091 per Zeneca request) Pentium 233 MHz processor,
64 Mbytes RAM, 4 Gbyte hard disk, 20x CDROM, Windows NT. This system
meets or exceeds minimum computer requirements specified by Argonaut
for operation of Trident.
[ARGONAUT TECHNOLOGIES LETTERHEAD]
<PAGE> 29
SPARE PARTS AND ACCESSORIES:
900168 TRIDENT REACTION CASSETTE WITH 48 REACTION VESSEL ASSEMBLIES
900165 TRIDENT EXTERNAL AGITATION-THERMAL UNIT
<PAGE> 1
EXHIBIT 10.19
LEASE
THIS LEASE, executed in duplicate as of this 9th day of July 1999, by and
between TANKLAGE FAMILY PARTNERSHIP, a Limited Partnership hereafter called
LESSOR, and ARGONAUT TECHNOLOGIES, a Delaware Corporation hereafter called the
LESSEE (Lessor and Lessee being for convenience herein, in the singular number
and masculine gender).
WITNESSETH: Lessor hereby leases to Lessee, and Lessee hereby leases from
Lessor, for and in consideration of the rent herein reserved and covenants
herein contained and upon the conditions hereof, that certain real property
situated in the City of San Carlos, County of San Mateo, State of California,
commonly known as 887 Industrial Road, Units D, E, F & G and 871 Industrial
Road, Units A & B, and 853 Industrial Road, Units A, I, & J and described as
follows:
853 Industrial, A, I & J: Approximately 8,100 sq. ft.
887 Industrial, D, E, F, & G: Approximately 11,950 sq. ft.
871 Industrial, A & B: Approximately 3,910 sq. ft.
as per exhibits, A, B, C, D, E, F, G, H, I, & J
on an "AS IS" basis
A. The terms of this lease shall be for one year, beginning on the 19th day
of July 1999 and ending on the 18th day of July 2000 inclusive, for a monthly
base rental of $30,934.00 per month in advance, commencing with the first day of
said term and on the same day of each succeeding month thereof. Receipt of the
first month's rent in the amount of $-0- is hereby acknowledged.
B. As consideration for the execution of this lease, the Lessee shall pay to
the Lessor the sum of $30,934.00*, receipt of which is hereby acknowledged. In
the event Lessee is not then in default under the terms of this lease, said sum
of $30,934.00 shall be applied toward the rental due for the last one month of
the term hereof. If this lease is extended, said consideration, if Lessee is not
then in default, shall be applied toward rental due for the last month of the
extended term, in lieu of the last month of the initial term. * see paragraph 9
C. The base rental above set forth shall be subject to escalation as follows:
At the end of the first twelve (12) months of the lease term, the monthly
rental shall be increased as follows for the next and each succeeding twelve
(12) month period of the lease term:
(a) The Consumer Price Index, for all Urban consumers, as published monthly by
the U.S. Department of Labor, Bureau of Labor Statistics, All Items, for the
United States Average (1967 = 100) is the "Index" herein referred to. Said Index
as published shall be used herein, whether or not certain items may hereafter be
added or deleted therefrom by the Bureau of Labor Statistics, or whether a
"successor index" is published.
(b) The "Base Year Index" shall be the average monthly Index over the twelve
(12) month period ending with the calendar month immediately preceding the month
in which the term of this lease commences.
(c) Commencing with the second twelve (12) months of the lease term, and
continuing thereafter for each remaining twelve (12) month lease period (and for
the last months of the term if said period is less than twelve (12) months),
monthly rent for each such period of the term shall be increased in the same
ratio that the average monthly Index for the previous twelve (12) months
preceding the month in which such rental period commences, shall have increased
over the Base Year Index. In no event shall the rental for any month of the
lease term be less than the base rental for the first month of the lease term.
IT IS HEREBY AGREED BY LESSOR AND LESSEE that this lease is made upon the
following terms, covenants and conditions:
1. RENTAL. The Lessee will pay said rental monthly in advance and without
deductions to Lessor at the office listed as Lessor's address under Lessor's
signature hereto, or at such place or places as Lessor may in writing designate,
without grace or previous demand.
2. POSSESSION. If Lessor is unable to deliver possession of the premises
to Lessee on the date specified for commencement of the term hereof, this lease
shall not be void or voidable, nor shall Lessor be responsible to Lessee for
damages therefor, but there shall in such event be a deduction of rent for the
pro rata period during which possession is delayed. Neither such delay nor
occupancy by Lessee prior to the commencement date shall extend or shorten the
term, but Lessee shall pay rent for such latter period at the initial monthly
rate.
3. USES OF PREMISES. The Lessee shall during the term hereof exclusively
and actively conduct therein and thereon the sole business of
Research and development, manufacturing and laboratory use in connection
with the development of systems using chemical synthesis
Roof surfaces shall not be penetrated by Lessee or his agents without prior
written consent of Lessor.
The premises shall not be used for living quarters.
Motor vehicle parking, if any, provided to Lessee under this lease shall be
non-exclusive, subject to reallocation by Lessor from time to time, and Lessee
agrees that no vehicle will be parked on the leased premises for longer than
eighteen (18) hours in any twenty-four (24) hour period. Lessee agrees that in
the event this provision is violated, the motor vehicle may at Lessor's option
be towed away at Lessee's expense.
Lessee shall not use solid hard tires on any fork lifts or dollies on paved
parking, truck loading or driveway areas, and in the event Lessee violates this
provision, Lessee shall be responsible for the cost of resurfacing the entire
area.
Lessee shall not use any machinery on said premises the use of which will
shake or vibrate the improvements thereon, or any part thereof, to such a degree
that injury will be done to such improvements.
No use of said premises shall be made, or any act committed thereon, or any
article kept thereon, which would increase the existing rate of fire insurance
upon the improvements upon said premises or cause a cancellation of such
insurance; that Lessee shall not commit any act on said premises, the doing of
which is prohibited by any condition or restriction of record affecting the
title to or the right to occupy that property; that no public sale or auction
shall be conducted on said premises; and that Lessee shall not in the use of
said premises violate any present or future law, ordinance or regulation of any
public authority; and that no waste or public or private nuisance shall be
committed on said premises.
No corrosive chemicals, acids, inflammable liquids, paints, dangerous or
toxic substances or similar materials shall be used or stored on the leased
premises. Lessee shall comply with all federal, state and local environmental
laws, ordinances and regulations, and shall indemnify Lessor against any
liability, claims and expense at any time incurred for violation of this
subparagraph, including any sum assessed against Lessor for any violations of
said laws, regulations or ordinances or incurred at any time for the elimination
of toxic substances effects or soil removal. Lessee agrees in this connection to
waive the statute of limitations applicable to any action brought hereunder.
4. ALTERATIONS. No alterations shall be made on or of said premises
without the written consent of Lessor first have been obtained, and any
alterations of said premises or additions thereto shall, when affixed to the
realty, become a part thereof, except moveable furniture and trade fixtures.
No additional lock or locks shall be placed by Lessee on any door, nor
shall any existing lock be re-keyed, unless written consent of Lessor shall have
been obtained. Two keys will be furnished by Lessor. All keys shall be
surrendered to Lessor upon termination of the lease term.
page one
<PAGE> 2
The following items, whether installed by Lessor or Lessee shall be deemed
permanent improvements and not trade fixtures, but shall be subject to the
election by Lessor to require removal of any or all of them at the termination
of the lease:
Electrical wiring, panels and conduit; all piping and ductwork; heating
units, air conditioners, lighting fixtures, ballasts, globes and tubes; and hot
water heaters, shelving and counters, and partition walls.
5. REPAIRS. Lessee accepts said premises (including glazing, outside
adjacent sidewalks and parking areas, if any) in their present condition,
acknowledging same to be in good order and repair; Lessee shall maintain the
said premises in as good order and repair as when received, damage by fire,
war, earthquake, or reasonable use and wear thereof, excepted; unless said fire
be caused by the negligence of Lessee, his employees or invitees. Lessee waives
the provisions of Sections 1941 and 1942 of the California Civil Code, or any
other law which would permit Lessee to make repairs at Lessor's expense.
Lessee agrees to water, maintain and replace, when necessary, any
shrubbery, landscaping, exterior lighting, sprinklers and other such facilities
provided by Lessor on the leased premises. If parking and landscaping are
provided for an entire building or building site, the maintenance cost of such
parking and landscaping, including sweeping service, by a service designated by
Lessor shall be prorated on a square footage or other equitable basis as
calculated by Lessor. Lessee agrees to pay this cost in addition to the monthly
rental.
Included in repairs and maintenance for which the Lessee is obligated to
pay are: replacement when necessary of light globes, fluorescent tubes,
ballasts and starters in all lighting equipment; and for repairs to doors,
storefronts and windows, including glazing, door closers, locks and frames,
landscape sprinkler system, toilet fixtures, fire sprinkler and fire sprinkler
supervisory systems, due to damage from any cause. This list is not intended to
be exclusive and shall not limit the general provisions hereof concerning
repairs.
For the duration of the lease, Lessee agrees to maintain and pay for a
service contract which meets the manufacturer's recommendations of the air
conditioning and heating systems installed in the leased premises. Lessor shall
not be obligated to repair minor settlement cracks on walls or floor of the
leased premises, and shall not be responsible for the leaking of said walls due
thereto or as the result of porosity thereof.
6. INDEMNIFICATION OF LESSOR; INSURANCE. Lessee assumes all risk of injury
to person and property in or about said premises, including Lessee's property,
and will hold Lessor free and harmless from liability therefor, including costs
and counsel fees. Lessee shall secure and keep in force a public liability
insurance policy on an occurrence basis covering leased premises, including
parking areas, if any, included in this lease, insuring Lessee and naming
Lessor as an additional insured, and a copy of same shall be delivered to
Lessor. Said insurance policy shall have minimum limits of coverage of $500,000
personal injury and property damage. Lessee shall further insure, at his
expense, the glass, glazing, window frames, skylights, door, mullions and
storefront window wall, if any, in said premises in a company and in an amount
acceptable to Lessor; loss, if any, to be payable to Lessor. A copy of said
policy shall be delivered to Lessor; and if the Lessee does not so deliver said
policy to Lessor, Lessor may insure said glass and glazing, and collect the
cost thereof from Lessee. All policies shall be kept current and provide for
non-cancellation and non-modification without 30 days advance notice to Lessor.
7. UTILITIES. Lessee will pay, when due, all charges incurred by him for
water, light, power, heat, gas, garbage removal, sewer charges and storm drain
charges (rental, tax, assessment or other), telephone and other services
furnished to said premises, including fire sprinkler supervisory. If any such
charges are assessed to a larger building of which the leased premises are a
part, such charges shall be appropriately prorated on the basis of area by the
Lessor. All such charges incurred by Lessor for the common areas of an entire
premises of which the leasehold is a part, including but not limited to
walkways, driveways, parking areas and landscaping, shall be prorated on a
square footage or other equitable basis as calculated by Lessor. Lessee agrees
to pay this cost in addition to the monthly rental.
8. ASSIGNMENT. Lessee shall not assign this lease, or any interest
therein, or sub-lease said premises, or any portion thereof, or license the use
thereof, or any portion thereof, without the written consent of Lessor first
had and obtained; that consent given by Lessor to one or more assignments,
sub-leases or licenses shall not be construed as a subsequent or continuing
consent; and that any such assignment, sub-letting or licensing (including
transfer by operation of law) without such consent shall at Lessor's option
terminate this lease. In the event of any assignment or sub-lease hereunder
whether consented to by Lessor or not, Lessee agrees to pay Lessor monthly 100%
of the excess of the rent provided under assignment or sub-lease over the rent
specified herein.
9. SUBORDINATION TO DEED OF TRUST. This lease at the option of Lessor
shall be subordinate to any deed of trust now existing, or which Lessor may in
the future execute covering said premises. Lessee agrees forthwith upon request
of Lessor to execute such documents providing subordination of this lease to
any such deed of trust executed now or in the future.
Lessee shall from time to time upon ten (10) days' prior written request
by Lessor execute, acknowledge and deliver to Lessor (a) a statement in writing
certifying, if such be true, that his Lease is unmodified and in full force and
effect (or if there have been modifications that the same is in full force and
effect as modified and stating the modifications) and the dates to which rental
and other charges have been paid; and (b) such other instruments as may
reasonably be required or requested by any mortgagee, beneficiary of a deed of
trust or holder of any other encumbrance on the Premises.
10. DESTRUCTION OF PREMISES. In the event the premises are totally
destroyed, then this lease will be forthwith terminated. In the event the
demised premises are part of a building and such building is damaged to such an
extent that the cost of repairs exceeds one-third of the cost of replacement of
said building, then at the option of the Lessor, this lease shall terminate. In
the event of partial destruction of the premises, which Lessor elects to or is
bound to repair, the same shall be repaired by Lessor as soon as reasonably
possible if such repairs can be made in ninety (90) working days after receipt
of all permits under the laws, ordinances and regulations applicable thereto,
and also if the necessary financing therefor is obtainable on a reasonable
basis from local lending agencies; but if such repairs cannot be so made, then
this lease, at the option of Lessor, shall terminate; but if not so terminated,
then Lessor shall repair the same as soon as reasonably possible. During the
time such repairs are being made Lessor shall not unreasonably interfere with
Lessee's business, and the rent for such period shall be reduced
proportionately to the extent Lessee is deprived of the use of the premises.
Lessee waives the provisions of sections 1932 (subdivision 2) and 1933
(subdivision 4) of the California Civil Code.
11. DEFAULT. In the event Lessee defaults in the terms hereof, Lessor, at
his option, and in addition to any other rights he may have, may re-enter and
repossess said premises and remove all property therefrom and store the same at
the expense of Lessee. Lessor, upon default of Lessee, may relet said premises
or any portion thereof, in a changed condition or otherwise, for such rental
and upon such terms as he deems reasonable, and hold Lessee for the difference
received, plus expenses of reletting and collecting such rental, and the rental
herein provided. No such re-entry or taking of possession by Lessor shall be
deemed an election to terminate this lease unless Lessee is served with notice
of said termination by Lessor or the same be decreed by a court of competent
jurisdiction.
In the event Lessee shall breach this lease and abandon the demised
premises, Lessor may also elect to continue the lease in effect and Lessor may
enforce all rights and remedies hereunder, including the right to recover rent
as it becomes due, all pursuant to the provisions of Section 1951.4 of the
California Civil Code. In the event of such election by Lessor to continue the
lease, Lessee hereby irrevocably appoints Lessor the agent of Lessee to enter
upon the demised premises and remove any and all persons and/or property
whatsoever situated upon said premises, and to place all or any portion of said
property, except such property as may become the property of Lessor, in storage
for the account of and at the expense of Lessee; and, in such case, Lessor may
relet the demised premises upon such terms as to it may seem fit, and if a
sufficient sum shall not be thus realized, after paying expenses of such
reletting and collecting, to satisfy the rent and such other sums as may be
reserved herein to be paid, Lessee shall satisfy and pay any deficiency, and
pay the expenses of such reletting and collecting. Lessee hereby releases
Lessor and agrees to save harmless Lessor from any cost, loss or damage arising
out of or caused by any such entry or reentry upon the demised premises and/or
the removal of persons and/or property and storage of such property by Lessor
or his agents.
Lessee hereby grants to Lessor a security interest in all its fixtures,
machinery, equipment, presently owned by Lessee and located at said demised
premises. While Lessee is not in default in the payment of rent or any of its
obligations under this Lease, it may trade in or replace any of said items free
of this security interest and the security interest shall then apply to the
newly acquired items. All trade fixtures, equipment and other like property
which the Lessee has installed in the building shall remain the property of the
Lessee, subject to Lessor's security interest, and the Lessor agrees that the
Lessee shall have the option at any time, and from time to time, provided the
Lessee is not then in default in the performance of any of the obligations of
the lease on its part to be performed, to trade in or replace any and all of its
trade fixtures, equipment, and other
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<PAGE> 3
like property which it may have installed in the building or improvements, and
upon the termination of the lease, to remove same, provided, that if Lessee be
in default it shall not then have any right of trading in, replacing or
removing of such trade fixtures, equipment and other like property which it may
have installed.
12. ATTORNEY'S FEES. In the event of any suit, action or proceeding
brought by either party for the breach of any term hereof, or to enforce any
provision hereof, or for unlawful detainer, the losing party will pay to the
other reasonable counsel fees in said action or proceeding as fixed by the
court.
In the event Lessee is in default in payment of rent for any period or in
Lessee's performance of any covenant hereof, and the Lessor engages an attorney
to prepare a notice of such default for service on the Lessee, the Lessee
agrees to reimburse the Lessor for the services of such attorney; and in the
event the default is cured prior to institution of suit, the fee for the
preparation of such notice shall be a reasonable amount therefor, plus actual
costs of service.
13. ENTRY AND INSPECTION. Lessor reserves the right to enter said premises
at all reasonable times for the purpose of repairing, altering or maintaining
the improvements thereon, inspecting said premises, showing the same to
prospective encumbrancers, lessees, insurers, or purchasers, posting any notice
or sign deemed necessary by him to protect his title or interest in said
property; and during the last one hundred twenty (120) days of the term hereof
placing and maintaining therein customary "for sale" or "to let" signs.
14. WAIVER. The waiver by Lessor of any breach hereof shall not be deemed
a waiver of any subsequent breach of the terms hereof.
15. HOLDING OVER. Should Lessee remain in said premises after the
expiration of this lease, such holding over shall be construed as a tenancy
from month to month upon such increase in rental, if any, as established by
notice from Lessor, but otherwise on the terms and conditions hereof so far as
applicable, including rent, and the provisions for cost of living increases
therein (if any) and tax reimbursement. This paragraph shall in no sense imply
any consent by Lessor to such holding over.
16. NOTICES TO LESSEE. All notices required by law or this lease to be
given to Lessee by Lessor may be given personally to Lessee or mailed to him
by United States mail, postage prepaid and addressed to Lessee at the premises,
whether or not Lessee has abandoned or vacated them.
17. TRANSFER OF SECURITY. In the event any security be given by the
Lessee to secure the faithful performance of this lease, Lessor shall not be
chargeable with interest thereon, and in the event of a sale of said premises
he may transfer such security to the purchaser and be relieved of further
liability therefor.
18. INSOLVENCY OR BANKRUPTCY. To the extent permitted by law, the
interest of Lessee in such premises and this lease, at the opinion of Lessor,
shall terminate in the event of levy of execution against Lessee upon such
interest (provided Lessee fails for a period of five (5) days to discharge or
bond against said levy), or upon Lessee filing or having filed against him
bankruptcy proceedings or other proceedings under the bankruptcy statutes, or
upon Lessee making a general assignment for the benefits of creditors, or upon
the appointment of a receiver to take possession of all or substantially all of
Lessee's assets.
19. LIENS. In the event any lien is filed against said premises for any
claim against Lessee, Lessee shall remove the same forthwith; but failing to do
so, Lessor may remove the same at the expense of Lessee. Lessee may, however,
dispute the validity of such lien, but as a condition thereof, shall file with
Lessor a surety bond covering the amount thereof.
20. SIGNS. Lessee shall not place any signs, visible from the exterior,
on any part of the premises without the written consent of Lessor. Upon the
expiration of this lease, Lessee shall remove all signs or decorations placed
on or in said premises and shall repair any damage done by placing, maintaining
or removing of said signs or other equipment on the roof or other portions of
the premises. Lessee may place professionally designed signs in and on said
building advertising Lessee's business after written approval by Lessor, and
governmental entitles. Signs shall include tethered airborne objects and mobile
units.
21. SURRENDER OF PREMISES. Lessee agrees to surrender the premises at the
termination of the tenancy herein created, in the same condition as herein
agreed they have been received,* damage caused by war, earthquake, and ordinary
wear and tear excepted; and upon the surrender of the premises, either at the
expiration of the term or otherwise, Lessee agrees to remove all personal
property and rubbish from the premises; but if not so removed by Lessee, Lessor
may have the same removed at Lessee's expense. In the event of surrender of
this lease, Lessor shall have the option of terminating all existing sub-leases
or of assigning said sub-leases to Lessor. At the time of termination of this
lease, Lessor may require any or all of the alterations or additions installed
by Lessee or by Lessor for the benefit of Lessee at Lessee's request, to be
removed and the premises restored to their original condition, whether or not
said alterations or additions have become part of the premises under paragraph
4 hereof. *See paragraph 34
22. SUCCESSORS AND ASSIGNS. The covenants and conditions herein
contained, subject to the provisions as to assignment, shall apply to and bind
the heirs, executors, administrators, successors and assigns of Lessor and
Lessee. The term "Lessor" as used herein shall mean only the owner or owners at
the time in question of the fee title or a Lessee's interest in a ground lease
of the Premises, and except as expressly herein provided, in the event of any
transfer of such title or interest, Lessor herein named (and in case of any
subsequent transfers the then grantor) shall be relieved from and after the
date of such transfer of all liability as respects Lessor's obligations
thereafter to be performed, provided that any funds in the hands of Lessor or
the then grantor at the time of such transfer, in which Lessee has an interest,
shall be delivered to the grantee. The obligations contained in this Lease to
be performed by Lessor shall, subject as aforesaid, be binding on Lessor's
successors and assigns, only during their respective periods of ownership.
23. TIME. Time is of the essence of this lease.
24. RECORDING. This lease shall not be recorded by Lessee, but in the
event the interest of Lessee herein is shown as an exception to title in any
title company report of title, Lessee agrees to execute and deliver to Lessor a
quitclaim deed covering all Lessee's interest in said premises, forthwith upon
termination of this lease.
25. TAX INCREASES. Lessee agrees to pay Lessor the amount of any increase
in city, county and district real estate taxes assessed against said premises,
in excess of the taxes for the fiscal year 1999 - 2000. Included in "taxes"
shall be any levy, tax, charge or fee levied by a governmental entity on
parking spaces or privileges or parking uses in the leased premises and any tax
on Lessor's gross rental receipts (other than income tax).
Also included in said taxes shall be any future special assessments for
local improvements of any sort. If said assessments are permitted to go to
bond, the total amount of the annual installment shall be added to the tax bill
for the purpose of the computation of any increase in taxes; if Lessor
discharges said assessment and does not permit the same to go to bond, the
amount which each annual installment, less interest, would have been if the
same had gone to bond, shall be annually added to Lessor's tax bill for the
purpose of tax increase computation.
Lessee shall pay Lessor the amount of any such increase in real property
taxes, as above defined, in two equal installments, one on December 1 and the
other on April 1 of the said fiscal tax years. Submission of copies of tax
bills by Lessor shall be evidence of and notice of the amount of said taxes.
The amount of said increase shall be prorated in the event this lease commences
or terminates during any fiscal tax year, and in such event the split-period,
proratable semi-annual installment of the tax increase shall be paid either
thirty (30) days prior to the termination of this lease or within ten (10) days
of notification by the Lessor to the Lessee of the amount of said increase.
In the event said tax reimbursement payments are not made to Lessor on or
before the dates herein set forth, the Lessee shall pay to Lessor a ten percent
(10%) per annum late charge for such delinquency to be added to the tax
reimbursement payment due. If said taxes and assessments are assessed against
the entire building and building site, the taxes and assessments allocated to
the leased premises shall be prorated on a square footage or other equitable
basis, as calculated by Lessor.
If the assessed value of the Lessor's premises is increased by the
inclusion therein of a value placed upon the personal property or improvements
of the Lessee, and if the Lessor pays the taxes based on such increased
assessment, the Lessee shall, upon demand, repay to the Lessor the portion of
such taxes resulting from such increase in assessment.
26. OUTSIDE STORAGE. No materials, supplies, equipment, finished products
or semi-finished products, raw materials or articles of any nature shall be
stored upon or permitted to remain on any portion of the leased premises
outside of the building constructed thereon, except with the prior written
consent of the Lessor.
No waste materials or refuse shall be dumped upon or permitted to remain
unreasonably upon any part of the leased premises outside of building proper,
unless approved by Lessor.
27. OTHER RULES. Lessor reserves the right to make such other reasonable
rules and regulations, including parking regulations, as in Lessor's judgment
may from time to time be necessary for the safety, cleanliness and orderly
operation of the leased premises for the benefit of all the tenants in the
area. Lessee agrees to require its employees, executive, invitees and customers
to abide by such results and regulations, including parking regulations.
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28. CONDEMNATION. In the event more than ten per cent (10%) of the
building area or more than twenty per cent (20%) of the surrounding land in the
demised premises shall be condemned by any public authority under eminent
domain, this lease shall terminate and the award for damages shall belong
entirely to Lessor, except as to trade fixtures of Lessee. If a lesser portion
of the premises be condemned, the Lessee shall be entitled to a reasonable
abatement of rent proportionate to the loss of use of space being leased. The
granting by Lessor of storm drainage or utility easements over the demised
premises shall not involve any reduction in rent, unless such easements
materially affect Lessee's use of the demised premises.
29. NOTICES TO LESSOR. All notices required by law or this lease to be
given to Lessor by Lessee shall be mailed to Lessor, registered or certified
mail, return receipt requested, by United States Mail, postage prepaid to Lessor
at the following address or such other address as Lessor may direct in writing:
1025A Tanklage Road
San Carlos, CA 94070
30. ROOF MAINTENANCE. Notwithstanding the provisions of Paragraph 5,
Lessor shall maintain the roof and structural components of the leased
premises, such duty to repair being subject to the condition precedent that
Lessee shall give prior written notice of at least 24 hours to Lessor (during
working hours) specifying the need for such repairs. Structural components are
defined as outside walls (excluding windows, doors, doorframes, storefront,
glazing, door closers, locks and hardware), footings, columns, floor slab, and
roof structure systems. The Lessee, however, shall be obligated to make any and
all repairs caused by any act or omission of Lessee, his employees or invitees.
31. ADDITIONAL CLAUSES TO THIS LEASE. The following additional paragraphs
have been included in this lease as attachments thereto: No. 32, 33, 34, 35, 36,
37, 38, 39, & 40. In the event any of the provisions of said added paragraphs
conflicts with the provisions of paragraphs 1 through 31 hereof, the additional
paragraphs shall control and shall be effective.
IN WITNESS WHEREOF, Lessor and Lessee have executed this lease the day and
year first above written.
LESSOR: TANKLAGE FAMILY PARTNERSHIP LESSEE: ARGONAUT TECHNOLOGIES, a
a Limited Partnership Delaware Corporation
/s/ DON TANKLAGE /s/ D. P. BINKLEY
------------------------------ ------------------------------
Tanklage Construction Co., Inc. David P. Binkley, Ph.D.
General Partner
Don Tanklage, President
Address: 1025 Tanklage Road, Unit A Address: 887 Industrial Road, Unit G
San Carlos, California 94070 San Carlos, California 94070
32.) Lessee shall not generate or cause any of the following: Noise,
vibrations, odor or dust discernible or audible to adjoining tenants and in the
event of any complaint by any adjoining tenant, Lessor or any municipal entity
or agency, then Lessee shall cure such breach of the lease within 60 days of
said notice.
33.) Any other provisions of this lease not withstanding, the parties hereby
agree that the demised premises may be subject to the terms and conditions of
the Americans with Disabilities Act of 1990 (herein after the "ADA") as a
result of Lessee's use of said premises. The parties further agrees to
indemnify and hold the Lessor harmless against any claims which may arise out
of Lessee's failure to comply with the ADA. Such indemnification shall include,
but not necessarily be limited to reasonable attorney's fees, court costs and
judgments as a result of said claims.
34.) "received shall be defined as received at the time of the original lease
dated October 9, 1995 for 853 Industrial Road, Units A, I & J; and original
lease dated November 4, 1997 for 871 Industrial Road, Units A & B; and original
lease dated January 19, 1995 for 887 Industrial Road, Units D, E, F & G.
35.) All dumpster and garbage cans to be stored indoors except on day of pickup.
36.) Lessee agrees that only pneumatic tired forklifts and hand trucks shall be
used, operated, parked or stored on the leased premises, and any violation of
this provision shall be deemed a material breach of the lease entitling the
Lessor to exercise any or all of its remedies at law or as provided by this
lease.
37.) Lessee agrees to notify Lessor and P.G.&E. of any electrical loads
connected within the space by filling out a SerCare sheet and submit it to
P.G.&E. with a copy to Lessor. Lessee agrees to indemnify and hold Lessor
harmless and pay for any damages caused by connection of electrical loads to
building electrical system or P.G.&E. transformer.
38.) Lessor acknowledges that Lessee uses and stores small quantities of
products which have as their ingredients items listed on Exhibit "E". Storage
and use of chemicals and hazardous waste to comply with federal, state and
local regulations. Flammable solvent waste to be stored in separate, labeled
containers not exceeding 5 gallons.
39.) Deposits: 887 Industrial Road - $17,327.00 paid to Escagenetics and
received by Tanklage Family Partnership 3/18/96; 853 Industrial Road -
$5,265.00 paid to Escagenetics and received by Tanklage Family Partnership
3/18/96; 871 Industrial Road - $3,206.00 received 11/18/97. The amount of
$5,136.00 due with the execution of this lease dated 7/9/93.
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40.) OPTION - The Lessee shall have the right to one, one year option, extending
the term of the lease from July 19, 2000 through July 18, 2001 providing
Lessee is not in default of the terms and conditions of this lease and that
notice of Lessee's exercise of the option is given in writing to Lessor
prior to January 18, 2000. The base year rent for July 19, 2000 and the
first year rent for the option period for the new lease shall be the
greater of the following: 1) 95% of the market rent based on comparable
properties in the immediate area; 2) the 1999-2000 base year index adjusted
or updated to July 2000, using the same formula specified in the original
lease dated July 9, 1999. All terms and conditions agreed upon in the
original lease shall carry forward to the lease option period with the
exception of the change in base year rental amount, the lease term and the
option clause.
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EXHIBIT 10.20
Translation from Japanese
Lease Agreement
MK Kojimachi Building
[Notes handwritten in English on original document have not been
included in the translation--Translator's note.]
Lessor: Manrikiya Corp.
Renting Party: Argonaut Technologies KK
<PAGE> 2
Lease Agreement
Lessor Manrikiya Corp. (hereafter referred to as "Party A") and renting party
Argonaut Technologies KK (herefter referred to as "Party B") have reached a
lease agreement (hereafter referred to as "this Agreement") as follows.
Article 1 Leased Building
A leases to Party B the following building (hereafter referred to as this
Building) and Party B rents it.
Note:
Name: MK Kojimachi Building
Address: 4-2-1 Kojimachi, Chiyoda-ku, Tokyo
Structure: Steel structure, part steel framed reinforced concrete structure,
two floors below ground, 10 floors above ground
Number of floors, area: 5 floors, 161,229 m2 (48.77 tsubo
[Japanese unit of measure])
Article 2 Lease Agreement Period
The lease agreement period will be from October 1, 1997 to September 30, 1999.
However, if Party A or Party B does not express the intent to refuse a renewal
or express the intent to change the conditions to the other party in writing by
six months before the period ends, this Agreement will be renewed for another
two years. The same holds true thereafter.
Article 3 Purpose of Use
B must not use this Building for any purpose other than as Party B's office.
Article 4 Rental Fee, etc.
(1) The monthly rental fee will be 804,705 yen, and the consumption tax will be
40,235 yen. The monthly maintenance fee will be 170,695, and the consumption tax
will be 8,535 yen. Party B will make a bank transfer to a bank account specified
by Party A by the 25th of each month for the next month's payment that includes
the rental fee, maintenance fee, and their corresponding consumption tax
amounts. Note that when the calculation period is not a full month, the amount
will be pro-rated on a daily basis.
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(2) In addition to the lease fee and maintenance fee, Party B will bear the
actual expense of things such as electrical expenses and cleaning expenses for
the rented rooms, and will make payments to Party A using the same payment date
and payment method as noted in the previous item.
Article 5 Changes in Rental Fee, etc.
When the lease fee and maintenance fee have become unsuitable due to
fluctuations in the price of commodities, fluctuations in fees in the rental
market, changes in economic conditions, increases in public charges, etc., or
when compared to similar examples, these fees can be changed by discussion
between Party A and Party B at the end of the lease period.
Article 6 Deposit
(1) Party B will deposit with Party A at the time the agreement is reached a
deposit amount of 9,656,460 yen. Note that the deposit is non-interest bearing.
(2) When this Agreement ends due to cancellation or some other reason, after
Party B has fulfilled all of its obligations to Party A, Party A will directly
return to Party B the remaining amount of the deposit after vacating this
Building.
Article 7 Deposit Offset, etc.
(1) When Party B delays payment of the rental fee or neglects some other part of
the execution obligations of this Agreement, Party A can appropriate the deposit
for this without having to give any warning. Note that Party B cannot claim to
offset the rental fee or any other obligation using the deposit during this
Agreement.
(2) In the case of the previous item, within seven days of the date it received
notification of appropriation from Party A, Party B must compensate the
insufficient portion of the deposit.
Article 8 Prohibition of Deposit Transfer, etc.
B cannot perform transfer, pledge, or any other disposition of the right to
request return of deposit based on this Agreement.
Article 9 Prohibited Items
B must not carry out any of the actions listed below.
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(1) Transfer or sublease the lease rights based on this Agreement to a third
party without consent from Party A.
(2) Have a third party reside together [with Party B] in the building, or show a
party other than Party B as the named resident.
(3) Carry out actions that are dangerous, unsanitary, or otherwise cause
problems for the neighborhood, actions that would cause damage or pose a risk to
the building.
Article 10 Compensation Liability
(1) When Party B, its agent, or user, etc. causes damage to Party A by intention
or neglect, Party B must pay compensatory damages for this.
(2) When Party B, its agent, or user, etc. cause damage to a third party by
intention or neglect, Party B carries full responsibility for handling the
issue, and will not place any burden on Party A.
(3) Party A will not bear any responsibility for damages to Party B due to fire,
earthquake, flooding, or theft, etc. However, this is not true if damage was
caused due to the intent or neglect of Party A, its agent or user.
Article 11 Changes to the Original State
When Party B tries to change the appearance of this Building, newly establish
accessory equipment, or otherwise change the original state, Party B must obtain
advance approval from Party A and perform construction according to Party A's
instructions, and Party B will bear the expense of the changes.
Article 12 Repairs
(1) Party A is obligated to perform repairs necessary to maintain the main body
of this Building (roof, outer walls, structural walls) and accessory equipment
installed by Party A.
(2) As a rule, Party B will perform and bear the expenses for repairs and
painting, etc. of rented rooms for items other than those determined in the
previous item.
(3) When a location that requires repair within a rented room, regardless of
whether or not Party B is responsible for the expenses for the repair, Party B
must notify Party A of this without
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delay, and even when the repair is Party B's responsibility, Party B must obtain
advance approval from Party A and perform repairs according to Party A's
instructions.
Article 13 Facilities Inspections
A, its agent, or user can enter this Building and perform appropriate measures
with advance notification to Party B when necessary to perform inspections,
repairs, fire prevention, or theft prevention, etc. for various fittings and
various equipment of the building. Note that when it is not possible for Party A
to notify Party B in advance in cases of emergency, Party A will report to Party
B as soon as possible after the event.
Article 14 Right to Request Purchase of Fittings, etc.
When Party B vacates this Building, Party B cannot make any claims for
compensation for expenses required to be spent for various fittings and
equipment within this Building or for beneficial expenses, or for expenses
incurred for having the user removed or compensation for removal, regardless of
the reason or pretext. Also, Party B cannot make a claim to Party A for purchase
of various fittings and equipment that Party B installed in this Building at its
own expense.
Article 15 Preliminary Warning of Cancellation During the Lease Period
If either party Party A or Party B desires to cancel this Agreement during the
lease agreement, that party must express its intent to the other party in
writing six months in advance. Note that Party B can cancel the agreement
immediately by paying an amount equivalent to six months of rental fees and
maintenance fees.
Article 16 Cancellation Due to Agreement Violations, etc.
When any of the following numbered items applies to Party B, Party A can cancel
this Agreement without having to give any kind of warning. In this case, when
Party A has suffered damages, it can make a claim to Party B for compensation
for those damages. Also, Party B loses the benefit of time for all obligations
it has in relation to Party A.
(1) When there has been a delay of a total of two or more times for all or part
of the payment of the rental fee or the maintenance fee.
(2) When execution of seizure, provisional attachment, or provisional
disposition has been received, or when there is a claim of liquidation,
corporate reorganization, composition,
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<PAGE> 6
bankruptcy, or special liquidation, or when disposition for nonpayment of a bill
or check or disposition for stopping of a bank transaction has been received.
(3) When there has been an action that clearly violates this Agreement.
Article 17 Restoration to Original State, etc.
When this Agreement ends, Party B will follow the following provisions when it
vacates this Building.
(1) At the time that this Agreement ends, Party B will remove (at its own
expense) fittings and other equipment installed in this Building by Party B as
well as belongings of Party B, will repair at its own expense damaged locations
in this Building and accessory equipment, and will vacate this Building for
transfer to Party A having returned this Building to its original state. In this
case, if Party B does not take measures to restore the building to its original
state without delay, Party A can perform these measures at the expense of Party
B.
(2) When there were instructions by Party A regarding property of Party A
installed by Party A at the request of Party B, Party B will remove this at its
own expense, and will transfer it to Party A.
(3) When property of Party B remains within this Building after Party B has
vacated this Building, this will be considered to mean that Party B has
relinquished property rights, and Party A can dispose of this property as it
sees fit.
(4) When Party B does not vacate this Building after this Agreement has ended,
Party B must pay to Party A compensation money in an amount equivalent to double
the rent for the period from the day after the agreement ended until vacancy is
complete.
Article 18 Consumption Tax
For this Agreement and agreements incidental to this Agreement, of all the money
received by Party A from Party B such as the rental fee, for the items that are
subject to consumption tax taxation, Party A will make a request to Party B for
an amount that includes the consumption tax amount, and Party B will be
responsible for that amount.
Article 19 Method of Consent
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<PAGE> 7
All items for which Party B requires Party A's consent for this Agreement will
be dealt with in writing.
Article 20 Rules Within the Building, etc.
When Party A gives notification of rules within the building and precautions for
its management of the building, Party B must obey these.
Article 21 Name Change, etc.
When Party B changes its name, undergoes a merger, changes its purpose of
operation, or makes any other major organizational or operational change from
the time this Agreement was reached, Party B must notify Party A of this
immediately.
Article 22 Joint Guarantor
The joint guarantor will jointly bear the responsibility with Party B in
relation to Party A for execution of all obligations borne by Party B based on
this Agreement.
Article 23 Notary Document
This Agreement can be created as a notary document, and the expense for this
will be split half and half by Party A and Party B.
Article 24 Court of Jurisdiction
On the chance that a legal dispute arises between Party A and Party B, the court
of jurisdiction for the first trial will be the Tokyo District Court or the
Tokyo Summary Court.
Article 25 Other
Issues that are not addressed in this Agreement or for which questions of
interpretation arise, will be resolved by discussion in good faith by Party A
and Party B according to related laws and ordinances or general practice.
As proof that this agreement was reached, two originals are being created, and
Parties A and B will each keep one original copy.
7
<PAGE> 8
September 16, 1997
Lessor (A)
Manrikiya Corp.
Masaru Takahashi, President [seal]
Renting Party (B)
Argonaut Technologies KK
Ichibancho NN Building, 15-5 Ichibancho, Chiyoda-ku, Tokyo
Hirofumi Kajihara, President [seal]
Joint Guarantor
[blank]
Witness to the Agreement
Minister of Construction (5) No. 3105
1-10-8 Dogenzaka, Shibuya-ku, Tokyo (Shibuya Nomura) [seal]
Witness: Sanko Estate Corp.
Shibuya Office
Office Director: Junji Chinen
Transactions Manager: Atsushi Maruyama
Registration Number: Tokyo No. 143688 [seal]
8
<PAGE> 9
Memo on Change of Lessor
Lessor: Manrikiya
Renting Party: Argonaut Technologies KK
New Lessor: MK Kojimachi Building Co., Ltd.
9
<PAGE> 10
Memo on Change of Lessor
Lessor Manrikiya Corp. (hereafter referred to as "Party A"), renting party
Argonaut Technologies KK (hereafter referred to as "Party B"), and MK Kojimachi
Building Co., Ltd. (hereafter referred to as "Party C") agree to a memo as noted
below in addition to the lease agreement dated September 16, 1997 reached
between Party A and Party B (hereafter referred to as the "Original Agreement").
Note:
Name: MK Kojimachi Building
Address: 4-2-1 Kojimachi, Tokyo
Number of floors, area: Five floors, 161,229 m2 (48.77 tsubo)
Article 1 Change of Lessor
B consents to the change of lessor from Manrikiya Corp. to MK Kojimachi Building
Co., Ltd. from January 1, 2000.
Article 2 Description of Agreement
The contents of the lease agreement are the same as in the Original Agreement.
Article 3 Handling of Money
For the deposit of 9,656,460 yen deposited by Party B with Party A, a deposit
receipt will be returned to Party A at the same time as the procedure to change
the lessor, and new lessor C will grant a new deposit receipt to Party B.
As proof that this memo was agreed to, three originals are being created, and
Parties A, B, and C will each keep one original copy.
10
<PAGE> 11
December 17, 1999
Lessor (A)
4-2-1 Kojimachi, Chiyoda-ku, Tokyo
Manrikiya Corp.
Masaru Takahashi, President [seal]
Renting Party (B)
MK Kojimachi Building, 5F
4-2-1 Kojimachi, Chiyoda-ku, Tokyo 102-0083
Argonaut Technologies KK
Koji Yanagisawa, President [seal]
New Lessor (C)
3-19 Hayabusacho, Chiyoda-ku, Tokyo
MK Kojimachi Building Co., Ltd.
Ryoji Takahashi, President [seal]
11
<PAGE> 12
Deposit Receipt
December 17, 1999
To: Argonaut Technologies KK
An amount of 9,656,460 yen
Note:
This is a deposit for the lease agreement for the building noted below.
4-2-1 Kojimachi, Chiyoda-ku, Tokyo
MK Kojimachi Building, 5F, 161,229 m2 (48.77 tsubo)
3-19 Hayabusacho, Chiyoda-ku, Tokyo
MK Kojimachi Building Co., Ltd.
Ryoji Takahashi, President [seal]
12
<PAGE> 1
EXHIBIT 10.21
Translation from German
1
ADDENDUM TO THE LEASE CONTRACT
Dated from: April 16, 1997
Rental property: office rooms in the 1st floor, archive room in the 1st
basement and miscellaneous common areas
Address of property: St. Jakobs Strasse 148, 4132 Muttenz
Landlord: Personalvorsorgestiftung Rapp AG [Rapp Personal Pension
Fund], Hochstrasse 100, 4018 Basel
Tenant: Argonaut Technologies AG, St. Jakobs Strasse 148, 4132
Muttenz
By joint wish of all parties involved, the following points are herewith agreed
to:
* procurement of the legally valid signatures of the Tenant
* the expansion protocol and floor plans
* cleaning and maintenance of the common restroom facilities
1. PROCURING THE LEGALLY VALID SIGNATURES
By signing this Addendum, the Tenant declares his consent to the terms defined
in the Lease Contract of April 16, 1997 as well as the following terms.
2. EXPANSION PROTOCOL AND FLOOR PLANS
The rental property is marked in orange on the accompanying floor plans. In
addition to this Addendum, the Lease Contract shall also include the expansion
protocol of the company Rap AG Engineering and Planning Company.
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3. CLEANING AND MAINTENANCE OF THE JOINT RESTROOM FACILITIES
Cleaning and maintenance of the restroom facilities including the waiting room
(rooms 119, 120) which serve as a lounge area shall be regulated jointly by the
tenants of the 1st floor (including the distribution of costs).
4. SPECIFICS
* All other terms of the Lease Contract of April 16, 1997 shall
continue to remain in effect with no changes.
* This Addendum shall go into effect immediately.
Place and date: Basel, Switzerland, July 4, 1997
The Landlord: The Tenant:
Personalvorsorgestiftung Rapp AG Argonaut Technologies AG
[Rapp Personal Pension Fund] St. Jakobs Strasse 148, 4132 Muttenz
[signatures] [signatures]
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LEASE CONTRACT
for
business rooms in the property at
St. Jakobs Strasse 148, 4132 Muttenz
Argonaut Technologies AG
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLE TITLE PAGE(S)
- ------- ----- -------
<S> <C> <C>
Landlord/Administration........................................................3
Article 1 - Type of use........................................................7
Article 2 - Sublease...........................................................7
Article 3 - Start of lease, duration of lease, termination.....................7
Article 4 - Rent, incidental costs, due date...................................8
Article 5 - Contract security..................................................9
Article 6 - Rent adjustment, index (escalator) clause..........................9
Article 7 - Incidental costs..................................................10
Article 8 - Transfer of property..............................................11
Article 9 - Use of the rental property; order.................................12
Article 10 - Structural changes...............................................13
Article 11 - Builder's lien...................................................14
Article 12 - Addresses, advertising signs.....................................14
Article 13 - Maintenance, repairs.............................................15
Article 14 - Permits..........................................................16
Article 15 - Insurance, risk..................................................16
Article 16 - Right of access..................................................17
Article 17 - Keys.............................................................17
Article 16 - Return of the rental property....................................17
Article 19 - Improvements.....................................................18
Article 20 - Specifics........................................................22
Article 21 - Addresses........................................................23
Article 22 - Written form, subsidiary law, jurisdiction.......................23
</TABLE>
<PAGE> 5
LANDLORD/ADMINISTRATION
Personalvorsorgestiftung Rapp AG
[Rapp Personal Pension Fund]
Hochstrasse 100
4018 Basel
TENANT
Argonaut Technologies AG
St. Jakobs Strasse 148
4132 Muttenz
The following lease contract is herewith concluded:
RENTAL PROPERTY
The landlord herewith leases to the tenant the following accommodations/
objects in the landlord's property at St. Jakobs Strasse 148, 4132
Muttenz, as the rental property:
Office accommodations in the 1st floor, gross area approx. 236.67 m2,
archives room in the 1st basement gross area approx. 11.52 m2. The
toilet facilities, and the foyers on the ground floor and the 1st floor
shall be used jointly with the other tenants on the 1st floor.
(Rental property marked in yellow on the accompanying floor plans.)
The tenant shall confirm that the rental property is in a condition
suitable for the intended use.
ARTICLE 1 - TYPE OF USE
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The rental property shall be leased for use as office accommodations for
sale and distribution of products for use in the pharmaceutical,
chemical and agrochemical industries.
The tenant shall agree not to use the rental property for any purpose
other than the purpose intended as per this contract. Any changes shall
require the written consent of the landlord. If necessary for the
stability of the value of the lease object or the rental property (in
particular for businesses with "pedestrian traffic" such as retail
shops, etc.), it shall also be subject to a use requirement.
ARTICLE 2 - SUBLEASE
Subleasing the rental property or transfer of the lease contract to a
third party shall be allowed only with the written consent of the
landlord.
ARTICLE 3 - START OF LEASE, DURATION OF LEASE, TERMINATION
The lease relationship shall begin on May 1, 1997 and the fixed and
irrevocable terms of the lease shall remain in effect for a period of
five years, i.e., until April 30, 2002.
The tenant shall have the unilateral right to terminate the present
lease contract with six months' notice as of April 30, 2000.
This lease contract shall be extended by five (5) additional years
unless terminated by registered letter by the tenant or the landlord at
least twelve (12) months before this contract expires. During this
5-year extension, the tenant shall have the option to terminate the
lease contract with twelve (12) months' notice by registered letter as
of April 30 of the third year of the extension (i.e., as of April 30,
2005, April 30, 2010, etc.).
The termination shall be considered as having been made in due time if
it arrives at the
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recipient's office or within the area under control of the recipient
(notice of delivery in the recipient's mailbox or post office box) at
the latest on the last day before the start of the termination period.
ARTICLE 4 - RENT, INCIDENTAL COSTS, DUE DATE
The rent plus incidental costs shall be as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
ANNUALLY QUARTERLY
- -----------------------------------------------------------------------------------
FR FR
- -----------------------------------------------------------------------------------
<S> <C> <C>
Rent, net, for office and archives 41,820.00 10,445.00
- -----------------------------------------------------------------------------------
Variable incidental costs on account as per Article 7 1,440.00 360,000
- -----------------------------------------------------------------------------------
RENT, GROSS, TOTAL 42,260.00 10,815.00
- -----------------------------------------------------------------------------------
</TABLE>
Rent and incidentals shall be payable quarterly (calendar) in advance,
due on the first day of each calendar quarter (due date). As an
accommodating option and without acknowledging any legal obligation and
without any prejudice, the tenant shall be allowed to pay the rent and
the incidental costs in monthly installments, always due on the first of
the months (due date) in the sense of an easy payment option.
IF THE TENANT IS EIGHT (8) DAYS IN ARREARS WITH THE MONTHLY RENTAL
PAYMENTS, THIS EASY PAYMENT OPTION SHALL EXPIRE WITHOUT NOTICE.
ARTICLE 5 - CONTRACT SECURITY
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To ensure all claims of the Landlord arising from this lease contract,
the tenant shall deposit a bank guarantee in the amount of Fr. 21,630.00
(twenty-one thousand six hundred thirty francs) for the duration of the
lease agreement, due at the time of signing of this lease contract. This
deposit shall be released against payment of all due claims on the part
of the landlord at the latest within four (4) months after termination
of the lease relationship. Any rent and incidental costs that may be due
cannot be charged against this deposit by the tenant.
ARTICLE 6 - RENT ADJUSTMENT, INDEX (ESCALATOR) CLAUSE
The stipulated net rent amount of Fr. 41,820.00 annually (= base rent or
starting rent) shall be based on the National Index of Consumer Prices
of 104.0 points as of March 1997, as calculated by the BIGA [Federal
(Swiss) Office for Industry, Commerce and Labor].
If there is any change in the index, the rent can be adjusted once a
year in accordance with the new index at the beginning of any quarter
without any regard for termination notice and time and regardless of the
fixed duration of the contract. The increase or reduction may amount to
one hundred percent (100%) of the change in the index.
THE RENT CAN BE ADJUSTED DOWNWARD ONLY UNTIL REACHING THE BASE RENT
ESTABLISHED TODAY, WHICH SHALL BE CONSIDERED THE MINIMUM RENT.
The starting basis for calculating the adjustments shall always be the
base rent and base index stipulated today.
In addition to the orderly rent adjustments based on the preceding rent
adjustment clause, there may also be extraordinary rent increases to a
legally allowed extent for increased services rendered by the landlord
(= in particular investments for improvements in the rental property
itself or in general parts of the building). These increases shall be
added to
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the base rent and may begin at the beginning of any month with one
month's notice.
The landlord shall be entitled to make a corresponding change in rent by
adding the change to the base rent for new or increased taxes or other
required public expenditures on the basic property.
If the landlord or tenant makes use of the rent adjustment option, they
shall notify the other party to the contract thereof at least one month
before the option is implemented (notification for rent changes).
ARTICLE 7 - INCIDENTAL COSTS
The cost of electric power consumption and/or gas consumption in the
rental property as well as electric power consumption by any lighted
signs and advertising devices shall be borne by the tenant, who shall
comply with the requirements of the supplier regarding operation of such
signs and devices and shall be liable for any damages caused by his
negligence. Taxes, fees and overhead incurred exclusively due to the
tenant's business operations shall be borne by the tenant, even if said
amounts are levied against the landlord.
The tenants shall jointly bear the incidental costs and operating costs
of the shared facilities as listed below; the landlord shall prepare an
annual accounting of these costs which shall be distributed among the
tenants proportionately:
* heating and hot water costs
* janitorial services
* general electric power consumption
* water consumption
* wastewater purification and garbage hauling fees, container cleaning
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The incidental costs shall be divided on the basis of the office area
leased (236.67/514.80).
A fee of at least 4% of the total expenditures shall be billed for
administrative work. Differences between the settlement balance and the
tenant's prepayments shall be settled within 30 days after the bill has
been submitted. If the tenant's payments on account do not cover the
tenant's actual share of the cost, the landlord may increase the
tenant's payments on account accordingly at the beginning of any quarter
with one month's notice.
IF THE LEASE RELATIONSHIP IS TERMINATED DURING AN ACCOUNTING PERIOD, THE
TENANT SHALL NOT HAVE ANY CLAIM REGARDING PREMATURE SETTLEMENT OF
HEATING COSTS AND INCIDENTAL COSTS.
ARTICLE 8 - TRANSFER OF PROPERTY
The rental property shall be transferred to the tenant in its current
condition, suitable for the intended use, as per inspection, cleaned and
with a complete inventory and building as per Article 19. The tenant
must notify the landlord of any existing defects in writing within
thirty (30) days after the start of the lease. Otherwise, the rental
property shall be considered as having been transferred without any
defects.
The tenant shall not have any damage claims based on activities
associated with any renovations or completion work performed after the
start of the lease.
ARTICLE 9 - USE OF THE RENTAL PROPERTY; ORDER
The tenant shall be required to use the rental property with care and to
always keep it in good clean condition. The tenant shall ensure regular
ventilation and the required heating of the rental property, whether or
not the heating or ventilation is used. The tenant shall be liable for
damage that occurs due to improper use (extraordinary damage).
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In using the rental property, the tenant must use the greatest possible
consideration in dealing with the joint tenants and neighbors. The
tenant agrees to observe all house rules issued by the landlord.
Before introducing especially heavy objects (machines, display cases,
etc.), the tenant shall check with the landlord regarding the
load-bearing capacity of the floors. Appropriate underlayments must be
placed under heavy items of equipment to protect the floors and to act
as sound and vibration absorbing layers.
Access to the building and courtyard, the corridors of the building and
basement, passages or other free space must not be used for storing
objects and/or goods of any type. Vehicles may be parked only in the
spaces allocated for this purpose. The tenant shall be responsible for
setting his garbage out for hauling. Waste of any type shall be kept
only in an appropriate manner in the locations provided for this purpose
by the landlord.
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ARTICLE 10 - STRUCTURAL CHANGES
Changes, especially of a structural type, in and on the rental property,
the installation of equipment, changes in existing facilities and adding
or changing roller blinds, etc. shall be allowed only with the written
consent of the landlord. The designs and blueprints as well as cost
proposals must be submitted to the landlord for approval. In particular,
the tenant must not make any changes in or additional connections to
existing electric power or plumbing facilities without the prior consent
of the landlord.
It shall be the responsibility of the tenant to obtain any required
official permits, in particular building permits for expansion on the
part of the tenant, and to pay the respective fees. The tenant also
pledges to take out the conventional building insurance policies and/or
to bear the cost thereof.
Equipment and furnishings introduced by the tenant or transferred by the
landlord and fixedly connected to the building shall be removed at the
end of the lease relationship -- on demand by the landlord -- and the
original condition of the rental property shall be restored.
IF SUCH EQUIPMENT AND FURNISHINGS REMAIN IN THE RENTAL PROPERTY, THE
TENANT HAS A CLAIM FOR COMPENSATION ONLY IF CONSENTED TO BY THE LANDLORD
IN WRITING.
If a third party brings a claim against the landlord for emissions that
have occurred because of the tenant's equipment or structural changes
made by or on behalf of the tenant, the tenant shall be liable for the
resulting damage compensation claims.
If the landlord intends to make any changes or improvements in the
rental property, he must notify the tenant in writing in advance:
The type and scope of the planned changes and/or improvements, the start
of the
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respective work and the anticipated duration of work, as well as the
proposed extent of the intended increase in rent. This notice shall be
submitted to the tenant at least three months in advance -- except when
there is a risk in delaying the work. If the tenant considers the
disturbance associated with such changes and/or improvements to be
unreasonable, he must notify the landlord of this in writing within ten
(10) days.
ARTICLE 11 - BUILDER's LIEN
The tenant agrees to settle within a suitable period of time any and all
demands with respect to the property owner incurred in conjunction with
renovations ordered by the tenant. If builder's lien(s) are nevertheless
entered in the registry of deeds, the tenant shall be required to settle
such claims immediately. The tenant shall grant the right of recourse at
any time to the property owner for all claims that could be made against
the building owner in conjunction with renovations contracted by the
tenant.
The landlord shall be entitled to demand a security (e.g., a bank
guarantee) from the tenant in the amount of the anticipated costs for
the construction work contracted by the tenant to be able to defend
against any builder's liens in particular.
ARTICLE 12 - ADDRESSES, ADVERTISING SIGNS
The tenant agrees to acquire uniform name plates (for mailboxes,
doorbells, elevator, etc.). These are usually ordered and paid for by
the tenant at the engravers indicated by the administration.
Wall surfaces in or on the house are not leased for advertising
purposes. Company name plates and advertising panels, billboards,
shadowboxes, placards and the like may be mounted only with the consent
of the landlord.
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ARTICLE 13 - MAINTENANCE, REPAIRS
The landlord shall be responsible for performing major maintenance work,
extensive repairs and replacement services for deficiencies due to
natural, age-related wear and tear.
The tenant shall assume at his cost the normal maintenance and cleaning
of the rental property and improvements as well as minor repairs up to
an amount of 1.5% of the respective net annual rent for the office
facilities per individual case. In particular and without regard for the
cost limit and the cause of damage, the tenant shall be responsible for
the following: repairing and replacing switches and electric outlets,
locks, hinges, window and door closures, water taps; gaskets on the
heating facilities and plumbing installations, belts, bands and cranks
for the rolling blinds, disks and plates, and eliminating blockages in
plumbing facilities, as well as periodic cleaning of gutters on
balconies and terraces.
THE COST OF OPERATION, MAINTENANCE, REPAIRS AND RENEWAL OF THE TENANT'S
OWN FACILITIES SHALL BE BORNE EXCLUSIVELY BY THE TENANT.
If any defects, damages or imminent hazards occur, the tenant shall be
obligated to notify the landlord immediately (e.g., water damage,
defective equipment, occurrence of moisture). If the tenant fails to
notify the landlord, the tenant shall be liable for the resulting
damages. The tenant shall not be entitled to eliminate the defects on
his own at the expense of the landlord. The cost of work ordered by the
tenant without the written consent of the landlord shall be borne by the
tenant in any case.
ARTICLE 14 - PERMITS
The tenant shall be responsible for obtaining all permits (e.g.,
business and construction permits) required for use and operation of the
leased property and shall bear the costs associated with acquiring these
permits.
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ARTICLE 15 - INSURANCE, RISK
The landlord shall acquire fire and explosion insurance for the
building. Furthermore, the landlord shall carry insurance for liability
claims on the part of a third party (property owner's liability
insurance). More extensive insurance shall be the responsibility of the
tenant. In particular, the tenant shall bear the risk of damage or loss
of his property for any reasons (e.g., fire damage, explosion damage and
water damage, theft, burglary, etc.). The tenant shall waive any damage
claims with respect to the landlord arising from such damage (except for
the statutory liability of the property owner as per Swiss Debenture
Law, Article 58). Likewise, the tenant shall bear the risk of all
damages to all panes of glass and other glass belonging to the rental
property (windows, display windows, glass doors, mirrors, etc.,
including labeling). The tenant is advised to insure this risk
appropriately.
THE TENANT SHALL BE OBLIGATED TO CARRY AT LEAST ONE ADEQUATE LIABILITY
INSURANCE POLICY.
If the tenant's own expansions and facilities are regarded as parts of
the building and therefore are necessarily insured by the property
owner, the respective share of the premium shall be paid by the tenant.
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ARTICLE 16 - RIGHT OF ACCESS
The landlord or his representative shall be entitled to enter the rental
property during the usual business hours to preserve his rights. In the
absence of the tenant, the keys shall be kept available. If the lease
relationship has been terminated or if negotiations for sale of the
property have been started, the tenant shall be obligated to make the
rental property accessible to those interested in leasing it for
inspection during the usual business hours, with or without being
accompanied by the landlord.
ARTICLE 17 - KEYS
The tenant shall be issued the required keys on acquisition of the
rental property. The tenant can have additional keys made only with the
written consent of the landlord. The landlord must be notified if any
keys are lost. In such cases, the landlord shall be entitled to have the
locks and keys changed at the expense of the tenant. When moving out,
the tenant shall return all keys, including any additional keys made at
the expense of the tenant, to the landlord without compensation.
ARTICLE 18 - RETURN OF THE RENTAL PROPERTY
The rental property together with all inventory shall be returned,
completely cleared, on the date of the end of the lease relationship (by
noon) at the latest. The rental property shall essentially be returned
to the landlord in the condition it was in at the start of the lease.
However, the tenant shall not be liable for the natural wear and tear
occurring due to contractual use.
The tenant shall be responsible for thoroughly cleaning the rental
property together with all accessories and inventory by the time of its
return (in particular, floors, windows, woodwork, lavaboes, lighting
bodies, cabinets, radiators, etc.), to restore their previous condition
(see Article 10) and eliminating any damage to the rental property not
due to
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normal wear and tear. If the rental property is furnished with
carpeting, the tenant shall have it cleaned professionally at the end of
the lease by a company to be named by the landlord.
The maintenance and cleaning work to be performed by the tenant shall be
started promptly so that it will be completed by the end of the lease
relationship or by the time of premature return of the rental property.
In the event the tenant moves out prematurely, the tenant shall clear
out the rental property completely and transfer possession to the
landlord immediately and without compensation. In the event the tenant
moves out prematurely, the tenant shall be liable for the rent and
incidental costs until the end of the contract.
Any defects and damage for which the tenant is responsible, found at the
end of the lease, shall be documented in an acceptance protocol, or the
tenant shall be notified thereof in writing within 30 days after the end
of the lease. The tenant shall also be liable for defects that were not
apparent at the time of acceptance, if brought to his attention in
writing within 30 days after the end of the lease. The terms of Swiss
Debenture Law shall be applicable for enforcement or expiration of any
claims in this regard.
ARTICLE 19 - IMPROVEMENTS
On the part of the landlord, the rental property is transferred with the
following improvements:
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Entryway, ground floor
----------------------
Floor: carpet
Walls: plaster, white, rough surface, painted
Ceiling: suspended Pavatex sheets, white, rough surface, painted, one
rectangular milk glass diffuser
Plus: fixedly mounted drill tool (property of Rapp AG)
Stairwell
---------
Floor: slab flooring
Walls: plaster, white, rough surface, painted
Ceiling: - metal panels, white, rough surface, painted (1st floor)
- plaster, white, rough surface, painted (1st basement/ground
floor)
Light: ground floor: two rectangular milk glass diffusers, 1st floor:
two recessed lights, 1st basement: one incandescent bulb
without diffuser
Plus: 1st floor: wooden wardrobe, flower box bordered in wood
Offices on the first floor
--------------------------
Meeting room (101):
Floor: carpet
Ceiling: glued mineral fiber panels
Walls: plaster, white, painted
Light: two light fixtures
Reception (102):
Floor: carpet
Ceiling: suspended metal panels
Walls: plaster, white, painted
Light: three recessed light fixtures
Doors: Connecting door to office 103 to be made workable.
Connecting door to the hallway to be installed.
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Office (103):
Floor: carpet
Ceiling: suspended metal panels
Walls: raw fiber paper, white, painted
Light: two light fixtures
Doors: reinforced, insulated, made of wood
Office (104):
Floor: carpet
Ceiling: plaster, white, painted
Walls: raw fiber paper, white, painted
Light: six light fixtures
Doors: wood with a glass insert
Office (105, 106, 107):
Floor: carpet
Ceiling: plaster, white, painted
Walls: raw fiber paper, white, painted
Light: two light fixtures in each office
Doors: wood with a glass insert
Office (108):
Floor: carpet
Ceiling: plaster, white, painted
Walls: raw fiber wallpaper, white, painted
Light: four light fixtures
Doors: wood with a glass insert
Cleaning room (121):
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Floor: boards, gray finish
Walls: plaster
Ceiling: suspended mineral fiber boards
Light: one incandescent bulb with a milk glass diffuser,
one soap dispenser, wash basin
Corridor (122):
Floor: carpet
Walls: raw fiber paper, white, painted
Ceiling: suspended metal panels, beige
Light: five recessed high efficiency lights
Archives, first basement:
Floor: cement coating, gray
Walls: plaster, white, rough surface
Ceiling: concrete, rough
Light: one incandescent bulb with diffuser,
electric distributor box,
one cold water connection
Atrium (118):
Floor: garden boards (50 x 50 x 4)
Inventory: four planter boxes (60 x 160 x 42), brown
two planter boxes (60 x 80 x 42) brown,
One garden hose with attachable spray
ALL IMPROVEMENTS BEYOND THOSE LISTED ABOVE SHALL BE AT THE EXPENSE OF
THE TENANT. THIS CIRCUMSTANCE HAS BEEN TAKEN INTO ACCOUNT IN
ESTABLISHING THE RENT. WITH A FULL IMPROVEMENT OF THE RENTAL PROPERTY TO
CONFORM TO THE INDIVIDUAL TENANT'S NEEDS, A HIGHER RENT WOULD HAVE TO BE
SET.
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ARTICLE 20 - SPECIFICS
Closets and built-in cabinets (102):
The blue marks made on the respective floor plans indicate the
location of closets and built-in cabinets. These belong to
Personalvorsorgestiftung Rapp AG and shall be turned over to the
tenant for his use. These furnishings must not be removed from
the rental property.
Atrium (lounge area):
The atrium is set aside as a lounge area (marked in red on the
accompanying floor plan). The planting and maintenance of the
planters shall be handled jointly by the tenants directly
(including bearing the costs).
Foyer (lounge area):
The cleaning and maintenance of the foyer including maintenance
of the planters (marked in red on the accompanying floor plan)
shall be handled jointly by the tenants directly (including
bearing the costs).
Exhaust fan:
Installation of an exhaust fan, if any, shall be borne by the
tenant. Any permits required including the cost thereof shall be
obtained and paid for by the tenant.
ARTICLE 21 - ADDRESSES
The following addresses shall be considered the legal address of the
contractual parties in the sense of this contract until revoked by
registered letter to the other party:
Address of the tenant:
Argonaut Technologies AG
St. Jakobs Strasse 148
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4132 Muttenz [Switzerland]
Address of the landlord:
Personalvorsorgestiftung Rapp AG
[Rapp Personal Pension Fund]
Hochstrasse 100
4018 Basel [Switzerland]
ARTICLE 22 - WRITTEN FORM, SUBSIDIARY LAW, JURISDICTION
Any change in this contract must be in written form to be valid. In all
cases not addressed by the present contract and any respective house
rules, the terms of Swiss Debenture Law and any other applicable
statutes shall be applicable as subsidiary law. The terms of this
contract shall have precedence over any local convention to the
contrary. The parties to this lease shall submit to the jurisdiction at
the site of the rental property. This jurisdiction clause shall be
irrevocable, even after expiration of the contract. If a parity
arbitration board has been established at the site of the rental
property or for that region, any disputes arising from the lease
contract shall be submitted for arbitration before coming before a
judge. If no agreement is reached in this way, the ordinary courts at
the site of the rental property shall be competent, excluding any
justice of the peace and reserving the right to appeal. In cases which
do not fall within the jurisdiction of the arbitration board, the case
shall go directly to the ordinary courts: eviction suits due to failure
of the tenant to move out in the event of termination on the basis of
Article 257 d of the Swiss Debenture Law; suits for suppression of a
legal proposal in prosecution and retaining rights; suits for premature
dissolution of the contract for important reasons.
MULTIPLE TENANTS SHALL BE JOINTLY AND SEVERALLY LIABLE FOR THE
OBLIGATIONS ARISING FROM THIS LEASE CONTRACT.
Place and date: Basel, April 16, 1997
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Landlord: Tenant
Personalvorsorgestiftung Rapp AG [signature]
[signatures]
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Exhibit 10.22
LICENSE AGREEMENT
This License Agreement ("Agreement"), effective as of the 30th day of June,
1999 (the "Effective Date"), is entered into by and between Argonaut
Technologies, Inc., a Delaware corporation having offices at 887 Industrial
Road, Suite G, San Carlos, California 94070, U.S.A. ("Argonaut"), and The
Jackson Laboratory a non-profit corporation having offices at 600 Main Street,
Bar Harbor, Maine 04609-1500 ("Jackson").
WITNESSETH
A. WHEREAS, Jackson is the owner of U.S. Patent 4, 911, 555, and has the
right to grant licenses under said Patent, subject only to a royalty-free,
nonexclusive license heretofore granted to the United States Government;
B. WHEREAS, Jackson desires to have the Patent developed and
commercialized to benefit the public and is willing to grant a license
thereunder;
C. WHEREAS, Argonaut has represented to Jackson, to induce Jackson to
enter into this License Agreement, that Argonaut is experienced in the
development production, manufacturing, marketing, and sale of products Similar
to Products (as later defined herein) and that it will commit itself to a
thorough, vigorous, and diligent program of exploiting the Patent so that
public utilization can result therefrom.
D. Jackson desires to grant to Argonaut the right to develop,
manufacture, and distribute Products (as defined below) using the Licensed
Patent (as defined below).
1. DEFINITIONS
a. "Licensed Patent" means U.S. Patent 4,911,555, Magnetic Stirrer For
Multiple Samples including all revisions, extensions, substitutions,
re-registrations, examinations, re-validations and patents of additions as well
as any foreign patents covering any claims described in the foregoing patent.
b. "Products" means any revenue producing product or part thereof which is
covered in whole or in part by an issued, unexpired claim of the Licensed
Patent, which is developed, manufactured, distributed or licensed by or through
Argonaut using the Licensed Patent, including that product specifically set
forth in Exhibit A.
c. "Field" means all organic and inorganic reaction specific applications.
d. "Revenue" means any funds or other consideration Argonaut actually
receives from the sale of the Products.
-1-
<PAGE> 2
e. "Year" shall mean each twelve (12) month period following the
Effective Date.
2. LICENSE GRANT.
a. Licensed Patent. Jackson hereby grants to Argonaut a worldwide
Field exclusive, sub-licensable, worldwide license, under the Licensed Patent,
to develop, manufacture, have manufactured, modify, use, market, service, sell
and otherwise distribute the Products. Jackson reserves the right to practice
under the Patent solely for its own research purposes.
b. Distributors. Argonaut may exercise its distribution rights
granted pursuant to Section 2 above through the use of third party
distributors, resellers, dealers and sales representatives (collectively,
"Distributors").
c. Products. Argonaut agrees that Products leased or sold in the United
States shall be manufactured substantially in the United States.
3. PATENT NOTICES.
Argonaut shall place appropriate patent markings on Products used,
sold or otherwise distributed hereunder during the term of this Agreement.
4. CONFIDENTIALITY.
Each party agrees that the terms and conditions of this Agreement
shall be treated as Confidential Information; provided that each party may
disclose the terms and conditions of this Agreement; (i) as required by any
court or other government body or as otherwise required by law; (ii) to legal
counsel, employees, and trustees; (iii) in confidence, to accountants, banks,
and financing sources and their advisors; (iv) in confidence, in connection
with the enforcement of this Agreement or rights under this Agreement.
5. INDEMNIFICATION AND INTELLECTUAL PROPERTY
a. By Jackson. Jackson shall at Argonaut's request, notify Argonaut
of all countries in which it is seeking patents covering the Products. Jackson
shall promptly after discovery notify Argonaut of any material infringement of
which it becomes aware related to any patents covering the Products. Jackson
shall have the right to bring, defend, and maintain any appropriate suit, action
or proceeding involving any such infringement at Jackson's expense. In the event
that Jackson fails to take any such action in a reasonable time, Jackson shall
give Argonaut all authority, information and assistance necessary to pursue,
defend or settle any such suit, action or proceeding and Argonaut shall pay the
expenses (including attorneys' fees) incurred in connection with any such suit,
action or proceeding. In the event that Argonaut lack standing to bring any such
suit, action or proceeding, then Argonaut may, for such purposes, use the name
of Jackson as a party plaintiff
-2-
<PAGE> 3
provided that no settlement, consent judgment, or other voluntary final
disposition of the suit may be entered into without the consent of Jackson,
which consent shall not unreasonably be withheld. Any amounts recovered in any
suit, action or proceeding under this Section 5(a) by either party, whether by
judgment or settlement (including, but not limited to, any royalties or other
consideration received pursuant to any sublicenses or other arrangements
entered into as part of settlement), shall be retained by that party.
b. By Argonaut. Argonaut shall indemnify, hold harmless and, at
Jackson's request, defend Jackson from and against any and all claims,
liabilities and expenses (including reasonable fees of attorneys and other
professionals) arising out of or in connection with Argonaut's use,
manufacture, sale, lease, distribution, or advertisement of the Products,
provided Jackson promptly notifies Argonaut of any such claim and permits
Argonaut to control the defense and settlement thereof.
6. LIMITATION OF LIABILITY
In no event shall either party be liable to the other party for any
special, incidental or consequential damages arising out of this Agreement,
the use of the Licensed Patent or distribution of Products by Argonaut or any
third party, whether under theory of contract, tort (including negligence),
indemnity, product liability or otherwise. Notwithstanding the foregoing, this
Section 6 shall not apply to Section 5(b) of this Agreement.
7. FIELD EXCLUSIVITY.
Unless otherwise agreed in writing, Jackson shall only allow Argonaut
Field exclusive distribution rights for Products.
8. TECHNOLOGY LICENSE FEE.
a. Royalty. Unless otherwise agreed in writing, Argonaut agrees to
pay Jackson a per unit royalty for each of the Products.
b. Royalty Amount. Unless otherwise agreed in writing, the per unit
Royalty Amount will be set separately for each instrument as defined as
Products, as specifically set forth in Exhibit A.
c. Payment. Unless otherwise agreed in writing, Payment shall
include all Royalty Amounts for Products distributed in Argonaut's previous
quarter. The Payment will be made in USD to Jackson quarterly. The Payment
shall be made to Jackson sixty (60) days from the end of Argonaut's fiscal
quarter and shall include all Payments for Products distributed the previous
fiscal quarter.
9. TERM AND TERMINATION.
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<PAGE> 4
a. Term.
(i) This Agreement shall continue in full force and effect until
the expiration of the Patent, unless earlier terminated as provided in Section
9(b).
(ii) At the end of the Term, Argonaut retains all rights granted
hereunder. However, all obligations to pay the Royalty and Payments discontinue.
b. Termination.
This Agreement will terminate automatically without notice, (i) upon
the institution by or against Argonaut of insolvency, receivership or
bankruptcy proceedings or any other proceedings for the settlement of
Argonaut's debts, (ii) upon Argonaut's making an assignment for the benefit of
creditors, or (iii) in the event of Argonaut's dissolution or insolvency. This
Agreement will also terminate should Argonaut fail to make any payment due and
payable to Jackson hereunder, or upon any material breach or default of this
Agreement by Argonaut, upon thirty (30) days notice. Upon the expiration of the
thirty (30) day period, if Argonaut shall not have made such payments or cured
any such material breach, the rights, privileges, and license granted hereunder
shall automatically terminate.
c. Survival. The parties' rights and obligations under Sections 1,
3, 4, 5, 6, 9(c) and 10 shall survive any termination of this Agreement.
d. No Waiver. The failure of either party to enforce any provision
of this Agreement shall not be deemed a waiver of such provision.
10. MISCELLANEOUS PROVISIONS.
a. Assignment. Neither party may transfer or assign its rights or
obligations under this Agreement without the prior written consent of the other
party. Subject to the foregoing sentence, this Agreement will be binding upon
and inure to the benefit of the parties hereto, their successors and assigns.
Successors of Argonaut shall include any party which acquires Argonaut or into
which Argonaut merges.
b. No Implied Waivers. The failure of either party at any time to
require performance by the other of any provision hereof shall not affect the
right of such party to require performance at any time thereafter, nor shall the
waiver of either party of a breach of any provision hereof be taken or held to
be a waiver of a provision itself.
c. Severability. If any provision of this Agreement is held to be
invalid by a court of competent jurisdiction, then the remaining provisions
will nevertheless remain in full force and effect. The parties agree to
renegotiate in
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<PAGE> 5
good faith those provisions so held to be invalid to be valid, enforceable
provisions which provisions shall reflect as closely as possible the original
intent of the parties, and further agree to be bound by the mutually agreed
substitute provision.
d. Force Majeure. Except for payment of monies, neither party shall
be liable for failure to fulfill its obligations under this Agreement,
including, but not limited to, acts of God, manmade or natural disasters,
earthquakes, fire, riots, flood, material shortages, strikes, delays in
transportation or inability to obtain labor or materials through its regular
sources. The time for performance of any such obligations shall be extended for
the time period lost by reason of the delay.
e. Conflicting Terms. The parties agree that the terms and
conditions of this Agreement shall prevail, notwithstanding contrary or
additional terms, in any purchase order, sales acknowledgement, confirmation or
any other document issued by either party effecting the purchase and/or sale of
Products, unless the parties agree otherwise in writing.
f. Headings. Headings of paragraphs herein are inserted for
convenience of reference only and shall not affect the construction or
interpretation of this Agreement.
g. Notice. Any notice required or permitted to be given under this
Agreement shall be delivered (i) by hand, (ii) by registered or certified mail,
postage prepaid, return receipt requested, to the address of the other party
first set forth above, or to such other address as a party may designate by
written notice in accordance with this Section 10(g), (iii) by overnight
courier, or (iv) by fax with confirming letter mailed under the conditions
described in (ii) above. Notice so given shall be deemed effective when
received, or if not received by reason of fault of addressee, when delivered.
h. Entire Agreement. This Agreement contains the entire understanding
of the parties with respect to the subject matter hereof and supersedes all
prior agreements relating thereto, written or oral, between the parties.
Amendments to this Agreement must be in writing, signed by the duly authorized
officers of the parties. The terms of any purchase order are expressly excluded.
i. Governing Law. This Agreement shall be governed by and construed
under the law of the State of Maine, without regard to conflict of laws
principles or the U.N. Convention on Contracts for the International Sale of
Goods.
j. Arbitration. Any dispute or claim arising out of or in relation to
this Agreement, or the interpretation, making, performance, breach or
termination thereof, shall be finally settled by binding arbitration under the
Rules of
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<PAGE> 6
conciliation and Arbitration of the International Chamber of Commerce as
presently in force ("Rules") and by three (3) arbitrators appointed in
accordance with said Rules. Judgment on the award rendered may be entered in any
court having jurisdiction thereof. The place of arbitration shall be Hancock
County, Maine, U.S.A. The parties may apply to any court of competent
jurisdiction for temporary or permanent injunctive relief, without breach of
this Section 10(j) and without any abridgment of the powers of the arbitrators.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
effective as of the Effective Date.
THE JACKSON LABORATORY ARGONAUT TECHNOLOGIES, INC.
By: /s/ KENNETH PAIGEN By: /s/ JAN K. HUGHES
------------------ -------------------------------------
Name: Kenneth Paigen Name: Jan K. Hughes
Title: Director Title: Vice President Product Development
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<PAGE> 7
EXHIBIT A
PRODUCTS AND DOCUMENTATION
Products:
A. ENTRY LEVEL PARALLEL REACTOR SYSTEM
1) Manual Parallel Organic and Inorganic Reactor System
- Number of Reactors <24
- Rotary Stir Magnet Mixing
- Heating
- Cooling
- Inert Reaction Environment
- Approximate Average Unit Revenue: USD 2,500.00
Royalty Amounts:
A. ENTRY LEVEL PARALLEL REACTOR SYSTEM: USD 100.00 PER UNIT
-7-
<PAGE> 1
EXHIBIT 10.23
LICENSE AGREEMENT
THIS AGREEMENT, effective as of the first day of June, 1997, by and between
ARGONAUT TECHNOLOGIES, INC., a corporation of Delaware, having a place of
business at 887 INDUSTRIAL ROAD, SUITE G, SAN CARLOS, CA 94070 (hereinafter
"LICENSEE"), and Rohm and Haas Company, a corporation of the State of Delaware,
having a principal place of business at 100 Independence Mall West,
Philadelphia, Pennsylvania 19106 (hereinafter "LICENSOR").
WITNESSETH:
WHEREAS, LICENSOR is the owner of the U.S. Patents set forth in Schedule A
appended to this Agreement relating to porous or macroreticular adsorbents and
ion exchange resins which have found use in the FIELD;
WHEREAS, LICENSEE wishes to obtain and LICENSOR is willing to grant
a non-exclusive, royalty-bearing license under these patents.
NOW, THEREFORE, the parties intending to be legally bound agree as follows:
ARTICLE 1 - DEFINITIONS
1.01 "PATENT RIGHTS" shall mean the U.S. patents listed in Schedule A
appended to this Agreement, or as later amended by written agreement of the
parties.
1.02 "VALID CLAIM" shall mean a claim in any unexpired, issued patent of
the PATENT RIGHTS which has not been disclaimed, forfeited or held invalid or
unenforceable by a decision beyond the right of review.
1.03 "RESIN" shall mean polymers covered by any VALID CLAIM or produced by
a process covered by any VALID CLAIM of the patents in Schedule A or produced by
a process covered by one or more of such claims and suitable for conversion to
PRODUCTS (as defined hereinafter).
1.04 "PRODUCTS" shall mean RESIN (a) made and sold by LICENSEE after
incorporation of an active ingredient, or (b) made for Licensee under a legally
executed toll production agreement, wherein the
<PAGE> 2
RESIN may or may not incorporate an active ingredient, and subsequently used
or sold by LICENSEE to an END USER (as defined hereinafter).
1.05 "FIELD" shall mean manual and automated synthesis of chemical
compounds excluding synthesis of industrial chemicals catalyzed by typical ion
exchange resins.
1.06 "AFFILIATE" shall mean any entity in which at least forty-nine
percent (49%) of the stock normally entitled to vote for the election of
directors is directly or indirectly owned or controlled by LICENSEE.
1.07 "GROSS PURCHASES" shall mean (a) the total cost of manufacture of
RESIN (not including addition of the active ingredient) including all raw
materials, intermediates, equipment amortization and labor costs, or (b) the
actual gross amounts of the invoices (less shipping costs, if any) covering all
of LICENSEE's PURCHASES of RESIN, including the value of any materials,
technology or know-how provided by the LICENSEE to any third party engaged in
the manufacture of RESIN for the LICENSEE, its customers or AFFILIATES.
PURCHASES are deemed to include RESIN provided for both internal use and resale,
after addition of active ingredient.
1.08 "END-USER" shall mean any customer of LICENSEE which is not an
AFFILIATE or an INTERMEDIARY.
ARTICLE 2 - GRANT
LICENSOR hereby grants to LICENSEE, and LICENSEE hereby accepts, subject
to the terms and conditions set forth in this Agreement, a non-exclusive
license under the PATENT RIGHTS to make or have made and use RESINS and sell
PRODUCTS, based on said RESINS in the FIELD.
ARTICLE 3 - MARKING
LICENSEE shall mark labels, products literature, or packages for the
PRODUCTS with the following legend:
"This product contains RESIN manufactured under one or more of the U.S.
Patent 4,297,220 and 4,382,124."
-2-
<PAGE> 3
ARTICLE 4 - PAYMENTS AND REPORTS
4.01 For the rights granted under this Agreement, LICENSEE shall pay to
LICENSOR an initial sum of One Thousand Dollars ($1000), payable upon signing
of this Agreement, and royalties calculated as follows:
(a) ten percent (10%) of GROSS PURCHASES of packed bottles of RESIN
purchased by LICENSEE when RESIN is used to make PRODUCT for sale to
END USERS,
(b) fourteen percent (14%) of GROSS PURCHASES of bulk RESIN purchased by
LICENSEE when RESIN is used to make PRODUCT for sale to END USERS, and
(c) seven and one-half percent (7.5%) of GROSS PURCHASES of RESIN when
RESIN is used to make PRODUCT for internal use.
4.02 LICENSEE shall make written confidential reports to LICENSOR within
sixty (60) days after the end of each calendar quarter during the term of this
Agreement. Each report shall state the total volume and GROSS PURCHASES of
RESIN (a) purchased from toll manufacturers and (b) produced internally for
each category listed in 4.01. The royalty for all PRODUCTS purchased during each
calendar quarter shall be due and payable with the report for that quarter. Any
late payment of the royalty shall bear interest at the rate of one-and-one-half
percent (1 1/2%) per month.
4.03 All payments and reports shall be sent to the following address:
ROHM AND HAAS COMPANY
ATTN: Corporate Licensing
P.O. Box 8500 S-1150
Philadelphia, PA 19178
4.04 LICENSEE shall maintain sufficiently detailed books and records for
the PRODUCTS sold or used by LICENSEE and AFFILIATES to enable LICENSOR to
verify the payments made to LICENSOR by LICENSEE. LICENSEE shall permit an
accountant, appointed by LICENSOR and reasonably acceptable to LICENSEE, to
inspect, at reasonable times and upon reasonable notice, but not to exceed once
per year, the books and records of LICENSEE relating to the sale of the
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<PAGE> 4
PRODUCTS for use in the FIELD. The accountant shall report to LICENSOR only
whether the amounts reported and paid to LICENSOR by LICENSEE are accurate. In
no event, however, shall an examination of LICENSEE's books be made for a period
prior to three (3) years before the date such audit is requested by LICENSOR. In
the event the accountant reports to LICENSOR that LICENSEE has underpaid the
amounts due to LICENSOR by more than ten percent (10%), LICENSEE shall bear the
cost of the audit.
4.05 LICENSEE shall have no obligation to pay royalties under this
Agreement on PRODUCTS which LICENSEE has purchased from another licensee who has
already paid royalties on such PRODUCTS to LICENSOR under the PATENT RIGHTS,
provided that the rights granted to LICENSEE with the purchase of such PRODUCTS
shall not exceed those which the other licensee is entitled to extend to its
customers.
ARTICLE 5 - TERM AND TERMINATION
5.01 This Agreement shall remain in effect until the expiration of the
last patent to expire under the PATENT RIGHTS, unless terminated earlier as
provided in this Agreement.
5.02 LICENSEE may terminate this Agreement and the licenses granted under
this Agreement by giving LICENSOR three (3) months prior written notice of
LICENSEE's intention to terminate.
5.03 LICENSOR, at its discretion, may terminate this Agreement for one of
the following reasons by giving notice to LICENSEE.
(1) If there is a sale, loss, transfer, or other disposition by LICENSEE of
or execution or other legal process levied upon or enforced against all
or a substantial portion of the assets of LICENSEE, or an action or
proceeding is commenced by or against LICENSEE under any bankruptcy act
or under any present or future law for the relief of debtors, or a
receiver or trustee is appointed for LICENSEE or LICENSEE's assets, or
an action or proceeding is commenced to dissolve LICENSEE, or LICENSEE
makes an assignment for the benefit of creditors or ceases to carry on
business for any reason; or
(2) If LICENSEE fails to perform or observe any agreement, provision, duty
or obligation under this Agreement, such as the
-4-
<PAGE> 5
timely reporting and payment of royalties, and does not remedy the
failure within thirty (30) days after receipt of notice from LICENSOR,
provided, however, that repeated failures by LICENSEE shall constitute
and independent basis for LICENSOR to terminate this Agreement.
5.04 The termination of this Agreement shall not prejudice any rights or
remedies which shall have accrued to either party prior to the date of such
termination.
ARTICLE 6 - ASSIGNMENT
LICENSEE may assign this Agreement to an entity that acquires all of the
LICENSEE's business or assets to which this Agreement pertains, whether by
merger, reorganization, acquisition, sale or otherwise. This Agreement shall be
binding upon and inure to the benefits of the successors and permitted assigns
of the parties.
ARTICLE 7 - NOTICES
Any notice required or provided for by the terms of this Agreement shall be
in writing. All notices shall be sent by first class mail, postage prepaid, to
the business address of the party to be given notice. The business addresses of
the parties shall be as follows:
ROHM AND HAAS COMPANY
100 Independence Mall West
Philadelphia, PA 19106
Attn: Director of Licensing
Either party may change its business address by notice to the other party.
ARTICLE 8 - MISCELLANEOUS
8.01 This Agreement shall be construed and the legal relations between the
parties determined in accordance with the laws of the Commonwealth of
Pennsylvania.
8.02 Neither party shall be deemed to have waived any of its rights under
this Agreement by failure to take any action to enforce any of its rights at any
particular time.
8.03 This Agreement is the entire agreement between the parties and there
are no other terms, obligations, covenants, representations,
-5-
<PAGE> 6
statements or conditions, oral or otherwise, of any kind. This Agreement may not
be changed, modified, or amended in whole or in part except by a written
document signed by the duly-authorized officers of the parties.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
in duplicate to be effective as of 27 June, 1997.
ROHM AND HAAS COMPANY
By: /s/ PAUL VAN EIKEREW By: /s/ PAUL BADUINI
---------------------------- -----------------
Name: Paul Van Eikerew Name: Paul Baduini
-------------------------- ---------------
Title: Vice President, Chemistry Title: Vice-President
------------------------- --------------
Date: 27 June 1997 Date: July 24, 1997
-------------------------- ---------------
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<PAGE> 7
SCHEDULE A
<TABLE>
<CAPTION>
Patent No. Title Expiration Date
- ---------- ----- ---------------
<S> <C> <C>
U.S. 4,297,220 Macroreticulated Copolymer October 26, 1998
Adsorption Process
U.S. 4,382,124 Process for Preparing May 2, 2000
Macroreticular Resins
Copolymers and Products
of said Process
</TABLE>
<PAGE> 1
Exhibit 10.24
LICENSE AND SUPPLY AGREEMENT
This LICENSE AND SUPPLY AGREEMENT (this "Agreement"), effective as of
August 6, 1999(the "Effective Date"), is by and between Symyx Technologies,
Inc., a Delaware corporation with offices at 3100 Central Expressway, Santa
Clara, California 95051 ("Symyx"), and Argonaut Technologies, Inc., a Delaware
corporation with offices at 887 Industrial Rd., Ste. G, San Carlos, California
94070 ("Argonaut")(each, a "Party"; together, the "Parties").
BACKGROUND
A. Symyx is engaged in research and development activities in the field of
catalyst research, polymer research and the use of process/reaction
optimization chemistry reactors and screening tools, and has created equipment
and software for use in the discovery and optimization of catalysts, polymers,
electronic and other materials;
B. Symyx has acquired considerable experience and know-how with regard to
the Product (as hereinafter defined) and owns certain patent rights relating
thereto;
C. Argonaut has expertise in the development, manufacture and distribution
of instrumentation and consumables;
D. Symyx is willing to provide Argonaut with a licence under the Patent
Rights and Know-How (as hereinafter defined) in order that Argonaut may develop,
produce, market and sell the Products, and Argonaut wishes to acquire such a
license, on the terms and conditions herein; and
E. Argonaut desires to supply Symyx with certain requirements of Product,
and Symyx desires to purchase such Product from Argonaut.
NOW, THEREFORE, in consideration of the foregoing and mutual promises and
covenants contained herein, the parties agree as follows:
1. CONSTRUCTION AND DEFINITIONS
1.1 Construction.
(a) All references in this Agreement to "Articles," "Sections"
and "Exhibits" refer to the articles, sections and exhibits of this Agreement.
(b) As used in this Agreement, neutral pronouns and any
variations thereof include the feminine and masculine and all terms used in the
singular include the plural, and vice versa, as the context may require.
(c) The words "hereof," "herein" and "hereunder" and other words
of similar
1
<PAGE> 2
import refer to this Agreement as a whole, as the same may from time to time be
amended or supplemented, and not to any subdivision contained in this Agreement.
(d) The word "including" when used herein is not intended to be
exclusive and means "including, without limitation."
1.2 Definitions. As used herein:
(a) "Accessories" means items that are (i) sold for Two Thousand
Five Hundred Dollars ($2,500) or more; (ii) not Consumables; and (iii) provide
enhanced functionality to the Device, but are not required to operate the
Device.
(b) "Affiliate" means, with respect to a Party hereto, a
corporation, company or other entity that is owned and controlled by such Party
by virtue of such Party's direct or indirect ownership or control of more than
fifty percent (50%) of the outstanding shares or securities (representing the
right to vote for the election of directors or other managing authority) of such
corporation, company or other entity, but such corporation, company or other
entity shall be deemed to be an Affiliate only so long as such ownership or
control exists.
(c) "Confidential Information" means any information: (i)
disclosed by one Party (the "Disclosing Party") to the other (the "Receiving
Party"), which, if in written, graphic, machine-readable or other tangible form
is marked as "Confidential" or "Proprietary", or which, if disclosed orally or
by demonstration, is identified at the time of initial disclosure as
confidential and reduced to writing and marked "Confidential" within thirty (30)
days of such disclosure; or (ii) which is otherwise deemed to be confidential
by the terms of this Agreement.
(d) "Cost of Goods" means the sum of materials, labor, overhead,
warranty reserve and installation reserve.
(e) "Consumables" means those items that are consumed or
commonly replaced as a result of the routine operation of the Device (e.g.,
stir paddles, glass inserts and O-Rings).
(f) "Device" means an eight (8) cell parallel pressure reactor
that conforms to the Specifications.
(g) "Gross Margin" means Net Sales minus Cost of Goods.
(h) "Know-How" means certain component drawings, data sheets,
cost estimates, assembly criteria, test data and prototypes and other
information which are owned, controlled or licensable by Symyx and are
reasonably necessary for the development, testing, use, manufacture or sale of
Products. Know-How does not include any inventions included in the Patent.
(i) "Improvements" means any and all improvements, additions,
enhancements, changes or modifications to the Product or any component thereof
which Argonaut, (whether by invention, assignment, license or otherwise)
develops, conceives, reduces to practice or
2
<PAGE> 3
otherwise develops during the term of the Agreement, and all intellectual
property rights relating thereto, including any patent applications and patents
worldwide.
(j) "Net Sales" means that the gross revenues actually received
by Argonaut or its Affiliates from sales of Products to bona fide independent
third parties or sublicensee less sales, use and excise taxes and less returns,
insurance and shipping charges included in those revenues. If Argonaut or its
Affiliates should offer a discount to a third party on an order that includes
the Device and other Argonaut products, the discount shall be applied evenly to
the entire order. All sales of Products between Argonaut and any of its
Affiliates shall be disregarded for purposes of computing Net Sales.
(k) "Patent Rights" means (i) all US patent applications
claiming inventions that are infringed by the manufacture, use or sale
of the Products, including without limitation, those set forth on Exhibit D,
(ii) all divisions, substitutions, continuations, continuations-in-part
applications and re-issues, re-examinations and extensions of (i) above,
(iii) any foreign counterparts of any of the preceding, and (iv) any patents
issuing on any of the preceding.
(l) "Product" means: (i) Devices; (ii) Accessories; and (iii)
Consumables, each as more fully described on Exhibit B attached hereto.
(m) "Specification" means the specification for the Product set
forth in Exhibit B, as may be amended by written agreement of the Parties.
(n) "Sublicensee" means any third party to whom Argonaut has
granted the right to distribute the Product.
(o) "Term" has the meaning given to it pursuant to Section 11.1.
(p) "Territory" means all countries in the world.
(q) "Trademark" has the meaning given to it in Section 5.5.
2. LICENSE
2.1 Licenses to Argonaut.
(a) Patent Rights and Know-How.
(i) Subject to the terms and conditions of this Agreement,
Symyx hereby grants Argonaut an exclusive (except as provided in this Section
2.1), non-transferable, worldwide, royalty-bearing, revocable, non-sublicensable
license during the Term, under the Patent Rights and Know-How, solely to make,
use, sell, offer for sale, import and export Products in the Territory.
(ii) Notwithstanding Section 2.1(a)(i), above, nothing in
this Agreement shall restrict or prevent Symyx from making, having made, or
using Products or any of the components thereof for internal use by Symyx for
itself or on behalf of third parties.
3
<PAGE> 4
(b) Trademark. Subject to the terms and conditions of this
Agreement, including those set forth in Section 5.5. Symyx hereby grants
Argonaut a non-exclusive, non-transferable, worldwide, royalty-bearing,
revocable, non-sublicensable license, under the Trademarks, solely to reproduce
the Trademarks for use in connection with the marketing, sale and offer for sale
of Products in the Territory.
(c) All rights in the Patent Rights and Know-How not expressly
granted to Argonaut above are reserved to Symyx.
(d) Enforcement. Symyx shall have the first opportunity in its
sole discretion and without obligation, for initiating contact with, providing
notice to, asserting claims or causes of action against, or initiating
proceedings or lawsuits against a third party known or suspected of infringing
or misappropriating the Patent Rights, Know-How or Trademarks. In the event that
either Party becomes aware of or suspects third-party activities that could
constitute an infringement or misappropriation of the Patent Rights, Know-How or
Trademarks, then such Party shall promptly notify the other Party of such
third-party activities, including identification of the third party and
delineation of the facts relating to such third-party activities. In the event
Symyx fails to take commercially appropriate steps with respect to an
infringement that is likely to have a material adverse effect on the sale of
Products within six (6) months following notice of such infringement, Argonaut
shall have the right to do so at its expense; provided that if Symyx has
commenced negotiations with an alleged infringer of the patent for
discontinuance of such infringement within such six-month period. Symyx shall
have an additional three (3) months to conclude its negotiations before Argonaut
may bring suit for such infringement. The party not enforcing the applicable
Patent Rights shall provide reasonable assistance to the other Party, including
providing access to relevant documents and other evidence and making its
employees available, subject to the enforcing Party's reimbursement of any
out-of-pocket expenses incurred by the non-enforcing Party. Any amounts
recovered by either Party pursuant to this subsection, whether by settlement or
judgement, shall be allocated in the following order: (i) to reimburse the
Parties for their reasonable out-of-pocket expenses in making such recovery
(which amounts shall be allocated pro rata if insufficient to cover the totality
of such expenses); and (ii) the remainder shall be retained by Argonaut, with
such remainder being deemed "Net Sales" of Products for which Argonaut shall pay
Symyx, a royalty under Section 6.1.
2.2 Delivery.
(a) Know-How. Following the Effective Date, Symyx shall deliver
to Argonaut one (1) copy of the documents embodying the Know-How.
(b) Disclaimer of Liability. THE KNOW-HOW PROVIDED HEREUNDER IS
PROVIDED "AS IS" AND SYMYX MAKES NO, AND HEREBY DISCLAIMS EACH AND EVERY,
WARRANTY WITH RESPECT TO THE KNOW-HOW, INCLUDING ANY AND ALL WARRANTIES OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND NON-INFRINGEMENT.
2.3 Restrictions on Material Improvements. All material Improvements
shall be reviewed and approved by the Joint Development Committee as outlined in
Exhibit A.
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2.4 License to Improvements and Rights to First Negotiation. Argonaut
hereby grants to Symyx a nonexclusive, worldwide, royalty-free, fully paid,
non-transferable, non-sublicensable license, under all improvements, to make,
and use any product and practice any process utilizing the Improvements for
internal purposes. If Argonaut wishes to grant a license to sell products under
the Improvements to a third party or Symyx wishes to receive such a license,
then following written notice of this fact Argonaut shall offer Symyx a ninety
(90) day period starting from the date of such notice to negotiate with
Argonaut for the right to enter into such an agreement with Argonaut on terms
and conditions approved by Argonaut in its sole discretion. Neither Party shall
have any liability to the other for any failure to reach any agreement;
provided, in the event the parties do not enter into such an agreement.
Argonaut shall not offer to enter into an agreement with any third party on
terms more favorable to such third party than those last offered to Symyx.
2.5 Improvement of Symyx. Any Symyx modification or improvement to
the Patent Rights or Know-How licensed to Argonaut made before termination of
this Agreement shall be included in the license without additional charge to
Argonaut. The parties agree to promptly disclose modifications and improvements.
2.6 Right of First Negotiation. If Symyx wishes to enter into a
distribution agreement with a third party for the distribution of new equipment
incorporating the Know-How or Patent Rights used in the Device, then Symyx shall
notify Argonaut of this fact before it notifies any other third party and offer
Argonaut a ninety (90) day period starting from the date of such notice to
negotiate with Symyx for the right to enter into such an agreement with Symyx on
terms and conditions approved by Symyx in its sole discretion. Neither Party
shall have any liability to the other for any failure to reach any agreement;
provided, in the event the parties do not enter into such an agreement, Symyx
shall not offer to enter into a distribution agreement with any third party on
terms more favorable to such third party than those last offered to Argonaut.
3. OWNERSHIP
3.1 Patent Rights, Know-How & Trademarks. Argonaut acknowledges that,
as between the Parties, Symyx owns all right, title and interest in and to the
Specifications, Patent Rights, Know-How and Trademarks.
3.2 Improvements. Symyx acknowledges that, as between the Parties,
Argonaut owns all right, title and interest in and to the Improvements.
4. PRODUCT DEVELOPMENT
4.1 Efforts. Argonaut shall use reasonable efforts to develop the
Product in accordance with the Product Development Plan established by the Joint
Development Committee pursuant to Section 4.2 and the time schedules
contemplated therein. Except as otherwise expressly agreed in writing,
Argonaut shall bear its own costs incurred in connection with the development of
the Product.
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4.2 Joint Development Committee ("JDC"). The parties shall establish a
joint development committee which shall be responsible for reviewing the Product
Development Plan. The JDC shall prepare an initial Product Development Plan by
September 17, 1999.
4.3 Delivery and Testing. Argonaut will deliver to Symyx one (1) unit
of the Product by the date set forth in the Product Development Plan, as
determined by the JDC in writing (the "Prototype"). Following the receipt of the
Prototype, Symyx shall evaluate the Prototype for conformity with the
Specifications as set forth in Product Development Plan. Within (20) business
days after the receipt of the Prototype, Symyx shall provide Argonaut with a
written evaluation of the Prototype.
4.4 Product Specifications and Schedule. The JDC will define the Final
Specifications and Development Schedule as part of the Product Development Plan.
Symyx may terminate the Agreement based on non-conformity of the Prototype of
either the Final Specifications or Development Schedule as set forth in the
Product Development Plan.
5. SALES
5.1 Purchase and Sale to Symyx. Argonaut shall manufacture and sell to
Symyx Products for Symyx's internal research purposes (including research on
behalf of third parties) at a cost of Six Thousand Dollars ($6,000.00) per
Product plus Cost of Goods. All such sales shall be pursuant to Argonaut's
standard terms and conditions of sales as set forth in Exhibit E.
5.2 Payment for Product Purchases. Symyx shall pay each invoice for
Products purchased by Symyx within sixty (60) days of the date of such invoice
or the delivery date, whichever is later. All payments due hereunder shall be
made by check or by wire transfer to an account specified by the receiving
party.
5.3 Overdue Payments. Any payments due hereunder which are not paid
within five (5) days of the date such payments are due in accordance with
Section 5.2 shall bear interest at the lesser of one and one-half percent (1.5%)
per month or the maximum rate permitted by law, calculated on the number of days
such payment is delinquent. This Section 5.3 shall in no way limit any other
remedies available to either party.
5.4 Marketing Efforts to Third Parties.
(a) Performance. Argonaut shall use its commercially reasonable
efforts to maximize Product sales in the Territory. For purposes of this Section
5.4, "reasonable efforts" shall mean at least those efforts made by Argonaut
with respect to its own internally developed products, including those mutually
agreeable equivalent, distribution marketing activities and resources set forth
in Exhibit C.
(b) Training. Argonaut, its Affiliates and Sublicensees shall
maintain knowledgeable sales and marketing personnel to provide instructions to
customers in the use of the Products.
(c) Service and Support. Argonaut, its Affiliates and Sublicensees
shall be
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solely responsible for all support and service with respect to the Product and
shall at all times during the Term maintain an adequate number of trained
service technicians to assist its customers with respect to use and maintenance
of the Product.
(d) Advertising and Promotions. Argonaut shall be responsible for
all Product marketing commitments and procedures but upon launch of commercial
sale of the Product, or earlier upon mutual agreement of the Parties. Argonaut
and Symyx shall issue a joint press release regarding the Product and the
Parties' relationship. Argonaut shall list the Products in its catalogs and make
such Products available to its customers. Argonaut shall engage actively in
advertising and promotion of the Products which may take the form of, but shall
not be limited to, magazine advertising, direct mail promotion, trade show
displays, educational seminars and other activities related to promoting
Products and shall present the Product at scientific and commercial conferences
as more fully described in Exhibit C.
(e) Use of Symyx Name and Logo. In furtherance of Argonaut's
marketing obligations hereunder, Symyx grants to Argonaut, during the term of
this Agreement, the non-exclusive, non-transferable, limited right to use
Symyx's name and logo (the "Logo") in connection with marketing and sales of the
Product; provided, however, Argonaut shall comply with Symyx's guidelines for
use of the Logo in every use of the Logo on any product advertising or other
marketing material, or, if any such proposed use does not comply with such
guidelines, Argonaut shall, prior to using the Logo, obtain Symyx's written
consent, which consent Symyx may withhold in its sole discretion. The Logos and
all good will associated therewith, including any intellectual property rights
therein, are the exclusive property of Symyx and all use thereof by Argonaut
shall inure exclusively to the benefit of Symyx. In all events, Symyx may at any
time terminate the right granted in this Section 5.4(e) in its sole discretion.
(f) Net Sales Reports. If requested by Symyx, Argonaut shall
provide to Symyx monthly, Net Sales reports (to be delivered to Symyx no later
than the fifteen (15) days following the end of such month in which the report
is due) setting forth Argonaut's sales of the Devices, Accessories and
Consumables.
(g) Business Obligations. Any and all obligations associated with
Argonaut's business shall remain the sole responsibility of Argonaut. Any and
all sales and other agreements between Argonaut and its customers are and shall
remain Argonaut's exclusive responsibility and shall have no effect on
Argonaut's obligations pursuant to this Agreement.
(h) Foreign Corrupt Practices Act. Argonaut shall comply with the
United States Foreign Corrupt Practices Act.
5.5 Trademarks. Argonaut shall select the trademarks, trade names and
trade dresses to be used in connection with the Product, subject to Symyx's
prior approval, such approval not to be unreasonably withheld. All such
trademarks, trade names and trade dresses (the "Trademarks") and all good will
associated therewith shall be and become the exclusive property of Symyx. Symyx
shall bear the reasonable costs of registering and maintaining the Trademarks,
using counsel reasonably acceptable to Symyx. Argonaut shall not adopt any
Trademarks, or other trademark, trade name or trade dress that may be
confusingly similar with the Trademarks.
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Argonaut shall mark all Products with the Trademarks. Except as set forth in
Section 2.1(b), Argonaut shall acquire no interest or rights in and to any
Trademarks. Argonaut shall not remove, modify or obscure any Trademarks
incorporated in, marked on, or fixed to the Product.
6. ROYALTIES TO SYMYX
6.1 Running Royalties. In consideration of the licenses and other
rights granted herein, Argonaut shall pay to Symyx royalties in an amount set
equal to (i) twenty percent (20%) of Net Sales for each Device and Accessory
sold by Argonaut and (ii) fifty percent (50%) of the Gross Margin earned on all
Consumables sold by Argonaut. Amounts paid by Symyx to Argonaut for the
purchase of any products hereunder shall not be included in Net Sales. Royalties
on sales by Argonaut or its Affiliates to Argonaut's sublicensees shall be
calculated using Argonaut's international list price.
6.2 Royalty Reports. Argonaut shall deliver to Symyx, within fifteen
(15) days after the end of each calendar month during which any Product is sold,
a report setting forth in reasonable detail the calculation of the royalties
payable to Symyx for such calendar quarter, including the Product sold, the Net
Sales thereof.
6.3 Royalty Payments. All royalties earned for the relevant month due
pursuant to Section 6.1 shall be paid to Symyx due Net (sixty) 60 days after the
end of the relevant month.
6.4 Overdue Payments. Any payments due hereunder which are not paid
within five (5) days of the date such payments are due in accordance with
Section 6.3 shall bear interest at the lesser of one and one-half percent (1.5%)
per month or the maximum rate permitted by law, calculated on the number of days
such payment is delinquent. This Section 6.4 shall in no way limit any other
remedies available to either party.
6.5 Books and Records. Argonaut shall maintain accurate books and
records which enable the calculation of royalties payable hereunder to be
verified. Argonaut shall retain the books and records for each calendar month
for one (1) year after the submission of the corresponding report under Section
6.2 hereof. Upon prior notice to Argonaut, independent accountants selected by
Symyx, reasonably acceptable to Argonaut, after entering into a confidentiality
agreement with Argonaut, may have access to Argonaut's books and records during
Argonaut's normal business hours at mutually agreed times to conduct a review or
audit once per calendar quarter, for the purpose of verifying the accuracy of
Argonaut's payments and compliance with this Agreement. Any such inspection or
audit shall be at Symyx's expense, however, in the event an inspection reveals
underpayment of ten percent (10%) or more in any audit period, Argonaut shall
pay the costs of the inspection. Argonaut shall promptly pay to Symyx any
underpayment identified in such an audit which amount is undisputed by Argonaut,
with interest from the date such amount(s) were due at an annual percentage rate
of fifteen percent (15%).
6.6 Possible Readjustment of Royalty. In the event Argonaut reasonably
determines that it is commercially impracticable to sell Products anywhere in
the Territory because, for example and without limitation: (i) Argonaut's
operating profit margins on Products are lower than expected, (ii) the number of
Products sold per year is lower than expected, (iii) a material investment is
needed
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to provide a competitive and successful Device, (iv) Argonaut desires to lower
prices to increase market penetration, (v) no patent licensed hereunder with
claims covering the Products has issued, or (vi) payments in royalties, license
fees, or otherwise for third party technology are excessive, then Argonaut will
notify Symyx and the parties agree to discuss for a period not to exceed thirty
(30) days the possibility of adjusting the royalty rates for Products. It is
understood that neither party is obligated to accept or agree to terms of such
royalty readjustment.
7. PRODUCT QUALITY
7.1 Quality Assurance. Argonaut agrees to assure the quality level of
Product through the use of Argonaut's standard quality assurance program
currently maintained for Argonaut's other commercially manufactured products.
During the term of the Agreement, Symyx shall have the right to audit such
quality assurance program, at its expense, during regular business hours.
7.2 Presence at Facility. During the first six (6) months during which
each Product is commercially manufactured for Symyx and thereafter upon
reasonable written notice to Argonaut, Symyx shall have the right to have its
representatives visit, from time to time, each facility at which such Product is
being manufactured, to verify Argonaut's compliance with the Quality Assurance
program outlined in Section 7.1.
8. CONFIDENTIALITY
8.1 Confidential Information and Exclusions. Notwithstanding Section
1.2(c), Confidential Information shall exclude information that the Receiving
Party can demonstrate: (i) was independently developed by the Receiving Party
without any use of the Disclosing Party's Confidential Information or by the
Receiving Party's employees or other agents (or independent contractors hired by
the Receiving Party) who have not been exposed to the Disclosing Party's
Confidential Information; (ii) becomes known to the Receiving Party, without
restriction, from a source other than the Disclosing Party without breach of
this Agreement and that had a right to disclose it; (iii) was in the public
domain at the time it was disclosed or becomes in the public domain through no
act or omission of the Receiving Party; or (iv) was rightfully known to the
Receiving Party, without restriction, at the time of disclosure.
8.2 Confidentiality Obligations. The Receiving Party shall treat as
confidential all of the Disclosing Party's Confidential Information and shall
not use such Confidential Information except as expressly permitted under this
Agreement. Without limiting the foregoing, the Receiving Party shall use at
least the same degree of care which it uses to prevent the disclosure of its
own confidential information of like importance, but in no event with less than
reasonable care, to prevent the disclosure of the Disclosing Party's
Confidential Information.
8.3 Confidentiality of Agreement. Each Party agrees that the terms and
conditions, but not the existence, of this Agreement shall be treated as the
other's Confidential Information and that no reference to the terms and
conditions of this Agreement or to activities pertaining thereto can be made in
any form of public or commercial advertising without the prior written consent
of the other Party; provided however, that each party may disclose the terms
and conditions of this
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Agreement: (i) as required by any court or other governmental body; (ii) as
otherwise required by law; (iii) to legal counsel of the parties; (iv) in
connection with the requirements of an initial public offering or securities
filing; (v) in confidence, to accountants, banks, and financing sources and
their advisors; (vi) in confidence, in connection with the enforcement of this
Agreement or rights under this Agreement; (vii) or in confidence, in connection
with a merger or acquisition or proposed merger or acquisition, or the like.
8.4 Compelled Disclosure. If a Receiving Party believes that it will
be compelled by a court or other authority to disclose Confidential Information
of the Disclosing Party, it shall give the Disclosing Party prompt notice so
that the Disclosing Party may take steps to oppose such disclosure.
8.5 Remedies. Unauthorized use by a Party of the other Party's
Confidential Information will diminish the value of such information.
Therefore, if a Party breaches any of its obligations with respect to
confidentiality or use of Confidential Information hereunder, the other Party
shall be entitled to seek equitable relief to protect its interest therein,
including but not limited to injunctive relief, as well as money damages.
9. INDEMNITY
9.1 Argonaut. Argonaut shall indemnify, defend and hold harmless Symyx
and its directors, officers and employees (each an "Indemnitee") from and
against any and all liabilities, damages, losses, costs or expenses (including
reasonable attorneys' and professional fees and other expenses of litigation
and/or arbitration) (a "Liability") resulting from a claim, suit or proceeding
brought against an Indemnitee, arising from or occurring as a result of (a)
Argonaut's material breach of any representation, warranty or covenant
contained in this Agreement; (b) the design, development, manufacture, sales or
other commercialization of the Products(s) except, in each case, any liability
as set forth in Section 9.2(c); (c) any action arising from or related to
Argonaut's negligence in the manufacture, storage, or handling of the
Product(s); and (d) any non-conformance with the Specifications, except in each
case, to the extent caused by the negligence or willful misconduct of Symyx.
9.2 Symyx. Symyx shall indemnify, defend and hold harmless Argonaut
and its directors, officers and employees (each an "indemnitee") from and
against any and all liabilities, damages, losses, costs or expenses (including
reasonable attorneys' and professional fees and other expenses of litigation
and/or arbitration) (a "Liability") resulting from a claim, suit or proceeding
brought against an Indemnitee, arising from or occurring as a result of (a)
Symyx's material breach of any representation, warranty or covenant contained
in this Agreement; (b) Symyx's use of the Products purchased hereunder; except,
in each case, to the extent caused by the negligence or willful misconduct of
Argonaut, or (c) a third party claim that the uses permitted hereunder of the
Specification or Know-How infringes any intellectual property rights of a third
party.
9.3 Procedure. In the event that any Indemnitee intends to claim
indemnification under this Article 11, it shall promptly notify the
indemnifying party in writing of such alleged Liability. The indemnifying party
shall have the sole right to control the defense and settlement thereof. The
Indemnitees shall cooperate with the indemnifying party and its legal
representatives in
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the investigation of any action, claim or liability covered by this Article 10.
The Indemnitee shall not, except at its own cost, voluntarily make any payment
or incur any expense with respect to any claim or suit without the prior
written consent of the indemnifying party, which the indemnifying party shall
not be required to give.
10. REPRESENTATIONS AND WARRANTIES
10.1 Symyx. Symyx represents and warrants on a continuing basis that
it: (i) has the right to enter this Agreement, is a corporation duly organized,
validly existing, and in good standing under the laws of the State of Delaware,
(ii) has the right to grant the rights hereunder, in the manner set forth in
this Agreement, (iii) has the power and authority to execute and deliver this
Agreement and to perform its obligations hereunder, (iv) has by all necessary
corporate action duly and validly authorized the execution and delivery of this
Agreement and the performance of its obligations hereunder, and (v) has not and
will not during the term of this Agreement enter into any agreement which
conflicts with or which will result in any breach of, or constitute a default
under this Agreement, any note, security agreement, commitment, contract or
other agreement, instrument or undertaking to which Symyx is a party.
10.2 Argonaut. Argonaut represents and warrants on a continuing basis
that it: (i) has the right to enter this Agreement, is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, (ii) has the power and authority, to execute and deliver this
Agreement and to perform its obligations hereunder, (iii) has by all necessary
corporate action duly and validly authorized the execution and delivery of this
Agreement and the performance of its obligations hereunder, and (iv) has not
and will not during the term of this Agreement enter into any agreement which
conflicts with or which will result in any breach of, or constitute a default
under this Agreement, any note, security agreement, commitment, contract or
other agreement, instrument or undertaking to which Argonaut is a party.
10.3 Effect of Representations and Warranties. It is understood that
if the representations and warranties under this Article 10 are not true and
accurate at any time during the term of the Agreement and the nonbreaching
party (i.e., Argonaut or Symyx, as the case may be) incurs any liabilities,
costs or other expenses as a result of such falsity, the breaching party shall
indemnify and hold harmless the other party and its affiliates for any such
liabilities, costs or expenses incurred.
10.4 Disclaimer of Liability. NEITHER PARTY MAKES AND BOTH PARTIES
HEREBY DISCLAIM ALL WARRANTIES, EXPRESS, IMPLIED, OR STATUTORY, REGARDING THE
PATENT RIGHTS, KNOW-HOW, TRADEMARKS, AND PRODUCTS, INCLUDING ANY AND ALL
WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, AND
NON-INFRINGEMENT.
10.5 Limitation of Liability. IN NO EVENT SHALL EITHER PARTY BE LIABLE
TO THE OTHER PARTY FOR ANY INCIDENTAL, CONSEQUENTIAL, INDIRECT, OR SPECIAL
DAMAGES ARISING OUT OF OR IN RELATION TO THIS AGREEMENT, EVEN IF SUCH PARTY HAS
BEEN INFORMED OF THE POSSIBILITY OF SUCH DAMAGES. IN NO EVENT SHALL EITHER
PARTY'S ENTIRE LIABILITY ARISING OUT
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OF OR IN RELATION TO THIS AGREEMENT OR THE RIGHTS GRANTED HEREUNDER (EXCEPT
LIABILITY UNDER ARTICLES 8 AND 9) EXCEED THE SUMS PAID BY ARGONAUT TO SYMYX
PURSUANT TO SECTION 6 IN THE TWELVE (12) MONTHS PRECEDING THE EVENT GIVING RISE
TO SUCH LIABILITY.
11. TERM AND TERMINATION
11.1 Term. This Agreement shall commence on the Effective Date be in
full force in effect until the five (5) year anniversary of the Effective Date,
unless terminated earlier as provided in this Article 11 (such period, the
"Term"). Upon written agreement of the parties prior to the end of the
then-current Term, the Agreement may be extended for additional periods of one
(1) year each; provided, however, that either party may terminate this
Agreement after December 31, 2000, upon six (6) months written notice but not
before such date except as expressly provided for herein.
11.2 Termination for Cause. Either party may, without penalty,
terminate this Agreement or cancel any purchase order or portion thereof
effective upon written notice to the other party in the event the other party
materially breaches this Agreement, including without limitation, by failing to
deliver conforming Product on the requested delivery dates set forth on Symyx's
purchase orders, and such breach remains uncured for thirty (30) days following
written notice of breach by the nonbreaching party, unless such breach is
incurable in which event termination shall be immediate upon receipt of written
notice.
11.3 Insolvency. Either party may terminate this Agreement, effective
upon written notice to the other party in the event the other party (i) becomes
insolvent, (ii) enters into any composition or arrangement with its creditors,
(iii) resolves to wind up its business, dissolve or liquidate, (iv) is placed
in provisional or final liquidation, (v) is placed in provisional or final
judicial management, or (vi) otherwise ceases to conduct business generally.
11.4 Effect of Termination or Expiration.
(a) Any right or obligation of a party that has accrued as of the
effective date of any termination or expiration, including without limitation,
obligations to deliver Product and pay amounts owed, shall survive such
termination or expiration.
(b) In the event of a termination or expiration of this
Agreement, the provisions of this Agreement shall continue to apply to all
purchase orders accepted by Argonaut prior to the effective date of such
termination or expiration.
(c) In the event of default by Argonaut, Symyx may take any
reasonable steps which Symyx deems appropriate and which are authorized by law
or this Agreement to obtain the benefit of its bargain pursuant to this
Agreement in addition to or in lieu of the termination procedure set forth in
this Paragraph.
(d) In the event of any termination of this Agreement by Symyx
under Section 11.2 or, the licenses granted in Section 2.1 shall terminate.
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(e) In the event of a termination or expiration of the Agreement,
Argonaut will provide Symyx with all necessary technical, supply, economic, and
marketing information regarding Products during the six months prior to the
termination date so that Symyx may continue to provide its partners and
customers with Products.
11.5 Survival. Sections 2.2(b), and 12.5 and Articles 9, 10, 13, and
14 shall survive the termination of this Agreement for any reason.
12. DISPUTE RESOLUTION
12.1 Arbitration. If a dispute arises between the parties relating to
the interpretation or performances of this Agreement or the grounds for the
termination thereof, representatives of the parties with decision-making
authority shall meet to attempt in good faith to negotiate a resolution of the
dispute prior to pursuing other available remedies. If within thirty (30) days
after such meeting the parties have not succeeded in negotiating a resolution
of the dispute, such dispute shall be submitted to final and binding
arbitration under the then current Commercial Arbitration Rules of the American
Arbitration Association ("AAA") by one (1) arbitrator in San Francisco,
California. Such arbitrator shall be selected by the mutual agreement of the
parties or, failing such agreement, shall be selected according to the
aforesaid AAA rules. The arbitrator will be instructed to prepare and deliver a
written, reasoned opinion stating his decision within thirty (30) days of the
completion of the arbitration. Such arbitration shall be concluded within nine
(9) months following the filing of the initial request for arbitration. The
parties shall bear the costs of arbitration equally and shall bear their own
expenses, including professional fees. The decision of the arbitrator shall be
final and non-appealable and may be enforced in any court of competent
jurisdiction.
13. MISCELLANEOUS
13.1 Governing Law. THIS AGREEMENT AND ALL ACTS AND TRANSACTIONS
PURSUANT HERETO AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO SHALL BE
GOVERNED, CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
CALIFORNIA, WITHOUT REFERENCE TO RULES OF CONFLICTS OR CHOICE OF LAWS.
13.2 Independent Contractors. The relationship of Argonaut and Symyx
established by this Agreement is that of independent contractors, and nothing
contained in the Agreement shall be construed to (i) give either party the
power to direct and control the day-to-day activities of the other, (ii)
constitute the parties as partners, joint venturers, co-owners or otherwise as
participants in a joint or common undertaking, or (iii) allow either party to
create or assume any obligation on behalf of the other party for any purpose
whatsoever.
13.3 Compliance with Laws. Argonaut shall perform this Agreement in
compliance with all applicable federal, state and local laws, rules and
regulations. Argonaut shall indemnify Symyx and its distributor and customers
for loss or damage sustained because of Argonaut's noncompliance with any such
law, rule or regulation. Argonaut shall furnish to Symyx any information
requested or required by Symyx during the term of this Agreement or any
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extensions hereof to enable Symyx to comply with the requirements of any U.S. or
foreign federal, state and/or government agency.
13.4 No Use of Names. Except as expressly provided herein, neither
party will use the name of the other in its advertising or promotional
materials without the prior written consent of such other party.
13.5 Confidentiality of Agreement. Except as required by law,
Argonaut shall not disclose the contents or any term of this Agreement to any
person or entity without the prior written consent of Symyx.
13.6 No Conflicting Obligations. Argonaut agrees not to engage in any
work or services on its behalf or for any other party which would conflict with
its obligations under this Agreement.
13.7 Patent Marking. Argonaut shall mark and have its Affiliates mark
all Products they sell or distribute pursuant to this Agreement to provide
notice of issued and pending patent applications having claims that cover the
Product. The form of such marking shall be in accordance with the applicable
statute or regulations in the country or countries of manufacture and sale
thereof.
13.8 Interpretation. The parties hereto acknowledge and agree that:
(i) each party and its counsel reviewed and negotiated the terms and
provisions of this Agreement and have contributed to its revision; (ii) the
rule of construction to the effect that any ambiguities are resolved against
the drafting party shall not be employed in the interpretation of this
Agreement; and (ii) the terms and provisions of this Agreement shall be
construed fairly as to all parties hereto and not in a favor of or against any
party, regardless of which party was generally responsible for the preparation
of this Agreement.
13.9 Force Majeure. Neither party shall be held responsible for any
delay or failure in performance hereunder (except for failure to make any
payment due hereunder) caused by strikes, embargoes, unexpected government
requirements, civil or military authorities, acts of God, or by the public
enemy or other similar causes reasonably beyond such party's control and
without such party's fault or negligence.
13.10 Further Assurances. At any time or from time to time on and
after the Effective Date, a Party shall at the request of the other Party (i)
deliver to such other Party such records, data or other documents consistent
with the provisions of this Agreement, and (ii) execute, and deliver or cause
to be delivered, all such assignments, consents, documents or further
instruments of transfers or license, and (iii) take or cause to be taken all
such other actions, as such other Party may reasonably deem necessary or
desirable in order for such other Party to obtain the full benefits of this
Agreement and the transactions contemplated hereby.
13.11 Notices. Any notice required or permitted by this Agreement
shall be in writing and shall be sent by prepaid registered or certified mail,
return receipt requested, internationally recognized courier or personal
delivery, or by fax with confirming letter mailed under
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the conditions described above in each case addressed to the other party at the
address shown below or at such other address for which such party give notice
hereunder. Such notice shall be deemed to have been given when delivered:
If to Symyx: 3100 Central Expressway
Santa Clara, California 95051
Attn:
------------------------
If to Argonaut: 887 Industrial Rd., Ste. G
San Carlos, California 94070
Attn: Jan K. Hughes
13.2 Assignment. Argonaut shall not assign this Agreement or any
rights hereunder, directly or indirectly, by operation of law, change of control
or otherwise, without the prior written consent of Symyx. Notwithstanding the
foregoing, Argonaut may assign this Agreement without the consent of Symyx to
an acquirer of all or substantially all of the stock or assets of Argonaut
pertaining to the Agreement. Symyx may assign this Agreement without
restriction. Any permitted assigns or successors hereof shall be bound by all
terms and conditions of this Agreement.
13.3 Severability: Waiver. If any provision(s) of this Agreement shall
be held invalid, illegal or unenforceable by a court of competent jurisdiction,
this Agreement shall continue in full force and effect without said provision.
The failure of a party to enforce any provision of the Agreement shall not be
construed to be a waiver of the right of such party to thereafter enforce that
provision or any other provision or right.
13.14 Entire Agreement. This Agreement together with the Exhibits
hereto represent and constitute the entire agreement between the parties and
supersede all prior agreements and understandings with respect to the matters
covered by this Agreement. This Agreement may only be amended in writing signed
by both parties.
SYMYX TECHNOLOGIES, INC. ARGONAUT TECHNOLOGIES, INC.
By: By: /s/ David P. Binkley
----------------------------- --------------------------------
Print Name: Steven Goldby Print Name: David P. Binkley, Ph.D.
Title: CEO Title: President and CEO
15
<PAGE> 16
Exhibits: A: Development Plan (Joint Development Committee Plan)
B: Product Description and Specifications
C: Marketing Plan
D: Intellectual Property Rights
E: Argonaut's Standard Terms and Conditions of Sale
16
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EXHIBIT A
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JOINT DEVELOPMENT COMMITTEE
1. A committee will be established as outlined in Section 4.2 of the Agreement
for the purpose of reviewing the development of the product. The committee
will be called the Joint Development Committee and the operating points are
outlined below.
(a) Participants: Argonaut (Jan Hughes, Jim Wasson)
Symyx (Cameron Dales, Lynn van Erden)
(b) Duration of the Committee: The Committee will continue to meet until
three months after commercial shipment of the Product, and then on an
as-needed basis to discuss Improvements and Know-how.
2. Meetings: Bi-weekly, held at Argonaut or Symyx to be determined by the JDC.
3. Product Development Plan.
The Product Development Plan is targeted for completion on
September 17, 1999.
4. Meeting Agenda:
(a) Development Schedule Review. The development schedule will be reviewed
at the meetings and any changes will be noted during the meetings.
(b) Product Specification Review. The Product Specification and performance
testing will be reviewed at the meetings and any changes will be noted
during the meetings.
(c) Material Improvements. Material Improvements will be reviewed at the
meetings and approved by the committee as outlined in Section 2.3 of the
Agreement.
<PAGE> 18
Depth: 16-inches
(h) Power Requirements
100 - 240 VAC, 750 Watts
(i) Certifications
Laboratory Product Safety EN61010
Electromagnetic Compliance to European 89/336/EEC EMC Directive
<PAGE> 19
Providing instrument service support through both corporate and field
service organizations worldwide, providing documentation for both
customers and worldwide service organizations to support maintenance
and usage of instrument, and monitoring customer usage and satisfaction
to ensure success.
3. The initial strategy in 1999 will be to:
(a) Quickly get the product launched to ensure market awareness.
(b) Focus on key accounts already identified by both companies for
immediate sales.
(c) Train and build the sales/marketing organizations so we are
prepared for much greater market penetration in the year 2000
and beyond.
4. Our preliminary budget expectations, which includes only those
resources dedicated to the PPR-8 product such as personnel, advertising,
marketing collateral, tradeshows and documentation are:
(a) $225,000 for 1999
(b) $625,000 for the year 2000.
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EXHIBIT D
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PATENT RIGHTS
1. Following is a list of filed, pending patent applications:
(a) "Parallel Reactor with Internal Sensing and Method of Using Same" as
directed toward the parallel polymerization reactor and the internal
property/reaction sensing methods.
(b) "Improved Parallel Reactor with Internal Sensing" as directed toward
improvements made in the Parallel Polymerization Reactor, including the
magnetic feed through and the removable stirrer.
<PAGE> 21
EXHIBIT E
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STANDARD TERMS AND CONDITIONS OF SALE
1. PRICE: Quoted prices are valid for 30 days from the date of the quote
unless canceled in writing by Seller. Shipping charges, insurance, duties
and taxes are not included in prices and will be invoiced, if applicable,
as separate items.
2. PACKING AND LOSS OR DAMAGE IN TRANSIT: Equipment will be packed for
shipment in a manner suitable to air or truck. Unless otherwise indicated
on the sales order acknowledgement, all sales are F.O.B. shipping point
and, subject to Paragraph 5, all risk of loss or damage to equipment in
transit is upon Buyer. Payment will be made in accordance with Paragraph 4
below.
3. TAXES: Buyer is responsible for the ultimate payment of all taxes which may
be assessed or levied on or on the account of materials sold hereunder to
the Buyer whether termed a gross receipts tax, use tax, property tax, sales
tax or otherwise. Where Buyer claims that this transaction is not subject to
any such tax; that Buyer is exempt or that Seller is not required to collect
such tax. Buyer agrees to provide Seller with any documentation necessary to
support such a claim, to allow Seller to document its decision not to
collect such tax(es), and to indemnify Seller from any subsequent claims
that such tax(es) were due.
4. TERMS OF PAYMENT: Payment terms are net 30 from day of invoicing, not
installation. Seller reserves the right in its sole discretion to require
alternative payment terms, including, without limitation, sight draft,
letter of credit or full or partial payment in advance.
5. INSTALLATION AND SITE PREPARATION: Installation services are included in the
purchase price of the equipment sold hereunder only if expressly so stated
on the face of the seller's quote or in Seller's most current price list.
For equipment requiring installation by Seller's service personnel, it is
the responsibility of the Buyer to prepare the site environmentally and
provide the required services, power, water, drain, air, bottled and
compressed gases, permits, licenses, approvals, etc. as well as whatever is
required to uncrate and move the equipment to its location. The tasks that
must be completed by the Buyer prior to Seller installation are outlined in
the Seller's pre-installation manual.
6. DELIVERY DATES: The scheduled shipping date shown on the sales order
acknowledgement is our best estimate of the time the order will be shipped.
Seller may make, and invoice, partial shipments. Seller assumes no liability
for loss, general damages, or special or consequential damages due to
delays.
7. RETURNED GOODS: Credit will not be issued for goods returned without prior
approval. Please call Order Administration for required approval and return
procedures. Returns
<PAGE> 22
may be subject to a restocking fee. Termination: Upon any termination or
cancellation of this sales order by Buyer, either in whole or in part, Buyer
agrees to promptly pay appropriate termination or cancellation charges
invoiced by Seller.
8. WARRANTY: Seller makes the following warranties with respect to the
equipment sold hereunder:
(a) Hardware products against defects in materials and workmanship for one
year from the original date of invoicing. Seller will use reasonable efforts
to repair or replace in its sole discretion, such defective hardware at no
charge provided that Seller is notified of defects within the warranty
period.
(b) Software has a limited warranty to the original purchaser that the media
on which the program is distributed and the documentation will be free from
defects in materials and workmanship.
(c) Seller makes and Buyer receives no other warranty express or implied and
all warranties of merchantability and fitness for a particular purpose are
expressly excluded. Neither party shall have any liability with respect to
its obligations under this agreement for consequential, exemplary, or
incidental damages even if it has been advised of the possibility of such
damages.
(d) Consumable products or the like are only warranted to conform to the
quantity and content stated on the label at the time of delivery.
9. EXCLUSIONS: This warranty covers normal use. Seller does not warrant and
will not be held responsible for loss or damages resulting from a cause
other than defects in material or workmanship, including damage or loss
caused by:
(a) neglect, accident, servicing or modification by anyone other than a
qualified service engineer;
(b) any natural disaster, including earthquake, lightning, flood, or fire;
electrical surges or use of improper power sources;
(c) failure to perform routine preventative maintenance as specified in the
user operation manual; or
(d) non-conformance to recommended instrument operation procedure.
10. SOFTWARE LICENSES AND COPYRIGHTED MATERIAL: Seller provides certain software
products by license only. The terms of the license are available from Seller
and are accepted by Buyer on delivery of the licensed software. Unless
otherwise specified, Seller's copyrighted material (software, firmware and
printed documentation) may not be copied except for archive purposes, to
replace a defective copy, or for program error verification by Buyer.
11. AUTHORITY TO EXPORT: All orders accepted for export (and/or re-export) are
subject to: a) issuance of an export (re-export) license by the United
States Government, and b) the Buyer providing Seller with all documentation
necessary for shipment to the destination country.
<PAGE> 23
12. INDEMNITY: Seller agrees to defend, at its own expense, any suit or legal
proceeding which may be brought against Buyer alleging infringement by Buyer
of any third party's intellectual property rights, by Buyer's use of the
Product sold hereunder for its intended purpose, provided that Buyer shall
give Seller prompt written notice of any claim, threat, or institution of
suit or legal proceeding and provided that Seller shall then have the sole
right to control and conduct the defense and/or settlement of such claim,
threat, suit or legal proceeding, either in the name of Seller or Buyer or
both, and Buyer shall, at Seller's request and expense, provide relevant
information and reasonable cooperation. Seller shall pay final judgment and
all costs and attorney's fees assessed against Buyer in any such suit or
legal proceeding, provided Buyer has complied with the conditions hereof
with respect to prompt notice and cooperation in connection with such suit
or legal proceeding and given exclusive control thereof to Seller, but
Seller shall not be liable for any attorney's fees or other legal expenses
incurred by Buyer without the knowledge and prior written consent of Seller.
Seller shall also have the right, at its own expense, to replace the
equipment claimed to infringe with equally satisfactory non-infringing
equipment, modify said Product so that it becomes non-infringing, or remove
such equipment and refund the price thereof.
The foregoing indemnity fully defines Seller's obligations for patent
infringement. Such obligations to defend and make payment shall specifically
not apply to:
(a) An infringement claim resulting from additions or changes in or to the
product made by Buyer or any third party or from use in combination with
other equipment, where such claim would not have occurred but for such
addition or combination, or
(b) An infringement claim which is settled without the consent of Seller, or
(c) The total amount of Seller's obligation and liability under this Section
shall not exceed the price paid by Buyer to Seller for the product held to
infringe and in no event will Seller be accountable for special or
consequential damages under this indemnity, such as, for example, loss of
business profits or goodwill.
13. SPECIFICATIONS: Weights and dimension set forth in sales literature are not
guaranteed unless previously certified in writing. Seller may without
affecting the obligations under this sales order, make insignificant changes
to the specification of the product or products delivered under this sales
order from those contained in sales literature.
14. MISCELLANEOUS: This sales order is made and entered into and shall be
governed by the laws of the State of California.
<PAGE> 1
EXHIBIT 10.25
MANUFACTURING AGREEMENT
This Manufacturing Agreement ("Agreement"), effective as of the 24th day
of June, 1997 (the "Effective Date"), is entered into by and between Argonaut
Technologies, Inc., a Delaware corporation having offices at 887 Industrial
Road, Suite G, San Carlos, California 94070, U.S.A. ("Argonaut"), and [*],
a New Jersey corporation having offices at [*] ("[*]").
BACKGROUND
A. [*] desires to grant to Argonaut the right to manufacture, modify and
distribute certain Instrument Products and Consumable Products (as defined
below) developed by [*].
B. [*] desires to grant to Argonaut the right to manufacture the
Instrument Products and Consumable Products provided Argonaut sells such
Instrument Products and Consumable Products to [*] in accordance with the
terms of this Agreement.
1. Definitions.
(a) "Consumable Products" means items (including but not limited to
tubes, filters, caps and connectors) consumed or commonly replaced as a result
of routine operation of the Instrument Products, excluding chemical reagents
and polymeric supports.
(b) "Documentation" means the documentation that embodies the Licensed
Technology, as specifically set forth in Exhibit A.
(c) "Instrument Products" shall mean the TCMS product set forth in
Exhibit A hereto, successor products and related instrumentation.
(d) "Intellectual Property Rights" means all current and future
worldwide patents and other patent rights, copyrights, trade secrets and all
other intellectual property rights, including without limitation all
applications and registrations with respect thereto, in and to the Licensed
Technology, which [*] owns or to which [*] has the right to grant licenses
of the scope granted herein as of the Effective Date or during the term of this
Agreement. [*]'s current patents and patent applications in the Licensed
Technology are set forth in Exhibit B.
(e) "Licensed Technology" means all technical data, processes,
formulae, inventions, discoveries and technical information, whether or not
patentable, that (i) are necessary for the manufacture or use of the Products
and (ii) are owned by [*], or to which [*] has the right to grant licenses
of the scope granted herein, as of the Effective Date or during the term of the
Agreement.
[*] Confidential Treatment Requested
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(f) "Year" shall mean each twelve (12) month period following the date of
this Agreement.
2. LICENSE GRANT.
(a) Licensed Technology. [*] hereby grants to Argonaut an exclusive,
sublicensable, worldwide license, under the Intellectual Property Rights, to
develop, manufacture, have manufactured, modify, use, market, service, sell and
otherwise distribute the Instrument Products and Consumable Products, and to
use the Documentation to support such efforts.
(b) Documentation. Argonaut shall have the right to modify, reproduce and
distribute that portion of the Documentation designated "End User
Documentation" in connection with Argonaut's distribution of the Instrument
Products and Consumable Products. Argonaut shall have no other right to modify,
reproduce, distribute or otherwise provide to third parties, the Documentation.
(c) Distributors. Argonaut may exercise its distribution rights granted
pursuant to Sections 2(a) and 2(b) above through the use of third party
distributors, resellers, dealers and sales representatives (collectively,
"Distributors").
3. DELIVERY.
[*] will deliver to Argonaut the Documentation upon the execution of
this Agreement.
4. TECHNICAL ASSISTANCE.
[*] will provide reasonable technical assistance to Argonaut as
necessary in order for Argonaut to understand the Licensed Technology and
Documentation. Any written information provided as part of such technical
assistance shall be considered Documentation hereunder.
5. AGREEMENT TO MANUFACTURE, SELL AND PURCHASE.
Upon [*]'s orders therefor, Argonaut agrees to manufacture and sell
Instrument Products and Consumable Products and [*] agrees to purchase such
Products from Argonaut, on the terms and conditions set forth herein. Prices
will be as set forth in Exhibit C.
6. FORECASTS AND ORDERS.
(a) Forecasts. Prior to the beginning of each Year of this Agreement,
[*] shall provide to Argonaut, [*]'s written forecast of its Instrument
Product manufacturing requirements hereunder ("Annual Forecast"). This shall be
a non-binding forecast but shall reflect [*]'s best good faith estimate of
its requirements.
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(b) Initial Order. Upon execution of this Agreement, [*] shall provide
to Argonaut, [*]'s firm purchase order, for the manufacture by Argonaut of
thirty (30) Instrument Products for sale to [*] hereunder. Argonaut will
commence work on the initial order upon [*]'s reasonable acceptance of the
Instrument Product production prototype. Prior to the beginning of each
subsequent quarter during the term hereof, [*] will provide to Argonaut,
[*]'s written Instrument Product and Consumable Product purchase order for
the second quarter thereafter, and [*]'s Instrument Product purchase forecast
for the third quarter thereafter. Argonaut shall promptly acknowledge, in
writing, all [*] purchase orders hereunder.
(c) Quantities. During each subsequent Year of this Agreement, Argonaut
shall accept and shall use its commercially reasonable efforts to fulfill
[*]'s orders for Instrument Products and Consumable Products. During each
subsequent Year of this Agreement, Argonaut shall accept and fulfill all [*]
purchase orders for quantities of Products up to [*] ([*]%) of [*]'s aggregate
Product purchases during the prior Year, and shall use its commercially
reasonable efforts to fulfill [*]'s orders for additional Products.
(d) Consumable Products. Argonaut shall sell Consumable Products for use
with the Instrument Products to [*] at [*] ([*]%) off Argonaut's North American
List Price, as amended from time to time but no more than one (1) time per year.
[*] shall have the right to purchase Consumable Products from Argonaut at such
price, from any of [*]'s world-wide sites, subject to customs duties, import
taxes, freight etc.
(e) Service, Labor and Parts. [*] shall have a [*] ([*]%) discount off
Argonaut's North American List Price, as amended from time to time, for all
service, labor and parts for the Products. Service shall be performed at a
facility specified by Argonaut in accordance with Argonaut's then-current
service terms and conditions. [*] shall pay for shipping for Instrument Products
and Consumable Products requiring service to the specified facility, and
Argonaut shall pay for return shipping fees.
7. TERMS AND CONDITIONS.
All purchases shall be subject to the following terms and conditions:
(a) Ordering. All purchases and sales between Argonaut and [*] shall be
initiated by [*]'s issuance of written purchase orders, or by telephone or fax
or telex confirmed by written purchase order. Such orders shall state unit
quantities, unit descriptions, applicable prices, requested delivery dates, and
shipping instructions.
(b) Acceptance. The acceptance by Argonaut of an order shall be indicated
by written acknowledgment thereof by Argonaut.
(c) Controlling Document. The terms and conditions of this Agreement
shall control all sales of Instrument Products and Consumable Products to [*]
hereunder, and any additional or
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<PAGE> 4
different terms or conditions in either party's purchase order, acknowledgment,
or similar document shall be of no effect.
(d) Delivery. Delivery shall be FOB San Carlos. [*] shall have the right
to designate the method of shipment, but if Argonaut has not received such
designation within a reasonable time prior to the scheduled delivery date,
Argonaut may, at its discretion, make arrangements for delivery to [*]'s
destination in accordance with its existing shipping practices. Title to and all
risk of loss or damage with respect to the Instrument Products and Consumable
Products shall pass to [*] upon their delivery by Argonaut at the FOB point.
(e) Payment. Unless otherwise agreed in writing, payment to Argonaut for
Instrument Products and Consumable Products shall be due net thirty (30) days
from delivery to [*].
(f) Warranty. Argonaut warrants for a period of ninety (90) days that the
Instrument Products and Consumable Products sold to [*] will be free from
defects in material and workmanship. Argonaut's sole obligation under the
foregoing warranty, and [*]'s sole remedy for breach, shall be for Argonaut to
correct any deficiencies in the product that cause it not to comply with such
warranty, replace the product or refund payment therefor, at Argonaut's
discretion. ARGONAUT AND ITS SUPPLIERS MAKE AND [*] RECEIVES NO WARRANTIES OR
CONDITIONS, EXPRESS, IMPLIED OR STATUTORY, INCLUDING WITHOUT LIMITATION THE
IMPLIED WARRANTIES OR MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE
REGARDING THE INSTRUMENT PRODUCTS AND CONSUMABLE PRODUCTS.
8. WARRANTY AND DISCLAIMER.
[*] warrants that the Documentation provided hereunder is a complete set of
the documentation of the Licensed Technology. [*]'s sole obligation under the
foregoing warranty, and Argonaut's sole remedy for breach, shall be for [*] to
correct any deficiencies in the Documentation that cause it not to comply with
such warranty. Except as expressly provided above, [*] licenses the Licensed
Technology on an "AS IS" basis. [*] AND ITS SUPPLIERS MAKE AND ARGONAUT RECEIVES
NO WARRANTIES OR CONDITIONS, EXPRESS, IMPLIED OR STATUTORY, INCLUDING WITHOUT
LIMITATION THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE REGARDING THE LICENSED TECHNOLOGY.
9. LIMITATION OF LIABILITY.
IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY FOR ANY
SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES ARISING OUT OF THIS AGREEMENT, THE
USE OF THE LICENSED TECHNOLOGY OR DISTRIBUTION OF INSTRUMENT PRODUCTS AND
CONSUMABLE PRODUCTS BY ARGONAUT OR ANY THIRD PARTY, WHETHER UNDER THEORY OF
CONTRACT, TORT (INCLUDING NEGLIGENCE), INDEMNITY, PRODUCT LIABILITY OR
OTHERWISE.
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10. PATENT NOTICES.
Argonaut shall place appropriate patent markings on Instrument Products
used, sold or otherwise distributed hereunder during the term of this Agreement.
11. CONFIDENTIALITY.
(a) Confidential Information. As used herein, Confidential Information
means information that one party discloses to the other party.
(b) Use and Disclosure. The receiving party agrees not to use, disclose,
distribute or disseminate the Confidential Information of the disclosing party
except as expressly permitted under this Agreement. The receiving party agrees
to restrict access to such Confidential Information to only those employees who
need such Confidential Information in order for the receiving party to exercise
its rights hereunder. The receiving party will not use such materials at a
location other than its address listed above without the disclosing party's
consent. The receiving party agrees to protect the confidentiality of the
disclosing party's Confidential Information using the same degree of care that
it uses to protect its own most confidential information, but in no event less
than reasonable care.
(c) Remedies. The receiving party acknowledges that breach of the
foregoing confidentiality obligation may cause irreparable harm to the
disclosing party, the extent of which would be difficult to ascertain.
Accordingly, the receiving party agrees that the disclosing party may seek
immediate injunctive relief in the event of a breach by the receiving party or
any of its employees of the provisions of this Section 11. In the event of such
a breach, the disclosing party shall have the right to terminate this Agreement
immediately upon notice without opportunity to cure.
(d) Exceptions. The foregoing restrictions will not apply to information
that the receiving party can demonstrate: (i) was known to the receiving party
at the time of disclosure to the receiving party by the disclosing party as
shown by the files of the receiving party in existence at the time of
disclosure; (ii) has become publicly known through no wrongful act of the
receiving party; (iii) has been rightfully received from a third party
authorized by the disclosing party to make such disclosure without restriction;
(iv) has been approved for release by written authorization of the disclosing
party; or (v) has been independently developed by the receiving party without
any use of Confidential Information of the disclosing party and by employees or
other agents of the receiving party who have not been exposed to the
Confidential Information of the disclosing party.
(e) Confidentiality of Agreement. Each party agrees that the terms and
conditions of this Agreement shall be treated as Confidential Information;
provided that each party may disclose the terms and conditions of this
Agreement: (i) as required by any court or other governmental body or as
otherwise required by law; (ii) to legal counsel; (iii) in confidence, to
accountants, banks, and financing sources and their advisors; (iv) in
confidence, in connection with the enforcement of this Agreement or rights
under this Agreement. Argonaut agrees not to disclose that it has entered into
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an Agreement with [*] concerning the Instrument Products or the Consumable
Products and Argonaut will not mention [*] in connection with the Instrument
Products or the Consumable Products.
12. INDEMNIFICATION AND INTELLECTUAL PROPERTY.
(a) [*] Intellectual Property. [*] will exercise reasonable efforts in
processing patents covering the Instrument Products. [*] shall at Argonaut's
request, notify Argonaut of all countries in which it is seeking patents
covering the Instrument Products. Argonaut shall have the right, but not the
obligation, to apply for such patents in any countries in which [*] is not
seeking such patent protection in [*]'s name and at Argonaut's expense. [*]
shall provide cooperation to Argonaut including the execution of documents, so
that Argonaut may prosecute such patents, as Argonaut may reasonably request.
[*] shall promptly after discovery notify Argonaut of any material infringement
of which it becomes aware related to any patents covering the Instrument
Products. [*] shall have the right to bring, defend and maintain any appropriate
suit, action or proceeding involving any such infringement at [*]'s expense. In
the event that [*] fails to take any such action, [*] shall give Argonaut all
authority, information and assistance necessary to pursue, defend or settle any
such suit, action or proceeding and Argonaut shall pay the expenses (including
attorneys' fees) incurred in connection with any such suit, action or
proceeding. Should Argonaut lack standing to bring any such suit, action or
proceeding, then [*] will, at the request of Argonaut, do so upon Argonaut's
undertaking to promptly to reimburse [*] monthly, or make advances to [*], for
all [*]'s reasonable expenses (including attorneys' fees) resulting therefrom.
Any amounts recovered in any suit, action or proceeding under this Section
12(b), whether by judgment or settlement (including, but not limited to, any
royalties or other consideration received pursuant to any sublicenses or other
arrangements entered into as part of settlement), shall be retained by Argonaut.
(b) By Argonaut. Argonaut shall indemnify, hold harmless and, at [*]'s
request, defend [*] from and against any and all claims, liabilities and
expenses (including reasonable fees of attorneys and other professionals)
arising out of or in connection with Argonaut's use, manufacture or distribution
of the Instrument Products and Consumable Products, provided [*] promptly
notifies Argonaut of any such claim and permits Argonaut to control the defense
and settlement thereof.
13. TERM AND CONDITION.
(a) Term. This Agreement shall continue in full force and effect for a
period of five (5) years unless earlier terminated as provided in Section 13(b)
below.
(b) Termination.
(i) If either party defaults in the performance of any provision of
this Agreement, then the non-defaulting party may give written notice to the
defaulting party that if the default is not
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cured within thirty (30) days the Agreement will be terminated. If the
non-defaulting party gives such notice and the default is not cured during the
thirty (30) day period, then the Agreement will terminate immediately upon
notice by the non-defaulting party.
(ii) This Agreement will terminate automatically without notice,
(i) upon the institution by or against Argonaut of insolvency, receivership or
bankruptcy proceedings or any other proceedings for the settlement of Argonaut's
debts, (ii) upon Argonaut's making an assignment for the benefit of creditors,
or (iii) in the event of Argonaut's dissolution or insolvency.
(c) Survival. The parties' rights and obligations under Sections 1, 2,
7(g), 10, 11, 9, 10, 11, 12 and 13 shall survive any termination of this
Agreement.
(d) No Waiver. The failure of either party to enforce any provision of
this Agreement shall not be deemed a waiver of such provision.
14. MISCELLANEOUS PROVISIONS.
(a) Independent Contractors. The relationship of Argonaut and [*]
established by this Agreement is that of independent contractors, and neither
party is an employee, agent, partner or joint venturer of the other. All
financial obligations associated with [*] business are the sole responsibility
of [*]. All sales and other agreements between [*] and its customers are [*]'s
exclusive responsibility and will have no effect on [*]'s obligations under this
Agreement.
(b) Assignment. [*] may not transfer or assign its rights or
obligations under this Agreement without prior written consent of Argonaut.
Subject to the foregoing sentence, this Agreement will be binding upon and
inure to the benefit of the parties hereto, their successors and assigns.
Successors of Argonaut shall include any party which acquires Argonaut or into
which Argonaut merges.
(c) No Implied Waivers. The failure of either party at any time to
require performance by the other of any provision hereof shall not affect the
right of such party to require performance at any time thereafter, nor shall
the waiver of either party of a breach of any provision hereof be taken or held
to be a waiver of a provision itself.
(d) Severability. If any provision of this Agreement is held to be
invalid by a court of competent jurisdiction, then the remaining provisions
will nevertheless remain in full force and effect. The parties agree to
renegotiate in good faith those provisions so held to be invalid to be valid,
enforceable provisions which provisions shall reflect as closely as possible
the original intent of the parties, and further agree to be bound by the
mutually agreed substitute provision.
(e) Force Majeure. Except for payment of monies, neither party shall
be liable for failure to fulfill its obligations under this Agreement or any
purchase order issued hereunder or for delays in delivery due to causes beyond
its reasonable control, including, but not limited to, acts of God, man-
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made or natural disasters, earthquakes, fire, riots, flood, material shortages,
strikes, delays in transportation or inability to obtain labor or materials
through its regular sources. The time for performance of any such obligation
shall be extended for the time period lost by reason of the delay.
(f) Conflicting Terms. The parties agree that the terms and conditions of
this Agreement shall prevail, notwithstanding contrary or additional terms, in
any purchase order, sales acknowledgment, confirmation or any other document
issued by either party effecting the purchase and/or sale of Products, unless
the parties agree otherwise in writing.
(g) Headings. Headings of paragraphs herein are inserted for convenience
of reference only and shall not affect the construction or interpretation of
this Agreement.
(h) Notice. Any notice required or permitted to be given under this
Agreement shall be delivered (i) by hand, (ii) by registered or certified mail,
postage prepaid, return receipt requested, to the address of the other party
first set forth above, or to such other address as a party may designate by
written notice in accordance with this Section 14(h), (iii) by overnight
courier, or (iv) by fax with confirming letter mailed under the conditions
described in (ii) above. Notice so given shall be deemed effective when
received, or if not received by reason of fault of addressee, when delivered.
(i) Entire Agreement. This Agreement contains the entire understanding of
the parties with respect to the subject matter hereof and supersedes all prior
agreements relating thereto, written or oral, between the parties. Amendments
to this Agreement must be in writing, signed by the duly authorized officers of
the parties. The terms of any purchase order are expressly excluded.
(j) Governing Law. This Agreement shall be governed by and construed
under the law of the State of California, without regard to conflict of laws
principles or the U.N. Convention on Contracts for the International Sale of
Goods.
(k) Arbitration. Any dispute or claim arising out of or in relation to
this Agreement, or the interpretation, making, performance, breach or
termination thereof, shall be finally settled by binding arbitration under the
Rules of Conciliation and Arbitration of the International Chamber of Commerce
as presently in force ("Rules") and by three (3) arbitrators appointed in
accordance with said Rules. Judgment on the award rendered may be entered in
any court having jurisdiction thereof. The place of arbitration shall be San
Francisco, California, U.S.A. The parties may apply to any court of competent
jurisdiction for temporary or permanent injunctive relief, without breach of
this Section 14(k) and without any abridgment of the powers of the arbitrators.
-8-
<PAGE> 9
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
effective as of the Effective Date.
[*] ARGONAUT TECHNOLOGIES, INC.
By: /s/ [*] By: /s/ JAN HUGHES
-------------------------------- --------------------------------
Name: [*] Name: Jan Hughes
------------------------------ ------------------------------
(Typed or Printed) (Type or Printed)
Title: V.P. MRL Title: VP PRODUCT DEVELOPMENT
------------------------------ -----------------------------
[*] Confidential Treatment Requested
-9-
<PAGE> 10
EXHIBIT A
Documentation and Products
Documentation: All Product documentation provided to Argonaut on March __,
1997, including drawings and schematics.
Products:
A. INSTRUMENT PRODUCTS
1) TCMS
Manual Parallel Solid Phase Synthesis Device
Approximate Footprint: 2 ft X 2 ft
Reaction Vessel Capacity: 20
Variable Reaction Vessel Volume: 2 to 10 ml Inert Reaction
Environment
Inert Materials: Teflon and Glass
Agitation: Vertical Oscillation
Group Temperature Range: 40 to 150 C with Preset temperature set
time (A recirculating bath chiller is required to meet the low
temperature requirements of this temperature range. The bath
chiller will not be supplied by Argonaut)
Pressurized Solvent Delivery
Parallel/Individual Pressurized Solvent Filtering Discrete Reagent
Addition
Compound Collection Capability
2) ACCESSORY: AUTOMATED SOLVENT WASH MODULE FOR TCMS
Automated, Timed Delivery of Solvents Preset Control of Solvent
Filtering
Preset Control of Repeats
B. CONSUMABLE PRODUCTS
1) REACTION VESSELS (MULTIPLE FIXED VOLUMES)
2) FRITS: TEFLON POROUS SINTERED FRITS
3) COLLECTION TUBES AND CAPS: SAMPLE COLLECTION VIALS
<PAGE> 11
EXHIBIT B
Patents and Patent Applications
U.S. Patent Application USSN [*]
[*] Confidential Treatment Requested
<PAGE> 12
EXHIBIT C
Product Prices
A. INSTRUMENT PRODUCTS
1) TCMS $[*]
2) ACCESSORY: AUTOMATED SOLVENT WASH MODULE FOR TCMS [*]%
Discount off of Argonaut's North American List Price.
B. CONSUMABLE PRODUCTS
1) REACTION VESSELS (MULTIPLE FIXED VOLUMES) As per 6(d)
2) FRITS: TEFLON POROUS SINTERED FRITS As per 6(d)
3) COLLECTION TUBES: SAMPLE COLLECTION VIALS As per 6(d)
[*] Confidential Treatment Requested
<PAGE> 13
AMENDMENT
Effective June 15, 1998, the following products may be purchased under the
terms of the agreement dated June 24, 1997 between Argonaut Technologies, Inc.
and [*]. This Amendment replaces the prior Exhibit A and Exhibit C.
EXHIBIT A & C
PRODUCT & NET PRICE LISTING
Instrumentation Products
- - Quest(TM) 210 Manual Synthesizer (Part Number 900093) $[*]
Originally referred to as TCMS by [*].
- - Quest(TM) 210 Synthesizer
with Automated Solvent Wash Module (Part Number 900090) $[*]
- - Quest(TM) Automated Solvent Wash upgrade (See notes below.) $[*]
Quest 210 units manufactured prior to June 1, 1998 will order this part
number (Part Number 900089)
Quest 210 units manufactured after June 1, 1998 will order this part
number (Part Number 900094)
Consumable Products
- - Quest(TM) 210 accessories and consumable parts
Per the original agreement, section 6.d, the prices remain [*]
percent ([*]) off Argonaut's North America. A price list is attached
that reflect the terms of the Agreement for each part.
The parties have executed this Amendment by their duly authorized
representatives, effective as of the day and year written above.
ARGONAUT TECHNOLOGIES, INC. [*]
By: /s/ JAN HUGHES By:
------------------------------- -------------------------------
Jan Hughes [*]
V.P. Product Development Director of Combinatorial Chemistry
[*] Confidential Treatment Requested
<PAGE> 14
PROPERTY OF
ARGONAUT TECHNOLOGIES INC.
VIII
H
AMENDMENT
Effective June 15, 1998, the following products may be purchased under the terms
of the agreement dated June 24, 1997 between Argonaut Technologies, Inc. and
[*]. This Amendment replaces the prior Exhibit A and Exhibit C.
EXHIBIT A & C
PRODUCT & NET PRICE LISTING
Instrumentation Products
<TABLE>
<S> <C>
o Quest(TM) 210 Manual Synthesizer (Part Number 900093) $[*]
Originally referred to as TCMS by [*].
o Quest(TM) 210 Synthesizer
with Automated Solvent Wash Module (Part Number (900090) $[*]
o Quest(TM) Automated Solvent Wash upgrade (See notes below.) $[*]
</TABLE>
Quest 210 units manufactured prior to June 1, 1998 will order this part
number (Part Number 900089)
Quest 210 units manufactured after June 1, 1998 will order this part number
(Part Number 900094)
Consumable Products
o Quest(TM) 210 accessories and consumable parts
Per the original agreement, section 6.d. the prices remain [*]
percent ([*]) off Argonaut's North America. A price list is attached
that reflect the terms of the Agreement for each part.
The parties have executed this Amendment by their duly authorized
representatives, effective as of the day and year written above.
ARGONAUT TECHNOLOGIES, INC. [*]
By: /s/ JAN HUGHES By:
----------------------------- ----------------------------------
Jan Hughes [*]
V.P. Product Development Director of Combinatorial Chemistry
[*] Confidential Treatment Requested
<PAGE> 1
EXHIBIT 10.28
ARGONAUT TECHNOLOGIES, INC.
1995 INCENTIVE STOCK PLAN
(AS AMENDED AND RESTATED)
1. Purposes of the Plan. The purposes of this Stock Plan are to attract
and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees and Consultants of
the Company and its Subsidiaries and to promote the success of the Company's
business. Options granted under the Plan may be incentive stock options (as
defined under Section 422 of the Code) or non-statutory stock options, as
determined by the Administrator at the time of grant of an option and subject to
the applicable provisions of Section 422 of the Code, as amended, and the
regulations promulgated thereunder. Stock purchase rights may also be granted
under the Plan.
2. Definitions. As used herein, the following definitions shall apply:
(a) "Administrator" means the Board or any of its Committees
appointed pursuant to Section 4 of the Plan.
(b) "Board" means the Board of Directors of the Company.
(c) "Cause" means the (i) Employee's engagement in acts of
embezzlement, dishonesty or moral turpitude; (ii) the conviction of Employee for
having committed a felony; (iii) a breach by Employee of Employee's fiduciary
duties and responsibilities to the Company having the potential to result in an
adverse effect on the Company's business, operations, prospects or reputation;
(iv) gross negligence or bad faith as determined by a duly authorized
representative of the Company; or (v) the repeated failure of Employee to
perform Employee's duties and responsibilities to the reasonable satisfaction of
a duly authorized representative of the Company except in the case of death or
disability.
(d) "Change of Control" means the occurrence of any of the
following events:
(i) Any "person" (as such term is used in Sections 13(d)
and 14(d) of the Exchange Act) becomes the "beneficial owner" (as defined in
Rule 13d-3 of the Exchange Act), directly or indirectly, of securities of the
Company representing fifty percent (50%) or more of the total voting power
represented by the Company's then outstanding voting securities; or
(ii) The consummation of the sale or disposition by the
Company of all or substantially all of the Company's assets; or
(iii) The consummation of a merger or consolidation of
the Company with any other corporation, other than a merger or consolidation
which would result in the voting securities of the Company outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving entity
or its parent) at least fifty percent (50%) of the total voting power
represented by the voting securities of
<PAGE> 2
the Company or such surviving entity or its parent outstanding immediately after
such merger or consolidation.
(e) "Code" means the Internal Revenue Code of 1986, as amended.
(f) "Committee" means a Committee appointed by the Board of
Directors in accordance with Section 4 of the Plan.
(g) "Common Stock" means the Common Stock of the Company.
(h) "Company" means Argonaut Technologies, Inc., a Delaware
corporation.
(i) Constructive Termination. "Constructive Termination" shall
mean the Employee voluntarily resigns within ninety (90) days after the
occurrence of any of the following (i) without the Employee's express written
consent, a material reduction of the Employee's duties, title, authority or
responsibilities, relative to the Employee's duties, title, authority or
responsibilities as in effect immediately prior to such reduction, or the
assignment to Employee of such reduced duties, title, authority or
responsibilities; provided, however, that a reduction in duties, title,
authority or responsibilities solely by virtue of the Company being acquired and
made part of a larger entity (as, for example, when the Chief Executive Officer
of the Company remains as such following a Change of Control and is not made the
Chief Executive Officer of the acquiring corporation) shall not by itself
constitute grounds for a "Constructive Termination" (ii) without the Employee's
express written consent, a material reduction, without good business reasons, of
the facilities and perquisites (including office space and location) available
to the Employee immediately prior to such reduction; (iii) a more than ten
percent (10%) reduction by the Company of the base salary of the Employee as in
effect immediately prior to such reduction; (iv) a material reduction by the
Company in the kind or level of employee benefits, including bonuses, to which
the Employee was entitled immediately prior to such reduction with the result
that the Employee's overall benefits package is materially reduced; (v) the
relocation of the Employee to a facility or a location outside of a one-hundred
(100) mile radius from the Employee's present location or facility, without the
Employee's express written consent; (vi) the failure of the Company to obtain
the assumption of this agreement by any successors contemplated in Article X
below; or (vii) any act or set of facts or circumstances which would, under
California case law or statute constitute a constructive termination of the
Employee.
(j) "Consultant" means any person who is engaged by the Company
or any Parent or Subsidiary to render consulting or advisory services and is
compensated for such services, and any director of the Company whether
compensated for such services or not, provided that if and in the event the
Company registers any class of any equity security pursuant to the Exchange Act,
the term Consultant shall thereafter not include directors who are not
compensated for their services or are paid only a director's fee by the Company.
(k) "Continuous Status as an Employee or Consultant" means that
the employment or consulting relationship with the Company or any Parent or
Subsidiary is not interrupted or terminated. Continuous Status as an Employee or
Consultant shall not be considered interrupted in the case of: (i) any leave of
absence approved by the Company, including sick leave, military leave, or any
other personal leave; provided, however, that for purposes of Incentive Stock
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<PAGE> 3
Options, no such leave may exceed ninety (90) days, unless reemployment upon the
expiration of such leave is guaranteed by contract (including certain Company
policies) or statute; provided, further, that on the ninety-first (91st) day of
any such leave (where reemployment is not guaranteed by contract or statute) the
Optionee's Incentive Stock Option shall cease to be treated as an Incentive
Stock Option and will be treated for tax purposes as a Nonstatutory Stock
Option; or (ii) transfers between locations of the Company or between the
Company, its Parent, its Subsidiaries or its successor.
(l) "Employee" means any person, including officers and
directors, employed by the Company or any Parent or Subsidiary of the Company.
The payment of a director's fee by the Company shall not be sufficient to
constitute "employment" by the Company.
(m) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(n) "Fair Market Value" means, as of any date, the value of
Common Stock determined as follows:
(i) If the Common Stock is listed on any established
stock exchange or a national market system, including without limitation the
Nasdaq National Market of the National Association of Securities Dealers, Inc.
Automated Quotation ("NASDAQ") System, its Fair Market Value shall be the
closing sales price for such stock (or the closing bid, if no sales were
reported, as quoted on such exchange or system for the last market trading day
prior to the time of determination) as reported in The Wall Street Journal or
such other source as the Administrator deems reliable;
(ii) If the Common Stock is quoted on the NASDAQ System
(but not on the Nasdaq National Market thereof) or regularly quoted by a
recognized securities dealer but selling prices are not reported, its Fair
Market Value shall be the mean between the high bid and low asked prices for the
Common Stock on the last market trading day prior to the day of determination,
or;
(iii) In the absence of an established market for the
Common Stock, the Fair Market Value thereof shall be determined in good faith by
the Administrator in accordance with Section 260.140.40, Title 10 of the
California Code of Regulations ("California Code").
(o) "Incentive Stock Option" means an Option intended to qualify
as an incentive stock option within the meaning of Section 422 of the Code.
(p) "Nonstatutory Stock Option" means an Option not intended to
qualify as an Incentive Stock Option.
(q) "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.
(r) "Option" means a stock option granted pursuant to the Plan.
(s) "Optioned Stock" means the Common Stock subject to an Option
or a Stock Purchase Right.
-3-
<PAGE> 4
(t) "Optionee" means an Employee or Consultant who receives an
Option or Stock Purchase Right.
(u) "Parent" means a "parent corporation", whether now or
hereafter existing, as defined in Section 424(e) of the Code.
(v) "Plan" means this 1995 Incentive Stock Plan.
(w) "Restricted Stock" means shares of Common Stock acquired
pursuant to a grant of a Stock Purchase Right under Section 11 below.
(x) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 12 below.
(y) "Stock Purchase Right" means the right to purchase Common
Stock pursuant to Section 11 below.
(z) "Subsidiary" means a "subsidiary corporation", whether now
or hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 12 of
the Plan, the maximum aggregate number of shares which may be optioned and sold
under the Plan is 3,935,308 shares of Common Stock. The shares may be
authorized, but unissued, or reacquired Common Stock.
If an Option or Stock Purchase Right should expire or become
unexercisable for any reason without having been exercised in full, the
unpurchased Shares which were subject thereto shall, unless the Plan shall have
been terminated, become available for future grant under the Plan.
4. Administration of the Plan.
(a) Initial Plan Procedure. Prior to the date, if any, upon
which the Company becomes subject to the Exchange Act, the Plan shall be
administered by the Board or a committee appointed by the Board.
(b) Plan Procedure After the Date, if any, upon Which the
Company becomes Subject to the Exchange Act.
(i) Administration With Respect to Directors and
Officers. With respect to grants of Options or Stock Purchase Rights to
Employees who are also officers or directors of the Company, the Plan shall be
administered by (A) the Board if the Board may administer the Plan in compliance
with Rule 16b-3 promulgated under the Exchange Act or any successor thereto
("Rule 16b-3") with respect to a plan intended to qualify thereunder as a
discretionary plan, or (B) a committee designated by the Board to administer the
Plan, which committee shall be constituted in such a manner as to permit the
Plan to comply with Rule 16b-3 with respect to a plan intended to qualify
thereunder as a discretionary plan. Once appointed, such Committee shall
continue to serve in its designated capacity until otherwise directed by the
Board. From time to time the Board may
-4-
<PAGE> 5
increase the size of the Committee and appoint additional members thereof,
remove members (with or without cause) and appoint new members in substitution
therefor, fill vacancies, however caused, and remove all members of the
Committee and thereafter directly administer the Plan, all to the extent
permitted by Rule 16b-3 with respect to a plan intended to qualify thereunder as
a discretionary plan.
(ii) Multiple Administrative Bodies. If permitted by
Rule 16b-3, the Plan may be administered by different bodies with respect to
directors, non-director officers and Employees who are neither directors nor
officers.
(iii) Administration With Respect to Consultants and
Other Employees. With respect to grants of Options or Stock Purchase Rights to
Employees or Consultants who are neither directors nor officers of the Company,
the Plan shall be administered by (A) the Board or (B) a committee designated by
the Board, which committee shall be constituted in such a manner as to satisfy
the legal requirements relating to the administration of incentive stock option
plans, if any, of California corporate and securities laws, of the Code, and of
any applicable stock exchange (the "Applicable Laws"). Once appointed, such
Committee shall continue to serve in its designated capacity until otherwise
directed by the Board. From time to time the Board may increase the size of the
Committee and appoint additional members thereof, remove members (with or
without cause) and appoint new members in substitution therefor, fill vacancies,
however caused, and remove all members of the Committee and thereafter directly
administer the Plan, all to the extent permitted by the Applicable Laws.
(c) Powers of the Administrator. Subject to the provisions of
the Plan and, in the case of a Committee, the specific duties delegated by the
Board to such Committee, and subject to the approval of any relevant
authorities, including the approval, if required, of any stock exchange upon
which the Common Stock is listed, the Administrator shall have the authority, in
its discretion:
(i) to determine the Fair Market Value of the Common
Stock, in accordance with Section 2(k) of the Plan;
(ii) to select the Consultants and Employees to whom
Options and Stock Purchase Rights may from time to time be granted hereunder;
(iii) to determine whether and to what extent Options
and Stock Purchase Rights or any combination thereof are granted hereunder;
(iv) to determine the number of shares of Common Stock
to be covered by each such award granted hereunder;
(v)to approve forms of agreement for use under the Plan;
(vi) to determine the terms and conditions, not
inconsistent with the terms of the Plan, of any award granted hereunder;
(vii) to determine whether and under what circumstances
an Option may be settled in cash under subSection 9(f) instead of Common Stock;
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<PAGE> 6
(viii) to reduce the exercise price of any Option to the
then current Fair Market Value if the Fair Market Value of the Common Stock
covered by such Option shall have declined since the date the Option was
granted;
(ix) to determine the terms and restrictions applicable
to Stock Purchase Rights and the Restricted Stock purchased by exercising such
Stock Purchase Rights; and
(x) to construe and interpret the terms of the Plan and
awards granted pursuant to the Plan.
(d) Effect of Administrator's Decision. All decisions,
determinations and interpretations of the Administrator shall be final and
binding on all Optionees and any other holders of any Options or Stock Purchase
Rights.
5. Eligibility.
(a) Nonstatutory Stock Options and Stock Purchase Rights may be
granted to Employees and Consultants. Incentive Stock Options may be granted
only to Employees. An Employee or Consultant who has been granted an Option or
Stock Purchase Right may, if otherwise eligible, be granted additional Options
or Stock Purchase Rights.
(b) Each Option shall be designated in the written option
agreement as either an Incentive Stock Option or a Nonstatutory Stock Option.
However, notwithstanding such designations, to the extent that the aggregate
Fair Market Value:
(i) of Shares subject to an Optionee's Incentive Stock
Options granted by the Company, any Parent or Subsidiary, which
(ii) become exercisable for the first time during any
calendar year (under all plans of the Company or any Parent or Subsidiary)
exceeds $100,000, such excess Options shall be treated as Nonstatutory Stock
Options. For purposes of this Section 5(b), Incentive Stock Options shall be
taken into account in the order in which they were granted, and the Fair Market
Value of the Shares shall be determined as of the time the Option with respect
to such Shares is granted.
(c) The Plan shall not confer upon any Optionee any right with
respect to continuation of employment relationship with the Company, nor shall
it interfere in any way with his or her right or the Company's right to
terminate his or her employment relationship at any time, with or without cause.
(d) Upon the Company or a successor corporation issuing any
class of common equity securities required to be registered under Section 12 of
the Exchange Act or upon the Plan being assumed by a corporation having a class
of common equity securities required to be registered under Section 12 of the
Exchange Act, the following limitations shall apply to grants of Options and
Stock Purchase Rights to Employees:
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<PAGE> 7
(i) The foregoing limitation shall be adjusted
proportionately in connection with any change in the Company's capitalization as
described in Section 12(a).
(ii) If an Option or Stock Purchase Right is cancelled
(other than in connection with a transaction described in Section 12), the
cancelled Option or Stock Purchase Right will be counted against the limit set
forth in Section 5(e)(i). For this purpose, if the exercise price of an Option
or Stock Purchase Right is reduced, the transaction will be treated as a
cancellation of the Option or Stock Purchase Right and the grant of a new Option
or Stock Purchase Right.
6. Term of Plan. The Plan shall become effective upon the earlier to
occur of its adoption by the Board of Directors or its approval by the
shareholders of the Company, as described in Section 18 of the Plan. It shall
continue in effect for a term of ten (10) years unless sooner terminated under
Section 14 of the Plan.
7. Term of Option. The term of each Option shall be the term stated in
the Option Agreement; provided, however, that the term shall be no more than ten
(10) years from the date of grant thereof. However, in the case of an Incentive
Stock Option granted to an Optionee who, at the time the Option is granted, owns
stock representing more than ten percent (10%) of the voting power of all
classes of stock of the Company or any Parent or Subsidiary, the term of the
Option shall be five (5) years from the date of grant thereof or such shorter
term as may be provided in the Option Agreement.
8. Option Exercise Price and Consideration.
(a) The per share exercise price for the Shares to be issued
pursuant to exercise of an Option shall be such price as is determined by the
Board, but shall be subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time of
the grant of such Incentive Stock Option, owns stock representing more than ten
percent (10%) of the voting power of all classes of stock of the Company or any
Parent or Subsidiary, the per Share exercise price shall be no less than 110% of
the Fair Market Value per Share on the date of grant.
(B) granted to any Employee other than an
Employee described in the preceding paragraph, the per Share exercise price
shall be no less than 100% of the Fair Market Value per Share on the date of
grant.
(ii) In the case of a Nonstatutory Stock Option
(A) granted to a person who, at the time of the
grant of such Option, owns stock representing more than ten percent (10%) of the
voting power of all classes of stock of the Company or any Parent or Subsidiary,
the per Share exercise price shall be no less than 110% of the Fair Market Value
per Share on the date of the grant.
(B) granted to any person, the per Share
exercise price shall be no less than 85% of the Fair Market Value per Share on
the date of grant.
-7-
<PAGE> 8
(b) The consideration to be paid for the Shares to be issued
upon exercise of an Option, including the method of payment, shall be determined
by the Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant) and may consist entirely of (1) cash, (2)
check, (3) promissory note, (4) other Shares which (x) in the case of Shares
acquired upon exercise of an Option, have been owned by the Optionee for more
than six months on the date of surrender, and (y) have a Fair Market Value on
the date of surrender equal to the aggregate exercise price of the Shares as to
which said Option shall be exercised, (5) 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, or (6) any combination of the foregoing methods of payment. In
making its determination as to the type of consideration to accept, the Board
shall consider if acceptance of such consideration may be reasonably expected to
benefit the Company.
9. Exercise of Option.
(a) Procedure for Exercise; Rights as a Shareholder. Any Option
granted hereunder shall be exercisable at such times and under such conditions
as determined by the Board, including performance criteria with respect to the
Company and/or the Optionee, and as shall be permissible under the terms of the
Plan. In no event shall the Option be exercised at a rate of less than 20% per
year over five years from the date of grant of the Option.
An Option may not be exercised for a fraction of a
Share.
An Option shall be deemed to be exercised when written
notice of such exercise has been given to the Company in accordance with the
terms of the Option by the person entitled to exercise the Option and full
payment for the Shares with respect to which the Option is exercised has been
received by the Company. Full payment may, as authorized by the Board, consist
of any consideration and method of payment allowable under Section 8(b) of the
Plan. Until the issuance (as evidenced by the appropriate entry on the books of
the Company or of a duly authorized transfer agent of the Company) of the stock
certificate evidencing such Shares, no right to vote or receive dividends or any
other rights as a shareholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. The Company shall issue (or cause to
be issued) such stock certificate promptly upon exercise of the Option. No
adjustment will be made for a dividend or other right for which the record date
is prior to the date the stock certificate is issued, except as provided in
Section 12 of the Plan.
Exercise of an Option in any manner shall result in a
decrease in the number of Shares which thereafter may be available, both for
purposes of the Plan and for sale under the Option, by the number of Shares as
to which the Option is exercised.
(b) Termination of Employment or Consulting Relationship. In the
event of termination of an Optionee's Continuous Status as an Employee or
Consultant with the Company (but not in the event of an Optionee's change of
status from Employee to Consultant (in which case an Employee's Incentive Stock
Option shall automatically convert to a Nonstatutory Stock Option on the
ninety-first (91st) day following such change of status) or from Consultant to
Employee), such
-8-
<PAGE> 9
Optionee may, but only within such period of time as is determined by the
Administrator, of at least thirty (30) days, with such determination in the case
of an Incentive Stock Option not exceeding three (3) months after the date of
such termination (but in no event later than the expiration date of the term of
such Option as set forth in the Option Agreement), exercise his or her Option to
the extent that Optionee was entitled to exercise it at the date of such
termination. To the extent that Optionee was not entitled to exercise the Option
at the date of such termination, or if Optionee does not exercise such Option to
the extent so entitled within the time specified herein, the Option shall
terminate.
(c) Disability of Optionee. In the event of termination of an
Optionee's consulting relationship or Continuous Status 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.
(d) Death of Optionee. In the event of the death of an 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 expiration of the term of such
Option as set forth in the Notice of Grant), by the Optionee's estate or by a
person who acquired the right to exercise the Option by bequest or inheritance,
but only to the extent that the Optionee was entitled to exercise the Option at
the date of death. If, at the time of death, the Optionee was not entitled to
exercise his or her entire Option, the Shares covered by the unexercisable
portion of the Option shall immediately revert to the Plan. If, after death, the
Optionee's estate or a person who acquired the right to exercise the Option by
bequest or inheritance does not exercise the Option within the time specified
herein, the Option shall terminate, and the Shares covered by such Option shall
revert to the Plan.
(e) Rule 16b-3. Options granted to persons subject to Section
16(b) of the Exchange Act must comply with Rule 16b-3 and shall contain such
additional conditions or restrictions as may be required thereunder to qualify
for the maximum exemption from Section 16 of the Exchange Act with respect to
Plan transactions.
(f) Buyout Provisions. The Administrator may at any time offer
to buy out for a payment in cash or Shares, an Option previously granted, based
on such terms and conditions as the Administrator shall establish and
communicate to the Optionee at the time that such offer is made.
-9-
<PAGE> 10
10. Non-Transferability of Options and Stock Purchase Rights. Options
and Stock Purchase Rights may not be sold, pledged, assigned, hypothecated,
transferred, or disposed of in any manner other than by will or by the laws of
descent or distribution and may be exercised, during the lifetime of the
Optionee, only by the Optionee.
11. Stock Purchase Rights.
(a) Rights to Purchase. Stock Purchase Rights may be issued
either alone, in addition to, or in tandem with other awards granted under the
Plan and/or cash awards made outside of the Plan. After the Administrator
determines that it will offer Stock Purchase Rights under the Plan, it shall
advise the offeree in writing of the terms, conditions and restrictions related
to the offer, including the number of Shares that such person shall be entitled
to purchase, the price to be paid, and the time within which such person must
accept such offer, which shall in no event exceed thirty (30) days from the date
upon which the Administrator made the determination to grant the Stock Purchase
Right. The offer shall be accepted by execution of a Restricted Stock purchase
agreement in the form determined by the Administrator. Shares purchased pursuant
to the grant of a Stock Purchase Right shall be referred to herein as
"Restricted Stock."
(b) Repurchase Option. Unless the Administrator determines
otherwise, the Restricted Stock purchase agreement shall grant the Company a
repurchase option exercisable within 90 days of the voluntary or involuntary
termination of the purchaser's employment with the Company for any reason
(including death or Disability). The purchase price for Shares repurchased
pursuant to the Restricted Stock purchase agreement shall be the original price
paid by the purchaser and may be paid by cancellation of any indebtedness of the
purchaser to the Company. The repurchase option shall lapse at such rate as the
Administrator may determine, but at a minimum rate of 20% per year.
(c) Other Provisions. The Restricted Stock purchase agreement
shall contain such other terms, provisions and conditions not inconsistent with
the Plan as may be determined by the Administrator in its sole discretion. In
addition, the provisions of Restricted Stock purchase agreements need not be the
same with respect to each purchaser.
(d) Rights as a Shareholder. Once the Stock Purchase Right is
exercised, the purchaser shall have the rights equivalent to those of a
shareholder, and shall be a shareholder when his or her purchase is entered upon
the records of the duly authorized transfer agent of the Company. No adjustment
will be made for a dividend or other right for which the record date is prior to
the date the Stock Purchase Right is exercised, except as provided in Section 12
of the Plan.
12. Adjustments Upon Changes in Capitalization or Merger.
(a) Changes in Capitalization. Subject to any required action by
the shareholders of the Company, the number of shares of Common Stock covered by
each outstanding Option or Stock Purchase Right, and the number of shares of
Common Stock which have been authorized for issuance under the Plan but as to
which no Options or Stock Purchase Rights have yet been granted or which have
been returned to the Plan upon cancellation or expiration of an Option or Stock
Purchase Right, as well as the price per share of Common Stock covered by each
such outstanding
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<PAGE> 11
Option or Stock Purchase Right, shall be proportionately adjusted for any
increase or decrease in the number of issued shares of Common Stock resulting
from a stock split, reverse stock split, stock dividend, combination or
reclassification of the Common Stock, or any other increase or decrease in the
number of issued shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an Option or Stock
Purchase Right.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Board shall notify the Optionee
at least fifteen (15) days prior to such proposed action. To the extent it has
not been previously exercised, the Option or Stock Purchase Right will terminate
immediately prior to the consummation of such proposed action.
(c) Merger. Subject to subsection (d) below, in the event of a
merger of the Company with or into another corporation, the Option or Stock
Purchase Right shall be assumed or an equivalent option or right shall be
substituted by such successor corporation or a parent or subsidiary of such
successor corporation. If, in such event, the Option or Stock Purchase Right is
not assumed or substituted, the Option or Stock Purchase Right shall terminate
as of the date of the closing of the merger. For the purposes of this paragraph,
the Option or Stock Purchase Right shall be considered assumed if, following the
merger, the option or right confers the right to purchase, for each Share of
Optioned Stock subject to the Option or Stock Purchase Right immediately prior
to the merger, the consideration (whether stock, cash, or other securities or
property) received in the merger by holders of Common Stock for each Share held
on the effective date of the transaction (and if holders were offered a choice
of consideration, the type of consideration chosen by the holders of a majority
of the outstanding Shares); provided, however, that if such consideration
received in the merger was not solely common stock of the successor corporation
or its Parent, the Administrator may, with the consent of the successor
corporation, provide for the consideration to be received upon the exercise of
the Option or Stock Purchase Right, for each Share of Optioned Stock subject to
the Option or Stock Purchase Right, to be solely common stock of the successor
corporation or its Parent equal in fair market value to the per share
consideration received by holders of Common Stock in the merger.
(d) Change of Control. In the event of (a) A Constructive
Termination or (b) Optionee's termination by the Company without Cause, within
twelve (12) months following a Change of Control, all outstanding options shall
become fully vested and exercisable.
-11-
<PAGE> 12
13. Time of Granting Options and Stock Purchase Rights. The date of
grant of an Option or Stock Purchase Right shall, for all purposes, be the date
on which the Administrator makes the determination granting such Option or Stock
Purchase Right, or such other date as is determined by the Board. Notice of the
determination shall be given to each Employee or Consultant to whom an Option or
Stock Purchase Right is so granted within a reasonable time after the date of
such grant.
14. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time amend,
alter, suspend or discontinue the Plan, but no amendment, alteration, suspension
or discontinuation shall be made which would impair the rights of any Optionee
under any grant theretofore made, without his or her consent. In addition, to
the extent necessary and desirable to comply with Rule 16b-3 under the Exchange
Act or with Section 422 of the Code (or any other applicable law or regulation,
including the requirements of the NASD or an established stock exchange), the
Company shall obtain shareholder approval of any Plan amendment in such a manner
and to such a degree as required.
(b) Effect of Amendment or Termination. Any such amendment or
termination of the Plan shall not affect Options or Stock Purchase Rights
already granted, and such Options and Stock Purchase Rights shall remain in full
force and effect as if this Plan had not been amended or terminated, unless
mutually agreed otherwise between the Optionee and the Board, which agreement
must be in writing and signed by the Optionee and the Company.
15. Conditions Upon Issuance of Shares. Shares shall not be issued
pursuant to the exercise of an Option or Stock Purchase Right unless the
exercise of such Option or Stock Purchase Right and the issuance and delivery of
such Shares pursuant thereto shall comply with all relevant provisions of law,
including, without limitation, the Securities Act of 1933, as amended, the
Exchange Act, the rules and regulations promulgated thereunder, and the
requirements of any stock exchange upon which the Shares may then be listed, and
shall be further subject to the approval of counsel for the Company with respect
to such compliance.
As a condition to the exercise of an Option or Stock Purchase
Right, the Company may require the person exercising such Option or Stock
Purchase Right to represent and warrant at the time of any such exercise that
the Shares are being purchased only for investment and without any present
intention to sell or distribute such Shares if, in the opinion of counsel for
the Company, such a representation is required by any of the aforementioned
relevant provisions of law.
16. Reservation of Shares. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
The inability of the Company to obtain authority from any
regulatory body having jurisdiction, which authority is deemed by the Company's
counsel to be necessary to the lawful issuance and sale of any Shares hereunder,
shall relieve the Company of any liability in respect of the failure to issue or
sell such Shares as to which such requisite authority shall not have been
obtained.
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<PAGE> 13
17. Agreements. Options and Stock Purchase Rights shall be evidenced by
written agreements in such form as the Board shall approve from time to time.
18. Shareholder Approval. Continuance of the Plan shall be subject to
approval by the shareholders of the Company within twelve (12) months before or
after the date the Plan is adopted. Such shareholder approval shall be obtained
in the degree and manner required under applicable state and federal law and the
rules of any stock exchange upon which the Common Stock is listed.
19. Information to Optionees and Purchasers. The Company shall provide
to each Optionee and to each individual who acquired Shares pursuant to the
Plan, not less frequently than annually during the period such Optionee or
purchaser has one or more Options or Stock Purchase Rights outstanding, and, in
the case of an individual who acquired Shares pursuant to the Plan, during the
period such individual owns such Shares, copies of annual financial statements.
The Company shall not be required to provide such statements to key employees
whose duties in connection with the Company assure their access to equivalent
information.
-13-
<PAGE> 1
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated April 18, 2000, in the Registration Statement (Form S-1
No. 333- ) and related Prospectus of Argonaut Technologies, Inc. for the
registration of shares of its common stock.
Palo Alto, California
April 27, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM AUDITED
FINANCIAL STATEMENTS INCLUDED IN THE REGISTRATION STATEMENT AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C> <C> <C> <C>
<PERIOD-TYPE> 3-MOS YEAR YEAR YEAR 3-MOS
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<SECURITIES> 5,137 997 0 6,127 0
<RECEIVABLES> 2,295 1,182 2,601 3,462 2,131
<ALLOWANCES> (50) (50) (50) (50) (50)
<INVENTORY> 2,500 1,172 2,191 2,110 2,411
<CURRENT-ASSETS> 14,511 10,299 7,466 17,234 7,084
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<DEPRECIATION> (2,550) (986) (1,654) (2,368) (1,838)
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<SALES> 3,564 5,826 12,076 10,558 2,981
<TOTAL-REVENUES> 3,564 5,826 12,076 10,558 2,981
<CGS> 1,399 3,155 5,608 4,689 1,241
<TOTAL-COSTS> 1,399 3,155 5,608 4,689 1,241
<OTHER-EXPENSES> 1,261 4,292 4,922 4,180 975
<LOSS-PROVISION> 0 0 0 0 0
<INTEREST-EXPENSE> (187) (190) 545 (698) (184)
<INCOME-PRETAX> (2,017) (6,200) (5,656) (7,603) (1,397)
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<NET-INCOME> (2,017) (6,200) (5,656) (7,603) (1,397)
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