SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark one)
X Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934. For the quarterly period ended September 30,
1997.
-- Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934. For the transition period from _______ to _______.
Commission File Number
0-19423
Somatogen, Inc.
(Exact name of registrant as specified in its charter)
Delaware 84-0991858
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2545 Central Ave., Suite FD 1, Boulder, CO 80301-2857
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (303) 440-9988
Securities registered pursuant to Section 12(g) of the Act:
Common Stock $.001 par value
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No __
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Common Stock $.001 par value 20,873,220
Class Outstanding at October 22, 1997
There are a total of 11 pages included in this document.
Somatogen, Inc., the Somatogen logo and Optro are tradenames and/or trademarks
of the Company. All other brand names or trademarks appearing in this Form 10-Q
are the property of their respective holders.
<PAGE> 2
SOMATOGEN, INC.
INDEX
PART I. FINANCIAL INFORMATION PAGE NO.
Consolidated Balance Sheet -
September 30, 1997 and June 30, 1997 3
Consolidated Statement of Operations-
for the three-month periods ended September 30, 1997
and 1996 and the period from July 10, 1985 (inception) to
September 30, 1997 4
Consolidated Statement of Cash Flows -
for the three-month periods ended September 30, 1997 and
1996 and the period from July 10, 1985 (inception) to
September 30, 1997 5
Notes to Consolidated Financial Statements 6
Management's Discussion and Analysis of Financial Condition
and Results of Operations 7-9
PART II. OTHER INFORMATION 10
SIGNATURES 11
<PAGE> 3
SOMATOGEN, INC.
(A Corporation in the Development Stage)
CONSOLIDATED BALANCE SHEET
(In thousands, except share and per share amounts)
ASSETS
<TABLE>
<CAPTION>
September 30, June 30,
1997 1997
------------ -------
(unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 13,400 $ 24,868
Short-term investments 26,982 19,158
Other receivables 530 483
Prepaid expenses and other current assets 513 382
----------- -----------
Total current assets 41,425 44,891
Property and equipment, at cost, net of
accumulated depreciation and amortization 3,706 3,842
Assets held for sale 5,787 5,942
Other assets, net 1,368 1,356
----------- -----------
$ 52,286 $ 56,031
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,300 $ 1,363
Accrued payroll 761 543
Other accrued liabilities 563 527
----------- -----------
Total current liabilities 2,624 2,433
----------- -----------
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.001 par value, 10,000,000 shares
authorized at September 30, 1997,
no shares issued or outstanding -- --
Common stock, $.001 par value; 35,000,000 shares
authorized, 20,870,746 and 20,865,362 shares
issued and outstanding at September 30, 1997 and
June 30, 1997, respectively 21 21
Additional paid-in capital 205,662 205,652
Deficit accumulated during the development stage (155,862) (151,888)
Deferred compensation related to grant of options (159) (187)
----------- -----------
Total stockholders' equity 49,662 53,598
----------- -----------
$ 52,286 $ 56,031
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 4
SOMATOGEN, INC.
(A Corporation in the Development Stage)
CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except share and per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Period from
Three-months ended July 10, 1985
September 30, (inception) to
1997 1996 September 30, 1997
---- ---- ------------------
<S> <C> <C> <C>
Revenue:
Technology disclosure and license fees $ -- $ -- $ 4,904
Research and development grants
and contracts -- -- 1,684
------------ ------------ -------------
Total revenue -- -- 6,588
------------ ------------ -------------
Operating expense:
Research and development 3,750 4,881 125,081
Reimbursements from Lilly -- (1,669) (15,577)
Reimbursements to Lilly -- 840 4,483
----------- ------------ -------------
Research and development, net 3,750 4,052 113,987
General, administrative and marketing 823 1,010 32,195
Writedown of manufacturing
facility assets -- -- 29,194
----------- ------------ -------------
Total operating expense 4,573 5,062 175,376
----------- ------------ -------------
Operating loss (4,573) (5,062) (168,788)
Interest and other income, net 599 685 17,844
----------- ------------ -------------
Loss from continuing operations (3,974) (4,377) (150,944)
Discontinued operations:
Loss from operations of subsidiary -- -- (1,225)
Gain on sale of subsidiary -- -- 300
------------ ----------- -------------
Net loss $ (3,974) $ (4,377) $ (151,869)
============ =========== =============
Net loss per share $ (0.19) $ (0.21)
============ ============
Shares used in calculating
per share data 20,871,000 20,703,000
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 5
SOMATOGEN, INC.
(A Corporation in the Development Stage)
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands - unaudited)
<TABLE>
<CAPTION>
Period from
Three-months ended July 10, 1985
September 30, (inception) to
1997 1996 September 30, 1997
---- ---- ------------------
<S> <C> <C> <C>
Cash flows provided by (used in) operating activities:
Net loss $ (3,974) $ (4,377) $ (151,869)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 365 400 16,817
Writedown of manufacturing facility assets -- -- 29,194
Other, net (1) 30 1,212
Changes in assets and liabilities:
Receivables (47) 459 (368)
Prepaid expenses and other current assets (131) 151 (488)
Accounts payable and accrued liabilities 191 (466) 2,775
Other, net -- -- 335
----------- ----------- ------------
Net cash used in operating activities (3,597) (3,803) (102,392)
----------- ----------- ------------
Cash flows provided by (used in) investing activities:
Purchase of short-term investments (15,613) (5,246) (324,292)
Proceeds from sale of short-term investments 7,789 13,479 297,310
Purchases of property and equipment (154) (272) (23,665)
Proceeds from sale of property and equipment 145 102 3,455
Additions to construction-in-progress -- -- (18,956)
Other, net (48) (61) (9,336)
----------- ----------- ------------
Net cash provided by (used in) investing activities (7,881) 8,002 (75,484)
----------- ----------- ------------
Cash flows provided by (used in) financing activities:
Payments of capital lease obligations and long-
term debt -- (80) (10,467)
Net proceeds from issuance of stock and warrants 10 93 198,224
Other -- -- 3,519
----------- ----------- ------------
Net cash provided by financing activities 10 13 191,276
----------- ----------- ------------
Net increase (decrease) in cash and cash equivalents (11,468) 4,212 13,400
Cash and cash equivalents at beginning of period 24,868 29,541 --
----------- ----------- ------------
Cash and cash equivalents at end of period $ 13,400 $ 33,753 $ 13,400
=========== =========== ============
Supplemental disclosures of cash flow information:
Cash paid for interest $ 3 $ 7 $ 2,402
Capital lease obligations incurred for purchase
of property and equipment -- -- 5,318
Equipment deposits transferred to net
property, plant and equipment -- -- 3,423
Net property, plant and equipment transferred
to assets held for sale -- -- 9,541
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 6
SOMATOGEN, INC.
(A Corporation in the Development Stage)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1997
(Unaudited)
Note 1. Statement of Accounting Presentation
In the opinion of the Company, the accompanying unaudited consolidated
financial statements include all adjustments (consisting only of normal
recurring accruals) necessary to fairly state the Company's consolidated
financial position as of September 30, 1997 and the consolidated results of
operations and of cash flows for the three-month periods ended September 30,
1997 and 1996, and for the period from July 10, 1985 (inception) to September
30, 1997. The accompanying consolidated financial statements should be read in
conjunction with the consolidated financial statements included in the Company's
Annual Report on Form 10-K for the year ended June 30, 1997. The information set
forth in the accompanying consolidated balance sheet as of June 30, 1997, has
been derived from the audited consolidated balance sheet included in the
Company's Annual Report on Form 10-K for the year ended June 30, 1997.
Interim results are not necessarily indicative of the results for the
full year.
Note 2. Strategic Alliance and Research and Development Arrangement
In June 1994, the Company entered into a global strategic alliance (the
"Alliance") with Eli Lilly and Company ("Lilly") to co-develop Optro, the
Company's lead development compound. In March 1997, the Company received notice
of Lilly's decision to discontinue its co-development of Optro. The termination
was effective May 20, 1997, at which time all rights to Optro reverted back to
the Company, except the marketing rights to Optro in Scandinavia which Pharmacia
& Upjohn Inc. received under its 1991 agreement with the Company. In accordance
with the termination provision of the Alliance, the Company received a one-time
termination payment of $6,000,000 in May 1997 and in July 1997, the Company and
Lilly executed a revolving credit agreement which provides that the Company may
borrow up to $8,000,000 from Lilly.
Note 3. Net Loss Per Share
Net loss per share is computed using the weighted average number of shares
of common stock outstanding. Common equivalent shares from stock options and
warrants are excluded from the computation as their effect is antidilutive.
<PAGE> 7
SOMATOGEN, INC.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Except for the historical information contained herein, the following
discussion contains forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ materially from those
discussed here. Factors that could cause or contribute to such differences
include, but are not limited to, those discussed in this section and those
discussed in the Company's Annual Report on Form 10-K for the year ended June
30, 1997.
Since 1987, Somatogen has been a development stage Company and has devoted
substantially all of its efforts and resources to research and development
related to its recombinant hemoglobin technology. No revenue has been generated
by Somatogen to date from commercial product sales, and such sales are not
expected to commence for several years, if at all. To achieve sustained
profitable operations, Somatogen must successfully develop, obtain regulatory
approval for, manufacture and market its products. The time-frame necessary to
achieve market success for any individual product is long and uncertain. There
can be no assurance that the Company will be able to achieve profitability at
all or on a sustained basis.
For the period from its inception to September 30, 1997, the Company
incurred a cumulative net loss of $151,869,000. The Company expects to incur
substantial and increasing operating losses during the remainder of fiscal 1998
and for the next several years as the Company's products will require
significant additional research and development including extensive preclinical
and clinical testing, before the Company will be able to apply for and obtain
approval from the FDA or corresponding foreign authorities for any indication,
if at all. There can be no assurance that the Company's research and development
efforts will be successful, that any of the Company's products under
development, including Optro, will prove to be safe or effective in clinical
trials, that the Company will be able to obtain regulatory approval to sell any
products, that the products can be manufactured at an acceptable cost and with
appropriate quality, or that any products, if and when approved, could be
successfully marketed.
Results of Operations
Revenue
The Company did not recognize any revenue for the three-month periods ended
September 30, 1997 or 1996.
Operating Expenses
Total operating expense decreased by 10% to $4,573,000 during the quarter
ended September 30, 1997 from $5,062,000 for the comparable period in the
previous fiscal year.
Net research and development expense for the quarter ended September 30,
1997 decreased by 7% to $3,750,000 from $4,052,000 for the comparable period in
the previous fiscal year. The decrease in net research and development expense
was primarily due to lower personnel and laboratory supply expenses, partially
offset by an increase in clinical trial expenditures and a decrease in
reimbursements from Eli Lilly and Company ("Lilly").
<PAGE> 8
General, administrative and marketing expense decreased by 19% to $823,000
for the quarter ended September 30, 1997 from $1,010,000 for the comparable
quarter in the previous fiscal year. This decrease was primarily a result of
decreases in personnel and consulting expenses.
Interest and Other Income, Net
Interest and other income, net decreased by 13% to $599,000 for the quarter
ended September 30, 1997 from $685,000 for the quarter ended September 30, 1996.
This decrease was primarily a result of decreased average investment balances
partially offset by higher yields on U.S. government securities, high grade
commercial paper and money market funds held by the Company.
Net Loss
The net loss for the quarter ended September 30, 1997 was $3,974,000 (or
$0.19 per share) compared to $4,377,000 (or $0.21 per share) for the same period
in fiscal 1997.
Liquidity and Capital Resources
Somatogen's operations to date have consumed substantial amounts of cash.
Negative cash flow from operations is expected to increase during the remainder
of fiscal 1998 compared to the levels experienced during the three-month period
ended September 30, 1997, and to increase in subsequent fiscal years as the
clinical studies for Optro increase in scope and the preclinical and clinical
studies of new products are undertaken. Somatogen will need to raise significant
additional funds in order to fund the Company's future operations and capital
expenditures prior to commercialization of the Company's products. The Company
has relied primarily on public and private offerings of equity and cost sharing
and equity investments pursuant to the Lilly strategic alliance to fund its
operations and upon equipment leasing arrangements to finance the acquisition of
capital equipment for the Company's laboratory and pilot manufacturing
facilities.
At September 30, 1997 the Company had cash, cash equivalents and short-term
investments of $40,382,000. The Company's cash, cash equivalents and short-term
investments decreased approximately $3,644,000 during the three-month period
ended September 30, 1997. This decrease was primarily a result of the use of
cash for operations.
In September 1992, the Company commenced construction of a clinical
manufacturing facility. The Company had also acquired land for, and begun the
design of, a larger commercial manufacturing facility. In conjunction with
entering into the Lilly strategic alliance, an evaluation of the Company's
future manufacturing requirements was completed and construction of the clinical
manufacturing facility was discontinued. During the fourth quarter of fiscal
1994, the Company recognized a non-recurring charge, which was principally
non-cash, associated with the writedown of its clinical and commercial
manufacturing assets of $29,200,000. The components of the charge included
approximately $21,000,000 for the clinical manufacturing facility, $6,000,000
for related manufacturing equipment and $2,200,000 for engineering design costs
for the proposed commercial manufacturing facility.
<PAGE> 9
Land and building related to manufacturing facilities and the related
manufacturing equipment aggregating $5,787,000 are classified in Somatogen's
balance sheet as assets held for sale. During the three-month period ended
September 30, 1997, the Company realized approximately $145,000 in proceeds from
the sale of assets held for sale. The Company believes the aggregate carrying
value of all assets held for sale approximates the assets' net realizable value;
however, the Company continues to monitor estimated realizable values on a
quarterly basis. There can be no assurances that the Company will realize the
aggregate carrying value of assets held for sale. Proceeds from such asset sales
are being used for general corporate purposes.
The Company historically has leased a significant portion of the equipment
used in its laboratory and pilot manufacturing facilities. As of September 30,
1997, the Company had aggregate future operating lease obligations of
approximately $2,364,000. The Company spent $154,000 during the three-month
period ended September 30, 1997 for the purchase of capital equipment and
leasehold improvements.
The Company's near-term operating requirements include increased research
and development expenditures, including costs related to clinical trials and new
product development and manufacturing. The Company's capital spending program
includes purchases of additional equipment for its research and development
laboratories and pilot manufacturing facility. In subsequent fiscal years, the
Company's operating requirements are expected to include continuing increases in
research and development funding to cover the costs of expanded preclinical and
clinical studies, expenditures associated with commercial manufacturing, as well
as general, administrative, marketing and distribution expenses.
In order to meet its long-term financing requirements, the Company may
pursue a number of financing alternatives, including public and/or private
offerings of securities and strategic alliances. The Company is currently
engaged in preliminary discussions with potential strategic partners. However,
there can be no assurance that the Company will be able to enter into any
strategic relationships and/or raise additional financing. There can be no
assurance that any strategic relationship which the Company may enter into will
be on terms favorable to the Company, or that any additional funding which may
become available to the Company will be on acceptable terms. The Company's
ability to raise additional financing may be dependent on many factors beyond
the Company's control, including the state of the capital markets and the rate
of progress of the Company's clinical trials. Any additional financing that the
Company may be able to obtain could result in substantial dilution to existing
stockholders. If adequate funds are not available, the Company will be required
to significantly curtail operations. Any such action could impact the Company's
research and development programs, including the Company's clinical trial
program. Any of these events could adversely affect the Company's ability to
commercialize its products.
Cash requirements for the Company may vary materially from those now
planned due to results of research and development, results of clinical testing,
changes in focus and direction of the Company's research and development
programs, manufacturing processes, competitive and technological advances, the
FDA regulatory process, changes in the Company's marketing and distribution
strategy and other factors.
<PAGE> 10
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
10.77 CB Commercial Real Estate Group, Inc. Exclusive
Right-to-Sell Listing Contract, dated September 17, 1997.
27.1 Financial Data Schedule (submitted to the SEC only in
electronic format)
b) Reports on Form 8-K
None
<PAGE> 11
SOMATOGEN, INC.
SIGNATURES
The financial information furnished herein has not been audited by
independent auditors; however, in the opinion of management all adjustments
necessary for a fair presentation for the three-month periods ended September
30, 1997 and 1996, have been included.
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: October 27, 1997 SOMATOGEN, INC.
Andre de Bruin
Chairman of the Board, President
and Chief Executive Officer
(Authorized Signatory)
Timothy D. Hoogheem
Senior Vice President of Finance
and Administration, Chief Financial
Officer, Treasurer and Assistant Secretary
(Principal Financial Officer)
Conrad A. McCarty
Corporate Controller
(Principal Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 1997 AND THE CONSOLIDATED
STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> SEP-30-1997
<CASH> 13,400
<SECURITIES> 26,982
<RECEIVABLES> 530
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 41,425
<PP&E> 17,903
<DEPRECIATION> 14,197
<TOTAL-ASSETS> 52,286
<CURRENT-LIABILITIES> 2,624
<BONDS> 0
<COMMON> 21
0
0
<OTHER-SE> 49,641
<TOTAL-LIABILITY-AND-EQUITY> 52,286
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,750
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3
<INCOME-PRETAX> (3,974)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,974)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,974)
<EPS-PRIMARY> (0.19)
<EPS-DILUTED> 0
</TABLE>
Compensation charged by real estate brokers is not set by law. Such charges are
established by each real estate broker.
DIFFERENT BROKERAGE RELATIONSHIPS ARE AVAILABLE WHICH INCLUDE BUYER AGENCY,
SELLER AGENCY, SUBAGENCY OR TRANSACTION-BROKER.
EXCLUSIVE RIGHT-TO-SELL LISTING CONTRACT
(FARM AND RANCH/VACANT LAND)
(SELLER AGENCY)
Denver, Colorado 9/17/97
SOMATOGEN, INC. ("Seller") hereby irrevocably appoint(s) CB Commercial Real
Estate Group, Inc., 1050 - 17th Street, Suite 800, Denver, Colorado 80265
("Broker") as Seller's exclusive agent for the purposes and under the terms
specified herein, and the parties agree:
1. PURPOSE OF AGENCY. The purpose of this agency contract ("Listing
Contract") is to engage the efforts of Broker to accomplish the sale of real
property legally described as:
Lot 8 Flatiron Industrial Park 5
also known as 2400 - 55th Street, Boulder, Colorado 80301, together with the
following water rights: None the following water stock: None all well rights,
reservoir or storage rights, if any; all pumping or well equipment, if any, the
following growing crops: None and all items of personal property to be conveyed
pursuant to Section 8 (collectively, the "Property").
2. BROKER'S SERVICES. Broker is a limited agent of the Seller and will
represent only Seller.
(a) Broker shall promote the interests of the Seller with the utmost
good faith, loyalty and fidelity, including, but not limited to:
(1) Seeking a price and terms which are acceptable to the Seller,
except that Broker shall not be obligated to seek additional
offers to purchase the Property while the Property is subject to a
contract for sale;
<PAGE> 2
(2) Presenting all offers to and from the Seller in a timely
manner regardless of whether the Property is subject to a contract
for sale;
(3) Disclosing to the Seller adverse material facts actually known
by the Broker;
(4) Counseling the Seller as to any material benefits or risks of
a transaction actually known by the Broker;
(5) Advising the Seller to obtain expert advice as to material
matters about which the Broker knows but the specifics of which
are beyond the expertise of the Broker;
(6) Accounting in a timely manner for all money and property
received; and
(7) Informing the Seller that such Seller may be vicariously
liable for the acts of such Seller's agent or any subagent
when the Broker is acting within the scope of the agency
relationship;
(b) Broker shall not disclose the following information without the
informed consent of the Seller:
(1) That the Seller is willing to accept less than the asking
price for the Property;
(2) What the motivating factors are for the Seller to sell the
Property;
(3) That the Seller will agree to financing terms other than
those offered;
(4) Any material information about the Seller unless the
disclosure is required by law or failure to disclose such
information would constitute fraud or dishonest dealing; or
(5) Any facts or suspicions regarding circumstances which may
psychologically impact or stigmatize any real property
pursuant to Colorado law.
(c) Broker shall disclose to any prospective buyer all adverse
material facts actually known by Broker including but not limited
to adverse material facts pertaining to the title to the Property
and the physical condition of the Property, any material defects
in the Property, and any environmental hazards affecting the
Property which are required by law to be disclosed.
3. SALE. "Sale of the Property" or "Sale" means the voluntary transfer or
exchange of any interest in the Property or the voluntary creation of the right
to acquire any interest in the Property.
4. EFFECT OF THIS LISTING CONTRACT. By this appointment, Seller agrees to
conduct all negotiations for the Sale of the Property only through Broker, and
to refer to Broker all inquiries received in any form from real estate brokers,
salespersons, perspective buyers, tenants or any other source during the time
this Listing Contract is in effect. Seller authorizes Broker to disclose any
facts about the Property. In addition, Seller agrees that any Broker
compensation which is conditioned upon the Sale of the Property shall be earned
by Broker as set forth herein without any discount or allowance for any efforts
made by Seller or by any representative of Seller in connection with the Sale of
the Property.
<PAGE> 3
5. THE LISTING PERIOD. Broker's authority shall begin September 17, 1997
and shall continue through September 17, 1998 ("Listing Period").
6. PRICE AND TERMS. Price: U.S. $3,500,000.00 Terms: Cash. Minimum
amount of earnest money deposit - Acceptable to owner.
7. DEPOSITS. Broker is authorized to accept earnest money deposits pursuant
to a proposed Sale contract. Broker is authorized to deliver the earnest money
deposit to the closing agent, if any, at or before the closing of the Sale
contract.
8. Intentionally omitted from contract.
9. TITLE AND ENCUMBRANCES. Seller represents to Broker that title to the
Property is solely in Seller's name. Seller shall deliver to Broker true copies
of all relevant title materials, lease(s) and survey(s) in Seller's possession
and shall disclose to Broker all easements, liens and encumbrances, if any, on
the Property of which Seller has knowledge. Seller authorizes the holder of any
obligation secured by an encumbrance on the Property to disclose to Broker the
amount owing on said encumbrance and the terms thereof.
In case of Sale, Seller agrees to convey, by a special Warranty deed,
only that title Seller has in the Property. All monetary encumbrances (such as
mortgages, deeds of trust, liens, financing statements) shall be paid by Seller
and released except as Seller and buyer may otherwise agree. Existing monetary
encumbrances are as follows: none. The Property is subject to the following
leases and tenancies: none.
10. EVIDENCE OF TITLE. Seller agrees to furnish buyer, at Seller's expense,
a commitment for, and a policy of, title insurance to the Property certified to
a current date in the amount specified by any Sale contract.
11. PRORATIONS. General taxes for the year of closing, based on the taxes
for the calendar year immediately preceding closing, rents, water and sewer
charges, owner's association dues and interest on continuing loans(s), if any,
shall be prorated to date of closing.
12. POSSESSION. Possession of the Property shall be delivered to buyer as
follows: upon delivery of deed, subject to leases and tenancies as described in
Section 9.
13. MATERIAL DEFECTS -- BROKER DISCLOSURES -- INSPECTION. Seller agrees
that any defects of a material nature (including, but not limited to, structural
defects; soil conditions; violations of health, zoning or building laws;
nonconforming uses and zoning variances) actually known by Broker must be
disclosed by Broker to any prospective buyer. Seller agrees that any buyer may
have the Property and inclusions inspected.
<PAGE> 4
14. COMMISSION TO BROKER.
(a) Commission. In consideration of the services to be performed by
Broker, Seller agrees to pay Broker as follows:
(1) Sale Commission: 6% of the gross sales price in U.S. dollars.
(b) When Earned. Such commission shall be earned upon the happening of
any of the following:
(1) Any Sale of the Property within the Listing Period by
Seller, by Broker or by any other person;
(2) Intentionally omitted from contract.
(3) Any Sale of the Property within 90 calendar days subsequent to
the expiration of the Listing Period ("Holdover Period") to
anyone with whom Broker negotiated and whose name was
submitted, in writing, to Seller by Broker during the Listing
Period (including any extensions thereof).
(c) When Applicable and Payable. The commission obligation shall
apply to a Sale made during the Listing Period or made during
any extension of such original or extended term. The commission
described in subsection (a)(1) shall be payable at the time of the
closing of the Sale as contemplated by subsection (b)(1) or
(b)(3).
15. LIMITATION ON BROKER'S COMPENSATION. Broker shall not accept
compensation from the buyer, the buyer's agent, or any entity participating in
or providing services for the Sale without the written consent of Seller.
16. OTHER BROKERS, ASSISTANCE -- MULTIPLE LISTING SERVICE.
(a) Broker shall seek assistance from and offer compensation to the
following brokers outside of the listing company:
(1) Intentionally omitted from contract.
(2) Brokers representing the buyer ("Buyer Agents"), (Buyer Agents
representing the buyer owe duties of utmost good faith,
loyalty and fidelity to buyer only. Seller is not vicariously
liable for the acts of Buyer Agents). Broker will offer
compensation to Buyer Agents as follows: 50% of total
commission.
(3) Brokers assisting the buyer in the transactions but not acting
as agents ("Transaction-Brokers"). (Transaction-Brokers must
exercise reasonable skill and care for the parties. Seller is
not vicariously liable for the acts of Transaction-Broker).
Broker will offer compensation to Transaction-Broker as
follows: 50% of total commission.
(b) Broker will not submit the Property to a multiple listing
service.
<PAGE> 5
17. IN-COMPANY DUAL AGENCY AND TRANSACTION-BROKER. If a written Dual Agency
Addendum or Transaction-Broker Addendum is signed by Seller, Broker may show
Property to buyers represented or assisted by Broker.
18. FORFEITURE OF PAYMENTS. In the event of a forfeiture of payments made
by a buyer, the sums received shall be divided between Broker and Seller,
one-half thereof to Broker, but not to exceed the commission agreed upon herein,
and the balance to Seller.
19. COST OF SERVICES; REIMBURSEMENT. Unless otherwise specified in Section
28, Broker shall bear all expenses incurred by Broker, if any, to market
Property and to compensate cooperating brokers, if any. Broker will not obtain
or order any other products or services unless Seller agrees in writing to pay
for them promptly when due. Unless otherwise agreed, Broker shall not be
obligated to advance funds for the benefit of Seller in order to complete a
closing (Examples: surveys, radon tests, soil tests, title reports, engineering
studies). Seller shall reimburse Broker for payments made by Broker for such
other products or services authorized by Seller.
20. MAINTENANCE OF THE PROPERTY. Seller agrees that Broker shall not be
responsible for maintenance of the Property nor shall Broker be liable for
damage of any kind occurring to the Property, unless such damage shall be caused
by the negligence of Broker.
21. OTHER SELLERS. Seller acknowledges that Broker may have agreements with
other sellers to market and sell their properties.
22. NONDISCRIMINATION. The parties agree not to discriminate unlawfully
against any prospective buyer because of the race, creed, color, sex, marital
status, national origin, familial status, physical or mental handicap, religion
or ancestry of such person.
23. RECOMMENDATION OF LEGAL COUNSEL. By signing this document, Seller
acknowledges that Broker has advised that this document has important legal
consequences and has recommended consultation with legal and tax or other
counsel, before signing this contract.
24. ALTERNATIVE DISPUTE RESOLUTION: MEDIATION. If a dispute arises relating
to this contract, and is not resolved, the parties involved in such dispute
(Disputants) shall first proceed in good faith to submit the matter to
mediation. The Disputants will jointly appoint an acceptable mediator and will
share equally in the cost of such mediation. In the event the entire dispute is
not resolved within thirty (30) calendar days from the date written notice
requesting mediation is sent by one Disputant to the other(s), the mediation,
unless otherwise agreed, shall terminate. This section shall not alter any date
in this contract, unless otherwise agreed.
<PAGE> 6
25. ATTORNEY FEES. In case of arbitration or litigation between Seller and
Broker in their respective capacities, the parties agree that costs and
reasonable attorney fees shall be awarded to the prevailing party.
26. MODIFICATION OF THIS LISTING CONTRACT. No subsequent modification of
any of the terms of this Listing Contract shall be valid, binding upon the
parties, or enforceable unless made in writing and signed by the parties.
27. ENTIRE AGREEMENT. This listing Contract constitutes the entire
agreement between the parties relating to the subject hereof, and any prior
agreements pertaining thereto, whether oral or written, have been merged and
integrated into this Listing Contract.
28. ADDITIONAL PROVISIONS: (The language of these additional provisions,
Sections 29 and 30, has not been approved by the Colorado Real Estate
Commission.)
29. If any of the following parties enters into a purchase contract for the
subject property within the first 45 days of this Exclusive Right to Sell
Agreement, then "No broker fee will be due." Broker shall be due one quarter
(1/4) of the fee stated herein should one of the following parties enter into a
purchase contract during the second 45 days and 100% after 90 days of listing.
These parties are:
1) Flatiron Park Company or any of its Agents - Larry Frey
2) WW Reynolds Company
3) Boulder County
30. If the Property is sold as part of a contract to the sale of 5600
Flatiron Parkway ("CMF-1") by Binswanger, a Broker retained by the Seller for
the purpose of selling CMF-1, then Binswanger shall be entitled to 50% of the
total commission.
31. COPIES OF AGREEMENT. This Listing Contract is executed in multiple
copies and Seller acknowledges receipt of one copy of this Listing Contract
signed by Broker.
32. COUNTERPARTS. If more than one person is named as a Seller herein, this
Listing Contract may be executed by each Seller individually and when each
Seller has executed a copy of this Listing Contract such copies taken together
shall be deemed to be a full and complete contract between the parties.
Accepted: CB Commercial Real Estate Group, Inc. Somatogen, Inc.
-------------------------------------- ---------------
Broker Seller
By: Stan S. O'Dell Timothy D. Hoogheem
Address: 1050 - 17th Street, Suite 800 2545 Central Avenue
Denver, Colorado 80265 Suite FD1
Phone: (303) 628-7400 Boulder, Colorado 80301
(303) 440-9988
<PAGE> 7
DUAL AGENCY ADDENDUM
(For In-Company Transactions)
1. AMENDMENT TO AGENCY CONTRACT: This Dual Agency Addendum is part of a Listing
Contract dated September 17, 1997 between the broker named below and its sales
agents ("Broker") and the undersigned Buyer or Seller. If this addendum is used
with a lease or rental transaction, the word "Seller" shall mean "Landlord" and
the word "Buyer" shall mean "Tenant". This Addendum will control in the event of
any conflict with the contract to which it is attached.
2. LIMITATION ON BROKER'S AGENCY OBLIGATIONS. When acting as the agent for one
party (either Buyer or Seller), Broker has duties and obligations which include
utmost good faith, loyalty and fidelity to that one principal. If the principal
consents, however, Broker may act as a Dual Agent when both the Seller and Buyer
have an agency relationship with the same real estate company ("In-Company
Transaction"). A Dual Agent is a broker engaged as a limited agent for both
Seller and Buyer. Dual agency creates a conflict of interest because Broker's
duties and obligations of confidentiality, full disclosure and loyalty to one
party conflict with those same duties to the other. Seller and Buyer may be
vicariously liable for acts of a Dual Agent.
a. If this addendum is signed by Seller, Broker will act only as the
exclusive agent for Seller when the Property is shown to a prospective buyer who
has a working relationship with another licensed real estate company, but will
act only as a Dual Agent in an In-Company Transaction.
b. If this addendum is signed by Buyer, Broker will act only as the
exclusive agent for Buyer when showing properties that are not listed with
Broker, but will act only as a Dual Agent in an In- Company Transaction.
The remaining provisions of this addendum describe significant changes to the
obligations of Broker when acting as a Dual Agent in an In-Company Transaction.
3. MATTERS THAT CAN BE DISCLOSED BY A DUAL AGENT. Except as set forth in Section
4, Broker, when acting as a Dual Agent, may disclose any information to one
party that Broker gains from the other party if the information is relevant to
the transaction or party.
<PAGE> 8
4. MATTERS THAT CANNOT BE DISCLOSED BY A DUAL AGENT. Broker, when acting as a
Dual Agent, shall not disclose the following information without the prior
consent of Seller and Buyer.
a. That Buyer is willing to pay more than the purchase price offered for
the property;
b. That Seller is willing to accept less than the asking price for the
property;
c. What the motivating factors are for any party buying or selling the
property;
d. That Seller or Buyer will agree to financing terms other than those
offered;
e. Any material information about the other party unless either:
(1) the disclosure is required by law,
(2) the disclosure pertains to adverse material facts about Buyer's
financial ability to perform the terms of the transaction,
(3) the disclosure pertains to Buyer's intent to occupy the property as
a principal residence, or (4) failure to disclose such information
would constitute fraud or dishonest dealing.
5. ADDITIONAL PROVISIONS. Notwithstanding any provision contained in the
Agreement, Somatogen will not be obligated to pay to CB Commercial any
commission, fee or any other compensation including, but not limited to the
Commission Fee, pursuant to the Listing Contract or otherwise, if Somatogen
sells, leases, conveys, or in any other way transfers the Property to any party
that was introduced to Somatogen through an entity or individual (such entity or
individual, an "Investment Bank") that has a written agreement with Somatogen
which obligates Somatogen to pay a fee to such Investment Bank in connection
with a transaction involving Somatogen.
Accepted: Somatogen, Inc..
Seller: Timothy D. Hoogheem Date: 9/17/97
Broker: CB Commercial Real Estate Group, Inc.
By: Stan S. O'Dell Date: 9/18/97
<PAGE> 9
ADDENDUM A
TO
EXCLUSIVE RIGHT-TO-SELL LISTING CONTRACT
DATED
SEPTEMBER 17, 1997
between
SOMATOGEN, INC. ("SELLER")
and
CB COMMERCIAL REAL ESTATE GROUP, INC. ("BROKER")
(the "Listing Contract")
THIS ADDENDUM A (this "Addendum") is attached to and made part of the
above-referenced Listing Contract. In the event of the existence of any conflict
between the terms set forth in the Listing Contract and the terms set forth in
this Addendum, the terms set forth in this Addendum shall control. As used in
this Addendum, the term "Listing Contract" shall mean the Listing Contract as
amended and supplemented by this Addendum.
1. Price and Terms. The price for the Property set forth in Section 6 of
this Listing Contract, and the other terms for the sale of the Property set
forth in Sections 6 through 12 of this Listing Contract, are provided only as
guidelines to be used by Broker in presenting the Property to prospective
purchasers. Seller reserves the right to change such price and any of such terms
at any time and from time to time. Seller shall have no obligation to sell the
Property, or to enter into any contract for the sale of the Property, at such
price or upon any of such terms.
2. Commission Earned Upon Closing. No commission shall be earned by Broker,
and no commission shall be payable by Seller, except upon the consummation of
the closing of the sale by Seller of the Property in accordance with the terms
set forth in this Listing Contract. No commission shall be payable under this
Listing Contract unless and until the closing of the sale of the Property
occurs, without regard to the reason why a closing failed to occur. Without
limiting the generality of the foregoing, no commission shall be payable in the
event that: (i) Seller fails to acquire the Property, (ii) Seller refuses or
fails to enter into a contract for sale with any purchaser, regardless of the
terms provided in such contract, (iii) Seller fails or refuses to close the sale
of the Property which Seller has contracted to sell, regardless of whether such
failure constitutes a breach by Seller under such contract, or (iv) the closing
of a sale of the Property fails to occur for any other reason, including both
reasons which are in the control of Seller and reasons which are not in the
control of Seller.
<PAGE> 10
3. Determination of Co-ops: Indemnity. Broker shall be responsible for
determining whether any other broker, salesman, or agent is entitled to a co-op
commission or other compensation on any sale of the Property for which a
commission is payable to Broker under the terms of this Listing Contract. Broker
shall indemnify, defend and hold harmless Seller from and against any and all
claims for co-op commissions or other compensation payable to any other broker,
salesman or agent as a result of the Property hereunder; provided that Broker
does not hereby indemnify Seller against any claims for commissions, fees, or
other compensation payable to any other broker, salesman, or agent arising from
the sale of the Property to the extent such claims are based upon any specific
agreement or undertaking made by Seller outside of this Listing Agreement.
4. As Is Sale. Broker shall market the Property "As Is," without
representation or warranty of any kind from Seller as to any matter whatsoever.
5. Termination. Seller may terminate this Listing Contract at any time, for
any reason or no reason, upon 15 days written notice to Broker, subject to
Section 14(b)(3) of this Listing Contract.
6. No Assignment. Neither party hereto shall be permitted to assign this
Listing Contract without the prior written consent of the other party hereto.
7. Governing Law. The validity and effect of this Listing Contract shall be
determined in accordance with the laws of the State of Colorado.
8. Facsimile. Facsimile signatures are acceptable to and binding upon all
parties to this Listing Contract.
