SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
ANNUAL REPORT PURSUANT TO SECTIONS 13 OR 15(d)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
FORM 10-K
(Mark One)
/ X / ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended May 31, 1996
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ________________to _______________.
Commission File Number 0-21354
ENDOGEN, INC.
(Exact name of registrant as specified in its charter)
Massachusetts 04-2789249
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
30 Commerce Way 01801
Woburn, Massachusetts (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (617) 937-0890
Securities registered pursuant to Section 12(b) of the Act:
Title of each Class Name of Exchange on which registered
------------------- ------------------------------------
Common Stock, $.01 Par Value The Boston Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 Par Value
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 ___
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
Aggregate market value as of August 23, 1996, of Common Stock held by
non-affiliates of the registrant: $13,109,000, based on the average per share
bid and ask price of such stock on the Nasdaq SmallCap Market on August 23,
1996.
Number of shares of Common Stock outstanding on August 23, 1996: 2,952,477
DOCUMENTS INCORPORATED BY REFERENCE
The registrant intends to file a definitive Proxy Statement pursuant to
Regulation 14A within 120 days of the end of the fiscal year ended May 31, 1996.
Portions of such Proxy Statement are incorporated by reference in Part III of
this report. Portions of the registrant's Registration Statement on Form S-4
declared effective by the Securities and Exchange Commission on February 12,
1993 are incorporated by reference in the exhibits to this report.
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PART I
This Report includes a number of forward-looking statements which reflect
the Company's current views with respect to future events and financial
performance. These forward-looking statements are subject to certain risks and
uncertainties, including those discussed in "Item 1. Business" under the
subheading "Risk Factors" and in "Item 7. Management's Discussion and Analysis
of Financial Condition and Results of Operations" and elsewhere in this Report,
that could cause actual results to differ materially from historical results or
those currently anticipated. In this Report, the words "anticipates,"
"believes," "expects," "intends," "future" and similar expressions identify
forward-looking statements. Readers are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of the date hereof.
ITEM 1. BUSINESS.
Overview
Endogen, Inc. ("Endogen") was incorporated on June 1, 1983 and commenced
commercial operations in November 1985. In March 1993, Endogen became a publicly
traded company upon the consummation of the merger of Diagnostics Holding Corp.
("Diagnostics") with and into Endogen, with Endogen being the surviving
corporation. The shareholders of Diagnostics consisted of all of the former
minority shareholders of Leeco Diagnostics, Inc., a company formerly traded on
the NASD OTC Bulletin Board(SM).
Endogen is a supplier of specialty reagents and immuno-assay test kits to
customers involved in biomedical research, the biotechnology industry and
pharmaceutical drug discovery. Endogen uses monoclonal antibody and recombinant
DNA technology to develop and manufacture products in the field of cytokines and
related immune system factors, the chemical messengers which convey signals
within the immune system.
Endogen offers three major product lines. The first is in vitro
immuno-assay test kits, used for the measurement of human cytokines and related
cell surface proteins in biological samples. The second is in vitro immuno-assay
test kits, used for the measurement of mouse and other species cytokines, an
important and growing area of biomedical research. The third is specialty
reagents, including monoclonal antibodies and recombinant proteins, which are
used by the biomedical research community in the course of basic and applied
research projects. Endogen's product lines provide researchers with tools for
investigating the basic cellular mechanisms underlying the human immune system
and its response to infection, AIDS, cancer and other diseases. Endogen's
products are developed through technology in-licensing agreements with leading
medical institutions and pharmaceutical companies, followed by in-house product
development, validation, manufacturing and quality control.
Endogen's products are sold via catalog and direct selling throughout the
United States and are distributed in approximately 40 other countries worldwide.
Approximately 49% of Endogen's fiscal 1996 sales were exported, and
approximately 33% and 32% of sales were exported in Endogen's fiscal 1995 and
1994, respectively. Endogen has sold its products to almost 1,000 organizations
and institutions including pharmaceutical and biotechnology firms, hospitals,
universities and biomedical research labs worldwide.
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The Market
Biomedical researchers around the world are constantly in search of
specialty research products necessary to conduct basic and applied research.
This research is conducted in settings that range from university and medical
school laboratories to pharmaceutical and biotechnology research and development
groups. Biomedical research depends on the availability of new biomedical
products of the type developed and marketed by Endogen.
The market for biomedical research products includes specialty reagents
as well as enzyme immuno-assay ("EIA") test kits. Endogen's specialty reagents
are used by customers as part of their general biomedical research. Endogen's
EIA test kits streamline the laboratory research process by eliminating the need
for customers to independently develop and validate methods for measuring
cytokines and related immune system factors in laboratory samples.
Cytokines are small, hormone-like, soluble proteins secreted by activated
cells of the immune system. Through their activities, cytokines coordinate and
orchestrate the proper functioning of the immune system. These proteins
typically are present in extremely small quantities in both the bloodstream and
the cells by which they are produced. Cytokines are capable of exerting profound
effects on the body even when present in concentrations of less than one
nanogram per milliliter (a nanogram is one-billionth of a gram). Cytokines, like
growth factors, interact with specialized target receptors and stimulate a chain
of secondary messengers leading to a biological response. Such biological
responses result from changes in both the molecular capabilities and behaviors
of cells. For example, cytokines can activate cells to recognize and eliminate
harmful bacteria and viruses. In addition, cytokines are instrumental in the
body's defense against cancer, AIDS and other life-threatening diseases.
Cytokines are the subject of worldwide research efforts. To date, more
than 50 molecules have been identified as cytokines; this number is expected to
continue growing as research in this field expands. Cytokines have played a
role, not only in biomedical research, but in the emergence of the biotechnology
industry where gene splicing is used to produce large quantities of a single
protein for therapeutic use. Endogen believes that the products it provides to
the biomedical research market are well-matched to the growing interest in the
cytokine and cytokine-related field. There can be no assurance, however, that
this field will continue to expand or that the Company's products will be
successfully introduced into the marketplace. See "BUSINESS--Risk Factors"
herein.
Specialty Research Reagents
Endogen currently offers approximately 200 specialty reagent products.
These include recombinant DNA-derived cytokines, polyclonal and monoclonal
antibodies. Such products are used by customers to investigate the biological
responses evoked by immune system proteins. Applications for Endogen's research
reagents include a variety of laboratory experiments involving live cell
cultures or laboratory animal models.
In-licensing agreements for novel hybridoma cell lines which produce
monoclonal antibodies provide a significant source of new specialty reagents.
Endogen develops and maintains relationships with leading medical research
institutions across the United States and overseas through activities, including
attendance at scientific meetings. This allows Endogen to identify new products
and to support its existing products. There can be no assurance, however, that
the Company will maintain these relationships or that these relationships will
continue to facilitate the Company's development with respect to new and
existing products.
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In Vitro Assay Kits
Endogen currently markets 49 in vitro assay kits. Thirty-two of the kits
measure human cytokines and related biomolecules; the other seventeen kits
measure mouse, rat, pig and rabbit cytokines and related biomolecules. Most of
Endogen's test kits are for laboratory research only, not for diagnostic or
therapeutic use. One test kit acquired from T Cell Diagnostics, Inc. ("TCD")
measures soluble IL2R which is approved for the diagnosis of hairy cell
leukemia. In general, EIA kits are used by customers to precisely determine the
level of a particular cytokine in serum, plasma or other biological samples.
EIAs provide for more specific, reproducible and easier techniques for measuring
biological factors. Prior to the development of EIAs, cytokines and other
factors were measured using cell-based bioassays in which the cytokine level in
a sample is estimated by observing the experimental sample's effect on cultured
live cells, relative to a standard of known effect.
In a typical EIA test kit, an antibody specifically isolates the cytokine
from a researcher's sample during the first incubation step. A second antibody
then binds to the captured cytokine. This second antibody is linked to an
enzymatic tag which provides a measurable signal, allowing precise determination
of the cytokine concentration in the sample, even in minute concentrations.
Results from the assay are recorded using a standard laboratory instrument.
Endogen believes that the discovery of new cytokines, coupled with
ongoing research on the cellular and molecular role of cytokines in preventing
and combating disease, will continue to increase demand for this product line.
There is no assurance, however, that any of the reagents or test kits that are
presently in the research and development phase can be developed, or if
developed, successfully introduced into the marketplace. See "BUSINESS - Risk
Factors" herein.
Product Licensing
Endogen obtains commercial rights to new technologies and new products
for the research markets through in-licensing. In-licensing generally provides
Endogen with the raw materials for product development in a timely fashion,
thereby reducing the product development cycle time and supporting in-house
manufacturing capabilities.
Endogen's success will depend in part upon its ability to keep pace with
evolving technologies and market demands for specialty biological products.
Endogen is highly dependent on product licensing arrangements as a source for
the basic components utilized in the development and manufacture of both human
and mouse product lines. See "BUSINESS - Risk Factors" herein. Through certain
in-license agreements, Endogen has obtained cell lines for the production of
monoclonal antibodies utilized in the majority of the Company's human and animal
test kits. The antibodies are also sold as specialty reagents. These products,
manufactured at Endogen, accounted for a substantial portion of revenues for
fiscal 1996.
Products Under Development
Endogen is currently developing additional antibodies, recombinant
proteins and test kits for segments of the life sciences market. These programs
are expected to result in further expansion of its existing product lines and
the introduction of new product lines. Kits for the measurement of novel
biomolecules are currently in the prototype stage of development and several of
these products are expected to reach the marketplace in fiscal 1997. There is no
assurance, however, that any of the specialty reagents or test kit products that
are presently in the research and development phase can be
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developed, or if developed, be successfully introduced into the marketplace.
Research and development expenditures totaled $758,772, $956,386 and $1,124,910
in fiscal years 1994, 1995, and 1996, respectively. Purchased in-process
research and development expense related to the TCD asset purchase in March 1996
totaled $579,600. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS" herein.
Business Relationships
Endogen has entered into a number of business relationships with
commercial organizations, including the following:
Endogen entered into a distribution agreement with Funakoshi Co., Ltd.
("Funakoshi") in 1988. Under the terms of the agreement, subject to certain
performance objectives, Endogen grants exclusive rights to Funakoshi to
distribute products under the Endogen label in the Japanese market.
In 1991, Endogen entered into a distribution and supply agreement with
Biozol Diagnostica Vertrieb, GmbH ("Biozol") under which Biozol has exclusively
distributed Endogen's products to individual country distributors in certain
European countries. Effective September 1, 1996, the agreement has been amended
so that Endogen will distribute its products directly to individual country
distributors in Europe. Biozol will continue as Endogen's exclusive distributor
in Germany.
In 1994, Endogen entered into a three-year worldwide product supply and
marketing agreement with Amersham International PLC ("Amersham PLC") and
initiated distribution of Endogen's mouse cytokine ELISA kits under the Amersham
PLC label. In September 1995, the agreement was broadened to include
distribution of Endogen's human cytokine ELISA kits under Amersham PLC label.
Amersham PLC is a leader in the market for biomedical products such as labeled
compounds, antibodies and test kits and is a leading developer and marketer of
radiopharmaceuticals and reagents. Endogen continues to manufacture and market
human and animal test kit product lines under its own label in addition to
supplying Amersham PLC.
In 1994, Endogen entered into an investment banking and financial
advisory services agreement with Barber and Bronson, Incorporated ("B&B") which,
by its terms expired in December 1995. Pursuant to that agreement, Endogen
granted a warrant to B&B to purchase up to 180,000 shares of Endogen's common
stock. The warrant is exercisable through December 15, 1999 at exercise prices
ranging from $2.00 to $4.00 per share.
In 1996, Endogen entered into an asset purchase agreement with Cytokine
Sciences, Inc. ("CSI"), a manufacturer and seller of cytokine specialty reagents
and test kits. Under the terms of the agreement, Endogen acquired two novel
product lines in exchange for $100,000 cash and 20,984 shares of Endogen common
stock.
In 1996, Endogen entered into an agreement with T Cell Sciences, Inc.
("TCS") and T Cell Diagnostics, Inc. ("TCD") pursuant to which Endogen acquired
substantially all of the assets and operating business of TCD, TCS's subsidiary,
and certain assets of TCS, in exchange for a $2,002,978 convertible subordinated
note payable over five years beginning in September 1996, a $452,153 short-term
promissory note and $528,341 cash. Endogen now markets all of the research
products formerly sold under the TCD name. Endogen also manufactures certain
diagnostic products, acquired from TCD, one of which is approved for sale in the
U.S. and a second which is supplied under contract to a partner
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in Japan. Endogen further agreed to manufacture certain diagnostic products for
TCS for a period of five years.
Government Regulation
Most of Endogen's products are marketed as "research use only" products
and are not currently regulated by the U.S. Food and Drug Administration (the
"FDA"). As a result of the acquisition of TCD's operating business, Endogen now
manufactures certain in vitro diagnostic products which are subject to
regulation by the FDA. Consequently, the Company's manufacturing facility is
regulated by the FDA under Good Manufacturing Practices regulations and is
therefore subject to periodic site inspections.
Endogen's laboratories and manufacturing operations are subject to
regulation by a variety of other federal, state, and local governmental
agencies. See "BUSINESS - Risk Factors" herein.
Availability of Raw Materials
Endogen holds licenses to and maintains back-up stocks of various cell
lines that are necessary to the manufacture of key components of its product
lines. Endogen believes that it maintains adequate supplies of materials on hand
to allow it to continue to manufacture products and meet customer demand.
Patents, Trademarks, and Trade Secrets
Endogen relies upon trade secrets and proprietary know-how in addition to
licensing arrangements to maintain and develop its business. Although Endogen
seeks to protect its proprietary information, there can be no assurance that
others will not either independently develop the same or similar information,
obtain unauthorized access to Endogen's proprietary information or misuse
information to which Endogen has granted access.
Endogen has obtained federal trademark registration for the Endogen name
and mark in the United States. Trademark registration has also been obtained or
is pending in various foreign countries.
No assurance can be given that Endogen's products do not infringe upon
patents or proprietary rights owned or claimed by others. Except as noted below,
Endogen has not been notified that its products infringe upon proprietary rights
held by others; nor has it conducted patent infringement studies. See "BUSINESS
- - Risk Factors" herein.
Significant Customers
Endogen's largest customers are Amersham PLC, Funakoshi and Biozol.
Amersham PLC distributes certain of Endogen's test kits under the Amersham PLC
label, pursuant to a three-year worldwide product supply and marketing agreement
with Endogen. Sales to Amersham PLC totaled $1,224,000 in fiscal year 1996.
Endogen sells its products to Funakoshi for distribution in Japan under the
terms of a distribution agreement. Sales under this agreement were approximately
$473,000, $429,000 and $657,000 for the fiscal years 1994, 1995 and 1996,
respectively. Endogen has sold its
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products since 1991 to Biozol for European distribution under the terms of their
distribution and supply agreement. Sales under this agreement were approximately
$393,000, $527,000 and $492,000 for the fiscal years 1994, 1995, and 1996,
respectively. Biozol currently owns approximately 5% of the outstanding capital
stock of Endogen. See "BUSINESS - Business Relationships" herein.
Export Sales
Export sales to Europe accounted for approximately 31% of revenues in
fiscal 1996 compared with 22% of revenues in fiscal 1995 and 15% in fiscal 1994.
The increase in fiscal 1996 was related primarily to the addition of new
products sold under the Endogen name and under private label. The increase in
fiscal 1995 was primarily due to new product introductions. Export sales to
Japan and the Far East accounted for 15%, 8% and 14% of Endogen product revenue
for the fiscal years 1996, 1995 and 1994, respectively.
Seasonality of Business
Endogen's customers include university-based research centers and
hospital laboratories whose operations follow the academic calendar. Sales
levels worldwide are often lower in the summer months. Accordingly, the first
quarter of Endogen's fiscal year, which runs from June through August, tends to
be the weakest quarter of Endogen's fiscal year, although Endogen cannot predict
if this tendency will continue.
Backlog
There was no significant backlog for Endogen's products over the past
three years. Endogen ships most orders within one week of the placement of the
order.
Competition
The life science market, including research biologicals and Cytokine EIA
kits, is supplied by a number of established biomedical products manufacturers
located in the United States, Europe and Japan. Many of Endogen's competitors
are actively developing additional products for this market.
Many of Endogen's competitors have substantially greater financial,
research and development, manufacturing, marketing, and human resources than
Endogen. Consequently, Endogen expects the continuation of intensive competition
in the biomedical products market. See "BUSINESS - Risk Factors" herein.
Employees
Endogen had 59 full-time and part-time employees as of May 31, 1996.
Endogen recognizes that its future success depends in part on its ability to
recruit and retain talented and trained scientific and commercial personnel. See
"BUSINESS - Risk Factors" herein. Endogen believes that it has been generally
successful in hiring and retaining such personnel, but there can be no assurance
that such success will continue.
None of Endogen's employees is represented by a labor union, and Endogen
considers its relations with its employees to be excellent.
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Risk Factors
The Company's future business, operating results and financial condition
are subject to various risks and uncertainties, including those described below.
Capital Requirements.
In the future Endogen may need to raise substantial additional funds
through equity or debt financings, research and development financings,
collaborative relationships or otherwise. Endogen may seek to raise funds
whenever conditions are favorable, even if it does not have an immediate need
for additional capital at that time. There can be no assurance that any such
additional funding will be available to Endogen or, if available, that it will
be on reasonable terms. Any such additional funding may result in significant
dilution to existing shareholders. If adequate funds are not available, Endogen
may be required to significantly curtail its operations or obtain funds through
arrangements with collaborative partners that may require Endogen to relinquish
certain material rights to its products.
Risks Related to Growth through Acquisition.
The Company's strategy is to continue its internal growth and to pursue
additional acquisitions of, or relationships with, other companies as strategic
opportunities arise in the biomedical industry and related industries. As a
result, the Company is subject to certain growth-related risks, including the
risk that it will be unable to retain personnel or acquire other resources
necessary to adequately accommodate such growth. There can be no assurance that
any suitable opportunities for future strategic acquisitions or relationships
will arise or, if they do arise, that the transactions contemplated thereby
could be completed. There can be no assurance that the Company will be able to
integrate effectively into the Company the businesses that the Company has
acquired or those that it may acquire in the future. In addition, such
transactions are subject to various risks generally associated with the
acquisition of businesses, including the financial impact of expenses associated
with the integration of businesses and the diversion of management resources.
There can be no assurance that any recent or future acquisition or other
strategic relationship will not have an adverse impact on the Company's business
or results of operations. If suitable opportunities arise in the future, the
Company anticipates that it would finance such transactions, as well as its
internal growth, through working capital or, in certain instances, through
additional debt or equity financing. There can be no assurance, however, that
such debt or equity financing would be available to the Company on acceptable
terms when, and if, suitable strategic opportunities arise.
Uncertainty of Future Profitability.
To sustain future profitability Endogen must, among other things,
continue to market its current research products and successfully introduce new
products to the market. There can be no assurance that Endogen will be able to
continue manufacturing its current products, successfully develop new products
or that such products, if developed, will be in demand by customers. Endogen
expects to incur substantial expenses over the next several years as its product
lines and operations expand. There can be no assurance that Endogen will be able
to sustain profitability.
Dependence on Technology Licensing.
Endogen is highly dependent on technology and product licensing
arrangements as a principal source for the basic components used in the
development and manufacture of its products. Endogen
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expects to continue to need licenses to proprietary cell lines, patents or other
proprietary rights of third parties. No assurance can be given that any licenses
required under any such patents or proprietary rights would be made available on
terms acceptable to Endogen, if at all. In addition, certain of Endogen's
technology and product licenses have been obtained under non-exclusive terms. No
assurances can be given that such technologies or products will not be licensed
or commercialized by competitors and marketed to the same customers. See
"BUSINESS - Product Licensing" herein.
Competition and Risk of Technological Obsolescence.
Competitors of Endogen in the United States and abroad are numerous and
include, among others, biotechnology companies, diagnostics manufacturers and
catalog supply companies. Endogen's success depends upon developing and
maintaining a competitive position in the development of products and
technologies in its area of focus. Competition from other research products and
diagnostics companies is intense and expected to increase as new products enter
the market and new technologies become available. Endogen's competitors may also
succeed in developing technologies and products that are more effective than any
which have been or are being developed by Endogen or that render Endogen's
technologies or products obsolete or noncompetitive. Endogen's competitors may
also succeed in obtaining patent protection or other intellectual property
rights that would block Endogen's ability to develop new products. Finally, many
of these competitors have substantially greater research and development
capabilities, manufacturing, regulatory and marketing experience and financial
and managerial resources than Endogen. See "BUSINESS - Competition" herein.
Government Regulation.
Endogen's research and development programs, as well as its manufacturing
and marketing operations, are subject to extensive regulation by numerous
governmental authorities in the United States and other countries. Certain of
Endogen's products are subject to governmental approval for continued commercial
sale. The manufacturing and marketing of additional products in the future for
diagnostic use would be subject to the rigorous testing and approval processes
of the FDA and corresponding foreign regulatory authorities.
Dependence on Proprietary Technology.
Endogen's success will depend, in part, on its ability to preserve its
trade secrets and operate without infringing the proprietary rights of third
parties. Endogen could encounter delays in product market introductions while it
attempts to design around such patents or other rights, or be unable to develop,
manufacture or sell such products. See "BUSINESS - Patents, Trademarks and Trade
Secrets" herein.
Endogen also seeks to protect its proprietary technology, including
technology which may not be patented or patentable, in part by confidentiality
agreements and, if applicable, inventors' rights agreements with its
collaborators, advisors, employees and consultants. There can be no assurance
that these agreements will not be breached, that Endogen will have adequate
remedies for any breach, or that Endogen's trade secrets will not otherwise be
disclosed to, or discovered by, competitors.
Commercial Sales and Marketing Requirements.
Endogen currently sells its research products directly to end-users in
the United States and through distributors abroad. While Endogen has expanded
its marketing and sales force, there can be no
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assurance that Endogen will be able to further expand its sales and distribution
capabilities for the research market without undue delays or expenditures or
that it will be successful in maintaining market acceptance for its products.
Dependence Upon Key Personnel.
Endogen is highly dependent on the members of its management and
scientific staff, the loss of whom could have a material adverse effect on
Endogen. Endogen also depends on scientific advisors, who may have commitments
that limit their availability to Endogen. In addition, Endogen believes that its
future success will depend in large part upon its ability to attract and retain
highly skilled scientific, managerial and marketing personnel. Endogen faces
significant competition for such personnel from other companies, research and
academic institutions, government entities and other organizations. There can be
no assurance that Endogen will be successful in hiring or retaining the
personnel it requires for continued growth. The failure to hire and retain such
personnel could materially and adversely affect Endogen's prospects. See
"BUSINESS - Employees" herein.
International Operations.
The percentage of revenues from international sales were 49%, 33% and 32%
in fiscal years 1996, 1995 and 1994, respectively. Endogen believes that
international sales will continue to represent a significant portion of its
business. Endogen's international business and financial performance may be
adversely affected by such matters as fluctuations in exchange rates, tariff
regulations and difficulties in obtaining export licenses. In addition,
Endogen's business may be adversely affected by lower sales levels that
typically occur during the summer months in Europe and other parts of the world.
ITEM 2. PROPERTIES.
Endogen leases but does not own real property. Endogen's executive
offices and manufacturing operations currently occupy approximately 38,000
square feet located at 6-8 Gill Street, Woburn, Massachusetts pursuant to a
lease, acquired through the TCD acquisition, which expires in June 2001. Rent
payments at this facility totaled approximately $68,000 from March 4, 1996
through May 31, 1996. Annual rent payments for each of the remaining years under
the lease will average approximately $229,000, payable in monthly installments.
In addition, Endogen pays certain operating expenses and will depreciate
approximately $938,000 of existing leasehold improvements over the
three-and-one-half years remaining in the initial term of the Gill Street lease.
In connection with the acquisition of TCD, Endogen is in the process of
consolidating all operations formerly located at 640 Memorial Drive, Cambridge,
Massachusetts to Woburn, Massachusetts. On May 31, 1996, Endogen entered into a
lease termination agreement with Massachusetts Institute of Technology ("MIT")
covering the approximately 21,000 square feet located at 640 Memorial Drive,
Cambridge, Massachusetts. Endogen has been released from all commitments under
the Cambridge lease and, in addition, will be reimbursed approximately $354,000
by MIT for undepreciated leasehold improvements over a 33-month period. Endogen
will continue to occupy approximately 5,000 square feet of laboratory space at
the Cambridge, Massachusetts location until September 29, 1996 through a
sub-lease from Millennium Pharmaceuticals, Inc.
On August 1, 1996, Endogen entered into a three-year lease agreement with
Landman Omnibus XI Limited Partnership for approximately 12,000 square feet of
office and laboratory space at 30 Commerce Way, Woburn, Massachusetts. Rent will
be payable effective December 1, 1996. Payments will total
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approximately $52,000 for the year ending May 31, 1997 and afterwards will
average approximately $103,000 per year, payable in monthly installments.
The Company believes its present facilities are adequate to meet current
needs.
ITEM 3. LEGAL PROCEEDINGS.
Endogen is not a party to and none of its property is subject to any
material pending legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of the security holders during the
fourth quarter of the Company's fiscal 1996.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company's Common Stock was traded on the NASD OTC Bulletin Board(SM)
under the symbol "ENDG" since its initial public offering on March 19, 1993. The
Company's Common Stock has been traded on the Nasdaq SmallCap Market since
September 18, 1995 under the symbol "ENDG" and on the Boston Stock Exchange
under the symbol "EDG" since May 12, 1994. Prior to March 19, 1993, there was no
public market for the Company's Common Stock. The following table sets forth the
range of quarterly high and low bid information for the Common Stock as reported
by the National Quotation Bureau Incorporated until September 17, 1995 and the
range of quarterly high and low sales prices as reported on Nasdaq Small Cap
Market from September 18, 1995 forward. Such over-the-counter market quotations
reflect inter-dealer prices, without retail markups, markdowns or commissions
and may not necessarily represent actual transactions.
High Low
Fiscal 1995
First Quarter.......................... 1 7/8 1
Second Quarter......................... 2 1
Third Quarter.......................... 3 1 1/8
Fourth Quarter......................... 3 3/16 2 1/4
Fiscal 1996
First Quarter.......................... 4 1/8 3 3/16
Second Quarter......................... 4 7/8 3
Third Quarter.......................... 4 1/8 3 1/32
Fourth Quarter......................... 5 1/4 3 1/4
Fiscal 1997
First Quarter through
August 23, 1996 5 1/8 3 3/16
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As of August 23, 1996, there were approximately 538 shareholders of
record. The Company believes that shares of the Company's Common Stock held in
bank, money management, institution and brokerage house "nominee" names may
account for at least an estimated 1,200 additional beneficial holders.
The Company has never paid cash dividends on its Common Stock and has no
present intention to pay cash dividends in the future. The Company intends to
retain any future earnings to finance the growth of the Company.
ITEM 6. SELECTED FINANCIAL DATA.
The following table sets forth certain financial data with respect to the
Company for the five fiscal years ended May 31, 1996. The annual data for the
five years ended May 31, 1996 have been derived from financial statements
audited by Price Waterhouse, LLP, independent accountants. The balance sheets at
May 31, 1995 and May 31, 1996, respectively, and the related statements of
operations, of changes in stockholders' equity and of cash flows for the three
years ended May 31, 1996 and the notes thereto, appear elsewhere in this report.
The selected financial data is qualified by reference to and
<PAGE>
-14-
should be read in conjunction with the financial statements and notes thereto
and with Management's Discussion and Analysis of Financial Condition and Results
of Operations included elsewhere in this report.
<TABLE>
<CAPTION>
Year Ended May 31,
----------------------------------------------------------
1992 1993 1994 1995 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Operating Statement
Data:
Revenues $1,846,003 $2,557,995 $3,266,410 $5,072,075 $6,622,161
Cost of sales 676,100 769,369 1,037,048 1,772,051 2,476,997
Research and
development
expenses 397,562 513,064 758,772 956,386 1,124,910
Purchased in-process research and
development -- -- -- 579,600
Selling, general, and
administrative
expenses 941,119 1,143,891 1,872,499 2,337,700 3,130,629
Income (loss) from
operations (168,778) 131,671 (401,909) 5,938 (689,975)
Net income (loss) (174,815) 132,492 (370,089) 24,302 (700,539)
Net income (loss)
per share (.29) .02 (.14) .01 (.25)
Weighted average common and common
equivalent shares outstanding 988,467 1,990,051 2,592,600 2,792,229 2,835,697
</TABLE>
<TABLE>
<CAPTION>
May 31,
----------------------------------------------------------
1992 1993 1994 1995 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Working capital 397,652 $2,964,743 $1,967,888 $2,378,996 $2,143,598
Total assets 1,083,829 4,003,953 3,742,669 4,415,153 6,556,380
Total long-term debt 31,150 82,501 53,616 334,411 2,060,015
Redeemable convertible
preferred stock 1,115,214 -- -- -- --
Total stockholders'
equity(1) 657,857 3,355,153 3,021,309 3,181,774 2,891,353
</TABLE>
- -----------------------------
(1) Endogen has not declared cash dividends during any of the periods
presented.
<PAGE>
-15-
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The following discussion includes forward-looking statements, including,
but not limited to, statements with respect to the Company's future financial
performance, operating results, plans and objectives, and actual results may
differ materially from those currently anticipated depending upon a variety of
factors, including those described above. See "BUSINESS - Risk Factors" herein.
Results of Operations
As an aid to understanding Endogen's operating results, the following
table shows each item from the statement of operations expressed as a percentage
of revenues.
PERCENTAGE OF REVENUES
Fiscal year ended May 31,
1994 1995 1996
----- ---- ----
Revenues 100.0% 100.0% 100.0%
Costs and expenses:
Cost of sales 31.8% 34.9% 37.3%
Selling, general, and administrative 57.3% 46.1% 47.3%
Research and development 23.2% 18.9% 17.0%
Purchased in-process R&D -- -- 8.8%
Income (loss) from operations (12.3%) .1% (10.4%)
Interest income (expense) net 1.0% .4% (.2%)
Net income (loss) (11.3%) .5% (10.6%)
As described below, the primary reason for the net loss of $700,539 or
$0.25 per share for the fiscal year ended May 31, 1996 were fiscal fourth
quarter charges of $579,600, or $0.20 per share, relating to purchased
in-process research and development associated with the acquisition of
substantially all of the assets and operating business of T Cell Diagnostics
("TCD") in March 1996 as well as other charges of approximately $384,400, or
$0.14 per share, related to the TCD acquisition and integration of the two
operations.
Revenues
Total revenues of Endogen were $6,622,161, $5,072,075, and $3,266,410 in
fiscal years 1996, 1995, and 1994, respectively. Total revenues increased by
$1,550,086, or 31%, from fiscal 1995 to fiscal 1996 and increased by $1,805,665,
or 55%, from fiscal 1994 to fiscal 1995. Revenues from all three years were
derived entirely from product sales. Revenues increased primarily because of
expanded sales of existing products and the introduction of new products. The
consolidation of the TCD product revenues beginning in March 1996 contributed to
the growth of revenues for the fiscal fourth quarter and year ended May 31,
1996.
Cost of Sales
Cost of sales was $2,476,997, $1,772,051, and $1,037,048 for fiscal years
1996, 1995, and 1994, respectively. Cost of sales as a percentage of product
revenues increased to 37% in fiscal 1996 from 35% in fiscal 1995, due primarily
to the increased inventory valuation, and subsequent charge to cost of goods of
the finished goods acquired from TCD under purchase accounting rules and sold
during the fiscal fourth quarter. The difference between 35% in fiscal 1995 and
32% in fiscal 1994 was due
<PAGE>
-16-
primarily to the addition of manufacturing staff in order to meet increased
customer demand for Endogen products, and also to higher overhead costs
associated with the Cambridge manufacturing facility which was occupied in April
1994.
Research and Development Expenses
Research and development expenses were $1,124,910 for the year ended May
31, 1996, up from $956,386 in fiscal 1995 and $758,772 in fiscal 1994. As a
percentage of revenues, research and development expenses were 17% in fiscal
1996, versus 19% in fiscal 1995 and 23% in fiscal 1994. The Company's 1996
spending on R&D, which increased 18% from fiscal 1995 to fiscal 1996 and 26%
from fiscal 1994 to fiscal 1995, reflects the continued commitment to invest in
the development of new products. However, R&D spending decreased from 19% of
revenues in fiscal 1995 to 17% of revenues in fiscal 1996 as a direct result of
the growth of Endogen's business.
The Company also recognized a charge of $579,600 in the fourth quarter of
fiscal 1996 for purchased in-process R&D in connection with the TCD acquisition.
The purchased in-process R&D consisted of several early-stage EIA kit
development projects. At the date of acquisition the technology underlying such
projects was unproven and had no future alternative uses. The valuation of the
purchased in-process R&D expense was conducted using discounted cash flow
analysis by offsetting the costs of completing the projects against the
projected net cash flows which could result upon commercialization. It is
estimated that to complete development of the acquired technology into
commercially viable products, it would take up to one year and an estimated
$425,000.
Selling, General and Administrative Expenses
Selling, general and administrative expenses were $3,130,629, $2,337,700,
and $1,872,499 in fiscal years 1996, 1995, and 1994, respectively. Selling,
general and administrative expenses increased by $792,929 from fiscal 1995 to
fiscal 1996 as the field sales force, staffing and overhead charges increased.
Selling, general and administrative expenses were 47% as a percentage of product
revenue for fiscal 1996 versus 46% for fiscal 1995. This increase is due to
charges associated with the acquisition and integration of the TCD business into
Endogen. Looking at fiscal 1995 versus fiscal 1994, selling, general and
administrative expenses decreased to 46% of revenues from 57% due to the
substantially higher sales level and administrative cost controls.
Interest Income and Interest Expense
In fiscal 1996, net interest expense was $10,564 compared to net interest
income of $18,364 in fiscal 1995 and $31,820 in fiscal 1994. This is a result of
a decrease of cash balances over the past two years due to the expansion of
Endogen's business as well as increased borrowing levels related to the
acquisition of certain assets from TCD in March 1996.
Income Taxes
Endogen did not have a provision for income taxes for fiscal years 1996,
1995, or 1994. In fiscal year 1995, Endogen reported net income of $24,302 but
had sufficient net operating loss carryforwards to offset taxable income and
research and development tax credit carryforwards to reduce tax liabilities. In
fiscal years 1996 and 1994, Endogen reported net losses of $700,539 and
$370,089, respectively.
<PAGE>
-17-
Inflation and Changing Prices
The Company believes that inflation has not had a material effect on its
operations or on its financial condition.
Foreign Currency Transactions
Substantially all of Endogen's revenues generated outside of the United
States are negotiated, invoiced and paid in U.S. dollars. Consequently, there
have been no gains or losses to date on foreign transactions.
New Accounting Standard
Statement of Financial Accounting Standards No. 123 ("SFAS No. 123"),
"Accounting for Stock-Based Compensation," was issued in October 1995. In fiscal
1997, the Company intends to adopt the pro forma disclosure method outlined in
SFAS No. 123 and continue to measure compensation cost under the provisions of
APB Opinion No. 25, "Accounting for Stock Issued to Employees." Because the pro
forma disclosure method has been selected, the adoption of SFAS No. 123 will not
impact the Company's results of operations or financial position.
Liquidity and Capital Resources
The continued growth of Endogen's business during the year ended May 31,
1996 has increased working capital needs. This included financing inventories
which increased by $308,208 and accounts receivable which increased by $602,350
as well as expanded manufacturing capacity in the form of property, plant and
equipment. The increased levels of inventory and accounts receivable include
amounts assumed in the CSI acquisition and the TCD acquisition. Endogen has
financed its liquidity needs primarily with cash in the bank. In addition,
Endogen issued a convertible subordinated note in the amount of $2,002,978 in
connection with the TCD acquisition. At May 31, 1996, Endogen had utilized
$450,000 of a $500,000 working capital line of credit with a bank. Subsequent to
year end, the working capital line of credit has been increased to $850,000 with
an expiration in August 1997 and a $400,000 term loan for the purchase of fixed
assets has been added.
At May 31, 1996, Endogen's cash and cash equivalents position was
$763,739, a decrease of $540,220 from May 31, 1995. Net cash provided by
operations in fiscal 1996 was $732,855, in contrast to $112,463 used in fiscal
1995. However, acquisition of fixed assets in the amount of $346,033, the cash
used in the purchase of CSI in the amount of $100,000 and cash utilized in the
acquisition of TCD in the amount of $1,230,005 resulted in a total cash use for
investing activities of $1,676,038. Further cash was provided through an
increase in borrowings of $95,751 and proceeds from the issuance of common stock
of $307,212.
The Company expects to continue expanding operations through internal
growth and strategic acquisitions offering products similar or complementary to
those offered by the Company. Although the Company has no material current
acquisition agreements or arrangements, there may be opportunities which require
additional external financing, and the Company may from time to time seek to
obtain additional funds from public or private issuance of equity or debt
securities. There can be no assurance that such financing will be available at
all or on terms acceptable to the Company. The Company estimates that its
working capital, cash flow from operations and available borrowings under credit
arrangements will be sufficient to fund the Company's current operations through
fiscal 1997.
The foregoing statements contain forward-looking statements which involve
risks and uncertainties. The Company's actual experience may differ materially
from that discussed above.
<PAGE>
-18-
Factors that might cause such a difference include, but are not limited to,
those discussed in "BUSINESS - Risk Factors," as well as future events that have
the effect of reducing the Company's available cash balances, such as
unanticipated operating losses or capital expenditures or cash expenditures
related to possible future acquisitions.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The information required by this item is contained in the financial
statements and schedules set forth in Item 14(a) under the captions "Financial
Statements" and "Financial Statement Schedules" as a part of this report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
There have been no changes in or disagreements with accountants on
accounting or financial disclosure matters during the Company's two most recent
fiscal years.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Directors
The information concerning directors of the Company required under this
item is incorporated herein by reference to the Company's definitive proxy
statement pursuant to Regulation 14A, to be filed with the Commission not later
than 120 days after the close of the Company's fiscal year ended May 31, 1996
under the heading "Election of Directors."
Executive Officers
The information concerning executive officers of the Company required
under this item is incorporated herein by reference to the Company's definitive
proxy statement pursuant to Regulation 14A, to be filed with the Commission not
later than 120 days after the close of the Company's fiscal year ended May 31,
1996 under the heading "Election of Directors."
ITEM 11. EXECUTIVE COMPENSATION.
The information required under this item is incorporated herein by
reference to the Company's definitive proxy statement pursuant to Regulation
14A, to be filed with the Commission not later than 120 days after the close of
the Company's fiscal year ended May 31, 1996, under the heading "Compensation
and Other Information Concerning Directors and Officers."
<PAGE>
-19-
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required under this item is incorporated herein by
reference to the Company's definitive proxy statement pursuant to Regulation
14A, to be filed with the Commission not later than 120 days after the close of
the Company's fiscal year ended May 31, 1996, under the headings "Principal
Stockholders" and "Election of Directors."
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required under this item is incorporated herein by
reference to the Company's definitive proxy statement pursuant to Regulation
14A, to be filed with the Commission within 120 days after the close of the
Company's fiscal year ended May 31, 1996, under the headings "Principal
Stockholders" and "Election of Directors."
<PAGE>
-20-
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, FINANCIAL STATEMENT SCHEDULES,
AND REPORTS ON FORM 8-K.
(a) 1. Financial Statements.
For the following financial information included herein, see
Index on page F-1.
Report of Independent Accountants
Balance Sheet at May 31, 1995 and May 31, 1996.
Statement of Operations for the three years ended
May 31, 1996.
Statement of Changes in Stockholders' Equity for the
three years ended May 31, 1996.
Statement of Cash Flows for the three years ended
May 31, 1996.
Notes to Financial Statements.
2. Financial Statement Schedule.
For the following financial information included herein,
see Index on page F-1.
II - Valuation and Qualifying Accounts and
Reserves
3. List of Exhibits.
Exhibit
Number
- -------
2.1 Asset Purchase Agreement dated as of March 4, 1996 by and between
Endogen, Inc., T Cell Diagnostics, Inc. and T Cell Sciences, Inc.**
3.1 Restated Articles of Organization of Endogen, Inc.*
3.2 By-laws of Endogen, Inc., as amended.*
4.1 $2,002,978 Convertible Subordinated Note dated March 4, 1996 of
Endogen, Inc. to T Cell Diagnostics, Inc. (filed herewith as Exhibit
10.21).
10.1 Endogen 1992 Stock Plan.*
10.1A 1993 Non-Employee Director Stock Option Plan.**
10.2 Key Man Life Insurance in the amount of $250,000 with Columbian
Mutual Life Insurance Company (Owen Dempsey).*
<PAGE>
-21-
10.3 Non-competition Agreement with Owen Dempsey dated November 30, 1990
(Schedule of Additional Agreements).*
10.4 License Agreement dated as of January 25, 1989 between Endogen and
Dana-Farber Cancer Institute.*
10.5 License Agreement dated as of March 30, 1990 between Endogen and
Dana-Farber Cancer Institute.*
10.6 License Agreement dated as of December 1, 1990, as amended on
September 3, 1991, and September 2, 1992, between Endogen and
Schering Corporation.*
10.7 Exclusive License Agreement dated as of October 22, 1990 between
Endogen and The Wistar Institute of Anatomy and Biology.*
10.8 Distribution and Supply Agreement dated as of March 6, 1991, as
amended on September 2, 1991, between Endogen and Biozol Diagnostica
Vertrieb GmbH.*
10.9 Supply Agreement dated as of September 6, 1990 between Endogen and
Peprotech Incorporated.*
10.10 Stockholder's Agreement dated November 3, 1986 by and among Endogen
and Mark Allegretta, Owen Dempsey, Roy Dempsey, Wallace Dempsey, and
Phillip Servidori*, as amended on March 19, 1993.**
10.11 Stock Purchase Agreement dated December 23, 1986 by and between
Endogen and Roy Dempsey (Schedule of Additional Agreements)*, as
amended on March 19, 1993.**
10.12 Registration Rights Agreement dated as of November 30, 1990, as
amended on April 4, 1991, by and among Endogen, G&G Diagnostics
Limited Partnership, Biozol Diagnostica Vertrieb GmbH, and
Massachusetts Technology Development Corporation*, as amended on
March 19, 1993.**
10.13 License Agreement dated November 15, 1992 between Endogen and Syntex
(U.S.A.) Inc.**
10.14 Agreement dated February 10, 1993 between Endogen and Schering
Corporation.**
<PAGE>
-22-
10.15 Amendment to Exclusive License Agreement dated as of August 18, 1993
between Endogen and Wistar Institute of Anatomy and Biology.**
10.16 Amendments to Agreement dated February 10, 1993 between Endogen and
Schering Corporation dated September 22, 1993 and May 9, 1994.**
10.17 Distribution Agreement dated November 1, 1994 between Endogen, Inc.
and Amersham International PLC. (Filed without schedules)**
10.18 Financial Consulting Agreement dated as of December 15, 1994 by and
between Endogen, Inc. and Barber and Bronson, Incorporated.**
10.19 Amendment dated March 3, 1995 to Distribution and Supply Agreement
dated as of March 6, 1991, as amended on September 2, 1991, between
Endogen and Biozol Diagnostica Vertrieb GmbH.**
10.20 Asset Purchase Agreement dated as of March 4, 1996 by and among
Endogen, Inc., T Cell Diagnostics, Inc. and T Cell Sciences, Inc.**
10.21 $2,002,978 Convertible Subordinated Note dated March 4, 1996 of
Endogen, Inc. to T Cell Diagnostics, Inc. (filed herewith).
10.22 Registration Rights Agreement dated
March 4, 1996 between Endogen, Inc. and T Cell Diagnostics, Inc.**
<PAGE>
-23-
10.23 Lease Termination Agreement dated as of May 31, 1996 between
Endogen, Inc. and Massachusetts Institute of Technology (filed
herewith).
10.24 Lease dated July 29, 1996 between Endogen, Inc. and Landman Omnibus
XI Limited Partnership (filed herewith).
10.25 Loan and Security Agreement dated August 28, 1996 between Endogen,
Inc. and Silicon Valley Bank (filed herewith).
10.26 $850,000 Revolving Promissory Note dated August 28, 1996 of Endogen,
Inc. to Silicon Valley Bank (filed herewith).
10.27 $400,000 Term Promissory dated August 28, 1996 of Endogen, Inc. to
Silicon Valley Bank (filed herewith).
10.28 Commercial Lease dated October 13, 1994, as amended, between
Cummings Properties Management, Inc. and T Cell Diagnostics, Inc.
(filed herewith).
10.29 Lease Assignment dated March 4, 1996 between T Cell Diagnostics,
Inc. and Endogen, Inc. (filed herewith).
11.1 Statement re: Computation of earnings per share.
23.1 Consent of Independent Accountants.
27.1 Financial Data Schedule (filed herewith).
- ------------
*Previously filed as an exhibit to the Company's Registration Statement on Form
S-4 No. 33-54430 and incorporated herein by reference.
**Previously filed with the Securities and Exchange Commission and incorporated
herein by reference.
(b) Reports on Form 8-K.
The Company filed a Report on Form 8-K dated March 4, 1996, on
March 19, 1996 and a Report on Form 8-K/A on May 20, 1996 in connection with the
Asset Purchase Agreement by and among the Company, T Cell Diagnostics, Inc. and
T Cell Sciences, Inc. The Report on 8-K/A includes an audited balance sheet of
TCD at December 31, 1995 and 1994 and audited statements of operations and cash
flows for TCD's fiscal years ended December 31, 1995, 1994 and 1993 (see
Exhibits 10.33, 10.34, 10.35 and 10.36 above).
(c) Exhibits.
The Company hereby files as exhibits to this Form 10-K those
exhibits listed in Item 14(a)(3), above.
(d) Financial Statement Schedules.
The Company hereby files as financial statement schedules to
this Form 10-K those financial statement schedules listed in Item 14(a)(2),
above, which are attached hereto.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended, the Registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized,
in the City of Woburn, Commonwealth of Massachusetts, on the 29th day of
August, 1996.
ENDOGEN, INC.
By: /s/ Owen A. Dempsey
------------------------------
Owen A. Dempsey
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, as amended, this report has been signed by the following persons on behalf
of the Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ Owen A. Dempsey President, Chief Executive August 27, 1996
- ------------------------- Officer (Principal Executive
Owen A. Dempsey Officer, Principal Financial
Officer and Principal Accounting
Officer) and Director
/s/ Wallace G. Dempsey Director August 27, 1996
- ------------------------
Wallace G. Dempsey
/s/ Irwin J. Gruverman Director August 27, 1996
- ------------------------
Irwin J. Gruverman
/s/ Hayden H. Harris Director August 27, 1996
- ------------------------
Hayden H. Harris
/s/ Wolfgang Woloszczuk Director August 27, 1996
- ------------------------
Wolfgang Woloszczuk
</TABLE>
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Page
----
Report of Independent Accountants.........................................F-2
Balance Sheet at May 31, 1995 and 1996....................................F-3
Statement of Operations for the three years ended
May 31, 1996............................................................F-4
Statement of Changes in Stockholders' Equity for
the three years ended May 31, 1996......................................F-5
Statement of Cash Flows for the three years ended
May 31, 1996............................................................F-6
Notes to Financial Statements.............................................F-7
Financial Statement Schedules for the three years ended May 31, 1996:
Schedule II - Valuation and Qualifying Accounts
and Reserves..........................................................F-18
All other schedules are omitted since the required information is inapplicable
or has been presented in the financial statements and related notes.
F-1
<PAGE>
Report of Independent Accountants
To the Board of Directors and Stockholders of
Endogen, Inc.
In our opinion, the accompanying financial statements listed in the Index on
page F-1 present fairly, in all material respects, the financial position of
Endogen, Inc. at May 31, 1996 and 1995, and the results of its operations and
its cash flows for each of the three years in the period ended May 31, 1996, in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
[Signature of Price Waterhouse LLP]
PRICE WATERHOUSE LLP
Boston, Massachusetts
August 2, 1996, except as to Note 16,
which is as of August 28, 1996
F-2
<PAGE>
Endogen, Inc.
Balance Sheet
<TABLE>
<CAPTION>
May 31,
1995 1996
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $1,303,959 $ 763,739
Accounts receivable, net of allowance for doubtful accounts of
$11,750 and $20,000 at May 31, 1995 and 1996, respectively 735,993 1,280,280
Accounts receivable - stockholder 91,004 149,067
Inventories 981,694 1,289,902
Prepaid expenses and other current assets 165,314 265,622
--------- -----------
Total current assets 3,277,964 3,748,610
Fixed assets, net 810,293 1,894,982
Patent and license costs, net 203,830 205,120
Other assets 123,066 707,668
--------- -----------
$4,415,153 $ 6,556,380
========= ===========
Liabilities and Stockholders' Equity
Current liabilities:
Current portion of note payable - bank $ 62,882 $ 64,723
Current portion of convertible note payable - 400,596
Current portion of capital lease obligations and other
note payable 42,667 13,355
Accounts payable and accrued expenses 793,419 1,126,338
--------- -----------
Total current liabilities 898,968 1,605,012
--------- -----------
Borrowings under line of credit 250,000 450,000
Note payable - bank 73,106 7,633
Convertible note payable - 1,602,382
Capital lease obligations and other note payable 11,305 -
--------- -----------
334,411 2,060,015
--------- -----------
Stockholders' equity:
Common stock, $.01 par value; 5,000,000 shares authorized; 2,711,561 and
2,949,346 shares issued and outstanding at
May 31, 1995 and 1996, respectively 27,116 29,493
Additional paid-in capital 3,741,999 4,149,740
Accumulated deficit (587,341) (1,287,880)
--------- -----------
Total stockholders' equity 3,181,774 2,891,353
--------- -----------
$4,415,153 $ 6,556,380
========= ===========
</TABLE>
The accompanying notes are an integral part of
these financial statements.
F-3
<PAGE>
Endogen, Inc.
Statement of Operations
<TABLE>
<CAPTION>
Year ended May 31,
1994 1995 1996
<S> <C> <C> <C>
Revenue:
Product sales $2,873,586 $4,545,078 $6,129,958
Product sales to stockholder 392,824 526,997 492,203
--------- --------- -----------
3,266,410 5,072,075 6,622,161
--------- --------- -----------
Costs and expenses:
Cost of sales 900,271 1,567,908 2,289,960
Cost of sales to stockholder 136,777 204,143 187,037
Selling, general and administrative 1,872,499 2,337,700 3,130,629
Research and development 758,772 956,386 1,124,910
Purchased in-process research and
development - - 579,600
--------- --------- -----------
3,668,319 5,066,137 7,312,136
--------- --------- -----------
Income (loss) from operations (401,909) 5,938 (689,975)
Interest income (expense), net 31,820 18,364 (10,564)
--------- --------- -----------
Net income (loss) $(370,089) $ 24,302 $(700,539)
========= ========= ===========
Net income (loss) per share $ (.14) $ .01 $ (.25)
========= ========= ===========
Weighted average common and common equivalent
shares outstanding 2,592,600 2,792,229 2,835,697
========= ========= ===========
</TABLE>
The accompanying notes are an integral part of
these financial statements.
F-4
<PAGE>
Endogen, Inc.
Statement of Changes in Stockholders' Equity
<TABLE>
<CAPTION>
Number of Additional Total
shares of Par paid-in Accumulated stockholders'
common stock Value capital deficit equity
<S> <C> <C> <C> <C> <C>
Balance at May 31, 1993 2,560,563 $25,606 $3,571,101 $ (241,554) $3,355,153
Sale of common stock, pursuant to exercise
of stock options 45,498 455 35,790 - 36,245
Net loss - - - (370,089) (370,089)
---------- ------- --------- ------------- ----------
Balance at May 31, 1994 2,606,061 26,061 3,606,891 (611,643) 3,021,309
Sale of common stock, pursuant to exercise
of stock options 105,500 1,055 60,108 - 61,163
Issuance of warrants for
financial advisory services (Note 10) - - 75,000 - 75,000
Net income - - - 24,302 24,302
---------- ------- --------- ------------- ----------
Balance at May 31, 1995 2,711,561 27,116 3,741,999 (587,341) 3,181,774
Sale of common stock, pursuant to exercise
of stock options 210,079 2,100 305,112 - 307,212
Common stock issued pursuant to
acquisitions 27,706 277 102,629 - 102,906
Net loss - - - (700,539) (700,539)
---------- ------- --------- ------------- ----------
Balance at May 31, 1996 2,949,346 $29,493 $4,149,740 $(1,287,880) $2,891,353
========== ======= ========= ============= ==========
</TABLE>
The accompanying notes are an integral part of
these financial statements.
F-5
<PAGE>
Endogen, Inc.
Statement of Cash Flows
Increase (Decrease) in Cash and Cash Equivalents
<TABLE>
<CAPTION>
Year ended May 31,
1994 1995 1996
<S> <C> <C> <C>
Cash flows from operating activities:
Net (loss) income $ (370,089) $ 24,302 $ (700,539)
Adjustments to reconcile net (loss) income
to net cash (used for) provided by
operating activities:
Depreciation and amortization 170,508 325,550 492,191
Loss on disposal of fixed assets -- -- 50,944
Purchased in-process research and development -- -- 579,600
Increase in accounts receivable (113,963) (300,621) (200,297)
Decrease (increase) in accounts receivable-stockholder 5,772 (13,801) (58,063)
(Increase) decrease in inventories (183,326) (293,989) 251,422
(Increase) decrease in prepaid expenses
and other assets (238,708) 33,568 149,393
Increase in patent and license costs (30,201) (58,439) (76,334)
Increase (decrease) in accounts payable
and accrued expenses 252,661 170,967 244,538
----------- ----------- -----------
Net cash (used for) provided by operations (507,346) (112,463) 732,855
----------- ----------- -----------
Cash flows from investing activities:
Acquisition of fixed assets (635,566) (259,763) (346,033)
Purchase of Cytokines Sciences, Inc. ("CSI") -- -- (100,000)
Purchase of T Cell Diagnostics ("TCD") -- -- (1,230,005)
----------- ----------- -----------
Net cash used for investing activities (635,566) (259,763) (1,676,038)
Cash flows from financing activities:
Net proceeds (repayments) from borrowings
under line of credit (150,000) 250,000 200,000
Proceeds from note payable - bank -- 135,988 --
Repayment of note payable - bank (22,375) (8,606) (63,632)
Repayment of capital lease obligations and
other note payable (30,726) (36,330) (40,617)
Proceeds from issuance of common stock 36,245 61,163 307,212
----------- ----------- -----------
Net cash (used for) provided by financing activities (166,856) 402,215 402,963
----------- ----------- -----------
Net increase (decrease) in cash and
cash equivalents (1,309,768) 29,989 (540,220)
Cash and cash equivalents, beginning of year 2,583,738 1,273,970 1,303,959
----------- ----------- -----------
Cash and cash equivalents, end of year $ 1,273,970 $ 1,303,959 $ 763,739
=========== =========== ===========
Supplemental disclosures of cash flow information:
Cash paid for interest $ 22,871 $ 23,361 $ 42,360
=========== =========== ===========
Supplemental disclosure of non-cash investing and
financing activity:
Capital lease additions $ 23,000 $ -- $ --
=========== =========== ===========
</TABLE>
In connection with the purchase of CSI (Note 15), the Company issued 20,984
shares of common stock valued at $78,690.
In connection with the purchase of TCD (Note 15), the Company issued a
convertible note payable in the amount of $2,002,978 to TCD as part of the
consideration paid. Furthermore, in connection with this acquisition, the
Company issued 6,722 shares of its common stock to a consultant.
In May 1996, the Company sold certain leasehold improvements in exchange for a
note receivable in the amount of $307,341.
The Company ascribed a value of $75,000 to warrants issued in connection with an
investment banking and advisory services agreement entered into in December 1994
(Note 10).
The accompanying notes are an integral part of
these financial statements.
F-6
<PAGE>
Endogen, Inc.
Notes to Financial Statements
1. Organization and History
Endogen, Inc. (the "Company") is principally engaged in the development,
manufacture and sale of biological products and test kits for the
medical research industry. The Company was incorporated in Massachusetts
in June 1983.
2. Summary of Significant Accounting Policies
Cash and Cash Equivalents
The Company invests its excess cash in money market accounts with
banks. These investments, totalling $1,032,704 and $36,536 at May 31,
1995 and 1996, respectively, mature within three months of the initial
investment. Accordingly, the investments are subject to minimal credit
and market risk and are considered by the Company to be cash
equivalents. In accordance with Statement of Financial Accounting
Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities," the Company has classified its investments as
held-to-maturity which have been recorded at amortized cost on the
Company's balance sheet, which approximates fair value.
Revenue Recognition
The Company recognizes revenue upon product shipment.
Inventories
Inventories are stated at the lower of cost or market, cost being
determined using the first-in, first-out method.
Fixed Assets
Fixed assets are recorded at cost and depreciated using the
straight-line method over their estimated useful lives. Repair and
maintenance expenditures are charged to expense as incurred.
Patent and License Costs
Costs associated with patents and licensing arrangements are capitalized
as incurred and amortized on a straight-line basis over the estimated
economic lives, which range from 5 to 10 years.
Advertising Costs
Costs associated with sales catalogues are capitalized as incurred and
amortized as the catalogues are distributed.
Income Taxes
The Company utilizes the liability method of accounting for income
taxes, as set forth in Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes". Under this method, deferred tax
liabilities and assets are recognized for the expected future tax
consequences of temporary differences between the carrying amounts and
the tax basis of assets and liabilities.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
F-7
<PAGE>
Endogen, Inc.
Notes to Financial Statements - (Continued)
Net Income (Loss) Per Share
Net income (loss) per share is determined by dividing net income (loss)
by the weighted average number of common shares and common share
equivalents outstanding during the period. Common share equivalents have
been excluded from the computation for periods in which the Company
incurred a net loss because their effect would be antidilutive.
New Accounting Standard
Statement of Financial Accounting Standards No. 123 ("SFAS No. 123").
"Accounting for Stock-Based Compensation," was issued in October 1995.
In fiscal 1997, the Company intends to adopt the pro forma disclosure
method outlined in SFAS No. 123 and continue to measure compensation
cost under the provisions of APB Opinion No. 25, "Accounting for Stock
Issued to Employees." Because the pro forma disclosure method has been
selected, the adoption of SFAS No. 123 will not impact the Company's
results of operations or financial position.
3. Inventories
Inventories consist of the following:
<TABLE>
<CAPTION>
May 31,
1995 1996
<S> <C> <C>
Raw materials and supplies $ 274,544 $ 294,176
Work-in-process 283,463 314,976
Finished goods 423,687 680,750
---------- -----------
$ 981,694 $ 1,289,902
========== ===========
</TABLE>
4. Fixed Assets
Fixed assets consist of the following:
<TABLE>
<CAPTION>
Useful life May 31,
in years 1995 1996
<S> <C> <C> <C>
Laboratory equipment 5-7 $ 464,036 $ 896,056
Computer and office
equipment 3-7 307,038 603,540
Leasehold improvements lease term 584,704 945,736
---------- -----------
1,355,778 2,445,332
Accumulated depreciation
and amortization (545,485) (550,350)
----------- ------------
$ 810,293 $ 1,894,982
========== ===========
</TABLE>
At May 31, 1996 and 1995, included in computer and office equipment
are capital leases at a cost of $79,662 with accumulated amortization
of $58,785 and $39,831 at May 31, 1996 and 1995, respectively.
Additionally, included in laboratory equipment at a cost of $84,079
with accumulated depreciation of $58,855, is equipment purchased using
cash resources of $20,000 and issuance of a note payable in the amount
of $64,079 (Note 6).
In May 1996, the Company sold certain leasehold improvements in
exchange for a note receivable in the amount of $307,341. Payments on
this note are due in 33 equal payments commencing July 1, 1996. At May
31, 1996, amounts due within one year, $93,025, are included in prepaid
expenses and other current assets. The remaining balance of $214,316 is
included in other assets.
F-8
<PAGE>
Endogen, Inc.
Notes to Financial Statements - (Continued)
5. Patent and License Costs
Patent and license costs consist of the following:
May 31,
1995 1996
Patent costs $ 68,240 $ 68,240
License costs 304,725 381,059
--------------- ---------------
372,965 449,299
Accumulated amortization (169,135) (244,179)
---------------- ----------------
$ 203,830 $ 205,120
=============== ===============
6. Borrowings
Borrowing Under Line of Credit/Notes Payable - Bank
In February 1995, the Company entered into a line of credit agreement
with a bank providing for maximum borrowings of $500,000. Outstanding
borrowings bear interest at 1.5% above the bank's prime rate (9.75% at
May 31, 1996). The Company had outstanding borrowings of $250,000 at May
31, 1995 which were repaid by the Company in September 1995. In
connection with the Company's acquisition of TCD (Note 15), the Company
borrowed $450,000 under this credit agreement to finance a portion of
the purchase price. On August 28, 1996, the Company entered into a
replacement line of credit agreement with this same bank (Note 16).
In May 1994 and December 1994, the Company entered into fixed asset line
of credit agreements with this same bank. Drawings under the agreements
were permitted through a certain date at which point the line of credit
converted into a term loan payable in thirty equal monthly principal
installments plus interest. Outstanding borrowings under both notes
payable bear interest at 2% above the bank's prime rate (10.25% at May
31, 1996).
Aggregate maturities of the Company's two notes payable are as follows:
1997 $ 64,723
1998 7,633
--------------
$ 72,356
==============
Outstanding borrowings under the agreements are secured by all corporate
assets. The Company is required to comply with certain covenants
including maintaining certain financial statement ratios, a minimum
tangible net worth and minimum profitability levels. At May 31, 1996,
the Company was in compliance with the terms of the agreements or had
obtained the appropriate waiver.
Convertible Note Payable
In connection with the company's acquisition of TCD (Note 15), the
Company issued a convertible note payable in the amount of $2,002,978.
This convertible note payable is payable in semi-annual principal
installments of $200,298 each commencing September 1, 1996. This note
bears interest at 7%. At the option of the holder, such note is
convertible into shares of the Company's common stock at an initial
conversion price equal to $4.63 per share of common stock. Such
conversion is subject to adjustment as defined in the agreement.
F-9
<PAGE>
Endogen, Inc.
Notes to Financial Statements - (Continued)
Aggregate maturities of this convertible note payable are as follows:
1997 $ 400,596
1998 400,596
1999 400,596
2000 400,596
2001 400,594
---------
$2,002,978
=========
Capital Lease Obligations and Other Note Payable
The Company has entered into three capital leases for equipment. The
gross amount of assets recorded under the leases aggregated $79,662 at
May 31, 1996 and 1995 and the total accumulated amortization on those
assets at May 31, 1996 and 1995 aggregated $58,785 and $39,381,
respectively. The remaining principal balance of $13,355 is due in
fiscal 1997.
In July 1992, the Company issued a note payable in the amount of $64,079
in connection with the purchase of certain equipment (Note 4). The
outstanding borrowings are payable in monthly installments of $1,641,
including principal and interest. The outstanding borrowings bear
interest at 10% and are secured by laboratory equipment having a book
value of approximately $25,000 at May 31, 1996. The outstanding
obligations were paid in full in fiscal 1996.
7. Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses consist of the following:
May 31,
1995 1996
Accounts payable $ 521,517 $ 624,043
Accrued wages 132,680 138,204
Accrued royalties 80,637 147,357
Accrued professional fees 58,585 216,734
--------- ----------
$ 793,419 $1,126,338
========= ==========
8. Export Sales
The Company generates revenue through product sales to customers outside
the United States. Product sales by geographic area are as follows:
Year ended May 31,
1994 1995 1996
United States $2,211,151 $3,391,600 $3,390,406
Europe 484,120 1,141,061 2,036,835
Japan 473,325 429,145 982,221
Other 97,814 110,269 212,699
---------- ---------- ----------
$3,266,410 $5,072,075 $6,622,161
========== ========== ==========
F-10
<PAGE>
Endogen, Inc.
Notes to Financial Statements - (Continued)
9. Income Taxes
The provision (benefit) for income taxes differs from the amount of
income tax determined by applying the applicable U.S. statutory federal
income tax rate to pretax operating results as a result of the following
differences:
<TABLE>
<CAPTION>
Year ended May 31,
1994 1995 1996
<S> <C> <C> <C>
Expected tax (benefit) $(130,000) $ 9,000 $(245,000)
State and local taxes, net (18,000) 11,000 (4,000)
Purchased in-process research and
development -- -- 203,000
Nondeductible items 18,000 22,000 6,000
Research and development
tax credits (45,000) (74,000) (60,000)
Enacted rate changes (2,000) -- --
--------- --------- ---------
(177,000) (32,000) (100,000)
Benefit of loss not recognized,
increase in valuation allowance 177,000 32,000 100,000
--------- --------- ---------
Provision for income tax $ -- $ -- $ --
========= ========= =========
</TABLE>
F-11
<PAGE>
Endogen, Inc.
Notes to Financial Statements - (Continued)
Components of deferred taxes consist of the following:
<TABLE>
<CAPTION>
May 31,
1995 1996
<S> <C> <C>
Assets:
Accounts receivable reserve $ 5,000 $ 8,000
Inventory reserve 10,000 13,000
Accrued expenses 11,000 7,000
Loss and tax credit carryforwards 331,000 412,000
Consulting expense 20,000 -
Fixed assets 31,000 64,000
Miscellaneous - 8,000
--------------- ---------------
Gross deferred tax assets 408,000 512,000
Deferred tax asset valuation allowance (392,000) (492,000)
---------------- ----------------
16,000 20,000
---------------- ----------------
Liabilities:
Patent costs $ 14,000 $ 9,000
Miscellaneous 2,000 11,000
--------------- ---------------
Gross deferred tax liability 16,000 20,000
--------------- ---------------
$ - $ -
=============== ==============
</TABLE>
At May 31, 1996, the Company has net operating loss carryforwards
available to reduce future federal taxable income and research and
development tax credit carryforwards available to reduce future federal
tax liabilities which expire as follows:
<TABLE>
<CAPTION>
Research and
development
Year of Net operating loss tax credit
expiration carryforward carryforwards
<S> <C> <C>
2003 $ - $ 2,000
2004 - 12,000
2005 - 20,000
2006 - 14,000
2007 - 19,000
2008 - 22,000
2009 200,000 49,000
2010 - 46,000
2011 50,000 10,000
--------------- -----------------
$ 250,000 $ 194,000
============== ================
</TABLE>
F-12
<PAGE>
Endogen, Inc.
Notes to Financial Statements - (Continued)
At May 31, 1996, the Company has net operating loss carryforwards of
$333,000 available to reduce future state taxable income and research
and development and investment tax credit carryforwards available to
reduce future state tax liabilities of $116,000 and $53,000,
respectively. These carryforwards expire in various amounts through
1999.
An ownership change, as defined in the Internal Revenue Code, may limit
the amount of net operating loss and tax credit carryforwards which can
be utilized annually to offset future taxable income or tax liability.
The amount of the annual limitation is determined based upon the
Company's value immediately prior to the ownership change. Future
ownership changes may affect the limitation in future years.
10. Common Stock Warrants
On December 15, 1994, the Company entered into a financial advisory
agreement with an investment banking and brokerage firm. The
compensation agreement with this financial advisor included a five-year
warrant to purchase up to 180,000 shares of the common stock of the
Company at prices ranging from $2.00 to $4.00 per share. The Company
ascribed a value of $75,000 to such warrants which was expensed over the
one year term of the agreement.
11. Stock Option and Stock Purchase Plan
In June 1989, the Company adopted the 1989 Stock Option and Stock
Purchase Plan (the "Plan") which was amended in August 1992 to comply
with Section 16 of the Securities and Exchange Act of 1934 and to make
certain other changes. Under the Plan, officers, employees and certain
other individuals may be awarded shares of common stock or granted
options and rights to purchase up to 768,499 shares of common stock.
Options granted may be either incentive stock options or non-qualified
options. As of May 31, 1996, 152,349 shares are available for future
grant.
Incentive stock options may be granted to any employee at an exercise
price per share of not less than the fair market value per common share
on the date of such grant as determined by the board of directors (not
less than 110% of such value in the case of holders of 10% or more of
the total combined voting power of all classes of the Company's stock).
Non-qualified options may be granted to any employee, officer, director
or consultant at an exercise price per share of not less than the lesser
of book value per common share or fifty percent of the fair market value
per common share on the date of grant.
All options under the Plan are exercisable over periods determined by
the board of directors, not to exceed ten years from the date of grant
(five years in the case of incentive stock options granted to holders of
10% or more of the total combined voting power of all classes of the
Company's stock). The duration of options granted under the Plan has
generally been six to ten years. In the event of termination of the
optionee's relationship with the Company, options not yet exercised
terminate 90 days from the optionee's termination date unless otherwise
specified in the agreement.
F-13
<PAGE>
Endogen, Inc.
Notes to Financial Statements - (Continued)
A summary of stock option activity of the Plan is as follows:
<TABLE>
<CAPTION>
Number of Option
shares price
<S> <C> <C>
Options outstanding at May 31, 1993 114,000 $.33-$1.36
Granted 245,600 $2.25-$2.50
Canceled (10,002) $1.36
Exercised (40,998) $.33-$1.36
---------
Options outstanding at May 31, 1994 308,600 $.33-$2.50
Granted 202,000 $2.00 - $2.75
Canceled (142,200) $1.36 - $2.50
Exercised (1,500) $.33
---------
Options outstanding at May 31, 1995 366,900 $.33 - $2.75
Granted 265,500 $2.00 - $3.94
Canceled (29,250) $1.36 - $3.94
Exercised (29,550) $.33 - $2.75
---------
Options outstanding at May 31, 1996 573,600 $1.36 - $3.94
========
Options exercisable at May 31, 1996 165,425 $1.36-$3.94
========
</TABLE>
The Company has granted non-qualified options to purchase common shares
which were not pursuant to the Plan. At May 31, 1996, there were
outstanding options to purchase 9,000 common shares at $4.71 per share.
At May 31, 1996, all of the non-qualified options not granted pursuant
to the Plan were exercisable.
In fiscal 1994, the Company adopted the 1993 Non-Employee Stock Option
Plan. This plan provides for automatic grants to Board of Director
members, who are not employees or officers of the Company, on successive
anniversary dates, as determined under this plan. Options granted under
this plan shall not exceed 200,000 and shall be at a purchase price that
equals the fair market value per common share on the date of grant.
Options generally vest over a two year period and have a term of ten
years from the date of grant.
F-14
<PAGE>
Endogen, Inc.
Notes to Financial Statements - (Continued)
A summary of stock option activity from inception of the plan is as
follows:
<TABLE>
<CAPTION>
Number of Option
shares price
<S> <C> <C>
Options granted in fiscal 1994 and outstanding at May 31, 1994 36,000 $2.25
Granted 36,000 $2.00
--------
Options outstanding at May 31, 1995 72,000 $2.00 - $2.25
Granted 36,000 $3.94
Cancelled (16,000) $2.25 - $3.94
Exercised (20,000) $2.00 - $3.94
---------
Options outstanding at May 31,1996 72,000 $2.00 - $3.94
========
Options exercisable at May 31, 1996 48,000 $2.00 - $3.94
========
</TABLE>
12. Commitments
The Company has entered into license agreements pursuant to which it
pays royalties generally ranging from 1% to 10% on sales of certain
products. Royalty rates may be higher on bulk sales of certain products
to other resellers. Royalty payments made in connection with these
agreements in fiscal 1994, 1995 and 1996 were $132,000, $194,000 and
$243,000 respectively.
The Company leases its office and laboratory space under non-cancelable
operating leases which expire through October 1999. The Company also
leases certain office and computer equipment under operating leases.
Future minimum rental commitments under these operating leases are as
follows:
1997 $ 328,000
1998 384,000
1999 397,000
2000 168,000
---------------
$ 1,277,000
===============
For the years ended May 31, 1994, 1995 and 1996 rent expense was
approximately $145,000, $233,000, and $313,000, respectively. In
addition, the Company is required to pay a portion of certain tax and
operating expenses incurred by the lessor.
13. Significant Customers
During the year ended May 31, 1994, the Company recorded revenue of
approximately $393,000 (Note 14) and $473,000 from two customers. During
the year ended May 31, 1995, the Company recorded revenue of
approximately $527,000 (Note 14) and $543,000 from two customers. During
the year ended May 31, 1996, the Company recorded revenue of
approximately $1,224,000 and $657,000 from two customers.
F-15
<PAGE>
Endogen, Inc.
Notes to Financial Statements - (Continued)
14. Related Party Transactions
In March 1991, the Company entered into a distribution agreement with a
corporate stockholder. The agreement entitled the stockholder to
exclusively distribute the Company's labeled products to individual
country distributors in certain European countries. Under the agreement,
the Company is required to sell its products to the distributor at 50%
of the Company's current United States list price. Effective September
1, 1996 the agreement has been amended so that Endogen will distribute
its products directly to individual country distibutors in Europe. The
shockholder will continue as Endogen's exclusive distributor in Germany.
Sales under this agreement and accounts receivable from this stockholder
are reflected on the statement of operations and the balance sheet,
respectively.
The Company paid a director of the Company $38,000, $112,000 and $47,000
under a consulting contract in fiscal 1994, 1995, and 1996,
respectively.
15. Acquisitions
T-Cell Diagnostics
On March 4, 1996, the Company acquired substantially all of the net
assets of T-Cell Diagnostics ("TCD"), a biomedical products
manufacturer, for a total purchase price of approximately $3,300,000,
including acquisition costs of approximately $270,000. In connection
with the acquisition, the Company is required to make additional
payments to TCD if annual net sales of certain products exceed a
predetermined level during the two year period following the close of
the acquisition. The Company's results for the year ended May 31, 1996
include the operations of TCD from the date of acquisition.
The acquisition was accounted for using the purchase method of
accounting. Accordingly, the purchase price has been allocated to the
net assets acquired based on their estimated fair values. A portion of
the purchase price has been allocated to inprocess research and
development ($579,600), which was expensed upon the close of the
acquisition, and acquired technology ($305,290), which is included in
other assets at May 31, 1996. Acquired technology will be amortized over
a period of five years commencing on the date of acquisition.
Amortization expense related to acquired technology was not material for
the year ended May 31, 1996.
The following unaudited pro forma financial information combines the
results of operations as if the acquisition had occurred at the
beginning of each respective period after giving effect to certain pro
forma adjustments. The unaudited pro forma financial information for the
year ended May 31, 1995 combines the historical financial information of
the Company for the year ended May 31, 1995 and the unaudited financial
historical information of TCD for the twelve months ended March 31,
1995. The unaudited pro forma financial information for the year ended
May 31, 1996 combines the historical financial information of the
Company for the nine months ended February 29, 1996, the unaudited
financial historical information of TCD for the nine months ended
December 31, 1995, and the consolidated results of the combined
companies from the date of acquisition, March 4, 1996, through May 31,
1996. This pro forma financial information is presented for
informational purposes only and management believes it is not indicative
of the results of operations which will occur in the future.
Year Ended May 31,
1995 1996
------------ -----------
Revenue $ 7,793,912 $ 8,339,238
=========== ===========
Net loss $(2,717,246) $(1,662,812)
=========== ===========
Net loss per share $ (0.97) $ (0.59)
=========== ===========
The above pro forma financial information does not include a $579,600
non-recurring charge for purchased in-process research and development
that was expensed upon the close of the acquisition. The pro forma per
share amount of this non-recurring charge is $(0.21) and $(0.20) for
fiscal 1995 and 1996, respectively.
In connection with this acquisition, the Company is committed to enter
into a manufacture and supply agreement with TCD whereby the Company has
agreed to manufacture and sell certain products to TCD over a five year
period. In fiscal 1996 Net sales to TCD of products which will be
subject to the agreement totaled approximately $2,000.
F-16
<PAGE>
Cytokine Sciences, Inc.
In January 1996, the Company purchased substantially all of the assets
of Cytokine Sciences, Inc. (CSI), a manufacturer and seller of
biological products and test kits. The purchase price included $100,000
cash and 20,984 shares of Endogen common stock. The acquisition has been
accounted for by the purchase method of accounting and, accordingly, the
purchase price has been allocated to the net assets acquired based on
their estimated fair values. The results of operations of CSI have been
included in the combined results of operations since the date of
acquisition.
16. Subsequent Event
On August 28, 1996, the Company entered into a replacement line of
credit agreement with a bank providing for maximum borrowings of
$850,000. Outstanding borrowings, which include the $450,000 discussed
in the first paragraph of Note 6, bear interest at 1.5% above the bank's
prime rate (9.75% at May 31, 1996) and must be paid in full by August
27, 1997.
Also, on August 28, 1996 the Company borrowed an additional $400,000
from this bank in the form of a term loan. Such term loan is payable in
thirty-six equal monthly principal installments plus interest at 1.5%
above the bank's prime rate.
F-17
<PAGE>
Schedule II
Endogen, Inc.
Valuation and Qualifying Accounts and Reserves
<TABLE>
<CAPTION>
Additions
-----------------------
(1) (2)
Charged to Charged
Balance at Costs and to Other Deductions- Balance at
Description May 31, expenses accounts write-offs May 31, 1996
- ----------- -------- ---------- ---------- ------------ ------------
1995
----
<S> <C> <C> <C> <C> <C>
Deferred tax asset
valuation allowance $392,000 100,000 - - $492,000
Additions
------------------------
(1) (2)
Charged to Charged
Balance at Costs and to Other Deductions- Balance at
Description May 31, expenses accounts write-offs May 31, 1995
- ----------- -------- ---------- ---------- ------------ ------------
1994
----
Deferred tax asset
valuation allowance $360,000 32,000 - - $392,000
Additions
--------------------------
(1) (2)
Charged to Charged
Balance at Costs and to Other Deductions- Balance at
Description May 31, expenses accounts write-offs May 31, 1994
- ----------- -------- ---------- ---------- ------------ ------------
1993
----
Deferred tax asset
valuation allowance $183,000 177,000 - - $360,000
</TABLE>
F-18
<PAGE>
EXHIBIT INDEX
Exhibit
Number
- -------
2.1 Asset Purchase Agreement dated as of March 4, 1996 by and between
Endogen, Inc., T Cell Diagnostics, Inc. and T Cell Sciences, Inc.**
3.1 Restated Articles of Organization of Endogen, Inc.*
3.2 By-laws of Endogen, Inc., as amended.*
4.1 $2,002,978 Convertible Subordinated Note dated March 4, 1996 of
Endogen, Inc. to T Cell Diagnostics, Inc. (filed herewith as Exhibit
10.21).
10.1 Endogen 1992 Stock Plan.*
10.1A 1993 Non-Employee Director Stock Option Plan.**
10.2 Key Man Life Insurance in the amount of $250,000 with Columbian
Mutual Life Insurance Company (Owen Dempsey).*
10.3 Non-competition Agreement with Owen Dempsey dated November 30, 1990
(Schedule of Additional Agreements).*
10.4 License Agreement dated as of January 25, 1989 between Endogen and
Dana-Farber Cancer Institute.*
10.5 License Agreement dated as of March 30, 1990 between Endogen and
Dana-Farber Cancer Institute.*
10.6 License Agreement dated as of December 1, 1990, as amended on
September 3, 1991, and September 2, 1992, between Endogen and
Schering Corporation.*
10.7 Exclusive License Agreement dated as of October 22, 1990 between
Endogen and The Wistar Institute of Anatomy and Biology.*
10.8 Distribution and Supply Agreement dated as of March 6, 1991, as
amended on September 2, 1991, between Endogen and Biozol Diagnostica
Vertrieb GmbH.*
10.9 Supply Agreement dated as of September 6, 1990 between Endogen and
Peprotech Incorporated.*
10.10 Stockholder's Agreement dated November 3, 1986 by and among Endogen
and Mark Allegretta, Owen Dempsey, Roy Dempsey, Wallace Dempsey, and
Phillip Servidori*, as amended on March 19, 1993.**
10.11 Stock Purchase Agreement dated December 23, 1986 by and between
Endogen and Roy Dempsey (Schedule of Additional Agreements)*, as
amended on March 19, 1993.**
10.12 Registration Rights Agreement dated as of November 30, 1990, as
amended on April 4, 1991, by and among Endogen, G&G Diagnostics
Limited Partnership, Biozol Diagnostica Vertrieb GmbH, and
Massachusetts Technology Development Corporation*, as amended on
March 19, 1993.**
10.13 License Agreement dated November 15, 1992 between Endogen and Syntex
(U.S.A.) Inc.**
10.14 Agreement dated February 10, 1993 between Endogen and Schering
Corporation.**
10.15 Amendment to Exclusive License Agreement dated as of August 18, 1993
between Endogen and Wistar Institute of Anatomy and Biology.**
10.16 Amendments to Agreement dated February 10, 1993 between Endogen and
Schering Corporation dated September 22, 1993 and May 9, 1994.**
10.17 Distribution Agreement dated November 1, 1994 between Endogen, Inc.
and Amersham International PLC. (Filed without schedules)**
10.18 Financial Consulting Agreement dated as of December 15, 1994 by and
between Endogen, Inc. and Barber and Bronson, Incorporated.**
10.19 Amendment dated March 3, 1995 to Distribution and Supply Agreement
dated as of March 6, 1991, as amended on September 2, 1991, between
Endogen and Biozol Diagnostica Vertrieb GmbH.**
10.20 Asset Purchase Agreement dated as of March 4, 1996 by and among
Endogen, Inc., T Cell Diagnostics, Inc. and T Cell Sciences, Inc.**
10.21 $2,002,978 Convertible Subordinated Note dated March 4, 1996 of
Endogen, Inc. to T Cell Diagnostics, Inc. (filed herewith).
10.22 Registration Rights Agreement dated
March 4, 1996 between Endogen, Inc. and T Cell Diagnostics, Inc.**
10.23 Lease Termination Agreement dated as of May 31, 1996 between
Endogen, Inc. and Massachusetts Institute of Technology (filed
herewith).
10.24 Lease dated July 29, 1996 between Endogen, Inc. and Landman Omnibus
XI Limited Partnership (filed herewith).
10.25 Loan and Security Agreement dated August 28, 1996 between Endogen,
Inc. and Silicon Valley Bank (filed herewith).
10.26 $850,000 Revolving Promissory Note dated August 28, 1996 of Endogen,
Inc. to Silicon Valley Bank (filed herewith).
10.27 $400,000 Term Promissory dated August 28, 1996 of Endogen, Inc. to
Silicon Valley Bank (filed herewith).
10.28 Commercial Lease dated October 13, 1994, as amended, between
Cummings Properties Management, Inc. and T Cell Diagnostics, Inc.
(filed herewith).
10.29 Lease Assignment dated March 4, 1996 between T Cell Diagnostics,
Inc. and Endogen, Inc. (filed herewith).
11.1 Statement re: Computation of earnings per share.
23.1 Consent of Independent Accountants.
27.1 Financial Data Schedule (filed herewith).
- ------------
*Previously filed as an exhibit to the Company's Registration Statement on Form
S-4 No. 33-54430 and incorporated herein by reference.
**Previously filed with the Securities and Exchange Commission and incorporated
herein by reference.
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY APPLICABLE STATE SECURITIES LAW, AND MAY NOT BE SOLD OR
OTHERWISE DISPOSED OF, IN WHOLE OR IN PART, OTHER THAN PURSUANT TO REGISTRATION
UNDER SAID ACT OR IN CONFORMITY WITH THE LIMITATIONS OF RULE 144 PROMULGATED
THEREUNDER OR OTHER SIMILAR RULE AS THEN IN EFFECT, WITHOUT FIRST OBTAINING (i)
A WRITTEN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE ISSUER'S COUNSEL TO
THE EFFECT THAT THE CONTEMPLATED SALE OR OTHER DISPOSITION WILL NOT BE IN
VIOLATION OF SAID ACT OR (ii) A `NO-ACTION' LETTER FROM THE STAFF OF THE
SECURITIES AND EXCHANGE COMMISSION TO THE EFFECT THAT SUCH STAFF WILL TAKE NO
ACTION IN RESPECT OF THE CONTEMPLATED SALE OR OTHER DISPOSITION.
ENDOGEN, INC.
CONVERTIBLE SUBORDINATED NOTE
$2,002,978 March 4, 1996
FOR VALUE RECEIVED, the undersigned, ENDOGEN, INC., a Massachusetts
corporation (the "Company"), hereby promises to pay to the order of T CELL
DIAGNOSTICS, INC., a Delaware corporation ("Payee"), or registered assigns, the
principal sum of TWO MILLION TWO THOUSAND NINE HUNDRED SEVENTY-EIGHT DOLLARS
($2,002,978), payable in ten semi-annual installments of $200,297.80, plus
interest accrued thereon at the rate herein specified, on September 1 and March
1 of each year commencing September 1, 1996 and the entire unpaid balance on
March 1, 2001. Interest on the outstanding principal balance hereof shall accrue
at the rate of seven percent (7%) per annum.
Principal and interest shall be payable in lawful money of the United
States of America at the address of the registered holder maintained in
accordance with Section 1.01 or at such other place as such holder may designate
from time to time in writing to the Company.
This note (this "Note") has been issued pursuant to, is entitled to the
benefits of and is subject to the provisions of an Asset Purchase Agreement (the
"Agreement") dated as of March 4, 1996 between (i) the Company and (ii) the
Payee and T Cell Sciences, Inc., a Delaware corporation ("TCS"), and each holder
of this Note, by his acceptance hereof, agrees to be bound by the provisions of
the Agreement, a copy of which may be inspected by the registered holder hereof
at the principal office of the Company. As used herein, the term "Note" means
and includes this Note and any note issued in a transfer, exchange or
replacement hereof or thereof.
<PAGE>
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Capitalized terms used herein and not otherwise defined herein shall have
the meanings assigned to them in the Agreement.
ARTICLE I
1.01. Registration, Etc. The Company shall maintain at its principal
office a note register containing a record of the name and address of the
registered holder of the Note, the address to which notices are to be sent and
the address to which payments are to be made as designated by the registered
holder if other than the address of the holder, and the particulars of all
transfers, exchanges and replacements of the Note. No transfer of the Note shall
be valid unless made on such register by the registered holder or its duly
appointed attorney, upon surrender therefor for exchange as hereinafter
provided, accompanied by an instrument in writing, in form and execution
reasonably satisfactory to the Company. Each Note, whether issued originally or
upon transfer, exchange or replacement of the Note, shall be registered on the
date of execution thereof by the Company. The registered holder of a Note shall
be that person in whose name the Note has been registered by the Company. The
right to the principal of, and interest on, the Note may be transferred only in
accordance with the provisions of this Section 1.01 and only on the register
maintained by the Company, and the registered holder shall be deemed the owner
of the Note for all purposes of the Note.
1.02. Transfer and Exchange. The registered holder of the Note may,
prior to maturity or conversion in full thereof, surrender the Note at the
principal office of the Company for transfer (subject to compliance with the
requirements of the Securities Act of 1933, as amended (the "Securities Act"),
and any applicable state securities laws, as more particularly described in
Section 3.30 of the Agreement) or exchange. Promptly after notice to the Company
from a registered holder of its intention to make such transfer or exchange and
without expense (other than transfer taxes, if any) to such registered holder,
the Company shall issue in transfer or exchange therefor another Note dated the
date on which such transfer or exchange is made on the Note register maintained
by the Company, and for the same principal amount as the unpaid principal amount
of, the Note so surrendered, having the same maturity and rate of interest,
containing the same provisions and subject to the same terms and conditions as
the Note so surrendered. Each new Note shall be made payable to such person, or
registered assign, as the registered holder of such surrendered Note may
designate, and such transfer or exchange shall be made in such manner that no
gain or loss of principal or interest shall result therefrom.
1.03. Replacement. Upon receipt of evidence satisfactory to the Company
of the loss, theft, destruction or mutilation of the Note and, if requested in
the case of any such loss, theft or destruction, upon delivery of an indemnity
bond or other agreement or security reasonably satisfactory to the Company, or,
in the case of any such mutilation, upon surrender and cancellation of the Note,
the Company will issue a new Note, of like tenor and amount and dated the date
of execution of such replacement Note by the Company, in lieu of such lost,
stolen, destroyed or mutilated Note.
1.04. Payment on Non-Business Days. Whenever any payment to be made
hereunder shall be due on a day which is not a business day, such payment may be
made on the next
<PAGE>
-3-
succeeding business day, and such extension of time shall in such case be
included in the computation of payment of interest due. For all purposes of the
Note, "business day" means each Monday, Tuesday, Wednesday, Thursday and Friday
which is not a legal holiday for banking institutions in Boston, Massachusetts,
or a day on which such institutions are authorized or required by law or
executive order to close.
1.05. Payment and Endorsements. Payments of principal and interest on
the Note shall be made directly by check duly mailed or delivered to the
registered holder at its address as maintained in accordance with Section 1.01
hereof, or, if the holder directs to the Company in writing, to such holder by
wire transfer to an account designated by such holder, without any presentment
or notation of payment.
ARTICLE II
2.01. Conversion.
----------
(a) Conversion Rights. Subject to the terms and conditions of
this Article II, the registered holder of this Note shall have the right, at its
option at any time and from time to time (except during the Notice Period
described in section 2.01(b) during which time such holder shall be subject to
the provisions set forth therein), to convert any or all of the outstanding
principal amount of the Note into fully paid and nonassessable shares of common
stock, $.01 par value per share, of the Company (the "Common Stock"), at a
conversion price equal to $4.63 per share of Common Stock, subject to adjustment
as provided herein (the "Conversion Price") and in accordance with the
provisions of this Article II; provided, however, that the minimum principal
amount which the registered holder may convert pursuant to this section 2.01(a)
on any single occasion shall be $200,297.80(such conversion being referred to
herein as the "Conversion"). The Conversion Price shall be rounded to the
nearest whole cent. Such rights of conversion shall be exercised by the holder
hereof by giving written notice to the Company that the holder elects to convert
a stated principal amount of the Note into Common Stock and by surrender of the
Note for the shares so to be converted to the Company at its principal office
(or such other office or agency of the Company as the Company may designate by
notice in writing to the registered holder of the Note at any time) during its
usual business hours on the date set forth in such notice, together with a
statement of the name or names (with address) in which the certificate or
certificates for shares of Common Stock shall be issued; provided, that if
shares of Common Stock are issued in the name or names of persons other than the
holder of this Note, such action shall constitute a transfer under the
Securities Act and such transfer must comply with the requirements of Section
3.30 of the Agreement. Any conversion of principal hereunder shall be applied to
installments of principal due hereunder in inverse order of maturity.
(b) Prepayment. The Company may prepay this Note, without
penalty, in whole or in part, at any time prior to demand or acceleration,
without the consent of the registered holder of this Note upon giving the
registered holder of this note 30 days prior written notice; provided, however,
that the minimum principal amount which the Company may prepay pursuant to this
Section 2.01(b) on any single occasion shall be $200,297.80(a "Prepayment"). The
registered holder of this Note can exercise its conversion rights pursuant to
Section 2.01(a)
<PAGE>
-4-
any time prior to the expiration of such notice period. Any Prepayment hereunder
shall be applied to installments of principal due hereunder in inverse order of
maturity.
(c) Promptly after any Conversion and the Company's receipt of
the Note, the Company shall (i) issue and deliver to or upon the written order
of the registered holder of the Note a certificate or certificates (registered
in the name of such holder or his designee) for the number of full shares of
Common Stock issuable upon such Conversion, (ii) pay cash as hereinafter
provided in respect of (A) any accrued but unpaid interest on the Note at the
time of the Conversion, and (B) any fraction of a share of Common Stock issuable
upon such Conversion, and (iii) if any principal amount remains outstanding
under the Note, the Company shall issue and deliver a replacement Note for such
outstanding principal amount with the same maturity and rate of interest,
containing the same provisions and subject to the same terms and conditions as
the Note so surrendered. The Company, as a condition to the issuance of
certificates for Common Stock upon an Conversion, may require the payment of a
sum equal to any transfer tax or other governmental charge (but not including
any tax payable upon the original issue of the Common Stock deliverable upon
such Conversion) that may be imposed or required by law upon any transfer
incidental thereto, or the submission of proper proof that the same has been
paid. Except as otherwise specifically set forth herein, no payment or
adjustment shall be made upon any Conversion on account of any dividends on the
Common Stock issued upon such Conversion that are payable to holders of record
prior to the date of Conversion.
(d) Fractional Shares. The Company shall not be required to issue
fractions of shares of Common Stock upon conversion of the Note. If any
fractional interest in a share of Common Stock shall be deliverable upon the
conversion of the Note, the Company shall make a cash payment therefor on the
same basis as the market price of the Common Stock used in the determination of
the number of shares of Common Stock issuable upon the conversion.
(e) Adjustment Upon Changes in Capitalization. In the event of
any change in the number (or conversion or exchange) of issued and outstanding
shares of Common Stock by reason of any stock dividend, split-up, merger,
recapitalization, combination, exchange of shares, spin-off or other change in
the corporate or capital structure of the Company which could have the effect of
diluting or otherwise diminishing the rights of the holder of this Note, the
number of shares of Common Stock subject to conversion hereunder shall be
appropriately adjusted so that the holder of this Note shall receive upon
conversion of this Note the number of shares of Common Stock that such holder
would have received in respect of the shares of Common Stock that such holder is
entitled to purchase upon conversion of this Note if this Note had been
converted immediately prior to such event.
(f) Reorganization. If any capital reorganization or
reclassification of the capital stock of the Company shall be effected in such a
way that holders of Common Stock shall be entitled to receive stock, securities
or assets with respect to or in exchange for Common Stock, then, as a condition
of such reorganization or reclassification, adequate provision shall be made
whereby the holder of the Note shall thereafter have the right to receive upon
the basis and upon the terms and conditions specified herein, and in lieu of the
shares of Common Stock immediately theretofore receivable upon the conversion of
the Note, such shares of stock,
<PAGE>
-5-
securities or assets as may be issued or payable with respect to or in exchange
for a number of outstanding shares of such Common Stock equal to the number of
shares of such Common Stock immediately theretofore so receivable upon such
conversion had such reorganization or reclassification not taken place, and in
any such case appropriate provisions shall be made with respect to the rights
and interests of such holder to the end that the provisions of the Note shall
thereafter be applicable, as nearly as may be practicable, in relation to any
shares of stock, securities or assets thereafter deliverable upon the exercise
of such conversion rights.
2.02. Other Conversion Provisions.
---------------------------
(a) Whenever the Conversion Price is required to be adjusted as
provided herein, the Company shall promptly make a certificate signed by its
President 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 Conversion Price, after giving effect to such
adjustment, and shall promptly cause a copy of such certificate to be mailed (by
first class mail, postage prepaid) to the registered holder of the Note, or sent
by telex if the holder is not a U.S. resident.
(b) The Company will at all times reserve from its authorized
Common Stock a sufficient number of shares to provide for conversion of the
Note. The Company will take such corporate action as may be necessary in order
that it may validly and legally issue to the holder of the Note upon conversion
fully paid and non-assessable shares of Common Stock at the adjusted Conversion
Price.
2.03. Registration Rights. Payee has no registration rights with
respect to this Note or the shares of Common Stock issuable upon conversion of
this Note except as set forth in the Registration Rights Agreement.
ARTICLE III
3.01. Subordination. The Company and each holder of the Note, by such
holder's acceptance hereof, covenants and agrees that notwithstanding any other
provision of the Note, the payment of the principal of and interest on the Note
shall be subordinated in right of payment, to the extent and in the manner
hereinafter set forth, to the prior payment in full of all Senior Indebtedness
(as hereinafter defined) at any time outstanding. The provisions of this Article
III shall constitute a continuing representation to all persons who, in reliance
upon such provisions, become the holders of or continue to hold Senior
Indebtedness, and such provisions are made for the benefit of the holders of
Senior Indebtedness, and such holders are hereby made obligees hereunder the
same as if their names were written herein as such, and they or any of them may
proceed to enforce such provisions against the Company or against the holder of
the Note without the necessity of joining the Company as a party.
3.02. Senior Indebtedness Defined. The term "Senior Indebtedness" shall
mean the principal of and premium, if any, and interest on (a) all indebtedness
of the Company, whether outstanding on the date of the Note or thereafter
created, (i) for money borrowed from banks,
<PAGE>
-6-
trust companies, insurance companies and other financial institutions
(collectively, "Lending Institutions") by the Company or by others and
guaranteed, directly or indirectly, by the Company, (ii) in respect of other
obligations of the Company or of others and guaranteed, directly or indirectly,
by the Company, to Lending Institutions, including but not limited to
obligations arising under letters of credit issued by Lending Institutions,
pursuant to commercial paper or accounts receivable sold or assigned to Lending
Institutions, or constituting purchase money indebtedness to Lending
Institutions for the payment of which the Company is directly or contingently
liable, and (iii) in respect of obligations of the Company to Lending
Institutions, or of others to Lending Institutions and guaranteed, directly or
indirectly by the Company, as lessee under leases of personal property, unless
in each case referred to above, by the terms of the instrument creating or
evidencing the indebtedness it is provided that such indebtedness ranks on a
parity with the Note and is entitled to like rights of subrogation, or is
subordinated to, or is otherwise not superior in right of payment to the Note,
and (b) all renewals, extensions, modifications and refundings of any such
indebtedness, guarantees or obligations referred to in clause (a) above, up to a
maximum aggregate principal amount equal to the greater of (i) $2,000,000, or
(ii) an amount such that the Company's Consolidated Interest Coverage Ratio (as
defined below) for the quarter immediately preceding the incurrence of such
indebtedness shall be 1.2 until the execution of financing documentation with
Silicon Valley Bank by the Company in connection with the transactions
contemplated by the Agreement, at which time such ratio shall equal the
comparable ratio set forth in such financing documentation. For purposes of this
Note, "Consolidated Interest Coverage Ratio" means, for any period, with respect
to any Person for any period, the ratio of (i) consolidated net income before
interest, Taxes, depreciation and amortization for such period for such Person
and its Subsidiaries on a consolidated bases for such period, excluding (A)
extraordinary items, (B) earnings from discontinued businesses and (C) any
non-cash gains and losses used in determining net income, to (ii) the aggregate
consolidated interest expense of such Person and its Subsidiaries for such
period, net of aggregate consolidated interest income of such Person and its
Subsidiaries for such period determined on a consolidated basis in accordance
with generally accepted accounting principles. As used in this Section 3.02, the
term "purchase money indebtedness" shall mean indebtedness evidenced by a Note,
debenture, bond, agreement or other instrument (whether or not secured by any
lien or other security interest) issued or assumed as all or a part of the
consideration for the acquisition of property. In no event, however, shall
Senior Indebtedness include any principal of, interest on, or other obligations
in respect of the Note.
3.03. Bankruptcy, Insolvency, Etc. In the event of any insolvency or
bankruptcy proceedings relative to the Company or to its property, or, in the
event of any proceedings for voluntary liquidation, dissolution or other winding
up of the Company or distribution or marshaling of its assets or any composition
with creditors of the Company, whether or not pursuant to insolvency or
bankruptcy laws (an "Event of Insolvency"), then and in any such event all
Senior Indebtedness shall be paid in full before any payment or distribution of
any character, whether in cash, securities or other property (except in
securities which are subordinated and junior in right of payment to the payment
of all Senior Indebtedness then outstanding in terms of substantially the same
tenor as this Article III), shall be made on account of the Note by the Company
or demanded or accepted by any holder of the Note; and any such payment or
distribution which would, but for the provisions hereof, be payable or
deliverable in
<PAGE>
-7-
respect of the Note, shall be paid or delivered directly to the holders of
Senior Indebtedness (or their duly authorized representatives), until all Senior
Indebtedness shall have been paid in full. If the holder of the Note does not
file with the appropriate legal authorities a proper claim or proof of debt in
the form required in connection with an Event of Insolvency prior to the thirty
(30) days before the expiration of the time to file such claim or proof, then
the holders of Senior Indebtedness shall have the right to demand, sue for,
collect, receive or receipt for such Senior Indebtedness holder's ratable share
of the payments and distributions in respect of the indebtedness represented by
the Note which are required to be paid or delivered to any such holder of Senior
Indebtedness as provided in this Article III, and to file and prove all claims
therefor and to take all such other action in the name of the holder of the Note
or otherwise, as such holder of Senior Indebtedness may reasonably determine to
be necessary or appropriate for this Article III.
3.04. Default on or Acceleration of Senior Indebtedness. In the event that:
(i) the Company shall be in default in respect of payment of any Senior
Indebtedness that does not, by its express terms, permit the holder of such
Senior Indebtedness to declare such Senior Indebtedness due and payable
prior to its stated maturity, and such default shall not have been cured or
waived within sixty (60) days;
then and during the continuance of any such event described in clause (i) of
this Section 3.04 (each such event described in clause (i) above being an
"Acceleratable Default") for the first 180 days after the holder hereof has
received notice from the holder of Senior Indebtedness of the occurrence of such
Acceleratable Default and thereafter (provided the holder of any such Senior
Indebtedness declares such Senior Indebtedness due and payable within 180 days
after the occurrence of such Acceleratable Default (such declaration being an
"Acceleration")), no payment or distribution of any character, whether in cash,
securities or other property (except in securities which are subordinated and
junior in right of payment to the payment of all Senior Indebtedness then
outstanding in terms of substantially the same tenor as this Article III) shall
be made on account of the Note by the Company or demanded or accepted by the
holder of the Note. No more than two notices of the occurrence of Acceleratable
Defaults may be given in any 365 day period.
Without the prior written consent of all holders of any Senior
Indebtedness, so long as payments or distributions on account of the Note are
prohibited pursuant to this Section 3.04, the holder of the Note will not
commence or prosecute (except for the limited purpose of tolling any applicable
statute of limitations) any administrative, legal or equitable action against
the Company relating to the Note or that might materially adversely affect the
Company or its property, and will not assert, collect or enforce all or any
portion of the Note. If the holder of the Note, in violation of the provisions
set forth herein, shall commence or prosecute any suit, action or proceeding
against or affecting the Company, the Company may interpose as a defense or plea
the provisions set forth herein, and any holder or holders of the Senior
Indebtedness, or their authorized representatives, may intervene and interpose
such defense or plea in its own name or in the name of the Company, and may, in
any event, have standing to refrain the enforcement of
<PAGE>
-8-
the payment provisions of the Note in its own name or in the name of the Company
in the same suit, action or proceeding or in an independent suit, action or
proceeding.
3.05. Payments Held in Trust. In case any payment or distribution shall
be paid or delivered to any holder of the Note in violation or contravention of
the terms of this Article III, such payment or distribution shall be held in
trust for and paid and delivered ratably to the holders of Senior Indebtedness
(or their duly authorized representatives) in accordance with their respective
priorities and preferences, until all Senior Indebtedness shall have been paid
in full; provided, however, that the obligations of the holder of the Note
pursuant to this Section 3.05 shall not apply to any payment or distribution, or
portion thereof, to such holder to the extent it accrued prior to the later of
(i) thirty (30) days before such holder received written notice that any such
payment or distribution would be in violation or contravention of the terms of
this Article III because of the existence of a default with respect to Senior
Indebtedness or (ii) the occurrence of such default with respect to Senior
Indebtedness.
3.06. Subrogation. Subject to the payment in full of all Senior
Indebtedness and until the Note shall be paid in full, the holder of the Note
shall be subrogated to the rights of the holders of Senior Indebtedness (to the
extent of payments or distributions previously made to such holders of Senior
Indebtedness pursuant to the provisions of this Article III) to receive payments
or distributions of assets of the Company applicable to the Senior Indebtedness.
No such payments or distributions applicable to the Senior Indebtedness shall,
as between the Company and its creditors, other than the holders of Senior
Indebtedness and the holder of the Note, be deemed to be a payment by the
Company to or on account of the Note; and for the purposes of such subrogation,
no payments or distributions to the holders of Senior Indebtedness to which the
holder of the Note would be entitled except for the provisions of this Article
III shall, as between the Company and its creditors, other than the holders of
Senior Indebtedness and the holder of the Note, be deemed to be a payment by the
Company to or on account of the Senior Indebtedness.
3.07. Scope of Article. The provisions of this Article III are intended
solely for the purpose of defining the relative rights of the holder of the
Note, on the one hand, and the holders of the Senior Indebtedness, on the other
hand. Nothing contained in this Article III or elsewhere in the Note is intended
to or shall impair, as between the Company, its creditors other than the holders
of Senior Indebtedness, and the holder of the Note, the obligation of the
Company to pay to the holder of the Note the principal of and interest on the
Note as and when the same shall become due and payable in accordance with the
terms thereof, or to affect the relative rights of the holder of the Note and
creditors of the Company other than the holders of the Senior Indebtedness.
3.08. Survival of Rights. The right of any present or future holder of
Senior Indebtedness to enforce subordination of the Note pursuant to the
provisions of this Article III shall not at any time be prejudiced or impaired
by any act or failure to act on the part of the Company or any such holder of
Senior Indebtedness, including without limitation, any forbearance, waiver,
consent, compromise, amendment, extension, renewal, or taking or release of
security of or in respect of any Senior Indebtedness or by noncompliance by the
Company
<PAGE>
-9-
with the terms of such subordination regardless of any knowledge thereof
such holder may or otherwise be charged with.
3.09. Company to Make Payments of Interest and Principal Except as
Provided. Except as provided in the Note, the Company shall make payments of
principal of and interest on the Note in accordance with its tenor. Upon any
payment or distribution of assets of the Company referred to in Section 3.03
hereof, the holder of the Note shall be entitled to rely upon a certificate of
the receiver, trustee in bankruptcy, liquidating trustee, agent or other person
making any such payment or distribution for the purpose of ascertaining the
persons entitled to participate in such distribution, the holders of Senior
Indebtedness and other indebtedness of the Company, the amount thereof or
payable thereon, the amount or amounts paid or distributed thereon and all other
facts pertinent thereto or to this Article III.
3.10. Separate Agreement. The holder of the Note agrees to execute, at
the request of the Company, a separate agreement with any holder of Senior
Indebtedness on the terms set forth in this Article III.
3.11. Conversion Permitted. Notwithstanding anything to the contrary
set forth herein, this Article III shall in no manner or fashion prevent the
holder of the Note from exercising his right of Conversion.
ARTICLE IV
4.01. Events of Default. Each of the following events shall be deemed
an "Event of Default":
(a) default in the payment of (i) any installment of the
principal of this Note to the holder of this Note, (ii) any obligation to make
Additional Payments under the Agreement, or (iii) any amounts due under the
Equipment Note, on the date when the same shall become due and payable, whether
at maturity, on a date fixed for prepayment or by acceleration or otherwise;
(b) default in the payment of any installment of interest on this
Note for more than thirty (30) days after the date when the same shall become
due and payable;
(c) default in any material respect in the due observance or
performance of any other covenant by the Company set forth in this Note, which
default shall continue unremedied for thirty (30) days after the earlier to
occur of (i) the Company obtaining actual knowledge of such default, or (ii)
written notice thereof from the holder of this Note;
(d) the Company, pursuant to or within the meaning of any
Bankruptcy Law (as hereinafter defined) (i) becomes insolvent, (ii) fails to pay
its debts generally as they become due, (iii) admits in writing its inability to
pay its debts generally as they become due, (iv) commences a voluntary case or
proceeding under any Bankruptcy Law with respect to itself, (v) consents to the
entry of a judgment, decree or order for relief against it in an involuntary
case or proceeding under any Bankruptcy Law, (vi) consents to the appointment of
a custodian of or
<PAGE>
-10-
for any part of its property, (vii) consents to or acquiesces in the institution
of bankruptcy or insolvency proceedings against it, (viii) applies for, consents
to or acquiesces in the appointment of or taking possession by a custodian of
the Company or for any part of its property, (ix) makes a general assignment for
the benefit of its creditors, or (x) takes any corporate action in furtherance
of or to facilitate, conditionally or otherwise, any of the foregoing;
(e) a court of competent jurisdiction enters a judgment, decree
or order or relief in respect of the Company, in an involuntary case or
proceeding under any Bankruptcy Law which shall (i) approve as properly filed a
petition seeking reorganization, arrangement adjustment or composition in
respect of the Company, (ii) appoint a custodian of the Company or for any part
of its property, or (iii) order the winding-up or liquidation of its affairs;
and such judgment, decree or order shall remain unstayed and in effect for a
period of thirty (30) consecutive days; or any bankruptcy or insolvency petition
or application is filed, or any bankruptcy or insolvency proceeding is commenced
against the Company and such petition, application or proceeding is not
dismissed within thirty (30) days; or any warrant of attachment is issued
against any portion of the property of the Company thereof which is not released
within 15 days of service;
(f) any of the Security Documents cease to be in full force and
effect (other than as a result of termination pursuant to its terms) or such
Security Document or any of its material provisions is declared null and void or
otherwise becomes unenforceable in accordance with its terms; or
(g) the Company shall default in the performance or observance of
any other material term, covenant or agreement on its part to be performed or
observed pursuant to any of the Security Documents and the default continues
unremedied for 30 days after the earlier to occur of (i) the Company obtaining
actual knowledge thereof or (ii) written notice thereof from the holder of this
Note.
For purposes hereof, "Bankruptcy Law" means Title 11, United States Code
or any similar United States federal or state law relating to bankruptcy,
insolvency, receivership, winding-up, liquidation, reorganization or relief of
debtors or the law of any other jurisdiction relating to bankruptcy, insolvency,
receivership, winding-up, liquidation, reorganization or relief of debtors or
any amendment to, succession to or change in any such law.
4.02. Remedies.
(a) At any time during the continuance of an Event of Default and
subject to the provisions of Article III, the holder of the Note may, by written
notice to the Company, declare the entire principal amount thereof forthwith to
be due and payable, whereupon the Note shall become due and payable, both as to
principal and interest, without presentment, demand, protest or notice of any
kind, all of which are hereby expressly waived; provided, however, that if any
Event of Default described in Section 4.01 shall occur for any reason whatsoever
(and regardless of whether such occurrence shall be voluntary or involuntary or
come about or be effected by operation of law of otherwise), then subject to the
absolute priority in right of payment of the
<PAGE>
-11-
holders of the Senior Indebtedness as described in Article III hereof, the
entire principal of and accrued interest on the Note shall automatically become
immediately due and payable without any presentment, demand, protest or notice
of any kind, all of which are hereby expressly waived.
(b) Subject to the provisions of Article III hereof and the
rights of the holders of Senior Indebtedness (including without limitation the
absolute priority in right of payment of the holders of Senior Indebtedness as
described in Article III hereof), in case any one or more Events of Default
shall occur and be continuing, the holder of the Note may proceed to protect and
enforce its rights by an action at law, suit in equity, or other appropriate
proceeding, whether for the specific performance of any agreement contained in
the Note or for an injunction against a violation of any of the terms of the
Note, or in the aid of the exercise of any power granted by the Note, or by law.
In case of a default in the payment of any principal of or interest on the Note,
the Company shall pay to the holder such further amount as shall be sufficient
to cover the cost and expenses of collection, including, without limitation,
reasonable attorneys' fees, expenses and disbursements. No course of dealing and
no delay on the part of the holder of the Note in exercising any right shall
operate as a waiver thereof or otherwise prejudice such holder's rights, powers
or remedies. No right, power or remedy conferred by the Note upon the holder
shall be exclusive of any right, power or remedy referred to in the Note, or now
or hereafter available at law, in equity, by statute or otherwise.
4.03. Annulment of Defaults. Section 4.02 is subject to the condition
that, if at any time after the Note shall have become due and payable pursuant
to Section 4.02, and before any judgment or decree for the payment of the moneys
so due, or any portion thereof, shall have been entered, every Event of Default
shall have been made good or cured, then and in every such case the holder of
the Note may, but need not, by written instrument filed with the Company,
rescind and annul the acceleration of payment on any of the Note pursuant to
Section 4.02, but no such rescission or annulment shall extend to or affect any
subsequent Event of Default or impair any right consequent thereon.
ARTICLE V
5.01. Right of Set-Off. The Company shall have no right of set-off with
respect to any amounts or sums due to the Company against it payment obligations
under this Note, except amounts or sums arising from the indemnification
obligations of Payee the setoff of which amounts shall be subject to the
provisions of Sections 9.02(c) of the Agreement or TCS.
5.02 Security for Note. This Note and all amounts payable hereunder are
secured by the liens described in, and intended to be within the scope of, that
certain Security Agreement dated the date hereof between the Company and the
Payee.
<PAGE>
-12-
ARTICLE VI
6.01. Governing Law. The terms of the Note shall be construed under
and interpreted in accordance with the internal laws of the Commonwealth of
Massachusetts.
6.02. Notices. All notices and other communications thereunder shall be
in writing and shall be deemed to have been duly given when mailed, by
registered or certified mail, return receipt requested, postage prepaid:
If to the Company, to:
Endogen, Inc.
30 Commerce Way
Woburn, MA 01801
Telecopy: (617) 937-0891
Attn.: President and Chief Executive Officer
with a copy to:
William J. Schnoor, Jr., Esq.
Testa, Hurwitz & Thibeault
High Street Tower
125 High Street
Boston, MA 02110
Telecopy: (617) 248-7100
If to the holder of the Note, to:
its address as maintained in accordance with Section 1.01
with a copy to:
Goodwin, Procter & Hoar L.L.P
Exchange Place
Boston, MA 02109
Attention: Stuart M. Cable, Esq.
Telecopy: (617) 570-1231
<PAGE>
-13-
If to the holder of Senior Indebtedness, to:
the respective address for notices set forth in the applicable
documentation evidencing such indebtedness.
or to such other address as any such party shall give notice of to all known
parties under this Section 6.02.
6.03. Amendments; No Waivers. The Note may be amended with respect to
any and all provisions hereof by a writing signed by the Company and the holder
of the Note. No waiver of any right hereunder by the Company or the holder of
the Note shall operate as a waiver of any other right or of the same right with
respect to any subsequent occasion. No waiver by the Company or the holder of
the Note of any breach of the Note shall be held to constitute a waiver of any
other breach.
6.04. Successors and Assigns. All provisions of the Note shall be
binding upon, inure to the benefit of, and be enforceable by and against the
successors or assigns of the Company and any subsequent transferee of the Note.
6.05. Headings. Headings in the Note are included for reference only and
shall have no effect upon the construction or interpretation of any part of the
Note.
IN WITNESS WHEREOF, the Company has caused this Note to be executed by
its officer thereunto duly authorized as of the date first above written.
ENDOGEN, INC.
By: /s/Owen A. Dempsey
-------------------------------------
Owen A. Dempsey
President and Chief Executive Officer
LEASE TERMINATION AGREEMENT
THIS, LEASE TERMINATION AGREEMENT ("Agreement") is made as of the day of
the 31st day of May , 1996 by and between MASSACHUSETTS INSTITUTE OF TECHNOLOGY
("Lessor"), a Massachusetts educational corporation with an address of 238 Main
Street, Suite 200, Cambridge, Massachusetts 02142 and ENDOGEN, INCORPORATED
("Lessee") , a Delaware corporation with an address of 640 Memorial Drive,
Cambridge, Massachusetts 02139.
R E C I T A L
A. Pursuant to a lease dated August 10, 1993 (as amended, the "Lease"),
Lessor leased to Lessee a portion of the third floor of Lessor's building at 640
Memorial Drive, Cambridge, Massachusetts. Capitalized terms used in this
Agreement which are defined in the Lease and not otherwise defined herein shall
have the same meaning herein as therein.
B. Lessee has occupied the Premises pursuant to the Lease but now wishes to
vacate the Premises and to terminate the Lease.
C. Lessor is willing to agree to the termination of the Lease upon the
terms and conditions herein provided.
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, Lessor and Lessee hereby agree as
follows:
1. Lessee shall vacate the Premises on a phased basis, commencing on or
about June 14, 1996 and ending not later than August 14, 1996.
2. On or about June 14, 1996, Millenium Pharmaceuticals, Inc.
("Millennium") shall be construct within the Premises on the third floor of the
Building, at no cost to Lessee, temporary demising partitions dividing the
Premises into two areas, one of which shall consist of approximately- 10,000
square feet of rentable area (the "First Occupied Area") , and the other of
which shall comprise the balance of the Premises on the third floor of the
Building (the "Second Occupied Area") . Lessee shall permit such access to the
Premises for Millennium, its contractors, subcontractors and agents, as is
necessary for the construction of such temporary demising partitions.
3. Lessee shall vacate the First Occupied Area and surrender and redeliver
it to Lessor in the condition required by the terms of the Lease by June 14,
1996. Upon the redelivery of the First Occupied Area to Lessor, Lessor shall
promptly inspect the same and determine whether it has been redelivered in
accordance with the terms of the Lease. Lessor shall thereafter
<PAGE>
promptly notify Lessee whether it accepts the surrender of the First occupied
Area. Immediately upon Lessor's acceptance of the surrender of the First
Occupied Area, the Lease shall be deemed to be amended so as to delete the
First Occupied Area from the Premises for all purposes of the Lease except as
otherwise provided in this Agreement.
4. Lessee shall vacate the Second Occupied Area and surrender and redeliver
it to Lessor in the condition required by the terms of the Lease by August 14,
1996. Upon the redelivery of the Second Occupied Area to Lessor, Lessor shall
promptly inspect the same and determine whether it has been redelivered in
accordance with the terms of the Lease. Lessor shall thereafter promptly notify
Lessee whether it accepts the surrender of the Second Occupied Area. Immediately
upon Lessor's acceptance of the surrender of the Second occupied Area, the Lease
shall terminate in its entirety with the same effect as if the Term had expired
on the date of Lessor's acceptance of such surrender, except that those
provisions of the Lease which by their terms survive the expiration of the Term
(e.g., Section 12(m)) shall survive such termination. Notwithstanding anything
to the contrary herein contained, Lessee shall vacate the entire Premises
(including, without limitation, the Basement Space) and surrender and redeliver
it to Lessor in the condition required by the terms of the Lease by August 14,
1996.
5 . On or prior to June 14, 1996, Lessee shall yield up and relinquish to
Lessor fifteen (15) of the parking spaces leased by Lessee pursuant to Section
10.1 of the Lease, which spaces shall then be available for re-lease by Lessor
to a third party.
6 . Until such time as Lessor accepts the surrender and redelivery of the
First Occupied Area, the Lease shall remain in full force and effect regardless
of whether or not Lessee actually occupies all or any portion of the First
Occupied Area. From and after the date on which Lessor accepts the surrender of
the First Occupied Area, Lessee's obligations under the Lease to pay Basic Rent,
Taxes and Operating Expenses to Lessee shall be pro-rated to reflect the partial
termination of the Lease as to the First Occupied Area except that Lessee shall
remain obligated to pay for all electricity consumed in the Premises, whether by
Lessee or by others, but Lessee shall have the right to collect from Millennium
its pro-rata share of such electric charges. Lessee shall remain obligated to
pay Basement Rent in accordance with the terms of the Lease until Lessor has
accepted the surrender of the Basement Space.
7 . All Alterations to the Premises made, installed or constructed on
behalf of Lessee, and all of Lessee's Work shall remain in or on the Premises
notwithstanding the termination of the Lease as herein provided. Provided that
the Lease is terminated pursuant to the terms of this Agreement, Lessor hereby
agrees to reimburse Lessee for the undepreciated cost of the
2
<PAGE>
Alterations and Lessee's Work (determined on a straight-line basis) which
shall remain in the Premises, by making thirty-three (33) equal monthly payments
of $10,727.00 each to Lessee on the first day of each month, commencing on July
1, 1996 and ending on March 1, 1999, inclusive. [Amount of payments is subject
to verification by Lessor of undepreciated costs and timely execution of
documents.]
8. Notwithstanding anything contained herein to the contrary, this
Agreement shall not be effective unless and until all of the following occur:
(a) Lessor unconditionally delivers to Lessee an executed counterpart of
this Agreement;
(b) Lessor receives a written waiver from Lifeline Systems, Inc. of its
right of offer with respect to the proposed lease of the Premises by Lessor to
a third party;
(c) Lessor receives a written waiver from Pathology Services, Inc. of its
right of offer with respect to the proposed lease of the Premises by Lessor to a
third party; and
(d) Lessor unconditionally delivers to such third party a written agreement
executed by Lessor leasing the Premises to such third party.
Lessee acknowledges that Lessor's willingness to enter into this Agreement
is based, in part, on Lessor's expectation that third parties over whom Lessor
has no control will take the actions described above in this Paragraph. Lessor
makes no representation or warranty concerning whether or not such third parties
will take such actions so that the foregoing conditions to the effectiveness of
this Agreement are satisfied in full.
9 . It shall constitute an Event of Default under the Lease, for which no
notice is required or cure period allowed, if Lessee either (i) fails to
surrender and redeliver the First Occupied Area to Lessor in the condition
required by the terms of the Lease by June 14, 1996, or (ii) fails to surrender
and redeliver the entire Premises to Lessor in the condition required by the
terms of the Lease by August 14, 1996. In the event of the occurrence of such an
Event of Default, or any other Event of Default under the Lease, then, in
addition to the rights and remedies of Lessor as provided in the Lease, Lessor
shall have the right, by notice given to Lessee, to terminate this Agreement,
whereupon the Lease shall remain in full force and effect as if this Agreement
had never been executed.
10. The Security Deposit shall be accounted for and, to the extent
applicable, refunded to Lessee, in accordance with the provisions of Section
25.0 of the Lease, within thirty (30) days
3
<PAGE>
of the termination of the Lease in its entirety as herein provided.
11. Contemporaneously with its execution of this Agreement, Lessee shall
furnish to Lessor a certified copy of the resolution of the Board of Directors
of Lessee authorizing Lessee to enter into this Agreement.
12. This Agreement constitutes the entire agreement of the parties with
respect to its subject matter, and no oral statement or prior written matter
shall have any force or effect. This Agreement shall not be modified or canceled
except by writing subscribed to by all parties. This Agreement shall be governed
by and construed in accordance with the laws of the Commonwealth of
Massachusetts.
EXECUTED under seal as of the day and year first above written.
LESSOR: MASSACHUSETTS INSTITUTE OF
TECHNOLOGY
Date: 6/12/ ,1996 By: /s/ Philip A. Trussell
--------------------------------------
Philip A. Trussell
Director of Real Estate
Hereunto duly authorized
LESSEE: ENDOGEN, INCORPORATED
Date: 5/31 ,1996 By: /s/ Owen A. Dempsey
--------------------------------------
Owen A. Dempsey
President and Chief
Executive Officer
Hereunto duly authorized
STANDARD FORM INDUSTRIAL LEASE
1. PARTIES AND PREMISES, Landman Omnibus XI Limited Partnership, a
Massachusetts limited partnership having an address c/o Berkeley Investments,
Inc., 101 Federal Street, Boston, Massachusetts 02110, hereinafter called the
Lessor ("Lessor"), which expression shall include its heirs, successors, and
assigns where the context so admits, does hereby lease to Endogen, Inc., a
Massachusetts corporation with a principal place of business at 6 Gill Street,
Wobum, Massachusetts, hereinafter called the Lessee, which expression shall
include its successors, executors, administrators, and assigns where the context
so adopts, and the Lessee hereby leases the following described premises (the
"Premises"):
Approximately 12,144 rentable square feet of first (1st) floor space as
shown on Exhibit A attached hereto in a building (the "Building") known as and
numbered 30 Commerce Way, Woburn, Massachusetts 01801, which Building and the
location of the Premises therein are depicted in the plan attached hereto as
Exhibit A, and which Building is part of a complex contaning two buildings (20
and 30 Commerce Way) and associated grounds (the "Complex"), as depicted in the
plan attached hereto as Exhibit A; together with the right to use in common,
with others entitled thereto, the Building's common utility pipes and its common
utility service connections and the Building lot's entrances, exits and
accessways for the purpose of access to and from the Premises. Included as part
of the Premises are the loading docks and the doors serving the same located in
that part of the Building occupied by the Premises.
2. PARKING AND LOADING. Lessee shall have the right, in common with others
entitled thereto and subject to the reasonable regulation by Lessor, to utilize
the paved lot as shown as the cross-hatched area on Exhibit B (except for such
parking spaces which have been assigned as of the date of this Lease) for the
parking of up to thirty (30) registered and insured trucks, trailers, passenger
and commercial motor vehicles and other vehicles for purposes of loading and
unloading and for purposes of parking. In exercising the aforesaid rights,
Lessee shall not block or impede vehicular or pedestrian passageway or traffic
in any entrance or exit to the Building's lot,
All parking and loading or unloading shall be at Lessee's sole risk, and Lessor
shall not be responsible for any property damage or loss or any personal injury
related thereto except to the extent caused by the negligence or willful
misconduct of Lessor or Lessor's employees or agents. At Lessor's request made
reasonably in advance, Lessee temporarily shall cause to be removed any parked
vehicles or trailers from the parking and loading areas for the purpose of
Lessor conducting maintenance of the Building's lot.
Lessor shall be responsible for snow removal/plowing of the Building's paved
lot, walkways and loading areas, and for maintenance of landscaping of the
Building's
<PAGE>
grounds; provided however, the parties recognize and agree that in the event
vehicles, trailers or other obstructions are present in the parking area
or loading area during snow removal activities, Lessor will plow around such
vehicles trailers or obstructions and shall not be required or expected to
remove any residue of snow adjacent thereto.
3. TERM. The term of this lease shall commence upon the date hereof (the
"Commencement Date"), and the term shall terminate on October 31, 1999 (the
"Expiration Date"), unless sooner terminated or extended as may be provided
herein. The first lease year shall consist of any partial calendar month
following the Commencement Date (the "Partial Month") and the next twelve (12)
calendar months, Each succeeding lease year shall commence upon the expiration
of the prior lease year and shall consist of twelve (12) calendar months, except
that Lease Year Four shall be three (3) months in duration.
Lessor shall deliver the Premises to Lessee "as is", free of all tenants
or occupants and their possessions. If Lessor fails to deliver possession of the
Premises at the Commencement Date, the Lessor shall not be liable for any
damages caused thereby, nor shall this lease be void or voidable, except as
provided in the following sentence, but the Commencement Date shall be delayed
by the period of delay in the delivery of possession of the Premises. In the
event Lessor fails to deliver the Premises in the condition required hereunder
by August 15, 1996, Lessee shall have the option to terminate the Lease. If this
lease is extended or renewed, all references to "term" herein shall refer to the
extension or renewal terms unless specifically designated otherwise.
In the event it is unable so to deliver possession by the Commencement
Date, Lessor will make its reasonable best efforts to deliver possession as soon
thereafter as is practical, and it will take all reasonable and necessary legal
steps available to it so to secure possession. In no event shall Lessor be
liable to Lessee for any damages or claims if Lessor is delayed in delivering or
is unable to deliver possession of the Premises to Lessee.
4. RENT. (A) Rent is payable in twelve (12) equal monthly installments in
accordance with subparagraph B below in advance on the first day of each month
during each lease year of the term at the office of Landman 2O-3O Commerce Way,
P.O. Box 1147, Boston, Massachusetts O2lll. If the Commencement Date or
Expiration Date occurs on a day other than the first day of a calendar month,
the monthly installment of rent for such month shall be pro-rated based on the
number of days in such month, All rent checks shall be payable to LANDMAN XI
CORPORATION. If Lessor fails to receive a monthly installment of rent by the
fifth (5th) day of the month, interest will accrue on such sum at the rate of 1
1/2% per month until such time as it is paid.
2
<PAGE>
(B) The base rent for each year of the term (the "Base Rent") shall be
as follows:
Lease Year Per Year Per Month (or Partial Month)
---------- -------- ----------------------------
Year One* $69,093.48
08/01/96 - 11/30/96 0.00**
12/01/96 - 07/31/97 $8,602.00
Year Two $103,224.00 $8,602.00
Year Three $103,224.00 $8,602.00
Year Four*** $ 25,806.00 $8,602.00
*Base Rent is also due for any Partial Month in lease Year One, pro-rata based
on the length of said Partial Month.
** In the event Lessor does not deliver the Premises free of all tenants or
occupants and their possessions on or before August 1, 1996, the free rent
period shall be adjusted on a daily basis so that the Lessee shall receive four
(4) calendar months of free rent.
*** Lease Year Four is three (3) months in duration.
Base Rent for any Partial Month shall be equal to the product of the
number of calendar days remaining in said Partial Month (commencing on the
Commencement Date and ending on the the last calendar day of said Partial Month)
multiplied by the Pro Rata Amount (as hereinafter defined).
As used herein, the "Pro Rata Amount" shall be equal to the product of the Base
Rent per month for Lease Year One divided by the number of calendar days in said
Partial Month.
5. SECURITY DEPOSIT. Upon the execution of this Lease by Lessee, the Lessee
shall deposit with the Lessor the amount of Seventeen Thousand Two Hundred Four
($17,204.00) Dollars. This deposit shall be held by Lessor as security for
payment of all rent and other sums of money payable for the term and for the
faithful performance by Lessee of all other covenants and agreements; provided,
however, that the Lessee shall have no right to require Lessor to indemnify
itself from this deposit for any particular violation or default of Lessee,
the use of this deposit to indemnify Lessor being within Lessor's sole
discretion and Lessor hereby reserves the right to proceed against the Lessee
directly for any amounts owed by Lessee for any violation or default of Lessee
pursuant to the terms of this Lease. If all or any part of the deposit is
applied to an obligation of Lessee hereunder, Lessee shall immediately upon
request by Lessor restore said deposit to its original amount. No interest shall
be payable to Lessee on account of this deposit, provided that Lessor shall
place the funds from this deposit in a separate account. Upon any conveyance by
Lessor of its interest under this lease, the deposit may be delivered by Lessor
to Lessor's grantee or transferee (or accounted for by means of an adjustment
between seller and buyer). Upon any such delivery or accounting, Lessee hereby
releases Lessor of any and all liability with respect to the deposit, its
application and return, and Lessee agrees to look solely to such grantee or
transferee.
3
<PAGE>
This deposit, or any part thereof, not applied by Lessor, to cure a default
by Lessee, in the exercise of Lessor's remedies hereunder or as otherwise
permitted under this Lease, shall be returned to Lessee within thirty (30) days
of the Expiration Date or earlier termination of this Lease or the date on
which any renewal term expires, and only after Lessee has fully vacated the
Premises, notwithstanding that this lease has been terminated by Lessor; it
being the intention of the parties that this deposit shall secure Lessor not
only as to default by Lessee before such termination, but also to secure Lessor
from any deficiency of rent or other charges payable to Lessor by Lessee.
6. ADDITIONAL RENTS.
A. - Additional Rent Due to Taxes.
The Lessee shall pay as additional rent (herein referred to as Lessee's
"Tax Adjustment"), Lessee's Proportionate Share of all real estate taxes, sewer
rents or taxes in the nature of real estate taxes, including special and general
assessments, however the same may be proportionately designated, levied or
assessed by state or local governmental authorities, (herein collectively
referred to as "Taxes"), attributable to all buildings and land that comprise
the total site of the Complex (20-30 Commerce Way, Woburn, Massachusetts).
Notwithstanding the foregoing, Lessee shall bear no share of any special or
betterment assessments which have been assessed prior to the Commencement Date
of the term of this Lease. Lessee shall be responsible for all taxes and other
levies assessed against personalty owned or controlled by it.
In the event Lessor obtains an abatement or refund of Taxes with respect
to any period of time falling wholly or partly within the term of this Lease,
Lessee shall receive Lessee's Proportionate Share of such refund for
the period falling within the term of this Lease after deduction of the
reasonable costs in obtaining said abatement or refund, which amount shall, in
the sole discretion of Lessor, be (i) applied in reduction of any Base Rent or
Additional Rent due or owing by Lessee to Lessor or (ii) paid to Lessee @thin
sixty (60) days of receipt of Lessor of said abatement or refund. Lessee shall
have no right to contest the amount of any valuation of the Complex or any
assessment of taxes without the written consent of Lessor, which may be withheld
in Lessor's sole and absolute discretion.
B. - Additional Rent Due to Expense Adjustments.
Lessee shall pay to Lessor as additional rent (hereinafter referred to as
Lessee's "Expense Adjustment"), Lessee's Proportionate Share of Operating Costs,
"Operating Costs" shall mean all costs incurred and expenditures made by the
Lessor in the operation and management of the Building or of buildings and the
associated land comprising the Complex (hereinafter collectively called the
Property), and the maintenance and repair of the Property and its common
systems, exclusive of capital expenditures, leasing commissions, special
services to other tenants, financing expenses and real estate taxes, as
determined in accordance with generally accepted accounting principles.
Operating Costs include, without limitation, costs of cleaning, security,
janitorial service, common area heating, ventilation, electricity,
air-conditioning, all utilities not separately metered, maintenance of the
grounds, (including periodic repaving and repainting of the paved areas when
necessary), snow removal, management fees not to exceed five (5%) percent of
rent, wages, salaries, benefits, payroll taxes and unemployment compensation
insurance for employees of Lessor or any contractor of Lessor engaged in the
cleaning, operation, maintenance or security of the Property, insurance relating
to the Property, legal and accounting fees related to the management of tenants
and the operation of the Property, payments other than
4
<PAGE>
taxes to the municipality in which the Property is located, including but not
limited to water and sewer charges, supplies, and all other expenses customarily
incurred in connection with the operation and maintenance of buildings of
comparable type and use. Operating Costs shall not include: salaries, wages,
benefits and other expenses of administrative employees and other persons not
involved in the daily operations of the Building; principal, interest or other
charges relating to indebtedness secured by a mortgage covering any portion of
the Building, Property or the Complex; any capital cost incurred in connection
with expansion of the rentable area of the Building or the Complex; any utility
or other service used or consumed in the premises leased to any tenant or
occupant, but only if Lessee's use or consumption of such utility or other
services is separately metered or sub-metered at the Premises; efforts to lease
portions of the Building or to procure new tenants for the Building, including
advertising expenses, leasing commissions and attorney's fees; negotiations or
disputes with any tenant of the Building; Lessor's general overhead not directly
related to the management or operations of the Building; depreciation of the
Building; repairs and replacements arising out of a fire or other casualty or an
exercise of the eminent domain of the Building to the extent of the net
insurance or eminent domain proceeds; Lessor's breach or violation of a law,
including fines, penalties and attorneys' fees; compensation paid to employees
or other persons in connection with commercial concessions operated by Lessor;
environmental testing and remediation; compliance by Lessor with laws
existing as of the date of this Lease, including without limitation the
Americans with Disabilities Act and the regulations and standards thereunder,
sculptures, paintings and other works of art; and any items with respect to
which Lessor receives reimbursement from insurance proceeds or from a third
party.
"Lessee's Proportionate Share" for purposes of this Lease shall be 11.56%
which percentage equals a fraction, the numerator of which is the square footage
of the Premises, and the denominator of which is the square footage of the
Complex. In the event there are additions to the Complex thereby adding square
footage thereto, or in the event the square footage of the Premises is changed
(except for voluntary changes made to the Premises by Lessee) resulting in
changes to the square footage figures of the Premises and Complex, then Lessee's
Proportionate Share shall be adjusted appropriately so as to reflect said
changes.
This section shall in no way define the responsibilities or duties of the Lessor
or Lessee regarding the maintenance, repair, or operation of the Complex or of
the Premises, said responsibilities and duties being defined elsewhere in the
lease. Moreover, the provisions of this section shall not be construed or
interpreted so as to require the Lessor or Lessee to take any action with
respect to maintenance or repair of the Complex or of the Premises.
C. - Payment of Expense Adjustment:
Lessee's Tax Adjustment and Lessee's Expense Adjustment shall be paid to the
Lessor in monthly installments coincidental with the the monthly Base Rent
payment as stated above; and the amount of such Adjustment payments shall be
initially established by the Lessor as a good faith estimate of such amounts and
may be modified from time to time as Lessor determines is reasonable and
necessary in order to adequately budget and allocate such expenses.
It is acknowledged that all of the Lessor's actual taxes and expenses for a
given fiscal year in accordance with generally accepted accounting practices
shall not be determined until ninety (90) days after the termination of the
Lessor's fiscal year, and thereafter, Lessor shall send Lessee a statement
reasonably itemizing the components and the calculation of Lessee's Tax and
Expense Adjustments. Accordingly, the Lessor shall
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exercise good faith and diligence in establishing the projected monthly expense
adjustments for any given fiscal year, and shall readjust and recompute said
monthly Lessee's Tax and Expense Adjustment as is appropriate for the following
fiscal year, In the event that an arrearage or overage exists in the payment
of Lessee's Annual Tax and Expense Adjustment for a fiscal Year, the Lessee or
Lessor (as the case may be) shall pay the same to the other pay within thirty
(30) days of receipt of a statement from Lessor to Lessee itemizing the same.
The Tax and Expense Adjustment shall be appropriately prorated for any
partial fiscal year falling within the term of this lease. For purposes of this
lease, the term "fiscal year" is defined as the twelve (12) calendar
month period commencing on July 1 and ending on June 30.
On the date this lease expires or is otherwise terminated, the entire
proportionate share of the additional rent on account of Taxes and Operating
Costs for the fiscal year during which such expiration or termination occurs
shall immediately become due and payable by Lessee to Lessor. Such proportionate
share shall be equal to the product of (i) Lessee's Share of the estimated
amount of Taxes and Operating Costs for said fiscal year (the estimated amount
being based upon the most recent applicable data reasonably available to Lessor)
divided by twelve (12); multiplied by (ii) the number of calendar months in the
period commencing on July 1 of the fiscal year in which the lease expires or
otherwise terminates and ending on the date of expiration or termination. Lessee
shall be liable to Lessor for any amount by which Lessee's Proportionate Share
of the estimated amount of any Taxes and Operating Costs for said fiscal year
are less than Lessee's Proportionate Share of actual Taxes and Operating Costs
for said fiscal year, and shall pay the same to Lessor within fifteen (15) days
of notice from Lessor of said amount of additional taxes and Operating Costs.
Lessor shall be liable to Lessee for any amount by which Lessee's Share of the
estimate amount of any Taxes and Operating Costs for said fiscal year are more
than Lessee's Share of actual Taxes and Operating Costs for said fiscal year,
and shall, in the sole discretion of Lessor, either (i) apply said additional
amount in reduction of any Base Rent or Additional Rent due or owing by Lessee
to Lessor or (ii) pay said additional amount to Lessee within thirty (30) days
of Lessor's determination of actual Tax liability and Operating Costs for said
fiscal year as provided under the second paragraph of this Section 6C,
Adjustments shall be made if the terms of this lease begins and/or ends on other
than the first or last day of a fiscal year. In the event of Lessee's default,
however, Lessee's obligation to pay any and all additional rent under this lease
shall continue and shall cover all periods up to the Expiration Date.
Lessee shall have the right to have the books and records relative to such
Tax and Expense Adjustment for any year audited by an independent accountant
selected by it, at Lessor's Boston area office, and in the event that such
independent accountant's inspection shall disclose any discrepancy either with
the Expense Adjustment or the Tax Adjustment stated by Lessor, then unless the
parties promptly resolve any such dispute the matter shall be resolved in
accordance with the arbitration procedures of the American Arbitration
Association. As soon as the Taxes and/or Operating Costs for a year have been
finally determined, there shall be an appropriate adjustment between Lessor and
Lessee to reflect any overpayment or underpayment of Lessee's proportionate
share for such year, and the Lessor shall pay within ten (10) days of said
determination any overpayment to the Lessee or the Lessee shall pay within ten
(10) days of said determination any underpayment to Lessor, as the case may be.
7. Intentionally Deleted.
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8. ADJUSTED RENT. Intentionally Deleted.
9. UTILITIES. The Lessee shall pay, during the term as they become due, all
bills for electricity and other utilities (including those that are used for
furnishing heat or other purposes) that are furnished to the Premises and
presently separately metered, and all bills for fuel furnished to a separate
tank servicing the Premises exclusively. The Lessor agrees to provide all other
utility service (except to the extent that the same are furnished through
separately metered utilities or separate fuel tanks as set forth above) to the
Premises, and to furnish cold water to the Premises' lavatories, and to light
any common passageways, parking areas and common stairways, all subject to
interruption due to the making of repairs, alterations, or improvements, and due
to circumstances beyond Lessor's control such as accident, labor difficulties,
trouble in obtaining fuel, electricity, service, or supplies from the sources
from which they are usually obtained for said Building, or to any other cause
beyond the Lessor's reasonable control.
Lessor shall have no obligation to provide utilities or equipment other
than the utilities and equipment within the Premises as of the Commencement Date
of this lease. In the event Lessee requires additional utilities or equipment,
the installation and maintenance thereof shall be Lessee's sole obligation,
provided that such installation shall be subject to the written consent of the
Lessor. Lessee agrees that, upon written notice to Lessee, Lessor may, at
Lessor's expense and subject to the terms of this lease, separately meter water
and sewer use to Lessee's Premises in which case Lessee shall pay directly for
its own water use pursuant to its meter readings and Lessee shall be responsible
for the maintenance thereof.
10. USE OF LEASED PREMISES. The Lessee shall use the Premises only for the
purpose of biomedical product research, biomedical product development,
biomedical product manufacturing and biomedical product sales and support and
related shipping, receiving, training, offices, warehousing, storage,
administration and other ancillary uses, but for no other purpose. Provided
however, Lessee shall not use the Premises in such a way as to unreasonably
interfere with the use of or by, or to unreasonably constitute a nuisance to
Lessor or to any other tenant or licensee of the Building or to passersby or do
or fail to do other acts which, in Lessor's reasonable judgement, may
unreasonably affect the reputation or appearance of the Building, or which, in
Lessor's reasonable judgement, may tend to unreasonably degrade the economic
status of the Building or unreasonably interfere with its most effective
operation and Lessee shall not conduct at the Premises any hazardous or
dangerous activities or any activities posing uncommon, unusual or out of the
ordinary level of risk to property or to persons. Moreover, Lessee shall not
utilize or produce at or bring on to the Premises any hazardous, dangerous or
volatile substances, or any infectious materials or waste products or any
diseased materials , substances, pathogens or viruses, except in accordance with
Addendum #2 of this lease. All substances utilized by Lessee at the Premises
shall be in compliance with all governmental and industry rules, regulations,
laws and practices, and Lessee shall obtain and maintain in force and effect all
governmental licenses and permits required therefore. In addition, Lessee shall
take all steps reasonable and necessary for the safe and adequate containment
and disposal of all substances or matter of whatever nature utilized, developed
or stored at the Premises and their by-products and any item or substance in
contact therewith. Lessee hereby indemnifies and holds harmless Lessor and its
Managing Agent, and will defend the same, from and against any liability, causes
of actions, claims, fines, penalties, judgments, suits, demands, bonds, damages
of every kind, nature and description in law or in equity arising from or
relating to Lessee's operations and activities at the Premises and Lessee shall
inform Lessor (within seven days of receipt thereof) of any notices of
violations it receives from any governmental agency regarding its use or
handling thereof
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All waste, trash, accumulated garbage generated or produced by Lessee in its
operations ("Operations Waste") at the Premises (other than its ordinary
business office trash) shall be held and stored by Lessee temporarily at the
Premises and shall not be co-mingled with its ordinary business office trash.
Lessee shall cause such Operations Waste to be removed from the Premises at its
expense on a weekly basis. Lessee shall not cause any odors, fumes, noise or
undue vibrations to emanate from the Premises or to disturb any other tenant of
the Building.
11. COMPLIANCE WITH LAWS. The Lessee acknowledges that no trade nor
occupation shall be conducted in the Premises or use made thereof which will be
unlawful, improper, noisy or offensive, or contrary to any law or any municipal
by-law or ordinance in force in the city or town in which the Premises are
situated, or which tend to degrade the economic status of the building. Lessee
has no obligation to cause any portion of the Building outside of the Premises
to comply with any law.
Lessor makes no representations or warranties concerning compliance of the
Premises or the Building with any federal, state or municipal law, rule,
regulation or ordinance, including, without limitation, compliance of the same
with applicable provisions of the Americans with Disabilities Act, so-called,
and with applicable zoning and permitting requirements.
12. FIRE INSURANCE. The Lessee shall not permit any use of the Premises
which will make voidable any insurance on the property of which the Premises are
a part, or on the contents of said property or which shall be contrary to any
law or regulation from time to time established by the New England Fire
Insurance Rating Association, or any similar body succeeding to it's powers. The
Lessee shall on demand reimburse the Lessor, and all other tenants existing as
of the date of this lease, all extra insurance premiums caused by the Lessee's
use of the Premises.
13. MAINTENANCE.
A. LESSEE'S OBLIGATIONS. The Lessee agrees to maintain the Premises as it
may be improved or put during the term of this lease in the same condition in
which the Premises were in on the Commencement Date, damage by fire and other
casualty, eminent domain and reasonable wear and tear only excepted, and
whenever necessary, to replace plate glass and other glass therein damaged or
broken by Lessee or anyone claiming by, through or under Lessee,. The Lessee
shall not permit the Premises to be overloaded, damaged, stripped, or defaced,
nor suffer any waste. Lessee shall be responsible for the maintenance and repair
of all electrical, plumbing, heating, air conditioning, ventilation and other
mechanical installations located entirely on or serving only the Premises as of
the Commencement Date and Lessee shall be responsible for the maintenance,
repair and replacement of all electrical, plumbing, heating, air conditioning,
ventilation and other mechanical installations installed on the Premises by
Lessee.
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B. LESSOR'S OBLIGATIONS. The Lessor agrees to maintain, repair and replace
(as necessary) the structure and foundation of the Building, the roof (except
for repairs thereto necessitated by Lessee's installation, repair or
replacement of equipment located on the roof), the parking areas, accessways,
and other common areas in the same condition as it is on the Commencement Date
or as it may be improved during the term of this lease, reasonable wear and
tear, damage by fire and other casualty only excepted, unless such maintenance
is the result of unreasonable wear and tear by the conduct of Lessee or those
for whom the Lessee is legally responsible. Except as otherwise provided in
section 13A above, Lessor shall be responsible for maintaining, repairing and
replacing (as necessary) the Building's mechanical, plumbing and electrical
systems and other mechanical installations (including without limitation the
HVAC system) which serve more than one leasing unit, Lessor shall maintain the
landscaping of the Building's grounds, shall plow the Building's paved lots as
hereinbefore stated and shall provide outside lighting for parking areas.
14. ALTERATIONS - ADDITIONS. The Lessee shall not make alterations or
additions, structural or otherwise, to the Premises, without the prior written
consent of Lessor, provided that Lessor's consent shall not be unreasonably
withheld solely with respect to non-structural alterations or additions to the
Premises which will not cause damage to the Premises upon removal. All such
allowed alterations shall be at Lessee's expense and shall be in quality at
least equal to the present construction. Lessee shall not permit any mechanic's
liens, or similar liens, to remain upon the leased Premises for labor and
material furnished to Lessee or claimed to have been furnished to Lessee in
connection with work of any character performed of claimed to have been
performed at the direction of Lessee and shall cause any such lien to be
released of record forthwith without cost to Lessor. Any alterations or
improvements (except as provided in Addendum #5) made by the Lessee shall become
the property of the Lessor at the termination of occupancy as provided herein,
unless the parties agree otherwise at the time Lessor's consent is requested.
Notwithstanding the foregoing, Lessor hereby approves construction by Lessee at
its sole cost and expense, of the improvements more specifically referenced on
Exhibit 6, provided, however, that it shall be a condition to such approval that
Lessee provide Lessor with and Lessor shall approve plans and specifications
showing said tenant improvements in such form, substance and detail as Lessor
shall reasonably require.
All work, construction activity, modifications, changes, remodeling to the
Premises or the Building by the Lessee pursuant to any rights specifically
granted to it in this Lease or other by Lessor (the "Work") shall be performed
subject to and in compliance with the following conditions:
a. Except as is specifically approved in writing by Lessor, the Work shall
not change, alter, remove or interfere with the structural components of the
Building, and shall not, except to an immaterial degree, restrict access to the
utility systems of the Building.
b. The Work, except to an insignificant degree, shall not interfere with other
tenants or their business operation and shall not affect or limit the storage
and other use of the basement, if any, or other areas of the Building by those
entitled thereto,
c. The Work shall be performed in a workmanlike manner with all governmental
permits in place, pursuant to stamped and professionally prepared plans which
have been approved in writing and in advance by Lessor, said approval not to be
unreasonably withheld, conditioned or delayed.
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d. All Work shall be performed by licensed adequately insured contractors who,
prior to the commencement of Work, have deposited a certificate of insurance
with Lessor naming Lessor as an additional insured under said certificates and
evidencing workman's compensation and comprehensive general liability insurance
in the amount of at least $1,000,000.
e. All damage to the Building (including other tenant spaces) or to the Premises
as a result of said Work shall be the responsibility of the Lessee, and Lessee
hereby indemnifies and holds Lessor harmless for any costs, causes of actions or
damages resulting from said Work, including costs of repair.
f Prior to the commencement of the Work, Lessee shall deliver to Lessor in a
form reasonably satisfactory to Lessor the general contractor's license and
copies of all building permit's and applications for permits.
15. ASSIGNMENT - SUBLEASING. Lessee shall not assign, sublet, underlet,
mortgage, pledge or encumber (collectively referred to as "Transfer") this lease
without Lessor's prior written consent; which consent shall not be unreasonably
withheld or delayed. Any Transfer made without such consent shall be void.
Moreover, as additional rent, Lessee shall reimburse Lessor promptly for
reasonable legal and other expenses incurred by Lessor in connection with any
request by Lessee for consent to a Transfer. The factors which Lessor may
consider, without limitation, as part of its determination as to whether it may
reasonably withhold consent to an assignment or sublet to a proposed
transferee, are as follows: (i) whether such proposed transferee has a good
reputation and has previous business experience, (ii) whether such proposed
transferee has a net worth sufficient in the reasonable discretion of the Lessor
to satisfy all of the obligations of the lessee under this lease, and (iii)
whether such proposed transferee shall continue to use the Premises as stated in
Article VI of this lease and in character with the Building.
In the event that Lessor gives its consent pursuant to the foregoing
paragraph, Lessee shall remain primarily liable upon all the terms, conditions
and covenants hereof, will deliver to Lessor an instrument executed by the
Transferee binding the same to the terms and provisions of this lease and will
pay to Lessor fifty (50%) percent of the amount by which the sum of rent,
additional rent due to taxes and all other money or consideration it received
from a Transferee exceeds the sum of all monetary obligations which Lessee owes
to Lessor for the period of such Transfer.
Consent by Lessor, whether express or implied, to any Transfer shall not
constitute a waiver of Lessor's right to prohibit any subsequent Transfer; nor
shall such consent be deemed a waiver of Lessor's right to terminate this lease
upon any subsequent Transfer. Moreover, Lessor's acceptance of any name for
listing on any Building directory will not be deemed, nor will it substitute for
Lessor's consent, as required herein, to any sublease, assignment or other
occupancy of the Premises.
As used herein, the term "assign" or "assignment" shall be deemed to
include, without limitation: (a) any transfer of the Lessee's interest in the
lease by operation of law, the merger or consolidation of the Lessee with or
into any other firm or corporation; or (b) the transfer or sale of a
controlling interest in the Lessee or any parent of Lessee whether by sale of
its capital stock or otherwise; or (c) any transfer to an entity which controls,
is under common control, or is controlled by Lessee (any of the foregoing being
collectively referred to herein as a "Corporate Assignment"); provided howPever,
that Lessor shall give its consent to a Corporate Assignment if (i) the
assignee, transferee or resulting entity pursuant to said Corporate Assignment
has a net worth at least equal to the greater of (a) the net worth of Lessee on
the date of this Lease, or (b) the net worth of Lessee on the day
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immediately preceding such Corporate Assignment, (ii) the assignee, transferee
or resulting entity pursuant to such Corporate Assignment executes an assumption
agreement in form and substance reasonably satisfactory to Lessor assuming all
of the obligations of Lessee under this Lease, and (iii) the assignee,
transferee or resulting entity shall continue to use the Premises as stated in
Article VI of this Lease and in character with the Building. The preceding
notwithstanding, the term "assign" or "assignment" shall not be deemed to
include public trading of shares of stock in Lessee on the stock exchange in
the ordinary course of business so long as same does not constitute the sale of
a controlling interest in Lessee.
16. TENANT ESTOPPELS AND MORTGAGEE RIGHTS. Lessee agrees from time to time,
upon not less than fifteen (15) days prior written request by Lessor, to
execute, acknowledge and deliver to Lessor a statement in writing certifying
that this Lease is unmodified and in full force and effect and that Lessee has
no defenses, offsets or counterclaims against its obligations to pay the fixed
rent and additional rent and to perform its other covenants under this Lease and
that there are no uncured defaults of Lessor or Lessee under this Lease (or, if
there have been any modifications that the same is in full force and effect as
modified and stating the modifications and, if there are any defenses, offsets,
counterclaims, or defaults, setting them forth in reasonable detail), and the
dates to which the fixed rent, additional rent and other charges have been paid,
and such other matters as a mortgagee or purchaser of the Premises may
reasonably request. Any such statement delivered pursuant to this Section may be
relied upon by any current or prospective purchaser or mortgagee or any current
or prospective assignee of any such mortgagee.
16.1 Lease Subordinate-Superior. This Lease shall be subject and
subordinate to any mortgage ("Mortgage") now or hereinafter placed on the
Building or its grounds, or both, or any portion or portions thereof or interest
therein, which are separately and together hereinafter in this Section 16
referred to as "the mortgaged premises", and to each advance made or hereafter
to be made under any Mortgage, and to all renewals, modifications,
consolidations, replacements and extensions thereof and all substitutions
therefor, provided, however, that conditioned upon Lessee not being in default
beyond applicable cure periods under any of the terms of this Lease, subsequent
to the Commencement Date, Lessor shall use reasonable efforts to obtain from any
such mortgagee on Lessee's behalf an agreement on the part of such mortgagee to
recognize this Lease and all of Lessee's rights hereunder as though this Lease
were prior to any such mortgage, such agreement to be in form and substance of
the Subordination, Non-Disturbance and Attornment Agreement attached hereto as
Exhibit 1 and incorporated herein by reference (the "Non-Disturbance
Agreement"), subject to the execution and delivery by Lessee, at the time of
execution of this lease, of the Non-Disturbance Agreement (and Lessee
acknowledges that the execution of such Non-Disturbance Agreement by Lessor's
mortgagee, shall be at the sole discretion of such mortgagee), provided further,
however, that the mortgagee, or any purchaser at a foreclosure sale or otherwise
shall not be:
(a) liable for any act or omission of a prior Lessor (including the
mortgagor); or
(b) subject to any offset or defenses which the Lessee might have against
any prior Lessor (including the mortgagor); or
(c) bound by any rent or additional rent which the Lessee might have paid
in advance to any prior Lessor (including the mortgagor) for any period
beyond the month in which foreclosure or sale occurs; or
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(d) bound by any security deposit which Lessee may have paid to any
prior Lessor (including the mortgagor), unless such deposit is in an
escrow fund available to the mortgagee; or
(e) bound by any agreement or modification of the Lease made without
the consent of the mortgagee; or
(f) bound by any notice of termination given by any prior Lessor
(including the mortgagor) without the mortgagee's written consent
thereto; or
(g) personally liable under this Lease and the mortgagee's liability
under the Lease shall be limited to the ownership interest of the
mortgagee in the Premises; or
(h) liable for any fact or circumstance or condition to the extent
existing or arising prior to the mortgagee's (or such purchaser's)
succession to the interest of the Lessor under the Lease and such
mortgagee or such purchaser further shall not be liable except during
that period of time, if any, in which such mortgagee or purchaser and
Lessee are in privity of estate.
In the event that any mortgagee or its successor in title shall succeed
to the interest of Lessor, then, Lessee shall and does hereby agree to attorn to
such mortgagee or successor and to recognize such mortgagee or successor as its
Lessor. Any claim by Lessee under the Lease against the mortgagee or such
successor shall be satisfied solely out of the mortgagee's or such successor's
interest in the Premises and Lessee shall not seek recovery against or out of
any other assets of mortgagee or such successor.
Notwithstanding the foregoing, any mortgagee may at its election
subordinate its Mortgage to this Lease without the consent or approval of
Lessee.
This Section 16.1 shall be self-operative. Lessee agrees to execute and
deliver promptly any appropriate certificates or instruments requested by Lessor
or any mortgagee to carry out the subordination and attornment agreements
contained in this Section 16.1.
16.2 Modification, Termination or Cancellation. No assignment of the Lease
and no agreement to make or accept any surrender, termination or cancellation of
this Lease and no agreement to modify so as to reduce the rent, change the Term,
or otherwise materially change the rights of Lessor under this Lease, or to
relieve Lessee of any obligations or liability under this Lease, shall be
binding on Lessor's mortgagees of record unless consented to by such mortgagees
of record, if any. No fixed rent, additional rent, or any other charge shall be
paid more than ten (10) days prior to the due date thereof and payments made in
violation of this provision shall (except to the extent that such payments are
actually received by a mortgagee) be a nullity as against any mortgagee and
Lessee shall be liable for the amount of such payments to such mortgagee.
16.3 Rights of Holder of Mortgage. No act or failure to act on the part of
Lessor which would entitle Lessee under the terms of this Lease, or by law, to
be relieved of Lessee's obligations hereunder or to terminate this Lease, shall
result in a release or termination of such obligations or a termination of this
Lease unless (i) Lessee shall have first given written notice of Lessor's act or
failure to act to Lessor's mortgagees of record, if any, specifying the act or
failure to act on the part of Lessor which could or would give basis to Lessee's
rights; and (ii)
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such mortgagees, after receipt of such notice, have failed or refused to correct
or cure the condition complained of within a reasonable time thereafter; but
nothing contained in this Section 16.3 shall be deemed to impose any obligation
on any such mortgagees to correct or cure any condition. "Reasonable time" as
used above means and includes a reasonable time to obtain possession of the
mortgaged premises if the mortgagee elects to do so and a reasonable time to
correct or cure the condition if such condition is determined to exist.
16.4 Assignment of Rents. With reference to any assignment by Lessor of
Lessor's interest in this Lease, or the rents payable hereunder, conditional in
nature or otherwise, which assignment is made to the holder of a mortgage on
property which includes the Premises, Lessee agrees:
(a) that the execution thereof by Lessor, and the acceptance thereof by the
holder of such mortgage, shall never be treated as an assumption by such holder
of any of the obligations of Lessor hereunder, unless such holder shall, by
notice sent to Lessee, specifically otherwise elect; and
(b) that, except as aforesaid, such holder shall be treated as having
assumed Lessor's obligations hereunder only upon foreclosure of such holder's
mortgage (or the acceptance of a deed in lieu of foreclosure) and the taking of
possession of the Premises.
16.5 Implementation of Section 16. Lessee agrees on request of Lessor to
execute and deliver from time to time any agreement which may reasonably be
deemed necessary to implement the provisions of this Section 16.
17A. LESSOR'S ACCESS. The Lessor or agents of the Lessor may, at reasonable
times and upon reasonable advance notice, enter to view the Premises and remove
placards and signs not approved and affixed as herein provided, and make repairs
and alterations as Lessor should elect to do and may show the Premises to others
within the last six (6) months of the term, and at any time within three (3)
months before expiration of the term and may affix to any suitable part of the
Premises a notice for letting or selling the Premises or property of which the
Premises are a part and keep the same so affixed without hindrance or
molestation. In addition to the foregoing, the holder of any Mortgage shall have
access to the Premises during normal business hours and upon reasonable advance
notice for the purposes of conducting appraisals, environmental assessments,
structural and other types of inspections of the Premises that Mortgagee deems
advisable.
During the term, Lessor may, at its sole discretion, choose to undertake
rehabilitation, renovation, and/or repair of the Premises and Building,
including, without limitation, remodeling the storefronts, installation of new
windows, HVAC systems, stairwells, bathrooms, sprinkler systems, detection
systems, etc. (collectively or singly referred to as "Rehabilitation"). Such
Reahabilitation, which may be minor or major in nature, shall be undertaken
solely at the Lessor's option and expense, and does not in any way constitute
part of the Lessee's consideration under this lease and does not in any way
obligate Lessor to perform the same.
Moreover, Lessor reserves the right from time to time, without unreasonable
interference with Lessee's use: (a) to install, use, maintain, repair, replace
and relocate for service to the Premises and/or other parts of the Building,
pipes, ducts, conduits, wires and appurtenant fixtures, wherever located in the
Premises or Building, and (b) to alter or relocate any other common facility,
provided that substitutions are substantially equivalent or better.
Installations, replacements and relocations referred to in clause (a) above
shall be located, so far as practicable, in the central core area of the
Building, above ceiling surfaces, below floor surfaces or within
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perimeter walls of the premises. The work detailed in this paragraph shall be
deemed to be Rehabilitation for purposes of this Article.
Lessee recognizes and agrees that during the time that any Rehabilitation
is made to the Premises, and during the time that Rehabilitation work is being
done to the Building including the Premises, the Lessee may experience
interruptions (including interruptions to services) due to such construction and
rehabilitation work and workmen entering the Premises in connection with such
work, and agrees to cooperate fully with the Lessor's efforts to make such
repairs and rehabilitation and further agrees that Lessor shall have no
liability for said interruptions. The preceding notwithstanding, Lessor agrees
to not unreasonably disturb Lessee's use and occupancy of the Premises due to
Lessor's Rehabilitation work pursuant to this Article 17A. Moreover, in the
event Lessee is substantially unable for seven (7) days in the aggregate within
any sixty (60) day period after written notice to Lessor, to conduct its
business operations at the Premises due to Lessor's Rehabilitation work, then
Minimum Rent payable by Lessee under this lease shall abate in an amount fair
and equitable under the circumstances, for each day that Lessee is unreasonably
disturbed in its use and occupancy of the Premises due to such Rehabilitation
work.
Lessee agrees to provide Lessor, his employees and independent contractors
with access to the Premises at all reasonable times upon reasonable advance
notice during Lessee's regular business hours or otherwise in order to enable
Lessor to complete the aforementioned improvements to the Premises and
rehabilitation work to the Building. Lessor agrees that it will use its
reasonable efforts to have its employees and independent contractors work so as
not substantially to interfere with Lessee's business. Lessor shall not be
responsible for any damages, whether direct, indirect or consequential, to the
Lessee, his business or the Premises arising out of the aforementioned
improvements or rehabilitations.
Lessor hereby indemnifies Lessee and holds Lessee harmless from and against
any and all claims, liabilities, losses and causes of action arising out of
injury to persons or property based upon the gross negligence or willful
misconduct of Lessor, its agents, contractors, employees or servants in the
performance of the Rehabilitation work.
17B. RELOCATION. Lessee acknowledges that from time to time Lessor may
desire to relocate Lessee to other portions of the Building or Complex in order
to incorporate all or a portion of the Premises in portions of the Building to
be leased to Lessees other than Lessee. Lessee further acknowledges that
restriction of the right of Lessor to effect such a relocation would cause
substantial damage to Lessor in the leasing of the Building. Accordingly, Lessee
specifically acknowledges that Lessor shall have the right to substitute for the
Premises other substantially similar space of equal or greater size in the
Building or the Complex of approximately the same size provided that Lessor, at
Lessor's sole cost and expense, shall make improvements to the substitute
premises comparable to the improvements existing in to the Premises as of the
date of said relocation and shall pay in advance all moving costs and further
provided that the Base Rent and additional rent payable shall be the same as are
payable in respect of the Premises. In the event Lessor desires Lessee to make
such relocation, Lessor shall give written notice thereof to Lessee at least
thirty (30) days prior to the date on which such relocation takes effect. Lessee
agrees that upon notice from the Lessor that the substitute premises have been
substantially completed, Lessee shall relocate to the substitute premises
furnished by Lessor and yield up and deliver occupancy of the Premises to Lessor
within fifteen (15) days thereof and shall, if requested by Lessor, enter into a
suitable confirmatory amendment of this Lease to reflect Lessee's occupancy of
the substitute premises.
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18. INDEMNIFICATION. The Lessee will save Lessor harmless, defend and will
exonerate and indemnify Lessor, from and against any and all claims, liabilities
or penalties:
(i) on account of or based upon any injury to person, or loss of or damage to
property sustained or occurring or emanating from the Premises, except to the
extent resulting from or arising out of the negligence or willful misconduct of
Lessor, its agents, employees or contractors.
(ii) on account of or based upon any injury to person, or loss of or damage to
property, sustained on or occurring elsewhere in or about the Building arising
out of the use or occupancy of the Building or Premises by the Lessee or by any
person claiming by, through or under Lessee, except to the extent resulting from
or arising out of the negligence or willful misconduct of Lessor, its agents,
employees or contractors.
and in addition to and not in limitation of either of the foregoing subdivisions
(i) and (ii);
(iii) on account of or based upon any work or thing whatsoever done on the
Premises.
and, in respect of any of the foregoing, from and against all costs, expenses
(including reasonable attorneys' fees), and liabilities incurred in or in
connection with any such claim, or any action or proceedings; and in case any
action or proceeding is brought against Lessor by reason of any such claim,
Lessee upon notice from Lessor shall at Lessee's expense resist or defend such
action or proceeding and employ counsel reasonably satisfactory to Lessor.
Notwithstanding anything herein to the contrary, for purposes of this Section
18, the term "Lessor" shall include the Lessor's managing agent.
19. LESSEE'S INSURANCE.
1. Personal Property. All risks (including that of casualty, theft, and any
other harm, damage or loss) to Lessee's personal property and to the personal
property of others held by Lessee, and the loss of use of the same, shall be
borne solely by Lessee and Lessee shall insure said risks in commercially
reasonable amounts. In that regard, Lessee hereby releases Lessor and its
managing agent (and indemnifies and holds them harmless) from and against any
claims or liability for any casualty, theft, harm, damages or other loss to
Lessee's personal property and to the personal property of others held by
Lessee. As used herein, personal property includes, but is not limited to, all
tangible and intangible goods and accounts, inventory, merchandise, fixtures,
equipment and systems. Lessee shall purchase and maintain insurance in an amount
adequate to repair or replace or otherwise cover its personal property (and the
personal property of others held or leased by it, or otherwise on the Premises)
and the tenant improvements and interior finish and build-out to the Premises.
2. Comprehensive Commercial Liability Insurance. Lessee agrees to maintain
throughout the term of the lease, Comprehensive Commercial Liability Insurance
written on an occurrence basis. Such insurance shall include coverage for
personal injury, broad form property damage, host liquor, extended bodily injury
and broad form contractual liability. As of the Commencement Date, the minimum
limit of liability carried on such insurance shall be $1,000,000 combined single
limit for each occurrence with any aggregate limit applying only to each of the
following: personal injury and contractual liability. However, if the policy
contains a general policy aggregate
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or an aggregate which applies to coverages other than the aforementioned
coverages, the Lessee shall purchase minimum limits of $1,000,000 per
occurrence/$2,000,000 aggregate per location.
3. Automobile Liability. Lessee agrees to maintain automobile liability
insurance for owned, non-owned, and hired vehicles. The minimum limit of
liability carried on such insurance, as of the Commencement Date, shall be
($1,000,000) each accident, combined single limit for bodily injury and property
damage.
4. Workers Compensation. Lessee agrees to maintain workers' compensation
insurance (including employer's liability insurance) at statutory limits.
All policy limits, as of the Commencement Date, shall be at least equal to
those stated above, and from time to time during the term shall be for such
higher limits, if any, as are customarily carried in Boston with respect to
similar properties.
All insurance policies required in paragraphs 1 and 2 above shall designate
the Lessor, as an additional insured. Lessee agrees that the insurance coverages
required under sections number 1 through number 4 above shall be written by a
company or companies authorized to do business in the Commonwealth of
Massachusetts with an A.M. Best's rating of "A-", VIII or better. The liability
coverage of the policies specified above in Paragraph 2 shall cover all business
activities conducted by Lessee at the Premises.
Lessee agrees to furnish the Lessor with Certificates of Insurance prior to
the beginning of the term of the lease. Renewal Certificates of Insurance shall
be delivered to the Lessor at least fifteen (15) days in advance of each renewal
date. Such certificates shall state that in the event of cancellation or
material change written notification shall be given to the Lessor at least
thirty (30) days in advance of such cancellation or material change.
20A. EMINENT DOMAIN AND DEMOLITION. If the Premises or any part thereof or
the whole or any part of the Building are taken for any street or other public
use, by lawful action of the City or other authorities, or if the Lessor or the
Lessee are entitled to or receive any damages by reason of anything lawfully
done in pursuance of any public authority, or if Lessor voluntarily elects to
demolish the Building or any part of the Building, except as a consequence of
fire or other casualty damage, then this lease and the term shall terminate at
the election of the Lessor. Lessor may elect so to terminate this lease even if
the entire interest of the Lessor is divested by such a taking. If, as a result
of a taking, the Premises or any substantial portion thereof is taken such that
the Premises is rendered unfit for its use and the Premises is not in fact
restored by Lessor within nine (9) months after dispossession of the Premises or
such substantial portion, then Lessee may elect to terminate this lease
(effective upon dispossession of the Premises or such substantial portion), and
if not terminated or if less than a substantial portion of the Premises is
taken, the Minimum Rent and other charges shall be abated proportionately
according to the nature and extent of the injury sustained by the Premises until
the Premises and access thereto or, in the case of a taking, what may remain
thereof, shall have been restored to a proper and tenantable condition, which
restoration Lessor shall promptly conduct.
In the event of a taking, any election to terminate shall be made by LESSOR
not later than thirty (30) days after Lessor receives notice of such taking to
be effective upon dispossession. The Lessor reserves and excepts from this lease
all rights to damages resulting from the taking for public use of the Premises
or any portion thereof, or right appurtenant thereto, or privilege or easement
in, through or over the same, and by way of
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confirmation of the foregoing the Lessee hereby grants all rights to such
damages previously accrued or accruing during the term to the Lessor, to have
and to hold for the Lessor forever. Solely, in the case of Lessor's election
voluntarily to demolish the Premises, Building or any material portion of the
Building such that the use and occupancy of the Premises by Lessee is
substantially impaired as stated above in this Article, Lessor must (i) give
Lessee at least one (1) year prior termination notice, after which this lease
shall terminate and be of no further recourse to either party except as to
rights and obligations incurred prior to the termination date, and (ii) Lessor
shall reimburse Lessee up to a maximum amount of $450,000.00 for the unamortized
cost of the improvements (based on a forty-five month, straight-line
amortization schedule) made to the Premises by Lessee with Lessor's consent,
such payment to be made to Lessee within 30 days of its vacating the Premises.
No award for any partial or entire taking of the Premises shall be
apportioned. Lessor shall receive (subject to the rights of mortgagees of
Lessor) and Lessee hereby assigns to Lessor any award which may be made and any
other proceeds in connection with such taking, together with all rights of
Lessee to such award or proceeds, including, without limitation, any award or
compensation for the value of all or any part of the leasehold estate of the
Lessee; provided that nothing contained in this Section shall be deemed to give
Lessor any interest in or to require Lessee to assign to Lessor any separate
award made to Lessee for (i) the taking of Lessee's personal property, or (ii)
interruption of or damage to Lessee's business, or (iii) Lessee's moving and
relocation costs.
20B. FIRE AND OTHER DAMAGE; SUBROGATION.
1. Fire and Other Damage - If the Building or any part thereof is partially
damaged by fire or other casualty such that the Premises and the Building are
not rendered substantially untenantable and Lessee is able to remain open for
business, the damage thereto (except for damage to the Premises's interior
finish and build-out and to Lessee's fixtures, property and equipment, for which
Lessee shall be responsible) shall be restored by and at the expense of Lessor,
and until such restoration shall be made, if all or any portion of the Premises
are rendered unfit for Lessee's use and purpose, the rent and other charges
shall be subject to an abatement to the extent fair and equitable, except if
such casualty was a result of the willful fault or negligence of Lessee, in
which event there shall be no abatement of rent. Such restoration shall be made
promptly by Lessor subject to delay which may arise by reason of adjustment of
insurance, and for reasonable delay on account of "labor troubles" or any other
cause beyond Lessor's control (excluding financial inability). Lessor shall not
be liable for any inconvenience or annoyance to Lessee or for injury to the
business of Lessee resulting from such excused delays.
If the Building or the Premises is substantially damaged so as to be
substantially untenantable by fire or other casualty or if Lessee's means of
access to the Premises is materially obstructed, the rent and other charges
shall be subject to an abatement to the extent fair and equitable as of the date
of the fire or casualty, and continuing until Lessor completes its restoration
obligations hereunder or until the term expires hereunder, except if such
casualty was a result of the willful fault or negligence of Lessee, in which
event there shall be no abatement of rent, and the Lessor shall promptly restore
the same (excluding Lessee's interior finish and build-out and Lessee's
fixtures, property, and equipment), unless Lessor decides not to restore, in
which event the Lessor may, within forty-five (45) days, after such fire or
other cause, give Lessee a notice in writing of such decision and thereupon the
term shall expire upon the thirtieth (30th) days after such notice is given, and
the Lessee shall vacate the Premises and surrender the same to the Lessor. If
the Building (excluding Tenant Improvements and Lessee's fixtures, property and
equipment) is not in fact restored by Lessor within (i) nine (9) months after
the fire or other casualty, the Lessee may terminate this Lease by written
notice to Lessor within sixty (60) days after
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the end of the said nine (9) month period or (ii) if the fire or other casualty
occurs during the final twelve (12) months of the lease term, Lessee may
terminate this Lease by written notice to Lessor.
The provisions of this Article 20B, shall govern in the case of damage or
destruction of the Building or any part thereof and restoration thereof due to a
fire or casualty notwithstanding any inconsistent Provisions of this Lease.
Notwithstanding anything to the contrary contained in this Article 20B, the
provisions hereof shall be subject and subordinate to the rights of institutions
holding mortgages on the Building including the rights contained in any of
Lessor's mortgage financing documents affecting the Building.
2. Waiver of Subrogation - Lessor and Lessee hereby release each other from
any and all liability or responsibility to the other or anyone claiming through
or under them by way of subrogation or otherwise for any loss or damage to
property caused by fire or any of the extended coverage or supplementary
contract casualties, even if such fire or other casualty shall have been caused
by the fault or negligence of the other party, or anyone for whom such party may
be responsible, and irrespective of whether the releasor carries property
insurance. Lessor and Lessee each agree that it will request its insurance
carriers to include in its policies, whether or not such policies are required
hereunder, a clause or endorsement to the effect that any such release shall not
adversely affect said policies or prejudice the right of releasor to recover
thereunder. In any of Lessee's property insurance policies with respect to the
Premises which do not contain or which do not allow a waiver of subrogation
rights, Lessee shall have Lessor designated thereon as an additional insured,
and Lessee hereby agrees to defend, indemnify and hold Lessor harmless from any
liability, loss, damage, or causes of action to which Lessor is subject due to
or resulting from Lessee's failure to either maintain property insurance with
waiver of subrogation rights or alternatively designate Lessor as an additional
insured.
21. DEFAULT AND BANKRUPTCY. The following shall constitute a default by
Lessee under this Lease:
(a) The Lessee shall fail to make any payment or any installment of rent or
other sum herein specified and such failure shall continue for five (5) days
after written notice thereof; or
(b) The Lessee shall fail to observe or perform any other of the Lessee's
covenants, agreements or obligations hereunder and such default shall not be
corrected within thirty (30) days after written notice thereof or, if such
default shall reasonably require longer than thirty (30) days to cure, shall not
within said period commence and diligently proceed to cure such default within
sixty (60) days or sooner if practicable; or
(c) Lessee becomes insolvent or fails to pay its debts as they fall due; or if
Lessee makes any trust mortgage of assignment for the benefit of creditors; or
if Lessee proposes any composition, arrangement, reorganization or
recapitalization with creditors; or if Lessee's leasehold hereunder or any
substantial part of the property of Lessee is taken on execution or other
process of law or is attached or subjected to any other involuntary encumbrance;
or if a receiver, trustee, custodian, guardian, liquidator or similar agent is
appointed with respect to Lessee, or if any such person or a mortgagee, secured
party or other creditor takes possession of the Premises or if any substantial
part of the property of Lessee, and, in any case, if such appointment or taking
of possession is not terminated within thirty (30) days after it first occurs;
or if a petition is filed by or with the consent of Lessee under any federal or
state law concerning bankruptcy, insolvency, reorganization, arrangement, or
relief from
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creditors; or if a petition is filed against Lessee under any federal or state
law concerning bankruptcy, insolvency, reorganization, arrangement, or relief
from creditors, and such petition is not dismissed within thirty (30) days
thereafter; or if Lessee dissolves or is dissolved or liquidated or adopts any
plan or commences any proceeding, the result of which is intended to include
dissolution or liquidation.
In the event of a default, whether or not the Term shall have begun, Lessor
may immediately, or at any time while such default exists and without further
notice, terminate this Lease by notice to Lessee and this Lease shall come to an
end on the date specified in such notice as fully and completely as if such date
were the date herein originally fixed for the expiration of the Term, and Lessee
will then quit and surrender the Premises to Lessor, but Lessee shall remain
liable as hereinafter provided.
The preceding notwithstanding, any notice required to be given by Lessor
for any failure of Lessee to pay rent or other sums (prior to said failure being
deemed an actionable default) shall be deemed satisfied by the serving by Lessor
on Lessee at the Premises of a "notice to quit" so long as the same provides
Lessee with the right to cure within at least five (5) days of service.
22. LESSOR'S DEFAULT. Lessor shall not be deemed to be in default unless
such default remains uncured for more than thirty (30) days following written
notice from Lessee specifying the nature of such default, or such longer period
as may be reasonably required to correct such default. Lessor's liability for
maintenance and repair shall always be limited to the cost of making such repair
or accomplishing such maintenance or repair. In no event shall Lessor be liable
for consequential or any indirect damages. The provisions of this Article are
subject to the provisions of Articles 20A and 20B dealing with eminent domain
and fire and other casualty.
23. LESSOR'S REMEDIES. If this lease is terminated as provided in Article
21, Lessee shall forthwith pay to Lessor all sums which were due prior to the
date of such termination and Lessee shall pay on the days originally fixed
herein for the payment thereof amounts equal to the several installments of
rent, adjusted rent, additional rent and any and all other charges as they would
have become due if this lease had not been terminated.
As a second alternative, at the election of Lessor, Lessee will, at the
time of such termination, pay to Lessor, as liquidated damages, the amount of
the excess, if any, of the present value at the time of termination of the total
rent and other benefits which would have accrued to Lessor under this lease over
and above the fair market rental value (in advance) of the Premises for the
balance of the term. For the purpose of this paragraph, the total rent shall be
computed by assuming that Lessee's Proportionate Share of Taxes, Operating Costs
and other charges would be the amount thereof (if any) for the immediately
preceding year of the term.
As a third alternative, upon any such termination, at Lessor's election,
Lessor shall have the right to declare all installments of rent, additional rent
and other charges payable hereunder for the next one (1) full year to be
immediately due and payable as liquidated damages and not as a penalty.
In addition to the foregoing (and whether or not the Lease is terminated
upon a default), Lessee agrees (i) to indemnify and save Lessor harmless from
and against all reasonable expenses together with interest at the rate of 1.5%
per month which Lessor may incur in collecting such amount or in obtaining
possession of, or in re-letting the Premises, or in defending any action arising
as a result of or in connection with a default, including, without limitation,
legal expenses, attorneys' fees, brokerage fees, and the cost of putting the
Premises in good
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order or preparing the same for rental; (ii) that Lessor may re-let the Premises
or any part or parts thereof, either in the name of Lessor or otherwise for a
term or terms which may, at Lessor's option, be less than or exceed the period
which would otherwise have constituted the balance of the term and may grant
concessions or free rent for a reasonable time. The failure of Lessor to re-let
the Premises or any part thereof shall not release or affect Lessee's liability
for damage, but Lessor does agree to use reasonable efforts to re-let the
Premises in order to mitigate Lessee's damages. Any suit brought to collect the
amount of deficiency for any month shall not prejudice the right of Lessor to
collect the deficiency for any subsequent month by a similar proceeding. Lessor
may make such alterations, repairs, replacements and decorations on the Premises
which in Lessor's sole judgement are advisable or necessary for the purpose of
re-letting the Premises, and the making of such alterations or decorations shall
not release Lessee from any liability. In the event the Premises are re-let by
Lessor, Lessee shall be entitled to a credit in the net amount of rent received
by Lessor, after deduction of all expenses incurred in connection with Lessee's
default, re-letting the Premises and in collecting the rent, except in the event
Lessor has chosen the second or third alternative as a remedy in which event
Lessee shall not be entitled to any credit.
Lessee further agrees that, if on the Expiration Date or other termination
date, Lessee does not surrender the Premises or fails to remove any of its
property from the Premises and Lessor obtains an order of eviction then Lessor
may enter the Premises for the purpose of removing Lessee's good and effects,
without prejudice to any other remedies, and Lessor may remove and store such
goods and effects at Lessee's expense, Lessee hereby granting Lessor an
irrevocable power of attorney to accomplish same, but for no other purpose.
24. NOTICE. Any notice from the Lessor to the Lessee, shall be in writing
(except as otherwise may be permitted in this lease) and shall be deemed duly
served if delivered to the Premises by a recognized delivery service or
constable utilizing a return receipt or return of service addressed to the
Lessee; or if mailed to the Premises, or to such other address as the Lessee may
from time to time advise Lessor in writing by registered or certified mail,
return receipt requested, postage prepaid, addressed to the Lessee. Prior to the
Commencement Date, all notices to Lessee shall be delivered or sent to Lessee at
its address stated in the first paragraph of this lease. A copy of all notices
to Lessee shall also be sent by first class mail or by certified mail, return
receipt requested, or delivered by a national commercial overnight or express
delivery service, addressed as follows:
Endogen, Inc.
30 Commerce Way
Woburn, Massachusetts
Attn: President
and
Testa Hurwitz & Thibeault, L.L.P.
125 High Street
Boston, MA 02110
Attn.: Real Estate Department
Any notice from the Lessee to the Lessor, shall be in writing and shall be
deemed duly served, if delivered to Lessor by a recognized delivery service
utilizing a return receipt or mailed to the Lessor by registered or certified
mail, return receipt requested, postage prepaid, addressed to the Lessor at such
address as the Lessor
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may from time to time advise in writing. All notices to Lessor, unless otherwise
directed in writing by Lessor, shall be delivered or sent to the Lessor at:
c/o Berkeley Investments, Inc.
101 Federal Street
Boston, Massachusetts 02110
Attention: Mr. Peter Merrigan
With a copy to:
Carl Valeri, President
The Hamilton Company
39 Brighton Ave.
Boston, Massachusetts 02134
25. SURRENDER. The Lessee shall at the expiration or other termination of
this lease remove all Lessee's goods and effects from the Premises, (including,
without hereby limiting the generality of the foregoing, all signs and lettering
affixed or painted by the Lessee, either inside or outside the Premises). Lessee
shall deliver to the Lessor the Premises and all keys, locks thereto, and other
fixtures connected therewith and all alterations and additions made to or upon
the Premises (unless otherwise agreed in writing), in the same condition in
which the Premises were in on the Commencement Date, reasonable wear and tear,
damage by fire or other casualty and eminent domain only excepted. If the lease
term terminates by acceleration or expiration of time and Lessee does not
surrender the Premises and remove his effects from the Premises, and Lessor
obtains an order of eviction from a court, then Lessor may enter the Premises
for the purpose of removing Lessee's goods and effects, without prejudice to any
other remedies, and Lessor may remove and store such goods and effects at
Lessee's expense, Lessee hereby granting Lessor an irrevocable power of attorney
to accomplish the same, but for no other purpose.
26. BROKERAGE. Lessor and Lessee each warrant and represent that it has not
negotiated with any broker other than Hunter Emerson of CB Commercial and Keith
Coulter of McPherson Corporation, whose commission is to paid by Landlord in
connection with this Lease, and each party agrees to hold the other harmless if
such warranty or representation is untrue.
27. Intentionally Deleted.
28. HOLDOVER. If the Lessee remains on the Premises beyond the expiration
or earlier termination of this lease, such holding over shall not be deemed to
create any tenancy at will, but the Lessee shall be a tenant at sufferance only,
at a rate equal to two (2) times the annual rent and other charges for the last
year under this lease and also for all additional rent otherwise due and payable
and all damages sustained by Landlord on account of such holding over. The
provisions of this Section shall not operate as a waiver of any right of reentry
provided in this Lease. However, all other conditions of this lease to be
performed by Lessee shall continue in force.
29. LIABILITY. Lessee hereby agrees that any judgement, decree or award
obtaining against the Lessor which is related to this lease, the Premises or the
Lessee's use or occupancy of the Premises or the building,
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whether at law or in equity, shall be satisfied out of the Lessor's equity in
the land and building, and further agrees to look only to such assets and to no
other assets of the Lessor for satisfaction. Lessor's liability for maintenance
and repair shall always be limited to the cost of making such repair or
accomplishing such maintenance or repair. In no event shall Lessor or Lessee be
liable for consequential or any indirect damages.
30. NON-WAIVER PROVISION. No acceptance by Lessor of a lesser sum than the
rent, additional rent or any other charge then due shall be deemed to be other
than on account of the earliest installments of such rent or charge due, nor
shall any endorsement or statement on any check or any charge be deemed an
accord and satisfaction, and Lessor may accept such check or payment without
prejudice to Lessor's right to recover the balance of such installment or pursue
any other remedy provided in this Lease.
31. NO OFFER TO LEASE. The submission of this document for examination and
negotiation does not constitute an offer to lease, or a reservation of, or
option for, the Premises. This document shall become effective and binding only
upon the execution and delivery hereof by Lessor and by Lessee, and until such
execution and delivery, Lessor shall not in any way be bound to enter into a
lease with Lessee for the Premises.
32. PARTIAL INVALIDITY. The invalidity of one or more phrases, sentences,
clauses or articles shall not affect the remaining portions of this lease, and
if any part of this lease should be declared invalid by the final order, decree
or judgment of a court of competent jurisdiction, this lease shall be construed
as if such invalid phrases, sentences, clauses or articles had not been
inserted.
33. NO RECORDING. This lease shall not be recorded, however a notice of
lease in statutory form may be recorded by Lessee.
34. ADDENDA. The Addenda attached hereto are incorporated herein by
reference.
35. TRUSTEE AS LESSOR. If the Lessor is a trust or a trustee or trustees,
it is agreed that no trustee nor any beneficiary under any agreement or
declaration of trust under which said trust exists or by virtue of which such
trustees act, shall be personally liable under any of the covenants or
agreements of the parties expressed herein or implied hereunder, or otherwise
because of anything arising from or connected with the use and occupation of the
demised Premises by the Lessee, and the parties agree that any and all claims
arising or accruing to them hereunder shall be enforced and satisfied only
against the assets and property of said trust and not in any case against said
trustees or any of them or their successors in trust individually.
36. AUTHORITY. Lessee hereby covenants, represents and warrants that Lessee
is a duly incorporated or duly qualified (if foreign) corporation and is
authorized to do business in the Commonwealth of Massachusetts (a copy of
evidence thereof to be supplied to Lessor upon request); and that each person
executing this Lease on behalf of Lessee is an officer of Lessee and that he or
she is duly authorized to execute, acknowledge and deliver this Lease to Lessor
(a copy of a resolution to that effect to be supplied to Lessor upon request).
Lessor hereby covenants, represents and warrants that Lessor is a duly formed
Massachusetts limited partnership and is authorized to do business in the
Commonwealth of Massachusetts (a copy of evidence thereof to be supplied to
Lessee upon request); and that each person executing this Lease on behalf of
Lessor is duly authorized to execute, acknowledge and deliver this Lease to
Lessee.
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IN WITNESS WHEREOF, the said parties hereunto set their hands and seals
this 29th day of July, 1996.
LESSOR: LANDMAN OMNIBUS XI LIMITED PARTNERSHIP
BY: LANDMAN XI CORPORATION, ITS GENERAL PARTNER
BY: /s/ Sig.
-------------------
[Name]
ADDRESS: c/o Berkeley Investments, Inc., 101 Federal Street, Boston,
Massachusetts 02110
LESSEE: ENDOGEN, INC.
BY: /s/ Owen A. Dempsey
--------------------------------
Name: Owen A. Dempsey
Title: President & CEO
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ADDENDUM #1: RULES AND REGULATIONS
1. The sidewalks, entrances, driveways, passages, courts, elevators,
vestibules, stairways, corridors or halls shall not be obstructed or encumbered
by any lessee or used for any purpose other than for ingress to and egress from
the Premises and for delivery of merchandise and equipment in a prompt and
efficient manner using elevators and passageways designated for such delivery by
Lessor. There shall not be used in any space, or in the public hall of the
building, either by a lessee or by jobbers or others in the delivery or receipt
of merchandise, any hand trucks, except those equipped with rubber tires and
sideguards.
2. The water and wash closets and plumbing fixtures shall not be used for
any purpose other than those for which they were designed or constructed and no
sweepings, rubbish, rags, acids or other substances shall be deposited therein,
and the expense of any breakage, stoppage, or damage resulting from the
violation of this rule shall be borne by the Lessee who, or whose clerks,
agents, employees or visitors, shall have caused it.
3. No Lessee shall sweep or throw or permit to be swept or thrown from the
Premises any dirt or other substances into any of the corridors or halls,
elevators, or out of the doors or windows or stairways of the Building and
Lessee shall not use, keep or permit to be used or kept any foul or noxious gas
or substance in the Premises or permit or suffer the Premises to be occupied or
used in a manner offensive or objectionable to Lessor or other occupants of the
Building by reason of noise, odors and/or vibrations, or interfere in any way
with other Lessees or those having business therein, nor shall any animals or
birds be kept in or about the Building. Smoking or carrying lighted cigars or
cigarettes in the elevators of the Building is prohibited.
4. No awnings or other projections shall be attached to the outside walls
of the Building without the prior written consent of Lessor.
5. No sign, advertisement, notice or other lettering shall be exhibited,
inscribed, painted or affixed by any Lessee on any part of the outside of the
Premises or the Building or on the inside of the Premises if the same is visible
from the outside of the Premises without the prior written consent of Lessor,
except that the name of Lessee may appear on the entrance door of the Premises.
In the event of the violation of the foregoing by any Lessee, Lessor may remove
same without any liability, and may charge the expense incurred by such removal
to Lessee or Lessees violating this rule. Interior signs on doors and directory
tablet shall be inscribed, painted or affixed for each Lessee by Lessor at the
expense of such Lessee, and shall be of a size, color and style acceptable to
Lessor.
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<PAGE>
6. Except with prior written consent of Lessor and as Lessor may direct, no
Lessee shall mark, paint, drill into, or in any way deface any part of the
Premises or the Building of which they form a part or cut or string wires, lay
linoleum, or other similar floor covering, so that the same shall come in direct
contact with the floor of the Premises, and, if linoleum or other similar floor
covering is desired to be used, an interlining of builder's deadening felt shall
be first affixed to the floor, by a paste or other material, soluble in water,
the use of cement or other similar adhesive material being expressly prohibited.
7. Except with the prior written consent of Lessor, no additional locks or
bolts of any kind shall be placed upon any of the doors or windows by any
Lessee, nor shall any changes be made in existing locks or mechanism thereof. If
requested, Lessee shall provide Lessor with a copy of a key for all new locks or
bolts. Each Lessee shall, upon the termination of his tenancy, restore to Lessor
all keys either furnished to or otherwise procured by such Lessee. In the event
of the loss of any keys furnished to Lessee, Lessee shall pay to Lessor the cost
thereof.
8. Freight, furniture, business equipment, merchandise and bulky matter of
any description shall be delivered to and removed from the Premises only by way
of loading docks or in an alternative way approved by Lessor and only during
hours and in a manner approved by Lessor.
9. Canvassing, soliciting and peddling in the Building is prohibited and
each Lessee shall cooperate to prevent the same.
10. Lessor shall have the right to prohibit any advertising by any Lessee
which, in Lessor's opinion, tends to impair the reputation of the Building or
its desirability as a building for offices, and upon written notice from Lessor,
Lessee shall refrain from or discontinue such advertising.
11. Except as permitted in Addendum #2 attached hereto, Lessee shall not
bring or permit to be brought or kept in or on the Premises, any inflammable,
combustible or explosive fluid, material, chemical or substance, or cause or
permit any odors of cooking or other process, or any unusual or other
objectionable odors to permeate in or emanate from the Premises.
25
<PAGE>
ADDENDUM #2: HAZARDOUS SUBSTANCES
As used herein, the following definitions shall apply:
1. "Hazardous Substance" means any substance, waste or material which is
deemed hazardous, toxic, a pollutant or contaminant under any federal state or
local statute, law, ordinance, rule regulation, or judicial or administrative
order or decision, now or hereafter in effect.
2. "Hazardous Substance on the Premises" means any hazardous substance
present in, on, near or emanating from the Premises or at the surface or below
the surface thereof. As used in this Addendum, the term "Premises" includes, in
addition to the leased Premises, the building(s) and grounds of which it is a
part.
3. "Applicable Law" shall mean all federal, state and local statutes, laws,
ordinances, rules and regulations and judicial and administrative orders,
rulings and decisions that are applicable now or in future to the Premises or
any portion thereof or to any activity which shall take place thereon.
Lessee shall not generate, store, release, dispose of or otherwise handle
any Hazardous Substance on the Premises except for those substances listed on
schedule A attached hereto; moreover, Lessee shall not take any action, conduct
any activity or fail to take any action which causes contributes, or is likely
to cause or contribute to, a threat of release of any Hazardous Substance on the
Premises.
Lessee furthermore shall not install or cause to be installed any chemical,
oil or gasoline storage tank(s) on, under or around the Premises and it shall
not install or cause to be installed on, around or under the Premises any
transformers or other equipment which contain PCBs or other Hazardous
Substances.
Lessee shall defend, indemnify and hold harmless Lessor and any mortgagee
of the Premises from and against any and all liability, loss, suits, claims,
actions, causes of action, proceedings, demands, costs, penalties, fines and
expenses, including without limitation attorneys' fees, consultants' fees, and
clean-up costs, resulting from the presence of, release of, or threat of release
of, any Hazardous Substance on the Premises, or arising from the action or
inaction of Lessee, its employees, invitees, contractors, and agents, or arising
out of the generation, storage, treatment, handling, transportation, disposal or
release ( or threat of release) by Lessee its employees, invitees, contractors
and agents of any Hazardous Substance at or near the Premises, or arising out of
any violation(s) by the same of any Applicable Law regarding Hazardous
Substances; provided that Lessee shall have no liability with respect to
Hazardous Substances on the Premises as of the date of this lease ("Predecessor
Contamination").
Lessor hereby agrees to defend, indemnify and hold harmless Lessee from any
direct damages (but not for any indirect or consequential damages) which Lessee
may suffer by reason of any enforcement action by any state, local or government
authority arising out of Predecessor Contamination (the foregoing indemnity of
Lessor being referred to as the "Predecessor Contamination Indemnity"), provided
further that the Predecessor Contamination Indemnity shall not extend to, and
Lessee shall indemnify and hold harmless Lessor to the extent that (i) the
Predecessor Contamination was increased in severity by any action of Lessee, or
(ii) the removal, clean-up or remediation of the Predecessor Contamination was
made more difficult and/or expensive by any action of Lessee.
26
<PAGE>
Except for any Predecessor Contamination (to the extent that the
Predecessor Contamination was not increased in severity by any action of Lessee,
or (ii) the removal, clean-up or remediation of the Predecessor Contamination
was not made more difficult and/or expensive by any action of Lessee), Lessee
shall remove, clean-up and remedy any Hazardous Substance on the Premises, or
any threat of release of Hazardous Substance on the Premises to the extent
required by Applicable Law, and Lessee shall be obligated to continue to pay
Base Rental, Additional Rents and other sums due under the Lease until such
removal, clean-up or remedy is completed in accordance with Applicable Laws,
whether or not the term of this Lease shall terminate or expire. Lessee hereby
grants Lessor the right to inspect the Premises throughout the term of this
Lease, to determine that Lessee is in compliance with Applicable Laws and Lessee
agrees to provide Lessor with all information necessary to ascertain that Lessee
is in compliance with Applicable Laws.
Lessee shall comply with all provisions of Massachusetts General Laws
Chapter 21E, the Massachusetts Oil and Hazardous Material Release Prevention Act
(the "Act"), and in that regard shall comply with all "operator" obligations
therein including the reporting and requirements of Section 7 thereof.
Any release or threat of release of any Hazardous Substance on the Premises
arising from the action or inaction of Lessee, its employees, invitees,
contractors, or agents, any breach by Lessee of its obligations under this
Addendum, or any violation by Lessee of the provisions of the Act shall
constitute a default by Lessee under the Lease. In the event of such a default,
notwithstanding the provisions of Paragraph 21, Lessor shall have the additional
right, but not the obligation, to take any action or perform any act required by
this Addendum of the Lessee to such extent and in such manner as Lessor deems
appropriate, including paying necessary costs, fees and attorneys' fees. The
making of any such payment or the performing of any such act by the Lessor shall
not waive or release the Lessee from its obligations and agreements hereunder.
All amounts so paid by Lessor shall be immediately due and payable by Lessee to
Lessor on demand, as additional rent with interest thereon at the rate of three
percent over the prime rate of interest announced from time to time by the First
National Bank of Boston.
Lessor, in addition and not in limitation of its rights in the preceding
paragraph, shall have the right to enforce Lessee's obligations under this
addendum by taking legal action seeking among other things, injunctive relief.
27
<PAGE>
ADDENDUM #3: TRASH/GARBAGE; PESTS
Lessee shall be responsible at its expense for disposal of all trash, garbage
and waste generated by its use, and shall store the same within the Premises
only on a temporary basis with trash removal from the Premises to occur on a
daily basis so that no trash or garbage accumulation occurs within the Premises.
Moreover, Lessee shall not store or cause to be disposed any trash, garbage,
waste or debris of any sort in or on any of the grounds of the Building or of
the property or complex. Lessee shall maintain in force a service contract with
a trash removal company for said daily removal of its trash and provide Lessor
with a copy of the same. Lessee shall store the same in an appropriate
container, of a type approved by Lessor, to be located within the Premises.
Lessee shall maintain the immediate area around such container and also the
grounds around its Premises to be free of trash, garbage, rubbish or other like
encumbrances. If required by Lessor, Lessee shall engage or provide for such
additional removal or disposal service or activities as in Lessor's reasonable
judgement shall be necessary to maintain the Premises and the Building and its
grounds free from Lessee's garbage, rubbish, trash or other like encumbrances.
At its expense, Lessee shall be responsible for keeping its Premises free of all
rodents and pests. In that regard, it shall maintain in force a monthly service
contract with a professional extermination company and shall take all other
necessary steps to keep infestation free from the Premises (and other parts of
the Building if said other parts experience pest problems related to the use of
or activities at the Premises).
29
<PAGE>
ADDENDUM #4: OPTION TO EXTEND AT MARKET
Lessee, having at all times faithfully performed all of the terms and conditions
of this lease such that Lessee (i) has not been sent more that two (2) notices
of default relating to a default beyond applicable cure periods and (ii) is not
in default at the time of Lessee's notice of its election to extend the Lease or
at the time of such extension pursuant to such election, shall have the option
to extend this lease under the same terms and conditions of this lease except
for rent, adjustments to rent, and tax clause, and except for this option, for
two (2) years, provided Lessee complies with the provisions stated below: The
time periods herein set forth are of the essence, and the requirements for the
exercise of its option shall be strictly construed.
a. Upon Lessor's receipt of written notice, sent by certified mail return
receipt requested, from Lessee that Lessee wishes to extend the term of this
Lease on or before six (6) months prior to the Expiration Date (which time
period is deemed of the essence), Lessor shall, within thirty (30) days of
receipt of such notice by the Lessee, notify the Lessee in writing of the
proposed minimum rent, adjusted rent and additional rent due to taxes for the
extension term (the "Fair Market Rent").
b. Within thirty (30) days after receipt of Lessor's proposed terms, Lessee will
notify Lessor in writing either of its acceptance of the proposed terms, or of
its rejection of the proposed terms. Lessor's failure to receive Lessee's
written notice within the prescribed period shall be deemed a rejection. Upon
such rejection, Lessee's option herein to extend shall be deemed revoked and
without any further force and effect.
If Lessor and Lessee are unable to agree on the Fair Market Rent within such
30-day period, the Fair Market Rent shall be determined according to the
following procedures:
(a) At any time after such 30-day period, Lessor and Lessee each shall have
the right, by written notice (a "Notice of Arbitration") to the other, to demand
arbitration of the calculation of the Fair Market. The party demanding
arbitration (the "first party") shall appoint an arbitrator in the Notice of
Arbitration. Within seven days after the Notice of Arbitration is given, the
other party (the "second party") shall by notice to the first party appoint a
second arbitrator. If the second party fails to appoint a second arbitrator
within such seven-day period, the position taken by the first party shall be
deemed to be the correct calculation of the Fair Market Rent.
(b) Within fourteen days after the designation of the second arbitrator,
the two arbitrators shall conduct such investigations as they deem appropriate
and determine the correct calculation of the Fair Market Rent. The arbitrators,
or either of them, shall give notice of such resolution (or notice of their
inability to reach agreement, as the case may be) to the Lessor and the Lessee
within such fourteen-day period. Any agreement of the two arbitrators shall be
binding upon the Lessor and the Lessee.
(c) If the two arbitrators are unable to reach an agreement within such
fourteen-day period, the two arbitrators shall, within such fourteen-day period,
designate a third arbitrator. If the two arbitrators fail to agree upon the
designation of a third arbitrator within such fourteen-day period, then they or
either of them shall give notice of such failure to agree to Lessor and Lessee
within such fourteen-day period. If Lessor and Lessee fail to agree upon the
selection of a third arbitrator within seven days after the arbitrators give
such notice, then either party on behalf of both may apply to the president of
the Greater Boston Real Estate Board
30
<PAGE>
or, on his or her failure, refusal or inability to act, to a court of competent
jurisdiction, for the designation of such third arbitrator.
(d) Within fourteen days after the designation of the third arbitrator, the
third arbitrator shall conduct such investigations as he or she may deem
appropriate and determine the correct calculation of the Fair Market Rent.
Within such fourteen-day period, the third arbitrator shall give notice of such
resolution to Lessor and Lessee. The third arbitrator's determination shall be
binding upon Lessor and Lessee.
(e) All arbitrators shall be qualified real estate professionals who shall
have had at least ten years of experience appraising buildings substantially
similar to the Building in the Greater Woburn area. Lessor and Lessee shall each
be entitled to present evidence to the arbitrators in support of their
respective positions. The arbitrators shall not make any determination
inconsistent with the terms of this Lease. The arbitrators shall not have the
power to add to, modify or change any of the provisions of this Lease. The
determination of the arbitrator(s) shall be conclusive and shall have the same
force as a judgment in a court of competent jurisdiction. Judgment on the
determination made by the arbitrator(s) under the foregoing provisions may be
entered in any court of competent jurisdiction.
(f) Each party shall pay the fees, costs and expenses of the arbitrator
appointed by such party and of the attorneys and expert witnesses of such party
and one-half of the other fees, costs and expenses of arbitration properly
incurred under this Lease.
(g) If, for whatever reason, Lessee has not in fact extended this lease
within the period ending thirty (30) days before the Expiration Date, this
option shall expire and Lessee shall have no further right to extend its tenancy
beyond the Expiration Date. In this event Lessor shall be free to rent the
Premises to whomever it chooses, on any terms it chooses, free and clear of this
option.
31
<PAGE>
ADDENDUM #5: EQUIPMENT TO BE REMOVED BY LESSEE
See attached list incorporated herein by reference
ADDENDUM #5
Equipment which may be removed:
Tissue Culture Hoods
Incubators
Fermentation Equipment
Centrifuges
Freezers, refrigerator, cold rooms
Computers (computer controllers, computer hubs, computer network architecture)
communication equipment (telephone system)/copies
Office furniture (cubes, chairs, desks, and file cabinets)
Water purification systems
Autoclaves
General laboratory equipment and instruments (plate readers,
spectrophotometers, scales, balances, pumps, gel apparatus, power supplies,
hot plates, stirrers, glassware, protein purification equipment, small
lyophilizer, shaking incubators, plate coaters, sealing and capping and
labeling equipment etc.
Dishwashers
Kitchenette equipment
Emergency power generator
Shelving
Specified lab benches and cabinets
Water Coolers and related filters and connection
White Boards
32
<PAGE>
ADDENDUM #6
[FLOOR PLAN]
33
<PAGE>
CLERK'S CERTIFICATE
-------------------
I, Daniel Burns, Clerk of Endogen, Inc. hereby certify that the Corporation
is authorized as Lessee, to enter into a Lease with Landman Omnibus XI Limited
Partnership, as Lessor, for approximately 12,144 square feet of first (1st)
floor space, at 30 Commerce Way, Woburn, Massachusetts 01801, with said Lease to
be for a term of three (3) years and three (3) months at a rent of $103,224.00
for the first year, as adjusted by the terms of this Lease, a copy of which
Lease is hereby attached and made a part hereof.
I further certify that Owen A. Dempsey, President & CEO of the Corporation,
has authority to execute and deliver to the Lessor the Lease on behalf of the
Corporation upon the above terms.
WITNESS my hands and seal of the Corporation, this 29th day of July, 1996.
/s/ Daniel Burns
-------------------
Daniel Burns, Clerk
(Affix Corporate Seal)
[Seal]
34
LOAN AND SECURITY AGREEMENT
$850,000 WORKING CAPITAL LINE
$400,000 TERM LOAN
PROVIDED BY
SILICON VALLEY BANK
TO
ENDOGEN, INC.
AUGUST 28, 1996
<PAGE>
This LOAN AND SECURITY AGREEMENT is entered into as of AUGUST 28, 1996,
by and between SILICON VALLEY BANK, a California-chartered bank with its
principal place of business at 3003 Tasman Drive, Santa Clara, CA 95054 and with
a loan production office located at Wellesley Office Park, 40 William Street,
Suite 350, Wellesley, MA 02181, doing business under the name Silicon Valley
East ("Bank"), and ENDOGEN, INC., a MASSACHUSETTS corporation with its principal
place of business at 30 COMMERCE WAY, WOBURN, MASSACHUSETTS ("Borrower").
RECITALS
--------
Borrower wishes to obtain credit from time to time from Bank, and Bank
desires to extend credit to Borrower. This Agreement sets forth the terms on
which Bank will advance credit to Borrower, and Borrower will repay the amounts
owing to Bank.
AGREEMENT
---------
The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION
----------------------------
1.1 Definitions. As used in this Agreement, the following terms
shall have the following definitions:
"Accounts" means all presently existing and hereafter arising
accounts, contract rights, and all other forms of obligations owing to Borrower
arising out of the sale or lease of goods (including, without limitation, the
licensing of software and other technology) or the rendering of services by
Borrower, whether or not earned by performance, and any and all credit
insurance, guaranties, and other security therefor, as well as all merchandise
returned to or reclaimed by Borrower and Borrower's Books relating to any of the
foregoing.
"Advance" or "Advances" means a Revolving Advance or Advances
under the Committed Revolving Line.
"Affiliate" means, with respect to any Person, any Person
that owns or controls directly or indirectly such Person, any Person that
controls or is controlled by or is under common control with such Person, and
each of such Person's senior executive officers, directors, and partners.
"Bank Expenses" means all reasonable costs or expenses
(including reasonable attorneys' fees and expenses) incurred in connection with
the preparation, negotiation, administration, and enforcement of the Loan
Documents and Bank's reasonable attorneys' fees and expenses incurred in
amending, enforcing or defending the Loan Documents, whether or not suit is
brought.
"Borrower's Books" means all of Borrower's books and records
including: ledgers; records concerning Borrower's assets or liabilities, the
Collateral, business operations or financial condition; and all computer
programs, or tape files, and the equipment, containing such information.
"Borrowing Base" means an amount equal to (i) SEVENTY FIVE
percent (75%) of Eligible Accounts.
"Business Day" means any day that is not a Saturday, Sunday,
or other day on which banks in the State of California are authorized or
required to close.
"Closing Date" means the date of this Agreement.
"Code" means the Massachusetts Uniform Commercial Code.
"Collateral" means the property described on Exhibit A
attached hereto.
<PAGE>
"Committed Revolving Line" means EIGHT HUNDRED FIFTY THOUSAND
AND NO/100THS Dollars ($850,000).
"Contingent Obligation" means, as applied to any Person, any
direct or indirect liability, contingent or otherwise, of that Person with
respect to (i) any indebtedness, lease, dividend, letter of credit or other
obligation of another, including, without limitation, any such obligation
directly or indirectly guaranteed, endorsed, co-made or discounted or sold with
recourse by that Person, or in respect of which that Person is otherwise
directly or indirectly liable; (ii) any obligations with respect to undrawn
letters of credit issued for the account of that Person; and (iii) all
obligations arising under any interest rate, currency or commodity swap
agreement, interest rate cap agreement, interest rate collar agreement, or other
agreement or arrangement designated to protect a Person against fluctuation in
interest rates, currency exchange rates or commodity prices; provided, however,
that the term "Contingent Obligation" shall not include endorsements for
collection or deposit in the ordinary course of business. The amount of any
Contingent Obligation shall be deemed to be an amount equal to the stated or
determined amount of the primary obligation in respect of which such Contingent
Obligation is made or, if not stated or determinable, the maximum reasonably
anticipated liability in respect thereof as determined by such Person in good
faith; provided, however, that such amount shall not in any event exceed the
maximum amount of the obligations under the guarantee or other support
arrangement.
"Current Assets" means, as of any applicable date, all
amounts that should, in accordance with GAAP, be included as current assets on
the consolidated balance sheet of Borrower and its Subsidiaries as at such date.
"Current Liabilities" means, as of any applicable date, all
amounts that should, in accordance with GAAP, be included as current liabilities
on the consolidated balance sheet of Borrower and its Subsidiaries, as at such
date, plus, to the extent not already included therein, all outstanding Advances
made under this Agreement, including all Indebtedness that is payable upon
demand or within one year from the date of determination thereof unless such
Indebtedness is renewable or extendable at the option of Borrower or any
Subsidiary to a date more than one year from the date of determination, but
excluding Subordinated Debt.
"Daily Balance" means the amount of the Obligations owed at
the end of a given day.
"Debt Service" means net income plus interest and
depreciation, divided by total interest plus current portion of long term debt
(excluding Subordinated Debt).
"Eligible Accounts" means those Accounts that arise in the
ordinary course of Borrower's business that comply with all of Borrower's
representations and warranties to Bank set forth in Section 5.4; provided, that
standards of eligibility may be fixed and revised from time to time by Bank in
Bank's reasonable judgment and upon notification thereof to Borrower in
accordance with the provisions hereof. Unless otherwise agreed to by Bank,
Eligible Accounts shall not include the following:
(a) Accounts that the account debtor has failed to pay within
ninety (90) days of invoice date;
(b) Accounts with respect to an account debtor, fifty percent
(50%) of whose Accounts the account debtor has failed to pay within ninety (90)
days of invoice date;
(c) Accounts with respect to which the account debtor is an
officer, employee, or agent of Borrower;
(d) Accounts with respect to which goods are placed on
consignment, guaranteed sale, sale or return, sale on approval, bill and hold,
or other terms by reason of which the payment by the account debtor may be
conditional;
(e) Accounts with respect to which the account debtor is an
Affiliate (other than by virtue of being directly or indirectly under common
ownership or control with Borrower) of Borrower;
2
<PAGE>
(f) Accounts with respect to which the account debtor does
not have its principal place of business in the United States, except for
Eligible Foreign Accounts, and Accounts arising from products shipped to or
services provided to branches or offices located in the United States of any
account debtor that does not have its principal place of business in the United
States;
(g) Accounts with respect to which the account debtor is a
federal, state, or local governmental entity or any department, agency, or
instrumentality thereof.
(h) Accounts with respect to which Borrower is liable to the
account debtor for goods sold or services rendered by the account debtor to
Borrower, but only to the extent of any amounts owing to the account debtor
against amounts owed to Borrower;
(i) Accounts with respect to an account debtor, including
Subsidiaries and Affiliates, whose total obligations to Borrower exceed
twenty-five percent (25%) of all Accounts, to the extent such obligations exceed
the aforementioned percentage, except as approved in writing by Bank;
(j) Accounts with respect to which the account debtor
disputes liability or makes any claim with respect thereto as to which Bank
believes, in its sole discretion, that there may be a basis for dispute (but
only to the extent of the amount subject to such dispute or claim), or is
subject to any Insolvency Proceeding, or becomes insolvent, or goes out of
business; and
(k) Accounts the collection of which Bank reasonably
determines to be doubtful.
"Eligible Foreign Accounts" means Accounts with respect to
which the account debtor does not have its principal place of business in the
United States and that are: (1) covered by credit insurance in form and amount,
and by an insurer satisfactory to Bank less the amount of any deductible(s)
which may be or become owing thereon; or (2) supported by one or more letters of
credit in favor of Bank as beneficiary, in an amount and of a tenor, and issued
by a financial institution, acceptable to Bank; or (3) that Bank approves on a
case-by-case basis.
"Eligible Inventory" means that portion of Borrower's
Inventory that is located at Borrower's principal place of business or such
other locations as are permitted under Section 7.10 and that complies with the
representations and warranties set forth in Section 5.5.
"Equipment" means all present and future machinery,
equipment, tenant improvements, furniture, fixtures, vehicles, tools, parts and
attachments in which Borrower has any interest.
"ERISA" means the Employment Retirement Income Security Act
of 1974, as amended, and the regulations thereunder.
"GAAP" means generally accepted accounting principles as in
effect from time to time.
"Indebtedness" means (a) all indebtedness for borrowed money
or the deferred purchase price of property or services, including without
limitation reimbursement and other obligations with respect to surety bonds and
letters of credit, (b) all obligations evidenced by notes, bonds, debentures or
similar instruments, (c) all capital lease obligations and (d) all Contingent
Obligations.
"Insolvency Proceeding" means any proceeding commenced by or
against any person or entity under any provision of the United States Bankruptcy
Code, as amended, or under any other bankruptcy or insolvency law, including
assignments for the benefit of creditors, formal or informal moratoria,
compositions, extension generally with its creditors, or proceedings seeking
reorganization, arrangement, or other relief.
"Inventory" means all present and future inventory in which
Borrower has any interest, including merchandise, raw materials, parts,
supplies, packing and shipping materials, work in process and finished products
intended for sale or lease or to be furnished under a contract of service, of
every kind and description now or at any time hereafter owned by or in the
custody or possession, actual or constructive, of Borrower, including such
inventory as is temporarily out of its custody or possession or in transit and
including
3
<PAGE>
any returns upon any accounts or other proceeds, including insurance
proceeds, resulting from the sale or disposition of any of the foregoing and any
documents of title representing any of the above, and Borrower's Books relating
to any of the foregoing.
"Investment" means any beneficial ownership (including stock,
partnership interest or other securities) of any Person, or any loan, advance or
capital contribution to any Person.
"IRC" means the Internal Revenue Code of 1986, as amended,
and the regulations thereunder.
"Lien" means any mortgage, lien, deed of trust, charge,
pledge, security interest or other encumbrance.
"Loan Documents" means, collectively, this Agreement, any
note or notes executed by Borrower in connection with this Agreement, and any
other agreement entered into between Borrower and Bank in connection with this
Agreement, all as amended or extended from time to time.
"Material Adverse Effect" means a material adverse effect on
(i) the business operations or condition (financial or otherwise) of Borrower
and its Subsidiaries taken as a whole or (ii) the ability of Borrower to repay
the Obligations or otherwise perform its obligations under the Loan Documents.
"Negotiable Collateral" means all of Borrower's present and
future letters of credit of which it is a beneficiary, notes, drafts,
instruments, securities, documents of title, and chattel paper, and Borrower's
Books relating to any of the foregoing.
"Obligations" means all debt, principal, interest, Bank
Expenses and other amounts owed to Bank by Borrower pursuant to this Agreement
or any other agreement, whether absolute or contingent, due or to become due,
now existing or hereafter arising, including any interest that accrues after the
commencement of an Insolvency Proceeding and including any debt, liability, or
obligation owing from Borrower to others that Bank may have obtained by
assignment or otherwise.
"Payment Date" means the 27th calendar day of each month.
"Periodic Payments" means all installments or similar
recurring payments that Borrower may now or hereafter become obligated to pay to
Bank pursuant to the terms and provisions of any instrument, or agreement now or
hereafter in existence between Borrower and Bank.
"Permitted Indebtedness" means:
(a) Indebtedness of Borrower in favor of Bank arising under
this Agreement or any other Loan Document;
(b) Indebtedness existing on the Closing Date and disclosed
in the Schedule;
(c) Subordinated Debt; and
(d) Indebtedness to trade creditors incurred in the ordinary
course of business.
"Permitted Investment" means:
(a) Investments existing on the Closing Date disclosed in the
Schedule; and
(b) (i) marketable direct obligations issued or
unconditionally guaranteed by the United States of America or any agency or any
State thereof maturing within one (1) year from the date of acquisition thereof,
(ii) commercial paper maturing no more than one (1) year from the date of
creation thereof and currently having the highest rating obtainable from either
Standard & Poor's Corporation or Moody's Investors Service, Inc., (iii)
certificates of deposit maturing no more than one (1) year from the date of
investment
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therein issued by Bank, and (iv) any Investments permitted by
Borrower's investment policy, as amended from time to time, provided that such
investment policy (any such amendment thereto) has been approved by Bank, which
approval shall not be unreasonably withheld.
"Permitted Liens" means the following:
(a) Any Liens existing on the Closing Date and disclosed in
the Schedule or arising under this Agreement or the other Loan Documents;
(b) Liens for taxes, fees, assessments or other governmental
charges or levies, either not delinquent or being contested in good faith by
appropriate proceedings, provided the same have no priority over any of Bank's
security interests;
(c) Liens (i) upon or in any equipment acquired or held by
Borrower or any of its Subsidiaries to secure the purchase price of such
equipment or indebtedness incurred solely for the purpose of financing the
acquisition of such equipment, or (ii) existing on such equipment at the time of
its acquisition, provided that the Lien is confined solely to the property so
acquired and improvements thereon, and the proceeds of such equipment;
(d) Liens incurred in connection with the extension, renewal
or refinancing of the indebtedness secured by Liens of the type described in
clauses (a) through (c) above, provided that any extension, renewal or
replacement Lien shall be limited to the property encumbered by the existing
Lien and the principal amount of the indebtedness being extended, renewed or
refinanced does not increase.
"Person" means any individual, sole proprietorship,
partnership, limited liability company, joint venture, trust, unincorporated
organization, association, corporation, institution, public benefit corporation,
firm, joint stock company, estate, entity or governmental agency.
"Prime Rate" means the variable rate of interest, per annum,
most recently announced by Bank, as its "prime rate," whether or not such
announced rate is the lowest rate available from Bank.
"Quick Assets" means, at any date as of which the amount
thereof shall be determined, the consolidated cash, cash-equivalents, accounts
receivable and investments, with maturities not to exceed 90 days, of Borrower
determined in accordance with GAAP.
"Responsible Officer" means each of the Chief Executive
Officer, the Chief Financial Officer and the Controller of Borrower.
"Revolving Maturity Date" means August 27, 1997.
"Schedule" means the schedule of exceptions attached hereto.
"Subordinated Debt" means any debt incurred by Borrower that
is subordinated to the debt owing by Borrower to Bank on terms acceptable to
Bank (and identified as being such by Borrower and Bank), including without
limitation Borrower's debt subordinated to Bank pursuant to that certain
Subordination Agreement of even date herewith between T Cell Diagnostics, Inc.,
a Delaware corporation, and Bank.
"Subsidiary" means any corporation or partnership in which
(i) any general partnership interest or (ii) more than 50% of the stock of which
by the terms thereof ordinary voting power to elect the Board of Directors,
managers or trustees of the entity shall, at the time as of which any
determination is being made, be owned by Borrower, either directly or through an
Affiliate.
"Tangible Net Worth" means at any date as of which the amount
thereof shall be determined, the consolidated total assets of Borrower and its
Subsidiaries minus, without duplication, (i) the sum of any amounts attributable
to (a) goodwill, (b) intangible items such as unamortized debt discount and
expense, patents, trade and service marks and names, copyrights and research and
development expenses except prepaid expenses, and (c) all reserves not already
deducted from assets, and (ii) Total Liabilities.
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"Term Loan" means FOUR HUNDRED THOUSAND AND NO/100THS Dollars
($400,000).
"Total Liabilities" means at any date as of which the amount
thereof shall be determined, all obligations that should, in accordance with
GAAP be classified as liabilities on the consolidated balance sheet of Borrower,
including in any event all Indebtedness, but specifically excluding Subordinated
Debt.
1.2 Accounting Terms. All accounting terms not specifically
defined herein shall be construed in accordance with GAAP and all calculations
made hereunder shall be made in accordance with GAAP. When used herein, the
terms "financial statements" shall include the notes and schedules thereto.
2. LOAN AND TERMS OF PAYMENT
-------------------------
2.1 Revolving Advances. Subject to and upon the terms and
conditions of this Agreement, Bank agrees to make Revolving Advances to Borrower
in an aggregate amount not to exceed (i) the Committed Revolving Line or the
Borrowing Base, whichever is less, (ii) minus, until Borrower maintains for two
fiscal quarters after the date of this Agreement a Debt Service ratio of at
least 1.50 to 1.00, TWENTY PERCENT (20%) of the total outstanding obligations
under the Term Loan. Subject to the terms and conditions of this Agreement,
amounts borrowed pursuant to this Section 2.1 may be repaid and reborrowed at
any time during the term of this Agreement.
Whenever Borrower desires a Revolving Advance, Borrower will
notify Bank by facsimile transmission or telephone no later than 3:00 p.m.
Pacific time, on the Business Day that the Revolving Advance is to be made. Each
such notification shall be promptly confirmed by a Payment/Advance Form in
substantially the form of Exhibit B hereto. Bank is authorized to make Revolving
Advances under this Agreement, based upon instructions received from a
Responsible Officer, or without instructions if in Bank's discretion such
Revolving Advances are necessary to meet Obligations which have become due and
remain unpaid. Bank shall be entitled to rely on any telephonic notice given by
a person who Bank reasonably believes to be a Responsible Officer, and Borrower
shall indemnify and hold Bank harmless for any damages or loss suffered by Bank
as a result of such reliance. Bank will credit the amount of Revolving Advances
made under this Section 2.1 to Borrower's deposit account.
The Committed Revolving Line shall terminate on the Revolving
Maturity Date, at which time all Revolving Advances under this Section 2.1 and
other amounts due under this Agreement (except as otherwise expressly specified
herein) shall be immediately due and payable.
2.2 Term Loan.
---------
Borrower shall pay THIRTY (36) equal installments of
principal in the amount of ELEVEN THOUSAND ONE HUNDRED ELEVEN AND 11/100THS
Dollars ($11,111.11) plus all accrued and unpaid Interest. (the "Term Loan
Payment"). Each Term Loan Payment shall be due and payable on the Payment Date
of each month during the term hereof. Borrower's final Term Loan Payment, due on
August 27, 1999, shall include all outstanding Term Loan principal plus all
accrued interest not yet paid.
2.3 Overadvances. If, at any time or for any reason, the amount
of Obligations owed by Borrower to Bank pursuant to Section 2.1 of this
Agreement is greater than the lesser of (i) the Committed Revolving Line or (ii)
the Borrowing Base, Borrower shall immediately pay to Bank, in cash, the amount
of such excess.
2.4 Interest Rates, Payments, and Calculations.
------------------------------------------
(a) Interest Rate. Except as set forth in Section 2.4(b), all
Advances and the Term Loan shall bear interest on the average Daily Balance at a
rate equal to ONE AND ONE-HALF (1.50) percentage points above the Prime Rate;
provided, however, that at such time as Borrower shall submit to bank compliance
certificates showing net profits of at least TWO HUNDRED THOUSAND AND N0/100THS
Dollars ($200,000) in two (2) consecutive fiscal quarters, existing and future
Advances and the Term Loan shall bear interest at a rate equal to ONE (1.0)
percentage point above the Prime Rate.
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(b) Default Rate. All Obligations shall bear interest, from
and after the occurrence, and during the continuance, of an Event of Default, at
a rate equal to five (5) percentage points above the interest rate applicable
under Section 2.4(a).
(c) Payments. Interest hereunder shall be due and payable on
the Payment Date of each month during the term hereof. Borrower hereby
authorizes Bank to debit any accounts with Bank, including, without limitation,
Account Number 07002246-70 for payments of principal and interest due on the
Obligations and any other amounts owing by Borrower to Bank. Bank will notify
Borrower of all debits which Bank makes against Borrower's accounts. Any such
debits against Borrower's accounts in no way shall be deemed a set-off. Any
interest not paid when due shall be compounded by becoming a part of the
Obligations, and such interest shall thereafter accrue interest at the rate then
applicable hereunder.
(d) Computation. In the event the Prime Rate is changed from
time to time hereafter, the applicable rate of interest hereunder shall be
increased or decreased effective as of 12:01 a.m. on the day the Prime Rate is
changed, by an amount equal to such change in the Prime Rate. All interest
chargeable under the Loan Documents shall be computed on the basis of a three
hundred sixty (360) day year for the actual number of days elapsed.
2.5 Crediting Payments. Prior to the occurrence of an Event of
Default, Bank shall credit a wire transfer of funds, check or other item of
payment to such deposit account or Obligation as Borrower specifies. After the
occurrence of an Event of Default, the receipt by Bank of any wire transfer of
funds, check, or other item of payment shall be immediately applied to
conditionally reduce Obligations, but shall not be considered a payment on
account unless such payment is of immediately available federal funds or unless
and until such check or other item of payment is honored when presented for
payment. Notwithstanding anything to the contrary contained herein, any wire
transfer or payment received by Bank after 12:00 noon Pacific time shall be
deemed to have been received by Bank as of the opening of business on the
immediately following Business Day. Whenever any payment to Bank under the Loan
Documents would otherwise be due (except by reason of acceleration) on a date
that is not a Business Day, such payment shall instead be due on the next
Business Day, and additional fees or interest, as the case may be, shall accrue
and be payable for the period of such extension.
2.6 Fees. Borrower shall pay to Bank the following:
(a) Facility Fee. A Facility Fee equal to SIX THOUSAND TWO
HUNDRED FIFTY AND NO/100THS Dollars ($6,250), which fee shall be due on or
before the Closing Date and shall be fully earned and non-refundable;
(b) Financial Examination and Appraisal Fees. Bank's
customary fees and out-of-pocket expenses for Bank's audits of Borrower's
Accounts, and for each appraisal of Collateral and financial analysis and
examination of Borrower performed from time to time by Bank or its agents;
(c) Bank Expenses. Upon demand from Bank, including, without
limitation, upon the date hereof, all Bank Expenses incurred through the date
hereof, including reasonable attorneys' fees and expenses, and, after the date
hereof, all Bank Expenses, including reasonable attorneys' fees and expenses, as
and when they become due.
2.7 Additional Costs. In case any law, regulation, treaty or
official directive or the interpretation or application thereof by any court or
any governmental authority charged with the administration thereof or the
compliance with any guideline or request of any central bank or other
governmental authority (whether or not having the force of law):
(a) subjects Bank to any tax with respect to payments of
principal or interest or any other amounts payable hereunder by Borrower or
otherwise with respect to the transactions contemplated hereby (except for taxes
on the overall net income of Bank imposed by the United States of America or any
political subdivision thereof);
(b) imposes, modifies or deems applicable any deposit
insurance, reserve, special deposit or similar requirement against assets held
by, or deposits in or for the account of, or loans by, Bank; or
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(c) imposes upon Bank any other condition with respect to its
performance under this Agreement,
and the result of any of the foregoing is to increase the
cost to Bank, reduce the income receivable by Bank or impose any expense upon
Bank with respect to any loans, Bank shall notify Borrower thereof. Borrower
agrees to pay to Bank the amount of such increase in cost, reduction in income
or additional expense as and when such cost, reduction or expense is incurred or
determined, upon presentation by Bank of a statement of the amount and setting
forth Bank's calculation thereof, all in reasonable detail, which statement
shall be deemed true and correct absent manifest error.
2.8 Term. Except as otherwise set forth herein, this Agreement
shall become effective on the Closing Date and, subject to Section 12.7, shall
continue in full force and effect for a term ending on the Revolving Maturity
Date. Notwithstanding the foregoing, Bank shall have the right to terminate its
obligation to make Advances under this Agreement immediately and without notice
upon the occurrence, and during the continuance, of an Event of Default.
Notwithstanding termination, Bank's Lien on the Collateral shall remain in
effect for so long as any Obligations are outstanding.
2.9 Cancellation of Existing Indebtedness. Upon Borrower's
compliance with the provisions of Section 3.1 hereof and the effectiveness of
this Agreement pursuant to Section 12.9 hereof, (i) Borrower's Obligations
pursuant to that certain Letter Agreement dated February 24, 1995 between
Borrower and Bank shall be replaced in their entirety with the Obligations of
Borrower created under this Agreement, and (ii) all of Borrower's Indebtedness
to Bank, including without limitation indebtedness pursuant to (a) that certain
Promissory Note dated June 25, 1991 in the original principal amount of
$150,000, (b) that certain Promissory Note dated November 28, 1993 in the
original principal amount of $200,000, (c) that certain Promissory Note dated
December 16, 1994 in the original principal amount of $220,000, and (d) that
certain Promissory Note dated February 24, 1995 in the original principal amount
of $500,000 shall all become outstanding Advances under the Committed Revolving
Line.
3. CONDITIONS OF LOANS
-------------------
3.1 Conditions Precedent to Initial Advance. The obligation of
Bank to make the initial Advance is subject to the condition precedent that Bank
shall have received, in form and substance satisfactory to Bank, the following:
(a) this Agreement, the Working Capital Note and the Term
Note each duly executed by Borrower;
(b) a certificate of the Clerk of Borrower with respect to
incumbency and resolutions authorizing the execution and delivery of this
Agreement;
(c) subordination agreements by certain Persons;
(d) financing statements (Forms UCC-1);
(e) insurance certificates;
(f) payment of the fees and Bank Expenses then due specified
in Section 2.6 hereof; and
(g) such other documents, and completion of such other
matters, as Bank may reasonably deem necessary or appropriate.
3.2 Conditions Precedent to all Advances. The obligation of Bank
to make each Advance, including the initial Advance, is further subject to the
following conditions:
(a) timely receipt by Bank of the Payment/Advance Form as
provided in Section 2.1; and
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(b) the representations and warranties contained in Section 5
shall be true and correct in all material respects on and as of the date of such
Payment/Advance Form and on the effective date of each Advance as though made at
and as of each such date, and no Event of Default shall have occurred and be
continuing, or would result from such Advance. The making of each Advance shall
be deemed to be a representation and warranty by Borrower on the date of such
Advance as to the accuracy of the facts referred to in this Section 3.2(b).
4. CREATION OF SECURITY INTEREST
-----------------------------
4.1 Grant of Security Interest. Borrower grants and pledges to
Bank a continuing security interest in all presently existing and hereafter
acquired or arising Collateral in order to secure prompt repayment of any and
all Obligations and in order to secure prompt performance by Borrower of each of
its covenants and duties under the Loan Documents. Except as set forth in the
Schedule, such security interest constitutes a valid, first priority security
interest in the presently existing Collateral, and will constitute a valid,
first priority security interest in Collateral acquired after the date hereof.
Borrower acknowledges that Bank may place a "hold" on any Deposit Account
pledged as Collateral to secure the Obligations.
4.2 Delivery of Additional Documentation Required. Borrower shall
from time to time execute and deliver to Bank, at the request of Bank, all
Negotiable Collateral, all financing statements and other documents that Bank
may reasonably request, in form satisfactory to Bank, to perfect and continue
perfected Bank's security interests in the Collateral and in order to fully
consummate all of the transactions contemplated under the Loan Documents.
4.3 Right to Inspect. Bank (through any of its officers,
employees, or agents) shall have the right, upon reasonable prior notice, from
time to time during Borrower's usual business hours, to inspect Borrower's Books
and to make copies thereof and to check, test, and appraise the Collateral in
order to verify Borrower's financial condition or the amount, condition of, or
any other matter relating to, the Collateral.
5. REPRESENTATIONS AND WARRANTIES
------------------------------
Borrower represents and warrants, except as set forth in the Schedule,
as follows:
5.1 Due Organization and Qualification. Borrower and each
Subsidiary is a corporation duly existing and in good standing under the laws of
its state of incorporation and qualified and licensed to do business in, and is
in good standing in, any state in which the conduct of its business or its
ownership of property requires that it be so qualified.
5.2 Due Authorization; No Conflict. The execution, delivery, and
performance of the Loan Documents are within Borrower's powers, have been duly
authorized, and are not in conflict with nor constitute a breach of any
provision contained in Borrower's Articles of Organization or Bylaws, nor will
they constitute an event of default under any material agreement to which
Borrower is a party or by which Borrower is bound. Borrower is not in default
under any agreement to which it is a party or by which it is bound, which
default could have a Material Adverse Effect.
5.3 No Prior Encumbrances. Borrower has good and indefeasible
title to the Collateral, free and clear of Liens, except for Permitted Liens.
5.4 Bona Fide Eligible Accounts. The Eligible Accounts are bona
fide existing obligations. The property giving rise to such Eligible Accounts
has been delivered to the account debtor or to the account debtor's agent for
immediate shipment to and unconditional acceptance by the account debtor.
Borrower has not received notice of actual or imminent Insolvency Proceeding of
any account debtor that is included in any Borrowing Base Certificate as an
Eligible Account.
5.5 Merchantable Inventory. All Inventory is in all material
respects of good and marketable quality, free from all material defects.
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5.6 Name; Location of Chief Executive Office. Except as disclosed
in the Schedule, Borrower has not done business under any name other than that
specified on the signature page hereof. The chief executive office of Borrower
is located at the address indicated in Section 10 hereof.
5.7 Litigation. Except as set forth in the Schedule, there are no
actions or proceedings pending by or against Borrower or any Subsidiary before
any court or administrative agency in which an adverse decision could have a
Material Adverse Effect or a material adverse effect on Borrower's interest or
Bank's security interest in the Collateral. Borrower does not have knowledge of
any such pending or threatened actions or proceedings.
5.8 No Material Adverse Change in Financial Statements. All
consolidated financial statements related to Borrower and any Subsidiary that
have been delivered by Borrower to Bank fairly present in all material respects
Borrower's consolidated financial condition as of the date thereof and
Borrower's consolidated results of operations for the period then ended. There
has not been a material adverse change in the consolidated financial condition
of Borrower since the date of the most recent of such financial statements
submitted to Bank.
5.9 Solvency. Borrower is solvent and able to pay its debts
(including trade debts) as they mature.
5.10 Regulatory Compliance. Borrower and each Subsidiary has met
the minimum funding requirements of ERISA with respect to any employee benefit
plans subject to ERISA. No event has occurred resulting from Borrower's failure
to comply with ERISA that is reasonably likely to result in Borrower's incurring
any liability that could have a Material Adverse Effect. Borrower is not an
"investment company" or a company "controlled" by an "investment company" within
the meaning of the Investment Company Act of 1940. Borrower is not engaged
principally, or as one of the important activities, in the business of extending
credit for the purpose of purchasing or carrying margin stock (within the
meaning of Regulations G, T and U of the Board of Governors of the Federal
Reserve System). Borrower has complied with all the provisions of the Federal
Fair Labor Standards Act. Borrower has not violated any statutes, laws,
ordinances or rules applicable to it, violation of which could have a Material
Adverse Effect.
5.11 Environmental Condition. None of Borrower's or any
Subsidiary's properties or assets has ever been used by Borrower or any
Subsidiary or, to the best of Borrower's knowledge, by previous owners or
operators, in the disposal of, or to produce, store, handle, treat, release, or
transport, any hazardous waste or hazardous substance other than in accordance
with applicable law; to the best of Borrower's knowledge, none of Borrower's
properties or assets has ever been designated or identified in any manner
pursuant to any environmental protection statute as a hazardous waste or
hazardous substance disposal site, or a candidate for closure pursuant to any
environmental protection statute; no lien arising under any environmental
protection statute has attached to any revenues or to any real or personal
property owned by Borrower or any Subsidiary; and neither Borrower nor any
Subsidiary has received a summons, citation, notice, or directive from the
Environmental Protection Agency or any other federal, state or other
governmental agency concerning any action or omission by Borrower or any
Subsidiary resulting in the releasing, or otherwise disposing of hazardous waste
or hazardous substances into the environment.
5.12 Taxes. Borrower and each Subsidiary has filed or caused to
be filed all tax returns required to be filed, and has paid, or has made
adequate provision for the payment of, all taxes reflected therein.
5.13 Subsidiaries. Borrower does not own any stock, partnership
interest or other equity securities of any Person, except for Permitted
Investments.
5.14 Government Consents. Borrower and each Subsidiary has
obtained all consents, approvals and authorizations of, made all declarations or
filings with, and given all notices to, all governmental authorities that are
necessary for the continued operation of Borrower's business as currently
conducted.
5.15 Full Disclosure. No representation, warranty or other
statement made by Borrower in any certificate or written statement furnished to
Bank contains any untrue statement of a material fact or omits to
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state a material fact necessary in order to make the statements contained in
such certificates or statements not misleading.
6. AFFIRMATIVE COVENANTS
---------------------
Borrower covenants and agrees that, until payment in full of all
outstanding Obligations, and for so long as Bank may have any commitment to make
an Advance hereunder, Borrower shall do all of the following:
6.1 Good Standing. Borrower shall maintain its and each of its
Subsidiaries' corporate existence and good standing in its jurisdiction of
incorporation and maintain qualification in each jurisdiction in which the
failure to so qualify could have a Material Adverse Effect. Borrower shall
maintain in force, and shall cause each of its Subsidiaries to maintain in
force, to the extent consistent with prudent management of Borrower's business,
all licenses, approvals and agreements, the loss of which could have a Material
Adverse Effect.
6.2 Government Compliance. Borrower shall meet, and shall cause
each Subsidiary to meet, the minimum funding requirements of ERISA with respect
to any employee benefit plans subject to ERISA. Borrower shall comply, and shall
cause each Subsidiary to comply, with all statutes, laws, ordinances and
government rules and regulations to which it is subject, noncompliance with
which could have a Material Adverse Effect or a material adverse effect on the
Collateral or the priority of Bank's Lien on the Collateral.
6.3 Financial Statements, Reports, Certificates. Borrower
shall deliver to Bank:
(a) as soon as available, but in any event within twenty-five
(25) days after the end of each month, a company prepared consolidated balance
sheet and income statement covering Borrower's consolidated operations during
such period, certified by an officer of Borrower reasonably acceptable to Bank;
(b) as soon as available, but in any event within ninety (90)
days after the end of Borrower's fiscal year, audited consolidated financial
statements of Borrower prepared in accordance with GAAP, consistently applied,
together with an unqualified opinion on such financial statements of an
independent certified public accounting firm reasonably acceptable to Bank;
(c) within ten (10) days of filing, copies of all statements,
reports and notices sent or made available generally by Borrower to its security
holders or to any holders of Subordinated Debt and all reports on Form 10-K,
10-Q and 8-K filed with the Securities and Exchange Commission;
(d) promptly upon receipt of notice thereof, a report of any
legal actions pending or threatened against Borrower or any Subsidiary that
could result in damages or costs to Borrower or any Subsidiary of One Hundred
Thousand Dollars ($100,000) or more; and
(e) such budgets, sales projections, operating plans or other
financial information as Bank may reasonably request from time to time.
Within twenty-five (25) days after the last day of each month,
Borrower shall deliver to Bank a Borrowing Base Certificate signed by a
Responsible Officer in substantially the form of Exhibit C hereto, together with
aged listings of accounts receivable and accounts payable.
Within twenty-five (25) days after the last day of each month,
Borrower shall deliver to Bank with the monthly financial statements a
Compliance Certificate signed by a Responsible Officer in substantially the form
of Exhibit D hereto.
Bank shall have a right from time to time hereafter to audit
Borrower's Accounts at Borrower's expense, provided that such audits will be
conducted no more often than every six (6) months unless an Event of Default has
occurred and is continuing.
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6.4 Inventory; Returns. Borrower shall keep all Inventory in good
and marketable condition, free from all material defects. Returns and
allowances, if any, as between Borrower and its account debtors shall be on the
same basis and in accordance with the usual customary practices of Borrower, as
they exist at the time of the execution and delivery of this Agreement. Borrower
shall promptly notify Bank of all returns and recoveries and of all disputes and
claims, where the return, recovery, dispute or claim involves more than Fifty
Thousand Dollars ($50,000).
6.5 Taxes. Borrower shall make, and shall cause each Subsidiary
to make, due and timely payment or deposit of all material federal, state, and
local taxes, assessments, or contributions required of it by law, and will
execute and deliver to Bank, on demand, appropriate certificates attesting to
the payment or deposit thereof; and Borrower will make, and will cause each
Subsidiary to make, timely payment or deposit of all material tax payments and
withholding taxes required of it by applicable laws, including, but not limited
to, those laws concerning F.I.C.A., F.U.T.A., state disability, and local,
state, and federal income taxes, and will, upon request, furnish Bank with proof
satisfactory to Bank indicating that Borrower or a Subsidiary has made such
payments or deposits; provided that Borrower or a Subsidiary need not make any
payment if the amount or validity of such payment is contested in good faith by
appropriate proceedings and is reserved against (to the extent required by GAAP)
by Borrower.
6.6 Insurance.
---------
(a) Borrower, at its expense, shall keep the Collateral
insured against loss or damage by fire, theft, explosion, sprinklers, and all
other hazards and risks, and in such amounts, as ordinarily insured against by
other owners in similar businesses conducted in the locations where Borrower's
business is conducted on the date hereof. Borrower shall also maintain insurance
relating to Borrower's ownership and use of the Collateral in amounts and of a
type that are customary to businesses similar to Borrower's.
(b) All such policies of insurance shall be in such form,
with such companies, and in such amounts as reasonably satisfactory to Bank. All
such policies of property insurance shall contain a lender's loss payable
endorsement, in a form satisfactory to Bank, showing Bank as an additional loss
payee thereof and all liability insurance policies shall show the Bank as an
additional insured, and shall specify that the insurer must give at least twenty
(20) days notice to Bank before canceling its policy for any reason. Borrower
shall deliver to Bank certified copies of such policies of insurance and
evidence of the payments of all premiums therefor. All proceeds payable under
any such policy shall, at the option of Bank, be payable to Bank to be applied
on account of the Obligations.
6.7 Principal Depository. Borrower shall maintain its
principal depository and operating accounts with Bank.
6.8 Quick Ratio. Borrower shall maintain, as of the last day
of each calendar month, a ratio of Quick Assets to Current Liabilities of at
least 1.3 to 1.0.
6.10 Debt-Net Worth Ratio. Borrower shall maintain, as of the
last day of each calendar month, a ratio of Total Liabilities less Subordinated
Debt to Tangible Net Worth plus Subordinated Debt of not more than 0.75 to 1.0.
6.11 Tangible Net Worth. Borrower shall maintain, as of the last
day of each calendar month, a Tangible Net Worth of not less than FOUR MILLION
AND NO/100THS Dollars ($4,000,000).
6.12 Profitability. Borrower shall not incur net losses greater
than SEVENTY FIVE THOUSAND AND NO/100THS Dollars ($75,000) for each fiscal
quarter commencing with Borrower's fiscal quarter ended August 31, 1996.
6.13 Minimum Debt Service. Once Borrower has maintained a Debt
Service ratio of at least 1.50 to 1.00 for two fiscal quarters after the date of
this Agreement, Borrower shall maintain, as of the last day of each calendar
month, a Debt Service ratio of at least 1.50 to 1.00.
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6.14 Further Assurances. At any time and from time to time
Borrower shall execute and deliver such further instruments and take such
further action as may reasonably be requested by Bank to effect the purposes of
this Agreement.
7. NEGATIVE COVENANTS
------------------
Borrower covenants and agrees that, so long as any credit
hereunder shall be available and until payment in full of the outstanding
Obligations or for so long as Bank may have any commitment to make any Advances,
Borrower will not do any of the following:
7.1 Dispositions. Convey, sell, lease, transfer or otherwise
dispose of (collectively, a "Transfer"), or permit any of its Subsidiaries to
Transfer, all or any part of its business or property, other than: (i) Transfers
of Inventory in the ordinary course of business; (ii) Transfers of non-exclusive
licenses and similar arrangements for the use of the property of Borrower or its
Subsidiaries; or (iii) Transfers of worn-out or obsolete Equipment.
7.2 Change in Business. Engage in any business, or permit any of
its Subsidiaries to engage in any business, other than the businesses currently
engaged in by Borrower and any business substantially similar or related thereto
(or incidental thereto), or undergo a material change in Borrower's ownership,
management or directors. Borrower will not, without thirty (30) days prior
written notification to Bank, relocate its chief executive office.
7.3 Mergers or Acquisitions. Merge or consolidate, or permit any
of its Subsidiaries to merge or consolidate, with or into any other business
organization, or acquire, or permit any of its Subsidiaries to acquire, all or
substantially all of the capital stock or property of another Person.
7.4 Indebtedness. Create, incur, assume or be or remain liable
with respect to any Indebtedness, or permit any Subsidiary so to do, other than
Permitted Indebtedness.
7.5 Encumbrances. Create, incur, assume or suffer to exist any
Lien with respect to any of its property, or assign or otherwise convey any
right to receive income, including the sale of any Accounts, or permit any of
its Subsidiaries so to do, except for Permitted Liens.
7.6 Distributions. Pay any dividends or make any other
distribution or payment on account of or in redemption, retirement or purchase
of any capital stock other than dividends and distributions payable solely in
the capital stock of Borrower.
7.7 Investments. Directly or indirectly acquire or own, or make
any Investment in or to any Person, or permit any of its Subsidiaries so to do,
other than Permitted Investments.
7.8 Transactions with Affiliates. Directly or indirectly enter
into or permit to exist any material transaction with any Affiliate of Borrower
except for transactions that are in the ordinary course of Borrower's business,
upon fair and reasonable terms that are no less favorable to Borrower than would
be obtained in an arm's length transaction with a non-affiliated Person.
7.9 Subordinated Debt. Make any payment in respect of any
Subordinated Debt, or permit any of its Subsidiaries to make any such payment,
except in compliance with the terms of such Subordinated Debt, or amend any
provision contained in any documentation relating to the Subordinated Debt
without Bank's prior written consent.
7.10 Inventory. Store the Inventory with a bailee, warehouseman,
or similar party unless Bank has received a pledge of the warehouse receipt
covering such Inventory. Except for Inventory sold in the ordinary course of
business and except for such other locations as Bank may approve in writing,
Borrower shall keep the Inventory only at the location set forth in Section 10
hereof, at its facility at 6-8 Gill Street, Woburn, Mass. 01801, and at such
other locations of which Borrower gives Bank prior written notice and as to
which Borrower signs and files a financing statement where needed to perfect
Bank's security interest.
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7.11 Compliance. Become an "investment company" controlled by an
"investment company," within the meaning of the Investment Company Act of 1940,
or become principally engaged in, or undertake as one of its important
activities, the business of extending credit for the purpose of purchasing or
carrying margin stock, or use the proceeds of any Advance for such purpose. Fail
to meet the minimum funding requirements of ERISA, permit a Reportable Event or
Prohibited Transaction, as defined in ERISA, to occur, fail to comply with the
Federal Fair Labor Standards Act or violate any law or regulation, which
violation could have a Material Adverse Effect or a material adverse effect on
the Collateral or the priority of Bank's Lien on the Collateral, or permit any
of its Subsidiaries to do any of the foregoing.
8. EVENTS OF DEFAULT
-----------------
Any one or more of the following events shall constitute an Event of
Default by Borrower under this Agreement:
8.1 Payment Default. If Borrower fails to pay, when due, any
of the Obligations.
8.2 Covenant Default.
(a) If Borrower fails to perform any obligation under
Sections 6.3, 6.7, 6.8, 6.9, 6.10, 6.11 or 6.12 or violates any of the covenants
contained in Article 7 of this Agreement, or
(b) If Borrower fails or neglects to perform, keep, or
observe any other material term, provision, condition, covenant, or agreement
contained in this Agreement, in any of the Loan Documents, or in any other
present or future agreement between Borrower and Bank and as to any default
under such other term, provision, condition, covenant or agreement that can be
cured, has failed to cure such default within ten (10) days after Borrower
receives notice thereof or any officer of Borrower becomes aware thereof;
provided, however, that if the default cannot by its nature be cured within the
ten (10) day period or cannot after diligent attempts by Borrower be cured
within such ten (10) day period, and such default is likely to be cured within a
reasonable time, then Borrower shall have an additional reasonable period (which
shall not in any case exceed thirty (30) days) to attempt to cure such default,
and within such reasonable time period the failure to have cured such default
shall not be deemed an Event of Default (provided that no Advances will be
required to be made during such cure period);
8.3 Material Adverse Change. If (i) there occurs a material
adverse change in the business, operations, or condition (financial or
otherwise) of the Borrower, or (ii) Bank determines after reasonable
consultation with Borrower that there is a material impairment of the prospect
of repayment of any portion of the Obligations or (iii) there is a material
impairment of the value or priority of Bank's security interests in the
Collateral;
8.4 Attachment. If any material portion of Borrower's assets is
attached, seized, subjected to a writ or distress warrant, or is levied upon, or
comes into the possession of any trustee, receiver or person acting in a similar
capacity and such attachment, seizure, writ or distress warrant or levy has not
been removed, discharged or rescinded within ten (10) days, or if Borrower is
enjoined, restrained, or in any way prevented by court order from continuing to
conduct all or any material part of its business affairs, or if a judgment or
other claim becomes a lien or encumbrance upon any material portion of
Borrower's assets, or if a notice of lien, levy, or assessment is filed of
record with respect to any of Borrower's assets by the United States Government,
or any department, agency, or instrumentality thereof, or by any state, county,
municipal, or governmental agency, and the same is not paid within ten (10) days
after Borrower receives notice thereof, provided that none of the foregoing
shall constitute an Event of Default where such action or event is stayed or an
adequate bond has been posted pending a good faith contest by Borrower (provided
that no Advances will be required to be made during such cure periods);
8.5 Insolvency. If Borrower becomes insolvent, or if an
Insolvency Proceeding is commenced by Borrower, or if an Insolvency Proceeding
is commenced against Borrower and is not dismissed or stayed within ten (10)
days (provided that no Advances will be made prior to the dismissal of such
Insolvency Proceeding);
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8.6 Other Agreements. If there is a default in any agreement to
which Borrower is a party with a third party or parties resulting in a right by
such third party or parties, whether or not exercised, to accelerate the
maturity of any Indebtedness in an amount in excess of One Hundred Thousand
Dollars ($100,000) or that could have a Material Adverse Effect;
8.7 Subordinated Debt. If Borrower makes any payment on
account of Subordinated Debt, except to the extent such payment is allowed under
any subordination agreement entered into with Bank;
8.8 Judgments. If a judgment or judgments for the payment of
money in an amount, individually or in the aggregate, of at least Fifty Thousand
Dollars ($50,000) shall be rendered against Borrower and shall remain
unsatisfied and unstayed for a period of ten (10) days (provided that no
Advances will be made prior to the satisfaction or stay of such judgment); or
8.9 Misrepresentations. If any material misrepresentation or
material misstatement exists now or hereafter in any warranty or representation
set forth herein or in any certificate delivered to Bank by any Responsible
Officer pursuant to this Agreement or to induce Bank to enter into this
Agreement or any other Loan Document.
9. BANK'S RIGHTS AND REMEDIES
--------------------------
9.1 Rights and Remedies. Upon the occurrence and during the
continuance of an Event of Default, Bank may, at its election, without notice of
its election and without demand, do any one or more of the following, all of
which are authorized by Borrower:
(a) Declare all Obligations, whether evidenced by this
Agreement, by any of the other Loan Documents, or otherwise, immediately due and
payable (provided that upon the occurrence of an Event of Default described in
Section 8.5 all Obligations shall become immediately due and payable without any
action by Bank);
(b) Cease advancing money or extending credit to or for the
benefit of Borrower under this Agreement or under any other agreement between
Borrower and Bank;
(c) Settle or adjust disputes and claims directly with
account debtors for amounts, upon terms and in whatever order that Bank
reasonably considers advisable;
(d) Without notice to or demand upon Borrower, make such
reasonable payments and do such acts as Bank considers necessary or reasonable
to protect its security interest in the Collateral. Borrower agrees to assemble
the Collateral if Bank so requires, and to make the Collateral available to Bank
as Bank may designate. Borrower authorizes Bank to enter the premises where the
Collateral is located, to take and maintain possession of the Collateral, or any
part of it, and to pay, purchase, contest, or compromise any encumbrance,
charge, or lien which in Bank's determination appears to be prior or superior to
its security interest and to pay all expenses incurred in connection therewith.
With respect to any of Borrower's owned premises, Borrower hereby grants Bank a
license to enter into possession of such premises and to occupy the same,
without charge, for up to one hundred twenty (120) days in order to exercise any
of Bank's rights or remedies provided herein, at law, in equity, or otherwise;
(e) Without notice to Borrower set off and apply to the
Obligations any and all (i) balances and deposits of Borrower held by Bank, or
(ii) indebtedness at any time owing to or for the credit or the account of
Borrower held by Bank;
(f) Ship, reclaim, recover, store, finish, maintain, repair,
prepare for sale, advertise for sale, and sell (in the manner provided for
herein) the Collateral. Bank is hereby granted a license or other right, solely
pursuant to the provisions of this Section 9.1, to use, without charge,
Borrower's labels, patents, copyrights, rights of use of any name, trade
secrets, trade names, trademarks, service marks, and advertising matter, or any
property of a similar nature, as it pertains to the Collateral, in completing
production of, advertising for sale, and selling any Collateral and, in
connection with Bank's exercise of its rights under this Section 9.1, Borrower's
rights under all licenses and all franchise agreements shall inure to Bank's
benefit;
15
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(g) Sell the Collateral at either a public or private sale,
or both, by way of one or more contracts or transactions, for cash or on terms,
in such manner and at such places (including Borrower's premises) as Bank
determines is commercially reasonable;
(h) Bank may credit bid and purchase at any public sale; and
(i) Any deficiency that exists after disposition of the
Collateral as provided above will be paid immediately by Borrower.
9.2 Power of Attorney. Effective only upon the occurrence and
during the continuance of an Event of Default, Borrower hereby irrevocably
appoints Bank (and any of Bank's designated officers, or employees) as
Borrower's true and lawful attorney to: (a) send requests for verification of
Accounts or notify account debtors of Bank's security interest in the Accounts;
(b) endorse Borrower's name on any checks or other forms of payment or security
that may come into Bank's possession; (c) sign Borrower's name on any invoice or
bill of lading relating to any Account, drafts against account debtors,
schedules and assignments of Accounts, verifications of Accounts, and notices to
account debtors; (d) make, settle, and adjust all claims under and decisions
with respect to Borrower's policies of insurance; and (e) settle and adjust
disputes and claims respecting the accounts directly with account debtors, for
amounts and upon terms which Bank determines to be reasonable; provided Bank may
exercise such power of attorney to sign the name of Borrower on any of the
documents described in Section 4.2 regardless of whether an Event of Default has
occurred. The appointment of Bank as Borrower's attorney in fact, and each and
every one of Bank's rights and powers, being coupled with an interest, is
irrevocable until all of the Obligations have been fully repaid and performed
and Bank's obligation to provide advances hereunder is terminated.
9.3 Accounts Collection. At any time from the date of this
Agreement, Bank may notify any Person owing funds to Borrower of Bank's security
interest in such funds and verify the amount of such Account. Borrower shall
collect all amounts owing to Borrower for Bank, receive in trust all payments as
Bank's trustee, and immediately deliver such payments to Bank in their original
form as received from the account debtor, with proper endorsements for deposit.
9.4 Bank Expenses. If Borrower fails to pay any amounts or
furnish any required proof of payment due to third persons or entities, as
required under the terms of this Agreement, then Bank may do any or all of the
following: (a) make payment of the same or any part thereof; (b) set up such
reserves under the Committed Revolving Line as Bank deems necessary to protect
Bank from the exposure created by such failure; or (c) obtain and maintain
insurance policies of the type discussed in Section 6.6 of this Agreement, and
take any action with respect to such policies as Bank deems prudent. Any amounts
so paid or deposited by Bank shall constitute Bank Expenses, shall be
immediately due and payable, and shall bear interest at the then applicable rate
hereinabove provided, and shall be secured by the Collateral. Any payments made
by Bank shall not constitute an agreement by Bank to make similar payments in
the future or a waiver by Bank of any Event of Default under this Agreement.
9.5 Bank's Liability for Collateral. So long as Bank complies
with reasonable banking practices, Bank shall not in any way or manner be liable
or responsible for: (a) the safekeeping of the Collateral; (b) any loss or
damage thereto occurring or arising in any manner or fashion from any cause; (c)
any diminution in the value thereof; or (d) any act or default of any carrier,
warehouseman, bailee, forwarding agency, or other person whomsoever. All risk of
loss, damage or destruction of the Collateral shall be borne by Borrower.
9.6 Remedies Cumulative. Bank's rights and remedies under this
Agreement, the Loan Documents, and all other agreements shall be cumulative.
Bank shall have all other rights and remedies not inconsistent herewith as
provided under the Code, by law, or in equity. No exercise by Bank of one right
or remedy shall be deemed an election, and no waiver by Bank of any Event of
Default on Borrower's part shall be deemed a continuing waiver. No delay by Bank
shall constitute a waiver, election, or acquiescence by it. No waiver by Bank
shall be effective unless made in a written document signed on behalf of Bank
and then shall be effective only in the specific instance and for the specific
purpose for which it was given.
9.7 Demand; Protest. Borrower waives demand, protest, notice of
protest, notice of default or dishonor, notice of payment and nonpayment, notice
of any default, nonpayment at maturity, release,
16
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compromise, settlement, extension, or renewal of accounts, documents,
instruments, chattel paper, and guarantees at any time held by Bank on which
Borrower may in any way be liable.
10. NOTICES
-------
Unless otherwise provided in this Agreement, all notices or demands by
any party relating to this Agreement or any other agreement entered into in
connection herewith shall be in writing and (except for financial statements and
other informational documents which may be sent by first-class mail, postage
prepaid) shall be personally delivered or sent by a recognized overnight
delivery service, certified mail, postage prepaid, return receipt requested, or
by telefacsimile to Borrower or to Bank, as the case may be, at its addresses
set forth below:
If to Borrower Endogen, Inc.
30 Commerce Way
Woburn, MA 01801
Attn: Dan Burns, Financial Controller
FAX: (617) 937-0891
If to Bank Silicon Valley Bank
40 William Street
Wellesley, MA 02181
Attn: Timothy O'Loughlin
FAX: 617-431-9906
The parties hereto may change the address at which they are to receive
notices hereunder, by notice in writing in the foregoing manner given to the
other.
11. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER
------------------------------------------
The laws of the Commonwealth of Massachusetts shall apply to this
Agreement. BORROWER ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES,
UNCONDITIONALLY, THE NON-EXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL COURT OF
COMPETENT JURISDICTION IN THE COMMONWEALTH OF MASSACHUSETTS IN ANY ACTION, SUIT,
OR PROCEEDING OF ANY KIND AGAINST IT WHICH ARISES OUT OF OR BY REASON OF THIS
AGREEMENT; PROVIDED, HOWEVER, THAT IF FOR ANY REASON BANK CANNOT AVAIL ITSELF OF
THE COURTS OF THE COMMONWEALTH OF MASSACHUSETTS, BORROWER ACCEPTS JURISDICTION
OF THE COURTS AND VENUE IN SANTA CLARA COUNTY, CALIFORNIA. BORROWER AND BANK
EACH HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE
OF ACTION BASED UPON OR ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE
TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS,
BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS. EACH PARTY
RECOGNIZES AND AGREES THAT THE FOREGOING WAIVER CONSTITUTES A MATERIAL
INDUCEMENT FOR IT TO ENTER INTO THIS AGREEMENT. EACH PARTY REPRESENTS AND
WARRANTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL AND THAT IT
KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION
WITH LEGAL COUNSEL.
12. GENERAL PROVISIONS
------------------
12.1 Successors and Assigns. This Agreement shall bind and inure
to the benefit of the respective successors and permitted assigns of each of the
parties; provided, however, that neither this Agreement nor any rights hereunder
may be assigned by Borrower without Bank's prior written consent, which consent
may be granted or withheld in Bank's sole discretion. Bank shall have the right
without the consent of or notice to Borrower to sell, transfer, negotiate, or
grant participation in all or any part of, or any interest in, Bank's
obligations, rights and benefits hereunder.
12.2 Indemnification. Borrower shall defend, indemnify and hold
harmless Bank and its officers, employees, and agents against: (a) all
obligations, demands, claims, and liabilities claimed or asserted
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by any other party in connection with the transactions contemplated by this
Agreement; and (b) all losses or Bank Expenses in any way suffered, incurred, or
paid by Bank as a result of or in any way arising out of, following, or
consequential to transactions between Bank and Borrower whether under this
Agreement, (including without limitation reasonable attorneys fees and
expenses), except for losses, in the case of either 12.2(a) or 12.2(b), caused
by Bank's gross negligence or willful misconduct.
12.3 Time of Essence. Time is of the essence for the
performance of all obligations set forth in this Agreement.
12.4 Severability of Provisions. Each provision of this Agreement
shall be severable from every other provision of this Agreement for the purpose
of determining the legal enforceability of any specific provision.
12.5 Amendments in Writing, Integration. This Agreement cannot be
amended or terminated orally. All prior agreements, understandings,
representations, warranties, and negotiations between the parties hereto with
respect to the subject matter of this Agreement, if any, are merged into this
Agreement and the Loan Documents.
12.6 Counterparts. This Agreement may be executed in any number
of counterparts and by different parties on separate counterparts, each of
which, when executed and delivered, shall be deemed to be an original, and all
of which, when taken together, shall constitute but one and the same Agreement.
12.7 Survival. All covenants, representations and warranties made
in this Agreement shall continue in full force and effect so long as any
Obligations remain outstanding. The obligations of Borrower to indemnify Bank
with respect to the expenses, damages, losses, costs and liabilities described
in Section 12.2 shall survive until all applicable statute of limitations
periods with respect to actions that may be brought against Bank have run,
provided that so long as the obligations set forth in the first sentence of this
Section 12.7 have been satisfied, and Bank has no commitment to make any
Advances or to make any other loans to Borrower, Bank shall release all security
interests granted hereunder and redeliver all Collateral held by it in
accordance with applicable law.
12.8 Confidentiality. In handling any confidential information
Bank shall exercise the same degree of care that it exercises with respect to
its own proprietary information of the same types to maintain the
confidentiality of any non-public information thereby received or received
pursuant to this Agreement except that disclosure of such information may be
made (i) to the subsidiaries or affiliates of Bank in connection with their
present or prospective business relations with Borrower, provided those
subsidiaries or affiliates are under a comparable confidentiality obligation in
favor of Borrower (ii) to prospective transferees or purchasers of any interest
in the Loans, provided that they have entered into a comparable confidentiality
agreement in favor of Borrower and have delivered a copy to Borrower, (iii) as
required by law, regulations, rule or order, subpoena, judicial order or similar
order and (iv) as may be required in connection with the examination, audit or
similar investigation of Bank. Confidential information hereunder shall not
include information that either: (a) is in the public domain or in the knowledge
or possession of Bank when disclosed to Bank, or becomes part of the public
domain after disclosure to Bank through no fault of Bank; or (b) is disclosed to
Bank by a third party, provided Bank does not have actual knowledge that such
third party is prohibited from disclosing such information.
12.9 Effectiveness. This Agreement shall become effective only
when it shall have been executed by Borrower and Bank (provided, however, in no
event shall this Agreement become effective until signed by an officer of Bank
in California).
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as a sealed instrument as of the date first set forth above.
"Borrower" "Bank"
ENDOGEN, INC. SILICON VALLEY BANK, doing business
as SILICON VALLEY EAST
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By: /s/Owen A. Dempsey By: /s/Timothy O'Loughlin
- ------------------------- --------------------------------
Owen A. Dempsey, President Timothy O'Loughlin, VP
ATTEST: /s/Dan Burns SILICON VALLEY BANK
------------------------
Dan Burns, Clerk
By: [Signature]
Title: Vice President
--------------------------------
(Signed in Santa Clara County, California)
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EXHIBIT A
---------
The Collateral shall consist of all right, title and interest of
Borrower in and to the following:
(a) All goods and equipment now owned or hereafter acquired, including,
without limitation, all machinery, fixtures, vehicles (including motor vehicles
and trailers), and any interest in any of the foregoing, and all attachments,
accessories, accessions, replacements, substitutions, additions, and
improvements to any of the foregoing, wherever located;
(b) All inventory, now owned or hereafter acquired, including, without
limitation, all merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products including such
inventory as is temporarily out of Borrower's custody or possession or in
transit and including any returns upon any accounts or other proceeds, including
insurance proceeds, resulting from the sale or disposition of any of the
foregoing and any documents of title representing any of the above, and
Borrower's Books relating to any of the foregoing;
(c) All contract rights and general intangibles now owned or hereafter
acquired, including, without limitation, goodwill, trademarks, service marks,
trade styles, trade names, patents, patent applications, leases, license
agreements, franchise agreements, blueprints, drawings, purchase orders,
customer lists, route lists, infringements, claims, computer programs, computer
discs, computer tapes, literature, reports, catalogs, design rights, income tax
refunds, payments of insurance and rights to payment of any kind;
(d) All now existing and hereafter arising accounts, contract rights,
royalties, license rights and all other forms of obligations owing to Borrower
arising out of the sale or lease of goods, the licensing of technology or the
rendering of services by Borrower, whether or not earned by performance, and any
and all credit insurance, guaranties, and other security therefor, as well as
all merchandise returned to or reclaimed by Borrower and Borrower's Books
relating to any of the foregoing;
(e) All documents, cash, deposit accounts, securities, letters of
credit, certificates of deposit, instruments and chattel paper now owned or
hereafter acquired and Borrower's Books relating to the foregoing;
(f) All copyright rights, copyright applications, copyright
registrations and like protections in each work of authorship and derivative
work thereof, whether published or unpublished, now owned or hereafter acquired;
all trade secret rights, including all rights to unpatented inventions,
know-how, operating manuals, license rights and agreements and confidential
information, now owned or hereafter acquired; all mask work or similar rights
available for the protection of semiconductor chips, now owned or hereafter
acquired; all claims for damages by way of any past, present and future
infringement of any of the foregoing; and
(g) Any and all claims, rights and interests in any of the above and all
substitutions for, additions and accessions to and proceeds thereof.
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EXHIBIT B
LOAN PAYMENT/ADVANCE TELEPHONE REQUEST FORM
The undersigned hereby certifies as follows:
I, ________________, am the duly elected and acting __________ of
ENDOGEN, INC. ("Borrower").
This certificate is delivered pursuant to Section 2.1 of that certain
Loan and Security Agreement dated August 28, 1996 by and between Borrower and
Silicon Valley Bank ("Bank") (the "Loan Agreement"). The terms used in this
Borrowing Request which are defined in the Loan Agreement have the same meaning
herein as ascribed to them therein.
Borrower is confirming its telephone request made on _____, 199___ for
an Advance as follows:
(a) The date on which the Advance is to be made is ______, 199__.
(b) The amount of the Advance is to be $____________.
All representations and warranties of Borrower stated in the Loan
Agreement are true, accurate and complete in all material respects as of the
date of the telephone request for and Advance confirmed by this Borrowing
Request; provided, however, that those representations and warranties expressly
referring to another date shall be true, accurate and complete in all material
respects as of such date.
IN WITNESS WHEREOF, this Borrowing Request is executed by the
undersigned as of this ______ day of ______________, 199__.
ENDOGEN, INC.
By:
--------------------------------------
Title:
-----------------------------------
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EXHIBIT C
BORROWING BASE CERTIFICATE
Borrower: Endogen, Inc. Lender: Silicon Valley Bank
30 Commerce Way 3003 Tasman Drive
Woburn, MA 01801 Santa Clara, CA 95054
Commitment Amount: $850,000
ACCOUNTS RECEIVABLE
1. Accounts Receivable Book Value as of ________________ $__________
2. Additions (please explain on reverse) $__________
3. TOTAL ACCOUNTS RECEIVABLE $__________
ACCOUNTS RECEIVABLE DEDUCTIONS
4. Amounts over 90 days due $_________
5. Credit Balances Applied to Over 90-Day Accounts $_________
6. Balance of 50% over 90 day accounts $_________
7. Concentration Limits $_________
8. Ineligible Foreign Accounts $_________
9. Governmental Accounts $_________
10. Contra Accounts $_________
11. Promotion or Demo Accounts $_________
12. Intercompany/Employee Accounts $_________
13. Other (please explain on reverse) $_________
14. TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS $_________
15. Eligible Accounts (#3 - #14) $_________
16. LOAN VALUE OF ACCOUNTS (____% of #15) $_________
BALANCES
17. Maximum Loan Amount $_________
18. Total Funds Available (Lesser of #17 or #16) $_________
19. Present balance owing on Line of Credit $_________
20. Outstanding under Sublimits ( ) $_________
21. RESERVE POSITIVE (#18 - #19 + #20) $_________
The undersigned represents and warrants that the foregoing is true, complete and
correct, and that the information reflected in this Borrowing Base Certificate
complies with the representations and warranties set forth in the Loan and
Security Agreement dated August 28, 1996, as may be amended from time to time,
between the undersigned and Silicon Valley Bank.
COMMENTS:
-----------------------------
BANK USE ONLY
Rec'd By: ___________
Auth. Signer
Date: _______________
ENDOGEN, INC. Verified: _______________
Auth. Signer
By: ____________________________ Date: ________________
Authorized Signer
-----------------------------
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<PAGE>
EXHIBIT D
COMPLIANCE CERTIFICATE
Borrower: Endogen, Inc. Lender: Silicon Valley Bank
30 Commerce Way 3003 Tasman Drive
Woburn, MA 01801 Santa Clara, CA 95054
The undersigned authorized officer of ENDOGEN, INC. hereby certifies
that in accordance with the terms and conditions of the Loan and Security
Agreement dated AUGUST 28, 1996 between Borrower and Bank (the "Loan
Agreement"), (i) Borrower is in complete compliance for the period ending
___________ of all required conditions and terms except as noted below and (ii)
all representations and warranties of Borrower stated in the Agreement are true,
accurate and complete in all material respects as of the date hereof. Attached
herewith are the required documents supporting the above certification. The
Officer further certifies that these are prepared in accordance with Generally
Accepted Accounting Principals (GAAP) and are consistent from one period to the
next except as explained in an accompanying letter or footnotes.
Please indicate compliance status by circling Yes/No under "Complies" column
<TABLE>
<CAPTION>
Reporting Covenant Required Complies
<S> <C> <C> <C>
Monthly financial statements Monthly within 25 days Yes No
Annual (CPA Audited) FYE within 90 days Yes No
A/R & A/P Agings Monthly within 25 days Yes No
A/R Audit Initial and Annual Yes No
</TABLE>
<TABLE>
<CAPTION>
Financial Covenants Required Actual Complies
<S> <C> <C> <C> <C>
Maintain on a Monthly Basis:
Minimum Quick Ratio 1.3:1.0 __________:1.0 Yes No
Minimum TNW $4,000,000 $_____________ Yes No
Maximum Debt/TNW 0.75:1.0 __________:1.0 Yes No
Minimum Debt Service+ 1.5:1.0 __________:1.0 Yes No
Maintain on a Quarterly Basis:
Minimum Debt Service ++ 1.5:1.0 __________:1.0 Yes No
Minimum Profitability for FQE
8/31/96 and thereafter ($75,000) $_____________ Yes No
</TABLE>
+ To be met only after Borrower has met Minimum Debt Service for two
fiscal quarters
++ Not a financial covenant, but a condition to increase the revolving line
availability as per ss.2.1 of the Loan Agreement
Comments Regarding Exceptions:
On behalf of Borrower, the Officer further acknowledges that at any such time as
Borrower is out of compliance with any of the terms set forth in the Agreement,
including, without limitation, any of the financial covenants, Borrower cannot
receive any advances.
Sincerely,
-------------------------------
BANK USE ONLY
- -----------------------------------
Signature Received by: __________________
- ----------------------------------- Date: _________________________
TITLE
- ----------------------------------- Verified: _____________________
DATE Date: _________________________
Compliance Status: Yes No
-------------------------------
Revolving Promissory Note
$850,000 Woburn, Massachusetts
August 28, 1996
FOR VALUE RECEIVED, the undersigned, ENDOGEN, INC., a Massachusetts
corporation (the "Borrower"), promises to pay to the order of Silicon Valley
Bank, a California-chartered bank ("Bank"), at such place as the holder hereof
may designate, in lawful money of the United States of America, the aggregate
unpaid principal amount of all advances ("Advances") made by Bank to Borrower in
accordance with the terms of the Loan and Security Agreement between Borrower
and Bank of even date herewith, as amended from time to time (the "Loan
Agreement"), up to a maximum principal amount of EIGHT HUNDRED FIFTY THOUSAND
AND NO/100THS Dollars ($850,000), until paid in full. Borrower shall also pay
interest on the aggregate unpaid principal amount of such Advances at the rates
and in accordance with the terms of the Loan Agreement. The entire principal
amount and all accrued interest shall be due and payable on AUGUST 27, 1997.
Borrower irrevocably waives the right to direct the application of any
and all payments at any time hereafter received by Bank from or on behalf of
Borrower, and Borrower irrevocably agrees that Bank shall have the continuing
exclusive right to apply any and all such payments against the then due and
owing obligations of Borrower as Bank may deem advisable. In the absence of a
specific determination by Bank with respect thereto, all payments shall be
applied in the following order: (a) then due and payable fees and expenses; (b)
then due and payable interest payments and mandatory prepayments; and (c) then
due and payable principal payments and optional prepayments.
Bank is hereby authorized by Borrower to endorse on Bank's books and
records each Advance made by Bank under this Note and the amount of each payment
or prepayment of principal of each such Advance received by Bank; it being
understood, however, that failure to make any such endorsement (or any error in
notation) shall not affect the obligations of Borrower with respect to Advances
made hereunder, and payments of principal by Borrower shall be credited to
Borrower notwithstanding the failure to make a notation (or any errors in
notation) thereof on such books and records.
Borrower promises to pay Bank all costs and expenses of collection of
this Note and to pay all reasonable attorneys' fees incurred in such collection,
whether or not there is a suit or action, or in any suit or action to collect
this Note or in any appeal thereof. Borrower waives presentment, demand,
protest, notice of protest, notice of dishonor, notice of nonpayment, and any
and all other notices and demands in connection with the delivery, acceptance,
performance, default or enforcement of this Note, as well as any applicable
statutes of limitations. No delay by Bank in exercising any power or right
hereunder shall operate as a waiver of any power or right. Time is of the
essence as to all obligations hereunder.
This Note is issued pursuant to the Loan Agreement, which shall govern
the rights and obligations of Borrower with respect to all obligations
hereunder.
This Note shall be deemed to be made under, and shall be construed in
accordance with and governed by, the laws of the Commonwealth of Massachusetts,
excluding conflicts of laws principles.
Executed as an instrument under seal.
ENDOGEN, INC.
By: /s/Owen A. Dempsey
-------------------------------
Owen A. Dempsey, President
ATTEST /s/Dan Burns
- --------------------
Dan Burns, Clerk
Term Promissory Note
--------------------
$400,000 Woburn, Massachusetts
August 28, 1996
FOR VALUE RECEIVED, the undersigned, ENDOGEN, INC., a Massachusetts
corporation (the "Borrower"), promises to pay to the order of Silicon Valley
Bank, a California-chartered bank ("Bank"), at such place as the holder hereof
may designate, in lawful money of the United States of America, in accordance
with the terms of the Loan and Security Agreement between Borrower and Bank of
even date herewith, as amended from time to time (the "Loan Agreement"), the
principal amount of FOUR HUNDRED THOUSAND AND NO/100THS Dollars ($400,000),
until paid in full. Borrower shall also pay interest on the aggregate unpaid
principal amount of such principal amount at the rates and in accordance with
the terms of the Loan Agreement. The entire principal amount and all accrued
interest shall be due and payable on August 27, 1999.
Borrower irrevocably waives the right to direct the application of any
and all payments at any time hereafter received by Bank from or on behalf of
Borrower, and Borrower irrevocably agrees that Bank shall have the continuing
exclusive right to apply any and all such payments against the then due and
owing obligations of Borrower as Bank may deem advisable. In the absence of a
specific determination by Bank with respect thereto, all payments shall be
applied in the following order: (a) then due and payable fees and expenses; (b)
then due and payable interest payments and mandatory prepayments; and (c) then
due and payable principal payments and optional prepayments.
Bank is hereby authorized by Borrower to endorse on Bank's books and
records each Advance made by Bank under this Note and the amount of each payment
or prepayment of principal of each such Advance received by Bank; it being
understood, however, that failure to make any such endorsement (or any error in
notation) shall not affect the obligations of Borrower with respect to Advances
made hereunder, and payments of principal by Borrower shall be credited to
Borrower notwithstanding the failure to make a notation (or any errors in
notation) thereof on such books and records.
Borrower promises to pay Bank all costs and expenses of collection of
this Note and to pay all reasonable attorneys' fees incurred in such collection,
whether or not there is a suit or action, or in any suit or action to collect
this Note or in any appeal thereof. Borrower waives presentment, demand,
protest, notice of protest, notice of dishonor, notice of nonpayment, and any
and all other notices and demands in connection with the delivery, acceptance,
performance, default or enforcement of this Note, as well as any applicable
statutes of limitations. No delay by Bank in exercising any power or right
hereunder shall operate as a waiver of any power or right. Time is of the
essence as to all obligations hereunder.
This Note is issued pursuant to the Loan Agreement, which shall govern
the rights and obligations of Borrower with respect to all obligations
hereunder.
This Note shall be deemed to be made under, and shall be construed in
accordance with and governed by, the laws of the Commonwealth of Massachusetts,
excluding conflicts of laws principles.
Executed as an instrument under seal.
ENDOGEN, INC.
By: /s/Owen A. Dempsey
-------------------------------
Owen A. Dempsey, President
ATTEST /s/Dan Burns
- --------------------
Dan Burns, Clerk
CUMMINGS PROPERTIES MANAGEMENT, INC
STANDARD FORM
COMMERCIAL LEASE
In consideration of the covenants herein contained, Cummings Properties
Management, Inc., hereinafter called LESSOR, does hereby lease to T-Cell
Diagnostics, Inc. (a DE corp.) hereinafter called LESSEE, the following
described premises, hereinafter called the leased premises: approximately 27,043
square feet at 8-H, K, F & G and 6-X & AA Gill Street, Woburn, MA 01801 TO HAVE
AND HOLD the leased premises for a term of five (5) years commencing at noon on
October 15, 1994 and ending at noon on October 14, 1999 unless sooner terminated
as herein provided. LESSOR and LESSEE now covenant and agree that the following
terms and conditions shall govern this lease during the term hereof and for such
further time as LESSEE shall hold the leased premises.
1. RENT. LESSEE shall pay to LESSOR base rent at the rate of two hundred ninety
thousand seven hundred twelve (290,712.00) U.S. dollars per year, drawn on a
U.S. bank, payable in advance in monthly installments of $24,226.00 on the first
day in each calendar month in advance, the first monthly payment to be made upon
LESSEE's execution of this lease, including payment in advance of appropriate
fractions of a monthly payment for any portion of a month at the commencement or
end of said lease term. All payments shall be made to LESSOR or agent at 200
West Cummings Park, Woburn, Massachusetts 01801, or at such other place as
LESSOR shall from time to time in writing designate. If the "Cost of Living" has
increased as shown by the Consumer Price Index (Boston, Massachusetts, all
items, all urban consumers), U.S. Bureau of Labor Statistics, the amount of base
rent due during each calendar year of this lease and any extensions thereof
shall be annually adjusted in proportion to any increase in the Index. All such
adjustments shall take place with the rent due on January 1 of each year during
the lease term. The base month from which to determine the amount of each
increase in the Index shall be January 1994, which figure shall be compared with
the figure for November 1994, and each November thereafter to determine the
percentage increase (if any) in the base rent to be paid during the following
calendar year. In the event that the Consumer Price Index as presently computed
is discontinued as a measure of "Cost of Living" changes, any adjustment shall
then be made on the basis of a comparable index then in general use.
2. SECURITY DEPOSIT. LESSEE shall pay to LESSOR a security deposit in the amount
of forty-two thousand (42,000.00) dollars upon the execution of this lease by
LESSEE, which shall be held as security for LESSEE's performance as herein
provided and refunded to LESSEE without interest at the end of this lease
subject to LESSEE's satisfactory compliance with the conditions hereof. LESSEE
may not apply the security deposit to payment of the last month's rent. In the
event of any default or breach of this lease by LESSEE, LESSOR shall immediately
apply the security deposit first to any unamortized improvements completed for
LESSEE's occupancy, then to offset any outstanding invoice or other payment due
to LESSOR, with the balance applied to outstanding rent. If all or any portion
of the security deposit is applied to cure a default or breach during the term
of the lease, LESSEE shall be responsible for restoring said deposit forthwith
and failure to do so shall be considered a substantial default under the lease.
LESSEE's failure to remit the full security deposit or any portion thereof when
due shall also constitute a substantial lease default.
3. USE OF PREMISES. LESSEE shall use the leased premises only for the purpose
of executive and administrative offices and laboratory with light manufacturing
inclusive of cell line, and animal facility.
4. ADDITIONAL RENT. LESSEE shall pay to LESSOR as additional rent a
proportionate share (based on square footage leased by LESSEE as compared with
the total leaseable square footage of the building of which the leased premises
are a part) of any increase in the real estate taxes levied against the land and
building of which the leased premises are a part, whether such increase is
caused by an increase in the tax rate, or the assessment on the property, or a
change in the method of determining real estate taxes. LESSEE shall make payment
within thirty (30) days of written notice from LESSOR that such increased taxes
are payable, and any additional rent shall be prorated should the lease
terminate before the end of any tax year. The base from which to determine the
amount of any increase in taxes shall be the rate and the assessment in effect
as of July 1, 1994. In the event that said building was not assessed as a
completed building as of the aforementioned date, then the base assessment shall
be as of the first date when the building is assessed as a completed structure.
5. UTILITIES. LESSOR shall provide equipment per LESSOR's building standard
specifications to heat the leased premises in season and to cool all office
areas between May 1 and November 1. LESSEE shall pay all charges for heat and
electricity used on the leased premises. LESSEE shall pay LESSOR for all water
and sewer use as determined by LESSOR either by a separate water meter serving
the leased premises, or as a proportionate share of water and sewer charges for
the entire building of which the leased premises are a part if not separately
metered, and LESSEE shall pay LESSOR a proportionate share of any other fees and
charges relating in any way to water or sewer use at the building. No plumbing,
construction or electrical work of any type shall be done without LESSOR's prior
written approval and the appropriate municipal permit.
6. COMPLIANCE WITH LAWS. LESSEE acknowledges that no trade, occupation, activity
or work shall be conducted in the leased premises or use made thereof which may
be unlawful, improper, noisy, offensive, or contrary to any applicable statute,
regulation, ordinance or bylaw. LESSEE shall keep all employees working in the
leased premises covered with Worker's Compensation Insurance and shall obtain
any licenses and permits necessary for LESSEE's occupancy. LESSEE shall be
responsible for causing the leased premises and any alterations by LESSEE which
are allowed hereunder to be in full compliance with any applicable statute,
regulation, ordinance or bylaw.
7. FIRE, CASUALTY, EMINENT DOMAIN. Should a substantial portion of the leased
premises, or of the property of which they are a part, be substantially damaged
by fire or other casualty, or be taken by eminent domain, LESSOR may elect to
terminate this lease. When such fire, casualty, or taking renders the leased
premises substantially unsuitable for their intended use, a just and
proportionate abatement of rent shall be made, and LESSEE may elect to terminate
this lease if: (a) LESSOR fails to give written notice within thirty (30) days
of intention to restore the leased premises, or (b) LESSOR fails to restore the
leased premises to a condition substantially suitable for their intended use
within ninety (90) days of said fire, casualty or taking. LESSOR reserves all
rights for damages or injury to the leased premises for any taking by eminent
domain, except for damage to LESSEE's property or equipment.
<PAGE>
8. MAINTENANCE OF PREMISES. LESSOR will be responsible for all structural
maintenance of the leased premises, including the roof and exterior walls of the
building, and for the normal daytime maintenance of all space heating and
cooling equipment, sprinklers, doors, locks, plumbing, and electrical wiring,
but specifically excluding damage caused by the careless, malicious, willful, or
negligent acts of LESSEE or others, chemical, water or corrosion damage from any
source, and maintenance of any non "building standard" leasehold improvements.
LESSEE agrees to maintain at its expense all other aspects of the leased
premises in the same condition, as they are at the commencement of the term or
as they may be put in during the term of this lease, normal wear and tear and
damage by fire or other casualty only expected, and whenever necessary, to
replace light bulbs, plate glass and other glass therein, acknowledging that the
leased premises are now in good order and the light bulbs and glass whole.
LESSEE will properly control or vent all solvents, degreasers, smoke, odors,
etc. and shall not cause the area surrounding the leased premises to be in
anything other than a neat and clean condition, depositing all waste in
appropriate receptacles. LESSEE shall be solely responsible for any damage to
plumbing equipment, sanitary lines, or any other portion of the building which
results from the discharge or use of any acid or corrosive substance by LESSEE.
LESSEE shall not permit the leased premises to be overloaded, damaged, stripped
or defaced, nor suffer any waste, and will not keep animals within the leased
premises. If the leased premises include any wooden mezzanine type space, the
floor capacity of such space is suitable only for office use, light storage or
assembly work. If the leased premises are carpeted or partially carpeted, LESSEE
will protect carpet with plastic or masonite chair pads under any rolling
chairs. Unless heat is provided at LESSOR's expense, LESSEE shall maintain
sufficient heat to prevent freezing of pipes or other damage. Any increase in
air conditioning equipment or electrical capacity, or any installation and/or
maintenance of equipment which is necessitated by some specific aspect of
LESSEE's use of the leased premises shall be at LESSEE's expense. All
maintenance provided by LESSOR shall be during LESSOR's normal business hours.
9. ALTERATIONS. LESSEE shall not make structural alterations or additions of any
kind to the leased premises, including the roof and exterior walls of the
building, but may make nonstructural alterations provided LESSOR consents
thereto in writing such consent shall not be unreasonably withheld. All such
allowed alterations shall be at LESSEE's expense and shall conform with LESSOR's
construction specifications. If LESSOR provides any services or maintenance for
LESSEE in connection with such alterations or otherwise under this lease, any
just invoice will be promptly paid. LESSEE shall not permit any mechanics'
liens, or similar liens, to remain upon the leased premises in connection with
work of any character performed or claimed to have been performed at the
direction of LESSEE and shall cause any such lien to be released or removed
forthwith without cost to LESSOR. Any alterations or additions shall become part
of the leased premises and the property of LESSOR. Any alterations completed by
LESSOR shall be LESSOR's "building standard" unless noted otherwise. LESSOR
shall have the right at any time to change the arrangement of parking areas,
stairs, walkways or other common areas of the building of which the leased
premises are a part.
10. ASSIGNMENT OR SUBLEASING. LESSEE shall not assign this lease or sublet or
allow any other firm or individual to occupy the whole or any part of the leased
premises without LESSOR's prior written consent. Notwithstanding such assignment
or subleasing, LESSEE and GUARANTOR shall remain liable to LESSOR for the
payment of all rent and for the full performance of the covenants and conditions
of this lease. LESSEE shall pay LESSOR promptly for legal and administrative
expenses incurred by LESSOR in connection with any consent requested hereunder
by LESSEE.
11. SUBORDINATION. This lease shall be subject and subordinate to any and all
mortgages and other instruments in the nature of a mortgage, now or at any time
hereafter, and LESSEE shall, when requested, promptly execute and deliver such
written instruments as shall be necessary to show the subordination of this
lease to said mortgages or other such instruments in the nature of a mortgage.
12. LESSOR'S ACCESS. LESSOR or agents of LESSOR may at any reasonable time enter
to view the leased premises, to make repairs and alterations as LESSOR should
elect to do for the leased premises, the common areas or any other portions of
the building of which the leased premises are a part, to make repairs which
LESSEE is required but has failed to do, and to show the leased premises to
others.
13. SNOW REMOVAL. The plowing of snow from all roadways, accessways and
unobstructed parking and loading areas shall be at the sole expense of LESSOR.
The control of snow and ice on all steps serving the leased premises and all
other areas not readily accessible to plows shall be the sole responsibility of
LESSEE. Notwithstanding the foregoing, however, LESSEE shall hold LESSOR and
OWNER harmless from any and all claims by LESSEE's agents, representatives,
employees, callers or invitees for damage or personal injury resulting in any
way from snow or ice on any area serving the leased premises.
14. ACCESS AND PARKING. LESSEE shall have the right without additional charge to
use parking facilities provided for the leased premises in common with others
entitled to the use thereof. Said parking areas plus any stairs, walkways,
elevators or other common areas shall in all cases be considered a part of the
leased premises to the extent that they are utilized by LESSEE, or LESSEE's
employees, agents, callers or invitees. LESSEE will not obstruct in any manner
any portion of the building or the walkways or approaches to said building, and
will conform to all rules and regulations now or hereafter made by LESSOR for
parking, and for the care, use, or alteration of the building, its facilities
and approaches. LESSEE further warrants that LESSEE will not permit any employee
or visitor to violate this or any other covenant or obligation of LESSEE. No
unattended parking will be permitted between 7:00 PM and 7:00 AM without
LESSOR's prior written approval, and from December 1 through March 31 annually,
such parking shall be permitted only in those areas specifically designated for
assigned overnight parking. Unregistered or disabled vehicles, or storage
trailers of any type, may not be parked at any time. LESSOR may tow, at LESSEE's
sole risk and expense, any misparked vehicle belonging to LESSEE or LESSEE's
agents, employees, invitees or callers, at any time. LESSOR shall not be
responsible for providing any security services for the leased premises.
15. LESSEE'S LIABILITY AND INSURANCE. LESSEE shall be solely responsible as
between LESSOR and LESSEE for deaths or personal injuries to all persons
whomsoever occurring in or on the leased premises (including any extension
thereof) from whatever cause arising, and damage to property to whomsoever
belonging arising out of the use, control, condition or occupation of the leased
premises by LESSEE except where directly resulting from the sole negligence of
LESSOR, and LESSEE agrees to indemnify and save harmless LESSOR and OWNER from
any and all liability, including but not limited to expenses, damage, causes of
action, suits, claims or judgments caused by or in any way growing out of any
matters aforesaid, except for death, personal injuries or property damage
directly resulting from the sole negligence of LESSOR. LESSEE will secure and
carry at its own expense a comprehensive general liability policy insuring
LESSEE, LESSOR and OWNER against any claims based on bodily injury (including
death) or property damage arising out of the condition of the leased premises or
their use by LESSEE, such policy to insure LESSEE, LESSOR and OWNER against any
claim up to One Million (1,000,000) Dollars in the case of any one accident
involving bodily injury (including death), and up to One Million (1,000,000)
Dollars against any claim for damage to property. LESSOR and OWNER shall be
included in each such policy as additional insureds. LESSEE will file with
LESSOR prior to occupancy certificates and any applicable riders of endorsements
showing that such insurance is in force, and thereafter will file renewal
certificates prior to the expiration of any such policies. All such insurance
certificates shall provide that such policies shall not be cancelled without at
least ten (10) days prior written notice to each insured. In the event LESSEE
shall fail to provide or maintain such insurance at any time during the term of
this lease, then LESSOR may elect to contract for such insurance at LESSEE's
expense.
16. FIRE INSURANCE. LESSEE shall not permit any use of the leased premises which
will adversely affect or make voidable any insurance on the property of which
the leased premises are a part, or on the contents of said property, or which
shall be contrary to any law or regulation from time to time established by the
Insurance Services Office (or successor), local Fire Department, LESSOR's
insurer, or any similar body. LESSEE shall on demand reimburse LESSOR, and all
other tenants, all extra insurance premiums caused by LESSEE's use of the leased
premises. LESSEE shall not vacate the leased premises or permit same to be
unoccupied other than during LESSEE's customary non-business days or hours.
17. BROKERAGE. LESSEE warrants and represents to LESSOR that LESSEE has dealt
with no broker or third person with respect to this lease and LESSEE agrees to
indemnify LESSOR against any brokerage claims arising by virtue of this lease.
LESSOR warrants and represents to LESSEE that LESSOR has employed no exclusive
broker or agent in connection with the letting of the leased premises.
18. SIGNS. LESSOR authorizes, and LESSEE at LESSEE's expense agrees to erect,
signage for the leased premises in accordance with LESSOR's building standards
for style, size, location, etc. LESSEE shall obtain the prior written consent of
LESSOR before erecting any sign on the leased premises, which consent shall
include approval as to size, wording, design and location. LESSOR may remove and
dispose of any sign not approved, erected or displayed in conformance with this
lease.
<PAGE>
19. DEFAULT AND ACCELERATION OF RENT. In the event that: (a) LESSEE shall
default in the observance or performance of any of LESSEE's covenants,
agreements, or obligations hereunder, other than substantial monetary payments
as provided below, and such default shall not be corrected within ten (10) days
after written notice thereof; or (b) LESSEE vacates the leased premises, then
LESSOR shall have the right thereafter, while such default continues and without
demand or further notice, to re-enter and take possession of the leased
premises, to declare the term of this lease ended, and to remove LESSEE's
effects, without being guilty of any manner of trespass, and without prejudice
to any remedies which might be otherwise used for arrears of rent or other
default or breach of the lease. If LESSEE shall default in the payment of the
security deposit, rent, taxes, or any substantial invoice for goods and/or
services or other sum herein specified, and such default shall continue for ten
(10) days after written notice thereof, and, because both parties agree that
nonpayment of said sums when due is a substantial breach of the lease, and,
because the payment of rent in monthly installments is for the sole benefit and
convenience of LESSEE, then in addition to the foregoing remedies the entire
balance of rent which is due hereunder shall become immediately due and payable
as liquidated damages. LESSOR, without being under any obligation to do so and
without thereby waiving any default, may remedy same for the account and at the
expense of LESSEE. If LESSOR pays or incurs any obligations for the payment of
money in connection therewith, such sums paid or obligations incurred plus
interest and costs, shall be paid to LESSOR by LESSEE as additional rent. Any
sums received by LESSOR from or on behalf of LESSEE at any time shall be applied
first to any unamortized improvements completed for LESSEE's occupancy, then to
offset any outstanding invoice or other payment due to LESSOR, with the balance
applied to outstanding rent. LESSEE agrees to pay reasonable attorney's fees
and/or administrative costs incurred by LESSOR in enforcing any or all
obligations of LESSEE under this lease at any time. LESSEE shall pay LESSOR
interest at the rate of eighteen (18) percent per annum on any payment from
LESSEE to LESSOR which is past due.
20. NOTICE. Any notice from LESSOR to LESSEE relating to the leased premises or
to the occupancy thereof shall be deemed duly served when left at the leased
premises addressed to LESSEE, or served by constable, or sent to the leased
premises by certified mail, return receipt requested, postage prepaid, addressed
to LESSEE. Any notice from LESSEE to LESSOR relating to the leased premises or
to the occupancy thereof shall be deemed duly served when served by constable,
or delivered to LESSOR by certified mail, return receipt requested, postage
prepaid, addressed to LESSOR at 200 West Cummings Park, Woburn, MA 01801 or at
LESSOR's last designated address. No oral notice or representation shall have
any force or effect. Time is of the essence in service of any notice.
21. OCCUPANCY. In the event that LESSEE takes possession of said leased premises
prior to the start of said term, LESSEE will perform and observe all of LESSEE's
covenants from the date upon which LESSEE takes possession except the obligation
for the payment of extra rent for any period of less than one month. LESSEE
shall not remove LESSEE's goods or property from the leased premises other than
in the ordinary and usual course of business, without having first paid and
satisfied LESSOR for all rent which may become due during the entire term of
this lease. In the event that LESSEE continues to occupy or control all or any
part of the leased premises after the agreed termination of this lease without
the written permission of LESSOR, then LESSEE shall be liable to LESSOR for any
and all loss, damages or expenses incurred by LESSOR, and all other terms of
this lease shall continue to apply except that rent shall be due in full monthly
installments at a rate of one hundred fifty (150) percent of that which would
otherwise be due under this lease, it being understood between the parties that
such extended occupancy is as a tenant at sufferance and is solely for the
benefit and convenience of LESSEE and as such has greater rental value. LESSEE's
control or occupancy of all or any part of the leased premises beyond noon on
the last day of any monthly rental period shall constitute LESSEE's occupancy
for an entire additional month, and increased rent as provided in this section
shall be due and payable immediately in advance. LESSOR's acceptance of any
payments from LESSEE during such extended occupancy shall not alter LESSEE's
status as a tenant at sufferance.
22. FIRE PREVENTION. LESSEE agrees to use every reasonable precaution against
fire and agrees to provide and maintain approved, labeled fire extinguishers,
emergency lighting equipment, and exit signs and complete any other
modifications within the leased premises as required or recommended by the
Insurance Services Office (or successor organization), OSHA, the local Fire
Department, or any similar body.
23. OUTSIDE AREA. No goods, equipment, or things of any type or description
shall be held or stored outside the leased premises at any time without prior
written consent from LESSOR. Any goods, equipment or things left outside the
leased premises without LESSOR's prior written consent shall be deemed abandoned
and may be removed at LESSEE's expense without notice by LESSOR. A single
two-yard capacity dumpster is hereby authorized for the disposal of trash,
provided that the location of said receptacle is approved by LESSOR. LESSEE
agrees to have said container provided and serviced at its expense by whichever
disposal firm may from time to time be designated by LESSOR. If a dumpster is
provided on a shared cost basis, LESSEE shall pay its proportionate share of the
costs associated with said dumpster.
24. ENVIRONMENT. LESSEE will so conduct and operate the leased premises as not
to interfere in any way with the use and enjoyment of other portions of the same
or neighboring buildings by others by reason of odors, smoke, smells, noise,
pets, accumulation of garbage or trash, vermin or other pests, or otherwise, and
will at its expense employ a professional pest control service if necessary.
LESSEE agrees to maintain efficient and effective devices for preventing damage
to heating equipment from solvents, degreasers, cutting oils, propellants, etc.
which may be present at the leased premises. No hazardous materials or wastes
shall be stored, disposed of, or allowed to remain at the leased premises at any
time, and LESSEE shall be solely responsible for any and all corrosion or other
damage associated with the use, storage and/or disposal of same by LESSEE.
25. RESPONSIBILITY. Neither LESSOR nor OWNER shall be held liable to anyone for
loss or damage caused in any way by the use, leakage, seepage or escape of water
from any source, or for the cessation of any service rendered customarily to
said premises or buildings, or agreed to by the terms of this lease, due to any
accident, the making of repairs, alterations or improvements, labor
difficulties, weather conditions, mechanical breakdowns, trouble or scarcity in
obtaining fuel, electricity, service or supplies from the sources from which
they are usually obtained for said building, or any cause beyond LESSOR's
immediate control.
26. SURRENDER. LESSEE shall at the termination of this lease remove all of
LESSEE's goods and effects from the leased premises. LESSEE shall deliver to
LESSOR the leased premises and all keys and locks thereto, all fixtures and
equipment connected therewith, and all alterations, additions and improvements
made to or upon the leased premises, whether completed by LESSEE, LESSOR or
others, including but not limited to any offices, partitions, window blinds,
floor coverings (including computer floors), plumbing and plumbing fixtures, air
conditioning equipment and ductwork of any type, exhaust fans or heaters, water
coolers, burglar alarms, telephone wiring, telephone equipment, air or gas
distribution piping, compressors, overhead cranes, hoists, trolleys or
conveyors, counters, shelving or signs attached to walls or floors, all
electrical work, including but not limited to lighting fixtures of any type,
wiring, conduit, EMT, transformers, distribution panels, bus ducts, raceways,
outlets and disconnects, and furnishings or equipment which have been bolted,
welded, nailed, screwed, glued or otherwise attached to any wall, floor or
ceiling, or which have been directly wired to any portion of the electrical
system or which have been plumbed to the water supply, drainage or venting
systems serving the leased premises. LESSEE shall deliver the leased premises
sanitized from any chemicals or other contaminants, and broom clean and in the
same condition as they were at the commencement of this lease or any prior lease
between the parties for the leased premises, or as they were modified during
said term with LESSOR's written consent, reasonable wear and tear and damage by
fire or other casualty only excepted. In the event of LESSEE's failure to remove
any of LESSEE's property from the leased premises upon termination of the lease,
LESSOR is hereby authorized, without liability to LESSEE for loss or damage
thereto, and at the sole risk of LESSEE, to remove and store any such property
at LESSEE's expense, or to retain same under LESSOR's control, or to sell at
public or private sale (without notice), any or all of the property not so
removed and to apply the net proceeds of such sale to the payment of any sum due
hereunder, or to destroy such abandoned property. In no case shall the leased
premises be deemed surrendered to LESSOR until the termination date provided
herein or such other date as may be specified in a written agreement between the
parties, notwithstanding the delivery of any keys to LESSOR.
<PAGE>
27. GENERAL. (a) The invalidity or unenforceability of any provision of this
lease shall not affect or render invalid or unenforceable any other provision
hereof. (b) The obligations of this lease shall run with the land, and this
lease shall be binding upon and inure to the benefit of the parties hereto and
their respective successors and assigns, except that LESSOR and OWNER shall be
liable only for obligations occurring while lessor, owner, or master lessee of
the premises. (c) Any action or proceeding arising out of the subject matter of
this lease shall be brought by LESSEE within one year after the cause of action
has occurred and only in a court of the Commonwealth of Massachusetts. (d) If
LESSOR is acting under or as agent for any trust or corporation, the obligations
of LESSOR shall be binding upon the trust or corporation, but not upon any
trustee, officer, director, shareholder, or beneficiary of the trust or
corporation individually. (e) If LESSOR is not the owner (OWNER) of the leased
premises, LESSOR represents that said OWNER has agreed to be bound by the terms
of this lease unless LESSEE is in default hereof. (f) This lease is made and
delivered in the Commonwealth of Massachusetts, and shall be interpreted,
construed, and enforced in accordance with the laws thereof. (g) This lease was
the result of negotiations between parties of equal bargaining strength, and
when executed by both parties shall constitute the entire agreement between said
parties. No other oral or written representation shall have any effect hereon,
and this agreement may not be altered, extended or amended except by written
agreement attached hereto or as otherwise provided herein. (h) Notwithstanding
any other statements herein, LESSOR makes no warranty, express or implied,
concerning the suitability of the leased premises for LESSEE's intended use. (i)
LESSEE agrees that if LESSOR does not deliver possession of the leased premises
as herein provided for any reason, LESSOR shall not be liable for any damages to
LESSEE for such failure, but LESSOR agrees to use reasonable efforts to deliver
possession to LESSEE at the earliest possible date, and a proportionate
abatement of rent for such time as LESSEE may be deprived of possession of said
leased premises shall be LESSEE's sole remedy. (j) Neither the submission of
this lease form, nor the prospective acceptance of the security deposit and/or
rent shall constitute a reservation of or option for the leased premises, or an
offer to lease, it being expressly understood and agreed that this lease shall
not bind either party in any manner whatsoever until it has been executed by
both parties. (k) LESSEE shall not be entitled to exercise any option contained
herein if LESSEE is in default of any terms or conditions hereof. (l) The
headings in this lease are for convenience only and shall not be considered part
of the terms hereof. (m) No endorsement by LESSEE on any check shall bind LESSOR
in any way.
28. SECURITY AGREEMENT. LESSEE hereby grants LESSOR a continuing security
interest in all existing or hereafter acquired property of LESSEE which is in
the leased premises to secure the payment of rent, the cost of leasehold
improvements, and the performance of any other obligations of LESSEE under this
lease. Default in the payment or performance of any of LESSEE's obligations
hereunder is a default under this Security Agreement, and shall entitle LESSOR
to immediately exercise all of the rights and remedies of a Secured Party under
the Uniform Commercial Code. LESSEE also agrees to execute a UCC-1 Financing
Statement and any other financing agreement required by LESSOR in connection
with this security interest.
29. WAIVERS, ETC. No consent or waiver, express or implied, by LESSOR, to or of
any breach of any covenant, condition or duty of LESSEE shall be construed as a
consent or waiver to or of any other breach of the same or any other covenant,
condition or duty. If LESSEE is several persons, several corporations or a
partnership, LESSEE's obligations are joint or partnership and also several.
Unless repugnant to the context, "LESSOR" and "LESSEE" mean the person or
persons, natural or corporate, named above as LESSOR and as LESSEE respectively,
and their respective heirs, executors, administrators, successors and assigns.
30. THIS PARAGRAPH DOES NOT APPLY.
31. ADDITIONAL PROVISIONS. (Continued on attached rider if necessary.)
See Attached Rider
IN WITNESS WHEREOF, LESSOR AND LESSEE have hereunto set their hands and common
seals and intend to be legally bound hereby this 13th day of October, 1994.
LESSOR: CUMMINGS PROPERTIES MANAGEMENT, INC.
By: James McKenan
- ------------------
President
LESSEE: T-CELL DIAGNOSTICS, INC.
By: /s/[signature]
- ------------------------------------
[name]
GUARANTY
THIS PARAGRAPH DOES NOT APPLY
<PAGE>
CUMMINGS PROPERTIES MANAGEMENT, INC.
STANDARD FORM
RIDER TO LEASE
The following additional provisions are incorporated into and made part of the
attached lease.
A. *Prior to the termination date of this lease, LESSEE may remove lab benches
and hoods and other equipment and furniture listed on the attached "Exhibit A"
which have been supplied and installed by LESSEE if LESSEE has satisfactorily
complied with all other conditions of this lease and if LESSEE repairs any and
all damage resulting from such removal and restores the leased premises to their
condition prior to the installation of said equipment, all on a timely basis
prior to the end of the lease term. LESSEE may, with LESSOR's written approval,
add to Exhibit A equipment and furniture that is supplied and installed by
LESSEE after the commencement of this lease. Time is of the essence.
B. The leased premises consists of approximately 22,800 square feet of ground
level space and approximately 4,243 square feet of mezzanine level office space.
C. *LESSOR, at an expense incorporated entirely into the base rent and at no
further cost to LESSEE, shall modify the leased premises by removing the
existing mezzanine and arching out the existing office partitions at 8-F Gill
Street and supplying and installing four (4) skylights in locations designated
by LESSOR at 8 Gill Street before or about the time LESSEE takes possession of
the leased premises.
D. *During the initial term of this lease, LESSEE shall have the one-time right
of first lease of approximately 6,859 square feet of additional space at 8-E
Gill Street at LESSOR's then current published rental rate for said space as it
becomes available for lease directly from LESSOR, subject to the right of the
current lessee (if any) to extend or otherwise renegotiate its lease. LESSEE
shall have forty-eight (48) hours from receipt of notice from LESSOR of said
availability to execute LESSOR's then current standard form lease or amendment
to lease for said additional space. If LESSOR fails to notify LESSEE of the
availability of said space and leases said space to others, and if LESSEE
notifies LESSOR of its desire to lease said space and immediately executes
LESSOR's then current standard form lease for said space, LESSOR shall
thereafter have sixty (60) days to relocate the other party. If LESSOR fails to
relocate the other party within said sixty days and execute the new lease with
LESSEE, then LESSEE may elect, by serving LESSOR written notice within thirty
(30) days after expiration of the relocation period, to occupy a similar amount
of additional space on a no-charge basis until such time as LESSOR delivers
possession of 8-E Gill Street. Time is of the essence.
E. Notwithstanding Section 1 of this lease, LESSEE shall pay rent during the
initial term of the lease in accordance with the following schedule and with no
"Cost of Living" adjustments:
October 15, 1994 to October 14, 1997; $243,387.00 per year and $20,282.25 per
month
October 15, 1997 to October 14, 1998; $277,190.00 per year and $23,099.16 per
month
October 15, 1998 to October 14, 1999; $290,712.00 per year and $24,226.00 per
month
F. LESSOR shall transfer to this lease the $27,800.00 Security Deposit held by
LESSOR under two (2) prior leases between the parties at the leased premises.
LESSEE shall pay the balance of $14,200.00 upon execution of this lease. Time is
of the essence.
G. LESSOR shall apply to the first month's rent due under this lease $7,690.55
of the rent paid by LESSEE for the month of October 1994 under said prior
leases.
H. As of October 15, 1994, all prior leases between the parties for the leased
premises shall terminate, except as otherwise provided in this lease.
I. The parties acknowledge and agree that 8-G Gill Street is presently under
lease to another third party whose lease terminates on or about March 31, 1995.
Upon full execution of this lease, LESSOR will use reasonable efforts to
relocate this existing tenant. In the event that LESSOR fails for any reason to
deliver possession of 8-G Gill Street by October 15, 1994, then LESSEE shall
receive a discount in the amount of $3,120.00 per month from its monthly rent
(to be apportioned for any partial month's occupancy following delivery of
possession) until such time as LESSOR delivers possession of 8-G Gill Street to
LESSEE. This abatement of rent shall be LESSEE's sole remedy for any delay in
delivery of 8-G Gill Street.
J. *Provided LESSEE is not then in default of this lease or in arrears of any
rent or invoice payment, LESSEE shall have the right to extend this lease,
including all terms, conditions, escalations, etc., for one additional period of
five (5) years ("the extended lease term") by serving LESSOR with written notice
of its desire to so extend the lease. The time for serving such written notice
shall be not more than twelve (12) months or less than six (6) months prior to
the expiration of the initial lease term. Time is of the essence.
K. Notwithstanding the provisions of Section 1, annual base rent during the
extended lease term shall be recalculated at the lesser of (1) the annual base
rent set forth in Section 1 of this lease, as adjusted by any increase in the
consumer price index since the base month set forth in Section 1, or (2)
LESSOR's published annual rental rate as of the commencement of the extended
lease term for similar space less $1.00 per square foot per year. The base month
from which to determine the amount of each "Cost of Living" adjustment during
the extended lease term shall be changed to January 1999, the "comparison" month
shall be changed to November 1999 and the first adjustment during the extended
lease term shall take place with the rent due on January 1, 2000. Section 1
shall continue to apply in all other respects during the extended lease term.
L. *In the event that LESSOR is unable to obtain a building permit for the
modifications at the leased premises for the purposes set forth in Section 3
hereinabove, or the City of Woburn issues a citation to LESSEE prohibiting such
use, LESSOR shall have the right, at its sole expense, to appeal any such
decision. If LESSOR declines to prosecute said appeal or if any such decision is
upheld after all applicable appeals have been exhausted, then LESSEE may cancel
this lease by serving LESSOR with thirty (30) days prior written notice to that
effect, and neither party shall thereafter have any further obligation to the
other.
LESSOR: CUMMINGS PROPERTIES MANAGEMENT, INC.
By: James McKenan
- ------------------
President
DATE: 10/13/94
5/93
LESSEE: T-CELL DIAGNOSTICS, INC.
By: /s/[signature]
- ---------------------------------
<PAGE>
CUMMINGS PROPERTIES MANAGEMENT, INC.
STANDARD FORM
AMENDMENT TO LEASE #1
In connection with a lease currently in effect between the parties at 8-F, G, H
& K and 6-AA & 6-X Gill Street, Woburn Massachusetts executed on October 13,
1994 and terminating October 14, 1999 and in consideration of the mutual
benefits to be between benefactor Cummings Properties Management, Inc. LESSOR,
and T-Cell Diagnostics, Inc., LESSEE, hereby agree to amendments.
1. In accordance with Sections 8, 9, and 26 of the lease, LESSOR hereby consents
to LESSEE's making alterations: the leased premises at LESSEE's sole cost and
expense in accordance with the attached plans, specifications and attached list
of "Contract Documents" dated January 30, 1995, and upon the following
additional conditions.
A. LESSOR and LESSEE acknowledge and agree that LESSEE shall reimburse LESSOR
for restoration of certain building standard improvements to be demolished by
LESSEE as part of LESSEE's alterations as follows:
1) Reconstruct two building standard restrooms in Suite F: COST. $5,000.00
2) Reconstruct full height DRYWALL partition between Suites F and G: COST:
$9,773.00
3) Reduce the size of multiple, LESSEE installed restrooms.COST: $3,240.00
4) Reconstruct full height drywall partition between Suites K and H. COST:
$6,218.00
5) Separate consolidated electrical service to serve individual Suites F, G,
H and K (assumes panels at existing locations will remain for reconnection
to previous weatherheads). COST: $7,600.00
6) Replace LESSEE supplied wood doors with standard metal doors. COST:
$7,000.00
7) Less Credit for cost of "arching out of office partitions" to be done by
LESSOR under the Rider to Lease.
(Existing wood mezzanine has already been removed.) CREDIT: $2,266.00
Upon LESSEE's execution of this amendment, LESSEE shall pay to LESSOR
$18,282.50 as a 50% downpayment toward the above-referenced restoration
expenses. Prior to the sooner to occur of LESSEE vacation of the leased
premises or the termination date of this lease, LESSEE shall pay to LESSOR
the remaining balance of $18,282.50. Each payment shall be fully due and
payable without regard to whether or not LESSEE actually completes its
alterations and without regard to whether or not the alterations are further
modified in the future.
B. With respect to its alterations, LESSEE shall be solely responsible for
conforming to any and all applicable federal, state and municipal law,
ordinance, rule, etc. as well as LESSOR's construction standards and reasonable
rules and regulations.
2. Pursuant to Paragraph 1 of the Rider to Lease, LESSOR and LESSEE agree that
concurrent with and in reliance on the execution of this amendment, LESSOR shall
execute an agreement to terminate the lease currently in effect with a third
party at 8-G Gill Street effective February 15, 1995. LESSEE further agrees to
accept delivery of 8-G Gill Street as of February 15, 1995 and to adjust
LESSEE's rental payments to eliminate the $3,120.00 per month discount specified
in Paragraph 1 of the Rider to Lease effective February 15, 1995.
All other terms, conditions and covenants of the present lease shall continue to
apply. This amendment shall be effective February 15, 1995 and shall continue
through the balance of the lease and any extensions thereof unless further
modified by written amendment(s).
In Witness Whereof, LESSOR and LESSEE have hereunto set their hands and
common seals this 31st day of January, 1995.
LESSOR: CUMMINGS PROPERTIES MANAGEMENT, INC.
By: /s/James L. McKenan
- --------------------------
President
LESSEE: T-CELL DIAGNOSTICS, INC.
By: /s/[signature]
- --------------------------------
1/31/95
LEASE ASSIGNMENT
In connection with the Commercial Lease dated October 13, 1994 (the
"Lease"), between T-Cell Diagnostics, Inc., a Delaware corporation ("Lessee"),
and Cummings Properties Management, Inc. ("Lessor"), concerning premises at 8-H,
8-K, 8-F and 8-G and 6-X and 6-AA Gill Street, Woburn, Massachusetts (the
"Leased Premises"), and in consideration of one dollar ($1.00) and other mutual
benefits to be derived herefrom, Lessee and Endogen, Inc., a Massachusetts
corporation ("Assignee"), hereby agree as follows:
1. Lessee hereby assigns and transfers all of its right, title and
interest in the Lease and the Leased Premises to Assignee as of
the Effective Date (as hereinafter defined). Assignee hereby
accepts such assignment and assumes all of the obligations of
Lessee as tenant under the Lease arising or accruing on or after
the Effective Date.
2. Lessee shall indemnify, defend and hold harmless Assignee from and
against all claims, liabilities, expenses, losses and damages
arising out of a breach or default by Lessee in its obligations as
the lessee under the Lease which arise or accrue on or before the
Effective Date. Assignee shall indemnify, defend and hold harmless
Lessee from and against all claims, liabilities, expenses, losses
and damages arising out of a breach or default by Assignee in its
obligations as the lessee under the Lease which arise or accrue
after the Effective Date.
3. The Assignment shall be effective as of the end of the day on
March 4, 1996 (the "Effective Date").
IN WITNESS WHEREOF, Lessee and Assignee have hereunto set their hands
and common seals this 4th day of March, 1996.
T CELL DIAGNOSTICS, INC.
By: /s/ Alan W. Tuck
-------------------------------
Alan W. Tuck
President
ENDOGEN, INC.
By: /s/ Owen A. Dempsey
-------------------------------
Owen A. Dempsey
President and Chief Executive Officer
Exhibit 11.1
Endogen, Inc.
Computation of Earnings Per Share
<TABLE>
<CAPTION>
Year ended May 31,
1994 1995 1996
<S> <C> <C> <C>
Primary earnings per share:
Weighted average number of
shares outstanding 2,592,600 2,649,920 2,835,697
Shares deemed outstanding from
the assumed exercise of stock
options and warrants -- 142,309 --
----------- ----------- -----------
Total 2,592,600 2,792,229 2,835,697
=========== =========== ===========
Net income (loss) applicable to
common shares $ (370,089) $ 24,302 $ (700,539)
=========== =========== ===========
Primary earnings (loss) per share
of common stock $ (0.14) $ 0.01 $ (0.25)
=========== =========== ===========
</TABLE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 33-64440 and No. 33-77576) of Endogen, Inc. of our
report dated August 2, 1996, except as to Note 16, which is as of August 28,
1996, appearing on page F-2 of this Form 10-K. We also consent to the reference
to us under the heading "Selected Financial Data" in this Form 10-K. However, it
should be noted that Price Waterhouse LLP has not prepared or certified such
"Selected Financial Data".
[Signature of Price Waterhouse LLP]
PRICE WATERHOUSE LLP
Boston, Massachusetts
August 28, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements included in the Annual Report on Form 10-K of Endogen, Inc.
to which this exhibit is a part and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<CIK> 0000894020
<NAME> Endogen, Inc.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> May-31-1996
<PERIOD-START> Jun-01-1995
<PERIOD-END> May-31-1996
<CASH> 764
<SECURITIES> 0
<RECEIVABLES> 1,449
<ALLOWANCES> 20
<INVENTORY> 1,290
<CURRENT-ASSETS> 3,749
<PP&E> 2,445
<DEPRECIATION> 550
<TOTAL-ASSETS> 6,556
<CURRENT-LIABILITIES> 1,605
<BONDS> 0
0
0
<COMMON> 29
<OTHER-SE> 2,862
<TOTAL-LIABILITY-AND-EQUITY> 6,556
<SALES> 6,622
<TOTAL-REVENUES> 6,622
<CGS> 2,477
<TOTAL-COSTS> 7,312
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11
<INCOME-PRETAX> (701)
<INCOME-TAX> 0
<INCOME-CONTINUING> (701)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (701)
<EPS-PRIMARY> (0.25)
<EPS-DILUTED> (0.25)
</TABLE>
