<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended December 31, 1999
-----------------
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______________ to ____________
Commission file number: 0-26642
-------
MYRIAD GENETICS, INC.
(Exact name of registrant as specified in its charter)
Delaware 87-0494517
-------- ----------
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
320 Wakara Way, Salt Lake City, UT 84108
- ---------------------------------------- --------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (801) 584-3600
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 [_]
As of February 8, 2000, the registrant had 10,303,403 shares of common stock
outstanding.
<PAGE>
MYRIAD GENETICS, INC.
INDEX TO FORM 10-Q
Page
----
PART I - Financial Information
Item 1. Financial Statements.
Condensed Consolidated Balance Sheets as of December 31, 1999
and June 30, 1999 3
Condensed Consolidated Statements of Operations for the
three and six months ended December 31, 1999 and 1998 4
Condensed Consolidated Statements of Cash Flows for the
six months ended December 31, 1999 and 1998 5
Notes to Condensed Unaudited Consolidated Financial
Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 9
PART II - Other Information
Item 1. Legal Proceedings 14
Item 2. Changes in Securities 14
Item 3. Defaults Upon Senior Securities 14
Item 4. Submission of Matters to a Vote of Security Holders 14
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 15
SIGNATURE(S) 16
2
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MYRIAD GENETICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
Dec. 31, 1999
(Unaudited) June 30, 1999
--------------- -------------
Assets
------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 27,679,996 $ 5,404,944
Marketable investment securities 16,940,184 4,477,138
Prepaid expenses 911,778 622,700
Trade accounts receivables, less allowance for doubtful accounts of
$108,847 at December 31, 1999, $73,439 at June 30, 1999 1,798,478 1,322,950
Other receivables 113,449 1,855,696
--------------- -------------
Total current assets 47,443,885 13,683,428
--------------- -------------
Equipment and leasehold improvements:
Equipment 14,129,785 13,351,229
Leasehold improvements 3,951,776 3,520,253
--------------- -------------
18,081,561 16,871,482
Less accumulated depreciation and amortization 8,242,006 6,871,981
--------------- -------------
Net equipment and leasehold improvements 9,839,555 9,999,501
Long-term marketable investment securities 15,422,327 29,044,377
Other assets 1,156,408 823,634
--------------- -------------
$ 73,862,175 $ 53,550,940
=============== =============
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
Accounts payable $ 3,426,068 $ 2,917,810
Accrued liabilities 2,317,545 1,754,634
Deferred revenue 12,629,422 662,760
--------------- -------------
Total current liabilities 18,373,035 5,335,204
--------------- -------------
Stockholders' equity
Common stock, $0.01 par value. Authorized 15,000,000 shares;
issued and outstanding 10,284,349 on December 31, 1999 and 9,428,732
on June 30, 1999 102,843 94,287
Additional paid-in capital 103,592,079 92,377,949
Accumulated other comprehensive loss (85,715) (68,846)
Deferred compensation (111,945) (247,774)
Accumulated deficit (48,008,122) (43,939,880)
--------------- -------------
Net stockholders' equity 55,489,140 48,215,736
--------------- -------------
$ 73,862,175 $ 53,550,940
=============== =============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
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MYRIAD GENETICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------ -----------------
Dec. 31, 1999 Dec. 31, 1998 Dec. 31, 1999 Dec. 31, 1998
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Revenues:
Research revenue $ 6,255,872 $ 4,536,512 $ 11,503,517 $ 9,183,028
Molecular diagnostic revenue 2,023,871 1,210,959 3,638,157 2,124,429
-------------- ------------- ------------- -------------
Total revenues 8,279,743 5,747,471 15,141,674 11,307,457
-------------- ------------- ------------- -------------
Expenses:
Molecular diagnostic cost of revenue 989,156 778,936 1,792,087 1,381,808
Research and development expense 6,205,468 5,681,806 11,992,270 11,499,295
Selling, general and administrative
expense 3,353,944 2,760,301 6,375,930 5,315,717
-------------- ------------- ------------- -------------
Total costs and expenses 10,548,568 9,221,043 20,160,287 18,196,820
-------------- ------------- ------------- -------------
Operating loss (2,268,825) (3,473,572) (5,018,613) (6,889,363)
Other income (expense):
Interest income 736,664 579,471 1,310,453 1,275,690
Interest expense - (3,908) - (6,279)
Gain (loss) on disposition of assets (344,989) 47,750 (360,082) 67,191
-------------- ------------- ------------- -------------
391,675 623,313 950,371 1,336,602
-------------- ------------- ------------- -------------
Net loss ($1,877,150) ($2,850,259) ($4,068,242) ($5,552,761)
============== ============= ============= =============
Basic and diluted loss per share ($0.19) ($0.30) ($0.42) ($0.59)
============== ============= ============= =============
Basic and diluted weighted average
shares outstanding 10,123,902 9,391,844 9,778,319 9,367,393
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
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MYRIAD GENETICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended
------------------
Dec. 31, 1999 Dec. 31, 1998
(Unaudited) (Unaudited)
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net loss ($4,068,242) ($5,552,761)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization 1,565,663 1,750,082
Loss on disposition of assets 360,082 12,401
Bad debt expense 35,410 21,000
Increase in trade receivables (510,936) (333,159)
Decrease in other receivables 1,742,247 36,800
Increase in prepaid expenses (289,080) (455,370)
Decrease (increase) in other assets (332,774) 84,375
Increase (decrease) in accounts payable and accrued expenses 1,071,169 (2,146,413)
Increase (decrease) in deferred revenue 11,966,662 (987,429)
------------- -------------
Net cash provided by (used in) operating activities 11,540,201 (7,570,474)
------------- -------------
Cash flows from investing activities:
Capital expenditures (1,582,927) (1,897,878)
Proceeds from sale of equipment - 3,554,379
Net change in marketable investment securities 1,095,091 8,370,588
------------- -------------
Net cash provided by (used in) investing activities (487,836) 10,027,089
------------- -------------
Cash flows from financing activities:
Net payments of notes payable - (128,843)
Net proceeds from issuance of common stock 11,222,686 380,039
------------- -------------
Net cash provided by financing activities 11,222,686 251,196
------------- -------------
Net increase in cash and cash equivalents 22,275,051 2,707,811
Cash and cash equivalents at beginning of period 5,404,944 14,595,034
------------- -------------
Cash and cash equivalents at end of period $ 27,679,995 $ 17,302,845
=============== =============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE>
MYRIAD GENETICS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(1) Basis of Presentation
---------------------
The accompanying condensed unaudited consolidated financial statements have
been prepared by Myriad Genetics, Inc. (the "Company") in accordance with
generally accepted accounting principles for interim financial information
and pursuant to the applicable rules and regulations of the Securities and
Exchange Commission. The condensed unaudited consolidated financial
statements include the accounts of the Company and its wholly-owned
subsidiaries. All intercompany accounts and transactions have been
eliminated in consolidation. In the opinion of management, the
accompanying financial statements contain all adjustments (consisting of
normal and recurring accruals) necessary to present fairly all financial
statements. The financial statements herein should be read in conjunction
with the Company's audited consolidated financial statements and notes
thereto for the fiscal year ended June 30, 1999, included in the Company's
Annual Report on Form 10-K for the year ended June 30, 1999. Operating
results for the three and six month periods ended December 31, 1999 may not
necessarily be indicative of the results to be expected for any other
interim period or for the full year.
(2) Leases
------
On October 25, 1999, the Company entered into a Master Lease Agreement with
Comdisco Laboratory and Scientific Group, a Division of Comdisco Healthcare
Group, Inc. ("Comdisco") for a 48 month period. Under the Master Lease
Agreement, the Company is subject to certain financial covenants. As of
December 31, 1999, the Company was fully compliant with these covenants.
(3) Collaborative Research Agreements
---------------------------------
In December 1999, the Company entered into a 12 month collaboration with
Hoffmann-LaRoche Inc., to utilize the Company's protein interaction
technology ("ProNet") for drug discovery and development in the area of
cardiovascular disease. This collaboration may provide the Company with
research funding, licensing fees, and milestone payments with a value of up
to $13,000,000.
(4) Common Stock
------------
In October 1999, the Company announced the expansion of its collaboration
with Schering AG, Germany to include research into the field of
cardiovascular disease. The Company also entered into a Securities
Purchase Agreement and a Standstill Agreement with Schering Berlin Venture
Corporation ("Schering Berlin") to sell to Schering Berlin 303,030 shares
of the Company's unregistered Common Stock, $.01 par value per share (the
"Shares"). Schering Berlin acquired the Shares for an aggregate purchase
price of $5,000,000.
6
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(5) Comprehensive Earnings (Loss)
-----------------------------
The Company adopted Statement of Financial Accounting Standards No. 130
(SFAS 130), "Reporting Comprehensive Income", effective July 1, 1998. SFAS
130 establishes standards for reporting and displaying comprehensive loss
and its components in financial statements. The components of the
Company's comprehensive loss are as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
------------------ -----------------
Dec. 31, 1999 Dec. 31, 1998 Dec. 31, 1999 Dec. 31, 1998
(unaudited) (unaudited) (unaudited) (unaudited)
------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Net loss ($1,877,150) ($2,850,259) ($4,068,242) ($5,552,761)
Unrealized loss on available-
for-sale marketable
investment securities (16,842) (129,085) (16,869) (36,007)
------------- -------------- -------------- --------------
Comprehensive loss ($1,893,992) ($2,979,344) ($4,085,111) ($5,588,768)
============= ============== ============== ==============
</TABLE>
(6) Segment and Related Information
-------------------------------
The Company's business units have been aggregated into two reportable
segments: (i) research and (ii) molecular diagnostics. The research
segment is focused on the discovery and sequencing of genes related to
major common diseases, marketing of subscriptions to proprietary database
information, and the development of therapeutic products for the treatment
and prevention of major diseases. The molecular diagnostics segment
provides testing to determine predisposition to common diseases.
The accounting policies of the segments are the same as those described in
the basis of presentation (note 1). The Company evaluates segment
performance based on loss from operations before interest income and
expense and other income and expense. The Company's assets are not
identifiable by segment.
<TABLE>
<CAPTION>
Molecular
Research diagnostics Total
----------- ----------- ----------
<S> <C> <C> <C>
Three months ended December 31, 1999:
Revenues $ 6,255,872 $2,023,871 $ 8,279,743
Depreciation and amortization 582,021 189,915 771,936
Segment operating loss 641,612 1,627,213 2,268,825
Three months ended December 31, 1998:
Revenues 4,536,512 1,210,959 5,747,471
Depreciation and amortization 705,620 203,867 909,487
Segment operating loss 2,107,730 1,365,842 3,473,572
Six months ended December 31, 1999:
Revenues 11,503,517 3,638,157 15,141,674
Depreciation and amortization 1,190,624 375,039 1,565,663
Segment operating loss 2,228,560 2,790,053 5,018,613
Six months ended December 31, 1998:
Revenues 9,183,028 2,124,429 11,307,457
Depreciation and amortization 1,344,242 405,840 1,750,082
Segment operating loss 3,742,649 3,146,714 6,889,363
</TABLE>
7
<PAGE>
(7) Net Loss Per Common and Common Equivalent Share
-----------------------------------------------
Loss per common share is computed based on the weighted-average number of
common shares and, as appropriate, dilutive potential common shares
outstanding during the period. Stock options and warrants are considered
to be potential common shares.
Basic loss per common share is the amount of loss for the period available
to each share of common stock outstanding during the reporting period.
Diluted earnings per share is the amount of loss for the period available
to each share of common stock outstanding during the reporting period and
to each share that would have been outstanding assuming the issuance of
common shares for all dilutive potential common shares outstanding during
the period.
In calculating loss per common and common-equivalent share the net loss and
the weighted average common and common-equivalent shares outstanding were
the same for both the basic and diluted calculation.
As of December 31, 1999 and December 31, 1998, there were antidilutive
potential common shares of 1,753,484 and 2,017,645, respectively.
Accordingly, these potential common shares were not included in the
computation of diluted loss per share for the years presented, but may be
dilutive to future basic and diluted earnings per share.
(8) Recent Accounting Pronouncements
--------------------------------
On December 3, 1999, the SEC staff issued Staff Accounting Bulletin No.
101, Revenue Recognition in Financial Statements (SAB 101). SAB 101
summarizes certain of the staff's views in applying generally accepted
accounting principles to revenue recognition in financial statements. The
Company will incorporate the guidance of SAB 101 in the first quarter of
fiscal 2001. Management has not yet determined the impact that SAB 101
will have on the financial position or results of operations of the
Company.
8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
Since inception, the Company has devoted substantially all of its resources to
maintaining its research and development programs, supporting collaborative
research agreements, operating a molecular diagnostic laboratory, and more
recently establishing genomic sequencing, high throughput screening, and drug
development facilities. The Company's revenues have been primarily payments
received pursuant to collaborative research agreements, upfront fees, milestone
payments, and sales of molecular diagnostics. The Company has been unprofitable
since its inception and, for the quarter ended December 31, 1999, the Company
had a net loss of $1,877,150 and as of December 31, 1999 had an accumulated
deficit of $48,008,122.
In April 1995, the Company commenced a five-year collaborative research and
development arrangement with Novartis Corporation ("Novartis"). This
collaboration may provide the Company with an equity investment, research
funding and potential milestone payments of up to $60,000,000. The Company is
entitled to receive royalties from sales of therapeutic products sold by
Novartis.
In September 1995, the Company commenced a five-year collaborative research and
development arrangement with Bayer Corporation ("Bayer"). This collaboration
may provide the Company with an equity investment, research funding and
potential milestone payments of up to $71,000,000. In November 1997 and again
in December 1998, the Company announced expansions of its collaborative research
and development arrangement with Bayer. The expanded collaboration may provide
the Company with additional research funding and potential milestone payments of
up to $137,000,000. The Company is entitled to receive royalties from sales of
therapeutic products sold by Bayer.
In October 1996, the Company announced the introduction of BRACAnalysis, a
comprehensive BRCA1 and BRCA2 gene sequence analysis for susceptibility to
breast and ovarian cancer. In January 1998, the Company announced the
introduction of CardiaRisk, which may assist physicians both in (i) identifying
which hypertensive patients are at a significantly increased risk of developing
cardiovascular disease and (ii) identifying which patients are likely to respond
to low salt diet therapy and antihypertensive drug therapy. The Company,
through its wholly owned subsidiary Myriad Genetic Laboratories, Inc.,
recognized molecular diagnostic revenues, primarily from BRACAnalysis, of
$2,023,871 for the quarter ended December 31, 1999.
In April 1997, the Company commenced a three-year collaborative research and
development arrangement with Schering Corporation ("Schering-Plough"). This
collaboration may provide the Company with an equity investment, license fees,
research funding and potential milestone payments of up to $60,000,000. The
Company is entitled to receive royalties from sales of therapeutic products sold
by Schering-Plough.
In October 1998, the Company entered into a five-year collaboration with
Schering AG, Germany ("Schering AG"), to utilize the Company's protein
interaction technology ("ProNet) for drug discovery and development. Under the
agreement, the Company will have an option to co-promote all new therapeutic
products in North America and receive 50 percent of the profits from North
American sales of all new drugs discovered with ProNet. This collaboration may
provide the Company with licensing fees, subscription fees, option payments and
milestone fees with a value of up to $51,000,000. If the Company chooses to co-
promote a drug developed by Schering AG as a 50 percent partner, the Company may
be required to pay funds to Schering AG to establish equal ownership.
In November 1998, the Company entered into a 15 month collaboration with
Monsanto Company ("Monsanto"), to utilize ProNet for drug discovery and
development. In December 1999, Monsanto exercised its option to extend the
research term for an additional twelve months and exercised its option to expand
the research funding. This collaboration may provide the Company with research
funding, option payments, license fees and potential milestone payments of up to
$28,000,000. The Company is entitled to receive royalties from sales of
therapeutic products sold by Monsanto.
9
<PAGE>
In July 1999, the Company entered into a two-year collaboration and license
agreement with the Novartis Agricultural Discovery Institute, Inc. ("NADII").
The genomic collaboration will focus on the discovery of the genetic structure
of cereal crops. The collaboration may provide the Company with an upfront
payment and research funding of up to $33,500,000. Upon completion, NADII and
the Company intend to jointly offer commercial access to the genomic databases
and share equally in any resulting proceeds.
In October 1999, the Company announced the expansion of its collaboration with
Schering AG to include research in the field of cardiovascular disease. The
Company also entered into a Securities Purchase Agreement and a Standstill
Agreement with Schering Berlin Venture Corporation ("Schering Berlin") to sell
to Schering Berlin 303,030 Shares. Schering Berlin acquired the Shares for an
aggregate purchase price of $5,000,000.
In December 1999, the Company entered into a 12 month collaboration with
Hoffmann-LaRoche Inc. ("Roche"), to utilize ProNet for drug discovery and
development in the area of cardiovascular disease. This collaboration may
provide the Company with research funding, licensing fees, and milestone
payments with a value of up to $13,000,000. The Company is entitled to receive
royalties from sales of therapeutic products sold by Roche.
The Company intends to enter into additional collaborative relationships to
locate and sequence genes and discover protein networks associated with other
common diseases as well as to continue to fund internal research projects. There
can be no assurance that the Company will be able to enter into additional
collaborative relationships on terms acceptable to the Company. The Company
expects to incur losses for at least the next several years, primarily due to
expansion of its research and development programs, expansion of its drug
discovery efforts, increased staffing costs and expansion of its facilities.
Additionally, the Company expects to incur substantial sales, marketing and
other expenses in connection with building its molecular diagnostic business.
The Company expects that losses will fluctuate from quarter to quarter and that
such fluctuations may be substantial.
Results of Operations for the Three Months Ended December 31, 1999 and 1998
Research revenues for the quarter ended December 31, 1999 were $6,255,872 as
compared to $4,536,512 for the same quarter of 1998. The increase in research
revenue is primarily attributable to revenue recognized from the NADII
collaboration which began in July 1999. Research revenue from the research
collaboration agreements is recognized as related costs are incurred.
Consequently, as these programs progress and costs increase or decrease,
revenues increase or decrease proportionately.
Molecular diagnostic revenues of $2,023,871 were recognized in the quarter ended
December 31, 1999, an increase of 67% or $812,912 over the same quarter of the
prior year. Molecular diagnostic revenue is comprised of sales of molecular
diagnostic tests. The Company's sales and marketing efforts since that time
have given rise to the increased revenues for the quarter ended December 1999.
There can be no assurance, however, that molecular diagnostic revenues will
continue to increase at the historical rate.
Research and development expenses for the quarter ended December 31, 1999 were
$6,205,468 as compared to $5,681,806 for the same quarter of 1998. This
increase was primarily due to an increase in research activities as a result of
the Company's recent collaboration with NADII. The increased level of research
spending also includes the ongoing drug discovery efforts of Myriad
Pharmaceuticals, a wholly-owned subsidiary, continuing development and
utilization of ProNet, and third-party sponsored research programs.
Selling, general and administrative expenses for the quarter ended December 31,
1999 were $3,353,944 as compared to $2,760,301 for the same quarter of 1998.
The increase was primarily attributable to costs associated with expansion of
the Company's sales force and start-up expenses for the sales staff including
recruiting, training, and sales supplies. The Company has also incurred
increased expenses for its ongoing promotion of its molecular diagnostic
business and the filing of patent applications both domestically and abroad.
The Company expects its selling, general and administrative expenses will
continue to fluctuate as needed in support of its molecular diagnostic business
and its research and drug development efforts.
Cash, cash equivalents, and marketable investment securities were $60,042,507 at
December 31, 1999 as compared to $47,410,710 at December 31, 1998. This
increase in cash and investments is primarily attributable to the private
10
<PAGE>
sale of approximately $10,000,000 worth of the Company's Common Stock, as well
as the receipt of advance payments from the Company's collaborators. These cash
receipts were offset by expenditures incurred in the ordinary course of
business. As a result of the Company's increased cash position, the Company's
interest income for the quarter ended December 31, 1999 was $736,664 as compared
to $579,471 for the same quarter of 1998. Interest expense for the quarter ended
December 31, 1998, amounting to $3,908, was due entirely to borrowings under the
Company's equipment financing facility. The loss on sale of assets of $344,989
in the quarter ended December 31, 1999 is the result of the Company retiring an
unproductive asset.
Results of Operations for the Six Months Ended December 31, 1999 and 1998
Research revenues for the six months ended December 31, 1999 were $11,503,517 as
compared to $9,183,028 for the same period of 1998. The increase in research
revenue is primarily attributable to revenue recognized from the NADII
collaboration which began in July 1999. Research revenue from the research
collaboration agreements is recognized as related costs are incurred.
Consequently, as these programs progress and costs increase or decrease,
revenues increase or decrease proportionately.
Molecular diagnostic revenues of $3,638,157 were recognized in the six months
ended December 31, 1999, an increase of $1,513,728 over the same six month
period of 1998. Molecular diagnostic revenue is comprised of sales of
diagnostic tests. The Company's sales and marketing efforts have given rise to
the increased revenues for the six months ended December 1999. There can be no
assurance, however that molecular diagnostic revenues will continue to increase
at the historical rate.
Research and development expenses for the six months ended December 31, 1999
were $11,992,270 as compared to $11,499,295 for the prior year. This increase
was primarily due to an increase in research activities as a result of the
Company's recent collaboration with NADII. The increased level of research
spending also includes the ongoing drug discovery efforts of Myriad
Pharmaceuticals, a wholly-owned subsidiary, continuing development and
utilization of ProNet, and third-party sponsored research programs.
Selling, general and administrative expenses for the six months ended December
31, 1999 were $6,375,930 as compared to $5,315,717 for the prior year. The
increase was primarily attributable to costs associated with expansion of the
Company's sales force and start-up expenses for the sales staff including
recruiting, training, and sales supplies. The Company has also incurred
increased expenses for its ongoing promotion of its molecular diagnostic
business and the filing of patent applications both domestically and abroad.
During the six months ended December 31, 1999, the Company also wrote off an
intangible asset resulting in a one-time expense of $344,531. The Company
expects its selling, general and administrative expenses will continue to
fluctuate as needed in support of its molecular diagnostic business and its
research and drug development efforts.
Cash, cash equivalents, and marketable investment securities were $60,042,507 at
December 31, 1999 as compared to $47,410,710 at December 31, 1998. This
increase in cash and investments is primarily attributable to the private sale
of approximately $10,000,000 of Company Common Stock, as well as advance
payments received by the company from its collaborators. These cash receipts
were offset by expenditures incurred in the ordinary course of business. As a
result of the Company's increased cash position, the Company's interest income
for the six months ended December 31, 1999 was $1,310,453 as compared to
$1,275,690 for the six month period ended December 31, 1998. Interest expense
for the six months ended December 31, 1998, amounting to $6,279, was due
entirely to borrowings under the Company's equipment financing facility. The
loss on disposition of assets of $360,082 in the six months ended December 31,
1999 is primarily the result of the Company retiring an unproductive asset.
Liquidity and Capital Resources
Net cash provided by operating activities was $11,493,157 during the six months
ended December 31, 1999 as compared to net cash used by operating activities of
$7,570,474 during the same six months of 1998. Trade receivables for the six
months ended December 31, 1999 increased by $510,936, from $1,396,389 to
$1,907,325. This increase is primarily attributable to the increase in molecular
diagnostic revenue for the six month period ended December 31, 1999. Other
receivables decreased $1,742,247, from $1,855,696 to $113,449, for the six
months ended December 31, 1999 primarily as a result of the receipt of
collaborative partner payments for research work
11
<PAGE>
performed in prior periods. Prepaid expenses decreased by $289,080 during the
six months ended December 31, 1999. The decrease is primarily due to advance
royalties and insurance premiums being expensed during the six month period.
Accounts payable and accrued expenses increased by $1,071,170 between June 30,
1999 and December 31, 1999 primarily as a result of a large order of laboratory
supplies which was received by the Company in December 1999 but not paid for
until after December 31, 1999. Deferred revenue, representing the difference in
collaborative payments received and research revenue recognized, increased by
$11,966,662, from $662,760 to $12,629,422, during the six months ended December
31, 1999 in large part due to an upfront payment by NADII.
The Company's investing activities used cash in the amount of $440,792 in the
six months ended December 31, 1999. Investing activities were comprised
primarily of capital expenditures for research equipment, office furniture, and
facility improvements and marketable investment securities. During the six
month period ended December 31, 1999, the Company shifted a portion of its
investment in marketable securities from longer term investments to cash and
cash equivalents in order to take advantage of more favorable interest rates.
Financing activities provided $11,222,686 during the six months ended December
31, 1999. Proceeds were recognized from two separate financings during the
period. In September 1999, the Company entered into a Subscription Agreement
pursuant to which the Company sold 355,000 shares of the Company's unregistered
Common Stock, $.01 par value per share (the "Shares") for a purchase price of
$4,987,750. The Company has no obligation to register the Shares with the
Securities and Exchange Commission. In conjunction with the Subscription
Agreement, the Company issued a 3-year warrant to purchase an additional 17,750
Shares at a premium of 10%. In October 1999, the Company entered into a
Securities Purchase Agreement and a Standstill Agreement with Schering Berlin to
sell to Schering Berlin 303,030 Shares. Schering Berlin agreed to acquire the
Shares for an aggregate purchase price of $5,000,000. Additional cash was
provided from the exercise of stock options during the six months ended December
31, 1999.
The Company anticipates that its existing capital resources will be adequate to
maintain its current and planned operations for at least the next two years,
although no assurance can be given that changes will not occur that would
consume available capital resources before such time. The Company's future
capital requirements will be substantial and will depend on many factors,
including progress of the Company's research and development programs and drug
discovery and drug development programs; the cost of developing and launching
additional molecular diagnostic tests; results and costs of clinical correlation
testing of the Company's molecular diagnostic tests; the costs of filing,
prosecuting and enforcing patent claims; competing technological and market
developments; payments received under collaborative agreements and changes in
collaborative research relationships; the costs associated with potential
commercialization of its gene discoveries, if any, including the development of
manufacturing, marketing and sales capabilities; the cost and availability of
third-party financing for capital expenditures and administrative and legal
expenses. Because of the Company's significant long-term capital requirements,
the Company intends to raise funds when conditions are favorable, even if it
does not have an immediate need for additional capital at such time.
Impact of the Year 2000 Issue
The Year 2000 Issue
The Year 2000 Issue arose because many computer programs use a two-digit format,
as opposed to four digits, to indicate the year. Any of the Company's computer
programs or other information systems that have time-sensitive software or
embedded microcontrollers may recognize a date using "00" as the year 1900
rather than the year 2000. This could result in a system failure or
miscalculations causing disruptions of operations.
State of Readiness
The Company completed its Year 2000 readiness testing in the quarter ended
December 31, 1999. Testing was performed on all of the Company's critical
systems and any necessary modifications have taken place. Where possible,
third-party certification of Year 2000 readiness was obtained on systems
purchased by the Company. Third-party systems which were not certified by the
supplier were tested internally or upgraded to compliant versions. The Company
has received assurances from its significant suppliers and customers that they
are Year 2000 ready. The Company has not experienced any significant Year 2000
problems, either before or after December 31, 1999.
12
<PAGE>
Risks of the Year 2000 Issue
The Company is not aware of any Year 2000 compliance problems relating to its
information technology or non-information technology systems that would have a
material adverse effect on its business. If critical systems fail due to a lack
of Year 2000 readiness, or if any of the Company's suppliers or customers do not
successfully deal with the Year 2000 Issue, the Year 2000 Issue could have a
material impact on the operations of the Company. The Company could experience
delays in receiving or sending its molecular diagnostic products that would
increase its costs and that could cause the Company to lose business and even
customers and could subject the Company to claims for damages. Problems with
the Year 2000 Issue could also result in delays in the Company invoicing its
molecular diagnostic customers or in the Company receiving payments from them.
In addition, the Company's research and development efforts which rely heavily
on the storage and retrieval of electronic information could be interrupted
resulting in significant delays in discovering genes, the loss of current
collaborations, and the impairment of the Company's ability to enter into new
collaborations. The severity of these possible problems would depend on the
nature of the problem and how quickly it could be corrected or an alternative
implemented, which is unknown at this time. In the extreme, such problems could
bring the Company to a standstill.
Contingency Plan
As discussed above, the Company has conducted a Year 2000 assessment and has not
found it necessary to implement any contingency plans. Contingency plans will
be implemented if it appears that the Company or any of its vendors will not be
Year 2000 compliant and such noncompliance is expected to have a material
adverse impact on the Company's operations. The cost of developing and
implementing such plans may itself be material.
Certain Factors That May Affect Future Results of Operations
The Company believes that this report on Form 10-Q contains certain forward-
looking statements as that term is defined in the Private Securities Litigation
Reform Act of 1995. Such statements are based on management's current
expectations and are subject to a number of factors and uncertainties which
could cause actual results to differ materially from those described in the
forward-looking statements. The Company cautions investors that there can be no
assurance that actual results or business conditions will not differ materially
from those projected or suggested in such forward-looking statements as a result
of various factors, including, but not limited to, the following: the timely
implementation by the Company of its plan to prepare its computer systems for
the Year 2000, the costs to the Company of such preparation, and the timely
conversion by other parties on which the Company's business relies; intense
competition related to the discovery of disease-related genes and the
possibility that others may discover, and the Company may not be able to gain
rights with respect to, genes important to the establishment of a successful
molecular diagnostic business; difficulties inherent in developing genetic tests
once genes have been discovered; the Company's limited experience in operating a
molecular diagnostic laboratory; the Company's limited marketing and sales
experience and the risk that tests which the Company has or may develop may not
be able to be marketed at acceptable prices or receive commercial acceptance in
the markets that the Company is targeting or expects to target; uncertainty as
to whether there will exist adequate reimbursement for the Company's services
from government, private health care insurers and third-party payors;
uncertainties as to the extent of future government regulation of the Company's
business; uncertainties as to whether the Company and its collaborators will be
successful in developing and obtaining regulatory approval for, and commercial
acceptance of, therapeutics based on the discovery of disease-related genes and
proteins; uncertainties as to the Company's ability to develop therapeutic lead
compounds, which is a new business area for the Company; and the risk that
markets will not exist for therapeutic lead compounds that the Company develops
or if such markets exist, that the Company will not be able to sell compounds
which it develops at acceptable prices. As a result, the Company's future
development efforts involve a high degree of risk. For further information,
refer to the more specific risks and uncertainties disclosed throughout this
Quarterly Report on Form 10-Q.
13
<PAGE>
PART II - Other Information
Item 1. Legal Proceedings.
The Company is not a party to any legal proceedings.
Item 2. Changes in Securities.
(c) Sales of Unregistered Securities
--------------------------------
During the three months ended December 31, 1999, the Company issued a total of
25,269 shares of Common Stock to an employee, a director, and consultants of the
Company pursuant to the exercise of stock options at a weighted average price of
$1.03 per share. During the same period, the Company issued a total of 1,654
shares of Common Stock to a holder of warrants issued to Trautman Kramer &
Company, the placement agent for the Company's 1995 private placement of Series
B convertible Preferred Stock, at a weighted average exercise price of $15.40
per share.
On October 15, 1999, the Company entered into a Securities Purchase Agreement
and a Standstill Agreement pursuant to which the Company sold 303,030 Shares for
an aggregate purchase price of $5,000,000. The sale was made to an accredited
investor in a private placement that was exempt from registration under Rule 506
of Regulation D of the Securities Act.
No person acted as an underwriter with respect to the transactions set forth
above. In each of the foregoing instances, the Company relied on Section 4(2)
of the Securities Act of 1933, as amended (the "Securities Act") or Rule 701
promulgated under the Securities Act for the exemption from the registration
requirements of the Securities Act, since no public offerings were involved.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
On November 10, 1999, the Company held its Annual Meeting of Shareholders (the
"Annual Meeting"). A quorum of 6,089,755 shares of Common Stock of the Company
(of a total 9,438,989 outstanding shares, or approximately 64.5%) was
represented at the Annual Meeting in person or by proxy, which was held to vote
on the following proposals:
1. To elect three members to the Board of Directors. Nominees for Directors
were Walter Gilbert, Ph.D., Arthur H. Hayes, Jr., M.D., and John J. Horan.
2. To consider and act upon a proposal to amend the Company's 1992 Employee,
Director and Consultant Stock Option Plan to increase, from 2,000,000 to
3,000,000, the aggregate number of shares of Common Stock authorized for
issuance thereunder.
3. To consider and act upon a proposal to ratify the appointment of KPMG LLP
as the Company's independent public accountants for the fiscal year ending
June 30, 2000.
Each of the proposals was adopted, with the vote totals as follows:
Proposal 1:
- -----------
FOR WITHHELD
--------- --------
Walter Gilbert, Ph.D. 5,910,122 179,633
14
<PAGE>
Arthur H. Hayes, Jr., M.D. 5,541,214 548,541
John J. Horan 5,905,372 184,383
Michael J. Berendt, Ph.D., Alan J. Main, Ph.D., and Dale A. Stringfellow, Ph.D.
continue to serve as Directors for terms which expire in 2000 and Peter D.
Meldrum and Mark H. Skolnick, Ph.D., continue to serve as Directors for terms
which expire in 2001 and until their successors are duly elected and qualified.
Proposal 2:
- -----------
For 2,752,713
Against 688,040
Abstain 36,043
Broker Non-Vote 2,612,959
Proposal 3:
- -----------
For 6,070,354
Against 13,801
Abstain 5,600
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
--------
The following is a list of exhibits filed as part of this Quarterly Report on
Form 10-Q.
Exhibit
Number Description
- ------ -----------
10.1 Master Lease Agreement dated October 25 between Comdisco Laboratory and
Scientific Group, a Division of Comdisco Healthcare Group, Inc. and the
Company.
10.2 Addendum to the Master Lease Agreement dated October 25, 1999 between
Comdisco Laboratory and Scientific Group, a Division of Comdisco
Healthcare Group, Inc. and the Company.
10.3 Amendment No. 1 to the Master Lease Agreement dated October 25, 1999
between Comdisco Laboratory and Scientific Group, a Division of Comdisco
Healthcare Group, Inc. and the Company.
10.4 Equipment Schedule No. SG01 dated November 10, 1999 to Master Lease
Agreement dated October 25, 1999 between Comdisco Laboratory and
Scientific Group, a Division of Comdisco Healthcare Group, Inc. and the
Company.
27.1 Financial Data Schedule
(b) Reports on Form 8-K
-------------------
No reports on Form 8-K were filed during the quarter ended December 31, 1999.
15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MYRIAD GENETICS, INC.
Date: February 14, 1999 By: /s/ Peter D. Meldrum
------------------ ---------------------------------------
Peter D. Meldrum
President and Chief Executive Officer
Date: February 14, 1999 /s/ Jay M. Moyes
------------------ ------------------------------------------
Jay M. Moyes
Vice President of Finance
(principal financial and accounting officer)
16
<PAGE>
MYRIAD GENETICS, INC.
EXHIBIT INDEX
Exhibit
Number Description
- ------ -----------
10.1 Master Lease Agreement dated October 25 between Comdisco Laboratory and
Scientific Group, a Division of Comdisco Healthcare Group, Inc. and the
Company.
10.2 Addendum to the Master Lease Agreement dated October 25, 1999 between
Comdisco Laboratory and Scientific Group, a Division of Comdisco
Healthcare Group, Inc. and the Company.
10.3 Amendment No. 1 to the Master Lease Agreement dated October 25, 1999
between Comdisco Laboratory and Scientific Group, a Division of Comdisco
Healthcare Group, Inc. and the Company.
10.4 Equipment Schedule No. SG01 dated November 10, 1999 to Master Lease
Agreement dated October 25, 1999 between Comdisco Laboratory and
Scientific Group, a Division of Comdisco Healthcare Group, Inc. and the
Company.
27.1 Financial Data Schedule
17
<PAGE>
Exhibit 10.1
COMDISCO
MASTER LEASE AGREEMENT
A TECHNOLOGY SERVICES COMPANY
MASTER LEASE AGREEMENT dated as of OCTOBER 25, 1999 by and between COMDISCO
LABORATORY AND SCIENTIFIC GROUP, A DIVISION OF COMDISCO HEALTHCARE GROUP, INC.
("Lessor") and MYRIAD GENETICS. INC. ("Lessee").
IN CONSIDERATION of the mutual agreements described below, the parties agree as
follows (all capitalized terms are defined in Section 14.12:
1. Property Leased.
Lessor leases to Lessee all of the Equipment described on each Schedule. In
the event of a conflict, the terms of a Schedule prevail over this Master Lease.
2. Term.
On the Commencement Date Lessee will be deemed to accept the Equipment,
will be bound to its rental obligations for each item of Equipment and the term
of a Schedule will begin and continue through the Initial Term and thereafter
until terminated by either party upon prior written notice received during the
Notice Period. No termination may be effective prior to the expiration of the
Initial Term.
3. Rent and Payment.
Rent is due and payable in advance, in immediately available funds, on the
first day of each Rent Interval to the payee and at the location specified in
Lessor's invoice. Interim Rent is due and payable when invoiced. If any payment
is not made when due, Lessee will pay interest at the Overdue Rate.
4. Selection and Warranty and Disclaimer of Warranties.
4.1 Selection. Lessee acknowledges that it has selected the Equipment and
disclaims any reliance upon statements made by the Lessor.
4.2 Warranty and Disclaimer of Warranties. Lessor warrants to Lessee that,
so long as Lessee is not in default, Lessor will not disturb Lessee's quiet and
peaceful possession, and unrestricted use of the Equipment. To the extent
permitted by the manufacturer, Lessor assigns to Lessee during the term of the
Schedule any manufacturer's warranties for the Equipment. LESSOR MAKES NO OTHER
WARRANTY, EXPRESS OR IMPLIED AS TO ANY MATTER WHATSOEVER, INCLUDING, WITHOUT
LIMITATION, THE MERCHANTABILITY OF THE EQUIPMENT OR ITS FITNESS FOR A PARTICULAR
PURPOSE, OR ITS COMPLIANCE WITH GOVERNMENTAL REGULATIONS. Lessor is not
responsible for any liability, claim, loss, damage or expense of any kind
(including strict liability in tort) caused by the Equipment except for any loss
or damage caused by the negligent acts of Lessor. In no event is Lessor
responsible for special, incidental or consequential damages.
5. Title and Assignment.
5.1 Title. Lessee holds the Equipment subject and subordinate to the rights
of the Owner, Lessor, any Assignee and any Secured Party. Lessee authorizes
Lessor, as Lessee's agent, to prepare, execute and file in Lessee's name
precautionary Uniform Commercial Code financing statements showing the interest
of the Owner, Lessor, and any Assignee or Secured Party in the Equipment and to
insert serial numbers in Schedules as appropriate. Except as provided in
Sections 5.2 and 7.2, Lessee will, at its expense, keep the Equipment free and
clear from any liens or encumbrances of any kind (except any caused by Lessor)
and will indemnify and hold Lessor, Owner, any Assignee and Secured Party
harmless from and against any loss caused by Lessee's failure to do so.
<PAGE>
5.2 Relocation or Sublease. Upon prior written notice, Lessee may relocate the
Equipment to any location within the continental United States provided (i) the
Equipment will not be used by an entity exempt from federal income tax, (ii) all
additional costs (including any administrative fees, additional taxes and
insurance coverage) are reconciled and promptly paid by Lessee. Lessee may
sublease the Equipment upon the reasonable consent of the Lessor and the Secured
Party and provided Lessee meets the requirements under (i) and (ii) above. No
relocation or sublease will relieve Lessee from any of its obligations under
this Master Lease and the applicable Schedule.
5.3 Assignment by Lessor. The terms and conditions of each Schedule have been
fixed by Lessor in order to permit Lessor to sell and/or assign or transfer its
interest or grant a security interest in each Schedule and/or the Equipment to a
Secured Party or Assignee. In that event the term Lessor will mean the Assignee
and any Secured Party. However, any assignment, sale, or other transfer by
Lessor will not relieve Lessor of its obligations to Lessee and will not
materially change Lessee's duties or materially increase the burdens or risks
imposed on Lessee. The Lessee consents to and will acknowledge such assignments
in a written notice given to Lessee. Lessee also agrees that:
(a) The Secured Party will be entitled to exercise all of Lessor's rights, but
will not be obligated to perform any of the obligations of Lessor. The
Secured Party will not disturb Lessee's quiet and peaceful possession and
unrestricted use of the Equipment so long as Lessee is not in default and
the Secured Party continues to receive all Rent payable under the
Schedule;
(b) Lessee will pay all Rent and all other amounts payable to the Secured
Party, despite any defense or claim which it has against Lessor. Lessee
reserves its right to have recourse directly against Lessor for any
defense or claim; and
(c) Subject to and without impairment of Lessee's leasehold rights in the
Equipment, Lessee holds the Equipment for the Secured Party to the extent
of the Secured Party's rights in that Equipment.
6. Net Lease and Taxes and Fees.
6.1 Net Lease. Each Schedule constitutes a net lease. Lessee's obligation to
pay Rent and all other amounts is absolute and unconditional and is not subject
to any abatement, reduction, set-off, defense, counterclaim, interruption,
deferment or recoupment for any reason whatsoever.
6.2 Taxes and Fees. Lessee will pay when due or reimburse Lessor for all
taxes, fees or any other charges (together with any related interest or
penalties not arising from the negligence of Lessor) accrued for or arising
during the term of each Schedule against Lessor, Lessee or the Equipment by any
govemmental authority (except only Federal, state and local taxes on the capital
or the net income of Lessor). Lessor will file all personal property tax retums
for the Equipment and pay all property taxes due. Lessee will reimburse Lessor
for property taxes within thirty (30) days of receipt of an invoice.
7. Care, Use and Maintenance, Attachments and Reconfigurations, and
Inspection by Lessor.
7.1 Care, Use and Maintenance. Lessee will operate the Equipment in accordance
with all laws and regulations and maintain the Equipment in good operating order
and appearance, protect the Equipment from deterioration, other than normal wear
and tear, and will not use the Equipment for any purpose other than that for
which it was designed. If commercially available, Lessee will maintain in force
a standard maintenance contract with the manufacturer of the Equipment and upon
request will provide Lessor with a complete copy of that contract. With Lessor's
prior written consent, Lessee may have the Equipment maintained by a party other
than the manufacturer. Lessee agrees to pay any costs necessary for the
manufacturer to bring the Equipment to then current release, revision and
engineering change levels, and to re-certify the Equipment as eligible for
manufacturer's maintenance at the expiration of the lease term. The lease term
will continue upon the same terms and conditions until recertification has been
obtained.
7.2 Attachments and Reconfigurations. Upon Lessor's prior written consent,
Lessee may reconfigure and install Attachments on the Equipment. In the event of
such a Reconfiguration or Attachment, Lessee shall, upon return of the
Equipment, at its expense, restore the Equipment to the original configuration
specified on the Schedule in accordance with the manufacturer's specifications
and in the same operating order, repair and appearance as when installed (normal
wear and tear excluded). Altematively, with Lessors prior written consent which
will not be unreasonably withheld, Lessee may retum the Equipment with any
Attachment or upgrade.
<PAGE>
7.3 Inspection by Lessor. Upon request, Lessee, during reasonable business
hours and subject to Lessee's security requirements, will make the Equipment and
its related log and maintenance records, instruction manuals, published
statements of capabilities and technical specifications and certification,
qualification and calibration reports available to Lessor for inspection.
8. Representations and Warranties of Lessee.
Lessee represents and warrants that for the Master Lease and each Schedule:
(a) The execution, delivery and performance of the Lessee have been duly
authorized by all necessary corporate action;
(b) The individual executing was duly authorized to do so;
(c) The Master Lease and each Schedule constitute legal, valid and binding
agreements of the Lessee enforceable in accordance with their terms;
(d) The Equipment is personal property and when subjected to use by the
Lessee will not be or become fixtures under applicable law; and
(e) The Equipment will be for laboratory use only and will not be used in a
clinical environment on patients.
9. Delivery and Return of Equipment.
Lessee assumes the full expense of transportation of the Equipment to its
initial location, installation, deinstallation, and return to a location within
the continental United States (including without limitation the expense of in-
transit insurance) all pursuant to Lessor's instructions and manufacturer's
specifications. Regarding deinstallation, Lessee will assure that the Equipment
is deinstalled by the manufacturer in accordance with the manufacturer's
recommended procedures and decontaminated for transport in accordance with any
Environmental Law, and retumed with a Verification of Decontamination in the
same operating order, repair, condition and appearance as when originally
installed (less normal wear and tear and depreciation) meeting all original
equipment manufacturer's specifications for continued manufacturer's
maintenance, and accompanied by all associated documents, manuals (including,
but not limited to, those listed in Section 7.3), spare parts and accessories
and maintenance records for the duration of the Schedule. In connection with
deinstallation, Lessee will assure that any Contaminant removed from the
Equipment will be removed and transported by a licensed waste removal
transporter.
10. Labeling.
Upon request, Lessee will mark the Equipment indicating Lessors interest.
Lessee will keep all Equipment free from any other marking or labeling which
might be interpreted as a claim of ownership.
11. Indemnity.
Lessee will indemnify and hold Lessor, its parent company, any Assignee and any
Secured Party harmless from and against any and all claims, costs, expenses,
damages and liabilities, including reasonable attomeys' fees, arising out of the
ownership (for strict liability in tort only), selection, possession, leasing,
operation, control, use, maintenance, delivery, return or other disposition of
the Equipment. However, Lessee is not responsible to a party indemnified
hereunder for any claims, costs, expenses, damages and liabilities occasioned by
the negligent acts of such indemnified party. Lessee agrees to carry death,
bodily injury and property damage liability insurance during the term of the
Master Lease in amounts and against risks customarily insured against by the
Lessee on similar equipment owned by it. Any amounts received by Lessor under
that insurance will be credited against Lessee's obligations under this Section.
12. Risk of Loss.
Effective upon delivery and until the Equipment is retumed, Lessee relieves
Lessor of responsibility for all risks of physical damage to or loss or
destruction of the Equipment. Lessee will carry casualty insurance for each item
of Equipment in an amount
<PAGE>
not less than the Casualty Value. All policies for such insurance will name the
Lessor and any Secured Party as additional insured and as loss payee, and will
provide for at least thirty (30) days prior written notice to the Lessor of
cancellation or expiration. The Lessee will fumish appropriate evidence of such
insurance. Lessee shall promptly repair any damaged item of Equipment unless
such Equipment has suffered a Casualty Loss. Within fifteen (15) days of a
Casualty Loss, Lessee will provide written notice of that loss to Lessor and
Lessee will, at Lessors option, either (a) replace the item of Equipment with
Like Equipment and marketable title to the Like Equipment will automatically
vest in Lessor or (b) pay the Casualty Value and after that payment and the
payment of all other amounts due and owing, Lessee's obligation to pay further
Rent for the item of Equipment will cease.
13. Default, Remedies and Mitigation.
13.1 Default. The occurrence of any one or more of the following Events of
Default constitutes a default under a Schedule:
(a) Lessee's failure to pay Rent or other amounts payable by Lessee when due
if that failure continues for ten (10) days after written notice; or
(b) Lessee's failure to perform any other term or condition of the Schedule
or the material inaccuracy of any representation or warranty made by the
Lessee in the Schedule or in any document or certificate furnished to the
Lessor hereunder if that failure or inaccuracy continues for fifteen (15)
days after written notice; or
(c) An assignment by Lessee for the benefit of its creditors, the failure by
Lessee to pay its debts when due, the insolvency of Lessee, the filing by
Lessee or the filing against Lessee of any petition under any bankruptcy
or insolvency law or for the appointment of a trustee or other officer
with similar powers, the adjudication of Lessee as insolvent, the
liquidation of Lessee, or the taking of any action for the purpose of the
foregoing; or
(d) The occurrence of an Event of Default under any Schedule or other
agreement between Lessee and Lessor or its Assignee or Secured Party.
13.2 Remedies. Upon the occurrence of any of the above Events of Default,
Lessor, at its option, may:
(a) enforce Lessee's performance of the provisions of the applicable Schedule
by appropriate court action in law or in equity;
(b) recover from Lessee any damages and or expenses, including Default Costs;
(c) with notice and demand, recover all sums due and accelerate and recover the
present value of the remaining payment stream of all Rent due under the
defaulted Schedule (discounted at the same rate of interest at which such
defaulted Schedule was discounted with a Secured Party plus any prepayment
fees charged to Lessor by the Secured Party or, if there is no Secured
Party, then discounted at 6%) together with all Rent and other amounts
currently due as liquidated damages and not as a penalty;
(d) with notice and process of law and in compliance with Lessee's security
requirements, Lessor may enter on Lessee's premises to remove and repossess
the Equipment without being liable to Lessee for damages due to the
repossession, except those resulting from Lessors, its assignees', agents'
or representatives' negligence; and
(e) pursue any other remedy permitted by law or equity.
The above remedies, in Lessor's discretion and to the extent permitted by law,
are cumulative and may be exercised successively or concurrently.
13.3 Mitigation. Upon return of the Equipment pursuant to the terms of Section
13.2, Lessor will use its best efforts in accordance with its normal business
procedures (and without obligation to give any priority to such Equipment) to
mitigate Lessors damages as described below. EXCEPT AS SET FORTH IN THIS
SECTION, LESSEE HEREBY WAIVES ANY RIGHTS NOW OR HEREAFTER CONFERRED BY STATUTE
OR OTHERWISE WHICH MAY REQUIRE LESSOR TO MITIGATE ITS DAMAGES OR MODIFY ANY OF
LESSOR'S RIGHTS OR REMEDIES STATED HEREIN. Lessor may sell, lease or otherwise
dispose of all or any part of the Equipment at a public or private sale for cash
or credit with the privilege of purchasing
<PAGE>
the Equipment. The proceeds from any sale, lease or other disposition of the
Equipment are defined as either:
(a) if sold or otherwise disposed of, the cash proceeds less the Fair
Market Value of the Equipment at the expiration of the Initial Term
less the Default Costs; or
(b) if leased, the present value (discounted at three points over the
prime rate as referenced in the Wall Street Journal at the time of the
mitigation) of the rentals for a term not to exceed the Initial Term,
less the Default Costs.
Any proceeds will be applied against liquidated damages and any other sums
due to Lessor from Lessee. However, Lessee is liable to Lessor for, and Lessor
may recover, the amount by which the proceeds are less than the liquidated
damages and other sums due to Lessor from Lessee.
14. Additional Provisions.
14.1 Entire Agreement. This Master Lease and associated Schedules
supersede all other oral or written agreements or understandings between the
parties concerning the Equipment including, for example, purchase orders. ANY
AMENDMENT OF THIS MASTER LEASE OR A SCHEDULE, MAY ONLY BE ACCOMPLISHED BY A
WRITING SIGNED BY THE PARTY AGAINST WHOM THE AMENDMENT IS SOUGHT TO BE ENFORCED.
14.2 No Waiver. No action taken by Lessor or Lessee shall be deemed to
constitute a waiver of compliance with any representation, warranty or covenant
contained in this Master Lease or a Schedule. The waiver by Lessor or Lessee of
a breach of any provision of this Master Lease or a Schedule will not operate or
be construed as a waiver of any subsequent breach.
14.3 Binding Nature. Each Schedule is binding upon, and inures to the
benefit of Lessor and its assigns. LESSEE MAY NOT ASSIGN ITS RIGHTS OR
OBLIGATIONS.
14.4 Survival of Obligations. All agreements, obligations including, but
not limited to those arising under Section 6.2, representations and warranties
contained in this Master Lease, any Schedule or in any document delivered in
connection with those agreements are for the benefit of Lessor and any Assignee
or Secured Party and survive the execution, delivery, expiration or termination
of this Master Lease.
14.5 Notices. Any notice, request or other communication to either party
by the other will be given in writing and deemed received upon the eariier of
actual receipt or three days after mailing if mailed postage prepaid by regular
or airmail to Lessor (to the attention of "Lease Administrator") or Lessee, at
the address set out in the Schedule or, one day after it is sent by courier or
facsimile transmission if receipt is verified by the receiving party.
14.6 Applicable Law. THIS MASTER LEASE HAS BEEN, AND EACH SCHEDULE WILL
HAVE BEEN MADE, EXECUTED AND DELIVERED IN THE STATE OF ILLINOIS AND WILL BE
GOVERNED AND CONSTRUED FOR ALL PURPOSES IN ACCORDANCE WITH THE LAWS OF THE STATE
OF ILLINOIS WITHOUT GIVING EFFECT TO CONFLICT OF LAW PROVISIONS. NO RIGHTS OR
REMEDIES REFERRED TO IN ARTICLE 2A OF THE UNIFORM COMMERCIAL CODE WILL BE
CONFERRED ON LESSEE UNLESS EXPRESSLY GRANTED IN THIS MASTER LEASE OR A SCHEDULE.
14.7 Severability. If any one or more of the provisions of this Master
Lease or any Schedule is for any reason held invalid, illegal or unenforceable,
the remaining provisions of this Master Lease and any such Schedule will be
unimpaired, and the invalid, illegal or unenforceable provision replaced by a
mutually acceptable valid, legal and enforceable provision that is closest to
the original intention of the parties.
14.8 Counterparts. This Master Lease and any Schedule may be executed in
any number of counterparts, each of which will be deemed an original, but all
such counterparts together constitute one and the same instrument, If Lessor
grants a security interest in all or any part of a Schedule, the Equipment or
sums payable thereunder, only that counterpart Schedule marked "Secured Party's
Original" can transfer Lessor's rights and all other counterparts will be marked
"Duplicate".
14.9 Licensed Products. Lessee shall obtain no title to Licensed Products
which will at all times remain the property of the
<PAGE>
owner of the Licensed Products. A license from the owner may be required and it
is Lessee's responsibility to obtain any required license before the use of the
Licensed Products. Lessee agrees to treat the Licensed Products as confidential
information of the owner, to observe all copyright restrictions, and not to
reproduce or sell the Licensed Products.
14.10 Additional Documents. Lessee will, upon execution of this Master
Lease and as may be requested thereafter, provide Lessor with a secretary's
certificate of incumbency and authority and any other documents reasonably
requested by Lessor. Upon the execution of each Schedule with an aggregate Rent
in excess of $2,000,000, Lessee will provide Lessor with an opinion from
Lessee's counsel regarding the representations and warranties in Section 8.
Lessee will fumish, upon request, audited financial statements for the most
recent period.
14.11 Electronic Communications. Each of the parties may communicate
with the other by electronic means under mutually agreeable terms.
14.12 Definitions.
Assignee - means an entity to whom Lessor has sold or assigned its rights
as owner and Lessor of Equipment.
Attachment - means any accessory, equipment or device and the installation
thereof that does not impair the original function or use of the Equipment and
is capable of being removed without causing material damage to the Equipment and
is not an accession to the Equipment.
Casualty Loss - means the irreparable loss or destruction of Equipment.
Casualty Value - means the amount equal to the present value of the
aggregate Rent remaining for the balance of the current term, plus the present
value of the Fair Market Value (determined as of the expiration of the current
term) of Like Equipment computed using an interest rate equal to the rate for
Treasury Securities having a comparable term to the current term. However, if a
Casualty Value Table is attached to the relevant Schedule its terms will
control.
Commencement Certificate - means the Lessor provided certificate which must
be signed by Lessee within ten days of the Commencement Date as requested by
Lessor.
Commencement Date - is defined in each Schedule.
Contaminant - means those substances which are regulated by or form the
basis of liability under any Environmental Law, including without limitation,
asbestos, polychlorinated biphenyls ("PCB"), and radioactive substances, or
other material or substance which has in the past or could in the future
constitute a health, safety or environmental hazard to any person, property or
natural resources.
Default Costs - means reasonable attorney's fees and remarketing costs
resulting from a Lessee default or Lessor's enforcement of its remedies.
Environmental Law - means any federal, foreign, state or local law, rule or
regulation pertaining to the protection of the environment, including, but not
limited to, the Comprehensive Environmental Response, Compensation and Liability
Act ("CERCLA") (42 U.S.C. Section 9601 et seq.), the Federal Water Pollution
Control Act (33 U.S.C. 1251 et seq.), the Resource Conservation and Recovery Act
(42 U.S.C. 6901 et seq.), the Clean Air Act (42 U.S.C. 7401 et seq.), the Toxic
Substances Control Act (15 O.S.C. 2601 et seq.), the Federal Insecticide,
Fungicide and Rodenticide Act (7 U.S.C. 1361 et seq.), and the Occupational
Safety and Health Act (10 U.S.C. 651 et seq.), as these laws have been amended
or supplemented, and any analogous foreign, state or local statutes, and the
regulations promulgated pursuant thereto.
Equipment - means the property described on a Schedule and any replacement
for that property required or permitted by this Master Lease or a Schedule but
not including any Attachment.
Event of Default - means the events described in Subsection 13.1.
Fair Market Value - means the aggregate amount which would be obtainable in
an arms-length transaction between an informed
<PAGE>
and willing buyer/user purchasing the Equipment in place for its originally
intended use and an informed and willing seller under no compulsion to sell.
Initial Term - means the period of time beginning on the first day of the
first full Rent Interval following the Commencement Date for all items of
Equipment and continuing for the number of Rent Intervals indicated on a
Schedule.
Installation Date - means the day on which the Equipment is installed and
qualified for a commercially available manufacturer's standard maintenance
contract or warranty coverage, if available.
Interim Rent - means the pro-rata portion of Rent due for the period from
the Commencement Date through but not including the first day of the first full
Rent Interval included in the Initial Term.
Licensed Products - means any software or other licensed products attached
to the Equipment.
Like Equipment - means replacement Equipment which is lien free and of the
same model, type, configuration and manufacture as Equipment.
Notice Period - means the time period descnbed in a Schedule during which
Lessee may give Lessor notice of the termination of the term of that Schedule.
Overdue Rate - means the lesser of 18% per year or the maximum rate
permitted by the law of the state where the Equipment is located.
Owner - means the owner of Equipment.
Reconfiguration - means any change to Equipment that would upgrade or
downgrade the performance capabilities of the Equipment in any way.
Rent - means the rent, including Interim Rent, Lessee will pay for each
item of Equipment expressed in a Schedule either as a specific amount or an
amount equal to the amount which Lessor pays for an item of Equipment multiplied
by a lease rate factor plus all other amounts due to Lessor under this Master
Lease or a Schedule.
Rent Interval - means a full calendar month or quarter as indicated on a
Schedule.
Schedule - means an Equipment Schedule which incorporates all of the terms
and conditions of this Master Lease and, for purposes of Section 14.8, its
associated Commencement Certificate(s).
Secured Party - means an entity to whom Lessor has granted a security
interest in a Schedule and related Equipment for the purpose of securing a loan.
Verification of Decontamination - means a letter from the party performing
the decontamination, stating that it is properiy licensed to perform the
decontamination and that an actual decontamination and disposal of Contaminants
was completed in accordance with the manufacturer's specifications and
procedures and all applicable governmental rules and regulations including but
not limited to all Environmental Laws.
IN WITNESS WHEREOF, the parties hereto have executed this Master Lease on or as
of th eday and year first above written.
MYRIAD GENETICS, INC COMDISCO LABORATORY AND SCIENTIFIC GROUP
as lesee A DIVISION OF COMDISCO HEALTHCARE GROUP,
INC. As Lessor
By: /s/ Jay M. Moyes By: /s/ Doug Berman
--------------------------- -----------------------------
Title: C.F.O. Title: Credit Manager
----------------------- --------------------------
<PAGE>
Exhibit 10.2
ADDENDUM DATED AS OF OCTOBER 25, 1999
TO THE MASTER LEASE AGREEMENT DATED AS OF OCTOBER 25, 1999
BETWEEN MYRIAD GENETICS, INC. ("LESSEE")
AND COMDISCO LABORATORY AND SCIENTIFIC GROUP, A DIVISION OF
COMDISCO HEALTHCARE GROUP, INC. ("LESSOR")
The terms and conditions of this Addendum shall be incorporated into the Master
Lease Agreement and supersedes the Master Lease Agreement to the extent
expressly provided herein. Each capitalized terms used herein and not otherwise
defined shall have the same meaning attributed to it in the Master Lease
Agreement.
The terms and conditions of the following sections of the Master Lease Agreement
are hereby modified:
1. SECTION 5, TITLE AND ASSIGNMENT
-------------------------------
In subsection 5.3, line 8, delete the word "The" and insert the words
"Subject to the foregoing,". The penultimate sentence of the first
paragraph of subsection 5.3 is revised to read as follows: "However, the
mere act of assignment, sale or other transfer by Lessor will not relieve
Lessor of its obligations to Lessee under the applicable Schedule and will
not result in a material change in Lessee's duties nor a material increase
in the burdens or risks imposed on Lessee."
2. SECTION 6, NET LEASE AND TAXES
------------------------------
In subsection 6.2, in line 1, delete the words "or reimburse Lessor" and
insert the words "and indemnify and hold Lessor harmless from and against".
Delete the last two sentences in their entirety and replace with the
following: "Lessee will, for the entire lease term of each Schedule, file
all personal property tax returns for the Equipment and pay all property
taxes when due. Lessee will forward copies of such tax returns to Lessor at
the time of filing such tax returns and will give Lessor evidence of
payment of such taxes.
3. SECTION 7, CARE, USE AND MAINTENANCE, ATTACHMENTS AND RECONFIGURATIONS, AND
---------------------------------------------------------------------------
INSPECTION BY LESSOR
--------------------
In subsection 7.1, delete the fourth and fifth sentences in their entirety
and replace with the following: "Lessee agrees to return the Equipment at
the end of the lease term with the manufacturer's then current release,
revisions and engineering change levels (not including Attachments) that
are ordinarily provided to an end-user/lessee at no cost under the
manufacturer's standard maintenance agreement."
4. SECTION 8, REPRESENTATIONS AND WARRANTIES OF LESSEE
---------------------------------------------------
Paragraph (e) is revised to read as follows: "The Equipment will be used
for general laboratory use only for screening purposes, but will not be
used directly on patients."
5. SECTION 9, DELIVERY AND RETURN OF EQUIPMENT
-------------------------------------------
In line 6, after the word "manufacturer" insert the words "or qualified
third party".
6. SECTION 11, INDEMNITY
---------------------
In line 9, delete the word "death,".
7. SECTION 14, ADDITIONAL PROVISIONS
---------------------------------
A. In subsection 14.4, line 2, after the words "Section 6.2" insert the
words "and Sections 4, 5, 7, 9, 11, 12, 14, plus". In line 6, after
the word "Lease" insert the words "for a period of time sufficient to
cover any applicable statute of limitations". Add the following
sentence at the end of this subsection: "Notwithstanding the
foregoing, Lessee's obligations to pay Rent shall terminate following
expiration or
<PAGE>
termination of the Initial Term or any extension thereof so long as
Lessee has fully performed its obligations under the applicable
Schedule."
B. In subsection 14.6, lines 3 and 5, delete the word "ILLINOIS" and
insert the word "UTAH".
C. In subsection 14.10, line 6, after the word "Lessee's" insert the word
"in-house".
D. In subsection 14.12, in the definition of "Environmental Law", line 1
before the word "foreign" insert the word "pertinent". In line 10,
before the word "foreign" insert the word "applicable".
IN WITNESS WHEREOF, the parties have caused this Addendum to be executed by
their authorized representatives as of the date and year set forth below.
ACCEPTED AND AGREED TO:
Myriad Genetics, Inc. Comdisco Laboratory and Scientific Group,
A Division of Comdisco Healthcare Group, Inc.
By: /s/ Jay M. Moyes By: /s/ Doug Berman
--------------------------- ---------------------------
Printed Name: Jay M. Moyes Printed Name: Doug Berman
----------------- --------------------
Title: C.F.O. Title: Credit Manager
------------------------ ---------------------------
Date: 11/16/99 Date: 11/21/99
------------------------- ----------------------------
<PAGE>
Exhibit 10.3
AMENDMENT NO. 1 TO MASTER LEASE AGREEMENT DATED OCTOBER 25, 1999 (the "Lease")
BY AND BETWEEN MYRIAD GENETICS, INC. ("Lessee")
AND COMDISCO LABORATORY AND SCIENTIFIC GROUP,
A DIVISION OF COMDISCO HEALTHCARE GROUP, INC. ("Lessor")
WHEREAS, Lessor and Lessee desire to enter into the Lease; and
WHEREAS, Lessor and Lessee desire to amend certain provisions of the Lease as
hereafter provided; and
WHEREAS, the Amendment shall be deemed to have been entered into
contemporaneously with and integrated into the terms and conditions of the
Lease.
NOW THEREFORE, for good and valuable consideration, Lessor and Lessee hereby
agree to amend the Lease as follows:
1. Lessee agrees to maintain a financial status of all of the following
during the term of the Lease and any extension or renewal thereof:
a. Current ratio of no less than 1.5:1;
b. Tangible net worth of not less than $15,000,000.00;
c. Cash and Marketable Securities (including long-term) of not less than
$15,000,000.00;
d. Total liabilities to tangible net worth not to exceed .75:1.
e. For purposes of this Agreement, Deferred Revenue is not included as
debt and Convertible Debt is treated as equity and not as debt.
2. In addition, Lessee agrees to provide Lessor with quarterly financial
statements within forty-five (45) days after the end of each fiscal quarter and
audited annual financial statements within one hundred twenty (120) days of the
end of each fiscal year.
3. Failure of Lessee to maintain any one of the above at any time during
the Lease term and any extension or renewal thereof or the failure to make any
payment due under the Lease is an Event of Default under the Lease which Lessee
must, within twenty (20) days following notice from Comdisco, provide a Letter
of Credit from a bank acceptable to Lessor for one hundred percent (100%) of all
rent then due or to become due under the lease as of the date of the default.
Along with the Letter of Credit, Lessee shall also execute a Letter of Credit
Agreement with Lessor. The Letter of Credit and Letter of Credit Agreement shall
be in a form substantially similar to Exhibits A & B attached and incorporated
herein.
4. Lessor shall also be entitled to any or all remedies or actions in the
event of default, as provided in the Lease, and this Amendment shall not be
construed to limit Lessor's rights in any way.
Except as set out herein, Lessor and Lessee hereby agree that the terms and
conditions of the Lease shall remain in full force and effect as entered into by
the parties on or prior to the date hereof.
MYRIAD GENETICS, INC. COMDISCO LABORATORY AND SCIENTIFIC GROUP,
as Lessee A DIVISION OF COMDISCO HEALTHCARE GROUP, INC.
as Lessor
By: /s/ Jay M. Moyes By: /s/ Doug Berman
--------------------------- -----------------------------
Title: C.F.O. Title: Credit Manager
------------------------ --------------------------------
Date: 11/16/99 Date: 11/21/99
------------------------- ---------------------------
<PAGE>
Exhibit 10.4
17-SL40476-SG
EQUIPMENT SCHEDULE NO. SG01
DATED AS OF NOVEMBER 10, 1999,
TO MASTER LEASE AGREEMENT DATED AS OF OCTOBER 25, 1999 ("Master Lease")
LESSEE: MYRIAD GENETICS, INC. LESSOR: COMDISCO LABORATORY AND
SCIENTIFIC GROUP, A DIVISION OF
COMDISCO HEALTHCARE GROUP, INC.
Address for Legal Notices: Address for All Notices:
- --------------------------- ------------------------------
320 Wakara Way 6111 North River Road
Salt Lake City, Utah 84108 Rosemont, Illinois 60018
Attn: Contracts Administration
Attn: Corporate Secretary
Address for Invoices:
------------------------------
Address for Administrative
Correspondence:
- ---------------------------
320 Wakara Way
320 Wakara Way Salt Lake City, Utah 84108
Salt Lake City, Utah 84108
Attn: Ms. Tina Frisby
Attn: Mr. Jay Moyes
Phone: 801-584-3633 Lessee Reference No:
- --------------------- -------------------
Fax: 801-584-3640
(24 digits maximum)
Location of Equipment: Initial Term/
Rent Interval: 16 Quarters
-------------
320 Wakara Way
Salt Lake City, Utah 84108 Lease Rate Factor: .066921
------------------
Estimated Rent: $421,315.08
---------------
Attn: Mr. Jim Evans
Phone: 801-584-3672
EQUIPMENT (as defined below):
- ---------
Item Machine Model/ Serial
No. Qty. Mfg. Type Feature Description Number
- --- ---- ---- ---- ------- ----------- ------
SEE ATTACHMENT A
<PAGE>
Notice Period: The Notice Period will be not less than one hundred eighty (180)
days nor more than twelve (12) months prior to the expiration of the Initial
Term, or any extension thereof. If Lessee gives proper written notice of
termination but fails to return the Equipment on the expiration date of the
Initial Term, or any extension thereof, the Schedule will continue in full force
and effect and Lessee will be required to provide an additional sixty (60) days
written notice of termination. Such termination will be effective at the end of
the quarter in which the last day of the sixty (60) day notice requirement
occurs. The Rent will continue at the current rate until the effective date of
written notice of termination and the Equipment is properly returned.
Special Terms: The following additional terms are a part of this Equipment
Schedule. The terms and conditions of the Master Lease Agreement as they pertain
to this Equipment Schedule are modified and amended as follows:
Master Lease Modifications
- --------------------------
7. Section 7.1, "Care, Use and Maintenance"
-------------------------
Delete this subsection in its entirety and replace with the following:
"Lessee will, at its sole expense, maintain each unit of Equipment in good
operating order and repair, normal wear and tear excepted. Lessee shall
also maintain the Equipment in accordance with manufacturer's
recommendations. Lessee shall make all alterations or modifications
required to comply with any applicable law, rule or regulation during the
term of the Schedule. Lessee agrees to return the Equipment at the end of
the lease term with the manufacturer's then current release, revisions and
engineering change levels (not including Attachments) that are ordinarily
provided to an end-user/lessee at no cost under the manufacturer's standard
maintenance agreement. Lessee agrees that upon return of the Equipment, it
will comply with all original manufacturer's performance specifications for
new Equipment without expense to Lessor. Lessee shall, if requested by
Lessor, obtain a certificate or service report from the manufacturer
attesting to such condition."
7. Section 9, "Delivery and Return of Equipment"
--------------------------------
Delete the second and third sentences in their entirety and replace with
the following:
"At the expiration or termination of the Schedule, Lessee shall perform any
testing and repairs required to place the units of Equipment in the same
condition and appearance as when received by Lessee (reasonable wear and
tear excepted) and in good working order for the original intended purpose
of the Equipment. If required the units of Equipment shall be deinstalled,
disassembled and crated by an authorized manufacturer's representative or
such other service person as is reasonably satisfactory to Lessor. All
Equipment will be cleaned, cosmetically acceptable, and in such condition
as to be immediately installed into use in a similar environment for which
the Equipment was originally intended to be used. All Contaminants must be
removed from the Equipment and disposed of in accordance with then current
waste disposal laws. The Equipment will be returned to Lessor accompanied
by all associated documents, manuals (including, but not limited to, those
listed in Section 7.3) spare parts and accessories, current release,
revision and engineering change levels of the manufacturer, and maintenance
records for the duration of the Schedule.
Upon the expiration or termination of the Schedule, but in no event more
than ninety (90) days prior to the expiration or termination of the
Schedule, Lessee shall, at its expense:
7. cause the manufacturer's representative or qualified equipment
maintenance provider, acceptable to Lessor, (the "Authorized
Inspector") to perform a comprehensive physical inspection,
including testing all material and workmanship of the Equipment and
ensure all Equipment and Equipment operations conform to all
applicable local, state, and federal laws, health and safety
guidelines including the then current FDA regulations; and if during
such inspection, examination and test, the Authorized Inspector
finds any of the material or workmanship to be defective or the
Equipment not operating within manufacturer's specifications and the
then current FDA regulations, then Lessee shall repair or replace
such defective material and, after corrective measures are
completed, Lessee will provide for a follow-up inspection of the
Equipment by the Authorized Inspector as outlined in the preceding
clause;
<PAGE>
7. have each item of Equipment returned with an in-depth field service
report detailing said inspection as outlined in Section (a) above.
The report shall certify that the Equipment has been properly
inspected, examined and tested and is operating within the
manufacturer's specifications;
7. (C)ensure all items of Equipment will be completely free of
Contaminants upon return to Lessor;
(d) have the Equipment returned with a certificate supplied by the
manufacturer's representative qualifying the Equipment to be in
good condition and to be eligible for the manufacturer's
maintenance plan.
1. Commencement Date and Purchase/Leaseback (Installed Equipment)
--------------------------------------------------------------
The Commencement Date will be the date Lessor tenders payment of the
purchase price for the Equipment. The Initial Term will begin on the first
day of the calendar quarter following the Commencement Date for all items
of Equipment. The Rent is computed and this Schedule is contingent upon
Lessor purchasing the Equipment for an aggregate amount of approximately
$6,295,708.07 pursuant to satisfactory purchase documentation. Lessee
acknowledges that it has either received or approved Lessor's purchase
documentation for the Equipment. If the cost or configuration of the
Equipment changes, Lessor may adjust the Lease Rate Factors for any
additional costs or expenses resulting from those changes.
7. Interest Rate Adjustment
------------------------
In the event the Commencement Date for all items of Equipment to be leased
hereunder is after September 30, 1999, the following will apply. The Lease
Rate Factors set forth in this Schedule have been calculated, in part,
based on the 4-year U.S. Treasury Constant Maturity of 5.77% as set forth
in the Federal Reserve Statistical Release H.15 ("Treasury Rate"). If on
the last Commencement Date for all items of Equipment to be leased
hereunder, there is a change in Treasury Rate in excess of 10 basis points,
the effective lease rate of 3.71% will be adjusted one basis point for each
basis point change in the Treasury Rate. Additionally, if there is an
adverse change in Lessee's credit standing prior to the Commencement Date
for all items of Equipment to be leased hereunder, the Lease Rate Factors
may be adjusted accordingly.
7. Equipment Procurement Charges (Progress Payments-Lease Rate Factor)
-------------------------------------------------------------------
Because items of Equipment will be delivered to Lessee prior to the
Commencement Date, progress payments will be required to be paid to the
vendor prior to the Commencement Date ("Progress Payments"). With respect
to any items of Equipment delivered prior to the Commencement Date, all
terms and conditions of this Equipment Schedule will be applicable except
the Lessee's rental obligations. However, Lessee agrees to pay Lessor
"Equipment Procurement Charges" equal to a daily lease rate factor of
.000744 multiplied by the aggregate of the Progress Payments paid by Lessor
for each day from the date Progress Payments are made until the
Commencement Date. Accrued Equipment Procurement Charges are payable when
invoiced.
If the Commencement Date occurs after the Outside Date, the daily lease
rate factor applicable from the Outside Date until the Commencement Date
will be equal to .000744. If Lessee rejects the Equipment prior to the
Commencement Date pursuant to the purchase agreement with the Equipment
vendor or if Lessee is in default of this Equipment Schedule, then this
Equipment Schedule will terminate and Lessee will (i) reimburse Lessor for
all amounts paid by Lessor for the purchase of the Equipment and (ii) pay
all Equipment Procurement Charges due through the date of termination.
Upon payment of all amounts due and owing by Lessee, Lessor will transfer
to Lessee all of Lessor's interest in the Equipment and under any purchase
agreement.
7. General Upgrade Provision
-------------------------
If Lessee is not in default, and assuming all required third party consents
are obtained, Lessor will, on Lessee's request enter into negotiation of a
contract in which Lessor would on mutually agreeable terms and conditions,
lease to Lessee standard feature and/or equipment model upgrades to the
Equipment offered either by the Equipment manufacturer or by another
manufacturer.
<PAGE>
7. Renewal Option (Fair Market Rental Value)
-----------------------------------------
So long as no Event of Default shall have occurred, Lessee shall have the
right to extend the Initial Term of this Schedule by giving Lessor at least
one hundred eighty (180) days written notice prior to the expiration of the
Initial Term, provided, however, this Schedule shall continue in effect
following the extended period until terminated by either party upon not
less than one hundred eighty (180) days prior written notice, which notice
shall be effective the first of the month following receipt. The rent
required to be paid during the extended period shall be based on the Fair
Market Rental Value of the Equipment. Unless otherwise agreed in writing
between the parties, this option shall not apply to add-ons or upgrades to
the Equipment leased hereunder. Fair Market Rental Value shall be defined
as the amount which would be obtainable at the commencement of the extended
Initial Term in an arm's-length transaction between an informed and willing
lessee/user leasing the Equipment in place for its originally intended use
for the proposed lease term, and an informed and willing lessor/dealer
under no compulsion to lease.
7. Purchase Option (Fair Market Value)
-----------------------------------
So long as no Event of Default shall have occurred and is continuing
hereunder, and upon at least one hundred eighty (180) days prior written
notice to Lessor, Lessee will have the option at the expiration of the
Initial Term of this Schedule to purchase all, but not less than all, of
the Equipment for an amount equal to the aggregate amount which would be
obtainable in an arm's-length transaction between an informed and willing
buyer/user purchasing the Equipment in place for its originally intended
use and an informed and willing seller under no compulsion to sell (plus
any taxes applicable at time of purchase) on the date of the expiration of
the Initial Term (the "Purchase Date"), payable to Lessor by the Purchase
Date. Title to the Equipment will automatically pass to Lessee on the
Purchase Date, provided Lessee has paid the full purchase price.
7. Return Option
-------------
In the event that Lessee does not elect the "Purchase Option" or "Renewal
Option" contained herein, Lessee will return the Equipment to Lessor upon
termination of the Schedule in accordance with the "Delivery and Return of
Equipment" provision.
Master Lease: This Equipment Schedule is issued pursuant to the Master Lease
identified on page 1 of this Equipment Schedule. All of the terms and
conditions of the Master Lease are incorporated in and made a part of this
Equipment Schedule as if they were expressly described in this Equipment
Schedule, and this Equipment Schedule constitutes a separate lease for the
Equipment. The parties reaffirm all of the terms and conditions of the Master
Lease (including, without limitation, the representations and warranties set
forth in the Master Lease) except as modified by this Equipment Schedule. This
Equipment Schedule may not be amended or rescinded except by a writing signed by
both parties.
MYRIAD GENETICS, INC. COMDISCO LABORATORY AND SCIENTIFIC GROUP,
as Lessee A DIVISION OF COMDISCO HEALTHCARE GROUP, INC.
as Lessor
By: /s/ Jay M. Moyes By: /s/ Doug Berman
-------------------------- ------------------------------------------
Title: C.F.O. Title: Credit Manager
----------------------- ---------------------------------------
Date: 11/16/99 Date: 11/21/99
------------------------ ---------------------------------------
DV/jlp.17-SL40476-SG
CLSG-ES (NML) form 05/98
<PAGE>
<TABLE>
<CAPTION>
ATTACHMENT A
MYRIAD GENETICS, INC.
SG-01
<S> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
MANUFACTURER/ MACHINE PO Invoice EQUIPMENT
VENDOR NAME TYPE/MODEL EQUIPMENT DESCRIPTION SERIAL # Number Number COST Total
- ------------------------------------------------------------------------------------------------------------------------------------
Boise Technology 5843-02 Base Unit 72"W x 84"H 1,910.00
- ------------------------------------------------------------------------------------------------------------------------------------
5843-06 Worksurface 72" w/cmb 592.00
- ------------------------------------------------------------------------------------------------------------------------------------
5843-08 Fixed shelf 72" w/lip 672.00
- ------------------------------------------------------------------------------------------------------------------------------------
2125-32Q Independent 31" roll out shelf 232.00
- ------------------------------------------------------------------------------------------------------------------------------------
2148-23Q Cable guide for roll out shelf 22.00
- ------------------------------------------------------------------------------------------------------------------------------------
58411-WT Cable Management trough 348.00
- ------------------------------------------------------------------------------------------------------------------------------------
Freight 346.64
- ------------------------------------------------------------------------------------------------------------------------------------
5840-08 Power bar 22" w/8 outlets 13615 572447 232.00 4,354.64
- ------------------------------------------------------------------------------------------------------------------------------------
Miron Eletronics Millennia MAX 2,615.00
- ------------------------------------------------------------------------------------------------------------------------------------
Client Pro 13626 4517423 5,196.00 8,336.99
- ------------------------------------------------------------------------------------------------------------------------------------
CPS Computer Protection Toshiba 1400XL Plus Series, 13619 28102 7,383.00 7,501.95
8KVA 240VAC UPS
- ------------------------------------------------------------------------------------------------------------------------------------
Freight 118.95
- ------------------------------------------------------------------------------------------------------------------------------------
Molucular Dynamics Megabase 1000 13215 1995 132158 180,000.00
- ------------------------------------------------------------------------------------------------------------------------------------
Freight 1,400.00
- ------------------------------------------------------------------------------------------------------------------------------------
Freight 132793-1 2,337.00 183,737.00
- ------------------------------------------------------------------------------------------------------------------------------------
Bio-Rad 165-2102 E. Coli Pulser 941BR2165 13853 1685228 1,625.00
- ------------------------------------------------------------------------------------------------------------------------------------
Freight 19.12 1,644.12
- ------------------------------------------------------------------------------------------------------------------------------------
Cole Palmer Instruments KN-07550-10 Peristaltic Pump 8,250.00
- ------------------------------------------------------------------------------------------------------------------------------------
KN-07550-64 rs-232 Interface C 270.00
- ------------------------------------------------------------------------------------------------------------------------------------
KN-07519-06 L/S Multi Channel 1,950.00
- ------------------------------------------------------------------------------------------------------------------------------------
KN07519-50 L/S Cartridge Lar 510.00
- ------------------------------------------------------------------------------------------------------------------------------------
FK-06360-22 In Line Quick conn 56.76
- ------------------------------------------------------------------------------------------------------------------------------------
IK-06360-43 In Line Quick conn 56.76
- ------------------------------------------------------------------------------------------------------------------------------------
KN-06429-25 Tygon Lfl 42/25 Tu 13913 324.00
- ------------------------------------------------------------------------------------------------------------------------------------
Freight 93.32 11,510.84
- ------------------------------------------------------------------------------------------------------------------------------------
Granite Funiture Company GFU21M4G Gibson 21' Freezer 6,400.00
- ------------------------------------------------------------------------------------------------------------------------------------
KTRP20KG 20cf Refrigerator 13933 2,799.96 9,199.96
- ------------------------------------------------------------------------------------------------------------------------------------
McMaster - Carr Supply 2791T28 Foot Operated Liif 14034 1,139.46 1,139.46
- ------------------------------------------------------------------------------------------------------------------------------------
Micron PC Client Pro with LC 14,988.00
- ------------------------------------------------------------------------------------------------------------------------------------
Client Pro with Cr 14041 8,640.00 23,628.00
- ------------------------------------------------------------------------------------------------------------------------------------
1 Advanced System Group E4500 Disk Arrary 2008 16266 205,230.00
- ------------------------------------------------------------------------------------------------------------------------------------
16292
- ------------------------------------------------------------------------------------------------------------------------------------
16392
- ------------------------------------------------------------------------------------------------------------------------------------
13514
- ------------------------------------------------------------------------------------------------------------------------------------
16517
- ------------------------------------------------------------------------------------------------------------------------------------
16619
- ------------------------------------------------------------------------------------------------------------------------------------
17220
- ------------------------------------------------------------------------------------------------------------------------------------
17312
- ------------------------------------------------------------------------------------------------------------------------------------
Total Freight 659.00
- ------------------------------------------------------------------------------------------------------------------------------------
17359 205,889.00
- ------------------------------------------------------------------------------------------------------------------------------------
Wallac 196-345 Quadra Sv Station 196-345-133, 196-248-134 316,000.00
- ------------------------------------------------------------------------------------------------------------------------------------
196-35-384 384 Well Plate Rgt 4,800.00
- ------------------------------------------------------------------------------------------------------------------------------------
196-36 Tip Wash Station 2,000.00
- ------------------------------------------------------------------------------------------------------------------------------------
196-350 Quadra Bar Code Re 9920608, 9920613 34,000.00
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ATTACHMENT A
MYRIAD GENETICS, INC.
SG-01
<S> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
MANUFACTURER/ MACHINE PO Invoice EQUIPMENT
VENDOR NAME TYPE/MODEL EQUIPMENT DESCRIPTION SERIAL # Number Number COST Total
- ------------------------------------------------------------------------------------------------------------------------------------
196-135-03 Reservior Only for 2,400.00 2,400.00
- ------------------------------------------------------------------------------------------------------------------------------------
Freight 736.90 736.90
- ------------------------------------------------------------------------------------------------------------------------------------
196-130-01 Reservior W/ Dimple 2009 120824 1,024.00 360,960.90
- ------------------------------------------------------------------------------------------------------------------------------------
Genetix Limited QP21 Qpix Colony Picker 2010 186,200.00
- ------------------------------------------------------------------------------------------------------------------------------------
Freight 85.00
- ------------------------------------------------------------------------------------------------------------------------------------
Note: Customer made first deposit of $55,860.00 to vendor.
Check Number 598 186,200.00
- ------------------------------------------------------------------------------------------------------------------------------------
MJ Research PTC-2225 DNA Tetrad Engine 167,344.20
- ------------------------------------------------------------------------------------------------------------------------------------
Total Freight 1,644.00
- ------------------------------------------------------------------------------------------------------------------------------------
ALS-1238 Alpha Unit 384 Well 2011 61338, 63114 133,696.80 302,685.00
- ------------------------------------------------------------------------------------------------------------------------------------
Molecular Dynamics MBW-WKSTN Megabace 1000 DNA 2012 132793 4,140,000.00 4,140,000.00
- ------------------------------------------------------------------------------------------------------------------------------------
Zymark Corporation 63808 Twister Microplate 118,405.00
- ------------------------------------------------------------------------------------------------------------------------------------
65125 Extended Capacity 38,850.00
- ------------------------------------------------------------------------------------------------------------------------------------
Freight 876.00
- ------------------------------------------------------------------------------------------------------------------------------------
64709 Standard Stack 2013 114441-M 9,520.00 167,651.00
- ------------------------------------------------------------------------------------------------------------------------------------
Molecular Devices 0200-3040 SpectraMax Gemini 2016 20544 32,250.00 32,311.36
- ------------------------------------------------------------------------------------------------------------------------------------
Freight 61.36
- ------------------------------------------------------------------------------------------------------------------------------------
Amersham MEGABACE1000 Workstation 2017 360,000.00
- ------------------------------------------------------------------------------------------------------------------------------------
Freight 15.00 360,015.00
- ------------------------------------------------------------------------------------------------------------------------------------
Advanced System Group X2602A Cpu Memory Board 25,920.00
- ------------------------------------------------------------------------------------------------------------------------------------
X2580A 400mhz Ultrasparc 100,800.00
- ------------------------------------------------------------------------------------------------------------------------------------
DSR702/1024 3rd Party 1gb Memo 18,472.00
- ------------------------------------------------------------------------------------------------------------------------------------
A6713A Fcal Gbic Module 1,728.00
- ------------------------------------------------------------------------------------------------------------------------------------
X954A Power/Cooling Modu 1,296.00
- ------------------------------------------------------------------------------------------------------------------------------------
X6710A 9.1gb 10,000 rpm L 18,792.00
- ------------------------------------------------------------------------------------------------------------------------------------
DRS2OUT/256 memory 639.00
- ------------------------------------------------------------------------------------------------------------------------------------
X2612A Sbus I/O Board 2018 1,710,817,151 4,680.00 172,327.00
- ------------------------------------------------------------------------------------------------------------------------------------
Freight 160.00
- ------------------------------------------------------------------------------------------------------------------------------------
SLNBS11500 NetBackup Package 2020 23,483.00 23,483.00
- ------------------------------------------------------------------------------------------------------------------------------------
Jouan, Inc. 11175331 Jouan Cr422 Ref Ce 34,080.00
- ------------------------------------------------------------------------------------------------------------------------------------
11175338 M4 Rtr C/G Ser 4p 199380003 4,800.00
- ------------------------------------------------------------------------------------------------------------------------------------
Freight 917.95
- ------------------------------------------------------------------------------------------------------------------------------------
11174223 Carrier Seal 13762 199360128 7,200.00 46,997.95
- ------------------------------------------------------------------------------------------------------------------------------------
Forma Scientific 8516 Upright Freezer 13750 284734 6,772.80 6,772.80
- ------------------------------------------------------------------------------------------------------------------------------------
Datavision LS2106 Laserlink Scanner 13,680.00
- ------------------------------------------------------------------------------------------------------------------------------------
Freight 153.20
- ------------------------------------------------------------------------------------------------------------------------------------
LS3070 Base Power Supply 13789 121,282,121,733 1,400.00 15,233.20
- ------------------------------------------------------------------------------------------------------------------------------------
Mathsoft Licences 2 users for SPLus 13858 81205-92555 11,414.00
- ------------------------------------------------------------------------------------------------------------------------------------
Freight 24.95 11,439.90
- ------------------------------------------------------------------------------------------------------------------------------------
Barcode SATO300DPI Barcode applicator 2023 12,689.00 12,689.00
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL EQUIPMENT 6,295,708.07
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS AND CONDENSED CONSOLIDATED BALANCE SHEETS
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JUL-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 27,679,996
<SECURITIES> 32,362,511
<RECEIVABLES> 2,020,774
<ALLOWANCES> 108,847
<INVENTORY> 0
<CURRENT-ASSETS> 47,443,885
<PP&E> 18,081,561
<DEPRECIATION> 8,242,006
<TOTAL-ASSETS> 73,862,175
<CURRENT-LIABILITIES> 18,373,035
<BONDS> 0
0
0
<COMMON> 102,843
<OTHER-SE> 55,386,297
<TOTAL-LIABILITY-AND-EQUITY> 73,862,175
<SALES> 3,638,157
<TOTAL-REVENUES> 15,141,674
<CGS> 1,792,087
<TOTAL-COSTS> 20,160,287
<OTHER-EXPENSES> 360,082
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (4,068,242)
<INCOME-TAX> 0
<INCOME-CONTINUING> (4,068,242)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,068,242)
<EPS-BASIC> (0.42)
<EPS-DILUTED> (0.42)
</TABLE>
