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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended June 30, 1998
Commission file number 000-21215
PROGENITOR, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 31-1344193
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification number)
4040 CAMPBELL AVENUE
MENLO PARK, CA 94025
(650) 617-0880
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
Class Outstanding at July 31, 1998
- ----------------------------- ----------------------------
Common Stock, $.001 par value 13,741,565 shares
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PROGENITOR, INC.
INDEX
<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets -
June 30, 1998 and September 30, 1997 3
Condensed Consolidated Statements of Operations-three and nine month
periods ended June 30, 1998 and June 30, 1997, and the period from
May 8, 1992 (Date of Inception) to June 30, 1998 4
Condensed Consolidated Statements of Cash Flows-nine month periods
ended June 30, 1998 and June 30, 1997, and the period from May 8,
1992 (Date of Inception) to June 30, 1998 5
Notes to the Unaudited Condensed 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 13
Item 2. Changes in Securities and Use of Proceeds 13
Item 5. Other Matters 14
Item 6. Exhibits and Reports on Form 8-K 14
SIGNATURES 15
</TABLE>
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PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
PROGENITOR, INC. (A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
June 30, September 30,
1998 1997
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 6,202,000 $ 19,673,000
Short-term investments 2,993,000 --
Accounts receivable 216,000 130,000
Prepaid expenses and other current assets 305,000 421,000
------------ ------------
Total current assets 9,716,000 20,224,000
------------ ------------
Property and equipment, net 2,499,000 1,919,000
Notes receivable-employees, net 197,000 480,000
Intangible assets, net 731,000 962,000
------------ ------------
Total assets $ 13,143,000 $ 23,585,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 304,000 $ 1,793,000
Accrued liabilities 2,724,000 4,148,000
Current portion of long-term debt 167,000 --
Capital lease obligations, current 952,000 762,000
------------ ------------
Total current liabilities 4,147,000 6,703,000
------------ ------------
Long-term debt 1,583,000 --
Capital lease obligations, non-current 1,140,000 942,000
------------ ------------
Total liabilities 6,870,000 7,645,000
------------ ------------
Stockholders' equity:
Preferred stock -- --
Common stock 14,000 13,000
Stock subscription promissory note receivable (500,000) (1,000,000)
Additional paid-in-capital 80,052,000 79,651,000
Deficit accumulated during development stage (73,293,000) (62,724,000)
------------ ------------
Total stockholders' equity 6,273,000 15,940,000
------------ ------------
Total liabilities and stockholders' equity $ 13,143,000 $ 23,585,000
============ ============
</TABLE>
The accompanying notes are an integral part of the unaudited condensed
consolidated financial statements.
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PROGENITOR, INC. (A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
MAY 8, 1992
THREE MONTHS ENDED NINE MONTHS ENDED (DATE OF
JUNE 30, JUNE 30, INCEPTION) TO
------------------------------ ------------------------------
1998 1997 1998 1997 JUNE 30, 1998
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues $ 105,000 $ 232,000 $ 365,000 $ 1,091,000 $ 5,660,000
Operating expenses:
Research and development 2,990,000 1,147,000 8,510,000 3,298,000 30,078,000
Write-off of acquired in-process
research and development -- -- -- -- 21,092,000
General and administrative 828,000 469,000 2,772,000 1,695,000 11,438,000
Nonrecurring expenses -- -- -- -- 1,507,000
------------ ------------ ------------ ------------ ------------
Total operating expenses 3,818,000 1,616,000 11,282,000 4,993,000 64,115,000
------------ ------------ ------------ ------------ ------------
Loss from operations (3,713,000) (1,384,000) (10,917,000) (3,902,000) (58,455,000)
Nonrecurring expense -- -- -- -- (974,000)
Interest and other income 139,000 -- 540,000 -- 795,000
Interest expense - related party -- (249,000) -- (514,000) (1,940,000)
Interest expense - other (98,000) (17,000) (192,000) (39,000) (436,000)
------------ ------------ ------------ ------------ ------------
Net loss $ (3,672,000) $ (1,650,000) $(10,569,000) $ (4,455,000) $(61,010,000)
============ ============ ============ ============ ============
Net loss per common share:
Basic and diluted $ (0.27) $ (0.57) $ (0.78) $ (1.54)
============ ============ ============ ============
Shares used in computing net
loss per common share:
Basic and diluted 13,736,535 2,887,217 13,586,079 2,886,561
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of the unaudited condensed
consolidated financial statements.
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PROGENITOR, INC. (A DEVELOPMENT STAGE COMPANY)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
MAY 8, 1992
NINE MONTHS ENDED (DATE OF
JUNE 30, INCEPTION) TO
------------------------------
1998 1997 JUNE 30, 1998
------------ ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $(10,569,000) $ (4,455,000) $(61,010,000)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 1,100,000 221,000 2,970,000
Gain on sale of equipment -- -- (23,000)
Noncash expense for anti-dilution
stock issuances -- -- 763,000
Write-off of acquired in-process
research and development -- -- 21,092,000
Changes in operating assets and liabilities:
Accounts receivable (86,000) -- (216,000)
Prepaid expenses and other current assets 116,000 (55,000) (56,000)
Notes receivable-employees, net 283,000 1,000 (128,000)
Accounts payable (1,489,000) 399,000 (2,311,000)
Accrued liabilities (1,424,000) (195,000) 1,015,000
Accrued interest-related party -- 514,000 1,912,000
------------ ------------ ------------
Cash used in operating activities (12,069,000) (3,570,000) (35,992,000)
------------ ------------ ------------
Cash flows from investing activities:
Purchases of short-term investments (2,993,000) -- (2,993,000)
Purchases of property and equipment (1,448,000) (206,000) (3,859,000)
Proceeds from sale of equipment -- -- 54,000
Advances under convertible bridge
promissory note -- (3,245,000) (3,770,000)
Cash paid in purchase of Mercator -- -- (763,000)
------------ ------------ ------------
Cash used in investing activities (4,441,000) (3,451,000) (11,331,000)
------------ ------------ ------------
Cash flows from financing activities:
Proceeds from note payable-related party -- 4,813,000 20,555,000
Proceeds from convertible debenture-related
party -- -- 437,000
Proceeds from bridge loan-related party -- 3,245,000 3,665,000
Proceeds from long-term debt 1,900,000 -- 1,900,000
Deferred offering and acquisition costs -- (1,059,000) --
Proceeds from issuance of stock, net 251,000 6,000 25,246,000
Proceeds from payments received on stock
subscription note 500,000 -- 500,000
Proceeds from capital lease financings 890,000 295,000 2,584,000
Principal payments on capital lease financings (502,000) (251,000) (1,362,000)
------------ ------------ ------------
Cash provided by financing activities 3,039,000 7,049,000 53,525,000
------------ ------------ ------------
Net increase (decrease) in cash and cash
equivalents (13,471,000) 28,000 6,202,000
Cash and cash equivalents, beginning of period 19,673,000 22,000 --
------------ ------------ ------------
Cash and cash equivalents, end of period $ 6,202,000 $ 50,000 $ 6,202,000
============ ============ ============
</TABLE>
The accompanying notes are an integral part of the unaudited condensed
consolidated financial statements.
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PROGENITOR, INC. (A DEVELOPMENT STAGE COMPANY)
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. Basis of Presentation
The unaudited condensed consolidated financial statements included herein
have been prepared by Progenitor, Inc. (the "Company") in accordance with
generally accepted accounting principles for interim information and pursuant to
the rules and regulations of the Securities and Exchange Commission. In the
opinion of management, the accompanying unaudited condensed consolidated
financial statements include all adjustments (consisting only of normal
recurring adjustments) necessary to present fairly the financial position,
results of operations and cash flows of the Company. The condensed consolidated
financial statements included herein should be read in conjunction with the
audited consolidated financial statements and the notes thereto included in the
Company's Form 10-K for the fiscal year ended September 30, 1997. Results for
the interim period are not necessarily indicative of the results for any other
interim period or for the full fiscal year.
The unaudited condensed consolidated financial statements have been
prepared assuming that the Company will continue as a going concern. The Company
is in the development stage and has incurred losses from operations and an
accumulated deficit that raise substantial doubt about its ability to continue
as a going concern.
The Company expects negative cash flow from operations to continue for the
foreseeable future. The Company will require substantial additional funds to
continue research and development, conduct preclinical studies and clinical
trials, conduct activities relating to commercialization of rights it has
retained in collaborative or license agreements, if any, and expand
administrative capabilities. The Company estimates that, at its planned rate of
spending, its existing cash and cash equivalents will be sufficient to meet its
funding requirements until approximately March 1999. In order to achieve this
result, however, the Company will need to closely manage the rate of
expenditures for all of its research programs. Although the Company anticipates
that its existing cash balances will be sufficient to meet its funding
requirements for its primary research programs for approximately the next nine
months, the Company may be required to curtail the expansion of, or to reduce
the level of expenditures for, certain of its other research programs in the
future or to seek corporate collaborations with respect to such programs at an
earlier stage than would be required if the Company had greater financial
resources or to obtain other funding. There can be no assurance that any such
corporate collaboration will be obtained on terms favorable to the Company or at
all or that any such funding will be available on terms favorable to the Company
or at all. In addition, there can be no assurance that the Company's assumptions
regarding its future levels of expenditures and operating losses will prove
accurate.
The Company's future funding requirements will depend on many factors,
including any expansion or acceleration of the Company's research and
development programs; the results of research and development, preclinical
studies and clinical trials conducted by the Company or its collaborative
partners or licensees, if any; the acquisition and licensing of products and
technologies or businesses, if any; the Company's ability to establish and
maintain corporate relationships and academic collaborations; the Company's
ability to manage growth; competing technological and market developments; the
time and costs involved in filing, prosecuting, defending and enforcing patent
and intellectual property claims; the receipt of licensing or milestone fees
from any current or future collaborative and licensing arrangements, if
established; the continued funding of governmental research grants; the timing
of regulatory approvals, if any; and other factors. To the extent undertaken by
the Company, the time and costs involved in conducting preclinical studies and
clinical trials, seeking regulatory approvals, and
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scaling-up manufacturing and commercialization activities also would increase
the Company's funding requirements.
The Company will need to raise substantial additional capital to fund
operations beyond March 1999. The Company is currently seeking additional
funding through public or private equity or debt financing and collaborative
arrangements. There can be no assurance that additional financing will be
available when needed, or that, if available, such financing will be available
on terms acceptable to the Company. If additional funds are raised by issuing
equity securities, dilution to existing stockholders will result. In addition,
in the event that additional funds are obtained through collaborative or license
arrangements, such arrangements may require the Company to relinquish rights to
certain of its technologies or potential products that it would otherwise seek
to develop or commercialize itself. There can be no assurance that the Company
will be able to successfully consummate a debt or equity financing.
These factors raise substantial doubt about the Company's ability to
continue as a going concern. Accordingly, the unaudited condensed consolidated
financial statements do not include any adjustments that might result from the
outcome of this uncertainty. The effects of any such adjustments, if necessary,
could be material.
2. Short-Term Investments
The Company has classified its short-term investments as
available-for-sale. Such investments are recorded at fair value and unrealized
gains and losses, when material, are reported as a separate component of
stockholders' equity. Realized gains and losses on sales of such securities are
reported in earnings and computed using the specific identification method.
3. Net Loss per Share
Effective December 31, 1997, the Company adopted Financial Accounting
Standards Board No. 128 "Earnings Per Share" (EPS) and, accordingly, all prior
periods have been restated. Basic EPS is computed as net income (loss) divided
by the weighted average number of common shares outstanding for the period.
Stock options to purchase 2,498,965 and 736,489 shares of common stock at prices
ranging from $0.20 to $1.875 and from $.20 to $5.50 were outstanding at June 30,
1998 and 1997, respectively, and were not included in the calculation of
earnings per share as their effect was anti-dilutive. Additionally, at June 30,
1997, 2,369,496 shares of convertible preferred stock, representing 3,074,767
shares of common stock on an as-converted basis, were excluded from the
calculation of earnings per share as their effect was anti-dilutive.
4. Stock Subscription Promissory Note Receivable
In December 1997, Amgen Inc. paid $500,000 of the outstanding balance of
its stock subscription promissory note receivable by the Company, in accordance
with the terms of the note. The remainder of the note is scheduled to be repaid
in December 1998.
5. Long Term Financing Arrangements
On May 13, 1998, the Company entered into two agreements with Transamerica
Business Credit ("Transamerica"). The first agreement relates to an equipment
lease line of $1.2 million, through which the Company has received $890,000 in a
sale-leaseback transaction. Under the second agreement, the Company received
$1.9 million, representing the total future license fees due under an agreement
which called for license fees to be received over six years. The Company has
pledged these guaranteed receipts as collateral for the loan along with certain
other personal and intellectual property. The note carries an interest rate of
14.75% per year. In conjunction with the agreement, the Company issued
Transamerica warrants to purchase 108,571 shares of common stock at a strike
price of $1.75 per share. The warrants had a fair value of approximately $1.38
per warrant at the time of issuance. The fair value has been reflected in the
financial statements as a
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discount to the debt and will be accreted and recorded as interest expense over
the life of the note. The warrants expire on May 13, 2005.
6. Revenue
Revenue in the three and nine month periods ended June 30, 1998 included
$19,000 in royalties under a licensing agreement with SmithKline Beecham
Clinical Laboratories. The Company recognizes revenue under the agreement when
earned. Also included in revenue in the three and nine month periods is $86,000
and $346,000, respectively, of grant revenue under the Company's ATP grant,
which expired in May 1998.
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PROGENITOR, INC. (A DEVELOPMENT STAGE COMPANY)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
- --------------------------------------------------------------------------------
The following discussion is intended to assist in the understanding and
assessment of significant changes and trends related to the results of
operations and financial condition of Progenitor, Inc., ("Progenitor" or the
"Company"). This discussion and analysis should be read in conjunction with the
Company's Unaudited Condensed Consolidated Financial Statements and Notes
thereto included herein, and with the Consolidated Financial Statements and
Notes thereto included in the Company's Form 10-K for the fiscal year ended
September 30, 1997.
In addition to historical information, the following management's
discussion and analysis includes certain forward-looking statements regarding
events and financial trends which may affect the Company's future operating
results and financial position. These forward-looking statements include but are
not limited to statements regarding: future sources of revenue; uncertainty of
product development; uncertainty of additional funding; and liquidity and
capital resources. Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date hereof. The Company
undertakes no obligation to publicly release the result of any revisions to
these forward-looking statements to reflect events or circumstances after the
date hereof or to reflect the occurrence of unanticipated events.
The forward-looking statements included herein are also subject to a number
of other risks and uncertainties that could cause the Company's actual results
and financial position to differ materially from those anticipated in the
forward-looking statements. Such risks and uncertainties include, but are not
limited to: uncertainties relating to the technological approaches of the
Company; history of operating losses and anticipation of future losses;
uncertainty of product development; need for additional capital and uncertainty
of additional funding; dependence on collaborators and licensees; intense
competition and rapid technological change; uncertainty of patents and
proprietary rights; management of growth, and risks of acquiring new
technologies; uncertainties related to clinical trials; government regulation
and uncertainty of obtaining regulatory approval; dependence on key personnel;
dependence on research collaborators and scientific advisors; control of the
Company by, and potential conflicts of interest with, Interneuron
Pharmaceuticals, Inc. ("Interneuron"); uncertainty of health care reform
measures and third-party reimbursement; risk of product liability; no assurance
of an active trading market and potential volatility of trading prices; possible
delisting from the Nasdaq National Market and market illiquidity; redemption of
warrants; current prospectus required to exercise the warrants; anti-takeover
considerations; hazardous and radioactive materials and environmental matters;
and the absence of dividends. Due to the foregoing factors, it is possible that
in some future period the Company's results of operations may be below the
expectations of public market analysts and investors. These and other risks and
uncertainties related to the Company's business are described in detail in the
Company's Form 10-K for the fiscal year ended September 30, 1997 under the
caption "Factors That May Affect Future Financial Results."
OVERVIEW
A development stage company, Progenitor was incorporated in February 1992
and commenced operations in May 1992. Progenitor has devoted substantially all
of its resources since inception to research and development programs. To date,
all of Progenitor's revenues have resulted from payments from collaborators and
licensees and a grant from the U.S. Department of Commerce's National Institute
of Standards and Technology Advanced Technology Program ("ATP") that was awarded
to Progenitor in November 1994. Royalties, payments from collaborators, license
fees, payments under governmental grants and investment income, in each case, if
any, are expected to be the only sources
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of revenue for the foreseeable future. Certain payments under collaborative and
license arrangements are contingent upon the Company meeting certain milestones.
Payments under collaborative or licensing arrangements, if any, will be subject
to significant fluctuation in both timing and amount, and therefore the
Company's results of operations for any period may not be comparable to the
results of operations for any other period. The Company has not yet received any
significant royalties or other revenues from the sale of products or services
and does not expect to receive significant revenues from sales of products for
the next several years, if at all. As of June 30, 1998, Progenitor had total
stockholders' equity of $6.3 million, including an accumulated deficit of $73.3
million.
Significant discovery, research and development efforts will be required
prior to the time any of the Company's gene discoveries may lead to product
candidates or result in products that may be brought to the market, if at all.
Products, if any, resulting from the Company's research and development programs
are not expected to be commercially available for a number of years, if at all,
even if any are successfully developed and proven safe and effective.
Significant additional research and development efforts and extensive
preclinical studies and clinical trials will be required prior to submission of
any regulatory application for commercial use.
RESULTS OF OPERATIONS
The Company recognized ATP grant revenue of $86,000 and $346,000 in the
three and nine month periods ended June 30, 1998 respectively. In the comparable
periods of the prior year total revenue was $232,000 and $1,091,000,
respectively. Other than a $500,000 milestone payment from Chiron in the nine
month period ended June 30, 1997, revenues in the 1997 periods were derived from
the ATP grant. The Company's ATP grant expired in May 1998. Revenue in the three
and nine month periods of 1998 also included $19,000 in royalties under a
licensing agreement with SmithKline Beecham Clinical Laboratories.
Research and development ("R&D") expenses increased 161% to $3.0 million in
the quarter ended June 30, 1998 from $1.1 million in the quarter ended June 30
1997. R&D expenses increased 158% to $8.5 million in the nine month period ended
June 30, 1998 from $3.3 million in the comparable period in the prior year. The
increase is primarily the result of increased staffing and research activity due
to the acquisition of Mercator Genetics, Inc. ("Mercator"). The Company expects
R&D expenses in the remainder of fiscal 1998 to continue to exceed 1997 levels
as a result of the Mercator acquisition. Further increases in R&D expenses in
future periods based on the expansion or proliferation of research programs will
depend on the availability of capital.
General and administrative ("G&A") expenses increased 77% to $828,000 in
the quarter ended June 30, 1998 from $469,000 in the quarter ended June 30,
1997. G&A expenses increased 64% to $2.8 million in the nine month period ended
June 30, 1998 from $1.7 million in the comparable period in the prior year. The
increase is due to higher headcount resulting from the Mercator acquisition, as
well as incremental corporate expenses incurred as a result of operating as a
publicly held company. The Company expects G&A expenses to continue to increase
in the future, depending on the level of R&D spending.
Related party interest expense of $249,000 and $514,000 in the three and
nine month periods ended June 30 1997, respectively, arose from a promissory
note owed Interneuron until the Company's initial public offering (the
"Offering") in August 1997. Other interest expense increased to $98,000 and
$192,000 in the three and nine month periods ended June 30, 1998, respectively,
from $17,000 and $39,000 in the comparable three and nine month periods,
respectively, in the prior year, due to the Company's assumption of Mercator's
capital lease obligations, and, to a lesser extent, the new long term financing
obligations entered into with Transamerica in May 1998 (see note 5 in Notes to
Condensed Consolidated Financial Statements in Part I, Item 1). During the three
and
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nine month periods ended June 30, 1998 the Company recorded $139,000 and
$540,000, respectively, of interest and other income primarily from interest
earned on cash balances.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 1998, the Company had cash, cash equivalents and short-term
investments of $9.2 million, a decrease of $10.5 million from September 30,
1997. The Company used $12.1 million of cash to fund operating activities, and
purchased property and equipment of $1.4 million. The Company received proceeds
of $2.8 million from long term debt and capital lease financings from
Transamerica. Accounts payable and accrued liabilities decreased $2.9 million in
the nine month period ended June 30, 1998, resulting from the payment of
liabilities outstanding at the end of the 1997 fiscal year relating to the
Mercator acquisition and the Offering, both of which were completed in the
fourth quarter of fiscal 1997.
The Company expects negative cash flow from operations to continue for the
foreseeable future. The Company will require substantial additional funds to
continue research and development, conduct preclinical studies and clinical
trials, conduct activities relating to commercialization of rights it has
retained in collaborative or license agreements, if any, and expand
administrative capabilities. The Company estimates that, at its planned rate of
spending, its existing cash and cash equivalents will be sufficient to meet its
funding requirements until approximately March 1999. In order to achieve this
result, however, the Company will need to closely manage the rate of
expenditures for all of its research programs. Although the Company anticipates
that its existing cash balances will be sufficient to meet its funding
requirements for its primary research programs for approximately the next nine
months, the Company may be required to curtail the expansion of, or to reduce
the level of expenditures for, certain of its other research programs in the
future or to seek corporate collaborations with respect to such programs at an
earlier stage than would be required if the Company had greater financial
resources or to obtain other funding. There can be no assurance that any such
corporate collaboration will be obtained on terms favorable to the Company or at
all or that any such funding will be available on terms favorable to the Company
or at all. In addition, there can be no assurance that the Company's assumptions
regarding its future levels of expenditures and operating losses will prove
accurate.
The Company's future funding requirements will depend on many factors,
including any expansion or acceleration of the Company's research and
development programs; the results of research and development, preclinical
studies and clinical trials conducted by the Company or its collaborative
partners or licensees, if any; the acquisition and licensing of products and
technologies or businesses, if any; the Company's ability to establish and
maintain corporate relationships and academic collaborations; the Company's
ability to manage growth; competing technological and market developments; the
time and costs involved in filing, prosecuting, defending and enforcing patent
and intellectual property claims; the receipt of licensing or milestone fees
from any current or future collaborative and licensing arrangements, if
established; the continued funding of governmental research grants; the timing
of regulatory approvals, if any; and other factors. To the extent undertaken by
the Company, the time and costs involved in conducting preclinical studies and
clinical trials, seeking regulatory approvals, and scaling-up manufacturing and
commercialization activities also would increase the Company's funding
requirements.
The Company will need to raise substantial additional capital to fund
operations beyond March 1999. The Company is currently seeking additional
funding through public or private equity or debt financing and collaborative
arrangements. There can be no assurance that additional financing will be
available when needed, or that, if available, such financing will be available
on terms acceptable to the Company. If additional funds are raised by issuing
equity securities, dilution to existing stockholders will result. In addition,
in the
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event that additional funds are obtained through collaborative or license
arrangements, such arrangements may require the Company to relinquish rights to
certain of its technologies or potential products that it would otherwise seek
to develop or commercialize itself. There can be no assurance that the Company
will be able to successfully consummate a debt or equity financing.
IMPACT OF THE YEAR 2000 ISSUE
The Year 2000 issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Any programs that
have time-sensitive software may recognize a date using "00" as the year 1900
rather than the year 2000. This could result in a major system failure or
miscalculations. The Company is currently engaged in a two-phase process to
evaluate its internal status with respect to the Year 2000 issue. In the first
phase, which the Company expects to complete in the first quarter of fiscal
1999, the Company is conducting an evaluation of its systems, including both
information technology ("IT") systems and non-IT systems such as hardware
containing embedded technology, for Year 2000 compliance. The Company has
completed a significant portion of this phase to date, and systems that have
been evaluated are either Year 2000 compliant or are expected to be made
compliant at an immaterial cost to the Company. Although the Company does not
expect that the impact of the Year 2000 issue will be material in systems still
under evaluation, there can be no assurance that the Company will not discover
Year 2000 issues in the course of its evaluation process that would have a
material adverse effect on the business, financial condition or results of
operations of the Company.
Phase two of the process, which is expected to be completed during the
fourth quarter of fiscal 1999, will involve taking any needed corrective action
to bring systems into compliance and to develop a contingency plan in the event
any non-compliant critical systems remain by January 1, 2000. As part of this
phase, the Company will attempt to quantify the impact, if any, of the failure
to complete any necessary corrective action. Although the Company cannot
currently estimate the magnitude of such impact, if systems material to the
Company's operations have not been made Year 2000 compliant upon completion of
this phase, the Year 2000 issue could have a material adverse effect on the
Company's business, financial condition and results of operations.
To date, the costs incurred by the Company with respect to this process have
not been material. Future costs will remain difficult to estimate until the
completion of phase one; however, the Company does not currently anticipate that
such costs will be material.
Concurrently with the two-phase analysis of its internal systems, the
Company has begun to survey third-party entities with which the Company
transacts business, including critical vendors and financial institutions, for
Year 2000 compliance. The Company expects to complete this survey in the second
quarter of fiscal 1999. At this time the Company cannot estimate the effect, if
any, that non-compliant systems at these entities could have on the business,
financial condition or results of operations of the Company, and there can be no
assurance that the impact, if any, will not be material.
12
<PAGE> 13
PART II. OTHER INFORMATION
- --------------------------------------------------------------------------------
Item 1. LEGAL PROCEEDINGS
The Company is not currently a party to any litigation that could have a
material adverse effect on its business, financial condition or results of
operations. However, from time to time the Company may be threatened with, or
named as a defendant in, lawsuits, including administrative claims and lawsuits
brought by employees or former employees.
Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
(d) Use of Proceeds
As described above in "Management's Discussion and Analysis of Financial
Condition and Results of Operations," the Company has completed the Offering.
The following information relates to the use of proceeds of the Offering:
(1) Effective Date of Registration Statement and Commission File Number.
The Company's Registration Statement on Form S-1, File No. 333-05369 (the
"Registration Statement"), relating to the Offering, became effective on August
6, 1997.
(2) Offering Date. The initial closing date of the Offering was August 12,
1997. A subsequent closing in connection with the partial exercise by the
Underwriters of the Offering of their over-allotment option occurred on
September 10, 1997.
(3) Managing Underwriters. Lehman Brothers Inc.
(4) Securities Registered and Proposed Aggregate Offering Price. The
Company registered a total of 3,162,500 Units, each Unit consisting of one share
of Common Stock ("Unit Share") and one Warrant, and 3,162,500 shares of Common
Stock issuable upon exercise of the Warrants (the "Warrant Shares"). The
proposed maximum aggregate offering price was $37,950,000 for the Units and
$56,925,000 for the Warrant Shares.
(5) Securities Sold. A total of 2,875,000 Units were sold pursuant to the
Offering. This consisted of 2,750,000 Units sold on August 12, 1997 upon the
initial closing of the Offering, and 125,000 Units sold on September 10, 1997
pursuant to the partial exercise, at the request of Lehman Brothers Inc. as
managing underwriter, of the over-allotment option granted to the Underwriters.
None of the Warrants had been exercised as of August 14, 1998, and consequently
no Warrant Shares had been sold. The Company intends to maintain the
effectiveness of the Registration Statement to the extent required by the terms
of the Warrants with respect to the 2,875,000 Warrant Shares issuable upon
exercise of the Warrants actually sold.
(6) Aggregate Gross Proceeds, Expenses and Aggregate Net Proceeds. The sale
of the 2,875,000 Units generated aggregate gross proceeds of $20,125,000,
consisting of $15,453,125 from the sale of the Unit Shares (at a price of $5.375
per share) and $4,671,875 from the sale of the Warrants (at a price of $1.625
per Warrant). The aggregate net proceeds to the Company from the sale of the
2,875,000 Units were approximately $17,200,000, after deducting underwriting
discounts and commissions of approximately $1,200,000 and estimated expenses of
the Offering of approximately $1,700,000 payable by the Company. The Company
also received $4,500,000 in cash and a $1,000,000 promissory note from the sale
of the Amgen Shares ($500,000 of which was paid by Amgen in December 1997), and
approximately $67,000 in cash from the sale of 25,000 shares of Common Stock to
The Ohio University Foundation, pursuant to a stock purchase right.
(7) Use of Proceeds. Through June 30, 1998, the Company used $9,529,000 of
the net proceeds of the Offering, together with the cash proceeds received from
the sale of the
13
<PAGE> 14
Amgen Shares and the sale of 25,000 shares of Common Stock to The Ohio
University Foundation, for research and development, and $3,053,000 of such
proceeds for administration. In addition, the Company used a portion of such net
proceeds as follows: (i) approximately $579,000 to pay expenses relating to
employee benefit and retention plans relating to the Acquisition; (ii)
approximately $2,776,000 legal, accounting and other costs incurred in the
Acquisition and related Form S-4 registration statement; (iii) approximately
$372,000 to facilitate employee relocation to Mercator's facility in California;
(iv) approximately $389,000 for other costs such as benefit costs, the
consolidation of operations, the elimination of duplicate systems and
facilities, and other integration costs; and (v) approximately $1,448,000 for
purchases of property and equipment. The Company anticipates using the balance
of such net proceeds primarily for research and development, and also for the
expansion or upgrade of facilities for the acquisition of equipment and for
working capital and other general corporate purposes. The Company also may use
such proceeds for other purposes, including the acquisition of technology
rights, products, equipment, businesses or assets of other companies. At June
30, 1998, the Company had approximately $4,852,000 of such proceeds remaining,
held in cash and cash equivalents.
The amounts actually expended for each purpose, including the allocation of
funding among the Company's research programs, will depend on numerous factors,
including any expansion or acceleration and the breadth of the Company's
research and development programs; the results of research and development,
preclinical studies and clinical trials conducted by the Company or its
collaborative partners or licensees, if any; the acquisition and licensing of
products and technologies or businesses, if any; the Company's ability to
establish and maintain corporate relationships and academic collaborations; the
Company's ability to manage growth; competing technological and market
developments; the time and costs involved in filing, prosecuting, defending and
enforcing patent and intellectual property claims; the receipt of licensing or
milestone fees from any current or future collaborative and license
arrangements, if established; the continued funding of governmental research
grants; the timing of regulatory approvals; and other factors.
ITEM 5. OTHER MATTERS
Any stockholder proposal submitted with respect to the Company's 1999
Annual Meeting of Stockholders, which proposal is submitted outside the
requirements of rule 14a-8 under the Securities Exchange Act of 1934, will be
considered untimely for purposes of Rule 14a-4 and Rule 14a-5 if notice
thereof is received by the Company after December 19, 1998.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
4.7 Stock Subscription Warrant issued to Transamerica
Business Credit Corporation, dated May 13, 1998
10.45 Master Lease Agreement, dated as of May 1, 1998, by
and between the Company and Transamerica Business
Credit Corporation.
10.46 Security Agreement, dated as of May 4, 1998, by and
between the Company and Transamerica Business Credit
Corporation.
10.47 Sale and Leaseback Agreement, dated as of May 6, 1998,
by and between the Company and Transamerica Business
Credit Corporation.
27.1 Financial Data Schedule
</TABLE>
(b) Reports on Form 8-K
None.
14
<PAGE> 15
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.
PROGENITOR, INC.
August 14, 1998 /s/ Mark N.K. Bagnall
- --------------- ---------------------------
Date Mark N.K. Bagnall
Vice President, Finance
and Chief Financial Officer
15
<PAGE> 16
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
4.7 Stock Subscription Warrant issued to Transamerica
Business Credit Corporation, dated May 13, 1998.
10.45 Master Lease Agreement, dated as of May 1, 1998, by
and between the Company and Transamerica Business
Credit Corporation.
10.46 Security Agreement, dated as of May 4, 1998, by and
between the Company and Transamerica Business Credit
Corporation.
10.47 Sale and Leaseback Agreement, dated as of May 6, 1998,
by and between the Company and Transamerica Business
Credit Corporation.
27.1 Financial Data Schedule.
</TABLE>
16
<PAGE> 1
EXHIBIT 4.7
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD OR OFFERED FOR SALE
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER
SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR THE AVAILABILITY OF AN
EXEMPTION FROM REGISTRATION UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES
LAWS.
NO.
STOCK SUBSCRIPTION WARRANT
TO PURCHASE COMMON STOCK OF
PROGENITOR, INC. (THE "COMPANY")
DATE OF INITIAL ISSUANCE: MAY 13, 1998
THIS CERTIFIES THAT for value received, TRANSAMERICA BUSINESS CREDIT
CORPORATION or its registered assigns (hereinafter called the "Holder") is
entitled to purchase from the Company, at any time during the Term of this
Warrant, One Hundred Eight Thousand Five Hundred Seventy-One (108,571) shares of
common stock, $.001 par value, of the Company (the "Common Stock"), at the
Warrant Price, payable as provided herein. The exercise of this Warrant shall be
subject to the provisions, limitations and restrictions herein contained, and
may be exercised in whole or in part.
SECTION 1. DEFINITIONS.
For all purposes of this Warrant, the following terms shall have the
meanings indicated:
COMMON STOCK - shall mean and include the Company's authorized Common
Stock, $.001 par value, as constituted at the date hereof.
EXCHANGE ACT - shall mean the Securities Exchange Act of 1934, as
amended from time to time.
SECURITIES ACT - the Securities Act of 1933, as amended.
TERM OF THIS WARRANT - shall mean the period beginning on the date of
initial issuance hereof and ending on May 13, 2005.
WARRANT PRICE - $1.75 per share, subject to adjustment in accordance
with Section 5 hereof.
WARRANTS - this Warrant and any other Warrant or Warrants issued in
connection with a Commitment Letter dated March 17, 1998 executed by the Company
and Transamerica Business Credit Corporation (the "Commitment Letter") to the
original holder of this Warrant, or any transferees from such original holder or
this Holder.
WARRANT SHARES - shares of Common Stock purchased or purchasable by the
Holder of this Warrant upon the exercise hereof.
<PAGE> 2
SECTION 2. EXERCISE OF WARRANT.
2.1. PROCEDURE FOR EXERCISE OF WARRANT. To exercise this Warrant in
whole or in part (but not as to any fractional share of Common Stock), the
Holder shall deliver to the Company at its office referred to in Section 12
hereof at any time and from time to time during the Term of this Warrant: (i)
the Notice of Exercise in the form attached hereto, (ii) cash, certified or
official bank check payable to the order of the Company, wire transfer of funds
to the Company's account, or evidence of any indebtedness of the Company to the
Holder (or any combination of any of the foregoing) in the amount of the Warrant
Price for each share being purchased, and (iii) this Warrant. Notwithstanding
any provisions herein to the contrary, if the Current Market Price (as defined
in Section 5) is greater than the Warrant Price (at the date of calculation, as
set forth below), in lieu of exercising this Warrant as hereinabove permitted,
the Holder may elect to receive shares of Common Stock equal to the value (as
determined below) of this Warrant (or the portion thereof being canceled) by
surrender of this Warrant at the office of the Company referred to in Section 12
hereof, together with the Notice of Exercise, in which event the Company shall
issue to the Holder that number of shares of Common Stock computed using the
following formula:
CS = WCS x (CMP-WP)
--------------
CMP
Where
CS equals the number of shares of Common Stock to be issued to the
Holder
WCS equals the number of shares of Common Stock purchasable under
the Warrant or, if only a portion of the Warrant is being
exercised, the portion of the Warrant being exercised (at the
date of such calculation)
CMP equals the Current Market Price (at the date of such
calculation)
WP equals the Warrant Price (as adjusted to the date of such
calculation)
In the event of any exercise of the rights represented by this Warrant, a
certificate or certificates for the shares of Common Stock so purchased,
registered in the name of the Holder or such other name or names as may be
designated by the Holder, shall be delivered to the Holder hereof within a
reasonable time, not exceeding fifteen (15) days, after the rights represented
by this Warrant shall have been so exercised; and, unless this Warrant has
expired, a new Warrant representing the number of shares (except a remaining
fractional share), if any, with respect to which this Warrant shall not then
have been exercised shall also be issued to the Holder hereof within such time.
The person in whose name any certificate for shares of Common Stock is issued
upon exercise of this Warrant shall for all purposes be deemed to have become
the holder of record of such shares on the date on which the Warrant was
surrendered and payment of the Warrant Price and any applicable taxes was made,
irrespective of the date of delivery of such certificate, except that, if the
date of such surrender and payment is a date when the stock transfer books of
the Company are closed, such person shall be deemed to have become the holder of
such shares at the close of business on the next succeeding date on which the
stock transfer books are open.
2.2. TRANSFER RESTRICTION LEGEND. Each certificate for Warrant Shares
shall bear the following legend (and any additional legend required by (i) any
applicable state securities laws and (ii) any securities exchange upon which
such Warrant Shares may, at the time of such exercise, be listed) on the face
thereof unless at the time of exercise such Warrant Shares shall be registered
under the Securities Act:
-2-
<PAGE> 3
"The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended, and may not be sold or
transferred in the absence of such registration or an exemption
therefrom under said Act."
Any certificate issued at any time in exchange or substitution for any
certificate bearing such legend (except a new certificate issued upon completion
of a public distribution under a registration statement of the securities
represented thereby) shall also bear such legend unless, in the opinion of
counsel for the holder thereof (which counsel shall be reasonably satisfactory
to counsel for the Company) the securities represented thereby are not, at such
time, required by law to bear such legend.
SECTION 3. COVENANTS AS TO COMMON STOCK. The Company covenants and agrees that
all shares of Common Stock that may be issued upon the exercise of the rights
represented by this Warrant will, upon issuance, be validly issued, fully paid
and nonassessable, and free from all taxes, liens and charges with respect to
the issue thereof. The Company further covenants and agrees that it will pay
when due and payable any and all federal and state taxes which may be payable in
respect of the issue of this Warrant or any Common Stock or certificates
therefor issuable upon the exercise of this Warrant. The Company further
covenants and agrees that the Company will at all times have authorized and
reserved, free from preemptive rights, a sufficient number of shares of Common
Stock to provide for the exercise of the rights represented by this Warrant. The
Company further covenants and agrees that if any shares of capital stock to be
reserved for the purpose of the issuance of shares upon the exercise of this
Warrant require registration with or approval of any governmental authority
under any federal or state law before such shares may be validly issued or
delivered upon exercise, then the Company will in good faith and as
expeditiously as possible endeavor to secure such registration or approval, as
the case may be. If and so long as the Common Stock issuable upon the exercise
of this Warrant is listed on any national securities exchange, the Company will,
if permitted by the rules of such exchange, list and keep listed on such
exchange, upon official notice of issuance, all shares of such Common Stock
issuable upon exercise of this Warrant.
SECTION 4. ADJUSTMENT OF NUMBER OF SHARES. Upon each adjustment of the Warrant
Price as provided in Section 5, the Holder shall thereafter be entitled to
purchase, at the Warrant Price resulting from such adjustment, the number of
shares (calculated to the nearest tenth of a share) obtained by multiplying the
Warrant Price in effect immediately prior to such adjustment by the number of
shares purchasable pursuant hereto immediately prior to such adjustment and
dividing the product thereof by the Warrant Price resulting from such
adjustment.
SECTION 5. ADJUSTMENT OF WARRANT PRICE. The Warrant Price shall be subject to
adjustment from time to time as follows:
(i) If, at any time during the Term of this Warrant, the number of
shares of Common Stock outstanding is increased by a stock dividend payable in
shares of Common Stock or by a subdivision or split-up of shares of Common
Stock, then, following the record date fixed for the determination of holders of
Common Stock entitled to receive such stock dividend, subdivision or split-up,
the Warrant Price shall be appropriately decreased so that the number of shares
of Common Stock issuable upon the exercise hereof shall be increased in
proportion to such increase in outstanding shares.
(ii) If, at any time during the Term of this Warrant, the number of
shares of Common Stock outstanding is decreased by a combination of the
outstanding shares of Common Stock, then, following the record date for such
combination, the Warrant Price shall appropriately increase so that the number
of shares of Common Stock issuable upon the exercise hereof shall be decreased
in proportion to such decrease in outstanding shares.
-3-
<PAGE> 4
(iii) In case, at any time during the Term of this Warrant, the Company
shall declare a cash dividend upon its Common Stock payable otherwise than out
of earnings or earned surplus or shall distribute to holders of its Common Stock
shares of its capital stock (other than Common Stock), stock or other securities
of other persons, evidences of indebtedness issued by the Company or other
persons, assets (excluding cash dividends and distributions) or options or
rights (excluding options to purchase and rights to subscribe for Common Stock
or other securities of the Company convertible into or exchangeable for Common
Stock), then, in each such case, immediately following the record date fixed for
the determination of the holders of Common Stock entitled to receive such
dividend or distribution, the Warrant Price in effect thereafter shall be
determined by multiplying the Warrant Price in effect immediately prior to such
record date by a fraction of which the numerator shall be an amount equal to the
difference of (x) the Current Market Price of one share of Common Stock minus
(y) the fair market value (as determined by the Board of Directors of the
Company, whose determination shall be conclusive) of the stock, securities,
evidences of indebtedness, assets, options or rights so distributed in respect
of one share of Common Stock, and of which the denominator shall be such Current
Market Price.
(iv) All calculations under this Section 5 shall be made to the nearest
cent or to the nearest one-tenth (1/10) of a share, as the case may be.
(v) For the purpose of any computation pursuant to this Section 5, the
Current Market Price at any date of one share of Common Stock shall be deemed to
be the average of the daily closing prices for the 15 consecutive business days
ending on the last business day before the day in question (as adjusted for any
stock dividend, split, combination or reclassification that took effect during
such 15 business day period). The closing price for each day shall be the last
reported sales price regular way or, in case no such reported sales took place
on such day, the average of the last reported bid and asked prices regular way,
in either case on the principal national securities exchange on which the Common
Stock is listed or admitted to trading or as reported by Nasdaq (or if the
Common Stock is not at the time listed or admitted for trading on any such
exchange or if prices of the Common Stock are not reported by Nasdaq then such
price shall be equal to the average of the last reported bid and asked prices on
such day as reported by The National Quotation Bureau Incorporated or any
similar reputable quotation and reporting service, if such quotation is not
reported by The National Quotation Bureau Incorporated); provided, however, that
if the Common Stock is not traded in such manner that the quotations referred to
in this clause (v) are available for the period required hereunder, the Current
Market Price shall be determined in good faith by the Board of Directors of the
Company or, if such determination cannot be made, by a nationally recognized
independent investment banking firm selected by the Board of Directors of the
Company (or if such selection cannot be made, by a nationally recognized
independent investment banking firm selected by the American Arbitration
Association in accordance with its rules).
(vi) Whenever the Warrant Price shall be adjusted as provided in Section
5, the Company shall prepare a statement showing the facts requiring such
adjustment and the Warrant Price that shall be in effect after such adjustment.
The Company shall cause a copy of such statement to be sent by mail, first class
postage prepaid, to each Holder of this Warrant at its, his or her address
appearing on the Company's records. Where appropriate, such copy may be given in
advance and may be included as part of the notice required to be mailed under
the provisions of subsection (viii) of this Section 5.
(vii) Adjustments made pursuant to clauses (i), (ii) and (iii) above
shall be made on the date such dividend, subdivision, split-up, combination or
distribution, as the case may be, is made, and shall become effective at the
opening of business on the business day next following the record date for the
determination of stockholders entitled to such dividend, subdivision, split-up,
combination or distribution.
-4-
<PAGE> 5
(viii) In the event the Company shall propose to take any action of the
types described in clauses (i), (ii), or (iii) of this Section 5, the Company
shall forward, at the same time and in the same manner, to the Holder of this
Warrant such notice, if any, which the Company shall give to the holders of
capital stock of the Company.
(ix) In any case in which the provisions of this Section 5 shall require
that an adjustment shall become effective immediately after a record date for an
event, the Company may defer until the occurrence of such event issuing to the
Holder of all or any part of this Warrant which is exercised after such record
date and before the occurrence of such event the additional shares of capital
stock issuable upon such exercise by reason of the adjustment required by such
event over and above the shares of capital stock issuable upon such exercise
before giving effect to such adjustment exercise; provided, however, that the
Company shall deliver to such Holder a due bill or other appropriate instrument
evidencing such Holder's right to receive such additional shares upon the
occurrence of the event requiring such adjustment.
SECTION 6. OWNERSHIP.
6.1. OWNERSHIP OF THIS WARRANT. The Company may deem and treat the
person in whose name this Warrant is registered as the holder and owner hereof
(notwithstanding any notations of ownership or writing hereon made by anyone
other than the Company) for all purposes and shall not be affected by any notice
to the contrary until presentation of this Warrant for registration of transfer
as provided in this Section 6.
6.2. TRANSFER AND REPLACEMENT. This Warrant and all rights hereunder are
transferable in whole or in part upon the books of the Company by the Holder
hereof in person or by duly authorized attorney, and a new Warrant or Warrants,
of the same tenor as this Warrant but registered in the name of the transferee
or transferees (and in the name of the Holder, if a partial transfer is
effected) shall be made and delivered by the Company upon surrender of this
Warrant duly endorsed, at the office of the Company referred to in Section 12
hereof. Upon receipt by the Company of evidence reasonably satisfactory to it of
the loss, theft or destruction, and, in such case, of indemnity or security
reasonably satisfactory to it, and upon surrender of this Warrant if mutilated,
the Company will make and deliver a new Warrant of like tenor, in lieu of this
Warrant; provided that if the Holder hereof is an instrumentality of a state or
local government or an institutional holder or a nominee for such an
instrumentality or institutional holder an irrevocable agreement of indemnity by
such Holder shall be sufficient for all purposes of this Section 6, and no
evidence of loss or theft or destruction shall be necessary. This Warrant shall
be promptly cancelled by the Company upon the surrender hereof in connection
with any transfer or replacement. Except as otherwise provided above, in the
case of the loss, theft or destruction of a Warrant, the Company shall pay all
expenses, taxes and other charges payable in connection with any transfer or
replacement of this Warrant, other than stock transfer taxes (if any) payable in
connection with a transfer of this Warrant, which shall be payable by the
Holder. Holder will not transfer this Warrant and the rights hereunder except in
compliance with federal and state securities laws.
SECTION 7. MERGERS, CONSOLIDATION, SALES. In the case of any proposed
consolidation or merger of the Company with another entity, or the proposed sale
of all or substantially all of its assets to another person or entity, or any
proposed reorganization or reclassification of the capital stock of the Company,
then, as a condition of such consolidation, merger, sale, reorganization or
reclassification, lawful and adequate provision shall be made whereby the Holder
of this Warrant shall thereafter have the right to receive upon the basis and
upon the terms and conditions specified herein, in lieu of the shares of the
Common Stock of the Company immediately theretofore purchasable hereunder, such
shares of stock, securities or assets as may (by virtue of such consolidation,
merger, sale, reorganization or reclassification) be issued or payable with
respect to or in exchange for the number of shares of such
-5-
<PAGE> 6
Common Stock purchasable hereunder immediately before such consolidation,
merger, sale, reorganization or reclassification. In any such case appropriate
provision shall be made with respect to the rights and interests of the Holder
of this Warrant to the end that the provisions hereof shall thereafter be
applicable as nearly as may be, in relation to any shares of stock, securities
or assets thereafter deliverable upon the exercise of this Warrant.
SECTION 8. NOTICE OF DISSOLUTION OR LIQUIDATION. In case of any distribution of
the assets of the Company in dissolution or liquidation (except under
circumstances when the foregoing Section 7 shall be applicable), the Company
shall give notice thereof to the Holder hereof and shall make no distribution to
shareholders until the expiration of thirty (30) days from the date of mailing
of the aforesaid notice and, in any case, the Holder hereof may exercise this
Warrant within thirty (30) days from the date of the giving of such notice, and
all rights herein granted not so exercised within such thirty-day period shall
thereafter become null and void.
SECTION 9. NOTICE OF EXTRAORDINARY DIVIDENDS. If the Board of Directors of the
Company shall declare any dividend or other distribution on its Common Stock
except out of earned surplus or by way of a stock dividend payable in shares of
its Common Stock, the Company shall mail notice thereof to the Holder hereof not
less than thirty (30) days prior to the record date fixed for determining
shareholders entitled to participate in such dividend or other distribution, and
the Holder hereof shall not participate in such dividend or other distribution
unless this Warrant is exercised prior to such record date. The provisions of
this Section 9 shall not apply to distributions made in connection with
transactions covered by Section 7.
SECTION 10. FRACTIONAL SHARES. Fractional shares shall not be issued upon the
exercise of this Warrant but in any case where the Holder would, except for the
provisions of this Section 10, be entitled under the terms hereof to receive a
fractional share upon the complete exercise of this Warrant, the Company shall,
upon the exercise of this Warrant for the largest number of whole shares then
called for, pay a sum in cash equal to the excess of the value of such
fractional share (determined in such reasonable manner as may be prescribed in
good faith by the Board of Directors of the Company) over the Warrant Price for
such fractional share.
SECTION 11. SPECIAL ARRANGEMENTS OF THE COMPANY. The Company covenants and
agrees that during the Term of this Warrant, unless otherwise approved by the
Holder of this Warrant:
11.1. WILL RESERVE SHARES. The Company will reserve and set apart and
have available for issuance at all times, free from preemptive or other
preferential rights, the number of shares of authorized but unissued Common
Stock deliverable upon the exercise of this Warrant.
11.2. WILL NOT AMEND CERTIFICATE. The Company will not amend its
Certificate of Incorporation to eliminate as an authorized class of capital
stock that class denominated as "Common Stock" on the date hereof.
11.3. WILL BIND SUCCESSORS. This Warrant shall be binding upon any
corporation or other person or entity succeeding to the Company by merger,
consolidation or acquisition of all or substantially all of the Company's
assets.
SECTION 12. NOTICES. Any notice or other document required or permitted to be
given or delivered to the Holder shall be delivered at, or sent by certified or
registered mail to, the Holder at Transamerica Technology Finance Division, 76
Batterson Park Road, Farmington, Connecticut 06032, Attention: Assistant Vice
President, Lease Administration, with a copy to the Lender at Riverway II, West
Office Tower, 9399 West Higgins Road, Rosemont, Illinois 60018, Attention: Legal
Department or to such
-6-
<PAGE> 7
other address as shall have been furnished to the Company in writing by the
Holder. Any notice or other document required or permitted to be given or
delivered to the Company shall be delivered at, or sent by certified or
registered mail to, the Company at 4040 Campbell Avenue, Menlo Park, California
94025, Attention: Chief Financial Officer or to such other address as shall have
been furnished in writing to the Holder by the Company. Any notice so addressed
and mailed by registered or certified mail shall be deemed to be given when so
mailed. Any notice so addressed and otherwise delivered shall be deemed to be
given when actually received by the addressee.
SECTION 13. NO RIGHTS AS STOCKHOLDER; LIMITATION OF LIABILITY. This Warrant
shall not entitle the Holder to any of the rights of a shareholder of the
Company except upon exercise in accordance with the terms hereof. No provision
hereof, in the absence of affirmative action by the Holder to purchase shares of
Common Stock, and no mere enumeration herein of the rights or privileges of the
Holder, shall give rise to any liability of the Holder for the Warrant Price
hereunder or as a shareholder of the Company, whether such liability is asserted
by the Company or by creditors of the Company.
SECTION 14. LAW GOVERNING. THE VALIDITY, INTERPRETATION, AND ENFORCEMENT OF THIS
WARRANT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF ILLINOIS WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW PRINCIPLES
THEREOF.
SECTION 15. MISCELLANEOUS. This Warrant and any provision hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by both
parties (or any respective predecessor in interest thereof). The headings in
this Warrant are for purposes of reference only and shall not affect the meaning
or construction of any of the provisions hereof.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officer this 13th day of May, 1998.
PROGENITOR, INC.
[CORPORATE SEAL]
By: /s/ Mark Bagnall
---------------------------
Title: Vice President & CFO
-7-
<PAGE> 8
FORM OF NOTICE OF EXERCISE
[TO BE SIGNED ONLY UPON EXERCISE OF THE WARRANT]
TO BE EXECUTED BY THE REGISTERED HOLDER
TO EXERCISE THE WITHIN WARRANT
The undersigned hereby exercises the right to purchase _________ shares
of Common Stock which the undersigned is entitled to purchase by the terms of
the within Warrant according to the conditions thereof, and herewith
[check one]
[ ] makes payment of $__________ therefor; or
[ ] directs the Company to issue ______
shares, and to withhold ____ shares
in lieu of payment of the Warrant
Price, as described in Section 2.1
of the Warrant.
All shares to be issued pursuant hereto shall be issued in the name of and the
initial address of such person to be entered on the books of the Company shall
be:
The shares are to be issued in certificates of the following
denominations:
-------------------------------
[Type Name of Holder]
By:
----------------------------
Title:
-------------------------
Dated:
-------------------------------
-8-
<PAGE> 9
FORM OF ASSIGNMENT
(ENTIRE)
[TO BE SIGNED ONLY UPON TRANSFER OF ENTIRE WARRANT]
TO BE EXECUTED BY THE REGISTERED HOLDER
TO TRANSFER THE WITHIN WARRANT
FOR VALUE RECEIVED ___________________________ hereby sells, assigns and
transfers unto _______________________________ all rights of the undersigned
under and pursuant to the within Warrant, and the undersigned does hereby
irrevocably constitute and appoint _______________________________ Attorney to
transfer the said Warrant on the books of the Company, with full power of
substitution.
-------------------------------
[Type Name of Holder]
By:
----------------------------
Title:
-------------------------
Dated:
-------------------------------
NOTICE
The signature to the foregoing Assignment must correspond to the name as
written upon the face of the within Warrant in every particular, without
alteration or enlargement or any change whatsoever.
-9-
<PAGE> 10
FORM OF ASSIGNMENT
(PARTIAL)
[TO BE SIGNED ONLY UPON PARTIAL TRANSFER OF WARRANT]
TO BE EXECUTED BY THE REGISTERED HOLDER
TO TRANSFER THE WITHIN WARRANT
FOR VALUE RECEIVED _________________________ hereby sells, assigns and
transfers unto _______________________________ (i) the rights of the undersigned
to purchase ___ shares of Common Stock under and pursuant to the within Warrant,
and (ii) on a non-exclusive basis, all other rights of the undersigned under and
pursuant to the within Warrant, it being understood that the undersigned shall
retain, severally (and not jointly) with the transferee(s) named herein, all
rights assigned on such non-exclusive basis. The undersigned does hereby
irrevocably constitute and appoint __________________________ Attorney to
transfer the said Warrant on the books of the Company, with full power of
substitution.
-------------------------------
[Type Name of Holder]
By:
----------------------------
Title:
-------------------------
Dated:
-------------------------------
NOTICE
The signature to the foregoing Assignment must correspond to the name as
written upon the face of the within Warrant in every particular, without
alteration or enlargement or any change whatsoever.
-10-
<PAGE> 1
EXHIBIT 10.45
CUSTOMER NO. 1118
MASTER LEASE AGREEMENT
Lessor: TRANSAMERICA BUSINESS CREDIT CORPORATION
RIVERWAY II
WEST OFFICE TOWER
WEST HIGGINS
ROSEMONT, ILLINOIS 60018
Lessee: PROGENITOR, INC.
4040 CAMPBELL AVENUE
MENLO PARK, CALIFORNIA 94025
The lessor pursuant to this Master Lease Agreement ("Agreement") dated as of May
1, 1998, is Transamerica Business Credit Corporation ("Lessor"). All equipment,
together with all present and future additions, parts, accessories, attachments,
substitutions, repairs, improvements, and replacements thereof or thereto, which
are the subject of a Lease (as defined in the next sentence) shall be referred
to as "Equipment." Simultaneous with the execution and delivery of this
Agreement, the parties are entering into one or more Lease Schedules (each, a
"Schedule") which refer to and incorporate by reference this Agreement, each of
which constitutes a lease (each, a "Lease") for the Equipment specified therein.
Additional details pertaining to each Lease are specified in the applicable
Schedule. Each Schedule that the parties hereafter enter into shall constitute a
Lease. Except as set forth in the Commitment Letter executed by Lessor and
Lessee, dated as of March 17, 1998 as modified or amended to the date hereof and
attached hereto as Exhibit A (the "Commitment Letter"), Lessor has no obligation
to enter into any additional leases with, or extend any future financing to,
Lessee.
1. LEASE. Subject to and upon all of the terms and conditions of
this Agreement and each Schedule, Lessor hereby agrees to lease to Lessee and
Lessee hereby agrees to lease from Lessor the Equipment for the Term (as defined
in Paragraph 2 below) thereof. The timing and financial scope of Lessor's
obligation to enter into Leases hereunder are limited as set forth in the
Commitment Letter.
2. TERM. Each Lease shall be effective and the term of each Lease
("Term") shall commence on the commencement date specified in the applicable
Schedule and, unless sooner terminated (as hereinafter provided), shall expire
at the end of the term specified in such Schedule; provided, however, that
obligations due to be performed by Lessee during the Term shall continue until
they have been performed in full. Continuing indemnification obligations
hereunder shall not result in an extension of the Term of any Lease. Schedules
will only be executed after the delivery of the Equipment to Lessee or upon
completion of deliveries of items of such Equipment with aggregate cost of not
less than $50,000.
3. RENT. Lessee shall pay as rent to Lessor, for use of the
Equipment during the Term or Renewal Term (as defined in Paragraph 8), rental
payments equal to the sum of all rental payments including, without limitation,
security deposits, advance rents, and interim rents payable in the amounts and
on the dates specified in the applicable Schedule ("Rent"). If any Rent or other
amount payable by Lessee is not paid within five days after the day on which it
becomes payable, Lessee will pay on demand, as a late charge, an amount equal to
5% of such unpaid Rent or other amount but only to the extent permitted by
applicable law. All payments provided for herein shall be payable to Lessor at
its address specified above, or at any other place designated by Lessor.
4. LEASE NOT CANCELABLE; LESSEE'S OBLIGATIONS ABSOLUTE. No Lease
may be canceled or terminated except as expressly provided herein. Lessee's
obligation to pay all Rent due or to become due hereunder shall be absolute and
unconditional and shall not be subject to any delay, reduction, set-off,
defense, counterclaim, or recoupment for any reason whatsoever, including any
failure of the Equipment or any
<PAGE> 2
representations by the manufacturer or the vendor thereof. If the Equipment is
unsatisfactory for any reason, Lessee shall make any claim solely against the
manufacturer or the vendor thereof and shall, nevertheless, pay Lessor all Rent
payable hereunder. Notwithstanding anything to the contrary contained herein,
Lessee reserves the right to seek damages against the appropriate party
resulting from any material breach by Lessor (or any assignee or secured party
under Paragraph 20) of any provision hereof.
5. SELECTION AND USE OF EQUIPMENT. Lessee agrees that it shall be
responsible for the selection and use of, and results obtained from, the
Equipment and any other associated equipment or services.
6. WARRANTIES. LESSOR MAKES NO REPRESENTATION OR WARRANTY,
EXPRESS OR IMPLIED, AS TO ANY MATTER WHATSOEVER, INCLUDING, WITHOUT LIMITATION,
THE DESIGN OR CONDITION OF THE EQUIPMENT OR ITS MERCHANTABILITY, SUITABILITY,
QUALITY, OR FITNESS FOR A PARTICULAR PURPOSE, AND HEREBY DISCLAIMS ANY SUCH
WARRANTY. EXCEPT AS TO THE ABSENCE OF LESSOR LIENS (AS DEFINED IN PARAGRAPH 20
BELOW), LESSEE SPECIFICALLY WAIVES ALL RIGHTS TO MAKE A CLAIM AGAINST LESSOR FOR
BREACH OF ANY WARRANTY WHATSOEVER. LESSEE LEASES THE EQUIPMENT "AS IS." IN NO
EVENT SHALL LESSOR HAVE ANY LIABILITY, NOR SHALL LESSEE HAVE ANY REMEDY AGAINST
LESSOR, FOR ANY LIABILITY, CLAIM, LOSS, DAMAGE, OR EXPENSE CAUSED DIRECTLY OR
INDIRECTLY BY THE EQUIPMENT OR ANY DEFICIENCY OR DEFECT THEREOF OR THE
OPERATION, MAINTENANCE, OR REPAIR THEREOF OR ANY CONSEQUENTIAL DAMAGES AS THAT
TERM IS USED IN SECTION 2-719(3) OF THE MODEL UNIFORM COMMERCIAL CODE, AS
AMENDED FROM TIME TO TIME ("UCC"). Lessor grants to Lessee, for the sole purpose
of prosecuting a claim, the benefits of any and all warranties made available by
the manufacturer or the vendor of the Equipment to the extent assignable.
7. DELIVERY. Lessor hereby appoints Lessee as Lessor's agent for
the sole and limited purpose of accepting delivery of the Equipment from each
vendor thereof. Lessor shall not be liable to Lessee for any delay in, or
failure of, delivery of the Equipment.
8. RENEWAL. So long as no Event of Default or event which, with
the giving of notice, the passage of time, or both, would constitute an Event of
Default, shall have occurred and be continuing, or the Lessee shall not have
exercised its purchase option under Paragraph 9 hereof, each Lease will
automatically renew for a term specified in the applicable Schedule (the
"Renewal Term") on the terms and conditions of this Agreement or as set forth in
such Schedule; provided, however, that Obligations due to be performed by the
Lessee during the Renewal Term shall continue until they have been performed in
full. Continuing indemnification obligations hereunder shall not result in an
extension of the Term or Renewal Term of any Lease.
9. PURCHASE OPTION. So long as no Event of Default or event
which, with the giving of notice, the passage of time, or both, would constitute
an Event of Default, shall have occurred and be continuing, Lessee may, upon
written notice to Lessor received at least ninety days before the expiration of
a Term, purchase all, but not less than all, the Equipment covered by the
applicable Lease on the date specified therefor in the applicable Schedule
("Purchase Date"). The purchase price for such Equipment shall be its Fair
Market Value as defined in the applicable Schedule determined on an "In-place,
In-use" basis, as mutually agreed by Lessor and Lessee, or, if they cannot
agree, as determined by an independent appraiser selected by Lessor and approved
by Lessee, which approval will not be unreasonably delayed or withheld. Lessee
shall pay the cost of any such appraisal. So long as no Event of Default or
event which, with the giving of notice, the passage of time, or both, would
constitute an Event of Default shall have occurred and be continuing, Lessee
may, upon written notice to Lessor received at least ninety days prior to the
expiration of the Renewal Term, purchase all, but not less than all, the
Equipment covered by the applicable Schedule by the last date of the Renewal
Term (the "Alternative Purchase Date") at a purchase price equal to its then
fair market value on an "In-place, In-use" basis. On the Purchase Date or the
Alternative Purchase Date, as the case may be, for any Equipment, Lessee shall
pay to Lessor the purchase price, together with all sales and other taxes
applicable to the transfer of the Equipment and any other amount payable and
arising hereunder, in immediately available funds, whereupon Lessor shall
transfer to Lessee, without recourse or warranty of any kind (except as to the
absence of Lessor Liens), express or implied, all of Lessor's right, title, and
2
<PAGE> 3
interest in and to such Equipment on an "As Is, Where Is" basis.
10. OWNERSHIP; INSPECTION; MARKING; FINANCING STATEMENTS. Lessee
shall affix to the Equipment any labels supplied by Lessor indicating ownership
of such Equipment. The Equipment is and shall be the sole property of Lessor.
Lessee shall have no right, title, or interest therein, except as lessee under a
Lease. Except as to items of Equipment which are tenant improvements, the
Equipment is and shall at all times be and remain personal property and shall
not become a fixture. Lessee shall obtain and record such instruments and take
such steps as may be necessary to prevent any person from acquiring any rights
in the Equipment by reason of the Equipment being claimed or deemed to be real
property. Upon request by Lessor, Lessee shall obtain and deliver to Lessor
valid and effective waivers, in recordable form, by the owners, landlords, and
mortgagees of the real property upon which the Equipment is located or
certificates of Lessee that it is the owner of such real property or that such
real property is neither leased nor mortgaged. Lessee shall make the Equipment
and its maintenance records available for inspection by Lessor at reasonable
times and upon reasonable notice. Lessee shall execute and deliver to Lessor for
filing any UCC financing statements or similar documents Lessor may reasonably
request.
11. EQUIPMENT USE. Lessee agrees that the Equipment will be
operated by competent, qualified personnel in connection with Lessee's business
for the purpose for which the Equipment was designed and in accordance with
applicable operating instructions, laws, and government regulations, and that
Lessee shall use all reasonable precautions to prevent loss or damage to the
Equipment from fire and other hazards. Lessee shall procure and maintain in
effect all orders, licenses, certificates, permits, approvals, and consents
required by federal, state, or local laws or by any governmental body, agency,
or authority in connection with the delivery, installation, use, and operation
of the Equipment.
12. MAINTENANCE. Lessee, at its sole cost and expense, shall keep
the Equipment in a suitable environment as specified by the manufacturer's
guidelines or the equivalent, shall meet all recertification requirements, if
any, and shall maintain the Equipment in its original condition and working
order, ordinary wear and tear excepted. At the reasonable request of Lessor,
Lessee shall furnish all proof of maintenance.
13. ALTERATION; MODIFICATIONS; PARTS. Except with respect to
alterations or modifications which enhance the value of the Equipment, Lessee
may alter or modify the Equipment only with the prior written consent of Lessor.
Except with respect to alterations or modifications which enhance the value of
the Equipment, any alteration shall be removed and the Equipment restored to its
normal, unaltered condition at Lessee's expense (without damaging the
Equipment's originally intended function or its value) prior to its return to
Lessor. Any part installed in connection with warranty or maintenance service or
which cannot be removed in accordance with the preceding sentence shall be the
property of Lessor.
14. RETURN OF EQUIPMENT. Except for Equipment that has suffered a
Casualty Loss (as defined in Paragraph 15 below) and is not required to be
repaired pursuant to Paragraph 15 below or Equipment purchased by Lessee
pursuant to Paragraph 9 above, upon the expiration of the Renewal Term of a
Lease, or upon demand by Lessor pursuant to Paragraph 22 below, Lessee shall
contact Lessor for shipping instructions and, at Lessee's own risk, immediately
return the Equipment, freight prepaid, to a location in the continental United
States specified by Lessor. At the time of such return to Lessor, the Equipment
shall (i) be in the operating order, repair, and condition as required by or
specified in the original specifications and warranties of each manufacturer and
vendor thereof, ordinary wear and tear excepted, (ii) meet all recertification
requirements, and (iii) be capable of being promptly assembled and operated by a
third party purchaser or third party lessee without further repair, replacement,
alterations, or improvements, and in accordance and compliance with any and all
statutes, laws, ordinances, rules, and regulations of any governmental authority
or any political subdivision thereof applicable to the use and operation of the
Equipment. Except as otherwise provided under Paragraph 9 hereof, at least one
hundred twenty days before the expiration of the Renewal Term, Lessee shall give
Lessor notice of its intent to return the Equipment at the end of such Renewal
Term. During the one hundred twenty-day period prior to the end of a Term or the
Renewal Term, Lessor and its prospective purchasers or lessees shall have, upon
not less than two business days' prior notice to Lessee and during normal
business hours, or at any time and without prior notice upon the occurrence and
continuance of an Event of Default, the right of access to the premises on which
the Equipment
3
<PAGE> 4
is located to inspect the Equipment, and Lessee shall cooperate in all other
respects with Lessor's remarketing of the Equipment. The provisions of this
Paragraph 14 are of the essence of the Lease, and upon application to any court
of equity having jurisdiction in the premises, Lessor shall be entitled to a
decree against Lessee requiring specific performance of the covenants of Lessee
set forth in this Paragraph 14. If Lessee fails to return the Equipment when
required, the terms and conditions of the Lease shall continue to be applicable
and Lessee shall continue to pay Rent until the Equipment is received by Lessor.
15. CASUALTY INSURANCE; LOSS OR DAMAGE. Lessee will maintain, at
its own expense, liability and property damage insurance relating to the
Equipment, insuring against such risks as are customarily insured against on the
type of equipment leased hereunder by businesses in which Lessee is engaged in
such amounts, in such form, and with insurers satisfactory to Lessor; provided,
however, that the amount of insurance against damage or loss shall not be less
than the greater of (a) the replacement value of the Equipment and (b) the
stipulated loss value of the Equipment specified in the applicable Schedule
("Stipulated Loss Value"). Each liability insurance policy shall provide
coverage (including, without limitation, personal injury coverage) of not less
than $1,000,000 for each occurrence, and shall name Lessor as an additional
insured; and each property damage policy shall name Lessor as sole loss payee
and all policies shall contain a clause requiring the insurer to give Lessor at
least thirty days' prior written notice of any alteration in the terms or
cancellation of the policy. Lessee shall furnish to Lessor a copy of each
insurance policy (with endorsements) or other evidence satisfactory to Lessor
that the required insurance coverage is in effect; provided, however, Lessor
shall have no duty to ascertain the existence of or to examine the insurance
policies to advise Lessee if the insurance coverage does not comply with the
requirements of this Paragraph. If Lessee fails to insure the Equipment as
required, Lessor shall have the right but not the obligation to obtain such
insurance, and the cost of the insurance shall be for the account of Lessee due
as part of the next due Rent. Lessee consents to Lessor's release, upon its
failure to obtain appropriate insurance coverage, of any and all information
necessary to obtain insurance with respect to the Equipment or Lessor's interest
therein.
Until the Equipment is returned to and received by Lessor as
provided in Paragraph 14 above, Lessee shall bear the entire risk of theft or
destruction of, or damage to, the Equipment including, without limitation, any
condemnation, seizure, or requisition of title or use ("Casualty Loss"). No
Casualty Loss shall relieve Lessee from its obligations to pay Rent except as
provided in clause (b) below. When any Casualty Loss occurs, Lessee shall
immediately notify Lessor and, at the option of Lessor, shall promptly (a) place
such Equipment in good repair and working order; or (b) pay Lessor an amount
equal to the Stipulated Loss Value of such Equipment and all other amounts
(excluding Rent) payable by Lessee hereunder, together with a late charge on
such amounts at a rate per annum equal to the rate imputed in the Rent payments
hereunder (as reasonably determined by Lessor) from the date of the Casualty
Loss through the date of payment of such amounts, whereupon Lessor shall
transfer to Lessee, without recourse or warranty (express or implied) (except as
to the absence of Lessor Liens), all of Lessor's interest, if any, in and to
such Equipment on an "AS IS, WHERE IS" basis. The proceeds of any insurance
payable with respect to the Equipment shall be applied, at the option of Lessor,
either towards (i) repair of the Equipment or (ii) payment of any of Lessee's
obligations hereunder. Lessee hereby appoints Lessor as Lessee's
attorney-in-fact during continuance of an Event of Default to make claim for,
receive payment of, and execute and endorse all documents, checks or drafts
issued with respect to any Casualty Loss under any insurance policy relating to
the Equipment.
16. TAXES. Lessee shall pay when due, and indemnify and hold
Lessor harmless from, all sales, use, excise, and other taxes, charges, and fees
(including, without limitation, income, franchise, business and occupation,
gross receipts, licensing, registration, titling, personal property, stamp and
interest equalization taxes, levies, imposts, duties, charges, or withholdings
of any nature), other than taxes that are being diligently contested in good
faith by the Lessee by appropriate proceedings promptly instituted and for which
an adequate reserve is being maintained by the Lessee in accordance with
Generally Accepted Accounting Principles, and any fines, penalties, or interest
thereon, imposed or levied by any governmental body, agency, or tax authority
upon or in connection with the Equipment, its purchase, ownership, delivery,
leasing, possession, use, or relocation of the Equipment or otherwise in
connection with the transactions contemplated by each Lease or the Rent
thereunder, excluding taxes on or measured by the net income of Lessor and taxes
resulting from any voluntary transfer by Lessor of any interest in the Equipment
or any part thereof or any interest under the Lease, or from any involuntary
4
<PAGE> 5
transfer by Lessor of any of the foregoing interests in connection with any
bankruptcy or other proceeding for the relief of debtors in which Lessor is the
debtor or any foreclosure by a creditor of Lessor (unless such foreclosure is
the result of an Event of Default hereunder). Upon request, Lessee will provide
proof of payment. Unless Lessor elects otherwise, Lessee will pay all property
taxes on the Equipment. Lessee shall timely prepare and file all reports and
returns which are required to be made with respect to any obligation of Lessee
under this Paragraph 16. Lessee shall, to the extent permitted by law, cause all
billings of such fees, taxes, levies, imposts, duties, withholdings, and
governmental charges to be made to Lessor in care of Lessee. Upon request,
Lessee will provide Lessor with copies of all such billings.
17. LESSOR'S PAYMENT. If Lessee fails to perform its obligations
under Paragraph 15 or 16 above, or Paragraph 23 below, within fifteen (15) days
after Lessor's request to Lessee to do so, Lessor shall have the right to
substitute performance, in which case Lessee shall immediately reimburse Lessor
therefor.
18. GENERAL INDEMNITY. Each Lease is a net lease. Therefore,
Lessee shall indemnify Lessor and its successors and assigns against, and hold
Lessor and its successors and assigns harmless from, any and all claims,
actions, damages, obligations, liabilities, and all costs and expenses,
including, without limitation, legal fees incurred by Lessor or its successors
and assigns arising out of each Lease including, without limitation, the
purchase, ownership, delivery, lease, possession, maintenance, condition, use,
or return of the Equipment, or arising by operation of law, except that Lessee
shall not be liable for any claims, actions, damages, obligations, and costs and
expenses determined by a non-appealable, final order of a court of competent
jurisdiction to have occurred as a result of the gross negligence or willful
misconduct of Lessor or its successors and assigns. Lessee agrees that upon
written notice by Lessor of the assertion of any claim, action, damage,
obligation, liability, or lien, Lessee shall assume full responsibility for the
defense thereof, provided that Lessor's failure to give such notice shall not
limit or otherwise affect its rights hereunder. Any payment pursuant to this
Paragraph (except for any payment of Rent) shall be of such amount as shall be
necessary so that, after payment of any taxes required to be paid thereon by
Lessor, the balance will equal the amount due hereunder. The provisions of this
Paragraph with regard to matters arising during a Lease shall survive the
expiration or termination of such Lease.
19. ASSIGNMENT BY LESSEE. Lessee shall not, without the prior
written consent of Lessor, (a) assign, transfer, pledge, or otherwise dispose of
any Lease or Equipment, or any interest therein; (b) sublease or lend any
Equipment or permit it to be used by anyone other than Lessee and its employees;
or (c) move any Equipment from the location specified for it in the applicable
Schedule, except that Lessee may move Equipment to another location within the
United States provided that Lessee has delivered to Lessor (A) prior written
notice thereof and (B) duly executed financing statements and other agreements
and instruments (all in form and substance satisfactory to Lessor) necessary or,
in the opinion of the Lessor, desirable to protect Lessor's interest in such
Equipment. Notwithstanding anything to the contrary in the immediately preceding
sentence, Lessee may keep any Equipment consisting of motor vehicles or rolling
stock at any location in the United States.
20. ASSIGNMENT BY LESSOR; LESSOR LIENS. Lessor may assign its
interest or grant a security interest in any Lease and the Equipment
individually or together, in whole or in part. If Lessee is given written notice
of any such assignment, it shall immediately make all payments of Rent and other
amounts hereunder directly to such assignee. Each such assignee shall have all
of the rights of Lessor under each Lease assigned to it. Lessee shall not assert
against any such assignee any set-off, defense, or counterclaim that Lessee may
have against Lessor or any other person. The term "Lessor Liens" shall mean (a)
liens resulting from (i) an affirmative act of Lessor to create such Liens and
(ii) that are not Permitted Liens, or consented to by Lessee, and (b) liens
resulting from claims against Lessor not related to the transactions
contemplated hereby (other than such liens which are either not delinquent or
which are being contested in good faith by appropriate proceedings that suspend
the collection of any amounts due or which have been adequately bonded or with
respect to which a stay of execution has been obtained pending an appeal or
proceeding for review).
21. DEFAULT; NO WAIVER. Lessee or any guarantor of any or all of
the obligations of Lessee hereunder (together with Lessee, the "Lease Parties")
shall be in default under each Lease upon the occurrence of any of the following
events (each, an "Event of Default"): (a) Lessee fails to pay within five days
of when due any amount required to be paid by Lessee under or in connection with
any Lease; (b) any of the Lease
5
<PAGE> 6
Parties fails in any material respect to perform any other provision under or in
connection with a Lease or violates in any material respect any of the covenants
or agreements of such Lease Party under or in connection with a Lease, and such
failure or violation continues for 10 Business Days after the sooner of receipt
of notice from Lessor or Lessee's actual knowledge of such failure or violation;
(c) any representation made or financial information delivered or furnished by
any of the Lease Parties under or in connection with a Lease shall prove to have
been inaccurate in any material respect when made; (d) any of the Lease Parties
makes an assignment for the benefit of creditors, whether voluntary or
involuntary, or consents to the appointment of a trustee or receiver, or if
either shall be appointed for any of the Lease Parties or for a substantial part
of its property without its consent and, in the case of any such involuntary
proceeding, such proceeding remains undismissed or unstayed for forty-five days
following the commencement thereof; (e) any petition or proceeding is filed by
or against any of the Lease Parties under any Federal or State bankruptcy or
insolvency code or similar law and, in the case of any such involuntary petition
or proceeding, such petition or proceeding remains undismissed or unstayed for
forty-five days following the filing or commencement thereof, or any of the
Lease Parties takes any action authorizing any such petition or proceeding; (f)
any of the Lease Parties fails to pay when due any indebtedness for borrowed
money or under conditional sales or installment sales contracts or similar
agreements, leases, or obligations evidenced by bonds, debentures, notes, or
other similar agreements or instruments to any creditor (including Lessor under
any other agreement, including but not limited to a certain Security Agreement
and Promissory Note, each of even date herewith) for an amount in excess of
$25,000 after any and all applicable cure periods therefor shall have elapsed;
(g) any judgment shall be rendered against any of the Lease Parties which shall
remain unpaid or unstayed for a period of sixty days; (h) any of the Lease
Parties shall dissolve, liquidate, wind up or cease its business, sell or
otherwise dispose of all or substantially all of its assets, or make any
material change in its lines of business; (i) any of the Lease Parties shall
amend or modify its name, unless such Lease Party delivers to Lessor, thirty
days prior to any such proposed amendment or modification, written notice of
such amendment or modification and within ten days before such amendment or
modification delivers executed financing statements (in form and substance
satisfactory to the Lessor); (j) any of the Lease Parties shall merge or
consolidate with any other entity or make any material change in its capital
structure, in each case without Lessor's prior written consent, which shall not
be unreasonably withheld; (k) any of the Lease Parties shall suffer any loss or
suspension of any material license, permit, or other right or asset necessary to
the conduct of its business, fail generally to pay its debts as they mature, or
call a meeting for purposes of compromising its debts; (l) any of the Lease
Parties shall deny or disaffirm its obligations hereunder or under any of the
documents delivered in connection herewith; or (m) there is a change, which
change results from a single transaction or series of related transactions, but
not from the sale of newly issued securities to investors, in more than 40% of
the ownership of any equity interests of any of the Lease Parties on the date
hereof or more than 40% of such interests become subject to any contractual,
judicial or statutory lien, charge, security interest, or encumbrance
22. REMEDIES. Upon the occurrence and continuation of an Event of
Default, Lessor shall have the right, in its sole discretion, to exercise any
one or more of the following remedies: (a) terminate each Lease; (b) declare any
and all Rent and other amounts then due and any and all Rent and other amounts
to become due under each Lease (collectively, the "Lease Obligations")
immediately due and payable; (c) take possession of any or all items of
Equipment, wherever located, without demand, notice, court order, or other
process of law, and without liability for entry to Lessee's premises, for damage
to Lessee's property, or otherwise; (d) demand that Lessee immediately return
any or all Equipment to Lessor in accordance with Paragraph 14 above, and, for
each day that Lessee shall fail to return any item of Equipment, Lessor may
demand an amount equal to the Rent payable for such Equipment in accordance with
Paragraph 14 above; (e) lease, sell, or otherwise dispose of the Equipment in a
commercially reasonable manner, with or without notice and on public or private
bid; (f) recover the following amounts from the Lessee (as damages, including
reimbursement of costs and expenses, liquidated for all purposes and not as a
penalty): (i) all costs and expenses of Lessor reimbursable to it hereunder,
including, without limitation, expenses of disposition of the Equipment, legal
fees, and all other amounts specified in Paragraph 23 below; (ii) an amount
equal to the sum of (A) any accrued and unpaid Rent through the later of (1) the
date of the applicable default, (2) the date that Lessor has obtained possession
of the Equipment, or (3) such other date as Lessee has made an effective tender
of possession of the Equipment to Lessor (the "Default Date") and (B) if Lessor
resells or re-lets the Equipment, Rent at the periodic rate provided for in each
Lease for the additional period that it takes Lessor to resell or re-let all of
the Equipment; (iii) the present value of all future Rent reserved in the Leases
and contracted to be paid over the unexpired Term of the Leases discounted at
five percent compound interest;
6
<PAGE> 7
(iv) the reversionary value of the Equipment as of the expiration of the Term of
the applicable Lease as set forth on the applicable Schedule; and (v) any
indebtedness for Lessee's indemnity under Paragraph 18 above, plus a late charge
at the rate specified in Paragraph 3 above, less the amount received by Lessor,
if any, upon sale or re-let of the Equipment; and (g) exercise any other right
or remedy to recover damages or enforce the terms of the Leases. Upon the
occurrence and continuance of an Event of Default or an event which with the
giving of notice or the passage of time, or both, would result in an Event of
Default, Lessor shall have the right, whether or not Lessor has made any demand
or the obligations of Lessee hereunder have matured, to appropriate and apply to
the payment of the obligations of Lessee hereunder all security deposits and
other deposits (general or special, time or demand, provisional or final) now or
hereafter held by and other indebtedness or property now or hereafter owing by
Lessor to Lessee. Lessor may pursue any other rights or remedies available at
law or in equity, including, without limitation, rights or remedies seeking
damages, specific performance, and injunctive relief. Any failure of Lessor to
require strict performance by Lessee, or any waiver by Lessor of any provision
hereunder or under any Schedule, shall not be construed as a consent or waiver
of any other breach of the same or of any other provision. Any amendment or
waiver of any provision hereof or under any Schedule or consent to any departure
by Lessee herefrom or therefrom shall be in writing and signed by Lessor.
No right or remedy is exclusive of any other provided herein or
permitted by law or equity. All such rights and remedies shall be cumulative and
may be enforced concurrently or individually from time to time.
23. LESSOR'S EXPENSE. Lessee shall pay Lessor on demand all costs
and expenses (including reasonable legal fees and expenses) incurred in
connection with the preparation, execution and delivery of this Agreement and
any other agreements and transactions contemplated hereby and all costs and
expenses in protecting and enforcing Lessor's rights and interests in each Lease
and the equipment, including, without limitation, legal, collection, and
remarketing fees and expenses incured by Lessor in enforcing the terms,
conditions, or provisions of each Lease or upon the occurrence and continuation
of an Event of Default.
24. LESSEE'S WAIVERS. To the extent permitted by applicable law,
Lessee hereby waives any and all rights and remedies conferred upon a lessee by
Sections 2A-508 through 2A-522 of the UCC. To the extent permitted by applicable
law, Lessee also hereby waives any rights now or hereafter conferred by statute
or otherwise which may require Lessor to sell, lease, or otherwise use any
Equipment in mitigation of Lessor's damages as set forth in Paragraph 22 above
or which may otherwise limit or modify any of Lessor's rights or remedies under
Paragraph 22. Any action by Lessee against Lessor for any default by Lessor
under any Lease shall be commenced within one year after any such cause of
action accrues.
25. NOTICES; ADMINISTRATION. Except as otherwise provided herein,
all notices, approvals, consents, correspondence, or other communications
required or desired to be given hereunder shall be given in writing and shall be
delivered by overnight courier, hand delivery, or certified or registered mail,
postage prepaid, if to Lessor, then to Transamerica Technology Finance Division,
76 Batterson Park Road, Farmington, Connecticut 06032, Attention: Assistant Vice
President, Lease Administration, with a copy to Lessor at Riverway II, West
Office Tower, 9399 West Higgins Road, Rosemont, Illinois 60018, Attention: Legal
Department, if to Lessee, then to Progenitor, Inc., 4040 Campbell Avenue, ,
Menlo Park, California 94025, Attention: Chief Financial Officer or such other
address as shall be designated by Lessee or Lessor to the other party. All such
notices and correspondence shall be effective when received.
26. REPRESENTATIONS. Lessee represents and warrants to Lessor
that (a) Lessee is duly organized, validly existing, and in good standing under
the laws of the State of its incorporation; (b) the execution, delivery, and
performance by Lessee of this Agreement are within Lessee's powers, have been
duly authorized by all necessary action, and do not and will not contravene (i)
Lessee's organizational documents or (ii) any law, regulation, rule, or
contractual restriction binding on or affecting Lessee; (c) no authorization or
approval or other action by, and no notice to or filing with, any governmental
authority or regulatory body is required for the due execution, delivery, and
performance by Lessee of this Agreement; (d) each Lease constitutes the legal,
valid, and binding obligations of Lessee enforceable against Lessee in
accordance with its terms; (e) the cost of each item of Equipment does not
exceed the fair and usual price for such type of equipment purchased in like
quantity and reflects all discounts, rebates, and allowances for the Equipment
(including, without limitation, discounts for
7
<PAGE> 8
advertising, prompt payment, testing, or other services) given to the Lessee by
the manufacturer, supplier, or any other person; and (f) all information
supplied by Lessee to Lessor in connection herewith is correct and does not omit
any material statement necessary to insure that the information supplied is not
misleading.
27. FURTHER ASSURANCES. Lessee, upon the request of Lessor, will
execute, acknowledge, record, or file, as the case may be, such further
documents and do such further acts as may be reasonably necessary, desirable, or
proper to carry out more effectively the purposes of this Agreement as Lessor
directs. Lessee hereby appoints Lessor as its attorney-in-fact to execute on
behalf of Lessee and authorizes Lessor to file without Lessee's signature any
UCC financing statements and amendments Lessor deems advisable.
28. FINANCIAL STATEMENTS. Lessee shall deliver to Lessor: (a) as
soon as available, but not later than 120 days after the end of each fiscal year
of Lessee and its consolidated subsidiaries, the consolidated balance sheet,
income statement, and statements of cash flows and shareholders equity for
Lessee and its consolidated subsidiaries (the "Financial Statements") for such
year, reported on by independent certified public accountants without an adverse
qualification; and (b) as soon as available, but not later than 60 days after
the end of each of the first three fiscal quarters in any fiscal year of Lessee
and its consolidated subsidiaries, the Financial Statements for such fiscal
quarter, together with a certification duly executed by a responsible officer of
Lessee that such Financial Statements have been prepared in accordance with
generally accepted accounting principles and are fairly stated in all material
respects (subject to normal year-end audit adjustments). Lessee shall also
deliver to Lessor as soon as available copies of all press releases and other
similar communications issued by Lessee.
29. CONSENT TO JURISDICTION. Lessee irrevocably submits to the
jurisdiction of any Illinois state or federal court sitting in Illinois for any
action or proceeding arising out of or relating to this Agreement or the
transactions contemplated hereby, and Lessee irrevocably agrees that all claims
in respect of any such action or proceeding may be heard and determined in such
Illinois state or federal court.
30. WAIVER OF JURY TRIAL. LESSEE AND LESSOR IRREVOCABLY WAIVE ALL
RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM ARISING OUT OF
OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
31. FINANCE LEASE. Lessee and Lessor agree that each Lease is a
"Finance Lease" as defined by Section 2A-103(g) of the UCC. Lessee acknowledges
that Lessee has reviewed and approved each written Supply Contract (as defined
by UCC 2A-103(y)) covering Equipment purchased from each "Supplier" (as defined
by UCC 2A-103(x)) thereof.
32. NO AGENCY. Lessee acknowledges and agrees that neither the
manufacturer or supplier, nor any salesman, representative, or other agent of
the manufacturer or supplier, is an agent of Lessor. No salesman,
representative, or agent of the manufacturer or supplier is authorized to waive
or alter any term or condition of this Agreement or any Schedule and no
representation as to the Equipment or any other matter by the manufacturer or
supplier shall in any way affect Lessee's duty to pay Rent and perform its other
obligations as set forth in this Agreement or any Schedule.
33. GOVERNING LAW; SEVERABILITY. EACH LEASE SHALL BE GOVERNED BY
THE LAWS OF THE STATE OF ILLINOIS WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW
PRINCIPLES THEREOF. IF ANY PROVISION SHALL BE HELD TO BE INVALID OR
UNENFORCEABLE, THE VALIDITY AND ENFORCEABILITY OF THE REMAINING PROVISIONS SHALL
NOT IN ANY WAY BE AFFECTED OR IMPAIRED.
LESSEE ACKNOWLEDGES THAT LESSEE HAS READ THIS AGREEMENT AND THE SCHEDULE HERETO,
UNDERSTANDS THEM, AND AGREES TO BE BOUND BY THEIR TERMS AND CONDITIONS. FURTHER,
LESSEE AND LESSOR AGREE THAT THIS AGREEMENT, THE SCHEDULES DELIVERED IN
CONNECTION HEREWITH FROM TIME TO TIME, AND THE COMMITMENT LETTER ARE THE
COMPLETE AND EXCLUSIVE STATEMENT OF THE AGREEMENT BETWEEN THE PARTIES,
SUPERSEDING ALL PROPOSALS OR PRIOR AGREEMENTS, ORAL OR WRITTEN, AND ALL OTHER
8
<PAGE> 9
COMMUNICATIONS BETWEEN THE PARTIES RELATING TO THE SUBJECT MATTER HEREOF. SHOULD
THERE EXIST ANY INCONSISTENCY BETWEEN THE TERMS OF THE COMMITMENT LETTER AND
THIS AGREEMENT, THE TERMS OF THIS AGREEMENT SHALL PREVAIL.
IN WITNESS WHEREOF, the parties hereto have executed or caused
this Agreement to be duly executed by their duly authorized officers as of the
date first written above.
PROGENITOR, INC.
By: /s/ Mark Bagnall
-------------------------------
Name: Mark Bagnall
Title: Vice President & Chief
Financial Officer
Federal Tax ID:
TRANSAMERICA BUSINESS CREDIT CORPORATION
By: /s/ Gary P. Moro
-------------------------------
Name: Gary P. Moro
Title: Vice President
Form 1
9
<PAGE> 10
SCHEDULE TO MASTER LEASE AGREEMENT
Dated as of May 6, 1998
Schedule No. 1
LESSOR NAME & MAILING ADDRESS LESSEE NAME & MAILING ADDRESS
Transamerica Business Credit Corporation Progenitor, Inc.
Riverway II 4040 Campbell Avenue
West Office Tower Menlo Park, California 94025
9399 West Higgins Road
Rosemont, Illinois 60018
Equipment Location (if different than Lessee's address above):
This Schedule covers the following described equipment ("Equipment"):
See Exhibit II attached hereto and made a part hereof.
The Equipment is hereby leased pursuant to the provisions of the Master Lease
Agreement between the undersigned Lessee and Lessor dated May 1, 1998 (the
"Master Lease"), the terms of which are incorporated herein by reference
thereto, plus the following additional terms, provisions, and modifications. The
Lessor reserves the right to adjust the monthly payments in accordance with the
Commitment Letter dated March 17, 1998, if the Lessor has not received this
Schedule and an Acceptance and Delivery Certificate executed by the Lessee
within five business days from the date first set forth above.
<TABLE>
<S> <C> <C>
1. Term (Number of Months) 48 months
2. Equipment Cost $889,987.77
3. Commencement Date May 13, 1998
4. Rate Factor 2.47937% of Equipment Cost
5. Total Rents $ 1,059,172.80
Total sales/use tax $ 39,197.76 $ 1,098,370.56
6. Advance Rents (first and last) $ 44,132.20
Sales/use tax for advance rent $ 1,633.24 $ 45,765.44
7. Monthly rental payments $ 22,066.10
Monthly sales/use tax $ 816.62 $ 22,882.72
and the second such rental payment
will be due on July 1, 1998
and subsequent rental payments will
be due on the same day of each month thereafter
8. Security Deposit N/A
9. In addition to the monthly rental
payments provided for herein, Lessee shall
pay to Lessor, as interim rent, payable on
the commencement date specified above, an
amount equal to 1/30th of the monthly rental
payment (including monthly sales/use tax)
multiplied by the number of days from and
including the commencement date through the
end of the same calendar month. $ 14,492.39
</TABLE>
10
<PAGE> 11
<TABLE>
<CAPTION>
TOTAL INTERIM
EQUIPMENT EQUIPMENT MONTHLY SALES MONTHLY INTERIM RENT +
TYPE COST RENTAL TAX 8.25% PAYMENT RENT SALES TAX
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Computer Equipment (E) $ 287,485.64 $ 7,127.84 $ 7,127.84 $ 4,514.30 $ 4,514.30
Computer Equipment (T) $ 289,669.70 $ 7,181.99 $ 592.51 $ 7,774.50 $ 4,548.59 $ 4,923.85
Laboratory Equipment (E) $ 24,339.56 $ 603.47 $ 603.47 $ 382.20 $ 382.20
Laboratory Equipment (T) $ 91,676.03 $ 2,272.99 $ 187.52 $ 2,460.51 $ 1,439.56 $ 1,558.32
Leasehold Improvements (E) $ 178,928.47 $ 4,436.30 $ 4,436.30 $ 2,809.66
Office Furniture (T) $ 17,888.37 $ 443.51 $ 36.59 $ 480.10 $ 280.89 $ 304.06
------------ ------------ ------------ ------------ ------------ ------------
TOTAL $ 889,987.77 $ 22,066.10 $ 816.62 $ 22,882.72 $ 13,975.20 $ 14,492.39
============ ============ ============ ============ ============ ============
</TABLE>
Renewal terms:
In the event the Lease does not exercise the Purchase Option described below,
the Lease shall automatically renew for a term of 12 months with Monthly Rental
equal to 1.5% of the original Equipment Cost payable in monthly in advance. At
the expiration of the renewal period, the Lessee shall have the option to
purchase all (but not less than all) the Equipment for its then current fair
market value, plus applicable and other taxes. Fair market value will not
include any non-severable modifications to the Equipment made by Lessee.
Lessee hereby irrevocably authorizes Lessor to insert in this Schedule the
Commencement Date and the due date of the first rental payment.
Except as expressly provided or modified hereby, all the terms and provisions of
the Master Lease Agreement shall remain in full force and effect.
The Lessee shall have the option to purchase all (but not less than all) the
Equipment at the expiration of the term of the lease for the then Fair Market
Value of the Equipment, plus applicable sales and other taxes. It is agreed that
the Fair Market Value will be not less than 10% nor more than 20% of the
Equipment Cost. Fair Market Value will not include any non-severable
modifications to the Equipment made by Lessee. The Purchase Date shall be May
31, 2002.
The Stipulated Loss Value of any items of Equipment shall be an amount equal to
the present value of all future Rent discounted at a rate of 5% per annum plus
the Reversionary Value.
The Reversionary Value of any item of Equipment shall be 20% of Equipment Cost.
TRANSAMERICA BUSINESS CREDIT PROGENITOR, INC.
CORPORATION (Lessee)
(Lessor)
By: /s/ Gary P. Moro By: /s/ Mark Bagnall
------------------------------- -------------------------------
Title: Vice President Title: VP & CFO
Form 2
11
<PAGE> 1
EXHIBIT 10.46
SECURITY AGREEMENT
THIS SECURITY AGREEMENT dated as of May 4, 1998, is made by
Progenitor, Inc. (the "Borrower"), a Delaware corporation having its principal
place of business and chief executive office at 4040 Campbell Avenue, Menlo
Park, California 94025, in favor of Transamerica Business Credit Corporation, a
Delaware corporation (the "Lender"), having its principal office at Riverway II,
West Office Tower, 9399 West Higgins Road, Rosemont, Illinois 60018, and an
office at 76 Batterson Park Road, Farmington, Connecticut 06032-2571.
WHEREAS, the Borrower has requested that the Lender make a loan
to it; and
WHEREAS, the Lender has agreed to make such loan on the terms and
conditions of this Security Agreement.
NOW, THEREFORE, in consideration of the premises and to induce
the Lender to make such loan, the Borrower hereby agrees with the Lender as
follows:
SECTION 1. DEFINITIONS.
As used herein, the following terms shall have the following
meanings, and shall be equally applicable to both the singular and plural forms
of the terms defined:
"Applicable Law" shall mean the laws of the State of Illinois (or
any other jurisdiction whose laws are mandatorily applicable notwithstanding the
parties' choice of Illinois law) or, with respect to laws limiting the rates of
interest charges on loans, the laws of the United States of America, whichever
laws allow the greater interest to be charged thereon, as such laws now exist or
may be changed or amended or come into effect in the future.
"Business Day" shall mean any day other than a Saturday, Sunday,
or public holiday or the equivalent for banks in New York City.
"Code" shall have the meaning specified in Section 8(a).
"Collateral" shall have the meaning specified in Section 2.
"Designated Assets" shall have the meaning specified in Section
2(iii).
"Effective Date" shall mean the date on which all of
<PAGE> 2
the conditions specified in Section 3.3 shall have been satisfied.
"Event of Default" shall mean any event specified in Section 7.
"Financial Statements" shall have the meaning specified in
Section 6.1.
"GAAP" shall mean generally accepted accounting principles in the
United States of America, as in effect from time to time.
"Intellectual Property Assignment" shall mean the Assignment for
Security, substantially in the form of Exhibit D, as amended, supplemented or
otherwise modified from time to time.
"Lease Agreement" shall mean the Master Lease Agreement of even
date herewith between the Borrower and the Lender, as amended, supplemented or
otherwise modified from time to time.
"Loan" shall mean the loan made by the Lender to the Borrower in
accordance with the terms of this Security Agreement and the Note.
"Loan Documents" shall mean, collectively, this Security
Agreement, the Note, the Lockbox Agreement, the Intellectual Property Assignment
and all other documents, agreements, certificates, instruments, and opinions
executed and delivered in connection herewith and therewith, as the same may be
amended, supplemented or otherwise modified from time to time.
"Lockbox Agreement" shall mean the Lockbox Agreement,
substantially in the form of Exhibit B, as amended, supplemented or otherwise
modified from time to time.
"Material Adverse Change" shall mean, with respect to any Person,
a material adverse change in the business, prospects, operations, results of
operations, assets, liabilities, or condition (financial or otherwise) of such
Person taken as a whole.
"Material Adverse Effect" shall mean, with respect to any Person,
a material adverse effect on the business, prospects, operations, results of
operations, assets, liabilities, or condition (financial or otherwise) of such
Person taken as a whole.
"Note" shall mean the Promissory Note, substantially in the form
of Exhibit A, as amended, supplemented, or otherwise modified from time to time.
<PAGE> 3
"Obligations" shall mean all indebtedness, obligations, and
liabilities of the Borrower under the Loan Documents and the Lease Agreement,
whether on account of principal, interest, rent, finance charges, indemnities,
fees (including, without limitation, attorneys' fees, remarketing fees,
origination fees, collection fees, and all other professionals' fees), costs,
expenses, taxes, or otherwise.
"Permitted Liens" shall mean (a) such of the following as to
which no enforcement, collection, execution, levy, or foreclosure proceeding
shall have been commenced: (i) liens for taxes, assessments, and other
governmental charges or levies or the claims or demands of landlords, carriers,
warehousemen, mechanics, laborers, materialmen, and other like Persons arising
by operation of law in the ordinary course of business for sums which are not
yet due and payable, or liens which are being contested in good faith by
appropriate proceedings diligently conducted and with respect to which adequate
reserves are maintained to the extent required by GAAP; (ii) deposits or pledges
to secure the payment of workmen's compensation, unemployment insurance, or
other social security benefits or obligations, public or statutory obligations,
surety or appeal bonds, bid or performance bonds, or other obligations of a like
nature incurred in the ordinary course of business; (iii) licenses,
restrictions, or covenants for or on the use of equipment which do not
materially impair either the use of such equipment in the operation of the
business of the Borrower or the value thereof; (iv) licenses on intellectual
property entered into on arms'-length terms in the ordinary course of business;
and (v) attachment or judgment liens that do not constitute an Event of Default;
(b) purchase money security interests upon equipment acquired or held by the
Borrower to secure the purchase price of such equipment; (c) liens existing on
the date hereof and specified in Schedule 1 hereto, but only to secure
indebtedness in the maximum amount secured thereby on the date hereof; and (d)
liens on assets acquired by the Borrower after the date hereof which liens
existed prior to such acquisition.
"Person" shall mean any individual, sole proprietorship,
partnership, joint venture, trust, unincorporated organization, association,
corporation, institution, entity, party, or government (including any division,
agency, or department thereof), and the successors, heirs, and assigns of each.
"Receivables" shall have the meaning specified in Section
8(a)(iii).
"SBCL" shall mean SmithKline Beecham Clinical Laboratories, Inc.,
a Delaware corporation.
"SBCL License" shall have the meaning specified in
<PAGE> 4
Section 2(iii).
"Security Agreement" shall mean this Security Agreement, as
amended, supplemented, or otherwise modified from time to time.
"Solvent" shall mean, with respect to any Person, that as of the
date as to which such Person's solvency is measured:
(a) the fair saleable value of its assets is in excess of
the total amount of its liabilities (including contingent
liabilities as valued in accordance with GAAP) as they become
absolute and matured;
(b) it has sufficient capital to conduct its business; and
(c) it is able generally to meet its debts as they mature.
"Taxes" shall have the meaning specified in Section 5.5.
SECTION 2. CREATION OF SECURITY INTEREST; COLLATERAL. The
Borrower hereby assigns and grants to the Lender a continuing general lien on,
and security interest in, all the Borrower's right, title, and interest in and
to the collateral described in the next sentence (the "Collateral") to secure
the payment and performance of all the Obligations. The Collateral consists of
(i) all present and future machinery, equipment, furniture,
fixtures, leasehold improvements, conveyors, tools, materials,
storage and handling equipment, hydraulic presses, cutting
equipment, computer equipment and hardware, including central
processing units, terminals, drives, memory units, printers,
keyboards, screens, peripherals and input or output devices,
molds, dies, stamps, and other equipment of every kind and
nature and wherever situated now or hereafter owned and held for
use by the Borrower or in which the Borrower may have any
interest as lessee (to the extent of such interest), together
with all additions and accessions thereto, all replacements and
all accessories and parts therefor, all manuals, blueprints,
know-how, warranties and records in connection therewith
(including, without limitation, any computer software, whether
on tape, disc, card, strip or cartridge or in any other form)
and all rights against suppliers, warrantors, manufacturers, and
sellers or others in connection therewith, together with all
substitutes for any of the
<PAGE> 5
foregoing;
(ii) all present and future goods intended for sale, lease
or other disposition by the Borrower including, without
limitation, all raw materials, work in process, systems,
accessories, spare parts, finished goods and other retail
inventory, goods in the possession of outside processors or
other third parties, consigned goods (to the extent of the
consignee's interest therein), materials, parts and supplies of
any kind, nature or description which are or might be used in
connection with the manufacture, packing, shipping, advertising,
selling or finishing of any such goods, all documents of title
or documents representing the same and all records, files and
writings (including, without limitation, any computer software,
whether on tape, disc, card, strip or cartridge or in any other
form) with respect thereto;
(iii) all of the Borrower's present and future accounts
(including rights to receive payments for goods sold or services
rendered arising out of the sale or delivery of personal
property or work done or labor performed), contract rights,
agreements, understandings, open purchase and sale orders,
promissory notes, chattel paper, documents, tax refunds, rights
to receive tax refunds, bonds, certificates, insurance policies,
insurance proceeds, patents, patent applications, copyrights
(registered and unregistered), royalties, licenses (including,
without limitation, the License Agreement dated as of September
18, 1997 (as amended, supplemented or otherwise modified from
time to time, the "SBCL License") between the Borrower and
SBCL), rights to receive fees, royalties and other payments
under license agreements (including, without limitation, the
SBCL License), permits, franchise rights, authorizations,
customer and supplier lists, rights of indemnification,
contribution and subrogation, leases, computer tapes, programs,
discs and software, trade secrets, computer service contracts,
trademarks, trade names, service marks and names, logos,
goodwill, deposits, causes of action, choses in action,
judgments, designs, blueprints, quotations and bids, plans,
specifications, sales literature, know-how, all other general
intangibles, claims against third parties of every kind or
nature, investment securities, notes, drafts, acceptances,
letters of credit and rights to receive payments under letters
of credit, deposit accounts, book accounts, prepaid expenses,
credits and reserves and all forms of obligations whatsoever
owing, instruments, documents of title, leasehold rights,
<PAGE> 6
including in any goods, books, ledgers, files (including credit
and project files) and records (including tax records) with
respect to any collateral or security, together with all right,
title, security and guaranties with respect thereto, including
any right of stoppage in transit; and
(iv) all proceeds of the foregoing;
provided, however, that the Collateral shall not include, and the Borrower shall
not be deemed to have granted a security interest in, any of the Borrower's
right, title or interest in, to or under (i) any operating lease or capital
lease of personal property or any intellectual property license, in each case
entered into in the ordinary course of business at arm's-length, with respect to
which the Borrower is the lessee or licensee to the extent that such grant would
result in a breach of the terms of such lease or license and (ii) any contract
or other agreement existing on the date hereof to the extent that such grant
would result in a breach of a term of such contract or agreement prohibiting
such grant without the consent of the other party thereto, and, in the case of
clause (i) and (ii) hereof, other than to the extent that any such term would be
rendered ineffective pursuant to Section 9-318 of the Code (the assets specified
in clauses (i) and (ii) hereof being referred to herein collectively as the
"Designated Assets").
SECTION 3. THE LOAN.
SECTION 3.1. BORROWING. The Loan shall be in an amount not
greater than $1,900,000 available for borrowing in a single draw at any time
until June 30, 1998. Notwithstanding anything herein to the contrary, the Lender
shall be obligated to make the Loan only after the Lender, in its sole
discretion, determines that the applicable conditions for borrowing contained in
Section 3.3 are satisfied.
SECTION 3.2. APPLICATION OF PROCEEDS. The Borrower shall
not directly or indirectly use any proceeds of the Loan other than for general
working capital purposes.
SECTION 3.3. CONDITIONS TO LOAN.
(a) The obligation of the Lender to make the Loan is
subject to the Lender's receipt of the following, each dated the date of the
making of the Loan or as of an earlier date acceptable to the Lender, in form
and substance satisfactory to the Lender and its counsel:
(i) completed requests for information (Form UCC-11)
listing all effective Uniform Commercial Code financing
statements naming the Borrower as debtor and
<PAGE> 7
all patent, trademark, copyright, tax lien, judgment, and
litigation searches for the Borrower as the Lender shall deem
necessary or desirable, in each case with results satisfactory
to the Lender;
(ii) Uniform Commercial Code financing statements (Form
UCC-1) duly executed by the Borrower (naming the Lender as
secured party and the Borrower as debtor and in form acceptable
for filing in all jurisdictions that the Lender deems necessary
or desirable to perfect the security interests granted to it
hereunder) and, if applicable, termination statements or other
releases duly filed in all jurisdictions that the Lender deems
necessary or desirable to perfect and protect the priority of
the security interests granted to it hereunder;
(iii) the Lockbox Agreement, duly executed by the
Borrower, the Lender and Wells Fargo Bank;
(iv) the Intellectual Property Assignment, duly
executed by the Borrower;
(v) the Note, duly executed by the Borrower;
(vi) a notification letter from the Borrower to SBCL,
substantially in the form of Exhibit C, duly executed by the
Borrower (which shall not be delivered by the Lender to SBCL
except during the continuance of an Event of Default);
(vii) a copy of the SBCL License, attached to which is
a certificate of the Secretary or an Assistant Secretary of the
Borrower certifying that such copy is true, complete and
accurate and contains any and all amendments thereto;
(viii) certificates of insurance required under Section
5.4 of this Security Agreement together with loss payee
endorsements for all such policies naming the Lender as lender
loss payee and as an additional insured;
(ix) a copy of the resolutions of the Board of
Directors of the Borrower (or a unanimous consent of directors
in lieu thereof) authorizing the execution, delivery, and
performance of this Security Agreement, the other Loan
Documents, and the transactions contemplated hereby and thereby,
attached to which is a certificate of the Secretary or an
Assistant Secretary of the Borrower certifying (A) that the copy
of the resolutions is true, complete, and accurate, and that
<PAGE> 8
such resolutions have not been amended or modified since the
date of such certification and are in full force and effect and
(B) the incumbency, names, and true signatures of the officers
of the Borrower authorized to sign the Loan Documents to which
it is a party;
(x) the opinion of counsel for the Borrower covering
such matters incident to the transactions contemplated by this
Security Agreement as the Lender may reasonably require; and
(xi) such other agreements and instruments as the
Lender deems necessary in its sole and absolute discretion in
connection with the transactions contemplated hereby.
(b) There shall be no pending or, to the knowledge of the
Borrower after due inquiry, threatened litigation, proceeding, inquiry, or other
action (i) seeking an injunction or other restraining order, damages, or other
relief with respect to the transactions contemplated by this Security Agreement
or the other Loan Documents or (ii) which affects or could affect the business,
prospects, operations, assets, liabilities, or condition (financial or
otherwise) of the Borrower, except, in the case of clause (ii), where such
litigation, proceeding, inquiry, or other action could not be expected to have a
Material Adverse Effect in the judgment of the Lender.
(c) The Borrower shall have paid all fees and expenses
required to be paid by it to the Lender as of such date. (d) All representations
and warranties of the Borrower contained in this Security Agreement and the
other Loan Documents shall be true and correct on and as of the date of the
making of the Loan.
(e) No Event of Default or event which with the giving of
notice or the passage of time, or both, would constitute an Event of Default
shall be continuing or would result from the making of the Loan.
<PAGE> 9
SECTION 4. THE BORROWER'S REPRESENTATIONS AND WARRANTIES.
SECTION 4.1. GOOD STANDING; QUALIFIED TO DO BUSINESS; NO
TRADE NAMES. The Borrower (a) is duly organized, validly existing, and in good
standing under the laws of the State of its organization, (b) has the power and
authority to own its properties and assets and to transact the businesses in
which it is presently, or proposes to be, engaged, and (c) is duly qualified and
authorized to do business and is in good standing in every jurisdiction in which
the failure to be so qualified could have a Material Adverse Effect on (i) the
Borrower, (ii) the Borrower's ability to perform its obligations under the Loan
Documents or (iii) the rights of the Lender hereunder. The Borrower does not
use, and has not used during the past five years, any trade or other fictional
name.
SECTION 4.2. DUE EXECUTION, ETC. The execution, delivery,
and performance by the Borrower of each of the Loan Documents to which it is a
party are within the powers of the Borrower, do not contravene the
organizational documents of the Borrower and do not (a) violate any law or
regulation, or any order or decree of any court or governmental authority, (b)
conflict with or result in a breach of, or constitute a default under, any
material indenture, mortgage or deed of trust, or any material lease, agreement
or other instrument binding on the Borrower or any of its properties or (c)
require the consent of, authorization by, approval of, notice to or filing or
registration with any Person. This Security Agreement is, and each of the other
Loan Documents to which the Borrower is or will be a party, when delivered will
be, the legal, valid, and binding obligation of the Borrower enforceable against
the Borrower in accordance with its terms (except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting creditors' rights generally and except as such
enforceability may be limited by general principles of equity, whether
considered in a suit in law or in equity).
SECTION 4.3. SOLVENCY; NO LIENS. The Borrower is Solvent
and will be Solvent upon the completion of all transactions contemplated to
occur hereunder (including, without limitation, the making of the Loan); the
security interests granted herein constitute and shall at all times constitute
the first and only liens on the Collateral other than Permitted Liens; and the
Borrower is, or will be at the time additional Collateral is acquired by it, the
absolute owner of the Collateral with full right to pledge, sell, consign,
transfer, and create a security interest therein, free and clear of any and all
claims or liens in favor of any other Person other than Permitted Liens.
<PAGE> 10
SECTION 4.4. NO JUDGMENTS, LITIGATION. No judgments are
outstanding against the Borrower nor is there now pending or, to the best of the
Borrower's knowledge after diligent inquiry, threatened any litigation,
contested claim, or governmental proceeding by or against the Borrower except
judgments and pending or threatened litigation, contested claims, and
governmental proceedings which would not, in the aggregate, have a Material
Adverse Effect on the Borrower.
SECTION 4.5. NO DEFAULTS. The Borrower is not in default
and has not received a notice of default under any material contract, lease, or
commitment to which it is a party or by which it is bound. The Borrower knows of
no dispute regarding any contract, lease, or commitment which could have a
Material Adverse Effect on the Borrower.
SECTION 4.6. COLLATERAL LOCATIONS. On the date hereof, (i)
each item of the Collateral consisting of goods is located at the address of the
Borrower specified in the introductory paragraph of this Security Agreement and
(ii) the principal place of business and chief executive office of the Borrower
and the office where the Borrower keeps the original SBCL License and its
records is the address of the Borrower specified in the introductory paragraph
of this Security Agreement. None of the Collateral is evidenced by promissory
notes or other instruments.
SECTION 4.7. NO EVENTS OF DEFAULT. No Event of Default has
occurred and is continuing nor has any event occurred which, with the giving of
notice or the passage of time, or both, would constitute an Event of Default.
SECTION 4.8. NO LIMITATION ON LENDER'S RIGHTS. Except for
Permitted Liens, none of the Collateral is subject to contractual obligations
that may restrict or inhibit the Lender's rights or ability to sell or otherwise
dispose of the Collateral or any part thereof during the continuance of an Event
of Default.
SECTION 4.9. PERFECTION AND PRIORITY OF SECURITY INTEREST.
This Security Agreement creates a valid and, upon completion of all required
filings of financing statements and similar registrations, perfected first
priority and exclusive security interest in the Collateral (other than Permitted
Liens), securing the payment of all the Obligations.
<PAGE> 11
SECTION 4.10. ACCURACY AND COMPLETENESS OF INFORMATION.
All data, reports and information heretofore, contemporaneously or hereafter
furnished by or on behalf of the Borrower in writing to the Lender or for
purposes of or in connection with this Security Agreement or any other Loan
Document, or any transaction contemplated hereby or thereby, are or will be true
and accurate in all material respects on the date as of which such data, reports
and information are dated or certified and not incomplete by omitting to state
any material fact necessary to make such data, reports and information not
misleading at such time. There are no facts now known to the Borrower which
individually or in the aggregate would reasonably be expected to have a Material
Adverse Effect on the Borrower and which have not been specified herein, in the
Financial Statements, or in any certificate, opinion, or other written statement
previously furnished by the Borrower to the Lender.
SECTION 4.11. SBCL LICENSE. The SBCL License has been duly
authorized, executed and delivered by the Borrower and, to the best of the
Borrower's knowledge after due inquiry, by SBCL, has not been amended or
otherwise modified, is in full force and effect and is binding upon and
enforceable against the Borrower and, to the best of the Borrower's knowledge
after due inquiry, against SBCL in accordance with its terms. There exists no
default under the SBCL License by the Borrower or, to the best of the Borrower's
knowledge after due inquiry, by SBCL.
SECTION 5. COVENANTS OF THE BORROWER.
SECTION 5.1. EXISTENCE, ETC. The Borrower will: (a) retain
its existence and its current yearly accounting cycle, (b) maintain in full
force and effect all licenses, bonds, franchises, leases, trademarks, patents,
contracts and other rights necessary or desirable to the conduct of its business
unless the failure to do so could not have a Material Adverse Effect on the
Borrower, (c) continue in, and limit its operations to, the same general lines
of business as those presently conducted by it and (d) comply with all
applicable laws and regulations of any federal, state or local governmental
authority, except for such laws and regulations the violations of which would
not, in the aggregate, have a Material Adverse Effect on the Borrower.
<PAGE> 12
SECTION 5.2. NOTICE TO THE LENDER. As soon as possible,
and in any event within five days after the Borrower learns of the following,
the Borrower will give written notice to the Lender of (a) any proceeding
instituted or threatened to be instituted by or against the Borrower in any
federal, state, local or foreign court or before any commission or other
regulatory body (federal, state, local or foreign) involving a sum, together
with the sum involved in all other similar proceedings, in excess of $50,000 in
the aggregate, (b) any contract that is terminated or amended and which has had
or could reasonably be expected to have a Material Adverse Effect on the
Borrower, (c) the occurrence of any Material Adverse Change with respect to the
Borrower and (d) the occurrence of any Event of Default or event or condition
which, with notice or lapse of time, or both, would constitute an Event of
Default, together with a statement of the action which the Borrower has taken or
proposes to take with respect thereto.
SECTION 5.3. MAINTENANCE OF BOOKS AND RECORDS. The
Borrower will maintain books and records pertaining to the Collateral in such
detail, form, and scope as the Lender shall require in its commercially
reasonable judgment. The Borrower agrees that the Lender or its agents may enter
upon the Borrower's premises at any time and from time to time during normal
business hours, and at any time during the continuance of an Event of Default,
for the purpose of inspecting the Collateral and any and all records pertaining
thereto.
<PAGE> 13
SECTION 5.4. INSURANCE. The Borrower will maintain
insurance on the Collateral under such policies of insurance, with such
insurance companies, in such amounts, and covering such risks as are at all
times satisfactory to the Lender. All such policies shall be made payable to the
Lender, in case of loss, under a standard non-contributory "lender" or "secured
party" clause and are to contain such other provisions as the Lender may
reasonably require to protect the Lender's interests in the Collateral and to
any payments to be made under such policies. Certificates of insurance policies
are to be delivered to the Lender, premium prepaid, with the loss payable
endorsement in the Lender's favor, and shall provide for not less than thirty
days' prior written notice to the Lender of any alteration or cancellation of
coverage. If the Borrower fails to maintain such insurance, the Lender may
arrange for (at the Borrower's expense and without any responsibility on the
Lender's part for) obtaining the insurance. During the continuance of an Event
of Default, the Lender shall have the sole right, in the name of the Lender or
the Borrower, to file claims under any insurance policies, to receive and give
acquittance for any payments that may be payable thereunder, and to execute any
endorsements, receipts, releases, assignments, reassignments, or other documents
that may be necessary to effect the collection, compromise or settlement of any
claims under any such insurance policies.
SECTION 5.5. TAXES. The Borrower will pay, when due, all
taxes, assessments, claims and other charges ("Taxes") lawfully levied or
assessed against the Borrower or the Collateral other than taxes that are being
diligently contested in good faith by the Borrower by appropriate proceedings
promptly instituted and for which an adequate reserve is being maintained by the
Borrower in accordance with GAAP. If any Taxes remain unpaid after the date
fixed for the payment thereof, and if any lien shall be claimed therefor, then,
without notice to the Borrower, but on the Borrower's behalf, the Lender may pay
such Taxes, and the amount thereof shall be included in the Obligations.
<PAGE> 14
SECTION 5.6. BORROWER TO DEFEND COLLATERAL AGAINST CLAIMS;
FEES ON COLLATERAL. The Borrower will defend the Collateral against all claims
and demands of all Persons at any time claiming the same or any interest
therein. The Borrower will not permit any notice creating or otherwise relating
to liens on the Collateral or any portion thereof to exist or be on file in any
public office other than Permitted Liens. The Borrower shall promptly pay, when
payable, all transportation, storage, and warehousing charges and license fees,
registration fees, assessments, charges, permit fees, and taxes (municipal,
state and federal) which may now or hereafter be imposed upon the ownership,
leasing, renting, possession, sale or use of the Collateral, other than taxes on
or measured by the Lender's income and fees, assessments, charges and taxes
which are being contested in good faith by appropriate proceedings diligently
conducted and with respect to which adequate reserves are maintained to the
extent required by GAAP.
SECTION 5.7. NO CHANGE OF LOCATION. The Borrower will not
(a) change the location of its chief executive office or establish any place of
business other than that specified herein or (b) move or permit the movement of
any item of Collateral from such location, except that the Borrower may change
its chief executive office and keep Collateral at other locations within the
United States provided that the Borrower has delivered to the Lender (i) prior
written notice thereof and (ii) duly executed financing statements and other
agreements and instruments (all in form and substance satisfactory to the
Lender) necessary or, in the opinion of the Lender, desirable to perfect and
maintain in favor of the Lender a first priority security interest in the
Collateral.
<PAGE> 15
SECTION 5.8. FURTHER ASSURANCES. The Borrower will,
promptly upon request by the Lender, execute and deliver or use its best efforts
to obtain any document required by the Lender (including, without limitation,
warehouseman or processor disclaimers, mortgagee waivers, landlord disclaimers,
or subordination agreements with respect to the Obligations under the Loan
Documents and the Collateral), give any notices, execute and file any financing
statements, mortgages, or other documents (all in form and substance
satisfactory to the Lender), mark any chattel paper, deliver any chattel paper
or instruments to the Lender, and take any other actions that are necessary or,
in the opinion of the Lender, desirable to perfect or continue the perfection
and the first priority of the Lender's security interest in the Collateral, to
protect the Collateral against the rights, claims, or interests of any Person
(other than Permitted Liens), or to effect the purposes of this Security
Agreement. The Borrower hereby authorizes the Lender to file one or more
financing or continuation statements, and amendments thereto, relating to all or
any part of the Collateral without the signature of the Borrower where permitted
by law. A carbon, photographic, or other reproduction of this Security Agreement
or any financing statement covering the Collateral or any part thereof shall be
sufficient as a financing statement where permitted by law. To the extent
required under this Security Agreement, the Borrower will pay all costs incurred
in connection with any of the foregoing.
SECTION 5.9. NO DISPOSITION OF COLLATERAL. The Borrower
will not in any way hypothecate or create or permit to exist any lien, security
interest, charge, or encumbrance on or other interest in any of the Collateral
or the Designated Assets, except for the lien and security interest granted
hereby and Permitted Liens, and the Borrower will not sell, transfer, assign,
pledge, collaterally assign, exchange, or otherwise dispose of any of the
Collateral. In the event the Collateral, or any part thereof, is sold,
transferred, assigned, exchanged, or otherwise disposed of in violation of these
provisions, the security interest of the Lender shall continue in such
Collateral or part thereof notwithstanding such sale, transfer, assignment,
exchange, or other disposition, and the Borrower will hold the proceeds thereof
in a separate account for the benefit of the Lender. Following such a sale, the
Borrower will transfer such proceeds to the Lender in kind.
SECTION 5.10. NO LIMITATION ON LENDER'S RIGHTS. The
Borrower will not enter into any contractual obligations (other than Permitted
Liens) which may restrict or inhibit the Lender's rights or ability to sell or
otherwise dispose of the Collateral or any part thereof.
<PAGE> 16
SECTION 5.11. PROTECTION OF COLLATERAL. Upon not less than
fifteen days' prior written notice to the Borrower (provided that if an Event of
Default is continuing the Lender need not give any notice), the Lender shall
have the right at any time to make any payments and do any other acts the Lender
may deem necessary to protect its security interests in the Collateral if such
payments or other acts have not been made or done by the Borrower within such
fifteen-day period, including, without limitation, the rights to satisfy,
purchase, contest, or compromise any encumbrance, charge, or lien (other than
Permitted Liens) which, in the reasonable judgment of the Lender, appears to be
prior to or superior to the security interests granted hereunder (except in the
case of purchase money security interests in equipment), and appear in, and
defend any action or proceeding purporting to affect its security interests in,
or the value of, any of the Collateral. The Borrower hereby agrees to reimburse
the Lender for all payments made and reasonable expenses incurred under this
Security Agreement including reasonable fees, expenses, and disbursements of
attorneys and paralegals (including the allocated costs of in-house counsel)
acting for the Lender, including any of the foregoing payments under, or acts
taken to protect its security interests in, any of the Collateral, which amounts
shall be secured under this Security Agreement, and agrees it shall be bound by
any payment made or act taken by the Lender hereunder absent the Lender's gross
negligence or willful misconduct. The Lender shall have no obligation to make
any of the foregoing payments or perform any of the foregoing acts. The powers
conferred on the Lender hereunder are solely to protect its interest in the
Collateral and shall not impose any duty upon it to exercise any such powers.
Except for the safe custody of any Collateral in its possession, the accounting
for money actually received by it hereunder and the obligations of the Lender
under Section 9.7(b) hereof, the Lender shall have no duty as to any Collateral
or as to the taking of any necessary steps to preserve rights against prior
parties or any other rights pertaining to any Collateral.
SECTION 5.12. DELIVERY OF ITEMS. The Borrower will (a)
promptly (but in no event later than one Business Day) after its receipt
thereof, deliver to the Lender any documents or certificates of title issued
with respect to any property included in the Collateral, and any promissory
notes, letters of credit or instruments related to or otherwise in connection
with any property included in the Collateral, which in any such case come into
the possession of the Borrower, or shall cause the issuer thereof to deliver any
of the same directly to the Lender, in each case with any necessary endorsements
in favor of the Lender and (b) deliver to the Lender as soon as available copies
of any and all press releases and other similar communications issued by the
Borrower.
<PAGE> 17
SECTION 5.13. SOLVENCY. The Borrower shall be and remain
Solvent at all times.
SECTION 5.14. FUNDAMENTAL CHANGES. The Borrower will not
(a) amend or modify its name, unless the Borrower delivers to the Lender thirty
days prior to any such proposed amendment or modification written notice of such
amendment or modification and within ten days before such amendment or
modification delivers executed Uniform Commercial Code financing statements (in
form and substance satisfactory to the Lender) or (b) merge or consolidate with
any other entity or make any material change in its capital structure, in each
case without the Lender's prior written consent.
SECTION 5.15. SBCL LICENSE.
(a) The Borrower will, at its expense, (i) perform and
observe all of the terms and provisions of the SBCL License to be performed or
observed by it, maintain the SBCL License in full force and effect, enforce the
SBCL License in accordance with its terms, and take all such action to such end
as may be from time to time requested by the Lender; and (ii) furnish to the
Lender, promptly upon the Borrower's receipt thereof, copies of all notices,
requests and other documents received by the Borrower under or pursuant to the
SBCL License, and from time to time (A) furnish to the Lender such information
and reports regarding the SBCL License as the Lender may reasonably request and
(B) upon request of the Lender, make to SBCL such demands and request for
information and reports or for action as the Borrower is entitled to make under
the SBCL License.
(b) The Borrower will not (i) cancel or terminate the SBCL
License or consent to or accept any cancellation or termination thereof, (ii)
amend or otherwise modify the SBCL License or give any consent, waiver or
approval thereunder including, without limitation, a waiver of any default under
or breach of the SBCL License, (iii) consent to or permit any prepayment of any
fees, royalties or other amounts to become due under or in connection with the
SBCL License or (iv) take any other action in connection with the SBCL License
which would materially impair the value of the interest or rights of the
Borrower thereunder or which would materially impair the interest or rights of
the Lender.
<PAGE> 18
SECTION 5.16. CERTAIN INTELLECTUAL PROPERTY.
(i) The Borrower agrees that, should it obtain an
ownership interest in (x) any material patent or (y) any
exclusive rights as a licensee under a material patent license
which is not now a part of the Collateral, (A) the provisions of
Section 2 (including the proviso thereto) shall automatically
apply thereto, (B) except as limited by the proviso to Section
2, any such patent rights shall automatically become part of the
Collateral, and (C) with respect to any ownership interest in
any such patent or patent license that the Borrower should
obtain, it shall give notice thereof to the Lender in writing,
promptly after obtaining such ownership interest. The Borrower
authorizes the Lender to prepare and, during the continuance of
an Event of Default, file with the United States Patent and
Trademark Office a supplement to this Security Agreement or to
the Intellectual Property Assignment to include any patent of
which it receives notice under this Section.
(ii) The Borrower agrees to take all necessary steps
including, without limitation, in the United States Patent and
Trademark Office or in any court, to (A) maintain each of its
patents and patent licenses and (B) pursue each of its patent
applications, now or hereafter owned or submitted by it
including, without limitation, the filing of divisional,
continuation, continuation-in-part and substitute applications,
the filing of applications for reissue, renewal or extensions,
the payment of maintenance fees, and the participation in
interference, reexamination, opposition or infringement and
misappropriation proceedings, except, in each case in which the
Borrower has reasonably determined that any of the foregoing is
not of material economic value to it. The Borrower agrees to
take corresponding steps with respect to each new or acquired
patent, patent application, or any rights obtained under any
patent license, in each case, to which it is now or later
becomes entitled, except in each case in which the Borrower has
reasonably determined that any of the foregoing is not of
material economic value to it. Any expenses incurred in
connection with such activities shall be borne by the Borrower.
(iii) The Borrower shall take all additional steps not
set forth in subsections (i) and (ii) hereof which the Lender
deems reasonably appropriate under the circumstances to preserve
and protect the Borrower's
<PAGE> 19
material patents and patent licenses.
(iv) The Borrower shall not abandon any patent or any
pending patent application without the written consent of the
Lender, except, in each case in which the Borrower has
reasonably determined that any of the foregoing is not of
material economic value to it.
(v) In the event that the Borrower becomes aware that
any of its material patents has been infringed or
misappropriated by a third party, the Borrower shall notify the
Lender promptly in writing, in reasonable detail, and shall take
such actions as the Lender deems reasonably appropriate under
the circumstances to protect such patent including, without
limitation, suing for damages or for an injunction against such
infringement or misappropriation. Any expense incurred in
connection with such activities shall be borne by the Borrower.
The Borrower will advise the Lender promptly in writing, in
reasonable detail, of any averse determination or the
institution of any proceeding (including, without limitation,
the institution of any proceeding in the United States Patent
and Trademark Office or any court) regarding any of its material
patents.
(vi) The Borrower shall mark its products with the
numbers of all appropriate patents or the designation "patent
pending," as the case may be, to the extent that it is
reasonably and commercially practicable.
SECTION 5.17. ADDITIONAL REQUIREMENTS. The Borrower will
take all such further actions and execute all such further documents and
instruments as the Lender may reasonably request.
SECTION 6. FINANCIAL STATEMENTS. Until the payment and
satisfaction in full of all Obligations, the Borrower shall deliver to the
Lender the following financial information:
SECTION 6.1. ANNUAL FINANCIAL STATEMENTS. As soon as
available, but not later than 120 days after the end of each fiscal year of the
Borrower and its consolidated subsidiaries, the consolidated balance sheet,
income statement, and statements of cash flows and shareholders equity for the
Borrower and its consolidated subsidiaries (the "Financial Statements") for such
year, reported on by independent certified public accountants without an adverse
qualification; and
<PAGE> 20
SECTION 6.2. QUARTERLY FINANCIAL STATEMENTS. As soon as
available, but not later than sixty days after the end of each of the first
three fiscal quarters in any fiscal year of the Borrower and its consolidated
subsidiaries, the Financial Statements for such fiscal quarter, together with a
certification duly executed by a responsible officer of the Borrower that such
Financial Statements have been prepared in accordance with GAAP and are fairly
stated in all material respects (subject to normal year-end audit adjustments).
SECTION 7. EVENTS OF DEFAULT. The occurrence of any of the
following events shall constitute an Event of Default hereunder:
(a) the Borrower shall fail to pay within five days of
when due any amount required to be paid by the Borrower under or in connection
with the Note and this Security Agreement; (b) any representation or warranty
made or deemed made by the Borrower under or in connection with any Loan
Document or any Financial Statement shall prove to have been incorrect in any
material respect when made;
(c) the Borrower shall fail to perform or observe (i) any
of the terms, covenants or agreements contained in Sections 5.4, 5.7, 5.9, 5.10,
5.14, 5.15 or 5.16 hereof or (ii) any other term, covenant, or agreement
contained in any Loan Document (other than the other Events of Default specified
in this Section) and such failure remains unremedied for the earlier of fifteen
days from (A) the date on which the Lender has given the Borrower written notice
of such failure and (B) the date on which the Borrower knew or should have known
of such failure;
(d) any provision of any Loan Document to which the
Borrower is a party shall for any reason cease to be valid and binding on the
Borrower, or the Borrower shall so state;
(e) dissolution, liquidation, winding up or cessation of
the Borrower's business, failure of the Borrower generally to pay its debts as
they mature, admission in writing by the Borrower of its inability generally to
pay its debts as they mature, or calling of a meeting of the Borrower's
creditors for purposes of compromising any of the Borrower's debts;
(f) the commencement by or against the Borrower of any
bankruptcy, insolvency, arrangement, reorganization, receivership, or similar
proceedings under any federal or state law and, in the case of any such
involuntary proceeding, such proceeding remains undismissed or unstayed for
forty-five days following the commencement thereof, or any action by the
Borrower is taken authorizing any such proceeding;
<PAGE> 21
(g) an assignment for the benefit of creditors is made by
the Borrower, whether voluntary or involuntary, the appointment of a trustee,
custodian, receiver, or similar official for the Borrower or for any substantial
property of the Borrower, and in the case of any such involuntary appointment,
such appointment remains undismissed or unstayed for forty-five days following
the commencement thereof, or any action by the Borrower authorizing any such
proceeding;
(h) the Borrower shall default in (i) the payment of
principal or interest on any indebtedness in excess of $50,000 (other than the
Obligations) beyond the period of grace, if any, provided in the instrument or
agreement under which such indebtedness was created; or (ii) the observance or
performance of any other agreement or condition relating to any such
indebtedness or contained in any instrument or agreement relating thereto, or
any other event shall occur or condition exist, the effect of which default or
other event or condition is to cause, or to permit the holder or holders of such
indebtedness to cause, with the giving of notice if required, such indebtedness
to become due prior to its stated maturity;
(i) any Event of Default (as defined in the Lease
Agreement) shall be continuing;
(j) the Borrower suffers and sustains a Material Adverse
Change;
(k) any tax lien, other than a Permitted Lien, is filed of
record against the Borrower and is not bonded or discharged within fifteen
Business Days;
(l) any judgment is entered against the Borrower and such
judgment shall not be stayed, vacated, bonded, or discharged within sixty days;
(m) any material covenant, agreement, or obligation, as
determined in the sole discretion of the Lender, made by the Borrower and
contained in or evidenced by any of the Loan Documents shall cease to be
enforceable, or shall be determined to be unenforceable, in accordance with its
terms; the Borrower shall deny or disaffirm any of the Obligations or any liens
granted in connection therewith; or any liens granted on any of the Collateral
in favor of the Lender shall be determined to be void, voidable, or invalid, or
shall not be given the priority contemplated by this Security Agreement;
<PAGE> 22
(n) there occurs a change in more than 40% of the
ownership of any equity interests of the Borrower on the date hereof as the
result of a single transaction or a series of related transactions (but not from
the sale of newly issued securities to investors), or more than 40% of such
interests become subject to any contractual, judicial, or statutory lien,
charge, security interest, or encumbrance;
(o) the SBCL License shall be cancelled or terminated for
any reason (including, without limitation, under the provisions of Article 9
thereof), or SBCL shall become the subject of any proceeding of the type
described in subsection (f) hereof and the SBCL License shall not be assumed by
SBCL (which, in the case of a proceeding under title 11 of the United States
Code, shall be strictly in accordance with 11 U.S.C. Section 365(b)) within
thirty days of the commencement of such proceeding; or
(p) the exclusive right and license granted by the
Borrower to SBCL under the SBCL License shall be converted to a nonexclusive
right and license in any country of the Territory (as defined in the SBCL
License) under Section 2.2 of the SBCL License.
SECTION 8. REMEDIES.
(a) If any Event of Default shall be continuing, the
Lender may, without prejudice to any of its other rights under any Loan Document
or Applicable Law:
(i) declare all Obligations under the Loan Documents to
be immediately due and payable (except with respect to any Event
of Default set forth in Section 7(f) hereof, in which case all
Obligations under the Loan Documents shall automatically become
immediately due and payable without necessity of any
declaration) without presentment, representation, demand of
payment, or protest, which are hereby expressly waived;
(ii) take possession of the Collateral and, for that
purpose may enter, with the aid and assistance of any person or
persons, any premises where the Collateral or any part thereof
is, or may be placed, and remove the same;
(iii) remove for copying all documents, instruments,
files and records (including the copying of any computer
records) relating to the Borrower's accounts receivable,
contract rights (including, without limitation, all license
agreements under which the Borrower is the licensor) and all
other rights to
<PAGE> 23
the payment of money (collectively, "Receivables"), or use (at
the expense of the Borrower) such supplies or space of the
Borrower at the Borrower's places of business necessary to
administer and collect the Borrower's Receivables;
(iv) accelerate or extend the time of payment,
compromise, issue credits, or bring suit on the Borrower's
Receivables (in the name of the Borrower or the Lender) and
otherwise administer and collect such Receivables including,
without limitation, the delivery to SBCL of the notification
letter specified in Section 3.3(a)(vi);
(v) sell, assign and deliver the Borrower's Receivables
with or without advertisement, at public or private sale, for
cash, on credit or otherwise, subject to applicable law;
(vi) use all computer software programs, data bases,
processes, trademarks, tradenames and materials used by the
Borrower in connection with its businesses or in connection with
the Collateral (with respect to which the Lender shall have a
limited license therefor);
(vii) exercise in respect of the Collateral, in
addition to other rights and remedies provided for herein (or in
any other Loan Document) or otherwise available to it, all the
rights and remedies of a secured party under the applicable
Uniform Commercial Code (the "Code") whether or not the Code
applies to the affected Collateral and also may (i) require the
Borrower to, and the Borrower hereby agrees that it will at its
expense and upon request of the Lender forthwith, assemble all
or part of the Collateral as directed by the Lender and make it
available to the Lender at a place to be designated by the
Lender that is reasonably convenient to both parties and (ii)
without notice except as specified below, sell the Collateral or
any part thereof in one or more parcels at public or private
sale, at any of the Lender's offices or elsewhere, for cash, on
credit, or for future delivery, and upon such other terms as the
Lender may deem commercially reasonable. The Borrower agrees
that, to the extent notice of sale shall be required by law, at
least five days' notice to the Borrower of the time and place of
any public sale or the time after which any private sale is to
be made shall constitute reasonable notification. The Lender
shall not be obligated to make any sale of Collateral regardless
of notice of sale having been given. The
<PAGE> 24
Lender may adjourn any public or private sale from time to time
by announcement at the time and place fixed therefor, and such
sale may, without further notice, be made at the time and place
to which it was so adjourned; and
(viii) record or cause to be recorded in the United
States Patent and Trademark Office the Intellectual Property
Assignment, it being understood that such recording shall not be
made unless an Event of Default is continuing.
(b) All cash proceeds received by the Lender in respect of
any sale of, collection from, or other realization upon all or any part of the
Collateral may, in the discretion of the Lender, be held by the Lender as
collateral for, or then or at any time thereafter applied in whole or in part by
the Lender against, all or any part of the Obligations in such order as the
Lender shall elect. Any surplus of such cash or cash proceeds held by the Lender
and remaining after the full and final payment of all the Obligations shall be
paid over to the Borrower or to such other Person to which the Lender may be
required under Applicable Law, or directed by a court of competent jurisdiction,
to make payment of such surplus.
(c) During the continuance of an Event of Default, all
fees, royalties and other payments received by the Borrower under or in
connection with the SBCL License shall be received in trust for the benefit of
the Lender, shall be segregated from other funds of the Borrower and shall be
forthwith paid over to the Lender in the same form as so received (with any
necessary indorsement).
SECTION 9. MISCELLANEOUS PROVISIONS.
SECTION 9.1. NOTICES. Except as otherwise provided herein,
all notices and other communications required or desired to be given hereunder
shall be given in writing and shall be delivered by overnight courier, hand
delivery, or certified or registered mail, postage prepaid, if to the Lender,
then to Technology Finance Division, 76 Batterson Park Road, Farmington,
Connecticut 06032-2571, Attention: Assistant Vice President, Lease
Administration, with a copy to the Lender at Riverway II, West Office Tower,
9399 West Higgins Road, Rosemont, Illinois 60018, Attention: Legal Department,
and if to the Borrower, then to Progenitor, Inc., 4040 Campbell Avenue, Menlo
Park, California 94025, or such other address as shall be designated by the
Borrower or the Lender to the other party in accordance herewith. All such
notices and communications shall be effective when received or when delivery is
refused.
<PAGE> 25
SECTION 9.2. HEADINGS. The headings in this Security
Agreement are for purposes of reference only and shall not affect the meaning or
construction of any provision of this Security Agreement.
SECTION 9.3. ASSIGNMENTS. The Borrower shall not have the
right to assign the Note or this Security Agreement or any interest therein
unless the Lender shall have given the Borrower prior written consent and the
Borrower and its assignee shall have delivered assignment documentation in form
and substance satisfactory to the Lender in its sole discretion. The Lender may
assign its rights and delegate its obligations under the Note or this Security
Agreement.
SECTION 9.4. AMENDMENTS, WAIVERS, AND CONSENTS. Any
amendment or waiver of any provision of this Security Agreement and any consent
to any departure by the Borrower from any provision of this Security Agreement
shall be effective only by a writing signed by the Lender and shall bind and
benefit the Borrower and the Lender and their respective successors and assigns,
subject, in the case of the Borrower, to the first sentence of Section 9.3.
SECTION 9.5. BORROWER REMAINS LIABLE. Anything herein to
the contrary notwithstanding, (a) the Borrower shall remain liable under the
contracts and agreements included in the Collateral to the extent set forth
therein to perform all of its duties and obligations thereunder to the same
extent as if this Security Agreement had not been executed, (b) the exercise by
the Lender of any of the rights hereunder shall not release the Borrower from
any of its duties or obligations under the contracts and agreements included in
the Collateral and (c) the Lender shall not have any obligation or liability
under the contracts and agreements included in the Collateral by reason of this
Security Agreement, nor shall the Lender be obligated to perform any of the
obligations or duties of the Borrower thereunder or to take any action to
collect or enforce any claim for payment assigned hereunder.
<PAGE> 26
SECTION 9.6. INTERPRETATION OF AGREEMENT. Time is of the
essence in each provision of this Security Agreement of which time is an
element. All terms not defined herein or in the Note shall have the meaning set
forth in the Code, except where the context otherwise requires. To the extent a
term or provision of this Security Agreement conflicts with any term or
provision of the Note, this Security Agreement shall control with respect to the
subject matter of such term or provision. Acceptance of or acquiescence in a
course of performance rendered under this Security Agreement shall not be
relevant in determining the meaning of this Security Agreement even though the
accepting or acquiescing party had knowledge of the nature of the performance
and opportunity for objection.
SECTION 9.7. CONTINUING SECURITY INTEREST.
(a) This Security Agreement shall create a continuing
security interest in the Collateral and shall (i) remain in full force and
effect until the indefeasible payment in full of the Obligations, (ii) be
binding upon the Borrower and its successors and assigns and (iii) inure,
together with the rights and remedies of the Lender hereunder, to the benefit of
the Lender and its successors, transferees, and assigns.
(b) Upon the indefeasible payment in full of the
Obligations, the security interest provided herein shall terminate with respect
to all Collateral and the Lender shall at the expense of the Borrower return to
the Borrower all Collateral then held by the Lender, if any, and upon request of
the Borrower and at the expense of the Borrower shall execute, in form for
filing, termination statements of the security interest herein granted or any
other documents reasonably requested by the Borrower to evidence such
termination, and thereafter, no party shall have any further right or obligation
hereunder except for the obligations of the Borrower under Section 9.10 hereof.
<PAGE> 27
(c) The security interest provided herein shall be deemed
to be released with respect to any item of Collateral consisting of patents,
patent applications or know-how, in each case as reasonably required by the
Borrower to consummate licenses or collaborative agreements with third parties
in the ordinary course of business and at arm's-length, and the Lender shall at
the expense of the Borrower return to the Borrower all such Collateral then held
by the Lender, if any, and upon request of the Borrower and at the expense of
the Borrower shall execute, in form for filing, partial releases or amendments
of the security interest herein granted or any other documents reasonably
requested by the Borrower to evidence such release. The Borrower shall give the
Lender written notice within fifteen days of entering into any such licenses or
collaborative agreements specifying the items of Collateral released in
connection therewith.
SECTION 9.8. REINSTATEMENT. To the extent permitted by
law, this Security Agreement and the rights and powers granted to the Lender
hereunder and under the Loan Documents shall continue to be effective or be
reinstated if at any time any amount received by the Lender in respect of the
Obligations is rescinded or must otherwise be restored or returned by the Lender
upon the insolvency, bankruptcy, dissolution, liquidation, or reorganization of
the Borrower or upon the appointment of any receiver, intervenor, conservator,
trustee, or similar official for the Borrower or any substantial part of its
assets, or otherwise, all as though such payments had not been made.
SECTION 9.9. SURVIVAL OF PROVISIONS. All representations,
warranties, and covenants of the Borrower contained herein shall survive the
execution and delivery of this Security Agreement, and shall terminate only upon
the full and final payment and performance by the Borrower of the Obligations.
SECTION 9.10. INDEMNIFICATION. The Borrower agrees to
indemnify and hold harmless the Lender and its directors, officers, agents,
employees and counsel from and against any and all costs, expenses, claims or
liability incurred by the Lender or such other Person hereunder and under any
other Loan Document or in connection herewith or therewith, unless such claim or
liability shall be due to willful misconduct or gross negligence on the part of
the Lender or such other Person.
<PAGE> 28
SECTION 9.11. COUNTERPARTS; TELECOPIED SIGNATURES. This
Security Agreement may be executed in counterparts, each of which when so
executed and delivered shall be an original, but both of which shall together
constitute one and the same instrument. Each of this Security Agreement and the
other Loan Documents may be executed and delivered by telecopier or other
facsimile transmission all with the same force and effect as if the same was a
fully executed and delivered original manual counterpart.
SECTION 9.12. SEVERABILITY. In case any provision in or
obligation under this Security Agreement, the Note or any other Loan Document
shall be invalid, illegal, or unenforceable in any jurisdiction, the validity,
legality and enforceability of the remaining provisions or obligations, or of
such provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.
SECTION 9.13. DELAYS; PARTIAL EXERCISE OF REMEDIES. No
delay or omission of the Lender to exercise any right or remedy hereunder,
whether before or after the occurrence of any Event of Default, shall impair any
such right or shall operate as a waiver thereof or as a waiver of any such Event
of Default. No single or partial exercise by the Lender of any right or remedy
shall preclude any other or further exercise thereof, or preclude any other
right or remedy.
SECTION 9.14. ENTIRE AGREEMENT. The Borrower and the
Lender agree that this Security Agreement and the other Loan Documents are the
complete and exclusive statement and agreement between the parties with respect
to the subject matter hereof, superseding all proposals and prior agreements,
oral or written, and all other communications between the parties with respect
to the subject matter hereof.
SECTION 9.15. SETOFF. In addition to and not in limitation
of all rights of offset that the Lender may have under Applicable Law, and
whether or not the Lender has made any demand or the Obligations of the Borrower
have matured, the Lender shall have the right to appropriate and apply to the
payment of the Obligations all deposits and other obligations then or thereafter
owing by the Lender to or for the credit or the account of the Borrower.
SECTION 9.16. WAIVER OF JURY TRIAL. THE BORROWER AND THE
LENDER IRREVOCABLY WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING,
OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS SECURITY AGREEMENT, ANY OTHER
LOAN DOCUMENT, OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
<PAGE> 29
SECTION 9.17. GOVERNING LAW. THE VALIDITY, INTERPRETATION,
AND ENFORCEMENT OF THIS SECURITY AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF ILLINOIS WITHOUT GIVING EFFECT TO THE
CONFLICT OF LAW PRINCIPLES THEREOF.
SECTION 9.18. VENUE; SERVICE OF PROCESS. ANY LEGAL ACTION
OR PROCEEDING WITH RESPECT TO THIS SECURITY AGREEMENT OR ANY OTHER LOAN DOCUMENT
MAY BE BROUGHT IN THE COURTS OF THE STATE OF ILLINOIS SITUATED IN COOK COUNTY,
OR OF THE UNITED STATES OF AMERICA FOR THE NORTHERN DISTRICT OF ILLINOIS, AND,
BY EXECUTION AND DELIVERY OF THIS SECURITY AGREEMENT, THE BORROWER HEREBY
ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND
UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS. THE BORROWER HEREBY
IRREVOCABLY WAIVES, IN CONNECTION WITH ANY SUCH ACTION OR PROCEEDING, (A) ANY
OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE
OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, THAT IT MAY NOW OR HEREAFTER
HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING IN SUCH RESPECTIVE
JURISDICTIONS AND (B) THE RIGHT TO INTERPOSE ANY NONCOMPULSORY SETOFF,
COUNTERCLAIM, OR CROSS-CLAIM. THE BORROWER IRREVOCABLY CONSENTS TO THE SERVICE
OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING
BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE
PREPAID, TO THE BORROWER AT THE ADDRESS FOR IT SPECIFIED IN SECTION 9.1 HEREOF.
NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE LENDER TO SERVE PROCESS IN ANY
OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE
PROCEED AGAINST THE BORROWER IN ANY OTHER JURISDICTION, SUBJECT IN EACH INSTANCE
TO THE PROVISIONS HEREOF WITH RESPECT TO RIGHTS AND REMEDIES.
<PAGE> 30
IN WITNESS WHEREOF, the undersigned Borrower has caused this
Security Agreement to be duly executed and delivered by its proper and duly
authorized officer as of the date first set forth above.
PROGENITOR, INC.
By:/s/ Mark N.K. Bagnall
-------------------------------
Name: Marh N.K. Bagnall
Title: Vice President & C.F.O
Accepted as of the
4th day of May, 1998
TRANSAMERICA BUSINESS CREDIT CORPORATION
By:/s/Gary P. Moro
-------------------------------
Name: Gary P. Moro
Title:Vice President
<PAGE> 31
SCHEDULE 1
EXISTING LIENS/PROTECTIVE FILINGS
<TABLE>
<CAPTION>
ORIGINAL REMAINING
HOLDER'S NAME AND ADDRESS COLLATERAL/LEASED EQUIPMENT VALUE PAYMENTS
- ------------------------- --------------------------- ----- --------
<S> <C> <C> <C>
Phoenix Leasing Equipment, fixtures and general
Incorporated intangibles under a Master Lease
2401 Kerner Blvd. Agreement dated October 1, 1993
San Rafael, CA 94901
Phoenix Leasing Equipment, fixtures and general
Incorporated intangibles under a Master Lease
2401 Kerner Blvd. Agreement dated February 22, 1995
San Rafael, CA 94901
Schedule PGEN 1 $112,850.00 $85,632.00
Schedule PGEN 2 $19,670.00 $16,794.00
Schedule PGEN 3 $87,771.00 $10,086.64
Schedule PGEN 4 $71,159.00 $28,621.60
Schedule PGEN 5 $46,166.00 $21,221.60
Schedule PGEN 6 $295,381.00 $228,353.16
Mellon US Leasing, Equipment under a Master Lease
a Division of Mellon Agreement dated February 26, 1997
Leasing Corporation
733 Front Street
San Francisco, CA 94111
Schedule 1 $225,295.00 $156,751.00
Schedule 2 $275,998.00 $204,026.13
</TABLE>
<PAGE> 32
SCHEDULE 2
EXCLUDED PATENTS, PATENT APPLICATIONS AND KNOW-HOW
U.S. Serial No. 08/632673
U.S. Serial No. 08/891250
U.S. Serial No. 08/652265
U.S. Serial No. 08/834497
U.S. Serial No. 08/852495
U.S. Serial No. 08/436074
U.S. Serial No. 08/599252
PCT Application No. 97/06254
PCT Application No. 96/06583
South Africa Application No. 97/6370
South Africa Application No. 96/3639
<PAGE> 33
EXHIBIT A
PROMISSORY NOTE
Date: May 4, 1998
FOR VALUE RECEIVED, the undersigned promises to pay to the order
of Transamerica Business Credit Corporation or its assigns (the "Payee") at its
office located at Riverway II, West Office Tower, 9399 West Higgins Road,
Rosemont, Illinois 60018, or at such other place as the Payee or the holder
hereof may designate in writing, the principal amount of One Million Nine
Hundred Thousand Dollars ($1,900,000) received by the undersigned, plus interest
on the principal amount hereof from time to time outstanding, from the date
hereof until the date this Note is paid in full, payable monthly in arrears on
the first day of each month commencing June 1, 1998 and on the date this Note is
paid in full, at a rate equal at all times to 14.75% per annum. The principal
amount of this Note shall be payable in the following amounts on the following
dates:
<TABLE>
<CAPTION>
Amount Date
------ ----
<S> <C>
$200,000 October 31, 1998
$300,000 October 31, 1999
$400,000 October 31, 2000
$500,000 October 31, 2001
$500,000 October 31, 2002
</TABLE>
No amount of principal paid or prepaid hereunder may be reborrowed. All amounts
shall be paid hereunder in lawful money of the United States and in immediately
available funds.
This Note is the Note referred to in the Security Agreement dated
as of even date herewith (as amended, supplemented or otherwise modified from
time to time, the "Agreement") by the undersigned in favor of the Payee, and is
subject and entitled to all provisions and benefits thereof. Capitalized terms
used but not defined herein shall have the meanings set forth in the Agreement.
If any installment of this Note is not paid within five days
after its due date, the undersigned agrees to pay on demand, in addition to the
amount of such installment, an amount equal to 5% of such installment, but only
to the extent permitted by Applicable Law.
The undersigned shall have the right to prepay this Note, in
whole or in part, at any time on thirty days' prior written notice to the Payee.
On the date of any such prepayment,
<PAGE> 34
the undersigned shall pay the principal amount of this Note being so prepaid,
together with all accrued and unpaid interest thereon and a prepayment fee in an
amount equal to (a) 4% of the amount prepaid if such prepayment occurs prior to
the first anniversary hereof, (b) 3% of the amount prepaid if such prepayment
occurs on or after the first anniversary but prior to the second anniversary
hereof, (c) 2% of the amount prepaid if such prepayment occurs after the second
anniversary but prior to the third anniversary hereof or (d) 1% of the amount
prepaid if such prepayment occurs thereafter. Any prepayments shall be applied
to the installments hereof in the inverse order of maturity.
Upon the maturity of this Note or the acceleration of the
maturity of this Note in accordance with the terms of the Agreement, the entire
unpaid principal amount on this Note, together with all interest, fees and other
amounts payable hereon or in connection herewith, shall be immediately due and
payable without further notice or demand, with interest on all such amounts at a
rate not to exceed the lawful limit, from the date of such maturity or
acceleration, as the case may be, until all such amounts have been paid.
If any payment on this Note becomes payable on a day other than a
Business Day, the maturity thereof shall be extended to the next succeeding
Business Day.
The undersigned hereby waives diligence, demand, presentment,
protest and notice of any kind, and assents to extensions of the time of
payment, release, surrender or substitution of security, or forbearance or other
indulgence, without notice. The undersigned agrees to pay all amounts under this
Note without offset, deduction, claim, counterclaim, defense or recoupment, all
of which are hereby waived.
The Payee, the undersigned and any other parties to the Loan
Documents intend to contract in strict compliance with applicable usury law from
time to time in effect. In furtherance thereof such Persons stipulate and agree
that none of the terms and provisions contained in the Loan Documents shall ever
be construed to create a contract to pay, for the use, forbearance or detention
of money, interest in excess of the maximum amount of interest permitted to be
charged by Applicable Law from time to time in effect. Neither the undersigned
nor any present or future guarantors, endorsers, or other Persons hereafter
becoming liable for payment of any Obligation shall ever be liable for unearned
interest thereon or shall ever be required to pay interest thereon in excess of
the maximum amount that may be lawfully charged under Applicable Law from time
to time in effect, and the provisions of this paragraph shall control over all
other provisions of the Loan Documents which may be in conflict or apparent
conflict herewith. The Payee expressly disavows any intention to charge or
collect excessive unearned interest or finance charges in the event the maturity
of any Obligation
<PAGE> 35
is accelerated. If (a) the maturity of any Obligation is accelerated for any
reason, (b) any Obligation is prepaid and as a result any amounts held to
constitute interest are determined to be in excess of the legal maximum, or (c)
the Payee or any other holder of any or all of the Obligations shall otherwise
collect amounts which are determined to constitute interest which would
otherwise increase the interest on any or all of the Obligations to an amount in
excess of that permitted to be charged by Applicable Law then in effect, then
all sums determined to constitute interest in excess of such legal limit shall,
without penalty, be promptly applied to reduce the then outstanding principal of
the related Obligations or, at the Payee's or such holder's option, promptly
returned to the undersigned upon such determination. In determining whether or
not the interest paid or payable, under any specific circumstance, exceeds the
maximum amount permitted under Applicable Law, the Payee and the undersigned
(and any other payors thereof) shall to the greatest extent permitted under
Applicable Law, (i) characterize any non-principal payment as an expense, fee or
premium rather than as interest, (ii) exclude voluntary prepayments and the
effects thereof, and (iii) amortize, prorate, allocate, and spread the total
amount of interest through the entire contemplated term of this Note in
accordance with the amount outstanding from time to time thereunder and the
maximum legal rate of interest from time to time in effect under Applicable Law
in order to lawfully charge the maximum amount of interest permitted under
Applicable Law.
This Note may not be changed, modified or terminated orally, but
only by an agreement in writing signed by the undersigned and the Payee or any
holder hereof.
The undersigned shall, upon demand, pay to the Payee all costs
and expenses incurred by the Payee (including the reasonable fees and
disbursements of counsel and other professionals) in connection with the
preparation, execution and delivery of this Note and all other Loan Documents,
and in connection with the administration, modification and amendment of the
Loan Documents, and pay to the Payee all costs and expenses (including the fees
and disbursements of counsel and other professionals) paid or incurred by the
Payee in (A) enforcing or defending its rights under or in respect of this Note
or any of the other Loan Documents, (B) collecting any of the liabilities by the
undersigned to the Payee or otherwise administering the Loan Documents, (C)
foreclosing or otherwise collecting upon any collateral and (D) obtaining any
legal, accounting or other advice in connection with any of the foregoing.
This Note shall be binding upon the successors and assigns of the
undersigned and inure to the benefit of the Payee and its successors, endorsees
and assigns. If any term or provision of this Note shall be held invalid,
illegal or unenforceable, the validity of all other terms and provisions hereof
shall in no way be affected thereby.
<PAGE> 36
EACH OF THE UNDERSIGNED AND, BY ITS ACCEPTANCE HEREOF, THE PAYEE
HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES (TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW) ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY OF ANY
DISPUTE ARISING UNDER OR RELATING TO THIS NOTE AND AGREES THAT ANY SUCH DISPUTE
SHALL BE TRIED BEFORE A JUDGE SITTING WITHOUT A JURY.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF ILLINOIS WITHOUT GIVING EFFECT TO PRINCIPLES OF
CONFLICTS OF LAW.
PROGENITOR, INC.
By:
-------------------------------
Name:
Title:
<PAGE> 1
EXHIBIT 10.47
SALE AND LEASEBACK AGREEMENT
THIS SALE AND LEASEBACK AGREEMENT (this "Agreement"), is made as
of May 6, 1998, among Progenitor, Inc., a Delaware corporation ("Seller"), and
Transamerica Business Credit Corporation, a Delaware corporation ("Buyer").
W I T N E S S E T H :
WHEREAS, Seller is the owner of the equipment more particularly
described on Exhibit II hereto (the "Equipment");
WHEREAS, Seller desires to sell to Buyer and Buyer desires to
purchase from Seller the Equipment; and
WHEREAS, Buyer, as a condition to such purchase, wishes to lease
to Seller and Seller wishes to lease from Buyer the Equipment under the terms
and conditions of the Master Lease Agreement dated as of May 1, 1998 and
Schedule No. 1 thereto (collectively, as amended, supplemented or otherwise
modified from time to time, the "Lease") between Buyer, as lessor, and Seller,
as lessee.
NOW, THEREFORE, in consideration of the premises herein contained
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto hereby agree as follows:
1. AMOUNT AND TERMS OF PURCHASE.
(a) Subject to the terms and conditions of this Agreement,
and in reliance upon the representations and warranties of the Seller herein set
forth, the Buyer agrees to purchase all of the Seller's right, title and
interest in and to all of the Equipment such that the Buyer will become the
owner of all such Equipment for all purposes whatsoever. The Seller hereby
agrees that the Buyer is under no obligation to purchase any other equipment now
or in the future and shall not assert a claim that the Buyer may have any such
obligation.
(b) The price to be paid by the Buyer with respect to the
purchase of the Equipment (the "Purchase Price") is $889,987.77. The Purchase
Price shall be payable to the Seller on the Lease Commencement Date (as defined
in the Lease).
(c) The Seller shall pay any and all applicable federal,
state, county or local taxes and any and all present or future taxes or other
governmental charges arising in connection with the sale of the Equipment
hereunder, including sales, use or occupation taxes due upon the purchase by the
Buyer.
(d) The purchase of the Equipment shall be evidenced by a
bill of sale, substantially in the form attached hereto as Exhibit A (the "Bill
of Sale"), duly executed by the Seller.
<PAGE> 2
2. CONDITIONS TO PURCHASE. The obligation of the Buyer to
purchase the Equipment is subject to the following conditions:
(a) The Buyer shall have received this Agreement, duly
executed by the Seller.
(b) The Buyer shall have received the Bill of Sale, duly
executed by the Seller.
(c) The Buyer shall have received the Lease, duly executed
by the Seller.
(d) The Buyer shall have received resolutions of the Board
of Directors of the Seller approving and authorizing the execution, delivery and
performance by the Seller of this Agreement, the Lease and the notices and other
documents to be delivered by the Seller hereunder and thereunder (collectively,
the "Sale and Leaseback Documents").
(e) The Buyer shall have received the certificate of title
or similar evidence of ownership with respect to each item of Equipment and
Uniform Commercial Code financing statements covering the Equipment in form and
substance satisfactory to the Buyer, duly executed by the Seller.
(f) No material adverse change has occurred with respect
to the business, prospects, properties, results of operations, assets,
liabilities or condition (financial or otherwise) of the Seller and its
affiliates, taken as a whole, since September 30, 1997.
(g) The Buyer shall have received all warranties and other
documentation received or executed by Seller in connection with the original
acquisition of the Equipment by the Seller (and by its execution hereof the
Seller hereby assigns to the Buyer all such warranties and other Documentation).
(h) The Buyer shall have received an opinion of Seller's
counsel, substantially in the form attached hereto as Exhibit B.
(i) The Buyer shall have received such other approvals,
opinions or documents as the Buyer may reasonably request.
3. REPRESENTATION AND WARRANTIES. To induce the Buyer to enter
into this Agreement, the Seller represents and warrants to the Buyer that:
(a) The Seller is duly authorized to execute, deliver and
perform its obligations under each of the Sale and Leaseback Documents and all
corporate action required on its part for the due execution, delivery and
performance of the transactions contemplated herein and therein has been duly
and effectively taken.
<PAGE> 3
(b) The execution, delivery and performance by the Seller
of each of the Sale and Leaseback Documents and the consummation of the
transactions contemplated herein and therein does not and will not violate any
provision of, or result in a default under, the Seller's Articles or
Certificates of Incorporation or By-laws or any indenture or agreement to which
the Seller is a party or to which its assets are bound or any order, permit,
law, statute, code, ordinance, rule, regulation, certificate or any other
requirement of any governmental authority or regulatory body to which the Seller
is subject, or result in the creation or imposition of any mortgage, deed of
trust, pledge, security interest, lien or encumbrance of any kind upon or with
respect to the Equipment or any proceeds thereof, other than those in favor of
the Buyer as contemplated by the Sale and Leaseback Documents.
(c) No authorization or approval or other action by, and
no notice to or filing with, any governmental authority or regulatory body is
required for the due execution, delivery and performance by the Seller of any of
the Sale and Leaseback Documents to which it is a party.
(d) Each Sale and Leaseback Document to which the Seller
is a party constitutes or will constitute, when delivered hereunder, the legal,
valid and binding obligation of the Seller enforceable against the Seller in
accordance with its respective terms, except as such enforceability may be (i)
limited by the effect of applicable bankruptcy, insolvency, reorganization or
similar laws affecting the enforcement of creditors' rights generally or (ii)
subject to the effect of general principles of equity (regardless of whether
such enforceability is considered in a proceeding at equity or at law).
(e) There are no actions, suits, or proceedings pending,
threatened against or affecting the Seller which seek to enjoin, prohibit or
restrain the consummation of any of the transactions contemplated hereby or by
the other Sale and Leaseback Documents.
(f) Each item of Equipment is owned by the Seller free and
clear of any liens and encumbrances of any kind or description. Upon purchase of
the Equipment hereunder, the Buyer will acquire good and marketable title in and
to the Equipment.
All representations and warranties herein shall survive the execution of this
Agreement and the purchase of the Equipment.
4. INDEMNITIES. The Seller agrees to indemnify, defend, and save
harmless the Buyer and its officers, directors, employees, agents, and
attorneys, and each of them (the "Indemnified Parties"), from and against all
claims, actions, suits, and other legal proceedings, damages, costs, interest,
charges, counsel fees and other expenses and penalties (collectively, the
"Indemnified Amounts") which any of the Indemnified Parties may sustain or incur
by reason of or arising out of (i) the Seller's ownership of any Equipment prior
to the date on which such Equipment is sold to the Buyer, or the Seller's acts
or omissions prior to such date under, in connection with or relating to such
Equipment or any of the Sale and Leaseback Documents, (ii) the operation,
maintenance or use of such Equipment prior to such date, (iii) the inaccuracy
<PAGE> 4
of any of the Seller's representations or warranties contained in any of the
Sale and Leaseback Documents, (iv) the breach of any of the Seller's covenants
contained in any of the Sale and Leaseback Documents, (v) any loss or damage to
any Equipment in excess of the deductible which is not paid by insurance or (vi)
any sales, use, excise and other taxes, charges, and fees (including, without
limitation, income, franchise, business and occupation, gross receipts, sales,
use, licensing, registration, titling, personal property, stamp and interest
equalization taxes, levies, imposts, duties, charges or withholdings of any
nature), and any fines, penalties or interest thereon, imposed or levied by any
governmental body, agency or tax authority upon or in connection with the
Equipment, its acquisition, ownership, delivery, leasing, possession, use or
relocation or otherwise in connection with the transactions contemplated by each
Sale and Leaseback Document.
5. REMEDIES. Upon the Seller's violation of or default under any
provision of this Agreement, the Buyer may (subject to the provisions of the
other Sale and Leaseback Documents) proceed to protect and enforce its rights
either by suit in equity or by action at law or both, whether for the specific
performance of any covenant or agreement contained herein or in aid of the
exercise of any power granted in any Sale and Leaseback Document; it being
intended that the remedies contained in any Sale and Leaseback Document shall be
cumulative and shall be in addition to every other remedy given under such Sale
and Leaseback Document or now or hereafter existing at law or in equity or by
statute or otherwise.
6. AMENDMENTS, ETC. No amendment or waiver of any provision of
this Agreement, nor consent to any departure therefrom, shall in any event be
effective unless the same shall be in writing and signed by the Buyer, and then
such waiver or consent shall be effective only in the specific instance and for
the specific purpose for which given.
7. NOTICES, ETC. All notices and other communications provided
for hereunder shall be in writing and sent:
if to the Seller, at its address at:
PROGENITOR, INC.
4040 CAMPBELL AVENUE
MENLO PARK, CALIFORNIA 94025
Attention: Chief Financial Officer
Telephone No.: 650-617-0880
Telecopy No.: 650-617-0883
<PAGE> 5
if to the Buyer, at its address at:
Transamerica Business Credit Corporation
Technology Finance Division
76 Batterson Park Road
Farmington, Connecticut 06032-2571
Attention: Assistant Vice President,
Lease Administration
Telephone No.: 860-677-6466
Telecopy No.: 860-677-6766
with a copy to:
Transamerica Business Credit Corporation
9399 West Higgins Road
Rosemont, Illinois 60018
Attention: Legal Department
Telephone No.: 847-685-1106
Telecopy No.: 847-685-1143
or to such other address as shall be designated by such party in a written
notice to the other party. All such notices shall be deemed given (i) if sent by
certified or registered mail, three days after being postmarked, (ii) if sent by
overnight delivery service, when received at the above stated addresses or when
delivery is refused and (iii) if sent by facsimile transmission, when receipt of
such transmission is acknowledged.
8. NO WAIVER; REMEDIES. No failure on the part of the Buyer to
exercise, and no delay in exercising, any right hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right
preclude any other or further exercise thereof or the exercise of any other
right. The remedies herein provided are cumulative and not exclusive of any
remedies provided by law.
9. BENEFIT. Without the prior written consent of the Buyer, the
Seller may not transfer, assign or delegate any of its rights, duties or
obligations hereunder.
10. BINDING EFFECT. This Agreement shall be binding upon and
inure to the benefit of the Seller and the Buyer and their respective successors
and assigns.
11. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND SHALL
BE CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF ILLINOIS WITHOUT
GIVING EFFECT TO THE CONFLICTS OF LAW PRINCIPLES THEREOF.
<PAGE> 6
12. EXECUTION IN COUNTERPARTS. This Agreement may be executed in
any number of counterparts, each of which shall constitute an original and all
of which taken together shall constitute one and the same agreement.
13. SEVERABILITY. If one or more of the provisions contained in
this Agreement shall be invalid, illegal, or unenforceable in any respect, the
validity, legality, and enforceability of the remaining provisions contained
herein, and any other application thereof, shall not in any way be affected or
impaired thereby.
14. SUBMISSION TO JURISDICTION. ALL DISPUTES ARISING UNDER OR IN
CONNECTION WITH THIS AGREEMENT BETWEEN THE PARTIES HERETO, WHETHER SOUNDING IN
CONTRACT, TORT, EQUITY OR OTHERWISE, SHALL BE RESOLVED ONLY BY STATE AND FEDERAL
COURTS LOCATED IN ILLINOIS, AND THE COURTS TO WHICH AN APPEAL THEREFROM MAY BE
TAKEN; PROVIDED, HOWEVER, THAT THE BUYER SHALL HAVE THE RIGHT, TO THE EXTENT
PERMITTED BY APPLICABLE LAW, TO PROCEED AGAINST THE SELLER OR ITS PROPERTY IN
ANY LOCATION REASONABLY SELECTED BY THE BUYER IN GOOD FAITH TO ENABLE THE BUYER
TO REALIZE ON SUCH PROPERTY, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN
FAVOR OF THE BUYER. EACH PARTY AGREES THAT IT WILL NOT ASSERT ANY PERMISSIVE
COUNTERCLAIMS, SETOFFS OR CROSS-CLAIMS IN ANY PROCEEDING BROUGHT BY THE BUYER;
IT BEING UNDERSTOOD THAT THIS SENTENCE DOES NOT PRECLUDE THE SELLER FROM
ASSERTING COMPULSORY COUNTERCLAIMS. THE SELLER WAIVES ANY OBJECTION THAT IT MAY
HAVE TO THE LOCATION OF THE COURT IN WHICH THE BUYER HAS COMMENCED A PROCEEDING,
INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON
FORUM NON CONVENIENS.
15. JURY TRIAL. THE PARTIES HERETO EACH HEREBY WAIVE TO THE
FULLEST EXTENT PERMITTED BY LAW ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR
PROCEEDING ARISING UNDER OR IN CONNECTION WITH THIS AGREEMENT.
<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed by their respective officers hereunto duly authorized, as of the
first date written above.
PROGENITOR, INC.
By: /s/ Mark Bagnall
-------------------------------
Name: Mark Bagnall
Title: Vice President & CFO
TRANSAMERICA BUSINESS CREDIT CORPORATION
By: /s/ Gary P. Moro
-------------------------------
Name: Gary P. Moro
Title:
Exhibit II- Equipment
Exhibit A- Bill of Sale
Exhibit B- Opinion of Seller's Counsel
Form 14
<PAGE> 8
EXHIBIT A
BILL OF SALE
KNOW ALL PERSONS BY THESE PRESENTS PROGENITOR, INC. (the
"Seller"), for Eight Hundred Eighty Nine Thousand, Nine Hundred Eighty Seven and
77/100 Dollars ($889,987.77) and other valuable consideration to it in hand
paid, receipt of which is hereby acknowledged, does unconditionally, absolutely
and irrevocably grant, sell, assign, transfer and convey unto TRANSAMERICA
BUSINESS CREDIT CORPORATION and its assignees or successors (collectively, the
"Buyer"), all of the Seller's right, title and interest in and to the equipment
described on Exhibit II hereto (collectively, the "Equipment").
TO HAVE AND TO HOLD said Equipment unto the said Buyer, to and
for its use forever.
AND, the Seller hereby warrants, covenants and agrees that it (a)
has good and marketable title to the Equipment, free and clear of any liens and
other encumbrances; and (b) will warrant and defend the sale of the Equipment
against any and all persons claiming against such title.
IN WITNESS WHEREOF the Seller has caused this instrument to be
duly executed and delivered as of this 13th day of May, 1998.
PROGENITOR, INC.
By: ______________________________
Name:
Title:
Form 14
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> JUN-30-1998
<CASH> 6,202,000
<SECURITIES> 2,993,000
<RECEIVABLES> 216,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 9,716,000
<PP&E> 4,616,000
<DEPRECIATION> 2,117,000
<TOTAL-ASSETS> 13,143,000
<CURRENT-LIABILITIES> 4,147,000
<BONDS> 1,583,000
0
0
<COMMON> 14,000
<OTHER-SE> 6,259,000
<TOTAL-LIABILITY-AND-EQUITY> 13,143,000
<SALES> 0
<TOTAL-REVENUES> 365,000
<CGS> 0
<TOTAL-COSTS> 11,282,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 192,000
<INCOME-PRETAX> (10,569,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (10,569,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (10,569,000)
<EPS-PRIMARY> (0.78)
<EPS-DILUTED> (0.78)
</TABLE>
