AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 24, 2000
REGISTRATION NO. 333-32812
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
CIPHERGEN BIOSYSTEMS, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 8731 33-059-5156
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
|
6611 DUMBARTON CIRCLE
FREMONT, CA 94555
(510) 505-2100
WILLIAM E. RICH, PH.D.
PRESIDENT AND CHIEF EXECUTIVE OFFICER
CIPHERGEN BIOSYSTEMS, INC.
6611 DUMBARTON CIRCLE
FREMONT, CA 94555
(510) 505-2100
(Name, address, including zip code, and telephone number, including area code, of agent for service)
COPIES TO:
MICHAEL J. O'DONNELL, ESQ. JOHN MONTGOMERY, ESQ.
RICHARD L. PICHENY, ESQ. BROBECK, PHLEGER & HARRISON LLP
WILSON SONSINI GOODRICH & ROSATI TWO EMBARCADERO PLACE
PROFESSIONAL CORPORATION 2200 GENG ROAD
650 PAGE MILL ROAD PALO ALTO, CA 94304
PALO ALTO, CA 94304 (650) 424-0160
(650) 493-9300
|
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. / /
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434, check the following box. / /
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
SUBJECT TO COMPLETION, DATED AUGUST 24, 2000
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
PROSPECTUS
SHARES
[CIPHERGEN LOGO]
COMMON STOCK
This is an initial public offering of shares of common stock of Ciphergen Biosystems, Inc. Ciphergen expects that the initial public offering price will be between $ and $ per share.
We have applied for approval for trading and quotation of our common stock on the Nasdaq National Market under the symbol "CIPH."
OUR BUSINESS INVOLVES SIGNIFICANT RISKS. THESE RISKS ARE DESCRIBED UNDER THE
CAPTION "RISK FACTORS" BEGINNING ON PAGE 8.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
PER
SHARE TOTAL
Public offering price.................................... $ $
Underwriting discounts and commissions................... $ $
Proceeds, before expenses, to Ciphergen.................. $ $
|
The underwriters may also purchase up to an additional 750,000 shares of common stock at the public offering price, less the underwriting discounts and commissions, to cover over-allotments.
The underwriters expect to deliver the shares against payment in New York, New York on , 2000.
ING BARINGS
UBS WARBURG LLC
, 2000
TABLE OF CONTENTS
PAGE
--------
Prospectus Summary..................... 4
Risk Factors........................... 8
Special Note Regarding Forward-Looking
Statements........................... 15
Use of Proceeds........................ 16
Dividend Policy........................ 16
Capitalization......................... 17
Dilution............................... 18
Selected Consolidated Financial Data... 19
Management's Discussion and Analysis of
Financial Condition and Results of
Operations........................... 20
Business............................... 27
|
PAGE
--------
Management............................. 38
Certain Transactions................... 45
Principal Stockholders................. 49
Description of Capital Stock........... 52
Shares Eligible for Future Sale........ 55
Underwriting........................... 57
Legal Matters.......................... 60
Experts................................ 60
Where You Can Find Additional
Information.......................... 60
Index to Consolidated Financial
Statements........................... F-1
|
UNTIL , 2000, ALL DEALERS THAT EFFECT TRANSACTIONS IN THESE SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS REQUIREMENT IS IN ADDITION TO THE DEALERS' OBLIGATION TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
PROSPECTUS SUMMARY
YOU SHOULD CAREFULLY READ THE MORE DETAILED INFORMATION CONTAINED IN THIS PROSPECTUS, INCLUDING OUR FINANCIAL STATEMENTS AND RELATED NOTES INCLUDED IN THIS PROSPECTUS. UNLESS OTHERWISE NOTED, ALL INFORMATION IN THIS PROSPECTUS HAS BEEN ADJUSTED TO REFLECT A 0.43-FOR-1 REVERSE STOCK SPLIT THAT WILL BE EFFECTED PRIOR TO CONSUMMATION OF THIS OFFERING AND ASSUMES (1) THE CONVERSION OF ALL OUTSTANDING SHARES OF OUR PREFERRED STOCK INTO 12,971,890 SHARES OF COMMON STOCK WHICH INCLUDES 66,113 SHARES OF PREFERRED STOCK ASSUMED TO BE ISSUED ON EXERCISE OF WARRANTS UPON THE CLOSING OF THIS OFFERING AND (2) NO EXERCISE BY THE UNDERWRITERS OF THE OVER-ALLOTMENT OPTION.
THE COMPANY
Ciphergen Biosystems, Inc. develops, manufactures and markets our ProteinChip System using patented SELDI technology. The ProteinChip System enables protein discovery, characterization and assay development to provide researchers with a better understanding of biological functions at the protein level. Our ProteinChip System is a novel, enabling tool in the emerging field of protein-based biology research, known as proteomics. While recent technological advances in DNA tools have substantially changed the field of genomics, the absence of enabling protein analysis tools has limited progress in proteomics research. Proteomics provides a direct approach to understanding the role of proteins in the biology of disease, monitoring of disease progression and the therapeutic effects of drugs. We believe proteomics will be a major focus of biological research by enhancing the understanding of gene function and the molecular basis of disease. In May 1999, we commercially launched our current ProteinChip System, Series PBS II.
We believe our ProteinChip System is an enabling technology that will accelerate proteomics research. Our ProteinChip System integrates the key steps of proteomics research on a single, miniaturized biochip. Our ProteinChip System consists of three components: disposable chips with multiple protein capture sites, or ProteinChip Arrays, a ProteinChip Reader and ProteinChip Software. The ProteinChip System incorporates patented Surface-Enhanced Laser Desorption/Ionization, or SELDI, technology on a disposable chip. Our ProteinChip System captures, separates and quantitatively analyzes proteins directly from crude biological materials, such as whole blood, tissue and saliva, with minimal sample preparation. Our ProteinChip System allows researchers to compare proteins in the disease versus normal state and quantitatively analyze protein interactions. Our SELDI technology enhances protein detection by reducing signals from unwanted biomolecules that would otherwise obscure the measurement results. In addition, SELDI enables researchers to perform on-chip purification, sequencing, characterization and quantitative protein interaction analysis, and laser-based molecular weight detection.
The entire genetic content of any organism, known as its genome, is encoded in strands of DNA. Cells carry out their normal biological functions through the genetic instructions encoded in their DNA, which results in the production of proteins. The process of producing proteins from DNA is known as gene expression or protein expression. Diseases may be caused by a mutation of a gene that alters a protein, alters the gene's level of protein expression or by changes to the protein after gene expression. A protein biomarker is a protein that is present in a greater or lesser amount in a disease state versus a normal condition. Researchers can identify disease progression prior to the appearance of physical symptoms by monitoring protein biomarkers. In addition, researchers can use protein biomarkers to monitor disease treatment and identify new drug targets.
We believe our ProteinChip System facilitates proteomics research in the following markets:
- basic biology research;
- clinical research and diagnostics; and
- pharmaceutical research and development.
We are establishing Biomarker Discovery Centers directly and through partnerships to foster adoption of our products and technology as an industry standard. We intend to discover and characterize new protein biomarkers from biological samples provided by our future collaborators. We believe that our Biomarker Discovery Centers may accelerate biomarker discovery and validation in pharmaceutical drug discovery and development, including clinical trials, and in clinical research and diagnostic laboratories. We intend to obtain certain commercial rights related to biomarkers discovered in our Biomarker Discovery Centers. Currently, we have leased facilities for our Biomarker Discovery Centers in Copenhagen, Denmark and Fremont, California. We have entered into formal Biomarker Discovery Center partnerships with the MD Anderson Cancer Center and the Prostate Cancer Center at Eastern Virginia Medical School.
We intend to establish our ProteinChip System as the enabling technology for protein biomarker discovery and proteomics research in the basic biology research, drug discovery and development and clinical research and diagnostic markets. Key elements of our strategy are to:
- accelerate awareness and acceptance of our ProteinChip System;
- expand product development and innovation;
- establish Biomarker Discovery Centers; and
- expand our intellectual property portfolio.
Our principal executive offices are located at 6611 Dumbarton Circle, Fremont, California 94555 and our telephone number is (510) 505-2100. Our corporate web site is www.ciphergen.com. We do not intend the reference to our web address to constitute incorporation by reference of the information contained at that site. The information found on our site is not intended to be part of this prospectus and should not be relied upon by you when making a decision to invest in our common stock. We were incorporated in California in December 1993, and reincorporated in Delaware in June 2000.
THE OFFERING
Common stock we are offering......................... 5,000,000 shares
Common stock to be outstanding after this offering... 25,130,638 shares
Underwriters' over-allotment option.................. 750,000 shares
Use of proceeds...................................... We intend to use the net proceeds for working
capital, establishment of Biomarker Discovery
Centers, expansion of facilities, selected
strategic investments or acquisitions and
general corporate purposes. See "Use of
Proceeds."
Proposed Nasdaq National Market symbol............... CIPH
|
The number of shares of our common stock to be outstanding immediately after this offering is based on the number of shares outstanding on July 31, 2000. This number:
- includes 7,158,748 shares of our currently outstanding common stock;
- includes the conversion of all outstanding shares of series A, B, C, D and E preferred stock into an aggregate of 12,905,777 shares of common stock, which will automatically occur at the closing of this offering;
- includes warrants to purchase 66,113 shares of preferred stock at a weighted average exercise price of $2.95 per share, which warrants will expire at the closing of this offering;
- excludes 1,542,603 shares of common stock issuable upon the exercise of stock options outstanding under our 1993 Stock Option Plan at a weighted average exercise price of $2.98 per share;
- excludes 114,300 shares of common stock reserved for future grant under our 1993 Stock Option Plan;
- excludes 1,075,000 shares of common stock reserved for future issuance under the 2000 Stock Plan;
- excludes 215,000 shares of common stock reserved for future issuance under the 2000 Employee Stock Purchase Plan;
- excludes 57,600 shares of common stock issuable upon the exercise of warrants at a weighted average exercise price of $2.73 per share; and
- excludes 210,700 shares of common stock issuable to Stanford Research Systems, Inc. upon expected achievement of certain product development milestones under a product development agreement dated February 2, 1995 and amended on June 2, 2000.
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following summary historical financial data has been derived from our audited financial information and unaudited interim financial information and sets forth summary consolidated financial data of our business. You should read this information together with the consolidated financial statements and the notes to those statements appearing elsewhere in this prospectus and the information under "Selected Consolidated Financial Data" and "Management's Discussion and Analysis of Financial Condition and Results of Operations." See note 1 to our consolidated financial statements for information regarding computation of net loss per share attributable to common stockholders and pro forma net loss per share attributable to common stockholders.
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
------------------------------ -------------------
1997 1998 1999 1999 2000
-------- -------- -------- -------- --------
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenue:
Product revenue.............................. $ 1,283 $ 2,308 $ 4,128 $ 1,784 $ 3,188
Revenue from related parties................. -- 625 882 5 453
------- ------- ------- ------- --------
Total revenue.................................. 1,283 2,933 5,010 1,789 3,641
Loss from operations........................... (5,779) (7,909) (7,990) (4,194) (9,654)
Net loss....................................... (6,005) (8,052) (8,046) (4,224) (9,209)
Dividend related to beneficial conversion
feature of preferred stock................... -- -- -- -- (27,228)
Net loss attributable to common stockholders... (6,005) (8,052) (8,046) (4,224) (36,437)
Net loss per share attributable to common
stockholders:
Basic and diluted............................ $ (2.07) $ (1.62) $ (1.26) $ (0.67) $ (5.53)
Shares used in computing net loss per share
attributable to common stockholders, basic
and diluted................................ 2,903 4,970 6,397 6,306 6,585
Pro forma net loss per share attributable to
common stockholders:
Basic and diluted............................ $ (0.55) $ (2.04)
Shares used in computing net loss per share
attributable to common stockholders, basic
and diluted (pro forma).................... 14,594 17,845
|
The following table contains a summary of our consolidated balance sheet at June 30, 2000:
- on an actual basis;
- on a pro forma, basis to reflect the conversion of all outstanding shares of preferred stock on a one-for-one basis into 12,905,777 shares of common stock effective upon the closing of this offering; and
- on a pro forma, as adjusted basis, to reflect the sale of 5,000,000 shares of common stock offered hereby at an assumed initial public offering price per share of $15.00 after deducting estimated underwriting discounts, commissions and offering expenses and to reflect the exercise and conversion of warrants to purchase 66,113 shares of convertible preferred stock at a weighted average exercise price of $2.95 per share, which warrants will expire at the closing of this offering.
JUNE 30, 2000
----------------------------------
PRO FORMA,
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- -----------
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 24,027 $ 24,027 $ 92,472
Working capital............................................. 22,439 22,439 90,884
Total assets................................................ 33,311 33,311 101,756
Long-term debt and capital lease obligations, net of current
portion................................................... 609 609 609
Convertible preferred stock and warrants.................... 53,783 -- --
Total stockholders' equity (deficit)........................ (27,342) 26,441 94,886
|
RISK FACTORS
YOU SHOULD CAREFULLY CONSIDER THE RISKS DESCRIBED BELOW BEFORE MAKING AN INVESTMENT DECISION. THE RISKS AND UNCERTAINTIES DESCRIBED BELOW ARE THOSE THAT WE CURRENTLY BELIEVE MAY MATERIALLY AFFECT OUR COMPANY. ADDITIONAL RISKS AND UNCERTAINTIES THAT WE ARE UNAWARE OF OR THAT WE CURRENTLY DEEM IMMATERIAL ALSO MAY BECOME IMPORTANT FACTORS THAT AFFECT OUR COMPANY.
RISKS RELATED TO US AND OUR BUSINESS
IF WE FAIL TO SUCCESSFULLY DEVELOP AND COMMERCIALIZE OUR PRODUCTS, OUR REVENUE WILL NOT INCREASE AND WE WILL NOT ACHIEVE PROFITABILITY.
We have recently begun full commercialization of our products. Our success will depend on our ability to continue to develop and expand commercial sales of our ProteinChip System, including our ProteinChip Arrays. In addition, we may incur difficulties in producing our ProteinChip System or we may not be able to produce it economically, we may fail to achieve expected performance levels, or we may have to set a price for it that is unacceptable to the industry. We may not be able to successfully develop and commercialize our ProteinChip System or any other products on a timely basis, achieve anticipated performance levels, gain industry acceptance of such products or develop a profitable business.
IF WE ARE UNABLE TO ESTABLISH THE ACCURACY AND UTILITY OF OUR PRODUCTS, WE WILL NOT ACHIEVE MARKET ACCEPTANCE.
We introduced our second generation ProteinChip System, Series PBS II, and second generation ProteinChip Arrays in May 1999. The commercial success of our ProteinChip System will depend upon its accuracy, utility and market acceptance by researchers in pharmaceutical and biotechnology companies, academic and government research centers and clinical reference laboratories. If the accuracy of our ProteinChip System in providing commercially useful protein information is not equal to or better than current technologies, it could seriously undermine market acceptance of our products and damage our ability to become profitable.
IF WE ARE UNABLE TO PROVIDE OUR CUSTOMERS WITH SOFTWARE THAT ENABLES THE INTEGRATION AND ANALYSIS OF LARGE VOLUMES OF DATA, THE ACCEPTANCE AND USE OF OUR PRODUCTS MAY BE LIMITED.
The successful commercial research application of our products requires that they enable researchers to process and analyze large volumes of data and to integrate the results into other phases of their research. If we do not continue to develop and improve the capabilities of our ProteinChip Software, our products may not gain market acceptance and we may be unable to develop a profitable business.
IF OUR TECHNOLOGY IS NOT ABLE TO ADDRESS A BROAD RANGE OF BIOLOGICAL APPLICATIONS, OUR TARGET MARKETS WILL BE LIMITED.
Our ProteinChip System enables specific and sensitive detection of proteins in biological samples. However, there may be biological problems that are beyond the scope of our current technology. If we are unable to broaden the scope of our technology, our potential markets may be limited.
WE EXPECT TO CONTINUE TO INCUR NET LOSSES IN THE FORESEEABLE FUTURE. IF WE ARE UNABLE TO SIGNIFICANTLY INCREASE OUR REVENUES, WE MAY NEVER ACHIEVE PROFITABILITY.
From our inception in December 1993, through June 30, 2000, we have generated cumulative revenue of approximately $13.2 million and have incurred net losses of approximately $37.8 million. We have experienced significant operating losses each year since our inception and expect these losses to continue for the next several years. For example, we experienced net losses of approximately
$6.0 million in 1997, $8.1 million in 1998 and $8.0 million in 1999, and $9.2 million for the six months ended June 30, 2000. Our losses have resulted principally from costs incurred in research and development, sales and marketing, and general and administrative costs associated with our operations. These costs have exceeded our interest income and revenue, which, to date, have been generated principally from product sales. We expect to incur additional operating losses and these losses may be substantial as a result of increases in expenses for manufacturing, marketing and sales capabilities, research and product development and general and administrative costs. We may never achieve profitability. Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis.
IF WE DO NOT EFFECTIVELY MANAGE GROWTH, MANAGEMENT ATTENTION COULD BE DIVERTED AND OUR ABILITY TO INCREASE REVENUES AND PROFITABILITY COULD BE HARMED.
We are rapidly and significantly expanding our operations, which is placing a significant strain on our financial, managerial and operational resources. For example, we have recently relocated our corporate headquarters and plan to significantly increase our worldwide sales force and other personnel, and plan to establish additional Biomarker Discovery Centers. These changes could divert management attention or otherwise disrupt our operations. In order to achieve and manage this growth effectively, we must continue to improve and expand our operational and financial management capabilities and resources. Moreover, we will need to effectively train, integrate, motivate and retain our employees. Our failure to manage our growth effectively could damage our ability to increase revenue and become profitable.
IF WE ARE UNABLE TO SUCCESSFULLY EXPAND OUR LIMITED MANUFACTURING CAPACITY, WE MAY ENCOUNTER MANUFACTURING AND QUALITY CONTROL PROBLEMS AS WE INCREASE OUR EFFORTS.
We currently have only one manufacturing facility at which we produce limited quantities of our ProteinChip Arrays and ProteinChip Readers. Some aspects of our manufacturing processes may not be easily scalable to allow for production of our ProteinChip Arrays or ProteinChip Readers in larger volumes, resulting in higher than anticipated material, labor and overhead costs per unit. As a result, manufacturing and quality control problems may arise as we increase our level of production. We may not be able to increase our manufacturing capacity in a timely and cost-effective manner and we may experience delays in manufacturing new products. If we are unable to consistently manufacture our ProteinChip Arrays and ProteinChip Readers on a timely basis because of these or other factors, we will not be able to meet anticipated demand or become profitable.
WE FACE INTENSE COMPETITION IN OUR CURRENT AND POTENTIAL MARKETS AND IF OUR COMPETITORS DEVELOP NEW TECHNOLOGIES OR PRODUCTS, OUR PRODUCTS MAY NOT ACHIEVE MARKET ACCEPTANCE AND MAY FAIL TO CAPTURE MARKET SHARE.
Competition in our existing and potential markets is intense and we expect it to increase. Currently, our principal competition comes from existing technologies that are used to perform many of the same functions for which we market our ProteinChip System.
The major technologies that compete with our ProteinChip System are liquid chromatography-mass spectrometry and 2D-gel electrophoresis-mass spectrometry. In the life science research market, protein research tools are currently provided by companies such as the Applied Biosystems division of PE Biosystems, Inc., Amersham Pharmacia Biotech, Boehringer-Mannheim, Qiagen N.V. and several smaller reagent and equipment companies. Several other companies also provide products and services, some of which may be competitive with ours. Additionally, our potential customers may internally develop competing technologies. If we fail to compete effectively with these technologies and products, or if competitors develop significant improvements in protein detection systems or develop systems that are easier to use, our products may not achieve market acceptance and our sales may not increase.
IF WE ARE UNABLE TO MAINTAIN OUR LICENSED RIGHTS TO THE SELDI TECHNOLOGY, WE MAY LOSE THE RIGHT TO PRODUCE OUR PROTEINCHIP SYSTEMS AND PRODUCTS BASED ON THE SELDI TECHNOLOGY.
Our commercial success depends on our ability to maintain our sublicenses to the SELDI technology. We acquired our core SELDI technology, which was originally developed at the Baylor College of Medicine, pursuant to royalty-bearing sublicenses in the fields in which we operate. Our rights under these sublicenses are set forth in agreements between Molecular Analytical Systems, Inc., or MAS, the exclusive licensee of the Baylor patents, and our subsidiaries, IllumeSys Pacific, Inc. and Ciphergen Technologies, Inc.
In June 2000, MAS sent us letters signed by T. William Hutchens, President. Dr. Hutchens is the beneficial owner of approximately 16% of our outstanding shares prior to this offering and was formerly one of our directors and officers. The letters notify us that as a result of an alleged material breach by us of our obligations under the sublicense agreements, the sublicense agreements will terminate unless we cure the alleged breaches. In other communications with us, Dr. Hutchens has asserted that LumiCyte, Inc., another company in which he is involved, holds exclusive rights to the SELDI technology in the field of information and service products and, therefore he alleges, we do not have rights to sell such information and service products, including through our Biomarker Discovery Centers. Dr. Hutchens also claims that MAS shares certain rights with us in the area of drug discovery.
In July 2000, we filed a lawsuit against MAS and LumiCyte requesting a declaration that we have the right to sell information and service products, including through our Biomarker Discovery Centers, and requesting a preliminary injunction preventing MAS from terminating the sublicense agreements. We have not received a decision from the court regarding our requests for relief. Ciphergen and MAS have entered into an agreement that provides that MAS's license termination notices are suspended pending the conclusion of this lawsuit. The agreement also provides for a 60 day stay of litigation between the parties, during which the parties have agreed to attempt to resolve their differences. We believe that our case has merit and if we are unable to resolve the dispute during this period, we intend to pursue the litigation aggressively. Litigation is unpredictable and we may not prevail. The court may determine that LumiCyte or other companies possess exclusive rights to provide information products and service products that we seek to exercise as part of our business described in this prospectus. The sublicense agreements referred to above provide for termination in the event of material breach. Therefore, if we lose the lawsuit, and if it were determined that the sublicense agreements had been breached by our activities, such as proteomics services for fees, there is a risk that our sublicense agreements to sell ProteinChip Readers and Arrays could be terminated. Substantially all of our revenue is derived from products relying on technology covered by the sublicense agreements. If the agreements were terminated, we would be precluded from selling any SELDI-based products within the scope of the Baylor patents, we would no longer generate revenue from the sale of these products and we would have to revise our business direction and strategy. See "Legal Proceedings."
IF THE GOVERNMENT GRANTS A LICENSE TO OTHERS ON THE SELDI TECHNOLOGY, IT MAY HARM OUR BUSINESS.
Some of the inventions covered by the sublicense agreements were developed under a grant from an agency of the U.S. government and therefore the government has a paid-up nonexclusive nontransferable license to those inventions and the right in limited circumstances to grant a license to others on reasonable terms. If the government exercises those rights our business could be harmed.
IF A COMPETITOR INFRINGES OUR PROPRIETARY RIGHTS, WE MAY LOSE ANY COMPETITIVE ADVANTAGE WE MAY HAVE AS A RESULT OF DIVERSION OF MANAGEMENT TIME, ENFORCEMENT COSTS AND THE LOSS OF THE EXCLUSIVITY OF OUR PROPRIETARY RIGHTS.
Our commercial success depends in part on our ability to maintain and enforce our proprietary rights. We rely on a combination of patents, trademarks and trade secrets to protect our technology and brand. In addition to our licensed SELDI technology, we also have submitted patent applications
directed to subsequent technological improvements and application of the SELDI technology. Our patent applications may not result in us being granted additional U.S. patents.
If competitors engage in activities that infringe our proprietary rights, our management's focus will be diverted and we may incur significant costs in asserting our rights. We may not be successful in asserting our proprietary rights, which could result in our patents being held invalid or a court holding that the competitor is not infringing, either of which would harm our competitive position. We cannot be sure that others will not design around our patented technology.
We also rely upon the skills, knowledge and experience of our technical personnel. To help protect our rights, we require all employees to enter into confidentiality agreements that prohibit the disclosure of confidential information to anyone outside of us. These agreements may not provide adequate protection for our trade secrets, know-how or other proprietary information in the event of any unauthorized use or disclosure.
IF OTHERS SUCCESSFULLY ASSERT THEIR PROPRIETARY RIGHTS AGAINST US, WE MAY BE PRECLUDED FROM MAKING AND SELLING OUR PRODUCTS OR WE MAY BE REQUIRED TO OBTAIN LICENSES TO USE THEIR TECHNOLOGY.
Our success also depends on avoiding infringing on the proprietary technologies of others. We are aware of third parties whose business involves the use of mass spectrometry for the analysis of proteins and DNA. Certain of these parties have issued patents or pending patent applications on technology that they might assert against us. If they successfully make such assertions, we may be required to obtain licenses to use that technology and such licenses may not be available on commercially reasonable terms, if at all. We may incur substantial costs defending ourselves in lawsuits against charges of patent infringement or other unlawful use of another's proprietary technology. Any such lawsuit may not be decided in our favor, and if we are found liable, we may be subject to monetary damages or injunction against using their technology.
IF WE ARE UNSUCCESSFUL IN OBTAINING A FEDERAL REGISTRATION FOR THE SELDI TRADEMARK AND WE ARE SUCCESSFULLY SUED FOR TRADEMARK INFRINGEMENT, WE MAY BE REQUIRED TO LICENSE THE MARK OR CHANGE THE NAME OF OUR TECHNOLOGY AND INCUR ASSOCIATED COSTS.
Molecular Analytical Systems has opposed our trademark application for the SELDI mark on the basis of alleged earlier use of SELDI. That opposition remains pending. As a result, we may not be successful in obtaining a federal registration for the mark and may be sued by Molecular Analytical Systems for trademark infringement based on Molecular Analytical Systems' prior claimed rights to the SELDI mark. If Molecular Analytical Systems is successful, we will have to license rights to the mark or not use the name, and we will be subjected to costs and damages.
WE RELY ON SINGLE-SOURCE SUPPLIERS FOR MANY COMPONENTS OF OUR PROTEINCHIP SYSTEM AND IF WE ARE UNABLE TO OBTAIN COMPONENTS WE WOULD BE HARMED AND OUR OPERATING RESULTS WOULD SUFFER.
We depend on many single-source suppliers for the necessary materials and components required to assemble our products. Because of limited quantities of products manufactured at this stage of our development it is not economically feasible to qualify and maintain alternate vendors for most components of our ProteinChip Reader and ProteinChip Arrays. We have occasionally experienced delays in receiving components resulting in manufacturing delays. If we are unable to procure the necessary materials and components from our current vendors, we will have to arrange new sources of supply and our materials and components shipments could be delayed, harming our ability to assemble and manufacture our ProteinChip Reader and ProteinChip Arrays, and our ability to sustain or increase revenue could be harmed. As a result, our costs could increase and our profitability could be harmed.
WE MAY NEED TO RAISE ADDITIONAL CAPITAL IN THE FUTURE, AND IF WE ARE UNABLE TO SECURE ADEQUATE FUNDS ON TERMS ACCEPTABLE TO US, WE MAY BE UNABLE TO EXECUTE OUR BUSINESS PLAN.
We currently anticipate that the net proceeds of this offering will be sufficient to meet our anticipated financial needs for at least the next two years. However, we may need to raise additional capital sooner in order to develop new or enhanced products or services, establish Biomarker Discovery Centers and other facilities, acquire complementary products, businesses or technologies to respond to competitive pressures. If we are unable to obtain financing, or to obtain it on acceptable terms, we may be unable to successfully execute our business plan.
IF WE ARE UNABLE TO REDUCE OUR LENGTHY SALES CYCLE, OUR ABILITY TO BECOME PROFITABLE WILL BE HARMED.
Our ability to obtain customers for our products depends in significant part upon the perception that our products and services can help enable protein biomarker discovery, characterization and assay development. The sales cycle is lengthy, typically between a few months to one year. Our sales effort requires the effective demonstration of the benefits of our products to and significant training of many different departments within a potential customer. These departments might include research and development personnel and key management. In addition, we may be required to negotiate agreements containing terms unique to each customer. We may expend substantial funds and management effort and may not be able to successfully sell our products or services in a short enough time to achieve profitability.
IF THERE ARE REDUCTIONS IN RESEARCH FUNDING, THE ABILITY OF OUR EXISTING AND PROSPECTIVE RESEARCH CUSTOMERS TO PURCHASE OUR PRODUCTS COULD BE SERIOUSLY HARMED.
A significant portion of our products for research use is likely to be sold to universities, government research laboratories, private foundations and other institutions where funding is dependent upon grants from government agencies, such as the National Institutes of Health. Government funding for research and development has fluctuated significantly in the past due to changes in congressional appropriations. Research funding by the government may be significantly reduced in the future. Any such reduction may seriously harm the ability of our existing and prospective research customers to purchase our products or reduce the number of ProteinChip Arrays used. Limitations in funding for commercial, academic and biotechnology and pharmaceutical companies that are the potential customers for our ProteinChip System and ProteinChip Arrays and cost containment pressures for biomedical research may limit our ability to sell our products.
CONSOLIDATION OF THE PHARMACEUTICAL AND BIOTECHNOLOGY INDUSTRY MAY REDUCE THE SIZE OF OUR TARGET MARKET AND CAUSE A DECREASE IN OUR REVENUE.
Consolidation in the pharmaceutical and biotechnology industries is generally expected to occur. Planned or future consolidation among our current and potential customers could decrease or slow sales of our technology and reduce the markets our products target. Any such consolidation could limit the market for our products and seriously harm our ability to achieve or sustain profitability.
IF WE ARE UNABLE TO ATTRACT CLIENTS FOR OUR BIOMARKER DISCOVERY CENTERS, WE WILL NOT BE SUCCESSFUL IN FURTHERING ADOPTION OF OUR PRODUCTS AND TECHNOLOGY AND ACHIEVING PROFITABILITY.
An element of our business strategy is to establish Biomarker Discovery Centers in part through partnerships with academic and government research centers, and pharmaceutical and biotechnology companies. Although we are currently in negotiation with potential partners and clients, to date we have entered into only three such arrangements. Failure to enter into additional arrangements could limit adoption of our products and prevent us from achieving profitability.
RISKS RELATED TO THIS OFFERING
IF OUR STOCK PRICE IS VOLATILE, YOUR INVESTMENT IN OUR STOCK COULD DECLINE IN VALUE.
There is currently no public market for our common stock, and an active trading market may not develop or be sustained after this offering. The initial public offering price will be determined through negotiation between us and representatives of the underwriters and may not be indicative of the market price for our common stock after this offering. The price of our stock may decline after this offering.
IF OUR OPERATING RESULTS FLUCTUATE, IT MAY MAKE IT DIFFICULT TO FORECAST OUR FUTURE PERFORMANCE AND MAY CAUSE OUR STOCK PRICE TO DECLINE.
Our results of operations historically have fluctuated on an annual and quarterly basis, and we expect this trend to continue. In recent years, we have generated significantly more revenues during our fourth quarter than during our first quarter. Operating results can fluctuate as a result of a number of factors, including:
- the commencement, delay or cancellation of purchase orders;
- seasonal slowdowns;
- costs incurred in developing and testing our products and product enhancements;
- costs incurred in anticipation of future sales, such as inventory purchases, expansion of manufacturing facilities, or establishment of international sales offices;
- legal costs incurred in protecting our technology; and
- budget cycles of our customers.
We believe that period-to-period comparisons of our historical and future results will not necessarily be meaningful, and that investors should not rely on them as indicators of future performance. To the extent we experience the factors described above, our future operating results may not meet the expectations of securities analysts or investors from time to time, which may cause the market price of our common stock to decline.
BECAUSE THE NASDAQ NATIONAL MARKET IS LIKELY TO EXPERIENCE EXTREME PRICE AND VOLUME FLUCTUATIONS, PARTICULARLY WITH RESPECT TO THE STOCK OF BIOTECHNOLOGY COMPANIES SUCH AS OURS, THE PRICE OF OUR STOCK MAY DECLINE EVEN IF OUR BUSINESS IS DOING WELL.
The market price of our common stock could fluctuate significantly as a result of:
- our susceptibility to quarterly variations in our operating results, which may cause us to fail to meet analysts' or investors' expectations;
- earnings and other announcements by, and changes in analyst and investor evaluations of, pharmaceutical and biotechnology firms and us;
- announcements or implementation by us or our competitors of technological innovations or new products or services; and
- trading volume of our common stock.
The securities of many companies have experienced significant price and volume fluctuations in recent years, often unrelated to the companies' operating performance. Specifically, market prices for securities of biotechnology companies have sometimes reached elevated levels, often following their initial public offerings. These levels may not be sustainable and may not bear any relationship to the operating performances of these companies. If the market price of our common stock reaches an elevated level following this offering, it may significantly and rapidly decline. In the past, following
periods of volatility in the market price of a company's securities, stockholders have often instituted securities class action litigation against the company. If we were to become involved in a class action suit, it could divert the attention of senior management, and, if adversely determined, our business could suffer.
THE SALE OR AVAILABILITY FOR SALE OF SUBSTANTIAL AMOUNTS OF OUR COMMON STOCK
COULD CAUSE A DECLINE IN THE MARKET PRICE OF OUR COMMON STOCK, EVEN IF OUR BUSINESS IS DOING WELL.
Sales of substantial amounts of our common stock in the public market after the completion of this offering, or the perception that these sales could occur, could cause a decline in the market price of our common stock and could impair our future ability to raise capital through offerings of our common stock. Upon completion of the offering, we will have outstanding an aggregate of 25,130,638 shares of common stock, assuming no exercise of the underwriters' over-allotment option and no exercise of outstanding options or outstanding warrants after July 31, 2000. Of these outstanding shares, the 5,000,000 shares sold in the offering will be freely tradable without restriction or further registration under the Securities Act of 1933, unless purchased by our "affiliates" as that term is defined in Rule 144 under the Securities Act of 1933. The remaining 20,130,638 shares of common stock outstanding upon completion of the offering and held by existing stockholders will be "restricted securities" as that term is defined in Rule 144 under the Securities Act of 1933.
All officers, directors and certain other holders of common stock have entered into contractual "lock-up" agreements providing that they will not offer, sell, contract to sell or grant any option to purchase or otherwise dispose of shares of common stock owned by them or that could be purchased by them through the exercise of options or warrants for a period of 180 days after the date of this prospectus. SG Cowen may, in its sole discretion, at any time without notice, release all or any portion of the shares subject to the lock-up agreements, which would result in more shares being available for sale in the public market at an earlier date. As a result of these contractual restrictions, notwithstanding possible earlier eligibility for sale under the various provisions of the Securities Act of 1933, additional shares will be eligible for sale beginning 181 days after the effective date of the offering, subject in some cases to certain volume limitations.
Shares of our common stock, other than shares sold in this offering, will become eligible for sale in the public market as follows:
At the effective date..................................... 0 shares 90 days after effective date.............................. 0 shares 181 days after effective date............................. 20,130,638 shares More than 181 days after effective date................... 0 shares |
Sales of the restricted shares in the public market, or the availability of such shares for sale, could adversely affect the market price of the common stock.
CONCENTRATION OF OWNERSHIP OF OUR COMMON STOCK MAY LIMIT YOUR ABILITY TO INFLUENCE CORPORATE MATTERS.
Immediately following this offering, our executive officers and directors, or entities controlled by them, together with greater than five percent stockholders and their affiliates will own approximately 50.4% of the outstanding shares of our common stock.
If our significant stockholders choose to act or vote together on other matters, they will have the power to control the approval of any other action requiring the approval of our stockholders, including any amendments to our certificate of incorporation and mergers, acquisitions or sales of all of our assets. In addition, without the consent of these stockholders, we could be prevented from entering into transactions that could be beneficial to us. Also, third parties could be discouraged from making a tender offer or bid to acquire our company at a price per share that is above the then-prevailing market price.
PROVISIONS OF OUR CHARTER DOCUMENTS AND DELAWARE LAW COULD PREVENT OR DELAY A CHANGE IN OUR CONTROL AND MAY REDUCE THE MARKET PRICE OF OUR COMMON STOCK.
Amendments to our certificate of incorporation and our bylaws, as well as various provisions of the Delaware General Corporation Law, may make it more difficult to effect a change in control of us. The existence of these provisions may adversely affect the price of our common stock, discourage third parties from making a bid for us or reduce any premiums paid to our stockholders for their common stock. For example, our certificate of incorporation authorizes our board of directors to issue up to 5,000,000 shares of blank check preferred stock and to attach special rights and preferences to this preferred stock. The issuance of this preferred stock may make it more difficult for a third party to acquire control of us. Our Certificate of Incorporation also provides for the division of our board of directors into three classes as nearly equal in size as possible with staggered three-year terms. This classification of our board of directors could have the effect of making it more difficult for a third party to acquire us, or of discouraging a third party from acquiring control of us.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
We have made statements under the captions "Prospectus Summary," "Risk Factors," "Use of Proceeds," "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Business" and in other sections of this prospectus that are forward-looking statements. You can identify these statements by forward-looking words such as "may," "will," "expect," "intend," "anticipate," "believe," "estimate," "plan," "could," "should" and "continue" or similar words. These forward-looking statements may also use different phrases. We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements, which are subject to risks, uncertainties, and assumptions about us, may include, among other things, projections of our future results of operations or of our financial condition, our anticipated product commercialization strategies, and anticipated trends in our business.
We believe it is important to communicate our expectations to our investors. However, there may be events in the future that we are not able to accurately predict or that we do not fully control that could cause actual results to differ materially from those expressed or implied in our forward-looking statements. Because these forward-looking statements involve risks and uncertainties, there are important factors that could cause actual results to differ materially from those expressed or implied by these forward-looking statements.
You should also consider carefully the statements under "Risk Factors" and other sections of this prospectus, which address additional factors that could cause our results to differ from those set forth in the forward-looking statements.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT. WE ARE OFFERING TO SELL AND SEEKING OFFERS TO BUY SHARES OF OUR COMMON STOCK ONLY IN JURISDICTIONS WHERE OFFERS AND SALES ARE PERMITTED. THE INFORMATION CONTAINED IN THIS PROSPECTUS IS ACCURATE ONLY AS OF THE DATE OF THIS PROSPECTUS, REGARDLESS OF THE TIME OF DELIVERY OF THIS PROSPECTUS OR OF ANY SALE OF OUR COMMON STOCK. IN THIS PROSPECTUS, REFERENCES TO "CIPHERGEN BIOSYSTEMS," "CIPHERGEN," "WE," "US" AND "OUR" REFER TO CIPHERGEN BIOSYSTEMS, INC., A DELAWARE CORPORATION.
CIPHERGEN AND PROTEINCHIP ARE U.S. REGISTERED TRADEMARKS OF CIPHERGEN BIOSYSTEMS, INC. IN ADDITION, CIPHERGEN HAS FILED FOR TRADEMARK REGISTRATION OF SELDI, THE CIPHERGEN LOGO AND BIOMARKER DISCOVERY CENTER. THIS PROSPECTUS ALSO INCLUDES TRADEMARKS AND TRADENAMES OF OTHER PARTIES.
USE OF PROCEEDS
We estimate that the net proceeds from the sale of the 5,000,000 shares of common stock offered by us at an assumed initial public offering price of $15.00 per share will be approximately $68.3 million after deducting the underwriting discounts and estimated offering expenses payable by us. If the underwriters exercise in full their option to purchase an additional 750,000 shares of common stock, we estimate that such net proceeds will be approximately $78.7 million.
We expect to use the net proceeds from this offering primarily for:
- working capital--approximately $14.0 million;
- establishment of Biomarker Discovery Centers--approximately $6.0 million;
- expansion of our facilities--approximately $3.0 million;
- general corporate purposes, including selected strategic investments or acquisitions--approximately $45.3 million.
Based upon the current status of our product development and commercialization plans, we believe that the net proceeds of this offering, together with our cash, cash equivalents and investments, will be adequate to satisfy our capital needs through at least the next two years. Pending use of the net proceeds of this offering, we intend to invest the net proceeds in interest-bearing, investment-grade securities.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our capital stock. We currently intend to retain all of our future earnings, if any, to finance operations and we do not anticipate paying cash dividends in the foreseeable future. Our current equipment financing facilities and bank line-of-credit restrict our ability to declare and pay any dividends without the prior consent of our lenders.
CAPITALIZATION
The following table sets forth our capitalization at June 30, 2000:
- on an actual basis;
- on a pro forma basis to reflect the conversion upon the closing of this offering of all outstanding shares of convertible preferred stock on a one-for-one basis into 12,905,777 shares of common stock; and
- on a pro forma, as adjusted basis, to reflect the sale of the common stock offered by this prospectus at an assumed initial public offering price of $15.00 per share, after deducting the estimated underwriting discounts, commissions and offering expenses, and to reflect the exercise of warrants to purchase 66,113 shares of convertible preferred stock at a weighted average exercise price of $2.95 per share, which warrants will expire at the closing of this offering.
You should read the following table in conjunction with our consolidated financial statements and related notes included in this prospectus.
JUNE 30, 2000
----------------------------------
(UNAUDITED)
PRO FORMA,
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- -----------
(IN THOUSANDS EXCEPT PER SHARE
AND SHARE AMOUNTS)
Long-term debt and capital lease obligations, net of current
portion................................................... $ 609 $ 609 $ 609
-------- -------- --------
Convertible preferred stock, $0.001 par value,
Authorized: 13,869,067 shares actual; pro forma and pro
forma, as adjusted
Issued and outstanding: 12,905,777 shares actual; none pro
forma and pro forma, as adjusted........................ 53,215 -- --
-------- -------- --------
Preferred stock warrants.................................... 568 -- --
-------- -------- --------
Stockholders' equity (deficit):
Common stock, $0.001 par value,
Authorized: 25,800,000 shares
Issued and outstanding: 7,158,748 shares actual;
20,064,525 shares pro forma; 25,130,638 shares pro forma
as adjusted............................................. 7 20 25
Additional paid-in capital.............................. 25,862 79,632 148,072
Notes receivable from stockholders...................... (767) (767) (767)
Deferred stock compensation............................. (14,650) (14,650) (14,650)
Accumulated deficit..................................... (37,794) (37,794) (37,794)
-------- -------- --------
Total stockholders' equity (deficit)........................ (27,342) 26,441 94,886
-------- -------- --------
Total capitalization........................................ $ 27,050 $ 27,050 $ 95,495
======== ======== ========
|
The information in the table above does not include:
- 1,545,012 shares of common stock issuable upon exercise of options outstanding under our stock option plan at a weighted average exercise price of $2.98 per share;
- 111,892 shares of common stock reserved for future grant under our stock option plan;
- 215,000 shares of common stock reserved for future issuance under the 2000 Employee Stock Purchase Plan;
- 1,075,000 shares of common stock reserved for future issuance under the 2000 Stock Plan;
- 57,600 shares of our preferred stock issuable upon exercise of warrants at a weighted average exercise price of $2.73 per share; and
- 210,700 shares of common stock issuable to Stanford Research Systems, Inc. upon expected achievement of certain product development milestones under the product development agreement dated February 2, 1995 and amended on June 2, 2000.
DILUTION
Our net tangible book value as of June 30, 2000, was $25.9 million or $1.29 per share of common stock after giving effect to the conversion of all outstanding shares of preferred stock into shares of common stock in connection with this offering. Our net tangible book value per share represents the amount of total tangible assets less total liabilities, divided by the shares of common stock outstanding as of June 30, 2000, assuming the conversion of all outstanding shares of preferred stock.
After giving effect to the sale of 5,000,000 shares of common stock we are offering hereby at an assumed initial public offering price of $15.00 per share and after deducting estimated underwriting discounts and commissions and offering expenses, our net tangible book value as of June 30, 2000, would have been approximately $94.2 million or $3.76 per share. This represents an immediate increase in net tangible book value of $2.47 per share to existing stockholders and an immediate dilution of $11.24 per share to the investors purchasing shares of common stock in this offering. The following table illustrates this per share dilution.
Pro forma net tangible book value dilution per share represents the incremental dilutive effect of the exercise of warrants to purchase 66,113 shares of convertible preferred stock at a weighted average exercise price of $2.95 per share, which warrants will expire at the closing of this offering.
Assumed initial public offering price per share............. $15.00
Net tangible book value per share as of June 30, 2000....... $1.29
Increase attributable to new investors...................... 2.47
-----
Net tangible book value per share after the offering........ 3.76
------
Dilution per share to new investors......................... 11.24
Incremental dilution occurring upon exercise of warrants.... 0.01
------
Pro forma dilution per share to new investors............... $11.25
======
|
The following table summarizes, as of June 30, 2000, on the pro forma basis described above, the number of shares of common stock purchased in this offering, the aggregate cash consideration paid and the average price per share paid by existing stockholders for common stock and by new investors purchasing shares of common stock in this offering:
SHARES PURCHASED TOTAL CASH CONSIDERATION AVERAGE
--------------------- ------------------------- PRICE PER
NUMBER PERCENT AMOUNT PERCENT SHARE
---------- -------- ------------- --------- ---------
Existing Stockholders..................... 20,130,638 80% $ 59,741,538 44% $ 2.97
New Investors............................. 5,000,000 20 75,000,000 56 15.00
---------- --- ------------ ---
Total..................................... 25,130,638 100% $134,741,538 100%
========== === ============ ===
|
This discussion and tables above assume no exercise of options outstanding under our stock option plan. As of July 31, 2000, there were options outstanding to purchase a total of 1,542,603 shares of common stock at a weighted average exercise price of $2.98 per share and 114,300 shares available for future grant or issuance under our stock option plan. The discussion and tables above also assume no exercise of any outstanding warrants, other than those expected to be exercised due to their termination at the time of this offering. It also does not include 210,700 shares of preferred stock issuable upon possible achievement of product development milestones by Stanford Research Systems, Inc. As of July 31, 2000, there were outstanding warrants to purchase 123,713 shares of our preferred stock at a weighted average exercise price of $2.85 per share. To the extent that any of these options or warrants are exercised, there will be further dilution to new investors.
SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The selected financial data set forth below should be read in conjunction with our consolidated financial statements and the related notes and "Management's Discussion and Analysis of Financial Condition and Results of Operations," included in this prospectus. The consolidated statement of operations data for the years ended December 31, 1997, 1998, and 1999, and the consolidated balance sheet data as of December 31, 1998, and 1999, are derived from our audited consolidated financial statements included elsewhere in this prospectus. The consolidated statement of operations data for the years ended December 31, 1995 and 1996, and the consolidated balance sheet data as of December 31, 1995, 1996 and 1997, are derived from our audited consolidated financial statements that are not included in this prospectus. The consolidated statement of operations data for the six months ended June 30, 1999, and 2000, and the consolidated balance sheet data as of June 30, 2000, are derived from our unaudited financial statements included elsewhere in this prospectus. In the opinion of management, the unaudited consolidated financial statements include all adjustments, consisting principally of normal recurring adjustments, necessary for a fair presentation of the results of operations for the period. The historical results are not necessarily indicative of the operating results to be expected in the future and the results of interim periods are not necessarily indicative of the results for a full year.
See the notes to the consolidated financial statements for an explanation of the method used to determine the numbers of shares used in computing basic and diluted and pro forma basic and diluted net loss per share.
SIX MONTHS
YEARS ENDED DECEMBER 31, ENDED JUNE 30,
---------------------------------------------------- -------------------
1995 1996 1997 1998 1999 1999 2000
-------- -------- -------- -------- -------- -------- --------
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenue:
Product revenue.................................... $ -- $ 335 $ 1,283 $ 2,308 $ 4,128 $ 1,784 $ 3,188
Revenue from related parties....................... -- -- -- 625 882 5 453
------- ------- ------- ------- ------- ------- --------
Total revenue.................................. -- 335 1,283 2,933 5,010 1,789 3,641
Cost of revenue:
Product revenue.................................... -- 412 1,002 843 1,402 690 1,215
Revenue from related parties....................... -- -- -- 225 306 2 296
------- ------- ------- ------- ------- ------- --------
Total cost of revenue.......................... -- 412 1,002 1,068 1,708 692 1,511
------- ------- ------- ------- ------- ------- --------
Gross margin................................... -- (77) 281 1,865 3,302 1,097 2,130
------- ------- ------- ------- ------- ------- --------
Operating expenses:
Research and development........................... 1,180 1,906 3,249 4,733 3,139 1,524 2,876
Sales and marketing................................ 89 421 1,315 2,662 4,989 2,416 3,553
General and administrative......................... 826 650 1,332 2,100 2,799 1,168 5,188
Amortization of intangible assets.................. 164 279 365 183 167
------- ------- ------- ------- ------- ------- --------
Total operating expenses......................... 2,095 2,977 6,060 9,774 11,292 5,291 11,784
------- ------- ------- ------- ------- ------- --------
Loss from operations................................. (2,095) (3,054) (5,779) (7,909) (7,990) (4,194) (9,654)
Interest and other income (expense), net............. 4 (102) (226) (143) (56) (30) 445
------- ------- ------- ------- ------- ------- --------
Net loss............................................. (2,091) (3,156) (6,005) (8,052) (8,046) (4,224) (9,209)
Dividend related to beneficial conversion feature of
preferred stock.................................... -- -- -- -- -- -- (27,228)
------- ------- ------- ------- ------- ------- --------
Net loss attributable to common stockholders......... $(2,091) $(3,156) $(6,005) $(8,052) $(8,046) $(4,224) $(36,437)
======= ======= ======= ======= ======= ======= ========
Basic and diluted net loss per share attributable to
common stockholders................................ $ (3.08) $ (3.70) $ (2.07) $ (1.62) $ (1.26) $ (0.67) $ (5.53)
Weighted average shares used in computing basic and
diluted net loss per share attributable to common
stockholders....................................... 677 854 2,903 4,970 6,397 6,306 6,585
Pro forma basic and diluted net loss per share
attributable to common stockholders (unaudited).... $ (0.55) $ (2.04)
Weighted average shares used in computing pro forma
basic and diluted net loss per share attributable
to common stockholders............................. 14,594 17,845
|
AS OF DECEMBER 31,
---------------------------------------------------- JUNE 30,
1995 1996 1997 1998 1999 2000
-------- -------- -------- -------- -------- ---------
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 127 $ 900 $ 416 $ 7,002 $ 2,799 $24,027
Working capital............................................. (80) 1,063 (1,958) 6,616 1,533 22,439
Total assets................................................ 752 2,219 2,869 11,144 6,844 33,311
Long-term debt and capital lease obligations, net of current
portion................................................... 285 474 576 381 483 609
Convertible preferred stock and warrants.................... 3,317 7,506 10,425 24,264 25,339 53,783
Total stockholders' deficit................................. (3,267) (6,404) (11,375) (16,275) (22,938) (27,342)
|
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH OUR CONSOLIDATED
FINANCIAL STATEMENTS AND RELATED NOTES INCLUDED IN THIS PROSPECTUS. PLEASE REFER TO "SPECIAL NOTICE REGARDING FORWARD-LOOKING STATEMENTS" AND "RISK FACTORS."
OVERVIEW
We develop, manufacture and sell our ProteinChip System, which consists of disposable ProteinChip Arrays, a ProteinChip Reader and ProteinChip Software. We market and sell our products primarily to research biologists in pharmaceutical and biotechnology companies and academic and government research laboratories. As part of our early product design effort, in February 1995, we signed an agreement with Stanford Research Systems, a Sunnyvale, California based manufacturer of electronic test equipment, to assist in this development. As part of our early market research activities, in the fourth quarter of 1996, we began selling an early prototype of our reader, which we purchased from a supplier in the U.K., combined with our own software. In April 1997, we acquired IllumeSys Pacific, Inc., which held specific rights to the SELDI technology for the life science research market. Our first designed and manufactured system, the ProteinChip System, Series PBS I, was available for customer shipment for additional market research in the third quarter of 1997, and we discontinued supplying the U.K.-purchased system. In July 1998, we acquired Ciphergen Technologies, Inc., which held specific rights to the SELDI technology in other life science markets. During 1999, we initiated an expanded marketing program and in May began shipping our first commercial product, the ProteinChip System, Series PBS II.
Also in 1999, we invested $315,000 for 30% ownership of Ciphergen Biosystems, K.K., a joint venture we established with Sumitomo Corporation to distribute our products in Japan. We have the right to purchase an additional 40% ownership based on a predetermined formula as early as 2002. Until we exercise this right, Sumitomo Corporation has agreed to arrange all working capital for Ciphergen Biosystems, K.K. and receives payments from Ciphergen Biosystems, K.K. equal to 20% of the list price of our products sold by Ciphergen Biosystems, K.K. in exchange for providing support services to Ciphergen Biosystems, K.K.
Since 1997, we have used our resources primarily to develop our proprietary ProteinChip System and establish marketing and sales for commercialization of our products. Since our inception we have incurred significant losses and as of June 30, 2000, we had an accumulated deficit of $37.8 million.
We recognize revenue in accordance with Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements". Revenue from the sale of our ProteinChip System and disposable ProteinChip Arrays is recognized at the time of shipment provided no significant obligations remain and collections of the receivables are deemed probable. Currently, most of the units of our ProteinChip System placed in the field generate a recurring revenue stream from the sale of disposables. We expect the volume of disposables purchased from each site to increase over time as customers become increasingly familiar with the technology and adopt our ProteinChip System for a broader range of proteomics research programs. Our sales are currently driven by the need for better tools to perform protein biomarker discovery, characterization and assay development.
Our expenses have consisted primarily of costs incurred in manufacturing our ProteinChip System, including materials, labor and overhead costs, marketing and sales activities, research and development programs, and general and administrative costs associated with our operations. We expect our cost of revenue to increase in the future as we sell additional units of our ProteinChip System and Arrays, but to decrease as a percent of total revenue as we gain efficiencies from spreading our fixed costs over a greater number of units. Our selling expenses will increase as we continue to commercialize our products and expand our sales force. We expect our research and development expenses to increase in
the future as we continue to improve and develop products. Expansion of our facilities and the additional obligations of a public reporting entity will also add to our expenses. As a result, we expect to incur losses for the foreseeable future. Our current products do not provide sufficient revenue for us to become profitable. To become profitable, we will need to increase unit sales of our ProteinChip System and generate significant sales of disposables.
Effective July, 2000, we began an eight-year lease of a 30,000 square foot building in Fremont, California. The new building houses most of our California based employees, as well as a new Biomarker Discovery Center. We expect to expend approximately $2.5 million on leasehold improvement, and to incur operating costs of approximately $1.1 million per year in connection with our new facility. We use approximately 8% of the Fremont space for a Biomarker Discovery Center for which we expect to incur approximately $90,000 in operating costs per year. Capital equipment to set up each of our Biomarker Discovery Centers will cost $150,000 to $500,000. In the first quarter of 2000, we also established our Scandinavian headquarters for sales and service and a Biomarker Discovery Center facility in Copenhagen, Denmark, with an annual lease cost of approximately $80,000. We do not have customers or partnerships for the Copenhagen facility at this time. Until we initiate such revenue producing arrangements, we will deploy the staff and facility on product development projects and product demonstrations for potential partnerships.
We also expect to create a third Biomarker Discovery Center in the Philadelphia area as soon as our first pharmaceutical company partnership is established and revenue is committed to cover at least part of the operating cost before space is acquired. Finally, we are also negotiating with a university medical center in the eastern United States, where the facility, within the university's laboratory complex, is expected to have a similar annual operating cost to the others. We expect that the academic medical center will be our only partner and will supply the Biomarker Discovery Center with a renowned scientist to direct the Center and will provide samples from a variety of diseased and normal patients. We expect that this Biomarker Discovery Center will focus on the development of methodologies, the discovery and validation of jointly owned biomarkers, and generation of research publications. We project that each of the other three Centers will generate revenues from multiple partnerships and will become profitable within two to three years of the commencement of operations.
We have a limited history of operations and we anticipate that our quarterly results of operations will fluctuate for the foreseeable future due to several factors, including market acceptance of current and new products, the length of the sales cycle and timing of significant orders, the timing and results of our research and development efforts, the introduction of new products by our competitors and possible patent conflicts. Our limited operating history makes accurate prediction of future results of operations difficult or impossible.
Deferred stock compensation for options granted to employees is the difference between the fair value of our common stock on the date such options were granted and their exercise price. Deferred stock compensation for options granted to consultants has been determined in accordance with Statement of Financial Accounting Standards No. 123 as the fair value of the equity instruments issued. Deferred stock compensation for options granted to consultants is periodically remeasured as the underlying options vest in accordance with Emerging Issues Task Force Bulletin No. 96-18.
RESULTS OF OPERATIONS
COMPARISON OF SIX MONTHS ENDED JUNE 30, 2000 AND 1999
REVENUE
Total revenue for the six months ended June 30, 2000 was $3.6 million compared to $1.8 million for the six months ended June 30, 1999. This increase of $1.8 million or 104% was primarily due to
increases in unit sales of our ProteinChip Systems and increases in sales of disposable ProteinChip Arrays.
EXPENSES
COST OF REVENUE
Cost of revenue for the six months ended June 30, 2000 was $1.5 million compared to $692,000 for the six months ended June 30, 1999. This increase totaled $819,000 or 118% and was primarily due to increases in unit sales of our ProteinChip Systems and increases in sales of disposable ProteinChip Arrays. Cost of revenue as a percent of total revenue increased from 39% to 41% primarily as a result of increases in deferred stock compensation, increases in warranty and other reserves, and costs associated with the introduction of the ProteinChip System, Series PBS-II, and new ProteinChip Arrays. Deferred stock compensation expense was $72,000 for the six months ended June 30, 2000 and $14,000 for the six months ended June 30, 1999.
RESEARCH AND DEVELOPMENT
Research and development expenses for the six months ended June 30, 2000 were $2.9 million compared to $1.5 million for the six months ended June 30, 1999. This increase totaled $1.4 million or 89% and was primarily due to an increase in deferred stock compensation, increases in the number of employees engaged in research and development and the issuance of 60,000 shares of Series B Preferred Stock with a fair market value of $379,000 to SRS in connection with a product development agreement. Deferred stock compensation expense was $605,000 for the six months ended June 30, 2000 and $73,000 for the six months ended June 30, 1999.
SALES AND MARKETING
Sales and marketing expenses were $3.6 million for the six months ended June 30, 2000 compared to $2.4 million for the six months ended June 30, 1999. This increase of $1.1 million or 47% was due primarily to additional salaries and related costs associated with newly hired sales personnel, marketing activities associated with the launch of the ProteinChip System, Series PBS II and increases in general product promotion activities. Deferred stock compensation expense was $527,000 for the six months ended June 30, 2000 and $168,000 for the six months ended June 30, 1999.
GENERAL AND ADMINISTRATIVE
General and administrative expenses were $5.2 million for the six months ended June 30, 2000 compared to $1.2 million for the six months ended June 30, 1999. This increase of $4.0 million or 344% was due primarily to an increase in deferred stock compensation, as well as to intellectual property expenses and to additional salaries and related costs associated with newly hired employees and contractors in business development and accounting. Deferred stock compensation expense was $2.3 million for the six months ended June 30, 2000 and $221,000 for the six months ended June 30, 1999. We also incurred $996,000 of non-cash severance expense upon the retirement of a key employee for the six months ended June 30, 2000.
AMORTIZATION OF INTANGIBLE ASSETS
Amortization of intangible assets totaled $167,000 for the six months ended June 30, 2000 compared to $183,000 for the six months ended June 30, 1999. These amounts represent portions of the costs incurred to acquire IllumeSys Pacific, Inc. and 5% of Ciphergen Technologies, Inc., or CTI, in April 1997 and the costs to acquire the remaining 95% of CTI in July 1998.
INTEREST INCOME, INTEREST EXPENSE, OTHER INCOME (EXPENSE)
Interest income was $553,000 for the six months ended June 30, 2000 compared to $143,000 for the six months ended June 30, 1999. This increase of $410,000 or 287% was primarily due to larger average cash balances during the six months ended June 30, 2000 following the Series E preferred stock financing. Interest expense was $95,000 for the six months ended June 30, 2000 compared to $74,000 for the six months ended June 30, 1999. This increase of $21,000 or 28% was primarily due to interest expense on our accounts receivable bank line of credit, which was in place during the first three months of 2000 and not during the first six months of 1999. Other income was $12,000 for the six months ended June 30, 2000 compared to $14,000 for the six months ended June 30, 1999. Equity in net loss of joint venture (our 30% share of the losses incurred by Ciphergen Biosystems, K.K.) was $25,000 for the six months ended June 30, 2000 compared to $113,000 for the six months ended June 30, 1999.
COMPARISON OF YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
REVENUE
Revenue was $5.0 million in 1999, $2.9 million in 1998 and $1.3 million in 1997. This increase in revenue from 1998 to 1999, which was $2.1 million or 71%, was primarily due to increases in unit sales of our ProteinChip System, increases in sales of disposable ProteinChip Arrays and price increases in connection with the introduction of our first commercial product, the ProteinChip System, Series PBS II. This increase in revenue from 1997 to 1998, which was $1.6 million or 129%, was primarily due to an increase in the number of units of our ProteinChip System sold and increases in sales of ProteinChip Arrays. In 1999, our revenue included $546,000 from Ciphergen Biosystems, K.K. In 1998 revenue included $364,000 from Sumitomo Corporation as part of the establishment of the joint venture. We derived no revenue from Japan in 1997.
COST OF REVENUE
Cost of revenue was $1.7 million in 1999, $1.1 million in 1998 and $1.0 million in 1997. From 1998 to 1999, cost of revenue increased $640,000 or 60%. This increase from 1998 to 1999 was primarily due to an increase in unit sales of our ProteinChip System. Cost of revenue as a percent of revenue decreased from 36% to 34%, primarily as a result of manufacturing efficiencies as unit volumes of our ProteinChip System and Arrays manufactured increased. From 1997 to 1998, cost of revenue was essentially unchanged. Cost of revenue as a percent of revenue decreased from 78% to 36%, primarily due to one-time expenses incurred in 1997 from manufacturing start-up costs of both ProteinChip Readers and ProteinChip Arrays. In addition, manufacturing efficiencies were achieved as unit volumes of our ProteinChip System and Arrays increased. Deferred stock compensation expense was $39,000 in 1999, $2,000 in 1998 and $1,000 in 1997.
OPERATING EXPENSES
RESEARCH AND DEVELOPMENT. Research and development expenses were $3.1 million in 1999, $4.7 million in 1998 and $3.2 million in 1997. From 1998 to 1999, research and development expenses decreased $1.6 million or 34%. This decrease was primarily due to a one-time, non-cash charge of $1.7 million in compensation expense in 1998, related to an employee retained following our acquisition of IllumeSys Pacific, Inc. From 1997 to 1998, research and development expenses increased $1.5 million or 46%. This increase was primarily due to the one-time charge of $1.7 million recognized in 1998 described above and to a $275,000 milestone payment to Stanford Research Systems in 1997. Deferred stock compensation expense was $206,000 in 1999, $167,000 in 1998 and $44,000 in 1997.
SALES AND MARKETING. Sales and marketing expenses were $5.0 million in 1999, $2.7 million in 1998 and $1.3 million in 1997. From 1998 to 1999, sales and marketing expenses increased $2.3 million or
87%. This increase was primarily due to additional salaries and related costs associated with newly hired sales personnel, marketing activities associated with the launch of the ProteinChip, Series PBS II and increases in general product promotion activities. From 1997 to 1998, sales and marketing expenses increased $1.3 million or 102%. This increase was primarily due to additional salaries and related costs associated with newly hired sales personnel and limited marketing activities in 1998. Deferred stock compensation expense was $476,000 in 1999, $33,000 in 1998 and $5,000 in 1997.
GENERAL AND ADMINISTRATIVE. General and administrative expenses were $2.8 million in 1999, $2.1 million in 1998 and $1.3 million in 1997. From 1998 to 1999, general and administrative expenses increased $699,000 or 33%. This increase was primarily due to business development consulting expenses, legal and filing fees related to intellectual property and to additional salaries and related costs associated with newly hired employees and contractors in business development and accounting. From 1997 to 1998, general and administrative expenses increased $768,000 or 58%. This increase was primarily due to deferred stock compensation, intellectual property and business development expenses and to additional salaries and related costs associated with a newly hired Chief Financial Officer. In 1999, we incurred expenses of approximately $30,000 in legal fees and travel costs to conclude the joint venture and distribution and marketing agreements and attend the first board of directors meeting of Ciphergen Biosystems, K.K. In 1998, we incurred expenses of approximately $20,000 in legal fees related to negotiation of the Joint Venture Agreement with Sumitomo Corporation. Deferred stock compensation expense totaled $623,000 in 1999, $678,000 in 1998 and $69,000 in 1997.
INTEREST AND OTHER INCOME (EXPENSE), NET. Interest income was $245,000 in 1999, $175,000 in 1998 and $15,000 in 1997. The increase from 1998 to 1999 was $70,000 or 40% due primarily to larger average balances in short term securities investments resulting from the Series D preferred stock offering in July and September 1998. The increase from 1997 to 1998 was $160,000, again due primarily to larger average balances in short term securities investments.
Interest expense was $179,000 in 1999, $488,000 in 1998 and $236,000 in 1997. The decrease of $309,000 or 63% from 1998 to 1999 was primarily due to the decrease in interest expense related to the amortization of the debt discount from $229,000 in 1998 to $19,000 in 1999. The increase of $252,000 or 107%, from 1997 to 1998 was primarily due to increases related to the amortization of the debt discount from $18,000 in 1997 to $229,000 in 1998 due to Series D Preferred Stock warrants related to bridge loans paid off in July 1998.
Other income (expense) was $37,000 in 1999, $170,000 in 1998 and $(5,000) in 1997. In 1999, we received a $315,000 prepayment from Ciphergen Biosystems, K.K. for support and service, which is being recognized over the ten year life of the agreement. In 1999, we recognized $31,500 as other income. In 1999, we recorded our 30% share of the loss incurred by Ciphergen Biosystems, K.K., totaling $159,000, as equity in net loss of joint venture. The increase in income in 1998 was related to non-operating income received from a strategic partner.
INCOME TAXES
We incurred net losses during the past three years and during the first six months of the current year, and consequently are not subject to corporate income taxes to the extent of our tax loss carryforwards. At December 31, 1999, we had federal net operating loss carryforwards of $21.1 million, state net operating loss carryforwards of $10.9 million and research and development credits of $935,000, which will expire between 2002 and 2019. The utilization of net operating loss carryforwards to reduce future income taxes will depend on our ability to generate sufficient taxable income prior to the expiration of the net operating loss carryforwards. In addition, the maximum annual use of the net operating loss carryforwards may be limited in situations where changes occur in our stock ownership.
LIQUIDITY AND CAPITAL RESOURCES
From inception through June 30, 2000 we have financed our operations with $13.2 million from the sales of products and services to customers, and with private placements of preferred stock totaling $54 million. This includes the $29.0 million Series E Preferred Stock financing completed in March 2000. We had cash balances of $24.0 million and working capital of $22.4 million at June 30, 2000. Long-term debt and capital lease balances at June 30, 2000 were $609,000, net of current portions.
Net cash used in operating activities was $2.4 million in the first half of 2000, which was primarily the result of net losses in operations.
Net cash used in investing activities was $3.0 million in the first half of 2000, which consisted principally of capital equipment purchases.
Net cash provided by financing activities was $26.8 million in the first half of 2000, largely the result of the sale of preferred stock and the exercise of preferred stock warrants.
We may be required to raise additional capital through a variety of sources, including the public equity market, private financings, collaborative arrangements and debt. If additional capital is raised through the issuance of equity or securities convertible into equity, our stockholders may experience dilution, and such securities may have rights, preferences or privileges senior to those of the holders of the common stock. Additional financing may not be available to us on favorable terms, if at all. If we are unable to obtain financing, or to obtain it on acceptable terms, we may be unable to execute our business plan.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board, or FASB, issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133 establishes new standards of accounting and reporting for derivative instruments and hedging activities. SFAS No. 133 requires that all derivatives be recognized at fair value in the statement of financial position, and that the corresponding gains or losses be reported either in the statement of operations or as a component of comprehensive income, depending on the type of relationship that exists. In July 1999, the Financial Accounting Standards Board issued SFAS No. 137, "Accounting for Derivative Instruments and Hedging Activities--Deferral of the Effective Date of FASB Statement No. 133." SFAS No. 137 deferred the effective date of FASB Statement No. 133 until fiscal years beginning after June 15, 2000. The Company has not engaged in significant hedging activities or invested in significant derivative instruments.
In December 1999, the Securities and Exchange Commission ("SEC") issued Staff Accounting Bulletin ("SAB") 101, Revenue Recognition, which provides guidance on the recognition, presentation and disclosure on revenue in financial statements filed with the SEC. SAB 101 outlines the basic criteria that must be met to recognize revenue and provides guidance for disclosure related to revenue recognition policies. The Company believes that its current revenue recognition policy is in compliance with SAB 101.
In March 2000, the FASB issued Interpretation No. 44, "Accounting for
Certain Transactions Involving Stock Compensation--an Interpretation of APB 25"
("FIN 44"). This interpretation clarifies (a) the definition of employee for
purposes of applying APB 25, (b) the criteria for determining whether a plan
qualifies as a noncompensatory plan, (c) the accounting consequences of various
modifications to the terms of a previously fixed stock option or award, and
(d) the accounting for an exchange of stock compensation awards in a business
combination. This Interpretation is effective July 1, 2000, but certain
conclusions in this Interpretation cover specific events that occur after either
December 15, 1998 or January 12, 2000. To the extent that this Interpretation
covers events occurring during the period after December 15, 1998 or
January 12, 2000, but before the effective date of July 1,
2000, the effects of applying this Interpretation are recognized on a prospective basis from July 1, 2000. The adoption of FIN 44 will not have a material impact on our financial statements.
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The primary objective of our investment activities is to preserve principal while at the same time maximizing the income we receive from our investments without significantly increasing risk. Some of the securities that we invest in may have market risk. That means that a change in prevailing interest rates may cause the fair value of the principal amount of an investment to fluctuate. For example, if we hold a security that was issued with a fixed interest rate at the then-prevailing rate and the prevailing rate rises, the fair value of the principal amount of our investment will probably decline. To minimize this risk in the future, we intend to maintain our portfolio of cash equivalents and short-term investments in a variety of securities, including commercial paper, money market funds, government and non-government debt securities. The average duration of all of our investments has generally been less than one year. Due to the short-term nature of these investments, we believe we have no material exposure to interest rate risk arising from our investments.
Our exposure to market risk for changes in interest rates relates primarily to the increase or decrease in the amount of interest income we can earn on our available funds for investment. Our long-term debt and capital lease agreements are at fixed interest rates. We do not plan to use derivative financial instruments in our investment portfolio. We plan to ensure the safety and preservation of our invested principal funds by limiting default risks, market risk and reinvestment risk. We plan to mitigate default risk by investing in high-credit quality securities.
All of our revenue is realized in U.S. dollars. Therefore, we do not believe that we currently have any significant direct foreign currency exchange rate risk.
BUSINESS
OVERVIEW
We develop, manufacture and market our ProteinChip System using patented SELDI technology. The ProteinChip System enables protein discovery, characterization and assay development, which provides researchers with a better understanding of biological functions at the protein level. Our ProteinChip System is a novel, enabling tool in the emerging field of protein-based biology research, known as proteomics. While recent technological advances in DNA tools have substantially changed the field of genomics, the absence of enabling protein analysis tools has limited progress in proteomics research. Proteomics provides the researcher with a direct approach to understanding the role of proteins in the biology of disease, and to monitor disease progression and the therapeutic effects of drugs. We believe proteomics will be a major focus of biological research by enhancing the researcher's understanding of gene function and the molecular basis of disease. In May 1999, we commercially launched our current ProteinChip System, Series PBS II.
INDUSTRY BACKGROUND
Genes are the hereditary coding system of living organisms. Genes encode proteins that are responsible for cellular functions. The study of genes and their functions has led to the discovery of new targets for drug development. The majority of drug targets are proteins, such as receptors, hormones and enzymes. Although genomics allows researchers to identify drug targets, it does not provide complete information on how these targets function within an organism. Industry sources estimate that within the human genome there are approximately 100,000 genes. The initial structure of a protein is determined by a single gene. The final structure of a protein is frequently altered by interactions with additional genes or proteins. These subsequent modifications result in hundreds of thousands of different proteins. In addition, proteins may interact with one another to form complex structures that are ultimately responsible for cellular functions.
Genomics allows researchers to establish the relationship between gene activity and disease. However, many diseases are manifested not at the genetic level, but at the protein level. The complete structure of modified proteins cannot be determined by reference to the encoding gene alone. Thus, while genomics provides some information about diseases, it does not provide a full understanding of disease processes.
THE RELATIONSHIP BETWEEN PROTEINS AND DISEASES
The entire genetic content of any organism, known as its genome, is encoded in strands of deoxyribonucleic acid, or DNA. Cells perform their normal biological functions through the genetic instructions encoded in their DNA, which results in the production of proteins. The process of producing proteins from DNA is known as gene expression or protein expression. Differences in living organisms result from variability in their genomes, which can affect the levels of gene expression. Each cell of the organism expresses only approximately 10% to 20% of the genome. The type of cell determines which genes are expressed and the amount of a particular protein produced. For example, liver cells produce different proteins from those produced by cells found in the heart, lungs, skin, etc. Proteins play a crucial role in virtually all biological processes, including transportation and storage of energy, immune protection, generation and transmission of nerve impulses and control of growth.
Diseases may be caused by a mutation of a gene that alters a protein, the gene's level of protein expression or changes to the protein after gene expression. These alterations interrupt the normal balance of proteins and create disease symptoms. A protein biomarker is a protein that is present in a greater or lesser amount in a disease state versus a normal condition. By studying changes in protein biomarkers, researchers may identify diseases prior to the appearance of physical symptoms. Researchers identify proteins by their molecular weight. In addition, researchers can utilize protein
biomarkers to identify new disease pathways to be used as drug targets. Historically, researchers discovered protein biomarkers as a byproduct of basic biological disease research. This has resulted in the validation by researchers of approximately 200 protein biomarkers that are being used in commercially available clinical diagnostic products. The development of new diagnostic products has been limited by the complexity of disease states, which may be caused or characterized by several or many interacting proteins. Diagnostic products that are limited to the detection of a single protein may lack the ability to detect more complex diseases, and thus produce results that are unacceptable for practical use. Recently, the National Institutes of Health, or NIH, has recognized the importance of protein biomarkers in overcoming this problem and their usefulness in the development of new diagnostic and therapeutic products. The NIH has established a grant program to fund the discovery and clinical validation of new protein biomarkers.
LIMITATIONS OF AVAILABLE TECHNOLOGIES FOR PROTEOMICS RESEARCH
Efforts to understand biology and to improve the diagnosis, monitoring and treatment of diseases have been dramatically enhanced through advancements in modern genomic technologies. These new technologies have formed the basis for the development of new analytical tools, which are primarily directed at DNA and genomic analysis, but are not applicable to protein research or proteomics. These new tools have accelerated the ability to sequence and analyze the human genome. Historically, researchers used gel electrophoresis as a primary tool for sequencing DNA. Gel electrophoresis measures how far a DNA fragment migrates through the pores of gels in response to an applied electric field over a fixed time interval. Electrophoresis is a time-consuming, manual process that requires large amounts of pure DNA to be useful. The development of polymerase chain reaction, or PCR, allowed researchers to amplify, or produce multiple copies of a fragment of DNA. Researchers could then enhance the signal of trace amounts of DNA from an unprocessed biological sample, such as tissue or blood, to a level where measurement was possible. Successive advances in technologies have produced faster, automated sequencing machines and new, chip-based technologies. These new technologies have dramatically improved the throughput and accuracy of DNA analysis. In addition, these new technologies have reduced costs by increasing automation and reducing necessary labor.
Although recent technological advances have benefited genomics, there have been fewer significant advances in proteomics. While DNA has been relatively simple to study because of its ease of detection and linear structure, protein analysis has been a far more difficult challenge. The goal of proteomics is to determine the structure and function of proteins. Researchers use techniques, such as tagging, amplification and sequencing to analyze DNA, but researchers cannot use these techniques effectively to study proteins. These techniques can change the structure of proteins and may change their characteristics or function, which would limit researchers' ability to identify and analyze samples. In addition, these techniques do not allow researchers to monitor or study how proteins interact, or to identify which proteins interact together, to perform biological functions.
Currently, researchers perform proteomics research using gel electrophoresis and other protein purification and analysis products. These tools require substantial, labor-intensive sample preparation processes to enable researchers to produce enough purified proteins before identification and analysis can occur. In addition, these tools must be operated by researchers with substantial technical expertise. As a result, proteomics research has not advanced at a rate comparable to that of genomics. New tools are needed that are specifically designed to allow researchers to analyze proteins to enable protein biomarker discovery, to fully understand biological pathways and function, and ultimately to accelerate the discovery of new drugs and clinical diagnostics.
THE CIPHERGEN SOLUTION
We develop, manufacture and market our ProteinChip System using patented SELDI technology. The ProteinChip System enables protein biomarker discovery, characterization and assay development.
Our ProteinChip System integrates the key steps of proteomics research on a single, miniaturized biochip. Our ProteinChip System incorporates patented Surface-Enhanced Laser Desorption/Ionization, or SELDI, technology on the surface of a disposable chip, which allows researchers to capture and analyze proteins directly. Our ProteinChip System enables rapid, reproducible, on-chip protein expression and protein analysis from complex biological samples, such as whole blood, tissue or saliva, without separation, tagging and amplification processes and with minimal prior purification. SELDI enables protein detection and quantification by reducing signals from unwanted biomolecules that would otherwise obscure the measurement results.
We believe our ProteinChip System enables researchers to identify and quantify proteins by direct molecular weight detection and measurement. Researchers can add chemicals or enzymes at any step during the process to greatly enhance the detailed knowledge gained from a set of experiments. We believe the integration of these processes enables a researcher to rapidly discover, characterize and assay proteins directly from biological samples, providing a novel technique for protein discovery and analysis compared to currently available methods. We believe our ProteinChip System can enable protein research in the following areas:
- DIFFERENTIAL PROTEIN EXPRESSION. Our ProteinChip System is designed to enable biology researchers to rapidly discover and validate new protein biomarkers. In addition, our ProteinChip System enables scientists to tie genetic message information derived from DNA biochips, or miniaturized chips containing DNA, to protein information in order to better define protein function. Expression studies and protein discovery that previously were impossible to conduct or took months or years can be performed on our ProteinChip System in days or even hours. Researchers can use differential protein expressions to diagnose and monitor diseases.
- PROTEIN CHARACTERIZATION. Our ProteinChip System enables researchers to identify small quantities of proteins from biological samples by reducing or eliminating the need for labor-intensive sample purification. Biology researchers can purify samples in hours versus the days or weeks required with current methods. Researchers can then obtain the precise protein sequence using our ProteinChip System through on-chip peptide mapping and conventional database sequencing comparison methods. Also, enzymatic, chemical or antibody-based assays can be used by researchers to rapidly characterize modifications to proteins that occurred after they were produced. Researchers can identify proteins and their originating genes through protein characterization.
- QUANTITATIVE ASSAY OF PROTEINS AND PROTEIN INTERACTIONS. We believe our ProteinChip System will enable biology researchers to quantitatively analyze proteins and protein interactions within a sample. We believe this will speed functional validation of discovered biomarkers by allowing researchers to perform rapid functional assay development and analysis of hundreds or thousands of samples for clinical diagnostic or drug discovery research use. Currently, researchers take many weeks or months to accomplish this process using conventional technologies. Our ProteinChip technology can reduce this process to days or even hours. Researchers can use quantitative assays to determine with greater accuracy the severity or stage of progression of a disease.
OUR MARKET OPPORTUNITY
There are several types of research laboratories that perform proteomics research and development. We believe our ProteinChip System can enable proteomics research in the following markets:
- BASIC BIOLOGY RESEARCH. Basic biology research laboratories focus on the study of general biological processes and the understanding of the molecular basis of disease. There are over 320,000 scientists from academic and government research institutions pursuing this research
worldwide. Most of the techniques used by researchers in basic biology research to study proteins are labor intensive or have limited analytical capabilities. We believe that the ease of use and problem-solving versatility of our ProteinChip System may enable biologists to perform proteomics research at their workstations in the laboratory.
- CLINICAL RESEARCH AND DIAGNOSTICS. Clinical research is focused on associating clinical disease symptoms to changes in certain proteins in the disease state versus in the normal state. In doing so, researchers seek to identify biomarkers, many of which are proteins, that can be used to diagnose diseases early, assess treatment response and monitor treatment progress. Currently, physicians pursuing clinical research lack a flexible, integrated, standardized tool to perform protein biomarker discovery. We believe that our ProteinChip System may enable researchers to rapidly discover protein biomarkers and to develop these biomarkers into clinical diagnostic tests.
- PHARMACEUTICAL RESEARCH AND DEVELOPMENT. A current bottleneck in drug development is secondary screening, during which drug lead candidates are validated by researchers using complex biological assays in which markers are used to assess biological responses to varying compounds, dose levels and conditions. Current assay systems often have poor specificity, are usually labor intensive and require substantial development time. In addition, over 50% of drug development failures now occur in toxicology, or the study of the negative or harmful effects of a drug, in which the availability of useful data is hampered by similar issues. We believe a lack of protein biomarkers currently limits the ability of researchers to adequately evaluate drug target function, cell pathway analysis and toxicological and therapeutic effects throughout the drug development process. We believe our ProteinChip System can substantially improve preclinical development and clinical trial effectiveness by greatly expanding the use of protein biomarkers.
BUSINESS STRATEGY
We intend to establish our ProteinChip System as the enabling technology platform for protein biomarker discovery and proteomics research in the basic biological research, clinical research and diagnostics, and pharmaceutical drug discovery and development markets. Key elements of our strategy are to:
- ACCELERATE AWARENESS AND ACCEPTANCE OF OUR PROTEINCHIP SYSTEM. We intend to focus on expanding the installed base of our ProteinChip System with leading academic, government, pharmaceutical and clinical research laboratories to promote awareness and acceptance of our technology. In addition, we will support the use of our ProteinChip System through customer education and training as well as customer collaborations to increase the applications and use of our ProteinChip Arrays. Further, we intend to pursue commercialization of our products through our own sales and marketing organizations in the United States and Europe and through distributors in other parts of the world, including through our joint venture with Sumitomo Corporation in Japan.
- EXPAND PRODUCT DEVELOPMENT AND INNOVATION. We intend to expand the scope of our product portfolio by continuously developing new products and applications based on our ProteinChip technology. We believe that by expanding the applications of our technology and products and increasing their functionality we will promote the use and acceptance of our ProteinChip System by biology researchers. The ProteinChip products we are currently attempting to develop include next generation products to further automate the protein analysis process, high performance proteomics systems and more compact versions of our proteomics systems that can be used by researchers in the laboratory.
- ESTABLISH BIOMARKER DISCOVERY CENTERS. We intend to establish Biomarker Discovery Centers directly and through partnerships to foster further adoption of our products and technology as
an industry standard. We believe that our Biomarker Discovery Centers may accelerate biomarker discovery and validation in both pharmaceutical drug discovery, toxicology and clinical trials, and in clinical research laboratories. We plan to deploy the prototypes of our next-generation ProteinChip System to maintain a technological advantage in our Biomarker Discovery Centers. In addition, we intend to obtain commercial rights related to biomarkers discovered in our Biomarker Discovery Centers.
- EXPAND OUR INTELLECTUAL PROPERTY PORTFOLIO. We include many issued, allowed and pending patents on the SELDI technology and the ProteinChip System in our current patent portfolio and we intend to expand this portfolio in several areas of technology related to our business, including applications of SELDI technology and biomarker discoveries. We intend to continue to develop our proprietary technologies and proprietary infrastructure in support of our existing SELDI technology and ProteinChip System. In addition, we intend to develop new surface chemistries for our ProteinChip Arrays, enhancements to our ProteinChip Readers and advancements in our analysis and database ProteinChip Software, in order to broaden the range of applications and opportunities that researchers can address. We intend to continue to license and acquire technologies from others that complement our core capabilities and protect our proprietary technologies with patents and trade secrets.
OUR PROTEINCHIP TECHNOLOGY
Our ProteinChip technology is based on Surface-Enhanced Laser Desorption/Ionization, or SELDI, which combines laser-based molecular weight detection with the use of a chemically or biochemically active chip array surface constructed from proprietary-treated plastic or metal. Our ProteinChip technology enables researchers to apply a crude biological sample, such as whole blood or tissue, directly to the surface of a ProteinChip Array. These ProteinChip Arrays are designed to select desired proteins from the sample through affinity capture, which employs chemical processes or biochemical targets such as receptors, antibodies or DNA probes. Researchers then wash away the remainder of the unused sample with a variety of solutions with varying stringency conditions, depending on the type of test performed. This enhances the signal of the proteins of interest on the chip by reducing signals from unwanted biomolecules that would otherwise obscure the measurement results. The purified sample proteins remain evenly distributed on the surface of the ProteinChip Array. This even distribution allows the researcher to accurately measure and quantify the proteins.
The researcher then places the ProteinChip Array in a specially developed laser-based, molecular weight detection analyzer, or ProteinChip Reader. The ProteinChip Reader uses a laser beam to release the retained proteins from the ProteinChip Array surface. The ProteinChip Reader accelerates the retained proteins and guides them through a flight tube under vacuum to a detector. The time of this flight is directly related to the exact molecular weight of each protein. This process allows the molecular weight of a sample protein to be determined by the researcher.
The researcher generates protein expression profiles by examining the samples collected with different affinity-based ProteinChips or different stringency washes and collecting the information under the different conditions. Using our ProteinChip System, researchers can compare protein expression profiles from different samples, such as disease versus normal states and display differences in the proteins expressed. Proteins that are differently expressed in the disease versus normal state may be new, potentially relevant proteins biomarkers. Researchers can then process proteins of interest on-chip to:
- obtain sequence identification;
- detect secondary modifications of proteins;
- identify protein interactions; and
- quantitatively measure protein concentrations.
OUR PROTEINCHIP SYSTEM
In May 1999, we commercially launched our current ProteinChip System, Series PBS II. Our ProteinChip System, Series PBS II, consists of disposable ProteinChip Arrays containing chemical or biochemical binding sites on a chip, a ProteinChip Reader to read the ProteinChip Arrays and our proprietary ProteinChip Software to analyze and manage protein-based information.
Our PROTEINCHIP ARRAYS are typically used by researchers for protein expression profiling, characterization and quantitative protein interaction applications. Our ProteinChip Arrays consist of a metal surface with multiple sample wells, or spots. We treat these spots with our proprietary coatings that are designed to capture certain families of proteins. We can apply single coatings to several spots or we can simply apply multiple types of coatings to spots on one ProteinChip Array to create a variety of selectivity conditions. We offer two types of ProteinChip Arrays: one uses chemical surfaces to perform differential protein expression, and the other uses biochemical surfaces used in protein interaction studies. Researchers use both types of ProteinChip Arrays to perform protein identification and characterization. We recently introduced our second-generation chemical ProteinChip Arrays, which utilize our proprietary polymer technology that improves both the selectivity, sensitivity and capacity of our ProteinChip Arrays.
Our PROTEINCHIP READER is a laser-based, molecular weight detection system designed for use with our ProteinChip Arrays. We designed our ProteinChip Reader to be used in the laboratory by basic biology researchers. Our ProteinChip Reader consists of a nitrogen laser, high-speed digital electronics, a vacuum system and a standard personal computer with our proprietary ProteinChip Software for system control and data analysis.
Our PROTEINCHIP SOFTWARE is designed to facilitate system operation by biology researchers with no experience in molecular detection systems and minimal experience in protein analysis. The software allows fully automated operation of the ProteinChip System with graphic data presentation and analysis readouts in familiar formats for the biologist, such as those displayed by gel electrophoresis systems. Our ProteinChip Software enables differential protein expression analysis by automatically comparing protein profiles and highlighting differences in protein expression. Our ProteinChip Software provides researchers with Internet access for rapid database searches, which facilitates protein identification. Furthermore, our ProteinChip Software allows researchers to perform quantitative protein interaction assays.
BIOMARKER DISCOVERY CENTERS
We intend to establish Biomarker Discovery Centers, directly and through partnerships and client relationships, to foster further adoption of our products and technology as an industry standard. We intend to discover and characterize new protein biomarkers from biological samples provided by our future collaborators. We believe that our Biomarker Discovery Centers may accelerate biomarker discovery and validation in pharmaceutical drug discovery, toxicology and clinical trials, and in clinical research laboratories. We intend to deploy the prototypes of each next-generation ProteinChip System and other specialized equipment and software to maintain a technological advantage in our Biomarker Discovery Centers. In addition, we intend to obtain commercial rights related to biomarkers discovered in our Biomarker Discovery Centers. We have entered into several formal Biomarker Discovery Center partnerships.
We have leased facilities for our Biomarker Discovery Centers in Copenhagen, Denmark and Fremont, California, as part of our new headquarters facility. We have hired initial managerial and scientific staff for these facilities and have begun to build infrastructure necessary to begin operations
during 2000. We recently began operations at one center and plan to add additional Biomarker Discovery Centers in the U.S., Europe and Asia.
SALES AND MARKETING
We have developed a direct sales force worldwide. Our sales process involves on-site applications problem-solving, scientific publications, product demonstrations, seminars, exhibits, conventions and meetings, word of mouth, direct mail and the Internet. We have designed our sales process to increase market awareness of our ProteinChip System and promote acceptance of our technology as an industry standard. We initiated our first full commercial launch of the ProteinChip System, Series PBS II, in May 1999. This launch included over 30 exhibitions and trade shows, direct mailings and an expanded demonstration sales program throughout the United States, Japan and selected countries in Europe.
Our sales force includes field research scientists, most of whom have Ph.D. degrees in biology or biochemistry. The primary responsibility of the field research scientist is to provide solutions to biological problems for our current and future sale prospects through applications development, scientific seminars, joint scientific publications with customers and product demonstrations. In addition, the field research scientists also serve as our primary field representatives for after-sales customer service and technical support. We currently have 15 field research scientists in the United States, ten in Europe and four employed by our joint venture in Japan.
We formed Ciphergen Biosystems, K.K. in Japan in January 1999, as a joint venture with Sumitomo Corporation to distribute our products in Japan. Sumitomo has a majority ownership in the joint venture, with transfer of majority ownership to us to be accomplished, at our option, on a pre-determined formula basis as early as the first quarter of 2002. The joint venture currently has eleven employees, consisting of four field research scientists, two program managers and five administrative and support personnel. The joint venture agreement is for ten years from January 1999. We invested $315,000 for 30% of Ciphergen Biosystems, K.K. In March 1999, we signed a distribution and marketing agreement granting Ciphergen Biosystems, K.K. the exclusive right to distribute our products in Japan for ten years, and we were paid $315,000 by Ciphergen Biosystems, K.K.
Our sales and marketing organization as of July 31, 2000, including Ciphergen Biosystems, K.K., consisted of 51 employees, 23 of whom have Ph.D. degrees. We intend to significantly increase the size of our organization over the next 12 months, expanding in North America, Europe and Asia.
EXISTING CUSTOMERS
The following is a list of our customers:
PHARMACEUTICAL AND BIOTECHNOLOGY ACADEMIC AND GOVERNMENT Abbott Laboratories British Columbia Cancer Agency Abgenix, Inc. Carnegie Institute of Washington Alkermes, Inc. Brigham and Women's Hospital Amgen, Inc. Dana Farber Cancer Center Amylin Pharmaceuticals, Inc. Duke Medical School Antex Biologics, Inc. Harvard School of Public Health AstraZeneca plc Imperial College Prion Unit BASF Aktiengeseuschaft John Innes Institute Boehringer Ingelheim Pharma KG Johns Hopkins Medical School Cambridge Antibody Technology Group plc Lawrence Livermore Laboratories Cantab Pharmaceuticals plc Massachusetts General Hospital Creative Biomolecules, Inc. Massachusetts Institute of Technology Elan Pharmaceuticals Research Corp. MD Anderson Cancer Center GeminX Biotechnologies, Inc. Medical Research Council (Cambridge) Genome Therapeutics Corp. National Cancer Institute, National GlaxoWellcome plc Institutes Hisamitsu Pharmaceutical of Health Human Genome Sciences, Inc. Riken Brain Science Institute Janssen Pharmaceutica NV Royal Free Hospital School of Medicine Matritech, Inc. St. Mary's Hospital Medical School MediGene Stanford University Merck & Co., Inc. Tulane University Medical Center Mice & More GmbH & Co. KG University of British Columbia Novartis Pharmaceuticals AG University of California Los Angeles Novo Nordisk A/S (Zymogenetics) University of California, San Francisco Parke Davis & Co. Cancer Center Pfizer Pharmaceuticals University of Durham Rhone Poulenc Rorer, Inc. University of East Anglia Roche Vitamins, Inc. University of Maryland Schering Plough Corp. University of Massachusetts SmithKline Beecham plc University of Notre Dame Syn-X-Pharma U.S. Army, Medical Research Institute Tanabe Pharmaceuticals Co., Ltd. Veterans Administration Hospital, Loma Linda VistaGen, Inc. Virginia Prostate Center Yamanouchi Pharmaceuticals Co., Ltd. Wright State University Zeneca Agrochemicals |
Hisamitsu Pharmaceuticals, Riken Brain Science Institute, Tanabe Pharmaceuticals and Yamanouchi Pharmaceuticals are customers of our Japanese distributor, Ciphergen Biosystems, K.K. In 1999, Ciphergen Biosystems, K.K. accounted for 11% of our revenue. During the first half of 2000 Ciphergen Biosystems, K.K. accounted for 14% of our revenue.
RESEARCH AND DEVELOPMENT
Our ProteinChip System is a single technology platform, which we believe can be easily optimized for use in multiple markets. This flexibility allows us to rapidly introduce new applications and products from one field to other fields. Our research and development expenditures were $2.9 million in the first
half of 2000, $3.1 million in 1999, $4.7 million in 1998 and $3.2 million in 1997. The total expenditures for 1997 and 1998 included expenses for stock issued related to research and development services performed by a key employee pursuant to a contingent performance agreement as part of the acquisitions of IllumeSys Pacific, Inc. and Ciphergen Technologies, Inc.
We have ongoing technology development programs in our ProteinChip Arrays, materials, surface chemistries, high-density biochip formats and manufacturing processes. In applied research, we are developing new applications in differential protein expression, quantitative protein interaction assays and protein characterization.
Our research and development efforts related to our ProteinChip Readers, includes research in the automation of sample introduction, high-sensitivity detection, improvement in system resolution and quantitation. In addition, we are developing new SELDI-based accessories for high resolution, tandem mass spectrometry, whose capabilities will further enhance our ProteinChip System.
MANUFACTURING
We manufacture our ProteinChip Readers and Arrays in our Fremont, California facilities. We rely upon suppliers for certain components of our ProteinChip System, including Stanford Research Systems, which also performs specified design services for certain components of our ProteinChip Reader. We perform final assembly and quality control on our ProteinChip Reader at our facilities. We purchase extruded aluminum for our ProteinChip Arrays from a third-party supplier. External vendors etch and base coat our ProteinChip Arrays. We apply all chemistries to the ProteinChip Arrays and perform final quality control at our facilities. We intend to continue and may extend the subcontracting portions of our manufacturing processes when we think it best leverages the suppliers' manufacturing experience, reduces costs or improves our ability to meet customer demand.
INTELLECTUAL PROPERTY
As of July 31, 2000, we owned, co-owned or licensed a patent portfolio of five issued U.S. patents and 16 pending U.S. patent applications, two allowed U.S. patent applications as well as seven issued foreign patents, 47 pending foreign patent applications and one international patent application filed under the Patent Cooperation Treaty. This portfolio of patent properties includes four issued U.S. patents, five pending U.S. patent applications, one allowed U.S. patent application, two issued foreign patents and three pending foreign patent applications directed to the core SELDI technology. We licensed these patents and patent applications in the fields in which our business operates for laboratories and laboratory environments doing bioanalytic or biological measurements or assays from Molecular Analytical Systems, or MAS, which has an exclusive license on the properties from the original assignee, Baylor College of Medicine. Our rights under these sublicenses are set forth in agreements between MAS and our subsidiaries, IllumeSys Pacific, Inc. and Ciphergen Technologies, Inc.
These sublicense agreements with MAS provide us with the exclusive right under the Baylor patents to make, use and sell instruments, devices and non-drug consumables for use by customers in the life science laboratory and drug discovery laboratory markets worldwide. The terms of the sublicenses are the life of the Baylor patents in each country where we do business or, if no patents issue in a particular country, April 2013. We may terminate each sublicense with six months notice and MAS may terminate each sublicense in the event of our bankruptcy or in the event of an uncured material breach following 90 days notice of such breach. For each sublicense we are obligated to pay a royalty equal to 2% of revenues we generate related to the sublicense for four years from the date of first commercial sale, with an annual maximum royalty payment of $500,000 for each of the two sublicenses. On the IllumeSys Pacific sublicense, the date of first commercial sale was April 1997. The date of first commercial sale for the Ciphergen Technologies, Inc. sublicense has not yet occurred. We have the right to any improvements we make to the SELDI technology and we have filed 12 patent
applications on such improvements to date. In June 2000, we received letters from MAS alleging that we have committed material breaches of the sublicense agreements. The sublicense agreements provide for termination in the event of material breach, if not cured within 90 days, and MAS has threatened to terminate the agreements unless the alleged breaches are cured. We believe that we have not committed a material breach of the sublicense agreements, and in July 2000, we commenced litigation to confirm our position, which litigation is more fully described in the Risk Factors and Legal Proceedings sections of this prospectus.
Our portfolio also includes nine pending U.S. patent applications, one allowed U.S. patent application, 37 pending foreign patent applications and one international patent application filed under the Patent Cooperation Treaty directed to applications of SELDI technology for research, diagnostics and drug screening, as well as to mass spectrometer instrumentation, software and chip arrays. These properties are assigned or are expected to be assigned to us. Our portfolio also includes one issued U.S. patent, one pending U.S. patent application, one issued foreign patent and eight pending foreign patent applications directed to methods of determining the amino acid sequence of polypeptides. We licensed these properties from Rockefeller University and Scripps Research Institute. Our portfolio also includes four issued foreign patents directed to devices for and methods in mass spectrometry. We licensed these properties from Rockefeller University. Our portfolio also includes one pending U.S. patent application directed to methods of screening phage display libraries. We co-own this application with IntraImmune Therapies, Inc. through assignments from the inventors. Some of the inventions covered by our licenses were developed under a grant from an agency of the United States government and, therefore the government has a paid-up, non-exclusive, non-transferable license to those inventions and the right, in limited circumstances, to grant a license to others on reasonable terms. Our business could be harmed if the government exercises those rights. We also rely on trade secrets, know-how, continuing technological development and licensing opportunities to develop and maintain a competitive position in the market.
We have applied for a United States trademark on the term "SELDI." MAS has opposed our application, as more fully described under "Legal Proceedings" and "Risk Factors."
COMPETITION
Although we believe that we are currently the only company selling and delivering products with an integrated separations and molecular weight detection biochip platform for proteomics research, we expect to encounter intense competition from a number of companies that offer competing products. We anticipate that competition will come primarily from companies providing products that incorporate established technologies, such as gel electrophoresis, liquid chromatography and mass spectrometry.
In order to compete effectively, we will need to demonstrate the advantages of our ProteinChip System over well-established alternative technologies and products. We will also need to demonstrate the potential economic value of our ProteinChip products relative to these conventional technologies and products. Some of the companies that provide these products include the Applied Biosystems division of PE Biosystems, Amersham Pharmacia Biotech, BioRad Laboratories, Bruker Daltonics, Boehringer-Manheim, Genomic Solutions, ThermoQuest Corporation and several smaller reagent and equipment companies. Our future success will depend in large part on our ability to establish and maintain a competitive position with respect to these and future technologies.
We offer proteomics services through our Biomarker Discovery Centers. Our Biomarker Discovery Centers may compete with companies in the proteomics services area. We expect an increasing number of companies to provide proteomics services in the future.
In many instances, our competitors have or will have substantially greater financial, technical, research, and other resources and larger, more established marketing, sales, distribution, and service organizations than we do. Moreover, competitors may have greater name recognition than we do, and
may offer discounts as a competitive tactic. Our competitors may succeed in developing or marketing technologies or products that are more effective or commercially attractive than our products, or that would render our technologies and products obsolete. Also, we may not have the financial resources, technical expertise or marketing, distribution or support capabilities to compete successfully in the future. Our success will depend in large part on our ability to maintain a competitive position with respect to our technologies.
EMPLOYEES
As of July 31, 2000, we had 95 full-time employees worldwide, including 40 in sales and marketing, 27 in research and development, 16 in manufacturing and 12 in administration. Thirty-eight of our employees have Ph.D. degrees in chemistry, biology or biochemistry and many are experts in software and engineering. We have also engaged an additional 15 individuals as independent contractors. Ciphergen Biosystems, K.K. in Japan employs 11 people. None of our employees is covered by a collective bargaining agreement and we believe that our relations with our employees are good.
FACILITIES
We currently lease a 30,000 square foot facility in Fremont, California. The lease for this facility expires in March 2008.
LEGAL PROCEEDINGS
We currently are a party to the following legal proceedings:
CIPHERGEN BIOSYSTEMS, INC., CIPHERGEN TECHNOLOGIES, INC. AND ILLUMESYS PACIFIC, INC. V. MOLECULAR ANALYTICAL SYSTEMS, INC., LUMICYTE, INC. We instituted the proceeding against Molecular Analytical Systems, Inc. and LumiCyte, Inc., or the Defendants, on July 12, 2000 in the Superior Court of the State of California for the County of Santa Clara, case number CV791094. On July 21, 2000, Defendants removed the proceeding to the United States District Court for the Northern District of California, Case number C00-02628. On August 16, 2000, the federal court remanded the action to state court. Defendant Molecular Analytical Systems, Inc., or MAS, accused us of a material breach of certain Technology Transfer Agreements between MAS and us relating to SELDI technology, and threatened to terminate those agreements unless we cure the alleged breach. In particular, MAS has claimed that our business activities, including our continued marketing and sale of SELDI information and services to research laboratories and other customers, are a material breach of the technology transfer agreements. In the pending action, we are seeking a declaration from the court that our activities do not constitute a material breach, an injunction preventing MAS from terminating the licenses provided by the agreements and other relief. MAS has agreed to suspend its notices purporting to terminate the license agreements pending the conclusion of this litigation. The parties have also agreed to a 60 day stay of the litigation that will expire no sooner than October 23, 2000, during which the parties have agreed to attempt to resolve their differences.
MOLECULAR ANALYTICAL SYSTEMS, INC. V. CIPHERGEN BIOSYSTEMS. Molecular Analytical Systems, Inc. filed the proceeding on December 9, 1999 in the United States Trademark Trial and Appeal Board as Opposition No. 116,315. We have applied for registration of the term "SELDI" as a trademark. MAS has opposed registration of the trademark to us and is seeking to have the trademark registered in its name instead.
MANAGEMENT
EXECUTIVE OFFICERS, KEY EMPLOYEES AND DIRECTORS
The following table sets forth certain information regarding our executive officers, key employees and directors as of September , 2000:
NAME AGE POSITION ---- -------------------- ----------------------------------------------- William E. Rich, Ph.D..................... 56 President, Chief Executive Officer and Director Matthew J. Hogan.......................... 40 Vice President and Chief Financial Officer David A. DeNola........................... 50 Vice President, Operations Robert M. Maurer.......................... 48 Vice President, Business Development Christopher A. Pohl....................... 49 Vice President, Research and Development John R. Storella.......................... 45 Vice President, Intellectual Property Affairs Martin L. Verhoef......................... 40 Vice President, Sales and Marketing John A. Young............................. 68 Chairman of the Board of Directors Michael J. Callaghan...................... 47 Director Barbara J. Dalton, Ph.D................... 47 Director Jean-Francois Formela, M.D................ 43 Director William R. Green, Ph.D.................... 50 Director James L. Rathmann......................... 48 Director Daniel Vapnek, Ph.D....................... 61 Director |
WILLIAM E. RICH, PH.D., joined us in September 1994 as our President and Chief Executive Officer and as a director. Prior to joining us, Dr. Rich was Senior Vice President of Sepracor, Inc. from 1991 to 1994, and President of BioSepra, which was spun off by Sepracor. Prior to joining Sepracor, he was Senior Vice President of Dionex Corporation and from 1975 to 1990, he had responsibility for both the Marketing and Sales and Research and Development departments at various times during his tenure there. Dr. Rich received a B.S. in Chemistry from Carson Newman College and a Ph.D. in Chemistry from the University of North Carolina, Chapel Hill and conducted post-doctoral research in biochemistry at Duke University.
MATTHEW J. HOGAN joined us in September 2000 as our Vice President and Chief Financial Officer. Prior to joining us, he was the Chief Financial Officer at Avocet Medical, Inc. starting in June 1999. From 1996 to 1999, Mr. Hogan was the Chief Financial Officer at Microcide Pharmaceuticals, Inc. From 1986 to 1996, he held various positions in the investment banking group at Merrill Lynch & Co., most recently as a Director focusing on the biotechnology and pharmaceutical sectors. Mr. Hogan holds a B.A. in Economics from Dartmouth College and an M.B.A. from the Amos Tuck School of Business Administration.
DAVID A. DENOLA joined us in January 2000 as Vice President, Operations. Prior to joining us, he was Chief Operating Officer of Gamida-Cell, a cell therapy company, from March 1999 to January 2000. From September 1997 to March 1999, he was Vice President and Deputy General Manager of CBD Technologies, an agricultural biotechnology company. From August 1994 to August 1997, he held positions of Director of Operations, Business Development Manager and Chief Operating Officer at Diagenetics, Ltd., a molecular biology based diagnostics company. From 1992 to 1993, he served as Director of Operations at Tago Immunologicals, a division of Biosource International, an antibody company. From 1991 to 1992, he was Manager of Contract Manufacturing at Somatix Therapy, a gene therapy company. Mr. DeNola received a B.A. in Genetics from the University of California, Berkeley, and a post-graduate degree in Business from the Technion College in Israel.
ROBERT M. MAURER joined us in June 1999 on a consulting basis and became a full time employee as Vice President, Business Development in February 2000. Prior to joining us, he was an independent consultant in biomedical business development, technology licensing and corporate strategy from March 1999 to February 2000. Prior to that he served as Vice President of Business Development at Avigen Corporation, a gene delivery system company, from November 1996 to February 1999. From June to October 1996, he was an independent consultant. From November 1995 to June 1996, he was Vice President of Strategic Marketing at Promega Corporation, a life sciences company. From May 1995 to October 1995, he was an independent consultant. From February 1992 to April 1995, he was Chief Operating Officer, Secretary and Treasurer of Molecular Geriatrics Corporation, an Alzheimer's Disease research company. From 1974 to February 1992 he held various sales and general management positions in the diagnostics division of Abbott Laboratories. He received a B.A. degree in Economics and Mathematics from Carleton College and an M.B.A. from the Harvard Graduate School of Business.
CHRISTOPHER A. POHL joined us in March 2000 as Vice President, Research and Development. Prior to joining us, he was Vice President of Dionex Corporation responsible for chemistry research and development and chemical products manufacturing. He joined Dionex in the early 1980's and has held various senior management positions in research and development. He holds 19 U.S. patents in a broad range of separations areas including chromotography, electrophoresis and solid phase extractions. He received a B.S. in Chemistry from the University of Washington.
JOHN R. STORELLA joined us in April 2000 as Vice President, Intellectual Property Affairs. Prior to joining us, he was a Partner from January 1999 to April 2000, and an Associate Attorney from October 1994 to December 1998, at Townsend and Townsend and Crew, LLP, a law firm specializing in intellectual property. Prior to that he was an Associate Attorney at Campbell and Flores, where he specialized in biotechnology patent law from April 1993 to September 1994. From 1988 to 1993, he was an Associate Attorney specializing in patent law at Fish & Neave. He received a B.A. degree in Biology from Dartmouth College, an M.A. in Zoology from the University of Massachusetts, Amherst and a J.D. from the University of Virginia School of Law.
MARTIN L. VERHOEF joined us in April 2000 as Vice President, Sales and Marketing. Prior to joining us, he was with Hewlett-Packard Company/Agilent Technologies, Inc. from 1990 to April 2000. He was Marketing Manager, Bioscience Products from March 1999 to April 2000, System Program Manager, Bioscience Products from September 1997 to February 1999, and Marketing Section Manager, Bioscience Products from June 1996 to August 1997. Prior to that he was Product Marketing Manager, Capillary Electrophoresis and Liquid Chromatography from 1990 to 1996, at Hewlett-Packard GmbH, in Waldbronn, Germany. From 1989 to 1990, he was Product Manager, Process Chromatography at Pharmacia LKB Biotechnology AB in Sweden. He received a B.S. degree in Medical Microbiology and Biochemistry from the Van't Hoff Institute in Rotterdam, the Netherlands.
JOHN A. YOUNG has been one of our directors since our inception and became our Chairman in 1995. Mr. Young was President and Chief Executive Officer of Hewlett-Packard Company from 1977 until his retirement in 1992. He serves as a director of other public life science companies, including SmithKline Beecham plc and Affymetrix Incorporated, and also serves as a director of Wells Fargo & Co., Chevron Corporation, Novell Incorporated, and Lucent Technologies Inc. He received a B.S.E.E. from Oregon State University and an M.B.A. from the Stanford Graduate School of Business.
MICHAEL J. CALLAGHAN is Senior Vice President of MDS Capital Corporation and became one of our directors in 1998. Prior to joining MDS Capital in 1992, he was active in several general management positions. Mr. Callaghan began his career with Ernst & Young where he became a Chartered Accountant. He serves as a director of Systems Xcellence, Inc., a public company, and the following private companies: Apollo Biopharmaceuticals, Inc., Mitokor, Inc. and Redwood
Microsystems, Inc. He received a B. Comm from McGill University and an M.B.A. from York University.
BARBARA J. DALTON, PH.D. is a Vice President of S.R. One, Ltd. and became one of our directors in 1999. Prior to joining S.R. One in 1993, Dr. Dalton served for ten years as a research scientist at SmithKline Beecham. She was formerly a director of Genset, S.A., a public company and currently serves as a director of several private companies, including Gryphon Sciences, Molecular Mining Corporation, Physiome Sciences, Inc. and TerraGen Discovery, Inc. She received a B.S. in Biology from Pennsylvania State University and a Ph.D. in Microbiology and Immunology from the Medical College of Pennsylvania.
JEAN-FRANCOIS FORMELA, M.D. is a General Partner of Atlas Venture and became one of our directors in March 2000. Prior to joining Atlas Venture in 1993, Dr. Formela was Senior Director, Medical Marketing and Scientific Affairs at Schering-Plough in the U.S. He is also a director of the following public companies: BioChem Pharma, deCode Genetics, Exelixis and Variagenics, as well as several private companies. He holds an M.D. degree from Paris University School of Medicine and an M.B.A. from Columbia Business School.
WILLIAM R. GREEN, PH.D. is President and Chief Executive Officer of Stanford Research Systems, Inc., which he joined in 1984 and with which we have a strategic partnership. He became one of our directors in 1995. He received a B.S.E.E. degree from Cornell University and M.S.E.E. and Ph.D. degrees from Stanford University. He also served as a post-doctoral fellow at the Ecole Polytechnique in France.
JAMES L. RATHMANN has been President of Falcon Technology Management Corporation and a general partner of Falcon Technology Partners, L. P. since its founding in 1993. Mr. Rathmann has been one of our directors since our inception. He also serves as a director of several private companies, including Genomica Corporation and Array Biopharma Corporation. Prior to joining Falcon Technology in 1993, he was Senior Vice President of Operations at Soft-Switch, Inc. from 1984 to 1993. He received a B.A. in Mathematics from the University of Colorado and an M.S. in Computer Science from the University of Wisconsin.
DANIEL VAPNEK, PH.D. held senior research positions at Amgen, Inc., from 1981 to his retirement in 1996, serving the last 13 years as Senior Vice President, Research. He has been one of our directors since our inception. Prior to Amgen, Dr. Vapnek was a faculty member in the Department of Molecular and Population Genetics at the University of Georgia from 1972 to 1981, becoming a Professor in 1981. He holds B.S. and Ph.D. degrees from the University of Miami in Florida.
BOARD COMPOSITION
Our board of directors is currently comprised of eight directors. Our amended and restated bylaws authorize not fewer than five directors and not more than nine directors. Our board of directors is divided into three classes, with each director serving a three-year term and one class being elected at each year's annual meeting of stockholders. Directors Dalton and Vapnek will be in the class of directors whose initial term expires at the 2001 annual meeting of stockholders. Directors Young, Green and Callaghan will be in the class of directors whose initial term expires at the 2002 annual meeting of the stockholders. Directors Formela, Rathmann and Rich will be in the class of directors whose initial term expires at the 2003 annual meeting of stockholders.
BOARD COMMITTEES
Our board of directors has established an audit committee and a compensation committee.
AUDIT COMMITTEE
The audit committee is composed of Michael J. Callaghan, Daniel Vapnek, William R. Green and Jean-Francois Formela. It is responsible for assuring the integrity of our financial control, audit and reporting functions. It reviews with our management and our independent accountants the effectiveness of our financial controls, accounting and reporting practices and procedures. In addition, the audit committee reviews the qualifications of our independent accountants, makes recommendations to the board of directors regarding the selection or our auditors, reviews the scope, fees and results of activities related to audit and non-audit services. Prior to March 2000, the audit committee responsibilities were conducted by the full board of directors, which met annually with representatives of our independent accountants, including executive sessions from which members of management were excused.
COMPENSATION COMMITTEE
The compensation committee is chaired by James L. Rathmann, and has Barbara J. Dalton and John A. Young as members. Its principal responsibility is to administer our stock plans and to set the salary and incentive compensation, including stock option grants, for the President and Chief Executive Officer.
DIRECTOR COMPENSATION
Our seven outside directors serve without cash compensation. In each of August 2000, November 1999, September 1998 and September 1997, outside directors or the institutions they represent were each awarded non-statutory options for 8,600 shares of our common stock, with each option granted vesting monthly over 12 months. In March 2000, John A. Young, the Chairman of our board, was granted non-statutory options to acquire 86,000 shares, half vesting immediately and half vesting monthly over 24 months.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None of our executive officers serves as a member of the board of directors or compensation committee of any entity that has one or more of its executive officers serving as a member of our board of directors or compensation committee.
LIMITATION OF LIABILITY AND INDEMNIFICATION
Our Amended and Restated Certificate of Incorporation limits the liability of directors to the maximum extent permitted by Delaware law. Delaware law provides that directors of a corporation will not be personally liable for monetary damages for breach of their fiduciary duties as directors, except liability for:
- breach of their duty of loyalty to the corporation or its stockholders;
- acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law;
- unlawful payments of dividends or unlawful stock repurchases or redemptions; and
- any transaction from which the director derived an improper personal benefit.
This limitation of liability does not apply to liabilities arising under the federal or state securities laws and does not affect the availability of equitable remedies such as injunctive relief or rescission. Our bylaws provide that we will indemnify our directors, officers, employees and other agents to the fullest extent permitted by the Delaware General Corporation Law. We believe that indemnification under our bylaws covers at least negligence and gross negligence on the part of indemnified parties. Our bylaws also permit us to secure insurance on behalf of any officer, director, employee or other
agent for any liability arising out of his or her actions in such capacity, regardless of whether the bylaws would permit such indemnification.
We have obtained directors and officers' insurance providing indemnification for all of our directors, officers and employees for certain liabilities. Prior to closing of this offering we will enter into agreements to indemnify our directors and executive officers in addition to the indemnification provided for in our bylaws. These agreements, among other things, will indemnify our directors and executive officers for expenses, including attorneys' fees, judgments, fines and settlement amounts incurred by any such person in any action or proceeding, out of such person's services as a director, officer, employee, agent or fiduciary of ours, any subsidiary of ours or any other company or enterprise to which the person provides services at our request. We believe that these provisions and agreements are necessary to attract and retain qualified persons as directors and executive officers. At present, there is no litigation or proceeding involving any of our directors or officers in which indemnification is required or permitted, and we are not aware of any threatened litigation or proceeding that may result in a claim for indemnification.
EXECUTIVE COMPENSATION
The following table summarizes the compensation paid to or earned during the year ended December 31, 1999, by our Chief Executive Officer and our other mostly highly compensated executive officer whose total salary and bonus exceeded $100,000 for services rendered to us in all capacities during 1999. The executive officers listed in the table below are referred to as named executive officers.
SUMMARY COMPENSATION TABLE
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
---------------------- ----------------
SECURITIES
UNDERLYING
NAME AND PRINCIPAL POSITIONS SALARY ($) BONUS ($) OPTIONS (#)
---------------------------- ---------- --------- ----------------
William E. Rich, Ph.D.,
President and Chief Executive Officer and Director... 215,233 40,800 66,650
James H. Stanford,
Vice President and Chief Financial Officer(1)........ 176,191 24,302 --
|
(1) Mr. Stanford retired in June 2000.
OPTION GRANTS IN YEAR ENDED DECEMBER 31, 1999
The following table sets forth information concerning the individual grants of stock options to each of the named executive officers during the fiscal year ended December 31, 1999. The amounts listed in the following table under the heading "Exercise Price" were valued by our board of directors on the date of grant and were issued at estimated fair market value on the date of grant based upon the offering price herein and the purchase price paid by investors for shares of our preferred stock (taking
into account the liquidation preferences and other rights, priviliges and preferences associated with such preferred stock).
INDIVIDUAL GRANTS(1) POTENTIAL REALIZABLE
---------------------------------------------------- VALUE AT ASSUMED
PERCENT OF ANNUAL RATES OF
NUMBER OF TOTAL OPTIONS STOCK PRICE
SECURITIES GRANTED TO APPRECIATION
UNDERLYING EMPLOYEES EXERCISE FOR OPTION TERM(2)
OPTIONS IN FISCAL PRICE EXPIRATION -------------------------
NAME GRANTED (#) YEAR (%) ($/SH) DATE 5% ($) 10% ($)
---- ------------ ------------- -------- ---------- -------- ----------
William E. Rich, Ph.D...... 66,650 15 1.16 5/10/09 $854,651 $1,406,795
James H. Stanford.......... -- -- -- -- -- --
|
(1) All options were granted under our 1993 Stock Option Plan. Options granted to employees under the plan generally vest over a five-year period in equal monthly installments. Options granted to directors generally vest over 12 months. The board retains sole discretion to modify the terms, including the price, of outstanding options. Dr. Rich holds eight stock option grants totaling 905,150 shares. Options for 301,000 shares provide for simple five year vesting on a monthly basis. Options for 21,500 shares provided for immediate vesting upon grant. The other grants have a combination of five year vesting on a monthly basis and the possibility of partial or complete acceleration of vesting upon the occurrence of specified events.
(2) Amounts represent hypothetical gains that could be achieved for the respective options if exercised at the end of the option term based on the ten-year term of the option at the time of grant. These gains are based on assumed rates of stock price appreciation of 5% and 10% compounded annually from the date the respective options were granted to their expiration date based upon an assumed initial public offering price of $15.00 per share. These assumptions are not intended to forecast future appreciation of our stock price. The potential realizable value computation does not take into account federal or state income tax consequences of option exercises or sales of appreciated stock. The price to the public in this offering is higher than the estimated fair market value on the date of grant. Therefore, the potential realizable value of the option grants would be significantly higher than the calculations shown above.
AGGREGATE OPTION EXERCISES IN 1999
AND 1999 YEAR-END OPTION VALUES
The following table provides summary information concerning stock options granted under our 1993 Stock Option Plan during the year ended December 31, 1999, and exercised options subject to repurchase held as of December 31, 1999, by each of the named executive officers. The exercise price for the options granted in 1999 is $1.16 per share. Generally, these stock options are immediately exercisable. We have the right to repurchase all unvested shares at the original exercise price if the optionee's service terminates. Each of the options has a ten-year term, subject to earlier termination if the optionee's service terminates.
SHARES NUMBER OF SECURITIES VALUE OF SHARES
ACQUIRED VALUE SUBJECT TO REPURCHASE SUBJECT TO REPURCHASE
NAME ON EXERCISE REALIZED AT DECEMBER 31, 1999 (#) AT DECEMBER 31, 1999 ($)(1)
---- ----------- -------- -------------------------- -----------------------------
William E. Rich............... 66,650 -- 213,925 3,080,000
James H. Stanford............. -- -- 85,641 1,236,803
|
(1) There was no public trading market for our common stock as of December 31, 1999. Accordingly, the value of unexercised in-the-money options as of that date was calculated on the basis of an assumed initial public offering price of $15.00 per share, less the aggregate exercise price of the options. The securities subject to repurchase are all unvested options purchased under Early Exercise Stock Purchase Agreements.
EMPLOYEE BENEFIT PLANS
1993 STOCK OPTION PLAN
Our 1993 Stock Option Plan was adopted by our board of directors and
approved by our stockholders in December 1993. The 1993 Stock Option Plan
provides for the grant of incentive stock options intended to qualify under
Section 422 of the Internal Revenue Code and stock options that do not so
qualify. The granting of incentive stock options is subject to the limitations
set forth in the 1993 Stock Option Plan. Our directors, officers, employees and
consultants are eligible to receive grants under the 1993 Stock Option Plan. The
purpose of the 1993 Stock Option Plan is to promote the interests of us and our
stockholders by encouraging and enabling eligible employees and other persons
affiliated with us to acquire our stock. We believe that our granting of options
will stimulate the efforts of these persons, strengthen their desire to remain
with us, further align their interests with our success and assure a closer
identification between them and us.
The 1993 Stock Option Plan is administered by our board of directors, which, subject to the limitations on incentive stock options discussed above, has authority to determine the optionees, the number of shares covered by an option, the option exercise price, the term of the option, the vesting schedule and other terms and conditions. As of July 31, 2000, the 1993 Stock Option Plan, as amended, provided for the grant of options covering up to 3,321,750 shares of common stock. If an option expires, terminates, becomes unexercisable or is forfeited during the term of the 1993 Stock Option Plan without having been exercised in full, the shares subject to the unexercised portion of such plan will again be available for grant pursuant to the 1993 Stock Option Plan.
As of July 31, 2000, options for a total of 1,542,603 shares of common stock were outstanding under the 1993 Stock Option Plan. In addition, 1,664,844 shares of common stock have been purchased under the 1993 Stock Option Plan pursuant to exercises of options. A total of 114,300 shares remain available for issuance under the 1993 Stock Option Plan.
401(K) PLAN
We have established a tax-qualified employee savings and retirement plan, or
401(k) Plan, which covers all of our full-time U.S. employees who have completed
at least three months of service. Under the 401(k) Plan, eligible employees may
defer up to 20% of their pre-tax-earnings, subject to the Internal Revenue
Service's annual contribution limit. The 401(k) Plan permits additional
discretionary matching contributions by us on behalf of all participants in the
401(k) Plan in such a percentage amount as may be determined annually by the
Advisory Committee. The Advisory Committee has the responsibility of making all
discretionary determinations under the 401(k) Plan. The 401(k) Plan is intended
to qualify under Section 401 of the Internal Revenue Code so that contributions
by us to the 401(k) Plan, if any, will be deductible by us when made. The
Trustee under the 401(k) Plan invests the account balance under the plan in
accordance with an employee's written direction. To the extent an employee
directs the investment of his or her account balance under the plan, ERISA
relieves the Trustee from liability for any loss resulting from employee
direction of the investment.
EMPLOYMENT AGREEMENTS
We entered into an employment agreement, dated August 24, 2000, with William E. Rich, our President and Chief Executive Officer. The agreement provides for the acceleration of vesting of 100% of the options granted to Dr. Rich and severance pay equal to 12 months' pay in the event we are acquired by another company or group of investors and Dr. Rich's employment is terminated within 12 months thereof for reasons other than gross misconduct, Dr. Rich receives a cut in pay or responsibilities, or Dr. Rich is required to move beyond reasonable commuting distance from his home.
CERTAIN TRANSACTIONS
We have issued since our inception through July 31, 2000, in private placement transactions (collectively, the "Private Placement Transactions"), shares of preferred stock as follows: an aggregate of 1,313,392 shares of Series A preferred stock at $1.16 per share in February and July 1994, an aggregate of 2,827,231 shares of Series B preferred stock at $2.33 per share in March 1995, July 1996, March 2000, April 2000 and June 2000, an aggregate of 1,276,290 shares of Series C preferred stock at $3.48 per share in April 1997, March 1998 and March 2000, an aggregate of 2,957,738 shares of Series D preferred stock at $4.65 per share in July and September 1998, January 1999, March 2000 and April 2000, and an aggregate of 4,531,123 shares of Series E preferred stock at $6.40 per share in March 2000. In addition, an aggregate of 66,113 warrants to purchase shares of preferred stock issued in 1996 and 1998 remain outstanding and will expire upon the initial public offering.
Each share of preferred stock is convertible, without payment of additional consideration, into one share of common stock, and all of the 12,905,777 shares of preferred stock shall be converted into 12,905,777 shares of common stock upon closing of this offering.
The following table summarizes the shares of preferred stock purchased by our greater than 5% stockholders, our directors and our executive officers in private placement transactions:
SERIES A SERIES B SERIES C SERIES D SERIES E
PREFERRED PREFERRED PREFERRED PREFERRED PREFERRED
INVESTOR(1) STOCK STOCK STOCK STOCK STOCK
----------- --------- --------- --------- --------- ---------
DIRECTORS AND EXECUTIVE OFFICERS
John A. Young............................. 43,000 -- 131,053 55,739 41,605
William R. Green, Ph.D.................... -- 86,000 52,344 -- 22,059
William E. Rich, Ph.D..................... -- 107,500 28,940 -- --
Daniel Vapnek, Ph.D....................... 21,500 43,000 -- -- 11,677
MDS Capital Corporation(2)................ -- -- -- 1,075,000 194,638
ENTITIES AFFILIATED WITH DIRECTORS
S.R. One, Ltd.(3)......................... 591,533 749,788 288,719 89,183 156,323
Atlas Venture(4).......................... -- -- -- -- 1,632,684
Stanford Research Systems, Inc.(5)........ -- 738,412 -- -- 129,024
Falcon Technology Partners(6)............. 322,427 630,453 608,247 282,023 312,727
Lenita Rich (IRA)(7)...................... -- -- -- 21,548 4,679
Diana Young(8)............................ -- 35,832 -- -- 11,677
Gregory Young(8).......................... -- 35,832 -- -- 11,677
John Peter Young(8)....................... -- 35,832 -- -- 11,677
China Development Industrial Bank(9)...... -- -- -- -- 44,672
Central Investment Holding(9)............. -- -- -- -- 44,672
Bank Sinopac(9)........................... -- -- -- -- 44,672
First Bio Venture Capital
Corporation(9).......................... -- -- -- -- 22,343
5% STOCKHOLDERS
William E. Rich, Ph.D..................... -- 107,500 28,940 -- --
MDS Capital Corporation................... -- -- -- 1,075,000 194,638
S.R. One, Ltd............................. 591,533 749,724 288,719 89,183 156,363
Atlas Venture............................. -- -- -- -- 1,632,684
Falcon Technology Partners................ 322,427 630,453 608,312 282,023 312,727
T. William Hutchens, Ph.D................. -- -- -- -- --
Tai-Tung Yip, Ph.D........................ -- -- -- -- --
|
(1) See "Principal Stockholders" for more detail on shares held by these purchasers.
(2) Michael J. Callaghan, a director, is a Senior Vice President of MDS Capital Corporation.
(3) Barbara J. Dalton, Ph.D., a director, is a Vice President of S.R. One, Ltd.
(4) Jean-Francois Formela, M.D., a director, is a General Partner of Atlas Venture.
(5) William R. Green, Ph.D, a director, is President and Chief Executive Officer of Stanford Research Systems, Inc.
(6) James L. Rathmann, a director, is President of Falcon Technology Partners.
(7) William E. Rich, Ph.D., President and Chief Executive Officer and a director, is the spouse of Lenita Rich.
(8) John A. Young, Chairman of the board of directors, is the father of Diana, Gregory and John Peter Young.
(9) China Development Industrial Bank, Central Investment Holding, Bank Sinopac and First Bio Venture Capital Corporation are limited partners of MDS Capital Corporation, of which Michael J. Callaghan, a director, is Senior Vice President.
Since our inception, we have issued, in conjunction with the issuance of certain convertible promissory notes (all of which have been converted) in private placement transactions and in conjunction with other financing transactions, warrants to purchase shares of preferred stock as follows: an aggregate of 23,392 shares of Series A preferred stock at $1.16 per share in December 1993 and September 1996, an aggregate of 169,277 shares of Series B preferred stock at $2.33 per share in March and October 1995 and January 1996, 16,512 shares of Series C preferred stock at $2.91 per share in April 1997, an aggregate of 19,350 shares of Series C preferred stock at $3.49 per share in September and November, 1997, an aggregate of 71,360 shares of Series D preferred stock at $4.65 per share in February, March and August 1998, and 63,053 shares of Series E preferred stock at $6.40 per share in March 2000. The following table summarizes the number of preferred stock warrants granted to greater than 5% stockholders, directors, executive officers and entities affiliated with our executive officers and directors in private placement transactions (including 22,932 Series A warrants exercised in 1998, 66,268 Series B warrants exercised in 1999 and 2000, 16,512 Series C warrants exercised in 2000 and 11,287 Series D warrants exercised in 2000, by those listed in this table):
SERIES A SERIES B SERIES C SERIES D
PRINCIPAL AMOUNT WARRANT WARRANT WARRANT WARRANT
INVESTOR(1) OF NOTES SHARES SHARES SHARES SHARES
----------- ---------------- --------- --------- --------- ---------
S.R. One, Ltd............................. $1,721,683 22,932 59,792 -- 11,287
Falcon Technology Partners................ 1,250,784 -- 54,849 -- 9,675
William R. Green, Ph.D.................... 240,000 -- -- 16,512 --
John A. Young............................. 250,000 -- -- -- 8,062
|
(1) See "Principal Stockholders" for more detail on shares held by these purchasers.
In October 1996, September 1997 and June 2000, we issued an aggregate of 262,300 shares of Series B preferred stock to Stanford Research Systems, Inc., or SRS, upon achievement of product development milestones under a joint development agreement with SRS entered into in February 1995 and amended in June 2000. In connection with the agreement, SRS may be entitled to receive up to 210,700 additional shares of Series B preferred stock upon the achievement of additional milestones in the development of electronic subassemblies aimed primarily at cost reduction of our ProteinChip Reader. We expect SRS to achieve these milestones within the next 24 months and to award the full 210,700 shares to SRS.
In February 1997, Dr. Green loaned us $240,000 evidenced by a promissory note. In connection with the loan, we issued Dr. Green a warrant to purchase 16,512 shares of Series C preferred stock at an exercise price of $2.91 per share. The loan was fully repaid on March 3, 2000.
In April 1997, we entered into an agreement to acquire all of the outstanding capital stock of IllumeSys Pacific, Inc. Under the agreement, we issued an aggregate of 4,227,534 shares of our common stock to IllumeSys shareholders, including 2,916,998 shares of common stock to Dr. Hutchens.
In January 1998, the William E. Rich family loaned us $100,000 pursuant to a senior promissory note. The note accrued interest at a rate of 8 1/2% per annum. On March 26, 1998, we issued 28,940 shares of Series C preferred stock to the William E. Rich IRA at $3.49 per share and we repaid the outstanding principal balance and accrued interest on the note on March 31, 1998.
In February 1998, we agreed with Ciphergen Technologies, Inc., or CTI, that we would acquire the 95% of the capital stock of CTI we did not then own in exchange for 462,250 shares of our common stock. The consummation of the acquisition was concurrent with the first closing of the Series D preferred stock offering on July 28, 1998. Drs. Hutchens and Yip were the principal shareholders of CTI.
In March 1998, Mr. Stanford and Drs. Rich, Hutchens and Yip exercised incentive stock options totaling 827,750 shares with five-year promissory notes totaling $296,250. In May 1998, Mr. Stanford exercised an incentive stock option for 43,000 shares with a $50,000 five-year promissory note. In December 1998, a $200,000, five-year promissory note was executed by Dr. Rich, secured by his personal residence. In September 1999, Dr. Rich entered into a five-year promissory note for $47,548, which represented a renewal of a $35,000 promissory note of September 1994 plus accumulated interest. In November 1998, a $30,000, five year promissory note was executed by Dr. Rich, representing renewal of a $30,000, four year promissory note executed by Dr. Rich in November 1994.
In September 1999, Dr. Rich exercised an incentive stock option for 66,650 shares with a $77,500, five-year promissory note. In March 2000, Dr. Rich exercised an incentive stock option for 86,000 shares with a $300,000 five-year promissory note.
From June 1996 to March 1999, SRS provided space to us at no charge so that we could begin manufacturing operations of our ProteinChip Reader. SRS charged us on an hourly basis for the use of SRS purchasing personnel who ordered materials from vendors for ProteinChip Reader production. SRS charged us the suppliers' prices without markup and invoiced us monthly. In March 1999, we relocated our manufacturing operations to our former Palo Alto headquarters and instituted direct purchases of materials. SRS continues as a supplier of certain components of our ProteinChip Reader but no longer purchases from other suppliers for us. We believe that the price and quality of products made and supplied by SRS are competitive with available alternatives. From June 1996 to September 1999, we paid SRS $2.4 million for externally purchased parts, SRS staff time and SRS manufactured parts.
Our SELDI technology was acquired via royalty-bearing sub-licenses. The technology was developed by Drs. Hutchens and Yip when they were employed at the Baylor College of Medicine. Several patent applications have been filed under the names of Drs. Hutchens and Yip and assigned to Baylor.
In 1993, Molecular Analytical Systems, or MAS, owned primarily by Drs. Hutchens and Yip, obtained an exclusive worldwide license to the SELDI technology from Baylor. In 1997, MAS granted an exclusive sub-license for a broad range of applications in the life science research market to IllumeSys Pacific, Inc., or IPI, and an exclusive sub-license for a broad range of applications in other life science markets, including clinical diagnostics and consumer products, to ISP Acquisition Corporation, later re-named Ciphergen Technologies, Inc., or CTI. Exclusive rights for a broad range of applications in the field of therapeutic drug discovery were shared between IPI and CTI.
In April 1997, we acquired 100% of the stock of IPI and 5% of the stock of CTI. In July 1998, we acquired the remaining 95% of the stock of CTI concurrent with the first closing of the Series D preferred stock offering. MAS retained for itself rights to SELDI for non-life science applications and
for life science applications that do not involve biological or bioanalytical measurements or assays performed in laboratories or laboratory environments.
We entered into an employment agreement, dated April 7, 1997, with Tai-Tung Yip, our Director of Research. The agreement expired on April 6, 2000.
We believe the foregoing transactions were in our best interests. It is our policy that future transactions with affiliates, including any loans we make to our officers, directors, principal stockholders or other affiliates will be on terms no less favorable to us than we could have obtained from unaffiliated third parties. These transactions will be approved by a majority of our board of directors, including a majority of the independent and disinterested members, or, if required by law, a majority of our disinterested stockholders.
PRINCIPAL STOCKHOLDERS
The following table sets forth information regarding the beneficial ownership of our common stock as of July 31, 2000, and as adjusted to reflect the sale of common stock offered hereby for:
- each person known by us to own beneficially more than 5% of our common stock;
- each of our directors;
- our Chief Executive Officer and our other most highly compensated executive officer; and
- our executive officers and directors as a group.
Except as otherwise noted, the address of each person listed in the table is c/o Ciphergen Biosystems, Inc., 6611 Dumbarton Circle, Fremont, California, 94555. The table includes all shares of common stock issuable within 60 days of July 31, 2000, upon the exercise of options and warrants beneficially owned by the indicated stockholders on that date based on options and warrants outstanding as of July 31, 2000. Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and includes voting and investment power with respect to shares. To our knowledge, except under applicable community property laws or as otherwise indicated, the persons named in the table have sole voting and sole investment control with respect to all shares beneficially owned. The applicable percentage of ownership for each stockholder is based on 20,130,638 shares of common stock outstanding as of July 31, 2000, in each case together with applicable options and warrants for that stockholder. Shares of common stock issuable upon exercise of options and warrants beneficially owned are deemed outstanding for the purpose of computing the percentage of ownership of the person holding those options and warrants, but are not deemed outstanding for computing the percentage ownership of any other person.
PERCENT BENEFICIALLY
OWNED(1)
SHARES ---------------------
BENEFICIALLY BEFORE AFTER
BENEFICIAL OWNER OWNED OFFERING OFFERING
---------------- ------------ --------- ---------
T. William Hutchens ........................................ 3,235,951 16.1%
132 Palmer Avenue
Mountain View, CA 94043
James L. Rathmann(2) ....................................... 2,261,231 11.2%
Falcon Technology Partners
600 Dorsett Road
Devon, PA 19333
Falcon Technology Partners ................................. 2,235,431 11.1%
600 Dorsett Road
Devon, PA 19333
Barbara J. Dalton(3) ....................................... 1,944,389 9.6%
S.R. One, Limited
Four Tower Bridge
200 Barr Harbor Drive, Suite 250
West Conshohocken, PA 19428
S.R. One, Limited .......................................... 1,944,389 9.6%
Four Tower Bridge
200 Barr Harbor Drive, Suite 250
West Conshohocken, PA 19428
|
PERCENT BENEFICIALLY
OWNED(1)
SHARES ---------------------
BENEFICIALLY BEFORE AFTER
BENEFICIAL OWNER OWNED OFFERING OFFERING
---------------- ------------ --------- ---------
Jean-Francois Formela(4) ................................... 1,632,684 8.1%
Atlas Venture
222 Berkeley Street
Boston, MA 02116
Atlas Venture .............................................. 1,632,684 8.1%
222 Berkeley Street
Boston, MA 02116
Tai-Tung Yip(5)............................................. 1,464,985 7.3%
William E. Rich(6).......................................... 1,416,119 6.9%
Michael J. Callaghan(7) .................................... 1,278,239 6.3%
MDS Capital Corporation
100 International Blvd.
Etobicoke, Ontario, Canada M9W 6J6
MDS Capital Corporation .................................... 1,278,239 6.3%
100 International Blvd.
Etobicoke, Ontario, Canada M9W 6J6
William R. Green(8) ........................................ 1,264,342 6.2%
Stanford Research Systems, Inc.
1290 D Reamwood Avenue
Sunnyvale, CA 94089
John A. Young(9) ........................................... 593,997 2.9%
3200 Hillview Avenue
Palo Alto, CA 94304
Daniel Vapnek(10) .......................................... 119,178 *
414 Plaza Rubio
Santa Barbara, CA 93103
All directors and executive officers as group (nine 10,510,178 50.4%
persons) (11).............................................
|
* less than one percent of outstanding shares
(1) Assumes total conversion of preferred stock into common stock and includes all shares of common stock issuable (as of July 31, 2000) upon the exercise of outstanding options (including unvested options) held by the above listed stockholders and upon the exercise of outstanding warrants held by the above listed stockholders. Except as otherwise noted, the persons named in the table have sole voting and investment power with respect to all shares of common stock owned by them, subject to community property laws where applicable.
(2) Includes 17,200 shares in the name of James L. Rathmann, a director, issuable upon exercise of stock options, 8,600 shares of common stock currently owned by Mr. Rathmann and 58,050 shares in the name of Falcon Technology Partners, of which Mr. Rathmann is a General Partner, issuable upon exercise of preferred stock warrants.
(3) Includes 25,800 shares in the name of S.R. One, Ltd. issuable upon exercise of stock options. Barbara Dalton, a director, is a Vice President of S.R. One.
(4) Jean-Francois Formela, a director, is a General Partner of Atlas Venture.
(5) Includes 6,272 shares issuable upon exercise of a stock option and 8,778 shares of common stock in the name of Christine Yip, an employee, who is Dr. Yip's spouse. Includes 13,975 shares subject to repurchase in the event of the termination of Dr. Yip's employment, as part of an early option exercise agreement.
(6) Includes 21,549 shares of Series D preferred stock and 4,680 shares of Series E preferred stock held in an Individual Retirement Account and 4,300 shares of common stock held by Lenita L. Rich, a former employee, who is Dr. Rich's spouse. Includes 258,000 shares issuable upon exercise of a stock option grant and 243,773 shares subject to repurchase in the event of employment termination, as part of an early option exercise agreement.
(7) Includes 8,600 shares issuable upon exercise of a stock option grant to Michael J. Callaghan. Includes shares owned by three funds affiliated with MDS Capital Corporation. Michael J. Callaghan, a director, is Senior Vice President of MDS Capital Corporation.
(8) Includes 210,700 shares of Series B preferred stock issuable upon completion of certain milestones under a product development agreement between Stanford Research Systems, Inc. and us. William R. Green, a director, is President and Chief Executive Officer of Stanford Research Systems, Inc. Also includes 1,433 shares subject to repurchase as part of an early stock exercise agreement.
(9) Includes 107,500 shares of Series B and 35,034 shares of Series E preferred stock and 86,000 shares of common stock, 1,433 shares of which are subject to repurchase as part of an early stock exercise agreement, which are in the names of Mr. Young's three adult children and 8,062 shares issuable upon the exercise of Series D preferred stock warrants. Also includes 86,000 shares issuable upon exercise of stock option granted to Mr. Young.
(10) Includes 43,000 shares issuable upon exercise of stock options.
(11) Includes 438,600 shares issuable upon exercise of stock options, 66,113 shares issuable upon exercise of preferred stock warrants, 210,700 shares of Series B preferred stock issuable upon completion of certain milestones by Stanford Research Systems, Inc. under a product development agreement between Stanford Research Systems, Inc. and us. A total of 260,614 shares are subject to repurchase in the event of employment termination as part of early option exercise agreements for an executive officer, an employee and two outside directors.
DESCRIPTION OF CAPITAL STOCK
GENERAL
Our Certificate of Incorporation, which will become effective upon the closing of this offering, authorizes the issuance of up to 80,000,000 shares of common stock, par value $0.001 per share, and 5,000,000 shares of preferred stock, par value $0.001 per share, the rights and preferences of which may be established from time to time by our board of directors. As of July 31, 2000, 7,158,748 shares of common stock were issued and outstanding and 12,971,890 shares of preferred stock, which includes 66,113 shares of preferred stock assumed to be issued upon exercise of warrants, convertible into 12,971,890 shares of common stock upon the completion of this offering were issued and outstanding. As of July 31, 2000, we had 131 common stockholders of record.
Immediately after the closing of this offering, we will have 25,130,638 shares of common stock outstanding, assuming no exercise of options to acquire 1,542,603 additional shares of common stock or warrants to purchase 57,600 additional shares of preferred stock convertible into 57,600 shares of common stock that are outstanding as of the date of this prospectus.
The description below gives effect to the filing of the Certificate of Incorporation and the adoption of the Amended and Restated Bylaws. The following summary is qualified in its entirety by reference to our Certificate and Amended and Restated Bylaws, copies of which are filed as exhibits to the registration statement of which this prospectus is a part.
COMMON STOCK
Each holder of common stock is entitled to one vote for each share on all matters to be voted upon by the stockholders and there are no cumulative voting rights. Subject to preferences to which holders of preferred stock issued after the sale of the common stock offered hereby may be entitled, holders of common stock are entitled to receive ratably such dividends, if any, as may be declared from time to time by the board of directors out of funds legally available therefor. In the event of a liquidation, dissolution or winding up of us, holders of common stock would be entitled to share in our assets remaining after the payment of liabilities and the satisfaction of any liquidation preference granted the holders of any outstanding shares of preferred stock. Holders of common stock have no preemptive or conversion rights or other subscription rights and there are no redemption or sinking fund provisions applicable to the common stock. All outstanding shares of common stock are, and the shares of common stock offered by us in this offering, when issued and paid for will be, fully paid and nonassesable. The rights, preferences and privileges of the holders of common stock are subject to, and may be adversely affected by, the rights of the holders of shares of any series of preferred stock which we may designate in the future.
PREFERRED STOCK
Upon the closing of this offering, our board of directors will be authorized, subject to any limitations prescribed by law, without stockholder approval, to issue from time to time up to an aggregate of 5,000,000 shares of preferred stock, in one or more series, each of such series to have such rights and preferences, including voting rights, dividend rights, conversion rights, redemption privileges and liquidation preferences as shall be determined by the board of directors. The rights for the holders of common stock will be subject to, and may be adversely affected by, the rights of holders of any preferred stock that may be issued in the future. Issuance of preferred stock, while providing desirable flexibility in connection with possible acquisitions and other corporate purposes, could have the effect of making it more difficult for a third party to acquire, or of discouraging a third party from attempting to acquire, a majority of the outstanding voting stock of us. We have no present plans to issue any shares of preferred stock.
WARRANTS
We have issued and outstanding warrants to purchase an aggregate of 57,600 shares of our preferred stock convertible into 57,600 shares of common stock, excluding warrants to purchase 66,113 shares which will expire without exercise prior to consummation of this offering, which are assumed included in preferred stock outstanding immediately prior to this offering.
REGISTRATION RIGHTS
The holders of Preferred Stock, certain holders of warrants to purchase preferred stock and certain holders of our common stock are parties with us to an Investor Rights Agreement, dated March 3, 2000, pursuant to which those holders have customary demand and piggyback registration rights with respect to the shares of common stock held or to be issued upon conversion or exercise of their preferred stock and warrants, respectively. In addition, the holders of Preferred Stock are entitled to receive quarterly and annual financial statements, subject to certain conditions and limitations. Copies of the Investor Rights Agreement setting forth such rights will be furnished to investors upon request.
DEMAND REGISTRATION
According to the terms of the Investors Rights Agreement, beginning six months after the closing of this offering, the holders of shares of common stock shall have the right to require us to register their shares with the Securities and Exchange Commission so that those shares may be resold to the public. To demand such a registration, holders who hold together an aggregate of at least 50% of the shares having registration rights must request that the registration statement register shares for an aggregate offering price of at least $5,000,000, net of underwriting discounts and commissions. We are not required to effect more than two demand registrations. We may defer the filing of a demand registration for a period of up to 120 days once in any 12-month period.
PIGGYBACK REGISTRATION
If we register in a public offering any of our securities, other than a registration relating solely to employee benefit plans or a registration relating solely to a Rule 145 transaction, the holders of demand registration rights will have the right to include their shares in the registration statement.
FORM S-3 REGISTRATION
At any time after we become eligible to file a registration statement on Form S-3, holders of shares of common stock having demand and piggyback registration rights may require us to file a Form S-3 registration. We are obligated to file only one Form S-3 registration statement in any 12-month period. We are also not obligated to file a Form S-3 within 180 days after any registered offering by us, except for a registration relating solely to employee benefit plans or a registration relating solely to a Rule 145 transaction. Further, the aggregate offering proceeds of the requested Form S-3 registration, before deduction of underwriting discounts and expenses, must be at least $1,000,000. We may defer one registration request in any 12-month period for 120 days.
The registration rights are subject to certain conditions and limitations, including the right of the underwriters of an offering to limit the number of shares of common stock to be included in the registration. We are generally required to bear the expenses of all registrations, except underwriting discounts and commissions. However, we will not pay for any expenses of any demand registration if the request is subsequently withdrawn by the holders requesting the demand registration. The investors rights agreement also contains our commitment to indemnify the holders of registration rights for losses attributable to statements or omissions by us incurred with registrations under the agreement. The registration rights terminate six years from the closing of this offering.
EFFECT OF CERTAIN PROVISIONS OF OUR CERTIFICATE OF INCORPORATION AND BYLAWS, AND THE DELAWARE ANTI-TAKEOVER LAW
Certain provisions of our Amended and Restated Certificate of Incorporation and Bylaws, which will become effective upon the closing of this offering, may have the effect of making it more difficult for a third party to acquire, or of discouraging a third party from attempting to acquire, control of us. Such provisions could limit the price that certain investors might be willing to pay in the future for shares of our common stock. Our Bylaws eliminate the right of stockholders to call special meetings of stockholders or to act by written consent without a meeting and require advance notice for stockholder proposals and director nominations, which may preclude stockholders from bringing matters before an annual meeting of stockholders or from making nominations for directors at an annual meeting of stockholders. The authorization of undesignated preferred stock makes it possible for the Board of Directors to issue preferred stock with voting or other rights or preferences that could impede the success of any attempt to change control of us. These and other provisions may have the effect of deferring hostile takeovers or delaying changes in control or management of us. The amendment of any of these provisions would require approval by holders of at least 66 2/3% of our outstanding common stock. In addition, we are subject to Section 203 of the Delaware General Corporation which, subject to certain exceptions, prohibits a Delaware corporation from engaging in any business combination with any interested stockholder, unless:
- prior to such date, our Board of Directors approved either the business combination or the transaction which resulted in the stockholder becoming an interested stockholder;
- upon consummation of the transaction which resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of our voting stock outstanding at the time the transaction commenced, excluding for purposes of determining the number of shares outstanding (a) shares owned by persons who are directors and also officers, and (b) shares owned by employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer; or
- on or subsequent to such date, the business combination is approved by our Board of Directors and authorized at an annual or special meeting of stockholders, and not by written consent, by the affirmative vote of at least 66 2/3% of the outstanding voting stock which is not owned by the interested stockholder.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common stock is Continental Stock Transfer and Trust Company.
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no market for our common stock, and we cannot assure you that a significant public market for the common stock will develop or be sustained after this offering. Future sales of substantial amounts of common stock, including shares issued upon exercise of outstanding options and warrants, in the public market following this offering could adversely affect market prices prevailing from time to time and could impair our ability to raise capital through the sale of our equity securities. As described below, no shares currently outstanding will be available for sale immediately after this offering.
SALES OF RESTRICTED SECURITIES
Upon completion of the offering, we will have outstanding an aggregate of 25,130,638 shares of common stock, assuming no exercise of the underwriters' over-allotment option and no exercise of outstanding options or outstanding warrants after July 31, 2000. Of these outstanding shares, the 5,000,000 shares sold in the offering will be freely tradable without restriction or further registration under the Securities Act of 1933, unless purchased by our "affiliates" as that term is defined in Rule 144 under the Securities Act of 1933. The remaining 20,130,638 shares of common stock outstanding upon completion of the offering and held by existing stockholders will be "restricted securities" as that term is defined in Rule 144 under the Securities Act of 1933. Restricted shares may be sold in the public market only if registered or if they qualify for an exemption from registration under Rules 144, 144(k) or 701 promulgated under the Securities Act of 1933, which rules are summarized below, or another exemption. Sales of the restricted shares in the public market, or the availability of such shares for sale, could adversely affect the market price of the common stock. All officers, directors and certain other holders of common stock have entered into contractual "lock-up" agreements providing that they will not offer, sell, contract to sell or grant any option to purchase or otherwise dispose of shares of common stock owned by them or that could be purchased by them through the exercise of options or warrants for a period of 180 days after the date of this prospectus without the prior written consent of SG Cowen. As a result of these contractual restrictions, notwithstanding possible earlier eligibility for sale under the provisions of Rules 144, 144(k) and 701, additional shares will be eligible for sale beginning 181 days after the effective date of the offering, subject in some cases to certain volume limitations.
ELIGIBILITY OF RESTRICTED SHARES FOR SALE IN THE PUBLIC MARKET
At the effective date..................................... 0 shares 90 days after effective date.............................. 0 shares 181 days after effective date............................. 20,130,638 shares More than 181 days after effective date................... 0 shares |
RULE 144
In general, under Rule 144 as currently in effect, beginning 91 days after the date of this prospectus, a person, or persons whose shares are aggregated, who has beneficially owned restricted shares for at least one year, including persons who may be deemed to be our "affiliates," would be entitled to sell within any three-month period a number of shares that does not exceed the greater of:
- 1% of the number of shares of common stock then outstanding, which will equal approximately 251,306 shares immediately after the offering; or
- the average weekly trading volume of the common stock as reported through the Nasdaq National Market during the four calendar weeks preceding the filing of a Form 144 with respect to such sale.
Sales under Rule 144 are also subject to manner of sale provisions and notice requirements and to the availability of current public information about us. Under Rule 144(k), a person who is not deemed to have been our affiliate at any time during the 90 days preceding a sale, and who has beneficially owned for at least two years the restricted shares proposed to be sold, including the holding period of any prior owner except an affiliate, is entitled to sell such shares without complying with the manner of sale, public information, volume limitation or notice provisions of Rule 144.
RULE 701
Subject to certain limitations on the aggregate offering price of a transaction and other conditions, Rule 701 permits resales of shares issued prior to the date the issuer becomes subject to the reporting requirements of the Securities Exchange Act of 1934, pursuant to certain compensatory benefit plans and contracts commencing 90 days after the issuer becomes subject to the reporting requirements of the Securities and Exchange Act of 1933, in reliance upon Rule 144 but without compliance with certain restrictions, including the holding period requirements. In addition, the Securities and Exchange Commission has indicated that Rule 701 will apply to typical stock options granted by an issuer before it becomes subject to the reporting requirements of the Securities Exchange Act of 1934, along with the shares acquired upon exercise of such options, including exercises after the date the issuer becomes so subject. Securities issued in reliance on Rule 701 are restricted securities and, subject to the contractual restrictions described above, beginning 91 days after the date of this prospectus, may be sold by persons other than affiliates subject only to the manner of sale provisions of Rule 144 and by affiliates under Rule 144 without compliance with its one-year minimum holding period requirements.
LOCK-UP AGREEMENTS
The holders of % of our common stock, including all of our directors and executive officers, together with holders of options to purchase shares of common stock and the holders of warrants to purchase shares of common stock and preferred stock have entered into lock-up agreements under which they have agreed not to sell or otherwise dispose of any shares of common stock or any securities convertible into or exercisable or exchangeable for common stock, or enter into any swap or similar agreement that transfers, in whole or in part, the economic risk of ownership of the common stock, for a period of 180 days after the date of this prospectus. SG Cowen may, in its sole discretion, at any time without notice, release all or any portion of the shares subject to the lock-up agreements, which would result in more shares being available for sale in the public market at an earlier date.
We intend to file a registration statement under the Securities Act of 1933 covering the shares of common stock subject to outstanding options or reserved for issuance under the 1993 Stock Option Plan. We expect to file this registration statement within 90 days of effectiveness of the registration statement covering the shares of common stock in this offering and it will automatically become effective upon filing. Accordingly, shares registered under such registration statement will, subject to Rule 144 volume limitations applicable to affiliates and the expiration of a 180-day lock-up period, be available for sale in the open market, except to the extent that such shares are subject to our vesting restrictions or the contractual restrictions described above.
UNDERWRITING
Pursuant to the terms of an underwriting agreement dated , 2000, which is filed as an exhibit to the registration statement relating to this prospectus, the underwriters of the offering named below, for whom SG Cowen Securities Corporation, ING Barings LLC and UBS Warburg LLC are acting as representatives, have each agreed to purchase from us the respective number of shares of common stock set forth opposite its name below:
UNDERWRITERS NUMBER OF SHARES
------------ ----------------
SG Cowen Securities Corporation.............................
ING Barings LLC.............................................
UBS Warburg LLC.............................................
---------
Total..................................................... 5,000,000
=========
|
The underwriting agreement provides that the underwriters' obligations to purchase shares of common stock depend on the satisfaction of the conditions contained in the underwriting agreement, and that if any of the shares of common stock are purchased by the underwriters under the underwriting agreement, then all of the shares of common stock which the underwriters have agreed to purchase under the underwriting agreement must be purchased. The conditions contained in the underwriting agreement include the requirement that the representations and warranties made by us to the underwriters are true, that there is no material change in the financial markets and that we deliver to the underwriters customary closing documents.
We have granted to the underwriters an option to purchase up to an aggregate of 750,000 additional shares of common stock, exercisable solely to cover over-allotments, if any, at the public offering price less the underwriting discounts and commissions shown on the cover page of this prospectus. The underwriters may exercise this option at any time until 30 days after the date of the underwriting agreement. If this option is exercised, each underwriter will be committed, so long as the conditions of the underwriting agreement are satisfied, to purchase a number of additional shares of common stock proportionate to the underwriter's initial commitment as indicated in the preceding table and we will be obligated, under the over-allotment option, to sell the shares of common stock to the underwriters.
The underwriters propose to offer the common stock directly to the public at the public offering price set forth on the cover page of this prospectus. The underwriters may offer the common stock to securities dealers at that price less a concession not in excess of $ per share. Securities dealers may reallow a concession not in excess of $ per share to other dealers. After the shares of common stock are released for sale to the public, the underwriters may vary the offering price and other selling terms from time to time.
The following table shows the per share and total underwriting discounts and commissions to be paid to the underwriters by us. These amounts are shown assuming both no exercise and full exercise of the underwriters' option to purchase 750,000 additional shares described below.
WITHOUT
PER SHARE OPTION WITH OPTION
--------- ------------ -----------
Public offering price.....................
Underwriting discount.....................
Proceeds, before expenses, to Ciphergen...
|
We estimate that the total expenses of the offering, excluding underwriting discounts and commissions, will be approximately $1.5 million.
We have agreed to indemnify the underwriters against liabilities, including liabilities under the Securities Act of 1933 and liabilities arising from breaches of the representations and warranties contained in the underwriting agreement, and to contribute to payments that the underwriters may be required to make for these liabilities.
We, our executive officers and directors and certain of our other stockholders have agreed not to directly or indirectly do any of the following, whether any transaction described in clause (1) or (2) below is to be settled by delivery of common stock or other securities, in cash or otherwise, in each case without the prior written consent of SG Cowen on behalf of the underwriters, for a period of 180 days after the date of this prospectus:
(1) offer, sell or otherwise dispose of, or enter into any transaction or arrangement which is designed or could be expected to, result in the disposition or purchase by any person at any time in the future of, any shares of common stock or securities convertible into or exchangeable for common stock or substantially similar securities, other than any of the following:
- the common stock sold under this prospectus
- shares of common stock we issue under employee benefit plans, qualified stock option plans or other employee compensation plans existing on the date of this prospectus or under currently outstanding options, warrants or rights
(2) sell or grant options, rights or warrants with respect to any shares of our common stock or securities convertible into or exchangeable for our common stock or substantially similar securities, other than the grant of options under option plans existing on the date hereof
The underwriters have informed us that they do not intend to confirm sales to discretionary accounts that exceed five percent of the total number of shares of common stock offered by them.
We have applied for inclusion of our common stock on the Nasdaq National Market under the symbol "CIPH", subject to official notice of issuance.
Prior to the offering, there has been no public market for the shares of our common stock. The initial public offering price will be negotiated between the representatives and us. In determining the initial public offering price of the common stock, the representatives will consider, among other things and in addition to prevailing market conditions, our historical performance and capital structure, estimates of our business potential and earnings prospects, an overall assessment of our management and the consideration of the above factors in relation to market valuation of companies in related businesses.
Until the distribution of the common stock is completed, rules of the Securities and Exchange Commission may limit the ability of the underwriters and selling group members to bid for and purchase shares of common stock. As an exception to these rules, the representatives are permitted to engage in transactions that stabilize the price of the common stock. These transactions may consist of bids or purchases for the purpose of pegging, fixing or maintaining the price of common stock.
The underwriters may create a short position in the common stock in connection with the offering, which means that they may sell more shares than are set forth on the cover page of this prospectus. If the underwriters create a short position, then the representatives may reduce that short position by purchasing common stock in the open market. The representatives also may elect to reduce any short position by exercising all or part of the over-allotment option.
The representatives also may impose a penalty bid on underwriters and selling group members. This means that if the representatives purchase shares of common stock in the open market to reduce the underwriters' short position or to stabilize the price of the common stock, they may reclaim the
amount of the selling concession from the underwriters and selling group members who sold those shares as part of the offering.
In general, purchases of a security for the purpose of stabilization or to reduce a syndicate short position could cause the price of the security to be higher than it might otherwise be in the absence of those purchases. The imposition of a penalty bid might have an effect on the price of a security to the extent that it was to discourage resales of the security by purchasers in an offering.
Neither we nor any of the underwriters make any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the price of the common stock. In addition, neither we nor any of the underwriters make any representation that the representatives will engage in these transactions or that these transactions, once commenced, will not be discontinued without notice.
At our request, the underwriters have reserved up to 15% shares of the common stock offered by this prospectus for sale to our directors and to our business associates at the initial public offering price set forth on the cover page of this prospectus. These persons must commit to purchase no later than the close of business on the day following the date of this prospectus. The number of shares available for sale to the general public will be reduced to the extent these persons purchase the reserved shares.
SG Cowen Securities Corporation owns 63,053 shares of our Series E preferred stock. The shares of Series E preferred stock will convert into an equal number of shares of common stock upon completion of the initial public offering.
Certain of the representatives and their affiliates have in the past, and may in the future, provide investment banking, financial advisory and other services to us for which these representatives receive customary fees and commissions.
LEGAL MATTERS
The validity of the common stock offered hereby will be passed upon for us by Wilson Sonsini Goodrich & Rosati, P.C., Palo Alto, California. Certain legal matters in connection with this offering will be passed upon for the underwriters by Brobeck, Phleger & Harrison LLP, Palo Alto, California.
EXPERTS
Our consolidated financial statements as of December 31, 1998 and 1999, and for each of the three years in the period ended December 31, 1999 included in this prospectus have been so included in reliance on the report of PricewaterhouseCoopers LLP, independent accountants, given on the authority of said firm as experts in auditing and accounting.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We have filed with the SEC a registration statement on Form S-1 under the Securities Act, and the rules and regulations promulgated thereunder, with respect to the shares of common stock offered by this prospectus. This prospectus, which constitutes part of the registration statement, does not contain all of the information set forth in the registration statement and the exhibits thereto. Statements contained in this prospectus as to the contents of any contract or other document that is filed as an exhibit to the registration statement are not necessarily complete and each such statement is qualified in all respects by reference to the full text of such contract or document.
You may read and copy all or any portion of the registration statement and the exhibits at the SEC's public reference room at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the regional offices of the SEC located at Seven World Trade Center, Suite 1300, New York, New York 10048 and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. You can request copies of these documents, upon payment of a duplication fee, by writing to the SEC. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the SEC's public reference rooms. Also, the SEC maintains a World Wide Web site on the Internet at http://www.sec.gov that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC.
As a result of this offering, we will become subject to the information and periodic reporting requirements of the Securities Exchange Act of 1934 and, in accordance therewith, will file periodic reports, proxy and information statements and other information with the SEC. These periodic reports, proxy and information statements and other information will be available for inspection and copying at the public reference facilities, regional offices and SEC's Web site referred to above.
CIPHERGEN BIOSYSTEMS, INC.
INDEX TO FINANCIAL STATEMENTS
PAGE
----
Report of Independent Accountants........................... F-2
Consolidated Balance Sheets................................. F-3
Consolidated Statements of Operations....................... F-4
Consolidated Statements of Stockholders' Deficit............ F-5
Consolidated Statements of Cash Flows....................... F-6
Notes to Consolidated Financial Statements.................. F-7
|
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
Ciphergen Biosystems, Inc.
The reverse stock split described in Note 14 to the consolidated financial statements has not been consummated at the date of our opinion. When it has been consummated, we will be in a position to furnish the following report:
"In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, of stockholders' deficit and of cash flows present fairly, in all material respects, the financial position of Ciphergen Biosystems, Inc. and its subsidiaries at December 31, 1998 and 1999, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1999, in conformity with accounting principles generally accepted in the United States. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States, which require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above."
San Jose, California
March 6, 2000, except for Note 14 for
which the date is August , 2000
CIPHERGEN BIOSYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
PRO FORMA
STOCKHOLDERS'
DECEMBER 31, EQUITY AT
------------------- JUNE 30, JUNE 30,
1998 1999 2000 2000
-------- -------- --------- -------------
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents................................. $ 7,002 $ 2,799 $ 24,027
Accounts receivable, net of allowance for doubtful
accounts of $40, $100 and $130 (unaudited)
respectively............................................ 692 680 1,623
Accounts receivable from related parties.................. 380 318 180
Inventories, net.......................................... 730 722 1,412
Prepaid expenses and other current assets................. 231 322 1,119
-------- -------- --------
Total current assets.................................. 9,035 4,841 28,361
Property and equipment, net................................. 791 867 3,855
Goodwill and other intangible assets, net................... 1,062 697 531
Notes receivable from related party......................... 256 261 280
Investment in joint venture................................. -- 156 131
Other long-term assets...................................... -- 22 153
-------- -------- --------
Total assets.............................................. $ 11,144 $ 6,844 $ 33,311
======== ======== ========
LIABILITIES, CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS'
EQUITY (DEFICIT)
Current liabilities:
Accounts payable.......................................... $ 452 $ 728 $ 1,596
Accounts payable to related party......................... 369 42 27
Accrued liabilities....................................... 740 931 3,406
Deferred revenue.......................................... 377 161 364
Deferred revenue from related parties..................... -- 134 31
Current portion of capital lease obligations.............. 52 121 243
Current portion of long-term debt......................... 429 366 255
Line of credit............................................ -- 825 --
-------- -------- --------
Total current liabilities............................. 2,419 3,308 5,922
Capital lease obligations, net of current portion........... 105 184 413
Long-term debt, net of current portion...................... 276 299 196
Deferred revenue............................................ -- 45 103
Deferred revenue from related parties....................... -- 252 236
-------- -------- --------
Total liabilities..................................... 2,800 4,088 6,870
-------- -------- --------
Commitments and contingencies (Note 6 and 14)
Convertible preferred stock, $0.001 par value,
Authorized: 13,869,067 shares
Issued and outstanding: 7,987,231 shares at
December 31, 1998, 8,230,755 shares at December 31,
1999 and 12,905,777 shares at June 30, 2000
(unaudited); none pro forma (unaudited)............... 24,264 25,339 53,215 $ --
-------- -------- -------- --------
(Liquidation value: $25,834 at December 31, 1999)
Preferred stock warrants (Notes 8 and 14)................. 355 355 568 --
-------- -------- -------- --------
Stockholders' equity (deficit):
Common stock, $0.001 par value,
Authorized: 25,800,000 shares
Issued and outstanding: 6,861,446 shares at
December 31, 1998, 6,852,893 shares at December 31,
1999 and 7,158,748 shares at June 30, 2000
(unaudited); 20,064,525 shares pro forma
(unaudited)........................................... 6 6 7 20
Additional paid-in capital................................ 5,952 9,816 25,862 79,632
Notes receivable from stockholders........................ (386) (488) (767) (767)
Deferred stock compensation............................... (1,308) (3,687) (14,650) (14,650)
Accumulated deficit....................................... (20,539) (28,585) (37,794) (37,794)
-------- -------- -------- --------
Total stockholders' equity (deficit).................. (16,275) (22,938) (27,342) $ 26,441
-------- -------- -------- ========
Total liabilities, convertible preferred stock and
stockholders' equity (deficit).................... $ 11,144 $ 6,844 $ 33,311
======== ======== ========
|
The accompanying notes are an integral part of these consolidated financial statements.
CIPHERGEN BIOSYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
------------------------------ -------------------
1997 1998 1999 1999 2000
-------- -------- -------- -------- --------
(UNAUDITED)
Revenue:
Product revenue............................. $ 1,283 $ 2,308 $ 4,128 $ 1,784 $ 3,188
Revenue from related parties................ -- 625 882 5 453
-------- ------- ------- ------- --------
Total revenue........................... 1,283 2,933 5,010 1,789 3,641
Cost of revenue:
Product revenue............................. 1,002 843 1,402 690 1,215
Revenue from related parties................ -- 225 306 2 296
-------- ------- ------- ------- --------
Total cost of revenue................... 1,002 1,068 1,708 692 1,511
-------- ------- ------- ------- --------
Gross margin............................ 281 1,865 3,302 1,097 2,130
-------- ------- ------- ------- --------
Operating expenses:
Research and development.................... 3,249 4,733 3,139 1,524 2,876
Sales and marketing......................... 1,315 2,662 4,989 2,416 3,553
General and administrative.................. 1,332 2,100 2,799 1,168 5,188
Amortization of intangible assets........... 164 279 365 183 167
-------- ------- ------- ------- --------
Total operating expenses................ 6,060 9,774 11,292 5,291 11,784
-------- ------- ------- ------- --------
Loss from operations.......................... (5,779) (7,909) (7,990) (4,194) (9,654)
Interest income............................... 15 175 245 143 553
Interest expense.............................. (236) (488) (179) (74) (95)
Other income (expense), net................... (5) 170 37 14 12
Equity in net loss of joint venture........... -- -- (159) (113) (25)
-------- ------- ------- ------- --------
Net loss...................................... (6,005) (8,052) (8,046) (4,224) (9,209)
Dividend related to beneficial conversion
feature of preferred stock.................. -- -- -- -- (27,228)
-------- ------- ------- ------- --------
Net loss attributable to common
stockholders................................ $ (6,005) $(8,052) $(8,046) $(4,224) $(36,437)
======== ======= ======= ======= ========
Net loss per share attributable to common
stockholders:
Basic and diluted........................... $ (2.07) $ (1.62) $ (1.26) $ (0.67) $ (5.53)
======== ======= ======= ======= ========
Shares used in computing net loss per share
attributable to common stockholders....... 2,903 4,970 6,397 6,306 6,585
======== ======= ======= ======= ========
Pro forma net loss per share attributable to
common stockholders (unaudited):
Basic and diluted........................... $ (0.55) $ (2.04)
======= ========
Shares used in computing pro forma net loss
per share attributable to common
stockholders.............................. 14,594 17,845
======= ========
|
The accompanying notes are an integral part of these consolidated financial statements.
CIPHERGEN BIOSYSTEMS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999 AND THE SIX MONTHS ENDED
JUNE 30, 2000
(IN THOUSANDS)
NOTES
COMMON STOCK ADDITIONAL RECEIVABLE DEFERRED
------------------- PAID-IN FROM STOCK ACCUMULATED
SHARES AMOUNT CAPITAL STOCKHOLDERS COMPENSATION DEFICIT TOTAL
-------- -------- ---------- ------------ ------------- ------------ --------
Balances, December 31, 1996........... 1,073 $ 1 $ 112 $ (35) $ -- $ (6,482) $ (6,404)
Issuance of common stock upon
conversion of note payable.......... 2 -- 1 -- -- -- 1
Issuance of common stock for
acquisition......................... 2,113 2 735 -- -- -- 737
Issuance of common stock for cash and
notes receivable.................... 59 -- 11 (5) -- -- 6
Issuance of common stock for
services............................ 497 -- 171 -- -- -- 171
Deferred stock compensation........... -- -- 830 -- (830) -- --
Amortization of deferred stock
compensation........................ -- -- -- -- 119 -- 119
Net loss.............................. -- -- -- -- -- (6,005) (6,005)
------ --- ------- ----- -------- -------- --------
Balances, December 31, 1997........... 3,744 3 1,860 (40) (711) (12,487) (11,375)
Issuance of common stock for
services............................ 1,667 2 1,693 -- -- -- 1,695
Issuance of common stock for cash and
notes receivable.................... 988 1 385 (346) -- -- 40
Issuance of common stock for
acquisition......................... 462 -- 537 -- -- -- 537
Deferred stock compensation........... -- -- 1,477 -- (1,477) -- --
Amortization of deferred stock
compensation........................ -- -- -- -- 880 -- 880
Net loss.............................. -- -- -- -- -- (8,052) (8,052)
------ --- ------- ----- -------- -------- --------
Balances, December 31, 1998........... 6,861 6 5,952 (386) (1,308) (20,539) (16,275)
Issuance of common stock for
services............................ 12 -- 14 -- -- -- 14
Issuance of common stock for cash and
notes receivable.................... 339 -- 366 (341) -- -- 25
Repurchase of common stock............ (359) -- (239) 239 -- -- --
Deferred stock compensation........... -- -- 3,723 -- (3,723) -- --
Amortization of deferred stock
compensation........................ -- -- -- -- 1,344 -- 1,344
Net loss.............................. -- -- -- -- -- (8,046) (8,046)
------ --- ------- ----- -------- -------- --------
Balances, December 31, 1999........... 6,853 6 9,816 (488) (3,687) (28,585) (22,938)
Issuance of common stock for cash and
notes receivable.................... 321 1 535 (300) -- -- 236
Issuance of common stock for
services............................ 2 -- 27 -- -- -- 27
Repurchase of common stock............ (17) -- (21) 21 -- -- --
Deferred stock compensation........... -- -- 14,509 -- (14,509) -- --
Amortization of deferred stock
compensation........................ -- -- -- -- 3,546 -- 3,546
Issuance of preferred stock and
warrants with beneficial conversion
feature............................. -- -- 27,228 -- -- -- 27,228
Dividend related to beneficial
conversion feature of preferred
stock............................... -- -- (27,228) -- -- -- (27,228)
Charge for accelerated vesting of
employee stock options.............. -- -- 996 -- -- -- 996
Net loss.............................. -- -- -- -- -- (9,209) (9,209)
------ --- ------- ----- -------- -------- --------
Balances, June 30, 2000 (unaudited)... 7,159 $ 7 $25,862 $(767) $(14,650) $(37,794) $(27,342)
====== === ======= ===== ======== ======== ========
|
The accompanying notes are an integral part of these consolidated financial statements.
CIPHERGEN BIOSYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
SIX MONTHS
YEARS ENDED DECEMBER 31, ENDED JUNE 30,
------------------------------ -------------------
1997 1998 1999 1999 2000
-------- -------- -------- -------- --------
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................................. $(6,005) $(8,052) $(8,046) $(4,224) $(9,209)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization........................... 748 1,041 945 422 498
Common stock issued for services........................ 171 1,695 14 10 27
Preferred stock issued for services..................... 275 83 -- -- 379
Amortization of deferred stock compensation and
accelerated vesting of stock options.................. 119 880 1,344 475 4,542
Amortization of debt discount........................... 18 229 19 9 4
Equity in net loss of joint venture..................... -- -- 159 113 25
Preferred stock issued in lieu of interest.............. -- 91 -- -- --
Provision for obsolete inventory........................ 134 117 5 21 66
Loss on disposal of fixed assets........................ 155 67 164 -- 192
Provision for doubtful accounts......................... -- 40 60 30 30
Changes in operating assets and liabilities:
Accounts receivable................................... 80 (725) (48) 707 (973)
Accounts receivable from related parties.............. -- (380) 62 (368) 138
Inventories........................................... (921) (545) 3 (155) (756)
Prepaid and other current assets...................... 167 (114) (91) 40 (797)
Other long-term assets................................ -- -- (22) (11) (131)
Accounts payable and accrued liabilities.............. 310 76 467 (861) 3,343
Accounts payable to related parties................... 123 246 (327) 354 (15)
Deferred revenue...................................... (3) 334 81 (128) 165
Deferred revenue from related parties................. -- -- 134 362 (23)
------- ------- ------- ------- -------
Net cash used in operating activities............... (4,629) (4,917) (5,077) (3,204) (2,495)
------- ------- ------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment........................ (426) (196) (602) (173) (3,076)
Issuance of notes receivable to related party............. -- (226) (19) (5) (19)
Investment in joint venture............................... -- -- (315) (315) --
------- ------- ------- ------- -------
Net cash used in investing activities............... (426) (422) (936) (493) (3,095)
------- ------- ------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Exercise of common stock options.......................... 6 40 39 10 236
Proceeds from issuance of preferred stock, net of issuance
costs................................................... 2,640 9,665 1,019 1,019 26,899
Exercise of preferred stock warrants...................... -- -- 56 -- 811
Principal payments on capital lease obligations........... -- -- (70) (25) (85)
Proceeds from long-term debt.............................. 2,183 2,742 467 346 --
Repayments of long-term debt.............................. (257) (522) (526) (251) (218)
Borrowing under line of credit............................ -- -- 2,554 499 --
Payments under line of credit............................. -- -- (1,729) -- (825)
------- ------- ------- ------- -------
Net cash provided by financing activities........... 4,572 11,925 1,810 1,598 26,818
------- ------- ------- ------- -------
Net increase (decrease) in cash and cash equivalents........ (483) 6,586 (4,203) (2,099) 21,228
Cash and cash equivalents, beginning of period.............. 899 416 7,002 7,002 2,799
------- ------- ------- ------- -------
Cash and cash equivalents, end of period.................... $ 416 $ 7,002 $ 2,799 $ 4,903 $24,027
======= ======= ======= ======= =======
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid............................................. $ 138 $ 174 $ 140 $ 55 $ 84
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING
ACTIVITIES:
Acquisition of property and equipment under capital
leases.................................................. $ -- $ 186 $ 218 $ -- $ 436
Common stock issued in exchange for fixed assets,
purchased technology and assumption of liabilities...... 737 -- -- -- --
Common stock issued in exchange for notes receivable from
stockholders............................................ 5 346 327 19 300
Preferred stock issued upon conversion of convertible
notes payable........................................... 5 4,000 -- -- --
Issuance of warrants in connection with notes payable..... 165 190 -- -- --
Common stock issued in acquisition of Ciphergen
Technologies, Inc....................................... -- 537 -- -- --
Repurchase of common stock for cancellation of note
receivable.............................................. -- -- 239 66 21
Dividend related to beneficial conversion feature of
preferred stock and warrants............................ -- -- -- -- 27,228
Issuance of warrants in connection with Series E preferred
stock................................................... -- -- -- -- 213
Conversion of accrued interest into stockholder note...... -- -- 14 -- --
Deferred stock compensation recognized on option grants... 830 1,477 3,723 1,143 14,509
|
The accompanying notes are an integral part of these consolidated financial statements.
CIPHERGEN BIOSYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
THE COMPANY
Ciphergen Biosystems, Inc. (the "Company") develops, manufactures and sells ProteinChip Systems, which consist of disposable ProteinChip Arrays, ProteinChip Readers and ProteinChip Software for life science researchers. These products are primarily sold to biologists at pharmaceutical and biotechnology companies and academic and government research laboratories.
INITIAL PUBLIC OFFERING
In February 2000, the Board of Directors authorized management of the Company to file a registration statement with the Securities and Exchange Commission permitting the Company to sell shares of its common stock to the public. If the initial public offering is closed under the terms presently anticipated, all of the convertible preferred stock outstanding will automatically convert into shares of common stock. Unaudited pro forma stockholders' equity, as adjusted for the assumed conversion of the preferred stock, is set forth on the balance sheets.
UNAUDITED INTERIM RESULTS
The accompanying interim consolidated financial statements for the six months ended June 30, 1999 and 2000, together with the related notes, are unaudited. The unaudited interim financial statements have been prepared on the same basis as the annual financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the Company's financial position and results of operations and cash flows for the six month periods ended June 30, 1999 and 2000.
BASIS OF PRESENTATION
The accompanying consolidated financial statements include the accounts of the Company and its three wholly-owned subsidiaries. All intercompany transactions have been eliminated in consolidation.
The Company reports its minority ownership interest in Ciphergen Biosystems, K.K., a joint venture, using the equity method of accounting. Intercompany profits have been eliminated in the consolidated financial statements.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
CERTAIN RISKS AND UNCERTAINTIES
The Company's products and services are currently concentrated in a single segment of the life science research field which is characterized by rapid technological advances and changes in customer requirements. The success of the Company depends on management's ability to anticipate or to respond quickly and adequately to technological developments in its industry, changes in customer requirements or industry standards. Any significant delays in the development or introduction of
CIPHERGEN BIOSYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) products or services could have a material adverse effect on the Company's business and operating results.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of certain of the Company's financial instruments including cash and cash equivalents and accounts payable approximate fair value due to their short maturities. Based on borrowing rates currently available to the Company for loans with similar terms, the carrying value of its debt obligations approximates fair value.
CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to a concentration of credit risk consist of cash and cash equivalents and accounts receivable. The Company's cash and cash equivalents as of December 31, 1999 were deposited with financial institutions in the United States and exceed federally insured amounts. The Company also maintains cash deposits with one bank in the United Kingdom. The Company has not experienced any losses on its deposits of cash and cash equivalents. The Company's accounts receivable are derived from sales made to customers located in the United States, Europe and Asia. The Company performs ongoing credit evaluations of its customers' financial condition and generally does not require collateral. The Company maintains an allowance for doubtful accounts based upon the expected collectibility of accounts receivable.
INVENTORIES
Inventories are stated at the lower of cost, using the average cost method, or market value.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost and depreciated on a straight-line basis over the estimated useful lives of the related assets, generally three to five years. Gains and losses upon asset disposal are reflected in operations in the year of disposition.
GOODWILL AND OTHER INTANGIBLE ASSETS
Intangible assets arose from the Company's acquisitions. Goodwill is being amortized on a straight-line basis over five years. Other intangible assets consist of acquired workforce, which is being amortized on a straight-line basis over its estimated useful life of three years.
LONG-LIVED ASSETS
Long-lived assets are reviewed for impairment when events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Recoverability is measured by comparison of the asset's carrying amount to future net undiscounted cash flows the assets are expected to generate. If such assets are considered to be impaired, the impairment to be recognized is measured by the
CIPHERGEN BIOSYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) amount by which the carrying amount of the assets exceeds the projected discounted future net cash flows arising from the assets.
REVENUE RECOGNITION
The Company recognizes revenue in accordance with Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements." Revenue from product sales is recognized upon product shipment provided no significant obligations remain and collections of the receivables are deemed probable. The Company recognizes revenue for ongoing customer service contracts ratably over the period of the service contract. Payments for service contracts are generally made in advance and are non-refundable. Licensing product and distribution rights are recognized ratably over the term of such agreements.
RESEARCH AND DEVELOPMENT COSTS
Research and development expenditures are charged to operations as incurred.
Software is an integral component to our product and is not sold separately except as part of ongoing customer service contracts. Software development costs incurred in the research and development of new products are expensed as incurred until technological feasibility is established. Development costs are capitalized beginning when technological feasibility has been established and ending when the software component is available for general release to customers. To date, products and upgrades have generally reached technological feasibility and have been released for sale at substantially the same time.
STOCK-BASED COMPENSATION
The Company accounts for its stock-based employee compensation arrangements in accordance with provisions of Accounting Principles Board Opinion No. 25 ("APB 25"), "Accounting for Stock Issued to Employees" and complies with the disclosure provisions of Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation." Under APB 25, unearned compensation expense is based on the difference, if any, on the date of the grant, between the fair value of the Company's stock and the exercise price. Unearned compensation is amortized and expensed in accordance with Financial Accounting Standards Board Interpretation No. 28. The Company accounts for stock issued to non-employees in accordance with the provisions of SFAS No. 123 and Emerging Issue Task Force No. 96-18, "Accounting for Equity Instruments that are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services."
INCOME TAXES
The Company accounts for income taxes under the liability method. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial statement and the tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to affect taxable income. A valuation allowance is established when necessary to reduce deferred tax assets to the amounts expected to be realized.
CIPHERGEN BIOSYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) COMPREHENSIVE INCOME
The Company has adopted the provisions of SFAS No. 130, "Reporting Comprehensive Income." This statement requires the disclosure of comprehensive income and its components in a full set of general-purpose financial statements. Comprehensive income is defined as net income (loss) plus revenues, expenses, gains, and losses that, under generally accepted accounting principles, are excluded from net income (loss). The Company's comprehensive income approximated net income for all periods presented.
FOREIGN CURRENCY TRANSLATION
The functional currency of the Company's foreign subsidiary is the U.S. dollar. All assets and liabilities denominated in foreign currency are translated into U.S. dollars at the exchange rate on the balance sheet date. Revenues, costs and expenses are translated at the average rates of exchange prevailing during the period. Gains and losses resulting from foreign currency translations and transactions are included in the consolidated statements of operations and have not been significant.
NET LOSS PER SHARE
Basic net loss per share attributable to common stockholders is computed by dividing net loss attributable to common stockholders for the period by the weighted average number of common shares outstanding during the period. Diluted net loss per share attributable to common stockholders is computed by dividing the net loss attributable to common stockholders for the period by the weighted average number of common and potential common shares outstanding during the period, if their effect is dilutive. Potential common shares include common stock subject to repurchase and incremental shares of common stock issuable upon the exercise of stock options and warrants and upon the conversion of convertible preferred stock.
The following table sets forth the computation of basic and diluted net loss per share attributable to common stockholders for the periods indicated (in thousands, except per share amounts):
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
------------------------------ -------------------
1997 1998 1999 1999 2000
-------- -------- -------- -------- --------
(UNAUDITED)
Numerator:
Net loss attributable to common
stockholders...................... $(6,005) $(8,052) $(8,046) $(4,224) $(36,437)
Denominator:
Weighted average common shares
outstanding....................... 3,015 5,621 6,750 6,683 7,045
Weighted average unvested common
shares subject to repurchase...... (112) (651) (353) (377) (460)
------- ------- ------- ------- --------
Denominator for basic and diluted
calculations...................... 2,903 4,970 6,397 6,306 6,585
======= ======= ======= ======= ========
Basic and diluted net loss per share
attributable to common
stockholders...................... $ (2.07) $ (1.62) $ (1.26) $ (0.67) $ (5.45)
======= ======= ======= ======= ========
|
CIPHERGEN BIOSYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The following table sets forth the potential shares of common stock that are not included in the diluted net loss per share attributable to common stockholders calculation above because to do so would be anti-dilutive for the periods indicated (in thousands):
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
------------------------------ -------------------
1997 1998 1999 1999 2000
-------- -------- -------- -------- --------
(UNAUDITED)
Effect of dilutive securities:
Convertible preferred stock
outstanding....................... 4,781 7,987 8,231 8,207 12,906
Common stock subject to
repurchase........................ 111 579 392 312 422
Stock options outstanding........... 936 439 561 747 1,545
Warrants outstanding................ 229 266 242 266 124
------- ------- ------- ------- --------
6,057 9,271 9,426 9,532 14,997
======= ======= ======= ======= ========
|
PRO FORMA STOCKHOLDERS' EQUITY AND PRO FORMA NET LOSS PER SHARE (UNAUDITED)
Immediately prior to the effective date of the offering, all of the convertible preferred stock outstanding will automatically convert into common stock at a one-to-one ratio. The pro forma effects of these transactions are unaudited and have been reflected in the accompanying Pro Forma Stockholders' Equity as of June 30, 2000.
Pro forma net loss per share attributable to common stockholders for the year ended December 31, 1999 and the six months ended June 30, 2000 is computed using the weighted average number of common shares outstanding including the pro forma effects of the automatic conversion of the Company's convertible preferred stock into shares of the Company's common stock effective upon the closing of the Company's initial public offering as if such conversion occurred on January 1, 1999, or at the date of original issue, if later. The resulting pro forma adjustment includes an increase in the weighted average shares used to compute basic net loss per share attributable to common stockholders of approximately 8,197,000 shares and 11,260,000 shares for the year ended December 31, 1999 and for the six months ended June 30, 2000, respectively. The calculation of pro forma diluted net loss per share attributable to common stockholders excludes incremental common stock issuable upon the exercise of stock options, warrants and common stock subject to repurchase as their effect would be anti-dilutive.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133 establishes new standards of accounting and reporting for derivative instruments and hedging activities. SFAS No. 133 requires that all derivatives be recognized at fair value in the statement of financial position, and that the corresponding gains or losses be reported either in the statement of operations or as a component of comprehensive income, depending on the type of relationship that exists. In July 1999, the Financial Accounting Standards Board issued SFAS No. 137, "Accounting for Derivative Instruments and Hedging Activities--Deferral of the Effective Date of FASB Statement No. 133." SFAS No. 137 deferred the effective date until fiscal years beginning after June 15, 2000. The Company has not engaged in significant hedging activities or invested in significant derivative instruments.
CIPHERGEN BIOSYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
In December 1999, the Securities and Exchange Commission ("SEC") issued Staff Accounting Bulletin ("SAB") 101, Revenue Recognition, which provides guidance on the recognition, presentation and disclosure on revenue in financial statements filed with the SEC. SAB 101 outlines the basic criteria that must be met to recognize revenue and provides guidance for disclosure related to revenue recognition policies. The Company believes that its current revenue recognition policy is in compliance with SAB 101.
In March 2000, the FASB issued Interpretation No. 44, "Accounting for
Certain Transactions Involving Stock Compensation--an Interpretation of APB 25"
("FIN 44"). This interpretation clarifies (a) the definition of employee for
purposes of applying APB 25, (b) the criteria for determining whether a plan
qualifies as a noncompensatory plan, (c) the accounting consequences of various
modifications to the terms of a previously fixed stock option or award, and
(d) the accounting for an exchange of stock compensation awards in a business
combination. This Interpretation is effective July 1, 2000, but certain
conclusions in this Interpretation cover specific events that occur after either
December 15, 1998, or January 12, 2000. To the extent that this Interpretation
covers events occurring during the period after December 15, 1998, or
January 12, 2000, but before the effective date of July 1, 2000, the effects of
applying this Interpretation are recognized on a prospective basis from July 1,
2000. The adoption of FIN 44 will not have a material impact on the Company's
financial statements.
2. BALANCE SHEET COMPONENTS (IN THOUSANDS)
DECEMBER 31,
------------------- JUNE 30,
1998 1999 2000
-------- -------- -----------
(UNAUDITED)
INVENTORY, NET:
Raw materials............................................. $ 434 $ 471 $ 676
Work in process........................................... 160 102 543
Finished goods............................................ 136 149 193
------ ------- -------
$ 730 $ 722 $ 1,412
====== ======= =======
PROPERTY AND EQUIPMENT:
Machinery and equipment................................... $1,032 $ 1,472
Computers and equipment................................... 254 304
Furniture and fixtures.................................... 193 241
------ -------
1,479 2,017
Less: Accumulated depreciation............................ (688) (1,150)
------ -------
$ 791 $ 867
====== =======
|
Property and equipment includes $186 and $402 of equipment under capital leases at December 31, 1998 and 1999, respectively. Accumulated amortization of assets under capital leases totaled $38 and $123 at December 31, 1998 and 1999, respectively.
DECEMBER 31,
-------------------
1998 1999
-------- --------
ACCRUED LIABILITIES:
Payroll and related expenses.............................. $ 391 $ 452
Royalties................................................. 31 49
Other accrued liabilities................................. 318 430
------ -------
$ 740 $ 931
====== =======
|
CIPHERGEN BIOSYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. INVESTMENT IN JOINT VENTURE
In January 1999, the Company entered into a joint venture agreement with a Japanese company to form a limited liability corporation, Ciphergen Biosystems, K.K., to be incorporated under the commercial code of Japan. The Company invested $315,000 in exchange for 30% ownership of the joint venture. The Company has no future funding commitments to Ciphergen Biosystem, K.K. Commencing after the fiscal year ending December 31, 2001, the Company has the option to purchase an aggregate of 40% of Ciphergen Biosystems, K.K. from its joint venture partner each year within 30 days of the receipt of the joint venture's audited financial statements. Such buyout option terminates automatically 30 days after the receipt of the joint venture's audited financial statements for the year ending December 31, 2004. The aggregate purchase price for the buyout option is the greatest of (i) 50,000,000 yen, (ii) 8% of the joint venture's net sales during the last fiscal year, or (iii) 40% of the joint venture's book value at the end of the last fiscal year. The Japanese investor is obligated to provide or arrange for working capital for the joint venture until the Company purchases the additional 40% ownership, at which time the joint venture must repay such financing and arrange its own working capital financing. The Company's proportionate share of the joint venture's losses were recorded in the statement of operations as non-operating losses. Approximately 11% of the Company's revenues for 1999 were from sales to the joint venture.
In connection with the joint venture agreement, the Company entered into a distribution and marketing agreement with the joint venture whereby the joint venture would distribute the Company's products in the life science research markets in Japan. In exchange for providing trading, technical support, equipment demonstrations and seminars, the Company received a non-refundable payment of approximately $315,000. Such payment is included in deferred revenue and is being recognized as other income over a 10-year period, the term of the joint venture agreement.
4. LONG-TERM DEBT (IN THOUSANDS)
DECEMBER 31,
-------------------
1998 1999
-------- --------
Notes payable to a financial institution, bearing interest
between 14.8% and 17.8% collateralized by equipment and
inventory, with principal and interest payable monthly
through May 2000.......................................... $264 $ 29
Notes payable to a financial institution, bearing interest
between 14.7% and 16.8%, collateralized by equipment, with
principal and interest payable through August 2002........ 326 584
Note payable to a related party, bearing interest at 18%,
collateralized by certain equipment, with principal and
interest payable monthly through March 2000............... 128 50
Note payable to a financial institution, bearing interest at
6%, collateralized by certain equipment, with principal
and interest payable monthly through November 2001........ 11 7
---- ----
729 670
Unamortized discounts related to stock warrants (Note 8).... (24) (5)
---- ----
705 665
Less: Current portion....................................... 429 366
---- ----
$276 $299
==== ====
|
The notes payable to financial institutions are subject to certain covenants, including restrictions on the payment of dividends and the sale of assets. At December 31, 1999, the Company was not in violation of any covenants.
CIPHERGEN BIOSYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. LONG-TERM DEBT (IN THOUSANDS) (CONTINUED)
Scheduled principal payments on notes payable at December 31, 1999 are as follows:
2000........................................................ $366
2001........................................................ 182
2002........................................................ 117
----
$665
====
|
5. LINE OF CREDIT
On June 23, 1999, the Company entered into a loan and security agreement with a bank for a line of credit. At December 31, 1999, the Company had $825,000 outstanding under a $1,500,000 revolving line of credit for which the borrowing base is equal to 80% of the Company's eligible domestic accounts receivable and 75% of the Company's eligible foreign accounts receivable as determined by the lender. The line of credit matures on June 22, 2000. (Note 14). Interest is calculated daily at 0.75% above the prime rate based on a 360 day year. The line is collateralized by accounts receivable and other assets of the Company. The Company is subject to certain covenants, including restrictions on dividend payments and maintenance of certain financial ratios. The Company was not in violation of any covenants at December 31, 1999.
6. COMMITMENTS
CAPITAL LEASES
The Company leases certain machinery and equipment under capital lease agreements with an independent finance company which expire through December 2002.
As of December 31, 1999, future minimum lease payments under capital lease agreements were as follows (in thousands):
2000........................................................ $ 158
2001........................................................ 126
2002........................................................ 84
-----
Total minimum lease payments................................ 368
Less: Amount representing interest.......................... (63)
-----
Present value of minimum lease payments..................... 305
Less: Current portion....................................... (121)
-----
Non-current portion......................................... $ 184
=====
|
OPERATING LEASES
The Company leases various equipment and two facilities in Palo Alto, California. The two facility leases originally expired in December 31, 1999, but were extended for an additional six months to June 30, 2000 (see Note 14). Under the terms of one of the facility leases, the Company is responsible for common area maintenance. Total rent expense under all leases was $204, $221 and $397 for the years ended December 31, 1997, 1998 and 1999, respectively.
CIPHERGEN BIOSYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. COMMITMENTS (CONTINUED) As of December 31, 1999, future minimum lease payments under the operating leases were as follows (in thousands):
2000........................................................ $238
2001........................................................ 6
2002 and thereafter......................................... 6
----
Total minimum lease payments................................ $250
====
|
7. STOCKHOLDERS' EQUITY (DEFICIT)
CONVERTIBLE PREFERRED STOCK
In February 1995, the Company entered into a joint development agreement that provides for the issuance of a total of 949,113 shares of Series B preferred stock. Under this agreement, 476,113 shares of Series B preferred stock at $2.33 per share were issued upon the closing of the Company's Series B financing in March 1995, 118,250 shares were issued in October 1996 upon the achievement of the first milestone, and 118,250 shares were issued in September 1997 upon the achievement of the second milestone. The remaining 236,500 shares will be issued upon the achievement of additional milestones.
At December 31, 1999, the amounts, terms and liquidation values of Series A, Series B, Series C and Series D convertible preferred stock were as follows (in thousands):
SHARES COMMON
ISSUED STOCK
SHARES AND RESERVED FOR LIQUIDATION
SERIES AUTHORIZED OUTSTANDING CONVERSION VALUE
------ ---------- ----------- ------------ -----------
A................................ 1,314 1,314 1,314 $ 1,527
B................................ 3,124 2,753 2,753 6,403
C................................ 1,295 1,260 1,260 4,395
D................................ 2,976 2,904 2,904 13,509
E................................ 5,160 -- -- --
------ ----- ----- -------
13,869 8,231 8,231 $25,834
====== ===== ===== =======
|
The rights, preferences and privileges of Series A, Series B, Series C and Series D preferred stock are as follows:
VOTING RIGHTS
Holders of Series A, Series B, Series C and Series D preferred stock are entitled to one vote for each share of common stock into which such shares can be converted. The holders of the outstanding shares of Series A and Series B preferred stock, voting as separate classes, are each entitled to elect two members to the Company's Board of Directors and the holders of the outstanding shares of Series D preferred stock, voting as a separate class, are entitled to elect one member to the Company's Board of Directors. Any remaining board members will be elected by the holders of common stock and the holders of preferred stock voting together as a single class.
CIPHERGEN BIOSYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. STOCKHOLDERS' EQUITY (DEFICIT) (CONTINUED) DIVIDENDS
The holders of Series A, Series B, Series C and Series D preferred stock are entitled to noncumulative dividends prior and in preference to any declaration or payment of any dividend on the common stock of the Company, in the amount of $0.09, $0.19, $0.28 and $0.37 per share per annum, respectively, as declared by the Board of Directors. No dividends had been declared as of December 31, 1999.
CONVERSION RIGHTS
Shares of Series A, Series B, Series C and Series D preferred stock are convertible into common shares at the option of the holder or automatically upon a public offering of at least $10,000,000 of common stock at an offering price of at least $6.98 per share or upon the written consent of the holders of more than 50% of the then outstanding shares of Series A, Series B, Series C or Series D preferred stock voting as separate classes. The conversion rate is one share of common stock for one share of preferred stock (subject to certain adjustments).
LIQUIDATION
In the event of liquidation or sale of the Company, Series A, Series B, Series C and Series D preferred stock have preference over common stock in the amount of $1.16, $2.33, $3.49 and $4.65, respectively, in addition to any declared and unpaid dividends. The remaining assets of the Company shall be distributed on a pro rata basis to the holders of Series A, Series B, Series C and Series D preferred stock and common stock until holders of Series A, Series B, Series C and Series D preferred stock have received an amount equal to $2.33, $4.65, $6.98 and $9.30 per share outstanding, respectively, including the preferences disclosed above, at which time the remaining assets shall be distributed on a pro rata basis to holders of common stock.
8. STOCK OPTIONS AND WARRANTS
STOCK OPTIONS
The Company has reserved 2,504,750 shares of common stock for sale to employees, directors and consultants under its 1993 Stock Option Plan (the "Plan"). Under the Plan, options may be granted at prices not lower than 85% and 100% of the fair market value of the common stock for nonstatutory and statutory stock options, respectively. Options are exercisable when granted and such unvested shares are subject to repurchase upon termination of employment. Should the employment of the holders of common stock subject to repurchase terminate prior to full vesting of the outstanding shares, the Company may repurchase all unvested shares at a price per share equal to the original exercise price. At December 31, 1999, a total of 391,873 shares of common stock were subject to repurchase by the Company at a weighted average price of $0.65 per share. Unexercised options generally expire ten years from the date of grant (five years for incentive stock options granted to holders of more than 10% of the Company's common stock).
CIPHERGEN BIOSYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. STOCK OPTIONS AND WARRANTS (CONTINUED) Activity under the Plan was as follows:
OPTIONS OUTSTANDING WEIGHTED
SHARES -------------------------------------- AVERAGE
AVAILABLE NUMBER OF PRICE PER AGGREGATE EXERCISE
FOR GRANT SHARES SHARE PRICE PRICE
---------- --------- ------------- ---------- --------
Balances, December 31, 1996......... 378,286 211,775 $0.12-$0.23 $ 41,250 $0.20
Shares reserved for the Plan...... 881,500
Options granted................... (848,986) 848,986 $0.23-$0.35 291,483 0.34
Options canceled.................. 65,610 (65,610) $0.12-$0.23 (12,087) 0.19
Options exercised................. -- (59,232) $0.12-$0.35 (11,546) 0.20
---------- --------- ------------- ---------- -----
Balances, December 31, 1997......... 476,410 935,919 $0.12-$0.35 309,100 0.33
Shares reserved for the Plan...... 182,750
Options granted................... (532,555) 532,555 $0.35-$1.16 382,000 0.72
Options canceled.................. 41,592 (41,592) $0.35-$1.16 (31,875) 0.76
Options exercised................. -- (987,873) $0.35-$1.16 (386,295) 0.39
---------- --------- ------------- ---------- -----
Balances, December 31, 1998......... 168,197 439,009 $0.12-$1.16 272,930 0.62
Shares reserved for the Plan...... 516,000
Options granted................... (504,605) 504,605 $1.16 586,750 1.16
Options canceled/shares
repurchased..................... 402,630 (43,940) $0.23-$1.16 (30,225) 0.69
Options exercised................. -- (338,287) $0.23-$1.16 (366,155) 1.08
---------- --------- ------------- ---------- -----
Balances, December 31, 1999......... 582,222 561,387 $0.12-$1.16 463,300 0.83
Shares reserved for the Plan...... 817,000
Options granted................... (1,367,830) 1,367,830 $3.49 4,771,500 3.49
Options canceled/shares
repurchased..................... 80,500 (62,168) $0.23-$3.49 (98,509) 1.58
Options exercised................. -- (322,037) $0.23-$3.49 (535,133) 1.66
---------- --------- ------------- ---------- -----
Balances, June 30, 2000
(unaudited)....................... 111,892 1,545,012 $0.12-$3.49 $4,601,158 $2.98
========== ========= ============= ========== =====
|
The options outstanding and currently exercisable by exercise price at December 31, 1999 were as follows:
OPTIONS OUTSTANDING AND EXERCISABLE
-------------------------------------
WEIGHTED
AVERAGE WEIGHTED
REMAINING AVERAGE
NUMBER CONTRACTUAL EXERCISE
EXERCISE PRICE OUTSTANDING LIFE PRICE
-------------- ----------- ----------- ---------
$0.12........................................ 17,200 4.2 years $0.12
$0.23........................................ 66,005 6.5 years $0.23
$0.35........................................ 135,235 7.5 years $0.35
$1.16........................................ 342,947 9.1 years $1.16
-------
561,387 $0.83
=======
|
CIPHERGEN BIOSYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. STOCK OPTIONS AND WARRANTS (CONTINUED)
FAIR VALUE DISCLOSURES
The Company applies the measurement principles of APB 25 in accounting for its stock option plans. Had compensation expense for options granted been determined based on fair value at the grant date as prescribed by SFAS No. 123, the Company's net loss per share attributable to common stockholders would have increased to the pro forma amounts indicated below:
YEARS ENDED DECEMBER 31,
------------------------------
1997 1998 1999
-------- -------- --------
Net loss attributable to common stockholders:
As reported..................................... $(6,005) $(8,052) $(8,046)
======= ======= =======
Pro forma....................................... $(6,217) $(8,256) $(8,481)
======= ======= =======
Basic and diluted net loss attributable to common
stockholder per share:
As reported..................................... $ (2.07) $ (1.62) $ (1.26)
======= ======= =======
Pro forma....................................... $ (2.14) $ (1.67) $ (1.33)
======= ======= =======
|
The value of each option grant is estimated on the date of grant using the minimum value method with the following weighted assumptions:
YEARS ENDED DECEMBER 31,
------------------------------------
1997 1998 1999
-------- -------- --------
Risk-free interest rate......................... 6.2% 5.4% 5.6%
Expected average life........................... 5 years 5 years 5 years
Expected dividends.............................. -- -- --
|
The expected average life is based on the assumption that stock options on average are exercised 5 years after they are granted. The risk-free interest rate was calculated in accordance with the grant date and expected average life. The weighted-average fair value of options granted during the years ended December 31, 1997, 1998 and 1999 was $0.070, $0.163 and $0.256 per share, respectively.
DEFERRED STOCK-BASED COMPENSATION
During the period from April 1997 through June 30, 2000, the Company recorded $20.3 million of deferred stock compensation in accordance with APB 25, SFAS 123 and Emerging Issues Task Force 96-18, related to stock options granted to consultants and employees. For options granted to consultants, the Company determined the fair value of the options using the Black-Scholes option pricing model with the following assumptions: expected lives of five years; weighted average risk-free rate between 5.4% and 6.2%; expected dividend yield of zero percent; volatility of 50% and deemed values of common stock between $0.70 and $14.67 per share. Stock compensation expense is being recognized in accordance with FIN 28, an accelerated amortization method, over the vesting periods of the related options, generally five years. The Company recognized stock compensation expense of $0.1 million, $0.9 million, $1.3 million and $3.5 million for the years ended December 31, 1997, 1998 and 1999 and the six months ended June 30, 2000, respectively.
CIPHERGEN BIOSYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. STOCK OPTIONS AND WARRANTS (CONTINUED)
The allocation of stock-based compensation expense by functional area was as follows (in thousands):
YEARS ENDED SIX MONTHS
DECEMBER 31, ENDED JUNE 30,
------------------------------ -------------------
1997 1998 1999 1999 2000
-------- -------- -------- -------- --------
Cost of revenue.......................... $ 1 $ 2 $ 39 $ 14 $ 72
Research and development................. 44 167 206 73 605
Sales and marketing...................... 5 33 476 168 527
General and administrative............... 69 678 623 221 2,342
---- ---- ------ ---- ------
Total stock-based compensation....... $119 $880 $1,344 $476 $3,546
==== ==== ====== ==== ======
|
WARRANTS
In 1995, the Company issued warrants with lives ranging from three to five years to four shareholders and eight-year warrants to an equipment financing company to purchase an aggregate 34,687 and 37,840 shares of Series B preferred stock, respectively, for $2.33 per share, the fair market value at the dates of grant. Of the 34,687 warrants, 10,750 expired in 1998 and the remaining 23,937 were exercised in 1999. During 1996, the Company issued five-year warrants to two shareholders to purchase an aggregate of 96,750 shares of Series B preferred stock for $2.33 per share, the fair market value at the date of grant. The value of the warrants using the Black-Scholes valuation model was not material.
In 1997, the Company issued warrants to purchase an aggregate of 8,600 shares of Series C preferred stock for $3.49 per share, the fair market value at the date of grant to an equipment lender. The warrants expire in September 2007. Also in 1997, the Company issued warrants to an equipment lender to purchase an aggregate 16,512 shares of Series C preferred shares for $2.91 per share. These warrants were exercised in March 2000. The Company also issued warrants to an accounts receivable lender to purchase an aggregate 10,750 shares of Series C preferred shares for $3.49 per share. The warrants expire in November 2004. The value of the warrants using the Black-Scholes valuation model was not material.
In 1998, the Company issued warrants to purchase an aggregate of 411 shares of Series D preferred stock for $4.65 per share, the fair market value at the date of grant to an equipment lender. The warrants expire in August 2008. Also in 1998, the Company issued five-year warrants in conjunction with the issuance of Series D preferred stock bridge loans, to purchase an aggregate 70,950 shares of Series D preferred stock for $4.65 per share. The warrants issued had a fair value of approximately $188,000 at the time of issuance, based on a calculation using the Black-Scholes valuation model. The fair value of these warrants is reflected as a discount on the debt and accreted as interest expense to be amortized over the life of the debt. The loans were converted to Series D in 1998 and their note discount was taken to interest expense. At December 31, 1999, 241,813 warrants were outstanding to purchase 134,590, 35,862 and 71,361 shares of Series B, Series C and Series D preferred stock, respectively. For additional warrant activities, see Note 14, subsequent events.
CIPHERGEN BIOSYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. INCOME TAXES
The Company accounts for income taxes using the liability method. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities using the current tax laws and rates. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized.
At December 31, 1999, the Company had federal and state net operating loss carryforwards of approximately $21,053,000 and $10,859,000, respectively, available to offset future taxable income. The operating loss carryforwards and credits expire between 2002 and 2019, if not utilized. For federal and state tax purposes, a portion of the Company's net operating loss carryforwards may be subject to certain limitations on utilization in case of a change in ownership, as defined by federal and state tax law.
Temporary differences which give rise to significant portions of deferred tax assets and liabilities at December 31, 1998 and 1999 were as follows (in thousands):
1998 1999
-------- --------
Deferred tax assets and liabilities:
Net operating loss carryforwards........................ $ 5,622 $ 7,579
Research and development credits........................ 624 935
Depreciation and amortization........................... 293 375
Other................................................... 162 417
------- -------
Total deferred tax assets............................. 6,701 9,306
Less: Valuation allowance................................. (6,701) (9,306)
------- -------
Net deferred tax asset.................................... $ -- $ --
======= =======
|
Based on the evidence currently available, the Company has established a full valuation allowance because at this time it appears more likely than not that no benefit will be realized for its deferred tax assets.
10. EMPLOYEE BENEFIT PLAN
The Company maintains the Ciphergen Biosystems, Inc. 401(k) Savings Plan for its U.S. employees. This Plan allows eligible employees to defer up to 20%, subject to the Internal Revenue Service annual contribution limit, of their pretax compensation in certain investments at the discretion of the employee. Under the Plan, the Company is not required to make Plan contributions. The Company had not made any contributions to the Plan as of December 31, 1999.
11. ACQUISITIONS
On April 7, 1997, the Company acquired all the outstanding stock of IllumeSys Pacific, Inc. ("IllumeSys") and 5% of Ciphergen Technologies, Inc. ("CTI"). The total purchase price was approximately $737,000 which consisted of 2,113,767 shares of the Company's common stock. The acquisition was accounted for under the purchase accounting method and, accordingly, the purchase price was allocated to the tangible and intangible assets acquired and liabilities assumed on the basis of their fair values on the acquisition date.
CIPHERGEN BIOSYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. ACQUISITIONS (CONTINUED)
IllumeSys was an operating company with six employees. CTI was not an operating company. Both IllumeSys and CTI held sublicense rights to proprietary technology developed at and owned by the Baylor College of Medicine, and exclusively licensed to Molecular Analytical Systems, Inc. ("MAS"). The sublicenses from MAS to IllumeSys and CTI contained exclusive rights to make, use and sell instruments, devices and non-drug consumables covered by the Baylor technology to different life science and drug discovery laboratory markets worldwide. The 5% interest in CTI was accounted for as goodwill ($10,000) and is being amortized over five years from April 1997.
The excess of purchase price over the net assets of IllumeSys were assembled workforce of $183,000 which is being amortized over three years beginning April 1997 and goodwill of $775,000, which is being amortized over five years beginning April 1997.
The purchase price allocation was based on the estimated fair value of IllumeSys' and CTI's tangible and intangible assets less liabilities at April 7, 1997. The allocation follows (in thousands):
Property and equipment, IllumeSys........................... $ 118
Total liabilities, IllumeSys................................ (349)
Assembled workforce, IllumeSys.............................. 183
Goodwill, CTI............................................... 10
Goodwill, IllumeSys......................................... 775
-----
$ 737
=====
|
Under an employment agreement signed as part of the acquisition, the Company had a contingent obligation to issue an additional 2,113,767 shares of common stock to the owners of IllumeSys contingent upon the continued service of a certain key employee. As of December 31, 1997, 469,726 shares had been issued and $164,000 had been recorded as research and development expense. The remainder of that contingent obligation was then accelerated in conjunction with an employee separation agreement and $1.7 million was charged to research and development expense in July 1998.
On July 28, 1998, the Company acquired the remaining 95% of the outstanding stock of CTI. The total purchase price was $537,500 which consisted of 462,250 shares of the Company's common stock. The acquisition was accounted for under the purchase accounting method and accordingly, the purchase price was allocated to the intangible asset acquired. The purchase of the remaining 95% of CTI in July 1998 was accounted for as goodwill and is being amortized over 44 months through March 2002, the same ending date as the five-year amortization period for goodwill in the IllumeSys transaction.
12. RELATED PARTIES
At December 31, 1999, the Company had two notes receivable totaling $230,000 from an officer, with an imputed interest rate of 6.0%. The notes are repayable on or before December 30, 2003. Additionally, the Company has various notes receivable from stockholders in the aggregate amount of approximately $488,000 related to the early exercise of stock options. These notes have five year terms, bear interest between 5.59% and 6.85% and are collateralized by the underlying stock and other personal assets. All notes receivable related to the early exercise of options become due immediately upon termination of employment.
CIPHERGEN BIOSYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
12. RELATED PARTIES (CONTINUED)
During the years ended December 31, 1998 and 1999, the Company recorded revenue in the amount of $625,000 and $882,000, respectively, on sales to related parties. These sales were transactions related to the sale of equipment to companies who held minority investments in the Company. Additionally, the Company recorded approximately $31,000 of other income for services performed under the Ciphergen Biosystems, K.K. distribution and marketing agreement.
13. SEGMENT INFORMATION
The Company has adopted SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information" effective December 31, 1998. SFAS 131 establishes standards for disclosure about operating segments and related disclosures about products and services, geographic areas and major customers. Comparative information has been provided for prior years. The Company operates in one business segment. The Company sells its products and systems directly to customers in the United States and Europe, and through a distributor in Asia.
Revenue for geographic regions reported below are based upon the customers' locations. Long-lived assets, predominately property and equipment, are reported based on the location of the assets. Following is a summary of the geographic information related to revenues, long-lived assets and information related to significant customers for the years ended December 31, 1997, 1998 and 1999:
1997 1998 1999
-------- -------- --------
REVENUE
North America............................................... $1,163 $1,926 $3,142
Europe...................................................... 120 643 1,320
Asia (related party)........................................ -- 364 548
------ ------ ------
TOTAL..................................................... $1,283 $2,933 $5,010
====== ====== ======
LONG-LIVED ASSETS
North America............................................... $ 914 $ 789 $ 777
Europe...................................................... -- 2 90
------ ------ ------
TOTAL..................................................... $ 914 $ 791 $ 867
====== ====== ======
SIGNIFICANT CUSTOMERS
REVENUE
Ciphergen Biosystems, K.K................................... -- 12% 11%
====== ====== ======
|
ACCOUNTS RECEIVABLE
As of December 31, 1998 and 1999, six and seven customers accounted for 97% and 94% of accounts receivable, respectively.
The Company does not segregate information related to operating income generated by its export sales.
CIPHERGEN BIOSYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
14. SUBSEQUENT EVENTS
FACILITIES LEASE
In February 2000, the Company signed an eight year lease for a new facility. The lease expires in March 2008 and future rental commitments totaled $8,271,000 on the date the lease was signed.
DANISH SUBSIDIARY
In February 2000, the Company established a new subsidiary in Denmark, Ciphergen Biosystems A/S. The subsidiary will carry out both research and sales and marketing activities.
SERIES E CONVERTIBLE PREFERRED STOCK
In March 2000, the Company issued 4,468,070 shares of Series E preferred stock ("Series E") at $6.395 per share resulting in net cash proceeds of $26.9 million. The difference between the conversion price and the fair market value per share of the common stock on the transaction date resulted in a beneficial conversion feature of $26.6 million which has been reflected as a preferred stock dividend in the June 30, 2000 consolidated interim financial statements. Each share of Series E has voting rights equal to the number of shares of common stock into which such share is convertible. Holders of Series E are entitled to receive annual dividends of $0.51 per share, when and if declared by the Board of Directors, on a PARI PASSU basis with the holders of Series A, Series B, Series C and Series D preferred stock, and prior to the common stock. The Series E preferred stock is convertible at any time into common stock at a one-for-one exchange ratio. Such conversion is automatic upon the effective date of an initial public offering of at least $10.0 million provided the public offering price is at least $12.79 per share. In the event of any liquidation, dissolution or winding up of the Company, the holders of Series E are entitled to receive an amount equal to $6.395 per share, plus any declared but unpaid dividends. In connection with the Series E financing, the Company issued the underwriter warrants to purchase 63,053 shares of Series E preferred stock for $6.395 per share. The warrants, which terminate in February 2005, have a fair value of $8.32 per share based on a calculation using the Black-Scholes valuation model at the time of issuance. The aggregate amount allocated to the warrants based on the relative value of the warrants to the Series E preferred stock was $213,000. In March 2000, the underwriters exercised the 63,053 warrants. The resulting difference between the exercise price and fair market value resulted in an additional beneficial conversion feature of $542,000 on the date these warrants were exercised.
REINCORPORATION
Effective June 21, 2000, the Company reincorporated in the State of Delaware.
STOCK SPLIT
On August , 2000 the board of directors approved a 0.43-for-1 reverse stock split of the common and preferred stock. Stockholders' approval of the reverse stock split was obtained on 2000. All share and per share amounts for all periods presented in the accompanying consolidated financial statements have been adjusted retroactively.
CIPHERGEN BIOSYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
14. SUBSEQUENT EVENTS (CONTINUED)
STOCK PLANS
In April 2000, the stockholders approved the 2000 Stock Plan and the 2000 Employee Stock Purchase Plan. The 2000 Stock Plan provides for up to 1,075,000 shares of stock option grants. The 2000 Employee Stock Purchase Plan provides for up to 215,000 shares of stock purchases by employees.
In June 2000, 25,800 shares of Series B convertible preferred stock were issued for services received and in connection with established milestones. The value of these services $379,000, based on the value of the Series B convertible preferred stock on the date the milestone was reached, has been included as a component of research and development expense.
In March and April 2000, warrants to purchase 181,153 shares of Series B, C, D and E convertible preferred stock were exercised for total proceeds of $811,000.
LINE OF CREDIT
In June 2000, the Company extended its line of credit with a commercial bank through August 2000. The terms of the agreement were substantially the same as the terms in the original agreement (Note 5).
CONTINGENCIES
The Company is currently party to two legal proceedings: (1) CIPHERGEN BIOSYSTEMS, INC., CIPHERGEN TECHNOLOGIES, INC. AND ILLUMESYS PACIFIC, INC. V. MOLECULAR ANALYTICAL SYSTEMS, INC., LUMICYTE, INC. The proceeding was instituted on July 12, 2000 in the Superior Court of the State of California. Molecular Analytical Systems, Inc., or MAS, accused the Company of a material breach of certain Technology Transfer Agreements relating to SELDI technology, and threatened to terminate those agreements unless the Company cures the alleged breach. In particular, MAS has claimed that the Company's business activities including the continued marketing and sale of SELDI information and services to research laboratories and other customers, are a material breach of the technology transfer agreements. In the pending action, the Company is seeking a declaration from the court that its activities do not constitute a material breach, an injunction preventing MAS from terminating the licenses provided by the agreements and other relief. MAS has agreed to toll its notices purporting to terminate the license agreements pending the conclusion of this litigation. The parties have also agreed to a 60 day stay of the litigation, during which the parties have agreed to attempt to resolve their differences.
MOLECULAR ANALYTICAL SYSTEMS, INC. V. CIPHERGEN BIOSYSTEMS. The proceeding
was filed December 9, 1999 in the United States Trademark Trial and Appeal
Board. The Company has applied for registration of the term "SELDI" as a
trademark. MAS has opposed registration of the trademark and is seeking to have
the trademark registered in its name, instead.
Although the ultimate outcome of these matters is not presently determinable, management believes that the resolution of all such pending matters will not have a material adverse effect on the Company's consolidated financial position, results of operations or cash flows.
SHARES
[CIPHGERGEN LOGO]
COMMON STOCK
SG COWEN
ING BARINGS
UBS WARBURG LLC
, 2000
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth all expenses to be paid by the Registrant, other than the underwriting discounts and commissions payable by the Registrant in connection with the sale of the common stock being registered. All amounts shown are estimates except for the registration fee and the NASD filing fee.
AMOUNT TO BE PAID
-----------------
Registration fee............................................ $ 22,770
NASD filing fee............................................. 9,125
Nasdaq National Market listing fee.......................... 95,000
Blue sky qualification fees and expenses.................... 10,000
Printing and engraving expenses............................. 300,000
Legal fees and expenses..................................... 500,000
Accounting fees and expenses................................ 400,000
Transfer agent and registrar fees........................... 25,000
Miscellaneous expenses...................................... 138,105
----------
Total................................................... $1,500,000
==========
|
ITEM 14. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
Section 145 of the Delaware General Corporation Law permits indemnification of officers, directors and other corporate agents under certain circumstances and subject to certain limitations. The Registrant's certificate of incorporation and bylaws provide that the Registrant shall indemnify its directors, officers, employees and agents to the full extent permitted by Delaware General Corporation Law, including in circumstances in which indemnification is otherwise discretionary under Delaware law. In addition, the Registrant intends to enter into separate indemnification agreements with its directors, officers and certain employees that would require the Registrant, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service (other than liabilities arising from willful misconduct of a culpable nature).
These indemnification provisions and the indemnification agreements to be entered into between the Registrant and its officers and directors may be sufficiently broad to permit indemnification of the Registrant's officers and directors for liabilities (including reimbursement of expenses incurred) arising under the Securities Act.
The Registrant intends to obtain in conjunction with the effectiveness of the Registration Statement a policy of directors' and officers' liability insurance that insures the Registrant's directors and officers against the cost of defense, settlement or payment of a judgment under certain circumstances.
The underwriting agreement filed as Exhibit 1.1 to this Registration Statement provides for indemnification by the underwriters of the Registrant and its officers and directors for certain liabilities arising under the Securities Act, or otherwise.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Except as otherwise noted, we have issued and sold the following securities within the last three years and through July 31, 2000:
On June 2, 2000 we issued 25,800 shares of our Series B preferred stock to Stanford Research Systems under the terms of a product development agreement.
II-1
On April 7, 1997 and March 3, 1998, we sold an aggregate of 1,259,779 shares of our Series C preferred stock at a price of $3.49 per share to eight investors and their affiliates.
On July 28, 1998, September 30, 1998, and January 2, 1999, we sold an aggregate of 2,904,526 shares of our Series D Preferred Stock at a price of $4.65 per share to 20 investors and their affiliates.
On March 3, 2000 and March 3 and 8, 2000, we sold an aggregate of 4,468,070 shares of our Series E preferred stock at a price of $6.40 per share to 43 investors and their affiliates.
In connection with our financing activities we issued warrants to investors and lenders as follows: in 1997 we issued warrants to purchase 16,512 shares of Series C preferred stock at $2.91 per share and 19,350 shares of Series C preferred stock at $3.49 per share; in 1998 we issued warrants to purchase 71,361 shares of Series D preferred stock at $4.65 per share; and in 2000 we issued warrants to purchase 63,053 shares of Series E preferred stock at $6.40 per share.
We issued 23,392 shares of our Series A preferred stock in 1998, at an exercise price per share of $1.16, pursuant to the exercise of warrants issued in connection with our original issuance of our Series A preferred stock.
We issued 72,312 shares of our Series B preferred stock in 1999 and 2000, at an exercise price per share of $2.33, pursuant to the exercise of warrants issued in connection with our original issuance of our Series B preferred stock.
We issued 16,512 shares of our Series C preferred stock in 2000, at an exercise price per share of $2.91, pursuant to the exercise of warrants issued in connection with an equipment loan from William R. Green.
We issued 53,212 shares of our Series D preferred stock in 2000 at an exercise price per share of $4.65 pursuant to the exercise of warrants issued in connection with original issuance of our Series D preferred stock.
We issued 63,053 shares of our Series E preferred stock in 2000 at an exercise price per share of $6.40 to SG Cowen Securities Corporation, pursuant to the exercise of warrants issued in connection with original issuance of our Series E preferred stock.
Since our inception, we have granted options to purchase 3,815,772 shares of our common stock to employees, directors and consultants under our 1993 Stock Option Plan at exercise prices ranging from $0.02 to $3.49 per share. Of the 3,815,772 options granted; 1,542,603 remain outstanding, 1,664,844 shares of common stock have been purchased pursuant to exercises of stock options and options to acquire 608,325 shares have been cancelled and became available for grant under our 1993 Stock Option Plan. Of the 1,664,845 shares purchased, 409,700 shares were subject to repurchase.
The sales and issuances of securities in the transactions described above were deemed to be exempt from registration under the Securities Act in reliance upon Section 4(2) of the Securities Act, Regulation D promulgated thereunder or Rule 701 promulgated under Section 3(b) of the Securities Act, as transactions by an issuer not involving any public offering or transactions pursuant to compensatory benefit plans and contracts relating to compensation as provided under Rule 701. The recipients of securities in each transaction represented their intentions to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof and appropriate legends were affixed to the securities issued in such transactions. All recipients either received adequate information about us or had access, through their employment or other relationships with us, to adequate information about us.
Volpe Brown Whelan & Company acted as placement agent in connection with our private placement of our Series D preferred stock and received compensation for its services as placement agent. SG Cowen Securities Corporation acted as placement agent in connection with our private placement of our Series E preferred stock and received compensation for its services as placement agent. There were no other underwriters employed in connection with any of the transactions set forth in Item 15.
II-2
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) EXHIBITS.
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
--------------------- ------------------------------------------------------------
1.1 Form of Underwriting Agreement
3.1** Form of Amended and Restated Articles of Incorporation of
Registrant prior to completion of this offering
3.2 Form of Certificate of Incorporation of Registrant to be
effective upon completion of this offering
3.3** Amended and Restated Bylaws of Registrant prior to
completion of this offering
3.4 Amended and Restated Bylaws of Registrant to be effective
upon completion of this offering
4.1 Form of Registrant's Common Stock Certificate
5.1* Opinion of Wilson Sonsini Goodrich & Rosati, P.C., regarding
legality of the securities being issued
10.1** Form of Preferred Stock Purchase Agreement
10.2** Fourth Amended and Restated Investors Rights Agreement dated
March 3, 2000
10.3** 1993 Stock Option Plan
10.4 Form of Stock Option Agreement
10.5 2000 Stock Plan and related form of Stock Option Agreement
10.6 2000 Employee Stock Purchase Plan
10.7 401(k) Plan
10.8** Form of Warrant
10.9 Form of Proprietary Information Agreement between the
Registrant and certain of its employees
10.10 Lease Agreement dated March 15, 1996 between Nearon
Enterprises, LLC and Registrant and amendments thereto
10.11 Lease Agreement dated March 20, 1996, between Nearon
Enterprises LLC and Registrant and amendments thereto
10.12 Lease Agreement dated January 28, 2000, between the
Registrant and John Arrillaga, Trustee of the John
Arrillaga Survivor's Trust and Richard T. Peery, Trustee
of the Richard T. Peery Separate Property Trust
10.13 Employment Agreement dated as of August 24, 2000 between
William E. Rich and the Registrant
10.23 MAS License Agreement with IllumeSys Pacific, Inc.
10.24 MAS License agreement with Ciphergen Technologies, Inc.
(formerly ISP Acquisition Corporation)
10.25** Joint Venture Agreement between Registrant and Sumitomo
Corporation
10.26** Distribution and Marketing Agreement between Registrant and
Ciphergen Biosystems, K.K.
10.27** Joint Development Agreement between Registrant and Stanford
Research Systems, Inc., dated as of February 2, 1995 and
amendment thereto.
21.1 Subsidiaries of Registrant
23.1* Consent of Wilson Sonsini Goodrich & Rosati, P.C. (included
in Exhibit 5.1)
23.2 Consent of PricewaterhouseCoopers LLP, Independent
Accountants
24.1** Power of Attorney
27.1 Financial Data Schedule
|
* to be filed by amendment
** previously filed
II-3
(b) FINANCIAL STATEMENT SCHEDULES.
Report of Independent Accountants........................... S-1 Schedule II--Valuation and Qualifying Accounts.............. S-2 |
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes to provide to the Underwriters at the closing specified in the Underwriting Agreement certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.
Insofar as indemnification by the Registrant for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to the provisions referenced in Item 14 of this Registration Statement or otherwise, the Registrant has been advised that in the opinion of the Commission such indemnification is against public policy as expressed in the Securities Act, and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer, or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered hereunder, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act, the information omitted from the form of Prospectus filed as part of this Registration Statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this Registration Statement as of the time it was declared effective; and
(2) For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of Prospectus shall be deemed to be a new Registration Statement relating to the securities offered therein, and the offering of such securities at the time shall be deemed to be the initial bona fide offering thereof.
II-4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Amendment No. 1 to the Registration Statement on Form S-1 to be signed on its behalf by the undersigned, thereunto duly authorized, in Fremont, California, on the 24th day of August 2000.
CIPHERGEN BIOSYSTEMS, INC.
By: /s/ WILLIAM E. RICH
-----------------------------------------
William E. Rich
PRESIDENT AND CHIEF EXECUTIVE OFFICER
|
Pursuant to the requirements of the Securities Act of 1933, this Amendment No. 1 to the Registration Statement on Form S-1 has been signed by the following persons in the capacities and on the dates indicated:
SIGNATURE TITLE DATE
--------- ----- ----
/s/ WILLIAM E. RICH President and Chief Executive
------------------------------------ Officer, and Director August 24, 2000
William E. Rich (PRINCIPAL EXECUTIVE OFFICER)
Chief Financial Officer and
* Corporate Controller
------------------------------------ (PRINCIPAL FINANCIAL AND ACCOUNTING August 24, 2000
Daniel M. Caserza OFFICER)
*
------------------------------------ Director August 24, 2000
John A. Young
*
------------------------------------ Director August 24, 2000
Michael J. Callaghan
*
------------------------------------ Director August 24, 2000
Barbara J. Dalton
*
------------------------------------ Director August 24, 2000
Jean-Francois Formela
*
------------------------------------ Director August 24, 2000
William R. Green
*
------------------------------------ Director August 24, 2000
James L. Rathmann
*
------------------------------------ Director August 24, 2000
Daniel Vapnek
|
*By: /s/ WILLIAM E. RICH
-------------------------------
William E. Rich
ATTORNEY-IN-FACT
|
II-5
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULES
To the Board of Directors
of Ciphergen Biosystems, Inc.:
Our audits of the consolidated financial statements referred to in our report dated March 6, 2000, except for Note 14 for which the date is August , 2000, appearing in the Registration Statement on Form S-1 of Ciphergen Biosystems, Inc. also included an audit of the financial statement schedule listed in Item 16(b) of this Registration Statement. In our opinion, the financial statement schedule presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements.
/s/ PRICEWATERHOUSECOOPERS LLP San Jose, California March 6, 2000 |
SCHEDULE II
CIPHERGEN BIOSYSTEMS, INC.
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
(IN THOUSANDS)
BALANCE
BALANCE AT ADDITIONS AT END
BEGINNING CHARGED TO OTHER OF
OF YEAR EARNINGS DEDUCTIONS CHARGES PERIOD
---------- ---------- ---------- -------- --------
ALLOWANCE FOR DOUBTFUL ACCOUNTS:
31-Dec-99............................... $ 40 $ 60 $ -- $ -- $ 100
31-Dec-98............................... -- 40 -- -- 40
31-Dec-97............................... -- -- -- -- --
INVENTORY RESERVE:
31-Dec-99............................... $ 206 $ 40 $ -- $ (177)(1) $ 69
31-Dec-98............................... 134 117 -- (45)(2) 206
31-Dec-97............................... 15 74 -- 45 (2) 134
DEFERRED TAX VALUATION ALLOWANCE:
31-Dec-99............................... $6,701 $2,605 $ -- $ -- $9,306
31-Dec-98............................... 4,966 1,735 -- -- 6,701
31-Dec-97............................... 2,709 2,257 -- -- 4,966
WARRANTY RESERVE:
31-Dec-99............................... $ 43 $ 109 $ 91 $ -- $ 61
31-Dec-98............................... -- (2) -- 45 (2) 43
31-Dec-97............................... -- 45 -- (45)(2) --
|
(1) Represents a reclassification between demo reserve and inventory reserve.
(2) Represents a reclassification between inventory reserve and warranty reserve.
INDEX TO EXHIBITS
EXHIBITS
---------------------
1.1 Form of Underwriting Agreement
3.1** Form of Amended and Restated Articles of Incorporation of
Registrant prior to completion of this offering
3.2 Form of Certificate of Incorporation of Registrant to be
effective upon completion of this offering
3.3** Amended and Restated Bylaws of Registrant prior to
completion of this offering
3.4 Amended and Restated Bylaws of Registrant to be effective
upon completion of this offering
4.1 Form of Registrant's Common Stock Certificate
5.1* Opinion of Wilson Sonsini Goodrich & Rosati, P.C., regarding
legality of the securities being issued
10.1** Form of Preferred Stock Purchase Agreement
10.2** Fourth Amended and Restated Investors Rights Agreement dated
March 3, 2000
10.3** 1993 Stock Option Plan
10.4 Form of Stock Option Agreement
10.5 2000 Stock Plan and related form of Stock Option Agreement
10.6 2000 Employee Stock Purchase Plan
10.7 401(k) Plan
10.8** Form of Warrant
10.9 Form of Proprietary Information Agreement between the
Registrant and certain of its employees
10.10 Lease Agreement dated March 15, 1996 between Nearon
Enterprises, LLC and Registrant and amendments thereto
10.11 Lease Agreement dated March 20, 1996, between Nearon
Enterprises LLC and Registrant and amendments thereto
10.12 Lease Agreement dated January 28, 2000, between the
Registrant and John Arrillaga, Trustee of the John
Arrillaga Survivor's Trust and Richard T. Peery, Trustee
of the Richard T. Peery Separate Property Trust
10.13 Employment Agreement dated as of August 24, 2000, between
William E. Rich and the Registrant
10.23 MAS License Agreement with IllumeSys Pacific, Inc.
10.24 MAS License agreement with Ciphergen Technologies, Inc.
(formerly ISP Acquisition Corporation)
10.25** Joint Venture Agreement between Registrant and Sumitomo
Corporation
10.26** Distribution and Marketing Agreement between Registrant and
Ciphergen Biosystems, K.K.
10.27** Joint Development Agreement between Registrant and Stanford
Research Systems, Inc., dated as of February 2, 1995 and
amendment thereto.
21.1 Subsidiaries of Registrant
23.1* Consent of Wilson Sonsini Goodrich & Rosati, P.C. (included
in Exhibit 5.1)
23.2 Consent of PricewaterhouseCoopers LLP, Independent
Accountants
24.1** Power of Attorney
27.1 Financial Data Schedule
|
* to be filed by amendment
** previously filed
EXHIBIT 1.1
[Number of Shares]
CIPHERGEN BIOSYSTEMS, INC.
COMMON STOCK
UNDERWRITING AGREEMENT
, 2000
SG COWEN SECURITIES CORPORATION
ING BARINGS LLC
WARBURG DILLON READ LLC
As Representatives of the several Underwriters
c/o SG Cowen Securities Corporation
Financial Square
New York, New York 10005
Dear Sirs:
1. INTRODUCTORY. Ciphergen, Inc., a Delaware corporation (the "Company proposes to sell, pursuant to the terms of this Agreement, to the several underwriters named in Schedule A hereto (the "Underwriters," or, each, an "Underwriter"), an aggregate of ____ shares of Common Stock, $0.001 par value (the "Common Stock") of the Company. The aggregate of ____ shares so proposed to be sold is hereinafter referred to as the "Firm Stock". The Company also proposes to sell to the Underwriters, upon the terms and conditions set forth in Section 3 hereof, up to an additional ______ shares of Common Stock (the "Optional Stock"). The Firm Stock and the Optional Stock are hereinafter collectively referred to as the "Stock." SG Cowen Securities Corporation ("SG Cowen"), Ing Barings LLC and Warburg Dillon Read LLC are acting as representatives of the several Underwriters and in such capacity are hereinafter referred to as the "Representatives."
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents and warrants to, and agrees with, the several Underwriters that:
a. A registration statement on Form S-1 (File No. 333-__) (the "Initial Registration Statement") in respect of the Stock has been filed with the Securities and Exchange Commission (the "Commission"); the Initial Registration Statement and any post-effective amendment thereto, each in the form heretofore delivered to you, and, excluding exhibits thereto, to you for each of the other Underwriters, have been declared effective by the Commission in such form; other than a registration statement, if any, increasing the size of the offering (a "Rule 462(b) Registration Statement"), filed pursuant to Rule 462(b) under the Securities Act of 1933, as amended (the "Securities Act"), and the rules and regulations (the "Rules and Regulations") of the Commission thereunder, which became effective upon filing, no other document with respect to the Initial Registration Statement has heretofore been filed with the Commission; and no stop
order suspending the effectiveness of the Initial Registration Statement,
any post-effective amendment thereto or the Rule 462(b) Registration Statement,
if any, has been issued and no proceeding for that purpose has been initiated or
threatened by the Commission (any preliminary prospectus included in the Initial
Registration Statement or filed with the Commission pursuant to Rule 424(a) of
the Rules and Regulations, is hereinafter called a "Preliminary Prospectus");
the various parts of the Initial Registration Statement and the Rule 462(b)
Registration Statement, if any, including all exhibits thereto and including the
information contained in the form of final prospectus filed with the Commission
pursuant to Rule 424(b) under the Securities Act and deemed by virtue of Rule
430A under the Securities Act to be part of the Initial Registration Statement
at the time it was declared effective, each as amended at the time such part of
the Initial Registration Statement became effective or such part of the Rule
462(b) Registration Statement, if any, became or hereafter becomes effective,
are hereinafter collectively called the "Registration Statements"; and such
final prospectus, in the form first filed pursuant to Rule 424(b) under the
Securities Act, is hereinafter called the "Prospectus." No document has been or
will be prepared or distributed in reliance on Rule 434 under the Securities
Act. No order preventing or suspending the use of any Preliminary Prospectus has
been issued by the Commission.
b. The Registration Statement conforms (and the Rule 462(b) Registration Statement, if any, the Prospectus and any amendments or supplements to either of the Registration Statements or the Prospectus, when they become effective or are filed with the Commission, as the case may be, will conform) in all material respects to the requirements of the Securities Act and the Rules and Regulations and do not and will not, as of the applicable effective date (as to the Registration Statements and any amendment thereto) and as of the applicable filing date (as to the Prospectus and any amendment or supplement thereto) contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading; provided, however, that the foregoing representations and warranties shall not apply to information contained in or omitted from the Registration Statements or the Prospectus or any such amendment or supplement thereto in reliance upon, and in conformity with, written information furnished to the Company through the Representatives by or on behalf of any Underwriter specifically for inclusion therein.
c. The Company and each of its subsidiaries (as defined in Section 15) have been duly incorporated and are validly existing as corporations in good standing under the laws of their respective jurisdictions of incorporation, are duly qualified to do business and are in good standing as foreign corporations in each jurisdiction in which their respective ownership or lease of property or the conduct of their respective businesses requires such qualification, and have all power and authority necessary to own or hold their respective properties and to conduct the businesses in which they are engaged, except where the failure to so qualify or have such power or authority would not have, singularly or in the aggregate, a material adverse effect on the condition (financial or otherwise), results of operations, business or prospects of the Company and its subsidiaries taken as a whole (a "Material Adverse Effect"). The Company owns or controls, directly or indirectly, only the following corporations, associations or other entities: [LIST OF SUBSIDIARIES].
d. This Agreement has been duly authorized executed and delivered by the Company.
e. The Stock to be issued and sold by the Company to the Underwriters hereunder has been duly and validly authorized and, when issued and delivered against payment therefor as provided herein, will be duly and validly issued, fully paid and nonassessable and free of any preemptive or similar rights and will conform to the description thereof contained in the Prospectus.
f. The Company has an authorized capitalization as set forth in the Prospectus, and all of the issued shares of capital stock of the Company has been duly and validly authorized and issued, are fully paid and non-assessable and conform to the description thereof contained in the Prospectus.
g. All the outstanding shares of capital stock of each subsidiary of the Company have been duly authorized and validly issued, are fully paid and nonassessable and, except to the extent set forth in the Prospectus, are owned by the Company directly or indirectly through one or more wholly-owned subsidiaries, free and clear of any claim, lien, encumbrance, security interest, restriction upon voting or transfer or any other claim of any third party.
h. The execution, delivery and performance of this Agreement by the Company and the consummation of the transactions contemplated hereby will not conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries is bound or to which any of the property or assets of the Company or any of its subsidiaries is subject, nor will such actions result in any violation of the provisions of the charter or by-laws of the Company or any of its subsidiaries or any statute or any order, rule or regulation of any court or governmental agency or body having jurisdiction over the Company or any of its subsidiaries or any of their properties or assets.
i. Except for the registration of the Stock under the Securities Act and such consents, approvals, authorizations, registrations or qualifications as may be required under the Exchange Act and applicable state securities laws in connection with the purchase and distribution of the Stock by the Underwriters, no consent, approval, authorization or order of, or filing or registration with, any such court or governmental agency or body is required for the execution, delivery and performance of this Agreement by the Company and the consummation of the transactions contemplated hereby.
j. PriceWaterhouse Coopers LLP, who have expressed their opinions on the audited financial statements [and related schedules] included in the Registration Statements and the Prospectus are independent public accountants as required by the Securities Act and the Rules and Regulations.
k. The financial statements, together with the related notes [and schedules], included in the Prospectus and in each Registration Statement fairly present the financial position and the results of operations and changes in financial position of the Company and its consolidated
subsidiaries at the respective dates or for the respective periods therein specified. Such statements and related notes [and schedules] have been prepared in accordance with generally accepted accounting principles applied on a consistent basis except as may be set forth in the Prospectus.
l. Neither the Company nor any of its subsidiaries has sustained, since the date of the latest audited financial statements included in the Prospectus, any material loss or interference with its business from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor dispute or court or governmental action, order or decree, otherwise than as set forth or contemplated in the Prospectus; and, since such date, there has not been any change in the capital stock or long-term debt of the Company or any of its subsidiaries or any material adverse change, or any development involving a prospective material adverse change, in or affecting the business, general affairs, management, financial position, stockholders' equity or results of operations of the Company and its subsidiaries taken as a whole, otherwise than as set forth or contemplated in the Prospectus.
m. Except as set forth in the Prospectus, there is no legal or governmental proceeding pending to which the Company or any of its subsidiaries is a party or of which any property or assets of the Company or any of its subsidiaries is the subject which, singularly or in the aggregate, if determined adversely to the Company or any of its subsidiaries, might have a Material Adverse Effect or would prevent or adversely affect the ability of the Company to perform its obligations under this Agreement; and to the best of the Company's knowledge, no such proceedings are threatened or contemplated by governmental authorities or threatened by others.
n. Neither the Company nor any of its subsidiaries (i) is in violation of its charter or by-laws, (ii) is in default in any respect, and no event has occurred which, with notice or lapse of time or both, would constitute such a default, in the due performance or observance of any term, covenant or condition contained in any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which it is a party or by which it is bound or to which any of its property or assets is subject or (iii) is in violation in any respect of any law, ordinance, governmental rule, regulation or court decree to which it or its property or assets may be subject, except any violations or defaults which, singularly or in the aggregate, would not have a Material Adverse Effect.
o. The Company and each of its subsidiaries possess all licenses, certificates, authorizations and permits issued by, and have made all declarations and filings with, the appropriate state, federal or foreign regulatory agencies or bodies which are necessary or desirable for the ownership of their respective properties or the conduct of their respective businesses as described in the Prospectus except where any failures to possess or make the same, singularly or in the aggregate, would not have a Material Adverse Effect, and the Company has not received notification of any revocation or modification of any such license, authorization or permit and has no reason to believe that any such license, certificate, authorization or permit will not be renewed.
p. Neither the Company nor any of its subsidiaries is or, after giving effect to the offering of the Stock and the application of the proceeds thereof as described in the Prospectus will become an "investment company" within the meaning of the Investment Company Act of 1940, as amended, and the rules and regulations of the Commission thereunder.
q. Neither the Company nor any of its officers, directors or affiliates has taken or will take, directly or indirectly, any action designed or intended to stabilize or manipulate the price of any security of the Company, or which caused or resulted in, or which might in the future reasonably be expected to cause or result in, stabilization or manipulation of the price of any security of the Company.
r. The Company and its subsidiaries own or possess the right to use all patents, trademarks, trademark registrations, service marks, service mark registrations, trade names, copyrights, licenses, inventions, trade secrets and rights described in the Prospectus as being owned by them for the conduct of their respective businesses, and the Company is not aware of any claim to the contrary or any challenge by any other person to the rights of the Company and its subsidiaries with respect to the foregoing. The Company's business as now conducted and as proposed to be conducted does not and will not infringe or conflict with any patents, trademarks, service marks, trade names, copyrights, trade secrets, licenses or other intellectual property or franchise right of any person. Except as described in the Prospectus, no claim has been made against the Company alleging the infringement by the Company of any patent, trademark, service mark, trade name, copyright, trade secret, license in or other intellectual property right or franchise right of any person.
s. The Company and each of its subsidiaries have good and marketable title in fee simple to, or have valid rights to lease or otherwise use, all items of real or personal property which are material to the business of the Company and its subsidiaries taken as a whole, in each case free and clear of all liens, encumbrances, claims and defects that may result in a Material Adverse Effect.
t. No labor disturbance by the employees of the Company or any of its subsidiaries exists or, to the best of the Company's knowledge, is imminent which might be expected to have a Material Adverse Effect. The Company is not aware that any key employee or significant group of employees of the Company or any subsidiary plans to terminate employment with the Company or any such subsidiary.
u. No "prohibited transaction" (as defined in Section 406 of the Employee Retirement Income Security Act of 1974, as amended, including the regulations and published interpretations thereunder ("ERISA"), or Section 4975 of the Internal Revenue Code of 1986, as amended from time to time (the "Code")), or "accumulated funding deficiency" (as defined in Section 302 of ERISA) or any of the events set forth in Section 4043(b) of ERISA (other than events with respect to which the 30-day notice requirement under Section 4043 of ERISA has been waived) has occurred with respect to any employee benefit plan which could have a Material Adverse Effect; each employee benefit plan is in compliance in all material respects with applicable law, including ERISA and the Code; the Company has not incurred and does not
expect to incur liability under Title IV of ERISA with respect to the termination of, or withdrawal from, any "pension plan"; and each "pension plan" (as defined in ERISA) for which the Company would have any liability that is intended to be qualified under Section 401(a) of the Code is so qualified in all material respects and nothing has occurred, whether by action or by failure to act, which could cause the loss of such qualification.
v. There has been no storage, generation, transportation, handling, treatment, disposal, discharge, emission, or other release of any kind of toxic or other wastes or other hazardous substances by, due to, or caused by the Company or any of its subsidiaries (or, to the best of the Company's knowledge, any other entity for whose acts or omissions the Company or any of its subsidiaries is or may be liable) upon any of the property now or previously owned or leased by the Company or any of its subsidiaries, or upon any other property, in violation of any statute or any ordinance, rule, regulation, order, judgment, decree or permit or which would, under any statute or any ordinance, rule (including rule of common law), regulation, order, judgment, decree or permit, give rise to any liability, except for any violation or liability which would not have, singularly or in the aggregate with all such violations and liabilities, a Material Adverse Effect; there has been no disposal, discharge, emission or other release of any kind onto such property or into the environment surrounding such property of any toxic or other wastes or other hazardous substances with respect to which the Company or any of its subsidiaries have knowledge, except for any such disposal, discharge, emission, or other release of any kind which would not have, singularly or in the aggregate with all such discharges and other releases, a Material Adverse Effect.
w. The Company and its subsidiaries each (i) have filed all necessary federal, state and foreign income and franchise tax returns, (ii) have paid all federal state, local and foreign taxes due and payable for which it is liable, and (iii) do not have any tax deficiency or claims outstanding or assessed or, to the best of the Company's knowledge, proposed against it which could reasonably be expected to have a Material Adverse Effect.
x. The Company and each of its subsidiaries carry, or are covered by, insurance in such amounts and covering such risks as is adequate for the conduct of their respective businesses and the value of their respective properties and as is customary for companies engaged in similar businesses in similar industries.
y. The Company and each of its subsidiaries maintains a system of internal accounting controls sufficient to provide reasonable assurances that (i) transactions are executed in accordance with management's general or specific authorization; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain accountability for assets; (iii) access to assets is permitted only in accordance with management's general or specific authorization; and (iv) the recorded accountability for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences.
z. The minute books of the Company and each of its subsidiaries have been made available to the Underwriters and counsel for the Underwriters, and such books (i) contain a
complete summary of all meetings and actions of the directors and shareholders of the Company and each of its subsidiaries since the time of its respective incorporation through the date of the latest meeting and action, and (ii) accurately in all material respects reflect all transactions referred to in such minutes.
aa. There is no franchise, lease, contract, agreement or document required by the Securities Act or by the Rules and Regulations to be described in the Prospectus or to be filed as an exhibit to the Registration Statements which is not described or filed therein as required; and all descriptions of any such franchises, leases, contracts, agreements or documents contained in the Registration Statements are accurate and complete descriptions of such documents in all material respects.
bb. No relationship, direct or indirect, exists between or among the Company on the one hand, and the directors, officers, stockholders, customers or suppliers of the Company on the other hand, which is required to be described in the Prospectus and which is not so described.
cc. No person or entity has the right to require registration of shares of Common Stock or other securities of the Company because of the filing or effectiveness of the Registration Statements or otherwise, except for persons and entities who have expressly waived such right or who have been given proper notice and have failed to exercise such right within the time or times required under the terms and conditions of such right.
dd. Neither the Company nor any of its subsidiaries owns any "margin securities" as that term is defined in Regulations G and U of the Board of Governors of the Federal Reserve System (the "Federal Reserve Board"), and none of the proceeds of the sale of the Stock will be used, directly or indirectly, for the purpose of purchasing or carrying any margin security, for the purpose of reducing or retiring any indebtedness which was originally incurred to purchase or carry any margin security or for any other purpose which might cause any of the Securities to be considered a "purpose credit" within the meanings of Regulation G, T, U or X of the Federal Reserve Board.
ee. Neither the Company nor any of its subsidiaries is a party to any contract, agreement or understanding with any person that would give rise to a valid claim against the Company or the Underwriters for a brokerage commission, finder's fee or like payment in connection with the offering and sale of the Stock.
ff. No forward-looking statement (within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act) contained in the Prospectus has been made or reaffirmed without a reasonable basis or has been disclosed other than in good faith.
(i) [The Company has reviewed its operations and that of its subsidiaries and any third parties with which the Company or any of its subsidiaries has a material relationship to evaluate the extent to which the business or operations of the Company or any of its subsidiaries will be affected by the Year 2000 Problem. As a result of such review, the Company has no reason to believe, and does not believe that the Year 2000 Problem will have a Material Adverse Effect. The "Year 2000 Problem" as used herein means any significant risk that computer
hardware or software used in the receipt, transmission, processing, manipulation, storage, retrieval, retransmission or other utilization of data or in the operation of mechanical or electrical systems of any kind will not, in the case of dates or time periods occurring after December 31, 1999, function at least as effectively as in the case of dates or time periods occurring prior to January 1, 2000.]
gg. The Stock has been approved for quotation, subject to notice of issuance, on the Nasdaq Stock Market's National Market.
3. PURCHASE SALE AND DELIVERY OF OFFERED SECURITIES. On the basis of the representations, warranties and agreements herein contained, but subject to the terms and conditions herein set forth, the Company agrees to sell to each Underwriter, and each Underwriter agrees, severally and not jointly, to purchase from the Company that number of shares of Firm Stock (rounded up or down, as determined by SG Cowen in its discretion, in order to avoid fractions) obtained by multiplying [ ] shares of Firm by a fraction, the numerator of which is the number of shares of Firm Stock set forth opposite the name of such Underwriter in Schedule A hereto and the denominator of which is the total number of shares of Firm Stock.
The purchase price per share to be paid by the Underwriters to the Company for the Stock will be $_____ per share (the "Purchase Price").
The Company will deliver the Firm Stock to the Representatives for the respective accounts of the several Underwriters (in the form of definitive certificates, issued in such names and in such denominations as the Representatives may direct by notice in writing to the Company given at or prior to 12:00 Noon, New York time, on the second full business day preceding the First Closing Date (as defined below)) against payment of the aggregate Purchase Price therefor by wire transfer to an account at a bank acceptable to SG Cowen, payable to the order of the Company all at the offices of Wilson Sonsini Goodrich & Rosati, Professional Corporation, 650 Page Mill Road, Palo Alto, California 94304. Time shall be of the essence, and delivery at the time and place specified pursuant to this Agreement is a further condition of the obligations of each Underwriter hereunder. The time and date of the delivery and closing shall be at 10:00 A.M., New York time, on , 2000, in accordance with Rule 15c6-1 of the Exchange Act. The time and date of such payment and delivery are herein referred to as the "First Closing Date." The First Closing Date and the location of delivery of, and the form of payment for, the Firm Stock may be varied by agreement between the Company and SG Cowen.
The Company shall make the certificates for the Stock available to the Representatives for examination on behalf of the Underwriters in New York, New York at least twenty-four hours prior to the First Closing Date.
For the purpose of covering any over-allotments in connection with the distribution and sale of the Firm Stock as contemplated by the Prospectus, the Underwriters may purchase all or less than all of the Optional Stock. The price per share to be paid for the Optional Stock shall be the Purchase Price. The Company agrees to sell to the Underwriters the number of shares of Optional Stock specified in the written notice by SG Cowen described below and the Underwriters agree, severally and not jointly, to purchase such shares of Optional Stock. The
option granted hereby may be exercised as to all or any part of the Optional Stock at any time, and from time to time, not more than thirty (30) days subsequent to the date of this Agreement. No Optional Stock shall be sold and delivered unless the Firm Stock previously has been, or simultaneously is, sold and delivered. The right to purchase the Optional Stock or any portion thereof may be surrendered and terminated at any time upon notice by SG Cowen to the Company.
The option granted hereby may be exercised by written notice given to the Company by SG Cowen setting forth the number of shares of the Optional Stock to be purchased by the Underwriters and the date and time for delivery of and payment for the Optional Stock. Each date and time for delivery of and payment for the Optional Stock (which may be the First Closing Date, but not earlier) is herein called the "Option Closing Date" and shall in no event be earlier than two (2) business days nor later than five (5) business days after written notice is given. (The Option Closing Date and the First Closing Date are herein called the "Closing Dates.")
The Company will deliver the Optional Stock to the Underwriters (in the form of definitive certificates, issued in such names and in such denominations as the Representatives may direct by notice in writing to the Company given at or prior to 12:00 Noon, New York time, on the second full business day preceding the Option Closing Date) against payment of the aggregate Purchase Price therefor in federal (same day) funds by certified or official bank check or checks or wire transfer to an account at a bank acceptable to SG Cowen payable to the order of the Company all at the offices of Wilson Sonsini Goodrich & Rosati, Professional Corporation, 650 Page Mill Road, Palo Alto, California 94304. Time shall be of the essence, and delivery at the time and place specified pursuant to this Agreement is a further condition of the obligations of each Underwriter hereunder. The Company shall make the certificates for the Optional Stock available to the Representatives for examination on behalf of the Underwriters in New York, New York not later than 10:00 A.M., New York Time, on the business day preceding the Option Closing Date. The Option Closing Date and the location of delivery of, and the form of payment for, the Optional Stock may be varied by agreement between the Company and SG Cowen.
The several Underwriters propose to offer the Stock for sale upon the terms and conditions set forth in the Prospectus.
4. FURTHER AGREEMENTS OF THE COMPANY. The Company agrees with the several Underwriters that:
a. The Company will prepare the Rule 462(b) Registration Statement, if necessary, in a form approved by the Representatives and file such Rule 462(b) Registration Statement with the Commission on the date hereof; prepare the Prospectus in a form approved by the Representatives and file such Prospectus pursuant to Rule 424(b) under the Securities Act not later than the second business day following the execution and delivery of this Agreement; make no further amendment or any supplement to the Registration Statements or to the Prospectus to which the Representatives shall reasonably object by notice to the Company after a reasonable period to review; advise the Representatives, promptly after it receives notice thereof, of the
time when any amendment to either Registration Statement has been filed or becomes effective or any supplement to the Prospectus or any amended Prospectus has been filed and to furnish the Representatives with copies thereof; advise the Representatives, promptly after it receives notice thereof, of the issuance by the Commission of any stop order or of any order preventing or suspending the use of any Preliminary Prospectus or the Prospectus, of the suspension of the qualification of the Stock for offering or sale in any jurisdiction, of the initiation or threatening of any proceeding for any such purpose, or of any request by the Commission for the amending or supplementing of the Registration Statements or the Prospectus or for additional information; and, in the event of the issuance of any stop order or of any order preventing or suspending the use of any Preliminary Prospectus or the Prospectus or suspending any such qualification, use promptly its best efforts to obtain its withdrawal.
b. If at any time prior to the expiration of nine months after the
effective date of the Initial Registration Statement when a prospectus relating
to the Stock is required to be delivered any event occurs as a result of which
the Prospectus as then amended or supplemented would include any untrue
statement of a material fact, or omit to state any material fact necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, or if it is necessary at any time to amend the Prospectus
to comply with the Securities Act, the Company will promptly notify the
Representatives thereof and upon their request will prepare an amended or
supplemented Prospectus which will correct such statement or omission or effect
such compliance. The Company will furnish without charge to each Underwriter and
to any dealer in securities as many copies as the Representatives may from time
to time reasonably request of such amended or supplemented Prospectus; and in
case any Underwriter is required to deliver a prospectus relating to the Stock
nine months or more after the effective date of the Initial Registration
Statement, the Company upon the request of the Representatives and at the
expense of such Underwriter will prepare promptly an amended or supplemented
Prospectus as may be necessary to permit compliance with the requirements of
Section 10(a)(3) of the Securities Act.
c. The Company will furnish promptly to each of the Representatives and to counsel for the Underwriters a conformed copy of each of the Registration Statements as originally filed with the Commission, and each amendment thereto filed with the Commission, including all consents and exhibits filed therewith.
d. The Company will deliver promptly to the Representatives in New York City such number of the following documents as the Representatives shall reasonably request: (i) conformed copies of the Registration Statements as originally filed with the Commission and each amendment thereto (in each case excluding exhibits), (ii) each Preliminary Prospectus, (iii) the Prospectus (not later than 10:00 A.M., New York time, of the business day following the execution and delivery of this Agreement) and any amended or supplemented Prospectus (not later than 10:00 A.M., New York City time, on the business day following the date of such amendment or supplement).
e. The Company will make generally available to its stockholders as soon as practicable, but in any event not later than eighteen months after the effective date of the Registration
Statement (as defined in Rule 158(c) under the Securities Act), an earnings statement of the Company and its subsidiaries (which need not be audited) complying with Section 11(a) of the Securities Act and the Rules and Regulations (including, at the option of the Company, Rule 158).
f. The Company will promptly take from time to time such actions as the Representatives may reasonably request to qualify the Stock for offering and sale under the securities or Blue Sky laws of such jurisdictions as the Representatives may designate and to continue such qualifications in effect for so long as required for the distribution of the Stock; PROVIDED that the Company and its subsidiaries shall not be obligated to qualify as foreign corporations in any jurisdiction in which they are not so qualified or to file a general consent to service of process in any jurisdiction;
g. During the period of five years from the date hereof, the Company will deliver to the Representatives and, upon request, to each of the other Underwriters, (i) as soon as they are available, copies of all reports or other communications furnished to shareholders and (i) as soon as they are available, copies of any reports and financial statements furnished or filed with the Commission pursuant to the Exchange Act or any national securities exchange or automatic quotation system on which the Stock is listed or quoted.
h. The Company will not directly or indirectly offer, sell, assign, transfer, pledge, contract to sell, or otherwise dispose of any shares of Common Stock or securities convertible into or exercisable or exchangeable for Common Stock for a period of 180 days from the date of the Prospectus without the prior written consent of SG Cowen other than the Company's sale of the Stock hereunder and the issuance of shares pursuant to employee benefit plans, qualified stock option plans or other employee compensation plans existing on the date hereof or pursuant to currently outstanding options, warrants or rights; The Company will cause each officer, director and shareholder listed in Schedule C to furnish to the Representatives, prior to the First Closing Date, a letter, substantially in the form of Exhibit I hereto, pursuant to which each such person shall agree not to directly or indirectly offer, sell, assign, transfer, pledge, contract to sell, or otherwise dispose of any shares of Common Stock or securities convertible into or exercisable or exchangeable for Common Stock for a period of 180 days from the date of the Prospectus, without the prior written consent of SG Cowen.
i. The Company will supply the Representatives with copies of all correspondence to and from, and all documents issued to and by, the Commission in connection with the registration of the Stock under the Securities Act.
j. Prior to each of the Closing Dates the Company will furnish to the Representatives, as soon as they have been prepared, copies of any unaudited interim consolidated financial statements of the Company for any periods subsequent to the periods covered by the financial statements appearing in the Registration Statement and the Prospectus.
k. Prior to each of the Closing Dates, the Company will not issue any press release or other communication directly or indirectly or hold any press conference with respect to the
Company, its condition, financial or otherwise, or earnings, business affairs or business prospects (except for routine oral marketing communications in the ordinary course of business and consistent with the past practices of the Company and of which the Representatives are notified), without the prior written consent of the Representatives, unless in the judgment of the Company and its counsel, and after notification to the Representatives, such press release or communication is required by law.
l. In connection with the offering of the Stock, until SG Cowen shall have notified the Company of the completion of the resale of the Stock, the Company will not, and will cause its affiliated purchasers (as defined in Regulation M under the Exchange Act) not to, either alone or with one or more other persons, bid for or purchase, for any account in which it or any of its affiliated purchasers has a beneficial interest, any Stock, or attempt to induce any person to purchase any Stock; and not to, and to cause its affiliated purchasers not to, make bids or purchase for the purpose of creating actual, or apparent, active trading in or of raising the price of the Stock.
m. The Company will not take any action prior to the Option Closing Date
which would require the Prospectus to be amended or supplemented pursuant to
Section 4(b);
n. The Company will apply the net proceeds from the sale of the Stock as set forth in the Prospectus under the heading "Use of Proceeds."
5. PAYMENT OF EXPENSES. The Company agrees with the Underwriter to pay (a) the costs incident to the authorization, issuance, sale, preparation and delivery of the Stock and any taxes payable in that connection; (b) the costs incident to the Registration of the Stock under the Securities Act; (c) the costs incident to the preparation, printing and distribution of the Registration Statement, Preliminary Prospectus, Prospectus any amendments and exhibits thereto, the costs of printing, reproducing and distributing the "Agreement Among Underwriters" between the Representatives and the Underwriters, the Master Selected Dealers' Agreement, the Underwriters' Questionnaire and this Agreement by mail, telex or other means of communications; (d) the fees and expenses (including related fees and expenses of counsel for the Underwriters) incurred in connection with filings made with the National Association of Securities Dealers; (e) any applicable listing or other fees; (f) the fees and expenses of qualifying the Stock under the securities laws of the several jurisdictions as provided in Section 4(f) and of preparing, printing and distributing Blue Sky Memoranda and Legal Investment Surveys (including related fees and expenses of counsel to the Underwriters); (g) all fees and expenses of the registrar and transfer agent of the Stock; and (h) all other costs and expenses incident to the performance of the obligations of the Company under this Agreement (including, without limitation, the fees and expenses of the Company's counsel and the Company's independent accountants); provided that, except as otherwise provided in this Section 5 and in Section 10, the Underwriters shall pay their own costs and expenses, including the fees and expenses of their counsel, any transfer taxes on the Stock which they may sell and the expenses of advertising any offering of the Stock made by the Underwriters.
6. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The respective obligations of the several Underwriters hereunder are subject to the accuracy, when made and on each of the Closing Dates, of the representations and warranties of the Company contained herein, to the accuracy of the statements of the Company made in any certificates pursuant to the provisions hereof, to the performance by the Company of their obligations hereunder, and to each of the following additional terms and conditions:
a. No stop order suspending the effectiveness of either the Registration Statements shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the Commission, and any request for additional information on the part of the Commission (to be included in the Registration Statements or the Prospectus or otherwise) shall have been complied with to the reasonable satisfaction of the Representatives. The Rule 462(b) Registration Statement, if any, and the Prospectus shall have been timely filed with the Commission in accordance with Section 4(a).
b. None of the Underwriters shall have discovered and disclosed to the Company on or prior to the Closing Date that the Registration Statement or the Prospectus or any amendment or supplement thereto contains an untrue statement of a fact which, in the opinion of counsel for the Underwriters, is material or omits to state any fact which, in the opinion of such counsel, is material and is required to be stated therein or is necessary to make the statements therein not misleading.
c. All corporate proceedings and other legal matters incident to the authorization, form and validity of each of this Agreement, the Stock, the Registration Statement and the Prospectus and all other legal matters relating to this Agreement and the transactions contemplated hereby shall be reasonably satisfactory in all material respects to counsel for the Underwriters, and the Company shall have furnished to such counsel all documents and information that they may reasonably request to enable them to pass upon such matters.
d. Wilson Sonsini Goodrich & Rosati, Professional Corporation shall have furnished to the Representatives such counsel's written opinion, as counsel to the Company, addressed to the Underwriters and dated the Closing Date, in form and substance reasonably satisfactory to the Representatives, to the effect that:
(i) The Company and each of its subsidiaries have been duly incorporated and are validly existing as corporations in good standing under the laws of their respective jurisdictions of incorporation, are duly qualified to do business and are in good standing as foreign corporations in each jurisdiction in which their respective ownership or lease of property or the conduct of their respective businesses requires such qualification, and have all power and authority necessary to own or hold their respective properties and to conduct the businesses in which they are engaged, except where the failure to so qualify or have such power or authority would not have, singularly or in the aggregate, a Material Adverse Effect.
(ii) The Company has an authorized capitalization as set forth in the Prospectus, and all of the issued shares of capital stock of the Company, including the Stock being delivered on the Closing Date, have been duly and validly authorized and issued, are fully
paid and non-assessable and conform to the description thereof contained in the Prospectus.
(iii) All the outstanding shares of capital stock of each subsidiary of the Company have been duly authorized and validly issued, are fully paid and nonassessable and, except to the extent set forth in the Prospectus, are owned by the Company directly or indirectly through one or more wholly-owned subsidiaries, free and clear of any claim, lien, encumbrance, security interest, restriction upon voting or transfer or any other claim of any third party.
(iv) There are no preemptive or other rights to subscribe for or to purchase, nor any restriction upon the voting or transfer of, any shares of the Stock pursuant to the Company's charter or by-laws or any agreement or other instrument known to such counsel.
(v) This Agreement has been duly authorized, executed and delivered by the Company.
(vi) The execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby will not conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument known to such counsel after reasonable investigation to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries is bound or to which any of the properties or assets of the Company or any of its subsidiaries is subject, nor will such actions result in any violation of the Charter or by-laws of the Company or of any of its subsidiaries or any statute or any order, rule or regulation of any court or governmental agency or body or court having jurisdiction over the Company or any of its subsidiaries or any of their properties or assets.
(vii) Except for the registration of the Stock under the Securities Act and such consents, approvals, authorizations, registrations or qualifications as may be required under the Exchange Act and applicable state securities laws in connection with the purchase and distribution of the Stock by the Underwriters, no consent, approval, authorization or order of, or filing or registration with, any such court or governmental agency or body is required for the execution, delivery and performance of this Agreement by the Company and the consummation of the transactions contemplated hereby.
(viii) The statements in the Prospectus under the heading "Shares Eligible for Future Sale" and "Description of Capital Stock" to the extent that they constitute summaries of matters of law or regulation or legal conclusions, have been reviewed by such counsel and fairly summarize the matters described therein in all material respects.
(ix) The description in the Registration Statement and Prospectus of statutes, legal or governmental proceedings and contracts and other documents are accurate in all material respects; and to the best of such counsel's knowledge, there are no statutes, legal or governmental proceedings, contracts or other documents of a character required to be described in the Registration Statement or Prospectus or to be filed as exhibits to the Registration Statement which are not described or filed as required.
(x) To the best of such counsel's knowledge, neither the Company nor any of its subsidiaries (i) is in violation of its charter or by-laws, (ii) is in default, and no event has occurred, which, with notice or lapse of time or both, would constitute a default, in the due performance or observance of any term, covenant or condition contained in any agreement or instrument to which it is a party or by which it is bound or to which any of its properties or assets is subject or (iii) is in violation of any law, ordinance, governmental rule, regulation or court decree to which it or its property or assets may be subject or has failed to obtain any license, permit, certificate, franchise or other governmental authorization or permit necessary to the ownership of its property or to the conduct of its business except, in the case of clauses (ii) and (iii), for those defaults, violations or failures which, either individually or in the aggregate, would not have a Material Adverse Effect.
(xi) To the best of such counsel's knowledge and other than as set forth in the Prospectus, there are no legal or governmental proceedings pending to which the Company or any of its subsidiaries is a party or of which any property or asset of the Company or any of its subsidiaries is the subject which, singularly or in the aggregate, if determined adversely to the Company or any of its subsidiaries, might have a Material Adverse Effect or would prevent or adversely affect the ability of the Company to perform its obligations under this Agreement; and, to the best of such counsel's knowledge, no such proceedings are threatened or contemplated by governmental authorities or threatened by others.
(xii) The Registration Statement was declared effective under the
Securities Act as of the date and time specified in such opinion, the Rule
462(b) Registration Statement, if any, was filed with the Commission on the date
specified therein, the Prospectus was filed with the Commission pursuant to the
subparagraph of Rule 424(b) of the Rules and Regulations specified in such
opinion on the date specified therein and no stop order suspending the
effectiveness of the Registration Statement has been issued and, to the
knowledge of such counsel, no proceeding for that purpose is pending or
threatened by the Commission.
(xiii) The Registration Statements, as of the respective effective dates and the Prospectus, as of its date, and any further amendments or supplements thereto, as of their respective dates, made by the Company prior to the Closing Date (other than the financial statements and other financial data contained therein, as to which such counsel need express no opinion) complied as to form in all material respects with the requirements of the Securities Act and the Rules and Regulations (other than the financial statements and related schedules therein, as to which such counsel need express no opinion), when they were filed with the Commission.
(xiv) To the best of such counsel's no person or entity has the right to require registration of shares of Common Stock or other securities of the Company because of the filing or effectiveness of the Registration Statements or otherwise, except for persons and entities who have expressly waived such right or who have been given proper notice and have failed to exercise such right within the time or times required under the terms and conditions of such right.
(xv) Neither the Company nor any of its subsidiaries is an "investment company" within the meaning of the Investment Company Act and the rules and regulations of
the Commission thereunder.
Such counsel shall also have furnished to the Representatives a written statement, addressed to the Underwriters and dated the Closing Date, in form and substance satisfactory to the Representatives, to the effect that (x) such counsel has acted as counsel to the Company in connection with the preparation of the Registration Statements (y) based on such counsel's examination of the Registration Statements and such counsel's investigations made in connection with the preparation of the Registration Statements and "conferences with certain officers and employees of and with auditors for and counsel to the Company", such counsel has no reason to believe that the Registration Statements, as of the respective effective dates, contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary in order to make the statements therein not misleading, or that the Prospectus contains any untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading when they were filed with the Commission contained any untrue statement of a material fact or omitted to state any material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading]; it being understood that such counsel need express no opinion as to the financial statements or other financial data contained in the Registration Statement or the Prospectus.
The foregoing opinion and statement may be qualified by a statement to the effect that such counsel has not independently verified the accuracy, completeness or fairness of the statements contained in the Registration Statement or the Prospectus and takes no responsibility therefor except to the extent set forth in the opinion described in clauses (viii) and (ix) above.
e. Townsend & Townsend & Crew shall have furnished to the Representatives such counsel's written opinion, as intellectual property counsel to the Company addressed to the Underwriters and dated the Closing Date, in form and substance reasonably satisfactory to the Representatives, to the effect that:
(i) The Company is listed in the records of the United States Patent and Trademark Office as the holder of record of the patents listed on a schedule to such opinion (the "Patents") and each of the applications listed on a schedule to such opinion (the "Applications"). To the knowledge of such counsel, there are no claims of third parties to any ownership interest or lien with respect to any of the Patents or Applications. Such counsel is not aware of any material defect in form in preparation or filing of the Applications on behalf of the Company. To the knowledge of such counsel, the Applications are being pursued by the Company. To the knowledge of such counsel, the Company owns as its sole property the Patents and pending Applications.
(ii) The Company is listed in the records of the appropriate foreign offices as the sole holder of record of the foreign patents listed on a schedule to such opinion (the "Foreign Patents") and each of the applications listed on a schedule to such opinion (the "Foreign Applications"). Such counsel knows of no claims of third parties to any ownership interest or lien with respect to the Foreign Patents or Foreign Applications. Such counsel is not aware of
any material defect of form in the preparation or filing of the Foreign Applications on behalf of the Company. To the knowledge of such counsel, the Foreign Applications are being pursued by the Company. To the knowledge of such counsel, the Company owns as its sole property the Foreign Patents and pending Foreign Applications.
(iii) Such counsel knows of no reason why the Patents or Foreign Patents are not valid as issued. Such counsel has no knowledge of any reason why any patent to be issued as a result of any Application or Foreign Application would not be valid or would not afford the Company useful patent protection with respect thereto.
(iv) As to the statements under the captions ["Risk Factors -- We rely on our intellectual property rights and may be unable to protect those rights" and "Business -- Intellectual Property,"] nothing has come to the attention of such counsel which caused them to believe that the above-mentioned sections of the Registration Statement, at the time the Registration Statement became effective and at all times subsequent thereto up to and on the Closing Date and on any later date on which the Optional Stock are to be, as the case may be, the above-mentioned sections of the Registration Statement, Prospectus and any amendment or supplement thereto made available and reviewed by such counsel contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.
Such counsel knows of no material action, suit, claim or proceeding relating to patents, patent rights or licenses, trademarks or trademark rights, copyrights, collaborative research, licenses or royalty arrangements or agreements or trade secrets, know-how or proprietary techniques, including processes and substances, owned by or affecting the business or operations of the Company which are pending or threatened against the Company or any of its officers or directors.
f. The Representatives shall have received from Brobeck, Phleger & Harrison LLP, counsel for the Underwriters, such opinion or opinions, dated the Closing Date, with respect to such matters as the Underwriters may reasonably require, and the Company shall have furnished to such counsel such documents as they request for enabling them to pass upon such matters.
g. At the time of the execution of this Agreement, the Representatives shall have received from PriceWaterhouse Coopers LLP a letter, addressed to the Underwriters and dated such date, in form and substance satisfactory to the Representatives (i) confirming that they are independent certified public accountants with respect to the Company and its subsidiaries within the meaning of the Securities Act and the Rules and Regulations and (ii) stating the conclusions and findings of such firm with respect to the financial statements and certain financial information contained or incorporated by reference in the Prospectus.
h. On the Closing Date, the Representatives shall have received a letter (the "bring-down letter") from PriceWaterhouse Coopers LLP addressed to the Underwriters and dated the Closing Date confirming, as of the date of the bring-down letter (or, with respect to matters involving changes or developments since the respective dates as of which specified financial
information is given in the Prospectus as of a date not more than three business days prior to the date of the bring-down letter), the conclusions and findings of such firm with respect to the financial information and other matters covered by its letter delivered to the Representatives concurrently with the execution of this Agreement pursuant to Section 6(g).
i. The Company shall have furnished to the Representatives a certificate,
dated the Closing Date, of its Chairman of the Board, its President or a Vice
President and its chief financial officer stating that (i) such officers have
carefully examined the Registration Statements and the Prospectus and, in their
opinion, the Registration Statements as of their respective effective dates and
the Prospectus, as of each such effective date, did not include any untrue
statement of a material fact and did not omit to state a material fact required
to be stated therein or necessary to make the statements therein not misleading,
(ii) since the effective date of the Initial Registration Statement no event has
occurred which should have been set forth in a supplement or amendment to the
Registration Statements or the Prospectus, (iii) to the best of their knowledge
after reasonable investigation, as of the Closing Date, the representations and
warranties of the Company in this Agreement are true and correct and the Company
has complied with all agreements and satisfied all conditions on its part to be
performed or satisfied hereunder at or prior to the Closing Date, and (iv)
subsequent to the date of the most recent financial statements in the
Prospectus, there has been no material adverse change in the financial position
or results of operation of the Company and its subsidiaries, or any change, or
any development including a prospective change, in or affecting the condition
(financial or otherwise), results of operations, business or prospects of the
Company and its subsidiaries taken as a whole, except as set forth in the
Prospectus.
j. Neither the Company nor any of its subsidiaries shall have sustained
since the date of the latest audited financial statements included in the
Prospectus any loss or interference with its business from fire, explosion,
flood or other calamity, whether or not covered by insurance, or from any labor
dispute or court or governmental action, order or decree, otherwise than as set
forth or contemplated in the Prospectus (ii) since such date there shall not
have been any change in the capital stock or long-term debt of the Company or
any of its subsidiaries or any change, or any development involving a
prospective change, in or affecting the business, general affairs, management,
financial position, stockholders' equity or results of operations of the Company
and its subsidiaries, otherwise than as set forth or contemplated in the
Prospectus, the effect of which, in any such case described in clause (i) or
(ii), is, in the judgment of the Representatives, so material and adverse as to
make it impracticable or inadvisable to proceed with the sale or delivery of the
Stock on the terms and in the manner contemplated in the Prospectus.
k. No action shall have been taken and no statute, rule, regulation or order shall have been enacted, adopted or issued by any governmental agency or body which would, as of the Closing Date, prevent the issuance or sale of the Stock; and no injunction, restraining order or order of any other nature by any federal or state court of competent jurisdiction shall have been issued as of the Closing Date which would prevent the issuance or sale of the Stock.
l. Subsequent to the execution and delivery of this Agreement (i) no downgrading shall have occurred in the rating accorded the Company's debt securities by any "nationally
recognized statistical rating organization," as that term is defined by the Commission for purposes of Rule 436(g)(2) of the Rules and Regulations and (ii) no such organization shall have publicly announced that it has under surveillance or review (other than an announcement with positive implications of a possible upgrading), its rating of any of the Company's debt securities.
m. Subsequent to the execution and delivery of this Agreement there shall not have occurred any of the following: (i) trading in securities generally on the New York Stock Exchange or the American Stock Exchange or in the over-the-counter market, or trading in any securities of the Company on any exchange or in the over-the-counter market, shall have been suspended or minimum prices shall have been established on any such exchange or such market by the Commission, by such exchange or by any other regulatory body or governmental authority having jurisdiction, (ii) a banking moratorium shall have been declared by Federal or state authorities, (iii) the United States shall have become engaged in hostilities, there shall have been an escalation in hostilities involving the United States or there shall have been a declaration of a national emergency or war by the United States or (iv) there shall have occurred such a material adverse change in general economic, political or financial conditions (or the effect of international conditions on the financial markets in the United States shall be such) as to make it, in the judgment of the Representatives, impracticable or inadvisable to proceed with the sale or delivery of the Stock on the terms and in the manner contemplated in the Prospectus.
n. The National Market System shall have approved the Stock for inclusion, subject only to official notice of issuance.
o. SG Cowen shall have received the written agreements, substantially in the form of Exhibit I hereto, of the officers, directors and shareholders of the Company listed in Schedule C to this Agreement.
p. All opinions, letters, evidence and certificates mentioned above or elsewhere in this Agreement shall be deemed to be in compliance with the provisions hereof only if they are in form and substance reasonably satisfactory to counsel for the Underwriters.
7. INDEMNIFICATION AND CONTRIBUTION.
a. The Company shall indemnify and hold harmless each Underwriter, its officers, employees, representatives and agents and each person, if any, who controls any Underwriter within the meaning of the Securities Act (collectively the "Underwriter Indemnified Parties" and each an "Underwriter Indemnified Party") against any loss, claim, damage or liability, joint or several, or any action in respect thereof, to which that Underwriter Indemnified Party may become subject, under the Securities Act or otherwise, insofar as such loss, claim, damage, liability or action arises out of or is based upon (i) any untrue statement or alleged untrue statement of a material fact contained in the Preliminary Prospectus , either of the Registration Statements or the Prospectus or in any amendment or supplement thereto, (ii) the omission or alleged omission to state in any Preliminary Prospectus, either of the Registration Statement or the Prospectus or in any amendment or supplement thereto a material fact required to be stated therein or necessary to make the statements therein not misleading or (iii) any act or failure to
act, or any alleged act or failure to act, by any Underwriter in connection with, or relating in any manner to , the Stock or the offering contemplated hereby, and which is included as part of or referred to in any loss, claim, damage, liability or action arising out of or based upon matters covered by clause (i) or (ii) above, (provided that the Company shall not be liable in the case of any matter covered by this clause (iii) to the extent that it is determined in a final judgement by a court of competent jurisdiction that such loss, claim, damage, liability or action resulted directly from any such act or failure to act undertaken or omitted to be taken by such Underwriter through its gross negligence or wilful misconduct) and shall reimburse each Underwriter Indemnified Party promptly upon demand for any legal or other expenses reasonably incurred by that Underwriter Indemnified Party in connection with investigating or preparing to defend or defending against or appearing as a third party witness in connection with any such loss, claim, damage, liability or action as such expenses are incurred; PROVIDED, HOWEVER, that the Company shall not be liable in any such case to the extent that any such loss, claim, damage, liability or action arises out of or is based upon (i) an untrue statement or alleged untrue statement in or omission or alleged omission from the Preliminary Prospectus, either of the Registration Statements or the Prospectus or any such amendment or supplement in reliance upon and in conformity with written information furnished to the Company through the Representatives by or on behalf of any Underwriter specifically for use therein, which information the parties hereto agree is limited to the Underwriter's Information (as defined in Section 16). This indemnity agreement is not exclusive and will be in addition to any liability which the Company might otherwise have and shall not limit any rights or remedies which may otherwise be available at law or in equity to each Underwriter Indemnified Party.
b. Each Underwriter, severally and not jointly, shall indemnify and hold harmless the Company its officers, employees, representatives and agents, each of its directors and each person, if any, who controls the Company within the meaning of the Securities Act (collectively the "Company Indemnified Parties" and each a "Company Indemnified Party"), against any loss, claim, damage or liability, joint or several, or any action in respect thereof, to which the Company Indemnified Parties may become subject, under the Securities Act or otherwise, insofar as such loss, claim, damage, liability or action arises out of or is based upon (i) any untrue statement or alleged untrue statement of a material fact contained in the Preliminary Prospectus, either of the Registration Statements or the Prospectus or in any amendment or supplement thereto or (ii) the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, but in each case only to the extent that the untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to the Company through the Representatives by or on behalf of that Underwriter specifically for use therein, and shall reimburse the Company Indemnified Parties for any legal or other expenses reasonably incurred by such parties in connection with investigating or preparing to defend or defending against or appearing as third party witness in connection with any such loss, claim, damage, liability or action as such expenses are incurred; provided that the parties hereto hereby agree that such written information provided by the Underwriters consists solely of the Underwriter's Information. This indemnity agreement is not exclusive and will be in addition to any liability which the Underwriters might otherwise have and shall not limit any rights or remedies which may otherwise be available at law or in equity to the Company Indemnified
Parties.
c. Promptly after receipt by an indemnified party under this Section 7 of notice of any claim or the commencement of any action, the indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party under this Section 7, notify the indemnifying party in writing of the claim or the commencement of that action; PROVIDED, HOWEVER, that the failure to notify the indemnifying party shall not relieve it from any liability which it may have under this Section 7 except to the extent it has been materially prejudiced by such failure; and, PROVIDED, FURTHER, that the failure to notify the indemnifying party shall not relieve it from any liability which it may have to an indemnified party otherwise than under this Section 7. If any such claim or action shall be brought against an indemnified party, and it shall notify the indemnifying party thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it wishes, jointly with any other similarly notified indemnifying party, to assume the defense thereof with counsel reasonably satisfactory to the indemnified party. After notice from the indemnifying party to the indemnified party of its election to assume the defense of such claim or action, the indemnifying party shall not be liable to the indemnified party under this Section 7 for any legal or other expenses subsequently incurred by the indemnified party in connection with the defense thereof other than reasonable costs of investigation; provided, however, that any indemnified party shall have the right to employ separate counsel in any such action and to participate in the defense thereof but the fees and expenses of such counsel shall be at the expense of such indemnified party unless (i) the employment thereof has been specifically authorized by the indemnifying party in writing, (ii) such indemnified party shall have been advised by such counsel that there may be one or more legal defenses available to it which are different from or additional to those available to the indemnifying party and in the reasonable judgment of such counsel it is advisable for such indemnified party to employ separate counsel or (iii) the indemnifying party has failed to assume the defense of such action and employ counsel reasonably satisfactory to the indemnified party, in which case, if such indemnified party notifies the indemnifying party in writing that it elects to employ separate counsel at the expense of the indemnifying party, the indemnifying party shall not have the right to assume the defense of such action on behalf of such indemnified party, it being understood, however, that the indemnifying party shall not, in connection with any one such action or separate but substantially similar or related actions in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the reasonable fees and expenses of more than one separate firm of attorneys at any time for all such indemnified parties, which firm shall be designated in writing by SG Cowen, if the indemnified parties under this Section 7 consist of any Underwriter Indemnified Party, or by the Company if the indemnified parties under this Section 7 consist of any Company Indemnified Parties. Each indemnified party, as a condition of the indemnity agreements contained in Sections 7(a) and 7(b), shall use all reasonable efforts to cooperate with the indemnifying party in the defense of any such action or claim. Subject to the provisions of Section 7(e) below, no indemnifying party shall be liable for any settlement of any such action effected without its written consent (which consent shall not be unreasonably withheld), but if settled with its written consent or if there be a final judgment for the plaintiff in any such action, the indemnifying party agrees to indemnify and hold harmless any indemnified party from and against any loss or liability by reason of such
settlement or judgment.
d. If at any time an indemnified party shall have requested that an indemnifying party reimburse the indemnified party for fees and expenses of counsel, such indemnifying party agrees that it shall be liable for any settlement of the nature contemplated by this Section 7 effected without its written consent if (i) such settlement is entered into more than 45 days after receipt by such indemnifying party of the request for reimbursement, (ii) such indemnifying party shall have received notice of the terms of such settlement at least 30 days prior to such settlement being entered into and (iii) such indemnifying party shall not have reimbursed such indemnified party in accordance with such request prior to the date of such settlement.
e. If the indemnification provided for in this Section 7 is unavailable or
insufficient to hold harmless an indemnified party under Section 7(a) or 7(b),
then each indemnifying party shall, in lieu of indemnifying such indemnified
party, contribute to the amount paid or payable by such indemnified party as a
result of such loss, claim, damage or liability, or action in respect thereof,
(i) in such proportion as shall be appropriate to reflect the relative benefits
received by the Company on the one hand and the Underwriters on the other from
the offering of the Stock or if the allocation provided by clause (i) above is
not permitted by applicable law, in such proportion as is appropriate to reflect
not only the relative benefits referred to in clause (i) above but also the
relative fault of the Company on the one hand and the Underwriters on the other
with respect to the statements or omissions which resulted in such loss, claim,
damage or liability, or action in respect thereof, as well as any other relevant
equitable considerations. The relative benefits received by the Company on the
one hand and the Underwriters on the other with respect to such offering shall
be deemed to be in the same proportion as the total net proceeds from the
offering of the Stock purchased under this Agreement (before deducting expenses)
received by the Company bear to the total underwriting discounts and commissions
received by the Underwriters with respect to the Stock purchased under this
Agreement, in each case as set forth in the table on the cover page of the
Prospectus. The relative fault shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company on the one hand or the Underwriters on the other, the
intent of the parties and their relative knowledge, access to information and
opportunity to correct or prevent such untrue statement or omission; provided
that the parties hereto agree that the written information furnished to the
Company through the Representatives by or on behalf of the Underwriters for use
in any Preliminary Prospectus, either of the Registration Statements or the
Prospectus consists solely of the Underwriter's Information. The Company and the
Underwriters agree that it would not be just and equitable if contributions
pursuant to this Section 7(e) were to be determined by pro rata allocation (even
if the Underwriters were treated as one entity for such purpose) or by any other
method of allocation which does not take into account the equitable
considerations referred to herein. The amount paid or payable by an indemnified
party as a result of the loss, claim, damage or liability, or action in respect
thereof, referred to above in this Section 7(e) shall be deemed to include, for
purposes of this Section 7(e), any legal or other expenses reasonably incurred
by such indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section 7(e), no
Underwriter shall be required to contribute any amount in excess of the amount
by which the total price at which the Stock underwritten by it and distributed to the public were offered to the public less the amount of any damages which such Underwriter has otherwise paid or become liable to pay by reason of any untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation.
f. The Underwriters' obligations to contribute as provided in this Section 7(f) are several in proportion to their respective underwriting obligations and not joint.
8. TERMINATION. The obligations of the Underwriters hereunder may be terminated by SG Cowen, in its absolute discretion by notice given to and received by the Company prior to delivery of and payment for the Firm Stock if, prior to that time, any of the events described in Sections 6(k), 6(m) or 6(n) have occurred or if the Underwriters shall decline to purchase the Stock for any reason permitted under this Agreement.
9. REIMBURSEMENT OF UNDERWRITERS' EXPENSES. If (a) this Agreement shall have been terminated pursuant to Section 8 or 10, (b) the Company shall fail to tender the Stock for delivery to the Underwriters for any reason permitted under this Agreement, or (c) the Underwriters shall decline to purchase the Stock for any reason permitted under this Agreement the Company shall reimburse the Underwriters for the fees and expenses of their counsel and for such other out-of-pocket expenses as shall have been reasonably incurred by them in connection with this Agreement and the proposed purchase of the Stock, and upon demand the Company shall pay the full amount thereof to the SG Cowen. If this Agreement is terminated pursuant to Section 11 by reason of the default of one or more Underwriters, the Company shall not be obligated to reimburse any defaulting Underwriter on account of those expenses.
10. SUBSTITUTION OF UNDERWRITERS
a. If any Underwriter or Underwriters shall default in its or their obligations to purchase shares of Stock hereunder and the aggregate number of shares which such defaulting Underwriter or Underwriters agreed but failed to purchase does not exceed ten percent (10%) of the total number of shares underwritten, the other Underwriters shall be obligated severally, in proportion to their respective commitments hereunder, to purchase the shares which such defaulting Underwriter or Underwriters agreed but failed to purchase. If any Underwriter or Underwriters shall so default and the aggregate number of shares with respect to which such default or defaults occur is more than ten percent (10%) of the total number of shares underwritten and arrangements satisfactory to the Representatives and the Company for the purchase of such shares by other persons are not made within forty-eight (48) hours after such default, this Agreement shall terminate.
b. If the remaining Underwriters or substituted Underwriters are required hereby or agree to take up all or part of the shares of Stock of a defaulting Underwriter or Underwriters as provided in this Section 10, (i) the Company shall have the right to postpone the Closing Dates for a period of not more than five (5) full business days in order that the Company may effect whatever changes may thereby be made necessary in the Registration Statement or the
Prospectus, or in any other documents or arrangements, and the Company agrees promptly to file any amendments to the Registration Statement or supplements to the Prospectus which may thereby be made necessary, and (ii) the respective numbers of shares to be purchased by the remaining Underwriters or substituted Underwriters shall be taken as the basis of their underwriting obligation for all purposes of this Agreement. Nothing herein contained shall relieve any defaulting Underwriter of its liability to the Company or the other Underwriters for damages occasioned by its default hereunder. Any termination of this Agreement pursuant to this Section 10 shall be without liability on the part of any non-defaulting Underwriter or the Company, except expenses to be paid or reimbursed pursuant to Sections 5 and 9 and except the provisions of Section 7 shall not terminate and shall remain in effect.
11. SUCCESSORS; PERSONS ENTITLED TO BENEFIT OF AGREEMENT. This Agreement shall inure to the benefit of and be binding upon the several Underwriters, the Company and their respective successors. Nothing expressed or mentioned in this Agreement is intended or shall be construed to give any person other than the persons mentioned in the preceding sentence any legal or equitable right, remedy or claim under or in respect of this Agreement, or any provisions herein contained, this Agreement and all conditions and provisions hereof being intended to be and being for the sole and exclusive benefit of such persons and for the benefit of no other person; except that the representations, warranties, covenants, agreements and indemnities of the Company contained in this Agreement shall also be for the benefit of the Underwriter Indemnified Parties, and the indemnities of the several Underwriters shall also be for the benefit of the Company Indemnified Parties.
12. SURVIVAL OF INDEMNITIES, REPRESENTATIONS, WARRANTIES, ETC. The respective indemnities, covenants, agreements, representations, warranties and other statements of the Company and the several Underwriters, as set forth in this Agreement or made by them respectively, pursuant to this Agreement, shall remain in full force and effect, regardless of any investigation made by or on behalf of any Underwriter, the Company or any person controlling any of them and shall survive delivery of and payment for the Stock.
13. NOTICES. All statements, requests, notices and agreements hereunder shall be in writing, and:
a. if to the Underwriters, shall be delivered or sent by mail, telex or
facsimile transmission to SG Securities Corporation Attention:
[ ] (Fax: 212-[ ]);
b. if to the Company shall be delivered or sent by mail, telex or facsimile
transmission to Ciphergen Biosystems, Inc. Attention: [_________] (Fax:
_________); PROVIDED, HOWEVER, that any notice to an Underwriter pursuant to
Section 7 shall be delivered or sent by mail, telex or facsimile transmission to
such Underwriter at its address set forth in its acceptance telex to the
Representatives, which address will be supplied to any other party hereto by the
Representatives upon request. Any such statements, requests, notices or
agreements shall take effect at the time of receipt thereof.
14. DEFINITION OF CERTAIN TERMS. For purposes of this Agreement, (a) "business day" means any day on which the New York Stock Exchange, Inc. is open for trading and (b) "subsidiary" has the meaning set forth in Rule 405 of the Rules and Regulations.
15. GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of New York.
16. UNDERWRITERS' INFORMATION. The parties hereto acknowledge and agree that, for all purposes of this Agreement, the Underwriters' Information consists solely of the following information in the Prospectus: (i) the last paragraph on the front cover page concerning the terms of the offering by the Underwriters; and (ii) the statements concerning the Underwriters under the heading "Underwriting."
17. AUTHORITY OF THE REPRESENTATIVES. In connection with this Agreement, you will act for and on behalf of the several Underwriters, and any action taken under this Agreement by the Representatives, will be binding on all the Underwriters.
18. PARTIAL UNENFORCEABILITY. The invalidity or unenforceability of any Section, paragraph or provision of this Agreement shall not affect the validity or enforceability of any other Section, paragraph or provision hereof. If any Section, paragraph or provision of this Agreement is for any reason determined to be invalid or unenforceable, there shall be deemed to be made such minor changes (and only such minor changes) as are necessary to make it valid and enforceable.
19. GENERAL. This Agreement constitutes the entire agreement of the parties to this Agreement and supersedes all prior written or oral and all contemporaneous oral agreements, understandings and negotiations with respect to the subject matter hereof. In this Agreement, the masculine, feminine and neuter genders and the singular and the plural include one another. The section headings in this Agreement are for the convenience of the parties only and will not affect the construction or interpretation of this Agreement. This Agreement may be amended or modified, and the observance of any term of this Agreement may be waived, only by a writing signed by the Company and the Representatives.
20. COUNTERPARTS. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.
If the foregoing is in accordance with your understanding of the agreement between the Company and the several Underwriters, kindly indicate your acceptance in the space provided for that purpose below.
Very truly yours,
CIPHERGEN BIOSYSTEMS, INC.
Title:
Accepted as of the date first above written:
SG COWEN SECURITIES CORPORATION
ING BARINGS LLC
WARBURG DILLON READ LLC
Acting on their own behalf and as
Representatives of several Underwriters
referred to in the foregoing Agreement.
By: SG COWEN SECURITIES CORPORATION
SCHEDULE A
NUMBER OF NUMBER OF
FIRM SHARES OPTIONAL SHARES
TO BE TO BE
NAME PURCHASED PURCHASED
---- ----------- ---------------
SG COWEN SECURITIES CORPORATION
ING Barings LLC
Warburg Dillon Read LLC
--------- ----------
Total
========= ==========
|
SCHEDULE C
[list of shareholders subject to Section 4(h)]
EXHIBIT I
LOCK-UP AGREEMENT
----------, ----
SG Cowen Securities Corporation
ING Barings LLC
Warburg Dillon Read LLC
As representatives of the
several Underwriters
c/o SG Cowen Securities Corporation
Financial Square
New York, New York 10005
Re: Ciphergen Biosystems, Inc. Shares of Common Stock
Dear Sirs:
In order to induce SG Cowen Securities Corporation ("SG Cowen"), ING Barings LLC and Warburg Dillon Read LLC (together with SG Cowen, the "Representatives"), to enter in to a certain underwriting agreement with Ciphergen Biosystems LLC, a Delaware corporation (the "Company"), with respect to the public offering of shares of the Company's Common Stock, par value $0.001 per share ("Common Stock"), the undersigned hereby agrees that for a period of 180 days following the date of the final prospectus filed by the Company with the Securities and Exchange Commission in connection with such public offering, the undersigned will not, without the prior written consent of SG Cowen, directly or indirectly, offer, sell, assign, transfer, pledge, contract to sell, or otherwise dispose of, any shares of Common Stock (including, without limitation, Common Stock which may be deemed to be beneficially owned by the undersigned in accordance with the rules and regulations promulgated under the Securities Act of 1933, as the same may be amended or supplemented from time to time (such shares, the "Beneficially Owned Shares")) or securities convertible into or exercisable or exchangeable in Common Stock.
Anything contained herein to the contrary notwithstanding, any person to whom shares of Common Stock or Beneficially Owned Shares are transferred from the undersigned shall be bound by the terms of this Agreement.
In addition, the undersigned hereby waives, from the date hereof until the expiration of 180-day period following the date of the Company's final Prospectus, any and all rights, if any, to request or demand registration pursuant to the Securities Act of any shares of Common Stock that are registered in the name of the undersigned or that are Beneficially Owned Shares. In order to enable the aforesaid covenants to be enforced, the undersigned hereby
consents to the placing of legends and/or stop-transfer orders with the transfer agent of the Common Stock with respect to any shares of Common Stock or Beneficially Owned Shares.
Title:
Exhibit 3.2
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
CIPHERGEN BIOSYSTEMS, INC.
Ciphergen Biosystems, Inc., a corporation organized and existing under the laws of the State of Delaware, hereby certifies as follows:
A. The name of the corporation is Ciphergen Biosystems, Inc. The corporation was originally incorporated under the same name, and the original Certificate of Incorporation was filed with the Secretary of State of the State of Delaware on May 23, 2000.
B. Pursuant to Sections 242 and 245 of the General Corporation Law of the State of Delaware, this Restated Certificate of Incorporation restates and amends the provisions of the Certificate of Incorporation of the corporation.
C. The text of the Certificate of Incorporation is hereby amended and restated in its entirety to read as follows:
ARTICLE I
The name of this corporation is Ciphergen Biosystems, Inc.
ARTICLE II
The address of the corporation's registered office in the State of Delaware is 1209 Orange Street, City of Wilmington, County of New Castle, Delaware 19801. The name of its registered agent at such address is The Corporation Trust Company.
ARTICLE III
The purpose of the corporation is to engage in any lawful act or activity for which a corporation may be organized under the General Corporation Law of Delaware.
ARTICLE IV
The corporation is authorized to issue two classes of shares of stock to be designated, respectively, Common Stock, $0.001 par value, and Preferred Stock, $0.001 par value. The total number of shares that the corporation is authorized to issue is 85,000,000 shares. The number of shares of Common Stock authorized is 80,000,000. The number of shares of Preferred authorized is 5,000,000.
The Preferred Stock may be issued from time to time in one or more series pursuant to a resolution or resolutions providing for such issue duly adopted by the board of directors (authority to do so being hereby expressly vested in the board). The board of directors is further authorized to determine or alter the rights, preferences, privileges and restrictions granted to or imposed upon any wholly unissued series of Preferred Stock and to fix the number of shares of any series of Preferred Stock and the designation of any such series of Preferred Stock. The board of directors, within the limits and restrictions stated in any resolution or resolutions of the board of directors originally fixing the number of shares constituting any series, may increase or decrease (but not below the number of shares of any such series then outstanding) the number of shares of any series subsequent to the issue of shares of that series.
The authority of the board of directors with respect to each such class or series shall include, without limitation of the foregoing, the right to determine and fix:
(a) the distinctive designation of such class or series and the number of shares to constitute such class or series;
(b) the rate at which dividends on the shares of such class or series shall be declared and paid, or set aside for payment, whether dividends at the rate so determined shall be cumulative or accruing, and whether the shares of such class or series shall be entitled to any participating or other dividends in addition to dividends at the rate so determined, and if so, on what terms;
(c) the right or obligation, if any, of the corporation to redeem shares of the particular class or series of Preferred Stock and, if redeemable, the price, terms and manner of such redemption;
(d) the special and relative rights and preferences, if any, and the amount or amounts per share that the shares of such class or series of Preferred Stock shall be entitled to receive upon any voluntary or involuntary liquidation, dissolution or winding up of the corporation;
(e) the terms and conditions, if any, upon which shares of such class or series shall be convertible into, or exchangeable for, shares of capital stock of any other class or series, including the price or prices or the rate or rates of conversion or exchange and the terms of adjustment, if any;
(f) the obligation, if any, of the corporation to retire, redeem or purchase shares of such class or series pursuant to a sinking fund or fund of a similar nature or otherwise, and the terms and conditions of such obligation;
(g) voting rights, if any, on the issuance of additional shares of such class or series or any shares of any other class or series of Preferred Stock;
(h) limitations, if any, on the issuance of additional shares of such class or series or any shares of any other class or series of Preferred Stock; and
(i) such other preferences, powers, qualifications, special or relative rights and privileges thereof as the board of directors of the corporation, acting in accordance with this Restated Certificate of Incorporation, may deem advisable and are not inconsistent with law and the provisions of this Restated Certificate of Incorporation.
ARTICLE V
The corporation reserves the right to amend, alter, change, or repeal any provision contained in this Certificate of Incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred upon the stockholders herein are granted subject to this right.
ARTICLE VI
The corporation is to have perpetual existence.
ARTICLE VII
1. LIMITATION OF LIABILITY. To the fullest extent permitted by the General Corporation Law of the State of Delaware as the same exists or as may hereafter be amended, a director of the corporation shall not be personally liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director.
2. INDEMNIFICATION. The corporation shall indemnify to the fullest extent permitted by law any person made or threatened to be made a party to an action or proceeding, whether criminal, civil, administrative or investigative, by reason of the fact that such person or his or her testator or intestate is or was a director or officer of the corporation, or any predecessor of the corporation, or serves or served at any other enterprise as a director, officer or employee at the request of the corporation or any predecessor to the corporation and may indemnify to the fullest extent permitted by law any person made or threatened to be made a party to an action or proceeding, whether criminal, civil, administrative or investigative, by reason of the fact that such person or his or her testator or intestate is or was an employee of the corporation, or any predecessor of the corporation, or serves or served at any other enterprise as a director, officer or employee at the request of the corporation or any predecessor to the corporation.
3. AMENDMENTS. Neither any amendment nor repeal of this Article VII, nor the adoption of any provision of the corporation's Certificate of Incorporation inconsistent with this Article VII, shall eliminate or reduce the effect of this Article VII, in respect of any matter occurring, or any action or proceeding accruing or arising or that, but for this Article VII, would accrue or arise, prior to such amendment, repeal, or adoption of an inconsistent provision.
ARTICLE VIII
In the event any shares of Preferred Stock shall be redeemed or converted pursuant to the terms hereof, the shares so converted or redeemed shall not revert to the status of authorized but unissued shares, but instead shall be canceled and shall not be re-issuable by the corporation.
ARTICLE IX
Holders of stock of any class or series of the corporation shall not be entitled to cumulate their votes for the election of directors or any other matter submitted to a vote of the stockholders, unless such cumulative voting is required pursuant to Sections 214 of the Delaware General Corporation Law, in which event each such holder shall be entitled to as many votes as shall equal the number of votes which (except for this provision as to cumulative voting) such holder would be entitled to cast for the election of directors with respect to his shares of stock multiplied by the number of directors to be elected by him, and the holder may cast all of such votes for a single director or may distribute them among the number of directors to be voted for, or for any two or more of them as such holder may see fit, so long as the name of the candidate for director shall have been placed in nomination prior to the voting and the stockholder, or any other holder of the same class or series of stock, has given notice at the meeting prior to the voting of the intention to cumulate votes.
1. NUMBER OF DIRECTORS. The number of directors which constitutes
the whole Board of Directors of the corporation shall be designated in the
Amended and Restated Bylaws of the corporation. The directors shall be
divided into three classes with the term of office of the first class (Class
I) to expire at the annual meeting of stockholders held in 2001; the term of
office of the second class (Class II) to expire at the annual meeting of
stockholders held in 2002; the term of office of the third class (Class III)
to expire at the annual meeting of stockholders held in 2003; and thereafter
for each such term to expire at each third succeeding annual meeting of
stockholders after such election.
2. ELECTION OF DIRECTORS. Elections of directors need not be by written ballot unless the Amended and Restated Bylaws of the corporation shall so provide.
ARTICLE X
In furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized to make, alter, amend or repeal the Amended and Restated Bylaws of the corporation.
ARTICLE XI
No action shall be taken by the stockholders of the corporation except at an annual or special meeting of the stockholders called in accordance with the Amended and Restated Bylaws, no special meetings of the stockholders shall be called by stockholders without approval of the Board of Directors, and no action, including the removal of directors without cause shall be taken by the stockholders by written consent. The affirmative vote of sixty-six and two-thirds percent (66 2/3%) of the then outstanding voting securities of the corporation, voting together as a single class, shall be required for the amendment, repeal or modification of the provisions of Article IX, Article X, Article XI or Article XII of this Amended and Restated Certificate of Incorporation or Sections 2.3 (Special Meeting), 2.4 (Notice of Stockholders' Meeting), 2.8 (Voting), or 3.2 (Number of Directors) of the corporation's Amended and Restated Bylaws.
ARTICLE XII
Meetings of stockholders may be held within or without the State of Delaware, as the Amended and Restated Bylaws may provide. The books of the corporation may be kept (subject to any provision contained in the statutes) outside of the State of Delaware at such place or places as may be designated from time to time by the Board of Directors or in the Amended and Restated Bylaws of the corporation.
IN WITNESS WHEREOF, Ciphergen Biosystems, Inc. has caused this certificate to be signed by William E. Rich, its Chief Executive Officer, this ____ day of ________, 2000.
Exhibit 3.4
BYLAWS
OF
CIPHERGEN BIOSYSTEMS, INC.
TABLE OF CONTENTS
PAGE
----
ARTICLE I.............................................................................................................1
1.1 REGISTERED OFFICE...................................................................................1
1.2 OTHER OFFICES.......................................................................................1
ARTICLE II............................................................................................................1
2.1 PLACE OF MEETINGS...................................................................................1
2.2 ANNUAL MEETING......................................................................................1
2.3 SPECIAL MEETING.....................................................................................2
2.4 NOTICE OF STOCKHOLDERS' MEETINGS....................................................................2
2.5 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE........................................................2
2.6 QUORUM..............................................................................................2
2.7 ADJOURNED MEETING; NOTICE...........................................................................2
2.8 VOTING..............................................................................................3
2.9 WAIVER OF NOTICE....................................................................................3
2.10 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS.........................................3
2.11 PROXIES.............................................................................................4
2.12 LIST OF STOCKHOLDERS ENTITLED TO VOTE...............................................................4
ARTICLE III...........................................................................................................4
3.1 POWERS..............................................................................................4
3.2 NUMBER OF DIRECTORS.................................................................................5
3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS.............................................5
3.4 RESIGNATION AND VACANCIES...........................................................................5
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE............................................................6
3.6 FIRST MEETINGS......................................................................................6
3.7 REGULAR MEETINGS....................................................................................7
3.8 SPECIAL MEETINGS; NOTICE............................................................................7
3.9 QUORUM..............................................................................................7
3.10 WAIVER OF NOTICE....................................................................................7
3.11 ADJOURNED MEETING; NOTICE...........................................................................7
3.12 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING...................................................8
3.13 FEES AND COMPENSATION OF DIRECTORS..................................................................8
3.14 APPROVAL OF LOANS TO OFFICERS.......................................................................8
3.15 REMOVAL OF DIRECTORS................................................................................8
ARTICLE IV............................................................................................................8
4.1 COMMITTEES OF DIRECTORS.............................................................................8
-i-
|
TABLE OF CONTENTS
(CONTINUED)
PAGE
----
4.2 COMMITTEE MINUTES...................................................................................9
4.3 MEETINGS AND ACTION OF COMMITTEES...................................................................9
ARTICLE V............................................................................................................10
5.1 OFFICERS...........................................................................................10
5.2 ELECTION OF OFFICERS...............................................................................10
5.3 SUBORDINATE OFFICERS...............................................................................10
5.4 REMOVAL AND RESIGNATION OF OFFICERS................................................................10
5.5 VACANCIES IN OFFICES...............................................................................10
5.6 CHAIRMAN OF THE BOARD..............................................................................11
5.7 PRESIDENT..........................................................................................11
5.8 VICE PRESIDENT.....................................................................................11
5.9 SECRETARY..........................................................................................11
5.10 TREASURER..........................................................................................12
5.11 ASSISTANT SECRETARY................................................................................12
5.12 ASSISTANT TREASURER................................................................................12
5.13 AUTHORITY AND DUTIES OF OFFICERS...................................................................12
ARTICLE VI...........................................................................................................13
6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS..........................................................13
6.2 INDEMNIFICATION OF OTHERS..........................................................................13
6.3 INSURANCE..........................................................................................13
ARTICLE VII..........................................................................................................14
7.1 MAINTENANCE AND INSPECTION OF RECORDS..............................................................14
7.2 INSPECTION BY DIRECTORS............................................................................14
7.3 ANNUAL STATEMENT TO STOCKHOLDERS...................................................................15
7.4 REPRESENTATION OF SHARES OF OTHER CORPORATIONS.....................................................15
ARTICLE VIII.........................................................................................................15
8.1 CHECKS.............................................................................................15
8.2 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS...................................................15
8.3 STOCK CERTIFICATES; PARTLY PAID SHARES.............................................................15
8.4 SPECIAL DESIGNATION ON CERTIFICATES................................................................16
8.5 LOST CERTIFICATES..................................................................................16
8.6 CONSTRUCTION; DEFINITIONS..........................................................................17
8.7 DIVIDENDS..........................................................................................17
8.8 FISCAL YEAR........................................................................................17
8.9 SEAL...............................................................................................17
-ii-
|
TABLE OF CONTENTS
(CONTINUED)
PAGE
----
8.10 TRANSFER OF STOCK..................................................................................17
8.11 STOCK TRANSFER AGREEMENTS..........................................................................17
8.12 REGISTERED STOCKHOLDERS............................................................................18
ARTICLE IX...........................................................................................................18
ARTICLE X............................................................................................................18
ARTICLE XI...........................................................................................................19
11.1 APPOINTMENT OF A CUSTODIAN IN CERTAIN CASES........................................................19
11.2 DUTIES OF CUSTODIAN................................................................................19
|
BYLAWS
OF
CIPHERGEN BIOSYSTEMS, INC.
ARTICLE I
CORPORATE OFFICES
1.1 REGISTERED OFFICE
The registered office of the corporation shall be in the City of Wilmington, County of New Castle, State of Delaware. The name of the registered agent of the corporation at such location is Corporation Trust Company.
1.2 OTHER OFFICES
The board of directors may at any time establish other offices at any place or places where the corporation is qualified to do business.
ARTICLE II
MEETINGS OF STOCKHOLDERS
2.1 PLACE OF MEETINGS
Meetings of stockholders shall be held at any place, within or outside the State of Delaware, designated by the board of directors. In the absence of any such designation, stockholders' meetings shall be held at the registered office of the corporation.
2.2 ANNUAL MEETING
The annual meeting of stockholders shall be held each year on a date and at a time designated by the board of directors. In the absence of such designation, the annual meeting of stockholders shall be held on the Second Tuesday of May in each year at 10:00 a.m. However, if such day falls on a legal holiday, then the meeting shall be held at the same time and place on the next succeeding full business day. At the meeting, directors shall be elected and any other proper business may be transacted.
2.3 SPECIAL MEETING
A special meeting of the stockholders may be called, at any time for any purpose or purposes, by the board of directors.
2.4 NOTICE OF STOCKHOLDERS' MEETINGS
All notices of meetings with stockholders shall be in writing and shall be sent or otherwise given in accordance with Section 2.5 of these bylaws not less than ten (10) nor more than sixty (60) days before the date of the meeting to each stockholder entitled to vote at such meeting. The notice shall specify the place, date, and hour of the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called.
2.5 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE
Written notice of any meeting of stockholders, if mailed, is given when deposited in the United States mail, postage prepaid, directed to the stockholder at his address as it appears on the records of the corporation. An affidavit of the secretary or an assistant secretary or of the transfer agent of the corporation that the notice has been given shall, in the absence of fraud, be prima facie evidence of the facts stated therein.
2.6 QUORUM
The holders of a majority of the stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business except as otherwise provided by statute or by the certificate of incorporation. If, however, such quorum is not present or represented at any meeting of the stockholders, then the stockholders entitled to vote thereat, present in person or represented by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present or represented. At such adjourned meeting at which a quorum is present or represented, any business may be transacted that might have been transacted at the meeting as originally noticed.
2.7 ADJOURNED MEETING; NOTICE
When a meeting is adjourned to another time or place, unless these bylaws otherwise require, notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting the corporation may transact any business that might have been transacted at the original meeting. If the adjournment is for more than thirty (30) days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.
2.8 VOTING
The stockholders entitled to vote at any meeting of stockholders shall be determined in accordance with the provisions of Section 2.11 of these bylaws, subject to the provisions of Sections 217 and 218 of the General Corporation Law of Delaware (relating to voting rights of fiduciaries, pledgors and joint owners of stock and to voting trusts and other voting agreements).
Except as may be otherwise provided in the Certificate of Incorporation, each stockholder shall be entitled to one vote for each share of capital stock held by such stockholder.
2.9 WAIVER OF NOTICE
Whenever notice is required to be given under any provision of the General Corporation Law of Delaware or of the certificate of incorporation or these bylaws, a written waiver thereof, signed by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders need be specified in any written waiver of notice unless so required by the certificate of incorporation or these bylaws.
2.10 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS
In order that the corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the board of directors may fix, in advance, a record date, which shall not be more than sixty (60) nor less than ten (10) days before the date of such meeting, nor more than sixty (60) days prior to any other action.
If the board of directors does not so fix a record date:
(a) The record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held.
(b) The record date for determining stockholders entitled to express consent to corporate action in writing without a meeting, when no prior action by the board of directors is necessary, shall be the day on which the first written consent is expressed.
(c) The record date for determining stockholders for any other purpose shall be at the close of business on the day on which the board of directors adopts the resolution relating thereto.
A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the board of directors may fix a new record date for the adjourned meeting.
2.11 PROXIES
Each stockholder entitled to vote at a meeting of stockholders or to express consent or dissent to corporate action may authorize another person or persons to act for him by a written proxy, signed by the stockholder and filed with the secretary of the corporation, but no such proxy shall be voted or acted upon after three (3) years from its date, unless the proxy provides for a longer period. A proxy shall be deemed signed if the stockholder's name is placed on the proxy (whether by manual signature, typewriting, telegraphic transmission or otherwise) by the stockholder or the stockholder's attorney-in-fact. The revocability of a proxy that states on its face that it is irrevocable shall be governed by the provisions of Section 212(e) of the General Corporation Law of Delaware.
2.12 LIST OF STOCKHOLDERS ENTITLED TO VOTE
The officer who has charge of the stock ledger of a corporation shall prepare and make, at least ten (10) days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten (10) days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present.
ARTICLE III
DIRECTORS
3.1 POWERS
Subject to the provisions of the General Corporation Law of Delaware and any limitations in the certificate of incorporation or these bylaws relating to action required to be approved by the stockholders or by the outstanding shares, the business and affairs of the corporation shall be managed and all corporate powers shall be exercised by or under the direction of the board of directors.
3.2 NUMBER OF DIRECTORS
The board of directors shall consist of eight (8) members. The number of directors may be changed by an amendment to this bylaw, duly adopted by the board of directors or by the stockholders, or by a duly adopted amendment to the certificate of incorporation. Upon the closing of the first sale of the corporation's common stock pursuant to a firmly underwritten registered public offering (the "IPO"), the directors shall be divided into three classes, with the term of office of the first class, which class shall initially consist of two directors, to expire at the first annual meeting of stockholders held after the IPO; the term of office of the second class, which shall initially consist of three directors, to expire at the second annual meeting of stockholders held after the IPO; the term of office of the third class, which class shall initially consist of three directors, to expire at the third annual meeting of stockholders held after the IPO; and thereafter for each such term to expire at each third succeeding annual meeting of stockholders held after such election.
No reduction of the authorized number of directors shall have the effect of removing any director before that director's term of office expires.
3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS
Except as provided in Section 3.4 of these bylaws, directors shall be elected at each annual meeting of stockholders to hold office until the next annual meeting. Directors need not be stockholders unless so required by the certificate of incorporation or these bylaws, wherein other qualifications for directors may be prescribed. Each director, including a director elected to fill a vacancy, shall hold office until his successor is elected and qualified or until his earlier resignation or removal.
Elections of directors need not be by written ballot.
3.4 RESIGNATION AND VACANCIES
Any director may resign at any time upon written notice to the corporation. When one or more directors so resigns and the resignation is effective at a future date, a majority of the directors then in office, including those who have so resigned, shall have power to fill such vacancy or vacancies, the vote thereon to take effect when such resignation or resignations shall become effective, and each director so chosen shall hold office as provided in this section in the filling of other vacancies.
Unless otherwise provided in the certificate of incorporation or these bylaws:
(a) Vacancies and newly created directorships resulting from any increase in the authorized number of directors elected by all of the stockholders having the right to vote as a single class may be filled by a majority of the directors then in office, although less than a quorum, or by a sole remaining director.
(b) Whenever the holders of any class or classes of stock or series thereof are entitled to elect one or more directors by the provisions of the certificate of incorporation, vacancies and newly created directorships of such class or classes or series may be filled by a majority of the directors elected by such class or classes or series thereof then in office, or by a sole remaining director so elected.
If at any time, by reason of death or resignation or other cause, the corporation should have no directors in office, then any officer or any stockholder or an executor, administrator, trustee or guardian of a stockholder, or other fiduciary entrusted with like responsibility for the person or estate of a stockholder, may call a special meeting of stockholders in accordance with the provisions of the certificate of incorporation or these bylaws, or may apply to the Court of Chancery for a decree summarily ordering an election as provided in Section 211 of the General Corporation Law of Delaware.
If, at the time of filling any vacancy or any newly created directorship, the directors then in office constitute less than a majority of the whole board (as constituted immediately prior to any such increase), then the Court of Chancery may, upon application of any stockholder or stockholders holding at least ten (10) percent of the total number of the shares at the time outstanding having the right to vote for such directors, summarily order an election to be held to fill any such vacancies or newly created directorships, or to replace the directors chosen by the directors then in office as aforesaid, which election shall be governed by the provisions of Section 211 of the General Corporation Law of Delaware as far as applicable.
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE
The board of directors of the corporation may hold meetings, both regular and special, either within or outside the State of Delaware.
Unless otherwise restricted by the certificate of incorporation or these bylaws, members of the board of directors, or any committee designated by the board of directors, may participate in a meeting of the board of directors, or any committee, by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at the meeting.
3.6 FIRST MEETINGS
The first meeting of each newly elected board of directors shall be held at such time and place as shall be fixed by the vote of the stockholders at the annual meeting and no notice of such meeting need be given to the newly elected directors in order legally to constitute the meeting, provided a quorum shall be present. In the event of the failure of the stockholders to fix the time or place of such first meeting of the newly elected board of directors, or in the event such meeting is not held at the time and place so fixed by the stockholders, the meeting may be held at such time and
place as shall be specified in a notice given as hereinafter provided for special meetings of the board of directors, or as shall be specified in a written waiver signed by all of the directors.
3.7 REGULAR MEETINGS
Regular meetings of the board of directors may be held without notice at such time and at such place as shall from time to time be determined by the board.
3.8 SPECIAL MEETINGS; NOTICE
Special meetings of the board may be called by the president on 48 hours' notice to each director, either personally or by mail, telegram, telex, or telephone; special meetings shall be called by the president or secretary in like manner and on like notice on the written request of two (2) directors unless the board consists of only one (1) director, in which case special meetings shall be called by the president or secretary in like manner and on like notice on the written request of the sole director.
3.9 QUORUM
At all meetings of the board of directors, a majority of the authorized number of directors shall constitute a quorum for the transaction of business and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the board of directors, except as may be otherwise specifically provided by statute or by the certificate of incorporation. If a quorum is not present at any meeting of the board of directors, then the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present.
3.10 WAIVER OF NOTICE
Whenever notice is required to be given under any provision of the General Corporation Law of Delaware or of the certificate of incorporation or these bylaws, a written waiver thereof, signed by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the directors, or members of a committee of directors, need be specified in any written waiver of notice unless so required by the certificate of incorporation or these bylaws.
3.11 ADJOURNED MEETING; NOTICE
If a quorum is not present at any meeting of the board of directors, then the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present.
3.12 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Unless otherwise restricted by the certificate of incorporation or these bylaws, any action required or permitted to be taken at any meeting of the board of directors, or of any committee thereof, may be taken without a meeting if all members of the board or committee, as the case may be, consent thereto in writing and the writing or writings are filed with the minutes of proceedings of the board or committee.
3.13 FEES AND COMPENSATION OF DIRECTORS
Unless otherwise restricted by the certificate of incorporation or these bylaws, the board of directors shall have the authority to fix the compensation of directors.
3.14 APPROVAL OF LOANS TO OFFICERS
The corporation may lend money to, or guarantee any obligation of, or otherwise assist any officer or other employee of the corporation or of its subsidiary, including any officer or employee who is a director of the corporation or its subsidiary, whenever, in the judgment of the directors, such loan, guaranty or assistance may reasonably be expected to benefit the corporation. The loan, guaranty or other assistance may be with or without interest and may be unsecured, or secured in such manner as the board of directors shall approve, including, without limitation, a pledge of shares of stock of the corporation. Nothing contained in this section shall be deemed to deny, limit or restrict the powers of guaranty or warranty of the corporation at common law or under any statute.
3.15 REMOVAL OF DIRECTORS
Unless otherwise restricted by statute, by the certificate of incorporation or by these bylaws, any director or the entire board of directors may be removed, with or without cause, by the holders of a majority of the shares then entitled to vote at an election of directors.
No reduction of the authorized number of directors shall have the effect of removing any director prior to the expiration of such director's term of office.
ARTICLE IV
COMMITTEES
4.1 COMMITTEES OF DIRECTORS
The board of directors may, by resolution passed by a majority of the whole board, designate one or more committees, with each committee to consist of one or more of the directors of the corporation. The board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of a committee, the member or members thereof present at any
meeting and not disqualified from voting, whether or not he or they
constitute a quorum, may unanimously appoint another member of the board of
directors to act at the meeting in the place of any such absent or
disqualified member. Any such committee, to the extent provided in the
resolution of the board of directors or in the bylaws of the corporation,
shall have and may exercise all the powers and authority of the board of
directors in the management of the business and affairs of the corporation,
and may authorize the seal of the corporation to be affixed to all papers
that may require it; but no such committee shall have the power or authority
to (i) amend the certificate of incorporation (except that a committee may,
to the extent authorized in the resolution or resolutions providing for the
issuance of shares of stock adopted by the board of directors as provided in
Section 151(a) of the General Corporation Law of Delaware, fix any of the
preferences or rights of such shares relating to dividends, redemption,
dissolution, any distribution of assets of the corporation or the conversion
into, or the exchange of such shares for, shares of any other class or
classes or any other series of the same or any other class or classes of
stock of the corporation), (ii) adopt an agreement of merger or consolidation
under Sections 251 or 252 of the General Corporation Law of Delaware, (iii)
recommend to the stockholders the sale, lease or exchange of all or
substantially all of the corporation's property and assets, (iv) recommend to
the stockholders a dissolution of the corporation or a revocation of a
dissolution, or (v) amend the bylaws of the corporation; and, unless the
board resolution establishing the committee, the bylaws or the certificate of
incorporation expressly so provide, no such committee shall have the power or
authority to declare a dividend, to authorize the issuance of stock, or to
adopt a certificate of ownership and merger pursuant to Section 253 of the
General Corporation Law of Delaware.
4.2 COMMITTEE MINUTES
Each committee shall keep regular minutes of its meetings and report the same to the board of directors when required.
4.3 MEETINGS AND ACTION OF COMMITTEES
Meetings and actions of committees shall be governed by, and held and
taken in accordance with, the provisions of Article III of these bylaws,
Section 3.5 (place of meetings and meetings by telephone), Section 3.7 (regular
meetings), Section 3.8 (special meetings and notice), Section 3.9 (quorum),
Section 3.10 (waiver of notice), Section 3.11 (adjournment and notice of
adjournment), and Section 3.12 (action without a meeting), with such changes in
the context of those bylaws as are necessary to substitute the committee and its
members for the board of directors and its members; provided, however, that the
time of regular meetings of committees may also be called by resolution of the
board of directors and that notice of special meetings of committees shall also
be given to all alternate members, who shall have the right to attend all
meetings of the committee. The board of directors may adopt rules for the
government of any committee not inconsistent with the provisions of these
bylaws.
ARTICLE V
OFFICERS
5.1 OFFICERS
The officers of the corporation shall be a president, one or more vice
presidents, a secretary, and a treasurer. The corporation may also have, at the
discretion of the board of directors, a chairman of the board, one or more
assistant vice presidents, assistant secretaries, assistant treasurers, and any
such other officers as may be appointed in accordance with the provisions of
Section 5.3 of these bylaws. Any number of offices may be held by the same
person.
5.2 ELECTION OF OFFICERS
The officers of the corporation, except such officers as may be appointed in accordance with the provisions of Sections 5.3 or 5.5 of these bylaws, shall be chosen by the board of directors, subject to the rights, if any, of an officer under any contract of employment.
5.3 SUBORDINATE OFFICERS
The board of directors may appoint, or empower the president to appoint, such other officers and agents as the business of the corporation may require, each of whom shall hold office for such period, have such authority, and perform such duties as are provided in these bylaws or as the board of directors may from time to time determine.
5.4 REMOVAL AND RESIGNATION OF OFFICERS
Subject to the rights, if any, of an officer under any contract of employment, any officer may be removed, either with or without cause, by an affirmative vote of the majority of the board of directors at any regular or special meeting of the board or, except in the case of an officer chosen by the board of directors, by any officer upon whom such power of removal may be conferred by the board of directors.
Any officer may resign at any time by giving written notice to the corporation. Any resignation shall take effect at the date of the receipt of that notice or at any later time specified in that notice; and, unless otherwise specified in that notice, the acceptance of the resignation shall not be necessary to make it effective. Any resignation is without prejudice to the rights, if any, of the corporation under any contract to which the officer is a party.
5.5 VACANCIES IN OFFICES
Any vacancy occurring in any office of the corporation shall be filled by the board of directors.
5.6 CHAIRMAN OF THE BOARD
The chairman of the board, if such an officer be elected, shall, if
present, preside at meetings of the board of directors and exercise and perform
such other powers and duties as may from time to time be assigned to him by the
board of directors or as may be prescribed by these bylaws. If there is no
president, then the chairman of the board shall also be the chief executive
officer of the corporation and shall have the powers and duties prescribed in
Section 5.7 of these bylaws.
5.7 PRESIDENT
Subject to such supervisory powers, if any, as may be given by the board of directors to the chairman of the board, if there be such an officer, the president shall be the chief executive officer of the corporation and shall, subject to the control of the board of directors, have general supervision, direction, and control of the business and the officers of the corporation. He shall preside at all meetings of the stockholders and, in the absence or nonexistence of a chairman of the board, at all meetings of the board of directors. He shall have the general powers and duties of management usually vested in the office of president of a corporation and shall have such other powers and duties as may be prescribed by the board of directors or these bylaws.
5.8 VICE PRESIDENT
In the absence or disability of the president, the vice presidents, if any, in order of their rank as fixed by the board of directors or, if not ranked, a vice president designated by the board of directors, shall perform all the duties of the president and when so acting shall have all the powers of, and be subject to all the restrictions upon, the president. The vice presidents shall have such other powers and perform such other duties as from time to time may be prescribed for them respectively by the board of directors, these bylaws, the president or the chairman of the board.
5.9 SECRETARY
The secretary shall keep or cause to be kept, at the principal executive office of the corporation or such other place as the board of directors may direct, a book of minutes of all meetings and actions of directors, committees of directors, and stockholders. The minutes shall show the time and place of each meeting, whether regular or special (and, if special, how authorized and the notice given), the names of those present at directors' meetings or committee meetings, the number of shares present or represented at stockholders' meetings, and the proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal executive office of the corporation or at the office of the corporation's transfer agent or registrar, as determined by resolution of the board of directors, a share register, or a duplicate share register, showing the names of all stockholders and their addresses, the number and classes of shares held by each, the number and date of certificates evidencing such shares, and the number and date of cancellation of every certificate surrendered for cancellation.
The secretary shall give, or cause to be given, notice of all meetings of the stockholders and of the board of directors required to be given by law or by these bylaws. He shall keep the seal of the corporation, if one be adopted, in safe custody and shall have such other powers and perform such other duties as may be prescribed by the board of directors or by these bylaws.
5.10 TREASURER
The treasurer shall keep and maintain, or cause to be kept and maintained, adequate and correct books and records of accounts of the properties and business transactions of the corporation, including accounts of its assets, liabilities, receipts, disbursements, gains, losses, capital, retained earnings, and shares. The books of account shall at all reasonable times be open to inspection by any director.
The treasurer shall deposit all money and other valuables in the name and to the credit of the corporation with such depositaries as may be designated by the board of directors. He shall disburse the funds of the corporation as may be ordered by the board of directors, shall render to the president and directors, whenever they request it, an account of all of his transactions as treasurer and of the financial condition of the corporation, and shall have such other powers and perform such other duties as may be prescribed by the board of directors or these bylaws.
5.11 ASSISTANT SECRETARY
The assistant secretary, or, if there is more than one, the assistant
secretaries in the order determined by the stockholders or board of directors
(or if there be no such determination, then in the order of their election)
shall, in the absence of the secretary or in the event of his or her inability
or refusal to act, perform the duties and exercise the powers of the secretary
and shall perform such other duties and have such other powers as the board of
directors or the stockholders may from time to time prescribe.
5.12 ASSISTANT TREASURER
The assistant treasurer, or, if there is more than one, the assistant treasurers, in the order determined by the stockholders or board of directors (or if there be no such determination, then in the order of their election), shall, in the absence of the treasurer or in the event of his or her inability or refusal to act, perform the duties and exercise the powers of the treasurer and shall perform such other duties and have such other powers as the board of directors or the stockholders may from time to time prescribe.
5.13 AUTHORITY AND DUTIES OF OFFICERS
In addition to the foregoing authority and duties, all officers of the corporation shall respectively have such authority and perform such duties in the management of the business of the corporation as may be designated from time to time by the board of directors or the stockholders.
ARTICLE VI
INDEMNITY
6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS
The corporation shall, to the maximum extent and in the manner permitted by the General Corporation Law of Delaware, indemnify each of its directors and officers against expenses (including attorneys' fees), judgments, fines, settlements, and other amounts actually and reasonably incurred in connection with any proceeding, arising by reason of the fact that such person is or was an agent of the corporation. For purposes of this Section 6.1, a "director" or "officer" of the corporation includes any person (i) who is or was a director or officer of the corporation, (ii) who is or was serving at the request of the corporation as a director or officer of another corporation, partnership, joint venture, trust or other enterprise, or (iii) who was a director or officer of a corporation which was a predecessor corporation of the corporation or of another enterprise at the request of such predecessor corporation.
6.2 INDEMNIFICATION OF OTHERS
The corporation shall have the power, to the extent and in the manner permitted by the General Corporation Law of Delaware, to indemnify each of its employees and agents (other than directors and officers) against expenses (including attorneys' fees), judgments, fines, settlements, and other amounts actually and reasonably incurred in connection with any proceeding, arising by reason of the fact that such person is or was an agent of the corporation. For purposes of this Section 6.2, an "employee" or "agent" of the corporation (other than a director or officer) includes any person (i) who is or was an employee or agent of the corporation, (ii) who is or was serving at the request of the corporation as an employee or agent of another corporation, partnership, joint venture, trust or other enterprise, or (iii) who was an employee or agent of a corporation which was a predecessor corporation of the corporation or of another enterprise at the request of such predecessor corporation.
6.3 INSURANCE
The corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the corporation would have the power to indemnify him against such liability under the provisions of the General Corporation Law of Delaware.
ARTICLE VII
RECORDS AND REPORTS
7.1 MAINTENANCE AND INSPECTION OF RECORDS
The corporation shall, either at its principal executive office or at such place or places as designated by the board of directors, keep a record of its stockholders listing their names and addresses and the number and class of shares held by each stockholder, a copy of these bylaws as amended to date, accounting books, and other records.
Any stockholder of record, in person or by attorney or other agent, shall, upon written demand under oath stating the purpose thereof, have the right during the usual hours for business to inspect for any proper purpose the corporation's stock ledger, a list of its stockholders, and its other books and records and to make copies or extracts therefrom. A proper purpose shall mean a purpose reasonably related to such person's interest as a stockholder. In every instance where an attorney or other agent is the person who seeks the right to inspection, the demand under oath shall be accompanied by a power of attorney or such other writing that authorizes the attorney or other agent to so act on behalf of the stockholder. The demand under oath shall be directed to the corporation at its registered office in Delaware or at its principal place of business.
The officer who has charge of the stock ledger of a corporation shall prepare and make, at least ten (10) days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten (10) days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present.
7.2 INSPECTION BY DIRECTORS
Any director shall have the right to examine the corporation's stock ledger, a list of its stockholders, and its other books and records for a purpose reasonably related to his position as a director. The Court of Chancery is hereby vested with the exclusive jurisdiction to determine whether a director is entitled to the inspection sought. The Court may summarily order the corporation to permit the director to inspect any and all books and records, the stock ledger, and the stock list and to make copies or extracts therefrom. The Court may, in its discretion, prescribe any limitations or conditions with reference to the inspection, or award such other and further relief as the Court may deem just and proper.
7.3 ANNUAL STATEMENT TO STOCKHOLDERS
The board of directors shall present at each annual meeting, and at any special meeting of the stockholders when called for by vote of the stockholders, a full and clear statement of the business and condition of the corporation.
7.4 REPRESENTATION OF SHARES OF OTHER CORPORATIONS
The chairman of the board, the president, any vice president, the treasurer, the secretary or assistant secretary of this corporation, or any other person authorized by the board of directors or the president or a vice president, is authorized to vote, represent, and exercise on behalf of this corporation all rights incident to any and all shares of any other corporation or corporations standing in the name of this corporation. The authority granted herein may be exercised either by such person directly or by any other person authorized to do so by proxy or power of attorney duly executed by such person having the authority.
ARTICLE VIII
GENERAL MATTERS
8.1 CHECKS
From time to time, the board of directors shall determine by resolution which person or persons may sign or endorse all checks, drafts, other orders for payment of money, notes or other evidences of indebtedness that are issued in the name of or payable to the corporation, and only the persons so authorized shall sign or endorse those instruments.
8.2 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS
The board of directors, except as otherwise provided in these bylaws, may authorize any officer or officers, or agent or agents, to enter into any contract or execute any instrument in the name of and on behalf of the corporation; such authority may be general or confined to specific instances. Unless so authorized or ratified by the board of directors or within the agency power of an officer, no officer, agent or employee shall have any power or authority to bind the corporation by any contract or engagement or to pledge its credit or to render it liable for any purpose or for any amount.
8.3 STOCK CERTIFICATES; PARTLY PAID SHARES
The shares of a corporation shall be represented by certificates, provided that the board of directors of the corporation may provide by resolution or resolutions that some or all of any or all classes or series of its stock shall be uncertificated shares. Any such resolution shall not apply to shares represented by a certificate until such certificate is surrendered to the corporation. Notwithstanding the adoption of such a resolution by the board of directors, every holder of stock
represented by certificates and upon request every holder of uncertificated shares shall be entitled to have a certificate signed by, or in the name of the corporation by the chairman or vice-chairman of the board of directors, or the president or vice-president, and by the treasurer or an assistant treasurer, or the secretary or an assistant secretary of such corporation representing the number of shares registered in certificate form. Any or all of the signatures on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate has ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue.
The corporation may issue the whole or any part of its shares as partly paid and subject to call for the remainder of the consideration to be paid therefor. Upon the face or back of each stock certificate issued to represent any such partly paid shares, upon the books and records of the corporation in the case of uncertificated partly paid shares, the total amount of the consideration to be paid therefor and the amount paid thereon shall be stated. Upon the declaration of any dividend on fully paid shares, the corporation shall declare a dividend upon partly paid shares of the same class, but only upon the basis of the percentage of the consideration actually paid thereon.
8.4 SPECIAL DESIGNATION ON CERTIFICATES
If the corporation is authorized to issue more than one class of stock or more than one series of any class, then the powers, the designations, the preferences, and the relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights shall be set forth in full or summarized on the face or back of the certificate that the corporation shall issue to represent such class or series of stock; provided, however, that, except as otherwise provided in Section 202 of the General Corporation Law of Delaware, in lieu of the foregoing requirements there may be set forth on the face or back of the certificate that the corporation shall issue to represent such class or series of stock a statement that the corporation will furnish without charge to each stockholder who so requests the powers, the designations, the preferences, and the relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights.
8.5 LOST CERTIFICATES
Except as provided in this Section 8.5, no new certificates for shares shall be issued to replace a previously issued certificate unless the latter is surrendered to the corporation and cancelled at the same time. The corporation may issue a new certificate of stock or uncertificated shares in the place of any certificate theretofore issued by it, alleged to have been lost, stolen or destroyed, and the corporation may require the owner of the lost, stolen or destroyed certificate, or his legal representative, to give the corporation a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate or uncertificated shares.
8.6 CONSTRUCTION; DEFINITIONS
Unless the context requires otherwise, the general provisions, rules of construction, and definitions in the Delaware General Corporation Law shall govern the construction of these bylaws. Without limiting the generality of this provision, the singular number includes the plural, the plural number includes the singular, and the term "person" includes both a corporation and a natural person.
8.7 DIVIDENDS
The directors of the corporation, subject to any restrictions contained in the certificate of incorporation, may declare and pay dividends upon the shares of its capital stock pursuant to the General Corporation Law of Delaware. Dividends may be paid in cash, in property, or in shares of the corporation's capital stock.
The directors of the corporation may set apart out of any of the funds of the corporation available for dividends a reserve or reserves for any proper purpose and may abolish any such reserve. Such purposes shall include but not be limited to equalizing dividends, repairing or maintaining any property of the corporation, and meeting contingencies.
8.8 FISCAL YEAR
The fiscal year of the corporation shall be fixed by resolution of the board of directors and may be changed by the board of directors.
8.9 SEAL
The seal of the corporation shall be such as from time to time may be approved by the board of directors.
8.10 TRANSFER OF STOCK
Upon surrender to the corporation or the transfer agent of the corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignation or authority to transfer, it shall be the duty of the corporation to issue a new certificate to the person entitled thereto, cancel the old certificate, and record the transaction in its books.
8.11 STOCK TRANSFER AGREEMENTS
The corporation shall have power to enter into and perform any agreement with any number of stockholders of any one or more classes of stock of the corporation to restrict the transfer of shares of stock of the corporation of any one or more classes owned by such stockholders in any manner not prohibited by the General Corporation Law of Delaware.
8.12 REGISTERED STOCKHOLDERS
The corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends and to vote as such owner, shall be entitled to hold liable for calls and assessments the person registered on its books as the owner of shares, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of another person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware.
ARTICLE IX
AMENDMENTS
The original or other bylaws of the corporation may be adopted, amended or repealed by the stockholders entitled to vote; provided, however, that the corporation may, in its certificate of incorporation, confer the power to adopt, amend or repeal bylaws upon the directors. The fact that such power has been so conferred upon the directors shall not divest the stockholders of the power, nor limit their power to adopt, amend or repeal bylaws.
ARTICLE X
DISSOLUTION
If it should be deemed advisable in the judgment of the board of directors of the corporation that the corporation should be dissolved, the board, after the adoption of a resolution to that effect by a majority of the whole board at any meeting called for that purpose, shall cause notice to be mailed to each stockholder entitled to vote thereon of the adoption of the resolution and of a meeting of stockholders to take action upon the resolution.
At the meeting a vote shall be taken for and against the proposed
dissolution. If a majority of the outstanding stock of the corporation entitled
to vote thereon votes for the proposed dissolution, then a certificate stating
that the dissolution has been authorized in accordance with the provisions of
Section 275 of the General Corporation Law of Delaware and setting forth the
names and residences of the directors and officers shall be executed,
acknowledged, and filed and shall become effective in accordance with
Section 103 of the General Corporation Law of Delaware. Upon such certificate's
becoming effective in accordance with Section 103 of the General Corporation Law
of Delaware, the corporation shall be dissolved.
Whenever all the stockholders entitled to vote on a dissolution consent in writing, either in person or by duly authorized attorney, to a dissolution, no meeting of directors or stockholders shall be necessary. The consent shall be filed and shall become effective in accordance with Section 103 of the General Corporation Law of Delaware. Upon such consent's becoming effective in accordance with Section 103 of the General Corporation Law of Delaware, the corporation shall be
dissolved. If the consent is signed by an attorney, then the original power of attorney or a photocopy thereof shall be attached to and filed with the consent. The consent filed with the Secretary of State shall have attached to it the affidavit of the secretary or some other officer of the corporation stating that the consent has been signed by or on behalf of all the stockholders entitled to vote on a dissolution; in addition, there shall be attached to the consent a certification by the secretary or some other officer of the corporation setting forth the names and residences of the directors and officers of the corporation.
ARTICLE XI
CUSTODIAN
11.1 APPOINTMENT OF A CUSTODIAN IN CERTAIN CASES
The Court of Chancery, upon application of any stockholder, may appoint one or more persons to be custodians and, if the corporation is insolvent, to be receivers, of and for the corporation when:
(a) at any meeting held for the election of directors the stockholders are so divided that they have failed to elect successors to directors whose terms have expired or would have expired upon qualification of their successors; or
(b) the business of the corporation is suffering or is threatened with irreparable injury because the directors are so divided respecting the management of the affairs of the corporation that the required vote for action by the board of directors cannot be obtained and the stockholders are unable to terminate this division; or
(c) the corporation has abandoned its business and has failed within a reasonable time to take steps to dissolve, liquidate or distribute its assets.
11.2 DUTIES OF CUSTODIAN
The custodian shall have all the powers and title of a receiver appointed under Section 291 of the General Corporation Law of Delaware, but the authority of the custodian shall be to continue the business of the corporation and not to liquidate its affairs and distribute its assets, except when the Court of Chancery otherwise orders and except in cases arising under Sections 226(a)(3) or 352(a)(2) of the General Corporation Law of Delaware.
CERTIFICATE OF ADOPTION OF BYLAWS
OF
CIPHERGEN BIOSYSTEMS, INC.
The undersigned person appointed in the Certificate of Incorporation to act as the Incorporator of Ciphergen Biosystems, Inc. hereby adopts the foregoing bylaws, comprising 20 pages, as the Bylaws of the corporation.
Executed as of _______________, 20__.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and affixed the corporate seal this _____ day of __________, 20___.
(ALTERNATIVE)
CERTIFICATE OF ADOPTION OF BYLAWS
OF
CIPHERGEN BIOSYSTEMS, INC.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and affixed the corporate seal this ____ day of ____________ 20__.
EXHIBIT 4.1
Number C-((CERTIFICATE_NO)) CIPHERGEN BIOSYSTEMS ((NO_OF_SHARES)) Shares
A California Corporation Common Stock
CAPITAL STOCK 90,000,000 SHARES
Common Stock 60,000,000 Shares
Preferred Stock 30,000,000 Shares
THIS CERTIFIES THAT ((NAME)) is the record holder of ((NO_SPELLED)) (((No_of_shares))) shares of the Common Stock of CIPHERGEN BIOSYSTEMS, INC., transferable only on the books of the Corporation by the holder hereof, in person or by duly authorized attorney, upon surrender of this Certificate properly endorsed or assigned.
A statement of all of the rights, preferences, privileges and restrictions granted to or imposed upon the respective classes or series of shares of stock of the Corporation and upon the holders thereof as established by the Articles of Incorporation, or by any Certificate of Determination of Preferences, and the number of shares constituting each series and the designations thereof, may be obtained by any stockholder upon request and without charge at the principal office of the corporation, which is presently located at 490 San Antonio Road, Palo Alto, California 94306.
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be signed by its duly authorized officers this ____ day of _________, 1999.
FOR VALUE RECEIVED ___________________________ HEREBY SELL, ASSIGN, AND TRANSFER UNTO ___________________________________ SHARES REPRESENTED BY THE WITHIN CERTIFICATE AND DO HEREBY IRREVOCABLY CONSTITUTE AND APPOINT ________________________, ATTORNEY TO TRANSFER THE SAID SHARES ON THE SHARE REGISTER OF THE WITHIN NAMED CORPORATION WITH FULL POWER OF SUBSTITUTION IN THE PREMISES.
DATED _____________, 19___
NOTICE: THE SIGNATURE ON THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS WRITTEN UPON THE FACE OF THIS CERTIFICATE, IN EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT, OR ANY CHANGE WHATSOEVER.
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A RIGHT OF FIRST REFUSAL OPTION IN FAVOR OF THE COMPANY AND OR ITS ASSIGNEE(S), AS PROVIDED IN THE BYLAWS OF THE COMPANY.
EXHIBIT 10.4
IT IS UNLAWFUL TO CONSUMMATE
A SALE OR TRANSFER OF THIS
SECURITY, OR ANY INTEREST
THEREIN, OR TO RECEIVE ANY
CONSIDERATION THEREFOR,
WITHOUT THE PRIOR WRITTEN
CONSENT OF THE COMMISSIONER
OF CORPORATIONS OF THE STATE
OF CALIFORNIA, EXCEPT AS
PERMITTED IN THE
COMMISSIONER'S RULES.
INCENTIVE STOCK OPTION
[NAME], OPTIONEE:
CIPHERGEN BIOSYSTEMS, INC. (the "Company"), pursuant to its 1993 Stock Option Plan (the "Plan"), has this day granted to you, the optionee named above, an option to purchase shares of the common stock of the Company ("Common Stock"). This option is intended to qualify as an "incentive stock option" within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code").
The grant hereunder is in connection with and in furtherance of the Company's compensatory benefit plan for participation of the Company's employees (including officers), directors or consultants and is intended to comply with the provisions of Rule 701 promulgated by the Securities and Exchange Commission under the Securities Act of 1933, as amended (the "Act").
The details of your option are as follows:
1. The total number of shares of Common Stock subject to this option is
[SHRSSPELLEDOUT] ([NO-OF-SHARES]). Subject to the limitations contained
herein, One-sixtieth (1/60) of the total number of shares will vest on
[VESTSTART] and an additional (1/60) shall be exercisable each full month
thereafter until all of such shares are exercisable, based upon the Optionee's
continued relationship with the corporation.
This option may be exercised only with respect to those shares which are vested except as permitted under paragraph 3 of this Agreement.
(FORM FOR CASH AND EARLY EXERCISE)
2. (a) The exercise price of this option is __________________________ ______ per share, being not less than the fair market value of the Common Stock on the date of grant of this option.
(b) Payment of the exercise price per share is due in full upon exercise of all or any part of each installment which has accrued to you. You may elect, to the extent permitted by applicable statutes and regulations, to make payment of the exercise price under one of the following alternatives:
(i) Payment of the exercise price per share in cash (including check) at the time of exercise; or
(ii) Payment pursuant to a program developed under Regulation T as promulgated by the Federal Reserve Board which results in the receipt of cash (or check) by the Company prior to the issuance of Common Stock.
3. (a) Subject to the provisions of this option you may elect at any time during your employment with the Company or an affiliate thereof, to exercise the option as to any part or all of the shares subject to this option at any time during the term hereof, including without limitation, a time prior to the date of earliest exercise ("vesting") stated in paragraph 1 hereof; PROVIDED, HOWEVER, that:
(i) a partial exercise of this option shall be deemed to cover first vested shares and then the earliest vesting installment of unvested shares;
(ii) any shares so purchased from installments which have not vested as of the date of exercise shall be subject to the purchase option in favor of the Company as described in the Early Exercise Stock Purchase Agreement attached hereto;
(iii) you shall enter into an Early Exercise Stock Purchase Agreement in the form attached hereto with a vesting schedule that will result in the same vesting as if no early exercise had occurred; and
(iv) this option shall not be exercisable under this paragraph 3 to the extent such exercise would cause the aggregate fair market value of any shares subject to incentive stock options granted you by the Company or any affiliate (valued as of their grant date) which would become exercisable for the first time during any calendar year to exceed $100,000.
(b) The election provided in this paragraph 3 to purchase shares upon the exercise of this option prior to the vesting dates shall cease upon termination of your employment with the Company or an affiliate thereof and may not be exercised after the date thereof.
4. The minimum number of shares with respect to which this option
may be exercised at any one time is 100, except (a) as to an installment
subject to exercise, as set forth in paragraph 1, which amounts to fewer than
100 shares, in which case, as to the exercise of that installment, the number
of such shares in such installment shall be the minimum number of shares, and
(b) with respect to the final exercise of this option this minimum shall not
apply. This option may not be exercised for any number of shares which would
require the issuance of anything other than whole shares.
5. Notwithstanding anything to the contrary contained herein, this option may not be exercised unless the shares issuable upon exercise of this option are then registered under the Act or, if such shares are not then so registered, the Company has determined that such exercise and issuance would be exempt from the registration requirements of the Act.
6. The term of this option commences on the date hereof and, unless
sooner terminated as set forth below or in the Plan, terminates on
[TERMINATIONDATE] (which date shall be no more than ten (10) years from date
this option is granted). In no event may this option be exercised on or after
the date on which it terminates. This option shall terminate prior to the
expiration of its term as follows: three (3) months after the termination of
your employment with the Company or an affiliate of the Company (as defined in
the Plan) for any reason or for no reason unless
(a) such termination of employment is due to your disability, in which event the option shall terminate on the earlier of the termination date set forth above or six (6) months following such termination of employment; or
(b) such termination of employment is due to your death, in which event the option shall terminate on the earlier of the termination date set forth above or six (6) months after your death; or
(c) during any part of such three (3) month period the option is not exercisable solely because of the condition set forth in paragraph 5 above, in which event the option shall not terminate until the earlier of the termination date set forth above or until it shall have been exercisable for an aggregate period of three (3) months after the termination of employment; or
(d) exercise of the option within three (3) months after termination of your employment with the Company or with an affiliate would result in liability under section 16(b) of the Securities Exchange Act of 1934, in which case the option will terminate on the earlier of (i) the termination date set forth above, (ii) the tenth (10th) day after the last date upon which exercise would result in such liability or (iii) six (6) months and ten (10) days after the termination of your employment with the Company or an affiliate.
However, this option may be exercised following termination of employment only as to that number of shares as to which it was exercisable on the date of termination of employment under the provisions of paragraph 1 of this option.
7. (a) This option may be exercised, to the extent specified above, by delivering a notice of exercise (in a form designated by the Company) together with the exercise price to the Secretary of the Company, or to such other person as the Company may designate, during regular business hours, together with such additional documents as the Company may then require pursuant to subparagraph 6(f) of the Plan.
(b) By exercising this option you agree that:
(i) the Company may require you to enter an arrangement
providing for the payment by you to the Company of any tax withholding
obligation of the Company arising by reason of (1) the exercise of this option;
(2) the lapse of any substantial risk of forfeiture to which the shares are
subject at the time of exercise; or (3) the disposition of shares acquired upon
such exercise;
(ii) you will notify the Company in writing within fifteen (15) days after the date of any disposition of any of the shares of the Common Stock issued upon exercise of this option that occurs within two (2) years after the date of this option grant or within one (1) year after such shares of Common Stock are transferred upon exercise of this option; and
(iii) the Company (or a representative of the underwriters) may, in connection with the first underwritten registration of the offering of any securities of the Company under the Act, require that you not sell or otherwise transfer or dispose of any shares of Common Stock or other securities of the Company during such period (not to exceed one hundred eighty (180) days) following the effective date (the "Effective Date") of the registration statement of the Company filed under the Act as may be requested by the Company or the representative of the underwriters. For purposes of this restriction you will be deemed to own securities which (i) are owned directly or indirectly by you, including securities held for your benefit by nominees, custodians, brokers or pledgees; (ii) may be acquired by you within sixty (60) days of the Effective Date; (iii) are owned directly or indirectly, by or for your brothers or sisters (whether by whole or half blood) spouse, ancestors and lineal descendants; or (iv) are owned, directly or indirectly, by or for a corporation, partnership, estate or trust of which you are a shareholder, partner or beneficiary, but only to the extent of your proportionate interest therein as a shareholder, partner or beneficiary thereof. You further agree that the Company may impose stop-transfer instructions with respect to securities subject to the foregoing restrictions until the end of such period.
8. This option is not transferable, except by will or by the laws of descent and distribution, and is exercisable during your life only by you. By delivering written notice to the Company, in a form satisfactory to the Company, you may designate a third party who, in the event of your death, shall thereafter be entitled to exercise this option.
9. This option is not an employment contract and nothing in this option shall be deemed to create in any way whatsoever any obligation on your part to continue in the employ of the Company, or of the Company to continue your employment with the Company.
10. Any notices provided for in this option or the Plan shall be given in writing and shall be deemed effectively given upon receipt or, in the case of notices delivered by the Company to you, five (5) days after deposit in the United States mail, postage prepaid, addressed to you at the address specified below or at such other address as you hereafter designate by written notice to the Company.
11. This option is subject to all the provisions of the Plan, a copy of which is attached hereto and its provisions are hereby made a part of this option, including without limitation the provisions of paragraph 6 of the Plan relating to option provisions, and is further subject to all interpretations, amendments, rules and regulations which may from time to time be promulgated and adopted pursuant to the Plan. In the event of any conflict between the provisions of this option and those of the Plan, the provisions of the Plan shall control. The Company may amend this option; PROVIDED, HOWEVER, that your rights and obligations under this option shall not be impaired by any such amendment unless the Company obtains your written consent.
Dated the ____________________ 2000.
Very truly yours,
CIPHERGEN BIOSYSTEMS, INC.
ATTACHMENTS:
1993 Stock option Plan
Form of Early Exercise Stock Purchase Agreement
Notice of Exercise
Section 83(b) Election
The undersigned:
(a) Acknowledges receipt of the foregoing option and the attachments referenced therein and understands that all rights and liabilities with respect to this option are set forth in the option and the Plan; and
(b) Acknowledges that as of the date of grant of this option, it sets forth the entire understanding between the undersigned optionee and the Company and its affiliates regarding the acquisition of stock in the Company and supersedes all prior oral and written agreements on that subject with the exception of (i) the options previously granted and delivered to the undersigned under stock option plans of the Company, and (ii) the following agreements only:
NONE _______________
(Initial)
OTHER _______________________________________
(c) Acknowledges receipt of a copy of Section 260.141.11 of Title 10 of the California Code of Regulations.
Address: ________________________________
EARLY EXERCISE STOCK PURCHASE AGREEMENT
THIS AGREEMENT is made by and between CIPHERGEN BIOSYSTEMS, INC., a California corporation (the "Corporation"), and _____________________________ ("Purchaser").
WITNESSETH:
WHEREAS, Purchaser holds a _________________ stock option to purchase shares of common stock of the Corporation pursuant to the Corporation's 1993 Stock Option Plan (the "Plan") which Purchaser desires to exercise; and
WHEREAS, Purchaser wishes to take advantage of the early exercise provision of his option and therefore to enter into this Agreement;
NOW, THEREFORE, IT IS AGREED between the parties as follows:
1. Purchaser hereby agrees to purchase from the Corporation, and the Corporation hereby agrees to sell to Purchaser, an aggregate of ________ shares of the common stock (the "Stock") of the Corporation, for an exercise price of __________ per share (total exercise price: __________), payable in cash.
The closing hereunder shall occur at the offices of the Corporation on the date of this Agreement or at such other time and place as the parties may mutually agree upon in writing.
At the closing, Purchaser shall deliver three (3) stock assignments in the form of Exhibit B duly endorsed (with date and number of shares left blank), joint escrow instructions (the "Joint Escrow Instructions") in the form of Exhibit C, duly executed by Purchaser, and the total exercise price in cash.
(CASH)
1.
At the closing or as soon thereafter as practicable, the Corporation shall deliver to the Escrow Agent (as defined in paragraph 8 below) share certificates for all of the Stock that is to be subject to the Purchase Option (as defined in paragraph 2 below), and shall deliver share certificates to Purchaser for all of the Stock, if any, that is not to be subject to the Purchase Option.
2. In accordance with the provisions of section 408(b) of the California General Corporation Law, the Stock to be purchased by Purchaser pursuant to this Agreement shall be subject to the following option ("Purchase Option"):
(a) In the event that Purchaser shall cease to be an employee of the Corporation for any reason (including his death), or no reason, with or without cause, the Purchase Option may be exercised. The Corporation shall have the right at any time within ninety (90) days after such cessation of employment to purchase from Purchaser or his personal representative, as the case may be, at the price per share paid by Purchaser pursuant to this Agreement ("Option Price"), up to but not exceeding the number of shares of the Stock shown on Exhibit A hereto which is incorporated herein by this reference. Notwithstanding the foregoing, however, if the expiration of the aforesaid ninety (90) day period will occur prior to the date that is twenty-seven (27) months following the date of this Agreement, the Corporation shall be entitled to extend the period during which it shall be entitled to exercise such option to such date that is twenty-seven (27) months following the date of this Agreement.
(b) In addition, and without limiting the foregoing Purchase Option,
if at any time during the term of the Purchase Option, there occurs: (a) a
dissolution or liquidation of the Corporation; (b) a merger or consolidation
involving the Corporation in which the Corporation is not the surviving
corporation; (c) a reverse merger in which the Corporation is the surviving
corporation but the shares of the Corporation's common stock outstanding
immediately preceding the merger are converted by virtue of the merger into
other property, whether in the form of other securities, cash or otherwise; or
(d) any other capital reorganization in which more than fifty percent (50%) of
the shares of the Corporation entitled to vote are exchanged, then: (i) if there
will be no successor to the Corporation, the Corporation shall have the right to
exercise its Purchase Option as to all or any portion of the Stock then subject
to the Purchase Option set forth above to the same extent as if Purchaser's
employment by the Corporation had ceased on the date preceding the date of
consummation of said event or transaction, or (ii) the Purchase Option may be
assigned to any successor of the Corporation, and the Purchase Option shall
apply if Purchaser shall cease for any reason to be an employee of such
successor on the same basis as set forth above. In that case, references herein
to the "Corporation" shall be deemed to refer to such successor.
(c) The Corporation shall be entitled to pay for any shares purchased pursuant to its Purchase Option at the Corporation's option in cash, by offset against any indebtedness owing to the Corporation and given in payment for the Stock by Purchaser, or a combination of both.
(d) As used herein, employment with the Corporation shall include employment with an affiliate of the Corporation.
2.
(e) This Agreement is not an employment contract and nothing in this Agreement shall be deemed to create in any way whatsoever any obligation on the part of the Purchaser to continue in the employ of the Corporation, or of the Corporation to continue Purchaser in the employ of the Corporation.
(f) In the event that the Stock's Fair Market Value (as defined in the Plan) is equal to or exceeds the Option Price on the date that the Purchaser ceases to be employed, the Company shall exercise its purchase option to the extent permitted by law.
3. The Purchase Option may be exercised by giving written notice of exercise delivered or mailed as provided in paragraph 14. Upon providing such notice and payment or tender of the purchase price, the Corporation shall become the legal and beneficial owner of the Stock being purchased and all rights and interests therein or related thereto.
4. If from time to time during the term of the Purchase Option there is any stock dividend or liquidating dividend or distribution of cash and/or property, stock split or other change in the character or amount of any of the outstanding securities of the Corporation, then, in such event, any and all new, substituted or additional securities or other property to which Purchaser is entitled by reason of his ownership of Stock will be immediately subject to the Purchase Option and be included in the word "Stock" for all purposes of the Purchase Option with the same force and effect as the shares of Stock then subject to the Purchase Option. While the total Option Price shall remain the same after each such event, the Option Price per share of Stock upon exercise of the Purchase Option shall be appropriately adjusted.
5. All certificates representing any shares of Stock of the Corporation subject to the provisions of this Agreement shall have endorsed thereon legends in substantially the following form:
(i) "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO AN OPTION SET FORTH IN AN AGREEMENT BETWEEN THE CORPORATION AND THE REGISTERED HOLDER, OR HIS PREDECESSOR IN INTEREST, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THIS CORPORATION. ANY TRANSFER OR ATTEMPTED TRANSFER OF ANY SHARES SUBJECT TO SUCH OPTION IS VOID WITHOUT THE PRIOR EXPRESS WRITTEN CONSENT OF THE ISSUER OF THESE SHARES."
(ii) "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED."
(iii) Any legend required to be placed thereon by the California Commissioner of Corporations.
6. Purchaser acknowledges that he is aware that the Stock to be issued to him by the Corporation pursuant to this Agreement has not been registered under the Securities Act of 1933, as amended (the "Act"), on the basis that no distribution or public offering of the Stock is to be
3.
effected, and in this connection acknowledges that the Corporation is relying on the following representations: Purchaser warrants and represents to the Corporation that he is acquiring the Stock for investment and not with a view to or for sale in connection with any distribution of the Stock or with any present intention of distributing or selling the Stock and he does not presently have reason to anticipate any change in circumstances or any particular occasion or event which would cause him to sell the Stock. Purchaser recognizes that the Stock must be held indefinitely unless it is subsequently registered under the Act or an exemption from such registration is available and, further, recognizes that the Corporation is under no obligation to register the Stock or to comply with any exemption from such registration.
7. Purchaser is aware that the Stock may not be sold pursuant to Rule 144 adopted under the Act unless certain conditions are met and until Purchaser has held the Stock for at least two (2) years. Among the conditions for use of Rule 144 is the availability of specified current public information about the Corporation. Purchaser recognizes that the Corporation presently has no plans to make such information available to the public.
Whether or not the Purchase Option is exercised or has lapsed, Purchaser further agrees not to make any disposition of any of the Stock in any event unless and until:
(a) There is then in effect a registration statement under the Act covering such proposed disposition and such disposition is made in accordance with such registration statement; or
(b) (i) Purchaser shall have notified the Corporation of the proposed disposition and shall have furnished the Corporation with a detailed statement of the circumstances surrounding the proposed disposition, and (ii) Purchaser shall have given the Corporation an opinion of counsel, which opinion and counsel shall be satisfactory to the Corporation, to the effect that such disposition will not require registration of the Stock under the Act.
8. As security for his faithful performance of the terms of this Agreement and to insure the availability for delivery of Purchaser's Stock upon exercise of the Purchase Option herein provided for, Purchaser agrees, at the closing hereunder (or as soon thereafter as practicable) to deliver (or have the Corporation deliver on the Purchaser's behalf) to and deposit with the Secretary of the Corporation, as escrow agent in this transaction (the "Escrow Agent"), three (3) stock assignments duly endorsed (with date and number of shares left blank) in the form attached hereto as Exhibit B, together with a certificate or certificates evidencing all of the Stock subject to the Purchase Option; said documents are to be held by the Escrow Agent and delivered by said Escrow Agent pursuant to the Joint Escrow Instructions of the Corporation and Purchaser set forth in Exhibit C attached hereto and incorporated herein by this reference, which instructions shall also be delivered to the Escrow Agent at the closing hereunder (or as soon thereafter as practicable).
9. Purchaser shall not sell or transfer any of the Stock subject to the Purchase Option or any interest therein so long as such Stock is subject to the Purchase Option.
10. The Corporation shall not be required (i) to transfer on its books any shares of Stock of the Corporation which shall have been sold or transferred in violation of any of the provisions set
4.
forth in this Agreement or (ii) to treat as owner of such shares or to accord the right to vote as such owner or to pay dividends to any transferee to whom such shares shall have been so transferred.
11. Subject to the provisions of paragraphs 9 and 10 above, Purchaser (but not any unapproved transferee) shall, during the term of this Agreement, exercise all rights and privileges of a stockholder of the Corporation with respect to the Stock.
12. Purchaser acknowledges receipt of a copy of Section 260.141.11 of Title 10 of the California Administrative Code, attached hereto as Exhibit D.
13. The parties agree to execute such further instruments and to take such further action as reasonably may be necessary to carry out the intent of this Agreement.
14. Any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given upon personal delivery or upon deposit in any United States Post Office Box, by registered or certified mail with postage and fees prepaid, addressed to the other party hereto as his address hereinafter shown below his signature or at such other address as such party may designate by ten (10) days' advance written notice to the other party hereto.
5.
15. This Agreement shall bind and inure to the benefit of the successors and assigns of the Corporation and, subject to the restrictions on transfer herein set forth, inure to the benefit of and be binding upon Purchaser, his heirs, executors, administrators, successors, and assigns. Without limiting the generality of the foregoing, the Purchase Option of the Corporation hereunder shall be assignable by the Corporation at any time or from time to time, in whole or in part. Should the right of repurchase be assigned by the Corporation, the assignee shall pay to the Corporation cash equal to the excess, if any, of the Stock's Fair Market Value (as defined in the Plan) over the Option Price.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the ___________________________.
CIPHERGEN BIOSYSTEMS, INC.
By:______________________________________
William E. Rich,
President and Chief Executive Officer
Address:
490 San Antonio Road
Palo Alto, CA 94306
PURCHASER
ATTACHMENTS:
Exhibit A Vesting Schedule Exhibit B Assignment Separate from Certificate Exhibit C Joint Escrow Instructions Exhibit D Cal. Admin. Code, Title 10, Section 260.141.11 |
6.
EXHIBIT A
VESTING SCHEDULE
NUMBER OF SHARES
SUBJECT TO
IF CESSATION OF EMPLOYMENT OCCURS: PURCHASE OPTION:
Before _________________ ,19__ ____________________shares
After___________________ ,19__
but before__________________,19__ ____________________shares
After___________________ ,19__
but before__________________,19__ ____________________shares
After___________________ ,19__
but before__________________,19__ ____________________shares
After___________________ ,19__
but before__________________,19__ ____________________shares
After___________________ ,19__
but before__________________,19__ ____________________shares
After___________________ ,19__
but before__________________,19__ ____________________shares
After___________________ ,19__
but before__________________,19__ ____________________shares
After___________________ ,19__
but before__________________,19__ ____________________shares
After___________________ ,19__
but before__________________,19__ ____________________shares
After___________________ ,19__
but before__________________,19__ ____________________shares
|
EXHIBIT B
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED and pursuant to that certain Early Exercise Stock Purchase Agreement dated as of _________________, _________________ hereby sells, assigns and transfers unto CIPHERGEN BIOSYSTEMS, INC. __________________________ (_______________________) shares of common stock of Ciphergen Biosystems, Inc., a California corporation, standing in the undersigned's name on the books of said corporation represented by Certificate No. __________________ herewith, and does hereby irrevocably constitute and appoint Wilson Sonsini Goodrich & Rosati attorney to transfer the said stock on the books of the said corporation with full power of substitution in the premises. This Assignment may be used only in accordance with and subject to the terms and conditions of the Agreement, in connection with the repurchase of shares of Common Stock issued to the undersigned pursuant to the Agreement, and only to the extent that such shares remain subject to the Company's Purchase Option under the Agreement.
Dated: ____________________________
Signature _____________________
EXHIBIT C
JOINT ESCROW INSTRUCTIONS
Michael J. O'Donnell, Secretary
Ciphergen Biosystems, Inc.
c/o Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, CA 94304-1050
Dear Mr. O'Donnell:
As Escrow Agent for both CIPHERGEN BIOSYSTEMS, INC., a California corporation ("Corporation"), and the undersigned purchaser of stock of the Corporation ("Purchaser"), you are hereby authorized and directed to hold the documents delivered to you pursuant to the terms of that certain Early Exercise Stock Purchase Agreement ("Agreement"), dated _____________________, to which a copy of these Joint Escrow Instructions is attached as Exhibit C, in accordance with the following instructions:
1. In the event the Corporation or an assignee shall elect to exercise the Purchase Option set forth in the Agreement, the Corporation or its assignee will give to Purchaser and you a written notice specifying the number of shares of stock to be purchased, the purchase price, and the time for a closing hereunder at the principal office of the Corporation. Purchaser and the Corporation hereby irrevocably authorize and direct you to close the transaction contemplated by such notice in accordance with the terms of said notice.
2. At the closing you are directed (a) to date any stock assignments necessary for the transfer in question, (b) to fill in the number of shares being transferred, and (c) to deliver same, together with the certificate evidencing the shares of stock to be transferred, to the Corporation against the simultaneous delivery to you of the purchase price (which may include suitable acknowledgment of cancellation of indebtedness) of the number of shares of stock being purchased pursuant to the exercise of the Purchase Option.
3. Purchaser irrevocably authorizes the Corporation to deposit with you any certificates evidencing shares of stock to be held by you hereunder and any additions and substitutions to said shares as specified in the Agreement. Purchaser does hereby irrevocably constitute and appoint you as his attorney-in-fact and agent for the term of this escrow to execute with respect to such securities and other property all documents of assignment and/or transfer and all stock certificates necessary or appropriate to make all securities negotiable and complete any transaction herein contemplated.
4. This escrow shall terminate upon expiration or exercise in full of the Purchase Option, whichever occurs first.
1.
5. If at the time of termination of this escrow you should have in your possession any documents, securities, or other property belonging to Purchaser, you shall deliver all of same to Purchaser and shall be discharged of all further obligations hereunder; PROVIDED, HOWEVER, that if at the time of termination of this escrow you are advised by the Corporation that the property subject to this escrow is the subject of a pledge or other security agreement, you shall deliver all such property to the pledgeholder or other person designated by the Corporation.
6. Except at otherwise provided in these Joint Escrow Instructions, your duties hereunder may be altered, amended, modified or revoked only by a writing signed by all of the parties hereto.
7. You shall be obligated only for the performance of such duties as are specifically set forth herein and may rely and shall be protected in relying or refraining from acting on any instrument reasonably believed by you to be genuine and to have been signed or presented by the proper party or parties or their assignees. You shall not be personally liable for any act you may do or omit to do hereunder as Escrow Agent or as attorney-in-fact for Purchaser while acting in good faith and any act done or omitted by you pursuant to the advice of your own attorneys shall be conclusive evidence of such good faith.
8. You are hereby expressly authorized to disregard any and all warnings given by any of the parties hereto or by any other person or corporation, excepting only orders or process of courts of law, and are hereby expressly authorized to comply with and obey orders, judgments or decrees of any court. In case you obey or comply with any such order, judgment or decree of any court, you shall not be liable to any of the parties hereto or to any other person, firm or corporation by reason of such compliance, notwithstanding any such order, judgment or decree being subsequently reversed, modified, annulled, set aside, vacated or found to have been entered without jurisdiction.
9. You shall not be liable in any respect on account of the identity, authority or rights of the parties executing or delivering or purporting to execute or deliver the Agreement or any documents or papers deposited or called for hereunder.
10. You shall not be liable for the outlawing of any rights under any statute of limitations with respect to these Joint Escrow Instructions or any documents deposited with you.
11. You shall be entitled to employ such legal counsel (including without limitation the firm of Wilson Sonsini Goodrich & Rosati) and other experts as you may deem necessary properly to advise you in connection with your obligations hereunder, may rely upon the advice of such counsel, and may pay such counsel reasonable compensation therefor.
12. Your responsibilities as Escrow Agent hereunder shall terminate if you shall cease to be Secretary of the Corporation or if you shall resign by written notice to each party. In the event of any such termination, the Corporation may appoint any officer or assistant officer of the Corporation as successor Escrow Agent and Purchaser hereby confirms the appointment of such successor or successors as his attorney-in-fact and agent to the full extent of your appointment.
2.
13. If you reasonably require other or further instruments in connection with these Joint Escrow Instructions or obligations in respect hereto, the necessary parties hereto shall join in furnishing such instruments.
14. It is understood and agreed that should any dispute arise with respect to the delivery and/or ownership or right of possession of the securities, you may (but are not obligated to) retain in your possession without liability to anyone all or any part of said securities until such dispute shall have been settled either by mutual written agreement of the parties concerned or by a final order, decree or judgment of a court of competent jurisdiction after the time for appeal has expired and no appeal has been perfected, but you shall be under no duty whatsoever to institute or defend any such proceedings.
15. Any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given upon personal delivery or upon deposit in any United States Post Box, by registered or certified mail with postage and fees prepaid, addressed to each of the other parties hereunto entitled at the following addresses, or at such other addresses as a party may designate by ten days' written notice to each of the other parties hereto:
CORPORATION: CIPHERGEN BIOSYSTEMS, INC.
490 San Antonio Road
Palo Alto, CA 94306
PURCHASER:
______________________________________
______________________________________
SECRETARY: MICHAEL J. O'DONNELL
Ciphergen Biosystems, Inc.
c/o Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, CA 94304-1050
|
16. By signing these Joint Escrow Instructions you become a party hereto only for the purpose of said Joint Escrow Instructions; you do not become a party to the Agreement.
3.
17. This instrument shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. It is understood and agreed that references to "you" or "your" herein refer to the original Escrow Agent and to any and all successor Escrow Agents. It is understood and agreed that the Corporation may at any time or from time to time assign its rights under the Agreement and these Joint Escrow Instructions in whole or in part.
Very truly yours,
CIPHERGEN BIOSYSTEMS, INC.
By: _____________________________________
William E. Rich,
President and Chief Executive Officer
PURCHASER:
ESCROW AGENT:
4.
EXHIBIT D
STATE OF CALIFORNIA - CALIFORNIA ADMINISTRATIVE CODE
TITLE 10. INVESTMENT - CHAPTER 3. COMMISSIONER OF CORPORATIONS
260.141.11: RESTRICTION ON TRANSFER. (a) The issuer of any security upon which a restriction on transfer has been imposed pursuant to Sections 260.102.6, 260.141.10 or 260.534 shall cause a copy of this section to be delivered to each issuee or transferee of such security at the time the certificate evidencing the security is delivered to the issuee or transferee.
(b) It is unlawful for the holder of any such security to consummate a
sale or transfer of such security, or any interest therein, without the prior
written consent of the Commissioner (until this condition is removed pursuant to
Section 260.141.12 of these rules), except:
(1) to the issuer;
(2) pursuant to the order or process of any court;
(3) to any person described in Subdivision (i) of Section
25102 of the Code or Section 260.105.14 of these rules;
(4) to the transferor's ancestors, descendants or spouse, or
any custodian or trustee for the account of the transferror or the
transferor's ancestors, descendants, or spouse; or to a transferee by a
trustee or custodian for the account of the transferee or the
transferee's ancestors, descendants or spouse;
(5) to holders of securities of the same class of the same
issuer;
(6) by way of gift or donation inter vivos or on death;
(7) by or through a broker-dealer licensed under the Code
(either acting as such or as a finder) to a resident of a foreign
state, territory or country who is neither domiciled in this state to
the knowledge of the broker-dealer, nor actually present in this state
if the sale of such securities is not in violation of any securities
law of the foreign state, territory or country concerned;
(8) to a broker-dealer licensed under the Code in a principal
transaction, or as an underwriter or member of an underwriting
syndicate or selling group;
(9) if the interest sold or transferred is a pledge or other
lien given by the purchase to the seller upon a sale of the security
for which the Commissioner's written consent is obtained or under this
rule not required;
(10) by way of a sale qualified under Sections 25111, 25112,
25113 or 25121 of the Code, of the securities to be transferred,
provided that no order under Section 25140 or subdivision (a) of
Section 25143 is in effect with respect to such qualification;
(11) by a corporation to a wholly owned subsidiary of such
corporation, or by a wholly owned subsidiary of a corporation to such
corporation;
(12) by way of an exchange qualified under Section 25111,
25112 or 25113 of the Code, provided that no order under Section 25140
or subdivision (a) of Section 25143 is in effect with respect to such
qualification;
(13) between residents of foreign states, territories or
countries who are neither domiciled nor actually present in this state;
1.
(14) to the State Controller pursuant to the Unclaimed
Property Law or to the administrator of the unclaimed property law of
another state; or
(15) by the State Controller pursuant to the Unclaimed
Property Law or by the administrator of the unclaimed property law of
another state if, in either such case, such person (i) discloses to
potential purchasers at the sale that transfer of the securities is
restricted under this rule, (ii) delivers to each purchaser a copy of
this rule, and (iii) advises the Commissioner of the name of each
purchaser;
(16) by a trustee to a successor trustee when such transfer
does not involve a change in the beneficial ownership of the
securities;
(17) by way of an offer and sale of outstanding securities in
an issuer transaction that is subject to the qualification requirement
of Section 25110 of the Code but exempt from that qualification
requirement by subdivision (f) of Section 25102;
provided that any such transfer is on the condition that any certificate evidencing the security issued to such transferee shall contain the legend required by this section.
(c) The certificates representing all such securities subject to such a restriction on transfer, whether upon initial issuance or upon any transfer thereof, shall bear on their face a legend, prominently stamped or printed thereon in capital letters of not less than 1O-point size, reading as follows:
"IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY, OR ANY INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT THE PRIOR WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA, EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES."
2.
NOTICE OF EXERCISE
Ladies and Gentlemen:
This constitutes notice under my stock option that I elect to purchase the number of shares for the price set forth below.
Type of option (check one): Incentive / / Nonstatutory / / Stock option dated: __________________ Number of shares as to which option is exercised: __________________ Certificates to be issued in name of: __________________ Total exercise price: $_________________ Cash payment delivered herewith: $_________________ |
By this exercise, I agree (i) to provide such additional documents as
you may require pursuant to the terms of the 1993 Stock Option Plan, (ii) to
provide for the payment by me to you (in the manner designated by you) of your
withholding obligation, if any, relating to the exercise of this option, and
(iii) if this exercise relates to an incentive stock option, to notify you in
writing within fifteen (15) days after the date of any disposition of any shares
of Common Stock issued upon exercise of this option that occurs within two (2)
years after the date of grant of this option or within one (1) year after such
shares of Common Stock are issued upon exercise of this option.
1.
I hereby make the following certifications and representations with respect to the number of shares of Common Stock of the Company listed above (the "Shares"), which are being acquired by me for my own account upon exercise of the Option as set forth above:
I acknowledge that the Shares have not been registered under the Securities Act of 1933, as amended (the "Act"), and are deemed to constitute "restricted securities" under Rule 701 and "control securities" under Rule 144 promulgated under the Act. I warrant and represent to the Company that I have no present intention of distributing or selling said Shares, except as permitted under the Act and any applicable state securities laws.
I further acknowledge that I will not be able to resell the Shares for at least ninety days after the stock of the Company becomes publicly traded (i.e., subject to the reporting requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934) under Rule 701 and that more restrictive conditions apply to affiliates of the Company under Rule 144.
I further acknowledge that all certificates representing any of the Shares subject to the provisions of the Option shall have endorsed thereon appropriate legends reflecting the foregoing limitations, as well as any legends reflecting restrictions pursuant to the Company's Articles of Incorporation, Bylaws and/or applicable securities laws.
I further agree that, if required by the Company (or a representative
of the underwriters) in connection with the first underwritten registration of
the offering of any securities of the Company under the Act, I will not sell or
otherwise transfer or dispose of any shares of Common Stock or other securities
of the Company during such period (not to exceed one hundred eighty (180) days)
following the effective date of the registration statement of the Company filed
under the Act (the "Effective Date") as may be requested by the Company or the
representative of the underwriters. For purposes of this restriction I will be
deemed to own securities that (i) are owned directly or indirectly by me,
including securities held for my benefit by nominees, custodians, brokers or
pledges; (ii) may be acquired by me within sixty (60) days of the Effective
Date; (iii) are owned directly or indirectly, by or for my brothers or sisters
(whether by whole or half blood), spouse, ancestors and lineal descendants; or
(iv) are owned, directly or indirectly, by or for a corporation, partnership,
estate or trust of which I am a shareholder, partner or beneficiary, but only to
the extent of my proportionate interest therein as a shareholder, partner or
beneficiary thereof. I further agree that the Company may impose stop-transfer
instructions with respect to securities subject to the foregoing restrictions
until the end of such period.
Very truly yours,
2.
Exhibit 10.5
CIPHERGEN BIOSYSTEMS, INC.
2000 STOCK PLAN
1. PURPOSES OF THE PLAN. The purposes of this 2000 Stock Plan are:
- to attract and retain the best available personnel for positions of substantial responsibility,
- to provide additional incentive to Employees, Directors and Consultants, and
- to promote the success of the Company's business.
Options granted under the Plan may be Incentive Stock Options or Nonstatutory Stock Options, as determined by the Administrator at the time of grant.
2. DEFINITIONS. As used herein, the following definitions shall apply:
(a) "ADMINISTRATOR" means the Board or any of its Committees as shall be administering the Plan, in accordance with Section 4 of the Plan.
(b) "APPLICABLE LAWS" means the requirements relating to the administration of stock option plans under U.S. state corporate laws, U.S. federal and state securities laws, the Code, any stock exchange or quotation system on which the Common Stock is listed or quoted and the applicable laws of any other country or jurisdiction where Options are granted under the Plan.
(c) "BOARD" means the Board of Directors of the Company.
(d) "CODE" means the Internal Revenue Code of 1986, as amended.
(e) "COMMITTEE" means a committee of Directors appointed by the Board in accordance with Section 4 of the Plan.
(f) "COMMON STOCK" means the common stock of the Company.
(g) "COMPANY" means Ciphergen Biosystems, Inc., a Delaware corporation.
(h) "CONSULTANT" means any natural person, including an advisor, engaged by the Company or a Parent or Subsidiary to render services to such entity.
(i) "DIRECTOR" means a member of the Board.
(j) "DISABILITY" means total and permanent disability as defined in
Section 22(e)(3) of the Code.
(k) "EMPLOYEE" means any person, including Officers and Directors, employed by the Company or any Parent or Subsidiary of the Company. A Service Provider shall not cease to be an Employee in the case of (i) any leave of absence approved by the Company or (ii) transfers between locations of the Company or between the Company, its Parent, any Subsidiary, or any successor. For purposes of Incentive Stock Options, no such leave may exceed ninety days, unless reemployment upon expiration of such leave is guaranteed by statute or contract. If reemployment upon expiration of a leave of absence approved by the Company is not so guaranteed, then three (3) months following the 91st day of such leave any Incentive Stock Option held by the Optionee shall cease to be treated as an Incentive Stock Option and shall be treated for tax purposes as a Nonstatutory Stock Option. Neither service as a Director nor payment of a director's fee by the Company shall be sufficient to constitute "employment" by the Company.
(l) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
(m) "FAIR MARKET VALUE" means, as of any date, the value of Common Stock determined as follows:
(i) If the Common Stock is listed on any established stock exchange or a national market system, including without limitation the Nasdaq National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its Fair Market Value shall be the closing sales price for such stock (or the closing bid, if no sales were reported) as quoted on such exchange or system on the day of determination, as reported in THE WALL STREET JOURNAL or such other source as the Administrator deems reliable;
(ii) If the Common Stock is regularly quoted by a recognized securities dealer but selling prices are not reported, the Fair Market Value of a Share of Common Stock shall be the mean between the high bid and low asked prices for the Common Stock on the day of determination, as reported in THE WALL STREET JOURNAL or such other source as the Administrator deems reliable; or
(iii) In the absence of an established market for the Common Stock, the Fair Market Value shall be determined in good faith by the Administrator.
(n) "INCENTIVE STOCK OPTION" means an Option intended to qualify as an incentive stock option within the meaning of Section 422 of the Code and the regulations promulgated thereunder.
(o) "NONSTATUTORY STOCK OPTION" means an Option not intended to qualify as an Incentive Stock Option.
(p) "NOTICE OF GRANT" means a written or electronic notice evidencing certain terms and conditions of an individual Option grant. The Notice of Grant is part of the Option Agreement.
(q) "OFFICER" means a person who is an officer of the Company within the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder.
(r) "OPTION" means a stock option granted pursuant to the Plan.
(s) "OPTION AGREEMENT" means an agreement between the Company and an Optionee evidencing the terms and conditions of an individual Option grant. The Option Agreement is subject to the terms and conditions of the Plan.
(t) "OPTIONED STOCK" means the Common Stock subject to an Option.
(u) "OPTIONEE" means the holder of an outstanding Option granted under the Plan.
(v) "PARENT" means a "parent corporation," whether now or hereafter existing, as defined in Section 424(e) of the Code.
(w) "PLAN" means this 2000 Stock Plan.
(x) "RULE 16b-3" means Rule 16b-3 of the Exchange Act or any successor to Rule 16b-3, as in effect when discretion is being exercised with respect to the Plan.
(y) "SECTION 16(b) " means Section 16(b) of the Exchange Act.
(z) "SERVICE PROVIDER" means an Employee, Director or Consultant.
(aa) "SHARE" means a share of the Common Stock, as adjusted in accordance with Section 12 of the Plan.
(bb) "SUBSIDIARY" means a "subsidiary corporation", whether now or hereafter existing, as defined in Section 424(f) of the Code.
3. STOCK SUBJECT TO THE PLAN. Subject to the provisions of Section 12 of the Plan, the maximum aggregate number of Shares that may be optioned and sold under the Plan is 2,500,000 Shares, plus an annual increase to be added on the first day of the Company's fiscal year, beginning fiscal year 2001, equal to the lesser of (i) 5,000,000 Shares, (ii) 5% of the outstanding Shares of Common Stock on the last day of the immediately preceding fiscal year or (iii) an amount determined by the Board. The Shares may be authorized, but unissued, or reacquired Common Stock.
If an Option expires or becomes unexercisable without having been exercised in full, the unpurchased Shares which were subject thereto shall become available for future grant or sale under the Plan (unless the Plan has terminated); PROVIDED, however, that Shares that have actually been issued under the Plan upon exercise of an Option shall not be returned to the Plan and shall not become available for future distribution under the Plan, except that if unvested Shares are repurchased by the Company at their original purchase price, such Shares shall become available for future grant under the Plan.
4. ADMINISTRATION OF THE PLAN.
(a) PROCEDURE.
(i) MULTIPLE ADMINISTRATIVE BODIES. Different Committees with respect to different groups of Service Providers may administer the Plan.
(ii) SECTION 162(m). To the extent that the Administrator determines it to be desirable to qualify Options granted hereunder as "performance-based compensation" within the meaning of Section 162(m) of the Code, the Plan shall be administered by a Committee of two or more "outside directors" within the meaning of Section 162(m) of the Code.
(iii) RULE 16b-3. To the extent desirable to qualify transactions hereunder as exempt under Rule 16b-3, the transactions contemplated hereunder shall be structured to satisfy the requirements for exemption under Rule 16b-3.
(iv) OTHER ADMINISTRATION. Other than as provided above, the Plan shall be administered by (A) the Board or (B) a Committee, which committee shall be constituted to satisfy Applicable Laws.
(b) POWERS OF THE ADMINISTRATOR. Subject to the provisions of the Plan, and in the case of a Committee, subject to the specific duties delegated by the Board to such Committee, the Administrator shall have the authority, in its discretion:
(i) to determine the Fair Market Value;
(ii) to select the Service Providers to whom Options may be granted hereunder;
(iii) to determine the number of shares of Common Stock to be covered by each Option granted hereunder;
(iv) to approve forms of agreement for use under the Plan;
(v) to determine the terms and conditions, not inconsistent with the terms of the Plan, of any Option granted hereunder. Such terms and conditions include, but are not limited to, the exercise price, the time or times when Options may be exercised (which may be based on performance criteria), any vesting acceleration or waiver of forfeiture restrictions, and any restriction or limitation regarding any Option or the shares of Common Stock relating thereto, based in each case on such factors as the Administrator, in its sole discretion, shall determine;
(vi) to construe and interpret the terms of the Plan and awards granted pursuant to the Plan;
(vii) to prescribe, amend and rescind rules and regulations relating to the Plan, including rules and regulations relating to sub-plans established for the purpose of satisfying applicable foreign laws;
(viii) to modify or amend each Option (subject to Section 14(c) of the Plan), including the discretionary authority to extend the post-termination exercisability period of Options longer than is otherwise provided for in the Plan;
(ix) to allow Optionees to satisfy withholding tax obligations by electing to have the Company withhold from the Shares to be issued upon exercise of an Option that number of Shares having a Fair Market Value equal to the minimum amount required to be withheld. The Fair Market Value of the Shares to be withheld shall be determined on the date that the amount of tax to be withheld is to be determined. All elections by an Optionee to have Shares withheld for this purpose shall be made in such form and under such conditions as the Administrator may deem necessary or advisable;
(x) to authorize any person to execute on behalf of the Company any instrument required to effect the grant of an Option previously granted by the Administrator;
(xi) to make all other determinations deemed necessary or advisable for administering the Plan.
(c) EFFECT OF ADMINISTRATOR'S DECISION. The Administrator's decisions, determinations and interpretations shall be final and binding on all Optionees and any other holders of Options or Shares issued under the Plan.
5. ELIGIBILITY. Nonstatutory Stock Options may be granted to Service Providers. Incentive Stock Options may be granted only to Employees.
6. LIMITATIONS.
(a) Each Option shall be designated in the Option Agreement as either an Incentive Stock Option or a Nonstatutory Stock Option. However, notwithstanding such designation, to the extent that the aggregate Fair Market Value of the Shares with respect to which Incentive Stock Options are exercisable for the first time by the Optionee during any calendar year (under all plans of the Company and any Parent or Subsidiary) exceeds $100,000, such Options shall be treated as Nonstatutory Stock Options. For purposes of this Section 6(a), Incentive Stock Options shall be taken into account in the order in which they were granted. The Fair Market Value of the Shares shall be determined as of the time the Option with respect to such Shares is granted.
(b) Neither the Plan nor any Option shall confer upon an Optionee any right with respect to continuing the Optionee's relationship as a Service Provider with the Company, nor shall they interfere in any way with the Optionee's right or the Company's right to terminate such relationship at any time, with or without cause.
(c) The following limitations shall apply to grants of Options:
(i) No Service Provider shall be granted, in any fiscal year of the Company, Options to purchase more than 1,500,000 Shares.
(ii) In connection with his or her initial service, a Service Provider may be granted Options to purchase up to an additional 1,500,000 Shares, which shall not count against the limit set forth in subsection (i) above.
(iii) The foregoing limitations shall be adjusted proportionately in connection with any change in the Company's capitalization as described in Section 12.
7. TERM OF PLAN. Subject to Section 18 of the Plan, the Plan shall become effective upon its adoption by the Board. It shall continue in effect for a term of ten (10) years unless terminated earlier under Section 14 of the Plan.
8. TERM OF OPTION. The term of each Option shall be stated in the Option Agreement. In the case of an Incentive Stock Option, the term shall be ten (10) years from the date of grant or such shorter term as may be provided in the Option Agreement. Moreover, in the case of an Incentive Stock Option granted to an Optionee who, at the time the Incentive Stock Option is granted, owns stock representing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or any Parent or Subsidiary, the term of the Incentive Stock Option shall be five (5) years from the date of grant or such shorter term as may be provided in the Option Agreement.
9. OPTION EXERCISE PRICE AND CONSIDERATION.
(a) EXERCISE PRICE. The per share exercise price for the Shares to be issued pursuant to exercise of an Option shall be determined by the Administrator, subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time the Incentive Stock Option is granted, owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or any Parent or Subsidiary, the per Share exercise price shall be no less than 110% of the Fair Market Value per Share on the date of grant.
(B) granted to any Employee other than an Employee described in paragraph (A) immediately above, the per Share exercise price shall be no less than 100% of the Fair Market Value per Share on the date of grant.
(ii) In the case of a Nonstatutory Stock Option, the per Share exercise price shall be determined by the Administrator. In the case of a Nonstatutory Stock Option intended to qualify as "performance-based compensation" within the meaning of Section 162(m) of the Code, the per Share exercise price shall be no less than 100% of the Fair Market Value per Share on the date of grant.
(iii) Notwithstanding the foregoing, Options may be granted with a per Share exercise price of less than 100% of the Fair Market Value per Share on the date of grant pursuant to a merger or other corporate transaction.
(b) WAITING PERIOD AND EXERCISE DATES. At the time an Option is granted, the Administrator shall fix the period within which the Option may be exercised and shall determine any conditions that must be satisfied before the Option may be exercised.
(c) FORM OF CONSIDERATION. The Administrator shall determine the acceptable form of consideration for exercising an Option, including the method of payment. In the case of an Incentive Stock Option, the Administrator shall determine the acceptable form of consideration at the time of grant. Such consideration may consist entirely of:
(i) cash;
(ii) check;
(iii) promissory note;
(iv) other Shares which, in the case of Shares acquired directly or indirectly from the Company, (A) have been owned by the Optionee for more than six (6) months on the date of surrender, and (B) have a Fair Market Value on the date of surrender equal to the aggregate exercise price of the Shares as to which said Option shall be exercised;
(v) consideration received by the Company under a cashless exercise program implemented by the Company in connection with the Plan;
(vi) a reduction in the amount of any Company liability to the Optionee, including any liability attributable to the Optionee's participation in any Company-sponsored deferred compensation program or arrangement;
(vii) any combination of the foregoing methods of payment; or
(viii) such other consideration and method of payment for the issuance of Shares to the extent permitted by Applicable Laws.
Notwithstanding the foregoing, the Administrator may permit an Option to be exercised by delivery of a full-recourse promissory note secured by the purchased shares. All other terms of such promissory note shall be determined by the Administrator in its sole discretion.
10. EXERCISE OF OPTION.
(a) PROCEDURE FOR EXERCISE; RIGHTS AS A STOCKHOLDER. Any Option granted hereunder shall be exercisable according to the terms of the Plan and at such times and under such conditions as determined by the Administrator and set forth in the Option Agreement. Unless the Administrator provides otherwise, vesting of Options granted hereunder shall be suspended during any unpaid leave of absence. An Option may not be exercised for a fraction of a Share.
An Option shall be deemed exercised when the Company receives:
(i) written or electronic notice of exercise (in accordance with the Option
Agreement) from the person entitled to exercise the Option, and (ii) full
payment for the Shares with respect to which the Option is
exercised. Full payment may consist of any consideration and method of
payment authorized by the Administrator and permitted by the Option Agreement
and the Plan. Shares issued upon exercise of an Option shall be issued in the
name of the Optionee or, if requested by the Optionee, in the name of the
Optionee and his or her spouse. Until the Shares are issued (as evidenced by
the appropriate entry on the books of the Company or of a duly authorized
transfer agent of the Company), no right to vote or receive dividends or any
other rights as a stockholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. The Company shall issue (or cause
to be issued) such Shares promptly after the Option is exercised. No
adjustment will be made for a dividend or other right for which the record
date is prior to the date the Shares are issued, except as provided in
Section 12 of the Plan.
Exercising an Option in any manner shall decrease the number of Shares thereafter available, both for purposes of the Plan and for sale under the Option, by the number of Shares as to which the Option is exercised.
(b) TERMINATION OF RELATIONSHIP AS A SERVICE PROVIDER. If an Optionee ceases to be a Service Provider, other than upon the Optionee's death or Disability, the Optionee may exercise his or her Option within such period of time as is specified in the Option Agreement to the extent that the Option is vested on the date of termination (but in no event later than the expiration of the term of such Option as set forth in the Option Agreement). In the absence of a specified time in the Option Agreement, the Option shall remain exercisable for three (3) months following the Optionee's termination. If, on the date of termination, the Optionee is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option shall revert to the Plan. If, after termination, the Optionee does not exercise his or her Option within the time specified by the Administrator, the Option shall terminate, and the Shares covered by such Option shall revert to the Plan.
(c) DISABILITY OF OPTIONEE. If an Optionee ceases to be a Service Provider as a result of the Optionee's Disability, the Optionee may exercise his or her Option within such period of time as is specified in the Option Agreement to the extent the Option is vested on the date of termination (but in no event later than the expiration of the term of such Option as set forth in the Option Agreement). In the absence of a specified time in the Option Agreement, the Option shall remain exercisable for twelve (12) months following the Optionee's termination. If, on the date of termination, the Optionee is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option shall revert to the Plan. If, after termination, the Optionee does not exercise his or her Option within the time specified herein, the Option shall terminate, and the Shares covered by such Option shall revert to the Plan.
(d) DEATH OF OPTIONEE. If an Optionee dies while a Service Provider, the Option may be exercised following Optionee's death within such period of time as is specified in the Option Agreement to the extent that the Option is vested on the date of death (but in no event may the option be exercised later than the expiration of the term of such Option as set forth in the Option Agreement) by the Optionee's designated beneficiary, provided such beneficiary has been designated prior to Optionee's death in a form acceptable by the Administrator. If no such beneficiary has been designated by the Optionee, then such Option may be exercised by the personal representative of the Optionee's estate or by the person(s) to whom the Option is transferred pursuant to the Optionee's
will or in accordance with the laws of descent and distribution. In the absence of a specified time in the Option Agreement, the Option shall remain exercisable for twelve (12) months following Optionee's death. If, at the time of death, the Optionee is not vested as to his or her entire Option, the Shares covered by the unvested portion of the Option shall immediately revert to the Plan. If the Option is not so exercised within the time specified herein, the Option shall terminate, and the Shares covered by such Option shall revert to the Plan.
11. LIMITED TRANSFERABILITY OF OPTIONS. Unless determined otherwise by the Administrator, an Option may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised, during the lifetime of the Optionee, only by the Optionee. If the Administrator makes an Option transferable, such Option shall contain such additional terms and conditions as the Administrator deems appropriate.
12. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, DISSOLUTION, MERGER OR ASSET SALE.
(a) CHANGES IN CAPITALIZATION. Subject to any required action by
the stockholders of the Company, the number of shares of Common Stock which
have been authorized for issuance under the Plan but as to which no Options
have yet been granted or which have been returned to the Plan upon
cancellation or expiration of an Option or repurchase of unvested Shares, the
number of Shares that may be added annually to the Plan pursuant to Section
3(i), and the number of shares of Common Stock covered by each outstanding
Option as well as the price per share of Common Stock covered by each such
outstanding Option, shall be proportionately adjusted for any increase or
decrease in the number of issued shares of Common Stock resulting from a
stock split, reverse stock split, stock dividend, combination or
reclassification of the Common Stock, or any other increase or decrease in
the number of issued shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been
"effected without receipt of consideration." Such adjustment shall be made by
the Board, whose determination in that respect shall be final, binding and
conclusive. Except as expressly provided herein, no issuance by the Company
of shares of stock of any class, or securities convertible into shares of
stock of any class, shall affect, and no adjustment by reason thereof shall
be made with respect to, the number or price of shares of Common Stock
subject to an Option.
(b) DISSOLUTION OR LIQUIDATION. In the event of the
proposed dissolution or liquidation of the Company, the Administrator shall
notify each Optionee as soon as practicable prior to the effective date of
such proposed transaction. The Administrator in its discretion may provide
for an Optionee to have the right to exercise his or her Option until ten
(10) days prior to such transaction as to all of the Optioned Stock covered
thereby, including Shares as to which the Option would not otherwise be
exercisable. In addition, the Administrator may provide that any Company
repurchase option applicable to any Shares purchased upon exercise of an
Option shall lapse as to all such Shares, provided the proposed dissolution
or liquidation takes place at the time and in the manner contemplated. To the
extent it has not been previously exercised, an Option will terminate
immediately prior to the consummation of such proposed action.
(c) MERGER OR ASSET SALE. In the event of a merger of the Company with or into another corporation, or the sale of substantially all of the assets of the Company, each outstanding Option shall be assumed or an equivalent option substituted by the successor corporation or a Parent or Subsidiary of the successor corporation. In the event that the successor corporation refuses to assume or substitute for the Option, the Optionee shall fully vest in and have the right to exercise the Option as to all of the Optioned Stock, including Shares as to which it would not otherwise be vested or exercisable. If an Option becomes fully vested and exercisable in lieu of assumption or substitution in the event of a merger or sale of assets, the Administrator shall notify the Optionee in writing or electronically that the Option shall be fully vested and exercisable for a period of fifteen (15) days from the date of such notice, and the Option shall terminate upon the expiration of such period. For the purposes of this paragraph, the Option shall be considered assumed if, following the merger or sale of assets, the option confers the right to purchase or receive, for each Share of Optioned Stock subject to the Option immediately prior to the merger or sale of assets, the consideration (whether stock, cash, or other securities or property) received in the merger or sale of assets by holders of Common Stock for each Share held on the effective date of the transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding Shares); provided, however, that if such consideration received in the merger or sale of assets is not solely common stock of the successor corporation or its Parent, the Administrator may, with the consent of the successor corporation, provide for the consideration to be received upon the exercise of the Option, for each Share of Optioned Stock subject to the Option, to be solely common stock of the successor corporation or its Parent equal in fair market value to the per share consideration received by holders of Common Stock in the merger or sale of assets.
13. DATE OF GRANT. The date of grant of an Option shall be, for all purposes, the date on which the Administrator makes the determination granting such Option, or such other later date as is determined by the Administrator. Notice of the determination shall be provided to each Optionee within a reasonable time after the date of such grant.
14. AMENDMENT AND TERMINATION OF THE PLAN.
(a) AMENDMENT AND TERMINATION. The Board may at any time amend, alter, suspend or terminate the Plan.
(b) STOCKHOLDER APPROVAL. The Company shall obtain stockholder approval of any Plan amendment to the extent necessary and desirable to comply with Applicable Laws.
(c) EFFECT OF AMENDMENT OR TERMINATION. No amendment, alteration, suspension or termination of the Plan shall impair the rights of any Optionee, unless mutually agreed otherwise between the Optionee and the Administrator, which agreement must be in writing and signed by the Optionee and the Company. Termination of the Plan shall not affect the Administrator's ability to exercise the powers granted to it hereunder with respect to Options granted under the Plan prior to the date of such termination.
15. CONDITIONS UPON ISSUANCE OF SHARES.
(a) LEGAL COMPLIANCE. Shares shall not be issued pursuant to the exercise of an Option unless the exercise of such Option and the issuance and delivery of such Shares shall comply with Applicable Laws and shall be further subject to the approval of counsel for the Company with respect to such compliance.
(b) INVESTMENT REPRESENTATIONS. As a condition to the exercise of an Option, the Company may require the person exercising such Option to represent and warrant at the time of any such exercise that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a representation is required.
16. INABILITY TO OBTAIN AUTHORITY. The inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company's counsel to be necessary to the lawful issuance and sale of any Shares hereunder, shall relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained.
17. RESERVATION OF SHARES. The Company, during the term of this Plan, will at all times reserve and keep available such number of Shares as shall be sufficient to satisfy the requirements of the Plan.
18. STOCKHOLDER APPROVAL. The Plan shall be subject to approval by the stockholders of the Company within twelve (12) months after the date the Plan is adopted. Such stockholder approval shall be obtained in the manner and to the degree required under Applicable Laws.
Exhibit 10.6
CIPHERGEN BIOSYSTEMS, INC.
2000 EMPLOYEE STOCK PURCHASE PLAN
The following constitute the provisions of the 2000 Employee Stock Purchase Plan of Ciphergen Biosystems, Inc.
1. PURPOSE. The purpose of the Plan is to provide employees of the Company and its Designated Subsidiaries with an opportunity to purchase Common Stock of the Company through accumulated payroll deductions. It is the intention of the Company to have the Plan qualify as an "Employee Stock Purchase Plan" under Section 423 of the Internal Revenue Code of 1986, as amended. The provisions of the Plan, accordingly, shall be construed so as to extend and limit participation in a manner consistent with the requirements of that section of the Code.
2. DEFINITIONS.
(a) "BOARD" shall mean the Board of Directors of the Company or any committee thereof designated by the Board of Directors of the Company in accordance with Section 14 of the Plan.
(b) "CODE" shall mean the Internal Revenue Code of 1986, as amended.
(c) "COMMON STOCK" shall mean the common stock of the Company.
(d) "COMPANY" shall mean Ciphergen Biosystems, Inc. and any Designated Subsidiary of the Company.
(e) "COMPENSATION" shall mean all base straight time gross earnings, bonuses and commissions, but exclusive of payments for overtime, shift premium, and other compensation.
(f) "DESIGNATED SUBSIDIARY" shall mean any Subsidiary that has been designated by the Board from time to time in its sole discretion as eligible to participate in the Plan.
(g) "EMPLOYEE" shall mean any individual who is an Employee of the Company for tax purposes whose customary employment with the Company is at least twenty (20) hours per week and more than five (5) months in any calendar year. For purposes of the Plan, the employment relationship shall be treated as continuing intact while the individual is on sick leave or other leave of absence approved by the Company. Where the period of leave exceeds 90 days and the individual's right to reemployment is not guaranteed either by statute or by contract, the employment relationship shall be deemed to have terminated on the 91st day of such leave.
(h) "ENROLLMENT DATE" shall mean the first Trading Day of each Offering Period.
(i) "EXERCISE DATE" shall mean the first Trading Day on or after May 1st and November 1st of each year.
(j) "FAIR MARKET VALUE" shall mean, as of any date, the value of Common Stock determined as follows:
(i) If the Common Stock is listed on any established stock exchange or a national market system, including without limitation the Nasdaq National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its Fair Market Value shall be the closing sales price for such stock (or the closing bid, if no sales were reported) as quoted on such exchange or system on the date of determination, as reported in THE WALL STREET JOURNAL or such other source as the Board deems reliable;
(ii) If the Common Stock is regularly quoted by a recognized securities dealer but selling prices are not reported, its Fair Market Value shall be the mean of the closing bid and asked prices for the Common Stock on the date of determination, as reported in THE WALL STREET JOURNAL or such other source as the Board deems reliable;
(iii) In the absence of an established market for the Common Stock, the Fair Market Value thereof shall be determined in good faith by the Board; or
(iv) For purposes of the Enrollment Date of the first Offering Period under the Plan, the Fair Market Value shall be the initial price to the public as set forth in the final prospectus included within the registration statement in Form S-1 filed with the Securities and Exchange Commission for the initial public offering of the Company's Common Stock (the "Registration Statement").
(k) "OFFERING PERIODS" shall mean the periods of approximately twenty-four (24) months during which an option granted pursuant to the Plan may be exercised, commencing on the first Trading Day on or after May 1st and November 1st of each year and terminating on the first Trading Day on or after the May 1st and November 1st Offering Period commencement date approximately twenty-four months later; provided, however, that the first Offering Period under the Plan shall commence with the first Trading Day on or after the date on which the Securities and Exchange Commission declares the Company's Registration Statement effective and ending on the first Trading Day on or after May 1, 2002. The duration and timing of Offering Periods may be changed pursuant to Section 4 of this Plan.
(l) "PLAN" shall mean this 2000 Employee Stock Purchase Plan.
(m) "PURCHASE PERIOD" shall mean the approximately six month period commencing on one Exercise Date and ending with the next Exercise Date, except that the first Purchase Period of any Offering Period shall commence on the Enrollment Date and end with the next Exercise Date.
(n) "PURCHASE PRICE" shall mean 85% of the Fair Market Value of a share of Common Stock on the Enrollment Date or on the Exercise Date, whichever is lower; provided however, that the Purchase Price may be adjusted by the Board pursuant to Section 20.
(o) "RESERVES" shall mean the number of shares of Common Stock covered by each option under the Plan which have not yet been exercised and the number of shares of Common Stock which have been authorized for issuance under the Plan but not yet placed under option.
(p) "SUBSIDIARY" shall mean a corporation, domestic or foreign, of which not less than 50% of the voting shares are held by the Company or a Subsidiary, whether or not such corporation now exists or is hereafter organized or acquired by the Company or a Subsidiary.
(q) "TRADING DAY" shall mean a day on which national stock exchanges and the Nasdaq System are open for trading.
3. ELIGIBILITY.
(a) Any Employee who shall be employed by the Company on a given Enrollment Date shall be eligible to participate in the Plan.
(b) Any provisions of the Plan to the contrary notwithstanding, no Employee shall be granted an option under the Plan (i) to the extent that, immediately after the grant, such Employee (or any other person whose stock would be attributed to such Employee pursuant to Section 424(d) of the Code) would own capital stock of the Company and/or hold outstanding options to purchase such stock possessing five percent (5%) or more of the total combined voting power or value of all classes of the capital stock of the Company or of any Subsidiary, or (ii) to the extent that his or her rights to purchase stock under all employee stock purchase plans of the Company and its subsidiaries accrues at a rate which exceeds Twenty-Five Thousand Dollars ($25,000) worth of stock (determined at the fair market value of the shares at the time such option is granted) for each calendar year in which such option is outstanding at any time.
4. OFFERING PERIODS. The Plan shall be implemented by consecutive, overlapping Offering Periods with a new Offering Period commencing on the first Trading Day on or after May 1st and November 1st each year, or on such other date as the Board shall determine, and continuing thereafter until terminated in accordance with Section 20 hereof; provided, however, that the first Offering Period under the Plan shall commence with the first Trading Day on or after the date on which the Securities and Exchange Commission declares the Company's Registration Statement effective and ending on the first Trading Day on or after May 1, 2002. The Board shall have the power to change the duration of Offering Periods (including the commencement dates thereof) with respect to future offerings without stockholder approval if such change is announced at least five (5) days prior to the scheduled beginning of the first Offering Period to be affected thereafter.
5. PARTICIPATION.
(a) An eligible Employee may become a participant in the Plan by completing a subscription agreement authorizing payroll deductions in the form of Exhibit A to this Plan and filing it with the Company's payroll office prior to the applicable Enrollment Date.
(b) Payroll deductions for a participant shall commence on the first payroll following the Enrollment Date and shall end on the last payroll in the Offering Period to which such authorization is applicable, unless sooner terminated by the participant as provided in Section 10 hereof.
6. PAYROLL DEDUCTIONS.
(a) At the time a participant files his or her subscription agreement, he or she shall elect to have payroll deductions made on each pay day during the Offering Period in an amount not exceeding fifteen percent (15%) of the Compensation which he or she receives on each pay day during the Offering Period; provided, however, that should a pay day occur on an Exercise Date, a participant shall have the payroll deductions made on such day applied to his or her account under the new Offering Period or Purchase Period, as the case may be.
(b) All payroll deductions made for a participant shall be credited to his or her account under the Plan and shall be withheld in whole percentages only. A participant may not make any additional payments into such account.
(c) A participant may discontinue his or her participation in the Plan as provided in Section 10 hereof, or may increase or decrease the rate of his or her payroll deductions during the Offering Period by completing or filing with the Company a new subscription agreement authorizing a change in payroll deduction rate. The Company may, in its discretion, limit the nature and/or number of participation rate changes during any Offering Period, and may establish such other conditions or limitations as it deems appropriate for Plan administration. The change in rate shall be effective with the first full payroll period following five (5) business days after the Company's receipt of the new subscription agreement unless the Company elects to process a given change in participation more quickly. A participant's subscription agreement shall remain in effect for successive Offering Periods unless terminated as provided in Section 10 hereof.
(d) Notwithstanding the foregoing, to the extent necessary to comply with Section 423(b)(8) of the Code and Section 3(b) hereof, a participant's payroll deductions may be decreased to zero percent (0%) at any time during a Purchase Period. Payroll deductions shall recommence at the rate provided in such participant's subscription agreement at the beginning of the first Purchase Period which is scheduled to end in the following calendar year, unless terminated by the participant as provided in Section 10 hereof.
(e) At the time the option is exercised, in whole or in part, or at the time some or all of the Company's Common Stock issued under the Plan is disposed of, the participant must make adequate provision for the Company's federal, state, or other tax withholding obligations, if any, which arise upon the exercise of the option or the disposition of the Common Stock. At any time, the Company may, but shall not be obligated to, withhold from the participant's compensation the amount necessary for the Company to meet applicable withholding obligations, including any withholding required to make available to the Company any tax deductions or benefits attributable to sale or early disposition of Common Stock by the Employee.
7. GRANT OF OPTION. On the Enrollment Date of each Offering Period, each eligible Employee participating in such Offering Period shall be granted an option to purchase on each Exercise Date during such Offering Period (at the applicable Purchase Price) up to a number of shares of the Company's Common Stock determined by dividing such Employee's payroll deductions accumulated prior to such Exercise Date and retained in the Participant's account as of the Exercise Date by the applicable Purchase Price; provided that in no event shall an Employee be permitted to purchase during each Purchase Period more than 2,500 shares of the Company's Common Stock
(subject to any adjustment pursuant to Section 19), and provided further that
such purchase shall be subject to the limitations set forth in Sections 3(b)
and 12 hereof. The Board may, for future Offering Periods, increase or
decrease, in its absolute discretion, the maximum number of shares of the
Company's Common Stock an Employee may purchase during each Purchase Period
of such Offering Period. Exercise of the option shall occur as provided in
Section 8 hereof, unless the participant has withdrawn pursuant to Section 10
hereof. The option shall expire on the last day of the Offering Period.
8. EXERCISE OF OPTION.
(a) Unless a participant withdraws from the Plan as provided in
Section 10 hereof, his or her option for the purchase of shares shall be
exercised automatically on the Exercise Date, and the maximum number of full
shares subject to option shall be purchased for such participant at the
applicable Purchase Price with the accumulated payroll deductions in his or
her account. No fractional shares shall be purchased; any payroll deductions
accumulated in a participant's account which are not sufficient to purchase a
full share shall be retained in the participant's account for the subsequent
Purchase Period or Offering Period, subject to earlier withdrawal by the
participant as provided in Section 10 hereof. Any other monies left over in a
participant's account after the Exercise Date shall be returned to the
participant. During a participant's lifetime, a participant's option to
purchase shares hereunder is exercisable only by him or her.
(b) If the Board determines that, on a given Exercise Date, the
number of shares with respect to which options are to be exercised may exceed
(i) the number of shares of Common Stock that were available for sale under
the Plan on the Enrollment Date of the applicable Offering Period, or
(ii) the number of shares available for sale under the Plan on such Exercise
Date, the Board may in its sole discretion (x) provide that the Company shall
make a pro rata allocation of the shares of Common Stock available for
purchase on such Enrollment Date or Exercise Date, as applicable, in as
uniform a manner as shall be practicable and as it shall determine in its
sole discretion to be equitable among all participants exercising options to
purchase Common Stock on such Exercise Date, and continue all Offering
Periods then in effect, or (y) provide that the Company shall make a pro rata
allocation of the shares available for purchase on such Enrollment Date or
Exercise Date, as applicable, in as uniform a manner as shall be practicable
and as it shall determine in its sole discretion to be equitable among all
participants exercising options to purchase Common Stock on such Exercise
Date, and terminate any or all Offering Periods then in effect pursuant to
Section 20 hereof. The Company may make pro rata allocation of the shares
available on the Enrollment Date of any applicable Offering Period pursuant
to the preceding sentence, notwithstanding any authorization of additional
shares for issuance under the Plan by the Company's stockholders subsequent
to such Enrollment Date.
9. DELIVERY. As promptly as practicable after each Exercise Date on which a purchase of shares occurs, the Company shall arrange the delivery to each participant, as appropriate, of a certificate representing the shares purchased upon exercise of his or her option.
10. WITHDRAWAL.
(a) A participant may withdraw all but not less than all the payroll deductions credited to his or her account and not yet used to exercise his or her option under the Plan at any time by giving written notice to the Company in the form of Exhibit B to this Plan. All of the participant's payroll deductions credited to his or her account shall be paid to such participant promptly after receipt of notice of withdrawal and such participant's option for the Offering Period shall be automatically terminated, and no further payroll deductions for the purchase of shares shall be made for such Offering Period. If a participant withdraws from an Offering Period, payroll deductions shall not resume at the beginning of the succeeding Offering Period unless the participant delivers to the Company a new subscription agreement.
(b) A participant's withdrawal from an Offering Period shall not have any effect upon his or her eligibility to participate in any similar plan which may hereafter be adopted by the Company or in succeeding Offering Periods which commence after the termination of the Offering Period from which the participant withdraws.
11. TERMINATION OF EMPLOYMENT.
Upon a participant's ceasing to be an Employee, for any reason, he or she shall be deemed to have elected to withdraw from the Plan and the payroll deductions credited to such participant's account during the Offering Period but not yet used to exercise the option shall be returned to such participant or, in the case of his or her death, to the person or persons entitled thereto under Section 15 hereof, and such participant's option shall be automatically terminated. The preceding sentence notwithstanding, a participant who receives payment in lieu of notice of termination of employment shall be treated as continuing to be an Employee for the participant's customary number of hours per week of employment during the period in which the participant is subject to such payment in lieu of notice.
12. INTEREST. No interest shall accrue on the payroll deductions of a participant in the Plan.
13. STOCK.
(a) Subject to adjustment upon changes in capitalization of the Company as provided in Section 19 hereof, the maximum number of shares of the Company's Common Stock which shall be made available for sale under the Plan shall be 500,000 shares, plus an annual increase to be added on the first day of the Company's fiscal year, beginning in 2001, equal to the lesser of (i) 1,000,000 shares, (ii) 1% of the outstanding shares of Common Stock on the last day of the immediately preceding fiscal year, or (iii) an amount determined by the Board.
(b) The participant shall have no interest or voting right in shares covered by his option until such option has been exercised.
(c) Shares to be delivered to a participant under the Plan shall be registered in the name of the participant or in the name of the participant and his or her spouse.
14. ADMINISTRATION. The Plan shall be administered by the Board or a committee of members of the Board appointed by the Board. The Board or its committee shall have full and exclusive discretionary authority to construe, interpret and apply the terms of the Plan, to determine eligibility and to adjudicate all disputed claims filed under the Plan. Every finding, decision and determination made by the Board or its committee shall, to the full extent permitted by law, be final and binding upon all parties.
15. DESIGNATION OF BENEFICIARY.
(a) A participant may file a written designation of a beneficiary who is to receive any shares and cash, if any, from the participant's account under the Plan in the event of such participant's death subsequent to an Exercise Date on which the option is exercised but prior to delivery to such participant of such shares and cash. In addition, a participant may file a written designation of a beneficiary who is to receive any cash from the participant's account under the Plan in the event of such participant's death prior to exercise of the option. If a participant is married and the designated beneficiary is not the spouse, spousal consent shall be required for such designation to be effective.
(b) Such designation of beneficiary may be changed by the participant at any time by written notice. In the event of the death of a participant and in the absence of a beneficiary validly designated under the Plan who is living at the time of such participant's death, the Company shall deliver such shares and/or cash to the executor or administrator of the estate of the participant, or if no such executor or administrator has been appointed (to the knowledge of the Company), the Company, in its discretion, may deliver such shares and/or cash to the spouse or to any one or more dependents or relatives of the participant, or if no spouse, dependent or relative is known to the Company, then to such other person as the Company may designate.
16. TRANSFERABILITY. Neither payroll deductions credited to a participant's account nor any rights with regard to the exercise of an option or to receive shares under the Plan may be assigned, transferred, pledged or otherwise disposed of in any way (other than by will, the laws of descent and distribution or as provided in Section 15 hereof) by the participant. Any such attempt at assignment, transfer, pledge or other disposition shall be without effect, except that the Company may treat such act as an election to withdraw funds from an Offering Period in accordance with Section 10 hereof.
17. USE OF FUNDS. All payroll deductions received or held by the Company under the Plan may be used by the Company for any corporate purpose, and the Company shall not be obligated to segregate such payroll deductions.
18. REPORTS. Individual accounts shall be maintained for each participant in the Plan. Statements of account shall be given to participating Employees at least annually, which statements shall set forth the amounts of payroll deductions, the Purchase Price, the number of shares purchased and the remaining cash balance, if any.
19. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, DISSOLUTION, LIQUIDATION, MERGER OR ASSET SALE.
(a) CHANGES IN CAPITALIZATION. Subject to any required action by the stockholders of the Company, the Reserves (including the number of shares automatically added annually to the Plan pursuant to Section 13(a)(i)), the maximum number of shares each participant may purchase each Purchase Period (pursuant to Section 7), as well as the price per share and the number of shares of Common Stock covered by each option under the Plan which has not yet been exercised shall be proportionately adjusted for any increase or decrease in the number of issued shares of Common Stock resulting from a stock split, reverse stock split, stock dividend, combination or reclassification of the Common Stock, or any other increase or decrease in the number of shares of Common Stock effected without receipt of consideration by the Company; provided, however, that conversion of any convertible securities of the Company shall not be deemed to have been "effected without receipt of consideration." Such adjustment shall be made by the Board, whose determination in that respect shall be final, binding and conclusive. Except as expressly provided herein, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares of Common Stock subject to an option.
(b) DISSOLUTION OR LIQUIDATION. In the event of the proposed dissolution or liquidation of the Company, the Offering Period then in progress shall be shortened by setting a new Exercise Date (the "New Exercise Date"), and shall terminate immediately prior to the consummation of such proposed dissolution or liquidation, unless provided otherwise by the Board. The New Exercise Date shall be before the date of the Company's proposed dissolution or liquidation. The Board shall notify each participant in writing, at least ten (10) business days prior to the New Exercise Date, that the Exercise Date for the participant's option has been changed to the New Exercise Date and that the participant's option shall be exercised automatically on the New Exercise Date, unless prior to such date the participant has withdrawn from the Offering Period as provided in Section 10 hereof.
(c) MERGER OR ASSET SALE. In the event of a proposed sale of all or substantially all of the assets of the Company, or the merger of the Company with or into another corporation, each outstanding option shall be assumed or an equivalent option substituted by the successor corporation or a Parent or Subsidiary of the successor corporation. In the event that the successor corporation refuses to assume or substitute for the option, any Purchase Periods then in progress shall be shortened by setting a new Exercise Date (the "New Exercise Date") and any Offering Periods then in progress shall end on the New Exercise Date. The New Exercise Date shall be before the date of the Company's proposed sale or merger. The Board shall notify each participant in writing, at least ten (10) business days prior to the New Exercise Date, that the Exercise Date for the participant's option has been changed to the New Exercise Date and that the participant's option shall be exercised automatically on the New Exercise Date, unless prior to such date the participant has withdrawn from the Offering Period as provided in Section 10 hereof.
20. AMENDMENT OR TERMINATION.
(a) The Board of Directors of the Company may at any time and for any reason terminate or amend the Plan. Except as provided in Section 19 hereof, no such termination can affect options previously granted, provided that an Offering Period may be terminated by the Board of Directors on any Exercise Date if the Board determines that the termination of the Offering Period or the Plan is in the best interests of the Company and its stockholders. Except as provided in Section 19 and this Section 20 hereof, no amendment may make any change in any option theretofore granted which adversely affects the rights of any participant. To the extent necessary to comply with Section 423 of the Code (or any successor rule or provision or any other applicable law, regulation or stock exchange rule), the Company shall obtain stockholder approval in such a manner and to such a degree as required.
(b) Without stockholder consent and without regard to whether any participant rights may be considered to have been "adversely affected," the Board (or its committee) shall be entitled to change the Offering Periods, limit the frequency and/or number of changes in the amount withheld during an Offering Period, establish the exchange ratio applicable to amounts withheld in a currency other than U.S. dollars, permit payroll withholding in excess of the amount designated by a participant in order to adjust for delays or mistakes in the Company's processing of properly completed withholding elections, establish reasonable waiting and adjustment periods and/or accounting and crediting procedures to ensure that amounts applied toward the purchase of Common Stock for each participant properly correspond with amounts withheld from the participant's Compensation, and establish such other limitations or procedures as the Board (or its committee) determines in its sole discretion advisable which are consistent with the Plan.
(c) In the event the Board determines that the ongoing operation of the Plan may result in unfavorable financial accounting consequences, the Board may, in its discretion and, to the extent necessary or desirable, modify or amend the Plan to reduce or eliminate such accounting consequence including, but not limited to:
(i) altering the Purchase Price for any Offering Period including an Offering Period underway at the time of the change in Purchase Price;
(ii) shortening any Offering Period so that Offering Period ends on a new Exercise Date, including an Offering Period underway at the time of the Board action; and
(iii) allocating shares.
Such modifications or amendments shall not require stockholder approval or the consent of any Plan participants.
21. NOTICES. All notices or other communications by a participant to the Company under or in connection with the Plan shall be deemed to have been duly given when received in the form specified by the Company at the location, or by the person, designated by the Company for the receipt thereof.
22. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued with respect to an option unless the exercise of such option and the issuance and delivery of such shares pursuant
thereto shall comply with all applicable provisions of law, domestic or foreign, including, without limitation, the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, the rules and regulations promulgated thereunder, and the requirements of any stock exchange upon which the shares may then be listed, and shall be further subject to the approval of counsel for the Company with respect to such compliance.
As a condition to the exercise of an option, the Company may require the person exercising such option to represent and warrant at the time of any such exercise that the shares are being purchased only for investment and without any present intention to sell or distribute such shares if, in the opinion of counsel for the Company, such a representation is required by any of the aforementioned applicable provisions of law.
23. TERM OF PLAN. The Plan shall become effective upon the earlier to
occur of its adoption by the Board of Directors or its approval by the
stockholders of the Company. It shall continue in effect for a term of ten
(10) years unless sooner terminated under Section 20 hereof.
24. AUTOMATIC TRANSFER TO LOW PRICE OFFERING PERIOD. To the extent permitted by any applicable laws, regulations, or stock exchange rules if the Fair Market Value of the Common Stock on any Exercise Date in an Offering Period is lower than the Fair Market Value of the Common Stock on the Enrollment Date of such Offering Period, then all participants in such Offering Period shall be automatically withdrawn from such Offering Period immediately after the exercise of their option on such Exercise Date and automatically re-enrolled in the immediately following Offering Period.
CIPHERGEN BIOSYSTEMS, INC.
2000 EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
_____ Original Application Enrollment Date:___________ _____ Change in Payroll Deduction Rate _____ Change of Beneficiary(ies) |
1. ____________________ hereby elects to participate in the Ciphergen Biosystems, Inc. Employee Stock Purchase Plan (the "Employee Stock Purchase Plan") and subscribes to purchase shares of the Company's Common Stock in accordance with this Subscription Agreement and the Employee Stock Purchase Plan.
2. I hereby authorize payroll deductions from each paycheck in the amount
of ____% of my Compensation on each payday (from 0 to 15%) during the
Offering Period in accordance with the Employee Stock Purchase Plan.
(Please note that no fractional percentages are permitted.)
3. I understand that said payroll deductions shall be accumulated for the purchase of shares of Common Stock at the applicable Purchase Price determined in accordance with the Employee Stock Purchase Plan. I understand that if I do not withdraw from an Offering Period, any accumulated payroll deductions will be used to automatically exercise my option.
4. I have received a copy of the complete Employee Stock Purchase Plan. I understand that my participation in the Employee Stock Purchase Plan is in all respects subject to the terms of the Plan. I understand that my ability to exercise the option under this Subscription Agreement is subject to stockholder approval of the Employee Stock Purchase Plan.
5. Shares purchased for me under the Employee Stock Purchase Plan should be issued in the name(s) of (Employee or Employee and Spouse only).
6. I understand that if I dispose of any shares received by me pursuant to the Plan within 2 years after the Enrollment Date (the first day of the Offering Period during which I purchased such shares) or one year after the Exercise Date, I will be treated for federal income tax purposes as having received ordinary income at the time of such disposition in an amount equal to the excess of the fair market value of the shares at the time such shares were purchased by me over the price which I paid for the shares. I HEREBY AGREE TO NOTIFY THE COMPANY IN WRITING WITHIN 30 DAYS AFTER THE DATE OF ANY DISPOSITION OF MY SHARES AND I WILL MAKE ADEQUATE PROVISION FOR FEDERAL, STATE OR OTHER TAX WITHHOLDING OBLIGATIONS, IF ANY, WHICH ARISE UPON THE
DISPOSITION OF THE COMMON STOCK. The Company may, but will not be obligated to, withhold from my compensation the amount necessary to meet any applicable withholding obligation including any withholding necessary to make available to the Company any tax deductions or benefits attributable to sale or early disposition of Common Stock by me. If I dispose of such shares at any time after the expiration of the 2-year and 1-year holding periods, I understand that I will be treated for federal income tax purposes as having received income only at the time of such disposition, and that such income will be taxed as ordinary income only to the extent of an amount equal to the lesser of (1) the excess of the fair market value of the shares at the time of such disposition over the purchase price which I paid for the shares, or (2) 15% of the fair market value of the shares on the first day of the Offering Period. The remainder of the gain, if any, recognized on such disposition will be taxed as capital gain.
7. I hereby agree to be bound by the terms of the Employee Stock Purchase Plan. The effectiveness of this Subscription Agreement is dependent upon my eligibility to participate in the Employee Stock Purchase Plan.
8. In the event of my death, I hereby designate the following as my beneficiary(ies) to receive all payments and shares due me under the Employee Stock Purchase Plan:
NAME: (Please print)_________________________________________________
(First) (Middle) (Last)
________________________ ___________________________________________
Relationship
___________________________________________
(Address)
-2-
|
Employee's Social
Security Number: ____________________________________
Employee's Address: ____________________________________
____________________________________
____________________________________
|
I UNDERSTAND THAT THIS SUBSCRIPTION AGREEMENT SHALL REMAIN IN EFFECT THROUGHOUT SUCCESSIVE OFFERING PERIODS UNLESS TERMINATED BY ME.
Dated:_________________________ ____________________________________________
Signature of Employee
____________________________________________
Spouse's Signature (If beneficiary other
than spouse)
|
2000 EMPLOYEE STOCK PURCHASE PLAN
NOTICE OF WITHDRAWAL
The undersigned participant in the Offering Period of the Ciphergen Biosystems, Inc. Employee Stock Purchase Plan which began on ____________, ______ (the "Enrollment Date") hereby notifies the Company that he or she hereby withdraws from the Offering Period. He or she hereby directs the Company to pay to the undersigned as promptly as practicable all the payroll deductions credited to his or her account with respect to such Offering Period. The undersigned understands and agrees that his or her option for such Offering Period will be automatically terminated. The undersigned understands further that no further payroll deductions will be made for the purchase of shares in the current Offering Period and the undersigned shall be eligible to participate in succeeding Offering Periods only by delivering to the Company a new Subscription Agreement.
Name and Address of Participant:
Signature:
Date:___________________________
SUMMARY PLAN DESCRIPTION
FOR THE
CIPHERGEN BIOSYSTEMS, INC. 401(K) SAVINGS PLAN
TABLE OF CONTENTS
(1) GENERAL. ...................................................................................................... 1
(2) IDENTIFICATION OF PLAN. ....................................................................................... 1
(3) TYPE OF PLAN. ................................................................................................. 1
(4) PLAN ADMINISTRATOR............................................................................................. 1
(5) TRUSTEE/TRUST FUND. ........................................................................................... 2
(6) HOURS OF SERVICE. .............................................................................................. 2
(7) ELIGIBILITY TO PARTICIPATE. ................................................................................... 2
(8) EMPLOYER'S CONTRIBUTIONS. ..................................................................................... 3
(9) EMPLOYEE CONTRIBUTIONS. ....................................................................................... 5
(10) VESTING IN EMPLOYER CONTRIBUTIONS............................................................................. 5
(11) PAYMENT OF BENEFITS AFTER TERMINATION OF EMPLOYMENT. ......................................................... 7
(12) PAYMENT OF BENEFITS PRIOR TO TERMINATION OF EMPLOYMENT. ...................................................... 9
(13) DISABILITY BENEFITS. .......................................................................................... 10
(14) PAYMENT OF BENEFITS UPON DEATH. ............................................................................... 10
(15) DISQUALIFICATION OF PARTICIPANT STATUS - LOSS OR DENIAL OF BENEFITS. .......................................... 11
(16) CLAIMS PROCEDURE. ............................................................................................. 11
(17) RETIRED PARTICIPANTS, SEPARATED PARTICIPANT WITH VESTED BENEFIT, BENEFICIARY RECEIVING
BENEFITS. ................................................................................................. 12
(18) PARTICIPANT'S RIGHTS UNDER ERISA. ............................................................................. 12
(19) FEDERAL INCOME TAXATION OF BENEFITS PAID. ..................................................................... 13
(20) PARTICIPANT LOANS. ............................................................................................ 13
(21) PARTICIPANT DIRECTION OF INVESTMENT. .......................................................................... 13
|
SUMMARY PLAN DESCRIPTION
(1) GENERAL. The legal name, address and Federal employer identification number of the Employer are -
Ciphergen Biosystems, Inc.
490 San Antonio Road, 2nd Fl.
Palo Alto, CA 94306
33-0595156
The Employer has established a retirement plan ("Plan") to supplement your income upon retirement. In addition to retirement benefits, the Plan may provide benefits in the event of your death or disability or in the event of your termination of employment prior to normal retirement. If after reading this summary you have any questions please ask the Plan Administrator. We emphasize XXX XXX XXX description is a highlight of the more important provisions of the Plan. If there is a XXX XXX XXX statement in this summary plan description and in the Plan, the terms of the Plan control.
(2) IDENTIFICATION OF PLAN. The Plan is known as -
Ciphergen Biosystems, Inc. 401(k) Savings Plan
The Employer has assigned 001 as the Plan identification number. The plan year is the period on which the Plan maintains its records: the twelve consecutive month period ending every December 31.
(3) TYPE OF PLAN. The Plan is commonly known as a Code Section 401(k) profit sharing plan. Section (8), "Employer's Contributions," explains how you share in the Employer's annual contributions to the trust fund and the extent to which the Employer has an obligation to make annual contributions to the trust fund.
Under this Plan, there is no fixed dollar amount of retirement benefits. Your actual retirement benefit will depend on the amount of your account balance at the time of retirement. Your account balance will reflect the annual allocations, the period of time you participate in the Plan and the success of the Plan in investing and reinvesting the assets of the trust fund. Furthermore, a governmental agency known as the Pension Benefit Guaranty Corporation (PBGC) insures the benefits payable under plans which provide for fixed and determinable retirement benefits. The Plan does not provide a fixed and determinable retirement benefit. Therefore, the PBGC does not include this Plan within its insurance program.
(4) PLAN ADMINISTRATOR. The Employer is the Plan Administrator. The Employer's telephone number is (415) 496-3770. The Employer has designated William E. Rich to assist the Employer with the duties of Plan Administrator. You must contact William E. Rich at the Employer's address. The Plan Administrator is responsible for providing you and other participants information regarding your rights and benefits under the Plan. The Plan Administrator also has the primary authority for filing the various reports, forms and returns with the Department of Labor and the Internal Revenue Service.
The name of the person designated as agent for service of legal process and the address where a processor may serve legal process upon the Plan are -
William E. Rich
Ciphergen Biosystems, Inc.
490 San Antonio Road, 2nd Fl.
Palo Alto, CA 94306
A legal processor may also serve the Trustee of the Plan or the Plan Administrator.
The Plan permits the Employer to appoint an Advisory Committee to assist in the administration of the Plan. The Advisory Committee has the responsibility for making all discretionary determinations under the Plan and for giving distribution directions to the Trustee. If the Employer does not appoint an Advisory Committee, the Plan Administrator assumes these responsibilities. The members of the Advisory Committee may change from time to time. You may obtain the names of the current members of the Advisory Committee from the Plan Administrator.
(5) TRUSTEE/TRUST FUND. The Employer has appointed -
William E. Rich 490 San Antonio Road, 2nd Fl.
Palo Alto, CA 94306
to hold the office of Trustee. The Trustee will hold all amounts the Employer contributes to it in a trust fund. Upon the direction of the Advisory Committee, the Trustee will make all distribution and benefit payments from the trust fund to participants and beneficiaries. The Trustee will maintain trust fund records on a plan year basis.
(6) HOURS OF SERVICE. The Plan and this summary plan description include reference to hours of service. To advance on the vesting schedule or to share in the allocation of Employer contributions for a plan year, the Plan requires you to complete a minimum number of hours of service during a specified period, such as the plan year. The sections covering vesting and employer contributions explain this aspect of the Plan in the context of those topics. However, hour of service has the same meaning for all purposes of the Plan.
The Department of Labor, in its regulations, has prescribed various methods under which the Employer may credit hours of service. The Employer has selected the "actual" method for crediting hours of service. Under the actual method, you will receive credit for each hour for which the Employer pays you, directly or indirectly, or for which you are entitled to payment, for the performance of your employment duties. You also will receive credit for certain hours during which you do not work if the Employer pays you for those hours, such as paid vacation.
If an employee's absence from employment is due to maternity or paternity leave, the employee will receive credit for unpaid hours of service related to his leave, not to exceed 501 hours. The Advisory Committee will credit these hours of service to the first period during which the employee otherwise would incur a l-year break in service as a result of the unpaid absence.
(7) ELIGIBILITY TO PARTICIPATE. You do not have to complete any form for entry into the Plan. You will become a Participant on the first day of each quarter immediately following the later of the date 3 months after your first day of employment or the date you attain age 21.
To become a participant in the Plan. you must wait a minimum of 3 months after your first day of employment with the Employer. It is not necessary for you to complete any specified number of hours of service during this period nor for you to be employed during the entire period. For example, if you begin work on February 15, you would satisfy the service requirement on the following May 15. Therefore, you would enter the Plan on the 1st day of each quarter immediately following that May 15, assuming you are employed on that 1st day of each quarter.
The example in the prior paragraph assumes you are at least age 21 when you complete the service requirement. If you have not attained age 21 when you complete the service requirement, then you will become a participant in the Plan on the first day of each quarter immediately following your attainment of age 21.
If you terminate employment after becoming a Participant in the Plan and later return to employment, you will re-enter the Plan on your re-employment date. Also, if you terminate employment after satisfying the Plan's eligibility conditions but before actually becoming a participant in the Plan, you will become a participant in the Plan on the later of your scheduled entry date or your reemployment date.
The following employees, are not eligible to participate in the plan:
employees working in a classification of employees covered by a collective bargaining agreement.
a nonresident alien who does not receive any earned income from the Employer which constitutes United States source income
If by reason of this exclusion, you should become ineligible to participate in the Plan, you may not receive an allocation of the Employer's contribution during the period of your exclusion, but during this period your account balance will continue to share in trust fund earnings or losses.
(8) EMPLOYER'S CONTRIBUTIONS. 401(k) Arrangement. This Plan includes a "401(k) arrangement," under which you may elect to have the employer contribute a portion of your compensation to the Plan. The contributions the Employer makes under your election are "elective deferrals." The Advisory Committee will allocate your elective deferrals to a separate account designated by the Plan as your Deferral Contributions Account.
As a participant in the Plan, you may enter into a salary reduction agreement with the Employer. The Advisory Commence will give you a salary reduction agreement form which will explain your salary reduction options. The Employer will withhold from your pay the amount you have agreed to have the Employer contribute as elective deferrals.
Your salary reduction agreement remains in effect until you revoke the agreement. You may revoke your salary reduction agreement anytime. If you revoke your salary reduction agreement, you may file a new agreement with an effective date as of any subsequent Plan Entry Date. You may increase or decrease your salary reduction percentage or dollar amount as of any Plan Entry Date. Your salary reduction contributions may not exceed 20% of your Compensation for the Plan Year.
For any calendar year, your elective deferrals may not exceed a specific dollar amount determined by the Internal Revenue Service. If your elective deferrals for a particular calendar year exceed the dollar
limitation in effect for that calendar year, the Plan will refund the excess amount, plus any earnings (or loss) allocated to that excess amount. If you participate in another "401(k) arrangement" or in similar arrangements under which you elect to have an employer contribute on your behalf, your total elective deferrals may not exceed the dollar limitation in effect for that calendar year. The Form W-2 you receive from each employer for the calendar year will report the amount of your elective deferrals for that calendar year under that employer's plan. If your total exceeds the dollar limitation in effect for that calendar year you should decide which plan you wish to designate as the plan with the excess amount. If you designate this Plan as holding the excess amount for a calendar year, you must notify the Advisory Committee of that designation by March 1 of the following calendar year. The Trustee then will distribute the excess amount to you, plus earnings (or loss) allocated to that excess amount.
Matching Contributions. For each plan year, the Employer will contribute to the Plan an amount of matching contributions determined by the Employer at its discretion. The Employer may choose not to make matching contributions for a particular plan year. The Advisory Committee will allocate the matching contributions on the basis of the participant's "eligible contributions." A participant's "eligible contributions" equal the participant's elective deferrals for the plan year (other than any elective deferrals which exceed the dollar limitation determined by the Internal Revenue Service). A participant's share of the matching contributions is equal to his share of the total eligible contributions made by all participants. For example, if your eligible, contributions equal 10% of the total eligible contributions made by all participants, your account would receive an allocation of 10% of the total amount of matching contributions made by the Employer for the plan year. The Advisory Committee allocates your share of these matching contributions to your Regular Matching Contributions Account.
Employer's nonelective contributions. Each plan year, the Employer will make nonelective contributions to the Plan in the amount determined by the Employer at its discretion. The Employer may choose not to make nonelective contributions to the Plan for a particular plan year.
For each plan year the Employer makes nonelective contributions to the Plan, the Advisory Committee will allocate this contribution to the separate accounts maintained for participants. The Advisory Committee will base your allocation upon your proportionate share of the total compensation paid during that plan year to all participants in the Plan. For example, if your compensation for that plan year is 10% of the total compensation for all participants for that particular plan year, the Advisory Committee will allocate 10% of the total Employer contribution for the plan year to your separate account.
Allocation of forfeitures. The Plan allocates participant forfeitures as if the forfeitures were Employer contributions. The Plan treats a forfeiture as a reduction of the Employer contributions otherwise made for the plan year in which the forfeiture occurs. If a participant forfeits from his Regular Matching Contributions Account, the Plan allocates the forfeited amount as a matching contribution. The Advisory Committee will treat the forfeited amount as a reduction of the matching contributions otherwise made for the plan year following the plan year in which the forfeiture occurs.
Compensation. the Plan defines compensation as the total compensation paid to the employee for services rendered to the Employer including wages, salary, overtime, bonuses, commissions, tips and fees for professional services.
With limited exceptions, the Plan includes an employee's compensation only for the part of the plan year in which he actually is a participant.
Conditions for allocation. Generally, your account is entitled to an allocation of Employer contributions for each plan year in which you are a participant. However, in the year you terminate employment with the Employer, with limited exceptions, you must complete at least 501 hours of service to be entitled to an allocation.
The contribution allocations described in this Section (8) may vary for certain employees if the Plan is top heavy. Generally, the Plan is top heavy if more than 60% of the Plan's assets are allocated to the accounts of key employees (certain owners and officers). If the Plan is top heavy, any participant who is not a key employee and who is employed on the last day of the plan year, may not receive a contribution allocation which is less than a certain minimum. Usually that minimum is 3%, but if the contribution allocation for the plan year is less than 3% for all the key employees, the top heavy minimum is the smaller allocation rate. If you are a participant in the Plan, your allocation described in this Section (8) in most cases will be equal to or greater than the top heavy minimum contribution allocation. The Plan also may vary the definition of the top heavy minimum contribution to take into account another plan maintained by the Employer.
The law limits the amount of "additions" (other than trust earnings) which the Plan may allocate to your account under the Plan. Your additions may never exceed 25% of you compensation for a particular plan year, but may be less if 25% of your compensation exceeds a dollar amount announced by the Internal Revenue Service each year. The Plan may need to reduce this limitation if you participate (or have participated) in any other plans maintained by the Employer. The discussion of Plan allocations in this Section (8) is subject to this limitation.
(9) EMPLOYEE CONTRIBUTIONS. The Plan does not permit nor require you to make employee contributions to the trust fund. "Employee contributions" are contributions made by an employee for which the employee does not receive an income tax deduction. The only source of contributions under the Plan is the annual Employer contribution, including the "elective deferrals" made at your election under the 401(k) arrangement described in Section (8). "Elective deferrals" are not "employee contributions" for purposes of the Plan.
(10) VESTING IN EMPLOYER CONTRIBUTIONS. Your interest in the contributions the Employer makes to the Plan for your benefit becomes 100% vested when you attain normal retirement age (as defined in Section (11)). Prior to normal retirement age, your interest in the contributions the employer makes on your behalf become vested in accordance with, the following schedule:
Percent
Years of Service Nonforfeitable Interest
----------------- ------------------------
LESS THAN 1.........................................0%
1 .............................................33%
2 .............................................66%
3 ............................................100%
4.............................................100%
5 ............................................100%
6 ............................................100%
7 OR MORE ....................................100%
|
100% vesting for Deferral Contributions Account. The vesting schedule does not apply to your Deferral Contributions Account described in Section (8). Instead, you are 100% vested at all times in your Deferral Contributions Account.
Special vesting rule for death or disability. If you die or become disabled while still employed by the Employer, your entire Plan interest becomes 100% vested, even if you otherwise would have a vested interest less than 100%.
Year of service. To determine your percentage under a vesting schedule, a year of service means a 12-month vesting service period in which you complete at least 1,000 hours of service. The Plan measures the vesting service period as the plan year. If you complete at least 1,000 hours of service during a plan year, you will receive credit for a year of service even though you are not employed by the Employer on the last day of that plan year.
You will receive credit for years of service with the Employer prior to the time the Employer established the Plan and for years of service prior to the time you became a participant in the Plan.
The Plan provides two methods of vesting forfeiture which may apply before a participant becomes 100% vested in his entire interest under the Plan. The primary method of vesting forfeiture is the "forfeiture break in service" rule. The secondary method of forfeiture is the "cash out" rule. Also see Section (15) relating to loss or denial of benefits.
Forfeiture Break in Service Rule. Termination of employment alone will not result in forfeiture under the Plan unless you do not return to employment with the Employer before incurring a "forfeiture break in service." A "forfeiture break in service" is a period of 5 consecutive vesting service periods in which you do not work more than 500 hours in each vesting service period comprising the 5 year period.
Example. Assume you are 60% vested in your account balance. After working 400 hours during particular vesting service period, you terminate employment and perform no further services XXX XXX Employer during the next 4 vesting service periods. Under this example, you would XXX "forfeiture break in service" during the fourth vesting service period following the vesting service period in which you terminated employment because you did not work more than 500 hours during each vesting service period of 5 consecutive vesting service periods. Consequently, you would forfeit the 40% non-vested portion of your account. If you had returned to employment with the Employer at any time during the 5 consecutive vesting service periods and worked more than 500 hours during any vesting service period within that 5-year period, you would not incur a forfeiture under the "forfeiture break in service" rule.
Cash Out Rule. The cash out rule applies if you terminate employment and receive a total distribution of the vested portion of your account balance before you incur a forfeiture break in service. For example, assume you terminated employment during a particular vesting service period after completing 800 hours of service. Assume further the total value of your account balance is $6,000 in which you have a 60% vested interest. Before you incur a forfeiture break in service, you receive a distribution of the $3,600 vested portion ($6,000 X 60%) of your account balance. Upon payment of the $3,600 vested portion of your account balance, you would forfeit the $2,400 nonvested portion. If you return to employment before you incur a "forfeiture break in service," you may have the Plan restore your "cash out" forfeiture by repaying the amount of the distribution you received attributable to Employer
contributions. This repayment right applies only if you do not incur a "forfeiture break in service." You must make this repayment no later than the date 5 years after you return to employment with the Employer. Upon your reemployment with the Employer, you may request the Advisory Committee to provide you a full explanation of your rights regarding this repayment option. If the vested portion of your account balance does not exceed $3,500, the Plan will distribute that vested portion to you in a lump sum, without your consent. This involuntary cash-out distribution will result in the forfeiture of your nonvested account balance, in the same manner as an employee who voluntarily elects a cash-out distribution. Also, upon reemployment you would have the same repayment option as an employee who elected a cash-out distribution, if you return to employment before incurring a "forfeiture break in service."
If you are 0% vested in your entire interest in the Plan, the Plan will treat you as having received a cash-out distribution of $0. This "distribution" results in a forfeiture of your entire plan interest. Normally, this forfeiture occurs on the date you terminate employment with the Employer. However, if you are entitled to an allocation of Employer contributions for the plan year in which XXX XXX XXX XXX with the Employer, this forfeiture occurs as of the first day of the next XXX XXX XXX XXX XXX employment before you incur a forfeiture break in service, the Plan will restore this forfeiture, as if you repaid a cash-out distribution.
(11) PAYMENT OF BENEFITS AFTER TERMINATION OF EMPLOYMENT. After you terminate employment with the Employer, the time at which the Plan will commence distribution to you and the form of that distribution depends on whether your vested account balance exceeds $3,500. If you receive a distribution from the Plan before you attain age 59-1/2, the law imposes a 10% penalty on the amount of the distribution you receive to the extent you must include the distribution in your gross income, unless you qualify for an exception from this penalty. You should consult a tax advisor regarding this 10% penalty. This summary makes references to your normal retirement age. Normal retirement age under this Plan is the later of the date you attain age 65 or the 5th anniversary of the first day of the plan year in which you became a participant in the Plan.
If your vested account balance does not exceed $3,500, the Plan will distribute that portion to you, in a lump sum, on first distribution date of the first plan year beginning after you terminate employment with the Employer, or as soon as administratively practicable following that date. If you already have attained normal retirement age when you terminate employment, the Plan must make this distribution no later than the 60th day following the close of the plan year in which your employment terminates, even if the normal distribution date would occur later. The Plan does not permit you to receive distribution in any form other than a lump sum if your vested account balance does not exceed $3,500.
If your vested account balance exceeds $3,500, the Plan will commence distribution to you at the time you elect to commence distribution. The Plan permits you to elect distribution:
as of any distribution date in the first plan year(s) beginning after your termination of employment with the Employer.
A "distribution date" under the Plan means first day of 4th month of Plan Year. You may not actually receive distribution on the distribution date you elect. The Plan provides the Trustee an administratively reasonable time following a particular distribution date to make actual distribution to a participant.
No later than 30 days prior to your earliest possible distribution date, the Advisory Committee will provide you a notice explaining your right to elect distribution from the Plan and the forms necessary to make your election. If you do not make a distribution election, the Plan will commence distribution to you on the 60th day following the close of the plan year in which the latest of three events occurs: (1) your attainment of normal retirement age; (2) your attainment of age 62; or (3) your termination of employment with the Employer. To determine whether your vested account balance exceeds $3,500, the Plan normally looks to the last valuation of your account prior to the scheduled distribution date.
With limited exceptions, you may not commence distribution of your vested account balance later than April 1 of the calendar year following the calendar year in which you attain age 70-1/2, even if you have not terminated employment with the Employer. This required distribution date overrides any contrary distribution date described in this summary. If the Employer terminates the Plan before you receive complete distribution of your vested benefits, the Plan might make distribution to you before you otherwise would elect distribution. Upon Plan termination, if your vested account balance exceeds $3,500, you will receive an explanation of your distribution rights.
For purposes of making a distribution of any portion of your vested recount balance, the Plan refers to the latest valuation of your account balance. The Plan requires valuation of the trust fund, and adjustment of participant's account, as of the last day of each plan year. The Advisory Committee also may require a valuation on any other date. You will not receive any adjustment to your account balance for trust fund earnings after the latest valuation date. In general, the Plan allocates trust fund earnings, gains or losses for a valuation period on the basis of each participant's opening account balance at the beginning of the valuation period, less any distributions and charges to each participant's account during the valuation period.
Forms of Benefit Payment. If your vested account balance exceeds $3,500, the Plan permits you to elect distribution under any one of the following methods:
(a) Lump sum.
(b) Part lump sum and part installments, as described in (c).
(c) Installment payments (annually, quarterly or monthly) over a specified period of time, not exceeding your life expectancy or the joint life expectancy of you and your designated beneficiary.
(d) A joint and survivor annuity.
Under an installment distribution, the Advisory Committee may direct to have the Plan segregate the amount owed to you in a separate account apart from other trust fund assets. Your separate account will continue to draw interest during the period the Plan is making retirement payment to you. If the Plan does not segregate amount owed to you in a separate account, your retirement account will remain a part of the trust fund and continue to share in trust fund earnings, gains or losses.
A joint and survivor annuity means you would receive an annuity for your life and, upon your death, your surviving spouse would receive an annuity for his or her life in an amount equal to 50% of your life annuity. For example, if, under the joint and survivor annuity, a participant was receiving (or would have received) a monthly pension of $400 at the time of his death, the surviving spouse would receive
a monthly pension of $200 upon the participant's death for the remainder of his or her life. If you are not married at the time benefit payments commence, the joint and survivor annuity simply is a life annuity, meaning you receive an annuity for your life and payments end upon your death.
To provide the joint and survivor annuity, the Trustee would use your vested
account balance to purchase that type of annuity contract from an insurance
company. The exact monthly annuity payable to you would depend upon the amount
of the account balance and the insurance company's annuity rates at the time of
the purchase. No later than 30 days prior to your earliest distribution date,
the Advisory Committee will provide you a written notice explaining the joint
and survivor annuity, your waiver rights and the spousal consent requirements.
The Advisory Committee will provide you an appropriate form to receive your
benefits in the form of a joint and survivor annuity, or to elect not to receive
your benefits in the form. The form the Advisory Committee will provide you will
explain the economic effect of taking your benefits in the form of a joint and
survivor annuity. The Plan must make any distribution described in Sections
(11), (12) and (13) in the form of the joint and survivor annuity if the
participant's vested account balance exceeds $3,500, unless the participant
properly elects a different form of payment. If you are married, your spouse
must consent in writing to any election not to take a joint survivor annuity
form of payment.
The benefit payment rules described in Sections (11) through (14) reflect the current Plan provisions. If an Employer amends its Plan to change benefit payment options, some options may continue for those participants or beneficiaries who have account balances at the time of the change. If an eliminated option continues to apply to you, the information you receive from the Advisory Committee at the time you are first eligible for distribution from the Plan will include an explanation of that option.
(12) PAYMENT OF BENEFITS PRIOR TO TERMINATION OF EMPLOYMENT. Distributions from your Employer Contributions Account and Matching Contributions Account. Other than the post-age 70-1/2 distribution requirement described in Section (11), the Plan does not permit you to receive payment of any portion of your account balance, unless you terminate employment with the Employer.
Distributions from your Deferral Contributions Account. Prior to your termination of employment with the Employer, you may elect to withdraw all or any portion of your Deferral Contributions Account:
if you incur a hardship. A hardship distribution is available only from your Deferral Contributions Account. A hardship distribution must be on account of any of the following: (a) deductible medical expenses incurred by the participant, by the participant's spouse, or by any of the participant's dependents; (b) the purchase (excluding mortgage payments) of a principal residence for the participant; (c) the payment of post-secondary education tuition, for the next 12-month period, for the participant or for the participant's spouse, or for any of the participant's dependents; (d) to prevent the eviction of the participant from his principal residence or the foreclosure on the mortgage of the participant's principal residence. To qualify for this hardship distribution, the participant may not make elective deferrals or employee contributions to the Plan for the 12-month period following the date of his hardship distribution, the participant first must obtain all other available distributions and all nontaxable loans currently available under the Plan and all other qualified plans mainlined by the Employer, and a special limitation may apply to the participant's elective deferrals in the following taxable year.
The Advisory Committee will provide you a withdrawal election form. Other than the withdrawal right described in this Section (12) and the post-age 70-1/2 distribution requirement described in Section (11), the Plan does not permit you to receive payment of any portion of your account balance for any other reason, unless you terminate employment with the Employer.
(13) DISABILITY BENEFITS. If you terminate employment because of disability, the Plan will pay your vested account balance to you in lump sum at the same time as it would pay your vested account balance for any other termination of employment. However, if your vested account balance exceeds $3,500, the disability distribution rules are subject to any election requirements described in Section (11). In general, disability under the Plan means because of a physical or mental disability you are unable to perform the duties of your customary position of employment for an indefinite period which, in the opinion of the Advisory Committee, will be of long continued duration. The Advisory Committee also considers you disabled if you terminate employment because of a permanent loss or loss of use of a member or function of your body or a permanent disfigurement. The Advisory Committee may require a physical examination in order to confirm the disability.
(14) PAYMENT OF BENEFITS UPON DEATH. If you die prior to receiving all of your benefits under the Plan, the Plan will pay the balance of your account to your beneficiary. If the Employer permits the Trustee to purchase life insurance on your life with a portion of your account balance, your account balance also will receive any life insurance proceeds payable by reason of your death.
If your death occurs before you commence distribution of your vested account balance, the Plan will pay a preretirement survivor annuity to your surviving spouse, unless you waive this annuity benefit, with your spouse's consent, or unless you and your spouse are not married for the one year period ending on your date of death. A preretirement survivor annuity means your surviving spouse would receive an annuity for life. To provide the preretirement survivor annuity, the Trustee would use 50% of your vested account balance to purchase that type of annuity contract from an insurance company. The exact monthly annuity payable to your surviving spouse would depend upon the amount of your account balance, and the insurance company's annuity rates at the time of the purchase. The Advisory Committee will provide you an appropriate form to elect to have the Plan pay a preretirement survivor annuity or to elect not to have the Plan pay that annuity. The form the Advisory Committee will provide you will explain the economic effect of taking death benefits in the form of a preretirement survivor annuity. Your spouse must consent in writing to any election not to receive a preretirement survivor annuity. If your death occurs after you commence distribution under the Plan, this preretirement survivor annuity coverage does not apply, even if you and your spouse had not waived that coverage, and your surviving spouse's interest in your remaining account balance would be subject to the distribution election described in Section (11).
After making a reduction for the portion of your vested account balance used to purchase the preretirement survivor annuity benefit described in the preceding paragraph, the Plan will pay your vested account balance remaining in the Plan at the time of your death to your designated beneficiary. The Advisory Committee will provide you with an appropriate form for naming a beneficiary. If you are married, your spouse must consent to the designation of any nonspouse beneficiary only if you have waived the preretirement survivor annuity coverage described in the preceding paragraph. If your vested account balance payable to your designated beneficiary does not exceed $3,500, the Plan will pay the benefit, in a lump sum, to your designated beneficiary as soon as administratively practicable after your death. If your vested account balance payable to your designated beneficiary exceeds $3,500, the Plan
will pay the benefit to your designated beneficiary, in the form and at the time
elected by the beneficiary, unless, prior to your death, you specify the timing
and form of the beneficiary's distribution. The benefit payment election
generally must complete distribution of your vested account balance within five
years of your death, unless distribution commences within one year of your death
to your designated beneficiary or unless benefits had commenced prior to your
death under the mandatory post-age 70-1/2 distribution requirements described in
Section (11).
(l5) DISQUALIFICATION OF PARTICIPANT STATUS - LOSS OR DENIAL OF BENEFITS. There are no specific Plan provisions which disqualify you as a participant or which cause you to lose plan benefits, except as provided in Sections (7) and (10). However, if you become disabled and do not receive compensation from the Employer, you will not receive an allocation of the Employer's contribution to the Plan during the period of disability. In addition, if your Plan benefits become payable after termination of employment and the Advisory Committee is unable to locate you at your last address of record, you may forfeit your benefits under the Plan. Therefore, it is very important that you keep the Employer apprised of your mailing address even after you have terminated employment. Finally, if the Employer terminates the Plan, which it has the right to do, you would receive benefits under the Plan based on your account balance accumulated to the date of the termination of the Plan. Termination of the Plan could occur before you attain normal retirement age. If the Employer terminates the Plan, your account will become 100% vested, if not already 100% vested, unless you forfeited the nonvested portion prior to the termination date.
The termination of the Plan does not permit you to receive a distribution from your Deferral Contributions Account unless: (1) you otherwise have the right to a distribution, as described in Sections (11) and (12): or (2) the Employer does not maintain a successor defined contribution plan. If you are able to receive a distribution only because the Employer does not maintain a successor defined contribution plan, you must agree to take that distribution as part of a lump sum payment of your entire account balance under the Plan. The Trustee will transfer to the successor defined contribution plan any portion of your interest the Plan is unable to distribute to you.
The fact that the Employer has established this Plan does not confer any right to future employment with the Employer. Furthermore, you may not assign your interest in the Plan to another person or use your Plan interest as collateral for a loan from a commercial lender.
(16) CLAIMS PROCEDURE. You need not file a formal claim with the Advisory Committee in order to receive your benefits under the Plan. When an event occurs which entitles you to a distribution of your benefits under the Plan, the Advisory Committee automatically will notify you regarding your distribution rights. However, if you disagree with the Advisory Committee's determination of the amount of your benefits under the Plan or with respect to any other decision the Advisory Committee may make regarding your interest in the Plan, the Plan contains the appeal procedure you should follow. In brief, if the Advisory Committee of the Plan determines it should deny benefits to you, the Plan Administrator will give you written notice of the specific reasons for the denial. The notice will refer you to the pertinent provisions of the Plan supporting the Advisory Committee's decision. If you disagree with the Advisory Committee, you, or a duly authorized representative, must appeal the adverse determination in writing to the Advisory Committee within 75 days after the receipt of the notice of denial of benefits. If you fail to appeal a denial within the 75-day period, the Advisory Committee's determination will be final and binding.
If you appeal to the Advisory Committee, you, or your duly authorized representative, must submit the issues and comments you feel are pertinent to permit the Advisory Committee to re-examine all facts and make a final determination with respect to the denial. The Advisory Committee, in most cases, will make a decision within 60 days of a request on appeal unless special circumstances would make the rendering of a decision within the 60-day period unfeasible. In any event, the Advisory Committee must render a decision within 120 days after its receipt of a request for review. The same procedures apply if, after your death, your beneficiary makes a claim for benefits under the Plan.
(17) RETIRED PARTICIPANT, SEPARATED PARTICIPANT WITH VESTED BENEFIT, BENEFICIARY RECEIVING BENEFITS. If you are a retired participant or beneficiary receiving benefits, the benefits you presently are receiving will continue in the same amount and for the same period provided in the mode of settlement selected at retirement. If you are a separated participant with a vested benefit, you may obtain a statement of the dollar amount of your vested benefit upon request to the Plan Administrator. There is no Plan provision which reduces, changes, terminates, forfeits, or suspends the benefits of a retired participant, a beneficiary receiving benefits or a separated participant's vested benefit amount, except as provided in Section (15).
(l8) PARTICIPANT'S RIGHTS UNDER ERISA. As a participant in this Plan, you are entitled to certain rights and protections under the Employee Retirement Income Security Act of 1974 (ERISA). ERISA provides that all Plan participants are entitled to:
(a) Examine, without charge, at the Plan Administrator's office and at other specified locations (such as worksites), all Plan documents, including insurance contracts and copies of all documents filed by the Plan with the U.S. Department of Labor, such as detailed annual reports and plan descriptions.
(b) Obtain copies of all Plan documents and other Plan information upon written request to the Plan Administrator. The Plan Administrator may make a reasonable charge for the copies.
(c) Receive a summary of the Plan's annual financial report. ERISA requires the Plan Administrator to furnish each participant with a copy of this summary annual report.
(d) Obtain a statement telling you that you have a right to receive a retirement benefit at the normal retirement age under the Plan and what your benefit could be at normal retirement age if you stop working under the Plan now. If you do not have a right to a retirement benefit, the statement will advise you of the number of additional years you must work to receive a retirement benefit. You must request this statement in writing. The law does not require the Plan Administrator to give this statement more than once a year. The Plan must provide the statement free of charge.
In addition to creating rights for Plan participants, ERISA imposes duties upon the people who are responsible for the operation of the employee benefit plan. The people who operate this Plan, called "fiduciaries" of the Plan, have a duty to do so prudently and in the interest of you and other Plan participants and beneficiaries. No one, including your Employer, your union or any other person may fire you or otherwise discriminate against you in any way to prevent you from obtaining a retirement benefit or from exercising your rights under ERISA.
If your claim for a retirement benefit is denied in whole or in part, you must receive a written explanation of the reason for the denial. You have the right to have the Plan review and reconsider your claim.
Under ERISA, there are steps you can take to enforce the above rights. For instance, if you request materials from the Plan and do not receive the materials within 30 days, you may file suit in a Federal court. In such a case, the court may require the Plan Administrator to provide the materials and pay you up to $100 a day until you receive the materials, unless the materials were not sent because of reasons beyond the control of the Plan Administrator. If you have a claim for benefits which is denied or ignored, in whole or in part, you may file suit in a state or Federal court. If it should happen that Plan fiduciaries misuse the Plan's money, or if you are discriminated against for asserting your rights, you may seek assistance from the U.S. Department of Labor, or you may file suit in a Federal court. The court will decide who should pay court costs and legal fees. If you are successful, the court may order the person you have sued to pay these costs and fees. If you lose, the court may order you to pay these costs and fees, for example, if it finds your claim is frivolous.
If you have any questions about your Plan, you should contact the Plan Administrator. If you have any questions about this statement or about your rights under ERISA, you should contact the nearest Area Office of the U.S. Labor-Management Services Administration, Department of Labor.
(19) FEDERAL INCOME TAXATION OF BENEFITS PAID. Existing Federal income tax laws do not require you to report as income the portion of the annual Employer contribution allocated to your account. However, when the Plan later distributes your account balance to you, such as upon your retirement, you must report as income the Plan distributions you receive. The Federal tax laws may permit you to report a Plan distribution under a special averaging provision. Also, it may be possible for you to defer Federal income taxation of a distribution by making a "rollover" contribution to your own rollover individual retirement account.
Mandatory income tax withholding rules apply to some distributions you do not rollover directly to an individual retirement account or to another plan. At the time you receive a distribution, you also will receive a notice discussing withholding requirement and the options available to you. We emphasize you should consult your own tax adviser with respect to the proper method of reporting any distribution you receive from the Plan.
(20) PARTICIPANT LOANS. This Plan permits the Advisory Committee to adopt a policy under which the Plan may make loans to participants and beneficiaries. A copy of the loan policy adopted by the Advisory Committee is attached to this summary plan description as Exhibit A.
(21) PARTICIPANT DIRECTION OF INVESTMENT. The Plan permits every participant to direct the investment of his account balance under the plan. For this purpose, the Advisory Committee upon your request, will provide you a form for making your investment direction. The investment direction explains your investment direction options and explains the frequency with which you may change your investment direction. The Trustee will invest your account balance under the Plan in accordance with your written direction. To the extent you direct the investment of your account balance under the Plan, ERISA relieves the Trustee from liability for any loss resulting from your direction of investment.
LOAN POLICY
The Advisory Committee of the Ciphergen Biosystems, Inc. 40l(k) Savings Plan adopts the following loan policy pursuant to the terms of the Plan. As a participant or beneficiary under the Plan, you may receive a loan only as permitted by this loan policy.
1. LOAN APPLICATION. Any Plan participant may apply for a loan from the
Plan. For purposes of this loan policy, the term "participant" means any
participant or beneficiary who is party in interest (as determined under ERISA
Section 3(14)) with respect to the Plan. A participant must apply for each loan
in writing with an application which specifies the amount of the loan desired,
the requested duration for the loan and the source of security for the loan. The
Advisory Committee will not approve any loan if a participant is not
creditworthy.
In order to be creditworthy, the participant must have established in his or her community, a reputation which would entitle him or her to a similar loan from a commercial or business lender. In applying for the loan from the Plan, each participant must give full authority to investigate his or her creditworthiness.
2. LIMITATION ON LOAN AMOUNT. The Advisory Committee will not approve any loan to a participant in an amount which exceeds 50% of his or her nonforfeitable accrued benefit (account balance), as reflected by the books and records of the Plan. The maximum aggregate dollar amount of loans outstanding to any participant may not exceed $50,000 as aggregated with all participant loans from other employer qualified plans, reduced by the excess of the participant's highest outstanding participant loan balance during the 12-month period ending on the date of the loan over the participant's current outstanding participant loan balance on the date of the loan. A participant may not request a loan for less than $1,000.00.
3. EVIDENCE AND TERMS OF LOAN. The Advisory Committee will document every loan in the form of a promissory note signed by the participant for the face amount of the loan, together with a commercially reasonable rate of interest. The Advisory Committee will determine the appropriate interest rate by obtaining at least one quote from a financial institution, as chosen by the Advisory Committee, that is in the business of lending money. The interest rate quote(s) must take into account the term of the loan, the security on that loan, the creditworthiness of the participant, whether the interest rate is adjustable during the term of the loan, and the intended use of the loan proceeds, if known, and must reflect a commercially reasonable rate for the geographical region in which the participant lives. If participants in the Plan live in different geographical regions, the Advisory Committee may establish a uniform commercially reasonable interest rate applicable to all regions based on information obtained from at least one region in which participants live. The Advisory Committee must reevaluate interest for loans made more than one month since the last loan made by the Plan.
A loan may provide a fixed rate of interest or an adjustable rate of interest, as negotiated between the Advisory Committee and the participant. The Advisory Committee will determine whether the interest rate is commercially reasonable at the time it approves the loan and, in the case of an adjustable rate loan, at the time of each scheduled adjustment. The loan must provide at least quarterly payments under a level amortization schedule.
The loan may permit a suspension of payments for a period not exceeding one year which occurs during an approved leave of absence. The Advisory Committee will fix the term for repayments of any loan, however, in no instance may the term of repayment be greater than five years, unless the loan qualifies as a home loan. The Advisory Committee may fix the term for repayment of a home loan for a period not to exceed 10 years. A "home loan" is a loan used to acquire a dwelling unit which, within a reasonable time, the participant will use as a principal residence.
Participants should note the law treats the amount of any loan (other than a "home loan") not repaid five years after the date of the loan as a taxable distribution on the last day of the five year period or, if sooner, at the time the loan is in default. If a participant extends a non-home loan having a five year or less repayment term beyond five years, the balance of the loan at the time of the extension is a taxable distribution to the participant.
4. SECURITY FOR LOAN. A participant must secure each loan with an irrevocable pledge and assignment of 50% of the nonforfeitable amount of the borrowing participant's accrued benefit under the Plan or other security (e.g., principal residence) the Advisory Committee accepts and finds to be adequate, or both 50% of the participant's accrued benefit and other security. The Advisory Committee may request the borrowing participant to secure each loan with additional collateral acceptable to the Advisory Committee or to substitute collateral given for the loan.
5. FORM OF PLEDGE. If the participant secures the loan wholly or partly with 50% of his vested accrued benefit, the pledge and assignment of that portion of his accrued benefit will be in the form attached to this Loan Policy.
6. DEFAULT/RISK OF LOSS. The Advisory Committee will treat this loan in default if:
(a) any scheduled payment remains unpaid more than 120 days;
(b) the making or furnishing of any representation or statement to the Plan by or on behalf of the participant which proves to have been false in any material respect when made or furnished;
(c) loss, theft, damage, destruction, sale or encumbrance to or of any of the collateral, or the making of any levy seizure or attachment thereof or thereon;
(d) death, dissolution, insolvency, business failure, appointment of receiver of any part of the property of, assignment for the benefit of creditors by, or the commencement of any proceeding under any bankruptcy or insolvency laws of, by or against the participant.
The participant will have the opportunity to repay the loan, resume current status of the loan by paying any missed payment plus interest or, if distribution is available under the plan, request distribution of the note. If the loan remains in default, the Advisory Committee has the option of foreclosing on any other security it holds or, to the extent a distribution to the participant is permissible under the Plan, offset the participant's vested account balance by the outstanding balance of the loan. The Advisory Committee will treat the note as repaid to the extent of any permissible offset. Pending final disposition of the note, the participant remains obligated for any unpaid principal and accrued interest.
The Plan intends this loan program not to place other participants at risk with respect to their interests in the Plan. In this regard, the Advisory Committee will administer any participant loan as a participant directed investment of that portion of the participant's vested account balance equal to the outstanding principal balance of the loan. The Plan will credit that portion of the participant's interest with the interest earned on the note and with principal payments received by the participant. The Plan also will charge that portion of the participant's account balance with expenses directly related to the organization, maintenance and collection of the note.
Dated this day of ,19 .
------- ---------------- ----
/s/ William E. Rich
-------------------
|
Exhibit 10.9
CIPHERGEN BIOSYSTEMS, INC.
PROPRIETARY INFORMATION
AND INVENTIONS AGREEMENT
In consideration of my employment or continued employment by Ciphergen Biosystems (the "Company"), and the compensation now and hereafter paid to me, I hereby agree as follows:
1. RECOGNITION OF COMPANY'S RIGHTS; NONDISCLOSURE. At all times during the term of my employment and thereafter, I will hold in strictest confidence and will not disclose, use, lecture upon or publish any of the Company's Proprietary Information (defined below), except as such disclosure, use or publication may be required in connection with my work for the Company, or unless an officer of the Company expressly authorizes such in writing. I hereby assign to the Company any rights I may have or acquire in such Proprietary Information and recognize that all Proprietary Information shall be the sole property of the Company and its assigns and the Company and its assigns shall be the sole owner of all trade secret rights, patent rights, copyrights, mask work rights and all other rights throughout the world (collectively, "Proprietary Rights") in connection therewith.
The term "Proprietary Information" shall mean trade secrets, confidential knowledge, data or any other proprietary information of the Company. By way of illustration but not limitation, "Proprietary Information" includes (a) trade secrets, inventions, mask works, ideas, processes, formulas, source and object codes, data, programs, other works of authorship, know-how, improvements, discoveries, developments, designs and techniques (hereinafter collectively referred to as "Inventions"); and (b) information regarding plans for research, development, new products, marketing and selling, business plans, budgets and unpublished financial statements, licenses, prices and costs, suppliers and customers; and information regarding the skills and compensation of other employees of the Company.
2. THIRD PARTY INFORMATION. I understand, in addition, that the Company has received and in the future will receive from third parties confidential or proprietary information ("Third Party Information") subject to a duty on the Company's part to maintain the confidentiality of such information and to use it only for certain limited purposes. During the term of my employment and thereafter, I will hold Third Party Information in the strictest confidence and will not disclose (to anyone other than Company personnel who need to know such information in connection with their work for the Company) or use, except in connection with my work for the Company, Third Party Information unless expressly authorized by an officer of the Company in writing.
1.
3. ASSIGNMENT OF INVENTIONS.
1 ASSIGNMENT. I hereby assign to the Company all my right, title and interest in and to any and all Inventions (and all Proprietary Rights with respect thereto) whether or not patentable or registrable under copyright or similar statutes, made or conceived or reduced to practice or learned by me, either alone or jointly with others, during the period of my employment with the Company which are related to or useful in the business of the Company or result from tasks assigned to me by the Company or result from the use of premises leased, owned or contracted for by the Company. Inventions assigned to or as directed by the Company by this paragraph 3 are hereinafter referred to as "Company Inventions." I recognize that this Agreement does not require assignment of any invention which qualifies fully for protection under Section 2870 of the California Labor Code (hereinafter "Section 2870"), which provides as follows:
(a) Any provision in an employment agreement which provides that an employee shall assign, or offer to assign, any of his or her rights in an invention to his or her employer shall not apply to an invention that the employee developed entirely on his or her own time without using the employer's equipment, supplies, facilities, or trade secret information except for those inventions that either:
(1) Relate at the time of conception or reduction to practice of the invention to the employer's business, or actual or demonstrably anticipated research or development of the employer; or
(2) Result from any work performed by the employee for the employer.
(b) To the extent a provision in an employment agreement purports to require an employee to assign an invention otherwise excluded from being required to be assigned under subdivision (i), the provision is against the public policy of this state and is unenforceable.
2 GOVERNMENT. I also assign to or as directed by the Company all my right, title and interest in and to any and all Inventions, full title to which is required to be in the United States by a contract between the Company and the United States or any of its agencies.
3 WORKS FOR HIRE. I acknowledge that all original works of
authorship which are made by me (solely or jointly with others) within the scope
of my employment and which are protectable by copyright are "works made for
hire," as that term is defined in the United States Copyright Act (17 U.S.C.,
Section 101).
4. ENFORCEMENT OF PROPRIETARY RIGHTS. I will assist the Company in every proper way to obtain and from time to time enforce United States and foreign Proprietary Rights relating to Company Inventions in any and all countries. To that end I will execute, verify and deliver such documents and perform such other acts (including appearances as a witness) as the
Company may reasonably request for use in applying for, obtaining, perfecting, evidencing, sustaining and enforcing such Proprietary Rights and the assignment thereof. In addition, I will execute, verify and deliver assignments of such Proprietary Rights to the Company or its designee. My obligation to assist the Company with respect to Proprietary Rights relating to such Company Inventions in any and all countries shall continue beyond the termination of my employment, but the Company shall compensate me at a reasonable rate after my termination for the time actually spent by me at the Company's request on such assistance.
In the event the Company is unable for any reason, after reasonable effort, to secure my signature on any document needed in connection with the actions specified in the preceding paragraph, I hereby irrevocably designate and appoint the Company and its duly authorized officers and agents as my agent and attorney in fact, which appointment is coupled with an interest, to act for and in my behalf to execute, verify and file any such documents and to do all other lawfully permitted acts to further the purposes of the preceding paragraph with the same legal force and effect as if executed by me. I hereby waive and quitclaim to the Company any and all claims, of any nature whatsoever, which I now or may hereafter have for infringement of any Proprietary Rights assigned hereunder to the Company.
5. OBLIGATION TO KEEP COMPANY INFORMED. During the period of my
employment and for six (6) months after termination of my employment with the
Company, I will promptly disclose to the Company fully and in writing all
Inventions authored, conceived or reduced to practice by me, either alone or
jointly with others. In addition, I will promptly disclose to the Company all
patent applications filed by me or on my behalf within a year after termination
of employment. At the time of each such disclosure, I will advise the Company in
writing of any Inventions that I believe fully qualify for protection under
Section 2870; and I will at that time provide to the Company in writing all
evidence necessary to substantiate that belief. The Company will keep in
confidence and will not disclose to third parties without my consent any
proprietary information disclosed in writing to the Company pursuant to this
Agreement relating to Inventions that qualify fully for protection under the
provisions of Section 2870. I will preserve the confidentiality of any Invention
that does not fully qualify for protection under Section 2870.
I agree to keep and maintain adequate and current records (in the form of notes, sketches, drawings and in any other form that may be required by the Company) of all Proprietary Information developed by me and all Inventions made by me during the period of my employment at the Company, which records shall be available to and remain the sole property of the Company at all times.
6. PRIOR INVENTIONS. Inventions, if any, patented or unpatented, which I made prior to the commencement of my employment with the Company are excluded from the scope of this Agreement. To preclude any possible uncertainty, I have set forth on Exhibit A attached hereto a complete list of all Inventions that I have, alone or jointly with others, conceived, developed or reduced to practice or caused to be conceived, developed or reduced to practice prior to the commencement of my employment with the Company, that I consider to be my property or the property of third parties and that I wish to have excluded from the scope of this Agreement. If
disclosure of any such Invention on Exhibit A would cause me to violate any prior confidentiality agreement, I understand that I am not to list such Inventions in Exhibit A but am to inform the Company that all such Inventions have not been listed for that reason.
7. ADDITIONAL ACTIVITIES. I agree that during the period of my employment by the Company I will not, without the Company's express written consent, engage in any employment or business activity other than for the Company. I agree further that for the period of my employment by the Company and for one (1) year after the date of termination of my employment by the Company I will not (i) induce any employee of the Company to leave the employ of the Company or (ii) solicit the business of any client or customer of the Company (other than on behalf of the Company).
8. NO IMPROPER USE OF MATERIALS. During my employment by the Company I will not improperly use or disclose any confidential information or trade secrets, if any, of any former employer or any other person to whom I have an obligation of confidentiality, and I will not bring onto the premises of the Company any unpublished documents or any property belonging to any former employer or any other person to whom I have an obligation of confidentiality unless consented to in writing by that former employer or person. I will use in the performance of my duties only information which is generally known and used by persons with training and experience comparable to my own, which is common knowledge in the industry or otherwise legally in the public domain, or which is otherwise provided or developed by the Company.
9. NO CONFLICTING OBLIGATION. I represent that my performance of all the terms of this Agreement and as an employee of the Company does not and will not breach any agreement to keep in confidence information acquired by me in confidence or in trust prior to my employment by the Company. I have not entered into, and I agree I will not enter into, any agreement either written or oral in conflict herewith.
10. RETURN OF COMPANY DOCUMENTS. When I leave the employ of the Company, I will deliver to the Company any and all drawings, notes, memoranda, specifications, devices, formulas, and documents, together with all copies thereof, and any other material containing or disclosing any Company Inventions, Third Party Information or Proprietary Information of the Company. I further agree that any property situated on the Company's premises and owned by the Company, including disks and other storage media, filing cabinets or other work areas, is subject to inspection by Company personnel at any time with or without notice. Prior to leaving, I will cooperate with the Company in completing and signing the Company's termination statement for technical and management personnel.
11. LEGAL AND EQUITABLE REMEDIES. Because my services are personal and unique and because I may have access to and become acquainted with the Proprietary Information of the Company, the Company shall have the right to enforce this Agreement and any of its provisions by injunction, specific performance or other equitable relief, without bond and without prejudice to any other rights and remedies that the Company may have for a breach of this Agreement.
12. NOTICES. Any notices required or permitted hereunder shall be given to the appropriate party at the address specified below or at such other address as the party shall specify in writing. Such notice shall be deemed given upon personal delivery to the appropriate address or if sent by certified or registered mail, three days after the date of mailing.
13. GENERAL PROVISIONS.
1 GOVERNING LAW. This Agreement shall be governed by the laws of the State of California as those laws are applied to contracts entered into and to be performed entirely in California by California residents.
2 ENTIRE AGREEMENT. This Agreement is the final, complete and exclusive agreement of the parties with respect to the subject matter hereof and supersedes and merges all prior discussions between us. No modification of or amendment to this Agreement, nor any waiver of any rights under this Agreement, will be effective unless in writing and signed by the party to be charged. Any subsequent change or changes in my duties, salary or compensation will not affect the validity or scope of this Agreement. As used in this Agreement, the period of my employment includes any time during which I may be retained by the Company as a consultant.
3 SEVERABILITY. If one or more of the provisions in this Agreement are deemed unenforceable by law, then such provision will be deemed stricken from this Agreement and the remaining provisions will continue in full force and effect.
4 SUCCESSORS AND ASSIGNS. This Agreement will be binding upon my heirs, executors, administrators and other legal representatives and will be for the benefit of the Company, its successors, and its assigns.
5 SURVIVAL. The provisions of this Agreement shall survive the termination of my employment and the assignment of this Agreement by the Company to any successor in interest or other assignee.
6 EMPLOYMENT. I agree and understand that nothing in this Agreement shall confer any right with respect to continuation of employment by the Company, nor shall it interfere in any way with my right or the Company's right to terminate my employment at any time, with or without cause.
7 WAIVER. No waiver by the Company of any breach of this Agreement shall be a waiver of any preceding or succeeding breach. No waiver by the Company of any right under this Agreement shall be construed as a waiver of any other right. The Company shall not be required to give notice to enforce strict adherence to all terms of this Agreement.
This Agreement shall be effective as of the first day of my employment with the Company, namely: _____________, 200 .
I UNDERSTAND THAT THIS AGREEMENT AFFECTS MY RIGHTS TO INVENTIONS I MAKE DURING MY EMPLOYMENT, AND RESTRICTS MY RIGHT TO DISCLOSE OR USE THE COMPANY'S CONFIDENTIAL INFORMATION DURING OR SUBSEQUENT TO MY EMPLOYMENT.
I HAVE READ THIS AGREEMENT CAREFULLY AND UNDERSTAND ITS TERMS. I HAVE
COMPLETELY FILLED OUT EXHIBIT A TO THIS AGREEMENT.
Dated: __________________, 200 ____ ________________________________________
Signature
________________________________________
Name of Employee
Address: ________________________________________
________________________________________
|
ACCEPTED AND AGREED TO:
Ciphergen Biosystems
By:______________________________
Name:____________________________
Title: ____________________________
EXHIBIT A
Ciphergen Biosystems
490 San Antonio Road,
Palo Alto, CA 94306
Ladies and Gentlemen:
14. The following is a complete list of all inventions or improvements relevant to the subject matter of my employment by Ciphergen Biosystems (the "Company") that have been made or conceived or first reduced to practice by me alone or jointly with others prior to my engagement by the Company:
/ / No inventions or improvements.
/ / See below:
/ / Due to confidentiality agreements with prior employer, I cannot disclose certain inventions that would otherwise be included on the above-described list.
/ / Additional sheets attached.
15. I propose to bring to my employment the following devices, materials and documents of a former employer or other person to whom I have an obligation of confidentiality that are not generally available to the public, which materials and documents may be used in my employment pursuant to the express written authorization of my former employer or such other person (a copy of which is attached hereto):
/ / No material.
1.
/ / See below:
/ / Additional sheets attached.
Date:______________, 200___
Very truly yours,
2.
Exhibit 10.10
STANDARD OFFICE LEASE - FULL SERVICE
1. BASIC LEASE PROVISIONS ("Basic Lease Provisions"):
1.1 DATE AND EFFECTIVE DATE: This Lease is dated MARCH 15, 1996, for reference purposes only. The Effective Date shall the date inserted below by Lessor and shall be the date this Lease is executed by Lessor. PRIOR TO THE EFFECTIVE DATE THE TERMS OF THIS LEASE SHALL NOT BE BINDING ON THE LESSOR AND, UNTIL SIGNED BY LESSOR, THIS DOCUMENT SHALL BE CONSTRUED ONLY AS AN OFFER BY LESSEE TO LEASE THE PREMISES. UNTIL SIGNED BY LESSOR, LESSOR SHALL HAVE NO OBLIGATION OF ANY KIND TO ANY OF THE PARTIES INVOLVED IN MAKING THIS OFFER TO LEASE THE PREMISES.
1.2 PARTIES: This Lease is made by and between NEARON ENTERPRISES, LLC (herein called "Lessor") and CIPHERGEN BIOSYSTEMS, INC., (herein called "Lessee").
1.3 PREMISES: Suite Number(s) B, consisting of approximately 1,700
square feet, more or less, as defined in paragraph 2 and as shown on Exhibit
"A" hereto (the "Premises"). The rentable area of the Premises as stated in
the preceding sentence is based on (i) the area of the Premises measured to
the lease line for street elevations (which shall extend to the property line
and/or to the public area boundary line with respect to the interior
frontage, if any, of the "Premises") and to the center line of interior
walls, (without deduction for level changes or openings in the floor, or for
stairs and stair openings which connect levels within the Premises), and
shall include structural elements, stairs, elevators, escalators, display
areas and other interior construction or equipment (the "usable area"), plus
(ii) amounts equal to portions of the area of the receiving and trash areas,
elevators and elevator lobbies, vestibules, restrooms, exit and access
corridors, parking areas, loading areas, electrical, mechanical and telephone
rooms and other areas designated by Lessor as necessary to the Building. The
Base Rent may have been calculated based on this square footage, however, the
square footage figure used in this lease is a rough approximation. Lessor and
Lessee agree that the Base Rent is derived from the beneficial use of the
Premises as described and not from any mathematical calculation involving
square footage. Neither Lessor nor Lessee shall be entitled to have the Base
Rent adjusted, recalculated, raised or lowered as a result of any discrepancy
between the square footage approximation contained in this Lease and any
measurement that may be determined to be the actual square footage of the
premises.
1.4 BUILDING: Commonly described as being located at 470 San Antonio Road in the City of Palo Alto, County of Santa Clara, State of California.
1.5 USE: Business Office/Storage/R&D of bioanalytical instrumentation systems, subject to paragraph 6.
1.6 TERMS: Twenty four (24) months, commencing April 1, 1996 ("Commencement Date" and ending March 31, 1998, with an option to renew for one (1) year given five (5) months prior written notice at the rate of $1.28 per square foot per month, as defined in paragraph 3.
1.7 BASE RENT: $2,091.00 per month, payable on or before the first (1st day of each month, per paragraph 4.1.
1.8 BASE RENT INCREASE: N/A
1.9 RENT PAID UPON EXECUTION: $2,091.00 for April 1-30, 1996.
1.10 SECURITY DEPOSIT: $2,091.00 of which Lessee has already deposited $1,434.00 The balance of $657.00 is to be paid upon execution.
2. PREMISES, PARKING AND COMMON AREAS.
2.1 PREMISES: The Premises are a portion of a building herein sometimes referred to as the "Building" identified in paragraph 1.4 of the Basic Lease Provisions. "Building" shall include adjacent parking structures used in connection therewith. The Premises, the Building, the Common Areas, the land upon which the same are located, along with all other buildings and improvements thereon or thereunder, are herein collectively referred to as the "Office Building Project". Lessor hereby leases to Lessee and Lessee leases from Lessor for the term, at the rental, and upon all of the conditions set forth herein, the real property referred to in the Basic Lease Provisions, paragraph 1.3, as the "Premises", including rights to the Common Areas as hereinafter specified.
2.2 VEHICLE PARKING: So long as Lessee is not in default, and subject to the rules and regulations attached hereto and as established by Lessor from time to time, Lessee shall be entitled to non-exclusive use of available parking at the Office Building Project, proportionate to Lessee's pro-rata share of total building space.
2.2.1 If Lessee commits, permits or allows any of the prohibited activities described in the Lease or the rules then in effect, then Lessor shall have the right, without notice, in addition to such other rights and remedies that it may have, to remove or tow away the vehicle involved and charge the cost to Lessee, which cost shall be immediately payable upon demand by Lessor.
2.3 COMMON AREAS-DEFINITION: The term "Common Areas" is defined as all areas and facilities outside the Premises and within the exterior boundary line of the Office Building Project that are provided and designated by the Lessor from time to time for general non-exclusive use of Lessor, Lessee and of other lessees of the Office Building Project and their respective employees, suppliers, shippers, customers, and invitees, including but not limited to common entrances, lobbies, corridors, stairways and stairwells, public rest rooms, elevators, escalators, parking areas to the extent not otherwise prohibited by this Lease, loading and unloading areas, trash areas, roadways, sidewalks, walkways, parkways, ramps, driveways, landscaped areas and decorative walls.
2.4 COMMON AREAS-RULES AND REGULATIONS: Lessee agrees to abide by and conform to the rules and regulations attached hereto as Exhibit B with respect to the Office Building Project and Common Areas and to cause its employees, suppliers, shippers, customers, and invitees to so abide and conform. Lessor or such other person(s) as Lessor may appoint shall have the exclusive control and management of the Common Areas and shall have the right, from time to time to modify, amend and enforce said rules and regulations. Lessor shall not be responsible to Lessee for the non-compliance with said rules and regulations by other lessees, their agents, employees, and invitees of the Office Building Project.
2.5 COMMON AREAS-CHANGES: Lessor shall have the right, in Lessor's sole discretion, from time to time:
(a) To make changes to the Building interior and exterior and Common Areas, including, without limitation changes in the location, size, shape, number, and appearance thereof, including but not limited to the lobbies, windows, stairways, air shafts, elevators, escalators, rest rooms, driveways, entrances, parking spaces, parking areas, loading and unloading areas, ingress, egress, direction of traffic, decorative walls, landscaped areas and walkways; provided, however, Lessor shall at all times provide parking facilities required by applicable law;
(b) To close temporarily any of the Common Areas for maintenance purposes so long as reasonable access to the Premises remains available;
(c) To designate other land and improvements outside the boundaries of the Office Building Project to be part of the Common Areas, provided that such other land and improvements have a reasonable and functional relationship to the Office Building Project;
(d) To add additional buildings and improvements to the Common Areas;
(e) To use the Common Areas while engaged in making additional improvements, repairs or alterations to the Office Building Project, or any portion thereof;
(f) To do and perform such other acts and make such other changes in, to or with respect to the Common Areas and Office Building Project as Lessor may, in the exercise of sound business judgment deem to be appropriate.
3. TERM.
3.1 TERM. The term and Commencement Date of this Lease shall be as specified in paragraph 1.6 of the Basic Lease Provisions.
PAGE 1 OF 13 PAGES
3.2 DELAY IN POSSESSION. Notwithstanding said Commencement Date, if for any reason Lessor cannot deliver possession of the Premises to Lessee on said date and subject to paragraph 3.2.2, Lessor shall not be subject to any liability therefor, nor shall such failure affect the validity of this Lease or the obligations of Lessee hereunder or extend the term of hereof; but, in such case, Lessee shall not be obligated to pay rent or perform any other obligation of Lessee under the terms of this Lease, except as may be otherwise provided in this Lease, until possession of the Premises is tendered to Lessee, as hereinafter defined, provided, however, that if Lessor shall not have delivered possession of the Premises within ninety (90) days following said Commencement Date, Lessee may, at Lessee's option, by notice in writing to Lessor within ten (10) days thereafter, cancel this Lease, in which event the parties shall be discharged from all obligations hereunder; provided, however, that, as to Lessee's obligations, Lessee first reimburses Lessor for all costs incurred for and, as to Lessor's obligations, Lessor shall return any money previously deposited by Lessee (less any offsets due Lessor for any improvements made by Lessor for Lessee in performance of the terms of this Lease that are not ordinarily a part of the Building), and provided further that if such written notice by Lessee is not received by Lessor within said ten (10) day period, Lessee's right to cancel this Lease hereunder shall terminate and be of no further force or effect.
3.2.1 POSSESSION TENDERED -- DEFINED. Possession of the Premises shall be deemed tendered to Lessee ("Tender of Possession") when (1) the improvements to be provided by Lessor under this Lease are substantially completed, (2) the Building utilities are ready for use in the Premises, (3) Lessee has reasonable access to the Premises, and (4) ten (10) days shall have expired following advance written notice to the Lessee of the occurrence of the matters described in (1), (2) and (3) above of this paragraph 3.2.1.
3.2.2 DELAYS CAUSED BY LESSEE. There shall be no abatement of rent, and the ninety (90) day period following the Commencement Date before which Lessee's right to cancel this Lease accrues under paragraph 3.2, shall be deemed extended to the extent of any delays caused by acts or omissions of Lessee, Lessee's agents, employees and contractors.
3.3 EARLY POSSESSION. If Lessee occupies the Premises prior to said Commencement Date, such occupancy shall be subject to all provisions of this Lease, such occupancy shall not change the termination date, and Lessee shall pay rent for such occupancy.
3.3 UNCERTAIN COMMENCEMENT. In the event commencement of the Lease term is defined as the completion of the improvements, Lessee and Lessor shall execute an amendment to this Lease establishing the date of Tender of Possession (as defined in paragraph 3.2.1) or the actual taking of possession by Lessee, whichever first occurs, as the Commencement Date.
4. RENT.
4.1 BASE RENT. Subject to adjustment as hereinafter provided in paragraph 4.2, and except as may be otherwise expressly provided in this Lease, Lessee shall pay to Lessor the Base Rent for the Premises set forth in paragraph 1.7 of the Basic Lease Provisions without offset or deduction. Lessee shall pay Lessor upon execution hereof the advance Base Rent described in paragraph 1.8 of the Basic Lease Provisions. Rent for any period during the term hereof which is for less than one month shall be prorated based upon the actual number of days of the calendar month involved. Rent shall be payable in lawful money of the United States to Lessor at the address stated herein or to such other persons or at such other places as Lessor may designate in writing.
4.2 RENT INCREASE. N/A
5. SECURITY DEPOSIT. Lessee shall deposit with Lessor upon execution hereof
the security deposit set forth in paragraph 1.9 of the Basic Lease Provisions
as security for Lessee's faithful performance of Lessee's obligations
hereunder. If Lessee fails to pay rent or other charges due hereunder or
otherwise defaults with respect to any provision of this Lease, Lessor may
use, apply or retain all or any portion of said deposit for the payment of
any rent or other charge in default for the payment of any other sum to which
Lessor may become obligated by reason of Lessee's default, or to compensate
Lessor for any loss or damage which Lessor may suffer thereby. If Lessor so
uses or applies all or any portion of said deposit, Lessee shall within ten
(10) days after written demand therefor deposit cash with Lessor in an amount
sufficient to restore said deposit to the full amount then required of
Lessee. If the monthly Base Rent shall, from time to time, increase during
the term of this Lease, Lessee shall, at the time of such increase, deposit
with Lessor additional money as a security deposit so that the total amount
of the security deposit held by the Lessor shall at all times bear the same
proportion to the then current Base Rent as the initial security deposit
bears to the initial Base Rent set forth in paragraph 1.7 of the Basic Lease
Provisions. Lessor shall not be required to keep said security deposit
separate from its general accounts. If Lessee performs all of Lessee's
obligations hereunder, said deposit, or so much thereof as has not heretofore
been applied by Lessor, shall be returned, without payment of interest or
other increment for its use, to Lessee (or, at Lessor's option, to the last
assignee, if any, of Lessee's interest hereunder) at the expiration of the
term hereof, and after Lessee has vacated the Premises. No trust relationship
is created herein between Lessor and Lessee with respect to said Security
Deposit.
6. USE
6.1 USE. The Premises shall be used and occupied only for the purpose set forth in paragraph 1.5 of the Basic Lease Provisions and for no other purpose.
6.2 HAZARDOUS SUBSTANCES.
(a) REPORTABLE USES REQUIRE CONSENT. The term "Hazardous Substance" as used in this Lease shall mean any product, substance, chemical, material or waste whose presence, nature, quantity and/or intensity of existence, use, manufacture, disposal, transportation, spill, release or effect, either by itself or in combination with other materials expected to be on the Premises, is either: (i) potentially injurious to the public health, safety or welfare, the environment, or the Premises; (ii) regulated or monitored by any governmental authority; or (iii) a basis for potential liability of Lessor to any governmental agency or third party under the applicable statute or common law theory. Hazardous Substance shall include, but not be limited to, hydrocarbons, petroleum, gasoline, crude oil or any products or by-products thereof. Lessee shall not engage in activity in or about the Premises which constitutes a Reportable Use (as hereinafter defined) of Hazardous Substances without the express prior written consent of Lessor and compliance in a timely manner (at Lessee's sole cost and expense) with all Applicable Requirements (as defined in Paragraph 6.3). "Reportable Use" shall mean (i) the installation or use of any above or below ground storage tank, (ii) the generation, possession, storage, use, transportation, or disposal of a Hazardous Substance that requires permit from, or with respect to which a report, notice, registration or business plan is required to be filed with, any governmental authority, and (iii) the presence in, on or about the Premises of a Hazardous Substance with respect to which any Applicable Laws require that a notice be given to persons entering or occupying the Premises or neighboring properties. Notwithstanding the foregoing, Lessee may, without Lessor's prior consent, but upon notice to Lessor and in compliance with all Applicable Requirements, use any ordinary and customary materials reasonably required to be used by Lessee in the normal course of the Permitted Use, so long as such use is not a Reportable Use and does not expose the Premises or neighboring properties to any meaningful risk of contamination or damage or expose Lessor to any liability therefor. In addition, Lessor may (but without any obligation to do so) condition its consent to any Reportable Use of any Hazardous Substance by Lessee upon Lessee's giving Lessor such additional assurances Lessor, in its reasonable discretion, deems necessary to protect itself, the public, the Premises and the environment against damage, contamination or injury and/or liability therefor, including but not limited to the installation (and, at Lessor's option, removal on or before Lease expiration or earlier termination) of reasonably necessary protective modification to the Premises (such as concrete encasements) and/or the deposit of an additional Security Deposit under Paragraph 5 hereof.
(b) DUTY TO INFORM LESSOR. If Lessee knows, or has reasonable cause to believe, that a Hazardous Substance has come to be located in, on, under or about the Premises or the Building, other than as previously consented to by Lessor, Lessee shall immediately give Lessor written notice thereof, together with a copy of any statement, report, notice, registration, application, permit, business plan, license, claim, action, or proceeding given to, or received from, any governmental authority or private party concerning the presence, spill, release, discharge of, or exposure to, such Hazardous Substance including but not limited to all such documents as may be involved in any Reportable Use involving the Premises. Lessee shall not cause or permit any Hazardous Substance to be spilled or released in, on, under or about the Premises (including, without limitation, through the plumbing or sanitary sewer system).
Initials: /s/ WER
---------------
/s/ [ILLEGIBLE]
---------------
PAGE 2 OF 13 PAGES
|
(c) DUTY TO INFORM LESSEE. If Lessor knows, or has reasonable cause to believe, that a Hazardous Substance has come to be located in, on, under or about the Premises or the Building, Lessor shall immediately give Lessee written notice thereof, together with a copy of any statement, report, notice, registration, application, permit, business plan, license, claim, action, or proceeding given to, or received from, any governmental authority or private party concerning the presence, spill, release, discharge of, or exposure to, such Hazardous Substance including but not limited to all such documents as may be involved in any Reportable Use involving the Premises. Lessor shall not cause or permit any Hazardous Substance to be spilled or released in, on, under or about the Premises (including, without limitation, through the plumbing or sanitary sewer system).
(d) INDEMNIFICATION. Lessee shall indemnify, protect, defend and hold Lessor, its agents, employees, lenders and ground lessor, if any, and the Premises, harmless from and against any and all damages, liabilities, judgments, costs, claims, liens, expenses, penalties, loss of permits and attorneys' and consultants' fees arising out of or involving any Hazardous Substance brought onto the Premises by or for Lessee or by anyone under Lessee's control. Lessee's obligations under this Paragraph 6.2(c) shall include, but not be limited to, the effects of any contamination or injury to person, property or the environment created or suffered by Lessee, and the cost of investigation (including consultants' and attorneys' fees and testing), removal, remediation, restoration and/or abatement thereof, or of any contamination therein involved, and shall survive the expiration or earlier termination of this Lease. No termination, cancellation or release agreement entered into by Lessor and Lessee shall release Lessee from its obligations under this Lease with respect to Hazardous Substances, unless specifically so agreed by Lessor in writing at the time of such agreement.
6.3 LESSEE'S COMPLIANCE WITH REQUIREMENTS. Lessee shall, at Lessee's
sole cost and expense, fully, diligently and in a timely manner, comply with
all "Applicable Requirements," which term is used in this Lease to mean all
laws, rules, regulations, ordinances, directives, covenants, easements and
restrictions of record, permits, and the requirements of any applicable fire
insurance underwriter or rating bureau, and the recommendations of Lessor's
engineers and/or consultants, relating in any manner to the Premises
(including but not limited to matters pertaining to (i) industrial hygiene,
(ii) environmental conditions on, in, under or about the premises, including
soil and groundwater conditions, and (iii) the use, generation, manufacture,
production, installation, maintenance, removal, transportation, storage,
spill or release of any Hazardous Substance), now in effect or which may
hereafter come into effect. Lessee shall, within ten (10) days after receipt
of Lessor's written request, provide Lessor with copies of all documents and
information, including but not limited to permits, registrations, manifests,
applications, reports and certificates, evidencing Lessee's compliance with
any Applicable Requirements specified by Lessor, and shall immediately upon
receipt, notify Lessor in writing (with copies of any documents involved of
any threatened or actual claim, notice, citation, warning, complaint or
report pertaining to or involving failure by Lessee to the Premises to comply
with any Applicable Requirements.
Notwithstanding anything to the contrary contained herein, Lessee's obligation to comply with Applicable Requirements, as set forth in Section 6.3 above, shall only apply if such compliance is required or necessitated by Lessee's acts, use, or occupancy of the Premises. For example, if any governmental authority should require the Building or the Premises to be structurally strengthened against earthquake, or should require the removal of asbestos from the Premises and such measures are imposed as a general requirement applicable to all tenants rather than as a condition to Lessee's specific use or occupancy of the Premises, such work shall be performed by and at the sole cost of Lessor.
It is being expressly agreed that Lessee shall have no obligation or liability of any kind or nature with respect to contamination or Hazardous Substances that existed at, on or under the Premises and Building (which shall be deemed to include the underlying soil and groundwater) prior to the commencement of this Lease or that was not caused by Lessee's acts, use or occupancy of the Premises.
To the best of Lessor's current actual knowledge, none of Lessor's tenants at the Office Building Project are in violation or subject to any existing, pending or threatened investigation or order by any governmental authority under any applicable federal, state or local law, regulation or ordinance pertaining to air and water quality, the handling, transportation, storage, treatment, usage or disposal of Hazardous Substances, air emissions, other environmental matters and all zoning and land use matters.
To the best of Lessor's current, actual knowledge, any handling, transportation, storage, treatment or use of Hazardous Substances that has occurred on the Premises to date is not in non-compliance with all Applicable Requirements regulating same.
To the best of Lessor's current, actual knowledge, no leak, spill, release, discharge, emission or disposal of Hazardous Substances has occurred on the Premises. Building and Industrial Center to date and the soil, groundwater and soil vapor on or under the Premises, Building and Industrial Center is free of Hazardous Substances as of the date the term of this Lease commences.
In the event of (i) a breach of the foregoing representations, or (ii) the occurrence, release or threatened release of any Hazardous Substances on or about the Premises, Building and Industrial Center during the term hereof that is not caused by Lessee, Lessor, at Lessor's sole expense, shall (a) promptly remove, eliminate or remediate said Hazardous Substances and/or take such other action with respect thereto as is required by any federal, state or local government agency having jurisdiction thereof.
6.4 COMPLIANCE WITH LAW.
(a) Lessee shall, at Lessee's expense, fully, diligently, and in a timely manner, comply with all applicable laws, rules, regulations, ordinances, directives, covenants, assessments, and restrictions of record, permits, and the requirements of fire insurance underwriters or rating bureau, relating in any manner to Lessee's use and occupancy of the Premises, now in effect or which may hereafter come into effect, whether or not they reflect a change in policy from that now existing, during the term or any part of the term hereof, relating in any manner to the Premises and the occupation and use by Lessee of the Premises. Without limiting the generality of the foregoing and as it relates to the Premises, Lessee agrees to comply with all laws, orders and regulations relating to the rights of individuals with disabilities, including without limitation the Americans with Disabilities Act. Lessee shall conduct its business in a lawful manner and shall not use or permit the use of the Premises or the Common Areas in any manner that will tend to create waste or a nuisance or shall tend to disturb other occupants of the Office Building Project.
(b) Lessor, Lessor's agents, employees, contractors and designated representatives, and the holders of any mortgages, deeds of trust or ground leases on the Premises ("Lenders") shall have the right to enter the Premises at any time in the case of an emergency, and otherwise at reasonable times, for the purpose of inspecting the condition of the Premises and for verifying compliance by Lessee with this Lease and all Applicable Requirements (as defined in Paragraph 6.3), and Lessor shall be entitled to employ experts and/or consultants in connection therewith to advise Lessor with respect to Lessee's activities, including but not limited to Lessee's installation, operation, use, monitoring, maintenance, or removal of any Hazardous Substance on or from the Premises. The costs and expenses of any such inspections shall be paid by the party requesting same, unless a Default or Breach of this Lease by Lessee or a violation of Applicable Requirements or a contamination, caused or materially contributed to by Lessee, is found to exist or to be imminent, or unless the inspection is requested or ordered by a governmental authority as the result of any such existing or imminent violation or contamination. In such case, Lessee shall upon request, reimburse Lessor or Lessor's Lender, as the case may be, for the costs and expenses of such inspections.
6.5 CONDITION OF PREMISES.
(a) Lessor shall deliver the Premises to Lessee in a clean condition on the Lease Commencement Date (unless Lessee is already in possession) and Lessor warrants to Lessee that the plumbing, lighting, air conditioning, and heating system in the Premises shall be in good operating condition. In the event that it is determined that this warranty has been violated, then it shall be the obligation of Lessor, after receipt of written notice from Lessee setting forth with specificity the nature of the violation, to promptly, at Lessor's sole cost, rectify such violation.
(b) Except as otherwise provided in this Lease, Lessee hereby accepts the Premises and the Office Building Project in their condition existing as of the Lease Commencement Date or the date that Lessee takes possession of the Premises, whichever is earlier, subject to all applicable zoning, municipal, county and state laws, ordinances and regulations governing and regulating the use of the Premises, and any easements, covenants or restrictions of record, and accepts this Lease subject thereto and to all matters disclosed thereby and by any exhibits
PAGE 3 OF 13 PAGES
attached hereto. Lessee acknowledges that it has satisfied itself by its own independent investigation that the Premises are suitable for its intended use and that neither Lessor nor Lessor's agent or agents has made any representation or warranty as to the present or future suitability of the Premises, Common Areas, or Office Building Project for the conduct of Lessee's business.
7. MAINTENANCE, REPAIRS, ALTERATIONS AND COMMON AREA SERVICES.
7.1 LESSOR'S OBLIGATIONS. Lessor shall keep the Office Building Project, including the Premises, interior and exterior walls, roof, and common areas, and the equipment whether used exclusively for the Premises or in common with other premises, in good condition and repair, provided, however, Lessor shall not be obligated to paint, repair or replace wall coverings, or to repair or replace any improvements that are not ordinarily a part of the Building or are above then Building standards. Except as provided in paragraph 9.5, there shall be no abatement of rent or liability of Lessee as a result of any injury or interference with Lessee's business with respect to any improvements, alterations or repairs made by Lessor to the Office Building, Project or any part thereof. Lessee expressly waives the benefits of any statute now or hereafter in effect that would otherwise afford Lessee the right to make repairs at Lessor's expense or to terminate this Lease because of Lessor's failure to keep the Premises in good order, conditions and repair. Lessee hereby waives and releases its rights under California Civil Code Sections 1932(1) and 1942.
7.2 LESSEE'S OBLIGATIONS.
(a) Notwithstanding Lessor's obligation to keep the Premises in good condition and repair, Lessee shall be responsible for payment of the cost thereof to Lessor as additional rent for that portion of the cost of any maintenance and repair of the Premises, or any equipment (wherever located) that serves only Lessee or the Premises, to the extent such cost is attributable to causes beyond normal wear and tear. Lessee shall be responsible for the cost of painting, repairing or replacing wall coverings, and to repair or replace any Premises improvements that are not ordinarily a part of the Building or that are above then Building standards. Lessor may, at its option, upon reasonable notice, elect to have Lessee perform any particular such maintenance or repairs the cost of which is otherwise Lessee's responsibility hereunder.
(b) On the last day of the term hereof, or on any sooner termination, Lessee shall surrender the Premises to Lessor in the same condition as received, ordinary wear and tear excepted, clean and free of debris. Any damage or deterioration of the Premises shall not be deemed ordinary wear and tear if the same could have been prevented by good maintenance practices by Lessee. Lessee shall repair any damage to the Premises occasioned by the installation or removal of Lessee's trade fixtures, alterations furnishings and equipment. Except as otherwise stated in this Lease, Lessee shall leave the air lines, power panels, electrical distribution systems, lighting fixtures, air conditioning, window coverings, wall coverings, carpets, wall paneling, ceilings and plumbing on the Premises and in good operating condition.
7.3 ALTERATIONS AND ADDITIONS.
(a) Lessee shall not, without Lessor's prior written consent make any alterations, improvements, additions, Utility Installations or repairs in, on or about the Premises, or the Office Building Project. As used in this paragraph 7.3 the term "Utility Installation" shall mean carpeting, window and wall coverings, power panels, electrical distribution systems, lighting fixtures, air conditioning, plumbing, and telephone and telecommunication wiring and equipment. At the expiration of the term, Lessor may require the removal of any or all of said alterations, improvements, additions or Utility Installations, and the restoration of the premises and the Office Building Project to their prior condition, at Lessee's expense. Should Lessor permit Lessee to make its own alterations, improvements additions or Utility Installations, Lessee shall use only such contractor as has been expressly approved by Lessor, and Lessor may require Lessee to provide Lessor, at Lessee's sole cost and expense, a lien and completion bond in an amount equal to one and one-half times the estimated cost of such improvements, to insure Lessor against any liability for mechanic's and material men's liens and to insure completion of the work. Should Lessee make any alterations, improvements, additions or Utility Installations without the prior approval of Lessor, or use a contractor not expressly approved by Lessor, Lessor may at any time during the term of this Lease, require that Lessee remove any part or all of the same.
(b) Any alterations, improvements, additions or Utility Installations in or about the Premises or the Office Building Project that Lessee shall desire to make shall be presented to Lessor in written form, with proposed detailed plans. If Lessor shall give its consent to Lessee's making such alteration, improvement, addition or Utility Installation, the consent shall be deemed conditioned upon Lessee acquiring a permit to do so from the applicable governmental agencies, furnishing a copy thereof to Lessor prior to the commencement of the work, and compliance by Lessee with all conditions of said permit in a prompt and expeditious manner.
(c) Lessee shall pay, when due, all claims for labor or materials furnished or alleged to have been furnished to or for Lessee at or for use in the Premises, which claims are or may be secured by any mechanic's or material men's lien against the Premises, the Building or the Office Building Project, or any interest therein.
(d) Lessee shall give Lessor not less than ten (10) days notice prior to the commencement of any work in the Premises by Lessee, and Lessor shall have the right to post notices of non responsibility in or on the Premises or the Building as provided by law. If Lessee shall in good faith, contest the validity of any such lien, claim or demand, then Lessee shall, at its sole expense defend itself and Lessor against the same and shall pay and satisfy any such adverse judgement that may be rendered thereon before the enforcement thereof against the Lessor or the Premises the Building or the Office Building Project, upon the condition that if Lessor shall require, Lessee shall furnish to Lessor's surety bond satisfactory to Lessor in an amount equal to such contested lien claim or demand indemnifying Lessor against liability for the same and holding the Premises, the Building and the Office Building Project free from the effect of such lien or claim. In addition, Lessor may require Lessee to pay Lessor's reasonable attorneys' fees and costs in participating in such action if Lessor shall decide it is to Lessor's best interest so to do.
(e) All alterations, improvements, additions and Utility Installations (whether or not such Utility Installations constitute trade fixtures of Lessee), which may be made to the Premises by Lessee, including but not limited to, floor coverings, paneling, doors, drapes, built-ins, moldings, sound attenuation, and lighting and telephone or communication systems, conduit, wiring and outlets, shall be made and done in a good and workmanlike manner and of good and sufficient quality and materials and shall be the property of Lessor and remain upon and be surrendered with the Premises at the expiration of the Lease term, unless Lessor requires their removal pursuant to paragraph 7.3(a). Provided Lessee is not in default, notwithstanding the provisions of this paragraph 7.3(e), Lessee's personal property and equipment, other than that which is affixed to the Premises so that it cannot be removed without material damage to the Premises or the Building, and other than Utility Installations, shall remain the property of Lessee and may be removed by Lessee subject to the provisions of paragraph 7.2.
(f) Lessee shall provide Lessor with as-built plans and specifications for any alterations, improvements, additions or Utility Installations.
7.4 UTILITY ADDITIONS. Lessor reserves the right to install now or additional utility facilities throughout the Office Building Project for the benefit of Lessor or Lessee, or any other lessee of the Office Building Project, including, but not by way of limitation, such utilities as plumbing, electrical systems, communication systems, and fire protection and detection systems, so long as such installations do not unreasonably interfere with Lessee's use of the Premises.
8. INSURANCE; INDEMNITY.
8.1 LIABILITY INSURANCE-LESSEE. Lessee shall, at Lessee's expense, obtain and keep in force during the term of this Lease a policy of Comprehensive General Liability insurance utilizing an Insurance Services Office standard form with Broad Form General Liability Endorsement (GL0404), or equivalent, in an amount not less than $1,000,000 per occurrence of bodily injury and property damage combined or in greater amount as reasonably determined by Lessor and shall insure Lessee with Lessor as an additional insured against liability arising out of the use, occupancy or maintenance of the Premises. Compliance with the above requirement shall not, however, limit the liability of Lessee hereunder.
8.2 LIABILITY INSURANCE-LESSOR. Lessor shall obtain and keep in force during the term of this Lease a policy of Combined Single Limit Bodily Injury and Broad Form Property Damage Insurance, plus coverage against such other risks Lessor deems advisable from time to
Initials: /s/ WER
---------------
/s/ [ILLEGIBLE]
---------------
PAGE 4 OF 13 PAGES
|
time, insuring Lessor, but not Lessee, against liability arising out of the ownership, use, occupancy or maintenance of the Office Building Project in an amount not less than $1,000,000.00 per occurrence.
8.3 PROPERTY INSURANCE - LESSEE. Lessee shall, at Lessee's expense, obtain and keep in force during the term of this Lease for the benefit of Lessee, replacement cost fire and extended coverage insurance, with vandalism and malicious mischief, sprinkler leakage and earthquake sprinkler leakage endorsements, if applicable, in an amount sufficient to cover not less than 100% of the full replacement cost, as the same may exist from time to time, of all of Lessee's personal property, fixtures, equipment and tenant improvements.
8.4 PROPERTY INSURANCE - LESSOR. Lessor shall obtain and deep in force during the term of this Lease a policy or policies of insurance covering loss or damage to the Office Building Project improvements, but not Lessee's personal property, fixtures, equipment or tenant improvements, in the amount of the full replacement cost thereof, as the same may exist from time to time, utilizing Insurance Services Office standard form or equivalent providing protection against all perils included within the classification of fire, extended coverage, vandalism, malicious mischief, plate glass, and such other perils as Lessor deems advisable or may be required by a lender having a lien on the Office Building Project. In addition, Lessor shall obtain and keep in force, during the term of this Lease, a policy of rental value insurance covering a period of one year, with loss payable to Lessor, which insurance shall also cover all Operating Expenses for said period. Lessee will not be named in any such policies carried by Lessor and shall have no right to any proceeds therefrom. The policies required by these paragraphs 8.2 and 8.4 shall contain such deductibles as Lessor or the aforesaid lender may determine. In the event that the Premises shall suffer an insured loss as defined in paragraph 9.1(f) hereof, the deductible amounts under the applicable insurance policies shall be deemed an Operating Expense. Lessee shall not do or permit to be done anything that shall invalidate the insurance policies carried by Lessor. Lessee shall pay the entirety of any increase in the property insurance premium for the Office Building Project over what it was immediately prior to the commencement of the term of this Lease if the increase is specified by Lessor's insurance carrier as being caused by the nature of Lessee's occupancy or any act or omission of Lessee.
8.5 INDEMNITY. Lessee shall indemnify and hold harmless Lessor and its agents, partners and lenders, from and against any and all claims for damage to the person or property of anyone or any entity arising from the following:
(1.) Lessee's use of the Office Building Project, or from the conduct of Lessee's business or from any activity, work or things done, permitted or suffered by Lessee in or about the Premises or elsewhere.
(2.) Any breach or default in the performance of any obligation on Lessee's part to be performed under the terms of this Lease.
(3.) Any act or omission of Lessee, or any of Lessee's agents, contractors, employees, or invitees, and from and against all costs, attorney's fees, expenses and liabilities incurred by Lessor as the result of any such use, conduct, activity, work, things done, permitted or suffered, breach, default or negligence and dealing reasonably therewith, including but not limited to the defense or pursuit of any claim or any action or proceeding involved therein.
In case any action or proceeding be brought against Lessor by reason of any such matter, Lessee upon notice from Lessor shall defend the same at Lessee's expense by counsel reasonably satisfactory to Lessor and Lessor shall cooperate with Lessee in such defense.
Lessor need not have first paid any such claim in order to be so indemnified.
Lessee, as a material part of the consideration to Lessor, hereby assumes all risk of damage to property of Lessee or injury to persons, in, upon or about the Office Building Project arising from any cause and Lessee hereby waives all claims in respect thereof against Lessor.
For the purposes of this paragraph 8.5 "claims" means claims, demands, losses, damages, liability, costs, and expenses, including without limitation attorney's fees, court costs, expenses and other costs of investigation and preparation, including attorney's fees and costs and expenses incurred in connection with any appeal.
The foregoing indemnification obligations shall not apply to any claims arising from the sole negligence or willful misconduct of the party seeking indemnification.
The foregoing indemnification obligations shall survive the expiration or earlier termination of this Lease to and until the date permitted by law for the bringing of any claim with respect to which indemnification may be claimed under this paragraph.
8.6 EXEMPTION OF LESSOR FROM LIABILITY. Lessee hereby agrees that Lessor shall not be liable for injury to Lessee's business or any loss of income therefrom or for loss of or damage to the goods, wares, merchandise or other property of Lessee, Lessee's employees, invitees, customers, or any other person in or about the Premises or the Office Building Project, nor shall Lessor be liable for injury to the person of Lessee, Lessee's employees agents or contractors, whether such damage or injury is caused by or results from theft, fire, steam, electricity, gas, water or rain, or from the breakage, leakage, obstruction or other defects of pipes, sprinklers, wires, appliances, plumbing, air conditioning or lighting fixtures, or from any other cause, whether said damage or injury results from conditions arising upon the Premises or upon other portions of the Office Building Project, or from other sources or places, or from new construction or the repair, alteration or improvement of any part of the Office Building Project, or of the equipment, fixtures or appurtenances applicable thereto, and regardless of whether the cause of such damage or injury or the means of repairing the same is inaccessible. Lessor shall not be liable for any damages arising from any act or neglect of any other lessee, occupant or user of the Office Building Project, nor from the failure of Lessor to enforce the provisions of any other lease of any other lessee of the Office Building Project.
The exemption of Lessor from liability shall not apply if loss arises from Lessor's negligence in fulfilling his obligations as stated in 7.1.
8.7 NO REPRESENTATION OF ADEQUATE COVERAGE. Lessor makes no representation that the limits or forms of coverage of insurance specified in this paragraph 8 are adequate to cover Lessee's property or obligations under this Lease.
9. DAMAGE OR DESTRUCTION.
9.1 DEFINITIONS.
(a) "Premises Damage" shall mean if the Premises are damaged or destroyed to any extent.
(b) "Premises Building Partial Damage" shall mean if the Building of which the Premises are a part is damaged or destroyed to the extent that the cost to repair is less than fifty percent (50%) of the then Replacement Cost of the building.
(c) "Premises Building Total Destruction" shall mean if the Building of which the Premises are a part is damaged or destroyed to the extent that the cost to repair is fifty percent (50%) or more of the then Replacement Cost of the Building.
(d) "Office Building Project Buildings" shall mean all of the buildings on the Office Building Project site.
(e) "Office Building Project Buildings Total Destruction" shall mean if the Office Building Project Buildings are damaged or destroyed to the extent that the cost of repair is fifty percent (50%) or more of the then Replacement Cost of the Office Building Project Buildings.
(f) "Insured Loss" shall mean damage or destruction that was caused by an event required to be covered by the insurance described in paragraph 8. The fact that an Insured Loss has a deductible amount shall not make the loss an uninsured loss.
(g) "Replacement Cost" shall mean the amount of money necessary to be spent in order to repair or rebuild the damaged area to the condition that existed immediately prior to the damage occurring, excluding all improvements made by lessees, other than those installed by Lessor at Lessee's expense.
9.2 PREMISES DAMAGE; PREMISES BUILDING PARTIAL DAMAGE.
(a) Insured Loss: Subject to the provisions of paragraphs 9.4 and 9.5, if at any time during the term of this Lease there is damage which is an Insured Loss and which falls into the classification of either Premises Damage or Premises Building Partial Damage, then Lessor shall, as soon as reasonably possible and to the extent the required materials and labor are readily available through usual commercial
Initials: /s/ WER
---------------
/s/ [ILLEGIBLE]
---------------
|
PAGE 5 OF 13 PAGES
channels, at Lessor's expense, repair such damage (but not Lessee's fixtures, equipment or tenant improvements originally paid for by Lessee) to its condition existing at the time of the damage, and this Lease shall continue in full force and effect.
(b) Uninsured Loss: Subject to the provisions of paragraphs 9.4 and 9.5, if at any time during the term of this Lease there is damage which is not an Insured Loss and which falls within the classification of Premises Damage or Premises Building Partial Damage, unless caused by a negligent or willful act of Lessee (in which event Lessee shall make the repairs at Lessee's expense), which damage prevents Lessee from making any substantial use of the Premises, Lessor may at Lessor's option either (i) repair such damage as soon as reasonably possible at Lessor's expense in which event this Lease shall continue in full force and effect, or (ii) give written notice to Lessee within thirty (30) days after the date of the occurrence of such damage of Lessee's intention to cancel and terminate this Lease as of the date of the occurrence of such damage, in which event this Lease shall terminate as of the date of the occurrence of such damage.
9.3 PREMISES BUILDING TOTAL DESTRUCTION; OFFICE BUILDING PROJECT TOTAL
DESTRUCTION. Subject to the provisions of paragraphs 9.4 and 9.5 if at any time
during the term of this Lease there is damage, whether or not it is an Insured
Loss, which falls into the classifications of either (i) Premises Building Total
Destruction, or (ii) Office Building Project Total Destruction, then Lessor may
at Lessor's option either (i) repair such damage or destruction as soon as
reasonably possible at Lessor's expense (to the extent the required materials
are readily available through usual commercial channels) to its condition
existing at the time of the damage, but not Lessee's fixtures equipment or
tenant improvements, and this Lease shall continue in full force and effect, or
(ii) give written notice to Lessee within thirty (30) days after the date of
occurrence of such damage of Lessor's intention to cancel and terminate this
Lease, in which case this Lease shall terminate as of the date of the occurrence
of such damage.
9.4 DAMAGE NEAR END OF TERM.
(a) Subject to paragraph 9.4(b), if at any time during the last twelve (12) months of the term of this Lease there is substantial damage to the Premises, Lessor may at Lessor's option cancel and terminate this Lease as of the date of occurrence of such damage by giving written notice to Lessee of Lessor's election to do so within 30 days after the date of occurrence of such damage.
(b) Notwithstanding paragraph 9.4(a), in the event that
Lessee has an option to extend or renew this Lease, and the time within which
said option may be exercised has not yet expired, Lessee shall exercise such
option, if it is to be exercised at all, no later than twenty (20) days after
the occurrence of an Insured Loss falling within the classification of
Premises Damage during the last twelve (12) months of the term of this Lease.
If Lessee duly exercises such option during said twenty (20) day period,
Lessor shall, at Lessor's expense, repair such damage, but not Lessee's
fixtures, equipment or tenant improvements, as soon as reasonably possible
and this Lease shall continue in full force and effect. If Lessee fails to
exercise such option during said twenty (20) day period, then Lessor may at
Lessor's option terminate and cancel this Lease as of the expiration of said
twenty (20) day period by giving written notice to Lessee of Lessor's
election to do so within ten (10) days after the expiration of said twenty
(20) day period, notwithstanding any term or provision in the grant of option
to the contrary.
9.5 ABATEMENT OF RENT; LESSEE'S REMEDIES.
(a) In the event Lessor repairs or restores the Building or Premises pursuant to the provisions of this paragraph 9, and any part of the Premises are not usable (including loss of use due to loss of access or essential services), the rent payable hereunder (including Lessee's Share of Operating Expense Increase) for the period during which such damage, repair or restoration continues shall be abated, provided (1) the damage was not the result of the negligence of Lessee, and (2) such abatement shall only be to the extent the operation and profitability of Lessee's business as operated from the Premises is adversely affected. Except for said abatement of rent, if any, Lessee shall have no claim against Lessor for any damage suffered by reason of any such damage, destruction, repair or restoration.
(b) If Lessor shall be obligated to repair or restore the
Premises or the Building under the provisions of this Paragraph 9 and shall not
commence such repair or restoration within ninety (90) days after such
occurrence or if Lessor shall not complete the restoration and repair within six
(6) months after such occurrence Lessee may at Lessee' option cancel and
terminate this Lease by giving Lessor written notice of Lessee's election to do
so at any time prior to the commencement or completion, respectively, of such
repair or restoration. In such event this Lease shall terminate as of the date
of such notice.
(c) Lessee agrees to cooperate with Lessor in connection with any such restoration and repair, including but not limited to the approval and/or execution of plans and specifications required.
9.6 TERMINATION-ADVANCE PAYMENTS. Upon termination of this Lease pursuant to this paragraph 9, an equitable adjustment shall be made concerning advance rent and any advance payments made by Lessee to Lessor shall, in addition, return to Lessee so much of Lessee's security deposit as has not therefore been applied by Lessor.
9.7 WAIVER. Lessor and Lessee waive the provisions of any statute that relate to termination of leases when leased property is destroyed and agree that such event shall be governed by the terms of this Lease. Any statute or regulation of the State of California or any other governmental authority or body, including, without limitation, California Civil Code Sections 1932(2) and 1933 (4) with respect to any rights or obligations concerning any damage or destruction to the Premises or the Office Building Project in the absence of an express agreement between the parties, and any other statute or regulation relating to damage or destruction of leased premises, now or hereafter in effect, shall have no application to this Lease or any damage or destruction to all or any part of the Premises or any other portion of the Office Building Project.
10. UTILITIES
10.1 SERVICES PROVIDED BY LESSOR. Lessor shall provide heating, ventilation, air conditioning, and janitorial services as reasonably required, reasonable amounts of electricity for normal lighting and office machines, water for reasonable and normal drinking and lavatory use, and replacement light bulbs and/or fluorescent tubes and ballasts for standard overhead fixtures.
10.2 SERVICES EXCLUSIVE TO LESSEE. Lessee shall pay for all water, gas, heat, light, power, telephone and other utilities and services specially or exclusively supplied and/or metered exclusively to the Premises or to Lessee, together with any taxes thereon. If any such services are not separately metered to the Premises, Lessee shall pay at Lessor's option, either Lessee's Share or a reasonable proportion to be determined by Lessor of all charges jointly metered with other premises of the Building.
10.3 HOURS OF SERVICE. Said services and utilities shall be provided during generally accepted business days and hours or such other days or hours as may hereafter be set forth. Utilities and services required at other times shall be subject to advance request and reimbursement by Lessee to Lessor of the cost thereof.
10.4 EXCESS USAGE BY LESSEE. Lessee shall not make connection to the utilities except by or through existing outlets and shall not install or use machinery or equipment in or about the Premises that uses excess water, lighting or power, or suffer or permit any act that causes extra burden upon the utilities or services, including but not limited to security services, over standard office usage for the Office Building Project. Lessor shall require Lessee to reimburse Lessor for any excess expenses or costs that may arise out of a breach of this subparagraph by Lessee. Lessor may, in its sole discretion, install at Lessee's expense supplemental equipment and/or separate metering applicable to Lessee's excess usage or loading.
10.5 INTERRUPTIONS. There shall be not abatement of rent and Lessor shall not be liable in any respect whatsoever for the inadequacy, stoppage, interruption or discontinuance of any utility or service due to riot, strike, labor dispute, breakdown, accident, repair or other cause beyond Lessor's reasonable control or in cooperation with governmental request or directions.
11. ASSIGNMENT AND SUBLETTING. LESSOR'S CONSENT REQUIRED. Lessee shall not voluntarily or by operation of law assign, transfer, mortgage, sublet, or otherwise transfer or encumber all or any part of Lessee's interest in the Lease or in the Premises, without Lessor's prior written consent.
12. DEFAULT; REMEDIES.
12.1 DEFAULT. The occurrence of any one or more of the following events shall constitute a material default of this Lease by Lessee:
Initials: /s/ WER
---------------
/s/ [ILLEGIBLE]
---------------
PAGE 6 OF 13 PAGES
|
(a) The vacation or abandonment of the Premises by Lessee. Vacation of the Premises shall include the failure to occupy the Premises for a continuous period of sixty (60) days or more, whether or not the rent is paid.
(b) The breach by Lessee of any of the covenants, conditions or provisions, of paragraphs 7.3(a), (b) or (d) (alterations), 12 (assignment or subletting, 12.1 (a) (vacation or abandonment), 12.1. (e) (insolvency), 13 (f) (false statement), 14 (a) (estoppel certificate), 27.2 (b) (subordination) 30 (auctions), or 38.1 (easements), all of which are hereby deemed to be material, non curable defaults without the necessity of any notice by Lessor to Lessee thereof.
(c) The failure by Lessee to make any payment of rent or any other payment required to be made by Lessee hereunder, as and when due, where such failure shall continue for a period of three (3) days after written notice thereof from Lessor to Lessee. In the event that Lessor serves Lessee with a Notice to Pay Rent or Quit pursuant to applicable Unlawful Detainer statutes such Notice to Pay Rent or Quit shall also constitute the notice required by this subparagraph.
(d) The failure by Lessee to observe or perform any of the covenants, conditions or provisions of this Lease to be observed or performed by Lessee other than those referenced in subparagraphs (b) and (c), above, where such failure shall continue for a period of thirty (30) days after written notice thereof from Lessor to Lessee; provided, however, that if the nature of Lessee's noncompliance is such that more than thirty (30) days are reasonably required for its cure, then Lessee shall not be deemed to be in default if Lessee commenced such cure within said thirty (30) day period and thereafter diligently pursues such cure to completion. To the extent permitted by law, such thirty (30) day notice shall constitute the sole and exclusive notice required to be given to Lessee under applicable Unlawful Detainer statutes.
(e) (i) The making by Lessee of any general arrangement or
general assignment for the benefit of creditors; (ii) Lessee becoming a "debtor"
as defined in 11 U.S.C. Section 101 or any successor statute thereto (unless, in
the case of a petition filed against Lessee, the same is dismissed within sixty
(60) days; (iii) the appointment of a trustee or receiver to take possession of
substantially all of Lessee's assets located at the Premises or of Lessee's
interest in this Lease where possession is not restored to Lessee within thirty
(30) days, or (iv) the attachment, execution or other judicial seizure of
substantially all of Lessee's assets located at the Premises or of Lessee's
interest in this Lease, where such seizure is not discharged within thirty (30)
days. In the event that any provision of this paragraph 12.1(c) is contrary to
any applicable law, such provision shall be of no force or effect.
(f) The discovery by Lessor that any financial statement given to Lessor by Lessee, or its successor in interest or by any guarantor of Lessee's obligation hereunder, was materially false.
12.2 REMEDIES. In the event of any material default or breach of this Lease by Lessee, Lessor may at any time thereafter, with or without notice or demand and without limiting Lessor in the exercise of any right or remedy which Lessor may have by reason of such default:
(a) Terminate Lessee's right to possession of the Premises by any lawful means, in which case this Lease and the term hereof shall terminate and Lessee shall immediately surrender possession of the Premises to Lessor. In such event Lessor shall be entitled to recover from Lessee all damages incurred by Lessor by reason of Lessee's default including, but not limited to, the cost of recovering possession of the Premises; expenses of reletting, including necessary renovation and alteration of the Premises, reasonable attorneys' fees, and any real estate commission actually paid; the worth at the time of award by the court having jurisdiction thereof of the amount by which the unpaid rent for the balance of the term after the time of such award exceeds the amount of such rental loss for the same period that Lessee proves could be reasonably avoided.
(b) Maintain Lessee's right to possession in which case this Lease shall continue in effect whether or not Lessee shall have vacated or abandoned the Premises. In such event Lessor shall be entitled to enforce all of Lessor's rights and remedies under this Lease, including the right to recover the rent as it becomes due hereunder.
(c) Pursue any other remedy now or hereafter available to Lessor under the laws or judicial decisions of the state wherein the Premises are located. Unpaid installments of rent and other unpaid monetary obligations of Lessee under the terms of this Lease shall bear interest from the date due at the maximum rate then allowable by law.
(d) In addition to the remedies set forth in paragraph 12.2(a) through (c) and in addition to all other rights and remedies available to Lessor at law or in equity, Lessor shall have the following rights and remedies:
(i) the rights and remedies provided by California Civil Code Section 1951.2, including, but not limited to, the right to terminate Lessee's right to possession of the Premises and to recover (i) "the worth at the time of award" (as defined in Section 12.2(d)(vi) below) of the unpaid Base Rent which shall have been earned after termination; plus (ii) the worth at the time of award of the amount by which the unpaid Base Rent which would have been earned after termination until the time of award shall exceed the amount of loss of such Base Rent that Lessee proves could have been reasonably avoided; plus (iii) the worth at the time of award of the amount by which the unpaid Base Rent for the balance of the Term after the time of award shall exceed the amount of loss of such Base Rent that Lessee proves could be reasonably avoided; plus (iv) any other amount necessary to compensate Lessor for all the detriment proximately caused by Lessee's failure to perform its obligations under this Lease or which would be likely to result therefrom (including without limitation attorneys' and accountants' fees, costs of alterations of the Premises, interest costs and brokers' fees incurred upon any reletting of the Premises);
(ii) the rights and remedies described in California Civil Code Section 1951.4 (Lessor may continue the Lease in effect after Lessee's breach and abandonment and recover Base Rent and Operating Expenses as they become due, since Lessee, pursuant to the provisions of paragraph 11 may sublet or assign, subject only to reasonable limitations). Acts of maintenance or preservation, efforts to relet the Premises or the appointment of a receiver upon Lessor's initiative to protect its interest under this Lease shall not of themselves constitute a termination of Lessee's right to possession;
(iii) the right to enter the Premises and remove therefrom all persons and property, to store such property in a public warehouse or elsewhere at the cost of and for the account of Lessee, and to sell such property and apply the proceeds therefrom pursuant to applicable California law and subject to the prior rights of third party owners with respect to consigned property or secured creditors having a claim prior in right. In such event Lessor may from time to time sublet the Premises or any part thereof for such term or terms (which may extend beyond the Term) and at such rent and such other terms as Lessor in its sole discretion may deem advisable, with the right to make alterations an repairs to the Premises. Upon each such subletting, rents received from such subletting shall be applied by Lessor, first, to payment of any indebtedness other than Base Rent due hereunder from Lessee to Lessor; second, to the payment of any costs of such subletting (including without limitation attorneys' and accountants' fees, costs of alterations of the Premises, interest costs, and brokers' fees) and of any such alterations and repairs; third, to payment of Base Rent due and unpaid hereunder; and the residue, if any, shall be held by Lessor and applied in payment of future Base Rent as it becomes due hereunder. If any rental or other charges due under such sublease shall not be promptly paid to Lessor by the sublessee(s), or if such rentals received from such subletting during any month are less than Base Rent to be paid during that month by Lessee hereunder, Lessee shall pay any such deficiency to Lessor, as well as any unpaid indebtedness other than Base Rent due hereunder from Lessee to Lessor and the costs of such subletting (including without limitation attorneys' and accountants' fees, costs of alterations of the Premises, interest costs, and brokers' fees), and any other amounts due Lessor under this Section 12.2. Such deficiency shall be calculated and paid monthly. No taking possession of the Premises by Lessor shall be construed as an election on its part to terminate this Lease unless a written notice of such intention is given to Lessee. Lessor's subletting the Premises without termination shall not constitute a waiver of Lessor's right to elect to terminate this Lease for such previous breach;
(iv) The right to have a receiver appointed for Lessee, upon application by Lessor, to take possession of the Premises, to apply any rental collected from the Premises and to exercise all other rights and remedies granted to Lessor pursuant to paragraph 12.2(d)(iii); and
(v) the right to specific performance of any or all of Lessee's obligations hereunder, and to damages for delay in or failure of such performance.
Initials: /s/ WER
---------------
/s/ [ILLEGIBLE]
---------------
|
PAGE 7 OF 13 PAGES
(e) For purposes of paragraph 12.2(d) the "worth at the time of award" of the amounts referred to in subparagraphs (i) and (ii) shall be computed with interest at the lesser of the maximum rate then allowed by law or a rate which is five percent (5%) per annum plus the rate from time to time, established by the Federal Reserve Bank of San Francisco on advances to member banks under Sections 13 and 13(a) of the Federal Reserve Act as now in effect or hereafter from time to time amended; the "worth at the time of award" of the amount referred to in subparagraph (iii) shall be computed by discounting such amount at the discount rate of the Federal Reserve Bank of San Francisco at the dime of award plus one percent(1%).
12.2.1 REMEDIES CUMULATIVE. The exercise of any remedy provided by law or the provisions of this Lease shall not exclude any other remedies unless they are expressly excluded by this Lease. Any notice of default given or required to be given by Lessor to Lessee hereunder may be combined with, serve as or include any statutory notice required in connection with the exercise by Lessor of any of its remedies. Lessee hereby waives any right of redemption or relief from forfeiture following termination of, or exercise of any remedy by Lessor with respect to, this Lease.
12.2.2 RECOVERY AGAINST LESSOR. Lessee shall look solely to Lessor's interest in the Office Building Project for the recovery of any judgment against Lessor. Lessor, or if Lessor is a partnership, its partners whether general or limited, or if Lessor is a corporation, its directors, officers and shareholders, shall never be personally liable for any such judgment.
12.3 DEFAULT BY LESSOR. Lessor shall not be in default unless Lessor fails to perform obligations required of Lessor within a reasonable time, bit in no event later than thirty (30) days after written notice by Lessee to Lessor and to the holder of any first mortgage or deed of trust covering the Premises whose name and address shall have the theretofore been furnished to Lessee in writing, specifying wherein Lessor has failed to perform such obligation provided, however, that if the nature of Lessor's obligation is such that more than thirty (30) days are required for performance then Lessor shall not be in default if Lessor commences performance within such 30 day period and thereafter diligently pursues the same to completion.
12.4 LATE CHARGES. Lessee hereby acknowledges that late payment by Lessee to Lessor of Base Rent, or other sums due hereunder will cause Lessor to incur costs not contemplated by this Lease, the exact amount of which will be extremely difficult to ascertain. Such costs include, but are not limited to, processing and accounting charges, and late charges that may be imposed on Lessor by the terms of any mortgage or trust deed covering the Office Building Project. Accordingly, if any installment of Base Rent, Operating Expense Increase, or any other sum due from Lessee shall not be received by Lessor or Lessor's designee within five (5) days after such amount shall be due, then, without any requirement for notice to Lessee, Lessee shall pay to Lessor a late charge equal to 6% of such overdue amount. The parties hereby agree that such later charge represents a fair and reasonable estimate of the costs Lessor will incur by reason of late payment by Lessee and shall be paid as Additional Rent. Acceptance of such late charge by Lessor shall in no event constitute a waiver of Lessee's default with respect to such overdue amount, nor prevent Lessor from exercising any of the other rights and remedies granted hereunder.
12.5 RETURNED CHECKS. If any check for payment by Lessee to Lessor of Base Rent or other sums due hereunder shall be returned to Lessor by Lessee's bank for any reason, all payments made by Lessee, for the period of six (6) months following, shall be made with certified funds or upon demonstration of good credit at Lessor's sole discretion. A returned check charge in the amount of $20.00 in addition to any sums due hereunder including late charges.
13. CONDEMNATION. If the Premises or any portion thereof or the Office Building Project are taken under the power of eminent domain, or sold under the threat of the exercise of said power (all of which are herein called "condemnation"), this Lease shall terminate as to the part so taken as of the date the condemning authority takes title or possession, whichever first occurs; provided that if so much of the Premises or the Office Building Project are taken by such condemnation as would substantially and adversely affect the operation or profitability of Lessee's business conducted from the Premises, Lessee shall have the option, to be exercised only in writing within thirty (30) days after Lessor shall have given Lessee written notice of such taking (or in the absence of such notice, within thirty (30) days after the condemning authority shall have taken possession), to terminate this Lease as of the date the condemning authority takes such possession. If Lessee does not terminate this Lease in accordance with the foregoing, this Lease shall remain in full force and effect as to the portion of the Premises remaining, except that the rent and Lessee's Share of Operating Expense Increase shall be reduced in the proportion that the floor area of the Premises taken bears to the total floor area of the Premises. Common Areas taken shall be excluded from the Common Areas usable by Lessee and no reduction of rent shall occur with respect thereto or by reason thereof. Lessor shall have the option in its sole discretion to terminate this Lease as of the taking of possession by the condemning authority by giving written notice to Lessee of such election within thirty (30) days after receipt of notice of a taking by condemnation of any part of the Premises or the Office Building Project. Any award for the taking of all or any part of the Premises or the Office Building Project under the power of eminent domain or any payment made under threat of the exercise of such power shall be the property of Lessor, whether such award shall be made as compensation for diminution in value of the leasehold or for the taking of the fee, or as severance damages; provided, however, that Lessee shall be entitled to any separate award for loss of or damage to Lessee's trade fixtures, removable personal property and unamortized tenant improvements that have been paid for by Lessee. For that purpose the cost of such improvements shall be amortized over the original term of this Lease excluding any options. In the event that this Lease is not terminated by reason of such condemnation, Lessor shall to the extent of severance damages received by Lessor in connection with such condemnation, repair any damage to the Premises caused by such condemnation except to the extent that Lessee has been reimbursed therefor by the condemning authority. Lessee shall pay any amount in excess of such severance damages required to complete such repair.
14. ESTOPPEL CERTIFICATE.
14.1 Each party (as "responding party") shall at any time upon not less than ten (10) days' prior written notice from the other party ("requesting party") execute, acknowledge and deliver to the requesting party a statement in writing (i) certifying that this Lease is unmodified and in full force and effect (or, if modified, stating the nature of such modification and certifying that this Lease, as so modified, is in full force and effect) and the date to which the rent and other charges are paid in advance, if any, and (ii) acknowledging that there are not, to the responding party's knowledge, any uncured defaults on the part of the requesting party, or specifying such defaults if any are claimed. Any such statement may be conclusively relied upon by any prospective purchaser or encumbrancer of the Office Building Project or of the business of Lessee.
14.2 At the requesting party's option, the failure to deliver such statement within such time shall be a material default of this Lease by the party who is to respond, without any further notice to such party, or it shall be conclusive upon such part that (i) this Lease is in full force and effect, without modification except as may be represented by the requesting party, (ii) there are no uncured defaults in the requesting party's performance, and (iii) if Lessor is the requesting party, not more than one month's rent has been paid in advance.
15. LESSOR'S LIABILITY. The term "Lessor" as used herein shall mean only the owner or owners, at the time in question, of the fee title or a lessee's interest in a ground lease of the Office Building Project, in the event of any transfer of such title or interest, Lessor herein named (and in case of any subsequent transfers then the grantor) shall be relieved from and after the date of such transfer of all liability as respects Lessor's obligations thereafter to be performed, provided that any funds in the hands of Lessor or the then grantor at the time of such transfer, in which Lessee has an interest, shall be delivered to the grantee. The obligations contained in this Lease to be performed by Lessor shall, subject as aforesaid, be binding on Lessor's successors and assigns, only during their respective periods of ownership.
16. SEVERABILITY. The invalidity of any provision of this Lease as determined by a court of competent jurisdiction shall in no way affect the validity of any other provision hereof.
17. INTEREST ON PAST-DUE OBLIGATIONS. Except as expressly herein provided, any amount due to Lessor not paid when due shall bear interest at the maximum rate then allowable by law or judgments from the date due. Payment of such interest shall not excuse or cure any default by Lessee under this Lease; provided, however, that interest shall not be payable on late charges incurred by Lessee nor on any amounts upon which late charges are paid by Lessee.
Initials: /s/ WER
---------------
/s/ [ILLEGIBLE]
---------------
|
PAGE 8 OF 13 PAGES
18. TIME OF ESSENCE. Time is of the essence with respect to the obligations to be performed under this Lease.
19. ADDITIONAL RENT. All monetary obligations of Lessee to Lessor under the terms of this Lease, including, but not limited to Late Charges, Lessee's Share of Operating Expense Increase and any other expenses payable by Lessee hereunder shall be deemed to be rent.
20. INCORPORATION OF PRIOR AGREEMENTS; AMENDMENTS. This Lease contains all agreements of the parties with respect to any matter mentioned herein. No prior or contemporaneous agreement or understanding pertaining to any such matter shall be effective. This Lease may be modified in writing only signed by the parties in interest at the time of the modification. Except as otherwise stated in this Lease, Lessee hereby acknowledges that Lessor or any employee or agents of any said persons has made any oral or written warranties or representations to Lessee relative to the condition or use by Lessee of the Premises or the Office Building Project and Lessee acknowledges that Lessee assumes all responsibility regarding the Occupational Safety Health Act, the legal use and adaptability of the Premises and the compliance thereof with all applicable laws and regulations in effect during the term of this Lease.
21. NOTICES. Any notice required or permitted to be given hereunder shall be in writing and may be given by personal delivery or by certified or registered mail, and shall be deemed sufficiently given if delivered or addressed to Lessee or to Lessor at the address noted below or adjacent to the signature of the respective parties, as the case may be. Mailed notices shall be deemed given upon actual receipt at the address required, or forty-eight hours following deposit in the mail, postage prepaid, whichever first occurs. Either party may by notice to the other specify a different address for notice purposes except that upon Lessee's taking possession of the Premises, the Premises shall constitute Lessee's address for notice purposes. A copy of all notices required or permitted to be given to Lessor hereunder shall be concurrently transmitted to such party or parties at such addresses as Lessor may from time to time hereafter designate by notice to Lessee. Lessee acknowledges that service of any notice on one Lessee constitutes service on all Parties herein called Lessee.
22. WAIVERS. No waiver by Lessor by Lessor of any provision hereof shall be deemed a waiver of any other provision hereof or of any subsequent breach by Lessee of the same or any other provision. Lessor's consent to, or approval of, any act shall not be deemed to render unnecessary the obtaining of Lessor's consent to or approval of any subsequent act by Lessee. The acceptance of rent hereunder by Lessor shall not be waiver of any preceding breach by Lessee of any provision hereof.
23. HOLDING OVER. If Lessee, with Lessor's consent, remains in possession of the Premises or any part thereof after the expiration of the term hereof, such occupancy shall be a tenancy from month to month upon all the provisions of this Lease pertaining to the obligations of Lessee, except that the rent payable shall be one hundred twenty percent (120%) of the rent payable immediately preceding the termination date of this Lease, and all Options, if any, granted under the terms of this Lease shall be deemed terminated and be of no further effect during said month to month tenancy.
24. CUMULATIVE REMEDIES. No remedy or election hereunder shall be deemed exclusive but shall, wherever possible, be cumulative with all other remedies at law or in equity.
25. COVENANTS AND CONDITIONS. Each provision of this Lease performable by Lessee shall be deemed both a covenant and a condition.
26. BINDING EFFECT; CHOICE OF LAW. Subject to any provisions hereof restricting assignment or subletting by Lessee and subject to the provisions of paragraph 11, this Lease shall bind the parties, their personal representatives, successors and assigns. This Lease shall be governed by the laws of the State where the Office Building Project is located and any litigation concerning this Lease between the parties hereto shall be initiated in the county in which the Office Building Project is located.
27. SUBORDINATION.
27.1 This Lease, and any Option or right of first refusal granted hereby, at Lessor's option, shall be subordinate to any ground lease, mortgage deed of trust, or any other hypothecation or security now or hereafter placed upon the Office Building Project and to any and all advances made on the security thereof and to all renewals, modifications, consolidations, replacements and extensions thereof. Notwithstanding such subordination, Lessee's right to quiet possession of the Premises shall not be disturbed if Lessee is not in default and so long as Lessee shall pay the rent and observe and perform all of the provisions of this Lease, unless this Lease is otherwise terminated pursuant to its terms. If any mortgagee, trustee or ground lessor shall elect to have this Lease and any Options granted hereby prior to the lien of its mortgage, deed or trust or ground lease, and shall give written notice thereof to Lessee, this Lease and such Options shall be deemed prior to such mortgage, deed of trust or ground lease, whether this Lease or such Options are dated prior or subsequent to the date of said mortgage, deed of trust or ground lease or the date of recording thereof.
27.2 Lessee agrees to execute any documents required to effectuate an attornment, a subordination, or to make this Lease or any Option granted herein prior to the lien of any mortgage, deed of trust or ground lease, as the case may be. Lessee's failure to execute such documents within ten (10) days after written demand shall constitute a material default by Lessee hereunder without further notice to Lessee or, at Lessor's option lessor shall execute such documents on behalf of Lessee as Lessee's attorney-in-fact. Lessee does hereby make, constitute and irrevocably appoint Lessor as Lessee's attorney in fact and in Lessee's name, place and stead, to execute such documents in accordance with this paragraph 27.2.
28. ATTORNEY'S FEES.
28.1 If either party bring and action to enforce the terms hereof or declare rights hereunder, the prevailing party in any such action, trial or appeal thereon, shall be entitled to his reasonable attorneys' fees to be paid by the losing party as fixed by the court in the same or a separate suit, and whether or not such action is pursued to decision or judgment.
28.2 The attorneys' fee award shall not be computed in accordance with any court fee schedule, but shall be such as to fully reimburse all attorney's fees reasonably incurred in good faith.
28.3 Lessor shall be entitled to reasonable attorneys' fees and all other costs and expenses incurred in the preparation and service of notice of default and consultations in connection therewith, whether or not a legal transaction is subsequently commenced in connection with such default.
29. LESSOR'S ACCESS.
29.1 LESSOR. Lessor's agents, employees, contractors, and designated representatives shall have the right to enter the Premises at reasonable times for the purpose of inspecting the same, performing and services required of Lessor, showing the same to prospective purchasers, lenders or lessees, taking such safety measures, erecting such scaffolding or other necessary structures, making such alterations, repairs, improvements or additions to the Premises or to the Office Building Project as Lessor may reasonably deem necessary or desirable and the erecting, using and maintaining of utilities, services, pipes and conduits through the Premises and/or other premises as long as there is no material adverse effect to Lessee's use of the Premises. Lessor may at any time place on or about the Premises or the Building any ordinary "For Sale" signs and Lessor may at any time during the last 120 days of the term hereof place on or about the Premises any ordinary "For Lease" signs.
29.2 All activities of Lessor pursuant to this paragraph shall be without abatement of rent, nor shall Lessor have any liability to Lessee for the same.
29.3 Lessor shall have the right to retain keys to the Premises and to unlock all doors in or upon the Premises other than to files, vaults and safes, and in the case of emergency to enter the Premises by any reasonably appropriate means, and any such entry shall not be deemed a forcible or unlawful entry or detainer of the Premises or an eviction. Lessee waives any charges for damages or injuries or interference with Lessee's property or business in connection therewith.
30. AUCTIONS. Lessee shall not conduct, nor permit to be conducted, either voluntarily or involuntarily, any auction upon the Premises or the Common Areas without first having obtained Lessor's prior written consent. Notwithstanding anything to the contrary in this Lease, Lessor shall not be obligated to exercise any standard of reasonableness in determining whether to grant such consent. The holding of any auction on the Premises or Common Areas in violation of this paragraph shall constitute a material default of this Lease.
Initials: /s/ WER
---------------
/s/ [ILLEGIBLE]
---------------
PAGE 9 OF 13 PAGES
|
31. SIGNS. Lessee shall not place any sign upon the Premises or the Office Building Project without Lessor's prior written consent. Under no circumstances shall Lessee place a sign on any roof of the Office Building Project.
32. MERGER. The voluntary or other surrender of this Lease by Lessee, or a mutual cancellation thereof, or a termination by Lessor, shall not work a merger, and shall, at the option of Lessor, terminate all or any existing subtenancies or may, at the option of Lessor, operate as an assignment to Lessor of any or all of such subtenancies.
33. CONSENTS. Except for paragraphs 30 (auctions) and 31 (signs) hereof, wherever in this Lease the consent of one party is required to an act of the other party such consent shall not be unreasonably withheld or delayed.
34. GUARANTOR. In the event that there is a guarantor of this Lease, said guarantor shall have the same obligations as Lessee under this Lease.
35. QUIET POSSESSION. Upon Lessee paying the rent for the Premises and observing and performing all of the covenants, conditions and provisions on Lessee's part to be observed and performed hereunder, Lessee shall have quiet possession of the Premises for the entire term hereof subject to all of the provisions of this Lease. The individuals executing this Lease on behalf of Lessor represent and warrant to Lessee that they are fully authorized and legally capable of executing this Lease on behalf of Lessor and that such execution is binding upon all parties holding an ownership interest in the Office Building Project.
36. OPTIONS.
36.1 DEFINITION. As used in this paragraph the word "Option" has the following meaning: (1) the right or option to extend the term of this Lease or to renew this Lease or to extend or renew any lease that Lessee has on other property of Lessor; (2) the option of first refusal to the lease the Premises or the right of first offer to lease the Premises or the right of first refusal to lease other space within the Office Building Project or other property of Lessor or the right of first offer to lease other space within the Office Building Project or other property of Lessor; (3) the right or option to purchase the Premises or the Office Building Project, or the right of first refusal to purchase the Premises or the Office Building Project or the right of first offer to purchase the Premises or the Office Building Project, or the right or option to purchase other property of Lessor, or the right of first refusal to purchase other property of Lessor or the right of first offer to purchase other property of Lessor.
36.2 Leases shall have no options whatsoever unless expressly granted in an Exhibit to this Lease initiated by both parties.
36.3 Options Personal. Each Option granted to Lessee in this Lease is personal to the original Lessee and may be exercised only by the original Lessee while occupying the Premises who does so without the intent of thereafter assigning this Lease or subletting the Premises or any portion thereof, and may not be exercised or be assigned, voluntarily or involuntarily, by or to any person or entity other than Lessee. The Options, if any, herein granted to Lessee are not assignable separate and apart from this Lease, nor may any Option be separated from this Lease in any manner, either by reservation or otherwise.
36.4 MULTIPLE OPTIONS. In the event that Lessee has any multiple options to extend or renew this Lease a later option cannot be exercised unless the prior option to extend or renew this Lease has been so exercised.
36.5 EFFECT OF DEFAULT ON OPTIONS.
(a) Lessee shall have no right to exercise an Option, notwithstanding any provision in the grant of Option to the contrary, (i) during the time commencing from the date Lessor gives to Lessee a notice of default pursuant to paragraph 12.1 (c) or 12.1 (d) and continuing until the noncompliance alleged in said notice of default is cured, or (ii) during the period of time commencing on the day after a monetary obligation to Lessor is due from Lessee and unpaid (without any necessity for notice thereof to Lessee) and continuing until the obligation is paid, or (iii) in the event that Lessor has given to Lessee three or more notices of default under paragraph 12.1 (c), or paragraph 12.1(d), whether or not the defaults are cured during the 12 month period of time immediately prior to the time that Lessee attempts to exercise the subject Option, (iv) if Lessee has committed any non-curable breach, including without limitation those described in paragraph 12.1(b), or is otherwise in default of any of the terms, covenants or conditions of this Lease.
(b) The period of time within which an Option may be exercised shall not be extended or enlarged by reason of Lessee's inability to exercise an Option because of the provisions of paragraph 36.5(a).
(c) All rights of Lessee under the provisions of an Option
shall terminate and be of no further force or effect, notwithstanding Lessee's
due and timely exercise of the Option, if, after such exercise and during the
term of this Lease, (i) Lessee fails to pay to Lessor a monetary obligation of
Lessee for a period of thirty (30) days after such obligation becomes due
(without any necessity of Lessor to give notice thereof to Lessee), or (ii)
Lessee fails to commence to cure a default specified in paragraph 12.1 (d)
within thirty (3) days after the date that Lessor gives notice to Lessee of such
default and/or Lessee fails thereafter to diligently prosecute said cure to
completion or (iii) Lessor gives to Lessee three or more notices of default
under paragraph 12.1(c), or paragraph (d) whether or not the defaults are cured,
or (iv) if Lessee has committed any non-curable breach including without
limitation those described in paragraph 12.1 (b), or is otherwise in default of
any of the terms, covenants and conditions of this Lease.
37. SECURITY MEASURES-LESSOR'S RESERVATIONS.
37.1 Lessee hereby acknowledges that Lessor shall have no obligation whatsoever to provide guard service or other security measures for the benefit of the Premises or the Office Building Project. Lessee assumes all responsibility for the protection of Lessee, its agents, and invitees and the property of Lessee and of Lessee's agents and invitees from acts of third parties. Nothing herein contained shall prevent Lessor, at Lessor's sole option, from providing security protection for the Office Building Project or any part thereof, in which event the cost thereof shall be included within the definition of Operating Expenses, as set forth in paragraph 4.2(b).
37.2 Lessor shall have the following rights:
(a) To change the name, address or title of the Office Building Project or building in which the Premises are located upon not less than 90 days prior written notice;
(b) To, at Lessee's expense, provide and install Building standard graphics on the door of the Premises and such portions of the Common Areas as Lessor shall reasonably deem appropriate;
(c) To permit an lessee the exclusive right to conduct any business as long as such exclusive does not conflict with any rights expressly given herein;
(d) To place such signs, notices or displays as Lessor reasonably deems necessary or advisable upon the roof, exterior of the buildings or the Office Building Project or on post signs in the Common Areas;
37.3 Lessee shall not:
(a) Use a representation (photographic or otherwise) of the Building or the Office Building Project or their name(s) in connection with Lessee's business;
(b) Suffer or permit anyone, except in emergency, to go upon the roof of the building.
38. EASEMENTS
38.1 Lessor reserves to itself the right, from time to time, to grant such easements, rights and dedications that Lessor deems necessary or desirable and to cause the recordation of Parcel Maps and restrictions, so long as such easements, rights, dedications, Maps and restrictions do not unreasonably interfere with the use of the Premises by Lessee. Lessee shall sign any of the aforementioned documents upon request of Lessor and failure to do so shall constitute a material default of this Lease by Lessee without the need for further notice to Lessee.
38.2 The obstruction of Lessee's view, air, or light by any structure erected in the vicinity of the Building, whether by Lessor or third parties, shall in no way affect this Lease or impose any liability upon Lessor.
39. PERFORMANCE UNDER PROTEST. If at any time a dispute shall arise as to any amount or sum of money to be paid by one party to the other under the provisions hereof, the party against whom the obligation to pay the money is asserted shall have the right to make payment "under protest" and such payment shall not be regarded as a voluntary payment, and there shall survive the right on the part of said party to institute suit
Initials: /s/ WER
---------------
/s/ [ILLEGIBLE]
---------------
PAGE 10 OF 13 PAGES
|
for recovery of such sum. If it shall be adjudged that there was no legal obligation on the part of said party to pay such sum or any part thereof, said party shall be entitled to recover such sum or so much thereof as it was not legally required to pay under the provisions of this Lease.
40. AUTHORITY. If Lessee is a corporation, trust, or general or limited partnership, Lessee, and each individual executing this Lease on behalf of such entity represent and warrant that such individual is duly authorized to execute and deliver this Lease on behalf of said entity. If Lessee is a corporation, trust or partnership, Lessee shall, within thirty (30) days after execution of this Lease, deliver to Lessor evidence of such authority satisfactory to Lessor.
41. CONFLICT. Any conflict between the printed provisions, Exhibits or Addenda of this Lease and the typewritten or handwritten provisions, if any, shall be controlled by the typewritten or handwritten provisions.
42. NO OFFER. Preparation of this Lease by Lessor or Lessor's agent and submission of same to Lessee shall not be deemed an offer to Lessee to lease. This Lease shall become binding upon Lessor and Lessee only when fully executed by both parties.
43. LENDER MODIFICATIONS. Lessee agrees to make such reasonable modifications to this Lease as may be reasonably required by an institutional lender in connection with the obtaining of normal financing or refinancing of the Office Building Project.
44. MULTIPLE PARTIES. If more than one person or entity is named as either Lessor or Lessee herein, except as otherwise expressly provided herein the obligations of the Lessor or Lessee herein shall be the joint and several responsibility of all persons or entities named herein as such Lessor or Lessee, respectively.
45. ACCEPTANCE: Upon occupancy of the Premises by Lessee, Lessee formally accepts the Premises "as is". Unless and to the extent specified by both parties in writing, Lessor has no obligation to perform any work or improvement to the Premises.
46. ATTACHMENTS. Attached hereto are the following documents that constitute a part of this Lease:
EXHIBIT A (FLOOR PLAN OF OFFICE BUILDING PROJECT)
EXHIBIT B (RULES AND REGULATIONS FOR STANDARD OFFICE LEASE)
LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND PROVISION CONTAINED HEREIN AND, BY EXECUTION OF THIS LEASE, SHOW THEIR INFORMED AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE TIME THIS LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE REASONABLE AND EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE PREMISES.
THIS LEASE HAS BEEN PREPARED FOR SUBMISSION TO YOUR ATTORNEY FOR APPROVAL. NO REPRESENTATION OR RECOMMENDATION IS MADE BY THE LESSOR OR ITS AGENTS OR EMPLOYEES AS TO THE LEGAL SUFFICIENCY, LEGAL EFFECT, OR TAX CONSEQUENCES OF THIS LEASE OR THE TRANSACTION RELATING THERETO; THE PARTIES SHALL RELY SOLELY UPON THE ADVICE OF THEIR OWN LEGAL COUNSEL AS TO THE LEGAL AND TAX CONSEQUENCES OF THIS LEASE
LESSOR NEARON ENTERPRISES, LLC LESSEE CIPHERGEN BIOSYSTEMS, INC.
By Nearon Enterprises, a CA Corp. By William E. Rich
------------------------------- ------------------------------
Its Designated Manager Its President
--------------------- ----------------------
By /s/ David S. Christensen By
-------------------------------- --------------------------------
DAVID S. CHRISTENSEN
Its FVP and COO Its
--------------------- -----------------------
Executed at Danville, California Executed at
---------------------- ------------------------
on (date) 4-18-96 on (date) April 16,1996
-------------------------- --------------------------
Address 30 Oak Court Address 470 San Antonio Rd.
--------------------------- --------------------------
Danville, Ca 94526 Palo Alto, Ca 94306
--------------------------- --------------------------
Initials: /s/ WER
---------------
/s/ [ILLEGIBLE]
---------------
|
STANDARD OFFICE LEASE
FLOOR PLAN
[GRAPHIC]
470 SAN ANTONIO
Initials: /s/ WER
---------------
/s/ [ILLEGIBLE]
---------------
|
EXHIBIT B
GENERAL RULES
1. Lessee shall not suffer or permit the obstruction of any Common Areas, including driveways, walkways and stairways.
2. Lessor reserves the right to refuse access to any persons Lessor in good faith judges to be a threat to the safety, reputation, or property of the Office Building Project and its occupants.
3. Lessee shall not make or permit any noise or odors that annoy or interfere with other lessees or persons having business within the Office Building Project.
4. Lessee shall not keep animals or birds within the Office Building Project, and shall not bring bicycles, motorcycles or other vehicles into areas not designated as authorized for same.
5. Lessee shall not make, suffer or permit litter except in appropriate receptacles for that purpose.
6. Lessee shall not alter any lock or install new or additional locks or bolts.
7. Lessee shall be responsible for the inappropriate use of any toilet rooms, plumbing or other utilities. No foreign substances of any kind are to be inserted therein.
8. Lessee shall not deface the walls, partitions or other surfaces of the premises or Office Building Project.
9. Lessee shall not suffer or permit anything in or around the Premises or Building that causes excessive vibration or floor loading in any part of the Office Building Project.
10. Furniture, significant freight and equipment shall be moved into or out of the building only with the Lessor's knowledge and consent and subject to such reasonable limitations, techniques and timing, as may be designated by Lessor. Lessee shall be responsible for any damage to the Office Building Project arising from any such activity.
11. Lessee shall not employ any service or contractor for services or work to be performed in the Building, except as approved by Lessor.
12. Lessor reserves the right to close and lock the Building on Saturdays, Sundays and legal holidays, and on other days between the hours of 5:00 p.m. and 8:00 a.m. It is Lessee's responsibility to keep the Building locked at all times other than ordinary business hours. If Lessee uses the Premises during such periods, Lessee shall be responsible for securely locking any doors it may have opened for entry or exit.
13. Lessee shall be provided with two sets of keys upon occupancy. Lessee shall return all keys at the termination of its tenancy and shall be responsible for the cost of replacing any lost keys.
14. No window coverings, shades or awnings shall be installed or used by Lessee.
15. No Lessee, employee or invitee shall go upon the roof of the Building.
16. Lessee shall not suffer or permit smoking or carrying of lighted cigars or cigarettes anywhere inside the Building.
17. Lessee shall not use any method of heating or air conditioning other than as provided by Lessor.
18. Lessee shall not install, maintain or operate any vending machines upon the Premises without Lessor's written consent.
19. The Premises shall not be used for lodging or manufacturing, cooking or food preparation.
20. Lessee shall comply with all safety, fire protection and evacuation regulations established by Lessor any applicable governmental agency.
21. Lessor reserves the right to waive any one of these rules or regulations, and/or as to any particular Lessee, and any such waiver shall not constitute a waiver of any other rule or regulation or any subsequent application thereof to such Lessee.
22. Lessee assumes all risks from theft of vandalism and agrees to keep its Premises locked as may be required.
23. Lessor reserves the right to make such other reasonable rules and regulations as it may from time to time deem necessary for the appropriate operation and safety of the Office Building Project and its occupants. Lessee agrees to abide by and these and such rules and regulations.
PARKING RULES
1. Parking Areas shall be used only for parking by vehicles no longer than full size, passenger automobiles herein called "Permitted Size Vehicles". Vehicles other than Permitted Size Vehicles are herein referred to as "Oversized Vehicles".
2. Lessee shall not permit or allow any vehicles that belong to or are controlled by Lessee or Lessee's employees, suppliers, shippers, customers, or invitees to be loaded, unloaded, or parked in areas other than those designated by Lessor for such activities.
3. Lessor reserves the right to relocate all or a part of parking spaces from floor to floor, within one floor, and/or to reasonably adjacent off site location(s), and to reasonably allocate them between compact and standard size spaces, as long as the same complies with applicable laws, ordinances and regulations.
4. Users of the parking area will obey all posted signs and park only in the areas designated for vehicle parking.
5. Unless otherwise instructed, every person using the parking area is required to park and lock his own vehicle. Lessor will not be responsible for any damage to vehicles, injury to persons or loss of property, all of which risks are assumed by the party using the parking area.
6. The maintenance, washing, waxing or cleaning of vehicles in the parking structure of Common Area is prohibited.
7. Lessee shall be responsible for seeing that all of its employees, agents and invitees comply with the applicable parking rules, regulations, laws and agreements.
8. Lessor reserves the right to modify these rules and/or adopt such other reasonable and nondiscriminatory rules and regulations as it may deem necessary for the proper operation of the parking area.
9. Such parking used herein provided is intended merely as a license only and no bailment is intended or shall be created hereby.
Initials: /s/ WER
---------------
/s/ [ILLEGIBLE]
---------------
PAGE 13 OF 13 PAGES
|
EXTENSION AND AMENDMENT OF LEASE
THIS AMENDMENT OF LEASE is entered into as of January 6, 1999, by and between
NEARON ENTERPRISES, LLC, Lessor, and CIPHERGEN BIOSYSTEMS, INC., Lessee.
WITNESSETH
WHEREAS, under a Lease dated MARCH 15, 1995 [sic] and as previously amended on MAY 13, 1996, Lessor is leasing and Lessee is hiring from Lessor that certain Premises situated at 470 SAN ANTONIO ROAD, SUITE B, PALO ALTO, CALIFORNIA, together with non-exclusive use of parking areas and public facilities appurtenant to said Premises;
WHEREAS, Lessor and Lessee wish to amend, modify, and change the terms, covenants, and conditions of said Lease;
NOW, THEREFORE, the following portions of the aforementioned Lease shall be amended as follows:
1.6 TERM: The EXPIRATION DATE (Also see paragraph 3.) shall be
extended to DECEMBER 31, 1999. Provided Lessee is not in
default of any of the terms of this Lease and by giving
written notice on or before August 31, 1999, Lessee has the
option to renew for Six (6) Months. The monthly rental for
Suite B shall be $2.27 per square foot gross. [ILLEGIBLE]
1.8 BASE RENT: $3,655.00 per month BASE RENT, payable on the first day of
each month Commencing April 1, 1999.
|
All other terms and conditions of said Lease shall remain unchanged.
LESSOR: LESSEE:
NEARON ENTERPRISES, LLC CIPHERGEN BIOSYSTEMS, INC.
BY: Nearon Enterprises, BY: /s/ William E. Rich
a California Corporation --------------------------
William E. Rich
Its: Designated Manager Its: President/CEO
------------------ ---------------------
BY: /s/ Randolph N. Saar Date: 1/13/99
-------------------------- ---------------------
Randolph N. Saar
Operations Manager
Date: 1/14/99
-------------------
|
EXTENSION AND AMENDMENT OF LEASE
THIS AMENDMENT OF LEASE is entered into as of February 24, 1999 by and
between NEARON ENTERPRISES, LLC Lessor, and CIPHERGEN BIOSYSTEMS, INC.,
Lessee.
WITNESSETH
WHEREAS, under a Lease dated MARCH 15, 1996, AND AMENDED ON MAY 13, 1996 AND JANUARY 6, 1999, Lessor is leasing and Lessee is hiring from Lessor that certain Premises situated at 470 SAN ANTONIO ROAD, SUITE B, PALO ALTO, CALIFORNIA, together with non-exclusive use of parking areas and public facilities appurtenant to said Premises;
WHEREAS, Lessor and Lessee wish to amend, modify, and change the terms, covenants, and conditions of said Lease;
NOW, THEREFORE, the following portions of the aforementioned Lease shall be amended effective MARCH 1, 1999, as follows:
1.3 PREMISES:
FROM: SUITE NUMBER(S) B CONSISTING OF APPROXIMATELY 1,700 SQUARE FEET
TO: SUITE NUMBER B CONSISTING OF APPROXIMATELY 1,700 SQUARE FEET
SUITE NUMBER 103 CONSISTING OF APPROXIMATELY 200 SQUARE FEET
SUITE NUMBER 201 CONSISTING OF APPROXIMATELY 2,307 SQUARE FEET
SUITE NUMBER 203 CONSISTING OF APPROXIMATELY 1,100 SQUARE FEET
---------------------------------------------
TOTAL SQUARE FOOTAGE APPROXIMATELY 5,307 SQUARE FEET
|
1.6 TERM
FROM: THE EXPIRATION DATE (ALSO SEE PARAGRAPH 3) SHALL BE EXTENDED TO
DECEMBER 31, 1999. PROVIDED LESSEE IS NOT IN DEFAULT OF ANY OF THE
TERMS OF THIS LEASE AND BY GIVING WRITTEN NOTICE ON OR BEFORE
AUGUST 31, 1999, LESSEE HAS THE OPTION TO RENEW FOR SIX (6) MONTHS.
THE MONTHLY RENTAL FOR SUITE B SHALL BE $2.27 PER SQUARE FOOT, GROSS.
TO: THE EXPIRATION DATE (ALSO SEE PARAGRAPH 3) SHALL BE EXTENDED TO
DECEMBER 31, 1999. PROVIDED LESSEE IS NOT IN DEFAULT OF ANY OF THE
TERMS OF THIS LEASE AND BY GIVING WRITTEN NOTICE ON OR BEFORE
AUGUST 31, 1999, LESSEE HAS THE OPTION TO RENEW FOR SIX (6) MONTHS.
THE MONTHLY RENTAL RATE FOR SUITES B, 103, 201 AND 203 SHALL BE
$12,047.00, FULL SERVICE.
|
1.7 BASE RENT
FROM: $2,176.00 PER MONTH, PAYABLE ON THE FIRST DAY OF EACH MONTH.
TO: $10,292.00 PER MONTH, PAYABLE ON THE FIRST DAY OF EACH MONTH.
1.8 BASE RENT INCREASE
FROM: N/A
TO: $11,771.00 EFFECTIVE APRIL 1, 1999.
All other terms and conditions of said Lease shall remain unchanged.
LESSOR: LESSEE:
NEARON ENTERPRISES, LLC CIPHERGEN BIOSYSTEMS, INC.
By: Nearon Enterprises, By: /s/ WILLIAM E. RICH
a California Corporation ----------------------------
William E. Rich
Its: DESIGNATED MANAGER Its: PRESIDENT/CEO
By: /s/ RANDOLPH N. SAAR Date: 3-3-99
------------------------ --------------------------
Randolph N. Saar
Operations Manager
Date: 3/3/99
|
FOURTH EXTENSION AND AMENDMENT OF LEASE
THIS AMENDMENT OF LEASE is entered into as of January 6, 1999, by and between
NEARON ENTERPRISES, LLC, Lessor, and CIPHERGEN BIOSYSTEMS, INC., Lessee.
WITNESSETH
WHEREAS, under a Lease dated MARCH 20, 1996 and as previously amended on MAY 19, 1997 AND OCTOBER 31, 1997 AND NOVEMBER 7, 1997, Lessor is leasing and Lessee is hiring from Lessor that certain Premises situated at 490 SAN ANTONIO ROAD, SUITES 201 AND 202, PALO ALTO, CALIFORNIA, together with non-exclusive use of parking areas and public facilities appurtenant to said Premises;
WHEREAS, Lessor and Lessee wish to amend, modify, and change the terms, covenants, and conditions of said Lease;
NOW, THEREFORE, the following portions of the aforementioned Lease shall be amended as follows:
1.6 TERM: The EXPIRATION DATE (Also see paragraph 3.) shall be
extended to DECEMBER 31, 1999. Provided Lessee is not
in default of any of the terms of this Lease and by
giving written notice on or before August 31, 1999,
Lessee has the option to renew for Six (6) Months.
The monthly rental rate for Suites 201 and 202 shall
be $2.17 per square foot, gross.
1.8 BASE RENT: $22,960.00 per month BASE RENT, payable on the first
day of each month Commencing April 1, 1999.
|
All other terms and conditions of said Lease shall remain unchanged.
LESSOR: LESSEE:
NEARON ENTERPRISES, LLC CIPHERGEN BIOSYSTEMS, INC.
By: Nearon Enterprises, By: /s/ WILLIAM E. RICH
a California Corporation ---------------------
William E. Rich
Its: DESIGNATED MANAGER Its: PRESIDENT/CEO
By: /s/ RANDOLPH N. SAAR Date: 1-13-99
------------------------- -------------
Randolph N. Saar
Operations Manager
Date: 1/14/99
--------------
|
Exhibit 10.11
STANDARD INDUSTRIAL/COMMERCIAL MULTI-TENANT LEASE--GROSS
1. BASIC LEASE PROVISIONS ("BASIC LEASE PROVISIONS"):
1.1 DATE AND EFFECTIVE DATE: This Lease is dated March 20, 1996, for reference purposes only. The Effective Date shall XXX date inserted below by Lessor and shall be: (a) the date this Lease is executed by Lessor; or in the event this Lease is served upon you as Lessee of the Premises, (b) the date that the terms of this Lease become effective due to service upon Lessee by Lessor. PRIOR TO THE EFFECTIVE DATE, THE TERMS OF THIS LEASE SHALL NOT BE BINDING ON LESSOR AND UNTIL SIGNED BY LESSOR THIS DOCUMENT SHALL BE CONSTRUED ONLY AS AN OFFER BY LESSEE TO LEASE THE PREMISES. UNTIL SIGNED BY LESSOR, LESSOR SHALL HAVE NO OBLIGATION OF ANY KIND TO ANY OF THE PARTIES INVOLVED IN MAKING THE OFFER TO LEASE THE PREMISES.
1.2 PARTIES: This Lease is made by and between Neuron Enterprises, LLC (herein called "Lessor") and Ciphergen Biosystems, Inc., (herein called "Lessee").
1.3 PREMISES: Suite Number(s) 201, consisting of approximately 8,456 square feet, more or less, as defined in paragraph and as shown on Exhibit "A" hereto (the "Premises"). The rentable area of the Premises as stated in the preceding sentence is based on (i) the areas of the Premises measured to the lease line for street elevations (which shall extend to the property line and/or to the public area boundary with respect to the interior frontage, if any, of the Premises) and to the center line of interior walls, (without deduction for level change, openings in the floor, or for stairs and stair openings which connect levels within the Premises), and shall include structural elements, stairs, elevators, escalators, display areas and other interior construction or equipment (the "usable area"), plus (ii) amounts equal to portions of an area of the receiving and trash areas, elevators and elevator lobbies, vestibules, restrooms, exit and access corridors, parking areas, loading areas, electrical, mechanical and telephone rooms and other areas designated by Lessor as necessary to the Building. The Base Rent may have been calculated based on this square footage, however, the square footage figure used in this lease is a rough approximation. Lessor and Lessee agree that the Base Rent is derived from the beneficial use of the Premises as described and not from any mathematical calculation involved square footage. Neither Lessor nor Lessee shall be entitled to have the Base Rent adjusted, recalculated, raised or lowered as a result of discrepancy between the square footage approximation contained in this Lease and any measurement that may be determined to be the actual square footage of the premises.
1.4 BUILDING: Commonly described as being located at 490 San Antonio Road in the City of Palo Alto, County of Santa Clara, State of California.
1.5 VEHICLE PARKING: Subject to the rules and regulations attached hereto and as established by Lessor from time to time, Lessor shall be entitled to non-exclusive use of available parking at the Office Building Project, proportionate to Lessee's pro-rata share of total building space.
1.5.1 If Lessee commits, permits or allows any of the prohibited activities described in the Lease or the rules then in effect then Lessor shall have the right, without notice, in addition to such other rights and remedies that it may have, to remove or tow away the vehicle involved and charge the cost to Lessee, which cost shall be immediately payable upon demand by Lessor.
1.6 TERM: Twenty four (24) months ("Original Term") commencing April 1, 1996 ("Commencement Date") and ending March 31, 1998 ("Expiration Date"). (Also, see Paragraph 3.) With an option to renew for one (1) year given five (5) months prior written notice to Lessor at the rate of $1.20 per square foot per month Gross.
1.7 EARLY POSSESSION: N/A ("Early Possession Date"), (Also see Paragraphs 3.2 and 3.3.)
1.8 BASE RENT: $9,724.40 per month ("Base Rent"), payable on the first day of each month commencing April 1, 1996 (see Paragraph 4.)
/ / If this box is checked, this Lease provides for the Base Rent to be adjusted per Addendum ___, attached hereto.
1.9 BASE RENT PAID UPON EXECUTION: $9,724.40 as Base Rent for
the Period April 1-30, 1996.
1.10 LESSEE'S SHARE OF COMMON AREA OPERATING EXPENSES: Thirty eight percent (38%) ("Lessee's Share") as determined prorata square footage of the Premises as compared to the total square footage of the Building.
1.11 SECURITY DEPOSIT: $9,724.40 ("Security Deposit"). (Also see Paragraph 8.)
1.12 PERMITTED USE: Business Office/Storage/R&D of bioanalytical instrumentation systems ("Permitted Use") (Also see Paragraph 6.)
1.13 INSURING PARTY. Lessor is the "Insuring Party". (Also see Paragraph 8.)
1.14 REAL ESTATE BROKERS. The following real estate broker(s) (collectively, the "Brokers") and the brokerage relationships exists in this transaction and are consented to by the Parties (check applicable boxes):
/ / N/A represents Lessor exclusively ("Lessor's Broker")l
/X/ Randy Scott of Cornish & Carey represents Lessee exclusively ("Lessee's Broker"); or
1.15 PAYMENT TO BROKERS. Upon the execution of this Lease by both Parties, Lessor shall pay to said Broker(s) jointly, or in such separate shares as they may mutually designate in writing, a fee as set forth in a separate written agreement between Lessor and said Broker(s) (or in the event there is no separate written agreement between Lessor and said Broker(s), the sum of $14,000.00) for brokerage services rendered by said Broker(s) in connection with this transaction.
1.16 GUARANTOR. The obligations of the Lessee under this Lease are to be guaranteed by N/A ("Guarantor"). (Also see Paragraph 37.)
1.17 ADDENDA AND EXHIBITS. Attached hereto is an Addendum or Addenda consisting of Exhibits A through C, all of which constitute a part of this lease.
2. PREMISES, PARKING AND COMMON AREAS.
2.1 LETTING. Lessor hereby leases to Lessee, and Lessee hereby leases from Lessor, the Premises for a term, at the rental, and upon the terms, covenants and conditions set forth in this Lease. Unless otherwise provided herein, any statement of square footage set forth in this Lease, or that may have been used in calculating rental and/or Common Area Operating Expenses, is an approximation which Lessor and Lessee agree is reasonable and the rental and Lessee's Share (as defined in Paragraph 1.6(b)) based thereon is not subject to revision whether or not the actual square footage is more or less.
2.2 CONDITION. Lessor shall deliver the Premises to Lessee clean and free of debris on the Commencement Date and warrants to Lessee that the existing plumbing, electrical systems, fire sprinkler system, lighting, air conditioning and heating systems and loading doors, if any, in the Premises, other than those constructed by Lessee, shall be in good operating condition on the Commencement Date. If a non-compliance with said warranty exists as of the Commencement Date, Lessor shall, except as otherwise provided in this Lease, promptly after receipt of written notice from Lessee setting forth with specificity the nature and extent of such non-compliance, rectify same as Lessee's expense. If Lessee does not give Lessor written notice of non-compliance with this warranty within sixty (60) days after the Commencement Date, correction of that non-compliance shall be the obligation of Lessee at Lessee's sole cost and expense.
2.3 COMPLIANCE WITH COVENANTS, RESTRICTIONS AND BUILDING CODE. Lessor warrants that any improvements (other than those constructed by Lessee or at Lessee's direction) on or in the Premises which have been constructed or installed by Lessor or with Lessor's consent or at Lessor's direction shall comply with all applicable covenants or restrictions of record and applicable building codes, regulations and ordinances in effect on the Commencement Date. Lessor further warrants to Lessee that Lessor has no knowledge of any claim having been made by any governmental agency that a violation or violations of applicable building codes, regulations or ordinances exist with regard to
INDUSTRIAL/COMMERCIAL MULTI-TENANT LEASE--GROSS
Premises as of the Commencement Date. Said warranties shall not apply to any Alterations or Utility Installations (defined in Paragraph 7.3(a) made or to be made by Lessee. If the Premises do not comply with said warranties, Lessor shall, except as otherwise provided in this Lease promptly after receipt of written notice from Lessee given within six (6) months following the Commencement Date and setting forth specifically the nature and extent of such non-compliance, take such action, at Lessor's expense, as may be reasonable or appropriate to rectify the non-compliance. Lessor makes no warranty that the Permitted Use in Paragraph 1.12 is permitted for the Premises under Applicable Laws (as defined in Paragraph 2.4).
2.4 ACCEPTANCE OF PREMISES. Subject to Lessor's
representations and warranties contained herein, Lessee hereby acknowledges
(a) that it has been advised by the Broker(s) to satisfy itself with respect
to the condition of the Premises (including but not limited to the electrical
and fire sprinkler systems, security, environmental aspects, seismic and
earthquake requirements, and compliance with the Americans With Disabilities Act
and applicable zoning, municipal, county, state and federal laws, ordinances
and regulations and any covenants or restrictions of record (collectively
"Applicable Laws") and the present and future suitability of the Premises for
Lessee's intended use; (b) that Lessee made such investigation as it deems
necessary with reference to such matters, is satisfied with reference
thereto, and assumes all responsibility therefore as the same relate to
Lessee's occupancy of the Premises and/or the terms of this Lease; and (c)
that neither Lessor, nor any of Lessor's agents, has made any oral or written
representations or warranties with respect to said matters other than as set
forth in this Lease.
2.5 LESSEE AS PRIOR OWNER/OCCUPANT. The warranties made by Lessor in this Paragraph 2 shall be of no force or effect XXX immediately prior to the date set forth in Paragraph 1.1 Lessee was the owner or occupant of the Premises. In such event, Lessee shall XXX Lessee's sole cost and expense, correct any non-compliance of the Premises with said warranties.
2.6 VEHICLE PARKING. Lessee shall be entitled to use the number of Unreserved Parking Spaces and Reserved Parking Spaces specified in Paragraph 1.2(b) on those portions of the Common Areas designated from time to time by Lessor for parking. Lessee shall not use more parking spaces than said number. Said parking spaces shall be used for parking by vehicles no larger than full-size passenger automobiles or pick-up trucks, herein called "Permitted Size Vehicles." Vehicles other than Permitted Size Vehicles shall be parked and loaded or unloaded as directed by Lessor in the Rules and Regulations (as defined in Paragraph 40) issued by Lessor. (Also see Paragraph 2.9).
2.7 COMMON AREAS -- DEFINITION. The term "Common Areas" is defined as all areas and facilities outside the Premises and within the exterior boundary line of the Industrial Center and interior utility raceways within the Premises that are provided and designated by Lessor from time to time for the general non-exclusive use of Lessor, Lessee and other lessees of the Industrial Center and their respective employees, suppliers, shippers, customers, contractors and invitees, including parking areas, loading and unloading areas, trash areas, roadways, sidewalks, walkways, parkways, driveways and landscaped areas.
2.8 COMMON AREAS -- LESSEE'S RIGHTS. Lessor hereby grants to Lessee, for the benefit of Lessee and its employees, suppliers, shippers, contractors, customers and invitees, during the term of this Lease, the non-exclusive right to use, in common with others entitled such use, the Common Areas as they exist from time to time, subject to any rights, powers, and privileges reserved by Lessor under the terms hereof or under the terms of any rules and regulations or restrictions governing the use of the Industrial Center. Under no circumstances shall the right herein granted to use the Common Areas be deemed to include the right to store any property, temporarily or permanently, in the Common Areas. Any such storage shall be permitted only by the prior written consent of Lessor or Lessor's designated agent, which consent may be revoked at any time. In the event that any unauthorized storage shall occur than Lessor shall have the right without notice, in addition to such other rights and remedies that it may have, to remove the property and charge the cost to Lessee, which cost shall be immediately payable upon demand by Lessor.
2.9 COMMON AREA -- RULES AND REGULATIONS. Lessor or such other person(s) as Lessor may appoint shall have the exclusive control and management of the Common Areas and shall have the right, from time to time, to establish, modify, amend and enforce reasonable Rules and Regulations with respect thereto in accordance with Paragraph 40. Lessee agrees to abide by and conform to all such Rules and Regulations, and cause its employees, suppliers, shippers, customers, contractors, and invitees to so abide and conform. Lessor shall not be responsible to Lessee for the non-compliance with said rules and regulations by other lessees of the Industrial Center.
2.10 COMMON AREAS -- CHANGES. Lessor shall have the right, in Lessor's sole discretion, from time to time:
(a) To make changes to the Common Areas, including, without limitation, changes in the location, size, shape and number of driveways, entrances, parking spaces, parking areas, loading and unloading areas, ingress and egress, direction of traffic, landscaped areas, walkways and utility raceways;
(b) To close temporarily any of the Common Areas for maintenance purposes so long as reasonable access to the Premises remains available;
(c) To designate other land outside the boundaries of the Industrial Center to be a part of the Common Areas;
(d) To add additional buildings and improvements to the Common Areas;
(e) To use the Common Areas while engaged in making additional improvements, repairs or alterations to the Industrial Center, or any portion thereof; and,
(f) To do and perform such other acts and make such other changes in, to or with respect to the Common Areas Industrial Center as lessor may, in the exercise of sound business judgment, deem to be appropriate.
3. TERM.
3.1 TERM. The Commencement Date, Expiration Date and Original Term of this Lease are as specified in Paragraph 1.3.
3.2 EARLY POSSESSION. If an early Possession Date is specified in Paragraph 1.4 and if Lessee totally or partially occupies Premises after the Early Possession Date but prior to Commencement Date, the obligation to pay Base Rent shall be abated for the period of such early occupancy. All of the terms of this Lease, however, (including but not limited to the obligations to pay Lessee's Share of Common Area Operating Expenses and to carry the insurance required by Paragraph 8) shall be in effect during such period. Any such early possession shall not affect nor advance the expiration Date of the Original Term.
3.3 DELAY IN POSSESSION. If for any reason Lessor cannot deliver possession of the Premises to Lessee by the Early Possession Date, if one is specified in Paragraph 1.4, or if no Early Possession Date is specified, by the Commencement Date, Lessor shall not be subject to any liability therefor, nor shall such failure affect the validity of the Lease, or the obligations of Lessee hereunder, or extend the term hereof, in such case, Lessee shall not except as otherwise provided herein, be obligated to pay rent or perform any other obligation of Lessee under terms of this Lease until Lessor delivers possession of the Premises to Lessee. If possession of the Premises is not delivered to Lessee within sixty (60) days after the Commencement Date, Lessee may, at its option, by notice in writing to Lessor within (10) days after the end of said sixty (60) day period, cancel this Lease, in which event the parties shall be discharged from all obligations hereunder, provided further, however that if such written notice of Lessee is not received by Lessor within said ten (10) day period, Lessee's right to cancel this Lease hereunder shall terminate and be of no further force or effect. Except as may be otherwise provided, and regardless of when the Original Term actually commences, if possession is not tendered to Lessee when required by this Lease and Lessee does not terminate this Lease, as aforesaid, the period free of the obligation to pay Base Rent, if any, that Lessee would otherwise have enjoyed shall run from the date of delivery of possession
INDUSTRIAL/COMMERCIAL MULTI-TENANT LEASE--GROSS
and continue for a period equal to the period during which the Lessee would have otherwise enjoyed under the terms hereof, but minus any day of delay caused by the acts, changes or omissions of Lessee.
4. RENT.
4.1 BASE RENT. Lessee shall pay Base Rent and other rent or charges, as the same may be adjusted from time to time, to Lessor in lawful money of the United States, without offset or deduction, on or before the day on which it is due under the terms of this Lease. Base Rent and all other rent and charges for any period during the term hereof which is for less than one full month shall be prorated based upon the actual number of days of the month involved. Payment of Base Rent and other charges shall be made to Lessor at its address stated herein or to such other persons or at such other addresses as Lessor may from time to time designate in writing to Lessee.
4.2 COMMON AREA OPERATING EXPENSES. Lessee shall pay to Lessor during the term hereof, in addition to the Base Rent Lessee's Share (as specified in Paragraph 1.10) of all Common Area Operating Expenses, as hereinafter defined, during each calendar year or the term of this Lease, in accordance with the following provisions:
(a) "COMMON AREA OPERATING EXPENSES" are defined, for purpose of this Lease, as all costs incurred by Lessor relating to the ownership and operation of the Industrial Center, including, but not limited to, the following:
(i) The operation, repair and maintenance, in neat, clean, good order and condition, of the following:
(aa) The Common Areas, including parking areas, loading and unloading areas, trash areas, roadways, sidewalks, walkways, parkways, driveways, landscaped areas, striping, bumpers, irrigation systems, Common Area lighting facilities, fence and gates, elevators and roof.
(bb) Exterior signs and any tenant directories.
(cc) Fire detection and sprinkler systems.
(ii) The cost of water, gas, electricity and telephone to service the Common Areas.
(iii) Trash disposal, property management and security services and the costs of any environmental inspections.
(iv) Reserves set aside for maintenance and repair of Common Area.
(v) Any increase above the Base Real Property Taxes (as defined in Paragraph 10.2(b)) for the Building and the Common Areas.
(vi) Any "Insurance Cost Increase" (as defined in Paragraph 8.1).
(vii) The cost of insurance carried by Lessor with respect to Common Areas.
(viii) Any deductible portion of an insured loss concerning the Building or the Common Areas.
(ix) Any other services to be provided by Lessor that are stated elsewhere in this Lease to be a Common Area Operating Expense.
(b) Any Common Area Operating Expense and Real Property Taxes that are specifically attributable to the Building or to any other building in the Industrial Center or to the operation, repair and maintenance thereof, shall be allocated entirely to the Building or to such other building. However, any Common Area Operating Expenses and Real Property Taxes that are not specifically attributable to the Building or to any other building or to the operation, repair and maintenance thereof, shall be equitably allocated by Lessor to all buildings in the Industrial Center.
(c) The inclusion of the improvements, facilities and services set forth in Subparagraph 4.2(a) shall not be deemed to impose any obligation upon Lessor to either have said improvements or facilities or to provide those services unless the Industrial Center already has the same, Lessor already provides the services, or Lessor has agreed elsewhere in this Lease to provide the same or some of them.
(d) Lessee's Share of Common Area Operating Expenses shall be payable by Lessee within ten (10) days after a reasonably detailed statement of actual expenses is presented to Lessee by Lessor. At Lessor's option, however, an amount may be estimated by Lessor from time to time of Lessee's Share of annual Common Area Operating Expenses and the same shall be payable monthly or quarterly, as Lessor shall designate, during each 12-month period of the Lease term, on the same day as the Base Rent is due hereunder. Lessor shall deliver to Lessee within a reasonable period after the expiration of each calendar year a reasonably detailed statement showing Lessee's Share of the actual Common Area Operating Expenses incurred during the preceding year. If Lessee's payments under this Paragraph 4.2(d) during said preceding year exceed Lessee's Share as indicated on said statement, Lessor shall be credited the amount of such overpayment against Lessee's Share of Common Area Operating Expenses next becoming due. If Lessee's payments under the Paragraph 4.2(d) during said preceding year were less than Lessee's Share as indicated on said statement, Lessee shall pay to Lessor the amount of the deficiency within ten (10) days after delivery by Lessor to Lessee of said statement.
4.3 UTILITIES. Lessee shall pay to Lessor during the term hereof, in addition to the Base Rent and Common Area Operating Expenses, Lessee's Share of all Utilities, as hereinafter defined, during each calendar year of the term of this Lease. Lessee's Share of Utilities shall be payable by Lessee within ten (10) days after a reasonably detailed statement of actual expenses is presented to Lessee by Lessor. At Lessor's option, however, an amount may be estimated by Lessor from time to time of Lessee's Share of annual Common Area Operating Expenses and the same shall be payable monthly or quarterly, as Lessor shall designate, during each 12-month period of the Lease term, on the same day as the Base Rent is due hereunder. Lessor shall deliver to Lessee within a reasonable period after the expiration of each calendar year a reasonably detailed statement showing Lessee's Share of the actual Utilities incurred during the preceding year. If Lessee's payments under this Paragraph 4.2(d) during said preceding year exceed Lessee's Share as indicated on said statement, Lessor shall be credited the amount of such overpayment against Lessee's Share of Utilities next becoming due. If Lessee's payments under this Paragraph 4.2(d) during said preceding year were less than Lessee's Share as indicated on said statement, Lessee shall pay to Lessor the amount of the deficiency within ten (10) days after delivery by Lessor to Lessee of said statement.
5. SECURITY DEPOSIT. Lessee shall deposit with Lessor upon Lessee's execution hereof the Security Deposit set forth in Paragraph 1.2 as security for Lessee's faithful performance of Lessee's obligations under this Lease. If Lessee fails to pay Base Rent or other rent charges due hereunder, or otherwise Defaults under this Lease (as defined in Paragraph 13.1), Lessor may use, apply or retain all or any portion of said Security Deposit for the payment of any amount due Lessor or to reimburse or compensate Lessor for any liability, cost, expense, loss or damage (including attorneys' fees) which Lessor may suffer or incur by reason thereof. If Lessor uses or applies all or any portion of said Security Deposit, Lessee shall within ten (10) days after written request therefore deposit monies with Lessor sufficient to restore said Security Deposit to the full amount required by this Lease. Any time the Base Rent increases during the term of this Lease, Lessee shall, upon written request from Lessor, deposit additional monies with Lessor as an addition to the Security Deposit so that the total amount of the Security Deposit shall at all times bear the same proportion to the then current Base Rent as the initial Security Deposit bear to the initial Base Rent set forth in Paragraph 1.5. Lessor shall not be required to keep all or any part of the Security Deposit separate from its general accounts. Lessor shall, at the expiration or earlier termination of the term hereof and after Lessee has vacated the Premises, return to Lessee (or, at Lessor's option, to the last assignee, if any, of Lessee's interest herein), that portion of the Security Deposit not used or applied by Lessor. Unless otherwise expressly agreed in writing by Lessor, no part of the Security Deposit shall be consider to be held in trust, to bear interest or other increment for its use, or to be prepayment for any monies to be paid by Lessee under this Lease.
6. USE.
6.1 PERMITTED USE.
(A) Lessee shall use and occupy the Premises only for the Permitted Use set forth in Paragraph 1.3, or any other legal use which is reasonably comparable thereto, and for no other purpose. Lessee shall not use or permit the use of the Premises in a manner that is
INDUSTRIAL/COMMERCIAL MULTI-TENANT LEASE--GROSS
unlawful, creates waste or a nuisance, or that disturbs owners and/or occupants of, or causes damage to the Premises or neighboring premises or properties.
(b) Lessor hereby agrees to not unreasonably withhold or delay its consent to any written request by Lessee, Lessee's assignees or subtenants, and by prospective assignees and subtenants of Lessee, its assignees and subtenants, for a modification of said Permitted Use, so long as the same will not impair the structural integrity of the improvements on the Premises or in the Building or the mechanical or electrical systems therein, does not conflict with uses by other lessees, is not significantly more burdensome to the Premises of the building and improvements thereon, and is otherwise permissible pursuant to this Paragraph 6. If Lessor elects to withhold such consent, Lessor shall within five (5) business days after such request give a written notification of same, which notice shall include an explanation of Lessor's reasonable objections to the change in use.
6.2 HAZARDOUS SUBSTANCES.
(a) REPORTABLE USES REQUIRE CONSENT. The term "Hazardous Substance" as used in this Lease shall mean any product, substance, chemical, material or waste whose presence, nature, quantity and/or intensity of existence, use, manufacture, disposal, transportation, spill, release or effect, either by itself or in combination with other materials expected to be on the Premises, is either: (i) potentially injurious to the public health, safety or welfare, the environment, or the Premises; (ii) regulated or monitored by any governmental authority; or (iii) a basis for potential liability of loss to any governmental agency or third party under the applicable statute or common law theory. Hazardous Substance shall include, but not be limited to, hydrocarbons, petroleum, gasoline, crude oil or any products or by-products thereof. Lessee shall not engage in activity in or about the Premises which constitutes a Reportable Use (as hereinafter defined) of Hazardous Substances without the express prior written consent of Lessor and compliance in a timely manner (at Lessee's sole cost and expense) with all Applicable Requirements (as defined in Paragraph 6.3). "Reportable use" shall mean (i) the installation or use of any above or below ground storage tank, (ii) the generation, possession, storage, use, transportation, or disposal of a Hazardous Substance that requires a permit from, or with respect to which a report, notice, registration or business plan is required to be filed with, any governmental authority, and (iii) the presence in, on or about the Premises of a Hazardous Substance with respect to which any Applicable Laws require that a notice be given to persons entering or occupying the Premises or neighboring properties. Notwithstanding the foregoing, Lessee may, without Lessor's prior consent, but upon notice to Lessor and in compliance with all Applicable Requirements, use any ordinary and customary materials reasonably required to be used by Lessee in the normal course of the Permitted Use, so long as such use is not a Reportable Use and does not expose the Premises or neighboring properties to any meaningful risk of contamination or damage or expose Lessor to any liability therefore. In addition, Lessor may (but without any obligation to do so) condition its consent to any Reportable Use of any Hazardous Substance by Lessee upon Lessee's giving Lessor such additional assurances Lessor, in its reasonable discretion, deems necessary to protect itself, the public, the Premises and the environment against damage, contamination or injury and/or liability therefore, including but not limited to the installation (and, at Lessor's option, removal on or before Lease contamination or injury and/or liability therefore, including but not limited to the installation (and, at Lessor's option, removal on or before Lease expiration or earlier termination) of reasonably necessary protective modification to the Premises (such as concrete encasements) and/or the deposit of an additional Security Deposit under Paragraph 5 hereof.
(b) DUTY TO INFORM LESSOR. If Lessee knows, or has reasonable cause to believe, that a Hazardous Substance has come to be located in, on under or about the Premises or the Building, other than as previously consented to by Lessor, Lessee shall immediately give Lessor written notice thereof, together with a copy of any statement, report, notice, registration, application, permit, business plan, license, claim, action, or proceeding given to, or received from, any governmental authority or private party concerning the presence, spill, release, discharge of, or exposure to, such Hazardous Substance including but not limited to all such documents as may be involved in any Reportable Use involving the Premises. Lessee shall not cause or permit any Hazardous Substance to be spilled or released in, on, under or about the Premises (including, without limitation, through the plumbing or sanitary sewer system).
(c) DUTY TO INFORM LESSEE. If Lessor knows, or has reasonable cause to believe, that a Hazardous Substance has come to be located in, on, under or about the Premises or the Building, Lessor shall immediately give Lessee written notice thereof, together with a copy of any statement, report, notice, registration, application, permit, business plan, license, claim, action, or proceeding given to, or received from, any governmental authority or private party concerning the presence, spill, release, discharge of, or exposure to, such Hazardous Substance including but not limited to all such documents as may be involved in any Reportable Use involving the Premises. Lessor shall not cause or permit any Hazardous Substance to be spilled or released in, on, under or about the Premises (including, without limitation, through the plumbing or sanitary sewer system).
(d) INDEMNIFICATION. Lessee shall indemnify, protect, defend and hold Lessor, its agents, employees, lenders and ground lessor, if any, and the Premises, harmless from and against any and all damages, liabilities, judgments, costs, claims, liens, expenses, penalties, loss of permits and attorneys' and consultants' fees arising out of involving any Hazardous Substance brought onto the Premises by or for Lessee or by anyone under Lessee's control. Lessee's obligations under this Paragraph 6.2(o) shall include, but not be limited to, the effects of any contamination or injury to person, property or the environment created or suffered by Lessee, and the cost of investigation (including consultants' and attorneys' fees and testing), removal, remediation, restoration and/or abatement thereof, or of any contamination therein involved, and shall survive the expiration or earlier termination of this lease. No termination, cancellation or release agreement entered into by Lessor and Lessee shall release the Lessee from its obligations under this Lease with respect to Hazardous Substances, unless specifically so agreed by Lessor in writing at the time of such agreement.
6.3 LESSEE'S COMPLIANCE WITH REQUIREMENTS. Lessee shall, at
Lessee's sole cost and expense, fully, diligently and in a timely manner,
comply with all "Applicable Requirements," which term is used in this Lease
to mean all laws, rules, regulations, ordinances, directives, covenants,
easements and restrictions of record, permits, and the requirements of any
applicable fire insurance underwriter or rating bureau, and the
recommendations of Lessor's engineers and/or consultants, relating in any
manner to the Premises (including but not limited to matters pertaining to
(i) industrial hygiene, (ii) environmental conditions on, in, under or about
the Premises, including soil and groundwater conditions, and (iii) the use,
generation, manufacture, production, installation, maintenance, removal,
transportation, storage, spill, or release of any Hazardous Substance), now
in effect or which may hereafter come into effect. Lessee shall, within ten
(10) days after receipt of Lessor's written request, provide Lessor with
copies of all documents and information, including but not limited to
permits, registrations, manifests, applications, reports and certificates,
evidencing Lessee's compliance with any Applicable Requirements specified by
Lessor, and shall immediately upon receipt, notify Lessor in writing (with
copies of any documents involved of any threatened of actual claim, notice,
citation, warning, complaint or report pertaining to or involving failure by
Lessee to the Premises to comply with any Applicable Requirements.
Notwithstanding anything to the contrary contained herein, Lessee's obligation to comply with Applicable Requirements, as set forth in Section 6.3 above, shall only apply if such compliance is required or necessitated by Lessee's acts, use, or occupancy of the Premises. For example, if any governmental authority should require the Building of the Premises to be structurally strengthened against earthquake, or should require the removal of asbestos from the Premises and such measures are imposed as a general requirement applicable to all tenants rather than as a condition to Lessee's specific use or occupancy of the PREMISES, such work shall be performed by and at the sole cost of Lessor.
It is being expressly agreed that Lessee shall have no obligation or liability of any kind or nature with respect to contamination or Hazardous Substances that existed at, on or under the Premises and Building (which shall be deemed to include the underlying soil and groundwater) prior to the commencement of this Lease or that was not caused by Lessee's acts, use or occupancy of the Premises.
To the best of Lessor's current, actual knowledge, none of Lessor's tenants at the Office Building Project are in violation of subject to any existing, pending or threatened investigation or order by any governmental authority under any applicable federal, state or local law, regulation or ordinance pertaining to air and water quality, the handling, transportation, storage, treatment, usage or disposal of Hazardous Substances, air emissions, other environmental matters and all zoning and land use matters.
INDUSTRIAL/COMMERCIAL MULTI-TENANT LEASE--GROSS
To the best of Lessor's current, actual knowledge, any handling, transportation, storage, treatment or use of Hazardous Substances that has occurred on the Premises to date is not in non-compliance with all Applicable Requirements regulating same.
To the best of Lessor's current, actual knowledge, no leak, spill, release, discharge, emission or disposal of Hazardous Substances has occurred on the Premises, Building and Industrial Center to date and the soil, groundwater and soil vapor on or under the Premises, Building and Industrial Center is free of Hazardous Substances as of the date the term of this Lease commences.
In the event of (i) a breach of the foregoing representations, or
(ii) the occurrence, release or threatened release of any Hazardous
Substances on or about the Premises, Building and Industrial Center during
the term hereof that is not caused by Lessee, Lessor, at Lessor's sole
expense, shall (a) promptly remove, eliminate or remediate said Hazardous
Substances and/or take such other action with respect thereto as is required
by any federal, state or local government agency having jurisdiction thereof.
6.4 INSPECTION; COMPLIANCE WITH LAW. Lessor, Lessor's agents, employees, contractors and designated representatives, and the holders of any mortgages, deeds of trust or ground leases on the Premises ("Lenders") shall have the right to enter the Premises at any time in the case of an emergency, and otherwise at reasonable times, for the purpose of inspecting the condition of the Premises and for verifying compliance by Lessee with this Lease and all Applicable Requirements (as defined in Paragraph 6.3), and Lessor shall be entitled to employ experts and/or consultants in connection therewith to advise Lessor with respect to Lessee's activities, including but not limited to Lessee's installation, operation, use, monitoring, maintenance, or removal of any Hazardous Substance on or from the Premises. The costs and expenses of any such inspections shall be paid by the party requesting same, unless a Default or Breach of this Lease by Lessee or a violation of Applicable Requirements or a contamination, caused or materially contributed to by Lessee, is found to exist or to be imminent, or unless the inspection is requested or ordered by a governmental authority as the result of any such existing or imminent violation or contamination. In such case, Lessee shall upon request, reimburse Lessor or Lessor's Lender, as the case may be, for the costs and expenses of such inspections.
7. MAINTENANCE, REPAIRS, UTILITY INSTALLATIONS, TRADE FIXTURES AND ALTERATIONS.
7.1 LESSEE'S OBLIGATIONS.
(a) Subject to the provisions of Paragraphs 2.2
(Condition), 2.4 (Compliance with Covenants, Restrictions and Building Code),
7.2 (Lessor's Obligations), 9 (Damage or Destruction), and 14 (Condemnation),
Lessee shall, at Lessee's sole cost and expense and at all times, keep the
Premises and every part thereof in good order, condition and repair (whether
or not such portion of the Premises requiring repair, or the means of
repairing the same, are reasonably or readily accessible to Lessee, and
whether or not the need for such repairs occurs as a result of Lessee's use,
any prior use, the elements or the age of such portion of the Premises),
including, without limiting the generality of the foregoing, all equipment or
facilities specifically serving the Premises, such as plumbing, heating, air
conditioning, ventilating, electrical, lighting, facilities, boilers, fired
or unfired pressure vessels, fire hose connections if within the Premises,
fixtures, interior walls, interior surfaces of exterior walls, ceilings,
floors, windows, doors, plate, glass, and skylights, but excluding any items
which are the responsibility of Lessor pursuant to Paragraph 7.2 below.
Lessee, in keeping the Premises in good order, condition and repair, shall
exercise and perform good maintenance practices. Lessee's obligations shall
include restorations, replacements or renewals when necessary to keep the
Premises and all improvements thereon or a part thereof in good order,
condition and state of repair.
(b) Lessee shall at Lessee's sole cost and expense, procure and maintain a contract, with copies to Lessor, in customary form and substance for and with a contractor specializing and experienced in the inspection, maintenance and service of the heating, air conditioning and ventilation system for the Premises. However, Lessor reserves the right, upon notice to Lessee, to procure and maintain the contract for the heating, air conditioning and ventilating systems, and, if Lessor so elects, Lessee shall reimburse Lessor, upon demand, for the cost thereof.
(c) If Lessee fails to perform Lessee's obligations under this Paragraph 7.1, Lessor may enter upon the premises after ten (10) days' prior written notice to Lessee (except in the case of an emergency, in which case no notice shall be required), perform such obligations on Lessee's behalf, and put the Premises in good order, condition and repair, in accordance with Paragraph 13.2 below.
7.2 LESSOR'S OBLIGATIONS. Subject to the provisions of Paragraphs 2.2 (Condition), 2.3 (Compliance with Covenants, Restrictions and Building Code), 4.2 (Common Area Operating Expenses), 6 (Use), 7.1 (Lessee's Obligations), 9 (Damage or Destruction) and 14 (Condemnation), Lessor, subject to reimbursement pursuant to Paragraph 4.2, shall keep in good order, condition and repair the foundations, exterior walls, structural condition of interior bearing walls, exteriors roof, fire sprinkler and/or standpipe and hose (if located in the Common Areas) or other automatic fire extinguishing system including fire alarm and/or smoke detection systems and equipment, fire hydrants, parking lots, walkways, driveways, landscaping, fences, signs and utility systems serving the Common Areas and all parts thereof, as well as providing the services for which there is a Common Area Operating Expense pursuant to Paragraph 4.2. Lessor shall not be obligated to paint the exterior or interior surfaces of exterior walls nor shall Lessor be obligated to maintain, repair or replace windows, doors or plate glass of the Premises. Lessee expressly waives the benefit of any statute now or hereafter in effect which would otherwise afford Lessee the right to make repairs at Lessor's expense or to terminate this Lease because of Lessor's failure to keep the Building, Industrial Center or Common Areas in good order, condition and repair.
7.3 UTILITY INSTALLATIONS, TRADE FIXTURES, ALTERATIONS.
(a) DEFINITIONS; CONSENT REQUIRED. The term "Utility Installations" is used in this Lease to refer to all air lines, power panels, electrical distribution, security, fire protection systems, communications systems, lighting fixtures, heating, ventilation and air conditioning equipment, plumbing, and fencing in, on or about the Premises. The term "Trade Fixtures" shall mean Lessee's machinery and equipment which can be removed without doing material damage to the Premises. The term "Alterations" shall mean any modification of the improvements on the Premises which are provided by Lessor under the terms of this Lease, other than Utility Installations or Trade Fixtures. "Lessee-Owned Alterations and/or Utility Installations" are defined as Alterations and/or Utility Installations in, on, under or about the Premises without Lessor's prior written consent. Lessee may, however, make non-structural Utility Installations to the interior of the Premises (excluding the roof) without Lessor's consent but upon notice to Lessor, so long as they are not visible from the outside of the Premises, do not involve puncturing, relocating or removing the roof or any existing walls, or changing or interfering with the fire sprinkler or fire detection systems and the cumulative cost thereof during the term of this Lease as extended does not exceed $3,000.00.
(b) CONSENT. Any Alterations or Utility Installations that Lessee shall desire to make and which require the consent of the Lessor shall be presented to Lessor in written form with detailed plans. All consents given to Lessor, whether by virtue of Paragraph 7.3(a) or by subsequent specific consent, shall be deemed condition upon: (i) Lessee's acquiring all applicable permits required by governmental authorities; (ii) the furnishing of copies of such permits together with a copy of the plans and specifications for the Alteration or Utility Installations to Lessor prior to commencement of the work thereon; and (iii) the compliance by Lessee with all conditions of said permits in a prompt and expeditious manner. Any Alterations or Utility Installations by Lessee during the term of this Lease shall be done in a good and sufficient materials, and be in compliance with all Applicable Requirements. Lessee shall promptly upon completion thereof furnish Lessor with as-built plans and specifications therefor. Lessor may, (but without obligation to do so) condition its consent to any requested Alteration or Utility Installation that costs $3,000.00 or more upon Lessee's providing Lessor with a lien and completion bond in an amount equal to one and one-half times the estimated cost of such Alteration or Utility Installations.
(c) LIEN PROTECTION. Lessee shall pay when due all claims for labor or materials furnished to or for Lessee at or for use on the Premises, which claims are or may be secured by any mechanic's or materialman's lien against the Premises or any interest therein. Lessee shall give Lessor not less than ten (10) days' notice prior to the commencement of any work in, on or about the Premises, and Lessor shall have the right to post notice of non-responsibility in or on the Premises as provided by law. If Lessee shall, in good faith, contest the validity of any such lien, claim or demand, then Lessee shall, at its sole expense, defend and protect itself, Lessor and the Premises against the same and shall pay and satisfy any such adverse judgment that may be rendered thereon before the enforcement thereof against the Lessor or the Premises. If Lessor shall require, Lessee shall furnish to Lessor a surety bond satisfactory to Lessor in an amount equal to one and one-half times the amount
INDUSTRIAL/COMMERCIAL MULTI-TENANT LEASE--GROSS
of such contested lien, claim or demand, indemnifying Lessor against liability for the same, as required by law for the holding of the Premises free from the affect of such lien or claim. In addition, Lessor may require Lessee to pay Lessor's attorney's fees and costs in participating in such action if Lessor shall decide it is to its best interest to do so.
7.4 OWNERSHIP, REMOVAL, SURRENDER, AND RESTORATION.
(a) OWNERSHIP. Subject to Lessor's right to require their
removal and to cause Lessee to become the owner thereof as hereinafter
provided in this Paragraph 7.4, all Alterations and Utility Installations
made to the Premises by Lessee shall be the property of and owned by Lessee,
but considered a part of the Premises. Lessor may, at any time and at its
option, elect in writing to Lessee to be the owner of all or any specified
part of the Lessee-Owned Alterations and Utility Installations excepting on
fume hood installed by Lessee. Unless otherwise instructed per Subparagraph
7.4 (b) hereof, all Lease-Owned Alterations and Utility Installations shall,
at the expiration or earlier termination of this Lease, become the property
of Lessor and remain upon the Premises and be surrendered with the Premises
by Lease.
(b) REMOVAL. Unless otherwise agreed in writing, Lessor may require that any or all Lessee-Owned Alterations or Utility Installations be removed by the expiration or earlier termination of this Lease, notwithstanding that their installation may have been consented to by Lessor. Lessor may require the removal at any time of all or any part of any Alterations or Utility Installations made without the required consent of Lessor.
(c) SURRENDER/RESTORATION. Lessee shall surrender the Premises by the end of the last day of the Lease term or any earlier termination date, clean and free of debris and in good operating order, condition and state of repair, ordinary wear and tear excepted. Ordinary wear and tear shall not include any damage or deterioration that would have been prevented by good maintenance practice or by Lessee performing all of its obligations under this Lease. Except as otherwise agreed or specified herein, the Premises, as surrendered, shall include the Alterations and Utility Installations. The obligation of Lessee shall include the repair of any damage occasioned by the installation, maintenance or removal of Lessee's Trade Fixtures, furnishings, equipment, and Lessee-Owned Alterations and Utility Installations, as well as the removal of any storage tank installed by or for Lessee, and the removal, replacement or remediation of any soil, material or ground water contaminated by Lessee and shall be removed by Lessee subject to its obligation to repair and restore the Premises per this Lease.
8. INSURANCE; INDEMNITY.
8.1 PAYMENT OF PREMIUM INCREASES.
(a) As used herein, the term "Insurance Cost Increase" is defined as any increase in the actual cost of the insurance applicable to the Building and required to be carried by Lessor pursuant to Paragraphs 8.2(b), 8.3(a), and 8.3(b), ("Required Insurance"), over and above the Base Premium, as hereinafter defined, calculated on an annual basis. "Insurance Cost Increase" shall include, but not be limited to, requirements of the holder of a mortgage or deed of trust covering Premises, increased valuation of the Premises, and/or a general premium rate increase. The term "Insurance Cost Increase" shall not, however, include any premium increase resulting from the nature of the occupancy of any other lessee of the Building. If the parties insert a dollar amount in Paragraph 1.9, such amount shall be considered the "Base Premium". If a dollar amount has not been inserted in Paragraph 1.9 and if the Building has been previously occupied during the twelve (12) month period immediately preceding the Commencement Date, the "Base Premium" shall be the annual premium applicable to such twelve (12) month period. If the Building was not fully occupied during such twelve (12) month period, the "Base Premium" shall be the lowest annual premium reasonably obtainable for the Required Insurance as of the Commencement Date, assuming the most nominal use possible of the Building. In no event, however, shall Lessee be responsible for any portion of the premium cost attributable to liability insurance coverage in excess of $1,000.0000 procured under paragraph 8.2(b).
(b) CARRIED BY LESSOR. Lessor shall also maintain liability insurance described in Paragraph 8.2(a) above, in addition to and not in lieu of, the insurance required to be maintained by Lessee. Lessee shall not be named as an additional insured therein.
8.3 PROPERTY INSURANCE--BUILDING, IMPROVEMENTS AND RENTAL VALUE.
(a) BUILDING AND IMPROVEMENTS. Lessor shall obtain and keep in force during the term of this Lease a policy and policies in the name of Lessor, with loss payable to Lessor and any Lender(s), insuring against loss or damage to the Premises. Such insurance shall be for full replacement cost, as the same shall exist from time to time, or the amount required by any Lender(s), but in no event more than the commercially reasonable and available insurable value thereof if, by reason of the unique nature or age of this improvements involved, such latter amount is less than full replacement cost. Lessee-Owned Alterations and Utility Installations, Trade Fixtures and Lessee's personal property shall be insured by Lessee pursuant to Paragraph 8.4. If the coverage is available and commercially appropriate, Lessor's policy or policies shall insure against all risks of direct physical loss or damage (except the perils of flood and/or earthquake unless required by a Lender or included in the Base Premium), including coverage for any additional costs resulting from debris removal and reasonable amounts of coverage for the enforcement of any ordinance or law regulating the reconstruction or replacement of any undamaged sections of the Building required by a Lender or included in the Base Premium), including coverage for any additional costs resulting from debris removal and reasonable amounts of coverage for the enforcement of any ordinance or law regulating the reconstruction or replacement of any undamaged sections of the Building required to be demolished or removed by reason of the enforcement of any building, zoning, safety or land use laws as the result of a covered loss, but not including plate glass insurance. Said policy or policies shall also contain an agreed valuation provision in lieu of any co-insurance clause, waiver of subrogation, and inflation guard protection causing an increase in the annual property insurance coverage amount by a factor of not less than the adjusted U.S. Department of Labor Consumer Price Index for All Urban Consumers for the city nearest to where the Premises are located.
(b) RENTAL VALUE. Lessor shall also obtain and keep in force during the term of this Lease a policy or policies in the name of Lessor, with loss payable to Lessor and any Lender(s), insuring the loss of the full rental and other charges payable by all leases of the Building to Lessor for one year (including all Real Property Taxes, insurance costs, all Common Area Operating Expenses and any scheduled rental increases). Said insurance may provide that in the event the lease is terminated by reason of an insured loss, the period of indemnity for such coverage shall be extended beyond the date of the completion of repairs or replacement of the Premises, to provide for one full year's loss of the rental revenues from the date of any such loss. Said insurance shall contain an agreed valuation provision in lieu of any co-insurance clause, and the amount of coverage shall be adjusted annually to reflect the projected rental income, Real Property Taxes, insurance premium costs and other expenses, if any otherwise payable, for the next 12-month period. Common Area Operating Expenses shall include any deductible amount in the event of such loss.
INDUSTRIAL/COMMERCIAL MULTI-TENANT LEASE--GROSS
(c) ADJACENT PREMISES. Lessee shall pay for any increase in the premiums for the property insurance of the Building and for the Common Areas or other buildings in the Industrial Center if said increase is caused by Lessee's acts, omissions, use or occupancy of the Premises.
(d) LESSEE'S IMPROVEMENTS. Since Lessor is the Insuring Party, Lessor shall not be required to insure Lessee-Owner Alterations and Utility Installations unless the item in question has become the property of Lessor under the terms of this Lease.
8.4 LESSEE'S PROPERTY INSURANCE. Subject to the requirements of Paragraph 8.5, Lessee at its cost shall either by separate policy or, at Lessor's option by endorsement to a policy already carried, maintain insurance coverage on all of Lessee's personal property, Trade Fixtures, and Lessee-Owned Alterations and Utility Installations in, on, or about the Premises similar in coverage to that carried by Lessor as the Insuring Party under Paragraph 8.3(a). Such insurance shall be full replacement cost coverage with a deductible not to exceed $1,000 per occurrence. The proceeds from any such insurance by shall be used by Lessee for the replacement of personal property and the restoration of Trade Fixtures and Lessee-Owned Alterations and Utility Installations. Upon request from Lessor, Lessee shall provide Lessor with written evidence that such insurance is in force.
8.5 INSURANCE POLICIES. Insurance required hereunder shall be in companies duly licensed to transact business in the state where the Premises are located and maintaining during the policy term a "General Policyholders Rating" of at least B+, V, or such other rating as may be required by a Lender, as set forth in the most current issue of "Best Insurance Guide." Lessee shall not do or permit to be done anything which shall invalidate the Insurance policies referred to in this Paragraph 8. Lessee shall cause to be delivered to Lessor, within seven (7) days after the earlier of the Early Possession Date or Commencement Date, copies of, or certificates evidencing the existence and amounts of, the insurance required under Paragraph 8.2(a) and 8.4. No such policy shall be cancelable or subject to modification except after thirty (30) days prior to the expiration of such policies, furnish Lessor with evidence of renewals or "insurance binders" evidencing renewal thereof, or Lessor may, following notice to Lessee, order such insurance and charge the cost thereof to Lessee, which amount shall be payable by Lessee to Lessor upon demand.
8.6 WAIVER OF SUBROGATION. Without affecting any other rights or remedies, Lessee and Lessor each hereby release and relieve the other, and waive their entire right to recover damages (whether in contract or in tort) against the other for loss or damage to their property arising out of or incident to the perils required to be insured against under Paragraph 8. The effect of such releases and waivers of the right to recover damages shall not be limited by the amount of insurance carried or required, or by any deductibles applicable thereto. Lessor and Lessee agree to have their respective insurance companies issuing property damage insurance waive any right to subrogation that such companies may have against Lessor or Lessee, as the case may be, so long as the insurance is not invalidated thereby.
8.7 INDEMNITY. Except for Lessor's or its agents, contractors, or employees negligence, or willful misconduct and/or breach of express warranties, or its obligations hereunder, Lessee shall indemnify, protect, defend and hold harmless the Premises, Lessor and its agents, Lessor's master or ground lessor, partners and Lenders, from and against any and all claims, loss of rents and/or damages, costs, liens, judgements, penalties, loss of permits, attorneys' and consultants' fees, expenses and/or liabilities arising out of, involving, or in connection with the occupancy of the Premises by Lessee, the conduct of Lessee's business, any act, omission, or neglect of Lessee, it's agents, contractors, employees or invitees, and out of any Default or Breach by Lessee in the performance in a timely manner of any obligation on Lessee's part to be performed under this Lease. The foregoing shall include, but not be limited to, the defense or pursuit of any claim or any action or proceeding involved therein, and whether or not (in the case of claims made against Lessor), litigated and/or reduced to judgement. In case any action or proceeding be brought against Lessor by reason of any of the foregoing matters, Lessee upon notice from Lessor shall defend the same at Lessee's expense by counsel reasonably satisfactory to Lessor and Lessor shall cooperate with Lessee in such defense. Lessor need not have first paid any such claim in order to be so indemnified.
8.8 EXEMPTION OF LESSOR FROM LIABILITY. Lessor shall not be liable for injury or damage to the person or goods, wares, merchandise or other property of Lessee. Lessee's employees, contractors, invitees, customers, or any other person in or about the Premises, whether such damage or injury is caused by or results from fire, steam, electricity, gas, water or rain, or from the breakage, leakage, obstruction or other defects of pipes, fire sprinklers, wires, appliances, plumbing, air conditioning or lighting fixtures, or from any other cause, whether said injury or damage results from conditions arising upon the Premises or upon other portions of the Building of which the Premises are a part, from other sources or places, and regardless of whatever the cause of such damage or injury or the means of repairing the same is accessible or not. Lessor shall not be liable for any damages arising from any act or neglect of any other lessee of Lessor nor from the failure by Lessor to enforce the provisions of any other lease in the Industrial Center. Notwithstanding Lessor's negligence or breach of this Lease, Lessor shall under no circumstances be liable for injury to Lessee's business or for any loss of income or profit therefrom.
9. DAMAGE OR DESTRUCTION.
9.1 DEFINITIONS.
(a) "PREMISES PARTIAL DAMAGE" shall mean damage or destruction to the Premises, other than Lessee-Owned Alterations and Utility Installations, the repair cost of which damage or destruction is less than percent (50%) of the then Replacement Cost (as defined in Paragraph 9.1(d)) of the Premises (excluding Lessee-Owned Alterations and Utility Installations and Trade Fixtures) immediately prior to such damage or destruction.
(b) "PREMISES TOTAL DESTRUCTION" shall mean damage or destruction to the Premises, other than Lessee-Owned Alterations and Utility Installations, the repair cost of which damage or destruction is fifty percent (50%) or more of the then Replacement Cost of the Premises (excluding Lessee-Owned Alterations and Utility Installations and Trade Fixtures) immediately prior to such damage or destruction. In addition, damage or destruction to the Building, other than Lessee-Owned Alterations and Utility Installations and Trade Fixtures or any lessees of the Building, the cost of which damage or destruction is fifty percent (50%) or more of the then Replacement Cost Premises (excluding Lessee-Owned Alterations and Utility Installations and Trade Fixtures of any lessees of the Building) of the Building shall, at the option of Lessor, be deemed to be Premise Total Destruction.
(c) "INSURED LOSS" shall mean damage or destruction to the Premises, other than Lessee-Owned Alterations and Utility Installations and Trade Fixtures, which was caused by an event required to be covered by the insurance described in Paragraph 8.3(a) irrespective of any deductible amounts or coverage limits involved.
(d) "REPLACEMENT COST" shall mean the cost to repair or rebuild the improvements owned by Lessor at the time of the occurrence to their condition existing immediately prior thereto, including demolition, debris removal and upgrading required by the operation of applicable building codes, ordinances or laws, and without deduction for depreciation.
(e) "HAZARDOUS SUBSTANCE CONDITION" shall mean the occurrence or discovery of a condition involving the presence of, or a contamination by, a Hazardous Substance as defined in Paragraph 6.2(a), in, on, or under the Premises.
9.2 PREMISES PARTIAL DAMAGE--INSURED LOSS. If Premises Partial Damage that is an Insured Loss occurs, then Lessor shall, at Lessor's expense, repair such damage (but not Lessor's Trade Fixtures or Lessee-Owned Alterations and Utility Installations) as soon as reasonably possible and this Lease shall continue in full force and effect. In the event, however, that there is a shortage of insurance proceeds and such shortage is due to the fact that, by reason of the unique nature of the improvements in the Premises, full replacement cost insurance coverage was not commercially reasonable and available, Lessor shall have no obligation to pay for the shortage in insurance proceeds or to fully restore the unique aspects of the Premises unless Lessee provides Lessor with the funds to cover same, or adequate assurance thereof, within ten (10) days following receipt of written notice of such shortage and request therefor. If Lessor receives said funds or adequate assurance thereof within said ten (10) day period, Lessor shall complete them as soon as reasonably possible and this Lease shall remain in full force and effect. If Lessor does not receive such funds or assurance within said period, Lessor may nevertheless elect by written notice to Lessee within ten (10) days thereafter to make such restoration and repair as is commercially reasonable with Lessor paying any shortage in proceeds, in which case
INDUSTRIAL/COMMERCIAL MULTI-TENANT LEASE--GROSS
this Lease shall remain in full force and effect. If Lessor does not receive such funds or assurance within such ten (10) day period, and if Lessor does not so elect to restore and repair, then this shall terminate sixty (60) days following the occurrence of the damage or destruction. Unless otherwise agreed, Lessee shall in no event have any right to reimbursement from Lessor for any funds contributed by Lessee to repair any such damage or destruction. Premises Partial Damage due to flood or earthquake shall be subject to Paragraph 9.3 rather than Paragraph 9.2, notwithstanding that there may be some insurance coverage, but the net proceeds of any such insurance shall be made available for the repairs if made by either Party.
9.3 PARTIAL DAMAGE - UNINSURED LOSS. If Premises Partial Damage that is not an Insured Loss occurs, unless caused by a negligent or willful act of Lessee (in which event Lessee shall make the repairs at Lessee's expense and this Lease shall continue in full force and effect), Lessor may at Lessor's option, either (i) repair such damage as soon as reasonably possible at Lessor's expense, in which event, this Lease shall continue in full force and effect, or (ii) give written notice to Lessee within thirty (30) days after receipt by Lessor of Knowledge of the occurrence of such damage of Lessor's desire to terminate this Lease as of the date sixty (60) days following the date of such notice. In the event Lessor elects to give such notice of Lessor's intention to terminate this Lease, Lessee shall have the right within ten (10) days after the receipt of such notice to give written notice to Lessor of Lessee's commitment to pay for the repair of such damage totally at Lessee's expense and without reimbursement from Lessor. Lessee shall provide Lessor with the required funds or satisfactory assurance thereof within thirty (30) days following such commitment from Lessee. In such event this Lease shall continue in full force and effect, and Lessor shall proceed to make such repairs as soon as reasonably possible after the required funds are available. If Lessee does not give such notice and provide the funds or assurance thereof within the times specified above, this Lease shall terminate as of the date specified in Lessor's notice of termination.
9.4 TOTAL DESTRUCTION. Notwithstanding any other provisions hereof, if Premises Total Destruction occurs (including any destruction required by any authorized public authority), this Lease shall terminate sixty (60) days following the date of such Premises Total Destruction, whether or not the damage or destruction is an Insured Loss or was caused by a negligent or willful act of Lessee. In the event, however, that the damage or destruction was caused by Lessee, Lessor shall have the right to recover Lessor's damages from Lessee except as released and waived in Paragraph 9.7.
9.5 DAMAGE NEAR END OF TERM. If at any time during the last six (6) months of the term of this Lease there is damage for which the cost to repair exceeds one month's Base Rent, whether or not an Insured Loss, Lessor and Lessee may, terminate this Lease effective thirty (30) days following the date of occurrence of such damage by giving written notice to the other of its election to do so within thirty (30) days after the date of occurrence of such damage. Provided, however, if Lessee at this time has an exercisable option to extend this Lease or to purchase the Premises, then Lessee may preserve this Lease by (a) exercising such option, and (b) providing Lessor with any shortage in insurance proceeds (or adequate assurance thereof) needed to make the repairs on or before the earlier of (i) the date which is ten (10) days after Lessee's receipt of Lessor's written notice purporting to terminate this Lease, or (ii) the day prior to the date upon which such option expires. If Lessee duly exercises such option during such period and provide Lessor with funds (or adequate assurance thereof) to cover any shortage in insurance proceeds, Lessor shall, at Lessor's expense repair such damage as soon as reasonably possible and this Lease shall continue in full force and effect. If Lessee fails to exercise such option and provide such funds or assurance during such period, then this Lease shall terminate as of the date set forth in the first sentence of this Paragraph 9.5.
9.6 ABATEMENT OF RENT; LESSEE'S REMEDIES.
(a) In the event of (i) Premises Partial Damage or (ii) Hazardous Substance Condition for which Lessee is not legally responsible, the Base Rent, Common Area Operating Expenses and other charges, if any, payable by Lessee hereunder for the period during which such damage or condition, its repair, remediation or restoration continues, shall be abated in proportion to the degree to which Lessee's use of the Premises is impaired. Except for abatement of Base Rent, Common Area Operating Expenses and other charges, if any, as aforesaid, all other obligations of Lessee hereunder shall be performed by Lessee, and Lessee shall have no claim against Lessor for any damage suffered by reason of any such damage, destruction, repair, remediation or restoration.
(b) If Lessor shall be obligated to repair or restore the
Premises under the provision of this Paragraph 9 and shall not commence, in a
substantial and meaningful way, the repair or restoration of the Premises
within ninety (90) days after such obligation shall accrue, Lessee may, at
any time prior to the commencement of such repair or restoration, give
written notice to Lessor and to any Lenders of which Lessee has actual notice
of Lessee's election to terminate this Lease on a date not less than sixty
(60) following the giving of such notice. If Lessee gives such notice to
Lessor and such Lenders and such repair or restoration is not commenced
within thirty (30) days after receipt of such notice, this Lease shall
terminate as of the date specified in said notice. If Lessor or a Lender
commence the repair or restoration of the Premises within thirty (30) days
after the receipt of such notice, this Lease shall continue in full force and
effect. "Commence" as used in this Paragraph 9.6 shall mean either the
unconditional authorization of the preparation of the required plans, or the
beginning of the actual work on the Premises, whichever occurs first.
9.7 HAZARDOUS SUBSTANCE CONDITIONS. If a Hazardous Substance
Condition occurs, unless Lessee is legally responsible therefor (in which
case Lessee shall make the investigation and remediation thereof required by
Applicable Requirements and this Lease shall continue in full force and
effect, but subject to Lessor's rights under Paragraph 6.2(c) and Paragraph
13), Lessor may at Lessor's option either (i) investigate and remediate such
Hazardous Substance Condition, if required, as soon as reasonably possible at
Lessor's expense, in which event this Lease shall continue in full force and
effect, or (ii) if the estimated cost to investigate and remediate such
condition exceeds twelve (12) times the then monthly Base Rent or $100,000,
whichever is greater, give written notice to Lessee within thirty (30) days
after receipt by Lessor of knowledge of the occurrence of such Hazardous
Substance Condition of Lessor's desire to terminate this Lease as of the date
sixty (60) days following the date of such notice. In the event Lessor elects
to give such notice of Lessor's intention to terminate this Lease, Lessee
shall have the right within ten (10) days after the receipt of such notice to
give notice to Lessor of Lessee's commitment to pay for the excess costs of
(a) investigation and remediation of such Hazardous Substance Condition to
the extent required by Applicable Requirements, over (b) an amount equal to
twelve (12) times the then monthly Base Rent or $100,000, whichever is
greater. Lessee shall provide Lessor with the funds required of Lessee or
satisfactory assurance thereof within thirty (30) days following said
commitment by Lessee. In such event this Lease shall continue in full force
and effect, and Lessor shall proceed to make such investigation and
remediation as soon as reasonably possible after the required funds are
available. If Lessee does not give such notice and provide the required funds
or assurance thereof within the time period specified above, this Lease shall
terminate as of the date specified in Lessor's notice of termination.
9.8 TERMINATION - ADVANCE PAYMENTS. Upon termination of this Lease pursuant to this Paragraph 9, Lessor shall return to Lessee any advance payment made by Lessee to Lessor and so much of Lessee's Security Deposit as has not been, or is not then required to be, used by Lessor under the terms of this Lease.
9.9 WAIVER OF STATUS. Lessor and Lessee agree that the terms of this Lease shall govern the effect of any damage to or destruction of the Premises and the Building with respect to the termination of this Lease and hereby waive the provisions of any present or future statute to the extent it is inconsistent herewith.
10. REAL PROPERTY TAXES.
10.1 PAYMENT OF TAXES. Lessor shall pay the Real Property Taxes, as defined in Paragraph 10.2(a), applicable to the Industrial Center, and except as otherwise provided in Paragraph 10.3, any increases in such amounts over the Base Real Property Taxes shall be included in the calculation of Common Area Operating Expenses in accordance with the provisions of Paragraph 4.2.
10.2 REAL PROPERTY TAX DEFINITIONS.
(a) As used herein, the term "Real Property Taxes" shall include any form of real estate tax or assessment, general, special, ordinary or extraordinary, and any license fee, commercial rental tax, improvement bond or bonds, levy tax (other than inheritance, personal income or estate taxes) imposed upon the Industrial Center by any authority having the direct or indirect power to tax, including any city, state or federal government, or any school, agricultural, sanitary, fire, street, drainage, or other improvement district thereof, levied against any legal equitable interest of Lessor in the Industrial Center or any portion thereof, Lessor's right to rent or other income therefrom, and/or Lessor business of leasing the Premises. The term "Real Property Taxes" shall also include any tax, fee, levy, assessment or charge, or any increase therein, imposed by reason of events occurring, or changes in Applicable Law taking effect, during the term of this Lease, including the execution of this Lease, or any
INDUSTRIAL/COMMERCIAL MULTI-TENANT LEASE--GROSS
modification, amendment or transfer thereof, and any modification made to the Premises by or for Lessee whether or not contemplated by the Parties, but not including a change in ownership of the Industrial Center.
(b) As used herein, the term "BASE REAL PROPERTY TAXES" shall be the amount of Real Property Taxes, which are assessed against the Premises, Building or Common Area in the calendar year during which the Lease is executed. In calculating Real Property Taxes for any calendar year, the Real Property Taxes for any real estate tax year shall be included in the calculation of Real Property Taxes for such calendar year and tax year have in common.
10.3 ADDITIONAL IMPROVEMENTS. Common Area Operating Expenses shall not include Real Property Taxes specified in the tax assessor's records and worksheets as being caused by additional improvements placed upon the Industrial Center by other lessees or by Lessor for the exclusive enjoyment of such other lessees. Notwithstanding Paragraph 10.1 hereof, Lessee shall, however, pay to Lessor at the time Common Area Operating Expenses are payable under Paragraph 4.2, the entirety of any increase in Real Property Taxes if assessed solely by reason of Alteration, Trade Fixtures or Utility Installations placed upon the Premises by Lessee or at Lessee's request.
10.4 JOINT ASSESSMENT. If the Building is not separately assessed, Real Property Taxes allocated to the Building shall be an equitable proportion of the Real Property Taxes for all of the land and improvements included within the tax parcel assessed, such proportion to be determined by Lessor from the respective valuation signed in the assessor's worksheets or such other information as may be reasonably available. Lessor's reasonable determination thereof, in good faith, shall be conclusive.
10.5 LESSEE'S PROPERTY TAXES. Lessee shall pay prior to delinquency all taxes assessed against and levied upon Lessee-Owned Alterations and Utility Installations, Trade Fixtures, furnishings, equipment and all personal property of Lessee contained in the Premises or stored within the Industrial Center. When possible, Lessee shall cause its Lessee-Owned Alterations and Utility Installations, Trade Fixtures, furnishings, equipment and all other personal property to be assessed and billed separately from the real property of the Lessor. If any of Lessee's said property shall be assessed with Lessor's real property, Lessee shall pay Lessor the taxes attributable to Lessee's property within ten (10) days after receipt of a written statement setting forth the taxes applicable to Lessee's property.
11. UTILITIES. Lessee shall pay directly for all utilities and services supplied to the Premises, including but not limited to electricity, telephone, security, gas and cleaning of the Premises, together with any taxes thereon. If any such utilities or services are not separately metered to the Premises or separately billed to the Premises, Lessee shall pay to the Lessor a reasonable proportion to be determined by Lessor of all such changes jointly metered or billed with other premises in the Building, in the manner and within the time periods set forth in Paragraph 4.2(d).
12. ASSIGNMENT AND SUBLETTING.
12.1 LESSOR'S CONSENT REQUIRED.
(a) Lessee shall not voluntarily or by operation of law assign, transfer, mortgage or otherwise transfer or encumber (collectively "assign") or sublet all or any part of Lessee's interest in this Lease or in the Premises without Lessor's prior written consent given under and subject to the terms of Paragraph 36.
(b) a change in the control of Lessee shall constitute an assignment requiring Lessor's consent. The transfer, on a cumulative basis, of forty-nine percent (49%) or more of the voting control of Lessee shall constitute a change in control for this purpose.
(c) The involvement of Lessee or its assets in any transaction, or series of transactions (by way of merger, sale, acquisition, financing, refinancing, transfer, leveraged buy-out or otherwise), whether or not a formal assignment or hypothecation of this Lease or Lessee's assets occurs, which results or will result in a reduction of Net Worth of Lessee, as hereafter defined, by an amount equal to or greater than twenty-five percent (25%) of such Net Worth of Lessee as it was represented to Lessor at the time of full execution and delivery of this Lease or at the time of the most recent assignment to which Lessor has consented, or as it exists immediately prior to said transaction or transactions constituting such reduction, at whichever time said Net Worth of Lessee was or is greater, shall be considered an assignment of this Lease by Lessee to which Lessor may reasonably withhold its consent. "NET WORTH OF LEASE" for purpose of this Lease shall be the net worth of Lessee (excluding Guarantors) established under generally accepted accounting principles consistently applied.
(d) An assignment or subletting of Lessee's interest in this Lease without Lessor's specific prior written consent shall, at Lessor's option, be a Default curable after notice per Paragraph 13.1, or a non-curable Breach without the necessity of any notice and grace period. If Lessor elects to treat such uncontested to assignment or subletting as a non-curable Breach, Lessor shall have the right to either: (i) terminate this Lease, or (ii) upon thirty (30) days written notice ("Lessor's Notice"), increase the monthly Base Rent for the Premises to the greater of the then fair market rental value of the Premises, as reasonably determined by Lessor, or one hundred ten percent (110%) of the Base Rent then in effect. Pending determination of the new fair market rental value, if disputed by Lessee, Lessee shall pay the amount set forth in Lessor's Notice, with any overpayment credited against the next installment(s) of Base Rent coming due, and any underpayment for the period retroactively to the effective date of the adjustment being due and payable immediately upon the determination thereof. Further, in the event of such Breach and rental adjustment, (i) the purchase price of any option to purchase the Premises held by Lessee shall be subject to similar adjustment to the then fair market value as reasonably determined by Lessor (without the Lease being considered an encumbrance or any deduction for depreciation or obsolescence, and considering the Premises at its highest and best use and in good condition) or one hundred ten percent (110%) of the price previously in effect, (ii) any index-oriented rental or price adjustment formula contained in this Lease shall be adjusted to require that the base index be determined with reference to the index applicable to the time of such adjustment, and (iii) any fixed rental adjustment scheduled during the remainder of the Lease term shall be increased in the same ratio as the new rental bears to the Base Rent in effect immediately prior to the adjustment specified in Lessor's Notice.
(e) Lessee's remedy for any breach of this Paragraph 12.1 by Lessor shall be limited to compensatory damages and/or injunctive relief.
12.2 TERMS AND CONDITIONS APPLICABLE TO ASSIGNMENT AND SUBLETTING.
(a) Regardless of Lessor's consent, any assignment or
subletting shall not (i) be effective without the express written assumption
by such assignee or sublessee of the obligations of Lessee under this Lease,
(ii) release Lessee of any obligations hereunder, nor (iii) alter the primary
liability of Lessee for the payment of Base Rent and other sums due Lessor
hereunder or for the performance of any other obligations to be performed by
Lessee under this Lease.
(b) Lessor may accept any rent or performance of Lessee's obligations from any person other than Lessee pending approval or disapproval of an assignment. Neither a delay in the approval or disapproval of such assignment nor the acceptance of any rent for performance shall constitute a waiver or estoppel of Lessor's right to exercise its remedies for the Default or Breach by Lessee of any of the terms, covenants or conditions of this Lease.
(c) The consent of Lessor to any assignment or subletting shall not constitute a consent to any subsequent assignment or subletting by Lessee or to any subsequent or successive assignment or subletting by the assignee or sublessee. However, Lessor may consent to subsequent subletting and assignments of the sublease or any amendments or modifications thereto without notifying Lessee or anyone else liable under this Lease or the sublease and without obtaining their consent, and such actions shall not relieve such persons from liability under this Lease or the sublease.
(d) In the event of any Default or Breach of Lessee's obligation under this Lease, Lessor may proceed directly against Lessee, any Guarantors or anyone else responsible for the performance of Lessee's obligations under this Lease, including the sublessee, without first exhausting Lessor's remedies against any other person or entity responsible therefor to Lessor, or any security held by Lessor.
(e) Each request for consent to an assignment or subletting shall be writing, accompanied by information relevant Lessor's determination as to the financial and operational responsibility and appropriateness of the proposed assignee or sublessee, including but not limited to the intended use and/or required modification of the Premises, if any, together with a non-refundable deposit of $1,000 or ten percent (10%) of the monthly Base Rent applicable to the portion of the Premises which is the subject of the proposed assignment or sublease whichever is greater, as
INDUSTRIAL/COMMERCIAL MULTI-TENANT LEASE--GROSS
reasonable consideration for Lessor's considering and processing the request for consent. Lessee agrees to provide Lessor with such other or additional information and/or documentation as may be reasonably requested by Lessor.
(f) Any assignee of, or sublessee under, this Lease shall, by reason of accepting such assignment or entering into such sublease, be deemed, for the benefit of Lessor, to have assumed and agreed to conform and comply with each and every term, covenant, condition and obligation herein to be observed or performed by Lessee during the term of said assignment or sublease, other than such obligations as are contrary to or inconsistent with provisions of an assignment or sublease to which Lessor has specifically consented in writing.
(g) The occurrence of a transaction described in paragraph 12.2(c) shall give Lessor the right (but not the obligation) to require that the Security Deposit be increased by an amount equal to two (2) times the then monthly Base Rent, and Lessor may make the actual receipt by Lessor of the Security Deposit increase a condition to Lessor's consent to such transaction.
(h) Lessor, as a condition to giving its consent to any assignment or subletting may require that the amount and adjustment schedule of the rent payable under this Lease be adjusted to what is then the market value and/or adjustment schedule for property similar to the Premises as then constituted, as determined by Lessor.
12.3 ADDITIONAL TERMS AND CONDITIONS APPLICABLE TO SUBLETTING. The following terms and conditions shall apply to any subletting by Lessee of all or any part of the Premises and shall be deemed included in all subleases under this Lease whether or not expressly incorporated herein:
(a) Lessee hereby assigns and transfers to Lessor fifty percent (50%) above its cost of Lessee's interest in all rentals and income arising from any sublease of all or a portion of the Premises heretofore or hereafter made by Lessee, and Lessor may collect such rent and income and apply same toward Lessee's obligations under this Lease; provided, however, that until a Breach (as defined in Paragraph 13.1) shall occur in the performance of Lessee's obligations under this Lease, Lessee may, except as otherwise provided in this Lease, receive, collect, and enjoy the rents accruing under such sublease. Lessor shall not, by reason of the foregoing provision or any other assignment of such sublease to Lessor, nor by reason of the collection of the rents from a sublessee, be deemed liable to the sublessee for any failure of Lessee to perform and comply with any of Lessee's obligations to such sublessee under such Sublease. Lessee hereby irrevocably authorizes and directs any such sublessee, upon receipt of a written notice from Lessor stating that Breach exists in the performance of Lessee's obligations under this Lease, to pay to Lessor the rents and other charges due and to become due under the sublease. Sublessee shall rely upon any such statement and request from Lessor and shall pay such rents and other charges to Lessor without any obligation or rights to inquire as to whether such Breach exists and notwithstanding any notice from or claim from Lessee to the contrary. Lessee shall have no right or claim against such sublessee, or, until the Breach has been cured, against Lessor, for any such rents and other charges so paid by said sublessee to Lessor.
(b) In the event of a Breach by Lessee in the performance of its obligations under this Lease, Lessor, at its option and without any obligation to do so, may require sublessee to attorn to Lessor, in which event Lessor shall undertake the obligations of the sublessor under such sublease from the time of the exercise of said option to the expiration of such sublease; provided, however, Lessor shall not be liable for any prepaid rents or security deposit paid by such sublessee to such sublessor or for any other prior defaults or breaches of such sublessor under such sublease.
(c) Any matter or thing requiring the consent of the sublessor under a sublease shall also require the consent of Lessor herein.
(d) No sublessee under a sublease approved by Lessor shall further assign or sublet all or any part of the Premises without Lessor's prior written consent.
(e) Lessor shall deliver a copy of any notice of Default or Breach by Lessee to sublessee, who shall have the right to cure the Default of Lessee within the grace period, if any, specified in such notice. The sublessee shall have the right of reimbursement and offset from and against Lessee for any such Defaults cured by the sublessee.
13. DEFAULT; BREACH; REMEDIES.
13.1 DEFAULT; BREACH. Lessor and Lessee agree that if an attorney is consulted by Lessor in connection with a Lessee Default or Breach (as hereinafter defined), actual fees and costs is a reasonable sum for legal services and costs in the preparation and service of a notice of Default, Lessor may include the cost of such services and costs in said notice as rent due and payable to cure said default. A "Default" by Lessee is defined as a failure by Lessee to observe, comply with or perform any of the terms, covenants, conditions or rules applicable to Lessee under this Lease. A "Breach" by Lessee is defined as the occurrence of any one or more of the following Defaults, and, where a grace period for cure after notice is specified herein, the failure by Lessee to cure such Default prior to the expiration of the applicable grace period, and shall entitle Lessor to pursue the remedies set forth in Paragraph 13.2 and/or 13.3:
(a) The vacating of the Premises without the intention to reoccupy the same, or the abandonment of the Premises.
(b) Except as expressly otherwise provided in this Lease, the failure by Lessee to make any payments of Base Rent, Lessee's Share of Common Area Operating Expenses, or any other monetary payment required to be made by Lessee hereunder as and when due, the failure by Lessee to provide Lessor with reasonable evidence of insurance or surety bond required under this Lease, or the failure of Lessee to fulfill any obligation under this Lease, where such failure continues for a period of five (5) days following written notice thereof by or on behalf of Lessor to Lessee, except that which endangers or threatens life or property where such failure continues for a period of one (1) day.
(c) Except as expressly otherwise provided in this Lease,
the failure by Lessee to provide Lessor with reasonable written evidence (in
duly executed original form, if applicable) of (i) compliance with Applicable
Requirements per Paragraph 6.3, (ii) the inspection, maintenance and service
contracts required under Paragraph 7, (iii) the rescission of an unauthorized
assignment or subletting per Paragraph 12.1, (iv) a Tenancy Statement per
Paragraphs 16 or 37, (v) the subordination or non-subordination of this Lease
per Paragraph 30, (vi) the guaranty of the performance of Lessee's
obligations under this Lease if required under Paragraphs 1.11 and 37, (vii)
the execution of any document requested under Paragraph 42 (easements), or
(viii) any other documentation or information which Lessor may reasonably
require of Lessee under the terms of this Lease, where any such failure
continues for a period of fifteen (15) days following written notice by or on
behalf of Lessor to Lessee.
(d) a Default by Lessee as to the terms, covenants,
conditions or provisions of this Lease, or of the rules adopted under
Paragraph 40 hereof that are to be observed, complied with or performed by
Lessee, other than those described in Subparagraphs 13.1(a), (b), or (c),
above, where such Default continues for a period of thirty (30) days after
written notice thereof by or on behalf of Lessor to Lessee; provided,
however, that if the nature of Lessee's Default is such that more than thirty
(30) days are reasonably required for its cure, then it shall not be deemed
to be a Breach of this Lease by Lessee if Lessee commences such cure within
said thirty (30) day period and thereafter diligently prosecutes such cure to
completion.
(e) The occurrence of any of the following events: (i) the
making by Lessee of any general arrangements or assignments for the benefit
of creditors; (ii) Lessee's becoming a "debtor" as defined in 11 U.S. Code
Section 101 or any successor statute thereto (unless, in the case of a
petition filed against Lessee, the same is dismissed within sixty (60) days;
(iii) the appointment of a trustee or receiver to take possession of
substantially all of Lessee's assets located at the Premises or of Lessee's
interest in this Lease, where possession is not restored to Lessee within
thirty (30) days; or (iv) the attachment, execution or other judicial seizure
of substantially all of Lessee's assets located at the Premises or of
Lessee's interest in this Lease, where such seizure is not discharged within
thirty (30) days; provided, however, in the event that
INDUSTRIAL/COMMERCIAL MULTI-TENANT LEASE--GROSS
any provision of this Subparagraph 13.1(c) is contrary to any applicable law, such provision shall be of no force or effect, and shall not affect the validity of the remaining provisions.
(f) The discovery by Lessor that any financial state of Lessee or of any Guarantor, given to Lessor by Lessee or any Guarantor, was materially false.
(g) If the performance of Lessee's obligations under this Lease is guaranteed: (i) the death of a Guarantor, (ii) the termination of a Guarantor's liability with respect to this Lease other than in accordance with the terms of such guaranty, (iii) a Guarantor's becoming insolvent or the subject of a bankruptcy filing, (iv) a Guarantor's refusal to honor the guaranty, or (v) a Guarantor's breach of its guaranty obligation on anticipatory breach basis, and Lessee failure, within sixty (60) days following written notice by or on behalf of Lessor to Lessee of any such event, to provide Lessor with written alternative assurances of security, which, when coupled with the then existing resources of Lessee, equals or exceeds the combined financial resources of Lessee and the Guarantors that existed at the time of execution of this Lease.
13.2 REMEDIES. If Lessee fails to perform an affirmative duty or obligation of Lessee under this Lease, within ten (10) days after written notice to Lessee (or in case of an emergency, without notice), Lessor may at its option (but without obligation to do so), perform such duty or obligation on Lessee's behalf, including but not limited to the obtaining of reasonably required bonds, insurance policies, or governmental licenses, permits or approvals. The costs and expenses of any such performance by Lessor shall be due and payable by Lessee to Lessor upon invoice therefor. If any check given to Lessor by Lessee shall not be honored by the bank upon which it is drawn, Lessor, at its own option, may require all future payments to be made under this Lease by Lessee to be made only by cashier's check. In the event of a Breach of this Lease by Lessee (as defined in Paragraph 13.1), with or without further notice or demand, and without limiting Lessor in the exercise of any right or remedy which Lessor may have by any reason of such Breach, Lessor may:
(a) Terminate and Lessee shall immediately surrender possession of the Premises to Lessor. In such event Lessor shall be entitled to recover from Lessee: (i) the worth at the time of the award of the unpaid rent which had been earned at the time of termination; (ii) the worth at the time of the amount by which the unpaid rent which would have been earned after termination until the time of award exceeds the amount of unpaid rent for the balance of the term after the time of award exceeds the amount of such rental loss that the Lessee proves could be reasonably avoided; and (iii) any other amount necessary to compensate Lessor for all the detriment proximately award exceeds the amount of unpaid rent for the balance of the terms after the time of award excess the amount of such rental by the Lessee failure to perform its obligations under this Lease or which in the ordinary course of things could be likely to result therefrom, including but not limited to the cost of recovering possession of the Premises, expenses of reletting, including necessary renovation and alteration of the Premises, reasonable Lease. The worth at the time of award of the amount referred to in provision (iii) of the immediately preceding sentence shall be computed by discount in such amount at the discount rate of the Federal Reserve Bank of San Francisco or the Federal Reserve Bank District in which the Premises are located at the time of award plus one percent (1%). Efforts by Lessor to mitigate damages caused by Lessee's Default or Breach of this Lease shall not waive Lessor's right to recover damages under this Paragraph 13.2. If termination of this Lease is obtained through the provisional remedy of unlawful detainer, Lessor shall have the right to recover in such proceeding the unpaid rent and damages are recoverable therein, or Lessor may reserve the right to recover all or any part thereof in a separate suit for such rent and/or damages if a notice and grace may be given to Lessee under any statute authorizing the forfeiture of leases for unlawful detainer shall also constitute the applicable notice for grace period purposes required by Subparagraph 13.1(b), (c) or (d). In such case, the applicable grace period under this unlawful detainer statute shall run concurrently after the one such statutory notice, and the failure of Lessee to cure the Default within the greater of the two (2) such grace periods shall constitute both an unlawful detainer and a Breach of this Lease entitle in Lessor to the remedies provided for this Lease and/or by said statute.
(b) Continue the Lease and Lessee's right to possession in effect (in California under California Civil Code Section 1951.4) after Lessee's Breach and recover the rent as it becomes due, provided Lessee has the right to sublet or assign, subject only to reasonable limitations. Lessor and Lessee agree that the limitations on assignment and subletting in this Lease are reasonable. Acts of maintenance or preservation, efforts to relet the Premises, or the appointment of a receiver to protect the Lessor's interest under this Lease, shall not constitute a termination of the Lessee's right to possession.
(c) Pursue any other remedy now or hereafter available to Lessor under the laws or judicial decisions of the state wherein the Premises are located.
(d) The expiration or termination of this Lease and/or the termination of Lessee's right to possession shall not relieve Lessee from liability under any indemnity provisions of this Lease as to matters occurring or accruing during the term hereof by reason of Lessee's occupancy of the Premises.
13.3 INDUCEMENT RECAPTURE IN EVENT OF BREACH. Any agreement by Lessor for free or abated rent or other charges applicable to the Premises, or forth giving or paying by Lessor to or for Lessee of any cash or other bonus, inducement reconsideration for Lessee's entering into this Lease, all of which concessions are hereinafter referred to as "Inducement Provisions" shall be deemed conditioned upon Lessee's full and faithful performance of all of the terms, covenants and conditions of this Lease to be performed or observed by Lessee during the term hereof as the same may be extended. Upon the occurrence of a Breach (as defined in paragraph 13.1) of this Lease by Lessee, any such Inducement or vision shall automatically be deemed deleted from the lease and of no further force or effect, and any rent, other change, bonus inducement or consideration therefor abated, given or paid by Lessor under such an Inducement Provision shall be immediately due and payable by Lessee to Lessor, and recoverable by Lessor, as additional rent due under this Lease, notwithstanding any subsequent cure of said Breach by Lessee. The acceptance by Lessor of rent or the cure of the Breach which initiated the operation of this Paragraph 13.3 shall not be deemed waiver by Lessor of the Provisions of this Paragraph 13.3 unless specifically so stated in writing by Lessor at the time of such acceptance.
13.4 LATE CHARGES. Lessee hereby acknowledges that late payment
by Lessee to Lessor of rent and other sums due hereunder will cause Lessor to
incur costs not contemplated by this Lease, the exact amount of which will be
extremely difficult to ascertain. Such costs include, but are not limited to,
processing and accounting charges, and alter charges which may be imposed
upon Lessor by the terms of any ground lease, mortgage or deed of trust
covering the Premises. Accordingly, if any installment of rent or the sum due
from Lessee shall not be received by Lessor or Lessor's designee with three
(3) business days after such amount shall be due, then, without any
requirement for notice to Lessee, Lessee shall pay to Lessor a late charge
equal to six percent (6%) of such overdue amount. The parties hereby agree
that such late charge represents a fair and reasonable estimate of the costs
Lessor will incur by reason of late payment by Lessee. Acceptance of such
late charge by Lessor shall in no event constitute a waiver of Lessee's
Default or Breach with respect to such overdue amount, nor prevent Lessor
from exercising any of the other rights and remedies granted hereunder. In
the event that a late charge is payable hereunder, whether or not collected,
for three (3) consecutive installments of Base Rent, then notwithstanding
Paragraph 4.1 or any other provision of this Lease to the contrary, Base Rent
shall, at Lessor's option, become due and payable quarterly in advance.
13.5 BREACH BY LESSOR. Lessor shall not deemed in breach of this Lease unless Lessor fails within a reasonable time to perform an obligation required to be performed by Lessor. For purposes of this Paragraph 13.5, a reasonable time shall in no event be less then perform an obligation required to be performed by Lessor. For purposes of this paragraph 13.5, a reasonable time shall in no event be less than thirty (30) days after receipt by Lessor, and by any Lender(s) whose names and address shall have been furnished to Lessee in writing for such purpose, or written notice specifying wherein such obligation of Lessor has not been performed; provided, however, that if the nature of Lessor's
INDUSTRIAL/COMMERCIAL MULTI-TENANT LEASE--GROSS
obligation is such that more than thirty (30) days after such notice are reasonably required for its performance, then Lessor shall not be in breach of this Lease if performance is commenced within such thirty (30) day period and thereafter diligently pursued to completion.
14. CONDEMNATION. If the Premises or any portion thereof are taken under the power of eminent domain or sold under the threat of the exercise of such power (all of which are herein called "condemnation"), this Lease shall terminate as to the part so taken as of the date of the condemnation authority takes title or possession, whichever first occurs. If more than ten percent (10%) of the floor area of the Premises, or more than twenty five percent (25%) of the portion of the Common Areas designated for Lessee's parking, is taken by condemnation, Lessee may, at Lessee's option, to be exercise in writing within ten (10) days after Lessor shall have given Lessees written notice of such taking over in the absence of such notice, within ten (10) days after the condemning authority shall have taken possession) terminate this Lease as of the date the condemning authority takes such possession. If Lessee does not terminate this Lease in accordance with the foregoing, this Lease shall remain in full force and effect as to the portion of the Premises remaining, except that the Base Rent shall be reduced in the same proportion as the rentable floor area of the Premises taken bears to the total rentable floor area of the Premises. No reduction of Base Rent shall occur if the condemnation does not apply to any portion of the Premises. Any award for the taking of all or any part of the Premises under the power of eminent domain or any payment made under threat of the exercise of such power shall be the property of Lessor, whether such award shall be made as compensation for diminution of value of the leasehold or for the making of the fee or as severance damages; provided, however, that Lessee shall be entitled to any compensation, separately awarded to Lessee for Lessee's relocation expenses and/or loss of Lessee's Trade Fixtures. In the event that this Lease is not terminated by reason of such condemnation, Lessor shall to the extent of its net severance damages receive, over and above Lessee's Share of the legal and other expenses incurred by Lessor in the condemnation matter, repair any damage to the Premises caused by such condemnation authority.
15. BROKER'S FEES.
15.1 PROCURING CAUSE. The Broker(s) named in Paragraph 1.14 is/are the procuring cause of this Lease.
15.2 ADDITIONAL TERMS. Unless Lessor and Broker(s) have otherwise agreed in writing, Lessor agrees that: (a) if Lessee exercises any Option (as defined in Paragraph 39.1) granted under this Lease or any Option subsequently granted, or (b) if Lessee acquires any rights to the Premises or other premises in which Lessor has an interest, or (c) if Lessee remains in possession of the Premises with the consent of Lessor after the expiration of the term of this Lease after having failed to exercise an Option, or (d) if said Brokers are the procuring cause of any other lease or sale entered into between the Parties pertaining to the Premises and/or any adjacent property in which Lessor has an interest, or (e) if Base Rent is increased, whether by agreement or operation of an escalation clause herein, then as to any of said transactions, Lessor shall pay said Broker(s) a fee in accordance with the schedule of said Broker(s) in effect at the time of the execution of this Lease.
15.3 ASSUMPTION OF OBLIGATIONS. Any buyer or transferee of Lessor's interest in this Lease, whether such transfers by agreement or by operation of law shall be deemed to have assumed Lessor's obligation under this paragraph 15. Each Broker shall be an intended third party beneficiary of the provisions of Paragraph 1.14 and of this Paragraph 15 to the extent of its interest in any commission arising from this Lease and may enforce that right directly against Lessor and its successors.
15.4 REPRESENTATIONS AND WARRANTIES. Lessee and Lessor each represent and warrant to the other that it has had no dealings with any person, firm, broker or finder other than as named Paragraph 1.14 in connection with the negotiation of this Lease and/or the consummation of the transaction contemplated hereby, and that no broker or other firm or entity other than said named Broker(s) is entitled to any commission or finder's fee in connection with said transaction. Lessee and Lessor do each hereby agree to indemnify, protect, defend and hold the other harmless from and against liability for compensation or charges which may be claimed by any such unnamed broker, finder or other similar party by reason of any dealings or actions of the indemnifying Party, including any costs, expenses, and/or attorney' fees reasonably incurred with respect thereto.
16. TENANCY AND FINANCIAL STATEMENTS.
16.1 TENANCY STATEMENT. Each Party (as "Responding Party") shall within ten (10) days after written notice from the other Party (the "Requesting Party") execute, acknowledge and deliver to the Requesting Party a statement in writing in a form similar to the then most current "Tenancy Statement" form published by the American Industrial Real Estate Association, plus such additional information, confirmation and/or statements as may be reasonably requested by the requesting party.
16.2 FINANCIAL STATEMENT. If Lessor desires to finance, refinance, or sell the Premises or the building, or any part thereof, Lessee and all Guarantors shall deliver to any potential lender or purchaser designated by Lessor such financial statements of Lessee and such Guarantors as may be reasonably required by such lender or purchaser, including but not limited to Lessee's financial statements for the past three (3) years. All such financial statements shall be received by Lessor and such lender or purchaser in confidence and shall be used only for the purposes herein set forth.
17. LESSOR'S LIABILITY. The term "Lessor" as used herein shall mean the owner or owners at the time in question of the fee title to the Premises. In the event of a transfer of Lessor's title or interest in the Premises or in this Lease, Lessor shall deliver to the transferee or assignee (in cash or by credit) any unused Security Deposit held by Lessor at the time of such transfer or assignment. Except as provided in Paragraph 15.3, upon such transfer or assignment and delivery of the Security Deposit as aforesaid the prior Lessor shall be relieved of all liability with respect to the obligations and/or covenants under this Lease thereafter to be performed by the Lessor. Subject to the foregoing, the obligations and/or covenants in this Lease to be performed by the Lessor shall be binding only upon the Lessor as hereinabove defined.
18. SEVERABILITY. The invalidity of any provision of this Lease, as determined by a court of competent jurisdiction, shall in no way affect the validity of any other provision hereof.
19. INTEREST OF PAST-DUE OBLIGATIONS. Any monetary payment due Lessor hereunder, other than late charges, not received by Lessor within ten (10) days following the date on which it was due, shall bear interest from the date due at the prime rate charged by the largest state chartered bank in the state in which the Premises are located plus four percent (4%) per annum, but not exceeding the maximum rate allowed by law, in addition to the potential late charge provided for in Paragraph 13.4.
20. TIME OF ESSENCE. Time is of the essence with respect to the performance of all obligations to be performed or observed by the Parties under this Lease.
21. RENT DEFINED. All monetary obligations of Lessee to Lessor under the terms of this Lease are deemed to be rent.
22. NO PRIOR OR OTHER AGREEMENTS; BROKER DISCLAIMER. This Lease contains all agreements between the Parties with respect to any matter mentioned herein, and no other prior or contemporaneous agreement or understanding shall be effective. Lessor and Lessee each represents and warrants to the Brokers that it has made and is relying solely upon, its own investigation as to the nature, quality, character and financial responsibility of the other Party to this Lease and as to the nature, quality and character of the Premises. Brokers have no responsibility with respect thereto or with respect to any default or breach hereof by either Party. Each Broker shall be an intended third party beneficiary of the provisions of this Paragraph 22.
23. NOTICES.
23.1 NOTICE REQUIREMENTS. All notices required or permitted by this Lease shall be in writing and may be delivered in person (by hand or by messenger or courier service or may be sent by regular, certified or registered mail or U.S. Postal Service Express Mail, with postage prepaid, or by facsimile transmission during normal business hours, and shall be deemed sufficiently given if served in a manner specified in this Paragraph 23. The address noted adjacent to a party's signature on this Lease shall be that Party's address for delivery or mailing of notice purposes. Either Party may by written notice to the other specify a different address for notice purposes, except that upon Lessee's taking possession of the Premises, the Premises shall constitute Lessee's address for the purpose of mailing or delivering notices to Lessee. A copy of all notices required or permitted to be given to Lessor hereunder shall be concurrently transmitted to such party or parties at such addresses as Lessor may from time to time hereafter designate by written notice to Lessee.
INDUSTRIAL/COMMERCIAL MULTI-TENANT LEASE--GROSS
23.3 DATE OF NOTICE. Any notice sent by registered or certified mail, return receipt requested, shall be deemed given on the date of delivery shown on the receipt card, or if no delivery date is shown, the postmark thereon. If sent by regular mail, the notice shall be deemed given forty-eight (48) hours after the same is addressed as required therein and mailed with postage prepaid. Notice delivered by United States Express Mail or overnight courier that guarantees next day delivery shall be deemed given twenty-four hours after delivery of the same served or delivered upon telephone or facsimile confirmation of receipt of the transmission thereto, provided a copy is also delivered via delivery or mail. If notice is received on a Saturday or a Sunday or a legal holiday, it shall be deemed received on the next business day.
24. WAIVERS. No waiver by Lessor or the Default or Breach of any term, covenant or condition hereof by Lessee, shall be deemed a waiver of any other term, covenant or condition hereof, or of any subsequent Default or Breach by Lessee of the same or any other term covenant or condition hereof by Lessee, shall be deemed a waiver of any other term, covenant or condition hereof, or of any subsequent Default or Breach by Lessee of the same or any other term, covenant or condition hereof. Lessor's consent to, or approval of, any such act shall not be deemed to render unnecessary the obtaining of Lessor's consent to or approval of, any subsequent or similar act by Lessee, or be construed as the basis of an estoppel to enforce the provision or provisions of the Lease requiring such consent. Regardless of Lessor's knowledge of a Default or Breach at the time of accepting rent, the acceptance of rent by Lessor shall not be a waiver of any Default or Breach by Lessee of any provision hereof. Any payment given Lessor by Lessee may be accepted by Lessor on account of money or damages due Lessor, notwithstanding any qualifying terms or conditions made by Lessee in connection therewith, which such statements and/or conditions shall be of no force of effect whatsoever unless specifically agreed to in writing by Lessor at or before the time of deposit of such payment.
25. RECORDING. Either Lessor or Lessee shall, upon request of the other, execute, acknowledge and deliver to the other a short form memorandum of this Lease for recording purposes. The Party requesting recordation shall be responsible for the payment of any fees or taxes applicable thereto.
26. NO RIGHT TO HOLDOVER. Lessee has no right to retain possession of the Premises or any part thereof beyond the expiration or earlier termination of this Lease. In the event that Lessee holds over in violation of this Paragraph 26 then the Base Rent applicable during the month immediately preceding such expiration or earlier termination. Nothing contained herein shall be construed as a consent by Lessor to any holding over by Lessee.
27. CUMULATIVE REMEDIES. No remedy or election hereunder shall be deemed exclusive but shall, whenever possible, be cumulative with all other remedies at law or in equity.
28. BINDING EFFECT; CHOICE OF LAW. This Lease shall be binding upon the Parties, their personal representatives, successors and assigns and be governed by the laws of the State in which the Premises are located. Any litigation between the Parties hereto concerning this Lease shall be initiated in the county in which the Premises are located.
30. SUBORDINATION; ATTORNMENT; NON-DISTURBANCE.
30.1 SUBORDINATION. This Lease and any Option granted hereby shall be subject to and subordinate to any ground lease, mortgage deed of trust, or other type hypothecation or security device (collectively "Security Device"), now or hereafter placed by Lessor upon the real property of which the Premises are a part, to any and all advances made on the security thereof, and to all renewals, modifications, consolidations, replacements and extensions thereof. Lessee agrees that the Lenders holding any such Security Device shall have not duty, liability or obligation to perform any of the obligations of Lessor under this Lease, but that in the event of Lessor's default with respect to any default pursuant to Paragraph 13.5 if any Lender shall elect to have this Lease and/or any Option granted hereby superior to the lien of its Security Device and shall give written notice thereof to Lessee, this Lease and such Options shall be deemed prior to such Security Device, notwithstanding the relative dates of the documentary or recordation thereof.
30.2 ATTORNMENT. Subject to the non-disturbance provisions of Paragraph 30.3, Lessee agrees to attorn to a Lender or any other party who acquires ownership of the Premises by reason of a foreclosure of a Security Device, and that in the event of such foreclosure such new shall not: (i) be liable for any act or omission of any prior Lessor with respect to events occurring prior to acquisition of ownership, (i) be subject to any offsets or defenses which Lessee might have against any prior Lessor, or (iii) be bound by prepayment of more than one month's rent.
30.3 NON-DISTURBANCE. With respect to Security Devices entered into by Lessor after the execution of this Lease, Lessee's subordination of this Lease shall be subject to receiving assurance (a "non-disturbance agreement") from the Lender that Lessee's possession and his Lease, including any options to extend the term thereof, will not be disturbed so long as Lessee is not in Breach hereof and attorns to the record owner of the Premises.
30.4 SELF-EXECUTING. The agreements contained in this Paragraph 30 shall be effective without the execution of any further documents; provided, however, that upon written request from Lessor or a Lender in connection with a sale financing or refinancing of the documents; provided, however, that upon written request from Lessor or a Lender in connection with a sale financing or refinancing of the Premises, Lessee and Lessor shall execute such further writing as may be reasonably required to separately document any such subordination or non-subordination, attornment and/or non-disturbance agreement as is provided for herein.
31. ATTORNEYS' FEES. If any Party brings an action or proceeding to enforce the term thereof or declare rights hereunder, the Prevailing Party (as hereafter defined) in any such proceeding, action, or appeal thereon, shall be entitled to reasonable attorneys' fees. Such fees may be awarded in the same suit or recovered in a separate suit, whether or not such action or proceeding is pursued to decision or judgment. The term "Prevailing Party" shall include, without limitation, a Party who substantially obtains or defects the relief sought, as the case may be, whether by compromise, settlement, judgment, or the abandonment by the other Party of its claim or defense. The attorneys' fee award shall not be computed by compromise, settlement, judgment, or the abandonment by the other Party of its claim or defense. The attorney's fee award shall not be computed in accordance with any court fee schedule, but shall be such as to fully reimburse all attorneys' fees reasonably incurred. Lessor shall be entitled to attorneys' fees, costs and expenses incurred in preparation and service of notices of Default and consultations in connection therewith, whether or not a legal action subsequently commenced in connection with such Default or resulting Breach.
32. LESSOR'S ACCESS: SHOWING PREMISES; REPAIR. Lessor and Lessor's agents shall have the right to enter the Premises at any time, in the case of an emergency, and otherwise at reasonable times with reasonable advance notice for the purpose of showing the same to prospective purchasers, lenders, or lessee, and making such alterations, repairs, improvements or additions to the Premises or to the Building, as Lessor may reasonably deem necessary. Lessor may at any time place on or about the Premises or Building any ordinary "For Sale" signs and Lessor may at any item during the last one hundred eighty (180) days of the term thereof place on or about the Premises ordinary "For Lease" signs. All such activities of Lessor shall be without abatement of rent or liability to Lessee.
33. AUCTIONS. Lessee shall not conduct, nor permit to be conducted, either voluntarily or involuntarily, any auction upon the Premises without first having obtained Lessor's prior written consent. Notwithstanding anything to the contrary in this Lease, Lessor shall not be obligated to exercise any standard of reasonableness in determining whether to grant such consent.
34. SIGNS. Lessee shall not place any sign upon the exterior of the Premises of the Building, except that Lessee may, with Lessor's prior written consent, install (but not on the roof) such signs as are reasonably required to advertise Lessee's own business so long as such signs are in a location designated by Lessor and comply with the Applicable Requirements and the signage criteria established for the Industrial Center by Lessor. The installation of any sign on the Premises by or for Lessee shall be subject to the provisions of Paragraph 7 (Maintenance, Repairs, Utility Installations, Trade Fixtures and Alterations). Unless otherwise expressly agreed herein, Lessor reserves all rights to the use of the roof of the Building, and the right to install advertising signs on the Building, including the roof, which do not unreasonably interfere with the conduct of Lessee's business; Lessor shall be entitled to all revenues from such advertising signs.
INDUSTRIAL/COMMERCIAL MULTI-TENANT LEASE--GROSS
35. TERMINATION; MERGER. Unless specifically stated otherwise in writing by Lessor, the voluntary or other surrender of this Lease by Lessee, the mutual termination or cancellation hereof, or a termination hereof by Lessor for Breach by Lessee, shall automatically terminate any sublease or lesser estate in the Premises; provided, however, Lessor shall, in the event of any such surrender, termination or cancellation, have the option to continue any one or all of any existing subtenancies. Lessor's failure within ten (10) days following any such event to make a written elect to the contrary by written notice to the holder of any such lessor interest, shall constitute Lessor's election to have such event constitute termination of such interest.
36. CONSENTS.
(a) Except for Paragraph 33 hereof (auctions) or as otherwise provided herein, wherever in this Lease the consent of a Party is required to an act by or for the other Party, such consent shall not be unreasonably withheld or delayed. Lessor's actual reasonable costs and expenses (including but not limited to architects', attorneys, engineers, and other consultants' fees) incurred in the consideration of, or response to, a request by Lessee for any Lessor consent pertaining to this Lease or the Premises, including, but not limited to consents to an assignment subletting or the presence or use of a Hazardous Substance, shall be paid by Lessee to Lessor upon receipt of an invoice and supporting documentation therefor. In addition to the deposit described in Paragraph 12.2(e), Lessor may as a condition to considering any such request by Lessee, require that Lessee deposit with Lessor an amount of money (in addition to the Security Deposit held under Paragraph 5) reasonably calculated by Lessor to represent the cost Lessor will incur in considering and responding to Lessee's request. Any unused portion of a deposit shall be refunded to Lessee without interest. Lessor's consent to any act, assignment of this Lease or subletting of the Premises by Lessee shall not constitute an acknowledgment that no Default or Breach by Lessee of this Lease exists, nor shall such consent be deemed waiver of any then existing Default or Breach, except, as may be otherwise specifically stated in writing by Lessor at the time of such consent.
(b) All conditions to Lessor's consent authorized by this Lease are acknowledged by Lessee as being reasonable. The failure to specify herein any particular condition to Lessor's consent shall not preclude the impositions by Lessor at the time of consent of such further or other conditions as are then reasonable with reference to the particular matter for which consent is being given.
37. GUARANTOR.
37.1 FORM OF GUARANTY. If there are to be any Guarantors of this lease per Paragraph 1.11, the form of the guaranty to be executed by each such Guarantor shall be in the form most recently published by the American Industrial Real Estate Association, and each such Guarantor shall have the same obligations as Lessee under this Lease, including but not limited to the obligation to provide the tenancy statements and information required in Paragraph 16.
37.2 ADDITIONAL OBLIGATIONS OF GUARANTOR. It shall constitute a Default of the Lessee under this Lease if any such Guarantor fails or refuses, upon reasonable request by Lessor to give: (a) evidence of the due execution of the guaranty called for by this Lease, including the authority of the Guarantor (and of the party signing on the Guarantor's behalf) to obligate such Guarantor on said guaranty, and resolution of its board of directors authorizing the making of such guaranty, together with a certificate of incumbency showing the signatures of the persons authorized to sign on its behalf, (b) current financial statements of Guarantor as may from time to time be requested by Lessor, (c) a Tenancy Statement, or (d) written confirmation that the guaranty is still in effect.
38. QUIET POSSESSION. Upon payment by Lessee for the rent for the Premises and the performance of all of the covenants, conditions and provisions on Lessee's part to be observed and performed under this Lease, Lessee shall have quiet possession of the Premises or for the entire term hereof subject to all provisions of this Lease.
39. OPTIONS.
39.1 DEFINITIONS. As used in this Lease, the word "Option" has the following meaning: (a) the right to extend the term of this Lease or to renew this Lease or to extend or renew any lease that Lessee has on other property of Lessor: (b) the right of first refusal to lease the Premises or their right of first offer to lease the Premises or the right of first refusal to lease other property of Lessor, or the right of first offer to lease other property of Lessor; (c) the right to purchase the Premises, or the right of first refusal to purchase the Premises, or the right of first offer to purchase the Premises, or the right to purchase other property of Lessor or the right of first refusal to purchase other property of Lessor, or the right of first offer to purchase other property of Lessor.
39.2 OPTIONS PERSONAL TO ORIGINAL LESSEE. Each option granted to
Lessee in this Lease is personal to the original Lessee named in Paragraph
1.1. hereof, and cannot be voluntarily or involuntarily assigned or exercised
by any person or entity other than said original Lessee while the original
Lessee is in full and actual possession of the Premises and without the
intention of thereafter assigning or subletting. The Options, if any, herein
granted to Lessee are not assignable, with a part of an assignment of this
Lease or separately or apart therefrom, and no Option may be separated from
this Lease in any manner, by reservation or otherwise.
39.3 MULTIPLE OPTIONS. In the event that Lessee has any multiple Options to extend or renew this Lease, a later option cannot be exercised unless the prior Options to extend or renew this Lease have been validly exercised.
39.4 EFFECT OF DEFAULT ON OPTIONS.
(a) Lessee shall have no right to exercise an Option, notwithstanding any provisions the grant of Option of the contrary: (i) during the period commencing with the giving of any notice of Default under Paragraph 13.1 and continuing until the noticed Default is cured, or (ii) during the period of time any monetary obligation due Lessor from Lessee is unpaid (without regard to whether notice thereof is given Lessee) or (iii) during the time Lessee is in Breach of this Lease, or (iv) in the event that Lessor has given to Lessee three (3) or more notices of separate Defaults under Paragraph 13.1 during the twelve (12) month period immediately preceding the exercise of the option, whether or not the Defaults are cured.
(b) The period of time within which an Option may be exercised shall not be extended or enlarged by reason of Lessee's inability to exercise an Option because of the provisions of Paragraph 39.4(a).
(c) All rights of Lessee under the provisions of an option shall terminate and be of no further force of effect, notwithstanding Lessee's due and timely exercise of the Option, if, after such exercise and during the term of this Lease (i) Lessee fails to pay to Lessor a monetary obligation of Lessee for a period of thirty (30) days after such obligation becomes due (without any necessity of Lessor to give notice thereof to Lessee), or (ii) Lessor gives to Lessee three (3) or more notices of separate Defaults under Paragraph 13.1 during any twelve (12) month period, whether or not the Defaults are cured, or (iii) if Lessee is in a Breach of this Lease.
40. RULES AND REGULATIONS. Lessee agrees that it will abide by, and keep and observe all reasonable rules and regulations ("Rules and Regulations") which Lessor may make from time to time for the management, safety, care, and cleanliness of the grounds, the parking and unloading of vehicles and the preservation of good order, as well as for the convenience of other occupants or tenants of the Building and the Industrial Centre and their invitees.
41. SECURITY MEASURES. Lessee hereby acknowledges that the rental payable to Lessor hereunder does not include the cost of guard service or other security measures, and that Lessor shall have no obligation whatsoever to provide same. Lessee assumes all responsibility for the protection of the Premises, Lessee, its agents and invitees and their property from the acts of third parties.
42. RESERVATIONS. Lessor reserves the right, from time to time, to grant, without the consent or joinder of Lessee, such easements, rights of way, utility raceways, and dedications that Lessor deems necessary, and to cause the recordation of parcel map and restrictions, so long as such easements, rights of way, utility raceways, dedications, maps and restrictions do not unreasonably interfere with the use of the Premises by Lessee. Lessee agrees to sign any documents reasonably requested by Lessor to effectuate any such easement rights, dedication, map or restrictions.
43. PERFORMANCE UNDER PROTEST. If at any time a dispute shall arise as to any amount or sum of money to be paid by one Party to the other under the provisions hereof, the Party against whom the obligation to pay the money is asserted shall have the right to make payment "under protest" and such payment shall not be regarded as a voluntary payment and there shall survive the right on the part of said Party to institute
INDUSTRIAL/COMMERCIAL MULTI-TENANT LEASE--GROSS
suit for recovery of such sum. If it shall be adjudged that there was no legal obligation on the part of said Party to pay such sum or any part thereof, said Party shall be entitled to recover such sum or so much thereof as it was not legally required to pay under the provisions of Lease.
44. AUTHORITY. If either Party hereto is a corporation, trust, or general or limited partnership, each individual executing this Lease on behalf of such entity represents and warrants that he or she is duly authorized to execute and deliver this Lease on its behalf. If Lessee is a corporation, trust or partnership, Lessee shall, within thirty (30) days after request by Lessor, deliver to Lessor evidence satisfactory to lessor of XXX authority.
45. CONFLICT. Any conflict between the printed provisions of this Lease and the typewritten or handwritten provisions shall be controlled by typewritten or handwritten provisions.
46. OFFER. Preparation of this Lease by either Lessor or Lessee or Lessor's agent or Lessee's agent and submission of same to Lessee XXX Lessor shall not be deemed an offer to lease. This lease is not intended to be binding until executed and delivered by all Parties hereto.
47. AMENDMENTS. This Lease may be modified only in writing, signed by the parties in interest at the time of the modification. The Parties shall amend this Lease from time to time to reflect any adjustments that are made to the Base Rent or other rent payable under this Lease. As long as they do not materially change Lessee's obligations hereunder, Lessee agrees to make such reasonable non-monetary modifications to the Lease as may be reasonably required by an institutional insurance company or pension plan Lender in connection with the obtaining of normal financing or refinancing of the property of which the Premises are a part.
48. MULTIPLE PARTIES. Except as otherwise expressly provided herein, if more than one person or entity is named herein as either Lessor or Lessee, the obligations of such multiple parties shall be joint and several responsibility of all persons or entities named herein as such Lessor or Lessee.
LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND PROVISION CONTAINED HEREIN AND, BY EXECUTION OF THIS LEASE, SHOW THEIR INFORMED AND VOLUNTARY CONSENT THERETO, THE PARTIES HEREBY AGREE THAT AT THE TIME THIS LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE REASONABLE AND EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE PREMISES.
IF THIS LEASE HAS BEEN FILLED IN, IT HAS BEEN PREPARED FOR YOUR ATTORNEY'S REVIEW AND APPROVAL. FURTHER EXPERTS SHOULD BE CONSULTED TO EVALUATE THE CONDITION OF THE PROPERTY FOR THE POSSIBLE PRESENCE OF ASBESTOS, UNDERGROUND STORAGE TANKS OR HAZARDOUS SUBSTANCES. NO REPRESENTATION OR RECOMMENDATION IS MADE BY THE AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION OR BY THE REAL ESTATE BROKERS OR THEIR CONTRACTORS, AGENTS OR EMPLOYEES AS TO THE LEGAL SUFFICIENCY, LEGAL EFFECT, OR TAX CONSEQUENCES OF THIS LEASE OR THE TRANSACTION TO WHICH IT RELATES; THE PARTIES SHALL RELY SOLELY UPON THE ADVICE OF THEIR OWN COUNSEL AS TO THE LEGAL AND TAX CONSEQUENCES OF THIS LEASE. IF THE SUBJECT PROPERTY IS IN A STATE OTHER THAN CALIFORNIA, AN ATTORNEY FROM THE STATE WHERE THE PROPERTY IS LOCATED SHOULD BE CONSULTED.
The parties hereto have executed this Lease at the place and on the dates specified above their respective signatures.
LESSOR NEARON ENTERPRISES, LLC
By By /s/ William E. Rich
------------------------------- --------------------------------
Its Its President
--------------- ----------------------
By By
------------------------------- --------------------------------
Its Its
--------------- ----------------------
|
Executed at Executed at
---------------------- -----------------------
On (date) On (date) April 16, 1996
------------------------ -------------------------
Address 30 Oak Court Address 470 San Antonio Rd.
-------------------------- ---------------------------
Danville, CA 94526 Palo Alto, CA 94306
--------------------------------- ----------------------------------
|
INDUSTRIAL/COMMERCIAL MULTI-TENANT LEASE--GROSS
EXHIBIT B
GENERAL RULES
1. Lessee shall not suffer or permit the obstruction of any Common Areas, including driveways, walkways and stairways.
2. Lessor reserves the right to refuse access to any persons Lessor in good faith judges to be a threat to the safety, reputation, property of the Office Building Project and its occupants.
3. Lessee shall not make or permit any noise or odors that annoy or interfere with other lessees or persons having business within Office Building Project.
4. Lessee shall not keep animals or birds within the Office Building Project, and shall not bring bicycles, motorcycles or other vehicles into areas not designated as authorized for same.
5. Lessee shall not make, suffer or permit litter except in appropriate receptacles for that purpose.
6. Lessee shall not alter any lock or install new or additional locks or bolts.
7. Lessee shall be responsible for the inappropriate use of any toilet rooms, plumbing or other utilities. No foreign substances of any kind are to be inserted therein.
8. Lessee shall not deface the walls, partitions or other surfaces of the premises or Office Building Project.
9. Lessee shall not suffer or permit anything in or around the Premises or Building that causes excessive vibration or floor loading in a part of the Office Building Project.
10. Furniture, significant freight and equipment shall be moved into or out of the building only with the Lessor's knowledge and consent and subject to such reasonable limitations, techniques and timing, as may be designated by Lessor. Lessee shall be responsible for any damage to the Office Building Project arising from any such activity.
11. Lessee shall not employ any service or contractor for services or work to be performed in the Building, except as approved by Lessor.
12. Lessor reserves the right to close and lock the Building on Saturdays, Sundays and legal holidays, and on other days between the hours of 5:00 p.m. and 8:00 a.m. It is Lessee's responsibility to keep the Building locked at all times other than ordinary business hours. If Lessee uses the Premises during such periods, Lessee shall be responsible for securely locking any doors it may have opened for entry or exit.
13. Lessee shall be provided with two sets of keys upon occupancy. Lessee shall return all keys at the termination of its tenancy and shall be responsible for the cost of replacing any lost keys.
14. No window coverings, shades or awnings shall be installed or used by Lessee.
15. No Lessee, employee or invitee shall go upon the roof of the Building.
16. Lessee shall not suffer or permit smoking or carrying of lighted cigars or cigarettes anywhere inside the Building.
17. Lessee shall not use any method of heating or air conditioning other than as provided by Lessor.
18. Lessee shall not install, maintain or operate any vending machines upon the Premises without Lessor's written consent.
19. The Premises shall not be used for lodging or manufacturing, cooking or food preparation.
20. Lessee shall comply with all safety, fire protection and evacuation regulations established by Lessor any applicable governmental agency.
21. Lessor reserves the right to waive any one of these rules or regulations, and/or as to any particular Lessee, and any such waiver shall not constitute a waiver of any other rule or regulation or any subsequent application thereof to such Lessee.
22. Lessee assumes all risks from theft of vandalism and agrees to keep its Premises locked as may be required.
23. Lessor reserves the right to make such other reasonable rules and regulations as it may from time to time deem necessary for the regulations.
PARKING RULES
1. Parking Areas shall be used only for parking by vehicles no longer than full size, passenger automobiles herein called "Permitted Size Vehicles". Vehicles other than Permitted Size Vehicles are herein referred to as "Oversized Vehicles".
2. Lessee shall not permit or allow any vehicles that belong to or are controlled by Lessee or Lessee's employees, suppliers, shippers, customers, or invitees to be loaded, unloaded, or parked in areas other than those designated by Lessor for such activities.
3. Lessor reserves the right to relocate all or a part of parking spaces from floor to floor, within one floor, and/or to reasonably adjacent off site location(s), and to reasonably allocate them between compact and standard size spaces, as long as the same complies with applicable laws, ordinances and regulations.
4. Users of the parking area will obey all posted signs and park only in the areas designated for vehicle parking.
5. Unless otherwise instructed, every person using the parking area is required to park and lock his own vehicle. Lessor will not be responsible for any damage to vehicles, injury to property, all of which risks are assumed by the party using the parking area.
6. The maintenance, washing, waxing or cleaning of vehicles in the parking structure of Common Area is prohibited.
7. Lessee shall be responsible for seeing that all of its employees, agents and invitees comply with the applicable parking rules, regulations, laws and agreements.
8. Lessor reserves the right to modify these rules and/or adopt such other reasonable and nondiscriminatory rules and regulations as it may deem necessary for the proper operation of the parking area.
9. Such parking used herein provided is intended merely as a license only and no bailment is intended or shall be created hereby.
INDUSTRIAL/COMMERCIAL MULTI-TENANT LEASE--GROSS
EXHIBIT C
TENANT IMPROVEMENTS
The premises shall be constructed in accordance with Lessor's Standard Improvements, as follows:
As shown on Exhibit "A" and as follows:
1. PARTITIONS - Demolish walls in Areas 6 & 7; Install walls in Areas 2, 5, & 9.
2. WALL SURFACES - Installed walls will be painted to match existing.
3. WINDOW COVERINGS - As is.
4. FLOORING - As is.
5. DOORS - Seal door in Area 1; Install doors in Areas 3, 4, & 8.
6. ELECTRICAL AND TELEPHONE OUTLETS - As is.
7. CEILINGS - As is.
8. LIGHTING - As is.
9. HEATING AND AIR CONDITIONING DUCTS - As is.
10. PLUMBING - As is.
11. VENT HOOD - Lessee to install vent hood in Area 10.
INDUSTRIAL/COMMERCIAL MULTI-TENANT LEASE--GROSS
AMENDMENT OF LEASE
THIS EXTENSION AND AMENDMENT OF LEASE is entered into as of APRIL 22, 1997, by and between NEARON ENTERPRISES, LLC, hereinafter called "Lessor", and CIPHERGEN BIOSYSTEMS, INC., hereinafter called "Lessee".
WITNESSETH
WHEREAS, under a Lease dated MARCH 20, 1996, Lessor is leasing and Lessee is hiring from Lessor that certain Premises situated at 490 SAN ANTONIO ROAD, SUITE 201, PALO ALTO, CALIFORNIA, together with non-exclusive use of parking areas and public facilities appurtenant to said Premises;
WHEREAS, Lessor and Lessee wish to amend, modify, and change the terms, covenants, and conditions of said Lease;
NOW, THEREFORE, the following portions of the aforementioned Lease shall be amended as follows:
1.3 PREMISES: Current: Suite 201, approximately 8,456 square feet
Additional: Suite 202, approximately 2,744 square feet
Total: Suites 201 and 202, approximately 11,200 square
feet
1.6 TERM: Eleven (11) months, commencing MAY 1, 1997 ("Commencement Date") and
ending MARCH 31, 1998, as defined in paragraph 3.
1.8 BASE RENT: Current: $9,724.0 per month
Additional: $3,567.00 per month begining May 1, 1997, payable
on or before the first (1st) day of each month.
Total: $13,291.00 per month
1.9 BASE RENT PAID UPON EXECUTION: $13,291.00
($1,784.00) discounted rent for the period
May 1-31, 1997
Total paid upon execution: $11,507.00 for the period May 1-31, 1997
1.10 SECURITY DEPOSIT: Current: $9,724.00
Total: $9,724.00
|
All other terms and conditions of said Lease shall remain unchanged.
LESSOR: LESSEE:
NEARON ENTERPRISES, LLC CIPHERGEN BIOSYSTEMS, INC.
BY: Nearon Enterprises, BY: /s/ William E. Rich
a California Corporation ----------------------------
William E. Rich
|
Its: Designated Manager Its: President
------------------ --------------------------
BY: Date: April 28, 1997
------------------------- ----------------------------
David S. Christensen
EVP & COO
Date:
------------------
|
AMENDMENT OF LEASE
THIS EXTENSION AND AMENDMENT OF LEASE is entered into as of MAY 19, 1997, by and between NEARON ENTERPRISES, LLC, hereinafter called "Lessor", and CIPHERGEN BIOSYSTEMS, INC., hereinafter called "Lessee".
WITNESSETH
WHEREAS, under a Lease dated MARCH 20, 1996, Lessor is leasing and Lessee is hiring from Lessor that certain Premises situated at 490 SAN ANTONIO ROAD, SUITE 201, PALO ALTO, CALIFORNIA, together with non-exclusive use of parking areas and public facilities appurtenant to said Premises;
WHEREAS, Lessor and Lessee wish to amend, modify, and change the terms, covenants, and conditions of said Lease;
NOW, THEREFORE, the following portions of the aforementioned Lease shall be amended as follows:
1.3 PREMISES: Current: Suite 201, approximately 8,456 square feet
Additional: Suite 202, approximately 2,744 square feet
Total: Suites 201 and 202, approximately 11,200 square feet
1.6 TERM: Eleven (11) months, commencing MAY 1, 1997 ("Commencement Date") and ending
MARCH 31, 1998, as defined in paragraph 3.
1.8 BASE RENT: Current: $9,724.0 per month
Additional: $3,567.00 per month beginning May 1, 1997, payable on or
before the first (1st) day of each month.
Total: $13,291.00 per month
1.9 BASE RENT PAID UPON EXECUTION: $13,291.00
($1,784.00) discounted rent for the period
May 1-31, 1997
Total paid upon execution: $11,507.00 for the period May 1-31, 1997
1.10 LESSEE'S SHARE OF COMMON AREA OPERATING EXPENSES:
Current: Thirty-eight percent (38%) as determined by prorata
square footage of the Premises as compared to the
total square footage of the Building.
Modified Fifty percent (50%)
1.11 SECURITY DEPOSIT: Current: $9,724.00
Additional: $ - 0 -
Total: $9,724.00
|
All other terms and conditions of said Lease shall remain unchanged.
LESSOR: LESSEE:
NEARON ENTERPRISES, LLC CIPHERGEN BIOSYSTEMS, INC.
BY: Nearon Enterprises, BY: /s/ William E. Rich
a California Corporation ---------------------
William E. Rich
Its: Designated Manager Its: President
------------------ ----------------
BY: /s/ David S. Christensen Date: May 22, 1997
------------------------ ---------------------
David S. Christensen
EVP & COO
Date: 6-4-97
------------------
|
SECOND AMENDMENT OF LEASE
THIS AMENDMENT OF LEASE is entered into as of October 31, 1997, by and between
NEARON ENTERPRISES, LLC, Lessor, and CIPHERGEN BIOSYSTEMS, INC., Lessee.
WITNESSETH
WHEREAS, under a Lease dated MARCH 20, 1996 and as previously amended on MAY 19, 1997, Lessor is leasing and Lessee is hiring from Lessor that certain Premises situated at 490 SAN ANTONIO ROAD, SUITES 201 AND 202, PALE ALTO, CALIFORNIA, together with non-exclusive use of parking areas and public facilities appurtenant to said Premises;
WHEREAS. Lessor end Lessee wish to amend, modify, end change the terms, covenants, and conditions of said Lease;
NOW, THEREFORE, the following portions of the aforementioned Lease shall be amended as follows:
1.6 TERM: Twenty-four (24) months, ("ORIGINAL TERM") commencing
April l, 1996 ("COMMENCEMENT DATE") and ending MARCH 31, 1998
("EXPIRATION DATE"). (Also see paragraph 3.) Provided Lesee is
not in default of any of the terms of this Lease and by giving
written notice on or before November 7, 1997, Lessee has the
option to renew for one (1) year. The monthly rental rate for
Suite 201 during said option period shall be $1.20 per square
foot, gross.
|
All other terms and conditions of said Lease shall remain unchanged.
LESSOR: LESSEE:
NEARON ENTERPRISES, LLC CIPHERGEN BIOSYSTEMS, INC.
BY: Nearon Enterprise, BY: /S/ WILLIAM E. RICH
a California Corporation --------------------------
William E Rich
Its: DESIGNATED MANAGER Its: PRESIDENT/CEO
BY: /S/ RANDOLPH N. SAAR Date: 10-31-97
------------------------ ------------------------
Randolph N. Saar
Operations Manager
Date: 10/31/97
|
THIRD AMENDMENT OF LEASE
THIS AMENDMENT OF LEASE is entered into as of NOVEMBER 7, 1997, by and between
NEARON ENTERPRISES, LLC, Lessor, and CIPHERGEN BIOSYSTEMS, INC., Lessee.
WITNESSETH
WHEREAS, under a Lease dated MARCH 20, 1996 and as previously amended on MAY 19, 1997 AND OCTOBER 31, 1997, Lessor is leasing and Lessee is hiring from Lessor that certain Premises situated at 490 SAN ANTONIO ROAD, SUITES 201 AND 202, PALO ALTO, CALIFORNIA, together with non-exclusive use of parking areas and public facilities appurtenant to said Premises;
WHEREAS, Lessor and Lessee wish to amend, modify, and change the terms, covenants, and conditions of said Lease;
NOW, THEREFORE, the following portions of the aforementioned Lease shall be amended as follows:
1.6 TERM: THE EXPIRATION DATE (Also see paragraph 3.) shall
be extended to MARCH 31, 1999.
1.8 BASE RENT: $14,729.68 per month BASE RENT, payable on the first
day of each month Commencing April 1, 1998.
|
All other terms and conditions of said Lease shall remain unchanged.
LESSOR: LESSEE:
NEARON ENTERPRISES, LLC CIPHERGEN BIOSYSTEMS, INC.
By: Nearon Enterprises, By: /s/
a California Corporation -------------------------
for William E. Rich
Its: DESIGNATED MANAGER Its: PRESIDENT/CEO
By: /s/ RANDOLPH N. SAAR Date: 11-7-97
--------------------------- ------------------------
Randolph N. Saar
Operations Manager
Date: 11/7/97
-------------------
|
Exhibit 10.12
LEASE AGREEMENT
THIS LEASE, made this 28th day of January, 2000 between JOHN ARRILLAGA, Trustee, or his Successor Trustee, UTA dated 7/20/77 (JOHN ARRILLAGA SURVIVOR'S TRUST) as amended, and RICHARD T. PEERY, Trustee, or his Successor Trustee, UTA dated 7/20/77 (RICHARD T. PEERY SEPARATE PROPERTY TRUST) as amended hereinafter called Landlord, and CIPHERGEN BIOSYSTEMS, INC., a California corporation, hereinafter called Tenant.
WITNESSETH:
Landlord hereby leases to Tenant and Tenant hereby hires and takes from Landlord those certain premises (the "Premises") outlined in red on Exhibit "A", attached hereto and incorporated herein by this reference thereto more particularly described as follows:
A portion of that certain 60,720 PLUS OR MINUS square foot, one-story building located at 6607 Dumbarton Circle, Suite 200, Fremont, California 94555, consisting of approximately 30,232 PLUS OR MINUS square feet of space. Said Premises is more particularly shown within the area outlined in Red on EXHIBIT A attached hereto. The entire parcel, of which the Premises is a part, is shown within the area outlined in Green on EXHIBIT A attached. The Premises shall be constructed by Landlord as set forth in the related Construction Agreement of even date herewith. The improved interior configuration is shown in Red on EXHIBIT B to be attached hereto.
The word "Premises" as used throughout this lease is hereby defined to include the nonexclusive use of landscaped areas, sidewalks and driveways in front of or adjacent to the Premises, and the nonexclusive use of the area directly underneath or over such sidewalks and driveways. The gross leasable area of the building shall be measured from outside of exterior walls to outside of exterior walls, and shall include any atriums, covered entrances or egresses and covered loading areas.
Said letting and hiring is upon and subject to the terms, covenants and conditions hereinafter set forth and Tenant covenants as a material part of the consideration for this Lease to perform and observe each and all of said terms, covenants and conditions. This Lease is made upon the conditions of such performance and observance.
1. USE Tenant shall use the Premises only in conformance with applicable governmental laws, regulations, rules and ordinances for the purpose of general office, laboratory, research and development, storage and other uses necessary for Tenant to conduct Tenant's business, provided that such uses shall be in accordance with all applicable governmental laws and ordinances, and for no other purpose. Tenant shall not do or permit be done in or about the Premises nor bring or keep or permit to be brought or kept in or about the Premises anything which is prohibited by or will in any way increase the existing rate of (or otherwise affect) fire or any insurance covering the Premises or any part thereof, or any of its contents, or will cause a cancellation of any insurance covering the Premises or any part thereof, or any of its contents. Tenant shall not do or permit to be done anything in, on or about the Premises which will in any way obstruct or interfere with the rights of other tenants or occupants of the Premises or neighboring premises or injure or annoy them, or use or allow the Premises to be used for any improper, immoral, unlawful or objectionable purpose, nor shall Tenant cause, maintain or permit any nuisance in, on or about the Premises. No sale by auction shall be permitted on the Premises. Tenant shall not place any loads upon the floors, walls, or ceiling which endanger the structure, or place any harmful fluids or other materials in the drainage system of the building, or overload existing electrical or other mechanical systems. No waste materials or refuse shall be dumped upon or permitted to remain upon any part of the Premises or outside of the building in which the Premises are a part, except in trash containers placed inside exterior enclosures designated by Landlord for that purpose or inside of the building proper where designated by Landlord. No materials, supplies, equipment, finished products or semi-finished products, raw materials or articles of any nature shall be stored upon or permitted to remain outside the Premises. Tenant shall not place anything or allow anything to be placed near the glass of any window, door partition or wall which may appear unsightly from outside the Premises. No loudspeaker or other device, system or apparatus which can be heard outside the Premises shall be used in or at the Premises without the prior written consent of Landlord. Tenant shall not commit or suffer to be committed any waste in or upon the Premises. Tenant shall indemnify, defend and hold Landlord harmless against any loss, expense, damage, reasonable attorneys' fees, or liability arising out of failure of Tenant to comply with any applicable law. Tenant shall comply with any covenant, condition, or restriction ("CC&R's") affecting the Premises. The provisions of this paragraph are for the benefit of Landlord only and shall not be construed to be for the benefit of any tenant or occupant of the Premises. Landlord has provided a copy of said CC&R's to Tenant.
2. TERM*
A. The term of this Lease shall be for a period of EIGHT (8) years (unless
sooner terminated as hereinafter provided) and, subject to Paragraphs 2B and
3, shall commence on the 1st day of April , 2000 and end on the 31st day of
March, 2008.
B. Possession of the Premises shall be deemed tendered and the term of the Lease shall commence when the first of the following occurs:
(a) One day after a Certificate of Occupancy is granted by the proper
governmental agency, or, if the governmental agency having jurisdiction over the
area in which the Premises are situated does not issue certificates of
occupancy, then the same number of days after certification by Landlord's
architect or contractor that Landlord's construction work has been completed;
or
(b) Upon the occupancy of the Premises by any of Tenant's operating
personnel; or
(c) When the Tenant Improvements have been substantially completed for Tenant's use and occupancy, in accordance and compliance with Exhibit B of this Lease Agreement; or
(d) As otherwise agreed in writing.
* It is agreed in the event said Lease commences on a date other than the first day of the month the term of the Lease will be extended to account for the number of days in the partial month. The Basic Rent during the resulting partial month will be pro-rated (for the number of days in the partial month) at the Basic Rent rate scheduled for the projected commencement date as shown in Paragraph 39.
Initials: [ILLEGIBLE]
3. POSSESSION If Landlord, for any reason whatsoever, cannot deliver possession of said premises to Tenant at the commencement of the said term, as hereinbefore specified, this Lease shall not be void or voidable; no obligation of Tenant shall be affected thereby; nor shall Landlord or Landlord's agents be liable to Tenant for any loss or damage resulting therefrom; but in that event the commencement and termination dates of the Lease, and all other dates affected thereby shall be revised to conform to the date of Landlord's delivery of possession, as specified in Paragraph 2B, above. The above is, however, subject to the provision that the period of delay of delivery of the Premises shall not exceed 90 days from the commencement date herein (except those delays caused by Acts of God, strikes, war, utilities, governmental bodies, weather, unavailable materials, and delays beyond Landlord's control shall be excluded in calculating such period) in which instance Tenant, at its option, may, by written notice to Landlord, terminate this Lease.
4. RENT
A. BASIC RENT. Tenant agrees to pay to Landlord at such place as Landlord may designate without deduction, offset, prior notice, or demand, and Landlord agrees to accept as Basic Rent for the leased Premises the total sum of EIGHT MILLION TWO HUNDRED SEVENTY ONE THOUSAND FOUR HUNDRED SEVENTY FIVE AND 20/100 Dollars ($ 8,271,475.20) in lawful money of the United States of America, payable as follows:
See Paragraph 39 for Basic Rent Schedule
B. TIME FOR PAYMENT. Full monthly rent is due in advance on the first day of each calendar month. In the event that the term of this Lease commences on a date other than the first day of a calendar month, on the date of commencement of the term hereof Tenant shall pay to Landlord as rent for the period from such date of commencement to the first day of the next succeeding calendar month that proportion of the monthly rent hereunder which the number of days between such date of commencement and the first day of the next succeeding calendar month bears to thirty (30). In the event that the term of this Lease for any reason ends on a date other than the last day of a calendar month, on the first day of the last calendar month of the term hereof Tenant shall pay to Landlord as rent for the period from said first day of said last calendar month to and including the last day of the term hereof that proportion of the monthly rent hereunder which the number of days between said first day of said last calendar month and the last day of the term hereof bears to thirty (30).
C. LATE CHARGE. Notwithstanding any other provision of this Lease, if Tenant is in default in the payment of rental as set forth in this Paragraph 4 when due, or any part thereof, Tenant agrees to pay Landlord, in addition to the delinquent rental due, a late charge for each rental payment in default ten (10) days. Said late charge shall equal ten percent (10%) of each rental payment so in default.
D. ADDITIONAL RENT. Beginning with the commencement date of the term of this Lease, Tenant shall pay to Landlord or to Landlord's designated agent in addition to the Basic Rent and as Additional Rent the following:
(a) All Taxes relating to the Premises as set forth in Paragraph 9, and
(b) All insurance premiums and deductibles relating to the Premises, as set forth in Paragraph 12, and
(c) All charges, costs and expenses, which Tenant is required to pay hereunder, together with all interest and penalties, costs and expenses including reasonable attorneys' fees and legal expenses, that may accrue thereto in the event of Tenant's failure to pay such amounts, and all damages, reasonable costs and expenses which Landlord may incur by reason of default of Tenant or failure on Tenant's part to comply with the terms of this Lease. In the event of nonpayment by Tenant of Additional Rent, Landlord shall have all the rights and remedies with respect thereto as Landlord has for nonpayment of rent, and
(d) all prorated costs and expenses related to the Ardenwood Property Owners' Association as set forth in Paragraph 53.
The Additional Rent due hereunder shall be paid to Landlord or Landlord's agent (i) within five days for taxes and insurance and within thirty days for all other Additional Rent items after presentation of invoice from Landlord or Landlord's agent setting forth such Additional Rent and/or (ii) at the option of Landlord, Tenant shall pay to Landlord monthly, in advance, Tenant's pro rata share of an amount estimated by Landlord to be Landlord's approximate average monthly expenditure for such Additional Rent items, which estimated amount shall be reconciled within 120 days of the end of each calendar year or more frequently if Landlord elects to do so at Landlord's sole and absolute discretion as compared to Landlord's actual expenditure for said Additional Rent items, with Tenant paying to Landlord, upon demand, any amount of actual expenses expended by Landlord in excess of said estimated amount, or Landlord crediting to Tenant (providing Tenant is not in default in the performance of any of the terms, covenants and conditions of this Lease) any amount of estimated payments made by Tenant in excess of Landlord's actual expenditures for said Additional Rent items.
The respective obligations of Landlord and Tenant under this paragraph shall survive the expiration or other termination of the term of this Lease, and if the term hereof shall expire or shall otherwise terminate on a day other than the last day of a calendar year, the actual Additional Rent incurred for the calendar year in which the term hereof expires or otherwise terminates shall be determined and settled on the basis of the statement of actual Additional Rent for such calendar year and shall be prorated in the proportion which the number of days in such calendar year preceding such expiration or termination bears to 365.
E. FIXED MANAGEMENT FEE. Beginning with the Commencement Date of the Term of this Lease, Tenant shall pay to Landlord, in addition to the Basic Rent and Additional Rent, a fixed monthly management fee ("Management Fee") equal to 3% of the Basic Rent due for each month during the Lease Term.
F. PLACE OF PAYMENT OF RENT AND ADDITIONAL RENT. All Basic Rent hereunder and all payments hereunder for Additional Rent shall be paid to Landlord at the office of Landlord at Peery/Arrillaga, File 1504, Box 60000, San Francisco, CA 94160 or to such other person or to such other place as Landlord may from time to time designate in writing.
G. SECURITY DEPOSIT. Concurrently with Tenant's execution of this Lease, Tenant shall deposit with Landlord the sum of ONE HUNDRED NINETY THREE THOUSAND FOUR HUNDRED EIGHTY FOUR AND 80/100 Dollars ($ 193,484.80). Said sum shall be held by Landlord as a Security Deposit for the faithful performance by Tenant of all of the terms, covenants, and conditions of this Lease to be kept and performed by Tenant during the term hereof. If Tenant defaults with respect to any provision of this Lease, including, but not limited to, the provisions relating to the payment of rent and any of the monetary sums due herewith, Landlord may (but shall not be required to) use, apply or retain all or any part of this Security Deposit for the payment of any other amount which Landlord may spend by reason of Tenant's default or to compensate Landlord for
Initials: [ILLEGIBLE]
any other loss or damage which Landlord may suffer by reason of Tenant's default. If any portion of said Deposit is so used or applied, Tenant shall, within ten (10) days after written demand therefor, deposit cash with Landlord in the amount sufficient to restore the Security Deposit to its original amount. Tenant's failure to do so shall be a material breach of this Lease. Landlord shall not be required to keep this Security Deposit separate from its general funds, and Tenant shall not be entitled to interest on such Deposit. If Tenant fully and faithfully performs every provision of this Lease to be performed by it, the Security Deposit or any balance thereof shall be returned to Tenant (or at Landlord's option, to the last assignee of Tenant's interest hereunder) at the expiration of the Lease term and after Tenant has vacated the Premises. In the event of termination of Landlord's interest in this Lease, Landlord shall transfer said Deposit to Landlord's successor in interest whereupon Tenant agrees to release Landlord from liability for the return of such Deposit or the accounting therefor.
5. ACCEPTANCE AND SURRENDER OF PREMISES By entry hereunder, Tenant accepts the Premises as being in good and sanitary order, condition and repair and accepts the building and improvements included in the Premises in their present condition and without representation or warranty by Landlord as to the condition of such building or as to the use or occupancy which may be made thereof. Any exceptions to the foregoing must be by written agreement executed by Landlord and Tenant. Tenant agrees on the last day of the Lease term, or on the sooner termination of this Lease, to surrender the Premises promptly and peaceably to Landlord in good condition and repair (damage by Acts of God, fire, normal wear and tear excepted), with all interior walls painted, or cleaned so that they appear freshly painted, and repaired and replaced, if damaged; all floors cleaned and waxed; all carpets cleaned and shampooed; all broken, marred or nonconforming acoustical ceiling tiles replaced; all windows washed; the air conditioning and heating systems serviced by a reputable and licensed service firm and in good operating condition and repair; the plumbing and electrical systems and lighting in good order and repair, including replacement of any burned out or broken light bulbs or ballasts; the lawn and shrubs in good condition including the replacement of any dead or damaged plantings; the sidewalk, driveways and parking areas in good order, condition and repair; together with all alterations, additions, and improvements which may have been made in, to, or on the Premises (except moveable trade fixtures installed at the expense of Tenant) except that Tenant shall ascertain from Landlord within thirty (30) days before the end of the term of this Lease whether Landlord desires to have the Premises or any part or parts thereof restored to their condition and configuration as when the Premises were delivered to Tenant and if Landlord shall so desire, then Tenant shall restore said Premises or such part or parts thereof before the end of this Lease at Tenant's sole cost and expense. Tenant, on or before the end of the term or sooner termination of this Lease, shall remove all of Tenant's personal property and trade fixtures from the Premises, and all property not so removed on or before the end of the term or sooner termination of this Lease shall be deemed abandoned by Tenant and title to same shall thereupon pass to Landlord without compensation to Tenant. Landlord may, upon termination of this Lease, remove all moveable furniture and equipment so abandoned by Tenant, at Tenant's sole cost, and repair any damage caused by such removal at Tenant's sole cost. If the Premises be not surrendered at the end of the term or sooner termination of this Lease, Tenant shall indemnify Landlord against loss or liability resulting from the delay by Tenant in so surrendering the Premises including, without limitation, any claims made by any succeeding tenant founded on such delay. Nothing contained herein shall be construed as an extension of the term hereof or as a consent of Landlord to any holding over by Tenant. The voluntary or other surrender of this Lease or the Premises by Tenant or a mutual cancellation of this Lease shall not work as a merger and, at the option of Landlord, shall either terminate all or any existing subleases or subtenancies or operate as an assignment to Landlord of all or any such subleases or subtenancies.
6. ALTERATIONS AND ADDITIONS Tenant shall not make, or suffer to be made, any alteration or addition to the Premises, or any part thereof, without the written consent of Landlord first had and obtained by Tenant (such consent not to be unreasonably withheld), but at the cost of Tenant, and any addition to, or alteration of, the Premises, except moveable furniture and trade fixtures, shall at once become a part of the Premises and belong to Landlord. Landlord reserves the right to approve all contractors and mechanics proposed by Tenant to make such alterations and additions. Tenant shall retain title to all moveable furniture and trade fixtures placed in the Premises. All heating, lighting, electrical, airconditioning, floor to ceiling partitioning, drapery, carpeting, and floor installations made by Tenant, together with all property that has become an integral part of the Premises, shall not be deemed trade fixtures. Tenant agrees that it will not proceed to make such alteration or additions, without having obtained consent from Landlord to do so, and until five (5) days from the receipt of such consent, in order that Landlord may post appropriate notices to avoid any liability to contractors or material suppliers for payment for Tenant's improvements. Tenant will at all times permit such notices to be posted and to remain posted until the completion of work. Tenant shall, if required by Landlord, secure at Tenant's own cost and expense, a completion and lien indemnity bond, satisfactory to Landlord, for such work. Tenant further covenants and agrees that any mechanic's lien filed against the Premises for work claimed to have been done for, or materials claimed to have been furnished to Tenant, will be discharged by Tenant, by bond or otherwise, within ten (10) days after the filing thereof, at the cost and expense of Tenant. Any exceptions to the foregoing must be made in writing and executed by both Landlord and Tenant.
7. TENANT MAINTENANCE Tenant shall, at its sole cost and expense, keep and maintain the Premises (including appurtenances) and every part thereof in a high standard of maintenance and repair, and in good and sanitary condition. Tenant's maintenance and repair responsibilities herein referred to include, but are not limited to, janitorization, plumbing systems within the non-common areas of the Premises (such as water and drain lines, sinks), electrical systems within the non-common areas of the Premises (such as outlets, lighting fixtures, lamps, bulbs, tubes, ballasts), heating and airconditioning controls within the non-common areas of the Premises (such as mixing boxes, thermostats, time clocks, supply and return grills), all interior improvements within the premises including but not limited to: wall coverings, window coverings, acoustical ceilings, vinyl tile, carpeting, partitioning, doors (both interior and exterior, including closing mechanisms, latches, locks), and all other interior improvements of any nature whatsoever. Tenant agrees to provide carpet shields under all rolling chairs or to otherwise be responsible for wear and tear of the carpet caused by such rolling chairs if such wear and tear exceeds that caused by normal foot traffic in surrounding areas. Areas of excessive wear shall be replaced at Tenant's sole expense upon Lease termination.
9. TAXES
A. As Additional Rent and in accordance with Paragraph 4D of this Lease, Tenant shall pay to Landlord, or if Landlord so directs, directly to the Tax Collector, all Real Property Taxes relating to the Premises. In the event the Premises leased hereunder consist of only a portion of the entire tax parcel, Tenant shall pay to Landlord Tenant's proportionate share of such real estate taxes allocated to the leased Premises by square footage or other reasonable basis as calculated and determined by Landlord. If the tax billing pertains 100% to the leased Premises, and Landlord chooses to have Tenant pay said real estate taxes directly to the Tax Collector, then in such event it shall be the responsibility of Tenant to obtain the tax and assessment bills and pay, prior to delinquency, the applicable real property taxes and assessments pertaining to the leased Premises, and failure to receive a bill for taxes and/or assessments shall not provide a basis for cancellation of or nonresponsibility for payment of penalties for nonpayment or late payment by Tenant. The term "Real Property Taxes", as used herein, shall mean (1) all taxes, assessments, levies and other charges of any kind or nature whatsoever, general and special, foreseen and unforeseen (including all installments of principal and interest required to pay any general or special assessments for public improvements and any increases resulting from reassessments caused by any change in ownership of the Premises) now or hereafter imposed by any governmental or quasi-governmental authority or special district having the direct or indirect power to tax or levy assessments, which are levied or assessed against, or with respect to the value, occupancy or use of, all or any portion of the Premises (as now constructed or as may at any time hereafter be constructed, altered, or otherwise changed) or Landlord's interest therein; any improvements located within the Premises (regardless of ownership); the fixtures, equipment and other property of Landlord, real or personal, that are an integral part of and located in the Premises; or parking areas, public utilities, or energy within the Premises; (ii) all charges, levies or fees imposed by reason of environmental regulation or other governmental control of the Premises; and (iii) all costs and fees (including
Initials: [ILLEGIBLE]
reasonable attorneys' fees) Incurred by Landlord in reasonably contesting any Real Property Tax and in negotiating with public authorities as to any Real Property Tax. If at any time during the term of this Lease the taxation or assessment of the Premises prevailing as of the commencement date of this Lease shall be altered so that in lieu of or in addition to any Real Property Tax described above there shall be levied, assessed or imposed (whether by reason of a change in the method of taxation or assessment, creation of a new tax or charge, or any other cause) an alternate or additional tax or charge (i) on the value, use or occupancy of the Premises or Landlord's interest therein or (ii) on or measured by the gross receipts, income or rentals from the Premises, on Landlord's business of leasing the Premises, or computed in any manner with respect to the operation of the Premises, then any such tax or charge, however designated, shall be included within the meaning of the term "Real Property Taxes" for purposes of this Lease. If any Real Property Tax is based upon property or rents unrelated to the Premises, then only that part of such real Property Tax that is fairly allocable to the Premises shall be included within the meaning of the term "Real Property Taxes". Notwithstanding the foregoing, the term "Real Property Taxes" shall not include estate, inheritance, gift or franchise taxes of Landlord or the federal or state net income tax imposed on Landlord's income from all sources. The term "Real Estate Taxes" shall also include supplemental taxes related to the period of Tenant's Lease Term whenever levied, including any such taxes that may be levied after the Lease Term has expired.
B. TAXES ON TENANT'S PROPERTY Tenant shall be liable for and shall pay ten days before delinquency, taxes levied against any personal property or trade fixtures placed by Tenant in or about the Premises. If any such taxes on Tenant's personal property or trade fixtures are levied against Landlord or Landlord's property or if the assessed value of the Premises is increased by the inclusion therein of a value placed upon such personal property or trade fixtures of Tenant and if Landlord, after written notice to Tenant, pays the taxes based on such increased assessment, which Landlord shall have the right to do regardless of the validity thereof, but only under proper protest if requested by Tenant, Tenant shall upon demand, as the case may be, repay to Landlord the taxes so levied against Landlord, or the proportion of such taxes resulting from such increase in the assessment; provided that in any such event Tenant shall have the right, in the name of Landlord and with Landlord's full cooperation, to bring suit in any court of competent jurisdiction to recover the amount of any such taxes so paid under protest, and any amount so recovered shall belong to Tenant.
10. LIABILITY INSURANCE Tenant, at Tenant's expense, agrees to keep in force during the term of this Lease a policy of commercial general liability insurance with combined single limit coverage of not less than Two Million Dollars ($2,000,000) per occurrence for bodily injury and property damage occurring in, on or about the Premises, including parking and landscaped areas. Such insurance shall be primary and noncontributory as respects any insurance carried by Landlord. The policy or policies effecting such insurance, shall name Landlord as additional insureds, and shall insure any liability of Landlord, contingent or otherwise, as respects acts or omissions of Tenant, its agents, employees or invitees or otherwise by any conduct or transactions of any of said persons in or about or concerning the Premises, including any failure of Tenant to observe or perform any of its obligations hereunder; shall be issued by an insurance company admitted to transact business in the State of California; and shall provide that the insurance effected thereby shall not be canceled, except upon thirty (30) days' prior written notice to Landlord. A certificate of insurance of said policy shall be delivered to Landlord. If during the term of this Lease, in the considered opinion of Landlord's Lender, insurance advisor, or counsel, the amount of insurance described in this Paragraph 10 is not adequate, Tenant agrees to increase said coverage to such reasonable amount as Landlord's Lender, insurance advisor, or counsel shall deem adequate.
11. TENANT'S PERSONAL PROPERTY INSURANCE AND WORKMAN'S COMPENSATION INSURANCE Tenant shall maintain a policy or policies of fire and property damage insurance in "all risk" form with a sprinkler leakage endorsement insuring the personal property, inventory, trade fixtures, and leasehold improvements within the leased Premises for the full replacement value thereof. The proceeds from any of such policies shall be used for the repair or replacement of such items so insured.
Tenant shall also maintain a policy or policies of workman's compensation insurance and any other employee benefit insurance sufficient to comply with all laws.
12. PROPERTY INSURANCE Landlord shall purchase and keep in force, and as Additional Rent and in accordance with Paragraph 4D of this Lease, Tenant shall pay to Landlord (or Landlord's agent if so directed by Landlord) Tenant's proportionate share (allocated to the leased Premises by square footage or other equitable basis as calculated and determined by Landlord) of the deductibles on insurance claims and the cost of, policy or policies of insurance covering loss or damage to the Premises (excluding routine maintenance and repairs and incidental damage or destruction caused by accidents or vandalism for which Tenant is responsible under Paragraph 7) in the amount of the full replacement value thereof, providing protection against those perils included within the classification of "all risks" insurance and flood and/or earthquake insurance, if available, plus a policy of rental income insurance in the amount of one hundred (100%) percent of twelve (12) months Basic Rent, plus sums paid as Additional Rent. If such insurance cost is increased due to Tenant's use of the Premises, Tenant agrees to pay to Landlord the full cost of such increase. Tenant shall have no interest in nor any right to the proceeds of any insurance procured by Landlord for the Premises.
Landlord and Tenant do each hereby respectively release the other, to the extent of the insurance coverage of the releasing party, from any liability for loss or damage caused by fire or any of the extended coverage casualties included in the releasing party's insurance policies, irrespective of the cause of such fire or casualty; provided, however, that if the insurance policy of either releasing party prohibits such waiver, then this waiver shall not take effect until consent to such waiver is obtained. If such waiver is so prohibited, the insured party affected shall promptly notify the other party thereof.
13. INDEMNIFICATION Landlord shall not be liable to Tenant and Tenant hereby waives all claims against Landlord for any injury to or death of any person or damage to or destruction of property in or about the Premises by or from any cause whatsoever, including, without limitation, gas, fire, oil, electricity or leakage of any character from the roof, walls, basement or other portion of the Premises but excluding, however, the willful misconduct or negligence of Landlord, its agents, servants, employees, invitees, or contractors of which negligence Landlord has knowledge and reasonable time to correct. Except as to injury to persons or damage to property to the extent arising from the willful misconduct or the negligence of Landlord its agents, servants, employees, invitees, or contractors. Tenant shall hold Landlord harmless from and defend Landlord against any and all expenses, including reasonable attorneys' fees, in connection therewith, arising out of any injury to or death of any person or damage to or destruction of property occurring in, on or about the Premises, or any part thereof, from any cause whatsoever.
14. COMPLIANCE Tenant, at its sole cost and expense, shall promptly comply with all laws, statutes, ordinances and governmental rules, regulations or requirements now or hereafter in effect; with the requirements of any board of fire underwriters or other similar body now or hereafter constituted; and with any direction or occupancy certificate issued pursuant to law by any public officer; provided, however, that no such failure shall be deemed a breach of the provisions if Tenant, immediately upon notification, commences to remedy or rectify said failure. The judgment of any court of competent jurisdiction or the admission of Tenant in any action against Tenant, whether Landlord be a party thereto or not, that Tenant has violated any such law, statute, ordinance or governmental rule, regulation, requirement, direction or provision, shall be conclusive of that fact as between Landlord and Tenant. Tenant shall, at its sole cost and expense, comply with any and all requirements pertaining to said Premises, of any insurance organization or company, necessary for the maintenance of reasonable fire and public liability insurance covering requirements pertaining to said Premises.
15. LIENS Tenant shall keep the Premises free from any liens arising out of any work performed, materials furnished or obligation incurred by Tenant. In the event that Tenant shall not, within ten (10) days following the imposition of such lien, cause the same to be released of record, Landlord shall have, in addition to all other remedies provided herein and by law, the right, but no obligation, to cause the same to be released by such means as it shall deem proper, including payment of the claim giving rise to such lien. All sums paid by Landlord for such purpose, and all expenses incurred by it in connection therewith, shall be payable to Landlord by Tenant on demand with interest at the prime rate of interest as quoted by the Bank of America.
16. ASSIGNMENT AND SUBLETTING Tenant shall not assign, transfer, or hypothecate the leasehold estate under this Lease, or any interest therein, and shall not sublet the Premises, or any part thereof, or any right or privilege appurtenant thereto, or suffer any other person or entity to occupy or use the Premises, or any portion thereof, without, in each case, the prior written consent of Landlord which consent will not be unreasonably withheld. As a condition for granting this consent to any assignment, transfer, or subletting, Landlord shall require that (i) the sublease be a triple net sublease and that the basic rent due under any such sublease be no less than the then current market rate with annual increases at the then prevailing market rate, and (ii) Tenant to pay Landlord, as Additional Rent, all rents and/or additional consideration due Tenant from its assignees, transferees, or subtenants in excess of the Rent payable by Tenant to Landlord hereunder for the assigned, transferred and/or subleased space ("Excess Rent"). Tenant shall, by thirty (30) days written notice, advise Landlord of its intent to assign or transfer Tenant's interest in the Lease or sublet the Premises or any portion thereof for any part of the term hereof. Within thirty (30) days after receipt of said written notice, Landlord may, in its sole discretion, elect to terminate this Lease as to the portion of the Premises described in Tenant's notice on the date specified in Tenant's notice by giving written notice of such election to terminate. If no such notice to terminate is given to Tenant within said thirty (30) day period, Tenant may proceed to locate an acceptable sublessee, assignee, or other transferee from presentment to Landlord for Landlord's approval, all in accordance with the terms, covenants, and conditions of this paragraph 16. If Tenant intends to sublet the entire Premises and Landlord elects to terminate this Lease, this Lease shall be terminated on the date specified in Tenant's notice. If, however, this Lease shall terminate pursuant to the foregoing with respect to less than all the Premises, the rent, as defined and reserved hereinabove shall be adjusted on a pro rata basis to the number of square feet retained by Tenant, and this Lease as so amended shall continue in full force and effect. In the event Tenant is allowed to assign, transfer or sublet the whole or any part of the Premises, with the prior written
consent of Landlord, no assignee, transferee or subtenant shall assign or transfer this Lease, either in whole or in part, or sublet the whole or any part of the Premises, without also having obtained the prior written consent of Landlord XXX. A consent of Landlord to one assignment, transfer, hypothecation, subletting, occupation or use by any other person shall not release Tenant from any of Tenant's obligations hereunder or be deemed to be a consent to any subsequent similar or dissimilar assignment, transfer, hypothecation, subletting, occupation or use by any other person. Any such assignment, transfer, hypothecation, subletting, occupation or use without such consent shall be void and shall constitute a breach of this Lease by Tenant and shall, at the option of Landlord exercised by written notice to Tenant, terminate this Lease. The leasehold estate under this Lease shall not, nor shall any interest therein, by assignable for any purpose by operation of law without the written consent of Landlord. As a condition to its consent, Landlord shall require Tenant to pay all expenses in connection with the assignment, and Landlord shall require Tenant's assignee or transferee (or other assignees or transferees) to assume in writing all of the obligations under this Lease and for Tenant to remain liable to Landlord under the Lease. Notwithstanding the above, in no event will Landlord consent to a sub-sublease.
17. SUBORDINATION AND MORTGAGES In the event Landlord's title or leasehold interest is now or hereafter encumbered by a deed of trust, upon the interest of Landlord in the land and buildings in which the demised Premises are located, to secure a loan from a lender (hereinafter referred to as "Lender") to Landlord, Tenant shall, at the request of Landlord or Lender, execute in writing an agreement subordinating its rights under this Lease to the lien of such deed of trust, or, if so requested, agreeing that the lien of Lender's deed of trust shall be or remain subject and subordinate to the rights of Tenant under this Lease. Notwithstanding any such subordination, Tenant's possession under this Lease shall not be disturbed if Tenant is not in default and so long as Tenant shall pay all rent and observe and perform all of the provisions set forth in this Lease.
18. ENTRY BY LANDLORD Landlord reserves, and shall at all reasonable times after at least 24 hours notice (except in emergencies) have, the right to enter the Premises to inspect them; perform any services to be provided by Landlord hereunder; to make repairs or provide any services to a contiguous tenant(s); to submit the Premises to prospective purchasers, mortgagers or tenants; to post notices of nonresponsibility; and to alter, improve or repair the Premises or other parts of the building, all without abatement of rent, and may erect scaffolding and other necessary structures in or through the Premises where reasonably required by the character of the work to be performed; provided, however that the business of Tenant shall be interfered with to the least extent that is reasonably practical. Any entry to the Premises by Landlord for the purposes provided for herein shall not under any circumstances be construed or deemed to be a forcible or unlawful entry into or a detainer of the Premises or an eviction, actual or constructive, of Tenant from the Premises or any portion thereof.
19. BANKRUPTCY AND DEFAULT The commencement of a bankruptcy action or liquidation action or reorganization action or insolvency action or an assignment of or by Tenant for the benefit of creditors, or any similar action undertaken by Tenant, or the insolvency of Tenant, shall, at Landlord's option, constitute a breach of this Lease by Tenant. If the trustee or receiver appointed to serve during a bankruptcy, liquidation, reorganization, insolvency or similar action elects to reject Tenant's unexpired Lease, the trustee or receiver shall notify Landlord in writing of its election within thirty (30) days after an order for relief in a liquidation action or within thirty (30) days after the commencement of any action.
Within thirty (30) days after court approval of the assumption of this Lease, the trustee or receiver shall cure (or provide adequate assurance to the reasonable satisfaction of Landlord that the trustee or receiver shall cure) any and all previous defaults under the unexpired Lease and shall compensate Landlord for all actual pecuniary loss and shall provide adequate assurance of future performance under said Lease to the reasonable satisfaction of Landlord. Adequate assurance of future performance, as used herein, includes, but shall not be limited to: (i) assurance of source and payment of rent, and other consideration due under this Lease; (ii) assurance that the assumption or assignment of this Lease will not breach substantially any provision, such as radius, location, use, or exclusivity provision, in any agreement relating to the above described Premises.
Nothing contained in this section shall affect the existing right of Landlord to refuse to accept an assignment upon commencement of or in connection with a bankruptcy, liquidation, reorganization or insolvency action or an assignment of Tenant for the benefit of creditors or other similar act. Nothing contained in this Lease shall be construed as giving or granting or creating an equity in the demised Premises to Tenant. In no event shall the leasehold estate under this Lease, or any interest therein, be assigned by voluntary or involuntary bankruptcy proceeding without the prior written consent of Landlord. In no event shall this Lease or any rights or privileges hereunder be an asset of Tenant under any bankruptcy, insolvency or reorganization proceedings.
The failure to perform or honor any covenant, condition or representation made under this Lease shall constitute a default hereunder by Tenant upon expiration of the appropriate grace period hereinafter provided. Tenant shall have a period of five (5) days from the date of written notice from Landlord within which to cure any default in the payment of rental or adjustment thereto. Tenant shall have a period of thirty (30) days from the date of the written notice from Landlord within which to cure any other default under this Lease. Upon an uncured default of this Lease by Tenant, Landlord shall have the following rights and remedies in addition to any other rights or remedies available to Landlord at law or in equity:
(a) The rights and remedies provided for by California Civil Code
Section 1951.2, including but not limited to, recovery of the worth at the time
of award of the amount by which the unpaid rent for the balance of the term
after the time of award exceeds the amount of rental loss for the same period
that Tenant proves could be reasonably avoided, as computed pursuant to
subsection (b) of said Section 1951.2. Any proof by Tenant under subparagraphs
(2) and (3) of Section 1951.2 of the California Civil Code of the amount of
rental loss that could be reasonably avoided shall be made in the following
manner: Landlord and Tenant shall each select a licensed real estate broker in
the business of renting property of the same type and use as the Premises and in
the same geographic vicinity. Such two real estate brokers shall select a third
licensed real estate broker, and the three licensed real estate brokers so
selected shall determine the amount of the rental loss that could be reasonably
avoided from the balance of the term of this Lease after the time of award. The
decision of the majority of said licensed real estate brokers shall be final and
binding upon the parties hereto.
(b) The rights and remedies provided by California Civil Code Section which allows Landlord to continue the Lease in effect and to enforce all of its rights and remedies under this Lease, including the right to recover rent as it becomes due, for so long as Landlord does not terminate Tenant's right to possession; acts of maintenance or preservation, efforts to relet the Premises, or the appointment of a receiver upon Landlord's initiative to protect its interest under this Lease shall not constitute a termination of Tenant's right to possession.
(c) The right to terminate this Lease by giving notice to Tenant in accordance with applicable law.
(d) To the extent permitted by law, the right and power to enter the Premises and remove therefrom all persons and property, to store such property in a public warehouse or elsewhere at the cost of and for the account of Tenant, and to sell such property and apply such proceeds therefrom pursuant to applicable California law. Landlord may from time to time sublet the Premises or any part thereof for such term or terms (which may extend beyond the term of this Lease) and at such rent and such other terms as Landlord in its sole discretion may deem advisable, with the right to make alterations and repairs to the Premises. Upon each subletting, (i) Tenant shall be immediately liable to pay Landlord, in addition to indebtedness other that rent due hereunder, the cost of such subletting, including, but not limited to, reasonable attorney's fees, and any real estate commissions actually paid, and the costs of such alterations and repairs incurred by Landlord and the amount, if any, by which the rent hereunder for the period of such subletting (to the extent such period does not exceed the term hereof) exceeds the amount to be paid as rent for the Premises for such period or (ii) at the option of Landlord, rents received from such subletting shall be applied first to payment of indebtedness other than rent due hereunder from Tenant to Landlord; second, to the payment of any costs of such subletting and of such alterations and repairs; third to payment of rent due and unpaid hereunder; and the residue, if any, shall be held by Landlord and applied in payment of future rent as the same becomes due hereunder. If Tenant has been credited with any rent to be received by such subletting under option (i) and such rent shall not be promptly paid to Landlord by the subtenant(s), or if such rentals received from such subletting under option (ii) during any month be less than that to be paid during that month by Tenant hereunder, Tenant shall pay any such deficiency to Landlord. Such deficiency shall be calculated and paid monthly. No taking possession of the Premises by Landlord, shall be construed as an election on its part to terminate this Lease unless a written notice of such intention be given to Tenant. Notwithstanding any such subletting without termination, Landlord may at any time hereafter elect to terminate this Lease for such previous breach.
(e) The right to have a receiver appointed for Tenant upon application by Landlord, to take possession of the Premises and to apply any rental collected from the Premises and to exercise all other rights and remedies granted to Landlord pursuant to subparagraph d, above.
20. ABANDONMENT Tenant shall not vacate or abandon the Premises at any time during the term of this Lease, and if Tenant shall abandon, vacate or surrender said Premises, or be dispossessed by the process of law, or otherwise, any personal property belonging to Tenant and left on the Premises shall be deemed to be abandoned, at the option of Landlord, except such property as may be mortgaged to Landlord.
21. DESTRUCTION In the event the Premises are destroyed in whole or in part from any cause, except for routine maintenance and repairs and incidental
damage and destruction caused from vandalism and accident for which Tenant is responsible under Paragraph 7, Landlord may, at its option:
(a) Rebuild or restore the Premises to their condition prior to the damage or destruction, or
(b) Terminate this Lease. (providing that the Premises is damaged to the extent of 33 1/3% of the replacement cost)
If Landlord does not give Tenant notice in writing within thirty (30) days from the destruction of the Premises of its election to either rebuild and restore them, or to terminate this Lease, Landlord shall be deemed to have elected to rebuild or restore them, in which event Landlord agrees, at its expense except for any deductible, which is the responsibility of Tenant, promptly to rebuild or restore the Premises to their condition prior to the damages or destruction. Tenant shall be entitled to a reduction in rent from the date of such damage or destruction, provided Tenant is not using any portion of such damaged area, while such repair is being made in the proportion that the area of the Premises rendered untenantable by such damage bears to the total area of the Premises. If Landlord initially estimates that the rebuilding or restoration will exceed 180 days or if Landlord does not complete the rebuilding or restoration within one hundred eighty (180) days following the date of destruction (such period of time to be extended for delays caused by the fault or neglect of Tenant or because of Acts of God, acts of public agencies, labor disputes, strikes, fires, freight embargos, rainy or stormy weather, inability to obtain materials, supplies or fuels, acts of contractors or subcontractors, or delay of the contractors or subcontractors due to such causes or other contingencies beyond the control of Landlord), then Tenant shall have the right to terminate this Lease by giving fifteen (15) days prior written notice to Landlord, Notwithstanding anything herein to the contrary, Landlord's obligation to rebuild or restore shall be limited to the building and interior improvements constructed by Landlord as they existed as of the commencement date of the Lease and shall not include restoration of Tenant's trade fixtures, equipment, merchandise, or any improvements, alterations or additions made by Tenant to the Premises, which Tenant shall forthwith replace or fully repair at Tenant's sole cost and expense provided this Lease is not cancelled according to the provisions above.
Unless this Lease is terminated pursuant to the foregoing provisions, this Lease shall remain in full force and effect. Tenant hereby expressly waives the provisions of Section 1932, Subdivision 2, in Section 1933, Subdivision 4 of the California Civil Code.
In the event that the building in which the Premises are situated is damaged or destroyed to the extent of not less than 33 1/3% of the replacement cost thereof, Landlord may elect to terminate this Lease, whether the Premises be injured or not. Notwithstanding anything to the contrary herein, Landlord may terminate this Lease in the event of an uninsured event or if insurance proceeds are insufficient to cover one hundred percent of the rebuilding costs net of the deductible
22. EMINENT DOMAIN If all or any part of the Premises shall be taken by any public or quasi-public authority under the power of eminent domain or conveyance in lieu thereof, this Lease shall terminate as to any portion of the Premises so taken or conveyed on the date when title vests in the condemnor, and Landlord shall be entitled to any and all payment, income, rent, award, or any interest therein whatsoever which may be paid or made in connection with such taking or conveyance, and Tenant shall have no claim against Landlord or otherwise for the value of any unexpired term of this Lease. Notwithstanding the foregoing paragraph, any compensation specifically awarded to Tenant for loss of business, Tenant's personal property, moving cost or loss of good will, shall be and remain the property of Tenant.
If any action or proceeding is commenced for such taking of the Premises
or any part thereof, or if Landlord is advised in writing by any entity or
body having the right or power of condemnation of its intention to condemn
the premises or any portion thereof, then Landlord shall have the right to
terminate this Lease by giving Tenant written notice thereof within sixty
(60) days of the date of receipt of said written advice, or commencement of
said action or proceeding, or taking conveyance, which termination shall take
place as of first to occur of the last day of the calendar month next
following the month in which such notice is given or the date on which title
to the Premises shall vest in the condemnor.
In the event of such a partial taking or conveyance of the Premises, if the portion of the Premises taken or conveyed is so substantial that the Tenant can no longer reasonably conduct its business, Tenant shall have the privilege of terminating this Lease within sixty (60) days from the date of such taking or conveyance, upon written notice to Landlord of its intention so to do, and upon giving of such notice this Lease shall terminate on the last day of the calendar month next following the month in which such notice is given, upon payment by Tenant of the rent from the date of such taking or conveyance to the date of termination.
If a portion of the Premises be taken by condemnation or conveyance in lieu thereof and neither Landlord nor Tenant shall terminate this Lease as provided herein, this Lease shall continue in full force and effect as to the part of the Premises not so taken or conveyed, and the rent herein shall be apportioned as of the date of such taking or conveyance so that thereafter the rent to be paid by Tenant shall be in the ratio that the area of the portion of the Premises not so taken or conveyed bears to the total area of the Premises prior to such taking.
23. SALE OR CONVEYANCE BY LANDLORD In the event of a sale or conveyance of the Premises or any interest therein, by any owner of the reversion then constituting Landlord, the transferor shall thereby be released from any further liability upon any of the terms, covenants or conditions (express or implied) herein contained in favor of Tenant, and in such event, insofar as such transfer is concerned, Tenant agrees to look solely to the responsibility of the successor in interest of such transferor in and to the Premises and this Lease. This Lease shall not be affected by any such sale or conveyance, and Tenant agrees to attorn to the successor in interest of such transferor.
24. ATTORNMENT TO LENDER OR THIRD PARTY In the event the interest of Landlord in the land and buildings in which the leased Premises are located (whether such interest of Landlord is a fee title interest or a leasehold interest) is encumbered by deed of trust, and such interest is acquired by the lender or any third party through judicial foreclosure or by exercise of a power of sale at private trustee's foreclosure sale, Tenant hereby agrees to attorn to the purchaser at any such foreclosure sale and to recognize such purchaser as the Landlord under this Lease. In the event the lien of the deed of trust securing the loan from a Lender to Landlord is prior and paramount to the Lease, this Lease shall nonetheless continue in full force and effect for the remainder of the unexpired term hereof, at the same rental herein reserved and upon all the other terms, conditions and covenants herein contained.
25. HOLDING OVER Any holding over by Tenant after expiration or other termination of the term of this Lease with the written consent of Landlord delivered to Tenant shall not constitute a renewal or extension of the Lease or give Tenant any rights in or to the leased Premises except as expressly provided in this Lease. Any holding over after the expiration or other termination of the term of this Lease, with the consent of Landlord, shall be construed to be a tenancy from month to month, on the same terms and conditions herein specified insofar as applicable except that the monthly Basic Rent shall be increased to an amount equal to one hundred fifty (150%) percent of the monthly Basic Rent required during the last month of the Lease term.
26. CERTIFICATE OF ESTOPPEL Tenant shall at any time upon not less than ten
(10) days' prior written notice from Landlord execute, acknowledge and
deliver to Landlord a statement in writing (i) certifying that this Lease is
unmodified and in full force and effect (or, if modified, stating the nature
of such modification and certifying that this Lease, as so modified, is in
full force and effect) and the date to which the rent and other charges are
paid in advance, if any, and (ii) acknowledging that there are not, to
Tenant's knowledge, and any uncured defaults on the part of Landlord
hereunder, or specifying such defaults, if any, are claimed. Any such
statement may be conclusively relied upon by any prospective purchaser or
encumbrancer of the Premises. Tenant's failure to deliver such statement
within such time shall be conclusive upon Tenant that this Lease is in full
force and effect, without modification except as may be represented by
Landlord; that there are no uncured defaults in Landlord's performance, and
that not more than one month's rent has been paid in advance.
27. CONSTRUCTION CHANGES It is understood that the description of the Premises and the location of ductwork, plumbing and other facilities therein are subject to such minor changes as Landlord or Landlord's architect determines to be desirable in the course of construction of the Premises, and no such changes shall affect this Lease or entitle Tenant to any reduction of rent hereunder or result in any liability of Landlord to Tenant. Landlord does not guarantee the accuracy of any drawings supplied to Tenant and verification of the accuracy of such drawings rests with Tenant.
28. RIGHT OF LANDLORD TO PERFORM All terms, covenants and conditions of this Lease to be performed or observed by Tenant shall be performed or observed by Tenant at Tenant's sole cost and expense and without any reduction of rent. If Tenant shall fail to pay any sum of money, or other rent, required to be paid by it hereunder and such failure shall continue for five (5) days after written notice by Landlord, or shall fail to perform any other term or covenant hereunder on its part to be performed, and such failure shall continue for thirty (30) days after written notice thereof by Landlord. Landlord, without waiving or releasing Tenant from any obligations of Tenant hereunder, may, but shall not be obligated to, make any such payment or perform any such other term or covenant on Tenant's part to be performed. All sums so paid by Landlord and all necessary costs of such performance by Landlord together with interest thereon at the rate of the prime rate of interest per annum as quoted by the Bank of America from the date of such payment or performance by Landlord, shall be paid (and Tenant covenants to make such payment) to Landlord on demand by Landlord, and Landlord shall have (in addition to any other right or remedy of Landlord) the same rights and remedies in the event of nonpayment by Tenant in the case of failure by Tenant in the payment of rent hereunder.
29. ATTORNEY'S FEES.
A. In the event that either Landlord or Tenant should bring suit for the possession of the Premises, for the recovery of any sum due under this Lease, or because of the breach of any provision of this Lease, or for any other relief against the other party hereunder, then all costs and expenses, including reasonable attorneys' fees,
incurred by the prevailing party therein shall be paid by the other party, which obligation on the part of the other party shall be deemed to have accrued on the date of the commencement of such action and shall be enforceable whether or not the action is prosecuted to judgement.
(B) Should Landlord be named as a defendant in any suit brought against Tenant in connection with or arising out of Tenant's occupancy hereunder, Tenant shall pay to Landlord its costs and expenses incurred in such suit, including a reasonable attorney's fee.
33. WAIVER The waiver by either party of the other party's failure to perform or observe any term, covenant or condition herein contained to be performed or observed by such wavering party shall not be deemed to be a waiver of such term, covenant or condition or of any subsequent failure of the party failing to perform or observe the same or any other such term, covenant or condition therein contained, and no custom or practice which may develop between the parties hereto during the term hereof shall be deemed a waiver of, or in any way affect, the right of either party to insist upon performance and observance by the other party in strict accordance with the terms hereof.
31. NOTICES All notices, demands, requests, advices or designations which may be or are required to be given by either party to the other hereunder shall be in writing. All notices, demands, requests, advices or designations by Landlord to Tenant shall be sufficiently given, made or delivered if personally served on Tenant by leaving the same at the Premises or if sent by United States certified or registered mail, postage prepaid, addressed to Tenant at the Premises. All notices demands, requests, advices or designations by Tenant to Landlord shall be sent by the United States certified or registered mail, postage prepaid, addressed to Landlord at its offices at Peery/Arrillaga, 2560 Mission College Blvd., Suite 101, Santa Clara, CA 95054 Each notice, request, demand, advice or designation referred to in this paragraph shall be deemed received on the date of the personal service or mailing thereof in the manner herein provided, as the case may be.
32. EXAMINATION OF LEASE Submission of this instrument for examination or signature by Tenant does not constitute a reservation of or option for a lease, and this instrument is not effective as a lease or otherwise until its execution and delivery by both Landlord and Tenant.
33. DEFAULT BY LANDLORD Landlord shall not be in default unless Landlord fails to perform obligations required of Landlord within a reasonable time, but in no event earlier than thirty (30) days after written notice by Tenant to Landlord and to the holder of any first mortgage or deed of trust covering the Premises whose name and address shall have heretofore been furnished to Tenant in writing, specifying wherein Landlord has failed to perform such obligations; provided, however, that if the nature of Landlord's obligations is such that more than thirty (30) days are required for performance, then Landlord shall not be in default if Landlord commences performance within such thirty (30) day period and thereafter diligently prosecutes the same to completion.
34. CORPORATE AUTHORITY If Tenant is a corporation, (or a partnership) each individual executing this Lease on behalf of said corporation (or partnership) represents and warrants that he is duly authorized to execute and deliver this Lease on behalf of said corporation (or partnership) in accordance with the by-laws of said corporation (or partnership in accordance with the partnership agreement) and that this Lease is binding upon said corporation (or partnership) in accordance with its terms. If Tenant is a corporation, Tenant shall, within thirty (30) days after execution of this Lease, deliver to Landlord a certified copy of the resolution of the Board of Directors of said corporation authorizing or ratifying the execution of this Lease.
36. LIMITATION OF LIABILITY In consideration of the benefits accruing hereunder,
Tenant and all successors and assigns covenant and agree that, in the event of
any actual or alleged failure, breach or default hereunder by Landlord:
(a) the sole and exclusive remedy shall be against Landlord's
interest in the Premises leased herein;
(b) no partner of Landlord shall be sued or named as party in any
suit or action (except as may be necessary to secure
jurisdiction of the partnership);
(c) no service of process shall be made against any partner of
Landlord (except as may be necessary to secure jurisdiction of
the partnership);
(d) no partner of Landlord shall be required to answer or
otherwise plead to any service of process;
(e) no judgement will be taken against any partner of Landlord;
(f) any judgement taken against any partner of Landlord may be
vacated and set aside at any time without hearing;
(g) no writ of execution will ever be levied against the assets of
any partner of Landlord;
(h) these covenants and agreements are enforceable by both
Landlord and also by any partner of Landlord.
Tenant agrees that each of the foregoing covenants and agreements shall be
applicable to any covenant or agreement either expressly contained in this
Lease or imposed by statute or at common law.
37. SIGNS No sign, placard, picture, advertisement, name or notice shall be inscribed, displayed or printed or affixed on or to any part of the outside of the Premises or any exterior windows of the Premises without the written consent of Landlord first had and obtained and Landlord shall have the right to remove any such sign, placard, picture, advertisement, name or notice to and at the expense of Tenant. If Tenant is allowed to print or affix or in any way place a sign in, on or about the Premises, upon expiration or other sooner termination of this Lease, Tenant at Tenant's sole cost and expense shall both remove such sign and repair all damage in such a manner as to restore all aspects of the appearance of the Premises to the condition prior to the placement of said sign.
All approved signs or lettering on outside doors shall be printed, painted, affixed or inscribed at the expense of Tenant by a person approved of by Landlord.
Tenant shall not place anything or allow anything to be placed near the glass of any window, door partition or wall which may appear unsightly from outside the Premises.
38. MISCELLANEOUS AND GENERAL PROVISIONS
A. USE OF BUILDING NAME. Tenant shall not, without the written consent of Landlord, use the name of the building for any purpose other than as the address of the business conducted by Tenant in the Premises.
B. CHOICE OF LAW; SEVERABILITY. This Lease shall in all respects be governed by and construed in accordance with the laws of the State of California. If any provision of this Lease shall be invalid, unenforceable or ineffective for any reason whatsoever, all other provisions hereof shall be and remain in full force and effect.
C. DEFINITION OF TERMS. The term "Premises" includes the space leased hereby and any improvements now or hereafter installed therein or attached thereto. The term "Landlord" or any pronoun used in place thereof includes the plural as well as the singular and the successors and assigns of Landlord. The term "Tenant" or any pronoun used in place thereof includes the plural as well as the singular and individuals, firms, associations, partnerships and corporations, and their and each of their respective heirs, executors, administrators, successors and permitted assigns according to the context hereof, and the provisions of this Lease shall inure to the benefit of and bind such heirs, executors, administrators, successors and permitted assigns.
The term "person" includes the plural as well as the singular and individuals, firms, associations, partnerships and corporations. Words used in any gender include other genders. If there be more than one Tenant the obligations of Tenant hereunder are joint and several. The paragraph headings of this Lease are for convenience of reference only and shall have no effect upon the construction or interpretation of any provisions hereof.
D. TIME OF ESSENCE. Time is of the essence of this Lease and of each and all of its provisions.
E. QUITCLAIM. At the expiration or earlier termination of this Lease, Tenant shall execute, acknowledge and deliver to Landlord, within ten (10) days after written demand from Landlord to Tenant, any quitclaim deed or other document required by any reputable title company, licensed to operate in the State of California, to remove the cloud or encumbrance created by this Lease from the real property of which Tenant's Premises are a part.
F. INCORPORATION OF PRIOR AGREEMENTS; AMENDMENTS. This instrument along with any exhibit and attachments hereto constitutes the agreement between Landlord and Tenant relative to the Premises and this agreement and the exhibits and attachments may be altered, amended or revoked only by an instrument in writing signed by both Landlord and Tenant. Landlord and Tenant agree hereby that all prior or contemporaneous oral agreements between and among themselves and their agents or representatives relative to the leasing of the Premises are merged in or revoked by this agreement.
G. RECORDING. Neither Landlord nor Tenant shall record this Lease or a short form memorandum hereof without the consent of the other.
H. AMENDMENTS FOR FINANCING. Tenant further agrees to execute any amendments required by a lender to enable Landlord to obtain financing, so long as Tenant's rights hereunder are not substantially affected.
I. ADDITIONAL PARAGRAPHS. Paragraphs 39 through 53 are added hereto and are included as a part of this Lease.
J. CLAUSES, PLATS, AND RIDERS. Clauses, plats and riders, if any, signed by Landlord and Tenant and endorsed on or affixed to this Lease are a part hereof.
K. DIMINUTION OF LIGHT, AIR OR VIEW. Tenant covenants and agrees that no diminution or shutting off of light, air or view by any structure which may be hereafter erected (whether or not by Landlord) shall in any way affect his Lease, entitle Tenant to any reduction of rent hereunder or result in any liability of Landlord or Tenant.
IN WITNESS WHEREOF, Landlord and Tenant have executed and delivered this Lease as of the day and year last written below.
LANDLORD: TENANT:
JOHN ARRILLAGA SURVIVOR'S TRUST CIPHERGEN BIOSYSTEMS, INC.,
a California corporation
By By /s/ James H. Stanford
--------------------------------------- ----------------------------
John Arrillaga, Trustee James H. Stanford, Vice
President and Chief
Financial Officer
Date:
------------------------------------
Date: February 3, 2000
--------------------------
RICHARD T. PEERY SEPARATE PROPERTY TRUST
By
--------------------------------------
Richard T. Peery, Trustee
Date:
------------------------------------
Initials: [Illegible]
______________
Initials:
______________
|
Paragraphs 39 through 53 to Lease Agreement dated January 28, 2000, By and Between the John Arrillaga Survivor's Trust and the Richard T. Peery Separate Property Trust, as Landlord, and CIPHERGEN BIOSYSTEMS, INC., A CALIFORNIA CORPORATION, as Tenant for 30,232 PLUS OR MINUS Square Feet of Space Located at 6607 Dumbarton Circle, Suite 200, Fremont, California.
39. BASIC RENT: In accordance with Paragraph 4A herein, the total aggregate sum of EIGHT MILLION TWO HUNDRED SEVENTY ONE THOUSAND FOUR HUNDRED SEVENTY FIVE AND 20/100 DOLLARS ($8,271,475.20), shall be payable as follows:
On April 1, 2000, the sum of SEVENTY FIVE THOUSAND FIVE HUNDRED EIGHTY AND NO/100 DOLLARS ($75,580.00) shall be due, and a like sum due on the first day of each month thereafter, through and including March 1, 2001.
On April 1, 2001, the sum of SEVENTY EIGHT THOUSAND SIX HUNDRED THREE AND 20/100 DOLLARS ($78,603.20) shall be due, and a like sum due on the first day of each month thereafter, through and including March 1, 2002.
On April 1, 2002, the sum of EIGHTY ONE THOUSAND SIX HUNDRED TWENTY SIX AND 40/100 DOLLARS ($81,626.40) shall be due, and a like sum due on the first day of each month thereafter, through and including March 1, 2003.
On April 1, 2003, the sum of EIGHTY FOUR THOUSAND SIX HUNDRED FORTY NINE AND 60/100 DOLLARS ($84,649.60) shall be due, and a like sum due on the first day of each month thereafter, through and including March 1, 2004.
On April 1, 2004, the sum of EIGHTY SEVEN THOUSAND SIX HUNDRED SEVENTY TWO AND 80/100 DOLLARS ($87,672.80) shall be due, and a like sum due on the first day of each month thereafter, through and including March 1, 2005.
On April 1, 2005, the sum of NINETY THOUSAND SIX HUNDRED NINETY SIX AND NO/100 DOLLARS ($90,696.00) shall be due, and a like sum due on the first day of each month thereafter, through and including March 1, 2006.
On April 1, 2006, the sum of NINETY THREE THOUSAND SEVEN HUNDRED NINETEEN AND 20/100 DOLLARS ($93,719.20) shall be due, and a like sum due on the first day of each month thereafter, through and including March 1, 2007.
On April 1, 2007, the sum of NINETY SIX THOUSAND SEVEN HUNDRED FORTY TWO AND 40/100 DOLLARS ($96,742.40) shall be due, and a like sum due on the first day of each month thereafter, through and including March 1, 2008; or until the entire aggregate sum of EIGHT MILLION TWO HUNDRED SEVENTY ONE THOUSAND FOUR HUNDRED SEVENTY FIVE AND 20/100 DOLLARS ($8,271,475.20) has been paid.
40. "AS-IS" BASIS: Subject only to the Construction Agreement of even date herewith and to Landlord making the improvements shown on EXHIBIT B to be attached hereto, it is hereby agreed that the Premises leased hereunder is leased strictly on an "as-is" basis and in its present condition, and in the configuration as shown on EXHIBIT B to be attached hereto, and by reference made a part hereof. Except as noted within said Construction Agreement, it is specifically agreed between the parties that after Landlord makes the interior improvements as shown on EXHIBIT B, Landlord shall not be required to make, nor be responsible for any cost, in connection with any repair, restoration, and/or improvement to the Premises in order for this Lease to commence, or thereafter, throughout the Term of this Lease. Notwithstanding anything to the contrary within this Lease, Landlord makes no warranty or representation of any kind or nature whatsoever as to the condition or repair of the Premises, nor as to the use or occupancy which may be made thereof.
41. RULES AND REGULATIONS AND COMMON AREA: Subject to the terms and conditions of this Lease and such Rules and Regulations as Landlord may from time to time prescribe, Tenant and Tenant's employees, invitees and customers shall, in common with other occupants of the Parcel/Building in which the premises are located, and their respective employees, invitees and customers, and others entitled to the use thereof, have the non-exclusive right to use the access roads, parking areas, and facilities provided and designated by Landlord for the general use and convenience of the occupants of the Parcel/Building in which the Premises are located, which areas and facilities
are referred to herein as "Common Area". This right shall terminate upon the termination of this Lease. Landlord reserves the right from time to time to make changes in the shape, size, location, amount and extent of Common Area. Landlord further reserves the right to promulgate such reasonable rules and regulations relating to the use of the Common Area, and any part or parts thereof, as Landlord may deem appropriate for the best interests of the occupants of the Parcel/Building. Such Rules and Regulations may be amended by Landlord from time to time, with or without advance notice, and all amendments shall be effective upon delivery of a copy to Tenant. Landlord shall not be responsible to Tenant for the non-performance by any other tenant or occupant of the Parcel/Building of any of said Rules and Regulations.
Landlord shall operate, manage and maintain the Common Area. The manner in which the Common Area shall be maintained and the expenditures for such maintenance shall be at the discretion of Landlord.
42. EXPENSES OF OPERATION, MANAGEMENT, AND MAINTENANCE OF THE COMMON AREAS OF THE PARCEL AND BUILDING IN WHICH THE PREMISES ARE LOCATED: As Additional Rent and in accordance with Paragraph 4D of this Lease, Tenant shall pay to Landlord Tenant's proportionate share (calculated on a square footage or other equitable basis as calculated by landlord) of all expenses of operation, management, maintenance and repair of the Common Areas of the Parcel including, but not limited to, license, permit, and inspection fees; security; utility charges associated with exterior landscaping and lighting (including water and sewer charges); all charges incurred in the maintenance and replacement of landscaped areas, lakes, parking lots and paved areas (including repairs, replacement, resealing and restriping), sidewalks, driveways, maintenance, repair and replacement of all fixtures and electrical, mechanical and plumbing systems; supplies, materials, equipment and tools; the cost of capital expenditures which have the effect of reducing operating expenses, provided, however, that in the event Landlord makes such capital improvements, Landlord may amortize its investment in said improvements (together with interest at the rate of fifteen (15%) percent per annum on the unamortized balance) as an operating expense in accordance with standard accounting practices, provided, that such amortization is not at a rate greater than the anticipated savings in the operating expenses.
As Additional Rent and in accordance with Paragraph 4D of this Lease, Tenant shall pay its proportionate share (calculated on a square footage or other equitable basis as calculated by Landlord) of the cost of operation (including common utilities), management, maintenance, and repair of the building (including structural and common areas such as lobbies, restrooms, janitor's closets, hallways, elevators, mechanical and telephone rooms, stairwells, entrances, spaces above the ceilings and janitorization of said common areas) in which the Premises are located. The maintenance items herein referred to include, but are not limited to, all windows, window frames, plate glass, glazing, truck doors, main plumbing systems of the building (such as water drain lines, sinks, toilets, faucets, drains, showers and water fountains), main electrical systems (such as panels and conduits), heating and air-conditioning systems (such as compressors, fans, air handlers, ducts, boilers, heaters), structural elements and exterior surfaces of the building; store fronts, roof, downspouts, building common area interiors (such as wall coverings, window coverings, floor coverings and partitioning), ceilings, building exterior doors, skylights (if any), automatic fire extinguishing systems, and elevators (if any); license, permit and inspection fees; security, supplies, materials, equipment and tools; the cost of capital expenditures which have the effect of reducing operating expenses, provided, however, that in the event Landlord makes such capital improvements, Landlord may amortize its investment in said improvements (together with interest at the rate of fifteen (15%) percent per annum on the unamortized balance) as an operating expense in accordance with standard accounting practices, provided, that such amortization is not at a rate greater than the anticipated savings in the operating expenses. Tenant hereby waives all rights hereunder, and benefits of, subsection 1 of Section 1932 and Sections 1941 and 1942 of the California Civil Code and under any similar law, statute or ordinance now or hereafter in effect.
"Additional Rent" as used herein shall not include Landlord's debt repayments; interest on charges, expenses directly or indirectly incurred by Landlord for the benefit of any other tenant; cost for the installation of partitioning or any other tenant improvements; cost of attracting tenants; depreciation; interest; or executive salaries.
43. UTILITIES OF THE BUILDING IN WHICH THE PREMISES ARE LOCATED: As Additional Rent and in accordance with Paragraph 4D of this Lease Tenant shall pay its proportionate share (calculated on a square footage or other equitable basis as calculated by Landlord) of the cost of all utility charges such as water, gas, electricity, (telephone, telex and other electronic communications service, if applicable) sewer service, waste pick-up and any other utilities, materials or services
furnished directly to the building in which the Premises are located, including, without limitation, any temporary or permanent utility surcharge or other exactions whether or not hereinafter imposed.
Landlord shall not be liable for and Tenant shall not be entitled to any abatement or reduction of rent by reason of any interruption or failure of utility services to the Premises when such interruption or failure is caused by accident, breakage, repair, strikes, lockouts, or other labor disturbances or labor disputes of any nature, or by any other cause, similar or dissimilar, beyond the reasonable control of Landlord.
Provided that Tenant is not in default in the performance or observance of any of the terms, covenants or conditions of this Lease to be performed or observed by it, Landlord shall furnish to the Premises between the hours of 8:00 a.m. and 6:00 p.m., Mondays through Fridays (holidays excepted) and subject to the rules and regulations of the Common Area hereinbefore referred to, reasonable quantities of water, gas and electricity suitable for the intended use of the Premises and heat and air-conditioning required in Landlord's judgment for the comfortable use and occupation of the Premises for such purposes. Tenant agrees that at all times it will cooperate fully with Landlord and abide by all regulations and requirements that Landlord may prescribe for the proper functioning and protection of the building heating, ventilating and air-conditioning systems. Whenever heat generating machines, equipment, or any other devices (including exhaust fans) are used in the Premises by Tenant which affect the temperature or otherwise maintained by the air-conditioning system, Landlord shall have the right to install supplementary air-conditioning units in the Premises and the cost thereof, including the cost of installation and the cost of operation and maintenance thereof, shall be paid by Tenant to Landlord upon demand by Landlord. Tenant will not, without the written consent of Landlord, use any apparatus or device in the Premises (including, without limitation), electronic data processing machines or machines using current in excess of 110 Volts which will in any way increase the amount of electricity, gas, water or air-conditioning usually furnished or supplied to premises being used as general office space, or connect with electric current (except through existing electrical outlets in the Premises), or with gas or water pipes any apparatus or device for the purposes of using electric current, gas, or water. If Tenant shall require water, gas, or electric current in excess of that usually furnished or supplied to premises being used as general office space, Tenant shall first obtain the written consent of Landlord, which consent shall not be unreasonably withheld and Landlord may cause an electric current, gas or water meter to be installed in the Premises in order to measure the amount of electric current, gas or water consumed for any such excess use. The cost of any such meter and of the installation, maintenance and repair thereof, all charges for such excess water, gas and electric current consumed (as shown by such meters and at the rates then charged by the furnishing public utility); and any additional expense incurred by Landlord in keeping account of electric current, gas, or water so consumed shall be paid by Tenant, and Tenant agrees to pay Landlord therefor promptly upon demand by Landlord.
44. PARKING: Tenant shall have the right to the nonexclusive use of one hundred seventeen (117) parking spaces in the common parking area of the building. Tenant agrees that Tenant, Tenant's employees, agents, representatives, and/or invitees shall not use parking spaces in excess of said 117 parking spaces allocated to Tenant hereunder. Landlord shall have the right, at Landlord's sole discretion, to specifically designate the location of Tenant's parking spaces within the common parking area of the building in the event of a dispute among the tenants occupying the building referred to herein, in which event Tenant agrees that Tenant, Tenant's employees, agents, representatives and/or invitees shall not use any parking spaces other than those parking spaces specifically designated by Landlord for Tenant's use. Said parking spaces, if specifically designated by Landlord to Tenant, may be relocated by Landlord at any time, and from time to time. Landlord reserves the right, at Landlord's sole discretion, to rescind any specific designation of parking spaces, thereby returning Tenant's parking spaces to the common parking area. Landlord shall give Tenant written notice of any change in Tenant's parking spaces. Tenant shall not, at any time, park, or permit to be parked, any trucks or vehicles adjacent to the loading area so as to interfere in any way with the use of such areas, nor shall Tenant, at any time, park or permit the parking of Tenant's trucks and other vehicles or the trucks and vehicles of Tenant's suppliers or others, in any portion of the common areas not designated by Landlord for such use by Tenant. Tenant shall not park nor permit to be parked, any inoperative vehicles or equipment on any portion of the common parking area or other common areas of the building. Tenant agrees to assume responsibility for compliance by its employees with the parking provision contained herein. If Tenant or its employees park in other than designated parking areas, then Landlord may charge Tenant, as an additional charge, and Tenant agrees to pay Ten Dollars ($10.00) per day for each day or partial day each such vehicle is parking in any area other than that designated. Tenant hereby authorizes Landlord, at Tenant's sole expense, to tow away from the building any vehicle belonging to Tenant or Tenant's employees parked in violation of these provisions, or to attach violation stickers or notices to such vehicles. Tenant shall use the parking area for vehicle parking only and shall not use the parking areas for storage.
45. ASSESSMENT CREDITS: The demised property herein may be subject to a special assessment levied by the City of Fremont as part of an Improvement District. As a part of said special assessment proceedings (if any), additional bonds were or may be sold and assessments were or may be levied to provide for construction contingencies and reserve funds. Interest shall be earned on such funds created for contingencies and on reserve funds which will be credited for the benefit of said assessment district. To the extent surpluses are created in said district through unused contingency funds, interest earnings or reserve funds, such surpluses shall be deemed the property of Landlord. Notwithstanding that such surpluses may be credited on assessments otherwise due against the Leased Premises, Tenant shall pay to Landlord, as additional rent if, and at the time of any such credit of surpluses, an amount equal to all such surpluses so credited. For example: if (i) the property is subject to an annual assessment of $1,000.00, and (ii) a surplus of $200.00 is credited towards the current year's assessment which reduces the assessment amount shown on the property tax bill from $1,000.00 to $800.00, Tenant shall, upon receipt of notice from Landlord, pay to Landlord said $200.00 credit as Additional Rent.
46. ASSIGNMENT AND SUBLETTING (CONTINUED):
A. Notwithstanding the foregoing, Landlord and Tenant agree that it
shall not be unreasonable for Landlord to refuse to consent to a proposed
assignment, sublease or other transfer ("Proposed Transfer") if the Premises or
any other portion of the Property would become subject to additional or
different Government Requirements as a direct or indirect consequence of the
Proposed Transfer and/or the Proposed Transferee's use and occupancy of the
Premises and the Property. However, Landlord may, in its sole discretion,
consent to such a Proposed Transfer where Landlord is indemnified by Tenant and
(i) Subtenant or (ii) Assignee, in form and substance satisfactory to Landlord's
counsel, by Tenant and/or the Proposed Transferee from and against any and all
costs, expenses, obligations and liability arising out of the Proposed Transfer
and/or the Proposed Transferee's use and occupancy of the Premises and the
Property.
B. Any and all sublease agreement(s) between Tenant and any and all subtenant(s) (which agreements must be consented to by Landlord, pursuant to the requirements of this Lease) shall contain the following language:
"If Landlord and Tenant jointly and voluntarily elect, for any reason whatsoever, to terminate the Master Lease prior to the scheduled Master Lease termination date, then this Sublease (if then still in effect) shall terminate concurrently with the termination of the Master Lease. Subtenant expressly acknowledges and agrees that (1) the voluntary termination of the Master Lease by Landlord and Tenant and the resulting termination of this Sublease shall not give Subtenant any right or power to make any legal or equitable claim against Landlord, including without limitation any claim for interference with contract or interference with prospective economic advantage, and (2) Subtenant hereby waives any and all rights it may have under law or at equity against Landlord to challenge such an early termination of the Sublease, and unconditionally releases and relieves Landlord, and its officers, directors, employees and agents, from any and all claims, demands, and/or causes of action whatsoever (collectively, "Claims"), whether such matters are known or unknown, latent or apparent, suspected or unsuspected, foreseeable or unforeseeable, which Subtenant may have arising out of or in connection with any such early termination of this Sublease. Subtenant knowingly and intentionally waives any and all protection which is or may be given by Section 1542 of the California Civil Code which provides as follows: "A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with debtor.
The term of this Sublease is therefore subject to early termination. Subtenant's initials here below evidence (a) Subtenant's consideration of and agreement to this early termination provision, (b) Subtenant's acknowledgment that, in determining the net benefits to be derived by Subtenant under the terms of this Sublease, Subtenant has anticipated the potential for early termination, and (e) Subtenant's agreement to the general waiver and release of Claims above.
Initials: Initials:
---------- ----------
Subtenant Tenant
|
47. BANKRUPTCY AND DEFAULT: Paragraph 19 is modified to provide that with respect to non-monetary defaults not involving Tenant's failure to pay Basic Rent or Additional Rent, Tenant shall not be in default of any non-monetary obligation if (i) more than thirty (30) days is required to cure such non-monetary default, and (ii) Tenant commences cure of such default as soon as reasonably practicable after receiving written notice of such default from Landlord and thereafter continuously and with due diligence prosecutes such cure to completion.
48. ABANDONMENT: Paragraph 20 is modified to provide that Tenant shall not be in default under the Lease if it leaves all or any part of Premises vacant so long as (i) Tenant is performing all of its other obligations under the Lease including the obligation to pay Basic Rent and Additional Rent (ii) Tenant provides on-site security during normal business hours for those parts of the Premises left vacant, (iii) such vacancy does not materially and adversely affect the validity or coverage of any policy of insurance carried by Landlord with respect to the Premises, and (iv) the utilities and heating and ventilation system are operated and maintained to the extent necessary to prevent damage to the Premises or its systems.
49. HAZARDOUS MATERIALS: Landlord and Tenant agree as follows with respect to the existence or use of "Hazardous Materials" (as defined herein) on, in, under or about the Premises and real property located beneath said Premises and the common areas of the Parcel, which includes the entire parcel of land on which the Premises are located as shown in Green on EXHIBIT A attached hereto (hereinafter collectively referred to as the "Property"):
A. As used herein, the term "Hazardous Materials" shall mean any material, waste, chemical, mixture or byproduct which is or hereafter is defined, listed or designated under Environmental Laws (defined below) as a pollutant, or as a contaminant, or as a toxic or hazardous substance, waste or material, or any other unwholesome, hazardous, toxic, biohazardous, or radioactive material, waste, chemical, mixture or byproduct, or which is listed, regulated or restricted by any Environmental Law (including, without limitation, petroleum hydrocarbons or any distillates or derivatives or fractions thereof, polychlorinated biphenyls, or asbestos). As used herein, the term "Environmental Laws" shall mean any applicable Federal, State of California or local government law (including common law), statute, regulation, rule, ordinance, permit, license, order, requirement, agreement, or approval, or any determination, judgment, directive, or order of any executive or judicial authority at any level of Federal, State of California or local government (whether now existing or subsequently adopted or promulgated) relating to pollution or the protection of the environment, ecology, natural resources, or public health and safety.
B. Tenant shall obtain Landlord's written consent, which may be withheld in Landlord's discretion, prior to the occurrence of any Tenant's Hazardous Materials Activities (defined below); provided, however, that Landlord's consent shall not be required for normal use in compliance with applicable Environmental Laws of customary household and office supplies (Tenant shall first provide Landlord with a list of said materials use), such as mild cleaners, lubricants and copier toner. As used herein, the term "Tenant's Hazardous Materials Activities" shall mean any and all use, handling, generation, storage, disposal, treatment, transportation, release, discharge, or emission of any Hazardous Materials on, in, beneath, to, from, at or about the Property, in connection with Tenant's use of the Property, or by Tenant or by any of Tenant's agents, employees, contractors, vendors, invitees, visitors or its future subtenants or assignees. Tenant agrees that any and all Tenant's Hazardous Materials Activities shall be conducted in strict, full compliance with applicable Environmental Laws at Tenant's expense, and shall not result in any contamination of the Property or the environment. Tenant agrees to provide Landlord with prompt written notice of any spill or release of Hazardous Materials at the Property during the term of the Lease of which Tenant becomes aware, and further agrees to provide Landlord with prompt written notice of any violation of Environmental Laws in connection with Tenant's Hazardous Materials Activities of which Tenant becomes aware. If Tenant's Hazardous Materials Activities involve Hazardous Materials other than normal use of customary household and office supplies, Tenant also agrees at Tenant's expense: (i) to install such Hazardous Materials monitoring, storage and containment devices as Landlord reasonably deems necessary (Landlord shall have no obligation to evaluate the need for any such installation or to require any such installation); (ii) provide Landlord with a written inventory of such Hazardous Materials, including an update of same each year upon the anniversary date of the Commencement Date of the Lease ("Anniversary Date"); and (iii) on each Anniversary Date, to retain a qualified environmental consultant, acceptable to Landlord, to evaluate whether Tenant is in compliance with all applicable Environmental Laws with respect to Tenant's Hazardous Materials Activities. Tenant, at its expense,
shall submit to Landlord a report from such environmental consultant which discusses the environmental consultant's findings within two (2) months of each Anniversary Date. Tenant, at its expense, shall promptly undertake and complete any and all steps necessary, and in full compliance with applicable Environmental Laws, to fully correct any and all problems or deficiencies identified by the environmental consultant, and promptly provide Landlord with documentation of all such corrections.
C. Prior to termination or expiration of the Lease, Tenant, at its expense, shall (i) properly remove from the Property all Hazardous Materials which come to be located at the Property in connection with Tenant's Hazardous Materials Activities, and (ii) fully comply with and complete all facility closure requirements of applicable Environmental Laws regarding Tenant's Hazardous Materials Activities, including but not limited to (x) properly restoring and repairing the Property to the extent damaged by such closure activities, and (y) obtaining from the local Fire Department or other appropriate governmental authority with jurisdiction a written concurrence that closure has been completed in compliance with applicable Environmental Laws. Tenant shall promptly provide Landlord with copies of any claims, notices, work plans, data and reports prepared, received or submitted in connection with any such closure activities.
D. If Landlord, in its sole discretion, believes that the Property has become contaminated as a result of Tenant's Hazardous Materials Activities, Landlord in addition to any other rights it may have under this Lease or under Environmental Laws or other laws, may enter upon the Property and conduct inspection, sampling and analysis, including but not limited to obtaining and analyzing samples of soil and groundwater, for the purpose of determining the nature and extent of such contamination. Tenant shall promptly reimburse Landlord for the costs of such an investigation, including but not limited to reasonable attorneys' fees Landlord incurs with respect to such investigation, that discloses Hazardous Materials contamination for which Tenant is liable under this Lease. Notwithstanding the above, Landlord may, at its option and in its sole and absolute discretion, choose to perform remediation and obtain reimbursement for cleanup costs as set forth herein from Tenant. Any cleanup costs incurred by Landlord as the result of Tenant's Hazardous Materials Activities shall be reimbursed by Tenant within thirty (30) days of presentation of written documentation of the expense to Tenant by Landlord. Such reimbursable costs shall include, but not be limited to, any reasonable consultant and attorney fees incurred by Landlord. Tenant shall take all actions necessary to preserve any claims it has against third parties, including, but not limited to, its insurers, for claims related to its operation, management of Hazardous Materials or contamination of the Property. Except as may be required of Tenant by applicable Environmental Laws, Tenant shall not perform any sampling, testing, or drilling to identify the presence of any Hazardous Materials at the Property, without Landlord's prior written consent which may be withheld in Landlord's discretion. Tenant shall promptly provide Landlord with copies of any claims, notices, work plans, data and reports prepared, received or submitted in connection with any sampling, testing or drilling performed pursuant to the preceding sentence.
E. Tenant shall indemnify, defend (with legal counsel acceptable to Landlord, whose consent shall not unreasonably be withheld) and hold harmless Landlord, its employees, assigns, successors, successors-in-interest, agents and representatives from and against any and all claims (including but not limited to third party claims from a private party or a government authority), liabilities, obligations, losses, causes of action, demands, governmental proceedings or directives, fines, penalties, expenses, costs (including but not limited to reasonable attorneys', consultants' and other experts' fees and costs), and damages, which arise from or relate to: (i) Tenant's Hazardous Materials Activities; (ii) any Hazardous Materials contamination caused by Tenant prior to the Commencement Date of the Lease; or (iii) the breach of any obligation of Tenant under this Paragraph 49 (collectively, "Tenant's Environmental Indemnification"). Tenant's Environmental Indemnification shall include but is not limited to the obligation to promptly and fully reimburse Landlord for losses in or reductions to rental income, and diminution in fair market value of the Property. Tenant's Environmental Indemnification shall further include but is not limited to the obligation to diligently and properly implement to completion, at Tenant's expense, any and all environmental investigation, removal, remediation, monitoring, reporting, closure activities, or other environmental response action (collectively, "Response Actions"). Tenant shall promptly provide Landlord with copies of any claims, notices, work plans, data and reports prepared, received or submitted in connection with any Response Actions.
As evidenced by their initials set forth immediately below, Tenant acknowledges that Landlord has provided Tenant with copies of the environmental reports listed on EXHIBIT C ("Reports"), and Tenant acknowledges that Tenant and Tenant's experts (if any) have had ample opportunity to review such reports and that Tenant has satisfied itself as to the environmental conditions of the Property and the suitability of such conditions for Tenant's intended use of the Property. To the best of Landlord's knowledge as of the date of this Lease, except as noted in said Reports, no additional on site Hazardous
Materials contamination exist on the Property; however, Landlord shall have no obligation to further investigate.
Initial: [ILLEGIBLE] Initial:
----------- -----------
Tenant Landlord
|
It is agreed that the Tenant's responsibilities related to Hazardous Materials will survive the expiration or termination of this Lease and that Landlord may obtain specific performance of Tenant' s responsibilities under this Paragraph 49.
50. CONSENT: Whenever the consent of one party to the other is required hereunder, such consent shall not be unreasonably withheld.
51. AUTHORITY TO EXECUTE. The parties executing this Lease Agreement hereby warrant and represent that they are properly authorized to execute this Lease Agreement and bind the parties on behalf of whom they execute this Lease Agreement and to all of the terms, covenants and conditions of this Lease Agreement as they relate to the respective parties hereto.
52. ADDRESS FOR LEASED PREMISES: It is understood that (i) the current address for the building in which the Premises are located is 6607 Dumbarton Circle, Suite 200, Fremont, California, and that (ii) the address for the Premises may be changed by the City of Fremont (the "City") upon issuance of a building permit for the Interior Improvements as defined herein. In the event the address assigned to the Premises is changed by the City, said Lease shall thereafter be amended to reflect the assigned address for the Premises leased hereunder.
53. ASSOCIATION DUES: The Premises leased hereunder is part of the Ardenwood Property Owner's Association (the "Association"), and is subject to Association Dues to fund the cost of the Association's obligations and expenses as authorized under said Agreement. As of the date of this Lease, Tenant's current pro rata share of the Association Dues is currently estimated at $28.77 per month and is subject to adjustment as provided for by said Association. Said Association Dues are payable by Tenant to Landlord as Additional Rent on a monthly basis throughout the Term of this Lease. Tenant understands that it will not be a direct member of the Association
January 28, 2000
CIPHERGEN BIOSYSTEMS, INC.
490 San Antonio Road
Palo Alto, CA 94306
Attention: James H. Stanford
RE: CONSTRUCTION AGREEMENT RELATED TO LEASE AGREEMENT DATED JANUARY 28,
2000, BY AND BETWEEN THE JOHN ARRILLAGA SURVIVOR'S TRUST AND THE
RICHARD T. PEERY SEPARATE PROPERTY TRUST, AS LANDLORD, AND CIPHERGEN
BIOSYSTEMS, INC., A CALIFORNIA CORPORATION, AS TENANT, FOR
APPROXIMATELY 30,232 SQUARE FEET OF THAT CERTAIN 60,720 SQUARE FOOT
BUILDING LOCATED AT 6607 DUMBARTON CIRCLE, SUITE 200 IN FREMONT,
CALIFORNIA.
Gentlemen:
This Letter will confirm our agreement relative to the shell of the building and interior improvements related thereto to be constructed by Landlord on the property leased under the lease referenced above, hereinafter referred to as the "Lease", and shall be considered a part of the Lease.
1. CONSTRUCTION AND COST OF IMPROVEMENTS: The improvements to be constructed as part of the Premises in connection with this Lease Agreement shall be constructed, completed, and paid for in the following manner:
A. PLANS AND SPECIFICATIONS:
1. SHELL: Tenant shall furnish to Landlord complete detailed plans and specifications for all plumbing, electrical, heating and air conditioning that affect the construction of the "shell" of the building, as well as any other items that are required to construct the shell without modification being required at a later time, not later than February 14, 2000.
2. INTERIOR: Tenant shall furnish to Landlord complete and detailed plans and specifications for all interior improvements Tenant desires constructed in the building shell being constructed by Landlord not later than February 14, 2000. Such interior plans shall be in sufficient detail for the interior improvements to be accurately constructed. All of the plans and specifications, when approved by Landlord and furnished to Landlord on the dates provided for herein, shall be "EXHIBIT B" to the Lease.
If the above plans and specifications for any items affecting the shell of the building and/or interior plans and specifications are not received by Landlord for Landlord's approval (which approval shall not be unreasonable withheld) by the dates specified above, then it is agreed that, notwithstanding anything to the contrary in the Lease, this Lease, and Tenant's obligation to pay Rent and to perform all other terms, covenants and conditions of the Lease shall commence on April 1, 2000 regardless of whether or not the building and interior improvements are completed on April 1, 2000, and Landlord shall complete construction of the building and interior improvements as soon as reasonably possible thereafter.
B. LANDLORD'S RIGHT TO TERMINATE: It is understood that the Premises to be leased by Tenant are to be constructed by Landlord, and that Landlord is required to obtain the necessary building permits before construction of said Premises can commence. Therefore, it is agreed that in the event Landlord cannot obtain all the necessary building and governmental permits for said Premises within 90 days from the date this executed Lease is received by Landlord, that Landlord can terminate this Lease Agreement without any liability to Tenant, of any type whatsoever, and that this Lease Agreement will be null and void as of the date of said cancellation. Landlord agrees to use its best efforts to obtain the required permits within the aforementioned 90-day
period.
C. CONSTRUCTION OF IMPROVEMENTS BY LANDLORD:
1. The site, shell, and interior shall be constructed in accordance with Exhibit A and EXHIBIT B of the Lease; it being agreed, however, that if the Building does not conform exactly to the plans and specifications as set forth in the Lease, and the general appearance, structural integrity, and Tenant's use and occupancy of the Premises and/or building and interior improvements relating thereto are not materially or unreasonably affected by such deviation, it is agreed that the commencement date of the Lease, and Tenant's obligation to pay Rent shall not be affected, and Tenant hereby agrees, in such event, to accept the Premises and/or building and interior improvements as constructed by Landlord.
2. Landlord shall have a reasonable time period, not to exceed sixty
(60) days (acts of God and delays beyond Landlord's control excepted), after
completion by Landlord of Tenant's improvements set forth herein and the
commencement date of the Lease to complete the landscaping and "punch list"
items pertaining to Landlord's work with respect to Tenant's newly constructed
building and/or interior improvements relating thereto without the commencement
date of the Lease and Tenant's obligation to pay Rent thereunder being affected.
D. IMPROVEMENTS TO BE FURNISHED BY LANDLORD:
1. Landlord agrees to furnish the shell of the building, including the paving and parking areas, striping, curbs, and gutters as shown on EXHIBIT A of the Lease, the main plumbing line into the building and landscaping and irrigation system for the building.
2. In addition, Landlord agrees to furnish Tenant with an interior allowance of SEVEN HUNDRED FIFTY FIVE THOUSAND EIGHT HUNDRED AND NO/100 DOLLARS ($755,800.00) ("Improvement Allowance"), which allowance shall be considered Landlord's total monetary contribution with respect to Tenant's interior improvements to the building, which allowance shall be used for interior improvements including, but not limited to, elevators, elevator pits and guide rails (if any), stairwells (if any), the fire sprinkler system, loading docks, drop ceilings, interior plumbing, heating and air conditioning system ("HVAC"), electrical system, parking lot lighting, carpeting, vinyl floor covering, painting, interior walls and movable floor to ceiling partitioning, normal contractor's fees and interest due during the period of construction on the funds advanced for installation of improvements under the improvement allowance, Builders Risk Insurance premium and any school, City, County or governmental fees including fees for connection to utilities, etc. Notwithstanding anything to the contrary herein, in no event shall any of Landlord Improvement Allowance be used for any lab equipment, cabinets or special plumbing and/or electrical and/or HVAC requirements for any labs and/or clean rooms, if any (collectively hereinafter referred to as "Other Improvements")
3. Tenant hereby specifically agrees that the interior improvements to be constructed in the Premises leased hereunder shall be spread proportionately even within the building.
E. LIABILITY FOR INTERIOR EXPENSE ABOVE LANDLORD'S ALLOWANCE:
1. In the event that the total cost of the interior improvements constructed in the Premises exceeds Landlord's agreed-upon interior improvement allowance of $755,800.00, Landlord's total liability shall be limited to $755,800.00, which Landlord shall pay by paying the general contractor doing the interior improvements a pro rata share of the total cost of the contract as invoiced by the general contractor as work progresses. (For example: If the total contract from the general contractor for such improvements is $1,000,000.00 and Landlord agreed to contribute $755,800.00 toward the improvements, then Landlord would pay seventy five and fifty eight hundredths percent (75.58%) of each payment so invoiced and Tenant would pay the remaining twenty percent (24.42%) of each payment so invoiced with the exception that Landlord, at its option, may retain a pro rata share of the final ten percent (10%) of the interior contract until 62 days after recordation of a Notice of Completion on the Premises.
2. It is further agreed that Tenant shall be responsible for and pay one hundred percent (100%) of the costs in connection with (a) Tenant's Other Improvements and (b) any and all interior improvements in excess of those that are paid for with Landlord's allowance for Tenant's
improvements as set forth in Paragraph 1.C. 1 above and in addition, Tenant shall be responsible for and pay any additional construction costs and expenses related to the site or shell occasioned by changes or modifications by Tenant in the plans attached as Exhibits A and B to the Lease. Landlord shall be reimbursed by Tenant for the full cost of such improvements made by Landlord in excess of said $755,800.00 allowance upon demand of Landlord. (Tenant shall enter into a direct contract with the general contractor constructing the interior improvements if Landlord so directs.)
2. CHANGES, MODIFICATIONS, OR ADDITIONS TO THE PLANS, SPECIFICATIONS AND/OR PREMISES.
LIABILITY FOR ADDITIONAL COSTS:
A. All construction work relating to the Premises other than that to be performed by Landlord as set forth herein shall be performed by Landlord at Tenant's sole cost and expense, and in accordance with any plans and specifications first submitted and approved in writing by Landlord.
B. Notwithstanding anything to the contrary, it is agreed that in the event Tenant, with Landlord's written consent (which consent shall not be unreasonably withheld), makes changes, additions, or modifications to the plans and specifications and/or Premises to be constructed by Landlord as set forth herein, or improvements are installed for Tenant in excess of those to be provided Tenant by Landlord as set forth herein, any increased cost(s) resulting from said changes, additions, and/or modifications and/or improvements in excess of those to be provided Tenant as set forth in Paragraph 1.A. shall be contracted for with Landlord or the general contractor (as Landlord shall so designate) and paid for one hundred percent (100%) by Tenant.
3. TENANT DELAYS
In the event that the completion of Tenant's interior improvements and/or the completion of the building and Landlord's delivery of possession of the Premises to Tenant is delayed as a result of said changes, additions, and/or modifications made by Tenant, or because improvements installed by Tenant or Tenant's subcontractors (with Landlord's consent, which consent shall not be unreasonably withheld) hinder Landlord from timely completing any improvements to be installed by Landlord, or if Tenant installs, or requests to have installed, any special or nonstandard improvements, or if Tenant's plans and specifications include any special materials, finishes or installations which are not readily available, and which delay completion of the improvements due to a longer time span for delivery or installation of said nonstandard improvement or any other reason, including Tenant's failure to timely deliver the Construction Plans and Specifications as provided in above Paragraph 1.A, the commencement date of the Lease, and Tenant's obligation to pay Rent and perform all other terms, covenants and conditions of the Lease shall commence on April 1, 2000, in which event Landlord shall complete construction of the building as soon as reasonably possible thereafter.
Please execute this agreement in the space provided below, indicating your agreement with the above, and return all copies. A fully executed copy will be returned to you for your records after execution by the Landlord.
Respectfully yours,
JOHN ARRILLAGA SURVIVOR'S TRUST
(SIGNATURES CONTINUED ON FOLLOWING PAGE)
RICHARD T. PEERY SEPARATE
PROPERTY TRUST
By /s/ Richard T. Peery
-------------------------------------------
Richard T. Peery, Trustee
Date: 2/8/00
-----------------------------------------
|
AGREED:
CIPHERGEN BIOSYSTEMS, INC.
a California corporation
By /s/ James H. Stanford
-------------------------------------------
James H. Stanford, Vice President and
Chief Financial Officer
Date: February 3, 2000
-----------------------------------------
|
[Image Site Plan]
EXHIBIT A TO LEASE AGREEMENT DATED JANUARY 28, 2000 BY BETWEEN THE JOHN ARRILLAGA SURVIVOR'S TRUST AND THE RICHARD T. PEERY SEPARATE PROPERTY TRUST, AS LANDLORD, AND CIPHERGEN BIOSYSTEMS, INC., AS TENANT.
EXHIBIT C TO LEASE AGREEMENT DATED JANUARY 28, 2000 BETWEEN THE
JOHN ARRILLAGA SURVIVOR'S TRUST AND THE RICHARD T. PEERY
SEPARATE PROPERTY TRUST, AS LANDLORD, AND CIPHERGEN BIOSYSTEMS,
INC., AS TENANT.
HAZARDOUS MATERIALS REPORTS
PROVIDED TO TENANT
1) Preliminary Environmental Assessment and Soil Testing for Ardenwood Corporate Commons: prepared for Bedford Properties on August 10, 1988 by Kaldveer Associates;
2) Preliminary Environmental Assessment and Soil Testing for Ardenwood Corporate Commons Lots 1 through 27: prepared for Bedford Properties on June 13, 1989 by Kaldveer Associates;
3) Phase I Site Assessment for Ardenwood Corporate Commons: prepared for Bedford Properties in July 1991 by Mittelhauser Corporation.
[Image Site Plan]
EXHIBIT A TO LEASE AGREEMENT DATED JANUARY 28, 2000 BY BETWEEN THE JOHN ARRILLAGA SURVIVOR'S TRUST AND THE RICHARD T. PEERY SEPARATE PROPERTY TRUST, AS LANDLORD, AND CIPHERGEN BIOSYSTEMS, INC., AS TENANT.
FLOORPLAN
FLOORPLAN
January 28, 2000
CIPHERGEN BIOSYSTEMS, INC.
490 San Antonio Road
Palo Alto, CA 94306
Attention: James H. Stanford
RE: CONSTRUCTION AGREEMENT RELATED TO LEASE AGREEMENT DATED JANUARY 28,
2000, BY AND BETWEEN THE JOHN ARRILLAGA SURVIVOR'S TRUST AND THE
RICHARD T. PEERY SEPARATE PROPERTY TRUST, AS LANDLORD, AND CIPHERGEN
BIOSYSTEMS, INC., A CALIFORNIA CORPORATION, AS TENANT, FOR
APPROXIMATELY 30,232 SQUARE FEET OF THAT CERTAIN 60,720 SQUARE FOOT
BUILDING LOCATED AT 6607 DUMBARTON CIRCLE, SUITE 200 IN FREMONT,
CALIFORNIA.
Gentlemen:
This Letter will confirm our agreement relative to the shell of the building and interior improvements related thereto to be constructed by Landlord on the property leased under the lease referenced above, hereinafter referred to as the "Lease", and shall be considered a part of the Lease.
1. CONSTRUCTION AND COST OF IMPROVEMENTS: The improvements to be constructed as part of the Premises in connection with this Lease Agreement shall be constructed, completed, and paid for in the following manner:
A. PLANS AND SPECIFICATIONS:
1. SHELL: Tenant shall furnish to Landlord complete detailed plans and specifications for all plumbing, electrical, heating and air conditioning that affect the construction of the "shell" of the building, as well as any other items that are required to construct the shell without modification being required at a later time, not later than February 14, 2000.
2. INTERIOR: Tenant shall furnish to Landlord complete and detailed plans and specifications for all interior improvements Tenant desires constructed in the building shell being constructed by Landlord not later than February 14, 2000. Such interior plans shall be in sufficient detail for the interior improvements to be accurately constructed. All of the plans and specifications, when approved by Landlord and furnished to Landlord on the dates provided for herein, shall be "EXHIBIT B" to the Lease.
If the above plans and specifications for any items affecting the shell of the building and/or interior plans and specifications are not received by Landlord for Landlord's approval (which approval shall not be unreasonable withheld) by the dates specified above, then it is agreed that, notwithstanding anything to the contrary in the Lease, this Lease, and Tenant's obligation to pay Rent and to perform all other terms, covenants and conditions of the Lease shall commence on April 1, 2000 regardless of whether or not the building and interior improvements are completed on April 1, 2000, and Landlord shall complete construction of the building and interior improvements as soon as reasonably possible thereafter.
B. LANDLORD'S RIGHT TO TERMINATE: It is understood that the Premises to be leased by Tenant are to be constructed by Landlord, and that Landlord is required to obtain the necessary building permits before construction of said Premises can commence. Therefore, it is agreed that in the event Landlord cannot obtain all the necessary building and governmental permits for said Premises within 90 days from the date this executed Lease is received by Landlord, that Landlord can terminate this Lease Agreement without any liability to Tenant, of any type whatsoever, and that this Lease Agreement will be null and void as of the date of said cancellation. Landlord agrees to use its best efforts to obtain the required permits within the aforementioned 90-day
period.
C. CONSTRUCTION OF IMPROVEMENTS BY LANDLORD:
1. The site, shell, and interior shall be constructed in accordance with EXHIBIT A and EXHIBIT B of the Lease; it being agreed, however, that if the Building does not conform exactly to the plans and specifications as set forth in the Lease, and the general appearance, structural integrity, and Tenant's use and occupancy of the Premises and/or building and interior improvements relating thereto are not materially or unreasonably affected by such deviation, it is agreed that the commencement date of the Lease, and Tenant's obligation to pay Rent shall not be affected, and Tenant hereby agrees, in such event, to accept the Premises and/or building and interior improvements as constructed by Landlord.
2. Landlord shall have a reasonable time period, not to exceed sixty
(60) days (acts of God and delays beyond Landlord's control excepted), after
completion by Landlord of Tenant's improvements set forth herein and the
commencement date of the Lease to complete the landscaping and "punch list"
items pertaining to Landlord's work with respect to Tenant's newly constructed
building and/or interior improvements relating thereto without the commencement
date of the Lease and Tenant's obligation to pay Rent thereunder being affected.
D. IMPROVEMENTS TO BE FURNISHED BY LANDLORD:
1. Landlord agrees to furnish the shell of the building, including the paving and parking areas, striping, curbs, and gutters as shown on EXHIBIT A of the Lease, the main plumbing line into the building and landscaping and irrigation system for the building.
2. In addition, Landlord agrees to furnish Tenant with an interior allowance of SEVEN HUNDRED FIFTY FIVE THOUSAND EIGHT HUNDRED AND NO/100 DOLLARS ($755,800.00) ("Improvement Allowance"), which allowance shall be considered Landlord's total monetary contribution with respect to Tenant's interior improvements to the building, which allowance shall be used for interior improvements including, but not limited to, elevators, elevator pits and guide rails (if any), stairwells (if any), the fire sprinkler system, loading docks, drop ceilings, interior plumbing, heating and air conditioning system ("HVAC"), electrical system, parking lot lighting, carpeting, vinyl floor covering, painting, interior walls and movable floor to ceiling partitioning, normal contractor's fees and interest due during the period of construction on the funds advanced for installation of improvements under the improvement allowance, Builders Risk Insurance premium and any school, City, County or governmental fees including fees for connection to utilities, etc. Notwithstanding anything to the contrary herein, in no event shall any of Landlord Improvement Allowance be used for any lab equipment, cabinets or special plumbing and/or electrical and/or HVAC requirements for any labs and/or clean rooms, if any (collectively hereinafter referred to as "Other Improvements")
3. Tenant hereby specifically agrees that the interior improvements to be constructed in the Premises leased hereunder shall be spread proportionately even within the building.
E. LIABILITY FOR INTERIOR EXPENSE ABOVE LANDLORD'S ALLOWANCE:
1. In the event that the total cost of the interior improvements constructed in the Premises exceeds Landlord's agreed-upon interior improvement allowance of $755,800.00, Landlord's total liability shall be limited to $755,800.00, which Landlord shall pay by paying the general contractor doing the interior improvements a pro rata share of the total cost of the contract as invoiced by the general contractor as work progresses. (For example: If the total contract from the general contractor for such improvements is $1,000,000.00 and Landlord agreed to contribute $755,800.00 toward the improvements, then Landlord would pay seventy five and fifty eight hundredths percent (75.58%) of each payment so invoiced and Tenant would pay the remaining twenty percent (24.42%) of each payment so invoiced with the exception that Landlord, at its option, may retain a pro rata share of the final ten percent (10%) of the interior contract until 62 days after recordation of a Notice of Completion on the Premises.
2. It is further agreed that Tenant shall be responsible for and pay one hundred percent (100%) of the costs in connection with (a) Tenant's Other Improvements and (b) any and all interior improvements in excess of those that are paid for with Landlord's allowance for Tenant's
improvements as set forth in Paragraph 1.C.1 above and in addition, Tenant shall be responsible for and pay any additional construction costs and expenses related to the site or shell occasioned by changes or modifications by Tenant in the plans attached as Exhibits A and B to the Lease. Landlord shall be reimbursed by Tenant for the full cost of such improvements made by Landlord in excess of said $755,800.00 allowance upon demand of Landlord. (Tenant shall enter into a direct contract with the general contractor constructing the interior improvements if Landlord so directs.)
2. CHANGES, MODIFICATIONS, OR ADDITIONS TO THE PLANS, SPECIFICATIONS AND/OR PREMISES.
LIABILITY FOR ADDITIONAL COSTS:
A. All construction work relating to the Premises other than that to be performed by Landlord as set forth herein shall be performed by Landlord at Tenant's sole cost and expense, and in accordance with any plans and specifications first submitted and approved in writing by Landlord.
B. Notwithstanding anything to the contrary, it is agreed that in the event Tenant, with Landlord's written consent (which consent shall not be unreasonably withheld), makes changes, additions, or modifications to the plans and specifications and/or Premises to be constructed by Landlord as set forth herein, or improvements are installed for Tenant in excess of those to be provided Tenant by Landlord as set forth herein, any increased cost(s) resulting from said changes, additions, and/or modifications and/or improvements in excess of those to be provided Tenant as set forth in Paragraph 1.A. shall be contracted for with Landlord or the general contractor (as Landlord shall so designate) and paid for one hundred percent (100%) by Tenant.
3. TENANT DELAYS
In the event that the completion of Tenant's interior improvements and/or the completion of the building and Landlord's delivery of possession of the Premises to Tenant is delayed as a result of said changes, additions, and/or modifications made by Tenant, or because improvements installed by Tenant or Tenant's subcontractors (with Landlord's consent, which consent shall not be unreasonably withheld) hinder Landlord from timely completing any improvements to be installed by Landlord, or if Tenant installs, or requests to have installed, any special or nonstandard improvements, or if Tenant's plans and specifications include any special materials, finishes or installations which are not readily available, and which delay completion of the improvements due to a longer time span for delivery or installation of said nonstandard improvement or any other reason, including Tenant's failure to timely deliver the Construction Plans and Specifications as provided in above Paragraph 1.A, the commencement date of the Lease, and Tenant's obligation to pay Rent and perform all other terms, covenants and conditions of the Lease shall commence on April 1, 2000, in which event Landlord shall complete construction of the building as soon as reasonably possible thereafter.
Please execute this agreement in the space provided below, indicating your agreement with the above, and return all copies. A fully executed copy will be returned to you for your records after execution by the Landlord.
Respectfully yours,
JOHN ARRILLAGA SURVIVOR'S TRUST
By /s/ John Arrillaga
---------------------------------------
John Arrillaga, Trustee
Date: 2/8/00
-------------------------------------
|
(SIGNATURES CONTINUED ON FOLLOWING PAGE)
RICHARD T. PEERY SEPARATE
PROPERTY TRUST
By /s/ Richard T. Peery
---------------------------------------
Richard T. Peery, Trustee
Date: 2/8/00
-------------------------------------
|
AGREED:
CIPHERGEN BIOSYSTEMS, INC.
a California corporation
By /s/ James H. Stanford
---------------------------------------
James H. Stanford, Vice President and
Chief Financial Officer
Date: February 3, 2000
-------------------------------------
|
EXHIBIT A
SITE PLAN
(IMAGE)
Exhibit 10.13
CIPHERGEN BIOSYSTEMS, INC.
WILLIAM E. RICH EMPLOYMENT AGREEMENT
This Agreement is entered into as of August 24, 2000, (the "Effective Date") by and between CIPHERGEN BIOSYSTEMS, INC. (the "Company"), and WILLIAM E. RICH ("Executive").
1. DUTIES AND SCOPE OF EMPLOYMENT.
(a) POSITIONS AND DUTIES. As of the Effective Date, Executive will serve as President and Chief Executive Officer of the Company. Executive will render such business and professional services in the performance of his duties, consistent with Executive's position within the Company, as shall reasonably be assigned to him by the Company's Board of Directors (the "Board"). The period of Executive's employment under this Agreement is referred to herein as the "Employment Term."
(b) BOARD MEMBERSHIP. During the Employment Term, Executive will serve as a member of the Board, subject to any required Board and/or stockholder approval.
(c) OBLIGATIONS. During the Employment Term, Executive will perform his duties faithfully and to the best of his ability and will devote his full business efforts and time to the Company. For the duration of the Employment Term, Executive agrees not to actively engage in any other employment, occupation or consulting activity for any direct or indirect remuneration without the prior approval of the Board.
2. AT-WILL EMPLOYMENT. The parties agree that Executive's employment with the Company will be "at-will" employment and may be terminated at any time with or without cause or notice. Executive understands and agrees that neither his job performance nor promotions, commendations, bonuses or the like from the Company give rise to or in any way serve as the basis for modification, amendment, or extension, by implication or otherwise, of his employment with the Company.
3. COMPENSATION.
(a) BASE SALARY. During the Employment Term, the Company will initially pay Executive as compensation for his services a base salary at the annualized rate of $225,000.00 (the "Base Salary"), plus an annual car allowance in the amount of $10,530.60. The Base Salary will be paid periodically in accordance with the Company's normal payroll practices and be subject to the usual, required withholding.
(b) BONUS. Subject to the attainment of objectives as determined by the Company's Board of Directors on a yearly basis, Executive shall initially receive a cash bonus in the amount of 50% of the Base Salary, or in the event that there is an initial public offering of the Company's Common Stock during calendar year 2000, 100% of the Base Salary.
(c) ADJUSTMENTS. The initial Base Salary, bonus and other compensation levels shall be subject to adjustment from time to time by the Company's Compensation Committee.
4. EMPLOYEE BENEFITS. During the Employment Term, Executive will be entitled to participate in the employee benefit plans currently and hereafter maintained by the Company of general applicability to other senior executives of the Company, including, without limitation, the Company's group medical, dental, vision, disability, life insurance, and flexible-spending account plans. The Company reserves the right to cancel or change the benefit plans and programs it offers to its employees at any time.
5. VACATION. Executive will be entitled to paid vacation of four weeks per year in accordance with the Company's vacation policy, with the timing and duration of specific vacations mutually and reasonably agreed to by the parties hereto.
6. EXPENSES. The Company will reimburse Executive for reasonable travel, entertainment or other expenses incurred by Executive in the furtherance of or in connection with the performance of Executive's duties hereunder, in accordance with the Company's expense reimbursement policy as in effect from time to time.
7. SEVERANCE.
(a) INVOLUNTARY TERMINATION. If Executive's employment with the Company terminates other than voluntarily or for "Cause" (as defined herein), or if there is a "Constructive Termination" (as defined herein) of Executive's employment, and Executive signs and does not revoke a standard release of claims with the Company, then, subject to Section 11, Executive shall be entitled to receive continuing payments of severance pay (less applicable withholding taxes) at a rate equal to his Base Salary rate as then in effect, and continued participation in the Company's employee benefit plans, for a period of 12 months from the date of such termination, to be paid periodically in accordance with the Company's normal payroll policies; and (ii) any options granted by the Company to Executive shall continue to vest in accordance with its terms during the 24-month period after the date of such termination.
(b) VOLUNTARY TERMINATION; TERMINATION FOR CAUSE. If Executive's employment with the Company terminates voluntarily by Executive or for Cause by the Company, then all vesting of options granted by the Company to Executive will terminate immediately and the Executive shall be entitled to any accrued salary and bonus payments to the date of such termination. Notwithstanding anything to the contrary in this Agreement, a refusal by Executive to relocate to a work location outside of the Bay Area shall not constitute a voluntary termination or termination for Cause.
8. CHANGE OF CONTROL BENEFITS.
(a) In the event of a "Change of Control" (as defined below) that occurs prior to the Executive's termination of employment, any options granted by the Company to Executive with greater than 12 months of vesting then remaining will be accelerated immediately prior to such Change of Control as to all shares which would otherwise vest on the date which is one (1) year from the expiration of the vesting schedule for each option vested. Thereafter, such options will continue to be subject to the terms, definitions and provisions of the Company's Stock Plan (the
"Option Plan") and the stock option agreement by and between Executive and the Company (the "Option Plan"), both of which documents are incorporated herein by reference.
(b) If, within 12 months after the Change of Control, Executive's employment is terminated involuntarily pursuant to Section 7(a) of this Agreement, any unvested options granted by the Company to Executive will have their vesting accelerated so as to become 100% vested.
9. DEFINITIONS.
(a) CAUSE. For purposes of this Agreement, "Cause" is defined as (i) an act of dishonesty made by Executive in connection with Executive's responsibilities as an employee, (ii) Executive's conviction of, or plea of NOLO CONTENDERE to, a felony, (iii) Executive's gross misconduct, or (iv) Executive's continued substantial violations of his employment duties after Executive has received a written demand for performance from the Company which specifically sets forth the factual basis for the Company's belief that Executive has not substantially performed his duties.
(b) CHANGE OF CONTROL. For purposes of this Agreement, "Change of Control" of the Company is defined as: (i) any "person" (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) is or becomes the "beneficial owner" (as defined in Rule 13d-3 under said Act), directly or indirectly, of securities of the Company representing 50% or more of the total voting power represented by the Company's then outstanding voting securities; or (ii) a change in the composition of the Board occurring within a two-year period, as a result of which fewer than a majority of the directors are Incumbent Directors. "Incumbent Directors" will mean directors who either (A) are directors of the Company as of the date hereof, or (B) are elected, or nominated for election, to the Board with the affirmative votes of at least a majority of the Incumbent Directors at the time of such election or nomination (but will not include an individual whose election or nomination is in connection with an actual or threatened proxy contest relating to the election of directors to the Company); or (iii) the date of the consummation of a merger or consolidation of the Company with any other corporation that has been approved by the stockholders of the Company, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or the stockholders of the Company approve a plan of complete liquidation of the Company; or (iv) the date of the consummation of the sale or disposition by the Company of all or substantially all the Company's assets.
(c) CONSTRUCTIVE TERMINATION. For purposes of this Agreement, a "Constructive Termination" is defined as: a significant diminution of Executive's responsibilities without Executive's consent.
10. CONFIDENTIAL INFORMATION. Executive agrees to enter into the Company's standard Confidential Information and Invention Assignment Agreement (the "Confidential Information Agreement") upon commencing employment hereunder.
11. CONDITIONAL NATURE OF SEVERANCE PAYMENTS.
(a) NONCOMPETE. Executive acknowledges that the nature of the Company's business is such that if Executive were to become employed by, or substantially involved in, the business of a competitor of the Company during the 12 months following the termination of Executive's employment with the Company, it would be very difficult for the Executive not to rely on or use the Company's trade secrets and confidential information. Thus, to avoid the inevitable disclosure of the Company's trade secrets and confidential information, Executive agrees and acknowledges that Executive's right to receive the severance payments set forth in Section 7 (to the extent Executive is otherwise entitled to such payments) shall be conditioned upon the Executive not directly or indirectly engaging in (whether as an employee, consultant, agent, proprietor, principal, partner, stockholder, corporate officer, director or otherwise), nor having any ownership interested in or participating in the financing, operation, management or control of, any person, firm, corporation or business that competes with Company or is a customer of the Company. Upon any breach of this section, all severance payments pursuant to this Agreement shall immediately cease.
(b) NON-SOLICITATION. Until the date one year after the termination of Executive's employment with the Company for any reason, Executive agrees and acknowledges that Executive's right to receive the severance payments set forth in Section 7 (to the extent Executive is otherwise entitled to such payments) shall be conditioned upon Executive not either directly or indirectly soliciting, inducing, attempting to hire, recruiting, encouraging, taking away, hiring any employee of the Company or causing an employee to leave his or her employment either for Executive or for any other entity or person.
(c) UNDERSTANDING OF COVENANTS. The Executive represents that he (i) is familiar with the foregoing covenants not to compete and not to solicit, and (ii) is fully aware of his obligations hereunder, including, without limitation, the reasonableness of the length of time, scope and geographic coverage of these covenants.
12. ASSIGNMENT. This Agreement will be binding upon and inure to the benefit of (a) the heirs, executors and legal representatives of Executive upon Executive's death and (b) any successor of the Company. Any such successor of the Company will be deemed substituted for the Company under the terms of this Agreement for all purposes. For this purpose, "successor" means any person, firm, corporation or other business entity which at any time, whether by purchase, merger or otherwise, directly or indirectly acquires all or substantially all of the assets or business of the Company. None of the rights of Executive to receive any form of compensation payable pursuant to this Agreement may be assigned or transferred except by will or the laws of descent and distribution. Any other attempted assignment, transfer, conveyance or other disposition of Executive's right to compensation or other benefits will be null and void.
13. NOTICES. All notices, requests, demands and other communications called for hereunder shall be in writing and shall be deemed given (i) on the date of delivery if delivered personally, (ii) one (1) day after being sent by a well established commercial overnight service, or (iii) four (4) days after being mailed by registered or certified mail, return receipt requested, prepaid and addressed to the parties or their successors at the following addresses, or at such other addresses as the parties may later designate in writing:
If to the Company:
Ciphergen Biosystems, Inc.
490 San Antonio Road
Palo Alto, CA 94306
ATTN: President
If to Executive:
at the last residential address known by the Company.
14. SEVERABILITY. In the event that any provision hereof becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, this Agreement will continue in full force and effect without said provision.
15. ARBITRATION.
(a) Executive agrees that any dispute or controversy arising out of, relating to, or in connection with this Agreement, or the interpretation, validity, construction, performance, breach, or termination thereof, shall be settled by binding arbitration to be held in Santa Clara County, California accordance with the National Rules for the Resolution of Employment Disputes then in effect of the American Arbitration Association (the "Rules"). The arbitrator may grant injunctions or other relief in such dispute or controversy. The decision of the arbitrator will be final, conclusive and binding on the parties to the arbitration. Judgment may be entered on the arbitrator's decision in any court having jurisdiction.
(b) The arbitrator(s) will apply California law to the merits of any dispute or claim, without reference to rules of conflicts of law. The arbitration proceedings will be governed by federal arbitration law and by the Rules, without reference to state arbitration law. The Executive hereby consents to the personal jurisdiction of the state and federal courts located in California for any action or proceeding arising from or relating to this Agreement or relating to any arbitration in which the parties are participants.
(c) EXECUTIVE HAS READ AND UNDERSTANDS THIS SECTION, WHICH DISCUSSES ARBITRATION. EXECUTIVE UNDERSTANDS THAT BY SIGNING THIS AGREEMENT, EXECUTIVE AGREES TO SUBMIT ANY CLAIMS ARISING OUT OF, RELATING TO, OR IN CONNECTION WITH THIS AGREEMENT, OR THE INTERPRETATION, VALIDITY, CONSTRUCTION, PERFORMANCE, BREACH OR TERMINATION THEREOF TO BINDING ARBITRATION, AND THAT THIS ARBITRATION CLAUSE CONSTITUTES A WAIVER OF EXECUTIVE'S RIGHT TO A JURY TRIAL AND RELATES TO THE RESOLUTION OF ALL DISPUTES RELATING TO ALL ASPECTS OF THE EMPLOYER/EMPLOYEE RELATIONSHIP, INCLUDING BUT NOT LIMITED TO, DISCRIMINATION CLAIMS.
16. INTEGRATION. This Agreement, together with the Option Plan, Option Agreement and the Confidential Information Agreement represents the entire agreement and understanding between the parties as to the subject matter herein and supersedes all prior or contemporaneous agreements whether written or oral. No waiver, alteration, or modification of any of the provisions of this
Agreement will be binding unless in writing and signed by duly authorized representatives of the parties hereto.
17. TAX WITHHOLDING. All payments made pursuant to this Agreement will be subject to withholding of applicable taxes.
18. GOVERNING LAW. This Agreement will be governed by the laws of the State of California (with the exception of its conflict of laws provisions).
19. ACKNOWLEDGMENT. Executive acknowledges that he has had the opportunity to discuss this matter with and obtain advice from his private attorney, has had sufficient time to, and has carefully read and fully understands all the provisions of this Agreement, and is knowingly and voluntarily entering into this Agreement.
IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case of the Company by their duly authorized officers, as of the day and year first above written.
CIPHERGEN BIOSYSTEMS, INC.
By: /s/ Daniel M. Caserza Date: August 24, 2000
------------------------------ -------------------------
Title: CORPORATE CONTROLLER AND
INTERIM CHIEF FINANCIAL OFFICER
--------------------------------
|
EXECUTIVE
/s/ William E. Rich Date: August 24, 2000 --------------------------------- ------------------------- WILLIAM E. RICH |
TECHNOLOGY TRANSFER AGREEMENT
BETWEEN
MOLECULAR ANALYTICAL SYSTEMS, INC.
AND
ILLUMESYS PACIFIC, INC.
THIS TECHNOLOGY TRANSFER AGREEMENT (the "Agreement") is made and entered into on this 7th day of April, 1997 (the "Effective Date") and is retroactive to September 16, 1996 (the "Retroactive Date"), by and between MOLECULAR ANALYTICAL SYSTEMS, INC. ("MAS"), a Texas corporation with an address c/o Wagner, Kirkman & Blaine, 1792 Tribute Road, Suite 450, Sacramento, CA 95815, and ILLUMESYS PACIFIC, INC. ("IllumeSys"), a California corporation with an address c/o Wagner, Kirkman & Blaine, 1792 Tribute Road, Suite 450, Sacramento, CA 95815.
WITNESSETH
WHEREAS, pursuant to the Baylor Technology Transfer Agreement, MAS is the exclusive licensee of certain rights and interest in and to the Baylor Technology (as such terms are defined below); and
WHEREAS, MAS desires to grant to IllumeSys and IllumeSys desires to obtain rights under the Baylor Technology and the MAS Technology to make, use, sell, offer for sale and import products in the Life Sciences Market and, under certain circumstances, in the Drug Discovery Market (as such terms are defined below); and
WHEREAS, MAS and CTI are, simultaneous with the execution of this Agreement, entering into that Technology Transfer Agreement dated as of April 7, 1997 (the "MAS/CTI Agreement") granting certain license rights from MAS to CTI for the Other Markets and the Drug Discovery Market.
NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements hereinafter set forth and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
1. DEFINITIONS
As used herein, the terms "AGREEMENT," "MAS," "ILLUMESYS," "MAS/CTI AGREEMENT," "EFFECTIVE DATE" AND "RETROACTIVE DATE" shall have the meanings indicated above. As used herein, the following terms shall have the following meanings:
1.1 "AFFILIATE" shall mean any person, corporation, association or other entity which directly or indirectly controls, is controlled by or is under common control with the party in question. As used in this definition of "Affiliate", the term "control" shall mean direct or indirect beneficial ownership of more than 50% of the voting or income interest in such corporation or other business entity.
1.
1.2 "BAYLOR" shall mean the Baylor College of Medicine, a Texas non-profit corporation having its Principal place of business at One Baylor Plaza, Houston, Texas 77030.
1.3 "BAYLOR TECHNOLOGY" shall mean all Technology (as defined in the Baylor Technology Transfer Agreement) which is licensed from Baylor to MAS pursuant to the Baylor Technology Transfer Agreement.
1.4 "BAYLOR TECHNOLOGY TRANSFER AGREEMENT" shall mean that Technology Transfer Agreement, dated September 14, 1993, between MAS and Baylor. A copy of the Baylor Technology Transfer Agreement is attached hereto as Exhibit A.
1.5 "CIPHERGEN" shall mean Ciphergen Biosystems, Inc., a California corporation having its principal place of business at 490 San Antonio Road, Palo Alto, CA 94306.
1.6 "CTI" shall mean ISP Acquisition Corporation, a California corporation.
1.7 "DATE OF FIRST COMMERCIAL SALE" shall mean the date on which IllumeSys or any Sublicensee or Affiliate first transfers title to a Licensed Product to a Third Party (other than an Affiliate of such Sublicensee) for monetary consideration.
1.8 "DRUG DISCOVERY MARKET" shall mean Laboratories engaged in discovering new drugs for potential preclinical development, clinical development and commercialization.
1.9 "DRUG DISCOVERY PRODUCT" shall mean any device, instrument or consumable for use by a Third Party in the Drug Discovery Market. This term does not include any drug discovered by use of a Drug Discovery Product.
1.10 "ILLUMESYS FIELD OF USE" shall mean the scope of the license and sublicense grant to IllumeSys set forth in Sections 2.1(a), 2.1(b), 2.1(c) and 2.1(d) herein.
1.11 "IMPROVEMENT" shall have the meaning set forth in the Baylor Technology Transfer Agreement.
1.12 "LABORATORIES" shall mean all laboratories and laboratory environments.
1.13 "LICENSED PRODUCT" shall mean any product made, used, sold, imported or offered for sale or any service used, sold or offered for sale, using all or any part of the Licensed Technology.
1.14 "LICENSED TECHNOLOGY" shall mean the Baylor Technology, Improvements and the MAS Technology.
1.15 "LIFE SCIENCES MARKET" shall mean all Laboratories doing bioanalytical or biological measurements or assays. It is understood that "Life Sciences Market" includes, without limiting the foregoing, Laboratories developing clinical diagnostics. It is further
2.
understood that "Life Sciences Market" does not include (i) Laboratories
performing clinical diagnostics for patients or other Third Party customers,
(ii) entities involved in making, using and selling instruments, devices,
consumables, services and information for use by individual XXX (e.g. the
consumer market), and (iii) Laboratories engaged in discovering new drugs for
the potential preclinical development, clinical development and
commercialization.
1.16 "MAS TECHNOLOGY" shall mean all inventions, know-how, information, processes, formulae, patterns, compilations, programs, devices, methods, techniques, compounds, products, data, preparations and usage information or materials and sources thereof, whether or not patentable, which have been developed or otherwise acquired by MAS (i) prior to the Effective Date or (ii) after the Effective Date and prior to the four-year anniversary of the Effective Date. "MAS Technology" shall not include the Baylor Technology or Improvements.
1.17 "NET SALES" shall mean all monies and/or equivalent goods and services received directly by IllumeSys or an Affiliate of IllumeSys from the manufacture, use, sale, offer for sale or import of Royalty-Bearing Products by IllumeSys or an Affiliate of IllumeSys, less any separately identified discounts and allowances to customers (actually granted), refunds for returned or damaged goods, excise and sales taxes, customs duties and costs of transportation (including without limitation packing and insurance) actually paid.
1.18 "OTHER MARKETS" shall mean all Laboratories doing bioanalytical or biological measurements or assays which are not part of the Life Sciences Market or the Drug Discovery Market.
1.19 "PATENT RIGHTS" shall have the meaning set forth in the Baylor Technology Transfer Agreement.
1.20 "PATENTS AND PATENT APPLICATIONS" shall mean (i) any U.S. patent
application, and any patent issuing therefrom, covering the Licensed Technology;
(ii) any divisionals, continuations, continuations-in-part, extensions and
reissues of the foregoing and (iii) any foreign equivalents of the applications
or patents described in clause (i) or (ii).
1.21 "ROYALTY-BEARING PRODUCTS" shall mean any Licensed Products which use all or any part of the Baylor Technology.
1.22 "SUBLICENSEE" shall mean any Third Party to whom IllumeSys grants a further sublicense under the Licensed Technology, as permitted by Sections 2.1 and 2.2 of this Agreement.
1.23 "THIRD PARTY" shall mean any party other than MAS, IllumeSys or any Affiliate of MAS or IllumeSys.
2. GRANT OF LICENSE AND LICENSE FEE
2.1 (a) EXCLUSIVE LICENSE GRANT TO ILLUMESYS FOR LIFE SCIENCES MARKET. MAS hereby grants to IllumeSys:
3.
(i) a royalty-bearing (for such time period as is set forth in
Section 2.2), exclusive, worldwide sublicense, with a right to further
sublicense, under the Baylor Technology and Improvements to make, use, sell,
offer for sale and import any instrumentation, device or non-drug consumable for
use by customers in the Life Sciences Market; and
(ii) a royalty-free, exclusive, worldwide license, with a right to sublicense, under the MAS Technology to make, use, sell, offer for sale and import any instrumentation, device or non-drug consumable for use by customers in the Life Sciences Market.
(b) EXCLUSIVE LICENSE GRANT TO ILLUMESYS TO SELL DRUG DISCOVERY PRODUCTS. MAS hereby grants to IllumeSys:
(i) a royalty-bearing (for such time period as is set forth in
Section 2.2), exclusive, worldwide sublicense, with a right to further
sublicense, under the Baylor Technology and Improvements to sell and offer for
sale Drug Discover Products; and
(ii) a royalty-free, exclusive, worldwide license, with a right to sublicense, under the MAS Technology to sell and offer for sale Drug Discovery Products.
(c) CO-EXCLUSIVE LICENSE GRANT TO ILLUMESYS TO MAKE DRUG DISCOVERY PRODUCTS. Subject only to those rights granted to CTI by way of the MAS/CTI Agreement, MAS hereby grants to IllumeSys:
(i) a royalty-bearing, coexclusive (with CTI), worldwide sublicense, under the Baylor Technology and Improvements to make, use and import Drug Discovery Products; and
(ii) a royalty-free, coexclusive (with CTO, worldwide license, under the MAS Technology to make, use and import Drug Discovery Products.
IllumeSys shall not have the right to grant a sublicense under the sublicensee and license contained in this Subsection 2.1(c) to a Third Party except to grant sublicensee to subcontractors of IllumeSys who will make Drug Discovery Products (or components thereof) for sale by IllumeSys to the Drug Discovery Markets. In addition, IllumeSys may use the Baylor Technology, Improvements and the MAS Technology in the Drug Discovery Market but only for the purpose of developing and providing data and other information to Third Parties about the characteristics of compounds which IllumeSys may be asked to analyze for such Third Parties.
(d) LIMITATIONS. Each of the foregoing sublicenses in Section 2.1(a), 2.1(b) and 2.1(c) shall be subject to the terms of subsection (a), (b) and (c) of Section 2.1 of the Baylor Technology Transfer Agreement.
4.
2.2 LICENSE FEE. In consideration for the grant of the sublicenses set forth in Section 2.1, IllumeSys agrees to pay MAS an amount equal to two percent (2%) of Net Sales received by IllumeSys or an IllumeSys Affiliate from the Date of First Commercial Sale until the fourth anniversary of the Date of First Commercial Sale. Notwithstanding the foregoing, the obligation of IllumeSys to make payments under this Section 2.2 shall not exceed $500,000 per twelve-month period commencing on each of (i) the Date of First Commercial Sale, (ii) the first anniversary of the Date of First Commercial Sale, (iii) the second anniversary of the Date of First Commercial Sale and (iv) the third anniversary of the Date of First Commercial Sale. This Section 2.2 shall have no further force and effect as of the fourth anniversary of the Date of First Commercial Sale and, as of such date, no further royalties shall be owed to MAS by IllumeSys under this Agreement.
3. WARRANTIES AND REPRESENTATIONS
3.1 MAS. Except as set forth on Schedule 3.1 attached hereto, MAS represents and warrants that:
(a) MAS is validly existing and in good standing under the laws of the State of Texas.
(b) the execution, delivery and authority to execute and deliver this Agreement has been duly authorized by all necessary action on the part of MAS.
(c) MAS has the power and authority to execute and delivery this Agreement and to perform its obligations under this Agreement.
(d) as of the date of this Agreement, it is not a party to any agreement or arrangement with any third party or under any obligation or restriction, including pursuant to its Articles of Incorporation or By-Laws, which in any way limits or conflicts with its ability to fulfill any of its obligations under this Agreement.
(e) it is the owner of the entire right, title, and interest in and to the MAS Technology, that it has the sole right to grant licenses thereunder, and that it has not granted, and will not grant, licenses thereunder to any other entity that would restrict the rights granted to IllumeSys hereunder. MAS also further represents that there are no agreements, written or oral, relating to the MAS Technology and that it has delivered to IllumeSys and its counsel all written agreements relating to the MAS Technology.
(f) it is the exclusive licensee of the entire right, title, and interest in and to the Baylor Technology and the Improvements, that it has the sole right to grant sublicenses thereunder, and that it has not granted, and will not grant, sublicenses thereunder to any other entity that would restrict the rights granted to IllumeSys hereunder. MAS also further represents that there are no agreements, written or oral, involving the Baylor Technology or the Improvements and that it has delivered to IllumeSys and its counsel all written agreements relating to the Baylor Technology and the Improvements.
5.
(g) to the best of its knowledge, MAS owns or possesses sufficient legal rights to all patents, trade secrets, licenses, information, and proprietary rights and processes necessary for its business as now conducted and as proposed to be conducted without any conflict with, or infringement of the rights of, others. There are no outstanding options, licenses, or agreements of any kind relating to the foregoing, nor is MAS bound by or a party to any options, licenses or agreements of any kind with respect to the patents, trade secrets, licenses, information and proprietary rights and processes of any other person or entity. MAS has not received any communications alleging that MAS has violated or, by conducting its business as proposed would violate, any of the patents, trade secrets, or other proprietary rights or processes of any other person or entity. MAS is not aware of any infringement, unauthorized use or other violation by a Third Party of any of MAS's patents, licenses, trade secrets or other proprietary rights.
(h) to the best of its knowledge, there is no action, suit, proceeding, or investigation pending or currently threatened against MAS that questions the validity of this Agreement, the exclusive rights of MAS to the Licensed Technology or the right of MAS to enter into this Agreement, or to consummate the transactions contemplated hereby, or that might result, either individually or in the aggregate, in any material adverse change in the assets, business, properties, prospects, or financial condition of MAS. The foregoing includes, without limitation, any action, suit, proceeding, or investigation pending or currently threatened involving the prior employment of any of MAS's employees, their use in connection with MAS's business of any information or techniques allegedly proprietary to any of their former employers, their obligations under any agreements with prior employers, or negotiations by MAS with potential backers of, or investors in MAS or its proposed business. MAS is not a party to or, to the best of its knowledge, named in or subject to any order, writ, injunction, judgment, or decree of any court, government agency, or instrumentality. There is no action, suit, proceeding or investigation by MAS currently pending or that MAS currently intends to initiate.
(i) on the date hereof, it is not aware of any infringement or by the Patent Rights or any claims by any other party in and to the Licensed Technology.
(j) it is not currently in breach of the Baylor Technology Transfer Agreement, knows of no grounds for early termination of the Baylor Technology Transfer Agreement and will not breach the Baylor Technology Transfer Agreement during the term of this Agreement. Within two (2) business days of receipt of any notice from Baylor or delivery of any notice to Baylor under the Baylor Technology Transfer Agreement, it will provide a copy of such received or delivered notice to IllumeSys.
(k) except as may be as may be expressly set forth herein, MAS hereby disclaims and negates any and all warranties, whether express or implied, with respect to the Licensed Technology or any rights hereunder transferred, including but not limited to, any IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE. Without limiting the generality of the foregoing, MAS makes no representations or warranties as to the patentability, noninfringement, use or other application of the Licensed Technology,
6.
or as to the likelihood of the success of any research, development, testing, marketing or other utilization of the Licensed Technology.
3.2 ILLUMESYS. IllumeSys represents and warrants that as of the Effective Date:
(a) It is a corporation duly organized, validly existing and in good standing under the laws of the State of California.
(b) The execution, delivery and performance of this Agreement have been authorized by all necessary corporate action on the part of IllumeSys.
(c) IllumeSys has the corporate power and authority to execute and deliver this Agreement and to perform its obligations under this Agreement.
3.3 NO ASSURANCE OF PATENTS. MAS represents and warrants to IllumeSys that, and IllumeSys represents and warrants to MAS that it understands that, there is no assurance that any patents included in the Patent Rights or any patent applications subsequently filed on the Licensed Technology will actually be issued. In the event that any claim within the Patent Rights is disallowed in a final rejection by the United States Patent Office, then the provisions of Section 2.2 relating to such claim will be effectively deleted from this Agreement. However, with respect to Section 2.2, there shall be no retroactive adjustment.
4. FINANCIAL STATEMENTS. At the close of each calendar quarter from the Date of First Commercial Sale through the fourth anniversary of the Date of First Commercial Sale, the Net Sales shall be computed by IllumeSys, and the amounts due thereon pursuant to Section 2.2 shall be paid to MAS within sixty (60) days after the close of said quarter. With each royalty payment, IllumeSys shall furnish to MAS a written accounting report for the closed quarter stating the Net Sales, the amounts due to MAS and the amounts already paid to MAS. IllumeSys agrees, for three (3) years following a given calendar quarter, to maintain written records with respect to its operations pursuant to this Agreement for such calendar quarter, in sufficient detail to enable MAS or its designated certified public accountants to compute the amount of royalties due to MAS, and further agrees to permit said records to be examined from time to time, on reasonable notice during normal business hours to the extent necessary to verify the amount of royalties due MAS hereunder. MAS shall pay the costs of said examination unless it is determined that IllumeSys underpaid royalties by more than five percent (5 %) for the period being audited by MAS, in which case IllumeSys shall reimburse MAS for the audit by MAS, in which case IllumeSys shall reimburse MAS for the audit expenses.
5. PROTECTION OF PROPERTY RIGHTS
5.1 CONFIDENTIALITY. Except as provided below, each party receiving information of the other party hereunder agrees to keep confidential all information of the disclosing party which is in the possession or comes into the possession of the receiving party during the term of this Agreement, together with any and all documentation and other physical manifestations or embodiments thereof, and not to use such information for any purpose other than as set forth
7.
in this Agreement. In carrying out its obligations hereunder each receiving party shall use at least the degree of care, effort and procedures in protecting such confidential information as such party utilizes in connection with protecting its own information of similar character.
5.2 EXEMPTIONS. The foregoing provisions of Section 5.1 shall not apply to information which:
(a) was in the public domain at the time of disclosure;
(b) later became part of the public domain through no act or omission of the receiving party, its employees, agents, successors or assigns;
(c) was lawfully disclosed to the receiving party by a Third Party having the right to disclose it;
(d) was already known by the receiving party at the time of disclosure, other than as a result of previous disclosure by the disclosing party;
(e) was independently developed by the receiving or
(f) is required by court or governmental order, law or regulation to be disclosed, provided, however, that the receiving party required to disclose such information shall provide the other party with reasonable advance notice of any such proposed disclosure to give such party a reasonable period of time in which to object to such disclosure.
5.3 DISCLOSURES. Notwithstanding the foregoing, the parties understand and agree that IllumeSys may, to the extent it deems necessary or appropriate, disclose the Licensed Technology and any improvement to potential sublicensees or investors, but IllumeSys agrees to use its reasonable efforts to make such disclosures subject to a confidentiality agreement containing terms substantially similar to those contained in Sections 5.1 and 5.2.
5.4 RIGHTS TO SUBSEQUENT TECHNOLOGIES. MAS shall have no rights in any subsequent discoveries, inventions, and/or technologies resulting from the development of the Licensed Technology by IllumeSys, any Affiliate of IllumeSys or any Sublicensee.
5.5 PATENT APPLICATIONS. It is understood by the parties that, pursuant to the Baylor Technology Transfer Agreement, MAS has the initial responsibility for filing, prosecution and maintenance of Patents and Patent Applications covering the Baylor Technology. The parties agree that, as between MAS and IllumeSys, MAS shall be responsible for deciding whether and how to file, prosecute and maintain the Patents and Patent Applications, provided that:
(a) all decisions of MAS (whether substantive or procedural) concerning whether and how to file, prosecute and/or maintain any Patents and Patent Applications shall be acceptable to IllumeSys, such acceptance not to be unreasonably withheld;
8.
(b) with respect to any action permitted under Section 5.5 of the Baylor Technology Transfer Agreement or Section 5.5 of this Agreement, MAS will use legal counsel reasonably acceptable to IllumeSys and IllumeSys shall reimburse MAS for fifty percent (50%) of all out-of-pocket legal, filing, prosecution and maintenance expenses incurred by MAS in connection with the Patents and Patent Applications;
(c) MAS will provide IllumeSys with (i) drafts of all filings relating to the Patents and Patent Applications and (ii) drafts of all correspondence to be sent by MAS to Baylor, the Patent and Trademark Office (the "PTO") or any third party relating to the Patents and Patent Applications. Final versions of all such filings and correspondence shall be acceptable to IllumeSys, such acceptance not to be unreasonably withheld;
(d) MAS will promptly provide IllumeSys with copies of any notices and other correspondence received by IllumeSys from Baylor, the PTO or any other third party relating to the Patents and Patent Applications, including, but not limited to, any notices received by MAS pursuant to Section 5.5 of the Baylor Technology Transfer Agreement;
(e) MAS will, if requested by IllumeSys, provide notice to
Baylor under any of the circumstances permitting notice pursuant to
Section 5.5 of the Baylor Technology Transfer Agreement;
(f) MAS agrees to cooperate with IllumeSys to whatever extent is reasonably necessary to procure patent protection of any rights regarding the Licensed Technology and agrees to execute any and all documents to give IllumeSys the full benefit of the sublicenses and licenses granted herein;
(g) MAS represents and warrants that, as of the Effective Date, it has not received any notices from Baylor pursuant to Section 5.5(c) or Section 5.5(d) of the Baylor Technology Transfer Agreement. In the event MAS receives any notices from Baylor pursuant to Section 5.5(c) or Section 5.5(d) of the Baylor Technology Transfer Agreement after the Effective Date, MAS will provide a copy of such notice to IllumeSys within five (5) business days of receipt of such notice by MAS. MAS will then take all actions requested by IllumeSys to allow IllumeSys to retain its rights granted under this Agreement, including, but not limited to, promptly notifying Baylor in the event IllumeSys wishes MAS to proceed with any actions in connection with the Patents or Patent Applications.
5.6 COOPERATION WITH CTI. It is understood that the rights granted to IllumeSys under Section 5.5 and Articles 6 and 7 may overlap with rights granted by MAS to CTI pursuant to comparable provisions of the MAS/CTI Agreement. In the event of such overlap MAS and IllumeSys agree to cooperate in good faith with CTI with respect to any issues which may arise and decisions which may need to be made, so as to maximize the economic benefit of the Licensed Technology to all three parties.
9.
6. INFRINGEMENT BY THIRD PARTIES
6.1 ENFORCEMENT OF BAYLOR INTELLECTUAL PROPERTY AGAINST THIRD PARTIES. It is understood by the parties that MAS has certain rights under Article 6 of the Baylor Technology Transfer Agreement with respect to suspected infringement, misuse, misappropriation, theft or breach of confidence of other proprietary rights in the Patent Rights, the Baylor Technology and the Improvements (the "Baylor Technology Infringement"). It is further understood by the parties that, as a sublicensee under such intellectual property in the IllumeSys Field of Use, IllumeSys has an interest in any actions against third parties which may be taken or contemplated as a result of infringement of the Baylor Technology within the scope of the IllumeSys Field of Use. Accordingly, the parties hereby agree that with respect to any such infringement:
(a) MAS promptly will provide IllumeSys with copies of any notices received or sent by MAS pursuant to Article 6 of the Baylor Technology Transfer Agreement.
(b) MAS will, if requested by IllumeSys, provide notice to Baylor under any of the circumstances permitting notice pursuant to Article 6 of the Baylor Technology Transfer Agreement.
(c) with respect to any legal action permitted under Article 6 of the Baylor Technology Transfer Agreement, MAS will use legal counsel acceptable to IllumeSys;
(d) with respect to any legal action permitted under Article 6 of the Baylor Technology Transfer Agreement, all decisions of MAS (whether substantive or procedural) concerning whether to bring an action, how to proceed with such action and whether and how to settle such action shall be acceptable to IllumeSys; and
(e) with respect to any legal action permitted under Article 6 of the Baylor Technology Transfer Agreement, any recoveries which may be obtained by MAS as a result of such action shall be allocated between MAS and IllumeSys on the basis of their relative losses (or potential losses) of revenue as a result of such infringement.
6.2 ENFORCEMENT OF MAS TECHNOLOGY AGAINST THIRD PARTIES. IllumeSys shall have the right, but not the obligation, to enforce at its expense any patent contained in the MAS Technology against infringement by Third Parties within the IllumeSys Field of Use and shall be entitled to retain recovery from such enforcement. In the event that IllumeSys does not file suit against a substantial infringer of such patents within six (6) months of knowledge thereof, then MAS shall have the right, but not the obligation, to enforce at its expense any patent contained in the MAS Technology against infringement by Third Parties and shall be entitled to retain recovery from such enforcement.
6.3 COOPERATION. In any suit or dispute involving an infringer, the parties shall cooperate fully, and upon the request and at the expense of the party bringing suit, the other party shall make available to the party bringing suit at reasonable times and under appropriate conditions all relevant personnel, records, papers, information, samples, specimens, and the like
10.
which are in it possession. In the event a party brings suit under Sections 6.1 or 6.2, the other party agrees to be joined as a party plaintiff with respect to such suit, provided that the party bringing suit reimburses each other party for all out-of-pocket costs incurred by such other party in its role as party plaintiff.
7. INFRINGEMENT OF THIRD PARTY INTELLECTUAL PROPERTY
In the event of any infringement or likely infringement by any of the Licensed Technology of any Third Party's intellectual property, the parties shall cooperate in good faith and on a mutual and reasonable basis, with each party responsible for its respective expenses, to negotiate and settle any dispute with any such Third Party concerning, the Licensed Technology, and otherwise resolve any such infringement and secure MAS's and IllumeSys' continued rights to practice the Licensed Technology.
8. INDEPENDENT CONTRACTOR
It is agreed that the relationship of IllumeSys to MAS in the performance of this Agreement is as an independent licensee and that neither IllumeSys nor MAS is an agent of the other party. Each party agrees to refrain from representing itself as being the agent of the other party in performing or acting pursuant to this Agreement. Neither party shall have the power or authority to bind or otherwise commit the other party and shall not attempt to do so.
9. INDEMNIFICATION; DAMAGES
9.1 INDEMNIFICATION. Each of IllumeSys and MAS agrees to indemnify and
hold harmless the other party and such other party's Affiliates and their
respective employees, agents, officers, directors and permitted assigns (such
party's "Indemnified Group") from and against any claims by a third party
resulting in the award or payment of any judgments, expenses (including
reasonable attorney's fees), damages and awards (collectively a Claim) arising
out of or resulting from (i) the, indemnifying party's negligence or misconduct.
(ii) a breach of any of the indemnifying party's representations, warranties or
obligations hereunder or (iii) the indemnifying party's research, development,
manufacture, use, promotion, marketing or sale of any Licensed Product, except
to the extent that such Claim arises out of or results from the negligence or
misconduct of the party seeking to be indemnified and held harmless or the
negligence or misconduct of a member of such party's Indemnified Group. A
condition of this obligation is that, whenever a member of the Indemnified Group
has information from which it may reasonably conclude an incident has occurred
which could give rise to a Claim, such indemnified party shall immediately give
notice to the indemnifying party of all pertinent data surrounding such incident
and, in the event a Claim is made, all members of the Indemnified Group shall
assist the indemnifying party and cooperate in the gathering of information with
respect to the time, place and circumstances and in obtaining the names and
addresses of any injured parties and available witnesses. No member of the
Indemnified Group shall voluntarily make any payment or incur any expense in
connection with any such Claim or suit without the prior written consent of the
indemnifying party. The obligations set forth in this Section 9.1 shall survive
the expiration or termination of this Agreement.
11.
9.2 SPECIAL INDEMNIFICATION AGAINST INTELLECTUAL PROPERTY CLAIMS. MAS shall, on the terms and conditions and limitations set forth herein, indemnify IllumeSys against any loss, expenses, liability or other damages including reasonable costs of investigation, interest, penalties and attorneys' and, accountants' fees, whether or not involving any third party (collectively, "Damages"), incurred in connection with or arising from or attributable to any Third Party claims to the Licensed Technology.
9.3 INSURANCE. Commencing with the Date of First Commercial Sale, IllumeSys and/or each of its Affiliates and Sublicensees, as applicable, shall, for so long as IllumeSys or its Affiliates or Sublicensees manufactures, sells, tests, operates, leases or uses the Licensed Products, maintain in full force and effect policies of (i) general liability insurance with limits of not less than one million dollars ($1,000,000) per occurrence and three million dollars ($3,000,000) in the aggregate and (ii) product liability insurance with limits of not less than one million dollars ($1,000,000) per occurrence and three million dollars ($3,000,000) in the aggregate. Such coverage(s) shall name MAS and its Affiliates as additional insureds. IllumeSys shall promptly provide verification of such insurance coverages to MAS.
10. TERM AND TERMINATION
10.1 EXPIRATION; EFFECT OF EXPIRATION. This Agreement shall expire, on a country-by-country basis, on the date of expiration of the last to expire patent included within the Licensed Technology in that country or, if no patents in the Licensed Technology issue in such country, seventeen (17) years from the Effective Date. In the event this Agreement expires and has not been terminated early pursuant to Section 10.2, the license grants set forth in Sections. 2.1 and 2.2 will survive such expiration, except that all such licenses will become non-exclusive upon the expiration date. It is understood by the parties that the Baylor Technology Transfer Agreement may expire on a date which is earlier than the expiration date provided for in the first sentence of this Section 10.1 and that the sublicense granted pursuant to Section 2.1 may therefore expire on such earlier date.
10.2 VOLUNTARY TERMINATION BY ILLUMESYS. IllumeSys may terminate this Agreement for any reason upon prior written notice of one hundred eighty (180) days to MAS.
10.3 EARLY TERMINATION FOR BANKRUPTCY OR BREACH. This Agreement will earlier terminate:
(a) automatically if IllumeSys or its successors in interest shall become bankrupt or insolvent and/or if the business of IllumeSys shall be placed in the hand of a receiver or trustee, whether by voluntary act of IllumeSys or otherwise; or
(b) upon ninety (90) days written notice from one party if the other party shall commit a material breach of any of such other party's obligations under this Agreement; provided, however, such breaching party may avoid such termination if, before the end of such ninety (90) day period, it cures such material breach and provides the non-breaching party with a notice stating that such cure has occurred and stating the manner of such cure.
12.
10.4 EFFECT OF TERMINATION. Upon termination of all or part of this Agreement for any; cause, nothing herein shall be construed to release either party of any obligation matured prior to the effective date of such termination, IllumeSys may, after the effective date of such termination, sell all Licensed Products and parts thereof that it may have on hand at the date of termination.
10.5 SURVIVAL. The following provisions will survive expiration or termination of this Agreement: Article 4 and Sections 5.1, 5.2, 9.1, 9.2 and 10.1.
11. ASSIGNMENT
11.1 ASSIGNMENT BY MAS. MAS may not assign its rights or obligations under this Agreement without the prior written consent of IllumeSys.
11.2 ASSIGNMENT BY ILLUMESYS. IllumeSys may assign any of its rights and obligations under this Agreement. Within thirty (30) days of such assignment, IllumeSys shall notify MAS that such assignment has occurred.
12. MISCELLANEOUS
12.1 FURTHER ASSURANCES. Without further consideration, MAS hereby agrees to execute and deliver, and to cause its respective officers, trustees, directors, employees, and agents to execute and deliver, such other instruments, and to take such other action as IllumeSys hereunder may reasonably request to more effectively license and sublicense to IllumeSys the rights granted hereunder, and to assist IllumeSys in the recordation of same as necessary, all in such form and substance as IllumeSys may reasonably request and at its expense
12.2 ENTIRE AGREEMENT. This Agreement constitutes the entire and only agreement between the parties with respect to the subject matter of this Agreement, including the Licensed Technology, and all other prior negotiations, representations, agreements and understandings are superseded hereby. No agreements altering or supplementing the terms hereof may be made except by means of a written document signed by the duly authorized representatives of the parties.
12.3 NOTICE. Any notice required by this Agreement shall be in writing and shall be prepaid, first class, mail, return receipt requested, the case given by first certified addressed in of IllumeSys to:
IllumeSys Pacific, Inc. c/o Ciphergen Biosystems, Inc. 490 San Antonio Road Palo Alto, CA 94306 Attention: President
13.
with a copy to: Cooley Godward LLP
Five Palo Alto Square
3000 El Camino Real
Palo Alto, CA 94306
Attention: Robert J. Brigham, Esq.
or in the case of MAS:
Molecular Analytical Systems, Inc.
c/o Wagner, Kirkman & Blaine
1792 Tribute Road, Suite 450
Sacramento, CA 95815
Attention: Belan Kirk Wagner, Esq.
|
or such other address as may be given from time to time under the terms of this notice provision.
12.4 COMPLIANCE WITH LAWS. Each party shall comply with all applicable federal, state and local laws and regulations in connection with its activities pursuant to this Agreement.
12.5 GOVERNING LAW. This Agreement shall be construed and interpreted in accordance with the laws of the State of California other than those provisions governing conflicts of law. Any claim or controversy arising out of or related to this Agreement or any breach hereof shall be submitted to a court of applicable jurisdiction in the state of California, each party hereby consents to the jurisdiction and venue of such court.
12.6 NO WAIVER. Failure of a party to enforce a right under this Agreement shall not act as a waiver of that right or the ability to later assert that right relative to the particular situation involved.
12.7 HEADINGS. Headings included herein are for convenience only and shall not be used to construe this Agreement.
12.8 SEVERABILITY. If any provision of this Agreement shall be found by a court to be void, invalid or unenforceable, the same shall be reformed to comply with applicable law or stricken if not so conformable, so as not to affect the validity or enforceability of this Agreement.
12.9 COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument.
12.10 SUCCESSORS. This Agreement shall inure to the benefit of, and be binding upon, any successors and permitted assigns of each party and is not intended to confer upon any person, other than the parties and their permitted successors and assigns, any rights or remedies hereunder.
14.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement in multiple originals by their duly authorized officers and representatives.
ILLUMSYS PACIFIC, INC., MOLECULAR ANALYTICAL SYSTEMS, INC.
By: /s/ T. William Hutchens By: /s/ T. William Hutchens
------------------------------ -----------------------------------
|
Printed Name: T. William Hutchens Printed Name: T. William Hutchens
--------------------- --------------------------
TITLE: President Title: President
--------------------------- --------------------------------
|
Schedule 3.1 - Schedule of Exceptions
Exhibit A - Baylor Technology Transfer Agreement
15.
SCHEDULE 3.1
EXCLUSIONS TO REPRESENTATION AND WARRANTY BY MAS
1. Matthew A. McLean has been criminally prosecuted for theft of MAS trade secrets.
2. All or part of the Baylor and/or MAS Technology has been disclosed to Randall W. Nelson (Bioactive Proves). This information may have been used to prepare and file patent applications which may or may not contain Baylor and/or MAS Technology. See, e.g., PCT/US96/08994 entitled "A Sample Presentation Apparatus for Mass Spectrometry" and PCT/US96/07522, entitled "Mass Spectrometry Immunoassy"
3. All or part of the Baylor and/or MAS Technology has been disclosed to Marvin Vestal (Perceptive Biosystems). This information may have been used to prepare and file patent applications which may or may not contain Baylor and/or MAS Technology.
4. All or part of the Baylor and/or MAS Technology was disclosed to Hubert Koster (Sequenome). This information may have been used to prepare and file patent applications which may or may not include any or all of the Baylor and/or MAS Technology. See e.g., PCT/US94/02938, entitled "DNA Sequencing by Mass Spectrometry Via Exonuclease Degradation"; PCT/US96/05136, entitled "Solid Phase Sequencing of Biopolymers" and U.S. Patent No. 5,547,835, entitled "DNA Sequencing by Mass Spectrometry."
5. All of part of the Baylor and/or MAS Technology has been disclosed to Klaus Biemann (MIT). This information may have been used to prepare and file patent applications which may or may not include any or all of the Baylor and/or MAS Technology. See, e.g. PCT/US96/05796, entitled "Matrix-Bearing Targets for MALDI Mass Spectrometry and Methods of Production Thereof."
EX 10.24
TECHNOLOGY TRANSFER AGREEMENT
BETWEEN
MOLECULAR ANALYTICAL SYSTEMS, INC.
AND
ISP ACQUISITION CORPORATION
THIS TECHNOLOGY TRANSFER AGREEMENT (the "Agreement") is made and entered into on this 7th day of April, 1997 (the "Effective Date"), by and between MOLECULAR ANALYTICAL SYSTEMS, INC. ("MAS"), a Texas corporation with an address c/o Wagner, Kirkman & Blaine, 1792 Tribute Road, Suite 450, Sacramento, CA 95815, and ISP ACQUISITION CORPORATION ("CTI"), a California corporation with an address c/o Wagner, Kirkman & Blaine, 1792 Tribute Road, Suite 450, Sacramento, CA 95815.
WITNESSETH:
WHEREAS, pursuant to the Baylor Technology Transfer Agreement, MAS is the exclusive licensee of certain rights and interest in and to the Baylor Technology (as such terms are defined below); and
WHEREAS, MAS desires to grant to CTI and CTI desires to obtain rights under the Baylor Technology and the MAS Technology to make, use, sell, offer for sale and import products in the Other Markets and, under certain circumstances, in the Drug Discovery Market (as such terms are defined below); and
WHEREAS, MAS and IllumeSys are, simultaneous with the execution of this Agreement, entering into that Technology Transfer Agreement dated as of April 7, 1997 (the "MAS/IllumeSys Agreement") granting certain license rights from MAS to IllumeSys for the Life Sciences Market and the Drug Discovery Market.
NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements hereinafter set forth and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
1. DEFINITIONS
As used herein, the terms "AGREEMENT," "MAS," "EFFECTIVE DATE," "CTI" AND "MAS/ILLUMESYS AGREEMENT" shall have the meanings indicated above. As used herein, the following terms shall have the following meanings:
1.1 "AFFILIATE" shall mean any person, corporation, association or other entity which directly or indirectly controls, is controlled by or is under common control with the party in question. As used in this definition of "Affiliate", the term "control" shall mean direct or indirect beneficial ownership of more than 50% of the voting or income interest in such corporation or other business entity.
1.
1.2 "BAYLOR" shall mean the Baylor College of Medicine, a Texas non-profit corporation having its principal place of business at One Baylor Plaza, Houston, Texas 77030.
1.3 "BAYLOR TECHNOLOGY" shall mean all Technology (as such term is defined in the Baylor Technology Transfer Agreement) which is licensed from Baylor to MAS pursuant to the Baylor Technology Transfer Agreement.
1.4 "BAYLOR TECHNOLOGY TRANSFER AGREEMENT" shall mean that Technology Transfer agreement, dated September 14, 1993, between MAS and Baylor. A copy of the Baylor Technology Transfer Agreement is attached hereto as Exhibit A.
1.5 "CIPHERGEN" shall mean Ciphergen Biosystems, Inc., a California corporation having its principal place of business at 490 San Antonio Road, Palo Alto, CA 94306.
1.6 "CTI FIELD OF USE" shall mean the scope of the grant to CTI set forth in Sections 2.1(a), 2.1(b) and 2.1(c) herein.
1.7 "DATE OF FIRST COMMERCIAL SALE" shall mean the date on which CTI or any Sublicensee or Affiliate first transfers title to a Licensed Product to a Third Party (other than an Affiliate of such Sublicensee) for monetary consideration.
1.8 "DRUG DISCOVERY MARKET" shall mean Laboratories engaged in discovering new drugs for potential preclinical development, clinical development and commercialization.
1.9 "DRUG DISCOVERY PRODUCT" shall mean any device, instrument or consumable for use by a Third Party in the Drug Discovery Market. This term does not include any drug discovered by use of a Drug Discovery Product.
1.10 "ILLUMESYS" shall mean IllumeSys Pacific, Inc., a California corporation.
1.11 "IMPROVEMENT" shall have the meaning set forth in the Baylor Technology Transfer Agreement.
1.12 "LABORATORIES" shall mean all laboratories and laboratory environments.
1.13 "LICENSED PRODUCT" shall mean any product made, used, sold, imported or offered for sale or any service used, sold or offered for sale, using all or any part of the Licensed Technology.
1.14 "LICENSED TECHNOLOGY" shall mean the Baylor Technology, Improvements and the MAS Technology.
1.15 "LIFE SCIENCES MARKET" shall mean all Laboratories doing bioanalytical or logical measurements or assays. It is understood that "Life Sciences Market" includes, without limiting the foregoing, Laboratories developing clinical diagnostics. It is further
2.
understood that "Life Sciences Market" does not include (i) Laboratories
performing clinical diagnostics for patients or other third party customers,
(ii) entities involved in making, using and selling instruments, devices,
consumables, services and information for use by individual persons (e.g. the
consumer market), and (iii) Laboratories engaged in discovering new drugs for
potential preclinical development, clinical development and commercialization.
1.16 "MAS TECHNOLOGY" shall mean all inventions, know-how, information, processes, formulae, patterns, compilations, programs, devices, methods, techniques, compounds, products, data, preparations and usage information or materials and sources thereof, whether or not patentable, which have been developed or otherwise acquired by MAS (i) prior to the Effective Date or (ii) after the Effective Date and prior to the four-year anniversary of the Effective Date. "MAS Technology" shall not include the Baylor Technology or Improvements.
1.17 "NET SALES" shall mean all monies and/or equivalent goods and services received directly by CTI or an Affiliate of CTI from the manufacture, use, sale, offer for sale or import of Royalty-Bearing Products by CTI or an Affiliate of CTI, less any separately identified discounts and allowances to customers (actually granted), refunds for returned or damaged goods, excise and sales taxes, customs duties and costs of transportation (including without limitation packing and insurance) actually paid.
1.18 "OTHER MARKETS" shall mean all Laboratories doing bioanalytical or biological measurements or assays which are not part of the Life Sciences Market or the Drug Discovery Market.
1.19 "PATENT RIGHTS" shall have the meaning set forth in the Baylor Technology Transfer Agreement.
1.20 "PATENTS AND PATENT APPLICATIONS" shall mean (i) any U.S. patent
application, and any patent issuing therefrom, covering the Licensed Technology;
(ii) any divisionals, continuations, continuations-in-part, extensions and
reissues of the foregoing and (iii) any foreign equivalents of the applications
or patents described in clause (i) or (ii).
1.21 "ROYALTY-BEARING PRODUCTS" shall mean any Licensed Products which use all or any part of the Baylor Technology.
1.22 "SUBLICENSEE" shall mean any Third Party to whom CTI grants a further sublicense under the Licensed Technology, as permitted by Section 2.1 and 2.2 of this Agreement.
1.23 "THIRD PARTY" shall mean any party other than MAS, CTI or any Affiliate of MAS or CTI.
3.
2. GRANT OF LICENSE AND LICENSE FEE
2.1 (a) EXCLUSIVE LICENSE GRANT TO CTI FOR OTHER MARKETS. MAS hereby grants to CTI:
(i) a royalty-bearing (for such time period as is set forth in Section 2.2), exclusive, worldwide sublicense, with a right to further sublicense, under the Baylor Technology and Improvements to make, use, sell, offer for sale and import any instrumentation, device or non-drug consumable for use by customers in the Other Markets; and
(ii) a royalty-free, exclusive, worldwide license, with a right to sublicense, under the MAS Technology to make, use, sell, offer for sale and import any instrumentation, device or non-drug consumable for use by customers in the Other Markets.
(b) COEXCLUSIVE LICENSE TO CTI FOR DRUG DISCOVERY MARKETS. Subject only to those rights granted to IllumeSys by way of the MAS/IllumeSys Agreement, MAS hereby grants to CTI:
(i) a royalty-bearing, coexclusive (with IllumeSys), worldwide sublicense under the Baylor Technology and Improvements to make and use, but not to sell or offer for sale, Drug Discovery Products; and
(ii) a royalty-free, coexclusive (with IllumeSys), worldwide license under the MAS Technology to make and use, but not to sell or offer for sale, Drug Discovery Products.
CTI shall have a right to grant further sublicenses under the license and sublicense contained in this Section 2.1(b), but only to CTI Affiliates and one or more Third Parties for the purpose of allowing each such Affiliate or Third Party to make Drug Discovery Products for the Affiliate's or Third Party's own internal use. It is understood that any drug or information discovered by CTI or its permitted sublicensees may be sold without payment of further consideration to MAS. It is also understood that, pursuant to the MAS/IllumeSys Agreement, MAS has granted to IllumeSys (i) a co-exclusive right to make, use and import Drug Discovery Products, but without the right of IllumeSys to grant a sublicense except to have Drug Discovery Products made for sale by IllumeSys; (ii) the exclusive right to sell Drug Discovery Products; and (iii) the right to use the Baylor Technology, Improvements and the MAS Technology in the Drug Discovery Market for the purpose of developing and providing data and other information to Third Parties about the characteristics of compounds which IllumeSys may be asked to analyze for such Third Parties.
(c) Each of the foregoing sublicenses in Section 2.1(a) and 2.1(b) shall be subject to the terms of subsection (a), (b) and (c) of Section 2.1 of the Baylor Technology Transfer Agreement.
4.
2.2 LICENSE FEE. In consideration for the grant of the sublicenses set forth in Section 2.1, CTI agrees to pay MAS an amount equal to two percent (2%) of Net Sales received by CTI or a CTI Affiliate from the Date of First Commercial Sale until the fourth anniversary of the Date of First Commercial Sale. Notwithstanding the foregoing, the obligation of CTI to make payments under this Section 2.2 shall not exceed $500,000 per twelve-month period commencing on each of (i) the Date of First Commercial Sale, (ii) the first anniversary of the Date of First Commercial Sale, (iii) the second anniversary of the Date of First Commercial Sale and (iv) the third anniversary of the Date of First Commercial Sale. This Section 2.2 shall have no further force and effect as on the fourth anniversary of the Date of First Commercial Sale and, as of such date, no further royalties shall be owed to MAS by CTI under this Agreement.
3. WARRANTIES AND REPRESENTATION
3.1 MAS.
Except as set forth on Schedule 3.1 attached hereto, MAS represents and warrants:
(a) MAS is validly existing and in good standing under the laws of the State of Texas.
(b) The execution, delivery and authority to execute and deliver this Agreement has been duly authorized by all necessary action on the part of MAS.
(c) MAS has the power and authority to execute and delivery this Agreement and to perform its obligations under this Agreement.
(d) As of the date of this Agreement, it is not a party to any agreement or arrangement with any third party or under any obligation or restriction, including pursuant to its Articles of Incorporation or By-Laws, which in any way limits or conflicts with its ability to fulfill any of its obligations under this Agreement.
(e) It is the owner of the entire right, title, and interest in and to the MAS Technology, that it has the sole right to grant licenses thereunder, and that it has not granted, and will not grant, licenses thereunder to any other entity that would restrict the rights granted to CTI hereunder. MAS also further represents that there are no agreements, written or oral, involving the MAS Technology and that it has delivered to CTI and its counsel all written agreements relating to the MAS Technology.
(f) It is the exclusive licensee of the entire right, title, and interest in and to the Baylor Technology and the Improvements, that it has the sole right to grant sublicenses thereunder, and that it has not granted, and will not grant, sublicenses thereunder to any other entity that would restrict the rights granted to CTI hereunder. MAS also further represents that there are no agreements, written or oral, involving the Baylor Technology or the Improvements
5.
and that it has delivered to CTI and its counsel all written agreements relating to the Baylor Technology and the Improvements.
(g) To the best of its knowledge, MAS owns or possesses sufficient legal rights to all patents, trade secrets, licenses, information, and proprietary rights and processes necessary for its business as now conducted and as proposed to be conducted without any conflict with, or infringement of the rights of, others. There are no outstanding options, licenses, or agreements of any kind relating to the foregoing, nor is MAS bound by or a party to any options, licenses or agreements of any kind with respect to the patents, trade secrets, licenses, information, and proprietary rights and processes of any other person or entity. MAS has not received any communications alleging that MAS has violated or, by conducting its business as proposed would violate, any of the patents, trade secrets, or other proprietary rights processes of any other person or entity. MAS is not aware of any infringement, unauthorized use or other violation by a Third Party of any of MAS's patents, licenses, trade secrets or other proprietary rights.
(h) To the best of its knowledge there is no action, suit, proceeding, or investigation pending or currently threatened against MAS that questions the validity of this Agreement, the exclusive rights of MAS to the Licensed Technology or the right of MAS to enter into this Agreement, or to consummate the transactions contemplated hereby, or that might result, either individually or in the aggregate, in any material adverse change in the assets, business, properties, prospects, or financial condition of MAS. The foregoing includes, without limitation, any action, suit, proceeding, or investigation pending or currently threatened involving the prior employment of any of MAS's employees, their use in connection with MAS's business of any information or techniques allegedly proprietary to any of their former employers, their obligations under any agreements with prior employers, or negotiations by MAS with potential backers of, or investors in MAS or its proposed business. MAS is not a party to or, the best of its knowledge, named in or subject to any order, writ, injunction, judgment, or decree of any court, government agency, or instrumentality. There is no action, suit, proceeding investigation by MAS currently pending or that MAS currently intends to initiate.
(i) On the date hereof, it is not aware of any infringement of or by the Patent Rights or any claims by any other party in and to the Licensed Technology.
(j) It is not currently in breach of the Baylor Technology Transfer Agreement, knows of no grounds for early termination of the Baylor Technology Transfer Agreement and will not breach the Baylor Technology Transfer Agreement during the term of this Agreement. Within two (2) business days of receipt of any notice from Baylor or delivery of any notice to Baylor under the Baylor Technology Transfer Agreement, it will provide a copy of such received delivered notice to CTI.
(k) Except as may be expressly set forth herein, MAS hereby disclaims and negates any and all warranties, whether express or implied, with respect to the Licensed Technology or any rights hereunder transferred, including but not limited to, any IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE.
6.
Without limiting the generality of the foregoing, MAS makes no representations or warranties as to the patentability, noninfringement, use or other application of the Licensed Technology, or as to the likelihood of the success of any research, development, testing, marketing or other utilization of the Licensed Technology.
3.2 CTI
CTI represents and warrants that as of the Effective Date:
(a) It is a corporation duly organized, validly existing and in good standing under the laws of the State of California.
(b) The execution, delivery and performance of this Agreement have been duly authorized by all necessary corporate action on the part of CTI.
(c) CTI has the corporate power and authority to execute and deliver this Agreement and to perform its obligations under this Agreement.
3.3 NO ASSURANCE OF PATENTS.
MAS represents and warrants to CTI that, and CTI represents and warrants to MAS that it understands that, there is no assurance that any patents included in the Patent Rights or any patent applications subsequently filed on the Licensed Technology will actually be issued. In the event that any claim within the Patent Rights is disallowed in a final rejection by the United States Patent Office, then the provisions of Section 2.2 relating to such claim will be effectively deleted from this Agreement. However, in respect to Section 2.2, there shall be no retroactive adjustment.
4. FINANCIAL STATEMENTS. At the close of each calendar quarter from the Date of First Commercial Sale through the fourth anniversary of the Date of First Commercial Sale, the Net Sales shall be computed by CTI, and the amounts due thereon pursuant to Section 2.2 shall be paid to MAS within sixty (60) days after the close of said quarter. With each royalty payment, CTI shall furnish to MAS a written accounting report for the closed quarter stating the Net Sales, the amounts due to MAS and the amounts already paid to MAS. CTI agrees, for three (3) years following a given calendar quarter, to maintain written records with respect to its operations pursuant to this Agreement for such calendar quarter, in sufficient detail to enable MAS or its designated certified public accountants to compute the amount of royalties due to MAS, and further agrees to permit said records to be examined from time to time, on reasonable notice during normal business hours to the extent necessary to verify the amount of royalties due to MAS hereunder. MAS shall pay the costs of said examination unless it is determined that CTI underpaid royalties by more than five percent (5%) for the period being audited by MAS, in which case CTI shall reimburse MAS for the audit expenses.
5. PROTECTION OF PROPERTY RIGHTS
7.
5.1 CONFIDENTIALITY. Except as provided below, each party receiving information the other party hereunder agrees to keep confidential all information of the disclosing party which is in the possession or comes into the possession of the receiving party during the term of this Agreement, together with any and all documentation and other physical manifestations or embodiments thereof, and not to use such information for any purpose other than as set forth in this Agreement. In carrying out its obligations hereunder each receiving party shall use at least the same degree of care, effort and procedures in protecting such confidential information as such party utilizes in connection with protecting its own information of similar character.
5.2 EXEMPTIONS.
The foregoing provisions of Section 5.1 shall not apply to information which:
(a) was in the public domain at the time of disclosure;
(b) later became part of the public domain through no act or omission of the receiving party, its employees, agents, successors or assigns;
(c) was lawfully disclosed to the receiving party by a Third Party having the right to disclose it;
(d) was already known by the receiving party at the time of disclosure, other than as a result of previous disclosure by the disclosing party;
(e) was independently developed by the receiving party; or
(f) is required by court or governmental order, law or regulation to be disclosed, provided, however, that the receiving party required to disclose such information shall provide the other party with reasonable advance notice of any such proposed disclosure to give such party a reasonable period of time in which to object to such disclosure.
5.3 DISCLOSURES.
Notwithstanding the foregoing, the parties understand and agree that CTI may, to the extent it deems necessary or appropriate, disclose the Licensed Technology and any improvement to potential sublicensees or investors, but CTI agrees to use its reasonable efforts to make such disclosures subject to a confidentiality agreement containing terms substantially similar to those contained in Sections 5.1 and 5.2.
5.4 RIGHTS TO SUBSEQUENT TECHNOLOGIES.
MAS shall have no rights in any subsequent discoveries, inventions, and/or technologies resulting from the development of the Licensed Technology by CTI, any Affiliate of CTI or any Sublicensee.
8.
5.5 PATENT APPLICATIONS. It is understood by the parties that, pursuant to the Baylor Technology Transfer Agreement, MAS has the initial responsibility for filing, prosecution and maintenance of Patents and Patent Applications covering the Baylor Technology. The parties agree that, as between MAS and CTI, MAS shall be responsible for deciding whether and how to file, prosecute and maintain the Patents and Patent Applications, provided that:
(a) all decisions of MAS (whether substantive or procedural) concerning whether and how to file, prosecute and/or maintain any Patents and Patent Applications shall be acceptable to CTI, such acceptance not to be unreasonably withheld;
(b) with respect to any action permitted under Section 5.5 of the Baylor Technology Transfer Agreement or Section 5.5 of this Agreement, MAS will use legal counsel reasonably acceptable to CTI;
(c) MAS will provide CTI with (i) drafts of all filings relating to the Patents and Patent Applications and (ii) drafts of all correspondence to be sent by MAS to Baylor, the Patent and Trademark Office (the "PTO") or any third party relating to the Patents and Patent Applications. Final versions of all such filings and correspondence shall be acceptable to CTI, such acceptance not to be unreasonably withheld;
(d) MAS will promptly provide CTI with copies of any notices
and other correspondence received by CTI from Baylor, the PTO or any
other third party relating to the Patents and Patent Applications,
including, but not limited to, any notices received by MAS pursuant to
Section 5.5 of the Baylor Technology Transfer Agreement;
(e) MAS will, if requested by CTI, provide notice to Baylor under any of the circumstances permitting notice pursuant to Section 5.5 of the Baylor Technology Transfer Agreement;
(f) MAS agrees to cooperate with CTI to whatever extent is reasonably necessary to procure patent protection of any rights regarding the Licensed Technology and agrees to execute any and all documents to give CTI the full benefit of the sublicenses and licenses granted herein;
(g) MAS represents and warrants that, as of the Effective Date, it has not received any notices from Baylor pursuant to Section 5.5(c) or Section 5.5(d) of the Baylor Technology Transfer Agreement. In the event MAS receives any notices from Baylor pursuant to Section 5.5(c) or Section 5.5(d) of the Baylor Technology Transfer Agreement after the Effective Date, MAS will provide a copy of such notice to CTI within five (5) business days of receipt of such notice by MAS. MAS will then take all actions requested by CTI to allow CTI to retain its rights granted under this Agreement, including, but not limited to, promptly notifying Baylor in the event CTI wishes MAS to proceed with any actions in connection with the Patents or Patent Applications.
9.
5.6 COOPERATION WITH ILLUMESYS. It is understood that the rights granted to CTI under Section 5.5 and Articles 6 and 7 may overlap with rights granted by MAS to IllumeSys pursuant to comparable provisions of the MAS/IllumeSys Agreement. In the event of such overlap, MAS and CTI agree to cooperate in good faith with IllumeSys with respect to any issues which may arise and decisions which may need to be made, so as to maximize the economic benefit of the Licensed Technology to all three parties.
6. INFRINGEMENT BY THIRD PARTIES.
6.1 ENFORCEMENT OF BAYLOR INTELLECTUAL PROPERTY AGAINST THIRD PARTIES. It is understood by the parties that MAS has certain rights under Article 6 of the Baylor Technology Transfer Agreement with respect to suspected infringement, misuse, misappropriation, theft or breach of confidence of other proprietary rights in the Patent Rights, the Baylor Technology and the Improvements (the Baylor Technology Infringement"). It is further understood by the parties that, as a sublicensee under such intellectual property in the CTI Field of Use, CTI has an interest in any actions against third parties which may be taken or contemplated as a result of infringement of the Baylor Technology within the scope of the CTI Field of Use. Accordingly, the parties hereby agree that with respect to any such infringement:
(a) MAS promptly will provide CTI with copies of any notices received or sent by MAS pursuant to Article 6 of the Baylor Technology Transfer Agreement.
(b) MAS will, if requested by CTI, provide notice to Baylor under any of the circumstances permitting notice pursuant to Article 6 of the Baylor Technology Transfer Agreement;
(c) with respect to any legal action permitted under Article 6 of the Baylor Technology Transfer Agreement, MAS will use legal counsel acceptable to CTI;
(d) with respect to any legal action permitted under Article 6 of the Baylor Technology Transfer Agreement, all decisions of MAS (whether substantive or procedural) concerning whether to bring an action, how to proceed with such action and whether and how to settle such action shall be acceptable to CTI; and
(e) with respect to any legal action permitted under Article 6 of the Baylor Technology Transfer Agreement, any recoveries which may be obtained by MAS as a result of such action shall be allocated between MAS and CTI on the basis of their relative losses (or potential losses)of revenue as a result of such infringement.
6.2 ENFORCEMENT OF MAS TECHNOLOGY AGAINST THIRD PARTIES. CTI shall have the right, but not the obligation, to enforce at its expense any patent contained in the MAS Technology against infringement by Third Parties within the CTI Field of Use and shall be entitled to retain recovery from such enforcement. In the event that CTI does not file suit against a substantial infringer of such patents within six (6) months of knowledge thereof, then MAS shall have the right, but not the obligation, to enforce at its expense any patent contained
10.
in the MAS Technology against infringement by Third Parties and shall be entitled to retain recovery from such enforcement.
6.3 COOPERATION. In any suit or dispute involving an infringer, the parties shall cooperate fully, and upon the request and at the expense of the party bringing suit, the other party shall make available to the party bringing suit at reasonable times and under appropriate conditions all relevant personnel, records, papers, information, samples, specimens, and the like which are in its possession. In the event a party brings suit under Sections 6.1 or 6.2, the other party agrees to be joined as a party plaintiff with respect to such suit, provided that the party bringing suit reimburses each other party for all out-of-pocket costs incurred by such other party in its role as party plaintiff.
7. INFRINGEMENT OF THIRD PARTY INTELLECTUAL PROPERTY
In the event of any infringement or likely infringement by any of the Licensed Technology of any Third Party's intellectual property, the parties shall cooperate in good faith and on a mutual and reasonable basis, with each party responsible for its respective expenses, to negotiate and settle any dispute with any such Third Party concerning the Licensed Technology, and otherwise resolve any such infringement and secure MAS's and CTI's continued rights to practice the Licensed Technology.
8. INDEPENDENT CONTRACTOR
It is agreed that the relationship of CTI to MAS in the performance of this Agreement is as an independent licensee and that neither CTI nor MAS is an agent of the other party. Each party agrees to refrain from representing itself as being the agent of the other party in performing or acting pursuant to this Agreement. Neither party shall have the power or authority to bind or otherwise commit the other party and shall not attempt to do so.
9. INDEMNIFICATION; DAMAGES
9.1 INDEMNIFICATION. Each of CTI and MAS agrees to indemnify and
hold harmless the other party and such other party's Affiliates and their
respective employees, agents, officers, directors and permitted assigns (such
party's "Indemnified Group") from and against any claims by a third party
resulting in the award or payment of any judgments, expenses (including
reasonable attorney's fees), damages and awards (collectively a "Claim") arising
out of or resulting from (i) the indemnifying party's negligence or misconduct.
(ii) a breach of any of the indemnifying party's representations, warranties or
obligations hereunder or (iii) the indemnifying party's research, development,
manufacture, use, promotion, marketing or sale of any Licensed Product, except
to the extent that such Claim arises out of or results from the negligence or
misconduct of the party seeking to be indemnified and held harmless or the
negligence or misconduct of a member of such party's Indemnified Group. A
condition of this obligation is that, whenever a member of the Indemnified Group
has information from which it may reasonably conclude an incident has occurred
which could give rise to a Claim, such indemnified party shall immediately give
notice to the indemnifying party of all pertinent data
11.
surrounding such incident and, in the event a Claim is made, all members of the
Indemnified group shall assist the indemnifying party and cooperate in the
gathering of information with respect to the time, place and circumstances and
in obtaining the names and addresses of any injured parties and available
witnesses. No member of the Indemnified Group shall voluntarily make any payment
or incur any expense in connection with any such Claim or suit without the prior
written consent of the indemnifying party. The obligations set forth in this
Section 9.1 shall survive the expiration or termination of this Agreement.
9.2 SPECIAL INDEMNIFICATION AGAINST INTELLECTUAL PROPERTY CLAIMS. MAS shall, on the terms and conditions and limitations set forth herein, indemnify CTI against any loss, expenses, liability or other damages including reasonable costs of investigation, interest, penalties and attorneys' and accountants' fees, whether or not involving any third party (collectively, "Damages"), incurred in connection with or arising from or attributable to any Third Party claims to the Licensed Technology.
9.3 INSURANCE. Commencing with the Date of First Commercial Sale, CTI and/or each of its Affiliates and Sublicensees, as applicable, shall, for so long as CTI or its Affiliates or Sublicensees manufactures, sells, tests, operates, leases or uses the Licensed Products, maintain in full force and effect policies of (i) general liability insurance with limits of not less than one million dollars ($1,000,000) per occurrence and three million dollars ($3,000,000) in the aggregate and (ii) product liability insurance with limits of not less than one million dollars ($1,000,000) per occurrence and three million dollars ($3,000,000)in the aggregate. Such coverage(s) shall name MAS and its Affiliates as additional insureds. CTI shall promptly provide verification of such insurance coverages to MAS.
10. TERM AND TERMINATION
10.1 EXPIRATION; EFFECT OF EXPIRATION. This Agreement shall
expire, on a country-by-country basis, on the date of expiration of the last to
expire patent included within the Licensed Technology in that country or, if no
patents in the Licensed Technology issue in such country, seventeen (17) years
from the Effective Date. In the event this Agreement expires and has not been
terminated early pursuant to Section 10.2, the license grants set forth in
Section 2.1 and 2.2 will survive such expiration, except that all such licenses
will become non-exclusive upon the expiration date. It is understood by the
parties that the Baylor Technology Transfer Agreement may expire on a date which
is earlier than the expiration date provided for in the first sentence of this
Section 10.1 and that the sublicense granted pursuant to Section 2.1 may
therefore expire on such earlier date.
10.2 VOLUNTARY TERMINATION BY CTI. CTI may terminate this Agreement for any reason upon prior written notice of one hundred eighty (180) days to MAS.
10.3 EARLY TERMINATION FOR BANKRUPTCY OR BREACH. This agreement will earlier terminate:
12.
(a) automatically if CTI or its successors in interest shall become bankrupt or insolvent and/or if the business of CTI shall be placed in the hand of a receiver or trustee, whether by voluntary act of CTI or otherwise; or
(b) upon ninety (90) days written notice from one party if the other party shall commit a material breach of any of such other party's obligations under this Agreement; provided, however, such breaching party may avoid such termination if, before the end of such ninety (90) day period, it cures such material breach and provides the non-breaching party with a notice stating that such cure has occurred and stating the manner of such cure.
10.4 EFFECT OF TERMINATION. Upon termination of all or part of this Agreement for any cause, nothing herein shall be construed to release either party of any obligation matured prior to the effective date of such termination. CTI may, after the effective date of such termination, sell all Licensed Products and parts thereof that it may have on hand at the date of the termination.
10.5 SURVIVAL. The following provisions will survive expiration or termination of this Agreement: Article 4 and Sections 5.1, 5.2, 9.1, 9.2 and 10.1.
11. ASSIGNMENT
11.1 ASSIGNMENT BY MAS.
MAS may not assign its rights or obligations under this Agreement without the prior written consent of CTI.
11.2 ASSIGNMENT BY CTI.
CTI may assign any of its rights and obligations under this Agreement. Within thirty (30) days of such assignment, CTI shall notify MAS that such assignment has occurred.
12. MISCELLANEOUS
12.1 FURTHER ASSURANCES.
Without further consideration, MAS hereby agrees to execute and deliver, and to cause its respective officers, trustees, directors, employees, and agents to execute and deliver, such other instruments, and to take such other action as CTI hereunder may reasonably request to more effectively license and sublicense to CTI the rights granted hereunder, and to assist CTI in the recordation of same as necessary, all in such form and substance as CTI may reasonably request and at its expense.
12.2 ENTIRE AGREEMENT. This Agreement constitutes the entire and only agreement between the parties with respect to the subject matter of this Agreement, including the Licensed Technology, and all other prior negotiations, representations, agreements and understandings are
13.
superseded hereby. No agreements altering or supplementing the terms hereof may be made except by means of a written document signed by the duly authorized representatives of the parties.
12.3 NOTICE. Any notice required by this Agreement shall be in writing and shall be given by prepaid, first class, certified mail, return receipt requested, addressed in the case of CTI to:
ISP Acquisition Corporation
c/o Wagner, Kirkman & Blaine
1792 Tribute Road, Suite 450
Sacramento, CA 95815
Attention: Belan Kirk Wagner, Esq.
with a copy to: Cooley Godward LLP
Five Palo Alto Square
3000 EL Camino Real
Palo Alto, CA 94306
Attention: Robert J. Brigham, Esq.
or in the case of MAS:
Molecular Analytical Systems, Inc.
c/o Wagner, Kirkman & Blaine
1792 Tribute Road, Suite 450
Sacramento, CA 95815
Attention: Belan Kirk Wagner, Esq.
|
or such other address as may be given from time to time under the terms of thus notice provision.
12.4 COMPLIANCE WITH LAWS. Each party shall comply with all applicable federal, state and local laws and regulations in connection with its activities pursuant to this Agreement.
12.5 GOVERNING LAW. This Agreement shall be construed and interpreted in accordance with the laws of the State of California other than those provisions governing conflicts of law. Any claim or controversy arising out of or related to this Agreement or any breach hereof shall be submitted to a court of applicable jurisdiction in the state of California, and each party hereby consents to the jurisdiction and venue of such court.
12.6 NO WAIVER. Failure of a party to enforce a right under this Agreement shall not act as a waiver of that right or the ability to later assert that right relative to the particular situation involved.
14.
12.7 HEADINGS. Headings included herein are for convenience only and shall not be used to construe this Agreement.
12.8 SEVERABILITY. If any provision of this Agreement shall be found by a court to be void, invalid or unenforceable, the same shall be reformed to comply with applicable law or stricken if not so conformable, so as not to affect the validity or enforceability of this Agreement.
12.9 COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which shall be an original, but all of which together shall constitute one instrument.
12.10 SUCCESSORS. This Agreement shall inure to the benefit of, and be binding upon, the successors and permitted assigns and is not intended to confer upon any person, other than the parties and their permitted successors and assigns, any rights or remedies hereunder.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement in multiple originals by their duly authorized officers and representatives.
ISP ACQUISITION CORPORATION MOLECULAR ANALYTICAL SYSTEMS, INC.
By: /s/ T. William Hutchens By: T. William Hutchens
--------------------------------- -----------------------------
Printed Name: T. William Hutchens Printed Name: T. William Hutchens
--------------------- -------------------
Title: President Title: President
------------------------- ---------------
|
Schedule 3.1 - Schedule of Exceptions
Exhibit A - Baylor Technology Transfer Agreement
15.
SCHEDULE 3.1
EXCLUSIONS TO REPRESENTATION AND WARRANTY BY MAS
1. Matthew A. McLean has been criminally prosecuted for theft of MAS trade secrets.
2. All or part of the Baylor and/or MAS Technology has been disclosed to Randall W. Nelson (Bioactive Probes). This information may have been used to prepare and file patent applications which may or may not contain Baylor and/or MAS Technology. See, e.g., PCT/US96/08994, entitled "A Sample Presentation Apparatus for Mass Spectrometry" and PCT/US96/07522, entitled "Mass Spectrometric Immunoassay."
3. All or part of the Baylor and/or MAS Technology was disclosed to Marvin Vestal (Perceptive Biosystems). This information may have been used to prepare and file patent applications which may or may not contain Baylor and/or MAS Technology.
4. All or part of the Baylor and/or MAS Technology was disclosed to Hubert Koster (Sequenome). This information may have been used to prepare and file patent applications which may or may not contain Baylor and/or MAS Technology. See, e.g., PCT/US94/02938, entitled DNA Sequencing by Mass Spectrometry Via Exonuclease Degradation"; PCT/US96/05136, entitled "Solid Phase Sequencing of Biopolymers" and U.S. Patent No. 5,547,835, entitled "DNA Sequencing by Mass Spectrometry.
5. All or part of the Baylor and/or MAS Technology has been disclosed to Klaus Biemann MIT). This information may have been used to prepare and file patent applications which may or may not include any or all of the Baylor and/or MAS Technology. See, e.g., PCT/US96/05796, entitled "Matrix-Bearing Targets for MALDI Mass Spectrometry and Methods of Production Thereof."
EXHIBIT 21.1
SUBSIDIARIES OF REGISTRANT
IllumeSys Pacific, Inc. California Ciphergen Technologies, Inc. California Ciphergen Biosystems, Ltd. United Kingdom Ciphergen Biosystems A/S Denmark |
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Form S-1 of our reports dated March 6, 2000, except for Note 14 for which the date is August , 2000, relating to the consolidated financial statements and financial statement schedule of Ciphergen Biosystems, Inc., which appear in such Registration Statement. We also consent to the references to us under the heading "Experts" in such Registration Statement.
/s/ PRICEWATERHOUSECOOPERS LLP PricewaterhouseCoopers LLP San Jose, California August 24, 2000 |
| ARTICLE 5 |
| MULTIPLIER: 1,000 |
| PERIOD TYPE | 6 MOS |
| FISCAL YEAR END | DEC 31 1999 |
| PERIOD START | JAN 01 2000 |
| PERIOD END | JUN 30 2000 |
| CASH | 24,027 |
| SECURITIES | 0 |
| RECEIVABLES | 1,933 |
| ALLOWANCES | 130 |
| INVENTORY | 1,412 |
| CURRENT ASSETS | 28,361 |
| PP&E | 3,655 |
| DEPRECIATION | 0 |
| TOTAL ASSETS | 33,311 |
| CURRENT LIABILITIES | 5,922 |
| BONDS | 0 |
| PREFERRED MANDATORY | 0 |
| PREFERRED | 53,783 |
| COMMON | 25,869 |
| OTHER SE | 53,211 |
| TOTAL LIABILITY AND EQUITY | 33,311 |
| SALES | 3,641 |
| TOTAL REVENUES | 3,641 |
| CGS | 1,511 |
| TOTAL COSTS | 1,511 |
| OTHER EXPENSES | 11,244 |
| LOSS PROVISION | 0 |
| INTEREST EXPENSE | 95 |
| INCOME PRETAX | (9,209) |
| INCOME TAX | 0 |
| INCOME CONTINUING | (9,209) |
| DISCONTINUED | 0 |
| EXTRAORDINARY | 0 |
| CHANGES | 0 |
| NET INCOME | (9,209) |
| EPS BASIC | (5.53) |
| EPS DILUTED | (5.53) |