LUMINEX CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 8731 74-2747608
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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Copies to:
Michael L. Bengtson, Esq. Donald J. Murray, Esq.
Craig N. Adams, Esq. Dewey Ballantine LLP
Thompson & Knight LLP 1301 Avenue of the Americas
98 San Jacinto Boulevard, Suite 1200 New York, New York 10019
Austin, Texas 78701 (212) 259-8000
(512) 469-6100
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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, please check the following box. [_]
Proposed Maximum
Title of Each Class of Aggregate Offering Amount of
Securities to be Registered Price(1)(2) Registration Fee
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Common stock, par value $.001 per
share.............................. $100,000,000 $26,400
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PRELIMINARY PROSPECTUS , 2000
Subject to completion
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+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 preliminary prospectus + +is not an offer to sell these securities and is not soliciting an offer to + +buy these securities in any state where the offer or sale is not permitted. + |
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ Shares
[LOGO OF LUMINEX]
This is our initial public offering of shares of our common stock. No public market currently exists for our common stock. We expect the public offering price to be between $ and $ per share.
We have applied to have our common stock listed on the Nasdaq National Market under the symbol "LMNX."
Before buying any shares you should read the discussion of material risks of investing in our common stock in "Risk factors" beginning on page 7.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.
Per Share Total
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Public offering price $ $
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Underwriting discounts and commissions $ $
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Proceeds, before expenses, to Luminex $ $
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The underwriters may also purchase up to shares of common stock from us at the public offering price, less the underwriting discounts and commissions, within 30 days from the date of this prospectus. This option may be exercised only to cover over-allotments, if any. If the option is exercised in full, the total underwriting discounts and commissions will be $ , and the total proceeds, before expenses, to Luminex will be $ .
The underwriters are offering the common stock as set forth under "Underwriting." Delivery of the shares will be made on or about , 2000.
Warburg Dillon Read LLC
Lehman Brothers
Dain Rauscher Wessels
[artwork to come]
Through and including , 2000 (the 25th day after commencement of this offering), all dealers selling shares of our common stock, whether or not participating in this offering, may be required to deliver a prospectus. This delivery requirement is in addition to the obligation of dealers to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.
Prospectus summary................... 3 The offering......................... 5 Summary financial and operating data............................... 6 Risk factors......................... 7 Forward-looking information.......... 19 Use of proceeds...................... 20 Dividend policy...................... 20 Capitalization....................... 21 Dilution............................. 22 Selected financial data.............. 24 Management's discussion and analysis of financial condition and results of operations...................... 26 Business............................. 31 Management........................... 46 Related party transactions........... 53 Principal stockholders............... 55 Description of capital stock......... 57 Shares eligible for future sale...... 60 Underwriting......................... 62 Legal matters........................ 64 Experts.............................. 64 Where you can find more information........................ 64 Index to financial statements........ F-1 |
Luminex(R) and LabMAP(TM) are trademarks of Luminex Corporation. This prospectus also refers to trademarks and trade names of other organizations.
(THIS PAGE INTENTIONALLY LEFT BLANK)
Prospectus summary
This summary highlights information contained elsewhere in this prospectus. You should read the entire prospectus carefully, especially the risks of investing in our common stock discussed under "Risk factors." Our principal executive offices are located at 12212 Technology Boulevard, Austin, Texas 78727. Our telephone number is (512) 219-8020. Our web site is http://www.luminexcorp.com. The information found on our web site is not a part of this prospectus.
OUR BUSINESS
Luminex Corporation has developed, manufactures and markets a proprietary technology platform that simplifies biological testing for the life sciences industry. This industry depends on a broad range of tests, called bioassays, to discover new drugs, identify new genes or simply monitor blood cholesterol levels. The LabMAP system is able to simultaneously perform up to 100 bioassays on a single drop of fluid. This is accomplished with a compact instrument, the Luminex 100, that reads biological tests taking place on the surface of microscopic plastic beads called microspheres. The Luminex 100 combines this miniaturized bioassay capability with diode lasers, digital signal processors and proprietary software to create a system offering significant advantages in speed, precision, flexibility and cost. We believe our LabMAP technology is broadly applicable in the fields of drug discovery, clinical diagnostics, genetic analysis, biomedical research and pharmacogenomics.
We began marketing the current generation of LabMAP in 1999. As of January 31, 2000, 63 life sciences customers have purchased 100 LabMAP systems. Our customers include GlaxoWellcome plc, SmithKline Beecham Corporation, Eli Lilly & Company, Laboratory Corporation of America, Genentech Inc., Abbott Laboratories, Life Technologies Inc., Bio-Rad Laboratories, Inc., Lawrence Livermore National Laboratories, Mayo Clinic, Centers for Disease Control and Prevention and National Institutes of Health.
OUR MARKET OPPORTUNITY
Bioassays are used extensively throughout the life sciences industry to detect the presence of certain biochemicals, proteins or genes in a sample. They are broadly used in drug discovery, genetic analysis, pharmacogenomics, clinical diagnostics and general biomedical research. For example, bioassays can be used to:
.measure the affinity between a chemical compound and a disease target for drug discovery and development;
.assist physicians in prescribing the appropriate drug therapy to match the patient's unique genetic makeup, a process known as pharmacogenomics;
.detect genetic variations, such as single nucleotide polymorphisms or SNPs; and
.measure the presence and quantity of biochemicals in blood to assist physicians in diagnosing, treating and monitoring pathological conditions such as heart attack or diabetes.
Bioassays are either developed internally to meet the specific needs of the laboratory or purchased in the form of an off-the-shelf test kit or customized service. According to industry reports, the global
market for tools used to develop and perform bioassays is estimated to have been approximately $27.5 billion in 1998 and is expected to grow at an annual rate of 8%. There are a number of factors contributing to this increase, including:
.increased research and development spending by pharmaceutical and biomedical research companies;
.a shift in research and development focus from gene sequencing to functional genomics and proteomics;
.increased demand for disease-specific diagnostic tests;
.application of disease targets from drug discovery into in vitro diagnostics; and
.evolution of pharmacogenomics.
The differing bioassay needs of life sciences laboratories have led to the development of specialized techniques and instrumentation. As a result, most of these laboratories have become highly compartmentalized. For example, clinical testing facilities are organized into functional groups, such as chemistry, microbiology, immunology and serology. Similarly, pharmaceutical laboratories are separated by disease target, such as cancer and hypertension, as well as by the stages of the drug discovery process, from initial bioassay development to toxicology. This has created inefficiencies in laboratories since they must now purchase multiple instruments, often from different vendors, to meet their testing needs. This limits the laboratories' ability to standardize bioassay techniques, operator training and hardware maintenance.
THE LUMINEX SOLUTION
Our solution is to provide a single platform, the LabMAP technology, that can perform a wide range of bioassays in a cost-effective manner. The key features of our platform include the following:
.performs multiple tests simultaneously;
.flexible in customizing bioassays comprised of multiple tests;
.high throughput;
.ease of use; and
.low cost to purchase and operate.
OUR STRATEGY
Our goal is to establish our LabMAP system as the industry standard for performing bioassays. To achieve this goal, we have implemented the following strategy:
.focus on large, fast-growing segments of the life sciences industry;
.continue to develop strategic partnerships to broaden and accelerate market acceptance of our LabMAP technology;
.provide an open platform that allows customers to design bioassays using a single platform;
.expand the functionality of the LabMAP product line; and
.allow easy technology access to encourage rapid market adoption.
The offering
The following information assumes that the underwriters do not exercise the over-allotment option granted by us to purchase additional shares in the offering.
Common stock offered by us................. shares
Common stock to be outstanding after the
offering................................. shares
Proposed Nasdaq National Market symbol..... LMNX
Use of proceeds............................ To fund our operations, including
continued development and
manufacturing of existing
products and research and
development of additional
products, expanding our
facilities to be able to meet the
needs of our growing business,
and for other working capital and
general corporate purposes. See
"Use of proceeds."
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Except as otherwise indicated, information in this prospectus is based on the assumption that all outstanding shares of our preferred stock are converted into 4,298,340 shares of our common stock upon the closing of this offering.
We are obligated to issue shares of common stock upon exercise of options and warrants as follows:
. shares issuable if the underwriters' over-allotment option is exercised in full, as described in "Underwriting";
.1,684,980 shares issuable upon the exercise of options at a weighted average exercise price of $6.25 per share;
.262,500 shares issuable upon the exercise of warrants at an exercise price of $4.00 per share; and
. additional shares made available for future grant under our 2000 Long-Term Incentive Plan. See "Management -- Employee benefit plans -- 2000 Long-Term Incentive Plan."
The number of shares of common stock outstanding after the offering is based on shares outstanding as of January 31, 2000. See "Capitalization."
Summary financial and operating data
The as adjusted balance sheet reflects the receipt of the net proceeds from the sale of shares of our common stock in this offering at an assumed price to the public of $ per share, after deducting the underwriting discounts and commissions and estimated offering expenses. The pro forma net loss per share and shares used in computing pro forma net loss per share are calculated as if all of our convertible preferred stock was converted into shares of our common stock on the date of their issuance.
Period from
May 24, 1995
(inception) to Year Ended December 31,
December 31, 1995 1996 1997 1998 1999
Statement of operations
data (In thousands, except per share data)
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Revenue:
Product................ $-- $-- $99 $386 $2,606
Grant.................. -- -- -- -- 506
------ ------- ------- ------- -------
Total revenue......... -- -- 99 386 3,112
Cost of product
revenue.............. -- -- 10 88 1,172
------ ------- ------- ------- -------
Gross margin............ -- -- 89 298 1,940
Operating expenses:
Research and
development......... 58 1,036 1,594 3,611 5,741
Selling, general and
administrative...... 216 731 1,426 2,566 4,422
Amortization of
deferred stock and
stock compensation
expense............. -- -- -- -- 509
------ ------- ------- ------- -------
Total operating
expenses........... 274 1,767 3,020 6,177 10,672
------ ------- ------- ------- -------
Loss from operations.... (274) (1,767) (2,931) (5,879) (8,732)
Interest income......... 4 7 178 283 284
------ ------- ------- ------- -------
Net loss................ $(270) $(1,760) $(2,753) $(5,596) $(8,448)
====== ======= ======= ======= =======
Net loss per share,
basic and diluted.... $(0.12) $(0.33) $(0.44) $(0.87) $(1.31)
====== ======= ======= ======= =======
Shares used in computing
net loss per share,
basic and diluted.... 2,221 5,307 6,295 6,415 6,447
Pro forma net loss per
share, basic and
diluted.............. $(0.84)
=======
Shares used in computing
pro forma net loss
per share, basic and
diluted.............. 10,060
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As of December 31,
1999
Actual As Adjusted
Balance sheet data (In thousands)
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Cash and cash equivalents.................................. $4,083 $
Working capital............................................ 10,426
Total assets............................................... 12,566
Total stockholders' equity................................. 11,195
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Please see Note 2 to our financial statements for an explanation of the method used to calculate the net loss per share and the number of shares used in the computation of per share amounts.
Risk factors
You should carefully consider the risks described below together with all of the other information included in this prospectus before making an investment decision. If any of the following risks actually occurs, our business, financial condition or results of operations could be harmed. In such an event, the trading price of our common stock could decline, and you may lose all or part of your investment.
RISKS RELATED TO OUR BUSINESS
We are at an early stage of development, and our business model is still evolving.
We are at an early stage of development, and our business model is still evolving. As a result, we are subject to all of the risks inherent in the development of new commercial products, such as the need:
.to obtain substantial capital to support the expenses of developing our technology and commercializing our products;
.to develop a market for our products; and
.to successfully transition from a company with a research focus to a company capable of supporting commercial activities.
Since commencing operations in May 1995, we have dedicated substantially all of our resources to the research and development of our products. Because we have only recently begun to market our products commercially, we have generated limited revenues from product sales. We may not be able to successfully implement our business plan or adapt it to changes in the market.
We have a history of substantial losses and negative cash flow from operations, and we expect to continue to incur losses and negative cash flow from operations for the foreseeable future.
We have incurred operating losses and negative cash flow from operations since our inception. As of December 31, 1999, we had an accumulated deficit of $18.8 million. For the years ended December 31, 1997, 1998 and 1999, we had net losses of $2.8 million, $5.6 million and $8.4 million, respectively. We expect to continue to incur operating and net losses and negative cash flow from operations, which may increase, for the foreseeable future due in part to anticipated increases in expenses for research and product development and expansion of our facilities and sales and marketing capabilities. We anticipate that our business will generate operating losses until we successfully implement our commercial development strategy and generate significant additional revenues to support our level of operating expenses. We cannot assure you that we will ever achieve or sustain profitability or that our operating losses will not increase in the future.
Our success depends on market acceptance of our technology, which is new and unproven.
Life sciences companies have historically conducted screening and identification tests using a variety of technologies, including bead-based screening. However, compared to other technologies, the LabMAP technology is new and unproven, and the use of our technology by life sciences companies is limited. The commercial success of our technology will depend upon the adoption of this technology as a method to perform bioassays. In order to be successful, our products must meet the commercial
Risk factors
requirements for bioassays within the life sciences industry, and we must convince potential customers to utilize our system instead of competing technologies. Market acceptance will depend on many factors, including our ability to:
.convince prospective strategic partners and customers that our technology is an attractive alternative to other technologies for pharmaceutical, clinical and biomedical testing and analysis;
.manufacture products in sufficient quantities with acceptable quality and at an acceptable cost; and
.place and service sufficient quantities of our products.
Because of these and other factors, our products may not gain market acceptance. If our technology platform does not become a widely used method in the life sciences industry, demand for our products will not develop as expected, and it is unlikely that we will ever become profitable.
Our business plan may not succeed unless we establish meaningful and successful relationships with our strategic partners.
Our strategy for the development and commercialization of our LabMAP technology depends in part upon our ability to establish strategic relationships with a number of partners. Our business plan contemplates that a significant portion of our future revenues will come from sales of our systems, the development and sale of bioassay kits utilizing our technology and use of our technology by our strategic partners in performing services offered to third parties. This strategy entails a number of risks as more fully described below.
If we cannot establish and maintain sufficient effective strategic partnerships, we will not be able to realize the goals of our business plan.
Our success depends on our ability to maintain our current strategic partnerships and establish and maintain additional partnerships. Our ability to enter into agreements with additional partners depends in part on convincing them that our technology can help achieve and accelerate their goals or efforts. This may require substantial time and effort on our part. We will expend substantial funds and management effort with no assurance that a strategic relationship will result. We cannot assure you that we will be able to negotiate additional strategic agreements in the future on acceptable terms, if at all, or that current or future partners will not pursue or develop alternative technologies either on their own or in collaboration with others. Termination of strategic relationships, or the failure to enter into a sufficient number of additional agreements on favorable terms, could reduce sales of our products or lower margins on our products.
If our strategic partners do not effectively develop and market products based on our technology, our business will be adversely affected.
In return for the right to produce bioassay kits incorporating our technology, our strategic partners will purchase our systems from us for resale to end- users and will pay royalties to us based on revenues they generate from sales of the kits. We expect that we will also generate revenue from royalties on sales of diagnostic testing services by strategic partners utilizing our technology. This strategy entails a number of risks. We believe that our strategic partners will have economic incentives to market these products, but we cannot predict future sales and royalty revenues. The amount of these revenues will depend on a variety of factors that are outside our control, including the amount and timing of resources that current and future strategic partners devote to market products incorporating our
Risk factors
technology. Some of the companies we are targeting as strategic partners offer products competitive with our LabMAP technology. As a result, competition with these companies may hinder or prevent strategic relationships. Further, the development and marketing of certain bioassay kits will require our strategic partners to obtain governmental approvals, which could delay or prevent their commercialization efforts. If our current or future strategic partners do not effectively develop and market products based on our technology and obtain any necessary government approvals, our revenues from product sales and royalties will be significantly reduced.
We have only produced our products in limited quantities, and we may experience difficulty expanding our manufacturing capabilities.
We currently produce products incorporating our LabMAP technology in limited quantities. If we successfully develop and introduce these products to the marketplace, we may not be able to produce sufficient quantities at an acceptable cost. In addition, we may encounter difficulties expanding production due to, among other things, quality control and assurance, component supply and availability of qualified personnel. These difficulties could result in reduced sales of our products, increased repair or re-engineering costs due to product returns and defects as well as increased expenses due to switching to alternative suppliers, all of which could damage our industry reputation and hurt our profitability.
Because we have limited sources of production and suppliers, our ability to produce and supply our products could be impaired.
We have limited experience producing products for commercial purposes. We presently outsource most of the assembly of our products to contract assemblers. In addition, certain key components of our product line are currently purchased from a limited number of outside sources and may only be available through a few sources. We do not have agreements with any of our suppliers or certain of our contract assemblers.
Our reliance on our suppliers and contract assembler exposes us to risks including:
.the possibility that one or more of our suppliers or assemblers could terminate their services at any time without penalty;
.the potential inability of our suppliers to obtain required components;
.the potential delays and expenses of seeking alternative sources of supply or manufacturing services; and
.reduced control over pricing, quality and timely delivery due to the difficulties in switching to alternative suppliers or assemblers.
Consequently, in the event that components from our suppliers or work performed by our assembler are delayed or interrupted for any reason, our ability to produce and supply our products could be impaired.
We have limited experience in selling and marketing our products and may not be able to develop a direct sales and marketing force that can meet our customers' needs.
We intend to sell a portion of our products through our own sales force. We have limited experience in direct marketing, sales and distribution. Our future profitability will depend in part on our ability to
Risk factors
further develop a direct sales and marketing force to sell our products to our customers. Our products are technical in nature. As a result, we believe it is necessary to develop a direct sales force that includes people with scientific backgrounds and expertise. Competition for such employees is intense. We may not be able to attract and retain qualified salespeople or be able to build an efficient and effective sales and marketing force. Failure to attract or retain qualified salespeople or to build an efficient and effective sales and marketing force could negatively impact sales of our products, thus reducing our revenues and profitability.
If we cannot provide quality customer service, we could lose customers and our operating results could suffer.
Our success will depend largely on our ability to attract and retain customer and technical support personnel. We are currently expanding these areas and will need to increase our staff further to support expected new customers as well as the expanding needs of existing customers. The introduction of our products to new customers, the integration of our technology into our customers' existing systems and the ongoing customer support can be complex. Accordingly, we need highly trained customer support and technical personnel. Hiring customer support and technical personnel is very competitive in our industry due to the limited number of people available with the necessary technical skills and understanding of our systems and services. Our inability to attract, train or retain the number of highly qualified customer support and technical services personnel that our business needs may cause our business and prospects to suffer.
If we fail to manage our growth, our business could be harmed.
Our business plan contemplates a period of rapid and substantial growth that will place a strain on our administrative and operational infrastructure. We increased the number of our employees from 47 at December 31, 1998 to 81 at January 31, 2000. Our product revenue increased from $386,000 in 1998 to $2.6 million in 1999. Our ability to manage effectively our operations and growth requires us to continue to improve our operational, financial and management controls, reporting systems and procedures and to attract and retain sufficient numbers of talented employees. We may not successfully implement improvements to our management information and control systems in an efficient or timely manner and may discover deficiencies in existing systems and controls. If we are unable to manage this growth effectively, our business, results of operations or financial condition may be harmed.
Our research and development efforts may not produce commercially viable products.
We intend to devote significant personnel and financial resources to research and development activities designed to advance the capabilities of our LabMAP technology. Some of these research and development activities will be conducted by others. We may never realize any benefits from such research and development activities.
If we make any acquisitions, we will incur a variety of costs and may never realize the anticipated benefits.
If appropriate opportunities become available, we may attempt to acquire businesses, technologies, services or products that we believe are a strategic fit with our business. We currently have no commitments or agreements with respect to any material acquisitions. If we do undertake any transaction of this sort, the process of integrating an acquired business, technology, service or product may result in operating difficulties and expenditures and may absorb significant management attention that would otherwise be available for ongoing development of our business. Moreover, we may never
Risk factors
realize the anticipated benefits of any acquisition. Future acquisitions could result in potentially dilutive issuances of equity securities, the incurrence of debt, contingent liabilities and/or amortization expenses related to goodwill and other intangible assets, which could adversely affect our results of operations and financial condition.
Our success will depend on our ability to retain principal members of our management and scientific staff.
We depend on the principal members of our management and scientific staff. The loss of services of any of these persons could delay or reduce our product development and commercialization efforts. In addition, recruiting and retaining qualified scientific personnel to perform future research and development work will be critical to our success. There can be no assurance that we will be able to attract and retain our personnel.
RISKS RELATED TO OPERATING IN OUR INDUSTRY
The life sciences industry is highly competitive and subject to rapid technological change.
The life sciences industry is highly competitive. We compete with companies in the United States and abroad that are engaged in the development and production of similar products. We anticipate competition primarily from the following two sectors:
.companies marketing conventional testing products based on established technologies; and
.companies developing their own advanced testing technologies.
Many of our competitors have access to greater financial, technical, research, marketing, sales, distribution, service and other resources than we do. We face, and will continue to face, intense competition from organizations serving the life sciences industry that are pursuing competing technologies. These organizations may develop technologies that are superior alternatives to our technologies. Further, our competitors may be more effective at implementing their technologies to develop commercial products.
The life sciences industry is characterized by rapid and continuous technological innovation. We may need to develop new applications for our products to remain competitive. Our present or future products could be rendered obsolete or uneconomical by technological advances by one or more of our current or future competitors. In addition, the introduction or announcement of new products by us or by others could result in a delay of or decrease in sales of existing products, as customers evaluate these new products. Our future success will depend on our ability to compete effectively against current technology as well as to respond effectively to technological advances.
The intellectual property rights we rely upon to protect the technology underlying our products may not be adequate, which could enable third parties to use our technology or very similar technology and could reduce our ability to compete in the market.
Our success will depend on our ability to obtain, protect and enforce patents on our technology and to protect our trade secrets. Any patents we own may not afford meaningful protection for our technology and products. Others may challenge our patents and, as a result, our patents could be
Risk factors
narrowed, invalidated or rendered unenforceable. In addition, our current and future patent applications may not result in the issuance of patents in the United States or foreign countries. Competitors may develop products similar to ours which are not covered by our patents. Further, there is a substantial backlog of patent applications at the US Patent and Trademark Office, and the approval or rejection of patent applications may take several years.
We have obtained a patent in the United States and have pending applications in certain foreign jurisdictions, except Japan, for our method of "real time" detection and quantification of multiple analytes from a single sample. We have filed a lawsuit alleging that as a result of our prior patent counsel's negligence the corresponding patent application in Japan was not obtained. We are seeking damages caused by this negligence. We intend, however, to pursue patent protection in Japan for other aspects of our technology. As a result, we may not be able to prevent competitors from developing and marketing technologies similar to our LabMAP technology in Japan and certain other countries.
We require our employees, consultants and advisors to execute confidentiality agreements. However, we cannot guarantee that these agreements will provide us with adequate protection against improper use or disclosure of confidential information. In addition, in some situations, these agreements may conflict with, or be subject to, the rights of third parties with whom our employees, consultants or advisors have prior employment or consulting relationships. Further, others may independently develop substantially equivalent proprietary information and techniques, or otherwise gain access to our trade secrets. Our failure to protect our proprietary information and techniques may inhibit or limit our ability to exclude certain competitors from the market.
We may be involved in lawsuits to protect or enforce our intellectual property rights, which may be expensive. If we lose, we may lose the benefit of some of our intellectual property rights, the loss of which may inhibit or remove our ability to exclude certain competitors from the market.
In order to protect or enforce our patent rights, we may have to initiate legal proceedings against third parties, such as infringement suits or interference proceedings. These legal proceedings could be expensive, take significant time and divert management's attention from other business concerns. We may also provoke these third parties to assert claims against us. The patent position of companies like ours generally is highly uncertain, involves complex legal and factual questions, and has recently been the subject of much litigation. No consistent policy has emerged from the US Patent and Trademark Office or the courts regarding the breadth of claims allowed or the degree of protection afforded under patents like those we own.
Our success will depend partly on our ability to operate without infringing on or misappropriating the proprietary rights of others.
We may be sued for infringing on the intellectual property rights of others. In addition, we may find it necessary, if threatened, to initiate a lawsuit seeking a declaration from a court that we do not infringe the proprietary rights of others or that these rights are invalid or unenforceable. Intellectual property litigation is costly, and, even if we prevail, the cost of such litigation could adversely affect our business, financial condition and results of operations. In addition, litigation is time consuming and could divert management attention and resources away from our business If we do not prevail in any litigation, in addition to any damages we might have to pay, we could be required to stop the infringing activity or obtain a license. Any required license may not be available to us on acceptable terms, or at all. In addition, some licenses may be nonexclusive, and therefore, our competitors may
Risk factors
have access to the same technology licensed to us. If we fail to obtain a required license or are unable to design around a patent, we may be unable to sell some of our products, which could have a material adverse affect on our business, financial condition and results of operations.
We are aware of a European patent granted to Dr. Ioannis Tripatzis, which covers certain testing agents and certain methods of their use. Dr. Tripatzis has publicly stated his belief that his patent covers aspects of our technology. This patent expires in 2004. We cannot assure you that a dispute with Dr. Tripatzis will not arise or that any dispute with him will be resolved in our favor.
Our business is subject to extensive governmental regulation.
The production, labeling, distribution and marketing of our products for some purposes and products based on our technology expected to be produced by our strategic partners are subject to governmental regulation by the United States Food and Drug Administration in the United States and by similar agencies in other countries. Depending on their intended applications, some of our products and products based on our technology expected to be produced by our strategic partners are subject to approval or clearance by the FDA prior to marketing for commercial use. Products using our technology for clinical diagnostic purposes will require such approval or clearance. No such approvals or clearances have yet been obtained. The process of obtaining necessary FDA clearances or approvals can be time-consuming, expensive and uncertain. Further, clearance or approval may place substantial restrictions on the indications for which the product may be marketed or to whom it may be marketed. In addition, we are also required to comply with FDA requirements relating to laser safety.
Approved or cleared products are subject to continuing FDA requirements relating to quality control and quality assurance, maintenance of records and documentation and labeling and promotion of medical devices. Our inability, or the inability of our strategic partners, to obtain required regulatory approval or clearance on a timely or acceptable basis could harm our business. In addition, failure to comply with applicable regulatory requirements could subject us or our strategic partners to enforcement action, including product seizures, recalls, withdrawal of clearances or approvals, restrictions on or injunctions against marketing our products or products based on our technology, and civil and criminal penalties.
Medical device laws and regulations are also in effect in many countries outside the United States. These range from comprehensive device approval requirements for some or all of our medical device products to requests for product data or certifications. The number and scope of these requirements are increasing. Failure to comply with applicable federal, state and foreign medical device laws and regulations may harm our business, financial condition and results of operations.
We are also subject to a variety of other laws and regulations relating to, among other things, environmental protection and work place safety. See "Business -- Government regulation."
If we become subject to product liability claims, we may be required to pay damages that exceed our insurance coverage.
Our business exposes us to potential product liability claims that are inherent in the testing, production, marketing and sale of human diagnostic and therapeutic products. While we believe that we are reasonably insured against these risks, there can be no assurance that we will be able to obtain insurance in amounts or scope sufficient to provide us with adequate coverage against all potential liabilities. A product liability claim or recall could have a material adverse effect on our business, financial condition and results of operations.
Risk factors
Some of our programs are partially supported by government grants, which may be withdrawn.
We have received and may continue to receive funds under United States government research and technology development programs. Funding by the government may be significantly reduced in the future for a number of reasons. For example, some programs are subject to a yearly appropriations process in Congress. Additionally, we may not receive funds under existing or future grants because of budgeting constraints of the agency administering the program. We cannot assure you that we will receive significant funding under government grants.
Because our revenues are received principally from life sciences companies and government and research institutes, the capital spending policies of these entities have a significant effect on the demand for our products.
Our customers include pharmaceutical, biotechnology, chemical and industrial companies, and the capital spending policies of these companies can have a significant effect on the demand for our products. These policies are based on a wide variety of factors, including the resources available for purchasing research equipment, the spending priorities among various types of research equipment and the policies regarding capital expenditures during recessionary periods. Any decrease in capital spending by life sciences companies could have a material adverse effect on our business, financial condition and results of operations.
A portion of our sales have been to universities, government research laboratories, private foundations and other institutions, where funding is dependent on grants from government agencies such as the National Institutes of Health. The funding associated with approved NIH grants for instrumentation generally becomes available at particular times of the year, as determined by the government. Although research funding has increased during the past several years, grants have, in the past, been frozen for extended periods or have otherwise become unavailable to various institutions, sometimes without advance notice. Furthermore, increasing political pressures in the United States to reduce or eliminate budgetary deficits may result in reduced allocations to the NIH and the other government agencies that fund research and development activities. If government funding, especially NIH grants, necessary to purchase our products were to become unavailable to researchers for any extended period of time or if overall research funding were to decrease, our business, financial condition and results of operations could be materially adversely affected.
If third-party payors increasingly restrict payments for health care expenses, we may experience reduced sales which would hurt our business and our business prospects.
Third-party payors, such as government entities, health maintenance organizations and private insurers, are restricting payments for health care. These restrictions may decrease demand for our products and the price we can charge. Increasingly, Medicaid and other third-party payors are challenging the prices charged for medical services, including clinical diagnostic tests. They are also attempting to contain costs by limiting coverage and the reimbursement level of tests and other health care products. Without adequate coverage and reimbursement, consumer demand for tests will decrease. Decreased demand could cause sales of our products, and sales and services by our strategic partners, to fall. In addition, decreased demand could place pressure on us or our strategic partners to lower prices on these products or services, resulting in lower margins. Reduced sales or margins by us or our strategic partners would hurt our business, profitability and business prospects.
Risk factors
RISKS RELATED TO THIS OFFERING
Our products have lengthy sales cycles, which could cause our operating results to fluctuate significantly from quarter to quarter.
The sale of bioassay testing devices typically involves a significant technical evaluation and commitment of capital by customers. Accordingly, the sales cycle associated with our products is expected to be lengthy and subject to a number of significant risks, including customers' budgetary constraints and internal acceptance reviews that are beyond our control. Due to this lengthy and unpredictable sales cycle, our operating results could fluctuate significantly from quarter to quarter. We expect to continue to experience significant fluctuations as a result of a variety of factors, many of which are outside of our control. The following factors could affect our operating results:
.market acceptance of our products;
.the timing and willingness of strategic partners to commercialize our products which would result in royalties;
.expiration of contracts with strategic partners or government research grants, which may not be renewed or replaced; and
.general and industry specific economic conditions, which may affect our collaborative partners' research and development expenditures.
A large portion of our expenses, including expenses for facilities, equipment and personnel, are relatively fixed. Accordingly, if revenues decline or do not grow as anticipated, we might not be able to correspondingly reduce our operating expenses. In addition, we plan to significantly increase operating expenses in 2000. Failure to achieve anticipated levels of revenues could therefore significantly harm our operating results for a particular fiscal period.
Due to the possibility of fluctuations in our revenues and expenses, we believe that quarter-to-quarter comparisons of our operating results are not a good indication of our future performance. Our operating results in some quarters may not meet the expectations of stock market analysts and investors. In that case, our stock price would probably decline.
Our stock price could be volatile, and your investment could suffer a decline in value.
The trading price of our common stock is likely to be highly volatile and could be subject to wide fluctuations in price in response to various factors, many of which are beyond our control, including:
.actual or anticipated variations in quarterly operating results;
.announcements of technological innovations by us or our competitors;
.new products or services introduced or announced by us or our competitors;
.changes in financial estimates by securities analysts;
.conditions or trends in the biotechnology and pharmaceutical industries;
Risk factors
.announcements by us of significant acquisitions, strategic partnerships, joint ventures or capital commitments;
.additions or departures of key personnel; and
.sales of our common stock.
In addition, the stock market in general, and the Nasdaq National Market and the market for technology companies in particular, has experienced significant price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of those companies. Further, there has been particular volatility in the market prices of securities of life sciences companies. These broad market and industry factors may seriously harm the market price of our common stock, regardless of our operating performance. In the past, following periods of volatility in the market price of a company's securities, securities class action litigation has often been instituted. A securities class action suit against us could result in substantial costs, potential liabilities and the diversion of management's attention and resources, which could harm our business.
We may invest or spend the proceeds of this offering in ways with which you may not agree.
We will retain broad discretion over the use of proceeds from this offering. You may not agree with how we spend the proceeds, and our use of the proceeds may not yield a significant return or any return at all. We intend to use a majority of the proceeds from this offering to fund our operations, including continued development and manufacturing of existing products as well as research and development of additional products, hiring additional personnel and expanding our facilities to be able to meet the needs of our growing business, to acquire or invest in products, technologies or companies, and for general corporate purposes, including working capital. Because of the number and variability of factors that determine our use of the net proceeds from this offering, we cannot assure you that these uses will not vary substantially from our currently planned uses. Until we use the net proceeds of this offering for the above purposes, we intend to invest the funds in short-term, investment grade, interest-bearing securities.
There may not be an active, liquid trading market for our common stock.
Prior to this offering, there has been no public market for our common stock. We cannot assure you that an active trading market for our common stock will develop following this offering. You may not be able to sell your shares quickly or at the market price if trading in our stock is not active. The initial public offering price will be determined by negotiations between us and representatives of the underwriters based upon a number of factors. The initial public offering price may not be indicative of prices that will prevail in the trading market. See "Underwriting" for more information regarding our arrangement with the underwriters and the factors considered in setting the initial public offering price.
Our principal stockholders, directors and executive officers will own approximately % of our common stock, which may prevent new investors from influencing corporate decisions.
After this offering, our stockholders who currently own over 5% of our common stock, our directors and executive officers will beneficially own approximately % of our outstanding common stock or % if the underwriters exercise their over-allotment option in full. These stockholders will be able to exercise significant influence over all matters requiring stockholder approval, including the election of directors and the approval of significant corporate transactions. This concentration of ownership may also delay or prevent a change in control of the company even if beneficial to our stockholders. See "Principal stockholders" for additional information on the concentration of ownership of our common stock.
Risk factors
Future sales of our common stock may depress our stock price.
The market price of our common stock could decline as a result of sales of
substantial amounts of our common stock in the public market after the closing
of this offering, or the perception that these sales could occur. In addition,
these factors could make it more difficult for us to raise funds through future
offerings of common stock. There will be shares of common stock outstanding
immediately after this offering, or shares if the underwriters exercise
their over-allotment option in full. All of the shares sold in the offering
will be freely transferable without restriction or further registration under
the Securities Act, except for any shares purchased by our "affiliates," as
defined in Rule 144 of the Securities Act. The remaining 10,753,122 shares of
common stock outstanding will be "restricted securities" as defined in Rule
144. These shares may be sold in the future without registration under the
Securities Act to the extent permitted by Rule 144 or other exemptions under
the Securities Act.
After this offering, we intend to register approximately shares of common stock which are reserved for issuance upon exercise of options granted under our stock option plan. Once we register these shares, they can be sold in the public market upon issuance, subject to restrictions under the securities laws applicable to resales by affiliates. See "Shares eligible for future sale."
You will experience immediate and substantial dilution.
The initial public offering price of our common stock is expected to be substantially higher than the net tangible book value per share of our common stock. Therefore, if you purchase shares of our common stock in this offering, you will incur immediate and substantial dilution of approximately $ in the pro forma net tangible book value per share of common stock from the price per share that you pay for the common stock (based upon an assumed initial public offering price of $ per share). If the holders of outstanding options or warrants exercise those options or warrants at prices below the initial public offering price, you will incur further dilution.
We may need additional funding to support our operations.
We anticipate that our existing cash and cash equivalents, together with the net proceeds of this offering, will be sufficient to fund our currently planned operations through at least December 31, 2001. However, this expectation is based on our current operating plan, which could change as a result of many factors, and we could require additional funding sooner than anticipated. Our requirements for additional capital may be substantial and will depend on many factors, some of which are beyond our control, including:
.payments received or made under possible future strategic partner agreements;
.market acceptance of our products;
.continued progress of our research and development of our products;
.the cost of protection of patent and other intellectual property rights; or
.further development of production, marketing and sales capabilities.
We have no credit facility or other committed sources of capital. To the extent capital resources are insufficient to meet future capital requirements, we will have to raise additional funds to continue the development of our technologies. There can be no assurance that funds will be available on favorable
Risk factors
terms if at all. To the extent that additional capital is raised through the sale of equity or convertible debt securities, the issuance of those securities could result in dilution to our stockholders. Moreover, incurring debt financing could result in a substantial portion of our operating cash flow being dedicated to the payment of principal and interest on such indebtedness, could render us more vulnerable to competitive pressures and economic downturns and could impose restrictions on our operations. If adequate funds are not available, we may be required to curtail operations significantly or to obtain funds through entering into collaboration agreements on unattractive terms. Our inability to raise capital would have a material adverse effect on our business, financial condition and results of operations.
We have never paid cash dividends.
We have never paid cash dividends on our capital stock and do not anticipate paying any cash dividends in the foreseeable future.
Anti-takeover provisions in our charter and bylaws and Delaware law could make a third-party acquisition of us difficult.
Our restated certificate of incorporation and bylaws contain provisions that could make it more difficult for a third party to acquire us, even if doing so would be beneficial to our stockholders. These provisions could limit the price that investors might be willing to pay in the future for shares of our common stock. We are also subject to certain provisions of Delaware law that could delay, deter or prevent a change in control of us. See "Description of securities -- Anti-takeover effects of provisions of the certificate of incorporation, bylaws and Delaware law."
Forward-looking information
Some of the statements under "Prospectus summary," "Risk factors," "Management's discussion and analysis of financial condition and results of operations," "Business" and elsewhere in this prospectus constitute forward- looking statements. These statements relate to future events or our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our or our industry's actual results, levels of activity, performance or achievements to be materially different from those expressed or implied by any forward-looking statements. Some of these factors are listed under "Risk factors" and elsewhere in this prospectus. In some cases, you can identify forward-looking statements by terminology such as "may," "will," "should," "expects," "plans," "anticipates," "intends," "believes," "estimates," "predicts," "potential" or "continue" or the negative of these terms or other comparable terminology. These statements are only predictions. Actual events or results may differ materially. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of those statements. We are under no duty to update any of the forward-looking statements after the date of this prospectus to conform them to actual results.
Use of proceeds
We estimate that the net proceeds from the sale of the shares of common stock we are offering will be approximately $ million at an assumed initial public offering price of $ per share after deducting the estimated underwriting discounts and commissions and estimated offering expenses. If the underwriters' over-allotment option is exercised in full, we estimate that the net proceeds will be approximately $ million.
We currently intend to use the net proceeds to fund our operations, including continued development and manufacturing of existing products as well as research and development of additional products. In addition, we also intend to use a portion of the net proceeds to hire additional personnel and expand our facilities to be able to meet the growing needs of our business. Although we have no current plans, agreements or commitments with respect to any acquisition, we may, if the opportunity arises, use an unspecified portion of the net proceeds to acquire or invest in products, technologies or companies. We intend to use the balance of the net proceeds for general corporate purposes, including working capital. Our management may spend the proceeds from this offering in ways which the stockholders may not deem desirable.
The timing and amount of our actual expenditures will be based on many factors, including cash flows from operations and the growth of our business.
Until we use the net proceeds of this offering for the above purposes, we intend to invest the funds in short-term, investment grade, interest-bearing securities. We cannot predict whether the proceeds invested will yield a favorable return.
Dividend policy
We have never declared or paid any cash dividends on our capital stock. We anticipate that we will retain any earnings to support operations and to finance the growth and development of our business. Therefore, we do not expect to pay cash dividends in the foreseeable future. Any future determination relating to our dividend policy will be made at the discretion of our board of directors and will depend on a number of factors, including future earnings, capital requirements, financial conditions and future prospects and other factors the board of directors may deem relevant.
Capitalization
The following table sets forth our capitalization as of December 31, 1999:
.on an actual basis;
.on a pro forma basis to give effect to the conversion of 841,359 shares of our preferred stock outstanding as of the date this prospectus into 4,298,340 shares of common stock upon the closing of this offering; and
.on a pro forma as adjusted basis to give effect to the conversion of our preferred stock into common stock and the receipt of the estimated net proceeds from the sale of shares of common stock offered by this prospectus at an assumed initial public offering price of $ per share.
Pro Pro Forma
Actual Forma as adjusted
-------------------------------------------------------------------------------
(in thousands, except share
amounts)
Preferred stock, par value $0.001;
Authorized shares -- none actual, 5,000,000 pro
forma and pro forma as adjusted
Issued and outstanding shares -- none actual,
pro forma and pro forma as adjusted.......... $-- $-- $
Convertible preferred stock, par value $2.00;
Authorized shares -- 5,000,000 actual, pro forma
and pro forma as adjusted
Issued and outstanding shares -- 841,359 actual,
none pro forma and pro forma as adjusted..... 28,946 --
Common stock, par value $0.001;
Authorized shares -- 25,000,000 actual,
200,000,000 pro forma and pro forma as
adjusted
Issued and outstanding shares -- 6,454,782
actual, 10,753,122 pro forma and pro
forma as adjusted............................ 6 11
Warrants to purchase 262,500 shares of common
stock......................................... 180 180
Additional paid-in capital....................... 960 29,901
Deferred stock compensation...................... (69) (69)
Accumulated deficit.............................. (18,828) (18,828)
------- ------- --------
Total stockholders' equity...................... 11,195 11,195
------- ------- --------
Total capitalization............................ $11,195 $11,195 $
======= ======= ========
|
The table above does not include:
.1,684,980 shares of common stock issuable upon exercise of options outstanding at a weighted average price of $6.25 per share; and
. additional shares of common stock made available for future issuance under our 2000 Long-Term Incentive Plan.
To the extent that these options are exercised, there will be further dilution to new investors. See "Management -- Employee benefit plans."
Dilution
Our historical net tangible book value as of December 31, 1999 was approximately $11.2 million, or $1.73 per share, based on the number of common shares outstanding as of December 31, 1999. Historical net tangible book value per share is equal to the amount of our total tangible assets less total liabilities, divided by the number of shares of common stock outstanding as of December 31, 1999.
Our pro forma net tangible book value as of December 31, 1999 was approximately $11.2 million, or $1.04 per share, based on the pro forma number of shares outstanding as of December 31, 1999 of 10,753,122, calculated after giving effect to the automatic conversion of 841,359 shares of our preferred stock outstanding as of December 31, 1999 into 4,298,340 shares of our common stock.
Dilution in pro forma net tangible book value per share represents the difference between the amount per share paid by purchasers of shares of our common stock in this offering and the net tangible book value per share of our common stock immediately afterwards, after giving effect to the sale of shares in this offering. This represents an immediate increase in pro forma net tangible book value of $ per share to existing stockholders and an immediate dilution in pro forma net tangible book value of $ per share to new investors. The following table illustrates this per share dilution:
Assumed initial public offering price per share................. $
Historical net tangible book value per share as of December 31,
1999........................................................ $1.73
Decrease attributable to conversion of preferred stock......... (0.69)
-----
Pro forma net tangible book value per share as of December 31,
1999........................................................ 1.04
Increase attributable to the offering..........................
-----
Net tangible book value per share after the offering............
-------
Dilution per share to new investors............................. $
=======
|
The following table summarizes, on a pro forma basis as of December 31, 1999, after giving effect to this offering, the total number of shares of common stock purchased from us and the total consideration and the average price per share paid by existing stockholders and by new investors:
Shares purchased Total consideration Average price
Number Percent Amount Percent per share
--------------------------------------------------------------------------------
Existing stockholders.... 10,753,122 % $30,562,740 % $2.84
New investors............ $
---------- ----- ----------- -----
Total.................... 100% $ 100%
========== ===== =========== =====
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The tables and calculations above assume no exercise of outstanding options or warrants. As of December 31, 1999, there were:
.1,684,980 shares issuable upon the exercise of options outstanding as of a weighted average exercise price of $6.25 per share;
.262,500 shares issuable upon the exercise of warrants outstanding as of December 31, 1999 at a weighted average exercise price of $4.00 per share; and
Dilution
. additional shares available for future grant under our 2000 Long-Term Incentive Plan.
To the extent that these options or warrants are exercised, there will be further dilution to new investors. See "Management -- Employee benefit plans" for further information regarding our stock option plan and stock purchase plan.
If the underwriters exercise their over-allotment option in full, the following will occur:
.the percentage of shares of our common stock held by existing stockholders will decrease to approximately % of the total number of shares of our common stock outstanding after this offering;
.the number of shares of our common stock held by new public investors will increase to , or approximately % of the total number of shares of our common stock outstanding after this offering; and
.our pro forma net tangible book value will increase to $ per share to existing stockholders and our pro forma net tangible book value will be diluted by $ per share to new investors.
Selected financial data
The following selected financial data should be read in conjunction with the financial statements and the notes to such statements and "Management's discussion and analysis of financial condition and results of operations" included elsewhere in this prospectus. The statement of operations data for the years ended December 31, 1997, 1998 and 1999, and the balance sheet data as of December 31, 1998 and 1999, are derived from our financial statements which have been audited by Ernst & Young LLP, independent auditors, and are included elsewhere in this prospectus. The statement of operations data for the period from May 24, 1995 (inception) to December 31, 1995 and for the year ended December 31, 1996 and the balance sheet data as of December 31, 1995, 1996 and 1997 are derived from audited financial statements not included in this prospectus. Historical results are not necessarily indicative of the results to be expected in the future.
The pro forma net loss per share and shares used in computing pro forma net loss per share are calculated as if all of our convertible preferred stock was converted into shares of our common stock on the date of their issuance.
Period from
May 24, 1995
(inception) to
December 31, Year Ended December 31,
1995 1996 1997 1998 1999
Statement of operations
data (In thousands, except per share data)
-------------------------------------------------------------------------------
Revenue:
Product ................. $-- $-- $99 $386 $2,606
Grant ................... -- -- -- -- 506
------ ------- ------- ------- -------
Total revenue........... -- -- 99 386 3,112
Costs of product revenue.. -- -- 10 88 1,172
------ ------- ------- ------- -------
Gross margin.............. -- -- 89 298 1,940
Operating expenses:
Research and
development........... 58 1,036 1,594 3,611 5,741
Selling, general and
administrative........ 216 731 1,426 2,566 4,422
Amortization of deferred
stock and stock
compensation expense.. -- -- -- -- 509
------ ------- ------- ------- -------
Total operating
expenses............. 274 1,767 3,020 6,177 10,672
------ ------- ------- ------- -------
Loss from operations...... (274) (1,767) (2,931) (5,879) (8,732)
Interest income........... 4 7 178 283 284
------ ------- ------- ------- -------
Net loss.................. $(270) $(1,760) $(2,753) $(5,596) $(8,448)
====== ======= ======= ======= =======
Net loss per share, basic
and diluted............ $(0.12) $(0.33) $(0.44) $(0.87) $(1.31)
====== ======= ======= ======= =======
Shares used in computing
net loss per share,
basic and diluted...... 2,221 5,307 6,295 6,415 6,447
Pro forma net loss per
share, basic and
diluted................ $(0.84)
=======
Shares used in computing
pro forma net loss per
share, basic and
diluted................ 10,060
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Selected financial data
As of December 31,
1995 1996 1997 1998 1999
Balance sheet data (In thousands)
-------------------------------------------------------------------------------
Cash and cash equivalents.................... $229 $14 $2,821 $8,537 $4,083
Working capital (deficit).................... 138 (249) 2,761 8,391 10,426
Total assets................................. 286 154 3,119 9,590 12,566
Total stockholders' equity (deficit)......... 196 (110) 2,964 9,190 11,195
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Management's discussion and analysis of financial condition and results of operations
The following discussion of our financial condition and results of operations should be read in conjunction with the financial statements and the notes to those statements included elsewhere in this prospectus. This discussion may contain forward-looking statements that involve risks and uncertainties. As a result of many factors, such as those set forth under "Risk factors" and elsewhere in this prospectus, our actual results may differ materially from those anticipated in these forward-looking statements.
Since our inception, we have incurred significant losses and, as of December 31, 1999, we had an accumulated deficit of $18.8 million. We anticipate incurring additional losses, which may increase, for the foreseeable future. Prior to 1999, we were considered a development stage company.
We commenced marketing our first generation system, the Luminex R/O system, in 1997 and our second generation technology, the LabMAP system, in 1999. Revenue on sales of our products is recognized when persuasive evidence of an agreement exists, delivery has occurred, the fee is fixed and determinable and collectibility is probable. We expect that each system will generate a recurring revenue stream from the sale of consumable products. Grant revenue is recorded as the research expenses relating to the grant are incurred, provided that the amounts received are not refundable if the research is not successful. In addition, we may generate royalty revenue from some of our strategic partners as they sell products incorporating our technology or provide services to third parties using our technology.
Our expenses have consisted primarily of costs incurred in research and development, manufacturing scale-up and business development and from general and administrative costs associated with our operations. We expect our research and development expenses to increase in the future as we continue to develop our products. Also, our selling and marketing expenses will increase as we commercialize our products, and general and administrative expenses will increase as we expand our facilities and assume the obligations of a public reporting company.
We have a limited history of operations. We anticipate that our quarterly results of operations will fluctuate for the foreseeable future due to several factors, including market evaluation and acceptance of current or new products, which may result in a lengthy sales cycle, patent conflicts, the introduction of new products by our competitors, the timing and extent of our research and development efforts, and the timing of significant orders. Our limited operating history makes accurate predictions of future operations difficult or impossible.
RESULTS OF OPERATIONS
Years ended December 31, 1999 and 1998
Revenue
Revenue increased to $3.1 million in 1999 from $386,000 in 1998. The increase
was primarily attributable to the sale of Luminex 100 systems, which were
introduced in the first quarter of 1999, and Luminex XY Platforms, which were
introduced in the fourth quarter of 1999. Revenue from the sale of microspheres
increased $314,000 in conjunction with sales of the Luminex 100 and the
Management's discussion and analysis of financial condition and results of operation
development of additional applications. Offsetting this increase was a decrease in sales of the Luminex R/O system of $221,000 in 1999, which is consistent with the phase-out of the Luminex R/O system and the introduction of the higher-priced Luminex 100.
Also included in 1999 revenue was $506,000 associated with a government grant that commenced on January 1, 1999. The grant was suspended as of September 30, 1999 when our joint venture partner withdrew due to a change in its business strategy. We are in the process of evaluating the work plan and budget and may resume the project with a new partner. We had no grant revenue in 1998.
Cost of product revenue
Cost of product revenue increased to $1.2 million in 1999 from $88,000 in 1998.
The increase was primarily attributable to the increase in the number of units
of the Luminex 100 sold in 1999 and the higher per unit cost of the Luminex
100, relative to the Luminex R/O system.
Research and development expenses
Research and development expenses increased to $5.7 million in 1999 from $3.6
million in 1998. These expenses include salaries and related costs of research
and development personnel as well as the costs of consultants, parts and
supplies associated with research and development projects. The increase was
primarily attributable to an increase of $1.0 million in salaries and related
personnel costs from the addition of employees during the year as well as
additional costs to complete the development of the Luminex 100 system. Also,
included in 1999 were costs of $607,000 associated with a government grant.
Selling, general and administrative expenses Selling, general and administrative expenses increased to $4.4 million in 1999 from $2.6 million in 1998. These expenses consist primarily of salaries and related costs for executive, sales and marketing, finance and other administrative personnel as well as the costs of facilities, insurance, trade shows and legal support. The increase was attributable to consulting and professional fees primarily related to the filing of patent applications that were $244,000 higher than in 1998, a $662,000 increase in salary costs and a $262,000 increase in facilities costs due to the leasing of additional manufacturing space early in 1999.
Amortization of deferred stock and stock compensation expense Amortization of deferred stock and stock compensation expense was $509,000 in 1999. Deferred stock compensation represents the difference between the deemed fair value of our common stock and the exercise price of options at the date of grant. These amounts are being amortized ratably over the vesting periods. The increase was primarily attributable to the issuance of stock options to our consultants.
Interest income
Interest income remained relatively unchanged between 1998 and 1999.
Income taxes
As of December 31, 1999, we had federal net operating loss carryforwards of
$17.1 million. As of December 31, 1999, we have recorded a full valuation
allowance for our existing net deferred tax assets due to uncertainties
regarding their realization. We also have federal research tax credit
carryforwards of $536,000. The federal net operating loss and credit
carryforwards begin to expire in 2010, if not utilized. Utilization of the
federal net operating losses and credit carryforwards may be limited by the
change of ownership provisions contained in Section 382 of the Internal Revenue
Code. However, we do not believe these limitations will materially impact their
use.
Management's discussion and analysis of financial condition and results of operation
Years ended December 31, 1998 and 1997
Revenue
Revenue increased to $386,000 in 1998 from $99,000 in 1997. The increase was
primarily attributable to higher unit sales of Luminex R/O systems in 1998
compared with 1997.
Cost of product revenue
Cost of product revenue increased to $88,000 in 1998 from $10,000 in 1997. The
increase was primarily attributable to increased unit sales of Luminex R/O
systems in 1998 compared to 1997.
Research and development expenses
Research and development expenses increased to $3.6 million in 1998 from $1.6
million in 1997. The increase was primarily attributable to higher staffing
levels, consulting and professional fees and usage of parts and supplies for
the development purposes.
Selling, general and administrative expenses Selling, general and administrative expenses increased to $2.6 million in 1998 from $1.4 million in 1997 primarily attributable to an increase in facilities costs, consulting and professional fees and depreciation and amortization.
Interest income
Interest income increased to $283,000 in 1998 from $178,000 in 1997. The
increase was attributable to the higher average cash and cash equivalent
balances resulting from the $11.3 million net proceeds from the sale of our
Series C preferred stock, in mid 1998.
LIQUIDITY AND CAPITAL RESOURCES
We have funded our operations principally with $30.6 million of private equity financings, $28.9 million of which came from a series of five preferred stock offerings over the period 1996 through 1999 as follows:
Preferred stock transactions
No. of
Year Shares Amount
(dollar amounts in
Issue millions)
-------------------------------------------------------------------------------
Preferred Stock, Series A.................................. 1996 457,250 $0.9
Preferred Stock, Series B.................................. 1997 150,000 6.0
Preferred Stock, Series C.................................. 1998 151,571 12.1
Preferred Stock, Series D.................................. 1999 57,538 6.9
Preferred Stock, Series E.................................. 1999 25,000 3.0
-----
$28.9
=====
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Each share of Series A Preferred Stock is convertible into one share of our common stock. Each share of our Series B, C, D and E Preferred Stock is convertible into ten shares of our common stock.
At December 31, 1999, cash, cash equivalents and short-term investments totaled $9.0 million compared to $8.5 million and $2.8 million at December 31, 1998 and 1997, respectively. Our cash reserves are held in a variety of short term, interest-bearing instruments including high-grade corporate bonds, commercial paper, US government backed securities and money market accounts.
Management's discussion and analysis of financial condition and results of operation
Cash used in operations was $8.4 million for the year ended December 31, 1999 compared with $5.1 million and $2.9 million for the years ended December 31, 1998 and 1997, respectively. The net loss for 1999 of $8.4 million was partially offset by non-cash charges for depreciation, amortization and stock compensation of $1.0 million and an increase in deferred revenue of $646,000. Other factors contributing to the increase in operating cash used were an increase in accounts receivable of $1.2 million and inventory increases of $616,000.
Our purchases of property and equipment increased to $1.1 million in 1999, from $399,000 in 1998. The increase was related to machinery, equipment and computer equipment purchased to meet our operating equipment requirements, to provide computer equipment for our new employees and to upgrade our network to accommodate the increased rate of activity.
We expect to have negative cash flow from operations through at least 2000. We expect to incur increasing research and development expenses, including expenses related to additions to personnel and production and commercialization efforts. Our future capital requirements will depend on a number of factors, including our success in developing markets for our products, payments received or made under possible future strategic agreements, the availability of government research grants, continued progress of our research and development of potential products, the timing and outcome of regulatory approvals, the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims and other intellectual property rights, the need to acquire licenses to new technology, the status of competitive products and the availability of other financing. We believe our existing cash, cash equivalents and short-term investments, together with the net proceeds of this offering, will be sufficient to fund our operating expenses and capital equipment requirements through at least December 31, 2001.
We have no credit facility or other committed sources of capital. To the extent our capital resources are insufficient to meet future capital requirements, we will need to raise additional capital or incur indebtedness to fund our operations. There can be no assurance that additional debt or equity financing will be available on acceptable terms, if at all. If adequate funds are not available, we may be required to delay, reduce the scope of or eliminate our research and development programs, reduce our commercialization efforts or obtain funds through arrangements with collaborative partners or others that may require us to relinquish rights to certain technologies or products that we might otherwise seek to develop or commercialize.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our interest income is sensitive to changes in the general level of US interest rates, particularly since the majority of our investments are in short-term instruments. Due to the nature of our short-term investments, we have concluded that there is no material market risk exposure.
Inflation
We do not believe that inflation has had a material adverse impact on our business or operating results during the periods presented.
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 is effective for fiscal years beginning after June 15, 2000. SFAS No. 133 requires that all derivative instruments be recorded on the balance sheet
Management's discussion and analysis of financial condition and results of operation
at their fair value. Changes in the fair value of derivatives are recorded each period in current earnings or other comprehensive income. We do not expect that the adoption of SFAS No. 133 will have a material impact on our financial statements because we do not currently hold any derivative instruments.
On March 31, 1999, the FASB issued an exposure draft entitled "Accounting for Certain Transactions Involving Stock Compensation," which is a proposed interpretation of APB Opinion No. 25 which has an effective date for certain transactions of December 15, 1998. However, the exposure draft has not been finalized. Once finalized and issued, the current accounting practices for transactions involving stock compensation may need to change and such changes could effect our future earnings.
In December 1999, the Securities and Exchange Commission released Staff Accounting Bulletin No. 101, Revenue Recognition in Financial Statements, which provides guidance on the recognition, presentation and disclosure of revenue in financial statements. The application of SAB No. 101 did not have a material impact on our financial statements.
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OVERVIEW
Luminex Corporation has developed, manufactures and markets a proprietary
technology platform that simplifies biological testing for the life sciences
industry. This industry depends on a broad range of tests, called bioassays, to
discover new drugs, identify new genes or simply monitor blood cholesterol
levels. The LabMAP system is able to simultaneously perform up to 100 bioassays
on a single drop of fluid. This is accomplished with a compact instrument, the
Luminex 100, that reads biological tests taking place on the surface of
microscopic plastic beads called microspheres. The Luminex 100 combines this
miniaturized bioassay capability with diode lasers, digital signal processors
and proprietary software to create a system offering significant advantages in
speed, precision, flexibility and cost. We believe our LabMAP technology is
broadly applicable in the fields of drug discovery, clinical diagnostics,
genetic analysis, biomedical research and pharmacogenomics.
We began marketing the current generation of LabMAP in 1999. As of January 31, 2000, 63 life sciences customers have purchased 100 LabMAP systems. Our customers include GlaxoWellcome plc, SmithKline Beecham Corporation, Eli Lilly & Company, Laboratory Corporation of America, Genentech Inc., Abbott Laboratories, Life Technologies Inc., Bio-Rad Laboratories, Inc., Lawrence Livermore National Laboratories, Mayo Clinic, Centers for Disease Control and Prevention and National Institutes of Health.
MARKET OPPORTUNITY
Background
Bioassays are used extensively throughout the life sciences industry to detect the presence of certain biochemicals, proteins or genes in a sample. They are broadly used in drug discovery, genetic analysis, pharmacogenomics, clinical diagnostics and general biomedical research. For example, bioassays can be used to:
.measure the affinity between a chemical compound and a disease target for drug discovery and development;
.assist physicians in prescribing the appropriate drug therapy to match the patient's unique genetic makeup, a process known as pharmacogenomics;
.detect genetic variations, such as single nucleotide polymorphisms or SNPs; and
.measure the presence and quantity of biochemicals in blood to assist physicians in diagnosing, treating and monitoring pathological conditions such as heart attack or diabetes.
Bioassays are either developed internally to meet the specific needs of the laboratory or purchased in the form of an off-the-shelf test kit or customized service. According to industry reports, the global market for tools used to develop and perform bioassays is estimated to have been approximately $27.5 billion in 1998 and is expected to grow at an annual rate of 8%.
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Markets description
Drug discovery and development
The bioassays employed by the pharmaceutical industry vary in design and
complexity throughout the drug discovery and development process. Simple
bioassays are used to screen a pharmaceutical company's library of chemical
compounds against disease targets. More complex ones are then used in
confirmatory testing as well as in lead optimization. Finally, predictive
toxicity bioassays are used to test the safety of the potential drug.
According to industry reports, the global market for tools to develop and perform bioassays for the drug discovery and development industry is estimated to have been approximately $7.2 billion in 1998 and is expected to continue to grow at an annual rate of 14%. There are a number of factors driving this growth, including:
.Increased research and development spending. According to industry reports, pharmaceutical and biotechnology companies spent in excess of $48 billion worldwide in 1998 on drug discovery and development and are expected to increase spending at an annual rate of 15%. This is the result of increasing pressure to expand the product pipeline, find new applications for existing or failed drugs and shorten the drug discovery process in order to maximize the benefits of the patent protection period. As a result, we believe the number of identified disease targets for drug discovery will rise. According to industry reports, each pharmaceutical and biotechnology company expects to screen, on average, 27 targets in 2001, up from 17 in 1999.
.A shift in research and development focus from gene sequencing to functional genomics and proteomics. Recently, pharmaceutical companies have focused on the sequence of the human genome, driven by the objectives of the Human Genome Project and the activities of such companies as Celera Genomics Group and Incyte Pharmaceuticals. Pharmaceutical and biotechnology companies are now focusing a major part of their research and development efforts on identifying the role those genes serve in biological processes and how variations in gene sequences may result in a predisposition for a disease or an adverse reaction to a drug. These activities are referred to as functional genomics. Since proteins serve as the mechanism through which genes control cellular activities, the study of proteins, or proteomics, is expected to intensify. We expect this shift in focus to lead to a dramatic rise in the number of identified disease targets and related bioassays.
Clinical diagnostics
Bioassays are broadly used in the clinical diagnostics market. These bioassays
are commonly referred to as in vitro diagnostics, or IVD, and are used to
detect the presence and quantity of certain substances in body fluids, such as
whole blood, plasma, serum, urine and saliva, as well as cells and tissues.
Applications range from the simple detection of illegal drugs in urine to the
screening and diagnosis of genetic diseases, infectious diseases and cancer.
These applications are performed in a number of different clinical settings,
including hospital laboratories, commercial laboratories and physicians'
offices/ambulatory care centers. There are more than 150,000 hospital,
commercial clinical and physician office laboratories registered with the
Health Care Financing Administration (HCFA) in the United States.
According to an industry report, the global market for IVD products is estimated to have been approximately $18 billion in 1998 and growing at an annual rate of 4%. We believe a number of industry trends exist that will drive this growth, including:
.An increase in disease targets from the success of drug discovery efforts. We believe the rise in research and development spending by pharmaceutical and biotechnology companies will lead to the
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identification of a greater number of disease targets. These targets may be assayed during drug discovery and later developed as IVD products for disease diagnosis and monitoring. For example, the HIV viral load bioassay was originally used to evaluate potential drug candidates and is now the primary tool for patient monitoring.
.Evolution of pharmacogenomics. There are many studies investigating genetic variation among individuals, including SNPs, and their linkage to disease. These studies are principally funded by a consortium of pharmaceutical companies seeking to correlate the results of an individual's SNP profile with drug response. In doing so, pharmaceutical companies are attempting to discover new drugs and revive such potential blockbuster drugs as Rezulin, an extremely powerful anti-diabetic with dangerous side effects in a small fraction of users. Pharmacogenomics will allow a physician to tailor a diabetic patient's drug therapy after bioassay of his or her genetic make-up.
.Consolidation among the clinical diagnostic companies. As a result of industry consolidation, clinical diagnostic companies have been re-engineering the laboratory in order to streamline processes, improve productivity and lower costs. Attempts to integrate the many instruments employed by these laboratories have been part of this process. We believe, however, that clinical laboratories will ultimately prefer a single instrument that can perform the required bioassays.
.Evolution of disease-specific test panels. Traditionally, health care providers have focused on a single target of a particular disease. Rarely, though, are diseases confined to a single, isolated molecular abnormality. For example, the predictive value of a cholesterol test is increased significantly when the HDL and LDL levels are determined. More recently, physicians have added homocysteine and C-reactive protein levels to the risk profile for heart disease. We believe clinical laboratories will demand a system that can perform all of these tests simultaneously from a single sample in a simple, cost effective format.
Biomedical research
Biomedical research is focused on understanding biological processes at the
molecular level. Through an understanding of such processes, scientists can
better characterize disease, a critical first step in designing drug therapies.
The National Institutes of Health provides over $12 billion annually in funding
to more than 50,000 scientists. These scientists work in the laboratories of
universities and other not-for-profit research institutions. The pharmaceutical
and biotechnology industries also fund significant research.
According to industry reports, the global market for bioassays in biomedical research is estimated to have been approximately $2.3 billion in 1998 and growing at an annual rate of 13%. We believe there are a number of industry trends that will drive this growth, including:
.Increased research and development spending by pharmaceutical companies. Pharmaceutical companies have a long history of collaborating with academic institutions to study biological processes at the molecular and cellular level. As these collaborations increase and diversify in focus, we believe the number of bioassays performed will rise.
.Increased demand for SNP studies. Academic and not-for-profit institutions have played a major role in studying SNPs in the population. The SNP consortium, a collaboration of academic, not-for-profit research institutions and pharmaceutical companies, has announced an effort to identify over 300,000 SNPs, some of which may be correlated with disease. As a result, we anticipate that demand for SNP detection bioassays will increase.
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Current assay development technologies and their limitations
The differing bioassay needs of life sciences laboratories have led to the development of specialized techniques and instrumentation. As a result, most of these laboratories have become highly compartmentalized. For example, clinical testing facilities are organized into functional groups, such as chemistry, microbiology, immunology and serology. Similarly, pharmaceutical laboratories are separated by disease target, such as cancer and hypertension, as well as by the stages of the drug discovery process, from initial bioassay development to toxicology. This has created inefficiencies in laboratories since they must now purchase multiple instruments, often from different vendors, to meet their testing needs. This limits the laboratories' ability to standardize bioassay techniques, operator training and hardware maintenance.
While advances in bioassay technologies have delivered new capabilities, most remain highly specialized and reinforce the problems associated with compartmentalization.
The table below briefly describes the key bioassay technologies in the life sciences industry and what we consider to be their comparative advantages and disadvantages.
Key technologies Description Markets served Advantages Disadvantages
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BioChips High-density arrays Biomedical .Performs multiple .High equipment cost
of DNA fragments research tests on a single .High cost per test
attached to a flat platform .Fixed
glass or silicon surface .High throughput configuration/inflexible
.Limited format--can
only perform genetic
bioassays
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Clinical Automated test-tube Clinical .High throughput .High equipment cost-
Immuno-analyzers based platform diagnostics .Reproducible .High cost per test
.Perform large number .Requires large sample
of individual tests volume
.High maintenance costs
.Limited format -- can
only perform
immunologic bioassays
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Gels and Blots Physical separation of Clinical .Low equipment cost . Labor intensive
analytes for diagnostics .Performs multiple .Low throughput
visualization and biomedical bioassays .Cannot perform
research simultaneously enzymatic assays
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Microarrays Low-density arrays Biomedical .Performs multiple . High equipment cost
of DNA fragments research bioassays .Low throughput
attached to a flat simultaneously .Limited format--can
glass or silicon surface .Flexible only perform genetic
configuration bioassays
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Microfluidics chips Miniaturized liquid Biomedical .Low sample volume .High cost per test
handling system research .Low reagent volume .Fixed
on a chip .Performs multiple configuration/Inflexible
tests
simultaneously
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Microtiter based assays Plastic trays with Drug discovery, .Ease of use .High sample volume
discrete wells in which clinical .High throughput .Fixed configuration
assays are fixed diagnostics and .Reproducible .High reagent costs
biomedical .Broad formats .Single test per well
research
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THE LUMINEX SOLUTION
Our solution is to provide a single platform, the LabMAP technology, that can perform a wide range of bioassays in a cost-effective manner. Many technologies are available to perform bioassays in the niche markets that comprise the life sciences industry, all of which are accurate, sensitive and reliable. The LabMAP system meets these requirements while also providing the following key features critical to its function as a universal bioassay platform:
Multi-analyte/multi-format
LabMAP technology is designed to simultaneously perform from one to 100
distinct bioassays on a single sample. Unlike existing technologies that are
capable of performing only one type of bioassay, LabMAP can perform a broad
range of enzymatic, genetic and immunologic tests on a single instrumentation
platform. For example, the system could perform 100 immunologic allergy tests
using a single blood sample, while the next bioassay tested by the instrument
could be a complex genetic SNP panel.
Flexibility/scalability
LabMAP technology allows flexibility in customizing test panels. These panels
can be modified to include new bioassays simply by adding additional
microsphere sets. It is also scalable. Whether producing one million or just 10
microsphere-based tests, there is no change in the manufacturing process or the
required labor. The system remains cost-effective for the smallest and largest
laboratories.
Throughput
Our technology's current ability to perform up to 100 tests on a single sample
permits efficient use for high throughput applications. Throughput can be
further enhanced using the Luminex XY Platform, which permits 9,600 unattended
tests to be performed in less than an hour. A high throughput version of the
Luminex 100 being developed, the Luminex HTS, can be interfaced with automated
liquid handling equipment offered by several manufacturers to perform over
15,000 bioassays per hour.
Ease of use
Most LabMAP bioassays are simple to perform. A test sample, such as a drop of
blood, is added to a reagent solution containing microspheres and then
analyzed. Our LabMAP technology incorporates proprietary software to automate
all aspects of data acquisition and analysis in real-time. Results are provided
without the need for sophisticated data interpretation and can be directly
downloaded into a user's laboratory information system. The Luminex XY Platform
further simplifies use by enabling walk-away capability through automated
sample handling.
Low cost
We have designed the LabMAP system to be relatively inexpensive to manufacture
and utilize. Because the Luminex 100 is manufactured using many off-the-shelf
electronic components, such as diode lasers and digital signal processors, our
products have a comparatively low acquisition cost. In addition, microsphere-
based bioassays are inexpensive compared to test tubes, microtiter wells or
biochips.
STRATEGY
Our goal is to establish LabMAP technology as the industry standard for performing bioassays. To achieve this goal, we have implemented the following strategy:
Focus on large, fast-growing sectors -- We will continue to focus our commercialization efforts on large and fast-growing sectors of the life sciences industry. We have targeted major pharmaceutical companies,
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large clinical laboratories, in vitro diagnostic manufacturers and major medical institutions for our principal marketing efforts. We believe these customers provide the greatest opportunity for maximizing the use of LabMAP technology and that early adoption by these industry leaders will promote wider market acceptance.
Continue to develop strategic partnerships -- We intend to broaden and accelerate market acceptance of LabMAP technology by continuing to enter into development, marketing and distribution partnerships with those leaders in the life sciences industry that we believe could convert core product lines to the Luminex platform. They may also develop new applications that take advantage of unique LabMAP capabilities. By leveraging our partners' strong market positions and utilizing their distribution channels and marketing infrastructure, we believe we can expand our installed base.
Provide an open platform -- The LabMAP system allows end users to configure their own tests without complex and expensive equipment. This open platform encourages the development of a wide range of bioassays and enables our strategic partners to deliver a variety of applications to end-users. The value of LabMAP technology to our customers increases with each new application.
Develop next generation products -- We are committed to expanding the LabMAP product line. Our research and development group is pursuing a number of projects, including expanding the number of tests that can be performed on a given sample and increasing the LabMAP system's throughput. We are also collaborating with leading industry participants and major medical institutions to develop additional LabMAP products.
Allow easy technology access -- We do not impose access fees on users of our technology. We believe maximum value is derived from the recurring revenue stream generated by widespread and frequent use. This is encouraged by a pricing structure that combines a low system acquisition cost with inexpensive consumables.
OUR LABMAP TECHNOLOGY
Our LabMAP technology combines several proven technologies with advanced digital signal processing and proprietary software. With our technology, discrete bioassays are performed on the surface of color-coded microspheres. These microspheres are read in a compact analyzer that utilizes lasers and high-speed digital signal processing to simultaneously identify the bioassay and measure its result.
Polystyrene microspheres, approximately the size of a biological cell, are a fundamental component of LabMAP technology. We purchase raw, undyed microspheres and, in a proprietary process, dye them in sets with varying intensities of red and infrared fluorescent dyes to achieve up to 100 distinct colors. The specific dye proportions permit each color-coded microsphere to be readily identified based on its fluorescent signature. Our customers create bioassays by attaching different biochemical reactants to each distinct microsphere set. The microsphere sets can then be combined in test panels as required by the user, with a current maximum of 100 tests per panel.
To conduct a bioassay, microspheres with attached reagents are mixed with a test sample. This mixture is then passed through the Luminex 100 instrument. The microspheres travel single file in a fluid stream through two laser beams. The first laser excites the internal dyes that are used to identify the microsphere set. The second laser excites a third fluorescent dye that is used to quantitate the result of the bioassay taking place on the surface of each individual microsphere. Our proprietary optics, digital signal processors and software record the fluorescent signature of each microsphere and compare the
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results to the known identity of each color-coded microsphere set. Simultaneously, the test is analyzed and the result displayed in real-time.
PRODUCTS
We generally sell our products as a system comprised of one or more instruments that use LabMAP consumables.
Instruments
Luminex 100
The Luminex 100 is a compact analyzer that integrates fluidics, optics and
digital signal processing to perform up to 100 bioassays simultaneously with a
single drop of fluid. By combining small diode lasers with digital signal
processors and microcontrollers, the Luminex 100 performs rapid, multi-analyte
profiles under the control of a Windows-based personal computer. The Luminex
100 analyzer is sold with a personal computer, LabMAP software and a starter
supply of microspheres for bioassay development. From market introduction
through January 31, 2000, we had sold 100 systems.
Luminex XY Platform
We also offer the Luminex XY Platform, which complements the Luminex 100 by
automating the sequential positioning of each well of a microtiter plate. This
permits a total of up to 9,600 unattended tests per plate to be performed in
less than an hour. It is designed to interface with robotic systems that
deliver these plates to the Luminex 100, allowing integration into fully
automated test centers. From market introduction through January 31, 2000, we
had sold 40 Luminex XY platforms.
Consumables
We use polystyrene microspheres in our LabMAP technology that are approximately 5.6 microns in size. We dye them using our proprietary method in up to 100 distinctly colored microsphere sets. Each can carry the reagents of an enzymatic, genetic or immunologic bioassay. Consumables also include sheath fluid and other relevant spare parts.
RESEARCH AND DEVELOPMENT
Our research and development program is devoted to advancing the capabilities of our LabMAP technology and expanding the number of its applications. As of January 31, 2000, we had approximately 45 engineers, scientists and technicians dedicated to research and development. In addition, we are collaborating with academic institutions and other companies to increase the breadth of LabMAP applications.
Our current projects include:
.expanding our multiple testing capabilities This effort is primarily driven by the pharmaceutical industry's demand for advanced genetic testing. In order to expand the number of tests per sample to 1,000, a more complex instrument will be required incorporating three lasers instead of the two contained in the Luminex 100. In addition, a third dye must be incorporated into the microspheres for classification purposes.
.developing a point-of-care version of LabMAP This version of the LabMAP system would be designed for the small clinic, ambulance and other non-laboratory environments where bringing
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testing closer to the patient delivers significant medical benefits. For example, an ambulance-based instrument could evaluate the multiple indicators of heart attack and forward this information to the hospital prior to patient arrival.
.developing a high throughput screening version of LabMAP The Luminex HTS is being developed to meet the ultra-high-throughput demands of some laboratories. This instrument is being designed to generate up to 400,000 individual bioassay results per day and will readily interface with a number of existing liquid handling systems.
Our current research collaborations include:
.major manufacturers of liquid handling robotic systems The goal of some laboratories in the pharmaceutical industry is to perform up to a million bioassays per day. We believe this could be achieved in a cost-effective manner by integrating existing high-throughput liquid handlers with three Luminex HTS systems. We are collaborating with major manufacturers of sophisticated liquid handling equipment to develop the interface with the Luminex HTS.
SALES AND MARKETING
Our sales and marketing strategy is designed to expand the installed base of LabMAP systems and generate recurring, high-margin revenues from royalties on bioassay kits and testing services that use our technology, as well as from the sale of microspheres. The key elements of our strategy include:
.a strategic partner program with leading life sciences companies to act as resellers of our products to facilitate rapid adoption;
.a direct sales effort to complement the strategic partner program; and
.an extensive customer service program.
Our marketing efforts are divided between identifying leading life sciences companies and internally generating new leads. We intend to utilize outside public relations and advertising firms to increase market awareness.
Strategic partner program
We intend to use strategic partners as our primary distribution channel in order to achieve broad market acceptance of our LabMAP technology. We believe our strategic partners will provide us with complementary capabilities in product development, regulatory expertise and sales and marketing. We intend to target leading life sciences companies with established bioassays that we believe could be converted onto our LabMAP platform. By leveraging our partners' customer relationships and distribution channels, we believe that we can achieve rapid market penetration without a large direct sales force. As a result, we can utilize our internal resources for technology development and customer support.
We have agreements with partners that contemplate the incorporation of LabMAP technology in their application-specific bioassay kits and services. Our partners sell these kits to medical laboratories, hospitals and other end-users that use standardized sample analysis and screening products and services. Our strategic partners also use our technology in performing services for third parties. Under
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these agreements, we have agreed to supply our partners with Luminex 100 systems and microspheres in amounts and at prices that are determined by mutual agreement. While our strategic partners are not required to purchase any minimum number of our systems or microspheres, the agreements obligate them to pay us specified transfer fees, as well as royalties based on revenues generated by kits and services using our technology. These agreements also include cross indemnities by our strategic partners and us for infringement of third party intellectual property rights and other specified costs and liabilities.
Direct sales
Direct sales are supported by a team of scientists with expertise in the pharmaceutical industry, clinical diagnostics and biomedical research. We intend to expand our direct and field sales staff in selected geographic locations as required by market demand.
Customer service
Customer service supports users through a comprehensive training program and a toll-free customer support hotline. If a system requires an upgrade or on-site repair, customer service will dispatch one of our field service technicians. Our customer service team assists our strategic partners with the development of their bioassays. This value-added service is designed to facilitate and expedite the development of applications based on the LabMAP technology.
CUSTOMERS
Our customers consist of a broad range of participants in the life sciences industry. As of January 31, 2000, our customers included the following:
Customer Market Application
--------------------------------------------------------------------------------------
Bio-Rad Laboratories, Inc. In vitro diagnostics, Kits
biomedical
research and drug
discovery
Eli Lilly & Company Drug discovery Protein analysis
GlaxoWellcome PLC Drug discovery SNP detection
Laboratory Corporation of America Commercial clinical Clinical testing
laboratory
Life Technologies, Inc. Biomedical research and Kits
drug discovery
Novartis Pharma AG Drug discovery Genetic testing
Quest Diagnostics Incorporated Commercial clinical Clinical testing
laboratory
RW Johnson/Pharmaceutical Drug discovery High throughput screening
Research Institute
SmithKline Beecham Corporation Drug discovery Protein analysis
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In 1999, Bio-Rad Laboratories, Inc. accounted for approximately 10% of our total net revenue. No other customer accounted for more than 10% of our revenues in 1999.
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MANUFACTURING OPERATIONS
Luminex 100
The basic components of the Luminex 100 are assembled by an ISO 9002 contract manufacturer. This manufacturer purchases the required system components and parts for the Luminex 100 from an approved supplier list. Once the manufacturer has completed its portion of the assembly process, the system is shipped to our facility in Austin, Texas, where our employees install and align the optical/laser assembly. At this point, a personal computer with our proprietary software is added and each unit is run through a quality control protocol.
Parts and component assemblies that comprise the Luminex 100 are obtained from a number of sources. We intend to develop multiple sources for as many of the component parts and assemblies as possible.
XY Platform
We purchase the principal components of the XY Platform from several manufacturers. Final assembly and quality control occurs at our facility in Austin, Texas.
Microspheres
We buy generic, undyed polystyrene microspheres from any one of three suppliers. We then dye the microspheres using a proprietary method in our manufacturing facility in large lots with ten intensities each of red and infrared dyes to produce 100 distinctly colored microsphere sets. The dyed microspheres are then repackaged for sale.
INTELLECTUAL PROPERTY
To establish and protect our proprietary technologies and products, we rely on a combination of patent, copyright, trademark and trade secrets laws, as well as confidentiality provisions in our contracts.
We have implemented an aggressive patent strategy designed to maximize our intellectual property rights. We are pursuing patent coverage in the United States and those foreign countries which correspond to the majority of our anticipated customer base. We currently own two issued patents in the United States and have received notices of allowances for two additional patent applications. In addition, our patent portfolio includes pending patent applications in the United States and corresponding international and foreign filings in major industrial nations. One of our patents provides protection for systems and technology that allows "real time" techniques for the detection and quantification of many analytes from a single sample. As a result of a procedural omission, we are unable to obtain comparable patent protection in Japan.
The issued patents and allowed or pending patent applications claim proprietary methods for the detection and quantification of analytes from a single sample in a "real time" format as well as specific aspects and applications of the LabMAP technology to molecular research.
Generally, United States patents issued from applications filed on or after June 8, 1995 have a term of 20 years from the application filing date or earlier claimed priority. Patents in most other countries have a term of 20 years from the date of filing the patent application. All of our patent applications, including the applications from which both of our issued patents were derived, were filed after June 8,
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1995. Because the time from filing to issuance of patent applications in the life sciences industry is often several years, this process may result in a shortened period of patent protection, which may adversely affect our ability to exclude competitors from our markets. Our issued United States patents will expire in 2015. Our success depends to a significant degree upon our ability to develop proprietary products and technologies and to obtain patent coverage for the products and technologies. We intend to continue to file patent applications covering any newly-developed products and technologies.
Patents provide some degree of protection for our proprietary technology. However, the pursuit and assertion of patent rights, particularly in areas like medical device development, pharmaceuticals and biotechnology, involve complex legal and factual determinations and, therefore, are characterized by some uncertainty. In addition, the laws governing patentability and the scope of patent coverage continue to evolve, particularly in life sciences. As a result, we cannot assure you that patents will issue from any of our patent applications or from applications licensed to us. The scope of any of our issued patents may not be sufficiently broad to offer meaningful protection. In addition, our issued patents or patents licensed to us may be successfully challenged, invalidated, circumvented or rendered unenforceable so that our patent rights might not create an effective competitive barrier. Moreover, the laws of some foreign countries may not protect our proprietary rights to the same extent as do the laws of the United States. There can be no assurance that any patents issued to us or our strategic partners will provide a legal basis for establishing an exclusive market for our products or provide us with any competitive advantages or that the patents of others will not have an adverse effect on our ability to do business or to continue to use our technologies freely. In view of these factors, our intellectual property positions bear some degree of uncertainty.
The source code for our proprietary software is protected both as a trade secret and as a copyrighted work.
We also rely in part on trade secret protection of our intellectual property. We attempt to protect our trade secrets by entering into confidentiality agreements with third parties, employees and consultants. Our employees also sign agreements requiring that they assign to us their interests in inventions and original expressions and any corresponding patents and copyrights arising from their work for us. However, it is possible that these agreements may be breached, invalidated or rendered unenforceable and if so, there may not be an adequate corrective remedy available. Despite the measures we have taken to protect our intellectual property, we cannot assure you that parties to our agreements will not breach the confidentiality provisions in our contracts or infringe or misappropriate our patents, copyrights, trademarks, trade secrets and other proprietary rights. In addition, we cannot assure you that third parties will not independently discover or invent competing technologies or reverse engineer our trade secrets, or other technology. Therefore, the measures we are taking to protect our proprietary technology may not be adequate.
Although we are not a party to any legal proceedings, in the future, third parties may file claims asserting that our technologies or products infringe on their intellectual property. We cannot predict whether third parties will assert such claims against us or our licensees or against the licensors of technology licensed to us, or whether those claims will harm our business. If we are forced to defend against such claims, whether they are with or without any merit, whether they are resolved in favor of or against us, our licensees or our licensors, we may face costly litigation and diversion of management's attention and resources. As a result of such disputes, we may have to develop at a substantial cost non-infringing technology, or enter into licensing agreements. These agreements, if necessary, may be unavailable on terms acceptable to us, or at all, which could seriously harm our business or financial condition.
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In particular, we are aware of a European patent granted to Dr. Ioannis Tripatzis, which covers certain testing agents useful for the determination of antigens and/or antibodies as well as for methods of their use. Dr. Tripatzis has publicly stated his belief that his patent covers aspects of our bead technology in Europe. Counterparts of Dr. Tripatzis' European patent exist in Japan and Canada. While we believe that the overall impact, if any, of Dr. Tripatzis' patent, which expires in 2004, is limited, we cannot assure you that any disputes that may arise ultimately will be resolved in our favor or that the cost of litigating or otherwise resolving any disputes will not materially adversely affect us.
COMPETITION
Our LabMAP technology can perform many different kinds of tests in many different fields, including pharmaceutical and biomedical research, clinical laboratory testing and many other segments of the life sciences industry. For this reason, the competition we will encounter will necessarily be fragmented based on the market. There are competitors in every field. Our competition includes companies marketing conventional testing products based on established technologies as well as companies developing their own advanced testing technologies. Most of our competitors are larger than we are and can commit significantly greater resources to competitive efforts. We cannot assure you that the LabMAP system will be widely adopted in one or more markets or that we will be able to compete effectively.
The pharmaceutical industry is the single biggest market for the genomic and high throughput screening applications of the LabMAP technology. In each application, Luminex faces a different set of competitors. Genomic testing for variability in DNA can also be performed by products available from Affymetrix Inc., Aclara Biosciences, Inc., Clontech Laboratories, Inc., a wholly-owned subsidiary of Becton Dickinson & Company, and Sequenom, Inc., among others. In high throughput screening, LJL BioSystems Inc. and Aurora BioSciences Corporation offer products competitive with ours.
The clinical laboratory market is dominated by several very large competitors. These include Abbott Laboratories, Bayer Corporation, Bio-Rad, Dade Behring Inc., a wholly-owned subsidiary of Aventis, and Roche Bioscience, among others. None currently offer multi-analyte testing systems, but it should be presumed that programs are underway within at least some of these companies to develop this capability.
Competition within the biomedical research market is even more fragmented than that within the pharmaceutical industry. There are hundreds of suppliers to this market including Amersham Pharmacia Biotech, Molecular Devices Corporation, PerkinElmer, Inc. and Stratagene Cloning Systems, Inc. Any company in this field could be a potential competitor with us.
GOVERNMENT REGULATION
We are regulated by the Food and Drug Administration within the framework of medical devices, pursuant to various statutes including the Federal Food, Drug and Cosmetic Act as amended and supplemented by the Medical Device Amendments of 1976, the Safe Medical Devices Act of 1990, the Medical Device Amendments of 1992 and the FDA Modernization Act of 1997. The FDA classifies medical devices intended for human use into three classes, Class I, Class II and Class III. The controls applied to the different classifications are those the FDA believes are necessary to provide reasonable assurance that a device is safe and effective. Class I devices are noncritical products that can be adequately regulated by "general controls," including provisions related to labeling, producer registration, defect notification, records and reports and CGMP (Current Good Manufacturing
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Practices) requirements. CGMP requirements govern the methods used in, and the facilities and controls used for, the design, manufacture, packaging and servicing of all finished medical devices intended for human use. Class II devices are products for which the general controls of Class I devices alone are not sufficient to assure the safety and effectiveness of the device and require special controls. The additional special controls for Class II devices include performance standards, post-market surveillance patient registries and the use of FDA guidelines. Standards may include both design and performance requirements. Class III devices have the most restrictive controls and require pre-market approval by the FDA. Class III devices include life-sustaining, life-supporting or implantable devices. The FDA inspects medical device manufacturers and distributors and has broad authority to order recalls of medical devices, to seize noncomplying medical devices, to enjoin and/or impose civil penalties on manufacturers and distributors marketing noncomplying medical devices and to prosecute criminal violators.
Federal law requires individuals or companies manufacturing most medical devices intended for human use to file a notice, which is known as a 510(k), with the FDA at least 90 days before introducing the product into the marketplace. The 510(k) notice must identify the type of classified device into which the product falls, the class of that type and the specific marketed product to which the product claims to be "substantially equivalent." In some cases the notification must include data from human clinical studies in order to establish "substantial equivalence." If the registrant states the device is unclassified, but nonetheless claims substantial equivalence to a marketed device or recognized diagnostic procedure, it must explain the basis for that determination. The FDA must affirmatively agree with the claim of substantial equivalence before the device may be marketed.
The hardware portion of the Luminex 100 is a Class I medical device of a particular type, which is exempt from the 510(k) notice requirements. Depending on their intended applications, some of our products and products based on our technology expected to be produced by our strategic partners are subject to approval or clearance by the FDA prior to marketing for commercial use. Products using our technology for clinical diagnostic purposes will require such approval or clearance. We will assist our strategic partners in filing their own 510(k)s for their bioassays that will be run on our LabMAP technology, including providing the verification and validation of our LabMAP system.
If a product does not qualify for the 510(k) notice procedure (either because it is not substantially equivalent to a legally marketed device or because it is a Class III device), the FDA must approve a pre-market approval application before marketing can begin. Obtaining approval can take several years. Clearance pursuant to notification can be obtained in less time. In general, clearance of a 510(k) notification for a device is obtained by the registrant establishing that the new device is "substantially equivalent" to another device of such class that is already on the market. This requires the new device to have the same intended use as a legally marketed predicate device and have the same technological characteristics as the predicate device. If the technological characteristics are different, the new device can still be found to be "substantially equivalent" if information submitted by the applicant (including clinical data if requested) supports a finding that the new device is as safe and effective as a legally marketed device and does not raise questions of safety and efficacy that are different from the predicate device. There can be no assurance that we will not be required to obtain 510(k) clearance or pre-market approval prior to commercial distribution of future products or future applications of current products.
We are registered with the FDA as a device manufacturer. We are subject to periodic inspection by the FDA for compliance with the FDA's CGMP and other regulations. These regulations require that we manufacture our products and maintain our documents in a prescribed manner with respect to manufacturing, testing and control activities. Further, we are required to comply with various FDA requirements for labeling. The Medical Device Reporting regulation requires that a company provide
Business
information to the FDA whenever there is evidence to reasonably suggest that one of its devices may have caused or contributed to a death or serious injury, or a device malfunction would be likely to cause or contribute to a death or serious injury if the malfunction were to recur. In addition, the FDA prohibits a company from marketing approved devices for unapproved indications. If the FDA believes that a company is not in compliance with applicable regulations, it can institute proceedings to detain or seize products, issue a recall, impose operating restrictions, enjoin future violations and assess civil and criminal penalties against the company, its officers or its employees and can recommend criminal prosecution to the Department of Justice. Other regulatory agencies may have similar powers. Our strategic partners are subject to the same requirements and enforcement.
Medical device laws are also in effect in many countries outside of the United States. These range from comprehensive device approval requirements for some or all of our medical device products to simpler requests for product data or certification. The number and scope of these requirements are increasing. In addition to the requirements relating to medical devices, we will also have to comply with FDA regulations on the performance of laser products because our Luminex 100 utilizes lasers in order to identify the bioassays and measure their result. These regulations are intended to ensure the safety of laser products by establishing standards to prevent exposure to excess levels of laser radiation.
Failure to comply with applicable federal, state and foreign medical device laws and regulations would likely have a material adverse effect on the our business. In addition, federal, state and foreign regulations regarding the manufacture and sale of medical devices are subject to future changes. We cannot predict what impact, if any, such changes might have on our business, but such change could have a material impact.
We are subject to various federal, state and local laws and regulations relating to the protection of the environment. In the course of our business, we are involved in the handling, storage and disposal of certain chemicals. The laws and regulations applicable to our operations include provisions that regulate the discharge of materials into the environment. Usually these environmental laws and regulations impose "strict liability," rendering a person liable without regard to negligence or fault on the part of such person. Such environmental laws and regulations may expose us to liability for the conduct of, or conditions caused by, others, or for acts that were in compliance with all applicable laws at the time the checks were performed. We do not believe that we have been required to expend material amounts in connection with our efforts to comply with environmental requirements or that compliance with such requirements will have a material adverse effect upon our capital expenditures, results of operations or competitive position. Because the requirements imposed by such laws and regulations are frequently changed, we are unable to predict the cost of compliance with such requirements in the future, or the effect of such laws on our capital expenditures, results of operations or competitive position.
EMPLOYEES
As of January 31, 2000, we had 81 employees. None of our employees are covered by a collective bargaining agreement. We believe that our relations with our employees are good.
FACILITIES
We occupy approximately 36,000 combined square feet of leased and sub-leased office space and other facilities in Austin, Texas for our headquarters and as the base for our marketing and product support
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operations, research and development and manufacturing activities. The monthly rent on the combined space is approximately $35,000. Substantially all of our space is leased through early 2002. We intend to use a portion of the proceeds of this offering to expand our current facilities.
LEGAL PROCEEDINGS
As a result of a procedural omission, we are unable to pursue a patent in Japan and certain other countries, which corresponds to our issued US patent directed to our method of "real time" detection and quantification of multiple analytes from a single sample. We have filed a lawsuit alleging negligence on the part of our prior patent counsel in this matter and seeking to recover the damages we believe will result from any gaps in our patent protection in Japan and certain other countries as a result of this omission. At this time, we cannot predict whether this lawsuit will be successful and, if so, the amount of any damages we may recover.
From time to time, we may be involved in litigation that arises through the normal course of business. As of the date of this prospectus, we are not a party to any litigation we believe could reasonably be expected to have a material adverse effect on our business or results of operations.
Management
EXECUTIVE OFFICERS AND DIRECTORS
Set forth below is the name, age, position and a brief account of the business experience of each of our executive officers and directors.
Name Age Position
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Chairman of the Board, President and Chief
Mark B. Chandler, PhD (1).... 46 Executive Officer
Van S. Chandler.............. 49 Vice President of Instruments
Ralph L. McDade, PhD......... 45 Vice President of Scientific Affairs
Michael D. Spain, MD......... 47 Vice President of Clinical Affairs
Vice President, Treasurer and Chief
James L. Persky.............. 51 Financial Officer
Randel S. Marfin............. 43 Vice President of Business Development
G. Walter Loewenbaum (1)..... 55 Director
A. Sidney Alpert............. 61 Director
Robert J. Cresci (2)......... 56 Director
Laurence E. Hirsch (1)(2).... 54 Director
Jim D. Kever (2)(3).......... 47 Director
Fred C. Goad, Jr. (3)........ 59 Director
John E. Koerner, III (2)(3).. 57 Director
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(1) Member of the executive committee
(2) Member of the audit committee
(3) Member of the compensation and stock option committee
Mark B. Chandler, PhD Dr. Chandler founded our company with his brother Van S. Chandler, in May 1995, and has served as Chairman of the Board and Chief Executive Officer since that date and as President since June 1999. He also has served as a member of the executive committee of our board of directors since its formation in July 1997. In 1982, he founded Inland Laboratories, Inc., which provides plant and bacterial toxins to the medical research community. As the President and CEO of Inland, Dr. Chandler received the KPMG Peat Marwick, High Technology Entrepreneur of the Year award in 1987. He received his PhD in Immunology from the University of Texas Southwestern Medical School in Dallas in 1981.
Van S. Chandler Mr. Chandler, our co-founder, has served as Vice President of Instruments since January 1998. In addition, Mr. Chandler served as a director from May 1995 to February 2000 and as an independent contractor from 1995 to 1998. Since 1995, he has led the design and development of the digital signal processing hardware and data analysis software for the Luminex 100 and Luminex R/O Systems. In 1990, Mr. Chandler founded Sigma Logic Corp., and while serving as its President and CEO from 1990 to 1995, he developed an array of law enforcement technologies, including wireless police data networks and imaging systems for the FBI. Mr. Chandler founded Concept Communications, Inc. and served as its President and CEO from 1985 to 1990. He graduated from the University of Texas at Arlington in 1972 with a BBA in Statistics.
Ralph L. McDade, PhD Dr. McDade has served as Vice President of Scientific Affairs since June 1999. From January 1996 to June 1999 he served as Vice President of Development. From 1988 until 1996, he served as Director of Research and Development for Inland Laboratories. After post-doctoral training at The University of Connecticut Health Center in Farmington, he held faculty positions at The Rockefeller University in New York and at Louisiana State University Medical Center in New Orleans. Dr. McDade received his PhD in Microbiology from the University of Texas Southwestern Medical School in 1980.
Management
Michael D. Spain, MD Dr. Spain has served as Vice President of Clinical Affairs of Luminex since March 1997. From 1994 until joining us, he served as Medical Director of Laboratory Corporation of America in San Antonio, Texas. From 1984 to 1994, he served as Medical Director of Quest Laboratory in Dallas (formerly Damon Clinical Laboratory). Following a four year residency in pathology at Baylor University Medical Center in Dallas, he became board certified in 1984. Dr. Spain received his MD from the University of Texas Southwestern Medical School in Dallas in 1980.
James L. Persky Mr. Persky joined our company in March 1998 and has served as Vice President, Treasurer and Chief Financial Officer since that date. Prior to joining us, he was Executive Vice President-Finance and Administration and Chief Financial Officer for Southdown, Inc., a publicly-traded cement manufacturing company where he served for 13 years. Mr. Persky also spent over thirteen years in the oil and gas industry in various finance and accounting positions. Mr. Persky received a BBA from the University of Texas in 1971 and an MS in Accounting from the University of Houston in 1983. He has been a Certified Public Accountant since 1979.
Randel S. Marfin Mr. Marfin has served as Vice President of Business Development, since joining our company in June 1999 and has over thirteen years of clinical laboratory management experience. Prior to joining us, he worked for three years at SpectraCell Laboratories, Inc., most recently as Vice President of Sales and Marketing where he was responsible for business development, acquisitions, strategic planning and sales and marketing. From 1990 to 1998, he served as General Manager of Texas for both Damon Clinical Laboratories and Nichols Institute. In addition, Mr. Marfin held sales management and business development positions for Damon Clinical Laboratories and MPC Labs. Mr. Marfin has a BS in Biochemistry and Biophysics from the University of Houston and served in the United States Air Force.
G. Walter Loewenbaum Mr. Loewenbaum has served as a member of our board of directors since May 1995 and served as Vice Chairman of the Board from April 1998 until January 2000. He also has served as a member of the executive committee of our board of directors since its formation in July 1997. Since April 1990, he has served as the President, Chairman and CEO of Loewenbaum & Company Inc. He received a BA from the University of North Carolina. Mr. Loewenbaum is also Chairman of 3D Systems Corporation.
A. Sidney Alpert Mr. Alpert has served as a member of our board of directors since December 1996 and as a member of the audit committee of our board of directors since its formation in July 1997. Since June 1999, he has served as a legal consultant to Luminex as well as 3D Systems. From January 1996 to June 1999, Mr. Alpert served as Vice President and General Counsel of 3D Systems where he was also a director from August 1993 to May 1996. From January 1994 through December 1995, he was an independent intellectual property consultant. From late 1988 through December 1993, Mr. Alpert served as Chairman of the Board and CEO of Competitive Technologies Inc.
Robert J. Cresci Mr. Cresci has served as a member of our board of directors since December 1996 and has served as a member of the compensation and stock option committee of our board of directors since its formation in July 1997. He has been a Managing Director of Pecks Management Partners Ltd., an investment management firm, since September 1990. Mr. Cresci currently serves on the boards of Sepracor Inc., Arcadia Financial Ltd., Aviva Petroleum Inc., Quest Education Corporation, Castle Dental Centers, Inc., Candlewood Hotel Co., Inc., SeraCare, Inc., E-Stamp Corporation and Film Roman, Inc.
Laurence E. Hirsch Mr. Hirsch has served as a member of our board of directors since December 1996 and has served as a member of the executive committee of our board of directors since its formation in July 1997. He is currently the Chairman of the Board and CEO of Centex Corporation.
Management
He has served in these positions since July 1991 and July 1988, respectively. He joined Centex as President and Chief Operating Officer and became a member of their board of directors in 1985. Mr. Hirsch received a BS in Economics from the Wharton School at the University of Pennsylvania and a JD from the Villanova University School of Law. He also serves as a director of Centex Construction Products, Inc. and A.H. Belo Corporation.
Jim D. Kever Mr. Kever has served as a member of our board of directors since December 1996 and has served as a member of the audit committee of our board of directors since its formation in July 1997. He is currently the President and CEO of Envoy Corporation, a wholly-owned subsidiary of Quintiles Corporation. Mr. Kever joined Envoy Corporation as Treasurer and General Counsel in October 1981. Prior to joining Envoy (and its predecessor) in 1981, Mr. Kever was employed by Datanet, a pharmaceutical software company. Mr. Kever received a BS in business and administration from the University of Arkansas in 1974 and JD from Vanderbilt University School of Law in 1977.
Fred C. Goad, Jr. Mr. Goad has served as a member of our board of directors since September 1997 and has served as a member of the compensation and stock option committee of our board of directors since April 1998. He is Senior Advisor to the Office of the President of Envoy Corporation. He became a director and President of Envoy Corporation in August 1984 and served as Chairman of the Board of Directors and co-CEO of Envoy from August 1995 to March 1999. Mr. Goad spent ten years with IBM, where he contributed in both staff and line responsibilities. Mr. Goad also serves on the Board of Directors for Performance Food Group Company and Quintiles Corporation.
John E. Koerner, III Mr. Koerner has served as a member of our board of directors since September 1997 and has served as a member of the compensation and stock option committee of our board of directors since April 1998. He has been President of Koerner Capital Corporation since 1995 and also serves as a director on the board of Legg Mason, Inc. He earned a BS in 1965, a JD in 1969 and an MBA in 1971, all from Tulane University.
BOARD COMPOSITION
We currently have nine authorized directors. We intend to fill the vacancy prior to the consummation of this offering. In accordance with the terms of our restated certificate of incorporation, the terms of office of the directors are divided into three classes:
.Class I, whose term will expire at the annual meeting of stockholders to be held in 2001;
.Class II, whose term will expire at the annual meeting of stockholders to be held in 2002; and
.Class III, whose term will expire at the annual meeting of stockholders to be held in 2003.
The Class I directors are A. Sidney Alpert and Robert J. Cresci, the Class II directors are Laurence E. Hirsch, Jim D. Kever and Fred C. Goad, Jr., and the Class III directors are Mark B. Chandler, G. Walter Loewenbaum and John E. Koerner, III. At each annual meeting of stockholders after the initial classification or special meeting in lieu thereof, the successors to directors whose terms will then expire will be elected to serve from the time of election and qualification until the third annual meeting following election or special meeting held in lieu thereof. The authorized number of directors may be changed only by resolution of the board of directors or a super-majority vote of the stockholders. Any additional directorships resulting from an increase in the number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one third of the directors. This classification of the board of directors may have the effect of delaying or preventing changes in control or management of Luminex.
Management
BOARD COMMITTEES
The executive committee of the board of directors was established in July 1997. The members of our executive committee are Mark B. Chandler, G. Walter Loewenbaum and Laurence E. Hirsch. The executive committee has broad powers as delegated by the board of directors.
The audit committee of the board of directors was established in July 1997 and reviews, acts on and reports to the board of directors on various auditing and accounting matters, including the recommendation of our independent auditors, the scope of the annual audits, fees to be paid to the independent auditors, the performance of our independent auditors and our accounting practices. The members of our audit committee are Robert J. Cresci, Laurence E. Hirsch, Jim D. Kever and John E. Koerner, III, each of whom is an independent director.
The compensation and stock option committee of the board of directors was established in July 1997 and determines the salaries and benefits for our employees, consultants, directors and other individuals compensated by us. The compensation and stock option committee also administers our stock option plans, including determining the stock option grants for our employees, consultants, directors and other individuals. The members of the compensation and stock option committee are Jim D. Kever, Fred C. Goad, Jr. and John E. Koerner, III.
DIRECTOR COMPENSATION
We reimburse our non-employee directors for expenses incurred in connection with attending board and committee meetings but do not compensate them for their services as board or committee members. We have in the past granted non- employee directors options to purchase our common stock pursuant to the terms of our 1996 Stock Option Plan, and our board continues to have discretion to grant options to new non-employee directors. We anticipate that we will continue to grant options from time to time under the 2000 Long-Term Incentive Plan to our non-employee directors. In 1997, seven nonemployee directors were granted fully vested options to purchase 5,000 shares of common stock and one additional director was granted fully vested options to purchase 30,000 shares of common stock. In 1999, six non-employee directors were granted a fully vested option to purchase 15,000 shares of common stock.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Our compensation and stock option committee currently consists of Messrs. Kever, Goad and Koerner. No member of the compensation and stock option committee has been an officer or employee of ours at any time. None of our executive officers serves as a member of the board of directors or compensation committee of any other company that has one or more executive officers serving as a member of our board of directors or compensation and stock option committee. Prior to the formation of the compensation and stock option committee in July 1997, the board of directors as a whole made decisions relating to compensation of our executive officers.
LIMITATION OF LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS
Our restated certificate of incorporation and our amended and restated bylaws provide that our directors and officers shall be indemnified by us to the fullest extent authorized by Delaware law, as it now exists or may in the future be amended, against all expenses and liabilities reasonably incurred in
Management
connection with their service for or on our behalf. In addition, the restated certificate of incorporation provides that our directors will not be personally liable for monetary damages to us for breaches of their fiduciary duty as directors, unless they violated their duty of loyalty to us or our stockholders, acted in bad faith, knowingly or intentionally violated the law, authorized illegal dividends or redemptions or derived an improper personal benefit from their action as directors. We have obtained insurance which insures our directors and officers against specified losses and which insures us against specific obligations to indemnify our directors and officers.
EXECUTIVE COMPENSATION
Summary of cash and other compensation
The following table shows all compensation received during the year ended December 31, 1999 by our Chief Executive Officer and our four other highest- paid executive officers, collectively referred to as the Named Executive Officers. Other compensaton consists of matching payments made under our Savings Incentive Match Plan for Employees under Section 408(p) of the Internal Revenue Code.
Summary compensation
--------------------------------------------------------------------------------
Annual Long-term
compensation compensation awards
Securities
Other annual underlying Other
Name and principal position Salary Bonus compensation options compensation
--------------------------------------------------------------------------------
Mark B. Chandler........... $225,000 $ -- $ -- 250,000 $--
Chairman and Chief
Executive Officer
Van S. Chandler............ 175,000 -- -- 75,000 5,250
Vice President of
Instruments
Ralph L. McDade............ 175,000 -- -- -- 5,250
Vice President of
Scientific Affairs
Michael D. Spain........... 160,000 -- -- 25,000 4,800
Vice President of Clinical
Affairs
James L. Persky............ 150,000 -- -- -- 4,500
Vice President, Treasurer
and Chief Financial
Officer
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Options
The following table shows information regarding options granted to the executive officers listed in the summary compensation table above during the fiscal year ended December 31, 1999. We have not granted any stock appreciation rights.
Each option represents the right to purchase one share of our common stock. The options generally become vested over three years. See "Management--Employee benefit plans" for more details regarding these options. In the year ended December 31, 1999, we granted options to purchase an aggregate of 817,100 shares of common stock to various officers, employees, directors and consultants.
The potential realizable value at assumed annual rates of stock price appreciation for the option term represents hypothetical gains that could be achieved for the respective options if exercised at the end of the option term. The 5% and 10% assumed annual rates of compounded stock price appreciation are required by rules of the SEC and do not represent our estimate or projection of our future common
Management
stock prices. These amounts represent assumed rates of appreciation in the value of our common stock from the fair market value on the date of grant. Actual gains, if any, on stock option exercises are dependent on the future performance of our common stock and overall stock market conditions. The amounts reflected in the table may not necessarily be achieved.
Individual grants
Potential
realizable
value at assumed
% of annual rates of
Number of total appreciation of
securities options Exercise stock
underlying granted price price for option
options to per Expiration term
Name granted employees share date 5% 10%
--------------------------------------------------------------------------------
Mark B.
Chandler...... 250,000 40% $8 5/20/04 $552,563 $1,221,020
Van S. Chandler.. 75,000 12 8 5/20/04 165,769 366,306
Ralph L. McDade.. -- -- -- -- -- --
Michael D.
Spain......... 25,000 4 8 5/20/04 55,256 122,102
James L. Persky.. -- -- -- -- -- --
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The following table shows information as of December 31, 1999 concerning the number and value of unexercised options held by each of the executive officers listed in the summary compensation table above. Options shown as exercisable in the table below are immediately exercisable. However, we have rights to repurchase shares of the common stock underlying some of these options upon termination of the holder's employment with us. There was no public trading market for the common stock as of December 31, 1999. Accordingly, the value of unexercised in-the-money options listed below has been calculated on the basis of the assumed initial public offering price of $ per share, less the applicable exercise price per share, multiplied by the number of shares underlying such options.
Number of securities
Shares underlying unexercised Value of unexercised
acquired options at December 31, in-the-money options
upon Value 1999 at December 31, 1999
Name exercise realized Exercisable Unexercisable Exercisable Unexercisable
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Mark B. Chandler........ -- $ -- -- 250,000 $--
Van S. Chandler......... -- -- -- 75,000 --
Ralph L. McDade......... -- -- 69,999 55,001
Michael D. Spain........ -- -- 33,332 41,668
James L. Persky......... -- -- 33,333 66,667
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EMPLOYMENT AGREEMENTS
We intend to enter into employment agreements with certain of our executive officers prior to the completion of this offering.
Management
EMPLOYEE BENEFIT PLANS
1996 Stock Option Plan
Our 1996 Stock Option Plan was approved by our board of directors in March 1996 and subsequently amended by our stockholders on May 11, 1998. Our 1996 plan authorizes the issuance of up to 2,000,000 shares of our common stock as either incentive stock options within the meaning of Section 422 of the Internal Revenue Code of 1986 or nonqualified stock options. As of January 31, 2000, we had 1,667,100 options to purchase common stock under this plan outstanding to employees, directors and consultants with a weighted average exercise price of $6.31 per share. After the completion of this offering, no further options will be granted under this plan.
The board of directors, or a board committee, has the power to determine the terms of the options, including the exercise price of the options, the number of shares subject to each option, the exercisability thereof, and the form of consideration payable on such exercise, provided that the exercise price for incentive stock options must be at least 100% of fair market value. Incentive stock options granted to any holder of 10% or more of the combined voting power of all classes of stock must have an exercise price of not less than 110% of fair market value and be exercisable for a term of no more than five years.
2000 Long-Term Incentive Plan
Our 2000 Long-Term Incentive Plan was adopted by our board of directors and will be submitted to our stockholders for approval in February 2000 as a successor equity plan to our 1996 plan. Up to shares of common stock may be issued under the 2000 plan.
The 2000 plan provides for the discretionary grant of incentive stock options, within the meaning of Section 422 of the Internal Revenue Code of 1986, to employees and for the grant of nonqualified stock options, stock appreciation rights, dividend equivalents, restricted stock and other incentive awards to employees, outside directors and consultants. The 2000 plan provides that we cannot issue incentive stock options after January 2010.
The 2000 plan is administered by the board of directors or a board committee. The administrator has the power to determine the terms of the options or other awards granted, including the exercise price of the options or other awards, the number of shares subject to each option or other award (up to per year per participant), the exercisability thereof and the form of consideration payable upon exercise. In addition, the administrator has the authority to amend, suspend or terminate the 2000 plan, provided that no such action may affect any share of common stock previously issued and sold or any option previously granted under the 2000 plan without the consent of the holder.
The exercise price of all incentive stock options granted under the 2000 plan must be at least equal to 100% of the fair market value of the common stock on the date of grant. The exercise price of nonqualified stock options and other awards granted under the 2000 plan is determined by the administrator, but the exercise price must be at least 50% of the fair market value of the common stock on the date of grant. The term of all options granted under the 2000 plan may not exceed ten years.
Each option and other award is exercisable during the lifetime of the optionee only by such optionee. Options granted under the 2000 plan must generally be exercised within 60 days after the end of optionee's status as an employee, director or consultant, or within one year after such optionee's termination by disability or death, respectively, but in no event later than the expiration of the option's term.
The 2000 plan provides that in the event of a merger of our company all options and other awards shall be assumed or a substitute option or award issued by the acquiring company unless the board determines in its sole discretion to accelerate vesting or remove any restrictions.
Related party transactions
SALES OF SECURITIES
Since January 1, 1997 through January 31, 2000, we have issued the following securities in private placement transactions:
.150,000 shares of our Series B convertible preferred stock, at a purchase price of $40.00 per share, for an aggregate purchase price of $6,000,000 between February and April 1997;
.151,571 shares of our Series C convertible preferred stock, at a purchase price of $80.00 per share, for an aggregate purchase price of $12,125,680 in June and July 1998;
.57,538 shares of our Series D convertible preferred stock, at a purchase price of $120.00 per share, for an aggregate purchase price of $6,904,560 between August and December 1999; and
.25,000 shares of our Series E convertible preferred stock, at a purchase price of $120.00 per share, for an aggregate purchase price of $3,000,000 in December 1999.
All preferred stock was issued to accredited investors in reliance upon exemption from registration under Regulation D of the Securities Act.
The purchasers of more than $60,000 of these securities include, among others, the following directors of Luminex:
Shares of preferred stock
-------------------------------------------------------------------------------
Total
Series B Series C Series D Series E consideration
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Robert J. Cresci............. 1,875 1,500 -- -- $195,000
Laurence E. Hirsch........... 5,000 6,250 -- -- 700,000
Jim D. Kever(1).............. 5,000 2,000 -- -- 360,000
Fred C. Goad, Jr. ........... 3,750 6,000 300 -- 666,000
John E. Koerner, III(2)...... 25,000 12,500 -- 25,000 5,000,000
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For additional information regarding the ownership of securities by executive officers, directors and stockholders who beneficially own 5% or more of our outstanding common stock, please see "Principal stockholders."
CONSULTING AGREEMENT
On June 1, 1999 we entered into a consulting agreement with A. Sidney Alpert, a director of Luminex, whereby Mr. Alpert agreed to provide us with consulting services one day per week. In consideration for those services, we paid Mr. Alpert $5,833 per month and granted him options to purchase 25,000
Related party transactions
shares of our common stock at an exercise price of $8.00 per share. The options vest on June 1, 2000. On November 1, 1999, we amended that agreement to increase the number of days to two per week and to increase the consulting fee to be paid to Mr. Alpert to $11,666 per month.
OTHER TRANSACTIONS
In April 1997, we paid Southcoast Capital Corporation $228,000 in cash and issued warrants to Southcoast to purchase 262,500 shares of our common stock at an exercise price of $4.00 per share for acting as placement agent for the sale of our Series B convertible preferred stock. The warrants may be exercised in whole or in part at any time prior to April 3, 2002. At the time of the transaction, G. Walter Loewenbaum was the chairman and chief executive officer of Southcoast.
During 1997, we paid Van Chandler, a director of Luminex, $136,000 for consulting services.
On January 1, 1998, we purchased office and laboratory equipment from Inland Laboratories, Inc. for $208,782 in cash and 140,246 shares of our common stock. Mark B. Chandler, our chairman, president and chief executive officer, is the sole stockholder of Inland.
In July 1998, we paid Loewenbaum & Company $849,000 for acting as placement agent for the sale of our Series C convertible preferred stock. At the time of the transaction, G. Walter Loewenbaum was the majority stockholder of Loewenbaum & Company.
Principal stockholders
The following table shows information known to us with respect to the beneficial ownership of our common stock as of January 31, 2000, and as adjusted to reflect the sale of the shares of common stock offered under this prospectus by:
.each person or group of affiliated persons who is known by us to own beneficially 5% or more of our common stock;
.each of our directors;
.each executive officer listed in the "Summary compensation" table above; and
.all of our directors and executive officers as a group.
Except as indicated in the footnotes to this table and subject to community property laws where applicable, the persons named in the table have sole voting and investment power with respect to all shares of our common stock shown as beneficially owned by them. Beneficial ownership and percentage ownership are determined in accordance with the rules of the SEC. The table below includes the number of shares underlying options and warrants which are exercisable within 60 days from January 31, 2000 and assumes the conversion of all shares of our preferred stock into shares of our common stock prior to this offering. It is therefore based on 11,804,070 shares of our common stock outstanding prior to this offering and shares outstanding immediately after this offering. The address for those individuals for which an address is not otherwise indicated is: 12212 Technology Boulevard, Austin, Texas 78727.
Number of Number of Percent owned
shares shares underlying before this Percent owned
Beneficial Owner outstanding options or warrants offering after this offering
---------------------------------------------------------------------------------------------------------
Directors and named executive officers
Mark B. Chandler, Ph.D. ............ 1,830,246 -- 15.5
Van S. Chandler..................... 939,667 -- 8.0
Ralph L. McDade, Ph.D. ............. -- 93,332 *
Michael D. Spain, M.D. ............. -- 33,332 *
James L. Persky..................... -- 66,667 *
G. Walter Loewenbaum (1)(2)......... 1,690,000 203,876 16.0
A. Sidney Alpert.................... 100,000 5,000 *
Robert J. Cresci.................... 58,750 20,000 *
Laurence E. Hirsch.................. 142,500 20,000 1.4
Fred C. Goad, Jr. (3)............... 120,500 20,000 1.2
Jim D. Kever (4).................... 100,000 37,500 1.2
John E. Koerner, III (5)............ 699,000 20,000 6.1
All directors and executive officers
as a group (13 persons).......... 5,681,997 529,207 52.6
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Principal stockholders
Number of Number of
shares shares underlying Percent owned
Beneficial Owner outstanding options or warrants Percent after this offering
------------------------------------------------------------------------------------
Five percent
stockholders
R. Jerrold Fulton (6)... 820,000 -- 6.9
305 Evergreen Trail
Cedar Hill, Texas 75104
John R. Kettman......... 668,166 -- 5.7
3119 Barton Road
Carrollton, Texas 75007
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* Less than 1.0%.
(1) Consists of 1,390,000 shares held by Mr. Loewenbaum and 300,000 shares of held by a partnership in which Mr. Loewenbaum is the general partner. Mr. Loewenbaum disclaims beneficial ownership of the shares held by the partnership.
(2) Includes 203,876 shares issuable upon the exercise of a warrant, 131,376 of which are held by Mr. Loewenbaum and 72,000 of which are held by a trust for the benefit of Mr. Loewenbaum's children.
(3) Includes 300 shares held by a trust of which Mr. Goad is the trustee. Mr. Goad disclaims beneficial ownership of the shares held by the trust.
(4) Consists of 42,064 shares held by Mr. Kever and 57,936 shares held by a trust of which Mr. Kever is the trustee. Mr. Kever disclaims beneficial ownership of the shares held by the trust.
(5) Includes 625,000 shares held by Koerner Capital Corporation of which Mr. Koerner is the sole stockholder and 74,000 shares held by two trusts for the benefit of his children. Mr Koerner disclaims beneficial ownership of the shares held by the trusts.
(6) Consists of 220,000 shares held by Dr. Fulton and 600,000 shares held by a partnership in which Dr. Fulton is the general partner. Dr. Fulton disclaims beneficial ownership of the shares held by the partnership.
Description of capital stock
The following information describes our common stock and preferred stock, as well as options and warrants to purchase our common stock, and provisions of our restated certificate of incorporation and our amended and restated bylaws, all as will be in effect upon the closing of this offering. This description is only a summary. You should also refer to the certificate and bylaws which have been filed with the SEC as exhibits to our registration statement, of which this prospectus forms a part. The descriptions of the common stock and preferred stock, as well as options and warrants to purchase our common stock, reflect changes to our capital structure that will occur upon the closing of this offering in accordance with the terms of the certificate.
Upon completion of this offering, our authorized capital stock will consist of 200,000,000 shares of common stock, par value $.001 per share, and 5,000,000 shares of preferred stock, par value $.001 per share.
COMMON STOCK
As of January 31, 2000, there were 6,472,662 shares of common stock outstanding and held of record by 296 stockholders. There will be shares of common stock outstanding upon the closing of this offering, which gives effect to the issuance of shares of common stock offered by us under this prospectus and the conversion of preferred stock discussed below.
Each share of common stock has identical rights and privileges in every respect. The holders of our common stock are entitled to vote upon all matters submitted to a vote of our stockholders and are entitled to one vote for each share of common stock held.
Subject to the prior rights and preferences, if any, applicable to shares of preferred stock or any series of preferred stock, the holders of common stock are entitled to receive such dividends, payable in cash, stock or otherwise, as may be declared by our board out of any funds legally available for the payment of dividends.
If we voluntarily or involuntarily liquidate, dissolve or wind-up, the holders of common stock will be entitled to receive after distribution in full of the preferential amounts, if any, to be distributed to the holders of preferred stock or any series of preferred stock, all of the remaining assets available for distribution ratably in proportion to the number of shares of common stock held by them. Holders of common stock have no preferences or any preemptive conversion or exchange rights.
PREFERRED STOCK
As of January 31, 2000, there were 841,359 shares of convertible preferred stock outstanding. All outstanding shares of convertible preferred stock will be converted into 4,298,340 shares of our common stock upon the closing of this offering and these shares of convertible preferred stock will no longer be authorized, issued or outstanding. Our restated certificate of incorporation authorizes the issuance of 5,000,000 shares of preferred stock, par value $.001 per share.
Our board is authorized to provide for the issuance of shares of preferred stock in one or more series, and to fix for each series voting rights, if any, designations, preferences and relative, participating, optional or other special rights and such qualifications, limitations or restrictions as provided in a
Description of capital stock
resolution or resolutions adopted by the board. The board may authorize the issuance of shares of preferred stock with terms and conditions which could discourage a takeover or other transaction that holders of some or a majority of shares of common stock might believe to be in their best interests or in which holders of common stock might receive a premium for their shares over the then market price.
WARRANTS
As of January 31, 2000, warrants to purchase a total of 262,500 shares of our common stock, at an exercise price of $4.00 per share, were outstanding. The warrants contain anti-dilution provisions providing for adjustments of the exercise price and the number of shares underlying the warrants upon the occurrence of certain events, including any recapitalization, reclassification, stock dividend, stock split, stock combination or similar transaction. The warrants expire April 2, 2002. The warrants grant to the holders registration rights with respect to the common stock issuable upon their exercise, which are described below. All of these warrants will be exercisable immediately before this offering.
REGISTRATION RIGHTS
At any time six months following the effective date of this offering, the holders of warrants to purchase 262,500 shares of common stock will be entitled to demand the registration of their shares under the Securities Act of 1933. We are not required to effect more than one registration for such holders pursuant to these demand registration rights, which expire on April 2, 2002. In addition, after the closing of this offering these holders will be entitled to piggyback registration rights with respect to the registration of the shares of common stock underlying their warrants. If we propose to register any shares of common stock either for our account or for the account of other security holders, the holders of shares having piggyback rights are entitled to receive notice of the registration and are entitled to include their shares in the registration. These registration rights are subject to conditions and limitations, among which is the right of the underwriters of an offering to limit the number of shares of common stock held by security holders with registration rights to be included in such registration. We are generally required to bear all of the expenses of all these registrations, including the reasonable fees of a single counsel acting on behalf of all selling stockholders, except underwriting discounts and selling commissions. Registration of any of the shares of our common stock held by security holders with registration rights would result in such shares becoming freely tradable without restriction under the Securities Act of 1933 immediately upon effectiveness of such registration.
ANTI-TAKEOVER EFFECTS OF PROVISIONS OF THE CERTIFICATE OF INCORPORATION, BYLAWS AND DELAWARE LAW
We are subject to Section 203 of the Delaware General Corporation Law, or DGCL
Section 203, which regulates corporate acquisitions. DGCL Section 203 prevents
certain Delaware corporations, including those whose securities are listed for
trading on the Nasdaq National Market, from engaging, under certain
circumstances in a "business combination" with any "interested stockholder" for
three years following the date that such stockholder became an interested
stockholder. For purposes of DGCL Section 203, a "business combination"
includes, among other things, a merger or consolidation involving Luminex and
the interested stockholder and the sale of more than ten percent (10%) of
Luminex's assets. In general, DGCL Section 203 defines an "interested
stockholder" as any entity or person beneficially owning 15% or more of the
outstanding voting stock of Luminex and any entity or person affiliated with or
controlling or controlled by such entity or person. A Delaware corporation may
"opt out" of DGCL Section 203 with an express provision in its original
certificate of
Description of capital stock
incorporation or an express provision in its certificate of incorporation or bylaws resulting from amendments approved by the holders of at least a majority of the corporation's outstanding voting shares. We have not "opted out" of the provisions of DGCL Section 203.
Our restated certificate of incorporation provides that the board of directors is divided into three classes of directors, with each class serving a staggered three-year term. The classification system of electing directors may tend to discourage a third party from making a tender offer or otherwise attempting to obtain control of Luminex and may maintain the incumbency of the board of directors, as the classification of the board of directors generally increases the difficulty of replacing a majority of the directors. The restated certificate of incorporation also provides that all stockholder actions must be effected at a duly called meeting and not by a consent in writing. Further, certain provisions of our restated certificate of incorporation provide that the stockholders may amend the bylaws or certain provisions of the restated certificate of incorporation only with the affirmative vote of 75% of our capital stock. These provisions of the restated certificate of incorporation and amended and restated bylaws could discourage potential acquisition proposals and could delay or prevent a change in control of Luminex. These provisions are intended to enhance the likelihood of continuity and stability in the composition of the board of directors and in the policies formulated by the board of directors and to discourage certain types of transactions that may involve an actual or threatened change of control of Luminex. These provisions are designed to reduce our vulnerability to an unsolicited acquisition proposal. The provisions also are intended to discourage certain tactics that may be used in proxy fights. However, such provisions could have the effect of discouraging others from making tender offers for our shares and, as a consequence, they also may inhibit fluctuations in the market price of our shares that could result from actual or rumored takeover attempts. Such provisions also may have the effect of preventing changes in our management.
Our bylaws provide that any action required or permitted to be taken by our stockholders at an annual meeting or special meeting of stockholders may only be taken if each stockholder is given proper advance notice of the action. The amended and restated bylaws further provide that special meetings of stockholders may only be called by a majority of our board of directors, our chairman of the board of directors or our president. The foregoing provisions could have the effect of delaying until the next stockholders meeting stockholder actions which are favored by the holders of a majority of our outstanding voting securities.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common stock is .
Shares eligible for future sale
Prior to this offering, there has been no public market for our common stock. The market price of our common stock after this offering could decline as a result of the sale of a large number of shares of our common stock in the market, or the perception that such sales could occur. Such sales also could make it more difficult for us to sell equity securities in the future at a time and price that we deem appropriate. After this offering, we will have outstanding shares of common stock. Of these shares, the shares being offered hereby are freely tradable. This leaves 10,753,122 shares eligible for sale in the public market as follows:
Number
of Shares Date
----------------------------------------------------------------------------
-- After the date of this prospectus
At various times after 90 days from the date of this prospectus
469,739 under Rules 701 and 144
At various times after 180 days from the date of this prospectus,
subject, in some cases, to volume limitations under Rule 144
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Our directors and officers and all of our stockholders, together with the holders of options to purchase shares of common stock and the holders of warrants to purchase shares of common stock, have entered into lock-up agreements under which they have agreed with the underwriters not to offer, sell, contract to sell, hedge or otherwise dispose of, directly or indirectly, or file with the SEC a registration statement under the Securities Act relating to, any of its common stock or securities convertible into or exchangeable for shares of common stock during the period from the date of this prospectus continuing through the date 180 days after the date of this prospectus, without the prior written consent of Warburg Dillon Read LLC.
In general, under Rule 144 of the Securities Act of 1933, a person or persons whose shares are required to be aggregated, including an affiliate, whose shares have been owned for at least one year is entitled to sell, within any three-month period after the date of this prospectus, a number of shares that does not exceed the greater of 1% of the then outstanding shares of common stock -- approximately shares immediately after this offering -- or the average weekly trading volume in our common stock during the four calendar weeks preceding the date on which notice of such sale is filed, subject to certain restrictions. In addition, a person who is not deemed to have been an affiliate of ours at any time during the 90 days preceding a sale and whose shares have been beneficially owned by nonaffiliates for at least two years would be entitled to sell such shares under Rule 144(k) without regard to the requirements described above. To the extent that shares were acquired from one of our affiliates, such person's holding period for the purpose of effecting a sale under Rule 144 commences on the date of transfer from the affiliate.
Following 90 days after the date of this prospectus, shares issued upon exercise of options that we granted prior to the date of this offering will also be available for sale in the public market pursuant to Rule 701 under the Securities Act of 1933. Rule 701 permits resales of such shares in reliance upon Rule 144 under the Securities Act of 1933 but without compliance with the restrictions, including the holding-period requirement, imposed under Rule 144. As of January 31, 2000, options to purchase a total of 1,667,100 shares of common stock were outstanding, 688,906 of which were currently exercisable, and all of which are subject to repurchase by us. Of these 1,667,100 shares, 469,739 shares may be eligible for sale in the public market at various times after 90 days from the date of this prospectus.
Shares eligible for future sale
Upon the closing of this offering, we intend to file a registration statement to register for resale the shares of common stock reserved for issuance under our stock option plans. We expect the registration statement to become effective immediately upon filing. Shares issued upon the exercise of stock options granted under our stock option plans will be eligible for resale in the public market from time to time subject to vesting and, in the case of certain options, the expiration of the lock-up agreements referred to above.
Stockholders holding warrants to purchase 262,500 shares of common stock have the right, subject to various conditions and limitations, to include their shares in registration statements relating to our securities. By exercising their registration rights and causing a large number of shares to be registered and sold in the public market, these holders may cause the price of the common stock to fall. In addition, any demand to include such shares in our registration statements could have a material adverse effect on our ability to raise needed capital. See "Management -- Benefit plans," "Principal stockholders," "Shares eligible for future sale" and "Underwriting."
Underwriting
Luminex and the underwriters for the offering named below have entered into an underwriting agreement concerning the shares being offered. Subject to conditions, each underwriter has severally agreed to purchase the number of shares indicated in the following table. Warburg Dillon Read LLC, Lehman Brothers Inc. and Dain Rauscher Incorporated are the representatives of the underwriters.
Number
Underwriters of shares
--------------------------------------------------------------------------------
Warburg Dillon Read LLC..............................................
Lehman Brothers Inc..................................................
Dain Rauscher Incorporated...........................................
-----
Total..............................................................
=====
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If the underwriters sell more shares than the total number set forth in the table above, the underwriters have a 30-day option to buy from us up to an additional shares at the initial public offering price less the underwriting discounts and commissions to cover these sales. If any shares are purchased under this option, the underwriters will severally purchase shares in approximately the same proportion as set forth in the table above.
The following table shows the per share and total underwriting discounts and commissions we will pay to the underwriters. These amounts are shown assuming both no exercise and full exercise of the underwriters' option to purchase up to an additional shares.
No exercise Full exercise
--------------------------------------------------------------------------------
Per share............................................ $ $
Total.............................................. $ $
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We estimate that the total expenses of the offering payable by us, excluding underwriting discounts and commissions, will be approximately $ .
Shares sold by the underwriters to the public will initially be offered at the initial public offering price set forth on the cover of this prospectus. Any shares sold by the underwriters to securities dealers may be sold at a discount of up to $ per share from the initial public offering price. Any of these securities dealers may resell any shares purchased from the underwriters to other brokers or dealers at a discount of up to $ per share from the initial public offering price. If all the shares are not sold at the initial public offering price, the representatives may change the offering price and the other selling terms.
The underwriters have informed us that they do not expect discretionary sales to exceed 5% of the shares of common stock to be offered.
Luminex, its directors, officers and certain of its stockholders have agreed with the underwriters not to offer, sell, contract to sell, hedge or otherwise dispose of, directly or indirectly, or file with the SEC a registration statement under the Securities Act relating to, any of its common stock or securities convertible into or exchangeable for shares of common stock during the period from the date of this prospectus continuing through the date 180 days after the date of this prospectus, without the prior written consent of Warburg Dillon Read LLC.
Underwriting
The underwriters have reserved for sale, at the initial public offering price, up to shares of our common stock being offered for sale to our customers and business partners. At the discretion of our management, other parties, including our employees, may participate in the reserve shares program. The number of shares available for sale to the general public in the offering will be reduced to the extent these persons purchase reserved shares. Any reserved shares not so purchased will be offered by the underwriters to the general public on the same terms as the other shares in this offering.
Prior to this offering, there has been no public market for our common stock. The initial public offering price will be negotiated by us and the representatives. The principal factors to be considered in determining the initial public offering price include:
.the information set forth in this prospectus and otherwise available to the representatives;
.the history and the prospects for the industry in which we compete;
.the ability of our management;
.our prospects for future earnings, the present state of our development, and our current financial position;
.the general condition of the securities markets at the time of this offering; and
.the recent market prices of, and the demand for, publicly traded common stock of generally comparable companies.
In connection with the offering, the underwriters may purchase and sell shares of common stock in the open market. These transactions may include short sales, stabilizing transactions and purchases to cover positions created by short sales. Short sales involve the sale by the underwriters of a greater number of shares than they are required to purchase in the offering. Stabilizing transactions consist of bids or purchases made for the purpose of preventing or retarding a decline in the market price of the common stock while the offering is in progress.
The underwriters also may impose a penalty bid. This occurs when a particular underwriter repays to the underwriters a portion of the underwriting discount received by it because the representatives have repurchased shares sold by or for the account of that underwriter in stabilizing or short covering transactions.
These activities by the underwriters may stabilize, maintain or otherwise affect the market price of the common stock. As a result, the price of the common stock may be higher than the price that otherwise might exist in the open market. If these activities are commenced, they may be discontinued by the underwriters at any time. These transactions may be effected on the Nasdaq National Market, in the over-the-counter market or otherwise.
We have agreed to indemnify the several underwriters against some liabilities, including liabilities under the Securities Act of 1933 and to contribute to payments that the underwriters may be required to make in respect thereof.
Legal matters
The validity of the shares of common stock offered hereby will be passed upon for Luminex Corporation by Thompson & Knight LLP, Austin, Texas. Certain partners of Thompson & Knight LLP maintain beneficial ownership of shares of our common stock. Dewey Ballantine LLP, New York, New York, is acting as counsel for the underwriters in connection with various legal matters relating to the shares of common stock offered by this prospectus.
Experts
Ernst & Young LLP, independent auditors, have audited our financial statements at December 31, 1998 and 1999, and for each of the three years in the period ended December 31, 1999 as set forth in their report. We have included our financial statements in this prospectus in reliance on Ernst & Young LLP's report given on their authority as experts in accounting and auditing.
Where you can find more information
We have filed with the SEC a registration statement on Form S-1 (including exhibits, schedules and amendments) under the Securities Act with respect to the shares of common stock to be sold in this offering. This prospectus does not contain all the information set forth in the registration statement. For further information with respect to us and the shares of common stock to be sold in this offering, reference is made to the registration statement. Statements contained in this prospectus as to the contents of any contract, agreement or other document referred to are not necessarily complete. Whenever a reference is made in this prospectus to any contract or other document of ours, the reference may not be complete, and you should refer to the exhibits that are apart of the registration statement for a copy of the contract or document.
You may read and copy all or any portion of the registration statement or any other information Luminex files at the SEC's public reference room at 450 Fifth Street, N.W., Washington, D.C. 20549. You can request copies of these documents, upon payment of a duplicating fee, by writing to the SEC. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the public reference rooms. Our SEC filings, including the registration statement, are also available to you on the SEC's web site (http://www.sec.gov).
As a result of this offering, we will become subject to the information and reporting requirements of the Securities Exchange Act, and, in accordance with those requirements, will file periodic reports, proxy statements and other information with the SEC.
This prospectus includes statistical data that were obtained from industry publications. These industry publications generally indicate that the authors of these publications have obtained information from sources believed to be reliable, but do not guarantee the accuracy and completeness of their information. While we believe these industry publications to be reliable, we have not independently verified their data.
Luminex Corporation
INDEX TO FINANCIAL STATEMENTS
Page
--------------------------------------------------------------------------------
Report of Independent Auditors............................................. F-2
Balance Sheets............................................................. F-3
Statements of Operations................................................... F-4
Statements of Changes in Stockholders' Equity.............................. F-5
Statements of Cash Flows................................................... F-6
Notes to Financial Statements.............................................. F-7
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Luminex Corporation
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
Luminex Corporation
We have audited the accompanying balance sheets of Luminex Corporation as of December 31, 1998 and 1999, and the related statements of operations, changes in stockholders' equity and cash flows for each of the three years in the period ended December 31, 1999. 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 in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Luminex Corporation at December 31, 1998 and 1999, and the results of its operations and its 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.
/s/ Ernst & Young LLP
Austin, Texas
January 28, 2000
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Luminex Corporation
BALANCE SHEETS
(in thousands, except share and per share amounts)
Pro Forma
Stockholders'
Equity
December 31, December 31,
1998 1999 1999
-------------------------------------------------------------------------------
(unaudited)
Assets
Current assets:
Cash and cash equivalents................. $8,537 $4,083
Short-term investments.................... -- 4,929
Accounts receivable, net of allowance for
doubtful accounts of $14 in 1998 and
$64 in 1999............................ 146 1,341
Inventory................................. 47 663
Other..................................... 61 181
-------- --------
Total current assets....................... 8,791 11,197
Property and equipment, net................ 799 1,369
-------- --------
Total assets............................... $9,590 $12,566
======== ========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable.......................... $168 $373
Accrued liabilities....................... 158 278
Deferred revenue.......................... 74 120
-------- --------
Total current liabilities.................. 400 771
Deferred revenue........................... -- 600
Stockholders' equity:
Preferred Stock, $2 par value, 5,000,000
shares authorized:
Series A Convertible Preferred Stock, $2
stated value, shares issued and
outstanding: 457,250 in 1998 and 1999;
no shares pro forma................... 915 915 $--
Series B Convertible Preferred Stock, $40
stated value, shares issued and
outstanding: 150,000 in 1998 and 1999;
no shares pro forma................... 6,000 6,000 --
Series C Convertible Preferred Stock, $80
stated value, shares issued and
outstanding: 151,571 in 1998 and 1999;
no shares pro forma................... 12,126 12,126 --
Series D Convertible Preferred Stock,
$120 stated value, shares issued and
outstanding: 57,538 in 1999; no shares
pro forma............................. -- 6,905 --
Series E Convertible Preferred Stock,
$120 stated value, shares issued and
outstanding: 25,000 in 1999; no shares
pro forma............................. -- 3,000 --
Common Stock, $.001 par value, 25,000,000
shares authorized; shares issued and
outstanding: 6,438,162 and 6,454,782 in
1998 and 1999, respectively; 10,753,122
shares pro forma....................... 6 6 11
Warrants to purchase 262,500 shares of
Common Stock at $4 per share........... 180 180 180
Additional paid-in capital................ 343 960 29,901
Deferred stock compensation............... -- (69) (69)
Accumulated deficit....................... (10,380) (18,828) (18,828)
-------- -------- -------
Total stockholders' equity................. 9,190 11,195 $11,195
-------- -------- =======
Total liabilities and stockholders'
equity.................................. $9,590 $12,566
======== ========
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See accompanying notes.
Luminex Corporation
STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
Year ended December 31,
1997 1998 1999
------------------------------------------------------------------------------
Revenue:
Product........................................... $99 $386 $2,606
Grant............................................. -- -- 506
------- ------- -------
Total revenue...................................... 99 386 3,112
Cost of product revenue............................ 10 88 1,172
------- ------- -------
Gross margin....................................... 89 298 1,940
Operating expenses:
Research and development.......................... 1,594 3,611 5,741
Sales, general and administrative................. 1,426 2,566 4,422
Amortization of deferred stock and stock
compensation expense........................... -- -- 509
------- ------- -------
Total operating expenses........................... 3,020 6,177 10,672
------- ------- -------
Loss from operations............................... (2,931) (5,879) (8,732)
Interest income.................................... 178 283 284
------- ------- -------
Net loss........................................... $(2,753) $(5,596) $(8,448)
======= ======= =======
Net loss per share, basic and diluted ............. $(0.44) $(0.87) $(1.31)
======= ======= =======
Shares used in computing net loss per share, basic
and diluted..................................... 6,295 6,415 6,447
Pro forma net loss per share, basic and diluted
(unaudited)..................................... $(0.84)
=======
Shares used in computing pro forma net loss per
share, basic and diluted (unaudited)............ 10,060
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See accompanying notes.
Luminex Corporation
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(in thousands, except share amounts)
Convertible Total
Preferred Stock Common Stock Additional Deferred Stockholders'
Number Number Paid-in Stock Accumulated Equity
of Shares Amount of Shares Amount Warrants Capital Compensation Deficit (Deficit)
---------------------------------------------------------------------------------------------------------------------------
Balance at December 31,
1996.................. 457,250 $915 6,295,250 $6 $-- $1,000 $-- $(2,031) $(110)
Issuance of Preferred
Stock,
Series B............. 150,000 6,000 -- -- -- -- -- -- 6,000
Stock issuance costs... -- -- -- -- 180 (353) -- -- (173)
Net loss............... -- -- -- -- -- -- -- (2,753) (2,753)
------- ------- ---------- --- ---- ------- ----- -------- -------
Balance at December 31,
1997.................. 607,250 6,915 6,295,250 6 180 647 -- (4,784) 2,964
Issuance of Preferred
Stock,
Series C............. 151,571 12,126 -- -- -- -- -- -- 12,126
Stock issuance costs... -- -- -- -- -- (868) -- -- (868)
Exercise of stock
options.............. -- -- 2,666 -- -- 3 -- -- 3
Common stock issued for
assets purchased..... -- -- 140,246 -- -- 561 -- -- 561
Net loss............... -- -- -- -- -- -- -- (5,596) (5,596)
------- ------- ---------- --- ---- ------- ----- -------- -------
Balance at December 31,
1998.................. 758,821 19,041 6,438,162 6 180 343 -- (10,380) 9,190
Issuance of Preferred
Stock,
Series D............. 57,538 6,905 -- -- -- -- -- -- 6,905
Issuance of Preferred
Stock,
Series E............. 25,000 3,000 -- -- -- -- -- -- 3,000
Stock issuance costs... -- -- -- -- -- (8) -- -- (8)
Exercise of stock
options.............. -- -- 16,620 -- -- 47 -- -- 47
Stock options granted
to consultants....... -- -- -- -- -- 578 (578) -- --
Amortization of
deferred stock and
stock compensation
expense.............. -- -- -- -- -- -- 509 -- 509
Net loss............... -- -- -- -- -- -- -- (8,448) (8,448)
------- ------- ---------- --- ---- ------- ----- -------- -------
Balance at December 31,
1999.................. 841,359 $28,946 6,454,782 $6 $180 $960 $(69) $(18,828) $11,195
======= ======= ========== === ==== ======= ===== ======== =======
Pro forma balance at
December 31, 1999
(unaudited)........... -- $-- 10,753,122 $11 $180 $29,901 $(69) $(18,828) $11,195
======= ======= ========== === ==== ======= ===== ======== =======
|
See accompanying notes.
Luminex Corporation
STATEMENTS OF CASH FLOWS
(in thousands)
Year ended December 31,
1997 1998 1999
-------------------------------------------------------------------------------
Operating activities
Net loss........................................... $(2,753) $(5,596) $(8,448)
Adjustment to reconcile net loss to cash used in
operating activities:
Depreciation expense.............................. 69 220 330
Amortization expense.............................. -- 143 186
Amortization of deferred stock and stock
compensation expense........................... -- -- 509
Changes in operating assets and liabilities:
Accounts receivable.............................. (39) (108) (1,195)
Inventory........................................ (44) (3) (616)
Other assets..................................... (13) (48) (120)
Accounts payable................................. 59 64 205
Accrued liabilities.............................. (167) 107 120
Deferred revenue................................. -- 74 646
------- ------- -------
Net cash used in operating activities.............. (2,888) (5,147) (8,383)
Investing activities
Purchase of short-term investments................. -- -- (4,929)
Purchase of property and equipment................. (132) (399) (1,085)
------- ------- -------
Net cash used in investing activities.............. (132) (399) (6,014)
Financing activities
Proceeds from issuance of Common Stock............. -- 3 47
Proceeds from issuance of Preferred Stock.......... 6,000 12,126 9,904
Stock issuance costs............................... (173) (867) (8)
------- ------- -------
Net cash provided by financing activities.......... 5,827 11,262 9,943
Increase in cash and cash equivalents.............. 2,807 5,716 (4,454)
Cash and cash equivalents, beginning of year....... 14 2,821 8,537
------- ------- -------
Cash and cash equivalents, end of year............. $2,821 $8,537 $4,083
======= ======= =======
Non-cash activities
Common stock issued to acquire property and
equipment from related party.................... $-- $561 $--
|
See accompanying notes.
Luminex Corporation
NOTES TO FINANCIAL STATEMENTS
1. Organization and business
Luminex Corporation (the "Company") was incorporated in the state of Texas in May 1995. In June 1998, the Company reincorporated in the state of Delaware. Since its formation, the Company's activities have been focused primarily on the research and development of a unique molecular measurement and analysis system (the LabMAP System) capable of performing multiple tests rapidly and economically on a single patient sample.
From its inception through December 31, 1998, the Company's activities were focused primarily on research and development and raising capital and, accordingly, the Company was considered to be a development stage company. In 1999, the Company commenced shipments of its intended product, the Luminex 100, and is no longer considered a development stage company.
2. Summary of significant accounting policies
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 amounts reported in the financial statements and accompanying
notes. Actual amounts and results could differ from those estimates, and such
differences could be material to the financial statements.
Revenue recognition
Revenues from sales of the Company's products are recognized when persuasive
evidence of an agreement exists, delivery of the product has occurred, the fee
is fixed and determinable and collectibility is probable. The Company reserves
for the cost of estimated sales returns as well as uncollectible accounts based
upon experience.
Grant revenue is recorded as the research expenses relating to the grant are incurred, provided that the amounts received are not refundable if the research is not successful.
Cash equivalents
Cash equivalents consist of cash deposits and investments with original
maturities of three months or less when purchased.
Short-term investments
In accordance with Statement of Financial Accounting Standards ("SFAS") No.
115, Accounting for Certain Investments in Debt and Equity Securities, the
Company's short-term investments are classified as held-to-maturity. Short-term
investments are classified as held-to maturity as the Company has the positive
intent and ability to hold the securities to maturity. Held-to-maturity
securities are stated at amortized cost, adjusted for amortization of premiums
and accretion of discounts to maturity. Such amortization is included in
interest income. Interest on securities classified as held-to-maturity is also
included in interest income.
All of the short-term investments mature within one year of December 31, 1999.
Concentration of credit risk and significant customers Financial instruments which potentially subject the Company to concentrations of credit risk consist of short-term investments and trade receivables. The Company's short-term investments consist of investments in high credit quality financial institutions and issuers.
Luminex Corporation
NOTES TO FINANCIAL STATEMENTS (continued)
The Company provides credit, in the normal course of business, to a number of customers geographically dispersed primarily throughout the U.S. The Company performs ongoing credit evaluations of its customers and maintains allowances for potential credit losses.
The following table summarizes the changes in the allowance for doubtful accounts for 1997, 1998, and 1999 (in thousands):
Balance at December 31, 1996............................................... $--
Additions charged to costs and expenses.................................. --
Write-off of uncollectible accounts...................................... --
---
Balance at December 31, 1997............................................... --
Additions charged to costs and expenses.................................. 14
Write-off of uncollectible accounts...................................... --
---
Balance at December 31, 1998............................................... 14
Additions charged to costs and expenses.................................. 64
Write-off of uncollectible accounts...................................... (14)
---
Balance at December 31, 1999............................................... $64
===
|
Sales to individual customers constituting 10% or more of total revenues for each year were as follows (in thousands):
Year ended
December 31,
1997 1998 1999
---------------------------------------------------------------------------------
Customer No. 1................................................... 14% -- --
Customer No. 2................................................... 10 -- --
Customer No. 3................................................... 10 -- --
Customer No. 4................................................... 10 -- --
Customer No. 5................................................... 10 -- --
Customer No. 6................................................... -- -- 10%
|
Inventory
Inventory, consisting primarily of raw materials and purchased components, is
stated at the lower of cost or market. Cost is determined by the weighted
average method.
Property and equipment
Property and equipment are stated at cost. Property and equipment are
depreciated on a straight-line basis over the useful lives of the assets, which
are generally three to seven years. Leasehold improvements are amortized on a
straight-line basis over the shorter of the remaining term of the lease or its
estimated useful life.
Software costs
Purchased software is capitalized at cost and amortized over the estimated
useful life, generally five years. Software developed for use in the Company's
products is expensed as incurred and is classified as research and development
expense.
Luminex Corporation
NOTES TO FINANCIAL STATEMENTS (continued)
Impairment of long-lived assets
In accordance with SFAS No. 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed of, if indicators of impairment
exist, the Company assesses the recoverability of the affected long-lived
assets by determining whether the carrying value of such assets can be
recovered through undiscounted future operating cash flows. If impairment is
indicated, the Company will measure the amount of such impairment by comparing
the carrying value of the asset to the present value of the expected future
cash flows associated with the use of the asset. To date, no such indicators of
impairment have been identified.
Research and development costs
Research and development costs are expensed in the period incurred.
Patent costs
Costs related to patent applications and prosecution are expensed as incurred
as recoverability of such expenditures is uncertain.
Income taxes
The Company accounts for income taxes in accordance with SFAS No. 109,
Accounting for Income Taxes. This statement prescribes the use of the liability
method whereby deferred tax assets and liabilities are determined based on
differences between financial reporting and tax bases of assets and
liabilities, and are measured using enacted tax rates and laws that will be in
effect when the differences are expected to reverse.
Advertising costs
The Company expenses advertising costs as incurred. Advertising expenses were
not significant for all years presented.
Stock-based compensation
SFAS No. 123, Accounting for Stock-Based Compensation ("SFAS 123"), prescribes
accounting and reporting standards for all stock-based compensation plans,
including employee stock options. As allowed by Statement 123, the Company has
elected to continue to account for its employee stock-based compensation in
accordance with Accounting Principles Board Opinion No. 25, Accounting for
Stock Issued to Employees.
Comprehensive income
In June 1997, the Financial Accounting Standards Board issued Statement No.
130, Reporting Comprehensive Income ("SFAS 130"), which establishes standards
for reporting comprehensive income and its components in a full set of
financial statements. The Company adopted Statement 130 during the year ended
December 31, 1998. There was no impact to the Company as a result of the
adoption of SFAS 130, as there no differences between net loss and
comprehensive loss for all periods.
Segment reporting
The Company adopted SFAS No. 131, Disclosures About Segments of an Enterprise
and Related Information, during 1998. SFAS No. 131 requires the use of a
management approach in identifying segments of an enterprise. Management has
determined that the Company operates in one business segment.
Luminex Corporation
NOTES TO FINANCIAL STATEMENTS (continued)
Net loss per share
In accordance with SFAS No. 128, Earnings Per Share, and SEC Staff Accounting
Bulletin (or SAB) No. 98, basic net income (loss) per share is computed by
dividing the net income (loss) for the period by the weighted average number of
common shares outstanding during the period. Diluted net income (loss) per
share is computed by dividing the net income (loss) for the period by the
weighted average number of common and common equivalent shares outstanding
during the period. Potentially dilutive securities composed of incremental
common shares issuable upon the exercise of stock options and warrants, and
common shares issuable on conversion of preferred stock, were excluded from
historical diluted loss per share because of their anti-dilutive effect.
Under the provisions of SAB No. 98, common shares issued for nominal consideration, if any, would be included in the per share calculations as if they were outstanding for all periods presented. No common shares have been issued for nominal consideration.
Pro forma net loss per share has been computed as described above and also gives effect to common equivalent shares arising from preferred stock that will automatically convert upon the closing of the initial public offering contemplated by this prospectus (using the as-if converted method from the original date of issuance).
The following is a reconciliation of the numerator and denominator of basic and diluted net loss per share (in thousands, except per share amounts):
Year Ended December 31,
1997 1998 1999
--------------------------------------------------------------------------------
Basic and diluted:
Net loss............................................ $(2,753) $(5,596) $(8,448)
======= ======= =======
Weighted average shares of common stock
outstanding...................................... 6,295 6,415 6,447
======= ======= =======
Basic and diluted net loss per share................ $(0.44) $(0.87) $(1.31)
======= ======= =======
Pro forma basic and diluted:
Shares used above................................... 6,447
Pro forma adjustment to reflect weighted average
effect of assumed conversion of preferred stock.. 3,613
-------
Shares used in computing pro forma basic and diluted
net loss per share............................... 10,060
=======
Basic and diluted pro forma net loss per share...... $(0.84)
=======
|
The Company has excluded all convertible preferred stock, outstanding stock options, outstanding warrants to purchase stock and shares subject to repurchase from the calculation of diluted loss per common share because all such securities are antidilutive for all applicable periods presented. The total number of shares excluded from the calculations of diluted net loss per share, prior to application of the treasury stock method for options, was 3,045,750, 4,834,960 and 6,245,740 for the years ended December 31, 1997, 1998 and 1999, respectively. Such securities, had they been dilutive, would have been included in the computations of diluted net loss per share. See Note 4 for further information on these securities.
Luminex Corporation
NOTES TO FINANCIAL STATEMENTS (continued)
Unaudited pro forma stockholders' equity The unaudited pro forma stockholders' equity information at December 31, 1999 reflects the conversion of the convertible preferred stock.
Recently issued accounting standards
In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities, as amended by SFAS No. 137, which is
effective for fiscal years beginning after June 15, 2000. This statement
requires companies to record derivatives on the balance sheet as assets or
liabilities measured at fair value. Gains or losses resulting from changes in
the values of those derivatives would be accounted for depending on the use of
the derivative and whether it qualifies for hedge accounting. SFAS No. 133 will
be effective for the Company's financial statements for the year ending
December 31, 2001. Management believes that this statement will not have a
material impact on the Company's financial position or results of operations.
In March 1999, the FASB issued an exposure draft entitled "Accounting for Certain Transactions involving Stock Compensation," which is a proposed interpretation of APB Opinion No. 25. However, the exposure draft has not been finalized. Once finalized and issued, the current accounting practices for transactions involving stock compensation may need to change and such changes could affect the Company's future operating results.
In December 1999, the Securities and Exchange Commission staff released Staff Accounting Bulletin No. 101, Revenue Recognition in Financial Statements (SAB No. 101), which provides guidance on the recognition, presentation and disclosure of revenue in financial statements. The application of SAB No. 101 did not have a material impact on the financial statements of the Company.
Reclassification
Certain amounts in the prior year financial statements have been reclassified
to conform to current year presentation.
3. Property and equipment
Property and equipment consisted of the following at December 31 (in thousands):
1998 1999
--------------------------------------------------------------------------------
Laboratory equipment............................................ $783 $1,180
Computer equipment.............................................. 128 264
Leasehold improvements.......................................... 229 609
Purchased software and intangibles.............................. 56 123
Furniture and fixtures.......................................... 87 192
------ ------
1,283 2,368
Less accumulated amortization and depreciation.................. (484) (999)
------ ------
$799 $1,369
====== ======
|
Luminex Corporation
NOTES TO FINANCIAL STATEMENTS (continued)
4. Stockholders' equity
Series A Preferred Stock
A total of 457,250 shares of Series A Preferred Stock ("Series A Stock") were
issued in 1995 and 1996 at $2.00 per share. The Series A Stock does not
currently pay a dividend but is entitled to receive a dividend on a pro rata
basis if any dividend is paid to holders of the Common Stock. The Series A
Stock is entitled to one vote on all matters in which shares of Common Stock
are entitled to vote except in certain circumstances under the Delaware General
Corporation Law ("DGCL") where the holders are entitled to vote as a class.
Each share of Series A Stock is convertible at the option of the holder into
one share of Common Stock subject to adjustment to protect against dilution,
and has a preference in liquidation of $2.00.
With at least 30 days notice to each holder, the Company may, at its option, redeem all but not part of the Series A Stock. All outstanding shares of Series A Stock are subject to mandatory redemption on the date that a registration statement registering any shares of Common Stock under the Securities Act is declared effective by the Securities and Exchange Commission.
Series B Preferred Stock
A total of 150,000 shares of Series B Preferred Stock ("Series B Stock") were
issued in 1997 at $40.00 per share. The Series B Stock does not currently pay a
dividend but is entitled to receive a dividend on a pro rata basis if any
dividend is paid to the holders of the Common Stock. The Series B Stock is
entitled to ten votes on all matters in which shares of Common Stock are
entitled to vote except in certain circumstances under the DGCL where the
holders are entitled to vote as a class. Each share of Series B Stock is
convertible at the option of the holder into ten shares of Common Stock,
subject to adjustment to protect against dilution, and has a preference in
liquidation of $40.00.
The Company may at its option, with not less than 30 and not more than 60 days notice, redeem all but not part of the Series B Stock for $40.00 per share. All outstanding shares of Series B Stock are subject to mandatory redemption by the Company at $40.00 per share, (with not less than 30 and not more than 60 days notice) on the date that a registration statement registering any shares of Common Stock is declared effective by the Securities and Exchange Commission.
Series C Preferred Stock
A total of 151,571 shares of Series C Preferred Stock ("Series C Stock") were
issued in 1998 at $80.00 per share. The Series C Stock does not currently pay a
dividend but is entitled to receive a dividend on a pro rata basis if any
dividend is paid to holders of the Common Stock. The Series C Stock is entitled
to ten votes on all matters in which shares of Common Stock are entitled to
vote except in certain circumstances under the DGCL where the holders are
entitled to vote as a class. Each share of Series C Stock is convertible at the
option of the holder into ten shares of Common Stock subject to adjustment to
protect against dilution, and has a preference in liquidation of $80.00.
The Company may, at its option, with not less than 30 and not more than 60 days notice, redeem all but not part of the Series C Stock for $80.00 per share. All outstanding shares of Series C Stock are subject to automatic conversion into fully paid and nonassessable shares of Common Stock by the Company at $8.00 per share of common stock, on the date that a registration statement registering any shares of Common Stock under the Securities Act is declared effective by the Securities and Exchange Commission.
Luminex Corporation
NOTES TO FINANCIAL STATEMENTS (continued)
Series D Preferred Stock
A total of 57,538 shares of Series D Preferred Stock ("Series D Stock") were
issued in 1999 at $120.00 per share. The Series D Stock does not currently pay
a dividend but is entitled to receive a dividend on a pro rata basis if any
dividend is paid to holders of the Common Stock. The Series D Stock is entitled
to ten votes on all matters in which shares of Common Stock are entitled to
vote except in certain circumstances under the DGCL where the holders are
entitled to vote as a class. Each share of Series D Stock is convertible at the
option of the holder into ten shares of Common Stock subject to adjustment to
protect against dilution, and has a preference in liquidation of $120.00.
The Company may, at its option, with not less than 30 and not more than 60 days notice, redeem all but not part of the Series D Stock for $120.00 per share. All outstanding shares of Series D Stock are subject to automatic conversion into fully paid and nonassessable shares of Common Stock by the Company at $12.00 per share of common stock, on the date that a registration statement registering any shares of Common Stock under the Securities Act is declared effective by the Securities and Exchange Commission.
Series E Preferred Stock
A total of 25,000 shares of Series E Preferred Stock ("Series E Stock") were
issued in 1999 at $120.00 per share. The Series E Stock does not currently pay
a dividend but is entitled to receive a dividend on a pro rata basis if any
dividend is paid to holders of the Common Stock. The Series E Stock is entitled
to ten votes on all matters in which shares of Common Stock are entitled to
vote except in certain circumstances under the DGCL where the holders are
entitled to vote as a class. Each share of Series E Stock is convertible at the
option of the holder into ten shares of Common Stock subject to adjustment to
protect against dilution, and has a preference in liquidation of $120.00.
The Company may, at its option, with not less than 30 and not more than 60 days notice, redeem all but not part of the Series C Stock for $120.00 per share. All outstanding shares of Series E Stock are subject to automatic conversion into fully paid and nonassessable shares of Common Stock by the Company at $12.00 per share of common stock, on the date that a registration statement registering any shares of Common Stock under the Securities Act is declared effective by the Securities and Exchange Commission.
Common Stock
At December 31, 1999, there were 6,454,782 shares of Common Stock issued and
outstanding. In addition, approximately 6,542,000 shares were reserved for
future issuance upon exercise of stock options and warrants and upon conversion
of convertible securities.
Warrants to purchase Common Stock
In conjunction with the sale of the Series B Stock, the Company issued warrants
to purchase an aggregate of 262,500 shares of Common Stock at an exercise price
of $4.00 per share. The warrants may be exercised, in whole or in part, at any
time prior to April 3, 2002. (See also Note 8.)
Stock option plan
Under the Company's Stock Option Plan, which was amended in May 1998 (the
"Plan"), options to purchase up to 2,000,000 shares of the Company's Common
Stock may be granted to employees, officers, non-employee directors and
advisors of the Company. The Plan is administered by the Stock Option Committee
of the Board of Directors which has the authority to determine the terms and
Luminex Corporation
NOTES TO FINANCIAL STATEMENTS (continued)
conditions under which options will be granted, including the number of shares, option price, vesting schedule and term. Under certain circumstances, the Company may repurchase previously granted options or shares issued upon the exercise of a previously granted option.
Since inception, the Company has granted options to employees at estimated fair market value on the date of grant. Employee options generally vest one-third on each of the first, second and third anniversary dates from the date of grant and have a term of five years.
In 1997, the Company granted a fully vested option to purchase 18,750 shares of the Company's Common Stock to a consulting firm at an exercise price of $4.00 per share that expires on January 31, 2002. The Company granted an additional 181,250 options to this consulting firm with vesting based on the achievement of identified milestones. No amount was allocated to the value of these options as such amounts were insignificant. In 1999, the consulting firm surrendered all the options in exchange for issuance by the Company of a fully vested option to purchase 50,000 shares of the Company's Common Stock at an exercise price of $4.00 per share. The Company recorded stock compensation in the amount of approximately $433,000 in connection with the issuance of stock options to the consulting firm.
Pro forma information regarding net loss is required by Statement 123, and has been determined as if the Company had accounted for its employee stock options under the minimum value method of that Statement. The minimum value for these options was estimated at the date of grant using a minimum value option pricing model with the following assumptions for 1997, 1998 and 1999; volatility of 0%; risk free interest rate of 6%; expected life of the options of 5 years; and an expected dividend yield of 0%.
For purposes of pro forma disclosures, the estimated fair value of the options is expensed over the options' vesting periods. The Company's pro forma information is as follows (in thousands):
1997 1998 1999
-------------------------------------------------------------------------------
Net loss as reported................................ $(2,753) $(5,596) $(8,448)
Pro forma net loss.................................. (2,800) (5,753) (8,714)
Diluted net loss per share as reported.............. (0.44) (0.87) (1.31)
Pro forma diluted net loss per share................ (0.44) (0.90) (1.35)
|
The weighted average grant date fair value of options granted was $1.04, $1.72 and $2.13 for 1997, 1998 and 1999, respectively.
Luminex Corporation
NOTES TO FINANCIAL STATEMENTS (continued)
A summary of the changes in Common Stock options is as follows:
Weighted
Range of Average
Exercise Exercise
Shares Prices Price
-------------------------------------------------------------------------------
Options outstanding, December 31, 1996........ 199,000 $1.00 $1.00
Granted...................................... 627,000 $4.00 $4.00
Exercised.................................... -- -- --
Surrendered.................................. -- -- --
--------- ------------ -----
Options outstanding, December 31, 1997........ 826,000 $1.00-$ 4.00 $3.28
Granted...................................... 281,500 $6.00-$ 8.00 $7.19
Exercised.................................... (2,666) $1.00 $1.00
Surrendered.................................. (5,334) $1.00-$ 6.00 $4.00
--------- ------------ -----
Options outstanding, December 31, 1998........ 1,099,500 $1.00-$ 8.00 $4.28
Granted...................................... 817,100 $4.00-$12.00 $8.23
Exercised.................................... (16,620) $1.00-$ 4.00 $2.81
Surrendered.................................. (215,000) $4.00 $4.00
--------- ------------ -----
Options outstanding, December 31, 1999........ 1,684,980 $1.00-$12.00 $6.25
========= ============
|
The following table summarizes information about options outstanding at December 31, 1999:
Options Outstanding Options Exercisable
Weighted Average Weighted Number Weighted
Exercise Number Remaining Average Exercisable Average
Price Outstanding Contractual Life Exercise Price and Vested Exercise Price
--------------------------------------------------------------------------------
$1.00 188,380 1.16 $1.00 158,380 $1.00
4.00 450,000 2.80 4.00 338,318 4.00
6.00 162,000 3.16 6.00 53,994 6.00
8.00 762,500 4.29 8.00 130,829 8.00
12.00 122,100 4.21 12.00 22,933 12.00
--------- -------
1,684,980 704,454
========= =======
|
5. Income taxes
As of December 31, 1999, the Company had federal net operating loss carryforwards of approximately $17,077,000 and research and development credit carryforwards of approximately $536,000 that will begin to expire in 2010 if not utilized.
The Tax Reform Act of 1986 imposes substantial restrictions on the utilization of net operating losses and tax credits in the event of an "ownership change" of a corporation. The Company's utilization of the net operating losses may be subject to a substantial annual limitation due to an "ownership change" resulting from the sales of private equity securities. The annual limitation may result in the expiration of net operating losses before utilization.
Luminex Corporation
NOTES TO FINANCIAL STATEMENTS (continued)
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's deferred tax liabilities and assets as of December 31 are as follows (in thousands):
1998 1999
--------------------------------------------------------------------------------
Deferred tax assets:
Deferred revenue.............................................. $-- $267
Depreciable assets............................................ -- 147
Accrued expenses.............................................. 5 40
Net operating loss and credit carryforwards................... 4,080 6,855
Start-up and organization costs............................... 17 11
Stock compensation............................................ -- 188
------- ------
Total deferred tax assets...................................... 4,102 7,508
Valuation allowance for deferred tax assets................... (4,086) (7,485)
------- ------
Net deferred taxes............................................. 16 23
Deferred tax liabilities:
Prepaid expenses.............................................. (16) (23)
------- ------
Total deferred tax liabilities................................. (16) (23)
------- ------
Net deferred taxes............................................. $-- $--
======= ======
|
The Company has established a valuation allowance equal to the net deferred tax assets due to uncertainties regarding the realization of deferred tax assets based on the Company's lack of earnings history. The valuation allowance increased by approximately $2,161,000 and $3,399,000 during 1998 and 1999, respectively.
The Company's provision for income taxes differs from the expected tax benefit amount computed by applying the statutory federal income tax rate of 34% to income before income taxes as a result of the following:
Year Ended
December 31,
1997 1998 1999
--------------------------------------------------------------------------------
Statutory tax rate...................................... (34.0)% (34.0)% (34.0)%
State taxes, net of federal benefit..................... (3.0) (3.0) (3.0)
Nondeductible expenses.................................. -- 1.0 0.1
R&D credit generated.................................... (5.6) (2.6) (2.7)
Other................................................... -- -- (0.6)
Valuation allowance..................................... 42.6 38.6 40.2
----- ----- -----
-- % -- % -- %
===== ===== =====
|
6. Employee benefit plans
Beginning January 1, 1998, the Company instituted a Savings Incentive Match Plan for Employees ("SIMPLE") under Section 408(p) of the Internal Revenue Code. Each employee of the Company who received at least $5,000 of compensation during the year from the Company was eligible to contribute
Luminex Corporation
NOTES TO FINANCIAL STATEMENTS (continued)
up to $6,000 annually. The Company matches such contributions on a dollar-for- dollar basis up to a maximum of 3% of the employee's gross salary compensation. All employee and employer contributions are immediately vested. The Company's contributions totaled approximately $40,000 in 1998 and $92,000 in 1999.
7. Commitments
Lease arrangements
The Company has various operating leases related primarily to office facilities. Rental expense for these operating leases for the years 1997, 1998 and 1999 totaled approximately $105,000, $152,000 and $399,000, respectively. Minimum annual rental commitments as of December 31, 1999 under noncancelable leases for each of the next five years and in the aggregate are as follows (in thousands):
2000....................................................................... $327
2001....................................................................... 304
2002....................................................................... 74
2003....................................................................... --
2004....................................................................... --
Thereafter................................................................. --
----
Total...................................................................... $705
====
|
Legal proceedings
As a result of a procedural omission by the Company's prior patent counsel, the Company is unable to obtain a patent in Japan and certain other countries for the Company's method of "real time" detection and quantification of multiple analytes from a single sample. The Company has filed a lawsuit alleging negligence on the part of its prior patent counsel in this matter and seeking to recover the damages believed to result from the lack of this patent protection in Japan and certain other countries. At this time, management cannot predict whether this lawsuit will be successful and, if so, the amount of any damages that may be recovered.
8. Related party transactions
The Company purchased certain office and laboratory equipment from Inland Labs on January 1, 1998 for $769,766, which was based on the net book value of the assets acquired by Inland Labs prior to July 1, 1995, and the cost of assets acquired by Inland Labs subsequent to June 30, 1995. Dr. Chandler was paid $208,782 in cash and was issued 140,246 shares of the Company's Common Stock. A committee of outside directors determined that the transaction was fair and in the best interest of the Company and its stockholders.
In 1997, the Company paid $136,000 to a stockholder and Director of the Company for consulting services provided in conjunction with the development of the Company's FlowMetrixTM System and the Luminex 100 diagnostic instrument.
In conjunction with the issuance of the Series B Preferred Stock in 1997, the Company made cash payments totaling approximately $354,000 and issued warrants to purchase 262,500 shares of
Luminex Corporation
NOTES TO FINANCIAL STATEMENTS (continued)
Common Stock to the predecessor of Loewenbaum & Company, Incorporated ("Loewenbaum"), which acted as the placement agent for the Series B Preferred Stock. G. Walter Loewenbaum is a major stockholder and Director of Luminex and is Chairman and Chief Executive Officer of Loewenbaum and held such offices with its predecessor. The cash and warrants were paid to Loewenbaum's predecessor as the placement fee for the Series B Preferred Stock. The warrants may be exercised in whole or in part, at any time prior to April 3, 2002 at $4.00 per share.
In conjunction with the issuance of the Series C Preferred Stock in 1998, the Company made cash payments totaling approximately $849,000 to Loewenbaum, which acted as the placement agent for the Series C Preferred Stock. G. Walter Loewenbaum is a major stockholder and Director of Luminex and is Chairman and Chief Executive Officer of Loewenbaum. The cash was paid to Loewenbaum as the placement fee for the Series C Preferred Stock.
On June 1, 1999 the Company entered into a consulting agreement with a director of Luminex for consulting services. In consideration for those services, the Company paid the director $5,833 per month. On November 1, 1999, the Company amended that agreement to increase the level of consulting services and to increase the consulting fee to $11,666 per month. In addition, the Company issued stock options for the purchase of 25,000 shares of the Company's common stock to this Director of the Company. The Company recorded deferred stock compensation in the amount of $74,500 in connection with such transaction of which approximately $41,000 was amortized during the year.
On September 1, 1997, seven outside directors of Luminex were each granted fully vested options to purchase 5,000 shares of common stock at an exercise price of $4.00 per share, and one outside director of Luminex was granted fully vested options to purchase 30,000 shares of common stock at an exercise price of $4.00 per share.
On May 20, 1999, six outside directors of Luminex were each granted fully vested options to purchase 15,000 shares of common stock at an exercise price of $8.00 per share.
In December 1999, the Company issued 25,000 shares of Series E convertible preferred stock for an aggregate price of $3,000,000 to Koerner Capital Corporation, of which John E. Koerner III, one of the Company's directors is the sole stockholder.
9. Joint venture research arrangement
In October 1998, the Company, along with a joint venture partner, was granted a special assistance award by the National Institute of Standards and Technology to conduct liquid array technology development. In September 1999, the Company and its joint venture partner suspended all joint venture activities. During the year, the Company incurred expenses related to liquid array development activities totaling approximately $600,000 and recognized grant revenues of approximately $506,000.
[Inside back cover]
[LOGO OF LUMINEX]
Part II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. Other Expenses of Issuance and Distribution
The following is an itemized statement of the amounts of all expenses payable by the Registrant in connection with the registration of the common stock offered hereby (estimated except for the Registration Fee, NASD Filing Fee and Nasdaq National Market listing fee), other than underwriting discounts and commissions:
Registration Fee--Securities and Exchange Commission................... $26,400
NASD Filing Fee........................................................ 10,500
Nasdaq National Market listing fee..................................... *
Blue Sky fees and expenses............................................. 5,000
Accountants' fees and expenses......................................... 175,000
Legal fees and expenses................................................ 250,000
Printing and engraving expenses........................................ 125,000
Transfer agent and registrar fees...................................... *
Miscellaneous.......................................................... *
-------
Total................................................................ $ *
=======
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ITEM 14. Indemnification of Directors and Officers
Pursuant to Sections 102(b)(7) and 145 of the Delaware General Corporation Law, our Restated Certificate of Incorporation and Amended and Restated Bylaws include provisions eliminating or limiting the personal liability of the members of our board of directors to our company and our stockholders for monetary damages for breach of fiduciary duty as a director. This does not apply for any breach of a director's duty of loyalty to our company or our stockholders, for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of the law, for paying an unlawful dividend or approving an illegal stock repurchase, or for any transaction from which a director derived an improper personal benefit.
Our Restated Certificate of Incorporation and Amended and Restated Bylaws also provide that we have the power to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding (other than an action by or in the right of our company) by reason of the fact that the person is or was a director, officer, employee or agent of any corporation, partnership, joint venture, trust or other enterprise, against any and all expenses (including attorneys' fees), judgments, fines and amounts paid in settlement and reasonably incurred in connection with such action, suit or proceeding. Our power to indemnify applies only if the person acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of our corporation, and with respect to any criminal action or proceeding, had no reasonable cause to believe the person's conduct was unlawful.
In the case of an action by or in the right of our company, no indemnification may be made with respect to any claim, issue or matter as to which such person shall have been adjudged to be liable to us unless and only to the extent that the court in which such action or suit was brought shall determine that despite the adjudication of liability such person is fairly and reasonably entitled to indemnity for such expenses which the court shall deem proper. To the extent a director or officer of our company has been successful in the defense of any action, suit or proceeding referred to above or in the defense of any claim, issue or matter therein, he shall be indemnified against expenses (including attorney's fees) actually and reasonably incurred by him in connection therewith.
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We have the power to purchase and maintain insurance on behalf of any person covering any liability incurred by such person in his capacity as a director, officer, employee or agent of our company, or arising out of his status as such, whether or not we would have the power to indemnify him against such liability.
The foregoing summaries are necessarily subject to the complete text of the statute, Amended and Restated Bylaws and Restated Certificate of Incorporation referred to above and are qualified in their entirety by reference thereto.
ITEM 15. Recent Sales of Unregistered Securities
A. In the three years preceding the filing of this registration statement, the
Registrant from time to time has granted stock options to employees and
consultants in reliance upon exemption from registration pursuant to either
(1) Section 4(2) of the Securities Act of 1933 or (2) Rule 701 promulgated
under the Securities Act of 1933. The following table sets forth certain
information regarding such grants:
Number Exercise
of shares prices
-------------------------------------------------------------------------------
January 1, 1997 to December 31, 1997.................... 627,000 $ 4.00
January 1, 1998 to December 31, 1998.................... 281,500 $ 6.00-$8.00
January 1, 1999 to December 31, 1999.................... 817,100 $4.00-$12.00
January 1, 2000 to January 31, 2000..................... -- --
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For additional information concerning these transactions, please see "Management -- Employee benefit plans" in the prospectus included in this registration statement.
B. Set forth in chronological order is information regarding all securities sold by the Registrant in the three years preceding the filing of this registration statement.
(1) Since January 1, 1997, the Registrant has granted to employees, directors and consultants options to purchase an aggregate of 1,725,600 shares of Common Stock under its 1996 Stock Option Plan at a weighted average exercise price of $6.52.
(2) On April 2, 1997, the Registrant issued a warrant to purchase 262,500 shares of common stock to Southcoast Capital Corporation or its permitted assigns for an aggregate purchase price of $1,050,000.
(3) In April 1997, the Registrant issued 150,000 shares of its Series B convertible preferred stock to individuals and entities for an aggregate purchase price of $6,000,000.
(4) In July 1999, the Registrant issued 151,571 shares of its Series C convertible preferred stock to individuals and entities for an aggregate purchase price of $12,125,680.
(5) In December 1999, the Registrant issued 57,538 shares of its Series D convertible preferred stock to individuals and entities for an aggregate price of $6,904,560.
(6) In December 1999, the Registrant issued 25,000 shares of our Series E convertible preferred stock to an entity for an aggregate purchase price of $3,000,000.
The sale of the above securities were deemed to be exempt from registration under the Securities Act in reliance on Section 4(2) of the Securities Act, or Regulation D promulgated thereunder, or, with respect
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to issuances to employees, directors and consultants, Rule 701 promulgated under Section 3(b) of the Securities Act as transactions by an issuer not involving a public offering or transactions pursuant to compensatory benefit plans and contracts relating to compensation as provided under such Rule 701. Other than the placement agent utilized in connection with sales of our Series B and C preferred stock, no underwriters were involved in the foregoing sales of securities. Each share of the Registrant's convertible preferred stock listed above will convert automatically into ten shares of the Registrant's common stock upon the effectiveness of this registration statement.
ITEM 16. Exhibits and Financial Statement Schedules
(a)Exhibits
Exhibit
Number Description
-------------------------------------------------------------------------------
1.1* Form of Underwriting Agreement
3.1 Form of Restated Certificate of Incorporation of the Registrant
3.2 Amended and Restated Bylaws of the Registrant
4.1* Form of Common Stock Certificate
4.2 Warrant for the Purchase of Shares of Common Stock dated as of April
2, 1997 by and between the Registrant and Southcoast Capital
Corporation.
5.1* Opinion of Thompson & Knight L.L.P.
10.1 1996 Stock Option Plan of the Registrant, as amended.
10.2 Form of Stock Option Agreement of the Registrant.
10.3 Form of Incentive Stock Option Agreement of the Registrant.
10.4* 2000 Long-Term Incentive Plan of the Registrant.
10.5* Form of Incentive Stock Option Award Agreement of the Registrant.
10.6* Form of Non-Qualified Stock Option Award Agreement of the Registrant.
10.7+ Development and Supply Agreement dated as of March 19, 1999 by and
between the Registrant and Bio-Rad Laboratories, Inc.
10.8+ Amendment to Development and Supply Agreement dated as of January 13,
2000 by and between the Registrant and Bio-Rad Laboratories, Inc.
10.9+ Agreement for Electronic Manufacturing Services dated as of January 1,
2000 by and between the Registrant and Sanmina Corporation.
10.10 Consultant Agreement dated as of June 1, 1999 by and between the
Registrant and A. Sidney Alpert.
10.11 Amendment to Consultant Agreement dated as of November 1, 1999 by and
between the Registrant and A. Sidney Alpert.
10.12 Standard Commercial Lease Agreement dated as of August 21, 1989 by and
between the Registrant and Aetna Life Insurance Company, as amended,
for facilities situated at 12112 Technology Boulevard, Austin, Texas
78727.
10.13 Sublease Agreement dated as of December 20, 1999 by and between the
Registrant and American Innovations, Ltd., for facilities situated at
12112 Technology Boulevard, Austin, Texas 78727.
10.14 First Amendment to Sublease Agreement dated as of December 20, 1999 by
and between the Registrant and American Innovations, Ltd., for
facilities situated at 12112 Technology Boulevard, Austin, Texas
78727.
23.1 Consent of Thompson & Knight L.L.P. (included as part of Exhibit 5.1
hereto)
23.2 Consent of Independent Auditors
24.1 Power of Attorney (included on signature page of the Registration
Statement hereto)
27.1 Financial Data Schedule
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(b)Financial Statement Schedules
None.
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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 for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by 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, 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 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 of 1933, 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.
(2) For the purpose of determining any liability under the Securities Act of 1933, 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.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Austin, State of Texas, on February 4, 2000.
Luminex Corporation
/s/ Mark B. Chandler, Ph.D.
By___________________________________
Mark B. Chandler, Ph.D.
Chief Executive Officer
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KNOW ALL PERSONS BY THESE PRESENTS, that each of the persons whose names appear below appoint and constitute Mark B. Chandler, Ph.D. and James L. Persky, and each of them, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to execute any and all amendments to the within Registration Statement, and to sign any and all registration statements relating to the same offering of securities as this Registration Statement that are filed pursuant to Rule 462(b) of the Securities Act of 1933, as amended, and to file the same, together with all exhibits thereto, with the Securities and Exchange Commission, the National Association of Securities Dealers, Inc., and such other agencies, offices and persons as may be required by applicable law, granting unto each said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that each said attorney-in-fact and agent may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons on February 4, 2000 in the capacities indicated
Signature Title Date
--------- ----- ----
/s/ Mark B. Chandler, Ph.D. Chairman of the Board and February 4, 2000
____________________________________ Chief Executive Officer
Mark B. Chandler, Ph.D. (Principal Executive
Officer)
/s/ James L. Persky Vice President, Treasurer February 4, 2000
____________________________________ and Chief Financial Officer
James L. Persky (Principal Financial
Officer)
/s/ Harriss T. Currie Controller (Principal February 4, 2000
____________________________________ Accounting Officer)
Harriss T. Currie
/s/ G. Walter Loewenbaum Director February 4, 2000
____________________________________
G. Walter Loewenbaum
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Signature Title Date
--------- ----- ----
/s/ A. Sidney Alpert Director February 4, 2000
____________________________________
A. Sidney Alpert
/s/ Robert J. Cresci Director February 4, 2000
____________________________________
Robert J. Cresci
/s/ Laurence E. Hirsch Director February 4, 2000
____________________________________
Laurence E. Hirsch
/s/ Jim D. Kever Director February 4, 2000
____________________________________
Jim D. Kever
/s/ Fred C. Goad, Jr. Director February 4, 2000
____________________________________
Fred C. Goad, Jr.
/s/ John E. Koerner, III Director February 4, 2000
____________________________________
John E. Koerner, III
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INDEX TO EXHIBITS
Exhibit
Number Description
-------------------------------------------------------------------------------
1.1* Form of Underwriting Agreement
3.1 Form of Restated Certificate of Incorporation of the Registrant
3.2 Amended and Restated Bylaws of the Registrant
4.1* Form of Common Stock Certificate
4.2 Warrant for the Purchase of Shares of Common Stock dated as of April
2, 1997 by and between the Registrant and Southcoast Capital
Corporation.
5.1* Opinion of Thompson & Knight L.L.P.
10.1 1996 Stock Option Plan of the Registrant, as amended.
10.2 Form of Stock Option Agreement of the Registrant.
10.3 Form of Incentive Stock Option Agreement of the Registrant.
10.4* 2000 Long-Term Incentive Plan of the Registrant.
10.5* Form of Incentive Stock Option Award Agreement of the Registrant.
10.6* Form of Non-Qualified Stock Option Award Agreement of the Registrant.
10.7+ Development and Supply Agreement dated as of March 19, 1999 by and
between the Registrant and Bio-Rad Laboratories, Inc.
10.8+ Amendment to Development and Supply Agreement dated as of January 13,
2000 by and between the Registrant and Bio-Rad Laboratories, Inc.
10.9+ Agreement for Electronic Manufacturing Services dated as of January 1,
2000 by and between the Registrant and Sanmina Corporation.
10.10 Consultant Agreement dated as of June 1, 1999 by and between the
Registrant and A. Sidney Alpert.
10.11 Amendment to Consultant Agreement dated as of November 1, 1999 by and
between the Registrant and A. Sidney Alpert.
10.12 Standard Commercial Lease Agreement dated as of August 21, 1989 by and
between the Registrant and Aetna Life Insurance Company, as amended,
for facilities situated at 12112 Technology Boulevard, Austin, Texas
78727.
10.13 Sublease Agreement dated as of December 20, 1999 by and between the
Registrant and American Innovations, Ltd., for facilities situated at
12112 Technology Boulevard, Austin, Texas 78727.
10.14 First Amendment to Sublease Agreement dated as of December 20, 1999 by
and between the Registrant and American Innovations, Ltd., for
facilities situated at 12112 Technology Boulevard, Austin, Texas
78727.
23.1 Consent of Thompson & Knight L.L.P. (included as part of Exhibit 5.1
hereto)
23.2 Consent of Independent Auditors
24.1 Power of Attorney (included on signature page of the Registration
Statement hereto)
27.1 Financial Data Schedule
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Commission.
Exhibit 3.1
FORM
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
LUMINEX CORPORATION
Luminex Corporation, a corporation organized and existing under the laws of the State of Delaware (the "Corporation"), hereby certifies as follows:
FIRST: The name of the Corporation is Luminex Corporation.
SECOND: The original Certificate of Incorporation of the Corporation was filed with the Secretary of State of Delaware on June 19, 1998.
THIRD: This Restated Certificate of Incorporation amends and restates the provisions of the Certificate of Incorporation of the Corporation filed with the Secretary of State of Delaware on June 19, 1998.
FOURTH: The Board of Directors duly adopted resolutions proposing to amend and restate the Certificate of Incorporation of the Corporation, declaring said amendment and restatement to be advisable and in the best interests of the Corporation and its stockholders, and authorizing the appropriate officers of the Corporation to obtain the approval of the stockholders therefor.
FOURTH: The Restated Certificate of Incorporation was approved by the requisite number of shares of the Corporation in accordance with the requirements of Sections 242 and 245 of the General Corporation Law of the State of Delaware at the Corporation's annual meeting of stockholders held on February ___, 2000.
FIFTH: The text of the Restated Certificate of Incorporation is hereby amended and restated to read in its entirety as follows:
ARTICLE I
The name of the corporation is Luminex Corporation (the "Corporation").
ARTICLE II
The address of the Corporation's registered office in the State of Delaware is Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County of New Castle 19801, and the name of the Corporation's 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 corporations may be organized under the General Corporation Law of the State of Delaware.
ARTICLE IV
1. Dividends. Subject to the preferential rights, if any, of the Preferred Stock, the holders of shares of Common Stock shall be entitled to receive, when and if declared by the Board of Directors, out of the assets of the Corporation which are by law available therefore, dividends payable either in cash, in property or in shares of Common Stock or other securities of the Corporation.
2. Voting Rights. At every annual or special meeting of shareholders of the Corporation, every holder of Common Stock shall be entitled to one vote, in person or by proxy, for each share of Common Stock standing in his or her name on the books of the Corporation.
3. Liquidation, Dissolution or Winding Up. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Corporation, after payment or provision for payment of the debts and other liabilities of the Corporation and of the preferential amounts, if any, to which the holders of Preferred Stock may be entitled, the holders of all outstanding shares of Common Stock shall be entitled to share ratably in the remaining net assets of the Corporation.
ARTICLE V
Except to the extent that the General Corporation Law of Delaware prohibits the elimination or limitation of liability of directors for breaches of fiduciary duty, no director of the Corporation shall be personally liable to the Corporation or its stockholders for monetary damages for any breach of fiduciary duty as a director, notwithstanding any provision of law imposing such liability. No amendment to or repeal of this provision shall apply to or have any effect on the liability or alleged liability of any director of the Corporation for or with respect to any acts or omissions of such director occurring prior to such amendment.
ARTICLE VI
A. The Corporation shall indemnify each person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation), by reason of the fact that he is or was, or has agreed to become, a director or officer of the Corporation, or is or was serving, or has agreed to serve, at the request of the Corporation, as a director, officer or trustee of, or in a similar capacity with, another corporation, partnership, joint venture, trust or other enterprise (including any employee benefit plan) (all such persons being referred to hereafter as an "Indemnitee"), or by reason of any action alleged to have been taken or omitted in such capacity, against all expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him or on his behalf in connection with such action, suit or proceeding and any appeal therefrom, if he acted in good faith and in a manner he reasonably believed to be in, or not opposed to, the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in, or not opposed to, the best interests of the Corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful. Notwithstanding anything to the contrary in this Article, except as set forth in Section G below, the Corporation shall not indemnify an Indemnitee seeking indemnification in connection with a proceeding (or part thereof) initiated by the Indemnitee unless the initiation thereof was approved by the Board of Directors of the
Corporation. Notwithstanding anything to the contrary in this Article, the Corporation shall not indemnify an Indemnitee to the extent such Indemnitee is reimbursed from the proceeds of insurance, and in the event the Corporation makes any indemnification payments to an Indemnitee and such Indemnitee is subsequently reimbursed from the proceeds of insurance, such Indemnitee shall promptly refund such indemnification payments to the Corporation to the extent of such insurance reimbursement.
B. The Corporation shall indemnify any Indemnitee who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that he is or was, or has agreed to become, a director or officer of the Corporation, or is or was serving, or has agreed to serve, at the request of the Corporation, as a director, officer or trustee of, or in a similar capacity with, another corporation, partnership, joint venture, trust or other enterprise (including any employee benefit plan), or by reason of any action alleged to have been taken or omitted in such capacity, against all expenses (including attorneys' fees) and, to the extent permitted by law, amounts paid in settlement actually and reasonably incurred by him or on his behalf in connection with such action, suit or proceeding and any appeal therefrom, if he acted in good faith and in a manner he reasonably believed to be in, or not opposed to, the best interests of the Corporation, except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation unless and only to the extent that the Court of Chancery of Delaware shall determine upon application that, despite the adjudication of such liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses (including attorneys' fees) which the Court of Chancery of Delaware shall deem proper.
C. Notwithstanding the other provisions of this Article, to the extent that an Indemnitee has been successful, on the merits or otherwise, in defense of any action, suit or proceeding referred to in Sections A and B of this Article, or in defense of any claim, issue or matter therein, or on appeal from any such action, suit or proceeding, he shall be indemnified against all expenses (including attorneys' fees) actually and reasonably incurred by him or on his behalf in connection therewith. Without limiting the foregoing, if any action, suit or proceeding is disposed of, on the merits or otherwise (including a disposition without prejudice), without (i) the disposition being adverse to the Indemnitee, (ii) an adjudication that the Indemnitee was liable to the Corporation, (iii) a plea of guilty or nolo contendere by the Indemnitee, (iv) an adjudication that the Indemnitee did not act in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation, and (v) with respect to any criminal proceeding, an adjudication that the Indemnitee had reasonable cause to believe his conduct was unlawful, the Indemnitee shall be considered for the purposes hereof to have been wholly successful with respect thereto.
D. As a condition precedent to his right to be indemnified, the Indemnitee must notify the Corporation in writing as soon as practicable of any action, suit, proceeding or investigation involving him for which indemnity will or could be sought. With respect to any action, suit, proceeding or investigation of which the Corporation is so notified, the Corporation will be entitled to participate therein at its own expense and/or to assume the defense thereof at its own expense, with legal counsel reasonably acceptable to the Indemnitee. After notice from the Corporation to the Indemnitee of its election so to assume such defense, the Corporation shall not be liable to the Indemnitee for any legal or other expenses subsequently incurred by the Indemnitee in connection with such claim, other than as provided below in this Section 4. The Indemnitee shall have the right to employ his own counsel in connection with such claim, but the fees and expenses of such counsel incurred after notice from the Corporation of its assumption of the defense thereof shall be at the expense of the Indemnitee unless (i) the employment of counsel by the Indemnitee has been authorized by the Corporation, (ii) counsel to the Indemnitee shall have reasonably concluded that there may be a conflict of interest or position on any significant issue between the Corporation and the Indemnitee in the conduct of the defense of such action or (iii) the Corporation shall not in fact have employed counsel to assume the defense of such action, in each of which cases the fees and expenses of counsel for the Indemnitee shall be at the expense of the Corporation, except as otherwise expressly provided by this Article. The Corporation shall not be entitled, without the consent of the Indemnitee, to assume the defense of any claim brought by or in the right of the Corporation or as to which counsel for the Indemnitee shall have reasonably made the conclusion provided for in clause (ii) above.
E. Subject to the provisions of Section F below, in the event that the Corporation does not assume the defense pursuant to Section D of this Article of any action, suit, proceeding or investigation of which the Corporation
receives notice under this Article, any expenses (including attorneys' fees) incurred by an Indemnitee in defending a civil or criminal action, suit, proceeding or investigation or any appeal therefrom shall be paid by the Corporation in advance of the final disposition of such matter; provided, however, that the payment of such expenses incurred by an Indemnitee in advance of the final disposition of such matter shall be made only upon receipt of an undertaking by or on behalf of the Indemnitee to repay all amounts so advanced in the event that it shall ultimately be determined that the Indemnitee is not entitled to be indemnified by the Corporation as authorized in this Article. Such undertaking shall be accepted without reference to the financial ability of the Indemnitee to make such repayment.
F. In order to obtain indemnification or advancement of expenses pursuant to Section A, B, C or D of this Article, the Indemnitee shall submit to the Corporation a written request, including in such request such documentation and information as is reasonably available to the Indemnitee and is reasonably necessary to determine whether and to what extent the Indemnitee is entitled to indemnification or advancement of expenses. Any such indemnification or advancement of expenses shall be made promptly, and in any event within 60 days after receipt by the Corporation of the written request of the Indemnitee, unless with respect to requests under Section A, B or C the Corporation determines within such 60-day period that the Indemnitee did not meet the applicable standard of conduct set forth in Section A or B, as the case may be. Such determination shall be made in each instance by (i) a majority vote of the directors of the Corporation consisting of persons who are not at that time parties to the action, suit or proceeding in question ("disinterested directors"), whether or not a quorum, (ii) a majority vote of a committee of disinterested directors designated by majority vote of disinterested directors, whether or not a quorum, (iii) a majority vote of a quorum of the outstanding shares of stock of all classes entitled to vote for directors, voting as a single class, which quorum shall consist of stockholders who are not at that time parties to the action, suit or proceeding in question, (iv) independent legal counsel (who may, to the extent permitted by law, be regular legal counsel to the Corporation), or (v) a court of competent jurisdiction.
G. The right to indemnification or advances as granted by this Article
shall be enforceable by the Indemnitee in any court of competent jurisdiction if
the Corporation denies such request, in whole or in part, or if no disposition
thereof is made within the 60-day period referred to above in Section F. Unless
otherwise required by law, the burden of proving that the Indemnitee is not
entitled to indemnification or advancement of expenses under this Article shall
be on the Corporation. Neither the failure of the Corporation to have made a
determination prior to the commencement of such action that indemnification is
proper in the circumstances because the Indemnitee has met the applicable
standard of conduct, nor an actual determination by the Corporation pursuant to
Section F that the Indemnitee has not met such applicable standard of conduct,
shall be a defense to the action or create a presumption that the Indemnitee has
not met the applicable standard of conduct. The Indemnitee's expenses (including
attorneys' fees) incurred in connection with successfully establishing his right
to indemnification, in whole or in part, in any such proceeding shall also be
indemnified by the Corporation.
H. No amendment, termination or repeal of this Article or of the relevant provisions of the General Corporation Law of Delaware or any other applicable laws shall affect or diminish in any way the rights of any Indemnitee to indemnification under the provisions hereof with respect to any action, suit, proceeding or investigation arising out of or relating to any actions, transactions or facts occurring prior to the final adoption of such amendment, termination or repeal.
I. The indemnification and advancement of expenses provided by this Article shall not be deemed exclusive of any other rights to which an Indemnitee seeking indemnification or advancement of expenses may be entitled under any law (common or statutory), agreement or vote of stockholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in any other capacity while holding office for the Corporation, and shall continue as to an Indemnitee who has ceased to be a director or officer, and shall inure to the benefit of the estate, heirs, executors and administrators of the Indemnitee. Nothing contained in this Article shall be deemed to prohibit, and the Corporation is specifically authorized to enter into, agreements with officers and directors providing indemnification rights and procedures different from those set forth in this Article. In addition, the Corporation may, to the extent authorized from time to time by its Board of Directors, grant indemnification rights to other employees or agents of the Corporation or other persons serving the Corporation and such rights may be equivalent to, or greater or less than, those set forth in this Article.
J. If an Indemnitee is entitled under any provision of this Article to indemnification by the Corporation for some or a portion of the expenses (including attorneys' fees), judgments, fines or amounts paid in settlement actually and reasonably incurred by him or on his behalf in connection with any action, suit, proceeding or investigation and any appeal therefrom but not, however, for the total amount thereof, the Corporation shall nevertheless indemnify the Indemnitee for the portion of such expenses (including attorneys' fees), judgments, fines or amounts paid in settlement to which the Indemnitee is entitled.
K. The Corporation may purchase and maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the Corporation or another corporation, partnership, joint venture, trust or other enterprise (including any employee benefit plan) against any expense, liability or loss 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 such person against such expense, liability or loss under the General Corporation Law of Delaware.
L. If the Corporation is merged into or consolidated with another corporation and the Corporation is not the surviving corporation, the surviving corporation shall assume the obligations of the Corporation under this Article with respect to any action, suit, proceeding or investigation arising out of or relating to any actions, transactions or facts occurring prior to the date of such merger or consolidation.
M. If this Article or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the Corporation shall nevertheless indemnify each Indemnitee as to any expenses (including attorneys' fees), judgments, fines and amounts paid in settlement in connection with any action, suit, proceeding or investigation, whether civil, criminal or administrative, including an action by or in the right of the Corporation, to the fullest extent permitted by any applicable portion of this Article that shall not have been invalidated and to the fullest extent permitted by applicable law.
N. Terms used herein and defined in Section 145(h) and Section 145(i) of the General Corporation Law of Delaware shall have the respective meanings assigned to such terms in such Section 145(h) and Section 145(i).
O. If the General Corporation Law of Delaware is amended after adoption of this Article to expand further the indemnification permitted to Indemnitees, then the Corporation shall indemnify such persons to the fullest extent permitted by the General Corporation Law of Delaware, as so amended.
ARTICLE VII
The following provisions are inserted for the management of the business and for the conduct of the affairs of the Corporation and for defining and regulating the powers of the Corporation and its directors and stockholders:
A. The directors, other than those who may be elected by the holders of the Preferred Stock or any series thereof, shall be classified, with respect to the time for which they severally hold office, into three classes, Class One to serve for a term expiring at the annual meeting of stockholders to be held in 2001, Class Two to serve for a term expiring at the annual meeting of stockholders to be held in 2002 and Class Three to serve for a term expiring at the annual meeting of stockholders to be held in 2003, with each class to hold office until its successors are duly elected and qualified or until their earlier resignation, death or removal. At each annual meeting of the stockholders of the Corporation, the date of which shall be fixed by or pursuant to the Bylaws of the Corporation, the successors of the class of directors whose term expires at that meeting shall be elected to hold office for a term expiring at the annual meeting of stockholders held in the third year following the year of their election and until their successors are duly elected and qualified or until their earlier resignation, death or removal.
B. The number of directors constituting the entire Board of Directors of the Corporation is eight. Subject to the provisions of law and the rights of holders of the Preferred Stock or any series thereof, the number of directors of the Corporation may be increased or decreased from time to time pursuant to the Bylaws of the Corporation. No decrease in the number of directors constituting the Board of Directors shall shorten the term of any incumbent director, and no action shall be taken by the directors (whether through amendment to the Bylaws or
otherwise) to increase the number of directors unless at least 75% of the directors then in office shall concur in said action.
C. Subject to the provisions of law and the rights of holders of the Preferred Stock or any series thereof, newly created directorships resulting from any increase in the number of directors and any vacancies on the Board of Directors resulting from death, resignation, removal or other cause shall be filled only by the affirmative vote of a majority of the remaining directors then in office, even though less than a quorum of the Board of Directors, or by a sole remaining director. Any director elected in accordance with the preceding sentence of this paragraph shall hold office for the remainder of the full term of the class of directors in which the new directorship was created or the vacancy occurred and until such director's successor shall have been duly elected and qualified.
D. Subject to provisions of law and the rights of the holders of the Preferred Stock or any series thereof, any director may be removed from office only for cause and only by the affirmative vote of the holders of a majority of the combined voting power of the then outstanding shares of voting capital stock of the Corporation, voting together as a single class. For purposes of this paragraph, "cause" shall mean the willful and continuous failure of a director substantially to perform such director's duties to the Corporation (other than any such failure resulting from incapacity due to physical or mental illness) or the willful engaging by a director in gross misconduct materially and demonstrably injurious to the Corporation.
E. The Board of Directors of the Corporation is expressly authorized and empowered to make, alter or repeal the Bylaws, subject only to such limitation, if any, as may be from time to time imposed by law.
F. Elections of directors need not be by written ballot unless otherwise provided in the Bylaws of the Corporation.
G. Advance notice of stockholder nominations for election of directors and other business to be brought by stockholders before a meeting of stockholders shall be given in the manner provided by the Bylaws of the Corporation.
H. Notwithstanding any other provisions of law, this Certificate of Incorporation or the Bylaws of the Corporation, and notwithstanding the fact that a lesser percentage may be specified by law, the affirmative vote of the holders of at least seventy-five percent (75%) of the shares of capital stock of the Corporation issued and outstanding and entitled to vote shall be required to amend or repeal, or to adopt any provision inconsistent with, this Article VII.
ARTICLE VIII
Stockholders of the Corporation may not take any action by written consent in lieu of a meeting. Notwithstanding any other provisions of law, this Restated Certificate of Incorporation or the Bylaws of the Corporation, and notwithstanding the fact that a lesser percentage may be specified by law, the affirmative vote of the holders of at least seventy-five percent (75%) of the shares of capital stock of the Corporation issued and outstanding and entitled to vote shall be required to amend or repeal, or to adopt any provision inconsistent with, this Article VIII.
ARTICLE IX
Special meetings of stockholders may be called at any time by only the Chairman of the Board of Directors, the President or a majority of the Board of Directors. Business transacted at any special meeting of stockholders shall be limited to matters relating to the purpose or purposes stated in the notice of meeting. Notwithstanding any other provision of law, this Restated Certificate of Incorporation or the Bylaws of the Corporation, and notwithstanding the fact that a lesser percentage may be specified by law, the affirmative vote of the holders of at least seventy-five percent (75%) of the shares of capital stock of the Corporation issued and outstanding and entitled to vote shall be required to amend or repeal, or to adopt any provision inconsistent with, this Article IX.
ARTICLE X
This certificate shall be effective as of April ___, 2000 at 9:00 a.m. eastern standard time.
IN WITNESS WHEREOF, the undersigned has executed this Restated Certificate of Incorporation as of this ____ day of February, 2000.
LUMINEX CORPORATION
By:_______________________________________________
Mark B. Chandler, Ph.D.
Chairman, President and Chief Executive Officer
Exhibit 3.2
AMENDED AND RESTATED BYLAWS
OF
LUMINEX CORPORATION
February 4, 2000
AMENDED AND RESTATED BYLAWS
OF
LUMINEX CORPORATION
ARTICLE I
CORPORATE OFFICES
ARTICLE II
MEETINGS OF STOCKHOLDERS
(a) The annual meeting of stockholders shall be held each year on a date and at a time designated by the Board of Directors. At the meeting, directors shall be elected and any other proper business may be transacted.
(b) For nominations of persons for election to the Board of Directors of the Corporation and the proposal of business to be transacted by the stockholders may be made at an annual meeting of stockholders (i) pursuant to the Corporation's notice with respect to such meeting, (ii) by or at the direction of the Board of Directors or (iii) by any stockholder of the Corporation who was a stockholder of record at the time of giving of the notice provided for in this Section 2.2, who is entitled to vote at the meeting and who has complied with the notice procedures set forth in this Section 2.2.
(c) For nominations of persons for election as directors of the
Corporation or for other business to be properly brought before an annual
meeting by a stockholder pursuant to clause (iii) of paragraph (b) of this
Section 2.2, the stockholder must have given timely notice thereof in
writing to the secretary of the Corporation and such business must be a proper matter for stockholder action under the Delaware General Corporation Law. To be timely, a stockholder's notice shall be delivered to the secretary at the principal executive offices of the Corporation not less than 30 days nor more than 90 days prior to the first anniversary of the preceding year's annual meeting of stockholders; provided, however, that in the event that the date of the annual meeting is more than 30 days prior to or more than 60 days after such anniversary date, notice by the stockholder to be timely must be so delivered not earlier than the 90th day prior to such annual meeting and not later than the close of business on the later of the 20th day prior to such annual meeting or the 10th day following the day on which public announcement of the date of such meeting is first made. Such stockholder's notice shall set forth (i) as to each person whom the stockholder proposes to nominate for election or re- election as a director all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the "Exchange Act") (including such person's written consent to being named in the proxy statement as a nominee and to serving as a director if elected); (ii) as to any other business that the stockholder proposes to bring before the meeting, a brief description of such business, the reasons for conducting such business at the meeting and any material interest in such business of such stockholder and the beneficial owner, if any, on whose behalf the proposal is made; and (iii) as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made:
(A) The name and address of such stockholder, as they appear on the Corporation's books, and of such beneficial owner; and
(B) The class and number of shares of capital stock of the Corporation that are owned beneficially and of record by such stockholder and such beneficial owner.
(d) Only such business shall be conducted at an annual meeting of stockholders as shall have been brought before the meeting in accordance with the procedures set forth in this Section 2.2. The chairman of the meeting shall determine whether a nomination or any business proposed to be transacted by the stockholders has been properly brought before the meeting and, if any proposed nomination or business has not been properly brought before the meeting, the chairman shall declare that such proposed business or nomination shall not be presented for stockholder action at the meeting.
(e) For purposes of this Section 2.2, "public announcement" shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or a comparable national news service or the filing of information with the Securities and Exchange Commission via the EDGAR filing system.
(f) Nothing in this Section 2.2 shall be deemed to affect any rights of stockholders to request inclusion of proposals in the Corporation's proxy statement pursuant to Rule 14a-8 (or any successor rule) promulgated under the Exchange Act.
(a) A special meeting of the stockholders may be called at any time by the Board of Directors, the chairman of the board or the president of the Corporation.
(b) Nominations of persons for election to the Board of Directors may be made at a special meeting of stockholders at which directors are to be elected pursuant to such notice of meeting (i) by or at the direction of the Board of Directors or (ii) by any stockholder of the Corporation who is a stockholder of record at the time of giving of notice provided for in Section 2.4, who shall be entitled to vote at the meeting and who complies with the notice procedures set forth in Section 2.4.
(a) All notices of meetings of stockholders shall be in writing and shall be sent or otherwise given in accordance with this Section 2.4 of these Bylaws not less than 10 nor more than 60 days before the date of the meeting to each stockholder entitled to vote at such meeting (or such longer or shorter time as is required by Section 2.5 of these Bylaws, if applicable). 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.
(b) 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 or her 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.
(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 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.
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 Delaware General Corporation Law.
ARTICLE III
DIRECTORS
Directors resulting from death, resignation, removal or other cause shall be filled solely by the affirmative vote of a majority of the remaining directors then in office, even though less than a quorum of the Board of Directors, or by a sole remaining director. Any such director elected to fill a vacancy on the Board of Directors shall hold such office for the remainder of the full term of the class of directors in which the new directorship was created or the vacancy occurred and until such director's successor shall have been elected and qualified.
Unless otherwise provided in the Certificate of Incorporation or these Bylaws, whenever any holders of a class or series of capital stock of the Corporation have the right to elect one or more directors pursuant to the Certificate of Incorporation or the provisions of any valid and binding agreement, vacancies in directorships to which such right relates may be filled by a majority of the directors elected by the holders of such class or classes or series 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 Delaware General Corporation Law.
(a) The Board of Directors of the Corporation may hold meetings, both regular and special, either within or outside the State of Delaware.
(b) 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.
(a) Special meetings of the Board of Directors for any purpose or purposes may be called at any time by the chairman of the board, the president or any two directors.
(b) Notice of the time and place of special meetings shall be delivered to each directors (i) personally, (ii) by telephone, (iii) by facsimile, (iv) by electronic mail, or (v) sent by first-class mail, addressed to each director at that director's address as it is shown on the records of the Corporation. If the notice is mailed, it shall be deposited in the United States mail at least four days before the time of the holding of the meeting. If the notice is delivered personally, by telephone, by facsimile or by electronic mail, it shall be delivered at least 24 hours before the time of the holding of the meeting. Any oral notice given personally or by telephone may be communicated either to the director or to a person at the office of the director who the person giving the notice has reason to believe will promptly communicate it to the director. The notice need not specify the purpose or the place of the meeting, if the meeting is to be held at the principal executive office of the Corporation.
A meeting at which a quorum is initially present may continue to transact business notwithstanding the withdrawal of directors, if any action taken is approved by at least a majority of the required quorum for that meeting.
ARTICLE IV
COMMITTEES
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 (a) amend the Certificate of Incorporation (except that 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 Delaware General Corporation Law, fix the designations and
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 or fix the number of shares of any series of stock or
authorize the increase or decrease of the shares of any series), (b) adopt an
agreement of merger or consolidation under Sections 251, 252, 254, 255, 256,
257, 258, 263 or 264 of the Delaware General Corporation Law, (c) recommend to
the stockholders the sale, lease or exchange of all or substantially all of the
Corporation's property and assets, (d) recommend to the stockholders a
dissolution of the Corporation or a revocation of a dissolution, or (e) 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 Delaware General Corporation Law.
ARTICLE V
OFFICERS
accordance with the provisions of Section 5.3 of these Bylaws. Any number of offices may be held by the same person.
Any officer may resign at any time by giving written notice to the attention of the secretary of 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.
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 or she 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.
The chief financial officer shall deposit all moneys and other valuables in the name and to the credit of the Corporation with such depositories as may be designated by the Board of Directors. He or she shall disburse the funds of the Corporation as may be ordered by the Board of Directors, shall render to the president, the chief executive officer, or the directors, upon request, an account of all his or her transactions as chief financial officer and of the financial condition of the Corporation, and shall have other powers and perform such other duties as may be prescribed by the Board of Directors or the Bylaws.
or the chief executive officer 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 the person having such authority.
ARTICLE VI
RECORDS AND REPORTS
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.
ARTICLE VII
GENERAL MATTERS
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 Delaware General Corporation Law, 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.
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.
certificate to the person entitled thereto, cancel the old certificate, and record the transaction in its books.
ARTICLE VIII
AMENDMENTS
EXHIBIT 4.2
THIS WARRANT AND ANY SHARES ACQUIRED UPON THE EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AMENDED, OR ANY STATE SECURITIES LAWS AND MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF UNLESS REGISTERED PURSUANT TO THE PROVISIONS OF THAT ACT OR UNLESS AN OPINION OF COUNSEL TO THE COMPANY OR OTHER COUNSEL, REASONABLY SATISFACTORY TO THE COMPANY, IS OBTAINED STATING THAT SUCH DISPOSITION IS IN COMPLIANCE WITH AN AVAILABLE EXEMPTION FROM SUCH REGISTRATION.
Warrant for the Purchase of Shares of Common Stock
--------------------------------------------------
No. 1 262,500 Shares
FOR VALUE RECEIVED, Luminex Corporation, a Texas corporation (the
|
"Company"), hereby certifies that Southcoast Capital Corporation or its
permitted assigns, is entitled to purchase from the Company, at any time or from
time to time commencing on April 2, 1997 and prior to 5:00 P.M., New York City
time, on April 2, 2002, Two Hundred Sixty Two Thousand Five Hundred (262,500)
fully paid and non-assessable shares of the common stock, $.001 par value per
share, of the Company for an aggregate purchase price of $1,050,000 (computed on
the basis of $4.00 per share). (Hereinafter, (i) said common stock, together
with any other equity securities which may be issued by the Company with respect
thereto or in substitution therefor, is referred to as the "Common Stock" (ii)
the shares of the Common Stock purchasable hereunder or under any other Warrant
(as hereinafter defined) are referred to individually as a "Warrant Share" and
collectively as the "Warrant Shares," (iii) the aggregate purchase price payable
for the Warrant Shares hereunder is referred to as the "Aggregate Warrant Price"
(iv) the price payable for each of the Warrant Shares hereunder is referred to
as the "Per Share Warrant Price," (v) this Warrant and all Warrants hereafter
issued in exchange or substitution for this Warrant or such similar Warrants are
referred to as the "Warrants" and (vi) the holder of this Warrant is referred to
as the "Holder" and the holder of this Warrant and all other Warrants or Warrant
Shares issued upon the exercise of any Warrant are referred to as the
"Holders.") The Aggregate Warrant Price is not subject to adjustment. The per
Share Warrant Price is subject to adjustment as hereinafter provided; in the
event of any such adjustment, the number of Warrant Shares shall be adjusted by
dividing the Aggregate
Warrant Price by the Per Share Warrant Price in effect immediately after such adjustment.
(i) By presentation and surrender of this Warrant to the Company at the address set forth in Subsection 9(a) hereof, with the Subscription Form annexed hereto (or a reasonable facsimile thereof) duly executed and accompanied by payment of the Per Share Warrant Price for each Warrant Share to be purchased. Payment for Warrant Shares shall be made by certified or official bank check payable to the order of the Company; or
(ii) By presentation and surrender of this Warrant to the
Company at the address set forth in Subsection 9(a) hereof, with a
Cashless Exercise Form annexed hereto (or a reasonable facsimile
thereof) duly executed (a "Cashless Exercise"). Such presentation and
surrender shall be deemed a waiver of the Holder's obligation to pay
all or any portion of the Aggregate Warrant Price. In the event of a
Cashless Exercise, the Holder shall exchange its Warrant for that
number of shares of Common Stock determined by multiplying the number
of Warrant Shares being exercised by a fraction, the numerator of
which shall be the difference between the then current market price
per share of the Common Stock and the Per Share Warrant Price, and the
denominator of which shall be the then current market price per share
of Common Stock. For purposes of any computation under this Section
1(a)(ii), the then current market price per share of Common Stock at
any date shall be deemed to be the average for the thirty consecutive
business days immediately prior to the Cashless Exercise of the daily
closing prices of the Common Stock on the principal national
securities exchange on which the Common Stock is admitted to trading
or listed, or if not listed or admitted to trading on any such
exchange the closing price as reported by the Nasdaq National Market,
or if not then listed on the Nasdaq National Market, the average of
the highest reported bid and lowest reported asked prices as reported
by the National Association of Securities Dealers, Inc. Automated
Quotations System ("NASDAQ") or if not then publicly traded, the fair
market price of the Common Stock as determined in good faith by the
Board of Directors.
(b) If this Warrant is exercised in part, this Warrant must be exercised for a number of whole shares of the Common Stock, and the Holder is entitled to receive a new Warrant covering the Warrant Shares which have not been exercised and setting forth the proportionate part of the Aggregate Warrant Price applicable to such Warrant Shares. Upon such surrender of this Warrant, the Company will (i) issue a certificate or certificates, in such denominations as are requested for delivery by the
Holder, in the name of the Holder for the largest number of whole shares of the Common Stock to which the Holder shall be entitled and, if this Warrant is exercised in whole, in lieu of any fractional share of the Common Stock to which the Holder shall be entitled, pay to the Holder cash in an amount squat to the fair value of such fractional share (determined in such reasonable manner as the Board of Directors of the Company shall determine), and (ii) deliver the other securities and properties receivable upon the exercise of this Warrant, or the proportionate part thereof if this Warrant is exercisable in part, pursuant to the provisions of this Warrant. The Holder shall be deemed to be the holder of record of the shares of Common Stock issuable upon such exercise, notwithstanding that the stock transfer books of the Company shall then be closed or that certificates representing such shares of Common Stock shall not then be actually delivered to the Holder.
(b) at any time or from time to time after the date of this Warrant, the Company shall issue or distribute to the holders of shares of Common Stock evidences of its indebtedness, any other securities of the Company or any cash, property or other assets (excluding a subdivision, combination or reclassification, or dividend or distribution payable in shares of Common Stock, referred to in Subsection 3(a), and also excluding cash dividends or cash distributions paid out of not profits legally available therefor if the full amount thereof, together with the value of other dividends and distributions made substantially concurrently therewith or pursuant to a plan which
includes payment thereof, is equivalent to not more than 5% of the Company's net worth) (any such nonexcluded event being herein called a "Special Dividend"), the Per Share Warrant Price shall be adjusted by multiplying the Per Share Warrant price then in effect by a fraction, the numerator of which shall be the then current market price of the Common Stock (defined as the average for the thirty consecutive business days immediately prior to the record date of the daily closing price of the Common Stock as reported by the national securities exchange upon which the Common Stock is then listed or if not listed on any such exchange, the average of the closing prices as reported by the Nasdaq National Market, or if not then listed on the Nasdaq National Market, the average of the highest reported bid and lowest reported asked prices as reported by NASDAQ, or if not then publicly traded, the fair market price as determined in good faith by the Company's Board of Directors) less the fair market value (as determined in good faith by the Company's Board of Directors) of the evidences of indebtedness, cash, securities or Property, or other assets issued or distributed in such Special Dividend applicable to one share of Common Stock and the denominator of which shall be such then current market price per share of Common Stock. An adjustment made pursuant to this Subsection 8(b) shall become effective immediately after the record date of any such Special Dividend.
(c) Except as provided in Subsection 3(e), in case the Company shall prior to June 30, 1998 issue or sell any share of Common Stock for a consideration per share less than the Per Share Warrant Price on the date of such issuance or sale, the Per Share Warrant Price shall be adjusted as of the date of such issuance or sale so that the same shall equal the price determined by dividing (i) the sum of (A) the number of shares of Common Stock outstanding immediately prior to such issuance or sale multiplied by the Per Share Warrant Price plus (B) the consideration received by the Company upon such Issuance or sale by (ii) the total number of share of Common Stock outstanding after such issuance or sale.
(d) Except as provided in Subsections 3(b) and 3(e), in case the
Company shall prior to June 30, 1998 issue or sell any rights, options, warrants
or securities convertible into Common Stock entitling the holders thereof to
purchase Common Stock or to convert such securities into Common Stock at a price
per share (determined by dividing (i) the total amount if any, received or
receivable by the Company in consideration of the issuance or sale of such
rights, options, warrants or convertible securities plus the total
consideration, if any, payable to the Company upon exercise or conversion
thereof (the "Total Consideration") by (ii) the number of additional shares of
Common Stock issuable, upon exercise or conversion of such securities) low than
the then current Per Share Warrant Price in effect on the date of such issuance
or sale, the Per Share Warrant Price shall be adjusted as of the date of such
issuance or sale so that the same shall equal the price determined by dividing
(i) the sum of (A) the number of shares of Common Stock outstanding on the date
of such issuance or sales multiplied by the Per Share Warrant Price plus (B) the
Total Consideration by (ii) the number of share of Common Stock outstanding on
the date of such issuance or sale plus the maximum number of additional shares
of Common Stock issuable upon exercise or conversion of such securities.
(e) No adjustment in the Per Share Warrant Price shall be required in the case of (i) the issuance by the Company of options, warrants or rights to officers, directors and employees to purchase shares of Common Stock or the issuance of shares of Common Stock upon the exercise thereof, including any such options, warrants or rights as are issued and outstanding as of the date hereof and (ii) the issuance by the Company of Common Stock pursuant to the exercise of any Warrant.
(f) In case of any capital reorganization or reclassification, or any consolidation or merger to which the Company is a party other than a merger or consolidation in which the Company is the continuing corporation, or in case of any sale or conveyance to another entity of the property of the Company as an entirety or as an entirety, or in the case of any statutory exchange of securities with another corporation (including any exchange affected in connection with a merger of a third corporation into the Company), the Holder of this Warrant shall have the right thereafter to receive on the exercise of this Warrant the kind and amount of securities, cash or other property which the Holder would have owned or have been entitled to receive after such reorganization, consolidation, merger, statutory exchange, age or conveyance had this Warrant been exercised immediately prior to the effective date of such reorganization, reclassification, consolidation, merger, statutory exchange, sale or conveyance and in any such case, if necessary, appropriate adjustment shall, be made in the application of the provisions set forth in this Section 3 with respect to the rights and interests thereafter of the Holder of this Warrant to the end that the provisions set forth in this Section 3 shall thereafter correspondingly be made applicable, as nearly as may reasonably be, in relation to any shares of stock or other securities or property thereafter deliverable on the exercise of this Warrant. The above provisions of this Subsection 3(f) shall similarly apply to successive reorganizations, consolidations, mergers, statutory exchanges, sales or conveyances. The issuer of any shares of stock or other securities or property thereafter deliverable on the exercise of this Warrant shall be responsible for all of the agreements and obligations of the Company hereunder. Notice of any such reorganization, reclassification, consolidation, merger, statutory exchange, sale or conveyance and of said provision so proposed to be made, shall be mailed to the Holders of the Warrants not less than 30 days prior to such event. A sale of all of the assets of the Company for a consideration consisting primarily of securities shall be deemed a consolidation or merger for the foregoing purposes.
(g) In case any event shall occur as to which the other provisions of this Section 3 are not strictly applicable but as to which the failure to make any adjustment would not fairly protect the purchase rights represented by this Warrant in accordance with the essential intent and principles hereof then, in each such case, the Holders of Warrants representing the right to purchase a majority of the Warrant Shares subject to all outstanding Warrants may appoint a firm of independent public accountants of recognized national standing reasonably acceptable to the Company, which shall give their opinion as to the adjustment, if any, an a basis consistent with the essential intent and principles established herein, necessary to preserve the purchase rights represented by the Warrants. Upon receipt of such opinion, the
Company will promptly mail a copy thereof to the Holder of this Warrant and shall make the adjustments described therein. The fees and expenses of such independent public accountants shall be borne by the company.
(i) Whenever the Per Share Warrant Price is adjusted as provided in this Section 3 and upon any modification of the rights of a Holder of Warrants in with this Section 3, the Company shall promptly obtain, at its expense, a certificate of a firm of independent public accountants of recognized standing selected by the Board of Directors (who may be the regular auditors of the Company) setting forth the Per Share Warrant Price and the number of Warrant Shares after such adjustment or the effect of such modification, a brief statement of the facts requiring such Adjustment or modification and the manner of computing the same and cause copies of such certificate to be mailed to the Holders of the Warrants.
(j) If the Board of Directors of the Company shall (i) declare any dividend or other distribution with respect to the Common Stock, other than a cash dividend subject to the first parenthetical in Subsection 3(b), (ii) offer to the holders of sham of Common Stock any additional share of Common Stock any securities convertible into or exercisable for shares of Common Stock or any rights to subscribe thereto, or (iii) propose a dissolution, liquidation or winding up of the Company, the Company shall mail notice thereof to the Holders of the Warrants not less than 15 days prior to the record date fixed for determining stockholders entitled to participate In such dividend, distribution, offer or subscription right or to vote on such dissolution, liquidation or winding up.
(k) It as a result of an adjustment made pursuant to this Section 8, the Holder of any Warrant thereafter surrendered for exercise shall become entitled to receive shares of two or more classes of capital stock or shares of Common Stock and other capital stock of the Company, the Board of Directors (whose determination shall
be conclusive and shall be described in a written notice to the Holder of any Warrant promptly after such adjustment) shall determine the allocation of the adjusted Per Share Warrant Price between or among shares or such classes of capital stock or shares of Common Stock and other capital stock.
(a) The Company agrees that if, at any time or times six months following the effective date of an initial public offering of securities of the Company to the general public covered by a registration statement under the Securities Act of 1983 (the "Act") the Holder and/or the Holders of any other Warrants and/or Warrant Shares who or which shall hold not less than 35% of the Warrants and/or Warrant Shares outstanding at such time and not previously sold pursuant to this Section 5 shall request that the Company file, under the Act, a registration statement under the Act covering not less than 35% of the Warrant Shares issued or Issuable upon the exercise of the Warrants and not so previously sold, the Company will (i) promptly notify each Holder of the Warrants and each holder of Warrant Shares not go previously sold that such registration statement will be filed and that the Warrant Shares which are then held, and/or may be acquired upon exercise of the Warrants by the Holder and such Holders, will be included in such registration statement at the Holder's and such. Holders' request, (ii) cause such registration statement to be filed with the Securities and Exchange Commission within thirty days of such request and to cover all Warrant Shares which it had been so requested to include, (iii) use its best efforts to cause such registration statement to become effective as soon as practicable and (iv) take all other action necessary under any Federal or state law or regulation of any governmental authority to permit all Warrant Shares which it has been so requested to include in such registration statement to be sold or otherwise disposed of, and will maintain such compliance with each such Federal and state law and regulation of any governmental authority for the period necessary for such Holders to effect the proposed sale or other disposition. The Company shall be required to effect a registration or qualification pursuant to this Subsection 5(a) on one occasion only.
(b) The Company agrees that if the Board of Directors of the Company shall authorize the filing of a registration statement (any such registration statement being hereinafter called a "Subsequent Registration Statement) under the Act
(otherwise than pursuant to Subsection 5(a) hereof, or other than (i) an initial
public offering of the Company's securities, (ii) a registration statement on
Form S-8 or other form which does not include substantially the same information
as would be required in a form for the general registration of securities) or
(iii) an exchange offer or an offering of securities solely to the emitting
shareholders or employees of the Company or the existing shareholders of another
company in connection with a merger or acquisition or otherwise on Form S-4 or
an equivalent form, in connection with the proposed offer of any of its
securities by it or any of its stockholders, the Company will (A) promptly
notify the Holder and each of the Holders, if any, of other Warrants and/or
Warrant Shares not previously sold pursuant to this Section 5 that such
Subsequent Registration Statement will be filed and that the Warrant Share which
are then held, and/or which may be acquired upon the exercise of the Warrants,
by the Holder and such Holders, will at the Holder's and such Holders' request,
be included in such Subsequent Registration Statement and (B) upon the written
request of a Holder made within 20 days after the giving of such notice by the
Company, include in the securities covered by such Subsequent Registration
Statement all Warrant Shares which it has been so requested to include.
(c) Whenever the Company is required pursuant to the provisions of this Section 5 to include Warrant Shares in a registration statement, the company shall, (i) furnish each Holder of any such Warrant shares and each underwriter of such arrant Shares with such copies of the prospectus, conforming to the Act (and such other documents as each such Holder or each such underwriter may reasonably request) in order to facilitate the sale or distribution Of the Warrant Sales, (ii) use its best efforts to register or qualify such Warrant Shares under the blue sky laws (to the extent applicable) of such jurisdiction or laws (to the extent applicable) of such jurisdiction or Jurisdictions as the Holder of any such Warrant Shares and each underwriter of Warrant Shares being sold by such Holders shall reasonably request and (iii) take such other actions as may be reasonably necessary or advisable to enable such Holders and such underwriters to consummate the sale or distribution In such jurisdiction, or jurisdictions in which such Holders shall have reasonably requested that the Warrant Shares be sold. Nothing contained in this Warrant shall be construed as requiring a Holder to exercise its Warrant prior to the
closing of an offering pursuant to a registration statement referred to in Subsection 5(a) or 5(b).
(d) The Company shall furnish to each Holder participating in an underwritten Owing pursuant to a registration statement under this Section 5 and to each underwriter, if any a signed counterpart, addressed to such Holder or underwriter, of (i) an opinion of counsel to the Company, dated the effective date of such registration statement and an opinion dated the data of the closing under the underwriting agreement, and (ii) a "comfort" letter dated the effective date of such registration statement and a letter dated the date of the closing under the underwriting agreement signed by the independent Public accountants who have issued a report on the Company's financial statements included in such registration statement, in each case covering substantially the same matters with respect to such registration statement (and the prospectus included therein) and, in the case of such accountants' letter, with respect to events subsequent to the date of such financial statements as are customarily covered in opinions of issuer's counsel and in accountants' letters delivered to underwriters in underwritten public offering of securities.
(e) In connection with an underwritten offering, the Company shall enter into an underwriting agreement with the managing underwriters reasonably satisfactory in form and substance to the Company, each Holder and such managing underwriters, which shall contain such representations, warranties and covenants by the Company and such other term as are customarily contained in agreements of that type used by the managing underwriter. The Holder shall be parties to any underwriting agreement relating to an underwritten sale of their Warrant Shares and may, at their option, require that any or all representatives, warranties and covenants of the Company to or for the benefit of such underwriters also be made to and for the benefit of such Holders.
(f) The Company shall pay all expenses incurred in connection with
any registration statement or Other action, pursuant to the provisions of this
Section 5, including the reasonable fees and expenses of one counsel
representing the Holders of Warrant Shares included in any such registration
statement, other than underwriting discounts, commissions, selling commissions
and applicable transfer taxes relating to the Warrant Shares.
(g) (1) The Company will indemnify and hold harmless each Holder Of Warrant Shares which are Included in each registration statement referred to in Subsections 5(a) and 5(b), each of Its officers, directors and partners, and each Person. if any controlling such Holder within the meaning of Section, 15 of the Act or Section 20(a) Of the Securities & Exchange Act of 1934, as amended (the "Exchange Act"), and each underwriter of such Warrant Shares, and each Of its Officers, directors and partners, and each person if any, who controls any underwriter, from and against any and all claims, losses, damages and liabilities (or actions, proceedings or settlements in respect thereof) arising out of or based upon any untrue statement or alleged untrue statement of a material fact contained in any registration statement, related prospectus
(3) Each person entitled to indemnification hereunder (the "Indemnitee") shall promptly notify the indemnifying party (the "Indemnitor") in writing after the Indemnitee receives any notice of the commencement of any action, suit,
proceeding or investigation or threat thereof for which the Indemnitee will claim indemnification or contribution pursuant to this Agreement. Unless in the reasonable judgment of the Indemnitee, an actual Or Potential conflict of interest exists between the Indemnitee and the Indemnitor with respect to such claim, the Indemnitee will permit the Indemnitor to assume the defense of such claim with counsel reasonably satisfactory to the indemnitee. If the Indemnitor is not entitled, or elects not, to assume the defense of a claim, it need not pay the fees and expenses of more than one counsel with respect to such claim unless in an Indemnitee's reasonable judgment, an actual or potential conflict of interest may exist between such Indemnitee and any other Indemnitee(s) with respect to such claim. In such event the Indemnitor shall pay the fees and expenses of such additional counsel or counsels; as may be necessary. The Indemnitor shall not be subject to any liabilities for any settlement made without its consent, which consent shall not unreasonably be withheld or delayed. No Indemnitor shall, except With the consent of each Indemnitee, consent to entry of any judgment or enter into any settlement which does not unconditionally require the claimant or Plaintiff to release the Indemnitee from all liability in respect of such claim or litigation.
(4) If the indemnification provided for in this Subsection 5(g) is unavailable to an Indemnitee here under in respect of any claims, losses, damages, liabilities or expenses; referred to herein, then the Indemnitor in lieu of indemnifying such Indemnitee, shall contribute to the amount paid or payable by such Indemnitee, as a result of such claims, losses, damages, liabilities or expenses, in such proportion as appropriately reflects the relative fault of the Indemnitor(s) and Indemnitee(s) in connection with such claims, losses, damages, liabilities; or expenses, as well as any other relevant equitable considerations. The relative fault of the Indemnitor(s) and Indemnitee(s) and relevant equitable considerations shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact, has been made by, or relates to information supplied by, such Indemnitor(s) or Indemnitee(s) and their relative intent, knowledge, access to information and opportunity to correct or prevent such action, and their benefit therefrom. The amount paid or payable by a party as a result of the claims, losses, damages, liabilities and expenses referred to above shall include any legal or other fees; or expenses reasonably incurred by such party in connection with investigating or defending and action, suit, proceeding or claim. In no event shall the amount of any such contribution payable by a Holder exceed the amount payable by that Holder under Subsection 5(g)(2) hereunder. No person guilty of fraudulent misrepresentation (within the meaning of Section 11 (f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent representation.
or assigned, (b) such assignment in accordance with and permitted by all other agreements between the transferor or assignor and the Company, and (c) immediately following such transfer the further disposition of such securities by the transferee or assignee In restricted under the Act.
(a) If to the Company at 12212 Technology Blvd., Austin, Texas, Att.: Mark B. Chandler, Ph.D., facsimile no. (512) 258-4173, or such other address as the Company has designated in writing to the Holder, or
(b) if to the Holder at 277 Park Avenue, New York, New York 10172, Att.: Calvin L. Chrisman, facsimile No. (212) 940-9339 or such other address or facsimile number as the Holder has designated in writing to the company.
IN WITNESS WHEREOF, Luminex Corporation has caused this Warrant to be signed by its Chairman and Chief Executive Officer and its corporate seal to be hereunto affixed and attested by its Secretary this 2nd day of April, 1997.
LUMINEX CORPORATION
By: /s/ Mark B. Chandler
------------------------------------
Mark B. Chandler, Ph.D.
Chairman and Chief Executive Officer
ATTEST:
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[Corporate Seal]
CASHLESS EXERCISE FORM
(To be executed upon exercise of Warrant pursuant to Section 1(a)(ii))
The undersigned hereby irrevocably elects to surrender _____________ shares purchasable under this Warrant for such shares of Common Stock issuable in exchange therefor pursuant to the Cashless Exercise provisions of the within Warrant, as provided for in Section 1(a)(ii) of such Warrant.
Please issue a certificate or certificates for such Common Stock in the name of, and pay cash for fractional shares to:
Name:______________________________
(Please Print Name, Address and
Social Security No.)
Address:___________________________
___________________________
___________________________
Social Security No.________________
Signature:_________________________
NOTE: The above signature should
correspond exactly with the
name of the first page of
this Warrant or with the
name of the assignee
appearing in the assignment
form below.
Date:______________________________
|
And if said number of shares shall not be all the shares exchangeable or purchasable under the within Warrant, a new Warrant is to be issued in the name of the undersigned for the balance remaining of the shares purchasable thereunder.
EXHIBIT 10.1
LUMINEX CORPORATION
STOCK OPTION PLAN
1. Purpose. The purpose of Luminex Corporation Stock Option Plan (the "Plan") is to increase shareholder value and to advance the interests of Luminex Corporation (the "Company") through the issuance of incentive and non-qualified stock options (the "Options") to purchase shares of common stock, $.01 par value per share of the Company (the "Common Stock"). In order to effectuate this purpose, the Board of Directors hereby approves and adopts the Plan.
2. Administration.
2.1. Composition. The Plan shall be administered by the stock option committee (the "Committee") of the Board of Directors of the Company.
2.2 Authority. The Committee shall have plenary authority to award Options under the Plan, to interpret the Plan, to establish any rules or regulations relating to the Plan that it determines to be appropriate, and to make any other determination that it believes necessary or advisable for the proper administration of the Plan. Its decisions in matters relating to the Plan shall be final and conclusive on the Company and participants in the Plan. The Committee may fully delegate its authority hereunder.
3. Participants. Employees, officers, consultants, and directors of the Company shall become eligible to receive Options under the Plan designated by the Committee or its designees. Employees may be designated individually or by groups or categories as the Committee or its designees deem appropriate.
4. Shares Subject to the Plan.
4.1. Number of Shares. Up to 2,000,000 shares of Common Stock are authorized to be issued upon the exercise of Options granted under the Plan (the "Option Shares"). If any Option granted hereunder expires or is terminated or cancelled prior to exercise, any Option Shares that were issuable thereunder may again be issued under the Plan.
4.2. Cancellation. The Committee may also determine to cancel, and agree to the cancellation of, Options in order to make a participant eligible for the grant of Options at a lower price than the Options to be cancelled.
4.3. Type of Common Stock. Common Stock issued under the Plan in connection with Options may be authorized and unissued shares or issued shares held as treasury shares.
5. All Stock Options. An Option is a right to purchase shares of Common Stock from the Company. Each Option granted by the Committee under this Plan shall be subject to the following terms and conditions, and such other terms and conditions as are set forth in the stock option agreement executed in connection with the grant of Options:
5.1 Price. The Option price per share shall be determined by the Committee at the time that the Option is granted.
5.2 Number. The number of shares of Common Stock subject to an Option shall be determined by the Committee subject to adjustment as provided in Section 8 hereof.
5.3 Duration and Time for Exercise. Subject to earlier termination as may be provided in the stock option agreement, the term of each Option shall be determined by the Committee. Each Option shall become exercisable at such time or times during its term as shall be determined by the Committee at the time of grant or as shall be accelerated by the Committee after the date of grant.
5.4 Repurchase. Upon approval of the Committee, the Company may repurchase a previously granted option from a participant by mutual agreement before such Option has been exercised by payment to the participant of the amount per share by which: (i) the Fair Market Value (as defined in Section 10.7 hereof) of the Common Stock subject to the Option on the date of purchase exceeds (ii) the Option price.
5.5 Manner of Exercise. An Option may be exercised, in whole or in part, by giving written notice to the Company, specifying the number of shares of Common Stock to be purchased and accompanied by the full purchase price for such shares. The Option price hall be payable upon exercise of the Option and may be paid by cash, check or in such other manner as may be authorized from time to time by the Committee. In the case of delivery of an uncertified check upon exercise of an Option, no shares shall be issued until the check has been paid in full. Prior to the issuance of shares of Common Stock upon the exercise of an Option, a participant in the Plan shall have no rights as a shareholder.
6. Incentive Stock Options. Notwithstanding anything in the Plan to the contrary, the following additional provisions shall apply to the grant of Options that are intended to qualify as incentive stock options (as such term is defined in Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"):
(a) Any incentive stock option authorized under the Plan shall contain such other provisions as the Committee shall deem advisable, but shall in all events be consistent with and contain or be deemed to contain all provisions required in order to qualify the Options as incentive stock options;
(b) All incentive stock options must be granted within ten (10) years from the date on which this Plan was adopted by the Board of Directors;
(c) The Option price must not be less than the Fair Market Value of the Common Stock at the time the Option is granted;
(d) Unless sooner exercised, all incentive stock options shall expire no later than ten (10) years after the date of grant;
(e) No incentive stock option shall be granted to any participant who, at the time such option is granted, would own (within the meaning of Section 422 of the Code) stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the employer corporation or of its parent or subsidiary corporation;
(f) The aggregate Fair Market Value (determined with respect to each incentive stock option as of the time such incentive stock option is granted) of the Common Stock with respect to which incentive stock options are exercisable for the first time by a participant during any calendar year (under the Plan or any other plan of the Company) shall not exceed $100,000. To the extent that such limitation is exceeded, such Options shall not be treated, for federal income tax purposes, as incentive stock options;
(g) Incentive stock options may be granted under the Plan only if the Plan has been approved by the shareholders of the Company within twelve (12) months of the date of adoption of the Plan by the Board of Directors;
(h) An incentive stock option may not be exercised more than three (3) months after termination of employment, except in the case of death or disability. An incentive stock option may not be exercised more than one (1) year after termination of employment as a result of disability.
(i) Incentive stock options may not be granted to a director unless the director is also an employee of the Company.
7. Non-Transferability of Options. Options granted under the Plan shall not be transferable otherwise than by will or by the laws of descent and distribution and Options may be exercised during the lifetime of a participant only by the participant or by the participant's guardian or legal representative. Any attempted assignment, transfer, pledge, hypothecation, or other disposition of an Option, or levy of attachment or similar process upon the Option not specifically permitted herein shall be null and void and without effect.
8. Adjustment of Options. In the event of any merger, consolidation or reorganization of the Company with any other corporation or corporations, there shall be substituted for each of the shares of Common Stock then subject to the Plan, including shares subject to Options, the number and kind of shares of stock or other securities to which the holders of the shares of Common Stock will be entitled pursuant to the transaction. In the event of any recapitalization, stock dividend, stock
split, combination of share or other change in the Common Stock, the number of shares of Common Stock then subject to the Plan, including shares subject to Options, shall be adjusted in proportion to the change in outstanding shares of Common Stock. In the event of any such adjustments, the purchase price of any Option and the shares of Common Stock issuable pursuant to any Option shall be adjusted as and to the extent appropriate, in the reasonable discretion of the Committee, to provide participants in the Plan with the same relative rights before and after such adjustment.
9. Call Option of the Company
9.1 Call Right. The Company shall have the right to repurchase any and all Option Shares (a "Call Option") if the holder thereof ceases to be an employee or director of the Company for any reason other than death, disability or retirement at normal retirement age.
9.2 The Call Price. The per share price that the Company will be required to pay upon exercise of the Call Option (the "Call Price") shall be the Fair Market Value of Common Stock (as defined in Section 10.7 hereof) on the date that the Call Option is exercised.
9.3 Payment of the Call Price. The Call Price may be paid, in the sole discretion of the Company, in any of the following three ways: (a) in a lump sum payable on the date the Call Option is exercised; (b) in substantially equal, annual installments over a period not exceeding ten years from the date that the Call Option is exercised (with interest payable at a reasonable rate, as determined by the Board of Directors of the Company, on any unpaid installment balance), or (c) any combination of the foregoing.
10. General.
10.1 Duration. The Plan shall remain in effect until all Options authorized to be granted under the Plan have been granted and have either been satisfied by the issuance of Option Shares or been terminated under the terms of the Plan.
10.2 Effect of Termination of Employment or Death. If a participant in the Plan ceases to be an employee, director, or consultant of the Company for any reason, including death, any Option may be exercised or shall expire at such times as shall be set forth in the stock option agreement between such participant and the Company entered into at the time the Option is granted.
10.3 Additional Condition. Anything in this Plan to the contrary notwithstanding: (a) the Company may, if it shall determine it necessary or desirable for any reason, at the time of the award of any Option or the issuance of any shares of Common Stock pursuant to any Option, require the recipient of the Option as a condition to the receipt thereof or to the receipt of shares of Common Stock issued pursuant thereto, to deliver to the Company a written representation of present intention to acquire the shares of Common
Stock issued pursuant to the option for his own account for investment and not for distribution; and (b) if at any time the Company further determines, in its sole discretion, that the listing, registration or qualification (or any updating of any such document) of any Option or the shares of Common Stock issuable pursuant to the Plan is necessary on any securities exchange or under any federal or state securities or blue sky law, or that the consent or approval of any governmental regulatory body is necessary or desirable as a condition of, or in connection with the award of any Option or the issuance of shares of Common Stock pursuant to the Plan, such Option shall not be awarded or such shares of Common Stock shall not be issued, in whole or in part, unless such listing, registration, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Company.
10.4 Withholding. The Company shall have the right to withhold at the time a non-qualified Option is exercised or to collect as a condition of exercise, any taxes required by law to be withheld.
10.5 No Continued Employment. No participant under the Plan shall have any right, because of his or her participation herein, to continue in the employ of the Company for any period of time or any right to continue his or her present or any other rate of compensation.
10.6 Amendment of the Plan. The Board of Directors of the Company may amend or discontinue the Plan at any time. However, no such amendment or discontinuance shall, subject to adjustment under Section 8 hereof, change or impair, without the consent of the recipient, an Option previously granted. Shareholder approval of certain Plan amendments may be necessitated by applicable tax laws.
10.7 Definition of Fair Market Value. Whenever "Fair Market Value" of Common Stock shall be determined for purposes of this Plan, it shall be such value as is determined by the Committee in good faith.
EXHIBIT 10.2
[FORM OF]
STOCK OPTION AGREEMENT FOR THE GRANT OF STOCK OPTIONS
UNDER LUMINEX CORPORATION STOCK OPTION PLAN
THIS AGREEMENT is entered into effective as of ______ ___ 19___, by and between Luminex Corporation, a Delaware corporation (the "Company"), and _________ ("Optionee").
WHEREAS, Optionee is a key employee of the Company and the Company considers it desirable and in its best interest that Optionee be given an inducement to acquire a proprietary interest in the Company and an added incentive to advance the interests of the Company by possessing an option to purchase shares of Common Stock of the Company in accordance with the Luminex Corporation Stock Option Plan (the "Plan").
NOW, THEREFORE, in consideration of the premises, it is agreed as follows:
1. DEFINITIONS
For purposes of this Agreement, all capitalized terms, if not otherwise defined herein, shall have the meanings provided in the Plan.
2. GRANT OF OPTION
The Company hereby grants to Optionee the right, privilege, and option to purchase _________ shares of Common Stock (the "Option") at a price of $_______ per share (the "Exercise Price"). The Option shall be exercisable as specified in Section 3 below.
3. TIME OF EXERCISE
3.1 Subject to the provisions of the Plan and Sections 3.2 and 3.3 hereof, the Optionee shall be entitled to exercise his Option as follows:
With respect to ________ Beginning _______ ___, ______
of the shares subject to
the Option
With respect to ________ Beginning _______ ___, ______
of the shares subject to
the Option, less any
shares previously issued
hereunder
-1-
|
With respect to all of the shares subject to the Beginning ________ ___, _____ Option, less any shares previously issued hereunder |
3.2 The Option may not be exercised later than _______ ___, _____.
3.3 If the Optionee's employment is terminated for any reason, other than death or disability, the Option must be exercised, to the extent exercisable at the time of termination of employment, within 30 days of the date on which Optionee ceases to be an employee, but no later than ________ ___, _____. In the event of death or disability, the Option must be exercised, to the extent exercisable at the time of termination of employment, within one year of the date on which employment terminated as the result of death or disability, but no later than ______ ___, _____.
4. NO CONTRACT OF EMPLOYMENT INTENDED
Nothing in this Agreement shall confer upon Optionee any right to continue in the employ of the Company, or interfere in any way with the right of the Company to terminate Optionee's employment relationship with the Company.
5. BINDING EFFECT
This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective heirs, executors, administrators and successors.
6. INCONSISTENT PROVISIONS
The Option granted hereby is subject to the provisions of the Plan as in effect on the date hereof. If any provision of this Agreement conflicts with such a provision of the Plan, the Plan provision shall control.
7. COMPLIANCE WITH SECURITIES LAWS
It is the intention of the Company to effect full compliance with all securities and other applicable laws with respect to the sale of shares pursuant to the exercise of Options hereunder and subsequent resales by the Optionee. The Company shall not be required to sell and deliver shares hereunder upon exercise of this Option in whole or part until the Optionee shall have made such representations and agreed to the legending of stock certificates in a fashion as may reasonably be required by the Company's counsel to effect compliance with all applicable securities or other laws.
8. NON-TRANSFERABILITY; CALL OPTION OF THE COMPANY
The Optionee hereby recognizes and acknowledges that the Options granted hereunder are not transferable other than by will or descent. Further, as provided in the Plan, the Company shall have the right, but not the obligation, to repurchase any and all Option Shares if the Optionee ceases to be an employee of the Company for any reason other than death, disability, or retirement at normal retirement age (the "Call Option"). The per share price of the Option Shares repurchased pursuant to the Call Option shall be the Fair Market Value of the Common Stock on the date that the Call Option is exercised.
IN WITNESS WHEREOF the parties hereto have caused this Agreement to be executed effective as of the day and year first above written.
LUMINEX CORPORATION
By: ___________________________________
Mark B. Chandler
President and CEO
EXHIBIT 10.3
[FORM OF]
INCENTIVE STOCK OPTIONS UNDER
LUMINEX CORPORATION STOCK OPTION PLAN
THIS AGREEMENT is entered into effective as of _________ ___, _______, by and between Luminex Corporation, a Texas corporation (the "Company"), and ____________ ("Optionee").
WHEREAS, Optionee is a key employee of the Company and the Company considers it desirable and in its best interest that Optionee be given an inducement to acquire a proprietary interest in the Company and an added incentive to advance the interests of the Company by possessing an option to purchase shares of the common stock of the Company in accordance with Luminex Corporation Stock Option Plan (the "Plan").
NOW, THEREFORE, in consideration of the premises, it is agreed as follows:
1. DEFINITIONS
For purposes of this Agreement, all capitalized terms, if not otherwise defined herein, shall have the meanings provided in the Plan.
2. GRANT OF OPTION
The Company hereby grants to Optionee the right, privilege and option to purchase _______ shares of Common Stock (the "Option") at a price of $_____ per share (the "Exercise Price"), determined by the Committee to be the Fair Market Value of a share of Common Stock of the Company on ___________ ____, _____, the date of grant of the Option (the "Date of Grant"). The Option shall be exercisable as specified in Section 3 below. The Option is an incentive stock option (as such term is defined in Section 422 of the Code).
3. TIME OF EXERCISE
3.1 Subject to the provisions of the Plan and Sections 3.2 and 3.3 hereof, the Optionee shall be entitled to exercise his Option as follows:
With respect to ______ of Beginning _________ ____, _____
the shares subject to the
Option
With respect to ________ Beginning _________ ____, ______
of the shares subject to
the Option, less any shares
-1-
|
previously issued hereunder With respect to all of the Beginning ________ ____, _____ shares subject to the Option, less any shares previously issued hereunder |
3.2 The Option may not be exercised later than _________ ___, _____.
3.3 If the Optionee's employment is terminated for any reason, other than death or disability, the Option must be exercised, to the extent exercisable at the time of termination of employment, within 30 days of the date on which Optionee ceases to be an employee, but no later than ___________ ____, _____. In the event of death or disability, the Option must be exercised, to the extent exercisable at the time of termination of employment, within one year of the date on which employment terminated as the result of death or disability, but no later than _________ ____, ______.
4. NO CONTRACT OF EMPLOYMENT INTENDED
Nothing in this Agreement shall confer upon Optionee any right to continue in the employ of the Company, or interfere in any way with the right of the Company to terminate Optionee's employment relationship with the Company.
5. BINDING EFFECT
This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective heirs, executors, administrators and successors.
6. INCONSISTENT PROVISIONS
The Option granted hereby is subject to the provisions of the Plan as in effect on the date hereof. If any provision of this Agreement conflicts with such a provision of the Plan, the Plan provision shall control.
7. COMPLIANCE WITH SECURITIES LAWS
It is the intention of the Company to effect full compliance with all securities and other applicable laws with respect to the sale of shares pursuant to the exercise of Options hereunder and subsequent resales by the Optionee. The Company shall not be required to sell and deliver shares hereunder upon exercise of this Option in whole or part until the Optionee shall have made such representations and agreed to the legending of stock certificates in a fashion as may reasonably be required by the Company's counsel to effect compliance with all applicable securities or other laws.
8. RIGHT OF FIRST REFUSAL
The Optionee recognizes that under the By-laws of the Company the Option Shares may not be sold or transferred unless they are first offered to the Corporation as provided in the By-laws.
IN WITNESS WHEREOF the parties hereto have caused this Agreement to be executed effective as of the day and year first above written.
LUMINEX CORPORATION
By: ____________________________________
Mark B. Chandler
President and CEO
EXHIBIT 10.7
Confidential Materials omitted and filed separately with the Securities and Exchange Commission. Asterisks denote omissions.
DEVELOPMENT AND SUPPLY AGREEMENT
This Development and Supply Agreement (the "Agreement"), effective as of March 19, 1999 (the "Effective Date"), is made by and between LUMINEX CORPORATION, a Delaware corporation with principal offices at 12212 Technology Boulevard, Austin, Texas 78727 ("LUMINEX"), and BIO-RAD LABORATORIES, INC., a Delaware corporation with principal offices at 1000 Alfred Nobel Drive, Hercules, California 94547 ("BIO-RAD").
BACKGROUND
A. LUMINEX has developed Standard Beads (as defined below) for detection and quantification of analytes, either singly or in multiplexed (multiple analytes simultaneously) form and is developing a system for use with such Standard Beads.
B. BIO-RAD is an international company which manufactures and sells a wide variety of research and clinical diagnostics products used in healthcare, scientific investigation and industry.
C. The parties desire that BIO-RAD develop and distribute Kits incorporating Tests (as defined below) for use within certain fields, and that BIO-RAD distribute Luminex100 Systems (as defined below) as incorporated into BIO-RAD's instrumentation.
NOW THEREFORE, for and in consideration of the covenants, conditions, and undertakings hereinafter set forth, it is agreed by and between the parties as follows:
ARTICLE 1
ARTICLE 2
(a) BIO-RAD shall be responsible, at its expense, for all Kit design and development hereunder.
(b) BIO-RAD further shall be responsible, at its expense, for performing all activities required to secure and maintain all required regulatory approvals for use of Kits and the BIO-RAD System within the Fields. LUMINEX will cooperate with BIO-RAD, at BIO-RAD's expense, to the extent LUMINEX's participation is necessary for BIO-RAD to obtain regulatory approval for the Kits and BIO-RAD System for use within the Fields. LUMINEX will make available to BIO-RAD [**] such tangible written information in LUMINEX's possession and control as is necessary to obtain regulatory approval for the Kits, it being understood that LUMINEX shall not be required to perform any tests or studies required for regulatory approval.
(c) LUMINEX may, at BIO-RAD's request and on the terms acceptable to both parties, conduct initial feasibility studies and/or contract manufacturing for BIO-RAD.
(d) Subject to the terms and conditions of this Section 2.1(d), LUMINEX shall use reasonable efforts to treat the Magnetic Beads provided to LUMINEX by if feasible in LUMINEX's judgment, to permit use of such Magnetic Beads with the Luminex100 System ("Services"). Such Services shall be subject to LUMINEX's standard nonrecurring engineering fees then in effect; provided that BIO-RAD shall not be obligated to pay LUMINEX in excess of [**] Dollars ($[**]) in the aggregate for the Services, and LUMINEX shall not be obligated to provide services which at LUMINEX's standard rates exceed [**] Dollars ($[**]) with respect to such Services. It is understood and agreed that LUMINEX's treatment and BIO-RAD's sale of Magnetic Beads for use with the Luminex100 System will be subject to LUMINEX's production of a beadmap for the Magnetic Beads that is acceptable to LUMINEX as determined in accordance with criteria to be set forth in the Development Agreement (as defined below). BIO-RAD's rights hereunder with respect to Magnetic Beads shall be subject to agreement upon a tolling fee payable by BIO-RAD to LUMINEX with respect to each Magnetic Bead dyed for use with the Luminex100 System or BIO-RAD System. Such supply of Magnetic Beads by BIO-RAD, the tolling fees payable by BIO-RAD with respect to Magnetic Beads and any Services provided by LUMINEX with respect to Magnetic Beads is subject to agreement on the terms and conditions of a development, services and supply agreement to be negotiated in good faith by the parties ("Development Agreement"). Notwithstanding any provision of this Agreement to the contrary, including the provisions of Section 8.3, if the parties do not agree upon a tolling fee for Magnetic Beads
within [**] days of the Effective Date, all rights of BIO-RAD and all obligations of LUMINEX with respect to Magnetic Beads shall automatically terminate unless otherwise agreed in writing.
3.2 [**]
(a) From time to time during the term of this Agreement, if BIO-RAD requests that one or more of the Fields granted to BIO-RAD be expanded to include additional analytes, such analytes will be included as part of a Field presently covered by this Agreement to the extent set forth in Exhibit A, or as part of an additional field to be licensed or granted to BIO-RAD, in each case to the extent mutually agreed in writing by the parties. The [**] to BIO- RAD for each additional analyte or field made generally available for [**] by LUMINEX on a nonexclusive basis to LUMINEX's customers shall not exceed one [**] Dollars ($[**]).
(b) Preferential Right.
(i) Prior to granting to a third party exclusive rights to
develop or distribute Kits for the detection or quantification of one or more
analytes for use within a field within the human clinical diagnostics industry
(such analytes and field of use are referred to collectively herein as the
"Subject Field"), LUMINEX shall provide BIO-RAD with a right of first offer with
respect to such Subject Field, as follows: prior to entering into an agreement
granting a third party exclusive rights to develop and/or distribute Kits within
a Subject Field, LUMINEX shall provide written notification to BIO-RAD, together
with a summary of the Subject Field. Upon request by BIO-RAD within [**]
days after receipt of such a notice, LUMINEX and BIO-RAD shall negotiate in
good faith an agreement with respect to such Subject Field. If BIO-RAD is not
interested in obtaining rights with respect to such Subject Field, BIO-RAD shall
so notify LUMINEX as early as possible during the foregoing [**] day period. If
(i) BIO-RAD does not so request within such [**] day period to commence
negotiations, or notifies LUMINEX that it is not interested in obtaining rights
with respect to such Subject Field, or (ii) the parties do not enter into a
definitive agreement with respect to such Subject Field within [**] days
after BIO-RAD's receipt of LUMINEX's notice under this Section 3.3(b) (in each
of (i) and (ii), the "Negotiation Period"), LUMINEX may proceed to grant rights
or licenses to third parties with respect to all or any part of the Subject
Field, with no further obligation under this Section 3.3. Notwithstanding the
foregoing, BIO-RAD's rights and obligations under this Section 3.3 shall not
apply to a Subject Field for which BIO-RAD does not Control sufficient rights to
commercialize Kits within such Subject Field, where "Control" means ownership or
a license under all applicable intellectual property rights to make, have made,
use, import, sell, offer for sale, and otherwise distribute each Kit within the
Subject Field on a worldwide basis. BIO-RAD's rights and obligations under this
Section 3.3(b) shall terminate [**] years after the Effective Date. For the
avoidance of doubt, it is understood and agreed that LUMINEX shall have no
obligation to disclose to BIO-RAD any information concerning the terms of
LUMINEX's offers to third parties with respect to Subject Fields. It is further
understood and agreed that nothing in this Section 3.3(b) shall restrict LUMINEX
from granting nonexclusive rights to third parties with respect to any analyte
or field of use without any obligation under this Section 3.3(b).
[**] Indicates that material has been omitted and confidential treatment requested therefor. All such material has been filed seperately with the Commission pursuant to Rule 406.
(ii) If BIO-RAD disputes LUMINEX'S right to proceed to
grant rights or licenses to third parties with respect to any Subject Field,
BIO-RAD shall request that such dispute be resolved in accordance with Section
12.5 below. If such dispute is not so resolved and BIO-RAD wishes to pursue such
dispute, then prior to ten (10) days after the expiration of the Negotiation
Period described above regarding such Subject Field, or within ten (10) days
after LUMINEX notifies BIO-RAD that LUMINEX believes Section 3.3(b) does not
apply to a Subject Field (as the case may be), BIO-RAD shall submit to LUMINEX a
written notification requesting arbitration pursuant to Section 12.5 below and
including a written report setting forth (without limitation), the specific
basis for the dispute, and the specific actions BIO-RAD believes LUMINEX must
take to resolve the dispute ("Arbitration Notice"). If such Arbitration Notice
is not received within ten (10) days after the expiration of the Negotiation
Period or such ten (10) day period after notice of LUMINEX's belief that this
Section 3.3(b) does not apply (respectively), then notwithstanding Section 12.5
below, BIO-RAD shall have no further right to dispute LUMINEX'S right to grant
any right or license, or otherwise claim rights pursuant to this Section 3.3(b)
in or to the Subject Field. It is further understood that, notwithstanding the
provisions of Section 12.5, the parties and the arbitrators shall complete the
arbitration within sixty (60) days after the appointment of the arbitrators
under Section 12.5. So long as LUMINEX provides to BIO-RAD the notice required
by Section 3.3(b) above, this Section 3.3(b)(ii) is BIO-RAD's sole remedy for
any failure by LUMINEX to comply with this Section 3.3(b) with respect to a
Subject Field.
(iii) It is understood and agreed that a transfer of all or
substantially all of the business or assets of LUMINEX pertaining to the subject
matter of this Agreement to a third party, whether by merger, acquisition or
otherwise, shall not be deemed a grant to a third party of a right or license
with respect to a Subject Field nor give rise to any right or obligation under
Section 3.3(b) above.
shipping point designated by LUMINEX. The carrier shall be selected by agreement between LUMINEX and BIO-RAD, provided that in the event no such agreement is reached, LUMINEX shall select the carrier. All shipping and insurance costs, as well as any special packaging expenses, shall be paid by BIO-RAD.
to the Kit shall be calculated by multiplying the total net sales for the combination by the fraction A/B, where "A" is BIO-RAD list price for the Kit and "B" is the sum of BIO-RAD list price for the Kit and BIO-RAD list prices of the other products sold in combination with the Kit. If BIO-RAD does not have a separate list price for the Kit or such other products, BIO-RAD and LUMINEX agree to negotiate in good faith a reasonable allocation.
in the calendar month to which the payment pertains and the total Kit Royalties due. All payments hereunder shall be made in U.S. dollars, by direct bank transfer to an account designated in LUMINEX's invoice. Any late payments shall bear interest at the rate of one and one-half percent (1 1/2 %) per month or the highest rate under applicable law, which ever is less, based on the number of days overdue.
(a) Any and all amounts payable hereunder do not include any government taxes (including without limitation sales, use, excise, and value added taxes) or duties imposed by any governmental agency that are applicable to the export, import, or purchase of the Standard Beads or the Luminex100 System (other than taxes on the net income of LUMINEX), and BIO-RAD shall bear all such taxes and duties. When LUMINEX has the legal obligation to collect and/or pay such taxes, the appropriate amount shall be added to BIO-RAD's invoice and paid by BIO-RAD, unless BIO-RAD provides LUMINEX with a valid tax exemption certificate authorized by the appropriate taxing authority.
(b) All payments by BIO-RAD specified hereunder are expressed as net amounts and shall be made free and clear of, and without reduction for, any withholding taxes. Any such taxes which are otherwise imposed on payments to LUMINEX shall be the sole responsibility of BIO-RAD. BIO-RAD shall provide LUMINEX with official receipts issued by the appropriate taxing authority or such other evidence as is reasonably requested by LUMINEX to establish that such taxes have been paid. If LUMINEX uses a foreign tax credit received by LUMINEX as a result of the payment of withholding taxes by BIO-RAD and thereby reduces the amount of U.S. income tax that LUMINEX otherwise would have paid, LUMINEX shall refund to BIO-RAD the amount of such reduction with respect to such foreign tax credit. LUMINEX will use commercially reasonable efforts to obtain foreign tax credits to which LUMINEX is entitled.
(a) At the Effective Date, to the knowledge of LUMINEX's senior management, LUMINEX is not engaged in negotiations to obtain rights to royalty- bearing technologies to which this Section 4.11 pertains.
(b) LUMINEX represents and warrants to BIO-RAD that it has not, up through and including the date of this Agreement, received from any third party any information about or notice of any claim or infringement with respect to or affecting the validity or enforceability of any of the patents, copyrights, trademarks or know-how relating to the Standard Beads or the Luminex100 System or any portions thereof.
auditor chosen by LUMINEX at BIO-RAD's site for the purpose of verifying the amounts payable by BIO-RAD under this Article 4 or compliance with Section 8.1. Such on-site inspections may be made no more than once each calendar year, at reasonable times and on reasonable notice. LUMINEX's auditor will only be required to reveal whether correct payment was made and if not, the amount of the underpayment or overpayment. The auditor will be subject to reasonable confidentialty restrictions with respect to information learned in the course of performing the audit. Inspections conducted under this Section 4.13 shall be at the expense of LUMINEX, unless a variation or error producing an underpayment in amounts payable exceeding five percent (5%) of the amount paid for any period covered by the inspection is established in the course of any such inspection, whereupon all costs relating to the inspection for such period and any unpaid amounts that are discovered shall be paid by BIO-RAD, together with interest as specified in Section 4.9 above. The parties will endeavor to minimize disruption of BIO-RAD's normal business activities to the extent reasonably practicable.
Days of LUMINEX Delay Percentage of Invoiced Sales Price of Standard
--------------------- ----------------------------------------------
Beads
-----
[**] [**]%
[**] [**]%
[**] [**]%
[**] [**]%
|
If LUMINEX fails to deliver Luminex100 Systems in accordance with the requirements of Section 4.3 and 4.4, LUMINEX shall deduct from invoices submitted to BIO-RAD the following percentage of the sales price of the Luminex100 System (excluding off-the-shelf computer components):
Days of LUMINEX Delay Percentage of Invoiced Sales Price of Luminex100 System -------------------- ------------------------------------------------------- [**] [**]% [**] [**]% [**] [**]% [**] [**]% |
4.17 THE PROVISIONS OF SECTION 4.15 SETS FORTH THE SOLE AND EXCLUSIVE REMEDY FOR ANY FAILURE BY LUMINEX TO SUPPLY BEADS OR LUMINEX100 SYSTEMS.
LUMINEX makes the warranties set forth in Exhibit C to BIO-RAD. BIO-RAD agrees not to represent the Standard Beads or Luminex100 System in a manner that is inconsistent with the Specifications or otherwise misrepresent the Standard Beads or Luminex100 System. EXCEPT AS EXPRESSLY PROVIDED IN EXHIBIT C, LUMINEX MAKES NO WARRANTIES OR CONDITIONS (EXPRESS, IMPLIED, STATUTORY OR OTHERWISE) WITH RESPECT TO THE SUBJECT MATTER HEREOF, AND LUMINEX SPECIFICALLY DISCLAIMS ANY AND ALL IMPLIED WARRANTIES OR CONDITIONS OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
to LUMINEX or LUMINEX's designee, as LUMINEX may direct, at LUMINEX's expense. BIO-RAD shall not make or retain any copies of any LUMINEX Confidential Information which may have been entrusted to it except for one (1) archival copy.
provided, however, that the foregoing shall not apply to any stock of brochures or products existing at the time of such termination.
subject matter for which patent protection should be sought. If so notified, BIO-RAD shall withhold its proposed public disclosure and the parties shall mutually consult in good faith to determine the best course of action to take in order to modify the disclosure or to obtain patent protection. After resolution of the confidentiality, regulatory or other issues, including without limitation the filing of a patent application, to both parties' reasonable satisfaction, BIO-RAD shall be free to submit the manuscript and/or make its public oral disclosure.
replaced; or (iii) modify the Standard Beads or Luminex100 System to make the
same noninfringing provided they have substantially the same functionality as
the unmodified Standard Beads and Luminex100 System; or (iv) in the event (i),
(ii) or (iii) above are not commercially reasonable in LUMINEX's judgment,
terminate BIO-RAD's distribution rights with respect to the infringing subject
matter and at LUMINEX's option require that BIO-RAD remove the Standard Beads
and/or Luminex100 System or portion thereof from use. If LUMINEX requires
removal of Standard Beads and/or Luminex100 Systems, the costs of removal from
use of End Users or other purchasers of the BIO-RAD System shall be at LUMINEX's
expense, provided that BIO-RAD shall not incur any such costs without first
obtaining LUMINEX's prior written approval.
If to LUMINEX: Luminex Corporation
12212 Technology Boulevard
Austin, Texas 78727
Attention: General Counsel
Fax: (512) 258-4173
19
|
If to BIO-RAD: Bio-Rad Laboratories, Inc.
Corporate Offices
1000 Alfred Nobel Drive
Hercules, California 94547
Attention: General Counsel
Fax: (510) 741-5815
with a copy to:
Bio-Rad Laboratories, Inc. Diagnostics Group
4000 Alfred Nobel Drive
Hercules, California 94547
Attention: Vice-President, Diagnostics Group
Fax: (510) 741-6499
|
comply with the U.S. Export Administration Regulations and other laws and regulations governing exports in effect from time to time. BIO-RAD further agrees not to knowingly provide Standard Beads, Magnetic Beads, Luminex100 Systems or BIO-RAD Systems to any organization, public or private, which engages in the research or production of military devices, armaments, or any instruments of warfare, including biological, chemical and nuclear warfare.
IN WITNESS WHEREOF, the parties hereto have caused their duly authorized representatives to execute this Agreement.
BIO-RAD LABORATORIES, INC. LUMINEX CORPORATION
By: /s/ Sanford S. Wadler By: /s/ Mark Chandler
----------------------------- -----------------------------
Name: Sanford S. Wadler Name: Mark Chandler
-------------------------- ---------------------------
Title: Vice President and General Counsel Title: Chairman & CEO
----------------------------------- --------------------------
|
EXHIBIT A
FIELDS
BIO-RAD may add, [**] an additional [**] analytes (either DNA or protein) to each Field listed above which analytes are not included within the the Field definitions at the Effective Date. The foregoing, right is exercisable by written notice to LUMINEX of the analytes. In addition, BIO-RAD may expand each Field listed above by an additional [**] analytes (either DNA or protein) by written notice of such additional analytes and payment to LUMINEX of [**] Dollars [**] per Field so expanded.
EXHIBIT B
END USER LICENSES
Label/Sticker for Luminex 100 System:
No rights or licenses under any of Luminex's patents are granted by or shall be implied from the sale of this unit of Luminex100 instrumentation or license of Luminex software to you, the purchaser, and you do not receive any right under Luminex's patent rights by virtue of your purchase of Luminex100 instrumentation or license of Luminex software. You agree that the Luminex100 instrumentation and Luminex software are sold only for use with fluorescently labeled microsphere beads authorized by Luminex and you may obtain a royalty-free license under Luminex's patents, if any, to use this unit of Luminex100 instrumentation with fluorescently labeled microsphere beads authorized by Luminex by registering this unit of Luminex100 instrumentation with Luminex in accordance with the instructions accompanying the Luminex100 instrumentation.
Label License/Sticker for Kit:
By purchasing this Kit, which contains fluorescently labeled microsphere beads authorized by Luminex, you, the customer, acquire the right under Luminex's patent rights, if any, to use this Kit or any portion of this Kit, including without limitation the microsphere beads contained herein, only with Luminex's laser based fluorescent analytical test instrumentation marketed under the name Luminex100.
End-User License Agreement (EULA) for Luminex100(TM) Operating System
This Luminex End-User License Agreement ("EULA") is a legal agreement between you (either an individual or a single entity) the end-user and Luminex Corporation ("Luminex") regarding the use of the Luminex software product identified above, which includes computer software and online or electronic documentation and may include associated media and printed materials (if any) ("SOFTWARE PRODUCT" or "SOFTWARE"). By clicking on the button below labeled "Accept", you represent that you have read, understand and agree to be bound by the terms of this EULA. If you do not agree to be bound by the terms of this EULA, please click on the button below labeled "Decline". If you do not agree to be bound by the terms of this EULA, you are not authorized to use the SOFTWARE PRODUCT and shall discontinue use immediately. Any unauthorized use is a violation of the law and acts as a total nullification of all warranties.
The SOFTWARE PRODUCT is protected by copyright laws and international copyright treaties, as well as other intellectual property laws and treaties. The SOFTWARE PRODUCT is licensed, not sold.
1. GRANT OF LICENSE. Subject to the terms and conditions of this EULA, Luminex hereby grants to you a nonexclusive, nontransferable, nonassignable license (without right to sublicense) under Luminex's copyrights and trade secrets to use the SOFTWARE PRODUCT on a hardware platform purchased from Luminex pursuant to Luminex's terms and conditions of sale. You may make one (1) copy of the SOFTWARE PRODUCT for backup or archival purposes only. Although no rights or licenses under any of Luminex's patents are granted by or shall be implied from the license of the SOFTWARE or the sale of Luminex100 instrumentation to you, the purchaser, you may obtain a license under Luminex's patents, if any, to use this unit of Luminex100 instrumentation with fluorescently labeled microsphere beads authorized by Luminex by purchasing such beads from Luminex or an authorized Luminex reseller.
2. RESTRICTIONS.
. You must maintain all proprietary notices on all copies of the SOFTWARE PRODUCT.
. You may not distribute copies of the SOFTWARE PRODUCT to third parties.
. You may not reverse-engineer, decompile, disassemble, or otherwise attempt to derive source code from the SOFTWARE PRODUCT.
. You may not copy (other than one backup or archival copy), distribute, sublicense, rent, lease, transfer or grant any rights in or to all or any portion of the SOFTWARE PRODUCT.
. You must comply with all applicable laws regarding the use of the SOFTWARE PRODUCT.
. You may not modify or prepare derivative works of the SOFTWARE PRODUCT.
. You may not use the SOFTWARE PRODUCT in a computer-based service business or publicly display visual output of the SOFTWARE PRODUCT.
. You may not transmit the SOFTWARE PRODUCT over a network, by telephone, or electronically by any means.
3. TERM AND TERMINATION. Your rights under this EULA are effective until termination. You may terminate this EULA at any time by destroying the SOFTWARE PRODUCT, including all computer programs and documentation, and erasing any copies residing on your computer equipment. Luminex may terminate this EULA upon thirty (30) days written notice to you. Your rights under this EULA automatically terminate without further action on the part of Luminex if you do not comply with any of the terms or conditions of this EULA. Upon any termination of this EULA, you agree to destroy the SOFTWARE PRODUCT and erase any copies residing on your computer equipment.
4. RIGHTS IN SOFTWARE. All rights and title in and to the SOFTWARE PRODUCT and any copies thereof are owned by Luminex or its suppliers. This EULA is not a sale and does not transfer to you any title or ownership interest in or to the SOFTWARE or any patent, copyright, trade secret, trade name, trademark or other intellectual property right therein. You shall not remove, alter, or obscure any proprietary notices contained on or within the SOFTWARE and shall reproduce such notices on any back-up copy of the SOFTWARE. All title and intellectual property rights in and to the content which may be accessed through use of the SOFTWARE PRODUCT is the property of the respective content owner and may be protected by applicable copyright or other intellectual property laws and treaties. This EULA grants you no rights to use such content.
5. EXPORT RESTRICTIONS. You agree that you will not export or re-export the SOFTWARE PRODUCT to any country, person, entity, or end-user subject to U.S.A. export restrictions. You hereby warrant no state or federal agency has suspended, revoked, or denied your export privileges.
6. NO WARRANTY. THE SOFTWARE PRODUCT IS LICENSED "AS IS." ANY USE OF THE SOFTWARE PRODUCT IS AT YOUR OWN RISK. THE SOFTWARE PRODUCT IS PROVIDED FOR USE ONLY WITH LUMINEX PRODUCTS. TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, LUMINEX AND ITS SUPPLIERS DISCLAIM ALL WARRANTIES, EITHER EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, AND NONINFRINGEMENT.
7. LIMITATION OF LIABILITY. IN NO EVENT SHALL LUMINEX OR ITS SUPPLIERS BE LIABLE FOR ANY SPECIAL, INCIDENTAL, INDIRECT, OR CONSEQUENTIAL DAMAGES WHATSOEVER (INCLUDING, WITHOUT LIMITATION, DAMAGES FOR LOSS OF BUSINESS PROFITS, BUSINESS INTERRUPTION, LOSS OF BUSINESS INFORMATION, OR ANY OTHER PECUNIARY LOSS) ARISING OUT OF THE USE OF OR INABILITY TO USE THE SOFTWARE PRODUCT, EVEN IF LUMINEX HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
8. MISCELLANEOUS. This EULA is governed by the laws of the State of Texas, U.S.A., without reference to conflicts of laws principles. You shall not assign or sublicense or otherwise transfer the rights or license granted hereunder, by agreement or by operation of law, without the prior written consent of Luminex, and all assignments in violation of this prohibition shall be null and void. This EULA is the complete and exclusive agreement of Luminex and you and supersedes all other communications, oral or written, relating to the subject matter hereof. No change to this EULA shall be valid unless in writing and signed by the party against whom enforcement is sought. The waiver or failure of Luminex or you to exercise in any respect any right or rights provided for herein shall not be deemed a waiver of any further right hereunder. If any provision of this EULA is held unenforceable, the remainder of this EULA will continue in full force and effect.
EXHIBIT C
LIMITED WARRANTY
EXHIBIT D
TRADEMARKS
Luminex
Luminex100
EXHIBIT E
Product
Number Item Description
------ ----------------
51-00001 Luminex100 System [**]
[**]
|
This Luminex100 Purchase Price will be effective during the first [**] years of this Agreement, after which time LUMINEX may, at its option, increase the Luminex100 Purchase Price effective on [**] days written notice to BIO- RAD, provided that such increases may occur no more frequently than once per year. Any increase in the Luminex100 Purchase Price shall be effective for all Luminex100 Systems ordered after such notice.
Commission pursuant to Rule 406.
EXHIBIT 10.8
Confidential Materials omitted and filed separately with the Securities and Exchange Commission. Asterisks denote omissions.
AMENDMENT TO DEVELOPMENT AND SUPPLY AGREEMENT
This Amendment to Development and Supply Agreement ("Amendment"), effective as of January 13, 2000 (the "Amendment Effective Date"), by and between Luminex Corporation, a Delaware corporation with principal offices at 12212 Technology Boulevard, Austin, Texas 79727 ("LUMINEX") and Bio-Rad Laboratories, Inc., a Delaware corporation with principal offices at 1000 Alfired Nobel Drive, Hercules, California 94547 ("BIO-RAD") (LUMINEX and BIO-RAD collectively, the "Parties"), amends that certain Development and Supply Agreement by and between the Parties effective as of March 19, 1999 (the "Agreement").
WHEREAS, the Parties desire to amend the Agreement as set forth herein below.
NOW, THEREFORE, the Parties agree as follows:
AMENDMENT. This Amendment hereby amends the Agreement to incorporate the terms and conditions set forth in this Amendment. The relationship of the Parties shall continue to be governed by the terms and conditions of the Agreement, as amended herein; and in the event that there is any conflict between the terms and conditions of the Agreement and this Amendment, the term and conditions of this Amendment shall control. As used in this Amendment, all capitalized terms shall have the meanings defined for such terms in this Amendment or, if not defined in the Amendment, the meanings defined in the Agreement
MODIFICATIONS TO THE AGREEMENT.
I. Exhibit A to the Agreement is hereby amended to add the following:
[**]
2. "Field Two" in Exhibit A of the Agreement is deleted and replaced with the following: [**]
3. Section 1.7 of the Agreement is hereby amended to add the following:
"Fields Five and Six, as set forth in Exhibit A, shall be limited to Research Use.
4. The Agreement is hereby amended to add the following Section 1.23:
5. Section 2.1 (d) of the Agreement is hereby amended to delete the last sentence of such section and replace it with the following:
6. Section 3.1 of the Agreement is hereby amended to add the following after the phrase "only as part of BIO-RAD Systems":
"'or, within Fields Five and Six, Luminex100 Systems separately"
7. Section 3.1 of the Agreement is hereby further amended to add the following after the phrase "BIO-RAD U.S. Diagnostics Division management":
"or BIO-RAD U.S. Life Sciences Division management"
8. Section 3.1 of the Agreement is hereby further amended to add the following after the phrase "in conjunction with their operation of BIO- RAD Systems":
"and Luminex100 Systems"
9. Section 3.3(b)(i) of the Agreement is hereby amended to add the following after the phrase "human clinical diagnostics industry":
"or the life science research industry"
10. Section 3.5 of the Agreement is hereby amended to add the following after the phrase "BIO-RAD U.S. Diagnostics Division management":
"or BIO-RAD U.S. Life Sciences Division management"
"or Kits for Research Use"
12. Section 4.8 of the Agreement is hereby amended to add the following after the phrase "All invoices shall be sent to the following address:"
"For Clinical Diagnostics Group, Bio-Rad Laboratories, Accounts Payable, 4000 Alfred Nobel Drive, Hercules, California 49547, or for Life Sciences Group, Bio Rad Laboratories, Accounts Payable, 2000 Alfred Nobel Drive, Hercules, California."
13. Section 4.11 (a) of the Agreement is hereby amended to add the following after the phrase "At the Effective Date:"
"and at the Amendment Effective Date"
14. Section 4.11(b) of the Agreement is hereby amended to add the following after the phrase "the date of this Agreement:"
"and at the Amendment Effective Date"
15. Section 5.2 of the Agreement is hereby amended to read in its entirety as follows:
16. Section 8.1 of the Agreement is hereby amended to add the following after the words "each such renewal term":
"but which in no case shall vary by more than [**] percent ([**]%)
from the average of the three prior years' sales. Notwithstanding the
foregoing provisions of this Section 8.1, Fields Five and Six shall be
included in the Agreement during each of the renewal terms only if the
parties agree upon and BIO-RAD meets annual sales goals with respect
to Kits in Fields Five and Six, which annual sales goals shall be
negotiated in good faith by the parties prior to the commencement of
each such renewal term but which in no case shall vary by more than
[**] percent ([**]%) from the average of the three prior years'
sales."
17. Section 8.3 of the Agreement is hereby amended to add the following after the phrase "Luminex100 System" in the second line of that Section:
"(or, with respect to Fields other than Fields One, Two, Three or Four, beginning five (5) years after the addition to the Agreement of such Field or Fields)"
18. Section 8.3 of the Agreement is hereby further amended to delete the last sentence thereof and replace if with the following:
"If BIO-RAD has not made commercially available Kits incorporating Magnetic Beads in each of Fields One, Two, Three and Four within [**] years of the Effective Date plus any extension of time necessary to produce Magnetic Beads reasonably acceptable to BIO-RAD, LUMINEX may terminate BIO-RAD's exclusive rights with respect to Magnetic Beads in Fields One, Two, Three and Four by written notice to BIO-RAD. If BIO- RAD has not made commercially available Kits incorporating Magnetic Beads in each of Fields Five and Six within [**] years of the Amendment Effective Date plus any extension of time necessary to produce Magnetic Beads reasonably acceptable to BIO-RAD, LUMINEX may terminate BIO-RAD's exclusive rights with respect to Magnetic Beads in Five and Six by written notice to BIO- RAD.
19. Section 12.2 of the Agreement is hereby amended to add the following after the word "Group" in the third line of that Section:
"or BIO-RAD Vice-President Life Sciences Division, as appropriate,"
20. Section 12.8 of the Agreement is hereby amended to add the following at the end of that Section:
"with a further copy to:
Bio-Rad Laboratories, Inc. Life Science Group
2000 Alfred Nobel Drive
Hercules, California 94547
Attention: Vice-President, Life Science Group"
Fax: (510) 741-5803"
21. ADDITIONAL TERM: ADVANCE AGAINST ROYALTIES. Upon the effective date of this Amendment, BIO-RAD shall pay to LUMINEX an aggregate of [**] Dollars ($[**]) for both of Fields Five and Six as an Advance.
22. The additional fee for expansion of Field Two set forth in Exhibit A of the Agreement is waived.
ENTIRE AGREEMENT. Notwithstanding the first sentence of Section 12.17 of the Agreement, together the Agreement (including the Exhibits thereto) and this Amendment constitute the entire agreement between the Parties in connection with the subject matter thereof and supersede all prior and contemporaneous agreements, understandings, negotiations and discussions, whether oral or written, of the Parties.
IN WITNESS WHEREOF, the Parties have executed this Amendment.
LUMINEX CORPORATION BIO-RAD LABORATORIES, INC.
By: /s/ Randel S. Marfin By: /s/ Sanford Wadler
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Name: Randel S. Marfin Name: Sanford Wadler
---------------------- --------------------
Title: Vice President - Business Development Title: Vice President
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[**] Indicates that material has been omitted and confidential treatment requested therefor. All such material has been filed separately with the Commission pursuant to Rule 406.
EXHIBIT 10.9
Confidential Materials omitted and filed separately with the Securities and Exchange Commissions, Asterisks denote omissions.
AGREEMENT FOR ELECTRONIC MANUFACTURING SERVICES
This Agreement between Luminex Corporation, a Delaware corporation with principal offices at 12212 Technology Boulevard, Austin, Texas 78727 (hereinafter "Luminex"), and Sanmina Corporation, having a place of business at 2300 Highway 79 South, Guntersville, Alabama 35976 (hereinafter "Sanmina") is entered into effective as of January 1, 2000 (the "Effective Date"). Sanmina shall perform manufacturing services for Luminex under the terms and conditions set forth herein.
NOW THEREFORE, for and in consideration of the covenants, conditions, and undertakings hereinafter set forth, it is agreed by and between the parties as follows:
I. Term
This Agreement shall be in effect for four (4) years from the Effective Date of this Agreement. Unless either party gives the other party written notice of its intent not to renew this Agreement at least ninety (90) days prior to the expiration of the current term, the Agreement shall renew under the then current terms for successive one (1) year terms.
II. Scope of Work Performed
A. Luminex wishes Sanmina to manufacture on behalf of Luminex a range of products, assemblies, and/or subassemblies, hereafter called the "Products," identified in and at the prices in Exhibit A, as amended in writing from time to time by mutual agreement. Sanmina and Luminex shall mutually agree upon a delivery schedule for the Products per Section IV of this Agreement.
B. Luminex shall be liable for material(s), components, or parts that Sanmina procures or otherwise contracts for in order to manufacture the products that Luminex wishes to buy from Sanmina on a turnkey basis (hereinafter the "Material" or "Materials"). This liability shall be determined by defining the process that incurs this liability and describing the situations or circumstances under which Luminex is liable for Material that Sanmina has procured per Section IV of this Agreement.
III. Pricing
The prices for the Products shown in Exhibit A shall remain fixed for six (6) months after the Effective Date, thereafter to be reviewed by the Parties on a semiannual basis. Sanmina agrees that there shall be no increase in Build Time not due to an ECO (defined below) or a change request from Luminex. "Build Time" means the amount of time Sanmina requires to assemble and test the Materials into a finished Product. Notwithstanding the foregoing, the following exceptions allow prices to be increased or decreased:
1. ECO - Engineering Change Order (referred to in Section IV.G.) or change request; or
2. Material variations on the market price of components that are the basis of the Purchase Order. This will be reviewed and mutually agreed to quarterly unless abnormal ["abnormal" defined as greater ten percent (10%) variation in Sanmina's cost of Material(s)] changes are experienced in material costs; or
3. If the monthly volume of Products ordered by Luminex under this Agreement meets or exceeds [**] units per month for [**] consecutive months (the "Established Level"), then the
Materials Mark-up and Profit Gross-up percentages stated in Exhibit A will be reviewed and agreed upon at lower or higher percentages, respectively. These new percentages will be applied to all subsequent shipments. Notwithstanding the foregoing, if the monthly volume of Products ordered by Luminex under this Agreement drops below the Established Level then in effect, then the percentages will be reviewed and agreed upon to lower (Gross-up) or higher (Mark-up) percentages, not to exceed the original percentages set out herein as of the Effective Date; or
IV. Forecasting and Ordering
A. Sanmina shall purchase Materials for the Products in accordance with an Approved Vendor List ("AVL"), as provided by Luminex to Sanmina from time to time. In the event Sanmina cannot purchase Materials from an approved vendor for any reason, including unavailability or commercial unfeasibility of the purchase of such Materials, Sanmina may purchase such Materials from an alternate vendor with the prior written consent of Luminex.
B. General Planning and Procurement Process
1. On the date this Agreement is executed and the first business day of each calendar month thereafter, Luminex shall provide Sanmina with monthly, rolling purchase orders covering a minimum period of three (3) months ("Purchase Order").
2. On the same dates, Luminex shall provide Sanmina with an additional monthly, rolling nine (9) month forecast ("Forecast") covering the nine (9) months immediately following the Purchase Order period. Forecast does not incur any liability for either Sanmina or Luminex except that of any long lead-time Materials for which the forecast would cause procurement activity, and, even in such a situation such liability for Luminex would be limited per Section IV.C.
3. Sanmina will take the Purchase Orders and Forecast referred to in Subsections 1 and 2 above and generate a Master Production Schedule ("MPS") for a twelve (12) month period using the process described in Subsection 4 below.
4. The MPS will define the master plan on which Sanmina will base its procurement, internal capacity projections, and commitments:
(a) Sanmina will use the Purchase Orders referred to in Subsection 1 above to generate the first three (3) months of the MPS.
(b) Sanmina will use the Forecast referred to in Subsection 2 above to generate the following nine (9) months of the MPS.
5. Sanmina will release (launch) orders to suppliers of Materials sometime prior to the anticipated date that the Material is needed. When these orders are launched will depend on the Vendor Lead Time that Sanmina will determine from time to time and maintain as a parameter of Sanmina's manufacturing or materials planning systems.
6. Sanmina, through its MRP System will also issue an instruction ("MRP Signal") to its procurement group to buy the Material in order to meet the delivery schedule as specified in the respective Purchase Order.
7. When Sanmina places an order with its suppliers per the sections above, Sanmina will order Materials in various quantities (defined in periods-worth-of-supply) that are defined by the Material's ABC Classification. This classification as well as the expected distribution or characteristics of various classes of Materials, and, the periods-worth-of-supply (Periods-of-Supply) that will be bought for each class of Material is shown on Exhibit C.
8. In addition to ordering Materials for various periods-of-supply and in order to obtain volume discounts, Sanmina will order Materials according to various minimum-buy quantities, tape and reel quantities, and multiples of packaging quantities in accordance with the Excess Materials provisions of Subsection IV.D.5.
C. Liabilities for Materials
1. For the purposes of Sections C, D, and E of Article IV, "Materials" means without the cost of the Materials Mark-up and is at Sanmina's cost. Also, for the purposes of Sections C, D, and E of Article IV, Luminex's liability for Materials under these section is separate and exclusive of any liability for Materials used in completed Products purchased from Sanmina by Luminex per the Product Pricing of Exhibit A.
2. Luminex's financial liability for Materials that Sanmina has procured under this Agreement under valid Forecasts and/or Purchase Orders and separate and exclusive of any liability for Materials used in completed Products purchased from Sanmina by Luminex per the Product Pricing of Exhibit A ("Materials Liability"), is limited to the following:
(a) Materials that Sanmina, having ordered per the guidelines in
Section IV.B. above, cannot cancel prior to its receipt. This
includes Materials that may not be cancelable by virtue of
having insufficient time between the MRP signal to cancel and
the expected or real receipt date at Sanmina. If the receipt
of Material cannot be stopped but the Materials can be
returned, they will be covered under Subsection (b) below or
Section IV.C.2.; and
(b) Materials that Sanmina, having ordered per the guidelines above, cannot return to the suppliers that the Materials came from, or other 3/rd/ party, and where Sanmina has made reasonable efforts to return the Materials. Prior to being included in Luminex's liability, Luminex shall be given the option to try to arrange a return for Sanmina; and
(c) Material which Luminex and Sanmina agree that the return of such Materials is not required.
3. Luminex shall also be liable to Sanmina for other Material-related costs separate and exclusive of any liability for Materials used in completed Products purchased from Sanmina by Luminex per the Product Pricing of Exhibit A. ("Other Material Costs"), which shall include:
(a) Instances in which Sanmina is able to return Materials with reasonable re-stocking or other fees, those fees shall become part of Luminex's Total Liability in place of the costs of those Materials and markups; and
(b) Associated reasonable expenses related to purchasing, ordering, manufacturing (labor and overhead), shipping, storing, and eliminating such Materials that Sanmina purchases or orders to fulfill a Purchase Order and/or the Forecast on behalf of Luminex to manufacture the Products shall constitute a part of Luminex's Total Liability, such amount not to exceed the current Materials Mark-up; and
(c) If necessary and with Luminex's prior, written consent, Sanmina shall purchase any necessary tools to fulfill the Purchase Order and Forecast. Such tools shall be deemed a part of Luminex's Total Liability. All such tooling purchased by Sanmina shall remain Luminex's sole property, and Sanmina shall return such tooling (normal wear and tear excepted) to Luminex upon request, the completion of the relevant order, or the termination of the Agreement. Such tooling may only be used by Sanmina to fulfill its obligations hereunder to Luminex.
4. Except as otherwise provided herein, Luminex's total financial liability for Materials and separate and exclusive of any liability for Materials used in completed Products purchased from Sanmina by Luminex per the Product Pricing of Exhibit A ("Total Liability"), shall be the sum of: (i) Materials Liability plus the agreed upon Materials Mark-up per Exhibit A, and (ii) Other Material Costs. Sanmina shall use commercially reasonable efforts to minimize the Total Liability consistent with meeting the production requirements of this Agreement.
D. Excess Material
1. "Excess Material" and "Excess Materials" mean Materials greater than the quantity needed to fulfill all outstanding or open Purchase Orders submitted to Sanmina by Luminex hereunder.
2. Sanmina agrees to provide Luminex with monthly progress Excess Reserve Detail Reports which shall detail any Excess Materials. Luminex agrees to review and notify Sanmina, in writing, within thirty (30) days of any issues regarding the composition of the Excess Materials, in response to the Excess Reserve Detail Report. Sanmina agrees to use commercially reasonable efforts to reduce the amount of Excess Material(s) consistent with meeting the production requirements of this Agreement.
3. If, at any time at which the total dollar amount of Excess
Materials exceeds twenty-five thousand dollars ($25,000.00), the
Parties will, within thirty (30) days, conduct a review of the
composition of Excess Materials and alternative means of reducing
the level of such Excess Materials; e.g., by returns, sales, etc..
If, after such review, Luminex's responsibility for Excess
Materials would still exceed twenty-five thousand dollars
($25,000.00), then Luminex will, within fourteen (14) days, either
(1) issue a Purchase Order for the delivery of that portion over
twenty-five thousand dollars ($25,000.00), or (2) issue sufficient
top level Purchase Orders to result in the consumption of said
Excess Materials.
4. Upon termination of this agreement by notice per Section X.A.,
Luminex agrees to purchase Excess and Unallocated Material it is
responsible for creating through MRP driven demand for forecast,
production, and minimum buy requirements per the provisions of
Section IV. Within thirty (30) days of notification of
termination, Luminex will provide Sanmina with the address where
Excess Material is to be shipped, or arrange for pick-up by third
party purchasers from Sanmina's facility.
5. In order to simplify and expedite the process of placing orders with vendors, where minimum buys are required, and the minimum buy order would create an Excess Material condition, this Agreement authorizes Sanmina to make those purchases under the following guidelines:
(a) Sanmina may make purchases for line items which total extended excess cost to Sanmina does not exceed five hundred dollars ($500.00); and
(b) In the event a line item increases Excess Materials by five hundred dollars ($500.00) or more, Sanmina shall notify Luminex in writing within one (1) week. Luminex will, within one (1) week, provide written authorization to place the order.
E. Unallocated Materials
1. "Unallocated Material" and "Unallocated Materials" are defined as Material or Materials for which there are no open or outstanding Purchase Orders. Unallocated Material is identified on Excess Reserve Detail Reports as those items having zero (0) demand.
2. Sanmina agrees to include in the aforementioned monthly Excess Reserve Detail Reports details of any Unallocated Materials. Luminex agrees to review and notify Sanmina, in writing, within thirty (30) days of any issues regarding the composition of Unallocated Material, in response to the Excess Reserve Detail Report. After such review, Luminex will, within fourteen (14) days, either (1) issue a Purchase Order for the delivery of Unallocated Material, or (2) issue sufficient top level Purchase Orders to result in the consumption of said Unallocated Material.
F. Reschedules
1. Luminex may reschedule delivery dates of Products subject to the matrix set forth on Exhibit D.
2. For a decrease in quantity of Products to be delivered on a specific delivery date, Sanmina and Luminex shall mutually agree upon a date to deliver the undelivered Products.
3. For an increase in quantity of Products to be delivered on a specific delivery date, Sanmina, on a best efforts basis, will attempt to accommodate such increase.
4. If any change in the delivery dates of any results in additional expenses to Sanmina to store such Products or to acquire additional Materials, such additional expenses as are reasonably incurred and documented shall be deemed part of Luminex's Total Liability with Luminex's prior approval.
G. Revisions
In the event Luminex requests an engineering change to a product, Sanmina shall notify Luminex of any impact on the cost and/or scheduled delivery of such Products within five (5) business days of the receipt of Luminex's request in reasonable detail with supporting documentation. Sanmina will use its best efforts to reduce the impact the costs of any change order. Unless Luminex consents to the amended notification from Sanmina, the requested
engineering change shall be deemed canceled and Luminex will be notified in writing. Any increases in the cost of the Products resulting from such Engineering Change Order ("ECO") shall be deemed a part of Luminex's Total Liability. Similarly, any Materials made obsolete or excess as a result of such an ECO shall be deemed part of Luminex's Total Liability.
H. Cancellations
Luminex may cancel any Purchase Order by notifying Sanmina in writing at least thirty (30) days prior to the delivery date of such order. Within thirty (30) days of such cancellation, Sanmina shall provide Luminex with the amount of the Total Liability under Section IV related to such canceled Purchase Order. To the extent practical, any Materials resulting from a cancellation shall be used to fulfill other Purchase Orders. If a sufficient amount of purchases is not forecasted to consume such materials within the next sixty (60) day period, with respect to the Excess Materials Luminex shall pay such cancellation amount to Sanmina on a net-30 day basis. After receipt of such cancellation amount, Sanmina shall deliver to Luminex, at Luminex's expense, any remaining Materials purchased but unused as a result of such cancellation, or scrap Materials, at the sole discretion of Luminex.
V. Delivery
A. Delivery of all items under this Agreement shall be delivered F.O.B. Sanmina's Plant located at the address specified in Exhibit A to the common carrier specified from time to time by Luminex ("Delivery Point"). Upon delivery to the common carrier, risk of loss and title shall pass to Luminex. Sanmina will provide insurance for the value of the Material (with any deductible to be approved by Luminex) until delivery to the common carrier, and shall name Luminex as an additional insured on such policies and furnish Luminex with certificates of same..
B. Sanmina shall use its best efforts to deliver the Products to the Delivery Point on the agreed upon delivery dates. If Products pursuant to a Purchase Order are more than thirty (30) days late, then Luminex shall have the option to cancel that Purchase Order. If Products pursuant to any Purchase Order are more than forty-five (45) days late, Sanmina shall be in breach of this Agreement and Luminex shall have the option to terminate this Agreement. If Luminex terminates this Agreement for Sanmina's failure to timely deliver the Products, Luminex shall be liable for the Materials per Section IV.
C. Sanmina shall transport the Products using the common carrier and such shipment terms as are designated by Luminex from time to time to Luminex's address or to an address specified in writing by Luminex. All freight, insurance, and other shipping expenses from the delivery point shall be borne by Luminex. When special packaging is requested or, in the opinion of Sanmina is required under the circumstances, the additional expenses related to such special packaging shall also be borne by Luminex if agreed to in advance by Luminex.
VI. Payment and Invoicing
Payment terms will be net-30 (thirty) days from invoice date, provided it
is not earlier than the ship date. Sanmina will provide Luminex with a credit
limit adequate to equal or exceed six (6) months of projected shipments of the
Products to Luminex. In the event that Luminex exceeds this credit limit or has
undisputed outstanding invoices for more than sixty (60) days and such credit
limit remains exceeded or such invoices remain outstanding, as applicable, ten
(10) days after Luminex has received notice thereof, Sanmina may stop shipments
of Products to Luminex until Luminex makes sufficient payment to
bring its account consistent with terms outlined above. Sanmina may reduce the credit limit with sixty (60) days prior written notice to Luminex, provided, that Luminex may terminate this Agreement on thirty (30) days prior written notice if such credit limit is reduced by more than ten percent (10%).
VII. Warranty
A. Sanmina warrants that each Product shall at the time of delivery be new and free and clear of all liens and encumbrances. Sanmina warrants that the Products shall be free from any defects in workmanship for a period of one (1) year from the date of manufacture except to the extent that such defects are caused by components purchased from third-party vendors but not Sanmina-owned companies ("Vendor Components"). Warranty on components is limited to the warranty provided by the component manufacturer. Sanmina, to the extent permitted, hereby agrees to assign to Luminex any unexpired warranties for such Vendor Components provided by third-party vendors or passed on by such third-party vendors from the original manufacturers until the expiration of such warranties. Sanmina shall execute any documents necessary to assign such warranties to Luminex. As Luminex's remedy under Sanmina's warranty, Sanmina will, at no charge, rework, repair, and retest any such Products returned to Sanmina and found to contain defects in workmanship, provided, however, in the event such Product cannot be repaired or replaced within thirty (30) days of return by Luminex, Luminex may elect a refund of the purchase price for the applicable Product. Sanmina will return defective Vendor Components to third party vendors for warranty replacement or repair from the original manufacturers. All reasonable transportation and expenses arising from shipping the non-conforming Products to and the replacement Products from the shipping location shall be paid by Sanmina to the extent the Products are defective due to Sanmina's workmanship. However, if a Product returned to Sanmina for replacement proves to be not defective, Luminex shall reimburse Sanmina for all transportation expenses incurred by Sanmina in connection with the shipment of such Products to Sanmina and its return by Sanmina. Warranty coverage does not include failures due to Luminex design errors, the supply or selection by Luminex of improper or defective parts or materials used by Luminex, damages caused by Luminex's misuse, unauthorized repair, or negligence. Sanmina does not assume any liability for low-cost, expendable items such as lamps and fuses. Sanmina reserves the right to inspect the Products, Materials, and Vendor Components and verify that they are defective or non- conforming.
B. The performance of any repair or replacement by Sanmina does not extend the warranty period for any Products beyond the period applicable to the Products originally delivered; provided, however, that the warranty period shall extend for a period of time equal to the time elapsed from notice to Sanmina of a warranty claim until redelivery of the repaired or reworked product.
C. EXCEPT FOR THE ABOVE EXPRESS WARRANTIES, SANMINA MAKES AND LUMINEX RECEIVES NO WARRANTIES OR CONDITIONS ON, THE PRODUCTS, EXPRESS, IMPLIED, STATUTORY, OR OTHERWISE, AND SANMINA SPECIFICALLY DISCLAIMS ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
VIII. General Indemnity
A. Sanmina shall defend, indemnify and save harmless Luminex from any liability or claim (including, without limitation, the costs and reasonable attorney's fee in connection therewith) to the extent such liability or claim is based upon an allegation that, by reason of processes
used by Sanmina or otherwise, a Product infringes, under the applicable law of the United States, Canada or any other country to which Sanmina or Luminex may have delivered the allegedly infringing Product, any Intellectual Property of a third party. Luminex shall promptly notify Sanmina of any such claim or proceeding brought against it and grant Sanmina the right of defense in any such claim or proceeding, and Luminex shall provide all information and reasonable assistance, all at Sanmina's expense, in the defense of such a claim or proceeding.
B. Sanmina's obligation to indemnify Luminex under this Article shall not apply to any liability for such infringement based solely upon a Product being manufactured in compliance with Luminex's specific design requirements, or the application of a Product by Luminex in an unintended manner. Each party shall indemnify the other party against, and hold it harmless from any loss, cost, liability, or expense (including court costs and the reasonable fees of attorneys and other professionals) to the extent that such loss, cost, liability, or expense arises out of, or in connection with, in whole or in part, (A) infringements of any patent, trademark, copyright, or other intellectual property of another party by the other party or (B) any gross negligence or willful misconduct by the other party, its employees or agents and subcontractors, including but not limited to any such act or omission that causes: (i) any bodily injury, sickness, disease, or death; (ii) any injury or destruction to tangible or intangible property of the injured party or any loss of use resulting therefrom; or (iii) any violation of any statute, ordinance, or regulation.
IX. Quality, Inspection, and Reporting
A. Luminex will have the right at reasonable times, upon reasonable advance notice, to visit Sanmina's plant to inspect the work performed on the Products, the Materials, and the Vendor Components. Such inspection shall not relieve Sanmina of any of its obligations under the Agreement or Purchase Orders. Sanmina shall provide Luminex with all mutually agreed upon quality reports at agreed upon intervals. Sanmina reserves the right to restrict Luminex's access to the plant or any area within it as necessary to protect confidential information of Sanmina or its other Customers.
B. If Luminex demands inspection of the Products prior to the delivery of such Products as a condition of acceptance of such Products, Luminex must inspect the Products within five business (5) days of a transmission of written notice by facsimile or other electronic or telephonic delivery system from Sanmina informing Luminex that the Products are ready to be shipped. If Luminex does not inspect the Products within such five-business-day period, Luminex shall be deemed to have waived its right to inspect the Products as a condition of acceptance of such Products. This does not disallow rejection of the Products after incoming inspection if such inspection determines that the shipment does not meet the agreed to specifications.
C. Luminex and Sanmina will implement a joint quality improvement program that will develop and implement a continuous quality improvement.
D. Luminex and Sanmina will agree on what reports and other items (such as reports on component part inventory, products shipped and copies of invoices) will be prepared by Sanmina and delivered to Luminex.
X. Termination
A. Either party may, without penalty, terminate this Agreement upon thirty
(30) days written notice to the other party in either one of the
following events:
1. The other party materially breaches this Agreement and such breach remains uncured for thirty (30) days following written notice of breach by the non-breaching party; or
2. The other party becomes involved in any voluntary or involuntary bankruptcy or other insolvency petition or proceeding for the benefit of its creditors, and such petition, assignment or proceeding is not dismissed within sixty (60) days after it was filed.
B. Luminex may, without penalty, terminate this Agreement upon thirty (30) days written notice to Sanmina in the event Sanmina has not met, or is reasonably expected not to be able to meet, Luminex's requirements for Products for a period in excess of sixty (60) days.
C. Luminex may, without penalty, terminate this Agreement upon one hundred twenty (120) days written notice to Sanmina.
D. Upon termination, Sanmina shall provide Luminex with an invoice of
Luminex's Total Liabilities per Section IV. In addition, Luminex shall
be liable for work-in-progress and any outstanding charges per Section
IV. Upon termination, Luminex shall pay all undisputed invoice charges
on a net thirty (30) days basis.
XI. Limitation of Liability
IN NO EVENT WILL EITHER PARTY BE LIABLE FOR ANY SPECIAL, INDIRECT, CONSEQUENTIAL, OR INCIDENTAL DAMAGES, HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY, ARISING IN ANY WAY OUT OF THIS AGREEMENT. THIS LIMITATION WILL APPLY EVEN IF A PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, AND NOTWITHSTANDING ANY FAILURE OF ESSENTIAL PURPOSE OF ANY LIMITED REMEDY PROVIDED HEREIN.
XII. Miscellaneous
A. Notices. Any notice or report required or permitted to be given or made under this Agreement by either party shall be in writing and delivered to the other party at its address indicated below (or to such other address as a party may specify by notice hereunder) by courier or by registered or certified airmail, postage prepaid, or by facsimile; provided, however, that all facsimile notices shall be promptly confirmed, in writing, by registered or certified airmail, postage prepaid. All notices shall be effective as of the date received by the addressee.
Sanmina address:
Sanmina Corporation
2300 Highway 79 South
Guntersville, AL 35976
Luminex address:
Luminex Corporation
12212 Technology Blvd.
Austin, TX 78727
B. Confidential Information. "Confidential Information" shall mean all confidential documentation and information provided to the other party under this Agreement and all information previously supplied by Luminex to Sanmina regarding the Luminex 100 or Luminex technology or intellectual property. All Confidential Information shall remain the property of its owner. The parties grant to each other a nontransferable and nonexclusive right to use Confidential Information, solely in the performance of this Agreement and, unless prior consent in writing is obtained or disclosure is required by law (in which case the disclosing party shall provide the other party advance notice and an opportunity to prevent disclosure of such Confidential Information), such Confidential Information shall not be disclosed, except for any part thereof that is known to be free of any obligation to keep it in confidence or that becomes generally known to the public through acts not attributable to the party under an obligation to keep the Confidential Information confidential.
C. Intellectual Property. Except as expressly provided in this Agreement, nothing in this Agreement is to be construed as granting to Sanmina a license or any other intellectual property right to utilize any information (including Confidential Information) received from Luminex or under any patent or other intellectual property right, and Sanmina recognizes that Luminex is the owner of all such rights, including all goodwill relating thereto.
D. Governing Law. This Agreement will be governed by and interpreted under the laws of the State of Texas, without reference to conflict of laws principles.
E. Jurisdiction. For any dispute arising out of this Agreement, the parties consent to personal and exclusive jurisdiction of and venue in the state and federal courts within Travis County, Texas.
F. Entire Agreement; Enforcement of Rights. This Agreement sets forth the entire agreement and understanding of the parties relating to the subject matter herein and therein and merges all prior discussions between them. 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 a duly authorized representative of the party to be charged. The failure by either party to enforce any rights thereunder will not be construed as a waiver of any rights of such party.
G. Severability. If any provision of this Agreement is held to be illegal, invalid, or unenforceable under present or future state or federal laws or rules and regulations promulgated thereunder effective during the term hereof, such provision shall be fully severable, and this Agreement shall be construed and enforced as if such illegal, invalid, or unenforceable provision had never comprised a part hereof, and the remaining provisions hereof shall remain in full force and effective and shall not be affected by the illegal, invalid, or unenforceable provision or by its severance herefrom. Furthermore, the parties hereto agree to negotiate in good faith to modify and amend this Agreement so as to effect the original intent of the parties as closely as possible with respect to those provisions which were held to be illegal, invalid, or unenforceable.
H. Assignment. The rights and liabilities of the parties hereto will bind and incur to the benefit of their successors, executors or administrators; provided, that this Agreement may not be assigned by either party hereto without the prior written consent of the other party, which shall not be unreasonably withheld. Any assignment or any attempted assignment without such written consent shall be void and of no effect. For purposes hereof, any transaction or series of related transactions (whether by sale of stock, issuance of new stock, merger or otherwise) that results in the transfer of ownership of 50% or more of the capital stock of Sanmina shall be deemed to be an assignment.
I. Force Majeure. Neither party will be liable to the other for any default thereunder if such default is caused by an event beyond such party's control, including without limitation acts or failures to act of the other party, strikes or labor disputes, component shortages, unavailability of transportation, floods, fires, governmental requirements and acts of God (a "Force Majeure Event"). In the event of threatened or actual non-performance as a result of any of the above causes, the non-performing party will exercise reasonable efforts to avoid and cure such non-performance. Should a Force Majeure Event prevent a party's performance thereunder for a period in excess of forty-five (45) days, then the other party may elect to terminate this Agreement by written notice thereof.
J. Allocation. In the event of Force Majeure or any other shortfall in Sanmina's manufacturing capacity, Sanmina will allocate to Luminex Products capacity allocation no less favorable than that offered to any other Sanmina customer.
K. Counterparts. This Agreement may be executed in two or more counterparts, each of which will be deemed an original and all of which together will constitute one instrument.
L. Non-Exclusive. This Agreement is not exclusive and, subject to the obligations of this agreement, including but not limited to confidentiality and the intellectual property rights of each party, Luminex shall be free to have other parties manufacture products for Luminex, and Sanmina shall be free to manufacture products for other purchasers.
M. Advice of Counsel. Sanmina and Luminex have each consulted counsel of their choice regarding this Agreement, and each acknowledges and agrees that this Agreement shall not be deemed to have been drafted by one party or another and will be construed accordingly.
IN WITNESS WHEREOF, the parties hereto have caused their duly authorized representatives to execute this Agreement.
SANMINA CORPORATION LUMINEX CORPORATION
By: /s/ Gary Switzer By: /s/ Van S. Chandler
-------------------------- ---------------------------------
Name: Gary Switzer Name: Van S. Chandler
------------------------ -------------------------------
Title: Director of Operations Title: Vice President of Instruments
----------------------- ------------------------------
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Exhibit A
PRODUCT PRICING
Products Covered: Luminex 100 and Various Subassemblies
Pricing for Products on a per unit basis:
_________________________________________________________________________________________________________ Cost of Materials Cost of Materials to Sanmina --------------------------------------------------------------------------------------------------------- Materials Mark-up Cost of Materials multiplied by [**]% (the "Materials Mark-up") --------------------------------------------------------------------------------------------------------- Labor Build Time multiplied by $[**] --------------------------------------------------------------------------------------------------------- Subtotal Sum of Cost of Materials, Materials Mark-up and Labor --------------------------------------------------------------------------------------------------------- Total Subtotal [**] (the "Profit Gross-up") --------------------------------------------------------------------------------------------------------- |
The parties agree that the Product Pricing per this exhibit shall be reviewed quarterly
EXHIBIT B
ABC CLASSIFICATIONS, DESCRIPTIONS AND PERIODS-OF-SUPPLY
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Expected Periods Worth of Supply
Class Expected Percentage of Total to be Bought with Each
Percentage of Value (Gross Order (if necessary to
Total Materials Requirements) meet the scheduled
requirements)
-------------------------------------------------------------------------------------------------------
A 3% 80% 1 Month
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B 17% 17% 3 Months
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C 80% 3% 6 Months
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EXHIBIT C
RESCHEDULES
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Notice Prior to Original Delivery Date (or Current Delivery Percentage of Original Quantity that
Date if valid for more than 30 days calendar days) can be Rescheduled
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0 to 30 days 10%
---------------------------------------------------------------------------------------------------------
31 to 60 days 45%
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61 to 90 days 90%
---------------------------------------------------------------------------------------------------------
Beyond 90 Days 100%
---------------------------------------------------------------------------------------------------------
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As an example, if Luminex notifies Sanmina in writing between thirty-one (31) and sixty (60) days prior to the scheduled delivery date of the Products, Luminex may reschedule a maximum of forty-five percent (45%) of the total amount of the Products to be delivered on such date.
EXHIBIT 10.10
THIS CONSULTANT AGREEMENT (the "Agreement") is made and entered into as of this 1st day of June, 1999 (the "Effective Date"), by and between A. Sidney Alpert ("Consultant") and Luminex Corporation (the "Company"). In consideration of the covenants, representations and agreements set forth below, the Company and Consultant hereby agree as follows:
8.1 Consultant hereby acknowledges and agrees that any and all copyrightable works authored by Consultant in connection with the performance of the Services, alone or with others, during the Term or any Additional Term of this Agreement, shall be deemed to have been specially ordered or commissioned for use as either a contribution to a collective work, as a translation, as a supplementary work, as a compilation, or as an instructional text and, as such, shall be deemed to be "works for hire" under the United States copyright laws from the inception of creation or such works. In the event that any such works shall be deemed by a court of competent jurisdiction not to be a "work made for hire," this Agreement shall operate as an irrevocable assignment by Consultant to the Company of all right, title and interest in and to such works, including without limitation, all worldwide copyright interests therein, in perpetuity. The fact that such copyrightable works are created by Consultant outside of the Company's facilities or other than during Consultant's working hours with the Company, shall not diminish Company's rights with respect to such works which otherwise fall within this subsection. Consultant agrees to execute and deliver to Company such further instruments or documents as may be requested by the Company in order to effectuate the purposes of this subsection.
9.1 Consultant enters into this Agreement as, and shall continue to be, an independent contractor. The parties agree that no employment relationship, partnership, joint venture or other association shall be deemed created by this Agreement. Under no circumstances shall Consultant look to the Company as his employer, or as a partner, agent, or principal. Consultant shall not be entitled to any benefits accorded to the Company's employees including, without limitation, workers' compensation, disability insurance, vacation or sick pay.
9.2 Consultant shall have the entire responsibility to discharge any and all obligations under federal, state or local laws, regulations or orders now or hereafter in effect, relating to taxes, unemployment compensation or insurance, social security, workers' compensation, disability pensions and tax withholdings (the "Tax Obligations"). Consultant hereby agrees to indemnify and hold the Company harmless for any and all claims, losses, costs, fees, liabilities, damages or injuries suffered by the Company arising out of Consultant's failure to properly discharge the Tax Obligations.
11.1 Any dispute regarding any aspect of this Agreement or any act which would violate any provision in this Agreement (hereafter referred to as "arbitrable dispute") shall be resolved by an experienced arbitrator licensed to practice law in the State of Texas and selected in accordance with the rules of the American Arbitration Association, as the exclusive remedy for such dispute. Judgment on any award rendered by such arbitrator may be entered in any court having proper jurisdiction.
11.2 Should Consultant or the Company institute any legal action or
administrative proceeding regarding any dispute or matter covered by this
Section by any method other than said arbitration, the responding party shall be
entitled to recover from the other party all damages, costs, expenses and
attorneys' fees incurred as a result of such action.
12.1 Should any of the provisions in this Agreement be declared or be determined to be illegal or invalid, all remaining parts, terms or provisions shall be valid, and the illegal or invalid part, term or provision shall be deemed not to be a part of this Agreement.
12.2 This Agreement is made and entered into in the State of Texas and shall in all respects be interpreted, enforced and governed under the laws of Texas.
13.1 The language of all parts of this Agreement shall in all cases be construed as a whole according to its fair meaning, and not strictly for or against any of the parties.
13.2 As used in this Agreement, the term "or" shall be deemed to include the term "and/or" and the singular or plural number shall be deemed to include the other whenever the context so indicates or requires.
13.3 The paragraph headings used in this Agreement are intended solely for convenience of reference and shall not in any manner amplify, limit, modify or otherwise be used in the interpretation of any of the provisions hereof.
If to the Company: Luminex Corporation
12212 Technology Drive
Austin, TX 78727-6115
Attention: John Dapper
If to Consultant: A. Sidney Alpert
26078 Bates Place
Stevenson Ranch, CA 91381
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IN WITNESS WHEREOF, the parties hereto have hereby executed this Agreement as of the day and year first written above.
LUMINEX CORPORATION
/s/ A. Sidney Alpert By: /s/ Mark B. Chandler
----------------------------- ----------------------------
A. Sidney Alpert Mark B. Chandler
President & CEO
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EXHIBIT 10.11
AMENDMENT
AMENDMENT, made and entered into as of this 1/st/ day of November, 1999, to that certain Consultant Agreement ("Agreement"), entered into on June 1, 1999, by and between A. Sidney Alpert and Luminex Corporation.
WHEREAS, at this time, Luminex Corporation and Mr. Alpert, wish to revise the terms and conditions of the Agreement.
NOW, THEREFORE, all of the terms and conditions set forth in the Agreement shall remain in effect as stated, except as follows:
1. The term of the Agreement shall be extended through October 31, 2000.
2. Article 3.1 of the Agreement shall be amended by changing the phrase, "one working day" to "two working days."
3. The compensation set forth in Article 4 of the Agreement shall be changed to the sum of Eleven Thousand Six Hundred Sixty-Six and No/100 Dollars ($11,666.00) per month.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the day and year first written above.
LUMINEX CORPORATION
/s/ A. Sidney Alpert By /s/ Mark Chandler
------------------------------- -----------------------------------
A. Sidney Alpert Mark B. Chandler
President and CEO
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EXHIBIT 10.12
Lease Agreement
THIS LEASE AGREEMENT, made and entered into by and between AEtna Life Insurance Company hereinafter referred to as "Landlord" and Mark Chandler, Individually hereinafter referred to as "Tenant";
W I T N E S S E T H:
1. Premises and Term. In consideration of the obligation of Tenant to pay rent as herein provided, and in consideration of the other terms, provisions and covenants hereof, Landlord hereby demises and leases to Tenant, and Tenant hereby accepts and leases from Landlord certain premises situated within the County of Travis, State of Texas, more particularly described an Exhibit "A" attached hereto and incorporated herein by reference, together with all rights, privileges, easements, appurtenances and immunities belonging to or in any way pertaining to the premises and together with the buildings and other improvements situated upon said premises (said real property, buildings and improvements hereinafter referred to as the "premises").
TO HAVE AND TO HOLD the same for a term commencing on November 1, 1989 and ending 55 months thereafter. Tenant acknowledges that it has inspected and accepts the premises, and specifically the buildings and improvements comprising the same, in their present condition as suitable for the purpose for which the premises are leased. Taking of possession by Tenant shall be deemed conclusively to establish that said buildings and other improvements are in good and satisfactory condition as of when possession was taken. Tenant further acknowledges that no representations as to the repair of the premises nor premises to alter, remodel or improve the premises have been made by Landlord, unless such are expressly set forth in this lease. If this lease is executed before the premises become vacant or otherwise available and ready for occupancy, or if any present tenant or occupant of the premises holds over, and Landlord cannot acquire possession of the premises prior to the date above recited as the commencement date of this lease, Landlord shall not be deemed to be in default hereunder, and Tenant agrees to accept possession of the premises at such time as Landlord is able to tender the same, which date shall thenceforth be deemed the "commencement date"; and Landlord hereby waives payment of rent covering any period prior to the tendering of possession to Tenant hereunder. After the commencement date Tenant shall, upon demand, execute and deliver to Landlord a letter of acceptance of delivery of the premises.
2. Base Rent and Security Deposit.
A. Tenant agrees to pay to Landlord rent for the premises, in advance, without demand, deduction or set off, for the entire term hereof at the rate of see "Rental Rate" paragraph on attached Addendum Dollars ($________) per month. One such monthly installment shall be due and payable on the date hereof and a like monthly installment shall be due and payable or before the first day of each calendar month succeeding the commencement date recited above during the hereby demised term, except that the rental payment for any fractional calendar month at the commencement or end of the lease period shall be prorated.
B. In addition, Tenant agrees to deposit with Landlord on the date hereof the sum of Two Thousand Nine Hundred Fifty-Three and No/Dollars ($2,953.00), which sum shall be held by Landlord, without obligation for interest, as security for the performance of Tenant's covenants and obligations under this lease, it being expressly understood and agreed that such deposit is not an advance rental deposit or a measure of Landlord's damages in case of Tenant's default. Upon the occurrence of any event of default by Tenant, Landlord may, from time to time, without prejudice to any other remedy provided herein or provided by law, use such fund to the extent necessary to make good any arrears of rent or other payments due hereunder, and any other damage, injury, expense or liability caused by such event of default; and Tenant shall pay to Landlord on demand the amount so applied in order to restore the security deposit to its original amount. Although the security deposit shall be deemed the property of Landlord, any remaining balance of such deposit shall be returned by Landlord to Tenant at such time after termination of this lease that all of Tenant's obligations under this lease have been fulfilled.
3. Use. The demised premises shall be used only for the purpose of receiving, storing, shipping and selling (other than retail) products, materials and merchandise made and/or distributed by Tenant and for such other lawful purposes as may be incidental thereto. Outside storage, including without limitation, trucks and other vehicles, is prohibited without Landlord's prior written consent. Tenant shall at its own cost and expense obtain any and all licenses and permits necessary for any such use. Tenant shall comply with all governmental laws, ordinances and regulations applicable to the use of the premises, and shall promptly comply with all governmental orders and directives for the correction, prevention and abatement of nuisances in or upon, or connected with, the premises, all at Tenant's sole expense. Tenant shall not permit any objectionable or unpleasant odors, smoke, dust, gas, noise or vibrations to emanate from the premises, nor take any other action which would constitute a nuisance or would disturb or endanger any other tenants of the building in which the premises are situated or unreasonably interfere with their use of their respective premises. Without Landlord's prior written consent, Tenant shall not receive, store or otherwise handle any product, material or merchandise which is explosive or highly inflammable. Tenant will not permit the premises to be used for any purpose or in any manner (including without limitation any method of storage) which would render the insurance thereon void or the insurance risk more hazardous or cause the State Board of Insurance or other insurance authority to disallow any sprinkler credits.
4. Taxes.
A. Landlord agrees to pay before they become delinquent all taxes, assessments and governmental charges of any kind and nature whatsoever (hereinafter collectively referred to as "taxes") lawfully levied or assessed against the building and the grounds, parking areas, driveways and alleys around the building; provided, however, that the maximum amount of taxes to be paid by Landlord hereunder during any one real estate tax year shall be -0-. Tenant shall pay prorata share of all real estate taxes. If in any real estate tax year during the term hereof or any renewal or extension the taxes levied or assessed against the building and the grounds, parking areas, driveways and alleys around the building during such tax year shall exceed the sum set forth in the proceeding sentence, Tenant shall pay to Landlord as additional rental, upon demand, the amount of such excess. In the event any such amount is not paid within twenty (20) days after the date of Landlord's invoice to Tenant, the unpaid amount shall bear interest at the rate of ten percent (10%) per annum from the date of such invoice until payment by Tenant.
B. In the event the premises constitute a portion of a multiple occupancy building, Tenant agrees to pay to Landlord, as additional rental, upon demand, the amount of Tenant's "proportionate share" of the excess taxes referred to in Paragraph A above. Tenant's "proportionate share", as used in this lease, shall mean a fraction, the numerator of which is the space contained in the premises and the denominator of which is the entire space contained within the building.
C. If at any time during the term of this lease, the present method of taxation shall be charged so that in lieu of the whole or any part of any taxes, assessments or governmental charges levied, assessed or imposed on real estate and the improvements thereon, there shall be levied, assessed or imposed on Landlord a capital levy or other tax directly on the rents received therefrom and/or a franchise tax, assessment, levy or charge measured by or based in whole or in part, upon such rents for the present or any future building or buildings on the premises, then all such taxes, assessments, levies, or charges, or the part thereof so, measured or based, shall be deemed to be included within the term "taxes" for the purpose hereof. Landlord tax statement with respect to the premises shall be made available for inspection by Tenant.
D. The Landlord shall have the right to employ a tax consulting firm to attempt to assure a fair tax burden on the building and grounds within the applicable taxing jurisdiction, Tenant shall pay to Landlord upon demand, from time to time, as additional rent, the amount of Tenant's "proportionate share" (as defined in subparagraph 4(B) above) of the cost of such service.
E. Any payment to be made pursuant to this Paragraph 4 with respect to the real estate tax year in which this lease commences or terminates shall be prorated.
5. Landlord's Repairs. Landlord shall at his expense maintain only the roof, foundation and the structural soundness of the exterior walls of the building in good repair, reasonable wear and tear excepted. Tenant shall repair and pay for any damage caused by the negligence of Tenant, or Tenant's employees, agents or invitees, or caused by Tenant's default hereunder. The term "walls" as used herein shall not include windows, glass and plate glass, doors, and special store fronts and office entrys. Tenant shall immediately give Landlord written notice of defect or need for repairs after which Landlord shall have twenty (20) days to repair same or cure such defect or show evidence of intent to repair same or cure defect within a reasonable period of time. Landlord's liability with respect to any defects, repairs or maintenance for which Landlord is responsible under any of the provisions of this lease, shall be limited to the cost of such repairs or maintenance or the curing of such defect.
6. Tenant's Repairs
A. Tenant shall at its own cost and expense keep and maintain all parts of the premises (except those for which Landlord is expressly responsible under the terms of this lease) in good condition, promptly making all necessary repairs and replacements, including but on limited to windows, glass and plate glass, doors, any special office entry, interior walls and finish work, floors and floor covering, downspouts, heating and air conditioning systems, dock boards, truck doors, dock bumpers, paving, plumbing work and fixtures, termite and pest extermination, regular removal of trash and debris, regular mowing of any grass, trimming, weed removal and general landscape maintenance. Tenant shall not be obligated to repair any damage caused by fire, tornado or other casualty covered by the insurance to be maintained by Landlord pursuant to subparagraph 12(A) below, except that Tenant shall be obligated to repair all wind damage to glass except with respect to tornado or hurricane damage.
B. Tenant shall not damage any demising wall or disturb the integrity and support provided by any demising wall and shall, at its sole cost and expense promptly repair any damage or injury to any demising wall caused by Tenant or its employees, agents or invitees.
C. In the event the premises constitute a portion of a multiple occupancy building, Tenant and its employees, customers and licensees shall have the exclusive right to use the parking areas, if any, as may be designated by Landlord in writing, subject to such reasonable rule
and regulations as Landlord may from time to time prescribe and subject to rights of ingress and egress of other tenants. Landlord shall not be responsible for enforcing Tenant's exclusive parking rights against any third parties. Further, in multiple occupancy buildings, Landlord reserves the right to perform the paving and landscape maintenance, exterior painting and common sewage line plumbing which are otherwise Tenant's obligations under subparagraph A above, and Tenant shall, in lieu of the obligations set forth under subparagraph A above with respect to such items, be liable for its proportionate share (as defined in subparagraph 4(B) above) of the cost and expense of the care for the grounds around the building, including but not limited to, the mowing of grass, care of shrubs, general landscaping, maintenance of parking areas, driveways and alleys, exterior repainting and common sewage line plumbing; provided, however, that Landlord shall have the right to require Tenant to pay such other reasonable proportion of said mowing, shrub care and general landscaping costs as may be determined by Landlord in its sole discretion; and further provided that if Tenant or any other particular tenant of the building can be clearly identified as being responsible for obstructions or stoppage of the common sanitary sewage line, then Tenant, if Tenant is responsible, or such other responsible tenant, shall pay the entire cost thereof, with thirty (30) days written notice as additional rent, Tenant shall pay when due its share, determined as aforesaid, of such costs and expenses along with the other tenants of the building to Landlord upon demand, as additional rent, for the amount of its share as aforesaid of such costs and expenses in the event Landlord elects to perform or cause to be performed such work.
E. Tenant shall, at its own cost and expense, enter into a regularly scheduled preventive maintenance/service contract with a maintenance contractor for servicing all hot water, heating and air conditioning systems and equipment within the premises. The maintenance contractor and the contract must be approved by Landlord. The service contract must include all services suggested by the equipment manufacturer within the operation/maintenance manual and must become effective (and a copy thereof delivered to Landlord) with thirty (30) days of the date Tenant takes possession of the premises.
7. Alterations. Tenant shall not make any alterations, additions or improvements to the premises (including but not limited to roof and wall penetrations) without the prior written consent of Landlord. Tenant may, without the consent of Landlord, but at its own cost and expense and in good workmanlike manner erect such shelves, bins, machinery, and trade fixtures as it may deem advisable, without altering the basic character of the building or improvements and without overloading or damaging such building or improvements, and in each case complying with all applicable governmental laws, ordinances, regulations and other requirements. All alterations, additions, improvements, and partitions erected by Tenant shall be and remain the property of Tenant during the term of this lease and Tenant shall, unless Landlord otherwise elects as hereinafter provided, remove all alterations, additions, improvements and partitions erected by Tenant and paid for by Tenant and restore the premises to their original condition by the date of termination of this lease or upon earlier vacating of the premises; provided, however, that if Landlord so elects prior to termination of this lease or upon earlier vacating of premises, such alterations, additions, improvements, and partitions shall become the property of Landlord as of the date of termination of this lease or upon earlier vacating of the premises and shall be delivered up to the Landlord with the premises. All shelves, bins, machinery and trade fixtures installed by Tenant may be removed by Tenant prior to the termination of this lease if Tenant so elects, and shall be removed by the date of termination of this lease or upon earlier vacating of the premises if required by Landlord; upon any such removal Tenant shall restore the premises to their original condition. All such removals and restoration shall be accomplished in a good workmanlike manner so as not to damage the primary structure or structural qualities of the buildings and other improvements situated on the premises.
8. Signs. Tenant shall have the right to install signs upon the premises only when first approved in writing by Landlord and subject to any applicable governmental laws, ordinances, regulations and other requirements. Tenant shall remove all such signs by the termination of this lease. Such installations and removals shall be made in such manner as to avoid injury or defacement of the building and other improvements, and Tenant shall repair any injury or defacement, including without limitation discoloration, caused by such installation and/or removal.
9. Inspection. Landlord and Landlord's agents and representatives shall have
the right to enter and inspect the premises at any reasonable time during
business hours, for the purpose of ascertaining the condition of the premises or
in order to make such repairs as may be required or permitted to be made by
Landlord under the terms of this lease. During the period that is six (6)
months prior to the end of the term hereof, Landlord and Landlord's agents and
representatives shall have the right to enter the premises at any reasonable
time during business hours for the purpose of showing the premises and shall
have the right to erect on the premises a suitable sign indicating the premises
are available. Tenant shall give written notice to Landlord at least thirty
(30) days prior to vacating the premises and shall arrange to meet with Landlord
for a joint inspection of the premises prior to vacating. In the event of
Tenant's failure to give such notice or arrange such joint inspection,
Landlord's inspection at or after Tenant's vacating the premises shall be
conclusively deemed correct for purposes of determining Tenant's reasonable
responsibility for repairs and restoration.
10. Utilities. Landlord agrees to provide at its cost water, electricity and telephone service connections into the premises; but Tenant shall pay for all water, gas, heat, light, power, telephone, sewer, sprinkler charges and other utilities and services used on or from the premises, together with any taxes, penalties, surcharges of the like pertaining thereto and any maintenance charges for utilities and shall furnish all electric light bulbs and tubes. If any such services are not separately metered to Tenant, Tenant shall pay a reasonable proportion as determined by Landlord of all charges jointly metered with other premises. Landlord shall in no event be liable for any interruption or failure of utility services on the premises.
11. Assignment and Subletting. Tenant shall not have the right to assign this lease or to sublet the whole or any part of the premises without the prior written consent of Landlord which consent shall not be unreasonable withheld. Notwithstanding any permitted assignment or subletting, Tenant shall at all times remain directly, primarily and fully responsible and liable for the payment of the rent herein specified and for compliance with all of its other obligations under the terms, provisions and covenants of this lease. Upon the occurrence of an "event of default" as hereinafter defined, if the premises or any part thereof are then assigned or sublet, Landlord, in addition to any other remedies herein provided, or provided by law, may at its option collect directly from such assignee or subtenant all rents becoming due to Tenant under such assignment or sublease and apply such rent against any sums due to Landlord from Tenant hereunder, and no such collection shall be construed to constitute a novation or a release of Tenant from the further performance of Tenant's obligations hereunder.
12. Fire and Casualty Damage.
A. Landlord agrees to maintain standard fire and extended coverage insurance
covering the building of which the premises are a part in an amount not less
than 80% (or such greater percentage as may be necessary to comply with the
provisions of any co-insurance clauses of the policy) of the "replacement cost"
thereof as such term is defined in the Replacement Cost Endorsement to be
attached thereto, insuring against the perils of Fire, Lightning, and Extended
Coverage, such coverages and endorsements to be as defined, provided and limited
in the standard bureau forms prescribed by the insurance regulatory authority
for the State in which the premises are situated for use by insurance companies
admitted in such state for the writing of such insurance on risks located within
such state. Subject to the provisions of subparagraphs 12(C), 12(D), and 12(E)
below, such insurance shall be for the sole benefit of Landlord and under its
sole control. If during the second full lease year after the commencement date
of this lease, or during any subsequent year of the primary term or any renewal
or extension, Landlord's cost of maintaining such insurance shall exceed
Landlord's cost of maintaining such insurance for the first full lease year of
the term hereof, Tenant agrees to pay to Landlord, as additional rent, the
amount of such excess (or in the event the premises constitute a portion of a
multiple occupancy building, Tenant's full proportionate share (as defined in
subparagraph 4(B) above) of such excess). Said payments shall be made to
Landlord within ten (10) days after presentation to Tenant of Landlord's
statement setting forth the amount due. Any payment to be made pursuant to this
subparagraph A with respect to the year in which this lease commences or
terminates shall bear the same ratio to the payment which would be required to
be made for the full year as the part of such year covered by the term of this
lease bears to a full year.
B. If the buildings situated upon the premises should be damaged or destroyed by fire, tornado, or other casualty, Tenant shall give immediate written notice thereof to Landlord.
C. If the buildings situated upon the premises should be totally destroyed by fire, tornado, or other casualty, or if they should be so damaged thereby that rebuilding or repairs cannot in Landlord's estimation be completed within one hundred fifty (150) days after the date upon which Landlord is notified by Tenant of such damage, this lease shall terminate and the rent shall be abated during the unexpired portion of this lease, effective upon the date of the occurrence of such damage.
D. If the buildings situated upon the premises should be damaged by any
peril covered by the insurance to be provided by Landlord under subparagraph
12(A) above, but only to such extent that rebuilding or repairs can in
Landlord's estimation be completed within one hundred fifty (150) days after the
date upon which the Landlord is notified by Tenant of such damage, this lease
shall not terminate, and Landlord shall at its sole cost and expense thereupon
proceed with reasonable diligence to rebuild and repair such buildings to
substantially the condition in which they existed prior to such damage, except
that Landlord shall not be required to rebuild, repair or replace any part of
the partitions, fixtures, additions and other improvements which may have been
placed in, on or about the premises by Tenant. If the premises are untentantable
in whole or in part following such damage, the rent payable hereunder during the
period in which the are untentantable shall be reduced to such extent as may be
fair and reasonable under all the circumstances. In the event that Landlord
should fail to complete such repairs and rebuilding within one hundred fifty
(150) days after the date upon which Landlord is notified by Tenant of such
damage, Tenant may at its option terminate this lease by delivering written
notice of termination to Landlord as Tenant's exclusive remedy, whereupon all
rights and obligations hereunder shall cease and terminate.
E. Notwithstanding anything herein to the contrary, in the event the holder of any indebtedness secured by a mortgage or deed of trust covering the premises requires that the insurance proceeds be applied to such indebtedness, then Landlord shall have the right to terminate this lease by delivering written notice of termination to Tenant within fifteen (15) days after such requirement is made by any such holder, whereupon all rights and obligations hereunder shall cease and terminate.
F. Each of Landlord and Tenant hereby releases the other from any loss or damage to property caused by fire or any other perils insured through or under them by way of subrogation or otherwise for any loss or damage to property caused by fire or any other perils insured in policies of insurance covering such property, even if such loss or damage shall have been caused by the fault or negligence of the other party, or anyone for whom such party may be responsible; provided, however, that this release shall be applicable and in force and effect only with respect to loss or damage occurring during such times as the releasor's policies shall contain a clause or endorsement to the effect that any such release shall not adversely affect or impair said policies or prejudice the right of the releasor to recover thereunder and then only to the extent of the insurance proceeds payable under such policies. Each of the Landlord and Tenant agrees that it will request its insurance carriers to include in its policies such a clause or endorsement. If extra cost shall be charged therefor, each party shall advise the other thereof and of the amount of the extra cost, and the other party, at its election, may pay the same, but shall not be obligated to do so.
13. Liability. Landlord shall not be liable to Tenant or Tenant's employees, agents, patrons or visitors, or to any other person whomsoever, for any injury to person or damage to property on or about the premises, resulting from and/or caused in part or whole by the negligence or misconduct of Tenant, its agents, servants or employees, or of any person entering upon the premises, or caused by the buildings and improvements located on the premises becoming our of repair, or caused by leakage of gas, oil, water or steam or by electricity emanating from the premises, or due to any cause whatsoever, and Tenant hereby covenants and agrees that it will at all times indemnify and hold safe and harmless the property, the Landlord (including without limitation the trustee and beneficiaries if Landlord is a trust), Landlord's
agents and employees from any loss, liability, claims, suits, costs, expenses, including without limitation attorney's fees and damages, both real and alleged, arising out of such damage or injury; except injury to persons or damage to property the sole cause of which is negligence of Landlord or the failure of Landlord to repair any part of the premises which Landlord is obligated to repair and maintain hereunder within a reasonable time after the receipt of written notice from Tenant of needed repairs. Tenant shall procure and maintain throughout the term of this lease a policy or policies of insurance, at its sole cost and expense, insuring both Landlord and Tenant against all claims, demands or actions arising out of or in connection with: (i) the premises; (ii) the condition of the premises; (iii) Tenant's operations in and maintenance and use of the premises; and (iv) Tenant's liability assumed under this lease, the limits of such policy or policies to be in the amount of not less than $300,000 per occurrence in respect of injury to persons (including death), and in the amount of not less than $50,000 per occurrence in respect of property damage or destruction, including loss of use thereof. All such policies shall be procured by Tenant from responsible insurance companies satisfactory to Landlord. Certified copies of such policies, together with receipt evidencing payment of premiums therefor, shall be delivered to Landlord prior to the commencement date of this lease. Not less than fifteen (15) days prior to the expiration date of any such policies, certified copies of the renewals thereof (bearing notations evidencing the payment of renewal premiums) shall be delivered to Landlord. Such policies shall further provide that not less than thirty (30) days written notice shall be given to Landlord before such policy may be cancelled or changed to reduce insurance provided thereby.
14. Condemnation.
A. If the whole or any substantial part of the premises should he taken for any public or quasi-public use under governmental law, ordinance or regulation, or by right of eminent domain, or by private purchase in lieu thereof and the taking would prevent or materially interfere with the use of the premises or the normal operation of the company for the purpose which they are being used, this lease shall terminate and the rent shall be abated during the unexpired portion of this lease, effective When the physical taking of said premises shall occur.
B. If part of the promises shall be taken for any public or quad-public use under any governmental law, ordinance or regulation, or by right of eminent domain, or by private purchase in lieu thereof, and this lease is not terminated as provided in the subparagraph above, this lease shall not terminate but the rent payable hereunder during the unexpired portion of this lease shall be reduced to such extent as may be fair and reasonable under all of the circumstances.
C. In the event of any such taking or private purchase in lieu thereof, Landlord and Tenant shall each be entitled to receive and retain such separate awards and/or portion of lump sum awards as may be allocated to their respective interests in any condemnation proceedings.
15. Holding Over. Tenant will, at the termination of this lease by lapse of time or otherwise, yield up immediate possession to Landlord. If Landlord agrees in writing that Tenant may hold over after the expiration or termination of this lease, unless the parties hereto otherwise agree in writing on the terms of such holding over, the hold over tenancy shall be subject to termination by Landlord at any time upon not less than five (5) days advance written notice, or by Tenant at any time upon not less than thirty (30) days advance written notice, and all of the other terms and provisions of this lease shall be applicable during that period, except that Tenant shall pay Landlord from time to time upon demand, as rental for the period of any hold over, an amount equal to one and one-half (1 1/2) the rent in effect on the termination date, computed on a daily basis for each day of the hold over period. No holding over by Tenant, whether with or without consent of Landlord, shall operate to extend this lease except as otherwise expressly provided. The preceding provisions of this paragraph 15 shall not be construed as Landlord's consent for Tenant to hold over.
16. Quiet Enjoyment. Landlord covenants that it now has, or will acquire before Tenant takes possession of the premises, good title to the premises, free and clear of all liens and encumbrances, excepting only the lien for current taxes not yet due, such mortgage or mortgages as are permitted by the terms of this lease, zoning ordinances, and other building and fire ordinances and governmental regulations relating to the use of such property, and easements, restrictions and other conditions of record. In the event this lease is a sublease, then Tenant agrees to take the premises subject to the provisions of the prior leases. Landlord represents and warrants that it has full right and authority to enter into this lease and that Tenant, upon paying the rental herein set forth and performing its other covenants and agreements herein set forth, shall peaceably and quietly have, hold and enjoy the premises for the term hereof without hindrance or molestation from Landlord, subject to the terms and provisions of this lease.
17. Events of Default. The following events shall be deemed to be events of default by Tenant under this lease:
(a) Tenant shall fail to pay any installment of the rent herein reserved when due, or any payment with respect to taxes hereunder when due, or any other payment or reimbursement to Landlord required herein when due, and such failure shall continue for a period of five (5) days from the date such payment was due.
(b) Tenant shall become insolvent, or shall make a transfer in fraud of creditors, or shall make an assignment for the benefit of creditors.
(c) Tenant shall file a petition under any section or chapter of the National Bankruptcy Act, as amended, or under any similar law or statute of the United States or any State thereof; or Tenant shall be adjudged bankrupt or insolvent in proceedings filed against Tenant thereunder.
(d) A receiver or trustee shall be appointed for all or substantially all of the assets of Tenant
(e) Tenant shall desert or vacate any substantial portion of the promises.
(f) Tenant shall fail to comply with any term, provision or covenant of this lease (other than the foregoing in this paragraph 17), and shall not cure such failure within thirty (30) days after written notice thereof to Tenant.
18. Remedies. Upon the occurrence of any such event of default described in paragraph 17 hereof, Landlord shall have the option to pursue any one or more of the following remedies without notice or demand whatsoever:
(a) Terminate this lease, in which event Tenant shall immediately surrender the premises to Landlord, and if Tenant fails so to do, Landlord may, without prejudice to any other remedy which it may have for possession or arrearages in rent, enter upon and take possession of the premises, and expel or remove Tenant and any other person who may be occupying such premises or any part thereof, and Tenant agrees to pay to Landlord on demand the amount of all loss and damage which Landlord may suffer by reason of such termination, whether through inability to relet the premises on satisfactory terms or otherwise.
(b) Enter upon and take possession of the premises and expel or remove Tenant and any other person who may be occupying such premises or any part thereof, by force if necessary, without being liable for prosecution or any claim for damages therefor, and relet the premises and receive the rent therefor; and Tenant agrees to pay to the Landlord on demand any deficiency that may arise by reason of such reletting. In the event Landlord is successful in reletting the premises at a rental in excess of that agreed to be paid by Tenant pursuant to the terms of this lease, Landlord and Tenant each mutually agree that Tenant shall not be entitled, under any circumstances, to such excess rental, and Tenant does hereby specifically waive any claim to such excess rental.
(c) Enter upon premises, and do whatever Tenant is obligated to do under the terms of this lease; and Tenant agrees to reimburse Landlord on demand for any expenses which Landlord may incur in thus effecting compliance with Tenant's obligations under this lease.
In the event Tenant fails to pay any installment of rent hereunder as and when such installment is due, to help defray the additional cost to Landlord for processing such late payments Tenant shall pay to Landlord on demand a late charge in an amount equal to five (5%) of such installment; and the failure to pay such amount within twenty (20) days after demand therefor shall be an event of default hereunder. The provision for such late charge shall be in addition to all of Landlord's other rights and remedies hereunder or at law and shall not be construed as liquidated damage or as limiting Landlord's remedies in any manner.
Pursuit of any of the foregoing remedies shall not preclude pursuit of any of the other remedies herein provided or any other remedies provided by law, nor shall pursuit of any remedy herein provided constitute a forfeiture or waiver of any rent due to Landlord hereunder or of any damages accruing to Landlord by reason of the violation of any of the terms, provisions and covenants herein contained. No act or thing done by the Landlord or its agents during the term hereby granted shall be deemed a termination of this lease or an acceptance of the surrender of the premises, and no agreement to terminate this lease or accept a surrender of said premises shall be valid unless in writing signed by Landlord. No waiver by Landlord of any violation or breach of any of the terms, provisions and covenants herein contained be deemed or construed to constitute a waiver of any other violation or breach of any of the terms, provisions and covenants herein contained. Landlord's acceptance of the payment of rental or other payments hereunder after the occurrence of an event of default shall not be construed as a waiver of such default, unless Landlord so notifies Tenant in writing. Forbearance by Landlord to enforce one or more of the remedies herein provided upon an event of default shall not be deemed or construed to constitute a waiver of such default or of Landlord's right to enforce any such remedies with respect to such default or subsequent default. If, on account of any breach or default by Tenant in Tenant's obligations under the terms and conditions of this lease, it shall become necessary or appropriate for Landlord to employ or consult with an attorney concerning or to enforce or defend any of Landlord's rights or remedies hereunder, Tenant agrees to pay any reasonable attorneys fees so incurred. This clause shall be mutually applied to Landlord or Tenant.
19. Landlord's Lien. In addition to any statutory lien for rent in Landlord's favor, Landlord shall have and Tenant hereby grant to Landlord a continuing security interest for all rentals and other sums of money becoming due hereunder from Tenant, upon all goods, wares, equipment, fixtures, furniture, inventory, accounts, contract rights, chattel paper and other personal property of Tenant situated on the premises, and such property shall not be removed therefrom without the consent of Landlord until all arrearages in rent as well as any and all other sums of money then due to Landlord hereunder shall first have been paid and discharged. In the event of a default under this lease, Landlord shall have, in addition to any other remedies provided herein or by law, all rights and remedies under the Uniform Commercial Code, including without limitation the right to sell the property described in this Paragraph 19 at public or private sale upon ten (10) days notice to Tenant. Tenant hereby agrees to execute such financing statements and other instruments necessary or desirable in Landlord's discretion to perfect the security interest hereby created. Any statutory lien for rent is not hereby waived, the express contractual lien herein granted being in addition and supplementary thereto.
20. Mortgages. Tenant accepts this lease subject and subordinate to any mortgage(s) and/or deed(s) of trust now or at any time here after constituting a lien or charge upon the premises or the improvements situated thereon, provided, however, that if the mortgagee trustee or holder of any such mortgage or deed of trust elects to have Tenant's interest in this lease superior to such lien, whether this lease was executed before or after said mortgage or deed of trust. Tenant shall at any time hereafter on demand execute any instruments, releases or other documents which may be required by any mortgagee for the purpose of subjecting and subordinating this lease to the lien of any such mortgage.
21. Landlord's Default. In the event Landlord should become in default in any payments due on any such mortgage described in Paragraph 20, hereof or in the payment of taxes or any other items which might become a lien upon the premises and which Tenant is not obligated to pay under the terms and provisions of this lease, Tenant is authorized and empowered after giving Landlord five (5) days prior written notice of such default and Landlord's failure to cure such default, to pay any such items for and on behalf of Landlord, and the amount of any item so paid by Tenant for or on behalf of Landlord, together with any interest or penalty required to be paid in connection therewith, shall
be payable on demand by Landlord to Tenant; provided, however, that Tenant shall not be authorized and empowered to make any payment under the terms of this Paragraph 21 unless the item paid shall be superior to Tenant's interest hereunder. In the event Tenant pays any mortgage debt in full, in accordance with this paragraph, it shall, at its election, be entitled to the mortgage security by assignment or subrogation.
22. Mechanic's Liens. Tenant shall have no authority, express or implied, to create or place any lien or encumbrance of any kind or nature whatsoever upon, or in any manner to bind, the interest of Landlord in the premises or to charge the rentals payable hereunder for any claim in favor of any person dealing with Tenant, including those who may furnish materials or perform labor for any construction or repairs, and each such claim shall affect and each such lien shall attach to, If at all, only the leasehold interest granted to Tenant by this instrument. Tenant covenants and agrees that it will pay or cause to be paid all sums legally due and payable by it on account of any labor performed or materials furnished in connection with any work performed on the premises on which any lien is or can be validly and legally asserted against its leasehold interest in the premises or the improvements thereon and that it will save and hold Landlord harmless from any and all loss, cost or expense based on or arising out of asserted claims or liens against the leasehold estate or against the right, title and interest of the Landlord in the premises or under the terms of this lease.
23. Notices. Each provision of this instrument or of any applicable governmental laws, ordinances, regulations and other requirements with reference to the sending, mailing or delivery of any notice or the making of any payment by Landlord to Tenant or with reference to the sending, mailing or delivery of any notice or the making of any payment by Tenant to Landlord shall be deemed to be complied with when and if the following steps are taken:
(a) All rent and other payments required to be made by Tenant to Landlord hereunder shall be payable to Landlord at the address hereinbelow set forth or at such other address as Landlord may specify from time to time by written notice delivered in accordance herewith. Tenant's obligation to pay rent and any other amounts to Landlord under the terms of this lease shall not be deemed satisfied until such rent and other amounts have been actually received by Landlord.
(b) All payments required to be made by Landlord to Tenant hereunder shall be payable to Tenant at the address hereinbelow set forth, or at such other address within the continental United States as Tenant may specify from time to time by written notice delivered in accordance herewith.
(c) Any notice or document required or permitted to be delivered hereafter shall be deemed to be delivered whether actually received or not when deposited in the United States Mail, postage prepaid, Certified or Registered Mail, addressed to the parties hereto at the respective addresses set out below, or at such other address as they have theretofore specified by written notice delivered in accordance herewith.
LANDLORD: TENANT:
AEtna Life Insurance Company Mark Chandler, Individually
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c/o Trammell Crow Company 12212 Technology Blvd., Suite K
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301 Congress Avenue, Suite 1300 Austin, Texas 78727
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Austin, Texas 78701
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(P.O. Box 2176, Austin, TX 78768)
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If and when included within the term "Landlord" as used in this instrument, there are more than one person, firm or corporation, all shall jointly arrange among themselves for their joint execution of such a notice specifying some individual at some specific address for the receipt of notices and payments to Landlord if and when included within the term "Tenant", as used in this instrument, there are more than one person, firm or corporation, all shall jointly arrange among themselves for their joint execution of such a notice specifying some individual at some specific address within the continental United States for the receipt of notices and payments to Tenant. All parties included within the terms "Landlord" and "Tenant", respectively, shall be bound by notices given in accordance with the provisions of this paragraph to the same effect as if each had received such notice.
24. Miscellaneous.
A. Words of any gender used in this lease shall be held and construed to include any other gender, and words in the singular number shall be held to include the plural, unless the context otherwise requires.
B. The terms, provisions and covenants and conditions contained in this lease shall apply to, inure to the benefit of, and be binding upon, the parties hereto and upon their respective heirs, legal representative, successors and permitted assigns, except as otherwise herein expressly provided. Landlord shall have the right to assign any of its rights and obligations under this lease. Each party agrees to furnish to the other, promptly upon demand a corporate resolution, proof of due authorization by partners, or other appropriate documentation evidencing the due authorization, of such party to enter into this lease.
C. The captions inserted in this lease are for convenience only and in no way define, limit or otherwise describe the scope or intent of this lease, or any provision hereof, or in any way affect the interpretation of this lease.
D. Tenant agrees from time to time within test (10) days after request of Landlord, to deliver to Landlord, or Landlord's designee an estoppel certificate stating that this lease is in full force and effect, the date to which rent has been paid, the unexpired term of this lease and such other matters pertaining to this lease as may be requested by Landlord. It is understood and agreed that Tenant's obligation to furnish such estoppel certificates in a timely fashion is a material inducement for Landlord's execution of this lease.
E. This lease may not be altered, changed or amended except by an instrument in writing signed by both parties hereto.
F. All obligations of Tenant hereunder not fully performed as of the expiration or earlier termination of the term of this lease shall survive the expiration or earlier termination of the term hereof including without limitation all payment obligations with respect to taxes and insurance and all obligations concerning the condition of the premises. Upon this expiration or earlier termination of the term hereof. and prior to Tenant vacating the premises, Tenant shall pay to Landlord any amount reasonably estimated by Landlord as necessary to put the premises, including without limitation all heating and air conditioning systems and equipment therein, In good condition and repair. Tenant shall also, prior to vacating the premises, pay to Landlord the amount, as estimated by Landlord, of Tenant's obligation hereunder for real estate taxes and insurance premiums for the year in which the lease expires or terminates. All such amounts shall be used and held by Landlord for payment of such obligations of Tenant hereunder, with Tenant being liable for any additional costs therefor upon demand by Landlord, or with any excess to be returned to Tenant after all such obligations have been determined and satisfied, as the case may be. Any security deposit held by Landlord shall be credited against the amount payable by Tenant under this Paragraph 24(F).
G. If any clause or provision of this lease is Illegal, invalid or unenforceable under present or future laws effective during the term of this lease, then and in that event, it is the intention of the parties hereto that the remainder of the lease shall not be affected thereby, and it is also the intention of the parties to this lease that in lieu of each clause or provision of this lease that is illegal, invalid or unenforceable, there be added as a part of this lease contract a clause or provision as similar in terms to such illegal, invalid or unenforceable clause of provision as may be possible and be legal, valid and enforceable.
H. Because the premises are on the open market and are presently being shown, this lease shall be treated as an offer with the premises being subject to prior lease and such offer subject to withdrawal or non-acceptance by Landlord or to other use of the premises without notice, and this lease shall not be valid or binding unless and until accepted by Landlord in writing and a fully executed copy delivered to both parties hereto.
I. All references in this lease to "the data hereof" or similar references shall be deemed to refer to the last date, in point of time, on which all parties hereto have executed this lease.
25. Additional Provisions. See Addendum and Exhibits "A" and "B" attached hereto and made a part thereof.
EXECUTED BY LANDLORD, this day of , 19 .
Attest/Witness; Aetna Life Insurance Company
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/s/ [ILLEGIBLE] By /s/ [ILLEGIBLE]
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Title: Leasing Agent Title: Assistant Vice President
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EXECUTED BY TENANT, this 1 day of August, 1989
Attest/Witness
/s/ Mark Chandler By /s/ Mark Chandler ---------------------------------- -------------------------------------- Title:____________________________ ________________________________________ |
ADDENDUM TO LEASE AGREEMENT BETWEEN
AETNA LIFE INSURANCE COMPANY, AS LANDLORD
AND MARK CHANDLER, INDIVIDUALLY
The monthly base rental shall be paid according to the following schedule:
Months 1 - 6 @ $2,000.00 gross (common area maintenance and taxes will not be due during this period.)
Months 7 - 55 @ $2,953.00 triple net (common area maintenance and taxes will be due during this period.)
The Tenant shall be assigned the entire rights of Landlord in all warranties provided by the subcontractors relating to the finish-out construction of the demised premises. This assignment of rights and warranties shall coincide with the term of the lease. If for any reason the Tenant no longer occupies the premises before the expiration of any warranties, then the assignment of the warranties shall revert back to the Landlord. Landlord shall be responsible for contracting and supervising the construction of the improvements to be constructed in the demised space, as described in Exhibit "B" attached hereto. Landlord warrants that HVAC has been serviced and is in good working order for a period of 90 days following occupancy.
The Tenant shall have the right to use fifteen (15) parking spaces of the total spaces provided for the building on a non-exclusive basis during the term of the lease. These spaces shall be provided at no cost to the Tenant. If no such event shall the Tenant be entitled to paint, mark or otherwise identify any such spaces for its exclusive use. Tenant shall prevent its employees from parking on the streets adjacent to the premises and use its best effort to prevent all other invitees from parking on such streets.
In addition to the obligations and responsibilities of the Tenant documented in Paragraph 6 "Tenant Repairs" of the lease, Tenant shall be responsible for its proportionate share of all costs involving the non-structural maintenance of (1) the exterior of the building, (2) the building and park landscaping, (3) the parking lots and driveways, (4) interior and exterior sprinkler systems and any other miscellaneous costs of the common area maintenance of the building and park or park security.
During each month of the term of this lease, Tenant shall make a monthly escrow
deposit with Landlord equal to 1/12 of its proportionate share of the taxes,
common area maintenance charges and common utility charges which will be due and
payable for that particular year and which are Tenant's obligations pursuant to
Paragraphs 4, 6, and 10 of the Lease, respectively. Tenant authorizes Landlord
to use the funds so deposited with Landlord to pay such costs. Within ninety
(90) days after execution of this lease by both parties, Landlord shall estimate
all such costs for the year in question. The initial monthly escrow payment
required above shall be based upon Tenant's proportionate share of the estimated
costs, and the monthly escrow payments are subject to increase or decrease as
determined by Landlord to reflect an accurate monthly escrow of Tenant's
estimated proportionate share of all such costs. The escrow payment account of
Tenant shall be reconciled annually. If the Tenant's total escrow payments are
less than Tenant's actual proportionate share of all such costs, Tenant shall
pay Landlord upon demand the difference; if the total escrow payments of Tenant
are more than Tenant's actual proportionate share of all such costs, Landlord
shall retain such excess and credit it to Tenant's next accruing escrow account
payments.
Tenant shall escrow estimated common area maintenance and property tax charges during months 7 through 55.
ADDENDUM TO LEASE AGREEMENT BETWEEN
AETNA LIFE INSURANCE COMPANY, AS LANDLORD AND
MARK CHANDLER, INDIVIDUALLY, AS TENANT
PAGE TWO OF TWO
Finish out will be constructed according to Tenant and Landlord approved plans and specifications to be attached at a later date. In no event shall Tenant finish out exceed $45,000.00.
Landlord will pay for building standard sign or pay for moving and installing Tenant's existing sign.
Tenant shall have the right and option to renew this lease for one (1) additional five (5) year term by delivering written notice thereof to Landlord at lease One Hundred and eighty (180) days prior to the expiration date of the lease term, provided that at the time of such notice and at the end of the lease term, Tenant is not in default hereunder. Upon the delivery of said notice and subject to the conditions set forth in the preceding sentence, this lease shall be extended upon the same terms, covenants and conditions as provided in this lease, except that the rental payable during said extended term shall be at the prevailing market rental rate for space of comparable size, quality and location at the commencement of such extended term. If a conflict arises in the determination of such a Fair Market Value rental rate, a three-member committee, selected from the Austin Board of Realtors, shall determine the Fair Market Value rental rate. The first two members of such committee shall be selected by Landlord and Tenant respectively, which two members shall select the third. In no event shall the rate decrease below the rate Tenant is currently paying.
Landlord agrees to subordinate its contractual lien hereunder to any purchase money or working capital line of credit financing.
Tenant must notify Landlord in writing upon each and every "secured party" desiring to perfect their purchase money or working capital line of credit financing.
EXHIBIT "A"
subdivision in Travis County, Texas
LOCAL ADDRESS: 12212-K Technology Blvd.
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Austin, Texas 78759
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[Map Appears Here]
EXHIBIT "B"
The tenant finish improvements will be constructed in accordance with the "Industrial Standards and Specifications" dated February 1986, unless noted otherwise on the construction drawings relating to the leased premises.
Actual construction plans will be accepted and agreed to as a separate document.
FIRST AMENDMENT TO LEASE AGREEMENT BETWEEN
AETNA LIFE INSURANCE COMPANY, AS LANDLORD AND
MARK CHANDLER, INDIVIDUALLY, AS TENANT
DATED: 10/4/89
This Amendment, shall attach to and form a part of the Lease Agreement and shall supersede and amend such Lease as follows:
Tenant covenants not to introduce any form of hazardous or toxic materials, as
defined by the U.S. Environmental Protection Agency onto the Premises without:
a) first obtaining Landlords written consent: and b) complying with all
applicable Federal, State and local laws or ordinances pertaining to the
transportation, storage, use or disposal of such material, including but not
limited to obtaining proper permits.
If Tenant's transportation, storage, use or disposal of hazardous or toxic materials the Premises results in: 1) contamination of the soil or surface or ground water: or 2) loss or damage to person(s) or property, then Tenant agrees to respond in accordance with the following paragraph.
Tenant agrees: (i) to notify Landlord immediately of any contamination, claim of contamination, loss or damage; (ii) after consultation and approval by Landlord, to clean up the contamination in full compliance with all applicable statutes, regulations and standard, and (iii) to indemnify, claims, suits, causes of action, costs and fees, including attorney's fees, arising from or connected with any such contamination, claim on contamination, loss or damage. This provision shall survive termination of this lease.
WITNESS: AETNA LIFE INSURANCE COMPANY:
_________________________________ /s/ [ILLEGIBLE]
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WITNESS: MARK CHANDLER, INDIVIDUALLY
/s/ [ILLEGIBLE] /s/ Mark Chandler
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SECOND AMENDMENT TO LEASE AGREEMENT BETWEEN
AETNA LIFE INSURANCE COMPANY, AS LANDLORD AND
MARK CHANDLER, INDIVIDUALLY, AS TENANT
To be attached to and form a part of Lease made the 1st day of August, 1989, (which together with any amendments, modifications and extensions thereof, is hereafter called the Lease), between, Landlord and Tenant, covering a total of 2,625 squaw feet and located at 12212 Technology Boulevard, Suite K, Austin, Texas.
WITNESSETH, THAT
WHEREAS, Tenant needs additional space for its business purposes and Landlord has available an area adjacent hereto.
NOW, THEREFORE, in consideration of the premises, Landlord and Tenant covenant and agree as follows:
1. Effective January 1, 1992 through end of Term, the demised promises stall contain, in addition to the approximately 5,906 square feet originally demised, an additional area hereinafter called the "new space", containing approximately 2,625 square feet immediately adjacent thereto (see Exhibit "A" attached hereto), thus making the aggregate area of the demised premises approximately 8,531 square feet.
3. Effective January 1, 1992, the monthly rental for the entire 8,531 square feet shall be $4,265.50 Triple Net, payable on the first day of each month during the balance of the term.
Except as herein and hereby modified and amended the Agreement of Lease shall remain in full force and effect and all the terms, provisions, covenants and conditions thereof are hereby ratified and confirmed.
DATE AS OF THE 10 DAY OF DECEMBER, 1991
WITNESS: AETNA LIFE INSURANCE COMPANY:
/s/ [ILLEGIBLE] /s/ [ILLEGIBLE]
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BY:
TITLE: Director
WITNESS: MARK CHANDLER INDIVIDUALLY:
/s/ [ILLEGIBLE] BY: /s/ Mark Chandler
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TITLE: President
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EXHIBIT "A"
BUILDING: McNeil #4
LEGAL DESCRIPTION: Lot 10, McNeil Road Commercial Subdivision,
Section 2
ADDRESS: 12212 Technology Boulevard, suites J & K,
Austin, Texas 78727
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NEW SPACE ORIGINAL SPACE
2,625 s.f. 5,906 s.f.
[MAP APPEARS HERE]
THIRD AMENDMENT TO LEASE AGREEMENT BETWEEN
AETNA LIFE INSURANCE COMPANY, AS LANDLORD, AND
MARK CHANDLER, INDIVIDUALLY, AS TENANT
To be attached to and form a part of Lease made the 1st day of August, 1989 (which together with any amendments, modifications and extensions thereof, is hereinafter called the Lease), between Landlord and Tenant, covering a total of 8,531 square feet and located at 12212 Technology Boulevard, Austin, Texas, known as McNeil 4..
1. WITNESSETH that the Lease is hereby extended and renewed for a further term of Sixty (60) months to commence on the 1st day of June, 1994, on condition that Landlord and Tenant comply with all terms, covenants and conditions contained in the Lease, and the monthly base rental shall be Four Thousand Nine Hundred Forty Seven and 98/100 Dollars ($4,947.98) plus property taxes, common area maintenance, and insurance as provided in the Lease. The Tenant shall accept the space in its current "as is" condition.
3. The Landlord will provide the Tenant with an HVAC Certificate of Inspection within thirty (30) days of the commencement of the renewal term. If the HVAC units require repair or replacement, the Landlord will do so at its cost.
Except as herein and hereby modified and amended the Agreement of Lease shall remain in full force and effect and all the terms, provisions, covenants and conditions thereof an hereby ratified and confirmed.
DATED AS OF THE 29 DAY OF APRIL, 1994.
WITNESS: AETNA LIFE INSURANCE COMPANY
___________________________ By: /s/ [ILLEGIBLE]
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Title: Director
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WITNESS: MARK CHANDLER, INDIVIDUALLY:
[ILLEGIBLE]
--------------------------- By: Mark Chandler
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Title:__________________________
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EXHIBIT "A"
BUILDING: McNeil #4
LEGAL DESCRIPTION: Lot 10, McNeil Road Commercial Subdivision,
Section 2
ADDRESS: 12212 Technology Boulevard
Austin, Texas 78727
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[MAP APPEARS HERE]
FOURTH AMENDMENT TO LEASE AGREEMENT BETWEEN
AETNA LIFE INSURANCE COMPANY, AS LANDLORD AND
MARK CHANDLER, INDIVIDUALLY, AS TENANT
To be attached to and form a part of Lease made the 1st day of August, 1989 (which together with any amendments, modifications and extensions thereof, is hereinafter called the Lease), between Landlord and Tenant, covering a total of 8,531 square feet and located at 12212 Technology Boulevard, Suites J and K, Austin, Texas, known as McNeil #4.
WITNESSETH That the Lease is hereby amended as follows:
1. The Lease shall be extended and renewed for a further term of four (4) months to commence on the 1st day of June, 1999, on condition that Landlord and Tenant comply with all terms, covenants and conditions contained in the Lease, and the monthly base rental shall be as follows. The Tenant shall accept the space in its current "as is" condition.
2. WHEREAS, Tenant needs additional space for its business purposes and Landlord has available an area adjacent hereto, effective on the commencement date, the demised premises shall contain, in addition to the approximately 8,531 square feet originally demised, an additional area, hereinafter called the "new space," containing approximately 4,206 square feet adjacent thereto (see Exhibit "A" attached hereto), thus making the aggregate area of the demised promises approximately 12,737 square feet. Tenant shall accept the "new space" in its current "as is" condition and all improvements must comply with Landlord's Standards and Specifications for Office/Warehouse Buildings.
The commencement due for the new space is defined as thirty (30) days following existing tenant's vacation of the "new space" and their completion of responsibilities outlined in Paragraph 4 of this document.
3. The Monthly Rental shall be as follows:
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MONTHLY BASE MONTHLY BASE MONTHLY BASE
RENTAL PSF EXISTING RENTAL EXISTING RENTAL PSF NEW MONTHLY BASE TOTAL MONTHLY
TERM SPACE (8531 SF) SPACE SPACE (4,206 SF) RENTAL NEW SPACE BASE RENTAL
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Commencement -
5/30/99 $0.58 $4,947.98 $0.65 $2,733.90 $7,681.88
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6/1/99 - 9/30/99 $0.58 $4,974.98 $0.65 $2,733.90 $7,681.88
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These amounts shall be in addition to property taxes, common area maintenance, and insurance as provided in the Lease.
4. Previous Tenant or Landlord shall be responsible for servicing and repairing, if necessary, the HVAC system, by a mutually acceptable, licensed contractor, cleaning the "new space" to broom clean condition and for building an opening in the demising wall between the "existing space" and the "new space" prior to occupancy of the "new space" by Tenant.
5. Paragraph 9.B.(i) of the Lease Agreement is hereby amended to name the Management Company as an additional insured on all Tenant's Liability Insurance Policies in connection with this Lease (except for the workers' compensation policy as stated in Paragraph 9.B.(i)).
6. Except as herein and hereby modified and amended the Agreement of Lease shall remain in full force and effect and all the terms, provisions, covenants and conditions thereof are hereby ratified and confirmed.
DATED AS OF THE 7 DAY OF JUNE, 1996.
WITNESS: LANDLORD:
AETNA LIFE INSURANCE COMPANY
BY: Alleges Realty Investors, LLC its Agent
and Investment Advisor
/s/ Kim House /s/ [ILLEGIBLE]
----------------------- --------------------------------------
Printed Name: [ILLEGIBLE]
-------------------------
Title: Vice President
-------------------------
WITNESS: TENANT:
MARK CHANDLER, INDIVIDUALLY
Kim House /s/ Mark Chandler
----------------------- --------------------------------------
Printed Name: Mark Chandler
-------------------------
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Title: _________________________
EXHIBIT "A"
BUILDING: McNeil #4
LEGAL DESCRIPTION: Lot 10, McNeil Road Commercial Subdivision,
Section 2
ADDRESS: 12212 Technology Boulevard
Austin, Texas 78727
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[MAP APPEARS HERE]
FIFTH AMENDMENT TO LEASE AGREEMENT BETWEEN
AETNA LIFE INSURANCE COMPANY, AS LANDLORD, AND
MARK CHANDLER, INDIVIDUALLY, AS TENANT
To be attached to and form a part of Lease made the 1/st/ day of August, 1989 (which together with any amendments, modifications and extensions thereof, is hereinafter called the Lease), between Landlord and Tenant, covering a total of 12,737 square feet and located at 12212 Technology Boulevard, Suites I, J and K, Austin, Texas, known as McNeil #4
WITNESSETH that the Lease is hereby amended as follows:
1. The Lease shall be extended and renewed (see Exhibit "A") for a further term. of thirty (30) months to commence on the 1/st/ day of October 1999, on condition that Landlord and Tenant comply with all terms, covenants and conditions contained in the Lease. The Tenant shall accept the space in its current "as is" condition.
2. WHEREAS, Tenant needs, additional space for its business purposes and Landlord has available an area nearby effective on Commencement Date, the demised premises shall contain, in addition to the approximately 12,737 square feet originally demised ("original space"), and additional area, hereinafter called the "new space", containing approximately 20,122 square feet located at 12212 Technology Boulevard, Suite 200 (known as McNeil #5) (see Exhibit "B") attached hereto, thus making the aggregate area of the premises approximately 32,859 square feet.
The Commencement Date for the new space is defined as forty five (45) days following existing tenant's vacation of the "new space" and the completion of responsibilities outlined in Paragraph 4 of this document.
3. Monthly Rental shall be as follows:
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MONTHLY BASE MONTHLY BASE MONTHLY BASE
RENTAL PSF EXISTING RENTAL EXISTING PSF NEW MONTHLY BASE TOTAL MONTHLY
TERM SPACE (12,737 SF) SPACE SPACE (20,122 SF) RENTAL NEW SPACE BASE RENTAL
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Commencement-9/30/99 $0.6031153 $7,681.88 $0.75 $15,091.50 $22,773.38
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10/1/99 - 3/31/02 $ 0.75 $9,552.75 $0.75 $15,091.50 $24,644.25
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These amounts shall be in addition to property taxes, common area maintenance, and insurance as provided in the Lease. Tenant shall be obligated to pay its proportionate share of management fees for the new space as of the Commencement Date. As of October 1, 1999, Tenant shall pay its proportionate share of management fees on the original space.
4. Previous tenant or Landlord shall be responsible for servicing and repairing, if necessary, the HVAC system by a mutually acceptable, licensed contractor and cleaning the "new space" to broom clean condition, including but not limited to, removal of trash and previous Tenant's equipment.
6. Landlord shall provide a tenant finish allowance of $40,224.00 to be applied toward interior improvements. Tenant shall bear the entire cost of any interior improvements to be installed by Landlord in the premises in excess of the finish-out allowance of $40,224.00 and shall pay for such excess over the allowance as hereinafter provided.
7. Witnesseth that the Lease expressly refers to Tenant as Mark Chandler, Individually. From and after the date hereof, the Tenant shall be Luminex Corporation and not Mark Chandler, Individually. The Lease and all related documents are hereby amended such that all references to "Tenant" or "Mark Chandler, Individually", will translate to mean "Luminex Corporation".
8. Tenant shall have the right and option to renew this Lease for one (1) additional thirty-six (36) month term by delivering written notice thereof at least one hundred eighty (180) days prior to the expiration date of the lease term, provided that at the time of such notice and at the end of the lease term, Tenant is not in default hereunder. Upon the delivery of said notice and subject to the conditions set forth in the preceding sentence, this Lease shall be extended upon the same terms, covenants and conditions as provided in this Lease, except that the rental payable during said extended term shall be the prevailing market rental rate for space of comparable size, quality and location at the commencement of such extended term (the "Market Rate"). The right and option shall apply to the initial lease term only. In the event Landlord and Tenant are unable to agree upon the Market Rate, Landlord and Tenant shall each promptly appoint a real estate broker who is licensed by the Texas Real Estate Commission (TREC) and active in the Austin industrial market, to assist in the determination of the Market Rate, and the two brokers shall appoint a third broker who is also licensed by the Texas Real Estate Commission and active in the Austin industrial market. The determination of the Market Rate by agreement of any two of such three brokers shall thereafter be payable until further adjusted. Landlord and Tenant agree to use all reasonable diligence to cause their appointed brokers to perform in good faith and in a timely manner in order to make the determination of the Market Rate on or before the date on which the Market Rate is to become effective. In the event the brokers to not make such determination in a timely manner, this Lease shall nevertheless continue in full force and effect until such determination is made, and the rental for such period shall be payable at the rate otherwise payable hereunder. Upon the determination of the Market Rate, the payment of the Market Rate shall commence on the first day of the month following the date of such determination, and in addition to such monthly installment of rental, Tenant shall pay to Landlord in the increase in rental payment hereunder, if any, applicable to the period from the date on which the Market Rate was scheduled to become effective to the payment of the first installment at the Market Rate. Landlord and Tenant shall each bear the cost and fees of their respective brokers and shall share equally the cost of the third broker, if needed.
9. Tenant, at its own cost and expense, shall enter into a regularly scheduled preventative maintenance/service contract with a maintenance contractor approved by Landlord for servicing all hot water, heating and air conditioning systems and equipment within the Premises. The service contract must include the replacement of filters on a regular basis and all services suggested by the equipment manufacturer in its operations/maintenance manual and must become effective within thirty (30) days of the date Tenant takes possession of the Premises. Provided that
Tenant maintains such service contract and is not in default under the terms of
this Lease, Landlord shall be responsible for any repairs or replacements
necessary to maintain the HVAC equipment in the new space for a period of sixty
(60) days following the Commencement Date.
10. Tenant shall have the nonexclusive right to utilize no more than fifty-six (56) parking spaces at the new space and no more than thirty-nine (39) parking spaces at the original space.
11. Tenant's "proportionate share" of McNeil #4 is 35.93%. Tenant's proportionate share of McNeil #5 is 45.34%.
12. Subject to Landlord's written approval of the installation process and procedure, Tenant, at its expense, shall have the right to install telecommunication lines connecting the new space and original space.
13. Tenant shall not use, and shall not permit any subtenant licensee, concessionaire, employee, agent or invitee (hereinafter collectively "Tenant's Representatives") to use, any portion of the Premises or Building, for the placement, storage, manufacture, disposal or handling of any hazardous materials (hereinafter defined) unless Tenant complies with all applicable environmental laws (federal, state and local), including, but not limited to those for obtaining proper permits. In the event Tenant or Tenant's Representatives desire to use or place hazardous materials on the Premises it shall notify Landlord in writing thirty (30) days prior to such proposed use or placement, and provide the names of the hazardous materials, procedures to insure compliance with the applicable environmental laws and such other information as Landlord may reasonable request.
In the event Tenant or Tenant's Representatives places, releases, or discovers any hazardous materials on the Premises or Building in violation of applicable environmental laws, Tenant shall immediately notify Landlord of such fact in writing within twenty-four (24) hours of the placement, release or discovery. Tenant shall not attempt any removal, abatement or remediation of those hazardous materials on the Premises in violation of applicable environmental laws, without obtaining the additional written consent of Landlord, which consent may be specifically conditioned on Landlord's right to approve the scope, timing and techniques of any such work and the appointment of all contractors, engineers, inspectors and consultants in connection with any such work. Tenant shall be responsible for the cost of any removal, abatement and remediation work of any hazardous materials placed, stored, manufactured, disposed of or handled by Tenant or Tenant's Representatives on the Premises or any other portion of the Building and for the cost of any removal abatement or remediation of any hazardous materials which might be disturbed or released as a result of any remodeling or construction in the Premises by Tenant or Tenant's Representatives. Such cost shall include, without limitation, the cost of any supervision by Landlord, its employees or agents, in connection with such work. Tenant shall comply with all environmental laws in connection with any such removal.
Tenant shall indemnify Landlord, its shareholders, directors, officers, employees and agents and hold them harmless, from and against any loss, damage (including, without limitation, a loss in value of the Building or damages due to restrictions on marketing contaminated space), cost, liability, expense (including reasonable attorney's fees and expenses and court costs) arising out of the placement, storage, use, manufacture, disposal, handling, removal, abatement or remediation of any hazardous materials by Tenant or Tenant's Representatives on the Premises or Building, or any removal, abatement or remediation of any hazardous materials required hereunder to be performed or paid for by Tenant, with respect to any portion of the Premises or the Building, or arising out of any breach by Tenant of its obligations under this paragraph.
The term "hazardous materials" as used herein shall mean (i) any "hazardous
waste" as defined by the Resource Conservation and Recovery Act of 1976 (42
U.S.C. Section 6901 et seq.), as amended from time to time, and regulations
promulgated thereunder; (ii) any "hazardous substance" as defined by the
Comprehensive Environmental Response, Compensation and Liability Act of 1980 (42
U.S.C. Section 9601, et seq.), as amended from time to time, and regulations
promulgated thereunder; (iii) asbestos or polychlorinated biphenyls; (iv) any
substance the presence of which on the Building or on the Premises is prohibited
or regulated by any federal, state or local law, regulation, code or rule; and
(v) any other substance
which requires special handling or notification of any federal, state, or local governmental entity in its collection, storage, treatment, or disposal.
14. This Lease shall be subordinate to any deed of trust, mortgage, of other security instrument (a "Mortgage"), of any ground lease, master lease, or primary lease (a "Primary Lease"). that now or hereafter covers all or any part of the Premises (the mortgagee under any Mortgage or the lessor under any Primary Lease is referred to herein as "Landlord's Mortgagee"), including any modifications, renewals or extensions of such Mortgage or Primary Lease, provided that it is a condition to the Subordination of this lease that the Landlord's Mortgagee execute and deliver to Tenant a non-disturbance and attornment agreement, in recordable form, whereby such Landlord's Mortgagee agrees that neither this Lease nor Tenant's right to possession will be terminated so long as Tenant is not in default under this Lease (provided Landlord's Mortgagee, or successor thereto, maintains its rights to terminate under other provisions of the Lease, e.g., for a casualty). Notwithstanding the foregoing, Tenant agrees that any such Landlord's Mortgagee shall have the right at any time to subordinate such Mortgage or Primary Lease to this lease on such terms and subject to such conditions as Landlord's Mortgagee may deem appropriate in its discretion. Tenant agrees upon demand to execute such further instruments subordinating this Lease or attorning to the Landlord's Mortgagee as Landlord may request, provided such contains non-disturbance provisions as noted above and such other provisions which do not affect The substantive provisions of this Lease. In the event that Tenant should fail to execute any subordination or other agreement required by this paragraph, within twenty (20) days of written request, it shall constitute an Event of Default, without further notice required of Landlord.
Except as herein and hereby modified and amended the Agreement of Lease shall remain in full force and effect and all the terms, provisions, covenants and conditions thereof are hereby ratified and confirmed.
DATED AS OF THE 21/st/ DAY OF DECEMBER, 1998.
WITNESS: AETNA LIFE INSURANCE COMPANY:
By: Allegis Realty Investors LLC,
Its Investment Advisor sad Agent
/s/ [ILLEGIBLE] /s/ [ILLEGIBLE]
------------------------- -----------------------------------
By: [ILLEGIBLE]
-----------------------------------
Title: Senior Vice President
--------------------------------
WITNESS: LUMINEX CORPORATION:
/s/ Mark Chandler
--------------------------------------
By MARK CHANDLER
------------------------------------
Title: CHAIRMAN & CEO
--------------------------------
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EXHIBIT "A"
BUILDING: McNeil #4
LEGAL DESCRIPTION: Lot 10, McNeil Road Commercial Subdivision,
Section 2
ADDRESS: 12212 Technology Boulevard
Austin, Texas 78727
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[MAP APPEARS HERE]
EXHIBIT "B"
BUILDING: McNeil #5
LEGAL DESCRIPTION: Lot 10, McNeil Road Commercial Subdivision,
Section 2
ADDRESS: 12112 Technology Boulevard
Austin, Texas 78727
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[MAP APPEARS HERE]
EXHIBIT 10.13
Sublease Agreement
This Sublease Agreement is made this 20th day of December, 1999 at Travis County, Texas by and between American Innovations, Ltd., (herein "Sublessor"), and Luminex Corporation, (herein "Sublessee"). Sublessor is the Lessee under that certain Lease, (the "Main Lease"), by and between Aetna Life Insurance, as Landlord, (herein "Lessor") and American Innovations, as Tenant, (herein "Sublessor") executed on or about July 1996, for the premises described in the Main Lease, (herein, "Leased Premises"). A true and correct copy of the Main Lease is attached as Exhibit A and incorporated herein by this reference.
In consideration of the mutual promises contained herein and upon the express condition of the occurrence of a HVAC and mechanical inspection of the Subleased Premises satisfactory to Sublessee, Sublessor hereby subleases a portion of the Leased Premises (herein *Subleased Premises*) to Sublessee, subject to the terms of the Main Lease, and subject further to the provisions of this Sublease Agreement, as follows:
1. All the duties and obligations of Sublessee hereunder are expressly conditioned on the occurrence of an inspection of the Subleased Premises by a licensed heating and air conditioning service company which is satisfactory to Sublessee by January 1, 2000. If such an inspection is not satisfactory to Sublessee, this Sublease Agreement shall terminate effective immediately and all of Sublessee's duties and obligations hereunder shall be deemed full and satisfactorily discharged.
2. Sublessee agrees to abide by and observe all the terms, covenants and conditions of the Main Lease.
3. Insofar as the provisions of the Main Lease do not conflict with the specific provisions of this Sublease Agreement each of them is incorporated into this Sublease as if completely rewritten herein. Sublessee agrees to be bound to Sublessor by all the terms of the Main Lease and to assume towards Sublessor and Worm all obligations and responsibilities that Sublessor, by the Main Lease, assumes towards Lessor, except for the payment of rent and tenant costs by Sublessee to Sublessor, which is governed by Paragraph 5 herein. Sublessee further agrees to indemnify and hold harmless Sublessor from any claim or liability under the Main Lease. The relationship between Sublessee and Sublessor shall be the same as between Sublessor and Lessor under the Main Lease.
4. The premises being subleased is identified in Exhibit B and consists of approximately 2,500 square feet located within the space leased by Sublessor from Lessor and adjoining to space leased by Sublessee from Landlord (the "Subleased Premises*). Prior to the execution of this Sublease Agreement Sublessee is responsible for ensuring that the Subleased Promises can be incorporated with Sublessee's adjoining space while maintaining security satisfactory to Sublessor and meeting fire safety code. Any costs related to modify the space to comply with security and fire safety shall be the sole responsibility of Sublessee. Sublessee may instaIl one (1) door where indicated on Exhibit B. Within fifteen (15) days of the end of the Sublease Agreement Sublessee shall remove the subject door and repair the wall so that the wall is consistent with the surrounding walls. Further, Sublessor gives its consent to Sublessee to make interior improvements to the Subleased Promises without further approval of Sublessor, limited to the addition or alteration of the paint, carpet, telephone and data lines.
5. The term of this Sublease Agreement shall be for a term of twelve (15) months commencing on January 1, 2000 and ending March 31, 2001 provided that this Sublease Agreement shall sooner terminate upon the termination for any cause whatsoever of the Main Lease. If Sublessee makes any assignment of assets for the benefit of creditors, or if a trustee or receiver is appointed to administer or conduct its business, or it is judged in any legal proceedings to be bankrupt, then this Sublease Agreement shall terminate without prior written notice. Unless otherwise terminated as specified in this paragraph, this Sublease Agreement shall automatically renew each month until termination of the Main Lease or upon ninety (90) days written notice by either party, whichever comes first.
6. Sublessee agrees to pay Sublessor, as rent and tenant costs (including electricity) for the Subleased Premises, the sum of two thousand six hundred twenty-five dollars ($2,625.00) per month, payable in advance on the 1st day of each calendar month during the term of this Sublease. The first monthly installment for rent as set forth above shall be due and payable upon execution of this Sublease. Upon Execution of this
American Innovations Page #1 Sublease Agreement
Sublease, Sublessee shall also deposit with Sublessor the sum of two thousand six hundred twenty-five dollars ($2,625.00) as a security deposit to be held by Sublessor pursuant to the provisions of the Main Lease.
7. The following events shall be deemed to be events of default by Sublessee under this Sublease: any events of default by Sublessee, listed as events of default by Tenant set forth in the Main Lease, or any default in the provisions of this Sublease Agreement. Upon the occurrence of any such events of default, and in addition to any other available remedies provided by law or in equity, Sublessor shall have all remedies granted to Lessor in the Main Lease.
8. Sublessee, shall have no right to assign any interest in this Sublease Agreement without first obtaining the written consent of the Lessor and Sublessor, which consent may or may not be granted by the Lessor or Sublessor in their sole opinion, judgment or discretion.
9. Sublessor shall have no liability to Sublessee for any wrongful action or default on the part of Lessor pursuant to the terms of the Main Lease, and Sublessee hereby agrees to look solely to Lessor in event of any such default the liability and obligations of Sublessor being solely pursuant to the terms and conditions of this Sublease Agreement.
10. Any notice pertaining to this Sublease Agreement or the Main Lease shall be in writing and shall be deemed to be delivered on the date it is hand delivered to the party to whom such notice is given, or if such notice is mailed, on the date on that it is sent by overnight courier or by registered or certified mail (postage prepaid, return receipt requested) to the respective party at the address listed in the heading of this Sublease Agreement.
12. If any provisions hereof shall for any reason be held void or unenforceable, the remaining provisions shall remain in full force. Any provisions of this Sublease Agreement prohibited by the law of any state shall, as to said state, be ineffective to the extent of such prohibition without effecting the remaining provisions of this Sublease Agreement This Sublease Agreement is governed by the laws of the State of Texas.
13. Except as provided above, no provisions of this Sublease Agreement may be waived or modified unless agreed to in writing by both parties. This Sublease Agreement constitutes the entire agreement between the parties with respect to the subject hereof and supercedes all prior written or oral agreements between the parties relating to such subject.
14. Each party represents and warrants to the other that it has the requisite authority to enter into this Sublease Agreement and to perform every term, provision and obligation of this Sublease Agreement and that neither the execution of this Sublease Agreement nor the performance hereunder is in conflict with any other agreement.
15. Nothing contained in this Sublease Agreement shall be construed to: a) give either party the power to direct or control the day to day activities of the other, b) constitute a partnership, joint venture or ownership; or c) allow either party to create or assume any obligation on behalf of the other.
16. Should a dispute arise between the parties, every effort will be made to resolve the differences by the personnel involved in the dispute. When such resolution cannot be achieved, the dispute will be referred to the management level of each party. Should all efforts be exhausted without satisfactory resolution, then either party may refer the matter to the American Arbitration Association for resolution under its rules and requirements. Each party shall be responsible for the costs of their own witnesses, technical support, lawyers and other assistance. All other costs, the timing of the arbitration and the location of the proceedings shall be agreed upon mutually and in writing. The parties agree that any matter requiring injunctive or temporary relief may be brought in any court having jurisdiction.
ACCEPTED: ACCEPTED:
American Innovations, Ltd. ("Sublessor") Luminex Corporation ("Sublessee")
BY: /s/ Richard J. Smalling BY: /s/ James Persky
-------------------------- ----------------------
Richard J. Smalling James Persky
President Vice President & Chief Financial Officer
Date: 12/20/99 Date: 12/20/99
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American Innovations Page #2 Sublease Agreement
(Separate sublease agreement required)
CONSENT TO SUBLEASE
OF LEASE
This Consent to Sublease of Lease (this "Consent") is executed this 4th day of January, 2000, by AEtna Life Insurance Company ("Landlord").
RECITALS
A. Landlord owns that certain 44,378 square feet located at 12112
Technology Blvd., Austin, Texas, commonly known as McNeil #5 (the "Building").
B. American Innovations, Ltd., ("Tenant") is a tenant leasing 24,256 sf of space in the Building pursuant to that certain lease document by and between Landlord and Tenant dated June 21, 1996, as amended (the "Lease").
C. Tenant desires to sublease a portion of its space, amounting to approximately 2,500 sf, to Luminex Corporation (the "New Tenant") according to the terms and conditions of the attached sublease agreement.
D. New Tenant has agreed to assume the obligations of Tenant and perform the obligations thereof as set forth in the Lease pursuant to Sublease Agreement between American Innovations, Inc. and Luminex Corporation dated as of December 20,1999 (the "Sublease").
AGREEMENT
Now therefor, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the undersigned hereby agree as follows.
1. The above recitals are incorporated herein by this reference.
2. Effective upon receipt by Landlord of (i) the executed Sublease, and
(ii) a certificate of insurance indicating that New Tenant carries all of the
insurance coverages required to be carried by Tenant under the Lease. Landlord
hereby consents to the Sublease of the Lease from Tenant to New Tenant pursuant
to the Sublease.
3. By acceptance hereof, Tenant acknowledges that Tenant shall be and remain liable for any claims that Landlord may have under the Lease prior to the date of the Sublease of the Lease, and New Tenant acknowledges that New Tenant will assume all obligations under the Lease and be liable for any claims that Landlord may have under the Lease after die date of such Sublease.
4. This consent relates solely to the Sublease and to no other or future Sublease of the Lease or with respect to any other matter requiring Landlord's consent under the Lease.
5. Except as otherwise expressly stated, nothing contained herein shall:
(a) operate as a representation or warranty by Landlord of any nature
whatsoever;
(b) be construed to modify, waive or affect any of the provisions,
covenants or conditions of the Lease or to waive any breach
thereof or any rights of Landlord thereunder or to increase
Landlord's obligations under the Lease; or
(c) release or discharge the Tenant from any liability under the
Lease and the Tenant shall remain liable and responsible for the
full performance and observance of all of the provisions,
covenants and conditions set forth in the Lease on the part of
the tenant to be performed and observed.
IN WTTNESS WHEREOF, Landlord has executed this Consent as of the date first written above.
AEtna Life Insurance Company
By: Allegis Realty Investors LLC, its
[investment advisor and agent]
By: /s/[ILLEGIBLE]
--------------------
Name: /s/ [ILLEGIBLE]
--------------------
Its: Vice President
--------------------
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ACCEPTED AND AGREED:
American Innovations, Ltd.:
By: /s/ Richard J. Smalling ------------------------- Name: Richard J. Smalling |
Its: President
Luminex Corporation:
By: /s/ James L. Persky ------------------------- Name: James L. Persky |
Its: Chief Financial Officer
EXHIBIT "B"
[DIAGRAM APPEARS HERE]
EXHIBIT 10.14
First Amendment to Sublease Agreement between Luminex
("Sublessee") and American Innovations, Ltd. ("Sublessor")
This amendment is to be attached to, and form a part of, the Sublease Agreement made the 20/th/ day of December, 1999 between Sublessor and Sublessee covering a portion of the space located at 12112 Technology Blvd., Suite 100, Austin, Texas known as McNeil #5 and subject to the Main Lease between Sublessor and Aetna Life Insurance.
1. The premises being subleased is amended as shown in Exhibit A to include an additional 400 square feet comprising a hallway that will serve as the fire exit pathway for said premises. Any costs related to modify the additional space to comply with security and fire safety shall be the sole responsibility of Sublessee. Sublessee is responsible for installing two doors where indicated on Exhibit A; one door will separate the premises being subleased from those being leased by Sublessor and the second door is required to open the additional hallway covered by this amendment.
2. Sublessee agrees to pay Sublessor rent and tenant costs (including electricity) for the premises being subleased, including the additional 400 square feet described in this amendment, in the amount of three thousand forty-five dollars ($3,045.00) per month payable in advance on the 1/st/ day of each calender month during the term of the Sublease Agreement. Upon execution of this amendment, Sublessee shall pay Sublessor $420 to cover the difference in rent and tenant costs for the additional 400 square feet in January 2000.
3. The term of the Sublease Agreement shall be for fifteen (15) months commencing on January 1, 2000 and ending March 31, 2001 provided that the Sublease Agreement shall sooner terminate upon the termination for any cause whatsoever of the Main Lease. The amendment is made to correct a typographical error in the Sublease Agreement.
4. Addresses were omitted from the Sublease Agreement. For the purposes of
Section 10 of the Sublease Agreement, any notices shall be delivered to the
following addresses:
American Innovations Luminex Corporation 12112 Technology Blvd., Suite 100 12212 Technology Blvd. Austin, Texas 78727 Austin, Texas 78727 |
Except as herein modified and amended, the Sublease Agreement shall remain in full force and effect and all the terms, provisions, covenants and conditions thereof are hereby confirmed:
ACCEPTED: ACCEPTED:
American Innovations, Ltd. ("Sublessor") Luminex ("Sublessee")
BY: /s/ Richard J. Smalling BY: /s/ James L. Persky
-------------------------------- --------------------------------
Richard J. Smalling James Persky
President Vice President & Chief Financial
Date: January 24, 2000 Officer
Date:___________________________
Page #1
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Exhibit 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Selected financial data" and "Experts" and to the use of our report dated January 28, 2000, in the Registration Statement (Form S-1) and related Prospectus of Luminex Corporation for the registration of shares of its common stock.
/s/ Ernst & Young LLP
Austin, Texas
February 3, 2000
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| ARTICLE 5 |
| THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM LUMNEX CORP 12-31-99 AFS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. |
| MULTIPLIER: 1,000 |
| PERIOD TYPE | YEAR | YEAR |
| FISCAL YEAR END | DEC 31 1998 | DEC 31 1999 |
| PERIOD START | JAN 01 1998 | JAN 31 1999 |
| PERIOD END | DEC 31 1998 | DEC 31 1999 |
| CASH | 8,537 | 4,083 |
| SECURITIES | 0 | 4,929 |
| RECEIVABLES | 146 | 1,341 |
| ALLOWANCES | (14) | (64) |
| INVENTORY | 47 | 663 |
| CURRENT ASSETS | 61 | 181 |
| PP&E | 799 | 1,369 |
| DEPRECIATION | (484) | (999) |
| TOTAL ASSETS | 9,590 | 12,566 |
| CURRENT LIABILITIES | 400 | 771 |
| BONDS | 0 | 0 |
| PREFERRED MANDATORY | 0 | 0 |
| PREFERRED | 19,041 | 28,946 |
| COMMON | 6 | 6 |
| OTHER SE | (9,851) | (17,751) |
| TOTAL LIABILITY AND EQUITY | 9,590 | 12,566 |
| SALES | 0 | 0 |
| TOTAL REVENUES | 0 | 506 |
| CGS | 88 | 1,172 |
| TOTAL COSTS | 88 | 1,172 |
| OTHER EXPENSES | 6,177 | 10,672 |
| LOSS PROVISION | 0 | 0 |
| INTEREST EXPENSE | 0 | 0 |
| INCOME PRETAX | (5,596) | (8,448) |
| INCOME TAX | 0 | 0 |
| INCOME CONTINUING | 0 | 0 |
| DISCONTINUED | 0 | 0 |
| EXTRAORDINARY | 0 | 0 |
| CHANGES | 0 | 0 |
| NET INCOME | (5,596) | (8,448) |
| EPS BASIC | (.87) | (1.31) |
| EPS DILUTED | (.87) | (1.31) |