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PURCHASE AGREEMENT
DATED AS OF MARCH 10, 1994
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TABLE OF CONTENTS
PAGE
SECTION 1:AUTHORIZATION, PURCHASE AND SALE OF THE SHARES AND WARRANT.............1
1.1 Authorization..................................................1
1.2 Sale and Purchase of the Shares and Warrant....................1
1.3 Certain Defined Terms..........................................1
SECTION 2:CLOSINGS, PAYMENT AND DELIVERY.........................................2
2.1 Closing Dates and Place of Closings............................2
2.2 Payment and Delivery...........................................2
2.3 Termination by the Purchaser...................................2
SECTION 3:REPRESENTATIONS AND WARRANTIES OF THE COMPANY..........................2
3.1 Organization and Standing: Articles and Bylaws.................2
3.2 Corporate Power................................................3
3.3 Subsidiaries...................................................3
3.4 Capitalization.................................................3
3.5 Authorization..................................................3
3.6 Contracts......................................................4
3.7 Financial Information..........................................5
3.8 Absence of Undisclosed Liabilities.............................5
3.9 Absence of Certain Changes.....................................5
3.10 Taxes..........................................................6
3.11 Transactions With Related Parties..............................6
3.12 Litigation.....................................................6
3.13 Consents.......................................................6
3.14 Title to Properties; Liens and Encumbrances....................7
3.15 Leases.........................................................7
3.16 Franchises, Licenses, Trademarks, Patents and Other Rights.....7
3.17 Issuance Taxes.................................................8
3.18 Offering.......................................................8
3.19 Compliance with Other Instruments..............................8
3.20 Employees......................................................9
3.21 Business of the Company........................................9
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3.24 Disclosure....................................................11
3.25 Warranties and Representations at Closing.....................11
SECTION 4:REPRESENTATIONS AND WARRANTIES OF PURCHASER...........................11
4.1 Experience....................................................11
4.2 Investment....................................................11
4.3 Restrictions on Transferability...............................11
4.4 Access to Data................................................12
4.5 Accredited Investor...........................................12
4.6 Warranties and Representations at Closing.....................12
SECTION 5:CONDITIONS TO CLOSING OF PURCHASER....................................12
5.1 Representations and Warranties Correct........................12
5.2 Performance...................................................12
5.3 Compliance and Secretary's Certificates.......................12
5.4 Opinion of Company Counsel....................................12
5.5 Legal Investment..............................................13
5.6 Qualifications................................................13
5.7 Proceedings and Documents.....................................13
5.8 Certificate of Non-Relocation.................................13
5.9 Good Standing Certificates....................................13
5.10 Tax Matters...................................................13
5.11 Reservation Fee...............................................13
5.12 Non-Competition, Proprietary Information and Other Agreements.13
5.13 Officers' Agreement...........................................13
SECTION 6:CONDITIONS TO CLOSING OF COMPANY......................................14
6.1 Representations...............................................14
6.2 Legal Investment..............................................14
6.3 Refund of Reservation Fee.....................................14
7.1 Basic Financial Information...................................14
7.2 Additional Information and Rights.............................16
7.3 Prompt Payment of Taxes, etc..................................16
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7.4 Maintenance of Properties and Leases..........................17
7.5 Insurance.....................................................17
7.6 Directors' and Officers' Liability Insurance..................17
7.7 Accounts and Records..........................................17
7.8 Compliance with Requirements of Governmental Authorities......17
7.9 Maintenance of Corporate Existence, etc.......................18
7.10 Availability of Stock for Exercise............................18
7.11 Confidentiality and Non-Competition Agreements................18
7.12 Use of Proceeds...............................................19
7.13 Transactions with Affiliates..................................19
7.14 Compliance by Subsidiaries....................................19
7.15 Maintenance of Connecticut Presence...........................19
7.16 Connecticut Employment........................................19
7.17 Equal Opportunity.............................................20
7.18 Certain Distributions/Payments................................20
7.19 Employee Stock Purchases......................................21
SECTION 8:RIGHT TO PUT SECURITIES...............................................21
8.1 Right to Put..................................................21
8.2 Method of Exercise............................................21
8.3 Time of Exercise..............................................21
8.4 Closing Date..................................................22
8.5 Closing Procedure.............................................22
SECTION 9:REGISTRATION RIGHTS...................................................22
9.1 Certain Definitions...........................................22
9.2 Company Registration..........................................23
9.3 Requested Registration........................................24
9.4 Registration Rights...........................................26
9.5 Expenses of Registration......................................27
9.6 Registration Procedures.......................................27
9.8 Information by Holder.........................................29
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9.9 Rule 144 Reporting............................................29
SECTION 10:DEFINITIONS..........................................................29
SECTION 11:MISCELLANEOUS........................................................32
11.1 Governing Law.................................................32
11.2 Survival......................................................33
11.3 Successors and Assigns........................................33
11.4 Entire Agreement; Amendment...................................33
11.5 Rights and Obligations Under Other Agreements.................33
11.6 Notices, etc..................................................33
11.7 Delays or Omissions...........................................33
11.8 Separability..................................................34
11.9 Agent's Fees and Services.....................................34
11.10 Legal Fees and Expenses.......................................34
11.11 Trial by Jury.................................................34
11.12 Waiver........................................................34
11.13 Titles and Subtitles..........................................35
11.14 Counterparts..................................................35
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PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT (this "Agreement") is made and entered into as
of the 10th day of March, 1994, by and between BIOS LABORATORIES, INC. (the
"Company"), a Delaware corporation, and CONNECTICUT INNOVATIONS, INC. (the
"Purchaser)."
WHEREAS, the Company wishes to issue and sell, and the Purchaser
desires to purchase, certain securities of the Company; and
WHEREAS, Purchaser has agreed to purchase the securities provided that
the Company make certain representations, warranties and agreements, including
that the Purchaser have the right under certain circumstances to sell the
securities, in whole or in part, to the Company;
NOW THEREFORE, each of the parties hereto, in consideration of the
mutual covenants set forth herein, agrees as follows:
SECTION 1: AUTHORIZATION, PURCHASE AND SALE OF THE SHARES AND WARRANT
1.1 AUTHORIZATION. The Company has, or before the Closing (as
defined in Section 2.1 hereof) will have, authorized the issuance and sale of
(i) one thousand ninety two (1,092) shares (the "Shares") of the common stock of
the Company, par value $.001 (the "Common Stock") and (ii) a Stock Subscription
Warrant (the "Warrant") substantially in the form set forth in Exhibit A hereto,
to purchase an aggregate of up to three hundred sixty four (364) shares at an
exercise price of $137.36 (the "Warrant Shares") of the Company's Common Stock,
subject to adjustment as provided in the Warrant. The term "Warrant" shall
include any warrant or warrants issued upon any replacement, exchange or
transfer, pursuant to which the Purchaser has the right to purchase certain
shares of Common Stock as set forth herein or in the Warrant.
1.2 SALE AND PURCHASE OF THE SHARES AND WARRANT.
(a) Subject to the terms and conditions of this Agreement
and in reliance upon the representations, warranties and agreements
contained herein, the Company will issue and sell to the Purchaser, and
the Purchaser will purchase from the Company at the Closing, the Shares
and Warrant for an aggregate purchase price of one hundred fifty
thousand dollars ($150,000).
(b) The Company and the Purchaser, having adverse
interests and as a result of arm's length bargaining, agree that (i)
the Purchaser has not rendered or agreed to render any services to the
Company in connection with this Agreement or the issuance of the Shares
and Warrant; (ii) the Shares and Warrant are not being issued as
compensation; and (iii) the assumed price at which the Shares would be
issued if issued apart from the Warrant is 99% of the aggregate
purchase price specified in Section 1.2(a).
1.3 CERTAIN DEFINED TERMS. Certain capitalized terms used in this
Agreement shall have the respective meanings ascribed to them in Section 10
hereof.
SECTION 2: CLOSINGS, PAYMENT AND DELIVERY.
2.1 CLOSING DATES AND PLACE OF CLOSINGS. The closing (the
"Closing") of the purchase and sale of the Shares and Warrant hereunder at the
price set forth in Section 1.2 hereof shall be held on such date (the "Closing
Date") that the Company fulfills the conditions of closing set forth in Section
5 hereof and as shall have been agreed to by the Company and the Purchaser. The
place of the Closing (including the place of delivery to the Purchaser by the
Company of the Shares and Warrant and the place of payment to the Company by the
Purchaser of the purchase price therefor) shall be at the offices of ▇▇▇▇▇▇▇ &
▇▇▇▇▇▇▇, or such other place as shall have been agreed to by the Company and the
Purchaser.
2.2 PAYMENT AND DELIVERY. At the Closing, the Purchaser will pay
to the Company, in cash, by certified check drawn on a bank acceptable to the
Company or wire transfer of immediately available funds (or any combination
thereof), as the Company may elect the amount set forth in Section 1.2, and the
Company will deliver to the Purchaser the Shares to be purchased by the
Purchaser and a Warrant for the number of Warrant Shares to be purchased by the
Purchaser, in each case registered in the Purchaser's name (or in such name or
names as otherwise requested prior to the Closing which shall be a nominee of
the Purchaser in which the Purchaser holds all beneficial interests). The
instruments evidencing the Shares and the Warrant shall bear an appropriate
legend indicating that transfer thereof is subject to compliance with the
provision of the Securities Act.
2.3 TERMINATION BY THE PURCHASER. Notwithstanding any other
provision hereof, if the conditions of the Closing set forth in Section 5 hereof
are not fulfilled prior to March 31, 1994, the Purchaser may in its absolute
discretion at any time thereafter terminate its obligations hereunder and shall
have no further responsibilities hereunder.
SECTION 3: REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as expressly set forth (with reference to a subsection in this
Section 3) on Schedule I (the "Schedule of Exceptions/Disclosures") with a
specific reference to a subsection of this Section 3, the Company hereby
represents and warrants to the Purchaser as follows:
3.1 ORGANIZATION AND STANDING: ARTICLES AND BYLAWS. The Company is
a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware. The Company has all requisite power to own the
properties owned by it and to conduct the business as it is now being conducted
by it and as contemplated by the Confidential Offering Memorandum dated August
27, 1993, as supplemented by Supplement No. 1 dated December 21, 1993 (the
"Offering Memorandum"), a true and correct copy of which is attached hereto as
Schedule III. The Company is duly qualified and registered to do business in and
is in good standing in every state in which the property owned by it and/or the
nature of its activities requires that it be so qualified and registered.
The Company has furnished special counsel for the Purchaser with true,
correct and complete copies of the Company's Certificate of Incorporation and
Bylaws, and all amendments thereto through and including the Closing Date and
copies of the minutes of all Board of Directors, Committees of the Board, and
shareholder meetings of the Company.
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3.2 CORPORATE POWER. The Company has all requisite corporate power
to enter into this Agreement and the other Financing Documents and will have on
the Closing Date all requisite corporate power to sell the Shares and Warrant to
the Purchaser pursuant to this Agreement and to carry out and perform its
obligations under the terms of this Agreement and the other Financing Documents.
3.3 SUBSIDIARIES. The Company has no subsidiaries and does not own
of record or beneficially any capital stock or equity interest or investment in
any other corporation, partnership, association or business entity, or if the
Company has any subsidiary or subsidiaries, each subsidiary is listed on the
Schedule of Exceptions/Disclosures and each of the representations and
warranties set forth in this Section 3 is also made by the Company with respect
to each such subsidiary as if such subsidiary were the "Company" and the
Schedule of Exceptions/Disclosures shall apply to each such subsidiary in the
same manner as if such subsidiary were the "Company".
3.4 CAPITALIZATION. The Schedule of Exceptions/Disclosures
contains a true and correct list of all securities of the Company (including the
amounts thereof) outstanding immediately prior to the Closing, and the holders
of any interest in such securities. Immediately prior to the Closing, the
Company's authorized capital stock will consist of 75,000 shares of Common
Stock, of $.001 par value each, of which not more than 19,656 shares will be
issued and outstanding on the Closing Date and of which 7209 are reserved for
issuance upon the exercise of employee stock options, outstanding warrants or
convertible securities. Upon consummation of the Closing, all issued and
outstanding shares of capital stock of the Company will have been duly
authorized and validly issued, will be fully paid and nonassessable, will be
owned of record and beneficially by the shareholders and in the amounts set
forth in the Schedule of Exceptions/Disclosures and will have been offered,
issued, sold and delivered by the Company in compliance with applicable federal
and state securities laws. Except as set forth in the Schedule of
Exceptions/Disclosures and in the Warrant, there are no outstanding preemptive
or other preferential rights, conversion rights or other rights, options,
warrants or agreements granted or issued by or binding upon the Company for the
purchase or acquisition of any shares of its capital stock. No holder of Common
Stock has granted any option or other right to purchase from such shareholder
any interest in any share of Common Stock except as set forth in the Schedule of
Exceptions/Disclosures. The Company holds no shares of its capital stock in its
treasury.
3.5 AUTHORIZATION. All action on the part of the Company, its
directors and shareholders necessary for the authorization, execution, delivery
and performance by the Company of this Agreement, and the other Financing
Documents and for the consummation of the transactions contemplated herein and
therein, and for the authorization, issuance and delivery of the Shares and the
Warrant and Of the Warrant Shares has been taken or will be taken prior to the
Closing. This Agreement and the other Financing Documents are each a valid and
binding obligation of the Company, enforceable in accordance with their
respective terms. The execution and delivery by the Company of this Agreement
and the other Financing Documents and compliance herewith and therewith, and the
issuance and sale of the Shares and Warrant and Warrant Shares will not with or
without notice or the passage of time or both result in any violation of and
will not conflict with, or result in a breach of any of the terms of, or
constitute a default under any provision of, any state or federal law to which
the Company is subject, the
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Company's Certificate of Incorporation or Bylaws, as amended, or any mortgage,
indenture, agreement, instrument, judgment, decree, order, rule or regulation or
other restriction to which the Company is a party or by which it or any of its
property is bound, or may be affected, or result in the creation of any
mortgage, pledge, lien, encumbrance or charge upon any of the properties or
assets of the Company pursuant to any such term or give to any other person or
entity the right to accelerate the time for performance of any obligation of the
Company. No shareholder has any preemptive rights or rights of first refusal by
reason of or in connection with the issuance of the Warrant. The Warrant Shares
have been duly and validly reserved by action of the Board of Directors (and are
in addition to any other shares reserved for any other purpose) and are not
subject to any preemptive rights or rights of first refusal, and, upon such
issuance, will be validly issued, fully paid and nonassessable, and will be free
of any liens or encumbrances.
3.6 CONTRACTS.
(a) The Schedule of Exceptions/Disclosures sets forth a
true and correct list of all contracts, obligations, commitments,
agreements, plans and the like, ("Contracts"), whether written or oral,
and all administrative, judicial and similar orders to which the
Company is a party or by which it or any of its properties are bound,
or affected, in which the Company is obligated to expend more than
$50,000 in the aggregate, including, without limitation, the following:
(i) any such employment, bonus or consulting
agreement, pension, profit sharing, deferred compensation,
stock bonus, retirement, stock option, stock purchase, phantom
stock or similar plan, or agreement evidencing rights to
purchase, phantom stock or similar plan, or agreement among
shareholders of the Company;
(ii) any such loan or other agreement, note,
indenture or instrument relating to, or evidencing,
indebtedness for borrowed money, or mortgaging, pledging or
granting or creating a lien or security interest or other
encumbrance on any property of the Company or any agreement or
instrument evidencing any guaranty by the Company of payment
or performance by any other party;
(iii) any such agreement with any dealer, sales
representative, broker or other distributor, jobber,
advertiser or sales agency;
(iv) any such agreement with any labor union or
collective bargaining organization or any other labor
agreement;
(v) any such contract for the furnishing ,
purchase or lease of machinery, equipment, goods or services
(including, without limitation, any agreement with processors
and subcontractors);
(vi) any such indenture, agreement or other
document (including private placement brochures) relating to
the future sale or repurchase of securities;
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(vii) any such agreement to register under the
Securities Act of 1933, as amended (the "Securities Act"), any
of the securities of the Company;
(viii) any such joint venture contract or
arrangement or other agreement involving a sharing of profits
or expenses;
(ix) any such agreement (other than
distributorship agreements or similar agreements providing for
the distribution of Company products with dealers,
distributors and sales representatives of the Company)
limiting the freedom of the company to compete in any line of
business or in any geographic area or with any party; and
(x) any such agreement providing for disposition
of any line of business, assets or securities of the Company,
or any agreement with respect to the acquisition of any line
of business, assets or shares of any other business, any
agreement of merger or consolidation or letter of intent with
respect to any of the foregoing.
(b) A copy of each of the Contracts has been delivered to
the Purchaser and a summary of each oral agreement is listed in the
Schedule of Exceptions/Disclosures. The Company has complied with all
material provisions of each such Contract and no event has occurred and
no condition exists which with notice or the passage of time or both
would constitute a default under any such Contract on the part of the
Company. To the Company's knowledge, no party to any such Contract has
threatened to terminate or has any intentions of terminating its
obligations thereunder.
3.7 FINANCIAL INFORMATION. Copies of the Company's balance sheet
as of September 30, 1993 (the "Balance Sheet"), and the related statements of
operations and cash flows for the period from January 1, 1993 through September
30, 1993 (collectively, the "Financial Statements") have been delivered to the
Purchaser and special counsel for the Purchaser, present fairly the financial
position of the Company as of such date, have been prepared in accordance with
Generally Accepted Accounting Principles, consistently applied, and show all
material liabilities, absolute or contingent, of the Company required to be
recorded thereon in accordance with Generally Accepted Accounting Principles as
of the date thereof. Company has also furnished Purchaser a preliminary draft of
Company's balance sheet and the related statements of operations and cash flows
for the year ending December 31, 1993.
3.8 ABSENCE OF UNDISCLOSED LIABILITIES. The Company does not have,
and does not know of, any liabilities (fixed or contingent, including without
limitation any tax liabilities due or to become due), which, either individually
or in the aggregate, are material and not disclosed on the Balance Sheet.
3.9 ABSENCE OF CERTAIN CHANGES. Since the date of the Balance
Sheet, there has not been:
(a) any change in the condition, assets, liabilities,
prospects or business of the Company from that shown on the Balance
Sheet or other Financial Statements or as
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described in or contemplated by the Offering Memorandum which, either
individually or in the aggregate, has been or is reasonably likely to
be materially adverse;
(b) any damage to, or destruction or loss of, any of the
properties or assets of the Company (whether or not covered by
insurance) materially adversely affecting the business or plans of the
Company or the Technology;
(c) any declaration, setting aside or payment of any
dividend or other distribution in respect of any of the Company's
capital stock, or any direct or indirect redemption, purchase or other
acquisition of any of such stock (or any warrant, option or other right
with respect to such stock) by the Company or any repayment of Company
debt held by any Related Party or by any Affiliate;
(d) any organizational activity, collective bargaining
activity, labor disputes or labor trouble; or
(e) any event or condition of any character, which,
either individually or in the aggregate, materially adversely affects
the business, operations or plans of the Company.
3.10 TAXES. The Company has filed or will file within the time
prescribed by law (including extensions of time approved by any appropriate
taxing authority) all tax returns and reports required to be filed with the
United States Internal Revenue Service or with the State of Connecticut, and
(except to the extent that the failure to file would not have a material
adverse effect on the condition or operations of the Company) with all other
jurisdictions where such filing is required by law; and the Company has paid
all taxes, interest, penalties, assessments or deficiencies due in connection
therewith.
3.11 TRANSACTIONS WITH RELATED PARTIES. There is no loan, lease or
other continuing transaction between the Company and any Related Party or any
Affiliate.
3.12 LITIGATION. There is neither pending nor to the Company's
knowledge threatened any action, suit, proceeding or claim, whether or not
purportedly on behalf of the Company, to which the Company or any key employee
of the Company is or may be named as a party or to which the Company's or any
such person's property is or may be subject. To the best of the Company's
knowledge and belief, there is no basis for any such action, suit, proceeding or
claim, in which an unfavorable outcome, ruling or finding in any such matter or
for more than one of such matters, taken together, might have a material adverse
effect on the condition, financial or otherwise, operations or prospects of the
Company or on the Technology. The Company has no knowledge of any unasserted
claim, the assertion of which is likely and which, if asserted, will seek
damages, an injunction or other legal, equitable, monetary or nonmonetary relief
and which if granted would have a material adverse effect on the condition,
financial or otherwise, operations or prospects of the Company.
3.13 CONSENTS. No consent, approval or authorization of, or
designation, declaration or filing with, any governmental authority on the part
of the Company, including qualification under applicable state securities laws
of the offer and sale of the Shares and Warrant or of the issuance of the
Warrant Shares, is required in connection with the valid execution and delivery
of
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this Agreement, or the other Financing Documents, the offer, sale or issuance of
the Shares and Warrant, the exercise of the Warrant or the issuance of the
Warrant Shares upon such exercise or the consummation of any other transaction
contemplated on the Closing Date or by this Agreement.
3.14 TITLE TO PROPERTIES; LIENS AND ENCUMBRANCES. The Company has
good and marketable title to all of its properties and assets, free from all
mortgages, pledges, liens, security interests, conditional sale agreements,
encumbrances or charges, except those in favor of Purchaser.
3.15 LEASES. Set forth in the Schedule of Exceptions/Disclosure, is
a correct and complete list of all leases (including, with respect to each
lease, the material provisions of such lease, including the term, the amount of
rent called for and a description of the leased property) under which the
Company is a lessee and under which the Company is obligated to spend more than
$50,000 in the aggregate. The Company enjoys peaceful and undisturbed possession
under all such leases, all of such leases are valid and subsisting and none of
them are in default in any respect on the part of the Company, and no event has
occurred and no condition exists which with notice or the passage of time or
both would constitute such a default on the part of the Company.
3.16 FRANCHISES, LICENSES, TRADEMARKS, PATENTS AND OTHER RIGHTS.
(a) All (i) franchises, permits, licenses and other
similar authority, (ii) patents, patent applications, patent rights,
service marks, trademarks, trademark applications, trademark rights,
trade names, trade name rights and copyrights (whether registered or
not), and (iii) know-how, technology and trade secrets, which, in any
case, are owned, possessed or used by any Related Party or which any
Related Party has the right to own, possess or use, and which in the
judgment of the Company in any way are or may be usable now or in the
future in a material way for the conduct of the Company's business as
now conducted or as planned to be conducted, have been duly and validly
transferred in full to the Company. The documents and instruments
evidencing such transfer are listed in the Schedule of
Exceptions/Disclosures, and a copy thereof has been delivered to
special counsel for the Purchaser.
(b) The Company has all franchises, permits, licenses and
other similar authority, necessary for the conduct of its business as
now being conducted by it and believes it can obtain any similar
authority necessary for the conduct of its business as planned to be
conducted, and it is not in violation, nor will the transactions
contemplated by this Agreement cause a violation of the terms or
provisions of any such franchise, permit, license .or other similar
authority.
(c) The Schedule of Exceptions/Disclosures lists all
patents, patent applications, patent rights, trademarks, trademark
applications, trademark rights, trade names, trade name rights, service
marks and copyrights (whether registered or not) owned or possessed by
the Company, (collectively, the "Listed Rights"). The Listed Rights
constitute all the patents, patent applications, patent rights,
trademarks, trademark applications, trademark rights, trade names,
trade name rights, service marks and
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copyrights (whether registered or not) necessary to the conduct of the
Company's business as now being conducted, and the Company believes
that it can obtain any such rights necessary for the conduct of its
business as planned to be conducted. The Company has and possesses the
know-how, technology and trade secrets not included in the Listed
Rights (such know-how, technology and trade secrets being collectively
called the "Intellectual Property") which it believes to be necessary
(i) to conduct the Company's business as now being conducted and (ii)
with additional know-how, technology and trade secrets which the
Company plans to develop, for the conduct of its business as planned to
be conducted. (The Listed Rights and the Intellectual Property
collectively constitute the "Technology"). There is neither pending,
nor, to the best of the Company's knowledge and belief, threatened, any
claim or litigation against the Company contesting the validity or
right to use any of the Listed Rights or any of the Intellectual
Property, nor is the Company aware of any basis therefor, and the
Company has received no notice of infringement upon or conflict with
any asserted right of others. To the best of the Company's knowledge
and belief, no person, corporation or other entity is infringing or
violating the Listed Rights or any of the Intellectual Property. Except
as disclosed on the Schedule, the Company does not have any obligation
to compensate others for the use of any Listed Right or any
Intellectual Property, nor has the Company granted any license or other
right to use, in any manner, any of the Listed Rights or Intellectual
Property, whether or not requiring the payment of royalties.
3.17 ISSUANCE TAXES. All taxes imposed by any state in connection
with the issuance, sale and delivery of the Shares and Warrant shall have been
fully paid, and all laws imposing such taxes shall have been fully complied
with, prior to the Closing Date.
3.18 OFFERING. Within the past six (6) months, the Company has not,
either directly or through any agent, offered any of the Shares or Warrant or
any security or securities similar to the Shares or Warrant for sale to, or
solicited any offers to buy the Shares or Warrant or any part thereof or any
such similar security or securities from, or otherwise approached or negotiated
in respect thereof with, any party or parties other than the Purchaser or
institutional or other sophisticated or accredited investors, each of which or
whom was offered all or a portion of the Shares or Warrant at private sale for
investment.
Subject in part to the truth and accuracy of the Purchaser's
representations set forth in this Agreement, the offer, sale and issuance of the
Shares, Warrant, and Warrant Shares to the Purchaser as contemplated by this
Agreement are exempt from the registration requirements of the Securities Act
and all applicable state securities laws, and neither the Company nor anyone
acting on its behalf will take any action hereafter that would cause the loss of
such exemption.
3.19 COMPLIANCE WITH OTHER INSTRUMENTS. The Company is not in
violation of any term of its Certificate of Incorporation or Bylaws, as amended.
Neither the Company nor any of its property is in violation of any term of any
mortgage, indenture, contract, agreement, instrument, judgment, decree, order,
statute, rule or regulation to which the Company or any of such property is
subject.
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3.20 EMPLOYEES.
(a) No employee of the Company and no Related Party is,
or is now expected to be, in violation of any term of any employment
contract, patent disclosure agreement, non-competition agreement, or
any other contract or agreement with any prior employer or any other
person, corporation, or other entity or any restrictive covenant in
such an agreement, or any obligation imposed by common law or
otherwise, relating to the right of any such employee or Related Party
to be employed by the Company or companies similarly situated because
of the nature of the business conducted or to be conducted by the
Company or companies similarly situated or relating to the use of trade
secrets or proprietary information of others, and the continued
employment of the Company's employees and/or Related Parties does not
subject the Company or the Purchaser to any liability for any such
violation.
(b) Each of the Company's present or former employees who
has had access to proprietary information of the Company has executed a
confidentiality and non-disclosure agreement. To the best of the
Company's knowledge and belief, no employee or former employee of the
Company is, or is now expected to be, in violation of the terms of the
aforesaid agreement or of any other obligation relating to the use of
confidential or proprietary information of the Company. Each of such
confidentiality and non-disclosure agreements is in full force and
effect.
(c) To the best of the Company's knowledge, no officer or
key employee of the Company has any present intent of terminating his
or her employment with the Company.
(d) Each of the key employees and consultants of the
Company listed on Schedule II has entered into a confidentiality and
non-disclosure agreement, a noncompetition agreement, a proprietary
information and invention agreement and an employment agreement, true
and accurate copies of which have been provided to Purchaser and are in
form and substance satisfactory to the Purchaser.
3.21 BUSINESS OF THE COMPANY. The Company has no knowledge or
belief that (i) there is pending or threatened any claim or litigation against
or affecting the Company contesting its right to manufacture, sell or use any
product or service presently manufactured, sold or used or planned to be
manufactured, sold or used by the Company in connection with its operations,
(ii) there exists, or there is pending or planned, any statute, rule, law,
regulation, standard or code which would materially adversely affect the
condition, financial or otherwise, the operations or the prospects of the
Company, or (iii) there is any other fact which in the future may materially
adversely affect the Company's condition, financial or otherwise, operations or
prospects. The Company currently intends to engage in the business of
developing, manufacturing and selling biological products and services and
laboratory equipment.
3.22 USE OF PROCEEDS. The Company shall use the proceeds of the
sale of the Shares and the Warrant to the Purchaser to market biological
products as proposed in its application to Purchaser. Without limitation, the
Company will not use the proceeds for repayment of indebtedness, including trade
payables, except in the ordinary course of business and incurred
9
after November 30, 1993; provided, however, Company may use the proceeds to
make regular payments on installment debts as they come due in the ordinary
course of business after March 1, 1994.
None of the transactions contemplated in this Agreement (including,
without limitation, the use of the proceeds from the sale of the Shares and
Warrant and Warrant Shares) will violate or result in a violation of Section 7
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or any
regulations issued pursuant thereto, including, without limitation, Regulations
G, I and X of the Board of Governors of the Federal Reserve System, 12 C.F.R.,
Chapter 11. The Company does not own or intend to carry or purchase any "margin
security" within the meaning of said Regulation G, including margin securities
originally issued by it. None of the proceeds from the sale of the Shares and
Warrant and Warrant Shares will be used to purchase or carry (or refinance any
borrowing the proceeds of which were used to purchase or carry) any "security"
within the meaning of the Exchange Act.
3.23 APPLICABILITY OF, AND COMPLIANCE WITH, OTHER LAWS.
(a) The Company does not have or make contributions to
any pension plans, defined benefit plans or defined contribution plans
for its employees which are subject to the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"). With respect to such plans,
if any, listed on the Schedule of Exceptions/Disclosures, the Company
is in compliance with the applicable provisions of ERISA. The Company
has not incurred any unremedied accumulated funding deficiency within
the meaning of ERISA or any unsatisfied liability to the Pension
Benefit Guaranty Corporation established under ERISA in connection with
any employee pension plan established or maintained by the Company
under the jurisdiction of ERISA. No Reportable Event or Prohibited
Transaction (as defined in Section 4043 of ERISA) has occurred with
respect to any plan administered by the Company.
(b) The Company's employment practices and policies are
in full compliance in all material respects with (i) all applicable
laws of the United States and each applicable jurisdiction relating to
equal employment opportunity, and any rules, regulations,
administrative orders and Executive Orders relating thereto; and (ii)
the applicable terms, relating to equal opportunity, of any contract,
agreement or grant the Company has with, from or relating (by way of
subcontract or otherwise) to any other contract, agreement or grant of,
any federal or state governmental unit. The Company has not been the
subject of any charge of employment discrimination made against it by
the United States Equal Employment Opportunity Commission or any other
governmental unit, and is not presently subject to any formal or
informal proceedings before, or investigations by, such Commission or
governmental unit. To the Company's knowledge, neither the Company nor
any of its employees nor any Related Parties are presently under
investigation by any commission or governmental agency for purposes of
security clearance or otherwise, except as disclosed on the Schedule.
(c) Neither the Company nor any property owned by the
Company is in violation of any Federal or State Environmental Law of
any sort or in violation of any
10
Federal or State "OSHA" Law, so-called. The Schedule of
Exceptions/Disclosures contains a list of all environmental permits
held by the Company.
3.24 DISCLOSURE. Neither this Agreement, the Schedule of
Exceptions/Disclosures, the Balance Sheet, the Offering Memorandum, the
Financial Statements, the other Financing Documents nor any other written
statement furnished to the Purchaser or its counsel in connection with the offer
and sale of the Shares or Warrant, contains any untrue statement of a material
fact or omits to state a material fact necessary in order to make the statements
contained therein or herein not misleading in the light of the circumstances
under which they were made. There is no fact which the Company has not disclosed
to the Purchaser in writing that materially adversely affects or, so far as the
Company can now foresee, will materially adversely affect the properties,
business, prospects, profits or condition (financial or otherwise) of the
Company or the ability of the Company to perform this Agreement and the other
Financing Documents. The forecasts, projections, estimates and other
forward-looking matters furnished to the Purchaser were prepared on the basis of
the Company's best estimates. The Company does not have any reason to believe
that any assumptions or statements of opinion contained in such forecasts,
projections, estimates or other forward-looking matters are unreasonable or
false, and the Company believes that the Purchaser may reasonably rely thereon.
3.25 WARRANTIES AND REPRESENTATIONS AT CLOSING. All of the
foregoing warranties and representations are true, complete and correct as of
the date hereof and will be true, complete and correct at the Closing Date as if
made at the time thereof and with respect thereto.
SECTION 4: REPRESENTATIONS AND WARRANTIES OF PURCHASER
The Purchaser represents and warrants to the Company as follows:
4.1 EXPERIENCE. It is experienced in evaluating and investing in
companies such as the Company.
4.2 INVESTMENT. It is acquiring the Shares and Warrant for
investment solely fonts own account and not with the view to, or for resale in
connection with, any distribution thereof. It understands that the Shares and
Warrant have not been registered under the Securities Act by reason of an
exemption from the registration provisions of the Securities Act which depends
upon, among other things, the bona fide nature of its investment intent as
expressed herein.
4.3 RESTRICTIONS ON TRANSFERABILITY. It acknowledges that the
Shares, Warrant and Warrant Shares must be held indefinitely unless they are
subsequently registered under the Act or an exemption from such registration is
available. It has been advised or is aware of the provisions of Rule 144
promulgated under the Securities Act, which permits limited resale of shares
purchased in a private placement subject to the satisfaction of certain
conditions (which conditions cannot presently be satisfied). Except as set forth
in Section 9 below, the Company is under no obligation to, and has no intention,
to register the Shares, the Warrant or the Warrant Shares or comply with an
exemption from registration so as to permit any resale and neither the Company
nor any of its representatives has represented that at some future date an
attempt will be made to register any of the Shares, the Warrant or the Warrant
Shares or to comply with an exemption from registration so as to permit any
resale.
11
Any Shares or Warrant Shares and the Warrant owned or acquired by the
Purchaser or any transferee shall be enclosed with an appropriate legend making
references to the restrictions on transfer set forth in this Agreement.
The Purchaser will not sell, transfer, assign, pledge or otherwise
dispose of, or attempt to sell, transfer, assign, pledge or otherwise dispose
of, all or any part of the Shares, the Warrant Shares or the Warrant in the
absence of either an effective registration statement or an opinion of ▇▇▇▇▇▇▇ &
▇▇▇▇▇▇▇ or other reputable securities counsel satisfactory in form and substance
to the Company and its counsel that such proposed sale, transfer, assignment,
pledge or other disposition would not be in violation of the Securities Act.
4.4 ACCESS TO DATA. It has had an opportunity to discuss the
Company's business, management and financial affairs with the Company's
management, and it has been furnished with copies of documents which it has
requested.
4.5 ACCREDITED INVESTOR. It is an "accredited investor" within the
meaning of Regulation D promulgated under the Securities Act.
4.6 WARRANTIES AND REPRESENTATIONS AT CLOSING. All of the
foregoing warranties and representations are true, complete and correct as of
the date hereof and will be true, complete and correct at the Closing Date as if
made at the time thereof and with respect thereto.
SECTION 5: CONDITIONS TO CLOSING OF PURCHASER
The obligation of the Purchaser to purchase the Shares and Warrant to
be purchased by it at the Closing is subject to the fulfillment to its
satisfaction on or prior to the Closing Date of each of the following
conditions:
5.1 REPRESENTATIONS AND WARRANTIES CORRECT. The representations
and warranties made by the Company in Section 3 hereof shall be true and correct
when made, and shall be true and correct in all respects at the Closing as if
made at and as of the Closing and with respect thereto, after giving effect to
the sale and issuance of the Shares and Warrant at the Closing.
5.2 PERFORMANCE. All covenants, agreements and conditions
contained in this Agreement to be performed or complied with by the Company on
or prior to the Closing Date shall have been so performed or complied with in
all respects.
5.3 COMPLIANCE AND SECRETARY'S CERTIFICATES. The Company shall
have executed and delivered to the Purchaser a certificate, substantially in the
form of Exhibit B to this Agreement, dated the Closing Date, certifying to the
fulfillment of the conditions specified in Sections 5.1 and 5.2 of this
Agreement and such other matters as the Purchaser may reasonably request, and
the Purchaser shall have received a certificate from the Secretary of the
Company, substantially in the form of Exhibit C to this Agreement, dated the
Closing Date, with respect to the matters therein set forth.
5.4 OPINION OF COMPANY COUNSEL. The Purchaser shall have received
from ▇▇▇▇▇▇▇▇ & ▇▇▇▇, counsel to the Company, an opinion addressed to it, dated
the Closing Date, to the effect and in substantially the form set forth in
Exhibit D hereto.
12
5.5 LEGAL INVESTMENT. At the time of the Closing, the purchase of
the Shares and Warrant to be purchased by the Purchaser hereunder and of the
Warrant Shares shall be legally permitted by all laws and regulations to which
it and the Company are subject.
5.6 QUALIFICATIONS. All authorizations, approvals, consents or
permits of any governmental authority, regulatory body or third party that are
required in connection with the lawful issuance and sale of the Shares and
Warrant pursuant to this Agreement, the exercise of the Warrant or the issuance
of the Warrant Shares upon such exercise shall have been duly obtained and shall
be effective on and as of the Closing Date, including, if necessary, permits
from applicable state securities authorities, qualifying the offer and sale of
the Shares and Warrant.
5.7 PROCEEDINGS AND DOCUMENTS. All corporate and other proceedings
taken by the Company in connection with the transactions contemplated hereby and
all documents and instruments incident to such transactions shall be
satisfactory in substance and form to the Purchaser and special counsel for the
Purchaser.
5.8 CERTIFICATE OF NON-RELOCATION. The Company shall have duly
executed and delivered to the Purchaser a Certificate of Non-Relocation (the
"Certificate of Non-Relocation") to the effect and substantially in the form set
forth in Exhibit E to this Agreement.
5.9 GOOD STANDING CERTIFICATES. The Company shall have delivered
to the Purchaser a certificate of recent date from the Secretary of State of the
State of Delaware with respect to the Company's and each subsidiary's due
incorporation, good standing, legal corporate existence, due authorization to
conduct business and the payment of all franchise taxes, and, certificates from
the Secretary of State of Connecticut and in each other jurisdiction in which
the Company or any subsidiary is required to be qualified to do business with
respect to the Company's or such subsidiary's good standing and due
authorization to conduct business therein and payment of all qualification fees.
5.10 TAX MATTERS. The Company shall have delivered to the Purchaser
tax clearance letters from the Connecticut Department of Revenue Services with
respect to the corporation business tax and sales and use tax respecting the
Company and each subsidiary.
5.11 RESERVATION FEE. The Company shall have paid to the Purchaser
a reservation fee of $1500. The Purchaser shall refund such fee to the Company
promptly upon the occurrence of the Closing.
5.12 NON-COMPETITION, PROPRIETARY INFORMATION AND OTHER AGREEMENTS.
Each of the key employees and consultants of the Company listed on Schedule II
shall have entered into a confidentiality and non-disclosure agreement,
non-competition agreement, a proprietary information and invention agreement and
an employment agreement, in each case satisfactory to Purchaser, copies of which
shall have been delivered to Purchaser.
5.13 OFFICERS' AGREEMENT. Each of the officers of the Company shall
have entered into a written covenant in favor of the Purchaser and enforceable
by the Purchaser in form and substance as set forth on Exhibit F to this
Agreement providing, inter alia, that so long as Purchaser owns any Securities
(a) such officer will not pledge, sell, transfer or otherwise dispose
13
of more than twenty percent (20%) of the shares of Common Stock of Company he
or she currently owns, except that such shares may be transferred at any time
to members of the officer's immediate family or trusts or custodianships for
the benefit of such persons provided that such transferees agree to be bound by
the terms of the Officers' Agreement, (b) such officer shall use his or her
best efforts to cause the Company to comply with its obligations under this
Agreement and .any Financing Document and (c) such officer shall not violate or
terminate his or her employment agreement with Company without the prior
written consent of Purchaser.
SECTION 6: CONDITIONS TO CLOSING OF COMPANY
The Company's obligation to sell the Shares and Warrant to be purchased
at the Closing is subject to the fulfillment to its satisfaction on or prior to
the Closing Date of each of the following conditions:
6.1 REPRESENTATIONS. The representations and warranties made by
the Purchaser in Section 4 hereof shall be true and correct when made and shall
be true and correct on the Closing Date.
6.2 LEGAL INVESTMENT. At the time of the Closing, the conditions
set forth in Sections 5.5 and 5.6 shall have occurred and the purchase of the
Shares and Warrant to be purchased by the Purchaser hereunder shall be legally
permitted by all laws and regulations to which the Purchaser and the Company are
subject.
6.3 REFUND OF RESERVATION FEE. The Purchaser shall have refunded
the reservation fee to the
Company.
SECTION 7: COVENANTS OF THE COMPANY
The Company hereby covenants and agrees, that so long as the Purchaser
owns any Shares, Warrant or Warrant Shares:
7.1 BASIC FINANCIAL INFORMATION. The Company will furnish the
following reports to the Purchaser:
(a) As soon as practicable after the end of each fiscal
year of the Company, and in any event within ninety (90) days
thereafter, a consolidated (and consolidating) balance sheet of the
Company and its subsidiaries, if any, as at the end of such fiscal
year, and consolidated (and consolidating) statements of income and
source and application of funds of the Company and its subsidiaries, if
any, for such year, prepared in accordance with Generally Accepted
Accounting Principles consistently applied and setting forth in each
case in comparative form the figures for the previous fiscal year, all
in reasonable detail and performed (without scope limitations imposed
by the Company) by independent public accountants of recognized
standing selected by the Company and satisfactory to the Purchaser;
(b) Beginning with the first fiscal year in which
Company's annual revenues exceed five million dollars ($5,000,000) and
continuing thereafter, as soon as practicable after the end of each
fiscal year of the Company, and in any event within ninety (90) days
14
thereafter, a consolidated (and consolidating) balance sheet of the
Company and its subsidiaries, if any, as at the end of such fiscal
year, and consolidated (and consolidating) statements of income and
source and application of funds of the Company and its subsidiaries, if
any, for such year, prepared in accordance with Generally Accepted
Accounting Principles consistently applied and setting forth in each
case in comparative form the figures for the previous fiscal year, all
in reasonable detail and audited (without scope limitations imposed by
the Company) by independent public accountants of recognized standing
selected by the Company and satisfactory to the Purchaser;
(c) As soon as practicable after the end of the first,
second and third quarterly accounting periods in each fiscal year of
the Company, and in any event within forty-five (45) days thereafter, a
consolidated (and consolidating) balance sheet of the Company and its
subsidiaries, if any, as of the end of each such quarterly period, and
consolidated (and consolidating) statements of income and source and
application of funds of the Company and its subsidiaries, if any, for
such period and for the current fiscal year to date, prepared in
accordance with Generally Accepted Accounting Principles consistently
applied and setting forth in comparative form the figures for the
corresponding periods of the previous fiscal year, subject to changes
resulting from year-end adjustments or year-end audit adjustments, as
the case may be, and setting forth any events which could reasonably be
expected to have an adverse effect upon the Company's finances or the
results of its operations, all in reasonable detail and certified by
the principal financial or accounting officer of the Company;
(d) From the date the Company becomes subject to the
reporting requirements of the Exchange Act, and in lieu of the
financial information required pursuant to Sections 7.1(a), (b), and
(c) but within the time periods required for the furnishing thereof,
copies of its reports filed on Form 1 0-K, Form 10-Q, Form 8-K, or any
successor form or forms;
(e) Each set of financial statements delivered to the
Purchaser pursuant to Section 7.1 will be accompanied by a certificate
of the Chairman, President or a Vice President and the Treasurer or an
Assistant Treasurer of the Company setting forth:
(i) Covenant Compliance - any information
required in order to establish whether the Company was in
compliance with the requirements of this Section 7 during the
period covered by the income statement then being furnished;
and
(ii) Event of Default - that the signers have
reviewed the relevant terms of this Agreement and have made,
or caused to be made, under their supervision, a review of the
transactions and conditions of the Company and its
subsidiaries, if any, from the beginning of the accounting
period covered by the, income statements being delivered
therewith to the date of the certificate and that such review
has not disclosed the existence during such period of any
condition or event which constitutes a breach or default under
this Agreement or any of the other Financing Documents or, if
any such condition or event existed or exists,
15
specifying the nature and period of existence thereof and what
action the Company has taken or proposes to take with respect
thereto.
7.2 ADDITIONAL INFORMATION AND RIGHTS. The Company will:
(a) Permit the Purchaser (or its designated
representative) to visit and inspect any of the properties of the
Company, including its books of account, and to discuss its affairs,
finances and accounts with the Company's officers and its independent
public accountants, all at such reasonable times and as often as any
such party may reasonably request;
(b) Deliver to the Purchaser the reports and data
described below:
(i) As soon as available, information and data
on any material adverse changes in or any event or condition
which materially adversely affects the business, operations or
plans of the Company;
(ii) Immediately upon becoming aware of any
condition or event which constitutes a breach of this
Agreement or any of the other Financing Documents, written
notice specifying the nature and period of existence thereof
and what action the Company is taking or proposes to take with
respect thereto; and
(iii) With reasonable promptness, such other
information and data with respect to the Company and its
subsidiaries as the Purchaser may from time to time reasonably
request;
(c) Hold meetings of its Directors at least quarterly;
(d) Not hold any meetings of its Directors on less than
ten (10) days' written notice and will permit the Purchaser to send a
representative (without voting rights) to each meeting of the Board of
Directors of the Company and all committees of such Board. The Company
shall give the Purchaser notice of each such meeting in the form and
manner such notice is given to the Company's directors. The Company
will not permit its directors or shareholders to conduct any material
business by written consent without giving at least ten (10) days'
written notice to the Purchaser, which notice shall contain an exact
copy of the consent resolution proposed to be adopted.
(e) On or before June 30, 1994, the Company shall
increase the size of the Board of Directors to five (5) directors. The
Company shall appoint, effective as of the date of such increase, one
(1) outside director selected by the Board of Directors and acceptable
to Purchaser for his or her knowledge and experience in strategic
planning and business development and will maintain such person on the
Board of Directors (or a person of similar qualities acceptable to
Purchaser) as long as the Purchaser shall so desire.
7.3 PROMPT PAYMENT OF TAXES, ETC. The Company will promptly pay
and discharge, or cause to be paid and discharged, when due and payable, all
lawful taxes, assessments and
16
governmental charges or levies imposed upon the income, profits, property or
business of the Company or any subsidiary, except for taxes, assessments, and
charges or levies contested in good faith by appropriate proceedings.
7.4 MAINTENANCE OF PROPERTIES AND LEASES. The Company will keep
its properties in good repair, working order and condition, reasonable wear and
tear excepted, and from time to time make all needful and proper, or legally
required, repairs, renewals, replacements, additions and improvements thereto;
and the Company and its subsidiaries, if any, will at all times comply with each
provision of all leases to which any of them is a party or under which any of
them occupies, or has possession of, any property.
7.5 INSURANCE. The Company will keep its assets and those of its
subsidiaries which are of an insurable character insured by financially sound
and reputable insurers, which are licensed to provide such insurance in the
State of Connecticut, against loss or damage by fire, extended coverage and
explosion in amounts sufficient to prevent the Company or any subsidiary from
becoming a co-insurer and not in any event less than the greater of (a) the
outstanding principal amount of any indebtedness of the Company to the Purchaser
and (b) the replacement value of the property insured. The Company will
maintain, with financially sound and reputable insurers, which are licensed to
provide such insurance in the State of Connecticut, insurance against other
hazards and risks and liability to persons and property to the extent and in the
manner customary for companies in similar businesses similarly situated. All
such policies of insurance shall be occurrence policies with "tail coverage"
so-called respecting all prior "claims made" policies, all in a form
satisfactory to the Purchaser and shall name the Purchaser as an additional
insured as its interest may appear. All such policies shall also contain a
provision requiring that the insurer give the Purchaser so long as Purchaser
holds any indebtedness of Company a minimum of thirty (30) days' written notice
prior to any change therein or cancellation thereof and a provision that the
interest of the Purchaser shall not be impaired or invalidated by any act or
neglect of the Company nor by the occupation by the premises on which the
property is located for purposes more hazardous than are permitted by the
policy. The Company shall give immediate written notice to the Purchaser and to
insurers of loss or damage to the property and shall promptly file proof of loss
with insurers.
7.6 DIRECTORS' AND OFFICERS' LIABILITY INSURANCE. The Company
shall use its best efforts to obtain and maintain Directors' and Officers'
liability insurance from financially sound and reputable insurers, which are
licensed to provide such insurance in the State of Connecticut, provided the
cost of such insurance is reasonable in relation to the resources of the Company
available to pay for the same at the time in question.
7.7 ACCOUNTS AND RECORDS. The Company will keep true records and
books of account in which full, true and correct entries will be made of all
dealings or transactions in relation to its business and affairs in accordance
with Generally Accepted Accounting Principles applied on a consistent basis.
7.8 COMPLIANCE WITH REQUIREMENTS OF GOVERNMENTAL AUTHORITIES. The
Company shall duly observe and conform in all material respects to all
requirements of governmental authorities relating to the conduct of its business
or to its property or assets. Without limiting the generality of the foregoing,
the Company will:
17
(a) Comply in all material respects with all minimum
funding requirements applicable to any pension plans, employee benefit
plans or employee contribution plans which are subject to ERISA or to
the Internal Revenue Code of 1986, as amended (the "Code"), and comply
in all other respects with the provisions of ERISA and the provisions
of the Code applicable to such plans; and
(b) Comply in all material respects with all applicable
laws of the United States and of each applicable jurisdiction relating
to equal employment opportunity, any rules, regulations, administrative
orders and Executive Orders relating thereto and the applicable terms,
relating to equal employment opportunity, of any contract, agreement or
grant the Company has with, from or relating (by way of subcontract or
otherwise) to any other contract, agreement or grant of, any federal or
state governmental unit; and keep all records required to be kept, and
file all reports, affirmative action plans and forms required to be
filed, pursuant to any such applicable law or the terms of any such
government contract.
(c) So conduct its business in all material respects that
neither the Company nor any property owned or occupied by the Company
is in violation of any Federal or State Environmental Law of any sort
or in violation of any Federal or State "OSHA" Law so-called.
7.9 MAINTENANCE OF CORPORATE EXISTENCE, ETC. The Company shall
maintain in full force and effect its corporate existence, rights, government
approvals and franchises and all licenses and all Listed Rights and other rights
to use patents, processes, licenses, trademarks, trade names or copyrights owned
or possessed by it.
7.10 AVAILABILITY OF STOCK FOR EXERCISE. The Company will, from
time to time, in accordance with the laws of the state of its incorporation,
increase the authorized amount of Common Stock if at any time the number of
shares of Common Stock remaining unissued and available for issuance shall be
insufficient to permit exercise in full of the Warrant (or the unexercised
portion thereof).
7.11 CONFIDENTIALITY AND NON-COMPETITION AGREEMENTS.
(a) The Company will require all persons now or hereafter
employed by the Company or a subsidiary and designated as a "Key
Employee" by the Company's Board of Directors to execute a
non-competition agreement, and all employees and Related Parties to
execute a proprietary information and non-disclosure agreement, in
favor of the Company and the Purchaser, all in form and substance
satisfactory to the Purchaser, in each case as a condition precedent to
the employment of such individuals and to induce the Purchaser to enter
into this Agreement and in each case Purchaser shall under the terms
thereof, have the right to enforce the same if the Company shall fail
to do so to the Purchaser's satisfaction.
(b) The Company will cause all technological
developments, inventions, discoveries or improvements made by employees
of the Company and its subsidiaries to be fully documented in
engineering notebooks in accordance with the best prevailing
18
industrial professional standards, and where possible and appropriate,
cause all employees to file and prosecute United States and foreign
patent applications relating to and protecting such developments.
7.12 USE OF PROCEEDS. The Company will use the proceeds from the
sale of the Shares and Warrant for the purposes described in Section 3.22
hereof.
7.13 TRANSACTIONS WITH AFFILIATES. The Company will not enter into
any transaction, including, without limitation, the purchase, sale or exchange
of property or the rendering of any service, with any Affiliate except in the
ordinary course of and pursuant to the reasonable requirements of the Company's
business and upon fair and reasonable terms no less favorable to the Company
than would obtain in a comparable arm's-length transaction with a person not an
Affiliate.
7.14 COMPLIANCE BY SUBSIDIARIES. The Company will cause any
subsidiary which it may now have and/or which it may organize or acquire in the
future to comply fully with all terms and provisions of Section 7 to the same
extent as if such subsidiary or subsidiaries were the "Company" herein.
7.15 MAINTENANCE OF CONNECTICUT PRESENCE. The Company shall not
relocate (as that term is defined in Section 32-5a of the Connecticut General
Statutes) outside of the State of Connecticut so long as the Purchaser owns any
Securities. The Company will maintain a "Connecticut Presence" so long as the
Purchaser owns any Securities. A Connecticut Presence shall mean, without
limitation, (a) maintaining the Company's principal place of business (including
its executive offices and officers) in the State of Connecticut, (b)basing a
majority of its employees and those of its subsidiaries in the State of
Connecticut, (c) conducting a majority of its operations and those of its
subsidiaries, including manufacturing activities conducted directly or through
subcontractors and vendors, In the State of Connecticut, and (d) maintaining the
Company's and each subsidiary's principal bank accounts in the State of
Connecticut.
7.16 CONNECTICUT EMPLOYMENT.
(a) The Company shall create jobs in the State of
Connecticut and shall use its best efforts to employ residents of
Connecticut in these jobs.
(b) The Company shall not relocate (as that term is
defined in Section 32-5a of the Connecticut General Statutes) within
the State of Connecticut without first obtaining the express written
consent of the Purchaser, which consent the Purchaser may withhold in
its discretion. If the Company relocates within the State of
Connecticut, it will offer employment at its new location to its
employees from the original location if such employment is available.
(c) The Company shall furnish to the Purchaser copies of
the quarterly reports filed by the Company and any of its subsidiaries
with the Connecticut Department of Labor and upon request, employment
records and such other personnel records to the extent permitted by law
as the Purchaser may reasonably request to verify the creation or
retention of Connecticut employment.
19
(d) The Company will at any time at the request of the
Purchaser provide Purchaser with authorization satisfactory to the
Connecticut Department of Labor enabling Purchaser to examine all
records of said Department relating to the Company and/or any of its
subsidiaries.
7.17 EQUAL OPPORTUNITY. The Company agrees and warrants that it is
an equal opportunity employer and that it does not discriminate. The Company
further agrees and warrants that:
(a) The Company will not discriminate or permit
discrimination against any employee or applicant for employment because
of sex, sexual orientation, race, color, religious creed, age, martial
status, mental retardation, physical disability, national origin, or
ancestry. Such action shall include, but not be limited to, the
following: Employment upgrading, demotion or transfer; recruitment
advertising; lay-off or termination; rates of pay or other forms of
compensation; and selection for training, including apprenticeship.
(b) The Company agrees to take affirmative action to
insure that applicants with job-related qualifications are employed.
(c) The Company will, in its solicitation for employees,
state that it is an "affirmative action-equal opportunity employer."
(d) The Company agrees to provide each labor union or
representative of workers with which the Company has a collective
bargaining agreement or other contract or understanding and each vendor
with which the Company has a contract or understanding, a notice to be
provided by the Commission of Human Rights and Opportunities (the
"CHRO") and to post copies of the notice in conspicuous places
available to employees and applicants for employment.
(e) The Company agrees to cooperate with the Purchaser,
the State of Connecticut and/or any of its agencies and the CHRO to
insure that the purpose of this equal opportunity clause is being
carried out.
(f) The Company agrees to comply with all relevant
regulations and orders issued by the CHRO, to provide the CHRO with
such information as it may request, and to permit the CHRO access to
pertinent books, records, and accounts concerning the contractor's
employment practices and procedures.
(g) The Company agrees to comply with all of the
requirements set out by Section 4a-60 of the Connecticut General
Statutes, as it may be amended.
(h) The Company agrees to post a notice of this
acceptance of the foregoing equal employment opportunity provisions at
its place of business, clearly visible, in such form as is satisfactory
to the Purchaser.
7.18 CERTAIN DISTRIBUTIONS/PAYMENTS. Until the Company shall close
a public offering registered under the Securities Act or be required to file
periodic reports under the Securities Exchange Act of 1934, as amended, the
Company will not and will not permit any
20
Subsidiary (except a 100% Subsidiary) to make any (1) declaration, setting aside
or payment of any dividend or other distribution in respect of any of the
Company's capital stock, or (ii) direct or indirect redemption, purchase or
other acquisition of any of such stock (or any warrant, option or other right
with respect to such stock) except in any case stock, warrant, options or other
rights owned by the Purchaser or by Technology Investment Fund, Inc. or (iii)
any repayment of Company debt held by any Related Party or by any Affiliate or
subsidiary debt held by any Related Party or by any Affiliate, except (a) debt
held by the Purchaser, or (b) debt held by officers of the Company representing
deferred salaries of not more than $37,000 in the aggregate which may not be
repaid until the Company has achieved a positive cash flow for three (3)
successive months or the Company is no longer obligated to make the royalty
payments as described in the Offering Memorandum; provided, however, the Company
also may repurchase stock of the Company owned by former employees in an amount
not exceeding $20,000 per year (provided the Company has funds legally available
therefor and the purchase price of such stock does not exceed one and one-half
percent (1 1/2%) of annual gross revenues).
7.19 EMPLOYEE STOCK PURCHASES. The Company will not issue (which
term shall, for the purpose of this Section 7.19, include without limitation the
issuance of any shares of, or the grant of any warrant, options or other rights
to purchase any shares of or any commitment to issue) any shares of its capital
stock (which term shall, for the purpose of this Section 7.19, include without
limitation, securities convertible into capital stock, or rights to acquire
capital stock), to employees officers, directors, consultants, or scientific
advisors of the Company or any subsidiary thereof; except the number of shares
of Common Stock (as adjusted for stock dividends, stock splits and similar
corporate events) issued or reserved for issuance pursuant to any existing or
proposed option plan disclosed on the Schedule of Exceptions/Disclosures and
then only at prices no less than 50% of the fair market value of such stock at
the time of the grant of option.
SECTION 8: RIGHT TO PUT SECURITIES
8.1 RIGHT TO PUT. On the terms and conditions herein set forth,
the Purchaser shall have the right to sell to the Company, and the Company
agrees to purchase from the Purchaser, in one or more transactions, the
Purchaser's Securities for the Put Price on the terms and conditions set forth
herein (the "Put").
8.2 METHOD OF EXERCISE. On the terms and conditions herein set
forth, the Purchaser may exercise its rights hereunder to sell all or any part
of its Securities by delivering to the Company a notice of Put (a "Notice of
Put") in the form attached hereto as Exhibit G.
8.3 TIME OF EXERCISE. The rights of the Purchaser to put any or
all of its Securities shall become exercisable at any time within one hundred
eighty (180) days after the occurrence of any one or more of the following
events:
(i) If the Company fails to maintain a
Connecticut Presence in accordance with Section 7.15 of this
Agreement; or
(ii) If, at any time prior to the closing of a
public offering registered under the Securities Act or such
time that the Company is required to file reports
21
pursuant to Section 13 or Section 15(d) under the Securities
Exchange Act of 1934, as amended:
(A) A Change of Control occurs; or
(B) The Company transfers, assigns or
licenses any of its Listed Rights, know how,
technology, trade secrets or Intellectual
Property now owned or hereafter acquired by
it without the written consent of the
Purchaser excluding therefrom licenses made
in the ordinary course of its business; or
(C) The Company sells or otherwise
disposes of the capital stock in any
subsidiary or of all or a substantial part
of the Company's assets or business or of
all or a substantial part of the assets or
business of any subsidiary (whether by sale
of assets, exclusive license or otherwise);
or
(D) The Company purchases or otherwise
acquires capital stock in any corporation or
equity interest in any other entity (other
than that of a subsidiary) or lends money to
any person (other than advances made to
officers or employees to cover business
expenses to be incurred in the ordinary
course of business) or entity or purchases a
substantial part of the operating assets of
any person or entity; or
(iii) If seven (7) years have elapsed from the
Closing Date.
8.4 CLOSING DATE. The closing of the purchase and sale of the
Securities pursuant to Section 8 hereof shall be held on the date which is the
thirtieth (30th) business day after delivery of the Notice of Put or, if later,
ten (10) days after the determination of the Aggregate Market Value, which the
parties agree to use their best efforts to determine as soon as possible after
delivery of a Notice of Put.
8.5 CLOSING PROCEDURE. At the closing, the Purchaser will deliver
to the Company the Securities which are covered by the Notice of Put and the
Company will deliver to the Purchaser the Put Price for such Securities in cash,
certified or bank check, or by wire transfer. The Purchaser shall, at the
Company's request, represent and warrant to the Company that (i) it owns the
Securities which are covered by the Notice of Put free and clear of all liens,
charges and encumbrances, and (ii) it has the power and authority to transfer
such Securities to the Company and to consummate the Put.
SECTION 9: REGISTRATION RIGHTS.
9.1 CERTAIN DEFINITIONS. As used in this Section 9, the following
terms shall have the following respective meanings:
"Commission" shall mean the Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act.
22
"Registrable Securities" shall mean the Shares and Warrant Shares less
any Shares and Warrant Shares theretofore sold to the public or in a private
placement.
The terms "register," "registered" and "registration" shall refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act and applicable rules and regulations
thereunder, and the effectiveness of such registration statement.
"Registration Expenses" shall mean all expenses incurred by the Company
in compliance with Section 9.2 or Section 9.3 hereof, including, without
limitation, all registration and filing fees, printing expenses, fees and
disbursements of counsel for the Company, blue sky fees and expenses, and the
expense of any special audits incident to or required by any such registration
(but excluding the compensation of regular employees of the Company, which shall
be paid in any event by the Company).
"Selling Expenses" shall mean all underwriting discounts and selling
commissions applicable to the sale of Registrable Securities, all fees and
disbursements of counsel for any Holder and any blue sky fees and expenses
excluded from the definition of "Registration Expenses."
"Holder" shall mean any holder of outstanding Shares, Warrant Shares or
Registrable Securities which (except for purposes of determining "Holders" under
Section 9.7 hereof) have not been sold to the public.
"Initiating Holders" shall mean Purchaser or its assignees who in the
aggregate are Holders of not less than thirty-three percent (33%) of the
Registrable Securities, and, after any other Holder or Holders have joined in a
request by such Initiating Holders, shall include such other Holder or Holders.
"Other Shareholders" shall mean holders of securities of the Company
who are entitled by contract with the Company or who are permitted by the
Company to have securities included in a registration of the Company's
securities.
9.2 COMPANY REGISTRATION.
(a) Notice of Registration. If the Company shall
determine to register any of its securities either for its own account
or the account of a security holder or holders exercising their
respective demand registration rights, other than a registration
relating solely to employee benefit plans, or a registration relating
solely to a Commission Rule 145 transaction, or a registration on any
registration form which does not permit secondary sales, the Company
will:
(i) promptly give to each Holder written notice
thereof (which shall include a list of the jurisdictions in
which the company intends to attempt to qualify such
securities under the applicable blue sky or other state
securities laws); and
(ii) include in such registration (and any
related qualification under blue sky laws or other
compliance), and in any underwriting involved therein, all
23
the Registrable Securities specified in a written request or
requests, made by any Holder within fifteen (15) days after
receipt of the written notice from the Company described in
clause (i) above, subject to any limitations on the number of
shares as set forth in Section 9.2 (b)below.
(b) UNDERWRITING. If the registration of which the
Company gives notice is for a registered public offering involving an
underwriting, the company shall so advise the Holders as part of the
written notice given pursuant to Section 9.2 (a)(i). In such event, the
right of any Holder's participation in such underwriting and the
inclusion of such Holder's Registrable Securities in the underwriting
shall be limited to the extent provided herein. All holders proposing
to distribute their securities through such underwriting shall
(together with the Company, directors and officers and the Other
Shareholders distributing their securities through such underwriting)
enter into an underwriting agreement in customary form with the
underwriter or underwriters selected for underwriting by the Company.
Notwithstanding any other provision of this Section 9.2, if the
underwriter determines that marketing factors require a limitation on the number
of shares to be underwritten, the underwriter may (subject to the allocation
priority set forth below) exclude from such registration and underwriting some
or all of the Registrable Securities which would otherwise be underwritten
pursuant hereto. The Company shall so advise all holders of securities
requesting registration, and the number of shares of securities that are
entitled to be included in the registration and underwriting shall be allocated
in the following manner. The number of shares that may be included in the
registration and underwriting on behalf of such Holders, directors and officers
and Other Shareholders in proportion, as nearly as practicable, to the
respective amounts of Registrable Securities and other securities which they had
requested to be included in such registration at the time of filing the
registration statement.
If any Holder of Registrable Securities or any officer, director or
Other Shareholder disapproves of the terms of any such underwriting, he may
elect to withdraw therefrom by written notice to the Company and the
underwriter. Any Registrable Securities or other securities excluded or
withdrawn from such underwriting shall be withdrawn from such registration.
9.3 REQUESTED REGISTRATION.
(a) REQUEST FOR REGISTRATION. If at any time the Company
shall receive from an Initiating Holder a written request that the
Company effect a registration with respect to all or a part of the
Registrable Securities, the Company will:
(i) promptly give written notice of the proposed
registration to all other Holders; and
(ii) as soon as practicable, use its diligent
best efforts to effect such registration (including, without
limitation, the execution of an undertaking to file
post-effective amendments, appropriate qualification under
applicable blue sky or other state securities laws and
appropriate compliance with applicable regulations
24
issued under the Securities Act) as may be so requested and as
would permit or facilitate the sale and distribution of all or
such portion of such Registrable Securities as are specified
in such request, together with all or such portion of the
Registrable Securities of any Holder or Holders joining in
such request as are specified in a written request given by
such Holder or Holders within thirty (30) days after receipt
of such written notice from the Company; provided that the
Company shall not be obligated to effect, or to take any
action to effect, any such registration pursuant to this
paragraph 9.3:
(A) after the Company has effected two
(2) such registrations pursuant to this
subparagraph 9.3(a) and such registrations
have been declared or ordered effective and
the sales of such Registrable Securities
shall have closed, provided, however, that
any such registration shall not be counted
as a registration for purposes of this
clause (A) if the securities of directors,
officers or Other Shareholders, if any,
included therein comprise greater than fifty
percent (50% ) of all securities included in
such registration unless the Holders have
been afforded the opportunity to sell all of
their Registrable Securities.
(B) prior to the time the Company has
consummated a public offering pursuant to an
effective registration statement under the
Securities Act or otherwise become a
reporting Company under the Exchange Act; or
(C) if the request for registration
does not request the registration of either
(i) thirty-three percent (33%) or more of
the Registrable Securities or (ii)
Registrable Securities with a proposed
public offering price of $500,000 or more.
Subject to the foregoing clauses (A), (B) and (C), the Company shall
file a registration statement covering the Registrable Securities so requested
to be registered as soon as practicable after receipt of the request or request
of the Initiating Holders.
The registration statement filed pursuant to the request of the
Initiating Holders may, subject to the provisions of subparagraph 9.3(b) below,
include other securities of the Company which are held by officers or directors
of the Company or which are held by parties who, by virtue of agreements with
the Company, are entitled to include their securities in any such registration.
(b) UNDERWRITING. If the Initiating Holders intend to
distribute the Registrable Securities covered by their request by means
of an underwriting, they shall so advise the Company as part of their
request made pursuant to this paragraph 9.3 and the Company shall
include such information in the written notice referred to in
subparagraph 9.3(a)(i) above. The right of any Holder to registration
pursuant to this paragraph 9.3 shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting (unless otherwise mutually
25
agreed by a majority in interest of the Initiating Holders and such
Holder) to the extent provided herein.
If officers or directors of the Company holding other securities of the
Company shall request inclusion in any registration pursuant to this paragraph
9.3, of if holders of securities of the Company who are entitled, by contract
with the Company, to have securities included in such registration (the "Other
Shareholders") request such inclusion, the Initiating Holders shall, on behalf
of all Holders, offer to include the securities of such officers, directors and
Other Shareholders in the underwriting and may condition such offer on their
acceptance of all applicable provisions of this Section 9. The Company shall
(together with all Holders, officers, directors and Other Shareholders proposing
to distribute their securities through such underwriting) enter into an
underwriting agreement in customary form with the representative of the
underwriter or underwriters selected for such underwriting by a majority in
interest of the Initiating Holders and reasonably acceptable to the Company.
Notwithstanding any other provision of this paragraph 9.3, if the
representative of the underwriter or underwriters advises the Initiating Holders
in writing that marketing factors make it advisable to impose a limitation on
the number of shares to be underwritten, the securities of the Company (other
than Registrable Securities) held by officers or directors of the Company and by
Other Shareholders shall be excluded from such registration to the extent so
required by such limitation and if a limitation of the number of shares is still
required, the Initiating Holders shall so advise all Holders of Registrable
Securities whose securities would otherwise be underwritten pursuant hereto, and
the number of shares of Registrable Securities that may be included in the
registration and underwriting shall be allocated among all such Holders in
proportion, as nearly as practicable, to the respective amounts of Registrable
Securities held by such persons at the time of filing the registration
statement. No Registrable Securities or any other securities excluded from the
underwriting by reason of the underwriter's marketing limitation shall be
included in such registration.
If any Holder of Registrable Securities, officer, director or Other
Shareholder above disapproves of the terms of the underwriting, such party may
elect to withdraw therefrom by written notice to the Company, the underwriter
and Initiating Holders. The securities so withdrawn shall also be withdrawn from
registration.
If the underwriter has not limited the number of Registrable Securities
or other securities to be underwritten, the Company may include its securities
for its own account in such registration if the underwriter so agrees and if the
number of Registrable Securities and other securities which would otherwise have
been included in such registration and underwriting will not thereby be limited.
9.4 REGISTRATION RIGHTS. In the event that the company grants or
has granted registration rights, including demand registration rights, to any
other holder of securities of the Company, the Company will promptly give to the
Holder written notice thereof and, if in the opinion of the Holder such
registration rights are more favorable than the registration rights provided
under this Agreement, the Holder shall so notify the Company within thirty (30)
days of the receipt of the foregoing notice of the Company, where upon such
registration rights shall automatically be deemed incorporated in this
Agreement.
26
9.5 EXPENSES OF REGISTRATION. The Company shall bear all
Registration Expenses incurred in connection with any registration,
qualification and compliance by the Company pursuant to Section 9.2 and 9.3
hereof All Selling Expenses shall be borne by the holders of the securities so
registered pro rata on the basis of the number of their shares, so registered.
9.6 REGISTRATION PROCEDURES. In the case of each registration
effected by the Company pursuant to this Section 9, the Company will keep each
Holder advised in writing as to the initiation of each registration and as to
the completion thereof The Company will, at its expense:
(a) keep such registration effective for a period of one
hundred twenty (120) days or until the Holder or Holders have completed
the distribution described in the registration statement relating
thereto, whichever first occurs;
(b) furnish such number of prospectuses and other
documents incident thereto as a Holder from time to time may reasonably
request; and
(c) use its best efforts to register or qualify the
Registrable Securities under the securities laws or blue-sky laws of
such jurisdictions as any Holder may request; provided, however, that
the company shall not be obligated to register or qualify such
Registrable Securities in any particular jurisdiction in which the
Company would be required to execute a general consent to service of
process in order to effect such registration, qualification or
compliance, unless the Company is already subject to service in such
jurisdiction and except as may be required by the Securities Act or
applicable rules or regulations thereunder.
9.7 INDEMNIFICATION.
(a) The Company, with respect to each registration,
qualification and compliance effected pursuant to this Section 9, will
indemnify and hold harmless each Holder, each of its officers,
directors, partners, and agents, and each party controlling such
Holder, and each underwriter, if any, and each party who controls any
underwriter, against all claims, losses, damages and liabilities (or
actions in respect thereof) arising out of or based on any untrue
statement (or alleged untrue statement of a material fact contained in
any prospectus, offering circular or other document (including any
related registration statement, notification or the like) incident to
any such registration, qualification or compliance, or based on any
omission ( or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading, or any violation by the Company of the
Securities Act or any rule or regulation thereunder applicable to the
Company and relating to action or inaction required of the Company in
connection with any such registration, qualification or compliance, and
will reimburse each such Holder, each of its officers, directors,
partners, and agents, and each party controlling such Holder, each such
underwriter and each party controlling such Holder, each such
underwriter and each party who controls any such underwriter, for any
legal and any other expenses incurred in connection with investigating
or defending any such claim, loss, damage, liability or action,
provided that the Company will not be liable in any such case to the
extent that any such claim, loss,
27
damage, liability or expense arises out of or is based on any untrue
statement or omission based solely upon written information furnished
to the Company by such Holder or underwriter, as the case may be, and
stated to be specifically for use in any prospectus, offering circular
or other document (including any related registration statement,
notification or the like) incident to any such registration,
qualification or compliance.
(b) Each Holder and Other Shareholder will, if
Registrable Securities held by him are included in the securities as to
which such registration, qualification or compliance is being effected,
indemnify and hold harmless the Company, each of its directors and
officers and each underwriter, if any, of the Company's securities
covered by such a registration statement, each party who controls the
Company or such underwriter, each other such Holder and Other
Shareholder and each of their respective officers, directors, partners,
and agents, and each party controlling such Holder or Other
Shareholder, against all claims, losses, damages and liabilities (or
actions in respect thereof) arising out of or based on any untrue
statement (or alleged untrue statement) of a material fact contained in
any such registration statement, prospectus, offering circular or other
document, or any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse the Company and
such Holders, Other Shareholders, directors, officers, partners,
agents, parties, underwriters or control persons for any legal or any
other expenses reasonably incurred in connection with investigating or
defending any such claim, loss, damage, liability or action, in each
case to the extent, but only to the extent, that such untrue statement
(or alleged untrue statement) or omission (or alleged omission) is made
in such registration statement, prospectus, offering circular or other
document solely in reliance upon and in conformity with written
information furnished to the Company by such Holder or Other
Shareholder and stated to be specifically for use in any prospectus,
offering circular or other document (including any related registration
statement, notification or the like) incident to any such registration,
qualification or compliance; provided, however, that the obligations of
such Holder and Other Shareholders hereunder shall be limited to an
amount equal to the proceeds to each such Holder and Other Shareholder
of securities sold as contemplated herein.
(c) Each party entitled to indemnification under this
Section 12.6 (the "Indemnified Party") shall give notice to the party
required to provide indemnification (the "Indemnifying Party") promptly
after such Indemnified Party has actual knowledge of any claim as to
which indemnify may be sought, and shall permit the Indemnifying Party
to assume the defense of any such claim or any litigation resulting
therefrom, provided that counsel for the Indemnifying Party, who shall
conduct the defense of such claim or any litigation resulting
therefrom, shall be approved by the Indemnified Party (whose approval
shall unreasonably be withheld), and the Indemnified Party may
participate in such defense at such party's expense (unless the
Indemnified Party shall have been advised by counsel that actual or
potential differing interests or defenses exist or may exist between
the Indemnifying Party and the Indemnified Party, in which case such
expense shall be paid by the Indemnifying Party), and provided further
that the failure of any Indemnified Party to give notice as provided
herein shall not relieve the Indemnifying Party of its obligations
under this Section 9. No Indemnifying Party, in the defense of any such
claim or litigation, shall, except with the consent of each Indemnified
28
Party, consent to entry of any judgment or enter into any settlement
which does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such Indemnified Party of a release from
all liability in respect to such claim or litigation. Each Indemnified
Party shall provide such information as may be reasonably requested by
an Indemnifying Party in order to enable such Indemnifying Party to
defend a claim as to which indemnity is sought.
9.8 INFORMATION BY HOLDER. Each Holder of Registrable Securities,
and each Other Shareholder holding securities included in any registration,
shall furnish to the Company such information regarding such Holder or Other
Shareholder as the Company may reasonably request in writing and as shall be
reasonably required in connection with any registration, qualification or
compliance referred to in this Section 9.
9.9 RULE 144 REPORTING. With a view to making available the
benefits of certain rules and regulations of the Commission which may permit the
sale of the Registrable Securities to the public without registration, the
Company agrees to:
(a) Make and keep public information available, as the
terms are understood and defined in Rule 144 under the Securities Act,
at all times from and after ninety (90) days following the effective
date of the first registration under the Securities Act filed by the
Company for an offering of its securities to the general public;
(b) Use its best efforts to file with the Commission in a
timely manner all reports and other documents required of the Company
under the Securities Act and the Securities Exchange Act of 1934, as
amended (the "Exchange Act") at any time after it has become subject to
such reporting requirements; and
(c) So long as the Holder owns any Registrable
Securities, furnish to the Holder forthwith upon request a written
statement by the Company as to its compliance with the reporting
requirements of Rule 144 (at any time from and after ninety (90) days
following the effective date of the first registration statement in
connection with an offering of its Securities to the general public),
and of the Securities Act and the Exchange Act (at any time after it
has become subject to such reporting requirements), a copy of the most
recent annual or quarterly report of the Company, and such other
reports and documents so filed as the Holder may reasonably request in
availing itself of any rule or regulation of the Commission allowing
the Holder to sell any such securities without registration.
SECTION 10: DEFINITIONS
As used in this Agreement, capitalized terms shall have the respective
meanings set forth in this Agreement or set forth below or in the Section of
this Agreement referred to below:
ACCREDITED INVESTOR - shall have the meaning set forth in Regulation D
under the Securities Act.
AFFILIATE - a person (other than a subsidiary or the Purchaser) (1)
which directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common
29
control with, the Company, (2) which beneficially owns or holds 5% or more of
any class of the voting stock of the Company or (3) 5% or more of the voting
stock (or in the case of a person which is not a corporation, 5% or more of the
equity interest) of which is beneficially owned or held by the Company or one of
its subsidiaries. The term "control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of a person, whether through the ownership of voting securities, by
contract or otherwise.
AGGREGATE MARKET VALUE - shall mean on any date (i) the Current Market
Value (as hereinafter defined) on such date of each share of Common Stock held
by the Purchaser and subject to a Notice of Put and (ii) if, at any time prior
to the termination of the right of the Purchaser to exercise the Put (as
hereinafter set forth), a registration statement under the Securities Act of
1933, as amended, has been declared effective covering the offering and sale of
securities of the Company, the difference between (A) the Current Market Value
on such date of the shares of Common Stock purchasable upon exercise of the
Warrant and covered by a Notice of Put and (B) the aggregate exercise price to
purchase such shares of Common Stock upon exercise of the Warrant. The term
"CURRENT MARKET VALUE" on any date shall be:
(a) if the Common Stock is not traded in such manner that
the quotations referred to in clause (b) below are available for the
period required hereunder, the value determined in good faith by the
Board of Directors of the Company or, if such determination cannot be
made or is reasonably objected to by the Purchaser within twenty (20)
days of its notification thereof, by a nationally recognized
independent investment banking firm (which has no past or present
relationship with the Company or the Purchaser) selected in good faith
by the Board of Directors of the Company, or if such selection cannot
be made or is reasonably objected to by the Purchaser within twenty
(20) days of its notification thereof, by a nationally recognized
independent investment banking firm selected by the American
Arbitration Association in Hartford Connecticut in accordance with its
rules;
(b) the average of the daily closing prices for the 30
consecutive business days ending no more than 15 .business days before
the day in question (as adjusted for any stock dividend, split,
combination or reclassification that took effect during such 30
business day period). The closing price for each day shall be the last
reported sales price regular way or, in case no such reported sales
took place on such day, the average of the last reported bid and asked
prices regular way, in either case on the principal national securities
exchange on which the Common Stock is listed or admitted to trading (or
if the Common Stock is not at the time listed or admitted for trading
on any such exchange, then such price as shall be equal to the average
of the last reported bid and asked prices, as reported by the National
Association of Securities Dealers Automated Quotations System
("NASDAQ") on such day, or if, on any day in question, the security
shall not be quoted on the NASDAQ, then such price shall be equal to
the average of the last reported bid and asked prices on such day as
reported by The National Quotation Bureau Incorporated or any similar
reputable quotation and reporting service, if such quotation is not
reported by The National Quotation Bureau Incorporated).
BALANCE SHEET - Section 3.7.
30
CERTIFICATE OF NON-RELOCATION - Section 5.8.
CHANGE OF CONTROL - shall mean if(1) the Company consolidates or merges
with or into another corporation, or conveys all or substantially all its assets
to another corporation, unless, upon consummation of any consolidation or merger
or a sale of assets, the holders of voting securities of the Company are
directly or indirectly greater than fifty percent (50%) of the voting power
needed to elect directors of the consolidated or surviving or acquiring
corporation, or (2) another person or entity not a stockholder of the Company on
the date hereof acquires Common Stock (or securities convertible into Common
Stock or exercisable thereof) representing more than 50 percent of the Company's
outstanding Common Stock (on a fully diluted basis).
CHRO - Section 7.17.
CLOSING(S) - Section 2.1.
CLOSING DATE(S) - Section 2.1.
CODE - the Internal Revenue Code of 1986, as amended.
COMMON STOCK- Section 1.1.
CONNECTICUT PRESENCE - Section 7.15.
CONTRACTS - Section 3.6
ERISA shall mean the Employee Retirement Income Security Act of 1974,
as amended from time to time.
EXCHANGE ACT shall mean the Securities Exchange Act of 1934, as amended
from time to time.
FINANCING DOCUMENTS - shall mean this Agreement, the Warrant, the
Offering Memorandum, and all other documents set forth in any of the other
Schedules and Exhibits hereto (other than Exhibit D), under which, upon
execution thereof, the Company or any Related Party shall have any obligation to
the Purchaser, all in the respective forms thereof as executed and as amended
from time to time.
INTELLECTUAL PROPERTY - Section 3.16.
INVESTMENT - shall mean the purchase of the Shares and Warrant by
Purchaser for an aggregate price of $150,000, plus any sums paid by Purchaser to
Company to exercise its rights to purchase the Warrant Shares under the Warrant.
KEY EMPLOYEES shall mean any employee who makes or has made a material
contribution to the Technology owned by the Company and/or to its marketing
and/or to its management.
LISTED RIGHTS - Section 3.16.
NOTICE OF PUT - Section 8.2.
31
OFFERING MEMORANDUM - Section 3.1
PUT - Section 8.1. The term "Put", when used as a verb, shall also mean
the Purchaser's exercise of the Put.
PUT DATE - shall mean the date on which a Notice of Put is given in
accordance with this Agreement.
PUT PRICE - shall mean the greater of (i) the amount of the Investment
plus an amount calculated to yield to the Purchaser a compounded rate of return
of twenty-five percent (25%) per annum on the Investment, or (ii) the Aggregate
Market Value on the Put Date.
RELATED PARTY - any officer, director, significant employee or
consultant of the Company or any holder of 5% or more of any class of capital
stock of the Company other than the Purchaser or any member of the immediate
family of any such officer, director, employee, consultant or shareholder or any
entity controlled by any such officer, director, employee, consultant or
shareholder or a member of the immediate family of any such officer, director,
employee, consultant or shareholder.
SCHEDULE OF EXCEPTIONS/DISCLOSURE - shall mean Schedule I attached
hereto.
SECURITIES - shall mean the Shares, the Purchase's rights under the
Warrant, and any shares of Common Stock received upon exercise of the Warrant
(including in each case any securities in respect of the foregoing received upon
any stock dividend, stock split or similar event).
SECURITIES ACT - shall mean the Securities Act of 1933, as amended from
time to time.
SHARES - Section 1.1.
TECHNOLOGY - Section 3.16(c).
WARRANT - Section 1.1.
WARRANT SHARES shall mean, at any time, shares of Common Stock (i)
issued and then outstanding upon exercise of the Warrant, (ii) issuable upon
exercise of the Warrant, and (iii) issued and then outstanding or issuable in
respect of the Common Stock referred to in clauses (i) and (ii) of this
definition upon any stock split, stock dividend, recapitalization or similar
event.
100% SUBSIDIARY shall mean an entity all of the capital stock or other
ownership interests in which are owned directly or indirectly by the Company.
SECTION 11: MISCELLANEOUS
11.1 GOVERNING LAW. This Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the State of Connecticut.
32
11.2 SURVIVAL. The representations, warranties, covenants and
agreements made herein shall survive the Closings and any investigation made by
the Purchaser.
11.3 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors and assigns of the parties hereto; provided, however, that
the Company may not assign its rights hereunder.
11.4 ENTIRE AGREEMENT; AMENDMENT. This Agreement (including the
Schedules and Exhibits hereto) and the other documents delivered pursuant hereto
constitute the full and entire understanding and agreement between the parties
with regard to the subjects hereof and thereof. Except as otherwise expressly
provided herein neither this Agreement nor any term hereof may be amended,
waived, discharged or terminated, except by a written instrument signed by
Company and Purchaser.
11.5 RIGHTS AND OBLIGATIONS UNDER OTHER AGREEMENTS. Nothing
contained herein shall be intended or construed to detract from or modify,
change, amend, or terminate the rights and obligations of the parties under any
other agreement or promissory note including, without limitation, a loan
agreement and consolidated promissory note dated June 15, 1992.
11.6 NOTICES, ETC..
(a) All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by
first-class, registered or certified mail, postage prepaid, or
delivered either by hand or by messenger, or sent via telecopier,
computer mail or other electronic means, addressed (a) if to the
Purchaser, at ▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇, Attention
▇▇▇▇▇ ▇. Driver, Executive Director, or at such other address as the
Purchaser shall have furnished to the Company in writing, or (b) if to
any other holder of any Shares or Warrant, at such address as such
holder shall have furnished to the Company in writing, or, until any
such holder so furnishes an address to the Company, then to and at the
address of the last holder thereof who has so furnished an address to
the Company, or (c) if to the Company, at ▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇,
▇▇▇ ▇▇▇▇▇, ▇▇, ▇▇▇▇▇, to the attention of the President or at such
other address as the Company shall have furnished to the Purchaser and
each such other holder in writing.
(b) Any notice or other communications so addressed and
mailed, postage prepaid, by registered or certified mail (in each case,
with return receipt requested) shall be deemed to be given when so
mailed. Any notice so addressed and otherwise delivered shall be deemed
to be given when actually received by the addressee.
11.7 DELAYS OR OMISSIONS. No delay or omission to exercise any
right, power or remedy accruing to any holder of any Shares, Warrant or
Warrant Shares, upon any breach or default of the Company under this
Agreement or any of the other Financing Documents, shall impair any such
right, power or remedy of such holder nor shall it be construed to be a
waiver of any such breach or default, or an acquiescence therein, or of or in
any similar breach or default thereafter occurring; nor shall any waiver of
any single breach or default be deemed a waiver of any other breach or
default theretofore or thereafter occurring. Any waiver, permit, consent or
approval of any kind or character on the part of any holder of any breach or
default under this
33
Agreement, or any waiver on the part of any holder of any provisions or
conditions of this Agreement must be made in writing and shall be effective
only to the extent specifically set forth in such writing. All remedies,
either under this Agreement or any of the other Financing Documents or by law
or otherwise afforded to any holder, shall be cumulative and not alternative.
11.8 SEPARABILITY. In case any provision of this Agreement shall
be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.
11.9 AGENT'S FEES AND SERVICES.
The Company represents and warrants that neither it nor any subsidiary
has retained any finder or broker or other person or firm in connection with the
transactions contemplated by this Agreement. The Company accepts sole
responsibility for and agrees to pay all agent's fees to any broker, finder or
other person or firm claiming the right to receive compensation of any sort in
connection with the transactions contemplated herein. In addition, the Company
hereby agrees to indemnify and to hold the Purchaser harmless of and from any
liability for any commission or compensation in the nature of an agent's fee to
any broker, finder or other person or firm (and the costs and expenses of
defending against such liability or asserted liability) claiming the right to
receive compensation of any sort arising from any act by the Company or any of
its employees or representatives.
11.10 LEGAL FEES AND EXPENSES. The Company shall bear its own
expenses and legal fees incurred on its behalf with respect to this Agreement
and the transactions contemplated hereby, whether or not a closing takes place.
On the Closing Date (or if no closing shall take place, within thirty (30) days
of receiving any statement or invoice therefor), the Company will pay the
reasonable legal fees and out-of-pocket expenses of the Purchaser and special
counsel to the Purchaser with respect to this Agreement and the transactions
contemplated hereby. The Company shall also pay the reasonable legal fees and
the fees of experts and consultants engaged by the Purchaser incurred with
respect to the enforcement of any of the Financing Documents and/or with respect
to responding to any request made by the Company for the consent of the
Purchasers to any action that the Company wishes to take that is either barred
under terms of any Financing Document or requires the consent of the Purchaser
therefor.
11.11 TRIAL BY JURY. THE COMPANY HEREBY WAIVES ITS RIGHT TO CLAIM A
TRIAL BY JURY WITH RESPECT TO ANY ACTION BY OR AGAINST PURCHASER ARISING
HEREUNDER.
11.12 WAIVER. THE COMPANY ACKNOWLEDGES THAT THE TRANSACTION OF WHICH
THIS AGREEMENT IS A PART IS A COMMERCIAL TRANSACTION, AND TO THE EXTENT ALLOWED
UNDER CONNECTICUT GENERAL STATUTES SECTION 52-278a TO 52-278g INCLUSIVE, OR BY
ANY OTHER APPLICABLE LAW, STATE OR FEDERAL, HEREBY WAIVES ITS RIGHTS TO NOTICE
AND HEARING WITH RESPECT TO ANY PREJUDGEMENT REMEDY WHICH ANY PURCHASER, AND/OR
THE SUCCESSORS OR ASSIGNS OF ANY PURCHASER MAY DESIRE TO USE.
34
11.13 TITLES AND SUBTITLES. The titles of the sections and
subsections of this Agreement are for convenience or reference only and are
not to be considered in construing this Agreement.
11.14 COUNTERPARTS. This Agreement may be executed in
counterparts, each of which when so executed and delivered shall constitute a
complete and original instrument but all of which together shall constitute
one and the same agreement, and it shall not be necessary when making proof
of this Agreement or any counterpart thereof to account for any other
counterpart.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers as
of the day and year first written above.
COMPANY:
BIOS LABORATORIES, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇
------------------------------------
Title: Secretary and Treasurer
---------------------------------
PURCHASER:
CONNECTICUT INNOVATIONS, INCORPORATED
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
------------------------------------
Title President and Executive Director
---------------------------------
35
SCHEDULE I
SCHEDULE OF EXCEPTIONS/DISCLOSURES
SCHEDULE I
SECTION 3.4
SCHEDULE OF EXCEPTIONS/DISCLOSURES - SECTION 3.4
OUTSTANDING PREEMPTIVE OR OTHER PREFERENTIAL RIGHTS, CONVERSION RIGHTS
OR OTHER RIGHTS, OPTIONS, WARRANTS OR AGREEMENTS GRANTED OR ISSUED BY
OR BINDING UPON THE COMPANY FOR THE PURCHASE OR ACQUISITION OF ANY
SHARES OF ITS CAPITAL STOCK
The company (has) (intends to adopt) a plan to offer stock options for
up to ~ shares of its Common Stock to officers, key employees, directors (other
than directors who also are employees) and outside consultants and scientific
advisors.** The plan will be administered by a committee appointed by the Board
of Directors of the Company. This committee will be authorized to select the
persons who will receive stock options and the number of options each will
receive. Employees of the Company will be eligible for incentive stock options
and non-qualified stock options under the plan, while non-employee directors and
consultants will be eligible only for non-qualified stock options. The option
price for incentive stock options may not be less than the fair market value of
the underlying stock at the time of the grant. The option price for
non-qualified stock options will be determined by the committee and may be lower
than the fair market value. As of the date hereof, no options have been granted.
Connecticut Innovations, Inc. holds warrants entitling it to purchase
an aggregate of 2,520 shares of Common Stock at an exercise price of $102.12 per
share. The number of shares which may be purchased and the exercise price are
subject to antidilution provisions.
Technology Investment Fund, Inc. holds warrants entitling it to
purchase an aggregate of 418 shares of Common Stock at an exercise price of
$102.12 per share. The number of shares which may be purchased and the exercise
price are subject to customary anti-dilution provisions.
All of these warrants also contain certain "piggyback" registration
rights and, if granted to the holder of any other securities of the Company,
comparable demand registration rights.
Under certain circumstances, the holders of these warrants may require
the Company to repurchase the warrants at a price to be determined in an
appraisal proceeding if the Company and the holder of the warrant are unable to
agree upon the repurchase price.
* 2,035
** The Company intends to increase the number of shares subject to the Plan
to 4,070.
The Company has entered into shareholder agreements with each of its
stockholders, who was an employee or consultant at the time of issue, other than
▇▇. ▇▇▇▇▇ and ▇▇. ▇▇▇▇▇, which gives the Company the right to purchase the stock
owned by such stockholder upon termination of his employment with the Company at
a price equal to the original purchase price of the shares
adjusted upwards for years of service with the Company and creates a right of
first refusal in favor of the Company upon the sale or other disposition of any
of such stock.
▇▇. ▇▇▇▇▇ and ▇▇. ▇▇▇▇▇ have entered into a Cross Purchase Agreement
which gives each person the right to purchase the stock owned by the other
person upon termination of his employment with the Company for any reason other
than death and creates a right of first refusal in favor of each person upon the
sale or other disposition of any of such stock. The Agreement will terminate in
certain events, including the occurrence of an initial public offering of any
common stock of the Company, upon the sale of all or substantially all of the
assets of the Company, or upon the death of either person.
SCHEDULE I
SECTION 3.4
SCHEDULE OF EXISTING SHAREHOLDERS
SHAREHOLDER NUMBER OF SHARES
1. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ 9,400
2. ▇▇▇▇▇ ▇. ▇▇▇▇▇ 4,400
3. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ 1,000
4. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ 1,000
5. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ 600
6. ▇▇▇▇▇▇ 14. ▇▇▇▇▇▇▇▇ ▇▇▇
▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ 600
8. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ 300
9. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ 300
10. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ 182
11. A. ▇▇▇▇▇▇ ▇▇▇▇▇▇ 182
12. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ 364
13. ▇▇▇▇▇▇ ▇▇▇▇▇ 182
------
19,110
14. Reserved for Issuance to new shareholders
(Yale University, ▇. ▇▇▇▇▇▇▇▇, and Dr. Ezzidden) 546
--------
19,656
SCHEDULE I
SECTION 3.6
SCHEDULE OF CONTRACTS
1. Contract between Microbiological Associates, Inc. and BIOS Laboratories
Inc.
2. Promissory Note between ICF, Inc. and BIOS Laboratories, Inc.
3. Contract between FMC Corporation and BIOS Laboratories, Inc.
4. Notice of Grant Award from National Institutes of Health to BIOS
Laboratories, Inc. Grant # 1 R43 GM50658-0l.
5. Notice of Grant Award from National Institutes of Health to BIOS
Laboratories, Inc. Grant # 9 R44 A134950-02.
6. Employment agreement between ▇▇▇▇▇ ▇. ▇▇▇▇▇ and BIOS Laboratories, Inc.
7. Employment Agreement between ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ and BIOS Laboratories,
Inc.
8. See Schedule I, Section 3.15 also.
SCHEDULE I
SECTION 3.12
LITIGATION
The following two cases are pending where BIOS Laboratories, Inc. is a
party:
1. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ v. BIOS Laboratories, Inc. (Sexual Discrimination
Claim)
2. ▇▇▇▇▇▇ ▇▇▇▇▇ v. BIOS Laboratories, Inc. (Claim for approximately $8,000
deferred compensation)
SCHEDULE I
SECTION 3.14
LIENS
The following are liens held on BIOS Laboratories, Inc. property:
--------------------------------------------------------------------------------
FINANCING STATEMENT NUMBER SECURED PARTY
--------------------------------------------------------------------------------
817367 Shawmut Bank Boston, MA
--------------------------------------------------------------------------------
817327 Connecticut Product Development
Corporation, Hartford, CT
--------------------------------------------------------------------------------
1003141 ICF Incorporated, Fairfax VA
--------------------------------------------------------------------------------
0995947 Technology Investment Fund, Inc.,
New Haven, CT
--------------------------------------------------------------------------------
961521 Connecticut Innovations, Incorporated,
Rocky Hill, CT
--------------------------------------------------------------------------------
SCHEDULE I
SECTION 3.15
LEASE
Lease between Science Park Development Corporation and BIOS Laboratories, Inc.
--------------------------------------------------------------------------------
LEASED PREMISES: Real property located at Science Park, New Haven,
Connecticut. BIOS Laboratories, Inc. shall lease from
Science Park Development Corporation part of Building
5, known as Suite 2110 consisting of approximately
5,929.40 square feet.
--------------------------------------------------------------------------------
TERM: The "term" shall commence on December 1, 1993 and will
expire on the 5th anniversary of the 21st day of
December 1993.
--------------------------------------------------------------------------------
RENT: BIOS Laboratories, Inc. shall pay to Science Park
Development Corporation a Basic Annual Rent in the
amount of $60,835.64 per year for the first year; and
$64,630.46 per year for the second and third years; and
$53,364.60 for the fourth and fifth years. The Basic
Annual Rent shall be increased by 5% on January 1, 1995
and will increase by 5% on January 1, 1997.
--------------------------------------------------------------------------------
SCHEDULE I
SECTION 3.16
SCHEDULE OF PATENTS
1. U.S. Patent No. 4,670,119, issued June 2, 1987, by ▇▇▇▇▇▇▇ ▇. ▇▇▇▇ et
al., for ISOELECTRIC FOCUSING DEVICE AND PROCESS (Attorney's Docket No.
85-164)
2. U.S. Patent No. 4,795,541, issued January 3, 1989, by ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
et al., for METHOD AND APPARATUS FOR MOLDING THIN GET SLABS
HORIZONTALLY WITH INTEGRALLY MOLDED LARGE VOLUME SAMPLE ▇▇▇▇▇
(Attorney's Docket No. 86-370)
3. U.S. Patent No. 4,818,360, issued April 4, 1989, by ▇▇▇▇▇▇▇ ▇. ▇▇▇▇ et
al., for METHOD AND APPARATUS FOR BLOTTING FROM ELECTROPHORESIS GELS
(Attorney's Docket No. 87-237)
4. U.S. Patent No. 4,812,216, issued March 14, 1989, by ▇▇▇▇▇▇▇ ▇. ▇▇▇▇ et
al., for METHOD OF HANDLING AND TRANSPORTING A TRANSFER MEMBRANE USED
IN A BLOTTING APPARATUS (Attorney's Docket No. 87-261)
5. U.S. Patent No. 4,909,977, issued March 20, 1990, by ▇▇▇▇▇▇▇ ▇. ▇▇▇▇ et
al., for METHOD FOR MOLDING THIN GEL SLABS HORIZONTALLY WITH INTEGRALLY
MOLDED LARGE VOLUME SAMPLE ▇▇▇▇▇ (Attorney's Docket No. 88-348)
6. U.S. Patent No. 4,913,791, issued April 3, 1990, by ▇▇▇▇▇▇▇ ▇. ▇▇▇▇ et
al., for BLOT FRAME AND METHOD OF HANDLING (Attorney's Docket No.
89-143)
7. U.S. Patent No. 4,732,656, for APPARATUS AND PROCESS FOR RESOLVING
SAMPLE SPECIES (Attorney's Docket No. 87-175)
8. U.S. Patent Application Serial No. 594,288, filed October 9, 1990, by
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, for IMPROVED METHOD FOR PROBE DETECTION (Attorney's
Docket No. 89-385)
9. U.S. Patent Application Serial No. 63-21476, for METHOD OF HANDLING AND
TRANSPORTING A TRANSFER MEMBRANE USED IN A BLOTTING APPARATUS
(Attorney's Docket No. ▇▇-▇ ▇▇ (▇▇▇))
▇▇. U.S. Patent Application Serial No. 88-40214, for METHOD OF HANDLING AND
TRANSPORTING A TRANSFER MEMBRANE USED IN A BLOTTING APPARATUS
(Attorney's Docket No. 87-261 (EPC))
11. U.S. Patent Disclosure filed for PRIMER UNDIMER METHODOLOGY FOR IN
VITRO AMPLIFICATION OF VERY DILUTE DNA SAMPLES (Attorney's Docket No.
90-120)
SCHEDULE I
SECTION 3.16
SCHEDULE OF TRADEMARKS
1. TINEFRANE-Registered Trademark-, U.S. Registration No. 1,571,468,
registered on December 19, 1989
2. BIOS-Registered Trademark-, U.S. Registration No. 1,648,603, registered
on June 25, 1991
3. BIOSLINK-Registered Trademark-, U.S. Registration No. 1,655,339,
registered on September 3, 1991
4. OPTITAQ-Registered Trademark-, U.S. Registration No. 1,667,165,
registered on December 3, 1991
5. EVO-Registered Trademark-, U.S. Registration No. 1,649,868, registered
on July 9, 1993
6. BIOSYCLER-Registered Trademark-, U.S. Registration No. 1,646,728,
registered on June 4, 1991
7. PCRABLE, U.S. Trademark Application Serial No. 069,413, filed on June
15, 1990
SCHEDULE I
Section 7.19 - Existing or Proposed Option Plans
See Schedule I, Section 3.4
SCHEDULE II
SCHEDULE OF KEY EMPLOYEES AND CONSULTANTS OF THE COMPANY
1. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ - President
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
2. ▇▇▇▇▇ ▇. ▇▇▇▇▇ - Treasurer
▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
SCHEDULE III
OFFERING MEMORANDUM
BIOS LABORATORIES, INC.
▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
SUPPLEMENT NO. 1 TO
CONFIDENTIAL OFFERING MEMORANDUM
DATED AUGUST 27, 1993
The Confidential Offering Memorandum of BIOS Laboratories, Inc. (the
"Company"), dated August 27, 1993, is supplemented as follows:
The Company's address is now: ▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇.
The Company is no longer a Subchapter `5' corporation; it is now a
Subchapter `C' corporation for tax purposes under the Internal Revenue Code.
December 21, 1993
CONFIDENTIAL OFFERING MEMORANDUM Copy No. -
BIOS LABORATORIES, INC.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
---------------------------------
2,184 Shares of Common Stock
Purchase Price Per Share $137.36
Minimum Subscription $25,000 for 182 Shares
---------------------------------
The Company is engaged in the business of developing and marketing
biological products and services and laboratory equipment for sale to
governmental entities, universities, other nonprofit entities and
pharmaceutical companies engaged in molecular genetics research. The Company
also engages in research relating to the cloning and characterization of
genes believed to be of commercial value.
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATES AND
ARE BEING OFFERED AND SOLD IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION
REQUIREMENTS OF SAID ACT AND SUCH LAWS. SUCH SECURITIES ARE SUBJECT TO
RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR
RESOLD EXCEPT AS PERMITTED UNDER SAID ACT AND SUCH LAWS PURSUANT TO
REGISTRATION OR EXEMPTION THEREFROM. THE SECURITIES OFFERED HEREBY HAVE NOT
BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION, ANY
STATE SECURITIES COMMISSION OR OTHER REGULATORY AUTHORITY, NOR HAVE ANY OF
THE FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE MERITS OF THIS OFFERING
OR THE ACCURACY OR ADEQUACY OF THIS MEMORANDUM. ANY REPRESENTATION TO THE
CONTRARY IS UNLAWFUL.
INVESTMENT IN THE SHARES OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. SEE
"RISK FACTORS".
August 27, 1993
THIS OFFERING MEMORANDUM HAS BEEN PREPARED ON A CONFIDENTIAL BASIS
SOLELY FOR THE BENEFIT OF SELECTED QUALIFIED ACCREDITED INVESTORS IN
CONNECTION WITH THE PRIVATE PLACEMENT OF SECURITIES OF THE COMPANY. IT IS NOT
TO BE REPRODUCED OR REDISTRIBUTED.
----------------------------------
THIS MEMORANDUM SHALL, UNDER NO CIRCUMSTANCES, CONSTITUTE AN OFFER
TO SELL OR SOLICITATION OF AN OFFER TO PURCHASE, NOR SHALL THERE BE ANY OFFER
OR SALE, OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION IN WHICH SUCH
OFFER, SOLICITATION, PURCHASE OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION
OR QUALIFICATION UNDER THE SECURITIES LAWS OF SUCH JURISDICTION.
----------------------------------
INVESTORS SHOULD NOT CONSTRUE THE CONTENTS OF THIS MEMORANDUM OR ANY
COMMUNICATION FROM THE COMPANY REGARDING THE INVESTMENT CONTEMPLATED BY THIS
MEMORANDUM, WHETHER WRITTEN OR ORAL, AS LEGAL, TAX, ACCOUNTING, INVESTMENT OR
OTHER EXPERT ADVICE. EACH INVESTOR SHOULD CONSULT HIS OWN COUNSEL,
ACCOUNTANT, AND OTHER PROFESSIONAL ADVISORS AS TO LEGAL, TAX, ACCOUNTING,
FINANCIAL AND RELATED MATTERS CONCERNING THE INVESTMENT.
--------------------------------
This page ends here.
EXHIBIT A - Charter and By-Laws of the Company
EXHIBIT B - Subscription Agreement
EXHIBIT C - Catalogue and Glossary of Terms
EXHIBIT D - Unaudited Financial Statements for 1992 and the 6-month period
ending 6/30/93
THE COMPANY
BIOS Laboratories, Inc. ("BIOS" or the "Company"), a Delaware
corporation, is engaged in the business of developing and marketing
biological products and services and laboratory equipment for sale to
governmental entities, universities, other nonprofit entities and
pharmaceutical companies engaged in molecular genetics research. Purchasers
use these products and services to study the organization and function of
genes in normal and diseased states, often with a view toward securing
proprietary rights to and commercially exploiting genes of importance to
human health. The Company also engages in research relating to the cloning
and characterization of genes believed to be of commercial value. See
"DESCRIPTION OF BUSINESS".
The Company's offices are located at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ and its telephone number is (▇▇▇) ▇▇▇-▇▇▇▇. A copy of the
Company's certificate of incorporation and bylaws accompany this Offering
Memorandum as Exhibit A.
The business of the company was acquired in 1991 from a predecessor
corporation (whose name was BIOS Corporation) organized by ▇▇. ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇ and others in 1986. ▇▇. ▇▇▇▇▇ is President of the Company and ▇▇. ▇▇▇▇▇
▇▇▇▇▇ is its Chief Financial Officer. Messrs. ▇▇▇▇▇ and Rakin are also the
sole directors of the Company and its principal shareholders.
TERMS OF THE OFFERING
The Company is offering hereby to sell 2,184 shares of its Common
Stock, par value S, 001 per share (the "Common Shares"), to a limited number
of investors who qualify as "accredited investors" under Regulation D of the
Rules and Regulations of the Securities and Exchange Commission. The criteria
for "accredited investors" are set forth in the form of subscription
agreement for the Common Shares included with this Memorandum as Exhibit B
(the "Subscription Agreement").
The offering of the Common Shares hereunder will not be registered
under federal or state securities laws and, accordingly, the Common Shares
offered hereby may not be resold unless a registration statement with respect
to the Common Shares is effective or an exemption from such registration is
available. Common Shares will also be subject to certain restrictions on
transfer described below.
Investment in the Common Shares is suitable only for purchasers who
have no need for liquidity with respect to their investment, have such
knowledge and experience as to be capable of evaluating their investment and
who are capable of bearing the risk of the entire loss of their investment.
Each subscriber for Common Shares will be required to enter into a
Subscription Agreement with BIOS in the form included with this Memorandum as
Exhibit B. Each Subscription Agreement will contain, among other things,
representations and warranties by the subscriber that he or she is an
"accredited investor" (as described in the Subscription Agreement)
and that the subscriber is acquiring the Common Shares for investment and not
with a view to the distribution thereof.
Each Subscription Agreement will also contain restrictions on the
transfer of the Common Shares by the subscriber giving the Company a right of
first refusal with respect to all of the Common Shares offered hereby. This
right of first refusal will require each subscriber to notify the Company of
any proposed sale, transfer, assignment, pledge or other disposition (a
"Transfer") of any of the Common Shares and of the terms and price of such
intended Transfer. The Company may then elect to purchase the Common Shares
subject to the proposed Transfer upon the terms and price given in the notice
to the Company from the subscriber.
Any transfer of Common Shares will also be subject to compliance
with applicable state and federal securities laws. All certificates for
Common Shares will bear an appropriate legend indicating the restrictions on
transfer contained in the Subscription Agreement.
Subscriptions for the Common Shares offered hereby may be made only
by completing and signing the Subscription Agreement and returning it to the
Company no later than September 30, 1993 or such later date prior to January
1, 1994 as may be established by the Company. The Company will not accept
subscriptions for less than 182 Common Shares, but reserves the right to
waive this requirement. The purchase price for the Common Shares must
accompany the Subscription Agreement and must be paid by check, bank draft,
or money order payable in United States currency to the order of BIOS
Laboratories, Inc. There is no requirement that any minimum number of Common
Shares be sold as a condition to the acceptance of subscriptions by the
Company.
The Company may reject all or any part of a subscription in its sole
discretion. If a subscription is rejected in whole or in part for any reason,
the subscription amounts rejected will be promptly repaid without interest.
Each prospective investor and his or her advisor may inquire about
any aspect of this offering, and will be afforded the opportunity to obtain,
and are encouraged to request, additional information, to the extent the
Company possesses such information or can acquire it without unreasonable
effort and expense. All requests for additional information should be
directed to the Company.
The Common Shares will be offered by the Company through its
officers, directors and employees and no selling fees or commissions will be
paid.
RISK FACTORS
The Common Shares offered hereby are highly speculative, involve a
high degree of risk and should be purchased only by sophisticated investors
who can afford to lose their entire investment. The following risk factors
should be considered carefully by prospective investors before making an
investment. Each prospective investor also should consult his own legal, tax
and financial advisor with respect to these risks and the suitability of his
making an investment in the Company.
ABSENCE OF ANY MARKET: LACK OF LIQUIDITY
There is no public market for the Common Shares and it is not
expected that any market will develop in the foreseeable future.
Consequently, if any investor needs to sell his Common Shares, he may find it
impossible to make such a sale and therefore should be prepared to hold his
Common Shares for an indefinite period.
RESTRICTIONS ON TRANSFER OF COMMON SHARES
The Common Shares offered hereby have not been registered under
state or federal securities laws. Accordingly, the Common Shares may not be
resold in the absence of an effective registration statement for or an
available exemption under such laws. The Company is under no obligation to,
and has no intention to, register the Common Shares or comply with an
exemption from registration so as to permit any resale. In addition, the
Subscription Agreement restricts the transfer of the Common Shares. See
"TERMS OF THE OFFERING."
HISTORY OF LOSSES: NEED FOR ADDITIONAL FUNDING
The Company has experienced operating losses since its inception and
expects to incur additional operating losses for the foreseeable future.
There can be no assurance that the Company can achieve profitability or that
the capital raised through this offering will be sufficient to satisfy the
Company's capital requirements in the near future.
Achievement by the Company of its objectives and its ability to
continue in business may depend upon its ability to raise substantial
additional funds to finance the expenses of its operations. There can be no
assurance that such additional funding can be obtained on acceptable terms or
at all, and if it can be obtained, what form or forms it may take. Any number
of factors, including prevailing market conditions and the Company's
performance could significantly affect or preclude the Company's obtaining
additional funding on terms acceptable to it, or cause the Company to change
materially, or abandon its business plan, or cease its operations.
DEPENDENCE UPON KEY PERSONNEL
The Company's continued operations are dependent on the active
participation of its officers and other key personnel. See "Management". The
loss of the services of any of these people could adversely affect the
conduct of the Company's business.
In addition, because of the nature of its business, the Company will
be dependent upon its ability to attract and retain additional qualified
management and scientific, marketing and sales personnel. There is
significant competition for such personnel, and there is no assurance that
the Company will be successful in recruiting and retaining such personnel.
COMPETITION
There are many companies, both public and private, engaged in
developing biological products for scientists conducting molecular biology
research. Many of these companies have substantially greater capital,
research and development, manufacturing, marketing, human
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resources and experience than BIOS and represent significant long-term
competition for BIOS. Such companies may succeed in developing products that are
more effective and less costly than those developed by BIOS in production and
marketing. See "Description of Business -Competition".
PATENT AND LICENSE UNCERTAINTIES
Because of the expense and length of time associated with bringing new
products to the marketplace, the biotech industry has traditionally placed
considerable importance on obtaining patents. Proprietary rights relating to the
products of the Company will be protected from unauthorized use by third parties
only to the extent that they are covered by enforceable patents or are
maintained in confidence as trade secrets. There can be no assurance that any
patent applications covering BIOS products will be successfully filed or that
any filed applications will result in issued patents.
NO DIVIDENDS
The Company has never paid any dividends on its Common Stock and does
not anticipate that dividends will be declared on the Common Stock in the
foreseeable future.
DILUTION
Prior to this offering, the outstanding 18,200 shares of common stock
of the Company had a negative tangible book value of $30.64 per share. Following
the sale of the Common Shares offered hereby at a price of $137.36 per share,
the negative tangible book value of the Common Stock of the Company will be
$20.61 per share. Consequently, the purchasers of the Common Shares offered
hereby will have experienced an immediate dilution in the tangible book value of
their shares of $157.97 per share, while the existing shareholders of the
Company will have experienced an immediate increase in the tangible book value
of their shares of $10.03 per share.
In addition, the Company has issued outstanding warrants entitling the
holders to purchase an aggregate of 2,938 shares of Common Stock at an exercise
price of $102.12 per share. Assuming all of the Common Shares offered hereby are
sold, the number of shares of Common Stock of the Company which may be purchased
under one of these warrants will increase from 1,672 to 1,873 and the exercise
price specified in this warrant will decrease from $102.12 to $91.18 per share.
See "MANAGEMENT - Principal Shareholders".
If any one or more of these warrants are exercised, the exercise will
result in additional dilution to the purchasers of the Common Shares offered
hereby.
CONTROL OF COMPANY BY KEY INVESTORS
Upon completion of this offering, the existing shareholders of the
Company will hold a majority of the total outstanding stock of the Company on a
fully diluted basis. Certain principal stockholders, acting together, will
continue to have the power to elect all of the directors of the Company and to
approve or disapprove any corporate actions requiring a majority vote of the
shareholders of the Company.
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UNAVAILABILITY OF AUDITED FINANCIAL INFORMATION
None of the financial data contained in this Memorandum has been
audited by independent certified public accountants.
OFFERING PRICE ARBITRARILY DETERMINED
The offering price for the Common Shares has been arbitrarily
established and bears no relationship to the assets or book value of the Company
or conventional financial criteria generally used in determining the value of a
company's securities.
SUBCHAPTER S STATUS
The Company has elected to be taxed under Subchapter S of the Internal
Revenue Code. Under Subchapter 5, the net income of the Company will be taxed to
the shareholders of the Company whether or not such income is distributed to
shareholders. If the Company decides not to distribute its net income to
shareholders but to use it instead to provide working capital or for future
business needs, shareholders would be taxed on their share of undistributed net
income without receiving any dividends with which to pay such taxes. In addition
there is always the risk that the Subchapter S election may be terminated
unintentionally, which may have an adverse impact on the Company and its
shareholders. The Company is now considering terminating its Subchapter S
election to take advantage of certain recent favorable changes in the tax law
with respect to the taxation of capital gains. Prospective investors should
consult with their own tax advisors about the effect of the Company's tax status
on their individual situations.
NO INDEPENDENT COUNSEL
No independent legal counsel has been retained to protect the interests
of the investors in this offering. Consequently, each prospective investor
should consult his own attorney and other professional advisors before making an
investment in the Common Shares and is invited to ask questions of the Company
concerning the terms of this offering, the Company and any other relevant
matters.
USE OF PROCEEDS
Assuming subscriptions are received for all of the Common Shares
offered hereby, the Company will receive gross proceeds of $300,000 less
estimated offering expenses of approximately $10,000.
Such proceeds will be used by the Company, to the extent of
approximately $200,000, to pay operating costs, including expenses for increased
sales and marketing activities. The balance will be retained for working capital
and for other general corporate purposes.
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CAPITALIZATION
The following table sets forth the capitalization of the Company at
June 30, 1993 and as adjusted to give effect to the sale of the Common Shares
offered hereby:
Actual As adjusted
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Current maturities of long-term $ 67,336 $ 67,336
debt
Long-term debt 562,084 562,084
Subordinated stockholder debt 36,845 36,845
Capital lease obligations 11,391 11,391
Stockholders' equity:
Common Stock, $O.001 par value per
share, 75,000 shares authorized, 18,200
shares issued and outstanding, 2,184
shares issued pro forma as adjusted 18 20
Additional paid-in capital 1,802 301,800
Accumulated deficit (559459) (559.459)
-------- ---------
Stockholders' equity (557.639) 1257.639)
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Total capitalization $ 120,017 $ 420,017
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DESCRIPTION OF BUSINESS
BIOS is engaged in the business of developing and marketing biological
products and services and laboratory equipment for sale to governmental
entities, universities, other nonprofit entities and pharmaceutical companies
engaged in molecular genetics research. Purchasers use these products and
services to study the organization and function of genes in normal and diseased
states, often with a view toward securing proprietary rights to and commercially
exploiting genes of importance to human health. BIOS also engages in the cloning
and characterization of genes believed to be of commercial value.
Much genetic research today involves the mapping of DNA sequences
present in human chromosomes, the identification and mapping of specific DNA
sequences which may cause or be associated with known diseases, and the
production of accurate diagnostic tests and modes of treatment for these
diseases.
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The process of mapping and identification is time-consuming and
expensive, and the Company believes that its products and services offer
significant savings of time and cost to researchers. Although customers may
themselves prepare products included in the Company's experimental biological
line, in many cases such preparation would be impracticable (requiring years of
work), inefficient (since the researcher would be the only user of the resulting
product) and uneconomical (diverting limited resources away from desirable
research). Consequently, the Company's products offer customers considerable
savings of time and expense. The utilization of Company products also permits
genetic research to be carried on by scientists who are without sufficient
resources to create such products themselves or carry on the testing activities
offered by the Company and who might otherwise be precluded entirely from
genetic research.
PRODUCTS AND SERVICES
BIOS derives its revenues from the sale of experimental biologicals and
laboratory apparatus and grants and contracts issued principally by the federal
government for genetic research.
EXPERIMENTAL BIOLOGICALS. Most BIOS experimental biological products
consist of DNA and RNA furnished for use in fundamental molecular genetics
research. The DNA is furnished either in a "digested" form impregnated in
"blots" or nylon membranes, ready for immediate use, or in a purified,
"undigested" form at concentrations permitting the researcher to prepare the
desired blots or use the product in a polymerase chain reaction (PCR) analysis.
The RNA is furnished in a form impregnated in "blots" or nylon membranes. With
the use of these products, the researcher often will attempt to identify the
precise location of a gene of interest within the genetic material of the cell
and to understand if or how the gene functions. The Company also sells molecular
"toolkits", consisting of combinations of chemicals, to facilitate DNA labelling
and other experimental procedures.
The Company's line of-experimental biologicals consists of DNA from
approximately 31 different species, including human beings, and RNA from
approximately five species, involving eight different tissues in three
developmental stages. Assembly of these products requires several
technically-complex steps including, for DNA preparation,: a) collection of
samples from particular population; b) isolation of peripheral lymphocytes; c)
transformation of these lymphocytes into permanent cell lines; d)
cryopreservation of these cell lines; e) bulk culture and DNA isolation of these
cells; f) DNA digestion, electrophoresis and blotting; and g) quality control of
DNA.
For RNA preparation, these steps include: a) accessing and collecting
fresh tissues with the RNA molecules intact; b) isolation and purification of
the RNA; C) cryopreservation of these RNAs; d) electrophoresis and blotting of
these RNA5; and e) quality control of RNA.
The Company believes that no competitor has a repository comparable to
this inventory of DNA and RNA and that the Company's inventory and related
manufacturing know-how could not be duplicated without devoting substantial
resources and several years of work to this effort.
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All products sold by the Company are accompanied by standard manuals
with directions for carrying out studies and troubleshooting guides. Control
samples for confirming the integrity of results are also provided.
The Company also offers a range of custom services, enabling customers
to engage BIOS to prepare special, custom-designed blots or carry out specific
testing procedures on BIOS experimental biologicals.
Experimental biologicals are offered at fixed prices through a
catalogue distributed at present to approximately 3000 potential customers. A
copy of this catalogue accompanies this Memorandum as Exhibit C. Sale of
experimental biologicals represented about 35% of gross revenues in 1992.
LABORATORY APPARATUS. The BIOS . line of apparatus is composed of an
integrated line of laboratory apparatus and related supplies for use in the
performance of electrophoretic separation of DNA or RNA, in techniques known as
Southern and Northern blotting.
During April, 1992 BIOS concluded an agreement with its United Kingdom
distributor, Scotlab, Ltd. Scotlab agreed to manufacture BIOS apparatus products
in the U.K. for sale throughout the European Economic Community under a royalty
agreement. In December, 1992 BIOS and Scotlab agreed to allow Scotlab to
manufacture and market the BIOS apparatus products in the United States in
exchange for licensing and royalty fees to BIOS.
In addition, BIOS has the right to sell all Scotlab products in the U.S.
Sale of laboratory apparatus represented approximately 50% of gross
revenues in 1992.
GRANTS AND CONTRACTS. The Company also endeavors to secure grants and
contracts from the United States Government and federal and state agencies for
genetic research and other genetic-related projects. Grants are generally made
to fund the commercial development of additional experimental biologicals or
other products useful in the mapping and characterization of human genes.
Contracts are generally entered into to carry out genetic projects that the
Government has undertaken but is unable to handle itself due to lack of
sufficient personnel or facilities or requisite technical expertise. Since 1986,
the Company and its predecessor received commitments for approximately $1.3
million of grants and contracts. During 1992, grants and contracts represented
about 15% of gross revenues.
BUSINESS DEVELOPMENT. The Company believes that several significant
opportunities exist which will enable it to profit in the future from the line
of experimental biologicals that it has developed since 1986, from its expertise
in the manufacturing of genetic material and the conduct of genetic research,
and from the relationships developed with researchers working in the field of
genetics.
The Company believes that as a result of the carrying-on of activities
associated with the human genome project, the potential market for the sale of
its line of experimental biologicals will expand significantly over the next
five years.
The Company believes that it has developed special expertise in
performing research funded by grants and contracts from the federal government.
It also believes this expertise has
8
created an opportunity for it to increase its base of research services to
include pharmaceutical companies. Such companies are expected to increase
their own genetic research and product development in the next several years.
Through the sale of experimental biologicals and collaboration with
genetic researchers, the Company hopes to develop opportunities to participate
in the commercial development of diagnostic and therapeutic products.
BIOS has a unique competitive advantage in its experimental biologicals
market since no competitor has as broad a range of gene mapping products.
Currently, new products are being developed by the Company in association with
Yale University and the University of Alabama, Birmingham (UAB). The Yale
product is based on coupled amplification and sequencing technology, for which
the Company and Yale have an agreement in principle for an exclusive license and
a patent application is pending for this technology. This technology also forms
the basis for a $500,000 Phase II Small Business Innovation Research (SBIR)
grant that has been recently awarded to the Company. BIOS has other SBIR grant
applications and a contract application currently pending. One of the Phase I
SBIR applications is based on the UAB technology -microdissection of
chromosomes. BIOS has received a favorable review score on its application, and
the Company believes it has a high probability of being awarded a $75,000 grant
in November, 1993.
SALES AND MARKETING
The Company sells its products through a three-person in- house
telemarketing and telesales department and five independent manufacturers
representatives. The Company expects to hire a vice president for sales and
marketing in the near future.
The Company also has overseas distribution for EEC countries, Japan and
other foreign markets. BIOS believes that it is one of the largest suppliers of
gene mapping products in the world.
The Company is currently conducting negotiations with several major
corporations in order to expand its channels of distribution. There can be no
assurances, however, that such negotiations will result in executed agreements.
FACILITIES AND EMPLOYEES
The Company has ten full-time employees, all of whom work at the
Company's facilities located at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇. This
facility consists of 3,000 square feet of office space and 2,000 square feet of
laboratory space. The Company anticipates moving into a new facility in the near
future at Science Park in New Haven, Connecticut and has a five-year lease from
its date of occupancy. This new facility will consist of approximately 3,000
square feet of new office space and approximately 3,000 square feet of
laboratory space; the Company also will have the option to obtain an additional
2,000 square feet of contiguous space. The annual rent for this new facility
will be about $61,000 in the first year, about $65,000 in the second and third
years and about $53,000 in the fourth and fifth years.
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The Company also uses several consultants, principally to assist with
the development of products and the completion of grants. The cost of such
consultants is not a material expense for the Company.
The Company manufactures most of its experimental biologicals, but
obtains certain product lines from subcontractors. The Company is not dependent
on any single supplier.
PATENTS AND TRADEMARKS
The Company has been awarded seven patents relating to its apparatus
product line and has two patent applications pending relating to its
experimental biologicals product line. The latter patents, if granted, could
have a positive effect on its business. The Company also owns four trademarks.
COMPETITION
Although the Company may experience competition in the future from
companies with substantially greater capital and technical expertise, at the
present time, the Company believes it does not have any significant competitors
in its line of experimental biologicals. However, some customers of the Company
can duplicate certain of the Company's products through their own internal
efforts.
MANAGEMENT
OFFICERS
▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ (age 50) is President and Director of Research of
the Company. He is one of the founders of the Company and its predecessor
company, BIOS Corporation, which he organized with others in 1986.
From 1983 to 1986, ▇▇. ▇▇▇▇▇ was Vice President and Director of
Research for International Biotechnologies, Inc., (IBI), which became a
publicly-traded company in 1985 (now a subsidiary of ▇▇▇▇▇▇▇ Kodak). IBI markets
equipment and biological supplies for molecular biology research. Prior to his
association with IBI, ▇▇. ▇▇▇▇▇ was employed for 13 years by Microbiological
Associates, which provided molecular biology research services for agencies of
the Federal government. During the last eight years of his association with
Microbiological Associates, ▇▇. ▇▇▇▇▇ held the office of Vice President,
Director of Research.
▇▇. ▇▇▇▇▇ holds M.S. and Ph.D. degrees in Radiation Biology from the
University of Tennessee and a B.S. in Microbiology from The Ohio State
University. He is Chair of the Immunology Molecular Biology Study Section for
the Small Business Innovation Research Program of NIH, Adjunct Research
Professor at Yale School of Medicine, and a member of the Finance Committee of
the American Association of Cancer Research. ▇▇. ▇▇▇▇▇ is a full-time employee
of the Company.
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▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇ (age 33) is the Chief Financial Officer of the
Company. During the first seven months of 1991, he served as a consultant to the
predecessor company of BIOS, which he then joined as its Chief Financial Office.
▇▇. ▇▇▇▇▇ is a Chartered Accountant and holds a B.S. in Business
Administration and a graduate degree (master's equivalent) in Financial
Accounting from the University of Cape Town in South Africa. From 1982 until
1985, he worked for the accounting firm of ▇▇▇▇▇▇ ▇▇▇▇▇ & Co. (now Ernst &
Young) in South Africa and, from 1985 until 1990, in Hartford, Connecticut as a
Senior Manager in its Entrepreneurial Services Group. He then joined The
▇▇▇▇▇▇▇▇▇ Group, of West Hartford, Connecticut, a management consulting firm, as
Chief Financial Officer.
▇▇. ▇▇▇▇▇ devotes approximately one-half of his time to the business of
the Company. He also is employed by The ▇▇▇▇▇▇▇▇▇ Group and its affiliated
companies as Chief Financial Officer.
SCIENTIFIC DIRECTORS
▇▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (age 35 and also a founder of the Company) has been
a Scientific Director of the Company on a full-time basis since March, 1993.
From 1989 until March, 1993, he served as consultant to the Company and its
predecessor, BIOS Corporation. ▇▇. ▇▇▇▇▇ holds M. Phil. and Ph.D. degrees in
Human Genetics and a M.D. degree from Yale University, and a B.A. in Biophysics
from ▇▇▇▇▇ ▇▇▇▇▇▇▇ University. He also has served as a consultant to the State
of Connecticut Forensic Laboratory.
▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ (age 39 and also a founder of the Company) is a
Scientific Director since 1988. ▇▇. ▇▇▇▇▇▇▇ holds an M.D. degree from Oxford
University and a B.A. in physics from Cambridge University. He has held clinical
appointments in ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Hospital, West Norwich Hospital, ▇▇▇▇▇▇'
Hospital, Guy's Hospital and the National Hospital for Nervous Diseases. He is
currently Associate Professor, Department of Internal Medicine and Human
Genetics, Yale University School of Medicine, and Assistant Investigator, ▇▇▇▇▇▇
▇▇▇▇▇▇ Medical Institute. He is a member of the Human Genetic Organization,
Chairman of the Chromosome 16 Committee for the X and XI International Human
Gene Mapping Workshops, and a member of the Task Force on Hypertension (NHLBI).
DIRECTORS
Messrs. ▇▇▇▇▇ and ▇▇▇▇▇ are presently the sole directors of the
Company. It is expected that the Board of Directors will be enlarged in the near
future.
REMUNERATION
The Company has entered into an employment agreement with
▇▇. ▇▇▇▇▇ for a term expiring May 25, 1998 and providing for the payment to him
of an annual base salary of $110,000 which may be increased at the discretion of
the Board of Directors. In the event ▇▇. ▇▇▇▇▇'▇ employment is terminated
without cause, as defined in the employment
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agreement, the Company is required to pay him an amount equal to one-half of
his then current annual salary in a lump sum.
The Company has entered into an employment agreement with ▇▇. ▇▇▇▇▇ for
a term expiring May 25, 1998 and providing for him to devote at least one-half
of his time to the business of the Company, subject to adjustment by the Board
of Directors. The agreement also provides for the payment to him of an annual
base salary of $43,470 which may be increased at the discretion of the Board of
Directors. In the event ▇▇. ▇▇▇▇▇'▇ employment is terminated without cause, as
defined in the employment agreement, the Company is required to pay him an
amount equal to one-half of his then current annual salary in a lump sum.
In addition, ▇▇. ▇▇▇▇▇ and ▇▇. ▇▇▇▇▇ are subject to nondisclosure
obligations and, for one year following the termination of employment,
non-competition obligations if termination occurs during the term of the
agreements.
The Company intends to adopt a plan to offer stock options for up to
2,035 shares of its Common Stock to officers, key employees, directors (other
than directors who also are employees) and outside consultants and scientific
advisors. The plan will be administered by a committee appointed by the Board of
Directors of the Company. This committee will be authorized to select the
persons who will receive stock options and the number of options each will
receive. Employees of the Company will be eligible for incentive stock options
and non-qualified stock options under the plan, while non-employee directors and
consultants will be eligible only for non-qualified stock options. The option
price for incentive stock options may not be less than the fair market value of
the underlying stock at the time of the grant. The option price for
non-qualified stock options will be determined by the committee and may be lower
than the fair market value.
The plan will provide for the termination of stock options previously
granted by the Company after a specified period of time following the
termination of employment or affiliation by any participant with the Company.
Each person granted a stock option under the plan will be required to execute a
shareholders agreement with the Company which will restrict the transfer of, any
shares of Common Stock issued pursuant to a stock option.
As of the date hereof, no options have been granted.
The Company does not maintain any retirement plan for its officers or
other employees.
PRINCIPAL SHAREHOLDERS
The following shareholders hold five percent or more of the 18,200
shares of Common Stock of the Company which are now outstanding:
Number of
Shares Percentage
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Number of
Shares Percentage
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▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇ 9,400 51.6
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▇▇. ▇▇▇▇▇ ▇▇▇▇▇ 4,400 24.2
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▇▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ 1,000 5.5
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▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 1,000 5.5
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Other Present and Former Employees 2,400 13.2
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18,200 100.0
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Connecticut Innovations, Inc. holds warrants entitling it to purchase
an aggregate of 2,520 shares of Common Stock at an exercise price of $102.12 per
share. The number of shares which may be purchased and the exercise price are
subject to customary anti-dilution provisions. However, one of the warrants,
providing for the purchase of 1,672 shares of Common Stock, contains additional
provisions that will apply in the case of the issuance of the Common Shares
offered hereby. As a result of the application of such provisions and assuming
all of the Common Shares offered hereby are sold, the number of shares which may
be purchased under this warrant will increase from 1,672 to 1,873 and the
exercise price will decrease from $102.12 to $91.18 per share. See "RISK FACTORS
- Dilution".
Technology Investment Fund, Inc. holds warrants entitling it to
purchase an aggregate of 418 shares of Common Stock at an exercise price of
$102.12 pr share. The number of shares which may be purchased and the exercise
price are subject to customary anti-dilution provisions.
All of these warrants also contain certain "piggyback" registration
rights and, if granted to the holder of any other securities of the Company,
comparable demand registration rights.
Under certain circumstances, the holders of these warrants may require
the Company to repurchase the warrants at a price to be determined in an
appraisal proceeding if the Company and the holder of the warrant are unable to
agree upon the repurchase price.
The Company has entered into shareholder agreements with each of its
stockholders, other than ▇▇. ▇▇▇▇▇ and ▇▇. ▇▇▇▇▇, which gives the Company the
right to purchase the stock owned by such stockholder upon termination of his
employment with the Company at a price equal to the original purchase price of
the shares adjusted upwards for years of service with the Company and creates a
right of first refusal in favor of the Company upon the sale or other
disposition of any of such stock.
▇▇. ▇▇▇▇▇ and ▇▇. ▇▇▇▇▇ have entered into a Cross Purchase Agreement
which gives each person the right to purchase the stock owned by the other
person upon termination of his employment with the Company for any reason
other than death and creates a right of first refusal in favor of each person
upon the sale or other disposition of any of such stock. The Agreement
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will terminate in certain events, including the occurrence of an initial
public offering of any common stock of the Company, upon the sale of all or
substantially all of the assets of the Company, or upon the death of either
person.
CREDIT ARRANGEMENTS
The Company is obligated under the following outstanding indebtedness:
(1) $430,285 of indebtedness owed to Connecticut Innovations, Inc.,
bearing interest at 10% per annum, repayable in equal monthly installments of
principal and interest over a six year period ending in July, 1988, and secured
by a lien on all of the assets of the Company. The lender agreed to defer
payment of one-half of the interest accrued in 1993 and all principal during
such year. If the Company is acquired by another company, the lender is entitled
to a minimum compounded annual return of 28% after giving the Company credit for
the payment of interest and any gain realized on the sale of warrants held by
the lender or stock acquired pursuant to such warrants.
(2) $100,000 of indebtedness owed to the Technology Investment Fund,
Inc., bearing interest at 10% per annum, repayable in equal monthly installments
of principal and interest over a six year period ending in June, 1988, and
secured by a lien on all of the assets of the Company. The lender agreed to
defer payment of one-half of the interest accrued in 1993 and all principal
during such year.
(3) Approximately $105,000 of indebtedness owed to ICF International,
Inc., bearing interest at the rate of 10% per annum and repayable in equal
monthly installments of principal and interest over a three-year period ending
March, 1996.
(4) $36,854 of indebtedness owed to officers of the Company for
deferred salaries. This indebtedness may not be repaid until the Company has
achieved positive cash flow for three successive months or the Company is no
longer obligated to make the royalty payments described below.
During 1993, the Connecticut Department of Economic Development made a
$300,000 grant to the Company to fund marketing expenditures and relocation of
the Company's facilities. Under the provisions of the grant, the Company is
obligated to pay a royalty to the Department equal to a percentage of annual
revenues (ranging from 1 1/2% in year one to 3% in year four and thereafter)
until the grant plus interest thereon, calculated at 6.2% per annum, is repaid.
If at any time Messrs. ▇▇▇▇▇ and ▇▇▇▇▇ own less then 51% of the outstanding
Common Stock of the Company, the Company will become obligated to repay the
grant with interest thereon less a credit for prior payments.
DESCRIPTION OF CAPITAL STOCK
The Company's authorized Common Stock presently consists of 75,000
shares, $0.001 par value, of which 18,200 shares are presently issued and
outstanding. In the event of any liquidation, dissolution or winding up of the
affairs of the Company, the assets of the Company
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remaining after payment of its obligations would be distributed equally among
the outstanding shares of Common Stock of the Company.
Each holder of record of Common Stock is entitled to one vote for
each outstanding share of Common Stock owned by him on every matter properly
submitted to the stockholders for their vote. Holders of the issued and
outstanding shares of Common Stock have no preemptive rights to subscribe for
or to purchase additional shares of any class of the Company's capital stock
in the event of any subsequent offering of shares of capital stock. The
shares of Common Stock presently issued and outstanding are, and the shares
of Common Stock being offered hereby, when purchased and paid for in
accordance with the terms hereof, will be, fully-paid and nonassessable, duly
authorized and validly issued and entitled to such dividends as may be
declared by the Board of Directors out of funds legally available therefor.
The Company does not anticipate that dividends will be declared on the Common
Stock in the foreseeable future.
LEGAL OPINION
The legality of the Common Shares offered hereby will be passed upon
for the Company by Messrs. ▇▇▇▇▇▇▇▇ & ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
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