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REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM S-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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NEOGEN CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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MICHIGAN 38-2367843
(STATE OF INCORPORATION) (IRS EMPLOYER IDENTIFICATION NO.)
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620 LESHER PLACE
LANSING, MICHIGAN 48912
(517) 372-9200
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
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JAMES L. HERBERT, PRESIDENT
NEOGEN CORPORATION
620 LESHER PLACE
LANSING, MICHIGAN 48912
(517) 372-9200
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
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Copies to:
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RICHARD C. LOWE DONALD J. KUNZ
FRASER TREBILCOCK DAVIS & FOSTER, P.C. HONIGMAN MILLER SCHWARTZ & COHN
1000 MICHIGAN NATIONAL TOWER 2290 FIRST NATIONAL BUILDING
LANSING, MI 48933 DETROIT, MICHIGAN 48226
(517) 482-5800 (313) 256-7800
</TABLE>
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 check the following box. / /
If the registrant elects to deliver its latest annual report to security
holders, or a complete and legible facsimile thereof, pursuant to Item 11(a)(1)
of this Form, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. /X/
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CALCULATION OF REGISTRATION FEE
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TITLE OF EACH CLASS OF PROPOSED PROPOSED AMOUNT OF
SECURITIES TO BE AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING REGISTRATION
REGISTERED REGISTERED SHARE(1) PRICE FEE
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Common Stock............ 1,725,000(2) $8.1875 $14,123,437.50 $4,870.15
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(1) Pursuant to Rule 457(c), based on the average of the high and low selling
prices as reported by the Nasdaq National Market on September 11, 1996.
(2) Includes 225,000 shares subject to the underwriters' over-allotment option.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE> 2
NEOGEN CORPORATION
CROSS REFERENCE SHEET
FORM S-2
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ITEM
NUMBER REGISTRATION STATEMENT HEADING LOCATION; CAPTION IN PROSPECTUS
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1 Forepart of the Registration Statement
and Outside Front Cover Page of
Prospectus............................... Front cover page
2 Inside Front and Outside Back Cover Pages
of Prospectus............................ Inside front page; outside back page;
Available Information and Incorporation
of Certain Documents by Reference
3 Summary Information, Risk Factors and
Ratio of Earnings to Fixed Charges....... Summary; The Offering; Risk Factors; and
The Company
4 Use of Proceeds.......................... Use of Proceeds
5 Determination of Offering Price.......... Not applicable
6 Dilution................................. Not applicable
7 Selling Security Holders................. Not applicable
8 Plan of Distribution..................... Underwriting
9 Description of Securities to be
Registered............................... Description of Capital Stock
10 Interests of Named Experts and Counsel... Not applicable
11 Information with Respect to the
Registrant............................... The Company; Financial Statements;
Selected Consolidated Financial Data;
Management's Discussion and Analysis of
Financial Condition and Results of
Operation; and Business
12 Incorporation of Certain Information by
Reference................................ Incorporation of Certain Documents by
Reference
13 Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities.............................. Not applicable
</TABLE>
i
<PAGE> 3
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor
may offers to buy be accepted prior to the time the registration statement
becomes effective. This prospectus shall not constitute an offer to sell or
the solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws
of any such State.
SUBJECT TO COMPLETION, DATED SEPTEMBER 17, 1996
1,500,000 SHARES
NEOGEN LOGO
COMMON STOCK
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All of the 1,500,000 shares of Common Stock offered hereby are being sold
by Neogen Corporation (the "Company"). The Company's Common Stock is quoted on
the Nasdaq National Market under the symbol "NEOG". The last reported sale price
of the Common Stock on September 16, 1996 was $8.8125 per share. See "Price
Range of Common Stock."
-------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 5 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)
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Per Share.................................... $ $ $
Total(3)..................................... $ $ $
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</TABLE>
(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.
(2) Before deducting estimated offering expenses of $ , payable by the
Company.
(3) The Company has granted the Underwriters a 30-day option to purchase an
additional 225,000 shares of Common Stock at the Price to Public, less
underwriting discounts and commissions, solely to cover over-allotments, if
any. If this option is exercised in full, the total Price to Public,
Underwriting Discounts and Commissions, and Proceeds to Company will total
$ , $ and $ , respectively. See "Underwriting."
-------------------------
The Common Stock offered by this Prospectus is offered by the several
Underwriters named herein when, as and if issued to and accepted by them, and
subject to their right to reject orders in whole or in part and subject to
certain other conditions. It is expected that delivery of certificates
representing the shares of Common Stock will be made at the offices of Roney &
Co., One Griswold, Detroit, Michigan 48226 on or about , 1996.
-------------------------
(RONEY & COMPANY LOGO)/---- THE OHIO COMPANY
The date of this Prospectus is , 1996.
<PAGE> 4
[Photo]
CAPTION #1
The Company's Veratox(R) and Agri-Screen(R) test kits are used by the grain, nut
and spice processing industries to detect the presence of harmful natural
toxins. Some of these toxins are federally regulated.
[Photo]
CAPTION #2
The Company's one-step Reveal(R) tests are used by processors to detect the
presence of foodborne bacteria, such as the potentially deadly E. coli 0157:H7
in hamburger.
[Photo]
CAPTION #3
The Company's Alert(R) test detects the presence of potentially deadly toxins,
like histamine in certain fish species.
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IN CONNECTION WITH THE OFFERING, THE UNDERWRITERS AND THE SELLING GROUP
MEMBERS (IF ANY) OR THEIR RESPECTIVE AFFILIATES MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON
STOCK OF THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE
OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
IN CONNECTION WITH THE OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP
MEMBERS (IF ANY) OR THEIR RESPECTIVE AFFILIATES MAY ENGAGE IN PASSIVE MARKET
MAKING TRANSACTIONS IN THE COMMON STOCK OF THE COMPANY ON THE NASDAQ NATIONAL
MARKET IN ACCORDANCE WITH RULE 10B-6A UNDER THE SECURITIES EXCHANGE ACT OF 1934.
SEE "UNDERWRITING."
The Company owns the following trademarks: Veratox(R), Agri-Screen(R),
Agri-Screen Ticket(R), Reveal(R), Insight(R), Alert(R), Ideal(R), Bot Tox B(R),
Gold Nugget(R), ELISA Technologies(R), K-Gold(TM), K-Blue Substrate(R), and
AMPCOR(R).
2
<PAGE> 5
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and consolidated financial statements, including the notes thereto,
appearing elsewhere in this Prospectus. As used in this Prospectus, the terms
the "Company" and "Neogen" refer to Neogen Corporation and its wholly-owned
subsidiaries unless the context otherwise requires. Unless otherwise indicated,
information in this Prospectus assumes that the Underwriters' over-allotment
option is not exercised. The Company's fiscal year ends on May 31.
THE COMPANY
Neogen Corporation develops, manufactures, and markets a diverse line of
products used to detect residues and improve quality for the agriculture, food,
pharmacologics and environmental industries. The Company's products are grouped
into two areas, diagnostic test kits and veterinary instruments. The Company's
diagnostic test kits aid in the detection of foodborne bacteria, natural toxins,
drug residues, pesticide residues, disease infections and quality aspects. These
diagnostic test kits are less expensive, easier to use, and provide greater
accuracy and speed than many of the conventional diagnostic methods currently
being used. The Company's veterinary instrument product line assists in the
promotion of animal health principally through the delivery of more precise drug
treatments such as antibiotics and vaccines.
The market for diagnostic products for food and environmental safety has
been estimated to be approximately $500 million by the year 2000. The Company
estimates that currently only 12% of the food safety and environmental testing
is done by diagnostic test kits such as those manufactured by the Company.
Approximately 88% of the total potential market is either not testing or is
still using older, traditional methods that are generally slower, more difficult
to use and more expensive. In July 1996, the U.S. Department of Agriculture's
Food Safety Inspection Service adopted a final rule governing (i) federally
inspected meat and poultry processing plants and (ii) businesses outside the
U.S. which export meat and poultry into the U.S. In December 1995, the U.S. Food
and Drug Administration issued a final rule, scheduled to become effective
January 1998, concerning the procedures required for the safe and sanitary
processing and importing of fish and fishery products. As a result of increased
public concern over food quality and the aforementioned governmental regulations
concerning food inspection, a significant portion of this untapped market
represents testing that is not being conducted today and testing that will occur
over the next few years.
The Company has developed and markets over 140 diagnostic test kits used in
food safety, plant diseases, animal health, pharmacologic research and a limited
number of products for human clinical use. These tests are generally immunoassay
products that rely on the Company's proprietary antibodies capable of the
detection of residues allowing for rapid and accurate test results. All of the
Company's diagnostic test kits are disposable, single use products. The Company
has developed its diagnostic test kits so they can be utilized across multiple
market segments. The Company's Ideal Instruments subsidiary manufactures and
markets over 250 different veterinary instrument products used in obstetrics and
surgery and to administer animal health.
The Company's marketing strategy has been to expand its product offerings
through multiple market segments. The Company has focused on selling its
products into seven market segments: grain, nut and spice processors; meat,
poultry and egg processors; seafood processors; animal producers; fruit and
vegetable producer/processors; human clinical and pharmacologic research; and
private and public laboratories. This strategy has allowed the Company to become
the market leader in diagnostic products for the grain, nut and spice processor
industry and to become the dominant producer of diagnostic tests for the
detection of drugs in animals. Further, the Company has devoted significant
resources to take advantage of recent changes in testing requirements for the
meat, poultry and egg processor and seafood processor industries.
The Company's vision is to become a world leader in diagnostic development
and marketing. The Company has developed a growth strategy to achieve this
vision consisting of the following elements: (i) increasing sales of existing
products; (ii) introducing new products and product lines; (iii) expanding
international sales; and (iv) acquiring businesses and forming strategic
alliances.
3
<PAGE> 6
THE OFFERING
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Common Stock Offered.......................... 1,500,000 shares
Common Stock to be Outstanding After
The Offering................................ 6,098,042 shares(1)
Use Of Proceeds............................... For general corporate purposes, including potential
acquisitions and working capital. See "Use Of
Proceeds."
Nasdaq National Market Symbol................. NEOG
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SUMMARY CONSOLIDATED FINANCIAL DATA
(in thousands, except per share data)
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<CAPTION>
THREE MONTHS
YEARS ENDED MAY 31, ENDED AUGUST 31,
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1994(2) 1995(2) 1996(2) 1995(2) 1996(2)
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STATEMENT OF OPERATIONS DATA:
Revenues......................................... $10,735 $11,726 $12,490 $2,926 $4,035
Income (loss) from operations.................... 922 630 (240) 132 416
Net income (loss)................................ 856 679 (244) 131 401
Net income (loss) per share...................... $.19 $.15 $(.05) $.03 $.08
Weighted average number of common shares
outstanding.................................... 4,521 4,675 4,514 4,695 4,770
</TABLE>
<TABLE>
<CAPTION>
AUGUST 31, 1996
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ACTUAL AS ADJUSTED(3)
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BALANCE SHEET DATA:
Working capital....................................................... $ 5,659 $
Total assets.......................................................... 12,324
Long-term debt, excluding current portion............................. 261 261
Stockholders' equity.................................................. 9,355
</TABLE>
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(1) Does not include 580,792 shares reserved for issuance upon exercise of stock
options and warrants outstanding as of August 31, 1996.
(2) The periods presented in the Statement of Operations Data are not comparable
due to a restructuring charge in fiscal 1996 and acquisitions in each
fiscal year. See Notes 2 and 3 of the Notes to Consolidated Financial
Statements.
(3) Adjusted to reflect the sale of the 1,500,000 shares of Common Stock offered
hereby at $ , and the application of the net proceeds of this
offering, after deducting the underwriting discounts and commissions and
estimated offering expenses.
4
<PAGE> 7
RISK FACTORS
Prospective investors should carefully consider the factors set forth
below, as well as other information included elsewhere herein or incorporated by
reference, prior to purchasing the shares of Common Stock offered hereby:
IDENTIFICATION AND INTEGRATION OF ACQUISITIONS
The Company's business has grown significantly over the past several years
as a result of both internal growth and acquisitions of products and businesses.
The Company plans to use a portion of the proceeds of this offering to make
additional acquisitions. See "Use of Proceeds." The Company has no agreements or
commitments in place with respect to, and is not currently engaged in any
negotiations for, any acquisition. Identifying and pursuing acquisition
opportunities, integrating these acquisitions into the Company's business, and
managing their growth require a significant amount of management time and skill.
There can be no assurance that the Company will be effective in identifying,
integrating or managing any acquisition target in the future. The failure to
successfully integrate and manage any future acquisition may have a material
adverse effect on the Company's operating results and financial condition.
NEW PRODUCT DEVELOPMENT RISKS
The Company is continually developing new products for which it believes
there should be significant market demand. There can be no assurance that the
Company will successfully develop these products, that the products will be
developed on a timely basis to meet market demand, or that the relevant market
will be properly identified. If the Company expends substantial resources in
developing an unsuccessful product, operating results will be adversely
affected.
INTERNATIONAL SALES
In fiscal 1996, international sales accounted for 21% of the Company's
total revenue. The Company expects that its international business will continue
to account for a significant portion of its total revenue. Foreign regulatory
bodies may establish product standards different from those in the U.S. and with
which the Company's current products do not comply. The inability of the Company
to design products to comply with foreign standards could have a material
adverse effect on the Company's future growth. Other risks related to
international sales include the possible disruption in transportation,
difficulties in building and managing foreign distribution, fluctuation in the
value of foreign currencies, import duties and quotas, and unexpected economic
and political changes in foreign markets. There can be no assurance that these
factors will not adversely affect international sales and the Company's overall
financial performance.
COMPETITION
The markets in which the Company competes are subject to rapid and
substantial changes in technology. The Company encounters, and expects to
continue to encounter, competition in the sale of its products. There can be no
assurance that new technology or products developed by the Company's competition
will not render the Company's products or technologies obsolete or
noncompetitive. Many of the Company's competitors and potential competitors have
greater capital, manufacturing, marketing, and research resources than the
Company. See "Business -- Competition."
DEPENDENCE ON AGRICULTURAL MARKETS
The Company's primary markets relate to agricultural and food production.
The agricultural marketplace is cyclical and is dependent upon many factors
outside the Company's control including weather conditions. A downturn in the
agriculture marketplace could adversely affect the Company's sales.
FLUCTUATIONS IN QUARTERLY OPERATING RESULTS
The Company has experienced, and may experience in the future, significant
fluctuations in its quarterly operating results. Factors such as the mix of
products sold, and the acceptance of new products, could contribute to this
quarterly variability. The Company operates with relatively little backlog and
has few
5
<PAGE> 8
long-term customer contracts. Substantially all of its product revenue in each
quarter results from orders received in that quarter. In addition, the Company's
expense levels are based, in part, on expectation of future revenue levels. A
shortfall in expected revenue could, therefore, result in a disproportionate
decrease in net income.
PATENTS, TRADE SECRETS AND LICENSES
The Company relies on a combination of patent, trade secret and trademark
law to protect its proprietary rights. There can be no assurance that patent
applications filed by the Company will result in the issuance of patents. There
can also be no assurance that the Company's nondisclosure agreements, together
with trade secrets and other common law rights, will provide meaningful
protection for the Company's trade secrets and other proprietary information. In
the absence of these assurances, the Company's business may be adversely
affected by competitors. From time to time, the Company has received notices
alleging that the Company's products infringe third party proprietary rights,
though no material legal action in this regard is currently pending. If the
Company is precluded from selling its products or is required to pay damages
with respect to such sales, the Company's business and results of operation
could be adversely affected. See "Business -- Proprietary Protection and
Approvals."
REGULATION BY GOVERNMENT AGENCIES
A significant portion of the Company's products are affected by the
regulations of various domestic and foreign government agencies, including the
U.S. Department of Agriculture and the U.S. Food and Drug Administration. Though
less than 10% of the Company's revenues is currently derived from products
requiring government approval prior to sale, a significant portion of its
revenues is derived from products used to monitor and detect the presence of
residues that are regulated by various government agencies. Furthermore, a
significant portion of the Company's growth may be affected by the
implementation of new regulations such as the U.S. Food and Drug
Administration's final rule, Procedures For The Safe And Sanitary Processing And
Importing Of Fish And Fishery Products, and the final rule of the U.S.
Department of Agriculture, Pathogen Reduction; Hazard Analysis And Critical
Control Point Systems. If, for some reason, these rules are overturned or
significantly modified, there would be a significant adverse affect on the
Company's future growth strategies. See "Business -- Governmental Regulation."
DEPENDENCE ON KEY EMPLOYEES
The Company's success depends, in large part, on its president and on other
members of its management team. The loss of services of these key employees
could have a material adverse effect on the Company. The Company maintains
certain incentive plans for its key employees and most of these employees have
been with the Company in excess of three years. However, the Company has not
executed long-term employment agreements with any of these employees and does
not expect to do so in the foreseeable future. The Company's success also
depends, significantly, on its ability to continue to attract such personnel.
There can be no assurance that the Company will be able to retain or attract
such personnel.
PRODUCT LIABILITY AND INSURANCE
The manufacturing and distribution of the Company's products involve an
inherent risk of product liability claims and the adverse publicity that may be
associated with such claims. Although the Company currently maintains liability
insurance, there can be no assurance the Company will be able to continue to
obtain such insurance on acceptable terms, or that such insurance will provide
adequate coverage against all potential claims. See "Business -- Insurance."
POSSIBLE VOLATILITY OF STOCK PRICE
The market prices for securities of technology companies have been volatile
in the past and could continue to be volatile in the future. Fluctuations in
financial performance from period to period may occur and could have a
significant impact on the market price of the Company's stock.
6
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CAPITALIZATION
The following table sets forth the capitalization of the Company as of
August 31, 1996 and as adjusted to give effect to the issuance and sale by the
Company of the 1,500,000 shares of Common Stock offered hereby, after deducting
the underwriting discounts and commissions, and estimated offering expenses. The
table should be read in conjunction with the Company's Consolidated Financial
Statements and related notes thereto appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AUGUST 31, 1996
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ACTUAL AS ADJUSTED
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(IN THOUSANDS)
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Short-term debt....................................................... $ 1,100 $
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Long-term debt........................................................ $ 261 $ 261
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Stockholders' equity:
Common stock:
$.16 par value; 10,000,000 shares authorized;
4,598,042 shares issued and outstanding, actual;
6,098,042 shares issued and outstanding, as adjusted(1).......... 736 976
Additional paid-in capital.......................................... 13,932
Retained earnings (deficit)......................................... (5,313) (5,313)
------ -------
Total Stockholders' equity....................................... 9,355
------ -------
Total Capitalization........................................... $ 9,616 $
====== =======
</TABLE>
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(1) Does not include 580,792 shares reserved for issuance upon the exercise of
stock options and warrants outstanding as of August 31, 1996.
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 1,500,000 shares of
Common Stock offered hereby are estimated to be $ ($ if the
Underwriters' over-allotment option is exercised in full), after deducting the
underwriting discounts and commissions and estimated offering expenses.
The Company intends to use the net proceeds primarily for general corporate
purposes, including potential acquisitions of businesses or products, licenses
of technologies and working capital needs. The Company expects to devote a
portion of the net proceeds to fund such acquisitions or licenses. The Company
expects that it may effect acquisitions to expand its product and service
offerings within its current markets, although the Company may also seek to
effect acquisitions to extend its business into complementary markets. While the
Company has made such acquisitions in the past, the Company has no agreements or
commitments with respect to, and is not currently engaged in any negotiations
for, any acquisition. The amount of the net proceeds actually expended for
acquisitions, licenses or working capital purposes will depend upon a number of
factors, including the Company's ability to identify and effect attractive
acquisitions and licenses, and the amount of cash generated by the Company's
operations.
Pending the uses described above, the net proceeds will be used to reduce
short-term bank borrowings and will be placed in short-term, interest bearing,
investment grade securities, certificates of deposit or direct or guaranteed
obligations of the United States of America.
7
<PAGE> 10
PRICE RANGE OF COMMON STOCK
The Common Stock is traded on the Nasdaq National Market under the symbol
"NEOG". The following table sets forth, for the fiscal periods indicated, the
high and low sales prices for the Common Stock as reported on the Nasdaq
National Market.
<TABLE>
<CAPTION>
HIGH LOW
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<S> <C> <C>
FISCAL YEAR ENDED MAY 31, 1995
First Quarter............................................................... $8.50 $6.63
Second Quarter.............................................................. 9.63 7.38
Third Quarter............................................................... 8.25 5.88
Fourth Quarter.............................................................. 7.63 6.13
FISCAL YEAR ENDED MAY 31, 1996
First Quarter............................................................... 8.00 5.88
Second Quarter.............................................................. 8.25 5.88
Third Quarter............................................................... 6.25 4.63
Fourth Quarter.............................................................. 8.25 5.13
FISCAL YEAR ENDED MAY 31, 1997
First Quarter............................................................... 9.00 6.38
Second Quarter (through September 16, 1996)................................. 9.38 7.88
</TABLE>
As of August 31, 1996, there were approximately 500 stockholders of record
of Common Stock which the Company believes represents a total of approximately
4,000 beneficial holders.
DIVIDEND POLICY
The Company has never paid any cash dividends on its Common Stock and does
not anticipate paying any cash dividends in the foreseeable future. The Company
currently intends to retain future earnings to fund the development and growth
of its business. Any future distributions will be made at the discretion of the
Board of Directors of the Company and will depend upon the Company's operating
results, financial condition, capital requirements, general business conditions
and such other factors as the Board of Directors deems relevant.
8
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SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth selected consolidated financial data of the
Company for each of the fiscal years ended 1992 through 1996 and for the three
months ended August 31, 1995 and 1996. The selected consolidated financial data
for the five fiscal years in the period ended May 31, 1992 through 1996 are
derived from the Company's audited Consolidated Financial Statements. The
selected consolidated financial data for the three months ended August 31, 1995
and 1996 are derived from the Company's unaudited quarterly financial
statements. In the opinion of management, the three month financial data reflect
all adjustments (consisting only of normal recurring adjustments) necessary for
a fair presentation of such data. The results for the first three months of
fiscal 1997 are not necessarily indicative of the results to be expected for the
full year. The information below should be read in conjunction with the
Consolidated Financial Statements and the notes thereto and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS
YEARS ENDED MAY 31, ENDED AUGUST 31,
--------------------------------------------------- ------------------
1992(1) 1993(1) 1994(1) 1995(1) 1996(1) 1995(1) 1996(1)
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(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues
Diagnostic products......... $2,511 $3,592 $ 6,804 $ 7,687 $ 8,921 $2,265 $3,405
Veterinary instruments...... 3,890 4,037 3,931 4,039 3,569 661 630
------- ------- -------- -------- -------- ------- -------
Total revenues......... 6,401 7,629 10,735 11,726 12,490 2,926 4,035
Cost of goods sold............... 3,681 3,793 4,704 5,152 5,484 1,182 1,546
Selling, general and
administrative expenses........ 2,879 3,441 4,253 4,808 5,312 1,291 1,725
Research and development
expense........................ 768 1,028 856 1,136 1,238 321 348
Restructuring charges............ -- -- -- -- 696 -- --
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Income (loss) from operations.... (927) (633) 922 630 (240) 132 416
Other income (expense)........... 108 94 (40) 73 3 6 (3)
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Net income (loss) before
provision for income tax....... (819) (539) 882 703 (237) 138 413
Provision for income tax......... -- -- (26) (24) (7) (7) (12)
------- ------- -------- -------- -------- ------- -------
Net income (loss)........... $ (819) $ (539) $ 856 $ 679 $ (244) $ 131 $ 401
======= ======= ======== ======== ======== ======= =======
Net income (loss) per common
share.......................... $ (.21) $ (.13) $ .19 $ .15 $ (.05) $ .03 $ .08
======= ======= ======== ======== ======== ======= =======
Weighted average common shares
outstanding.................... 3,881 4,041 4,521 4,675 4,514 4,695 4,770
</TABLE>
<TABLE>
<CAPTION>
MAY 31, AUGUST 31,
--------------------------------------------------- ------------------
1992(1) 1993(1) 1994(1) 1995(1) 1996(1) 1995(1) 1996(1)
------- ------- ------- ------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital................. $5,242 $4,454 $5,452 $ 5,789 $ 5,235 $ 5,201 $ 5,659
Total assets.................... 7,559 7,304 9,133 11,539 11,531 11,612 12,324
Long term debt, excluding
current portion............... 53 111 15 351 279 391 261
Stockholders' equity............ 6,369 6,069 7,653 8,836 8,858 8,974 9,355
</TABLE>
- -------------------------
(1) The periods presented in the Selected Consolidated Financial Data are not
comparable due to a restructuring charge in fiscal 1996 and several
acquisitions. See Notes 2 and 3 of the Notes to Consolidated Financial
Statements.
9
<PAGE> 12
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
the Company's Consolidated Financial Statements and the notes thereto appearing
elsewhere in this Prospectus.
RESULTS OF OPERATIONS
Comparison of Three Months Ended August 31, 1996 and 1995
Total revenues for the quarter ended August 31, 1996 were $1,109,000 or 38%
higher than the same quarter in 1995. Sales of diagnostic products were up
$1,213,500 in the first quarter representing an increase of 55% while sales of
veterinary instruments declined $31,000 or 5%. Contract revenues in the first
quarter decreased $73,500 or 94%.
The significant increase in diagnostic product sales was primarily due to a
$684,000 or 120% increase in sales of the Company's diagnostic test kits for the
detection of vomitoxin. In early July 1996, a large portion of midwest winter
wheat was found to contain high levels of vomitoxin due to cool, rainy weather
conditions during the flowering stages of the grain. Although sales of vomitoxin
test kits should continue to run higher than the prior year for the remainder of
fiscal 1997, it is unlikely that sales will continue at the pace experienced in
the first quarter.
The Company also experienced an increase in sales of $122,000 or 220% for
test systems to detect E. coli O157:H7 and salmonella. Approximately $37,000 of
this increase was due to international sales of E. coli test kits shipped to
Japan. The remaining increase is the result of a growing demand for test kits to
detect micro-organisms. Management believes that the July 1996 announcement of
new inspection and safety regulations for the meat and poultry industry
scheduled to begin implementation in January 1997, will have a positive effect
on future sales.
The decline in veterinary instrument sales was due to depressed cattle
prices resulting in lower overall demand for durable veterinary instruments. In
management's opinion, the current down cycle in cattle prices should improve
over the remainder of this fiscal year. In addition, the Company has reorganized
its sales and marketing efforts for veterinary instruments which management
believes will favorably impact future sales for this segment.
The decline in contract revenues for the first quarter of this year was
primarily due to scheduled completion in the second quarter of last year of two
contracts with the United States Department of Agriculture. It is common for
contract revenues to fluctuate from quarter to quarter and year to year
depending on timing and terms of the contracts.
Cost of goods sold increased 31% as a direct result of the overall increase
in product sales. Expressed as a percentage of sales, cost of goods sold was 38%
in the first quarter of fiscal 1997 compared to 42% in the first quarter of
fiscal 1996. This improvement was due to a higher sales mix of diagnostic test
kits, increased labor productivity and better utilization of fixed overhead
costs for diagnostic products.
Sales and marketing expenses increased $311,000 in the first quarter
compared to the prior year. Commissions and royalties expense increased $133,000
in the first quarter due to increased sales volume. Expenses for printing,
advertising and promotions related to sales activities for diagnostic products
increased $64,000 compared to the prior year. A total of $37,000 was due to
higher salaries, fringe benefits and travel costs associated with the hiring of
new salesmen and technical support personnel. The remaining increase is
primarily due to an increase in the provision for doubtful accounts.
General and administrative expenses were $124,000 higher in the quarter
ended August 31, 1996 than the quarter ended August 31, 1995. Bonus accruals
increased $75,000 in the first quarter compared to last year based on improved
operating performance. Michigan Single Business Tax was $16,000 higher than the
prior
10
<PAGE> 13
year due to increased profitability at the Company's Lansing, Michigan
operations. Salaries for clerical and accounting personnel increased $12,000 due
to higher sales volume. As a percentage of total revenues, general and
administrative expense declined to 14% in the first quarter compared to 15% last
year.
Although research and development expense increased less than 10% in the
first quarter this year compared to the first quarter last year, management
believes that research and development is critical to the Company's future.
Accordingly, the Company expects its annual research and development expense for
the current fiscal year to approximate the same levels, expressed as a
percentage of revenue, as experienced in prior years.
Other income (expense) was lower in the first quarter than last year
primarily due to the timing of recognition of the Company's share of royalties
paid to an affiliated partnership.
Due to the substantial increase in sales volume for diagnostic products in
the first quarter, the Company posted net income of $.08 per share compared to
$.03 per share in the same period last year.
Comparison of Fiscal Years Ended May 31, 1996 and 1995
Total revenues for the year increased 7% due to a strong 20% increase in
sales of diagnostic products. Of the $1,429,000 increase in diagnostic product
sales, $608,000 was the result of a 15% increase in sales of test kits to detect
harmful mycotoxin residues in the feed, grain, and nut markets. Another $621,000
of the increase was due to 30% higher sales of test kits and reagents sold into
the pharmacologics and equine markets. The remainder of the increase was due to
a 164% increase in test kits to detect microorganisms in the meat and poultry
market.
The increase in sales of diagnostic products was partially offset by a
decline in veterinary instruments sales. The decline in sales in this segment
was partially due to depressed cattle prices resulting in lower demand for
durable veterinary instruments. Sales representation that management believed
was unsatisfactory also contributed to the decline in sales causing the Company
to restructure its sales organization for veterinary instruments.
Contract revenues decreased significantly in 1996 due to scheduled
completion of two contracts awarded to the Company in September 1994 by the
United States Department of Agriculture. It is common for contract revenues to
fluctuate from year to year depending on terms and timing of the contracts.
However, contract revenues in total are not significant to total revenues for
the Company.
Expressed as a percentage of product sales, cost of goods sold was 44% in
1996 compared to 45% in 1995.
The increase in sales and marketing expenses is principally due to higher
costs in two areas. Entry into the meat and poultry market resulted in
approximately $130,000 of increased expense spread across a number of categories
including salary, fringe, travel, printing, advertising, and trade shows.
Increases in cost for the same categories totaled $110,000 related to the
introduction of new products for the seafood and equine markets. Increases in
sales and marketing expenses for the feed, grain, and nut markets, primarily in
the areas of royalties, shipping expense, and special promotions, were almost
completely offset by lower commissions related to veterinary instruments sales.
The Company expects to continue to expand sales and marketing activities
primarily in areas related to diagnostic products for food safety.
General and administrative expenses are higher as a result of several
items. A total of $55,000 of the increase is due to two extra months of
operations in 1996 than 1995 for AMPCOR Diagnostics, Inc. (ADI). Salary and
fringe expenses were up $150,000 as a result of new secretarial, accounting, and
clerical personnel needed to handle increased business volume. Amortization
expense was $40,000 higher than last year due exclusively to the acquisition of
certain assets of International Diagnostic Systems, Corp. (See Note 3 of the
Notes to Consolidated Financial Statements).
The $102,000 increase in research and development cost is partially due to
$44,000 of added expense this year because of an extra two months of operations
at ADI compared to last year. The remainder of the increase is the result of
higher salaries, fringe, and supplies for research programs to develop new
diagnostic
11
<PAGE> 14
test kits for the equine and pharmacologic markets and for the detection of
harmful bacteria. The Company considers investment in research activities
critical to the long-term future of the business.
Restructuring charges recorded in the fourth quarter of 1996 pertain to
costs associated with discontinuance of the Company's electronic instrument
operations and reorganization of sales and marketing efforts for veterinary
instruments. (See Note 2 to Consolidated Financial Statements.) Liabilities
recorded at May 31, 1996 as a result of the restructuring program amounted to
$218,000 and are expected to be paid or settled during fiscal year 1997.
Management believes that the restructuring program places the Company in a
better competitive position to achieve future growth. The restructuring also
enables the Company to redirect manpower and financial resources to the more
profitable and faster-growing diagnostics business.
Other income declined during 1996 primarily due to higher interest expense
as a result of increased balances outstanding for bank borrowings.
The net loss for the year is primarily due to restructuring charges of
$695,000 recorded in the fourth quarter.
Comparison of Fiscal Years Ended May 31, 1995 and 1994
Diagnostic product sales increased $670,000 in 1995 compared to 1994. Sales
in this segment were up $797,000 due to the acquisition of AMPCOR Diagnostics,
Inc. (formerly AMPCOR, Inc.) effective August 1, 1994. In addition, sales for
the ELISA Technologies division consisting of pharmacological and animal drugs
of abuse diagnostic test kits increased $451,000 or 30% in 1995.
The positive increase in sales for these two are as was partially offset by
a $593,000 reduction during 1995 in sales of diagnostic test kits for the
detection of vomitoxin. Management anticipated a decline in sales for vomitoxin
test kits in the current year as indicated in its 1994 annual report to
shareholders.
The increase in veterinary instrument sales for 1995 compared to 1994 is
primarily due to a new customers who began ordering specialized needles and
punches in the first quarter of 1995.
Contract revenues increased significantly in 1995 due to two contracts
awarded to the Company in September 1994 by the United States Department of
Agriculture. It is common for contract revenues to fluctuate from year to year
depending on terms and timing of the contracts. However, contract revenues in
total are not significant to total revenues for the Company.
The increase in cost of goods sold for 1995 is the direct result of higher
sales volume, including acquisitions, compared to 1994.
Sales and marketing expenses increased $449,000 or 16% in 1995 compared to
1994. Of this amount, $217,000 was due to a new marketing agreement with an
independent third party firm for the veterinary instrument product line. Another
$146,000 of the increase was the direct result of the acquisition of AMPCOR. The
remaining difference is due to increases in salaries and wages, advertising,
royalties and distribution costs pertaining to increased sales volume, and new
marketing programs for products sold by the ELISA Technologies division. The
Company intends to expand its sales and marketing activities for predictive and
diagnostic products primarily in the meat and poultry and seafood markets.
The increase in general and administrative expenses is due to $223,000 of
costs generated by the operations of AMPCOR which was acquired effective August
1, 1994. This increase was partially offset by lower general and administrative
expenses at the Company's Lansing, Michigan-based operations due to lower
bonuses for employees in 1995 compared to 1994 and a reduction in legal and
professional fees.
Research and development expenses were up $280,000 or 33% in 1995 compared
to 1994. A total of $185,000 was the result of research projects being conducted
at AMPCOR. The remaining difference is primarily due to higher salaries and
wages, contract services, and supplies related to several research projects for
new diagnostic products. Three of these projects are being funded via contracts
with the United States Department of Agriculture. The Company intends to
continue to expand its research activities for new predictive and diagnostic
products.
12
<PAGE> 15
Other income (expense) is $113,000 higher in 1995 than in 1994. In 1994,
the Company recorded a one-time $75,000 write-down to an investment in an
affiliated partnership to reflect current market value. Interest income is
$26,000 higher in 1995 due primarily to higher rates on invested funds. The
Company also recorded $72,000 in 1995 as its share of earned royalties paid to
an affiliated partnership. The positive effect of these items was partially
offset by $66,000 of higher interest expense in 1995 due to increased borrowings
and higher rates.
Net income for the year ended May 31, 1995 declined by $177,000 compared to
1994 due primarily to increases in research and development expenditures.
FINANCIAL CONDITION AND LIQUIDITY
At August 31, 1996, the Company had $2,389,000 in cash and equivalents,
working capital of $5,659,000 and stockholders' equity of $9,355,000. In
addition, the Company has bank lines of credit totaling $2,500,000, with
$1,029,000 borrowed against these lines as of August 31, 1996.
Effective June 15, 1995, the Company acquired certain assets of
International Diagnostic Systems Corporation (IDS) of St. Joseph, Michigan (See
Note 3 of the Notes to Consolidated Financial Statements.) The purchase price
paid in fiscal year 1996 was approximately $680,000 in cash. A second and final
cash payment of approximately $53,000 was paid in July 1996.
On August 17, 1994, the Company purchased substantially all of the assets
of AMPCOR, Incorporated, a New Jersey-based diagnostics company. The total
initial purchase price paid was approximately $1,871,000 consisting of $813,000
in cash (including acquisition costs), assumption of liabilities totaling
$733,000, and issuance of 55,763 shares of the Company restricted common stock
valued at $325,000. In connection with the acquisition, the Company entered into
a $400,000 term loan agreement and $600,000 line of credit facility,
subsequently increased to $1,000,000, with Comerica Bank (See Note 3 of the
Notes to the Consolidated Financial Statements). Proceeds from the term loan,
together with $256,000 borrowed against this line of credit, were used to pay
off certain liabilities assumed in the purchase of AMPCOR, Incorporated's
assets.
The Company has no material commitments for capital expenditures at August
31, 1996. Inflation and changing prices are not expected to have a material
effect on the Company's operations.
Prior to its 1994 fiscal year, cash required to sustain operations, retire
long-term debt, pay for capital expenditures, and fund acquisitions had been
primarily generated by proceeds from stock offerings. However, the Company was
profitable and did experience positive cash flows from operations in fiscal year
1994, was profitable again in 1995, and generated positive cash flows from
operations again in fiscal year 1996. Management believes this shows significant
progress toward achieving consistently positive cash flows from operations on an
annual basis. Management also believes that the Company's existing cash and cash
equivalents at August 31, 1996, along with its available bank lines of credit,
and the proceeds of this offering will be sufficient to fund normal operations
for the foreseeable future. Such funds may not be sufficient to meet the
Company's longer term cash requirements to commercialize products currently
under development or its plans to acquire additional technology and products
that fit within the Company's mission statement. Accordingly, the Company may be
required to issue equity securities or enter into other financing arrangements
for a portion of the Company's future capital needs.
13
<PAGE> 16
BUSINESS
GENERAL
Neogen Corporation develops, manufactures, and markets a diverse line of
products used to detect residues and improve quality for the agriculture, food,
pharmacologics and environmental industries. The Company's products are grouped
into two areas, diagnostic test kits and veterinary instruments. The Company's
diagnostic test kits aid in the detection of foodborne bacteria, natural toxins,
drug residues, pesticide residues, disease infections and quality aspects. These
diagnostic test kits are less expensive, easier to use and provide greater
accuracy and speed than many of the conventional diagnostic methods currently
being used. The Company's veterinary instrument product line assists in the
promotion of animal health principally through the delivery of more precise drug
treatments such as antibiotics and vaccines.
The Company has developed and markets over 140 diagnostic test kits used in
food safety, plant diseases, animal health, pharmacologic research and a limited
number of products for human clinical use. These tests are generally immunoassay
products that rely on the Company's proprietary antibodies capable of the
detection of residues allowing for rapid and accurate test results. All of the
Company's diagnostic test kits are disposable, single use products. The Company
has developed its diagnostic test kits so they can be utilized across multiple
market segments. The Company's Ideal Instruments subsidiary manufactures and
markets over 250 different veterinary instrument products used to administer
animal health and in obstetrics and surgery.
The Company's vision is to become a world leader in diagnostic development
and marketing. To meet this vision, the Company has developed a growth strategy
consisting of the following elements: (i) increasing sales of existing products;
(ii) introducing new products and product lines; (iii) expanding international
sales; and (iv) acquiring business and forming strategic alliances.
The Company was formed as a Michigan corporation in June 1981 and actual
operations began in 1982. The Company's principal executive offices are located
at 620 Lesher Place, Lansing, Michigan 48912-1595 and its telephone number is
(517) 372-9200.
RECENT DEVELOPMENTS
First Quarter Results
The Company's revenues in its first quarter ended August 31, 1996 were 38%
greater than its revenues for the same quarter in the previous year. These sales
were led by an increase in the Company's diagnostic test kits for the detection
of vomitoxin in wheat, due to a major outbreak of this fungal-related, natural
toxin in the central and upper midwest states of Ohio, Indiana, Michigan,
Wisconsin, North and South Dakota and Minnesota. This toxin is not regulated as
a human pathogen, but its presence affects the quality of flour and feed
intended for animal use.
Japanese E. Coli Outbreak
The severe outbreak of infections from the bacteria E. coli O157:H7 in
Japan in July 1996 also had an impact on the Company's diagnostic sales. Company
management believes these sales opportunities will continue to grow as the
Japanese government now considers mandating E. coli O157:H7 testing in all of
its meat processing plants.
New U.S. Meat Regulations
Federal regulations concerning food safety and food adulteration have had a
favorable impact on the sales of several of the Company's diagnostic products,
and management believes this impact will be even greater in the future. In July
1996, the U.S. Department of Agriculture's Food Safety Inspection Service
adopted a final rule governing federally inspected meat and poultry processing
plants, and businesses outside the U.S. which export meat and poultry into the
U.S. This rule and accompanying regulations will require mandatory testing for a
number of hazardous adulterants that may affect the safety of meat and poultry.
Though these
14
<PAGE> 17
regulations do not begin to become effective until January 1997, management
expects them to have a positive impact on sales of several of the Company's
diagnostic test kits, such as the one to detect salmonella.
New U.S. Seafood Regulations Issued
In December 1995, the U.S. Food and Drug Administration issued a final rule
concerning the procedures required for safe and sanitary processing and
importing of fish and fishery products. This rule and accompanying regulations
have had no material effect on the Company's diagnostic revenues to this point,
since the rule does not become effective until January 1998. However, Company
management believes these regulations could have a positive impact on future
sales for its seafood marketing group, since the U.S. seafood industry has not
previously been subject to mandatory inspection.
Salmonella Test Approved
In September 1996, the Company was awarded an approval and certification
for its diagnostic test kit for the detection of salmonella by the Association
of Official Analytical Chemists -- Research Institute. This is a third party
test validation organization which is recognized on a worldwide basis.
Management believes this certification will further enhance sales of this
disposable diagnostic test kit.
New Distributorship Signed
In September 1996, the Company entered into a distribution agreement with
Merck KGaA to become the exclusive distributor to the U.S. food processing
industry for that company's test to determine the level of plant sanitation.
Marketed under the trade name Hy-Lite(R), the test detects the presence of any
living cells as an indication of whether processing equipment and other surfaces
have been properly cleaned and sanitized. The test requires less than 10 minutes
to conduct and is portable enough to be used at the site where cleaning is
taking place.
Restructuring Program Announced
In June 1996, the Company announced a restructuring program for certain
operating divisions. As part of the restructuring plan, the Company discontinued
its electronic instrument operations and implemented a reorganization of sales
and marketing activities related to veterinary instruments. The restructuring
program was designed to better position the Company over the long term to
compete more efficiently and increase market share. In connection with the
restructuring plan, the Company incurred a one-time charge of $696,000, or $.15
per share, in the fourth quarter of fiscal 1996. See Note 2 of the Notes to
Consolidated Financial Statements.
ACQUISITIONS
A part of the Company's growth strategy has been to acquire products and
businesses that provide the Company with access to technology or products with
which to expand its core business. Since 1982, the Company has made several such
acquisitions. The information below summarizes acquisitions completed in the
past three years.
International Diagnostic Systems Corporation
In June 1995, the Company acquired certain assets of International
Diagnostic Systems Corporation of St. Joseph, Michigan. The Company acquired
inventory and technology for 35 different diagnostic tests used to detect drugs
of abuse in animals. The business was moved to the Company's ELISA Technologies
division in Lexington, Kentucky.
AMPCOR, Incorporated
In August 1994, the Company, through its wholly owned subsidiary, AMPCOR
Diagnostics, Inc., acquired substantially all of the assets of AMPCOR,
Incorporated of Camden, New Jersey. The Company relocated the business to larger
facilities in Bridgeport, New Jersey and maintained most of the former company's
products and employees. The products and technologies allowed the Company to
make a strong entry into the market for the rapid detection of foodborne
bacteria.
15
<PAGE> 18
Enzytec, Incorporated
In October 1993, the Company acquired substantially all the assets of
Enzytec, Incorporated of Kansas City, Missouri. All acquired assets, consisting
of inventory, patent licenses and furniture and fixtures, were moved to the
Company's Lansing, Michigan operations and integrated with existing
manufacturing and marketing efforts. This acquisition provided the Company with
products and technology necessary to detect pesticides in food and in the
environment.
BUSINESS STRATEGY
The Company's vision is to become a worldwide leader in offering diagnostic
and detection products to the food, environmental and related markets. The
Company expects to expand its diagnostics and detection products and increase
its market penetration of veterinary instruments with a focus on new delivery
devices to minimize animal trauma and reduce the likelihood of drug residues in
meat and milk products. The Company's strategy to achieve these objectives
includes the following:
- Increased Sales Of Existing Products. The Company will continue to
expand its product offering in multiple market segments. The Company
focuses on selling its products into seven market segments: grain, nut and
spice processors; meat, poultry and egg processors; seafood processors;
animal producers; fruit and vegetable producers/processors; human clinical
and pharmacologic research; and private and public laboratories. The
Company has generally developed its diagnostic test kits so they can be
utilized across multiple market segments. This strategy has allowed the
Company to become the market leader in diagnostic products for the grain,
nut and spice processing industry and in diagnostic tests for the detection
of drugs in animals. Further, the Company has devoted significant resources
to take advantage of recent changes in testing requirements for the meat,
poultry and egg, and seafood processor markets.
- Introduction Of New Products. The Company has a continued commitment
to research and development programs and has invested approximately 10% of
revenues in this area over the past two years. The Company plans to
continue to leverage its own internal research and development efforts
through strategic relationships with other organizations and important
government contracts and grants. The majority of the Company's new product
development is focused on expanding disposable product offerings to the
Company's current markets, which offers the opportunity to generate repeat
sales. In fiscal 1996, approximately 70% of the Company's total revenue was
generated from sales of these disposable products. Further, the Company's
strategy is to develop new products that generally utilize the Company's
existing, proven technology base that is already well accepted by existing
customers.
- Expansion Of International Sales. The Company believes that the
demand outside the United States for disposable diagnostic test kits such
as those manufactured by the Company is at least equal to demand in the
United States. As such, the Company will continue to emphasize
international sales as an important factor in its growth. In fiscal 1996,
21% of the Company's total revenue was derived from international sales. A
majority of these sales came from South and Central America where the
Company has an established distribution system. While the Company expects
its business in the South and Central American markets to continue to grow,
it plans to devote additional resources to the Asian and European markets
as a new source of international sales. The Company is developing
distribution channels to take advantage of these markets where there is a
growing need for diagnostic test kits such as those manufactured by the
Company.
- Acquisitions And Strategic Alliances. In the past, the Company has
expanded its product offerings and technology base through several
acquisitions. It also seeks to expand its products through licensing and
distribution agreements demonstrated through its license with the U.S.
Department of Agriculture for specific antibodies and a recently completed
distribution agreement with Merck KGaA for U.S. distribution of its test
kit for the detection of proper sanitation. The Company plans to continue
to aggressively pursue strategic acquisitions, and licensing and
distribution agreements to enhance its position in its existing markets
where it is more cost effective to use these strategies rather than to rely
solely on internal development of new products.
16
<PAGE> 19
INDUSTRY OVERVIEW
Detection and diagnostic tests are used in a broad range of applications,
including food safety, environmental safety, plant health and animal health. In
the plant-related food area, tests are used to detect the presence of harmful
plant diseases, pesticide residues, naturally-occurring toxins, foodborne
bacteria and numerous general areas of quality such as fats, proteins and
vitamins. In the area of animal and seafood-related food products, detection and
diagnostic tests are used to detect the presence of diseases, harmful
contaminants in animal feeds, foodborne bacteria, natural toxins, drug residues
and a number of aspects of quality including proper cooking and protein
composition.
Industry consulting groups have estimated the total market for testing of
food and environmental safety will be in the range of $500 million by the year
2000. They estimate that a significant portion of this potential market is
represented by firms not testing and tests that are not currently being
conducted. Another significant portion of the market is represented by older,
traditional methods utilizing laborious microbiological techniques, or time
consuming, and expensive, chemical analysis. Management believes that a
significant portion of this market potential will shift to rapid, easy to use
and inexpensive, test systems such as those produced by the Company. These tests
allow the food and agricultural industries to conduct tests on-site with less
skilled technicians and a considerably reduced investment in laboratory
equipment. More importantly, the rapid test systems can provide results in hours
rather than days and reduce the likelihood of unsafe food reaching the food
distribution systems.
COMPANY MARKETS
The Company has focused its strategy on the food safety market with its
diagnostic products. The Company is marketing and developing several types of
diagnostic tests to aid each of the individual food market areas in detecting
natural toxins, drug residues, foodborne bacteria, pesticide residues, disease
infections and quality aspects. The Company's products are sold into the
following seven definable market segments:
Grain, nut and spice processors. These commodities generally serve as the
foundation of the food chain. Therefore, it is important to determine their
quality on a daily basis. Over 1.8 billion tons of grain are harvested and
stored each year throughout the world. Corn, wheat, barley, oats, milo, rice,
oil seeds and various other minor grain products become the principal ingredient
for a multitude of food industries. A large variety of nuts, along with spices,
chocolate, coffee and tea, are also almost universally consumed. The safety of
these ingredients is a significant source of concern for snack food producers,
pasta manufacturers, flour millers, bakeries, baby food producers, brewers,
distillers and cereal manufacturers, just to name a few of those whose
livelihood depends upon the abundance of safe ingredients. The world's
production of pork, chicken, turkey, eggs and a major portion of the beef supply
also depends on quality grains.
The Company's diagnostic tests are used throughout these industries to
monitor for the presence of harmful natural toxins, pesticides and foodborne
bacteria. The Company generally defines this market as being from the time the
products leave the farm gate until they reach the consumer's plate.
Residues of a number of these adulterants are controlled by regulatory
agencies such as the U.S. Department of Agriculture and the U.S. Food and Drug
Administration. The Company has an exclusive supply agreement with the Federal
Grain Inspection Service to supply aflatoxin test kits that are used to screen
for the presence of this natural toxin for most grain crops that are shipped
from the U.S. The Company's test kit for vomitoxin, another of the naturally
occurring toxins, is also widely used by regulatory agencies.
Management believes it is the leader in the sale of disposable diagnostic
tests to the grain, nut and spice industries and has a larger selection of
products available to these industries than any of its competitors.
Meat, Poultry and Egg Processors. People all over the world have become
increasingly aware of the dangers foodborne bacteria can cause in meat and
poultry products. These pathogens cause illness in over 6.5 million people,
resulting in over 9,000 deaths in the U.S. annually, according to the Centers
for Disease Control and Prevention.
17
<PAGE> 20
According to the U.S. Department of Agriculture, there are approximately
114 million cattle, hogs and lambs slaughtered in the U.S. each year and over
840 million chickens are processed in the U.S. annually. The principal concern
for meat, poultry and egg safety is contamination by foodborne bacteria. Meat
often moves through several processing operations before reaching the consumer.
In addition to the carcass conversion plants, meat is typically handled again in
further processing and by food service and retail establishments. Foodborne
bacteria can be introduced at any one of these processing operations.
Management believes that the meat and poultry group has the best
opportunity currently to contribute to the Company's growth. The Company offers
tests for the bacteria E. coli O157:H7, salmonella, and a test to determine the
general level of plant sanitation. Company scientists are developing additional
tests for the meat and poultry markets and expect to have two new foodborne
bacteria tests available before the end of the 1997 fiscal year. Some of the
Company's tests that were originally developed to detect drugs of abuse in
racing animals are also being used to detect the presence of these same drugs in
meat.
A major reorganization in testing procedures by the U.S. Department of
Agriculture's Food Safety Inspection Service was announced in July 1996.
Beginning in January 1997 these new regulations will begin to become mandatory
for all meat and poultry plants in the U.S. according to an adoption schedule
that will continue through January 2000. These new regulations will mandate
certain bacteria testing by all inspected plants, and the programs will
encourage the use of a number of other rapid tests, such as those produced by
the Company.
Seafood Processors. The U.S. seafood industry records sales in excess of
$29 billion each year. Seafood is known to cause foodborne illnesses as a result
of both natural toxins and bacteria. At present, the U.S. seafood industry does
not have mandatory inspection requirements before its products can be marketed.
However, in December 1995, the U. S. Food and Drug Administration issued final
rules that will establish mandatory inspection programs for this industry in the
U.S. Though the final rules will not be in full force until January 1998, the
industry is now beginning to implement quality control procedures that will
include the use of rapid diagnostic tests similar to those manufactured by the
Company. The tests include a general sanitation rapid test to help seafood
processors ensure that processing equipment is adequately cleaned on a daily
basis to prevent product contamination. Other tests are used to detect the
presence of salmonella and histamine, natural toxins that can result in serious
illness or death.
A significant portion of the world's seafood supply now comes from
aquaculture production rather than wild harvest. These producers and processors
must also be concerned about the possibilities of pesticide contamination from
runoff water into their production areas and residues of drugs that may have
been used to ensure fish health.
Animal Producers. The animal production industry promotes food safety even
while the animal is inside the farm gate. The Company's Ideal Instruments
subsidiary manufacturers and markets 250 different products that are used to
administer animal health. A number of these products have been developed to
provide more precise drug delivery. These instruments help minimize the presence
of animal health drugs that might find their way into the meat and milk supply.
Because the instruments are better engineered, they also minimize mechanical
injuries to muscle tissue which reduces the chance for infection.
The Company also markets a vaccine and a line of topical products that are
sold to the professional equine market. The Company's line of diagnostic tests
to detect drugs in animals are sold virtually throughout the world to detect the
presence of drugs of abuse in racing animals. Most racing jurisdictions perform
post-race tests on horses and greyhounds to make certain the animals'
performance was not altered intentionally by some drug.
Many integrated poultry and livestock producers also use the Company's
diagnostic tests to detect harmful residues in animal feeds. These residues can
affect overall production efficiencies.
Fruit and Vegetable Producers/Processors. The value of fruit and vegetable
production in the U.S. alone is estimated at $15 billion annually. As with
animals, significant portions of food safety begin inside the farm gate where
plant production takes place. The Company manufactures and markets a group of
diagnostic tests that are used by fruit and vegetable producers as well as
greenhouse and ornamental plant producers to detect
18
<PAGE> 21
the presence of certain infectious diseases. These diseases affect crop
production and can play a major role in the quality and safety of the final food
products. As an example, the Company markets a diagnostic test for the detection
of several fungal diseases, including the disease that causes black rot in
potatoes. These potatoes may appear perfectly healthy, but once they reach the
processor or consumer a tell-tale black spot will be found in the center of the
potato.
The Company's test kits help ensure the quality and safety of final plant
products and also help the producer limit the amount of pesticides applied
during the production cycle. This helps reduce the likelihood of pesticide
residues in final food products.
This industry's testing arises from the potential presence of harmful
residues that might affect the safety of its products. The residues that require
rapid and inexpensive test kits include foodborne bacteria, natural toxins, and
pesticides. Several of the Company's products meet these industry needs and
others are being developed. The Company began this year building the sales and
marketing organization to serve this industry and management expects product
demand will grow over the next several years.
Human Clinical and Pharmacologic Research. The Company sells a limited
number of products used in clinical medicine and by the pharmaceutical research
industry. Since these products can be manufactured in the same facilities,
utilizing the same equipment and personnel, the Company has continued to support
this market activity.
As the Company continues to develop diagnostic tests for the detection of
foodborne bacteria, it foresees an opportunity to introduce these products into
the human clinical market. For example, the same test used to detect the
presence of salmonella in a food product can also be used clinically to
determine if a patient is suffering from a salmonella infection. The market for
human clinical test products is well-established and is served by a number of
mature, well-capitalized firms. As a result, the Company does not intend to
enter into this market by itself, but expects to pursue opportunities in this
market only by means of strategic alliances and joint ventures with companies
presently in the market.
As a part of its immunoassay diagnostics test development programs, the
Company has discovered methods to manufacture unique, stable enzymes used in
test color development. The Company now markets these products to research
laboratories and other commercial diagnostic kit manufacturers around the world.
The Company does not anticipate being a major factor in these markets.
However, its current products are profitable and synergistic to the Company's
other manufacturing activities.
Private and Public Laboratories. Private laboratories purchase diagnostic
tests from the Company to provide testing services to most of the market areas
indicated in this section. These private laboratories perform tests for firms
which do not wish to do their own testing internally. Public laboratories
generally use the Company's test for regulatory purposes. As an example, the
U.S. Department of Agriculture uses several of the Company's natural toxin test
kits to determine the quality and safety of grain products. The Company's test
kit for the detection of E. coli O157:H7 is used by the Food Safety Inspection
Service to monitor for the presence of this harmful bacteria in a number of
laboratory locations. The Company's bacteria tests are used by government animal
pathology labs to aid in determining causes of animal health problems, and plant
tests are used in regulatory labs to aid in plant quarantine situations.
19
<PAGE> 22
PRODUCTS
The Company's products are grouped into two areas: disposable diagnostic
test kits and veterinary instruments. The test kit products are generally the
result of biotechnology discoveries that allow customers to detect natural
toxins, bacteria, drugs, pesticides and determine general quality
characteristics. These products are the result of efforts by chemists,
microbiologists and immunologists. The Company's veterinary instruments are the
result of engineering and manufacturing expertise to develop safe, unique and
durable metal instruments.
DIAGNOSTIC TEST KITS
The Company has developed and markets over 140 separate diagnostic test
kits used in food safety, plant diseases, animal health, pharmacologic research
and a limited number of products for human clinical use. These tests are
generally characterized as immunoassay products that rely on the Company's
proprietary antibodies capable of detecting these analytes at the parts per
billion levels. All the products are single use and allow customers to conduct
tests more rapidly than with older conventional testing methods. The test kits
are also less expensive, require less laboratory equipment and less technical
capabilities than conventional testing methods.
Food Safety. Several of the Company's food safety test kits are aimed at
the detection of harmful foodborne bacteria. By monitoring for these bacteria,
food processors can minimize their potential impact. These tests are marketed
under the Company's tradename, Reveal(R). Current tests in this one-step simple
format are used to detect the presence of salmonella and E. coli O157:H7.
Company scientists are also developing test kits for other harmful bacteria that
are expected to be completed during the current fiscal year. Through a marketing
agreement with Merck KGaA, the Company also has the distribution rights to the
U. S. food industry for Merck's product, HY-LITE(R), which is used to detect
general plant sanitation levels.
The Company's Veratox(R) and Agri-Screen(R) diagnostic tests are used by
the food industry to detect levels of naturally occurring toxins. These products
include both qualitative and quantitative tests for aflatoxin, vomitoxin, T-2
toxin, zerealenone, ochratoxin and fumonisin. Other natural toxin tests are
being developed to detect toxins of concern in fruits and vegetables.
The Company's Agri-Screen Ticket(R) test is used by the food industry to
detect harmful residues of a large number of plant pesticides.
Plant Diseases. Marketed under the tradename Alert(R), the Company has
several diagnostic tests that are used to detect plant diseases that affect crop
production as well as the quality and safety of the ensuing food products. These
quick 10 minute tests identify the presence of Pythium, Phytophthora,
Rhizoctonia, Xanthamonas and Sclerotina. The kits are used as an early detection
device, and as a tool to limit fungicide applications.
Animal Health. Under the ELISA Technologies(R) tradename, the Company
markets over 50 high sensitivity immunoassay tests for drugs of abuse in animals
and residues in meat. These include tests for narcotic analgesics, stimulants,
depressants, tranquilizers, anesthetics, steroids and diuretics.
The Company also has developed a test kit for the detection of a
proprietary drug used to control internal parasites. This test kit allows
poultry producers to monitor for the effective level of this drug as a feed
additive. The Company's tests for bacteria and natural toxins are also used by
producers to ensure animal health.
Other Diagnostic Tests. Marketed under the AMPCOR(R) label, the Company has
15 different diagnostic tests used by the human clinical market for the
detection of serology disorders and a sexually transmitted disease.
Sold under its ELISA Technologies tradename, the Company has several
products used for the detection of biologically active substances in humans by
researchers and pharmaceutical companies for biomedical research purposes. These
tests are used to detect cyclic nucleotides, hormones, leukotrienes,
prostaglandins and steroids. Under the trademarks K-Blue and K-Gold, the Company
sells reagents used by others in diagnostic test kit manufacturing.
Sales of this class of products accounted for approximately 62%, 63% and
70% of the Company's total revenues for fiscal years 1994, 1995 and 1996,
respectively.
20
<PAGE> 23
VETERINARY INSTRUMENTS
Through its wholly-owned subsidiary Ideal Instruments, Inc. ("Ideal"), the
Company markets a complete line of veterinary instruments and animal health
delivery systems. Ideal offers approximately 250 different products, over half
of which are instruments used to deliver animal health products such as
antibiotics and vaccines. Most of the remaining instruments are used in
obstetrics and surgery. Included among these products is a line of disposable
syringes and needles presently custom manufactured and imported by Ideal.
The veterinary instruments product line is designed to provide better
control of animal health products, thereby reducing the likelihood of antibiotic
and pharmaceutical residues contaminating meat or milk products. At the same
time, the use of quality, high precision delivery instruments helps producers
improve efficiency.
In fiscal years ended May 31, 1994, 1995 and 1996, sales of veterinary
instruments as a percentage of total revenues were 37%, 34% and 29%,
respectively.
21
<PAGE> 24
Please refer to the following table for a summary of the Company's
principal products and tradenames available for the various markets.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
MARKETS PRINCIPAL PRODUCTS TRADENAMES
- ------------------------------------- --------------------------------- ---------------------
<S> <C> <C>
Grain, Nut, Spice Processors Natural Toxins -- Quantitative -- 6 Veratox(R)
Natural Toxins -- Qualitative -- 6 Agri-Screen(R)
Pesticide Test Agri-Screen Ticket(R)
General Sanitation Test HY-LITE(R)(1)
Bacteria Tests -- 2 bacteria Reveal(R)
- ---------------------------------------------------------------------------------------------------
Meat, Poultry, Egg Processors Bacteria Tests -- 2 bacteria Reveal(R)
Animal Drug Tests -- 5 drugs Agri-Screen(R)
General Sanitation Test HY-LITE(R)(1)
- ---------------------------------------------------------------------------------------------------
Seafood Processors Bacteria Tests -- 2 bacteria Reveal(R)
Drug Test Insight(R)
General Sanitation Test HY-LITE(R)(1)
Natural Toxin Alert(R)
- ---------------------------------------------------------------------------------------------------
Animal Producers Veterinary Instruments -- 250 Ideal(R)
Feed Additive Test Coxistat(R)-Elisa(2)
Mycotoxin Tests -- 6 Agri-Screen(R)
Equine Vaccine Bot Tox B(R)
Bacteria Tests -- 2 Reveal(R)
Topical Compounds -- 6 Gold Nugget(R)
Animal Drugs Tests -- 55 ELISA Technologies(R)
- ---------------------------------------------------------------------------------------------------
Fruit--Vegetable Plant Disease-Qualitative -- 5 Alert(R)
Producers--Processors Plant Disease-Quantitative -- 4 Agri-Screen(R)
Bacteria Tests -- 2 Reveal(R)
Pesticide Test Agri-Screen Ticket(R)
General Sanitation Test HY-LITE(R)(1)
- ---------------------------------------------------------------------------------------------------
Clinical and Pharmacologics Biologically Active Substances -- 35 ELISA Technologies(R)
Substrate Reagents -- 2 K-Gold(TM)
K-Blue Substrate(R)
Serology Tests -- 5 AMPCOR(R)
Enteric Bacteria -- 2 Reveal(R)
- ---------------------------------------------------------------------------------------------------
Private and Public Laboratories Natural Toxins -- 6 Veratox(R)
Bacteria Tests -- 2 Reveal(R)
Animal Drug Tests -- 55 ELISA Technologies(R)
Plant Disease -- 5 Alert(R)
Biologically Active Substances -- 35 ELISA Technologies(R)
Serology Tests -- 5 AMPCOR(R)
- ---------------------------------------------------------------------------------------------------
</TABLE>
(1) Registered trademark of Merck KGaA
(2) Registered trademark of Pfizer
22
<PAGE> 25
RESEARCH AND DEVELOPMENT
The Company maintains a strong commitment to research and development. The
Company's product development efforts are focused on the enhancement of existing
product lines in development of new products based on the Company's existing
technologies. The Company employs 17 individuals in its research and development
department, including immunologists, chemists, engineers and microbiologists.
Research and development expenditures were approximately $856,000, $1.1 million
and $1.2 million, representing 8%, 10% and 10% of total revenues in fiscal 1994,
1995 and 1996, respectively. The Company currently intends to maintain its
research and development expenditures at approximately 10% of total revenues.
The Company has ongoing development projects for new immunoassay diagnostic
tests for the food safety and pharmacologics markets, as well as development
projects for new and improved veterinary instruments. Current and ongoing
research and development projects include:
U.S. Department of Agriculture Grant. The Company continues to work on a
grant from the U.S. Department of Agriculture for the development of a
time-temperature test device. This simple device, if perfected, could be used
for accurate assessment or monitoring of a fast-food restaurant's cooking
process and equipment. Research on this project is expected to continue
throughout fiscal 1997. There can be no assurance that this product will
ultimately be successfully developed or marketed.
Collaboration with Academic Institutions. Since its inception, the Company
has identified a substantial amount of applied research in its area of interest
at universities that has been developed by researchers. The Company has worked
with over 45 scientific collaborators associated with 17 academic institutions.
The Company utilizes these relationships in three strategic ways: (i) the
technology is transferred from the scientist or university to the Company for
the completion of development from the precursor findings or laboratory
prototypes; (ii) the Company seeks out and contracts with university researchers
to aid its own staff in a part of the development activities for products
previously identified by the Company; and (iii) new products developed by the
Company are tested in laboratories on a widespread geographic basis prior to the
products' market release. The Company believes its research strategy has enabled
it to produce better products, faster and more cost effectively than if the
research, development and testing were done exclusively by Company employees in
Company facilities.
Other Collaboration Efforts. Portions of certain technologies utilized in
some products marketed by the Company were acquired from or developed in
collaboration with affiliated partnerships, independent scientists, governmental
units, universities, and other third parties. The Company has entered into
agreements with these parties which provide for the payment of royalties based
upon sales of products which utilize the pertinent technology. For fiscal 1994,
1995 and 1996, royalty payments under these agreements amounted to $476,159,
$521,690 and $579,045, respectively.
SALES AND MARKETING
The Company has chosen to organize its sales efforts according to market
segments rather than by product or geographic orientation. Management believes
that this strategy has been partially responsible for its revenue growth and
market share increases. The Company's sales and technical service organizations
understand their customers' businesses and are knowledgeable on how the
Company's various products can be used within those industries. Close
relationships built with these individual customers also help the Company
identify new diagnostic test products that can be useful.
During the fiscal year ended May 31, 1996, the Company had in excess of
1,000 customers for its products. Since many of these customers are
distributors, the total number of end users of the Company's products is
considerably larger. Sales to international markets in fiscal 1996 accounted for
21% of the Company's consolidated revenues. See Note 9 of the Notes to the
Company's Consolidated Financial Statements. No single distributor or customer
accounted for more than 10% of the Company's revenues in any of the past three
years.
The Company markets, sells and services its products in more than 70
countries through its own sales force, as well as through distributors in
certain geographic areas. Forty-nine people, or approximately 30% of
23
<PAGE> 26
the Company's total employees, are engaged in these sales and marketing
activities. The Company operates its sales and distribution organization
differently for given markets and products as summarized below:
Food Diagnostic Products. The Company has separately organized sales forces
that focus on the key industries in the food area. This group handles both sales
and technical services of the Company's disposable test kits. These products are
all sold directly to end-users in the U.S. Sales organizations are maintained
for: grain, nut and spices; meat, poultry and eggs; fruits and vegetables; and
seafood.
Veterinary Instruments. The animal health distribution market is well
organized in most countries of the world. Consequently, the Company markets
virtually all of its veterinary instruments through a network of domestic and
international distributors. These distributors typically market pharmaceutical
and biological products that are companions to veterinary instruments. The
Company has a sales force specifically dedicated to sales of this product line
through the distributor channels.
Clinical And Pharmacologic Biomedical Research. The Company does not
anticipate being a major factor in the marketing of products used in the human
clinical and pharmaceutical research areas. However, several products are
included in the Company's array of diagnostic tests as a result of acquisitions.
These products are profitable and synergistic to the Company's other
manufacturing activities. A separate sales organization is responsible for this
product group and sells through distributors and to large end users.
International Sales. Virtually all of the Company's sales to customers
outside of the U.S. and Canada are through well established distributors who
typically market the Company's products as well as other products that are used
by the same customer base. The Company's distribution organization is stronger
in the South and Central American countries than in Europe or Asia since this
geographic area was the Company's first focus. The Company is currently pursuing
distribution channels in Europe and Asia to increase sales. The Company does not
maintain sales offices outside the U.S.
PROPRIETARY PROTECTION AND APPROVALS
The Company applies for patents and trademarks whenever appropriate. Since
its inception, the Company has acquired and received 20 patents and 24
trademarks, and has several pending patents and trademarks. The patents expire
at various times over the next 20 years, beginning in 1997.
The Company has no material pending litigation as to proprietary rights to
its products which poses a significant threat to its operations, and management
believes that the Company has adequate protection as to proprietary rights for
its products. However, the Company is aware that substantial research in
agricultural biotechnology has taken place at universities, governmental
agencies and other companies throughout the world and that numerous patent
applications have been filed and that numerous patents have been issued. In
addition, patent litigation (none involving the Company or its products)
currently exists with respect to fundamental agricultural biotechnology and
biochemistry. Accordingly, there can be no assurance that the Company's existing
patents will be sufficient to protect completely the Company's proprietary
rights.
The Company uses trade secrets as proprietary protection in numerous of its
diagnostic products. In many cases, the Company has developed unique antibodies
capable of detecting residues in minute levels. The supply of these antibodies,
and the proprietary techniques utilized for their development, oftentimes offer
better protection than the filing of patents. Such proprietary reagents are kept
in secure facilities and stored in more than one location to circumvent their
destruction by natural disaster.
One of the major areas affecting the success of biotechnology development
involves the time, costs and uncertainty surrounding regulatory approvals.
Currently, the only Company products requiring regulatory approval are Bot
Tox-B(R) and serological test kits sold to human clinical laboratories (which
were acquired via the Company's acquisition of AMPCOR, Incorporated). On a
combined basis, sales for these products amounted to less than 10% of total
sales in fiscal year 1996. The Company's strategy is to select products on the
fringe of regulatory approval areas which do not require mandatory approval to
be marketed.
The Company does utilize third party validations on many of its disposable
test kits as a marketing tool to provide its customers with the proper
assurances. These include validation by the Association of Official Analytical
Chemists, independently administered third-party, multi-laboratory collaborative
studies and approvals by the U.S. Federal Grain Inspection Service and the U.S.
Food Safety Inspection Service for use of Company products in their own
laboratories.
24
<PAGE> 27
MANUFACTURING
The Company manufactures its products in Lansing, Michigan, Lexington,
Kentucky, Bridgeport, New Jersey, and Schiller Park, Illinois. There are
currently 73 full-time employees assigned to manufacturing in these four
locations. All locations generally operate on a one-shift basis, but could be
increased to a two-shift basis. The Company believes it could double its current
output of its two primary product lines using the current space available with
minimal amounts of additional capital equipment.
The Company's Schiller Park, Illinois facility, which is used primarily to
manufacture the Ideal veterinary instruments line, is a complete metal working
operation with equipment that allows Ideal to go from raw materials, such as
brass rod and tubing, to finished instruments with skin-wrapped merchandisable
packaging.
The Lexington, Kentucky facility is devoted exclusively to the manufacture
of pharmacological diagnostic test kits, test kits for drug residues and related
products marketed by ELISA Technologies. Proprietary antibodies for some of
these diagnostic kits were produced at the University of Kentucky under a
license and supply agreement. All other manufacturing operations, including
preparation of other reagents, quality assurance and final kit assembly, are
performed by ELISA Technologies personnel in the Lexington facilities.
The Bridgeport, New Jersey facility manufactures all of the Company's
one-step diagnostic tests for the detection of microorganisms as well as test
kits sold into the human clinical laboratory market. Proprietary monoclonal and
polyclonal antibodies are produced as needed in laboratories at the New Jersey
operations. Additional laboratory personnel prepare reagents and perform quality
assurance functions. Final kit assembly, packaging and shipping are all
performed in specific designated areas within the New Jersey facility. The
manufacture of the one-step diagnostic tests requires the use of several
custom-designed machines which enable manufacturing personnel to achieve
high-volume output on a per-hour basis.
Manufacturing diagnostic tests for natural toxins, pesticides and plant
disease diagnostic tests takes place at the Company's corporate headquarters in
Lansing, Michigan. Proprietary monoclonal and polyclonal antibodies for the
Company's diagnostic kits are produced on a regular schedule in the Company's
immunology laboratories in Lansing. Other reagents are similarly prepared by the
chemistry group. These component parts are then transferred to another section
in the same building, where final kit assembly and quality assurance are
conducted, and shipping takes place.
The Company purchases component parts and raw materials from over 200
suppliers. Though many of these supplies are purchased from a single source in
order to achieve the greatest volume discounts, the Company believes it has
identified acceptable alternative suppliers for all of its components and raw
materials.
Shipments of diagnostic test kits and veterinary instrument products are
generally accomplished within a 48-hour turnaround time. As a result of this
quick response time, the Company does not maintain a large backlog of unshipped
orders.
COMPETITION
The Company knows of no competitor that is pursuing its fundamental
strategy of developing a full line of products ranging from disposable tests to
veterinary instruments for a large number of food safety concerns. However, the
Company does have competitors for each of its primary product lines. The Company
competes with a large number of companies ranging from very small businesses to
divisions of large companies. Many of these firms have substantially greater
financial resources than the Company.
Academic institutions and other public and private research organizations
are also conducting research activities and may commercialize products on their
own or through joint ventures. The existence of competing products or procedures
that may be developed in future years may adversely affect the marketability of
the products developed by the Company.
The Company competes primarily on the basis of ease of use, speed,
accuracy, and other similar performance characteristics of its products. The
breadth of the Company's product line, the effectiveness of its sales and
customer service organizations and pricing are also components in the Company's
competitive plan.
25
<PAGE> 28
GOVERNMENTAL REGULATION
A significant portion of the Company's products are affected by the
regulations of various domestic and foreign government agencies, including the
U.S. Department of Agriculture and the U.S. Food and Drug Administration. Though
less than 10% of the Company's revenue is currently derived from products
requiring government approval prior to sale, a significant portion of its
revenue is derived from products used to monitor and detect the presence of
residues that are regulated by various government agencies. Furthermore, a
significant portion of the Company's growth may be affected by the
implementation of new regulations such as the U.S. Food and Drug
Administration's final rule, Procedures For The Safe And Sanitary Processing And
Importing Of Fish And Fishery Products, and the final rule of the U.S.
Department of Agriculture, Pathogen Reduction; Hazard Analysis And Critical
Control Point Systems.
EMPLOYEES
As of August 31, 1996, the Company employed approximately 160 full-time
persons. None of the employees are covered by collective bargaining agreements.
There have been no work stoppages or slow downs due to labor-related problems.
The Company believes that its relationship with its employees is good. All
employees having access to proprietary information have executed confidentiality
agreements with the Company.
PROPERTIES
The Company's corporate offices and Michigan-based manufacturing and
research facilities are maintained in a 25,000 square foot building located in
Lansing, Michigan. This facility was purchased by the Company on land contract
in August 1985 and is fully paid for. In fiscal 1996, the Company purchased
additional facilities comprising 1,100 square feet within one block of the
existing corporate headquarters. The new facility is used for offices to
accommodate eight persons employed in sales and marketing functions.
Veterinary instrument manufacturing operations are housed in a 34,000
square foot building located at 9355 West Byron Street in Schiller Park,
Illinois. The Company entered into a seven-year, non-cancelable operating lease
for this property effective August 1, 1993. The lease agreement provides for
annual lease payments of $100,300 for each of the first two years with annual
increases of approximately 3.5% thereafter for the remainder of the lease.
The ELISA Technologies operations are maintained in 9,000 square feet of
leased space on two floors of a three story building located at 628 East Third
Street in Lexington, Kentucky. The Company entered into a five-year,
non-cancelable operating lease for the space effective July 1, 1993. The lease
agreement provides for annual lease payments, including all utilities, of
$57,600 for the first year and increasing by $1,200 per year each year
thereafter.
The AMPCOR Diagnostics, Inc. operations are housed in 9,200 square feet of
leased space on one floor in a building located at 603 Heron Drive, Bridgeport,
New Jersey. The Company entered into a three-year three-month, non-cancelable
operating lease for the space effective February 1, 1995. The lease agreement
provides for annual lease payments of $37,585 plus additional rent equal to
$7,334 per year with the additional rent subject to annual increase based upon
actual increases to certain operating expenses.
Management believes that the Company's operating facilities are suitable
for conducting its current and anticipated business.
LEGAL PROCEEDINGS
Although the Company is a party to ordinary routine litigation incidental
to its business, there are no pending material adverse legal proceedings.
INSURANCE
The Company maintains product liability insurance on all products with a
coverage limit of $2 million per occurrence. In addition, the Company also
maintains insurance in amounts and types which the Company believes to be
customary in its industry.
26
<PAGE> 29
MANAGEMENT
The Company's Articles of Incorporation provide for a five to nine member
Board of Directors at the discretion of the then existing Board. Directors are
elected to one-year terms of office. The executive officers of the Company are
elected to serve until removed at the discretion of the Board. The Board of
Directors has also named a Scientific Review Council to serve at the pleasure of
the Board. The Scientific Review Council meets approximately 6 times annually to
review the research progress of the Company and to recommend or approve new
research and product development activities of the Company. The following table
sets forth certain information with respect to the directors, executive officers
and other key individuals of the Company as of October 11, 1996.
<TABLE>
<CAPTION>
YEAR JOINED
NAME POSITION WITH THE COMPANY THE COMPANY
- ------------------------------ ------------------------------------------------- -----------
<S> <C> <C>
Herbert D. Doan(1)(2)......... Chairman, Board of Directors..................... 1984
James L. Herbert.............. President, Chief Executive Officer, Director..... 1982
G. Bruce Papesh(3)............ Secretary, Director.............................. 1993
Gordon E. Guyer, Ph.D.(3)..... Director......................................... 1990
Robert M. Book(2)............. Director......................................... 1990
Leonard Heller, Ph.D.(3)...... Director......................................... 1992
Jack C. Parnell(1)............ Director......................................... 1993
Thomas H. Reed(2)............. Director......................................... 1995
Lon M. Bohannon............... Vice President, Chief Financial Officer, 1985
Director.........................................
Brinton M. Miller, Ph.D....... Vice President, Scientific Affairs............... 1984
Gerald S. Traynor............. Vice President................................... 1990
Donald W. Uglow............... Vice President................................... 1990
Terri A. Juricic.............. Vice President................................... 1992
Martin R. Gould............... Vice President, AMPCOR Diagnostics, Inc. ........ 1994
Sudhakar L. R. Vulimiri....... Vice President, AMPCOR Diagnostics, Inc. ........ 1994
David J. Ledden, Ph.D. ....... Vice President................................... 1994
Edward L. Bradley............. Vice President................................... 1994
John E. Cantlon, Ph.D. ....... Chairman, Scientific Review Council.............. 1990
N. Edward Tolbert, Ph.D. ..... Scientific Review Council........................ 1982
Robert Hollingworth, Ph.D. ... Scientific Review Council........................ 1991
Gavin L. Meerdink, DVM........ Scientific Review Council........................ 1992
Perry Gehring, Ph.D. ......... Scientific Review Council........................ 1994
</TABLE>
- -------------------------
(1) Member of Compensation Committee
(2) Member of Stock Option Committee
(3) Member of Audit Committee
There are no family relationships among directors, officers or key
individuals. Information concerning the Board of Directors, executive officers
and key individuals of the Company follows:
HERBERT D. DOAN, age 73, has been a director of the Company since September 1982
and the Company's Chairman of the Board of Directors since October 1984. Mr.
Doan has served as President of the Herbert H. and Grace A. Dow Foundation since
February 1996 and is chairman of the Michigan Molecular Institute, a position he
has held since 1964. He was formerly President and Chief Executive Officer of
Dow Chemical Company. He has been active as an independent venture capitalist
for the past five years.
JAMES L. HERBERT, age 56, has been President, Chief Executive Officer, and a
director of the Company since he joined the Company in June 1982. He previously
held the position of Corporate Vice President of DeKalb Ag Research, a major
agricultural genetics and energy company. He has management experience in animal
biologics, specialized chemical research, medical instruments, aquaculture,
animal nutrition, and poultry and livestock breeding and production.
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<PAGE> 30
G. BRUCE PAPESH, age 49, was elected to the Board of Directors in October 1993
and was elected Secretary in October 1994. Mr. Papesh was co-founder of Dart,
Papesh & Co., a Lansing, Michigan based investment consulting and financial
services firm. He has served as President of Dart, Papesh and Co. Inc., since
1987. Mr. Papesh provides investment services to Dart Container Corporation and
its affiliates which, on a combined basis, own 8.5% of the Company's Common
Stock. Mr. Papesh asserts that he has no investment power over the Company's
common stock owned by Dart Container Corporation and its affiliates. Mr. Papesh
also serves on the Board of Directors of Immucor, Inc., a publicly traded
immunodiagnostics company that manufactures and market tests, reagents and
instruments for the human clinical blood bank industry.
DR. GORDON E. GUYER, age 70, joined the Board of Directors in January 1990. Dr.
Guyer is currently serving as director for the Michigan Department of
Agriculture, a position he has held since 1993. Prior to his current position,
Dr. Guyer served as interim President of Michigan State University and was Vice
President of Governmental Affairs since 1988. From 1986 to 1988, he was Director
of the Department of Natural Resources for the State of Michigan.
ROBERT M. BOOK, age 66, was elected to the Board of Directors in November 1990.
Since January 1993, Mr. Book has served as President of AgriVista, Inc. a
company that provides agricultural consulting and marketing services. He served
as President of the Indiana Institute of Agriculture, Food and Nutrition, from
1983 through 1992. He was formerly Group Vice President of Agriculture Marketing
for Elanco Products Company. In January 1992, Mr. Book filed a petition for
relief under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy
Court, Southern District of Indiana, Indianapolis Division. This petition was
discharged on February 24, 1994. The Company believes that the filing of this
petition has had no effect on Mr. Book's ability to serve as director.
DR. LEONARD E. HELLER, age 51, was elected to the Board of Directors in October
1992. He has been an independent consultant in the area of medical, biomedical,
and pharmaceutical information systems since 1993. From 1992 to 1993, he was
Secretary, Cabinet for Human Resources for the Commonwealth of Kentucky. From
1986 to 1993 he was part owner of O.J. Packaging Inc., a retail packaging
company, and a general partner in Illinois Diversatech, a real estate
development partnership located in Manteno, Illinois.
JACK C. PARNELL, age 61, was elected to the Board of Directors in October 1993.
Since 1991, he has held the position of Governmental Relations Advisor with the
law firm of Kahn, Soares and Conway. In 1989, Mr. Parnell was appointed by
President Bush to serve as Deputy Secretary for the U.S. Department of
Agriculture. From 1983 to 1989, he served in three different senior governmental
positions for the State of California, including Secretary for the California
Department of Food and Agriculture from 1987 to 1989. Prior to 1987, Mr. Parnell
was a private entrepreneur who owned and operated various businesses including
diversified cattle and farming operations. The firm of Kahn, Soares and Conway
currently acts as the Company's government relations advisor.
THOMAS H. REED, age 51, was elected to the Board of Directors in October 1995.
He currently serves as President and Chief Executive Officer for the Michigan
Livestock Exchange where he has worked since 1977. Mr. Reed is a member of the
Board of Directors of City Bank, St. Johns, Michigan and is a former chairman of
the Michigan State University Board of Trustees.
LON M. BOHANNON, age 43, joined the Company in October 1985 as Vice President of
Finance, was promoted to Chief Financial Officer in June 1987, was promoted to
Vice President-Administration and Chief Financial Officer in November 1994, and
elected to the Board of Directors in October 1996. He is responsible for all
areas of accounting, finance, human resources, and investor relations. A CPA, he
was Administrative Controller for Federal Forge, Inc., a metal forging and
stamping firm, from March 1980 until October 1985, and a member of the public
accounting firm of Ernst & Young from June 1975 to March 1980.
DR. BRINTON M. MILLER, age 69, joined the Company in January 1984 as Vice
President of Research and Development. He presently serves as the Company's
chief scientific officer. Prior to joining the Company, Dr. Miller held numerous
research management positions during his 27 years with Merck, Sharp and Dohme
Laboratories.
28
<PAGE> 31
GERALD S. TRAYNOR, age 61, joined the Company in July 1990 as General Manager
for Ideal Instruments, Inc. He was promoted to Vice President of Instrument
Development and Manufacturing in January 1991 with responsibility for the
Company's veterinary instrument and electronic instrument manufacturing
operations. He was Vice President of Manufacturing for Martin Yale Industries
for three years before joining the Company and had served in the same position
with The Hedman Company from 1983-1987. Earlier, he served 16 years in various
manufacturing management positions at ITT.
DONALD W. UGLOW, age 55, joined the Company in October 1990 as Vice President of
Diagnostic Sales. He is responsible for sales activities for the Company's line
of diagnostic products for food safety to the grain, nut and spice, and the
fruit and vegetable markets. Prior to joining the Company, he served for four
years as Ag Chemical Sales and Marketing Manager for Great Lakes Chemical
Company. Prior to his experience at Great Lakes Chemical, he owned and operated
a farm implement business and served in sales and marketing management of
Ciba-Geigy.
TERRI A. JURICIC, age 31, joined the Company in September 1992 as part of the
Company's acquisition of WTT, Incorporated. She currently serves as Vice
President and General Manager of the Company's ELISA Technologies division. Ms.
Juricic graduated from Miami University in 1986. From 1986 to 1991, she was
Controller for Freeze Point Cold Storage Systems and concurrently served in the
same capacity for Powercore, Inc. In 1990, she joined WTT, Incorporated as
President, the position she held at the time the Company acquired the business.
MARTIN R. GOULD, age 45, joined the Company in August 1994 in connection with
the Company's acquisition of AMPCOR, Incorporated. He currently serves as Vice
President and General Manager for AMPCOR Diagnostics, Inc. From 1974 to 1986 he
served as manager of Research and Development and Production Manager for E.M.
Science, a division of Merck and Company. In 1987, he joined AMPCOR,
Incorporated, as President, a position he held at the time the Company acquired
the business.
SUDHAKAR L. R. VULIMIRI, age 41, joined the Company in August 1994 as part of
the Company's acquisition of AMPCOR, Incorporated. His current responsibilities
as Vice President of AMPCOR Diagnostics, Inc. include manufacturing,
engineering, and product development. From 1983 to 1987 he worked for E.M.
Diagnostic Systems, a division of Merck and Company, serving in the positions of
research scientist and research engineer. In 1987, he joined AMPCOR,
Incorporated as its firm's Executive Vice President.
DR. DAVID J. LEDDEN, age 44, joined the Company in December 1994 as Vice
President of Research and Development responsible for overseeing all of the
Company's research and development programs at all locations. From 1990 to 1994,
Dr. Ledden was Manager of Immunoreagents and Protein Chemistry at Boehringer
Mannheim in Indianapolis where he managed a 25 person R & D group. Dr. Ledden
has also held R & D management positions at 3M Corporation and the Ames Division
of Miles Laboratories. Dr. Ledden received his B.S. and M.S. degrees in
Biochemistry from Penn State University and his Ph.D. in Biochemistry from the
University of Louisville.
EDWARD L. BRADLEY, age 36, joined the Company in February 1995 as Vice President
of Sales and Marketing for AMPCOR Diagnostics, Inc. In June 1996, he also
assumed sales and marketing management responsibilities for Ideal Instruments.
From 1988 to 1995, Bradley served in several sales and marketing capacities for
Mallinckrodt Animal Health, most recently holding the position of National Sales
Manager responsible for the company's 40 employees in their Food Animal Products
Division. Prior to joining Mallinckrodt, Bradley held several sales and
marketing positions for Stauffer Chemical Company.
DR. JOHN E. CANTLON joined the Scientific Review Council in August 1990 and was
elected chairman in 1992. He was a member of the faculty of Michigan State
University from June 1954 until he retired in 1990. He served as Vice President
of Research and Graduate Studies for Michigan State University beginning in
1975.
DR. N. EDWARD TOLBERT has been a member of the Scientific Review Council since
February 1984. He has been a professor of biochemistry at Michigan State
University since June 1958, is the former president of the Society of Plant
Physiology and a member of the National Academy of Sciences.
29
<PAGE> 32
DR. ROBERT HOLLINGWORTH joined the Scientific Review Council in July 1991. Since
1987, he has served as director of the Pesticide Research Center and professor
at Michigan State University. Prior to joining Michigan State University, Dr.
Hollingworth was a professor in the Department of Entomology at Purdue
University for over 20 years.
DR. GAVIN L. MEERDINK joined the Scientific Review Council in October 1992. Dr.
Meerdink has a 20-year career as a diagnostician and toxicologist with special
interest in agricultural chemicals and mycotoxins. Since 1989, he has served as
Professor and Head of Clinical Toxicology in the College of Veterinary Medicine
at the University of Illinois. From 1983 to 1989 he was Chief Diagnostician and
Research Scientist at the University of Arizona and he has held associate
professorships at Michigan State University and Iowa State University. Early in
his career, Dr. Meerdink spent four years in private practice as a Doctor of
Veterinary Medicine.
DR. PERRY GEHRING joined the Scientific Review Council in April 1994. Dr.
Gehring has served as Vice President for Research and Development of Dow Elanco
since 1989. His career has focused primarily on the study of toxicity of
chemical substances. In addition to his current position, he has held various
senior research and development executive positions for the Dow Chemical
Company.
30
<PAGE> 33
PRINCIPAL SHAREHOLDERS
The following table sets forth information regarding beneficial ownership of
the Company's Common Stock as of October 11, 1996. Information is included for:
(i) each person or entity known by the Company to own beneficially more than 5%
of the Company's outstanding Common Stock prior to this offering; (ii) each of
the Company's directors who beneficially own the Company's Common Stock; and
(iii) all directors and officers as a group who beneficially own the Company's
Common Stock.
<TABLE>
<CAPTION>
PERCENT PERCENT OWNED
SHARES OWNED PRIOR AFTER
NAME AND ADDRESS OWNED TO OFFERING OFFERING(1)
- ------------------------------------------------------------------ ------- ----------- -------------
<S> <C> <C> <C>
Dart Container Corporation and Affiliates
Kenneth B. Dart Residual Trust and Robert C. Card
c/o First Interstate Bank of Nevada, N.A.
Trust Department
3800 Howard Hughes Parkway, Suite 200
Las Vegas, NV 89190............................................... 389,675 8.5% 6.4%
Herbert D. Doan(2)
P.O. Box 169
Midland, MI 48640................................................. 302,888 6.6% 5.0%
James L. Herbert(2)
Neogen Corporation
620 Lesher Place
Lansing, MI 48912................................................. 271,010 5.9% 4.4%
Gordon E. Guyer, Ph.D(2)
862 Whitman Dr.
East Lansing, MI 48823............................................ 17,999 * *
Robert M. Book(2)
c/o AgriVista
8440 Woodfield Crossing Blvd.
Suite 300
Indianapolis, IN 46240-3400....................................... 15,999 * *
Leonard E. Heller, Ph.D(2)
260 Mount Tabor Rd. #1
Lexington, KY 40502............................................... 56,766 1.2% *
G. Bruce Papesh(2)
c/o Dart Papesh and Co., Inc.
501 S. Capital Ave.
Suite 111
Lansing, MI 48933-2331............................................ 11,999 * *
Jack C. Parnell(2)
c/o Kahn, Soares and Conway
1112 "I" Street, Suite 200
Sacramento, CA 95814.............................................. 11,999 * *
Thomas H. Reed(2)
c/o Michigan Livestock Exchange
2651 Coolidge Rd.
East Lansing, MI 48823............................................ 1,866 * *
Lon M. Bohannon(2)
Neogen Corporation
620 Lesher Place
Lansing, MI 48912................................................. 82,837 1.8% 1.4%
All current directors and executive officers as a group (sixteen
persons)(2)....................................................... 872,383 18.3% 13.9%
</TABLE>
- -------------------------
* Less than 1%
(1) Assumes that these stockholders do not purchase any shares which are the
subject of this offering.
(2) Includes the following shares of Common Stock which directors and executive
officers have the right to acquire by exercise of options within 60 days of
October 11, 1996; Mr. Doan -- 19,999 shares; Mr. Herbert -- 28,000 shares;
Dr. Guyer -- 17,999 shares; Mr. Book -- 15,999 shares; Dr. Heller -- 13,999
shares; Mr. Papesh -- 11,999 shares; Mr. Parnell -- 11,999 shares; Mr.
Bohannon -- 9,400 shares; all current directors and executive officers as a
group -- 176,860.
31
<PAGE> 34
CERTAIN TRANSACTIONS
Dr. Leonard E. Heller, a member of the Board of Directors, and Terri A.
Juricic, a Vice President of the Company, owned 55% and 20%, respectively, of
WTT Incorporated, a Kentucky-based company which sold immunoassay diagnostics
for agricultural and research markets. In September 1992, the Company acquired
substantially all of the assets of WTT. The purchase price consisted of an
initial payment of cash and stock and a secondary payment of stock in October
1993, which resulted in total consideration of approximately $1,120,000. It is
estimated that Dr. Heller's share of this transaction, after deducting
liabilities of WTT not assumed by the Company, was approximately $313,000 in
cash and 42,767 shares of the Company's Common Stock. It is estimated that Ms.
Juricic's share of this transaction, after deducting liabilities of WTT not
assumed by the Company, was approximately $114,000 in cash and 15,552 shares of
the Company's Common Stock.
Martin R. Gould and Sudhakar L. R. Vulimiri, Vice Presidents of a
wholly-owned subsidiary of the Company, owned 32% and 20%, respectively, of
AMPCOR, Incorporated, a New Jersey-based company which sold diagnostic test kits
to detect microorganisms. In August 1994, the Company acquired substantially all
of the assets of AMPCOR, Incorporated. The initial purchase price consisted of a
payment of cash, stock, and assumption of certain liabilities which resulted in
total consideration of approximately $1,760,600 (See Note 3 of the Notes to the
Company's Consolidated Financial Statements). It is estimated that Mr. Gould's
share of this transaction, after deducting liabilities of AMPCOR, Incorporated
not assumed by the Company, was approximately $104,000 consisting of 17,800
shares of the Company's Common Stock. It is estimated that Mr. Vulimiri's share
of this transaction, after deducting liabilities of AMPCOR, Incorporated not
assumed by the Company, was approximately $65,000 consisting of 11,000 shares of
the Company's Common Stock.
Jack C. Parnell, a Company director, is a governmental relations advisor to
the law firm of Kahn, Soares & Conway. Kahn, Soares & Conway has been retained
by the Company to represent it in governmental relations matters. The Company
pays Kahn, Soares & Conway a monthly fee of $1,750 for ten hours of consulting.
The agreement with Kahn, Soares & Conway is terminable by either party at the
end of any month.
32
<PAGE> 35
DESCRIPTION OF CAPITAL STOCK
The Company's authorized capital stock consists of 10,000,000 shares of
common stock, $.16 par value. The following description of certain matters
relating to the capital stock of the Company is a summary and is qualified in
its entirety by the provisions of the Company's Articles of Incorporation.
COMMON STOCK
The Company had 4,598,042 shares issued and outstanding immediately prior
to the date of this Prospectus. Holders of Common Stock are entitled to one vote
for each share held on all matters submitted to a vote of stockholders and do
not have cumulative voting rights. Accordingly, holders of a majority of the
outstanding shares of Common Stock entitled to vote in any election of Directors
may elect all of the Directors standing for election.
Holders of Common Stock are entitled to receive ratably such dividends, if
any, as may be declared by the Board of Directors out of funds legally available
therefor. Upon the liquidation, dissolution or winding-up of the Company,
holders of Common Stock are entitled to receive ratably the net assets of the
Company available for distribution after the payment of all debts and other
liabilities of the Company. Holders of Common Stock have no preemptive,
subscription, redemption or conversion rights. The outstanding shares of Common
Stock are, and the shares offered hereby will be, when issued and paid for,
fully paid and nonassessable.
MICHIGAN LEGISLATION/CERTAIN PROVISIONS OF THE MICHIGAN BUSINESS CORPORATION ACT
The Company is subject to the provisions of Chapter 7A of the Michigan
Business Corporation Act ("MBCA") which applies to certain "Business
Combinations", defined to include a range of significant transactions such as
mergers, substantial sales of assets or securities issuances and liquidation,
recapitalization or reorganization plans. In general, Chapter 7A requires, for
any Business Combination with an "Interested Shareholder" (generally a
beneficial owner of 10% or more of the voting power of the Company's outstanding
voting stock), an advisory statement from the Board of Directors, the approval
of holders of at least 90% of the outstanding shares of each class of Company
voting stock and the approval of two-thirds of the holders of outstanding shares
of each such class, excluding those held by the Interested Shareholder, its
affiliates and associates. These requirements do not apply, however, where the
Interested Shareholder satisfies certain "fair price" form of consideration and
procedural requirements specified in the Chapter (including a requirement that
the Business Combination not occur within five years of attainment of Interested
Shareholder status) or where the Company's Board has approved the transaction
specifically, generally or generally by type prior to the Interested Shareholder
becoming an Interested Shareholder. Chapter 7A would cease to apply to the
Company if its Charter were amended to elect not to be covered by the Chapter,
but such an amendment would require the same votes for approval as the Chapter
requires for approval of a Business Combination with an Interested Shareholder.
The Company also is subject to Chapter 7B of the MBCA. Generally, Chapter
7B would divest of all voting rights any shares of the Common Stock acquired in
a "Control Share Acquisition", defined, subject to certain exclusions (including
an exclusion for a merger or consolidation to which the Company is a party), as
any acquisition of issued and outstanding "Control Shares", unless and until a
majority of all shares, and of all non-"Interested Shares", approve such voting
rights. In general, "Interested Shares" are shares owned or controlled as to
voting power by employee-directors of the Company, certain of its officers, the
entity making or proposing to make the Control Share Acquisition or its
affiliates. "Control Shares" are defined as shares that, when added to those
already owned or controlled as to voting power by an entity, would (if not for
the Chapter) give the entity voting power in the election of directors of the
Company within any of three thresholds: one-fifth, one-third and a majority. If
a Control Share Acquisition is approved as required by Chapter 7B, the Chapter
would afford special dissenters' rights to Company shareholders thereafter. By
an amendment to its Articles of Incorporation or Bylaws electing not to be
covered, either the Company's Board of Directors or its shareholders could cause
the Chapter to be inapplicable to Control Share Acquisitions
33
<PAGE> 36
occurring hereafter, for as long as such amendment continued in effect. The
Board currently has no plans to effect any such amendment, nor is it aware of
any other plans or proposals to do so.
The MBCA also contains certain "anti-greenmail" provisions, intended
generally to limit a covered corporation's ability to purchase shares from a 3%
or more shareholder at a premium over market price absent some form of prior
approval by the corporation's shareholders. These provisions are only triggered,
however, where the corporation has a class of securities listed on a national
securities exchange. Currently, the Company has no such class of listed stock
and no intention of effecting any such listing.
The foregoing discussion concerning the Common Stock and provisions of the
MBCA is qualified in its entirety by reference to pertinent sections of the
Company's Articles of Incorporation and to such MBCA provisions, respectively. A
copy of the Articles of Incorporation is on file with the Commission as an
exhibit to the Registration Statement. See "Additional Information."
Under Sections 561-571 of the MBCA, directors and officers of a Michigan
corporation may be entitled to indemnification by the corporation against
judgments, expenses, fines and amounts paid by the director or officer in
settlement of claims brought against them by third persons or by or in the right
of the corporation if those directors and officers acted in good faith and in a
manner reasonably believed to be in, or not opposed to, the best interests of
the corporation or its shareholders.
The Company is obligated under its bylaws to indemnify any present or
former director, officer or employee of the Company to the fullest extent now or
hereafter permitted by law in connection with any actual or threatened civil,
criminal, administrative or investigative action, suit or proceeding arising out
of their past or future service to the Company or a subsidiary, or to another
organization at the request of the Company or a subsidiary.
In addition, the MBCA permits a Michigan corporation to limit the personal
liability of directors for breach of their fiduciary duty. The Company's
Articles of Incorporation so limit the liability of its directors to the maximum
extent permitted by Michigan law.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers or persons controlling the
registrant pursuant to the foregoing provisions, the registrant has been
informed that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Company's Common Stock is American
Stock Transfer and Trust Company of New York.
34
<PAGE> 37
UNDERWRITING
The Underwriters named below have severally agreed, subject to the terms
and conditions contained in the Underwriting Agreement, to purchase from the
Company the aggregate number of shares of Common Stock (assuming the
Underwriters' over-allotment option is not exercised) set forth below opposite
their respective names.
<TABLE>
<CAPTION>
NUMBER
UNDERWRITERS OF SHARES
- --------------------------------------------------------------------------------- ---------
<S> <C>
Roney & Co.......................................................................
The Ohio Company.................................................................
---------
Total....................................................................... 1,500,000
=========
</TABLE>
The Underwriting Agreement provides that all of the Common Stock being
offered, excluding shares covered by the over-allotment option granted to the
Underwriters, must be purchased if any are purchased.
The Company has been advised that the several Underwriters propose to offer
the Common Stock to the public at the public offering price set forth on the
cover page of this Prospectus and may offer to selected dealers at such price
less a concession of not more than $ per share; that the Underwriters may
allow and such dealers may reallow a concession of $ per share on sales to
certain other dealers; and that the public offering price and concessions and
reallowances to dealers may be changed by the Underwriters.
The Company has granted to the Underwriters options to purchase up to an
additional 225,000 shares of Common Stock at the public offering price, less the
underwriting discounts and commissions, shown on the cover page of this
Prospectus, solely to cover over-allotments, if any. The options may be
exercised at any time up to 30 days after the date of this Prospectus. To the
extent that such option is exercised, each Underwriter will become obligated,
subject to certain conditions, to purchase approximately the same percentage of
such additional shares as the number set forth in the table above bears to the
total number of shares of Common Stock offered.
The Underwriting Agreement provides that the Company will indemnify the
several Underwriters against certain liabilities, including civil liabilities
under the Securities Act, or will contribute to payments the Underwriters may be
required to make in respect thereof.
All of the executive officers and directors of the Company have agreed not
to offer, sell, contract to sell, or grant any option to purchase or otherwise
dispose of any of the shares of Common Stock during the period of 90 days after
the date of this Prospectus without the prior written consent of Roney & Co. and
The Ohio Company ("Representatives"). The Company has further agreed not to
offer, sell, contract to sell, or otherwise dispose of any shares of Common
Stock or any securities convertible into shares of Common Stock (except pursuant
to employee and director stock plans or in consideration of acquisitions) for a
period of 90 days after the date of this Prospectus without the prior written
consent of the Representatives.
In connection with this offering, the Underwriters and selling group
members (if any) may engage in passive market making transactions in the shares
of Common Stock on the Nasdaq National Market immediately prior to the
commencement of sales in this offering, in accordance with Rule 10b-6A under the
Exchange Act. Passive market making consists of displaying bids on the Nasdaq
National Market limited by the bid prices of independent market makers and
purchases limited by such prices and effected in response to order flow. Net
purchases by a passive market maker on each day are limited to a specific
percentage of the
35
<PAGE> 38
passive market maker's average daily trading volume in the shares of Common
Stock during a specified prior period and must be discontinued when such limit
is reached. Passive market making may stabilize the market price of the shares
of Common Stock at a level above that which might otherwise prevail and, if
commenced, may be discontinued at any time.
LEGAL MATTERS
Certain legal matters in connection with the Common Stock offered hereby
will be passed upon for the Company by Fraser Trebilcock Davis & Foster, P.C.,
Lansing, Michigan. Certain legal matters in connection with the Offering will be
passed upon for the Underwriters by Honigman Miller Schwartz and Cohn, Detroit,
Michigan.
EXPERTS
The financial statements included and incorporated by reference in this
Prospectus and in the Registration Statement have been audited by BDO Seidman,
LLP, independent certified public accountants, to the extent and for the periods
set forth in their report appearing elsewhere herein and incorporated herein by
reference, and are included and incorporated herein in reliance upon such report
given upon the authority of said firm as experts in auditing and accounting.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission,
Washington D.C., a Registration Statement under the Securities Act of 1933 with
respect to the Common Stock being offered by this Prospectus. This Prospectus
does not contain all of the information contained in the Registration Statement.
For further information about the Company and the Common Stock offered,
reference is made to the Registration Statement and its exhibits and schedules.
Statements contained in this Prospectus as to the contents of any contract or
any other documents are not necessarily complete. Where the contract or other
document is an exhibit to the Registration Statement, each statement is
qualified in all respects by the provisions of that agreement.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 (the "Exchange Act") and in accordance therewith files
reports, proxy statements and other information with the Securities and Exchange
Commission (the "Commission"). Reports, proxy information and statements and
other information filed by the Company with the Commission can be inspected and
copies at the Public Reference Section of the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549, and at 7 World Trade Center, Suite 1300, New York,
New York. Copies may be obtained, at prescribed rates, by mail from the Public
Reference Section of the Commission at its Washington, D.C. address set forth
above. The Commission maintains a Web site that contains reports, proxy
information and statements, and other information regarding registrants that
file electronically with the Commission. The Web site address is
http://www.sec.gov. The Company files electronically.
36
<PAGE> 39
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Securities and
Exchange Commission are incorporated herein by reference:
A. The Company's Annual Report on Form 10-KSB for the fiscal year
ended May 31, 1996;
B. The Company's Quarterly Report on Form 10-QSB for the quarter ended
August 31, 1996;
C. The Company's Registration Statement on Form 8-A registering the
Common Stock under Section 12(g) of the Exchange Act.
All documents filed by the Company with the Commission pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to September 13, 1996
and prior to the termination of the offering of the Common Stock registered
hereby shall be deemed to be incorporated by reference into this Prospectus and
to be a part hereof from the date of filing such documents. Any statement
contained in a document incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein modified or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, upon written or oral request of such person, a copy of
any or all of the foregoing documents incorporated by reference into this
Prospectus (without exhibits to such documents other than exhibits specifically
incorporated by reference into such documents). Requests for such copies should
be directed to the Investor Relations Department of the Company, 620 Lesher
Place, Lansing, Michigan 48912; (517) 372-9200.
37
<PAGE> 40
NEOGEN CORPORATION AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Report of Independent Certified Public Accountants.................................... F-2
Consolidated Balance Sheets as of May 31, 1995, May 31, 1996 and
August 31, 1996 (Unaudited)......................................................... F-3
Consolidated Statements of Operations for the Years Ended May 31, 1994, May 31, 1995
and May 31, 1996 and for the Three Months Ended August 31, 1995 (Unaudited) and
August 31, 1996 (Unaudited)......................................................... F-4
Consolidated Statements of Stockholders' Equity for the Years Ended May 31, 1994, May
31, 1995 and May 31, 1996 and for the Three Months Ended August 31, 1996
(Unaudited)......................................................................... F-5
Consolidated Statements of Cash Flows for the Years Ended May 31, 1994, May 31, 1995
and May 31, 1996 and for the Three Months Ended August 31, 1995 (Unaudited) and
August 31, 1996 (Unaudited)......................................................... F-6
Notes to Consolidated Financial Statements............................................ F-7
</TABLE>
F-1
<PAGE> 41
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders
Neogen Corporation
Lansing, Michigan
We have audited the accompanying consolidated balance sheets of Neogen
Corporation and subsidiaries as of May 31, 1995 and 1996, and the related
consolidated statements of operations, stockholders' equity and cash flows for
each of the three years in the period ended May 31, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Neogen
Corporation and subsidiaries at May 31, 1995 and 1996, and the results of their
operations and their cash flows for each of the three years in the period ended
May 31, 1996 in conformity with generally accepted accounting principles.
BDO SEIDMAN, LLP
Troy, Michigan
July 18, 1996
F-2
<PAGE> 42
NEOGEN CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MAY 31,
------------------------- AUGUST 31,
1995 1996 1996
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS (Note 4)
Current Assets
Cash and equivalents............................................ $ 2,237,979 $ 2,183,033 $ 2,389,129
Accounts receivable, less allowance for doubtful
accounts of $152,000, $185,000 and $260,000................... 1,681,200 1,643,181 2,127,922
Inventories (Notes 1 and 2)..................................... 3,806,872 3,378,671 3,387,907
Prepaid expenses and other current assets....................... 355,027 318,882 356,798
----------- ----------- -----------
Total Current Assets.............................................. 8,081,078 7,523,767 8,261,756
----------- ----------- -----------
Property and Equipment
Land and improvements........................................... 22,715 33,882 33,882
Buildings and improvements...................................... 394,551 440,532 446,573
Machinery and equipment......................................... 2,895,263 3,192,665 3,310,681
Furniture and fixtures.......................................... 363,764 305,139 315,695
----------- ----------- -----------
3,676,293 3,972,218 4,106,831
Less accumulated depreciation................................... 2,363,623 2,590,430 2,677,868
----------- ----------- -----------
Net Property and Equipment........................................ 1,312,670 1,381,788 1,428,963
----------- ----------- -----------
Intangible and Other Assets
Goodwill, net of accumulated amortization of
$109,441, $210,740 and $236,065 (Note 3)...................... 1,513,032 2,034,153 2,061,951
Other assets, net of accumulated amortization of
$241,971, $330,810 and $352,019............................... 631,826 591,436 571,373
----------- ----------- -----------
Total Intangible and Other Assets................................. 2,144,858 2,625,589 2,633,324
----------- ----------- -----------
$11,538,606 $11,531,144 $12,324,043
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Notes payable -- banks (Note 4)................................. $ 1,058,946 $ 1,043,946 $ 1,028,946
Accounts payable................................................ 742,652 497,502 651,913
Accruals
Compensation and benefits..................................... 338,407 369,788 506,590
Restructuring charges (Note 2)................................ -- 217,794 163,812
Other......................................................... 65,129 88,878 179,946
Current maturities of long-term debt (Note 4)................... 87,136 71,147 71,147
----------- ----------- -----------
Total Current Liabilities......................................... 2,292,270 2,289,055 2,602,354
Long-Term Debt, less current maturities (Note 4).................. 351,233 278,918 261,131
Other Long-Term Liabilities....................................... 58,671 105,467 105,467
----------- ----------- -----------
Total Liabilities................................................. 2,702,174 2,673,440 2,968,952
----------- ----------- -----------
Commitments (Notes 6 and 8)
Stockholders' Equity (Note 5)
Common stock, $.16 par value, shares authorized
10,000,000; issued and outstanding 4,460,027, 4,559,260
and 4,598,042................................................. 713,604 729,482 735,687
Additional paid-in capital...................................... 13,592,684 13,841,617 13,932,040
Retained earnings (deficit)..................................... (5,469,856) (5,713,395) (5,312,636)
----------- ----------- -----------
Total Stockholders' Equity........................................ 8,836,432 8,857,704 9,355,091
----------- ----------- -----------
$11,538,606 $11,531,144 $12,324,043
=========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE> 43
NEOGEN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION> THREE MONTHS ENDED
YEAR ENDED MAY 31, AUGUST 31,
--------------------------------------- -------------------------
1994 1995 1996 1995 1996
----------- ----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues
Sales........................... $10,590,778 $11,368,672 $12,328,103 $ 2,847,579 $ 4,030,363
Contract revenues............... 144,185 357,583 162,308 78,065 4,560
----------- ----------- ----------- ---------- ----------
10,734,963 11,726,255 12,490,411 2,925,644 4,034,923
----------- ----------- ----------- ---------- ----------
Operating Expenses
Cost of goods sold.............. 4,704,315 5,151,957 5,484,524 1,182,238 1,546,190
Sales and marketing............. 2,834,964 3,284,420 3,538,876 858,554 1,169,641
General and administrative...... 1,417,280 1,523,883 1,773,966 431,297 555,046
Research and development........ 856,107 1,136,003 1,237,643 321,335 348,074
Restructuring charges (Note
2)........................... -- -- 695,500 -- --
----------- ----------- ----------- ---------- ----------
9,812,666 11,096,263 12,730,509 2,793,424 3,618,951
----------- ----------- ----------- ---------- ----------
Operating Income (Loss)........... 922,297 629,992 (240,098) 132,220 415,972
----------- ----------- ----------- ---------- ----------
Other Income (Expense)
Interest income................. 64,563 89,785 75,733 18,391 22,458
Interest expense................ (33,936) (99,898) (153,286) (36,376) (30,968)
Other........................... (71,120) 83,128 81,312 24,003 5,000
----------- ----------- ----------- ---------- ----------
(40,493) 73,015 3,759 6,018 (3,510)
----------- ----------- ----------- ---------- ----------
Income (Loss) Before Taxes On
Income.......................... 881,804 703,007 (236,339) 138,238 412,462
Taxes On Income (Note 7).......... (26,000) (24,300) (7,200) (7,200) (11,703)
----------- ----------- ----------- ---------- ----------
Net Income (Loss)................. $ 855,804 $ 678,707 $ (243,539) $ 131,038 $ 400,759
=========== =========== =========== ========== ==========
Net Income (Loss) Per Share (Note
1).............................. $.19 $.15 $(.05) $.03 $.08
=========== =========== =========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 44
NEOGEN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED MAY 31, 1994, 1995 AND 1996
AND THREE MONTHS ENDED AUGUST 31, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL RETAINED
---------------------- PAID-IN EARNINGS
SHARES AMOUNT CAPITAL (DEFICIT)
--------- -------- ----------- -----------
<S> <C> <C> <C> <C>
Balance, June 1, 1993..................... 4,068,294 $650,927 $12,422,915 $(7,004,367)
Issuance of common shares in connection
with acquisitions (Note 3)........... 223,160 35,706 622,164 --
Exercise of options..................... 38,275 6,124 63,736 --
Net income for the year................. -- -- -- 855,804
--------- -------- ----------- -----------
Balance, May 31, 1994..................... 4,329,729 692,757 13,108,815 (6,148,563)
Issuance of common shares in connection
with acquisitions (Note 3)........... 55,753 8,920 316,080 --
Exercise of options..................... 34,525 5,524 46,343 --
Exercise of warrants.................... 40,020 6,403 121,446 --
Net income for the year................. -- -- -- 678,707
--------- -------- ----------- -----------
Balance, May 31, 1995..................... 4,460,027 713,604 13,592,684 (5,469,856)
Exercise of options..................... 59,300 9,489 130,332 --
Exercise of warrants.................... 39,933 6,389 118,601 --
Net loss for the year................... -- -- -- (243,539)
--------- -------- ----------- -----------
Balance, May 31, 1996..................... 4,559,260 729,482 13,841,617 (5,713,395)
Exercise of options (unaudited)......... 37,000 5,920 82,119 --
Exercise of warrants (unaudited)........ 1,782 285 8,304 --
Net income for the period (unaudited)... -- -- -- 400,759
--------- -------- ----------- -----------
Balance, August 31, 1996 (unaudited)...... 4,598,042 $735,687 $13,932,040 $(5,312,636)
========= ======== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 45
NEOGEN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED MAY 31, AUGUST 31,
-------------------------------------- --------------------------
1994 1995 1996 1995 1996
---------- ---------- ---------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash Flows From Operating
Activities
Net income (loss)................ $ 855,804 $ 678,707 $ (243,539) $ 131,038 $ 400,759
Adjustments to reconcile net
income (loss) to net cash
provided by (used in)
operating activities
Depreciation and
amortization................ 354,564 488,590 537,232 131,213 139,202
Loss (gain) on sale of
property and equipment...... (334) (11,121) 2,489 -- --
Changes in operating assets
and liabilities
Accounts receivable......... (59,140) (400,322) 38,019 (229,173) (484,741)
Inventories................. 70,830 (844,783) 460,838 (129,517) (9,236)
Prepaid expenses and other
current assets........... (43,600) (86,571) 45,451 (32,710) (37,916)
Accounts payable............ 260,951 (72,244) (245,150) 42,190 154,411
Accrued liabilities......... 299,083 (229,756) 272,923 (84,472) 173,888
---------- ---------- ---------- ---------- ----------
Net Cash Provided By (Used In)
Operating Activities............. 1,738,158 (477,500) 868,263 (171,431) 336,367
---------- ---------- ---------- ---------- ----------
Cash Flows From Investing
Activities
Proceeds from sale of property
and equipment................. 6,699 161,236 7,863 -- --
Purchases of property, equipment
and other assets.............. (189,178) (551,972) (412,523) (189,497) (140,990)
Acquisitions of businesses....... (21,990) (812,957) (680,056) (680,056) (53,122)
---------- ---------- ---------- ---------- ----------
Net Cash Used In Investing
Activities....................... (204,469) (1,203,693) (1,084,716) (869,553) (194,112)
---------- ---------- ---------- ---------- ----------
Cash Flows From Financing
Activities
Net borrowing (payments) on notes
payable -- banks.............. (150,000) 871,945 (15,000) -- (15,000)
Proceeds from long-term
borrowings.................... -- 70,000 -- -- --
Payments on long-term
borrowings.................... (164,482) (209,430) (88,304) (22,052) (17,787)
Net proceeds from issuance of
common shares................. 69,860 179,716 264,811 6,285 96,628
---------- ---------- ---------- ---------- ----------
Net Cash Provided By (Used In)
Financing Activities............. (244,622) 912,231 161,507 (15,767) 63,841
---------- ---------- ---------- ---------- ----------
Net Increase (Decrease) in Cash and
Equivalents...................... 1,289,067 (768,962) (54,946) (1,056,751) 206,096
Cash and Equivalents, at beginning
of period........................ 1,717,874 3,006,941 2,237,979 2,237,979 2,183,033
---------- ---------- ---------- ---------- ----------
Cash and Equivalents, at end of
period........................... $3,006,941 $2,237,979 $2,183,033 $ 1,181,228 $ 2,389,129
========== ========== ========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE> 46
NEOGEN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION WITH RESPECT TO THE THREE MONTHS
ENDED AUGUST 31, 1995 AND 1996 IS UNAUDITED)
1. SUMMARY OF ACCOUNTING POLICIES
Nature of Operations
Neogen Corporation and subsidiaries (the Company) develop, manufacture, and
sell products to control residues and improve quality for the agriculture,
pharmacologics, food and environmental industries. The Company's products are
currently used for animal health applications, food and environmental testing,
and in medical research.
Basis of Consolidation
The consolidated financial statements include the accounts of Neogen
Corporation, Ideal Instruments, Inc. (Ideal), AMPCOR Diagnostics, Inc. (AMPCOR)
and several majority owned companies which are general partners for research
limited partnerships. The investments in partnerships are not significant to the
consolidated financial statements.
All significant intercompany accounts and transactions have been eliminated
in consolidation.
Use of Estimates
In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and assumptions
that affect (1) the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities as of the date of the financial
statements, and (2) revenues and expenses during the reporting period. Actual
results could differ from these estimates.
Concentrations of Credit Risk
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of accounts receivable. The
Company attempts to minimize credit risk by reviewing all customers' credit
history before extending credit and by monitoring customers' credit exposure on
a continuing basis. The Company establishes an allowance for possible losses on
accounts receivable based upon factors surrounding the credit risk of specific
customers, historical trends and other information.
Fair Values of Financial Instruments
The carrying amounts of cash and equivalents, accounts receivable, accounts
payable, and accrued expenses approximate fair value because of the short
maturity of these items.
The carrying amounts of the notes payable and long-term debt issued
pursuant to the Company's bank credit agreements approximate fair value because
the interest rates on these instruments change with market rates.
Cash Equivalents
Cash equivalents are short-term, highly liquid investments consisting of
primarily money market funds, certificates of deposit and commercial paper.
F-7
<PAGE> 47
NEOGEN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION WITH RESPECT TO THE THREE MONTHS
ENDED AUGUST 31, 1995 AND 1996 IS UNAUDITED)
Inventories
Inventories are stated at the lower of cost, determined on the first-in,
first-out method, or market. The components of inventories are as follows:
<TABLE>
<CAPTION>
MAY 31, AUGUST 31,
------------------------- ----------
1995 1996 1996
---------- ---------- ----------
<S> <C> <C> <C>
Raw material......................... $1,624,271 $1,468,316 $1,366,068
Work-in-process...................... 778,831 889,110 837,490
Finished goods....................... 1,403,770 1,021,245 1,184,349
---------- ---------- ----------
$3,806,872 $3,378,671 $3,387,907
========== ========== ==========
</TABLE>
Property and Equipment
Property and equipment is stated at cost. Expenditures for major
improvements are capitalized while repairs and maintenance are charged to
expense. Depreciation is provided on the straight-line method over the estimated
useful lives of the respective assets, generally twenty to thirty-one years for
buildings and improvements and three to ten years for furniture, machinery and
equipment. Depreciation expense was $258,644, $336,204 and $320,869 for the
years ended May 31, 1994, 1995 and 1996, and $92,234 and $96,384 for the three
months ended August 31, 1995 and 1996, respectively.
Intangible Assets
Goodwill represents the excess of acquisition costs over the estimated fair
value of net assets acquired. Goodwill is amortized on a straight-line basis
over periods ranging from fifteen to twenty-five years. The Company reviews
goodwill for impairment based upon undiscounted cash flows over the remaining
lives of the goodwill. If necessary, impairment will be measured based on the
difference between undiscounted future cash flows and the net book value of the
related goodwill.
Other intangible assets, consisting primarily of covenants not to compete,
licenses and patents, are recorded at fair value at the date of acquisition.
These intangible assets are amortized on a straight-line basis over periods
ranging from five to seventeen years.
Revenue Recognition
The Company recognizes product sales at the time of shipment. Contract
revenues are recognized as services are performed using the percentage of
completion method and/or upon achievement of certain levels of performance as
specified in the contracts.
Net Income (Loss) Per Share
Net income (loss) per share amounts are computed based on the weighted
average number of common shares outstanding, adjusted to reflect the assumed
exercise of outstanding stock options and warrants, to the extent these items
had a dilutive effect on the computations. Shares used in the computation were
4,520,743, 4,674,792 and 4,513,817 for the years ended May 31, 1994, 1995 and
1996, and 4,695,271 and 4,770,283 for the three months ended August 31, 1995 and
1996, respectively.
F-8
<PAGE> 48
NEOGEN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION WITH RESPECT TO THE THREE MONTHS
ENDED AUGUST 31, 1995 AND 1996 IS UNAUDITED)
Recent Accounting Pronouncements
The Financial Accounting Standards Board (FASB) has issued Statement of
Financial Accounting Standards (SFAS) No. 121, "Accounting for the Impairment of
Long-Lived Assets and Long-Lived Assets Being Disposed Of," which provides
guidance on how and when impairment losses are recognized on long-lived assets.
This statement was adopted June 1, 1996 and did not have a material impact on
the Company.
The FASB has issued SFAS No. 123, "Accounting for Stock-Based
Compensation," which establishes a fair value based method of accounting for
stock-based compensation plans. This statement provides a choice to either adopt
the fair value based method of accounting or continue to apply APB Opinion No.
25, which would require only disclosure of the proforma net income and earnings
per share, determined as if the fair value based method had been applied. The
Company adopted this statement June 1, 1996 and continues to apply APB Opinion
No. 25.
Unaudited Interim Financial Information
The unaudited interim consolidated financial statements for the three
months ended August 31, 1995 and 1996 include all adjustments, consisting of
normal recurring accruals, which the Company considers necessary for a fair
presentation of the consolidated financial position and the consolidated results
of operations for the periods presented. The interim period results are not
necessarily indicative of the results of operations for a full fiscal year.
2. RESTRUCTURING CHARGES
In May 1996, the Company recorded charges of $695,500 related to a
restructuring program for certain of its operations. The restructuring charges
include $437,700 related to inventory valuation adjustments and writedowns to
exit its electronic instruments operations, $205,300 related to veterinary
instrument sales group reorganization and $52,500 of other costs. The
restructuring program resulted in liabilities of $217,794 at May 31, 1996. The
majority of these liabilities are expected to be paid or settled during the 1997
fiscal year.
3. ACQUISITIONS
Effective June 15, 1995, Neogen acquired certain assets of International
Diagnostic Systems Corp. (IDS) of St. Joseph, Michigan. The acquisition was
accounted for by the purchase method and all acquired assets, consisting of
inventory and technology for 35 different diagnostic tests used to detect drugs
of abuse in animals, were moved to the Company's ELISA Technologies division in
Lexington, Kentucky.
The purchase price consisted of initial consideration of approximately
$680,000 paid in cash at closing resulting in goodwill of approximately
$622,000. The Company made a second and final cash payment of approximately
$53,000 in July 1996 based upon sales performance for the twelve month period
ended June 14, 1996.
Proforma results of operations are not presented as the effect of the IDS
acquisition was not material to the consolidated results of operations of the
Company for the year ended May 31, 1996.
On August 17, 1994, Neogen Corporation, through its wholly-owned subsidiary
AMPCOR Diagnostics, Inc., acquired substantially all of the assets of AMPCOR,
Inc., a New Jersey-based company that develops and manufactures diagnostic test
kits to detect the presence of harmful microorganisms.
The initial purchase price for the assets of AMPCOR was $1,760,610, which
consisted of $702,957 paid in cash, assumption of liabilities totaling $732,653,
and issuance of 55,753 shares of Neogen restricted
F-9
<PAGE> 49
NEOGEN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION WITH RESPECT TO THE THREE MONTHS
ENDED AUGUST 31, 1995 AND 1996 IS UNAUDITED)
common stock valued at $325,000. In addition, Neogen incurred $110,000 of
acquisition costs and organization expense in connection with this asset
purchase.
The acquisition was effective August 1, 1994, and has been accounted for
using the purchase method of accounting. Accordingly, the results of operations
of AMPCOR have been included with those of Neogen for periods beginning August
1, 1994. The excess acquisition cost over the fair value of the acquired net
assets approximated $730,000.
The purchase agreement provided for the payment of additional
consideration, contingent upon the sales and profit performance of AMPCOR for
two consecutive twelve month periods ending July 31, 1995 and 1996. The Company
did not pay any additional consideration on the basis of AMPCOR's performance
for the first twelve month period ended July 31, 1995. Management expects any
second year payment to be minimal.
Effective October 1, 1993, Neogen acquired substantially all of the assets
of Enzytec, Incorporated of Kansas City, Missouri. Enzytec marketed rapid
diagnostic screening tests for the detection of insecticide residues in food and
the environment. The acquisition was accounted for by the purchase method and
the results of operations have been included in the accompanying consolidated
financial statements from the date of the acquisition. All the acquired assets
were moved to Neogen's headquarters in Lansing, Michigan.
The initial purchase price of $226,000 consisted of $21,000 paid in cash,
issuance of 74,626 shares of Neogen common stock, and issuance of warrants to
purchase 50,374 shares of Neogen common stock after October 31, 1994 at an
exercise price of $4.82 per share. The purchase price in excess of the fair
value of the acquired net assets was $197,922.
During fiscal 1994, the Company issued 148,534 shares of its common stock
as final consideration for acquisitions made in prior years.
4. NOTES PAYABLE AND LONG-TERM DEBT
The Company and its subsidiaries have available lines-of-credit and
borrowing arrangements with banks totalling $2,500,000. At May 31, 1995 and 1996
and August 31, 1996, there were $1,058,946, $1,043,946 and $1,028,946,
respectively, of borrowings outstanding. These borrowings bear interest at .75%
over the prime rate (9.00% at August 31, 1996), and are collateralized by
substantially all assets of the Company and its subsidiaries.
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
AUGUST
MAY 31, 31,
--------------------- --------
1995 1996 1996
-------- -------- --------
<S> <C> <C> <C>
Term note payable to bank.................. $352,380 $295,236 $280,950
Installment note payable................... 70,000 54,829 51,328
Other notes and contracts payable.......... 15,989 -- --
------- ------- -------
438,369 350,065 332,278
Less current maturities.................... 87,136 71,147 71,147
------- ------- -------
Total Long-Term Debt....................... $351,233 $278,918 $261,131
======= ======= =======
</TABLE>
The term note is payable in eighty-four monthly installments of $4,762 plus
interest at .75% over the prime rate (9.00% at August 31, 1996), and is
collateralized by substantially all the assets of Neogen and AMPCOR.
F-10
<PAGE> 50
NEOGEN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION WITH RESPECT TO THE THREE MONTHS
ENDED AUGUST 31, 1995 AND 1996 IS UNAUDITED)
The installment note is payable in sixty monthly installments of $1,167
plus interest at .75% over prime rate (9.00% at August 31, 1996) and is
collateralized by substantially all the assets of AMPCOR.
The terms of certain financing agreements contain, among other provisions,
the requirements to meet certain financial ratios and levels of working capital
and tangible net worth, and restrict the payment of dividends.
Maturities of long-term debt at May 31, are: 1997 - $71,147;
1998 - $71,148; 1999 - $71,148; 2000 - $69,961; 2001 - $57,144; and
2002 - $9,517.
5. STOCK OPTIONS AND STOCK WARRANTS
The Company has a Stock Option Plan (the Plan) under which qualified and
non-qualified options to purchase shares of common stock may be granted to
eligible directors, members of the Scientific Review Council, officers, or
employees of the Company at an exercise price of not less than the fair market
value of the stock on the date of grant. The Plan was adopted in 1987, and the
number of shares authorized for issuance under this Plan is 1,059,375. Options
have been granted with three to five year vesting schedules. At August 31, 1996,
99,866 shares were available for future grants under the Plan.
The following table summarizes option activity for the years ended May 31,
1994, 1995 and 1996 and the three months ended August 31, 1996:
<TABLE>
<CAPTION>
OPTION
SHARES PRICE
------- -------------
<S> <C> <C>
Outstanding options at June 1, 1993 (110,379 exercisable)... 249,400 $ .32 to 3.25
Options granted during the year........................ 124,000 2.44 to 6.63
Options exercised during the year...................... (38,275) .32 to 2.88
Options expired or cancelled during the year........... (12,000) 2.50 to 3.25
------- -------------
Outstanding options at May 31, 1994 (108,234 exercisable)... 323,125 .32 to 6.63
Options granted during the year........................ 119,000 6.63 to 9.25
Options exercised during the year...................... (34,525) .32 to 2.50
Options expired or cancelled during the year........... (3,000) 2.25 to 7.25
------- -------------
Outstanding options at May 31, 1995 (140,472 exercisable)... 404,600 1.38 to 9.25
Options granted during the year........................ 99,500 6.50 to 7.13
Options exercised during the year...................... (59,300) 1.38 to 6.50
Options expired or cancelled during the year........... (2,000) 8.00
------- -------------
Outstanding options at May 31, 1996 (172,156 exercisable)... 442,800 $1.88 to 9.25
Options granted during the period...................... 101,000 7.50
Options exercised during the period.................... (37,000) 2.25 to 7.25
Options expired or cancelled during the period......... (4,600) 3.25 to 7.25
------- -------------
Outstanding options at August 31, 1996 (196,556
exercisable).............................................. 502,200 $1.88 to 9.25
======= =============
</TABLE>
F-11
<PAGE> 51
NEOGEN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION WITH RESPECT TO THE THREE MONTHS
ENDED AUGUST 31, 1995 AND 1996 IS UNAUDITED)
The following table summarizes warrant activity for the years ended May 31,
1994, 1995 and 1996 and the three months ended August 31, 1996. All warrants are
exercisable for unregistered common stock of the Company and expire between 1997
and 1999.
<TABLE>
<CAPTION>
WARRANT
SHARES PRICE
------- -------------
<S> <C> <C>
Outstanding warrants at June 1, 1993........................ 109,953 $2.63 to 3.90
Warrants granted during the year (Note 3).............. 50,374 4.82
------- -------------
Outstanding warrants at May 31, 1994........................ 160,327 2.63 to 4.82
Warrants exercised during the year..................... (40,020) 3.90
------- -------------
Outstanding warrants at May 31, 1995........................ 120,307 2.63 to 4.82
Warrants exercised during the year..................... (39,933) 3.13
------- -------------
Outstanding warrants at May 31, 1996........................ 80,374 $2.63 to 4.82
Warrants exercised during the period................... (1,782) 4.82
------- -------------
Outstanding warrants at August 31, 1996..................... 78,592 $2.63 to 4.82
======= =============
</TABLE>
6. COMMITMENTS
The Company has agreements with related research limited partnerships and
third parties which provide for the payment of royalties on the sale of certain
products. Royalty expense, primarily to related research limited partnerships,
under the terms of these agreements for the years ended May 31, 1994, 1995 and
1996 was $476,159, $521,690 and $579,045, respectively. Royalty expense was
$153,781 and $240,533 for the three months ended August 31, 1995 and 1996,
respectively.
The Company leases office and manufacturing facilities under noncancelable
operating leases. Rent expense for the years ended May 31, 1994, 1995 and 1996
was $149,000, $202,000 and $221,000, respectively. Rent expense was $42,000 and
$57,000 for the three months ended August 31, 1995 and 1996, respectively.
Future minimum rental payments at May 31, for these leases are as follows:
1997 - $211,000; 1998 - $201,000; 1999 - $119,000; 2000 - $118,000; and
2001 - $30,000.
7. TAXES ON INCOME
Income taxes are calculated using the liability method specified by SFAS
No. 109 "Accounting for Income Taxes."
As of May 31, 1996, the Company has net operating loss carryforwards of
approximately $4,400,000 for income tax purposes which expire between 2002 and
2008. Due to changes in ownership of the Company, utilization of $2,017,000 of
the tax net operating loss carryforward is limited to approximately $730,000 per
year. The remaining $2,383,000 may be utilized without limitation. In addition,
the Company has approximately $250,000 of tax credit carryforwards, the majority
of which expire between 1998 and 2010. Approximately $21,000 of the tax credit
carryforwards have no expiration.
Deferred income taxes reflect the tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax liabilities and assets are as follows:
F-12
<PAGE> 52
NEOGEN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION WITH RESPECT TO THE THREE MONTHS
ENDED AUGUST 31, 1995 AND 1996 IS UNAUDITED)
<TABLE>
<CAPTION>
MAY 31,
---------------------------
1995 1996
----------- -----------
<S> <C> <C>
Deferred Tax Liabilities:
Depreciation and amortization........................... $ 43,000 $ 57,000
Losses of affiliated partnerships....................... 45,000 47,000
----------- -----------
Total Deferred Tax Liabilities............................ 88,000 104,000
----------- -----------
Deferred Tax Assets:
Net operating loss carryforwards........................ 1,594,000 1,496,000
Tax credit carryforwards................................ 204,000 250,000
Inventory reserves...................................... 83,000 216,000
Other................................................... 120,000 140,000
----------- -----------
2,001,000 2,102,000
Valuation Allowance for Deferred Tax Assets (1,913,000) (1,998,000)
----------- -----------
Net Deferred Tax Assets................................... 88,000 104,000
----------- -----------
Net Deferred Tax.......................................... $ -- $ --
=========== ===========
</TABLE>
SFAS No. 109 requires that a valuation allowance be recorded against tax
assets which are not likely to be realized. The Company's carryforwards expire
at specific future dates and utilization of certain carryforwards is limited to
specific amounts each year. Due to the uncertain nature of their ultimate
realization based upon past performance and the difficulty predicting future
results, the Company has established a full valuation allowance against these
carryforward benefits and is recognizing the benefits only as reassessment
demonstrates they are realizable. The need for this valuation allowance is
subject to periodic review. If the allowance is reduced, the tax benefits of the
carryforwards will be recorded in future operations as a reduction of the
Company's income tax expense.
The reconciliation of income taxes computed at the U.S. federal statutory
tax rates to income tax expense is as follows:
<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
------------------------------------
1994 1995 1996
--------- --------- --------
<S> <C> <C> <C>
Tax at U.S. statutory rates...................... $ 300,000 $ 239,000 $(80,000)
Adjustment of valuation allowance.............. (310,000) (221,000) 85,000
Alternative minimum tax........................ 20,000 8,000 2,000
State income taxes, net of tax effect.......... 4,000 14,000 4,800
Other.......................................... 12,000 (15,700) (4,600)
------- ------- -------
$ 26,000 $ 24,300 $ 7,200
======= ======= =======
</TABLE>
8. DEFINED CONTRIBUTION BENEFIT PLAN
The Company maintains a defined contribution 401(k) benefit plan covering
substantially all employees. Employees are permitted to defer up to 15% of
compensation, with the Company matching 40% (20% for fiscal 1994) of the first
5% deferred. The Company's expense under this plan was $18,573, $38,722 and
$45,402 for the years ended May 31, 1994, 1995 and 1996, and $9,395 and $12,575
for the three months ended August 31, 1995 and 1996, respectively.
F-13
<PAGE> 53
NEOGEN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION WITH RESPECT TO THE THREE MONTHS
ENDED AUGUST 31, 1995 AND 1996 IS UNAUDITED)
9. INDUSTRY SEGMENT INFORMATION
The Company has two industry segments through which it conducts its
business - diagnostic products and veterinary instruments. The diagnostic
products segment includes test kits to detect harmful, natural toxins,
pesticides, and microorganisms. These products also include test kits for the
detection of drugs of abuse in race horses, test kits used in research by
universities and pharmaceutical companies, and test kits to detect plant
diseases in ornamental plants, turf grasses, and horticulture crops. In
addition, this segment includes electronic instruments which are primarily used
to monitor environmental conditions and predict the onset of diseases or
emergence of insects. In May 1996, the Company decided to exit its electronic
instruments operations (Note 2).
The veterinary instrument segment includes veterinary instruments to
provide more precise and accurate delivery of animal health products.
The following table summarizes Neogen's industry segment information:
<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
-------------------------------------------
1994 1995 1996
----------- ----------- -----------
<S> <C> <C> <C>
Revenues
Diagnostic products
Sales of products............................ $ 6,660,039 $ 7,329,962 $ 8,758,920
Other revenues............................... 144,185 357,583 162,308
---------- ---------- ----------
6,804,224 7,687,545 8,921,228
Veterinary instruments.......................... 3,930,739 4,038,710 3,569,183
---------- ---------- ----------
$10,734,963 $11,726,255 $12,490,411
========== ========== ==========
Operating Income (Loss)
Diagnostic products............................. $ 785,775 $ 553,925 $ 23,876
Veterinary instruments.......................... 136,522 76,067 (263,974)
---------- ---------- ----------
$ 922,297 $ 629,992 $ (240,098)
========== ========== ==========
Identifiable Assets
Diagnostic products............................. $ 3,953,017 $ 7,185,958 $ 7,202,571
Veterinary instruments.......................... 2,710,417 3,106,950 2,771,532
Corporate....................................... 2,469,910 1,245,698 1,557,041
---------- ---------- ----------
$ 9,133,344 $11,538,606 $11,531,144
========== ========== ==========
Depreciation and Amortization Expense
Diagnostic products............................. $ 193,820 $ 307,840 $ 437,030
Veterinary instruments.......................... 160,744 180,750 100,202
---------- ---------- ----------
$ 354,564 $ 488,590 $ 537,232
========== ========== ==========
Capital Expenditures
Diagnostic products............................. $ 52,971 $ 314,334 $ 274,496
Veterinary instruments.......................... 136,207 237,638 138,027
---------- ---------- ----------
$ 189,178 $ 551,972 $ 412,523
========== ========== ==========
</TABLE>
F-14
<PAGE> 54
NEOGEN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(INFORMATION WITH RESPECT TO THE THREE MONTHS
ENDED AUGUST 31, 1995 AND 1996 IS UNAUDITED)
Neogen has no significant foreign operations. Export sales amounted to
$2,232,907 or 21% of consolidated sales in fiscal 1994, $2,851,780 or 25% of
consolidated sales in fiscal 1995 and $2,580,128 or 21% of consolidated sales in
fiscal 1996. These sales were derived primarily in the geographic areas of South
and Latin America, Canada, Europe, and the Far East. No export sales to any
single geographic area exceeded 10% of consolidated sales.
10. SUPPLEMENTAL CASH FLOW INFORMATION
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED MAY 31, AUGUST 31,
-------------------------------- -------------------
1994 1995 1996 1995 1996
------- ------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
Cash Paid During the Period For
Interest........................ $27,489 $90,823 $153,212 $36,627 $38,455
Taxes on income................. 11,295 30,777 14,000 -- --
</TABLE>
F-15
<PAGE> 55
[Photo]
CAPTION #4
The Company markets diagnostic tests for the detection of drug residues in both
food animals and racing animals under the trade name ELISA Technologies(R).
[Photo]
CAPTION #5
Special delivery instruments made by the Company's subsidiary, Ideal
Instruments, are used by animal producers to more precisely deliver health
products and thereby help reduce drug residues in meat and milk.
[Photo]
CAPTION #6
The Company's phytophthora test kit detects the presence of harmful fungal
diseases that affect crop production and the quality of the resulting fruits and
vegetables.
<PAGE> 56
- ------------------------------------------------------
- ------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS, AND IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR ANY UNDERWRITERS. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT
TO THE DATE HEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OFFERED HEREBY BY ANYONE IN ANY
JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH
THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO
ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 5
Capitalization........................ 7
Use of Proceeds....................... 7
Price Range of Common Stock........... 8
Dividend Policy....................... 8
Selected Consolidated Financial
Data................................ 9
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 10
Business.............................. 14
Management............................ 27
Principal Shareholders................ 31
Certain Transactions.................. 32
Description of Capital Stock.......... 33
Underwriting.......................... 35
Legal Matters......................... 36
Experts............................... 36
Additional Information................ 36
Available Information................. 36
Incorporation of Certain Documents by
Reference........................... 37
Index to Consolidated Financial
Statements.......................... F-1
</TABLE>
------------------------
UNTIL , 1996 (25 DAYS AFTER
THE EFFECTIVE DATE OF THE OFFERING), ALL DEALERS EFFECTING TRANSACTIONS IN THE
COMMON STOCK, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED
TO DELIVER A PROSPECTUS. THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE
OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITER AND
WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
1,500,000 SHARES
NEOGEN LOGO
COMMON STOCK
---------------------------
PROSPECTUS
---------------------------
(RONEY & COMPANY LOGO)/----
THE OHIO COMPANY
, 1996
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 57
PART II
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The expenses payable by the Company in connection with the issuance and
distribution of the securities being registered, other than underwriting
discounts and commissions are estimated to be as follows:
<TABLE>
<S> <C>
Registration Fee................................................... $
National Association of Securities Dealer's Filing fee.............
Printing and Engraving.............................................
Legal Fees and Expenses............................................
Blue Sky Fees and Expenses.........................................
Transfer Agent's Fees and Expenses.................................
Accountant's Fees and Expenses.....................................
Electronic Filing Expenses.........................................
Miscellaneous......................................................
--------
Total......................................................... $
========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Neogen's Bylaws permit indemnification of officers and directors to the
fullest extent allowed by law. Under Michigan's Business Corporation Act, a
corporation may indemnify its officers and directors against expenses (including
attorneys' fees), judgments, penalties, fines and amounts paid in settlement
actually and reasonably incurred by the officer or director by virtue of his
position as an officer or director of the corporation in connection with any
threatened, pending, or completed action, suit or proceeding, whether civil,
criminal, administrative, or investigative and whether formal or informal, other
than an action by or in the right of the corporation. To be eligible for
indemnification, the officer or director must have acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the corporation or its shareholders, and with respect to a criminal action or
proceeding, the officer or director must have had no reasonable cause to believe
his conduct was unlawful. Indemnification for expenses if the officer or
director is successful on the merits in defending the action is mandatory. In
other situations, the corporation must determine eligibility based on one of
five alternative methods established in the statute. A court may order
indemnification if it determines that the person is fairly and reasonably
entitled to indemnification in view of all relevant circumstances, even if the
statutory eligibility standards are not otherwise met.
II-1
<PAGE> 58
ITEM 16. EXHIBITS.
The following exhibits are separately bound, except those incorporated by
reference to an earlier filing with the Commission.
<TABLE>
<S> <C>
Exhibit 1 Proposed form of Underwriting Agreement.*
Exhibit 3(i) Articles of Incorporation, as restated.
Exhibit 3(ii) Bylaws, as amended -- Incorporated by reference to exhibit 3(b)(1) filed
with Registrant's Annual Report on Form 10-KSB for the year ended May 31,
1996.
Exhibit 5 Opinion of Fraser Trebilcock Davis & Foster, P.C.*
Exhibit 10(a) Neogen Amended and Restated Incentive Stock Option Plan II and Sample
Individual Investment Stock Option Agreement -- Incorporated by reference to
exhibit 10(l)(3) filed with Registrant's Annual Report on Form 10-KSB for
the year ended May 31, 1996.
Exhibit 10(b) Neogen Corporation/Merck KGaA Distribution Agreement.*
Exhibit 10(c) Neogen Corporation/International Diagnostics Systems Corporation Asset
Purchase Agreement dated June 27, 1995 -- Incorporated by reference to
exhibit 10(m) filed with the Registrant's Annual Report on Form 10-KSB for
the year ended May 31, 1995.
Exhibit 10(d) Neogen Corporation AMPCOR, Incorporated Asset Purchase Agreement dated
August 1, 1994 -- Incorporated by reference to exhibit 10(q) filed with the
Registrant's Annual Report on Form 10-KSB for the year ended May 31, 1995.
Exhibit 10(e) Neogen Corporation/Enzytec, Incorporated Asset Purchase Agreement dated
October 1, 1993 -- Incorporated by reference to exhibit 10(k) filed with the
Registrant's Annual Report on Form 10-KSB for the year ended May 31, 1994.
Exhibit 10(f) Neogen Corporation/United States Department of Agriculture License Agreement
dated June 29, 1994.
Exhibit 10(g) Neogen Corporation/United States Department of Agriculture SBIR Phase II
Grant Award dated November 30, 1993 -- Incorporated by reference to exhibit
10(j)(6)filed with the Registrant's Annual Report on Form 10-KSB for the
year ended May 31, 1995.
Exhibit 10(h) Neogen Corporation/United States Department of Agriculture Grants --
Incorporated by reference to exhibits 10(c) and (e) filed with the
Registrant's Annual Report on Form 10-KSB for the year ended May 31, 1995.
Exhibit 10(i) Ideal Instruments, Inc. Lease Agreement for 9355 West Byron Street, Schiller
Park, Illinois, dated June 29, 1993 -- Incorporated by reference to exhibit
10(f)(5) filed with the Registrant's Annual Report on Form 10-KSB for the
year ended May 31, 1994.
Exhibit 10(j) Neogen Corporation/ELISA Technologies Division Lease Agreement for space at
628 East Third Street, Lexington, Kentucky, dated May 19, 1993 --
Incorporated by reference to exhibit 10(m)(5) filed with the Registrant's
Annual Report on Form 10-KSB for the year ended May 31, 1995.
Exhibit 10(k) AMPCOR Diagnostics, Inc. Lease Agreement for space at 603 Huron Drive,
Bridgeport, New Jersey, dated as of January 26, 1995.
Exhibit 10(l) Neogen Corporation/Kahn, Soares and Conway Contract.
Exhibit 10(m) NBD Bank Loan Documents -- Incorporated by reference to exhibit 10(s) filed
with the Registrant's Annual Report on Form 10-KSB for the year ended May
31, 1995.
Exhibit 10(n) Comerica Bank Loan Documents -- Incorporated by reference to exhibit 10(t)
filed with the Registrant's Annual Report on Form 10-KSB for the year ended
May 31, 1995.
Exhibit 10(o) NBD Bank Amendment dated September 11, 1996.
Exhibit 10(p) Comerica Bank Amendments dated August 29, 1995 and September 12, 1996.
</TABLE>
II-2
<PAGE> 59
<TABLE>
<S> <C>
Exhibit 10(q) Neogen Research Limited Partnership II, First Amended and Restated
Partnership Agreement dated December 30, 1985 -- Incorporated by reference
to exhibit 10(g)(1) filed with the Registrant's Annual Report on Form 10-KSB
for the year ended May 31, 1996.
Exhibit 10(r) Neogen Corporation/Agri-Sales Associates Marketing Agency Agreement dated
May 10, 1994 -- Incorporated by reference to exhibit 10(o)(5) filed with the
Registrant's Annual Report on Form 10-KSB for the year ended May 31, 1996.
Exhibit 10(s) Amendment to the Neogen Corporation/Agri-Sales Associates Marketing Agency
Agreement dated June 25, 1995 -- Incorporated by reference to exhibit
10(p)(6) filed with the Registrant's Annual Report on Form 10-KSB for the
year ended May 31, 1996.
Exhibit 11 Statement regarding computation of per-share earnings -- Incorporated by
reference to exhibit (11) filed with the Registrant's Quarterly Report on
Form 10-QSB for the three month period ended August 31, 1996.
Exhibit 21 List of Subsidiaries -- Incorporated by reference to exhibit 21 filed with
the Registrant's Annual Report on Form 10-KSB for the year ended May 31,
1996.
Exhibit 23(a) Consent of Fraser Trebilcock Davis & Foster, P.C. (furnished as part of
counsel's opinion)*
Exhibit 23(b) Consent of BDO Seidman, LLP
Exhibit 23(c) Consent of Lon M. Bohannon.
Exhibit 24 Power of Attorney.
Exhibit 27 Financial Data Schedule -- Incorporated by reference to exhibit (27) filed
with the Registrant's Quarterly Report on Form 10-QSB for the three month
period ended August 31, 1996.
</TABLE>
- -------------------------
* To be filed by amendment.
II-3
<PAGE> 60
ITEM 17 UNDERTAKINGS.
The undersigned registrant hereby undertakes to supplement the prospectus,
after the expiration of the subscription period, to set forth the results of the
subscription offer, the transactions by the underwriters during the subscription
period, the amount of unsubscribed securities to be purchased by the
underwriters, and the terms of any subsequent reoffering thereof. If any public
offering by the underwriters is to be made on terms differing from those set
forth on the cover page of the prospectus, a post-effective amendment will be
filed to set forth the terms of such offering.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The undersigned registrant hereby undertakes that:
1. For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
2. For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-4
<PAGE> 61
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-2 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Lansing, State of Michigan, on September 17, 1996.
NEOGEN CORPORATION
By: /s/ JAMES L. HERBERT, JR.
------------------------------------
James L. Herbert, Jr.,
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------- ---------------------------------- -------------------
<C> <S> <C>
/s/ JAMES L. HERBERT, JR. President, Chief Executive Officer September 17, 1996
- ------------------------------------- and Director (Principal Executive
James L. Herbert, Jr. Officer)
/s/ LON M. BOHANNON Vice President and Chief Financial September 17, 1996
- ------------------------------------- Officer (Principal Financial and
Lon M. Bohannon Accounting Officer)
* Chairman, Board of Directors September 17, 1996
- -------------------------------------
Herbert D. Doan
* Director September 17, 1996
- -------------------------------------
Roland M. Hendrickson
* Director September 17, 1996
- -------------------------------------
Robert M. Book
* Director September 17, 1996
- -------------------------------------
Jack C. Parnell
* Secretary and Director September 17, 1996
- -------------------------------------
G. Bruce Papesh
* Director September 17, 1996
- -------------------------------------
Dr. Gordon E. Guyer
* Director September 17, 1996
- -------------------------------------
Dr. Leonard E. Heller
* Director September 17, 1996
- -------------------------------------
Thomas H. Reed
</TABLE>
By: /s/ JAMES L. HERBERT, JR. September 17, 1996
--------------------------------------------
James L. Herbert, Jr.
Attorney-in-Fact
II-5
<PAGE> 62
EXHIBIT INDEX
NEOGEN CORPORATION
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
- --------------- --------------------------------------------------------------------- ------
<S> <C> <C>
Exhibit 1 Proposed form of Underwriting Agreement.*
Exhibit 3(i) Articles of Incorporation, as restated.
Exhibit 3(ii) Bylaws, as amended -- Incorporated by reference to exhibit 3(b)(1)
filed with Registrant's Annual Report on Form 10-KSB for the year
ended May 31, 1996.
Exhibit 5 Opinion of Fraser Trebilcock Davis & Foster, P.C.*
Exhibit 10(a) Neogen Amended and Restated Incentive Stock Option Plan II and Sample
Individual Investment Stock Option Agreement -- Incorporated by
reference to exhibit 10(l)(3) filed with Registrant's Annual Report
on Form 10-KSB for the year ended May 31, 1996.
Exhibit 10(b) Neogen Corporation/Merck KGaA Distribution Agreement.*
Exhibit 10(c) Neogen Corporation/International Diagnostics Systems Corporation
Asset Purchase Agreement dated June 27, 1995 -- Incorporated by
reference to exhibit 10(m) filed with the Registrant's Annual Report
on Form 10-KSB for the year ended May 31, 1995.
Exhibit 10(d) Neogen Corporation AMPCOR, Incorporated Asset Purchase Agreement
dated August 1, 1994 -- Incorporated by reference to exhibit 10(q)
filed with the Registrant's Annual Report on Form 10-KSB for the year
ended May 31, 1995.
Exhibit 10(e) Neogen Corporation/Enzytec, Incorporated Asset Purchase Agreement
dated October 1, 1993 -- Incorporated by reference to exhibit 10(k)
filed with the Registrant's Annual Report on Form 10-KSB for the year
ended May 31, 1994.
Exhibit 10(f) Neogen Corporation/United States Department of Agriculture License
Agreement dated June 29, 1994.
Exhibit 10(g) Neogen Corporation/United States Department of Agriculture SBIR Phase
II Grant Award dated November 30, 1993 -- Incorporated by reference
to exhibit 10(j)(6)filed with the Registrant's Annual Report on Form
10-KSB for the year ended May 31, 1995.
Exhibit 10(h) Neogen Corporation/United States Department of Agriculture Grants --
Incorporated by reference to exhibits 10(c) and (e) filed with the
Registrant's Annual Report on Form 10-KSB for the year ended May 31,
1995.
Exhibit 10(i) Ideal Instruments, Inc. Lease Agreement for 9355 West Byron Street,
Schiller Park, Illinois, dated June 29, 1993 -- Incorporated by
reference to exhibit 10(f)(5) filed with the Registrant's Annual
Report on Form 10-KSB for the year ended May 31, 1994.
Exhibit 10(j) Neogen Corporation/ELISA Technologies Division Lease Agreement for
space at 628 East Third Street, Lexington, Kentucky, dated May 19,
1993 -- Incorporated by reference to exhibit 10(m)(5) filed with the
Registrant's Annual Report on Form 10-KSB for the year ended May 31,
1995.
Exhibit 10(k) AMPCOR Diagnostics, Inc. Lease Agreement for space at 603 Huron
Drive, Bridgeport, New Jersey, dated as of January 26, 1995.
Exhibit 10(l) Neogen Corporation/Kahn, Soares and Conway Contract.
</TABLE>
<PAGE> 63
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
- --------------- --------------------------------------------------------------------- ------
<S> <C> <C>
Exhibit 10(m) NBD Bank Loan Documents -- Incorporated by reference to exhibit 10(s)
filed with the Registrant's Annual Report on Form 10-KSB for the year
ended May 31, 1995.
Exhibit 10(n) Comerica Bank Loan Documents -- Incorporated by reference to exhibit
10(t) filed with the Registrant's Annual Report on Form 10-KSB for
the year ended May 31, 1995.
Exhibit 10(o) NBD Bank Amendment dated September 11, 1996.
Exhibit 10(p) Comerica Bank Amendments dated August 29, 1995 and September 12,
1996.
Exhibit 10(q) Neogen Research Limited Partnership II, First Amended and Restated
Partnership Agreement dated December 30, 1985 -- Incorporated by
reference to exhibit 10(g)(1) filed with the Registrant's Annual
Report on Form 10-KSB for the year ended May 31, 1996.
Exhibit 10(r) Neogen Corporation/Agri-Sales Associates Marketing Agency Agreement
dated May 10, 1994 -- Incorporated by reference to exhibit 10(o)(5)
filed with the Registrant's Annual Report on Form 10-KSB for the year
ended May 31, 1996.
Exhibit 10(s) Amendment to the Neogen Corporation/Agri-Sales Associates Marketing
Agency Agreement dated June 25, 1995 -- Incorporated by reference to
exhibit 10(p)(6) filed with the Registrant's Annual Report on Form
10-KSB for the year ended May 31, 1996.
Exhibit 11 Statement regarding computation of per-share earnings -- Incorporated
by reference to exhibit (11) filed with the Registrant's Quarterly
Report on Form 10-QSB for the three month period ended August 31,
1996.
Exhibit 21 List of Subsidiaries -- Incorporated by reference to exhibit 21 filed
with the Registrant's Annual Report on Form 10-KSB for the year ended
May 31, 1996.
Exhibit 23(a) Consent of Fraser Trebilcock Davis & Foster, P.C. (furnished as part
of counsel's opinion)*
Exhibit 23(b) Consent of BDO Seidman, LLP
Exhibit 23(c) Consent of Lon M. Bohannon.
Exhibit 24 Power of Attorney.
Exhibit 27 Financial Data Schedule -- Incorporated by reference to exhibit (27)
filed with the Registrant's Quarterly Report on Form 10-QSB for the
three month period ended August 31, 1996.
</TABLE>
- -------------------------
* To be filed by amendment.
<PAGE> 1
C&S-510 (8/93) EXHIBIT 3(i)
MICHIGAN DEPARTMENT OF COMMERCE -- CORPORATION AND SECURITIES BUREAU
--------------------------------------------------------------------
Date Received (FOR BUREAU USE ONLY)
EFFECTIVE DATE:
Richard C. Lowe
Fraser Trebilcock Davis & Foster, P.C.
1000 Michigan National Tower
Lansing, Michigan 48933
DOCUMENT WILL BE RETURNED TO NAME AND ADDRESS INDICATED ABOVE
RESTATED ARTICLES OF INCORPORATION
FOR USE BY DOMESTIC PROFIT CORPORATIONS
(Please read information and instructions on last page)
Pursuant to the provisions of Act 284, Public Acts of 1972, the undersigned
corporation executes the following Articles:
1. The present name of the corporation is: Neogen Corporation
2. The identification number assigned by the Bureau is: 059-092
3. All former names of the corporation are: none
4. The date of filing the original Articles of Incorporation was:
June 30, 1981
The following Restated Articles of Incorporation supersede the Articles of
Incorporation as amended and shall be the Articles of Incorporation for the
corporation:
ARTICLE I
The name of the corporation is: Neogen Corporation
ARTICLE II
The purpose or purposes for which the corporation is organized is: to engage
in any activity within the purposes for which corporations may be organized
under the Business Corporation Act of Michigan.
<PAGE> 2
ARTICLE III
1. The total authorized capital stock of the Corporation is: 10,000,000
shares of Common Stock, Par Value per share of $.16.
2. In all matters in which the shareholders are entitled to vote, each
stockholder shall be entitled to one vote for each share of stock owned.
3. (a) The holders of a majority of the outstanding Class A Preferred
Stock shall have the right to give not less than thirty (30) days prior written
notice to the corporation and all holders of record of the Class A Preferred
Stock that, on the date specified in such notice, all (but no less than all)
outstanding shares of Class A Preferred Stock shall be converted to Common
Shares on the basis of one preferred share for one common share.
(b) The holders of a majority of the outstanding Class B Preferred
Stock shall have the right to give not less than thirty (30) days prior written
notice to the corporation and all holders of record of the Class B Preferred
Stock that, on the date specified in such notice, all (but not less than all)
outstanding shares of Class B Preferred Stock shall be converted to Common
Shares on the basis of one preferred share for one common share.
(c) Each holder of Class C Preferred Stock shall have the right, at
its option, at any time up until the date fixed for any redemption of such
stock, to convert each share of such Class C Preferred Stock into one share of
Common Stock. As promptly as practicable after the exercise by any holder of
such holder's option to convert any shares of Class C Preferred Stock, the
Company shall deliver or cause to be delivered to or upon the written order of
such holder, one or more certificates representing the number of shares of
Common Stock issuable upon such conversion, issued in such name or names as such
holder may direct. If the last day for the exercise of a holder's conversion
option be a Saturday, Sunday or legal holiday, then such conversion option may
be exercised upon the next succeeding day that is not a Saturday, Sunday or
legal holiday. Each such conversion shall be deemed to have been made
immediately prior to the close of business on the date the option to convert is
exercised, and notwithstanding such conversion, the holder shall be entitled to
receive all declared but unpaid dividends, if any, on the shares so converted.
(d) In the event the corporation completes an initial public offering
of shares with gross proceeds of at least $3,000,000, and the total value of the
corporation immediately prior to such offering is at least $10,000,000, all
shares of Class C Preferred stock shall be automatically converted into shares
of Common Stock on the basis of one preferred share for one common share.
4. The Corporation shall be managed by a Board of Directors composed of at
least five and not more than nine members, the precise number of which shall be
determined from time to time by the Board of Directors.
5. A director of the corporation shall not be personally liable to the
corporation or its shareholders for monetary damages for breach of fiduciary
duty as a director, except for liability for (i) any breach of the director's
duty of loyalty to the corporation or its shareholders, (ii) acts or omissions
not in good faith or that involve intentional misconduct or a knowing violation
of law, (iii) a violation of Section 551(1) of the Michigan Business
Corporation Act, or (iv) any transaction from which the director derived any
improper personal benefit. Any repeal or modification of the foregoing
sentence by the shareholders of the corporation shall not adversely affect any
right or protection of a director of the corporation existing at the time of
such repeal or modification.
<PAGE> 3
ARTICLE IV
1. The address of the current registered office is:
620 Lesher Place, Lansing, Michigan 48912
(Street Address) (City) (ZIP Code)
2. The mailing address of the current registered office, if different than
above:
(Street Address) (City) (ZIP Code)
3. The name of the current resident agent is: MR. JAMES L. HERBERT, JR.
ARTICLE V
The name and address of the incorporator is as follows: James R. Davis, 1018
Michigan National Tower, Lansing Michigan 48933.
ARTICLE VI
When a compromise or arrangement or a plan of reorganization of this
corporation is proposed between this corporation and its creditors or any class
of them or between this corporation and its shareholders or any class of them,
a court of equity jurisdiction within the state, on application of this
corporation or of a creditor or shareholder thereof, or on application of a
receiver appointed for the corporation, may order a meeting of the creditors or
class of creditors or of the shareholders or class of shareholders to be
affected by the proposed compromise or arrangement or reorganization, to be
summoned in such manner as the court directs. If a majority in number
representing 3/4 in value of the creditors or class of creditors, or of the
shareholders or class of shareholders to be affected by the proposed compromise
or arrangement or a reorganization, agree to a compromise or arrangement or a
reorganization of this corporation as a consequence of the compromise or
arrangement, the compromise or arrangement and the reorganization, if
sanctioned by the court to which the application has been made, shall be
binding on all the creditors or class of creditors, or on all the shareholders
or class of shareholders and also on this corporation.
<PAGE> 4
5. COMPLETE SECTION (a) IF THE RESTATED ARTICLES WERE ADOPTED BY THE
UNANIMOUS CONSENT OF THE INCORPORATOR(S) BEFORE THE FIRST MEETING OF THE
BOARD OF DIRECTORS; OTHERWISE, COMPLETE SECTION (b). DO NOT COMPLETE
BOTH.
a. These Restated Articles of Incorporation were duly adopted on the
--- _____ day of ____________, 1996 in accordance with the provisions
of Section 642 of the Act by the unanimous consent of the
incorporators before the first meeting of the Board of Directors.
Signed this day of , 1996.
------- -----------------
------------------------------- ----------------------------------
------------------------------- ----------------------------------
(Signatures of ALL incorporators; type or print name under each signature)
b. X These Restated Articles of Incorporation were duly adopted on
--- the 13th day of September, 1996 in accordance with the provisions
of Section 642 of the Act and: (check one of the following)
X were duly adopted by the Board of Directors without
--- a vote of the shareholders. These Restated Articles of
Incorporation only restate and integrate and do not further
amend the provisions of the Articles of Incorporation as
heretofore amended and there is no material discrepancy between
those provisions and the provisions of these Restated Articles.
were duly adopted by the shareholders. The necessary number of
--- shares as required by statute were voted in favor of these
Restated Articles.
were duly adopted by the written consent of the shareholders
--- having not less than the minimum number of votes required by
statute in accordance with Section 407(1) of the Act. Written
notice to shareholders who have not consented in writing has
been given. (Note: Written consent by less than all of the
shareholders is permitted only if such provision appears in the
Articles of Incorporation.)
were duly adopted by the written consent of all the
--- shareholders entitled to vote in accordance with Section 407(2)
of the Act.
Signed this 13th day of September, 1996.
By /s/ JAMES L. HERBERT
------------------------------------------------------------------
(Only Signature of President, Vice-President, Chairperson, or
Vice-Chairperson)
JAMES L. HERBERT PRESIDENT
----------------------------------------------------------------------
(Type or Print Name) (Type or Print Title)
<PAGE> 5
Name of person or organization Preparer's name and business
remitting fees: telephone number:
FRASER TREBILCOCK DAVIS & FOSTER, P.C. RICHARD C. LOWE
(517)377-0841
INFORMATION AND INSTRUCTIONS
1. The articles of incorporation cannot be restated until this form, or a
comparable document, is submitted.
2. Submit one original of this document. Upon filing, the document will be
added to the records of the Corporation and Securities Bureau. The
original will be returned to the address appearing in the box on the front
as evidence of filing.
Since this document will be maintained on optical disk media, it is
important that the filing be legible. Documents with poor black and white
contrast, or otherwise illegible, will be rejected.
3. This document is to be used pursuant to sections 641 through 643 of the Act
for the purpose of restating the articles of incorporation of a domestic
profit corporation. Restated articles of incorporation are an integration
into a single instrument of the current provisions of the corporation's
articles of incorporation, along with any desired amendments to those
articles.
4. Restated articles of incorporation which do not amend the articles of
incorporation may be adopted by the board of directors without a vote of
the shareholders. Restated articles of incorporation which amend the
articles of incorporation require adoption by the shareholders. Restated
articles of incorporation submitted before the first meeting of the board
of directors require adoption by the shareholders. Restated articles of
incorporation submitted before the first meeting of the board of directors
require adoption by all of the incorporators.
5. Item 2 -- Enter the identification number previously assigned by the
Bureau. If this number is unknown, leave it blank.
6. The duration of the corporation should be stated in the restated articles
of incorporation only if it is not perpetual.
7. This document is effective on the date endorsed "filed" by the Bureau. A
later effective date, no more than 90 days after the date of delivery, may
be stated.
8. If the restated articles are adopted before the first meeting of the board
of directors, item 5(a) must be signed in ink by a majority of the
incorporators. Other restated articles must be signed by the president,
vice-president, chairperson or vice-chairperson.
9. FEES: Make remittance payable to the State of Michigan. Include
corporation name and identification number on check or money order
NONREFUNDABLE FEE ............................................... $10.00
TOTAL MINIMUM FEE ............................................... $10.00
ADDITIONAL FEES DUE FOR INCREASED AUTHORIZED SHARES ARE:
each additional 20,000 authorized shares or portion thereof... $30.00
maximum fee for first 10,000,000 authorized shares......... $5,000.00
each additional 20,000 authorized shares or portion
thereof in excess of 10,000,000 shares........................ $30.00
maximum fee per filing for authorized shares in excess of
10,000,000 shares........................................ $200,000.00
10. Mail form and fee to: The office is located at:
Michigan Department of Commerce 6546 Mercantile Way
Corporation and Securities Bureau Lansing, MI 48910
Corporation Division Telephone: (517) 334-6302
P.O. Box 30054
Lansing, Michigan 48909-7554
<PAGE> 1
EXHIBIT 10(f)
LICENSE AGREEMENT
This Agreement is entered into between the Agricultural Research Service,
an agency of the United States Department of Agriculture (hereinafter referred
to as "ARS") and Neogen Corporation, a Michigan corporation having offices at
600 Lesher Place, Lansing, Michigan (hereinafter referred to as "NEOGEN").
WHEREAS, The United States Department of Agriculture has sponsored
research to develop a hybridoma which produces monoclonal antibodies which
recognize salinomycin and has received by assignment certain valuable patent
rights thereon in the United States; and
WHEREAS, ARS desires, in the public interest, that the subject invention
be perfected, marketed, and practiced so that the benefits are readily
available for widest possible utilization in the shortest time possible; and
WHEREAS, NEOGEN represents that it has the facilities, personnel and
expertise and is willing to expend reasonable efforts to bring the invention to
the point of practical application and to make the invention available to the
public;
NOW THEREFORE, in consideration of the foregoing and pursuant to 35 USC
207 and 37 CFR 404 and the mutual promises and obligations hereinafter set
forth, ARS and NEOGEN, intending to be legally bound, agree as follows:
ARTICLE I
DEFINITIONS
1.1 Licensed Patent shall mean U.S.S.N. 08/081,591, "Monoclonal Antibodies
to Salinomycin and Method for Detecting the Same" filed on June 23, 1993, and
any U.S. patent which issues therefrom, including all continuations, divisions,
reissues, renewals, reexaminations and extensions of such patent, and including
any continuations-in-part, provided that such continuations-in-part are not
directed to subject matter discovered subsequent to the filing of the above
referenced patent application.
1.2 Licensed Products shall mean the monoclonal antibodies encompassed
within the scope of the claims of the Licensed Patent and any immunoassay kit
which incorporates such monoclonal antibodies.
1.3 Net Sales shall mean the gross sales of Licensed Products by NEOGEN
to an independent third party less the sum of the following:
(a) discounts, in amounts customary in the trade, for quantity
purchases, cash payments, wholesalers, and distributors;
<PAGE> 2
(b) amounts repaid or credited by reason of rejection or returns; and
(c) any freight or other transportation costs, insurance, duties,
tariffs and sales and excise taxes based directly on sales or
turnover or delivery of material produced under this Agreement.
No deductions shall be made for commissions paid to sales persons or agents or
for the cost of collections. Licensed Products produced by NEOGEN for its own
use shall be included for the purposes of computing Net Sales, except such
Licensed Products used for non-revenue producing activity such as promotional
items or market trials. Licensed Products shall be considered sold when billed
or invoiced.
1.4 Effective Date shall mean the later date on which this Agreement is
executed by a party to the Agreement.
ARTICLE II
GRANT
2.1 ARS hereby grants to NEOGEN, subject to the terms and conditions
herein, a worldwide exclusive license under the Licensed Patent to make, have
made, use, and sell Licensed Products for the term of this Agreement.
2.2 ARS hereby grants to NEOGEN the right to grant sublicenses to
nonaffiliated companies subject to the provisions of this Agreement and to the
prior submission to and approval by ARS of the proposed sublicense, which
approval shall not be unreasonably withheld. All sublicenses shall make
reference to this Agreement, including the rights retained by the U.S.
Government in accordance with the provisions of Article III below. NEOGEN will
provide ARS with a copy of all sublicense agreements.
ARTICLE III
RESERVATION OF RIGHTS
3.1 The licenses granted in Article II above are subject to the
reservation by ARS of an irrevocable, nonexclusive, nontransferable,
royalty-free license for the practice of the Licensed Patent throughout the
world by or on behalf of the U.S. Government, and on behalf of any foreign
government pursuant to any existing or future treaty or agreement to which the
United States is a signatory, including the right to engage in research, either
alone or with one or more third parties, on inventions covered by the Licensed
Patent.
3.2 ARS reserves the right to require NEOGEN to grant sublicenses to
responsible applicants, on reasonable terms, when necessary to fulfill health or
safety needs.
2
<PAGE> 3
ARTICLE IV
FEES, ROYALTIES, AND PAYMENTS
4.1 Upon execution of this Agreement, NEOGEN shall pay to ARS an execution
fee of Two Thousand Five Hundred Dollars ($2,500), no part of which shall be
refunded for any reason. Payment of such fee shall be due within thirty (30)
days of the Effective Date.
4.2 NEOGEN shall pay to ARS an annual license maintenance fee of Two
Thousand Dollars ($2,000), no part of which shall be refunded for any reason.
The annual maintenance fee shall be due on March 1 of each calendar year. The
first annual maintenance fee shall be due March 1, 1995. The annual license
maintenance fee paid by NEOGEN for any given calendar year shall be a credit
against royalties owed during that calendar year, in accordance with the
provisions of Paragraph 4.4 below.
4.3 Should the costs to ARS for prosecuting and maintaining the Licensed
Patent exceed the annual license maintenance fee received from NEOGEN in any
calendar year, NEOGEN shall pay the difference between such costs and the
annual license maintenance fee, provided that ARS shall first notify NEOGEN of
any such costs. Should NEOGEN decline to pay any such costs, ARS may terminate
the Agreement in accordance with the provisions of Article VII below. ARS shall
keep NEOGEN advised as to the status of the prosecution of the Licensed Patent.
NEOGEN shall be entitled to review all actions undertaken in the prosecution of
the Licensed Patent and shall be given the opportunity to make reasonable
requests as to the conduct of such prosecution, provided that all such requests
are made in writing to ARS.
4.4 NEOGEN shall pay ARS royalties of three percent (3 %) on the Net Sales
of Licensed Products by NEOGEN. Royalties shall be due and payable upon
submission of each royalty report, submitted twice a year in accordance with the
provisions of Article V below.
4.5 Within thirty (30) days after entering into any sublicense agreement
as provided in Paragraph 2.2 above, NEOGEN shall pay to ARS fifty percent (50%)
of any lump sum payment or fee paid by a sublicensee upon execution of a
sublicense agreement. Within thirty (30) days of receipt, NEOGEN shall pay to
ARS fifty percent (50%) of any subsequent lump sum payment, fee, or other income
received by NEOGEN from a sublicensee pursuant to a sublicense agreement.
4.6 NEOGEN shall pay to ARS fifty percent (50%) of the royalties paid by
each sublicensee to NEOGEN on the Net Sales of Licensed Products by such
sublicensee pursuant to a sublicense agreement.
3
<PAGE> 4
4.7 All payments due ARS under this Article IV shall be payable in United
States dollars for the account of USDA/Agricultural Research Service, License
No. 08/081,591 001. All checks and bank drafts shall be drawn on United States
banks. Any payment not received by ARS by the due date shall be subject to a
late payment charge of one percent (1%) of the amount due, compounded on the
first day of each month following the due date of such late payment. Conversion
of foreign currency to United States dollars shall be made on the last business
day of the applicable reporting period for the purchase of United States dollar
bank wire transfers for settlement of such payment obligations. Any and all loss
of exchange, value, taxes, or other expenses incurred in the transfer or
conversion of other currency to United States dollars shall be paid entirely by
NEOGEN.
ARTICLE V
REPORTS AND RECORDS
5.1 NEOGEN shall provide written annual reports within sixty (60) days of
the end of each calendar year detailing progress being made to bring the
Licensed Patent to practical application. No further annual progress reports
will be required after notification of the first commercial sale of Licensed
Products unless otherwise requested by ARS.
5.2 NEOGEN shall submit to ARS within sixty (60) days after each calendar
half year ending June 30th and December 3 1st, reports setting forth for the
preceding six (6) month period the amount of Licensed Products made, used, or
sold or otherwise disposed of by NEOGEN, and its sublicensees, the Net Sales
thereof and the royalties due pursuant to Paragraph 4.4 above. The report shall
include an itemized accounting of the number of units of Licensed Products sold,
price per unit, and each deduction taken from the gross sales for the purpose of
calculating Net Sales. A written report shall be due for each reporting period
whether or not any royalties are due to ARS.
5.3 NEOGEN, and its sublicensees, shall keep accurate and complete records
as are required for the determination of royalties owed to ARS pursuant to this
Agreement. Such records shall be retained for at least five (5) years following
a given reporting period. Upon reasonable notice and at the expense of ARS,
such records shall be available during normal business hours for inspection by
an accountant selected by ARS and approved by NEOGEN for the sole purpose of
verifying reports and payments hereunder. Such accountant shall not disclose to
ARS any information other than information relating to the accuracy of reports
and payments made under this Agreement.
4
<PAGE> 5
ARTICLE VI
LICENSEE PERFORMANCE
6.1 NEOGEN shall expend reasonable efforts and resources to carry out the
development and marketing plan submitted with NEOGEN's application for a license
and to bring the Licensed Patent to the point of practical application as
defined in Title 37 of the Code of Federal Regulations, Section 404.3(d). NEOGEN
shall offer Licensed Products for sale within one (1) year of the Effective Date
of this Agreement unless this period is extended by mutual agreement of the
parties. ARS shall not unreasonably withhold approval of any request by NEOGEN
to extend this period if such request is supported by evidence of reasonable
efforts by NEOGEN to bring the Licensed Patent to practical application,
including any reasonable and diligent application for regulatory approvals
required by any U.S. Government agency.
6.2 NEOGEN shall notify ARS in writing within fifteen (15) days after the
first commercial sale of a Licensed Product by NEOGEN, or its sublicensees.
6.3 NEOGEN agrees that Licensed Products sold or otherwise disposed of in
the United States by NEOGEN, or its sublicensees, shall be manufactured
substantially in the United States.
6.4 After bringing the Licensed Patent to the point of practical
application in the United States, NEOGEN agrees to keep Licensed Products
reasonably available to the United States public during the term of this
Agreement.
ARTICLE VII
DURATION, MODIFICATION, AND TERMINATION
7.1 This Agreement shall commence on the Effective Date and, unless sooner
terminated as provided under this Article VII, shall remain in effect until the
expiration of the last to expire Licensed Patent.
7.2 This Agreement may be modified or terminated by ARS subject to the
provisions of Paragraphs 7.3 and 12.4 below if it is determined that any one of
the following has occurred:
(a) NEOGEN, or its sublicensees, fails to meet the obligations set
forth in Article VI above;
(b) Such action is necessary to meet requirements for public use
specified by Federal regulations issued after the date of the
license and such requirements are not reasonably satisfied by
NEOGEN, or one of its sublicensees;
(c) NEOGEN has willfully made a false statement or willfully omitted
a material fact in the license application or in any report
required by this Agreement;
5
<PAGE> 6
(d) NEOGEN, or its sublicensees, commits a substantial breach of a
covenant or agreement contained in this Agreement;
(e) NEOGEN is adjudged bankrupt or has its assets placed in the hands
of a receiver or makes any assignment or other accommodation for
the benefit of creditors; or
(f) NEOGEN, or its sublicensees, misuses the Licensed Patent.
7.3 Prior to modification or termination of this Agreement, ARS shall
furnish NEOGEN and any sublicensees of record a written notice of intention to
modify or terminate, and NEOGEN and any notified sublicensee shall be allowed
thirty (30) days after the date of receipt of such notice to remedy any breach
or default of any covenant or agreement of this Agreement or to show cause why
this Agreement should not be modified or terminated.
7.4 NEOGEN may terminate this Agreement at any time upon ninety (90) days
written notice to ARS. If NEOGEN terminates this Agreement in accordance with
the provisions of this Paragraph 7.4, NEOGEN shall provide ARS with all
technical data regarding the Licensed Patent generated by NEOGEN after the
Effective Date, and ARS shall be free to disclose such data to any third party.
7.5 Upon termination of this Agreement, all sums due to ARS pursuant to
Article IV hereunder shall become immediately payable. In all other respects,
the rights and obligations of the parties hereto concerning the Licensed Patent
included in such termination shall cease as of the effective date of such
termination. NEOGEN may, however, within a reasonable time after the date of
such termination, sell all Licensed Products completed and in inventory provided
that royalties are paid on any such sales in accordance with the provisions of
Article IV.
7.6 In the event of termination of this Agreement, any sublicense of
record granted pursuant to Paragraph 2.2 may, at the sublicensee's option,
either be converted to a license directly between sublicensee and ARS or be
terminated.
ARTICLE VIII
Patent Enforcement
8.1 The U.S. Government is not obligated to enforce the Licensed Patent
against infringers. NEOGEN shall continue to pay maintenance and royalty fees
accruing to the Government until such time as this Agreement is terminated by
either party, even if the Government elects not to enforce the Licensed Patent
against infringers.
6
<PAGE> 7
8.2 NEOGEN is granted the first option at its own expense, in its own
name, to enforce the Licensed Patent against a specific party who may be
infringing the Licensed Patent, subject to the following conditions:
(a) The right of enforcement granted under this Paragraph 8.2 shall
constitute the rights provided under Title 35, Chapter 29, of the
U.S. Code.
(b) If NEOGEN elects the option against a specific party, the
Government shall not be entitled to bring an enforcement action
against such party except if it chooses to join with NEOGEN.
(c) If NEOGEN submits a written request to elect the option against a
specific party, ARS must approve the election before NEOGEN may
bring an enforcement action against such party.
(i) If ARS does not approve the election, and can not
reasonably establish non-infringement, within ninety (90)
days of NEOGEN's request for approval, NEOGEN shall not be
obligated to pay royalties or fees that begin to accrue at
the end of the ninety day period.
(ii) If ARS grants approval after the end of the ninety day
period, NEOGEN shall be obligated to pay royalties and fees
that accrue beginning with the day of subsequent approval,
but shall not be obligated to pay royalties or fees that
previously accrued during the time extending from the end of
the ninety day period to the day of subsequent approval.
(d) If ARS requests in writing that NEOGEN decide whether to elect
the option against a specific party, NEOGEN shall submit its
decision within sixty (60) days of the date of request. In the
absence of a written response during the sixty day period, ARS
may enforce the Licensed Patent without NEOGEN.
8.3 The following conditions apply to court awards and sublicensing fees
as to the Licensed Patent, if NEOGEN elects the enforcement option against a
specific party:
(a) NEOGEN is not required to share, with ARS, court awards from such
party, but is required to share sublicensing royalty fees from
such party other than as awarded by a court.
(b) NEOGEN's attorney's fees for attempting to sublicense or enforce
the Licensed Patent(s) against a specific party may be deducted
from payments due to ARS under a sublicense to such party,
provided that such attorney's fees are not
7
<PAGE> 8
recouped as part of a court award for infringement of the
Licensed Patent by such party, and provided that any such
deductions do not exceed fifty percent (50%) of the payments due
to ARS during any single reporting period.
8.4 In the absence of prior written consent from ARS, NEOGEN shall not be
entitled to waive any rights in the Licensed Patent as part of an agreement with
a party who may be infringing the Licensed Patent.
ARTICLE IX
MARKINGS AND NON-USE OF NAMES
9.1 NEOGEN, and its sublicensees, shall mark Licensed Products or packages
containing Licensed Products with all applicable patent numbers.
9.2 NEOGEN shall not use the name of the U.S. Government, the name of any
department or agency of the U.S. Government, the name of any U.S. Government
employee, or any adaptation of the above in any promotional activity without
prior written approval from ARS.
ARTICLE X
REPRESENTATIONS AND WARRANTIES
10.1 ARS represents and warrants that the entire right, title and interest
in the Licensed Patent has been assigned to the United States of America as
represented by the Secretary of Agriculture and that ARS has the authority to
issue licenses under the Licensed Patent.
10.2 ARS does not warrant the patentability or validity of the Licensed
Patent and makes no representations whatsoever with regard to the scope of the
Licensed Patent or that such Licensed Patent may be exploited without infringing
other patents.
ARTICLE XI
PAYMENTS, NOTICES AND OTHER COMMUNICATIONS
Written notices and reports required to be given under this Agreement, and
submission of execution and maintenance fees and royalties, shall be mailed by
first class mail, postage prepaid and addressed as follows:
8
<PAGE> 9
If to ARS:
Coordinator, National Patent Program
USDA, ARS, Office of Technology Transfer
Building 005, BARC-West
Beltsville, Maryland 20705-2350
If to NEOGEN:
President
Neogen Corporation
620 Lesher Place
Lansing, Michigan 48912
ARTICLE XII
GENERAL PROVISIONS
12.1 This Agreement shall not be transferred or assigned by NEOGEN to any
party other than to a successor or assignee of the entire business interest of
NEOGEN relating to the Licensed Patent. NEOGEN shall notify ARS in writing
prior to any such transfer or assignment.
12.2 The interpretation and application of the provisions of this Agreement
shall be governed by the laws of the United States as interpreted and applied by
the Federal courts in the District of Columbia.
12.3 Neither party may waive or release any of its rights or interest in
this Agreement except in writing. The failure of a party to assert a right
hereunder or to insist on compliance with any term or condition of this
Agreement shall not constitute a waiver of that right or excuse a similar
subsequent failure to perform any such term or condition by the other party.
12.4 The parties shall make every reasonable effort to resolve amicably any
dispute concerning a question of fact arising under this Agreement. Any
disputes not settled amicably between the parties concerning a question of fact
arising under this Agreement shall be decided by the Assistant Administrator for
Technology Transfer, ARS, who shall reduce his decision to writing and mail or
otherwise furnish a copy thereof to NEOGEN. Any decision of the Assistant
Administrator, ARS, whether it be a question of fact, or to modify or terminate
this Agreement, may be appealed to the Administrator, ARS, whose decision shall
be administratively final and conclusive. Pending final decision of a dispute
hereunder, NEOGEN shall proceed diligently with the performance of its
obligations under this Agreement.
9
<PAGE> 10
12.5 This Agreement constitutes the entire agreement and understanding
between the parties, and neither party shall be obligated by any condition,
promise or representation other than those expressly stated herein or as may be
subsequently agreed to by the parties hereto in writing.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their duly authorized representatives.
FOR THE UNITED STATES DEPARTMENT OF AGRICULTURE, AGRICULTURAL RESEARCH SERVICE:
W.H. Tallent 5/26/94
- ---------------------------------- ----------------------
Signature Date
W. H. TALLENT
Assistant Administrator, Agricultural Research Service, USDA
FOR NEOGEN CORPORATION:
Brinton M. Miller, Ph.D. June 29, 1994
- ---------------------------------- ----------------------
Signature Date
Name: BRINTON M. MILLER, Ph.D.
-------------------------------------
Title: Vice President, Scientific Affairs
-----------------------------------
10
<PAGE> 1
EXHIBIT 10(k)
MULTI-TENANT INDUSTRIAL LEASE
WHITESELL ENTERPRISES ONE UNDERWOOD COURT DELRAN. NEW JERSEY 080
(LANDLORD)
TO
AMPCOR DIAGNOSTICS, INC.
A SUBSIDIARY OF NEOGEN CORPORATION
603 HERON DRIVE, UNIT 3
BRIDGEPORT, NEW JERSEY 08014
(TENANT)
PORTION OF
603 HERON DRIVE
BRIDGEPORT, NEW JERSEY 08014
(BUILDING)
<PAGE> 2
INDEX TO MULTI-TENANT INDUSTRIAL LEASE
DESCRIPTION PAGE
1. LEASE TERMS 1
2. DEMISE OF PREMISES 2
3. USE OF PREMISES 2
4. POSSESSION 3
5. RENT 3
6. LATE PAYMENT 4
7. SECURITY DEPOSIT 5
8. SIGNS 5
9. SERVICES AND UTILITIES 5
10. CONDITION OF PREMISES 5
11. SURRENDER 5
12. REPAIRS AND MAINTENANCE 6
13. ALTERATIONS AND TRADE FIXTURES 6
14. ACCESS TO PREMISES 7
15. ENVIRONMENTAL COMPLIANCE 7
16. ASSIGNMENT AND SUBLETTING 8
17. MECHANICS' LIENS 9
18. INDEMNIFICATION AND LIABILITY INSURANCE 9
19. WAIVER OF SUBROGATION 10
20. WAIVER OF CLAIMS 11
21. FIRE OR OTHER CASUALTY 11
22. CONDEMNATION 12
23. ESTOPPEL CERTIFICATE 12
24. TENANT'S DEFAULT 13
25. REQUIREMENT OF STRICT PERFORMANCE 15
26. RELOCATION OF TENANT 15
27. SUBORDINATION; RIGHTS OF MORTGAGEE 15
28. BANKRUPTCY AND INSOLVENCY 16
29. BROKERS 19
30. LANDLORD'S OBLIGATIONS/LIABILITY 19
31. LANDLORD'S SIGNS 19
32. QUIET ENJOYMENT 19
33. DELIVERY OF LEASE AND MODIFICATION BY MORTGAGEE 19
34. TENANT'S AUTHORITY 20
35. NOTICES 20
36. MISCELLANEOUS PROVISIONS 20
37. WAIVER OF TRIAL BY JURY 21
Exhibit "A" - PREMISES
----------------
Exhibit "B" - RULES AND REGULATIONS
----------------
Exhibit "C" - SCOPE OF WORK
----------------
Exhibit "D" - WARRANTY
----------------
Exhibit "E" - NONE
----------------
Exhibit "F" - RIGHT OF FIRST OFFER
----------------
Exhibit "G" - EQUIPMENT AND FIXTURES SUPPLIED BY TENANT
----------------
i
<PAGE> 3
LEASE
THIS LEASE ("Lease") entered into as of the 26th of January, 1995,
between Whitesell Enterprises, ("Landlord") and Ampcor Diagnostics, Inc.. a
Subsidiary of Neogen Corporation ("Tenant").
W I T N E S S E T H :
In consideration of the mutual covenants herein set forth, and intending
to be legally bound hereby, the parties hereto covenant and agree as follows:
1. LEASE TERMS. The parties agree that the following defined terms and
provisions, as used in this Lease, shall have the meanings and shall be
construed as set forth below.
(a) Date of Lease: January 26, 1995
------------- --------------------------------------
(b) Landlord: Whitesell Enterprises
-------- --------------------------------------
Address: One Underwood Court
------- --------------------------------------
Delran, New Jersey 08075
--------------------------------------
(c) Tenant: Ampcor Diagnostics, Inc.
------ --------------------------------------
A Subsidiary of Neogen Corporation
--------------------------------------
Address: 603 Heron Drive, Unit 3
------- --------------------------------------
Bridgeport, New Jersey 08014
--------------------------------------
Type of Entity: Limited Partnership
-------------- -----
(check one) General Partnership
-----
Corporation X
-----
Sole Proprietorship
-----
State of Organization Michigan
(d) Guarantor: Yes No X
--------- ----- -----
(e) Approximate Number of Employees: Office: 20
------------------------------- -----
Warehouse: 0
-----
(f) Approximate Number of Trucks/Trailers per day: 1
------------- -----
(g) Tenant's SIC Number: 7391/Research, development lab,
------------------- -------------------------------
(h) Premises:
--------
Street Address: 603 Heron Drive, Unit 3
-------------- -----------------------
Bridgeport, New Jersey 08014
----------------------------
Approximate Rentable Square Footage: 9,167
Units Number: 3 and 4. As cross hatched on Exhibit "A"
(i) Building: 603 Heron Drive
-------- ---------------
Bridgeport, New Jersey
----------------------
Lot & Block Number: 3.08/46
Approximate Rentable/Square Footage: 43,233
Tenant's Pro Rata Share: 21,20%
(k) Term: Three (3) Years, three (3) months,
----- ----------------------------------
Lease Commencement Date: February 1. 1995
-----------------------------------------
Expiration Date: January 31, 1998
---------------------------------
1
<PAGE> 4
Base Rent Commencement Date: May 1. 1995
Tenant shall be responsible for operating expenses only for
the period from February 1, 1995 to April 30, 1995.
(1-1) BASE RENT:. $37,584.70 per year.
--------- ----------------------
$3,123.06 per month
----------------------
$4.10 per square foot.
----------------------
(1-2) INITIAL ESTIMATE OF ADDITIONAL RENT: $0,80 PSF
FIXED FOR 1995. Operating expenses other than taxes and snow
removal shall be capped not to exceed ten percent (10%)
increase per year. See Paragraph 5 on Page 3 for definitions.
(m) Security Deposit: $3,123.06
---------------- ---------
(n) Permitted Use: Office, lab, storage and diagnostic kit
---------------------------------------
production space.
-----------------
(o) Renewals: None
----
(p) Broker: None
------ ----
(q) Tenant's Lease Execution Date Requirements:
------------------------------------------
Amount Received
------ --------
(i) initial payment (security deposit
and first months rent) $6,246.12
--------
(ii) insurance certificates per Article 18
-------------- --------
2. DEMISE OF PREMISES. Landlord, for and in consideration of the Rent (as
hereinafter defined) to be paid and the covenants and agreements to be
performed by Tenant as hereinafter set forth, does hereby lease, demise and let
unto Tenant the Premises, together with the non-exclusive right to use in
common with the other tenants in the Building all common parking spaces located
adjacent to the Building, walks, access roads and land surrounding the Building
and the common areas in the Building (collectively the "Property") .
3 . USE OF PREMISES. (a) Tenant covenants and agrees to use the Premises
for the Permitted Use, and for no other purpose or purposes. No machinery,
equipment or other thing that could cause excessive vibration, noise, odor or
fumes shall be installed or placed therein. Tenant shall not subject any
portion of the floor to greater loading than that portion of the Premises is
designed to carry. Tenant agrees that all outside storage of any kind is
prohibited. Parking of inoperable vehicles, non-motorized vehicles or trailers
in or about the Premises is prohibited.
(b) Tenant shall, in the use and occupancy of the Premises and the conduct
of Tenant's business or profession therein, at all times and at Tenant's
expense comply with, and conform the Premises to the following requirements
(the "Requirements"): all applicable laws, ordinances, orders, notices and
regulations of the federal, state and municipal governments, or any of their
departments and the regulations of the insurers of the Premises and Building
and the rules and regulations attached hereto as Exhibit "B." Without limiting
the generality of the foregoing, Tenant shall: (I) obtain, at Tenant's expense,
before engaging in Tenant's business or profession within the Premises, all
necessary licenses and permits including (but not limited to) state and local
use or occupancy and business licenses or permits; and (ii) remain in
compliance with and keep in force at all times all licenses, consents and
permits necessary for the lawful conduct of Tenant's business or profession at
the Premises. Tenant shall pay all personal property taxes, income taxes and
other taxes which are or may be assessed, levied
2
<PAGE> 5
or imposed upon Tenant and which, if not paid, could be liened against the
Premises or against Tenants property therein or against Tenant's leasehold
estate. Tenant agrees to promptly furnish Landlord with a copy of any notice
that it receives that it is in violation of any Requirements.
(c) Tenant shall indemnify, protect, defend and save harmless Landlord
with regard to any non-compliance or alleged noncompliance by Tenant with any
Requirements. If Landlord is named as defendant or a responsible party with
respect to any alleged violation or non-compliance by Tenant as aforesaid,
Landlord also may require, by notice to Tenant as aforesaid, that the matters
or conduct giving rise thereto be discontinued by Tenant unless and until the
alleged violation or non-compliance is resolved in Tenant's favor.
4 . POSSESSION. In no event shall Landlord be liable to Tenant for any
actual or consequential damages in the event that Landlord is unable to deliver
possession of the Premises on the Lease Commencement Date. If the Lease term
does not commence upon the Lease Commencement Date, Landlord and Tenant shall,
by separate writing, set forth the revised Lease Commencement Date and
Expiration Date (which shall be extended accordingly).
5 . RENT. (a) The Base Rent shall be paid without notice in equal monthly
installments on or prior to the first day of each month. If the Rent
Commencement Date is other than the first day of a calendar month or if the
Expiration Date is other than the last day of a calendar month, Rent for such
partial month shall be prorated. See Page 3A attached.
(b) In addition to the Base Rent, Tenant shall pay to Landlord its Pro
Rata Share of all real estate taxes and assessments (collectively "Taxes")
incurred during each tax year (pro rated where appropriate) during the term of
this Lease. The Taxes shall be estimated by Landlord from time to time and
Tenant shall pay to Landlord monthly, in addition to the Basic Rent and on the
same day provided in Article 5(a), 1/12 thereof. Landlord shall have the
right, but not the obligation to appeal or contest any Taxes and Tenant shall
pay its Pro Rata Share of Landlord's costs for the contest or appeal which
costs, shall in no case ever exceed any tax savings.
(c) In addition to the Base Rent and Taxes, Tenants are to pay to
Landlord its Pro Rata Share of all operating costs (the "Costs") incurred
during each calendar year (pro rated where appropriate) during the term of this
Lease. The Costs shall be estimated by Landlord from time to time and Tenant
shall pay to Landlord monthly, in addition to the Basic Rent and Taxes and on
the same day provided in Article 5(a), 1/12 thereof. The Costs shall include
any and all costs incurred (including labor costs for Landlord's employees) in
the maintenance, repair, upkeep, replacement, servicing, securing and operation
of the Building and Property (less any charges invoiced directly to other
tenants in the Building) and shall include but not be limited to:
(i) All costs and expenses directly related to the operation of the
Building and Property including lighting, cleaning, maintaining and
painting the building exterior, fire suppression and alarm systems,
removing snow, ice and debris and maintaining all landscape areas,
(including replacing and replanting flowers, shrubbery and trees),
maintaining and repairing all other exterior improvements (including
without limitation parking areas, drives and sidewalks) on the Property
and all repairs and compliance costs (including storm water runoff etc.,
if applicable) required of Landlord. Landlord's obligation to provide
snow removal services shall
3
<PAGE> 6
LANDLORD'S DEFAULT. In the event Landlord defaults under any of it's
specific obligations set forth in this Lease, Tenant shall provide a written
notice thereof to Landlord, which notice shall specify the nature of the
default and the actions proposed by Tenant to cure such default. Landlord
shall have a period of thirty (30) days following receipt of such notice in
which to commence and diligently pursue cure of such default and shall complete
cure within a reasonable time thereafter, failing which, Tenant shall have the
right to cure such default on behalf of Landlord on a commercially reasonable
basis. Upon effecting such cure on behalf of Landlord, Tenant shall submit a
detailed written invoice to Landlord and Landlord shall have a period of
fifteen (15) days in which to pay such invoice, failing which, Tenant shall
have the right to set off such amount against the next payment of rent owing to
Landlord under this Lease. In the event, however, that Landlord disputes the
existence of the default claimed by Tenant in it's original notification to
Landlord, Landlord shall so notify Tenant within ten (10) days of Landlord's
receipt of Tenant's notice and in such event, the parties shall then proceed to
arbitration as to the issue of the existence of the default claimed by Tenant.
Such arbitration shall be held before a single arbitrator appointed by and
under the rules of the American Arbitration Association in Burlington County,
New Jersey. In the event of arbitration under this paragraph, Tenant shall not
have the right to set off against rent unless and until the arbitrator rules in
Tenant's favor and Landlord fails to pay the award set forth by the arbitrator
within fifteen (15) days of the date of such decision.
Initial LMB
---
---
3A
<PAGE> 7
be limited to the parking areas and Tenant shall be responsible for
its entrance ways and sidewalks.
(ii) If the Property is located in an industrial park, Tenant shall
pay its pro rata share of maintenance and repair of any common areas
in the industrial park including, but not limited to drainage systems,
lighting, trash removal, snow removal, landscaping and dues if
applicable.
(iii) Administrative fee of three (3%) percent of the Base Rent plus
legal fees which are applicable to the overall operation of the
Building. It is expressly understood that legal fees incurred in an
action against an individual Tenant shall not be deemed includable as
an operating expense pursuant to this provision.
(iv) All costs and expenses Incurred by Landlord for environmental
testing, sampling or monitoring necessary except any costs or expenses
incurred in conjunction with the spilling or depositing of any
hazardous substance for which any other Tenant is legally liable.
(v) All costs for insurance carried by Landlord.
(vi) Capital expenditures and the costs of preparing any other unit
for rental shall not be included as operating expenses. However in
the event that Landlord incurs any capital expense for an improvement
required by virtue of any governmental statute, ordinance or
regulation then Landlord shall be permitted to recover on an amortized
basis (not to exceed five (5) years) the portion of the capital costs
applicable to the term of this Lease including any renewal or
extension. Similarly should Landlord make any capital improvement
which reduces the operating expenses payable hereunder then Landlord
shall be permitted to recover the amortized costs as aforesaid but in
no case shall the expense allocated exceed the cost savings achieved
by the capital improvement.
(d) Within 120 days following the end of each calendar year and/or tax
year, as the case may be, Landlord shall send to Tenant a statement of actual
Costs and/or Taxes, as the case may be, incurred for such year as appropriate,
showing the Pro Rata share due from Tenant. In the event the amount paid by
Tenant as Additional Rent for such period pursuant to this Article 5 exceeds
the amount that was actually due based upon actual year end cost, then Landlord
shall issue a credit to Tenant in an amount equal to the overcharge which
credit Tenant may apply to future rent payments until Tenant has been fully
credited with the overcharge. If the credit due to Tenant is more than the
aggregate total of future rental payments, Landlord shall pay to Tenant the
difference between the credit in such aggregate total. In the event Landlord
has undercharged Tenant, then Landlord shall send Tenant an invoice with the
additional amount due which amount shall be paid in full by Tenant within ten
(10) days of receipt.
(e) All Taxes, Costs and other sums other than Base Rent payable by Tenant
to Landlord under this Lease shall be deemed additional rent ("Additional
Rent") and Landlord shall have all rights with respect to the
non-payment of Additional Rent as for Base Rent. Base Rent and Additional Rent
are sometimes herein together called "Rent".
6 . LATE PAYMENT . For each payment of Rent received after the first
day following the due date therefor, Tenant shall pay to Landlord an initial
late charge of five percent (5%) of the payment due plus one and one-half
(1-1/2%) percent for each additional month such payment is late, which charge
must accompany the late payment. An additional charge will be made for checks
returned for insufficient funds.
4
<PAGE> 8
7 . SECURITY DEPOSIT. Tenant does herewith deposit with Landlord the
Security Deposit to be held as security for the full and faithful performance
by Tenant of Tenant's obligations under this Lease and for the payment of
damages to the Premises. Except for such sum as shall be applied by Landlord
to satisfy claims against Tenant arising from defaults under this Lease or by
reason of damages to the Premises, and further provided that Tenant is not then
in default hereunder and has complied with all obligations for surrender and
redelivery of the Premises to Landlord [including without limitation all
obligations contained in Article 15 (c) ], the Security Deposit shall be
returned to Tenant without Interest within thirty (30) days of the expiration
of the term of this Lease or any renewals or extensions thereof. It is
understood that no part of any Security Deposit is to be considered as the last
rental due under the term of the Lease. Notwithstanding any law to the
contrary, Landlord shall not be required to pay any interest to Tenant on
account of the holding of the Security Deposit and need not maintain this
deposit in a separate account but may co-mingle and use these funds as its own.
In the event of the sale or transfer of Landlord's interest in the Building,
Landlord shall have the right to transfer the Security Deposit to such
purchaser or transferee, in which event Tenant shall look only to the new
Landlord for the return of the Security Deposit and Landlord shall thereupon be
released from all liability to Tenant for the return of the Security Deposit.
8 . SIGNS. No sign, advertisement or notice shall be affixed to or placed
upon any part of the Premises, Building or Property by the Tenant or anyone
acting under Tenant. At any time Landlord may put upon the Premises a suitable
"for sale" sign and for six (6) months prior to the expiration of the current
term, Landlord or it agents may place the usual "to let" signs thereon.
Landlord shall provide Landlord's standard signage identifying Tenant on
Building pylon and at suite entrance.
9. SERVICES AND UTILITIES. The Tenants shall pay all costs and charges
for utilities and services including security deposits and minimum fees. The
utilities shall be deemed to include without limitation the cost of heating,
air conditioning if applicable, electricity, water, gas, sprinkler stand-by
fee, sewer service and septic fee if applicable. The Landlord shall not be
liable for any interruption or delay in any of the above services for any
reason. Upon demand, Tenant shall promptly furnish to Landlord payment or
evidence of payment of charges for utilities and services.
10. CONDITION OF PREMISES. (a) If landlord agrees to complete any work in
the Premises prior to occupancy by Tenant, then the specifications for such
construction shall be as set forth on the construction documents initialed by
the parties and incorporated by reference into this Lease on Exhibit "C". The
taking of possession of the Premises by Tenant shall conclusively establish
that the Premises and the Building were at such time in satisfactory condition,
order and repair, subject to any punch list items.
(b) Landlord shall undertake warranty work described in Exhibit "D" (if
any) and except as set forth therein Tenant is leasing the Premises in their
"as-is" condition.
11. SURRENDER. Tenant shall at the expiration of Term, hereof, peaceably
surrender possession of the Premises in as good and marketable order and
condition as existed at the inception of this Lease, reasonable wear and tear
of the finishing elements and carpeting and damage by fire, elements or
casualty excepted, and will, at the expiration of said term, or any
continuation thereof, deliver the keys at the office of said Landlord. Within
the final fifteen (15) days of the Term, the systems shall be inspected by a
reputable electrical, mechanical or plumbing contractor designated by Landlord
at the sole cost and obligation of Tenant. All mechanical, electrical,
plumbing, heating and air conditioning
5
<PAGE> 9
systems shall be in good operating order at the termination of this Lease and
Tenant shall perform a thorough cleaning of the Premises immediately prior to
surrender, including without limitation shampoo and repairs of all carpeted
areas of the Premises. Any property or fixtures which remain upon the Premises
after the expiration of the Lease shall be deemed abandoned by Tenant and
Landlord may take possession of same and dispose of same in any reasonable
manner without any further liability of Landlord to Tenant. Any costs
associated with the removal of such property shall be payable by Tenant.
12. REPAIRS AND MAINTENANCE. (a) Except as specifically otherwise provided
in subsection (b) of this Article 12, Tenant, at its sole cost and expense and
throughout the term of this Lease shall keep and maintain the Premises
including without limitation hot water heaters, roof fans, plumbing and
electrical systems and fixtures, Tenants improvements, betterments and other
special equipment attached to the Premises, glass, overhead doors, loading dock
bumpers and revelers and carpeting in good order and condition, free of dirt
and rubbish, and shall promptly make all repairs necessary to keep and maintain
such good order and condition, whether such repairs are ordinary or
extraordinary, foreseen or unforeseen. When used in this Article 12, the term
"repairs" shall include replacements and renewals when necessary. All repairs
made by Tenant shall utilize materials and equipment which are at least equal
in quality and usefulness to those originally used in constructing the Building
and the Premises. Tenant shall also repair and maintain any openings in the
roof or walls specifically installed by or for Tenant with Landlord's prior
written consent. Tenant shall pay Landlord's costs to service, repair and
maintain HVAC Equipment including any underground storage tank and associated
piping, any fire suppression system (including alarm monitoring) and any other
service which pertains to the Property. Tenant shall have the option to
purchase and maintain its own service contract on the HVAC Equipment so long as
Landlord has given its prior written consent to the service agreement.
(b) Landlord, throughout the term of this Lease shall make all necessary
repairs to the footings and foundations, roof, external walls and structural
steel columns and girders forming a part of the Premises (excluding doors,
windows and other apertures); provided, however, that Landlord shall have no
responsibility to make any repair unless and until Landlord receives written
notice of the need for such repair from Tenant. Tenant shall pay the
cost of any repairs made pursuant to this paragraph as same are occasioned by
the act, omission or negligence of Tenant, its employees or invitees.
13. ALTERATIONS AND TRADE FIXTURES. (a) Tenants shall not make any
alterations, additions, or improvements (collectively "Alterations") to the
Building or Property and shall not make any Alteration to the Premises without
Landlord's prior written consent. All Alterations made by either of the
parties hereto upon the Premises, except moveable and detached or detachable
office furniture, partitions, and machinery and equipment put in at Tenant's
expense AND EXCEPT FOR FIXTURES IDENTIFIED IN EXHIBIT "G", shall be the
property of Landlord, and shall remain upon and be surrendered with the
Premises, as part thereof at the termination of this Lease. Any damages caused
by or arising from the Tenant's removal of any Alterations shall be restored or
repaired at Tenant's expense.
(b) All labor and materials furnished by or on behalf of Tenant under or
pursuant to this Lease shall be first class, not less than the caliber and
quality which exists in the Premises and by contractors approved in writing by
Landlord and shall be accomplished at times so as not to disturb the business
of other tenants. Tenant shall not install any Alterations in such a manner
6
<PAGE> 10
as to compromise the structural integrity or impair the economic value or
marketability of the Premises or any part thereof. The labor and materials
shall be installed in complete conformity to all applicable statutes, codes,
ordinances and regulations.
(c) Landlord agrees that it will not unreasonably withhold or delay its
consent to any interior nonstructural Alterations to the Premises which do not
affect any Building systems. Tenant agrees that it will submit to Landlord
sealed plans and specifications along with the name and address of the proposed
contractor and all subcontractors as part of any request made hereunder. Prior
to commencing the work, Tenant will furnish Landlord with copies of
all governmental permits, certificates establishing that its contractor and
subcontractors have adequate insurance coverages naming Landlord (and any
property manager) and Landlord's mortgagee as additional insureds and a waiver
of lien. If the Landlord has installed a master lock system Tenant agrees that
under no circumstance will it change any of the exterior locks thereby making
it impossible for the Landlord to gain access with its master key.
14. ACCESS TO PREMISES. Landlord, its employees and agents shall have the
right to enter the Premises at all reasonable times for the purpose of
examining or inspecting the same, showing the same to prospective purchasers,
mortgagees or tenants of the Building, and making such alterations, repairs,
improvements or additions to the Premises or to the Building as may be
necessary. If representatives of Tenant shall not be present to open and
permit entry into the Premises at any time when such entry by Landlord is
necessary or permitted hereunder, Landlord may enter by means of a master key
(or forcibly in the event of an emergency) without liability to Tenant and
without such entry constituting an eviction of Tenant or termination of this
Lease.
15. ENVIRONMENTAL COMPLIANCE. TENANT HEREBY AGREES THAT IT SHALL COMPLY,
AT IT'S SOLE COST AND EXPENSE, WITH THE REQUIREMENTS OF ALL FEDERAL, STATE AND
LOCAL ENVIRONMENTAL LAWS, RULES, ORDINANCES, REGULATIONS AND ORDERS WITH
RESPECT TO THE PREMISES OR ARISING IN CONNECTION WITH TENANT'S USE OF OR
OPERATIONS AT THE PREMISES INCLUDING, WITHOUT LIMITATION, THE NEW JERSEY
INDUSTRIAL SITE RECOVERY ACT, THE NEW JERSEY SPILL COMPENSATION AND CONTROL
ACT, THE NEW JERSEY UNDERGROUND STORAGE OF HAZARDOUS SUBSTANCES ACT, THE NEW
JERSEY SOLID WANTS MANAGEMENT ACT, THE UNITED STATES RESOURCE CONSERVATION AND
RECOVERY ACT AND THE UNITED STATES COMPREHENSIVE ENVIRONMENTAL RESPONSE,
COMPENSATION AND LIABILITY ACT (ALL SUCH FEDERAL, STATE AND LOCAL ENVIRONMENTAL
LAWS, RULES, ORDINANCES, REGULATIONS AND ORDERS INCLUDING, WITHOUT LIMITATION,
THOSE SPECIFICALLY MENTIONED HEREIN, ARE HEREAFTER REFERRED TO AS THE "LAWS") .
TENANT SHALL, IN COMPLYING WITH THE LAWS, OBTAIN ALL NECESSARY PERMITS AND
APPROVALS REQUIRED IN CONNECTION WITH ITS USE OF THE PREMISES OR OPERATIONS AT
THE PREMISES; COMPLY WITH ALL NOTICE AND REPORTING REQUIREMENTS (AND IN THAT
REGARD, TENANT SHALL PROVIDE TO LANDLORD COPIES OF ALL NOTICES, ORDERS OR
COMMUNICATIONS OF ANY NATURE WITH ANY GOVERNMENTAL AUTHORITY PERTAINING TO THE
LAWS OR ANY ENVIRONMENTAL CONDITION AT THE PROMISES OR ARISING OUT OF TENANT'S
OPERATIONS AT THE PREMISES); COMPANY WITH ALL ORDERS AND REQUIREMENTS OF
GOVERNMENTAL AUTHORITIES UNDER THE LAWS INCLUDING THE UNDERTAKING OF ALL
REQUIRED TESTING AND REMEDIATION ACTIVITIES, WHETHER SUCH ACTIVITIES SHALL BE
WITHIN THE PREMISES OR ON ANY OTHER PART OF THE PROPERTY OR ELSEWHERE IF
ARISING FROM TENANT'S OPERATIONS; AND PAY ALL PENALTIES FINES, REMEDIATION OR
OTHER COSTS OR LIABILITY OF ANY NATURE TO LANDLORD, ANY GOVERNMENTAL AUTHORITY
OR ANY THIRD PARTY. TENANT SHALL SPECIFICALLY COMPLY WITH ALL REQUIREMENTS OF
THE NEW JERSEY INDUSTRIAL SITE RECOVERY ACT INCLUDING THE FILING OF NOTICES AND
REPORTS, THE UNDERTAKING OF TESTING AND, IF NECESSARY, REMEDIATION,
IRRESPECTIVE OF THE TRIGGERING EVENT FOR ANY SUCH REQUIREMENTS (INCLUDING, BY
EXAMPLE, THE CLOSURE OF TENANT'S OPERATIONS, THE SALE OF THE PROPERTY OR
OTHERWISE). TENANT HEREBY AGREES TO INDEMNIFY, DEFEND AND HOLD HARMLESS
LANDLORD FROM AND AGAINST ANY AND ALL CLAIM,
7
<PAGE> 11
DAMAGE, LOSS, COST, FINE, PENALTY, FEE OR EXPENSE OF ANY NATURE INCLUDING
WITHOUT LIMITATION, ALL REASONABLE ATTORNEYS, CONSULTANTS, AND OTHER FEES AND
COSTS OF ANY NATURE, ARISING, DIRECTLY OR INDIRECTLY, OUT OF (I) ANY BREACH BY
TENANT OF ANY OF ITS OBLIGATIONS NOT FORTH UNDER THIS PARAGRAPH; (II) ANY
ENVIRONMENTAL CONDITION AT THE PROPERTY, OR OTHERWISE, ARISING OUT OF TENANT'S
USE OF THE PREMISES OR TENANT'S OPERATIONS; (III) ANY CLAIM BY ANY THIRD PARTY,
LANDLORD OR ANY GOVERNMENTAL AUTHORITY ARISING OUT OF ANY ENVIRONMENTAL
CONDITION AT THE PREMISES OR ARISING OUT OF TENANT'S OPERATIONS. (See Paragraph
15 Addendum immediately following.)
16. ASSIGNMENT AND SUBLETTING. (a) Tenant shall have no right to assign or
sublet by operation of law or otherwise, all or any part of the Premises
without the prior written approval of Landlord.
(b) In the event Tenant desires to sublet the Premises or assign the
Lease, Tenant shall give to Landlord written notice of Tenant's intended
subtenant or assignee in order to secure Landlord's written consent within
ninety (90) days of receipt of said notice, Landlord shall have the right: (I)
to terminate this Lease by giving Tenant not less than thirty (30) days' notice
in the case of an assignment of the entire Lease or a subletting of more than
fifty percent (50%) of the Premises or (ii) to terminate this Lease and
simultaneously to enter into a new Lease with Tenant for that portion of the
demised Premises Tenant may desire to retain upon the same terms, covenants and
conditions of the existing Lease as applicable to the space retained. If
Landlord exercises its right to terminate this Lease, Tenant agrees that
Landlord shall have access to all or a portion of the demised Premises sixty
(60) days prior to the effective termination date for remodeling or
redecorating purposes.
(c) On any approved subletting or assignment of all or any part of the
Premises, (A) Landlord shall receive from Tenant all rent in excess of those
defined herein and other profits relating to the premises derived by Tenant
from the assignment or subletting, (B) Tenant shall remain liable under all
terms and conditions of this Lease; and (c) Landlord shall have the right to
approve the subtenant or assignee and the sublease or assignment documents (and
any assignee or subtenant must agree therein to assume all terms, conditions
and obligations of the Lease). In the event of default by Tenant under the
terms and conditions of this Lease at such time that all or part of the
Premises are then sublet, Landlord may collect directly from the subtenant(s)
all rents becoming due to Tenant under the Sublease(s) and apply such rents
against any sums due to Landlord by Tenant under this Lease, and Tenant hereby
authorizes and directs such Subtenant(s) to make such payment of rent to
Landlord upon receipt of notice from Landlord. Such collection of rent by
Landlord shall not constitute a novation or a release of Tenant from its
liability under the terms and conditions of this Lease.
(d) The written approval of Landlord to one or more sublettings or
assignments shall not operate as a waiver of Landlord's right to approve any
further sublettings and assignments.
(e) Tenant shall not (I) mortgage, pledge otherwise encumber its interest
in this Lease or (ii) grant any license, concession or other right of occupancy
of any portion of the Premises, without the prior written consent of Landlord.
(f) As a condition precedent to Tenant's right to sublease a Premises or
to assign this Lease, Tenant shall, at Tenant's own expense, comply with ISRA.
Tenant shall promptly furnish to Landlord true and complete copies of all
documents, submissions and correspondence provided by Tenant to the Bureau and
all documents, reports, directives and correspondence provided by the Bureau to
Tenant. Tenant shall also promptly furnish to Landlord true and
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PARAGRAPH 15. ENVIRONMENTAL COMPLIANCE - ADDENDUM
Landlord hereby acknowledges full responsibility for the integrity of any
underground storage tanks and agrees to indemnify, defend, and hold harmless
Tenant from and against any and all claims, fees, and expenses arising directly
or indirectly out of failure of the integrity of any such underground storage
tanks. Landlord hereby agrees that Tenant is not obligated to comply with the
provisions of Paragraph 15 for any environmental condition that exists or
existed prior to the date tenant commences occupancy of the Premises.
INITIAL:
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8 (Addendum)
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complete copies of all sampling and test results obtained from samples and
tests taken at and around the Premises. As a condition precedent to Tenant's
right to sublease the Premises or to assign the Lease, Tenant shall have
received from the Bureau either (I) a non-qualified approval of Tenant's
negative declaration or (ii) a non-applicability letter, for which Tenant shall
promptly apply pursuant to ISRA. If this condition shall not be satisfied,
then Landlord shall have the right to withhold consent to sublease or
assignment.
(g) Nothing herein to the contrary withstanding, Landlord's written
consent shall not be required for any sublease or assignment of this Lease to
any other entity which controls or is controlled by Tenant provided that Tenant
shall continue to remain liable in such instance. Tenant shall be required to
give Landlord thirty (30) days written notice in advance of any such subleasing
or assignment.
(h) Tenant agrees that any subleasing or assignment to any person, firm,
partnership or corporation which is not an actual user of the Premises is
absolutely prohibited and nothing herein shall require Landlord to consent to
any such assignment. In addition, subleases or assignments are absolutely
prohibited to any person, firm, entity or corporation which (I) at such time is
a tenant in any building owned by Landlord or any affiliate of Landlord or (ii)
is currently or has within six (6) months prior to the date of the proposed
sublease or assignment actively been discussing a proposed lease with Landlord
or any affiliate of Landlord.
17. MECHANICS' LIENS. If any mechanics other lein shall be filed against
the Property, Premises or the Building for labor or material furnished or to be
furnished at the request of the Tenant, then Tenant shall at its expense cause
such lien to be discharged of record by payment, bond or otherwise, within ten
(10) days after the filing thereof. If Tenant shall fail to cause such lien to
be discharged of record within such ten (10) day period, Landlord may cause
such lien to be discharged by payment, bond or otherwise, without investigation
as to the validity thereof or as to any offsets or defenses thereto. The cost
to Landlord for removal of such lien will be charged to Tenant as Additional
Rent and payable on the first day of the month next following the payment by
Landlord together with interest until payment at a rate (the "Rate") equal to
two percent (2%) per annum over the then domestic prime rate (the base rate on
corporate loans at large U.S. money center commercial banking) or equivalent
rate as announced daily in the Wall Street Journal under the heading "Money
Rates". Tenant shall indemnify and hold Landlord harmless against any and all
claims, costs, damages, liabilities and expenses (including reasonable attorney
fees) which may be brought or imposed against or incurred by Landlord by reason
of any such lien or its discharge.
18. INDEMNIFICATION AND LIABILITY INSURANCE. (a) Tenant covenants and
agrees that it shall, at its own cost and expense, indemnify and save harmless
Landlord against and from, and Landlord shall not be liable to Tenant for, any
and all claims by or on behalf of any person, entity, firm or corporation
arising in any manner whatsoever from, out of or in connection with (a) the use
and occupancy of the Property by Tenant (b) failure to perform any of the terms
or conditions of this Lease required to be performed by Tenant, (c) any failure
by Tenant to comply with any statutes, regulation, ordinances or orders of any
governmental authority or (d) any accident, death, injury, or
damage, loss or theft of property in or about the Property (whether involving
property belonging to Tenant or any other person) resulting from any cause
whatsoever, unless such accident, death, injury, damage, loss or theft is
caused by the sole negligence of Landlord, and from and against all costs,
attorney fees, expenses and liabilities incurred in or as a result of any such
claim or action or proceeding brought
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against Landlord by reason of any such claim. Tenant, upon notice from
Landlord, covenants to resist or defend such action or proceeding by legal
counsel reasonably satisfactory to Landlord.
(b) During the term of this Lease and any renewal thereof, Tenant shall
obtain and promptly pay all premiums for commercial general liability insurance
with respect to the Property, covering at least the hazards of
"premises/operations", "independent contractors" and "contractual liability"
with a per occurrence limit of not less than $1,000,000.00 combined bodily
injury and property damage, and an aggregate limit of not less than
$2,000,000-00, with such insurance company or companies as shall be
satisfactory to Landlord from time to time, and all such policies and renewals
thereof shall name the Landlord, its property manager and any mortgagee as an
additional insured and shall contain IF AVAILABLE WITHOUT SUBSTANTIAL
ADDITIONAL COSTS TO TENANT, a breach of warranty endorsement that the coverage
shall not be voided as to Landlord for any misrepresentation, act or omission
of Tenant. ON OR BEFORE THE COMMENCEMENT DATE OF THE TERM OF THIS LEASE, AND
THEREAFTER NOT LESS THAN FIFTEEN (15) DAYS PRIOR TO THE EXPIRATION DATES OF
SAID POLICY OR POLICIES, TENANT SHALL PROVIDE COPIES OF POLICIES OR
CERTIFICATES OF INSURANCE EVIDENCING COVERAGE REQUIRED BY THIS LEASE.
(c) Landlord shall insure the Building of which the Premises are a part
and any improvements constructed by Landlord in accordance with Article 10 and
Tenant shall insure the trade fixtures, equipment (including but not limited to
all equipment, machinery, furnishings and inventory) and any tenant
improvements and/or Alterations constructed by Tenant against loss or damage by
fire and such other risks as may be included in the broadest form of extended
coverage insurance including sprinkler leakage.
(d) Tenant shall not engage in any activity or store any product or
material in the Premises which will either cause an increase in the insurance
on the entire Building or which will make the Building uninsurable. In the
event Tenant engages in any activity or stores any product or material in the
Premises which causes an increase in the insurance on the entire Building
(nothing contained herein being intended to authorize or permit same) Tenant
shall pay, on demand, as Additional Rent from time to time, all such increased
cost of insurance.
(e) All Tenant's policies of insurance (and renewals) required to be
carried hereunder shall (iv) provide that no material change or cancellation of
said policies shall be made without thirty (30) days prior written notice to
Landlord; (v) provide that any loss shall be payable notwithstanding any act or
negligence of the Landlord which might otherwise result in the forfeiture of
said insurance; and (vi) provide that as to the interest of Landlord, the
insurance afforded by the policy shall not be invalidated by any breach or
violation by Tenant of any of the warranties, declarations or conditions in
the policy IF AVAILABLE.
19. WAIVER OF SUBROGATION. Tenant and Landlord respectively, hereby
release each other from any and all liability or responsibility to the other
for anyone claiming by, through or under it or them by way of subrogation or
otherwise for any loss or damage to property covered by any insurance then in
force, even if such loss or damage shall have been caused by the fault or
negligence of the other party or anyone for whom such party may be responsible;
provided, however, that this release shall be
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applicable and in force and effect only with respect to any loss or damage
occurring during such time as the policy or policies of to the effect that this
release shall not adversely affect or impair such insurance or prejudice the
right of the insured to recover thereunder. Landlord and Tenant each agree to
use their best efforts to obtain such a waiver in all applicable insurance
policies, failing which such party shall immediately notify the other of such
inability to obtain a waiver and provide with such notice written evidence of
all attempts to procure same and the written rejection of the insurers
consulted.
20. WAIVER OF CLAIMS. Except as otherwise in this Lease provided,
Landlord and Landlord's agents, servants and employees shall not be liable for,
and Tenant hereby releases and relieves Landlord, its agents, servants,
employees from, all liability in connection with any and all loss of life,
personal injury, damage to or loss of property, or loss or interruption of
business occurring to Tenant, its agents, servants, employees, invitees,
licensees, visitors, or any other person, firm, corporation or entity, in or
about or arising out of the Premises, from, without limitation, (a) any fire,
other casualty, accident, occurrence or condition in or upon the Premises,
Building and/or Property; (b) any defect in or failure of (I) plumbing,
sprinkling, electrical, heating or air conditioning systems or equipment,
telecommunication conduit, lines and equipment or any other systems and
equipment of the Premises and the Building, and (ii) the elevators, stairways,
railings or walkways of the Building and/or Property; (c) any steam, gas, oil,
water, rain or snow that may leak into, issue or flow from any part of the
Premises, Building and/or Property from the drains, pipes, roof, or plumbing,
sewer or other installation of same, or from any other place or quarter; (d)
the breaking or disrepair of any installations and equipment; (e) the falling
of any fixture or any wall or ceiling materials; (f) damaged or broken interior
or exterior glass; (g) latent or patent defects; (h) the exercise of any rights
by Landlord under the terms and conditions of this Lease; (I) any acts or
omissions of the other tenants or occupants of the Building or of nearby
buildings; (J) any acts or omissions of other persons or requirements or
restrictions of governmental entities; (k) any acts or omissions of Landlord,
its agents, servants and employees with the exception of Landlord's gross
negligence or willful misconduct; and (1) theft, acts of God, public enemy,
injunction, riot, strike, insurrection, war, court order or any order of any
governmental authorities having jurisdiction over the Premises.
21. FIRE OR OTHER CASUALTY. (a) Subject to subsections (b), (c) and (d) of
this Article 21 below, if the Premises are damaged by-fire or other casualty,
the damage shall be repaired by and at the expense of Landlord and the Rent
until such repairs shall be made shall be apportioned from the date of such
fire or other casualty according to the part of the Premises which is usable by
Tenant. Landlord agrees to repair such damage within a reasonable period of
time after receipt from Tenant of written notice of such damage, except that
Tenant agrees to repair and replace its own furniture, furnishings, equipment
and any alteration or improvement installed by Tenant. Landlord shall not be
liable for any inconvenience or annoyance to Tenant or injury to the business
of Tenant resulting from such damage or the repair thereof.
(b) If the Premises, in the opinion of Landlord's licensed architect or
engineer, are (I) rendered substantially untenantable by reason of such fire or
other casualty; or (ii) twenty (20%) percent or more of the Premises is damaged
by said fire or other casualty and less than six (6) months would remain on the
Lease term or any renewal thereof upon completion of the repairs or
reconstruction; or (iii) fifty (50%) percent or more on the Premises is damaged
by said fire or other casualty; then in any such events Landlord shall have the
right to be exercised by notice in writing delivered to the Tenant within
thirty (30) days from and after said occurrence, to elect to terminate this
Lease, and, in
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such event, this Lease and the tenancy hereby created shall cease as of the
date of said occurrence, the Rent to be adjusted as of said date.
(c) If the Building, in the sole opinion of Landlord, shall be
substantially damaged by fire or other casualty, regardless of whether or not
the Premises were damaged by such occurrence, Landlord shall have the right, to
be exercised by notice in writing delivered to Tenant within thirty (30) days
from and after said occurrence, to terminate this Lease; and in such event,
this Lease and the tenancy hereby created shall cease as of the date of said
termination, the Rent to be adjusted as of the date of such termination.
(d) In the event that any mortgagee unilaterally refuses to make the
proceeds of any policy of insurance available for restoration, Landlord shall
have the right, to be exercise by notice in writing delivered to Tenant within
thirty (30) days from notice of such refusal to terminate this Lease and in
such event, this Lease and the tenancy hereby created shall cease as of the
date of said termination, the Rent to be adjusted as of the date of such
termination.
22. CONDEMNATION. (a) If the whole of the Premises shall be condemned or
taken either permanently or temporarily for any public or quasi-public use or
purpose, under any statute or by right of eminent domain, or by private
purchase in lieu thereof, then in that event the term of this Lease shall cease
and terminate from the date when possession is taken thereunder pursuant to
such proceeding or purchase. The rent shall be adjusted as of the time of such
termination and any rent paid for a period thereafter shall be refunded. In
the event more than fifteen (15%) percent of the Building containing same shall
be so taken (or if more than fifty (50%) percent of the parking areas are taken
and not promptly replaced with contiguous parking areas) then Landlord may
elect to terminate this Lease from the date when possession is taken thereunder
pursuant to such proceeding or purchase or, Landlord shall repair and restore,
at its own expense, the portion not taken and thereafter the rent shall be
reduced proportionately to the portion of the premises taken.
(b) In the event of any total or partial taking of the Premises or the
Building, Landlord shall be entitled to receive the entire award in such
proceeding and Tenant may make a separate application for Tenant's fixtures,
equipment and moving expenses under the then applicable New Jersey eminent
domain code, but Tenant shall not make any claim that will detract from or
diminish any award for which Landlord may make a claim.
(c) If the Premises or the Building are declared unsafe by any duly
constituted authority having the power to make such determination, or are the
subject of a violation notice or notice requiring repair or reconstruction
which cannot be repaired by Landlord at its sole cost and expense within thirty
(30) days, then Landlord at its option, may terminate this Lease, and in such
event, Tenant shall immediately surrender said Premises to Landlord and
thereupon this Lease shall terminate and the rent shall be apportioned as of
the date of such termination.
23. ESTOPPEL CERTIFICATE. Tenant shall, at any time and from time to
time, within ten (10) days after written request by Landlord, execute,
acknowledge and deliver to Landlord, or its mortgagee or trustee, a statement
in writing duly executed by Tenant (I) certifying that this Lease is in full
force and effect (if that be the case) without modification or amendment (or,
if there have been any modifications or amendments, that this Lease is in full
force and effect as modified and amended and setting forth the modifications or
amendments) , (ii) certifying the dates to which Base Rent and Additional Rent
have been paid, (iii) either certifying that to the knowledge of the Tenant no
default exists
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under this Lease or specifying each such default, and (iv)
providing such other information as Landlords purchaser or mortgagee may
reasonably request; it being the intention and agreement of Landlord and Tenant
that any such statement by Tenant may be relied upon by a prospective purchaser
or a prospective or current mortgagee of the Building, or by others, in any
matter affecting the Premises.
24. TENANT'S DEFAULT. (a) The occurrence of any of the following
shall constitute a material default and breach of this Lease by Tenant:
(i) failure of Tenant to accept possession of the Premises within
thirty (30) days after the date of issuance of a certificate of occupancy;
(ii) the vacation or abandonment of the Premises by Tenant;
(iii) a failure by Tenant to pay, within five (5) days after written
notice, any installment of Rent hereunder or any Additional Rent or any such
other sum herein required to be paid by Tenant;
(iv) a failure by Tenant to observe and perform any other provisions or
covenants of this Lease to be observed or performed by Tenant, where such
failure continues for thirty (30) days after written notice thereof from
Landlord to Tenant provided, however, that if the nature of the default is such
that the same cannot reasonably be cured within such thirty (30) day period,
Tenant shall not be deemed to be in default if Tenant shall within such period
commence such cure and thereafter diligently prosecute the same to completion
(but in no event shall such cure period exceed an additional thirty (30) days).
(b) Upon the occurrence of any such event of default set forth above:
(i) Landlord may (but shall not be required to) perform for the
account of Tenant any such default of Tenant and immediately recover as
Additional Rent any expenditure made and the amount of any obligations incurred
in connection therewith, plus interest at the Rate (as defined in Article 17
hereof) from the date of such expenditure FROM DATE OF NOTICE TO TENANT;
(ii) Landlord may at its option accelerate all Rent and Additional Rent
due for the balance of the term of this Lease and declare the same to be
immediately due and payable as liquidated damages;
(iii) Landlord, at its option, may serve notice upon Tenant that this
Lease and the then unexpired term hereof and all renewal options shall cease
and expire and become absolutely void on the date specified in such notice, to
be not less than five (5) days after the date of such notice without any right
on the part of the Tenant to save the forfeiture by payment of any sum due or
by the performance of any terms, provision, covenant, agreement or condition
broken; and, thereupon and at the expiration of the time limit in such notice,
this Lease and the term hereof granted, as well as the right, title and
interest of the Tenant hereunder, shall wholly cease and expire and become void
in the same manner and with the same force and effect (except as to Tenant's
liability) as if the date fixed in such notice were the date herein granted for
expiration of the term of this Lease. Thereupon, Tenant shall immediately quit
and surrender to Landlord the Premises, and Landlord may enter into and
repossess the Premises by summary proceedings, detainer, ejectment or otherwise
and remove all occupants thereof and, at Landlord's option, any property
thereon without being liable to indictment, prosecution or damages therefor.
No such expiration or termination of this Lease shall
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relieve Tenant of its liability and obligations under this Lease, whether or
not the Premises shall be relet;
(iv) Landlord may, at any time after the occurrence of any event of
default, re-enter and repossess the Premises and any part thereof and attempt
in its own name, as agent for Tenant if this Lease not be terminated or in its
own behalf if this Lease be terminated, to relet all or any part of such
Premises for and upon such terms and to such persons, firms or corporations and
for such period or periods as Landlord, in its sole discretion, shall
determine, including the term beyond the termination of this Lease; and
Landlord shall not be required to accept any tenant offered by Tenant or
observe any instruction given by Tenant about such reletting. For the purpose
of such reletting, Landlord may decorate or make repairs, changes, alterations
or additions in or to the Premises to the extent deemed by Landlord desirable
or convenient; and the cost of such decoration, repairs, changes, alterations
or additions shall be charged to and be payable by Tenant as Additional Rent
hereunder, as well as any reasonable brokerage and legal fees expended by
Landlord; and any sums collected by Landlord from any new tenant obtained on
account of the Tenant shall be credited against the balance of the Rent due
hereunder as aforesaid. Landlord shall be entitled to recover from Tenant all
damages and losses incurred by Landlord pursuant to the laws of the state of
New Jersey and this subparagraph including, but not limited to (I) the loss of
all Rent and Additional Rent until the Premises is released and any anticipated
loss of future Rent to the end of the term of this Lease if the Rent and
Additional Rent payable by any new tenant is less than the amount which would
have been payable by Tenant until the end of the term and (ii) an amount equal
to any rental concessions received by Tenant and (iii) an amount equal to the
unamortized cost of the improvements furnished and installed by Landlord under
this Lease.
(v) Landlord shall have the right of injunction, in the event of a breach
or threatened breach by Tenant of any of the agreements, conditions, covenants
or terms hereof, including the actual or threatened failure to vacate the
Premises at the end of the term, to restrain the same and the right
to invoke any remedy allowed by law or in equity, whether or not other
remedies, indemnity or reimbursements are herein provided. Landlord shall have
the right of distraint upon Tenant's goods pursuant to N.J.S.A. 2A:33-1 et seq.
upon adequate notice consistent with due process. The right and remedies given
to Landlord in this Lease are distinct, separate and cumulative remedies; and
no one of them, whether or not exercised by Landlord, shall be deemed to be in
exclusion of any of the others.
(vi) In the event Tenant fails to vacate the Premises upon the expiration
of this or any extended term hereunder or upon termination of this Lease,
Tenant shall pay to Landlord ONE HUNDRED THIRTY-THREE PERCENT (133%) the Rent
and Additional Rent due and payable for the month in which this Lease expired
or terminated and for the two (2) subsequent months of any holdover by Tenant,
and TWO HUNDRED PERCENT (200%) the Rent and Additional Rent for any period
beyond two months, but such payment shall not preclude Landlord's right to seek
eviction of Tenant nor constitute a consent by Landlord to such holdover by
Tenant.
(vii) In addition to all remedies provided herein or by law, Tenant shall
pay to Landlord reasonable attorneys fees and court costs incurred as a result
of such breach.
(viii) Should Tenant fail to pay any sum required hereunder within any
applicable grace period or should Tenant fail to perform or commit any other
act which would enable Landlord to declare a default, in lieu of the
declaration of default, Landlord shall have the option to suspend, without any
liability to Tenant,
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any maintenance, repair or other service which it is required by the terms
of this Lease to supply until such time as Tenant has paid to Landlord the
delinquent payment or otherwise cured any event which would enable Landlord to
declare the Lease in default.
(ix) Landlord may, but shall not be obligated to, without prejudice and in
addition to any other rights it may have in law or equity, after giving Tenant
written notice of such default and after failure by Tenant within thirty (30)
days of the receipt of such notice to correct or to undertake and diligently
pursue correction of said default(s) (which notice and/or opportunity to cure
shall not be required in case Landlord shall determine that an emergency exists
requiring prompt action), cure such default(s) on behalf of Tenant; and Tenant
shall reimburse Landlord on demand for all costs incurred by Landlord in that
regard plus interest FROM DATE OF NOTICE OF EXPENDITURE at the Rate (as defined
in Article 17 hereof) which shall be deemed Additional Rent payable hereunder.
25. REQUIREMENT OF STRICT PERFORMANCE. The failure or delay on the part of
either party to enforce or exercise at any time any of the provisions, rights or
remedies in the Lease shall in no way be construed to be a waiver thereof, nor
in any way to affect the validity of this Lease or any part hereof, or the right
of the party to thereafter enforce each and every such provision, right or
remedy. No waiver of any breach of this Lease shall be held to be a waiver of
any other or subsequent breach. The receipt by Landlord of rent at a time when
the rent is in default under this Lease shall not be construed as a waiver of
such default. The receipt by Landlord of a lesser amount than the rent due
shall not be construed to be other than a payment on account of the rent then
due, nor shall any statement on Tenant's check or any letter accompanying
Tenant's check be deemed an accord and satisfaction, and Landlord may accept
such payment without prejudice to Landlord's right to recover the balance of the
rent due or to pursue any other remedies provided in this Lease. No act or
thing done by Landlord or Landlord's agents or employees during the term of this
Lease shall be deemed an acceptance of a surrender of the Premises, and no
agreement to accept such a surrender shall be valid unless in writing and signed
by Landlord.
26. RELOCATION OF TENANT. INTENTIONALLY DELETED.
27. SUBORDINATION RIGHTS OF MORTGAGEE. (a) This Lease shall be subject and
subordinate at all times to the lien of any mortgages now or hereafter placed
upon the Property, Premises or the Building without the necessity of any
further instrument or act on the part of Tenant to effectuate such
subordination. Tenant further agrees to execute and deliver upon demand such
further instrument or instruments evidencing such subordination of this Lease
to the lien of any such mortgage and such further instrument or instruments of
attornment as shall be desired by any mortgagee or proposed mortgagee or by any
other person. Notwithstanding the foregoing, any mortgagee may at any time
subordinate its mortgage to this Lease, without Tenant's consent, by notice in
writing to Tenant, and thereupon this Lease shall be deemed prior to such
mortgage without regard to their respective dates of execution and delivery and
in that event such mortgagee shall have the same rights with respect to this
Lease as though it had been executed prior to the execution and delivery of the
mortgage.
(b) In the event Landlord shall be or is alleged to be in default of any
of its obligations owing to Tenant under this Lease, Tenant agrees to give to
the holder of any mortgage (collectively the "Mortgagee") now or hereafter
placed upon the Premises or the Building and the Land, notice by registered
mail of any such default which Tenant shall have served upon the Landlord,
provided that prior thereto Tenant has been notified in writing (by way of
Notice of Assignment of Rents and/or Leases or otherwise) of the name and
address of any such Mortgagee. Tenant shall not be
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entitled to exercise any right or remedy as there may be because of any default
by Landlord without having given such notice to the Mortgagee; and Tenant
further agrees that if Landlord shall fail to cure such default: (I) the
Mortgagee shall have an additional thirty (30) days (measured from the later of
the date on which the default should have been cured by Landlord or the
Mortgagee's receipt of such notice from Tenant) within which to cure such
default, provided that if such default be such that the same could not be cured
within such thirty (30) day period and the Mortgagee is diligently pursuing the
remedies necessary to effectuate the cure (including but not limited to
foreclosure proceedings if necessary to effectuate the cure) (BUT IN NO EVENT
SHALL SUCH CURE PERIOD EXCEED AN ADDITIONAL THIRTY (30) DAYS), then the
Mortgagee shall have such additional time as may be necessary for effectuating
the cure within which to cure such default; and (ii) Tenant shall not exercise
any right or remedy as there may be arising because of Landlord's default,
including but not limited to termination of this Lease as may be expressly
provided for herein or available to Tenant as a matter of law, if the Mortgagee
either has cured the default within such thirty (30) day period or, as the case
may be, has initiated the cure of same within such thirty (30) day period and is
diligently pursuing the cure of same as aforesaid (but in no event shall such
cure period exceed an additional thirty (30) days).
(c) In the event Mortgagee acquires title to the Property, Premises or the
Building by foreclosure, deed in lieu of foreclosure or pursuant to the
exercise of any remedy provided in the mortgage held by such Mortgagee, such
Mortgagee shall not be (I) liable for any debt or omission of Landlord, (ii)
subject to any offset or deficiencies which Tenant might be entitled to assert
against Landlord, (iii) bound by any payment of Rent made by Tenant to Landlord
for more than one month in advance or (iv) bound by any agreement (other than
this Lease) made by Tenant with Landlord without the prior written consent of
the Mortgagee.
28. BANKRUPTCY AND INSOLVENCY. (a) In the event Tenant shall become a
debtor under Chapter 7 of the Bankruptcy Code as it may be amended, or to any
other successor statute thereto, and the Trustee or Tenant shall elect to
assume this Lease for the purpose of assigning the same or otherwise, such
election and assignment may only be made if all of the terms and conditions of
Section (b) hereof are satisfied. If such Trustee shall fail to elect or
assume this Lease within sixty (60) days after the filing of the Petition, this
Lease shall be deemed to have been rejected. Landlord shall be thereupon
immediately entitled to possession of the demised premises without further
obligation to Tenant or Trustee, and this Lease shall be canceled, but
Landlord's right to be compensated for damages in such liquidation proceeding
shall survive.
(b) In the event a Petition for reorganization or adjustment of debts is
filed concerning Tenant under Chapters 11 or 13 of the Bankruptcy Code, or a
proceeding is filed under Chapter 7 of the Bankruptcy Code and is transferred
to Chapters 11 or 13, the Trustee or Tenant, as Debtor-in-Possession, must
elect to assume this Lease within seventy-five (75) days from the date of the
filing of the Petition under Chapters 11 or 13, or the Trustee or
Debtor-in-Possession shall be deemed to have rejected this Lease. No election
by the Trustee or Debtor-in-Possession to assume this Lease, whether under
Chapters 7, 11 or 13, shall be effective unless each of the following
conditions, which Landlord and Tenant acknowledge are commercially reasonable
in the context of a bankruptcy proceeding of Tenant, have been satisfied, and
Landlord has so acknowledged in writing:
(1) The Trustee or the Debtor-in-Possession has cured, or has provided
Landlord adequate assurance (as defined below) that:
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<PAGE> 21
(i) Within ten (10) days from the date of such assumption the Trustee
will cure all monetary defaults under this Lease; and
(ii) Within thirty (30) days from the date of such assumption the
Trustee will cure all non-monetary defaults under this Lease.
(2) The Trustee or the Debtor-in-Possession has compensated, or has
provided to Landlord adequate assurance (as defined below) that within
ten (10) days from the date of assumption Landlord will be compensated
for any pecuniary loss incurred by Landlord arising from the default
of Tenant, the Trustee, or the Debtor-in-Possession as recited in
Landlord's written statement of pecuniary loss sent to the Trustee or
Debtor-in-Possession.
(3) The Trustee or the Debtor-in-Possession has provided Landlord with
adequate assurance of the future performance of each of Tenant's,
Trustee's or Debtor-in-Possession's obligations under this Lease;
provided, however, that:
(i) The Trustee or Debtor-in-Possession shall also deposit
with Landlord, as security for the timely payment of rent, an
amount equal to three (3) months Base Rent and other monetary
charges accruing under this Lease; and
(ii) If not otherwise required by the terms of this Lease,
the Trustee or Debtor-in-Possession shall also pay in advance on
the date Rent is payable 1/12th of Tenant's annual obligations
under this Lease for Costs and Taxes; and
(iii) From and after the date of the assumption of this Lease, the
Trustee or Debtor-in-Possession shall pay as Base Rent an
amount equal to the sum of the Base Rent otherwise payable
hereunder; and
(iv) The obligations imposed upon the Trustee or Debtor-in-Possession
shall continue with respect to Tenant or any assignee of the Lease
after the completion of bankruptcy proceedings.
(4) The assumption of this Lease will not breach any provision in any
other lease, mortgage, financing agreement or other agreement by which
Landlord is bound.
(c) For purposes of this Section, Landlord and Tenant acknowledge that in
the context of a bankruptcy proceeding of Tenant, at a minimum "adequate
assurance" shall mean:
(1) The Trustee or the Debtor-in-Possession has and will continue to have
sufficient unencumbered assets after the payment of all secured
obligations and administrative expenses to assure Landlord that the
Trustee or Debtor-in-Possession will have sufficient funds to fulfill
the obligations of Tenant under this Lease; and
(2) The Bankruptcy court shall have entered an order segregating
sufficient cash payable to Landlord, and/or the Trustee or
Debtor-in-Possession shall have granted a valid and perfected first
lien and security interest and/or mortgage in property of Tenant,
Trustee or Debtor-in-Possession, acceptable as to value and kind to
Landlord, to secure to Landlord the obligation of the Trustee or
Debtor-in-Possession to cure the monetary
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<PAGE> 22
and/or non-monetary defaults under this Lease within the time
periods set forth above; and
(3) In the event that this Lease is assumed by a Trustee
appointed for Tenant or by Tenant as Debtor-in-Possession under the
provisions of Section (2) hereof and thereafter Tenant is
liquidated or files a subsequent Petition for reorganization or
adjustment of debts under Chapters 11 or 13 of the Bankruptcy
Code, then, and in either of such events, Landlord may, at its
option, terminate this Lease and all rights of Tenant hereunder, by
giving Tenant written notice of its election to so terminate, by no
later than thirty (30) days after the occurrence of either of such
events; and
(4) If the Trustee or Debtor-in-Possession has assumed the
Lease pursuant to the terms and provisions of Section (1) or (2)
herein, for the purposes of assigning (or elects to assign)
Tenant's interest under this lease or the estate created thereby,
to any other - person, such interest or estate may be so assigned
only if Landlord shall acknowledge In writing that the intended
assignee has provided adequate assurance as defined in this Section
(4) of future performance of all of the terms, covenants and
conditions of this Lease to be performed by Tenant.
For purposes of this Section (4) , Landlord and Tenant acknowledge
that, in the context of a Bankruptcy proceeding of Tenant, at a
minimum "adequate assurance of future performance shall mean that
each of the following conditions have been satisfied, and Landlord
has so acknowledged in writing:
(I) The assignee has submitted a current financial
statement audited by a certified public accountant which shows
a net worth and working capital in amounts determined to be
sufficient by Landlord to assure the future performance by
such assignee of Tenant's obligations under this Lease; and
(ii) The assignee, if requested by Landlord, shall
have obtained guarantees in form and substance satisfactory to
Landlord from one or more persons who satisfy Landlord's
standards of creditworthiness; and
(iii) Landlord has obtained all consents or waivers
from any third party required under any lease, mortgage,
financing arrangement or other agreement by which Landlord
is bound to permit Landlord to consent to such assignment.
(5) When, pursuant to the Bankruptcy Code, the Trustee or
Debtor-in-Possession shall be obligated to pay reasonable use and
occupancy charges for the use of the demised premises or any
portion thereof, such charges shall not be less than the Base Rent
as defined in this Lease and other monetary obligations of Tenant
for the payment of Costs and Taxes.
(6) Neither Tenant's interest in the Lease, nor any lesser
interest of Tenant herein, nor any estate of Tenant hereby created,
shall pass to any trustee, receiver or assignee for the benefit of
creditors, or any other person or entity, or otherwise by operation
of law under the laws of any state having jurisdiction of the
person or property of Tenant (hereinafter referred to as the "state
law") unless Landlord shall consent to such transfer in writing.
No acceptance by Landlord of rent
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<PAGE> 23
or any other payments from any such trustee, receiver, assignee,
person or other entity shall be deemed to have waived, nor
shall it waive, the need to obtain Landlords consent of Landlord's
right to terminate this Lease for any transfer of Tenant's interest
under this lease without such consent.
(7) In the event the estate of Tenant created hereby shall be
taken in execution or by other Process of law, or if Tenant or any
guarantor of Tenants obligations hereunder (hereinafter referred to
as the "Guarantor") shall be adjudicated insolvent pursuant to the
provisions of any present or future insolvency law under state law,
or if any proceedings are filed by or against the Guarantor under
the Bankruptcy Code, or any similar provisions of any future
federal bankruptcy law, or if a Receiver or Trustee of the property
of Tenant or the Guarantor shall be appointed under state law by
reason of Tenant's or the Guarantor's insolvency or if any
assignment shall be made of Tenant's interest under this Lease,
then and in such event Landlord may, at its option, terminate this
Lease and all rights of Tenant hereunder by giving Tenant written
notice of the election to so terminate within thirty (30) days
after the occurrence of such event.
29. BROKERS. Tenant represents and warrants to Landlord that Tenant has
had no dealings, negotiations or consultations with respect to the Premises or
this transaction with any broker or finder other than the Broker, if any; and
that otherwise no broker or finder called the Premises to Tenant's attention
for lease or took any part in any dealings, negotiations or consultations with
respect to the Premises or this Lease. Tenant agrees to indemnify and hold
harmless Landlord from and against all liability, cost and expense, including
attorney's fees and court costs, arising out of any misrepresentation or breach
of warranty by Tenant under this Article 29.
30. LANDLORD'S OBLIGATIONS/LIABILITY. Landlord's obligations hereunder
shall be binding upon Landlord only for the period of time that Landlord is in
ownership of the Building; and, upon termination of that ownership, Tenant,
except as to any obligations which have then matured, shall look solely to
Landlord's successor in interest in the Building for the satisfaction of each
and every obligation of Landlord hereunder. Tenant shall look solely to the
equity of the Landlord in the Building of which the Premises form a part for
the satisfaction of any claim, remedy or cause of action accruing to Tenant as
a result of the breach of any action of this Lease by Landlord.
31. LANDLORD'S SIGNS. Landlord shall have the right to display a "for
sale" or "for rent" sign on the Premises or the property of which the Premises
is a part, as the case may be, but any "for rent" sign shall not be displayed
prior to six (6) months in advance of the end of the term hereof.
32. QUIET ENJOYMENT. Tenant, upon the payment of all Rent and other
charges provided for herein and upon the performance of all of the terms of
this Lease, shall at all times during the term hereof peacefully and quietly
enjoy the Premises without any disturbance from Landlord or any person claiming
through Landlord, subject, however, to the reservation and conditions of this
Lease and any mortgage or encumbrance to which this Lease is subordinate.
33. DELIVERY OF LEASE AND MODIFICATION BY MORTGAGEE. No rights are to be
conferred upon Tenant until this Lease has been signed by Landlord, approved by
the mortgagee if necessary and an executed copy of the Lease has been delivered
to the Tenant. No acceptance or deposit by Landlord of any payment called for
hereunder shall bind Landlord until or unless it executes this
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<PAGE> 24
Lease and returns a fully executed copy to the Tenant. Tenant agrees
that it will consent to the modification of any provision of this Lease
requested by Landlord's current or future mortgagees except in no case shall
any such modification increase the amount of Rent payable hereunder, the amount
of any other charge payable, OR IN ANYWAY INCREASE TENANT'S LIABILITIES OR
MATERIAL OBLIGATIONS PURSUANT TO THIS lEASE.
34. TENANT'S AUTHORITY. Tenant warrants and represents that: (I) if it is
a corporation it is in good standing organized and existing under the laws of
its state of incorporation and that it is duly qualified to do business in the
state in which the premises is located, that all corporate action necessary to
authorize the execution of this Lease has been taken by the Board of Directors
and that the President, and Secretary, have been authorized to execute and
attest respectively this Lease; and (ii) if is a partnership it is in good
standing organized and existing under the laws of its state of organization and
that it is duly qualified to do business in the state in which the premises is
located, that all partnership action necessary to authorize the execution of
this Lease has been taken and the person or persons executing this Lease are
authorized by the partnership agreement to bind the partnership. Tenant for
good and valuable consideration shall indemnify and hold Landlord harmless from
and against any and all claims, suits, proceedings, damages, obligations,
liabilities, counsel fees, costs, losses, expenses, orders and judgments
imposed upon, incurred by or asserted against Landlord by reason of the falsity
or error of this aforesaid warranty.
35. NOTICES. Wherever in this Lease it shall be required or permitted
that notice or demand be given or served-by either party to this Lease to or on
the other party, such notice or demand shall be deemed to have been duly given
or served if in writing and either personally served or forwarded by nationally
recognized overnight delivery service or Certified Mail, postage prepaid, to
the address set forth in Article 1 (b) or (c), as applicable. Each such mailed
notice shall be deemed to have been given to or served upon the party to which
addressed two (2) days after the date the same is deposited in the United
States Certified Mail, postage prepaid, and properly addressed in the manner
above provided, or one day after delivered to a nationally recognized overnight
delivery service. Either party hereto may change its address to which said
notices shall be delivered or mailed by giving written notice of such change to
the other party hereto as herein provided.
LANDLORD: P.O. BOX 1605 TENANT: 603 HERON DRIVE, UNIT 3
DELRAN, NJ 08075 BRIDGEPORT, NJ 08014
36. MISCELLANEOUS PROVISIONS.
A. Successors. The respective rights and obligations provided in this
Lease shall bind and inure to the benefit of the parties hereto, their legal
representatives, heirs, successors and assigns; provided, however, that no
rights shall inure to the benefit of any successors of Tenant unless Landlord's
written consent for the transfer to such successor has first been obtained as
provided in Article 16 hereof.
B. Governing Law. This Lease shall be construe , governed and enforced in
accordance with the laws of the state in which the Premises are located.
C. Severability. If any provisions of this Lease shall be held to be
invalid, void or unenforceable, the remaining provisions hereof shall in no way
be affected or impaired and such remaining provisions shall remain in full
force and effect.
D. Captions. Marginal captions, titles or exhibits and riders and the
table of contents in this Lease are for convenience and reference only, and are
in no way to be construed as defining,
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<PAGE> 25
limiting or modifying the scope of intent of the various provisions of
this Lease.
E. Gender. As used in this Lease, the word "person" shall mean and
include, where appropriate, an individual, corporation, partnership or other
entity; the plural shall be substituted for the singular, and the singular for
the plural, where appropriate; and the words of any gender shall mean to
include any other gender.
F. Entire Agreement. This Lease, including the Exhibits and any Riders
hereto (which are hereby incorporated by this reference, except that in the
event of any conflict before the printed portions of this Lease and any
Exhibits or Riders, the term of such Exhibits or Riders shall control),
supersedes any prior discussions, proposals, negotiations and discussions
between the parties and the Lease contains all the agreements, conditions,
understandings, representations and warranties made between the parties hereto
with respect to the subject matter hereof, and may not be modified orally or in
any manner other than by an agreement in writing signed by both parties hereto
or their respective successors in interest. Without in any way limiting the
generality of the foregoing, this Lease can only be extended pursuant to the
due exercise of an option (if any) contained herein or a formal agreement
signed by both Landlord and Tenant specifically extending the terms. No
negotiations, correspondence by Landlord or offers to extend the terms shall be
deemed an extension of the termination date for any period whatsoever.
G. Counterparts . This Lease may be executed in any number of
counterparts, each of which shall be deemed to be one and the same instrument.
H. Telefax Signatures. The parties acknowledge and agree that
notwithstanding any law or presumption to the contrary a telefaxed signature of
either party whether upon this Lease or any related document shall be deemed
valid and binding and admissible by either party against the other as if same
were an original ink signature.
37. WAIVER OF TRIAL BY JURY. LANDLORD AND TENANT WAIVE THE RIGHT TO A
TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, OR RELATED TO, THE
SUBJECT MATTER OF THIS LEASE. THIS WAIVER IS KNOWINGLY, INTENTIONALLY, AND
VOLUNTARILY MADE BY TENANT AND TENANT ACKNOWLEDGES THAT NEITHER LANDLORD NOR
ANY PERSON ACTING ON BEHALF OF LANDLORD HAS MADE ANY REPRESENTATIONS OF FACT TO
INDUCE THIS WAIVER OF TRIAL BY JURY OR IN ANY WAY TO MODIFY OR NULLIFY ITS
EFFECT. TENANT FURTHER ACKNOWLEDGES THAT IT HAS BEEN REPRESENTED (OR HAS HAD
THE OPPORTUNITY TO BE REPRESENTED) IN THE SIGNING OF THIS LEASE AND IN THE
MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL, SELECTED OF ITS OWN FREE
WILL, AND THAT IT HAS HAD THE OPPORTUNITY TO DISCUSS THIS WAIVER WITH COUNSEL.
TENANT FURTHER ACKNOWLEDGES THAT IT HAS READ AND UNDERSTANDS THE MEANING AND
RAMIFICATIONS OF THIS WAIVER PROVISION AND AS EVIDENCE OF SAME HAS EXECUTED
THIS LEASE.
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IN WITNESS WHEREOF, the parties hereto have duly executed this Lease and
have initialed the Exhibits and any Riders hereto as of the day and year first
above written.
WITNESS OR ATTEST: LANDLORD: WHITESELL ENTERPRISES
Joann Patchel By: Thomas R. Whitesell
- ------------- -------------------
Thomas R. Whitesell
TENANT: NEOGEN CORPORATION
Daren A. Kekchen By: Lon M. Bohannon
- ----------------- -------------------
JP:12/14/94
Revised: 1/13/95
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EXHIBIT "A"
PREMISES
FEATURES
Unit No. 3:
3,929 Square Feet - 1230 Office
2690 Warehouse
[UNIT 3 Electric Service - 120/208V
FLOOR DIAGRAM] 200 Amps
Oil Heated/Office Air Conditioned
Loading Dock - 8' x 10'
49" A.F.G.
Room Sizes:
300 - 8' x 9'
301 - Open Office Area
302 - 5' x 5'4"
303 - 5' x 9'
304 - 12' x 15'
305 - 12' x 15'
306 - 12' x 15'
307 - 12'6" x 10'
308 - 19' x 10'
309 - 10' x 10'
310 - Warehouse
[WHITESELL LOGO]
WHITESELL Construction Co., Inc. UNIT 3 FLOOR PLAN 3/94
MT. LAUREL N.J. 08054 603 HERON DRIVE, BRIDGEPORT, NJ
609-764-2600
<PAGE> 28
FEATURES
Unit Number 4:
5,238 Square feet - 4237 Office
990 Warehouse
Electric Service - 120/208 V
200 Amps
Oil Heated/Office Air Conditioned
[UNIT 4
FLOOR PLAN]
Two Loading Docks - 8' x 10'
48" A.F.G.
ROOM SIZE:
400 - 8'-0" x 9"-0"
401 - Open Office Area
402 - 5'-6" x 5'-0"
403 - 5'-6" x 9'-0"
404 - 14'-0" x 11'-0"
405 - 12'-0" x 12'-0"
406 - 12'-0" x 12'-0"
407 - Warehouse
[WHITESELL LOGO]
WHITESELL Construction Co., Inc. UNIT 4 FLOOR PLAN 3/94
MT. LAUREL N.J. 08054 603 HERON DRIVE, BRIDGEPORT, NJ
609-764-2600
<PAGE> 29
EXHIBIT "B"
RULES AND REGULATIONS
1 . No part or the whole of the sidewalks, plaza areas, entrances, passages,
courts, stairways, corridors or halls of the building or the real property
shall be obstructed or encumbered by any tenant or used for any purpose other
than ingress and egress to and from the space demised to such Tenant.
2 . No awnings or other projections shall be attached to the outside walls or
windows of the building. No curtains, blinds, shades, or screens shall be
attached to or hung in, or used in connection with, any window or door of the
space demised to any tenant other than those specified or supplied by landlord,
removal of same at any time will be prohibited.
3 . No sign, advertisement, object, notice or other lettering shall be
exhibited, inscribed, painted, or affixed on any part of the outside or inside
of tenant's premises, so as to be visible from the exterior without prior
written consent of landlord.
4 . No showcases or other articles shall be put in front of or affixed to any
part of the exterior of the building.
5 . The water and wash closets and other plumbing fixtures shall not be used
for any purposes other than those for which they were constructed, and no
sweepings, rubbish, rags, or other substances (including, without limitation,
coffee grounds) shall be thrown therein. All repairs necessitated by damage
resulting from any misuse of the plumbing fixtures shall be borne by the
tenant.
6 . No tenant, nor any of its agents, employees, visitors, licensees,
contractors, or suppliers shall at anytime bring or keep upon the leased
premises any flammable, combustible or explosive fluid, chemical or substance
without landlord's prior approval, and tenant shall obey fire regulations and
procedures governing said leased space and building.
7 . No cooking shall be done or permitted by any tenant leased space, without
the prior written consent of landlord, provided, however, that the heating,
refrigeration and preparing of beverages and light snacks for employees shall
be permitted if there are appropriate facilities and equipment for such
purposes. No tenant shall cause or permit any unusual or objectionable odors
to be produced upon or emanate from the leased space.
8 . Neither the whole nor any part of the space demised to any tenant shall be
used for manufacturing, without prior written approval from the landlord, or
for the sale at auction of merchandise, goods, or property.
9 . No tenant shall make or permit to be made, any unseemly or disturbing
noises or disturb or interfere with other tenants or occupants of the building
or neighboring buildings or premises.
<PAGE> 30
10. All moving of safes, freight, furniture or bulky matter of any description
to and from the leased space, shall only take place within the confines of
specified passageways or stairs, and during the hours designated by landlord.
There shall not be used in any space, or in the public walkways of
the building, either by the tenant or by jobbers or others, in the delivery or
receipt of merchandise, and hand trucks, except those equipped with rubber
tires.
11. NO tenant shall use or occupy or permit any portion of the space demised to
such tenant to be used or occupied as an employment bureau or for the storage,
manufacture or sale of liquor, narcotics or illegal drugs.
12. Landlord shall have the right to prohibit any advertising by any tenant
which in landlord's opinion, tends to impair the reputation of the building,
and upon notice from landlord, such tenant shall refrain from or discontinue
such advertising.
13. No space demised to any, tenant shall be used or Permitted to be used, for
lodging. or sleeping or for any immoral or illegal purposes.
14. The requirements of tenants will be attended to only upon application at
the office of landlord. Building employees shall not be required to perform,
and shall not be requested by any tenant to perform, any work outside of the
regular duties, unless under specific instructions from the office of landlord
or the building management.
15. Canvassing, soliciting, and peddling in the buildings are prohibited, and
each tenant shall cooperate to prevent the same.
16. No animals of any kind shall be brought into or kept about the building by
any tenant.
17. No tenant shall install or permit or allow installation of a television,
radio, or two-way radio antenna, or any other similar antenna, on the roof, in
the windows or upon the exterior of the leased space of the building, without
the prior written consent of landlord.
18. No tenant shall tie in, or permit other to tie into the water supply on the
premises without prior written consent of the building management.
19. No tenant shall remove, alter or replace the building standard ceiling
light diffusers in any portion 'of the leased space without the prior written
consent of the landlord.
20. Except for purposes of emergency, notices, posters, or advertising media
will not be permitted to be affixed on the exterior of the building.
21. Business machines and mechanical equipment belonging to tenant which cause
noise or vibration that may be transmitted to the structure of the building or
to any space therein to such a degree to be objectionable to landlord or to any
tenant in the building shall be installed and maintained by tenant, at tenant's
expense, on vibration eliminators or other devises sufficient to eliminate such
noise and vibration.
22. Tenant shall immediately notify the building management of any serious
breakage, or fire or disorder, which comes to its attention in its premises or
any of the common areas of the building.
23. Tenant shall apply, at tenant's costs, such reasonable pest extermination
measures as tenant deems reasonably necessary.
24. Tenant shall not burn any trash or garbage of any kind in or about the
demised premises.
<PAGE> 31
25. Tenant shall not permit the use or placement of door mats or the like on
the exterior of any entrance door to the demised premises.
26. For purposes of these Rules and Regulations, the "building management"
shall mean the duly designated representative of landlord to manage the
building.
27. Landlord reserves the right to rescind, amend, alter or waive any of the
foregoing Rules and Regulations at any time when, in its judgement, it deems it
necessary, desirable or proper for its best interest and for the best interest
of the tenants, and no such rescission, amendment, alteration or waiver of any
rule or regulation in favor of one tenant shall operate as an alteration or
waiver in favor of any other tenant. Landlord shall not be responsible to any
tenant for the non-observance or violation by any other tenant of any of these
Rules and Regulations at any time.
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EXHIBIT "C"
SCOPE OF WORK
THIS EXHIBIT "C" REPRESENTS THE ENTIRE SCOPE OF LANDLORD'S RESPONSIBILITY TO
PREPARE THE PREMISES FOR OCCUPANCY. NO VERBAL CONVERSATIONS SHALL BE CONSTRUED
TO INDICATE AGREEMENT BY LANDLORD TO MODIFY, AMEND AND/OR TO FURNISH ANY
ADDITIONAL LABOR/MATERIALS UNLESS INCORPORATED INTO THIS SCOPE OF WORK (EXHIBIT
"C").
Tenant Name: Ampcor Diagnostics, Inc., A Subsidiary
of Neogen Corporation
Address: 603 Heron Drive, Units 3 and 4
Bridgeport, New Jersey 08014
I. Scope Of Work:
1) Janitorial cleaning (construction or janitorial specifications
attached).
2) All lighting will be operational including emergency and exit
lights.
3) All code items will be addressed including plumbing.
4) HVAC systems will be made operational.
5) Provide standard keys and signage.
6) Renovations to unit which are required by the Americans with
Disabilities Act are the responsibility of Tenant.
7) Special Instructions:
a) All building systems to be in proper working order.
b) Office area to be painted and cove base installed
where missing.
c) Office floors to be cleaned, carpet shampooed and
restretched where feasible.
d) Laundry sink in Unit 3 to be replaced with standard
hand sink.
e) Cracked toilet to be replaced in Unit 3.
LANDLORD: WHITESELL ENTERPRISES:
By: Thomas H. Whitesell
-----------------------------------
Thomas H. Whitesell
TENANT: NEOGEN CORPORATION
By Lon M. Bohannon
-----------------------------------
<PAGE> 33
EXHIBIT "D"
WARRANTY
It is understood and agreed that the Tenant accepts the space upon occupancy in
its present condition, with the following warranty:
(1) We grant the Tenant a 30 day warranty period for mechanical, plumbing
and electrical systems. If repairs are required by reasons other than
Tenant's negligence and misuse during this 30 day period, then Landlord
will pay for corrective action. In addition, Landlord warrants the
mechanical system for 30 days during the beginning of the next cooling or
heating season. The change in season is deemed to mean the months of May
or October.
(2) The Landlord also agrees to give Tenant all the assignable rights of
Landlord under and by virtue of any equipment or other manufacturer's
warranties involved in connection with the original installation as it
pertains to Tenant's repair and maintenance responsibilities under this
Lease.
Except as hereinabove provided, Landlord shall have no obligation to repair,
maintain, alter, replace or modify the demised premises or any part thereof, or
any plumbing, heating, electrical, air-conditioning or other mechanical
installation therein at Landlord's expense following the initial 30 day
warranty period. Under no circumstances shall Landlord be obligated to repair,
replace or maintain any plate glass or door or window glass.
In the event the Tenant is the original occupant of the Premises in a newly
constructed building, notwithstanding the provisions of paragraph 12, Landlord
will replace or repair at its option and cost, any defect arising in the
Building or the Premises due to defective material or labor for a period of one
(1) year from the commencement date of the Lease.
Tenant acknowledges and agrees that, except for this Warranty, neither Landlord
nor any agent or representatives of Landlord have made, and Landlord is not
liable or responsible for or bound in any manner by any express or implied
representations, warranties, covenants, agreements, obligations, guarantees or
statements, pertaining to the Premises or any part hereof, the physical
condition thereof, the fitness and quality thereof, merchantability, fitness
for particular purpose, the income, expenses or operation thereof, the value
and profitability thereof, the uses which can be made thereof or any other
matter or thing whatsoever with respect thereto and that Landlord is not liable
or responsible for or bound in any manner by (and Tenant has no relief upon)
any verbal or written or supplied guarantees, statements, information or
inducements pertaining to the Premises or any part hereof.
IF AIR CONDITIONER OR HEATING UNITS REQUIRE REPLACEMENT, LANDLORD WILL
PAY FOR COST OF REPLACEMENT AND TENANT WILL REIMBURSE LANDLORD A PRO RATED
SHARE BASED ON FIVE YEAR AMORTIZATION.
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<PAGE> 34
EXHIBIT "F"
RIGHT OF FIRST OFFER
Provided that Tenant is not then in default hereunder, Landlord shall offer in
writing to lease to Tenant adjacent space at 603 Heron Drive, Bridgeport, New
Jersey before Landlord makes a bona fide offer to lease to any other
prospective tenant (hereinafter, a "qualified offer"). Said right of first
offer shall be subject to the following conditions:
1. If Tenant intends to exercise it's right of first offer as to the space
described in Landlord's notice, Tenant shall give Landlord written notice
of such intent. Such notice must be received by Landlord not later than
5:00 p.m., prevailing eastern time on the fifth day following Tenant's
receipt of Landlord's notice described above.
2. If Tenant fails to give timely notice in accordance with subparagraph (1)
above, Landlord may lease such space to another party and on the terms
specified in it's notice to Tenant, however, in the event a lease is not
consummated with the party identified in Landlord's notice, Tenant's right
of first offer shall not again apply.
Initial:
-----
LMB
-----
<PAGE> 35
EXHIBIT "G"
EQUIPMENT AND FIXTURES OWNED AND INSTALLED BY TENANT
A. LABORATORY CABINETS INSTALLED BY ADD
6 64' DRAWER CABINETS.
4 44' 2 DRAWER CABINETS.
2 24' SINK CABINETS WITH SINKS.
1 16' FUME/CHEMICAL HOOD WITH VENT THROUGH CEILING.
1 12' DOUBLE SINK WITH BASE AND COUNTER TOP.
3 33' 2 DRAWER CABINETS.
3 33' DRAWER CABINETS.
50' OF SLATE TOP.
B. MECHANICALS INSTALLED BY ADD
1 HARRIS DEHUMIDIFYING SYSTEM CONSISTING OF DEHUMIDIFIER,
CONDENSING UNIT AND EVAPORATOR COIL AND ELECTRICAL
DISCONNECTS.
2 STEP UP TRANSFORMERS.
1 TELEPHONE SYSTEM.
1 WALK-IN REFRIGERATOR
DEIONIZER WATER PURIFICATION SYSTEM WITH POLYPROPYLENE LINE
AND STOPCOCKS. CUSTOM 208 1 x AND 3 x OUTLETS.
BOLLARDS. - -
Landlord approves modifications to Premises shown on the attached plan
dated _____________________.
Tenant to contract and pay for these modifications at no cost to Landlord.
<PAGE> 1
EXHIBIT 10(l)
[NEOGEN CORPORATION LETTERHEAD]
September 4, 1991
Mr. Kirk Miller
Kahn, Soares and Conway
1001 Pennsylvania Avenue, NW
Suite 1350
Washington, DC 20004
Dear Kirk:
This letter is in follow-up of our telephone conversation last week and your
proposal of August 16. Neogen Corporation would like to employ the services of
your firm to represent us in specific government relations activities under the
following agreement.
1. Neogen will pay to your firm an amount of $1,750 per month
in return for 10 hours of consulting time from yourself or one of
the other two principals of your firm.
2. At times, Neogen may request services beyond the minimum monthly
guarantee set forth above. In such cases, you and I should have an
agreement in advance on the approximate additional hours required or
some other negotiated flat fee.
3. Neogen's specific areas of interest and activity with your firm should
be considered confidential, and you will not disclose those to other
parties unless we agree in advance.
4. Because of the undoubted broad base of your consulting practice, it is
possible that you may simultaneously be consulting for other companies
that are Neogen competitors. Though totally within your rights, please
advise Neogen of any competitive firms you may now be consulting with
or advise us in the future if you begin consulting agreements with such
firms.
5. Though we believe we are beginning a long-time and fruitful
relationship, you have agreed that if either party is not satisfied with
the relationship, this agreement can be canceled at the end of any month.
If you believe this letter fairly summarizes our verbal agreement, please sign
one copy for our records, retaining the other. We are assuming this agreement
will begin with the month of September if such starting time is agreeable with
you. To
<PAGE> 2
Mr. Kirk Miller
September 4, 1991
Page 2
prevent an confusion in communication, all communication from Neogen's
standpoint will be directed through my office. Please pass along my regards to
both Paul and Jack.
With best personal regards.
Cordially,
James L. Herbert
James L. Herbert
President
JLH:dak
ACCEPTS:
W. Kirk Miller
- ----------------------------------
Kirk Miller
September 9, 1991
- ----------------------------------
DATE
<PAGE> 1
EXHIBIT 10(o)
September 11, 1996
Ideal Instruments, Inc. Neogen Corporation
9355 West Bryon Street 620 Lesher Place
Schiller Park, IL 60176 Lansing, MI 48912
Attn: James L. Herbert, President
Dear Mr. Herbert,
NBD Bank acknowledges your request to increase subordination of debt owed by
Ideal Instruments, Inc. ("Borrower") to Neogen Corporation ("Creditor") in
favor of NBD Bank from $450,000.00 to $1,000,000.00.
The subordination of debt is described in Section 8.0, Subordination of the
Credit Authorization Agreement executed by you and the Bank on October 4, 1993.
The dollar amount set forth in Section 8.0 of the Credit Authorization
Agreement is changed from $450,000.00 and increased to $1,000,000.00 owing to
Neogen Corporation. Except as modified by this letter, all of the other terms
and conditions of the Credit Authorization Agreement remain in effect.
Please sign the enclosed copy of this letter and return it to the Bank along
with the newly completed Subordination Agreement dated September 11, 1996.
Sincerely,
Thomas E. Grabitz
Thomas E. Grabitz,
Vice President
Accepted and agreed to on September 11, 1996.
--------------------
Ideal Instruments, Inc. ("Borrower") Neogen Corporation ("Creditor")
By: James L. Herbert By: James L. Herbert
----------------------------- ----------------------------
James L. Herbert, President James L. Herbert, President
By: Lon M. Bohannon
---------------------------
Lon M. Bohannon, Treasurer
TEG:sac
cc:file
<PAGE> 2
[NBD LOGO] SUBORDINATION AGREEMENT
(All Debt and Liens)
Ideal Instruments, Inc. (the "Borrower") is indebted to Neogen Corporation (the
"Creditor") in the principal amount of $ 1,455,000.00 as evidenced by
/ / an open account /x/ promissory note(s) dated May 31, 1996
/ / other (describe) ________________________________________________________
That debt is /x/ unsecured / / secured by NOTE: Of the above mentioned
indebted "liabilities" amount, $1,000,000.00 to be considered "subordinated
debt" to "Bank debt".
The Borrower and the Creditor wish to induce NBD Bank, a Michigan banking
corporation, 611 Woodward Avenue, Detroit, Michigan 48226 (the "Bank"), to make
or continue loans or otherwise to extend or continue credit to the Borrower or
to accept the Borrower's guarantees of the debt of others to the Bank. The Bank
is willing to extend or continue such credit or accept such guarantees on the
condition, among others, that this agreement be executed by the Borrower and the
Creditor and delivered to the Bank.
THEREFORE, the Borrower and the Creditor severally represent and promise to
each other and to the Bank as follows:
1. DEFINITIONS AND SUBORDINATION OF SUBORDINATED DEBT TO BANK DEBT. The
following terms have the following meanings:
a. "BANK DEBT" means Liabilities to the Bank, including without limitation
costs of collecting those Liabilities and interest accruing on those
Liabilities after the commencement of bankruptcy or similar insolvency
proceedings.
b. "LIABILITIES" means all obligations and liabilities of the Borrower,
whether direct or indirect, absolute or contingent, joint, several, or
joint and several, secured or unsecured, due or to become due, now
existing or later arising, in whatever amount and however evidenced,
including, without limitation, principal and interest.
c. "SUBORDINATED DEBT" means Liabilities to the Creditor, including without
limitation the debt described above.
The Subordinated Debt is subordinated in right of payment to the Bank Debt.
2. PERMITTED PAYMENTS. Without the prior written consent of the Bank, the
Borrower shall not make or give, and the Creditor shall not accept, any
payment or other thing of value on account of the Subordinated Debt, except:
(check applicable option, if any)
/xx/ The Borrower may pay and the Creditor may accept currently accruing
interest on the Subordinated Debt if (a) the Borrower is not in default
under the Bank Debt and (b) the making of the payment to the Creditor
will not cause a default under the Bank Debt.
/ / The Borrower may pay and the Creditor may accept scheduled payments of
principal and interest on the Subordinated Debt as they become due if
(a) the Borrower is not in default under the Bank Debt and (b) the
making of the payment to the Creditor will not cause a default under
the Bank Debt.
In an event, the Borrower shall not prepay and the Creditor shall not accept
prepayment of all or any portion of the Subordinated Debt without the prior
written consent of the Bank.
3. PAYMENT TO THE BANK OF PAYMENTS AND DISTRIBUTIONS ON ACCOUNT OF
SUBORDINATED DEBT. Except for sums received by the Creditor in accordance
with Section 2, the Creditor shall promptly pay or otherwise deliver to the
Bank all amounts and other things of value which the Creditor may receive
on account of the Subordinated Debt. Those sums and other things of value
shall be held in trust by the Creditor for the benefit of the Bank until
paid or delivered to the Bank.
In any bankruptcy, liquidation, insolvency, receivership, or similar
proceeding, whether at law or in equity, or pursuant to state or federal
law, the Bank shall be entitled to receive payment in full of the
Bank Debt from payments or other distributions made on account of the Bank
Debt and on account of the Subordinated Debt from the assets of the
Borrower, before the Creditor is entitled to receive any payment or thing
of value on account of the Subordinated Debt.
4. SUBORDINATION OF LIENS. Except for the collateral recited above the
Borrower has not given and shall not give, and the Creditor has not
received and shall not accept any security for the Subordinated Debt. The
Creditor expressly subordinates all of its rights in any collateral now or
later securing the Subordinated Debt (the "Collateral") to all present and
future rights of the Bank in any of the Collateral to secure the Bank Debt.
This subordination is without regard to the time or order of attachment of
perfection of any security interest, the time or order of filing any
financing statement, or the giving or failure to give any notice of the
acquisition or expected acquisition of any purchase money security
interest. The Creditor consents to the creation and continuance of all
present and future security interest of the Bank in the Collateral to
secure the Bank Debt and to the enforcement of those security interest,
including the removal of the Collateral from the real property of the
Borrower. This subordination as to the Collateral is intended to define
the rights and duties of the Bank and the Creditor; it is not intended that
any third party shall benefit from it. If the effect of any provision of
this subordination would be to give any third party a priority status to
which that party would not otherwise be entitled, that provision shall, to
the extent necessary to avoid that priority, be given no effect and the
rights and priorities of the Bank and the Creditor shall be determined in
accordance with applicable law.
5. GRANT OF SECURITY INTEREST IN SUBORDINATED DEBT. To secure the prompt
payment and performance of the Bank Debt, the Creditor grants the Bank a
security interest in the Subordinated Debt, all instruments evidencing the
Subordinated Debt, the Collateral, and all other rights of the Creditor
related to the Subordinated Debt. The Creditor shall deliver to the Bank
all notes and other instruments evidencing any Subordinated Debt with such
endorsements as the Bank may reasonably require. In addition, the Creditor
shall execute and deliver to the Bank all financing statements which the
Bank may reasonably require in order to perfect the Bank's rights and
interests under this agreement.
6. BANK'S AUTHORITY TO ACT WITH RESPECT TO SUBORDINATED DEBT. The Creditor
irrevocably appoints the Bank its attorney-in-fact with full power of
substitution, in either the Bank's name or the Creditor's name to sign
financing statements, endorse instruments, execute and file proofs of claim
or other documents, and take any other action regarding all or any part of
the Subordinated Debt necessary or appropriate to insure payment to the
Bank of all payments and other distributions on account of the Subordinated
Debt, instruments evidencing the Subordinated Debt, or the Collateral.
Notwithstanding the foregoing, the Bank shall not be liable to the
Creditor for any failure to prove the
<PAGE> 3
existence, amount or circumstances of the Subordinated Debt, to exercise
any right related to it, or to collect any sums payable on it or
distributions attributable to it.
7. CREDITOR'S REPRESENTATIONS AND PROMISES. The Creditor represents to the
Bank that (a) it is the sole holder of the Subordinated Debt with full
power to make the subordinations and assignments in this agreement, (b) it
has not made or permitted any assignment or transfer, as collateral or
otherwise, of the Subordinated Debt, of any instrument evidencing the
Subordinated Debt, or of any of the Collateral, and it shall not do so as
long as this agreement remains in effect, (c) it has extended the
Subordinated Debt and entered into this agreement based on its own
independent investigation (or decision note to investigate) the financial
condition of the Borrower, and (d) it has not and shall not rely on any
representation or information of any nature regarding the Borrower made by
or received from the Bank.
8. WAIVERS. The Borrower and the Creditor each waive (a) notice of acceptance
of this agreement, and (b) demand, presentment, notice of dishonor and
protest in the collection of the Bank Debt or the Subordinated Debt.
9. ACTION REGARDING BANK DEBT. Without notice to or the consent of the
Creditor, the Bank may take or refrain from taking any action regarding the
Bank Debt that it deems appropriate, including without limitation (a)
amending, modifying, extending or renewing the Bank Debt or changing any
interest rate applicable to it, (b) releasing, compromising, or settling
any claim related to the Bank Debt, (c) forbearing or agreeing to forbear
from enforcing any right or remedy related to the Bank Debt, including
rights and remedies against any guarantor, surety or accommodation party of
all or any part of the Bank Debt, or (d) substituting, releasing or
exchanging any collateral for the Bank Debt. The Bank shall not be
required to perfect any security interest in any collateral securing the
Bank Debt.
10. CONTINUED RELIANCE. The Bank, by accepting delivery of this agreement,
shall be deemed to have relied upon all of its terms and conditions and
shall be entitled to continue that reliance. This agreement constitutes a
continuing agreement of subordination, even though at times the Borrower
may not be indebted to the Bank. The Bank may continue, without notice to
the Creditor, to lend monies, accept guarantees, extend credit, or modify,
renew or make other financial accommodations to or for the account of the
Borrower until the Bank sends the Creditor written notice of cancellation
of this agreement or until the forty-fifth (45th) day following written
acknowledgment by an officer of the Bank that the Bank has received written
notice of revocation of this agreement from the Creditor.
11. SUBROGATION. So long as this agreement remains in effect, the Creditor
shall not exercise any right of subrogation or other similar rights with
respect to the Bank Debt.
12. CONSTRUCTION. The term "or" shall mean "and/or." Each person or entity
executing this agreement as a "Borrower" or "Creditor" is jointly and
severally obligated with every other person and entity executing this
agreement as a "Borrower" or Creditor" respectively. The terms "Creditor"
and "Borrower" refer to any or all of the persons signing in that capacity.
Section headings and for convenience of reference only and do not affect
the interpretation of this agreement.
13. BINDING EFFECT; GOVERNING LAW; COUNTERPARTS. This agreement binds the
Borrower and the Creditor and their respective heirs, personal
representatives, successors and assigns, and benefits the Bank, its
successors and assigns. This agreement is governed by and construed in
accordance with Michigan law. This agreement may be executed in any number
of counterparts, each of which shall be deemed an original and all of which
taken together constitute one and the same agreement.
14. WAIVER OF JURY TRIAL. The Borrower, the Creditor and the Bank after
consulting or having had the opportunity to consult with counsel,
knowingly, voluntarily and intentionally waive any right any of them may
have to a trial by jury in any litigation based upon or arising out of this
agreement or any related instrument or agreement, or any of the
transactions contemplated by this agreement, or any course of conduct,
dealing, statements (whether oral or written), or actions of any of them.
Neither the Creditor, the Borrower, nor the Bank shall seek to consolidate
by counterclaim or otherwise any action in which a jury trial has been
waived with any other action in which a jury trial cannot be or has not
been waived. These provisions shall not be deemed to have been modified in
any respect or relinquished by the Borrower, the Creditor, or the Bank
except by a written instrument executed by all of them.
Executed by each party on the date indicated below its signature, but effective
as of September 11, 1996
BORROWER: IDEAL INSTRUMENTS, INC. CREDITOR: NEOGEN CORPORATION
------------------------ ---------------------
By: James L. Herbert By: James L. Herbert
- ----------------------------------- --------------------------------
James L. Herbert, President James L. Herbert, President
- ----------------------------------- --------------------------------
By: Lon M. Bohannon
- ----------------------------------- --------------------------------
Lon M. Bohannon, Treasurer
Dated: September 11, 1996 Dated: September 11, 1996
----------------------------- --------------------------
BANK:
NBD BANK
By: Thomas E. Grabitz
--------------------------------
Thomas E. Grabitz
Title: Vice President
-----------------------------
Dated: September 11, 1996
-----------------------------
<PAGE> 1
EXHIBIT 10(p)
FIRST AMENDMENT TO REVOLVING CREDIT LOAN AGREEMENT
-------------------------------------------------
This First Amendment to a Loan Agreement (the "Amendment") dated as of the
day of August, 1995, by and among Ampcor Diagnostics, Inc., a Michigan
corporation (hereinafter referred to as the "Borrower"), Neogen Corporation, a
Michigan Corporation (hereinafter referred to as the "Guarantor"), and Comerica
Bank, a Michigan banking corporation (hereinafter referred to as the "Bank").
WITNESSETH
----------
WHEREAS, Borrower, Guarantor and Bank entered into a certain Loan Agreement
dated August 29, 1994, (the "Agreement"); and
WHEREAS, the Borrower, the Guarantor and the Bank now desire to amend certain
of the covenants and restrictions set forth in the Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the Borrower, the Guarantor and the Bank hereby agree as
follows:
1. Paragraph 6.5 of Section 6 of the Agreement is hereby deleted
in its entirety and replaced by the followings:
6.5 Maintain Tangible Effective Net Worth. On a consolidated
and non-consolidated basis, maintain a Tangible Effective Net Worth of
not less than the amounts specified during the periods specified below:
FOR BORROWER:
(a) $248,000 for the fiscal quarter ended August 31, 1995,
(b) $221,000 for the fiscal quarter ended November 30, 1995,
(c) $250,000 for the fiscal quarter ended February 28, 1996,
(d) $400,000 for the fiscal quarter ended May 31, 1996,
(e) Thereafter, Tangible Effective Net Worth shall increase
by $100,000 by the end of each fiscal year of Borrower
FOR GUARANTOR:
(a) $4,675,000 for the fiscal quarter ended August 31, 1995,
(b) $4,800,000 for the fiscal quarter ended November 30,
1995,
(c) $5,050,000 for the fiscal quarter ended February 28,
1996,
(d) $5,575,000 for the fiscal quarter ended May 31, 1996,
(e) Thereafter, Tangible Effective Net Worth shall increase
by $500,000 by the end of each fiscal year of Guarantor
<PAGE> 2
2. Paragraph 6.6 of Section 6 of the Agreement is hereby deleted
in its entirety and replaced by the following:
6.6 Maintain Debt Ratio. On a consolidated and non-consolidated
basis, maintain the ratio of Debt to Tangible Effective Net Worth at
not more than the ratios specified during the periods specified below:
FOR BORROWER:
(a) 5.10 to 1.0 for the fiscal quarter ended August 31, 1995,
(b) 6.10 to 1.0 for the fiscal quarter ended November 30,
1995,
(c) 5.90 to 1.0 for the fiscal quarter ended February 28,
1996,
(d) 3.35 to 1.0 for the fiscal quarter ended May 31, 1996,
(e) 3.25 to 1.0 for the fiscal quarter ended May 31, 1997,
(f) 3.00 to 1.0 for the fiscal quarter ended May 31, 1998, and
at all times thereafter.
FOR GUARANTOR:
(a) .60 to 1.0 for the fiscal quarter ended August 31, 1995,
(b) .65 to 1.0 for the fiscal quarter ended November 30, 1995,
(c) .60 to 1.0 for the fiscal quarter ended May 31, 1996, and
at all times thereafter.
3. Paragraph 6.7 of Section 6 of the Agreement is hereby deleted
in its entirety and replaced by the following:
6.7 Maintain Net Current Assets. On a consolidated and
non-consolidated basis, maintain Net Current Assets of not less than the
amounts specified during the periods specified below:
FOR BORROWER:
(a) $83,500 for the fiscal quarter ended August 31, 1995,
(b) $46,500 for the fiscal quarter ended November 30 ,1995,
(c) $64,500 for the fiscal quarter ended February 28, 1996,
(d) $220,000 for the fiscal quarter ended May 31, 1996,
(e) $200,000 for the fiscal quarter ended May 31, 1997, and at
all times thereafter.
2
<PAGE> 3
FOR GUARANTOR:
(a) $3,570,000 for the fiscal quarter ended August 31, 1995,
(b) $3,645,000 for the fiscal quarter ended November 30, 1995,
(c) $3,930,000 for the fiscal quarter ended February 28, 1996,
(d) $4,500,000 for the fiscal quarter ended May 31, 1996, and
at all times thereafter.
4. Paragraph 6.8 of Section 6 of the Agreement is hereby deleted
in its entirety and replaced by the following:
6.8 Minimum Cash Flow. On a consolidated and non-consolidated
basis, achieve a Minimum Cash Flow of not less than the amounts
specified during the periods specified below:
FOR BORROWER:
Omitted Intentionally.
FOR GUARANTOR:
(a) $170,000 for the fiscal quarter ended August 31, 1995,
(b) $390,000 for the fiscal quarter ended November 30 ,1995,
(c) $700,000 for the fiscal quarter ended February 28, 1996,
(d) $1,300,000 for the fiscal quarter ended May 31, 1996,
(e) $1,200,000 for the fiscal quarter ended May 31, 1997, and
at all times thereafter.
5. There shall be added a new Paragraph 6.11 to Section 6 which
shall read as follows:
6.11 Maintain Current Ratio. On a consolidated statement
basis, maintain the ratio of Current Assets to Current Liabilities of
not less than the ratios specified during the periods specified below:
FOR BORROWER:
(a) .95 to 1.0 for the fiscal quarter ended August 31, 1995,
(b) .90 to 1.0 for the fiscal quarter ended November 30, 1995,
(c) .95 to 1.0 for the fiscal quarter ended February 28, 1996,
(d) 1.00 to 1.0 for the fiscal quarter ended May 31, 1996,
(e) 1.10 to 1.0 for the fiscal quarter ended May 31, 1997,
(f) 1.20 to 1.0 for the fiscal quarter ended May 31, 1999, and
at all times thereafter.
3
<PAGE> 4
FOR GUARANTOR:
(a) 2.00 to 1.0 for the fiscal quarter ended August 31, 1995,
and at all times thereafter.
6. There shall be added a new Paragraph 6.12 to Section 6 which
shall read as follows:
6.12 Maintain Debt Coverage Ratio. On a consolidated
statement basis, maintain the ratio of Cash Flow to Current Maturities
of Long Term Debt (as defined by GAAP) of not less than the ratios
specified during the periods specified below:
FOR BORROWER:
(a) (.45) to 1.0 for the fiscal year ended May 31, 1996,
(b) .75 to 1.0 for the fiscal year ended May 31, 1997,
(c) 1.00 to 1.0 for the fiscal year ended May 31, 1998,
(d) 1.10 to 1.0 for the fiscal year ended May 31, 1999, and
at all times thereafter.
7. Except as specifically modified hereby, the terms and
conditions of the Agreement and the Note remain in full force
and effect and the undersigned hereby ratify and agrees to be
bound by the terms of the Agreement as hereby amended.
8. Neither the extension of this First Amendment by the Bank, nor
any other act or omission by the Bank in connection herewith,
shall be deemed a waiver by the Bank of any default under the
Agreement, as herein amended, except as to the matter
specifically described in Section 3 herein, nor shall this
letter waive any default based upon matters the same as or
similar to the matter specifically described in Section 3 herein
which occur after the date of this First Amendment.
<PAGE> 5
IN WITNESS WHEREOF, the Borrower, the Guarantor and the Bank have caused this
First Amendment to be executed by their duly authorized officers as of the day
and year first written above.
AMPCOR DIAGNOSTICS, INC.
By Lon M. Bohannon
---------------------------
Its Treasurer WITNESSES
--------------------------
Beverly J. Rowell
-----------------------------
COMERICA BANK ------------------------------
By David G. Grantham
---------------------------
Its Vice President
---------------------------
The Undersigned Guarantor hereby acknowledge and consent to the above First
Amendment.
NEOGEN CORPORATION WITNESS
By James L. Herbert Beverly J. Rowell
---------------------------
Its President
---------------------------
<PAGE> 6
SECOND AMENDMENT TO
TERM LOAN AGREEMENT (SECURED)
THIS SECOND AMENDMENT TO TERM LOAN AGREEMENT (SECURED)(the "Second
Amendment") dated as of the 12th day of September, 1996, by and among AMPCOR
DIAGNOSTICS, INC., a Michigan Corporation (hereinafter referred to as the
"Borrower"), NEOGEN CORPORATION, a Michigan corporation (hereinafter referred
to as the "Guarantor") and Comerica Bank (formerly known as Comerica
Bank-Detroit), a Michigan banking corporation (hereinafter referred to as the
"Bank").
WITNESSETH
----------
WHEREAS, Borrower, Guarantor and Bank entered into certain Term Loan
Agreement dated August 29, 1994, as amended by First Amendment thereto dated
August 29, 1995 (the "Agreement");
WHEREAS, Borrower, Guarantor and Bank now desire to amend certain of
the covenants and restrictions set forth in the Agreement;
NOW THEREFORE, in consideration of the premises and the mutual
covenants herein contained, Borrower and Bank hereby agree as follows:
1. Paragraph 6.5, 6.7 and 6.12 of Section 6 hereby deleted in
their entirety and are replaced by the following:
6.5 Maintain Tangible Effective Net Worth. On a
consolidated and non-consolidated basis, Guarantor shall
maintain a Tangible Effective Net Worth of not less than
$5,750,000.
6.7 Maintain Net Current Assets. On a consolidated
and non-consolidated basis, Guarantor shall maintain Net
Current Assets of not less than $3,500,000.
6.12 Maintain Debt Coverage Ratio. On a consolidated
and non-consolidated basis, Guarantor maintain the ratio of
Cash Flow to Current Maturities of Long Term Debt (as defined
by GAAP) of not less than 2.0 to 1.0.
2. Paragraphs 6.6, 6.8 and 6.11 of Section 6 are hereby deleted in
their entirety and are replaced by the following:
6.6 Omitted Intentionally
6.8 Omitted Intentionally
-1-
<PAGE> 7
6.11 Omitted Intentionally
3. Paragraph 7.2 of Section 7 is hereby deleted in its entirety
and is replaced by the following:
7.2 Stock Issuance. Issue any additional shares of
its capital stock, or any warrant (i) except such warrants as
listed on Schedule 5.16, right or option relating thereto or any
security convertible into any of the foregoing; (ii) except
shares of Guarantor's capital stock issued to seller's of
Ampcor, Inc. in accordance with the Asset Purchase Agreement
between Borrower and Ampcor, Inc. dated August 1, 1994; (iii)
except under Neogen's Stock Option Plan II and any successor
plans thereto; and (iv) except for the proposed issuance of
1,725,000 shares of Guarantor's Capital Stock pursuant to the
[secondary stock offering plan] dated September 17, 1996.
4. Except as specifically modified hereby, the terms and conditions
of the Agreement and the Note remain in full force and effect and the
undersigned hereby ratify and agree to be bound by the terms of the Agreement
as hereby amended.
IN WITNESS WHEREOF, Borrower, Guarantor and Bank have caused this
Second Amendment to be executed by their duly authorized officers as of the day
and year first written above.
AMPCOR DIAGNOSTICS, INC.
BY Lon M. Bohannon
---------------------------
Lon M. Bohannon
Its Treasurer
COMERICA BANK
By David G. Grantham
---------------------------
David G. Grantham
Its Vice President
-2-
<PAGE> 8
The Undersigned Guarantor hereby acknowledges and consents to the above
Second Amendment.
NEOGEN CORPORATION
By James L. Herbert
----------------------------
James L. Herbert
Its President
-3-
<PAGE> 9
[COMERICA LOGO] MASTER REVOLVING NOTE
Variable Rate-Demand (Business and Commercial Loans Only)
================================================================================
OLIGOR # NOTE # NOTE DATE TAX IDENTIFICATION NUMBER
6201304198 38-2367843
- --------------------------------------------------------------------------------
AMOUNT MATURITY DATE
1,500,000.00 Lansing, Michigan ON DEMAND
-------
- --------------------------------------------------------------------------------
FOR VALUE RECEIVED, the undersigned promise(s) to pay ON DEMAND to the order of
Comerica Bank ("Bank"), at any office of the Bank in the State of Michigan, One
Million Five Hundred Thousand and no /100--------------------------------
Dollars (U.S.) (or that portion of it advanced by the Bank and not repaid as
later provided) with interest until demand or an Event of Default, as later
defined, at a per annum rate equal to the Bank's prime rate from time to time in
effect plus 0.75% per annum and after that at a rate equal to the rate of
interest otherwise prevailing under this Note plus 3% per annum (but in no event
in excess of the maximum rate permitted by law.) The Bank's "prime rate" is
that annual rate of interest so designated by the Bank and which is changed by
the Bank from time to time. Interest rate changes will be effective for
interest computation purposes as and when the Bank's prime rate changes.
Interest shall be calculated on the basis of a 360-day year for the actual
number of days the principal is outstanding. Unless sooner demanded, accrued
interest on this Note shall be payable on the 1st day of each month commencing
October 1, 1996. If the frequency of interest payments is not otherwise
specified, accrued interest on this Note shall be payable monthly on the first
day of each month, unless sooner demanded. If any payment of principal or
interest under this Note shall be payable on a day other than a day on which the
Bank is open for business, this payment shall be extended to the next succeeding
business day and interest shall be payable at the rate specified in this Note
during this extension. A late payment charge equal to 5% of each late payment
may be charged on any payment not received by the Bank within 10 calendar days
after the payment due date, but acceptance of payment of this charge shall not
waive any Default under this Note.
The principal amount payable under this Note shall be the sum of all advances
made by the Bank to or at the request of the undersigned, less principal
payments actually received in cash by the Bank. The books and records of the
Bank shall be the best evidence of the principal amount and the unpaid interest
amount owing at any time under this Note and shall be conclusive absent manifest
error. No interest shall accrue under this Note until the date of the first
advance made by the Bank; after that interest on all advances shall accrue and
be computed on the principal balance outstanding from time to time under this
Note until the same is paid in full. At no time shall the Bank be under any
obligation to make any advances to the undersigned pursuant to this Note
(notwithstanding anything expressed or implied in this Note or elsewhere to the
contrary, including without limit if the Bank supplies the undersigned with a
borrowing formula) and the Bank, at any time and from time to time, without
notice, and in its sole discretion, may refuse to make advances to the
undersigned without incurring any liability due to this refusal and without
affecting the undersigned's liability under this Note for any and all amounts
advanced.
This Note and any other indebtedness and liabilities of any kind of the
undersigned (or any of them) to the Bank, and any and all modifications,
renewals or extensions of it, whether joint or several, contingent or absolute,
now existing or later arising, and however evidenced (collectively
"Indebtedness") are secured by and the Bank is granted a security interest in
all items deposited in any account of any of the undersigned with the Bank and
by all proceeds of these items (cash or otherwise), all account balances of any
of the undersigned from time to time with the Bank, by all property of any of
the undersigned from time to time in the possession of the Bank and by any other
collateral, rights and properties described in each and every mortgage, security
agreement, pledge, assignment and other security or collateral agreement which
has been, or will at any time(s) later be, executed by any (or all) of the
undersigned to or for the benefit of the Bank (collectively "Collateral").
Notwithstanding the above, to the extent that any portion of the Indebtedness is
a consumer loan, that portion shall not be secured by any mortgage on or other
security interest in the undersigned's principal dwelling which is not a
purchase money security interest as to that portion, unless expressly provided
to the contrary in another place.
If the undersigned (or any of them) or any guarantor under a guaranty of all or
part of the Indebtedness ("guarantor") (a) fail(s) to pay any of the
Indebtedness when due, by maturity, acceleration or otherwise, or fail(s) to pay
any Indebtedness owing on a demand basis upon demand: or (b) fail(s) to comply
with any of the terms or provisions of any agreement between the undersigned (or
any of them) or any such guarantor and the Bank; or (c) become(s) insolvent or
the subject of a voluntary or involuntary proceeding in bankruptcy, or a
reorganization, arrangement or creditor composition proceeding, (if a business
entity) cease(s) doing business as a going concern, (if a natural person) die(s)
or become(s) incompetent, (if a partnership) dissolve(s) or any general partner
of it dies, becomes incompetent or becomes the subject of a bankruptcy
proceeding or (if a corporation) is the subject of a dissolution, merger or
consolidation; or (d) if any warranty of representation made by any of the
undersigned or any guarantor in connection with this Note or any of the
Indebtedness shall be discovered to be untrue or incomplete; or (e) if there is
any termination, notice of termination, or breach of any guaranty, pledge,
collateral assignment or subordination agreement relating to all or any part of
the Indebtedness; or (f) if there is any failure by any of the undersigned or
any guarantor to pay when due any of its indebtedness (other than to the Bank)
or in the observance or performance of any term, covenant or condition in any
document evidencing, securing or relating to such indebtedness; or (g) if the
Bank deems itself insecure believing that the prospect of payment of this Note
or any of the Indebtedness is impaired or shall fear deterioration, removal or
waste of any of the Collateral; or (h) if there is filed or issued a levy or
writ of attachment or garnishment or other like judicial process upon the
undersigned (or any of them), or any guarantor or any of the Collateral,
including without limit, any accounts of the undersigned (or any of them) or any
guarantor with the Bank, then the Bank, upon the occurrence of any of these
events (each a "Default"), may at its option and without prior notice to the
undersigned (or any of them), declare any or all of the Indebtedness to be
immediately due and payable (notwithstanding any provisions contained in the
evidence of it to the contrary), sell or liquidate all or any portion of the
Collateral, set off against the Indebtedness any amounts owing by the Bank to
the undersigned (or any of them), charge interest at the default rate provided
in the document evidencing the relevant Indebtedness and exercise any one or
more of the rights and remedies granted to the Bank by any agreement with the
undersigned (or any of them) or given to it under applicable law.
The undersigned acknowledge(s) that this Note matures upon issuance, and that
the Bank, at any time, without notice, and without reason, may demand that this
Note be immediately paid in full. The demand nature of this Note shall not be
deemed modified by reference to a Default in this Note or in any agreement to a
default by the undersigned or to the occurrence of an event of default
(collectively an "Event of Default"). For purposes of this Note, to the extent
there is reference to an Event of Default this reference is for the purpose of
permitting the Bank to accelerate Indebtedness not on a demand basis and to
receive interest at the default rate provided in the document evidencing the
relevant Indebtedness. It is expressly agreed that the Bank may exercise its
demand rights under this Note whether or not an Event of Default has occurred.
The Bank, with or without reason and without notice, may from time to time make
demand for partial payments under this Note and these demands shall not preclude
the Bank from demanding at any time this Note be immediately paid in full. All
payments under this Note shall be in immediately available United States funds,
without setoff or counterclaim.
<PAGE> 10
If this Note is signed by two or more parties (whether by all as makers or by
one or more as an accommodation party or otherwise), the obligations and
undertakings under this Note shall be that of all and any two or more jointly
and also of each severally. This Note shall bind the undersigned, and the
undersigned's respective heirs, personal representatives, successors and
assigns.
The undersigned waive(s) presentment, demand, protest, notice of dishonor,
notice of demand or intent to demand, notice of acceleration or intent to
accelerate, and all other notices and agree(s) that no extension or indulgence
to the undersigned (or any of them) or release, substitution or nonenforcement
of any security or release or substitution of any of the undersigned, any
guarantor or any other party, whether with or without notice, shall affect the
obligations of any of the undersigned. The undersigned waiver(s) all defenses
or right to discharge available under Section 3-606 of the Uniform Commercial
Code and waive(s) all other suretyship defenses or right to discharge. The
undersigned agree(s) that the Bank has the right to sell, assign, or grant
participations, or any interest, in any or all of the indebtedness, and that, in
connection with this right, but without limiting is ability to make other
disclosures to the full extent allowable, the Bank may disclose all documents
and information which the Bank now or later has relating to the undersigned or
the indebtedness.
The undersigned agree(s) to reimburse the holder or owner of this Note for any
and all costs and expenses (including without limit, court cost, legal expenses
and reasonable attorney fees, whether inside or outside counsel is used,
whether or not suit is instituted and, if suit is instituted, whether at the
trial court level, appellate level, in a bankruptcy, probate or administrative
proceeding or otherwise) incurred in collecting or attempting to collect this
note or incurred in any other matter or proceeding relating to this Note.
The undersigned acknowledge(s) and agree(s) that there are no contrary
agreements, oral or written, establishing a term of this Note and agree(s) that
the terms and conditions of this Note may not be amended, waived or modified
except in a writing signed by an officer of the Bank expressly stating that the
writing constitutes an amendment, waiver or modification of the terms of this
Note. As used in this Note, the word "undersigned" means, individually and
collectively, each maker, accommodation party, indorser and other party signing
this Note in a similar capacity. If any provision of this Note is
unenforceable in whole or part for any reason, the remaining provisions shall
continue to be effective. THIS NOT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF MICHIGAN.
THE UNDERSIGNED AND THE BANK ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY IS A
CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED. EACH PARTY, AFTER CONSULTING
(OR HAVING HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL OF THEIR CHOICE,
KNOWINGLY AND VOLUNTARILY, AND FOR THEIR MUTUAL BENEFIT, WAIVES ANY RIGHT TO
TRIAL BY JURY IN THE EVENT OF LITIGATION REGARDING THE PERFORMANCE OR
ENFORCEMENT OF, OR IN ANY WAY RELATED TO, THIS NOTE OR THE INDEBTEDNESS.
For Corporations or Partnerships
<TABLE>
<CAPTION>
<S> <C> <C>
Neogen Corporation By: Lon M. Bohannon Its: CFO
- ---------------------------- -------------------- ---------------
OBLIGOR NAME TYPED/PRINTED SIGNATURE OF TITLE
620 Lesher Place By: Its:
- ---------------------------- --------------------- ---------------
STREET ADDRESS SIGNATURE OF TITLE
Lansing, MI 48912-1509 By: Its:
- ---------------------------- ---------------------- ---------------
CITY STATE ZIP CODE SIGNATURE OF TITLE
For Individuals, Sole Proprietorships, Trusts, or Estates
Name(s) of Obligon(s) (Type or Print): Signatures(s) of Obligor(s)
---------------------------------------- -------------------------------
- ------------------------- ---------------------------------------- -------------------------------
STREET ADDRESS
- ------------------------- ---------------------------------------- -------------------------------
CITY STATE ZIP CODE
</TABLE>
<PAGE> 11
[COMERICA LOGO] GUARANTY
- --------------------------------------------------------------------------------
THE UNDERSIGNED, FOR VALUE RECEIVED, unconditionally and absolutely
guarantee(s) to Comerica Bank ("Bank"), a Michigan banking corporation of 100
Renaissance Center, Detroit, Michigan 48243 and to the Bank's successors and
assigns, payment when due, whether by stated maturity, demand, acceleration or
otherwise, of all existing and future indebtedness to the Bank of
-------------
Neogen Corporation, a Michigan corporation
- ------------------------------------------------------------------------------
whose address is 620 Lesher Place Lansing MI 48912-1509
-------------------------------------------------------------
STREET ADDRESS CITY STATE ZIP CODE
and also of any successor in interest, including without limit any
debtor-in-possession or trustee in bankruptcy which succeeds to the interests
of this party or person (jointly and severally the "Borrower"), however this
indebtedness has been or may be incurred or evidenced, whether absolute or
contingent, direct or indirect, voluntary or involuntary, liquidated or
unliquidated, joint or several, and whether or not known to the undersigned at
the time of this Guaranty or at the time any future indebtedness is incurred
(the "Indebtedness").
The indebtedness guaranteed includes without limit: (a) any and all direct
indebtedness of the Borrower to the Bank, including indebtedness evidenced by
any and all promissory notes; (b) any and all obligations or liabilities of the
Borrower to the Bank arising under any guaranty where the Borrower has
guaranteed the payment of indebtedness owing to the Bank from a third party;
(c) any and all obligations or liabilities of the Borrower to the Bank arising
from applications or agreements for the issuance of letters of credit; (d) any
and all obligations or liabilities of the Borrower to the Bank arising out of
any other agreement by the Borrower, including without limit any agreement to
indemnify the Bank for environmental liability or to clean up hazardous waste;
(e) any and all indebtedness, obligations or liabilities for which the Borrower
would otherwise be liable to the Bank were it not for the invalidity,
irregularity or unenforceability of them by reason of any bankruptcy,
insolvency or other law or order of any kind, or for any other reason,
including without limit liability for interest and attorney fees on, or in
connection with, any of the indebtedness from and after the filing by or
against the Borrower of a bankruptcy petition; (f) any and all amendments,
modifications, renewals and/or extensions of any of the above, including without
limit amendments, modifications, renewals and/or extensions which are evidenced
by new or additional instruments, documents or agreements; and (g) all costs of
collecting indebtedness, including without limit reasonable attorney fees.
The undersigned waive(s) notice of acceptance of this Guaranty and presentment,
demand, protest, notice of protest, dishonor, notice of dishonor, notice of
default, notice of intent to accelerate or demand payment of any Indebtedness
and diligence in collecting any Indebtedness, and agree(s) that the Bank may
modify the terms of any Indebtedness, compromise, extend, increase, accelerate,
renew or forbear to enforce payment of any or all Indebtedness, or permit the
Borrower to incur additional Indebtedness, all without notice to the undersigned
and without affecting in any manner the unconditional obligation of the
undersigned under this Guaranty. The undersigned further waive(s) any and all
other notices to which the undersigned might otherwise be entitled. The
undersigned acknowledge(s) and agree(s) that the liabilities created by this
Guaranty are direct and are not conditioned upon pursuit by the Bank of any
remedy the Bank may have against the Borrower or any other person or any
security. No invalidity, irregularity or unenforceability of any part or all of
the Indebtedness or any documents evidencing the same, by reason of any
bankruptcy, insolvency or other law or order of any kind or for any other
reason, and no defense or setoff available at any time to the Borrower, shall
impair, affect or be a defense or setoff to the obligations of the undersigned
under this Guaranty.
The undersigned deliver(s) this Guaranty based solely on the undersigned's
independent investigation of the financial condition of the Borrower and is
(are) not relying on any information furnished by the Bank. The undersigned
assume(s) full responsibility for obtaining any further information concerning
the Borrower's financial condition, the status of the Indebtedness or any other
matter which the undersigned may deem necessary or appropriate from time to
time. The undersigned waive(s) any duty on the part of the Bank, and agree(s)
that it is not relying upon nor expecting the Bank to disclose to the
undersigned any fact now or later known by the Bank, whether relating to the
operations or condition of the Borrower, the existence, liabilities or
financial condition of any co-guarantor of the Indebtedness, the occurrence of
any default with respect to the Indebtedness, or otherwise, notwithstanding any
effect these facts may have upon the undersigned's risk under this Guaranty or
the undersigned's rights against the Borrower. The undersigned knowingly
accept(s) the full range of risk encompassed in this Guaranty, which risk
includes without limit the possibility that the Borrower may incur indebtedness
to the Bank after the financial condition of the Borrower, or its ability to
pay its debts as they mature, has deteriorated.
The undersigned represent(s) and warrant(s) that: (a) the Bank has made no
representation to the undersigned as to the creditworthiness of the Borrower;
and (b) the undersigned has (have) established adequate means of obtaining from
the Borrower on a continuing basis financial and other information pertaining
to the Borrower's financial condition. The undersigned agree(s) to keep
adequately informed of any facts, events or circumstances which might in any way
affect the risks of the undersigned under this Guaranty.
The undersigned grant(s) to the Bank a security interest in and the right of
setoff as to any and all property of the undersigned now or later in the
possession of the Bank. The undersigned subordinate(s) any claim of any nature
that the undersigned now or later has (have) against the Borrower to and in
favor of all indebtedness and agree(s) not to accept payment or satisfaction of
any claim that the undersigned now or later may have against the Borrower
without the prior written consent of the Bank. Should any payment,
distribution, security, or proceeds, be received by the undersigned upon or with
respect to any claim that the undersigned now or may later have against the
Borrower, the undersigned shall immediately deliver the same to the Bank in the
form received (except for endorsement or assignment by the undersigned where
required by the Bank) for application on the indebtedness, whether matured or
unmatured, and until delivered the same shall be held in trust by the
undersigned as the property of the Bank. The undersigned further assign(s) to
the Bank as collateral for the obligations of the undersigned under this
Guaranty all claims of any nature that the undersigned now or later has (have)
against the Borrower with full right on the part of the Bank, in its own name or
in the name of the undersigned, to collect and enforce these claims.
The undersigned agree(s) that no security now or later held by the Bank for the
payment of any indebtedness, whether from the Borrower, any guarantor, or
otherwise, and whether in the nature of a security interest, pledge, lien,
assignment, setoff, suretyship, guaranty, indemnity, insurance or otherwise,
shall affect in any manner the unconditional obligation of the undersigned
under this Guaranty, and the Bank, in its sole discretion, without notice to
the undersigned, may release, exchange, enforce and otherwise deal with any
security without affecting in any manner the unconditional obligation of the
undersigned under this Guaranty. The undersigned acknowledges(s)
<PAGE> 12
and agree(s) that the Bank has no obligation to acquire or perfect any lien on
or security Interest in any asset(s), whether realty or personalty, to secure
payment of the Indebtedness, and the undersigned is (are) not relying upon any
asset(s) in which the Bank has or may have a lien or security interest for
payment of the Indebtedness.
The undersigned acknowledge(s) that the effectiveness of this Guaranty is not
conditioned on any or all of the Indebtedness being guaranteed by anyone else.
Until the Indebtedness is irrevocably paid in full, the undersigned waive(s)
any and all rights to be subrogated to the position of the Bank or to have the
benefit of any lien, security interest or other guaranty now or later held by
the Bank for the Indebtedness or to enforce any remedy which the Bank now or
later has against the Borrower or any other person. Until the Indebtedness is
irrevocably paid in full, the undersigned shall have no right of reimbursement,
indemnity, contribution or other right of recourse to or with respect to the
Borrower or any other person. The undersigned agree(s) to indemnify and hold
harmless the Bank from and against any and all claims, actions, damages, costs
and expenses, including without limit reasonable attorneys' fees, incurred by
the Bank in connection with the undersigned's exercise of any right of
subrogation, contribution, indemnification or recourse with respect to this
Guaranty. The Bank has no duty to enforce or protect any rights which the
undersigned may have against the Borrower or any other person and the
undersigned assume(s) full responsibility for enforcing and protecting these
rights.
Notwithstanding any provision of the preceding paragraph or anything else in
this Guaranty to the contrary, if any of the undersigned is or becomes an
"insider" or "affiliate" (as defined in Section 101 of the Federal Bankruptcy
Code, as it may be amended) with respect to the Borrower, then that undersigned
irrevocably and absolutely waives any and all rights of subrogation,
contribution, indemnification, recourse, reimbursement and any similar rights
against the Borrower (or any other guarantor) with respect to this Guaranty,
whether such rights arise under an express or implied contract or by operation
of law. It is the intention of the parties that the undersigned shall not be
(or be deemed to be) a "creditor" (as defined in Section 101 of the Federal
Bankruptcy Code, as it may be amended) of the Borrower (or any other guarantor)
by reason of the existence of this Guaranty in the event that the Borrower
becomes a debtor in any proceeding under the Federal Bankruptcy Code. This
waiver is given to induce the Bank to enter into certain written contracts with
the Borrower included in the Indebtedness. The undersigned warrant(s) and
agree(s) that none of Bank's rights, remedies or interests shall be directly or
indirectly impaired because of any of the undersigned's status as an "insider"
or "affiliate" of the Borrower, and the undersigned shall take any action, and
shall execute any document, which the Bank may request in order to effectuate
this warranty to the Bank.
If any Indebtedness is guaranteed by two or more guarantors, the obligation of
the undersigned shall be several and also joint, each with all and also each
with any one or more of the others, and may be enforced at the option of
the Bank against each severally, any two or more jointly, or some severally and
some jointly. The Bank, in its sole discretion, may release any one or more of
the guarantors for any consideration which it deems adequate, and may fail or
elect not to prove a claim against the estate of any bankrupt, insolvent,
incompetent or deceased guarantor; and after that, without notice to any other
guarantor, the Bank may extend or renew any or all Indebtedness and may permit
the Borrower to incur additional Indebtedness, without affecting in any manner
the unconditional obligation of the remaining guarantor(s). This action by the
Bank shall not, however, be deemed to affect any right to contribution which
may exist among the guarantors.
Any of the undersigned may terminate their obligation under this Guaranty as to
future Indebtedness (except as provided below) by (and only by) delivering
written notice of termination to an officer of the Bank and receiving from an
officer of the Bank written acknowledgement of delivery; provided, the
termination shall not be effective until the opening of business on the
forty-fifth (45th) day following written acknowledgement of delivery. Any
termination shall not affect in any way the unconditional obligations of the
remaining guarantor(s), whether or not the termination is known to the
remaining guarantor(s). Any termination shall not affect in any way the
unconditional obligations of the terminating guarantor(s) as to any
Indebtedness existing at the effective date of termination or any Indebtedness
created after that pursuant to any commitment or agreement of the Bank or any
Borrower loan with the Bank existing at the effective date of termination
(whether advances or readvances by the Bank are optional or obligatory), or any
modifications, extensions or renewals of any of this Indebtedness, whether in
whole or in part, and as to all of this Indebtedness and modifications,
extensions or renewals of it, this Guaranty shall continue effective until the
same shall have been fully paid. The Bank has no duty to give notice of
termination by any guarantor(s) to any remaining guarantor(s). The undersigned
shall indemnify the Bank against all claims, damages, costs and expenses,
including without limit reasonable attorney fees, incurred by the Bank in
connection with any suit, claim or action against the Bank arising out of any
modification or termination of a Borrower loan or any refusal by the Bank to
extend additional credit in connection with the termination of this Guaranty.
Notwithstanding any prior revocation, termination, surrender or discharge of
this Guaranty (or of any lien, pledge or security interest securing this
Guaranty) in whole or part, the effectiveness of this Guaranty, and of all
liens, pledges and security interests securing this Guaranty, shall
automatically continue or be reinstated, as the case may be, in the event that
(a) any payment received or credit given by the Bank in respect of the
Indebtedness is returned, disgorged or rescinded as a preference, impermissible
setoff, fraudulent conveyance, diversion of trust funds, or otherwise under any
applicable state or federal law, including, without limitation, laws pertaining
to bankruptcy or insolvency, in which case this Guaranty, and all liens,
pledges and security interests securing this Guaranty, shall be enforceable
against the undersigned as if the returned, disgorged or rescinded payment or
credit had not been received or given by the Bank, and whether or not the Bank
relied upon this payment or credit or changed its position as a consequence of
it; or (b) any liability is imposed, or sought to be imposed, against the Bank
relating to the environmental condition of, or the presence of hazardous or
toxic substances on, in or about, any property given as collateral to the Bank
by the Borrower, whether this condition is known or unknown, now exists or
subsequently arises (excluding only conditions which arise after any
acquisition by the Bank of any such property, by foreclosure, in lieu of
foreclosure or otherwise, to the extent due to the wrongful act or omission of
the Bank), in which case this Guaranty, and all liens, pledges and security
interests securing this Guaranty, shall be enforceable against the undersigned
to the extent of all liability, costs and expenses (including without limit
reasonable attorneys' fees) incurred by the Bank as the direct or indirect
result of any environmental condition or hazardous or toxic substances. In the
event of continuations or reinstatement of this Guaranty and the liens, pledges
and security interest securing it, the undersigned agree(s) upon demand by the
Bank to execute and deliver to the Bank those documents which the Bank
determines are appropriate to further evidence (in the public records or
otherwise) this continuation or reinstatement, although the failure of the
undersigned to do so shall not affect in any way the reinstatement or
continuation. If the undersigned do(es) not execute and deliver to the Bank
upon demand such documents, the Bank and each Bank officer is irrevocably
appointed (which appointment is coupled with an interest) the true and
lawful attorney of the undersigned (with full power of substitution) to execute
and deliver such documents in the name and on behalf of the undersigned. For
purposes of this Guaranty, "environmental condition" includes, without
limitation, conditions existing with respect to the surface or ground water,
drinking water supply, land surface or subsurface and the air; and "hazardous
or toxic substances" shall include any and all substances now or subsequently
determined by any federal, state, or local authority to be hazardous or toxic,
or otherwise regulated by any of these authorities.
<PAGE> 13
Although the intent of the undersigned and the Bank is that Michigan law shall
apply to this Guaranty, regardless if Michigan law applies, the undersigned
further agree(s) as follows: With respect to the limitation, if any, stated in
the Additional Provisions below on the amount of principal guaranteed under this
Guaranty, the undersigned agree(s) that (a) this limitation shall not be a
limitation on the amount of Borrower's Indebtedness to the Bank; (b) any
payments by the undersigned shall not reduce the maximum liability of the
undersigned under this Guaranty unless written notice to that effect is actually
received by the Bank at or prior to the time of the payment; and (c) the
liability of the undersigned to the Bank shall at all times be deemed to be the
aggregate liability of the undersigned under this Guaranty and any other
guaranties previously or subsequently given to the Bank by the undersigned and
not expressly revoked, modified or invalidated in writing.
The undersigned waive(s) any right to require the Bank to: (a) proceed against
any person, including without limit the Borrower; (b) proceed against or exhaust
any security held from the Borrower or any other person; (c) give notice of the
terms, time and place of any public or private sale of personal property
security held from the Borrower or any other person, or otherwise comply with
the provisions of Section 9-504 of the Michigan or other applicable Uniform
Commercial Code; (d) pursue any other remedy in the Bank's power; or (e) make
any presentments or demands for performance, or give any notices of
nonperformance, protests, notices of protest, or notices of dishonor in
connection with any obligations or evidences of Indebtedness held by the Bank as
security, in connection with any other obligations or evidences of indebtedness
which constitute in whole or in part Indebtedness, or in connection with the
creation of new or additional Indebtedness.
The undersigned authorize(s) the Bank, either before or after termination of
this Guaranty, without notice to or demand on the undersigned and without
affecting the undersigned's liability under this Guaranty, from time to time to:
(a) apply any security and direct the order or manner of sale of it, including
without limit, a non-judicial sale permitted by the terms of the controlling
security agreement, mortgage or deed of trust, as the Bank in its discretion may
determine; (b) release or substitute any one or more of the endorsers or any
other guarantors of the indebtedness; and (c) apply payments received by the
Bank from the Borrower to any indebtedness of the Borrower to the Bank, in such
order as the Bank shall determine in its sole discretion, whether or not this
indebtedness is covered by this Guaranty, and the undersigned waive(s) any
provision of law regarding application of payments which specifies otherwise.
The Bank may without notice assign this Guaranty in whole or in part. Upon the
Bank's request, the undersigned agree(s) to provide to the Bank copies of the
undersigned's financial statements.
The undersigned waive(s) any defense based upon or arising by reason of (a) any
disability or other defense of the Borrower or any other person; (b) the
cessation or limitation from any cause whatsoever, other than final and
irrevocable payment in full, of the Indebtedness; (c) any lack of authority of
any officer, director, partner, agent or any other person acting or purporting
to act on behalf of the Borrower which is a corporation, partnership or other
type of entity, or any defect in the formation of the Borrower; (d) the
application by the Borrower of the Proceeds of any indebtedness for purposes
other than the purposes represented by the Borrower to the Bank or intended or
understood by the Bank or the undersigned; (e) any act or omission by the Bank
which directly or indirectly results in or aids the discharge of the Borrower or
any Indebtedness by operation of law or otherwise; or (f) any modification of
the Indebtedness, in any form whatsoever including without limit any
modification made after effective termination, and including without limit the
renewal, extension, acceleration or other change in time for payment of the
Indebtedness, or other change in the terms of any Indebtedness, including
without limit increase or decrease of the interest rate. The undersigned
waive(s) any defense the undersigned may have based upon any election of
remedies by the Bank which destroys the undersigned's subrogation rights or the
undersigned's right to proceed against the Borrower for reimbursement, including
without limit any loss of rights the undersigned may suffer by reason of any
rights, powers or remedies of the Borrower in connection with any
anti-deficiency, appraisement or valuation laws or any other laws limiting,
qualifying or discharging any Indebtedness.
The undersigned acknowledge(s) that the Bank has the right to sell, assign,
transfer, negotiate, or grant participations in all or any part of the
indebtedness and any related obligations, including without limit this Guaranty.
In connection with that right, the Bank may disclose any documents and
information which the Bank now or later acquires relating to the undersigned and
this Guaranty, whether furnished by the Borrower, the undersigned or otherwise.
The undersigned further agree(s) that the Bank may disclose these documents and
information to the Borrower.
The total obligation under this Guaranty shall be UNLIMITED unless specifically
limited in the Additional Provisions of this Guaranty, and this obligation
(whether unlimited or limited to the extent indicated in the Additional
Provisions) shall include, IN ADDITION TO any limited amount of principal
guaranteed, any and all interest on all Indebtedness and any and all costs and
expenses of any kind, including without limit reasonable attorney fees, incurred
by the Bank at any time(s) for any reason in enforcing any of the duties and
obligations of the undersigned under this Guaranty or otherwise incurred by the
Bank in any way connected with this Guaranty, the Indebtedness or any other
guaranty of the Indebtedness (including without limit reasonable attorney fees
and other expenses incurred in any suit involving the conduct of the Bank, the
Borrower or the undersigned). All of these costs and expenses shall be payable
immediately by the undersigned when incurred by the Bank, without demand, and
until paid shall bear interest at the highest per annum rate applicable to any
of the Indebtedness, but not in excess of the maximum rate permitted by law. Any
reference in this Guaranty to attorney fees shall be deemed a reference to fees,
charges, costs and expenses of both in-house and outside counsel and paralegals,
whether or not a suit or action is instituted, and to court costs if a suit or
action is instituted, and whether attorney fees or court costs are incurred at
the trial court level, on appeal, in a bankruptcy, administrative or probate
proceeding or otherwise. Any reference in the Additional Provisions or
elsewhere (a) to this Guaranty being secured by certain collateral shall NOT be
deemed to limit the total obligation of the undersigned under this Guaranty or
(b) to this Guaranty being limited in any respect shall NOT be deemed to limit
the total obligation of the undersigned under any prior or subsequent guaranty
given by the undersigned to the Bank.
The undersigned unconditionally and irrevocably waive(s) each and every defense
and setoff of any nature which, under principles of guaranty or otherwise, would
operate to impair or diminish in any way the obligation of the undersigned under
this Guaranty, and acknowledge(s) that each such waiver is by this reference
incorporated into each security agreement, collateral assignment, pledge and/or
other document from the undersigned now or later securing this Guaranty and/or
the Indebtedness, and acknowledge(s) that as of the date of this Guaranty no
such defense or setoff exists. The undersigned acknowledge(s) that the
effectiveness of this Guaranty is subject to no conditions of any kind.
This Guaranty shall remain effective with respect to successive transactions
which shall either continue the Indebtedness, increase or decrease it, or from
time to time create new Indebtedness after all or any prior Indebtedness has
been satisfied, until this Guaranty is terminated in the manner and to the
extent provided above.
The undersigned warrant(s) and agree(s) that each of the waivers set forth above
are made with the undersigned's full knowledge of their significance and
consequences, and that under the circumstances, the waivers are reasonable and
not contrary to public policy or law. If any of these waivers are determined to
be contrary to any applicable law or public policy, these waivers shall be
effective only to the extent permitted by law.
<PAGE> 14
This Guaranty constitutes the entire agreement of the undersigned and the Bank
with respect to the subject matter of this Guaranty. No waiver, consent,
modification or change of the terms of this Guaranty shall bind any of the
undersigned or the Bank unless in writing and signed by the waiving party or an
authorized officer of the waiving party , and then this waiver, consent,
modification or change shall be effective only in the specific instance and for
the specific purpose given. This Guaranty shall inure to the benefit of the Bank
and its successors and assigns. This Guaranty shall be binding on the
undersigned and the undersigned's heirs, legal representatives, successors and
assigns including, without limit, any debtor in possession or trustee in
bankruptcy for any of the undersigned. The undersigned has (have) knowingly and
voluntarily entered into this Guaranty in good faith for the purpose of inducing
the Bank to extend credit or make other financial accommodations to the
Borrower, and the undersigned acknowledges(s) that the terms of this Guaranty
are reasonable. If any provision of this Guaranty is unenforceable in whole or
in part for any reason, the remaining provisions shall continue to be effective.
THIS GUARANTY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF MICHIGAN.
Additional provisions (if any):
All obligations of the guarantor under this guaranty are secured by the security
interests in certain properties of the undersigned, including but not limited to
accounts receivable, inventory, and machinery and equipment, all pursuant to
certain Security Agreements, executed by the undersigned and dated August 29,
1994. The foregoing is not intended to limit the total obligation of the
undersigned under this Guaranty, which obligation shall be unlimited.
THE UNDERSIGNED AND BANK ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY IS A
CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED. EACH PARTY, AFTER CONSULTING (OR
HAVING HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL OF THEIR CHOICE, KNOWINGLY
AND VOLUNTARILY, AND FOR THEIR MUTUAL BENEFIT WAIVES ANY RIGHT TO TRIAL BY JURY
IN THE EVENT OF LITIGATION REGARDING THE PERFORMANCE OR ENFORCEMENT OF, OR IN
ANY WAY RELATED TO, THIS GUARANTY OF THE INDEBTEDNESS.
IN WITNESS WHEREOF, the undersigned has (have) signed this Guaranty on September
12, 1996.
GUARANTOR(S): Ampcor Diagnostics, Inc.
--------------------------------------
TYPE/PRINT NAME OF ENTITY(IF APPLICABLE)
WITNESSES:
Lon M. Bohannon
- -------------------------------
SIGNATURE OF
By: James L. Herbert
SIGNATURE OF ----------------------------
SIGNATURE OF
Its: President
David. G. Granthan -----------------------
- -------------------------------- TITLE (IF APPLICABLE)
By:
-----------------------------
SIGNATURE OF
Its:
------------------------
TITLE (IF APPLICABLE)
GUARANTOR'S ADDRESS:
603 Heron Drive
-------------------------------------
STREET ADDRESS
Bridgeport, NJ 08014
--------------------------------------
City State ZIP CODE
<PAGE> 1
EXHIBIT 23(B)
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Neogen Corporation
Lansing, Michigan
We hereby consent to the use in the Prospectus constituting a part of this
Registration Statement of our report dated July 18, 1996, relating to the
consolidated financial statements of Neogen Corporation and subsidiaries, which
is contained in that Prospectus, and to the incorporation in the Prospectus by
reference of our report dated July 18, 1996, relating to the consolidated
financial statements of Neogen Corporation and subsidiaries, appearing in the
Company's Annual Report of Form 10-KSB for the year ended May 31, 1996.
We also consent to the reference to us under the caption "Experts" in the
Prospectus.
/s/ BDO SEIDMAN, LLP
Troy, Michigan
September 17, 1996
<PAGE> 1
Exhibit 23(c)
CONSENT OF LON M. BOHANNON
I hereby consent to being named as an individual who will be a director of
Neogen Corporation as of October 11, 1996.
Dated: September 16, 1996 /s/ LON M. BOHANNON
------------------------------------
Lon M. Bohannon
<PAGE> 1
EXHIBIT 24
POWER OF ATTORNEY
Each of the undersigned, in his capacity as a director, officer, or
both, of Neogen Corporation, appoints JAMES L. HERBERT and LON M. BOHANNON,
or either of them, to be his true and lawful attorney to execute in his name,
place and stead, a Form S-2 Registration Statement of Neogen Corporation and
any amendments thereto. JAMES L. HERBERT and LON M. BOHANNON shall have full
power and authority to do and perform in the name and on behalf of each of the
undersigned, in any capacity, every act required or necessary to be done as
fully as each of the undersigned might or could do in person, in order to
effectuate the registration of Neogen Corporation's stock.
Date: September 16, 1996 /s/ HERBERT D. DOAN
----------------------------
HERBERT D. DOAN, Chairman of
the Board of Directors
Date: September 13, 1996 /s/ JAMES L. HERBERT
----------------------------
JAMES L. HERBERT, President,
Chief Executive Officer, and
Director
Date: September 14, 1996 /s/ G. BRUCE PAPESH
----------------------------
G. BRUCE PAPESH, Secretary and
Director
Date: September 13, 1996 /s/ GORDON E. GUYER
----------------------------
GORDON E. GUYER, Ph.D, Director
Date: September 13, 1996 /s/ ROBERT M. BOOK
----------------------------
ROBERT M. BOOK, Director
Date: September 13, 1996 /s/ LEONARD HELLER
----------------------------
LEONARD HELLER, Ph.D, Director
Date: September 14, 1996 /s/ JACK C. PARNELL
----------------------------
JACK C. PARNELL, Director
Date: September 13, 1996 /s/ THOMAS H. REED
----------------------------
THOMAS H. REED, Director
Date: September 16, 1996 /s/ LON M. BOHANNON
----------------------------
LON M. BOHANNON, Vice President
and Chief Financial Officer
Date: September 13, 1996 /s/ ROLAND M. HENDRICKSON
----------------------------
ROLAND M. HENDRICKSON, Director
