AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 8, 1996
REGISTRATION NO. 333-10759
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1 TO
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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BOSTON BIOMEDICA, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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MASSACHUSETTS 2835 04-2652826
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION
NUMBER)
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375 WEST STREET, WEST BRIDGEWATER, MASSACHUSETTS 02379 (508) 580-1900
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
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RICHARD T. SCHUMACHER,
PRESIDENT AND CHIEF EXECUTIVE OFFICER
BOSTON BIOMEDICA, INC.
375 WEST STREET
WEST BRIDGEWATER, MASSACHUSETTS 02379
(508) 580-1900
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
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COPIES TO:
STEVEN R. LONDON, ESQ. PAUL JACOBS, ESQ.
BROWN, RUDNICK, FREED & GESMER FULBRIGHT & JAWORSKI L.L.P.
ONE FINANCIAL CENTER 666 FIFTH AVENUE
BOSTON, MASSACHUSETTS 02111 NEW YORK, NEW YORK 10103
TEL: (617) 856-8200 TEL: (212) 318-3000
FAX: (617) 856-8201 FAX: (212) 752-5958
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement is declared effective by the
Securities and Exchange Commission.
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. [x]
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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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SUBJECT TO COMPLETION, DATED OCTOBER 8, 1996
PROSPECTUS
- ----------
1,600,000 SHARES
[LOGO]
BOSTON BIOMEDICA, INC.
COMMON STOCK
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All of the 1,600,000 shares of Common Stock (the "Common Stock") offered
hereby are being sold by Boston Biomedica, Inc. (the "Company").
Prior to this Offering, there has been no public market for the Common Stock
of the Company. It is currently estimated that the initial public offering price
will be between $8.00 and $10.00 per share. See "Underwriting" for information
relating to the determination of the initial public offering price. The Common
Stock has been approved for quotation on the Nasdaq National Market under the
symbol "BBII."
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SEE "RISK FACTORS" BEGINNING ON PAGE 6 FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED
HEREBY.
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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
================================================================================
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)
- --------------------------------------------------------------------------------
Per Share $ $ $
- --------------------------------------------------------------------------------
Total(3) $ $ $
================================================================================
(1) Excludes the value of warrants to be issued to the Underwriters and a 1%
non-accountable expense allowance payable to the Underwriters, of which
$40,000 has been paid to date. The Company has agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting."
(2) Before deducting expenses payable by the Company estimated to be $792,000.
(3) The Company has granted the Underwriters an option, exercisable within 30
days of the date hereof, to purchase up to 240,000 additional shares of
Common Stock at the Price to Public less Underwriting Discounts and
Commissions to cover over-allotments, if any. If all such additional shares
are purchased, the total Price to Public, Underwriting Discounts and
Commissions and Proceeds to Company will be $_____, $ ____ and $_____,
respectively. See "Underwriting."
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The shares of Common Stock are offered by the Underwriters named herein,
subject to receipt and acceptance by them and subject to their right to reject
any order in whole or in part. It is expected that delivery of the certificates
representing such shares will be made against payment therefor at the office of
Oscar Gruss & Son Incorporated in New York, New York on or about_________, 1996.
OSCAR GRUSS & SON INCORPORATED KAUFMAN BROS., L.P.
THE DATE OF THIS PROSPECTUS IS , 1996.
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.
Description of photograph:
Under the caption "Total Quality System," there is a collage of the
Company's products which are a part of its Total Quality System. In the upper
left corner is a photograph of a TQS Qualification Panel, proceeding clockwise
to the upper right corner is a photograph of an Accurun 1(R) vial and pipette
superimposed over a typical Levey-Jennings daily quality control chart. In the
lower right corner is a photograph of a lab technician operating equipment in
one of the Company's laboratories, and finally, in the lower left corner, is a
photograph of Anti-HIV 1 Western Blots for seven different Company Panel
Products.
The BBI logo is a trademark of the Company. Accurun 1(R) is a registered
trademark of the Company. Accurun(tm) is a trademark of the Company.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
TQS Logo
o TARGETED TO THE EMERGING
END-USER MARKET FOR
TOTAL INFECTIOUS DISEASE TEST
QUALITY KIT QUALITY CONTROL
SYSTEM o USER-FRIENDLY PRODUCTS
FOR MONITORING
LABORATORY PROFICIENCY,
LOT ACCEPTANCE,
TROUBLESHOOTING AND TRAINING
o DESIGNED TO EVALUATE THE
KEY ELEMENTS IN
THE TESTING PROCESS:
TEST KIT, EQUIPMENT AND PERSONNEL
o ESSENTIAL PRODUCTS IN AN
OVERALL QUALITY ASSURANCE PROGRAM
QUALITY CONTROL
PRODUCTS FOR
INFECTIOUS DISEASE TESTS
o SEROCONVERSION
PANELS, PERFORMANCE
PANELS AND SENSITIVITY PANELS
FOR THE EVALUATION OF
INFECTIOUS DISEASE
TEST KITS Photograph of four of the
o USED BY TEST KIT Company's Quality Control Panel Products
MANUFACTURERS AND
REGULATORS THROUGHOUT
THE WORLD
o DEVELOPED FROM AN
EXTENSIVE INVENTORY
OF HUMAN BLOOD SPECIMENS
o CONTRIBUTING TO THE
IMPROVED SENSITIVITY
OF INFECTIOUS DISEASE
TESTS WORLDWIDE
Inside Front Cover
Title at top of page reads: "Serving Our Customer's Needs Throughout the
Entire Product Life Cycle."
Description of Photograph: Photograph is comprised of a pie chart
superimposed over photographs of the Company's products and services. The pie
chart has four sections and eight subsections. The four sections refer to the
four stages in the test kit life-cycle and are captioned: "R&D," "Regulatory,"
"Production" and "Marketing." Each subsection has a corresponding photograph of
a Company product or service. The eight subsections are captioned: "Performance
Panels," "Seroconversion Panels," "Highly Characterized Specimen Bank,"
"Clinical Trials," "Characterized Disease State Sera," "Basematrix," "Run
Controls" and "OEM and Custom Panels."
Underneath the photograph are the words: "Your Partner in Infectious Disease
Quality Control" and the Company's logo is to the immediate left.
PROSPECTUS SUMMARY
The following is qualified in its entirety by the more detailed information
(including the financial statements and notes thereto) appearing elsewhere in
this Prospectus. Unless otherwise indicated, all information in this Prospectus
(i) assumes no exercise of the Underwriters' option to purchase from the Company
up to 240,000 additional shares of Common Stock to cover over-allotments, if
any, (ii) gives effect to a 1-for-2 reverse stock split with respect to the
Common Stock effected in September 1996, (iii) gives effect to certain changes
to the Company's Articles of Organization effected in September 1996, and (iv)
gives effect to the termination of certain redemption provisions relating to
117,647 shares of Common Stock upon completion of this Offering. Unless the
context indicates otherwise, all references to the "Company" are to Boston
Biomedica, Inc. and its two wholly-owned subsidiaries, BTRL Contracts and
Services, Inc. ("BTRL"), and BBI -- North American Clinical Laboratories, Inc.
("BBI -- NACL"). For a discussion of certain matters that should be considered
by purchasers of the Common Stock offered hereby, see "Risk Factors." For the
definition of certain technical and scientific terms, see "Glossary."
THE COMPANY
Boston Biomedica, Inc. is a leading worldwide provider of proprietary
quality control products for use with in vitro diagnostic test kits ("test
kits") for the detection, analysis and monitoring of infectious diseases,
including AIDS, Hepatitis and Lyme Disease. These products are used to develop
test kits, to permit the monitoring of laboratory equipment and personnel, and
to help ensure the accuracy of test results. The Company's products are derived
from human plasma and serum using proprietary manufacturing processes. The
Company believes its Quality Control Panel products are viewed as the current
industry standard for the independent assessment of the performance of HIV and
Hepatitis test kits. The Company also manufactures diagnostic test kit
components and provides specialty laboratory services, including clinical
trials.
To date, the Company has sold its products primarily to test kit
manufacturers and regulatory agencies, but it has recently begun selling Quality
Control Products directly to the emerging end-user market for quality control
products for infectious disease test kits. In late 1994 the Company received
United States Food and Drug Administration ("FDA") clearance for Accurun 1(R),
its first Quality Control Product designed specifically for end-users, and
subsequently has introduced 24 additional Accurun(tm) Quality Control Products.
In July 1996, the Company introduced its Total Quality System ("TQS"), a
marketing platform that combines Accurun(tm) with other Quality Control Products
to provide test kit end-users with the products needed in an overall quality
assurance program. TQS products allow end-users to evaluate each of the key
elements of the testing process: the test kit, laboratory equipment and
laboratory personnel.
The Company's customers include Abbott Diagnostics, Boehringer Mannheim,
Chiron, Fujirebio, Hoffman LaRoche, Ortho Diagnostics (Johnson & Johnson) and
Sanofi Diagnostics; regulatory agencies such as the United States FDA, the
British Public Health Laboratory Service, the French Institut National de la
Transfusion Sanguine and the German Paul Ehrlich Institute; and end-users of
diagnostic test kits, such as blood banks, hospitals and clinical laboratories.
The increased threat of infectious diseases has created a large and growing
market for infectious disease test kits. Venture Planning Group, a medical
products research firm, estimates that the worldwide infectious disease test kit
market was approximately $2.7 billion in 1995 and will grow to $5.0 billion by
2000. The related market for quality control products for in vitro diagnostic
testing for infectious and non-infectious disease totaled approximately $600
million in 1994, according to the Genesis Report Dx, a medical products survey.
The Company believes that quality control products for infectious disease test
kits currently represent less than five percent of the overall quality control
market, primarily as a result of the limited use of such products by end-users.
The Company believes that the market for quality control products for
infectious disease test kits will continue to expand, particularly among
end-users, primarily as a result of several key factors: (i) increased
regulatory scrutiny due to public concern about the dangers of infectious
diseases such as AIDS and Hepatitis; (ii) growing recognition of the value of
using quality control products to ensure the greatest possible safety of the
blood supply, to achieve the earliest possible diagnosis of infection, and to
minimize the occurrence of false negative results; (iii) the discovery of new
infectious diseases and the development of new treatments for diseases requiring
periodic monitoring, such as viral load testing for HIV, Hepatitis B and C and
other diseases; and (iv) the emergence of new testing technologies and
equipment.
3
The Company offers three product groups in infectious disease diagnostics:
Quality Control Panels, Accurun(tm) Run Controls and Diagnostic Components.
These products are used throughout the entire test kit life cycle, from initial
research and development, through the regulatory approval process and test kit
production, to training, troubleshooting and routine use by end-users. The
Company's Quality Control Panels, which combine human blood specimens with
comprehensive quantitative data useful for comparative analysis, help ensure
that test kits detect the correct analyte (specificity), detect it the same way
every time (reproducibility), and detect it at the appropriate levels
(sensitivity). The Company's Accurun(tm) Run Controls enable end-users of test
kits to confirm the validity of results by monitoring test performance, thereby
minimizing false negative test results and improving error detection. In
addition, the Company provides Diagnostic Components, which are custom processed
human plasma and serum products, to test kit manufacturers.
The Company's specialty clinical laboratory services include both routine
and sophisticated infectious disease testing in microbiology, immunology and
molecular biology. The Company seeks to focus its specialty laboratory services
in advanced areas of infectious disease testing, and provides contract research
and clinical trials for domestic and foreign test kit manufacturers.
The Company's strategy is to leverage its scientific capabilities in
microbiology, immunology, virology, and molecular biology to (i) capitalize on
the emerging end-user market, (ii) develop new products and services, (iii)
enhance technical leadership, (iv) capitalize on complementary business
operations, and (v) pursue strategic acquisitions and alliances.
The Company believes that it has several competitive advantages that will
help it implement its strategy:
o an inventory of approximately 50,000 distinct human blood specimens
accumulated since 1986 through its worldwide sources of blood-supply,
which enable the Company to quickly respond to market trends;
o the ability to offer specialty laboratory services and conduct clinical
trials, which helps it to maintain contact and enhance credibility with
test kit manufacturers and regulatory authorities, and allows the Company
to remain at the forefront of market trends and customer needs;
o proprietary manufacturing know-how resulting from ten years of experience
working with leading worldwide manufacturers in the development of their
infectious disease test kits; and
o its reputation as an authority in infectious disease quality control
products among test kit manufacturers and regulatory agencies.
The Company, a Massachusetts corporation, was organized in 1978, but did not
commence significant operations until 1986. The Company's principal offices are
located at 375 West Street, West Bridgewater, MA 02379, and its telephone number
is (508) 580-1900.
THE OFFERING
Common Stock Offered 1,600,000 shares(1)
Common Stock to be Outstanding
after the Offering 4,290,064 shares(1)(2)
Use of Proceeds Repayment of indebtedness, capital
expenditures, and general corporate
purposes, including working capital and
potential acquisitions. See "Use of
Proceeds."
Proposed Nasdaq National
Market Symbol BBII
- -----------
(1) Does not include up to 240,000 shares of Common Stock that may be sold by
the Company pursuant to the Underwriters' over-allotment option.
See "Underwriting."
(2) Does not include 1,161,057 shares of Common Stock issuable upon exercise of
outstanding options and warrants and 14,333 shares of Common Stock issuable
upon conversion of an outstanding subordinated convertible note. See
"Capitalization" and Notes 6, 10 and 11 of Notes to Consolidated Financial
Statements.
4
SUMMARY CONSOLIDATED FINANCIAL DATA
(In thousands, except per share data)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
----------------------- -------------------------
1993(1) 1994 1995 1995 1996
------- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Product sales $3,942 $ 5,982 $ 6,622 $ 3,024 $ 3,946
Service revenue 5,215 4,741 5,649 2,540 2,982
Total revenue 9,157 10,723 12,271 5,564 6,928
Income from operations 312 405 508 104 307
Net income (loss) 142 97 103 (36) 83
Net income (loss) per share(2)(3) $ 0.06 $ 0.04 $ 0.04 $ (0.01) $ 0.03
Weighted average common and common equivalent shares
outstanding(2)(3) 2,438 2,587 3,151 2,598 3,253
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 1996
-------------
PRO FORMA
ACTUAL AS ADJUSTED(4)
------ --------------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital $ 4,497 $ 14,300
Total assets 10,047 19,360
Long term debt, less current maturities 2,798 --
Redeemable common stock 899 --
Total stockholders' equity 3,332 16,831
</TABLE>
- ----------
(1) On June 30, 1993, the Company exercised its option to pre-pay the
acquisition note issued in connection with the 1992 purchase of BTRL at a
discount from the balance due, resulting in an extraordinary gain of
$50,000, net of taxes of $33,000. The 1993 net income per share before such
extraordinary gain was $0.04.
(2) The effect of the common stock equivalents on net income per common share
has been excluded from the calculation for 1993 and 1994 and the six months
ended June 30, 1995 as its inclusion was antidilutive.
(3) Pro forma supplementary earnings per share for the year ended December 31,
1995 and the six months ended June 30, 1996 were $.09 and $.06,
respectively, based upon an assumed weighted average common and common
equivalent shares outstanding of 3,600,007 and 3,701,173, respectively. In
accordance with APB Opinion 15, pro forma supplementary earnings per share
is presented as if the Company sold on January 1, 1995, 448,530 shares of
Common Stock, representing the number of shares of Common Stock required to
be sold at the assumed initial public offering price of $9.00 per share in
order for the Company to repay the indebtedness outstanding during 1995 as
if the Offering had occurred on January 1, 1995. See "Use of Proceeds" and
Note 12 of Notes to Consolidated Financial Statements.
(4) Adjusted to reflect: (i) application of the estimated net proceeds from the
sale of 1,600,000 shares of Common Stock offered by the Company hereby at
an assumed initial public offering price of $9.00 per share, after
deducting estimated underwriting discounts and commissions and offering
expenses, and (ii) the termination of redemption provisions relating to
117,647 shares of Common Stock upon completion of this Offering.
5
RISK FACTORS
An investment in the shares of Common Stock offered hereby involves a high
degree of risk. In addition to the other information in this Prospectus, the
following factors should be considered carefully in evaluating the Company and
its business before purchasing the shares of Common Stock offered hereby.
UNDEVELOPED END-USER MARKET FOR QUALITY CONTROL PRODUCTS FOR INFECTIOUS
DISEASE TEST KITS
The Company intends to focus its product development and sales and marketing
efforts on quality control products for end-users of infectious disease test
kits. Currently, most quality control products for infectious disease test kits
are sold to test kit manufacturers and regulators. End-users of infectious
disease test kits are currently using quality control products only to a very
limited extent. See "Business -- Industry Overview." The Company's strategy is
based primarily upon significant growth in sales of quality control products to
the end-user market. See "Business -- Strategy." There can be no assurance that
end-users of infectious disease test kits will increase their use of quality
control products, or that the Company will be able to increase its sales of
quality control products to such end-users. Clearance or approval by the United
States Food and Drug Administration (the "FDA") will be necessary before quality
control products may be sold for clinical laboratory use rather than for
research purposes only. See "-- Stringent Government Regulation." If the
end-user market for quality control products does not develop, or if the Company
is unable to increase its sales to this market, the Company's future growth
could be materially and adversely affected.
COMPETITION
In sales of both its products and specialty laboratory services, the Company
experiences substantial competition and the threat of competition from
established and potential competitors, most of which have greater financial,
manufacturing and marketing resources than the Company. Competition for
customers is intense and depends principally on the ability to provide products
of the quality and in the quantity required by customers, as well as the ability
to provide sophisticated specialty laboratory services, at competitive prices.
The Company currently competes against independent reference laboratories,
integrated plasma collection and processing centers and manufacturers of quality
controls and other Diagnostic Components. In addition, the Company understands
that a leading manufacturer of quality control products for non-infectious
diseases recently entered the quality control market for infectious disease test
kits. There can be no assurance that other such manufacturers or other companies
will not enter this market. The entrance of any of these companies into the
quality control market for infectious disease test kits could have a material
adverse effect on the Company, particularly its ability to achieve its strategy
to capitalize on the end-user market for quality control products for infectious
disease test kits. In addition, certain of the Company's products are derived
from donors with rare antibody characteristics. Competition for blood specimens
from such donors may increase, which may increase the cost of obtaining such
specimens. There can be no assurance that such increased competition will not
adversely affect the Company. See "-- Difficulty in Obtaining Certain Raw
Materials" and "Business -- Competition."
ABILITY TO MANAGE GROWTH
The Company's future success will depend in part on its ability to manage
growth as it increases its production capacity and broadens distribution of its
products. To compete effectively and manage future growth, if any, the Company
will be required to continue to implement and improve its operational, financial
and management information systems, procedures and controls on a timely basis,
and to expand, train, motivate and manage its workforce. There can be no
assurance that the Company's personnel, systems, procedures and controls will be
adequate to support the Company's future operations. The failure to implement
new and improved existing operational, financial and management systems or to
expand, train, motivate or manage employees could have a material adverse effect
on the Company's business, operating results and financial condition. There can
be no assurance that the Company will continue to grow or, if it does, that the
Company will manage the growth successfully.
6
FLUCTUATIONS IN QUARTERLY RESULTS OF OPERATIONS
The Company's results of operations have been subject to quarterly
fluctuations due to a variety of factors, including customer purchasing patterns
and seasonal demand for laboratory testing services. In particular, the
Company's sales of its Quality Control Products and Diagnostic Components
typically have been highest in the fourth quarter and lowest in the first
quarter of each fiscal year. For example, total revenue for the fourth quarter
ended December 31, 1994 and 1995 were $3.0 million and $3.8 million compared
with total revenue for the first quarter ended March 31, 1995 and 1996 of $2.7
million and $3.1 million. The Company believes that its customers may expend
end-of-year budget surpluses in the fourth quarter, thereby causing the
Company's fourth quarter product sales to be higher at the expense of first
quarter product sales. In addition, demand for laboratory services tends to be
somewhat higher in the third and fourth quarters of the fiscal year due to the
seasonal nature of Lyme Disease testing, the Company's highest volume test.
Moreover, the Company's margins for its different products and services vary,
with Quality Control Products generally having the highest margins and Contract
Research the lowest. Therefore, the Company's results may vary from period to
period as a result of the mix of products and services and the mix among
products. As a result, quarterly results of operations may not be indicative of
future results of operations. Also, variations in the Company's quarterly
results of operations may affect the market price of the Common Stock. See " --
Volatility of Price of Common Stock" and "Management's Discussion and Analysis
of Financial Condition and Results of Operations."
RISK OF ACQUISITIONS
The Company intends to pursue strategic acquisitions to expand its core
product line, strengthen its base in medical science and technology, and secure
new sources of blood supply. The Company is subject to various risks associated
with an acquisition strategy, including the risk that the Company will be unable
to identify and attract suitable acquisition candidates or to integrate and
manage any acquired business. The Company will compete for acquisition
candidates with companies which have significantly greater financial and
management resources than the Company. Acquisitions could place a significant
burden on the Company's management and operating personnel. Implementing the
Company's expansion strategy may also require significant capital resources.
Capital is needed not only for acquisitions, but also for the effective
integration, operation and expansion of such businesses. The Company may need to
raise capital through the issuance of long-term or short-term indebtedness or
the issuance of its securities in private or public transactions, which could
result in dilution of existing equity positions, increased interest and
amortization expense or decreased income to fund future expansion. There can be
no assurance that acceptable financing for future acquisitions will be available
or that the integration of future acquisitions and expansion of existing
business can be achieved. See "-- Ability to Manage Growth."
DIFFICULTY IN OBTAINING CERTAIN RAW MATERIALS
The Company manufactures its products from human plasma and serum which the
Company obtains from nonprofit and commercial blood centers, primarily in the
United States, but also from similar sources throughout the world. Certain of
the Company's products, including its Seroconversion and Performance Panels, are
comprised of unique and rare plasma specimens obtained from individuals during
the short period of time when the disease markers of particular diseases are
converting from negative to positive. See "Business -- Products." As a result,
the quantity of any such panel is limited, so the Company must replace such
panels as they sell out with another panel comprised of specimens equally unique
and rare. Competition to obtain such specimens may increase, which may increase
the cost of obtaining such products. There can be no assurance that the Company
will continue to be successful in obtaining a steady and adequate supply of the
unique and rare specimens of plasma and serum necessary for certain of its
products. The inability to continue to obtain such specimens, or any significant
delays in obtaining such specimens, would have a material adverse effect on the
Company. See "-- Competition."
DEPENDENCE ON KEY PERSONNEL
The Company's success depends in large part upon its ability to attract and
retain highly qualified scientific and management personnel. The Company
competes for such individuals with other companies, academic institutions,
government entities and other organizations. There can be no
7
assurance that the Company will be successful in hiring or retaining requisite
personnel. The failure of the Company to recruit and retain qualified scientific
and management personnel could have a material adverse effect on the Company.
None of the Company's key management or scientific personnel is subject to an
employment agreement with the Company. The loss of the services of any such key
personnel, including Richard T. Schumacher, President and Chief Executive
Officer of the Company, could have a material adverse effect on the Company. The
Company maintains key person life insurance on certain of its officers,
including Mr. Schumacher, on whose life the Company has $4,750,000 of insurance,
$2,000,000 of which has been pledged to the Company's lender. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Liquidity and Capital Resources," "Business -- Competition" and "Management --
Directors and Executive Officers."
DEPENDENCE ON KEY CUSTOMERS
The Company's three largest customers accounted for an aggregate of
approximately 20% of the Company's revenues in 1993, 1994 and 1995 and the six
months ended June 30, 1995 and 1996, although the customers were not identical
in each period. In addition, the majority of the Company's revenues are based
upon purchase orders. None of the Company's customers are contractually
committed to make future product purchases from the Company. The loss of any
major customer or a material reduction in a major customer's purchases would
have a material adverse effect upon the Company.
A single U.S. government services contract accounted for approximately 7.5%
and 7.3% of the Company's revenues in 1995 and the six months ended June 30,
1996. This contract is due to expire in February 1997. The Company has responded
to a Request for Proposals by the United States government for a new four year
contract to replace this contract. There can be no assurance that the Company's
response to the Request for Proposals will be accepted by the United States
government. Failure to receive the new contract would have a material adverse
effect on the Company. See "Business -- Services."
STRINGENT GOVERNMENT REGULATION
The manufacture and distribution of medical devices, including products
manufactured by the Company that are intended for in vitro diagnostic use, are
subject to extensive government regulation in the United States and in other
countries. In the United States, the Food, Drug, and Cosmetic Act (the "FDCA")
prohibits the marketing of in vitro diagnostic products until they have been
cleared or approved by the FDA, a process that is time-consuming, expensive and
uncertain. Once clearance or approval is obtained, the FDA requires additional
clearances or approvals for product changes that could affect the safety and
effectiveness of the device, including, for example, new indications for use or
changes in the design or manufacturing process. Additional clearances or
approvals may also be required for changes in claims relating to uses of
products. The Company's Accurun Run Controls, when marketed for diagnostic use,
have been classified by the FDA as medical devices. The Company has received FDA
clearance to market its Accurun 1(R) line for diagnostic purposes. An
application for clearance for diagnostic use for one additional Accurun(tm)
product has been submitted by the Company to the FDA, and the Company
anticipates that applications for approximately 16 additional Accurun(tm)
products will be prepared and submitted to the FDA by the end of 1997. There can
be no assurance that the Company will obtain regulatory clearances or approvals
on a timely basis, if at all, for future products, changes in existing products
or changes in claims relating to uses of products. Delays in obtaining or
failure to obtain requisite FDA clearances or approvals could have a material
adverse effect on the Company.
All of the Company's Quality Control Products with the exception of Accurun
1(R) are marketed "for research use only," which do not require FDA premarket
clearance or approval of the product, and not marketed for diagnostic purposes,
which do require FDA premarket clearance or approval. The Company's labeling for
these products limits their use to research. It is possible, however, that some
purchasers of these products may use them for diagnostic purposes despite the
Company's intended use. In these circumstances, the FDA could allege that these
products should have been cleared or approved by the FDA prior to marketing and
initiate enforcement action against the Company, which could have a material
adverse effect on the Company. Failure to obtain, or delays in obtaining, FDA
clearances or approval would adversely affect the Company's strategy of
capitalizing on the end-user market.
8
The Company believes that its Quality Control Panels are not regulated by
the FDA because they are not intended for diagnostic purposes. The Company
believes that its Diagnostic Components, which are components of in vitro
diagnostic products, may be subject to certain regulatory requirements under the
FDCA and other laws administered by the FDA, but do not require that the Company
obtain a premarket approval or clearance. There can be no assurance, however,
that the FDA would agree or that the FDA will not adopt a different
interpretation of the FDCA or other laws it administers, which could have a
material adverse effect on the Company.
In addition, both before and after clearance or approval, medical devices,
such as Accurun 1(R), are subject to certain export and import requirements
under the FDCA.
The Company is also subject to strict FDA good manufacturing practices
("GMP") regulations governing testing, control and documentation, and to other
postmarketing restrictions with respect to the manufacture of the Company's
medical device products. Ongoing compliance with GMP and other applicable
regulatory requirements is monitored through periodic inspections by the
regulatory authorities. Failure to comply with GMP or other regulatory
requirements can result, among other consequences, in the failure to obtain
premarket clearances or approvals, withdrawal of clearances or approvals, total
or partial suspension of product distribution, injunctions, civil penalties,
recall or seizures of products, and criminal prosecution, each of which would
have a material adverse effect on the Company.
Laws and regulations affecting the Company's products are in effect in many
of the countries, states and other jurisdictions in which the Company markets or
intends to market its products. There can be no assurance that the Company will
be able to obtain any required regulatory clearances or approvals on a timely
basis, or at all. Delays in receipt of or failure to obtain such clearances or
approvals, or the failure to comply with regulatory requirements in these
countries, states or other jurisdictions, could have a material adverse effect
on the Company's business, financial condition and results of operations. See
"Business -- Government Regulation."
The Company is also subject to other national, state and local laws and
regulations, including those relating to the use and disposal of biohazardous,
radioactive and other hazardous substances and wastes. Failure to comply with
such laws and regulations could have a material adverse effect on the Company's
business, financial condition and results of operations. See "Business --
Government Regulation."
FOREIGN RESTRICTIONS ON IMPORTATION OF BLOOD DERIVATIVES
Sales outside the United States in 1993, 1994 and 1995 represented
approximately 15%, 21% and 25%, respectively, of the Company's revenues for
those years, and 27% in each of the six months ended June 30, 1995 and 1996.
Foreign sales are primarily to Western Europe and Japan. Concern over blood
safety has led to movements in a number of European and other countries to
restrict the importation of blood and blood derivatives, including antibodies.
Such restrictions continue to be debated and there can be no assurance that
additional restrictions will not be imposed in the future. If imposed, such
restrictions could have a material adverse effect on the Company's business.
RISK OF TECHNOLOGICAL CHANGE
The infectious disease test kit industry is characterized by rapid and
significant technological change and changes in customer requirements. As a
result, the Company's success will be dependent upon its ability to enhance its
existing products and to develop or acquire and introduce in a timely manner new
products that take advantage of technological advances and respond to customer
requirements. There can be no assurance that the Company will be successful in
developing and marketing such new products or enhancements to the Company's
existing products on a timely basis or that such products will adequately
address the changing needs of the marketplace. Furthermore, rapid technological
development by the Company or others may result in products or services becoming
obsolete or noncompetitive before the Company recovers its investment in
research, development and commercialization.
9
RISK OF BROAD MANAGEMENT DISCRETION IN APPLICATION OF PROCEEDS
A significant portion of the estimated net proceeds from this Offering will
be allocated to working capital and general corporate purposes, including
potential acquisitions. Accordingly, the Company will have broad discretion as
to the application of the net proceeds and may allocate portions of such
proceeds to uses which the Company's stockholders may not deem desirable. In
October 1996, the Company entered into a License Agreement and Preferred Stock
Purchase Agreement ("Purchase Agreement") with BioSeq, Inc. ("BioSeq"), an early
stage biotechnology company that is developing a technology for sequencing,
synthesizing and characterizing nucleic acids and proteins. See "Business --
Strategic Alliances." Under the Purchase Agreement, the Company has agreed to
purchase approximately 19% of the outstanding capital stock of BioSeq for an
aggregate of $1,482,500, to be paid in three installments. The Company has paid
the first installment of $210,000 and will pay the second installment of
$522,500 upon completion of the Offering. The Company intends to use a portion
of the proceeds of this Offering to fund the second installment and $210,000 of
such proceeds to repay amounts drawn on the Company's revolving line of credit
to fund the first installment. The Company must make the remaining $750,000
installment if BioSeq attains certain technical milestones by July 31, 1997.
There can be no assurance as to the commercial viability of BioSeq's technology
or that the Company will not lose its entire investment in BioSeq. Additionally
there can be no assurance that the Company's use of any of the proceeds from the
Offering will yield any return. See "Use of Proceeds."
PROTECTION OF INTELLECTUAL PROPERTY AND PROPRIETARY TECHNOLOGY
None of the Company's Quality Control Products or Diagnostic Components have
been patented and the Company does not intend to seek patent protection for such
products. The Company's ability to compete effectively with other companies will
depend, in part, on its ability to maintain the proprietary nature of its
technologies and products and operate without infringing the rights of third
parties. The Company relies primarily on a combination of trade secrets and
non-disclosure and confidentiality agreements, and in certain limited
circumstances, patents, to establish and protect its proprietary rights in its
technology and products. There can be no assurance that others will not
independently develop or otherwise acquire the same, similar or more advanced
trade secrets and know-how.
The Company has two United States patents and, jointly with the University
of North Carolina at Chapel Hill ("UNC"), has filed three series of United
States and foreign patent applications relating to compounds, pharmaceutical
compositions and therapeutic methods in connection with the Company's drug
discovery program at the University of North Carolina at Chapel Hill. See
"Business -- Services," and " -- Strategic Alliances." There can be no assurance
that patent applications will result in issued patents, that issued patents will
provide any competitive advantage or that patents will not be challenged,
circumvented or invalidated.
Third parties may be issued patents to, or may otherwise acquire the rights
to, technology necessary or potentially useful to the Company. The success of
the Company is dependent in part upon its not infringing patents or other
intellectual property rights of third parties. Litigation relating to the
infringement of the patents or other intellectual property rights of others
could result in substantial costs to the Company. Litigation which could result
in substantial costs to the Company may also be necessary to enforce the
Company's intellectual property rights or to determine the scope and validity of
the proprietary rights of others. Any such substantial costs would have a
material adverse effect on the Company.
UNCERTAINTY RELATED TO HEALTHCARE REFORM; NO ASSURANCE OF ADEQUATE REIMBURSEMENT
Political, economic and regulatory influences are subjecting the healthcare
industry in the United States to fundamental change. Although to date Congress
has failed to pass comprehensive health care reform legislation, the Company
anticipates that Congress and state legislatures will continue to review and
assess alternative healthcare delivery and payment systems and may in the future
propose and adopt legislation effecting fundamental changes in the healthcare
delivery system. Legislative debate is expected to continue in the future. In
addition, the private sector has been changing the healthcare industry as well
through consolidations and alternatives in healthcare delivery systems. The
Company cannot predict what impact the adoption of any federal or state health
care reform measures or future private sector reform may have on its industry or
business.
10
In both domestic and foreign markets, sales by the Company's customers of
products and services that incorporate or affect the demand for the Company's
products may depend in part on the availability of reimbursement from
third-party payors such as government health administration authorities, private
health insurers and other organizations. Third-party payors are increasingly
challenging the price and cost- effectiveness of medical products and services.
There can be no assurance that pricing pressures experienced by the Company's
customers will not adversely affect the Company because of a determination that
its products are not cost effective or because of inadequate third-party
reimbursement levels to such customers. In addition, where the payor for the
Company's specialty laboratory services is the patient rather than third-party
payors, there is a greater risk of non-payment. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Results of
Operations."
RISK OF HAZARDOUS WASTE AND PRODUCT LIABILITY; ABSENCE OF INSURANCE
The Company's manufacturing processes involve the controlled use of
biohazardous materials and chemicals. The risk of accidental contamination or
injury from these materials cannot be completely eliminated. In the event of
such an accident, the Company could be held liable for any damages that result,
and any such liability could exceed the resources of the Company. The Company
may incur substantial costs to maintain safety in the use of biohazardous
materials and to comply with environmental regulations as the Company further
develops its manufacturing capacity. See "Business -- Government Regulation."
Further, the Company's business exposes it to liability risks that are
inherent in the testing, manufacturing and marketing of its products. The
Company does not currently have product liability insurance. Product liability
claims could expose the Company to substantial liabilities and expenses, which
could materially and adversely affect the Company.
RISKS ASSOCIATED WITH EXPORT SALES
The Company generated significant sales outside the United States and
anticipates that foreign sales will continue to account for a significant
percentage of the Company's net revenues. The Company's foreign operations
accounted for approximately 15%, 21% and 25% of the Company's total revenues for
the years ended December 31, 1993, 1994 and 1995 and approximately 27% in each
of the six months ended June 30, 1995 and 1996, and 36%, 38% and 47% of the
Company's product sales for the years ended December 31, 1993, 1994 and 1995 and
50% and 48% for each of the six months ended June 30, 1995 and 1996. The Company
therefore is subject to risks associated with foreign sales, including United
States and foreign regulatory requirements and policy changes, political and
economic instability, difficulties in accounts receivable collection,
difficulties in managing distributors or representatives and seasonality of
sales. Although the Company's sales have been denominated in United States
dollars, the value of the United States dollar in relation to foreign currencies
may also adversely affect the Company's sales to foreign customers. To the
extent that the Company expands its international operations or changes its
pricing practices to denominate prices in foreign currencies, the Company will
be exposed to increased risks of currency fluctuation. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
Note 5 of the Notes to Consolidated Financial Statements.
POSSIBLE ADVERSE EFFECT OF CONTROL BY EXISTING STOCKHOLDERS
Upon consummation of this Offering, Richard T. Schumacher, President and
Chief Executive Officer, his relatives and the existing officers and directors
of the Company collectively will have voting control over approximately 39% of
the outstanding shares of Common Stock. Accordingly, these stockholders, should
they choose to act in concert, will be in a position to exercise a significant
degree of control over the Company, and to significantly influence stockholder
votes on the election of the Company's directors, increasing the Company's
authorized capital stock, mergers, and sales of the Company's assets. See
"Principal Stockholders."
POSSIBLE ADVERSE EFFECT OF CERTAIN ANTI-TAKEOVER PROVISIONS
Certain provisions of the Company's Amended and Restated Articles of
Organization and Restated Bylaws could have the effect of discouraging a third
party from pursuing a non-negotiated takeover of the Company and preventing
certain changes in control. These provisions include a classified Board of
Directors, a fair price provision, advance notice to the Board of Directors of
stockholder proposals and
11
stockholder nominees for the Board of Directors, limitations on the ability of
stockholders to remove directors and call stockholders meetings, the provision
that vacancies on the Board of Directors be filled by a majority of the
remaining directors and the ability of the Board to issue, without further
stockholder approval, preferred stock with rights and privileges which could be
senior to the Common Stock. The Company also is subject to Chapter 110F of the
Massachusetts General Laws which, subject to certain exceptions, prohibits a
Massachusetts corporation from engaging in any of a broad range of business
combinations with any "interested stockholder" for a period of three years
following the date that such stockholder became an interested stockholder. These
provisions could discourage a third party from pursuing a takeover of the
Company at a price considered attractive by many stockholders, since such
provisions could have the effect of preventing or delaying a potential acquiror
from acquiring control of the Company and its Board of Directors. See
"Description of Capital Stock -- Preferred Stock," "-- Massachusetts
Anti-Takeover and Related Statutes" and " -- Certain Provisions of the Company's
Articles of Organization and By-laws."
NO ASSURANCE OF PUBLIC MARKET; POSSIBLE VOLATILITY OF PRICE OF COMMON
STOCK
Prior to this Offering, there has been no public trading market for the
Common Stock. There can be no assurance that a regular trading market for the
Common Stock will develop after this Offering or that, if developed, it will be
sustained. The initial public offering price of the Common Stock will be
determined by negotiations between the Company and Representatives of the
Underwriters and may not be indicative of the price at which the Common Stock
will trade after completion of this Offering. For factors that will be
considered in determining the initial public offering price, see "Underwriting."
After completion of this Offering, the market price of the Common Stock could be
subject to significant fluctuations in response to various factors and events,
including the liquidity of the market for the shares of Common Stock, variations
in the Company's operating results, changes in earnings estimates by securities
analysts, publicity regarding the Company, the infectious disease test kit
industry or the healthcare industry generally, new statutes or regulations or
changes in the interpretation of existing statutes or regulations affecting the
healthcare industry in general or the infectious disease test kit industry in
particular. In addition, the stock market in recent years has experienced broad
price and volume fluctuations that often have been unrelated to the operating
performance of particular companies. These market fluctuations also may
adversely affect the market price of the shares of Common Stock.
LACK OF UNDERWRITING HISTORY
Kaufman Bros., L.P. became registered as a broker-dealer in July 1995 and
has participated in a limited number of public offerings as an underwriter. As
part of its due diligence function, the Underwriters make such inquiries of
management as they deem appropriate, review the accuracy of the Prospectus and
establish the initial public offering price for the Common Stock. Prospective
purchasers of Common Stock offered hereby should consider the limited experience
of Kaufman Bros., L.P. in evaluating an investment in the Common Stock. See
"Underwriting."
DILUTION
Purchasers of shares in the Offering will suffer immediate dilution of $5.10
in net tangible book value per share. See "Dilution" and "Underwriting."
SHARES ELIGIBLE FOR FUTURE SALE
Sales of substantial amounts of Common Stock in the public market, or the
perception that such sales may occur, could adversely affect the prevailing
market price of the Common Stock and the ability of the Company to raise capital
through a public offering of its equity securities. Upon completion of this
Offering, the Company will have 4,290,064 shares of Common Stock outstanding
(4,530,064 shares if the Underwriters' overallotment option is exercised in
full). Of those shares, the 1,600,000 shares sold in this Offering (1,840,000
shares if the Underwriters' overallotment option is exercised in full) will be
freely tradeable without restriction (except as to affiliates of the Company) or
further registration under the Securities Act. All of the Company's directors
and executive officers and certain other stockholders, holding in the
12
aggregate 2,555,244 shares of Common Stock, have agreed not to offer to sell,
sell or otherwise dispose of any shares of Common Stock prior to the expiration
of 180 days from the date of this Prospectus. Oscar Gruss & Son Incorporated
may, in its sole discretion and at any time without prior notice, release all or
any portion of the shares of Common Stock subject to the lockup agreements.
Beginning 91 days after the date of this Prospectus, 6,475 shares of Common
Stock will be eligible for sale in the public market without registration,
subject to certain volume and other limitations, pursuant to Rule 144 or Rule
701 under the Securities Act of 1933, as amended (the "Securities Act") and an
additional 122,571 shares will be eligible for sale without such restrictions.
Following the expiration of the 180-day lockup period, an additional 1,643,197
shares of Common Stock will be eligible for sale in the public market without
registration, subject to certain volume and other limitations, pursuant to Rule
144 or Rule 701 under the Securities Act and an additional 734,425 shares will
be eligible for sale without such restrictions. The remaining shares of Common
Stock held by existing stockholders, including shares issuable upon exercise of
options, will become eligible for sale under Rule 144 or otherwise at various
times thereafter. All shares of Common Stock outstanding on the date of this
Prospectus will be eligible for sale to certain qualified institutional buyers
in accordance with Rule 144A under the Securities Act. The Company intends to
register under the Securities Act, shortly after the consummation of the
Offering, shares of Common Stock issuable upon exercise of employee stock
options, including 934,387 shares issuable upon exercise of such options
outstanding on the date of this Prospectus. Two of the Company's stockholders
and the holder of a warrant to purchase Common Stock have the right to cause the
Company to register their shares under the Securities Act and to include their
shares in certain future registrations of securities effected by the Company
under the Securities Act. An aggregate of 627,650 shares of Common Stock,
including 226,670 shares of Common Stock issuable upon exercise of outstanding
warrants, are covered by such registration rights. If such holders, by
exercising their registration rights, cause a large number of shares to be
registered and sold in the public market, such sales may have an adverse effect
on the market price of the Common Stock. If the Company is required to include
in a Company-initiated registration shares held by such holders pursuant to the
exercise of their piggyback registration rights, such sales may have an adverse
effect on the Company's ability to raise needed capital. See "Certain
Transactions," "Principal Stockholders" and "Shares Eligible for Future Sale."
13
USE OF PROCEEDS
The net proceeds to be received by the Company from the sale of the
1,600,000 shares of Common Stock offered hereby are estimated to be $12,600,000
($14,587,200 if the Underwriters over-allotment option is exercised in full), at
an assumed public offering price of $9.00 per share and after deducting
estimated underwriting discounts and commissions and offering expenses payable
by the Company.
The Company expects to use approximately $4.1 million of the net proceeds to
repay outstanding indebtedness, as described below, and approximately $1.0
million for capital expenditures to expand its manufacturing capacity in West
Bridgewater, of which approximately $500,000 will be spent on building expansion
and approximately $500,000 will be spent on equipment. The Company intends to
use $522,500 of the net proceeds of this Offering to fund the second installment
of its investment in BioSeq. The Company anticipates using the remaining net
proceeds for general corporate purposes, including working capital, as well as
for potential acquisitions and alliances. See "Risk Factors -- Risk of Broad
Management Discretion in Application of Proceeds," and "Business -- Strategic
Alliances."
At October 4, 1996, the approximately $4.1 million of indebtedness to be
repaid from the proceeds of this Offering consists of (i) approximately $2.3
million of indebtedness under a secured revolving line of credit due June 30,
1998 that bears interest at a rate equal to the prime rate plus 0.5% per annum;
(ii) a mortgage note in the principal amount of approximately $685,215 on the
West Bridgewater property that bears interest at a fixed rate of 8.3% per annum
until December 2000 and thereafter bears interest at a rate equal to the prime
rate plus 1% per annum, and which is due December 2002; (iii) a term note, in
the principal amount of $442,187, that bears interest at 9.01% per annum and is
due in October 1998; (iv) a term note, in the principal amount of $137,037, that
bears interest at the prime rate plus 1% per annum and is due October 1999; (v)
a term note, in the principal amount of $332,549, that bears interest at a rate
equal to the prime plus 1% per annum and is due August 2000; (vi) a term note,
in the principal amount of $86,667, that bears interest at a rate of 8.22% per
annum and is due December 2000; and (vii) various other notes that aggregate
$78,456 due from June 1997 to August 2000. The proceeds from borrowings incurred
within the past year were used for working capital, to acquire the West
Bridgewater property, to purchase capital equipment and to make the Company's
$210,000 initial investment in BioSeq. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and Note 6 of Notes to the
Consolidated Financial Statements.
With respect to potential acquisitions and alliances, in addition to the
investment in BioSeq, the Company may use a portion of the net proceeds to
acquire blood donor centers and other businesses, products or technologies that
are complementary to the Company's current business, although it currently has
no commitments for such acquisitions or alliances. See "Business -- Strategy."
The specific timing and amount of funds required for specific uses by the
Company cannot be precisely determined at this time. Pending such uses, the
Company intends to invest in short-term, investment grade, interest bearing
obligations.
DIVIDEND POLICY
The Company has never declared or paid cash dividends on its capital stock
and does not plan to pay any cash dividends in the foreseeable future. The
Company's current policy is to retain all of its earnings to finance future
growth. Any future determination to pay cash dividends will be at the discretion
of the Board of Directors and will be dependent upon the Company's financial
condition, operating results, capital requirements, general business conditions
and such other factors as the Board of Directors deems relevant. The Company is
subject to financial and operating covenants, including a prohibition against
the payment of cash dividends, under its bank financing agreement. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
14
CAPITALIZATION
The following table sets forth as of June 30, 1996 (i) the actual
capitalization of the Company, (ii) the pro forma capitalization of the Company
after giving effect to the termination of certain redemption provisions relating
to 117,647 shares of Common Stock, and (iii) as adjusted to give effect to the
sale of 1,600,000 shares of Common Stock offered by the Company hereby at an
assumed public offering price of $9.00 per share, after deducting estimated
underwriting discounts and commissions and estimated offering expenses payable
by the Company. This table should be read in conjunction with the Consolidated
Financial Statements and related notes thereto appearing elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
JUNE 30, 1996
-------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
------ --------- -----------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C>
Current maturities of long term debt $ 490 $ 490 $ --
====== ====== =======
Long-term debt, less current maturities:
Line of credit 1,398 1,398 --
Bank term debt 719 719 --
Mortgage term debt 620 620 --
Other notes payable 61 61 --
----- ----- -------
2,798 2,798 --
----- ----- -------
Redeemable common stock, $.01 par value; authorized
issued and outstanding 117,647, and none pro forma
and pro forma as adjusted 899 -- --
----- ----- -------
Stockholders' equity:
Common stock, $.01 par value; authorized
15,000,000 shares; issued and outstanding
2,572,417 actual, 2,690,064 pro forma and
4,290,064 pro forma as adjusted(1) 26 27 43
Preferred Stock
Additional paid-in capital 2,717 3,615 16,199
Retained earnings 589 589 589
----- ----- -------
Total stockholders' equity 3,332 4,231 16,831
----- ----- -------
Total capitalization $7,029 $7,029 $16,831
====== ====== =======
</TABLE>
- ----------
(1) Excludes the following at June 30, 1996: (i) 934,387 shares of Common Stock
issuable pursuant to the exercise of stock options outstanding at a
weighted average exercise price of $3.15 per share, of which options to
purchase 653,684 shares were then exercisable, (ii) 226,670 shares of
Common Stock issuable pursuant to the exercise of warrants outstanding at a
weighted average exercise price of $2.50 per share, all of which were then
exercisable, and (iii) 14,333 shares of Common Stock issuable upon
conversion of the subordinated convertible note at $1.50 per share. Since
June 30, 1996, no stock options were exercised, granted or became
exercisable. See "MANAGEMENT -- Stock Plans."
15
DILUTION
At June 30, 1996, the Company had a net tangible book value of $4,137,943 or
$1.54 per share of Common Stock. "Net tangible book value per share" represents
the tangible book value of the Company (total tangible assets less total
liabilities) divided by the number of shares of Common Stock outstanding (on a
pro forma basis to give effect to the termination of certain redemption
provisions relating to 117,647 shares of Common Stock). Without taking into
account any changes in such net tangible book value as of June 30, 1996, other
than to give effect to the sale by the Company of the 1,600,000 shares of Common
Stock offered hereby at an assumed initial public offering price of $9.00 and
after deducting the estimated underwriting discounts and commissions and
offering expenses payable by the Company, the pro forma net tangible book value
of the Company at June 30, 1996 would have been $16,737,943, or $3.90 per share.
This represents an immediate increase in the net tangible book value per share
of $2.36 to existing stockholders and an immediate dilution of the net tangible
book value per share of $5.10 to persons purchasing the Common Stock offered
hereby (the "New Investors"). The following table illustrates this per share
dilution:
Assumed initial public offering price per share $ 9.00
Net tangible book value per share before the Offering $1.54
Increase per share attributable to New Investors 2.36
----
Pro forma as adjusted net tangible book value
per share after the Offering 3.90
----
Dilution per share to New Investors $5.10
=====
The following table sets forth on a pro forma basis, as of June 30, 1996,
the total number of shares purchased from the Company after giving effect to the
sale of the 1,600,000 shares of Common Stock offered by the Company hereby, the
total consideration paid to the Company and the average price per share paid by
existing stockholders and by New Investors at an assumed initial public offering
price of $9.00 per share:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
---------------- -------------------
AVERAGE
PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
------ ------- ------ ------- ---------
<S> <C> <C> <C> <C> <C>
Existing Stockholders 2,690,064 62.7% $ 3,835,373 21.0% $1.43
New Investors 1,600,000 37.3% 14,400,000 79.0% $9.00
--------- ---- ---------- ----
Total 4,290,064 100.0% $18,235,373 100.0%
========= ===== =========== =====
</TABLE>
The above information assumes (i) no exercise of the Underwriters' warrants
and (ii) no exercise of any other outstanding options and warrants after June
30, 1996. As of June 30, 1996, there were outstanding options, warrants and a
subordinated convertible note to purchase an aggregate of 1,175,390 shares of
Common Stock at exercise prices ranging from $0.25 to $8.50 per share. Since
June 30, 1996, no stock options were exercised, granted or became exercisable.
To the extent these options and warrants are exercised, there will be further
dilution to New Investors. See "Management -- Stock Plans," "Certain
Transactions" and Note 10 of Notes to Consolidated Financial Statements.
16
SELECTED CONSOLIDATED FINANCIAL DATA
The following table contains certain selected consolidated financial data of
the Company and is qualified in its entirety by the more detailed Consolidated
Financial Statements and Notes thereto included elsewhere in this Prospectus.
The statement of operations data for the fiscal years 1993, 1994 and 1995, and
the balance sheet data as of December 31, 1994 and 1995, have been derived from
the Consolidated Financial Statements of the Company which have been audited by
Coopers & Lybrand L.L.P., independent accountants, and which appear elsewhere in
this Prospectus. The balance sheet data as of December 31, 1993 are derived from
consolidated financial statements that have been audited by Coopers & Lybrand
L.L.P. The statement of operations data of the Company for the fiscal years
ending December 31, 1991 and 1992 and the balance sheet data as of December 31,
1991 and 1992 have been derived from consolidated financial statements of the
Company which have been audited by other independent public accountants. The
unaudited consolidated financial data as of June 30, 1996, and for the six
months ended June 30, 1996 and 1995, have been prepared on a basis consistent
with the audited consolidated financial statements and, in the opinion of
management, include all adjustments (consisting only of normal recurring
adjustments) necessary to present fairly the financial condition and results of
operations for the periods presented. The results for the six months ended June
30, 1996, are not necessarily indicative of the results that may be expected for
the year ending December 31, 1996. This data should be read in conjunction with
the Consolidated Financial Statements and related Notes thereto and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" appearing elsewhere herein.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
----------------
YEAR ENDED DECEMBER 31, JUNE 30, JUNE 30,
----------------------- -------- --------
1991 1992(1) 1993(2)(3) 1994 1995 1995 1996
---- ------- ---------- ---- ---- ---- ----
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
REVENUE:
Product sales $2,146 $2,955 $3,942 $ 5,982 $ 6,622 $3,024 $ 3,946
Services 264 1,680 5,215 4,741 5,649 2,540 2,982
--- ----- ----- ----- ----- ----- -----
Total revenue 2,410 4,635 9,157 10,723 12,271 5,564 6,928
----- ----- ----- ------ ------ ----- -----
COSTS AND EXPENSES:
Cost of product sales 1,172 1,638 2,088 3,194 3,564 1,646 2,007
Cost of services 191 1,443 3,965 3,416 4,168 1,960 2,250
Research and development 104 222 279 469 375 159 362
Selling and marketing 372 353 894 1,192 1,340 638 915
General and administrative 436 745 1,619 2,047 2,316 1,057 1,088
--- --- ----- ----- ----- ----- -----
Total operating costs and expenses 2,275 4,401 8,845 10,318 11,763 5,460 6,622
----- ----- ----- ------ ------ ----- -----
Income from operations 135 234 312 405 508 104 306
Interest expense, net 101 113 179 244 336 164 168
--- --- --- --- --- --- ---
Income (loss) before income taxes and
extraordinary item 34 121 133 161 172 (60) 138
Provision for income taxes (5) (45) (41) (64) (69) 24 (55)
----- ----- ------ ------- ------ ------ ------
Income (loss) before extraordinary item 29 76 92 97 103 (36) 83
Extraordinary item-gain on elimination of debt,
net of income taxes -- -- 50 -- -- -- --
----- ----- ------ ------ ------ ------ ------
Net income (loss) $ 29 $ 76 $ 142 $ 97 $ 103 $ (36) $ 83
====== ====== ====== ======= ======= ====== =======
Net income (loss) per share(4)(5) $ 0.01 $ 0.04 $ 0.06 $ 0.04 $ 0.04 $(0.01) $ 0.03
Weighted average common and common equivalent
shares outstanding(4)(5) 1,948 2,160 2,438 2,587 3,151 2,598 3,253
</TABLE>
17
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30, 1996
------------ -------------
1991 1992 1993 1994 1995 ACTUAL PRO FORMA(7)
---- ---- ---- ---- ---- ------ ------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Working capital(6) $1,698 $2,457 $3,612 $4,686 $4,829 $ 4,497 $ 4,497
Total assets 2,624 4,828 6,870 8,076 9,928 10,047 10,047
Long term debt, less current maturities(6) 993 1,760 2,381 3,180 4,216 2,798 2,798
Redeemable common stock -- -- -- -- -- 899 --
Total stockholders' equity 993 1,837 2,762 3,041 3,187 3,332 4,231
Dividends -- None
</TABLE>
- -----------
(1) Effective July 1, 1992, the Company acquired through its BTRL subsidiary the
net assets of a division of Cambridge Biotech Corporation for $762,000 which
increased 1992 revenues by $1,450,000.
(2) On June 30, 1993, the Company exercised its option to pre-pay the
acquisition note in connection with the 1992 purchase of BTRL at a
substantial discount from the balance due, resulting in an extraordinary
gain of $50,000 net taxes of $33,000. The 1993 net income per share before
such extraordinary gain was $0.04.
(3) Effective January 1, 1993, the Company acquired the net assets of North
American Laboratory Group Ltd., Inc. for $425,000, which increased 1993
revenues by $2,019,000.
(4) The effect of the common stock equivalents on net income per share has been
excluded from the calculation for years ended December 31, 1991 through 1994
and the six months ended June 30, 1995 as its inclusion was antidilutive.
(5) Pro forma supplementary earnings per share for the year ended December 31,
1995 and the six months ended June 30, 1996 were $.09 and $.06,
respectively, based upon an assumed weighted average common and common
equivalent shares outstanding of 3,600,007 and 3,701,173, respectively. In
accordance with APB Opinion 15, pro forma supplementary earnings per share
is presented as if the Company sold on January 1, 1995, 448,530 shares of
Common Stock, representing the number of shares of Common Stock required to
be sold at the assumed initial public offering price of $9.00 per share in
order for the Company to repay the indebtedness outstanding during 1995 as
if the Offering had occurred on January 1, 1995. See "Use of Proceeds" and
Note 12 of Notes to Consolidated Financial Statements.
(6) The Company's demand line of credit with outstanding amounts of $880,000,
$1,091,000 and $1,895,000 as of December 31, 1991, 1992 and 1993,
respectively, has been presented as part of long-term debt (and excluded
from current liabilities in calculating working capital) for 1991 through
1993 to be consistent with its reclassification to long-term debt in 1994,
1995 and 1996 due to a modification of its maturity date.
(7) Adjusted to reflect the reclassification of Redeemable Common Stock into
117,647 shares of Common Stock upon completion of this Offering, thereby
terminating the redemption provisions.
18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Prospectus contains forward-looking statements which involve risks and
uncertainties. The Company's actual results may differ significantly from the
results discussed in the forward-looking statements. Factors that might cause
such a difference include, but are not limited to, those discussed in "Risk
Factors."
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.
OVERVIEW
The Company generates revenue from products and services provided to the in
vitro diagnostic infectious disease industry. Products consist of three groups:
Quality Control Panels, Accurun(tm) Run Controls and Diagnostic Components.
Services consist of Specialty Clinical Laboratory Testing, Contract Research,
Clinical Trials and Drug Screening. In the three full years since the Company's
acquisition of BTRL and BBI-NACL, the Company has experienced a shift in revenue
mix towards increased product sales, as product revenue as a percentage of total
revenue increased from 43.1% in 1993 to 54.0% in 1995, with a corresponding
decrease in the percentage of total revenue provided by services.
The Company's gross profit margin increased from 33.9% in 1993 to 37.0% in
1995 principally as a result of the increased percentage of higher margin
product revenues. Within products, the Company's Quality Control Products
(Accurun(tm) Run Controls and Quality Control Panels) have higher margins than
the Company's Diagnostic Components. Within services, Contract Research gross
margins are lower than other services. However, such contracts enable the
Company to maintain certain scientific staff and capability that it might
otherwise not be able to afford. The Company intends to continue to concentrate
on the growth in sales of its Quality Control Products.
Historically, the Company's results of operations have been subject to
quarterly fluctuations due to a variety of factors, including customer
purchasing patterns, primarily driven by end-of-year expenditures, and seasonal
demand during the summer months for certain laboratory testing services. In
particular, the Company's sales of its Quality Control Products and Diagnostic
Components typically have been highest in the fourth quarter and lowest in the
first quarter of each fiscal year, whereas Specialty Clinical Laboratory Testing
has generally reached a seasonal peak during the third quarter, coinciding with
the peak incidence of Lyme Disease. Research Contracts are generally for large
dollar amounts spread over a one or two year period, and upon completion,
frequently do not have renewal phases. As a result they can cause large
fluctuations in revenue and net income. In addition to staff dedicated to
internal research and development, certain of the Company's technical staff work
on both Contract Research for customers and Company sponsored research and
development. The allocation of certain technical staff to such projects depends
on the volume of Contract Research. As a result, research and development
expenditures fluctuate due to increases or decreases in Contract Research. See
"Risk Factors -- Fluctuations in Quarterly Results of Operations."
To develop new Quality Control Products and support increased sales, the
Company hired additional research and development staff in the second half of
1995 and sales and marketing staff in 1996. The Company intends to continue to
add staff to these departments. This should cause both research and development
and selling and marketing expenses to increase as a percentage of revenue in
1996 and 1997, compared to 1995. General and administrative expenses are not
expected to increase at the same rate, as the Company has already incurred
significant infrastructure expenses.
The Company does not have any foreign operations. However, the Company does
have significant export sales to agents under distribution agreements, as well
as directly to test kit manufacturers. All sales are denominated in U.S.
dollars. Export sales for the years ended December 31, 1993, 1994, and 1995 were
$1.4 million, $2.3 million, and $3.1 million, respectively, and for the six
months ended June 30, 1995 and 1996 were $1.5 million and $1.9 million,
respectively. The Company expects that export sales will continue to be a
significant source of revenue and operating income. See "Risk Factors -- Risks
Associated with Export Sales."
19
The Company's cash flow from operations over the last three years has been
negative as it funded investment in research and development, increased sales
and marketing expenditures, and supported growth-driven working capital needs.
The Company funded the shortfall through a combination of sales of common stock
and bank financing. The Company anticipates using a portion of the net proceeds
of this Offering for working capital requirements until such time as its cash
flow from operations becomes sufficient.
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated the percentage of
total revenue represented by certain items reflected in the Company's
consolidated statements of operations:
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS
DECEMBER 31, ENDED JUNE 30,
------------ --------------
1993 1994 1995 1995 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Revenue:
Products 43.1% 55.8% 54.0% 54.4% 57.0%
Services 56.9 44.2 46.0 45.6 43.0
Total revenue 100.0 100.0 100.0 100.0 100.0
Gross profit 33.9 38.4 37.0 35.2 38.6
Operating expenses:
Research and development 3.0 4.4 3.1 2.9 5.2
Selling and marketing 9.8 11.1 10.9 11.4 13.2
General and administrative 17.7 19.1 18.9 19.0 15.7
Total operating expenses 30.5 34.6 32.9 33.3 34.1
Income from operations 3.4 3.8 4.1 1.9 4.4
Interest expense 2.0 2.3 2.7 3.0 2.4
Income (loss) before income taxes 1.5 1.5 1.4 (1.1) 2.0
Net income (loss) 1.6 0.9 0.8 (0.6) 1.2
Product gross profit 47.0% 46.6% 46.2% 45.6% 49.1%
Services gross profit 24.0% 28.0% 26.2% 22.8% 24.6%
</TABLE>
SIX MONTHS ENDED JUNE 30, 1996 AND 1995
Total revenue increased 24.5%, or $1,364,000, to $6,928,000 for the six
months ended June 30, 1996 from $5,564,000 in the prior year period. This
increase was the result of an increase in product sales of 30.4%, or $921,000,
to $3,946,000 from $3,025,000 and an increase in specialty laboratory services
of 17.4%, or $443,000, to $2,983,000 from $2,540,000. Product revenue increased
primarily as a result of an overall increase of 34.5% in Quality Control
Products, due to sales of new products and increased volume of existing
products, including an increase of 132.5% in the sales of Accurun(tm). The
increase in service revenue was primarily attributable to a 19.0% increase in
Specialty Clinical Laboratory Testing revenue, particularly molecular (PCR)
testing, and the addition of two new research contracts with the National
Institutes of Health in the fourth quarter of 1995.
Gross profit increased 36.5%, or $714,000, to $2,672,000 for the six months
ended June 30, 1996 from $1,958,000 in the prior year period. The gross profit
margin increased to 38.6% in the six months ended June 30, 1996 versus 35.2% in
the prior year period. Gross margins improved in both products, (45.6% to
49.1%), and services (22.8% to 24.6%), as the Company benefited from an improved
revenue mix at the higher volume level.
Research and development expenses increased 127.4%, or $203,000, to $362,000
for the six months ended June 30, 1996 from $159,000 in the prior year period.
Research and development costs as a percentage of revenues increased to 5.2% for
the six months ended June 30, 1996 from 2.9% in the comparable 1995 period. This
increase was primarily the result of increased costs of personnel hired in the
second half of 1995 which enabled the Company to introduce over 30 new products
in the first half of 1996 compared with 15 new introductions in the prior year
period.
20
Selling and marketing expenses increased 43.6%, or $278,000, to $915,000 for
the six months ended June 30, 1996 from $638,000 in the prior year period. This
increase was primarily attributable to increased personnel costs associated with
the addition of tele-sales staff for Quality Control Products, particularly
Accurun(tm), and increased advertising costs due to the commencement of the
Company's "Total Quality System" (TQS) marketing campaign.
General and administrative expenses increased 3.0%, or $31,000, to
$1,088,000 for the six months ended June 30, 1996 from $1,057,000 in the prior
year period. As a result, general and administrative expenses decreased as a
percentage of revenues to 15.7% for 1996 from 19.0% in the prior year period as
management maintained close control of expense levels.
Interest expense was essentially unchanged in the six months ended June 30,
1996 versus the prior year period as the prime rate increases in late 1995 were
offset by reduced borrowing due to both additional equity raised and prepayments
from certain customers for contract research services.
YEARS ENDED DECEMBER 31, 1995 AND 1994
Total revenue increased 14.4%, or $1,548,000, to $12,271,000 in 1995 from
$10,723,000 in 1994. The increase in revenues was the result of a 10.7% increase
in product revenues of $640,000 to $6,622,000 from $5,981,000, and a 19.1%
increase in service revenues of $908,000 to $5,649,000 from $4,741,000 in 1995
compared to 1994. The increase in product revenue was attributable to an
increase in prices at the beginning of 1995 and an increase in the volume of
sales of Quality Control Products and Basematrix (part of the Diagnostic
Components group), which increase was partially offset by the absence of
revenues in 1995 from two OEM Quality Control Panel contracts which were
completed in 1994. The Company also reduced emphasis on certain lower margin
Diagnostic Components as it focused more effort on sales of its proprietary
Basematrix product, which carries a higher margin. During 1995, the Company
reorganized its sales and marketing department and believes that this had an
adverse effect on sales growth for the period. The increase in service revenue
was primarily the result of increased specialty clinical laboratory testing, two
new research contracts and increased clinical trial services, particularly in
the area of HIV.
Gross profit increased 10.4%, or $426,000, to $4,539,000 for 1995 from
$4,113,000 in 1994. Products gross profit increased 9.7%, or $270,000, to
$3,057,000 in 1995 from $2,787,000 in 1994 as the products sales increase was
offset by a small decrease in products gross profit margin (to 46.2% in 1995
from 46.6%). The products gross margin decrease was a result of a small increase
in material handling personnel costs. Services gross profit increased 11.8%, or
$156,000, to $1,481,000 in 1995 from $1,326,000 in 1994 as the sales increase
was offset by a decrease in services gross profit margin to 26.2% in 1995 from
28.0% in 1994. Services gross margin declined primarily as a result of increased
personnel costs in the specialty clinical laboratory and an increase in contract
research activities, which carry a lower margin.
Research and development expenditures decreased 20.0%, or $94,000, to
$376,000 in 1995 from $469,000 in 1994. The decrease resulted from certain
technical staff being utilized for Company sponsored research and development in
1994 and Contract Research in 1995. See "-- Years Ended December 31, 1994 and
1993." Development projects included Accurun(tm), molecular and immunological
Run Controls, specialized molecular assays, and the development of a second
generation Lyme Disease western blot test kit for internal use by the Company's
specialty testing laboratory.
Selling and marketing expenses increased 12.4%, or $148,000, to $1,340,000
in 1995 from $1,192,000 in 1994. The increase was primarily attributable to
additional sales and marketing staff and overhead, partially offset by lower
trade show and travel expenses as the Company realized greater benefits from its
distributor network.
General and administrative costs increased 13.1%, or $269,000, to $2,316,000
in 1995 from $2,047,000 in 1994. This increase was primarily attributable to
additional staffing in support of revenue growth and higher reserve provisions
for doubtful accounts associated with the increased volume of revenue related to
testing in situations where payment to the Company depends on collecting from
the
21
patient rather than a healthcare institution. These increases were partially
offset by lower professional fees. Also included in general and administrative
expense was approximately $60,000 of nonrecurring costs associated with the move
of the specialty testing laboratory into a larger, custom-designed facility.
Interest expense increased 37.8%, or $92,000, to $336,000 in 1995 from
$244,000 in 1994, as the Company funded its working capital needs primarily
through increased borrowings.
YEARS ENDED DECEMBER 31, 1994 AND 1993
Total revenue increased 17.1%, or $1,566,000, to $10,723,000 in 1994 from
$9,157,000 in 1993. This increase was a result of a 51.7%, or $2,039,000,
increase in product sales, partially offset by a 9.1%, or $473,000, decrease in
service revenue. The product sales increase was primarily attributable to unit
volume growth of both existing and new Quality Control Panels for HIV and HCV,
and, to a lesser extent, to sales of the Company's first molecular-based Quality
Control Panel targeted for end-user PCR training. The service revenue decline
was primarily attributable to the completion in February 1994 of a government
contract with the United States Army for retrovirology research that reduced
contract research revenue by approximately $1,100,000 in 1994 compared with
1993. This decrease was partially offset by a $676,000, or 36.5%, increase in
specialty laboratory testing services.
Gross profit increased 32.5%, or $1,009,000, to $4,113,000 for 1994 from
$3,104,000 in 1993. Products gross profit increased 50.3%, or $933,000, to
$2,787,000 in 1994 from $1,855,000 in 1993 as the products sales increase was
partially offset by a small decrease in products gross margin (to 46.6% in 1994
from 47.0%). The products gross margin decrease was a result of higher costs
associated with pilot manufacturing of Accurun(tm). Services gross profit
increased 6.1%, or $76,000, to $1,326,000 in 1994 from $1,250,000 in 1993 as the
sales decrease was more than offset by an increase in services gross margin (to
28.0% in 1994 from 24.0%). Services gross margin increased primarily as a result
of improved economies of scale at its specialty clinical laboratory afforded by
higher test volume, and redeployment of staff into Company sponsored research
and development projects.
Research and development expenditures increased by 68.3%, or $190,000, to
$469,000 in 1994 from $279,000 in 1993 as the Company commenced several research
and development projects, including development of Quality Control Panels for
molecular diagnostics, increased expenditures related to the development of a
PCR test for Lyme Disease, and a second generation Lyme Disease western blot
test kit for internal use by the Company's specialty clinical laboratory.
Selling and marketing expenses increased 33.3%, or $297,000, to $1,192,000
in 1994 from $894,000 in 1993. This increase was primarily attributable to staff
additions in sales and customer service support for the products business and
also higher travel costs.
General and administrative expenses increased 26.4%, or $428,000, to
$2,047,000 in 1994 from $1,619,000 in 1993. This increase was primarily
attributable to a full year impact of staff additions in information systems,
regulatory affairs and accounting in support of the Company's sales growth and
growth expectations in both the Quality Control Products and the Specialty
Clinical Laboratory Services business.
Interest expense increased 36.4%, or $65,000, to $244,000 in 1994 from
$179,000 in 1993 as the Company funded its increased equipment and working
capital needs primarily from borrowings.
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its operations to date through cash flow from
operations, borrowings from banks and sales of equity.
At June 30, 1996 the Company had $1,398,000 outstanding and $2,028,000 of
availability under its $3.5 million Revolving Line of Credit Agreement due June
30, 1998 (the "Revolver"). The Revolver bears interest at a rate equal to the
prime rate plus 0.5% per annum, currently 8.75%. Prior to June 30, 1996, the
Revolver bore interest at a rate equal to the prime rate plus 1% per annum.
Under the terms of the Revolver, the Company operates under a zero balance
account arrangement whereby cash
22
receipts are received into a lockbox at the bank and reduce the Revolver, while
disbursements for payroll and accounts payable items increase the outstanding
balance of the Revolver. Borrowings under the Revolver are limited to 80% of
eligible accounts receivable plus the lesser of 40% of inventory or $1.5
million. The Revolver contains various covenants and restrictions and the
amounts outstanding are secured by all of the Company's assets and a $2 million
life insurance policy on an officer/stockholder. See Note 6 to Notes to the
Consolidated Financial Statements. The Company expects to use a portion of the
proceeds of the Offering to repay the outstanding amount under the Revolver,
which at October 4, 1996 was approximately $2,300,000. See "Use of Proceeds."
Amounts repaid on the Revolver will be available for reborrowing.
Net cash provided by operations for the six months ended June 30, 1996 was
$685,000 as compared to $105,000 in the prior year period. This increase in cash
flow was primarily attributable to an increase in net income and an increase in
deferred revenue from a payment of $308,000 under a research contract for future
clinical trial services. Cash flow used in operations in 1995, 1994 and 1993
amounted to $29,000, $554,000 and $427,000, respectively. The decrease in cash
used in operations in 1995 from 1994 was primarily attributable to an increase
in deferred revenue.
Cash used in investing activities for the six months ended June 30, 1996 was
$283,000 as compared to $216,000 in the prior year period. This increase in
investing activities was the result of increased capital expenditures for
production equipment associated with Accurun(tm) and other Quality Control
Products. Cash used in investing activities for 1995, 1994 and 1993 amounted to
$1,320,000, $405,000 and $850,000, respectively. The increased use of cash in
1995 versus 1994 was the result of the purchase of the Company's West
Bridgewater facility and in 1993 related to the acquisition of the net assets of
North American Laboratory Group Limited, Inc.
Cash used in financing activities for the six months ended June 30, 1996 was
$403,000 as compared to $151,000 provided by financing activities in the prior
comparable year period. Net cash was used in financing activities primarily as a
result of the repayment of $1,591,000 of the Revolver offset by $899,000 raised
through the sale of 117,647 shares of Common Stock to Kyowa Medex, Co., Ltd. in
April 1996. Cash provided by borrowings for 1995, 1994 and 1993 amounted to
$1,240,000, $846,000 and $494,000, respectively, and net proceeds from the sale
of Common Stock for the same periods amounted to $176,000, $170,000, and
$765,000, respectively. The proceeds of such debt were used for working capital,
to acquire the West Bridgewater property and to purchase capital equipment. The
Company expects to use a portion of the proceeds of the Offering to repay the
outstanding balances on these notes payable, which aggregated approximately
$1,829,000 at August 1, 1996. See "Use of Proceeds."
Capital expenditures relate primarily to the Company's facilities and
related equipment. For the six months ended June 30, 1996 and 1995, capital
expenditures totaled $283,000 and $216,000 respectively. This represents an
increase of $67,000 in the six months ended June 30, 1996, as the Company
continues to invest in manufacturing equipment and information systems related
to both operations and finance. In 1995, 1994 and 1993 capital expenditures
amounted to $1,316,000, $405,000 and $461,000, respectively. In 1995, $806,000
of the Company's capital expenditures related to the purchase of the West
Bridgewater facility. As of October 4, 1996, the Company has available to it a
$250,000 five year term facility to finance equipment purchases, bearing
interest at prime plus 1%.
The Company anticipates capital expenditures to increase over the near term
as it expects to use approximately $1.0 million from the proceeds of this
Offering to expand its manufacturing capacity in West Bridgewater over the next
12 months, of which approximately $500,000 will be spent on building expansion
and approximately $500,000 will be spent on equipment. The Company also expects
to use $522,500 to fund the Company's purchase of its second installment of
capital stock of BioSeq following the completion of this Offering. See "Use of
Proceeds." The Company must make the remaining $750,000 installment if BioSeq
attains certain technical milestones by July 31, 1997. If the milestones are not
achieved, the Company will have the option to purchase the additional $750,000
of BioSeq capital stock until December 31, 1997. The Company believes that
existing cash balances, the borrowing capacity available under the Revolver,
cash generated from operations and the proceeds of this Offering are sufficient
to fund operations and anticipated capital expenditures for the foreseeable
future. There were no material financial commitments for capital expenditures as
of June 30, 1996, and currently there are no material commitments for capital or
investment expenditures other than the BioSeq investment.
23
On April 26, 1996 the Company entered into a new five year distribution
agreement with Kyowa Medex, Co., Ltd., a foreign distributor, extending a six
year old relationship. Simultaneously, Kyowa Medex, Co., Ltd. purchased 117,647
shares of the Company's Common Stock at a price of $8.50 per share. The Purchase
Agreement includes a redemption right that may require the Company to repurchase
the stock at $8.50 per share in the event the Company terminates the
distribution agreement or it expires prior to the Company completing an initial
public offering of its Common Stock. These shares have been presented in the
Company's balance sheet separately as redeemable Common Stock. Completion of
this initial public offering will terminate the redemption provisions and cause
the reclassification of these shares into stockholders' equity.
RECENT ACCOUNTING PRONOUNCEMENTS
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" ("SFAS 121").
SFAS 121 requires that an impairment loss be recognized for long-lived assets
and certain identified intangibles when the carrying amount of these assets may
not be recoverable. The Company has adopted SFAS 121 effective in 1996 and the
adoption did not have a material impact on the financial statements.
In October 1995, the FASB issued Statement of Financial Accounting Standards
No. 123 ("SFAS 123") "Accounting for Stock-Based Compensation," which becomes
effective for fiscal years beginning after December 15, 1995. SFAS 123
establishes new financial accounting and reporting standards for stock-based
compensation plans. However, entities are allowed to elect whether to measure
compensation expense for stock-based compensation under SFAS 123 or APB No. 25,
"Accounting for Stock Issued to Employees." The Company has elected to continue
to account under APB No. 25 and will make the required pro forma disclosures of
net income and earnings per share as if the provisions of SFAS 123 had been
applied in its December 31, 1996 financial statements. The potential impact of
adopting this standard on the Company's pro forma disclosures of net income and
earnings per share has not been quantified at this time.
24
BUSINESS
GENERAL
The Company is a leading worldwide provider of proprietary quality control
products for use with in vitro diagnostic test kits ("test kits") for the
detection, analysis and monitoring of infectious diseases, including AIDS,
Hepatitis and Lyme Disease. These products are used to develop test kits, to
permit the monitoring of laboratory equipment and personnel, and to help ensure
the accuracy of test results. The Company's products are derived from human
plasma and serum using proprietary manufacturing processes. The Company believes
its Quality Control Panel products are viewed as the current industry standard
for the independent assessment of the performance of HIV and Hepatitis test
kits. The Company also manufactures diagnostic test kit components and provides
specialty laboratory services, including clinical trials. The Company's
customers include test kit manufacturers, regulatory agencies and end-users of
test kits such as blood banks, hospital laboratories and clinical reference
laboratories. Currently the Company's products are used in connection with the
detection of more than 15 infectious diseases, and its specialty laboratory
services are used in connection with the detection of over 100 such diseases.
INDUSTRY OVERVIEW
According to the World Health Organization ("WHO"), infectious diseases are
now the leading cause of premature death around the world and the third most
common cause of premature death in the United States. In 1995, more than 17
million people died from exposure to infectious diseases, constituting nearly
one-third of the approximately 52 million people worldwide who died from all
causes. Currently, the Company focuses on two infectious diseases, Viral
Hepatitis and AIDS, which are among the largest killers and are also a primary
focus of blood testing efforts worldwide.
WHO estimates that approximately 20 million people worldwide are infected
with HIV, and that approximately one million people died from AIDS-related
illnesses during 1995. WHO also estimates that up to 350 million people
worldwide are infected with Hepatitis Type B, one of several types of Viral
Hepatitis, and that over one million people died of Viral Hepatitis during 1995.
In developed countries, blood products are routinely screened for HIV and Viral
Hepatitis by use of infectious disease test kits.
The increased threat from infectious diseases has created a large and
growing market for test kits. Venture Planning Group, a medical products
research firm, estimates that the worldwide infectious disease test kit market
was approximately $2.7 billion in 1995, and will grow to $5.0 billion by 2000
and $8.0 billion by 2005.
Infectious Disease Test Kits and Testing Methods. Test kits contain in one
compact package all of the materials necessary to run a test for an infectious
disease. These include the disposable diagnostic components, instructions, and
reaction mixing vessels (generally 96-well plates or test tubes) which are
coated with the relevant infectious disease antigens, antibodies or other
materials. To perform the test, either a technician or a specially designed
instrument typically mixes the solutions from the test kit with human blood
specimens in a specific sequence according to the test kit instructions. The
mixture must then "incubate" for up to 18 hours, during which time a series of
biochemical reactions trigger signals (including color, light and radioactive
count) which indicate the presence or absence and amount of specific markers of
the particular disease in the specimen.
Test kits generally employ one of three methods for infectious disease
testing: microbiology, immunology or molecular biology. Traditional microbiology
tests use a growth medium that enables an organism, if present, to replicate and
be detected visually. Immunology tests detect the antigen or antibody, which is
an indicator (marker) of the pathogen (e.g., virus, bacterium, fungus or
parasite). Molecular diagnostic methods, such as the polymerase chain reaction
("PCR"), test for the presence of nucleic acids (DNA or RNA) which are specific
to a particular pathogen.
25
Most infectious disease tests currently use microbiological or immunological
methods. However, molecular diagnostic methods are increasingly being used in
research laboratories worldwide and the Company believes that soon they will be
accepted for routine use in the clinical laboratory setting. The Company
believes that the advent of molecular diagnostic methods will complement rather
than diminish the need to test by microbiological and immunological procedures,
because different test methods reveal different information about a disease
state. The Company anticipates that as new test methods become more widespread,
they will account for a larger portion of the Company's business.
Quality Control for In Vitro Diagnostic Test Kits. Customers employ quality
control products in order to develop and use test kits (both infectious and
non-infectious). Quality control products help ensure that test kits detect the
correct analyte (specificity), detect it the same way every time
(reproducibility or precision), and detect it at the appropriate levels
(sensitivity). The major element of this quality control process is the
continuous evaluation of test kits by the testing of carefully characterized
samples that resemble the donor or patient samples routinely used with the test.
Quality control is used in both the infectious and non-infectious disease
markets, although currently it is not as prevalent among end-users of infectious
disease test kits.
The market for quality control products consists of three main customer
segments: (i) manufacturers of test kits, (ii) regulatory agencies that oversee
the manufacture and use of test kits and (iii) end-users of test kits, such as
hospitals, clinical reference laboratories and blood banks.
According to the Genesis Report Dx (May 1994), a medical products survey,
the quality control market for in vitro diagnostic testing for infectious and
non-infectious disease in 1994 totaled approximately $600 million. The Company
believes that the market for quality control products for infectious disease
testing currently represents less than five percent of the overall quality
control market. At the present time, most quality control products for
non-infectious disease test kits are sold to end-users, who have used quality
control products as part of standard laboratory practice for several decades.
Conversely, most quality control products for the infectious disease test kit
segment of the market are sold to test kit manufacturers and regulators, and not
to end-users, who have historically used quality control products only on a
limited basis. The Company believes that this lower level of usage among
end-users of infectious disease test kits is primarily due to laboratory
practices that have evolved from earlier testing methods that did not require
routine and extensive use of external quality controls as part of standard
laboratory practice. However, the Company also believes that this lower level of
usage among end-users of test kits represents a major market opportunity since
current testing methods have been improving test kit performance to increasingly
higher levels of sensitivity, specificity and reproducibility. The Company
believes that these three key criteria of test kit performance can be best
monitored through the use of quality control products, such as those sold by the
Company.
MARKET TRENDS
The Company believes that end-users of test kits will become the most
significant users of quality control products in the infectious disease market
and that the market for infectious disease test kits and related quality control
products will continue to expand, primarily as a result of the following four
trends.
Increased Regulatory Scrutiny. Due to the high level of public concern with
the dangers of infectious diseases, particularly AIDS, Viral Hepatitis, and Lyme
Disease, governmental regulatory agencies are requiring additional tests to
improve the safety of the blood supply, and are requiring manufacturers and
end-users of test kits to adopt quality assurance programs applicable to the
entire test kit product life-cycle, from initial product design and development
through manufacture and end-use. The passage of the Clinical Laboratory
Improvement Amendments of 1988 ("CLIA") and its regulatory implementation
beginning in 1992 have resulted in a set of recommended laboratory practices,
including more stringent quality control programs, as well as regular government
inspections aimed at improving the overall standard of proficiency in clinical
laboratories. As a result, the Company believes that blood bank, hospital and
clinical laboratory personnel are adopting more comprehensive quality assurance
programs, especially in infectious disease testing, to minimize the risk of
errors and to comply with CLIA and other regulations.
26
Growing Recognition of the Value of Using Quality Control Products. To
ensure the greatest possible safety of the blood supply, to achieve the earliest
possible diagnosis of infection, and to minimize the occurrence of false
negative results, sensitivity of tests (i.e., their ability to accurately detect
very small amounts of the disease marker) is a critical element. The Company
believes there is increasing recognition of the benefit of continuously
monitoring test sensitivity using quality control products to help ensure the
accuracy of each test run.
New Diseases and the Development of New Therapies. In recent years, HIV,
Hepatitis C Virus ("HCV"), Borrelia burgdorferi ("Lyme Disease") and Ehrlichia,
among others, have emerged as significant human pathogens. New and drug
resistant strains of known pathogens, such as those causing tuberculosis, escape
mutants of Hepatitis B Virus ("HBV"), and Group O and other variants of HIV,
have also emerged. In response, new and improved tests are being developed. In
addition, as new drug therapies are introduced to treat infectious diseases, new
tests are needed to monitor the effectiveness of these therapies. For example,
the recent advances in AIDS drug therapy, which use a combination of several
drugs to treat infected patients, have prompted the creation of a new viral load
test used to periodically measure the precise amount of virus in the patient's
blood to evaluate the effectiveness of the drug therapy. The Company believes
that viral load testing will be applied to additional areas of infectious
disease, including Hepatitis B and C and Lyme Disease.
Advanced Test Technologies and Equipment. Test kit manufacturers are
continuing to enhance the sensitivity, specificity and reproducibility of their
tests. Molecular diagnostics now permit the direct detection of the nucleic
acids (DNA and RNA) specific to viruses and other pathogens and are being used
to complement traditional microbiological and immunological tests for infectious
disease. New tests for urine and saliva have been developed that offer
advantages in some settings over blood tests and may be more widely used in the
future. Test kit manufacturers are also developing assays on silicon chips,
laser-read microspot arrays, and are using electrochemi- luminescence detection,
among other technologies. The different types of information obtained through
the complementary use of various diagnostic methods can provide the physician
with a broader perspective on the diagnosis and prognosis of the disease, as
well as on the effectiveness of drug therapy.
THE BOSTON BIOMEDICA ADVANTAGE
The Company offers a broad, integrated range of products for quality
assurance throughout the entire infectious disease test kit life-cycle, from
initial research and development, through the regulatory approval process and
test kit production, to training, troubleshooting and routine use by end-users.
To directly address the emerging end-user market opportunity, the Company
introduced its TQS marketing platform based around its Accurun(tm) Run Control
products. The Company believes that TQS is the first comprehensive package of
quality control products designed specifically for infectious disease test kit
end-users, providing them with a customized approach to evaluate all of the key
elements of the testing process.
The Company believes that it has several competitive advantages which have
enabled it to achieve its current leadership position in quality control
products for infectious diseases:
Valuable Inventory. The Company has an inventory of approximately 50,000
distinct human blood specimens accumulated since 1986 through its worldwide
sources of blood-supply. This inventory cannot be easily or rapidly acquired on
the open market, and enables the Company to respond quickly to market trends and
customer needs.
Specialty Laboratory Services and Clinical Trials. The knowledge gained
through the Company's specialty laboratory services allows the Company to remain
at the forefront of emerging market trends and customer needs. By conducting
clinical trials of new test kits under development, the Company is able to
maintain close contact with manufacturers and to release Quality Control
Products for test kits soon after the test kits are introduced to the market. In
addition, by operating a specialty clinical laboratory, the Company is able to
better understand the requirements of the end-user.
27
Proprietary Manufacturing Know-How. As a result of ten years of experience
working with leading worldwide manufacturers in the development of their test
kits and with regulators to help in the evaluation of test kits, the Company has
developed proprietary know-how in manufacturing its Quality Control Products.
Reputation. The Company believes that it has developed a reputation as an
authority in quality control products for infectious disease among manufacturers
and regulators of infectious disease test kits. The Company believes that its
reputation, established over the past ten years, will assist it in penetrating
the emerging end-user market.
STRATEGY
The Company's strategy is to enhance its leadership position in the
infectious diseases quality control market and to take advantage of the emerging
opportunities in the end-user market for quality control products. There are
five key elements to this strategy:
Capitalize on Emerging End-User Market. In 1996 the Company introduced an
expanded line of Quality Control Products that are specifically designed for the
end-users of test kits, such as blood banks, hospitals and clinical
laboratories. The Company plans to continue to expand its line of Quality
Control Products, particularly its Accurun(tm) line of Run Controls, to cover a
wider range of immunological and molecular markers. The Company also recently
introduced its Total Quality System ("TQS") marketing platform, which combines
Accurun(tm) with other Quality Control Products to provide test kit end-users
with the products needed in an overall quality assurance program. The Company
intends to continue to expand its sales, marketing and distribution activities
to support its product development program for the emerging end-user quality
control market.
Develop New Products and Services. The Company intends to capitalize on its
reputation with manufacturers and regulators by developing Quality Control
Products and Diagnostic Components for use with test kits for both new test
methodologies and new diseases. For example, in response to a 1996 FDA mandate
that all blood collected for transfusion must be tested for the presence of the
HIV antigen, the Company recently introduced on an OEM basis the first quality
control training panels for use with the two FDA-licensed HIV antigen test kits
available in the United States. In addition, the Company has also provided a
training panel for end-users of the only FDA-licensed molecular amplification
test for HIV RNA, and has introduced a new line of HIV RNA controls to meet the
demand of the newly emerging viral load test market. In the future, the Company
expects to provide Quality Control Panels for use with tests that distinguish
among the subtypes of HIV, the serotypes of HCV, and the various strains of
Mycobacteria causing tuberculosis.
Enhance Technical Leadership. The Company seeks to expand its technical
capabilities by continually enhancing its strong scientific staff and
collaborating with other scientists worldwide, thus strengthening its reputation
in the area of quality control for infectious disease testing. The Company
maintains and enhances its technical leadership by participating in scientific
studies relevant to its products and services, and by making presentations at
scientific meetings on blood banking and infectious diseases. The Company's
scientists also publish articles in peer reviewed journals.
Capitalize on Complementary Business Operations. The Company intends to
capitalize on operational and marketing opportunities that arise out of its
activities in both infectious disease products and laboratory services. For
example, the Company conducts clinical trials for manufacturers of in vitro
diagnostic products, which allows the Company to maintain close contact with
test kit manufacturers and regulators, and enables the Company to evaluate new
technologies in various stages of development. The Company believes that the
reputation and experience of its laboratory and scientific staff, its large
number of unique Quality Control Panels, and its inventory of characterized
serum and plasma specimens assist the Company in marketing its clinical trial
services to its customers. Finally, the Company's specialty clinical laboratory
also affords the Company access to materials needed in the production of its
Quality Control Products and Diagnostic Components.
28
Pursue Strategic Acquisitions and Alliances. The Company intends to pursue
strategic acquisitions and alliances to expand its core product lines, to
strengthen its base in medical science and technology, and to secure sources of
blood supply. To date, the Company has acquired BTRL, a research and development
laboratory with a strong capability in molecular and cellular biology, and
BBI-NACL, formerly North American Laboratory Group Ltd., Inc., a microbiology
and immunology clinical laboratory specializing in the diagnosis of infectious
diseases, including tick-borne diseases. These acquisitions led to the
introduction in 1994 of the Company's first Quality Control Products for
molecular diagnostics. In October 1996, the Company entered into a strategic
alliance with BioSeq. Under the License Agreement, upon the earlier of payment
of the final installment of the Company's aggregate $1,482,500 investment and
December 31, 1997, the Company will be granted the worldwide right to use
technology which is being developed for DNA sequencing and analysis, a process
which may allow for more precise identification of infectious disease agents.
The Company believes that there may be additional acquisition and alliance
opportunities, such as blood donor centers in strategic locations and companies
with complementary technology or synergistic product lines, that would
strengthen its existing business.
PRODUCTS
The Company designs, develops and markets diagnostic products used for the
quality control, quality assurance and technical evaluation of test kits for the
laboratory diagnosis of infectious disease. The Company offers three product
groups: Quality Control Panels, Run Controls and Diagnostic Components.
The Company manufactures its products from human plasma and serum which are
obtained from nonprofit and commercial blood centers, primarily in the United
States. The Company has acquired and developed an inventory of approximately
50,000 individual blood units and specimens (with volumes ranging from 1 ml to
800 ml) which provides most of the raw material for its products.
QUALITY CONTROL PANELS
Quality Control Panels consist of blood products characterized by the
presence or absence of specific disease markers and a Data Sheet containing
comprehensive quantitative data useful for comparative analysis. These Quality
Control Products are designed for measuring overall test kit performance and
laboratory proficiency, as well as for training laboratory professionals. The
Company's Data Sheets are an integral part of its Quality Control Products.
These Data Sheets are created as the result of extensive testing of proposed
panel components in both the Company's laboratories and at major testing
laboratories on behalf of the Company in the United States and Europe, including
national public health laboratories, research and clinical laboratories and
regulatory agencies. These laboratories are selected based on their expertise in
performing the appropriate tests on a large scale in an actual clinical setting;
this testing process provides the Company's customers with the benefit that the
Quality Control Panels they purchase from the Company have undergone rigorous
testing in actual clinical settings. In addition, the Company provides
information on its Data Sheets on the reactivity of panel components in all FDA
licensed test kits and all leading European test kits for the target pathogen,
as well as for all other appropriate markers of this pathogen. For example, the
Company's HIV panel Data Sheets include anti-HIV by IFA, ELISA and western blot;
HIV antigen by ELISA; and HIV RNA by several molecular diagnostic procedures.
The Company's Data Sheets require significant time and scientific expertise to
prepare.
The Company first introduced Quality Control Panels in 1987. The Company
currently offers a broad range of Quality Control Panels that address a variety
of needs of manufacturers and regulators of test kits as well as blood banks,
hospitals, clinical laboratories and other end-users. Prices for the Company's
quality control seroconversion, performance and sensitivity panels range from
$450 to $2,000 each, and its qualification and OEM panels range from $100 to
$200 per panel. The following table describes the types of Quality Control Panel
products currently offered by the Company.
29
QUALITY CONTROL PANEL PRODUCTS
<TABLE>
<CAPTION>
PRODUCT LINE DESCRIPTION USE CUSTOMERS
------------ ----------- --- ---------
<S> <C> <C> <C>
Seroconversion Plasma samples Compare the Test kit
Panels collected from a clinical manufacturers and
single individual sensitivity of regulators
over a specific competing
time period showing manufacturers' test
conversion from kits, enabling the
negative to user to assess the
positive for sensitivity of a
markers of an test in detecting a
infectious disease developing
antigen/antibody
Performance A set of 10 to 50 Determine test kit Test kit
Panels serum and plasma performance against manufacturers and
samples collected all expected levels regulators
from many different of reactivities in
individuals and the evaluation of
characterized for new, modified and
the presence or improved test
absence of a methods
particular disease
marker
Sensitivity Panels Precise dilutions Evaluate the Test kit
of human plasma or low-end analytical manufacturers
serum containing a sensitivity of a
known amount of an test kit
infectious disease
marker as
calibrated against
international
standards
Qualification Dilutions of human Demonstrate the Clinical reference
Panels plasma or serum consistent laboratories, blood
manifesting a full lot-to-lot banks, and hospital
range of performance of test laboratories
reactivities in kits, troubleshoot
test kits for a problems, evaluate
specific marker proficiency, and
train laboratory
technicians
OEM Panels Custom-designed Train laboratory Custom designed
Qualification personnel on new with test kit
Panels for test kits or manufacturers and
regulators and test equipment regulators as an
kit manufacturers end-user product or
for distribution to for internal use
customers or for
internal use
</TABLE>
Seroconversion and Performance Panels are comprised of unique and rare
plasma specimens obtained from individuals during the short period of time when
the markers for a particular disease are converting from negative to positive.
As a result, the quantity of any such panel is limited, so that the Company must
replace these panels as they sell out with another panel comprised of different
specimens equally unique and rare. The Company believes that its inventory and
relationships with blood centers affords it a competitive advantage in acquiring
such plasma for replacement panels and developing new products to meet market
demand. There can be no assurance that the Company will be able to continue to
obtain such specimens. See "Risk Factors -- Difficulty in Obtaining Raw
Materials."
The Company believes that it offers its customers a broad range of Quality
Control Panel products to address the requirements of the complete life-cycle of
a test kit, from initial research and development, through the regulatory
approval process, test kit production, training, troubleshooting and routine use
by end-users. The Company further believes that its Data Sheets, an integral
part of all panel products, offer its customers in-depth information on a
particular test kit of interest. Quality
30
Control Panels currently span the immunologic markers for AIDS (i.e., HIV),
Hepatitis B and C, Lyme Disease and ToRCH (Toxoplasma, rubella, cytomegalovirus
and herpes simplex virus). New introductions this year include molecular
Performance Panels for HBV and HCV, qualification panels for HIV, HBV and HCV,
and additional Seroconversion Panels for HIV, HBV, and HCV.
ACCURUN(TM) RUN CONTROLS
End-users of test kits utilize Run Controls to confirm the validity of
results by monitoring test performance, thereby minimizing false negative test
results and improving error detection. Run controls consist of one or more
specimens of known reactivity that are tested together with donor or patient
samples in an assay to determine whether the assay is performing within the
manufacturer's specifications. Clinical laboratories generally process their
patient specimens in a batch processing mode, and typically include 25 to 100
specimens to be tested in each batch (a "run"). Large laboratories may perform
several runs per day, while smaller laboratories may perform only a single run
each day, or sometimes only several runs per week. A clinical laboratory using a
Run Control will place the Run Control product in a testing well or test-tube,
normally used for a specimen, and will test it in the same manner that it tests
the donor or patient specimens. It will then compare the results generated to an
acceptable range, determined by the user, to measure whether the other specimens
are being accurately tested. The Run Control result must be within the
acceptable range to be considered valid. This is often tracked visually using a
Levey-Jennings chart. Depending upon a particular laboratory's quality control
practices, it may use several Run Controls on each run or it may simply use a
Run Control in a single run at the beginning and end of the day.
The Company believes its Accurun(tm) product line provides the following
benefits to end-users:
* Helps to satisfy the requirements of Good Laboratory Practice.
* Tracks the accuracy and precision of test runs.
* Detects laboratory errors and identifies trends before they become a
problem.
* Monitors test kit performance, equipment and personnel.
* Helps to meet National Committee For Clinical Laboratory Standards
("NCCLS") for molecular and immunological diagnostic methods for
infectious disease quality control.
* Documents the validity of test results, day to day, week to week.
The Company introduced its first four Accurun(tm) Run Control products in
the fourth quarter of 1993 and has since developed and released for sale an
additional 24 Accurun(tm) products. A limited number of these products are
available for diagnostic purposes; the others currently are limited to research
use. See " -- Government Regulation." Current Accurun(tm) Run Control products
range in price from $15 to $45 per milliliter and are described in the following
table.
ACCURUN(TM) RUN CONTROLS
<TABLE>
<CAPTION>
CURRENT
NUMBER OF PRIMARY
PRODUCT LINE DESCRIPTION PRODUCTS CUSTOMER(S)
------------ ----------- -------- -----------
<S> <C> <C> <C>
Accurun(tm) 1-99 Multi-marker Run Control for 4 Blood Banks
immunological tests
Accurun(tm) 100-199 Single-marker Run Control 17 Hospitals and clinical
for immunological tests reference laboratories
Accurun(tm) 200-299 Multi-marker Run Control for 1 Research and specialty
molecular tests laboratories
Accurun(tm) 300-399 Single-marker Run Control 3 Research and specialty
for molecular tests laboratories
Accurun(tm) 800-899 Negative Run Control for 3 All laboratories
immunological and molecular
tests
</TABLE>
31
The Company's Accurun(tm) family of products is targeted at the emerging
market of end-users of infectious disease test kits. The Company believes that
it offers the most comprehensive line of Run Controls in the industry, and that
its Accurun(tm) products, in combination with its Quality Control Panel
products, provide an extensive line of products for quality assurance in
infectious disease testing. See "-- Sales and Marketing." The Company intends to
continue to expand its line of Accurun(tm) products, thereby providing its
customers with the convenience and cost effectiveness of a single supplier for
independent run controls. See "Risk Factors -- Undeveloped End-User Market For
Quality Control Products for Infectious Disease Test Kits."
The Company has received 510(k) clearance from the FDA to market its Accurun
1(R) line, for diagnostic purposes, and intends to apply for such clearance for
the remainder of its Accurun(tm) products. All of the Company's Accurun Run
Controls will require FDA premarket clearance or approval prior to being
marketed for diagnostic use. An application for clearance for diagnostic use for
one additional Accurun(tm) product has been submitted by the Company to the FDA,
and the Company anticipates that applications for approximately 16 additional
Accurun(tm) products will be prepared and submitted to the FDA by the end of
1997. Failure to obtain, or delays in obtaining, such clearance or approval
would adversely affect the Company's strategy of capitalizing on the end-user
market. See "Risk Factors -- Stringent Government Regulation" and "-- Government
Regulation."
DIAGNOSTIC COMPONENTS
Diagnostic Components are the individual materials supplied to infectious
disease test kit manufacturers and combined (often after further processing by
the manufacturer) with other materials to become the various fluid components of
the manufacturer's test kit. The Company supplies Diagnostic Components in four
product lines: Normal Human Plasma, Normal Human Serum, Basematrix, and
Characterized Disease State Serum and Plasma. Normal Human Plasma and Serum are
both the clear liquid portion of blood which contains proteins, antibodies,
hormones and other substances, except that the Serum product has had the
clotting factors removed. Basematrix, the Company's proprietary processed serum
product that has been chemically converted from plasma, is designed to be a
highly-stable, lower cost substitute for most Normal Human Serum and Plasma
applications. Characterized Disease State Serum and Plasma are collected from
specific blood donors pre-selected because of the presence or absence of a
particular disease marker. The Company often customizes its Diagnostic
Components by further processing the raw material to meet the specifications of
the test kit manufacturer. The Company's Diagnostic Components range in price
from $0.25 to $60 per milliliter, with the majority selling between $0.50 and $5
per milliliter.
The Company believes that it has several competitive advantages in
Diagnostic Components. Through its trained and experienced laboratory staff, the
Company is able to perform comprehensive in-house testing for a number of
markers in a particular material, and consequently is able to address the
demands of its customers. The Company's large inventory of approximately 50,000
specimens provides it with the flexibility to produce Diagnostic Components
efficiently and rapidly in response to customer requests. The Company believes
that its proprietary manufacturing knowledge enables it to manufacture stable,
high quality products to meet the demands of its worldwide customer base.
SERVICES
The Company seeks to focus its specialty laboratory services in both the
clinical reference laboratory testing and advanced research areas. The Company
concentrates its services in those areas of infectious disease testing which are
complementary to its quality control and diagnostic products businesses.
Specialty Clinical Laboratory Testing. The Company operates an independent
specialty clinical laboratory which performs both routine and sophisticated
infectious disease testing in microbiology, immunology and molecular biology,
with special emphasis in AIDS, Viral Hepatitis and Lyme Disease. The Company's
specialty clinical laboratory combines traditional microbiology, advanced
immunology, and current molecular diagnostic techniques, such as PCR, to detect
and identify microorganisms, their antigens and related antibodies, and their
nucleic acids (i.e., DNA and RNA). Customers include physicians, clinics,
hospitals and other clinical/research laboratories.
32
Contract Research. The Company offers a variety of contract research
services in molecular biology, cell biology and immunology to governmental
agencies, diagnostic test kit manufacturers and biomedical researchers.
Molecular biology services include DNA sequencing, recombinant DNA support,
probe labeling and custom PCR assays. Cell biology and immunology services
include sterility testing, virus infectivity assays, cultivations of virus or
bacteria from clinical specimens, preparation of viral or bacterial antigens or
nucleic acids, and production of antibodies. The Company is currently providing
research services for assessment of the efficiency of candidate HIV vaccines in
a monkey model system under two separate contracts with the National Institute
for Allergy and Infectious Disease ("NIAID"), a part of the National Institutes
of Health ("NIH"). Each of these contracts has a two year term which expires in
September 1997. In addition, since 1983, the Company, through its BTRL
subsidiary, has provided blood processing and repository services for the
National Cancer Institute ("NCI"), also a part of the NIH. The repository stores
over 2,000,000 specimens and processes or ships up to several thousand specimens
per week in support of various NIH cancer and virus research programs. While the
current NCI repository contract terminates in February 1997, the Company has
responded to a Request for Proposals by the United States government for a new
four year contract to replace this contract. There can be no assurance that any
of these contracts will be replaced with new contracts. See "Risk Factors --
Dependence on Key Customers."
Small Business Innovation Research ("SBIR") grants and other government
contracts similar to the ones described have enabled the Company to develop
technologies applicable to new product development and its specialty clinical
laboratory. For example, recent SBIR grants have enabled the Company to develop
PCR based assays for the detection of the nucleic acids of HIV, HCV and Lyme
Disease. Although the Company does not currently have any SBIR grants, it has
two pending applications for such grants and intends to continue to seek
government grants and contracts that further the Company's core technology and
commercial business. There can be no assurance that the Company will receive any
government research grants in the future.
Clinical Trials. The Company conducts clinical trials for domestic and
foreign test kit manufacturers. Test kit manufacturers must conduct such trials
to collect data for submission to the United States FDA and other regulatory
agencies. By providing this service, the Company is able to maintain close
contact with test kit manufacturers and regulators, and is able to evaluate new
technologies in various stages of development. The Company believes that the
reputation of its laboratory and scientific staff, its large number of Quality
Control Panels, and its inventory of characterized serum and plasma specimens
assist the Company in marketing its clinical trial services to its customers.
The Company has performed clinical trials for a number of United States and
foreign test kit manufacturers seeking to obtain FDA approval for their
infectious disease test kits.
Drug Screening Program. As a subcontractor for an NIH AIDS grant held by the
University of North Carolina at Chapel Hill, the Company has established an
anti-HIV drug screening program to test a large number of natural products
(largely plant derivatives) to determine whether they inhibit HIV replication in
an in vitro assay system. These in vitro assays are also offered as a service to
researchers and pharmaceutical companies who wish to test various candidate
anti-viral agents for anti-HIV activity.
RESEARCH AND DEVELOPMENT
The Company's research and development effort is focused on the development
of (i) new and improved Quality Control Products for the emerging end-user
market, (ii) new products for existing customers, (iii) Diagnostic Components
for use with test kits for both new test methodologies and new diseases, and
(iv) infectious disease testing services using PCR and other amplification
assays for AIDS, Viral Hepatitis, Lyme Disease and Chlamydia, among others. The
Company has approximately 20 full or part-time employees dedicated to its
research and development effort. For the six months ended June 30, 1996 the
Company increased spending on research and development as a percentage of
revenues compared to the same period ended June 30, 1995 and expects to continue
to increase such expenditures as a percentage of revenues for the next several
years. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Results of Operations." The Company's research
scientists work closely with sales, marketing and manufacturing personnel to
identify and prioritize the development of new products and services.
33
The Company's product development activities center on the identification
and characterization of materials for the manufacture of new Quality Control
Products and the replacement of sold-out products. For example, during 1996, the
Company has introduced 10 new Seroconversion, Performance and Sensitivity Panel
products as well as 14 new Accurun(tm) Run Controls; in addition, during July
1996, the Company released its first Qualification Panel products. The Company
is developing new Quality Control Products for use with molecular diagnostic
tests for HIV, HCV and HBV. Recently the Company expanded its Quality Control
Product line beyond the retrovirus and Viral Hepatitis diagnostics area to
include sexually transmitted diseases (e.g., Syphilis), tick-borne diseases
(e.g., Lyme Disease), and respiratory and other infections (e.g., Tuberculosis)
and is continuing to develop new Quality Control Products for these and other
diseases. The Company has increased the number of Quality Control Products it
offers from approximately 20 in 1990 to approximately 150 products in 1996.
The Company is also developing new and improved infectious disease specialty
tests for Lyme Disease and other tick-borne diseases for use in its specialty
laboratory business. For example, the Company was among the first to develop
enzyme immunoassays and Western Blot assays for Lyme Disease. The Company is
also pursuing new applications of PCR technology to infectious disease
diagnostics, such as amplification assays for the pathogens of AIDS, Viral
Hepatitis, Lyme Disease and Chlamydia, and for the direct detection of other
infectious agents in blood, tissues and other body fluids.
From time to time in the past, the Company has funded a portion of its
research and development activities from grants provided by various agencies and
departments of the U.S. government. See "-- Services."
STRATEGIC ALLIANCES
University of North Carolina at Chapel Hill. The Company is directly
supporting a drug discovery program at UNC, in which a full-time research
scientist is working to develop synthetic derivatives of anti-HIV compounds that
have been discovered pursuant to the Company's joint collaboration with UNC.
This research scientist is also working to introduce modifications to these
derivatives that would make them more soluble, less toxic, or otherwise enhance
their anti-viral properties. UNC has licensed to the Company exclusive worldwide
rights to three series of patent applications filed by the Company and UNC with
respect to three classes of anti-HIV compounds. Two such compounds have
exhibited therapeutic indices in in vitro test model systems in excess of those
recorded for AZT under comparable test conditions. The Company is expending
approximately $100,000 per year for research and development relating to these
compounds. In addition, under this license, the Company will also have the
rights to any new anti-HIV compounds or derivatives developed in the course of
this sponsored research, provided the Company obtains certain regulatory
approvals from the FDA. See "-- Services."
Ajinomoto Co., Inc. The Company entered into an agreement with Ajinomoto
Co., Inc. in October 1995 pursuant to which the Company is performing research
regarding among other things, whether tests for certain amino acids in plasma
can be used to determine a person's immune status, particularly in chronic
fatigue syndrome. This project is funded by Ajinomoto and has a three year
budget of approximately $1,000,000. Discoveries and inventions arising from the
research will be owned by Ajinomoto, but the Company has the right of first
refusal to obtain certain exclusive licenses from Ajinomoto of any patented
technology arising from the research. The Company is entitled to certain
royalties based upon a percentage of sales of products arising out of the
research. This agreement expires in September 1998.
BioSeq, Inc. In October 1996, the Company entered into a strategic alliance
with BioSeq, an early stage biotechnology company that is developing a
technology that may, through the use of pressure, be able to more precisely
control chemical reactions. The Company believes that this technology may be
useful for sequencing, synthesizing and characterizing nucleic acids and
proteins, which may then allow for the more precise identification of infectious
disease agents.
The Company has agreed to purchase approximately 19% of the capital stock of
BioSeq for an aggregate of $1,482,500 in three installments. Of the $1,482,500,
$210,000 has been invested and $522,500 will be invested upon completion of the
Offering. The Company must make the remaining $750,000 installment if BioSeq
attains certain technical milestones by July 31, 1997. If such milestones are
not attained by BioSeq by July 31, 1997, the Company will have the option to
make the remaining $750,000 investment until December 31, 1997. See "Use of
Proceeds." The Company has price anti-dilution protection, pre-emptive rights
and the right to board representation, the last of which terminates if the
Company fails to make the second installment
34
under the Purchase Agreement. In addition, the Company was granted the right to
acquire additional shares of common stock of BioSeq for additional consideration
under certain conditions, provided that this right is not exercisable to the
extent it would cause the Company's ownership of BioSeq to equal or exceed 20%.
BioSeq has also agreed to engage the Company to perform a minimum of $100,000
and $150,000 of research and development services following the payment of the
second and third installments, respectively.
Under the License Agreement, upon the earlier of payment of the final
installment of the Company's investment and December 31, 1997, the Company will
be granted a worldwide right to use the BioSeq technology relating to sequencing
and analysis services. The License will be exclusive until BioSeq commences
selling on a commercial basis the equipment used in the DNA sequencing and
analysis process, at which time the License will become non-exclusive. The
License provides that the Company will pay BioSeq certain royalties based upon
net revenues arising out of the services performed by the Company with the
licensed technology.
SALES AND MARKETING
The Company's sales and marketing efforts are directed by a Senior Vice
President of Sales and Marketing who supervises 15 sales people and four other
full-time sales and marketing employees.
The Company's marketing strategy is focused upon addressing the needs of its
customers in the infectious disease testing market throughout the entire test
kit life-cycle, from initial research and development, through the regulatory
approval process and test kit production, to training, troubleshooting and
routine use by end-users such as clinical laboratories, hospitals and blood
banks. By serving its customers at all stages of the product life-cycle, the
Company expects to stay at the forefront of trends in infectious disease
testing, which in turn enables the Company to anticipate and respond to the
needs of the marketplace.
The Company recently has begun to focus its sales and marketing efforts on
the emerging end-user market for quality control products for infectious disease
test kits. To promote this objective, the Company is implementing a major
marketing platform, known as "Total Quality System" ("TQS"). TQS is a package of
Quality Control Products, including the Company's Accurun(tm) Run Controls,
which is designed to provide test kit end-users with the products needed in an
overall quality assurance program. These products enable laboratories to
evaluate each of the key elements involved in the testing process: the test kit,
laboratory equipment and laboratory personnel. The Company believes that TQS
effectively addresses the need for end-users to ensure the accuracy of their
test results. The Company intends to continue to expand its sales and marketing
activities with respect to its Accurun(tm) line of Run Control products. Since
the beginning of 1996, the Company has hired two new employees for the sales and
marketing of its Accurun(tm) line of products and expects to add six more direct
salespeople by the end of 1997.
The Company's products are currently sold through a combination of
telephone, mail, third party distributors and limited direct sales efforts.
Domestically, products are sold through an in-house tele-sales group consisting
of five sales representatives, two sales managers and one customer service
representative. Internationally, the Company distributes its products both
directly and through 17 independent distributors located in Japan, Australia,
South America, Southeast Asia, Israel and Europe. The Company's international
sales manager oversees the Company's foreign distributors. During the fiscal
years 1993, 1994, 1995 and the six months ended June 30, 1995 and 1996 the
Company's distributors accounted for 1.9%, 3.5%, 6.2%, 2.8% and 8.8% of the
Company's total revenue, respectively. The Company intends to further expand
sales through international distributors, although there can be no assurances
that it will be able to do so. See "Risk Factors -- Risks Associated with Export
Sales."
The Company's Specialty Clinical Laboratory Testing services are marketed
primarily through a direct domestic sales force consisting of seven sales
representatives managed by a sales director. The sales representatives are
located throughout the eastern and mid-western United States. They are supported
internally by a client services representative.
The Company emphasizes high quality products and services, technical
knowledge, and responsiveness to customer needs in its marketing activities for
both products and services. The Company educates its distributors, customers and
prospective customers about its products through a series of detailed marketing
brochures, technical bulletins and pamphlets, press releases and direct mail
pieces. These materials are supplemented by advertising campaigns in major
industry publications, technical presentations, and exhibitions at local,
national and international trade shows and expositions.
35
CUSTOMERS
The Company's customers for Quality Control Products and Diagnostic
Components comprise three major groups: (i) international diagnostics and
pharmaceutical manufacturing companies, such as Abbott Diagnostics, Behring,
Boehringer Mannheim, Chiron, Fujirebio, Hoffman LaRoche, Ortho Diagnostics
(Johnson and Johnson), Sanofi Diagnostics and Sorin Biomedica; (ii) regulatory
agencies such as the United States FDA, the British Public Health Laboratory
Service, the French Institut National de la Transfusion Sanguine, and the German
Paul Ehrlich Institute; and (iii) end-users of diagnostic test kits, such as
hospital clinical laboratories, public health laboratories and blood banks,
including the Swiss Red Cross, United Blood Services and Kaiser Permanente. In
1995, the Company sold products to approximately 100 diagnostics and
pharmaceutical manufacturers, 15 regulatory agencies, and 250 end-users. The
Company's Specialty Clinical Laboratory Testing services are sold to hospital
and clinical laboratories, blood banks, researchers and other health care
providers. The Company's Contract Research services are typically offered under
contracts to governmental agencies, diagnostic test kit manufacturers and
biomedical researchers. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Overview."
The Company does not have long-term contracts with its customers for Quality
Control Products and Diagnostic Components. The Company's products are sold to
its customers pursuant to purchase orders for discrete purchases. Although the
Company believes that its relationships with these customers are satisfactory,
termination of the Company's relationship with any one of such customers could
have a material adverse effect on the Company. See "Risk Factors -- Dependence
on Key Customers."
During the fiscal years 1993, 1994 and 1995, and the six months ended June
30, 1995 and 1996, sales to the Company's three largest customers accounted for
an aggregate of approximately 20% of the Company's net sales, although the
customers were not identical in each period and no one customer accounted for
more than 10% of net sales.
MANUFACTURING AND OPERATIONS
The Company manufactures and assembles substantially all of its products at
its facility in West Bridgewater, Massachusetts. The Company has computerized
purchasing, inventory, and test result and materials tracking systems in an
integrated operations management system, and believes that these systems are
adequate for its current level of production, but would require further
enhancements if the Company experiences substantial future growth. The Company
acquires raw materials from a variety of vendors and through a program of donor
recruitment, donor screening, product collection, product characterization and
donor management. All important materials have multiple sources of supply.
The Company's West Bridgewater facility contains environmentally-controlled
freezers and cold rooms, which are used to store raw materials for manufacturing
and finished products. More than 3,000 square feet of space in the West
Bridgewater facility is dedicated to freezers and cold rooms. The freezers and
cold rooms are monitored continuously and the Company maintains a natural gas
fired emergency generator in the event of a power outage.
The Company also operates a specialty clinical laboratory in New Britain,
Connecticut and a research and development laboratory in Rockville, Maryland.
See "-- Properties."
COMPETITION
The market for the Company's products and services is highly competitive.
Many of the Company's competitors are larger than the Company and have greater
financial, research, manufacturing, and marketing resources. Important
competitive factors for the Company's products include product quality, price,
ease of use, customer service and reputation. In a broader sense, industry
competition is based upon scientific and technical capability, proprietary
know-how, access to adequate capital, the ability to develop and market products
and processes, the ability to attract and retain qualified personnel, and the
availability of patent protection. To the extent that the Company's products and
services do not reflect technological advances, the Company's ability to compete
in those products and services could be adversely affected. See "Risk Factors --
Risk of Technological Change" and "-- Competition."
In the area of Quality Control Products, the Company competes in the United
States primarily with NABI (formerly North American Biologicals, Inc.) in Run
Controls and Quality Control Panel products and Blackhawk Biosystems Inc. in Run
Controls. In Europe, the Netherlands Red Cross has recently
36
begun offering several Run Control and panel products. The Company believes that
all three of these competitors currently offer a more limited line of products
than the Company, although there can be no assurance these companies will not
expand their product lines.
In the Diagnostic Components area, the Company competes against integrated
plasma collection and processing companies such as Serologicals, Inc. and NABI,
as well as smaller, independent plasma collection centers and brokers of plasma
products. In the Diagnostic Components area, the Company competes on the basis
of quality, breadth of product line, technical expertise and reputation.
The Company believes that it has competitive advantages in the quality
control products and diagnostic components industry. These include its access to
raw materials, technical know-how, broad product line and established reputation
among large diagnostics and pharmaceutical manufacturers, as well as regulatory
agencies.
In the Specialty Clinical Laboratory Testing services portion of the
Company's business, it competes with large national reference laboratories, such
as LabCorp of America, Corning Clinical Laboratories and SmithKline Beecham
Clinical Laboratories, as well as several independent regional laboratories,
hospital laboratories, government contract laboratories and large research
institutions. The Company believes that by focusing on the specialty clinical
laboratory market, it is able to offer its customers a higher value-added
service on the more complex diagnostic tests than the larger national reference
laboratories.
GOVERNMENT REGULATION
The manufacture and distribution of medical devices, including products
manufactured by the Company that are intended for in vitro diagnostic use, are
subject to extensive government regulation in the United States and in other
countries. See "Risk Factors -- Stringent Government Regulation."
In the United States, the Food, Drug, and Cosmetic Act ("FDCA") prohibits
the marketing of in vitro diagnostic products until they have been cleared or
approved by the FDA, a process that is time-consuming, expensive, and uncertain.
In vitro diagnostic products must be the subject of either a premarket
notification clearance (a "510(k)") or an approved premarket approval
application ("PMA"). With respect to devices reviewed through the 510(k)
process, a Company may not market a device for diagnostic use until an order is
issued by FDA finding the product to be substantially equivalent to a legally
marketed device. A 510(k) submission may involve the presentation of a
substantial volume of data, including clinical data, and may require a
substantial period of review. With respect to devices reviewed through the PMA
process, a Company may not market a device until FDA has approved a PMA
application, which must be supported by extensive data, including preclinical
and clinical trial data, literature, and manufacturing information to prove the
safety and effectiveness of the device.
The Company's Accurun Run Controls, when marketed for diagnostic use, have
been classified by the FDA as medical devices. The Accurun 1(R) Multi-Marker Run
Control, which include eight analytes, has been cleared through the 510(k)
process. The Company expects that, in the future, most of its products that need
FDA premarket review also will be reviewed through the 510(k) process. The FDA
could, however, require that some products be reviewed through the PMA process,
which generally involves a longer review period and the submission of more
information to FDA. There can be no assurance that the Company will obtain
regulatory approvals on a timely basis, if at all. Failure to obtain regulatory
approvals in a timely fashion or at all could have a material adverse effect on
the Company.
All of the Company's Quality Control Products, with the exception of Accurun
1(R), are marketed "for research use only," which do not require FDA premarket
clearance or approval, and not for diagnostic uses, which do require FDA
premarket clearance or approval. The labeling of these products limits their use
to research. It is possible, however, that some purchasers of these products may
use them for diagnostic purposes despite the Company's intended use. In these
circumstances, the FDA could allege that these products should have been cleared
or approved by the FDA prior to marketing, and initiate enforcement action
against the Company, which could have a material adverse effect on the Company.
Once cleared or approved, medical devices are subject to pervasive and
continuing regulation by the FDA, including, but not limited to, good
manufacturing practices ("GMP") regulations governing testing, control, and
documentation; and reporting of adverse experiences with the use of the device.
37
Ongoing compliance with GMP and other applicable regulatory requirements is
monitored through periodic inspections. FDA regulations require agency clearance
or approval for certain changes if they do or could affect the safety and
effectiveness of the device, including, for example, new indications for use,
labeling changes or changes in design or manufacturing methods. In addition,
both before and after clearance or approval, medical devices are subject to
certain export and import requirements under the FDCA. Product labeling and
promotional activities are subject to scrutiny by the FDA and, in certain
instances, by the Federal Trade Commission. Products may be promoted by the
Company only for their approved use. Failure to comply with these and other
regulatory requirements can result, among other consequences, in failure to
obtain premarket approvals, withdrawal of approvals, total or partial suspension
of product distribution, injunctions, civil penalties, recall or seizures of
products and criminal prosecution.
The Company believes that its Quality Control Panels are not regulated by
the FDA because they are not intended for diagnostic purposes. The Company
believes that its Diagnostic Components, which are components of in vitro
diagnostic products, may be subject to certain regulatory requirements under the
FDCA and other laws administered by the FDA, but do not require that the Company
obtain a premarket approval or clearance. There can be no assurance, however,
that the FDA would agree or that the FDA will not adopt a different
interpretation of the FDCA or other laws it administers, which could have a
material adverse effect on the Company.
Laws and regulations affecting some of the Company's products are in effect
in many of the countries in which the Company markets or intends to market its
products. These requirements vary from country to country. Member states of the
European Economic Area (which is composed of the European Union members and the
European Free Trade Association members) are in the process of adopting various
product and services "Directives" to address essential health, safety, and
environmental requirements associated with the subject products and services.
The "Directives" cover both quality system requirements (ISO Series 9000
Standards) and product and marketing related requirements. In addition, some
jurisdictions have requirements related to marketing of the Company's products.
There can be no assurance that the Company will be able to obtain any regulatory
approvals required to market its products on a timely basis, or at all. Delays
in receipt of, or failure to receive such approvals, or the failure to comply
with regulatory requirements in these countries or states could lead to
compliance action, which could have a material adverse effect on the Company's
business, financial condition, or results of operations.
The Company's service-related business (clinical trials, infectious disease
testing, and contract research) is subject to other national and local
requirements. The Company's facilities are subject to review, inspection,
licensure or accreditation by some states, national professional organizations
(College of American Pathologists), and other national regulatory agencies
(Health Care Financing Administration). Studies to evaluate the safety or
effectiveness of FDA regulated products (primarily human and animal drugs or
biologics) must also be conducted in conformance with relevant FDA requirements,
including Good Laboratory Practice ("GLP") regulations, investigational new drug
or device regulations, Institutional Review Board ("IRB") regulations and
informed consent regulations.
CLIA prohibits laboratories from performing in vitro tests for the purpose
of providing information for the diagnosis, prevention or treatment of any
disease or impairment of, or the assessment of, the health of human beings
unless there is in effect for such laboratories a certificate issued by the U.S.
Department of Health and Human Services ("HHS") applicable to the category of
examination or procedure performed.
The Company currently holds permits issued by HHS (CLIA license), Centers
for Disease Control and Prevention (Importation of Etiological Agents or Vectors
of Human Diseases), the U.S. Department of Agriculture (Importation and
Transportation of Controlled Materials and Organisms and Vectors) and the U.S.
Nuclear Regulatory Commission (in vitro testing with byproduct material under
general license, covering the use of certain radioimmunoassay test methods).
The Company is also subject to government regulation under the Clean Water
Act, the Toxic Substances Control Act, the Resource Conservation and Recovery
Act, the Atomic Energy Act, and other national, state and local restrictions
relating to the use and disposal of biohazardous, radioactive and other
hazardous substances and wastes. The Company is an exempt small quantity
generator of hazardous waste
38
and has a U.S. Environmental Protection Agency identification number. The
Company is also registered with the U.S. Nuclear Regulatory Commission for use
of certain radioactive materials. All hazardous waste is manifested and disposed
of properly. The Company is also subject to various state regulatory
requirements governing the handling of and disposal of biohazardous, radioactive
and hazardous wastes. The Company has never been a party to any environmental
proceeding.
Internationally, some of the Company's products are subject to additional
regulatory requirements, which vary significantly from country to country. Each
country in which the Company's products and services are offered must be
evaluated independently to determine the country's particular requirements. In
foreign countries, the Company's distributors are generally responsible for
obtaining any required government consents.
INTELLECTUAL PROPERTY
None of the Company's Quality Control Products or Diagnostic Components have
been patented. The Company has decided to hold as trade secrets current
technology used to prepare Basematrix and other blood-based products. The
Company relies primarily on a combination of trade secrets and non-disclosure
and confidentiality agreements, and in certain limited circumstances, patents,
to establish and protect its proprietary rights in its technology and products.
There can be no assurance that others will not independently develop or
otherwise acquire the same, similar or more advanced trade secrets and know-how.
The Company has two United States patents and, jointly with UNC, has filed
three series of United States and foreign patent applications relating to
compounds, pharmaceutical compositions and therapeutic methods in connection
with the Company's drug discovery program at UNC. See "-- Services," and " --
Research and Development."
The Company has no reason to believe that its products and proprietary
methods infringe the proprietary rights of any other party. There can be no
assurance, however, that other parties will not assert infringement claims in
the future. See "Risk Factors -- Protection of Intellectual Property and
Proprietary Technology."
PROPERTIES
The Company's corporate offices and manufacturing facilities are located in
a two story, 22,500 square foot building in West Bridgewater, Massachusetts. The
Company owns and operates this building. The Company intends to use
approximately $1 million of the proceeds of this Offering to expand its
manufacturing capacity and to purchase necessary equipment at its West
Bridgewater site, and has submitted plans to local authorities for the
development of an additional 7,500 square feet, primarily for manufacturing
purposes. The Company anticipates that these renovations will begin this year.
The Company believes that following these renovations, its facility in West
Bridgewater will be sufficient to meet its foreseeable needs. See "Use of
Proceeds."
The Company leases its laboratory facilities in Rockville, Maryland and New
Britain, Connecticut. The Rockville facility contains 21,000 square feet and is
occupied under a five-year lease that is due to expire on June 30, 1997. The
Company is currently considering the exercise of its option to extend the lease
for an additional five years, as well as relocating its laboratory. The Company
believes that there is sufficient space available in the Rockville facility for
its current needs. The New Britain facility has 15,000 square feet, most of
which is dedicated to laboratory space. The lease is for five years and is due
to expire on July 30, 2000; the Company has an option to renew for an additional
five years.
EMPLOYEES
As of August 1, 1996 the Company employed 184 persons, all of whom were
located in the United States. Seventy-seven of these persons were employed in
West Bridgewater, Massachusetts, 58 in New Britain, Connecticut, and 49 at the
Rockville, Maryland site. None of the Company's employees is covered by a
collective bargaining agreement. The Company believes that it has a satisfactory
relationship with its employees.
39
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company and their ages are as
follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Richard T. Schumacher(1) 46 President; Chief Executive Officer and
Chairman of the Board
Kevin W. Quinlan(2) 46 Senior Vice President, Finance; Chief
Financial Officer; Treasurer and Director
Patricia E. Garrett, Ph.D. 53 Senior Vice President, Regulatory Affairs &
Strategic Programs
Mark M. Manak, Ph.D. 45 Senior Vice President, Research and
Development
Richard C. Tilton, Ph.D. 60 Senior Vice President, Specialty Laboratory
Services
Barry M. Warren 49 Senior Vice President, Sales & Marketing
Ronald V. DiPaolo, Ph.D. 52 Vice President of Operations
Francis E. Capitanio(2) 52 Director
Henry A. Malkasian(1) 79 Director
Calvin A. Saravis(1)(2) 66 Director
- ---------------
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.
</TABLE>
Mr. Schumacher, the founder of the Company, has been the President since
1986, and Chief Executive Officer and Chairman since 1992. Mr. Schumacher served
as the Director of Infectious Disease Services for Clinical Science Laboratory,
a New England-based medical reference laboratory, from 1986 to 1988. From 1972
to 1985, Mr. Schumacher was employed by the Center for Blood Research, a
nonprofit medical research institute associated with Harvard Medical School. Mr.
Schumacher received a B.S. in zoology from the University of New Hampshire.
Mr. Quinlan, a Director of the Company since its founding, has been Senior
Vice President, Finance, Treasurer, and Chief Financial Officer since January
1993. From 1990 to December 1992, he was the Chief Financial Officer of ParcTec,
Inc. a New York-based leasing company. Mr. Quinlan served as Vice President and
Assistant Treasurer of American Finance Group, Inc. from 1981 to 1989 and was
employed by Coopers & Lybrand from 1975 to 1980. Mr. Quinlan is a certified
public accountant and received a M.S. in accounting from Northeastern University
and a B.S. in economics from the University of New Hampshire.
Dr. Garrett has been Senior Vice President, Regulatory Affairs & Strategic
Programs since 1988. From 1980 to 1987, Dr. Garrett served as the Technical
Director of the Chemistry Laboratory, Department of Laboratory Medicine at the
Lahey Clinic Medical Center. Dr. Garrett earned her Ph.D. from the University of
Colorado and was a postdoctoral research associate at Harvard University, Oregon
State University, Massachusetts Institute of Technology and the University of
British Columbia.
Dr. Manak has served as Senior Vice President, Research and Development
since 1992. From 1980 to 1992, he served as Senior Research Scientist, Molecular
Biology, of Biotech Research Laboratories. Dr. Manak received his Ph.D. in
biochemistry from the University of Connecticut and completed postdoctoral
research work in biochemistry/virology at Johns Hopkins University.
40
Dr. Tilton has served as Senior Vice President, Specialty Laboratory
Services since the Company's acquisition of BBI-North American Clinical
Laboratories, Inc. in 1993 and was one of the founders of BBI-NACL, where he
served as President from 1989 to 1993. Dr. Tilton has 25 years of experience in
university hospital clinical microbiology laboratories and is board certified in
medical and public health microbiology. Dr. Tilton received his Ph.D. in
microbiology from the University of Massachusetts.
Mr. Warren has served as Senior Vice President, Sales & Marketing since
1993. From 1985 to 1993, Mr. Warren served as Group Director of Marketing of
Organon Teknika, a manufacturer of infectious disease reagents. Mr. Warren
received an M.A. in political science from Loyola University of Chicago and a
B.A. from Loyola University.
Dr. DiPaolo has been Vice President of Operations since 1993. Prior to
joining the Company, Dr. DiPaolo served as Vice President and General Manager of
the Biomedical Products Division of Collaborative Research, a medical research
products company. From 1975 to 1986 he was employed by DuPont New England
Nuclear, an in vitro test kit manufacturer. Dr. DiPaolo received his Ph.D. in
biochemistry from Massachusetts Institute of Technology and later completed
postdoctoral research at the Eunice Shriver Center in Waltham, Massachusetts.
Mr. Capitanio has served as a Director since January 1986. He has been
President, Treasurer and Director of Diatech Diagnostics Inc. (formerly
Immunotech Corporation), an in vitro diagnostics company and a wholly owned
subsidiary of Healthcare Technologies Ltd., since 1980. Mr. Capitanio received
an M.B.A. from the Sloan School of Management, Massachusetts Institute of
Technology and a B.S. in metallurgy from Massachusetts Institute of Technology.
Mr. Malkasian has served as a Director since the Company's organization in
1978. Mr. Malkasian is a practicing attorney-at-law and a member of the firm
Malkasian & Budge in Massachusetts. He received his J.D. degree from Harvard
University School of Law and a B.A. degree from Clark University.
Dr. Saravis has served as a Director since 1978. Since 1971, Dr. Saravis has
been a Senior Research Associate at the Mallory Institute of Pathology and since
1979 he has been a Senior Research Associate at the Cancer Research Institute --
New England Deaconess Hospital. Since 1984, Dr. Saravis has had an appointment
as an Associate Professor of Surgery (biochemistry) at Harvard Medical School
and an Associate Research Professor of Pathology at Boston University School of
Medicine. Dr. Saravis received his Ph.D. in immunology and serology from Rutgers
University.
In August 1990 the Board of Directors established a Compensation Committee
currently composed of Messrs. Schumacher, Saravis and Malkasian. The functions
of the Compensation Committee include presentation and recommendations to the
Board of Directors on compensation levels for officers and directors and
issuance of stock options to the Board of Directors, employees and affiliates.
In August 1990 the Board of Directors established an Audit Committee
currently composed of Messrs. Capitanio, Quinlan and Saravis. The functions of
the Audit Committee include recommending to the Board of Directors the
engagement of the independent accountants, reviewing the scope of internal
controls and reviewing the implementation by management of recommendations made
by the independent accountants.
The Company's Board of Directors is divided into three classes, with the
classes being elected for staggered three-year terms. At each annual meeting of
stockholders, directors will be elected to succeed those in the class whose term
then expires, and each elected director shall serve for a term expiring at the
third succeeding annual meeting of stockholders after such director's election,
and until the director's successor is elected and qualified. Thus, directors
stand for election only once in three years. Executive officers serve at the
discretion of the Board of Directors.
DIRECTOR COMPENSATION
Directors of the Company do not receive cash compensation for their
services. Each director is eligible to receive options to purchase Common Stock
under the Company's 1987 Non-Qualified Stock Option Plan. As of October 4, 1996,
options to purchase an aggregate of 249,750 shares have been granted to
directors of the Company under this Plan. During fiscal 1995, options to
purchase an aggregate of 15,000 shares of Common Stock were granted to the
Directors as follows: 5,000 shares to Mr. Capitanio, 5,000 shares to Mr.
Malkasian, and 5,000 shares to Dr. Saravis and no shares to either Mr.
Schumacher or Mr. Quinlan.
41
EXECUTIVE COMPENSATION
The following table sets forth the compensation for the fiscal year ended
December 31, 1995 of each of the Chief Executive Officer and the six most highly
compensated officers of the Company (the "Named Executive Officers"), none of
whom received any bonuses during the fiscal year ended December 31, 1995:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
FOR FISCAL 1995
OTHER ANNUAL
NAME AND PRINCIPAL POSITION SALARY($) COMPENSATION($)
--------------------------- --------- ---------------
<S> <C> <C>
Richard T. Schumacher....................................................... $166,676 $ 2,008(1)
President and Chief Executive Officer
Kevin W. Quinlan............................................................ 120,615 1,650(2)
Senior Vice President, Finance and Chief Financial Officer
Patricia E. Garrett, Ph.D. ................................................. 92,353 1,650(2)
Senior Vice President, Regulatory Affairs & Strategic Programs
Mark M. Manak, Ph.D. ....................................................... 102,753 --
Senior Vice President, Research & Development
Richard C. Tilton, Ph.D. ................................................... 111,924 6,000(3)
Senior Vice President, Specialty Laboratory Services
Barry M. Warren............................................................. 113,454 1,500(2)
Senior Vice President, Sales & Marketing
Ronald V. DiPaolo, Ph.D. ................................................... 86,614 1,500(2)
Vice President of Operations
- ----------------
(1) Consists of personal usage of Company vehicle, and includes the value of
premiums paid for a term life insurance policy.
(2) Consists of automobile allowance, discontinued as of March 31, 1995.
(3) Consists of automobile allowance.
</TABLE>
The following table sets forth the aggregate number and value of options
exercisable and unexercisable by the Named Executive Officers during fiscal
1995. No stock options were granted to, or exercised by, any of the Named
Executive Officers in fiscal 1995.
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT 12/31/95(#) AT 12/31/95($)(1)
NAME AND PRINCIPAL POSITION EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
--------------------------- ---------------------------------------------------
<S> <C> <C>
Richard T. Schumacher .............................. 127,500 2,500 $ 988,500 $ 16,250
President and Chief Executive Officer
Kevin W. Quinlan ................................... 58,000 10,000 403,750 65,000
Senior Vice President, Finance and Chief
Financial Officer
Patricia E. Garrett, Ph.D. ......................... 41,250 1,250 334,125 5,625
Senior Vice President, Regulatory Affairs &
Strategic Programs
Mark M. Manak, Ph.D. ............................... 26,250 8,750 170,625 56,875
Senior Vice President, Research & Development
Richard C. Tilton, Ph.D. ........................... 17,500 17,500 105,000 105,000
Senior Vice President, Specialty Laboratory
Services
Barry M. Warren .................................... 7,500 7,500 33,750 33,750
Senior Vice President, Sales & Marketing
Ronald V. DiPaolo, Ph.D. ........................... 25,000 1,000 183,900 4,500
Vice President of Operations
- -----------------------
</TABLE>
(1) There was no public trading market for the Common Stock as of December 31,
1995. Accordingly, these values have been calculated on the basis of the
assumed initial public offering price of $9.00 per share, less the
applicable exercise price.
42
EMPLOYMENT AGREEMENTS
None of the Company's employees are subject to employment agreements with
the Company.
STOCK PLANS
1987 Non-Qualified Stock Option Plan: The Company adopted the 1987
Non-Qualified Stock Option Plan (the "Non-Qualified Plan") to provide an
opportunity to employees, officers, directors and consultants employed by or
affiliated with the Company or any of its subsidiaries to acquire stock in the
Company, to provide increased incentives to such persons to promote the success
of the Company's business and to encourage such persons to become affiliated
with the Company through the granting of options to acquire its capital stock.
Any employee of the Company or of a subsidiary of the Company, including
officers, as well as directors of the Company and consultants or providers of
services to the Company, are eligible to receive nonqualified stock options
under the Non-Qualified Plan. A total of 897,600 shares of Common Stock has been
reserved for issuance under the Non-Qualified Plan.
The Non-Qualified Plan is required to be administered by a Committee
consisting of at least one member appointed by the Board of Directors, and after
the completion of this Offering, consisting of at least two independent members
of the Board of Directors. The Committee currently consists of Richard
Schumacher, Kevin Quinlan and Henry Malkasian. The Committee has the authority
and discretion to determine those persons to whom options shall be granted under
the Non-Qualified Plan, to determine the number of shares to be granted, to
establish the terms and conditions upon which options may be exercised or
transferred, to alter any restrictions or conditions on the options and to make
all other determinations necessary or desirable for the administration of the
Non-Qualified Plan. The exercise price for options granted under the
Non-Qualified Plan is determined by the Committee, but is in no event less than
the par value of the Common Stock. Options granted under the Non-Qualified Plan
continue in effect for such period as the Committee determines. The
Non-Qualified Plan terminates as of December 16, 1997.
As of October 4, 1996, options to purchase 749,850 had been issued pursuant
to the Non-Qualified Plan at exercise prices ranging from $.25 to $6.00,
including an aggregate of 249,750 shares to the Company's directors, Richard
Schumacher, Kevin Quinlan, Francis Capitanio, Henry Malkasian, and Calvin
Saravis.
Employee Stock Option Plan: The purpose of the Employee Stock Option Plan
(the "Employee Plan") is to provide increased incentives to employees, to
encourage new employees to become affiliated with the Company and to associate
more closely the interests of such persons with those of the Company. The
Employee Plan permits the issuance of options to purchase up to 750,000 shares
of Common Stock in the form of incentive stock options as defined in Section 422
of the Internal Revenue Code of 1986, as amended, and non-qualified stock
options. The Employee Plan is currently administered by a Committee consisting
of at least one member appointed by the Board of Directors, and after the
completion of this Offering, shall consist of at least two independent members
of the Board of Directors. The exercise price of stock options is determined by
the Committee, but is in no event less than par value, and the exercise price of
incentive stock options may not be less than the fair market value of the Common
Stock on the date of grant (or, in the case of holders of 10% or more of the
outstanding Common Stock, 110% of the fair market value on such date). The
Committee also determines the vesting schedule, number of shares and other terms
of the options. As of October 4, 1996, options to purchase 184,537 shares of
Common Stock at exercise prices ranging from $6.00 to $8.50 per share were
outstanding under the Employee Plan.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee currently consists of Messrs. Schumacher and
Malkasian and Dr. Saravis, each of whom has received options to purchase shares
of Common Stock. See "-- Director Compensation" and "-- Stock Plans."
LIMITATION OF OFFICERS' AND DIRECTORS' LIABILITY; INDEMNIFICATION AGREEMENTS
The Company's Amended and Restated Articles of Organization eliminate,
subject to certain exceptions, the personal liability of directors to the
Company or its stockholders for monetary damages for breaches of fiduciary
duties as directors. The Restated Articles do not provide for the elimination of
or any limitation on the personal liability of a director for (i) any breach of
the director's duty of loyalty
43
to the Company or its stockholders, (ii) acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii)
certain unauthorized dividends, redemptions or distributions as provided under
Section 61 of the Massachusetts Business Corporation Law, (iv) certain loans of
assets of the Company to any of its officers or directors as provided under
Section 62 of the Massachusetts Business Corporation Law or (v) any transaction
from which the director derived an improper personal benefit. This provision of
the Amended and Restated Articles of Organization will limit the remedies
available to a stockholder in the event of breaches of any director's duties to
such stockholder or the Company.
The Company's Amended and Restated Articles of Organization provide that the
Company may, either in its By-laws or by contract, provide for the
indemnification of directors, officers, employees and agents, by whomever
elected or appointed, to the full extent permitted by law, as it may be amended
from time to time.
The Company intends to enter into indemnification agreements with each of
the directors and officers. The indemnification agreements will provide that the
Company will pay certain amounts incurred by a director or officer in connection
with any civil or criminal action or proceeding and specifically including
actions by or in the name of the Company (derivative suits) where the
individual's involvement is by reason of the fact that he is or was a director
or officer. Such amounts include, to the maximum extent permitted by law,
attorney's fees, judgments, civil or criminal fines, settlement amounts and
other expenses customarily incurred in connection with legal proceedings. Under
the indemnification agreements, a director or officer will not receive
indemnification if he is found not to have acted in good faith in the reasonable
belief that his action was in the best interests of the Company.
CERTAIN TRANSACTIONS
Registration Rights. The Company is a party to a Registration Rights
Agreement dated June 5, 1990, as amended (the "Registration Agreement"), with G
& G Diagnostics Limited Partnership I and G & G Diagnostics Limited Partnership
II (together, "G & G") pursuant to which G & G has certain rights to have its
shares of Common Stock registered by the Company under the Securities Act. A
total of 366,670 shares of Common Stock (the "Registrable Shares") held by G & G
or subject to warrants held by G & G may be registered under the Registration
Agreement. If the Company proposes to register any of its securities under the
Securities Act, either for its own account or for the account of other
securityholders, G & G is entitled to notice of the registration and is entitled
to include, at the Company's expense, the Registrable Shares therein, provided,
among other conditions, that the underwriters have the right to limit the number
of such shares included in the registration. In addition, G & G may require the
Company at its expense on no more than two occasions, to file a registration
statement under the Securities Act with respect to its Registrable Shares, and
the Company is required to use its best efforts to effect a registration,
subject to certain conditions and limitations. Further, G & G may require the
Company at its expense to register the Registrable Shares on Form S-3 when such
form becomes available to the Company, subject to certain conditions and
limitations. G & G waived its respective registration rights for this Offering.
See "Principal Stockholders."
Warrant Exercise. In May 1995, G & G Diagnostics Limited Partnership II
exercised warrants to purchase 40,000 shares of the Company's Common Stock for
an exercise price of $2.50 per share or an aggregate amount of $100,000.
Indemnification Contracts. The Company intends to enter into indemnification
agreements with each of its directors and officers. See "Management --
Limitation of Officers' and Directors' Liability; Indemnification Agreements."
44
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information as of October 4, 1996
concerning the beneficial ownership of Common Stock by each director, certain
executive officers, all executive officers and directors as a group, and each
person known by the Company to be the beneficial owner of 5% or more of the
Company's Common Stock. This information is based upon information received from
or on behalf of the named individuals. Unless otherwise noted, the beneficial
owners listed have sole voting and investment power over the shares listed.
<TABLE>
<CAPTION>
PERCENTAGE OF OUTSTANDING SHARES
BENEFICIALLY OWNED(1)
---------------------
NUMBER OF SHARES BEFORE THE AFTER THE
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED OFFERING OFFERING
------------------------------------ ------------------ -------- --------
<S> <C> <C> <C>
5% Stockholders
Irwin J. Gruverman(2) 412,920 14.71% 9.37%
c/o G & G Diagnostics Limited Partnership I
30 Ossipee Road
Newton, MA 02164
G & G Diagnostics Limited Partnership II(3) 153,333 5.69 3.57
Directors and Senior Executives
Richard T. Schumacher(4)(5) 1,013,957 35.89 22.91
Henry A. Malkasian(4)(6) 311,510 11.54 7.24
Kevin W. Quinlan(4) 93,100 3.37 2.13
Patricia E. Garrett(4) 55,000 2.01 1.27
Richard C. Tilton(4) 62,500 2.29 1.44
Mark M. Manak(4) 55,500 2.03 1.28
Barry M. Warren(4) 37,500 1.37 *
Ronald V. DiPaolo(4) 28,000 1.03 *
Calvin A. Saravis(4) 23,000 * *
Francis E. Capitanio(4) 8,750 * *
All Executive Officers and Directors as a group
(10 Persons)(4)(5)(6)(7) 1,688,817 54.04 35.74
- -------------------
* Less than 1% of the outstanding Common Stock.
(1) The number of shares of Common Stock outstanding used in calculating the
percentage for each listed person includes the shares of Common Stock
underlying options or warrants held by such person.
(2) Includes 283,333 shares held of record by three limited partnerships
(including G & G Diagnostics Limited Partnership II), of which Mr.
Gruverman is the general partner, 10,000 shares subject to options held by
Mr. Gruverman and 106,670 shares subject to warrants held by one of three
limited partnerships.
(3) The address for G & G Diagnostics Limited Partnership II is the same as
that for Mr. Gruverman. Mr. Gruverman is the beneficial owner of the shares
of Common Stock held of record by G & G Limited Partnership II.
(4) Includes the following shares subject to options: Mr. Capitanio -- 8,750,
all of which are exercisable within 60 days after October 4, 1996; Dr.
DiPaolo -- 28,000, 25,000 of which are exercisable within 60 days after
October 4, 1996; Dr. Garrett -- 45,000, 41,250 of which are exercisable
within 60 days after October 4, 1996; Mr. Quinlan -- 73,000, 58,000 of
which are exercisable within 60 days after October 4, 1996; Mr. Malkasian
-- 10,000, all of which are exercisable within 60 days after October 4,
1996; Dr. Manak -- 37,500, 26,250 of which are exercisable within 60 days
after October 4, 1996; Dr. Saravis -- 23,000, all of which are exercisable
within 60 days after October 4, 1996; Mr. Schumacher --135,000, 127,500 of
which are exercisable within 60 days after October 4, 1996; Dr. Tilton --
37,500, 26,250 of which are exercisable within 60 days after October 4,
1996; and Mr. Warren -- 37,500, 7,500 of which are exercisable within 60
days after October 4, 1996.
(5) Includes 50,000 shares held of record by Mr. Schumacher's spouse and 20,000
shares held of record by Mr. Schumacher as custodian for his daughter.
Excludes an aggregate of 144,067 shares held by other relatives of Mr.
Schumacher as to which Mr. Schumacher disclaims beneficial ownership.
(6) Includes 12,000 shares held of record by Mr. Malkasian's son, 5,000 shares
held by Mr. Malkasian's daughter, 53,850 shares held by Mr. Malkasian's
spouse and 30,000 shares held by Mr. Malkasian as trustee in trust for each
of his son and his daughter.
(7) Includes 4,000 shares held of record by Mr. Manak as custodian for his
daughter.
</TABLE>
45
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 20,000,000 shares of
Common Stock, $0.01 par value (referred to herein as "Common Stock") and
1,000,000 shares of Preferred Stock, $.01 par value (referred to herein as
"Preferred Stock").
COMMON STOCK
As of October 4, 1996, there were 2,690,064 shares of Common Stock
outstanding, held of record by approximately 130 stockholders.
The holders of Common Stock are entitled to one vote per share on all
matters to be voted on by stockholders and are entitled to receive such
dividends, if any, as may be declared from time to time by the Board of
Directors from funds legally available therefor. The holders of Common Stock do
not have cumulative voting rights in the election of directors. Upon liquidation
or dissolution of the Company, the holders of Common Stock are entitled to
receive all assets available for distribution to the stockholders. The Common
Stock has no preemptive or other subscription rights, and there are no
conversion rights or redemption or sinking fund provisions with respect to such
shares. All of the shares of Common Stock are, and the shares to be sold in this
Offering will be, fully paid and nonassessable.
PREFERRED STOCK
The Company is authorized to issue up to 1,000,000 shares of Preferred
Stock, none of which are outstanding. The Board of Directors may, without future
action of the stockholders of the Company, issue the Preferred Stock in one or
more classes or series and fix the rights and preferences thereof, including the
dividend rights, dividend rates, conversion rights, voting rights, terms of
redemption (including sinking fund provisions), redemption price or prices,
liquidation preferences and the number of shares constituting any class or
series, or the designations of such class or series. The voting and other rights
of the holders of Common Stock may be subject to and adversely affected by, the
rights of holders of any Preferred Stock that may be issued in the future.
MASSACHUSETTS ANTI-TAKEOVER AND RELATED STATUTES
Control Share Acquisition Law. Under Chapter 110D of the Massachusetts
General Laws governing "control share acquisitions," any stockholder of certain
publicly-held Massachusetts corporations who acquires certain ranges of voting
power -- one-fifth or more but less than one-third of all voting power,
one-third or more but less than a majority of all voting power, or a majority or
more of all voting power -- may not (except in certain transactions) vote such
stock unless the stockholders (excluding the shares held by the interested
stockholders) of the corporation so authorize. As permitted by Chapter 110D, the
Company's Amended and Restated By-laws include a provision which excludes the
Company from the applicability of that statute upon completion of the Offering.
Business Combination Statute. Chapter 110F of the Massachusetts General
Laws, entitled "Business Combinations with Interested Shareholders," applies to
publicly-held Massachusetts corporations with 200 or more stockholders of
record. Generally, this statute prohibits such Massachusetts corporations from
engaging in a "business combination" with an "interested stockholder" for a
period of three years following the date of the transaction in which the person
becomes an interested stockholder unless (a) the interested stockholder obtains
the approval of the corporation's board of directors prior to becoming an
interested stockholder; (b) the interested stockholder acquires at least 90% of
the voting stock of the corporation (excluding shares held by certain affiliates
of the corporation) outstanding at the time he becomes an interested
stockholder; or (c) the business combination is both approved by the board of
directors and authorized at an annual or special meeting of stockholders by the
holders of at least two-thirds of the outstanding voting stock of the
corporation (excluding shares held by the interested stockholder). An
"interested stockholder" is a person who, together with
46
affiliates and associates, owns (or at any time within the prior three years did
own) 5% or more of the outstanding voting stock of the Corporation. A "business
combination" includes, among other transactions, a merger, stock or asset sale
and other transactions resulting in a financial benefit to the stockholder. The
Amended and Restated Articles of Organization and Restated By-laws of the
Company do not expressly provide for opting out of the provisions of Chapter
110F. As a result, the application of this statute to the Company after
completion of this Offering could discourage or make it more difficult for any
person or group of persons to attempt to obtain control of the Company. The
Company may at any time amend its Amended and Restated Articles of Organization
or Restated By-laws to elect not to be governed by Chapter 110F, by a vote of
the holders of a majority of its voting stock, but such an amendment would not
be effective for twelve months and would not apply to a business combination
with any person who became an interested stockholder prior to the date of the
amendment.
CERTAIN PROVISIONS OF THE COMPANY'S AMENDED AND RESTATED ARTICLES OF
ORGANIZATION AND AMENDED AND RESTATED BY-LAWS
The Company's Amended and Restated Articles of Organization include several
provisions which may render more difficult an unfriendly tender offer, proxy
contest, merger or other change in control of the Company. See "Risk Factors --
Possible Adverse Effect of Certain Anti-takeover Provisions."
Preferred Stock. The Amended and Restated Articles of Organization permit
the Board of Directors to issue preferred stock in one or more series and to fix
the rights, preferences, privileges and restrictions thereof, without further
vote or action by the stockholders. The issuance of preferred stock may have the
effect of delaying, deferring or preventing a change in control of the Company
and may adversely affect the voting and other rights of the holders of Common
Stock. The Company currently has no plans to issue any preferred stock.
Classification of Board of Directors. The Amended and Restated Articles of
Organization provide for the classification of the Company's Board of Directors
into three classes, with the classes being elected for staggered three-year
terms. At each annual meeting of stockholders, directors will be elected to
succeed those in the class whose term then expires, and each elected director
shall serve for a term expiring at the third succeeding annual meeting of
stockholders after such director's election, and until the director's successor
is elected and qualified. Thus, directors stand for election only once in three
years. This provision also restricts the ability of stockholders to enlarge the
Board of Directors. Changes in the number of Directors may be effected by a vote
of a majority of the Continuing Directors (as defined in the Amended and
Restated Articles of Organization) or by the stockholders by vote of at least
80% of the shares of the Company's voting stock outstanding, voting as a single
class. Under this provision, Directors may only be removed with or without cause
by the affirmative vote of the holders at least 80% of the combined voting power
of the outstanding shares of the Company's voting stock, voting together as a
single class, or upon the vote of a majority of the Continuing Directors.
Fair Price Provision. The Amended and Restated Articles of Organization
contain a "Fair Price Provision" that is intended to protect stockholders who do
not tender their shares in a takeover bid by guaranteeing them a minimum price
for their shares in any subsequent attempt to purchase such remaining shares at
a price lower than the acquiror's original acquisition price. The Fair Price
Provision requires the affirmative vote of the holders of at least 80% of the
Company's outstanding voting stock for certain business combinations with a
Related Person, unless specified price criteria and procedural requirements are
met or the business combination is approved by a majority of the Continuing
Directors.
Indemnification Provision. The Amended and Restated Articles of Organization
provide that the Company may, either in its By-laws or by contract, provide for
the indemnification of directors, officers, employees and agents, by whomever
elected or appointed, to the full extent permitted by applicable law, as it may
be amended from time to time. See "-- Limitation of Officers' and Directors'
Liability; Indemnification Agreements."
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock is American Securities
Transfer & Trust, Inc.
47
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this Offering, there has been no public market for the Common
Stock. Future sales of substantial amounts of Common Stock in the public market
could adversely affect the market price of the Common Stock.
Upon completion of this Offering, the Company will have 4,290,064 shares of
Common Stock outstanding (4,530,064 shares if the Underwriters' overallotment
option is exercised in full). Of those shares, the 1,600,000 shares sold in this
Offering (1,840,000 shares if the Underwriters' overallotment option is
exercised in full) will be freely tradeable without restriction (except as to
affiliates of the Company) or further registration under the Securities Act. The
remaining 2,690,064 shares of Common Stock were sold by the Company in reliance
on exemptions from the registration requirements of the Securities Act and are
"restricted securities" within the meaning of Rule 144 under the Securities Act.
All of the Company's directors and executive officers and certain other
stockholders, holding in the aggregate 2,555,244 shares of Common Stock, have
agreed not to offer to sell, sell or otherwise dispose of any shares of Common
Stock prior to the expiration of 180 days from the date of this Prospectus.
Oscar Gruss & Son Incorporated may, in its sole discretion and at any time
without prior notice, release all or any portion of the shares of Common Stock
subject to the lockup agreements.
Beginning 91 days after the date of this Prospectus, 6,475 shares of Common
Stock will be eligible for sale in the public market without registration,
subject to certain volume and other limitations, pursuant to Rule 144 or Rule
701 under the Securities Act of 1933, as amended (the "Securities Act") and an
additional 122,571 shares will be eligible for sale without such restrictions.
Following the expiration of the 180-day lockup period, an additional 1,643,197
shares of Common Stock will be eligible for sale in the public market without
registration, subject to certain volume and other limitations, pursuant to Rule
144 or Rule 701 under the Securities Act and an additional 734,425 shares will
be eligible for sale without such restrictions. The remaining shares of Common
Stock held by existing stockholders will become eligible for sale under Rule 144
or otherwise at various times thereafter. All shares of Common Stock outstanding
on the date of this Prospectus will be eligible for sale to certain qualified
institutional buyers in accordance with Rule 144A under the Securities Act.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated), including an affiliate of the Company, may sell in
the open market within any three-month period a number of shares that does not
exceed the greater of (i) 1% of the then-outstanding shares of the Company's
Common Stock or (ii) the average weekly trading volume in the over-the-counter
market during the four calendar weeks preceding such sale, provided that a
minimum of two years has elapsed between the later of the date of acquisition of
the securities from the issuer or from an affiliate of the issuer. The holding
period of shares of a non-affiliate for this purpose includes the holding period
of all prior non-affiliate holders, provided that if an affiliate has held such
shares at any time, the holding period shall commence upon the sale to a
non-affiliate by the last affiliate to hold the shares. Sales under Rule 144 are
also subject to certain limitations on the manner of sale, notice requirement
and availability of current public information about the Company. Under Rule
144(k), a non-affiliate who holds restricted securities and who has not been
affiliated with the Company during the three-month period preceding the proposed
sale thereof may sell such securities without regard to conditions imposed by
Rule 144 if at least three years have elapsed from the sale of such securities
by the Company or any affiliate. The Securities and Exchange Commission has
proposed amendments to Rule 144, including an amendment which would reduce the
waiting period to one year.
Under Rule 701 of the Securities Act, persons who purchased shares pursuant
to an employee stock purchase program or upon exercise of options granted prior
to the effective date of this Offering are entitled, subject to certain
conditions and limitations of Rule 701, to sell such shares 90 days after the
effective date of this Offering in reliance upon Rule 144, without regard to the
holding period requirement of Rule 144 and, in the case of non-affiliates,
without compliance with the public information, volume limitation or notice
provisions of Rule 144.
The Company intends to register under the Securities Act shortly after the
consummation of the offering an aggregate of 1,647,600 shares of Common Stock
issued or issuable upon exercise of employee stock options granted under the
Non-Qualified Plan and the Employee Plan, including 934,387 shares issuable upon
exercise of such options outstanding on the date of this Prospectus. Two of the
Company's stockholders and the holder of a warrant to purchase Common Stock have
the right to cause the Company to register their shares under the Securities Act
and to include their shares in certain future registrations of securities
effected by the Company under the Securities Act. An aggregate of 627,650 shares
of Common Stock, including 226,670 shares of Common Stock issuable upon exercise
of outstanding warrants are covered by such registration rights. See "Risk
Factors -- Shares Eligible for Future Sale," "Certain Transactions --
Registration Rights" and "Principal Stockholders."
48
UNDERWRITING
The Underwriters named below, for whom Oscar Gruss & Son Incorporated and
Kaufman Bros., L.P. are acting as the Representatives (the "Representatives"),
have severally agreed, subject to the terms and conditions contained in the
Underwriting Agreement, to purchase from the Company the number of shares of
Common Stock set forth opposite their respective names below.
<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
---- ------
<S> <C>
Oscar Gruss & Son Incorporated
Kaufman Bros., L.P.
---------
TOTAL 1,600,000
=========
</TABLE>
The Underwriting Agreement provides that the several Underwriters are
obligated to purchase all of the 1,600,000 shares of Common Stock offered by the
Underwriters hereby (other than shares which may be purchased under the
over-allotment option) if any are purchased. The Representatives have advised
the Company that the Underwriters propose to offer the shares to the public
initially at the public offering price set forth on the cover page of this
Prospectus, that the Underwriters may allow to selected dealers a concession of
$_____ per share and that such dealers may reallow a concession of $_____ per
share to certain other dealers. After the initial public offering, the offering
price and the concessions may be changed by the Representatives. The
Representatives have informed the Company that the Underwriters do not intend to
confirm sales to any accounts over which they exercise discretionary authority.
The Company has granted to the Underwriters an option, expiring at the close
of business on the 30th day after the date of the Underwriting Agreement, to
purchase up to 240,000 additional shares of Common Stock at the public offering
price less underwriting discounts and commissions, all as set forth on the cover
page of this Prospectus. The Underwriters may exercise the option only to cover
over-allotments, if any, in the sale of shares of Common Stock in this Offering.
To the extent that the Underwriters exercise the option, each Underwriter will
become obligated, subject to certain conditions, to purchase approximately the
same percentage thereof that the number of shares to be purchased by each of
them as shown in the foregoing table bears to the 1,600,000 shares of Common
Stock offered hereby.
The Company has agreed to pay to the Representatives a non-accountable
expense allowance of one percent of the gross proceeds of the Offering ($144,000
if the Underwriters' over-allotment option is not exercised and $165,600 if the
Underwriters' overallotment option is exercised in full, at an assumed public
offering price of $9.00 per share), of which $40,000 has been paid to date. If
the Offering is not consummated, the Representatives will return to the Company
any unused portion of the pre-paid expense allowance. The Company has also
agreed to pay all expenses in connection with registering or qualifying the
Common Stock offered hereby for sale under the laws of the states in which the
Common Stock is sold by the Underwriters (including expenses of counsel retained
for such purposes by the Underwriters) as well as certain expenses associated
with information meetings.
The Company has agreed to sell to the Representatives, or their designees,
warrants (the "Underwriters' Warrants") to purchase 160,000 shares of the
Company's Common Stock at an aggregate purchase price of $______. The exercise
price per Underwriters' Warrant, subject to anti-dilution adjustment, is equal
to 135% of the public offering price per share of Common Stock offered hereby.
The Underwriters' Warrants expire on the fifth anniversary of the closing date
of the Offering. The Underwriters' Warrants may not be transferred or exercised
for one year from the date of this Prospectus, except for transfers to officers
of the Representatives or members of the underwriting or selling group and/or
their officers or
49
partners, if any. The Underwriters' Warrants become exercisable during the
four-year period commencing one year from the date of this Prospectus (the
"Warrant Exercise Term"). During the Warrant Exercise Term, the holders of the
Underwriters' Warrants are given, at nominal cost, the opportunity to profit
from an increase in the market price of the Company's Common Stock. The Company
has granted the Representatives certain registration rights with respect to the
Underwriters' Warrants. All registration rights will terminate seven years from
the closing date of the Offering.
Except as set forth below, the Company, its officers and directors, and
certain of its stockholders, who will hold an aggregate of 2,555,244 shares
after this Offering, have agreed that they will not, directly or indirectly,
offer, sell, offer to sell, contract to sell, grant any option to purchase or
otherwise sell or dispose of any shares of Common Stock or other capital stock
of the Company or any securities convertible into, or exercisable or
exchangeable for, any shares of Common Stock or other capital stock of the
Company for a period of 180 days after the date of this Prospectus without the
prior written consent of Oscar Gruss & Son Incorporated on behalf of the
Underwriters. Oscar Gruss & Son Incorporated may, in its sole discretion and at
any time without prior notice, release all or any portion of the shares of
Common Stock subject to these "lock-up" agreements.
Prior to this Offering, there has not been any public market for the Common
Stock. Consequently, the initial public offering price of the Common Stock
offered hereby will be determined through negotiations between the Company and
the Representatives. Among the factors to be considered in making such
determination will be the prevailing market conditions, the Company's fiscal and
operating history and condition, the Company's prospects and the prospects of
its industry, the management of the Company, the market price for securities for
companies in businesses similar to that of the Company and the recent trading
activity and prices of shares of common stock on the Nasdaq National Market. The
estimated initial public offering price range set forth on the cover page of
this Prospectus is subject to change as a result of market conditions and other
factors. See "Risk Factors -- No Assurance of Public Market; Volatility of Stock
Price."
Kaufman Bros., L.P. became registered as a broker-dealer in July 1995 and
has participated in a limited number of public offerings as an underwriter. See
"Risk Factors -- Lack of Underwriting History."
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act.
LEGAL MATTERS
Certain legal matters in connection with this Offering will be passed upon
for the Company by Brown, Rudnick, Freed & Gesmer, Boston, Massachusetts.
Certain legal matters in connection with the Common Stock offered hereby will be
passed upon for the Underwriters by Fulbright & Jaworski L.L.P., New York, New
York. A member of Brown, Rudnick, Freed & Gesmer, counsel to the Company, is
Clerk and is the owner of 12,000 shares of the Company's Common Stock.
EXPERTS
The consolidated balance sheets of Boston Biomedica, Inc. and Subsidiaries
as of December 31, 1994 and 1995 and the consolidated statements of operations,
stockholders' equity, and cash flows for each of the three years in the period
ended December 31, 1995, included in this prospectus, have been included herein
in reliance on the report of Coopers & Lybrand L.L.P., independent accountants,
given on the authority of that firm as experts in accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission"), Washington, D.C. 20549, a Registration Statement on Form S-1 (the
"Registration Statement") under the Securities Act with respect to the Common
Stock offered hereby. This Prospectus does not contain all of the information
set forth in the Registration Statement and the exhibits and schedules thereto.
For
50
further information with respect to the Company and the Common Stock, reference
is made to the Registration Statement and the exhibits and schedules thereto.
Statements contained in this Prospectus as to the contents of any contract or
other document are not necessarily complete and, in each instance where such
contract or document is filed as an exhibit to the Registration Statement,
reference is made to the copy of such contract or document filed as an exhibit
to the Registration Statement, each such statement being qualified in all
respects by such reference. A copy of the Registration Statement may be
inspected without charge at the offices of the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the Commission's regional offices located
at Seven World Trade Center, 13th Floor, New York, New York 10048, and at 500
West Madison Street, Northwestern Atrium Center, Suite 1400, Chicago, Illinois
60661-2511. Copies of materials can also be obtained at prescribed rates from
the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549. The Commission maintains a World Wide Web site on the
Internet at http://www.sec.gov that contains registration statements, reports,
proxy and information statements and other information regarding registrants
that file electronically with the Commission.
The Company intends to distribute to its stockholders annual reports
containing consolidated financial statements audited by its independent
accountants and will make available copies of quarterly reports for the first
three quarters of each fiscal year containing unaudited consolidated financial
information.
51
BOSTON BIOMEDICA, INC. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Coopers & Lybrand L.L.P., Independent Accountants F-2
Consolidated Balance Sheets as of December 31, 1994 and 1995 and June
30, 1996 (unaudited) F-3
Consolidated Statements of Operations for the years ended December 31, 1993,
1994, and 1995 and for the six months ended June 30, 1995 (unaudited) and June
30, 1996 (unaudited) F-4
Consolidated Statements of Stockholders' Equity for the years ended
December 31, 1993, 1994, and 1995 and for the six months ended June
30, 1996 (unaudited) F-5
Consolidated Statements of Cash Flows for the years ended December 31,
1993, 1994, and 1995 and for the six months ended June 30, 1995
(unaudited) and June 30, 1996 (unaudited) F-6
Notes to Consolidated Financial Statements F-7
</TABLE>
F-1
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
BOSTON BIOMEDICA, INC.:
We have audited the accompanying consolidated balance sheets of Boston
Biomedica, Inc. and Subsidiaries as of December 31, 1994 and 1995 and the
related consolidated statements of operations, stockholders' equity and cash
flows for each of the three years in the period ended December 31, 1995. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
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 Boston
Biomedica, Inc. and Subsidiaries as of December 31, 1994 and 1995 and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1995 in conformity with generally accepted
accounting principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
March 12, 1996, except as to the information
in the first paragraph of Note 11,
for which the date is September 10, 1996
F-2
BOSTON BIOMEDICA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30, 1996
------------ -------------
1994 1995 ACTUAL PRO FORMA
---- ---- ------ ---------
(UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 89,129 $ 11,463 $ 10,548 $ 10,548
Accounts receivable, less allowances of $94,723 in 1994,
$142,372 in 1995 and $133,579 in 1996 2,259,842 3,075,870 2,866,401 2,866,401
Inventories (Notes 1 & 3) 3,609,516 3,676,851 3,865,219 3,865,219
Prepaid expense and other 156,117 254,199 294,646 294,646
Deferred income taxes (Note 7) 101,880 110,766 213,538 213,538
---------- --------- ---------- ----------
Total current assets 6,216,484 7,129,149 7,250,352 7,250,352
---------- --------- ---------- ----------
Property and equipment, net (Notes 1 & 4) 1,724,420 2,614,982 2,625,117 2,625,117
OTHER ASSETS:
Notes receivable and other 22,079 83,422 79,037 79,037
Goodwill and other intangibles, net (Notes 1 & 2) 112,521 100,820 92,777 92,777
---------- --------- ---------- ----------
134,600 184,242 171,814 171,814
---------- --------- ---------- ----------
TOTAL ASSETS $ 8,075,504 $9,928,373 $10,047,283 $10,047,283
=========== ========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long term debt (Note 6) $ 242,006 $ 436,509 $ 490,126 $ 490,126
Accounts payable 787,406 745,216 815,946 815,946
Accrued compensation 361,911 395,755 488,223 488,223
Other accrued expenses 139,052 199,334 127,712 127,712
Deferred revenue -- 523,401 831,244 831,244
---------- --------- ---------- ----------
Total current liabilities 1,530,375 2,300,215 2,753,251 2,753,251
---------- --------- ---------- ----------
LONG-TERM LIABILITIES:
Long-term debt, less current maturities (Note 6) 3,179,526 4,215,501 2,797,581 2,797,581
Deferred rent 186,860 141,068 107,832 107,832
Deferred income taxes (Note 7) 137,520 84,641 157,899 157,899
COMMITMENTS AND CONTINGENCIES (Note 8)
REDEEMABLE COMMON STOCK (Note 11)
$.01 par value; 117,647 shares authorized, issued and
outstanding -- -- 898,503 --
STOCKHOLDERS' EQUITY (Note 10):
Common stock, $.01 par value; authorized 15,000,000
shares in 1994, 1995 and 1996; issued and outstanding
2,578,865 in 1994; issued 2,640,417 in 1995;
issued and outstanding 2,572,417 in 1996 actual and
2,690,064 pro forma 25,789 26,404 25,724 26,901
Additional paid-in capital 2,612,500 2,798,620 2,717,700 3,615,026
Retained earnings 402,934 505,924 588,793 588,793
---------- --------- ---------- ----------
3,041,223 3,330,948 3,332,217 4,230,720
Less treasury stock, at cost -- 80,000 shares -- (144,000) -- --
---------- --------- ---------- ----------
Total stockholders' equity 3,041,223 3,186,948 3,332,217 4,230,720
---------- --------- ---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 8,075,504 $9,928,373 $10,047,283 $10,047,283
=========== ========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements
F-3
BOSTON BIOMEDICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
------------------------ -------------------------
1993 1994 1995 1995 1996
---- ---- ---- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUE:
Product sales $ 3,942,328 $ 5,981,378 $ 6,621,631 $ 3,024,629 $ 3,945,759
Services 5,214,688 4,741,376 5,649,099 2,539,851 2,982,624
---------- --------- ---------- ---------- ----------
Total revenue 9,157,016 10,722,754 12,270,730 5,564,480 6,928,383
COSTS AND EXPENSES:
Cost of product sales 2,087,771 3,194,217 3,564,241 1,646,594 2,006,833
Cost of services 3,965,154 3,415,777 4,167,625 1,960,315 2,249,610
Research and development 278,859 469,358 375,712 159,035 361,619
Selling and marketing 894,202 1,191,573 1,339,792 637,567 915,289
General and administrative 1,619,331 2,047,256 2,315,814 1,056,590 1,088,448
---------- --------- ---------- ---------- ----------
Total operating costs and expenses 8,845,317 10,318,181 11,763,184 5,460,101 6,621,799
---------- --------- ---------- ---------- ----------
Income from operations 311,699 404,573 507,546 104,379 306,584
Interest expense, net 178,640 243,694 335,899 164,569 168,469
---------- --------- ---------- ---------- ----------
Income (loss) before income taxes and
extraordinary item 133,059 160,879 171,647 (60,190) 138,115
(Provision) benefit (for) from income taxes
(Notes 1 & 7) (40,473) (64,351) (68,657) 24,034 (55,246)
---------- --------- ---------- ---------- ----------
Income (loss) before extraordinary item 92,586 96,528 102,990 (36,156) 82,869
---------- --------- ---------- ---------- ----------
Extraordinary item-gain on elimination of debt
(Notes 6 & 7), net of income taxes of $33,157 49,736 -- -- -- --
---------- --------- ---------- ---------- ----------
Net income (loss) $ 142,322 $ 96,528 $ 102,990 $ (36,156) $ 82,869
============ ============ ============ ============ ===========
Income (loss) per share:
Before extraordinary gain $ 0.04 $ 0.04 $ 0.04 $ (0.01) $ 0.03
Extraordinary gain 0.02 -- -- -- --
---------- --------- ---------- ---------- ----------
Net income (loss) $ 0.06 $ 0.04 $ 0.04 $ (0.01) $ 0.03
============ =========== =========== ============ ==========
Weighted average common and common equivalent
shares outstanding 2,437,725 2,587,137 3,151,477 2,597,590 3,252,643
============ =========== =========== =========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements
F-4
BOSTON BIOMEDICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK
------------
ADDITIONAL TOTAL
$.01 PAR PAID-IN RETAINED TREASURY STOCKHOLDERS'
SHARES VALUE CAPITAL EARNINGS STOCK EQUITY
------ ----- ------- -------- ----- ------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, December 31, 1992 2,280,040 $ 22,800 $ 1,635,830 $ 164,084 -- $ 1,822,714
Issuance of common stock 201,298 2,013 711,318 -- -- 713,331
Stock options and warrants exercised 33,000 330 65,420 -- -- 65,750
Conversion of note payable 10,690 107 17,532 -- -- 17,639
Net income -- -- -- 142,322 -- 142,322
---------- --------- ---------- ---------- -------- ----------
BALANCE, December 31, 1993 2,525,028 25,250 2,430,100 306,406 -- 2,761,756
Issuance of common stock 29,862 299 139,403 -- -- 139,702
Stock options and warrants exercised 23,975 240 30,197 -- -- 30,437
Tax benefit of stock options exercised -- -- 12,800 -- -- 12,800
Net income -- -- -- 96,528 -- 96,528
---------- --------- ---------- ---------- -------- ----------
BALANCE, December 31, 1994 2,578,865 25,789 2,612,500 402,934 -- 3,041,223
Issuance of common stock 8,535 85 58,160 -- -- 58,245
Stock options and warrants exercised 47,200 472 117,068 -- -- 117,540
Conversion of note payable 5,817 58 9,542 -- -- 9,600
Treasury stock purchased -- 80,000 shares -- -- -- -- $ (144,000) (144,000)
Tax benefit of stock options exercised -- -- 1,350 -- -- 1,350
Net income -- -- -- 102,990 -- 102,990
---------- --------- ---------- ---------- -------- ----------
BALANCE, December 31, 1995 2,640,417 26,404 2,798,620 505,924 (144,000) 3,186,948
Stock options and warrants exercised
(unaudited) 12,000 120 62,280 -- -- 62,400
Issuance of treasury stock -- 80,000 shares
(unaudited) (80,000) (800) (143,200) -- 144,000 --
Net income (unaudited) -- -- -- 82,869 -- 82,869
---------- --------- ---------- ---------- -------- ----------
BALANCE, June 30, 1996 (unaudited) 2,572,417 $ 25,724 $ 2,717,700 $ 588,793 -- $ 3,332,217
========== ========== =========== =========== ======== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements
F-5
BOSTON BIOMEDICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
------------------------ -------------------------
1993 1994 1995 1995 1996
---- ---- ---- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 142,322 $ 96,528 $ 102,990 $ (36,156) $ 82,869
Adjustments to reconcile net income (loss)
to net cash (used in) provided by
operating activities:
Depreciation and amortization 301,004 360,512 441,356 202,693 280,426
Provision for doubtful accounts 22,956 102,099 181,084 53,643 77,145
Deferred rent 99,708 5,908 (45,792) (12,556) (33,236)
Deferred income taxes 42,323 (42,798) (61,765) (74,809) (29,514)
Tax benefit of stock options exercised -- 12,800 1,350 -- --
Extraordinary item-gain on elimination of debt (49,736) -- -- -- --
Changes in operating assets and liabilities:
Accounts receivable (215,270) (529,157) (997,112) 11,403 132,324
Note receivable and other assets (17,002) (3,720) (61,343) (12,962) 4,385
Inventories (950,715) (567,420) (67,335) 77,857 (188,368)
Prepaid expenses 25,410 (3,500) (98,082) (79,496) (40,447)
Accounts payable 11,875 (86,130) (42,190) 35,834 70,730
Accrued expenses 160,021 100,767 94,126 (60,639) 20,846
Deferred revenue -- -- 523,401 -- 307,843
---------- --------- ---------- ---------- ----------
Net cash (used in) provided by operating
activities (427,104) (554,111) (29,312) 104,812 685,003
---------- --------- ---------- ---------- ----------
CASH FLOWS FOR INVESTING ACTIVITIES:
Additions to property and equipment (460,591) (404,639) (1,316,217) (215,542) (282,518)
Purchase of intangible assets -- -- (4,000) -- --
Net assets of acquisitions (net of cash
acquired) (389,703) -- -- -- --
---------- --------- ---------- ---------- ----------
Net cash used in investing activities (850,294) (404,639) (1,320,217) (215,542) (282,518)
---------- --------- ---------- ---------- ----------
CASH FLOWS FOR FINANCING ACTIVITIES:
Proceeds from notes payable 1,107,392 1,734,425 1,517,867 191,990 226,300
Proceeds from redeemable common stock, net -- -- -- -- 898,503
Proceeds of common stock issued, net 765,081 170,139 175,785 103,126 62,400
Repayments of long-term debt (613,199) (887,989) (277,789) -- (1,590,603)
Purchase of treasury stock -- -- (144,000) (144,000) --
---------- --------- ---------- ---------- ----------
Net cash (used in) provided by financing
activities 1,259,274 1,016,575 1,271,863 151,116 (403,400)
---------- --------- ---------- ---------- ----------
(DECREASE) INCREASE IN CASH: (18,124) 57,825 (77,666) 40,386 (915)
Cash, beginning of period 49,428 31,304 89,129 89,129 11,463
---------- --------- ---------- ---------- ----------
Cash, end of period $ 31,304 $ 89,129 $ 11,463 $ 129,515 $ 10,548
=========== ========== =========== ============ ===========
SUPPLEMENTAL DISCLOSURES OF NONCASH
ACTIVITIES:
Conversion of note payable to common stock $ 17,639 -- $ 9,600 $ 9,600 --
SUPPLEMENTAL INFORMATION:
Income taxes paid $ 10,689 $ 33,718 $ 168,994 $ 129,100 $ 85,000
Interest paid $ 163,831 $ 254,133 $ 331,495 $ 163,735 $ 178,328
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements
F-6
BOSTON BIOMEDICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION AS OF JUNE 30, 1996 AND FOR THE SIX MONTHS ENDED JUNE 30,
1996 AND 1995 IS UNAUDITED.)
(1) BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Boston Biomedica, Inc. ("BBI") and Subsidiaries (together, the "Company")
provide infectious disease diagnostic products, contract research and specialty
infectious disease testing services to the in-vitro diagnostic industry,
government agencies, blood banks, hospitals and other health care providers
worldwide.
Significant accounting policies followed in the preparation of these
consolidated financial statements are as follows:
(i) Principles of Consolidation
The consolidated financial statements include the accounts of BBI and its
wholly-owned subsidiaries, Biotech Research Laboratories, Inc. ("BTRL") and
BBI-North American Clinical Laboratories, Inc. ("BBI-NACL"). All significant
intercompany accounts and transactions have been eliminated in the
consolidation.
(ii) Reclassification
Certain amounts included in the prior year's financial statements have been
reclassified to conform to the current presentation.
(iii) Use of Significant Estimates
To prepare the financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period. In
particular, the Company records reserves for estimates regarding the
collectability of accounts receivable. Actual results could differ from the
estimates and assumptions used by management.
(iv) Revenue Recognition
Product revenues are recognized as sales upon shipment of the products or,
for specific orders at the request of the customer, on a bill and hold basis
after completion of manufacture. All bill and hold transactions meet specified
revenue recognition criteria which include normal billing, credit and payment
terms, and transfer to the customers of all risks and rewards of ownership.
Accounts receivable as of December 31, 1995 and June 30, 1996 include bill and
hold receivables of $179,000 and $85,000, respectively. There were no such
receivables as of December 31, 1993 and 1994.
The Company periodically enters into barter transactions whereby the Company
exchanges inventory for testing services. Revenue on these transactions are
recognized when both the products have been shipped and the testing services
have been completed and are recorded at the estimated fair market value of the
inventory based upon standard Company prices. The revenue recognized on these
transactions for the years ended December 31, 1993, 1994 and 1995 and for the
six months ended June 30, 1995 and 1996 was $30,000, $192,000, $213,000,
$126,000 and $191,000, respectively.
Services are recognized as revenue upon completion of tests for specialty
laboratory services.
Revenue under long-term contracts, including funded research and development
contracts, is recorded under the percentage of completion method, wherein costs
plus profit is recorded as service revenue and billed monthly as the work is
performed. Certain customers make advance payments that are deferred until
revenue recognition is appropriate. Unbilled amounts for fee retainage are
included in accounts receivable at
F-7
BOSTON BIOMEDICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(INFORMATION AS OF JUNE 30, 1996 AND FOR THE SIX MONTHS ENDED JUNE 30,
1996 AND 1995 IS UNAUDITED.)
(1) BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
December 31, 1994, 1995, and June 30, 1996, and are immaterial. When the current
contract estimates indicate a loss, provision is made for the total anticipated
loss. The Company does not believe there are any material collectability issues
associated with these receivables.
Total revenue related to funded research and development contracts was
approximately $1,721,000, $660,000, $728,000, $278,000 and $598,000 for the
years ended December 31, 1993, 1994 and 1995 and for the six months ended June
30, 1995 and 1996, respectively. Total contract costs associated with these
agreements were approximately $1,392,000, $511,000, $575,000, $219,000 and
$553,000 for the years ended December 1993, 1994 and 1995 and for the six months
ended June 30, 1995 and 1996, respectively.
(v) Research and Development Costs
Research and development costs are expensed as incurred.
(vi) Inventories
Inventories are stated at the lower of average cost or net realizable value
and include material, labor and manufacturing overhead.
(vii) Property and Equipment
Property and equipment are stated at cost. For financial reporting purposes,
depreciation is recognized using accelerated and straight-line methods,
allocating the cost of the assets over their estimated useful lives ranging from
five years to ten years for certain manufacturing and laboratory equipment, and
fifteen years for the building. Upon retirement or sale, the cost and related
accumulated depreciation of the asset are removed from the books. Any resulting
gain or loss is credited or charged to income.
(viii) Goodwill and Intangibles
Goodwill results from excess of the purchase prices over the net assets of
BTRL and BBI-NACL acquired and is amortized on a straight line basis over ten
years. Other intangibles primarily consist of patents, licenses, and
intellectual property rights and are amortized over five to ten years.
(ix) Income Taxes
The Company utilizes the liability method of accounting for income taxes.
Under the liability method, deferred taxes arise from temporary differences
between the financial statement and tax bases of assets and liabilities using
enacted tax rates in effect in the years in which the differences are expected
to reverse. A valuation allowance is provided for net deferred tax assets if,
based on the weighted available evidence, it is more likely than not that some
or all of the deferred tax assets will not be realized. Tax credits are
recognized when realized using the flow through method of accounting.
(x) Concentration of Credit Risk
Financial instruments which potentially subject the Company to
concentrations of credit risk are principally cash and accounts receivable. The
Company places its cash in federally chartered banks, each of which is insured
up to $100,000 by the Federal Deposit Insurance Corporation. Concentration of
credit risk with respect to accounts receivable is limited to certain customers
to whom the Company
F-8
BOSTON BIOMEDICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(INFORMATION AS OF JUNE 30, 1996 AND FOR THE SIX MONTHS ENDED JUNE 30,
1996 AND 1995 IS UNAUDITED.)
(1) BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
makes substantial sales. The Company does not require collateral from its
customers. To reduce risk, the Company routinely assesses the financial strength
of its customers and, as a consequence, believes that its trade accounts
receivable credit risk exposure is limited.
(xi) Interim Consolidated Financial Statements
The consolidated financial statements as of June 30, 1996 and for the six
months ended June 30, 1995 and 1996 and related footnote information are
unaudited and have been prepared on a basis substantially consistent with the
audited consolidated financial statements, and, in the opinion of management,
include all adjustments (consisting of only normal recurring adjustments)
necessary for fair presentation of the results of these interim periods. The
results of the six months ended June 30, 1996 are not necessarily indicative of
the results to be expected for the entire year.
(xii) Deferred Revenue
Deferred revenue consists of payments received from customers in advance of
services performed.
(xiii) Computation of Income (Loss) Per Share
Net income (loss) per common share is computed based upon the weighted
average number of common shares and common equivalent shares (using the treasury
stock method) outstanding after certain adjustments described below. Common
equivalent shares consist of common stock options and warrants outstanding. In
accordance with Securities and Exchange Commission Staff Accounting Bulletin No.
83, all common, redeemable common, and common equivalent shares issued during
the twelve month period prior to the proposed date of the initial filing of the
Registration Statement have been included in the calculation as if they were
outstanding for all periods using the treasury stock method and assuming an
initial public offering price of $9.00 per share. Fully diluted net income
(loss) per common share is not presented as it does not differ from primary
earnings per share.
(xiv) Recent Accounting Pronouncements
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" ("SFAS 121").
SFAS 121 requires that an impairment loss be recognized for long-lived assets
and certain identified intangibles when the carrying amount of these assets may
not be recoverable. The Company has adopted SFAS 121 effective in 1996 and the
adoption did not have a material impact on the financial statements.
In October 1995, the FASB issued Statement of Financial Accounting Standards
No. 123 ("SFAS 123") "Accounting for Stock-Based Compensation," which becomes
effective for fiscal years beginning after December 15, 1995. SFAS 123
establishes new financial accounting and reporting standards for stock-based
compensation plans. However, entities are allowed to elect whether to measure
compensation expense for stock-based compensation under SFAS 123 or APB No. 25,
"Accounting for Stock Issued to Employees." The Company has elected to continue
to account under APB No. 25 and will make the required pro forma disclosures of
net income and earnings per share as if the provisions of SFAS 123 had been
applied in its December 31, 1996 financial statements. The potential impact of
adopting this standard on the Company's pro forma disclosures of net income and
earnings per share has not been quantified at this time.
(xv) Pro Forma Presentation (Unaudited)
As discussed further in Note 11, completion of a public offering will
terminate the redemption feature of the Redeemable Common Stock and cause its
reclassification into 117,647 shares of common stock. The unaudited pro forma
balance sheet has been prepared assuming the reclassification of the Redeemable
Common Stock into common stock as of June 30, 1996.
F-9
BOSTON BIOMEDICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(INFORMATION AS OF JUNE 30, 1996 AND FOR THE SIX MONTHS ENDED JUNE 30,
1996 AND 1995 IS UNAUDITED.)
(2) ACQUISITION
Effective January 1, 1993, North American Laboratory, Inc., a Massachusetts
corporation and wholly-owned subsidiary of BBI, acquired the net assets of North
American Laboratory Group, Ltd., Inc. from its founder and chief scientific
officer, who remains in this same capacity. During 1995, the name was changed to
BBI-North American Clinical Laboratories, Inc. BBI-NACL is a specialty
infectious disease testing laboratory providing testing services to hospitals
and other health care providers. The purchase price was $425,000 in cash
representing $375,038 of net tangible assets (including cash of $35,297) and
$49,962 of goodwill and other intangibles.
(3) INVENTORIES
The Company purchases human plasma and serum from various private and
commercial blood banks. Upon receipt, such purchases generally undergo
comprehensive testing, and associated costs are included in the value of raw
materials. Most plasma is manufactured into Basematrix and other diagnostic
components to customer specifications. Plasma and serum with the desired
antibodies or antigens are sold or manufactured into Quality Control Panels,
Accurun(tm) run controls, and reagents ("Finished Goods"). Panels and reagents
are unique to specific donors and/or collection periods, and require substantial
time to characterize and manufacture due to stringent technical specifications.
Panels play an important role in diagnostic test kit development, licensure and
quality control. Panels are manufactured in quantities sufficient to meet
expected user demand which may exceed one year.
Inventories consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------
1994 1995 JUNE 30, 1996
---- ---- -------------
(UNAUDITED)
<S> <C> <C> <C>
Raw materials $ 1,548,560 $ 1,298,131 $ 1,272,687
Work-in-process 551,280 565,667 597,922
Finished goods 1,509,676 1,813,053 1,994,610
---------- ---------- ----------
$ 3,609,516 $ 3,676,851 $ 3,865,219
=========== =========== ===========
</TABLE>
(4) PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1994 and 1995 consist of the
following:
<TABLE>
<CAPTION>
1994 1995
---- ----
<S> <C> <C>
Laboratory equipment $1,442,349 $1,630,872
Management information systems 609,923 834,768
Office equipment 249,544 332,496
Automobiles 176,315 178,465
Leasehold improvements 300,341 108,892
Land, building and improvements -- 941,175
--------- ---------
2,778,472 4,026,668
Less accumulated depreciation 1,054,052 1,411,686
--------- ---------
Net book value $1,724,420 $2,614,982
========== ==========
</TABLE>
Depreciation expense for the years ended December 31, 1993, 1994 and 1995
and the six months ended June 30, 1995 and 1996 was $286,456, $345,228,
$425,655, $194,236 and $272,383, respectively.
F-10
BOSTON BIOMEDICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(INFORMATION AS OF JUNE 30, 1996 AND FOR THE SIX MONTHS ENDED JUNE 30,
1996 AND 1995 IS UNAUDITED.)
(5) REVENUE FROM SIGNIFICANT CUSTOMERS AND EXPORT SALES
The Company performs contract research and certain services under contracts,
subcontracts and grants from United States Government Agencies, primarily the
National Institutes of Health ("NIH"). Revenue from such contracts, subcontracts
and grants was approximately $2,707,000 in 1993, $1,677,000 in 1994, and
$1,628,000 in 1995.
Export sales accounted for approximately $1,411,000, or 15% of consolidated
revenue in 1993; $2,279,000, or 21% in 1994; $3,104,000, or 25% in 1995; and
$1,523,000, or 27%, and $1,877,000, or 27% for the six months ended June 30,
1995 and 1996, respectively.
(6) LONG TERM DEBT
In August 1995, the Company's revolving line of credit ("Revolver") was
increased to $3,500,000 and the due date extended to June 30, 1997. In July
1996, the due date of the Company's Revolver was extended to June 30, 1998, and
the interest rate reduced to prime plus 1/2 %. In addition, the Company borrowed
$200,000 under a five-year term loan approved in 1994 ($170,370 outstanding at
December 31, 1995), $100,000 under a five-year term loan, and $123,700 under a
$350,000 five year term loan facility for equipment acquisitions approved in
1995 ("New Term"). As of December 31, 1995, the Company had additional borrowing
capacity available under the New Term facility equal to $226,300. The Company
borrowed this amount prior to the facility expiration date of May 2, 1996. In
July 1996, the Company received approval for a $250,000, five year equipment
facility loan from its bank due July 31, 2001 at a rate of prime plus 1%.
Borrowings under the Revolver are limited to 80% of eligible accounts
receivable plus the lesser of 40% of inventory or $1,500,000. The Company had
approximately $657,000 and $2,028,000 available under it's Revolver as of
December 31, 1995 and June 30, 1996, respectively. Amounts outstanding under the
Revolver bear interest at the lender's base rate plus 1% (9.75% at December 31,
1995 and 9.25% at June 30, 1996) and are collateralized by all of the Company's
assets and a $2 million life insurance policy of an officer/stockholder.
The Revolver contains covenants regarding the Company's debt-to-equity ratio
and certain minimum debt service coverage ratios. The Revolver further provides
for restrictions on the payment of dividends, limitations on the acquisition of
property and equipment, limitations on additional borrowings, and certain
minimum stock ownership levels by the officer/stockholder referred to above.
In December 1995, the Company purchased its corporate headquarters and
manufacturing facility in West Bridgewater, MA from its former landlord at a
price of $806,800 including closing costs, and borrowed $750,000 from its bank
to finance the purchase. See also Note 4.
On June 30, 1993, the Company exercised its option to pre-pay the
acquisition note in connection with the 1992 purchase of BTRL at a substantial
discount from the balance due, resulting in an extraordinary gain of $49,736
($82,893 minus taxes of $33,157).
During 1993, convertible debt in the amount of $17,639 was converted into
10,690 shares of common stock at a price of $1.65 per share. During 1995,
convertible debt in the amount of $9,600 was converted into 5,817 shares of
common stock at a price of $1.65 per share.
F-11
BOSTON BIOMEDICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(INFORMATION AS OF JUNE 30, 1996 AND FOR THE SIX MONTHS ENDED JUNE 30,
1996 AND 1995 IS UNAUDITED.)
(6) LONG TERM DEBT -- (CONTINUED)
At December 31, 1994 and 1995, and June 30, 1996, the Company had the following
debt outstanding:
<TABLE>
<CAPTION>
JUNE 30,
1994 1995 1996
---- ---- ----
(UNAUDITED)
<S> <C> <C> <C>
Revolving Line of Credit Agreement due June 30, 1998 $2,533,860 $2,784,307 $1,397,884
Note payable to a bank, due in monthly principal
payments of $17,687 through October 1998 with
interest fixed at 9.01%. Collateralized by all of the
assets of the Company 813,625 601,375 495,250
Note payable to a bank, due in monthly principal payments
of $3,704 through October 1999 with interest at prime
rate plus 1.0%. Collateralized by all of the assets of
the Company -- 170,370 148,148
Note payable to a bank, due in monthly principal payments
of $1,667 through December 2000 with interest at 8.22%.
Collateralized by all of the assets of the Company -- 100,000 91,667
Note payable to a bank, with interest only due until May
2, 1996, and thereafter 54 consecutive equal monthly
principal payments of $6,863 commencing June 18, 1996.
Interest is at prime rate plus 1.0%. Collateralized by
all of the assets of the Company -- 123,700 343,137
Note payable to a bank, due in 84 fixed payments of principal
and interest of $11,729, bearing interest fixed at 8.30%
for the first five years, and floating at prime plus 1.0%
for the remaining term. Collateralized by a mortgage and
all of the assets of the Company -- 750,000 705,580
Subordinated convertible note payable, at 12.5% interest
rate, due December 31, 1996, interest payable monthly.
Convertible into common stock at $1.50 per share at the
option of the holder 31,100 21,500 21,500
Other installment notes payable with interest rates ranging
from 7.25% to 10.99% at December 31, 1995, collateralized
by office equipment and vehicles due at various maturity
dates from April 1996 to August 2001 42,947 100,758 84,541
--------- --------- ---------
Total long term debt 3,421,532 4,652,010 3,287,707
Less: current maturities (242,006) (436,509) (490,126)
--------- --------- ---------
$3,179,526 $4,215,501 $2,797,581
========== ========= ==========
</TABLE>
F-12
BOSTON BIOMEDICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(INFORMATION AS OF JUNE 30, 1996 AND FOR THE SIX MONTHS ENDED JUNE 30,
1996 AND 1995 IS UNAUDITED.)
(6) LONG TERM DEBT -- (CONTINUED)
At December 31, 1995, debt maturities are as follows:
<TABLE>
<CAPTION>
YEAR ENDED AMOUNT
---------- ------
<S> <C>
1996 $ 436,509
1997 3,199,875
1998 386,723
1999 207,300
2000 161,382
Thereafter 260,221
---------
$4,652,010
==========
</TABLE>
(7) INCOME TAXES
The Company's effective tax rate does not significantly differ from the
federal and state income tax statutory rates. The components of the provision
for income taxes are as follows:
<TABLE>
<CAPTION>
1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
Current expense: federal and state $ 23,700 $ 91,242 $ 130,422
Deferred (benefit) expense: federal and state 49,930 (26,891) (61,765)
-------- -------- --------
Total $ 73,630 $ 64,351 $ 68,657
========= ========= =========
</TABLE>
The provision for 1993 includes $33,157 of income taxes which was offset
against the extraordinary gain on elimination of debt of $82,893 and presented
net in the Statement of Operations. See also Notes 2 and 6.
Significant items making up deferred tax liabilities and deferred tax assets
are as follows:
<TABLE>
<CAPTION>
1994 1995
---- ----
<S> <C> <C>
Current deferred taxes:
Inventory $ 47,318 --
Allowances and other accruals 54,562 $ 110,766
------- -------
Total deferred tax assets 101,880 110,766
Long term deferred taxes:
Accelerated tax depreciation (163,139) (207,361)
Cash basis benefit of subsidiary (47,818) --
Goodwill (26,859) (22,795)
Tax credits 100,296 106,710
State net operating loss carryforwards -- 38,805
------- -------
Total deferred tax liabilities (137,520) (84,641)
------- -------
Total net deferred tax (liabilities) assets $ (35,640) $ 26,125
=========== =========
</TABLE>
As of December 31, 1995, the net operating loss carryforwards expire at
various dates beginning in 1998 through 2000. Tax credits expire at various
dates beginning in 2006 through 2009.
F-13
BOSTON BIOMEDICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(INFORMATION AS OF JUNE 30, 1996 AND FOR THE SIX MONTHS ENDED JUNE 30,
1996 AND 1995 IS UNAUDITED.)
(8) COMMITMENTS AND CONTINGENCIES
The Company leases certain office space, laboratory, and research facilities
under operating leases with various terms through July 2000. All the real estate
leases include renewal options at increasing levels of rent.
One of the facility leases includes scheduled base rent increases over the
term of the lease. The amount of base rent payments is being charged to expense
on the straight-line method over the term of the lease. As of December 31, 1995,
the Company has recorded a $141,068 noncurrent liability to reflect the excess
of rent expense over cash payments since inception of the lease. In addition to
base rent, the Company pays a monthly allocation of the operating expenses and
real estate taxes for the above facilities.
Rent expense for the years ended December 31, 1993, 1994 and 1995 and six
months ended June 30, 1995 and 1996 was $479,697, $549,713, $477,580, $225,109
and $181,816, respectively. At December 31, 1995, the remaining fixed lease
commitment was as follows:
<TABLE>
<CAPTION>
YEAR ENDED AMOUNT
---------- ------
<S> <C>
1996 $371,200
1997 254,600
1998 117,300
1999 124,800
2000 79,700
-------
$947,600
========
</TABLE>
Commencing in February 1995, the Company committed under a sponsored
research agreement with a university to fund a research scientist at a cost of
$13,125 per quarter for three years which costs are charged to research and
development expense. In return, the Company has exclusive rights to any anti-HIV
compounds or derivatives developed in the course of this research, provided the
Company obtains certain regulatory approvals from the FDA.
(9) RETIREMENT PLAN
In January, 1993, the Company adopted a retirement savings plan for its
employees, which has been qualified under Section 401(k) of the Code. Eligible
employees are permitted to contribute to the plan through payroll deductions
within statutory limitations and subject to any limitations included in the
plan. To date, the Company has made no contributions to the plan.
(10) COMMON STOCK
The Company has two stock option plans which are administered by a committee
of the Board of Directors who determines the employees and affiliated persons to
receive options and the number and option price of shares covered by each such
option.
Options granted under both plans may be either incentive stock options or
non-qualified stock options. In general, for incentive stock options, the option
price shall not be less than the fair market value at the time the option is
granted. Generally, options become exercisable at the rate of 25% at the end of
each of the four years following the anniversary of the grant. Options issued
expire ten years from the date of grant, or 30 days from the date of termination
or affiliation.
At December 31, 1995, 897,600 shares have been reserved for non-qualified
stock options, of which 97,125 are available for future grants. At December 31,
1995, 750,000 shares have been reserved for incentive stock options, of which
696,812 are available for future grants.
F-14
BOSTON BIOMEDICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(INFORMATION AS OF JUNE 30, 1996 AND FOR THE SIX MONTHS ENDED JUNE 30,
1996 AND 1995 IS UNAUDITED.)
(10) COMMON STOCK -- (CONTINUED)
The Company has issued warrants in connection with certain equity and debt
financings. As of June 30, 1996, 226,670 shares of Common Stock have been
reserved for issuance pursuant to the exercise of such warrants at a weighted
average exercise price of $2.50 per share.
The Company has reserved shares of its authorized but unissued common stock
for the following:
<TABLE>
<CAPTION>
STOCK OPTIONS WARRANTS
------------- --------
PRICE PRICE TOTAL
SHARES PER SHARE SHARES PER SHARE SHARES
------ --------- ------ --------- ------
<S> <C> <C> <C> <C> <C>
Balance outstanding, December 31, 1992 747,600 $.25-$4.50 266,670 $2.00-$2.50 1,014,270
Granted 166,250 4.50 59,468 3.75-5.20 225,718
Exercised (13,000) .25-1.50 (20,000) 2.50 (33,000)
Expired (19,000) 2.50 -- (19,000)
------- ------- --------
Balance outstanding, December 31, 1993 881,850 .25-4.50 306,138 2.00-5.20 1,187,988
Granted -- -- -- -- --
Exercised (19,375) .25-4.50 (4,600) 3.75 (23,975)
Expired (81,525) .25-4.50 -- -- (81,525)
------- ------- --------
Balance outstanding, December 31, 1994 780,950 .25-4.50 301,538 2.00-5.20 1,082,488
Granted 73,187 6.00 -- -- 73,187
Exercised (6,000) 1.50-2.50 (41,200) 2.50-5.20 (47,200)
Expired (47,850) 1.50-4.50 -- -- (47,850)
------- ------- --------
Balance outstanding, December 31, 1995 800,287 .25-6.00 260,338 2.00-5.20 1,060,625
Granted (unaudited) 140,600 7.00-8.50 -- -- 140,600
Exercised (unaudited) -- -- (12,000) 5.20 (12,000)
Expired (unaudited) (6,500) 6.00-7.00 (21,668) 5.20 (28,168)
------- ------- --------
Balance outstanding, June 30, 1996
(unaudited) 934,387 .25-8.50 226,670 2.00-5.00 1,161,057
======== ======= ==========
Exercisable at June 30, 1996 (unaudited) 359,500 .25-1.65 -- -- 359,500
262,200 2.50-4.50 206,670 2.00-2.50 468,870
31,984 6.00 20,000 5.00 51,984
------- ------- --------
Total exercisable at June 30, 1996
(unaudited) 653,684 $.25-$6.00 226,670 $2.00-$5.00 880,354
======== ======= ==========
Proceeds of exercisable at June 30, 1996
(unaudited) $1,356,655 $566,675 $1,923,330
========== ======== ==========
</TABLE>
F-15
BOSTON BIOMEDICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(INFORMATION AS OF JUNE 30, 1996 AND FOR THE SIX MONTHS ENDED JUNE 30
1996 AND 1995 IS UNAUDITED.)
(11) SUBSEQUENT EVENTS
Stock Split
On August 8, 1996 the Board of Directors approved a 1-for-2 reverse stock
split and an increase in authorized common shares to 20,000,000, and authorized
1,000,000 shares of preferred stock (par value $.01), which were approved by the
stockholders on September 10, 1996. The stock split has been retroactively
reflected in the accompanying financial statements and notes for all periods
presented.
STOCK PURCHASE AGREEMENT (UNAUDITED)
On April 26, 1996, the Company entered into a Stock Purchase Agreement and
Exclusive Distributor Agreement for five years with a foreign distributor.
Pursuant to the Stock Purchase Agreement, the Company issued 117,647 shares of
redeemable common stock at a price per share of $8.50, for which it received net
proceeds of $898,503. Issuance costs were $101,497. Furthermore, the agreement
may require the Company to repurchase the stock at the issuance price
($1,000,000 in total) in three equal installments in the event that the
Distribution Agreement is terminated by the Company prior to the completion of a
public offering. Completion of a public offering will terminate the redemption
feature and cause the reclassification of these shares into stockholders'
equity. In addition, the distributor is restricted from selling these securities
for a one-year period after completion of such Offering. The Company utilized
the 80,000 shares of Treasury Stock in connection with this transaction.
BioSeq, Inc. (Unaudited)
In October 1996, the Company entered into a License Agreement, Purchase
Agreement, Stockholders' Agreement and Warrant Agreement with BioSeq, a
privately held, technology based development stage company.
The Company has agreed to purchase convertible preferred stock of BioSeq for
an aggregate of $1,482,500 in three installments. Of the $1,482,500, $210,000
was invested at the date of the agreements and $522,500 is required to be
invested within ten business days of the closing of the initial public offering
of the Company's common stock provided the closing occurs before December 31,
1996. The Company must make the remaining $750,000 installment if BioSeq attains
certain technical milestones by July 31, 1997. If such milestones are not
attained by BioSeq by July 31, 1997, the Company will still have the option to
make the remaining $750,000 investment until December 31, 1997. Under the
operative documents, the Company has price anti-dilution protection, pre-emptive
rights and the right to board representation, the last of which terminates if
the Company fails to make the second installment under the Purchase Agreement.
In addition, the Company was granted warrants to acquire additional shares of
common stock of BioSeq for additional consideration under certain conditions,
provided that this right is not exercisable to the extent it would cause the
Company's ownership to equal or exceed 20%. The Company is accounting for its
investment in BioSeq on the cost basis in accordance with the provisions of APB
18 since the cumulative investment is and must remain less than 20% of the
equity of BioSeq and the Company does not exert significant influence or
control. Due to the uncertainty of technology based development stage
enterprises and in accordance with the provisions of SFAS 121, the Company will
perform a periodic analysis of the investment to determine whether the carrying
value of its investment in BioSeq has been impaired. If so determined, the
Company would adjust the carrying value of its investment by taking a charge to
earnings.
Upon the earlier of payment of the final installment of the Company's
aggregate $1,482,500 investment and December 31, 1997, the Company will be
granted a worldwide right to use the BioSeq technology relating to sequencing
and analysis services. The License will be exclusive until BioSeq commences
selling on a commercial basis the equipment used in the DNA sequencing and
analysis process, at which time the License will become non-exclusive. The
License provides that the Company will pay BioSeq royalties ranging from five
percent to ten percent of net revenues arising out of the services performed by
the Company with the licensed technology. The Company will account for the
royalty as a cost of revenue as the revenues are earned.
F-16
BOSTON BIOMEDICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(INFORMATION AS OF JUNE 30, 1996 AND FOR THE SIX MONTHS ENDED JUNE 30,
1996 AND 1995 IS UNAUDITED.)
(11) SUBSEQUENT EVENTS -- (CONTINUED)
Initial Public Offering (Unaudited)
The Company has filed a registration statement for the sale of shares of
common stock. Accordingly, the unaudited pro forma balance sheet has been
prepared assuming the reclassification of the redeemable common stock into
common stock as of June 30, 1996. There can be no assurances that the initial
public offering of common stock will be successfully completed.
(12) SUPPLEMENTARY PRO FORMA EARNINGS PER SHARE -- (UNAUDITED)
If the Offering had been completed on January 1, 1995, a portion of the
proceeds would have been used to retire all debt outstanding at that time, and
all debt incurred in 1995 and 1996 would not have been needed. Based on the
foregoing, supplemental pro forma net earnings per share of common stock would
have been $.09 and $.06 for the year ended December 31, 1995 and the six months
ended June 30, 1996, respectively. Such net earnings per share of common stock
are based on 3,600,007 and 3,701,173 shares of common stock respectively,
consisting of 3,151,477 and 3,252,643 shares of common stock and common stock
equivalents plus 448,530 shares assumed to be issued at $9.00 per share as if
the Offering had occurred on January 1, 1995 to retire indebtedness outstanding
during 1995.
F-17
GLOSSARY
AIDS Acquired Immune Deficiency Syndrome. AIDS is
caused by infection with the Human
Immunodeficiency Virus, HIV.
Antibodies Binding proteins naturally produced by the body in
response to exposure to non-self agents (e.g.,
bacteria, viruses, cancer cells). Antibodies form
part of the immunological defense system.
Antigens Foreign non-self agents (such as the proteins or
the nucleic acids of infectious agents) that
stimulate an immune response, including the
production of antibodies.
Assay Synonym for test: qualitative or quantitative
measurement of some component of a material.
Chlamydia A sexually transmitted pathogen that can cause
Trachoma (an eye disease which culminates in
blindness), chronic infection of genitals (which
can result in infertility), and pneumonia,
especially in the newborn.
CLIA The Clinical Laboratory Improvement Amendments,
passed by Congress in October 1988, and formulated
into regulations and implemented by the Health
Care Financing Administration beginning in 1992.
CLIA refers to a set of regulations which govern
the staffing and function of all U.S. laboratories
that perform in vitro diagnostic tests for
clinical use, except for blood bank laboratories
and Veterans' Administration hospital
laboratories, which are regulated separately using
similar rules.
Cytomegalovirus A virus responsible for several diseases that are
especially prevalent in immunocompromised patients
such as those infected with HIV, receiving organ
transplants or receiving cancer chemotherapy.
Diagnostic Components The solutions and materials that are combined,
sometimes after further manufacture, to make an in
vitro diagnostic test kit.
DNA Deoxyribonucleic Acid, together with RNA, a class
of molecules called "nucleic acids." DNA carries
the genetic information in most living organisms.
The DNA of each cell contains the information for
"building" a whole organism (e.g., a virus, a
plant, or a whole human being). DNA testing can
identify microscopic amounts of the genetic
material of a virus or bacterium, thus indicating
its presence in quantities undetectable in the
bloodstream by immunoassay techniques.
ELISA Enzyme-Linked Immunosorbent Assay, a biochemical
procedure in which interactions among antibodies,
antigens and enzymes are used to detect and
quantify various diseases and other materials of
interest through the measurement of color released
at the end of the assay.
End-User The purchaser and consumer of an in vitro
diagnostic test kit; usually clinical
laboratories, but may also be other health care
providers or members of the general public.
G-1
Hepatitis A disease that causes inflammation of and damage
to the liver, often caused by a virus. In advanced
stages, hepatitis can result in life threatening
liver dysfunction, liver cirrhosis or liver
cancer. The most common causes of viral hepatitis
are the Hepatitis A, B and C viruses (HAV, HBV and
HCV).
HIV Human Immunodeficiency Virus. HIV, a retrovirus,
causes AIDS. HIV infection leads to the
destruction of the immune system.
Immunology Narrowly defined as the study of the immune
system, but often used to describe tests for
infectious diseases which rely on the principle of
the binding of antigens and antibodies.
Immunoassay A test that relies on the specificity of the
reaction between antibodies and antigens to detect
and measure the concentration of biological
molecules.
In Vitro Laboratory procedures that occur "in the test
tube," or outside the body. In vitro diagnostic
testing is the process of analyzing blood, urine,
saliva and other specimens outside the body to
screen for, monitor or diagnose diseases and other
medical conditions.
Infectious Agent Any microorganism, such as bacteria, viruses,
fungi or other parasites, capable of invading
another organism, with or without pathological
manifestations.
Levey-Jennings Chart A chart on which the test results for a Run
Control are plotted over time, so that the
reproducibility of a test method can be monitored.
The acceptable range for the Run Control, as
determined by each individual test kit end-user,
is also indicated on the chart.
Lyme Disease A bacterial infection caused by a spirochete
called Borrelia burgdorferi (B. burgdorferi). This
spirochete usually infects the deer tick which
then bites a person or animal, thus transmitting
the infection.
Marker A substance which, when detected in blood or other
study sample by an in vitro diagnostic test, is
indicative of the presence of disease or other
medical condition.
Microbiology The clinical laboratory testing segment that
specializes in the detection of organisms that
cause infectious disease. Often used to refer to
traditional tests that use a growth medium which
enables an organism, if present, to replicate and
be detected visually. Newer methods for detection
and monitoring of infectious diseases such as
immunology and molecular biology methods are
sometimes performed in separate laboratories and
sometimes incorporated into microbiology
laboratories.
Molecular Biology The clinical laboratory testing segment which uses
newer methods such as PCR to detect nucleic acids
(i.e., DNA and RNA) for infectious disease
diagnosis and other purposes.
G-2
Multi-Marker Run Control A run control designed to be used with several
tests for different analytes or markers. These
controls are designed to cover groups of markers
that are tested in the same laboratory section,
e.g., Accurun 1(R) is a multi-marker run control
for blood bank tests.
Nucleic Acids Two families of compounds called deoxyribonucleic
acid (DNA) and ribonucleic acid (RNA) that carry
the coded information from which all living
organisms are made.
Pathogen An organism that causes disease in the study
subjects (e.g., a virus which causes disease in
humans is human pathogen; an insect that causes
disease in a plant is a plant pathogen).
PCR Polymerase Chain Reaction, a sequence of chemical
steps using DNA primers (short pieces of nucleic
acids) to locate and copy (amplify) specific
sequences of DNA, if present, to a concentration
high enough for chemical detection.
Performance Panels A set of serum and plasma samples collected from
many different individuals and characterized for
the presence or absence of a particular disease
marker.
Plasma The clear liquid portion of blood which contains
clotting factors, proteins, antibodies, hormones,
electrolytes and other components dissolved in
water. Plasma differs from serum only in that
plasma contains clotting factors in addition to
its other components, and serum does not.
Qualification Panels Dilutions of human plasma or serum manifesting a
full range of reactivities in test kits for a
specific marker.
Qualitative Test An assay for which the reportable results are
positive, negative or indeterminate. An
alternative set of terms sometimes used to express
qualitative test results is reactive, non-reactive
or gray zone.
Quality Control Products Materials including characterized samples of
various kinds, data sheets and software, all
designed for use in the performance evaluation of
in vitro diagnostic tests during their
development, manufacture or use.
Quantitative Test An assay for which the reportable results are
numeric.
Reactivity Test result for a qualitative test; can take one
of three forms: positive, negative or
indeterminate.
Reagent A substance, usually a chemical solution, used as
a component of an in vitro diagnostic test.
G-3
Retrovirus A virus with its genetic information encoded in
RNA rather than DNA. HIV is a retrovirus.
RNA Ribonucleic acid, with DNA, a class of molecules
called nucleic acids. RNA functions with DNA in
most organisms to translate the coded genetic
information into the organism itself. In some
viruses, RNA substitutes for DNA in carrying the
coded information from which the organism is made.
HIV and HCV are RNA viruses.
Run Controls Well-characterized samples designed to resemble
the donor and patient samples routinely tested
with a given method, manufactured to specific
levels of reactivity and provided in quantities
sufficient to be used each time the test is run,
over a period of time, so that test performance
can be continuously monitored.
Sensitivity The ability of a test to detect accurately small
quantities of a substance of interest. The greater
the sensitivity, the smaller the quantity of the
substance the test can detect, and the fewer false
negatives will be reported. Sensitivity and
specificity are two important measures of the
quality of a test.
Sensitivity Panels Precise dilutions of human plasma or serum
containing a known amount of an infectious disease
marker as calibrated against international
standards.
Seroconversion Panels Plasma samples collected from a single individual
over a specific time period showing conversion
from negative to positive for markers of an
infectious disease.
Serum The clear liquid portion of blood which contains
proteins, antibodies, hormones, electrolytes and
other components dissolved in water. Serum differs
from plasma only in that serum does not contain
clotting factors.
Single Analyte Run Control A run control designed to be used with tests for a
single analyte or marker, e.g., Accurun 106 is a
positive control for HIV antigen tests from
several manufacturers.
Specificity The ability of a test to distinguish between
similar materials. The greater the specificity,
the better a test is at identifying a substance in
the presence of substances of similar makeup, and
the fewer false positives will be reported.
Sensitivity and specificity are two important
measures of the quality of a test.
Therapeutic Index A mathematical description of the potential
usefulness of a candidate drug, based on its
toxicity to the host system versus its
effectiveness against the pathogen. The
Therapeutic Index of a candidate drug is compared
to the Therapeutic Index in the same test system
of a drug already in use for the disease being
studied.
G-4
Titer An approximation of the quantity of a marker in a
qualitative test, arrived at by diluting the
sample repeatedly and testing the dilutions until
the marker is no longer detected by the test
method.
Toxoplasma A protozoan parasite, ubiquitous in the
environment, and which causes Toxoplasmosis.
Toxoplasmosis is commonly acquired by eating food
contaminated by cysts. Pregnant women may be at
risk of acquiring Toxoplasmosis from cats, with
subsequent infection of the baby.
Virus A microorganism dependent on host cells in order
to grow and reproduce.
Western Blot Method The standard diagnostic method for confirmation of
the presence of an infectious disease marker (e.g.
HIV, Borrelia burgdorferi), in which lysate (a
mixture of proteins) is separated on a gel by
electrochemical means and then transferred to a
nitrocellulose filter. The filter is then tested
against a blood sample to identify antibodies to
the proteins.
G-5
Photograph showing certain of the Company's Quality Control Panel Products,
including Seroconversion and Performance Panels.
================================================================================
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFERING DESCRIBED HEREIN, AND, IF GIVEN OR
MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY, OR THE UNDERWRITERS. NEITHER THE DELIVERY
OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF
ANY TIME SUBSEQUENT TO ITS DATE. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THOSE
SPECIFICALLY OFFERED HEREBY OR OF ANY SECURITIES OFFERED HEREBY IN ANY
JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE AN OFFER OR
SOLICITATION IN SUCH JURISDICTION. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER
TO SELL OR A SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY
CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
----------
TABLE OF CONTENTS
PAGE
----
Prospectus Summary 3
Risk Factors 6
Use of Proceeds 14
Dividend Policy 14
Capitalization 15
Dilution 16
Selected Consolidated Financial Data 17
Management's Discussion and Analysis of
Financial Condition and Results of
Operations 19
Business 25
Management 40
Certain Transactions 44
Principal Stockholders 45
Description of Capital Stock 46
Shares Eligible for Future Sale 48
Underwriting 49
Legal Matters 50
Experts 50
Additional Information 50
Index to Consolidated Financial Statements F-1
Glossary G-1
UNTIL , 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS) ALL DEALERS
EFFECTING TRANSACTIONS IN THE SHARES OF COMMON STOCK, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATIONS OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
================================================================================
1,600,000 SHARES
[LOGO]
BOSTON BIOMEDICA, INC.
COMMON STOCK
----------
PROSPECTUS
----------
OSCAR GRUSS & SON INCORPORATED
KAUFMAN BROS., L.P.
, 1996
================================================================================
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
TOTAL
EXPENSES
--------
SEC Registration Fee $ 8,508
NASD Filing Fee 2,708
Nasdaq National Market Listing Fee 30,000*
Blue Sky Fees and Expenses 15,000*
Underwriters' Non-Accountable Expense
Allowance 144,000*
Transfer Agent and Registrar Fees 2,500*
Accounting Fees and Expenses 150,000*
Legal Fees and Expenses 300,000*
Printing and Engraving 60,000*
Miscellaneous 79,284*
---------
TOTAL $792,000*
=========
- ---------
* Estimate
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Amended and Restated By-Laws include provisions to permit the
indemnification of officers and directors of the Company for damages arising out
of the performance of their duties unless such damages arise out of the
officer's or director's failure to exercise his duties and to discharge the
duties of his office in good faith and in the reasonable belief that his action
was in, or not opposed to, the best interest of the Company, and with respect to
any criminal action or proceeding, had no reasonable cause to believe that his
conduct was unlawful. The Company intends to enter into indemnification
contracts with each of its directors and officers. Reference is hereby made to
the caption "Management -- Limitation of Officers' and Directors' Liability;
Indemnification Agreements."
Reference is hereby made to the caption "Description of Capital Stock --
Limitation of Directors' Liability" in the Prospectus, which is a part of this
Registration Statement.
Reference is hereby made to Section 6 of the Underwriting Agreement between
the Company and the Underwriter, filed as Exhibit 1.1 to this Registration
Statement, for a description of indemnification arrangements between the Company
and the Underwriter.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
The following information is furnished with regard to all securities issued
by the Registrant within the past three years which were not registered under
the Securities Act.
In August 1996, the stockholders of the Registrant voted to approve an
amendment to the Registrant's Articles of Organization to effect a one-for-two
reverse stock split of the Registrant's Common Stock, $.01 par value per share.
All references to number of shares of Common Stock give effect to this stock
split.
II-1
(1) In August 1993, the Registrant sold to eight individual investors an
aggregate of 45,000 shares of Common Stock for total cash consideration of
$202,500, at a price per share of $4.50, and to another investor 1,958 shares of
Common Stock in exchange for services rendered valued at $8,811, which
securities were not registered under the Securities Act.
(2) In April 1994, the Registrant sold to eight individual investors an
aggregate of 21,200 shares of Common Stock, for total consideration of $127,200
at a price per share of $6.00, which securities were not registered under the
Securities Act.
(3) From June through December 1994, the Registrant sold the following at
$6.00 per share: to one investor 5,000 shares of Common Stock for cash
consideration of $30,000, to a second investor 1,167 shares of Common Stock for
cash consideration of $3,501 and in exchange for services rendered valued at
$3,501, and to a third investor 2,494 shares in exchange for services rendered
valued at $14,964, which securities were not registered under the Securities
Act.
(4) In November and December 1995, the Registrant sold to two investors an
aggregate of 7,800 shares of Common Stock for total cash consideration of
$54,600 at a price of $7.00, and to another investor 734 shares of Common Stock
in exchange for services rendered valued at $5,138, which securities were not
registered under the Securities Act.
(5) On April 26, 1996, the Registrant sold 117,647 shares of Common Stock to
Kyowa Medex, Co., Ltd. for total cash consideration of $1,000,000, which
securities were not registered under the Securities Act.
(6) For the period August 1, 1993 to date, the Registrant granted to
directors, officers, employees and consultants, 15,000 ($6.00 per share), 63,000
($4.50 to $7.00 per share), 244,037 ($4.50 to $8.50 per share), and 8,000 ($6.00
per share), respectively, options to purchase shares of Common Stock under the
Registrant's 1987 Non-Qualified Stock Option Plan or Employee Stock Option Plan,
which securities were not registered under the Securities Act.
(7) During the period from March 1994 through June 1996, the Registrant
issued an aggregate of 88,993 shares to fifteen persons pursuant to the exercise
of options, warrants or convertible notes of the Registrant for exercise prices
ranging from $0.25 to $5.20 per share (an aggregate exercise price of
$219,977.50), which securities were not registered under the Securities Act.
To the extent that the foregoing transactions constituted "sales" within the
meaning of the Securities Act, the securities issued in such transactions were
not registered under the Securities Act, as amended, in reliance upon the
exemptions from registration set forth in Section 3(b) and 4(2) of the
Securities Act, relating to sales by an issuer not involving any public
offering, or in reliance upon Regulation S of the Securities Act relating to
sales by an issuer of securities outside the United States. None of the
foregoing transactions, either individually or in the aggregate, involved a
public offering.
ITEM 16. FINANCIAL STATEMENT SCHEDULE AND EXHIBITS
<TABLE>
<CAPTION>
SCHEDULE
NO.
---
<S> <C>
II -- Valuation and Qualifying Accounts
</TABLE>
<TABLE>
<CAPTION>
EXHIBIT
NO.
---
<S> <C>
1.1 -- Form of Underwriting Agreement***
3.1 -- Amended and Restated Articles of Organization of the Registrant
3.2 -- Amended and Restated By-Laws of the Registrant
4.1 -- Description of Certificate for Shares of the Registrant's Common Stock
</TABLE>
II-2
<TABLE>
<CAPTION>
EXHIBIT
NO.
---
<S> <C>
5.1 -- Legal Opinion of Brown, Rudnick, Freed & Gesmer***
10.1 -- Agreement, dated January 17, 1994, between Roche Molecular Systems, Inc. and the
Registrant*
10.2 -- Exclusive License Agreement, dated December 6, 1994, between the University of
North Carolina at Chapel Hill and the Registrant**
10.3 -- Contract, dated September 30, 1995, between the National Institutes of Health
and the Registrant (No. 1-AI-55273)**
10.4 -- Contract, dated September 30, 1995, between the National Institutes of Health
and the Registrant (No. 1-AI-55277)**
10.5 -- Contract, dated March 1, 1993, between the National Cancer Institute and the
Registrant**
10.6 -- Agreement, dated October 1, 1995, between Ajinomoto Co., Inc. and the Registrant**
10.7 -- Lease Agreement, dated June 30, 1992, for Rockville, Maryland Facility between
Cambridge Biotech Corporation and the Registrant**
10.8 -- Lease Agreement, dated July 28, 1995, for New Britain, Connecticut Facility between
MB Associates and the Registrant**
10.9 -- Worcester County Institution for Savings Warrant dated December 1, 1995 (No. 1)*
10.10 -- Worcester County Institution for Savings Warrant dated July 26, 1993 (No. 2)*
10.11 -- Stock Purchase Agreement, dated June 5, 1990, between G&G Diagnostics Limited
Partnership I and the Registrant, as amended*
10.12 -- Purchase and Sale Agreement, dated December 11, 1995, for 375 West Street Property
between James Leonard, Trustee, C.W.B. Trust and the Registrant*
10.13 -- Purchase and Sale Agreement, dated December 20, 1995, for 80 Manley Street Property
between the Registrant and Donald M. Leonard, Trustee, Live Oak Realty Trust*
10.14 -- Stock Purchase Agreement, dated April 26, 1996, between Kyowa Medex Co., Ltd.
and the Registrant*
10.15 -- 1987 Non-Qualified Stock Option Plan*
10.16 -- Employee Stock Option Plan*
10.17 -- Form of Underwriters Warrant (contained in Exhibit 1.1)***
10.18.1 -- Second Amended and Restated Loan and Security Agreement,
dated August 2, 1995, between the First National Bank of Boston
and the Registrant, as amended*
10.18.2 -- Note Payable to The First National Bank of Boston, dated
October 1994, in the amount of $200,000
10.18.3 -- Note Payable to The First National Bank of Boston, dated October 1994, in the
amount of $849,000
10.18.4 -- Note Payable to The First National Bank of Boston, dated August 1995, in the amount
of $350,000
10.18.5 -- Note Payable to The First National Bank of Boston, dated December 1995, in the
amount of $100,000
10.18.6 -- Mortgage Note to The First National Bank of Boston, dated December 1995, in the
amount of $750,000
10.18.7 -- Note Payable to The First National Bank of Boston, dated July 1996, in the amount
of $250,000
10.19 -- Form of Indemnification Agreement with Officers and Directors*
</TABLE>
II-3
<TABLE>
<CAPTION>
EXHIBIT
NO.
---
<S> <C>
10.20 -- Purchase Agreement, dated October 7, 1996, between BioSeq, Inc. and the Registrant
10.21 -- Warrant Agreement, dated October 7, 1996, between BioSeq, Inc. and the Registrant
10.22 -- Stockholders' Agreement, dated October 7, 1996, between BioSeq, Inc. and the Registrant
10.23 -- License Agreement, dated October 7, 1996, between BioSeq, Inc. and the Registrant
11 -- Statement re Computation of Per Share Earnings
21 -- Subsidiaries of the Registrant*
23.1 -- Consent of Brown, Rudnick, Freed & Gesmer (contained in Exhibit 5.1)***
23.2 -- Consent of Coopers & Lybrand L.L.P., independent accountants
24 -- Power of Attorney*
27 -- Financial Data Schedule*
</TABLE>
* Previously filed.
** Confidential Treatment requested for certain portions of this document which
has been previously filed.
*** To be filed by amendment.
ITEM 17. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table in
the effective registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment 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.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the Offering.
(b) The undersigned Registrant hereby undertakes to provide to the
underwriter at the closing specified in the underwriting agreements certificates
in such denominations and registered in such names as required by the
underwriter to permit prompt delivery to each purchaser.
(c) 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 Registrant's By-Laws, the Underwriting Agreement
relating to this Offering, or otherwise, the Registrant has been
II-4
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.
(d) The undersigned Registrant hereby further 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-5
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of West
Bridgewater, Commonwealth of Massachusetts, on October 8, 1996.
BOSTON BIOMEDICA, INC.
By: /s/ RICHARD T. SCHUMACHER
-----------------------------
RICHARD T. SCHUMACHER
PRESIDENT
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 1 TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN
THE CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ RICHARD T. SCHUMACHER Principal Executive Officer October 8, 1996
---------------------- and Director
RICHARD T. SCHUMACHER
/s/ KEVIN W. QUINLAN Principal Financial and Accounting October 8, 1996
------------------- Officer and Director
KEVIN W. QUINLAN
* Director October 8, 1996
-------------------
HENRY A. MALKASIAN
* Director October 8, 1996
-------------------
FRANCIS E. CAPITANIO
* Director October 8, 1996
--------------------
CALVIN A. SARAVIS
*By /s/ RICHARD T. SCHUMACHER
----------------------
RICHARD T. SCHUMACHER
ATTORNEY-IN-FACT
</TABLE>
II-6
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
BOSTON BIOMEDICA, INC.:
In connection with our audits of the consolidated financial statements of
Boston Biomedica, Inc. and Subsidiaries, as of December 31, 1994 and 1995, and
for each of the three years in the period ended December 31, 1995, which
financial statements are included in this Amendment No. 1 to the Registration
Statement on Form S-1 (File No. 333-10759), we have also audited the
consolidated financial statement schedule listed in Item 16 herein.
In our opinion, this consolidated financial statement schedule, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
March 12, 1996
S-1
SCHEDULE II
BOSTON BIOMEDICA, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
RECOVERIES
BALANCE AT FOR ACCOUNTS UNCOLLECTIBLE BALANCE AT
BEGINNING PROVISION FOR PREVIOUSLY ACCOUNTS END OF
ALLOWANCE FOR DOUBTFUL ACCOUNTS OF PERIOD BAD DEBT WRITTEN OFF WRITTEN OFF PERIOD
------------------------------- --------- -------- ----------- ----------- ------
<S> <C> <C> <C> <C> <C>
Six months ended June 30, 1996 $142,372 $ 77,145 -- $ (85,938) $133,579
1995 94,723 181,084 -- (133,435) 142,372
1994 43,956 102,099 -- (51,332) 94,723
1993 21,000 22,956 -- -- 43,956
</TABLE>
S-2
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
------ ----------- ----
<S> <C> <C>
1.1 -- Form of Underwriting Agreement***
3.1 -- Amended and Restated Articles of Organization of the Registrant
3.2 -- Amended and Restated By-Laws of the Registrant
4.1 -- Description of Certificate for Shares of the Registrant's Common Stock
5.1 -- Legal Opinion of Brown, Rudnick, Freed & Gesmer***
10.1 -- Agreement, dated January 17, 1994, between Roche Molecular Systems, Inc. and
the Registrant*
10.2 -- Exclusive License Agreement, dated December 6, 1994, between the University
of North Carolina at Chapel Hill and the Registrant**
10.3 -- Contract, dated September 30, 1995, between the National Institutes of Health
and the Registrant (No. 1-AI-55273)**
10.4 -- Contract, dated September 30, 1995, between the National Institutes of Health
and the Registrant (No. 1-AI-55277)**
10.5 -- Contract, dated March 1, 1993, between the National Cancer Institute and the
Registrant**
10.6 -- Agreement, dated October 1, 1995, between Ajinomoto Co., Inc. and the Registrant**
10.7 -- Lease Agreement, dated June 30, 1992, for Rockville, Maryland Facility between
Cambridge Biotech Corporation and the Registrant**
10.8 -- Lease Agreement, dated July 28, 1995, for New Britain, Connecticut Facility
between MB Associates and the Registrant**
10.9 -- Worcester County Institution for Savings Warrant dated December 1, 1995 (No.
1)*
10.10 -- Worcester County Institution for Savings Warrant dated July 26, 1993
(No. 2)*
10.11 -- Stock Purchase Agreement, dated June 5, 1990, between G&G
Diagnostics Limited Partnership I and the Registrant, as
amended*
10.12 -- Purchase and Sale Agreement, dated December 11, 1995, for 375 West Street
Property between James Leonard, Trustee, C.W.B. Trust and the Registrant*
10.13 -- Purchase and Sale Agreement, dated December 20, 1995, for 80 Manley Street
Property between the Registrant and Donald M. Leonard, Trustee, Live Oak Realty
Trust*
10.14 -- Stock Purchase Agreement, dated April 26, 1996, between Kyowa Medex Co., Ltd.
and the Registrant*
10.15 -- 1987 Non-Qualified Stock Option Plan*
10.16 -- Employee Stock Option Plan*
10.17 -- Form of Underwriters Warrant (contained in Exhibit 1.1)***
10.18.1 -- Second Amended and Restated Loan and Security Agreement, dated
August 2, 1995, between the First National Bank of Boston and the
Registrant, as amended*
10.18.2 -- Note Payable to The First National Bank of Boston, dated
October 1994, in the amount of $200,000
10.18.3 -- Note Payable to The First National Bank of Boston, dated October 1994, in
the amount of $849,000
</TABLE>
INDEX TO EXHIBITS (CONTINUED)
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
------ ----------- ----
<S> <C> <C>
10.18.4 -- Note Payable to The First National Bank of Boston, dated August 1995, in the
amount of $350,000
10.18.5 -- Note Payable to The First National Bank of Boston, dated December 1995, in
the amount of $100,000
10.18.6 -- Mortgage Note to The First National Bank of Boston, dated December 1995, in
the amount of $750,000
10.18.7 -- Note Payable to The First National Bank of Boston, dated July 1996, in the
amount of $250,000
10.19 -- Form of Indemnification Agreement with Officers and Directors*
10.20 -- Purchase Agreement, dated October 7, 1996, between BioSeq, Inc. and the Registrant
10.21 -- Warrant Agreement, dated October 7, 1996, between BioSeq, Inc. and the Registrant
10.22 -- Stockholders' Agreement, dated October 7, 1996, between BioSeq, Inc. and the
Registrant
10.23 -- License Agreement, dated October 7, 1996, between BioSeq, Inc. and the Registrant
11 -- Statement re Computation of Per Share Earnings
21 -- Subsidiaries of the Registrant*
23.1 -- Consent of Brown, Rudnick, Freed & Gesmer (contained in Exhibit 5.1)***
23.2 -- Consent of Coopers & Lybrand L.L.P., independent accountants
24 -- Power of Attorney*
27 -- Financial Data Schedule*
</TABLE>
- -----------
* Previously filed.
** Confidential Treatment requested for certain portions of this document which
has been previously filed.
*** To be filed by amendment.
EXHIBIT 3.1
THE COMMONWEALTH OF MASSACHUSETTS
MICHAEL JOSEPH CONNOLLY FEDERAL IDENTIFICATION
- ------------- Secretary of State
Examiner ONE ASHBURTON PLACE, BOSTON, MASS: 02108 NO. 04-2652826
-----------
RESTATED ARTICLES OF ORGANIZATION
General Laws, Chapter 156B, Section 74
This certificate must be submitted to the Secretary of the Commonwealth within
sixty days after the date of the vote of stockholders adopting the restated
articles of organization. The fee for filing this certificate is prescribed by
General Laws, Chapter 156B, Section 114. Make check payable to the Commonwealth
of Massachusetts.
-----------
We, Richard T. Schumacher , President and
Howard L. Levin , Clerk of
Boston Biomedica Inc.
- --------------------------------------------------------------------------------
(Name of Corporation)
located at 375 West Street, West Bridgewater
----------------------------------------------------------------------
do hereby certify that the following restatement of the articles of organization
of the corporation was duly adopted at a meeting held on September 5 , 1996,
by vote of
4,812,307 shares of common stock out of 5,380,130 shares outstanding,
- ------------ -------------------- ------------
(Class of Stock)
shares of out of shares outstanding, and
- ------------ ------------------- ---------
(Class of Stock)
shares of out of shares outstanding,
- ------------ ------------------- -------------
(Class of Stock)
being at least two-thirds of each class of stock outstanding and entitled to
vote and of each class or series of stock adversely affected thereby: -
1. The name by which the corporation shall be known is: -
Boston Biomedica, Inc.
2. The purposes for which the corporation is formed are as follows: -
C [ ] To engage generally in the clinical laboratory business relating to the
P [ ] testing of blood and doing all other types of medical testing, and in
M [ ] connection there with, obtaining blood, doing research therein and
RA [ ] supplying same to other institutions for research purposes, and to
carry on any other business, and to do and perform any other lawful
acts and businesses necessary or incidental to the above-stated
purposes. To have in furtherance of the corporate purposes, all the
powers conferred upon corporations organized under the Business corp-
oration Law subject to the limitations thereof contained in these
Restated Articles of Organization or in the Laws of the Commonwealth
of Massachusetts. To carry on any business or activity permitted by the
laws of the Commonwealth of Massachusetts to a corporation organized
under the provisions of Chapter 156B of the General Laws, whether or
not related to those in the foregoing.
- --------
P.C.
Note: If the space provided under any article or item on this form is
insufficient, additions shall be set forth on separate 81/2 x 11 sheets of
paper leaving a left hand margin of at least 1 inch for binding. Additions
to more than one article may be continued on a single sheet so long as each
article requiring each such addition is clearly indicated.
3. The total number of shares and the par value, if any, of each class of
stock which the corporation is authorized to issue is as follows:
WITHOUT PAR VALUE WITH PAR VALUE
----------------- --------------
CLASS OF STOCK NUMBER OF SHARES NUMBER OF SHARES PAR VALUE
- -------------- ---------------- ---------------- ---------
PREFERRED 1,000,000 $.01
COMMON 20,000,000 $.01
Please see Contination Pages marked Article 3(a)
*4.If more than one class is authorized, a description of each of the
different classes of stock with, if any, the preferences, voting powers,
qualifications, special or relative rights or privileges as to each
class thereof and any series now established:
Please see Continuation Pages marked Article 4
*5.The restrictions, if any, imposed by the artcles of organization upon
the transfer of shares of stock of any class are as follow:
None
*6.Other lawful provisions, if any, for the conduct and regulation of the
business and affairs of the corporation, for its voluntary dissolution,
or for limiting, defining, or regulating the powers of the corporation,
or of its directors or stockholders or of any class of stockholders:
Please see Continuation Pages marked Article 6
*If there are no such provisions, state "None".
BOSTON BIOMEDICA, INC.
RESTATED ARTICLES OF ORGANIZATION
CONTINUATION PAGES
ARTICLE 3(a)
Simultaneously with the effective date of this amendment (the
"Effective Date"), each share of the Corporation's Common Stock, $.01 par value
per share, issued and outstanding immediately prior to the Effective Date (the
"Old Shares") shall automatically and without any action on the part of the
holder thereof be reclassified as and changed into one-half of a share of the
Corporation's Common Stock, $.01 par value per share (the "New Shares"), subject
to the treatment of fractional share interests as described below. Each holder
of a certificate or certificates which immediately prior to the Effective Date
represented outstanding Old Shares (the "Old Certificates," whether one or more)
shall be entitled to receive upon surrender of such Old Certificates to the
Corporation for cancellation, a certificate or certificates (the "New
Certificates," whether one or more) representing the number of whole New Shares
into which and for which the Old Shares formerly represented by such Old
Certificates so surrendered are reclassified under the terms hereof. From and
after the Effective Date, Old Certificates shall represent only the right to
receive New Certificates (and, where applicable, one New Share in lieu of
fractional shares, as provided below) pursuant to the provisions hereto. No
certificates or scrip representing fractional share interests in New Shares will
be issued, and no such fractional share interest will entitle the holder thereof
to vote, or to any rights of a shareholder of the Corporation. A holder of Old
Certificates shall receive, in lieu of any fraction of a share of New Shares to
which the holder would otherwise be entitled, one additional New Share. If more
than one Old Certificate shall be surrendered at one time for the account of the
same stockholder, the number of full New Shares for which New Certificates shall
be issued shall be computed on the basis of the aggregate number of shares
represented by the Old Certificates so surrendered. In the event that the
Corporation determines that a holder of Old Certificates has not tendered all
his certificates for exchange, the Corporation shall carry forward any
fractional shares until all certificates of that holder have been presented for
exchange such that payment for fractional shares to any one person shall not
exceed the number of New Shares to which the holder would have been entitled if
all certificates of that holder had been presented for exchange at one time. If
any New Certificate is to be issued in a name other than that in which the Old
Certificates surrendered for exchange are issued, the Old Certificates so
surrendered shall be properly endorsed and otherwise delivered in proper form
for transfer, and the person or persons requesting such exchange shall affix any
requisite stock transfer tax stamps to the Old Certificates surrendered, or
provide funds for their purchase, or establish to the satisfaction of the
Corporation that such taxes are not payable. From and after the Effective Date
the amount of capital represented by the New Shares into which and for which Old
Shares are reclassified under the terms hereof shall be the same as the amount
of capital represented by the Old Shares so reclassified, until thereafter
reduced or increased in accordance with applicable law.
BOSTON BIOMEDICA, INC.
RESTATED ARTICLES OF ORGANIZATION
CONTINUATION PAGES
ARTICLE 4
The classes of stock of the Corporation authorized by this Article 4
shall have the preferences, voting powers, qualifications, and special or
relative rights or privileges as to each class thereof and any series now
established as set forth in this Article 4. Stock of any class or series
authorized pursuant hereto may be issued from time to time by authority of the
Board of Directors for such consideration as from time to time may be fixed by
vote of the Board of Directors.
PART I - COMMON STOCK
The holders of the Common Stock shall be entitled to one vote per share
and, subject to the rights and preferences of the holders of the Preferred Stock
and any other class of stock ranking senior to or on a parity with the Common
Stock, shall be entitled to dividends when, as and if declared and paid to the
holders of Common Stock, and upon liquidation, dissolution or winding up of the
Corporation, to share ratably in the assets available for distribution to the
holders of the Common Stock.
PART II - PREFERRED STOCK
Preferred Stock may be issued by the Board of Directors, in one or more
series and with such rights, powers, preferences and terms and at such times and
for such consideration as the Board of Directors shall determine, without
further stockholder action. With respect to each series of Preferred Stock,
prior to issuance, the Board of Directors by resolution shall designate that
series to distinguish it from other series and classes of stock of the
Corporation, shall specify the number of shares to be included in the series,
and shall fix the rights, powers, preferences and terms of the shares of the
series, including, but without limitation: (i) the dividend rate, which may be
fixed or variable, its preference as to any other class or series of capital
stock, and whether dividends will be cumulative or non-cumulative; (ii) whether
the shares are to be redeemable and, if so, at what times and prices (which
price or prices may, but need not, vary according to the time or circumstances
of such redemption) and on what other terms and conditions; (iii) the terms and
amount of any sinking fund provided for the purchase or redemption of the
shares; (iv) whether the shares shall be convertible or exchangeable and, if so,
the times, prices, rates, adjustments and other terms of such conversion or
exchange; (v) the voting rights, if any, applicable to the shares in addition to
those prescribed by law; (vi) the restrictions and conditions, if any, on the
issue or reissue of any additional shares of such series or of any other series
of Preferred Stock ranking on a parity with or prior to the shares of such
series; (vii) whether, and the extent to which, any of the rights, powers,
preferences and terms of any such series may be made dependent upon facts
ascertainable outside of the Articles of
Organization or outside the resolution or resolutions providing for the issuance
of such series by the Board of Directors, provided that the manner in which such
facts shall operate is clearly set forth in the resolution or resolutions
providing for the issuance of such series adopted by the Board of Directors; and
(viii) the rights of the holders of such shares upon voluntary or involuntary
liquidation, dissolution or winding up of the Corporation.
BOSTON BIOMEDICA, INC.
RESTATED ARTICLES OF ORGANIZATION
CONTINUATION PAGES
ARTICLE 6
The other lawful provisions for the conduct and regulation of business
and affairs of the corporation, for its voluntary dissolution, or for limiting,
defining or regulating the powers of the corporation, or of its directors or
stockholders, or any class of stockholders, are set forth in this Article 6.
A. DEFINITIONS
The following definitions shall apply for the purpose of this Article 6:
(a)"Affiliate" shall have the meaning given such term Rule 12b-2 under
the Exchange Act.
(b) "Announcement Date" shall mean the date of first public announcement
of the proposal of a Business Combination.
(c) "Associate" shall have the meaning given such term in Rule 12b-2
under the Exchange Act.
(d) "Business Combination" shall mean:
(i) any merger or consolidation of the Corporation or any Subsidiary
with (a) any Related Person, or (b) any other Person (whether or
not itself a Related Person) which is, or after such merger or
consolidation would be, an Affiliate of a Related Person; or
(ii) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of transactions) to
or with any Related Person or any Affiliate of any Related Person
of any assets of the Corporation or any Subsidiary having an
aggregate Fair Market Value in excess of ten percent (10%) of the
Corporation's total stockholder's equity as reflected on the
Corporation's most recent audited financial statements; or
(iii) the issuance or transfer by the Corporation or any Subsidiary (in
one transaction or a series of transactions) of any securities of
the Corporation or any Subsidiary to any Related Person or any
Affiliate of any Related Person in exchange for cash, securities
or other property (or a combination thereof) having an aggregate
Fair Market Value in excess of ten percent (10%) of the
Corporation's total stockholders' equity as reflected on the
Corporation's most recent audited financial statements; or
(iv) the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation proposed by or on behalf of any
Related Person or any Affiliate of any Related Person; or
(v) any reclassification of securities (including any reverse stock
split), or recapitalization of the Corporation, or any merger or
consolidation of the Corporation with any of its Subsidiaries or
any other transaction (whether or not with or into or otherwise
involving the Related Person) which has the effect, directly or
indirectly, of increasing the proportionate share of securities
of the Corporation or any Subsidiary which is directly or
indirectly owned by any Related Person or any Affiliate of any
Related Person.
(e) "Continuing Director" shall mean any member of the Board of
Directors who is not an Affiliate of any Related Person and who was a member of
the Board of Directors prior to the time that any such Related Person became a
Related Person, and any successor of a Continuing Director who is unaffiliated
with any Related Person and is recommended to succeed a Continuing Director by a
majority of the Continuing Directors then on the Board of Directors.
Notwithstanding the above, a majority of the then existing Continuing Directors
can deem a new director to be a Continuing Director, even though such person is
Affiliated with a Related Person.
(f) "Determination Date" shall mean the date upon which the Business
Combination is consummated.
(g) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, from time to time.
(h) "Fair Market Value" shall mean: (i) in the case of stock, the
highest closing sale price during the 30-day period immediately preceding the
date in question of a share of such stock on the principal United States
securities exchange or quotation system on which such stock is listed or quoted,
or, if no such price or quotations are available, the highest closing bid price
of a share of such stock during such period on the quotation system on which
such stock is then quoted, or, if no such quotations are available, the fair
market value on the date in question of a share of such stock as determined by
the Board of Directors in good faith; and (ii) in the case of property other
than cash or stock, the fair market value of such property on the date in
question as determined by the Board of Directors in good faith.
(i) "Person" shall mean any individual, firm, partnership, joint
venture, joint stock company, trust, business trust, corporation, limited
liability partnership, limited liability corporation, unincorporated association
or other entity of whatsoever nature.
(j) "Related Person" shall mean any Person (other than the Corporation,
any Subsidiary or any individual who was a stockholder of the Corporation on
July 31, 1996) which, together with such Person's Affiliates and Associates and
with any other Person (other than the Corporation, any Subsidiary, or any
individual who was a stockholder of the Corporation on July
-2-
31, 1996) with which such Person or they have entered into any agreement,
arrangements or understanding with respect to acquiring, holding or disposing of
voting stock, acquires beneficial ownership (as defined in Rule 13d-3 of the
Exchange Act, except that such term shall include any voting stock which such
person has the right to acquire, whether or not such right may be exercised
within 60 days), directly or indirectly of more than five percent (5%) of the
voting power of the outstanding voting stock after July 31, 1996.
(k) "Subsidiary" shall mean any corporation in which a majority of the
capital stock entitled to vote generally in the election of directors is owned,
directly or indirectly, by the Corporation.
(l) "Voting Stock" shall mean all the then outstanding shares of capital
stock entitled to vote generally in the election of directors.
B. CLASSIFICATION OF BOARD OF DIRECTORS AND RELATED MATTERS.
(a) Number, Election and Terms of Directors
1. Subject to the rights of the holders of any class or series of stock
having a preference over the Corporation's voting stock as to dividends or upon
liquidation to elect additional directors under specific circumstances, the
number of directors shall be fixed from time to time exclusively by the Board of
Directors pursuant to a resolution adopted by a majority of the Continuing
Directors or by the affirmative vote of the holders of at least eighty percent
(80%) of the shares of voting stock outstanding, voting as a single class
(whether or not there exist any vacancies in previously authorized directorships
at the time any such resolution is presented to the Board of Directors for
adoption). After the 1996 annual meeting of stockholders, the Board of Directors
shall vote to cause the directors, other than those who may be elected by the
holder of any class or series of stock having a preference over the voting stock
as to dividends or upon liquidation, to be divided into three classes, as nearly
equal in number as possible, with the term of office of the first class to
expire at the 1997 annual meeting of stockholders, the term of office of the
second class to expire at the 1998 annual meeting of stockholders and the term
of office of the third class to expire at the 1999 annual meeting of
stockholders. At each annual meeting of stockholders following such initial
classification and election, the successors of those directors whose terms
expire at that meeting shall be elected by a plurality vote of all votes cast at
such meeting for a term of office to expire at the third succeeding annual
meeting of stockholders after their election, unless by reason of any
intervening changes in the authorized number of directors, the Board of
Directors shall designate one or more of the then expired directorships as
directorships of another class in order more nearly to achieve equality of
number of directors among the classes.
2. The number of the Board of Directors may be changed by a vote of a
majority of the Continuing Directors then in office or by the stockholders by
vote of eighty percent (80%) of the shares of voting stock outstanding, voting
as a single class.
3. Notwithstanding the rule that the three classes shall be as nearly
equal in number of directors as possible, in the event of any change in the
authorized number of directors, each
-3-
director then continuing to serve as such, shall nevertheless continue as a
director of the class of which he is a member until the expiration of his
current term, or his prior death, resignation or removal. If any newly created
directorship may, consistent with the rule that the three classes shall be as
nearly equal in number of directors as possible, be allocated to one of two or
more classes, the Board of Directors shall allocate it to that of the available
classes whose term of office is due to expire at the earliest date following
such allocation.
(b) Newly Created Directorships and Vacancies
Except as otherwise provided for or fixed by or pursuant to the
provisions of these Articles of Organization relating to the rights of the
holders of any class or series of stock having a preference over the voting
stock as to dividends or upon liquidation to elect directors under specified
circumstances, newly created directorships resulting from any increase in the
number of directors and any vacancies on the Board of Directors resulting from
death, resignation, disqualification, removal or other cause shall be filled
only by the affirmative vote of a majority of a majority of the Continuing
Directors, even though less than a quorum of the Board of Directors. Any
director elected in accordance with the preceding sentence shall hold office for
the remainder of the full term of the class of directors in which the new
directorship was created or the vacancy occurred and until such director's
successor shall have been elected and qualified. No decrease in the number of
directors shall shorten the term of an incumbent director.
(c) Removal
Subject to the rights of the holders of any class or series of stock
having a preference over the voting stock as to dividends or upon liquidation to
elect additional directors under specified circumstances, any director may be
removed from office with or without cause only by the affirmative vote of the
holders of at least eighty percent (80%) of the combined voting power of the
outstanding shares of voting stock, voting together as a single class.
(d) Amendment, Repeal or Alteration
Notwithstanding anything contained in these Articles of Organization to
the contrary, the affirmative vote of the holders of at least eighty percent
(80%) of the outstanding shares of voting stock, voting together as a single
class, shall be required to alter, change, amend or repeal this Section B of
Article 6 or to adopt any provision inconsistent with this Section B of Article
6.
C. FAIR PRICE PROVISION.
1. In addition to the affirmative vote otherwise required by law or any
provision of these Articles of Organization, except as otherwise provided in
Section 2 of this Section C of Article 6, any Business Combination shall require
the affirmative vote of the holders of eighty percent (80%) of the combined
voting power of all Voting Stock voting together as a single class.
Such affirmative vote shall be required notwithstanding any other
provisions of these Articles of Organization, or any provision of law or of any
agreement with any national
-4-
securities exchange which might otherwise permit a lesser vote or no vote, and
such affirmative vote of the holders of the combined voting power of the
outstanding shares of any particular class or series of the Voting Stock or
other capital stock required by law or by these Articles of Organization.
2. The provisions of Section 1 of this Section C shall not be
applicable in respect of a Business Combination if, in the case of such Business
Combination that does not involve any consideration received by the stockholders
of the Corporation, solely in their respective capacities as stockholders of the
Corporation, the condition specified in paragraph (a) below is met, or, in the
case of any other Business Combination, the conditions specified in either of
paragraphs (a) or (b) below are met; in which event, such Business Combination
shall require only such affirmative vote as is required by law, any other
provision of these Articles of Organization, or any agreement with any national
securities exchange, as the case may be:
(a) The Business Combination shall have been approved by a majority of
the Continuing Directors, it being understood that this condition shall not be
capable of satisfaction unless there is at least one Continuing Director.
(b) All of the following conditions shall have been met:
(i) The form of the consideration received by holders of shares of
a particular class of outstanding Voting Stock shall be in cash or in the same
form as the Related Person has paid for shares of such class of Voting Stock
within the two-year period ending on and including the Determination Date. If,
within such two-year period, the Related Person has paid for shares of any class
of Voting Stock with varying forms of consideration, the form of consideration
received per share by holders of shares of such class of voting stock shall be
either cash or the form used to acquire the largest number of shares of such
class of Voting Stock acquired by the Related Person within such two-year
period.
(ii) The aggregate amount of consideration received per share by
holders of each class of Voting Stock in such Business Combination shall be at
least equal to the higher of the following (it being intended that the
requirements of this paragraph (b)(ii) shall be met with respect to every such
class of Voting Stock outstanding, whether or not the Related Person has
previously acquired any shares of that particular class of Voting Stock):
(a) (if applicable) the highest per share price (including any
brokerage commission, transfer taxes and soliciting dealers'
fees) paid by the Related Person for any shares of that class
of Voting Stock acquired by it within the two-year period
immediately prior to the Announcement Date or in the
transaction in which it became a Related Person, whichever is
higher; or
(b) the Fair Market Value per share of such Voting Stock on
the Announcement Date; or
(c) in the case of any class of Preferred Stock, the highest
preferential amount per share to which the holders of shares
of such class of Voting Stock are entitled
-5-
in the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation;
(iii) After such Related Person has become a Related Person and
prior to the consummation of such Business Combination:
(a) except as approved by a majority of the Continuing
Directors, there shall have been no failure to declare and pay
at the regular date therefor any full quarterly dividends
(whether or not cumulative) on any outstanding Preferred
Stock;
(b) there shall have been (I) no reduction in the annual rate
of dividends paid on the Common Stock (except as necessary to
reflect any subdivision of the Common Stock), except as
approved by a majority of the Continuing Directors, and (II)
an increase in such annual rate of dividends as necessary to
reflect any reclassification (including any reverse stock
split, recapitalization, reorganization or any similar
transaction which has the effect of reducing the number of
outstanding shares of the Common Stock), unless the failure so
to increase such annual rate of dividends is approved by a
majority of the Continuing Directors;
(c) such Related Person shall not have become the beneficial
owner of any newly issued shares of Voting Stock directly or
indirectly from the Corporation except as part of the
transaction which results in such Related Person becoming a
Related Person;
(d) after such Related Person has become a Related Person,
such Related Person shall not have received the benefit,
directly or indirectly (except proportionately, solely in such
Related Person's capacity as a stockholder of the
Corporation), of any loans, advances, guarantees, pledges or
other financial assistance or any tax credits or other tax
advantages provided by the Corporation, whether in
anticipation of or in connection with such Business
Combination or otherwise; and
(e) a proxy or information statement describing the proposed
Business Combination and complying with the requirements of
the Exchange Act and the rules and regulations thereunder (or
any subsequent provisions replacing such Act, rules or
regulations) shall be mailed to all stockholders of the
Corporation at least 30 days prior to the consummation of such
Business Combination (whether or not such proxy or information
statement is required to be mailed pursuant to the Exchange
Act or subsequent provisions). Such proxy or information
statement shall contain on the front thereof, prominently
displayed, any recommendation as to the advisability or
inadvisability of the Business Combination which the
Continuing Directors, or any of them, may have furnished in
writing to the Board of Directors and/or shall contain an
opinion by an investment banking firm, selected by a majority
of the Continuing Directors, as to
-6-
the fairness (or unfairness) of the Business Combination to
the stockholders of the Corporation, other than the Related
Person.
3. A majority of the total number of Continuing Directors shall have
the power and duty to determine, on the basis of information known to them,
after reasonable inquiry, all facts necessary to determine compliance with this
Section E of Article 6 including, without limitation, (i) whether a person is a
Related Person, (ii) the number of shares of voting stock beneficially owned by
any person, (iii) whether the applicable conditions set forth in paragraph (b)
of subsection 2 have been met with respect to any Business Combination, and (iv)
whether the assets which are the subject of any Business Combination or the
consideration received for the issuance or transfer of securities by the
Corporation or any Subsidiary in any Business Combination have an aggregate Fair
Market Value in excess of ten percent (10%) of the Corporation's total
stockholders' equity as reflected on the Corporation's most recent audited
financial statements.
4. Nothing contained in this Section E of Article 6 shall be construed
to relieve any Related Person from any fiduciary obligation imposed by law.
5. Notwithstanding anything contained in these Articles of Organization
to the contrary, the affirmative vote of the holders of at least eighty percent
(80%) of the combined voting power of all Voting Stock, voting together as a
single class, shall be required to amend or repeal this Section C, or to adopt
any provision inconsistent herewith.
6. In the event of any inconsistencies between this Section C and
Chapter 110 F of the Massachusetts General Laws, the provisions of this Section
C shall control.
D. BY-LAWS.
The By-laws may provide that the directors may make, amend or repeal the
By-laws in whole or in part, except with respect to any provision thereof which
by law or the By-laws requires action by the stockholders.
E. MEETINGS.
Meetings of the stockholders of the corporation may be held anywhere in
the United States.
F. ACTING AS PARTNER.
The corporation may be a general or limited partner in any business
enterprise it would have power to conduct by itself.
G. INDEMNIFICATION.
The corporation may provide, either in the corporation's By-laws or by
contract, for the indemnification of directors, officers, employees and agents,
by whomever elected or appointed,
-7-
to the full extent presently permitted by law; provided, however, that if
applicable law is hereafter modified to permit indemnification in situations
where it was not theretofor permitted, then such indemnification may be
permitted to the full extent permitted by such law as amended.
H. TRANSACTIONS WITH INTERESTED PERSONS.
The By-laws may contain provisions providing that no contract or
transaction of the corporation shall be void or voidable by reason of the fact
that any officer, director or stockholder of the corporation may have held an
interest therein.
I. REPURCHASES BY CORPORATION.
The corporation may from time to time offer to purchase and purchase
shares from any stockholder of the corporation upon fair and reasonable terms
and at a fair and reasonable price, whether or not the stockholder owns a
controlling interest in the corporation, without offering to any other
stockholder an equal opportunity to sell a ratable number, or any, of his shares
of stock in the corporation to the corporation upon comparable terms or at a
comparable price, or to make any offer to purchase whatsoever to other
stockholders of the corporation.
J. ELIMINATION OF DIRECTORS' PERSONAL LIABILITY.
No director shall be personally liable to the corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director
notwithstanding any provision of law imposing such liability; provided, however,
that this provision shall not eliminate or limit the liability of a director (i)
for any breach of the director's duty of loyalty to the corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under section
sixty-one or sixty-two of Chapter 156B of the Massachusetts General Laws, or
(iv) for any transaction from which the director derived an improper personal
benefit. No amendment to or repeal of this paragraph shall apply to or have any
effect on the liability or alleged liability of any director of the Corporation
for or with respect to any acts or omissions of such director occurring prior to
the date of such amendment or repeal.
-8-
*We further certify that the foregoing restated articles of organization effect
no amendments to the articles of organization of the corporation as heretofore
amended, except amendments to the following articles
----------------------------
3, 4 and 6
- --------------------------------------------------------------------------------
(*If there are no such amendments, state "None".)
Briefly describe amendments in space below:
Article 3 is amended to increase and change the authorized capital and
Article 4 is amended to describe the new classes of stock.
Article 6 is amended to change the other lawful provisions for the
conduct and regulation of the business and affairs of the Corporation.
IN WITNESS WHEREOF AND UNDER THE PENALTIES OF PERJURY, we have hereto signed our
names this 5th day of September in the year 1996
Richard T. Schumacher /s/ Richard T. Schumacher President
- -----------------------------------------------------------------------
Howard L. Levin /s/ Howard L. Levin Clerk
- -----------------------------------------------------------------------
THE COMMONWEALTH OF MASSACHUSETTS
RESTATED ARTICLES OF ORGANIZATION
(GENERAL LAWS, CHAPTER 156B, SECTION 74)
I hereby approve the within restated
articles of organization and, the filing
fee in the amount of $________ having
been paid, said articles are deemed
to have been filed with me this__day
of_________ , 19__.
MICHAEL JOSEPH CONNOLLY
Secretary of State
TO BE FILLED IN BY CORPORATION
PHOTO COPY OF RESTATED ARTICLES OF ORGANIZATION TO BE SENT
TO:
Howard L. Levin, Esquire
-------------------------------------------------
Brown, Rudnick, Freed & Gesmer, P.C.
-------------------------------------------------
One Financial Center, Boston, MA 0211l
-------------------------------------------------
Telephone (617) 856-8200
----------------------------------------
Copy Mailed
EXHIBIT 3.2
BY-LAWS
OF
BOSTON BIOMEDICA, INC.
A MASSACHUSETTS CORPORATION
Adopted: May 5, 1986
-------------------------------------
Howard L. Levin, Clerk
Amended: December 5, 1990
Amended and Restated: September 5, 1996
BY-LAWS
TABLE OF CONTENTS
ARTICLE I. STOCKHOLDERS....................................................1
Section 1.1. Annual Meeting........................................1
Section 1.2. Special Meetings......................................1
Section 1.3. Notice of Meeting.....................................1
Section 1.4. Quorum................................................2
Section 1.5. Voting and Proxies....................................2
Section 1.6. Action at Meeting.....................................2
Section 1.7. Action Without Meeting................................2
Section 1.8. Voting of Shares of Certain Holders...................2
Section 1.9. Meetings..............................................3
ARTICLE II. BOARD OF DIRECTORS.............................................3
Section 2.1. Powers................................................3
Section 2.2. Enumeration, Election and Term of Office..............3
Section 2.3. Nomination of Directors...............................4
Section 2.4. Election of Directors.................................5
Section 2.5. Vacancies; Reduction of the Board.....................5
Section 2.6. Enlargement of the Board..............................5
Section 2.7. Tenure and Resignation................................5
Section 2.8. Removal...............................................5
Section 2.9. Meetings..............................................5
Section 2.10. Notice of Meeting....................................6
Section 2.11. Agenda...............................................6
Section 2.12. Quorum...............................................6
Section 2.13. Action at Meeting....................................6
Section 2.14. Action Without Meeting...............................6
Section 2.15. Committees...........................................6
ARTICLE III. OFFICERS......................................................7
Section 3.1. Enumeration...........................................7
Section 3.2. Election..............................................7
Section 3.3. Qualification.........................................7
Section 3.4. Tenure................................................7
Section 3.5. Removal...............................................7
Section 3.6. Resignation...........................................7
Section 3.7. Vacancies.............................................8
Section 3.8. President.............................................8
Section 3.9. Vice-Presidents.......................................8
Section 3.10. Treasurer and Assistant Treasurers...................8
Section 3.11. Clerk and Assistant Clerks...........................8
Section 3.12. Other Powers and Duties..............................9
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ARTICLE IV. STOCK CERTIFICATES.............................................9
Section 4.1. Stock Certificates....................................9
Section 4.2. Transfer of Shares....................................9
Section 4.3. Record Holders........................................9
Section 4.4. Record Date..........................................10
Section 4.5. Transfer Agent and Registrar for Shares of
Corporation..........................................10
Section 4.6. Loss of Certificates.................................11
Section 4.7. Restrictions on Transfer.............................11
Section 4.8. Multiple Classes of Stock............................11
ARTICLE V. DIVIDENDS......................................................11
Section 5.1. Declaration of Dividends.............................11
Section 5.2. Reserves.............................................11
ARTICLE VI. POWERS OF OFFICERS TO CONTRACT WITH THE CORPORATION...........12
ARTICLE VII. INDEMNIFICATION..............................................12
Section 7.1. Definitions..........................................12
Section 7.2. Actions in Name of the Corporation or Stockholder....13
Section 7.3. Other Actions........................................13
Section 7.4. Advances of Expenses.................................14
Section 7.5. Presumptions upon Termination of Proceeding..........14
Section 7.6. Indemnification Not Exclusive........................14
Section 7.7. Insurance............................................14
Section 7.8. Employee Benefit Plans...............................14
ARTICLE VIII. MISCELLANEOUS PROVISIONS....................................14
Section 8.1. Articles of Organization.............................15
Section 8.2. Fiscal Year..........................................15
Section 8.3. Corporate Seal.......................................15
Section 8.4. Execution of Instruments.............................15
Section 8.5. Voting of Securities.................................15
Section 8.6. Evidence of Authority................................15
Section 8.7. Corporate Records....................................15
Section 8.8. Charitable Contributions.............................15
Section 8.9. Election in Respect of Control Share Acquisitions....16
ARTICLE IX. AMENDMENTS....................................................16
Section 9.1. Amendment by Stockholders............................16
Section 9.2. Amendment by Board of Directors......................17
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BY-LAWS
OF
BOSTON BIOMEDICA, INC.
(A Massachusetts Corporation)
ARTICLE I.
Stockholders
Section 1.1. Annual Meeting. The annual meeting of the stockholders of
the corporation shall be held on the first Tuesday of April in each year, at
such time and place within the United States as may be designated in the notice
of meeting. If the day fixed for the annual meeting shall fall on a legal
holiday, the meeting shall be held on the next succeeding day not a legal
holiday. If the annual meeting is omitted on the day herein provided, a special
meeting may be held in place thereof, and any business transacted at such
special meeting in lieu of annual meeting shall have the same effect as if
transacted or held at the annual meeting.
Section 1.2. Special Meetings. Special meetings of the stockholders may
be called at any time by the president or by the board of directors and shall be
called by the clerk upon written application of one or more stockholders who
hold shares representing at least ten percent (10%) of the capital stock
entitled to vote at such meeting. Special meetings of the stockholders shall be
held at such time, date and place within or without the United States as may be
designated in the notice of such meeting.
Section 1.3. Notice of Meeting. A written notice stating the place,
date, and hour of each meeting of the stockholders, and, in the case of a
special meeting, the purposes for which the meeting is called, shall be given to
each stockholder entitled to vote at such meeting, and to each stockholder who,
under the Articles of Organization or these By-laws, is entitled to such notice,
by delivering such notice to such person or leaving it at their residence or
usual place of business, or by mailing it, postage prepaid, and addressed to
such stockholder at his address as it appears upon the books of the corporation,
at least seven (7) days and not more than sixty (60) before the meeting. Such
notice shall be given by the clerk, an assistant clerk, or any other officer or
person designated either by the clerk or by the person or persons calling the
meeting.
The requirement of notice to any stockholder may be waived by a written
waiver of notice, executed before or after the meeting by the stockholder or his
attorney thereunto duly authorized, and filed with the records of the meeting,
or if communication with such stockholder is unlawful, or by attendance at the
meeting without protesting prior thereto or at its commencement the lack of
notice. Except as otherwise provided herein, the notice to the stockholders need
not specify the purposes of the meeting.
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If a meeting is adjourned to another time or place, notice need not be
given of the adjourned meeting if the time and place are announced at the
meeting at which the adjournment is taken, except that if the adjournment is for
more than thirty days, or if after the adjournment a new record date is fixed
for the adjourned meeting, notice of the adjourned meeting shall be given to
each stockholder of record entitled to vote at the meeting.
Section 1.4. Quorum. The holders of a majority in interest of all stock
issued, outstanding and entitled to vote at a meeting shall constitute a quorum.
Any meeting may be adjourned from time to time by a majority of the votes
properly cast upon the question, whether or not a quorum is present.
Section 1.5. Voting and Proxies. Each stockholder shall have one vote
for each share of stock entitled to vote owned by such stockholder of record
according to the books of the corporation, unless otherwise provided by law or
by the Articles of Organization. Stockholders may vote either in person or by
written proxy. No proxy dated more than six months prior to the date of the
meeting shall be valid although, unless otherwise limited therein, proxies shall
entitle the persons authorized thereby to vote at any adjournment of such
meeting. Proxies shall be filed with the clerk of the meeting, or of any
adjournment thereof. A proxy purporting to be executed by or on behalf of a
stockholder shall be deemed valid unless challenged at or prior to its exercise
and the burden of proving invalidity shall rest on the challenger. A proxy with
respect to stock held in the name of two or more persons shall be valid if
executed by one of them unless at or prior to exercise of the proxy the
corporation receives a specific written notice to the contrary from any one of
them.
Section 1.6. Action at Meeting. When a quorum is present at any
meeting, a plurality of the votes properly cast for election to any office shall
elect to such office, and a majority of the votes properly cast upon any
question other than election to an office shall decide such question, except
where a larger vote is required by law, the Articles of Organization or these
by-laws. No ballot shall be required for any election unless requested by a
stockholder present or represented at the meeting and entitled to vote in the
election.
Section 1.7. Action Without Meeting. Any action required or permitted
to be taken at any meeting of the stockholders may be taken without a meeting if
all stockholders entitled to vote on the matter consent to the action in writing
and the consent shall be treated for all purposes as a vote at a meeting.
Section 1.8. Voting of Shares of Certain Holders. Shares of stock of
the corporation standing in the name of another corporation, domestic or
foreign, may be voted by such officer, agent, or proxy as the by-laws of such
corporation may prescribe, or, in the absence of such provision, as the board of
directors of such corporation may determine.
Shares of stock of the corporation standing in the name of a deceased
person, a minor ward or an incompetent person, may be voted by his
administrator, executor, court-appointed guardian or conservator without a
transfer of such shares into the name of such administrator, executor, court
appointed guardian or conservator. Shares of capital stock of the corporation
standing in the name of a trustee may be voted by him.
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Shares of stock of the corporation standing in the name of a receiver
may be voted by such receiver, and shares held by or under the control of a
receiver may be voted by such receiver without the transfer thereof into his
name if authority so to do be contained in an appropriate order of the court by
which such receiver was appointed.
A stockholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee, and
thereafter the pledgee shall be entitled to vote the shares so transferred.
Shares of its own stock belonging to this corporation shall not be
voted, directly or indirectly, at any meeting and shall not be counted in
determining the total number of outstanding shares at any given time, but shares
of its own stock held by the corporation in a fiduciary capacity may be voted
and shall be counted in determining the total number of outstanding shares.
Section 1.9. Meetings. Special meetings of the stockholders may be
called at any time by the President or by the Board of Directors. Special
meetings of the stockholders shall be called by the Clerk, or in the case of the
death, absence, incapacity or refusal of the Clerk, by any other officer, upon
written application by one or more stockholders who hold at least 50% of each
class of stock outstanding and entitled to vote at such meeting. Such call shall
state the time, place and purposes of the meeting.
ARTICLE II.
Board of Directors
Section 2.1. Powers. Except as reserved to the stockholders by law, by
the Articles of Organization or by these By-laws, the business of the
corporation shall be managed under the direction of the board of directors, who
shall have and may exercise all of the powers of the corporation. In particular,
and without limiting the foregoing, the board of directors shall have the power
to issue or reserve for issuance from time to time the whole or any part of the
capital stock of the corporation which may be authorized from time to time to
such person, for such consideration and upon such terms and conditions as they
shall determine, including the granting of options, warrants or conversion or
other rights to stock.
Section 2.2. Enumeration, Election and Term of Office. The number of
Directors on the Board of Directors shall be determined as provided in the
Articles of Organization of the Corporation. No Director need be a Stockholder.
The Directors of the Corporation shall be divided into three classes:
Class I, Class II and Class III. Each class shall consist as nearly as may be
possible, of one-third of the whole number of the Board of Directors. In the
election of Directors at the 1996 Annual Meeting of Stockholders, the Class I
Directors shall be elected to hold office for a term to expire at the first
Annual Meeting of Stockholders thereafter; the Class II Directors shall be
elected to hold office for a term to expire at the second Annual Meeting of
Stockholders thereafter; and the Class III Directors shall be elected to hold
office for a term to expire at the third Annual Meeting of
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Stockholders thereafter; and in the case of each class, until their respective
successors are duly elected and qualified. At each annual election held after
the 1996 Annual Meeting of Stockholders, the Directors elected to succeed those
whose terms expire shall be identified as being the same class as the Directors
they succeed and shall be elected to hold office for a term to expire at the
third Annual Meeting of Stockholders after their election, and until their
respective successors are duly elected and qualified. If the number of Directors
changes, any increase or decrease in Directors shall be apportioned among the
classes so as to maintain all classes as nearly equal in number as possible, and
any additional Director elected to any class shall hold office for a term which
shall coincide with the terms of the other Directors in such class and until his
successor is duly elected and qualified.
Any vacancy in the Board of Directors, however occurring, including a
vacancy resulting from the enlargement of the Board of Directors, shall be
filled as provided in the Articles of Organization of the Corporation. The Board
of Directors may be enlarged as provided in the Articles of Organization of the
Corporation. A Director, whether elected by the stockholders or Directors, may
be removed from office in the manner provided by the Articles of Organization of
the Corporation.
Section 2.3. Nomination of Directors. Nominations for the election of
directors at an annual meeting of the stockholders, or special meeting in lieu
of the annual meeting, may be made by the Board of Directors or a committee
appointed by the Board of Directors or by any stockholder entitled to vote in
the election of directors at the meeting. Stockholders entitled to vote in such
election may nominate one or more persons for election as directors only if
written notice of such stockholder's intent to make such nomination or
nominations has been given either by personal delivery, overnight (receipted)
courier or by United States mail, postage prepaid, to the Clerk of the
Corporation not later than ninety days prior to the anniversary date of the
immediately preceding annual meeting or special meeting in lieu thereof. Such
notice shall set forth: (a) the name and address of the stockholder who intends
to make the nomination and of the persons or person to be nominated; (b) a
representation that the stockholder is a holder of record of stock of the
Corporation entitled to vote at such meeting and intends to appear in person or
by proxy at the meeting to nominate the person or persons specified in the
notice; (c) a description of all arrangements or understandings between the
stockholder and each nominee and any other person or persons (naming such person
or persons) pursuant to which the nomination or nominations are to be made by
the stockholder; (d) such other information regarding each nominee proposed by
such stockholder as would be required to be included in a proxy statement filed
pursuant to the proxy rules of the Securities and Exchange Commission; and (e)
the consent of each nominee to serve as a director of the Corporation if so
elected. The presiding officer of the meeting may refuse to acknowledge the
nomination of any person not made in compliance with the foregoing procedure
Section 2.4. Election of Directors. The initial board of directors
shall be elected by the incorporator(s) at the first meeting thereof and
thereafter by the stockholders at their annual meeting or at any special meeting
the notice of which specifies the election of directors as an item of business
for such meeting.
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Section 2.5. Vacancies; Reduction of the Board. Any vacancy in the
board of directors, however occurring, including a vacancy resulting from the
enlargement of the board of directors, may be filled by the stockholders or by
the directors then in office or by a sole remaining director. In lieu of filling
any such vacancy the stockholders or board of directors may reduce the number of
directors, but not to a number less than the minimum number required by Section
2.2. When one or more directors shall resign from the board of directors,
effective at a future date, a majority of the directors then in office,
including those who have so resigned, shall have power to fill such vacancy or
vacancies, the vote thereon to take effect when such resignation or resignations
shall become effective.
Section 2.6. Enlargement of the Board. The board of directors may be
enlarged by the stockholders at any meeting or by vote of a majority of the
directors then in office.
Section 2.7. Tenure and Resignation. Except as otherwise provided by
law, by the Articles of Organization or by these By-laws, directors shall hold
office until the next annual meeting of stockholders and thereafter until their
successors are chosen and qualified. Any director may resign by delivering or
mailing postage prepaid a written resignation to the corporation at its
principal office or to the president, clerk or assistant clerk, if any. Such
resignation shall be effective upon receipt unless it is specified to be
effective at some other time or upon the happening of some other event.
Section 2.8. Removal. A director, whether elected by the stockholders
or directors, may be removed from office with or without cause at any annual or
special meeting of stockholders by vote of a majority of the stockholders
entitled to vote in the election of such director, or for cause by a vote of a
majority of the directors then in office; provided, however, that a director may
be removed for cause only after reasonable notice and opportunity to be heard
before the body proposing to remove him.
Section 2.9. Meetings. Regular meetings of the board of directors may
be held without call or notice at such times and such places within or without
the Commonwealth of Massachusetts as the board may, from time to time,
determine, provided that notice of the first regular meeting following any such
determination shall be given to directors absent from such determination. A
regular meeting of the board of directors shall be held without notice
immediately after, and at the same place as, the annual meeting of the
stockholders or the special meeting of the stockholders held in place of such
annual meeting, unless a quorum of the directors is not then present. Special
meetings of the board of directors may be held at any time and at any place
designated in the call of the meeting when called by the president, treasurer,
or one or more directors. Members of the board of directors or any committee
elected thereby may participate in a meeting of (amended such board or committee
by means of a conference telephone or 12/5/90) similar communications equipment
by means of which all persons participating in the meeting can hear each other
at the same time, and participation by such means shall constitute presence in
person at the meeting.
Section 2.10. Notice of Meeting. It shall be sufficient notice to a
director to send notice by mail at least seventy-two (72) hours before the
meeting addressed to such person at his usual
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or last known business or residence address or to give notice to such person in
person or by telephone at least twenty-four (24) hours before the meeting.
Notice shall be given by the clerk, assistant clerk, if any, or by the officer
or directors calling the meeting. The requirement of notice to any director may
be waived by a written waiver of notice, executed by such person before or after
the meeting or meetings, and filed with the records of the meeting, or by
attendance at the meeting without protesting prior thereto or at its
commencement the lack of notice. A notice or waiver of notice of a directors'
meeting need not specify the purposes of the meeting.
Section 2.11. Agenda. Any lawful business may be transacted at a
meeting of the board of directors, notwithstanding the fact that the nature of
the business may not have been specified in the notice or waiver of notice of
the meeting.
Section 2.12. Quorum. At any meeting of the board of directors, a
majority of the directors then in office shall constitute a quorum for the
transaction of business. Any meeting may be adjourned by a majority of the votes
cast upon the question, whether or not a quorum is present, and the meeting may
be held as adjourned without further notice.
Section 2.13. Action at Meeting. Any motion adopted by vote of the
majority of the directors present at a meeting at which a quorum is present
shall be the act of the board of directors, except where a different vote is
required by law, by the Articles of Organization or by these By-laws. The assent
in writing of any director to any vote or action of the directors taken at any
meeting, whether or not a quorum was present and whether or not the director had
or waived notice of the meeting, shall have the same effect as if the director
so assenting was present at such meeting and voted in favor of such vote or
action.
Section 2.14. Action Without Meeting. Any action by the directors may
be taken without a meeting if all of the directors consent to the action in
writing and the consents are filed with the records of the directors' meetings.
Such consent shall be treated for all purposes as a vote of the directors at a
meeting.
Section 2.15. Committees. The board of directors may, by the
affirmative vote of a majority of the directors then in office, appoint an
executive committee or other committees consisting of one or more directors and
may by vote delegate to any such committee some or all of their powers except
those which by law, the Articles of Organization or these By-laws they may not
delegate. Unless the board of directors shall otherwise provide, any such
committee may make rules for the conduct of its business, but unless otherwise
provided by the board of directors or such rules, its meetings shall be called,
notice given or waived, its business conducted or its action taken as nearly as
may be in the same manner as is provided in these By-laws with respect to
meetings or for the conduct of business or the taking of actions by the board of
directors. The board of directors shall have power at any time to fill vacancies
in, change the membership of, or discharge any such committee at any time. The
board of directors shall have power to rescind any action of any committee, but
no such rescission shall have retroactive effect.
ARTICLE III.
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Officers
Section 3.1. Enumeration. The officers shall consist of a president, a
treasurer, a clerk and such other officers and agents (including one or more
vice-presidents, assistant treasurers, assistant clerks, secretaries and
assistant secretaries), with such duties and powers, as the board of directors
may, in their discretion, determine.
Section 3.2. Election. The president, treasurer and clerk shall be
elected annually by the directors at their first meeting following the annual
meeting of the stockholders. Other officers may be chosen by the directors at
such meeting or at any other meeting.
Section 3.3. Qualification. An officer may, but need not, be a director
or stockholder and no officer shall be a director solely by virtue of being an
officer. Any two or more offices may be held by the same person. The clerk shall
be a resident of Massachusetts unless the corporation has a resident agent
appointed for the purpose of service of process. Any officer may be required by
the directors to give bond for the faithful performance of his duties to the
corporation in such amount and with such sureties as the directors may
determine. The premiums for such bonds may be paid by the corporation.
Section 3.4. Tenure. Except as otherwise provided by the Articles of
Organization or these By-laws, the term of office of each officer shall be for
one year or until his successor is qualified or until his earlier resignation or
removal.
Section 3.5. Removal. Any officer may be removed from office, with or
without cause, by the affirmative vote of a majority of the directors then in
office; provided, however, that an officer may be removed for cause only after
reasonable notice and opportunity to be heard by the board of directors prior to
action thereon.
Section 3.6. Resignation. Any officer may resign by delivering or
mailing postage prepaid a written resignation to the corporation at its
principal office or to the president, clerk, or assistant clerk, if any, and
such resignation shall be effective upon receipt unless it is specified to be
effective at some other time or upon the happening of some event.
Section 3.7. Vacancies. A vacancy in any office arising from any cause
may be filled for the unexpired portion of the term by the board of directors.
Section 3.8. President. The president shall be the chief executive
officer of the corporation. Except as otherwise voted by the board or directors,
the president shall preside at all meetings of the stockholders and of the board
of directors at which present. The president shall have such duties and powers
as are commonly incident to the office and such duties and powers as the board
of directors shall from time to time designate.
Section 3.9. Vice-Presidents. Vice-presidents, if any, shall have such
powers and perform such duties as the board of directors may from time to time
determine.
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Section 3.10. Treasurer and Assistant Treasurers. The treasurer,
subject to the direction and under the supervision and control of the board of
directors, shall have general charge of the financial affairs of the
corporation. The treasurer shall have custody of all funds, securities and
valuable papers of the corporation, except as the board of directors may
otherwise provide. The treasurer shall keep or cause to be kept full and
accurate records of account which shall be the property of the corporation, and
which shall be always open to the inspection of each elected officer and
director of the corporation. The treasurer shall deposit or cause to be
deposited all funds of the corporation in such depository or depositories as may
be authorized by the board of directors. The treasurer shall have the power to
endorse for deposit or collection all notes, checks, drafts, and other
negotiable instruments payable to the corporation. The treasurer shall have the
power to borrow money and enter into and execute arrangements as to advances,
loans and credits to the corporation. The treasurer shall perform such other
duties as are incidental to the office, and such other duties as may be assigned
by the board of directors.
Assistant treasurers, if any, shall have such powers and perform such
duties as the board of directors may from time to time determine.
Section 3.11. Clerk and Assistant Clerks. The clerk shall record, or
cause to be recorded, all proceedings of the meetings of the stockholders and
directors (including committees thereof) in the book of records of this
corporation. The record books shall be open at reasonable times to the
inspection of any stockholder, director, or officer. The clerk shall notify the
stockholders and directors, when required by law or by these By-laws, of their
respective meetings, and shall perform such other duties as the directors and
stockholders may from time to time prescribe. The clerk shall have the custody
and charge of the corporate seal, and shall affix the seal of the corporation to
all instruments requiring such seal, and shall certify under the corporate seal
the proceedings of the directors and of the stockholders, when required. In the
absence of the clerk at any such meeting, a temporary clerk shall be chosen who
shall record the proceedings of the meeting in the aforesaid books.
Assistant clerk, if any, shall have such powers and perform such duties
as the board of directors may from time to time designate.
Section 3.12. Other Powers and Duties. Subject to these By-laws and to
such limitations as the board of directors may from time to time prescribe, the
officers of the corporation shall each have such powers and duties as generally
pertain to their respective offices, as well as such powers and duties as from
time to time may be conferred by the board of directors.
ARTICLE IV.
Capital Stock
Section 4.1. Stock Certificates. Each stockholder shall be entitled to
a certificate representing the number of shares of the capital stock of the
corporation owned by such person in such form as shall, in conformity to law, be
prescribed from time to time by the board of directors. Each certificate shall
be signed by the president or vice-president and treasurer or
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assistant treasurer or such other officers designated by the board of directors
from time to time as permitted by law, shall bear the seal of the corporation,
and shall express on its face its number, date of issue, class, the number of
shares for which, and the name of the person to whom, it is issued. The
corporate seal and any or all of the signatures of corporation officers may be
facsimile if the stock certificate is manually counter-signed by an authorized
person on behalf of a transfer agent or registrar other than the corporation or
its employee.
If an officer, transfer agent or registrar who has signed, or whose
facsimile signature has been placed on, a certificate shall have ceased to be
such before the certificate is issued, it may be issued by the corporation with
the same effect as if he were such officer, transfer agent or registrar at the
time of its issue.
Section 4.2. Transfer of Shares. Title to a certificate of stock and to
the shares represented thereby shall be transferred only on the books of the
corporation by delivery to the corporation or its transfer agent of the
certificate properly endorsed, or by delivery of the certificate accompanied by
a written assignment of the same, or a properly executed written power of
attorney to sell, assign or transfer the same or the shares represented thereby.
Upon surrender of a certificate for the shares being transferred, a new
certificate or certificates shall be issued according to the interests of the
parties.
Section 4.3. Record Holders. Except as otherwise may be required by
law, by the Articles of Organization or by these By-laws, the corporation shall
be entitled to treat the record holder of stock as shown on its books as the
owner of such stock for all purposes, including the payment of dividends and the
right to vote with respect thereto, regardless of any transfer, pledge or other
disposition of such stock, until the shares have been transferred on the books
of the corporation in accordance with the requirements of these By-laws.
It shall be the duty of each stockholder to notify the corporation of
his post office address.
Section 4.4. Record Date. In order that the corporation may determine
the stockholders entitled to receive notice of or to vote at any meeting of
stockholders or any adjournments thereof, or to express consent to corporate
action in writing without a meeting, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock or
for the purpose of any other lawful action, the board of directors may fix, in
advance, a record date, which shall not be more than sixty (60) days prior to
any other action. In such case only stockholders of record on such record date
shall be so entitled, notwithstanding any transfer of stock on the books of the
corporation after the record date.
If no record date is fixed: (i) the record date for determining
stockholders entitled to receive notice of or to vote at a meeting of
stockholders shall be at the close of business on the day next preceding the day
on which notice is given, or, if notice is waived, at the close of business on
the day next preceding the day on which the meeting is held; (ii) the record
date for determining stockholders entitled to express consent to corporate
action in writing without a meeting, when no prior action by the board of
directors is necessary, shall be the day on which the first written consent is
expressed; and (iii) the record date for determining stockholders for
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any other purpose shall be at the close of business on the day on which the
board of directors adopts the resolution relating thereto.
Section 4.5. Transfer Agent and Registrar for Shares of Corporation.
The board of directors may appoint a transfer agent and a registrar of the
certificates of stock of the corporation. Any transfer agent so appointed shall
maintain, among other records, a stockholders' ledger, setting forth the names
and addresses of the holders of all issued shares of stock of the corporation,
the number of shares held by each, the certificate numbers representing such
shares, and the date of issue of the certificates representing such shares. Any
registrar so appointed shall maintain, among other records, a share register,
setting forth the total number of shares of each class of shares which the
corporation is authorized to issue and the total number of shares actually
issued. The stockholders' ledger and the share register are hereby identified as
the stock transfer books of the corporation; but as between the stockholders'
ledger and the share register, the names and addresses of stockholders, as they
appear on the stockholders' ledger maintained by the transfer agent shall be the
official list of stockholders of record of the corporation. The name and address
of each stockholder of record, as they appear upon the stockholders' ledger,
shall be conclusive evidence of who are the stockholders entitled to receive
notice of the meetings of stockholders, to vote at such meetings, to examine a
complete list of the stockholders entitled to vote at meetings, and to own,
enjoy and exercise any other property or rights deriving from such shares
against the corporation. Stockholders, but not the corporation, its directors,
officers, agents or attorneys, shall be responsible for notifying the transfer
agent, in writing, of any changes in their names or addresses from time to time,
and failure to do so will relieve the corporation, its other stockholders,
directors, officers, agents and attorneys, and its transfer agent and registrar,
of liability for failure to direct notices or other documents, or pay over or
transfer dividends or other property or rights, to a name or address other than
the name and address appearing in the stockholders' ledger maintained by the
transfer agent.
Section 4.6. Loss of Certificates. In case of the loss, destruction or
mutilation of a certificate of stock, a replacement certificate may be issued in
place thereof upon such terms as the board of directors may prescribe,
including, in the discretion of the board of directors, a requirement of bond
and indemnity to the corporation.
Section 4.7. Restrictions on Transfer. Every certificate for shares of
stock which are subject to any restriction on transfer, whether pursuant to the
Articles of Organization the By-laws or any agreement to which the corporation
is a party, shall have the fact of the restriction noted conspicuously on the
certificate and shall also set forth on the face or back either the full text of
the restriction or a statement that the corporation will furnish a copy to the
holder of such certificate upon written request and without charge.
Section 4.8. Multiple Classes of Stock. The amount and classes of the
capital stock and the pal value, if any, of the shares, shall be as fixed in the
Articles of Organization. At all times when there are two or more classes of
stock, the several classes of stock shall conform to the description and the
terms and have the respective preferences, voting powers, restrictions and
qualifications set forth in the Articles of Organization and these By-laws.
Every certificate issued when the corporation is authorized to issue more than
one class or series of stock shall set
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forth on its face or back either (i) the full text of the preferences, voting
powers, qualifications and special and relative rights of the shares of each
class and series authorized to be issued, or (ii) a statement of the existence
of such preferences, powers, qualifications and rights, and a statement that the
corporation will furnish a copy thereof to the holder of such certificate upon
written request and without charge.
ARTICLE V.
Dividends
Section 5.1. Declaration of Dividends. Except as otherwise required by
law or by the Articles of Organization the board of directors may, in its
discretion, declare what, if any, dividends shall be paid from the surplus or
from the net profits of the corporation upon the stock of the corporation;
provided, however, that no dividend shall be declared or paid the payment of
which would diminish the amount of the paid-in capital of the corporation.
Dividends may be paid in cash, in property, in shares of the corporation's
stock, or in any combination thereof. Dividends shall be payable upon such dates
as the board of directors may designate.
Section 5.2. Reserves. Before the payment of any dividend and before
making any distribution of profits, the board of directors, from time to time
and in its absolute discretion, shall have power to set aside out of the surplus
or net profits of the corporation such sum or sums as the board of directors
deems proper and sufficient as a reserve fund to meet contingencies or for such
other purpose as the board of directors shall deem to be in the best interests
of the corporation, and the board of directors may modify or abolish any such
reserve.
ARTICLE VI.
Powers of Officers to Contract
With the Corporation
Any and all of the directors and officers of the corporation,
notwithstanding their official relations to it, may enter into and perform any
contract or agreement of any nature between the corporation and themselves, or
any and all of the individuals from time to time constituting the board of
directors of the corporation, or any firm or corporation in which any such
director may be interested, directly or indirectly, whether such individual,
firm or corporation thus contracting with the corporation shall thereby derive
personal or corporate profits or benefits or otherwise; provided, that (i) the
material facts of such interest are disclosed or are known to the board of
directors or committee thereof which authorizes such contract or agreement; (ii)
if the material facts as to such person's relationship or interest are disclosed
or are known to the stockholders entitled to vote thereon, and the contract is
specifically approved in good faith by a vote of the stockholders; or (iii) the
contract or agreement is fair as to the corporation as of the time it is
authorized, approved or ratified by the board of directors, a committee thereof,
or the stockholders. Any director of the corporation who is interested in any
transaction as aforesaid may nevertheless be counted in determining the
existence of a quorum at any meeting of the board of directors which shall
authorize or ratify any such transaction. This Article shall not be
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construed to invalidate any contract or other transaction which would otherwise
be valid under the common or statutory law applicable thereto.
ARTICLE VII.
Indemnification
Section 7.1. Definitions. For purposes of this Article VII:
(a) "Covered Person" means an individual: (i) who is a present or
former director, officer, agent or employee of the corporation or who serves or
served another corporation, partnership, joint venture, trust, employee benefit
plan or other enterprise in one of those capacities or as trustee, partner or
fiduciary at the request of the corporation; and (ii) who by reason of his
position was, is, or is threatened to be made a party to a proceeding. It shall
also include such person's heirs, executors and administrators.
(b) "Proceeding" includes any threatened, pending, or completed action,
suit, or proceeding, whether civil, criminal, administrative, or investigative,
and any claim which could be the subject of such a proceeding.
(c) "Disinterested Director" means a director who is not a party to the
Proceeding(s) in question.
(d) "Expenses" means liabilities, including but not limited to amounts
paid in satisfaction of judgments, in compromises or as fines or penalties, and
expenses, including reasonable legal and accounting fees.
Section 7.2. Actions in Name of the Corporation or Stockholder. The
corporation may indemnify any Covered Person to the extent legally permissible
against all Expenses incurred in connection with the defense or disposition of
any Proceeding by or in the name of the corporation or any stockholder in his
capacity as such if a reasonable determination is made, based on a review of the
readily available facts but without special investigation, that the Covered
Person acted in good faith, and in the reasonable belief that his action was in,
or not opposed to, the best interest of the corporation, and with respect to any
criminal action or proceeding, had no reasonable cause to believe that his
conduct was unlawful. Such determination shall be made by:
(a) the vote of a majority of a quorum of Disinterested Directors;
(b) a special litigation/indemnification committee of the board of
directors appointed by the board;
(c) independent legal counsel in a written opinion; or
(d) the vote of the holders of a majority of the outstanding stock at
the time entitled to vote for directors, voting as a single class, exclusive of
any stock owned by any interested director or officer.
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No indemnification shall be made with respect to any matter as to which
such Covered Person has been adjudicated liable for negligence or misconduct in
the performance of his duty to the corporation, unless, and only to the extent
that, the court deciding the action determines that such Covered Person is
entitled to indemnification.
Such indemnification may be provided in connection with a Proceeding in
which it is claimed that an officer or director received an improper personal
benefit by reason of his position, regardless of whether the claim involves his
service in such capacity, subject to the foregoing limitations and to the
additional limitation that it shall not have been finally determined that an
improper personal benefit was received by the director or officer.
Section 7.3. Other Actions. The corporation may indemnify any Covered
Person against any Expenses incurred in connection with the defense or
disposition of any Proceeding other than a Proceeding of the type described in
Section 7.2, except with respect to any matter as to which the Covered Person
shall have been finally adjudicated in the Proceeding (i) not to 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, (ii) with respect to any criminal
Proceeding, to have had reasonable cause to believe his conduct was unlawful.
Section 7.4. Advances of Expenses. The corporation may advance
attorneys' fees or other Expenses incurred by a Covered Person in defending a
Proceeding, upon receipt of an undertaking by or on behalf of the Covered Person
to repay the amount advanced, which undertaking may be accepted by the board of
directors without reference to the financial ability of such Covered Person to
make repayment.
Section 7.5. Presumptions upon Termination of Proceeding. The
termination of any Proceeding by judgment, order, settlement, conviction, or
upon a plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that a person did not act in good faith and in a manner which he
reasonably believed to be in, or not opposed, to the best interests of the
corporation, or, with respect to any criminal proceeding, had reasonable cause
to believe that his conduct was unlawful.
Section 7.6. Indemnification Not Exclusive. The right of
indemnification provided by this Article VII shall not be exclusive of or affect
any other rights to which any such Covered Person may be entitled.
Section 7.7. Insurance. The corporation may purchase and maintain
insurance on its behalf and on behalf of any Covered Person against any
liability asserted against such Covered Person and incurred by him in any such
capacity, or arising out of his status as such, whether or not the corporation
would have the power to indemnify him against such liability under the
provisions of this Article VII.
Section 7.8. Employee Benefit Plans. If the corporation or any of its
subsidiaries or affiliates sponsors any employee benefit plan, and any Covered
Person undertakes or incurs any responsibility as a fiduciary with respect
thereto then, for purposes of indemnification of such Covered Person under this
Article VII, (i) such Covered Person shall be deemed not to have
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failed to have acted in good faith and in the reasonable belief that his action
was in or not opposed to the best interests of the corporation if he acted in
good faith and in the reasonable belief that his action was in or not opposed to
the best interests of the participants or beneficiaries of said plan, and (ii)
"Expenses" shall be deemed to include any taxes or penalties assessed on such
Covered Person with respect to said plan under applicable law.
ARTICLE VIII.
Miscellaneous Provisions
Section 8.1. Articles of Organization. All references in these By-laws
to the Articles of Organization shall be deemed to refer to the Articles of
Organization of the corporation, as amended and in effect from time to time.
Section 8.2. Fiscal Year. Except as from time to time otherwise
provided by the board of directors, the fiscal year of the corporation shall end
on the 31st day in December of each year.
Section 8.3. Corporate Seal. The board of directors shall have the
power to adopt and alter the seal of the corporation.
Section 8.4. Execution of Instruments. All deeds, leases, transfers,
contracts, bonds, notes, and other obligations authorized to be executed by an
officer of the corporation on its behalf shall be signed by the president or the
treasurer except as the board of directors may generally or in particular cases
otherwise determine.
Section 8.5. Voting of Securities. Unless the board of directors
otherwise provides, the president or the treasurer may waive notice of and act
on behalf of this corporation, or appoint another person or persons to act as
proxy or attorney in fact for this corporation with or without discretionary
power and/or power of substitution, at any meeting of stockholders or
shareholders of any other corporation or organization, any of whose securities
are held by this corporation.
Section 8.6. Evidence of Authority. A certificate by the clerk or any
assistant clerk as to any action taken by the stockholders, directors or any
officer or representative of the corporation shall, as to all persons who rely
thereon in good faith, be conclusive evidence of such action. The exercise of
any power which by law, by the Articles of Organization or by these By-laws, or
under any vote of the stockholders or the board of directors, may be exercised
by an officer of the corporation only in the event of absence of another officer
or any other contingency shall bind the corporation in favor of anyone relying
thereon in good faith, whether or not such absence or contingency existed.
Section 8.7. Corporate Records. The original, or attested copies, of
the Articles of Organization, By-laws, records of all meetings of the
incorporators and stockholders, and the stock transfer books (which shall
contain the names of all stockholders and the record address and the amount of
stock held by each) shall be kept in Massachusetts at the principal office of
the corporation, or at an office of its resident agent, transfer agent or of the
clerk or of the assistant clerk, if any. Said copies and records need not all be
kept in the same office. They shall be
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available at all reasonable times to inspection of any stockholder for any
purpose but not to secure a list of stockholders for the purpose of selling said
list or copies thereof or of using the same for a purpose other than in the
interest of the applicant, as a stockholder, relative to the affairs of the
corporation.
Section 8.8. Charitable Contributions. The board of directors from time
to time may authorize contributions to be made by the corporation in such
amounts as it may determine to be reasonable to corporations, trusts, funds or
foundations organized and operated exclusively for charitable, scientific or
educational purposes, no part of the net earning of which inures to the private
benefit of any stockholder or individual.
Section 8.9. Election in Respect of Control Share Acquisitions. In
accordance with the provisions of Chapter 110D of the Massachusetts general
Laws, the provisions of such Chapter shall not apply to "control share
acquisitions" (as such term is defined under said Chapter 110D) of the
corporation.
ARTICLE IX.
Amendments
Section 9.1. Amendment by Stockholders. Prior to the issuance of stock,
these By-laws may be amended, altered or repealed by the incorporator(s) by
majority vote. After stock has been issued, these By-laws may be amended,
altered or repealed by the stockholders at any annual or special meeting by vote
of a majority of all shares outstanding and entitled to vote, except that where
the effect of the amendment would be to reduce any voting requirement otherwise
required by law, the Articles of Organization or these By-laws, such amendment
shall require the vote that would have been required by such other provision.
Notice and a copy of any proposal to amend these By-laws must be included in the
notice of meeting of stockholders at which action is taken upon such amendment.
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Section 9.2. Amendment by Board of Directors.
(a) These By-laws may be amended, altered or repealed by the board of
directors at a meeting duly called for the purpose by majority vote of the
directors then in office, except that directors shall not amend the By-laws in a
manner which:
(i) changes the stockholder voting requirements for any action;
(ii) alters or abolishes any preferential right or right of redemption
applicable to a class or series of stock with shares already outstanding;
(iii) alters the provisions of Articles VII or IX hereof; or
(iv) permits the board of directors to take any action which under law,
the Articles of Organization or these By-laws is required to be taken by the
stockholders.
(b) If the By-laws are amended or altered by the board of directors,
notice of the amendment, alteration or repeal shall be given to all stockholders
entitled to vote not later than the time of giving notice of the next meeting of
stockholders following such amendment, alteration or repeal.
(c) Any amendment of these By-laws by the board of directors may be
altered or repealed by the stockholders at any annual or special meeting of
stockholders.
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EXHIBIT 4.1
BBI
BOSTON BIOMEDICA, INC.
WEST BRIDGEWATER, MASSACHUSETTS
NUMBER SHARES
FBU
COMMON STOCK
INCORPORATED UNDER THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS
THIS STOCK IS TRANSFERABLE IN BOSTON, MASSACHUSETTS CUSIP 100560101
OR NEW YORK, NEW YORK
THIS CERTIFIES THAT SEE REVERSE FOR
CERTAIN DEFINITIONS
Is the owner of
fully-paid and non-assessable shares of the COMMON STOCK, $.01 par value, of
BOSTON BIOMEDICA, INC.
(herein called the "Corporation"), transferable on the books of the Corporation
by the holder hereof in person or by duly authorized attorney upon surrender of
this Certificate properly endorsed. This certificate and the shares represented
hereby are subject to the laws of the Commonwealth of Massachusetts and to the
Articles of Organization and the By-laws of the Corporation as from time to time
amended. This Certificate is not valid unless countersigned by the Transfer
Agent and Registrar.
WITNESS the facsimile seal of the Corporation and the facsimile signatures
of its duly authorized officers.
Dated
BOSTON BIOMEDICA, INC.
CORPORATE SEAL 1978
MASSACHUSETTS
_______________________ __________________________
President Treasurer
COUNTERSIGNED AND REGISTERED:
American Securities Transfer & Trust, Inc.
____________________________
BY TRANSFER AGENT
AND REGISTRAR
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tennants in common UNIF GIFT MIN ACT -- Custodian
TEN ENT - as tennants by the entireties (Cust) (Minor)
JT TEN - as joint tennants with right of under Uniform Gifts to Minors
survivorship and not as tennants Act _____________
in common (State)
Additional abbreviations may also be used though not in the above list.
For value received, _____________, hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
______________________________
________________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
________________________________________________________________________________
________________________________________________________________________________
_________________________________________________________________________ shares
of the common stock represented by the within Certificate and do hereby
irrevocably constitute and appoint
_______________________________________________________________________ Attorney
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.
Dated __________________________
__________________________________________________
THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND
NOTICE: WITH THE NAME AS WRITTEN UPON THE FACE OF THE
CERTIFICATE IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
Signature(s) Guaranteed:
____________________________________________
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN
ELIGIBLE GUARANTOR INSTITUTION (BANKS,
STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS
AND CREDIT UNIONS WITH MEMBERSHIP IN AN
APPROVED SIGNATURE GUARANTEE MEDALLION
PROGRAM), PURSUANT TO S.E.C. RULE 17Ad.-15.
The Corporation is authorized to issue more than one class of stock. A copy of
the full text of the preferences, voting powers, qualifications and special or
relative rights of the shares of each class of stock will be provided to the
holder hereof upon written request and without charge.
EXHIBIT 10.18.2
EXECUTION
TERM PROMISSORY NOTE
$200,000.00 Boston, Massachusetts
Due: October 18, 1999 Dated: October 11, 1994
FOR VALUE RECEIVED, the undersigned, BOSTON BIOMEDICA, INC., ("BBI"), BTRL
CONTRACTS AND SERVICES, INC. ("BTRL") and NORTH AMERICAN LABORATORY GROUP, INC.
("NALG"), each of which is a Massachusetts corporation validly created, legally
existing and in good standing under the laws of the Commonwealth of
Massachusetts and each of which has its "Notice Address" at 375 West Street,
West Bridgewater, Massachusetts 02379 (BBI, BTRL and NALG, together with their
successors and assigns, are collectively referred to herein as the "Borrower")
JOINTLY AND SEVERALLY, AND UNCONDITIONALLY PROMISE TO PAY TO THE ORDER OF THE
FIRST NATIONAL BANK OF BOSTON, a national banking association having an office
and "Notice Address" at Bank of Boston-Worcester Tower, P.O. Box 15073,
Worcester, Massachusetts 01615-0073 (together with its successors and assigns,
the "Lender"), successor-by-merger to WORCESTER COUNTY INSTITUTION FOR SAVINGS,
a Massachusetts savings bank ("WCiS"), the principal sum of TWO HUNDRED THOUSAND
AND 00/100 DOLLARS ($200,000.00), with interest on the unpaid balance thereof
from the date hereof until paid at the rate and in the manner herein provided,
in lawful money of the United States of America.
Amended and Restated Loan Agreement. The Borrower and WCiS are parties to a
certain Amended and Restated Loan and Security Agreement (the "Agreement") dated
as of June 18, 1993, which Agreement was amended by a certain letter agreement
dated August 26, 1993 ("Amendment No. 1") by and among the Borrower and WCiS,
and further amended by a certain Amendment No. 2 to Amended and Restated Loan
and Security Agreement dated as of July 29, 1994 ("Amendment No. 2") by and
between the Borrower and the Lender. As of the date hereof, the Borrower and the
Lender have entered into a certain Amendment No. 3 to Amended and Restated Loan
and Security Agreement (the Agreement, as amended by Amendment No 1, Amendment
No. 2 and Amendment No. 3, is hereinafter referred to as the "Loan Agreement").
Terms not otherwise specifically defined in this Term Promissory Note
(hereinafter referred to as the "Note") shall have the respective meanings given
to them in the Agreement.
Principal Advances. The Lender shall advance sums hereunder, up to the
principal amount hereof, for a period of six (6) months from the date hereof in
accordance with the provisions of the Loan Agreement (the "Advance Period").
Interest Rate. During the Advance Period, the unpaid principal of this Note
from time to time outstanding shall bear interest, computed on the basis of
actual number of days elapsed over a year assumed to have 360 days, at an
interest rate per annum equal to one and one-quarter percent (1.25%) per annum
above the rate of interest established from time to time by the Lender as its
Base Lending Rate (the "Base Rate"), such interest rate to be determined on a
daily basis and adjusted from time to time on the effective date of any change
in the Base Rate by the Lender (the "Adjusted Base Rate"). Thereafter, the
unpaid principal amount of this Note from time to time outstanding shall bear
interest at the Adjusted Base Rate unless the Borrower shall have elected the
Fixed Rate Option (as hereinafter defined) by irrevocable notice to the Lender
received not less than ten (10) business days prior to the last business day of
the Advance Period. In the absence of such election, the principal amount
outstanding hereunder shall bear interest at the Adjusted Base Rate.
"Fixed Rate Option" as used herein shall mean the one-time option of the
Borrower to have interest computed hereunder on the basis of an interest rate
per annum equal to two and one-half percent (2.50%) per annum above the "Fixed
Rate" (as hereinafter defined) (the "Adjusted Fixed Rate"). The "Fixed Rate"
shall be the fixed rate of interest quoted by the Lender for the outstanding
principal balance hereunder for the remainder of the term hereunder.
Certain Provisions Regarding Interest. To the extent used herein, Base Rate
means the rate of interest per annum announced, from time to time, by the Lender
as its Base Rate. The Borrower acknowledges that the Base Rate is a reference
rate and not necessarily the lowest rate charged by the Lender to borrowers.
Interest per annum shall be calculated for the actual number of days elapsed,
from time to time, over a year assumed to have 360 days. Therefore, each dollar
of principal outstanding hereunder for all or any part of a day shall accrue
interest equal to 1/360th of the annual interest accruing hereunder on each such
dollar. Interest shall accrue on each day or part thereof that any principal is
outstanding including Sundays, holidays and all days during which the Lender is
not open for the conduct of business.
Interest Increase after Maturity or Acceleration. Any and all amounts not
paid when due hereunder, whether after maturity, by acceleration or otherwise,
shall accrue interest, payable on demand, at the greater of (i) the annual rate
of eighteen percent (18%) or (ii) the annual rate equal to two percent (2%)
above the Base Rate, if permitted by law, calculated as above from the date when
due until so paid.
Payments. Commencing on November 18, 1994, and on the same day of each
month thereafter up to and including April 18, 1995, payments of interest only
shall be made in arrears on the outstanding principal amount of this Note.
Commencing on May 18, 1995, payments on this Note shall be made in
fifty-four (54) consecutive monthly installments of principal and interest. The
first fifty-three (53) such installments shall be equal to one-fifty-fourth of
the principal amount of this Note which has
-2-
been advanced, plus accrued and unpaid interest in arrears. The last installment
shall comprise the then unpaid principal balance of this Note together with all
accrued and unpaid interest and any and all other fees, charges, costs and
expenses due and payable to Lender hereunder.
Late Charges. If any payment due hereunder is not paid within ten (10) days
of its due date, the Borrower will also pay to Lender, on demand and in addition
to all other amounts payable hereunder, an amount equal to five percent (5%) of
the amount of such payment. The assessment or collection of late charges is not
intended and shall not be construed to permit payment of any amount payable
hereunder beyond the applicable due date thereof. The time period which is
allowed before the assessment of late charges is not intended and shall not be
construed as a grace or cure period with respect to payment or performance of
any obligation hereunder.
Prepayment. To the extent that interest accrues hereunder at the Adjusted
Base Rate, the Borrower shall have the right to prepay all or a portion of the
entire outstanding principal balance of this Note without penalty so long as
such prepayment includes payment of all accrued and unpaid interest and other
accrued costs and charges of Lender. If Borrower shall have elected the Fixed
Rate Option, the Borrower shall have the right to prepay all or a portion of the
entire outstanding principal balance of this Note ("Prepayment") upon (a)
delivery of sixty (60) days' prior written notice to the Lender, (b) payment of
all accrued interest and other accrued charges and costs of Lender, and (c)
payment of a Prepayment premium determined as provided in the next sentence of
this paragraph. Such Prepayment premium shall be in an amount equal to the daily
interest for the remaining term hereunder on the principal amount so prepaid at
a daily rate equal to one-three hundred sixtieth (1/360th) of the difference (if
positive) of (i) the Fixed Rate applicable thereto minus (ii) the rate of
interest obtainable by the Lender upon the purchase of debt securities
customarily issued by the Treasury of the United States of America, in an amount
equal to the principal amount so prepaid, which have a maturity date
approximating the Maturity Date. The Lender's determination of such amount of
interest, in the absence of manifest error, shall be conclusive.
Application of Payments. Any payments received by the Lender on account of
this Note prior to maturity or other acceleration, shall be applied: first, to
any fees, charges, costs and expenses then owed to the Lender by Borrower;
second to accrued and unpaid interest on the unpaid balance of principal; and
third, to the unpaid balance of principal hereof. Any payments received by the
Lender on account of this Note after maturity or other acceleration shall be
applied in such manner as the Lender may determine.
Note Issued Pursuant to Loan Agreement. This Note is issued pursuant to the
Loan Agreement, and the holder hereof is entitled to the benefits of the Loan
Agreement, and all other agreements, instruments, guarantees and other documents
executed and delivered in connection therewith and herewith (collectively
referred to herein as the "Financing Instruments").
-3-
Maturity Date. The entire outstanding principal balance hereof together
with all accrued and unpaid interest thereon and all fees, charges, costs and
expenses due Lender hereunder shall be due and payable on October 18, 1999 (the
"Maturity Date").
Security Provided in Other Writings. Payment and performance of this Note
may be secured, from time to time, now or hereafter, as provided in one or more
security agreements, mortgages, pledges, assignments or any other instruments,
documents or agreements ("Security"), whether or not such Security specifically
refers to this Note. Any and all such Security may provide, in general terms,
that such Security secures obligations of the Borrower to the Lender however and
whenever evidenced, created or arising. Payment and performance of this Note is
hereby secured by such Security without specific reference to this Note, and, in
addition, this Note is secured by any and all Security which specifically refers
to or provides security for this Note.
Grant of Security in Accounts and Other Property in Possession of the
Lender. To secure the payment and performance of this Note, the Borrower hereby
grants to the Lender a continuing security interest in and to: (a) any and all
deposits and sums at any time credited by or due from the Lender (or any of its
banking or lending affiliates) to the Borrower; and (b) any or all cash,
instruments, securities and other property of the Borrower, in the possession,
custody or control (whether for safekeeping or otherwise) of, or in transit to
or from, the Lender or any such affiliate, including such property in the
possession of any third party acting on behalf of the Lender or any such
affiliate, regardless of the reason for the receipt, possession, custody or
control of such property or any prior release thereof, conditional or otherwise.
Upon demand, maturity or acceleration of the payment of this Note, as
applicable, the Lender may, at any time, sell or dispose of any or all such
property and apply the proceeds thereof against the indebtedness of this Note.
With respect to all such property, the Lender shall have the rights and remedies
of a secured party under the Uniform Commercial Code and other applicable laws,
the choice and manner of exercise of any right or remedy being in the Lender's
sole discretion. No such right or remedy shall be exclusive, and each may be
exercised by the Lender concurrently or in any order or combination as the
Lender may select, from time to time. The Lender shall have the right to
foreclose the security interest granted herein by any available judicial
procedure and to sell the same with or without judicial process; the Lender may
sell or otherwise dispose of such property or any part thereof at public or
private sales, at such price or prices, and upon such terms, either for cash,
credit or future delivery, as the Lender may elect; and, except as to any part
of such property which is perishable or which threatens to decline speedily in
value, or is of the type customarily sold on a recognized market, the Lender
shall give the Borrower reasonable notification of such sale or sales, it being
agreed that in all events written notice mailed to the Borrower at least seven
(7) days prior to such sale is reasonable notification. The Lender may (but
shall have no obligation to) bid for and become the purchaser of any such
property.
Setoff. With respect to any and all deposits and sums referred to above,
upon the Maturity Date or acceleration of the payment of this Note, the Lender
may, at any time, apply
-4-
or setoff all or any portion of such deposits or sums against the indebtedness
evidenced by this Note, regardless of any other collateral or security available
to the Lender.
Payment of Costs and Attorney's Fees. The Borrower agrees, and all
co-makers and guarantors also agree, jointly and severally, to pay all costs
incurred by the Lender, including all attorneys' reasonable fees and
out-of-pocket costs and expenses, including court costs, in connection with (i)
the administration or implementation of the loan evidenced by this Note, (ii)
the collection of the indebtedness evidenced by this Note, or (iii) the
preservation, protection, collection or enforcement of any of the Lender's
rights or remedies hereunder or under any other instrument securing or
guaranteeing this Note, against the Borrower or any co-maker or guarantor, or
against any collateral securing this Note or securing any other instrument,
document or agreement securing or guaranteeing this Note (whether or not suit is
instituted by or against the Lender).
Waivers and Consents by Borrower and Others. By making or guaranteeing this
Note or by making any agreement to pay any of the indebtedness evidenced by this
Note, the Borrower, and each co-maker, guarantor, and other person or entity now
or hereafter liable for the payment of any of the indebtedness evidenced by this
Note, respectively, agrees to waive: presentment for payment; protest; demand;
notice of protest, demand, dishonor and non-payment of this Note; all other
notices; all other defenses in the nature thereof, including all suretyship
defenses; and any and all other demands or notices otherwise required to be
given in connection with the delivery, acceptance, endorsement, performance,
default or enforcement of this Note, any and all borrowings or advances
hereunder, any and all guarantees or undertakings hereof, and any security
taken, granted or released, from time to time, in connection herewith. The
Borrower and each such co-maker, guarantor and other person or entity hereby
consents, without notice: (a) to the substitution, exchange or release, from
time to time, of any collateral securing this Note or any part thereof; (b) to
the acceptance, from time to time, by the Lender of any additional collateral or
security for this Note, or the acceptance, from time to time, of other makers,
guarantors or other obligors of this Note, (c) to the modification or amendment,
from time to time, of this Note and any other instrument, document or agreement
securing or guaranteeing this Note, at the request of any person or entity
liable thereon; (d) to the granting of any extension of the time for payment of
this Note or any other indulgence for the performance of the agreements,
covenants and conditions contained in this Note, or any other instrument,
document or agreement securing or guaranteeing this Note, at the request of any
person or entity liable thereon; (e) to any and all other extensions,
forbearances and indulgences whatsoever granted by the Lender with respect to
this Note, any other liability of the Borrower, or any collateral securing this
Note or any other liability of the Borrower to the Lender; and any and all
assignments or transfers of this Note and any part or all of the indebtedness
evidenced hereby or any security therefor or guarantees thereof to any
successor, assignee, participant or other party. The happening of any one or
more of the foregoing events shall not alter or diminish the liability of any
person or entity liable on this Note. The release by the Lender of the Borrower
or any one or more co-makers or guarantors shall not release any other person
obligated on account of this Note, except only for payments actually received by
Lender free
-5-
and clear of the rights of all other parties. No person or entity obligated on
account of this Note may seek contribution from any other person or entity also
obligated unless and until all liabilities, obligations, and indebtedness to the
Lender of the person from whom contribution is sought have been satisfied in
full.
Joint and Several Obligations; Binding Effect. This Note and the
liabilities of the Borrower shall be the joint and several obligation of each of
the undersigned, if more than one, and each guarantor, co-maker, and surety, and
shall be binding upon each of them and each of their respective heirs,
representatives, successors and assigns, and shall inure to the benefit of the
Lender and its successors, indorsees and assigns. Each reference in this Note to
the Borrower, any co-maker and any guarantor refers to each such person or
entity individually and also to all such persons and entities jointly. The term
"Lender" shall include the Lender and each other payee hereof, or any indorsee
of this Note in possession hereof, or the bearer hereof if the Note is at the
time payable to the bearer.
The Lender's Rights Reserved. No delay or omission on the part of the
Lender in exercising or enforcing any of the Lender's rights, powers, privileges
or remedies or discretions hereunder or under any instrument or agreement which
is given or may be given to secure or guaranty the indebtedness evidenced
hereby, shall operate as a waiver thereof, or of any other right, power,
privilege or remedy of such holder on that occasion or on any other occasion,
nor shall any delay, omission or waiver on any one occasion be deemed to be a
bar to or waiver of the same or any other right on any future occasion, and no
waiver of a default hereunder shall operate as a waiver of any other default nor
as a continuing waiver.
Default. The entire unpaid principal balance of this Note and all accrued
and unpaid interest thereon and all other fees, charges, costs and expenses
hereunder shall become immediately due and payable, without demand, prior to the
maturity of this Note, at the sole option of the Lender, (exercisable without
demand, notice or protest, which are hereby waived) regardless of any prior
forbearance or indulgence by the Lender, upon the occurrence of one or more
Events of Default as that term is defined in the Loan Agreement.
Commercial Purposes. The Borrower hereby represents to the Lender that the
proceeds of this Note shall be used exclusively for business or commercial
purposes and not for personal, family or household purposes.
Payment of Proceeds. The proceeds of any and all loans or advances pursuant
to this Note may be paid to or at the direction of the Borrower.
Authority to Debit Accounts. The Borrower hereby authorizes the Lender to
charge or debit any deposit account of the Borrower with the Lender to effect
any payment due hereunder, all without prior notice.
Authority to Complete this Note. In the event that this Note is delivered
in an incomplete form in any respect, the Borrower and each co-maker, guarantor
and other person
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or entity liable hereon, hereby authorizes the Lender, without further notice,
to complete any blank spaces and to date the Note, if undated, as of the date
funds are first advanced hereunder.
Currency and Payments. All payments on this Note shall be made in lawful
currency of the United States of America, in each case without deduction, setoff
or counterclaim. All payments on this Note shall be made in immediately
available funds. With respect to any payment on this Note which is made by
check, the Lender may treat such amount as outstanding pending final collection
thereof, and interest hereunder shall continue to accrue pending such final
collection.
Acknowledgment of Terms and Receipt of a Copy. The Borrower has read all of
the terms and conditions of this Note and has received an exact copy of this
Note.
Severability of Provisions. Any determination that any provision of this
Note or any application thereof is invalid, illegal, or unenforceable in any
respect in any instance shall not affect the validity, legality and
enforceability of such provision in any other instance, nor the validity,
legality or enforceability of any other provision hereof.
Headings. The headings appearing in this Note are used for convenience only
and should not be deemed to affect the interpretation of this Note.
Sealed Instrument. This Note shall take effect as a sealed instrument.
Books and Records; Copies as Evidence. The Lender's books and records
concerning the Lender's loans and advances to the Borrower, the accrual of
interest thereon, and the repayment of such loans, advances and interest, shall
be prima facie evidence of the indebtedness owed under this Note. In any
proceeding with respect to this Note, any photographic, photostatic, microfilm
or similar reproduction of this Note shall be admissible in evidence as though
it were the original, whether or not the original hereof is in existence and
whether or not such reproduction was made in the regular course of business.
Governing Law; Jurisdiction for Proceedings. This Note is delivered to the
Lender in Boston, Massachusetts and shall be governed by and construed in
accordance with the laws of the Commonwealth of Massachusetts for all purposes
and in all respects. The Borrower, and each co-maker and guarantor of this Note
submits to the non-exclusive jurisdiction of the courts of the Commonwealth of
Massachusetts for all purposes with respect to this Note and any collateral
given to secure their respective liabilities, obligations and indebtedness to
the Lender, and their respective relationships with the Lender.
Legal Limitation on Interest. Notwithstanding any other provision of this
Note to the contrary, in the event that interest pursuant to the provisions of
this Note is finally determined by a court of competent jurisdiction to be
subject to usury or other similar laws affecting the maximum allowable interest
chargeable then, and only then, and only to the extent of such
-7-
final determination, the maximum amount of interest payable under this Note
shall be the maximum amount of interest determined by such court to be allowed
by such laws.
Notices and Notice Addresses. The respective Notice Addresses of the Lender
and the Borrower are those stated at the beginning of this Note, together with
the following additions: (a) for the Lender, "Attention: Commercial Banking
Department"; and (b) for the Borrower, "Attention: Kevin W. Quinlan, Chief
Financial Officer". To the extent required or voluntarily given, all notices or
demands hereunder shall be sufficient and shall be deemed to have been given if
made in writing and given in accordance with the provisions for notice contained
in the Loan Agreement. Any party may change its Notice Address hereunder by
giving notice of such change to the other party in accordance with the
provisions of this subsection.
-8-
IN WITNESS WHEREOF, the Borrower has executed this Note, as an instrument
under seal as of the date appearing on the first page of this Note.
BOSTON BIOMEDICA, INC.
By:
- ---------------------- ------------------------
Witness as to Borrower Kevin W. Quinlan
Treasurer
Hereunto duly authorized
BTRL CONTRACTS AND
SERVICES, INC.
By:
------------------------
Kevin W. Quinlan
Treasurer
Hereunto duly authorized
NORTH AMERICAN LABORATORY
GROUP, INC.
By:
------------------------
Kevin W. Quinlan
Treasurer
Hereunto duly authorized
ATTEST:
- -------------------------------
Clerk of Boston Biomedica, Inc.
ATTEST:
-9-
EXHIBIT 10.18.3
EXECUTION
AMENDED AND RESTATED TERM PROMISSORY NOTE
$849,000.00 Boston, Massachusetts
Due: October 18, 1998 Dated: October 11, 1994
FOR VALUE RECEIVED, the undersigned, BOSTON BIOMEDICA, INC., ("BBI"), BTRL
CONTRACTS AND SERVICES, INC. ("BTRL") and NORTH AMERICAN LABORATORY GROUP, INC.
("NALG"), each of which is a Massachusetts corporation validly created, legally
existing and in good standing under the laws of the Commonwealth of
Massachusetts and each of which has its "Notice Address" at 375 West Street,
West Bridgewater, Massachusetts 02379 (BBI, BTRL and NALG, together with their
successors and assigns, are collectively referred to herein as the "Borrower")
JOINTLY AND SEVERALLY, AND UNCONDITIONALLY PROMISE TO PAY TO THE ORDER OF THE
FIRST NATIONAL BANK OF BOSTON, a national banking association having an office
and "Notice Address" at Bank of Boston-Worcester Tower, P.O. Box 15073,
Worcester, Massachusetts 01615-0073 (together with its successors and assigns,
the "Lender"), successor-by-merger to WORCESTER COUNTY INSTITUTION FOR SAVINGS,
a Massachusetts savings bank ("WCiS"), the principal sum of EIGHT HUNDRED
FORTY-NINE THOUSAND AND 00/100 DOLLARS ($849,000.00), with interest on the
unpaid balance thereof from the date hereof until paid at the rate and in the
manner herein provided, in lawful money of the United States of America.
Amended and Restated Loan Agreement. The Borrower and WCiS are parties to a
certain Amended and Restated Loan and Security Agreement (the "Agreement") dated
as of June 18, 1993, which Agreement was amended by a certain letter agreement
dated August 26, 1993 ("Amendment No. 1") by and among the Borrower and WCiS,
and further amended by a certain Amendment No. 2 to Amended and Restated Loan
and Security Agreement dated as of July 29, 1994 ("Amendment No. 2") by and
between the Borrower and the Lender. As of the date hereof, the Borrower and the
Lender have entered into a certain Amendment No. 3 to Amended and Restated Loan
and Security Agreement (the Agreement, as amended by Amendment No 1, Amendment
No. 2 and Amendment No. 3 is hereinafter referred to as the "Loan Agreement").
Terms not otherwise specifically defined in this Amended and Restated Term
Promissory Note (hereinafter referred to as the "Note") shall have the
respective meanings given to them in the Loan Agreement.
Interest Rate. The unpaid principal of this Note from time to time
outstanding shall bear interest, computed on the basis of actual number of days
elapsed over a year assumed to have 360 days, at an interest rate per annum
equal to two and one-half percent (2.50%) per annum above the "Fixed Rate" (as
hereinafter defined) (the "Adjusted Fixed Rate"). The
"Fixed Rate" shall be the fixed rate of interest quoted by the Lender on the
date hereof for the outstanding balance hereunder for the entire term of this
Note.
Certain Provisions Regarding Interest. Interest per annum shall be
calculated for the actual number of days elapsed, from time to time, over a year
assumed to have 360 days. Therefore, each dollar of principal outstanding
hereunder for all or any part of a day shall accrue interest equal to 1/360th of
the annual interest accruing hereunder on each such dollar. Interest shall
accrue on each day or part thereof that any principal is outstanding including
Sundays, holidays and all days which the Lender is not open for the conduct of
business.
Interest Increase after Maturity or Acceleration. Any and all amounts not
paid when due hereunder, whether after maturity, by acceleration or otherwise,
shall accrue interest, payable on demand, at the greater of (i) the annual rate
of eighteen percent (18%) or (ii) the annual rate equal to two percent (2%)
above the Adjusted Fixed Rate, if permitted by law, calculated as above from the
date when due until so paid.
Payments. Commencing on November 18, 1994, and on the same day of each
month thereafter, payments on this Note shall be made in forty-eight (48)
consecutive monthly installments of principal plus interest. The first
forty-seven (47) such payments shall each comprise the sum of Seventeen Thousand
Six Hundred Eighty-seven and 50/100 ($17,687.50) Dollars in principal repayment,
plus accrued and unpaid interest in arrears. The last installment shall comprise
the then unpaid principal balance of this Note together with all accrued and
unpaid interest and any and all other fees, charges, costs and expenses due and
payable to the Lender hereunder.
Late Charges. If any payment due hereunder is not paid within ten (10) days
of its due date, the Borrower will also pay to Lender, on demand and in addition
to all other amounts payable hereunder, an amount equal to five percent (5%) of
the amount of such payment. The assessment or collection of late charges is not
intended and shall not be construed to permit payment of any amount payable
hereunder beyond the applicable due date thereof. The time period which is
allowed before the assessment of late charges is not intended and shall not be
construed as a grace or cure period with respect to payment or performance of
any obligation hereunder.
Prepayment. The Borrower shall have the right to prepay all or a portion of
the entire outstanding principal balance of this Note ("Prepayment") upon (a)
delivery of sixty (60) days' prior written notice to the Lender, (b) payment of
all accrued interest and other accrued charges and costs of Lender, and (c)
payment of a Prepayment premium determined as provided in the next sentence of
this paragraph. Such Prepayment premium shall be in an amount equal to the daily
interest for the remaining term hereunder on the principal amount so prepaid at
a daily rate equal to one-three hundred sixtieth (1/360th) of the difference (if
positive) of (i) the Fixed Rate applicable thereto minus (ii) the rate of
interest obtainable by the Lender upon the purchase of debt securities
customarily issued by the Treasury of the United States of America, in an amount
equal to the principal amount so prepaid, which have
-2-
a maturity date approximating the Maturity Date. The Lender's determination of
such amount of interest, in the absence of manifest error, shall be conclusive.
Application of Payments. Any payments received by the Lender on account of
this Note prior to maturity or other acceleration, shall be applied: first, to
any fees, charges, costs and expenses then owed to the Lender by Borrower;
second to accrued and unpaid interest on the unpaid balance of principal; and
third, to the unpaid balance of principal hereof. Any payments received by the
Lender on account of this Note after maturity or other acceleration shall be
applied in such manner as the Lender may determine.
Note Issued Pursuant to Loan Agreement. This Note is issued pursuant to the
Loan Agreement, and the holder hereof is entitled to the benefits of the Loan
Agreement, and all other agreements, instruments, guarantees and other documents
executed and delivered in connection therewith and herewith (collectively
referred to herein as the "Financing Instruments").
Maturity Date. The entire outstanding principal balance hereof together
with all accrued and unpaid interest thereon and all fees, charges, costs and
expenses due Lender hereunder shall be due and payable on October 18, 1998 (the
"Maturity Date").
Security Provided in Other Writings. Payment and performance of this Note
may be secured, from time to time, now or hereafter, as provided in one or more
security agreements, mortgages, pledges, assignments or any other instruments,
documents or agreements ("Security"), whether or not such Security specifically
refers to this Note. Any and all such Security may provide, in general terms,
that such Security secures obligations of the Borrower to the Lender however and
whenever evidenced, created or arising. Payment and performance of this Note is
hereby secured by such Security without specific reference to this Note, and, in
addition, this Note is secured by any and all Security which specifically refers
to or provides security for this Note.
Grant of Security in Accounts and Other Property in Possession of the
Lender. To secure the payment and performance of this Note, the Borrower hereby
grants to the Lender a continuing security interest in and to: (a) any and all
deposits and sums at any time credited by or due from the Lender (or any of its
banking or lending affiliates) to the Borrower; and (b) any or all cash,
instruments, securities and other property of the Borrower, in the possession,
custody or control (whether for safekeeping or otherwise) of, or in transit to
or from, the Lender or any such affiliate, including such property in the
possession of any third party acting on behalf of the Lender or any such
affiliate, regardless of the reason for the receipt, possession, custody or
control of such property or any prior release thereof, conditional or otherwise.
Upon demand, maturity or acceleration of the payment of this Note, as
applicable, the Lender may, at any time, sell or dispose of any or all such
property and apply the proceeds thereof against the indebtedness of this Note.
With respect to all such property, the Lender shall have the rights and remedies
of a secured party under the Uniform Commercial Code and other applicable laws,
the choice and manner of exercise of any right
-3-
or remedy being in the Lender's sole discretion. No such right or remedy shall
be exclusive, and each may be exercised by the Lender concurrently or in any
order or combination as the Lender may select, from time to time. The Lender
shall have the right to foreclose the security interest granted herein by any
available judicial procedure and to sell the same with or without judicial
process; the Lender may sell or otherwise dispose of such property or any part
thereof at public or private sales, at such price or prices, and upon such
terms, either for cash, credit or future delivery, as the Lender may elect; and,
except as to any part of such property which is perishable or which threatens to
decline speedily in value, or is of the type customarily sold on a recognized
market, the Lender shall give the Borrower reasonable notification of such sale
or sales, it being agreed that in all events written notice mailed to the
Borrower at least seven (7) days prior to such sale is reasonable notification.
The Lender may (but shall have no obligation to) bid for and become the
purchaser of any such property.
Setoff. With respect to any and all deposits and sums referred to above,
upon the Maturity Date or acceleration of the payment of this Note, the Lender
may, at any time, apply or setoff all or any portion of such deposits or sums
against the indebtedness evidenced by this Note, regardless of any other
collateral or security available to the Lender.
Payment of Costs and Attorney's Fees. The Borrower agrees, and all
co-makers and guarantors also agree, jointly and severally, to pay all costs
incurred by the Lender, including all attorneys' reasonable fees and
out-of-pocket costs and expenses, including court costs, in connection with (i)
the administration or implementation of the loan evidenced by this Note, (ii)
the collection of the indebtedness evidenced by this Note, or (iii) the
preservation, protection, collection or enforcement of any of the Lender's
rights or remedies hereunder or under any other instrument securing or
guaranteeing this Note, against the Borrower or any co-maker or guarantor, or
against any collateral securing this Note or securing any other instrument,
document or agreement securing or guaranteeing this Note (whether or not suit is
instituted by or against the Lender).
Waivers and Consents by Borrower and Others. By making or guaranteeing this
Note or by making any agreement to pay any of the indebtedness evidenced by this
Note, the Borrower, and each co-maker, guarantor, and other person or entity now
or hereafter liable for the payment of any of the indebtedness evidenced by this
Note, respectively, agrees to waive: presentment for payment; protest; demand;
notice of protest, demand, dishonor and non-payment of this Note; all other
notices; all other defenses in the nature thereof, including all suretyship
defenses; and any and all other demands or notices otherwise required to be
given in connection with the delivery, acceptance, endorsement, performance,
default or enforcement of this Note, any and all borrowings or advances
hereunder, any and all guarantees or undertakings hereof, and any security
taken, granted or released, from time to time, in connection herewith. The
Borrower and each such co-maker, guarantor and other person or entity hereby
consents, without notice: (a) to the substitution, exchange or release, from
time to time, of any collateral securing this Note or any part thereof; (b) to
the acceptance, from time to time, by the Lender of any additional collateral or
security for this Note, or the acceptance, from time to time, of other makers,
guarantors or other obligors of
-4-
this Note, (c) to the modification or amendment, from time to time, of this Note
and any other instrument, document or agreement securing or guaranteeing this
Note, at the request of any person or entity liable thereon; (d) to the granting
of any extension of the time for payment of this Note or any other indulgence
for the performance of the agreements, covenants and conditions contained in
this Note, or any other instrument, document or agreement securing or
guaranteeing this Note, at the request of any person or entity liable thereon;
(e) to any and all other extensions, forbearances and indulgences whatsoever
granted by the Lender with respect to this Note, any other liability of the
Borrower, or any collateral securing this Note or any other liability of the
Borrower to the Lender; and any and all assignments or transfers of this Note
and any part or all of the indebtedness evidenced hereby or any security
therefor or guarantees thereof to any successor, assignee, participant or other
party. The happening of any one or more of the foregoing events shall not alter
or diminish the liability of any person or entity liable on this Note. The
release by the Lender of the Borrower or any one or more co-makers or guarantors
shall not release any other person obligated on account of this Note, except
only for payments actually received by Lender free and clear of the rights of
all other parties. No person or entity obligated on account of this Note may
seek contribution from any other person or entity also obligated unless and
until all liabilities, obligations, and indebtedness to the Lender of the person
from whom contribution is sought have been satisfied in full.
Joint and Several Obligations; Binding Effect. This Note and the
liabilities of the Borrower shall be the joint and several obligation of each of
the undersigned, if more than one, and each guarantor, co-maker, and surety, and
shall be binding upon each of them and each of their respective heirs,
representatives, successors and assigns, and shall inure to the benefit of the
Lender and its successors, indorsees and assigns. Each reference in this Note to
the Borrower, any co-maker and any guarantor refers to each such person or
entity individually and also to all such persons and entities jointly. The term
"Lender" shall include the Lender and each other payee hereof, or any indorsee
of this Note in possession hereof, or the bearer hereof if the Note is at the
time payable to the bearer.
Lender's Rights Reserved. No delay or omission on the part of the Lender in
exercising or enforcing any of the Lender's rights, powers, privileges or
remedies or discretions hereunder or under any instrument or agreement which is
given or may be given to secure or guaranty the indebtedness evidenced hereby,
shall operate as a waiver thereof, or of any other right, power, privilege or
remedy of such holder on that occasion or on any other occasion, nor shall any
delay, omission or waiver on any one occasion be deemed to be a bar to or waiver
of the same or any other right on any future occasion, and no waiver of a
default hereunder shall operate as a waiver of any other default nor as a
continuing waiver.
Default. The entire unpaid principal balance of this Note and all accrued
and unpaid interest thereon and all other fees, charges, costs and expenses
hereunder shall become immediately due and payable, without demand, prior to the
maturity of this Note, at the sole option of the Lender, (exercisable without
demand, notice or protest, which are hereby
-5-
waived) regardless of any prior forbearance or indulgence by the Lender, upon
the occurrence of one or more Events of Default as that term is defined in the
Loan Agreement.
Commercial Purposes. The Borrower hereby represents to the Lender that the
proceeds of this Note shall be used exclusively for business or commercial
purposes and not for personal, family or household purposes.
Payment of Proceeds. The proceeds of any and all loans or advances pursuant
to this Note may be paid to or at the direction of the Borrower.
Authority to Debit Accounts. The Borrower hereby authorizes the Lender to
charge or debit any deposit account of the Borrower with the Lender to effect
any payment due hereunder, all without prior notice.
Authority to Complete this Note. In the event that this Note is delivered
in an incomplete form in any respect, the Borrower and each co-maker, guarantor
and other person or entity liable hereon, hereby authorizes the Lender, without
further notice, to complete any blank spaces and to date the Note, if undated,
as of the date funds are first advanced hereunder.
Currency and Payments. All payments on this Note shall be made in lawful
currency of the United States of America, in each case without deduction, setoff
or counterclaim. All payments on this Note shall be made in immediately
available funds. With respect to any payment on this Note which is made by
check, the Lender may treat such amount as outstanding pending final collection
thereof, and interest hereunder shall continue to accrue pending such final
collection.
Acknowledgment of Terms and Receipt of a Copy. The Borrower has read all of
the terms and conditions of this Note and has received an exact copy of this
Note.
Severability of Provisions. Any determination that any provision of this
Note or any application thereof is invalid, illegal, or unenforceable in any
respect in any instance shall not affect the validity, legality and
enforceability of such provision in any other instance, nor the validity,
legality or enforceability of any other provision hereof.
Headings. The headings appearing in this Note are used for convenience only
and should not be deemed to affect the interpretation of this Note.
Sealed Instrument. This Note shall take effect as a sealed instrument.
Books and Records; Copies as Evidence. The Lender's books and records
concerning the Lender's loans and advances to the Borrower, the accrual of
interest thereon, and the repayment of such loans, advances and interest, shall
be prima facie evidence of the indebtedness owed under this Note. In any
proceeding with respect to this Note, any
-6-
photographic, photostatic, microfilm or similar reproduction of this Note shall
be admissible in evidence as though it were the original, whether or not the
original hereof is in existence and whether or not such reproduction was made in
the regular course of business.
Governing Law; Jurisdiction for Proceedings. This Note is delivered to the
Lender in Boston, Massachusetts and shall be governed by and construed in
accordance with the laws of the Commonwealth of Massachusetts for all purposes
and in all respects. The Borrower, and each co-maker and guarantor of this Note
submits to the non-exclusive jurisdiction of the courts of the Commonwealth of
Massachusetts for all purposes with respect to this Note and any collateral
given to secure their respective liabilities, obligations and indebtedness to
the Lender, and their respective relationships with the Lender.
Legal Limitation on Interest. Notwithstanding any other provision of this
Note to the contrary, in the event that interest pursuant to the provisions of
this Note is finally determined by a court of competent jurisdiction to be
subject to usury or other similar laws affecting the maximum allowable interest
chargeable then, and only then, and only to the extent of such final
determination, the maximum amount of interest payable under this Note shall be
the maximum amount of interest determined by such court to be allowed by such
laws.
Notices and Notice Addresses. The respective Notice Addresses of the Lender
and the Borrower are those stated at the beginning of this Note, together with
the following additions: (a) for the Lender, "Attention: Commercial Banking
Group"; and (b) for the Borrower, "Attention: Kevin W. Quinlan, Chief Financial
Officer". To the extent required or voluntarily given, all notices or demands
hereunder shall be sufficient and shall be deemed to have been given if made in
writing and given in accordance with the provisions for notice contained in the
Loan Agreement. Any party may change its Notice Address hereunder by giving
notice of such change to the other party in accordance with the provisions of
this subsection.
Continuing Obligation. This Note amends and restates, in its entirety, (i)
a $400,000 principal amount Term Promissory Note from BBI and BTRL dated July
29, 1992; and (ii) a $500,000 principal amount Term Promissory Note dated June
18, 1993. Upon the execution and delivery of this Note, this Note shall replace
the $400,000 Term Promissory Note and the $500,000 Term Note and shall
immediately evidence all outstanding indebtedness under the $400,000 Term
Promissory Note and the $500,000 Term Note. The Borrower and Lender hereby agree
that the indebtedness embodied in and evidenced by this Note is the same
indebtedness embodied in and evidenced by the $400,000 Term Promissory Note and
the $500,000 Term Promissory Note, increased as provided herein, and that such
indebtedness is a continuing obligation of the Borrower to the Lender, and has
been and continues to be fully enforceable, absolute and in existence.
-7-
IN WITNESS WHEREOF, the Borrower has executed this Note, as an instrument
under seal as of the date appearing on the first page of this Note.
BOSTON BIOMEDICA, INC.
By:
- ---------------------- ---------------------------
Witness as to Borrower Kevin W. Quinlan
Treasurer
Hereunto duly authorized
BTRL CONTRACTS AND
SERVICES, INC.
By:
---------------------------
Kevin W. Quinlan
Treasurer
Hereunto duly authorized
NORTH AMERICAN LABORATORY
GROUP, INC.
By:
---------------------------
Kevin W. Quinlan
Treasurer
Hereunto duly authorized
ATTEST:
- ---------------------------
Clerk of Boston Biomedica, Inc.
-8-
EXHIBIT 10.18.4
EXECUTION
TERM PROMISSORY NOTE
$350,000.00 Boston, Massachusetts
Due: August 2, 2000 Dated: August 2, 1995
FOR VALUE RECEIVED, the undersigned, BOSTON BIOMEDICA, INC., ("BBI"), BTRL
CONTRACTS AND SERVICES, INC. ("BTRL") and BBI-NORTH AMERICAN CLINICAL
LABORATORIES, INC., formerly known as NORTH AMERICAN LABORATORY GROUP, INC.,
("NACL"), each of which is a Massachusetts corporation validly created, legally
existing and in good standing under the laws of the Commonwealth of
Massachusetts and each of which has its "Notice Address" at 375 West Street,
West Bridgewater, Massachusetts 02379, with BBI having its principal place of
business at its Notice Address, BTRL having its principal place of business at 3
Taft Court, Rockville, Maryland 20850 and NACL having its principal place of
business at 75 North Mountain Road, New Britain, Connecticut 06053 (BBI, BTRL
and NACL, together with their successors and assigns, are collectively referred
to herein as the "Borrower") JOINTLY AND SEVERALLY, AND UNCONDITIONALLY PROMISE
TO PAY TO THE ORDER OF THE FIRST NATIONAL BANK OF BOSTON, a national banking
association having an office and "Notice Address" at Bank of Boston-Worcester
Tower, P.O. Box 15073, 100 Front Street, Worcester, Massachusetts 01608-1438
(together with its successors and assigns, the "Lender"), successor-by-merger to
WORCESTER COUNTY INSTITUTION FOR SAVINGS, a Massachusetts savings bank ("WCiS"),
the principal sum of THREE HUNDRED FIFTY THOUSAND DOLLARS ($350,000.00), with
interest on the unpaid balance thereof from the date hereof until paid at the
rate and in the manner herein provided, in lawful money of the United States of
America.
Second Amended and Restated Loan Agreement. The Borrower and the Lender are
parties to a certain Second Amended and Restated Loan and Security Agreement
(the "Loan Agreement") dated as of the date hereof. Terms not otherwise
specifically defined in this Term Promissory Note (hereinafter referred to as
the "Note") shall have the respective meanings given to them in the Loan
Agreement.
Principal Advances. The Lender shall advance sums hereunder, up to the
principal amount hereof, for a period of six (6) months from the date hereof in
accordance with the provisions of the Loan Agreement (the "Advance Period").
Interest Rate. The unpaid principal of this Note from time to time
outstanding shall bear interest, computed on the basis of actual number of days
elapsed over a year assumed to have 360 days, at an interest rate per annum
equal to one percent (1.00%) per annum above the rate of interest established
from time to time by the Lender as its Base Lending Rate (the "Base Rate"), such
interest rate to be determined on a daily basis and adjusted from time to time
on the effective date of any change in the Base Rate by the Lender.
Certain Provisions Regarding Interest. To the extent used herein, Base Rate
means the rate of interest per annum announced, from time to time, by the Lender
as its Base Rate. The Borrower acknowledges that the Base Rate is a reference
rate and not necessarily the lowest rate charged by the Lender to borrowers.
Interest per annum shall be calculated for the actual number of days elapsed,
from time to time, over a year assumed to have 360 days. Therefore, each dollar
of principal outstanding hereunder for all or any part of a day shall accrue
interest equal to 1/360th of the annual interest accruing hereunder on each such
dollar. Interest shall accrue on each day or part thereof that any principal is
outstanding including Sundays, holidays and all days during which the Lender is
not open for the conduct of business.
Interest Increase after Maturity or Acceleration. Any and all amounts not
paid when due hereunder, whether after maturity, by acceleration or otherwise,
shall accrue interest, payable on demand, at the greater of (i) the annual rate
of eighteen percent (18%) or (ii) the annual rate equal to two percent (2%)
above the Base Rate, if permitted by law, calculated as above from the date when
due until so paid.
Payments. Commencing on August 18, 1995, and on the same day of each month
thereafter up to and including February 18, 1996, payments of interest only
shall be made in arrears on the outstanding principal amount of this Note.
Commencing on March 18, 1996, payments on this Note shall be made in
fifty-four (54) consecutive monthly installments of principal and interest. The
first fifty-three (53) such installments shall be equal to one-fifty-fourth of
the principal amount of this Note which has been advanced, plus accrued and
unpaid interest in arrears. The last installment shall comprise the then unpaid
principal balance of this Note together with all accrued and unpaid interest and
any and all other fees, charges, costs and expenses due and payable to Lender
hereunder.
Late Charges. If any payment due hereunder is not paid within ten (10) days
of its due date, the Borrower will also pay to Lender, on demand and in addition
to all other amounts payable hereunder, an amount equal to five percent (5%) of
the amount of such payment. The assessment or collection of late charges is not
intended and shall not be construed to permit payment of any amount payable
hereunder beyond the applicable due date thereof. The time period which is
allowed before the assessment of late charges is not intended and shall not be
construed as a grace or cure period with respect to payment or performance of
any obligation hereunder.
Prepayment. To the extent that interest accrues hereunder at the Adjusted
Base Rate, the Borrower shall have the right to prepay all or a portion of the
entire outstanding principal balance of this Note without penalty so long as
such prepayment includes payment of all accrued and unpaid interest and other
accrued costs and charges of Lender. If Borrower shall have elected the Fixed
Rate Option, the Borrower shall have the right to prepay all or a portion of the
entire outstanding principal balance of this Note
-2-
("Prepayment") upon (a) delivery of sixty (60) days' prior written notice to the
Lender, (b) payment of all accrued interest and other accrued charges and costs
of Lender, and (c) payment of a Prepayment premium determined as provided in the
next sentence of this paragraph. Such Prepayment premium shall be in an amount
equal to the daily interest for the remaining term hereunder on the principal
amount so prepaid at a daily rate equal to one-three hundred sixtieth (1/360th)
of the difference (if positive) of (i) the Fixed Rate applicable thereto minus
(ii) the rate of interest obtainable by the Lender upon the purchase of debt
securities customarily issued by the Treasury of the United States of America,
in an amount equal to the principal amount so prepaid, which have a maturity
date approximating the Maturity Date. The Lender's determination of such amount
of interest, in the absence of manifest error, shall be conclusive.
Application of Payments. Any payments received by the Lender on account of
this Note prior to maturity or other acceleration, shall be applied: first, to
any fees, charges, costs and expenses then owed to the Lender by the Borrower in
connection with this Note; second to accrued and unpaid interest on the unpaid
balance of principal; and third, to the unpaid balance of principal hereof. Any
payments received by the Lender on account of this Note after maturity or other
acceleration shall be applied in such manner as the Lender may determine.
Note Issued Pursuant to Loan Agreement. This Note is issued pursuant to the
Loan Agreement, and the holder hereof is entitled to the benefits of the Loan
Agreement, and all other agreements, instruments, guarantees and other documents
executed and delivered in connection therewith and herewith (collectively
referred to herein as the "Financing Instruments").
Maturity Date. The entire outstanding principal balance hereof together
with all accrued and unpaid interest thereon and all fees, charges, costs and
expenses due Lender hereunder shall be due and payable on August 2, 2000 (the
"Maturity Date").
Security Provided in Other Writings. Payment and performance of this Note
may be secured, from time to time, now or hereafter, as provided in one or more
security agreements, mortgages, pledges, assignments or any other instruments,
documents or agreements ("Security"), whether or not such Security specifically
refers to this Note. Any and all such Security may provide, in general terms,
that such Security secures obligations of the Borrower to the Lender however and
whenever evidenced, created or arising. Payment and performance of this Note is
hereby secured by such Security without specific reference to this Note, and, in
addition, this Note is secured by any and all Security which specifically refers
to or provides security for this Note.
Grant of Security in Accounts and Other Property in Possession of the
Lender. To secure the payment and performance of this Note, the Borrower hereby
grants to the Lender a continuing security interest in and to: (a) any and all
deposits and sums at any time credited by or due from the Lender (or any of its
banking or lending affiliates) to the
-3-
Borrower; and (b) any or all cash, instruments, securities and other property of
the Borrower, in the possession, custody or control (whether for safekeeping or
otherwise) of, or in transit to or from, the Lender or any such affiliate,
including such property in the possession of any third party acting on behalf of
the Lender or any such affiliate, regardless of the reason for the receipt,
possession, custody or control of such property or any prior release thereof,
conditional or otherwise. Upon demand, maturity or acceleration of the payment
of this Note, as applicable, the Lender may, at any time, sell or dispose of any
or all such property and apply the proceeds thereof against the indebtedness of
this Note. With respect to all such property, the Lender shall have the rights
and remedies of a secured party under the Uniform Commercial Code and other
applicable laws, the choice and manner of exercise of any right or remedy being
in the Lender's sole discretion. No such right or remedy shall be exclusive, and
each may be exercised by the Lender concurrently or in any order or combination
as the Lender may select, from time to time. The Lender shall have the right to
foreclose the security interest granted herein by any available judicial
procedure and to sell the same with or without judicial process; the Lender may
sell or otherwise dispose of such property or any part thereof at public or
private sales, at such price or prices, and upon such terms, either for cash,
credit or future delivery, as the Lender may elect; and, except as to any part
of such property which is perishable or which threatens to decline speedily in
value, or is of the type customarily sold on a recognized market, the Lender
shall give the Borrower reasonable notification of such sale or sales, it being
agreed that in all events written notice mailed to the Borrower at least seven
(7) days prior to such sale is reasonable notification. The Lender may (but
shall have no obligation to) bid for and become the purchaser of any such
property.
Setoff. With respect to any and all deposits and sums referred to above,
upon the Maturity Date or acceleration of the payment of this Note, the Lender
may, at any time, apply or setoff all or any portion of such deposits or sums
against the indebtedness evidenced by this Note, regardless of any other
collateral or security available to the Lender.
Payment of Costs and Attorney's Fees. The Borrower agrees, and all
co-makers and guarantors also agree, jointly and severally, to pay all costs
incurred by the Lender, including all attorneys' reasonable fees and
out-of-pocket costs and expenses, including court costs, in connection with (i)
the administration or implementation of the loan evidenced by this Note, (ii)
the collection of the indebtedness evidenced by this Note, or (iii) the
preservation, protection, collection or enforcement of any of the Lender's
rights or remedies hereunder or under any other instrument securing or
guaranteeing this Note, against the Borrower or any co-maker or guarantor, or
against any collateral securing this Note or securing any other instrument,
document or agreement securing or guaranteeing this Note (whether or not suit is
instituted by or against the Lender).
Waivers and Consents by Borrower and Others. By making or guaranteeing this
Note or by making any agreement to pay any of the indebtedness evidenced by this
Note, the Borrower, and each co-maker, guarantor, and other person or entity now
or hereafter
-4-
liable for the payment of any of the indebtedness evidenced by this Note,
respectively, agrees to waive: presentment for payment; protest; demand; notice
of protest, demand, dishonor and non-payment of this Note; all other notices;
all other defenses in the nature thereof, including all suretyship defenses; and
any and all other demands or notices otherwise required to be given in
connection with the delivery, acceptance, endorsement, performance, default or
enforcement of this Note, any and all borrowings or advances hereunder, any and
all guarantees or undertakings hereof, and any security taken, granted or
released, from time to time, in connection herewith. The Borrower and each such
co-maker, guarantor and other person or entity hereby consents, without notice:
(a) to the substitution, exchange or release, from time to time, of any
collateral securing this Note or any part thereof; (b) to the acceptance, from
time to time, by the Lender of any additional collateral or security for this
Note, or the acceptance, from time to time, of other makers, guarantors or other
obligors of this Note, (c) to the modification or amendment, from time to time,
of this Note and any other instrument, document or agreement securing or
guaranteeing this Note, at the request of any person or entity liable thereon;
(d) to the granting of any extension of the time for payment of this Note or any
other indulgence for the performance of the agreements, covenants and conditions
contained in this Note, or any other instrument, document or agreement securing
or guaranteeing this Note, at the request of any person or entity liable
thereon; (e) to any and all other extensions, forbearances and indulgences
whatsoever granted by the Lender with respect to this Note, any other liability
of the Borrower, or any collateral securing this Note or any other liability of
the Borrower to the Lender; and any and all assignments or transfers of this
Note and any part or all of the indebtedness evidenced hereby or any security
therefor or guarantees thereof to any successor, assignee, participant or other
party. The happening of any one or more of the foregoing events shall not alter
or diminish the liability of any person or entity liable on this Note. The
release by the Lender of the Borrower or any one or more co-makers or guarantors
shall not release any other person obligated on account of this Note, except
only for payments actually received by Lender free and clear of the rights of
all other parties. No person or entity obligated on account of this Note may
seek contribution from any other person or entity also obligated unless and
until all liabilities, obligations, and indebtedness to the Lender of the person
from whom contribution is sought have been satisfied in full.
Joint and Several Obligations; Binding Effect. This Note and the
liabilities of the Borrower shall be the joint and several obligation of each of
the undersigned, if more than one, and each guarantor, co-maker, and surety, and
shall be binding upon each of them and each of their respective heirs,
representatives, successors and assigns, and shall inure to the benefit of the
Lender and its successors, indorsees and assigns. Each reference in this Note to
the Borrower, any co-maker and any guarantor refers to each such person or
entity individually and also to all such persons and entities jointly. The term
"Lender" shall include the Lender and each other payee hereof, or any indorsee
of this Note in possession hereof, or the bearer hereof if the Note is at the
time payable to the bearer.
-5-
The Lender's Rights Reserved. No delay or omission on the part of the
Lender in exercising or enforcing any of the Lender's rights, powers, privileges
or remedies or discretions hereunder or under any instrument or agreement which
is given or may be given to secure or guaranty the indebtedness evidenced
hereby, shall operate as a waiver thereof, or of any other right, power,
privilege or remedy of such holder on that occasion or on any other occasion,
nor shall any delay, omission or waiver on any one occasion be deemed to be a
bar to or waiver of the same or any other right on any future occasion, and no
waiver of a default hereunder shall operate as a waiver of any other default nor
as a continuing waiver.
Default. The entire unpaid principal balance of this Note and all accrued
and unpaid interest thereon and all other fees, charges, costs and expenses
hereunder shall become immediately due and payable, without demand, prior to the
maturity of this Note, at the sole option of the Lender, (exercisable without
demand, notice or protest, which are hereby waived) regardless of any prior
forbearance or indulgence by the Lender, upon the occurrence of one or more
Events of Default as that term is defined in the Loan Agreement.
Commercial Purposes. The Borrower hereby represents to the Lender that the
proceeds of this Note shall be used exclusively for business or commercial
purposes and not for personal, family or household purposes.
Payment of Proceeds. The proceeds of any and all loans or advances pursuant
to this Note may be paid to or at the direction of the Borrower.
Authority to Debit Accounts. The Borrower hereby authorizes the Lender to
charge or debit any deposit account of the Borrower with the Lender to effect
any payment due hereunder, all without prior notice.
Authority to Complete this Note. In the event that this Note is delivered
in an incomplete form in any respect, the Borrower and each co-maker, guarantor
and other person or entity liable hereon, hereby authorizes the Lender, without
further notice, to complete any blank spaces and to date the Note, if undated,
as of the date funds are first advanced hereunder.
Currency and Payments. All payments on this Note shall be made in lawful
currency of the United States of America, in each case without deduction, setoff
or counterclaim. All payments on this Note shall be made in immediately
available funds. With respect to any payment on this Note which is made by
check, the Lender may treat such amount as outstanding pending final collection
thereof, and interest hereunder shall continue to accrue pending such final
collection.
Acknowledgment of Terms and Receipt of a Copy. The Borrower has read all of
the terms and conditions of this Note and has received an exact copy of this
Note.
-6-
Severability of Provisions. Any determination that any provision of this
Note or any application thereof is invalid, illegal, or unenforceable in any
respect in any instance shall not affect the validity, legality and
enforceability of such provision in any other instance, nor the validity,
legality or enforceability of any other provision hereof.
Headings. The headings appearing in this Note are used for convenience only
and should not be deemed to affect the interpretation of this Note.
Sealed Instrument. This Note shall take effect as a sealed instrument.
Books and Records; Copies as Evidence. The Lender's books and records
concerning the Lender's loans and advances to the Borrower, the accrual of
interest thereon, and the repayment of such loans, advances and interest, shall
be prima facie evidence of the indebtedness owed under this Note. In any
proceeding with respect to this Note, any photographic, photostatic, microfilm
or similar reproduction of this Note shall be admissible in evidence as though
it were the original, whether or not the original hereof is in existence and
whether or not such reproduction was made in the regular course of business.
Governing Law; Jurisdiction for Proceedings. This Note is delivered to the
Lender in Boston, Massachusetts and shall be governed by and construed in
accordance with the laws of the Commonwealth of Massachusetts for all purposes
and in all respects. The Borrower, and each co-maker and guarantor of this Note
submits to the non-exclusive jurisdiction of the courts of the Commonwealth of
Massachusetts for all purposes with respect to this Note and any collateral
given to secure their respective liabilities, obligations and indebtedness to
the Lender, and their respective relationships with the Lender.
Legal Limitation on Interest. Notwithstanding any other provision of this
Note to the contrary, in the event that interest pursuant to the provisions of
this Note is finally determined by a court of competent jurisdiction to be
subject to usury or other similar laws affecting the maximum allowable interest
chargeable then, and only then, and only to the extent of such final
determination, the maximum amount of interest payable under this Note shall be
the maximum amount of interest determined by such court to be allowed by such
laws.
Notices and Notice Addresses. The respective Notice Addresses of the Lender
and the Borrower are those stated at the beginning of this Note, together with
the following additions: (a) for the Lender, "Attention: Commercial Banking
Department"; and (b) for the Borrower, "Attention: Kevin W. Quinlan, Chief
Financial Officer". To the extent required or voluntarily given, all notices or
demands hereunder shall be sufficient and shall be deemed to have been given if
made in writing and given in accordance with the provisions for notice contained
in the Loan Agreement. Any party may change its Notice Address hereunder by
giving notice of such change to the other party in accordance with the
provisions of this subsection.
-7-
IN WITNESS WHEREOF, the Borrower has executed this Note, as an instrument
under seal as of the date appearing on the first page of this Note.
BOSTON BIOMEDICA, INC.
/s/ ? By: /s/ Kevin W. Quinlan
- ---------------------- -------------------------
Witness as to Borrower Kevin W. Quinlan
Treasurer
Hereunto duly authorized
BTRL CONTRACTS AND
SERVICES, INC.
By: /s/ Kevin W. Quinlan
-------------------------
Kevin W. Quinlan
Treasurer
Hereunto duly authorized
BBI - NORTH AMERICAN
CLINICAL LABORATORIES, INC.
By: /s/ Kevin W. Quinlan
-------------------------
Kevin W. Quinlan
Treasurer
Hereunto duly authorized
-8-
EXHIBIT 10.18.5
EXECUTION
TERM PROMISSORY NOTE
$100,000.00 Boston, Massachusetts
Due: December 1, 2000 Dated: December 29, 1995
FOR VALUE RECEIVED, the undersigned, BOSTON BIOMEDICA, INC., ("BBI"),
BTRL CONTRACTS AND SERVICES, INC. ("BTRL") and BBI-NORTH AMERICAN CLINICAL
LABORATORIES, INC. ("NACL"), each of which is a Massachusetts corporation
validly created, legally existing and in good standing under the laws of The
Commonwealth of Massachusetts and each of which has its "Notice Address" at 375
West Street, West Bridgewater, Massachusetts 02379, with BBI having its
principal place of business at its Notice Address, BTRL having its principal
place of business at 3 Taft Court, Rockville, Maryland 20850 and NACL having its
principal place of business at 75 North Mountain Road, New Britain, Connecticut
06053 (BBI, BTRL and NACL, together with their successors and assigns, are
collectively referred to herein as the "Borrower") JOINTLY AND SEVERALLY, AND
UNCONDITIONALLY PROMISE TO PAY TO THE ORDER OF THE FIRST NATIONAL BANK OF
BOSTON, a national banking association having an office and "Notice Address" at
Bank of Boston-Worcester Tower, P.O. Box 15073, 100 Front Street, Worcester,
Massachusetts 01608-1438 (together with its successors and assigns, the
"Lender") the principal sum of ONE HUNDRED THOUSAND DOLLARS ($100,000), with
interest on the unpaid balance thereof from the date hereof until paid at the
rate and in the manner herein provided, in lawful money of the United States of
America.
Note Issued Pursuant to Loan Agreement. This Note is issued pursuant to
a certain Second Amended and Restated Loan and Security Agreement by and among
the Borrower and the Lender, dated as of August 2, 1995, as amended by a certain
First Amendment to Second Amended and Restated Loan and Security Agreement by
and among the Borrower and the Lender, dated as of December 11, 1995, and a
certain Second Amendment to Second Amended and Restated Loan and Security
Agreement by and among the Borrower and the Lender, dated as of the date
herewith (as so amended and as may be further amended, restated or modified
hereafter, the "Loan Agreement"), and the holder hereof is entitled to the
benefits of the Loan Agreement, and all other agreements, instruments,
guarantees and other documents defined therein as the "Financing Instruments".
Terms not otherwise specifically defined in this Term Promissory Note
(hereinafter referred to as the "Note") shall have the respective meanings given
to them in the Loan Agreement.
Interest Rate. The unpaid principal of this Note from time to time
outstanding shall bear interest, computed on the basis of actual number of days
elapsed over a year assumed to have three hundred and sixty (360) days, at an
interest rate per annum equal to one percent (1%) per annum above the rate of
interest established from time to time by the Lender as its Base Lending Rate
(the "Base Rate"), such interest rate to be determined on a daily basis and
adjusted from time to time on the effective date of any change in the Base Rate
by the Lender (the "Adjusted Base Rate"); provided, however, that the Borrower
may,
at any time, elect to have interest computed hereunder pursuant to the Fixed
Rate Option (as hereinafter defined) by written notice to the Lender, which
notice, once sent to the Lender, shall be irrevocable. In the absence of the
election of the Fixed Rate Option, the principal amount outstanding hereunder
shall bear interest at the Adjusted Base Rate.
"Fixed Rate Option" as used herein shall mean the one-time option of
the Borrower to have interest computed hereunder on the basis of an interest
rate per annum equal to two and one-half percent (2.50%) per annum above the
"Fixed Rate" (as hereinafter defined) (the "Adjusted Fixed Rate") for a period
of three, four or five years (the "Fixed Rate Period"). The "Fixed Rate" shall
be the fixed rate of interest quoted by the Lender for the outstanding principal
balance hereunder for the remainder of the term hereunder. Upon expiration of
the Fixed Rate Period, the principal amount outstanding hereunder shall then
immediately bear interest at the Adjusted Base Rate for the balance at the term
hereof, if any.
Certain Provisions Regarding Interest. The Borrower acknowledges that
the Base Rate is a reference rate and not necessarily the lowest rate charged by
the Lender to borrowers. Interest per annum shall be calculated for the actual
number of days elapsed, from time to time, over a year assumed to have 360 days.
Therefore, each dollar of principal outstanding hereunder for all or any part of
a day shall accrue interest equal to 1/360th of the annual interest accruing
hereunder on each such dollar. Interest shall accrue on each day or part thereof
that any principal is outstanding including Sundays, holidays and all days
during which the Lender is not open for the conduct of business.
Interest Increase after Maturity or Acceleration. Any and all amounts
not paid when due hereunder, whether after the Maturity Date (as hereinafter
defined), by acceleration or otherwise, shall accrue interest, payable on
demand, at the annual rate equal to four percent (4%) above the Base Rate (the
"Default Rate"), if permitted by law, calculated as above from the date when due
until so paid.
Payments. Commencing on January 1st, 1996, and on the same day of each
month thereafter until the Maturity Date, payments on this Note shall be made in
sixty (60) consecutive monthly installments of principal and interest. The first
fifty-nine (59) such installments shall be equal to one-sixtieth (1/60th) of the
principal amount of this Note, plus accrued and unpaid interest in arrears. The
last installment shall comprise the then unpaid principal balance of this Note
together with all accrued and unpaid interest and any and all other fees,
charges, costs and expenses due and payable to the Lender hereunder.
Late Charges. If any payment due hereunder is not paid within ten (10)
days of its due date, the Borrower will also pay to the Lender, on demand and in
addition to all other amounts payable hereunder, an amount equal to three
percent (3%) of the amount of such payment. The assessment or collection of late
charges is not
-2-
intended and shall not be construed to permit payment of any amount payable
hereunder beyond the applicable due date thereof. The time period which is
allowed before the assessment of late charges is not intended and shall not be
construed as a grace or cure period with respect to payment or performance of
any obligation hereunder.
Prepayment. "Prepayment" shall mean any payment of the outstanding
principal due hereunder, whether in whole or in part, (a) on any date in advance
of the date scheduled therefor, or (b) following acceleration of the loan as a
consequence of the occurrence of any Event of Default, as defined below. Any
Prepayment made by the Borrower (other than a payment of the full outstanding
principal balance due under the Note) must be in an amount which is an integral
multiple of $10,000. Prior to the making of any Prepayment, the Borrower shall:
(a) deliver five (5) days' prior written notice to the Lender apprising the
Lender of the making of such Prepayment, (b) pay all accrued interest and other
accrued charges and costs of Lender to the date of prepayment on the principal
amount so prepaid, (c) pay a Prepayment premium equal to one percent (1%) of the
amount prepaid in the event that such Prepayment is from a refinancing, and (d)
if, at the time of Prepayment, the Borrower has elected the Fixed Rate Option,
pay the Fixed Rate Prepayment Premium as defined in the next sentence of this
paragraph. The "Fixed Rate Prepayment Premium" shall be an amount reasonably
determined by the Lender for the loss, if any, including any lost profits,
resulting from such prepayment. The Borrower shall pay the Prepayment premium or
the Fixed Rate Prepayment Premium, whichever is applicable, upon presentation by
the Lender of a statement therefor, which in either case shall be deemed true
and correct, absent manifest error. In addition, in the case of the Fixed Rate
Prepayment Premium, such statement shall set forth the Lender's calculation of
the same, which statement and calculation (including the method of calculation)
shall be deemed true and correct, absent manifest error. Any amounts prepaid by
the Borrower may not be subsequently re-borrowed from the Lender.
Application of Payments. Any payments received by the Lender on account
of this Note prior to the Maturity Date or by acceleration or otherwise, shall
be applied: first, to any fees, charges, costs and expenses then owed to the
Lender by the Borrower in connection with this Note; second to accrued and
unpaid interest on the unpaid balance of principal; and third, to the unpaid
balance of principal hereof. Any payments received by the Lender on account of
this Note after the Maturity Date or by acceleration or otherwise shall be
applied in such manner as the Lender may determine.
Maturity Date. The entire outstanding principal balance hereof together
with all accrued and unpaid interest thereon and all fees, charges, costs and
expenses due the Lender hereunder shall be due and payable on December 1, 2000
(the "Maturity Date").
Security Provided in Other Writings. Payment and performance of this
Note may be secured, from time to time, now or hereafter, as provided in one or
more security agreements, mortgages, pledges, assignments or any other
instruments, documents or agreements ("Security"), whether or not such Security
specifically refers to this Note. Any and all such Security may provide, in
general terms, that such Security secures obligations of the Borrower to the
Lender however and whenever evidenced, created or arising.
-3-
Payment and performance of this Note is hereby secured by such Security without
specific reference to this Note, and, in addition, this Note is secured by any
and all Security which specifically refers to or provides security for this
Note, or is referenced in the Loan Agreement or otherwise.
Grant of Security in Accounts and Other Property in Possession of the
Lender. To secure the payment and performance of this Note, the Borrower hereby
grants to the Lender a continuing security interest in and to: (a) any and all
deposits and sums at any time credited by or due from the Lender (or any of its
banking or lending affiliates) to the Borrower; and (b) any or all cash,
instruments, securities and other property of the Borrower, in the possession,
custody or control (whether for safekeeping or otherwise) of, or in transit to
or from, the Lender or any such affiliate, including such property in the
possession of any third party acting on behalf of the Lender or any such
affiliate, regardless of the reason for the receipt, possession, custody or
control of such property or any prior release thereof, conditional or otherwise.
Upon demand, maturity or acceleration of the payment of this Note, as
applicable, the Lender may, at any time, sell or dispose of any or all such
property and apply the proceeds thereof against the indebtedness of this Note.
With respect to all such property, the Lender shall have the rights and remedies
of a secured party under the Uniform Commercial Code and other applicable laws,
the choice and manner of exercise of any right or remedy being in the Lender's
sole discretion. No such right or remedy shall be exclusive, and each may be
exercised by the Lender concurrently or in any order or combination as the
Lender may select, from time to time. The Lender shall have the right to
foreclose the security interest granted herein by any available judicial
procedure and to sell the same with or without judicial process; the Lender may
sell or otherwise dispose of such property or any part thereof at public or
private sales, at such price or prices, and upon such terms, either for cash,
credit or future delivery, as the Lender may elect; and, except as to any part
of such property which is perishable or which threatens to decline speedily in
value, or is of the type customarily sold on a recognized market, the Lender
shall give the Borrower reasonable notification of such sale or sales, it being
agreed that in all events written notice mailed to the Borrower at least seven
(7) days prior to such sale is reasonable notification. The Lender may (but
shall have no obligation to) bid for and become the purchaser of any such
property.
Setoff. With respect to any and all deposits and sums referred to
above, upon the Maturity Date or upon acceleration of the payment of this Note,
the Lender may, at any time, apply or setoff all or any portion of such deposits
or sums against the indebtedness evidenced by this Note, regardless of any other
collateral or security available to the Lender.
Payment of Costs and Attorney's Fees. The Borrower agrees, and all
co-makers and guarantors also agree, jointly and severally, to pay all costs
incurred by the Lender, including all attorneys' reasonable fees and
out-of-pocket costs and expenses, including court costs, in connection with (i)
the administration or implementation of the loan evidenced by this Note, (ii)
the collection of the indebtedness evidenced by this Note, or (iii) the
-4-
preservation, protection, collection or enforcement of any of the Lender's
rights or remedies hereunder or under any other instrument securing or
guaranteeing this Note, against the Borrower or any co-maker or guarantor, or
against any collateral securing this Note or securing any other instrument,
document or agreement securing or guaranteeing this Note (whether or not suit is
instituted by or against the Lender).
Waivers and Consents by Borrower and Others. By making or guaranteeing
this Note or by making any agreement to pay any of the indebtedness evidenced by
this Note, the Borrower, and each co-maker, guarantor, and other person or
entity now or hereafter liable for the payment of any of the indebtedness
evidenced by this Note, respectively, agrees to waive: presentment for payment;
protest; demand; notice of protest, demand, dishonor and non-payment of this
Note; all other notices; all other defenses in the nature thereof, including all
suretyship defenses; and any and all other demands or notices otherwise required
to be given in connection with the delivery, acceptance, endorsement,
performance, default or enforcement of this Note, any and all borrowings or
advances hereunder, any and all guarantees or undertakings hereof, and any
security taken, granted or released, from time to time, in connection herewith.
The Borrower and each such co-maker, guarantor and other person or entity hereby
consents, without notice: (a) to the substitution, exchange or release, from
time to time, of any collateral securing this Note or any part thereof; (b) to
the acceptance, from time to time, by the Lender of any additional collateral or
security for this Note, or the acceptance, from time to time, of other makers,
guarantors or other obligors of this Note, (c) to the modification,
substitution, extension or amendment, from time to time, of this Note and any
other instrument, document or agreement securing or guaranteeing this Note, at
the request of any person or entity liable thereon; (d) to the granting of any
extension of the time for payment of this Note or any other indulgence for the
performance of the agreements, covenants and conditions contained in this Note,
or any other instrument, document or agreement securing or guaranteeing this
Note, at the request of any person or entity liable thereon; (e) to any and all
other extensions, forbearances and indulgences whatsoever granted by the Lender
with respect to this Note, any other liability of the Borrower, or any
collateral securing this Note or any other liability of the Borrower to the
Lender; and any and all assignments or transfers of this Note and any part or
all of the indebtedness evidenced hereby or any security therefor or guarantees
thereof to any successor, assignee, participant or other party. The happening of
any one or more of the foregoing events shall not alter or diminish the
liability of any person or entity liable on this Note. The release by the Lender
of the Borrower or any one or more co-makers or guarantors shall not release any
other person obligated on account of this Note, except only for payments
actually received by Lender free and clear of the rights of all other parties.
No person or entity obligated on account of this Note may seek contribution from
any other person or entity also obligated unless and until all liabilities,
obligations, and indebtedness to the Lender of the person from whom contribution
is sought have been satisfied in full.
Joint and Several Obligations; Binding Effect. This Note and the
liabilities of the Borrower shall be the joint and several obligation of each of
the undersigned, if more than
-5-
one, and each guarantor, co-maker, and surety, and shall be binding upon each of
them and each of their respective heirs, representatives, successors and
assigns, and shall inure to the benefit of the Lender and its successors,
indorsees and assigns. Each reference in this Note to the Borrower, any co-maker
and any guarantor refers to each such person or entity individually and also to
all such persons and entities jointly. The term "Lender" shall include the
Lender and each other payee hereof, or any indorsee of this Note in possession
hereof, or the bearer hereof if the Note is at the time payable to the bearer.
The Lender's Rights Reserved. No delay or omission on the part of the
Lender in exercising or enforcing any of the Lender's rights, powers, privileges
or remedies or discretions hereunder or under any instrument or agreement which
is given or may be given to secure or guaranty the indebtedness evidenced
hereby, shall operate as a waiver thereof, or of any other right, power,
privilege or remedy of such holder on that occasion or on any other occasion,
nor shall any delay, omission or waiver on any one occasion be deemed to be a
bar to or waiver of the same or any other right on any future occasion, and no
waiver of a default hereunder shall operate as a waiver of any other default nor
as a continuing waiver.
Default. The entire unpaid principal balance of this Note and all
accrued and unpaid interest thereon and all other fees, charges, costs and
expenses hereunder shall become immediately due and payable, without demand,
prior to the maturity of this Note, at the sole option of the Lender,
(exercisable without demand, notice or protest, which are hereby waived)
regardless of any prior forbearance or indulgence by the Lender, upon the
occurrence of one or more Events of Default as that term is defined in the Loan
Agreement.
Commercial Purposes. The Borrower hereby represents to the Lender that
the proceeds of this Note shall be used exclusively for business or commercial
purposes and not for personal, family or household purposes.
Payment of Proceeds. The proceeds of any and all loans or advances
pursuant to this Note may be paid to or at the direction of the Borrower.
Authority to Debit Accounts. The Borrower hereby authorizes the Lender
to charge or debit any deposit account of the Borrower with the Lender to effect
any payment due hereunder, all without prior notice.
Authority to Complete this Note. In the event that this Note is
delivered in an incomplete form in any respect, the Borrower and each co-maker,
guarantor and other person or entity liable hereon, hereby authorizes the
Lender, without further notice, to complete any blank spaces and to date the
Note, if undated, as of the date funds are first advanced hereunder.
-6-
Currency and Payments. All payments on this Note shall be made in
lawful currency of the United States of America, in each case without deduction,
setoff or counterclaim. All payments on this Note shall be made in immediately
available funds. With respect to any payment on this Note which is made by
check, the Lender may treat such amount as outstanding pending final collection
thereof, and interest hereunder shall continue to accrue pending such final
collection.
Acknowledgment of Terms and Receipt of a Copy. The Borrower has read
all of the terms and conditions of this Note and has received an exact copy of
this Note.
Severability of Provisions. Any determination that any provision of
this Note or any application thereof is invalid, illegal, or unenforceable in
any respect in any instance shall not affect the validity, legality and
enforceability of such provision in any other instance, nor the validity,
legality or enforceability of any other provision hereof.
Headings. The headings appearing in this Note are used for convenience
only and should not be deemed to affect the interpretation of this Note.
Sealed Instrument. This Note shall take effect as a sealed instrument.
Books and Records; Copies as Evidence. The Lender's books and records
concerning the Lender's loans and advances to the Borrower, the accrual of
interest thereon, and the repayment of such loans, advances and interest, shall
be prima facie evidence of the indebtedness owed under this Note. In any
proceeding with respect to this Note, any photographic, photostatic, microfilm
or similar reproduction of this Note shall be admissible in evidence as though
it were the original, whether or not the original hereof is in existence and
whether or not such reproduction was made in the regular course of business.
Governing Law; Jurisdiction for Proceedings. This Note is delivered to
the Lender in Boston, Massachusetts and shall be governed by and construed in
accordance with the laws of The Commonwealth of Massachusetts for all purposes
and in all respects. The Borrower, and each co-maker and guarantor of this Note
submits to the non-exclusive jurisdiction of the courts of The Commonwealth of
Massachusetts for all purposes with respect to this Note and any collateral
given to secure their respective liabilities, obligations and indebtedness to
the Lender, and their respective relationships with the Lender.
Legal Limitation on Interest. Notwithstanding any other provision of
this Note to the contrary, in the event that interest pursuant to the provisions
of this Note is finally determined by a court of competent jurisdiction to be
subject to usury or other similar laws affecting the maximum allowable interest
chargeable then, and only then, and only to the extent of such final
determination, the maximum amount of interest payable under this Note shall be
the maximum amount of interest determined by such court to be allowed by such
laws.
-7-
Notices and Notice Addresses. The respective Notice Addresses of the
Lender and the Borrower are those stated at the beginning of this Note, together
with the following additions: (a) for the Lender, "Attention: Commercial Banking
Department"; and (b) for the Borrower, "Attention: Kevin W. Quinlan, Chief
Financial Officer". To the extent required or voluntarily given, all notices or
demands hereunder shall be sufficient and shall be deemed to have been given if
made in writing and given in accordance with the provisions for notice contained
in the Loan Agreement. Any party may change its Notice Address hereunder by
giving notice of such change to the other party in accordance with the
provisions of this subsection.
IN WITNESS WHEREOF, the Borrower has executed this Note, as an
instrument under seal as of the date appearing on the first page of this Note.
BORROWER
BOSTON BIOMEDICA, INC.
/s/ Kevin W. Quinlan By: /s/ Richard T. Schumacher
- ---------------------- ----------------------------------------
Witness as to Borrower Richard T. Schumacher
President
Hereunto duly authorized
BTRL CONTRACTS AND SERVICES, INC.
By: /s/ Richard T. Schumacher
----------------------------------------
Richard T. Schumacher
President
Hereunto duly authorized
BBI - NORTH AMERICAN CLINICAL
LABORATORIES, INC.
By: /s/ Richard T. Schumacher
----------------------------------------
Richard T. Schumacher
President
Hereunto duly authorized
-8-
EXHIBIT 10.18.6
EXECUTION
TERM PROMISSORY NOTE
$750,000.00 Boston, Massachusetts
Due: December 1, 2002 Dated: December 11, 1995
FOR VALUE RECEIVED, the undersigned, BOSTON BIOMEDICA, INC., ("BBI"),
BTRL CONTRACTS AND SERVICES, INC. ("BTRL") and BBI-NORTH AMERICAN CLINICAL
LABORATORIES, INC. ("NACL"), each of which is a Massachusetts corporation
validly created, legally existing and in good standing under the laws of the
Commonwealth of Massachusetts and each of which has its "Notice Address" at 375
West Street, West Bridgewater, Massachusetts 02379, with BBI having its
principal place of business at its Notice Address, BTRL having its principal
place of business at 3 Taft Court, Rockville, Maryland 20850 and NACL having its
principal place of business at 75 North Mountain Road, New Britain, Connecticut
06053 (BBI, BTRL and NACL, together with their successors and assigns, are
collectively referred to herein as the "Borrower") JOINTLY AND SEVERALLY, AND
UNCONDITIONALLY PROMISE TO PAY TO THE ORDER OF THE FIRST NATIONAL BANK OF
BOSTON, a national banking association having an office and "Notice Address" at
Bank of Boston-Worcester Tower, P.O. Box 15073, 100 Front Street, Worcester,
Massachusetts 01608-1438 (together with its successors and assigns, the
"Lender") the principal sum of SEVEN HUNDRED FIFTY THOUSAND DOLLARS
($750,000.00), with interest on the unpaid balance thereof from the date hereof
until paid at the rate and in the manner herein provided, in lawful money of the
United States of America.
Note Issued Pursuant to Loan Agreement. This Note is issued pursuant to
a certain Real Estate Loan Agreement (the "Loan Agreement") by and among the
Borrower and the Lender, and the holder hereof is entitled to the benefits of
the Loan Agreement, and all other agreements, instruments, guarantees and other
documents defined therein as the "Financing Documents". Terms not otherwise
specifically defined in this Term Promissory Note (hereinafter referred to as
the "Note") shall have the respective meanings given to them in the Loan
Agreement.
Interest Rate. The unpaid principal of this Note from time to time
outstanding shall bear interest, computed on the basis of actual number of days
elapsed over a year assumed to have three hundred and sixty (360) days, at an
interest rate per annum equal to one percent (1%) per annum above the rate of
interest established from time to time by the Lender as its Base Lending Rate
(the "Base Rate"), such interest rate to be determined on a daily basis and
adjusted from time to time on the effective date of any change in the Base Rate
by the Lender (the "Adjusted Base Rate"); provided, however, that the Borrower
may, at any time, elect to have interest computed hereunder pursuant to the
Fixed Rate Option (as hereinafter defined) by written notice to the Lender,
which notice, once sent to the Lender, shall be irrevocable. In the absence of
the election of the Fixed Rate Option, the principal amount outstanding
hereunder shall bear interest at the Adjusted Base Rate.
"Fixed Rate Option" as used herein shall mean the one-time option of
the Borrower to have interest computed hereunder on the basis of an interest
rate per annum equal to two and one-half percent (2.50%) per annum above the
"Fixed Rate" (as hereinafter defined) (the "Adjusted Fixed Rate") for a period
of three, four or five years (the "Fixed Rate Period"). The "Fixed Rate" shall
be the fixed rate of interest quoted by the Lender for the outstanding principal
balance hereunder for the remainder of the term hereunder. Upon expiration of
the Fixed Rate Period, the principal amount outstanding hereunder shall then
immediately bear interest at the Adjusted Base Rate for the balance at the term
hereof, if any.
Certain Provisions Regarding Interest. The Borrower acknowledges that
the Base Rate is a reference rate and not necessarily the lowest rate charged by
the Lender to borrowers. Interest per annum shall be calculated for the actual
number of days elapsed, from time to time, over a year assumed to have 360 days.
Therefore, each dollar of principal outstanding hereunder for all or any part of
a day shall accrue interest equal to 1/360th of the annual interest accruing
hereunder on each such dollar. Interest shall accrue on each day or part thereof
that any principal is outstanding including Sundays, holidays and all days
during which the Lender is not open for the conduct of business.
Interest Increase after Maturity or Acceleration. Any and all amounts
not paid when due hereunder, whether after the Maturity Date (as hereinafter
defined), by acceleration or otherwise, shall accrue interest, payable on
demand, at the annual rate equal to four percent (4%) above the Base Rate (the
"Default Rate"), if permitted by law, calculated as above from the date when due
until so paid.
Payments. Commencing on January 1st, 1996, and on the same day of each
month thereafter until the Maturity Date, payments on this Note shall be made in
eighty-four (84) consecutive monthly installments of principal and interest. The
first eighty-three (83) such installments shall be equal to one-eighty-fourth
(1/84th) of the principal amount of this Note, plus accrued and unpaid interest
in arrears. The last installment shall comprise the then unpaid principal
balance of this Note together with all accrued and unpaid interest and any and
all other fees, charges, costs and expenses due and payable to the Lender
hereunder.
Late Charges. If any payment due hereunder is not paid within ten (10)
days of its due date, the Borrower will also pay to the Lender, on demand and in
addition to all other amounts payable hereunder, an amount equal to three
percent (3%) of the amount of such payment. The assessment or collection of late
charges is not intended and shall not be construed to permit payment of any
amount payable hereunder beyond the applicable due date thereof. The time period
which is allowed before the assessment of late charges is not intended and shall
not be construed as a grace or cure period with respect to payment or
performance of any obligation hereunder.
-2-
Prepayment. "Prepayment" shall mean any payment of the outstanding
principal due hereunder, whether in whole or in part, (a) on any date in advance
of the date scheduled therefor, or (b) following acceleration of the loan as a
consequence of the occurrence of any Event of Default, as defined below. Any
Prepayment made by the Borrower (other than a payment of the full outstanding
principal balance due under the Note) must be in an amount which is an integral
multiple of $10,000. Prior to the making of any Prepayment, the Borrower shall:
(a) deliver five (5) days' prior written notice to the Lender apprising the
Lender of the making of such Prepayment, (b) pay all accrued interest and other
accrued charges and costs of Lender to the date of prepayment on the principal
amount so prepaid, (c) pay a Prepayment premium equal to one percent (1%) of the
amount prepaid in the event that such Prepayment is from a refinancing, and (d)
if, at the time of Prepayment, the Borrower has elected the Fixed Rate Option,
pay the Fixed Rate Prepayment Premium as defined in the next sentence of this
paragraph. The "Fixed Rate Prepayment Premium" shall be an amount reasonably
determined by the Lender for the loss, if any, including any lost profits,
resulting from such prepayment. The Borrower shall pay the Prepayment premium or
the Fixed Rate Prepayment Premium, whichever is applicable, upon presentation by
the Lender of a statement therefor, which in either case shall be deemed true
and correct, absent manifest error. In addition, in the case of the Fixed Rate
Prepayment Premium, such statement shall set forth the Lender's calculation of
the same, which statement and calculation (including the method of calculation)
shall be deemed true and correct, absent manifest error. Any amounts prepaid by
the Borrower may not be subsequently re-borrowed from the Lender.
Notwithstanding the foregoing, "Prepayment" as defined in the
immediately preceding paragraph shall not include repayment of Fifty Thousand
and 00/100 Dollars ($50,000.00) upon the sale of the so-called "Manley Property"
in full compliance with, and as more particularly described in, a certain Letter
Agreement between the Borrower and the Lender of even date and delivery herewith
(the "Letter Agreement").
Application of Payments. Any payments received by the Lender on account
of this Note prior to the Maturity Date or by acceleration or otherwise, shall
be applied: first, to any fees, charges, costs and expenses then owed to the
Lender by the Borrower in connection with this Note; second to accrued and
unpaid interest on the unpaid balance of principal; and third, to the unpaid
balance of principal hereof. Any payments received by the Lender on account of
this Note after the Maturity Date or by acceleration or otherwise shall be
applied in such manner as the Lender may determine.
Maturity Date. The entire outstanding principal balance hereof together
with all accrued and unpaid interest thereon and all fees, charges, costs and
expenses due the Lender hereunder shall be due and payable on December 1, 2002
(the "Maturity Date").
Security Provided in Other Writings. Payment and performance of this
Note may be secured, from time to time, now or hereafter, as provided in one or
more security agreements, mortgages, pledges, assignments or any other
instruments, documents or agreements ("Security"), whether or not such Security
specifically refers to this Note. Any
-3-
and all such Security may provide, in general terms, that such Security secures
obligations of the Borrower to the Lender however and whenever evidenced,
created or arising. Payment and performance of this Note is hereby secured by
such Security without specific reference to this Note, and, in addition, this
Note is secured by any and all Security which specifically refers to or provides
security for this Note, or is referenced in the Loan Agreement or otherwise.
Grant of Security in Accounts and Other Property in Possession of the
Lender. To secure the payment and performance of this Note, the Borrower hereby
grants to the Lender a continuing security interest in and to: (a) any and all
deposits and sums at any time credited by or due from the Lender (or any of its
banking or lending affiliates) to the Borrower; and (b) any or all cash,
instruments, securities and other property of the Borrower, in the possession,
custody or control (whether for safekeeping or otherwise) of, or in transit to
or from, the Lender or any such affiliate, including such property in the
possession of any third party acting on behalf of the Lender or any such
affiliate, regardless of the reason for the receipt, possession, custody or
control of such property or any prior release thereof, conditional or otherwise.
Upon demand, maturity or acceleration of the payment of this Note, as
applicable, the Lender may, at any time, sell or dispose of any or all such
property and apply the proceeds thereof against the indebtedness of this Note.
With respect to all such property, the Lender shall have the rights and remedies
of a secured party under the Uniform Commercial Code and other applicable laws,
the choice and manner of exercise of any right or remedy being in the Lender's
sole discretion. No such right or remedy shall be exclusive, and each may be
exercised by the Lender concurrently or in any order or combination as the
Lender may select, from time to time. The Lender shall have the right to
foreclose the security interest granted herein by any available judicial
procedure and to sell the same with or without judicial process; the Lender may
sell or otherwise dispose of such property or any part thereof at public or
private sales, at such price or prices, and upon such terms, either for cash,
credit or future delivery, as the Lender may elect; and, except as to any part
of such property which is perishable or which threatens to decline speedily in
value, or is of the type customarily sold on a recognized market, the Lender
shall give the Borrower reasonable notification of such sale or sales, it being
agreed that in all events written notice mailed to the Borrower at least seven
(7) days prior to such sale is reasonable notification. The Lender may (but
shall have no obligation to) bid for and become the purchaser of any such
property.
Setoff. With respect to any and all deposits and sums referred to
above, upon the Maturity Date or upon acceleration of the payment of this Note,
the Lender may, at any time, apply or setoff all or any portion of such deposits
or sums against the indebtedness evidenced by this Note, regardless of any other
collateral or security available to the Lender.
Payment of Costs and Attorney's Fees. The Borrower agrees, and all
co-makers and guarantors also agree, jointly and severally, to pay all costs
incurred by the Lender, including all attorneys' reasonable fees and
out-of-pocket costs and expenses, including court
-4-
costs, in connection with (i) the administration or implementation of the loan
evidenced by this Note, (ii) the collection of the indebtedness evidenced by
this Note, or (iii) the preservation, protection, collection or enforcement of
any of the Lender's rights or remedies hereunder or under any other instrument
securing or guaranteeing this Note, against the Borrower or any co-maker or
guarantor, or against any collateral securing this Note or securing any other
instrument, document or agreement securing or guaranteeing this Note (whether or
not suit is instituted by or against the Lender).
Waivers and Consents by Borrower and Others. By making or guaranteeing
this Note or by making any agreement to pay any of the indebtedness evidenced by
this Note, the Borrower, and each co-maker, guarantor, and other person or
entity now or hereafter liable for the payment of any of the indebtedness
evidenced by this Note, respectively, agrees to waive: presentment for payment;
protest; demand; notice of protest, demand, dishonor and non-payment of this
Note; all other notices; all other defenses in the nature thereof, including all
suretyship defenses; and any and all other demands or notices otherwise required
to be given in connection with the delivery, acceptance, endorsement,
performance, default or enforcement of this Note, any and all borrowings or
advances hereunder, any and all guarantees or undertakings hereof, and any
security taken, granted or released, from time to time, in connection herewith.
The Borrower and each such co-maker, guarantor and other person or entity hereby
consents, without notice: (a) to the substitution, exchange or release, from
time to time, of any collateral securing this Note or any part thereof; (b) to
the acceptance, from time to time, by the Lender of any additional collateral or
security for this Note, or the acceptance, from time to time, of other makers,
guarantors or other obligors of this Note, (c) to the modification,
substitution, extension or amendment, from time to time, of this Note and any
other instrument, document or agreement securing or guaranteeing this Note, at
the request of any person or entity liable thereon; (d) to the granting of any
extension of the time for payment of this Note or any other indulgence for the
performance of the agreements, covenants and conditions contained in this Note,
or any other instrument, document or agreement securing or guaranteeing this
Note, at the request of any person or entity liable thereon; (e) to any and all
other extensions, forbearances and indulgences whatsoever granted by the Lender
with respect to this Note, any other liability of the Borrower, or any
collateral securing this Note or any other liability of the Borrower to the
Lender; and any and all assignments or transfers of this Note and any part or
all of the indebtedness evidenced hereby or any security therefor or guarantees
thereof to any successor, assignee, participant or other party. The happening of
any one or more of the foregoing events shall not alter or diminish the
liability of any person or entity liable on this Note. The release by the Lender
of the Borrower or any one or more co-makers or guarantors shall not release any
other person obligated on account of this Note, except only for payments
actually received by Lender free and clear of the rights of all other parties.
No person or entity obligated on account of this Note may seek contribution from
any other person or entity also obligated unless and until all liabilities,
obligations, and indebtedness to the Lender of the person from whom contribution
is sought have been satisfied in full.
-5-
Joint and Several Obligations; Binding Effect. This Note and the
liabilities of the Borrower shall be the joint and several obligation of each of
the undersigned, if more than one, and each guarantor, co-maker, and surety, and
shall be binding upon each of them and each of their respective heirs,
representatives, successors and assigns, and shall inure to the benefit of the
Lender and its successors, indorsees and assigns. Each reference in this Note to
the Borrower, any co-maker and any guarantor refers to each such person or
entity individually and also to all such persons and entities jointly. The term
"Lender" shall include the Lender and each other payee hereof, or any indorsee
of this Note in possession hereof, or the bearer hereof if the Note is at the
time payable to the bearer.
The Lender's Rights Reserved. No delay or omission on the part of the
Lender in exercising or enforcing any of the Lender's rights, powers, privileges
or remedies or discretions hereunder or under any instrument or agreement which
is given or may be given to secure or guaranty the indebtedness evidenced
hereby, shall operate as a waiver thereof, or of any other right, power,
privilege or remedy of such holder on that occasion or on any other occasion,
nor shall any delay, omission or waiver on any one occasion be deemed to be a
bar to or waiver of the same or any other right on any future occasion, and no
waiver of a default hereunder shall operate as a waiver of any other default nor
as a continuing waiver.
Default. The entire unpaid principal balance of this Note and all
accrued and unpaid interest thereon and all other fees, charges, costs and
expenses hereunder shall become immediately due and payable, without demand,
prior to the maturity of this Note, at the sole option of the Lender,
(exercisable without demand, notice or protest, which are hereby waived)
regardless of any prior forbearance or indulgence by the Lender, upon the
occurrence of one or more Events of Default as that term is defined in the Loan
Agreement.
Commercial Purposes. The Borrower hereby represents to the Lender that
the proceeds of this Note shall be used exclusively for business or commercial
purposes and not for personal, family or household purposes.
Payment of Proceeds. The proceeds of any and all loans or advances
pursuant to this Note may be paid to or at the direction of the Borrower.
Authority to Debit Accounts. The Borrower hereby authorizes the Lender
to charge or debit any deposit account of the Borrower with the Lender to effect
any payment due hereunder, all without prior notice.
Authority to Complete this Note. In the event that this Note is
delivered in an incomplete form in any respect, the Borrower and each co-maker,
guarantor and other person or entity liable hereon, hereby authorizes the
Lender, without further notice, to complete any blank spaces and to date the
Note, if undated, as of the date funds are first advanced hereunder.
-6-
Currency and Payments. All payments on this Note shall be made in
lawful currency of the United States of America, in each case without deduction,
setoff or counterclaim. All payments on this Note shall be made in immediately
available funds. With respect to any payment on this Note which is made by
check, the Lender may treat such amount as outstanding pending final collection
thereof, and interest hereunder shall continue to accrue pending such final
collection.
Acknowledgment of Terms and Receipt of a Copy. The Borrower has read
all of the terms and conditions of this Note and has received an exact copy of
this Note.
Severability of Provisions. Any determination that any provision of
this Note or any application thereof is invalid, illegal, or unenforceable in
any respect in any instance shall not affect the validity, legality and
enforceability of such provision in any other instance, nor the validity,
legality or enforceability of any other provision hereof.
Headings. The headings appearing in this Note are used for convenience
only and should not be deemed to affect the interpretation of this Note.
Sealed Instrument. This Note shall take effect as a sealed instrument.
Books and Records; Copies as Evidence. The Lender's books and records
concerning the Lender's loans and advances to the Borrower, the accrual of
interest thereon, and the repayment of such loans, advances and interest, shall
be prima facie evidence of the indebtedness owed under this Note. In any
proceeding with respect to this Note, any photographic, photostatic, microfilm
or similar reproduction of this Note shall be admissible in evidence as though
it were the original, whether or not the original hereof is in existence and
whether or not such reproduction was made in the regular course of business.
Governing Law; Jurisdiction for Proceedings. This Note is delivered to
the Lender in Boston, Massachusetts and shall be governed by and construed in
accordance with the laws of The Commonwealth of Massachusetts for all purposes
and in all respects. The Borrower, and each co-maker and guarantor of this Note
submits to the non-exclusive jurisdiction of the courts of The Commonwealth of
Massachusetts for all purposes with respect to this Note and any collateral
given to secure their respective liabilities, obligations and indebtedness to
the Lender, and their respective relationships with the Lender.
Legal Limitation on Interest. Notwithstanding any other provision of
this Note to the contrary, in the event that interest pursuant to the provisions
of this Note is finally determined by a court of competent jurisdiction to be
subject to usury or other similar laws affecting the maximum allowable interest
chargeable then, and only then, and only to the extent of such final
determination, the maximum amount of interest payable under this Note shall be
the maximum amount of interest determined by such court to be allowed by such
laws.
-7-
Notices and Notice Addresses. The respective Notice Addresses of the
Lender and the Borrower are those stated at the beginning of this Note, together
with the following additions: (a) for the Lender, "Attention: Commercial Banking
Department"; and (b) for the Borrower, "Attention: Kevin W. Quinlan, Chief
Financial Officer". To the extent required or voluntarily given, all notices or
demands hereunder shall be sufficient and shall be deemed to have been given if
made in writing and given in accordance with the provisions for notice contained
in the Loan Agreement. Any party may change its Notice Address hereunder by
giving notice of such change to the other party in accordance with the
provisions of this subsection.
-8-
IN WITNESS WHEREOF, the Borrower has executed this Note, as an
instrument under seal as of the date appearing on the first page of this Note.
BORROWER
BOSTON BIOMEDICA, INC.
/s/ Suanne C. St. Charles By: /s/ Richard T. Schumacher
- -------------------------- -----------------------------
Witness as to Borrower Richard T. Schumacher
President
Hereunto duly authorized
BTRL CONTRACTS AND SERVICES, INC.
By: /s/ Richard T. Schumacher
-----------------------------
Richard T. Schumacher
President
Hereunto duly authorized
BBI - NORTH AMERICAN CLINICAL
LABORATORIES, INC.
By: /s/ Richard T. Schumacher
-----------------------------
Richard T. Schumacher
President
Hereunto duly authorized
-9-
EXHIBIT 10.18.7
TERM PROMISSORY NOTE
$250,000.00 Boston, Massachusetts
Due: July 31, 2001 Dated: July 31, 1996
FOR VALUE RECEIVED, the undersigned, (a) BOSTON BIOMEDICA, INC.,
(together with its successors and assigns, "BBI"), (b) BTRL CONTRACTS AND
SERVICES, INC. (together with its successors and assigns, "BTRL") and (c)
BBI-NORTH AMERICAN CLINICAL LABORATORIES, INC., formerly known as NORTH AMERICAN
LABORATORY GROUP, INC. (together with its successors and assigns, "NACL"), each
of which is a Massachusetts corporation validly created, legally existing and in
good standing under the laws of the Commonwealth of Massachusetts and each of
which has its "Notice Address" at 375 West Street, West Bridgewater,
Massachusetts 02379, with BBI having its principal place of business at its
Notice Address, BTRL having its principal place of business at 3 Taft Court,
Rockville, Maryland 20850 and NACL having its principal place of business at 75
North Mountain Road, New Britain, Connecticut 06053 (BBI, BTRL and NACL are
collectively referred to herein as the "Borrower") JOINTLY AND SEVERALLY, AND
UNCONDITIONALLY PROMISE TO PAY TO THE ORDER OF THE FIRST NATIONAL BANK OF
BOSTON, a national banking association having an office and "Notice Address" at
Bank of Boston-Worcester Tower, P.O. Box 15073, 100 Front Street, Worcester,
Massachusetts 01608-1438 (together with its successors and assigns, the
"Lender"), successor-by-merger to WORCESTER COUNTY INSTITUTION FOR SAVINGS, a
Massachusetts savings bank ("WCiS"), the principal sum of TWO HUNDRED FIFTY
THOUSAND AND 00/100 DOLLARS ($250,000.00), with interest on the unpaid balance
thereof from the date hereof until paid at the rate and in the manner herein
provided, in lawful money of the United States of America.
Second Amended and Restated Loan Agreement. The Borrower and the Lender
are parties to a certain Second Amended and Restated Loan and Security
Agreement, dated as of August 2, 1995, as amended by (a) a certain First
Amendment to Second Amended and Restated Loan and Security Agreement, dated as
of December 11, 1995, and (b) a Second Amendment to Second Amended and Restated
Loan and Security Agreement, dated of even date herewith (said Second Amended
and Restated Loan Agreement, as so amended, is hereinafter referred to as the
"Loan Agreement"). Terms not otherwise specifically defined in this Term
Promissory Note (hereinafter referred to as the "Note") shall have the
respective meanings given to them in the Loan Agreement.
Principal Advances. The Lender shall advance sums hereunder, up to the
principal amount hereof, for a period of six (6) months from the date hereof, in
accordance with the provisions of the Loan Agreement (the "Advance Period").
Interest Rate. The unpaid principal of this Note from time to time
outstanding shall bear interest, computed on the basis of actual number of days
elapsed over a year assumed to have three hundred and sixty (360) days, at an
interest rate per annum equal to one percent (1%) per annum above the rate of
interest established from time to time by the
Lender as its Base Lending Rate (the "Base Rate"), such interest rate to be
determined on a daily basis and adjusted from time to time on the effective date
of any change in the Base Rate by the Lender (the "Adjusted Base Rate");
provided, however, that the Borrower may, at any time, elect to have interest
computed hereunder pursuant to the Fixed Rate Option (as hereinafter defined) by
written notice to the Lender, which notice, once sent to the Lender, shall be
irrevocable. In the absence of the election of the Fixed Rate Option, the
principal amount outstanding hereunder shall bear interest at the Adjusted Base
Rate.
"Fixed Rate Option" as used herein shall mean the one-time option of
the Borrower to have interest computed hereunder on the basis of an interest
rate per annum equal to two and one-half percent (2.50%) per annum above the
Fixed Rate (as hereinafter defined) (the "Adjusted Fixed Rate") for a period of
three, four or five years (the "Fixed Rate Period"). The "Fixed Rate" shall be
the fixed rate of interest quoted by the Lender for the outstanding principal
balance hereunder for the remainder of the term hereunder. Upon expiration of
the Fixed Rate Period, the principal amount outstanding hereunder shall then
immediately bear interest at the Adjusted Base Rate for the balance at the term
hereof, if any.
Certain Provisions Regarding Interest. To the extent used herein, Base
Rate means the rate of interest per annum announced, from time to time, by the
Lender as its Base Rate. The Borrower acknowledges that the Base Rate is a
reference rate and not necessarily the lowest rate charged by the Lender to
borrowers. Interest per annum shall be calculated for the actual number of days
elapsed, from time to time, over a year assumed to have 360 days. Therefore,
each dollar of principal outstanding hereunder for all or any part of a day
shall accrue interest equal to 1/360th of the annual interest accruing hereunder
on each such dollar. Interest shall accrue on each day or part thereof that any
principal is outstanding including Sundays, holidays and all days during which
the Lender is not open for the conduct of business.
Interest Increase after Maturity or Acceleration. Any and all amounts
not paid when due hereunder, whether after maturity, by acceleration or
otherwise, shall accrue interest, payable on demand, at the greater of (i) the
annual rate of eighteen percent (18%) or (ii) the annual rate equal to two
percent (2%) above the Base Rate, if permitted by law, calculated as above from
the date when due until so paid.
Payments. Commencing on September 1, 1996, and on the same day of each
month thereafter up to and including February 1, 1997, payments of interest only
shall be made in arrears on the outstanding principal amount of this Note.
Commencing on March 1, 1997, payments on this Note shall be made in
fifty-four (54) consecutive monthly installments of principal and interest. The
first fifty-three (53) such installments shall be equal to one-fifty-fourth of
the principal amount of this Note which has been advanced, plus accrued and
unpaid interest in arrears. The last installment shall comprise the then unpaid
principal balance of this Note together with all accrued and
-2-
unpaid interest and any and all other fees, charges, costs and expenses due and
payable to Lender hereunder.
Late Charges. If any payment due hereunder is not paid within ten (10)
days of its due date, the Borrower will also pay to Lender, on demand and in
addition to all other amounts payable hereunder, an amount equal to five percent
(5%) of the amount of such payment. The assessment or collection of late charges
is not intended and shall not be construed to permit payment of any amount
payable hereunder beyond the applicable due date thereof. The time period which
is allowed before the assessment of late charges is not intended and shall not
be construed as a grace or cure period with respect to payment or performance of
any obligation hereunder.
Prepayment. "Prepayment" shall mean any payment of the outstanding
principal due hereunder, whether in whole or in part, (a) on any date in advance
of the date scheduled therefor, or (b) following acceleration of the loan as a
consequence of the occurrence of any Event of Default, as defined below. Any
Prepayment made by the Borrower (other than a payment of the full outstanding
principal balance due under the Note) must be in an amount which is an integral
multiple of $10,000. Prior to the making of any Prepayment, the Borrower shall:
(a) deliver five (5) days' prior written notice to the Lender apprising the
Lender of the making of such Prepayment, (b) pay all accrued interest and other
accrued charges and costs of Lender to the date of prepayment on the principal
amount so prepaid, (c) pay a Prepayment premium equal to one percent (1%) of the
amount prepaid in the event that such Prepayment is from a refinancing, and (d)
if, at the time of Prepayment, the Borrower has elected the Fixed Rate Option,
pay the Fixed Rate Prepayment Premium as defined in the next sentence of this
paragraph. The "Fixed Rate Prepayment Premium" shall be an amount reasonably
determined by the Lender for the loss, if any, including any lost profits,
resulting from such prepayment. The Borrower shall pay the Prepayment premium or
the Fixed Rate Prepayment Premium, whichever is applicable, upon presentation by
the Lender of a statement therefor, which in either case shall be deemed true
and correct, absent manifest error. In addition, in the case of the Fixed Rate
Prepayment Premium, such statement shall set forth the Lender's calculation of
the same, which statement and calculation (including the method of calculation)
shall be deemed true and correct, absent manifest error. Any amounts prepaid by
the Borrower may not be subsequently re-borrowed from the Lender.
Application of Payments. Any payments received by the Lender on account
of this Note prior to the Maturity Date or by acceleration or otherwise, shall
be applied: first, to any fees, charges, costs and expenses then owed to the
Lender by the Borrower in connection with this Note; second to accrued and
unpaid interest on the unpaid balance of principal; and third, to the unpaid
balance of principal hereof. Any payments received by the Lender on account of
this Note after the Maturity Date or by acceleration or otherwise shall be
applied in such manner as the Lender may determine.
-3-
Note Issued Pursuant to Loan Agreement. This Note is issued pursuant to
the Loan Agreement, and the holder hereof is entitled to the benefits of the
Loan Agreement, and all other agreements, instruments, guarantees and other
documents executed and delivered in connection therewith and herewith
(collectively referred to herein as the "Financing Instruments").
Maturity Date. The entire outstanding principal balance hereof together
with all accrued and unpaid interest thereon and all fees, charges, costs and
expenses due Lender hereunder shall be due and payable on July 31, 2001 (the
"Maturity Date").
Security Provided in Other Writings. Payment and performance of this
Note may be secured, from time to time, now or hereafter, as provided in one or
more security agreements, mortgages, pledges, assignments or any other
instruments, documents or agreements ("Security"), whether or not such Security
specifically refers to this Note. Any and all such Security may provide, in
general terms, that such Security secures obligations of the Borrower to the
Lender however and whenever evidenced, created or arising. Payment and
performance of this Note is hereby secured by such Security without specific
reference to this Note, and, in addition, this Note is secured by any and all
Security which specifically refers to or provides security for this Note.
Grant of Security in Accounts and Other Property in Possession of the
Lender. To secure the payment and performance of this Note, the Borrower hereby
grants to the Lender a continuing security interest in and to: (a) any and all
deposits and sums at any time credited by or due from the Lender (or any of its
banking or lending affiliates) to the Borrower; and (b) any or all cash,
instruments, securities and other property of the Borrower, in the possession,
custody or control (whether for safekeeping or otherwise) of, or in transit to
or from, the Lender or any such affiliate, including such property in the
possession of any third party acting on behalf of the Lender or any such
affiliate, regardless of the reason for the receipt, possession, custody or
control of such property or any prior release thereof, conditional or otherwise.
Upon demand, maturity or acceleration of the payment of this Note, as
applicable, the Lender may, at any time, sell or dispose of any or all such
property and apply the proceeds thereof against the indebtedness of this Note.
With respect to all such property, the Lender shall have the rights and remedies
of a secured party under the Uniform Commercial Code and other applicable laws,
the choice and manner of exercise of any right or remedy being in the Lender's
sole discretion. No such right or remedy shall be exclusive, and each may be
exercised by the Lender concurrently or in any order or combination as the
Lender may select, from time to time. The Lender shall have the right to
foreclose the security interest granted herein by any available judicial
procedure and to sell the same with or without judicial process; the Lender may
sell or otherwise dispose of such property or any part thereof at public or
private sales, at such price or prices, and upon such terms, either for cash,
credit or future delivery, as the Lender may elect; and, except as to any part
of such property which is perishable or which threatens to decline speedily in
value, or is of the type customarily sold on a recognized market, the Lender
shall give the Borrower reasonable notification of such
-4-
sale or sales, it being agreed that in all events written notice mailed to the
Borrower at least seven (7) days prior to such sale is reasonable notification.
The Lender may (but shall have no obligation to) bid for and become the
purchaser of any such property.
Setoff. With respect to any and all deposits and sums referred to
above, upon the Maturity Date or acceleration of the payment of this Note, the
Lender may, at any time, apply or setoff all or any portion of such deposits or
sums against the indebtedness evidenced by this Note, regardless of any other
collateral or security available to the Lender.
Payment of Costs and Attorney's Fees. The Borrower agrees, and all
co-makers and guarantors also agree, jointly and severally, to pay all costs
incurred by the Lender, including all attorneys' reasonable fees and
out-of-pocket costs and expenses, including court costs, in connection with (i)
the administration or implementation of the loan evidenced by this Note, (ii)
the collection of the indebtedness evidenced by this Note, or (iii) the
preservation, protection, collection or enforcement of any of the Lender's
rights or remedies hereunder or under any other instrument securing or
guaranteeing this Note, against the Borrower or any co-maker or guarantor, or
against any collateral securing this Note or securing any other instrument,
document or agreement securing or guaranteeing this Note (whether or not suit is
instituted by or against the Lender).
Waivers and Consents by Borrower and Others. By making or guaranteeing
this Note or by making any agreement to pay any of the indebtedness evidenced by
this Note, the Borrower, and each co-maker, guarantor, and other person or
entity now or hereafter liable for the payment of any of the indebtedness
evidenced by this Note, respectively, agrees to waive: presentment for payment;
protest; demand; notice of protest, demand, dishonor and non-payment of this
Note; all other notices; all other defenses in the nature thereof, including all
suretyship defenses; and any and all other demands or notices otherwise required
to be given in connection with the delivery, acceptance, endorsement,
performance, default or enforcement of this Note, any and all borrowings or
advances hereunder, any and all guarantees or undertakings hereof, and any
security taken, granted or released, from time to time, in connection herewith.
The Borrower and each such co-maker, guarantor and other person or entity hereby
consents, without notice: (a) to the substitution, exchange or release, from
time to time, of any collateral securing this Note or any part thereof; (b) to
the acceptance, from time to time, by the Lender of any additional collateral or
security for this Note, or the acceptance, from time to time, of other makers,
guarantors or other obligors of this Note, (c) to the modification or amendment,
from time to time, of this Note and any other instrument, document or agreement
securing or guaranteeing this Note, at the request of any person or entity
liable thereon; (d) to the granting of any extension of the time for payment of
this Note or any other indulgence for the performance of the agreements,
covenants and conditions contained in this Note, or any other instrument,
document or agreement securing or guaranteeing this Note, at the request of any
person or entity liable thereon; (e) to any and all other extensions,
forbearances and indulgences whatsoever granted by the Lender with respect to
this Note,
-5-
any other liability of the Borrower, or any collateral securing this Note or any
other liability of the Borrower to the Lender; and any and all assignments or
transfers of this Note and any part or all of the indebtedness evidenced hereby
or any security therefor or guarantees thereof to any successor, assignee,
participant or other party. The happening of any one or more of the foregoing
events shall not alter or diminish the liability of any person or entity liable
on this Note. The release by the Lender of the Borrower or any one or more
co-makers or guarantors shall not release any other person obligated on account
of this Note, except only for payments actually received by Lender free and
clear of the rights of all other parties. No person or entity obligated on
account of this Note may seek contribution from any other person or entity also
obligated unless and until all liabilities, obligations, and indebtedness to the
Lender of the person from whom contribution is sought have been satisfied in
full.
Joint and Several Obligations; Binding Effect. This Note and the
liabilities of the Borrower shall be the joint and several obligation of each of
the undersigned, if more than one, and each guarantor, co-maker, and surety, and
shall be binding upon each of them and each of their respective heirs,
representatives, successors and assigns, and shall inure to the benefit of the
Lender and its successors, indorsees and assigns. Each reference in this Note to
the Borrower, any co-maker and any guarantor refers to each such person or
entity individually and also to all such persons and entities jointly. The term
"Lender" shall include the Lender and each other payee hereof, or any indorsee
of this Note in possession hereof, or the bearer hereof if the Note is at the
time payable to the bearer.
The Lender's Rights Reserved. No delay or omission on the part of the
Lender in exercising or enforcing any of the Lender's rights, powers, privileges
or remedies or discretions hereunder or under any instrument or agreement which
is given or may be given to secure or guaranty the indebtedness evidenced
hereby, shall operate as a waiver thereof, or of any other right, power,
privilege or remedy of such holder on that occasion or on any other occasion,
nor shall any delay, omission or waiver on any one occasion be deemed to be a
bar to or waiver of the same or any other right on any future occasion, and no
waiver of a default hereunder shall operate as a waiver of any other default nor
as a continuing waiver.
Default. The entire unpaid principal balance of this Note and all
accrued and unpaid interest thereon and all other fees, charges, costs and
expenses hereunder shall become immediately due and payable, without demand,
prior to the maturity of this Note, at the sole option of the Lender,
(exercisable without demand, notice or protest, which are hereby waived)
regardless of any prior forbearance or indulgence by the Lender, upon the
occurrence of one or more Events of Default as that term is defined in the Loan
Agreement.
Commercial Purposes. The Borrower hereby represents to the Lender that
the proceeds of this Note shall be used exclusively for business or commercial
purposes and not for personal, family or household purposes.
-6-
Payment of Proceeds. The proceeds of any and all loans or advances
pursuant to this Note may be paid to or at the direction of the Borrower.
Authority to Debit Accounts. The Borrower hereby authorizes the Lender
to charge or debit any deposit account of the Borrower with the Lender to effect
any payment due hereunder, all without prior notice.
Authority to Complete this Note. In the event that this Note is
delivered in an incomplete form in any respect, the Borrower and each co-maker,
guarantor and other person or entity liable hereon, hereby authorizes the
Lender, without further notice, to complete any blank spaces and to date the
Note, if undated, as of the date funds are first advanced hereunder.
Currency and Payments. All payments on this Note shall be made in
lawful currency of the United States of America, in each case without deduction,
setoff or counterclaim. All payments on this Note shall be made in immediately
available funds. With respect to any payment on this Note which is made by
check, the Lender may treat such amount as outstanding pending final collection
thereof, and interest hereunder shall continue to accrue pending such final
collection.
Acknowledgment of Terms and Receipt of a Copy. The Borrower has read
all of the terms and conditions of this Note and has received an exact copy of
this Note.
Severability of Provisions. Any determination that any provision of
this Note or any application thereof is invalid, illegal, or unenforceable in
any respect in any instance shall not affect the validity, legality and
enforceability of such provision in any other instance, nor the validity,
legality or enforceability of any other provision hereof.
Headings. The headings appearing in this Note are used for convenience
only and should not be deemed to affect the interpretation of this Note.
Sealed Instrument. This Note shall take effect as a sealed instrument.
Books and Records; Copies as Evidence. The Lender's books and records
concerning the Lender's loans and advances to the Borrower, the accrual of
interest thereon, and the repayment of such loans, advances and interest, shall
be prima facie evidence of the indebtedness owed under this Note. In any
proceeding with respect to this Note, any photographic, photostatic, microfilm
or similar reproduction of this Note shall be admissible in evidence as though
it were the original, whether or not the original hereof is in existence and
whether or not such reproduction was made in the regular course of business.
Governing Law; Jurisdiction for Proceedings. This Note is delivered to
the Lender in Boston, Massachusetts and shall be governed by and construed in
accordance with the
-7-
laws of the Commonwealth of Massachusetts for all purposes and in all respects.
The Borrower, and each co-maker and guarantor of this Note submits to the
non-exclusive jurisdiction of the courts of the Commonwealth of Massachusetts
for all purposes with respect to this Note and any collateral given to secure
their respective liabilities, obligations and indebtedness to the Lender, and
their respective relationships with the Lender.
Legal Limitation on Interest. Notwithstanding any other provision of
this Note to the contrary, in the event that interest pursuant to the provisions
of this Note is finally determined by a court of competent jurisdiction to be
subject to usury or other similar laws affecting the maximum allowable interest
chargeable then, and only then, and only to the extent of such final
determination, the maximum amount of interest payable under this Note shall be
the maximum amount of interest determined by such court to be allowed by such
laws.
Notices and Notice Addresses. The respective Notice Addresses of the
Lender and the Borrower are those stated at the beginning of this Note, together
with the following additions: (a) for the Lender, "Attention: Commercial Banking
Department"; and (b) for the Borrower, "Attention: Kevin W. Quinlan, Chief
Financial Officer". To the extent required or voluntarily given, all notices or
demands hereunder shall be sufficient and shall be deemed to have been given if
made in writing and given in accordance with the provisions for notice contained
in the Loan Agreement. Any party may change its Notice Address hereunder by
giving notice of such change to the other party in accordance with the
provisions of this subsection.
[THE REMAINDER OF THIS PAGE IS LEFT INTENTIONALLY BLANK]
-8-
IN WITNESS WHEREOF, the Borrower has executed this Note, as an
instrument under seal as of the date appearing on the first page of this Note.
BOSTON BIOMEDICA, INC.
/s/ Lori Rosenberg By: /s/ Kevin W. Quinlan
- ------------------------ ---------------------------
Witness as to Borrower Kevin W. Quinlan
Treasurer
Hereunto duly authorized
BTRL CONTRACTS AND
SERVICES, INC.
By: /s/ Kevin W. Quinlan
---------------------------
Kevin W. Quinlan
Treasurer
Hereunto duly authorized
BBI - NORTH AMERICAN
CLINICAL LABORATORIES, INC.
By: /s/ Kevin W. Quinlan
---------------------------
Kevin W. Quinlan
Treasurer
Hereunto duly authorized
-9-
EXHIBIT 10.20
================================================================================
PREFERRED STOCK
PURCHASE AGREEMENT
1150 SHARES OF
PREFERRED STOCK OF
BIOSEQ, INC.
Dated: as of October 7, 1996
================================================================================
PREFERRED STOCK PURCHASE AGREEMENT
----------------------------------
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PARTIES
RECITALS
<S> <C>
ARTICLE 1. PURCHASE AND SALE OF SECURITIES......................................................................... 1
1.1 Authorization: Filing of Amended and Restated Articles of Organization..................................... 1
1.2 Purchase and Sale of Securities............................................................................. 2
1.3 Closing..................................................................................................... 2
ARTICLE 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY........................................................... 2
2.1. Organization and Qualification............................................................................. 2
2.2. Subsidiaries............................................................................................... 3
2.3 Capitalization.............................................................................................. 3
2.4 Authorization of Transaction................................................................................ 3
2.5 Approvals; Compliance With Laws............................................................................. 3
2.6 Financial Statements........................................................................................ 4
2.7 Title to Properties......................................................................................... 4
2.8 Payment of Taxes............................................................................................ 4
2.9 Absence of Undisclosed Liabilities.......................................................................... 4
2.10 Absence of Certain Changes................................................................................. 5
2.11 Contracts and Commitments.................................................................................. 6
2.12 Intellectual Property...................................................................................... 6
2.13 Compliance with Other Instruments.......................................................................... 6
2.14 Litigation................................................................................................. 7
2.15 Permits and Licenses; Compliance with Law.................................................................. 7
2.16 Offerees; Sales of Securities.............................................................................. 7
2.17 Brokerage.................................................................................................. 7
2.18 Investment Materials....................................................................................... 7
2.19 Disclosure................................................................................................. 8
2.20 Certain Transactions....................................................................................... 8
2.21 Corporate Documents; Minute Books.......................................................................... 8
2.22 Employee Benefit Plans..................................................................................... 8
2.23 Environmental and Safety Laws.............................................................................. 8
2.24 Insurance.................................................................................................. 8
2.25 Labor Agreements and Actions............................................................................... 9
2.26 Registration Rights........................................................................................ 9
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF INVESTOR.............................................................. 9
3.1 Investment Intent........................................................................................... 9
3.2 Authorization............................................................................................... 9
3.3 Restricted Securities....................................................................................... 9
3.4 Brokerage................................................................................................... 9
3.5 Due Organization............................................................................................ 10
3.6. No Conflict................................................................................................ 10
-i-
CONDITIONS OF INVESTOR'S AND COMPANY'S OBLIGATION................................................................ 10
4.1 Representations and Warranties.............................................................................. 10
4.2 Performance; No Breach...................................................................................... 10
4.3 Consents and Waivers........................................................................................ 10
4.4 Corporate Proceedings....................................................................................... 10
4.5 Other Agreements............................................................................................ 11
4.6 Charter..................................................................................................... 11
4.7 Legal Action................................................................................................ 11
4.8 No Material Adverse Change.................................................................................. 11
4.8. Officer's Certificate...................................................................................... 11
4.9 Compliance Certificate...................................................................................... 11
4.10 Opinion of Counsel for Company............................................................................. 12
4.11 Representations and Warranties............................................................................. 12
4.12 Performance; No Breach..................................................................................... 12
4.13 Consents and Waivers....................................................................................... 12
4.14 Corporate Proceedings...................................................................................... 12
4.15 Legal Action............................................................................................... 12
4.16 Compliance Certificate..................................................................................... 13
ARTICLE 5. COVENANTS OF THE COMPANY................................................................................ 13
5.1 Corporate Existence......................................................................................... 13
5.2 Furnishing of Financial Statements and Information.......................................................... 13
5.3 Inspection.................................................................................................. 14
5.4 Meetings of Board of Directors.............................................................................. 14
5.5 Transactions with Affiliates................................................................................ 14
5.6 Use of Proceeds............................................................................................. 14
5.7 Employee Nondisclosure and Inventions Agreement............................................................. 15
5.8 Changes in Outstanding Securities........................................................................... 15
5.9 Most Favored Nation Status.................................................................................. 15
5.10 Offerees; Sales of Securities.............................................................................. 15
ARTICLE 6. REGISTRATION RIGHTS..................................................................................... 15
6.1 Three Required Registrations................................................................................ 15
6.2 Piggyback Registration Rights............................................................................... 16
6.3 Registration Procedures..................................................................................... 17
6.4 Expenses.................................................................................................... 19
6.5 Indemnification............................................................................................. 19
6.6 Exclusive Obligation to Register............................................................................ 21
ARTICLE 7. PARTICIPATION IN FUTURE OFFERINGS..................................................................... 21
7.1 Participation in Future Offerings........................................................................... 21
7.2 Notice..................................................................................................... 21
7.3 Acceptance.................................................................................................. 22
7.4 Percentage Interest......................................................................................... 22
7.5 No Accumulation............................................................................................. 22
7.6 Termination of Rights....................................................................................... 22
ARTICLE 8. RESERVED............................................................................................... 22
ARTICLE 9. DEFINITIONS............................................................................................. 22
-ii-
ARTICLE 10. MISCELLANEOUS.......................................................................................... 24
10.1 Termination................................................................................................ 24
10.2 Survival of Representations and Covenants.................................................................. 24
10.3 Breach..................................................................................................... 24
10.4 Notices.................................................................................................... 24
10.5 Costs and Expenses......................................................................................... 25
10.6 Confidentiality............................................................................................ 25
10.7 Assignment; Rights of Successors and Assigns............................................................... 25
10.8 Research and Development Services.......................................................................... 26
10.9 Entire Agreement........................................................................................... 26
10.10 Amendments and Waivers.................................................................................... 26
10.11 Governing Law; Severability............................................................................... 26
10.12 Counterparts.............................................................................................. 27
10.13 Effect of Table of Contents and Headings.................................................................. 27
SIGNATURES
LIST OF SCHEDULES AND EXHIBITS
Schedule A - Description of Milestones
Schedule B - Disclosure Schedule
Exhibit A - Amended and Restated Articles of Organization
Exhibit B - Financial Statements
Exhibit C - License Agreement between
BioSeq, Inc. and BioMolecular Assays, Inc.
Exhibit D - Warrant Agreement
Exhibit E - Stockholders' Agreement
Exhibit F - License Agreement between BioSeq, Inc. and the Investor
Exhibit G - Legal Opinion of Company Counsel
Exhibit H - Employee Nondisclosure and Inventions Agreement
</TABLE>
-iii-
PREFERRED STOCK PURCHASE AGREEMENT
----------------------------------
PURCHASE AGREEMENT entered into as of the 7th day of October, 1996 by
and between BioSeq, Inc. a Massachusetts corporation with its principal place of
business at 25 Olympia Avenue, Unit #F, Woburn, MA 01801 (the "Company"),
BioMolecular Assays, Inc., a Massachusetts corporation and principal stockholder
of the Company (the "Stockholder") and Boston Biomedica, Inc. (the "Investor").
W I T N E S S E T H:
--------------------
WHEREAS, the Company and the Stockholder is desirous of raising
additional capital for the Company, and the Investor is interested in investing
in the Company;
WHEREAS, in order to induce the Investor to invest in the Company, the
Stockholder has agreed to become a party to this Agreement with respect to the
representations and warranties contained in Article 2 hereof;
WHEREAS, the Company desires to grant to the Investor and the Investor
desires to acquire from the Company an exclusive, worldwide license to use the
Company's Pressure Cycling Reactor Technology; and
WHEREAS, the Company and the Investor desire to establish a research and
development arrangement under which the Investor will perform research and
development services for the Company with respect to certain aspects of the
Pressure Cycling Reactor Technology;
NOW, THEREFORE, in consideration of the mutual agreements contained
herein, the parties hereto agree as follows:
ARTICLE 1. PURCHASE AND SALE OF SECURITIES
1.1 Authorization: Filing of Amended and Restated Articles of Organization. The
Company has authorized the issuance and sale pursuant to the terms and
conditions hereof of up to 300 shares of its Series A Convertible Preferred
Stock, par value $.01 per share, 550 shares of its Series B Convertible
Preferred Stock, par value $.01 per share, and 300 shares of its Series C
Convertible Preferred Stock, par value $.01 per share, having the rights,
restrictions, privileges and preferences as set forth in the form of the Amended
and Restated Articles of Organization of the Company (the "Charter"), attached
hereto as Exhibit A. Such shares of Series A Convertible Preferred Stock, Series
B Convertible Preferred Stock and Series C Convertible Preferred Stock are
sometimes hereinafter referred to collectively as the "Shares." The Company
shall adopt and file the Charter with the Secretary of State of the Commonwealth
of Massachusetts on or before the first Closing (as defined below).
1.2 Purchase and Sale of Securities. Subject to the terms and conditions of this
Agreement and in reliance upon the representations and warranties of the Company
and the Stockholder
contained herein, the Investor agrees to purchase from the Company, and the
Company agrees to sell to the Investor, on each date set forth below, the
specified number of Shares at the price per share indicated:
(i) 300 Shares of Series A Convertible Preferred Stock on October 4,
1996, at a per share price of seven hundred ($700.00) dollars, for aggregate
consideration of two hundred ten thousand ($210,000) dollars;
(ii) subject to the closing of the Investor's initial public
offering, 550 Shares of Series B Convertible Preferred Stock on or before the
tenth business day following such closing, at a per share price of nine hundred
fifty ($950.00) dollars, for aggregate consideration of five hundred twenty two
thousand five hundred ($522,500.00) dollars, provided, however, that if the
Investor's public offering is not closed by December 31, 1996, neither the
Company nor the Investor shall have any obligation under this subparagraph;
(iii) 300 Shares of Series C Convertible Preferred Stock on or
before July 31, 1997, at a per share price of two thousand five hundred
($2,500.00) dollars, for aggregate consideration of seven hundred fifty thousand
($750,000.00) dollars, provided that the Company attains the milestones
described on Schedule A attached hereto; provided, however, in the event that
the Company does not attain such milestones by July 31, 1997, the Investor shall
nevertheless have the right, exercisable in its sole discretion, to purchase the
remaining 300 Shares until December 31, 1997 at the price set forth in this
subparagraph (iii), and further provided that the Investor's right to purchase
the Shares referenced in this subsection (iii) shall be applicable only if, and
after, the Investor has made the full investment required by subsection (ii)
above in accordance with its terms.
1.3 Closing. The first Closing and each Closing thereafter of the purchase and
sale of the Shares of Common Stock contemplated by this Agreement (hereinafter,
each a "Closing") shall take place at the offices of Brown, Rudnick, Freed &
Gesmer at One Financial Center, Boston, Massachusetts on October 7, 1996, or at
such other time, date and place as shall be mutually agreed by the Investor and
the Company. At each Closing, the Company shall deliver to the Investor
certificates for the number of Shares subscribed for against payment of the
purchase price therefor.
ARTICLE 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company and Stockholder hereby represent and warrant to the Investor that:
2.1. Organization and Qualification. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has all required corporate power and
authority to own its property, to carry on its business as presently conducted
and to carry out the transactions contemplated hereby. The copies of the Charter
and By-Laws of the Company, as amended to date, which have been furnished to
counsel for the Investor by the Company, are correct and complete. The Company
is qualified to do business as a foreign corporation and is in good standing in
each jurisdiction where the failure to be so
2
qualified or to be in good standing could have a material adverse effect on the
Company, its business or prospects.
2.2. Subsidiaries. The Company has no investments in any other corporation or
business organization.
2.3 Capitalization. Immediately prior to the first Closing, the authorized
capital stock of the Company consists of 25,000 shares of Common Stock, .01 par
value, and 15,000 shares of Preferred Stock, of which 300 shares have been
designated Series A Convertible Preferred Stock, 550 shares have been designated
Series B Convertible Preferred Stock and 300 shares have been designated Series
C Convertible Preferred Stock. Immediately prior to the Closing date, there were
issued and outstanding 4,712 shares of Common Stock and no shares of Preferred
Stock. All such issued and outstanding shares are validly issued and
outstanding, fully paid and non-assessable. Except as disclosed on Schedule B
hereto, there are no outstanding warrants, options or other rights to purchase
or acquire, or preemptive rights with respect to the issuance or sale of, the
Company's Common Stock. There are no securities of the Company directly or
indirectly convertible into or exchangeable for shares of capital stock of the
Company, and there are no restrictions on the transfer of the Company's Common
Stock, except as disclosed in Schedule B hereto.
2.4 Authorization of Transaction. The execution, delivery and performance of
this Agreement have been duly authorized by all necessary corporate or other
action of the Company and it is the valid and binding obligation of the Company,
enforceable in accordance with its terms, subject to laws of general application
relating to bankruptcy, insolvency and the relief of debtors and general
principles of equity. The issuance of the Shares and the Common Stock upon
conversion of the Shares pursuant to the terms of this Agreement and the Charter
shall be, at the first Closing, duly and validly authorized, and no further
approval or authority of the shareholders or the directors of the Company or of
any governmental authority or agency will be required for the issuance and sale
of the Shares and the underlying Common Stock as contemplated by this Agreement.
The Shares when issued and sold to the Investor in compliance with this
Agreement, and the shares of Common Stock issuable upon conversion of the
Shares, when issued in accordance with the provisions of the Charter, will be
duly and validly issued, fully paid and non-assessable. The rights, preferences,
privileges and restrictions of the Series A Convertible Preferred Stock, Series
B Convertible Preferred Stock and Series C Convertible Preferred Stock are as
set forth in the Charter attached hereto as Exhibit A.
2.5 Approvals; Compliance With Laws. The Company is not in violation of its
Charter or by-laws as of the date hereof. The execution, delivery and
performance of this Agreement and the transactions contemplated hereby (i) do
not require any approval or consent of, or filing with, any governmental agency
or authority in the United States of America or otherwise which has not been
obtained and which is not in full force and effect as of the date hereof, (ii)
will not conflict with or constitute a breach or violation of the respective
Charters or by-laws of the Company, and (iii) will not result in a violation of
or any law or regulation to which they are subject.
3
2.6 Financial Statements. Attached hereto as Exhibit B are the following
consolidated financial statements of the Company and unconsolidated statements
of such companies, audited or unaudited as indicated, all of which statements
are complete and correct and fairly present the financial position of the
Company on the dates of such statements and the results of their operations on
the applicable basis for the periods covered thereby and have been prepared in
accordance with generally accepted accounting principles consistently applied
throughout the periods involved and prior periods (except that footnotes
required in accordance with generally accepted accounting principles which are
not material to the financial statements have not been included):
Balance Sheet dated September 30, 1996 (unaudited)
Income Statement for the Twelve Month Period ended December 31, 1995
(unaudited) Income Statement for the Nine Month Period ended
September 30, 1996 (unaudited)
The balance sheet included in the above financial statements is
sometimes referred to hereinafter as the "Base Balance Sheet."
2.7 Title to Properties. The Company has good and marketable title to all of its
properties and assets, free and clear of all liens, restrictions or
encumbrances. All machinery and equipment included in such properties which is
necessary to the business of the Company is in good condition and repair, and
all leases of real or personal property to which the Company is a party are
fully effective and afford the Company peaceful and undisturbed possession of
the subject matter of the lease. The Company is not in violation of any zoning,
building, safety or environmental ordinance, regulation or requirement or other
law or regulation applicable to the operation of owned or leased properties, and
has not received any notice of violation with which it has not complied.
2.8 Payment of Taxes. The Company has filed all federal, state and local income,
excise or franchise tax returns, real estate and personal property tax returns,
sales and use tax returns and other tax returns required to be filed by it and
has paid all taxes owing by it except taxes which have not yet accrued or
otherwise become due for which adequate provision has been made in the pertinent
financial statements referred to in Section 2.6 above. The provisions for taxes
reflected in the above-mentioned financial statements are adequate to cover any
and all tax liabilities of the Company in respect of its business, properties
and operations during the periods covered by said financial statements and all
prior periods. Neither the Internal Revenue Service nor any other taxing
authority is now asserting or, to the knowledge of the Company, threatening to
assert against the Company any deficiency or claim for additional taxes or
interest thereon or penalties in connection therewith.
2.9 Absence of Undisclosed Liabilities. The Company does not have any material
accrued or contingent liability arising out of any transaction or state of facts
existing prior to the date hereof other than (i) as reflected or reserved
against in the Base Balance Sheet or (ii) liabilities arising in the ordinary
course of its business since the date of the Base Balance Sheet.
4
2.10 Absence of Certain Changes. Except as disclosed on Schedule B hereto, since
the date of the Base Balance Sheet, there has not been:
(a) any change in the financial condition, properties, assets,
liabilities, business or operations of the Company which change by itself or in
conjunction with all other such changes, whether or not arising in the ordinary
course of business, has had or will have a material adverse effect with respect
to the Company;
(b) any contingent liability incurred by the Company as guarantor or
otherwise with respect to the obligations of others;
(c) any mortgage, encumbrance or lien placed on any of the properties
of the Company which remains in existence on the date hereof or at the time of
any Closing;
(d) any obligation or liability incurred by the Company other than
obligations and liabilities incurred in the ordinary course of business;
(e) any purchase, sale or other disposition, or any agreement or
other arrangement for the purchase, sale or other disposition, of any of the
properties or assets of the Company other than in the ordinary course of
business;
(f) any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the properties, assets or business
of the Company on a consolidated basis;
(g) any declaration, setting aside or payment of any dividend on, or
the making of any other distribution in respect of, the capital stock of the
Company, or any direct or indirect redemption, purchase or other acquisition by
the Company of its own capital stock;
(h) any labor dispute or claim of unfair labor practices involving
the Company; any change in the compensation payable or to become payable by the
Company to any of their officers, employees or agents other than normal merit
increases in accordance with their usual practices, or any bonus payment or
arrangement made to or with any of such officers, employees or agents;
(i) any change with respect to the management, supervisory or other
key personnel of the Company;
(j) any payment or discharge of a material lien or liability of the
Company which was not shown on the Base Balance Sheet or incurred in the
ordinary course of business thereafter; or
(k) any obligation or liability incurred by the Company to any of its
officers, directors or shareholders or any loans or advances made by the Company
to any of its officers, directors or shareholders except normal compensation and
expense allowances payable to officers.
5
2.11 Contracts and Commitments. Except as set forth on Schedule B, neither the
Company nor any Subsidiary is subject to any contract, obligation or commitment
which is material or which involves a potential commitment in excess of $10,000
or any employment contract, stock redemption or purchase agreement, financing
agreement, license, lease, franchise, pension, profit-sharing, retirement or
stock option plan. Copies of each agreement or document listed in Schedule B
have been delivered to counsel for the Investor. Neither the Company nor any
Subsidiary is in default under any contract, obligation or commitment. Neither
the Company nor any Subsidiary is a party to or bound by any contract or
arrangement which has had or will have a material adverse effect on its business
or prospects. Neither the Company nor any Subsidiary has a material liability
for renegotiation of government contracts or subcontracts.
2.12 Intellectual Property. Set forth on Schedule B is a true and complete list
of all patents, patent applications, trademarks, service marks, trademark and
service mark applications, trade names, and copyrights presently owned or held
by the Company or the Stockholder, and any material license or right to any of
the foregoing. To the best of the Company's knowledge, the Company owns or
possesses or can obtain by payment of royalties which will not materially
adversely affect the business of the Company all of the patents, trademarks,
service marks, trade names, copyrights, proprietary rights, trade secrets, or
rights or licenses to the foregoing, reasonably necessary to the conduct of its
business as presently conducted or proposed to be conducted. To the best of the
Company's knowledge, the Company's business, as presently conducted or as
proposed to be conducted, does not and will not cause the Company to infringe or
violate any of the patents, trademarks, service marks, trade names, copyrights,
licenses, trade secrets or other proprietary rights of any other person. To the
best of the Company's knowledge, the Company has the right to use, free and
clear of claims or rights of others, all trade secrets, customer lists and
manufacturing processes required for or incident to their products, and none of
them is using any confidential information or trade secrets of any former
employer of any of their past or present employees.
2.13 Compliance with Other Instruments. The Company is not in default in the
performance of any material obligation, agreement or condition contained in any
bond or debenture or any other evidence of indebtedness or any indenture or loan
agreement of the Company which default affords to any person the unconditional
right to accelerate any material indebtedness or terminate any material right or
agreement of the Company. Neither the execution and delivery of this Agreement,
nor the fulfillment of the terms herein set forth, nor the consummation of the
transactions contemplated hereby, will (i) conflict with or constitute a breach
of, default under or violation of any agreement, indenture, mortgage, deed of
trust or other material instrument or undertaking by which the Company is bound
or to which it or any of its properties are subject, or (ii) result in a
violation of any court decree binding upon the Company, or (iii) result in the
creation or imposition of any material lien, charge or encumbrance upon any
property or assets of the Company.
2.14 Litigation. Except for matters described in Schedule B, there is no
litigation pending or, to the knowledge of the Company or the Stockholder,
threatened against the Company, and there are no outstanding court orders, court
decrees, or court stipulations to which the Company is a party which question
this Agreement or affect the transactions contemplated hereby, or which
6
will or could result in any materially adverse change in the business,
properties, operations, prospects, assets or in the condition, financial or
otherwise, of Company. Neither the Company nor the Stockholder has reason to
believe that any such action, suit, proceeding or investigation may be brought
against the Company.
2.15 Permits and Licenses; Compliance with Law. The Company has all franchises,
permits, licenses and other rights and privileges necessary to permit it to own
its properties and to conduct its present business. The Company is not in
violation of any law, regulation, authorization or order of any public authority
relevant to the ownership of its properties or the carrying on of its present
business.
2.16 Offerees; Sales of Securities. Except as disclosed on Schedule B, neither
the Company nor anyone acting on its behalf has within the past six (6) months
offered the Common Stock or any similar security of the Company for sale to, or
solicited any offers to buy the same from, any person or organization other than
the Investor. Except as disclosed on Schedule B, neither the Company nor anyone
acting on its behalf has in the past sold, offered for sale or solicited offers
to buy any of said securities so as to bring the offer, issuance or sale of the
Shares, as contemplated by this Agreement, within the provisions of Section 5 of
the Act. The Company has complied with all applicable state "blue-sky" or
securities laws in connection with the issuance and sale of the Shares and its
Common Stock and other securities.
2.17 Brokerage. Except as disclosed on Schedule B, there are no valid claims for
brokerage commissions, finder's fees or similar compensation in connection with
the transactions contemplated by this Agreement based on any arrangement or
agreement made by or on behalf of the Company and the Company will indemnify and
hold the Investor harmless against any liability or expense to it arising out of
such a claim.
2.18 Investment Materials. The written materials prepared by the Company and
furnished to the Investor prior to the date hereof describe all material aspects
of the business of the Company, contains no untrue or misleading statement of a
material fact or any omission to state a fact material to the business of the
Company or necessary to make the statements contained therein not misleading.
The factual information contained therein is correct, the assumptions, if any,
are reasonable, and the projections, if any, are, to the best knowledge of the
Company and the Stockholder reasonably attainable within the periods indicated.
2.19 Disclosure. Neither this Agreement, nor any financial statement,
certificate, list, exhibit, letter or other written statement pertaining to the
Company or the Stockholder, made or delivered to the Investor by the Company,
the Stockholder or any of their respective agents, when taken as a whole along
with such other information as provided to Investor, contains any untrue
statement of a material fact or omits to state any material fact necessary in
order to make the statements contained therein not misleading in light of the
circumstances under which they were made.
2.20 Certain Transactions. Except as disclosed on Schedule B, except with
respect to reimbursable business expenses and compensation payable for services
rendered, the Company is not indebted, directly or indirectly, to any of its
employees, officers, directors or stockholders or
7
to their spouses or children, in any amount whatsoever; and none of said
employees, officers, directors or, to the best of the Company's knowledge,
stockholders, or any member of their immediate families, are indebted to the
Company or have any direct or indirect ownership interest in any firm or
corporation with which the Company is affiliated or with which the Company has a
business relationship. No such employee, officer, director or stockholder, or
any member of their immediate families, is, directly or indirectly, interested
in any material contract with the Company. The Company is not guarantor or
indemnitor of any indebtedness of any other person, firm or corporation.
2.21 Corporate Documents; Minute Books. Except for amendments necessary to
satisfy representations and warranties or conditions contained herein (the form
of which amendments has been approved by the Investor), the Charter and Bylaws
of the Company are in the form previously provided to counsel to the Investor.
The minute books of the Company previously provided to counsel to the Investor
contain a complete summary of all meetings of directors and stockholders since
the time of incorporation of the Company.
2.22 Employee Benefit Plans. The Company does not have any "employee benefit
plan" as defined in the Employee Retirement Income Security Act of 1974, as
amended.
2.23 Environmental and Safety Laws. To the best of its knowledge, the Company is
not in violation of any applicable statute, law, or regulation relating to the
environment or occupational health and safety, and to the best of its knowledge,
no material expenditures are or will be required in order to comply with any
such existing statute, law, or regulation.
2.24 Insurance. Except as disclosed in Schedule B, the Company has in full force
and effect fire and casualty insurance policies, with extended coverage, and
insurance against other hazards, risks and liabilities to persons and property
to the extent and in the manner customary for companies in similar businesses
similarly situated.
2.25 Labor Agreements and Actions. The Company is not aware that any officer or
key employee or consultant intends to terminate his or her employment with the
Company, nor does the Company have a present intention to terminate the
employment of any of the foregoing. Subject to general principles related to
wrongful termination of employees, the employment of each officer and employee
of the Company is terminable at the will of the Company.
2.26 Registration Rights. Other than as granted by this Agreement, the Company
has not granted or agreed to grant any registration rights with respect to the
Company's capital stock, including piggyback registration rights, to any person
or entity.
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF INVESTOR
Investor hereby represents and warrants to the Company that:
3.1 Investment Intent. The Investor is purchasing or acquiring the Shares for
its, own account for investment and not with a present view to, or for sale in
connection with, any
8
distribution thereof in violation of the Act. The Investor hereby consents to
the imposition of a legend substantially similar to the following on each
certificate for Shares (and shares issued upon conversion of the Shares) and the
Investor agrees to abide by the restrictions contained therein:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended (the "Act"), and may
not be sold, transferred or assigned unless such shares are
registered under the Act or such sale, transfer or assignment is
exempt from the registration requirements of the Act."
3.2 Authorization. The Investor has the power and authority to enter into this
Agreement and to perform all of its obligations hereunder.
3.3 Restricted Securities. The Investor understands that the Shares have not
been registered under the Act by reason of a specific exemption from the
registration provisions of the Act which depends upon, among other things, the
bona fide nature of Investor's investment intent as expressed herein. The
Investor acknowledges that the Shares, when received, must be held indefinitely
unless they are subsequently registered under the Act or an exemption from such
registration is available. The Investor has been advised of or is aware of the
provisions of Rule 144 promulgated under the Act, which rule permits limited
resale of securities purchased in a private placement subject to the
satisfaction of certain conditions contained therein.
3.4 Brokerage. There are no valid claims for brokerage commissions, finder's
fees or similar compensation in connection with the transactions contemplated by
this Agreement based upon any arrangement or agreement made by or on behalf of
the Investor and the Investor agrees to indemnify and hold harmless the Company
against any liability or expense to it arising out of such a claim to the extent
that such claim arises out of actions or alleged actions of the Investor.
3.5 Due Organization. The Investor is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation and has all required corporate power and authority to own its
property, to carry on its business as presently conducted and to carry out the
transactions contemplated hereby.
3.6. No Conflict. The execution, delivery and performance of this Agreement and
the consummation of the transactions contemplated hereby will not conflict with
or constitute a breach or violation of the Amended and Restated Certificate of
Incorporation or By-Laws of the Investor.
ARTICLE 4. CONDITIONS OF INVESTOR'S AND COMPANY'S OBLIGATION
Conditions of Investor's Obligations.
In addition to the conditions set forth in Article 1 of this Agreement, the
obligation of the Investor to purchase and pay for the Shares subscribed for by
the Investor at each Closing shall be subject to the satisfaction of each of the
following conditions:
9
4.1 Representations and Warranties. The representations and warranties of the
Company and the Stockholder contained herein or in the exhibits annexed hereto
or otherwise made in writing by or on their behalf in connection with the
transactions contemplated hereby shall be true and correct as of the first
Closing with the same effect as though made on and as of that date.
4.2 Performance; No Breach. The Company shall have performed and complied with
all of the agreements and conditions contained herein and required to be
performed or complied with by the Company at or prior to each Closing and shall
not be in breach of any provision of this Agreement.
4.3 Consents and Waivers. All necessary consents, waivers, approvals, amendments
and other action on the part of any person necessary to have been obtained or
effected in order to carry out the transactions contemplated by this Agreement
shall have been duly obtained or effected and shall be in full force and effect
and adequate.
4.4 Corporate Proceedings. All corporate and other proceedings to be taken in
connection with the transactions contemplated hereby and all documents incident
thereto shall be satisfactory in substance and form to the Investor and its
counsel, and the Investor and its counsel shall have received all original
copies or certified or other copies of documents which they may have reasonably
requested.
4.5 Other Agreements. The Company shall have entered into (i) a License
Agreement with BioMolecular Assays, Inc. in the form of Exhibit C hereto; and
(ii) a Warrant Agreement with the Investor, in the form of Exhibit D hereto. The
Company, the stockholders of the Company and the Investor shall have entered
into a Stockholders' Agreement in the form of Exhibit E hereto. The Company
shall grant a license to the Investor to use its Pressure Cycling Reactor
Technology in the form of Exhibit F hereto.
4.6 Charter. The Charter, in a form satisfactory to the Investor, shall have
been filed with the Secretary of State for the Commonwealth of Massachusetts.
4.7 Legal Action.
(a) There shall not have been instituted or threatened any material
legal proceeding seeking to prohibit the consummation of the transactions
contemplated by this Agreement, or to obtain damages from Investor with respect
thereto.
(b) None of the parties hereto shall be prohibited by any order,
writ, injunction or decree of any governmental body of competent jurisdiction
from consummating the transactions contemplated by this Agreement, and no
material action or proceeding shall then be pending which questions the validity
of this Agreement, any of the transactions contemplated hereby or any action
which has been taken by any of the parties in connection herewith or in
connection with any of the transactions contemplated hereby.
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4.8 No Material Adverse Change. As of each Closing pursuant to Section 1.2(ii)
and 1.2(iii), the Investor shall have received a Certificate signed by the
President and Treasurer of the Company certifying which, if any, of the
representations and warranties contained in Article 2 hereof have become
inaccurate, and there shall have been no material adverse change with respect to
the business, condition (financial or otherwise) or prospects of the Company.
4.9. Officer's Certificate. The Company shall have delivered a Certificate,
executed by the Clerk of the Company, dated the first Closing Date, certifying
the Board of Director's and stockholders' resolutions approving this Agreement,
as well as all of the Agreements referred to in Section 4.5 hereof, the issuance
of the Shares, and certifying the Charter and Bylaws of the Company.
4.10 Compliance Certificate. The Investor shall have received at the first
Closing a certificate signed by the President and Treasurer of the Company
certifying that the conditions specified in Sections 1, and 4.1 through 4.7 have
been fulfilled. At any successive Closing, the Investor shall have received a
Certificate signed by the President and Treasurer of the Company certifying that
the conditions specified in Sections 1 and 4.2 through 4.7 have been fulfilled.
4.11 Opinion of Counsel for Company. The Investor shall have received from
Warner & Stackpole, LLP, counsel for the Company, a favorable opinion, in form
and substance satisfactory to the Investor and its counsel, as to matters
covered in Exhibit G hereto.
Conditions of Company's Obligations.
In addition to the conditions set forth in Article 1 of this Agreement, the
obligation of the Company to issue the Shares subscribed for by the Investor at
each Closing shall be subject to the satisfaction of each of the following
conditions:
4.12 Representations and Warranties. The representations and warranties of the
Investor contained herein or in the exhibits annexed hereto or otherwise made in
writing by or on its behalf in connection with the transactions contemplated
hereby shall be true and correct as of each Closing with the same effect as
though made on and as of that date.
4.13 Performance; No Breach. The Investor shall have performed and complied with
all of the agreements and conditions contained herein and required to be
performed or complied with by it at or prior to each Closing and shall not be in
breach of any provision of this Agreement.
4.14 Consents and Waivers. All necessary consents, waivers, approvals,
amendments and other action on the part of the Investor necessary to have been
obtained or effected in order to carry out the transactions contemplated by this
Agreement shall have been duly obtained or effected and shall be in full force
and effect and adequate.
4.15 Corporate Proceedings. All corporate and other proceedings to be taken in
connection with the transactions contemplated hereby and all documents incident
thereto shall be satisfactory in substance and form to the Company and its
counsel, and the Company and its
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counsel shall have received all original copies or certified or other copies of
documents which they may have reasonably requested.
4.16 Legal Action.
(a) There shall not have been instituted or threatened any material
legal proceeding seeking to prohibit the consummation of the transactions
contemplated by this Agreement, or to obtain damages from the Company with
respect thereto.
(b) None of the parties hereto shall be prohibited by any order,
writ, injunction or decree of any governmental body of competent jurisdiction
from consummating the transactions contemplated by this Agreement, and no
material action or proceeding shall then be pending which questions the validity
of this Agreement, any of the transactions contemplated hereby or any action
which has been taken by any of the parties in connection herewith or in
connection with any of the transactions contemplated hereby.
4.17 Compliance Certificate. The Company shall have received at each Closing a
certificate signed by the President and Treasurer of the Investor certifying
that the conditions specified in Sections 1, and 4.12 through 4.16 have been
fulfilled.
ARTICLE 5. COVENANTS OF THE COMPANY
The Company agrees that, until the consummation of a Qualified Public Offering
or, as to the Investor, until such earlier time as the Investor owns less than
twenty-five (25%) percent of the Series A Preferred (computed on an
as-if-converted basis and including the shares of Common Stock into which the
Series A Preferred may have been converted):
5.1 Corporate Existence. The Company will maintain and cause any Subsidiary to
maintain its corporate existence in good standing and comply with all applicable
laws and regulations of the United States or of any state or states thereof or
of any political subdivision thereof and of any governmental authority.
5.2 Furnishing of Financial Statements and Information. The Company will deliver
to the Investor:
(a) within five days of their availability, but in any event within
45 days after the close of each calendar quarter, consolidated balance sheets of
the Company and any Subsidiaries as of the end of each such quarter, together
with the related statements of consolidated operations, retained earnings and
changes in financial position for each such quarter, all in reasonable detail
and certified by an authorized accounting officer of the Company and the
President of the Company, subject to year-end adjustments;
(b) within five days of their availability, but in any event within
90 days after the end of each fiscal year, a consolidated balance sheet of the
Company and any Subsidiaries, as of the end of such fiscal year, together with
the related statements of consolidated operations,
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retained earnings and changes in financial position for such fiscal year,
prepared in accordance with generally accepted accounting principles, all in
reasonable detail and duly certified by independent public accountants
acceptable to the Investor, which accountants shall have given the Company an
opinion, unqualified as to the scope of the audit due to any restrictions placed
upon the auditors by the Company, regarding such statements;
(c) within thirty (30) days prior to the beginning of each fiscal
year, an annual budget for such year detailing relevant financial information,
including projected income and expense, borrowings, capital expenditures, cash
flow, sources and uses of funds and working capital, with a comparison of
budgeted amounts to actual amounts for the preceding year.
(d) with reasonable promptness, such other financial data related to
the business, affairs and financial condition of the Company and any
Subsidiaries as is available to the Company and as from time to time the
Investor may reasonably request;
(e) contemporaneously with the filing or mailing thereof, copies of all material
filed with the Securities and Exchange Commission or made available to any
stockholders of the Company; and
(f) within 15 days after the Company learns of the commencement of
any material suit, legal or equitable, or of any material administrative,
arbitration or other proceeding against the Company, any of its Subsidiaries or
their respective businesses, assets or properties, written notice of the nature
and extent of such suit or proceeding.
5.3 Inspection. The Company will permit an agent designated by the Investor to
visit and inspect at the Investor's expense any of the properties of the Company
or any Subsidiaries, including their books and records (and to make extracts
therefrom), and to discuss their affairs, finances, and accounts with their
officers, all to such reasonable extent and at such reasonable times and
intervals as the Investor may reasonably request. If the Company determines that
such inspection might result in the disclosure of trade secrets or other
confidential information, the Company may require such persons to sign
nondisclosure agreements with respect thereto.
5.4 Meetings of Board of Directors. The Company shall cause meetings of the
Board of Directors to be called not less often than once each calendar quarter,
shall give notice of each such meeting to the Investor, shall permit a
representative of the Investor to attend such meeting as a guest of the Board of
Directors (if a designee of the Investor is not then a member of the Board of
Directors), and shall provide copies of minutes of all actions taken by the
Board of Directors, whether at meetings or by written consent, to the Investor.
5.5 Transactions with Affiliates. Except for transactions approved by a majority
of disinterested directors, neither the Company nor any of its Subsidiaries
shall enter into any transaction with any director, officer, employee, or holder
of more than five (5%) percent of the outstanding shares of any class of capital
stock of the Company or any of its Subsidiaries, family member of any such
person, or any corporation, partnership, trust, or other entity in which any
such person, or family member of any such person, is a director, officer,
trustee, partner, or
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holder of more than five (5%) percent of the outstanding stock thereof, except
for transactions on customary terms and conditions related to such person's
employment, and except that the Company may maintain its current relationship
with BioMolecular Assays in substantially the same form as currently exists.
5.6 Use of Proceeds. The Company shall use the proceeds from the sale of the
Shares (i) to fund pre-operational start-up expenses, (ii) to fund operating
losses prior to profitable operations, (iii) for the acquisition of capital
equipment and other capital items and (iv) to pay the expenses of this offering;
provided that notwithstanding the foregoing, 33% of the proceeds of the first
investment pursuant to Section 1.2(i) hereof, and 67% of the proceeds of the
second and third investments pursuant to Sections 1.2(ii) and 1.2(iii) hereof,
shall be used to fund research and development efforts aimed at demonstration of
the technical feasibility of, and commercial development for, the Company's
pressure cycling reactor technology.
5.7 Employee Nondisclosure and Inventions Agreement. The Company shall use its
best efforts and shall cause any of its Subsidiaries to use their best efforts
to enter into an Employee Nondisclosure and Inventions Agreement with all
current and future officers, key employees, and other employees who will have
access to confidential information about the Company or any of its Subsidiaries.
Such Employee Nondisclosure and Inventions Agreement shall be in the form of
Exhibit H hereto.
5.8 Changes in Outstanding Securities. The Company shall not take any action
with respect to its outstanding equity securities which will result in the
Investor holding equity securities of the Company equal to or greater than
twenty (20%) percent of the outstanding equity securities of the Company.
5.9 Most Favored Nation Status. During the five (5) year period commencing on
the date of the Closing of the Investor's purchase of Shares pursuant to Section
1.2(ii) hereof, the Company will not grant to any persons or entities acquiring
shares or rights to acquire capital stock of the Company in connection with a
capital-raising transaction (an "Investor Group"), rights with respect to
matters which also constitute the subject matter of this Agreement (including
the Stockholder Agreement, the Warrant and the terms and conditions of the
Series Preferred but specifically excluding the subject matter of the License
Agreement) that are more favorable than the rights granted to the Investor
hereunder or thereunder, without granting to the Investor substantially similar
rights; provided, however, that the foregoing covenant shall not apply to rights
granted by the Company to the members of any Investor Group which invests in
such transaction an amount equal to at least five (5) times the amount the
Investor has then invested in the Company hereunder (including any amounts
invested pursuant to that certain Warrant Agreement between the Company and the
Investor of even date). The foregoing provision shall also be inapplicable to
the price term of any securities (excluding antidilutiono provisions) of the
Company to be purchased by any Investor Group.
5.10 Offerees; Sales of Securities. Neither the Company nor anyone acting on its
behalf shall offer for sale or solicit offers to buy any of the Company's
securities so as to bring such offer, issuance or sale within the provisions of
Section 5 of the Act. The Company will comply
14
with all applicable state "blue-sky" or securities laws in connection with the
issuance and sale of its securities in the future.
ARTICLE 6. REGISTRATION RIGHTS
6.1 Three Required Registrations.
(a) From and after the earliest to occur of (i) five (5) years from
the date hereof and (ii) six months after the closing of the initial public
offering of the Company, if on any three occasions the Investor shall notify the
Company in writing that it intends to offer or cause to be offered for public
sale all or any portion of the Registrable Securities, under such circumstances
as, in the opinion of Investor's counsel, would require registration thereof
under the Act, then the Company will prepare and file with the Commission and
use its best efforts to cause to become effective a Registration Statement under
the Act relating to such Registrable Securities as may be requested by the
Investor.
(b) In the event that the Investor determines for any reason not to
proceed with a registration at any time before a Registration Statement has been
declared effective by the Commission, and such Registration Statement, if
theretofore filed with the Commission, is withdrawn with respect to the
Registrable Securities covered thereby, and the Investor agrees to bear its own
expenses incurred in connection therewith and to reimburse the Company for the
out-of-pocket expenses incurred by it attributable to the registration of such
Registrable Securities, then the Investor shall not be deemed to have exercised
one of its three required registration rights pursuant to this Section.
(c) Without the written consent of the Investor, neither the Company
nor any holder of securities of the Company may include securities in such
registration if, in the good faith judgment of the managing underwriter of such
public offering, the inclusion of such securities would interfere with the
successful marketing of the Registrable Securities or would require the
exclusion of any portion of the Registrable Securities proposed to be
registered.
6.2 Piggyback Registration Rights.
(a) If at any time the Company shall determine to register any of
its securities under the Act and in connection therewith the Company may
lawfully register any of the Registrable Securities, the Company will promptly
give written notice thereof to the Investor. Upon the written request of
Investor given within 30 days after receipt of any such notice from the Company,
the Company will, except as herein provided, cause all such Registrable
Securities which the Investor has requested to be registered to be included in
such Registration Statement, all to the extent requisite to permit the sale or
other disposition of the Registrable Securities. Nothing herein shall prevent
the Company from at any time abandoning or delaying any registration.
(b) If any registration pursuant to this Section 6.2 shall be
underwritten in whole or in part, the Company may require that the Registrable
Securities requested for inclusion pursuant
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to this Section 6.2 be included in the underwriting on the same terms and
conditions as the securities otherwise being sold through the underwriters. In
the event that the Registrable Securities requested for inclusion pursuant to
this Section 6.2 would constitute more than 25% of the total number of shares to
be included in a proposed underwritten public offering, and if in the good faith
judgment of the managing underwriter of such public offering the inclusion of
all of the Registrable Securities originally covered by a request for
registration would reduce the number of shares to be offered by the Company or
interfere with the successful marketing of the shares of stock offered by the
Company, then the number of Registrable Securities otherwise to be included in
the underwritten public offering may be reduced pro rata among the Investor
requesting such registration and any other selling security holder (based on the
number of Registrable Securities for which registration is requested expressed
as a percentage of the total number of shares being registered on behalf of
selling security holders (including the Investor)); provided, however, that
after any such required reduction the Registrable Securities to be included in
such offering shall constitute at least 25% of the total number of shares to be
included in such offering.
6.3 Registration Procedures. If and whenever the Company is required by the
provisions of Sections 6.1 or 6.2 to effect the registration of Registrable
Securities under the Act, the Company will:
(a) prepare and file with the Commission a Registration Statement
with respect to such securities, and use its best efforts to cause such
Registration Statement to become and remain effective for such period as may be
reasonably necessary to effect the sale of such securities;
(b) prepare and file with the Commission such amendments to such
Registration Statement and supplements to the prospectus contained therein as
may be necessary to keep such Registration Statement effective for such period
as may be reasonably necessary to effect the sale of such Registrable
Securities;
(c) furnish to the Investor and to the underwriters of the
securities being registered such reasonable number of copies of the Registration
Statement, preliminary prospectus, final prospectus and such other documents as
such underwriters may reasonably request in order to facilitate the public
offering of such securities;
(d) use its best efforts to register or qualify the securities
covered by such Registration Statement under the state securities or blue sky
laws of such jurisdictions as Investor may reasonably request within 20 days
following the original filing of such Registration Statement, except that the
Company shall not for any purpose be required to execute a general consent to
service of process or to qualify to do business as a foreign corporation in any
jurisdiction wherein it is not so qualified;
(e) notify the Investor, promptly after it shall receive notice
thereof, of the time when such Registration Statement has become effective or a
supplement to any prospectus forming a part of such registration statement has
been filed;
16
(f) notify the Investor promptly of any request by the Commission for the
amending or supplementing of such Registration Statement or prospectus or for
additional information;
(g) prepare and file with the Commission, promptly upon the request
of the Investor, any amendments or supplements to such Registration Statement or
prospectus which, in the opinion of counsel for the Investor (and concurred in
by counsel for the Company), is required under the Act or the rules and
regulations thereunder in connection with the distribution of the Registrable
Securities by the Investor;
(h) prepare and promptly file with the Commission and promptly
notify the Investor of the filing of such amendment or supplement to such
Registration Statement or prospectus as may be necessary to correct any
statements or omissions if, at the time when a prospectus relating to such
securities is required to be delivered under the Act, any event shall have
occurred as the result of which any such prospectus or any other prospectus as
then in effect would include an untrue statement of a material fact or omit to
state any material fact necessary to make the statements therein, in the light
of the circumstances in which they were made, not misleading;
(i) advise the Investor, promptly after it shall receive notice or
obtain knowledge thereof, of the issuance of any stop order by the Commission
suspending the effectiveness of such Registration Statement or the initiation or
threatening of any proceeding for that purpose and promptly use its best efforts
to prevent the issuance of any stop order or to obtain its withdrawal if such
stop order should be issued;
(j) not file any amendment or supplement to such Registration
Statement or prospectus to which the Investor shall have reasonably objected on
the grounds that such amendment or supplement does not comply in all material
respects with the requirements of the Act or the rules and regulations
thereunder, after having been furnished with a copy thereof at least five
business days prior to the filing thereof, unless in the opinion of counsel for
the Company the filing of such amendment or supplement is reasonably necessary
to protect the Company from any liabilities under any applicable federal or
state law and such filing will not violate applicable law; and
(k) at the request of the Investor, furnish on the effective date of
the Registration Statement and, if such registration includes an underwritten
public offering, at the closing provided for in the underwriting agreement: (i)
an opinion, dated each such date, of the counsel representing the Company for
the purposes of such registration, addressed to the underwriters, if any, and to
the Investor, covering such matters as such underwriters and the Investor may
reasonably request, in which opinion such counsel shall state (without limiting
the generality of the foregoing) that such Registration Statement has become
effective under the Act and that (a) to the best of such counsel's knowledge no
stop order suspending the effectiveness thereof has been issued and no
proceedings for that purpose have been instituted or are pending or contemplated
under the Act, (b) the Registration Statement, related prospectus and each
amendment or supplement thereto appear on their face to be appropriately
responsive to the requirements of the Act and the applicable rules and
regulations of the Commission thereunder
17
applicable to the form of the Registration Statement (except that such counsel
need express no opinion as to financial statements contained therein), (c) to
the best of the knowledge of such counsel after investigation, neither the
Registration Statement, the prospectus nor any amendment nor supplement thereto
contains any untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading, (d) the description in the Registration Statement or prospectus
or any amendment or supplement thereto of all legal and governmental proceedings
and all contracts and other legal documents or instruments filed as exhibits to
the Registration Statement are accurate and fairly present the information
required to be shown, and (e) such counsel does not know of any legal or
governmental proceedings, pending or threatened, required to be described in the
Registration Statement or prospectus or any amendment or supplement thereto
which are not described as required, nor of any contracts or documents or
instruments of the character required to be described in the Registration
Statement or prospectus or amendment or supplement thereto or to be filed as
exhibits to the Registration Statement, which are not described and filed as
required; and (ii) a letter dated each such date, from the independent certified
public accountants of the Company, addressed to the underwriters, if any, and to
the Investor, covering such matters as such underwriters and the Investor may
reasonably request, in which letter such accountants shall state (without
limiting the generality of the foregoing) that they are independent certified
public accountants within the meaning of the Act and that in the opinion of such
accountants the financial statements and other financial data of the Company
included in the Registration Statement or the prospectus or any amendment or
supplement thereto comply in all material respects with the applicable
accounting requirements of the Act.
6.4 Expenses.
(a) With respect to each inclusion of Registrable Securities in a
Registration Statement pursuant to Section 6.1 or 6.2 hereof, all fees, costs
and expenses of and incidental to such registration, inclusion and public
offering (as specified in paragraph (b) below) in connection therewith shall be
borne by the Company; provided, however, that the Investor shall bear its pro
rata share of the underwriting discount and commissions and transfer taxes.
(b) The fees, costs and expenses of registration to be borne by the
Company as provided in paragraph (a) above shall include, without limitation,
all registration, filing and NASD fees, printing expenses, fees and
disbursements of counsel and accountants for the Company, fees and disbursements
of counsel for the underwriter or underwriters of such securities (if the
Company and/or selling security holders are required to bear such fees and
disbursements), all legal fees and disbursements and other expenses of complying
with state securities or blue sky laws of any jurisdictions in which the
securities to be offered are to be registered or qualified, and the premiums and
other costs of policies of insurance against liability arising out of such
public offering; the fees and disbursements of any counsel and accountants for
the Investor shall be borne by the Investor.
6.5 Indemnification.
18
(a) The Company will indemnify and hold harmless the Investor and
any underwriter (as defined in the Act) for the Investor and each person, if
any, who controls the Investor or such underwriter within the meaning of the
Act, from and against, and will reimburse the Investor and each such underwriter
and controlling person with respect to, any and all loss, damage, liability,
cost and expense to which the Investor or any such underwriter or controlling
person may become subject under the Act or otherwise, insofar as such losses,
damages, liabilities, costs or expenses are caused by any untrue statement or
alleged untrue statement of any material fact contained in such Registration
Statement, any prospectus contained therein or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances in which they were made,
not misleading; provided, however, that the Company will not be liable in any
such case to the extent that any such loss, damage, liability, cost or expense
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission so made in conformity with information furnished
by the Investor, such underwriter or such controlling person in writing
specifically for use in the preparation thereof.
(b) The Investor will indemnify and hold harmless the Company, any
underwriter and any controlling person of the Company or such underwriter from
and against, and will reimburse the Company, underwriter or controlling person
with respect to, any and all loss, damage, liability, cost or expense to which
the Company, any underwriter or any controlling person thereof may become
subject under the Act or otherwise, insofar as such losses, damages,
liabilities, costs or expenses are caused by any untrue or alleged untrue
statement of any material fact contained in such Registration Statement, any
prospectus contained therein or any amendment or supplement thereto, or arise
out of or are based upon the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances in which they were made, not misleading,
in each case to the extent, but only to the extent, that such untrue statement
or alleged untrue statement or omission or alleged omission was so made in
reliance upon and in strict conformity with written information furnished by the
Investor specifically for use in the preparation thereof.
(c) Promptly after receipt by an indemnified party pursuant to the
provisions of paragraph (a) or (b) of this Section 6.5 of notice of the
commencement of any action involving the subject matter of the foregoing
indemnity provisions, such indemnified party will, if a claim thereof is to be
made against the indemnifying party pursuant to the provisions of paragraph (a)
or (b), promptly notify the indemnifying party of the commencement thereof; but
the omission to so notify the indemnifying party will not relieve it from any
liability which it may have to any indemnified party otherwise than hereunder.
In case such action is brought against any indemnified party and it notifies the
indemnifying party of the commencement thereof, the indemnifying party shall
have the right to participate in, and, to the extent that it may wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel satisfactory to such indemnified party; provided, however,
that if the defendants in any action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that there may be legal defenses available to it and/or other indemnified
parties which are different from or additional to those available to the
indemnifying
19
party, or if there is a conflict of interest which would prevent counsel for the
indemnifying party from also representing the indemnified party, the indemnified
party or parties shall have the right to select separate counsel to participate
in the defense of such action on behalf of such indemnified party or parties.
After notice from the indemnifying party to the indemnified party of its
election so to assume the defense of any action, the indemnifying party will not
be liable to such indemnified party pursuant to the provisions of paragraphs (a)
or (b) hereof for any legal or other expense subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation, unless (i) the indemnified party shall have employed
counsel in accordance with the proviso of the preceding sentence, (ii) the
indemnifying party shall not have employed counsel satisfactory to the
indemnified party to represent the indemnified party within a reasonable time
after the notice of the commencement of the action, or (iii) the indemnifying
party has authorized the employment of counsel for the indemnified party at the
expense of the indemnifying party.
6.6 Exclusive Obligation to Register. Except as provided in this Article, the
Company will have no obligation to the Investor to register under the Act any
Registrable Securities received by any such Investor pursuant to this Agreement.
ARTICLE 7. PARTICIPATION IN FUTURE OFFERINGS
7.1 Participation in Future Offerings. In order to afford the Investor the
opportunity to maintain its percentage ownership interest in the Company, except
for securities offered by the Company in a public offering which is registered
under Section 5 of the Act, the Company agrees to offer to the Investor pro
rata, according to its percentage ownership interest in the Company (calculated
in accordance with Section 7.4 hereof), the opportunity to acquire any Common
Stock or other Voting Stock or securities that bear rights to acquire, convert
into or be redeemed or exchanged for shares of Common Stock or other Voting
Stock (including without limitation any rights, options, warrants or convertible
debt or equity instruments that provide any right to subscribe for, purchase or
otherwise acquire shares of Common Stock or other Voting Stock) (any such shares
being herein referred to as "New Shares") which may be offered by the Company
during the period commencing after the first Closing hereunder and ending on the
effective date of the Company's initial public offering pursuant to a
Registration Statement under the Act. For purposes of this Section 7.1, "New
Shares" does not include (i) the shares of Common Stock issuable upon conversion
of the Preferred Stock purchased hereunder or upon exercise of the Warrant
issued to the Investor of even date; (ii) securities issued as a result of any
stock split, stock dividend or reclassification of Common Stock, distributable
on a pro rata basis to all holders of Common Stock; (iii) securities issued to
any officer, director or employee of or consultant to the Company pursuant to a
stock option plan, employee stock purchase plan, restricted stock plan or other
employee stock plan or agreement approved by the Board of Directors; or (iv)
securities issued in connection with any merger or consolidation or acquisition
approved by the Board of Directors and by the Investor in accordance with the
Company's Charter.
7.2 Notice. The Company shall deliver written notice to the Investor of the
terms and conditions of each offering, borrowing or other similar transaction
pursuant to which the
20
Company intends to issue New Shares. Such notice shall be delivered to the
Investor not later than thirty (30) days prior to the date upon which any such
transaction is scheduled to be consummated. By such notice, the Company shall
offer to sell to the Investor the applicable amount of securities calculated
pursuant to Section 7.4.
7.3 Acceptance. The Investor may accept any such offer in whole or in part by
delivering to the Company a written agreement to make such purchase, executed by
that Investor, specifying the amount of the securities to be purchased by the
Investor, not later than ten (10) business days following the date of receipt by
the Company. The terms and conditions, price, timing of closing and other
provisions of such agreement by the Investor shall be not less favorable to the
Company than those of the other agreement to purchase such New Shares, except
that the Investor need not pay any non-cash consideration paid by the other
purchasers in the offering.
7.4 Percentage Interest. The amount of New Shares to be offered to the Investor
for purchase pursuant to this Article shall, with respect to each transaction
subject hereto, be calculated by multiplying (a) the aggregate number of New
Shares to be offered, times (b) the percentage ownership of Common Stock of the
Company held by the Investor at the time the New Shares are offered (assuming
conversion of all Preferred Stock of the Company into Common Stock and the
exercise of all then outstanding options, warrants and other rights to acquire
Common Stock).
7.5 No Accumulation. Each transaction or proposed issuance under this Article is
a separate transaction. The failure of the Investor to exercise in whole or in
part any prior offer shall not increase its rights with respect to the future
transaction subject hereto and the rights of the Investor under this Article
with respect to any transaction are reduced pro rata to the extent that such
Investor acquires securities of the Company by participating directly in such
transaction.
7.6 Termination of Rights. The rights provided to the Investor in this Article
shall terminate at such time as the Common Stock of the Company becomes
registered under Section 12(g) of the Exchange Act.
ARTICLE 8. RESERVED
ARTICLE 9. DEFINITIONS
For purposes of this Agreement the following terms shall have the indicated
respective meanings:
"Act" means the Securities Act of 1933, as amended, or any similar
Federal statute, and the rules and regulations of the Commission issued under
that Act, as they each may, from time to time, be in effect.
21
"Base Balance Sheet" means the most recent balance sheet included in
the financial statements listed in Section 2.6.
"Charter" means the Certificate of Incorporation or equivalent
document as amended and restated from time to time.
"Closing" shall have the meaning provided in Section 1.3.
"Commission" means the Securities and Exchange Commission, or any
other Federal agency at the time administering the securities laws of the United
States.
"Common Stock" shall include any class of capital stock of the
Company, now or hereafter authorized, the right of which to share in
distributions either of earnings or assets of the Company is without limit as to
any amount or percentage, and common stock or other securities issued in
substitution or exchange for the presently authorized Common Stock in connection
with a reorganization, reclassification, merger or sale of assets.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any similar Federal statute, and the rules and regulations of the
Commission issued under the Act, as they each may, from time to time, be in
effect.
"Preferred Stock" shall include any class of Preferred Stock of the
Company, now or hereafter authorized, and Preferred Stock or other securities
issued in substitution or exchange for the presently authorized Preferred Stock
in connection with a reorganization, reclassification, merger or sale of assets.
"Qualified Public Offering" means a firm commitment underwritten
public offering of shares of Common Stock of the Company pursuant to an
effective registration statement in which (i) the net proceeds to the Company
from such offering are at least $10 million and (ii) the price paid by the
public for such shares is at least $1,300 per share (appropriately adjusted to
reflect subdivisions and combinations of the Common Stock of the Company).
"Registrable Securities" means the Shares of Common Stock issuable
to the Investor upon conversion of the shares of Preferred Stock issued
hereunder; and any other shares of capital stock of the Company issued in
respect of the Shares (because of stock splits, stock dividends,
reclassifications, recapitalizations, mergers, consolidations, or similar
events), New Shares received through the Investor's exercise of its right to
purchase additional capital stock under Article 7 hereof or additional shares
received pursuant to Section 8.1 hereof; provided, however, that any shares
previously sold by the Investor to the public pursuant to a registered public
offering or Rule 144 under the Act shall cease to be Registrable Securities.
"Registration Statement" means a registration statement (other than
a registration statement on Form S-8 solely with respect to employee benefit
plans or any successor form or forms used for the purpose specified by such
form) filed by the Company with the Commission under the Act for a public
offering and sale of securities of the Company.
22
"Shares" means the 1150 shares of Preferred Stock of the Company which may be
purchased pursuant to this Agreement.
"Subsidiary" means any corporation, association, trust or business
entity of which the Company shall at any time own, directly or indirectly, at
least a majority of the capital stock or other interest entitled to vote
generally.
"Voting Stock" means any class of equity security entitled to vote
generally in the election of directors of the Company.
ARTICLE 10. MISCELLANEOUS
10.1 Termination.
(a) At any time prior to the Closing, this Agreement may be
terminated (i) by mutual consent of the parties, (ii) by either side if there
has been a material misrepresentation, breach of warranty or breach of covenant
by the other side in its representations, warranties and covenants set forth
herein, (iii) by the Investor if the conditions stated in Article 4 have not
been satisfied at or prior to the Closing.
(b) If this Agreement shall be terminated in accordance with
paragraph (a), all obligations of the parties hereunder shall terminate without
liability of any party to the others except as provided in Section 10.5. In the
event that this Agreement is so terminated, each party will return all papers,
documents, financial statements and other data furnished to it by or with
respect to each other party to such other party (including any copies thereof
made by the first party).
10.2 Survival of Representations and Covenants. All representations, warranties,
covenants, agreements and obligations made herein or in any schedule, exhibit,
notice, certificate or other document executed in connection herewith or
delivered by any party to another party incident hereto shall be deemed to have
been relied upon by the other party hereto and survive the execution and/or
delivery thereof, and all statements contained in any such schedules, exhibit,
notice, certificate or other document delivered by the Company hereunder or in
connection herewith shall be deemed to constitute representations and warranties
made by the Company herein.
10.3 Breach. In the event that there shall be a breach of any representation,
warranty, covenant, agreement or obligation of the Company or the Stockholder
after the Closing, which breach shall remain uncured for a period of thirty (30)
days after notice of such breach is given by the Investor to the Company or the
Stockholder, the Company shall immediately redeem the Shares at a price equal to
the original purchase price therefore.
10.4 Notices. Any notice or other communication in connection with this
Agreement shall be deemed to be delivered if in writing (or in the form of a
telegram) addressed as provided
23
below and if either (a) actually delivered at said address, or (b) in the case
of a letter, three business days shall have elapsed after the same shall have
been deposited in the United States mails, postage prepaid and registered or
certified:
If to the Company or the Stockholder, to:
BioSeq, Inc.
25 Olympia Avenue, Unit F
Woburn, Massachusetts 01801
Attention: President
with a copy to:
Kenneth S. Boger, Esquire
Warner & Stackpole, LLP
75 State Street
Boston, Massachusetts 02109
If to the Investor, to:
Boston Biomedica, Inc.
375 West Street
West Bridgewater, Massachusetts 02379
Attention: Richard T. Schumacher, President
with a copy to:
Steven R. London, Esquire
Brown, Rudnick, Freed & Gesmer
One Financial Center
Boston, Massachusetts 02111
and in any case at such other address as the addressee shall have specified by
written notice. All periods of notice shall be measured from the date of
delivery thereof.
10.5 Costs and Expenses. Each of the parties shall bear their own costs and
expenses in connection with the purchase of the Shares and the negotiation,
execution, performance and enforcement of this Agreement and any amendments,
waivers or consents with respect thereto.
10.6 Confidentiality. The Investor shall keep confidential and not disclose or
divulge any confidential, proprietary or secret information which they may
obtain from the Company in connection with the transactions contemplated herein,
or pursuant to inspection rights granted hereunder unless such information is or
hereafter becomes public information.
24
10.7 Assignment; Rights of Successors and Assigns. This Agreement shall be
assignable by the Investor to its affiliates and any successor of the Investor.
All representations, warranties, covenants, agreements and obligations hereunder
made by or on behalf of the parties hereto shall be binding upon and shall inure
to the benefit of the respective successors and assigns of the parties hereto,
whether so expressed or not.
10.8 Research and Development Services. The Investor shall perform research and
development services for the Company related to the Company's Pressure Cycling
Reactor Technology in areas to be agreed upon by the Investor and the Company.
The cost for such research and development services shall be $125 per hour for
senior staff(officers and department directors and managers), $75 per hour for
middle-management support staff (supervisors and medical technicians), and $50
per hour for all other personnel. Subject to the closing of the Investor's
second investment pursuant to Section 1.2(ii) of this Agreement, in the event
that the Company requests of the Investor less than $100,000 of research
services (based on the above rates), the Company shall nevertheless pay the
Investor a minimum of $100,000 for any research and development services
performed by the Investor between the date of the Investor's investment pursuant
to Section 1.2(ii) hereof and September 30, 1997. Subject to the closing of the
Investor's third investment pursuant to Section 1.2(iii) of this Agreement, in
the event that the Company requests of the Investor less than $150,000 of
research services (based on the above rates), the Company shall nevertheless pay
the Investor a minimum of $150,000 for research and development services
performed by the Investor after the date of such third closing until December
31, 1998. The scope and nature of each research and development project
performed by the Investor for the Company shall be jointly designed, developed
and agreed upon by the Investor and the Company.
10.9 Entire Agreement. This Agreement (including all exhibits or schedules
appended to this Agreement and all documents delivered pursuant to or referred
to in this Agreement, all of which are hereby incorporated herein by reference)
constitutes the entire agreement between the parties, and all promises,
representations, understandings, warranties and agreements with reference to the
subject matter hereof and inducements to the making of this Agreement relied
upon by any party hereto, have been expressed herein or in the documents
incorporated herein by reference.
10.10 Amendments and Waivers. Changes in or additions to this Agreement may be
made or compliance with any term, covenant, agreement, condition or provision
set forth herein or therein may be omitted or waived (either generally or in a
particular instance and either retroactively or prospectively), upon written
consent of the Company and the Investor; provided however, that no waiver or
consent on any one instance shall be deemed to be or be construed as a further
or continuing waiver of any such term or condition unless it expressly so
provides.
10.11 Governing Law; Severability This Agreement shall be deemed a contract made
under the laws of the Commonwealth of Massachusetts and, together with the
rights and obligations of the parties hereunder, shall be construed under and
governed by the laws of such Commonwealth. The invalidity or unenforceability of
any provision of this Agreement shall not affect the validity or enforceability
of any other provision hereof.
25
10.12 Counterparts. This Agreement may be executed in multiple counterparts,
each of which shall be deemed in original but all of which together shall
constitute one and the same instrument.
10.13 Effect of Table of Contents and Headings. Any table of contents, title of
an article or section heading herein contained is for convenience or reference
only and shall not affect the meaning of construction of any of the provisions
hereof.
IN WITNESS WHEREOF, this Agreement has been executed as a sealed
instrument by the parties hereto or their duly authorized representatives
effective as of the date first above written.
[SIGNATURE PAGE FOLLOWS]
26
Corporate Seal BioSeq, Inc.
ATTEST: By: ____________________________
James A. Laugharn, President
- -----------------------------
Clerk
Corporate Seal BioMolecular Assays, Inc. (only with
respect to Article 2 hereof)
ATTEST:
By: _______________________________
Clerk James A. Laugharn, President
Corporate Seal INVESTOR:
ATTEST: Boston Biomedica, Inc.
______________________________ By: ________________________________
Clerk Richard T. Schumacher, President
27
LIST OF SCHEDULES AND EXHIBITS
Schedule A - Description of Milestones
Schedule B - Disclosure Schedule
Exhibit A - Amended and Restated Articles of Organization
Exhibit B - Financial Statements
Exhibit C - License Agreement between BioSeq, Inc. and BioMolecular Assays, Inc.
Exhibit D - Warrant Agreement
Exhibit E - Stockholders' Agreement
Exhibit F - License Agreement between BioSeq, Inc. and the Investor
Exhibit G - Legal Opinion of Company Counsel
Exhibit H - Employee Nondisclosure and Developments Agreement
28
SCHEDULE A
TO
PREFERRED STOCK PURCHASE AGREEMENT
DATED OCTOBER 7, 1996
Description of Milestones
-------------------------
1. Conclusive demonstration of the ability to achieve and maintain
enzymatic synchrony.
2. Conclusive demonstration of the ability to control the extent of
digestions in order to allow the routine generation of groups of
deletions of variable or constant length.
3. Conclusive demonstration of the ability to immobilize the DNA substrate
at the 5" end, under pressure, and using available solid-phase
technologies.
29
SCHEDULE B
to
Preferred Stock Purchase Agreement between
BioSeq, Inc. and Boston Biomedica, Inc.
October 7, 1996
The following references are to sections of the Purchase Agreement
between BioSeq, Inc. and Boston Biomedica, Inc. dated 4 October, 1996.
SECTION 2.3, CAPITALIZATION
The following options to purchase shares of Common Stock of the Company
are currently outstanding:
Name of Option Holder Option to Purchase (Number of Shares)
- --------------------- -------------------------------------
Donald R. Johnson, Ph.D. 10 shares of Common Stock
Henry Paulus, Ph.D. 7.5 shares of Common Stock
Carson H. Powers 10 shares of Common Stock
Irwin Gruverman 50 shares of Common Stock (agreement)
BioMolecular Assays, Inc. 217 shares of Common Stock (convertible
loan arrangement)
The Company has reserved 1,086 shares of its Common Stock, $.01 par
value, for issuance pursuant to the exercise of options that may be granted to
employees of the Company pursuant to plans or agreements approved by a majority
of the Board of Directors.
SECTION 2.10, ABSENCE OF CERTAIN CHANGES
The Company entered into a Stock Purchase Agreement dated August 21,
1996 between the Company and G&G Diagnostics Limited Partnership II, a Delaware
limited partnership, pursuant to which G&G purchased 100 shares of Common Stock
of the Company for an aggregate purchase price $50,000.
SECTION 2.11, CONTRACTS AND COMMITMENTS
The Company has entered into the following contracts and commitments:
1. Letter Agreement dated September 14, 1995 granting options to purchase
up to 7.5 shares of Common Stock of the Company to Henry Paulus, Ph.D.
2. Letter Agreement dated September 24, 1995 granting options to purchase
up to 10 shares of Common Stock of the Company to Carson H. Powers.
30
3. Letter Agreement dated October 2, 1995 granting options to purchase up
to 10 shares of Common Stock of the Company to Donald R. Johnson, Ph.D.
4. Letter Agreement dated August 20, 1996 from Irwin Gruverman, P.E.
regarding his consulting services in consideration of 50 shares of
Common Stock of the Company.
5. Stock Purchase Agreement dated August 21, 1996 between the Company and
G&G Diagnostics Limited Partnership II, a Delaware limited partnership,
pursuant to which G&G purchased 100 shares of common stock of the
Company for an aggregate purchase price of $50,000.
6. Agreement between BioMolecular Assays, Inc. and the Company dated as of
September, 1996 regarding provision of services.
SECTION 2.12, INTELLECTUAL PROPERTY
1. Technology Transfer and Patent Assignment Agreement dated as of even
date herewith between BioMolecular Assays, Inc. and the Company,
pursuant to which BioMolecular Assays, Inc. has assigned certain
technology rights, trademark rights and the following patent
applications to the Company on the terms set forth therein:
a. type US application
title "Controlling Enzymatic Activity"
date March 7, 1995
b. type US CIP application
title "Controlling Enzymatic Activity"
date June 7, 1995
c. type PCT and US CIP application
title "Pressure Cycling Reactor"
date March 7, 1996
d. type US application
title "Pressure Controlled Binding
Application"
date July 3, 1996
e. type US application
title "Pressure Controlled Separation and
Purification Process"
date scheduled to file by September 1996
2. Application of BioMolecular Assays, Inc. for Service Mark Registration
Based on Intent to Use for the mark "BIOSEQ" dated May 3, 1996 in
international class 42 for Research, Development and Consulting
Services in the field of Pharmaceuticals, Diagnostics and Molecular
Biology, which BMA has agreed to assign to BioSeq as referenced in item
1. above.
31
SECTION 2.16, OFFEREES; SALES OF SECURITIES
Within the past six months the Company issued shares of Common Stock to
the following shareholders:
NAME OF HOLDER NUMBER OF SHARES OF
-------------- -------------------
COMMON STOCK
------------
BioMolecular Assays, Inc. 1,196
Dreier, Gustav H. 205
G&G Diagnostics Limited Partnership II 100
Green, David J. 285
Laugharn, Jr., James A. 333
Litt, Gerald 100
Powers, Carson II. 100
Rudd, Edwin A. 146
Smith, James H. 25
TOTAL 2,490
SECTION 2.20, CERTAIN TRANSACTIONS
BioMolecular Assays, Inc. and the Company have an agreement pursuant to
which Bimolecular Assays, Inc. provides services to the Company pursuant to a
payment schedule as set forth therein.
$32,500 of convertible debt was issued in March 1996 to BioMolecular
Assays, Inc. which is convertible into 217 shares of common stock of the Company
at BioMolecular Assays' option.
SECTION 2.24, INSURANCE
The Company plans to carry general liability insurance and special
equipment insurance but does not have such insurance policies in place as of the
date hereof.
32
EXHIBIT 10.21
NEITHER THIS WARRANT NOR THE SHARES OF STOCK ISSUABLE UPON EXERCISE HEREOF HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR STATE
SECURITIES LAWS. NO SALE, TRANSFER OR OTHER DISPOSITION OF THIS WARRANT OR SAID
SHARES MAY BE EFFECTED WITHOUT AN EXEMPTION FROM REGISTRATION UNDER SAID ACT AND
APPLICABLE STATE SECURITIES LAWS.
Warrant No. 1 STOCK PURCHASE WARRANT No. of Shares 1150
To Subscribe for and Purchase Common Stock of
BIOSEQ, INC.
THIS CERTIFIES THAT, for value received, Boston Biomedica, Inc. or
registered assigns, is entitled to subscribe for and purchase from BioSeq, Inc.,
a corporation incorporated under the laws of Massachusetts (hereinafter called
the "Company"), up to 1150 fully paid and non-assessable shares of the Company's
Common Stock, no par value per share (the "Common Stock"), during each period
set forth below, the specified number of shares of Common Stock at the price per
share indicated, subject, however, to the provisions and upon the terms and
conditions hereinafter set forth. This Warrant is being issued pursuant to that
certain Preferred Stock Purchase Agreement between the Company and Boston
Biomedica, Inc. ("Boston Biomedica") dated as of October 7, 1996 (the "Purchase
Agreement").
(i) 300 Shares, during the five-year period commencing on October 7,
1996, at a per share price of seven hundred seventy ($770.00) dollars, for
aggregate consideration of two hundred thirty-one thousand ($231,000) dollars;
(ii) 550 Shares, during the five-year period commencing on the closing
of Boston Biomedica's investment in the Company pursuant to Section 1.2(ii) of
the Purchase Agreement, at a per share price of one thousand forty-five
($1,045.00) dollars, for aggregate consideration of five hundred seventy-four
thousand seven hundred fifty ($574,750.00) dollars;
(iii) 300 Shares, during the five year-period commencing on the closing
of Boston Biomedica's investment in the Company pursuant to Section 1.2(iii)of
the Purchase Agreement, at a per share price of two thousand seven hundred fifty
($2,750.00) dollars, for aggregate consideration of eight hundred twenty-five
thousand ($825,000.00) dollars.
1. Exercise of Warrant. The rights represented by this Warrant may be exercised
by the holder hereof, in whole or in part (but not as to a fractional share), by
the surrender of this Warrant (properly endorsed if required) at the office of
any duly appointed transfer agent for the Common Stock or at the office of the
Company at 25 Olympia Avenue, Unit F, Woburn, Massachusetts 01801, and upon
payment to the Company, or for the account of the Company, by
cash or by certified check or bank draft, of the Warrant Purchase Price for such
shares. The Company agrees that the shares so purchased shall be and be deemed
to be issued to the holder hereof as the record owner of such shares as of the
close of business on the date on which this Warrant shall have been surrendered
and payment made for such shares as aforesaid. Certificates for the shares so
purchased shall be delivered to the holder hereof within a reasonable time, not
exceeding 10 days, after the rights represented by this Warrant shall have been
so exercised, and, unless this Warrant has expired, a new Warrant representing
the number of shares, if any, with respect to which this Warrant shall not then
have been exercised shall also be issued to the holder hereof within such time.
The purchase rights represented hereby shall not be exercisable to the extent
that the exercise thereof would cause Boston Biomedica's percentage interest in
the equity of the Company to equal or exceed twenty (20%) percent.
2. Shares to be Issued; Reservation of Shares. The Company covenants and agrees
that all shares which may be issued upon the exercise of the rights represented
by this Warrant will, upon issuance, be validly authorized, duly issued and
outstanding, fully paid and non-assessable, and free from all taxes, liens and
charges with respect to the issue thereof. The Company further covenants and
warrants that it will from time to time take all action required to assure that
the par value per share of the Common Stock is at all times equal to or less
than the effective Warrant Purchase Price. The Company further covenants and
agrees that, during the period within which the rights represented by this
Warrant may be exercised, the Company will at times have authorized and reserved
a sufficient number of shares of its Common Stock to provide for the exercise of
the rights represented by this Warrant and will at its expense expeditiously
upon each such reservation of shares procure the listing thereof (subject to
issuance or notice of issuance) on all stock exchanges, if any, on which the
Common Stock may then be listed.
3. Adjustment of Warrant Purchase Price. The Warrant Purchase Price in effect
from time to time shall be subject to adjustment as follows:
(a) Adjustment of Warrant Purchase Price Upon Issuance of Common Stock.
Except as provided in subparagraph (b), if and whenever the Company shall issue
or sell or is, in accordance with subparagraphs (a)(1) through (a)(6), deemed to
have issued or sold any shares of Common Stock for a consideration per share
less than the Warrant Purchase Price in effect immediately prior to the time of
such issuance or sale, then, forthwith upon such issuance or sale, the Warrant
Purchase Price shall be reduced to an amount equal to the quotient obtained by
dividing:
(i) an amount equal to the sum of
(x) the number of shares of all Common Stock outstanding or deemed in accordance
with subparagraphs (a)(1) through (a)(6) hereof to be issued and outstanding
immediately prior to such issuance or sale (with each share of Common Stock
issuable hereunder being deemed for such purpose to be issued and outstanding)
multiplied by the Warrant Purchase Price in effect immediately prior to the time
of such issuance or sale, plus
(y) the aggregate consideration received by the Company for such issuance or
sale,
-2-
by
(ii) the total number of shares of Common Stock outstanding or
deemed in accordance with subparagraphs (a)(1) through (a)(6) hereof to be
issued and outstanding immediately after such issuance or sale (with each share
of Common Stock issuable hereunder being deemed for such purpose to be issued
and outstanding).
For purposes of this subparagraph (a), the following
subparagraphs (a)(1) to (a)(6) shall also be applicable:
(a)(1) Issuance of Rights or Options. In case at any
time the Company shall in any manner grant (whether directly or by assumption in
a merger or otherwise) any warrants or other rights to subscribe for or to
purchase, or any options for the purchase of, Common Stock or any stock or
security convertible into or exchangeable for Common Stock (such warrants,
rights or options being called "Options" and such convertible or exchangeable
stock or securities being called "Convertible Securities") whether or not such
Options or the right to convert or exchange any such Convertible Securities are
immediately exercisable, and the price per share for which Common Stock is
issuable upon the exercise of such Options or upon the conversion or exchange of
such Convertible Securities (determined by dividing (i) the total amount, if
any, received or receivable by the Company as consideration for the granting of
such Options, plus the minimum aggregate amount of additional consideration
payable to the Company upon the exercise of all such Options, plus, in the case
of such Options which relate to Convertible Securities, the minimum aggregate
amount of additional consideration, if any, payable upon the issuance or sale of
such Convertible Securities and upon the conversion or exchange thereof, by (ii)
the total maximum number of shares of Common Stock issuable upon the exercise of
such Options or upon the conversion or exchange of all such Convertible
Securities issuable upon the exercise of such Options) shall be less than the
Warrant Purchase Price in effect immediately prior to the time of the granting
of such Options, then the shares of Common Stock issuable upon the exercise of
such Options or upon conversion or exchange of such Convertible Securities
issuable upon the exercise of such Options shall be deemed to have been issued
for such price per share as of the date of granting of such Options or the
issuance of such Convertible Securities and thereafter shall be deemed to be
outstanding. Except as otherwise provided in subparagraph (a)(3), no adjustment
of the Warrant Purchase Price shall be made upon the actual issuance of such
Common Stock or of such Convertible Securities upon exercise of such Options or
upon the actual issuance of such Common Stock upon conversion or exchange of
such Convertible Securities.
(a)(2) Issuance of Convertible Securities. In case
the Company shall in any manner issue (whether directly or by assumption in a
merger or otherwise) or sell any Convertible Securities, whether or not the
rights to exchange or convert any such Convertible Securities are immediately
exercisable, and the price per share for which Common Stock is issuable upon
such conversion or exchange (determined by dividing (i) the total amount
received or receivable by the Company as consideration for the issuance or sale
of such Convertible Securities, plus the minimum aggregate amount of additional
consideration, if any, payable to the
-3-
Company upon the conversion or exchange thereof, by (ii) the total maximum
number of shares of Common Stock issuable upon the conversion or exchange of all
such Convertible Securities) shall be less than the Warrant Purchase Price in
effect immediately prior to the time of such issuance or sale, then the shares
of Common Stock issuable upon conversion or exchange of such Convertible
Securities shall be deemed to have been issued for such price per share as of
the date of the issuance or sale of such Convertible Securities and thereafter
shall be deemed to be outstanding. Except as otherwise provided in subparagraph
(a)(3), no further adjustment of the Warrant Purchase Price shall be made upon
the actual issuance of such Common Stock upon conversion or exchange of such
Convertible Securities. If any such issuance or sale of such Convertible
Securities is made upon exercise of any options to purchase any such Convertible
Securities for which adjustments of the Warrant Purchase Price have been or are
to be made pursuant to other provisions of this subparagraph (a), no further
adjustment of the Warrant Purchase Price shall be made by reason of such
issuance or sale.
(a)(3) Change in Option Price or Conversion Rate.
Upon the happening of any of the following events, namely, if the purchase price
provided for in any Option referred to in subparagraph (a)(1), the additional
consideration, if any, payable upon the conversion or exchange of any
Convertible Securities referred to in subparagraph (a)(1) or (a)(2), or the rate
at which Convertible Securities referred to in subparagraph (a)(1) or (a)(2) are
convertible into or exchangeable for Common Stock shall change at any time
(including, but not limited to, changes under or by reason of provisions
designed to protect against dilution), the Warrant Purchase Price in effect at
the time of such event shall forthwith be readjusted to the Warrant Purchase
Price which would have been in effect at such time had such Options or
Convertible Securities still outstanding provided for such changed purchase
price, additional consideration or conversion rate, as the case may be, at the
time initially granted, issued or sold, but only if as a result of such
adjustment the Warrant Purchase Price then in effect hereunder is thereby
reduced; and on the expiration of any such Options without exercise of any
thereof or the termination of any such right to convert or exchange such
Convertible Securities without conversion or exchange of any thereof, the
Warrant Purchase Price then in effect hereunder shall forthwith be increased to
the Warrant Purchase Price which would have been in effect at the time of such
expiration or termination had such Option or Convertible Securities never been
issued.
(a)(4) Consideration for Stock. In case any shares of
Common Stock, Options or Convertible Securities shall be issued or sold for
cash, the consideration received therefor shall be deemed to be the amount
received by the Company therefor, without deduction therefrom of any expenses
incurred or any underwriting commissions or concessions paid or allowed by the
Company in connection therewith. In case any shares of Common Stock, Options or
Convertible Securities shall be issued or sold for a consideration other than
cash, the amount of the consideration other than cash received by the Company
shall be deemed to be the fair value of such consideration as determined in good
faith by the Board of Directors of the Company, without deduction therefrom of
any expenses incurred or any underwriting commissions or concessions paid or
allowed by the Company in connection therewith. In case any Options shall be
issued in connection with the issuance and sale of other securities of the
Company, together comprising one integral transaction in which no specific
consideration is allocated to such Options by the parties thereto, such Options
shall be deemed to have been
-4-
issued for such consideration as determined in good faith by the Board of
Directors of the Company.
(a)(5) Record Date. In case the Company shall take a
record of the holders of its Common Stock for the purpose of entitling them (a)
to receive a dividend or other distribution payable in Common Stock, Options or
Convertible Securities or (b) to subscribe for or purchase Common Stock, Options
or Convertible Securities, then such record date shall be deemed to be the date
of the issuance or sale of the shares of Common Stock deemed to have been issued
or sold upon the declaration of such dividend or the making of such other
distribution or the date of the granting of such right of subscription or
purchase, as the case may be.
(a)(6) Treasury Shares. The disposition of any shares
owned or held by or for the account of the Company shall be considered an
issuance or sale of Common Stock for the purposes of this subparagraph (a).
(b) Certain Issuances of Common Stock Excepted. Anything herein to the
contrary notwithstanding, the Company shall not be required to make any
adjustment of the Warrant Purchase Price upon issuance of
(i) Common Stock upon the exercise of this Warrant;
(ii) options to purchase Common Stock of the Company granted
to employees of the Company, and shares issued upon the exercise thereof,
pursuant to plans or agreements approved by a majority of the Board of
Directors; provided that this subparagraph (b)(ii) shall not apply to the grant
of any options if, upon such grant, the shares issuable upon exercise of those
options, when added to the shares issuable upon exercise of then outstanding
options falling within this subparagraph (b)(ii) and shares previously issued
upon exercise of any such options (all such shares being hereinafter referred to
as the "Option Shares") shall exceed 15% of the total number of shares of Common
Stock then outstanding (including as outstanding for purposes of this
calculation (i) all shares of Common Stock into which this Warrant or any other
then outstanding convertible securities of the Company may be converted and (ii)
all of the Option Shares.
(c) Subdivision or Combination of Common Stock. In case the Company
shall at any time subdivide (by any stock split, stock dividend or otherwise)
its outstanding shares of Common Stock into a greater number of shares, the
Warrant Purchase Price in effect immediately prior to such subdivision shall be
proportionately reduced, and, conversely, in case the outstanding shares of
Common Stock shall be combined into a smaller number of shares, the Warrant
Purchase Price in effect immediately prior to such combination shall be
proportionately increased.
(d) Reorganization or Reclassification. If any capital reorganization
or reclassification of the capital stock of the Company shall be effected in
such a way that holders of Common Stock shall be entitled to receive stock,
securities or assets with respect to or in
-5-
exchange for Common Stock, then, as a condition of such reorganization or
reclassification, lawful and adequate provisions shall be made whereby the
holder of this Warrant shall thereupon have the right to receive, upon the basis
and upon the terms and conditions specified herein and in lieu of the shares of
Common Stock immediately theretofore receivable upon the exercise of this
Warrant, such shares of stock, securities or assets as may be issued or payable
with respect to or in exchange for a number of outstanding shares of such Common
Stock equal to the number of shares of such Common Stock receivable upon such
exercise had such reorganization or reclassification not taken place, and in any
such case appropriate provision shall be made with respect to the rights and
interests of such holder to the end that the provisions hereof (including
without limitation provisions for adjustments of the Warrant Purchase Price)
shall thereafter be applicable, as nearly as may be, in relation to any shares
of stock, securities or assets thereafter deliverable upon the exercise of such
rights.
(e) Notice of Adjustment. In case any adjustment of the Warrant
Purchase Price is required hereunder, the Company shall give written notice
thereof, by first class mail, postage prepaid or by telex or facsimile,
addressed to the holder of this Warrant at the address of such holder as shown
on the books of the Company, which notice shall state the Warrant Purchase Price
resulting from such adjustment, setting forth in reasonable detail the
calculation upon which such adjustment is based.
(f) Other Notices. In case at any time:
(1) the Company shall declare any dividend upon its Common
Stock payable in cash or stock or make any other distribution to the holders of
its Common Stock;
(2) the Company shall offer for subscription pro rata to the
holders of its Common Stock any additional shares of stock of any class, or
other rights;
(3) there shall be any capital reorganization or
reclassification of the capital stock of the Company, or a consolidation or
merger of the Company with or into, or a sale of all or substantially all its
assets to, another entity or entities; or
(4) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company;
then, in any one or more of said cases, the Company shall give, by
first class mail, postage prepaid, or by telex or facsimile, addressed to the
holder of this Warrant at the address of such holder as shown on the books of
the Company, (i) at least 10 days' prior written notice of the date on which the
books of the Company shall close or a record shall be taken for such dividend,
distribution or subscription rights or for determining rights to vote in respect
of any such reorganization, reclassification, consolidation, merger, sale,
dissolution, liquidation or winding up and (ii) in the case of any such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding up, at least 20 days' prior written notice of the date
when the same shall take place. Such notice in accordance with the foregoing
clause shall also specify (a) in the case of any such dividend, distribution or
subscription rights, the date on
-6-
which the holders of Common Stock shall be entitled thereto and (b) the date on
which the holders of Common Stock shall be entitled to exchange their Common
Stock for securities or other property deliverable upon any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding up, as the case may be.
(g) Stock to be Reserved. The Company will at all times
reserve and keep available out of its authorized Common Stock, solely for the
purpose of issuance upon the exercise of this Warrant as herein provided, such
number of shares of Common Stock as shall then be issuable upon the exercise of
this Warrant. The Company covenants that all shares of Common Stock which shall
be so issued shall be duly and validly issued and fully paid and nonassessable
and free from all taxes, liens and charges with respect to the issuance thereof,
and, without limiting the generality of the foregoing, the Company covenants
that it will from time to time take all such action as may be requisite to
ensure that the par value per share of the Common Stock is at all times equal to
or less than the Warrant Purchase Price in effect at the time. The Company will
take all such action as may be necessary to ensure that all such shares of
Common Stock may be so issued without violation of any applicable law or
regulation, or of any requirement of any national securities exchange upon which
the Common Stock may be listed or any national securities association which may
provide quotations of the sale prices of the Common Stock.
4. Common Stock. As used herein the term "Common Stock" shall mean and include
the Company's Common Stock authorized on the date of the original issue of the
Warrants and shall also include any capital stock of any class of the Company
thereafter authorized which shall not be limited to a fixed sum or percentage in
respect of the rights of the holders thereof to participate in dividends and in
the distribution of assets upon the voluntary or involuntary liquidation,
dissolution or winding up of the Company; provided that the shares which may be
purchased pursuant to this Warrant shall include only shares of the class of
Common Stock, no par value referred to at the beginning of this agreement and
designated in the Company's original issue of Warrants or, in the case of any
reorganization, reclassification, consolidation, merger or sale of assets of the
character referred to in subparagraph 3(d) hereof, the stock, securities or
assets provided for in such subparagraph.
5. Transfer. Subject to the provisions of the Agreement, this Warrant and all
rights hereunder are transferable, in whole or in part, at the offices referred
to in paragraph 1 hereof by the holder hereof in person or by duly authorized
attorney, upon surrender of this Warrant properly endorsed. Each taker and
holder of this Warrant, by taking or holding the same, consents and agrees that
this Warrant, when endorsed in blank, shall be deemed negotiable and that when
this Warrant is so endorsed, the holder hereof may be treated by the Company and
all other persons dealing with this Warrant as the absolute owner hereof for any
purposes and as the person entitled to exercise the rights represented by this
Warrant or to the transfer hereof on the books of the Company, any notice to the
contrary notwithstanding; but until each transfer on such books, the Company may
treat the registered holder hereof as the owner hereof for all purposes.
-7-
6. Exchange. This Warrant is exchangeable, upon its surrender at the offices
referred to in paragraph 1, for new Warrants of like tenor representing in the
aggregate the right to subscribe for and purchase the number of shares which may
be subscribed for and purchased hereunder, each of such new Warrants to
represent the right to subscribe for and purchase such number of shares as shall
be designated by the holder hereof at the time of such surrender. Upon receipt
of evidence satisfactory to the Company of the loss, theft, destruction or
mutilation of this Warrant and, in the case of any such loss, theft or
destruction, upon delivery of a bond of indemnity satisfactory to the Company,
or, in the case of any such mutilation, upon surrender or cancellation of this
Warrant, the Company will issue to the holder hereof a new warrant of like
tenor, in lieu of this Warrant, representing the right to subscribe for and
purchase the number of shares which may be subscribed for and purchased
hereunder.
7. Registration Rights. The definition of "Registrable Securities" contained in
the Purchase Agreement shall include the shares of Common Stock or other
securities issued hereunder and such shares shall have the same registration
rights as are accorded to the Registrable Securities under the Purchase
Agreement.
8. Governing Law. This Warrant shall be construed and enforced in accordance
with the laws of the Commonwealth of Massachusetts.
IN WITNESS WHEREOF, BioSeq, Inc. has caused this Warrant to be signed
by its duly authorized officers under its corporate seal, and this Warrant to be
dated.
BioSeq, Inc.
By: /s/ James Laugharn
--------------------------------------------
James Laugharn, Jr., President
Attest:
/s/ Justine Laugharn
- ---------------------------
[Clerk]
-8-
EXHIBIT A
NOTICE OF EXERCISE
To: BioSeq, Inc.
1. The undersigned hereby elects to purchase _______ shares of Common
Stock of BioSeq, Inc. pursuant to the terms of the attached Warrant, and tenders
herewith payment of the purchase price of such shares in full.
2. Please issue a certificate or certificates representing said shares
in the name of the undersigned or in such other name or names as are specified
below.
Number of Shares ______________________
3. In the event of partial exercise, please re-issue an appropriate
Warrant exercisable into the remaining shares.
_____________________________________
(Name)
_____________________________________
(Address)
_____________________________________
(Signature)
_____________________________________
(Date)
-9-
EXHIBIT 10.22
STOCKHOLDERS' AGREEMENT
STOCKHOLDERS' AGREEMENT, made as of October 7, 1996 (the "Agreement")
by and among Bioseq, Inc., a Massachusetts corporation with a principal office
at 25 Olympia Avenue, Unit F, Woburn, Massachusetts 01801 (the "Company"), all
of the shareholders of the Company identified on Exhibit A hereto (the "Existing
Stockholders"), Boston Biomedica, Inc., a Massachusetts corporation with a
principal office at 375 West Street, West Bridgewater, Massachusetts 02379 (the
"Preferred Holder") and those additional holders of Preferred Stock and Common
Stock of the Company (the "Additional Holders") who may be added as parties
hereto from time to time in accordance with the terms of this Agreement. The
Existing Stockholders, the Preferred Holder and the Additional Holders are
hereinafter collectively referred to as "Holders."
WHEREAS, as of the date hereof the Preferred Holder has purchased an
aggregate of 300 shares of Series A Convertible Preferred Stock, $.01 par value
per share of the Company (the "Series A Preferred"), which is convertible into
common stock, $.01 par value per share of the Company ("Common Stock") in
accordance with the terms of the Company's Articles of Organization (the
"Charter"), pursuant to the terms of a Preferred Stock Purchase Agreement of
even date herewith (the "Purchase Agreement"); and
WHEREAS, the Preferred Holder is obligated and has an option to
purchase additional shares of the Series A Preferred, Series B Convertible
Preferred Stock, $.01 par value per share of the Company (the "Series B
Preferred") and Series C Convertible Preferred Stock, $.01 par value per share
of the Company (the "Series C Preferred," together, the Series A Preferred, the
Series B Preferred and the Series C Preferred are referred to herein as the
"Preferred Stock") pursuant to the terms of the Purchase Agreement and a certain
Warrant Agreement referenced therein; and
WHEREAS, the purchase and sale of the Preferred Stock as aforesaid has
been undertaken by the Company and the Preferred Holder in reliance on the
agreements of the parties hereto as hereinafter set forth; and
WHEREAS, the Company and the Holders wish to confirm their agreements
by entering into this Stockholders' Agreement, and each considers the provisions
contained herein to be in his, her or its best interest and in the best
interests of the Company;
NOW, THEREFORE, In consideration of the foregoing and the agreements
set forth below, the parties hereto agree as follows:
SECTION 1. BOARD OF DIRECTORS.
In all elections of Directors of the Company held during the term of
this Agreement (whether at a meeting or by written consent in lieu of a
meeting), each of the Holders unconditionally agrees to vote all shares of the
Company's Common Stock, Preferred Stock and any other equity securities of the
Company or securities of the Company having equity features,
now owned or hereafter acquired or controlled by the Holder, whether by
purchase, conversion of other securities, exercise of rights, warrants or
options, stock dividends or otherwise (collectively, the "Stock"), and otherwise
to use his or its respective best efforts to cause and maintain the election to
the Board of Directors of one nominee designated by the Preferred Holder.
The obligation of the Holders to vote their stock in favor of the
designee of the Preferred Holder shall terminate at such time as (a) the
Preferred Holder owns less than 25% of the Preferred Stock (calculated on an
as-if-converted basis, and including any shares of Common Stock into which the
Preferred Stock may have been converted) issued to it under the Purchase
Agreement, or (b) the Preferred Holder does not purchase the shares of Series B
Preferred referenced in Section 1.2 (ii) of the Stock Purchase Agreement in
accordance with the terms thereof.
SECTION 2. RIGHT OF FIRST REFUSAL ON DISPOSITIONS BY HOLDERS.
(a) No Holder shall sell, assign or otherwise transfer or agree to
sell, assign or otherwise transfer any shares of Stock held or beneficially
owned by such Holder to any third party (the "Proposed Transferee") other than a
Permitted Transferee as defined below, unless in each such case the Holder (an
"Offering Holder") shall have first offered to sell those shares (the "Offered
Shares"), in accordance with this Section 2, to all other Holders (collectively,
the "Offeree Holders"), on terms and conditions, including price, not less
favorable to the Offeree Holders than those on which the Offering Holder
proposes to sell such Offered Shares to the Proposed Transferee. Any sale,
assignment or other transfer contrary to the provisions of this Agreement shall
be void, and shall not be recorded on the Company's stock transfer records. In
the event of any attempt to make such a transfer, the Company shall continue to
treat the purported transferor as the owner of the Stock purported to be
transferred for all purposes, including without limitation, voting and dividend
rights.
(b) The Offering Holder shall give notice to the Company and to the
Offeree Holders in writing of the Offering Holder's intention to sell the
Offered Shares (the "Notification"), specifying the number of shares of Stock
proposed to be transferred and the price and terms of the proposed transfer (the
"Terms"), and offering to sell the Offered Shares to the Offeree Holders on the
Terms specified.
(c) Each Offeree Holder shall have the absolute right (subject to the
last sentence of this subsection (c)), by delivery of written notice to the
Company, the Offering Holder and each other Offeree Holder (as hereinafter
provided) to purchase that number of Offered Shares as shall be equal to the
number of Offered Shares multiplied by a fraction, the numerator of which shall
be the number of shares of Common Stock (including on an as-if-converted or
as-if-exercised basis any securities of the Company which are convertible into
or exercisable for Common Stock of the Company) then owned by such Offeree
Holder and the denominator of which shall be the aggregate number of shares of
Common Stock outstanding (including as outstanding any shares of Common Stock
issuable upon conversion or exercise of any outstanding securities of the
Company). The amount of Offered Shares that each Offeree Holder is entitled to
purchase under this Section 2(c) shall be referred to as its "Pro Rata
Fraction." Notwithstanding the foregoing,
2
no Offeree Holder shall have the right to purchase any of the Offered Shares
unless all of the Offered Shares are subscribed for by the Offeree Holders under
this Section 2.
(d) The Offeree Holders shall have a right to oversubscription such
that if any Offeree Holder declines to purchase its Pro Rata Fraction, the other
Offeree Holders shall, among them, have the right to purchase the balance of the
Offered Shares not so purchased. Such right of oversubscription may be exercised
by an Offeree Holder by accepting the offer of the Offered Shares as to more
than its Pro Rata Fraction. If, as a result thereof, such oversubscriptions
exceed the total number of Offered Shares available in respect of such
oversubscription privilege, the oversubscribing Offeree Holders shall be reduced
with respect to their oversubscriptions on a pro rata basis in accordance with
their respective Pro Rata Fractions or as they may otherwise agree among
themselves.
(e) The notice to be provided by an Offeree Holder under Section 2(c)
hereof shall state the number of Offered Shares the Offeree Holder desires to
purchase. The notice shall be delivered in person or mailed to the Offering
Holder, the Company, and each other Offeree Holder within 10 days of the date of
the Notification. Such notice shall, when taken in conjunction with the
Notification, be deemed to constitute a valid, legally binding and enforceable
agreement for the sale and purchase of such Offered Shares (subject to the
aforesaid limitations as to an Offeree Holder's right to purchase more than its
Pro Rata Fraction and to the condition that all of the Offered Shares be fully
subscribed for by the Offeree Holders). Sales of the Offered Shares to be sold
to purchasing Offeree Holders pursuant to this Section 2 shall be made at the
offices of the Company on the 45th day following the date of the Notification
(or if such 45th day is not a business day, then on the next succeeding business
day). Such sales shall be effected by the Offering Holder's delivery to each
purchasing Offeree Holder of a certificate or certificates evidencing the
Offered Shares to be purchased by it, duly endorsed for transfer to such
purchasing Offeree Holder, against payment to the Offering Holder of the
purchase price therefor by such purchasing Offeree Holder.
(f) If the Offeree Holders do not subscribe to purchase all of the
Offered Shares, the Offering Holder shall not be required to sell any of the
Offered Shares to the Offeree Holders hereunder; and in such event all (but not
less than all) of the Offered Shares may be sold by the Offering Holder to the
Proposed Transferee at any time within 90 days after the date the Notification
was made, subject to the provisions of Section 2 and Section 3 hereof. Any such
sale shall be to the Proposed Transferee, at not less than the price and upon
other terms and conditions, if any, not more favorable to the Proposed
Transferee than the Terms specified in the Notification. If the Offered Shares
are not sold within the 90 day period, they shall again be subject to the
requirements of a prior offer pursuant to this Section 2. Subject to the
provisions of Section 3 hereof, if Offered Shares are sold pursuant to this
Section 2 to any purchaser who is not a party to this Agreement, the Offered
Shares so sold shall be subject to the restrictions imposed by this Section 2
with respect to any subsequent sales.
(g) Notwithstanding any other provisions of this Section 2, each Holder
shall be entitled to transfer, without compliance with this Section 2, shares of
Stock held by it:
3
(i) to the trustees of a trust revocable by such Holder alone,
the beneficiaries of which consist solely of the Holder and transferees
enumerated in subsection (iv) below;
(ii) in the case of a Holder who is an individual, to his
guardian or conservator;
(iii) in the case of a deceased Holder, to his executors or
administrators or to trustees under his will;
(iv) in the case of a Holder who is an individual, or his
guardian, conservator or trustee under an inter vivos trust, or his executors,
administrators or trustees under his will, to the Holder's spouse, to any of his
children or their issue (or to custodians for the benefit of minor children or
issue) or to the Holder's parents or siblings;
(v) to its partners or other equity owners or to a liquidating
trust or similar entity established for the purpose of holding its assets prior
to distribution to its partners or other equity owners;
(vi) to any entity which is controlled by or under common
control with such Holder; or
(vii) in the case of any Holder who is or becomes an employee
of the Company, to the Company in accordance with written agreements entered
into in connection with the original issuance of Stock to such Holder (or the
grant of a right to acquire such Stock) giving the Company a right of first
refusal or a right to repurchase such Stock;
Each such transferee is referred to herein as a "Permitted Transferee." All such
Permitted Transferees (other than the Company pursuant to clause (vii) above)
shall remain subject to the terms of this Agreement and shall be deemed to be
"Holders" for purposes hereof.
SECTION 3. RIGHT TO PARTICIPATE IN SALES.
Upon compliance by an Offering Holder with the provisions of Section
2(a) through 2(c) hereby and prior to any transfer under Section 2(e) hereof,
the Offering Holder shall provide each Offeree with written notice (the
"Transfer Notice") of, and the opportunity to participate in, such transfer upon
the same terms as set forth in the original Notification under Section 2(b). Any
Offeree which elects to participate in such transfer shall notify the Offering
Holder not later than fifteen days after receipt of the Transfer Notice,
specifying the number of shares of Stock which such Offeree desires to transfer.
The Offering Holder will not transfer any shares of Stock pursuant to Section
2(e) in such transaction unless the transferee thereof at the same time
purchases from each Offeree Holder who elects to participate in the transfer as
aforesaid at least the lesser of (a) the number of shares of Stock set forth in
such Offeree Holder's notice to the Offering Holder or (b) that number of shares
computed by multiplying the total number of shares of Stock to which the
proposed transfer relates by a fraction, the numerator of which is the aggregate
number of shares of Stock owned by such Offeree Holder and the denominator of
which is the aggregate number of shares of Stock outstanding. Notwithstanding
the foregoing, at
all times during the term of this agreement Boston Biomedica, Inc. shall be
permitted, should it elect to do so in accordance with the notice provisions of
this Section 3, to sell a number of shares of stock pursuant to this Section 3
which is not less than the largest number of shares being sold pursuant hereto
by any of BioMolecular Assays, Inc., James A. Laugharn and David J. Green, and
the number of shares being sold by all such parties shall be reduced on a pro
rata basis to accommodate the foregoing entitlement.
SECTION 4. MISCELLANEOUS.
Section 4.1. Specific Performance; Other Rights. The Company and the
Holders recognize that the rights of the parties under this Agreement are
unique, and accordingly the Holders shall, in addition to such other remedies as
may be available to any of them at law or in equity, have the right to enforce
their rights hereunder by actions for injunctive relief and specific performance
to the extent permitted by law. Without limiting the generality of the
foregoing, if any transfer of shares of Stock of a Holder is made or attempted
to be made in contravention of the provisions of this Agreement, the other
Holders shall have the right to enforce their rights hereunder by actions for
injunctive relief and specific performance to the extent permitted by law.
Except as provided herein, this Agreement is not intended to limit or abridge
any rights of the parties which may exist apart from this Agreement.
Section 4.2. Stock Legend. Each certificate for shares of Stock subject
to this Agreement shall have endorsed, stamped or written thereon a legend which
shall read substantially as follows:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
TRANSFER RESTRICTIONS AND OTHER PROVISIONS OF A CERTAIN STOCKHOLDERS' AGREEMENT
DATED AS OF OCTOBER 7, 1996 (COPIES OF WHICH ARE AVAILABLE AT THE OFFICES OF THE
COMPANY FOR EXAMINATION)."
Section 4.3. Termination. This Agreement shall terminate on the
earliest to occur of (a) the closing of the sale of shares of Common Stock of
the Company in a Qualified Public Offering, as defined in the Purchase Agreement
(and shall not apply to any Stock being sold as part of such offering) and (b)
such time as none of the Preferred Stock is outstanding.
Section 4.4. Notices, Etc. All notices and other communications
hereunder shall be in writing and shall be deemed to have been given when
delivered or sent by overnight courier or mailed by certified mail, postage
prepaid, addressed (a) if to the Company, to the Chief Executive Officer at the
address first set forth above, with a copy to Warner & Stackpole LLP, 75 State
Street, Boston, Massachusetts 02109, Attn: Kenneth S. Boger, Esquire; (b) if to
any Holder, to the address set below its name on Exhibit A hereto; and (c) if to
any other person who becomes subject to the terms of this Agreement, to his
address as the same may appear in the records of the Company, and to the
Company. Each of the parties may change his, her or its notice address as
referenced above by notice to each of the other parties delivered as aforesaid.
5
Section 4.5. Entire Agreement. The parties hereto agree that this
Agreement constitutes the entire agreement between the parties with respect to
the subject matter hereof and supersedes all prior agreements and understandings
between them as to such subject matter.
Section 4.6. Waivers and Further Agreements. Any waiver of any terms or
conditions of this Agreement shall not be effective unless given in a writing
signed by the party against whom such waiver is sought to be enforced, nor shall
it operate as a waiver of any other breach of such terms or conditions or any
other term or condition, nor shall any failure to enforce any provision hereof
operate as a waiver of such provision or of any other provision hereof. No such
waiver, unless it by its own terms explicitly provides to the contrary, shall be
construed to effect a continuing waiver of the provision being waived, and no
such waiver in any instance shall constitute a waiver in any other instance or
for any other purpose or impair the right of the party against whom such waiver
is claimed in all other instances or for all other purposes to require full
compliance with such provision.
Section 4.7. Further Assurances. Each of the parties hereto agrees to
execute all such further instruments and documents and to take all such further
action as the other party may reasonably require in order to effectuate the
terms and purposes of this Agreement.
Section 4.8. Amendments. This Agreement may not be amended, nor shall
any waiver be effected except by an instrument in writing executed by the
holders of a majority of the Stock, which vote shall include the holders of a
majority of the Preferred Stock (on an as-if-converted basis, and including
shares of Common Stock into which any Preferred Stock may have been converted)
then owned or controlled by a Holder hereunder.
Section 4.9. Successors and Assigns. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
heirs, executors, legal representatives, successors and permitted assigns.
Section 4.10. Severability. If any provision of this Agreement shall be
held or deemed to be invalid, inoperative or unenforceable as applied to any
particular case in any jurisdiction or jurisdictions, or in all jurisdictions or
in all cases, because of the conflict of any provision with any constitution or
statute or rule of public policy or for any other reason, such circumstance
shall not have the effect of rendering the provision or provisions in question,
invalid, inoperative or unenforceable in any other jurisdiction or in any other
case or circumstance or of rendering any other provision or provisions herein
contained invalid, inoperative or unenforceable to the extent that such other
provisions are not themselves actually in conflict with such constitution,
statute or rule of public policy, but this Agreement shall be reformed and
construed in any such jurisdiction or case as if such invalid, inoperative or
unenforceable provision had never been contained herein, and such provision
shall be reformed so that it would be valid, operative and enforceable to the
maximum extent permitted in such jurisdiction or in such case.
Section 4.11. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute
6
one and the same instrument, and in pleading or proving any provision of this
Agreement, it shall not be necessary to produce more than one of such
counterparts.
Section 4.12. Additional Parties. The Company may issue additional
shares of Preferred Stock to persons or entities not initially parties to this
Agreement (the Additional Holders) under the terms of the Purchase Agreement.
Each Additional Holder shall execute a counterpart of this Agreement, and upon
such execution this agreement, including Exhibit A hereto which shall be
modified accordingly and distributed to each Holder hereunder, shall be deemed
to have been amended to add such additional Holder as a party hereto with all
rights and obligations of the other Holders hereunder.
Section 4.13. Section Headings. The headings contained in this
Agreement are for reference purposes only and shall not in any way affect the
meaning or interpretation of this Agreement.
Section 4.14. Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the Commonwealth of
Massachusetts.
THIS SPACE LEFT INTENTIONALLY BLANK.
7
IN WITNESS WHEREOF, the parties have caused this Agreement to
be duly executed under seal as of the date first above written.
THE COMPANY: BIOSEQ, INC.
By: /s/ J. Laugharn
-------------------------------------
Name: James Laugharn
Title: President and CEO
THE PREFERRED HOLDER: BOSTON BIOMEDICA, INC.
By: /s/ Richard T. Schumacher
-------------------------------------
Name: Richard T. Schumacher
Title: President and CEO
THE EXISTING HOLDERS: BIOMOLECULAR ASSAYS, INC.
By: /s/ J. Laugharn
-------------------------------------
Name: James Laugharn
Title: President and CEO
/s/ David J. Green
----------------------------------------
David J. Green
/s/ James A. Laugharn, Jr.
----------------------------------------
James A. Laugharn, Jr.
________________________________________
Edwin A. Rudd
________________________________________
Gustav H. Dreier
________________________________________
James H. Smith
________________________________________
Carson H. Powers
________________________________________
Gerald J. Litt
________________________________________
G&G Diagnostics Limited Partnership II
EXHIBIT A
<TABLE>
<CAPTION>
Number and Type of Shares
-------------------------
Names & Addresses Common Stock Series A Preferred Other
- ----------------- ------------ ------------------ -----
<S> <C> <C> <C>
THE EXISTING STOCKHOLDERS:
BioMolecular Assays, Inc.
25 Olympia Avenue, Unit F
Woburn, MA 01801
David J. Green
51 Amberwood Drive
Winchester, MA 01890
James A. Laugharn, Jr.
6 Chesterford Road
Winchester, MA 01890
Edwin A. Rudd
52 Brookdale Road
Salem, NH 03079
Gustav H. Dreier
189 Moxley Street
Jefferson, NY 12093
James H. Smith
138 Chace Hill Road
Sterling, MA 01545
G&G Diagnostics Limited Partnership II 100
30 Ossipee Road
Newton, MA 02164
Carson H. Powers
P.O. Box 77
Georgetown, CT 06829
Gerald J. Litt
16 Cove Island Road
Centerville, MA 02632
</TABLE>
EXHIBIT 10.23
LICENSE AGREEMENT
THIS AGREEMENT is made and entered into as of October 7, 1996 by and
between BioMolecular Assays, Inc. ("BMA"), a Massachusetts corporation with
principal offices at 25 Olympia Avenue, Woburn, Massachusetts 01801-6307 (as to
certain provisions hereof) and BioSeq, Inc. ("BioSeq"), a Massachusetts
corporation with principal offices at 25 Olympia Avenue, Unit #F, Woburn,
Massachusetts 01801-6307; and Boston Biomedica, Inc. a Massachusetts corporation
with principal offices at 375 West Street, West Bridgewater, Massachusetts 02379
("BBI").
WHEREAS, BMA is the owner of all right, title and interest in and to
the BMA Patents (as defined below) and the Technology (as defined below) related
thereto;
WHEREAS, BioSeq has obtained from BMA an exclusive, worldwide right and
license under the BMA Patents and the Technology, in accordance with the terms
of a certain License Agreement dated October 7, 1996 (the "BMA License");
WHEREAS, pursuant to the BMA License BioSeq has developed a prototype
instrument (the "Instrument") to be used for nucleic acid (DNA and RNA)
sequencing and analysis (the "Field");
WHEREAS, BBI wishes to obtain an exclusive, worldwide right and license
as provided herein, under the BMA Patents and Technology, to operate a
fee-for-service laboratory using the Instrument and associated "pressure cycling
reactor" technology within the Field; and BioSeq is willing to grant BBI such a
license in accordance with the terms of this Agreement, and BMA is willing to
join in and confirm the validity of such license;
NOW THEREFORE, in consideration of the premises and mutual covenants
herein contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledge, the parties hereto agree as
follows:
1. Definitions.
1.1. "Affiliate" shall mean, at any time, any person or legal entity
then directly or indirectly controlled by, controlling or under
common control with the party with respect to which this term is
associated.
1.2. "BMA Patents" shall mean those patents and patent applications
identified on schedule 1.2 hereto, and any and all divisions,
continuations, continuations-in-part, extensions, substitutions,
reissues, re-examinations or additions of or to any of the
foregoing, and any patents which issue from any of the foregoing
applications, and any foreign counterparts of the foregoing
currently or in the future filed or issued and not specifically
listed
on Schedule 1.2 hereto, and any other patents, patent applications
and the like of BMA that are necessary or appropriate to make,
use, sell, offer for sale or otherwise practice the Technology.
1.3. "Field" shall mean nucleic acid (DNA and RNA) sequencing and
analysis.
1.4. "Instrument" means a device using the BMA Patents and Technology
to perform nucleic acid (DNA and RNA) sequencing and analysis.
1.5. "Net Revenues" shall mean the amounts billed or invoiced (or if
not invoiced or billed, the amounts received) by BBI for Services
within the Field using the BMA Patents or Technology, less (a) the
amounts of actual trade and cash discounts and rebates given with
respect to services that were not already credited at the time of
invoice, (b) actual credited allowances on account of refunds or
price adjustments with respect to Services that were not already
credited at the time of invoice, (c) sales taxes, excise taxes,
import/export duties and rebates (including rebates to third party
payers) actually paid with respect to Services, and (d) other
reasonable and customary allowances actually credited to
customers, provided that if BBI provides any such Service to any
party other than to an independent third party in a bona fide
arm's length transaction, Net Revenues shall be based upon the
resale to an independent third party in an arm's length
transaction by the entity to which such Service was sold by BBI
or, if there is no such resale, Net Revenues shall be calculated
as above on the fair market price in the relevant country of sale
or transfer. If a transaction involves goods or services other
than Services, then Net Revenues shall be the product of (a) the
overall amount charged by BBI with respect to the transaction and
(b) a fraction which shall reflect the fair market value of the
Services as a component of the transaction relative to the overall
amount charged by BBI with respect to the transaction.
1.6. "Services" shall mean providing laboratory services as an
independent reference laboratory to third persons, using the BMA
Patents and Technology within the Field. "Services" shall include
all work in connection with preparation of samples for analysis by
an Instrument, and analysis of the information and data produced
as a result of the analysis by an Instrument. An "independent
reference laboratory" is a commercial laboratory unaffiliated, and
dealing on an arms-length basis, with its customers, which
provides high volume testing of samples received from customers
and which reports on results of that testing.
2
1.7. "Technology" shall mean all know-how, proprietary information or
special knowledge of BMA and BioSeq related to Instruments and
Services and involving nucleic acid sequencing and analysis, as it
may be modified or improved during the term hereof.
1.8. "Valid Claim" shall mean a claim of an issued an unexpired patent
within the BMA Patents which would be infringed by the provisions
of Services and which shall not have been withdrawn, canceled,
disclaimed or held invalid by a court of competent jurisdiction in
an unappealed or unappealable decision.
2. License and Rights
2.1. License. BMA and BioSeq each (as its rights may appear) hereby
grants to BBI an exclusive, worldwide right and license under the
BMA Patents and the Technology (the "License) to use the
Instrument, BMA Patents and Technology to provide Services to
third parties worldwide. BBI shall have no right to sublicense any
of the foregoing rights. The foregoing license shall become
effective upon the earlier of (a) payment in full by BBI of the
amount referenced in Section 1.2(iii) of a certain Preferred Stock
Purchase Agreement between the parties of even date, and (b)
December 31, 1997.
2.2. Equipment. BioSeq shall furnish one or (at BioSeq's sole
discretion) more Instruments to BBI, at no cost to BBI, at a
mutually agreeable site for the purpose of pre-commercial
evaluation and testing of the Instrument and its performance.
During the period in which the License remains exclusive (and
otherwise subject to the provisions of Section 8.2 below), BioSeq
will supply Instruments and associated equipment in such
quantities as may be requested by BBI to support its provision of
Services, upon such reasonable and customary terms of supply as
may be agreed between the parties and at a price equal to BioSeq's
fully-allocated cost of production of the items supplied. After
the License becomes non-exclusive, BioSeq will supply equipment to
BBI upon such reasonable and customary terms as may be agreed
between the parties and at prices no less favorable to BBI than
those at which BioSeq regularly sells such equipment to other
commercial, non-governmental Instrument purchasers. BioSeq shall
notify BBI of any improvements it makes to the Instruments and
offer BBI the opportunity to have its Instruments upgraded or
replaced to include these improvements at BBI's expense.
2.3. Supplies.During the period in which the License remains exclusive,
BBI shall have the right to purchase reagents and related supplies
from BioSeq,
3
as reasonably required to run the laboratory and meet the demand
for Services, at a price equal to BioSeq's cost plus 35%.
Thereafter BBI may continue to purchase such reagents and supplies
at prices no less favorable to BBI than those at which BioSeq
regularly sells such reagents or supplies to other commercial,
non-governmental Instrument purchasers.
2.4 Improvements. BBI shall keep BioSeq fully advised of any
improvements by BBI or its Affiliates during the term of this
Agreement relating to the Technology, whether patentable or not
("BBI Improvements"). At the request of BioSeq, BBI shall grant to
BioSeq a non-exclusive royalty-free license to any such BBI
Improvements, with a right to sublicense.
3. Payments
3.1. Royalty. During the term of the License BBI shall pay to BioSeq a
royalty, at the rate stated below, on BBI's Net Revenues derived
from Services. If Services are performed in whole or in part in,
and are requested by a client or customer whose principal place of
business is located in, any country or countries in which there is
no Valid Claim under a BMA Patent, then the royalty rate otherwise
applicable to Net Revenues from those Services shall be reduced by
fifty percent (50%) with respect to Services provided more than
three years from the first commercial sale of Services hereunder
by BBI. Subject to any reduction pursuant to the foregoing
sentence, for so long as the License is exclusive (see Section 8.2
below) the royalty rate shall be 5% of Net Revenues during the
three year period commencing at the earlier of (a) the first
commercial sale of Services by BBI, or (b) the end of the one year
period following commencement of the License term, and shall
increase to 8% during the next two years and to 10% during each
year thereafter; provided that if the License becomes nonexclusive
the royalty for all Net Revenues relating to Services provided
after that date shall be reduced to zero and BBI shall be deemed
to hold a fully paid license hereunder from that date forward.
Royalties shall be payable thirty days following the last day of
March, June, September and December of each calendar year on
account of Net Revenues during the quarter ended on such last day.
3.2. Reports. BBI shall provide a royalty report to BioSeq within
thirty days after the end of each quarterly period referenced in
that last sentence of Section 3.1 hereof, covering all Net
Revenues and royalties earned during that period and showing all
other facts necessary to the calculation of amounts due. All
royalty payments shall also be accompanied by a royalty report.
All payments to BioSeq shall be in United States dollars. Royalty
payments based on Net Revenues in currencies other than United
States dollars shall be converted to United States
4
dollars according to the average official rate of exchange for
that currency as published in The Wall Street Journal on the first
and last days of the calendar quarter in which that royalty
accrued (or, if not published on that day, the first and last
publication days for The Wall Street Journal during that quarter).
3.3. Books and Records and Audit. BBI shall maintain full, complete and
accurate books and records covering all transactions relating to
this Agreement, including information necessary to permit
calculation and verification of amounts due under Section 3.1
hereof. BioSeq shall at any time within one (1) year of any
payment be entitled to audit the books and records of BBI
pertaining to its payment obligations hereunder, for the sole
purpose of confirming the accuracy of the amounts stated to be due
on the royalty reports submitted to BioSeq under Section 3.1
hereof. Any such audit shall be performed during normal business
hours at BioSeq's expense by a firm of independent public
accountants acceptable to both BBI and BioSeq. The independent
agent shall report only such information as would properly be
included in such a report. If such audit reveals an underpayment
of five percent (5%) or greater of the amount that should have
been paid to BioSeq for the period audited, then BBI shall bear
the expense of the audit. In the event of any underpayment, BBI
shall promptly remit to BioSeq all amounts due, with interest on
late payments payable at the rate of ten percent (10%) per year
compounded annually.
4. Patents. BioSeq shall keep BBI fully informed of all developments
in regard to the preparation, filing, prosecuting, and maintenance
of the BMA Patents and shall, to the extent practicable, provide
BBI, for comment, with pre-filing copies of any materials relating
to BMA Patents filed with any patent office worldwide. BioSeq
shall reimburse BMA for its reasonable external (out-of-pocket)
costs arising out of actions occurring after the date of this
Agreement in connection with the preparation, filing, prosecution
and maintenance of BMA Patents.
5. Representations and Warranties of BMA and BioSeq.
5.1. Representations and Warranties of BMA. BMA represents and warrants
that it is the owner of the entire right, title and interest to
the BMA Patents, and that BioSeq is its exclusive licensee of the
BMA Patents and Technology for all markets, products, and
applications.
5.2. Representations and Warranties of BioSeq. BioSeq represents and
warrants that it has the right and authority to enter into this
Agreement and to grant the License granted hereunder, and that
this Agreement and the
5
License do not and will not conflict with the terms of any other
agreement to which BioSeq is a party or by which it is bound.
5.3. Disclaimers. Except as otherwise expressly set forth in this
Agreement, BMA and BioSeq and their directors, officers,
employees, and agents make no representations and extend no
warranties of any kind, either express or implied.
6. Representations, Warranties and Acknowledges of BBI.
6.1. Representations and Warranties. BBI represents and warrants that
it has the right and authority to enter into this Agreement and
that this Agreement and the exercise of the License do not and
will not conflict with the terms of any agreement to which BBI is
a party or by which it is bound.
6.2. Disclaimers. Except as otherwise expressly set forth in this
Agreement, BBI, its directors, officers, employees and agents make
no representations and extend no warranties of any kind, either
express or implied.
7. Indemnification
7.1 Indemnification by BMA. BMA shall indemnify, defend and hold BBI,
its directors, officers, employees and affiliates, harmless from
and against all claims, proceedings, demands and liabilities of
any kind whatsoever (including reasonable attorneys' fees and
costs and other expenses of litigation) resulting from the
material breach of BMA of any of its representations, warranties
or covenants contained in this Agreement.
7.2 Indemnification by BioSeq. BioSeq shall indemnify, defend and hold
BBI, its directors, officers, employees and affiliates, harmless
from and against all claims, proceedings, demands and liabilities
of any kind whatsoever (including reasonable attorneys' fees and
costs and other expenses of litigation) resulting from the
material breach by BioSeq of any of its representations,
warranties, acknowledgments or covenants contained in this
Agreement.
7.3. Indemnification by BBI. BBI shall indemnify, defend and hold
BioSeq, its directors, officers, employees and affiliates harmless
from and against all claims, proceedings, demands and liabilities
of any kind whatsoever (including reasonable attorneys' fees and
costs and other expenses of litigation) resulting from the
material breach by BBI of any of its
6
representations, warranties, acknowledgments or covenants
contained in this Agreement.
7.4 Infringement.
(a) Third Party Infringement. Each party shall notify
the other promptly of any possible infringements, unauthorized
possession, knowledge or use of the intellectual property
embodied in any of the BMA Patents by others of which such
party becomes aware, and shall promptly furnish the other
party with full details of such infringements, unauthorized
possession, knowledge or use. BioSeq shall have the first
right, but not the obligation, at its expense, to bring any
action on account of any such infringements, unauthorized
possessions, knowledge or use, and BBI shall cooperate with
BioSeq, as BioSeq may reasonably request, in connection with
any such action. If, within sixty (60) days after receipt by
BioSeq of a written request from BBI that it bring such action
BioSeq does not do so, BBI shall have the right, at its
expense and in its own name or in the name of BioSeq, if
required by law, to do so on its own behalf and on behalf of
BioSeq, and BioSeq shall cooperate with BBI, as BBI may
reasonably request, in connection with such action. No such
legal action may be settled by one party without the other's
prior written consent, which consent shall not be unreasonably
withheld. Damages recovered in any such actions which are
determined to relate to lost sales by BBI, after reimbursement
to each party of its expenses in prosecuting such actions,
shall be treated as proceeds of Net Revenues hereunder and
paid to each party accordingly.
(b) Third Party Actions. To BioSeq's knowledge, the
exercise of the rights granted herein will not result in the
infringement of valid patents of third parties. Nevertheless,
each party will promptly notify the other in the event any
relevant third party patents come to its notice. Neither party
gives any warranty regarding the infringement of third party
rights by practice of the license granted hereunder, and gives
no indemnity against costs, damages, expenses or other losses
arising out of proceedings brought against the other party or
any other person by any third party. In the event either party
is sued for infringement of any rights of any third party in
the exercise of its rights hereunder, the other party shall
extend to it, at no charge, good faith assistance and support
in defending such action, and may participate in the conduct
of the suit at its own expense, but, shall be under no
obligation in respect thereof.
8. Term and Termination.
8.1. Term. The term of this Agreement shall extend until the last Valid
Claim to expire under the BMA Patents, except as provided in
Section 8.2 below.
7
8.2 License Term. The term of the License set forth in Section 2
above, as distinguished from the term of this Agreement, shall
commence upon the earlier of (a) BBI's payment pursuant to Section
1.2(iii) of the Preferred Stock Purchase Agreement between the
parties of even date, and (b) December 31, 1997, and shall
continue on an exclusive basis until the first commercial sale of
an Instrument by BioSeq to a third party pursuant to a bona fide
intention of BioSeq to conduct a business involving the
manufacture, sale and servicing of Instruments in the ordinary
course of a business, upon which occurrence the License shall
become non-exclusive and, upon full payment of any royalties due
in respect of sales of Services prior to that date, fully paid and
royalty free.
8.3. Termination by BioSeq. In additional to all other remedies BioSeq
may have, BioSeq may terminate this Agreement and the License
granted in this Agreement in the event that BBI defaults on any
payment to BioSeq and such default continues unremedied for a
period of thirty (30) days after BBI receives written notice of
default from BioSeq; or BBI fails to perform any of its materials
obligations, warranties, duties or responsibilities hereunder, and
such failure continues unremedied for a period of thirty (30) days
after written notice thereof to BBI by BioSeq.
8.4. Termination by BBI. If the claims under the BMA Patents covering a
Service are determined to be invalid or unenforceable in the
United States by any court or tribunal of competent jurisdiction
(including a determination in the U.S. Patent and Trademark Office
that it not subject to appeal within that Office), and the
determination becomes final in that it is not further reviewable
through exhaustion of all permissible application for rehearing or
review, or through the expiration of the time permitted for such
applications, BBI may terminate this Agreement at will and shall
have no further royalty obligation. In addition to all other
remedies BBI may have, BBI may terminate this Agreement and the
License granted in this Agreement tin the event that BMA or BioSeq
fails to perform any of its materials obligations, warranties,
duties or responsibilities hereunder, and such failure continues
unremedied for a period of thirty (3) days after written notice
thereof by BBI.
8.5. BMA Confirmation and Extension. BMA has joined in the grant of
License rights to BBI under Section 2 above. Accordingly, in the
event the BMA License terminates at a time this License Agreement
is in effect, such termination shall not affect the validity or
efficacy of BBI's rights to the BMA Patents, Technology or
Instruments, or other rights and privileges granted BBI hereunder;
and in such event, if so requested by BBI, BMA shall enter into a
separate and direct license agreement extending directly to
8
BBI, without any involvement of BioSeq, all rights, licenses,
benefits and privileges granted to BBI hereunder.
9. Miscellaneous
9.1. Governing Law; Jurisdiction. This Agreement shall be governed and
construed in accordance with the internal laws of the Commonwealth
of Massachusetts. The parties hereto agree to submit to personal
jurisdiction in the Commonwealth of Massachusetts and to accept
and agree to venue in that State.
9.2. Waiver. No provision of the Agreement may be waived except in
writing by both parties hereto. No failure or delay by either
party hereto in exercising any right or remedy hereunder or under
applicable law will operate as a waiver thereof, or a waiver of a
particular right or waiver of any right or remedy on any
subsequent occasion.
9.3. Severability. It is the intention of the parties to comply with
all applicable laws domestic or foreign in connection with the
performance of their respective obligations hereunder. In the
event that any provision of this Agreement, or any party hereof,
is found invalid or unenforceable, the remainder of this Agreement
will be binding on the parties hereto, and will be construed as if
the invalid or unenforceable provision or part thereof had been
deleted, and the Agreement shall be deemed modified to the extent
necessary to render the surviving provisions enforceable to the
fullest extent permitted by law.
9.4. Assignment. BioSeq and BBI may each, without the prior consent of
the other, assign this Agreement to any of their respective
Affiliates and, with the prior written consent of the other, which
shall not be unreasonably withheld, to any entity which shall
assume all of the assigning party's obligations hereunder. Any
purported assignment is violation of the preceding sentence shall
be void. The identity of a prospective assignee as an organization
or entity involved in the Field shall not be a basis for a
reasonable objection to any assignment otherwise permitted
hereunder. Any permitted assignee shall assume all obligations of
its assignor under this Agreement. No assignment shall relieve
either party of responsibility for the performance of any accrued
obligation which such party than has hereunder.
9
9.5. Counterparts. This Agreement may be executed in duplicate both of
which shall be deemed to be originals, and both of which shall
constitute one and the same Agreement.
9.6. Notice. All communications between the parties with respect to any
of the provisions of this Agreement will be sent to the addresses
set out below, or to other addresses as notified by the parties
for the purpose of this clause, by prepaid, registered or
certified air mail which shall be deemed received by the other
party on the seventh business day following deposit in the mails,
or by cable, telex, facsimile transmission, or other electronic
means of communication (which shall be deemed received when
transmitted), with confirmation by letter given by the close of
business on the next following business day:
if to BMA, at
BioMolecular Assays, Inc.
25 Olympia Avenue, Unit #F
Woburn, Massachusetts 01801-63070
Attention: David J. Green, Chairman
if to BioSeq, at
BioSeq, Inc.
25 Olympia Avenue, Unit #F
Woburn, Massachusetts 01801-63070
Attention: James A. Laugharn, Jr.
President and Chief Executive Officer
with a copy to:
Warner & Stackpole LLP
75 State Street
Boston, Massachusetts 02109
Attention: Kenneth S. Boger, Esquire
if to BBI, at
Boston Biomedica, Inc.
375 West Street
West Bridgewater, Massachusetts 02379
Attention: Richard T. Schumacher
President and Chief Executive Officer
10
with a copy to:
Brown, Rudnick, Freed & Gesmer, P.C.
One Financial Center
Boston, Massachusetts 02111
Attention: Howard G. Zaharoff, Esquire
9.7. Authority. The undersigned represent that they are each duly
authorized to sign this Agreement on behalf of the party for whom
they purport to act. Each party represents that no provision of
this Agreement will violate the provisions of any other agreement
that such party may have with any other person or legal entity.
Each party has relied on that representation in entering into this
Agreement
9.8. Entire Agreement. This Agreement, including the Schedules appended
hereto, contains the entire understanding of the parties relating
to the matters referred to herein, and supersedes and mergers all
prior proposals, understanding and all other agreements, oral and
written, between the parties relating to the subject of this
Agreement
9.9. Binding on Successors. The license granted hereunder shall inure
to the benefit of and be binding upon BMA, BioSeq and BBI,
respectively, and their respective successors and assigns.
SIGNATURE PAGE FOLLOWS
11
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives as of the day and year first
above written.
BIOSEQ, INC.
By: /s/ J. Laugharn
------------------------------
Title: President & CEO
---------------------------
BOSTON BIOMEDICA, INC.
By: /s/ Richard T. Schumacher
------------------------------
Richard T. Schumacher
Title: President & CEO
---------------------------
President and CEO
As to its specific obligations hereunder only:
BIOMOLECULAR ASSAYS, INC.
By: /s/ J. Laugharn
----------------------
Title: President & CEO
-------------------
12
Schedule 1.2
To License Agreement
BioSeq, Inc. to Boston Biomedica, Inc.
- --------------------------------------------------------------------------------
BMA Patents and Pending Applications
1. type US application
title "Controlling Enzymatic Activity"
date March 7, 1995
2. type US CIP application
title "Controlling Enzymatic Activity"
date June 7, 1995
3. type PCT and US CIP application
title "Pressure Cycling Reactor"
date March 7, 1996
4. type US application
title "Pressure Controlled Separation and Purification Process"
date scheduled to file by September 1996
EXHIBIT 11
BOSTON BIOMEDICA, INC. AND SUBSIDIARIES
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
----------------------- -------------------------
1993 1994 1995 1995 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
WEIGHTED AVERAGE SHARES OUTSTANDING:
Average common stock outstanding 2,402,534 2,551,946 2,569,641 2,562,399 2,625,241
Net effect of dilutive common stock
equivalents -- based on treasury stock
method using average market price -- -- 548,542 -- 623,044
Issuance of "cheap stock" 35,191 35,191 33,297 35,191 4,358
------ ------ ------ ------ ------
Weighted average common and common
equivalent shares outstanding 2,437,725 2,587,137 3,151,477 2,597,590 3,252,643
========= ========= ========= ========= =========
ADJUSTED NET INCOME:
Income before extraordinary item 92,586 96,528 102,990 (36,156) 82,869
Extraordinary item -- gain on elimination
of debt, net of income taxes 49,736 -- -- -- --
------ ------ ------- ------ ------
Net income 142,322 96,528 102,990 (36,156) 82,869
Add: net reduction of interest on debt, less
40% taxes based on adjusted treasury stock
method -- -- 27,258 -- 20,894
------- ------ ------- ------- -------
Adjusted net income for earnings per share
calculation 142,322 96,528 130,248 (36,156) 103,763
======= ====== ======= ======= =======
Income (loss) per share 0.06 0.04 0.04 (0.01) 0.03
==== ==== ==== ===== ====
1993 1994 1995 1995 1996
---- ---- ---- ---- ----
SUPPLEMENTARY EARNINGS PER SHARE DATA: (1)
Weighted average common and common
equivalent shares outstanding 3,151,477 3,252,643
Additional shares to retire debt 448,530 448,530
--------- ---------
Pro forma shares outstanding 3,600,007 3,701,173
========= =========
Adjusted net income for earnings per share
calculation 130,248 103,763
Add: interest expense, net of tax benefit 201,539 101,081
--------- ---------
Pro forma adjusted net income for
earnings per share calculation 331,787 204,844
========= =========
Pro forma income per share 0.09 0.06
==== ====
(1) The pro forma income per share assumes the Offering issues only shares sufficient to retire all outstanding
debt as of January 1, 1995, thereby causing interest expense to be added back to net income, net of tax benefits
using a 40% combined federal and state tax rate.
</TABLE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this Amendment No. 1 to the Registration
Statement on Form S-1 (File No. 333-10759) of our reports dated March 12, 1996,
except as to the information in the first paragraph of Note 11, for which the
date is September 10, 1996 on our audits of the financial statements and
financial statement schedule of Boston Biomedica, Inc. and Subsidiaries. We also
consent to the references to our firm under the captions "Selected Consolidated
Financial Data" and "Experts."
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
October 8, 1996
