<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 17, 1998
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
LIFECODES CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 8071 52-1823048
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
------------------------
550 WEST AVENUE
STAMFORD, CONNECTICUT 06902
(203) 328-9500
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
WALTER O. FREDERICKS
PRESIDENT AND CHIEF EXECUTIVE OFFICER
LIFECODES CORPORATION
550 WEST AVENUE
STAMFORD, CONNECTICUT 06902
(203) 328-9500
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------
Copies of all communications, including all communications sent to the agent for
service, should be sent to:
<TABLE>
<S> <C>
NORMAN J. FLEMING, ESQ. MITCHELL S. BLOOM, ESQ.
WIGGIN & DANA TESTA, HURWITZ & THIBEAULT, LLP
ONE CENTURY TOWER HIGH STREET TOWER
265 CHURCH STREET 125 HIGH STREET
NEW HAVEN, CONNECTICUT 06508 BOSTON, MASSACHUSETTS 02110
TELEPHONE: (203) 498-4400 TELEPHONE: (617) 248-7000
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box: / /
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: / /
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: / /
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box: / /
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED
MAXIMUM OFFERING
TITLE OF EACH CLASS AMOUNT TO BE PRICE PER MAXIMUM AGGREGATE AMOUNT OF
OF SECURITIES TO BE REGISTERED REGISTERED(1) SHARE(2) OFFERING PRICE(2) REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock, par value $.10 per share......... 4,361,818 $12.00 $52,341,816 $18,048.91
</TABLE>
(1) Includes 480,000 shares of Common Stock that the Underwriters have the
option to purchase to cover over-allotments, if any. Also includes 681,818
shares to be issued in connection with the acquisition of GeneScreen Inc.
(2) The price is estimated solely for the purpose of calculating the
registration fee pursuant to Rule 457(a) of the Securities Act of 1933, as
amended.
------------------------
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.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
EXPLANATORY NOTE
This Registration Statement contains two forms of prospectus: one to be
used in connection with an underwritten offering of Common Stock (the 'IPO
Prospectus') and one to be used in connection with the issuance of shares of
Common Stock pursuant to the acquisition by the Registrant of the outstanding
shares of GeneScreen Inc. (the 'Acquisition Prospectus'). The IPO Prospectus and
the Acquisition Prospectus will be identical in all respects except for the
alternate pages of the Acquisition Prospectus included herein each of which is
labeled 'Alternate Page for Acquisition Prospectus.'
<PAGE>
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 any offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
SUBJECT TO COMPLETION, DATED JULY 17, 1998
PROSPECTUS
3,200,000 SHARES
[LOGO]
COMMON STOCK
------------------------
Of the 3,200,000 shares of Common Stock offered hereby, 2,900,000 shares
are being offered by Lifecodes Corporation ('Lifecodes' or the 'Company') and
300,000 shares are being offered by certain stockholders of the Company (the
'Selling Stockholders'). The Company will not receive any of the proceeds from
the sale of shares by the Selling Stockholders. See 'Principal and Selling
Stockholders.' Prior to this offering, there has been no public market for the
Common Stock of the Company. It is currently anticipated that the initial public
offering price of the Common Stock offered hereby will be between $10.00 and
$12.00 per share. See 'Underwriting' for a discussion of the factors considered
in determining the initial public offering price. The Common Stock has been
applied for quotation on the Nasdaq National Market under the symbol 'LFCD.'
------------------------
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE
OF RISK. SEE 'RISK FACTORS' ON PAGES 6-14.
------------------------
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.
[CAPTION]
<TABLE>
UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND PROCEEDS TO SELLING
PUBLIC COMMISSIONS(1) COMPANY(2) STOCKHOLDERS
<S> <C> <C> <C> <C>
Per Share.................... $ $ $ $
Total(3)..................... $ $ $ $
</TABLE>
(1) The Company and the Selling Stockholders have agreed to indemnify the
several 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 at $1,200,000.
(3) The Selling Stockholders have granted to the Underwriters a 45-day option to
purchase up to 480,000 additional shares of Common Stock on the same terms
and conditions set forth above solely to cover over-allotments, if any. If
the Underwriters exercise this option in full, the total Price to Public,
Underwriting Discounts and Commissions, Proceeds to Company and Proceeds to
Selling Stockholders will be $ , $ , $ and $ ,
respectively. See 'Underwriting.'
------------------------
The shares of Common Stock are offered by the several Underwriters named
herein, subject to prior sale, when, as and if accepted by them and subject to
certain conditions. The Underwriters reserve the right to withdraw, cancel or
modify such offer and to reject orders in whole or in part. It is expected that
the certificates for the shares of Common Stock will be available for delivery
at the offices of Volpe Brown Whelan & Company, LLC, One Maritime Plaza, San
Francisco, California, on or about , 1998.
VOLPE BROWN WHELAN & COMPANY
VECTOR SECURITIES INTERNATIONAL, INC.
ADVEST, INC.
THE DATE OF THIS PROSPECTUS IS , 1998
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK, INCLUDING
BY ENTERING STABILIZING BIDS, EFFECTING SYNDICATE COVERING TRANSACTIONS OR
IMPOSING PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
'UNDERWRITING.'
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information, including information set forth in 'Risk Factors,' 'Unaudited Pro
Forma Condensed Combined Financial Data,' the Consolidated Financial Statements,
including Notes thereto, included elsewhere in this Prospectus and the
Supplemental Consolidated Financial Statements, including Notes thereto,
included elsewhere in this Prospectus. Unless otherwise indicated, all
information in this Prospectus has been adjusted to give retroactive effect to
the split of the Common Stock at the rate of 3.65-for-1, to be effected prior to
the closing of this offering, and assumes (i) the consummation of the GeneScreen
Acquisition described under the heading 'Business--Recent and Pending
Acquisitions' and '--GeneScreen Acquisition' to be completed contemporaneously
with the closing of this offering, (ii) the Underwriters' over-allotment option
is not exercised and (iii) the conversion of 21,500 shares of Series A
Convertible Preference Stock ('Preferred Stock') into 156,950 shares of Common
Stock at a rate of 7.3 shares of Common Stock for each share of Preferred Stock
upon the closing of this offering. This Prospectus contains forward-looking
statements which involve risks and uncertainties. The Company's actual results
may differ materially from those results discussed in those forward-looking
statements and from results historically experienced. Factors that might cause
such a difference include, but are not limited to, those discussed in 'Risk
Factors.'
THE COMPANY
Lifecodes is a leading provider of DNA testing services and related
products for human paternity and forensic identification ('identity testing')
and for genetic typing of potential donors and recipients of bone marrow and
organ transplants ('transplant testing'). Paternity testing seeks to establish
the correct identity of a child's parents when such matters are disputed.
Forensic testing seeks to link hair, saliva, blood or other biological specimens
found at a crime scene to an alleged suspect. Transplant testing detects the
genetic sequence of certain human leukocyte antigens ('HLA') contained in DNA
which are believed to be a principal determinant of whether a donor's bone
marrow or organ transplant may be rejected by the recipient's immune system
('rejection') or may attack the recipient's immune system ('graft vs. host
disease'). The Company is one of the largest providers of paternity, forensic
and transplant testing services in the United States and is one of the largest
providers of transplant testing in Europe. In addition to testing services, the
Company offers a product line consisting of reagents and a wide range of DNA
probes, which are sold principally in either standard configurations or
customized test kits.
Lifecodes was the first company to commercially offer DNA testing for
paternity and forensic identification. In 1987, the Company assisted law
enforcement officials in obtaining the first conviction in the United States
based on DNA testing. The Company's Cellmark subsidiary was the first and is one
of only two commercial forensic laboratories accredited by the American Society
of Crime Laboratory Directors for DNA testing and regularly performs casework
and provides expert DNA testimony in criminal cases nationwide. The Company's
HLA test kits are used by the Naval Medical Research Institute and by 15 of the
19 screening laboratories (including three of the Company's laboratories)
performing DNA testing for the National Marrow Donor Program, which together are
generally regarded as being among the most influential institutions worldwide in
setting transplant testing standards.
Historically, the Company has focused on developing and incorporating its
DNA technology into products to be sold as stand-alone test kits and to a lesser
extent as DNA testing services. Since 1997, the Company has emphasized offering
testing services to end-users of DNA testing information in an effort to meet
demand for an integrated DNA testing solution and to take advantage of access to
new DNA testing process technologies from Molecular Dynamics, Inc., Amersham
Pharmacia Biotech and Molecular Innovations, Inc. which the Company believes,
when fully developed, will improve the speed, quality and breadth of information
provided by its testing services at a reduced cost. In addition, the Company
believes this strategy will allow the Company to exploit opportunities not
otherwise available to it as a marketer of DNA testing products.
Since January 1, 1998, the Company has substantially increased its testing
service revenue base and expanded its market coverage and laboratory
infrastructure by completing the acquisitions of (i) National Legal Laboratories
('NLL'), the fifth largest paternity testing laboratory in the United States,
(ii) International Support for Bone Marrow Drives, Ltd. ('ISBMD'), the largest
provider of HLA testing services in Germany, (iii) Micro
3
<PAGE>
Diagnostics, Inc. ('MDx'), a full service DNA testing laboratory and (iv) Helix
Biotech Ltd. ('Helix'), a full service DNA testing laboratory serving the
Canadian market (collectively, the 'Recent Acquisitions'). In addition, the
Company has entered into a letter of intent to acquire GeneScreen Inc.
('GeneScreen') for cash and stock valued at $12.5 million (the 'GeneScreen
Acquisition'). GeneScreen is a leading provider of paternity testing services
and had revenues of $11.2 million during the year ended December 31, 1997. The
GeneScreen Acquisition will close contemporaneously with this offering. See
'Business--Recent and Pending Acquisitions' and '--GeneScreen Acquisition.' The
Company intends to increase its revenue and profitability by leveraging its DNA
testing process technology, currently under development, across its existing and
acquired laboratory operations and those which it may acquire in the future and,
to a lesser extent, by taking advantage of operational efficiencies brought
about as a result of a larger laboratory infrastructure.
The Company's goal is to be the leading international supplier of
integrated DNA testing solutions. The Company's business strategy to meet this
goal consists of the following primary elements: (i) continuing to improve its
DNA testing process to increase the speed, quality and breadth of information
provided by its testing services and to lower its costs; (ii) pursuing strategic
acquisitions; (iii) expanding internationally through joint venture and
licensing arrangements; (iv) maintaining its industry leadership position by
working to set industry standards; and (v) extending the Company's technologies
into other diagnostic testing areas.
THE OFFERING
<TABLE>
<S> <C>
Common Stock being offered by:
The Company............................................ 2,900,000 shares
The Selling Stockholders............................... 300,000 shares
Common Stock to be outstanding after the offering........... 6,560,857 shares(1)
Use of proceeds............................................. For payment of the cash portion of the purchase
price of the GeneScreen Acquisition, repayment of
indebtedness, and for general corporate purposes,
including working capital and possible future
acquisitions. See 'Use of Proceeds.'
Proposed Nasdaq National Market symbol...................... LFCD
</TABLE>
- ------------------
(1) Based upon the number of shares outstanding on July 15, 1998. Does not
include: (i) 1,322,501 shares of Common Stock issuable upon the exercise of
stock options and warrants outstanding as of such date, of which 1,049,335
stock options and warrants were then exercisable; and (ii) 1,101,287
additional shares available for grant under the 1992 Employee Stock Option
Plan, the 1995 Employee Stock Option Plan and the 1998 Stock Plan. See
'Management--Stock Option Plans.'
4
<PAGE>
SUMMARY HISTORICAL CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
SIX MONTHS ENDED
FISCAL YEAR ENDED SEPTEMBER 30, MARCH 31,
--------------------------------------------------------- ---------------------
1993 1994 1995 1996(1) 1997(1) 1997(1) 1998(1)
--------- --------- --------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE
DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues........................... $ 2,402 $ 2,628 $ 3,534 $ 7,683 $ 15,065 $ 5,706 $ 10,250
Gross profit....................... 1,137 1,271 2,030 3,679 7,690 2,663 5,340
Income (loss) from operations...... (782) (205) 276 (335) 822 59 1,219
Net income (loss).................. (671) (391) 179 (576) 388 (103) 434
Net income (loss) per share
Basic............................ $ (0.56) $ (0.26) $ 0.12 $ (0.32) $ 0.18 $ (0.05) $ 0.19
Diluted.......................... $ (0.56) $ (0.26) $ 0.10 $ (0.32) $ 0.14 $ (0.05) $ 0.14
Weighted average common shares
outstanding
Basic............................ 1,199,627 1,498,807 1,555,053 1,803,761 2,159,902 2,153,562 2,281,641
Diluted.......................... 1,199,627 1,498,807 1,792,504 1,803,761 2,706,793 2,153,562 3,139,511
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 1998
----------------------------------------------
PRO FORMA
ACTUAL(1) PRO FORMA(2) AS ADJUSTED(3)
--------- --------------- --------------
(IN THOUSANDS)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.............................................. $ 729 $ 1,136 $ 22,500
Working capital........................................................ (429) (1,803) 18,902
Total assets........................................................... 10,972 14,332 42,377
Total indebtedness(4).................................................. 2,804 3,532 1,281
Stockholders' equity................................................... 2,356 3,145 23,113
</TABLE>
- ------------------
(1) Restated to give effect to the acquisition of MDx effective April 30, 1998
which was accounted for as a pooling of interests. See Supplemental
Consolidated Financial Statements and Notes thereto, included elsewhere in
this Prospectus.
(2) Pro forma to reflect the acquisitions of ISBMD and Helix as if they occurred
on March 31, 1998. See 'Business--Recent and Pending Acquisitions.'
(3) Adjusted to reflect the consummation of the GeneScreen Acquisition and the
sale of 2,900,000 shares of Common Stock offered by the Company hereby at an
assumed initial public offering price of $11.00 per share and the
application of the estimated net proceeds therefrom. See 'Use of Proceeds'
and 'Capitalization.'
(4) Includes short-term and long-term borrowings and current maturities of
long-term debt. Excludes capital lease obligations.
5
<PAGE>
RISK FACTORS
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. This
Prospectus contains forward-looking statements which involve risks and
uncertainties. The Company's actual results may differ materially from those
results discussed in those forward-looking statements and from results
historically experienced. Factors that might cause such a difference include,
but are not limited to, those discussed in 'Risk Factors.'
Absence of Profits. After giving effect to the Recent and Pending
Acquisitions, the Company has, on a pro forma basis, incurred operating losses.
For the fiscal year ended September 30, 1997 and the six months ended March 31,
1998, the Company incurred pro forma net losses of $1.3 million and $549,000,
respectively. The Company's ability to achieve profitability in the future will
depend on a variety of factors, including the Company's management of its
existing operations, the ability of the Company to successfully implement its
business strategy, the ability of the Company to integrate and increase the
profitability of recently acquired entities, the nature and extent of any future
acquisitions and general economic conditions. There can be no assurance that the
Company will be profitable in the future. See 'Management's Discussion and
Analysis of Financial Condition and Results of Operations,' 'Unaudited Pro Forma
Condensed Combined Financial Data' and the Consolidated Financial Statements and
Notes thereto, each included elsewhere in this Prospectus.
Fluctuations in Quarterly Operating Results. Variations in the Company's
results of operations have occurred from quarter to quarter and the Company may
experience significant fluctuations in results of operations on a quarter to
quarter basis in the future. Quarterly operating results will fluctuate due to
numerous factors, including: (i) the timing of the introduction and availability
of new or improved testing services and products; (ii) the timing and level of
expenditures associated with research and development activities; (iii)
seasonality in the Company's operating results; (iv) the Company's ability to
cost-effectively manage and integrate newly acquired entities; (v) variations in
laboratory efficiencies; (vi) the timing of establishment of strategic
technology licenses and the implementation of technology licenses under such
arrangements; (vii) changes in demand for its services and products based on
competition and changes in government regulation and other economic factors;
(viii) the timing of significant orders from customers; (ix) changes in pricing
and discounts; (x) variations in the mix of services and products sold; (xi) the
timing and level of expenditures associated with expansion of sales and
marketing activities and overall operations; and (xii) general economic
conditions. Many of these factors are difficult to forecast or are beyond the
Company's control, and these or other factors could have a material adverse
effect on the Company's business, financial condition and results of operations.
Specifically, the Company's operations are subject to certain seasonal and
market forces that are difficult for management to anticipate or control. In
particular, drives to find potential donors of bone marrow tend to occur in the
spring and fall with the result that the Company's second and fourth fiscal
quarters (winter and summer quarters) may not be as strong financially as its
first and third fiscal quarters. Furthermore, the Company generally provides
testing services as and when required by its customers and therefore does not
typically have significant backlog. Fluctuations in quarterly demand for the
Company's testing services and products may adversely affect the continuity of
the Company's laboratory operations, increase uncertainty in operational
planning and/or affect cash flows from operations. In addition, as a result of
these fluctuations, it is likely that in some future period the Company's
results will not meet the expectations of public market security analysts or
investors. In such event, the price of the Common Stock could be adversely
affected. See 'Management's Discussion and Analysis of Financial Condition and
Results of Operations--Quarterly Results of Operations.'
Management of Growth and Integration of Recently Completed and Pending
Acquisitions. Since January 1, 1998, the Company has completed four
acquisitions of businesses involved in providing laboratory services or
contracting for laboratory services in the fields of identity and transplant
testing. The Company is in the process of implementing a number of changes to
integrate these businesses into the Company, including but not limited to,
changing or eliminating management, implementing programs to reduce the cost of
purchased materials, implementing financial controls and consolidating
administrative functions. There can be no assurance that the Company will be
successful in implementing such changes or that such changes will be adequate to
enable the Company to generate profits from the historically unprofitable
operations acquired or to maintain the profitability of historically profitable
operations. In addition to these completed acquisitions, the GeneScreen
Acquisition, as well as the overall implementation of the Company's acquisition
strategy, will place significant
6
<PAGE>
strain on the Company's administrative, operational and financial resources and
increased demands on its systems and controls. The Company's ability to manage
its growth successfully will require it to continue to improve and expand such
systems and controls. The failure of the Company's management to manage growth
effectively may have a material adverse effect on the Company's business,
financial condition and results of operations.
Risks Related to Acquisition Strategy. A principal element of the
Company's strategy is to increase revenues and profitability through the
acquisition of laboratories engaged in DNA testing. The ability of the Company
to achieve this objective will depend upon a variety of factors, including
finding appropriate companies, acquiring such companies on commercially
reasonable terms and conditions, making such acquisitions profitable under the
Company's control, the integration of such companies into existing operations,
the hiring, training and retention of qualified personnel, and the availability
of capital necessary to make such acquisitions. Acquisitions involve a number of
risks, including diversion of management's attention, whether or not the target
is ultimately acquired, failure to retain key customers and employees,
unanticipated liabilities, and tax and accounting issues. In addition, the
Company competes for acquisition and expansion opportunities with a number of
companies, many of which have significantly greater financial and management
resources than does the Company. There can be no assurance that suitable
acquisition opportunities will be identified, that any such transactions can be
consummated, or that, if acquired, such new businesses can be integrated
successfully and profitably into the Company's operations. If the Company
consummates one or more significant acquisitions in which the consideration
consists of stock, or is financed with the net proceeds of the issuance of
stock, stockholders of the Company could suffer a significant dilution of their
equity interests. In addition, if the Company were to complete an acquisition
outside the United States, the Company's business may be subject to a variety of
risks affecting international operations, including difficulties in collecting
accounts receivable, potentially longer payment cycles, increased costs
associated with maintaining international marketing efforts, currency
fluctuations, changes in regulatory requirements, and difficulties in
enforcement of contractual obligations and intellectual property rights. There
can be no assurance that such factors would not have a material adverse effect
on the Company's business, financial condition and results of operations.
Uncertainties Relating to Technological Development and Improvements to DNA
Testing Process. Due to rapid product development and technological advancement
in the medical diagnostics and DNA testing industry, the Company's growth and
future operating results will depend, in significant part, upon its ability to
apply new technologies to automate and improve its DNA testing services and
modify its existing products to take advantage of new technologies. There can be
no assurance that the Company's development efforts will result in any
additional commercially viable or successful improvements to its testing
processes or products. Any potential improvements to the testing process or new
product will require substantial additional investment, laboratory development
and clinical testing, and possibly regulatory approvals, prior to
commercialization. The Company's inability to successfully develop improvements
to its testing processes or new products or to achieve market acceptance of such
improvements or new products could have a material adverse effect on the
Company's business, financial condition and results of operations. In addition,
the rapid product development and technological advancement in the medical
diagnostics and DNA testing industry could result in the Company's current or
future services or products becoming obsolete. The Company believes that its
future operating results will depend substantially upon its ability to overcome
significant technological challenges, successfully introduce new technologies
into its laboratories and to gain access to and successfully integrate such
technologies if developed by others. See 'Business--Testing Process and
Improvements.'
The Company is continuing its research and development activities with
respect to technology it has licensed from Molecular Dynamics, Inc. ('MDI'),
Amersham Pharmacia Biotech ('Amersham') and Molecular Innovations, Inc.
('Molecular Innovations') and technology it will gain access to pursuant to the
GeneScreen Acquisition. These technologies are currently at an early stage of
development. In order to fully develop and commercialize this technology, the
Company, alone or with others, must successfully develop, test, market and sell
DNA testing services based on this technology. The development of new DNA
testing technology is highly uncertain and subject to a number of significant
risks, including the possibilities that the potential improvements to the
testing process are found ineffective, fail to receive any necessary regulatory
approvals, are difficult or uneconomical to use on a large scale, fail to
achieve market acceptance or are precluded from commercialization by proprietary
rights of third parties. In addition, the improvements to the DNA testing
7
<PAGE>
process that the Company is pursuing will require extensive additional
development, testing and investment, as well as any regulatory approvals, prior
to commercialization. No assurance can be given that the Company's development
efforts will be successful, that required regulatory approvals will be obtained
or that any improvements to the DNA testing process, if introduced, will be
commercially successful. See 'Business-- Strategic Partnerships and
Relationships.'
Dependence on Licensed Technology. The Company's testing process and
related products incorporate technologies that are owned by third parties. As a
result, the Company's strategy for the improvement of its testing process and
the development and commercialization of related products depends on the
feasibility and continuity of arrangements with licensors. The Company has
obtained licenses for certain of these technologies and may be required to
obtain licenses for new technologies in the future. There can be no assurance
that the Company will be able to obtain or renew licenses for technology owned
by others on commercially reasonable terms, or at all, that it will be able to
develop alternative approaches if unable to obtain or renew licenses or that the
Company's current and future licenses will be adequate for the operation of the
Company's business. The failure to obtain or renew such licenses or identify and
implement alternative approaches could have a material adverse effect on the
Company's business, financial condition and results of operations. In
particular, the Company intends to improve its testing process by incorporating
the MDI Microarray system, which is comprised of a spotter and reader, and the
Amersham fluorescent dye technology, which is used to label probes used with the
MDI Microarray system. The Company, MDI and Amersham have entered into a
Technology Access Agreement covering the first phase of the Company's
development program. As the Company moves toward commercial use of the MDI
Microarray system, the Company will need to enter into further agreements with
Amersham and possibly MDI, including agreements regarding whether royalties must
be paid to MDI. The Company has also entered into a letter of intent with
Amersham regarding commercial use of the fluorescent dye technology, and is
currently negotiating a formal license agreement with Amersham. There can be no
assurance that the Company will be able to enter into additional definitive
agreements with MDI or Amersham on commercially acceptable terms, or at all.
Failure by the Company to maintain or finalize rights to such technology would
have a material adverse effect on the Company's business, financial condition
and results of operations. See 'Business--Patents and Proprietary Rights' and
'Business--Strategic Partnerships and Relationships.'
Reliance on Key Customer. During the fiscal year ended September 30, 1997
and six months ended March 31, 1998, on a pro forma basis after giving effect to
the Recent and Pending Acquisitions as if they were consummated on October 1,
1996, Deutsche Knochenmarkspenderdatei gemeinnuetzige GmbH ('DKMS'), accounted
for approximately 15% and 17% of the Company's revenues, respectively. DKMS is a
German charitable foundation of which Prof. Dr. Gerhard Ehninger, a director of
the Company, is a founder and a member of its Board of Directors. See 'Certain
Transactions.' DKMS has utilized the Company to oversee the logistics, quality
and data management needed by DKMS or the organizers of its bone marrow specimen
collection drives. The Company does not have a written contract with DKMS to
provide testing services and there can be no assurance that DKMS will organize
bone marrow specimen drives in the future or that DKMS will continue to use the
Company to provide the testing services related to the specimen drives. The loss
of or substantial decrease in business from DKMS would have a material adverse
effect on the Company's business, financial condition and results of operations.
Uncertain Market Acceptance of DNA Typing for Bone Marrow and Organ
Transplants. The Company's DNA testing services and products are utilized to
type and screen the genetic sequence of certain human leukocyte antigens ('HLA')
of a donor in order to determine the compatibility of the donor's bone marrow or
organ to that of a potential recipient in a transplant procedure.
Incompatibility between the bone marrow or organ of the donor and the recipient
has been associated with the donated bone marrow or organ being rejected by the
recipient's immune system as well as with 'graft vs. host disease.' While
scientific evidence suggests that the HLA regions of DNA which have been
identified to date are indicative of compatibility between donor and recipient,
this evidence is not conclusive and research in this area is continuing.
Accordingly, there is a significant risk that the marketplace may not accept or
be receptive to the benefits of DNA typing for bone marrow and organ
transplants. Market acceptance of DNA typing and screening will depend upon the
ability of the Company and others to demonstrate both the scientific and
economic feasibility of DNA typing and its advantages over available
alternatives, including serology. There can be no assurance that DNA typing for
bone
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marrow and organ transplants will be accepted by the medical community or
generally. Failure of DNA typing to gain market acceptance would have a material
adverse effect on the Company's business, financial condition and results of
operations.
Dependence on Key Personnel; Ability to Attract and Retain Qualified
Personnel. The Company is highly dependent on the principal members of its
management and scientific staff, particularly its President and Chief Executive
Officer, Walter O. Fredericks, the loss of whose services might impede
achievement of its strategic objectives. The Company maintains 'key man' life
insurance on Mr. Fredericks in the amount of $2 million, of which the Company is
the sole beneficiary, but there can be no assurance that the proceeds will be
sufficient to offset the loss to the Company in the event of his death. The
Company does not maintain any insurance on the lives of its other senior
management or scientific staff. The Company's success will depend, in large
part, on its ability to continue to attract, hire and retain qualified senior
management and scientific staff. There is intense competition among major
pharmaceutical and chemical companies, specialized biotechnology firms and
universities and other research institutions for qualified personnel in the
areas of the Company's activities. Loss of the services of, or failure to hire
and retain key scientific and technical personnel could adversely affect the
Company's business, financial condition and results of operations. In addition,
all of the stock options currently held by many of the Company's key employees,
including Mr. Fredericks, are vested. Although the Company intends to grant
additional stock options to key members of management in the future, there can
be no assurance that granting additional shares of Common Stock or stock options
will be sufficient to attract or retain key employees.
Risks Related to International Sales. After giving effect to the Recent
and Pending Acquisitions, on a pro forma basis as if such acquisitions were
consummated on October 1, 1996, international sales accounted for approximately
21% and 26% of the Company's revenues for the fiscal year ended September 30,
1997 and the six month period ended March 31, 1998, respectively. International
sales are subject to certain inherent risks, including difficulties in
collecting accounts receivable, potentially longer payment cycles, increased
costs associated with maintaining international marketing efforts, currency
fluctuations, changes in regulatory requirements, and difficulties in
enforcement of contractual obligations and intellectual property rights. Foreign
regulatory agencies often establish product standards different from those in
the United States and any inability to obtain or maintain foreign regulatory
approvals on a timely basis could have a material adverse effect on the
Company's business, financial condition and results of operations.
Dependence on Proprietary Technology; Uncertainty of Patent
Protection. The Company is the holder and the assignee of certain United States
patents covering genetic probe sequences and nucleic acid analysis methods
useful in the Company's DNA testing services and diagnostic test kits. However,
the issuance of a patent is not conclusive as to its validity or as to the
enforceable scope of the claims of the patent. There can be no assurance that
the Company's patents or any future patents will prevent other companies from
developing non-infringing similar or functionally equivalent testing services or
products or from successfully challenging the validity of the Company's patents.
Furthermore, there is no assurance that (i) any of the Company's future products
or processes will be patentable; (ii) any pending or additional patents will
issue to the Company in any appropriate jurisdiction; (iii) the Company's
processes or products will not infringe the patents of third parties; or (iv)
the Company will have the resources to defend against charges of infringement by
third parties or to protect its own patent rights. The inability of the Company
to protect its patent rights or infringement by the Company of the patent or
proprietary rights of others would have a material adverse effect on the
Company's business, financial condition and results of operations.
The Company's business consists of the sale of testing services and
products. In each area, the Company relies on a combination of patents,
trademarks, trade secrets, copyrights, and confidentiality agreements to protect
its proprietary technology, rights and know-how. The Company's success will
depend in part on its ability or the ability of its licensors or sub-licensors
to obtain patents, defend patents, maintain trade secrets, defend copyrights and
operate without infringing the proprietary rights of others, both in the United
States and in foreign countries. The position of companies relying upon
biotechnology is highly uncertain in general and involves complex legal and
factual issues, and no consistent policy has emerged regarding the breadth of
claims allowed in biotechnology patents. Although the Company and certain of the
Company's licensors and sub-licensors have filed patent applications relating to
technologies and discoveries used by the Company, there can be no assurance that
patents will be issued as a result of such patent applications or that, if
issued, such patents will be sufficiently
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broad to afford protection against competitors. The commercial success of the
Company also will depend upon avoiding the infringement of patents issued to
third parties, obtaining licenses to third parties' technologies and genetic
discoveries and maintaining licenses upon which certain of the Company's
services are, or might be, based. In particular, third parties, including
potential competitors, have already filed patent applications relating to a
variety of genes and genetic mutations underlying certain of the Company's
services, and may in the future file additional such patent applications. In the
event that any such patents are issued to such parties, such patents may
preclude the Company, its licensors and sub-licensors from providing DNA testing
services and could require the Company to enter into licenses with such parties
or cease such activities. There can be no assurance that any required licenses
would be available on acceptable terms, or at all.
Litigation, which could result in substantial cost to the Company, may be
necessary to determine the scope and validity of others' proprietary rights or
to enforce the Company's patent, copyright, trade secret and license and
sublicense rights. The failure by the Company to obtain any such licenses, if
required, and the Company's involvement in such litigation could have a material
adverse effect on the Company's business, financial condition and results of
operations.
The Company also relies on certain technologies, trade secrets and know-how
that are not patentable or proprietary and are available to the Company's
competitors. Although the Company has taken steps to protect its unpatented
technologies, trade secrets and know-how, in part through the use of
confidentiality agreements with its employees, consultants and certain of its
contractors, there can be no assurance that these agreements will not be
breached, that the Company would have adequate remedies for any breach or that
the Company's trade secrets will not otherwise become known or be independently
developed or discovered by competitors. See 'Business-- Patents and Proprietary
Rights.'
Competition. The Company competes in the medical diagnostics, laboratory,
biotechnology and medical services industries, each of which is characterized by
numerous competitors, extensive research and development efforts and rapid
technological progress. Among the Company's major competitors in the market for
DNA probe diagnostics products are The Perkin-Elmer Corporation, Roche Molecular
Systems, Inc. ('Roche'), Promega Corporation ('Promega'), Affymetrix, Inc.,
Myriad Genetics, Inc., Abbott Laboratories and Chiron Corporation. Many of these
competitors have substantially greater financial, technical and sales and
marketing resources than the Company. Other companies, including large
pharmaceutical and biotechnology companies, may enter the market for DNA probe
diagnostics or have already commenced research and development in the field.
Moreover, such competitors may offer broader product lines and have greater name
recognition than the Company, and may offer discounts as a competitive tactic.
In addition, competitive products may be designed, manufactured and marketed
more successfully than the Company's existing or potential products. Such
developments could render the Company's products less competitive or obsolete,
and could have a material adverse effect on the Company's business, financial
condition and results of operations.
In many instances, the Company's larger laboratory service competitors,
such as Laboratory Corporation of America Holdings, have substantially greater
financial, technical, research and other resources and larger, more established
marketing, sales, distribution and service organizations than the Company.
Certain competitors may also offer a broader array of testing services than the
Company. In addition, several development stage companies have entered the
market for DNA testing services and have test offerings that compete with or
will compete with those of the Company. The Company's future success will depend
in large part on its ability to maintain a competitive position in the quality
of service it provides to its laboratory service customers. The Company's
inability to consistently deliver accurate and timely services at a competitive
price could have a material adverse effect on the Company's business, financial
condition and results of operations.
The public segment of the forensics testing market includes the Federal
Bureau of Investigation (the 'FBI') as well as local and state law enforcement
agencies. Currently, the FBI and local and state law enforcement agencies
perform forensic testing in the United States and generally do not charge the
agencies that utilize their services. Most state and local criminal laboratories
also offer forensics testing at no charge to the law enforcement community in
their jurisdiction. See 'Business--Competition.'
Dependence on Single Source Suppliers. Certain key components of the
Company's testing process and products are currently provided to the Company by
single source suppliers. In particular, the Company's proposed improvements to
its testing process will make it dependent upon obtaining Microarray spotter and
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reader devices from MDI and fluorescent detection dyes for the Microarray system
currently provided by Amersham. See 'Business--Strategic Partnerships and
Relationships' and '--Manufacturing.' In the event that the Company is unable to
obtain sufficient quantities of such components on commercially reasonable
terms, and in a timely manner, the Company would not be able to complete
development of the improvements to its testing process on a timely and
cost-competitive basis, which would have a material adverse effect on the
Company's business, financial condition and results of operations. In addition,
if any of the components of the Company's testing process are no longer
available in the marketplace, the Company may be forced to further develop
technology that incorporates alternate components. There can be no assurance
that such development would be successful or that, if developed by the Company
or licensed from third parties, such alternative components would perform as
required, or at all. Furthermore, interruptions in the supply of certain
components could also have a material adverse effect on the Company's business,
financial condition and results of operations.
Risks Related to Litigation. The Company is a party to litigation with
Promega relating to the infringement by the Company, between October 1990 and
June 1993, of a patent covering major DNA probes used in paternity and forensic
testing (the 'White Patent'). Promega was the exclusive sub-licensee of the
White Patent until June 1995 and the Company is currently the exclusive licensee
of this patent. The action regarding the Company's infringement of Promega's
sub-licensee patent rights during the period in question is currently in the
damage phase and is scheduled for trial without a jury in April 1999. Each party
has submitted an expert's report as to the amount of damages owed by the Company
to Promega. Promega's expert has estimated the damages to range from
approximately $900,000 to $1.3 million, while the Company's expert has estimated
the damages to range from approximately $100,000 to $900,000. Furthermore, if
the Company is adjudicated to have willfully infringed the patent, the court has
the authority to impose up to treble damages and require the Company to pay
Promega's attorneys' fees. The Company has established a reserve to cover the
impact of this litigation. Although the Company believes its reserve is adequate
to cover any potential damages, there can be no assurance that damages will not
substantially exceed the reserved amount or that the judgment will not have a
material adverse effect on the Company's financial condition. See
'Business--Legal Proceedings.'
Government Regulation. The Company's clinical laboratories, as well as
customers using its products for clinical use in the United States, are
regulated under the Clinical Laboratory Improvement Amendments of 1988, as
amended ('CLIA'). CLIA is intended to ensure the quality and reliability of
clinical laboratories in the United States by mandating specific standards in
the areas of personnel qualification, administration, participation in
proficiency testing, patient test management, quality control, quality assurance
and inspections. CLIA requirements may prevent some clinical laboratories from
using certain of the Company's diagnostic products. Therefore, there can be no
assurance that CLIA regulations and future administrative interpretations of
CLIA will not have a material adverse impact on the Company by limiting the
potential market for the Company's products. While the Company believes it is in
material compliance with CLIA requirements, there can be no assurance that the
Company will be in compliance with such requirements in the future. In addition,
there can be no assurance that clinical laboratories acquired by the Company
will meet CLIA requirements. If the acquired laboratories do not meet CLIA
requirements, the Company may be required to expend significant resources to
bring them into compliance, which could have a material adverse effect on the
Company's business, financial condition, and results of operations.
Unlike the Company's current testing services and products, which are
offered exclusively for non-medical database and legal uses, future products may
be offered by the Company for the detection of diseases in humans and animals.
The manufacture and sale of medical diagnostic devices intended for commercial
use in humans and animals are subject to extensive government regulation in the
United States and in other countries. The process of obtaining United States
Food & Drug Administration ('FDA'), Medicare and other required regulatory
approvals can be time-consuming, expensive and uncertain, frequently requiring
several years from the commencement of clinical trials to the receipt of
regulatory approval. There can be no assurance that the Company will be able to
obtain necessary regulatory approvals or clearances or comply with regulatory
requirements applicable to any such new products in the United States or
internationally on a timely basis, or at all. Further, there can be no assurance
that the FDA or other government or industry agency will not regulate the
Company's products or services in the future. In addition, the Company is
subject to extensive federal, state and local regulation, including regulation
under the Occupational Safety and Health Act, the Environmental
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Protection Act, the Toxic Substances Control Act, the Resource Conservation and
Recovery Act and other laws, rules and regulations governing health care,
clinical laboratory activities, waste disposal, handling of toxic, dangerous or
radioactive materials and other matters. Delays in receipt of or failure to
receive such approvals or clearances, the loss of previously received approvals
or clearances or failure to comply with existing or future regulatory
requirements could have a material adverse effect on the Company's business,
financial condition and results of operations. See 'Business--Government
Regulation.'
Product Liability Exposure; Inadequacy or Unavailability of Insurance. The
testing, manufacturing and marketing of the Company's products and services
entails an inherent risk of product liability claims. To date, the Company has
not experienced any product liability claims, but any such claims arising in the
future could have a material adverse effect on the Company's business, financial
condition and results of operations. The Company currently has $5 million of
product liability/clinical liability insurance coverage. Potential product
liability claims may exceed the amount of the Company's insurance coverage or
may be excluded from coverage under the terms of the policy. There can be no
assurance that the Company's insurance can be renewed at a cost and level of
coverage comparable to that then in effect. Any claims against the Company,
regardless of their merit or eventual outcome, could have a material adverse
effect upon the Company's business, financial condition and results of
operations.
Control by Management and Directors. After this offering, the executive
officers and directors of the Company (and their affiliates) will beneficially
own approximately 34.4% of the outstanding Common Stock (approximately % if
the Underwriters' over-allotment option is exercised in full). As a result,
while there is no agreement among the executive officers and directors of the
Company as to the voting of their Common Stock, if they vote together, they
could effectively control the outcome of matters requiring a stockholder vote,
including the election of directors, adopting or amending provisions of the
Company's Certificate of Incorporation and Bylaws, and approving mergers or
other similar transactions, such as sales of substantially all of the Company's
assets. Control by the executive officers and directors could have the effect of
discouraging certain types of transactions involving an actual or potential
change of control of the Company, including transactions in which the holders of
Common Stock might otherwise receive a premium for their shares over then
current market prices. In addition, the possibility of such persons exercising
such control may limit the price that certain investors may be willing to pay in
the future for shares of the Common Stock. Purchasers in this offering will
become minority stockholders of the Company and will be unable to control the
management or business policies of the Company. The Company's Certificate of
Incorporation does not provide for cumulative voting in the election of
directors. See 'Management' and 'Principal and Selling Stockholders.'
Future Capital Needs; Uncertainty of Availability of Additional
Financing. The Company believes that the anticipated net proceeds from this
offering, together with interest thereon and the Company's existing capital
resources, will be sufficient to fund its operations for at least the next
twelve months. However, the Company's future liquidity and capital requirements
will depend upon numerous factors, including the resources required to improve
its testing system, to consummate additional acquisitions which may be
undertaken, or to further develop its sales and marketing capabilities
domestically and internationally. There can be no assurance that the Company
will not require additional financing or will not in the future seek to raise
additional funds through equity or debt offerings, bank facilities, or other
sources of capital. Additional funding may not be available when needed or on
terms acceptable to the Company, which would have a material adverse effect on
the Company's business, financial condition and results of operations. See 'Use
of Proceeds' and 'Management's Discussion and Analysis of Financial Condition
and Results of Operations--Liquidity and Capital Resources.'
Potential Issuance of Preferred Stock; Anti-takeover Effects of Certificate
of Incorporation and Delaware Law. The Company's Certificate of Incorporation
authorizes the issuance of 1,000,000 shares of Preferred Stock with such
designations, rights and preferences as may be determined from time to time by
the Company's Board of Directors (the 'Board'), without any further vote or
action by the Company's stockholders. The rights of the holders of the Common
Stock will be subject to, and may be adversely affected by, the rights of the
holders of any Preferred Stock that may be issued in the future. The issuance of
Preferred Stock, while providing desirable flexibility in connection with
possible acquisitions and other corporate purposes, could have the effect of
making it more difficult for a third party to acquire a majority of the
outstanding voting stock of the Company, thereby delaying, deferring or
preventing a change in control of the Company. Furthermore, such Preferred Stock
may have other rights, including economic rights senior to the Common Stock, and
as a result, the issuance of
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<PAGE>
such Preferred Stock could have a material adverse effect on the market value of
the Common Stock. Although the Company has no present intention to issue any
shares of its Preferred Stock, there can be no assurance that the Company will
not do so in the future. These provisions, as well as other provisions contained
in the Company's Certificate of Incorporation, may also have the effect of
discouraging, delaying or preventing a change in control of the Company. See
'Description of Capital Stock.'
In addition, the Company's Certificate of Incorporation provides for a
staggered Board of Directors. Certain provisions of Delaware law applicable to
the Company could also delay or make more difficult a merger, tender offer or
proxy contest involving the Company, including Section 203 of the Delaware
General Corporation Law, which prohibits a Delaware corporation from engaging in
any business combination with any interested stockholder for a period of three
years unless certain conditions are met. The potential issuance of Preferred
Stock, the existence of a staggered Board of Directors, and provisions of
Delaware law could have the effect of delaying, deferring or preventing a change
in control of the Company, including without limitation, discouraging a proxy
contest, making more difficult the acquisition of a substantial block of the
Common Stock or limiting the price that investors might be willing to pay in the
future for shares of the Common Stock.
Broad Discretion as to Use of Proceeds. The Company has no current
specific plan for the use of a significant portion of the estimated net proceeds
from this offering. As a consequence, the Company's management will have the
discretion to allocate a large percentage of the net proceeds to uses that
stockholders may not consider desirable, and there can be no assurance that the
net proceeds can or will be invested to yield a significant return. See 'Use of
Proceeds.'
Year 2000 Risks. The Company has initiated communications with its
software vendors to determine the extent to which the Company is vulnerable to
those third parties' failure to remediate the Year 2000 issue. The Company
relies on the ability of its outside software vendors for remedial action. There
can be no assurance that the systems of these third party software vendors on
which the Company relies will be converted on a timely basis, or that a failure
to convert by another company, or a conversion that is incompatible with the
Company's systems, would not have a material adverse effect on the Company. The
total remaining cost of completion of the Company's Year 2000 compliance plan is
estimated to be less than $100,000 and will be funded through operating cash
flows. The costs of the project and the date on which the Company plans to
complete the Year 2000 modifications are based on management's best estimates,
which were derived utilizing numerous assumptions of future events, including
the continued availability of certain resources, third party modification plans
and other factors. However, there can be no assurance that these estimates will
be achieved and actual results could differ materially from those plans. Any
disruption of its operations caused by the computer systems of any of the
Company's vendors or customers could have a material adverse effect on the
Company's financial position or results of operations, including customer
satisfaction issues and potential lawsuits. In addition, there can be no
assurance that the Company will not experience significant cost overruns or
delays in connection with upgrading software or the programming of changes
required to address the Year 2000 issue. See 'Management's Discussion and
Analysis of Financial Condition and Results of Operations--Year 2000.'
Shares Eligible for Future Sale. Sales of a substantial number of shares
of the Common Stock in the public market following this offering, or the
perception that such sales could occur, could materially adversely affect the
prevailing market price of the Common Stock. Immediately after completion of
this offering, the Company will have 6,560,857 shares of Common Stock
outstanding, of which the 3,200,000 shares offered hereby and the 681,818 shares
issued pursuant to the GeneScreen Acquisition will be eligible for sale without
regard to volume or other limitations pursuant to Rule 144 ('Rule 144') under
the Securities Act of 1933, as amended (the 'Securities Act'), unless purchased
by 'affiliates' of the Company as that term is defined under Rule 144. The
Company, its executive officers, directors and certain stockholders, who in the
aggregate own beneficially 2,802,186 of the remaining outstanding shares of
Common Stock, have agreed pursuant to lock-up agreements that they will not sell
or otherwise dispose of any shares of Common Stock beneficially owned by them
(except for shares sold in this offering) for a period of 180 days from the date
of this Prospectus other than as bona fide gifts or as distributions to the
stockholders or limited partners of certain stockholders, provided that, in
either event, the transferee agrees to be bound by similar restrictions. Such
agreements provide that Volpe Brown Whelan & Company, LLC may, in its sole
discretion, and at any time or from time to time, without notice, release all or
any portion of the shares subject to these lock-up agreements. Upon the
expiration of these lock-up agreements, all of such outstanding shares will
become immediately eligible for sale in the public
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market, subject in some cases to the volume and other restrictions of Rule 144
or Rule 701 under the Securities Act. Promptly after the date of this
Prospectus, the Company intends to register on one or more registration
statements on Form S-8 all shares of Common Stock issuable under its stock
option plans. Shares covered by such registration statements will be eligible
for sale in the public market after the effective date of such registration. In
addition, the holders of 591,943 shares of Common Stock ( shares if the
Underwriters' over-allotment option is exercised in full) are entitled to
certain registration rights with respect to such shares. 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 a material adverse
effect on the market price of the Common Stock. In addition, certain employees
of the Company's subsidiary Cellmark Diagnostics, Inc. ('Cellmark') own an
aggregate of 1,960 shares of the common stock of Cellmark (representing 19.6% of
the common stock of Cellmark). The Company has agreed to allow the Cellmark
employees to exchange, beginning in March 1999, each share of common stock of
Cellmark for 43.654 shares of the Company's Common Stock, representing a
potential issuance of an aggregate of 85,562 shares of the Company's Common
Stock. If such holders, by exercising their exchange rights, cause a large
number of shares to be sold in the public market, such sales may have a material
adverse effect on the market price of the Common Stock. See
'Management--Executive Compensation' and '--Stock Option Plans,' 'Description of
Capital Stock' and 'Shares Eligible for Future Sale.'
No Prior Public Market; Possible Volatility of Stock Price. Prior to this
offering, there has been no public market for the Common Stock and there can be
no assurance that an active public market for the Common Stock will develop or
be sustained after this offering. The initial public offering price will be
determined through negotiations between the Company and the Underwriters and may
bear no relationship to the price at which the Common Stock will trade after the
closing of this offering. In addition, the securities markets have from time to
time experienced significant price and volume fluctuations that are unrelated to
the operating performance of particular companies. The market prices of the
common stock of many publicly held medical diagnostics companies have in the
past been, and may in the future be, especially volatile. Announcements of
technological innovations or new services or products by the Company or its
competitors, release of reports by securities analysts, developments or disputes
concerning patents or proprietary rights, regulatory developments, economic and
other external factors, as well as period-to-period fluctuations in the
Company's financial results, may have a significant impact on the market price
of the Common Stock. In the past, securities class action litigation has often
been instituted following periods of volatility in the market price of a
company's securities. Such litigation could result in substantial costs and a
diversion of management attention and resources, either of which could have a
material adverse effect on the Company's business, financial condition and
results of operations.
Immediate and Substantial Dilution. Purchasers of shares of Common Stock
in this offering will incur immediate and substantial dilution in the pro forma
net tangible book value per share from the public offering price. In addition,
investors purchasing shares in this offering will incur additional dilution to
the extent that Company stock options and warrants (whether currently
outstanding or subsequently issued or granted) are exercised. See 'Dilution.'
Lack of Dividends. The Company currently intends to retain all earnings,
if any, for future growth and, therefore, does not intend to pay cash dividends
on the Common Stock in the foreseeable future. See 'Dividend Policy.'
Benefits of the Offering to Current Stockholders. The completion of this
offering will provide significant benefits to the current stockholders of the
Company, including certain of its directors and executive officers. The Company
will not receive any of the proceeds from the sale of shares by the Selling
Stockholders. The completion of this offering will also create a public market
for the Common Stock and thereby may increase the market value of the investment
by current stockholders in the Company. Upon the closing of this offering, the
difference between the aggregate purchase price paid by the Company's current
stockholders for their shares and the aggregate market value of such shares will
be approximately $27.9 million (calculated on the basis of an assumed initial
public offering price of $11.00 per share). See 'Dilution,' 'Management' and
'Principal and Selling Stockholders.'
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THE COMPANY
Lifecodes Corporation was incorporated in New York in April 1982 and was
purchased by, and became a wholly-owned subsidiary of, Quantum Chemical
Corporation ('Quantum') in 1985. In September 1991, existing management and
stockholders acquired all of Quantum's interest in the Company and relocated the
Company to Stamford, Connecticut. The Company reincorporated in Delaware in
January 1993. In March 1996, the Company acquired Cellmark, a division of
Zeneca, plc. In February 1997, the Company, ISBMD and its founders formed
Medical Molecular Diagnostics GmbH ('MMD') to perform HLA testing in Germany. In
October 1997, the Company acquired a controlling interest in MMD.
In 1998, the Company has completed or has pending a number of acquisitions
as part of its strategic plan, including the recently completed acquisitions of
National Legal Laboratories (the 'NLL Acquisition'), International Support for
Bone Marrow Drives, Ltd. (the 'ISBMD Acquisition'), Micro Diagnostics, Inc. (the
'MDx Acquisition'), Helix Biotech Ltd. (the 'Helix Acquisition'), and the
pending acquisition of GeneScreen Inc. (the 'GeneScreen Acquisition,' and
together with the NLL Acquisition, the ISBMD Acquisition, the MDx Acquisition
and the Helix Acquisition, the 'Recent and Pending Acquisitions'). See
'Business--Recent and Pending Acquisitions' and '--GeneScreen Acquisition.'
The Company's principal executive offices are located at 550 West Avenue,
Stamford, Connecticut 06902 and its telephone number is (203) 328-9500.
USE OF PROCEEDS
The net proceeds to the Company from this offering, after deducting
underwriting discounts and commissions and estimated expenses payable by the
Company in connection with this offering, are estimated to be approximately
$28.5 million assuming an initial public offering price of $11.00 per share. The
Company will not receive any of the proceeds from the sales of Common Stock by
the Selling Stockholders. See 'Principal and Selling Stockholders.'
The Company intends to use the net proceeds of this offering as follows:
(i) to pay the $5.0 million cash portion of the purchase price of the GeneScreen
Acquisition; (ii) to repay approximately $2.25 million outstanding under the
Company's Credit Facility as of June 30, 1998; and (iii) to use the remainder of
the net proceeds for general corporate purposes, including working capital and
possible future acquisitions. The Company's Credit Agreement with First Union
National Bank ('First Union') dated as of March 31, 1998 provides for a $2.3
million term loan and a $1.0 million revolving loan (collectively, the 'Credit
Facility'). Interest on the term loan accrues at a fixed rate of 8.39%, while
interest on the revolving loan accrues at a floating rate equal to First Union's
prime rate, currently 8.5%. The term loan matures on March 1, 2001 while the
termination date for the revolving loan commitment is May 31, 1999. The Credit
Facility replaced a prior credit facility with First Union that was used
primarily for working capital purposes.
From time to time in the ordinary course of business, the Company evaluates
the potential acquisition of businesses and technologies that complement the
Company's business, for which a portion of the net proceeds may be used.
Currently, the Company does not have any commitments or agreements with respect
to any such acquisitions other than with respect to the GeneScreen Acquisition.
See 'Business--Recent and Pending Acquisitions' and '--GeneScreen Acquisition.'
Pending such uses, the net proceeds will be invested in short-term, investment
grade securities.
DIVIDEND POLICY
Lifecodes Corporation has never declared or paid any cash dividends on the
Common Stock and does not anticipate paying cash dividends on the Common Stock
in the foreseeable future. The payment of any future dividends will be at the
discretion of the Company's Board of Directors and will depend upon, among other
things, future earnings, operations, capital requirements, the general financial
condition of the Company, contractual restrictions and general business
conditions. In addition, the Credit Facility prohibits the payment of dividends
without the consent of First Union.
15
<PAGE>
CAPITALIZATION
The following table sets forth as of March 31, 1998: (i) the actual
capitalization of the Company as reflected in the Supplemental Consolidated
Financial Statements; (ii) the pro forma capitalization of the Company after
giving effect to the ISBMD Acquisition and the Helix Acquisition; and (iii) the
pro forma as adjusted capitalization of the Company after giving effect to the
GeneScreen Acquisition, the sale by the Company of 2,900,000 shares of Common
Stock in this offering at an assumed initial public offering price of $11.00 per
share and the application of the estimated net proceeds therefrom (after
deducting underwriting discounts and commissions and estimated offering
expenses) and the conversion of all shares of Preferred Stock into shares of
Common Stock upon the closing of this offering. This table should be read in
conjunction with 'Use of Proceeds,' 'Unaudited Pro Forma Condensed Combined
Financial Data,' 'Management's Discussion and Analysis of Financial Condition
and Results of Operations,' the Consolidated Financial Statements and Notes
thereto and the Supplemental Consolidated Financial Statements and Notes
thereto, each included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
MARCH 31, 1998
--------------------------------------
PRO FORMA
ACTUAL(1) PRO FORMA AS ADJUSTED
--------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Current portion of long-term debt(2).............................. $ 1,103 $ 1,449 $ 900
--------- --------- -----------
Long-term debt, less current portion(2)........................... 1,701 2,083 381
--------- --------- -----------
Stockholders' equity:
Preferred Stock, $10.00 par value; 1,000,000 shares authorized,
21,500 shares issued and outstanding, actual; 21,500 shares
issued and outstanding, pro forma; 0 shares issued and
outstanding, pro forma as adjusted. ......................... 215 215 --
Common Stock, $0.10 par value; 15,000,000 shares authorized,
2,332,989 shares issued and outstanding, actual; 2,822,089
shares issued and outstanding, pro forma; 6,560,857 shares
issued and outstanding, pro forma as adjusted(3). ........... 233 282 656
Additional paid-in capital...................................... 3,252 5,100 33,409
Foreign currency translation adjustment......................... (5) (5) (5)
Notes receivable from stockholders.............................. (308) (1,416) (1,416)
Treasury stock.................................................. (4) (4) (4)
Accumulated deficit............................................. (1,027) (1,027) (9,527)
--------- --------- -----------
Total stockholders' equity................................... 2,356 3,145 23,113
--------- --------- -----------
Total capitalization....................................... $ 5,160 $ 6,677 $24,394
--------- --------- -----------
--------- --------- -----------
</TABLE>
- ------------------
(1) Restated to give effect to the acquisition of MDx effective April 30, 1998
which was accounted for as a pooling of interests. See Supplemental
Consolidated Financial Statements and Notes thereto, included elsewhere in
this Prospectus.
(2) Excludes capital lease obligations.
(3) Based upon the number of shares outstanding on July 14, 1998. Does not
include: (i) 1,322,501 shares of Common Stock issuable upon the exercise of
stock options and warrants outstanding as of such date, or which 1,049,335
stock options and warrants were then exercisable; and (ii) 1,101,287
additional shares available for grant under the 1992 Employee Stock Option
Plan, the 1995 Employee Stock Option Plan and the 1998 Stock Plan. See
'Management--Stock Option Plans.'
16
<PAGE>
DILUTION
As of March 31, 1998, the pro forma net tangible book value of the Company,
as adjusted to reflect: (i) the completion of the ISBMD Acquisition and the
Helix Acquisition and (ii) the conversion of all of the Preferred Stock into
Common Stock immediately prior to the closing of this offering, was
approximately $27,000, or $0.01 per share of Common Stock. Pro forma net
tangible book value per share represents the amount of total stockholders'
equity less intangible assets, exclusive of patents and licenses, divided by the
number of shares of Common Stock outstanding on a pro forma basis at that date.
After giving effect to (i) the sale by the Company of 2,900,000 shares of Common
Stock in this offering at an assumed initial public offering price of $11.00 per
share and the application of the estimated net proceeds therefrom (after
deducting underwriting discounts and commissions and estimated offering
expenses) and (ii) the completion of the GeneScreen Acquisition, the pro forma
net tangible book value of the Company at March 31, 1998 would have been
approximately $16.4 million or $2.50 per share, representing an immediate
increase in pro forma net tangible book value of $2.49 per share to existing
shareholders and an immediate dilution in pro forma net tangible book value per
share of $8.50 per share to persons purchasing shares of Common Stock in this
offering. The following table illustrates this per share dilution.
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share....................................... $11.00
Net tangible book value per share as of March 31, 1998 based on the Supplemental
Consolidated Financial Statements(1)............................................. 0.62
Decrease in net tangible book value per share as a result of completion of the ISBMD
Acquisition and the Helix Acquisition............................................ (0.61)
-----
Pro forma net tangible book value per share as of March 31, 1998(1)................. 0.01
Increase in pro forma net tangible book value per share as a result of the
GeneScreen Acquisition and the consummation of this offering..................... 2.49
-----
Pro forma net tangible book value per share after this offering....................... 2.50
------
Dilution per share to new investors................................................... $ 8.50
------
------
</TABLE>
The following table summarizes, on a pro forma basis as of March 31, 1998,
the differences between the number of shares of Common Stock purchased from the
Company, the total consideration paid to the Company, and the average price paid
per share by existing stockholders and by new investors in this offering.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
-------------------- ---------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders(2)(3)............. 2,979,039 45.4% $ 4,911,836 11.1% $ 1.65
GeneScreen stockholders................. 681,818 10.4 7,500,000 16.9 $ 11.00
New investors in this offering.......... 2,900,000 44.2 31,900,000 72.0 $ 11.00
--------- ------- ----------- -------
Total.............................. 6,560,857 100.0% $44,311,836 100.0%
--------- ------- ----------- -------
--------- ------- ----------- -------
</TABLE>
- ------------------------
(1) Restated to give effect to the acquisition of MDx effective April 30, 1998
which was accounted for as a pooling of interests. See Supplemental
Consolidated Financial Statements and Notes thereto, included elsewhere in
this Prospectus.
(2) Sales by the Selling Stockholders in this offering will cause the number of
shares held by existing stockholders to be reduced to 2,679,039 shares or
40.8% ( shares or % if the Underwriters' over-allotment option
is exercised in full) of the total number of shares of Common Stock to be
outstanding after this offering, and will increase the number of shares held
by new investors to 3,200,000 shares or 48.9% ( shares or % if
the Underwriters' over-allotment option is exercised in full) of the total
number of shares of Common Stock to be outstanding after this offering. See
'Principal and Selling Stockholders.'
(3) Gives effect to the Recent Acquisitions.
The calculation of pro forma net tangible book value and the other
computations above assume no exercise of stock options or warrants outstanding
as of March 31, 1998. As of March 31, 1998, there were stock options and
warrants outstanding to purchase a total of 1,332,501 shares of Common Stock, of
which 1,049,335 stock options and warrants were then exercisable. To the extent
that any of these stock options or warrants are exercised, there will be further
dilution to new investors. See 'Capitalization,' 'Management--Stock Option
Plans,' 'Description of Capital Stock,' 'Shares Eligible for Future Sale' and
the Notes to the Consolidated Financial Statements.
17
<PAGE>
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
The following table sets forth certain selected historical consolidated
financial and operating data of the Company as of the dates and for the periods
indicated. The statement of operations data for each of the three years in the
period ended September 30, 1997 and the balance sheet data as of September 30,
1996 and 1997 have been derived from the Company's Supplemental Consolidated
Financial Statements included elsewhere in this Prospectus. The balance sheet
data as of September 30, 1993, 1994, 1995, and statement of operations data for
the years ended September 30, 1993 and 1994 are derived from the audited
Consolidated Financial Statements of the Company which are not included herein.
The supplemental consolidated balance sheet data as of March 31, 1998 and
statement of operations data for the six months ended March 31, 1997 and March
31, 1998 are derived from the Company's unaudited Financial Statements included
elsewhere in this Prospectus. The supplemental consolidated balance sheet data
as of March 31, 1997 is derived from the Company's unaudited Financial
Statements which are not included herein. In the opinion of management, the
unaudited Financial Statements include all adjustments (consisting of only
normal recurring adjustments) necessary for a fair presentation of the
information set forth herein. The results of operations for the six months ended
March 31, 1998 are not necessarily indicative of the results that may be
expected for any other interim period or the entire year. See 'The Company,'
'Management's Discussion and Analysis of Financial Condition and Results of
Operations' and Notes 1 and 13 of the Notes to the Consolidated Financial
Statements. The following selected combined financial and operating data is
qualified by reference to, and should be read in conjunction with the Company's
Consolidated Financial Statements and Supplemental Consolidated Financial
Statements and Notes thereto, 'Management's Discussion and Analysis of Financial
Condition and Results of Operations' and the other financial information
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
FISCAL YEAR ENDED SEPTEMBER 30, MARCH 31,
-------------------------------------------------------------- -----------------------
1993 1994 1995 1996 1997 1997 1998
---------- ---------- ---------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues............................... $ 2,402 $ 2,628 $ 3,534 $ 7,683 $ 15,065 $ 5,706 $ 10,250
Cost of revenues....................... 1,265 1,357 1,504 4,004 7,375 3,043 4,910
---------- ---------- ---------- ---------- ---------- ---------- ----------
Gross profit......................... 1,137 1,271 2,030 3,679 7,690 2,663 5,340
Other costs and expenses:
Selling, general and administrative
expenses........................... 1,215 799 1,085 3,295 5,968 2,171 3,566
Research and development expenses.... 704 677 669 719 900 433 555
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income (loss) from operations.......... (782) (205) 276 (335) 822 59 1,219
Other income (expense):
Other income......................... 126 18 18 21 47 19 78
Interest expense..................... (114) (204) (115) (183) (308) (106) (110)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income (loss) before income taxes and
extraordinary item................... (770) (391) 179 (497) 561 (28) 1,187
Income taxes........................... 1 -- -- -- 173 75 753
Extraordinary item(1).................. 100 -- -- (79) -- -- --
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income (loss)...................... (671) (391) 179 (576) 388 (103) 434
---------- ---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income (loss) per share
Basic................................ $ (0.56) $ (0.26) $ 0.12 $ (0.32) $ 0.18 $ (0.05) $ 0.19
---------- ---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ---------- ----------
Diluted.............................. $ (0.56) $ (0.26) $ 0.10 $ (0.32) $ 0.14 $ (0.05) $ 0.14
---------- ---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ---------- ----------
Weighted average common shares
outstanding
Basic................................ 1,199,627 1,498,807 1,555,053 1,803,761 2,159,902 2,153,562 2,281,641
---------- ---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ---------- ----------
Diluted.............................. 1,199,627 1,498,807 1,792,504 1,803,761 2,706,793 2,153,562 3,139,511
---------- ---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ---------- ----------
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, MARCH 31,
------------------------------------------ ----------------
1993 1994 1995 1996 1997 1997 1998
------ ------ ------ ------ ------ ------ -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents..................................... $ 54 $ 218 $ 16 $ 760 $ 663 $ 777 $ 729
Working capital............................................... 95 296 533 369 128 1,120 (429)
Total assets.................................................. 1,749 1,989 2,351 4,715 7,511 5,363 10,972
Total indebtedness(2)......................................... 1,034 742 711 1,915 1,668 1,879 2,804
Stockholders' equity.......................................... 141 318 601 401 1,664 1,379 2,356
</TABLE>
- ------------------
(1) Extraordinary items relate to the gain (loss) on the extinguishment of debt.
(2) Includes short-term and long-term borrowings and current maturities of
long-term debt. Excludes capital lease obligations.
18
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA
Set forth below are the unaudited pro forma condensed combined balance
sheet as of March 31, 1998, and the unaudited pro forma condensed combined
statements of operations of the Company for the year ended September 30, 1997
and the six month period ended March 31, 1998. The unaudited pro forma condensed
combined balance sheet and statements of operations give effect to the
consolidation of the Company with the Recent and Pending Acquisitions. The
unaudited pro forma condensed combined balance sheet as of March 31, 1998 gives
effect to the acquisitions of ISBMD, Helix and GeneScreen as if such
transactions had been consummated as of such date. The unaudited pro forma
condensed combined statements of operations for the year ended September 30,
1997 and six months ended March 31, 1998 give effect to the acquisitions of NLL,
ISBMD, Helix and GeneScreen had such transactions been consummated as of the
beginning of the fiscal year and period, respectively. For classification
purposes, NLL, ISBMD and Helix are defined as the 'Recent Acquisitions' and
GeneScreen is defined as the 'Pending Acquisition,' collectively as the 'Recent
and Pending Acquisitions.' The historical balance sheet as of March 31, 1998 and
historical combined statements of operations for the year ended September 30,
1997 and six months ended March 31, 1998 of the Company reflect the acquisition
of MDx effective April 30, 1998, as discussed below. This acquisition was
accounted for as a pooling of interests and therefore all historical financial
information of the Company has been restated to reflect the pooling as if it
occurred as of the earliest financial period presented. See the Supplemental
Consolidated Financial Statements and Notes thereto, included elsewhere in this
Prospectus.
On February 6, 1998, the Company acquired substantially all of the assets
of NLL, a division of Group Benefit Services, Inc., for approximately $730,000
in cash and an aggregate of 14,600 shares of Common Stock. The NLL Acquisition
was accounted for under the purchase method of accounting. The cash portion of
the purchase price was financed primarily by borrowings. The excess of the
purchase price over the fair value of the net assets acquired was $780,000,
which has been recorded as goodwill and will be amortized over a 15-year period.
On April 3, 1998, the Company acquired all of the outstanding stock of
ISBMD for an aggregate of 365,000 shares of Common Stock. The ISBMD Acquisition
was accounted for under the purchase method of accounting. The excess of the
purchase price over the fair value of the net assets acquired was approximately
$1.2 million, whichhas been recorded as goodwill and will be amortized over a
15-year period.
Effective April 30, 1998, the Company acquired all of the outstanding
common stock of MDx and retired notes payable to stockholders aggregating
$200,000 in exchange for 325,372 shares of Common Stock.The MDx Acquisition was
accounted for as a pooling of interests and, accordingly, the historical
financial statements of the Company as of March 31, 1998, and for the year ended
September 30, 1997 and the six month period ended March 31, 1998 have been
restated to include the operations of the acquired company as if the pooling had
been consummated as of the earliest date presented.
In July 1998, the Company acquired certain assets and assumed certain
liabilities of Helix for $650,000 in cash payable over 26 months and an
aggregate of 124,100 shares of Common Stock. The Helix Acquisition was accounted
for under the purchase method of accounting. The excess of the purchase price
over the fair value of the net assets acquired was approximately $1.1 million
which has been recorded as goodwill and will be amortized over a 15-year period.
In July 1998, the Company signed a letter of intent to acquire the common
stock of GeneScreen. The closing of the GeneScreen Acquisition is contingent
upon the effectiveness of the Registration Statement of which this Prospectus is
a part. The preliminary aggregate purchase price is $12.5 million, consisting of
$5.0 million in cash and $7.5 million of Common Stock. The purchase price is
subject to certain net worth adjustments of the acquired business from May 31,
1998 through the date of closing. The cash portion of the purchase price will be
financed from the net proceeds of this offering. See 'Use of Proceeds.' The
Company estimates that approximately $8.5 million of the purchase price will be
allocated to purchased research and development and will be charged to
operations simultaneously with the closing of the acquisition. The excess of
purchase price over the fair value of the net assets acquired is estimated to be
approximately $2.1 million, which will be recorded as goodwill and will be
amortized over a 15-year period.
19
<PAGE>
The unaudited pro forma adjustments are based upon available information
and upon certain assumptions that the Company believes are reasonable. Final
adjustments may differ from the pro forma adjustments presented herein. The
Unaudited Pro Forma Condensed Combined Financial Data are not necessarily
indicative of the results that would have been achieved had such events occurred
as of the dates indicated or that may be achieved in the future. The Unaudited
Pro Forma Condensed Combined Financial Data should be read in conjunction with
the Consolidated Financial Statements and Notes thereto and Supplemental
Consolidated Financial Statements and Notes thereto of the Company, the
financial statements and notes thereto of NLL, ISBMD and MDx, 'Capitalization'
and 'Management's Discussion and Analysis of Financial Condition and Results of
Operations,' each included elsewhere in this Prospectus.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
MARCH 31, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
RECENT ACQUISITIONS PENDING
--------------------------------------------------- ACQUISITION
ACQUIRED ------------
OPERATIONS
HISTORICAL PRO FORMA PRO FORMA GENE
LIFECODES(a) (b)(c) ADJUSTMENTS LIFECODES SCREEN(b)(c)
------------ ---------- ----------- --------- ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.......................... $ 729 $ 407 $ -- $ 1,136 $ 147
Accounts receivable, net........................... 3,196 899 (584)(d) 3,511 2,409
Inventories........................................ 1,354 62 -- 1,416 394
Prepaid and other current assets................... 327 32 -- 359 7
------------ ---------- ----------- --------- ------
Total current assets................................. 5,606 1,400 (584) 6,422 2,957
Property and equipment, net.......................... 2,718 209 -- 2,927 772
Deferred tax assets.................................. 555 32 -- 587 --
Intangible assets:
Goodwill........................................... 815 -- 2,303(e) 3,118 --
Patents and licenses, net.......................... 1,160 -- -- 1,160 126
------------ ---------- ----------- --------- ------
Total intangible assets.............................. 1,975 -- 2,303 4,278 126
------------ ---------- ----------- --------- ------
Other assets......................................... 118 -- -- 118 756
------------ ---------- ----------- --------- ------
Total assets......................................... $ 10,972 $1,641 $ 1,719 $14,332 $4,611
------------ ---------- ----------- --------- ------
------------ ---------- ----------- --------- ------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses.............. $ 4,159 $2,326 $ (584)(d) $ 5,901 $1,410
Current portion of long-term debt.................. 1,205 46 300(g) 1,551 1,170
Other.............................................. 671 13 89(h) 773 788
------------ ---------- ----------- --------- ------
Total current liabilities............................ 6,035 2,385 (195) 8,225 3,368
Long-term debt, net.................................. 2,220 31 350(g) 2,601 8
Other liabilities.................................... 361 -- -- 361 --
------------ ---------- ----------- --------- ------
Total liabilities.................................... 8,616 2,416 155 11,187 3,376
------------ ---------- ----------- --------- ------
Stockholders' equity:
Preferred stock.................................... 215 -- -- 215 52
Common stock....................................... 233 -- 49(i) 282 26
Additional paid-in capital......................... 3,252 138(j) 1,710(i) 5,100 7,695
Retained earnings (accumulated deficit)............ (1,027) 195 (195)(i) (1,027) (6,453)
Foreign currency translation adjustment............ (5) -- -- (5) --
Less notes receivable from stockholders............ (308) (1,108) -- (1,416) (85)
Less common stock in treasury at cost.............. (4) -- -- (4) --
------------ ---------- ----------- --------- ------
Total stockholders' equity........................... 2,356 (775) 1,564 3,145 1,235
------------ ---------- ----------- --------- ------
Total liabilities and stockholders' equity........... $ 10,972 $1,641 $ 1,719 $14,332 $4,611
------------ ---------- ----------- --------- ------
------------ ---------- ----------- --------- ------
<CAPTION>
PENDING ACQUISITION
---------------------------
PRO FORMA
PRO FORMA LIFECODES AND
ADJUSTMENTS GENESCREEN
----------- -------------
<S> <<C> <C>
ASSETS
Current assets:
Cash and cash equivalents.......................... $ -- $ 1,283
Accounts receivable, net........................... (651)(d) 5,269
Inventories........................................ -- 1,810
Prepaid and other current assets................... -- 366
----------- -------------
Total current assets................................. (651) 8,728
Property and equipment, net.......................... -- 3,699
Deferred tax assets.................................. -- 587
Intangible assets:
Goodwill........................................... 3,584(e) 6,702
Patents and licenses, net.......................... -- 1,286
----------- -------------
Total intangible assets.............................. 3,584 7,988
----------- -------------
Other assets......................................... (720) 154
----------- -------------
Total assets......................................... $ 2,213 $21,156
----------- -------------
----------- -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses.............. $ 4,349(d)(f) $11,660
Current portion of long-term debt.................. -- 2,721
Other.............................................. 100(h) 1,661
----------- -------------
Total current liabilities............................ 4,449 16,042
Long-term debt, net.................................. -- 2,609
Other liabilities.................................... -- 361
----------- -------------
Total liabilities.................................... 4,449 19,012
----------- -------------
Stockholders' equity:
Preferred stock.................................... (52)(i) 215
Common stock....................................... 42(i) 350
Additional paid-in capital......................... (264)(i) 12,531
Retained earnings (accumulated deficit)............ (2,047)(i) (9,527)
Foreign currency translation adjustment............ -- (5)
Less notes receivable from stockholders............ 85(i) (1,416)
Less common stock in treasury at cost.............. -- (4)
----------- -------------
Total stockholders' equity........................... (2,236) 2,144
----------- -------------
Total liabilities and stockholders' equity........... $ 2,213 $21,156
----------- -------------
----------- -------------
</TABLE>
20
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1997
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
PENDING
RECENT ACQUISITIONS ACQUISITION
------------------------------------------------------------ ----------------
ACQUIRED
OPERATIONS PRO FORMA PRO FORMA
LIFECODES(a) HISTORICAL(c)(k) ADJUSTMENTS LIFECODES GENESCREEN(c)(k)
------------ ---------------- -------------- --------- ----------------
<S> <C> <C> <C> <C> <C>
Revenues................................... $ 15,065 $8,777 $ (1,469)(d) $22,373 $ 11,217
Cost of revenues........................... 7,375 5,937 (1,469)(d) 11,843 8,278
------------ ------ ------- --------- -------
Gross profit............................. 7,690 2,840 -- 10,530 2,939
Other costs and expenses:
Selling, general and administrative...... 5,968 2,940 206(l) 9,114 3,833
Research and development................. 900 -- -- 900 --
------------ ------ ------- --------- -------
Income (loss) from operations.............. 822 (100) (206) 516 (894)
Other income (expense):
Other income............................. 47 44 -- 91 16
Interest expense......................... (308) (67) (50)(m) (425) (23)
------------ ------ ------- --------- -------
Income (loss) before taxes................. 561 (123) (256) 182 (901)
------------ ------ ------- --------- -------
Income taxes (benefit)..................... 173 79 -- 252 --
------------ ------ ------- --------- -------
Net income (loss).......................... $ 388 $ (202) $ (256) $ (70) $ (901)
------------ ------ ------- --------- -------
------------ ------ ------- --------- -------
Net income per share:
Basic.................................... $ 0.18
Diluted.................................. 0.14
Average number of common shares and
dilutive common share equivalents
outstanding:
Basic.................................... 2,159,902
Diluted.................................. 2,706,793
<CAPTION>
PENDING AQUISITION
---------------------------
PRO FORMA
PRO FORMA LIFECODES AND
ADJUSTMENTS GENESCREEN
----------- -------------
<S> <C> <C>
Revenues................................... $(1,184)(d) $ 32,406
Cost of revenues........................... (1,184)(d) 18,937
----------- -------------
Gross profit............................. -- 13,469
Other costs and expenses:
Selling, general and administrative...... 311(l) 13,258
Research and development................. -- 900
----------- -------------
Income (loss) from operations.............. (311) (689)
Other income (expense):
Other income............................. -- 107
Interest expense......................... -- (448)
----------- -------------
Income (loss) before taxes................. (311) (1,030)
----------- -------------
Income taxes (benefit)..................... -- 252
----------- -------------
Net income (loss).......................... $ (311) $ (1,282)
----------- -------------
----------- -------------
Net income per share:
Basic.................................... $ (0.39)
Diluted.................................. (0.39)
Average number of common shares and
dilutive common share equivalents
outstanding:
Basic.................................... 3,330,820
Diluted.................................. 3,330,820
</TABLE>
FOR THE SIX MONTH PERIOD ENDED MARCH 31, 1998
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
PENDING
RECENT ACQUISITIONS ACQUISITION
-------------------------------------------------------------- ----------------
ACQUIRED
OPERATIONS PRO FORMA PRO FORMA
LIFECODES(a) HISTORICAL(c)(n) ADJUSTMENTS LIFECODES GENESCREEN(c)(n)
------------ ---------------- -------------- --------- ----------------
<S> <C> <C> <C> <C> <C>
Revenues................................. $ 10,250 $4,927 $ (785)(d) $14,392 $6,547
Cost of revenues......................... 4,910 3,057 (785)(d) 7,182 4,873
------------ ------ ----- --------- ------
Gross profit........................... 5,340 -- 7,210 1,674
Other costs and expenses:
Selling, general and administrative.... 3,566 1,870 93(l) 5,529 2,370
Research and development............... 555 -- -- 555 --
------------ ------ ----- --------- ------
Income (loss) from operations............ 1,219 -- (93) 1,126 (696)
Other income (expense)................. 78 37 -- 115 4
Interest expense, net.................. (110) (37) (17)(m) (164) (36)
------------ ------ ----- --------- ------
Income (loss) before taxes............... 1,187 -- (110) 1,077 (728)
------------ ------ ----- --------- ------
Income taxes (benefit)................... 753 (11) -- 742 --
------------ ------ ----- --------- ------
Net income (loss)........................ $ 434 $ (11) $ (110) $ 335 $ (728)
------------ ------ ----- --------- ------
------------ ------ ----- --------- ------
Net income per share:
Basic.................................. $ 0.19
Diluted................................ 0.14
<S> <C> <C>
Average number of common shares and
dilutive common share equivalents
outstanding:
Basic................................ 2,281,641
Diluted.............................. 3,139,511
<CAPTION>
PENDING AQUISITION
---------------------------
PRO FORMA
PRO FORMA LIFECODES AND
ADJUSTMENTS GENESCREEN
----------- -------------
<S> <C> <C>
Revenues................................. $(872)(d) $20,067
Cost of revenues......................... (872)(d) 11,183
----- -------------
Gross profit........................... -- 8,884
Other costs and expenses:
Selling, general and administrative.... 156(l) 8,055
Research and development............... -- 555
----- -------------
Income (loss) from operations............ (156) 274
Other income (expense)................. -- 119
Interest expense, net.................. -- (200)
----- -------------
Income (loss) before taxes............... (156) 193
----- -------------
Income taxes (benefit)................... -- 742
----- -------------
Net income (loss)........................ $(156) $ (549)
----- -------------
----- -------------
Net income per share:
Basic.................................. $ (0.16)
Diluted................................ (0.16)
Average number of common shares and
dilutive common share equivalent
outstanding:
Basic................................ 3,452,559
Diluted.............................. 3,452,559
</TABLE>
21
<PAGE>
(Footnotes from previous page)
- ------------------
(a) Restated to give effect to the acquisition of MDx effective April 30, 1998
which was accounted for as a pooling of interests. See Supplemental
Consolidated Financial Statements and Notes thereto, included elsewhere in
this Prospectus.
(b) Reflects the Recent and Pending Acquisitions as if they had occurred on
March 31, 1998.
(c) ISBMD and GeneScreen have different fiscal periods from the Company. For
financial reporting purposes, ISBMD and GeneScreen have a fiscal year ended
December 31, and the Company has a fiscal year ended September 30.
Consequently, ISBMD and GeneScreen have results of operations for the period
October 1, 1997 through December 31, 1997 that have been included in both
the unaudited pro forma results of operations for fiscal 1997 and the six
month interim period ended March 31, 1998. ISBMD revenues and net income
were $1.3 million and $43,000, respectively, for the three month period
ended December 31, 1997. GeneScreen revenues and net loss for the
three-month period ended December 31, 1997 were $3.1 million and $930,000
respectively.
(d) Reflects the pro forma adjustments necessary to eliminate intercompany
transactions as follows:
<TABLE>
<CAPTION>
INTERCOMPANY ACCOUNTS RECEIVABLE/PAYABLE AS OF MARCH 31, 1998
- ---------------------------------------------------------------- --------------------
<S> <C>
ISBMD........................................................... $ 536
Helix........................................................... 48
-------
584
GeneScreen...................................................... 651
-------
Total Intercompany Accounts Receivable/Payable.................. $1,235
-------
-------
<CAPTION>
YEAR ENDED SIX MONTHS
INTERCOMPANY SALES/COST OF SALES SEPTEMBER 30, 1997 ENDED MARCH 31, 1998
- ---------------------------------------------------------------- -------------------- --------------------
<S> <C> <C>
ISBMD........................................................... $ 839 $ 530
Helix........................................................... 325 158
NLL............................................................. 305 97
------- -------
1,469 785
GeneScreen...................................................... 1,184 872
------- -------
Total Intercompany Sales/Cost of Sales.......................... $2,653 $1,657
------- -------
------- -------
</TABLE>
(e) Represents the estimated excess of purchase price over the fair value of the
net assets acquired as follows:
<TABLE>
<CAPTION>
RECENT ACQUISITIONS PENDING ACQUISITION
-------------------------- -------------------
ISBMD HELIX TOTAL GENESCREEN
------ ------ ------ -------------------
<S> <C> <C> <C> <C>
Purchase price........................................... $1,433 $1,204 $2,637 $12,600
Net assets acquired...................................... 196 138 334 10,516
------ ------ ------ ----------
Goodwill................................................. $1,237 $1,066 $2,303 $ 2,084
------ ------ ------ ----------
------ ------ ------ ----------
</TABLE>
Net assets acquired in the GeneScreen Acquisition include acquired research
and development preliminarily valued at $8.5 million, which will be charged
to expense in the period corresponding to the closing of the acquisition.
Moreover, net assets acquired include $1.5 million in other intangible
assets which include approximately $900,000 in developed technology value
and $600,000 in workforce value which will be amortized over eight and ten
years, respectively. These intangible assets are reflected in goodwill and
other intangible assets.
(f) Represents cash to be paid in conjunction with the GeneScreen Acquisition
which will close contemporaneously with this offering. Accordingly, a pro
forma adjustment has been made to accounts payable to reflect the $5.0
million due upon the closing of this offering.
(g) Represents the cash portion of the Helix Acquisition, payable over 26 months
in equal monthly installments.
(Footnotes continued on next page)
22
<PAGE>
(Footnotes continued from previous page)
(h) Represents estimated capitalized expenses incurred in connection with the
acquisitions of ISBMD, Helix and GeneScreen.
(i) Represents the elimination of acquired companies' equity accounts and
issuance of 489,100 shares of Common Stock necessary to effect the
acquisitions of ISBMD and Helix. The estimated number of shares of Common
Stock to be issued in the GeneScreen Acquisition is 681,818, which is based
on a per share price of $11.00. The actual number of shares of Common Stock
to be issued will be based on the initial public offering price.
(j) The Helix Acquisition consists of the acquisition of only certain assets and
liabilities. Purchased assets exceeded liabilities assumed by approximately
$138,000 and have been reflected as 'additional paid-in capital' for pro
forma purposes only.
(k) Reflects the historical results of operations for the Recent and Pending
Acquisitions as if they had occurred on October 1, 1996.
(l) Reflects the increase in amortization expense relating to the estimated
goodwill for the Recent and Pending Acquisitions. Goodwill is amortized over
a 15-year period.
(m) Pro forma adjustment represents incremental interest expense on debt
utilized to acquire certain of the Recent Acquisitions at the Company's
current rate of interest of 8.39%.
(n) Reflects the historical results of operations for the Recent and Pending
Acquisitions as if they had occurred on October 1, 1997.
23
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Lifecodes is a leading provider of DNA testing services and related
products for human paternity and forensic identification and for genetic typing
of potential donors and recipients of bone marrow and organ transplants.
Paternity testing seeks to establish the correct identity of a child's parents
when such matters are disputed. Forensic testing seeks to link hair, saliva,
blood or other biological specimens found at a crime scene to an alleged
suspect. Transplant testing detects the genetic sequence of certain human
leukocyte antigens contained in DNA which are believed to be a principal
determinant of whether a donor's bone marrow or organ transplant may be rejected
by the recipient's immune system or may attack the recipient's immune system.
The Company is one of the largest providers of paternity, forensic and
transplant testing services in the United States and is one of the largest
providers of transplant testing in Europe. In addition to testing services, the
Company offers a product line consisting of reagents and a wide range of DNA
probes, which are sold principally in either standard configurations or
customized test kits.
The Company was incorporated in New York in April 1982 and was purchased
by, and became a wholly-owned subsidiary of, Quantum Chemical Corporation in
1985. In September 1991, management and certain investors acquired all of
Quantum's interest in the Company and relocated the Company to Stamford,
Connecticut. The Company reincorporated in Delaware in January 1993. In March
1996, the Company acquired Cellmark Diagnostics, Inc., a division of Zeneca,
plc. Cellmark is one of the two largest commercial forensic testing laboratories
in the United States and was the first and is one of only two commercial
laboratories accredited by the American Society of Crime Laboratory Directors
for DNA testing. The Company's services and products are marketed to each of the
paternity, forensic and transplant markets. For the fiscal year ended September
30, 1997 and the six months ended March 31, 1998, the Company derived
approximately 52%, 8% and 40% and 45%, 9% and 46% of its revenues from the
paternity, forensic and transplant markets, respectively.
Historically, the Company has focused on developing and incorporating its
DNA technology into products to be sold as stand-alone test kits and to a lesser
extent as DNA testing services. Since 1997, the Company has emphasized offering
testing services to end-users of DNA testing information in an effort to meet
demand for an integrated DNA testing solution and to take advantage of access to
new DNA testing process technologies from Molecular Dynamics, Inc., Amersham
Pharmacia Biotech and Molecular Innovations, Inc. which the Company believes,
when fully developed, will improve the speed, quality and breadth of information
provided by its testing services at a reduced cost. In addition, the Company
believes this strategy will allow the Company to exploit opportunities not
otherwise available to it as a marketer of DNA testing products. As a result,
the Company expects testing services to generate an increasing percentage of its
future revenues.
RECENT AND PENDING ACQUISITIONS
Since January 1, 1998, the Company has substantially increased its testing
services revenue base and expanded its market coverage and laboratory
infrastructure by completing the acquisitions of National Legal Laboratories
(the 'NLL Acquisition'), International Support for Bone Marrow Drives, Ltd. (the
'ISBMD Acquisition'), Micro Diagnostics, Inc. (the 'MDx Acquisition') and Helix
Biotech Ltd. (the 'Helix Acquisition') (collectively, the 'Recent
Acquisitions'). In addition, the Company has entered into a letter of intent to
acquire GeneScreen Inc. contemporaneously with the closing of this offering (the
'GeneScreen Acquisition,' and together with the Recent Acquisitions, the 'Recent
and Pending Acquisitions'). See 'Business--Recent and Pending Acquisitions' and
'--GeneScreen Acquisition.'
National Legal Laboratories. In February 1998, the Company acquired
substantially all of the assets of National Legal Laboratories ('NLL'), a
division of Group Benefit Services, Inc., for approximately $730,000 in cash and
an aggregate of 14,600 shares of Common Stock. NLL is the fifth largest
paternity testing laboratory in the United States. NLL generated revenues of
$2.0 million during the fiscal year ended September 30, 1997. The acquisition of
NLL was accounted for as a purchase.
International Support for Bone Marrow Drives, Ltd. In April 1998, the
Company acquired all of the outstanding stock of International Support for Bone
Marrow Drives, Ltd. ('ISBMD') for an aggregate of 365,000 shares of Common
Stock. ISBMD is the largest provider of HLA testing services in Germany. ISBMD
arranges HLA testing to be performed for a large marrow donor database
organization and contracts with a small
24
<PAGE>
group of specially selected laboratories in Germany and the United States to
perform both DNA and serological HLA testing. ISBMD generated revenues of $4.8
million during the year ended December 31, 1997. The acquisition of ISBMD was
accounted for as a purchase.
Micro Diagnostics, Inc. Effective April 1998, the Company acquired all of
the outstanding stock of Micro Diagnostics, Inc. ('MDx') for an aggregate of
325,372 shares of Common Stock. MDx is a full service DNA testing laboratory.
MDx generated revenues of $3.0 million during the year ended December 31, 1997.
The acquisition of MDx was accounted for as a pooling of interests.
Helix Biotech Ltd. In July 1998, the Company acquired substantially all of
the assets of Helix Biotech Ltd. ('Helix') for $650,000 in cash payable over 26
months and an aggregate of 124,100 shares of Common Stock. Helix is a full
service DNA testing laboratory serving the Canadian market. Helix generated
revenues of $1.9 million during the fiscal year ended July 31, 1997. The
acquisition of Helix was accounted for as a purchase.
GeneScreen Inc. In July 1998, the Company entered into a letter of intent
with GeneScreen Inc. ('GeneScreen') whereby the Company agreed to acquire
substantially all of the stock of GeneScreen for cash and Common Stock. The
preliminary aggregate purchase price is $12.5 million, consisting of $5.0
million in cash and $7.5 million of Common Stock. GeneScreen is a leading
provider of paternity testing services, primarily to the public testing market.
The acquisition is expected to be completed contemporaneously with the closing
of this offering. GeneScreen generated revenues of $11.2 million during the year
ended December 31, 1997. The acquisition of GeneScreen is being accounted for as
a purchase.
In connection with the GeneScreen Acquisition, the Company is also
acquiring rights to a technology developed by GeneScreen referred to as genetic
bit analysis ('GBA') for paternity, transplant, forensic and pharmacogenetic
applications. While management believes GBA technology will prove to be of value
in the future, the Company will need to make further investments in this
technology to prepare it for commercialization. As a result, the Company expects
to incur a sizable charge simultaneously with the completion of the GeneScreen
Acquisition from the write-off of the portion of the GeneScreen purchase price
that is deemed to be purchased research and development. This write-off is
expected to be approximately $8.5 million. In addition, it is expected that the
restructuring of the Recent and Pending Acquisitions will result in certain
additional charges during the fourth quarter of fiscal 1998 as a result of
integrating selling and marketing activities and streamlining operations. The
Company also expects to record approximately $2.1 million of goodwill that will
be amortized over a 15-year period. In addition, the Company expects to amortize
approximately $1.5 million of other intangible assets over an eight to ten year
period.
Except for the MDx Acquisition, the Recent and Pending Acquisitions have
been or will be accounted for as purchases. As a result, the Company's
historical financial statements do not reflect the operating results for the
full historical periods of the Recent and Pending Acquisitions that are treated
as purchases but will be restated to include the results of MDx, which has been
accounted for as a pooling of interests. The Recent and Pending Acquisitions
that have been treated, for accounting purposes, as purchases will cause the
Company to incur significant future amortization expense associated with the
excess of the purchase price over the fair value of the net tangible assets
acquired.
The Recent and Pending Acquisitions have resulted in a significant change
in the Company's financial profile. On a pro forma basis, after giving effect to
the Recent and Pending Acquisitions, the Company had revenues for the fiscal
year ended September 30, 1997 of $32.4 million and a net loss of $1.3 million,
compared to historical revenues of $12.2 million and net income of $1.4 million
in the same period. In addition, the Company's pro forma revenues were $20.0
million and net loss was $549,000 for the six months ended March 31, 1998,
compared to historical revenues of $8.4 million and net income of $884,000 for
the same period.
IMPACT OF NEW TECHNOLOGY
In furtherance of the Company's strategic goal of improving the speed,
quality and breadth of information provided by its testing services and lowering
its costs, the Company has entered into a number of strategic technology access
relationships to implement the ongoing improvement of its testing process. In
January 1998, the Company entered into a technology access agreement to enable
the Company to utilize the MDI Microarray spotter and reader. In addition, in
March 1998, the Company entered into an agreement with Molecular Innovations for
exclusive rights to a technology developed to reduce the cost of preparing DNA
for testing. The Company is also negotiating with Amersham a sublicense
agreement pursuant to which the Company would acquire the right to use
Amersham's fluorescent detection dye technology in connection with the MDI
25
<PAGE>
Microarray system for testing services in the areas of paternity, forensics and
tissue transplants. See 'Business-- Strategic Partnerships and Relationships'
and 'Risk Factors--Dependence on Licensed Technology.' The Company intends to
adapt its current DNA testing technology, and make improvements to its DNA
testing process, based on technology licensed or to be acquired from MDI,
Amersham, Molecular Innovations and GeneScreen. As a result, the Company expects
to incur a higher level of research and development spending during fiscal 1998,
1999 and 2000 than the Company experienced in fiscal 1996 and 1997.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain
financial data as a percentage of revenues:
<TABLE>
<CAPTION>
SIX MONTHS ENDED MARCH 31,
YEAR ENDED SEPTEMBER 30,
----------------------------------------------- ------------------------------------
1993 1994 1995 1996(1) 1997(1) 1997(1) 1998(1)
---- ---- ---- ------- ------- ---------------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues...................... 100 % 100 % 100 % 100% 100% 100% 100%
Cost of revenues.............. 53 52 43 52 49 53 48
---- ---- ---- ------- ------- --- ---
Gross profit................ 47 48 57 48 51 47 52
Other costs and expenses:
Selling, general and
administrative
expenses................. 51 30 31 43 40 38 35
Research and development
expenses................. 29 26 19 9 6 8 5
---- ---- ---- ------- ------- --- ---
Income (loss) from
operations.................. (33 ) (8 ) 7 (4) 5 1 12
Other income (expense):
Other income................ 5 1 1 -- -- -- 1
Interest expense............ (5 ) (8 ) (3 ) (2) (2) (2) (1)
---- ---- ---- ------- ------- --- ---
Income (loss) before income
taxes and extraordinary
item........................ (33 ) (15 ) 5 (6) 3 (1) 12
Income taxes.................. -- -- -- -- 1 1 7
Extraordinary item............ 4 -- -- (1) -- -- --
---- ---- ---- ------- ------- --- ---
Net income (loss)............. (29 )% (15 )% 5 % (7)% 2% (2)% 5%
---- ---- ---- ------- ------- --- ---
---- ---- ---- ------- ------- --- ---
</TABLE>
- ------------------
(1) Restated to give effect to the acquisition of MDx effective April 30, 1998
which was accounted for as a pooling of interests. See Supplemental
Consolidated Financial Statements and Notes thereto, included elsewhere in
this Prospectus.
Six Months Ended March 31, 1998 Compared With Six Months Ended March 31, 1997
Revenues. Revenues increased to $10.3 million during the six months ended
March 31, 1998 from $5.7 million during the six months ended March 31, 1997, an
increase of $4.6 million or 81%. The increased revenues are attributable to
further market penetration of the Company's services and products for transplant
testing and to a lesser extent to sales increases in its services and products
for paternity and forensic testing.
Cost of Revenues. Cost of revenues includes the cost of labor and
purchased chemicals and materials to produce reagents sold to other companies as
well as those used in the Company's own business. In addition, it also includes
the labor and outside services involved in obtaining and shipping specimens to
the Company's facilities, testing such specimens and returning results to the
appropriate party. Cost of revenues increased to $4.9 million during the six
months ended March 31, 1998 from $3.0 million during the six months ended March
31, 1997, an increase of $1.9 million or 63%. The increase in cost of revenues
is attributable to growth in the Company's revenues.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses, which include salaries, benefits, facility expenses and
other administrative overhead, increased to $3.6 million during the six months
ended March 31, 1998 from $2.2 million during the six months ended March 31,
1997, an increase of $1.4 million or 64%. Of this increase, approximately
$200,000 was attributable to increased royalty payments and selling expenses
related to the Company's new HLA tests, approximately $170,000 was due to
increased patent and legal expenditures to enforce newly issued patents received
by the Company and other litigation matters, approximately $200,000 was due to
increased compensation and costs related to the Company's acquisition program
and the balance was due to the general growth of the Company's business.
Amortization of
26
<PAGE>
goodwill arising from acquisitions is also included in selling, general and
administrative expenses. During the six months ended March 31, 1998, such
charges were approximately $10,000 compared to no such charges during the six
months ended March 31, 1997. Such charges are expected to increase as the
Company completes additional acquisitions. As a percentage of revenues, selling,
general and administrative expenses were 35% compared to 38% in the comparable
period last year.
Research and Development Expenses. Research and development expenses
include salaries, benefits, facilities expenses, outside services and other
related costs incurred for the identification, creation and development of new
products and services. The Company expenses all research and development
expenses as incurred except for depreciable equipment (which is depreciated over
its useful life) and prepaid licenses and expenses (which are amortized over the
life of the agreement covering such licenses and expenses). Research and
development expenses increased to $555,000 during the six months ended March 31,
1998 from $433,000 during the six months ended March 31, 1997, an increase of
$122,000 or 28%. As a percentage of revenues, research and development expenses
were 5% during the six months ended March 31, 1998 compared to 8% during the six
months ended March 31, 1997.
Interest Expense. Interest expense increased to $110,000 during the six
months ended March 31, 1998 from $106,000 during the six months ended March 31,
1997, an increase of $4,000 or 4%.
Income Taxes. Income tax expense increased to $753,000 during the six
months ended March 31, 1998 from $75,000 during the six months ended March 31,
1997. The effective tax rate in fiscal 1998 was adversely impacted by
non-deductible losses generated by the Company's equity investment in MMD and
other non-deductible expenses. Income taxes in 1997 reflect the utilization of
previously unrecognized net operating loss carryforwards and the recording for
the first time of a deferred tax asset for future tax benefits of $555,000.
Fiscal Year Ended September 30, 1997 Compared With Fiscal Year Ended September
30, 1996
Revenues. Revenues increased to $15.1 million during the fiscal year ended
September 30, 1997 from $7.7 million during the fiscal year ended September 30,
1996, an increase of $7.4 million or 96%. The growth of both service and product
revenues was primarily impacted by the growth of the Company's transplant
testing business and secondarily by continued growth of the Company's paternity
and forensic testing businesses.
Cost of Revenues. Cost of revenues increased to $7.4 million during the
fiscal year ended September 30, 1997 compared to $4.0 million in fiscal 1996, an
increase of $3.4 million or 85%. The increase in cost of revenues is
attributable to growth in the Company's sales.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased to $6.0 million during the fiscal year ended
September 30, 1997 from $3.3 million during the fiscal year ended September 30,
1996, an increase of $2.7 million or 82%. As a percentage of revenues, selling,
general and administrative expenses decreased to 40% in fiscal 1997 from 43% in
fiscal 1996 principally as a result of the Company's increase in revenues.
Research and Development Expenses. Research and development expenses
increased to $900,000 during the fiscal year ended September 30, 1997 from
$718,000 during the fiscal year ended September 30, 1996, an increase of
$182,000 or 25%. The increase in research and development expenses was primarily
attributable to increased spending on the Company's technology for transplant
testing. As a percentage of revenues, research and development expenses were 6%
in fiscal 1997 compared to 9% in fiscal 1996 principally as a result of the
Company's increase in revenues.
Interest Expense. Interest expense increased to $308,000 during the fiscal
year ended September 30, 1997 from $183,000 during the fiscal year ended
September 30, 1996, an increase of $125,000 or 68%. This increase resulted
primarily from interest expense for a full year related to borrowings for the
acquisition of Cellmark in the middle of fiscal 1996 and to the use of accounts
receivable factoring and shareholder advances rather than equity financing at
MDx.
Income Taxes. Prior to fiscal 1997, the Company did not recognize the tax
benefits related to its net operating loss carryforwards due to the uncertainty
related to their realization. Accordingly, no income tax expense or benefit was
recognized in fiscal 1996. In fiscal 1997, the Company concluded that this
uncertainty had been resolved based on three consecutive years of profitable
operations. A deferred tax benefit of $555,000 was recorded in fiscal 1997 that
impacted income taxes recorded for the period.
27
<PAGE>
Fiscal Year Ended September 30, 1996 Compared With Fiscal Year Ended September
30, 1995
Revenues. Revenues increased to $7.7 million in fiscal 1996 from $3.5
million in fiscal 1995, an increase of $4.2 million or 120%. Approximately $1.8
million of this increase came from Cellmark, which was acquired in fiscal 1996,
and approximately $622,000 of this increase was attributable to MDx, which was
founded in the second half of fiscal 1996. Of the remaining sales growth, both
service and product revenues were primarily impacted by the growth of the
Company's transplant testing business and secondarily by growth in the Company's
paternity and forensic testing businesses.
Cost of Revenues. Cost of revenues increased to $4.0 million in fiscal
1996 from $1.5 million in fiscal 1995, an increase of $2.5 million or 167%.
Approximately $981,000 of this increase was attributable to Cellmark, and
approximately $802,000 of this increase was attributable to the start-up of MDx.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased to $3.3 million during the fiscal year ended
September 30, 1996 from $1.1 million during the fiscal year ended September 30,
1995, an increase of $2.2 million or 200%. Of this increase, approximately
$240,000 was attributable to management incentive compensation payments based on
profitability goals, approximately $850,000 was attributable to the selling,
general and administrative expenses added by the acquisition of Cellmark and
approximately $704,000 was attributable to the selling, general and
administrative expenses added by the start-up of MDx. As a percentage of
revenues, selling, general and administrative expenses were 43% during the
fiscal year ended September 30, 1996 compared to 31% during the fiscal year
ended September 30, 1995.
Research and Development Expenses. Research and development expenses
increased to $718,000 during the fiscal year ended September 30, 1996 from
$669,000 during the fiscal year ended September 30, 1995, an increase of $49,000
or 7%. As a percentage of revenues, research and development expenses were 9% in
fiscal 1996 compared to 19% in fiscal 1995.
Interest Expense. Interest expense increased to $183,000 during the fiscal
year ended September 30, 1996 from $115,000 during the fiscal year ended
September 30, 1995, an increase of $68,000 or 59%. This increase resulted
primarily from interest expense related to borrowing to fund the acquisition of
Cellmark and the start-up of MDx.
Income Taxes. No income tax expense was incurred during the fiscal years
ended September 30, 1996 or 1995 because the Company had not recognized the tax
benefit of net operating loss carryforwards in prior years due to the
uncertainty regarding their realization. Such benefits were recognized in fiscal
1995 and 1996 to the extent the Company had current period income.
QUARTERLY RESULTS OF OPERATIONS
Variations in the Company's results of operations have occurred from
quarter to quarter and the Company may experience significant fluctuations in
results of operations on a quarter to quarter basis in the future. Quarterly
operating results will fluctuate due to numerous factors, including: (i) the
timing of the introduction and availability of new or improved testing services
and products; (ii) the timing and level of expenditures associated with research
and development activities; (iii) seasonality in the Company's operating
results; (iv) the Company's ability to cost-effectively manage and integrate
newly acquired entities; (v) variations in laboratory efficiencies; (vi) the
timing of establishment of strategic technology licenses and the implementation
of technology licenses under such arrangements; (vii) changes in demand for its
services and products based on competition and changes in government regulation
and other economic factors; (viii) the timing of significant orders from
customers; (ix) changes in pricing and discounts; (x) variations in the mix of
services and products sold; (xi) the timing and level of expenditures associated
with expansion of sales and marketing activities and overall operations; and
(xii) general economic conditions. Many of these factors are difficult to
forecast or are beyond the Company's control, and these or other factors could
have a material adverse effect on the Company's business, financial condition
and results of operations. Specifically, the Company's operations are subject to
certain seasonal and market forces that are difficult for management to
anticipate or control. In particular, drives to find potential donors of bone
marrow tend to occur in the spring and fall with the result that the Company's
second and fourth fiscal quarters (winter and summer quarters) may not be as
strong financially as its first and third fiscal quarters. Furthermore, the
Company generally provides testing services as and when required by its
customers and therefore does not typically have significant backlog.
Fluctuations in quarterly demand for the Company's testing services and products
may adversely affect the continuity of the Company's laboratory operations,
increase uncertainty in operational planning and/or affect cash flows from
operations.
28
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically financed its growth and operations through
cash flows from operations, borrowings under its credit facilities and the
private sale of equity and debt securities.
The Company borrows funds pursuant to a Credit Agreement with First Union
National Bank ('First Union') dated as of March 31, 1998 that provides for a
$2.3 million term loan and a $1.0 million revolving loan (collectively, the
'Credit Facility'). Interest on the term loan accrues at a fixed rate of 8.39%,
while interest on the revolving loan accrues at a floating rate equal to First
Union's prime rate, currently 8.5%. The term loan matures on March 1, 2001 while
the termination date for the revolving loan commitment is May 31, 1999. The
Credit Facility replaced a prior credit facility with First Union that was used
primarily for working capital purposes. On June 30, 1998, the Company had
outstanding borrowings of $2.25 million under the term loan and $0 under the
revolving loan. The Company intends to use certain of the net proceeds of this
offering to repay all amounts due under the Credit Facility. See 'Use of
Proceeds.'
The Company's net cash provided by operating activities during the six
months ended March 31, 1998 was $417,000 compared to $57,000 for the first half
of 1997. Generally, the cash used in operating activities results from increased
working capital requirements.
The Company's net cash used in investing activities during the six months
ended March 31, 1998 was $1.4 million compared to $133,000 during the six months
ended March 31, 1997. In particular, net cash used in investing activities
increased by $702,000 related to the NLL Acquisition and purchases of property
and equipment of $699,000. Net cash provided by financing activities during the
six months ended March 31, 1998 was $1.1 million compared to a use of $34,000
for the comparable period last year. Net cash provided by financing activities
increased primarily by additional bank borrowings in the amount of $1.2 million
which were used to finance investing activities and for the repayment of
$164,000 of long-term debt.
The Company is a party to litigation with Promega Corporation ('Promega')
relating to the infringement by the Company, between October 1990 and June 1993,
of a patent covering major DNA probes used in paternity and forensic testing.
The action regarding the Company's infringement of Promega's sub-licensee patent
rights during the period in question is currently in the damage phase and is
scheduled for trial without a jury in April 1999. Each party has submitted an
expert's report as to the amount of damages owed by the Company to Promega.
Promega's expert has estimated the damages to range from approximately $900,000
to $1.3 million, while the Company's expert has estimated the damages to range
from approximately $100,000 to $900,000. Furthermore, if the Company is
adjudicated to have willfully infringed the patent, the court has the authority
to impose up to treble damages and require the Company to pay Promega's
attorneys' fees. The Company has established a reserve to address expenses
associated with the potential impact of this litigation. Although the Company
believes its reserve is adequate, there can be no assurance that damages will
not substantially exceed the reserved amount or that the judgment will not have
a material adverse effect on the Company's financial condition. See
'Business--Legal Proceedings.'
The Company believes that cash flows from operations, availability under
the Credit Facility, and the anticipated net proceeds of this offering will be
adequate to fund its anticipated working capital requirements for at least the
next 12 months. In order to implement its growth strategy and fund additional
acquisitions, if any, the Company will require substantial capital resources and
may need to incur, from time to time, additional bank indebtedness. The Company
may also need to issue, in public or private transactions, equity or debt
securities, the availability and terms of which will depend on market and other
conditions. There can be no assurance that any such additional financing will be
available on terms acceptable to the Company, if at all. See 'Risk Factors--
Future Capital Needs; Uncertainty of Availability of Additional Financing.'
INFLATION
To date, inflation has not had a material impact on the Company's
operations and financial results.
YEAR 2000
The Company has initiated communications with its software vendors to
determine the extent to which the Company is vulnerable to those third parties'
failure to remediate the Year 2000 issue. The Company relies on the ability of
its outside software vendors for remedial action. There can be no assurance that
the systems of these third party software vendors on which the Company relies
will be converted on a timely basis, or that a failure to
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convert by another company, or a conversion that is incompatible with the
Company's systems, would not have a material adverse effect on the Company.
The Company will utilize internal and external resources to test, replace
and, if necessary, modify the software for Year 2000 compliance. The Company
plans to have all its critical hardware and software Year 2000 compliant not
later than June 30, 1999. The total remaining cost of completion of the
Company's Year 2000 compliance plan is estimated to be less than $100,000 and
will be funded through operating cash flows. Some or all of this expense will be
for new hardware and software, which will be capitalized. To date, the Company
has not incurred any costs, other than internal staff time, related to the
assessment and preliminary efforts in connection with the Year 2000 project and
the development of a remediation plan.
The costs of the project and the date on which the Company plans to
complete the Year 2000 modifications are based on management's best estimates,
which were derived utilizing numerous assumptions of future events, including
the continued availability of certain resources, third party modification plans
and other factors. However, there can be no assurance that these estimates will
be achieved and actual results could differ materially from those plans.
Specific factors that might cause such material differences include, but are not
limited to, the availability and cost of personnel trained in this area, the
ability to locate and correct all relevant software issues and similar
uncertainties. See 'Risk Factors--Year 2000 Risks.'
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BUSINESS
GENERAL
Lifecodes is a leading provider of DNA testing services and related
products for human paternity and forensic identification ('identity testing')
and for genetic typing of potential donors and recipients of bone marrow and
organ transplants ('transplant testing'). Paternity testing seeks to establish
the correct identity of a child's parents when such matters are disputed.
Forensic testing seeks to link hair, saliva, blood or other biological specimens
found at a crime scene to an alleged suspect. Transplant testing detects the
genetic sequence of certain human leukocyte antigens ('HLA') contained in DNA
which are believed to be a principal determinant of whether a donor's bone
marrow or organ transplant may be rejected by the recipient's immune system
('rejection') or may attack the recipient's immune system ('graft vs. host
disease'). The Company is one of the largest providers of paternity, forensic
and transplant testing services in the United States and is one of the largest
providers of transplant testing in Europe. In addition to testing services, the
Company offers a product line consisting of reagents and a wide range of DNA
probes, which are sold principally in either standard configurations or
customized test kits.
Lifecodes was the first company to commercially offer DNA testing for
paternity and forensic identification. In 1987, the Company assisted law
enforcement officials in obtaining the first conviction in the United States
based on DNA testing. The Company's Cellmark subsidiary was the first and is one
of only two commercial forensic laboratories accredited by the American Society
of Crime Laboratory Directors for DNA testing and regularly performs casework
and provides expert DNA testimony in criminal cases nationwide. The Company's
HLA test kits are used by the Naval Medical Research Institute and by 15 of the
19 screening laboratories (including three of the Company's laboratories)
performing DNA testing for the National Marrow Donor Program, which together are
generally regarded as being among the most influential institutions worldwide in
setting transplant testing standards.
Historically, the Company has focused on developing and incorporating its
DNA technology into products to be sold as stand-alone test kits and to a lesser
extent as DNA testing services. Since 1997, the Company has emphasized offering
testing services to end-users of DNA testing information in an effort to meet
demand for an integrated DNA testing solution and to take advantage of access to
new DNA testing process technologies from Molecular Dynamics, Inc., Amersham
Pharmacia Biotech and Molecular Innovations, Inc. which the Company believes,
when fully developed, will improve the speed, quality and breadth of information
provided by its testing services at a reduced cost. In addition, the Company
believes this strategy will allow the Company to exploit opportunities not
otherwise available to it as a marketer of DNA testing products.
INDUSTRY OVERVIEW
Technology
DNA (deoxyribonucleic acid) is the genetic material found in all living
organisms and contains the information that governs all cellular processes. In a
person, every cell contains identical DNA, which is obtained in equal amounts
from a person's biological mother and biological father. DNA is composed of four
chemical bases arranged in a strand, the order of which is unique to each
individual, with the exception of identical twins. A DNA molecule is composed of
two strands that combine in the form of a double helix based on the
complementary nature of their chemical building blocks or 'bases' and consists
of over three billion base pairs in each human cell. The two strands can
typically be separated by heating or by chemical means, but due to their
complementary nature, will flawlessly reform to their original orientation when
the separating agent is removed. DNA testing takes advantage of this strong
complementarity between DNA strands to locate the presence or absence of
specific DNA sequences in a test sample.
All DNA testing involves the isolation of DNA from a sample. Since DNA is
found in virtually all cells in the body, with the major exception of red blood
cells, samples are readily available. The amount of DNA needed for testing is as
little as that found in a few cells. Two primary approaches to DNA testing are
currently utilized. One approach, known as restriction fragment length
polymorphism ('RFLP') analysis, directly tests the DNA isolated from a sample.
The isolated DNA is cut into fragments by enzymes that recognize specific DNA
sequences and the fragments are separated by size. These fragments are then
separated into single strands and
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probes, generally labeled with a fluorescent chemical, are added. The labeled
probes recognize specific regions in the DNA and since the probe is
single-stranded, it binds with its complementary single strand and reforms the
DNA molecule. The chemical label allows the detection of where the probe bound
to the DNA and allows a determination of the size of the fragment identified.
Another approach, polymerase chain reaction ('PCR') analysis, replicates small
quantities of DNA by utilizing special enzymes. DNA is combined with primers,
single strand fragments which recognize specific regions, and enzymes to allow
defined regions of the DNA to be replicated. Once an appropriate number of
copies of DNA have been produced, a variety of detection methods can be used to
obtain a test result.
Prior to the advent of DNA testing technology, identity and transplant
testing were performed through the use of serology, which detects various
proteins found in blood. Although serological testing is typically 20 - 30% less
costly than DNA testing, serological testing has limited predictive power and is
based on measuring biological substances that are less stable than DNA. While
serological testing may provide greater than 95% certainty of identification in
paternity cases, DNA testing typically provides over 99.999% certainty when
identifying a particular individual. In transplant testing, DNA analysis enables
the detection of over 300 genetic differences that may contribute to transplant
incompatibility. One study reported that 48% of individuals deemed to be
compatible by serological testing were found to have one or more differences in
the most commonly studied genetic regions when DNA testing was used. The Company
believes that DNA testing is increasingly replacing serological testing because
it allows for more precise identification and matching, superior accuracy of
results, a broader range of information provided and less specimen degradation.
Markets
The market for nucleic acid diagnostic services (including both DNA and RNA
testing) is significant and growing. According to an independent market study,
the global nucleic acid diagnostic services market was approximately $2 billion
in 1997 and is expected to exceed $3 billion by the year 2002. The nucleic acid
diagnostics market includes testing for identity, transplant compatibility,
genetic diseases, infectious diseases, cancer and others. According to the same
market study, the markets for identity and pre-transplant testing services using
DNA and other technologies together exceeded $400 million worldwide in 1997 and
are growing as a result of emerging medical technology and social trends.
Although DNA testing has grown in many areas, there have been several barriers
to the wider use of DNA testing in the marketplace. Historically, DNA testing
has cost more than serology testing and has taken longer to provide results. For
instance, transplant serology tests can generally be completed in two hours,
while DNA testing currently takes up to four days, thus preventing DNA testing
from being widely used in solid organ transplants where time is a critical
factor. These issues have limited the ability to economically provide the broad
range of information available from DNA testing. For example, only 10% of the
specimens entered into the bone marrow databases in the United States have been
classified by DNA testing, although this percentage has been increasing in
recent years. The Company believes that as DNA testing becomes more economical
from a time and cost standpoint, customers will utilize DNA testing solutions
more broadly to obtain the greater breadth of information and higher quality of
results available from such technology.
Identity Testing
Paternity Testing. Paternity testing is used in both the public and
private sectors to determine the parentage of a child. The public paternity
testing market involves tests ordered by state governmental agencies commonly
referred to as Child Support Enforcement Agencies ('CSEAs'). This market
developed largely in response to the requirements of such agencies to identify
an alleged father, in circumstances where a mother applies for public monetary
assistance or welfare, in order to compel the father to make child support
payments or to recoup any disbursements made for the benefit of the child. In
the United States, the Federal government covers 90% of the cost of child
support as long as the CSEA abides by the specific Federal regulations
concerning enforcement. The Company believes that the growth of paternity
testing will continue in the United States due to various Federal laws which
contain financial penalties and incentives for states to obtain definitive
paternity evidence, either through voluntary admissions or appropriate
biological tests, for 80-90% of public assistance cases involving children. In
1995, only approximately 50% of illegitimate births had definitive paternity
evidence. With over one million illegitimate births annually in the United
States, the Company believes that the enforcement of this Federal legislation
will increase the use of DNA testing in the public paternity
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market. The private paternity testing market typically involves disputes over
paternity in which services are principally ordered through attorneys involved
in resolving such disputes.
Forensic Testing. Forensic testing is used to evaluate biological
specimens involved in a crime in order to identify the individual responsible
for the crime. In recent years, the acceptance of forensic DNA testing has
increased due to a number of high profile criminal cases. The growing
recognition of the effectiveness of DNA testing, combined with the high
percentage of repeat criminal offenders, has prompted the FBI and nearly every
state to establish a Convicted Felon Database Profiling program which would
allow law enforcement officials to search to see if DNA found at a crime scene
matches that of any felon in the database. Specifically, forty-eight states have
enacted legislation requiring persons convicted of felony sex offenses to
provide samples for DNA testing. Thirty-five of these states are currently
collecting such samples and thirty-two states have already started analyzing
those samples.
Transplant Testing
The two major markets for transplant testing worldwide are (i)
pre-transplant screening of potential donors, which consists of high volume
testing to classify and database each potential donor's human leukocyte antigens
('HLA') associated with organ rejection and (ii) clinical testing at transplant
centers to confirm donor/recipient compatibility and to diagnose and manage
organ rejection and other health issues faced by transplant recipients. The
Company believes that bone marrow transplants between two individuals are
increasing in number due to their established effectiveness in treating bone
marrow diseases such as leukemia. There is also anecdotal evidence indicating
that bone marrow transplants may affect tumor reduction in patients with breast
and other cancers, as well as provide therapeutic benefits in patients with
handicapped immune systems. According to a market research study, there were
over 17,000 bone marrow transplants worldwide between different individuals in
1997 and the number of such transplants has been increasing by approximately 16%
per year. In addition, according to a market research study, there were over
32,000 solid organ transplants worldwide in 1997 that required compatible donors
and recipients.
DNA testing is used in the transplant market to match potential bone marrow
and organ donors to recipients. Transplantation fails when the recipient's
immune system does not recognize the donated organ and rejects it. The immune
system recognizes HLA proteins on the surface of cells as part of its defense
mechanism. These HLA proteins vary greatly between individuals, and the DNA that
determines these protein differences can be tested to see whether the donor
matches the recipient. DNA probes that are designed to detect differences in HLA
DNA sequences provide a powerful tool to accurately type the HLA features of
cells. Tagged DNA probes are added to the DNA sample and they bind tightly to
specific HLA sequences. The HLA type is then determined by which DNA probe bound
to the sample.
Use of HLA testing may result in substantial cost savings to hospitals by
increasing the chance of a proper transplant match and therefore reducing the
probability of the need for additional transplants or expensive drug therapies
to prevent rejection of the donated bone marrow or organ. In the United States,
transplants between two individuals typically cost between $80,000 and $300,000,
in large part because physicians must manage not only the risk of donated bone
marrow being rejected, but also the risk that donated bone marrow may attack the
immune system of the recipient (graft vs. host disease). The Company believes
that access to a large number of HLA-typed individuals in order to find the most
compatible donor is a cost-effective way to manage these risks. DNA testing is
better suited to detect subtle genetic variations that impact organ rejection
than traditional serological testing methods. In addition to growth due to the
increased number of transplant procedures, the Company believes that HLA testing
will be used more extensively because scientists have recently discovered that
other portions of the HLA gene system may have important roles in many
nonmalignant diseases, the severity of infectious diseases and the occurrence of
toxic events after therapeutic interventions.
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STRATEGY
The Company's objective is to become the leading international provider of
integrated DNA testing solutions. The Company's strategy for achieving this
objective consists of the following principal elements:
o Continue to Improve DNA Testing Process. The Company intends to use
existing technology, as well as technology being developed through
its current collaborations, to lower costs and improve the quality,
speed and breadth of information provided by its testing services.
The Company is currently developing methods to automate and
miniaturize the DNA testing process and is acquiring additional
technology in this area pursuant to the GeneScreen Acquisition.
Automation is expected to lower labor costs while increasing
accuracy and speed while miniaturization is expected to lower
reagent costs. The Company believes that improvements in speed and
accuracy may permit it to set new standards and specifications,
thereby enhancing the Company's ability to win additional contracts
and further expand its business.
o Pursue Strategic Acquisitions. The Company has completed a number
of recent acquisitions and the pending GeneScreen Acquisition will
close contemporaneously with this offering. The Company intends to
continue to explore such opportunities to expand its market coverage
and laboratory infrastructure. The Company believes that there is an
opportunity to consolidate the industry and enhance laboratory
performance as many smaller laboratories do not have the automation,
information systems or implementation capabilities necessary to
serve larger customers.
o Expand Internationally. The Company believes that there are
substantial opportunities for growth in DNA testing outside the
United States. Due to its capability as a supplier of DNA testing
products, the Company intends to seek opportunities to enter into
joint venture and licensing arrangements in certain large countries
to broaden the base of users of the Company's technology and, where
appropriate, become a provider of testing services. The Company has
recently acquired entities with primary operations in Canada and
Germany and intends to pursue growth opportunities in other
international locations.
o Maintain Industry Leadership Position. The Company intends to
maintain its industry leadership position by working to set industry
standards. The Company's HLA test kits are currently used by the
Naval Medical Research Institute and by 15 of the 19 screening
laboratories (including three of the Company's laboratories)
performing DNA testing for the National Marrow Donor Program, which
together are generally regarded as being among the most influential
institutions worldwide in setting transplant testing standards.
Management is also active in other organizations that set industry
standards in the paternity testing market, such as the American
Association of Blood Banks. In addition, the Company is working with
various international groups to achieve a more uniform set of
testing standards and protocols for classifying potential bone
marrow donors around the world.
o Extend the Company's Technologies into Other Diagnostic Testing
Areas. Over the longer term, the Company believes that it can use
its DNA and related technology to develop other high volume genetic
tests such as those for childhood disorders, cancer risk indicators,
hematologic disorders and oncogene mutations. In addition, the
Company intends to investigate opportunities to expand its range of
testing capabilities and to provide DNA analysis in clinical
transplant centers and other settings.
SERVICES AND PRODUCTS
Services
The three general categories of DNA testing services provided by the
Company are as follows:
Paternity Testing Services. The Company offers a variety of paternity
tests, consisting primarily of a standard test involving the mother, child and
presumptive father. The Company also offers a non-maternal test in which only
the father and the child are tested, neo-natal and pre-natal tests, and a test
that uses samples collected from a child's grandparents to establish paternity.
Since we inherit our DNA from our parents, a child's DNA pattern is a
combination of that of both parents. Standard DNA testing is used to determine
paternity by matching
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the DNA pattern of the mother to those of the child, so that the patterns that
do not match the mother must therefore come from the father. The greater the
number of these DNA patterns that are matched between father and child, the
greater the certainty of paternity. In addition to providing DNA testing, the
Company also provides expert testimony in paternity cases.
Forensic Testing Services. The Company tests a variety of forensic samples
found at crime scenes, such as hair, blood, semen, saliva, skin, bone, muscle
tissue and urine. The Company has both the technological capability and
expertise required to test forensic specimens even in cases where the volume of
the specimen is small and where the specimen has been exposed to humidity and
temperature extremes that can reduce the amount of molecular material available
for testing. The Company also provides expert testimony in cases involving
forensic identity testing. Expert testimony is an important service in the
forensic testing market, as the expert witness is required to interpret both
laboratory methodology and statistics to a jury. Since the Company was one of
the first commercial entities in this field, Company experts have had extensive
experience in dealing with DNA data in such cases and have become recognized in
both lay and legal communities as credible and reliable witnesses.
Pre-Transplant Testing Services. The Company provides screening test
services for typing of bone marrow specimens through both DNA and serological
testing. Pre-transplant testing is generally provided to customer specifications
as to the level of detail and specificity in the test. The Company is able to
provide a wide range of pre-transplant tests due to its extensive selection of
DNA probes and primers. Since many pre-transplant specimens are collected in
large batches from drives sponsored by various organizations and since much of
this testing is still done by serological methods which require processing
within five to seven days, the Company believes it has a competitive advantage
due to its multiple laboratories that perform the testing and generate timely
results. Results are reported back to the central Company database, and
consolidated reports of specimens from each collecting organization and site are
distributed within seven to ten days. The following chart summarizes the types
of testing services offered by the Company and each of its divisions:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
PATERNITY FORENSIC PRE-TRANSPLANT
------------------------------------------------------------------------------------
FELON
DIVISION PRIVATE PUBLIC CASE WORK DATABASING DNA TESTING SEROLOGY
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
United States
Cellmark X X X
GeneScreen X X X X X X
Lifecodes X X X
MDx X X X X X X
NLL X X
International
Helix X X X
ISBMD X X
MMD X
</TABLE>
Laboratory Operations
While each Company laboratory has minor variations in its operating
techniques, the principal elements involved in the performance of the Company's
DNA testing services are as follows:
Specimen Collection and Transportation. For paternity testing and
pre-transplant screening, the Company has established a network of hundreds of
collection sites and experienced specimen collection personnel to handle
specimen collection and transportation, since specimens are often not obtained
in the same location as the customer. In addition, the network of collection
sites allows the Company flexibility in scheduling remote collections within
forty-eight to seventy-two hours after the request is made. Specimens are
generally fresh blood spotted on a specialized cardboard-like paper or cells
collected from the inside of the mouth on the cheek. Once
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the donor has provided the specimen, a detailed information sheet about the
donor is completed and a picture is taken by a trained individual. These, along
with the specimen, are sealed in a tamper-proof box and delivered to the
laboratory via overnight courier or regular mail.
Specimen collection and transportation for forensics and felon databasing
is generally provided by the applicable law enforcement agency. Because of the
nature of the testing (e.g., murder scenes, rape victims), forensic specimens
are found in a variety of forms, including hair, blood, semen, saliva, skin,
bone, muscle tissue and urine.
Receiving and Accessioning. The Company receives specimens in its
restricted accessioning areas, where they are inspected for tampering and
checked for proper documentation. With the exception of forensic cases that
generally require specialized handling, specimens are identified and monitored
using unique bar-coded laboratory accessioning numbers.
Laboratory Handling. After a specimen is received by one of the Company's
laboratories, it is entered into a specialized, proprietary sample tracking
system. The system software has been specifically designed for the Company to
track a specimen from the time it enters the laboratory until it leaves as a
finished result. Upon entry into the laboratory, the biographical information
collected with each specimen is entered into the system. The system allows the
laboratory personnel to monitor the specimen at any time during the testing
process and to catalogue it upon completion into a library of thousands of other
specimens. Along with tracking specimens, the system aids in monitoring the
entire testing process in each of the Company's areas of testing. After testing
is completed and reviewed by the Company's Ph.D. level scientists, the system
accepts the information that is yielded from the DNA test patterns and
transforms it into numeric results, which are the end product that is reported
to the customer.
Data Review and Reporting of Results. Each test result undergoes several
independent levels of review before being reported by a certifying scientist. In
order to assure quality control, each Company laboratory carefully monitors the
accuracy and reliability of its test results through the use of both internal
and external quality assurance and quality control programs. The Company's staff
evaluates laboratory performance with open and blind quality control samples. In
addition, the Company is subject to frequent proficiency testing by various
certifying agencies that send their own open and blind samples to the Company's
laboratories. The Company is also subject to frequent inspections by certifying
agencies. See '--Government Regulation.'
Program Contracting. To increase its share of transplant testing services
outside the United States, the Company acquired ISBMD, a specialized service
organization which contracts to assist a charitable organization in Germany to
process specimens obtained for bone marrow screening analysis.
Products
In addition to its DNA testing services, the Company offers a broad array
of DNA testing products for identity and transplant testing. The Company's
products are generally sold to laboratories as standardized test kits containing
all of the components, including probes, reagents, buffers, standards and
controls necessary to perform certain standard DNA test procedures. Each test
kit also includes protocols and instructions for use. Customers can also
customize test kits by adding selected probes, reagents and other components.
The Company sells over 300 different individual DNA probes. Standard identity
test kits range in price from $90 to $550, while transplant test kits range in
price from $650 to $2,225. DNA probes generally range in price from $200 to $750
per vial.
The Company's products are typically sold pursuant to purchase orders
delivered by customers. The Company generally warrants that its products will
meet written specifications for a limited period of time set forth on the label
of the product. Certain other equipment and supplies are warranted for 90 days.
The Company maintains minimal inventory levels to meet customer demands and
generally operates without a significant backlog.
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TESTING PROCESS AND IMPROVEMENTS
Although the DNA testing methods used by the Company vary based upon the
type of DNA testing performed, the Company's DNA testing processes generally
utilize the following basic steps:
Extraction. Prior to testing a DNA sample, the DNA must be isolated or
extracted from the applicable sample, typically blood or tissue. Extraction
procedures generally involve numerous manual and labor intensive steps to
separate and extract the DNA from the sample. Isolation and extraction of DNA in
forensic testing, in particular, is a time consuming and challenging process,
due largely to the often small amount and poor condition of the sample.
Amplification. In order to provide that the DNA can be easily detected,
the extracted target DNA is copied (or amplified) using PCR. The Company
licenses this process on a non-exclusive basis from Roche. See '--Strategic
Partnerships and Relationships.' In this process, DNA primers are added to a
sample of DNA and the sample is subjected to multiple cycles of heating and
cooling which causes the primers to locate the DNA segments of interest and to
duplicate them in every heating/cooling cycle. After multiple cycles, this
process produces millions of copies of the DNA segment of interest, enabling the
measurement of the presence or absence of this segment.
Probes and Dyes. After the DNA has been extracted and amplified, the two
DNA strands are separated chemically and specific DNA probes are then added,
depending on the type of test to be performed. DNA probes are short,
synthetically-prepared sequences of single-stranded DNA which are complementary
to specific target DNA regions. The DNA probes seek out the sequence that they
complement and bind tightly to the target DNA. The DNA probe is tagged with a
fluorescent chemical or radioactive marker so that the binding of the DNA probe
to the target DNA can be easily detected through automated or other means.
Spotting and Reading. In order to read the results of a DNA test, the DNA
is measured by a process called gel electrophoresis, which involves placing the
specimen on a gelatin-like substance and running electric current through it to
separate strands of DNA by molecular weight. After the electrophoresis process
is performed, a laboratory technician can read and report the test results.
The Company intends to use its existing technology, as well as technology
being licensed from third parties and developed through its current
collaborations, to lower the costs and improve the quality, speed and breadth of
information provided by its testing services. The Company's goal is to develop
the first fully automated, miniaturized DNA testing system that will reduce the
amount of labor and the quantity of reagents used in the DNA testing process.
The Company believes that reducing costs and improving the speed and accuracy of
its testing services will provide it with a competitive advantage in the DNA
testing service market.
In order to meet this goal, the Company has entered into a series of
arrangements with key industry participants to gain access to new technologies.
In January 1998, the Company entered into a technology access agreement with MDI
to use MDI's Microarray spotter and reader in its DNA testing system for
research and development purposes. The Company believes that these two devices
are potentially capable of processing a substantially greater number of samples
per technician than possible using current labor-intensive manual methods. In
connection with this arrangement with MDI, the Company also entered into a
non-binding letter of intent with Amersham, a major shareholder of MDI, pursuant
to which it is intended that the Company would use certain fluorescent dyes
developed by Amersham on a co-exclusive basis with Amersham for human identity
testing and transplantation typing and on a non-exclusive basis for other
diagnostic testing. The Company believes these dyes, when used in conjunction
with its already developed probes and primers and MDI's Microarray spotter and
reader, will allow faster processing time, significant reduction in reagent
costs and improved quality of results. In addition, to attempt to reduce the
costs and time consuming nature of current DNA extraction techniques, the
Company, in March 1998, entered into an exclusive worldwide license to use,
manufacture and sell certain DNA extraction technology developed by Molecular
Innovations. The Company believes that the Molecular Innovations extraction
technology, when fully developed, may allow the Company to perform both DNA
extraction and PCR amplification in the same container without any human
intervention, thereby significantly reducing the manual steps and time necessary
to extract and amplify DNA using currently available methods. See '--Strategic
Partnerships and Relationships.'
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In connection with the GeneScreen Acquisition, the Company is acquiring
certain rights to GeneScreen's proprietary genetic bit analysis ('GBA')
technology. These rights are co-exclusive with Laboratory Corporation of America
Holdings for paternity testing in the United States and exclusive for paternity
testing outside the United States and for all other human and animal identity
and transplant testing worldwide. GBA is a novel method of DNA testing that
employs PCR amplification in a manner that renders a yes/no answer, rather than
a more complex subjective result and permits the procedure to be performed in an
automated and miniaturized system. GBA differs from current PCR technology in
that it. The Company intends to implement GBA as part of its proposed testing
process improvements to maximize the potential benefits of GBA and to realize
its full potential through miniaturization.
The Company is continuing its research and development activities with
respect to its already developed transplant probes and primers and the MDI,
Amersham, Molecular Innovations and GBA technology for human and animal identity
testing. This technology is currently at an early stage of development. In order
to fully develop and commercialize this technology, the Company, alone or with
others, must successfully develop, test, market and sell DNA testing services
based on this technology. The development of a new DNA testing process is highly
uncertain and subject to a number of significant risks, including the
possibilities that the potential test system is found ineffective, fails to
receive any necessary regulatory approvals, is difficult or uneconomical to use
on a large scale, fails to achieve market acceptance or is precluded from
commercialization by proprietary rights of third parties. The improvements to
the DNA testing process that the Company is pursuing will require extensive
additional development, testing and investment, as well as any regulatory
approvals, prior to commercialization. No assurance can be given that the
Company's development efforts will be successful, that required regulatory
approvals will be obtained or that any improvements to the DNA testing process,
if introduced, will be commercially successful. See 'Risk Factors--Uncertainties
Relating to Technological Development and Improvements to DNA Testing Process.'
RESEARCH AND DEVELOPMENT
The Company conducts the majority of its research and development
activities at its own facilities using Company personnel. Taking into account
the Helix Acquisition and the GeneScreen Acquisition, at June 15, 1998, the
Company had 11 employees principally engaged in research and development.
Company-sponsored research and development expenditures in fiscal 1995, 1996 and
1997 were approximately $669,000, $718,000 and $900,000, respectively. The
Company's principal research and development programs are targeted at improving
the Company's testing services, expanding the range and improving the efficiency
and utility of its line of DNA probes and PCR primers. In addition, in 1998 the
Company is devoting significant effort to developing specialized reagent systems
for the MDI Microarray system.
The Company's research and development activities also include optimizing
and standardizing procedures, creating quality control and quality assurance
programs and ensuring that the results obtained through its laboratory services
are reproducible and accurate. Each of the Company's genetic testing services
undergoes an extensive development and testing process prior to its introduction
into the market. This process includes the verification and validation of the
service utilizing previously analyzed and characterized samples and establishing
written protocols and guidelines.
RECENT AND PENDING ACQUISITIONS
Since its acquisition of Cellmark in March 1996, the Company has completed
five acquisitions and has pending an additional acquisition to implement its
goal of becoming the leading integrated international provider of DNA testing
services:
Recent Acquisitions
o MEDICAL MOLECULAR DIAGNOSTICS GMBH. In February 1997, the Company, ISBMD
and its founders formed Medical Molecular Diagnostics GmbH ('MMD') to
perform HLA testing in Germany. In October 1997, the Company acquired a
controlling interest in MMD. See 'Certain Transactions.' The primary
purpose of MMD is to expand the Company's geographic base and to service
samples originated by ISBMD.
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o NATIONAL LEGAL LABORATORIES. In February 1998, the Company acquired
substantially all of the assets of National Legal Laboratories ('NLL'), a
division of Group Benefit Services, Inc., for approximately $730,000 in
cash and an aggregate of 14,600 shares of Common Stock. NLL is the fifth
largest paternity testing laboratory in the United States. NLL generated
revenues of $2.0 million during the year ended September 30, 1997.
o INTERNATIONAL SUPPORT FOR BONE MARROW DRIVES, LTD. In April 1998, the
Company acquired all of the outstanding stock of International Support
for Bone Marrow Drives, Ltd. ('ISBMD') for an aggregate of 365,000 shares
of Common Stock. ISBMD is the largest provider of HLA testing services in
Germany. ISBMD arranges HLA testing to be performed for a large marrow
donor database organization and contracts with a small group of specially
selected laboratories in Germany and the United States to perform both
DNA and serological HLA testing. ISBMD generated revenues of $4.8 million
during the year ended December 31, 1997.
o MICRO DIAGNOSTICS, INC. Effective April 1998, the Company acquired all
of the outstanding stock of Micro Diagnostics, Inc. ('MDx') for an
aggregate of 325,372 shares of Common Stock. MDx is a full service DNA
testing laboratory. MDx generated revenues of $3.0 million during the
year ended December 31, 1997.
o HELIX BIOTECH LTD. In July 1998, the Company acquired substantially all
of the assets of Helix Biotech Ltd. ('Helix') for $650,000 in cash,
payable over 26 months, and an aggregate of 124,100 shares of Common
Stock. Helix is a full service DNA testing laboratory serving the
Canadian market. Helix generated revenues of $1.9 million during the year
ended July 31, 1997.
Pending Acquisition
o GENESCREEN INC. In July 1998, the Company entered into a letter of
intent with GeneScreen Inc. ('GeneScreen') whereby the Company agreed to
acquire substantially all of the stock of GeneScreen for cash and Common
Stock having an aggregate value of $12.5 million. GeneScreen is a leading
provider of paternity testing services, primarily to the public testing
market. The acquisition is expected to be completed contemporaneously
with the closing of this offering. GeneScreen generated revenues of $11.2
million during the year ended December 31, 1997.
STRATEGIC PARTNERSHIPS AND RELATIONSHIPS
In furtherance of the Company's strategic goal of improving the speed,
quality, and breadth of information provided by its testing services and
lowering its costs, the Company has entered into a number of strategic
technology access relationships to implement the ongoing improvement of its
testing process. See '--Testing Process and Improvements.' These relationships
include the following:
Molecular Dynamics, Inc. and Amersham Pharmacia Biotech
In January 1998, the Company, MDI and Nycomed Amersham, plc (now known as
Amersham Pharmacia Biotech) entered into a Technology Access Agreement relating
to MDI's Microarray system, which is comprised of a spotter and reader. Pursuant
to this agreement, the Company obtained a license to purchase MDI Microarray
system units and related products for research, through July 15, 1999, in the
fields of paternity, forensics and tissue transplants. The MDI Microarray system
spots DNA onto a glass slide or other substrate and scans fluorescently-labeled
probes hybridized or bound to the DNA. Until July 15, 1999, the Company will
develop and sell products and test kits under such terms as may be agreed upon
between the Company and MDI. The Company is also permitted to perform tests
using the MDI Microarray system on a paid basis, from and after October 1, 1998,
for the National Marrow Donor Program and the United States Navy. After July 15,
1999, the Company will be free to provide services to all of its customers. The
Company is also negotiating with Amersham a sublicense agreement pursuant to
which the Company would acquire the right, co-exclusive with Amersham, to use
Amersham's fluorescent detection dye technology in connection with the MDI
Microarray system for testing services in the areas of paternity, forensics and
tissue transplants, although this agreement has not been finalized and there can
be no assurance that it will be finalized in the near future, or at all.
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Molecular Innovations, Inc.
In April 1998, the Company and Molecular Innovations entered into a
Purchase and License Agreement relating to Molecular Innovations' Xtra
technology. The Xtra technology, which is covered by pending patents, includes
nucleic acid binding material and a 96-well format for amplifications of DNA
samples. Pursuant to this agreement, the Company acquired an exclusive worldwide
license to make (under Molecular Innovations' authorization), use and sell
products and provide testing services incorporating the Xtra technology in the
fields of paternity, forensic and transplant testing.
Roche Molecular Systems, Inc.
The Company and Roche entered into a License Agreement in March 1997 and a
Parentage Testing Product Agreement in May 1998, each relating to Roche's PCR
technology. The PCR technology is used to amplify DNA samples so as to permit
detection by an automated system. Through the 1997 agreement, the Company
acquired a non-exclusive worldwide license to manufacture and sell PCR-based
products for HLA typing for organ transplants. Through the 1998 agreement, the
Company has a similar license for the paternity field. Under both agreements,
the Company uses and distributes to its affiliates such PCR-based products for
testing services in the licensed fields.
SALES AND MARKETING
Testing Services. The Company has an internal sales force of 23 employees
and also utilizes two independent contractors to promote the Company's testing
services to commercial and governmental laboratories and agencies, as well as to
selected physicians and hospitals across the United States. Decision making in
the public paternity and forensic markets is generally decentralized, requiring
sales activity in each locality or jurisdiction. The Company sells its paternity
testing services in the public market to state agencies through (i) statewide
exclusive contracts or pricing agreements, (ii) statewide non-exclusive
contracts or pricing agreements and (iii) a purchase order or similar basis. The
Company sells its forensic testing services through similar means on a statewide
basis or to local law enforcement authorities or individual attorneys. In
addition to face-to-face sales calls, the Company uses direct mailings and
telemarketing to target groups of physicians, prosecutors and family welfare
agencies. In the even more decentralized private paternity market, the Company
relies primarily on telemarketing and the use of brokers to reach its main
source of referrals--attorneys and physicians. As the pre-transplant market is
more highly concentrated primarily in the hands of a few governmental and
not-for-profit entities, the Company targets its sales force toward key decision
makers at the largest customers such as the Naval Medical Research Institute and
the National Marrow Donor Program. The Company also participates in professional
meetings, sponsors educational forums and promotes the Company on its site on
the World Wide Web. In order to facilitate the marketing of its testing
services, the Company contracts with over 200 collection sites with available
phlebotomists throughout the country to assist its customers in collecting
specimens. The phlebotomy service is an important competitive tool in the public
sector paternity market as the convenience of local phlebotomists can influence
a customer's decision about where to send specimens if more than one laboratory
is an approved provider.
During the fiscal year ended September 30, 1997 and six months ended March
31, 1998, on a pro forma basis after giving effect to the Recent and Pending
Acquisitions as if they were consummated on October 1, 1996, DKMS accounted for
approximately 15% and 17% of the Company's revenues, respectively. DKMS is a
German charitable foundation of which Prof. Dr. Gerhard Ehninger, a director of
the Company, is a founder and a member of its Board of Directors. See 'Certain
Transactions.' DKMS has utilized the Company to oversee the logistics, quality
and data management needed by DKMS or the organizers of its bone marrow specimen
collection drives. The Company does not have a written contract with DKMS to
provide testing services and there can be no assurance that DKMS will organize
bone marrow specimen drives in the future or that DKMS will continue to use the
Company to provide the testing services related to the specimen drives. The loss
of or substantial decrease in business from DKMS would have a material adverse
effect on the Company's business, financial condition and results of operations.
Products. The Company also has seven employees engaged in selling and
marketing DNA testing products and also utilizes the services of one sales
representative in Europe. The Company currently sells its
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products outside the United States through a network of approximately a dozen
distributors located worldwide. The Company's products are sold in the United
States and Europe to clinical, reference and hospital laboratories through its
direct sales force, with the exception of sales of paternity and forensic
products in Europe, which are sold through its distributor Cellmark UK, a
division of Zeneca, plc.
MANUFACTURING
The Company's products are manufactured, assembled and packaged at its
facility in Stamford, Connecticut. At June 15, 1998, the Company employed 15
people engaged in manufacturing and assembly operations. Certain of the
Company's paternity and transplant test kits also include reagents that the
Company purchases from third parties. In addition, certain of the Company's
transplant test kits include a license to use the PCR process for diagnostic use
which is covered by certain patents owned by Roche. See '--Strategic
Partnerships and Relationships.'
Of the components used in the Company's test kits, many are purchased from
third parties and are available from alternative suppliers. Several components,
however, are provided by single source suppliers and include certain probes,
light enhancing chemicals and substrates. The Company believes that in most of
these cases, alternative sources of supply are available or could be developed
within a reasonable period of time. To date, the Company has been able to obtain
adequate supplies of all necessary materials and components from its suppliers.
The Company maintains a strategic inventory of certain key components and raw
materials currently obtained from single-source suppliers; however, there can be
no assurance that such inventories would be adequate to meet the Company's
production needs during any interruption of supply. The inability to develop
alternative supply sources, if required, or a reduction or stoppage in supply
could have a material adverse effect on the Company's business, financial
condition and results of operations. See 'Risk Factors--Dependence on Single
Source Suppliers.'
GENESCREEN ACQUISITION
The letter of intent with GeneScreen provides that at the closing (the
'Closing'), the Company would acquire by merger all of the issued and
outstanding stock of GeneScreen. On the date of the Closing, the Company would
acquire all of the stock of GeneScreen for an aggregate purchase price of $12.5
million payable as follows: $5.0 million in cash plus $7.5 million in registered
shares of Common Stock (the 'Lifecodes Shares') to be issued on the date of
closing of this offering; provided that all shares issued to GeneScreen's
shareholders shall be subject to a 180 day lock-up agreement. See 'Shares
Eligible for Future Sale.' The number of shares will be determined by dividing
$7.5 million by the price to the public in this offering, except that for
purposes of the calculation, the price of such shares shall not exceed $16.44
per share. Payment of the cash portion of purchase price would be subject to
reserves or escrow arrangements of up to 20% of the aggregate purchase price.
There will be an adjustment at the time of the Closing providing for the
issuance of additional Lifecodes Shares up to a maximum aggregate value equal to
$1.25 million or reduction in the number of Lifecodes Shares issued or refund to
the Company of cash held in escrow based upon changes to the GeneScreen balance
sheet net worth from May 31, 1998 to the end of the month immediately preceding
the month in which the Closing occurs, with the Lifecodes Shares valued at the
same price as at Closing. The obligation of the Company to consummate the
GeneScreen Acquisition is subject to the execution of definitive agreements, the
approval of the transaction by the GeneScreen stockholders pursuant to Delaware
law, the sale (the 'MTI Sale') or spin-off by GeneScreen of its Molecular Tool,
Inc. ('MTI') subsidiary, and additional customary closing conditions, such as:
(i) satisfactory completion of due diligence, (ii) obtaining all approvals,
consents and/or waivers, and (iii) no adverse change in the business, assets,
liabilities, operations, prospects, properties or condition, financial or
otherwise, of GeneScreen.
The Company has agreed in principle until the sale of MTI, to provide
financial accommodations to GeneScreen contingent upon negotiation and execution
of definitive agreements. The Company agreed that from July 1, 1998 until the
earliest to occur of (i) the MTI Sale, or (ii) the GeneScreen Acquisition,
GeneScreen may defer further payment of accounts due to the Company, and may, in
accordance with its usual course of business, generate new accounts due to the
Company. At the Closing, accounts due to the Company through the date of
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Closing will be treated as reductions to the balance sheet of the Company for
purposes of the closing adjustment. In addition, commencing July 1, 1998, the
Company advanced $150,000 to GeneScreen and the Company shall advance up to
$150,000 per month (not to exceed $600,000 in the aggregate), until the MTI Sale
is consummated.
COMPETITION
The Company competes in the medical diagnostics, laboratory, biotechnology
and medical services industries, each of which is characterized by numerous
competitors, extensive research and development efforts and rapid technological
progress. Among the Company's major competitors in the market for DNA probe
diagnostics products are Abbott Laboratories, Affymetrix, Inc., Chiron
Corporation, Myriad Genetics, Inc., The Perkin-Elmer Corporation, Promega
Corporation and Roche Molecular Systems, Inc. Many of these competitors have
substantially greater financial, technical and sales and marketing resources
than the Company. Other companies, including large pharmaceutical and
biotechnology companies, may enter the market for DNA probe diagnostics or have
already commenced research and development in the field. Moreover, such
competitors may offer broader product lines and have greater name recognition
than the Company, and may offer discounts as a competitive tactic. In addition,
competitive products may be designed, manufactured and marketed more
successfully than the Company's existing or potential products. Such
developments could render the Company's products less competitive or obsolete,
and could have a material adverse effect on the Company's business, financial
condition and results of operations.
In the laboratory service market there are numerous competitors, including
Laboratory Corporation of America, many of which have substantially greater
financial, technical, research and other resources and larger, more established
marketing, sales, distribution and service organizations than the Company.
Certain competitors may also offer a broader array of services than the Company.
In addition, several development stage companies have entered the market for DNA
testing services and have test offerings that compete with or will compete with
those of the Company. The Company's future success will depend in large part on
its ability to maintain a competitive position in the quality of service it
provides to its laboratory service customers. If the Company is unable to
consistently deliver accurate and timely services at a competitive price, such
developments would have a material adverse effect on the Company's business,
financial condition and results of operations.
The public segment of the forensics testing market includes the FBI as well
as local and state law enforcement agencies. Currently the FBI and many state
and local criminal laboratories offer forensics testing at no charge to the law
enforcement community. However, FBI and state laboratories often have backlogs
of forensic casework that needs to be performed.
The Company relies on certain technologies that are not patentable or
proprietary and consequently may be available to the Company's competitors.
Competition may increase further as a result of the potential advances in the
technology underlying the services and products developed by the Company. The
Company also is aware that other companies have developed or may be developing
genetic testing and information technologies, services and products for
diagnostic purposes that are or may be competitive with the Company's services
and products. The Company also competes with others in acquiring products or
technology from research institutions or universities. Potential competitors may
be able to develop technologies that are as effective as, or more effective
than, those offered by the Company, which would render the Company's products or
services noncompetitive or obsolete and could have a material adverse effect on
the Company's business, financial condition and results of operations.
The important competitive factors in the Company's testing services
business are accuracy, response time and price. The important competitive
factors in the Company's products business are availability, accuracy and price.
PATENTS AND PROPRIETARY RIGHTS
The Company believes that intellectual property protection is important to
its business, and that the Company's success will depend in part on its ability
to maintain existing protection, obtain additional protection, and to avoid
infringing the proprietary rights of others.
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The Company is the assignee of five issued U.S. patents and certain
corresponding foreign patents. In addition, the Company is the exclusive
licensee of three U.S. patents worldwide. The patents issued or licensed to the
Company cover genetic probe sequences and nucleic acid analysis methods useful
in the Company's DNA testing services and diagnostic kits. The Company's patents
expire between 2010 and 2014.
The issuance of a patent is not conclusive as to its validity or as to the
enforceable scope of the claims of the patent. There is no assurance that the
Company's patents or any future patents will prevent other companies from
developing non-infringing similar or functionally equivalent products or from
successfully challenging the validity of the Company's patents. Furthermore,
there is no assurance that (i) any of the Company's future products or processes
will be patentable; (ii) any pending or additional patents will issue to the
Company in any appropriate jurisdiction; (iii) the Company's processes or
products will not infringe the patents of third parties; or (iv) the Company
will have the resources to defend against charges of infringement by third
parties, or to protect its own patent rights. The inability of the Company to
protect its patent rights or infringement by the Company of the patent or
proprietary rights of others could have a material adverse effect on the
Company's business, financial condition and results of operations. See 'Risk
Factors--Dependence on Proprietary Technology; Uncertainty of Patent
Protection.'
The Company's business consists of the sale of testing services and
products. In each area, the Company relies on a combination of patents,
trademarks, trade secrets, copyrights and confidentiality agreements to protect
its proprietary technology, rights and know-how. The Company's success will
depend in part on its ability or the ability of its licensors or sub-licensors
to obtain patents, defend patents, maintain trade secrets, defend copyrights and
operate without infringing the proprietary rights of others, both in the United
States and in foreign countries. The position of companies relying upon
biotechnology is highly uncertain in general and involves complex legal and
factual issues, and no consistent policy has emerged regarding the breadth of
claims allowed in biotechnology patents. Although the Company and certain of the
Company's licensors and sub-licensors have filed patent applications relating to
technologies and discoveries used by the Company, there can be no assurance that
patents will be issued as a result of such patent applications or that, if
issued, such patents will be sufficiently broad to afford protection against
competitors. The commercial success of the Company also will depend upon
avoiding the infringement of patents issued to third parties, obtaining licenses
to third parties' technologies and genetic discoveries and maintaining licenses
upon which certain of the Company's services are, or might be, based. In
particular, third parties, including potential competitors, have already filed
patent applications relating to a variety of genes and genetic mutations
underlying certain of the Company's services, and may in the future file
additional such patent applications. In the event that any such patents are
issued to such parties, such patents may preclude the Company, its licensors and
sub-licensors from providing genetic testing services and could require the
Company to enter into licenses with such parties or cease such activities. There
can be no assurance that any required licenses would be available on acceptable
terms, or at all.
Litigation, which could result in substantial cost to the Company, may be
necessary to determine the scope and validity of others' proprietary rights or
to enforce the Company's patent, copyright, trade secret and license and
sublicense rights. The failure by the Company to obtain any such licenses, if
required, and the Company's involvement in such litigation, could have a
material adverse effect on the Company's business, financial condition and
results of operations.
The Company also relies on certain technologies, trade secrets and know-how
that are not patentable or proprietary and are available to the Company's
competitors. Although the Company has taken steps to protect its unpatented
technologies, trade secrets and know-how, in part through the use of
confidentiality agreements with its employees, consultants and certain of its
contractors, there can be no assurance that these agreements will not be
breached, that the Company would have adequate remedies for any breach or that
the Company's trade secrets will not otherwise become known or be independently
developed or discovered by competitors.
GOVERNMENT REGULATION
The Clinical Laboratory Improvement Act ('CLIA'), as amended in 1988,
provides for regulation of clinical laboratories by the United States Department
of Health and Human Services ('HHS'). These regulations mandate the
certification of all clinical laboratories performing tests on human specimens
for the purpose of providing information for the diagnosis, prevention or
treatment of any disease. These regulations also contain
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guidelines for the qualifications, responsibilities, training, working
conditions and oversight of clinical laboratory employees. In addition, specific
standards are imposed for each type of test that is performed in a laboratory.
Each of the Company's laboratories requiring certification are certified under
these regulations and the Company believes that it is in substantial compliance
with these guidelines. CLIA, and the regulations promulgated thereunder, are
enforced through quality inspections of test methods, equipment,
instrumentation, materials and supplies on a bi-annual and 'spot' basis.
The Company's laboratories are licensed, accredited or regulated by various
trade, federal and state agencies. The Company has received accreditation from
HHS for laboratory services, and from the American Association of Blood Banks,
American Society of Crime Laboratory Directors, and the American Society of
Histocompatibility and Immunogenetics. The Company also possesses licenses in
the United States from the states of New York, Maryland and Pennsylvania and
intends to seek approval from other states as required. No assurance can be
given that the Company will be able to obtain or renew such approvals, licenses
or accreditations on a timely basis or at all. The loss of, or the failure to
obtain, any required state license or CLIA accreditation could have a material
adverse effect on the Company's business, financial condition and results of
operations. In addition, the loss of, or a failure to obtain accreditations from
certain trade associations could adversely affect the Company's competitive
position and could, therefore, have a material adverse effect on the Company's
business, financial condition and results of operations. See 'Risk
Factors--Government Regulation.'
While the United States Food and Drug Administration (the 'FDA') does not
currently regulate the genetic tests underlying the Company's services if they
are performed in a CLIA certified clinical laboratory, there can be no assurance
that the FDA will not seek to regulate such tests in the future. If, in the
future, the FDA should determine that the tests underlying the Company's
services should be subject to FDA approval, there can be no assurance that such
approval would be received on a timely basis or at all. Any change in CLIA or
related regulations, or in the interpretation thereof, or in the FDA's position
on regulating the tests underlying the Company's services, could have a material
adverse effect on the Company's business, financial condition and results of
operations. Furthermore, the Company does not have experience in obtaining FDA
approval for the products or services that it markets. Such approval, if
required, would increase the Company's costs of operations and increase the time
required to introduce new products to market.
The Company is subject to extensive federal, state and local regulation,
including regulation under the Occupational Safety and Health Act, the
Environmental Protection Act, the Toxic Substances Control Act, the Resource
Conservation and Recovery Act and other laws, rules and regulations governing
health care, clinical laboratory activities, waste disposal, handling of toxic,
dangerous or radioactive materials and other matters. Although the Company's
services are currently considered screening services under Medicare and are
therefore excluded from coverage under Medicare, if the Company begins providing
clinical transplant services or if the Medicare regulations are changed, the
Company's services may become subject to laws, rules and regulations governing
reimbursement and fraud and abuse, and prohibiting the filing of false claims.
These laws, rules and regulations include 'anti-kickback' and 'Stark' laws,
which contain extremely broad proscriptions, the violation of which may result
in exclusion from Medicare and Medicaid and criminal and civil penalties. In
addition, the Company is subject to state laws, rules and regulations limiting
certain financial relationships between health care providers and physicians and
other referral sources. Although the Company believes that it is in substantial
compliance with all applicable laws, rules and regulations, there can be no
assurance that the Company will remain in compliance with applicable laws, rules
and regulations or that changes in, or new interpretations of, existing laws,
rules and regulations would not have a material adverse effect on the Company's
business, financial condition and results of operations.
The availability of genetic predisposition testing has raised certain
ethical, legal and social issues regarding the appropriate utilization and
confidentiality of information provided by such testing. The medical information
obtained or determined about an individual from the Company's services is of an
extremely sensitive nature. In providing its services, the Company is subject to
certain statutory, regulatory and common law requirements regarding the
confidentiality of such medical information. The Company monitors compliance
with applicable confidentiality requirements, and believes that it is in
substantial compliance with such requirements. Failure to comply with such
confidentiality requirements could result in material liability to the Company.
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EMPLOYEES
Taking into account the Helix Acquisition and the GeneScreen Acquisition,
as of June 15, 1998, the Company employed 305 persons, consisting of 185 in
laboratory operations and genetic services, 64 in administration, 30 in sales
and marketing, 15 in manufacturing, and 11 in research and development. None of
the Company's employees is represented by a labor union. The Company has
experienced no work stoppages and believes that its relations with its employees
are good.
FACILITIES
The Company's executive offices and main manufacturing facilities are
located in an approximately 25,000 square foot facility located in Stamford,
Connecticut. The Company also leases facilities at the following locations:
<TABLE>
<CAPTION>
LOCATION USE SQUARE FOOTAGE
- ----------------------------------------------------- ------------------ --------------
<S> <C> <C>
Germantown, MD....................................... Laboratory/Office 16,300
Okemos, MI........................................... Laboratory/Office 5,700
Dresden, Germany..................................... Laboratory 3,700
Nashville, TN........................................ Laboratory/Office 15,000
High Point, NC....................................... Office 650
Dallas, TX........................................... Laboratory/Office 19,200
Dayton, OH........................................... Laboratory/Office 12,500
Sacramento, CA....................................... Laboratory/Office 5,100
Raritan, NJ.......................................... Office 360
Buffalo, NY.......................................... Office 500
Rochester, NY........................................ Office 180
Richmond, British Columbia........................... Laboratory/Office 6,000
Oakville, Ontario.................................... Office 500
Montreal, Quebec..................................... Office 300
</TABLE>
The lease on the Company's Stamford, Connecticut facility expires in April
2002 and the Company's other facility leases expire at various times between
1998 and 2007.
LEGAL PROCEEDINGS
The Company is a party to the action captioned Promega Corporation v.
Lifecodes Corporation in the United States District Court for the District of
Utah, (Civil No. 2:93cv0184C). This case relates to the infringement by the
Company, between October 1990 and June 1993, of a patent covering major DNA
probes used in paternity and forensic testing (the 'White Patent'). Promega was
the exclusive sub-licensee of the White Patent until June 1995 and the Company
is currently the exclusive licensee of this patent. The action regarding the
Company's infringement of Promega's sub-licensee patent rights during the period
in question is currently in the damage phase and is scheduled for trial without
a jury in April 1999. Each party has submitted an expert's report as to the
amount of damages owed by the Company to Promega. Promega's expert has estimated
the damages to range from approximately $900,000 to $1.3 million, while the
Company's expert has estimated the damages to range from approximately $100,000
to $900,000. Furthermore, if the Company is adjudicated to have willfully
infringed the patent, the court has the authority to impose up to treble damages
and require the Company to pay Promega's attorneys' fees. The Company has
established a reserve to cover the impact of this litigation. Although the
Company believes its reserve is adequate to cover any potential damages, there
can be no assurance that damages will not substantially exceed the reserved
amount or that the judgment will not have a material adverse effect on the
Company's financial condition. See 'Risk Factors--Risks Related to Litigation.'
The Company also entered into arbitration with Promega to resolve
differences arising from interpretation of the sub-license agreement that
expired on July 1, 1995. Promega argued that their right to continue to sell DNA
probes covered by the White Patent survived the expiration of the contract
because they had modified, improved or enhanced the probes. In January 1996, the
arbitrator determined that Promega has non-exclusive rights to sell modified
probes based on the White Patent but that Promega has no rights to further
improve or modify the probes. The arbitration was confirmed by the United States
District Court for the District of Utah on July 16,
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1996. The Company alleges that in violation of the arbitrator's decision,
Promega altered its probe products and is selling improved, modified products
and thus may be in contempt of the Federal confirmation. The Federal Court that
initially confirmed the arbitrator's decision heard arguments on whether Promega
violated the arbitrator's order and whether an injunction should issue on June 1
and 2, 1998 and a decision is pending. If the Company prevails on the issues
presented at the June 1998 hearing, it intends to seek damages and sanctions for
the unauthorized sales made by Promega and to have Promega's non-exclusive
license voided.
The Company is also a party to the action captioned Lifecodes Corporation
vs. Serological Services Limited in the Federal Court of Canada, Trial Division
(No. T-134-95). This case relates to the alleged infringement of a patent by
Serological Services Limited ('SSL') relating to a paternity testing technology.
SSL has filed a Statement of Defense and Counterclaim alleging that the patent
in question is invalid and seeking damages. The matter is currently pending
before the Trial Division of the Federal Court of Canada.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth, as of the date of this Prospectus, the
names, ages and other information concerning those persons who are or will be
directors and executive officers of the Company upon the closing of this
offering.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------------ --- ---------------------------------------------------------------
<S> <C> <C>
Richard A. Sandberg....................... 56 Chairman of the Board, Acting Chief Financial Officer and
Director
Walter O. Fredericks...................... 58 President, Chief Executive Officer and Director
Ivan Balazs, Ph.D.(1)..................... 56 Vice President, Research and Director
Michael T. Petrillo....................... 33 Vice President, Sales and Marketing
Jacob Victor, Ph.D........................ 47 Vice President, Development
Michael L. Baird, Ph.D.................... 48 Vice President, Laboratory Operations
Dean L. Somer............................. 35 Controller, Treasurer and Secretary
Joseph I. Bishop(2)(3).................... 59 Director
Keith W. Brown(4)......................... 45 Director
Claude L. Buller.......................... 55 Director
Prof. Dr. Gerhard Ehninger................ 46 Director
Dean E. Fenton(2)(3)...................... 64 Director
John A. Hansen, M.D.(2)(3)(5)............. 55 Director
Ross V. Hickey, Jr........................ 63 Director
Milton Steele(6).......................... 50 Director
</TABLE>
- ------------------
(1) Effective upon the closing of this offering, Dr. Balazs will resign as a
Director of the Company.
(2) Member of the Audit Committee.
(3) Member of the Compensation Committee.
(4) Mr. Brown will join the Board upon the closing of this offering and the
consummation of the GeneScreen Acquisition.
(5) Dr. Hansen will join the Board upon the closing of this offering.
(6) Effective upon the closing of this offering, Mr. Steele will resign as a
Director of the Company.
Richard A. Sandberg has served as Chairman of the Board and Chief Financial
Officer since May 1997. From 1983 to 1998, he served in a variety of positions
including Chairman and Chief Executive Officer at DIANON Systems Inc., an
oncology marketing and database firm that he co-founded. He has been a
co-founder of a number of companies in the healthcare and database fields over
the last twenty years. Prior to starting his first company, Mr. Sandberg was
engaged in venture capital and corporate finance activities with Smith Barney &
Co. and a predecessor to Rothschild, Inc. in New York City. Mr. Sandberg
currently serves as a director of UroMed Corporation.
Walter O. Fredericks has served as President and Chief Executive Officer
and as a Director of the Company since 1988. Prior to joining Lifecodes, Mr.
Fredericks held sales, marketing and senior management positions with Johnson &
Johnson and Becton Dickinson. Mr. Fredericks is also a founder and Chairman of
Electronic Instruments International Inc., a privately-held electronics company
focused on the monitoring of high voltage power distribution.
Ivan Balazs, Ph.D. joined Lifecodes in 1983 as Director of Research and
Development. He has also served as Director of Clinical Services and Director of
Genetics. He was appointed Vice President, Research in 1991. Dr. Balazs is a
geneticist specializing in DNA testing and is the author of numerous scientific
publications in the field of DNA testing. Dr. Balazs has served as a Director of
the Company since 1991.
Michael T. Petrillo joined Lifecodes in 1992 as Technical Marketing
Specialist and was appointed Director, Sales and Marketing in 1993. He was
appointed Vice President, Sales and Marketing in 1996. His background
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<PAGE>
includes over six years of sales and product management experience at CPG,
Applied Biosystems and International Biotechnologies.
Jacob Victor, Ph.D. joined Lifecodes in 1990 as Director, Medical Product
Development. He was appointed Vice President, Director of Product Development in
1991. Dr. Victor has broad experience in product development including six years
with Roche Diagnostics as Group Chief in their infectious disease group. Dr.
Victor served as a Director of the Company from October 1991 to April 1998.
Michael L. Baird, Ph.D. has been with Lifecodes since its inception in
1982. He was appointed Vice President, Laboratory Operations in 1992. Dr. Baird
serves as the primary expert witness for Lifecodes in court cases and testified
in the first case in the United States to result in a conviction utilizing DNA
technology.
Dean L. Somer joined Lifecodes in 1988 as Accounting Manager and was
appointed Controller and Treasurer in 1991. Mr. Somer was also appointed as
Secretary of the Company in July 1998. Prior to joining Lifecodes, Mr. Somer
worked for Oxford Energy Co., Ted Bates Worldwide and the Martin Segal Company.
Joseph I. Bishop has served as a Director of the Company since 1991. Mr.
Bishop is the founder and sole stockholder of Hydromotion, Inc., a manufacturer
of precision fluid valves, controls and hydraulics. In addition, Mr. Bishop is a
founder and director of New Century Bank.
Keith W. Brown has been the President and Chief Executive Officer of
GeneScreen Inc. since April 1988. Mr. Brown will join the Board and become a
Senior Vice President of Lifecodes upon the closing of this offering and the
consummation of the GeneScreen Acquisition.
Claude L. Buller has served as a Director of the Company since the sale of
his interest in ISBMD to the Company in April 1998 and also serves as a
consultant to the Company. Mr. Buller has been President, Chief Executive
Officer and a Director of Marco International, Inc., a privately-held
manufacturer of electronic components and assemblies since 1995. From November
1994 to June 1995 he served as President and Chief Executive Officer of VimRx
Pharmaceuticals, Inc., a biotechnology company, and from 1988 to 1994 he served
as President and Chief Executive Officer of Genetic Design, Inc., a paternity
testing laboratory.
Prof. Dr. Gerhard Ehninger has served as a Director of the Company since
the sale of his interest in ISBMD to the Company in April 1998 and also serves
as a consultant to the Company. Currently, he serves as Director, Medizinische
Klinik und Poliklinik I at the Universitatsklinikum Carl Gustav Carusin der
Technischen Universitat Dresden, in Germany. Dr. Ehninger is a founder and has
been a director since 1991 of Deutsche Knochenmarkspenderdatei GmbH, a private
charitable foundation creating a bone marrow registry in Germany.
Dean E. Fenton has served as a Director of the Company since November 1997.
He is a founding partner and has served as President of Prime Capital Management
Inc. ('Prime'), a venture capital firm specializing in technology investments,
since its formation in 1981. Mr. Fenton also serves as a director and general
partner of various private companies. Prime made its first investment in the
Company in 1991.
John A. Hansen, M.D. has served as head of the Human Immunogenetics Program
at the Fred Hutchinson Cancer Research Center in Seattle, Washington since 1993
and has served as a Professor of Medicine in the Division of Oncology at the
University of Washington since 1983. Dr. Hansen is currently the Chairman of the
National Marrow Donor Program and is a member of the editorial boards of
numerous professional publications and the author of over 300 articles in
immunogenetics and related fields.
Ross V. Hickey, Jr. has served as a Director of the Company since the sale
of his interest in Micro Diagnostics, Inc. to the Company in April 1998. Mr.
Hickey served as Chairman and Chief Executive Officer of Micro Diagnostics, Inc.
from March 1996 until the sale. Since 1970, Mr. Hickey has also been Chairman of
Century II Financial and Century II Corporation which are involved in financial
services to small businesses and retail pharmacies, and real estate investments.
Milton Steele has served as a Director of the Company since January 1998.
He joined FMC Corporation in 1977 and has been Division Manager of FMC
BioProducts since 1997. Prior to 1997, Mr. Steele spent 14 years in Asia, most
recently as General Manager of various FMC businesses in the Asia Pacific
region.
48
<PAGE>
Executive officers of the Company are elected by the Board on an annual
basis and serve until their successors are duly elected and qualified. There are
no family relationships among any of the executive officers or directors of the
Company.
BOARD CLASSIFICATION
Upon the closing of this offering, the Board will be divided into three
classes, with the members of each class of directors serving for staggered
three-year terms. Messrs. Fredericks, Brown and Hansen will serve in the class
the term of which expires in 1999; Messrs. Buller, Bishop and Fenton will serve
in the class the term of which expires in 2000; and Messrs. Ehninger, Hickey and
Sandberg will serve in the class the term of which expires in 2001. Upon the
expiration of the term of each class of directors, nominees for such class will
be elected for a three-year term at the next annual meeting of stockholders. The
Company's adoption of a classified Board of Directors could have the effect of
increasing the length of time necessary to change the composition of a majority
of the Board. In general, at least two annual meetings of stockholders will be
necessary for stockholders to effect a change in a majority of the members of
the Board. See 'Description of Capital Stock--Delaware Law and Certain
Provisions of the Company's Certificate of Incorporation and Bylaws.'
The General Corporation Law of Delaware permits a corporation, through its
Certificate of Incorporation, to eliminate the personal liability of its
directors to the corporation or its stockholders for monetary damages for breach
of fiduciary duty of loyalty and care as a director, with certain exceptions.
The exceptions include a breach of fiduciary duty of loyalty, acts or omissions
not in good faith or which involve intentional misconduct or knowing violation
of law, improper declarations of dividends, and transactions from which the
directors derived an improper personal benefit. The Company's Certificate of
Incorporation exonerates its directors from monetary liability to the fullest
extent permitted by this statutory provision but does not restrict the
availability of non-monetary and other equitable relief.
BOARD COMMITTEES
The Board has established an Audit Committee and a Compensation Committee.
The Audit Committee reviews the results and scope of the audit and other
services provided by the Company's independent accountants and is expected to
consist of Messrs. Bishop, Fenton and Hansen. The Compensation Committee will
approve salaries and certain incentive compensation for management and key
employees of the Company, will administer the 1992 Employee Stock Option Plan,
the 1995 Employee Stock Option Plan and the 1998 Stock Plan and will consist of
Messrs. Bishop, Fenton and Hansen.
DIRECTOR COMPENSATION
Directors who are also employees of the Company or one of its subsidiaries
will not receive additional compensation for serving as directors. Each director
who was a founder of the Company or who became an investor in the Company
through the acquisition of his business will receive a fee of $1,500 per meeting
attended, plus reimbursement of out of pocket expenses. Directors in this group
are Messrs. Bishop, Fenton, Hickey and Steele. Each director who is neither an
employee of the Company or one of its subsidiaries nor a founder or stockholder
of the Company through an acquisition (an 'Outside Director') receives an annual
retainer of $20,000, plus reimbursement of out of pocket expenses. Each Outside
Director also receives, upon joining the Board, a one-time five year option to
purchase 20,000 shares vesting 40% after the second anniversary of the date of
grant, 60% after the third anniversary of the date of grant, 80% after the
fourth anniversary of the date of grant and 100% after the fifth anniversary of
the date of grant. Directors are not compensated for service on committees of
the Board.
Mr. Buller and Prof. Dr. Ehninger are parties to Consulting Agreements with
the Company and are not paid Director fees. See 'Certain Transactions.'
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the fiscal year ended September 30, 1997, the Compensation Committee
consisted of three non-employee directors--Mr. Bishop, Theodore H. Elliott, Jr.
and Gerald A. Moss. Mr. Sandberg replaced Mr. Elliott as a member of the
Compensation Committee in October 1997 and Mr. Steele replaced Mr. Moss upon his
49
<PAGE>
resignation from the Board effective January 1, 1998. Mr. Sandberg also serves
as Acting Chief Financial Officer of the Company. Upon consummation of this
offering, the Compensation Committee of the Board will consist of Messrs.
Bishop, Fenton and Hansen. No member of the Compensation Committee serves as a
member of the board of directors or compensation committee of any entity that
has one or more executive officers serving as a member of the Board or
Compensation Committee.
EXECUTIVE COMPENSATION
The following table sets forth the annual and long-term compensation paid
or accrued by the Company and its subsidiaries to those persons who were (i) the
Chief Executive Officer and (ii) the other four most highly compensated
executive officers of the Company (collectively, the 'Named Executive
Officers'), for services rendered by them in all capacities in which they served
the Company and its subsidiaries during the fiscal year ended September 30,
1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION ------------
---------------------------------------- SECURITIES
OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION SALARY($) BONUS($) COMPENSATION(1) OPTIONS(2) COMPENSATION($)(3)
- -------------------------------------------- --------- -------- --------------- ------------ ------------------
<S> <C> <C> <C> <C> <C>
Walter O. Fredericks
President and Chief Executive Officer....... 197,637 90,000 -- -- 4,753
Michael T. Petrillo
Vice President, Sales and Marketing......... 88,750 161,882(4) -- -- 6,323
Ivan Balazs, Ph.D.
Vice President, Research.................... 106,916 44,000 -- -- 4,556
Jacob Victor, Ph.D.
Vice President, Development................. 94,277 25,000 -- -- 4,714
Michael L. Baird, Ph.D.
Vice President, Laboratory Operations....... 93,300 20,000 -- -- --
</TABLE>
- ------------------
(1) In accordance with the rules of the Securities and Exchange Commission,
other compensation in the form of perquisites and other personal benefits,
securities or property has been omitted for each of the Named Executive
Officers because such perquisites and other personal benefits, securities or
property constituted in the aggregate less than the lesser of $50,000 or 10%
of such person's salary and bonus shown in the table.
(2) The Company did not make any restricted stock awards, grant any stock
appreciation rights or stock options, or make any long-term incentive
payments during fiscal 1997 to the Named Executive Officers.
(3) All Other Compensation consists of matching contributions pursuant to the
Company's 401(k) plan.
(4) Amount consists of a $10,000 bonus for fiscal year 1997 and $151,882 in
commissions earned during fiscal year 1997.
Option Grants. No stock options were granted during fiscal 1997 to the
Named Executive Officers.
Option Exercises and Unexercised Option Holdings. The following table sets
forth information with respect to unexercised options to purchase the Company's
Common Stock held by the Named Executive Officers at September 30, 1997. No
options to purchase the Company's Common Stock were exercised during fiscal 1997
by such persons.
50
<PAGE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS AT
SHARES OPTIONS AT FISCAL YEAR-END(#) FISCAL YEAR-END($)(1)
ACQUIRED ON VALUE ------------------------------ ----------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------- ----------- ----------- ------------ -------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Walter O. Fredericks........... -- -- 111,690 52,560 614,295 289,080
Michael T. Petrillo............ -- -- 33,142 14,308 198,852 85,848
Ivan Balazs, Ph.D.............. -- -- 37,230 17,520 223,380 105,120
Jacob Victor, Ph.D............. -- -- 37,230 17,520 223,380 105,120
Michael L. Baird, Ph.D......... -- -- 29,784 14,016 178,704 84,096
</TABLE>
- ------------------
(1) There was no public trading market for the Common Stock as of September 30,
1997. Accordingly, these values have been calculated by determining the
difference between the fair market value of the securities underlying the
option as of September 30, 1997 (calculated on the basis of the midpoint of
the assumed initial public offering price of $11.00 per share) and the
exercise price of the Named Executive Officer's options.
TERMINATION OF EMPLOYMENT AND CHANGE OF CONTROL ARRANGEMENTS
The Company has not entered into any employment agreements with any of the
executives named in the Summary Compensation Table. Each of Messrs. Fredericks,
Balazs and Victor has entered into a severance agreement with the Company.
The severance agreements with Messrs. Fredericks, Balazs and Victor (the
'Senior Executive Officers') extended through December 31, 1994, with automatic
one-year extensions upon each anniversary date of such agreement unless the
Board gives at least 30 days' notice to the contrary. No such notice was given
in 1994, 1995, 1996 or 1997 with regard to the Senior Executive Officers and
their agreements were extended until December 31, 1998.
In the event a proposal is made to effect a 'change in control' (as defined
in the agreement), the Senior Executive Officers' agreements require each
executive to continue to render his services to the Company until such proposal
for a change in control is terminated or abandoned or until six months after a
change in control has occurred. A 'change in control' of the Company is defined
as (a) approval by the stockholders of the Company of (i) any consolidation or
merger of the Company or any subsidiary of the Company where (1) the
stockholders of the Company, immediately prior to such consolidation or merger,
would not, immediately after such consolidation or merger, hold more than 50% of
the combined voting power of the stock of the surviving entity, or (2) the
members of the Board, immediately prior to the consolidation or merger, would
not, immediately after the consolidation or merger, constitute a majority of the
Board of Directors of the corporation issuing cash or securities in the
consolidation or merger, or (ii) any sale, lease, exchange or other transfer of
all or substantially all of the assets of the Company; or (b) a change in the
majority of the Board with the result that those individuals constituting the
entire Board as of the date of the agreement (the 'Incumbent Directors') cease
to constitute a majority of the Board, unless the election of each new director
was approved by at least a majority of the remaining Incumbent Directors.
Each of the Senior Executive Officers' severance agreements provides for
the payment of severance benefits to the executive in the event of a
'termination' (as defined in the agreement). A 'termination' is defined as the
termination of such executive's employment by or consultancy with the Company at
any time from six months prior to a 'change in control' to two years following a
'change in control.' The Company may effect a 'termination' by terminating the
executive's employment with the Company for any reason other than 'cause' (as
defined in the agreement), 'disability' (as defined in the agreement), death, or
attainment of age 65. The executive may effect a 'termination' in the event
that, without the executive's consent, (i) the executive is assigned to any
duties or responsibilities that are inconsistent with his position, duties,
responsibilities or status immediately preceding such 'change in control,' or
any reduction of his responsibilities or position at the Company; (ii) the
executive's salary is reduced (except for across-the-board salary reductions
similarly affecting other executives); (iii) the executive's rate of incentive
compensation pursuant to any benefit plan is reduced by a greater amount than
the average reduction received by all participants in such benefit plan; (iv)
the executive is
51
<PAGE>
transferred to a location requiring a change in his residence or there is a
material increase in the amount of travel required of the executive in
connection with his employment by the Company; or (v) the Company fails to use
its best efforts to cause any successor to the Company to assume the Company's
obligations under the agreement. The executive may also effect a 'termination'
if he determines in good faith that, due to the change in control, he is no
longer able to effectively discharge his duties and responsibilities, and such
situation is not remedied by the Company within thirty days of receiving notice
of such situation by the executive.
Severance payments under the Senior Executive Officers' agreements will be
the greater of the executive's annual salary or annual consultancy payment in
effect immediately prior to a 'change in control' or 'termination,' and will be
payable in twelve, or at the executive's option, twenty-four monthly
installments. In addition, immediately prior to a 'change in control,' (i) all
outstanding options to buy Company stock held by the executive will become fully
vested and immediately exercisable, and (ii) any repurchase agreement or right
of first refusal agreement between the Company and the executive with respect to
the Company's stock will terminate and the executive's ownership of all shares
of the Company's stock will fully vest. Severance payments will be reduced by
any compensation received by the Senior Executive Officers from other
employment, except that the Company is required to provide a minimum of four
months severance payments.
The Senior Executive Officers are not entitled to any Severance Payments in
the event that (i) the Company terminates such executive's employment for
'cause' (as defined in each severance agreement), (ii) such executive becomes
disabled, or (iii) such executive refuses to resign as a director and/or officer
of the Company upon receiving a request to do so following a 'termination.'
STOCK OPTION PLANS
1998 Stock Plan
The 1998 Stock Plan (the 'Plan') permits the issuance of shares of
restricted common stock ('Restricted Shares') and the granting of options to
purchase shares of Common Stock, $.10 par value per share, of the Company
('Common Stock') to key employees, officers and directors of, and consultants or
advisors to, the Company and its subsidiaries. The maximum number of shares of
Common Stock that may be issued and sold under the Plan is 1,000,000 shares,
subject to proportionate adjustment in the event of (i) any increase or decrease
in the number of issued shares, (ii) the issuance of shares in exchange for a
different number or kind of shares or other securities of the Company, or (iii)
the distribution of additional shares or new or different shares or other
non-cash assets with respect to such shares of Common Stock or other securities
of the Company, resulting from any recapitalization, reclassification, stock
dividend, stock split, reverse stock split or other similar transaction.
Options granted pursuant to the Plan will be authorized by action of the
Board (or a Committee designated by the Board) and may be either incentive stock
options ('Incentive Stock Options') meeting the requirements of Section 422 of
the Code or non-statutory options which are not intended to meet the
requirements of Section 422 of the Code. The Plan also provides that each
director who is neither an employee of the Company nor a beneficial holder of
more than one percent of the outstanding Common Stock (an 'Outside Director')
receives, upon joining the Board, a one-time five year option to purchase 20,000
shares vesting 40% after the second anniversary of the date of grant, 60% after
the third anniversary of the date of grant, 80% after the fourth anniversary of
the date of grant and 100% on the fifth anniversary of the date of grant.
The Plan will be administered by the Board, which may delegate its powers
to a committee consisting of two or more non-employee directors (the
'Committee'). The Board or the Committee (if appointed) shall have full
authority to determine the individuals to whom Restricted Shares or stock
options will be granted, the timing of the option or Restricted Share grant, the
exercise price of the option and the number of Restricted Shares or shares
subject to the option. Any director to whom an option or stock grant is awarded
shall be ineligible to vote upon his or her option or stock grant, but such
option or stock grant may be awarded any such director by a vote of the
remainder of the directors, subject to certain limitations.
The exercise price for shares covered by an Incentive Stock Option shall
not be less than 100% of the fair market value (as defined in the Plan) of such
stock, at the time of grant of such option, or less than 110% of such fair
market value in the case of options granted to an employee, who at the time of
the grant, was the owner of
52
<PAGE>
stock possessing more than 10% of the combined voting power of all classes of
stock of the Company ('10% Stockholder'), and in the case of a non-statutory
option shall not be less than 50% of fair market value. In the event of a
merger, reorganization or consolidation of the Company with one or more other
corporations (collectively, 'Merger') in which the Company is the surviving
entity, the exercise price of all such shares is subject to proportionate
adjustment to ensure that the aggregate exercise price after such Merger is the
same as before the Merger. Options granted under the Plan may provide for the
payment of the exercise price by delivery of cash or a check, shares of Common
Stock, or by any other means which the Board determines are consistent with the
purpose of the Plan and with applicable laws and regulations. All options must
expire no later than ten years (five years in the case of an Incentive Stock
Option granted to a 10% Stockholder) after the date on which the option is
granted. No option granted under the Plan shall be assignable or otherwise
transferable by the optionee except by will or by the laws of descent and
distribution or pursuant to a qualified domestic relations order.
At the time an award of Restricted Shares is made, the Board shall
establish a period of time (the 'Restricted Period') applicable to such award
that shall not be less than one year nor more than ten years. During the
Restricted Period, the holder of Restricted Shares shall generally have the
rights and privileges of a stockholder as to such Restricted Shares, including
the right to vote such Restricted Shares, except that (i) the employee shall not
be entitled to delivery of an unlegended certificate until the expiration or
termination of the Restricted Period; (ii) such Restricted Shares may not be
sold, transferred, assigned, pledged, or otherwise encumbered or disposed of
until the expiration of the Restricted Period; and (iii) the employee shall
forfeit all rights with respect to the Restricted Shares unless the employee has
remained a regular full-time employee of the Company or any of its subsidiaries,
or a consultant to the Company or a subsidiary under a post-employment
consulting arrangement, until the expiration or termination of the Restricted
Period. Such restrictions shall lapse upon the expiration or termination of the
Restricted Period and a stock certificate shall be issued for the appropriate
number of Restricted Shares.
As of the date hereof, no options or Restricted Shares have been granted
under the Plan.
1992 and 1995 Employee Stock Option Plans
The 1992 Employee Stock Option Plan and 1995 Employee Stock Option Plan
(the '1992 Plan' and the '1995 Plan,' respectively) permit the granting of
options to purchase shares of Common Stock and the granting of options with
stock appreciation rights ('SARs') to key employees of the Company. The maximum
number of shares of Common Stock and SARs which may be issued and sold are
686,200 shares under the 1992 Plan and 237,250 shares under the 1995 Plan,
subject to proportionate adjustment in the event of any changes in the
outstanding stock of the Company by reason of stock dividends, split-ups,
consolidations, recapitalizations, or reorganizations.
The Plan is administered by the Compensation Committee appointed by the
Board, which has full authority to determine the individuals to whom stock
options will be granted, the period within which each option may be exercised,
the exercise price of the option and the number of shares subject to the option.
Options granted may be either Incentive Stock Options or non-statutory options
which are not intended to meet the requirements of Section 422 of the Code. An
option may be granted to a member of the Committee only by action of the Board
and only if the Committee member is also an employee of the Company.
The exercise price for all options shall not be less than 100% of the fair
market value (as defined therein) of such stock, at the time of grant of such
option, or less than 110% of such fair market value in the case of options
granted to an employee, who at the time of the grant, was the owner of stock
possessing more than 10% of the combined voting power of all classes of stock of
the Company ('10% Stockholder'). The aggregate fair market value of stock
subject to an Incentive Stock Option granted to an optionee in any calendar year
shall not exceed $100,000. Options granted under the 1992 Plan or the 1995 Plan
may provide for the payment of the exercise price by delivery of cash, a full
recourse promissory note, shares of Common Stock, or any combination thereof
unless the Committee requires payment in cash. All options must expire no later
than ten years (five years in the case of an Incentive Stock Option granted to a
10% Stockholder) after the date on which the option is granted. No option
granted under the 1992 Plan or the 1995 Plan is transferable by the optionee
except by will or by the laws of descent and distribution.
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<PAGE>
As of June 30, 1998, options covering 586,738 shares of Common Stock and
235,425 shares of Common Stock were outstanding under the 1992 Plan and the 1995
Plan, respectively. Of such shares, 423,400 and 125,597 were vested prior to
June 30, 1998. All stock options granted under the 1992 Plan and the 1995 Plan
which have not already vested shall become fully vested and exercisable upon
completion of this offering.
CERTAIN TRANSACTIONS
In April 1998, the Company acquired all of the issued and outstanding
shares of stock of ISBMD from Claude Buller and Gerhard Ehninger in exchange for
365,000 shares of Common Stock. Messrs. Buller and Ehninger joined the Company's
Board of Directors in April 1998 following the consummation of the transaction.
In connection with the acquisition of ISBMD by the Company, Messrs. Buller and
Ehninger executed and delivered non-recourse promissory notes in the amounts of
$541,392.28 and $632,072.14, respectively, representing advances previously made
to them by ISBMD. Interest on these notes accrues at eight percent (8%) per
annum until maturity. The notes are payable on demand after March 31, 2004 or
sooner upon an event of default and provide for recourse only to the 365,000
shares of Common Stock which is pledged to secure them. For these purposes, the
stock is valued at market price if the shares are publicly traded or at an
appraised value if privately held, but in no event less than $2.68 per share. To
the extent that a scheduled number of samples are generated for the Company and
its affiliates through ISBMD, the principal amount outstanding under each such
note will be reduced pursuant to a formula which allows for the forgiveness of
up to $50,000 per quarter beginning in 2001.
At the time of the ISBMD closing, each of Messrs. Buller and Ehninger
entered into a consulting agreement with the Company which provides for an
annual consulting fee in an amount equal to $100,000 per annum during the
initial two years of its term and $150,000 per annum for the next forty-eight
months if more than a set number of samples are obtained by ISBMD during the
first two years of the term of the consultancy. Dr. Ehninger is also a director
of DKMS, a private not-for-profit foundation that administers bone marrow donor
programs in Germany and which is the sole provider of bone marrow samples to
ISBMD in Germany. During the year ended December 31, 1997, ISBMD's revenues from
services provided to DKMS were $4.8 million.
During fiscal 1997, Walter O. Fredericks, the Company's President and Chief
Executive Officer, acquired a forty percent (40%) interest in MMD, a German
corporation that has established laboratories in Dresden, Germany and performs
molecular HLA typing. As part of the investment agreement, Mr. Fredericks
assumed the role of managing director of MMD and obtained veto power on all
significant matters relating to its operations. In connection with his personal
investment in MMD, the Company loaned money to and received a promissory note
from Mr. Fredericks in the principal amount of $150,000 bearing interest at
eight percent (8%) per annum, interest payable annually and maturing on December
31, 2001. As of April 30, 1998, there was $104,098 outstanding under the
promissory note. The promissory note contains a put and call feature pursuant to
which either Mr. Fredericks or the Company has the right at any time to acquire
all of Mr. Fredericks' interest in MMD solely in exchange for the cancellation
of the promissory note. As security for payment of the principal amount, the
Company received a Notarial Deed transferring the Chief Executive Officer's
interest in MMD to the Company. During fiscal 1997, the Company made various
loans to MMD totaling $469,398. In exchange for this, the Company received a
promissory note in the principal amount of $350,000 bearing interest at eight
percent (8%) per annum, interest payable annually with a maturity date of
December 31, 2001, with the balance of $119,398 remaining as unsecured
short-term advances. In conjunction with the loan agreement, MMD qualified for
reimbursement from Saxony Redevelopment Bank estimated at approximately
$167,000. Each of Messrs. Buller and Ehninger owns five percent (5%) of MMD.
Through its acquisition of ISBMD in April 1998, the Company's effective
ownership interest in MMD increased to ninety percent (90%) through the
acquisition of ISBMD's interest in MMD.
In connection with the acquisition of MDx in April 1998, the Company
repurchased approximately $1.2 million of the accounts receivable of MDx from
Century II Corp., a company controlled by Ross V. Hickey, Jr., a director of the
Company. The amounts paid for the accounts receivable are payable to Century II
Corp. over a six month period without interest. As part of the MDx Acquisition,
the Company also agreed to repay certain advances made to it by Century II Corp.
in the aggregate amount of $200,000. In June 1998 the Company issued 27,809
shares of Common Stock to repay the $200,000 advance in full.
54
<PAGE>
In March 1997, the Company sold 3,650 shares of Common Stock to its
President and Chief Executive Officer, Walter O. Fredericks, at a price of $1.51
per share.
In September 1997, the Company sold to its Chairman and Chief Financial
Officer, Richard A. Sandberg, 80,300 shares of Common Stock with an estimated
fair value of $2.69 per share, for $2.60 per share. In return, the Company
received cash proceeds of $2,200 and a promissory note in the amount of $206,800
that bears interest at a rate of eight percent (8%) per annum. In accordance
with the terms of the note, the first installment of interest is due on
September 30, 1998 and the remaining interest and principal are due on September
30, 1999. As collateral for the note, the Company retains all of the shares of
Common Stock purchased by Mr. Sandberg. As of April 30, 1998, there was $206,800
outstanding under the promissory note.
In June 1997, the Company loaned Michael T. Petrillo, its Vice President,
Sales and Marketing, $50,000 towards the purchase of a house. Mr. Petrillo
executed a promissory note that provides for interest accruing at a rate of
eight and one-half percent (8.5%) per annum. Mr. Petrillo is required to use
half of each quarterly sales bonus to pay down principal and interest under the
promissory note. Any balance remaining unpaid at June 30, 2000 shall become
immediately payable. The loan is secured by a pledge of Mr. Petrillo's stock
options and the shares of Common Stock underlying such options. As of April 30,
1998, there was $22,000 outstanding under the promissory note.
In January 1998, Mr. Fredericks exercised a stock option to purchase 54,750
shares of Common Stock at an aggregate exercise price of $82,500. In order to
pay for these shares, Mr. Fredericks executed a promissory note in the amount of
$82,500 that provides for interest accruing at a rate of eight percent (8%) per
annum. In accordance with the terms of the note, the first installment of
interest is due on January 2, 1999 and the remaining interest and principal are
due on January 2, 2000. As collateral for the note, the Company is retaining
36,500 of the shares of Common Stock exercised by Mr. Fredericks pursuant to the
option. As of April 30, 1998 there was $82,500 outstanding under the promissory
note.
The Company is a party to Severance Agreements with Messrs. Fredericks,
Balazs and Victor. See 'Management--Employment, Termination of Employment and
Change of Control Arrangements' for a description of the terms of these
agreements.
In 1992, the Company signed a Research and Development Agreement with FMC
Corporation ('FMC') to conduct joint research and development programs designed
to expand the applications of DNA analysis products. Lifecodes provides the
primary facilities and the scientific and technical input. The Company and FMC
also entered into license agreements relating to technology arising from the
foregoing research and certain existing patent rights. FMC also contributed
$300,000 to the Company in consideration for 109,500 shares of Common Stock and
received certain options that have since expired unexercised. Milton Steele, a
director of the Company, is an employee of FMC. FMC and its wholly-owned
subsidiary are Selling Stockholders in this offering. See 'Principal and Selling
Stockholders.'
55
<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of the date of this Prospectus and as
adjusted to reflect the sale of the shares of Common Stock offered hereby by:
(i) each person known by the Company to be the beneficial owner of more than 5%
of the Company's Common Stock; (ii) each of the Company's directors; (iii) each
Named Executive Officer (see 'Management--Executive Compensation.'); (iv) all
directors and executive officers of the Company as a group; and (v) each Selling
Stockholder.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
PRIOR TO THE OFFERING(1) AFTER OFFERING(1)(2)
-------------------------- -----------------------
NUMBER OF SHARES NUMBER OF
NAME OF BENEFICIAL OWNER(3) SHARES PERCENTAGE OFFERED(4) SHARES PERCENTAGE
- ---------------------------------------------- --------- ---------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C>
Richard A. Sandberg(5)........................ 80,300 2.7% -- 80,300 1.2%
Walter O. Fredericks(6)....................... 586,300 18.6 -- 586,300 8.7
Ivan Balazs, Ph.D.(7)......................... 178,120 5.8 -- 178,120 2.7
Michael T. Petrillo(8)........................ 84,315 2.8 -- 84,315 1.3
Jacob Victor, Ph.D.(9)........................ 146,183 4.8 -- 146,183 2.2
Michael L. Baird, Ph.D.(10)................... 107,675 3.6 -- 107,675 1.6
Dean L. Somer(11)............................. 84,315 2.6 -- 84,315 1.3
Joseph I. Bishop(12).......................... 639,214 21.2 -- 639,214 9.7
Keith W. Brown(13)............................ 0 -- -- 0 --
Claude L. Buller(14).......................... 182,500 6.1 -- 182,500 2.8
Prof. Dr. Gerhard Ehninger(14)................ 182,500 6.1 -- 182,500 2.8
Dean E. Fenton(15)............................ 36,007 1.2 -- 36,007 *
John A. Hansen, M.D........................... 0 -- -- 0 --
Ross V. Hickey, Jr.(16)....................... 139,047 4.7 -- 139,047 2.1
Milton Steele(17)............................. 309,082 10.4 -- 9,082 *
Crossroads Constitution L.P.(18).............. 274,035 8.7 -- 274,035 4.1
FMC A/S (19).................................. 309,082 10.4 300,000 9,082 *
Connecticut Innovations, Incorporated(20)..... 206,225 6.8 -- 206,225 3.1
Connecticut Development Authority(21)......... 184,263 5.8 -- 184,263 2.7
All directors and executive officers as a
group (15 persons)(22)...................... 2,755,558 77.4% 2,455,558 34.4%
</TABLE>
- ------------------
* Indicates less than 1%.
(1) Assumes conversion of all of the Company's outstanding Series A Convertible
Preference Stock on a 7.3 for one basis into Common Stock. Unless otherwise
indicated below, the persons and entities named in the table have sole
voting and investment power with respect to all shares beneficially owned.
Shares of Common Stock subject to options that are currently exercisable or
are exercisable within 60 days from the date of this Prospectus are deemed
to be outstanding and to be beneficially owned by the person holding such
options for the purpose of computing the percentage ownership of such
person but are not treated as outstanding for the purpose of computing the
percentage ownership of any other person.
(2) Assumes that the Underwriters' over-allotment option to purchase up to an
additional 480,000 shares from certain Selling Stockholders is not
exercised. Also assumes the issuance of 681,818 shares of Common Stock in
connection with the GeneScreen Acquisition.
(3) See 'Management--Executive Officers and Directors.' Unless otherwise
indicated, the address of each beneficial owner is c/o Lifecodes
Corporation, 550 West Avenue, Stamford, Connecticut 06902.
(Footnotes continued on next page)
56
<PAGE>
(Footnotes continued from previous page)
(4) If the Underwriters' exercise their over-allotment option to purchase up to
an additional 480,000 shares, then the following stockholders will sell up
to the following number of additional shares:
(5) The indicated shares are pledged to the Company as collateral for a
promissory note. See 'Certain Transactions.'
(6) Includes 171,733 shares issuable upon exercise of stock options. Also
includes 36,500 shares pledged to the Company as collateral for a
promissory note. See 'Certain Transactions.'
(7) Includes 87,600 shares issuable upon exercise of stock options.
(8) Includes 73,000 shares issuable upon exercise of stock options.
(9) Includes 73,000 shares issuable upon exercise of stock options.
(10) Includes 52,925 shares issuable upon exercise of stock options.
(11) Includes 65,335 shares issuable upon exercise of stock options.
(12) Includes 32,850 shares issuable upon exercise of warrants.
(13) Mr. Brown is President and Chief Executive Officer of GeneScreen and will
become a Senior Vice President of the Company upon consummation of the
GeneScreen Acquisition. See 'Business--Recent and Pending Acquisitions.'
(14) The indicated shares have been pledged to the Company to secure promissory
notes payable to the Company. See 'Certain Transactions.'
(15) Includes 24,324 shares issuable upon exercise of warrants exercisable
within 60 days.
(16) Includes 13,903 shares held by Century II Corp. of which Mr. Hickey is the
President.
(17) Consists of shares held by FMC, an entity of which Mr. Steele is a Division
Manager.
(18) Crossroads Constitution L.P.'s address is 190 Farmington Avenue,
Farmington, CT 06032. Includes 185,303 shares issuable upon exercise of
warrants exercisable within 60 days.
(19) FMC A/S's address is Risingevej 1, 2665 Vallensbaek Strand, Denmark. Milton
Steele, a Director of the Company, is a Division Manager of FMC
Corporation, the parent entity of FMC A/S.
(20) Connecticut Innovations, Incorporated's address is 40 Cold Spring Road,
Rocky Hill, CT 06067. Consists of 156,950 shares issuable upon conversion
of 21,500 shares of Series A Convertible Preference Stock and 49,275 shares
issuable upon exercise of warrants exercisable within 60 days.
(21) The Connecticut Development Authority's address is 217 Washington Street,
Hartford, CT 06106. Consists of shares issuable upon exercise of warrants
exercisable within 60 days.
(22) Includes 523,591 shares issuable upon exercise of stock options and 57,174
shares issuable upon exercise of warrants exercisable within 60 days.
57
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 15,000,000 shares
of Common Stock, $.10 par value, and 1,000,000 shares of Preferred Stock, $10.00
par value. Immediately prior to the offering and taking into effect the issuance
of shares in the GeneScreen Acquisition, there were 3,660,857 shares of Common
Stock outstanding, held of record by stockholders. The following summary of
certain terms of the Common Stock and Preferred Stock does not purport to be
complete and is subject to, and qualified in its entirety by, the provisions of
the Company's Amended and Restated Certificate of Incorporation (the
'Certificate of Incorporation') and Bylaws, which are included as exhibits to
the Registration Statement of which this Prospectus is a part, and the
provisions of applicable law.
COMMON STOCK
Holders of Common Stock have the right to cast one vote for each share held
of record on all matters submitted to a vote of holders of Common Stock,
including the election of directors. Holders of Common Stock are entitled to
receive such dividends, pro rata based on the number of shares held, when, as
and if declared by the Board, from funds legally available therefor, subject to
the rights of holders of any outstanding preferred stock. In the event of the
liquidation, dissolution or winding up of the affairs of the Company, all assets
and funds of the Company remaining after the payment of all debts and other
liabilities, subject to the rights of the holders of any outstanding preferred
stock, shall be distributed, among the holders of the Common Stock. Holders of
Common Stock are not entitled to preemptive, subscription, cumulative voting or
conversion rights, and there are no redemption or sinking fund provisions
applicable to the Common Stock.
PREFERRED STOCK
The Preferred Stock may be issued from time to time in one or more series
as determined by the Board. The Board is authorized to issue the shares of
Preferred Stock in one or more series and to fix the rights, preferences,
privileges and restrictions thereof, including dividend rights, dividend rates,
conversion rights, voting rights, terms of redemption, redemption prices,
liquidation preferences and the number of shares constituting any series of the
designation of such series, without further vote or action by the stockholders.
The issuance of such Preferred Stock may have the effect of delaying, deferring
or preventing a change in control of the Company without further action by the
stockholders and may adversely affect the voting and other rights of the holders
of Common Stock, including the loss of voting control to others. The Company
currently has no plan to issue any shares of Preferred Stock.
WARRANTS
As of July 15, 1998, the Company had warrants outstanding to purchase an
aggregate of 500,338 shares of Common Stock with exercise prices ranging from
$0.27 to $1.82 per share. These warrants are immediately exercisable and expire
at various times between 2001 and 2004. The exercise price and number of shares
issuable upon exercise are generally subject to adjustment in the event of a
stock dividend, reclassification, exchange, substitution, subdivision or reverse
stock split and such warrants contain anti-dilution protection in the event of
certain issuances of Common Stock below the respective exercise prices of the
warrants.
DELAWARE LAW AND CERTAIN PROVISIONS OF THE COMPANY'S CERTIFICATE OF
INCORPORATION AND BYLAWS
Certain provisions of the Company's Certificate of Incorporation and Bylaws
are intended to enhance the likelihood of continuity and stability in the Board
and in its policies, but might have the effect of delaying or preventing a
change in control of the Company and may make more difficult the removal of
incumbent directors or management even if such transactions could be beneficial
to the interests of stockholders. Set forth below is a summary description of
such provisions:
Authority to Issue Preferred Stock. The Company's Certificate of
Incorporation authorizes the Board, without stockholder approval, to
establish and to issue shares of one or more series of preferred stock,
each such series having such dividend rights, conversion rights, voting
rights, terms of redemption, liquidation preferences, the number of shares
constituting any series or designation of such series, and other rights as
may be fixed by the Board.
Staggered Board. The classification of the Board into three classes,
each with a three-year term, will have the effect of making it difficult
for stockholders to change the composition of the Board. At least two
annual meetings of stockholders generally will be required to effect a
change in the majority of the Board. Such a delay may help ensure that the
Company's directors, if confronted by a stockholder attempting to force a
proxy contest, a tender or exchange offer or an extraordinary corporate
transaction, would have sufficient time to review the proposal as well as
any available alternatives to the proposal and to act in what they believe
to be the best interests of the stockholders. The classification provisions
will apply to every
58
<PAGE>
election of directors, however, regardless of whether a change in the
composition of the Board would be beneficial to the Company and its
stockholders and whether a majority of the Company's stockholders and
whether a majority of the Company's stockholders believes that such a
change would be desirable.
Limitation of Director Liability. Section 102(b)(7) of the Delaware
General Corporation Law ('Section 102(b)') authorizes corporations to limit
or eliminate the personal liability of directors to corporations and their
stockholders for monetary damages for breach of directors' fiduciary duty
of care. Although Section 102(b) does not alter a director's duty of care,
it enables corporations to limit available relief to equitable remedies
such as injunction or rescission. The Company's Certificate of
Incorporation limits the liability of directors to the Company or its
stockholders to the fullest extent permitted by Section 102(b).
Specifically, directors of the Company will not be personally liable for
monetary damages for breach of a director's fiduciary duty as a director,
except for liability: (i) for any breach of the director's duty of loyalty
to the Company or its stockholders, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of
law, (iii) for unlawful payments of dividends or unlawful stock repurchases
or redemptions as provided in Section 174 of the Delaware General
Corporation Law (relating to certain unlawful dividends, stock purchases or
redemptions), or (iv) for any transaction from which the director derived
an improper personal benefit.
Indemnification. To the maximum extent permitted by law, the Company's
Certificate of Incorporation provides for mandatory indemnification of
directors and officers, and permits indemnification of employees and agents
of the Company against all expense, liability and loss to which they may
become subject or which they may incur as a result of being or having been
a director, officer, employee or agent of the Company. In addition, the
Company must advance or reimburse directors and officers, and may advance
employees and agents amounts for expenses incurred by them in connection
with indemnifiable claims.
The Company is subject to the provisions of Section 203 of the Delaware
General Corporation Law ('Section 203'). Section 203 generally provides that a
stockholder acquiring more than 15% of the outstanding voting stock of a
corporation (an 'Interested Stockholder') but less than 85% of such stock
(excluding voting stock owned by directors who are also officers or held in
employee benefit plans in which the employees do not have a confidential right
to tender or vote stock held by the plan) may not engage in certain Business
Combinations (as defined below) with the corporation for a period of three years
after the date on which the stockholder became an Interested Stockholder unless
(i) prior to such date, the corporation's board of directors approved either the
Business Combination or the transaction in which the stockholder became an
Interested Stockholder, or (ii) the Business Combination is approved by the
corporation's board of directors and authorized at a stockholders' meeting by a
vote of at least two-thirds of the corporation's outstanding voting stock not
owned by the Interested Stockholder. Under Section 203, these restrictions will
not apply to certain Business Combinations proposed by an Interested Stockholder
following the earlier of the announcement or notification of the Interested
Stockholder, during the previous three years or who became an Interested
Stockholder, with the approval of the corporation's board of directors, if such
extraordinary transaction is approved or not opposed by a majority of the
directors who were directors prior to any person becoming an Interested
Stockholder during the previous three years or were recommended for election or
elected to succeed such directors by a majority of such directors.
Section 203 defines the term 'Business Combination' to include transactions
in which the Interested Stockholder receives or could receive a benefit on other
than a pro forma basis with other stockholders, such as mergers, certain asset
sales, certain issuances of additional shares to the Interested Stockholder,
transactions with the corporation which increase the proportionate interest in
the corporation directly or indirectly owned by the Interested Stockholder, or
transactions in which the Interested Stockholder receives certain other
benefits.
The provisions of Section 203, together with the ability of the Board to
issue Preferred Stock without further stockholder action, could delay or
frustrate the removal of incumbent directors or a change in control of the
Company. The provisions also could discourage, impede or prevent a merger,
tender offer or proxy consent, even if such event would be favorable to the
interests of stockholders. The Company's stockholders, by adopting an amendment
to the Company's Certificate of Incorporation or Bylaws, may elect not to be
governed by Section 203 effective 12 months after such adoption. Neither the
Company's Certificate of Incorporation nor Bylaws currently exclude the Company
from the restrictions imposed by Section 203.
TRANSFER AGENT
American Stock Transfer & Trust Company, New York, New York, serves as
Transfer Agent and Registrar for the Common Stock.
59
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, the Company will have 6,560,857 shares of
Common Stock outstanding (based upon shares of Common Stock outstanding as of
the date of this Prospectus, the conversion of all outstanding shares of Series
A Convertible Preference Stock, the issuance of 681,818 shares in the concurrent
offering pursuant to the GeneScreen Acquisition and assuming no exercise of
outstanding stock options). Of these shares, the 3,200,000 shares sold in this
offering will be freely tradable without restriction or further registration
under the Securities Act, except that any shares purchased by 'affiliates' of
the Company, as that term is defined in Rule 144 ('Rule 144') under the
Securities Act ('Affiliates'), may generally only be sold in compliance with the
limitations of Rule 144 described below. The remaining 2,679,039 shares of
Common Stock (the 'Restricted Shares') held by existing stockholders upon
completion of this offering, other than holders pursuant to the GeneScreen
Acquisition, will be 'restricted' securities within the meaning of Rule 144 and
may not be sold except in compliance with the registration requirements of the
Securities Act or an applicable exemption under the Securities Act, including an
exemption pursuant to Rule 144.
SALES OF RESTRICTED SHARES
Beginning 180 days after the date of this Prospectus, approximately
1,829,259 Restricted Shares subject to lock-up agreements (the 'Lock-up
Agreements') between the Underwriters and certain stockholders, including
officers and directors, will become eligible for sale in the public market
pursuant to Rule 144(k), Rule 144 or Rule 701. In addition, certain existing
holders of an aggregate of 591,943 shares of Common Stock have the right to
require registration of their shares under certain circumstances. However, such
stockholders and holders of Common Stock pursuant to the GeneScreen Acquisition
have entered into Lock-up Agreements with respect to all shares owned by them
and not sold in this offering, which provide that they will not sell or
otherwise dispose of any shares of Common Stock (except for shares sold in this
offering) without the prior written consent of Volpe Brown Whelan & Company, LLC
for a period of 180 days from the date of this Prospectus other than bona fide
gifts or distributions to the stockholders or limited partners of such
stockholders, provided that, in either event, the transferee agrees to be bound
by similar restrictions. Volpe Brown Whelan & Company, LLC may, in its sole
discretion, and at any time or from time to time, without notice, release all or
any portion of the securities subject to the Lock-up Agreements. See
'--Registration Rights' and 'Underwriting.'
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated), including an Affiliate, who has beneficially owned
Restricted Shares for at least one year (including the holding period of certain
prior owners) is entitled to sell in 'brokers' transactions' or to market
makers, within any three-month period commencing 90 days after the Company
becomes subject to reporting requirements of Section 13 of the Exchange Act, a
number of such shares that does not exceed the greater of (i) one percent of the
then outstanding shares of Common Stock (approximately 65,609 shares immediately
after this offering) or (ii) the average weekly trading volume in the Common
Stock on the Nasdaq National Market during the four calendar weeks preceding the
date on which notice of such sale is filed. Sales under Rule 144 are also
subject to certain limitations on manner of sale, notice requirements and
availability of current public information about the Company. In addition, under
Rule 144(k), a person who is not an Affiliate and has not been an Affiliate for
at least three months prior to the sale and who has beneficially owned
Restricted Shares for at least two years may resell such shares without regard
to the limitations described above. In meeting the one and two year holding
periods described above, a holder of Restricted Shares can include the holding
periods of a prior owner who was not an Affiliate. Further, Rule 144A under the
Securities Act as currently in effect permits the immediate sale of restricted
shares to certain qualified institutional buyers without regard to the volume
restrictions described above.
STOCK OPTIONS
In general, under Rule 701 of the Securities Act as currently in effect,
any employee, consultant or advisor of the Company who purchased shares from the
Company in connection with a compensatory stock or option plan or other written
compensatory agreement is entitled to resell such shares without having to
comply with the public-information, holding-period, volume-limitation or notice
provisions of Rule 144, and Affiliates are entitled to sell their Rule 701
shares under Rule 144 without having to comply with Rule 144's holding period
restrictions, in each case commencing 90 days after the Company becomes subject
to the reporting requirements
60
<PAGE>
of Section 13 of the Exchange Act. Rule 701 is available for stockholders of the
Company as to all shares issued pursuant to exercise of options granted prior to
the offering.
As of the date of this Prospectus, the Board had authorized an aggregate of
up to 1,923,450 shares of Common Stock for issuance pursuant to the Company's
stock option plans. As of the date of this Prospectus, options to purchase a
total of 822,162 shares of Common Stock were outstanding; 273,166 of the shares
issuable pursuant to such options are not yet exercisable; and an additional
1,101,287 shares of Common Stock are available for future grants under the
Company's stock option and stock purchase plans. In addition, options to
purchase 20,000 shares will be granted as of the effective date of this offering
at an exercise price equal to the initial public offering price. The holder of
such option has executed a Lock-up Agreement.
The Company intends to file one or more registration statements on Form S-8
under the Securities Act promptly after the date of this Prospectus to register
all shares of Common Stock subject to outstanding stock options and Common Stock
issuable pursuant to the Company's stock option plans. Such registration
statements are expected to become effective upon filing. Shares covered by these
registration statements will thereupon be eligible for sale in the public
markets, subject to the Lock-up Agreements, to the extent applicable.
CELLMARK STOCKHOLDERS
Coincident with the Company's purchase of the diagnostics business of
Cellmark in March 1996, certain Cellmark employees purchased an aggregate of
1,960 shares of the common stock of the Company's subsidiary Cellmark
Diagnostics, Inc. (representing 19.6% of the common stock of Cellmark
Diagnostics, Inc.). The Company has agreed to allow the Cellmark employees to
exchange, beginning in March 1999, each share of common stock of Cellmark
Diagnostics, Inc. for 43.654 shares of Common Stock, representing a potential
issuance of an aggregate of 85,562 shares of Common Stock. If such holders, by
exercising their exchange rights, cause a large number of shares to be sold in
the public market, such sales may have a material adverse effect on the market
price of the Common Stock.
LOCK-UP AGREEMENTS
Certain security holders and all officers and directors of the Company have
agreed, pursuant to the Lock-up Agreements, that they will not, without the
prior written consent of Volpe Brown Whelan & Company, LLC, offer, sell,
contract to sell or otherwise dispose of, directly or indirectly, any shares of
Common Stock beneficially owned by them (except for shares sold in this
offering) for a period of 180 days after the date of this Prospectus other than
bona fide gifts and distributions to the stockholders or limited partners of
such security holders, provided that, in either event, the transferee agrees to
be bound by similar restrictions.
REGISTRATION RIGHTS
Upon the expiration of the contractual lock-up period, certain security
holders of the Company (the 'Rights Holders') will be entitled to require the
Company to register under the Securities Act up to a total of 591,943 shares
( shares if the Underwriters' over-allotment option is exercised in full)
of outstanding Common Stock (the 'Registrable Shares') under the terms of
various agreements between the Company and the Rights Holders. The Company is
generally required to bear the expenses of all such registrations, except
underwriting discounts and commissions.
Prior to this offer, there has not been any public market for the
securities of the Company. No predictions can be made as to the effect, if any,
that market sales of shares or the availability of shares for sale will have on
the market price prevailing from time to time. Nevertheless, sales of
substantial amounts of Common Stock in the public market could materially
adversely affect the prevailing market price. See 'Risk Factors--Shares Eligible
for Future Sale.'
61
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Company has agreed to sell to each of the underwriters named below (the
'Underwriters'), and each of such Underwriters, for whom Volpe Brown Whelan &
Company, LLC, Vector Securities International, Inc. and Advest, Inc.
(collectively, the 'Representatives'), are acting as representatives, have
agreed severally to purchase from the Company, the respective number of shares
of Common Stock set forth opposite its name below. The Underwriters are
committed to purchase and pay for all shares if any shares are purchased.
<TABLE>
<CAPTION>
NUMBER
UNDERWRITERS OF SHARES
- -------------------------------------------------------------------------------------------- ---------
<S> <C>
Volpe Brown Whelan & Company, LLC...........................................................
Vector Securities International, Inc........................................................
Advest, Inc.................................................................................
---------
Total..................................................................................
---------
---------
</TABLE>
The Representatives have advised the Company that the Underwriters propose
to offer the shares of Common Stock to the public at the initial public offering
price set forth on the cover page of this Prospectus and to certain dealers at
such price less a concession not in excess of $ per share, of which $
per share may be reallowed to other dealers. After the initial public offering,
the public offering price, concession and reallowance to dealers may be reduced
by the Representatives. No such reduction shall change the amount of proceeds to
be received by the Company as set forth on the cover page of this Prospectus.
Certain Selling Stockholders have granted the Underwriters an option for 45
days after the date of this Prospectus to purchase, at the initial public
offering price less the underwriting discounts and commissions set forth on the
cover page of this Prospectus, up to 480,000 additional shares of Common Stock
at the same price per share as the Company and the Selling Stockholders receive
for the 3,200,000 shares of Common Stock offered hereby, solely to cover
over-allotments, if any. If the Underwriters exercise their over-allotment
option, the Underwriters have severally agreed, subject to certain conditions,
to purchase approximately the same percentage thereof that the number of shares
of Common Stock to be purchased by each of them, as shown in the foregoing
table, bears to the 3,200,000 shares of Common Stock offered hereby. The
Underwriters may exercise such option only to cover the over-allotments in
connection with the sale of the 3,200,000 shares of Common Stock offered hereby.
To the extent that the Underwriters exercise such over-allotment option in part,
such shares shall be purchased pro-rata among the Company and the individual
Selling Stockholders.
Certain of the Company's executive officers, directors and existing
stockholders owning in the aggregate 2,802,186 shares of Common Stock have
agreed not to offer, pledge, sell, contract to sell, make any short sale or
otherwise dispose of any shares of Common Stock, options to acquire shares of
Common Stock or securities convertible into or exchangeable for shares of Common
Stock, or any rights to purchase or acquire shares of Common Stock, during the
180 day period following the date of this Prospectus, without the prior written
consent of Volpe Brown Whelan & Company, LLC. The Company also has agreed not to
offer, sell, contract to sell or otherwise dispose of any shares of Common Stock
or any securities convertible into or exchangeable for shares of Common Stock,
or any rights to purchase or acquire shares of Common Stock, during the 180 day
period following the date of this Prospectus without the prior written consent
of Volpe Brown Whelan & Company, LLC, except for the granting of options
pursuant to the Plan or the issuance of shares of Common Stock upon the
62
<PAGE>
exercise of outstanding options or in connection with acquisitions. Volpe Brown
Whelan & Company, LLC, in its discretion, may waive the foregoing restrictions
in whole or in part, with or without a public announcement of such action. In
recent offerings in which it has served as lead manager of underwriters, Volpe
Brown Whelan & Company, LLC has consented to early releases from lock-up
agreements only in a limited number of circumstances, after considering all
circumstances that it deemed to be relevant. Volpe Brown Whelan & Company, LLC
will have, however, complete discretion in determining whether to consent to
early releases from the lock-up agreements delivered in connection with this
offering, and no assurance can be given that it will not consent to the early
release of all or a portion of the shares of Common Stock and options covered by
such lock-up agreements.
The Representatives have informed the Company that the Underwriters do not
intend to confirm sales to accounts over which the Underwriters have
discretionary authority.
Prior to this offering, there has been no public trading market for the
Common Stock. Consequently, the initial public offering price of the Common
Stock has been determined by negotiations between the Company and the
Representatives. Among the factors considered in such negotiations were the
results of operations of the Company in recent periods, the prospects for the
Company and the industry in which the Company competes, an assessment of the
Company's management, its financial condition, the prospects for future earnings
of the Company, the present state of the Company's development, the general
condition of the economy and the securities markets at the time of this offering
and the market prices of and demand for publicly traded stock of comparable
companies in recent periods.
In connection with this offering, certain Underwriters and selling group
members and their respective affiliates may engage in transactions that
stabilize, maintain or otherwise affect the market price of the Common Stock.
Such transactions may include stabilization transactions effected in accordance
with Rule 104 of Regulation M, pursuant to which such persons may bid for or
purchase Common Stock for the purpose of stabilizing its market price. The
Underwriters also may create a short position for the account of the
Underwriters by selling more Common Stock in connection with this offering than
they are committed to purchase from the Company, and in such case may purchase
Common Stock in the open market following completion of this offering to cover
all or a portion of such short position. The Underwriters also may cover all or
a portion of such short position, up to 480,000 shares, by exercising the
Underwriters' over-allotment option referred to above. In addition, Volpe Brown
Whelan & Company, LLC on behalf of the Underwriters, may impose 'penalty bids'
under the contractual arrangements with the Underwriters whereby it may reclaim
from an Underwriter (or dealer participating in this offering), for the account
of the other Underwriters, the selling concession with respect to Common Stock
that is distributed in this offering but subsequently purchased for the account
of the Underwriters in the open market. Any of the transactions described in
this paragraph may result in the maintenance of the price of the Common Stock at
a level above that which otherwise might prevail in the open market. None of the
transactions described in this paragraph is required, and, if they are
undertaken, they may be discontinued at any time.
The Company has agreed to indemnify the Underwriters against certain
liabilities that may be incurred in connection with this offering, including
liabilities under the Securities Act, or to contribute to payments that the
Underwriters may be required to make in respect thereof.
The foregoing contains a summary of the principal terms of the Underwriting
Agreement and does not purport to be complete. Reference is made to the copy of
the Underwriting Agreement filed as an exhibit to the Registration Statement of
which this Prospectus is a part.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for the
Company and the Selling Stockholders by Wiggin & Dana, New Haven, Connecticut.
Certain legal matters for the Underwriters will be passed upon by Testa, Hurwitz
& Thibeault, LLP, Boston, Massachusetts.
63
<PAGE>
EXPERTS
The consolidated financial statements and supplemental consolidated
financial statements of Lifecodes Corporation and subsidiaries as of September
30, 1996, and 1997, and for each of the three years in the period ended
September 30, 1997, the financial statements of Micro Diagnostics, Inc. as of
December 31, 1996 and 1997 and for the years then ended, the financial
statements of International Support for Bone Marrow Drives, Ltd. as of December
31, 1997 and for the year then ended, the financial statements of GeneScreen
Inc. as of December 31, 1996, 1997 and for each of the three years in the period
ended December 31, 1997 included in this prospectus have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their reports
appearing herein and have been so included in reliance upon the reports of such
firm given upon their authority as experts in accounting and auditing.
The financial statements of National Legal Laboratories as of September 30,
1997 and for the year then ended included in this prospectus have been audited
by Schlattman & Associates, P.C., independent auditors, as stated in their
report appearing herein and have been so included in reliance upon the report of
such firm given upon their authority as experts in accounting and auditing.
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
'Commission'), Washington, D.C., a Registration Statement under the Securities
Act of 1933, as amended, with respect to the Common Stock offered hereby. This
prospectus, which is part of the Registration Statement, does not contain all of
the information set forth in the Registration Statement, certain parts of which
are omitted in accordance with the rules and regulations of the Commission. For
further information with respect to the Company and the Common Stock, reference
is hereby made to the Registration Statement. Statements contained herein
concerning the provisions of any document are not necessarily complete, and in
each instance reference is made to the copy of such document filed as an exhibit
to the Registration Statement or otherwise filed with the Commission. Each such
statement is qualified in its entirety by such reference. The Registration
Statement, together with its exhibits and schedules, may be inspected and copied
at the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at the regional offices of the Commission located at
500 West Madison Street, Chicago, Illinois 60661, and Seven World Trade Center,
New York, New York 10048. Copies of such material can be obtained from the
Public Reference Section of the Commission at prescribed rates by writing to the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. The Commission
also maintains a site on the World Wide Web that contains all such material
filed electronically with the Commission at www.sec.gov.
64
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
LIFECODES CORPORATION AND SUBSIDIARIES
Independent Auditor's Report............................................................................ F-3
Consolidated Balance Sheets as of September 30, 1996, 1997 and March 31, 1998 (unaudited)............... F-4
Consolidated Statements of Operations for the Years Ended September 30, 1995, 1996, 1997 and the Six
Months Ended March 31, 1997 (unaudited) and March 31, 1998 (unaudited)............................... F-5
Consolidated Statements of Stockholders' Equity for the Years Ended September 30, 1995, 1996 and 1997 and
the Six Months Ended March 31, 1998 (unaudited)...................................................... F-6
Consolidated Statements of Cash Flows for the Years Ended September 30, 1995, 1996, 1997 and the Six
Months Ended March 31, 1997 (unaudited) and March 31, 1998 (unaudited)............................... F-7
Notes to Consolidated Financial Statements.............................................................. F-8
Independent Auditor's Report............................................................................ F-22
Supplemental Consolidated Balance Sheets as of September 30, 1996, 1997 and March 31, 1998
(unaudited).......................................................................................... F-23
Supplemental Consolidated Statements of Operations for the Years Ended September 30, 1995, 1996, 1997
and the Six Months Ended March 31, 1997 (unaudited) and March 31, 1998 (unaudited)................... F-24
Supplemental Consolidated Statements of Stockholders' Equity for the Years Ended September 30, 1996,
1997 and the Six Months Ended March 31, 1998 (unaudited)............................................. F-25
Supplemental Consolidated Statements of Cash Flows for the Years Ended September 30, 1995, 1996, 1997
and the Six Months Ended March 31, 1997 (unaudited) and March 31, 1998 (unaudited)................... F-26
Notes to Supplemental Consolidated Financial Statements................................................. F-27
MICRO DIAGNOSTICS, INC.
Independent Auditors' Report............................................................................ F-42
Balance Sheets as of December 31, 1996 and 1997 and March 31, 1998...................................... F-43
Statements of Operations for the Years Ended December 31, 1996 and 1997 and the Three Months Ended March
31, 1997 (unaudited) and March 31, 1998 (unaudited).................................................. F-44
Statements of Stockholders' Deficiency for the Years Ended December 31, 1996 and 1997 and the Three
Months Ended March 31, 1998 (unaudited).............................................................. F-45
Statements of Cash Flows for the Years Ended December 31, 1996, 1997 and the Three Months Ended March
31, 1997 (unaudited) and March 31, 1998 (unaudited).................................................. F-46
Notes to Financial Statements........................................................................... F-47
INTERNATIONAL SUPPORT FOR BONE MARROW DRIVES, LTD.
Independent Auditors' Report............................................................................ F-53
Balance Sheets as of December 31, 1997 and March 31, 1998 (unaudited)................................... F-54
Statements of Operations for the Year Ended December 31, 1997 and the Three Months
Ended March 31, 1997 (unaudited) and March 31, 1998 (unaudited)...................................... F-55
Statements of Stockholders' Deficit for the Year Ended December 31, 1997 and Three Months Ended March
31, 1998 (unaudited)................................................................................. F-56
Statements of Cash Flows for the Year Ended December 31, 1997 and the Three Months Ended March 31, 1997
(unaudited) and March 31, 1998 (unaudited)........................................................... F-57
Notes to Financial Statements........................................................................... F-58
</TABLE>
F-1
<PAGE>
<TABLE>
<CAPTION>
PAGE
GENESCREEN, INC. AND SUBSIDIARIES ----
<S> <C>
Independent Auditors' Report............................................................................ F-61
Consolidated Balance Sheets as of December 31, 1996 and 1997, and March 31, 1998 (Unaudited)............ F-62
Consolidated Statements of Operations for the Years Ended December 31, 1995, 1996 and 1997, and for the
Three Months Ended March 31, 1997 (Unaudited) and 1998 (Unaudited)................................... F-63
Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 1995, 1996 and 1997,
and for the Three Months Ended March 31, 1998 (Unaudited)............................................ F-64
Consolidated Statements of Cash Flows for the Years Ended December 31, 1995, 1996 and 1997, and for the
Three Months Ended March 31, 1997 (Unaudited) and 1998 (Unaudited)................................... F-65
Notes to Consolidated Financial Statements.............................................................. F-66
NATIONAL LEGAL LABORATORIES
Independent Auditor's Report............................................................................ F-74
Balance Sheets as of September 30, 1996 and 1997........................................................ F-75
Statements of Operations for the Year Ended September 30, 1997 and the Three Months Ended December 31,
1997 (unaudited)..................................................................................... F-76
Statements of Changes in Accumulated Deficit for the Year Ended September 1997 and the Three Months
Ended December 31, 1997 (unaudited).................................................................. F-77
Statements of Cash Flows for the Year Ended September 30, 1997 and the Three Months Ended December 31,
1997 (unaudited)..................................................................................... F-78
Notes to Financial Statements........................................................................... F-79
</TABLE>
F-2
<PAGE>
The accompanying financial statements retroactively reflect a 3.65 for one
common stock split which the Company intends to adopt in conjunction with an
increase in its authorized number of common shares to 15,000,000 and authorized
number of preferred shares to 1,000,000. Accordingly, all common shares, options
and warrants to acquire common shares and the conversion terms of the preferred
stock have been adjusted to reflect the pending stock split. The below opinion
is in the form which will be signed by Deloitte and Touche LLP upon formal
stockholder approval of the stock split and an increase in authorized number of
common shares, and no other events shall have occurred that would effect the
accompanying financial statements and notes thereto.
'INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
Lifecodes Corporation
We have audited the accompanying consolidated balance sheets of Lifecodes
Corporation and subsidiaries (the 'Company') as of September 30, 1996 and 1997,
and the related statements of operations, stockholders' equity, and cash flows
for each of the three years in the period ended September 30, 1997. 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, such consolidated financial statements present fairly, in all
material respects, the consolidated financial position of the Company as of
September 30, 1996 and 1997, and the consolidated results of its operations and
its cash flows for each of the three years in the period ended September 30,
1997 in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
/s/ DELOITTE & TOUCHE LLP
Stamford, Connecticut
December 24, 1997, except for Note 13 and Note 5(e),
as to which the date is July 13, 1998'
F-3
<PAGE>
LIFECODES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1996, 1997 AND MARCH 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31, 1998
SEPTEMBER 30, 1996 SEPTEMBER 30, 1997 --------------
------------------ ------------------ (UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................................... $ 759,005 $ 615,408 $ 689,248
Accounts receivable (net of allowance for doubtful accounts of
$108,921, $181,490 and $256,947 for 1996, 1997 and 1998,
respectively)..................................................... 1,234,263 2,295,956 3,268,566
Inventories......................................................... 783,795 1,252,440 1,169,397
Prepaid expenses and other current assets........................... 176,321 311,072 305,297
------------------ ------------------ --------------
Total current assets.................................................. 2,953,384 4,474,876 5,432,508
Property and equipment--net........................................... 898,914 934,768 2,102,932
Deferred tax assets................................................... -- 555,421 555,421
Investment in and advances to affiliate--net.......................... -- 474,718 --
Intangible assets:
Patents and licenses less accumulated amortization of $187,095,
$235,591 and $370,649 for 1996, 1997 and 1998, respectively....... 206,766 172,513 1,160,110
Goodwill, less accumulated amortization of $10,166.................. -- -- 815,098
------------------ ------------------ --------------
Total intangible assets............................................... 206,766 172,513 1,975,208
Other assets.......................................................... 64,142 90,041 87,526
------------------ ------------------ --------------
Total assets.......................................................... $4,123,206 $6,702,337 $ 10,153,595
------------------ ------------------ --------------
------------------ ------------------ --------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................................... $ 577,478 $ 851,005 $ 1,858,303
Accrued royalties................................................... 52,059 152,348 419,977
Accrued litigation.................................................. 7,033 721,033 842,908
Income taxes payable................................................ -- 440,601 98,403
Accrued benefits and compensation................................... 403,520 491,545 412,023
Current maturities of debt.......................................... 167,856 167,856 327,858
Capital lease obligations--current portion.......................... -- 40,089 26,878
Deferred revenue.................................................... 309,486 263,662 199,173
Other............................................................... 202,898 76,034 331,407
------------------ ------------------ --------------
Total current liabilities............................................. 1,720,330 3,204,173 4,516,930
Long-term debt--net................................................... 1,188,007 825,300 1,701,370
Capital lease obligations--long-term portion.......................... -- 35,996 380,234
Other liabilities..................................................... 232,272 231,688 210,708
------------------ ------------------ --------------
Total liabilities..................................................... 3,140,609 4,297,157 6,809,242
------------------ ------------------ --------------
Commitments and contingencies
Stockholders' equity:
Preferred stock, $10 par value--authorized, 1,000,000 shares; issued
and outstanding, 21,500 shares.................................... 215,000 215,000 215,000
Common stock, $0.10 par value--authorized, 15,000,000 shares;
issued, 1,823,766, 1,939,362 and 2,009,435 for 1996, 1997 and
1998, respectively................................................ 182,377 193,936 200,943
Additional paid-in capital.......................................... 1,755,355 2,015,688 2,119,461
(Accumulated deficit) retained earnings............................. (1,168,642) 223,356 1,106,901
Foreign currency translation adjustment............................. -- -- (4,652)
Less notes receivable for common stock sold--80,300 and 135,050
shares, for 1997 and 1998, respectively........................... -- (206,800) (289,300)
Less common stock in treasury at cost--6,442, 16,425 and 1,825
shares for 1996, 1997 and 1998, respectively...................... (1,493) (36,000) (4,000)
------------------ ------------------ --------------
Total stockholders' equity............................................ 982,597 2,405,180 3,344,353
------------------ ------------------ --------------
Total liabilities and stockholders' equity............................ $4,123,206 $6,702,337 $ 10,153,595
------------------ ------------------ --------------
------------------ ------------------ --------------
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
LIFECODES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED SEPTEMBER 30, 1995, 1996, 1997
AND THE SIX MONTHS ENDED MARCH 31, 1997 (UNAUDITED)
AND MARCH 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
YEARS ENDED SIX MONTHS ENDED
-----------------------------------------------------------------------------
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, MARCH 31, MARCH 31,
1995 1996 1997 1997 1998
-------------- ------------- ------------- ----------- -----------
UNAUDITED UNAUDITED
<S> <C> <C> <C> <C> <C>
Revenues:
Service............................... $ 1,178,400 $ 3,370,762 $ 5,417,596 $ 2,434,321 $ 4,067,337
Product and other revenues............ 2,356,010 3,716,273 6,806,277 2,570,030 4,317,148
------------- ------------- ------------- ----------- -----------
Total......................... 3,534,410 7,087,035 12,223,873 5,004,351 8,384,485
Cost of revenues:
Service............................... 429,154 1,791,868 2,764,286 1,316,075 2,251,194
Product and other revenues............ 1,075,335 1,440,142 2,131,683 897,989 1,096,733
------------- ------------- ------------- ----------- -----------
Total......................... 1,504,489 3,232,010 4,895,969 2,214,064 3,347,927
------------- ------------- ------------- ----------- -----------
Gross profit............................ 2,029,921 3,855,025 7,327,904 2,790,287 5,036,558
------------- ------------- ------------- ----------- -----------
Other costs and expenses:
Selling, general and administrative... 1,084,755 2,625,107 4,680,891 1,628,593 2,872,239
Research and development.............. 669,392 717,839 900,404 433,297 555,471
------------- ------------- ------------- ----------- -----------
Total......................... 1,754,147 3,342,946 5,581,295 2,061,890 3,427,710
------------- ------------- ------------- ----------- -----------
Income from operations.................. 275,774 512,079 1,746,609 728,397 1,608,848
------------- ------------- ------------- ----------- -----------
Other income (expense):
Other income.......................... 18,002 17,975 43,422 17,980 75,187
Interest expense...................... (114,937) (144,943) (224,303) (71,261) (47,988)
------------- ------------- ------------- ----------- -----------
Total......................... (96,935) (126,968) (180,881) (53,281) 27,199
------------- ------------- ------------- ----------- -----------
Income before income taxes and
extraordinary item.................... 178,839 385,111 1,565,728 675,116 1,636,047
Income taxes............................ -- -- 173,730 74,910 752,502
Extraordinary item--Loss on early
extinguishment of debt................ -- 78,837 -- -- --
------------- ------------- ------------- ----------- -----------
Net income.............................. $ 178,839 $ 306,274 $ 1,391,998 $ 600,206 $ 883,545
------------- ------------- ------------- ----------- -----------
------------- ------------- ------------- ----------- -----------
Net income per share:
Basic................................. .12 .18 .76 .33 .45
------------- ------------- ------------- ----------- -----------
------------- ------------- ------------- ----------- -----------
Diluted............................... .10 .16 .58 .25 .31
------------- ------------- ------------- ----------- -----------
------------- ------------- ------------- ----------- -----------
Average number of common shares and
dilutive common share equivalents
outstanding:
Basic................................. 1,555,053 1,719,975 1,834,530 1,828,190 1,956,269
------------- ------------- ------------- ----------- -----------
------------- ------------- ------------- ----------- -----------
Diluted............................... 1,792,504 1,957,426 2,381,421 2,379,318 2,814,139
------------- ------------- ------------- ----------- -----------
------------- ------------- ------------- ----------- -----------
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
LIFECODES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED SEPTEMBER 30, 1995, 1996, AND 1997 AND MARCH 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
(ACCUMULATED FOREIGN
COMMON STOCK ADDITIONAL DEFICIT) CURRENCY
PREFERRED --------------------- PAID-IN RETAINED NOTE TRANSLATION
STOCK SHARES AMOUNT CAPITAL EARNINGS RECEIVABLE ADJUSTMENTS
--------- --------- -------- ---------- ------------ ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, October 1, 1994........ $ 215,000 1,572,946 $157,295 $1,604,347 $ (1,653,755) $ -- $ --
Net income.................... -- -- -- -- 178,839 -- --
Reclassification of put
warrant obligation......... -- -- -- 100,000 -- -- --
Issuance of common stock...... -- 2,555 256 3,245 -- -- --
--------- --------- -------- ---------- ------------ ---------- -----------
Balance, September 30, 1995..... 215,000 1,575,501 157,550 1,707,592 (1,474,916) -- --
Net income.................... -- -- -- -- 306,274 -- --
Issuance of common stock...... -- 248,265 24,827 32,325 -- -- --
Sale of treasury stock........ -- -- -- 15,438 -- -- --
--------- --------- -------- ---------- ------------ ---------- -----------
Balance, September 30, 1996..... 215,000 1,823,766 182,377 1,755,355 (1,168,642) -- --
Net income.................... -- -- -- -- 1,391,998 -- --
Issuance of common stock...... -- 115,596 11,559 253,000 -- (206,800) --
Sale of treasury stock........ -- -- -- 7,333 -- -- --
Purchase of treasury stock.... -- -- -- -- -- -- --
--------- --------- -------- ---------- ------------ ---------- -----------
Balance, September 30, 1997..... 215,000 1,939,362 193,936 2,015,688 223,356 (206,800) --
Net income (unaudited)........ -- -- -- -- 883,545 -- --
Issuance of common stock
(unaudited)................ -- 70,073 7,007 96,493 -- (82,500) --
Sale of treasury stock
(unaudited)................ 7,280
Translation adjustments
(unaudited)................ -- -- -- -- -- -- (4,652)
--------- --------- -------- ---------- ------------ ---------- -----------
Balance, March 31, 1998
(unaudited)................... $ 215,000 2,009,435 $200,943 $2,119,461 $ 1,106,901 $ (289,300) $(4,652)
--------- --------- -------- ---------- ------------ ---------- -----------
--------- --------- -------- ---------- ------------ ---------- -----------
<CAPTION>
TREASURY STOCK TOTAL
------------------ STOCKHOLDERS'
SHARES AMOUNT EQUITY
------ -------- -------------
<S> <C> <C> <C>
Balance, October 1, 1994........ 20,020 $ (4,655) $ 318,232
Net income.................... -- -- 178,839
Reclassification of put
warrant obligation......... -- -- 100,000
Issuance of common stock...... -- -- 3,500
------ -------- -------------
Balance, September 30, 1995..... 20,020 (4,655) 600,571
Net income.................... -- -- 306,274
Issuance of common stock...... -- -- 57,152
Sale of treasury stock........ 13,578 3,162 18,600
------ -------- -------------
Balance, September 30, 1996..... 6,442 (1,493) 982,597
Net income.................... -- -- 1,391,998
Issuance of common stock...... -- -- 57,759
Sale of treasury stock........ 6,442 1,493 8,826
Purchase of treasury stock.... 16,425 (36,000) (36,000)
------ -------- -------------
Balance, September 30, 1997..... 16,425 (36,000) 2,405,180
Net income (unaudited)........ -- -- 883,545
Issuance of common stock
(unaudited)................ -- -- 21,000
Sale of treasury stock
(unaudited)................ 14,600 32,000 39,280
Translation adjustments
(unaudited)................ -- -- (4,652)
------ -------- -------------
Balance, March 31, 1998
(unaudited)................... 1,825 $ (4,000) $ 3,344,353
------ -------- -------------
------ -------- -------------
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE>
LIFECODES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED SEPTEMBER 30, 1995, 1996, 1997 AND
THE SIX MONTHS ENDED MARCH 31, 1997 (UNAUDITED) AND MARCH 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
YEARS ENDED SIX MONTHS ENDED
----------------------------------------------- --------------------------
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, MARCH 31, MARCH 31,
1995 1996 1997 1997 1998
------------- ------------- ------------- ----------- -----------
(UNAUDITED) (UNAUDITED
<S> <C> <C> <C> <C> <C>
Operating activities:
Net income.............................. $ 178,839 $ 306,274 $ 1,391,998 $ 600,206 $ 883,545
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization....... 157,319 185,654 224,413 116,068 290,859
Amortization of debt discount....... 20,213 115,205 105,149 9,289 --
Net loss of affiliate............... -- -- 98,777 -- --
Loss on disposition of property and
equipment......................... -- -- 59,222 -- --
Increase in allowance for doubtful
accounts.......................... 14,127 5,921 72,569 33,646 75,457
Increase in deferred tax asset...... -- -- (555,421) (7,015) --
Increase (decrease) in provision for
inventory obsolescence............ (39,886) 2,044 -- -- --
(Decrease) increase in deferred
revenue........................... (99,676) 135,433 (96,160) (73,353) (64,489 )
Net change in operating assets and
liabilities (net of business
acquisitions):
Increase in accounts receivable..... (266,002) (149,010) (1,134,262) (532,677) (676,139 )
(Increase) decrease in
inventories....................... (297,158) 64,204 (468,645) (163,866) 138,981
(Increase) decrease in prepaid
expenses and other current
assets............................ 49,914 (17,283) (134,751) (102,313) 14,416
(Increase) decrease in patents and
licenses.......................... -- (14,560) (14,234) -- (1,034,602 )
Increase in security deposits....... -- (9,912) (25,899) -- 2,515
Increase in accounts payable........ 150,509 137,078 273,526 361,676 561,838
Increase (decrease) in accrued
expenses and other current
liabilities....................... 118,765 322,277 865,875 (258,921) 589,691
Decrease in deferred rent payable... (8,995) (8,994) (11,658) (4,498) (7,693 )
Increase (decrease) in other
noncurrent liabilities............ 50,768 (96,016) 47,070 4,131 (14,857 )
Increase (decrease) in income taxes
payable........................... -- -- 440,601 74,910 (342,198 )
------------- ------------- ------------- ----------- -----------
Net cash provided by operating
activities........................ 28,737 978,315 1,138,170 57,283 417,324
------------- ------------- ------------- ----------- -----------
Investing actvities:
Acquistion of Cellmark Diagnostics...... -- (500,000) -- -- --
Acquisition of National Legal
Laboratories.......................... -- -- -- -- (701,527 )
Acquistion of interest in and advances
to Medical Molecular Diagnostics...... -- -- (573,995) (123,495)
Purchases of property and equipment..... (181,546) (320,716) (270,501) (9,260) (699,029 )
------------- ------------- ------------- ----------- -----------
Net cash used in investing
activities........................ (181,546) (820,716) (844,496) (132,755) (1,400,556 )
------------- ------------- ------------- ----------- -----------
Financing activities:
Repayments of long-term debt............ (52,197) (665,414) (467,856) (83,929) (163,928 )
Proceeds from issuance of long-term
debt.................................. -- 1,175,000 -- -- 1,200,000
Proceeds from issuance of common
stock................................. 3,500 57,152 57,760 48,352 21,000
Purchase of treasury stock.............. -- -- (36,000) -- --
Proceeds from sale of treasury stock.... -- 18,600 8,825 1,493 --
------------- ------------- ------------- ----------- -----------
Net cash (used in) provided by
financing activities.............. (48,697) 585,338 (437,271) (34,084) 1,057,072
------------- ------------- ------------- ----------- -----------
Net (decrease) increase in cash and cash
equivalents........................... (201,506) 742,937 (143,597) (109,556) 73,840
Cash and cash equivalents, beginning...... 217,574 16,068 759,005 759,005 615,408
------------- ------------- ------------- ----------- -----------
Cash and cash equivalents, end............ $ 16,068 $ 759,005 $ 615,408 $ 649,449 $ 689,248
------------- ------------- ------------- ----------- -----------
------------- ------------- ------------- ----------- -----------
Supplemental disclosures of cash flow
information:
Cash paid during the period for
interest.............................. $ 58,990 $ 147,439 $ 137,452 $ 71,261 $ 47,988
------------- ------------- ------------- ----------- -----------
------------- ------------- ------------- ----------- -----------
Cash paid during the period for income
taxes................................. $ -- $ -- $ 288,776 $ -- $1,094,724
------------- ------------- ------------- ----------- -----------
------------- ------------- ------------- ----------- -----------
</TABLE>
See notes to consolidated financial statements.
F-7
<PAGE>
LIFECODES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1995, 1996, 1997 AND MARCH 31, 1998 (UNAUDITED)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Lifecodes Corporation ('Lifecodes' or the 'Company') is a leading provider
of DNA testing services and diagnostic test kits for human paternity and
forensic identification and for the genetic typing of potential donors and
recipients of bone marrow and other organ transplants. The Company's identity
testing services in the paternity and forensics areas seek to establish the
correct identify of a child's parents when such matters are disputed or seek to
link hair, saliva, blood or another biological specimen found at a crime scene
to an alleged felon. The Company's transplantation tests detect the genetic
sequence for certain human leukocyte antigens ('HLA') contained in DNA which are
the principal determinant whether a donor's bone marrow or organ transplant will
be rejected by the recipient's immune system.
During March 1996, the Company acquired Cellmark Diagnostics ('Cellmark'),
a division of Zeneca plc, for $500,000. The acquisition has been accounted for
under the purchase method of accounting. Accordingly, the purchase price was
allocated to the net assets acquired based on their fair values. The fair value
of the net assets acquired exceeded the total cost by $185,799, which reduced
the fair value of the long-term assets acquired (property and equipment and
other assets).
Coincident with the Company's purchase of Cellmark, certain Cellmark
employees purchased 1,960 shares (19.6%) of Cellmark common stock from Lifecodes
for $98,000 (representing a price of $50 per share), through the issuance of
noninterest bearing, nonrecourse notes. The notes receivable offset the Cellmark
minority interest in the consolidated balance sheet at September 30, 1996 and
1997. The notes are to be paid within the 36-month period following the
acquisition. Each Cellmark common share is convertible into 43.65 Lifecodes
common shares during the 36 month to 60 month period following the Cellmark
acquisition. Upon termination of employment, shares must be converted, subject
to time frame restrictions, or surrendered to the Company at their cost basis to
the extent the note had not been paid or at their cost basis plus 15% interest
to the extent the note had been paid.
During fiscal 1997, through an arrangement with the Company's Chief
Executive Officer, the Company acquired a 40 percent interest in Medical
Molecular Diagnostics GmbH ('MMD'). MMD's office and laboratory facilities are
located in Dresden, Germany, where it conducts molecular HLA typing (See note
9). Effective October 1, 1997 the Company increased its investment to 60%
through the conversion of debt to equity.
In September, 1997, the Company established a wholly-owned subsidiary,
Lifecodes Europe BVBA ('LC-Europe'), in Belgium. LC-Europe will function as a
distributor of DNA probe and reagent identity products and will commence
operations on April 1, 1998. Total costs associated with LC-Europe were $6,836
through September 30, 1997.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company,
its wholly-owned subsidiaries, Lifebank Inc. (a dormant company), and Genomics
International Corporation (which acquired the Assets of National Legal
Laboratories), and its majority-owned subsidiaries, Cellmark Diagnostics, Inc.,
and MMD (commencing October 1, 1997). All material intercompany balances and
transactions have been eliminated in consolidation.
F-8
<PAGE>
LIFECODES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED SEPTEMBER 30, 1995, 1996, 1997 AND MARCH 31, 1998 (UNAUDITED)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
Financial Instruments
The Company's financial instruments consist primarily of cash and cash
equivalents, trade receivables, and trade payables. The carrying amounts of cash
and cash equivalents, investments, trade receivables, and trade payables
approximate fair value due to the short maturity of these instruments. The
carrying value of the term debt approximates fair value.
Investment in Affiliate
Through September 30, 1997, the Company's 40% investment in MMD is
accounted for by the equity method. On October 1, 1997, the Company increased
its equity position in MMD to 60% through the conversion of debt to equity.
Accordingly, MMD has been consolidated in the March 31, 1998 (unaudited)
financial statements.
Cash and Cash Equivalents
The Company considers all investments purchased with an original maturity
of three months or less to be cash equivalents.
Revenue Recognition
Revenue is recognized when products are shipped and/or services are
provided to the customer.
Inventories
Inventories are valued at the lower of cost or market. Cost is determined
for the various categories of inventory using the first-in, first-out method.
Depreciation and Amortization
Property and equipment is stated at cost less accumulated depreciation.
Depreciation is computed using the straight-line method over the estimated
useful lives of the assets (five to ten years). Leasehold improvements are
amortized on a straight-line basis over the term of the lease which is not in
excess of the estimated useful life of the improvement. Purchased computer
software is being amortized over a period of three to five years.
Patents and Licenses
The Company capitalized the costs of acquiring certain patent rights and
licenses on its products. These costs are being amortized on a straight-line
basis over the terms of the agreements (one to ten years).
Licenses and Royalties
Lifecodes has licensed its technology to certain companies in Canada and
Australia under specific licensing agreements. Each of these agreements contain
minimum annual royalty requirements.
The Company also receives royalties under sublicense and distribution
agreements. These agreements stipulate the terms for computing the royalties due
to the Company based upon sales levels. The rates used to determine the
royalties range from 5 to 30 percent, depending on the agreement terms.
The Company earned $443,335, $388,960, and $462,469 in royalties for the
years ended September 30, 1995, 1996, and 1997, respectively. Revenue derived
from royalties are included in product and other revenues in the consolidated
statements of operations.
F-9
<PAGE>
LIFECODES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED SEPTEMBER 30, 1995, 1996, 1997 AND MARCH 31, 1998 (UNAUDITED)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
Intangible Assets
Intangible assets are stated at cost and amortized using the straight-line
method over the assets' estimated useful lives, which range from 1.5 to fifteen
years. The Company evaluates the possible impairment of long-lived assets,
including intangible assets, whenever events or circumstances indicate that the
carrying value of the assets may not be recoverable.
Income Taxes
Deferred income taxes are provided for the temporary differences between
the financial reporting basis and the income tax basis of the Company's assets
and liabilities in accordance with Statement of Financial Accounting Standards
No. 109.
Foreign Currency Translation
The financial statements of MMD were prepared in its respective local
currency and translated into U.S. dollars based on the current exchange rate at
the end of the period for the balance sheet and a weighted-average rate for the
period on the statement of operations. Translation adjustments are reflected as
foreign currency translation adjustments in Stockholders' Equity and accordingly
have no effect on net income.
Use of Estimates
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amount of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Reclassifications
Certain previously reported amounts have been reclassified to conform to
the 1997 financial statement presentation.
Interim Financial Statements
The accompanying balance sheet as of March 31, 1998 and the statements of
operations and cash flows for the six months ended March 31, 1997 and 1998 are
unaudited but, in the opinion of management, include all adjustments (consisting
of only normal, recurring adjustments) necessary for a fair presentation of
results for these interim periods. Results for interim periods are not
necessarily indicative of results for the entire year.
Stock Split
The accompanying financial statements retroactively reflect a 3.65 for one
common stock split which the Company intends to adopt in conjunction with an
increase in its authorized number of common shares to 15,000,000. Accordingly,
all common shares, options and warrants to acquire common shares and the
conversion terms of the preferred stock have been adjusted to reflect the
pending stock split. The above conversion has been presented as the Company
intends to obtain formal stockholder approval of the stock split and an increase
in the number of authorized common shares.
F-10
<PAGE>
LIFECODES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED SEPTEMBER 30, 1995, 1996, 1997 AND MARCH 31, 1998 (UNAUDITED)
2. ACCOUNTS RECEIVABLE
A summary of activity in the allowance for doubtful accounts is as follows:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30, 6 MONTHS ENDED MARCH 31,
---------------------------- --------------------------
1995 1996 1997 1998
------- -------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Balance beginning of period............................ $30,621 $ 44,738 $108,921 $ 181,490
Provision charged to expense........................... 34,211 120,763 110,503 94,601
Charge offs............................................ (20,094) (56,580) (37,934) (19,144)
------- -------- -------- -----------
Balance at end of period............................... $44,738 $108,921 $181,490 $ 256,947
------- -------- -------- -----------
------- -------- -------- -----------
</TABLE>
3. INVENTORY
<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 30, MARCH 31,
1996 1997 1998
------------- ------------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Inventory consists of the following:
Raw materials........................................... $ 104,657 $ 87,441 $ 102,068
Work-in-process......................................... 297,451 504,075 449,117
Finished goods.......................................... 381,687 660,924 618,212
------------- ------------- -----------
Total..................................................... $ 783,795 $ 1,252,440 $ 1,169,397
------------- ------------- -----------
------------- ------------- -----------
</TABLE>
4. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 30, MARCH 31,
1996 1997 1998
------------- ------------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Leasehold improvements.................................... $ 792,471 $ 794,662 $ 818,559
Furniture, fixtures and equipment......................... 523,757 798,640 2,135,708
Computer software......................................... 92,908 27,613 29,003
------------- ------------- -----------
Total..................................................... 1,409,136 1,620,915 2,983,270
Less accumulated depreciation and amortization............ 510,222 686,147 880,338
------------- ------------- -----------
Property and equipment--net............................... $ 898,914 $ 934,768 $ 2,102,932
------------- ------------- -----------
------------- ------------- -----------
</TABLE>
Included in furniture, fixtures and equipment is $112,090, $115,287 and
$115,287 at September 30, 1996 and 1997, and March 31, 1998 (unaudited),
respectively, which is restricted under a research grant with the U.S.
Department of Defense ('DOD'). Under the terms of the agreement, the DOD has
funded this equipment to complete various research projects. Based on the terms
of the agreement, the equipment may be returned to the DOD. A corresponding
amount has been recorded in other liabilities on the respective balance sheets.
F-11
<PAGE>
LIFECODES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED SEPTEMBER 30, 1995, 1996, 1997 AND MARCH 31, 1998 (UNAUDITED)
5. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 30, MARCH 31,
1996 1997 1998
------------- ------------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Promissory note, net of unamortized discount of $105,149
at September 30, 1996(a)................................ $ 194,851 -- --
Term note agreement(d).................................... 1,161,012 $ 993,156 $ 909,228
Lines of credit outstanding(e)............................ -- -- 1,120,000
------------- ------------- -----------
Total..................................................... 1,355,863 993,156 2,029,228
Less current maturities of long-term debt................. 167,856 167,856 327,858
------------- ------------- -----------
Long-term debt--net....................................... $ 1,188,007 $ 825,300 $ 1,701,370
------------- ------------- -----------
------------- ------------- -----------
</TABLE>
- ------------------
(a) In December 1991, the Company issued a promissory note to an investor for
$300,000. The promissory note bore interest at the rate of 10 percent per
annum. The promissory note was due October 31, 1997. In connection with the
promissory note, the Company issued a detachable warrant to purchase 165,155
shares of common stock at $1.82 per share. The portion of the proceeds
allocable to the warrant was accounted for as additional paid-in capital.
The discount was recorded as additional interest expense over the term of
the promissory note.
On July 15, 1994, a twelve-month interest moratorium commencing January 1,
1994 was granted to the Company. The interest accumulated during the
moratorium was deferred until the maturity of the promissory note. In
connection with the moratorium, the Company granted to the investor a
ten-year warrant for 21,900 common shares at $0.27 per share. The promissory
note was discounted and additional paid-in capital was increased for the fair
value of the warrant. The discount was recorded as additional interest
expense over the remaining term of the promissory note.
At September 30, 1996, the principal outstanding under the promissory note
was $300,000. On August 29, 1997, the Company paid the outstanding principal.
(b) On March 6, 1992, the Company entered into a note purchase agreement (the
'Agreement') with Connecticut Innovations Inc. ('CII'). Pursuant to the
Agreement, as most recently amended August 2, 1993, the Company issued a
senior secured note due March, 1998 in the principal amount of $450,000,
bearing interest at the rate of 10 percent per annum, payable quarterly (the
'Senior Secured Note'). Under the terms of the Agreement, royalties were
also due to CII on a percentage of sales ranging from 2 to 5 percent or a
minimum quarterly guaranteed amount of $22,500, as to allow CII to receive a
return on investment of 25 percent compounded quarterly. On July 20, 1994,
CII granted the Company a full payment moratorium for the period December
1993 through May 1994. The interest accumulated during the moratorium is
deferred until maturity of the note. In connection with the moratorium, the
Company granted to CII a ten year warrant for 49,275 common shares at $0.27
per share. The warrants contained CII's standard terms, including anti-
dilution protection and demand registration rights. The Senior Secured Note
was discounted and additional paid-in capital was increased for the fair
value of the warrant. The discount was recorded as additional interest
expense over the remaining term of the Senior Secured Note.
On March 4, 1996, the Company paid the outstanding principal and related
interest and royalties totaling $622,171. The related unamortized debt
discount of $37,328 was recognized as a loss on the early extinguishment of
debt.
F-12
<PAGE>
LIFECODES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED SEPTEMBER 30, 1995, 1996, 1997 AND MARCH 31, 1998 (UNAUDITED)
5. LONG-TERM DEBT--(CONTINUED)
(c) On April 13, 1992, the Company entered into a note and warrant purchase
agreement in which a promissory note was issued to Connecticut Development
Authority ('CDA') for $300,000.
In connection with the note and warrant purchase agreement, the Company
issued to CDA a detachable stock subscription warrant to purchase 129,305
shares of common stock, at $1.65 per share, and entered into a warrant put
and call agreement, subject to the defined terms. The portion of the proceeds
allocable to the warrant was accounted for as additional paid-in capital. The
resulting discount was recorded as additional interest expense over the term
of the promissory note. The warrant put and call agreement contained specific
terms whereby CDA was able to put the warrants back to the Company for
$100,000. During 1995, CDA waived its right to put the warrants to the
Company which resulted in the reclassification of the put warrant obligation
from liabilities to additional paid in capital.
The promissory note bore interest at the rate of 10 percent per annum, with
interest payable monthly, maturing on May 1, 1998. On July 11, 1994, CDA
granted the Company a full payment moratorium for the period May through July
1994 and requested interest payments only for the period August through
December 1994. The interest accumulated during the moratorium was deferred
until the maturity of the promissory note. In connection with the moratorium,
the Company granted to CDA a ten year warrant for 29,452 common shares at
$0.27 per share. The warrants carried all of CDA's standard terms, including
anti-dilution protection and demand registration rights. The promissory note
was discounted and additional paid-in capital was increased for the fair
value of the warrant. The discount was recorded as additional interest
expense over the remaining term of the promissory note.
On March 4, 1996, the Company paid the outstanding principal and related
interest totaling $201,886. The related unamortized debt discount relating to
the warrant and the interest moratorium of $41,509, has been recognized as a
loss on the early extinguishment of debt.
(d) On March 4, 1996, the Company entered into a term note agreement with First
Union Bank of Connecticut in which a promissory note was issued in the
principal amount of $1,175,000. The promissory note bears interest at a
fixed rate of 8.35% per annum. Interest and principal is payable monthly and
matures on August 1, 2003. In conjunction with this agreement, the Company
was extended a $1,000,000 line of credit.
The promissory note is collateralized by a first lien on all assets of the
Company and contains a number of financial covenants. As of September 30,
1997, the Company was in violation with certain debt covenants, for which the
Company received a waiver.
(e) In March of 1998, the line of credit was increased to $1,700,000. In April,
1998, the Company entered into a term note agreement of $2,300,000 and a
$1,000,000 revolving loan with First Union National Bank of Connecticut. The
term note is payable in monthly installments through March 1, 2001, with a
final balloon payment on April 2, 2001, while the termination date for the
revolving loan commitment is May 31, 1999. The Company's interest rate on
this term note is 8.39%, while interest on the revolving loan accrues at a
floating rate equal to First Union's prime rate. In conjunction with the
term note agreement, the Company refinanced $1,120,000 of its line of credit
advances into the term note agreement.
F-13
<PAGE>
LIFECODES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED SEPTEMBER 30, 1995, 1996, 1997 AND MARCH 31, 1998 (UNAUDITED)
5. LONG-TERM DEBT--(CONTINUED)
Future minimum payments under these loan agreements at September 30, 1997
and March 31, 1998 (unaudited) are as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997 MARCH 31, 1998 (UNAUDITED)
----------------------------------- ------------------------------------
PRINCIPAL INTEREST TOTAL PRINCIPAL INTEREST TOTAL
--------- -------- ---------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Within 1 year.................... $ 167,856 $ 76,505 $ 244,361 $ 327,858 $156,753 $ 484,611
1999............................. 167,856 62,489 230,345 327,850 136,025 463,875
2000............................. 167,856 48,473 216,329 327,851 115,297 443,148
2001............................. 167,856 34,457 202,313 807,873 74,433 882,306
2002............................. 167,856 20,441 188,297 167,856 13,433 181,289
Thereafter....................... 153,876 6,425 160,301 69,940 1,460 71,400
--------- -------- ---------- ---------- -------- ----------
Total............................ $ 993,156 $248,790 $1,241,946 $2,029,228 $497,401 $2,526,629
--------- -------- ---------- ---------- -------- ----------
--------- -------- ---------- ---------- -------- ----------
</TABLE>
6. STOCKHOLDERS' EQUITY
PREFERRED STOCK
In September 1994, the Company sold to an investor 21,500 shares of
convertible senior preferred stock at $10.00 per share for cash proceeds of
$215,000. The preferred stock ranks senior to the Company's other equity
securities, converts into two shares of common stock for each share of
preferred, has voting power equivalent to the votes of the underlying common
stock and has full anti-dilution protection.
COMMON STOCK
In February 1996, the Company issued to investors and the chief executive
officer 160,702 and 21,900 shares, respectively, of common stock in accordance
with an agreement made in August 1993, which provided for the issuance of
additional shares of common stock if certain sales targets were not met by the
fiscal year ending September 30, 1996.
In September 1997, the Company sold to its Chairman 80,300 shares of common
stock with an estimated fair value of $2.69 per share for $2.60 per share. In
return, the Company received cash proceeds of $2,200 and a promissory note in
the amount of $206,800 which bears interest at a rate of 8% per annum. Per terms
of the note, the first installment of interest is due on September 30, 1998 and
the remaining interest and principal are due on September 30, 1999. As
collateral for the note, the Company retains all of the shares of common stock
purchased by the Chairman. Additional paid-in capital was increased to recognize
the excess of fair value over the par value of the common shares. The difference
between the fair value of the common stock sold and its issuance proceeds was
recorded as compensation expense.
During 1992 and 1995, the Company implemented Stock Option Plans (the
'Plans') which provide for grants of incentive and nonstatutory options to
purchase up to 686,200 and 237,250 shares, respectively, of common stock at a
purchase price equal to the fair market value at the date of grant. All stock
options under the 1992 Plan were granted during 1992 through 1994. The options
expire between five and ten years from the date of grant. All stock options
under the 1995 Plan were granted during 1995 and expire five and ten years from
the date of grant. Subject to the terms of the Plan, the Company may repurchase
the shares issued at a price equal to the then fair market value. The Company
has elected to follow Accounting Principles Board Opinion No. 25, Accounting for
Stock Issued to Employees ('APB 25') and related interpretations in accounting
for its employee stock options. Under APB 25, because the exercise price of
employee stock options equaled the fair value of the underlying stock on the
date of grant, no compensation expense was recorded.
F-14
<PAGE>
LIFECODES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED SEPTEMBER 30, 1995, 1996, 1997 AND MARCH 31, 1998 (UNAUDITED)
6. STOCKHOLDERS' EQUITY--(CONTINUED)
The Company applies Accounting Principles Board Opinion No. 25, 'Accounting
for Stock Issued to Employees' and other related interpretations in accounting
for its stock option plans. No compensation expense has been recognized for
these plans. Had compensation cost been determined based upon the fair value at
grant date consistent with the accounting methodology prescribed under SFAS No.
123, 'Accounting for Stock Based Compensation,' the Company's pro forma net
income and pro forma diluted earnings per share would have been reported as
follows:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-----------------------------------
1995 1996 1997
-------- --------- ----------
<S> <C> <C> <C>
Pro forma net income............................................. $139,006 $ 283,886 $1,378,333
Pro forma diluted earnings per share............................. $ .08 $ .15 $ .58
-------- --------- ----------
</TABLE>
There were no options granted during 1996 or 1997. The weighted average
fair value of options granted during 1995 were estimated to be $1.32 on the
dates of grant using the Black-Scholes option-pricing model with the following
assumptions: volatility of 0%, risk free interest rate of 6.82% and an expected
life of 5 years, respectively.
As of September 30, 1997 the 725,985 stock options outstanding have
exercise prices between $1.37 and $1.51 and a weighted average remaining
contractual life of 4.9 years.
The following summarizes the transactions pursuant to the Plans for the
years ended September 30, 1995, 1996, and 1997:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
SHARES OPTION PRICE
------- ------------
<S> <C> <C>
Balance at October 1, 1994........................................... 642,035 $ 1.41
Granted............................................................ 237,250 1.40
Canceled........................................................... (32,850) 1.37
------- ------
Balance at September 30, 1995........................................ 846,435 1.41
Exercised.......................................................... (1,205) 1.37
Canceled........................................................... (44,420) 1.37
------- ------
Balance at September 30, 1996........................................ 800,810 1.41
Exercised.......................................................... (5,110) 1.37
Canceled........................................................... (14,965) 1.37
Expired............................................................ (54,750) 1.51
------- ------
Balance at September 30, 1997........................................ 725,985 $ 1.40
------- ------
------- ------
Exercisable at September 30, 1997.................................. 531,367 $ 1.41
------- ------
------- ------
</TABLE>
Warrants
In connection with the issuance of the promissory note in 1991, referred to
in Note 5(a), the Company has granted warrants to purchase 165,155 shares of
common stock. The warrants expire May 1, 2002 and are exercisable at $1.82 a
share. The fair value of the warrants when issued was estimated to be $150,000.
In connection with the issuance of the promissory note in 1992, referred to
in Note 5(c), the Company has granted warrants to purchase 129,305 shares of
common stock. The warrants expire April 13, 2000 and are exercisable at $1.64
per share. The fair value of the warrants when issued was estimated to be
$100,000.
F-15
<PAGE>
LIFECODES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED SEPTEMBER 30, 1995, 1996, 1997 AND MARCH 31, 1998 (UNAUDITED)
6. STOCKHOLDERS' EQUITY--(CONTINUED)
In connection with interest and principal moratoriums in 1994, for debt
referred to in Note 5(a), (b) and (c), the Company has granted warrants to
purchase 100,627 shares of common stock, respectively. The warrants expire on
September 26, 2004 and are exercisable at $0.27 per share. The fair value of the
warrants when issued was estimated to be $126,817, respectively.
On February 24, 1994, the Company issued a five-year stock warrant to an
investor for 27,375 common shares at the warrant price of $1.37 per share in
connection with the issuance of a short-term promissory note that has since been
paid. The fair value of the warrant when issued was estimated to be $19,650.
Earnings Per Common Share
The following table represents the computation of basic and diluted
earnings per common share.
<TABLE>
<CAPTION>
YEARS ENDED SIX MONTHS SIX MONTHS
----------------------------------------------- ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, MARCH 31, MARCH 31,
1995 1996 1997 1997 1998
------------- ------------- ------------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Basic Earnings per Share:
Net income......................... $ 178,839 $ 306,274 $ 1,391,998 $ 600,206 $ 883,545
------------- ------------- ------------- ----------- -----------
Weighted average common shares
outstanding..................... 1,555,053 1,719,975 1,834,530 1,828,190 1,956,269
------------- ------------- ------------- ----------- -----------
Basic earnings per common share.... $ .12 $ .18 $ .76 $ .33 $ .45
------------- ------------- ------------- ----------- -----------
------------- ------------- ------------- ----------- -----------
Diluted Earnings per Share:
Net income......................... $ 178,839 $ 306,274 $ 1,391,998 $ 600,206 $ 883,545
------------- ------------- ------------- ----------- -----------
Weighted average common shares
outstanding..................... 1,555,053 1,719,975 1,834,530 1.828,190 1,956,269
Common stock equivalents........... 80,501 80,501 389,941 394,178 700,920
Assumed conversion of preferred
stock........................... 156,950 156,950 156,950 156,950 156,950
------------- ------------- ------------- ----------- -----------
Total weighted average common
shares............................. 1,792,504 1,957,426 2,381,421 2,379,318 2,814,139
------------- ------------- ------------- ----------- -----------
Diluted earnings per common share.... $ .10 $ .16 $ .58 $ .25 $ .31
------------- ------------- ------------- ----------- -----------
------------- ------------- ------------- ----------- -----------
</TABLE>
7. INCOME TAXES
There was no income tax expense or benefit recorded in the years ended
September 30, 1995 and 1996. The Company recorded a provision for income taxes
in the year ended September 30, 1997 of $173,730.
F-16
<PAGE>
LIFECODES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED SEPTEMBER 30, 1995, 1996, 1997 AND MARCH 31, 1998 (UNAUDITED)
7. INCOME TAXES--(CONTINUED)
The tax effects of temporary differences that give rise to significant
portions of deferred tax assets are as follows:
<TABLE>
<CAPTION>
1996 1997
-------- --------
<S> <C> <C>
Net operating loss carryforwards...................................... $264,201 $ 3,553
Federal business credit carryforwards................................. 189,114 --
Accrued liabilities................................................... -- 325,114
Depreciation and amortization......................................... 20,000 131,689
Allowance for doubtful accounts....................................... 43,568 90,890
Other................................................................. -- 4,175
-------- --------
516,883 555,421
Less valuation allowance.............................................. 516,883 --
-------- --------
Deferred tax asset, net............................................... $ -- $555,421
-------- --------
-------- --------
</TABLE>
The Company recorded a valuation allowance with respect to the tax benefits
and loss carryforwards recorded as a deferred tax asset at September 30, 1996
due to the uncertainty of their ultimate realization. As of September 30, 1997
the Company concluded that a valuation allowance was no longer necessary due to
three consecutive years of profitable operations.
The provision for income taxes is different from the amount computed using
applicable statutory federal rates for the following reasons:
<TABLE>
<CAPTION>
1995 1996 1997
-------- --------- ---------
<S> <C> <C> <C>
Income taxes at federal statutory rates........................... $ 60,805 $ 104,133 $ 532,348
Adjustment due to:
Utilization of net operating loss carryforwards................. (29,000) (199,737) (260,648)
Utilization of general business credits......................... -- -- (189,114)
State taxes, net of Federal benefit............................. -- 41,347 99,132
Other........................................................... (31,805) 54,257 (7,988)
-------- --------- ---------
Income taxes...................................................... $ -- $ -- $ 173,730
-------- --------- ---------
-------- --------- ---------
</TABLE>
8. RELATED PARTY TRANSACTIONS
In April 1992, the Company signed an agreement with FMC Corporation to
conduct joint research and development programs designed to expand the
applications of DNA analysis products to both the research and identity markets.
Lifecodes provides the primary facilities and the scientific and/or technical
effort as set forth in the agreement. FMC Corporation initially contributed
$300,000 of equity capital and received 109,500 shares at $2.74 per share that
have since expired. For each year ended September 30, 1995, 1996 and 1997,
Lifecodes recognized $45,000, $22,500 and $22,500, respectively, of research
funding under this agreement. The Company also purchases certain inventory items
from FMC during fiscal 1995, 1996, 1997, which amounted to $59,494, $94,113 and
$74,962, respectively.
During 1995 and 1996, the Company provided management services to an entity
in which the Chief Executive Officer and other investors of the Company own an
interest. Services include accounting, purchasing, administration, and rental of
office space. During 1996, the Company made various loans to this entity. As of
December 31, 1996, all outstanding loans as of September 30, 1996 were paid. For
the year ended September 30, 1996, the Company received $56,800 in management
fees and rent which are reflected in the accompanying statement of operations as
reductions in expense.
F-17
<PAGE>
LIFECODES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED SEPTEMBER 30, 1995, 1996, 1997 AND MARCH 31, 1998 (UNAUDITED)
9. INVESTMENT IN AND ADVANCES TO AFFILIATE
During fiscal 1997, through an arrangement with its Chief Executive
Officer, the Company acquired a 40 percent interest in Medical Molecular
Diagnostics GmbH ('MMD'). As part of the investment agreement, the Chief
Executive Officer assumed the role of managing director of MMD and obtained veto
power on all significant matters relating to its operations. The Company
received a promissory note from its Chief Executive Officer in the principal
amount of $150,000 bearing interest at 8% per annum, interest receivable
annually and maturing on December 31, 2001. The promissory note contains a put
and call feature set forth in the agreement. As security for the payment of the
principal amount, the Company entered into an agreement transferring the Chief
Executive Officer's business interest in MMD to the Company. As of September 30,
1997, the outstanding principal on the note was $104,097.
During fiscal 1997, the Company made various loans to MMD totaling
$469,398. In return, the Company received a promissory note in the principal
amount of $350,000, bearing interest at 8% per annum, interest receivable
annually and maturing on December 31, 2001 with the balance of $119,398
remaining as unsecured short-term advances. In conjunction with the loan
agreement MMD qualified for reimbursement from Saxony Redevelopment Bank
estimated at approximately $150,000. MMD has agreed to repay the Company any
unsecured short-term advances outstanding upon receipt and release of the
development money.
At September 30, 1997, the Company had a trade receivable of $87,351 due
from MMD which is included in accounts receivable on the consolidated balance
sheet. Effective October 1, 1997 the Company increased its ownership interest in
MMD to 60% through the conversion of debt to equity.
10. EMPLOYEE BENEFIT PLAN
Effective October 1, 1991, the Company established a retirement plan
pursuant to Section 401(k) of the Internal Revenue Code (the 'Code'), whereby
employees over the age of 21 years with at least 12 months of service are
eligible to contribute a percentage of their compensation to the plan, but not
in excess of the maximum allowed under the Code. The Plan provides for a
discretionary matching contribution by the Company. During the years ended
September 30, 1996, and 1997, the Company's expense relating to the matching
contributions amounted to $47,796 and $142,462, respectively. There were no
matching contributions in 1995.
11. COMMITMENTS AND CONTINGENCIES
Operating Leases
Office Space and Laboratory Facilities--The Company has long-term operating
leases for office space and laboratory facilities in Stamford, Connecticut and
Germantown, Maryland. The leases provide for monthly rental payments and, in
addition, the Company is responsible for certain building and operating expenses
of such facilities based upon its proportionate share of occupancy.
Equipment and Automobiles--The Company also leases certain office equipment
and automobiles under operating leases which expire at various dates through
1999.
During September 1997, the Company entered into an agreement to amend its
long-term operating lease for approximately 7,595 square feet of new office
space in Stamford, Connecticut. The additional space is scheduled for occupancy
September 1, 1998, pending completion of construction. Commencing on the second
month anniversary of the commencement date through and including April 30, 2002,
the fixed annual rent will be increased by $106,880 per annum.
Office Space and Laboratory Facilities--On August 12, 1997, Cellmark
Diagnostics extended the operating lease for office space and laboratory
facilities in Germantown, Maryland to November 2007. Per terms of the new
agreement, the available space will be increased from 8,956 to 16,361 square
feet upon completion of
F-18
<PAGE>
LIFECODES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED SEPTEMBER 30, 1995, 1996, 1997 AND MARCH 31, 1998 (UNAUDITED)
11. COMMITMENTS AND CONTINGENCIES--(CONTINUED)
scheduled leasehold improvements commencing in December 1997. The Landlord
granted an improvement allowance of $196,332 to revitalize and expand the
current facilities. A deferred liability was recorded in the amount of this
improvement allowance which is being amortized against rent expense on a
straight-line basis over the term of the lease. Rent expense is being charged to
operations on a straight-line basis over the term of the lease.
Future minimum rental payments for office space, equipment and automobiles
under the above leases, are as follows:
<TABLE>
<S> <C>
1998........................................................ $ 706,299
1999........................................................ 824,446
2000........................................................ 765,265
2001........................................................ 765,265
2002........................................................ 594,189
----------
Total future minimum lease payments......................... $3,655,464
----------
----------
</TABLE>
Annual rent expense under these leases for the years ended September 30,
1995, 1996, 1997 were $288,315, $462,854 and $615,189, respectively.
Capital Leases
The Company leases certain machinery and equipment costing $99,200 and
$158,187 at September 30, 1996 and 1997, respectively, under capital lease
agreements. Accumulated depreciation on this equipment was $16,592 and $44,049
at September 30, 1996 and 1997, respectively. These amounts are included in
property and equipment in Note 4.
Minimum lease payments, including interest, under these capital leases at
September 30, 1997 are as follows:
<TABLE>
<CAPTION>
YEAR ENDING SEPTEMBER 30,
- --------------------------------------------------------------
<S> <C>
1998.......................................................... $43,084
1999.......................................................... 31,254
2000.......................................................... 5,752
-------
Total minimum lease payments.................................. 80,090
Less amounts representing interest............................ 4,005
-------
Present value of future minimum lease payments................ 76,085
Less current portion of obligations........................... 40,089
-------
Obligations under capital leases, net of current portion...... $35,996
-------
-------
</TABLE>
On December 9, 1991, the Company purchased certain patent rights and
licenses from Genmark and the University of Utah Research Foundation (the
'University'). The patent rights purchased allow for the commercial development,
use and sale of the patent rights. Included as part of the patent rights
acquired are certain sublicense and distribution agreements assumed by the
Company, which provide for royalty payments to be made to the Company based on
net sales. In addition, Lifecodes has assumed the responsibility to pay the
annual royalties due to the University over the life of the patent rights of
seventeen years. The royalties are based upon a percentage of sales or a minimum
guaranteed amount of $25,000 per year. For the years ended September 30, 1995,
1996, and 1997, Lifecodes paid $37,539, $72,968 and $119,638, respectively, in
royalties to the University.
F-19
<PAGE>
LIFECODES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED SEPTEMBER 30, 1995, 1996, 1997 AND MARCH 31, 1998 (UNAUDITED)
11. COMMITMENTS AND CONTINGENCIES--(CONTINUED)
The Company has claims against it arising out of the conduct of its
business. The ultimate resolution of such matters, in the opinion of management,
will not have a material effect on Lifecodes' financial statements. At September
30, 1997, the Company has accrued approximately $721,000 for domestic and
foreign litigation.
The Company has entered into severance agreements with two key executives
and the Chief Executive Officer to provide them with certain compensation and
benefits, including up to one year's salary upon termination. As of September
30, 1997, the Company's total potential payments under such severance agreements
is approximately $400,000.
12. RECENT ACCOUNTING PRONOUNCEMENTS
Statements of Financial Accounting Standards No. 130, 'Reporting
Comprehensive Income' ('SFAS 130'), and No. 131, 'Disclosures About Segments of
an Enterprise and Related Information' (SFAS 131), were issued in June 1997.
SFAS 130 establishes standards for reporting and display of comprehensive
income and its components in a full set of general purpose financial statements.
It requires that all items that are required to be recognized under accounting
standards as components of comprehensive income be reported in a financial
statement that is displayed with the same prominence as the other financial
statements. Comprehensive income is defined as 'the change in equity of a
business during a period from transactions and other events and circumstances
from non-owner sources.' It includes all changes in equity during a period,
except those resulting from investments by owners and distributions to owners.
This statement is effective for fiscal years beginning after December 15, 1997.
SFAS 131 establishes the way that public business enterprises report
information about operating segments in annual financial statements and requires
that those enterprises report selected information about segments in interim
financial reports issued to stockholders. It also establishes standards for
related disclosures about products and services, geographic areas and major
customers. This statement is effective for financial statements beginning after
December 15, 1997.
As the Company does not have material changes in equity other than from
investments by owners and distributions to owners and operates in a single
segment the implementation of both these standards are not expected to have a
material effect on the Company.
13. ACQUISITIONS
In February 1998, the Company's wholly-owned subsidiary, Genomics
International Corporation, acquired substantially all the assets of National
Legal Laboratories ('NLL'), a division of Group Benefit Services, Inc. for cash
and stock the value of which aggregated $807,000. NLL is a paternity testing
laboratory, with contracts in seven Midwestern and Eastern states. NLL is
located in Okemos, Michigan. The acquisition will be accounted for using the
purchase method.
In April 1998, the Company acquired all of the outstanding stock of
International Support for Bone Marrow Drives, Ltd. ('ISBMD'), a provider of HLA
testing services in Germany for cash and stock, the value of which aggregated
$1,433,000. ISBMD arranges HLA testing to be performed for large marrow donor
database organizations and contracts with a small group of specially selected
laboratories in Germany and the United States to perform both DNA and
serological HLA testing. The acquisition will be accounted for using the
purchase method.
Effective April 30, 1998, Micro Diagnostics, Inc. ('MDx') a DNA testing
laboratory located in Nashville, Tennessee, merged with and into a wholly-owned
subsidiary of the Company. The Company acquired all of the
F-20
<PAGE>
LIFECODES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED SEPTEMBER 30, 1995, 1996, 1997 AND MARCH 31, 1998 (UNAUDITED)
13. ACQUISITIONS--(CONTINUED)
MDx outstanding shares and notes payable to MDx stockholders in exchange for
325,372 Company shares. The acquisition will be accounted for as a pooling of
interests.
In July 1998, the Company acquired substantially all of the assets of Helix
Biotech Ltd. for cash and stock the value of which aggregated $1,203,200 Helix
is a full service DNA testing laboratory servicing the Canadian market. The
acquisition will be accounted for using the purchase method. In addition, if
Lifecodes has not completed an underwritten public offering before September
2000, Lifecodes will make monthly payments of $57,000 per month for up to 36
months depending upon the occurrence of certain events as set forth in the
agreement.
In July 1998, the Company entered into a letter of intent with GeneScreen,
Inc. of Dallas, Texas whereby the Company agreed to acquire GeneScreen testing
laboratory business and certain technology and patents for cash and Company
stock valued at $12.5 million. GeneScreen is a provider of paternity testing
services, primarily to the public testing market.
******
F-21
<PAGE>
The accompanying financial statements retroactively reflect a 3.65 for one
common stock split which the Company intends to adopt in conjunction with an
increase in its authorized number of common shares to 15,000,000 and authorized
number of preferred shares to 1,000,000. Accordingly, all common shares, options
and warrants to acquire common shares and the conversion terms of the preferred
stock have been adjusted to reflect the pending stock split. The below opinion
is in the form which will be signed by Deloitte and Touche LLP upon formal
stockholder approval of the stock split and an increase in authorized number of
common shares, and no other events shall have occurred that would effect the
accompanying financial statements and notes thereto.
'INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
Lifecodes Corporation
We have audited the accompanying supplemental consolidated balance sheets of
Lifecodes Corporation and subsidiaries (the 'Company') as of September 30, 1996
and 1997, and the related supplemental statements of operations, stockholders'
equity, and cash flows for each of the three years in the period ended September
30, 1997. The supplemental consolidated financial statements give retroactive
effect to the acquisition of Micro Diagnostics Incorporated on April 3, 1998,
which has been accounted for as a pooling of interests as described in Note 1.
These supplemental consolidated financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the supplemental consolidated financial statements referred to
above present fairly, in all material respects, the consolidated financial
position of the Company as of September 30, 1996 and 1997, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended September 30, 1997, after giving retroactive effect to the
acquisition of Micro Diagnostics Incorporated as described in Note 1, in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
/s/ DELOITTE & TOUCHE LLP
Stamford, Connecticut
May 22, 1998, except for Note 13
as to which the date is July 13, 1998'
F-22
<PAGE>
LIFECODES CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1996 AND 1997 AND MARCH 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 30, MARCH 31,
1996 1997 1998
------------- ------------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.......................................... $ 759,853 $ 662,839 $ 729,137
Accounts receivable (net of allowance for doubtful accounts of
$108,921, $181,490, and $256,947 for 1996, 1997 and 1998,
respectively).................................................... 1,214,379 2,242,118 3,195,700
Inventories........................................................ 877,642 1,502,358 1,353,743
Prepaid expenses and other current assets.......................... 184,288 316,581 326,450
------------- ------------- -----------
Total current assets................................................. 3,036,162 4,723,896 5,605,030
Property and equipment--net.......................................... 1,366,778 1,461,781 2,718,424
Deferred tax assets.................................................. -- 555,421 555,421
Investment in and advances to affiliate--net......................... -- 474,718 --
Intangible assets:
Goodwill, less accumulated amortization of $10,166................. -- -- 815,098
Patents and licenses less accumulated amortization of $187,095,
$235,591, and $370,649 for 1996, 1997 and 1998, respectively..... 206,766 172,513 1,160,110
------------- ------------- -----------
Total intangible assets.............................................. 206,766 172,513 1,975,208
Other assets......................................................... 104,891 122,718 117,829
------------- ------------- -----------
Total assets......................................................... $ 4,714,597 $ 7,511,047 $10,971,912
------------- ------------- -----------
------------- ------------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable................................................... $ 882,419 $ 1,405,004 $ 2,307,482
Accrued royalties.................................................. 52,059 152,348 424,355
Accrued litigation................................................. 7,033 721,033 842,908
Income taxes payable............................................... -- 440,601 98,403
Accrued benefits and compensation.................................. 408,977 561,369 485,929
Current maturities of debt......................................... 726,707 842,856 1,102,858
Capital lease obligations--current portion......................... 31,345 108,569 101,699
Deferred revenue................................................... 309,486 263,662 318,450
Other.............................................................. 248,825 100,839 352,754
------------- ------------- -----------
Total current liabilities............................................ 2,666,851 4,596,281 6,034,838
Long-term debt--net.................................................. 1,188,007 825,300 1,701,370
Obligations under capital lease...................................... 226,757 193,983 518,579
Other liabilities.................................................... 232,272 231,689 360,708
------------- ------------- -----------
Total liabilities.................................................... 4,313,887 5,847,253 8,615,495
------------- ------------- -----------
Commitments and contingencies
Stockholders' equity:
Preferred stock, $10 par value--authorized, 1,000,000 shares;
issued and outstanding, 21,500 shares............................ $ 215,000 $ 215,000 $ 215,000
Common stock, $0.10 par value--authorized, 15,000,000 shares;
issued, 1,907,552, 2,264,734, and 2,334,806 for 1996, 1997 and
1998, respectively............................................... 190,755 226,473 233,481
Additional paid-in capital......................................... 2,046,977 3,148,150 3,251,922
Accumulated deficit................................................ (2,050,529) (1,662,812) (1,027,350)
Foreign currency translation adjustment............................ -- -- (4,652)
Less notes receivable for common stock sold--80,300 shares and
135,050 for 1997 and 1998, respectively.......................... -- (227,017) (307,984)
Less common stock in treasury at cost--6,442, 16,425 and 1,825
shares, for 1996, 1997 and 1998, respectively.................... (1,493) (36,000) (4,000)
------------- ------------- -----------
Total stockholders' equity........................................... 400,710 1,663,794 2,356,417
------------- ------------- -----------
Total liabilities and stockholders' equity........................... $ 4,714,597 $ 7,511,047 $10,971,912
------------- ------------- -----------
------------- ------------- -----------
</TABLE>
See notes to supplemental consolidated financial statements.
F-23
<PAGE>
LIFECODES CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED SEPTEMBER 30, 1995, 1996, AND 1997,
AND FOR THE SIX MONTH PERIODS ENDED MARCH 31, 1997 (UNAUDITED)
AND MARCH 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
YEARS ENDED
SIX MONTHS ENDED
----------------------------------------------- --------------------------
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, MARCH 31, MARCH 31,
1995 1996 1997 1997 1998
------------- ------------- ------------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Service.................................... $ 1,178,400 $ 3,967,014 $ 8,258,819 $3,136,353 $5,933,335
Product and other revenues................. 2,356,010 3,716,273 6,806,277 2,570,030 4,317,148
------------- ------------- ------------- ----------- -----------
Total.................................... 3,534,410 7,683,287 15,065,096 5,706,383 10,250,483
Cost of Revenues:
Service.................................... 429,154 2,564,141 5,243,694 2,145,353 3,814,061
Product and other revenues................. 1,075,335 1,440,142 2,131,683 897,989 1,096,733
------------- ------------- ------------- ----------- -----------
Total.................................... 1,504,489 4,004,283 7,375,377 3,043,342 4,910,794
------------- ------------- ------------- ----------- -----------
Gross Profit................................. 2,029,921 3,679,004 7,689,719 2,663,041 5,339,689
------------- ------------- ------------- ----------- -----------
Other Costs and Expenses:
Selling, general and administrative........ 1,084,755 3,295,040 5,967,802 2,170,684 3,565,796
Research and development................... 669,392 717,839 900,404 433,297 555,471
------------- ------------- ------------- ----------- -----------
Total.................................... 1,754,147 4,012,879 6,868,206 2,603,981 4,121,267
------------- ------------- ------------- ----------- -----------
Income (loss) from operations................ 275,774 (333,875) 821,513 59,060 1,218,422
------------- ------------- ------------- ----------- -----------
Other income (expense):
Other income............................... 18,002 20,595 47,471 19,388 78,014
Interest expense........................... (114,937) (183,496) (307,537) (106,147 ) (109,611 )
------------- ------------- ------------- ----------- -----------
Total.................................... (96,935) (162,901) (260,066) (86,759 ) (31,597 )
------------- ------------- ------------- ----------- -----------
Income (loss) before income taxes and
extraordinary item......................... 178,839 (496,776) 561,447 (27,699 ) 1,186,825
Income taxes................................. -- -- 173,730 74,910 752,502
Extraordinary item--loss on early
extinguishment of debt..................... -- 78,837 -- -- --
------------- ------------- ------------- ----------- -----------
Net income (loss)............................ $ 178,839 $ (575,613) $ 387,717 $ (102,609 ) $ 434,323
------------- ------------- ------------- ----------- -----------
------------- ------------- ------------- ----------- -----------
Net income (loss) per share:
Basic...................................... 0.12 (0.32) 0.18 (0.05 ) 0.19
------------- ------------- ------------- ----------- -----------
------------- ------------- ------------- ----------- -----------
Diluted.................................... 0.10 (0.32) 0.14 (0.05 ) 0.14
------------- ------------- ------------- ----------- -----------
------------- ------------- ------------- ----------- -----------
Average number of common shares and dilutive
common share equivalents outstanding:
Basic...................................... 1,555,053 1,803,761 2,159,902 2,153,562 2,281,641
------------- ------------- ------------- ----------- -----------
------------- ------------- ------------- ----------- -----------
Diluted.................................... 1,792,504 1,803,761 2,706,793 2,153,562 3,139,511
------------- ------------- ------------- ----------- -----------
------------- ------------- ------------- ----------- -----------
</TABLE>
See notes to supplemental consolidated financial statements.
F-24
<PAGE>
LIFECODES CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED SEPTEMBER 30, 1995, 1996, 1997 AND MARCH 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
FOREIGN
COMMON STOCK ADDITIONAL CURRENCY
PREFERRED --------------------- PAID-IN ACCUMULATED TRANSLATION
STOCK SHARES AMOUNT CAPITAL DEFICIT ADJUSTMENTS
--------- --------- -------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance, October 1, 1994........................... $215,000 1,572,946 $157,295 $1,604,347 $(1,653,755) $ --
Net income....................................... -- -- -- -- 178,839 --
Reclassification of put warrant obligation....... -- -- -- 100,000 -- --
Issuance of common stock......................... -- 2,555 255 3,245 -- --
--------- --------- -------- ---------- ----------- -----------
Balance, September 30, 1995........................ 215,000 1,575,501 157,550 1,707,592 (1,474,916 ) --
Net income....................................... -- -- -- -- (575,613 ) --
Issuance of common stock......................... -- 248,266 24,824 31,645 -- --
Pooling of interests with MDI (Note 1)........... -- 83,786 8,380 291,392 -- --
Sale of treasury stock........................... -- -- -- 15,438 -- --
--------- --------- -------- ---------- ----------- -----------
Balance, September 30, 1996........................ 215,000 1,907,553 190,754 2,046,067 (2,050,529 ) --
Net income....................................... -- -- -- -- 387,717 --
Issuance of common stock......................... -- 115,596 11,560 252,684 -- --
Pooling of interests with MDI (Note 1)........... -- 241,585 24,159 840,180 -- --
Sale of treasury stock........................... -- -- -- 7,332 -- --
Purchase of treasury stock....................... -- -- -- -- -- --
--------- --------- -------- ---------- ----------- -----------
Balance, September 30, 1997........................ 215,000 2,264,734 226,473 3,148,150 (1,662,812 ) --
Net income (unaudited)........................... -- -- -- -- 434,323 --
Issuance of common stock (unaudited)............. -- 70,072 7,008 96,492 -- --
Sale of treasury stock (unaudited)............... -- -- -- 7,280 -- --
Foreign currency translation adjustment
(unaudited).................................... -- -- -- -- -- (4,652)
Adjustment for pooling of company with different
fiscal
year-end (unaudited)........................... -- -- -- -- 201,139 --
--------- --------- -------- ---------- ----------- -----------
Balance, March 31, 1998 (unaudited)................ $215,000 2,334,806 $233,481 $3,251,922 $(1,027,350) $(4,652)
--------- --------- -------- ---------- ----------- -----------
--------- --------- -------- ---------- ----------- -----------
<CAPTION>
TREASURY STOCK TOTAL
NOTE ------------------ STOCKHOLDERS'
RECEIVABLE SHARES AMOUNT EQUITY
---------- ------ -------- -------------
<S> <C> <C> <C> <C>
Balance, October 1, 1994........................... $ -- 20,020 $ (4,655) $ 318,232
Net income....................................... -- -- -- 178,839
Reclassification of put warrant obligation....... -- -- -- 100,000
Issuance of common stock......................... -- -- -- 3,500
---------- ------ -------- -------------
Balance, September 30, 1995........................ -- 20,020 (4,655) 600,571
Net income....................................... -- -- -- (575,613)
Issuance of common stock......................... -- -- -- 57,152
Pooling of interests with MDI (Note 1)........... -- -- -- 300,000
Sale of treasury stock........................... -- 13,578 3,162 18,600
---------- ------ -------- -------------
Balance, September 30, 1996........................ -- 6,442 (1,493) 400,710
Net income....................................... -- -- -- 387,717
Issuance of common stock......................... (227,017 ) -- -- 37,543
Pooling of interests with MDI (Note 1)........... -- -- -- 865,000
Sale of treasury stock........................... -- 6,442 1,493 8,825
Purchase of treasury stock....................... -- 16,425 (36,000) (36,000)
---------- ------ -------- -------------
Balance, September 30, 1997........................ (227,017 ) 16,425 (36,000) 1,663,794
Net income (unaudited)........................... -- -- -- 434,323
Issuance of common stock (unaudited)............. (80,967 ) -- -- 22,533
Sale of treasury stock (unaudited)............... -- 14,600 32,000 39,280
Foreign currency translation adjustment
(unaudited).................................... -- -- -- (4,652)
Adjustment for pooling of company with different
fiscal
year-end (unaudited)........................... -- -- -- 201,139
---------- ------ -------- -------------
Balance, March 31, 1998 (unaudited)................ $(307,984 ) 1,825 $ (4,000) $ 2,356,417
---------- ------ -------- -------------
---------- ------ -------- -------------
</TABLE>
See notes to supplemental consolidated financial statements.
F-25
<PAGE>
LIFECODES CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED SEPTEMBER 30, 1995, 1996, 1997 AND FOR THE SIX MONTH PERIOD
ENDED MARCH 31, 1997 (UNAUDITED) AND MARCH 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
YEARS ENDED SIX MONTHS ENDED
--------------------------------------------- -------------------------
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, MARCH 31, MARCH 31,
1995 1996 1997 1997 1998
------------- ------------- ------------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Operating activities:
Net income......................................... $ 178,839 $ (575,613) $ 387,717 $ (102,609) $ 434,323
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization.................. 157,319 282,206 444,244 190,006 421,661
Amortization of debt discount.................. 20,213 115,205 105,149 9,289 --
Equity in net loss of affiliate................ -- -- 98,777 -- --
Loss on disposition of property and equipment.. -- -- 59,222 -- --
Increase in allowance for doubtful accounts.... 14,127 5,921 72,569 33,646 75,457
Increase in deferred tax asset................. -- -- (555,421) (7,015) --
Increase (decrease) in provision for inventory
obsolescence................................ (39,886) 2,044 -- -- --
(Decrease) increase in deferred revenue........ (99,676) 135,433 (96,160) (73,353) (64,489)
Net change in operating assets and liabilities (net
of business acquisitions):
Increase in accounts receivable................ (266,002) (149,010) (1,134,262) (499,250) (676,139)
(Increase) decrease in inventories............. (297,158) (29,643) (624,715) (146,056) 102,476
Decrease (increase) in prepaid expenses and
other current assets........................ 49,914 (25,250) (129,713) (111,523) 1,119
(Increase) decrease in patents and licenses.... -- (14,560) (14,234) (1,034,602)
Increase in security deposits.................. -- (52,949) (25,899) 2,580 5,066
Increase in accounts payable................... 150,509 461,903 556,538 329,862 764,774
Increase in accrued expenses and other current
liabilities................................. 118,765 373,661 909,120 (252,542) 758,895
Decrease in deferred rent payable.............. (8,995) (8,994) (11,658) (4,498) (7,693)
Increase (decrease) in other noncurrent
liabilities................................. 50,768 (96,016) 47,070 4,131 (14,857)
Increase (decrease) in income taxes payable.... -- -- 440,601 74,910 (342,198)
------------- ------------- ------------- ----------- -----------
Net cash provided by (used in) operating
activities......................................... 28,737 424,338 528,945 (552,422) 423,793
------------- ------------- ------------- ----------- -----------
Investing actvities:
Acquistion of Cellmark Diagnostics................. -- (500,000) -- -- --
Acquistion of interest in and advances to
Medical.......................................... -- --
Molecular Diagnostics.............................. -- -- (573,995) (123,495) --
Acquisition of National Legal Laboratories......... -- (701,528)
Loans and advances to affiliate...................... -- -- -- -- --
Purchases of property and equipment................ (181,546) (624,742) (543,988) (89,691) (960,271)
------------- ------------- ------------- ----------- -----------
Net cash used in investing activities................ (181,546) (1,124,742) (1,117,983) (213,186) (1,661,799)
------------- ------------- ------------- ----------- -----------
Financing activities:
Repayments of long-term debt....................... (52,197) (1,023,316) (1,198,344) (707,562) (958,142)
Proceeds (repayments) from issuance of long-term
debt............................................. -- 2,091,753 815,000 690,000 2,265,000
Proceeds from issuance of common stock............. 3,500 357,152 902,543 798,352 21,000
Payments for purchase of treasury stock............ -- -- (36,000) -- --
Proceeds from sale of treasury stock............... -- 18,600 8,825 1,493 --
------------- ------------- ------------- ----------- -----------
Net cash (used in) provided by financing
activities......................................... (48,697) 1,444,189 492,024 782,283 1,327,858
------------- ------------- ------------- ----------- -----------
Net (decrease) increase in cash and cash
equivalents........................................ (201,506) 743,785 (97,014) 16,675 89,852
Cash and cash equivalents, beginning................. 217,574 16,068 759,853 759,853 639,285
------------- ------------- ------------- ----------- -----------
Cash and cash equivalents, end....................... $ 16,068 $ 759,853 $ 662,839 $ 776,528 $ 729,137
------------- ------------- ------------- ----------- -----------
------------- ------------- ------------- ----------- -----------
Supplemental disclosures of cash flow information:
Cash paid during the period for interest........... $ 58,990 $ 160,939 $ 219,782 $ 90,711 $ 88,488
------------- ------------- ------------- ----------- -----------
------------- ------------- ------------- ----------- -----------
Cash paid during the period for income taxes....... $ -- $ -- $ 288,776 $ -- $ 1,094,724
------------- ------------- ------------- ----------- -----------
------------- ------------- ------------- ----------- -----------
</TABLE>
See notes to consolidated supplemental financial statements.
F-26
<PAGE>
LIFECODES CORPORATION AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1995, 1996 AND 1997 AND MARCH 31, 1998 (UNAUDITED)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Lifecodes Corporation ('Lifecodes' or the 'Company') is a leading provider
of DNA testing services and diagnostic test kits for human paternity and
forensic identification and for the genetic typing of potential donors and
recipients of bone marrow and other organ transplants. The Company's identity
testing services in the paternity and forensics areas seek to establish the
correct identity of a child's parents when such matters are disputed or seek to
link hair, saliva, blood or another biological specimen found at a crime scene
to an alleged felon. The Company's transplantation tests detect the genetic
sequence for certain human leukocyte antigens ('HLA') contained in DNA which are
the principal determinant whether a donor's bone marrow or organ transplant will
be rejected by the recipient's immune system.
Effective April 30, 1998, the Company acquired all of the outstanding
common stock of Micro Diagnostics, Inc. (MDx) and notes payable to MDx
stockholders in exchange for 325,372 shares of Lifecodes common stock. MDx is
engaged principally in the business of providing serologic and DNA testing
services. The acquisition was accounted for as a pooling of interests and,
accordingly, the financial statements for the years ended September 30, 1996 and
1997 have been restated to include the accounts of the acquired company. MDx
commenced operations during March 1996.
MDx and the Company had different fiscal periods for financial reporting
purposes, MDx--December 31, and the Company--September 30. Consequently, the MDx
results of operations for the period October 1, 1996 through December 31, 1996
have been included in both the restated results of operations for fiscal 1996
and the six month interim period ended March 31, 1997. MDx revenues and net loss
were $361,586 and $401,831 for the three month period ended December 31, 1996.
Additionally, the MDx results of operations for the period October 1, 1997
through December 31, 1997 have been included in both the restated results of
operations for fiscal 1997 and the six month interim period ended March 31,
1998. MDx revenues and net loss were $1,220,438 and $201,139 for the three month
period ended December 31, 1997.
For fiscal years 1996, 1997, and the six month period ended March 31, 1998
(unaudited) all intercompany amounts have been eliminated which consist of
intercompany sales of $25,652, $122,410, $128,372 (unaudited) and cost of sales
of $25,652, $122,410, $128,372 (unaudited), respectively. As of September 30,
1996, September 30, 1997, and March 31, 1998 (unaudited) intercompany accounts
receivable from MDx to Lifecodes of $19,884, $40,291, and $67,809 (unaudited),
respectively, have been eliminated.
During March 1996, the Company acquired Cellmark Diagnostics ('Cellmark'),
a division of Zeneca plc, for $500,000. The acquisition has been accounted for
under the purchase method of accounting. Accordingly, the purchase price was
allocated to the net assets acquired based on their fair values. The fair value
of the net assets acquired exceeded the total cost by $185,799, which reduced
the fair value of the long-term assets acquired (property and equipment and
other assets).
Coincident with the Company's purchase of Cellmark, certain Cellmark
employees purchased 1,960 shares (19.6%) of Cellmark common stock from Lifecodes
for $98,000 (representing a price of $50 per share), through the issuance of
noninterest bearing, nonrecourse notes. The notes receivable offset the Cellmark
minority interest in the consolidated balance sheet at September 30, 1996 and
1997. The notes are to be paid within the 36-month period following the
acquisition. Each Cellmark common share is convertible into 43.65 Lifecodes
common shares during the 36 month to 60 month period following the Cellmark
acquisition. Upon termination of employment, shares must be converted, subject
to time frame restrictions, or surrendered to the Company at their cost basis to
the extent the note had not been paid or at their cost basis plus 15% interest
to the extent the note had been paid.
F-27
<PAGE>
LIFECODES CORPORATION AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED SEPTEMBER 30, 1995, 1996 AND 1997 AND MARCH 31, 1998 (UNAUDITED)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
During fiscal 1997, through an arrangement with the Company's Chief
Executive Officer, the Company acquired a 40 percent interest in Medical
Molecular Diagnostics GmbH ('MMD'). MMD's office and laboratory facilities are
located in Dresden, Germany, where it conducts molecular HLA typing (See note
9). During fiscal 1998, the Company increased its equity position in MMD to 60%
through the conversion of debt to equity. Accordingly, MMD has been consolidated
in the March 31, 1998 financial statements.
In September, 1997, the Company established a new wholly-owned subsidiary,
Lifecodes Europe BVBA ('LC-Europe'), in Belgium. LC-Europe will function as a
distributor of DNA probe and reagent identity products and will commence
operations on April 1, 1998. Total costs associated with LC-Europe were $6,836
through September 30, 1997.
Principles of Consolidation
The supplemental consolidated financial statements include the accounts of
the Company, its wholly-owned subsidiary, Lifebank Inc. (a dormant company) and
its majority-owned subsidiaries, Cellmark Diagnostics, Inc., National Legal
Laboratories, MMD, and MDx. All material intercompany balances and transactions
have been eliminated. As of September 30, 1997, the Company accounted for its 40
percent interest in MMD using the equity method.
Financial Instruments
The Company's financial instruments consist primarily of cash and cash
equivalents, trade receivables, and trade payables. The carrying amounts of cash
and cash equivalents, investments, trade receivables, and trade payables
approximate fair value due to the short maturity of these instruments. The
carrying value of the term debt approximates fair value.
Cash and Cash Equivalents
The Company considers all investments purchased with an original maturity
of three months or less to be cash equivalents.
Revenue Recognition
Revenue is recognized when products are shipped and/or services are
provided to the customer.
Inventories
Inventories are valued at the lower of cost or market. Cost is determined
for the various categories of inventory using the first-in, first-out method.
Depreciation and Amortization
Property and equipment is stated at cost less accumulated depreciation.
Depreciation is computed using straight-line or accelerated methods over the
estimated useful lives of the assets (five to ten years). Leasehold improvements
are amortized on a straight-line basis over the term of the lease which is not
in excess of the estimated useful life of the improvement. Purchased computer
software is being amortized over a period of three to five years.
F-28
<PAGE>
LIFECODES CORPORATION AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED SEPTEMBER 30, 1995, 1996 AND 1997 AND MARCH 31, 1998 (UNAUDITED)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
Patents and Licenses
The Company capitalized the costs of acquiring certain patent rights and
licenses on its products. These costs are being amortized on a straight-line
basis over the terms of the agreements (five to ten years).
Licenses and Royalties
Lifecodes has licensed its technology to certain companies in Canada and
Australia under specific licensing agreements. Each of these agreements contain
minimum annual royalty requirements.
The Company also receives royalties under sublicense and distribution
agreements. These agreements stipulate the terms for computing the royalties due
to the Company based upon sales levels. The rates used to determine the
royalties range from 5 to 30 percent, depending on the agreement terms.
The Company earned $443,335, $388,960, and $462,469 in royalties for the
years ended September 30, 1995, 1996, and 1997, respectively. Revenue derived
from royalties are included in product and other revenues in the supplemental
consolidated statements of operations.
Intangible Assets
Intangible assets are stated at cost and amortized using the straight-line
method over the assets' estimated useful lives, which range from 1.5 to fifteen
years. The Company evaluates the possible impairment of long-lived assets,
including intangible assets, whenever events or circumstances indicate that the
carrying value of the assets may not be recoverable.
Income Taxes
Deferred income taxes are provided for the temporary differences between
the financial reporting basis and the income tax basis of the Company's assets
and liabilities in accordance with Statement of Financial Accounting Standards
No. 109. Prior to the business combination, MDx was an S Corporation and,
consequently, was not subject to federal income taxes.
Foreign Currency Translation
The financial statements of MMD were prepared in its respective local
currency and translated into U.S. dollars based on the current exchange rate at
the end of the period for the balance sheet and a weighted-average rate for the
period on the statement of operations. Translation adjustments are reflected as
foreign currency translation adjustments in Stockholders' Equity and accordingly
have no effect on net income.
Use of Estimates
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amount of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
F-29
<PAGE>
LIFECODES CORPORATION AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED SEPTEMBER 30, 1995, 1996 AND 1997 AND MARCH 31, 1998 (UNAUDITED)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
Reclassifications
Certain previously reported amounts have been reclassified to conform to
the 1997 financial statement presentation.
Interim Financial Statements
The accompanying balance sheet as of March 31, 1998 and the statements of
operations and cash flows for the six months ended March 31, 1997 and 1998 are
unaudited but, in the opinion of management, include all adjustments (consisting
of only normal, recurring adjustments) necessary for a fair presentation of
results for these interim periods. Results for interim periods are not
necessarily indicative of results for the entire year.
Stock Split
The accompanying financial statements retroactively reflect a 3.65 for one
common stock split which the Company intends to adopt in conjunction with an
increase in its authorized number of common shares to 15,000,000. Accordingly,
all common shares, options and warrants to acquire common shares and the
conversion terms of the preferred stock have been adjusted to reflect the
pending stock split. The above conversion has been presented as the Company
intends to obtain formal stockholder approval of the stock split and an increase
in the number of authorized common shares.
2. ACCOUNTS RECEIVABLE
A summary of activity in the allowance for doubtful accounts is as follows:
<TABLE>
<CAPTION>
6 MONTHS
YEAR ENDED SEPTEMBER 30, ENDED
------------------------------- MARCH 31,
1995 1996 1997 1998
------- -------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Balance beginning of period............................ $30,621 $ 44,738 $108,921 $ 181,490
Provision charged to expense........................... 34,211 145,108 134,848 94,601
Charge offs............................................ (20,094) (80,925) (62,279) (19,144)
------- -------- -------- -----------
Balance at end of period............................... $44,738 $108,921 $181,490 $ 256,947
------- -------- -------- -----------
------- -------- -------- -----------
</TABLE>
F-30
<PAGE>
LIFECODES CORPORATION AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED SEPTEMBER 30, 1995, 1996 AND 1997 AND MARCH 31, 1998 (UNAUDITED)
3. INVENTORY
<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 30, MARCH 31,
1996 1997 1998
------------- ------------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Inventory consists of the following:
Raw materials........................................... $ 198,504 $ 337,359 $ 286,414
Work-in-process......................................... 297,451 504,075 449,117
Finished goods.......................................... 381,687 660,924 618,212
------------- ------------- -----------
Total................................................ $ 877,642 $ 1,502,358 $ 1,353,743
------------- ------------- -----------
------------- ------------- -----------
</TABLE>
4. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 30, MARCH 31,
1996 1997 1998
------------- ------------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Leasehold improvements.................................... $ 796,501 $ 801,597 $ 825,494
Furniture, fixtures and equipment......................... 1,081,855 1,627,321 3,097,916
Computer software......................................... 92,908 27,613 29,003
------------- ------------- -----------
Total..................................................... 1,971,264 2,456,531 3,952,413
Less accumulated depreciation and amortization............ 604,486 994,750 1,233,989
------------- ------------- -----------
Property and equipment--net............................... $ 1,366,778 $ 1,461,781 $ 2,718,424
------------- ------------- -----------
------------- ------------- -----------
</TABLE>
Included in furniture, fixtures and equipment is $112,090, $115,287 and
$115,287 at September 30, 1996 and 1997, and March 31, 1998 (unaudited),
respectively, which is restricted under a research grant with the U.S.
Department of Defense ('DOD'). Under the terms of the agreement, the DOD has
funded this equipment to complete various research projects. Based on the terms
of the agreement, the equipment may be returned to the DOD. A corresponding
amount has been recorded in other liabilities on the balance sheet.
5. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 30, MARCH 31,
1996 1997 1998
------------- ------------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Promissory note, net of unamortized discount of $105,149
at September 30, 1996(a)................................ $ 194,851
Term note agreement(d).................................... 1,161,012 $ 993,156 $ 909,228
Line of Credit Outstanding(d)............................. -- -- 1,120,000
Demand notes(e)........................................... 500,000 675,000 775,000
Other..................................................... 58,851 -- --
------------- ------------- -----------
Total..................................................... 1,914,714 1,668,156 2,804,228
Less current maturities of long-term debt................. 726,707 842,856 1,102,858
------------- ------------- -----------
Long-term debt--net....................................... $ 1,188,007 $ 825,300 $ 1,701,370
------------- ------------- -----------
------------- ------------- -----------
</TABLE>
F-31
<PAGE>
LIFECODES CORPORATION AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED SEPTEMBER 30, 1995, 1996 AND 1997 AND MARCH 31, 1998 (UNAUDITED)
5. LONG-TERM DEBT--(CONTINUED)
- ------------------
(a) In December 1991, the Company issued a promissory note to an investor for
$300,000. The promissory note bore interest at the rate of 10 percent per
annum. The promissory note was due October 31, 1997. In connection with the
promissory note, the Company issued a detachable warrant to purchase 165,155
shares of common stock at $1.82 per share. The portion of the proceeds
allocable to the warrant was accounted for as additional paid-in capital.
The discount was recorded as additional interest expense over the term of
the promissory note.
On July 15, 1994, a twelve-month interest moratorium commencing January 1,
1994 was granted to the Company. The interest accumulated during the
moratorium was deferred until the maturity of the promissory note. In
connection with the moratorium, the Company granted to the investor a
ten-year warrant for 21,900 common shares at $0.27 per share. The promissory
note was discounted and additional paid-in capital was increased for the fair
value of the warrant. The discount was recorded as additional interest
expense over the remaining term of the promissory note.
At September 30, 1996, the principal outstanding under the promissory note
was $300,000. On August 29, 1997, the Company paid the outstanding principal.
(b) On March 6, 1992, the Company entered into a note purchase agreement (the
'Agreement') with Connecticut Innovations Inc. ('CII'). Pursuant to the
Agreement, as most recently amended August 2, 1993, the Company issued a
senior secured note due March, 1998 in the principal amount of $450,000,
bearing interest at the rate of 10 percent per annum, payable quarterly (the
'Senior Secured Note'). Under the terms of the Agreement, royalties were
also due to CII on a percentage of sales ranging from 2 to 5 percent or a
minimum quarterly guaranteed amount of $22,500, as to allow CII to receive a
return on investment of 25 percent compounded quarterly. On July 20, 1994,
CII granted the Company a full payment moratorium for the period December
1993 through May 1994. The interest accumulated during the moratorium is
deferred until maturity of the note. In connection with the moratorium, the
Company granted to CII a ten year warrant for 49,275 common shares at $0.27
per share. The warrants contained CII's standard terms, including anti-
dilution protection and demand registration rights. The Senior Secured Note
was discounted and additional paid-in capital was increased for the fair
value of the warrant. The discount was recorded as additional interest
expense over the remaining term of the Senior Secured Note.
On March 4, 1996, the Company paid the outstanding principal and related
interest and royalties totaling $622,171. The related unamortized debt
discount of $37,328 was recognized as a loss on the early extinguishment of
debt.
(c) On April 13, 1992, the Company entered into a note and warrant purchase
agreement in which a promissory note was issued to Connecticut Development
Authority ('CDA') for $300,000.
In connection with the note and warrant purchase agreement, the Company
issued to CDA a detachable stock subscription warrant to purchase 129,305
shares of common stock, at $1.65 per share, and entered into a warrant put
and call agreement, subject to the defined terms. The portion of the proceeds
allocable to the warrant was accounted for as additional paid-in capital. The
resulting discount was recorded as additional interest expense over the term
of the promissory note. The warrant put and call agreement contained specific
terms whereby CDA was able to put the warrants back to the Company for
$100,000. During 1995, CDA waived its right to put the warrants to the
Company which resulted in the reclassification of the put warrant obligation
from liabilities to additional paid in capital.
F-32
<PAGE>
LIFECODES CORPORATION AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED SEPTEMBER 30, 1995, 1996 AND 1997 AND MARCH 31, 1998 (UNAUDITED)
5. LONG-TERM DEBT--(CONTINUED)
The promissory note bore interest at the rate of 10 percent per annum, with
interest payable monthly, maturing on May 1, 1998. On July 11, 1994, CDA
granted the Company a full payment moratorium for the period May through July
1994 and requested interest payments only for the period August through
December 1994. The interest accumulated during the moratorium was deferred
until the maturity of the promissory note. In connection with the moratorium,
the Company granted to CDA a ten year warrant for 29,452 common shares at
$0.27 per share. The warrants carried all of CDA's standard terms, including
anti-dilution protection and demand registration rights. The promissory note
was discounted and additional paid-in capital was increased for the fair
value of the warrant. The discount was recorded as additional interest
expense over the remaining term of the promissory note.
On March 4, 1996, the Company paid the outstanding principal and related
interest totaling $201,886. The related unamortized debt discount relating to
the warrant and the interest moratorium of $41,509, has been recognized as a
loss on the early extinguishment of debt.
(d) On March 4, 1996 the Company entered into a term note agreement with First
Union Bank of Connecticut in which a promissory note was issued in the
principal amount of $1,175,000. The promissory note bears interest at a
fixed rate of 8.35% per annum. Interest and principal are payable monthly
and matures on August 1, 2003. In conjunction with this agreement, the
Company was additionally extended a $1,000,000 line of credit, which was
increased to $1,700,000 in March of 1998.
The promissory note is collateralized by a first lien on all assets of
Lifecodes and contains a number of financial covenants. As of September 30,
1997, the Company was in violation with certain debt covenants, for which the
Company received a waiver.
In March of 1998, the line of credit was increased to $1,700,000. In April,
1998, the Company entered into a term note agreement of $2,300,000 and a
$1,000,000 revolving loan with First Union National Bank of Connecticut. The
term note is payable in monthly installments through March 1, 2001, with a
final balloon payment on April 2, 2001, while the termination date for the
revolving loan commitment is May 31, 1999. The Company's interest rate on
this term note is 8.39%, while interest on the revolving loan accrues at a
floting rate equal to First Union's prime rate. In conjunction with the term
note agreement, the Company refinanced $1,120,000 of its line of credit
advances into the term note agreement.
(e) During 1996 and 1997, MDx entered into demand notes with related parties of
approximately $800,000 and $815,000, respectively. At December 31, 1996 and
1997, there were $500,000 and $675,000 of demand notes outstanding,
respectively. The Company's interest rate for the notes payable was 12% for
all periods.
(f) In March 1996, the Company entered into a term note agreement of $116,753
with One Lambda, Inc. The promissory note is payable in monthly installments
through September 1997. The balance at September 30, 1996 was $58,851. The
promissory note was collateralized by certain assets of the Company
purchased from One Lambda, Inc.
F-33
<PAGE>
LIFECODES CORPORATION AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED SEPTEMBER 30, 1995, 1996 AND 1997 AND MARCH 31, 1998 (UNAUDITED)
5. LONG-TERM DEBT--(CONTINUED)
Future minimum payments under these loan agreements at September 30, 1997
and March 31, 1998 (unaudited) are as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997 MARCH 31, 1998 (UNAUDITED)
------------------------------------ ------------------------------------
PRINCIPAL INTEREST TOTAL PRINCIPAL INTEREST TOTAL
---------- -------- ---------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Within 1 year.................. $ 842,856 $ 76,505 $ 919,361 $1,102,858 $166,003 $1,268,861
1999........................... 167,856 62,489 230,345 327,850 136,025 463,875
2000........................... 167,856 48,473 216,329 327,850 115,297 443,147
2001........................... 167,856 34,457 202,313 807,874 74,433 882,307
2002........................... 167,856 20,441 188,297 167,856 13,433 181,289
Thereafter..................... 153,876 6,425 160,301 69,940 1,460 71,400
---------- -------- ---------- ---------- -------- ----------
Total.......................... $1,668,156 $248,790 $1,916,946 $2,804,228 $506,651 $3,310,879
---------- -------- ---------- ---------- -------- ----------
---------- -------- ---------- ---------- -------- ----------
</TABLE>
6. STOCKHOLDERS' EQUITY
PREFERRED STOCK
In September 1994, the Company sold to an investor 21,500 shares of
convertible senior preferred stock at $10.00 per share for cash proceeds of
$215,000. The preferred stock ranks senior to the Company's other equity
securities, converts into two shares of common stock for each share of
preferred, has voting power equivalent to the votes of the underlying common
stock and has full anti-dilution protection.
COMMON STOCK
In February 1996, the Company issued to investors and the chief executive
officer 160,702 and 21,900 shares, respectively, of common stock in accordance
with an agreement made in August 1993, which provided for the issuance of
additional shares of common stock if certain sales targets were not met by the
fiscal year ended September 30, 1996.
In September 1997, the Company sold to its Chairman 80,300 shares of common
stock with an estimated fair value of $2.69 per share for $2.60 per share. In
return, the Company received cash proceeds of $2,200 and a promissory note in
the amount of $206,800 which bears interest at a rate of 8% per annum. Per the
terms of the note the first installment of interest is due on September 30, 1998
and the remaining interest and principal are due on September 30, 1999. As
collateral for the note, the Company retains all of the shares of common stock
purchased by the Chairman. Additional paid-in capital was increased to recognize
the excess of fair value over the par value of the common shares. The difference
between the fair value of the common stock sold and its issuance proceeds was
recorded as compensation expense.
During 1992 and 1995, the Company implemented Stock Option Plans (the
'Plans') which provide for grants of incentive and nonstatutory options to
purchase up to 686,200 and 237,250 shares, respectively, of common stock at a
purchase price equal to the fair market value at the date of grant. All stock
options under the 1992 Plan were granted during 1992 through 1994. The options
expire between five and ten years from the date of grant. All stock options
under the 1995 Plan were granted during 1995 and expire five and ten years from
the date of grant. Subject to the terms of the Plan, the Company may repurchase
the shares issued at a price equal to the then fair market value. The Company
has elected to follow Accounting Principles Board Opinion No. 25, Accounting for
Stock Issued to Employees ('APB 25') and related interpretations in accounting
for its employee stock options. Under APB 25, because the exercise price of
employee stock options equaled the fair value of the underlying stock on the
date of grant, no compensation expense was recorded.
F-34
<PAGE>
LIFECODES CORPORATION AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED SEPTEMBER 30, 1995, 1996 AND 1997 AND MARCH 31, 1998 (UNAUDITED)
6. STOCKHOLDERS' EQUITY--(CONTINUED)
The Company applies Accounting Principles Board Opinion No. 25, 'Accounting
for Stock Issued to Employees' and other related interpretations in accounting
for its stock option plans. No compensation expense has been recognized for
these plans. Had compensation cost been determined based upon the fair value at
grant date consistent with the accounting methodology prescribed under SFAS No.
123, 'Accounting for Stock Based Compensation,' the Company's pro forma net
income (loss) and pro forma diluted earnings per share would have been reported
as follows:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
---------------------------------
1995 1996 1997
-------- --------- --------
<S> <C> <C> <C>
Pro forma net income............................................... $139,006 $(575,613) $374,052
-------- --------- --------
Pro forma diluted earnings per share............................... $ 0.08 $ (0.32) $ 0.14
-------- --------- --------
</TABLE>
There were no options granted during 1996 or 1997. The weighted average
fair value of options granted during 1995 were estimated to be $1.32 on the
dates of grant using the Black-Scholes option-pricing model with the following
assumptions: volatility of 0%, risk free interest rate of 6.82% and an expected
life of 5 years, respectively.
As of September 30, 1997 the 198,900 stock options outstanding have
exercise prices between $5.00 and $5.50 and a weighted average remaining
contractual life of 4.4 years.
The following summarizes the transactions pursuant to the Plans for the
years ended September 30, 1995, 1996, and 1997:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
SHARES OPTION PRICE
------- ------------
<S> <C> <C>
Balance at October 1, 1994........................................... 642,035 $ 1.41
Granted............................................................ 237,250 1.40
Canceled........................................................... (32,850) 1.37
------- ------
Balance at September 30, 1995........................................ 846,435 1.41
Exercised.......................................................... (1,205) 1.37
Canceled........................................................... (44,420) 1.37
------- ------
Balance at September 30, 1996........................................ 800,810 1.41
Exercised.......................................................... (5,110) 1.37
Canceled........................................................... (14,965) 1.37
Expired............................................................ (54,750) 1.51
------- ------
Balance at September 30, 1997........................................ 725,985 1.40
------- ------
Exercisable at September 30, 1997.................................. 531,367 1.41
------- ------
</TABLE>
Warrants
In connection with the issuance of the promissory note in 1991 referred to
in Note 5(a), the Company has granted warrants to purchase 165,155 shares of
common stock. The warrants expire May 1, 2002 and are exercisable at $1.82 a
share. The fair value of the warrants when issued was estimated to be $150,000.
In connection with the issuance of the promissory note in 1992 referred to
in Note 5(c), the Company has granted warrants to purchase 129,305 shares of
common stock. The warrants expire April 13, 2000 and are exercisable at $1.64
per share. The fair value of the warrants when issued was estimated to be
$100,000.
F-35
<PAGE>
LIFECODES CORPORATION AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED SEPTEMBER 30, 1995, 1996 AND 1997 AND MARCH 31, 1998 (UNAUDITED)
6. STOCKHOLDERS' EQUITY--(CONTINUED)
In connection with interest and principal moratoriums in 1994 for debt
referred to in Note 5(a), (b) and (c), the Company has granted warrants to
purchase 100,627 shares of common stock, respectively. The warrants expire on
September 26, 2004 and are exercisable at $0.27 per share. The fair value of the
warrants when issued was estimated to be $126,817.
On February 24, 1994, the Company issued a five-year stock warrant to an
investor for 27,375 common shares at the warrant price of $1.37 per share in
connection with the issuance of a short-term promissory note that has since been
paid. The fair value of the warrant when issued was estimated to be $19,650.
Earnings Per Common Share
The following table represents the computation of basic and diluted
earnings per common share:
<TABLE>
<CAPTION>
YEARS ENDED SIX MONTHS SIX MONTHS
----------------------------------------------- ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, MARCH 31, MARCH 31,
1995 1996 1997 1997 1998
------------- ------------- ------------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Basic Earnings (Loss) per Share:
Net income (net loss)................. $ 178,839 $(575,613) $ 387,717 $ (102,609) $ 434,323
------------- ------------- ------------- ----------- -----------
------------- ------------- ------------- ----------- -----------
Weighted average common shares
outstanding......................... 1,555,053 1,803,761 2,159,902 2,153,562 2,281,641
------------- ------------- ------------- ----------- -----------
Basic earnings (loss) per common
share............................... $ 0.12 $ (0.32) $ 0.18 $ (0.05) $ 0.19
------------- ------------- ------------- ----------- -----------
------------- ------------- ------------- ----------- -----------
Diluted Earnings per Share:
Net income (net loss)................. $ 178,839 $(575,613) $ 387,717 $ (102,609) $ 434,323
------------- ------------- ------------- ----------- -----------
------------- ------------- ------------- ----------- -----------
Weighted average common shares
outstanding......................... 1,555,053 1,803,761 2,159,902 2,153,562 2,281,641
Common stock equivalents.............. 80,501 -- 389,941 -- 700,920
Assumed conversion of preferred
stock............................... 156,950 -- 156,950 -- 156,950
------------- ------------- ------------- ----------- -----------
Total weighted average common
shares.............................. 1,792,504 1,803,761 2,706,793 2,153,562 3,139,511
------------- ------------- ------------- ----------- -----------
Diluted earnings (loss) per common
share............................... $ 0.10 $ (0.32) $ 0.14 $ (0.05) $ 0.14
------------- ------------- ------------- ----------- -----------
------------- ------------- ------------- ----------- -----------
</TABLE>
F-36
<PAGE>
LIFECODES CORPORATION AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED SEPTEMBER 30, 1995, 1996 AND 1997 AND MARCH 31, 1998 (UNAUDITED)
7. INCOME TAXES
There was no income tax expense or benefit recorded in the years ended
September 30, 1995 and 1996. The Company recorded a provision for income taxes
in the year ended September 30, 1997 of $173,730.
The tax effects of temporary differences that give rise to significant
portions of deferred tax assets are as follows:
<TABLE>
<CAPTION>
1996 1997
-------- --------
<S> <C> <C>
Net operating loss carryforwards...................................... $316,901 $116,153
Federal business credit carryforwards................................. 189,114 --
Accrued liabilities................................................... -- 325,114
Depreciation and amortization......................................... 20,000 131,689
Allowance for doubtful accounts....................................... 43,568 90,890
Other................................................................. -- 4,175
-------- --------
569,583 668,021
Less valuation allowance.............................................. (569,583) (112,600)
-------- --------
Deferred tax asset, net............................................... $ -- $555,421
-------- --------
-------- --------
</TABLE>
The Company recorded a valuation allowance with respect to the tax benefits
and loss carryforwards recorded as a deferred tax asset at September 30, 1996
due to the uncertainty of their ultimate realization. At September 30, 1997 the
valuation allowance relates to the state net operating loss carryforwards of MDx
which was an S corporation for federal income tax purposes. The valuation
allowance was established by MDx due to the uncertainty of the realization of
the state loss carryforwards.
The provision for income taxes is different from the amount computed using
applicable statutory federal rates for the following reasons:
<TABLE>
<CAPTION>
1995 1996 1997
------- --------- --------
<S> <C> <C> <C>
Income taxes (benefit) at federal statutory rates............................. $60,805 $(195,708) $190,893
Adjustment due to:
S Corporation status of MDx................................................. -- $ 299,841 $341,455
Utilization of net operating loss carryforwards............................. (29,000) (199,737) (260,648)
Utilization of general business credits..................................... -- -- (189,114)
State taxes, net of Federal benefit......................................... -- 41,347 99,132
Other....................................................................... (31,805) 54,257 (7,988)
------- --------- --------
Income taxes.................................................................. $ -- $ -- $173,730
------- --------- --------
------- --------- --------
</TABLE>
8. RELATED PARTY TRANSACTIONS
In April 1992, the Company signed an agreement with FMC Corporation to
conduct joint research and development programs designed to expand the
applications of DNA analysis products to both the research and identity markets.
Lifecodes provides the primary facilities and the scientific and/or technical
effort as set forth in the agreement. FMC Corporation initially contributed
$300,000 of equity capital and received 109,500 shares at $2.74 per share that
have since expired. For each year ended September 30, 1995, 1996 and 1997,
Lifecodes recognized $45,000, $22,500 and $22,500, respectively, of research
funding under this agreement. The Company also purchases certain inventory items
from FMC during fiscal 1995, 1996, 1997, and for the six month period ended
March 31, 1998, which amounted to $59,494, $94,113 and $74,962, and
respectively.
During 1995 and 1996, the Company provided management services to an entity
in which the Chief Executive Officer and other investors of the Company own an
interest. Services include accounting, purchasing,
F-37
<PAGE>
LIFECODES CORPORATION AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED SEPTEMBER 30, 1995, 1996 AND 1997 AND MARCH 31, 1998 (UNAUDITED)
8. RELATED PARTY TRANSACTIONS--(CONTINUED)
administration, and rental of office space. During 1996, the Company made
various loans to this entity. As of December 31, 1996, all outstanding loans as
of September 30, 1996 were paid. For the year ended September 30, 1996, the
Company received $56,800 in management fees and rent which are reflected in the
accompanying statement of operations as reductions in expense.
Prior to the business combination, MDx sold all its eligible accounts
receivable with limited recourse to Century II, Corp., whose chairman at that
time was also MDx's Chairman and shareholder. At December 31, 1996, and December
31, 1997, $375,306, and $766,430 of receivables, respectively, were sold and
were reflected as reductions of trade accounts receivable. Fees and discounting
expense were recorded as operating expenses and totaled approximately $19,616
and 1996, and $117,712 in 1997.
Prior to the business combination, MDx used Century II Staffing, Inc. as
its provider for the provision of employees and services incidental to employee
payroll, benefits, supervision and management. Century II Staffing, Inc. was
owned by MDx's Chairman until January 1, 1997 when it was sold to an unrelated
party. Total expenses incurred with Century II Staffing, Inc. for the leased
employees were $506,695 in 1996 and $1,479,476 in 1997 and $845,233 for the six
month period ended March 31, 1998.
9. INVESTMENT IN AND ADVANCES TO AFFILIATE
During fiscal 1997, through an arrangement with its Chief Executive
Officer, the Company acquired a 40 percent interest in Medical Molecular
Diagnostics GmbH ('MMD'). As part of the investment agreement, the Chief
Executive Officer assumed the role of managing director of MMD and obtained veto
power on all significant matters relating to its operations. The Company
received a promissory note from its Chief Executive Officer in the principal
amount of $150,000 bearing interest at 8% per annum, interest receivable
annually and maturing on December 31, 2001. The promissory note contains a put
and call feature set forth in the agreement. As security for the payment of the
principal amount, the Company entered into an agreement transferring the Chief
Executive Officer's business interest in MMD to the Company. As of September 30,
1997, the outstanding principal on the note was $104,097.
During fiscal 1997, the Company made various loans to MMD totaling
$469,398. In return, the Company received a promissory note in the principal
amount of $350,000, bearing interest at 8% per annum, interest receivable
annually and maturing on December 31, 2001 with the balance of $119,398
remaining as unsecured short-term advances. In conjunction with the loan
agreement MMD qualified for reimbursement from Saxony Redevelopment Bank
estimated at approximately $150,000. MMD has agreed to repay the Company any
unsecured short-term advances outstanding upon receipt and release of the
development money.
At September 30, 1997, the Company had a trade receivable of $87,351 due
from MMD which is included in accounts receivable on the supplemental
consolidated balance sheet. Effective October 1, 1997, the Company increased its
interest to 60 percent through the conversion of debt to equity.
10. EMPLOYEE BENEFIT PLAN
Effective October 1, 1991, the Company established a retirement plan
pursuant to Section 401(k) of the Internal Revenue Code, whereby employees over
the age of 21 years with at least 12 months of service are eligible to
contribute a percentage of their compensation to the plan, but not in excess of
the maximum allowed under the Code. The Plan provides for a discretionary
matching contribution by the Company. During the years ended September 30, 1996
and 1997, the Company's expense relating to the matching contributions amounted
to $47,796 and $142,462, respectively. There was no matching contribution in
1995.
F-38
<PAGE>
LIFECODES CORPORATION AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED SEPTEMBER 30, 1995, 1996 AND 1997 AND MARCH 31, 1998 (UNAUDITED)
11. COMMITMENTS AND CONTINGENCIES
OPERATING LEASES
Office Space and Laboratory Facilities
The Company has long-term operating leases for office space and laboratory
facilities in Stamford, Connecticut, Germantown, Maryland, Nashville, Tennessee,
Buffalo, New York and Rochester, New York. The leases provide for monthly rental
payments and, in addition, the Company is responsible for certain building and
operating expenses of such facilities based upon its proportionate share of
occupancy.
Equipment and Automobiles
The Company also leases certain office equipment and automobiles under
operating leases which expire at various dates through 1999.
During September 1997, the Company entered into an agreement to amend its
long-term operating lease for approximately 7,595 square feet of new office
space in Stamford, Connecticut. The additional space is scheduled for occupancy
September 1, 1998, pending completion of construction. Commencing on the second
month anniversary of the commencement date through and including April 30, 2002,
the fixed annual rent will be increased by $106,880 per annum.
Office Space and Laboratory Facilities
On August 12, 1997, Cellmark Diagnostics extended the operating lease for
office space and laboratory facilities in Germantown, Maryland to November 2007.
Per terms of the new agreement, the available space will be increased from 8,956
to 16,361 square feet upon completion of scheduled leasehold improvements
commencing in December 1997. The Landlord granted an improvement allowance of
$196,332 to revitalize and expand the current facilities. A deferred liability
was recorded in the amount of this improvement allowance which is being
amortized against rent expense on a straight-line basis over the term of the
lease. Rent expense is being charged to operations on a straight-line basis over
the term of the lease.
Future minimum rental payments for office space, equipment and automobiles
under the above leases, are as follows:
<TABLE>
<CAPTION>
YEAR ENDING SEPTEMBER 30, AMOUNT
- ------------------------------------------------------------ ----------
<S> <C>
1998........................................................ $ 861,644
1999........................................................ 975,341
2000........................................................ 788,395
2001........................................................ 904,045
2002........................................................ 732,969
----------
Total future minimum lease payments......................... $4,262,394
----------
----------
</TABLE>
Annual rent expense under these leases for the years ended September 30,
1995, 1996 and 1997 were $288,315, $588,152, and $770,444, respectively.
CAPITAL LEASES
The Company leases certain machinery and equipment costing $343,184 and
$402,171 at September 30, 1996 and 1997, respectively, under capital lease
agreements. Accumulated depreciation on this equipment was $68,317 and $176,517
at September 30, 1996 and 1997, respectively.
F-39
<PAGE>
LIFECODES CORPORATION AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED SEPTEMBER 30, 1995, 1996 AND 1997 AND MARCH 31, 1998 (UNAUDITED)
11. COMMITMENTS AND CONTINGENCIES--(CONTINUED)
Minimum lease payments, including interest, under these capital leases at
September 30, 1997 are as follows:
<TABLE>
<CAPTION>
YEAR ENDING SEPTEMBER 30, AMOUNT
- ------------------------------------------------------------ ----------
<S> <C>
1998........................................................ $ 135,347
1999........................................................ 127,629
2000........................................................ 86,064
----------
Total minimum lease payments................................ 349,040
Less amounts representing interest.......................... 46,488
----------
Present value of future minimum lease payments.............. 302,552
Less current portion of obligations......................... 108,569
----------
Obligations under capital leases, net of current portion.... $ 193,983
----------
----------
</TABLE>
On December 9, 1991, the Company purchased certain patent rights and
licenses from Genmark and the University of Utah Research Foundation (the
'University'). The patent rights purchased allow for the commercial development,
use and sale of the patent rights.
Included as part of the patent rights acquired are certain sublicense and
distribution agreements assumed by the Company, which provide for royalty
payments to be made to the Company based on net sales, as defined. In addition,
Lifecodes has assumed the responsibility to pay the annual royalties due to the
University over the life of the patent rights of seventeen years. The royalties
are based upon a percentage of sales or a minimum guaranteed amount of $25,000
per year. For the years ended September 30, 1995, 1996 and 1997, Lifecodes paid
$37,539, $72,968 and $119,638, respectively, in royalties to the University.
On August 26, 1997, the MDx entered into a Licensing Agreement with Roche
Molecular Service Sublicense Agreement with PE Applied Biosystems to perform
PCR-based forensic testing. The sublicense agreement assumed by the Company
provides for royalty payments to be made by the Company based on net sales, as
defined. On September 10, 1997, MDx entered into a Licensing Agreement with
Roche Molecular Systems to perform PCR-based paternity testing. The license
agreement assumed by the Company, provides for royalty payments to be made by
the Company based on net sales, as defined.
The Company has claims against it arising out of the conduct of its
business. The ultimate resolution of such matters, in the opinion of management,
will not have a material effect on Lifecodes' financial statements. At September
30, 1997, the Company has accrued approximately $721,000 for domestic and
foreign litigation.
The Company has entered into agreements with four key executives and the
Chief Executive Officer to provide them with certain compensation and benefits,
including up to one year's salary upon termination. As of September 30, 1997,
the Company's total potential payments under such severence agreements is
approximately $400,000.
12. RECENT ACCOUNTING PRONOUNCEMENTS
Statements of Financial Accounting Standards No. 130, 'Reporting
Comprehensive Income' ('SFAS 130'), and No. 131, 'Disclosures About Segments of
an Enterprise and Related Information' (SFAS 131), were issued in June 1997.
SFAS 130 establishes standards for reporting and display of comprehensive
income and its components in a full set of general purpose financial statements.
It requires that all items that are required to be recognized under accounting
standards as components of comprehensive income be reported in a financial
statement that is displayed with the same prominence as the other financial
statements. Comprehensive income is defined as 'the
F-40
<PAGE>
LIFECODES CORPORATION AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED SEPTEMBER 30, 1995, 1996 AND 1997 AND MARCH 31, 1998 (UNAUDITED)
12. RECENT ACCOUNTING PRONOUNCEMENTS--(CONTINUED)
change in equity of a business during a period from transactions and other
events and circumstances from non-owner sources.' It includes all changes in
equity during a period, except those resulting from investments by owners and
distributions to owners. This statement is effective for fiscal years beginning
after December 15, 1997.
SFAS 131 establishes the way that public business enterprises report
information about operating segments in annual financial statements and requires
that those enterprises report selected information about segments in interim
financial reports issued to stockholders. It also establishes standards for
related disclosures about products and services, geographic areas and major
customers. This statement is effective for financial statements beginning after
December 15, 1997.
As the Company does not have material changes in equity other than from
investments by owners and distributions to owners and operates in a single
segment the implementation of both these standards are not expected to have a
material effect on the Company.
13. ACQUISITIONS
In February 1998, the Company acquired substantially all the assets of
National Legal Laboratories ('NLL'), a division of Group Benefit Services, Inc.
for cash and stock the value of which aggregated $807,000. NLL is a paternity
testing laboratory, with contracts in seven Midwestern and Eastern states. NLL
is located in Okemos, Michigan. The acquisition will be accounted for using the
purchase method.
In April 1998, the Company acquired all of the outstanding stock of
International Support for Bone Marrow Drives, Ltd. ('ISBMD'), a provider of HLA
testing services in Germany for cash and stock, the value of which aggregated
$1,433,000. ISBMD arranges HLA testing to be performed for large marrow donor
database organizations and contracts with a small group of specially selected
laboratories in Germany and the United States to perform both DNA and
serological HLA testing. The acquisition will be accounted for using the
purchase method.
In July 1998, the Company acquired substantially all of the assets of Helix
Biotech Ltd. for cash and stock the value of which aggregated $1,203,200. Helix
is a full service DNA testing laboratory servicing the Canadian market. The
acquisition will be accounted for using the purchase method. In addition,
Lifecodes will make monthly payments of $57,000 per month for up to 36 months
depending upon the occurrence of certain events as set forth in the agreement.
In July 1998, the Company entered into a letter of intent with GeneScreen,
Inc. ('GeneScreen') of Dallas, Texas whereby the Company agreed to acquire the
capital stock of GeneScreen for cash and Company stock valued at $12.5 million.
GeneScreen is a provider of paternity testing services, primarily to the public
testing market. The closing of the transaction is contingent upon the completion
of an under written public offering of the Company's common stock.
* * * * * *
F-41
<PAGE>
INDEPENDENT AUDITORS' REPORT
Micro Diagnostics, Inc.
Nashville, Tennessee
We have audited the accompanying balance sheets of Micro Diagnostics, Inc. (the
'Company') as of December 31, 1996 and 1997, and the related statements of
operations, stockholders' deficiency, and cash flows for the years then ended.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Company at December 31, 1996 and 1997,
and the results of its operations and its cash flows for the years then ended in
conformity with generally accepted accounting principles.
_____/s/ DELOITTE & TOUCHE LLP_____
DELOITTE & TOUCHE LLP
Nashville, Tennessee
May 22, 1998
F-42
<PAGE>
MICRO DIAGNOSTICS, INC.
BALANCE SHEETS
DECEMBER 31, 1996 AND 1997 AND MARCH 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
------------------------- 1998
1996 1997 -----------
---------- ----------- (UNAUDITED)
(NOTE 11)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash................................................................ $ 848 $ 47,431 $ 39,889
Inventories......................................................... 93,847 249,918 184,346
Prepaid expenses and other current assets........................... 7,967 5,509 21,153
---------- ----------- -----------
Total current assets.................................................. 102,662 302,858 245,388
Property and equipment--net (Note 2).................................. 467,864 527,013 615,492
Other assets--net (Note 3)............................................ 40,749 32,677 31,303
---------- ----------- -----------
Total................................................................. $ 611,275 $ 862,548 $ 892,183
---------- ----------- -----------
---------- ----------- -----------
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current liabilities:
Accounts payable.................................................... $ 324,825 $ 607,837 $ 522,045
Accrued expenses and other current liabilities...................... 51,384 94,629 119,908
Current portion of obligations under capital lease (Note 8)......... 31,345 68,480 74,821
Notes payable (Note 4).............................................. 558,851 675,000 775,000
Deferred revenue (Note 2)........................................... -- -- 99,000
Advances from related party (Note 7)................................ -- -- 150,000
---------- ----------- -----------
Total current liabilities............................................. 966,405 1,445,946 1,740,774
Obligations under capital lease (Note 8).............................. 226,757 157,987 138,345
---------- ----------- -----------
Total liabilities..................................................... 1,193,162 1,603,933 1,879,119
Commitments and contingencies (Note 8)
Stockholders' deficiency (Note 6):
Common stock--no par value; 200,000, 1,000,000 and 1,000,000 shares
authorized at December 31, 1996, 1997, and March 31, 1998
respectively; 100,000, 273,000 and 273,000 shares issued and
outstanding at December 31, 1996, 1997 and March 31, 1998,
respectively..................................................... 300,000 1,165,000 1,165,000
Notes receivable from stock sales................................... -- (20,217) (18,928)
Accumulated deficit................................................. (881,887) (1,886,168) (2,133,008)
---------- ----------- -----------
Total stockholders' deficiency........................................ (581,887) (741,385) (986,936)
---------- ----------- -----------
Total................................................................. $ 611,275 $ 862,548 $ 892,183
---------- ----------- -----------
---------- ----------- -----------
</TABLE>
See notes to financial statements.
F-43
<PAGE>
MICRO DIAGNOSTICS, INC.
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1996 AND 1997 AND
FOR THE THREE MONTH PERIODS ENDED MARCH 31, 1997 (UNAUDITED)
AND MARCH 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
(NOTE 11)
YEARS ENDED THREE MONTHS ENDED
DECEMBER 31, MARCH 31,
---------------------- --------------------------
1996 1997 1997 1998
-------- ---------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Revenues (Note 9)............................................ $621,904 $2,963,633 $ 372,268 $ 773,932
Cost of revenues............................................. 797,925 2,601,818 413,477 697,050
-------- ---------- ----------- -----------
Gross (loss) profit..................................... (176,021) 361,815 (41,209) 76,882
Selling, general and administrative expenses................. 669,933 1,286,911 243,821 296,821
-------- ---------- ----------- -----------
Loss from operations......................................... 845,954 925,096 285,030 219,939
-------- ---------- ----------- -----------
Other income (expense):
Interest expense........................................... (38,553) (83,234) (16,665) (27,932)
Other income............................................... 2,620 4,049 711 1,031
-------- ---------- ----------- -----------
Net loss..................................................... $881,887 $1,004,281 $ 300,984 $ 246,840
-------- ---------- ----------- -----------
-------- ---------- ----------- -----------
</TABLE>
See notes to financial statements.
F-44
<PAGE>
MICRO DIAGNOSTICS, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIENCY (NOTE 6)
YEARS ENDED DECEMBER 31, 1996 AND 1997 AND
FOR THE THREE MONTH PERIOD ENDED MARCH 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
NOTES
COMMON STOCK RECEIVABLE
--------------------- FROM STOCK ACCUMULATED
SHARES AMOUNT SALES DEFICIT TOTAL
------- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Issuance of common stock...................... 100,000 $ 300,000 $ -- $ -- $ 300,000
Net loss.................................... -- -- -- (881,887) (881,887)
------- ---------- ---------- ----------- -----------
Balance, December 31, 1996.................... 100,000 300,000 -- (881,887) (581,887)
Issuance of common stock.................... 173,000 865,000 -- -- 865,000
Notes receivable from stock sales........... -- -- (20,217) -- (20,217)
Net loss.................................... -- -- -- (1,004,281) (1,004,281)
------- ---------- ---------- ----------- -----------
Balance, December 31, 1997.................... 273,000 1,165,000 (20,217) (1,886,168) (741,385)
Payment received for notes receivable
(unaudited).............................. -- -- 1,289 -- 1,289
Net loss (unaudited)........................ -- -- -- (246,840) (246,840)
------- ---------- ---------- ----------- -----------
Balance, March 31, 1998 (unaudited) (Note
11)......................................... 273,000 $1,165,000 $(18,928) $(2,133,008) $ (986,936)
------- ---------- ---------- ----------- -----------
------- ---------- ---------- ----------- -----------
</TABLE>
See notes to financial statements.
F-45
<PAGE>
MICRO DIAGNOSTICS, INC.
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996 AND 1997 AND
FOR THE THREE MONTH PERIODS ENDED MARCH 31, 1997 (UNAUDITED)
AND MARCH 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
(NOTE 11)
THREE MONTHS
YEARS ENDED DECEMBER 31, ENDED MARCH 31,
------------------------ --------------------------
1996 1997 1997 1998
--------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Operating activities:
Net loss.................................................. $(881,887) $(1,004,281) $(300,984) $(246,840)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization.......................... 96,552 219,831 45,141 46,419
Noncash interest expense............................... 14,118 -- -- --
Net change in assets and liabilities:
(Increase) decrease in inventories..................... (93,847) (156,071) (13,197) 65,572
(Increase) decrease in prepaid expenses and other
current assets....................................... (7,967) 2,458 (2,834) (15,644)
Decrease (increase) in other assets.................... (43,037) 2,580 2,580 --
Increase (decrease) in accounts payable................ 324,825 283,012 (39,964) (85,792)
Increase (decrease) in accrued expenses and other
current liabilities.................................. 51,384 43,245 (45,005) 25,279
Advances from related party............................ -- -- -- 150,000
--------- ----------- ----------- -----------
Net cash used in operating activities................ (539,859) (609,226) (354,263) (61,006)
Investing activities:
Purchases of property and equipment....................... (318,144) (273,488) (51,046) (34,524)
Financing activities:
Proceeds from notes payable............................... 916,753 815,000 90,000 100,000
Proceeds from issuance of common stock.................... 300,000 844,783 750,000 1,289
Payments on notes payable................................. (357,902) (698,851) (290,000) --
Payments on capital lease obligations..................... -- (31,635) (19,308) (13,301)
--------- ----------- ----------- -----------
Net cash provided by financing activities............ 858,851 929,297 530,692 87,988
--------- ----------- ----------- -----------
Net increase (decrease) in cash............................. 848 46,583 125,383 (7,542)
Cash, beginning of year..................................... -- 848 848 47,431
--------- ----------- ----------- -----------
Cash, end of year........................................... $ 848 $ 47,431 $ 126,231 $ 39,889
--------- ----------- ----------- -----------
--------- ----------- ----------- -----------
Supplemental disclosures of cash flow information-- cash
paid during the year for interest......................... $ 13,500 $ 82,330 $ 11,450 $ 27,932
--------- ----------- ----------- -----------
--------- ----------- ----------- -----------
Supplemental disclosures of noncash flow information:
Purchase of property and equipment included in obligations
under capital lease.................................... $ 243,984 $ -- $ -- $ --
--------- ----------- ----------- -----------
--------- ----------- ----------- -----------
Common stock issued in exchange for notes receivable...... $ -- $ 23,000 $ -- $ --
--------- ----------- ----------- -----------
--------- ----------- ----------- -----------
Nonmonetary assets exchanged.............................. $ -- $ -- $ -- $ 99,000
--------- ----------- ----------- -----------
--------- ----------- ----------- -----------
</TABLE>
See notes to financial statements.
F-46
<PAGE>
MICRO DIAGNOSTICS, INC.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996 AND 1997 AND THE THREE MONTH PERIODS ENDED MARCH
31, 1997 (UNAUDITED) AND MARCH 31, 1998 (UNAUDITED)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Micro Diagnostics, Inc. (the 'Company') was incorporated in January 1996.
The Company provides serologic and DNA testing services in the areas of 1)
paternity testing for state, county and municipal child support agencies, 2)
forensics casework testing for state and municipal law enforcement agencies, 3)
convicted felon database profiling for state law enforcement agencies and 4)
bone marrow donor screening for hospitals and donor centers throughout the
United States and in certain foreign locations. The Company is accredited by the
American Association of Blood Banks for paternity testing, the American Society
for Histocompatibility and Immunogenetics for serologic and DNA based HLA
testing, the National Forensic Sciences Training Center for DNA based forensic
testing and by the Department of Health and Human Services, Health Care
Financing Administration under the Clinical Laboratory Improvement Amendments
Public Law 100-578 for interstate transportation of clinical samples. In
addition, the Company is licensed by the Department of Health of the State of
New York to perform DNA based paternity, forensic and HLA testing.
Effective April 30, 1998, all of the Company's outstanding shares were
acquired by Lifecodes Corporation ('Lifecodes'). The Company's shareholders
received one Lifecodes' share for every 5.25 shares of the Company's stock.
Notes payable to shareholders and advances from related party were converted to
the Company's common stock at an exchange price of $5 per share and were
included in the acquisition by Lifecodes. A total of 89,143 Lifecodes shares
were issued in the transaction. The acquisition will be accounted for as a
pooling of interests.
Inventories
Inventories, consisting principally of raw materials, are valued at the
lower of cost or market. Cost is determined using the first-in, first-out
method.
Depreciation and Amortization
Property and equipment is stated at cost less accumulated depreciation.
Depreciation is computed using an accelerated method over the estimated useful
lives of the assets (five to seven years). Leasehold improvements are amortized
on a straight-line basis over the term of the lease which is not in excess of
the estimated useful life of the improvement.
Other Assets
Other assets, which consist primarily of organization costs, are generally
being amortized over five years. The AICPA recently issued Statement of Position
98-5 ('SOP 98-5'), Reporting on the Costs of Start-Up Activities, which the
Company is required to adopt effective January 1, 1999. SOP 98-5 requires that
costs of start-up activities, including organization costs, be expensed as
incurred. The adoption of SOP 98-5 on January 1, 1999 will result in the
write-off of organization costs expected to approximate $14,000.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
F-47
<PAGE>
MICRO DIAGNOSTICS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1996 AND 1997 AND THE THREE MONTH PERIODS ENDED MARCH
31, 1997 (UNAUDITED) AND MARCH 31, 1998 (UNAUDITED)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
Revenue Recognition
Revenue is recognized when testing services are provided to the customer.
Income Taxes
The Company has elected to be taxed as an S Corporation under provisions of
the Internal Revenue Code. Accordingly, the current federal taxable income of
the Company is allocated to the stockholders who are responsible for the payment
of federal taxes thereon. State income taxes are accounted for in accordance
with SFAS No. 109, Accounting for Income Taxes. Under SFAS No. 109, the asset
and liability approach requires recognition of deferred tax assets and
liabilities for expected future tax consequences of temporary differences
between the carrying amounts and the tax bases of assets and liabilities.
Accounting for Stock-Based Compensation
The Company accounts for its stock-based compensation arrangements under
the provisions of SFAS No. 123, Accounting for Stock-Based Compensation, whereby
companies may elect to account for stock-based compensation using a fair value
based method or the intrinsic value method prescribed in Accounting Principles
Board ('APB') Opinion No. 25, Accounting for Stock Issued to Employees. SFAS No.
123 requires that companies electing to use the intrinsic value method make pro
forma disclosure of net income as if the fair value based method of accounting
had been applied.
2. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
1996 1997
-------- --------
<S> <C> <C>
Leasehold improvements.......................................................... $ 4,030 $ 6,935
Furniture, fixtures and equipment............................................... 314,114 584,697
Furniture, fixtures and equipment under capital lease........................... 243,984 243,984
-------- --------
Total......................................................................... 562,128 835,616
Less accumulated depreciation and amortization................................ 94,264 308,603
-------- --------
Property and equipment--net................................................... $467,864 $527,013
-------- --------
-------- --------
</TABLE>
Included in furniture, fixtures and equipment is $99,000 of lab equipment
at March 31, 1998 which is restricted under an agreement with an unrelated
party. Under the terms of the agreement, the Company will test and evaluate the
equipment for the unrelated party. Based on the terms of the agreement, the
equipment may be returned to the unrelated party. A corresponding amount has
been recorded in deferred revenue on the balance sheet as of March 31, 1998.
3. OTHER ASSETS
Other assets consist of the following:
<TABLE>
<CAPTION>
1996 1997
-------- --------
<S> <C> <C>
Organizational costs--net of accumulated amortization of $2,288 and $7,780 at
December 31, 1996 and 1997, respectively...................................... $ 25,169 $ 19,677
Security deposits............................................................... 15,580 13,000
-------- --------
Other assets--net............................................................... $ 40,749 $ 32,677
--------
-------- --------
--------
</TABLE>
F-48
<PAGE>
MICRO DIAGNOSTICS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1996 AND 1997 AND THE THREE MONTH PERIODS ENDED MARCH
31, 1997 (UNAUDITED) AND MARCH 31, 1998 (UNAUDITED)
4. NOTES PAYABLE
Notes payable consist of the following:
<TABLE>
<CAPTION>
1996 1997
-------- --------
<S> <C> <C>
Demand notes from stockholders.................................................. $500,000 $675,000
Term note agreement............................................................. 58,851 --
-------- --------
Notes payable................................................................... $558,851 $675,000
-------- --------
-------- --------
</TABLE>
The Company's interest rate for demand notes from shareholders was 12% as
of December 31, 1996 and 1997. The notes can be converted to common stock at the
conversion rate of 1 share for each $5 of notes outstanding.
The notes were subsequently converted into the Company's common stock at
the rate of $5 per share and exchanged for Lifecodes shares in connection with
the acquisition discussed in Note 1.
In March 1996, the Company entered into a term note agreement of $116,753
with One Lambda, Inc. The term note agreement was payable in monthly
installments through September 1997. The term note agreement was collateralized
by certain assets of the Company purchased from One Lambda, Inc.
5. INCOME TAXES
Deferred income tax assets as of December 31, 1996 and 1997 were
approximately $52,700 and $112,600, respectively, consisting primarily of net
operating loss carryforwards. The Company recorded a valuation allowance of
approximately $52,700 and $112,600 during 1996 and 1997, respectively, for the
full amount of the deferred tax assets due to the uncertainty of their
realization. At December 31, 1996 and 1997, the Company had approximately
$869,000 and $1,848,000, respectively, of net operating loss carryforwards for
state tax purposes which begin to expire in 2011.
6. STOCKHOLDERS' DEFICIENCY
Common Stock
From time to time the Company offers shares of common stock to its
employees, officers, directors and outside investors. The amounts disclosed in
the table below and throughout the accompanying financial statements and notes
thereto reflect a 100:1 stock split that occurred in October 1996.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------
1996 1997
----------------------------- -----------------------------
AVERAGE AVERAGE
SHARES PRICE PROCEEDS SHARES PRICE PROCEEDS
------ ------- -------- ------ ------- --------
<S> <C> <C> <C> <C> <C> <C>
Employees............................... 20,000 $ -- $ -- 23,000 $5.00 $115,000
President............................... 20,000 -- -- -- -- --
Chairman................................ 30,000 5.00 150,000 80,000 5.00 400,000
Investors............................... 30,000 5.00 150,000 70,000 5.00 350,000
-------- --------
$300,000 $865,000
-------- --------
-------- --------
</TABLE>
The shares issued to the President and an employee in 1996 were issued in
accordance with the original incorporation agreement. All subsequent shares were
issued for $5.00 per share upon authorization by the Board of Directors.
F-49
<PAGE>
MICRO DIAGNOSTICS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1996 AND 1997 AND THE THREE MONTH PERIODS ENDED MARCH
31, 1997 (UNAUDITED) AND MARCH 31, 1998 (UNAUDITED)
6. STOCKHOLDERS' DEFICIENCY--(CONTINUED)
Included in stockholders' deficiency at December 31, 1997 is $20,217 of
notes receivable from shareholders taken in connection with such shareholders'
purchase of the Company's common stock during 1997. The notes are full recourse
promissory notes bearing interest at 8% and are collateralized by the stock
issued. Interest is payable weekly and principal is due from June 1997 through
June 2001.
Stock Options
In 1997, the Board of Directors adopted a stock option plan and awarded
23,000 warrants to senior management. Each warrant entitles the holder to
purchase one share of common stock at a price of $.01 subject to certain
conditions as described in the stock option plan. The warrants were to expire on
June 30, 2007. Compensation expense related to such warrants was not material to
the financial statements for the year ended December 31, 1997.
In April 1998, the Company rescinded the 23,000 warrants. Accordingly, the
pro forma effect of disclosures required by SFAS No. 123 was not material to the
financial statements for the year ended December 31, 1997.
7. RELATED PARTY TRANSACTIONS
In June 1996, the Company entered into an agreement to sell all its
eligible accounts receivable, with limited recourse, to Century II Corp., whose
Chairman is also the Company's Chairman and shareholder. At December 31, 1996
and 1997, $375,306 and $764,430 of outstanding receivables, respectively, were
sold under the agreement and were reflected as reductions of trade accounts
receivable. Fees and discounting expense were recorded as operating expenses and
totaled approximately $19,616 in 1996 and $117,712 in 1997. In March and April
1998, Century II Corp. provided $150,000 and $50,000, respectively, of advances
to the Company (See Note 10).
The Company uses Century II Staffing, Inc. as its provider of employees and
services incidental to employee payroll, benefits, supervision and management.
Century II Staffing, Inc. was owned by the Company's Chairman until January 1,
1997 when it was sold to an unrelated party. Total expenses paid to Century II
Staffing, Inc. for the leased employees and related services were $506,692 and
$1,479,476 in 1996 and 1997, respectively.
8. COMMITMENTS AND CONTINGENCIES
Operating Leases
Office Space and Laboratory Facilities--The Company has operating leases
for office space and laboratory facilities in Nashville, Tennessee, Buffalo, New
York and Rochester, New York. Lease terms generally cover periods from one year
to five years. The leases provide for monthly rental payments and, in addition,
the Company is responsible for certain building and operating expenses of such
facilities based upon its proportionate share of occupancy.
F-50
<PAGE>
MICRO DIAGNOSTICS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1996 AND 1997 AND THE THREE MONTH PERIODS ENDED MARCH
31, 1997 (UNAUDITED) AND MARCH 31, 1998 (UNAUDITED)
8. COMMITMENTS AND CONTINGENCIES--(CONTINUED)
Future minimum rental payments for office space and laboratory facilities
under these leases at December 31, 1997, are as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, AMOUNT
- -------------------------------------------------------------------------------- ----------
<S> <C>
1998............................................................................ $ 155,345
1999............................................................................ 150,895
2000............................................................................ 23,130
2001............................................................................ 138,780
2002............................................................................ 138,780
Thereafter...................................................................... 393,210
----------
Total future minimum lease payments............................................. $1,000,140
----------
----------
</TABLE>
Annual rent expense under these leases for the years ended December 31,
1996 and 1997 was $125,298 and $155,255, respectively.
Capital Leases
In connection with the operating lease of the Nashville, Tennessee
facility, the Company received the use of furniture, fixtures and equipment
which the Company has capitalized totaling $243,984 at December 31, 1996 and
1997. Accumulated depreciation on the furniture, fixtures and equipment was
$51,365 and $132,468 at December 31, 1996 and 1997, respectively. These amounts
are included in property and equipment (See Note 2).
Future minimum lease payments, including interest, under these capital
leases at December 31, 1997 are as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, AMOUNT
- ---------------------------------------------------------------------------------- --------
<S> <C>
1998.............................................................................. $ 92,263
1999.............................................................................. 96,375
2000.............................................................................. 80,312
--------
Total future minimum lease payments............................................... 268,950
Less amount representing interest................................................. (42,483)
--------
Present value of net minimum lease payments....................................... 226,467
Less current maturities........................................................... (68,480)
--------
Long-term obligations under capital lease......................................... $157,987
--------
--------
</TABLE>
Patent and License Agreement
On August 26, 1997, the Company entered into a Commercial Service
Sublicense Agreement with PE Applied Biosystems to perform PCR-based forensic
testing. The sublicense agreement assumed by the Company provides for royalty
payments to be made by the Company based on net sales, as defined.
On September 10, 1997, the Company entered into a Licensing Agreement with
Roche Molecular Systems, Inc. to perform PCR-based paternity testing. The
license agreement assumed by the Company provides for royalty payments to be
made by the Company based on net sales, as defined.
F-51
<PAGE>
MICRO DIAGNOSTICS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1996 AND 1997 AND THE THREE MONTH PERIODS ENDED MARCH
31, 1997 (UNAUDITED) AND MARCH 31, 1998 (UNAUDITED)
8. COMMITMENTS AND CONTINGENCIES--(CONTINUED)
Compensation Agreements
In January 1996, the Company entered into agreements with two key
executives to provide them with certain compensation and benefits, including up
to six months' salary upon termination. All agreements are similar in nature and
were approved by the Board of Directors in March 1996.
9. MAJOR CUSTOMERS
The Company had one major customer in 1996 and two major customers in 1997,
which individually accounted for 10% or more of net sales. Net sales to these
customer(s) represented approximately 54% and 39% of net sales for the years
ended December 31, 1996 and 1997, respectively.
10. SUBSEQUENT EVENTS
During April 1998, the Company rescinded all of its 23,000 outstanding
common stock warrants (See Note 6).
Effective April 30, 1998, the Company repurchased accounts receivable that
it had sold previously to Century II Corp. (See Note 7). The receivables were
purchased at their net invoice value of $1,117,141 and had no statement of
operations impact. In addition, the Company issued a $200,000 demand note to
Century II Corp. for advances received previously.
Effective April 30, 1998, the Company was acquired by Lifecodes in which
the Company was merged directly into Lifecodes (See Note 1).
11. UNAUDITED FINANCIAL STATEMENTS
The balance sheet of the Company as of March 31, 1998, and the statements
of operations, stockholders' deficiency, and cash flows for the quarters ended
March 31, 1998 and 1997 have been prepared by the Company without an audit.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (which include only normal
recurring adjustments) considered necessary for a fair presentation have been
included. Operating results for the quarter ended March 31, 1998 are not
necessarily indicative of the results that may be expected for the full year.
* * * * * *
F-52
<PAGE>
INDEPENDENT AUDITORS' REPORT
International Support for Bone Marrow Drives, Ltd.
We have audited the accompanying balance sheet of International Support for Bone
Marrow Drives, Ltd. (the 'Company') as of December 31, 1997, and the related
statements of operations, stockholders' deficit and cash flows for the year
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of International Support of Bone Marrow Drives,
Ltd. as of December 31, 1997, and the results of its operations and its cash
flows for the year then ended in conformity with generally accepted accounting
principles.
DELOITTE & TOUCHE LLP
/s/ DELOITTE & TOUCHE LLP
Raleigh, North Carolina
June 19, 1998
F-53
<PAGE>
INTERNATIONAL SUPPORT FOR BONE MARROW DRIVES, LTD.
BALANCE SHEETS
DECEMBER 31, 1997 AND MARCH 31, 1998 (UNAUDITED)
<TABLE>
<CAPTION>
DECEMBER 31, 1997 MARCH 31, 1998
----------------- --------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................................... $ 526,847 $ 406,427
Accounts receivable......................................................... 591,540 898,919
Refundable income taxes..................................................... 0 21,960
Prepaid expenses and other current assets................................... 6,906 6,906
----------------- --------------
Total current assets..................................................... 1,125,293 1,334,212
Deferred tax assets........................................................... 31,900 31,900
----------------- --------------
Total assets.................................................................. $ 1,157,193 $ 1,366,112
----------------- --------------
----------------- --------------
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable............................................................ $ 1,327,844 $ 2,271,301
Accrued expenses............................................................ 68,017 7,760
Income taxes payable........................................................ 136,977 0
----------------- --------------
Total current liabilities................................................ 1,532,838 2,279,061
----------------- --------------
COMMITMENTS AND CONTINGENCIES
Stockholders' deficit:
Common stock ($1 par value, 100,000 shares authorized, shares issued and
outstanding)............................................................. 200 200
Retained earnings........................................................... 154,255 194,871
Notes receivable--stockholders.............................................. (530,100) (1,108,020)
----------------- --------------
Total stockholders' deficit.............................................. (375,645) (912,949)
----------------- --------------
Total liabilities and stockholders' deficit................................... $ 1,157,193 $ 1,366,112
----------------- --------------
----------------- --------------
</TABLE>
See notes to financial statements.
F-54
<PAGE>
INTERNATIONAL SUPPORT FOR BONE MARROW DRIVES, LTD.
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997, AND THE
THREE MONTHS ENDED MARCH 31, 1997 AND 1998 (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED --------------------------------
DECEMBER 31, 1997 MARCH 31, 1997 MARCH 31, 1998
----------------- -------------- --------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Revenues...................................................... $ 4,824,421 $704,722 $1,766,038
Cost of revenues.............................................. 3,523,032 482,270 1,298,088
----------------- -------------- --------------
Gross profit............................................. 1,301,389 222,452 467,950
Other costs and expenses:
General and administrative.................................. 737,753 246,806 423,010
Equity in losses on investment in Medical Molecular
Diagnostics GmbH......................................... 68,975 0 0
Write off of amounts due from
Marco International, Inc................................. 64,500 63,108 0
----------------- -------------- --------------
Income (loss) from operations................................. 430,161 (87,372) 44,940
Other income--net:
Interest income............................................. 34,944 18,366 20,676
Other income................................................ 2,500 2,500 0
----------------- -------------- --------------
Income (loss) before income taxes............................. 467,605 (66,506) 65,616
Provision for income taxes (income tax benefit)............... 190,900 (27,100) 25,000
----------------- -------------- --------------
Net income (loss)............................................. $ 276,705 $(39,406) $ 40,616
----------------- -------------- --------------
----------------- -------------- --------------
</TABLE>
See notes to financial statements.
F-55
<PAGE>
INTERNATIONAL SUPPORT FOR BONE MARROW DRIVES, LTD.
STATEMENTS OF STOCKHOLDERS' DEFICIT
FOR THE YEAR ENDED DECEMBER 31, 1997 AND THREE MONTHS ENDED MARCH 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCK NOTES TOTAL
---------------- ACCUMULATED RECEIVABLE- STOCKHOLDERS'
SHARES AMOUNT DEFICIT STOCKHOLDERS DEFICIT
------ ------ ----------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1997............................ 200 $200 $(122,450) $ (230,293) $(352,543)
Net income........................................ 276,705 276,705
Increase in notes receivable--stockholders........ (299,807) (299,807)
------ ------ ----------- ------------ -------------
Balance, December 31, 1997.......................... 200 200 154,255 (530,100) (375,645)
Net income (unaudited)............................ 40,616 40,616
Increase in notes receivable--stockholders
(unaudited).................................... (577,920) (577,920)
------ ------ ----------- ------------ -------------
Balance, March 31, 1998 (unaudited)................. 200 $200 $ 194,871 $ (1,108,020) $(912,949)
------ ------ ----------- ------------ -------------
------ ------ ----------- ------------ -------------
</TABLE>
See notes to financial statements.
F-56
<PAGE>
INTERNATIONAL SUPPORT FOR BONE MARROW DRIVES, LTD.
STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1997,
AND THE THREE MONTHS ENDED MARCH 31, 1997 AND 1998 (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED --------------------------
DECEMBER 31, MARCH 31, MARCH 31,
1997 1997 1998
------------ ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Operating activities:
Net income (loss).................................................... $ 276,705 $ (39,406) $ 40,616
Adjustments to reconcile net income to net cash provided by operating
activities:
Equity in loss on investment in Medical Molecular Diagnostics
GmbH............................................................ 68,975 0
Write-off of amounts due from
Marco International, Inc........................................ 64,500 63,018 0
Deferred income tax benefit....................................... (28,100) 0 0
Net change in operating assets and liabilities:
Increase in accounts receivable................................. (77,313) (45,851) (307,379)
Increase in refundable income taxes............................. 0 0 (21,960)
Increase in prepaid expenses and other current assets........... (6,381) (6,381) 0
Increase (decrease) in accounts payable......................... 80,839 (72,675) 943,457
Increase (decrease) in accrued expenses and other current
liabilities.................................................. 57,373 20,431 (60,257)
Increase (decrease) in accrued income taxes..................... 108,009 (76,107) (136,977)
------------ ----------- -----------
Net cash provided by (used in) operating activities.................... 544,607 (156,971) 457,500
------------ ----------- -----------
Investing activities:
Investment in Medical Molecular Diagnostics GmbH..................... (68,975) (21,904) 0
Loans provided to Marco International, Inc........................... (64,500) (63,018) 0
------------ ----------- -----------
Net cash used in investing activities.................................. (133,475) (84,922) 0
------------ ----------- -----------
Financing activities--Loans provided to stockholders................... (299,807) (67,939) (577,920)
------------ ----------- -----------
Net increase (decrease) in cash and cash equivalents................... 111,325 (309,832) (120,420)
Cash and cash equivalents, beginning................................... 415,522 415,522 526,847
------------ ----------- -----------
Cash and cash equivalents, end......................................... $ 526,847 $ 105,690 $ 406,427
------------ ----------- -----------
------------ ----------- -----------
Supplemental disclosures of cash flow information:
Cash paid during the period for interest............................. $ 0 $ 0 $ 0
Cash paid during the period for income taxes......................... $ 81,340 $ 5,250 $ 184,000
</TABLE>
See notes to financial statements.
F-57
<PAGE>
INTERNATIONAL SUPPORT FOR BONE MARROW DRIVES, LTD.
NOTES TO FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1997
AND THREE MONTHS ENDED MARCH 31, 1998 AND 1997 (UNAUDITED)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization--International Support for Bone Marrow Drives, Ltd. ('ISBMD'
or the 'Company') is a provider of genetic typing of potential donors of bone
marrow. The Company is headquartered in High Point, North Carolina with
operations in the United States and Germany.
Cash and Cash Equivalents--The Company considers all investments purchased with
an original maturity of three months or less to be cash equivalents.
Investment in Affiliate--The Company's investment in Medical Molecular
Diagnostics GmbH ('MMD') is accounted for by the equity method. Beginning in
October 1997, the Company's ownership percentage in MMD exceeded 20%.
Revenue Recognition--Revenue is recognized when results are shipped and/or
services are provided to the customer.
Income Taxes--Deferred income taxes are provided for the temporary
differences between the financial reporting basis and the income tax basis of
the Company's assets and liabilities in accordance with Statement of Financial
Accounting Standards No. 109.
Use of Estimates--The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amount of assets and
liabilities, the disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Interim Financial Statements--The accompanying balance sheet as of March
31, 1998 and the statements of operations and cash flows for the three months
ended March 31, 1997 and 1998 are unaudited but, in the opinion of management,
include all adjustments (consisting of normal, recurring adjustments) necessary
for a fair presentation of results for these interim periods. Results for
interim periods are not necessarily indicative of results for the entire year.
2. RELATED PARTY TRANSACTIONS
Professor Dr. Gerhard Ehninger, one of the 50% owners of the Company, is a
director of Deutsche Knochenmarkspenderdatei gemeinnuetzige GMBH ('DKMS').
ISBMD's revenues from services provided to DKMS were $4,824,421 and $1,766,038,
representing 100% of net sales, for the year ended December 31,1997 and the
three months ended March 31,1998, respectively. Amounts receivable from DKMS as
of December 31, 1997 and March 31, 1998 were $591,549 and $898,919,
respectively. Consulting fees of $24,000 and $6,000 were paid in 1997 and the
period ended March 31, 1998 respectively, to Claudia Rutt, Director, of DKMS.
Consulting fees were paid in 1997 to Claude L. Buller and Professor Dr.
Gerhard Ehninger, each 50% owner of the Company, of $213,800 and $81,205,
respectively. For the three months ended March 31,1998, Mr. Buller and Professor
Dr. Ehninger received $147,547 and $179,920, respectively. In addition,
consulting fees relating to services provided by Ulf Ehninger, nephew of
Professor Dr. Gerhard Ehninger, in 1997 of $38,033 remained in accrued expenses
at December 31, 1997. For the three months ended March 31, 1998, Ulf Ehninger
earned $16,570.
During 1997, the Company loaned $299,807 to Mr. Buller at 8% interest. The
total notes receivable of $530,100 as of December 31, 1997 were secured by
Lifecodes Corporation ('Lifecodes') stock subsequent to year end (see Note 7).
Notes receivable from Professor Dr. Ehninger were $0 as of December 31, 1997.
During the three months ended March 31, 1998, the Company loaned Mr. Buller and
Professor Dr. Gerhard $11,292 and $566,628, respectively. The entire notes
receivable amount is subject to forgiveness if certain post acquisition
operational results are met.
F-58
<PAGE>
INTERNATIONAL SUPPORT FOR BONE MARROW DRIVES, LTD.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
YEAR ENDED DECEMBER 31, 1997
AND THREE MONTHS ENDED MARCH 31, 1998 AND 1997 (UNAUDITED)
2. RELATED PARTY TRANSACTIONS--(CONTINUED)
Loans were made to Marco International, Inc. ('Marco') in the amount of
$64,500 during 1997. The notes had an imputed interest rate of 8% but no
interest income was accrued during 1997 due to valuation issues. Marco is a
related party as Mr. Buller is the president of Marco and became a controlling
stockholder of Marco on April 1, 1997. These loans were written off as of
December 31, 1997 due to deemed insolvency of Marco. As of December 31, 1996,
loan to Marco aggregating $440,107 of principal and accrued interest were
written off due to the insolvency of Marco.
3. INVESTMENT IN AND ADVANCES TO AFFILIATE
In October, 1997, the Company invested $47,071 in MMD (see Note 1),
increasing its ownership interest to approximately 30%. The Company's share of
MMD's losses for 1997 exceeded the Company's investment in MMD. Therefore, the
investment in MMD as of December 31, 1997 is $0 as the Company is not committed
beyond its original investment. Certain owners of MMD are also owners of the
Company or officers of Lifecodes.
4. INCOME TAXES
The components of income tax expense (benefits) is as follows:
<TABLE>
<CAPTION>
PERIOD ENDED
---------------------------
DECEMBER 31, MARCH 31,
1997 1998
------------ -----------
(UNAUDITED)
<S> <C> <C>
Current:
Federal.......................................................... $195,900 $23,300
State............................................................ 23,100 1,700
------------ -----------
Total.............................................................. 219,000 25,000
Deferred benefit................................................... (28,100) --
------------ -----------
Income tax expense (benefit)....................................... $190,900 $25,000
------------ -----------
------------ -----------
</TABLE>
The provision for income taxes is different from the amount computed using
the applicable statutory federal rate of 34% as follows:
<TABLE>
<CAPTION>
PERIOD ENDED
---------------------------
DECEMBER 31, MARCH 31,
1997 1998
------------ -----------
(UNAUDITED)
<S> <C> <C>
Income taxes at federal statutory rate............................. $159,000 $23,400
Adjustment due to:
State taxes, net of Federal benefit.............................. 15,200 1,200
Other............................................................ 16,700 400
------------ -----------
Income tax expense (benefit)....................................... $190,900 $25,000
------------ -----------
------------ -----------
</TABLE>
The tax effect of temporary differences that give rise to deferred tax
assets as of December 31, 1997 and March 31, 1998 primarily related to losses on
its investment in MMD and certain interest that are not currently deductible.
F-59
<PAGE>
INTERNATIONAL SUPPORT FOR BONE MARROW DRIVES, LTD.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
YEAR ENDED DECEMBER 31, 1997
AND THREE MONTHS ENDED MARCH 31, 1998 AND 1997 (UNAUDITED)
5. COMMITMENTS AND CONTINGENCIES
Operating Leases
Office Space and Equipment--The Company has operating leases for office
space and office equipment in High Point, NC. The leases provide for monthly
rental payments and, in addition, the Company is responsible for certain
building and operating expenses of such facilities based upon its proportionate
share of occupancy. The leases expire in June 1998. Future committed lease
payments are $3,150.
Annual rent expense under these leases for the year ended December 31, 1997
was $8,163.
6. RECENT ACCOUNTING PRONOUNCEMENTS
Statements of Financial Accounting Standards No. 130, 'Reporting
Comprehensive Income' ('SFAS 130'), and No. 131, 'Disclosures About Segments of
an Enterprise and Related Information' (SFAS 131), were issued in June 1997.
SFAS 130 establishes standards for reporting and display of comprehensive
income and its components in a full set of general purpose financial statements.
It requires that all items that are required to be recognized under accounting
standards as components of comprehensive income be reported in a financial
statement that is displayed with the same prominence as the other financial
statements. Comprehensive income is defined as 'the change in equity of a
business during a period from transactions and other events and circumstances
from non-owner sources.' It includes all changes in equity during a period,
except those resulting from investments by owners and distributions to owners.
This statement is effective for fiscal years beginning after December 15, 1997.
SFAS 131 establishes the way that public business enterprises report
information about operating segments in annual financial statements and requires
that those enterprises report selected information about segments in interim
financial reports issued to stockholders. It also establishes standards for
related disclosures about products and services, geographic areas and major
customers. This statement is effective for financial statements beginning after
December 15, 1997.
As the Company does not have material changes in equity and operates in a
single segment, the implementation of both these standards are not expected to
have a material effect on the Company.
7. SUBSEQUENT EVENTS
In April 1998, Lifecodes acquired all of the outstanding stock of ISBMD.
Prior to the acquisition, Lifecodes laboratories processed less than 10% of the
specimens originated by ISBMD. Lifecodes laboratories are now performing an
increasing share of this testing.
* * * * * * *
F-60
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
and Stockholders of GeneScreen, Inc.:
We have audited the accompanying consolidated balance sheets of GeneScreen, Inc.
and subsidiaries (the 'Company') at December 31, 1996 and 1997, and the related
consolidated statements of operations, stockholders' equity and cash flows for
each of the three years in the period ended December 31, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of GeneScreen, Inc. and subsidiaries
at December 31, 1996 and 1997, and the results of their operations and their
cash flows for each of the three years in the period ended December 31, 1997, in
conformity with generally accepted accounting principles.
/s/ DELOITTE & TOUCHE LLP
Dallas, Texas
May 26, 1998
F-61
<PAGE>
GENESCREEN, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
------------------------ -----------
1996 1997 1998
---------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash.............................................................................. $ 509,841 $ 22,268 $ 147,256
Accounts receivable--net (Notes 4 and 7).......................................... 1,305,245 2,251,013 2,408,634
Laboratory materials and supplies (Note 7)........................................ 221,951 334,630 394,630
Prepaids and other assets......................................................... 17,173 5,581 6,874
---------- ---------- -----------
Total current assets...................................................... 2,054,210 2,613,492 2,957,394
Property And Equipment--Net (Notes 5 and 7)......................................... 752,094 850,016 771,909
Deferred Production Process Costs--Net (Note 3)..................................... 171,257 40,515 36,567
Intangible Assets--Net (Note 6)..................................................... 210,963 133,848 126,232
Investment In Discontinued Operations (Note 2)...................................... 1,217,635 708,477 719,778
---------- ---------- -----------
Total............................................................................... $4,406,159 $4,346,348 $ 4,611,880
---------- ---------- -----------
---------- ---------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Note payable--bank (Note 7)....................................................... $ -- $1,000,000 $ 1,170,000
Current portion of long--term debt (Note 7)....................................... 176,258 -- --
Accounts payable.................................................................. 498,614 1,204,586 1,410,262
Accrued compensation.............................................................. 228,881 251,758 152,927
Other accrued liabilities (Note 8)................................................ 342,079 349,776 517,384
Deferred revenue.................................................................. 76,979 142,917 117,667
---------- ---------- -----------
Total current liabilities................................................. 1,322,811 2,949,037 3,368,240
Long-term Debt And Other--Net of current portion (Note 7)........................... 87,285 8,250 8,250
Commitments And Contingencies (Note 8)..............................................
Stockholders' Equity (Notes 10 and 11):
Convertible preferred stock, Series A, $.05 par value; 350,000 shares authorized,
issued and outstanding (liquidation preference of $1,289,000 at December 31,
1997, and $1,307,000 at March 31, 1998)........................................ 17,500 17,500 17,500
Convertible preferred stock, Series B, $.05 par value; 700,000 shares authorized;
691,723 shares issued and outstanding (liquidation preference of $2,450,000 at
December 31, 1997, and $2,496,000 at
March 31, 1998)................................................................ 34,586 34,586 34,586
Common stock, $.01 par value; 10,000,000 shares authorized; 2,618,817 shares
issued at December 31, 1996, and 2,619,497 shares issued at December 31, 1997,
and March 31, 1998............................................................. 26,188 26,196 26,196
Additional paid-in capital.......................................................... 7,695,236 7,695,408 7,695,408
Accumulated deficit................................................................. (4,652,447) (6,299,290) (6,452,961)
Treasury stock--53 common shares.................................................... (22) (22)
Notes receivable--stockholders...................................................... (125,000) (85,317) (85,317)
---------- ---------- -----------
Total stockholders' equity..................................................... 2,996,063 1,389,061 1,235,390
---------- ---------- -----------
Total............................................................................... $4,406,159 $4,346,348 $ 4,611,880
---------- ---------- -----------
---------- ---------- -----------
</TABLE>
See notes to consolidated financial statements.
F-62
<PAGE>
GENESCREEN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED THREE MONTHS ENDED
-------------------------------------------- --------------------------
DECEMBER 31, DECEMBER 31, DECEMBER 31, MARCH 31, MARCH 31,
1995 1996 1997 1997 1998
------------ ------------ ------------ ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net revenues:
Paternity testing...................... $6,565,905 $6,675,218 $ 7,727,082 $ 1,739,302 $ 2,467,032
Genetic testing........................ 725,444 1,875,732 3,283,478 639,736 876,164
Forensic testing....................... 136,622 276,996 206,013 47,370 62,727
------------ ------------ ------------ ----------- -----------
Total net revenues............. 7,427,971 8,827,946 11,216,573 2,426,408 3,405,923
Costs and expenses:
Cost of testing revenues:
Salaries and benefits............... 1,650,128 1,790,973 2,523,149 478,914 780,957
Laboratory supplies................. 1,679,043 2,524,431 3,676,343 638,363 1,043,414
Drawing costs....................... 865,781 1,023,146 1,432,954 298,305 468,096
Royalties........................... 7,232 59,216 60,388 20,000 24,081
Depreciation--lab equipment......... 118,733 143,000 264,793 60,605 69,810
Facility allocation................. 236,858 227,797 320,587 75,122 99,258
------------ ------------ ------------ ----------- -----------
Total cost of testing
revenues..................... 4,557,775 5,768,563 8,278,214 1,571,309 2,485,616
Operating expenses:
Research and development (Note 3)... 101,106 -- 651,595 43,390 40,850
Other salaries and benefits......... 1,439,554 1,552,883 1,645,519 416,406 531,364
Advertising and marketing........... 100,188 104,863 187,792 19,862 46,894
General and administrative.......... 660,648 908,610 1,129,522 243,159 249,284
Depreciation--non-lab
equipment......................... 50,885 52,345 105,682 25,974 29,462
Amortization--intangible assets..... 189,441 202,225 113,128 32,665 21,083
------------ ------------ ------------ ----------- -----------
Total operating expenses....... 2,541,822 2,820,926 3,833,238 781,456 918,937
------------ ------------ ------------ ----------- -----------
Total costs and expenses..... 7,099,597 8,589,489 12,111,452 2,352,765 3,404,553
------------ ------------ ------------ ----------- -----------
Operating income (loss).................. 328,374 238,457 (894,879) 73,643 1,370
Other income (expense):
Interest expense....................... (87,953) (38,174) (22,597) (4,532) (26,638)
Rent and other income.................. -- 40,190 16,486 5,458 --
------------ ------------ ------------ ----------- -----------
Total other income
(expense)................. (87,953) 2,016 (6,111) 926 (26,638)
------------ ------------ ------------ ----------- -----------
Income (loss) from continuing operations
before extraordinary
item................................... 240,421 240,473 (900,990) 74,569 (25,268)
Loss on discontinued operations (Note
2)..................................... -- (838,741) (768,212) (211,801) (128,403)
------------ ------------ ------------ ----------- -----------
Income (loss) before extraordinary
item................................... 240,421 (598,268) (1,669,202) (137,232) (153,671)
Extraordinary item--Gain on early
extinguishment of debt................. -- -- 22,359 -- --
------------ ------------ ------------ ----------- -----------
Net income (loss)........................ $ 240,421 $ (598,268) $ (1,646,843) $ (137,232) $ (153,671)
------------ ------------ ------------ ----------- -----------
------------ ------------ ------------ ----------- -----------
</TABLE>
See notes to consolidated financial statements.
F-63
<PAGE>
GENESCREEN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
CONVERTIBLE PREFERRED STOCK
-------------------------------------
SERIES A SERIES B COMMON STOCK ADDITIONAL
----------------- ----------------- ------------------- PAID-IN ACCUMULATED
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT
------- ------- ------- ------- --------- ------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1995............ 350,000 $17,500 -- $ -- 1,660,783 $16,608 $4,769,905 $(4,294,600)
Exercise of common stock options.... 30 15
Net income.......................... 240,421
------- ------- ------- ------- --------- ------- ---------- -----------
Balance at December 31, 1995.......... 350,000 17,500 -- -- 1,660,813 16,608 4,769,920 (4,054,179)
Issuance of Series B convertible
preferred stock (Note 2):
Acquisition of net assets........ 243,902 12,195 787,805
For cash......................... 447,821 22,391 1,431,660
Issuance of common stock:
Acquisition of net assets (Note
2)............................. 906,284 9,063 580,022
Exercise of common stock
options........................ 1,720 17 1,329
Exercise of common stock
warrants....................... 50,000 500 124,500
Net loss............................ (598,268)
------- ------- ------- ------- --------- ------- ---------- -----------
Balance at December 31, 1996.......... 350,000 17,500 691,723 34,586 2,618,817 26,188 7,695,236 (4,652,447)
Exercise of common stock warrants... 732 8 172
Purchase of treasury stock.......... (52)
Collections on note receivable from
shareholders.....................
Net loss............................ (1,646,843)
------- ------- ------- ------- --------- ------- ---------- -----------
Balance at December 31, 1997.......... 350,000 17,500 691,723 34,586 2,619,497 26,196 7,695,408 (6,299,290)
Net loss (unaudited)................ (153,671)
------- ------- ------- ------- --------- ------- ---------- -----------
Balance at March 31, 1998
(unaudited)......................... 350,000 $17,500 691,723 $34,586 2,619,497 $26,196 $7,695,408 $(6,452,961)
------- ------- ------- ------- --------- ------- ---------- -----------
------- ------- ------- ------- --------- ------- ---------- -----------
<CAPTION>
NOTES
TREASURY RECEIVABLE--
STOCK STOCKHOLDERS TOTAL
-------- ----------- ----------
<S> <C> <C> <C>
Balance at January 1, 1995............ $ -- $ -- $ 509,413
Exercise of common stock options.... 15
Net income.......................... 240,421
-------- ----------- ----------
Balance at December 31, 1995.......... -- -- 749,849
Issuance of Series B convertible
preferred stock (Note 2):
Acquisition of net assets........ 800,000
For cash......................... 1,454,051
Issuance of common stock:
Acquisition of net assets (Note
2)............................. 589,085
Exercise of common stock
options........................ 1,346
Exercise of common stock
warrants....................... (125,000) --
Net loss............................ (598,268)
-------- ----------- ----------
Balance at December 31, 1996.......... -- (125,000) 2,996,063
Exercise of common stock warrants... 180
Purchase of treasury stock.......... (22) (22)
Collections on note receivable from
shareholders..................... 39,683 39,683
Net loss............................ (1,646,843)
-------- ----------- ----------
Balance at December 31, 1997.......... (22) (85,317) 1,389,061
Net loss (unaudited)................ (153,671)
-------- ----------- ----------
Balance at March 31, 1998
(unaudited)......................... $(22) $ (85,317) $1,235,390
-------- ----------- ----------
-------- ----------- ----------
</TABLE>
See notes to consolidated financial statements.
F-64
<PAGE>
GENESCREEN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED THREE MONTHS ENDED
-------------------------------------------- --------------------------
DECEMBER 31, DECEMBER 31, DECEMBER 31, MARCH 31, MARCH 31,
1995 1996 1997 1997 1998
------------ ------------ ------------ ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Operating activities:
Net income (loss):
Continuing operations.................. $ 240,421 $ 240,473 $ (900,990) $ 74,569 $ (25,268)
Discontinued operations................ (838,741 ) (768,212) (211,801 ) (128,403)
Noncash items in net income:
Depreciation and amortization.......... 359,059 397,570 483,603 119,244 120,355
Gain on early extinguishment of debt... 22,359
Write-off of deferred production
costs................................ 106,020
Cash from (used for) operating working
capital:
Accounts receivable.................... (194,339) (9,106 ) (945,768) (86,362 ) (157,621)
Laboratory supplies.................... (48,330) (49,393 ) (112,679) (60,000)
Prepaids and other assets.............. 17,088 (9,748 ) 11,592 (7,515 ) (1,293)
Accounts payable....................... (80,927) 123,167 705,972 48,482 205,676
Accrued liabilities.................... 263,950 30,235 30,574 123,517 68,777
Deferred revenue....................... (4,462) 8,685 65,938 9,689 (25,250)
Discontinued operations items--net..... 735,112 786,753 211,804 125,556
------------ ------------ ------------ ----------- -----------
Net cash from (used for) operating
activities............................... 552,460 628,254 (514,838) 281,627 122,529
------------ ------------ ------------ ----------- -----------
Investing activities:
Additions to property and equipment...... (149,602) (487,270 ) (486,938) (158,197 ) (21,165)
Additions to deferred production process
costs and intangible assets............ (184,042 ) (11,291) (8,509 ) (6,673)
Acquisition of MTool (Note 2)............ (235,771 )
Advances to MTool........................ (327,891 ) (259,054) (110,743 ) (139,703)
------------ ------------ ------------ ----------- -----------
Net cash used for investing activities..... (149,602) (1,234,974 ) (757,283) (277,449 ) (167,541)
------------ ------------ ------------ ----------- -----------
Financing activities:
Borrowings (net payments) under line of
credit................................. (240,000) (80,000 ) 1,000,000 170,000
Payments on long-term obligations........ (225,483) (308,234 ) (255,293) (71,278 )
Issuance of common stock and Series B
convertible preferred stock (Note 2)... 1,454,051
Exercise of common stock options......... 15 1,346 180
Buyback of common stock.................. (22)
Collections on notes receivable from
shareholders........................... 39,683 18,353
------------ ------------ ------------ ----------- -----------
Net cash from (used for) financing
activities............................... (465,468) 1,067,163 784,548 (52,925 ) 170,000
------------ ------------ ------------ ----------- -----------
Net increase (decrease) in cash............ (62,610) 460,443 (487,573) (48,747 ) 124,988
Cash:
Beginning of period...................... 112,008 49,398 509,841 509,841 22,268
------------ ------------ ------------ ----------- -----------
End of period............................ $ 49,398 $ 509,841 $ 22,268 $ 461,094 $ 147,256
------------ ------------ ------------ ----------- -----------
------------ ------------ ------------ ----------- -----------
Supplemental information:
Interest paid............................ $ 88,139 $ 38,723 $ 24,265 $ -- $ --
------------ ------------ ------------ ----------- -----------
------------ ------------ ------------ ----------- -----------
Income taxes paid........................ $ 8,000 $ 9,110 $ 13,000 $ -- $ --
------------ ------------ ------------ ----------- -----------
------------ ------------ ------------ ----------- -----------
Noncash investing and financing
activities:
Acquisition of net assets for common
stock and Series B convertible
preferred stock (Note 2)............. $ -- $ 1,389,085 $ -- $ -- $ --
------------ ------------ ------------ ----------- -----------
------------ ------------ ------------ ----------- -----------
Exercise of common stock warrants for
notes receivable (Note 10)........... $ -- $ 125,000 $ -- $ -- $ --
------------ ------------ ------------ ----------- -----------
------------ ------------ ------------ ----------- -----------
</TABLE>
See notes to consolidated financial statements.
F-65
<PAGE>
GENESCREEN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997, AND
THREE MONTHS ENDED MARCH 31, 1997 (UNAUDITED) AND 1998 (UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Business GeneScreen, Inc. ('GeneScreen') operates genetic
testing laboratories in Dallas, Texas; Dayton, Ohio (acquired in 1992); and
Sacramento, California (acquired in 1994). GeneScreen performs paternity
testing, forensic identification testing to assist in criminal investigations
and medical genetic testing using technologies developed at the University of
Texas Southwestern Medical Center and other medical research facilities.
GeneScreen's primary source of revenue represents paternity testing under
contracts with several state government agencies.
During 1996, GeneScreen acquired all of the members' capital of Molecular
Tool, LLC ('MTool') of Baltimore, Maryland, through issuance of common and
preferred stock. MTool performs research and development activities for third
parties under contract and for its own account and has developed and patented a
proprietary technology called genetic bit analysis ('GBA(Registered)') for the
analysis of DNA. This technology could be used in new areas of testing,
including animal and plant testing, and in a product format. On May 26, 1998,
the board of directors approved a plan to sell the MTool assets (see Note 2).
Consolidated Financial Statements include the accounts of GeneScreen and
its wholly owned subsidiaries, GeneScreen of Texas, Inc. (established in 1995)
and MTool (collectively referred to as the 'Company'), from the dates of their
formation. Significant intercompany balances and transactions are eliminated in
consolidation. Financial statement preparation requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingencies at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Differences from those estimates are recognized in the period
they become known.
Laboratory Materials and Supplies are stated at the lower of cost or
market. Cost is determined by the first-in, first-out ('FIFO') method.
Property and Equipment are stated at cost less accumulated depreciation and
amortization. Depreciation and amortization for financial statement purposes are
provided by the straight-line method over the various estimated useful lives of
the property and equipment, which range from two to seven years.
Deferred Production Process Costs represent direct project costs incurred
in 1996 to ready prototype tests using GBA Technology of MTool (see Note 2) for
high-volume production of specific testing revenues at specified quality levels
reasonably expected to be realized by 1997, and are stated net of accumulated
amortization. Amortization, which begins upon production of specific testing
revenues, is provided based on the greater of the ratio of current tests
processed to the estimated total tests for that particular testing process or
the straight-line method over the remaining estimated economic life of the
testing process of 36 months.
Intangible Assets are amortized on a straight-line basis over the estimated
lives as follows: costs of obtaining certain patented and unpatented testing
technologies in 1987 (ten years), assigned costs of noncompete contracts with
former owners (the contract lives of 30 to 60 months) and goodwill from
acquisitions in 1994 and 1996 (five to six years).
Financial Instruments consist of cash, accounts and notes receivable,
payables and notes payable, the carrying values of which are a reasonable
estimate of their fair values due to their short maturities or current interest
rates.
Paternity and Genetic Testing Revenues, primarily under contracts, are
recognized on a percentage-of-completion basis. Percentage of completion for
tests in process is estimated by relating labor and supplies costs expended to
date to expected total labor and supplies costs. Deferred revenue represents the
unearned portion of payments received in advance related to tests in process.
Other testing revenues are recognized when tests results are delivered.
F-66
<PAGE>
GENESCREEN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997, AND
THREE MONTHS ENDED MARCH 31, 1997 (UNAUDITED) AND 1998 (UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
Research and Development costs are expensed as incurred, and the amounts in
operating expenses represent in 1997 and in the 1998 period (unaudited)
primarily production process costs that do not satisfy capitalization criteria.
The results of operations for the acquired MTool research and development
facility to be sold are reported as discontinued operations (see Note 2).
Stock-Based Compensation arising from stock option grants is accounted for
by the intrinsic value method under Accounting Principles Board Opinion No. 25
('APB No. 25'). Statement of Financial Accounting Standards ('SFAS') No. 123 was
effective for GeneScreen beginning January 1, 1996, and encourages (but does not
require) compensation cost of stock-based compensation arrangements with
employees to be measured based on the fair value of the equity instrument
awarded. As permitted by SFAS No. 123, GeneScreen applies APB No. 25 to its
stock-based compensation awards to employees and discloses the required pro
forma effect on net income.
Unaudited Interim Financial Information at March 31, 1998, and for the
three months ended March 31, 1997 and 1998, have been prepared on the same basis
as the audited financial statements presented. In the opinion of management,
such unaudited information includes all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of this interim
information. The results of the three months ended March 31, 1998, are not
necessarily indicative of future results.
New Accounting Standards In June 1997, the Financial Accounting Standards
Board (the 'FASB') issued SFAS No. 130, 'Reporting Comprehensive Income,' which
establishes standards for the reporting and display of comprehensive income and
its components in the financial statements, and is effective for fiscal years
beginning after December 15, 1997. In June 1997, the FASB also issued SFAS No.
131, 'Disclosure About Segments of an Enterprise and Related Information,' which
establishes standards for the way public companies disclose information about
operating segments, products and services, geographic areas and major customers,
and is effective for periods beginning after December 31, 1997. The Company
believes initial adoption of these standards will not have a material impact on
its financial statements.
2. ACQUISITION AND DISCONTINUED OPERATIONS OF MTOOL
Effective February 26, 1996, GeneScreen acquired all of the members'
capital of MTool for $300,000 cash, 906,284 shares of GeneScreen common stock
valued at $589,085, 243,902 shares of GeneScreen Series B convertible preferred
stock valued at $800,000, and $39,400 of acquisition costs paid in cash. This
transaction was accounted for by the purchase method, with the total purchase
price allocated to the identifiable assets acquired and liabilities assumed in
proportion to their fair values, as follows:
<TABLE>
<S> <C>
Current assets acquired (including cash of $103,629)...................................... $ 505,383
Property and equipment acquired........................................................... 532,597
Current liabilities assumed............................................................... (254,996)
Contracts and license acquired (includes $168,093 for 1996 contracts)..................... 345,501
Goodwill.................................................................................. 600,000
------------
Net assets acquired....................................................................... $ 1,728,485
------------
------------
</TABLE>
In conjunction with the acquisition, GeneScreen also raised $1,454,051 (net
of issuance costs of $14,802) in proceeds from the sale of 447,821 shares of
Series B convertible preferred stock, priced at $3.28 per share.
On May 26, 1998, the board of directors approved a plan to sell the MTool
assets, except that the Company will retain certain rights to the GBA technology
of MTool to permit the Company to continue implementation of the GBA testing
processes. A sale consistent with this plan is currently being negotiated. Under
these
F-67
<PAGE>
GENESCREEN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997, AND
THREE MONTHS ENDED MARCH 31, 1997 (UNAUDITED) AND 1998 (UNAUDITED)
2. ACQUISITION AND DISCONTINUED OPERATIONS OF MTOOL--(CONTINUED)
negotiations, the Company expects to realize a gain from the MTool sale and
would distribute a substantial portion of the proceeds to its current
stockholders. Accordingly, the accompanying financial statements include the
Company's investment in MTool on the equity basis and MTool's operations as
discontinued operations.
The Company's investment, on the equity basis, in the net assets of MTool
for December 31, 1996 and 1997, and March 31, 1998, is based on the following:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
---------------------- -----------
1996 1997 1998
---------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
MTool's net assets:
Current assets................................................. $ 598,601 $190,914 $ 299,858
Property and equipment......................................... 245,814 150,885 121,669
Intangible assets--net......................................... 687,008 517,856 475,568
Current liabilities............................................ (313,788) (151,178) (177,317)
---------- -------- -----------
Total............................................................ $1,217,635 $708,477 $ 719,778
---------- -------- -----------
---------- -------- -----------
</TABLE>
Revenues and expenses for the MTool research and development facility for
December 31, 1996 and 1997, and March 31, 1997 and 1998, are as follows:
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, MARCH 31,
------------------------ --------------------------
1996 1997 1997 1998
---------- ---------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Research and development revenue................. $1,399,696 $1,126,066 $ 306,667 $ 267,312
Operating expenses:
Cost of revenue................................ 1,435,363 1,332,678 384,299 281,335
General and administrative..................... 258,826 137,761 50,146 11,646
Patent legal fees.............................. 124,120 172,853 30,067 43,786
Depreciation and amortization.................. 419,579 282,621 69,999 71,506
---------- ---------- ----------- -----------
Total operating expenses......................... 2,237,888 1,925,913 534,511 408,273
Other income (expense)........................... (549) 31,635 16,043 12,558
---------- ---------- ----------- -----------
Net loss......................................... $ (838,741) $ (768,212) $(211,801) $(128,403)
---------- ---------- ----------- -----------
---------- ---------- ----------- -----------
</TABLE>
3. GBA PRODUCTION PROCESS COSTS
Deferred production process costs at December 31, 1996 and 1997, and March
31, 1998, consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
---------------------- -----------
1996 1997 1998
---------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Capitalizable costs.............................................. $ 184,043 $ 88,581 $ 88,581
Less accumulated amortization.................................... 12,785 48,066 52,014
---------- -------- -----------
Net carrying value............................................... $ 171,258 $ 40,515 $ 36,567
---------- -------- -----------
---------- -------- -----------
</TABLE>
Capitalizable costs represent direct project costs incurred in 1996 to
ready prototypes using GBA technology of MTool (see Note 2) for specific testing
applications reasonably expected to generate revenues in 1997. At
F-68
<PAGE>
GENESCREEN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997, AND
THREE MONTHS ENDED MARCH 31, 1997 (UNAUDITED) AND 1998 (UNAUDITED)
3. GBA PRODUCTION PROCESS COSTS--(CONTINUED)
December 31, 1996, $106,020 of such costs relate to the development project for
paternity testing applications, which amount was written off in 1997 when
revenue generation status was not achieved. This write-off is included with
research and development amounts in 1997 that consist primarily of further
production process costs to use GBA technology in paternity testing; such
development costs have continued to be incurred in the 1998 period (unaudited).
The remaining net carrying value of capitalized costs at December 31, 1997, and
March 31, 1998 (unaudited) relate to revenue generating projects.
4. ACCOUNTS RECEIVABLE AND CREDIT RISKS
Accounts receivable at December 31, 1996 and 1997, and March 31, 1998,
consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
---------------------- -----------
1996 1997 1998
---------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Billed trade receivables...................................... $1,241,945 $1,538,200 $ 1,485,667
Accrued revenues on tests completed........................... 535,386 617,000
Accrued revenues on tests in process.......................... 130,760 240,527 368,695
---------- ---------- -----------
Total......................................................... 1,372,705 2,314,113 2,471,362
Less allowance for doubtful accounts.......................... 67,460 63,100 62,728
---------- ---------- -----------
Accounts receivable--net...................................... $1,305,245 $2,251,013 $ 2,408,634
---------- ---------- -----------
---------- ---------- -----------
</TABLE>
GeneScreen's accounts receivable is primarily composed of amounts owed by
private institutions. GeneScreen performs periodic credit evaluations of its
customers' financial condition and generally does not require a deposit from
government agencies or private institutions. GeneScreen believes private pay
accounts for paternity testing represent the most significant credit risk and
generally requires a deposit for all or a portion of the services to be
rendered. Credit losses have consistently been within management's expectations.
5. PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1996 and 1997, and March 31, 1998,
consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
---------------------- -----------
1996 1997 1998
---------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Laboratory and office equipment............................... $1,474,554 $1,879,356 $ 1,900,523
Leasehold improvements........................................ 87,619 151,954 151,945
---------- ---------- -----------
Total......................................................... 1,562,173 2,031,310 2,052,468
Less accumulated depreciation and amortization................ 810,079 1,181,294 1,280,559
---------- ---------- -----------
Property and equipment--net................................... $ 752,094 $ 850,016 $ 771,909
---------- ---------- -----------
---------- ---------- -----------
</TABLE>
F-69
<PAGE>
GENESCREEN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997, AND
THREE MONTHS ENDED MARCH 31, 1997 (UNAUDITED) AND 1998 (UNAUDITED)
6. INTANGIBLE ASSETS
Intangible assets at December 31, 1996 and 1997, and March 31, 1998,
consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
---------------------- -----------
1996 1997 1998
---------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Technologies acquired and technology license..................... $ 200,000 $200,000 $ 207,500
Noncompete contracts (amortized fully in 1997)................... 394,850 -- --
Goodwill......................................................... 257,502 257,503 257,503
---------- -------- -----------
852,352 457,503 465,003
Less accumulated amortization.................................... 641,389 323,655 338,771
---------- -------- -----------
Intangible assets--net........................................... $ 210,963 $133,848 $ 126,232
---------- -------- -----------
---------- -------- -----------
</TABLE>
7. CREDIT FACILITY AND DEBT
In 1997, the Company renewed its existing revolving line of credit
agreement for borrowings of up to $1,000,000, subject to borrowing base
requirements and interest at prime plus 1% (9.5% at December 31, 1997) payable
monthly, and collateralized by accounts receivable, inventory, equipment and
intangibles. In January 1998, this line of credit was increased by $250,000.
Long-term debt and other at December 31, 1996 and 1997, and March 31, 1998,
consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
---------------------- -----------
1996 1997 1998
---------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Note payable to former owners, due in quarterly principal
installments of $63,500. Paid in 1997.......................... $ 219,500 $ -- $ --
Note payable to bank in monthly principal installments of $3,889.
Paid in 1997................................................... 34,758 -- --
Deferred rent (Note 8)........................................... 9,285 8,250 8,250
---------- -------- -----------
Total............................................................ 263,543 8,250 8,250
Less current portion............................................. 176,258 -- --
---------- -------- -----------
Long-term debt and other--net of current portion................. $ 87,285 $ 8,250 $ 8,250
---------- -------- -----------
---------- -------- -----------
</TABLE>
8. COMMITMENTS AND CONTINGENCIES
Leases
The Company leases its facilities under noncancelable operating leases with
options to renew. Future minimum rental payments as of December 31, 1997, under
the leases are as follows:
<TABLE>
<S> <C>
1998.............................................................................. $ 216,209
1999.............................................................................. 214,418
2000.............................................................................. 233,762
2001.............................................................................. 204,041
2002.............................................................................. 87,861
----------
$ 956,291
----------
----------
</TABLE>
F-70
<PAGE>
GENESCREEN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997, AND
THREE MONTHS ENDED MARCH 31, 1997 (UNAUDITED) AND 1998 (UNAUDITED)
8. COMMITMENTS AND CONTINGENCIES--(CONTINUED)
The Company recognizes rent expense on a straight-line basis over the
initial and renewal terms of the leases and has recorded a liability of $9,485
and $8,250 at December 31, 1996 and 1997, respectively, and $8,250 at March 31,
1998 (unaudited), for deferred rent, which is included in long-term debt on the
accompanying balance sheet. Rent expense in 1995, 1996 and 1997 was $170,227,
$159,232 and $227,369, respectively.
Self-Insurance Reserve
The Company is self-insured for the risk of loss relating to certain
litigation claims that might arise from the Company's testing results. However,
due to provisions in certain service contracts, the Company is insured for
claims arising from testing performed under the Texas, Ohio and Arizona
contracts. Insurance coverage began in 1995 for testing under the Texas contract
and in 1997 for testing under the Ohio and Arizona contracts. Management
estimates future litigation costs based on historical litigation experience. The
accrued litigation reserve for the self-insured risk at December 31, 1996 and
1997, was $209,679 and $173,783, respectively, and $172,898 at March 31, 1998
(unaudited).
Employment Contracts
Under employment contracts with two individuals, the Company is
contingently liable through December 31, 2001, for minimum payments in the event
of involuntary termination or death of those individuals. This total contingency
at December 31, 1997, is $785,562, and is reduced by defined compensation
payments in the future.
9. INCOME TAXES
Net deferred tax assets consist of the following at December 31, 1996 and
1997:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1996 1997
---------- ----------
<S> <C> <C>
Current:
Allowances and accruals, not currently deductible........... $ 19,923 $ 168,911
Valuation allowance......................................... (19,923) (168,911)
---------- ----------
Net current asset................................... $ -- $ --
---------- ----------
---------- ----------
Long-term:
Depreciation and amortization, not currently deductible..... $ 179,128 $ (318,075)
Deferred production process costs deducted for tax
purposes................................................. -- 13,775
Allowances and accruals, not currently deductible........... (46,755) 8,777
Other....................................................... 11,174 14,227
Net operating loss carryforward............................. 1,330,574 1,912,724
---------- ----------
1,474,121 1,631,428
Valuation allowance......................................... (1,474,121) (1,631,428)
---------- ----------
Net long-term assets................................ $ -- $ --
---------- ----------
---------- ----------
</TABLE>
At December 31, 1997, net operating loss carryforwards of approximately
$5,039,000 for income tax reporting purposes, begin expiring in 2003. The Tax
Reform Act of 1986 imposed a limitation on the use of tax loss carryforwards
following certain actual or deemed ownership changes. As a result of an equity
financing in a prior year, GeneScreen sustained a 'deemed change in ownership,'
which limits the amount of tax losses
F-71
<PAGE>
GENESCREEN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997, AND
THREE MONTHS ENDED MARCH 31, 1997 (UNAUDITED) AND 1998 (UNAUDITED)
9. INCOME TAXES--(CONTINUED)
available for use in any given year. GeneScreen does not believe the tax loss
limitation will have a material adverse effect on the use of its net operating
loss carryforwards.
10. STOCKHOLDERS' EQUITY
Preferred Stock
The Company is authorized to issue a total of 5,000,000 shares of various
series of preferred stocks. The Series A and Series B Preferred Stocks are
convertible into common stock on a 1-for-1 basis, subject to adjustment for
dilution, are entitled to vote with common stock on the basis of common shares
into which they are convertible, and provide for noncumulative annual dividends
at rates of $.20 and $.26 per share, respectively, when and if declared.
The Series A and Series B Preferred Stocks may be redeemed in whole or in
part, at the Company's option, at any time beginning after March 31, 1999, and
January 31, 2003, respectively. The per-share redemption price for Series A is
$2.50 plus $.20 for each year outstanding since February 1992. The per-share
redemption price for Series B is $3.28 plus $.02 for each month outstanding
since February 1996. For both series, the liquidation value is computed in the
same manner as redemption price. The Series A and Series B Preferred Stocks have
a liquidation preference over common stock.
All shares of the Series A and Series B Preferred Stocks will automatically
convert to common stock upon the sale of the Company's common stock pursuant to
a public offering, subject to certain offering criteria. At December 31, 1997,
the Company had reserved approximately 1,050,000 shares of common stock for
issuance upon conversion of all preferred stock.
Common Stock Warrants
Warrants to purchase 50,000 shares of common stock at $2.50 per share,
granted in 1992 to the former owners of an acquired business, were outstanding
at December 31, 1995. These warrants were exercised in 1996 for receivables
totaling $125,000, which are classified as a reduction of stockholders' equity,
of which $39,683 was received in 1997. The balance in notes receivable bears
interest at the prime rate and is payable in quarterly principal installments of
$5,332 plus interest through December 31, 2001.
11. STOCK OPTION PLAN
Under the Stock Option Plan (the 'Plan'), options to purchase up to 686,667
shares of common stock may be granted to certain key employees and officers of
the Company. Options are exercisable immediately and expire no later than ten
years from the date of grant. The Board may determine the individuals to whom
and the time at which options shall be granted and the number of shares of
common stock covered by each option. The option price per share will be
determined by the Board but may not be less than 85% of the fair value of the
common stock on the date of grant. Common stock issued related to the options is
subject to repurchase by GeneScreen upon termination of employment. The
percentage of stock eligible for repurchase will decrease ratably over a period
varying from three to five years from the date of grant. Options for stock no
longer eligible for repurchase are considered vested.
F-72
<PAGE>
GENESCREEN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997, AND
THREE MONTHS ENDED MARCH 31, 1997 (UNAUDITED) AND 1998 (UNAUDITED)
11. STOCK OPTION PLAN--(CONTINUED)
The following information summarizes the shares subject to options:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
EXERCISE
NUMBER OF SHARES PRICE PER SHARE
-------------------- ---------------
1996 1997 1996 1997
-------- -------- ---- ----
<S> <C> <C> <C> <C>
Options outstanding, beginning of year.................. 340,144 574,044 $.21 $.45
Granted................................................. 238,800 6,000 .80 .80
Exercised............................................... (1,720) (732) .78 .24
Terminated.............................................. (3,180) (1,635) .79 .76
-------- --------
Options outstanding, end of year........................ 574,044 577,677 .45 .45
-------- --------
-------- --------
Options vested, end of year............................. 395,816 455,903 .30 .36
-------- --------
-------- --------
Reserved for future options at December 31, 1997........ 108,257
--------
--------
</TABLE>
The following table summarizes additional information about stock options
outstanding and vested at December 31, 1997:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
-------------------------------------- OPTIONS VESTED
WEIGHTED ----------------------
AVERAGE WEIGHTED WEIGHTED
RANGE OF REMAINING AVERAGE AVERAGE
EXERCISE NUMBER OF CONTRACTUAL EXERCISE NUMBER OF EXERCISE
PRICES SHARES LIFE PRICE SHARES PRICE
- ------------- --------- ----------- -------- --------- --------
<S> <C> <C> <C> <C> <C>
$.12 169,828 3.7 $.12 169,828 $.12
.25 140,000 4.0 .25 140,000 .25
.50 29,250 6.2 .50 21,880 .50
.80 238,600 8.0 .80 124,195 .80
--------- ---------
$.12 to $.80 577,678 5.7 .45 455,903 .36
--------- ---------
--------- ---------
</TABLE>
The Company applies the provisions of APB No. 25 and related
Interpretations in accounting for its stock option plan. Accordingly, no
compensation cost has been recognized for its stock option plan. Had
compensation cost for the Company's stock option plan been determined based on
the fair value at the grant dates for awards under the plan in 1996 and 1997
consistent with the method prescribed by SFAS No. 123, the Company's pro forma
net loss would have been $613,000 and $1,647,000 in 1996 and 1997, respectively,
and $154,000 in the 1998 period (unaudited).
In the pro forma calculations, the weighted average fair value of options
granted in 1996 and 1997 was estimated at $.24 and $.22, respectively. The fair
value of each option grant is estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted average
assumptions used for grants in 1997: risk-free interest rate of 5.9% and 5.5% in
1996 and 1997, respectively, expected lives of six years, no divided yield and
no expected volatility (because the Company's stock is not publicly traded).
12. SUBSEQUENT FINANCING AND SALE OF THE COMPANY
In April and May 1998, the Company received cash of $864,000 in exchange
for 18% demand notes payable ('Notes') to existing shareholders. The Notes
mature April 30, 1999, unless the individual shareholders demand payment at an
earlier date. Accrued interest at 18% and principal will be due at maturity.
On May 26, 1998, the board of directors approved a plan for the Company's
stockholders to sell their GeneScreen stock to Lifecodes Corporation. This sale
is contingent, among other things, on the sale of MTool or the distribution of
the shares of MTool to the Company's shareholders, as discussed in Note 2.
******
F-73
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
National Legal Laboratories
We have audited the accompanying balance sheets of National Legal Laboratories
(a separate Division of a Michigan Corporation) as of September 30, 1997 and the
related statements of income, retained earnings, and cash flows for the year
then ended. These 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, regarding the current and prior year end, the financial
statements present fairly, in all material respects, the financial position of
National Legal Laboratories, as of September 30, 1997, and the results of its
operations and its cash flows for the year then ended in conformity with
generally accepted accounting principles.
_____SCHLATTMAN & ASSOCIATES,
P.C._____
Certified Public Accountants
Mason, Michigan
February 20, 1998
F-74
<PAGE>
NATIONAL LEGAL LABORATORIES
BALANCE SHEETS
SEPTEMBER 30, 1997 AND DECEMBER 31, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997 DECEMBER 31, 1997
------------------ -----------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash..................................................................... $ 182,688 $ 142,670
Accounts receivable--trade............................................... 222,368 301,085
Accounts receivable--other............................................... 44,801 63,883
Work-in-progress......................................................... 29,535 29,535
Prepaid expenses and other............................................... 44,197 81,818
------------------ -----------------
Total current assets....................................................... 523,589 618,991
------------------ -----------------
Property, plant and equipment:
Vehicles................................................................. 55,153 55,153
Equipment................................................................ 470,960 470,960
Furniture................................................................ 41,633 41,633
Leasehold improvements................................................... 39,205 39,205
------------------ -----------------
Total...................................................................... 606,951 606,951
Accumulated depreciation................................................... (372,278) (390,563)
------------------ -----------------
Total, net................................................................. 234,673 216,388
------------------ -----------------
Other assets--Loans to officers............................................ 125,000 125,000
------------------ -----------------
Total assets............................................................... $ 883,262 $ 960,379
------------------ -----------------
------------------ -----------------
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current liabilities:
Accounts payable......................................................... $ 294,101 $ 343,082
Accrued liabilities...................................................... 41,249 18,242
Current portion of long-term debt........................................ 129,881 129,881
------------------ -----------------
Total current liabilities.................................................. 465,231 491,205
------------------ -----------------
Long-term liabilities--Notes payable-net of current portion................ 435,366 596,674
------------------ -----------------
Total liabilities.......................................................... 900,597 1,087,879
------------------ -----------------
Stockholders' deficiency:
Common stock, no par value--50,000 shares authorized, 3,000 shares issued
and outstanding....................................................... 3,000 3,000
Accumulated deficit...................................................... (20,335) (130,500)
------------------ -----------------
Total stockholders' deficiency............................................. (17,335) (127,500)
------------------ -----------------
Total liabilities and stockholders' deficiency............................. $ 883,262 $ 960,379
------------------ -----------------
------------------ -----------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-75
<PAGE>
NATIONAL LEGAL LABORATORIES
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1997
AND THE THREE MONTHS ENDED DECEMBER 31, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED
SEPTEMBER 30, DECEMBER 31,
1997 1997
------------- -------------
(UNAUDITED)
<S> <C> <C>
Revenues:
Lab.............................................................................. $ 2,034,720 $ 558,876
Less: refunds.................................................................... (2,994) (1,314)
------------- -------------
Total revenues................................................................ 2,031,726 557,562
Cost of revenues................................................................... 1,686,847 501,612
------------- -------------
Gross margin.................................................................. 344,879 55,950
Selling and administrative expenses................................................ 720,831 210,332
------------- -------------
Loss from operations............................................................... 375,952 154,382
Other income:
Interest income.................................................................. 4,402 2,100
Other............................................................................ 1,669 --
------------- -------------
Loss before income taxes........................................................... 369,881 152,282
Income tax benefits................................................................ 111,674 42,117
------------- -------------
Net loss........................................................................... $ 258,207 $ 110,165
------------- -------------
------------- -------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-76
<PAGE>
NATIONAL LEGAL LABORATORIES
STATEMENTS OF CHANGES IN ACCUMULATED DEFICIT
FOR THE YEAR ENDED SEPTEMBER 30, 1997
AND THE THREE MONTH PERIOD ENDED DECEMBER 31, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
YEAR THREE MONTHS
ENDED ENDED
SEPTEMBER 30, DECEMBER 31,
1997 1997
------------- ------------
(UNAUDITED)
<S> <C> <C>
Accumulated Deficit, Beginning...................................................... $ 237,872 $ (20,335)
Net Loss............................................................................ 258,207 110,165
------------- ------------
Accumulated Deficit, Ending......................................................... $ (20,335) $ (130,500)
------------- ------------
------------- ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-77
<PAGE>
NATIONAL LEGAL LABORATORIES
STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED SEPTEMBER 30, 1997 AND
THE THREE MONTHS ENDED DECEMBER 31, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1997
------------- ------------
(UNAUDITED)
<S> <C> <C>
Operating Activities:
Net loss.......................................................................... $(258,207) $ (110,165)
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation................................................................. 57,000 18,285
Increase in accounts receivable.............................................. (154,567) (78,717)
Increase in work-in-progress................................................. (1,171) --
Increase in prepaid and other assets......................................... (24,535) (56,703)
Increase in accounts payable................................................. 238,041 48,981
Decrease in accrued liabilities.............................................. (2,004) (23,007)
------------- ------------
Net cash used in operating activities............................................... (145,443) (201,326)
------------- ------------
Investing Activities:
Acquisition of property, plant and equipment...................................... (219,296) --
------------- ------------
Net cash used in investing activities............................................... (219,296) --
------------- ------------
Financing Activities:
Proceeds from issuance of debt.................................................... 1,044,576 169,416
Retirement of debt................................................................ (563,081) (8,108)
------------- ------------
Net cash provided by financing activities........................................... 481,495 161,308
------------- ------------
Net increase (decrease) in cash and cash equivalents................................ 116,756 (40,018)
Cash and cash equivalents, beginning................................................ 65,932 182,688
------------- ------------
Cash and cash equivalents, end...................................................... $ 182,688 $ 142,670
------------- ------------
------------- ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-78
<PAGE>
NATIONAL LEGAL LABORATORIES
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
1. NATURE OF BUSINESS
Organization
National Legal Laboratories is a division of Group Benefit Services, Inc.
This entity performs paternity testing for state governments and private
individuals. The accompanying financial statements were prepared from the
accounting records maintained by National Legal Laboratories, Inc., a division
of Group Benefit Services, Inc., which are maintained separate from Group
Benefit Services, Inc.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting policies of National Legal Laboratories, (the 'Company') are
as follows:
Income Recognition
Revenues are recognized as the testing and drawing services are performed.
Bad Debts
Bad debts are written off on a direct write off basis.
Inventories
Inventories are stated at the lower of cost or market.
Property and Equipment
Property and equipment are stated at cost, less accumulated depreciation.
Depreciation is calculated over the estimated life of the asset using rates
stipulated under the tax code. The annual provisions for depreciation are
computed using the following range of lives:
<TABLE>
<S> <C>
Leasehold Improvements........................................................ Life of lease
Furniture and Fixtures........................................................ 7 years
Equipment..................................................................... 5 years
</TABLE>
Upon disposition, the cost of the asset and the related accumulated
depreciation are eliminated from the accounts and any gain or loss is included
in the determination of net income.
Federal Income Taxes
Federal income tax is calculated using the rates provided in the tax laws.
Deferred tax assets and liabilities, if any, are determined based upon the
difference between the financial statement and tax basis of assets and
liabilities using currently enacted tax rates.
Common Stock
Common stock consists of 50,000 shares authorized with 3,000 shares issued
and outstanding.
Use of Estimates
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities at the
date of the financial statements, as well as revenues and expenses reported for
the periods presented. The Company regularly assess these estimates and, while
actual results may differ, management believes that the estimates are
reasonable.
F-79
<PAGE>
NATIONAL LEGAL LABORATORIES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1997
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
Recent Accounting Pronouncements
Statements of Financial Accounting Standards No. 130, 'Reporting
Comprehensive Income' ('SFAS 130'), and No. 131, 'Disclosures About Segments of
an Enterprise and Related Information' ('SFAS 131'), were issued in June 1997.
SFAS 130 establishes standards for reporting and display of comprehensive
income and its components in a full set of general purpose financial statements.
It requires that all items that are required to be recognized under accounting
standards as components of comprehensive income be reported in a financial
statement that is displayed with the same prominence as the other financial
statements. Comprehensive income is defined as 'the change in equity of a
business during a period from transactions and other events and circumstances
from non-owner sources.' It includes all changes in equity during a period,
except those resulting from investments by owners and distributions to owners.
This statement is effective for fiscal years beginning after December 15, 1997.
SFAS 131 establishes the way that public business enterprises report
information about operating segments in annual financial statements and requires
that those enterprises report selected information about segments in interim
financial reports issued to stockholders. It also establishes standards for
related disclosures about products and services, geographic areas and major
customers. This statement is effective for financial statements beginning after
December 15, 1997.
As the Company does not have material changes in equity other than from
investments by owners and distributions to owners and operates in a single
segment the implementation of both these standards are not expected to have a
material effect on the Company.
3. NOTES PAYABLE
Notes payable at September 30, 1997 consist of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30,
1997
-------------
<S> <C>
Note payable to bank with monthly payments of $467, (including principal and interest at
7.858%)................................................................................ $ 10,003
Line of credit with bank, secured by the assets of the company; maximum amount of line
$97,000 at .5% above prime............................................................. 97,000
Note payable to bank with monthly payments of $327, (including principal and interest at
10.75%) secured by equipment........................................................... 9,058
Note payable to creditor with monthly payments of $1,742, (including principal and
interest at 16.25%) secured by equipment............................................... 69,685
Note payable to creditor with monthly payments of $1,705, (including principal and
interest at 16.25%) secured by equipment............................................... 68,993
Note payable to creditor with monthly payments of $1,388, (including principal and
interest at 18.25%) secured by equipment............................................... 51,192
Line of credit with creditor secured by assets of the company. Maximum amount of credit
$300,000 at 10% above prime............................................................ 159,316
Line of credit with employee............................................................. 100,000
-------------
565,247
Less Current Portion..................................................................... 129,881
-------------
Total.................................................................................... $ 435,366
-------------
-------------
</TABLE>
All of the above notes payable to a bank were guaranteed by the
shareholders.
F-80
<PAGE>
NATIONAL LEGAL LABORATORIES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1997
3. NOTES PAYABLE--(CONTINUED)
Future minimum payments under loan agreements at September 30, 1997 are as
follows:
<TABLE>
<CAPTION>
YEAR ENDING SEPTEMBER 30,
- --------------------------------------------------------------------------------------------
<S> <C>
1999........................................................................................ $200,388
2000........................................................................................ 40,982
2001........................................................................................ 45,492
2002........................................................................................ 148,504
--------
$435,366
--------
--------
</TABLE>
4. COMMITMENTS AND CONTINGENCIES
The Company currently pays $6,487 a month for a lease at its current
location. The lease expires on July 31, 1998.
5. CASH FLOW INFORMATION
The Company considers all short-term investments with an original maturity
of three months or less to be cash equivalents.
Cash paid for interest and income taxes for 1997 was as follows:
<TABLE>
<CAPTION>
1997
-------
<S> <C>
Interest................................................................. $50,137
-------
Income Taxes............................................................. $ 0
-------
-------
</TABLE>
6. ECONOMIC DEPENDENCY
The National Legal Laboratories division, performs laboratory work
primarily for the Michigan Department of Social Services under a contract which
requires renewal under a bid process every three years. The contract was renewed
and expires on September 30, 1998, with one year renewable options for two
additional years. The revenues under this contract amounted to $756,570 for the
year ended September 30, 1997 representing 37% of the total revenues received in
1997.
The Company has become an authorized vendor with the States of Illinois,
Wisconsin, Minnesota, Indiana, Pennsylvania and the City of Baltimore.
7. BENEFIT PLANS
The Company adopted a 401(k) pension plan in 1995 and contributed $3,424 in
1997. Employees must be employed for one year before they are eligible to
participate. Contributions are matched by the Company based on a percentage of
income contributed by each employee.
An employee must be employed by the Company for 6 years before they are
fully vested in Company matching contributions.
The Company adopted a cafeteria benefit plan in 1995. The Company allocates
from their funds $214 per month for each employee. The employees may choose from
several different options. Any monies not used at the end of the year are
forfeited back to the Company. If the employee chooses options that exceed their
allotment, the excess is deducted from their wages.
F-81
<PAGE>
NATIONAL LEGAL LABORATORIES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
SEPTEMBER 30, 1997
8. RELATED PARTIES
Certain officers and directories of National Legal Laboratories are also
officers and directors of the parent company Group Benefit Services, Inc. and
other assorted ventures (Group Benefit Services Care, Inc., J & D Associates,
and School Administrative Services). These officers and directors have
significant stockholdings/ownership in all companies and/or partnerships.
9. SUBSEQUENT EVENT
This division was sold to a third party in February, 1998 for stock and
assets. The estimated proceeds to be recognized from this sale are $771,744.
* * * * * *
F-82
<PAGE>
================================================================================
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS OFFERING
OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY, THE SELLING STOCKHOLDERS, THE UNDERWRITERS OR ANY DEALER OF
AGENT. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION
OF ANY OFFER TO BUY THE COMMON STOCK TO ANY PERSON IN ANY JURISDICTION WHERE, OR
IN ANY CIRCUMSTANCE IN WHICH, SUCH OFFER OR SOLICITATION MAY NOT LEGALLY BE
MADE. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL,
UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS NOT BEEN ANY
CHANGE IN THE AFFAIRS OF THE COMPANY OR THE INFORMATION SET FORTH IN THE
PROSPECTUS IS CORRECT AS OF ANY TIMES SUBSEQUENT TO THE DATE OF THIS PROSPECTUS.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary............................. 3
Risk Factors................................... 6
The Company.................................... 15
Use of Proceeds................................ 15
Dividend Policy................................ 15
Capitalization................................. 16
Dilution....................................... 17
Selected Historical Consolidated Financial
Data......................................... 18
Unaudited Pro Forma Condensed Combined
Financial Data............................... 19
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................... 24
Business....................................... 31
Management..................................... 47
Certain Transactions........................... 54
Principal and Selling Stockholders............. 56
Description of Capital Stock................... 58
Shares Eligible for Future Sale................ 60
Underwriting................................... 62
Legal Matters.................................. 63
Experts........................................ 64
Available Information.......................... 64
Index to Financial Statements.................. F-1
</TABLE>
------------------------
UNTIL , 1998 (25 DAYS AFTER THE DATE OF
THIS PROSPECTUS), ALL DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK,
WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A
PROSPECTUS. THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF
DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO
THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
3,200,000 SHARES
[LOGO]
COMMON STOCK
------------------------
PROSPECTUS
, 1998
------------------------
VOLPE BROWN WHELAN & COMPANY
VECTOR SECURITIES INTERNATIONAL, INC.
ADVEST, INC.
================================================================================
<PAGE>
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 any 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.
(ALTERNATE PAGE FOR ACQUISITION PROSPECTUS)
SUBJECT TO COMPLETION, DATED JULY 17, 1998
PROSPECTUS
681,818 SHARES
[LOGO]
COMMON STOCK
------------------------
All of the 681,818 shares of Common Stock offered hereby are being offered
by Lifecodes Corporation (the 'Company') pursuant to an Agreement and Plan of
Merger (the 'Plan of Merger') between the Company and GeneScreen Inc.
('GeneScreen'). Pursuant to the Plan of Merger, the Company is acquiring all of
the issued and outstanding capital stock of GeneScreen in consideration for $5.0
million in cash and the number of shares equal to $7.5 million divided by
$ , the price to public in the Company's concurrent initial public
offering (the 'IPO'). Prior to this offering and the concurrent IPO, there has
been no public market for the Common Stock of the Company. It is currently
anticipated that the initial public offering price of the Common Stock offered
in the IPO will be between $10 and $12 per share. The Common Stock has been
applied for quotation on the Nasdaq National Market under the symbol 'LFCD.'
------------------------
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE 'RISK FACTORS' ON PAGES 6-14.
------------------------
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.
------------------------
THE DATE OF THIS PROSPECTUS IS , 1998
<PAGE>
(ALTERNATE PAGE FOR ACQUISITION PROSPECTUS)
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information, including information set forth in 'Risk Factors,' 'Unaudited Pro
Forma Condensed Combined Financial Data,' the Consolidated Financial Statements,
including Notes thereto, included elsewhere in this Prospectus and the
Supplemental Consolidated Financial Statements, including Notes thereto,
included elsewhere in this Prospectus. Unless otherwise indicated, all
information in this Prospectus has been adjusted to give retroactive effect to
the split of the Common Stock at the rate of 3.65-for-1, to be effected prior to
the closing of this offering, and assumes (i) the consummation of the GeneScreen
Acquisition described under the heading 'Business--Recent and Pending
Acquisitions' and '--GeneScreen Acquisition.' to be completed contemporaneously
with the closing of this offering and the Company's initial public offering of
2,900,000 shares of Common Stock at an initial public offering price of
$ , (ii) the Underwriters' over-allotment option is not exercised and
(iii) the conversion of 21,500 shares of Series A Convertible Preference Stock
('Preferred Stock') into 156,950 shares of Common Stock at a rate of 7.3 shares
of Common Stock for each share of Preferred Stock upon the closing of this
offering. This Prospectus contains forward-looking statements which involve
risks and uncertainties. The Company's actual results may differ materially from
those results discussed in those forward-looking statements and from results
historically experienced. Factors that might cause such a difference include,
but are not limited to, those discussed in 'Risk Factors.'
THE COMPANY
Lifecodes is a leading provider of DNA testing services and related
products for human paternity and forensic identification ('identity testing')
and for genetic typing of potential donors and recipients of bone marrow and
organ transplants ('transplant testing'). Paternity testing seeks to establish
the correct identity of a child's parents when such matters are disputed.
Forensic testing seeks to link hair, saliva, blood or other biological specimens
found at a crime scene to an alleged suspect. Transplant testing detects the
genetic sequence of certain human leukocyte antigens ('HLA') contained in DNA
which are believed to be a principal determinant of whether a donor's bone
marrow or organ transplant may be rejected by the recipient's immune system
('rejection') or may attack the recipient's immune system ('graft vs. host
disease'). The Company is one of the largest providers of paternity, forensic
and transplant testing services in the United States and is one of the largest
providers of transplant testing in Europe. In addition to testing services, the
Company offers a product line consisting of reagents and a wide range of DNA
probes, which are sold principally in either standard configurations or
customized test kits.
Lifecodes was the first company to commercially offer DNA testing for
paternity and forensic identification. In 1987, the Company assisted law
enforcement officials in obtaining the first conviction in the United States
based on DNA testing. The Company's Cellmark subsidiary was the first and is one
of only two commercial forensic laboratories accredited by the American Society
of Crime Laboratory Directors for DNA testing and regularly performs casework
and provides expert DNA testimony in criminal cases nationwide. The Company's
HLA test kits are used by the Naval Medical Research Institute and by 15 of the
19 screening laboratories (including three of the Company's laboratories)
performing DNA testing for the National Marrow Donor Program, which together are
generally regarded as being among the most influential institutions worldwide in
setting transplant testing standards.
Historically, the Company has focused on developing and incorporating its
DNA technology into products to be sold as stand-alone test kits and to a lesser
extent as DNA testing services. Since 1997, the Company has emphasized offering
testing services to end-users of DNA testing information in an effort to meet
demand for an integrated DNA testing solution and to take advantage of access to
new DNA testing process technologies from Molecular Dynamics, Inc., Amersham
Pharmacia Biotech and Molecular Innovations, Inc. which the Company believes,
when fully developed, will improve the speed, quality and breadth of information
provided by its testing services at a reduced cost. In addition, the Company
believes this strategy will allow the Company to exploit opportunities not
otherwise available to it as a marketer of DNA testing products.
Since January 1, 1998, the Company has substantially increased its testing
service revenue base and expanded its market coverage and laboratory
infrastructure by completing the acquisitions of (i) National Legal Laboratories
('NLL'), the fifth largest paternity testing laboratory in the United States,
(ii) International Support
3
<PAGE>
(ALTERNATE PAGE FOR ACQUISITION PROSPECTUS)
for Bone Marrow Drives, Ltd. ('ISBMD'), the largest provider of HLA testing
services in Germany, (iii) Micro Diagnostics, Inc. ('MDx'), a full service DNA
testing laboratory and (iv) Helix Biotech Ltd. ('Helix'), a full service DNA
testing laboratory serving the Canadian market (collectively, the 'Recent
Acquisitions'). In addition, the Company has agreed to acquire GeneScreen Inc.
('GeneScreen') for cash and stock valued at $12.5 million (the 'GeneScreen
Acquisition'). GeneScreen is a leading provider of paternity testing services
and had revenues of $11.2 million during the year ended December 31, 1997. The
GeneScreen Acquisition will close concurrently with this offering. See
'Business--Recent and Pending Acquisitions.' The Company intends to increase its
revenue and profitability by leveraging its DNA testing process technology
currently under development across its existing laboratory operations and those
which it may acquire in the future and, to a lesser extent, by taking advantage
of operational efficiency brought about as a result of a larger laboratory
infrastructure.
The Company's goal is to be the leading international supplier of
integrated DNA testing solutions. The Company's business strategy to meet this
goal consists of the following primary elements: (i) continuing to improve its
DNA testing process to increase the speed, quality and breadth of the
information provided by its testing services and to lower its costs; (ii)
pursuing strategic acquisitions; (iii) expanding internationally through joint
venture and licensing arrangements; (iv) maintaining its industry leadership
position by working to set industry standards; and (v) extending the Company's
technologies into other diagnostic testing areas.
THE OFFERING
<TABLE>
<S> <C>
Common Stock being offered by:
The Company.......................... 681,818 shares
Common Stock to be outstanding after the
offering................................ 6,560,857 shares(1)
Use of proceeds........................... The Company will not receive any cash proceeds from the sale of
shares hereunder. See 'Use of Proceeds.'
Proposed Nasdaq National Market symbol.... LFCD
</TABLE>
- ------------------
(1) Based upon the number of shares outstanding on July 15, 1998. Does not
include: (i) 1,322,501 shares of Common Stock issuable upon the exercise of
stock options and warrants outstanding as of such date, of which 1,049,335
stock options and warrants were then exercisable; and (ii) 1,101,287
additional shares available for grant under the 1992 Employee Stock Option
Plan, the 1995 Employee Stock Option Plan and the 1998 Stock Plan. See
'Management--Stock Option Plans.'
4
<PAGE>
(ALTERNATE PAGE FOR ACQUISITION PROSPECTUS)
such Preferred Stock could have a material adverse effect on the market value of
the Common Stock. Although the Company has no present intention to issue any
shares of its Preferred Stock, there can be no assurance that the Company will
not do so in the future. These provisions, as well as other provisions contained
in the Company's Certificate of Incorporation, may also have the effect of
discouraging, delaying or preventing a change in control of the Company. See
'Description of Capital Stock.'
In addition, the Company's Certificate of Incorporation provides for a
staggered Board of Directors. Certain provisions of Delaware law applicable to
the Company could also delay or make more difficult a merger, tender offer or
proxy contest involving the Company, including Section 203 of the Delaware
General Corporation Law, which prohibits a Delaware corporation from engaging in
any business combination with any interested stockholder for a period of three
years unless certain conditions are met. The potential issuance of Preferred
Stock, the existence of a staggered Board of Directors, and provisions of
Delaware law could have the effect of delaying, deferring or preventing a change
in control of the Company, including without limitation, discouraging a proxy
contest, making more difficult the acquisition of a substantial block of the
Common Stock or limiting the price that investors might be willing to pay in the
future for shares of the Common Stock.
Year 2000 Risks. The Company has initiated communications with its
software vendors to determine the extent to which the Company is vulnerable to
those third parties' failure to remediate the Year 2000 issue. The Company
relies on the ability of its outside software vendors for remedial action. There
can be no assurance that the systems of these third party software vendors on
which the Company relies will be converted on a timely basis, or that a failure
to convert by another company, or a conversion that is incompatible with the
Company's systems, would not have a material adverse effect on the Company. The
total remaining cost of completion of the Company's Year 2000 compliance plan is
estimated to be less than $100,000 and will be funded through operating cash
flows. The costs of the project and the date on which the Company plans to
complete the Year 2000 modifications are based on management's best estimates,
which were derived utilizing numerous assumptions of future events, including
the continued availability of certain resources, third party modification plans
and other factors. However, there can be no assurance that these estimates will
be achieved and actual results could differ materially from those plans. Any
disruption of its operations caused by the computer systems of any of the
Company's vendors or customers could have a material adverse effect on the
Company's financial position or results of operations, including customer
satisfaction issues and potential lawsuits. In addition, there can be no
assurance that the Company will not experience significant cost overruns or
delays in connection with upgrading software or the programming of changes
required to address the Year 2000 issue. See 'Management's Discussion and
Analysis of Financial Condition and Results of Operations--Year 2000.'
Shares Eligible for Future Sale. Sales of a substantial number of shares
of the Common Stock in the public market following this offering, or the
perception that such sales could occur, could materially adversely affect the
prevailing market price of the Common Stock. Immediately after completion of
this offering, the Company will have 6,560,857 shares of Common Stock
outstanding, of which the 681,818 shares offered hereby and the 3,200,000 shares
offered pursuant to the concurrent IPO will be eligible for sale without regard
to volume or other limitations pursuant to Rule 144 ('Rule 144') under the
Securities Act of 1933, as amended (the 'Securities Act'), unless purchased by
'affiliates' of the Company as that term is defined under Rule 144. The Company,
its executive officers, directors and certain stockholders, who in the aggregate
own beneficially 2,802,186 of the remaining outstanding shares of Common Stock,
have agreed pursuant to lock-up agreements that they will not sell or otherwise
dispose of any shares of Common Stock beneficially owned by them (except for
shares sold in this offering) for a period of 180 days from the date of this
Prospectus other than as bona fide gifts or as distributions to the stockholders
or limited partners of certain stockholders, provided that, in either event, the
transferee agrees to be bound by similar restrictions. Such agreements provide
that Volpe Brown Whelan & Company, LLC may, in its sole discretion, and at any
time or from time to time, without notice, release all or any portion of the
shares subject to these lock-up agreements. Upon the expiration of these lock-up
agreements, all of such outstanding shares will become immediately eligible for
sale in the public market, subject in some cases to the volume and other
restrictions of Rule 144 or Rule 701 under the Securities Act. Promptly after
the date of this Prospectus, the Company intends to register on one or more
registration statements on Form S-8 all shares of Common Stock issuable under
its stock option plans. Shares covered by such registration statements will be
eligible for sale in the public market after the effective date of such
registration. In addition, the holders of 591,943 shares of Common Stock (
shares if the Underwriters' over-allotment option is
13
<PAGE>
(ALTERNATE PAGE FOR ACQUISITION PROSPECTUS)
exercised in full) are entitled to certain registration rights with respect to
such shares. 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 a material adverse effect on the market price of the Common
Stock. In addition, certain employees of the Company's subsidiary Cellmark
Diagnostics, Inc. ('Cellmark') own an aggregate of 1,960 shares of the common
stock of Cellmark (representing 19.6% of the common stock of Cellmark). The
Company has agreed to allow the Cellmark employees to exchange, beginning in
March 1999, each share of common stock of Cellmark for 43.654 shares of the
Company's Common Stock, representing a potential issuance of an aggregate of
85,562 shares of the Company's Common Stock. If such holders, by exercising
their exchange rights, cause a large number of shares to be sold in the public
market, such sales may have a material adverse effect on the market price of the
Common Stock. See 'Management--Executive Compensation' and '--Stock Option
Plans,' 'Description of Capital Stock' and 'Shares Eligible for Future Sale.'
No Prior Public Market; Possible Volatility of Stock Price. Prior to this
offering, there has been no public market for the Common Stock and there can be
no assurance that an active public market for the Common Stock will develop or
be sustained after this offering. The initial public offering price will be
determined through negotiations between the Company and the Underwriters and may
bear no relationship to the price at which the Common Stock will trade after the
closing of this offering. In addition, the securities markets have from time to
time experienced significant price and volume fluctuations that are unrelated to
the operating performance of particular companies. The market prices of the
common stock of many publicly held medical diagnostics companies have in the
past been, and may in the future be, especially volatile. Announcements of
technological innovations or new services or products by the Company or its
competitors, release of reports by securities analysts, developments or disputes
concerning patents or proprietary rights, regulatory developments, economic and
other external factors, as well as period-to-period fluctuations in the
Company's financial results, may have a significant impact on the market price
of the Common Stock. In the past, securities class action litigation has often
been instituted following periods of volatility in the market price of a
company's securities. Such litigation could result in substantial costs and a
diversion of management attention and resources, either of which could have a
material adverse effect on the Company's business, financial condition and
results of operations.
Immediate and Substantial Dilution. Purchasers of shares of Common Stock
in this offering will incur immediate and substantial dilution in the pro forma
net tangible book value per share from the public offering price. In addition,
investors purchasing shares in this offering will incur additional dilution to
the extent that Company stock options and warrants (whether currently
outstanding or subsequently issued or granted) are exercised. See 'Dilution.'
Lack of Dividends. The Company currently intends to retain all earnings,
if any, for future growth and, therefore, does not intend to pay cash dividends
on the Common Stock in the foreseeable future. See 'Dividend Policy.'
14
<PAGE>
(ALTERNATE PAGE FOR ACQUISITION PROSPECTUS)
THE COMPANY
Lifecodes Corporation was incorporated in New York in April 1982 and was
purchased by, and became a wholly-owned subsidiary of, Quantum Chemical
Corporation ('Quantum') in 1985. In September 1991, existing management and
stockholders acquired all of Quantum's interest in the Company and relocated the
Company to Stamford, Connecticut. The Company reincorporated in Delaware in
January 1993. In March 1996, the Company acquired Cellmark, a division of
Zeneca, plc. In February 1997, the Company, ISBMD and its founders formed
Medical Molecular Diagnostics GmbH ('MMD') to perform HLA testing in Germany. In
October 1997, the Company acquired a controlling interest in MMD.
In 1998, the Company has completed or has pending a number of acquisitions
as part of its strategic plan, including the recently completed acquisitions of
National Legal Laboratories (the 'NLL Acquisition'), International Support for
Bone Marrow Drives, Ltd. (the 'ISBMD Acquisition'), Micro Diagnostics, Inc. (the
'MDx Acquisition'), Helix Biotech Ltd. (the 'Helix Acquisition'), and the
pending acquisition of GeneScreen Inc. (the 'GeneScreen Acquisition,' and
together with the NLL Acquisition, the ISBMD Acquisition, the MDx Acquisition
and the Helix Acquisition, the 'Recent and Pending Acquisitions'). See
'Business--Recent and Pending Acquisitions' and '--GeneScreen Acquisition.'
The Company's principal executive offices are located at 550 West Avenue,
Stamford, Connecticut 06902 and its telephone number is (203) 328-9500.
USE OF PROCEEDS
The Company will not receive any cash proceeds from the offering of shares
pursuant to the GeneScreen Acquisition. The net proceeds to the Company from the
concurrent IPO, after deducting underwriting discounts and commissions and
estimated expenses payable by the Company in connection with such offering, are
estimated to be approximately $28.5 million assuming an initial public offering
price of $11.00 per share. The Company will not receive any of the proceeds from
the sales of Common Stock by the Selling Stockholders. See 'Principal and
Selling Stockholders.'
From time to time in the ordinary course of business, the Company evaluates
the potential acquisition of businesses and technologies that complement the
Company's business, for which a portion of the net proceeds may be used.
Currently, the Company does not have any commitments or agreements with respect
to any such acquisitions other than with respect to the GeneScreen Acquisition.
See 'Business--Recent and Pending Acquisitions' and '--GeneScreen Acquisition.'
Pending such uses, the net proceeds will be invested in short-term, investment
grade securities.
DIVIDEND POLICY
Lifecodes Corporation has never declared or paid any cash dividends on the
Common Stock and does not anticipate paying cash dividends on the Common Stock
in the foreseeable future. The payment of any future dividends will be at the
discretion of the Company's Board of Directors and will depend upon, among other
things, future earnings, operations, capital requirements, the general financial
condition of the Company, contractual restrictions and general business
conditions. In addition, the Credit Facility prohibits the payment of dividends
without the consent of First Union.
15
<PAGE>
(ALTERNATE PAGE FOR ACQUISITION PROSPECTUS)
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, the Company will have 6,560,857 shares of
Common Stock outstanding (based upon shares of Common Stock outstanding as of
the date of this Prospectus, the conversion of all outstanding shares of Series
A Convertible Preference Stock, the issuance of 681,818 shares in this offering
pursuant to the GeneScreen Acquisition and assuming no exercise of outstanding
stock options). Of these shares, the 3,200,000 shares sold in the concurrent IPO
will be freely tradable without restriction or further registration under the
Securities Act, except that any shares purchased by 'affiliates' of the Company,
as that term is defined in Rule 144 ('Rule 144') under the Securities Act
('Affiliates'), may generally only be sold in compliance with the limitations of
Rule 144 described below. The remaining 2,679,039 shares of Common Stock (the
'Restricted Shares') held by existing stockholders upon completion of this
offering, other than holders pursuant to the GeneScreen Acquisition, will be
'restricted' securities within the meaning of Rule 144 and may not be sold
except in compliance with the registration requirements of the Securities Act or
an applicable exemption under the Securities Act, including an exemption
pursuant to Rule 144.
SALES OF RESTRICTED SHARES
Beginning 180 days after the date of this Prospectus, approximately
1,829,259 Restricted Shares subject to lock-up agreements (the 'Lock-up
Agreements') between the Underwriters and certain stockholders, including
officers and directors, will become eligible for sale in the public market
pursuant to Rule 144(k), Rule 144 or Rule 701. In addition, certain existing
holders of an aggregate of 591,943 shares of Common Stock have the right to
require registration of their shares under certain circumstances. However, such
stockholders and holders of Common Stock pursuant to the GeneScreen Acquisition
have entered into Lock-up Agreements with respect to all shares owned by them
and not sold in this offering, which provide that they will not sell or
otherwise dispose of any shares of Common Stock (except for shares sold in this
offering) without the prior written consent of Volpe Brown Whelan & Company, LLC
for a period of 180 days from the date of this Prospectus other than bona fide
gifts or distributions to the stockholders or limited partners of such
stockholders, provided that, in either event, the transferee agrees to be bound
by similar restrictions. Volpe Brown Whelan & Company, LLC may, in its sole
discretion, and at any time or from time to time, without notice, release all or
any portion of the securities subject to the Lock-up Agreements. See
'--Registration Rights' and 'Underwriting.'
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated), including an Affiliate, who has beneficially owned
Restricted Shares for at least one year (including the holding period of certain
prior owners) is entitled to sell in 'brokers' transactions' or to market
makers, within any three-month period commencing 90 days after the Company
becomes subject to reporting requirements of Section 13 of the Exchange Act, a
number of such shares that does not exceed the greater of (i) one percent of the
then outstanding shares of Common Stock (approximately 65,609 shares immediately
after this offering) or (ii) the average weekly trading volume in the Common
Stock on the Nasdaq National Market during the four calendar weeks preceding the
date on which notice of such sale is filed. Sales under Rule 144 are also
subject to certain limitations on manner of sale, notice requirements and
availability of current public information about the Company. In addition, under
Rule 144(k), a person who is not an Affiliate and has not been an Affiliate for
at least three months prior to the sale and who has beneficially owned
Restricted Shares for at least two years may resell such shares without regard
to the limitations described above. In meeting the one and two year holding
periods described above, a holder of Restricted Shares can include the holding
periods of a prior owner who was not an Affiliate. Further, Rule 144A under the
Securities Act as currently in effect permits the immediate sale of restricted
shares to certain qualified institutional buyers without regard to the volume
restrictions described above.
STOCK OPTIONS
In general, under Rule 701 of the Securities Act as currently in effect,
any employee, consultant or advisor of the Company who purchased shares from the
Company in connection with a compensatory stock or option plan or other written
compensatory agreement is entitled to resell such shares without having to
comply with the public-information, holding-period, volume-limitation or notice
provisions of Rule 144, and Affiliates are entitled to sell their Rule 701
shares under Rule 144 without having to comply with Rule 144's holding period
restrictions, in each case commencing 90 days after the Company becomes subject
to the reporting requirements
60
<PAGE>
(ALTERNATE PAGE FOR ACQUISITION PROSPECTUS)
CONCURRENT INITIAL PUBLIC OFFERING
Subject to the terms and conditions of the Underwriting Agreement, the
Company has agreed to sell to each of the underwriters named below (the
'Underwriters'), and each of such Underwriters, for whom Volpe Brown Whelan &
Company, LLC, Vector Securities International, Inc. and Advest, Inc.
(collectively, the 'Representatives'), are acting as representatives, have
agreed severally to purchase from the Company, the respective number of shares
of Common Stock set forth opposite its name below. The Underwriters are
committed to purchase and pay for all shares if any shares are purchased.
<TABLE>
<CAPTION>
NUMBER
UNDERWRITERS OF SHARES
- -------------------------------------------------------------------------------------------- ---------
<S> <C>
Volpe Brown Whelan & Company, LLC...........................................................
Vector Securities International, Inc........................................................
Advest, Inc.................................................................................
---------
Total..................................................................................
---------
---------
</TABLE>
The Representatives have advised the Company that the Underwriters propose
to offer the shares of Common Stock to the public at the initial public offering
price set forth on the cover page of this Prospectusand to certain dealers at
such price less a concession not in excess of $ per share, of which $
per share may be reallowed to other dealers. After the initial public offering,
the public offering price, concession and reallowance to dealers may be reduced
by the Representatives. No such reduction shall change the amount of proceeds to
be received by the Company as set forth on the cover page of this Prospectus.
Certain Selling Stockholders have granted the Underwriters an option for 45
days after the date of this Prospectus to purchase, at the initial public
offering price less the underwriting discounts and commissions set forth on the
cover page of this Prospectus, up to 480,000 additional shares of Common Stock
at the same price per share as the Company and the Selling Stockholders receive
for the 3,200,000 shares of Common Stock offered hereby, solely to cover
over-allotments, if any. If the Underwriters exercise their over-allotment
option, the Underwriters have severally agreed, subject to certain conditions,
to purchase approximately the same percentage thereof that the number of shares
of Common Stock to be purchased by each of them, as shown in the foregoing
table, bears to the 3,200,000 shares of Common Stock offered hereby. The
Underwriters may exercise such option only to cover the over-allotments in
connection with the sale of the 3,200,000 shares of Common Stock offered hereby.
To the extent that the Underwriters exercise such over-allotment option in part,
such shares shall be purchased pro-rata among the Company and the individual
Selling Stockholders.
Certain of the Company's executive officers, directors and existing
stockholders owning in the aggregate 2,802,186 shares of Common Stock have
agreed not to offer, pledge, sell, contract to sell, make any short sale or
otherwise dispose of any shares of Common Stock, options to acquire shares of
Common Stock or securities convertible into or exchangeable for shares of Common
Stock, or any rights to purchase or acquire shares of Common Stock, during the
180 day period following the date of this Prospectus, without the prior written
consent of Volpe Brown Whelan & Company, LLC. The Company also has agreed not to
offer, sell, contract to sell or otherwise dispose of any shares of Common Stock
or any securities convertible into or exchangeable for shares of Common Stock,
or any rights to purchase or acquire shares of Common Stock, during the 180 day
period following the date of this Prospectus without the prior written consent
of Volpe Brown Whelan & Company, LLC, except for the granting of options
pursuant to the Plan or the issuance of shares of Common Stock upon the
62
<PAGE>
(ALTERNATE PAGE FOR ACQUISITION PROSPECTUS)
================================================================================
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS OFFERING
OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY, THE SELLING STOCKHOLDERS, THE UNDERWRITERS OR ANY DEALER OF
AGENT. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION
OF ANY OFFER TO BUY THE COMMON STOCK TO ANY PERSON IN ANY JURISDICTION WHERE, OR
IN ANY CIRCUMSTANCE IN WHICH, SUCH OFFER OR SOLICITATION MAY NOT LEGALLY BE
MADE. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL,
UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS NOT BEEN ANY
CHANGE IN THE AFFAIRS OF THE COMPANY OR THE INFORMATION SET FORTH IN THE
PROSPECTUS IS CORRECT AS OF ANY TIMES SUBSEQUENT TO THE DATE OF THIS PROSPECTUS.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary............................. 3
Risk Factors................................... 6
The Company.................................... 15
Use of Proceeds................................ 15
Dividend Policy................................ 15
Capitalization................................. 16
Dilution....................................... 17
Selected Historical Consolidated Financial
Data......................................... 18
Unaudited Pro Forma Condensed Combined
Financial Data............................... 19
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................... 24
Business....................................... 31
Management..................................... 47
Certain Transactions........................... 54
Principal and Selling Stockholders............. 56
Description of Capital Stock................... 58
Shares Eligible for Future Sale................ 60
Concurrent Initial Public Offering............. 62
Legal Matters.................................. 63
Experts........................................ 64
Available Information.......................... 64
Index to Financial Statements.................. F-1
</TABLE>
------------------------
UNTIL , 1998 (25 DAYS AFTER THE DATE OF
THIS PROSPECTUS), ALL DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK,
WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A
PROSPECTUS. THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF
DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO
THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
681,818 SHARES
[LOGO]
COMMON STOCK
------------------------
PROSPECTUS
, 1998
------------------------
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The expenses payable by the Company in connection with the distribution of
the securities being registered hereby are as follows (asterisks indicate an
estimate):
<TABLE>
<CAPTION>
AMOUNT
- ------------------------------------------------------------
<S> <C>
SEC Registration Fee........................................ $ 18,049
NASD Filing Fee............................................. $ 4,916
Printing and Engraving Expenses............................. $ 150,000*
Accounting Fees and Expenses................................ $ 605,000*
Legal Fees and Expenses..................................... $ 300,000*
Blue Sky Fees and Expenses.................................. $ 15,000*
NASDAQ Listing Fee.......................................... $ 75,000*
Registrar and Transfer Agent Fees........................... $ 10,000*
Miscellaneous Expenses...................................... $ 22,035*
----------
Total.................................................. $1,200,000*
----------
----------
</TABLE>
All of the foregoing expenses are being borne by the Company. None of the
expenses are being borne by the Selling Stockholders.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Certificate of Incorporation and By-Laws of the Registrant provide that
the Registrant shall indemnify any director or officer to the full extent
permitted by the Delaware General Corporation Law (the 'GCL'). Section 145 of
the GCL, relating to indemnification, is hereby incorporated herein by
reference.
In accordance with Section 102(a)(7) of the GCL, the Certificate of
Incorporation of the Registrant eliminates the personal liability of directors
to the Registrant or its stockholders for monetary damages for breach of
fiduciary duty as a director with certain limited exceptions set forth in
Section 102(a)(7).
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
The following discussion does not give effect to the stock split of the
Company's Common Stock effected immediately prior to the offering. During the
past three years, the Company has sold and issued the following unregistered
securities:
In February 1996, the Company issued an aggregate of 50,028 shares of
Common Stock to certain stockholders without additional consideration under
the terms of a 1993 agreement requiring the Company to meet a specific
sales target.
In May and August of 1996, the Company issued an aggregate of 1,160
shares of Common Stock to certain of its employees at prices ranging from
$5.00 per share to $5.36 per share.
In August, October and November 1996 and September and November 1997
and January 1998, the Company issued an aggregate of 22,430 shares of
Common Stock to employees upon the exercise of various stock options each
at an exercise price of $5.00 per share.
In March 1997, the Company issued an aggregate of 6,770 shares of
Common Stock to certain of its employees for $5.00 per share.
In September 1997, the Company issued 22,000 shares of Common Stock to
its Chairman of the Board and Chief Financial Officer, Richard A. Sandberg
for $9.50 per share in cash and promissory notes. See 'Certain
Transactions.'
II-1
<PAGE>
In April 1998, the Company issued an aggregate of 100,000 shares of
Common Stock to Gerhard Ehninger and Claude L. Buller, the stockholders of
International Support for Bone Marrow Drives, Ltd., under the terms of
Agreement and Plan of Reorganization dated April 3, 1998 among the Company,
Gerhard Ehninger and Claude L. Buller.
In May 1998, the Company issued an aggregate of 89,143 shares of
Common Stock to the stockholders of Micro Diagnostics, Inc. under the terms
of an Agreement and Plan of Merger dated as of April 30, 1998 among the
Company's subsidiary, Genomics International Corporation, and Ross Hickey,
Deborah Torgersen and L. Brian Whitfield.
In May 1998, the Company issued an aggregate of 4,000 shares of Common
Stock to Group Benefit Services, Inc. under the terms of an Asset Purchase
Agreement dated as of January 26, 1998 between the Company's subsidiary,
Genomics International Corporation and Group Benefit Services, Inc.
In July 1998, the Company issued an aggregate of 34,000 shares of
Common Stock to Helix BioPharma Corp. under the terms of an Asset Purchase
Agreement dated July 10, 1998 among the Company, 3018524 Nova Scotia ULC
and Helix BioPharma Corp.
The above transactions were private transactions not involving a public
offering and were exempt from the registration provisions of the Securities Act
of 1933, as amended, pursuant to Section 4(2) thereof. The sales of securities
were without the use of an underwriter, and the certificates evidencing the
shares bear a restrictive legend permitting the transfer thereof only upon
registration of the shares or an exemption under the Securities Act of 1933, as
amended.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<S> <C> <C>
1.1 -- Form of Underwriting Agreement
2.1 -- Letter of Intent dated July 13, 1998 between the Company and GeneScreen Inc.
3.1 -- Form of Amended and Restated Certificate of Incorporation
3.2 -- Amended and Restated By-Laws
5.1 -- Opinion of Wiggin & Dana*
10.1 -- Lifecodes Corporation 1992 Employee Stock Option Plan
10.2 -- Lifecodes Corporation 1995 Employee Stock Option Plan
10.3 -- Lifecodes Corporation1998 Stock Plan
10.4 -- Executive Severance Agreement dated January 2, 1992 between the Registrant and Walter O. Fredericks
10.5 -- Executive Severance Agreement dated January 2, 1992 between the Registrant and Ivan Balazs
10.6 -- Executive Severance Agreement dated January 2, 1992 between the Registrant and Jacob Victor
10.7 -- Consulting Agreement dated April 3, 1998 between International Support for Bone Marrow Drives, Ltd.
('ISBMD') and Claude L. Buller
10.8 -- Consulting Agreement dated April 3, 1998 between ISBMD and Gerhard Ehninger
10.9 -- Promissory Note from Claude L. Buller to ISBMD
10.10 -- Promissory Note from Gerhard Ehninger to ISBMD
10.11 -- Stock Pledge Agreement dated April 3, 1998 between Claude L. Buller and ISBMD
10.12 -- Stock Pledge Agreement dated April 3, 1998 between Gerhard Ehninger and ISBMD
10.13 -- Non-Recourse Promissory Note and Agreement dated December 19, 1996 between the Registrant and Walter
O. Fredericks
10.14 -- Advance on Sales Bonuses dated June 1, 1997 from Michael Petrillo to the Registrant
10.15 -- Promissory Note dated September 30, 1997 from Richard A. Sandberg to the Registrant
10.16 -- Promissory Note dated October 1, 1997 from Medical Molecular Diagnostics, GmbH to the Registrant
</TABLE>
II-2
<PAGE>
<TABLE>
<S> <C> <C>
10.17 -- Full Recourse Promissory Note dated January 2, 1998 from Walter O. Fredericks to the Registrant
10.18 -- Letter Agreement dated February 26, 1997 between the Registrant and Roche Molecular Systems, Inc.
10.19 -- License Agreement effective as of April 1, 1997 by and among the Registrant, F. Hoffmann-LaRoche Ltd.
and Roche Molecular Systems, Inc. (Confidential treatment has been requested for portions of this
Exhibit)
10.20 -- Technology Access Agreement dated January 15, 1998 among the Registrant and Nycomed Amersham plc and
Molecular Dynamics, Inc. (Confidential treatment has been requested for portions of this Exhibit)
10.21 -- Letter of Intent dated January 15, 1998 between the Registrant and Nycomed Amersham plc (Confidential
treatment has been requested for portions of this Exhibit)
10.22 -- Parentage Testing Product Agreement effective April 1, 1998 by and among the Registrant, Roche
Molecular Systems, Inc., and F. Hoffman-La Roche, Ltd. (Confidential treatment has been requested for
portions of this Exhibit)
10.23 -- Purchase and License Agreement dated April 20, 1998 between the Registrant and Molecular Innovations,
Inc. (Confidential treatment has been requested for portions of this Exhibit)
10.24 -- Stock Purchase Agreement dated September 30, 1997 between the Registrant and Richard Sandberg
10.25 -- Stock Warrant Agreement dated April 13, 1992 between the Registrant and the Connecticut Development
Authority
10.26 -- Stock Warrant Agreement dated August 1, 1994 between the Registrant and the Connecticut Development
Authority
10.27 -- Stock Warrant Agreement dated August 1, 1994 between the Registrant and Crossroads Constitution, L.P.
10.28 -- Stock Warrant Agreement dated December 9, 1991 between the Registrant and Crossroads Constitution,
L.P.
10.29 -- Stock Warrant Agreement dated August 1, 1994 between the Registrant and Dean Fenton
10.30 -- Stock Warrant Agreement dated December 9, 1991 between the Registrant and Dean Fenton
10.31 -- Stock Warrant Agreement dated August 1, 1994 between the Registrant and Theodore Elliott
10.32 -- Stock Warrant Agreement dated December 9, 1991 between the Registrant and Theodore Elliott
10.33 -- Stock Warrant Agreement dated September 26, 1994 between the Registrant and Connecticut Innovations,
Inc.
10.34 -- Form of Agreement with Cellmark Employees*
10.35 -- Stock Warrant Agreement dated February 24, 1994 between the Registrant and Joseph Bishop
10.36 -- Lease Agreement, as amended, dated December 15, 1991 by and between RM Stamford Realty Associates,
successor-in-interest to Robert Martin Company.
21.1 -- Subsidiaries of the Registrant
23.1 -- Consent of Wiggin & Dana (included in Exhibit 5.1)
23.2 -- Consent of Deloitte & Touche LLP
23.3 -- Consent of Schlattman & Associates, P.C.
24.1 -- Power of Attorney (included on signature page)
27.1 -- Financial Data Schedule
99.1 -- Consent of John Hansen M.D.
99.2 -- Consent of Keith W. Brown
</TABLE>
- ------------------
* To be filed by amendment.
(b) Financial Statement Schedules
None.
II-3
<PAGE>
ITEM 17. UNDERTAKINGS
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.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The undersigned registrant hereby undertakes that:
(1) For 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 a part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Stamford, State of
Connecticut on July 16, 1998.
LIFECODES CORPORATION
(Registrant)
By: /s/ WALTER O. FREDERICKS
-----------------------------------
Name: Walter O. Fredericks
Title: President and Chief Executive
Officer
POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Walter O. Fredericks and Richard A. Sandberg his
true and lawful attorneys-in-fact and agents, each acting alone, with full power
of substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any or all amendments to this Registration
Statement, including post-effective amendments, and to file the same, with all
exhibits thereto, and all documents in connection therewith, with the Securities
and Exchange Commission, granting unto said attorneys-in-fact and agents, and
each of them, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as fully to
all intents and purposes as he might or could do in person, and hereby ratifies
and confirms all that said attorneys-in-fact and agents, each acting alone, or
their substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ ------------------------------------------- -------------------
<S> <C> <C>
/s/ RICHARD A. SANDBERG Chairman, Chief Financial Officer July 16, 1998
- ------------------------------------------ and Director (Principal Financial Officer)
Richard A. Sandberg
/s/ WALTER O. FREDERICKS President, Chief Executive Officer July 16, 1998
- ------------------------------------------ and Director (Principal Executive Officer)
Walter O. Fredericks
/s/ IVAN BALAZS, PH.D. Vice President--Research & Development and July 16, 1998
- ------------------------------------------ Director
Ivan Balazs, Ph.D.
/s/ JOSEPH I. BISHOP Director July 16, 1998
- ------------------------------------------
Joseph I. Bishop
/s/ CLAUDE L. BULLER Director July 16, 1998
- ------------------------------------------
Claude L. Buller
/s/ PROF. DR. GERHARD EHNINGER Director July 16, 1998
- ------------------------------------------
Prof. Dr. Gerhard Ehninger
</TABLE>
II-5
<PAGE>
<TABLE>
<S> <C> <C>
/s/ DEAN E. FENTON Director July 16, 1998
- ------------------------------------------
Dean E. Fenton
/s/ MILTON STEELE Director July 16, 1998
- ------------------------------------------
Milton Steele
/s/ ROSS V. HICKEY JR. Director July 16, 1998
- ------------------------------------------
Ross V. Hickey Jr.
/s/ DEAN L. SOMER Controller, Treasurer and Secretary July 16, 1998
- ------------------------------------------ (Principal Accounting Officer)
Dean L. Somer
</TABLE>
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION PAGE NO.
- ------ ---------------------------------------------------------------------------------------------- -----------
<S> <C> <C> <C>
1.1 -- Form of Underwriting Agreement
2.1 -- Letter of Intent dated July 13, 1998 between the Company and GeneScreen Inc.
3.1 -- Form of Amended and Restated Certificate of Incorporation
3.2 -- Amended and Restated By-Laws
5.1 -- Opinion of Wiggin & Dana*
10.1 -- Lifecodes Corporation 1992 Employee Stock Option Plan
10.2 -- Lifecodes Corporation 1995 Employee Stock Option Plan
10.3 -- Lifecodes Corporation1998 Stock Plan
10.4 -- Executive Severance Agreement dated January 2, 1992 between the Registrant and Walter O.
Fredericks
10.5 -- Executive Severance Agreement dated January 2, 1992 between the Registrant and Ivan
Balazs
10.6 -- Executive Severance Agreement dated January 2, 1992 between the Registrant and Jacob
Victor
10.7 -- Consulting Agreement dated April 3, 1998 between International Support for Bone Marrow
Drives, Ltd. ('ISBMD') and Claude L. Buller
10.8 -- Consulting Agreement dated April 3, 1998 between ISBMD and Gerhard Ehninger
10.9 -- Promissory Note from Claude L. Buller to ISBMD
10.10 -- Promissory Note from Gerhard Ehninger to ISBMD
10.11 -- Stock Pledge Agreement dated April 3, 1998 between Claude L. Buller and ISBMD
10.12 -- Stock Pledge Agreement dated April 3, 1998 between Gerhard Ehninger and ISBMD
10.13 -- Non-Recourse Promissory Note and Agreement dated December 19, 1996 between the
Registrant and Walter O. Fredericks
10.14 -- Advance on Sales Bonuses dated June 1, 1997 from Michael Petrillo to the Registrant
10.15 -- Promissory Note dated September 30, 1997 from Richard A. Sandberg to the Registrant
10.16 -- Promissory Note dated October 1, 1997 from Medical Molecular Diagnostics, GmbH to the
Registrant
10.17 -- Full Recourse Promissory Note dated January 2, 1998 from Walter O. Fredericks to the
Registrant
10.18 -- Letter Agreement dated February 26, 1997 between the Registrant and Roche Molecular
Systems, Inc.
10.19 -- License Agreement effective as of April 1, 1997 by and among Registrant, F.
Hoffmann-LaRoche Ltd. and Roche Molecular Systems, Inc. (Confidential treatment has been
requested for portions of this Exhibit)
10.20 -- Technology Access Agreement dated January 15, 1998 among the Registrant and Nycomed
Amersham plc and Molecular Dynamics, Inc. (Confidential treatment has been requested for
portions of this Exhibit)
10.21 -- Letter of Intent dated January 15, 1998 between the Registrant and Nycomed Amersham plc
(Confidential treatment has been requested for portions of this Exhibit)
10.22 -- Parentage Testing Product Agreement effective April 1, 1998 by and among the Registrant,
Roche Molecular Systems, Inc., and F. Hoffman-La Roche, Ltd. (Confidential treatment has
been requested for portions of this Exhibit)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NUMBER DESCRIPTION PAGE NO.
- ------ ---------------------------------------------------------------------------------------------- -----------
<S> <C> <C> <C>
10.23 -- Purchase and License Agreement dated April 20, 1998 between the Registrant and Molecular
Innovations, Inc. (Confidential treatment has been requested for portions of this
Exhibit)
10.24 -- Stock Purchase Agreement dated September 30, 1997 between the Registrant and Richard
Sandberg
10.25 -- Stock Warrant Agreement dated April 13, 1992 between the Registrant and the Connecticut
Development Authority
10.26 -- Stock Warrant Agreement dated August 1, 1994 between the Registrant and the Connecticut
Development Authority
10.27 -- Stock Warrant Agreement dated August 1, 1994 between the Registrant and Crossroads
Constitution, L.P.
10.28 -- Stock Warrant Agreement dated December 9, 1991 between the Registrant and Crossroads
Constitution, L.P.
10.29 -- Stock Warrant Agreement dated August 1, 1994 between the Registrant and Dean Fenton
10.30 -- Stock Warrant Agreement dated December 9, 1991 between the Registrant and Dean Fenton
10.31 -- Stock Warrant Agreement dated August 1, 1994 between the Registrant and Theodore Elliott
10.32 -- Stock Warrant Agreement dated December 9, 1991 between the Registrant and Theodore
Elliott
10.33 -- Stock Warrant Agreement dated September 26, 1994 between the Registrant and Connecticut
Innovations, Inc.
10.34 -- Form of Agreement with Cellmark Employees*
10.35 -- Stock Warrant Agreement dated February 24, 1994 between the Registrant and Joseph Bishop
10.36................................. -- Lease Agreement, as amended, dated December 15, 1991 by and between RM Stamford Realty
Associates, successor-in-interest to Robert Martin Company.
21.1 -- Subsidiaries of the Registrant
23.1 -- Consent of Wiggin & Dana (included in Exhibit 5.1)
23.2 -- Consent of Deloitte & Touche LLP
23.3 -- Consent of Schlattman & Associates, P.C.
24.1 -- Power of Attorney (included on signature page)
27.1 -- Financial Data Schedule
99.1 -- Consent of John Hansen M.D.
99.2 -- Consent of Keith W. Brown
</TABLE>
- ------------------
* To be filed by amendment.
(b) Financial Statement Schedules
None.
<PAGE>
_________ Shares(1)
LIFECODES CORPORATION
Common Stock
UNDERWRITING AGREEMENT
_________ , 1998
Volpe Brown Whelan & Company, LLC
Vector Securities International, Inc.
Advest, Inc.
As Representatives of the several Underwriters
c/o Volpe Brown Whelan & Company, LLC
One Maritime Plaza, 11th Floor
San Francisco, California 94111
Dear Sirs and Madams:
Lifecodes Corporation, a Delaware corporation (the "Company"), proposes to
issue and sell _____________ shares of its authorized but unissued Common Stock,
$.10 par value (the "Common Stock"), and the shareholders of the Company named
in Schedule II hereto (collectively, the "Selling Securityholders") propose to
sell an aggregate of _____________ shares of Common Stock of the Company (the
"Firm Shares"). The Company and the Selling Securityholders propose to grant to
the Underwriters (as defined below) an option to purchase up to _____________
additional shares of Common Stock (the "Optional Shares" and, with the Firm
Shares, collectively, the "Shares"). The Common Stock is more fully described in
the Registration Statement and the Prospectus hereinafter mentioned. Joseph I.
Bishop, a Selling Securityholder, is hereinafter also referred to as the
"Principal Securityholder."
The Company and the Selling Securityholders severally hereby confirm the
agreements made with respect to the purchase of the Shares by the several
underwriters, for whom you are acting, named in Schedule I hereto (collectively,
the "Underwriters," which term shall also include any underwriter purchasing
Shares pursuant to Section 3(b) hereof). You represent and warrant that you have
been authorized by each of the other Underwriters to enter into this Agreement
on its behalf and to act for it in the manner herein provided.
Section 1. Representations and Warranties of the Company and the Principal
Securityholder. The Company and the Principal Securityholder hereby represent
and warrant to the several Underwriters as of the date hereof and as of each
Closing Date (as defined below) that:
(a) The Company has filed with the Securities and Exchange
Commission (the "Commission") a registration statement on Form S-1 (No. 333-
_____), including the related preliminary prospectus, for the registration
under the Securities Act of 1933, as amended (the "Securities Act") of the
_______________
(1) Plus an option to purchase from the Company and the selling Securityholders
up to _____ additional shares to cover over-allotments.
<PAGE>
-2-
Shares. Copies of such registration statement and of each amendment thereto, if
any, including the related preliminary prospectus (meeting the requirements of
Rule 430A of the rules and regulations of the Commission) heretofore filed by
the Company with the Commission have been delivered to you.
The term Registration Statement as used in this agreement shall mean such
registration statement, including all exhibits and financial statements, all
information omitted therefrom in reliance upon Rule 430A and contained in the
Prospectus referred to below, in the form in which it became effective, and any
registration statement filed pursuant to Rule 462(b) of the rules and
regulations of the Commission with respect to the shares (a "Rule 462(b)
Registration Statement"), and, in the event of any amendment thereto after the
effective date of such registration statement (the "Effective Date"), shall also
mean (from and after the effectiveness of such amendment) such registration
statement as so amended (including any Rule 462(b) Registration Statement). The
term Prospectus as used in this Agreement shall mean the prospectus relating to
the Shares first filed with the Commission pursuant to Rule 424(b) and Rule 430A
(or if no such filing is required, as included in the Registration Statement)
and, in the event of any supplement or amendment to such prospectus after the
Effective Date, shall also mean (from and after the filing with the Commission
of such supplement or the effectiveness of such amendment) such prospectus as so
supplemented or amended. The term Preliminary Prospectus as used in this
Agreement shall mean each preliminary prospectus included in such registration
statement prior to the time it becomes effective.
The Registration Statement has been declared effective under the Securities
Act, and no post-effective amendment to the Registration Statement has been
filed as of the date of this Agreement. The Company has caused to be delivered
to you copies of each Preliminary Prospectus and has consented to the use of
such copies for the purposes permitted by the Securities Act.
(b) Each of the Company and its subsidiaries have been duly
incorporated and is validly existing as a corporation in good standing under the
laws of the jurisdiction of its incorporation, has full corporate power and
authority to own or lease its properties and conduct its business as described
in the Registration Statement and the Prospectus and as being conducted, and is
duly qualified as a foreign corporation and in good standing in all
jurisdictions in which the character of the property owned or leased or the
nature of the business transacted by it makes qualification necessary (except
where the failure to be so qualified would not have a material adverse effect on
the business, business prospects, properties, condition (financial or otherwise)
or results of operations of the Company and its subsidiaries, taken as a whole).
(c) Except as described in the Prospectus, the Company does not own or
control, directly or indirectly, any corporation, association or other entity
other than the subsidiaries listed in Exhibit 21 to the Registration Statement.
Except as described in the Prospectus, the Company owns all of the outstanding
capital stock of its subsidiaries free and clear of all claims, liens, charges
and encumbrances. The Company and each of its subsidiaries are in possession of
and operating in compliance with all material authorizations, licenses, permits,
consents, certificates and orders material to the conduct of their respective
businesses as described in the Prospectus, all of which are valid and in full
force and effect.
(d) Since the respective dates as of which information is given in the
Registration Statement and the Prospectus, there has not been any materially
adverse change in the business, business prospects, properties, condition
(financial or otherwise) or results of operations of the Company and its
subsidiaries, taken as a whole, whether or not arising from transactions in the
ordinary course of business, other than as set forth in the Registration
Statement and the Prospectus, and since such dates, except in the ordinary
course of business, neither the Company nor any of its subsidiaries has entered
into any material
<PAGE>
-3-
transaction not referred to in the Registration Statement and the Prospectus.
(e) The Registration Statement and the Prospectus comply, and on the
Closing Date (as hereinafter defined) and any later date on which Optional
Shares are to be purchased, the Prospectus will comply, in all material
respects, with the provisions of the Securities Act and the rules and
regulations of the Commission thereunder; on the Effective Date, the
Registration Statement did not contain any untrue statement of a material fact
and did not omit to state any material fact required to be stated therein or
necessary in order to make the statements therein not misleading; and, on the
Effective Date the Prospectus did not and, on the Closing Date and any later
date on which Optional Shares are to be purchased, will not contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading; provided, however, that none of the
representations and warranties in this subparagraph (e) shall apply to
statements in, or omissions from, the Registration Statement or the Prospectus
made in reliance upon and in conformity with information herein or otherwise
furnished in writing to the Company by or on behalf of the Underwriters for use
in the Registration Statement or the Prospectus.
(f) The Company has authorized and outstanding capital stock as set
forth under the heading "Capitalization" in the Prospectus (except for
subsequent issuances pursuant to agreements, employee benefit plans or the
exercise of convertible securities each as described in the Prospectus). The
issued and outstanding shares of Common Stock have been duly authorized and
validly issued, are fully paid and nonassessable, have been issued in compliance
with all federal and state securities laws, and were not issued in violation of
or subject to any preemptive rights or other rights to subscribe for or purchase
securities. All issued and outstanding shares of capital stock of each
subsidiary of the Company have been duly authorized and validly issued and are
fully paid and nonassessable. Except as disclosed in or contemplated by the
Prospectus and the consolidated financial statements of the Company and the
related notes thereto included in the Prospectus, neither the Company nor any
subsidiary has any outstanding options to purchase, or any preemptive rights or
other rights to subscribe for or to purchase, any securities or obligations
convertible into, or any contracts or commitments to issue or sell, shares of
its capital stock or any such options, rights, convertible securities or
obligations. The description of the Company's stock option, stock bonus and
other stock plans or arrangements, and the options or other rights granted and
exercised thereunder, set forth in the Prospectus accurately and fairly presents
the information required by the Securities Act and the Rules and Regulations to
be shown with respect to such plans, arrangements, options and rights.
(g) The Shares are duly authorized, are (or, in the case of Shares to
be sold by the Company, will be, when issued and sold to the Underwriters as
provided herein) validly issued, fully paid and nonassessable and conform to the
description thereof in the Prospectus. No further approval or authority of the
stockholders or the Board of Directors of the Company will be required for the
transfer and sale of the Shares to be sold by the Selling Securityholders or the
issuance and sale of the Shares to be sold by the Company as contemplated
herein.
(h) Prior to the Closing Date, the Shares to be issued and sold by the
Company and the Selling Securityholders will be authorized for listing and duly
admitted to trading on the Nasdaq National Market upon official notice of
issuance.
(i) The Shares to be sold by the Company will be sold free and clear of
any pledge, lien, security interest, encumbrance, claim or equitable interest,
and will conform to the description thereof contained in the Prospectus. Except
for rights which have been duly waived, no preemptive right,
<PAGE>
-4-
co-sale right, registration right, right of first refusal or other similar right
to subscribe for or purchase securities of the Company exists with respect to
the issuance and sale of the Shares by the Company pursuant to this Agreement.
No stockholder of the Company has any right which has not been waived, or
complied with, to require the Company to register the sale of any shares owned
by such stockholder under the Securities Act in the public offering contemplated
by this Agreement.
(j) The Company has full corporate power and authority to enter into
this Agreement and perform the transactions contemplated hereby. This Agreement
has been duly authorized, executed and delivered by the Company and constitutes
a valid and binding obligation of the Company enforceable in accordance with its
terms, except as enforceability may be limited by general equitable principles,
bankruptcy, insolvency, reorganization, moratorium laws affecting creditors'
rights generally and except as to those provisions relating to indemnity or
contribution for liabilities arising under federal and state securities laws.
The making and performance of this Agreement by the Company and the consummation
of the transactions contemplated hereby (i) will not violate any provisions of
the Certificate of Incorporation, Bylaws or other organizational documents of
the Company or any of its subsidiaries, and (ii) will not conflict with, result
in a material breach or violation of, or constitute, either by itself or upon
notice or the passage of time or both, a material default under (A) any
agreement, mortgage, deed of trust, lease, franchise, license, indenture, permit
or other instrument to which the Company or any of its subsidiaries is a party
or by which the Company or any of its subsidiaries or any of their respective
properties may be bound or affected, or (B) any statute or any authorization,
judgment, decree, order, rule or regulation of any court or any regulatory body,
administrative agency or other governmental body applicable to the Company or
any of its subsidiaries or any of their respective properties. No consent,
approval, authorization or other order of any court, regulatory body,
administrative agency or other governmental body that has not already been
obtained is required for the execution and delivery of this Agreement or the
consummation of the transactions contemplated by this Agreement, except for
compliance with the Securities Act, the Blue Sky laws applicable to the public
offering of the Common Shares by the several Underwriters and the clearance of
such offering with the NASD.
(k) The consolidated financial statements and schedules of the Company
and the related notes thereto included in the Registration Statement and the
Prospectus present fairly on a consolidated basis the financial position of the
Company and its subsidiaries as of the respective dates of such financial
statements and schedules, and the results of operations and cash flows of the
Company and its subsidiaries for the respective periods covered thereby. Such
statements, schedules and related notes have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis
throughout the periods specified, as certified by the independent accountants
named in subsection 10(f). The pro forma financial statements and other pro
forma financial information included in the Registration Statement and the
Prospectus present fairly the information shown therein, have been prepared in
accordance with the Commission's rules and guidelines with respect to pro forma
financial statements, have been properly compiled on the pro forma bases
described therein, and, in the opinion of the Company, the assumptions used in
the preparation thereof are reasonable and the adjustments used therein are
appropriate to give effect to the transactions or circumstances referred to
therein. No other financial statements or schedules are required to be included
in the Registration Statement. The selected financial data set forth in the
Prospectus under the captions "Capitalization" and "Selected Consolidated
Financial Information" fairly present the information set forth therein on the
basis stated in the Registration Statement.
(l) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurances that (i) transactions are executed
in accordance with management's general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of financial
<PAGE>
-5-
statements in conformity with generally accepted accounting principles and to
maintain accountability for assets, (iii) access to assets is permitted only in
accordance with management's general or specific authorization, and (iv) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(m) Neither the Company nor any of its subsidiaries is (i) in violation
or default of any provision of its Certificate of Incorporation, Bylaws or other
organizational documents, or (ii) in a material breach of or default with
respect to any provision of any material agreement, judgment, decree, order,
mortgage, deed of trust, lease, franchise, license, indenture, permit or other
instrument to which it is a party or by which it or any of its properties are
bound; and there does not exist any state of facts which, with notice or lapse
of time or both would constitute such a material breach or default on the part
of the Company and its subsidiaries, taken as a whole.
(n) There are no contracts or other documents required to be described
in the Registration Statement or to be filed as exhibits to the Registration
Statement by the Securities Act or by the Rules and Regulations which have not
been described or filed as required. The contracts so described in the
Prospectus are in full force and effect on the date hereof.
(o) Except as disclosed in the Prospectus, there are no legal or
governmental actions, suits or proceedings pending or, to the knowledge of the
Company, threatened to which the Company or any of its subsidiaries is or is
threatened to be made a party or of which property owned or leased by the
Company or any of its subsidiaries is or is threatened to be made the subject,
which actions, suits or proceedings could, individually or in the aggregate,
prevent or adversely affect the transactions contemplated by this Agreement or
result in a material adverse change in the business, business prospects,
properties, condition (financial or otherwise), or results of operations of the
Company or its subsidiaries; and no labor disturbance by the employees of the
Company or any of its subsidiaries exists or is imminent which could materially
adversely affect the business, business prospects, properties, condition
(financial or otherwise), or results of operations of the Company or its
subsidiaries. Except as disclosed in the Prospectus, neither the Company nor any
of its subsidiaries is a party or subject to the provisions of any material
injunction, judgment, decree or order of any court, regulatory body,
administrative agency or other governmental body. Except as disclosed in the
Prospectus, there are no material legal or governmental actions, suits or
proceedings pending or, to the Company's and the Selling Securityholders'
knowledge, threatened against any executive officers or directors of the Company
in their capacities as such.
(p) The Company or the applicable subsidiary has good and marketable
title to all the properties and assets reflected as owned in the financial
statements hereinabove described (or elsewhere in the Prospectus), subject to no
lien, mortgage, pledge, charge or encumbrance of any kind except (i) those, if
any, reflected in such financial statements (or elsewhere in the Prospectus), or
(ii) those which are not material in amount to the Company or its subsidiaries,
and do not adversely affect the use made and proposed to be made of such
property by the Company or its subsidiaries. The Company or the applicable
subsidiary holds its leased properties under valid and binding leases. Except as
disclosed in the Prospectus, the Company owns or leases all such properties as
are necessary to its operations as now conducted or as proposed to be conducted.
(q) Since the respective dates as of which information is given in the
Registration Statement and Prospectus, and except as described in or
specifically contemplated by the Prospectus: (i) the Company and its
subsidiaries have not (A) incurred any liabilities or obligations, indirect,
direct or contingent, or (B) entered into any oral or written agreement or other
transaction, which in the case of (A)
<PAGE>
-6-
or (B) is not in the ordinary course of business; (ii) the Company and its
subsidiaries have not sustained any material loss or interference with their
respective businesses or properties from fire, flood, windstorm, accident or
other calamity, whether or not covered by insurance; (iii) the Company and its
subsidiaries have not paid or declared any dividends or other distributions with
respect to their respective capital stock and the Company and its subsidiaries
are not in default in the payment of principal or interest on any outstanding
debt obligations; (iv) there has not been any change in the capital stock of the
Company or its subsidiaries (other than upon the sale of the Shares hereunder or
upon the exercise of any options or warrants disclosed in the Prospectus); (v)
there has not been any material increase in the short- or long-term debt of the
Company and its subsidiaries; and (vi) there has not been any material adverse
change or any development involving or which may reasonably be expected to
involve an imminent material adverse change, in the business, business
prospects, condition (financial or otherwise), properties, or results of
operations of the Company or its subsidiaries.
(r) The Company and its subsidiaries are conducting their business in
compliance with all the laws, rules and regulations of the jurisdictions in
which they are conducting business, except where the failure to so comply would
not have, singly or in the aggregate, a material adverse effect on the business
or financial condition of the Company or its subsidiaries. Without limiting the
foregoing, the Company and its subsidiaries hold and are operating in compliance
with all licenses, authorizations, consents, approvals, certificates and permits
(individually, a "Permit") from any regulatory body or administrative agency or
other governmental body having jurisdiction including, without limitation, the
United States Food and Drug Administration (the "FDA") and the Department of
Health and Human Services that are applicable to the operations of the Company
or the subsidiaries as now conducted or proposed to be conducted as described in
the Prospectus, all of which Permits are current, except where the failure to so
hold or comply with any Permit would not have, singly or in the aggregate, a
material adverse effect on the business or financial condition of the Company or
its subsidiaries. The Company is not aware, nor has it received any notice of,
any pending or threatened proceedings, or any circumstances which could lead
them to reasonably believe that any such proceedings are imminent, relating to
the revocation or modification of any such Permit or approval which, singly or
in the aggregate if the subject of an unfavorable decision, ruling or finding,
could have a material adverse effect on the business or financial condition of
the Company and its subsidiaries taken as a whole.
(s) The Company and its subsidiaries have filed all necessary federal,
state and foreign income and franchise tax returns, and all such tax returns are
complete and correct in all material respects, and the Company and its
subsidiaries have not failed to pay any taxes which were payable pursuant to
said returns or any assessments with respect thereto. The Company has no
knowledge of any tax deficiency which has been threatened or asserted against
the Company or its subsidiaries which, singly or in the aggregate if the subject
of an unfavorable decision, ruling or finding, could have a material adverse
effect on the business or financial condition of the Company and its
subsidiaries taken as a whole.
(t) The Company has not distributed, and will not distribute prior to
the later to occur of (i) completion of the distribution of the Shares, or (ii)
the expiration of any time period within which a dealer is required under the
Securities Act to deliver a prospectus relating to the Shares, any offering
material in connection with the offering and sale of the Shares other than the
Prospectus, the Registration Statement and any other materials permitted by the
Securities Act and consented to by the Underwriters.
(u) Each of the Company and its subsidiaries maintains
insurance of the types and in the amounts generally deemed adequate for their
business, including, but not limited to, directors' and officers' insurance,
insurance covering real and personal property owned or leased by the Company and
<PAGE>
-7-
its subsidiaries against theft, damage, destruction, acts of vandalism and all
other risks customarily insured against, all of which insurance is in full force
and effect. The Company has not been refused any insurance coverage sought or
applied for, and the Company has no reason to believe that it will not be able
to renew its existing insurance coverage as and when such coverage expires or to
obtain similar coverage from similar insurers as may be necessary to continue
its business at a cost that would not materially adversely affect the business,
business prospects, properties, condition (financial or otherwise) or results of
operations of the Company or its subsidiaries.
(v) Neither the Company nor any of its subsidiaries nor, to the best of
the Company's or the Principal Securityholders' knowledge, any of their
employees or agents has at any time during the last five years (i) made any
unlawful contribution to any candidate for foreign office, or failed to disclose
fully any contribution in violation of law, or (ii) made any payment to any
foreign, federal or state governmental officer or official or other person
charged with similar public or quasi-public duties, other than payments required
or permitted by the laws of the United States or any jurisdiction thereof.
(w) The Company has not taken and will not take, directly or
indirectly, any action designed to or that might be reasonably expected to cause
or result in stabilization or manipulation of the price of the Common Stock to
facilitate the sale or resale of the Shares.
(x) The Company (i) has caused each of its executive officers and
directors as set forth in the Prospectus and (ii) has used its best efforts to
cause each holder of 1% or more of the outstanding Common Stock (including
shares issuable upon the exercise or conversion of any option, warrant or other
security) to furnish to the Underwriters an agreement in form and substance
satisfactory to Volpe Brown Whelan & Company, LLC ("Volpe Brown Whelan &
Company") pursuant to which each such party has agreed that he, she or it will
not, without the prior written approval of Volpe Brown Whelan & Company, offer,
sell, contract to sell, make any short sale (including, but not limited to, a
"short against the box"), pledge or otherwise dispose of directly or indirectly,
any shares of Common Stock (except for Shares to be purchased by the
Underwriters as described herein), options to acquire shares of Common Stock or
securities exchangeable or exercisable for or convertible into shares of, or any
other rights to purchase or acquire, Common Stock of the Company (the
"Securities") which he, she or it may own directly or indirectly or beneficially
(as defined by the Securities Exchange Act of 1934 and the rules and regulations
thereunder) for a period beginning on the date hereof and ending one hundred
eighty (180) days (the "Lock-Up Period") following the day on which the
Registration Statement shall become effective. The foregoing restriction is
expressly agreed to preclude the holder of Securities from engaging in any
hedging or other transaction that is designed to or reasonably expected to lead
to, or result in, a disposition of Securities during the Lock-Up Period even if
such Securities would be disposed of by the holder subsequent to the Lock-Up
Period or by someone other than the holder. Notwithstanding the foregoing, any
transfer of Securities which either (i) will not result in any change in
beneficial ownership, including, but not limited to, pro rata partnership
distributions and transfers into trusts for the benefit of the original holder,
or (ii) constitute bona fide gifts of such shares will not require the consent
of Volpe Brown Whelan & Company; provided, that the transferee enters into a
lock-up agreement in substantially the same form covering the remainder of the
Lock-Up Period.
(y) Neither the Company nor any of its affiliates does business with
the government of Cuba or with any person or affiliate located in Cuba.
(z) Except as specifically disclosed in the Prospectus: (i) the Company
and its subsidiaries have sufficient trademarks, trade names, patent rights,
copyrights, licenses, approvals and governmental authorizations to conduct their
businesses as now conducted; (ii) the expiration within two
<PAGE>
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years of the Closing Date of any trademarks, trade names, patent rights,
copyrights, licenses, approvals or governmental authorizations would not have a
material adverse effect on the business, business prospects, properties,
condition (financial or otherwise) or results of operations of the Company and
its subsidiaries; (iii) neither the Company nor the Principal Securityholder has
any knowledge of any infringement by the Company or its subsidiaries of
trademark, trade name rights, patent rights, copyrights, licenses, trade secret
or other similar rights of others; and (iv) no claims have been made or, to the
Company's knowledge, are threatened against the Company or its subsidiaries
regarding trademark, trade name, patent, copyright, license, trade secret or
other infringement which could have a material adverse effect on the business,
business prospects, properties, condition (financial or otherwise) or results of
operations or prospects of the Company and its subsidiaries.
(aa) Except as disclosed in the Prospectus, (i) the Company and its
subsidiaries are in compliance in all material respects with all rules, laws and
regulation relating to the use, treatment, storage and disposal of toxic
substances and protection of health or the environment ("Environmental Laws")
which are applicable to their business, (ii) neither the Company nor any of its
subsidiaries has received any notice from any governmental authority or third
party of an asserted claim under Environmental Laws, (iii) no facts currently
exist that will require the Company or any of its subsidiaries to make future
material capital expenditures to comply with Environmental Laws, and (iv) to the
knowledge of the Company and the Principal Securityholder, no property which is
or has been owned, leased or occupied by the Company or any of its subsidiaries
has been designated as a Superfund site pursuant to the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended (42
U.S.C. ss. 9601, et seq.), or otherwise designated as a contaminated site under
applicable state or local law.
(bb) The Company is not an "investment company" within the meaning of
the Investment Company Act of 1940, as amended.
Section 2. Representations and Warranties, and Covenants, of the Selling
Securityholders.
Each of the Selling Securityholders, severally and not jointly, represents
and warrants and covenants to the several Underwriters as of the date hereof and
as of each Closing Date hereinafter mentioned that:
(a) Each such Selling Securityholder has reviewed the representations and
warranties of the Company and, although such Selling Securityholder has not
independently verified the accuracy of such representations and warranties, such
Selling Securityholder has no reason to believe that such representations and
warranties of the Company contained in Section 1 are not true and correct in all
respects.
(b) Such Selling Securityholder has, or has the right to acquire and on
such Closing Date will have, good and marketable title to the Shares to be sold
by such Selling Securityholder hereunder, free and clear of all liens,
encumbrances, equities, security interests and claims whatsoever, with full
right and authority to deliver the same hereunder, subject, in the case of each
Selling Securityholder, to the rights of the Company, as Custodian (the
"Custodian"), and that upon the delivery of and payment for such Shares
hereunder, the several Underwriters will receive good and marketable title
thereto, free and clear of all liens, encumbrances, equities, security interests
and claims whatsoever.
(c) Certificates in negotiable form for the Shares to be sold by such
Selling Securityholder (or
<PAGE>
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duly exercised warrants to purchase such Shares) have been placed in custody
under a Custody Agreement for delivery under this Agreement with the Custodian;
such Selling Securityholder specifically agrees that the Shares represented by
the certificates or warrants so held in custody for such Selling Securityholder
are subject to the interests of the several Underwriters and the Company, that
the arrangements made by such Selling Securityholder for such custody, including
the Power of Attorney provided for in such Custody Agreement, are to that extent
irrevocable, and that the obligations of such Selling Securityholder shall not
be terminated by any act of such Selling Securityholder or by operation of law,
whether by the death or incapacity of such Selling Securityholder (or, in the
case of a Selling Securityholder that is not an individual, the dissolution or
liquidation of such Selling Securityholder) or the occurrence of any other
event; if any such death, incapacity, dissolution, liquidation or other such
event should occur before the delivery of such shares of the shares hereunder,
certificates for the Shares shall be delivered by the Custodian in accordance
with the terms and conditions of this Agreement as if such death, incapacity,
dissolution, liquidation or other event had not occurred, regardless of whether
the Custodian shall have received notice of such death, incapacity, dissolution,
liquidation or other event.
(d) Such Selling Securityholder has reviewed the Registration Statement and
Prospectus and, although such Selling Securityholder has not independently
verified the accuracy or completeness of all the information contained therein,
nothing has come to the attention of such Selling Securityholder that would lead
such Selling Securityholder to believe that (i) on the Effective Date, the
Registration Statement contained any untrue statement of a material fact or
omitted to state any material fact required to be stated therein or necessary in
order to make the statements therein not misleading; and, (ii) on the Effective
Date the Prospectus contained and, on the Closing Date and any later date on
which Optional Shares are to be purchased contains, any untrue statement of a
material fact or omitted or omits to state any material fact necessary in order
to make the statements therein, in the light of the circumstances under which
they were made, not misleading.
(e) All information in the Registration Statement or the Prospectus, or any
amendment or supplement thereto, relating to such Selling Securityholder
(including, without limitation, the information relating to the Selling
Securityholder which is set forth in the Prospectus under the caption "Principal
and Selling Stockholders"), and all representations and warranties of such
Selling Securityholder in the Custody Agreement are true and correct in all
respects and do not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
information in the light of the circumstances under which they were made not
misleading. The sale of the Shares by such Selling Securityholder pursuant
hereto is not prompted by such Selling Securityholder's knowledge of any
material information concerning the Company or any subsidiary which is not set
forth in the Prospectus.
(f) Such Selling Securityholder has full power and authority to enter into
this Agreement and the Custody Agreement and perform the transactions
contemplated hereby and thereby. This Agreement and the Custody Agreement have
been duly authorized, executed and delivered by or on behalf of such Selling
Securityholder.
(g) The making and performance of this Agreement and the Custody Agreement
and the consummation of the transactions contemplated hereby and thereby will
not result in a breach or violation by such Selling Securityholder of any of the
terms or provisions of, or constitute a default by such Selling Securityholder
under, any indenture, mortgage, deed of trust, trust (constructive or other),
loan agreement, lease, franchise, license or other agreement or instrument to
which such Selling Securityholder is a party or by which such Selling
Securityholder or any of its properties is bound, any statute, or any judgment,
decree, order, rule or regulation of any court or governmental agency or body
applicable to
<PAGE>
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such Selling Securityholder or any of its properties except for the lock-up
arrangements described in the Prospectus.
(h) Such Selling Securityholder has not taken and will not take, directly
or indirectly, any action designed to or that might reasonably be expected to
cause or result in stabilization or manipulation of the price of any security of
the Company to facilitate the sale or resale of the Shares, except for the
lock-up arrangements described in the Prospectus.
(i) Each of the Selling Securityholders agrees that he, she or it will not,
without the prior written approval of Volpe Brown Whelan & Company, offer, sell,
contract to sell, make any short sale (including, but not limited to, a "short
against the box"), pledge or otherwise dispose of directly or indirectly, any
Securities (except for Shares to be purchased by the Underwriters as described
herein) which he, she or it may own directly or indirectly or beneficially (as
defined by the Securities Exchange Act of 1934 and the rules and regulations
thereunder) for the Lock-Up Period. The foregoing restriction is expressly
agreed to preclude the holder of Securities from engaging in any hedging or
other transaction that is designed to or reasonably expected to lead to, or
result in, a disposition of Securities during the Lock-Up Period even if such
Securities would be disposed of by the holder subsequent to the Lock-Up Period
or by someone other than the holder. Notwithstanding the foregoing, any transfer
of Securities which either (i) will not result in any change in beneficial
ownership, including, but not limited to, pro rata partnership distributions and
transfers into trusts for the benefit of the original holder, or (ii) constitute
bona fide gifts of such shares will not require the consent of Volpe Brown
Whelan & Company; provided, that the transferee enters into a lock-up agreement
in substantially the same form covering the remainder of the Lock-Up Period.
Section 3. Purchase of the Shares by the Underwriters.
(a) On the basis of the representations and warranties and subject to the
terms and conditions herein set forth, the Company agrees to issue and sell
_____________ of the Firm Shares to the several Underwriters, each Selling
Securityholder agrees to sell to the several Underwriters the number of the Firm
Shares set forth in Schedule II opposite the name of such Selling
Securityholder, and each of the Underwriters agrees to purchase from the Company
and the Selling Securityholders the respective aggregate number of Firm Shares
set forth opposite its name in Schedule I. The price at which such Firm Shares
shall be sold by the Company and the Selling Securityholders and purchased by
the several Underwriters shall be $___ per share. The obligation of each
Underwriter to the Company and each of the Selling Securityholders shall be to
purchase from the Company and the Selling Securityholders that number of Firm
Shares which represents the same proportion of the total number of Firm Shares
to be sold by each of the Company and the Selling Securityholders pursuant to
this Agreement as the number of Firm Shares set forth opposite the name of such
Underwriter in Schedule I hereto represents of the total number of shares of the
Firm Shares to be purchased by all Underwriters pursuant to this Agreement, as
adjusted by you in such manner as you deem advisable to avoid fractional shares.
In making this Agreement, each Underwriter is contracting severally and not
jointly; except as provided in paragraphs (b) and (c) of this Section 3, the
agreement of each Underwriter is to purchase only the respective number of
shares of the Firm Shares specified in Schedule I and Schedule II.
(b) If for any reason one or more of the Underwriters shall fail or refuse
(otherwise than for a reason sufficient to justify the termination of this
Agreement under the provisions of Section 9 or 10 hereof) to purchase and pay
for the number of Shares agreed to be purchased by such Underwriter or
Underwriters, the Company or the Selling Securityholders shall immediately give
notice thereof to you, and the non-defaulting Underwriters shall have the right
within 24 hours after the receipt by you of such
<PAGE>
-11-
notice to purchase, or procure one or more other Underwriters to purchase, in
such proportions as may be agreed upon between you and such purchasing
Underwriter or Underwriters and upon the terms herein set forth, all or any part
of Shares which such defaulting Underwriter or Underwriters agreed to purchase.
If the non-defaulting Underwriters fail so to make such arrangements with
respect to all such shares and portion, the number of Shares which each
non-defaulting Underwriter is otherwise obligated to purchase under this
Agreement shall be automatically increased on a pro rata basis to absorb the
remaining shares and portion which the defaulting Underwriter or Underwriters
agreed to purchase; provided, however, that the non-defaulting Underwriters
shall not be obligated to purchase the portion which the defaulting Underwriter
or Underwriters agreed to purchase if the aggregate number of such Shares
exceeds 10% of the total number of Shares which all Underwriters agreed to
purchase hereunder. If the total number of Shares which the defaulting
Underwriter or Underwriters agreed to purchase shall not be purchased or
absorbed in accordance with the two preceding sentences, the Company and the
Selling Securityholders shall have the right, within 24 hours next succeeding
the 24-hour period above referred to, to make arrangements with other
underwriters or purchasers satisfactory to you for purchase of such Shares and
portion on the terms herein set forth. In any such case, either you or the
Company and the Selling Securityholders shall have the right to postpone the
Closing Date determined as provided in Section 5 hereof for not more than seven
business days after the date originally fixed as the Closing Date pursuant to
Section 5 in order that any necessary changes in the Registration Statement, the
Prospectus or any other documents or arrangements may be made. If neither the
non-defaulting Underwriters nor the Company and the Selling Securityholders
shall make arrangements within the 24-hour periods stated above for the purchase
of all of the Shares which the defaulting Underwriter or Underwriters agreed to
purchase hereunder, this Agreement shall be terminated without further act or
deed and without any liability on the part of the Company or the Selling
Securityholders to any non-defaulting Underwriter and without any liability on
the part of any non-defaulting Underwriter to the Company or the Selling
Securityholders. Nothing in this paragraph (b), and no action taken hereunder,
shall relieve any defaulting Underwriter from liability in respect of any
default of such Underwriter under this Agreement.
(c) On the basis of the representations, warranties and covenants herein
contained, and subject to the terms and conditions herein set forth, the Company
and the Selling Securityholders grant an option to the several Underwriters to
purchase, severally and not jointly, up to _____________ Optional Shares from
the Company at the same price per share as the Underwriters shall pay for the
Firm Shares. Said option may be exercised only to cover over-allotments in the
sale of the Firm Shares by the Underwriters and may be exercised in whole or in
part at any time on or before the forty-fifth day after the date of this
Agreement upon written or telegraphic notice by you to the Company setting forth
the aggregate number of Optional Shares as to which the several Underwriters are
exercising the option. Delivery of certificates for the Optional Shares, and
payment therefor, shall be made as provided in Section 5 hereof. The number of
Optional Shares to be purchased by each Underwriter shall be the same percentage
of the total number of Optional Shares to be purchased by the several
Underwriters as such Underwriter is purchasing of the Firm Shares, as adjusted
by you in such manner as you deem advisable to avoid fractional shares.
Section 4. Offering by Underwriters.
(a) The terms of the initial public offering by the Underwriters of the
Shares to be purchased by them shall be as set forth in the Prospectus. The
Underwriters may from time to time change the public offering price after the
closing of the initial public offering and increase or decrease the concessions
and discounts to dealers as they may determine.
(b) The information (insofar as such information relates to the
Underwriters) set forth in the
<PAGE>
-12-
last paragraph on the front cover page, the stabilization legend on the inside
front cover page, and under "Underwriting" in the Registration Statement, any
Preliminary Prospectus and the Prospectus relating to the Shares constitutes the
only information furnished by the Underwriters to the Company for inclusion in
the Registration Statement, any Preliminary Prospectus, and the Prospectus, and
you on behalf of the respective Underwriters represent and warrant to the
Company that the statements made therein are correct.
Section 5. Delivery of and Payment for the Shares.
(a) Delivery of certificates for the Firm Shares and the Optional Shares
(if the option granted by Section 3(c) hereof shall have been exercised not
later than 7:00 A.M., San Francisco time, on the date two business days
preceding the Closing Date), and payment therefor, shall be made at the office
of __________________________, _____________, at 7:00 a.m., San Francisco time,
on the fourth business day after the date of this Agreement, or at such time on
such other day, not later than seven full business days after such fourth
business day, as shall be agreed upon in writing by the Company, the Selling
Securityholders and you. The date and hour of such delivery and payment (which
may be postponed as provided in Section 3(b) hereof) are herein called the
"Closing Date".
(b) If the option granted by Section 3(c) hereof shall be exercised after
7:00 a.m., San Francisco time, on the date two business days preceding the
Closing Date, delivery of certificates for the shares of Optional Shares, and
payment therefor, shall be made at the office of _____________, _____________,
at 7:00 a.m., San Francisco time, on the third business day after the exercise
of such option.
(c) Payment for the shares purchased from the Company shall be made to the
Company or its order, and payment for the shares purchased from the Selling
Securityholders shall be made, in the discretion of the Underwriters, to them or
to the Custodian, for the account of the Selling Securityholders, in each case
by (i) one or more certified or official bank check or checks in same day funds
(and the Company and the Selling Securityholders agree not to deposit any such
check in the bank on which drawn until the day following the date of its
delivery to the Company or the Custodian, as the case may be) or (ii) federal
funds wire transfer. Such payment shall be made upon delivery of certificates
for the shares to you for the respective accounts of the several Underwriters
(including without limitation by "full-fast" electronic transfer by Depository
Trust Company) against receipt therefor signed by you. Certificates for the
shares to be delivered to you shall be registered in such name or names and
shall be in such denominations as you may request at least one business day
before the Closing Date, in the case of Firm Shares, and at least one business
day prior to the purchase thereof, in the case of the Optional Shares. Such
certificates will be made available to the Underwriters for inspection, checking
and packaging at the offices of Volpe Brown Whelan & Company's clearing agent,
Bear Stearns Securities Corp., on the business day prior to the Closing Date or,
in the case of the Optional Shares, by 3:00 p.m., New York time, on the business
day preceding the date of purchase.
It is understood that you, individually and not on behalf of the
Underwriters, may (but shall not be obligated to) make payment to the Company
and the Selling Securityholders for shares to be purchased by any Underwriter
whose check shall not have been received by you on the Closing Date or any later
date on which Optional Shares are purchased for the account of such Underwriter.
Any such payment by you shall not relieve such Underwriter from any of its
obligations hereunder.
<PAGE>
-1-3
Section 6. Covenants of the Company and the Selling Securityholders. Each
of the Company and the Selling Securityholders respectively, as the case may be,
covenants and agrees as follows:
(a) The Company will (i) prepare and timely file with the Commission under
Rule 424(b) a Prospectus containing information previously omitted at the time
of effectiveness of the Registration Statement in reliance on Rule 430A and (ii)
not file any amendment to the Registration Statement or supplement to the
Prospectus of which you shall not previously have been advised and furnished
with a copy or to which you shall have reasonably objected in writing or which
is not in compliance with the Securities Act or the rules and regulations of the
Commission.
(b) The Company will promptly notify each Underwriter in the event of (i)
the request by the Commission for amendment of the Registration Statement or for
supplement to the Prospectus or for any additional information, (ii) the
issuance by the Commission of any stop order suspending the effectiveness of the
Registration Statement, (iii) the institution or notice of intended institution
of any action or proceeding for that purpose, (iv) the receipt by the Company of
any notification with respect to the suspension of the qualification of the
shares for sale in any jurisdiction, or (v) the receipt by it of notice of the
initiation or threatening of any proceeding for such purpose. The Company will
make every reasonable effort to prevent the issuance of such a stop order and,
if such an order shall at any time be issued, to obtain the withdrawal thereof
at the earliest possible moment.
(c) The Company will (i) on or before the Closing Date, deliver to you a
signed copy of the Registration Statement as originally filed and of each
amendment thereto filed prior to the time the Registration Statement becomes
effective and, promptly upon the filing thereof, a signed copy of each
post-effective amendment, if any, to the Registration Statement (together with,
in each case, all exhibits thereto unless previously furnished to you) and will
also deliver to you, for distribution to the Underwriters, a sufficient number
of additional conformed copies of each of the foregoing (but without exhibits)
so that one copy of each may be distributed to each Underwriter, (ii) as
promptly as possible deliver to you and send to the several Underwriters, at
such office or offices as you may designate, as many copies of the Prospectus as
you may reasonably request, and (iii) thereafter from time to time during the
period in which a prospectus is required by law to be delivered by an
Underwriter or dealer, likewise send to the Underwriters as many additional
copies of the Prospectus and as many copies of any supplement to the Prospectus
and of any amended prospectus, filed by the Company with the Commission, as you
may reasonably request for the purposes contemplated by the Securities Act.
(d) If at any time during the period in which a prospectus is required by
law to be delivered by an Underwriter or dealer any event relating to or
affecting the Company, or of which the Company shall be advised in writing by
you, shall occur as a result of which it is necessary, in the opinion of counsel
for the Company or of counsel for the Underwriters, to supplement or amend the
Prospectus in order to make the Prospectus not misleading in the light of the
circumstances existing at the time it is delivered to a purchaser of the shares,
the Company will forthwith prepare and file with the Commission a supplement to
the Prospectus or an amended prospectus so that the Prospectus as so
supplemented or amended will not contain any untrue statement of a material fact
or omit to state any material fact necessary in order to make the statements
therein, in the light of the circumstances existing at the time such Prospectus
is delivered to such purchaser, not misleading. If, after the initial public
offering of the shares by the Underwriters and during such period, the
Underwriters shall propose to vary the terms of offering thereof by reason of
changes in general market conditions or otherwise, you will advise the Company
in writing of the proposed variation, and, if in the opinion either of counsel
for the Company or of counsel for the Underwriters such proposed variation
requires that the Prospectus be supplemented or
<PAGE>
-14-
amended, the Company will forthwith prepare and file with the Commission a
supplement to the Prospectus or an amended prospectus setting forth such
variation. The Company authorizes the Underwriters and all dealers to whom any
of the shares may be sold by the several Underwriters to use the Prospectus, as
from time to time amended or supplemented, in connection with the sale of the
shares in accordance with the applicable provisions of the Securities Act and
the applicable rules and regulations thereunder for such period.
(e) Prior to the filing thereof with the Commission, the Company will
submit to you, for your information, a copy of any post-effective amendment to
the Registration Statement and any supplement to the Prospectus or any amended
prospectus proposed to be filed.
(f) The Company will cooperate, when and as requested by you, in the
qualification of the Shares for offer and sale under the securities or blue sky
laws of such jurisdictions as you may designate and, during the period in which
a prospectus is required by law to be delivered by an Underwriter or dealer, in
keeping such qualifications in good standing under said securities or blue sky
laws; provided, however, that the Company shall not be obligated to file any
general consent to service of process or to qualify as a foreign corporation in
any jurisdiction in which it is not so qualified. The Company will, from time to
time, prepare and file such statements, reports, and other documents as are or
may be required to continue such qualifications in effect for so long a period
as you may reasonably request for distribution of the shares.
(g) During a period of five years commencing with the date hereof, the
Company will furnish to you, and to each Underwriter who may so request in
writing, copies of all periodic and special reports furnished to stockholders of
the Company and of all information, documents and reports filed with the
Commission.
(h) As soon as practicable, but not later than the 60th day following the
end of the fiscal quarter first occurring after the first anniversary of the
Effective Date, the Company will make generally available to its security
holders an earnings statement in accordance with Section 11(a) of the Securities
Act and Rule 158 thereunder.
(i) For a period of one year commencing with the date hereof, the Company
agrees, at the Company's expense, to cause the Company's regularly engaged
independent certified public accountants to review (but not audit) the Company's
financial statements in accordance with the procedures specified by the American
Institute of Certified Public Accountants for a review of interim financial
information as described in Statement on Auditing Standards No. 71 "Interim
Financial Information" for each of the three fiscal quarters prior to the
announcement of quarterly financial information, the filing of the Company's
Quarterly Report on Form 10-Q with the Commission and the mailing of quarterly
financial information to stockholders of the Company.
(j) The Company agrees to pay all costs and expenses incident to the
performance of its obligations under this Agreement, including all costs and
expenses incident to (i) the preparation, printing and filing with the
Commission and the National Association of Securities Dealers, Inc. ("NASD") of
the Registration Statement, any Preliminary Prospectus and the Prospectus, (ii)
the furnishing to the Underwriters and the persons designated by them of copies
of any Preliminary Prospectus and of the several documents required by paragraph
(c) of this Section 6 to be so furnished, (iii) the printing of this Agreement
and related documents delivered to the Underwriters, (iv) the preparation,
printing and filing of all supplements and amendments to the Prospectus referred
to in paragraph (d) of this Section 6, (v) the furnishing to you and the
Underwriters of the reports and information referred to in paragraph (g) of this
<PAGE>
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Section 6 and (vi) the printing and issuance of stock certificates, including
the transfer agent's fees. The Selling Securityholders will pay any transfer
taxes incident to the transfer to the Underwriters of the Shares being sold by
the Selling Securityholders.
(k) The Company agrees to reimburse you, for the account of the several
Underwriters, for blue sky fees and related disbursements (including counsel
fees and disbursements and cost of printing memoranda for the Underwriters) paid
by or for the account of the Underwriters or their counsel in qualifying the
shares under state securities or blue sky laws and in the review of the offering
by the NASD.
(l) The provisions of paragraphs (j) and (k) of this Section are intended
to relieve the Underwriters from the payment of the expenses and costs which the
Company hereby agrees to pay and shall not affect any agreement which the
Company may make, or may have made, for the sharing of any such expenses and
costs.
(m) The Company and each of the Selling Securityholders hereby agrees that,
without the prior written consent of Volpe Brown Whelan & Company, the Company
or such Selling Securityholder, as the case may be, will not, for a period of
one hundred eighty 180 days following the date the Registration Statement
becomes effective, (i) offer, sell, contract to sell, make any short sale
(including without limitation short against the box), pledge, or otherwise
dispose of, directly or indirectly, any shares of Common Stock or any options to
acquire shares of Common Stock or securities convertible into or exchangeable or
exercisable for or any other rights to purchase or acquire Common Stock
(including without limitation, Common Stock of the Company which may be deemed
to be beneficially owned in accordance with the rules and regulations of the
Commission) other than the exercise or conversion of outstanding options,
warrants or convertible securities or (ii) enter into any swap or other
agreement that transfers, in whole or in part, any of the economic consequences
or ownership of Common Stock, whether any such transaction described in clause
(i) or (ii) above is to be settled by delivery of Common Stock or such other
securities, in cash or otherwise; provided, however, that bona fide gift
transactions and transfers which will not result in any change in beneficial
ownership may be permitted if the transferee enters into a lock-up agreement in
substantially the same form covering the remainder of the lock-up period. The
foregoing sentence shall not apply to (A) the shares to be sold to the
Underwriters pursuant to this Agreement, (B) shares of Common Stock issued by
the Company upon the exercise of options granted under the option plans of the
Company (the "Option Plans"), all as described in footnote (__) to the table
under the caption "Capitalization" in the Preliminary Prospectus, (C) options to
purchase Common Stock granted under the Option Plans and (D) shares of Common
Stock to be issued by the Company in connection with the GeneScreen Acquisition
as described in the Prospectus.
(n) If at any time during the 25-day period after the Registration
Statement becomes effective any rumor, publication or event relating to or
affecting the Company shall occur as a result of which in your opinion the
market price for the shares has been or is likely to be materially affected
(regardless of whether such rumor, publication or event necessitates a
supplement to or amendment of the Prospectus), the Company will, after written
notice from you advising the Company to the effect set forth above, forthwith
prepare, consult with you concerning the substance of, and disseminate a press
release or other public statement, reasonably satisfactory to you, responding to
or commenting on such rumor, publication or event.
(o) The Company is familiar with the Investment Company Act of 1940, as
amended, and has in the past conducted its affairs, and will in the future
conduct its affairs, in such a manner to ensure that the Company was not and
will not be an "investment company" or a company "controlled" by an
<PAGE>
-16-
"investment company" within the meaning of the Investment Company Act of 1940,
as amended, and the rules and regulations thereunder.
(p) The Company agrees to maintain directors' and officers' insurance in
the amount of not less than $5,000,000 for a period of two years from the date
of this Agreement.
Section 7. Indemnification and Contribution.
(a) Subject to the provisions of paragraph (f) of this Section 7, the
Company and the Principal Securityholder, jointly and severally, and the Selling
Securityholders, other than the Principal Securityholder, severally, and not
jointly, agree to indemnify and hold harmless each Underwriter and each person
(including each partner or officer thereof) who controls any Underwriter within
the meaning of Section 15 of the Securities Act from and against any and all
losses, claims, damages or liabilities, joint or several, to which such
indemnified parties or any of them may become subject under the Securities Act,
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or the
common law or otherwise, and the Company and the Principal Securityholder
jointly and severally agree to reimburse each such Underwriter and controlling
person for any legal or other expenses (including, except as otherwise
hereinafter provided, reasonable fees and disbursements of counsel) incurred by
the respective indemnified parties, each in connection with defending against
any such losses, claims, damages or liabilities or in connection with any
investigation or inquiry of, or other proceeding which may be brought against,
the respective indemnified parties, in each case arising out of or based upon
(i) any untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement (including the Prospectus as part
thereof and any Rule 462(b) Registration Statement) or any post-effective
amendment thereto (including any Rule 462(b) Registration Statement), or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein in the light of the
circumstances under which they were made, not misleading, (ii) any untrue
statement or alleged untrue statement of a material fact contained in any
Preliminary Prospectus or the Prospectus (as amended or as supplemented if the
Company shall have filed with the Commission any amendment thereof or supplement
thereto) or the omission or alleged omission to state therein a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading or (iii) any inaccuracy
in or any breach of any representation warranty, covenant or agreement of the
Company, the Principal Securityholder or the other Selling Securityholders
contained in this Agreement; provided, however, that (1) the indemnity
agreements of the Company, the Principal Securityholder and the other Selling
Securityholders contained in this paragraph (a) shall not apply to any such
losses, claims, damages, liabilities or expenses if such statement or omission
was made in reliance upon and in conformity with information furnished as herein
stated or otherwise furnished in writing to the Company by or on behalf of any
Underwriter for use in any Preliminary Prospectus or the Registration Statement
or the Prospectus or any such amendment thereof or supplement thereto, (2) the
indemnity agreement contained in this paragraph (a) with respect to any
Preliminary Prospectus shall not inure to the benefit of any Underwriter from
whom the person asserting any such losses, claims, damages, liabilities or
expenses purchased the shares which is the subject thereof (or to the benefit of
any person controlling such Underwriter) if at or prior to the written
confirmation of the sale of such Stock a copy of the Prospectus (or the
Prospectus as amended or supplemented) was not sent or delivered to such person
and the untrue statement or omission of a material fact contained in such
Preliminary Prospectus was corrected in the Prospectus (or the Prospectus as
amended or supplemented) unless the failure is the result of noncompliance by
the Company with paragraph (c) of Section 6 hereof and (3) each Selling
Securityholder (other than the Principal Securityholder) shall only be liable
under this paragraph with respect to (A) information pertaining to such Selling
Securityholder furnished by or on behalf of such Selling Securityholder
expressly for use in any Preliminary Prospectus or the Registration Statement or
the
<PAGE>
-17-
Prospectus or any such amendment thereof or supplement thereto or (B) facts that
would constitute a breach of any representation or warranty of such Selling
Securityholder set forth in Section 2 hereof. The indemnity agreements of the
Company, the Principal Securityholder and the other Selling Securityholders
contained in this paragraph (a) and the representations and warranties of the
Company, the Principal Securityholder and the other Selling Securityholders
contained in Sections 1 and 2 hereof, as the case may be, shall remain operative
and in full force and effect regardless of any investigation made by or on
behalf of any indemnified party and shall survive the delivery of and payment
for the shares.
(b) Each Underwriter severally agrees to indemnify and hold harmless the
Company, each of its officers who signs the Registration Statement on his own
behalf or pursuant to a power of attorney, each of its directors, each other
Underwriter and each person (including each partner or officer thereof) who
controls the Company or any such other Underwriter within the meaning of Section
15 of the Securities Act, and the Selling Securityholders from and against any
and all losses, claims, damages or liabilities, joint or several, to which such
indemnified parties or any of them may become subject under the Securities Act,
the Exchange Act, or the common law or otherwise and to reimburse each of them
for any legal or other expenses (including, except as otherwise hereinafter
provided, reasonable fees and disbursements of counsel) incurred by the
respective indemnified parties, each in connection with defending against any
such losses, claims, damages or liabilities or in connection with any
investigation or inquiry of, or other proceeding which may be brought against,
the respective indemnified parties, in each case arising out of or based upon
(i) any untrue statement or alleged untrue statement of a material fact
contained in the Registration Statement (including the Prospectus as part
thereof and any Rule 462(b) Registration Statement) or any post-effective
amendment thereto (including any Rule 462(b) Registration Statement) or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading or (ii) any untrue
statement or alleged untrue statement of a material fact contained in any
Preliminary Prospectus or the Prospectus (as amended or as supplemented if the
Company shall have filed with the Commission any amendment thereof or supplement
thereto) or the omission or alleged omission to state therein a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, if such statement or
omission was made in reliance upon and in conformity with information furnished
as herein stated or otherwise furnished in writing to the Company by or on
behalf of such indemnifying Underwriter for use in the Registration Statement,
Preliminary Prospectus or the Prospectus or any such amendment thereof or
supplement thereto. The indemnity agreement of each Underwriter contained in
this paragraph (b) shall remain operative and in full force and effect
regardless of any investigation made by or on behalf of any indemnified party
and shall survive the delivery of and payment for the shares.
(c) Each party indemnified under the provisions of paragraphs (a) or (b) of
this Section 7 agrees that, upon the service of a summons or other initial legal
process upon it in any action or suit instituted against it or upon its receipt
of written notification of the commencement of any investigation or inquiry of,
or proceeding against, it in respect of which indemnity may be sought on account
of any indemnity agreement contained in such paragraphs, it will promptly give
written notice (the "Notice") of such service or notification to the party or
parties from whom indemnification may be sought hereunder. No indemnification
provided for in such paragraphs shall be available to any party who shall fail
so to give the Notice if the party to whom such Notice was not given was unaware
of the action, suit, investigation, inquiry or proceeding to which the Notice
would have related and was prejudiced by the failure to give the Notice, but the
omission so to notify such indemnifying party or parties of any such service or
notification shall not relieve such indemnifying party or parties from any
liability which it or they may have to the indemnified party for contribution or
otherwise than on account of such indemnity agreement. Any indemnifying party
shall be entitled at its own expense to participate in the defense of
<PAGE>
-18-
any action, suit or proceeding against, or investigation or inquiry of, an
indemnified party. Any indemnifying party shall be entitled, if it so elects
within a reasonable time after receipt of the Notice by giving written notice
(the "Notice of Defense") to the indemnified party, to assume (alone or in
conjunction with any other indemnifying party or parties) the entire defense of
such action, suit, investigation, inquiry or proceeding, in which event such
defense shall be conducted, at the expense of the indemnifying party or parties,
by counsel chosen by such indemnifying party or parties and reasonably
satisfactory to the indemnified party or parties; provided, however, that (i) if
the indemnified party or parties reasonably determine that there may be a
conflict between the positions of the indemnifying party or parties and of the
indemnified party or parties in conducting the defense of such action, suit,
investigation, inquiry or proceeding or that there may be legal defenses
available to such indemnified party or parties different from or in addition to
those available to the indemnifying party or parties, then counsel for the
indemnified party or parties shall be entitled to conduct the defense to the
extent reasonably determined by such counsel to be necessary to protect the
interests of the indemnified party or parties and (ii) in any event, the
indemnified party or parties shall be entitled to have counsel chosen by such
indemnified party or parties participate in, but not conduct, the defense. It is
understood, however, that the indemnifying parties shall, in connection with any
one such action, suit or proceeding or separate but substantially similar or
related actions, suits or proceedings in the same jurisdiction arising out of
the same general allegations or circumstances, be liable for the reasonable fees
and expenses of only one separate firm of attorneys (in addition to any local
counsel) at any such time for all such indemnified parties not having actual or
potential differing interests with you or among themselves. If, within a
reasonable time after receipt of the Notice, an indemnifying party gives a
Notice of Defense and the counsel chosen by the indemnifying party or parties is
reasonably satisfactory to the indemnified party or parties, the indemnifying
party or parties will not be liable under paragraphs (a) through (c) of this
Section 7 for any legal or other expenses subsequently incurred by the
indemnified party or parties in connection with the defense of the action, suit,
investigation, inquiry or proceeding, except that (A) the indemnifying party or
parties shall bear the legal and other expenses incurred in connection with the
conduct of the defense as referred to in clause (i) of the proviso to the
preceding sentence and (B) the indemnifying party or parties shall bear such
other expenses as it or they have authorized to be incurred by the indemnified
party or parties. If, within a reasonable time after receipt of the Notice, no
Notice of Defense has been given, the indemnifying party or parties shall be
responsible for any legal or other expenses incurred by the indemnified party or
parties in connection with the defense of the action, suit, investigation,
inquiry or proceeding.
(d) If the indemnification provided for in this Section 7 is unavailable or
insufficient to hold harmless an indemnified party under paragraph (a) or (b) of
this Section 7, then each indemnifying party, in lieu of indemnifying such
indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of the losses, claims, damages or liabilities
referred to in paragraph (a) or (b) of this Section 7 (i) in such proportion as
is appropriate to reflect the relative benefits received by each indemnifying
party from the offering of the Shares or (ii) if the allocation provided by
clause (i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of each indemnifying party in connection with
the statements or omissions that resulted in such losses, claims, damages or
liabilities, or actions in respect thereof, as well as any other relevant
equitable considerations. The relative benefits received by the Company and the
Selling Securityholders on the one hand and the Underwriters on the other shall
be deemed to be in the same respective proportions as the total net proceeds
from the offering of the Shares received by the Company and the Selling
Securityholders and the total underwriting discount received by the
Underwriters, as set forth in the table on the cover page of the Prospectus,
bear to the aggregate public offering price of the shares. Relative fault shall
be determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to
<PAGE>
-19-
state a material fact relates to information supplied by each indemnifying party
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such untrue statement or omission.
The parties agree that it would not be just and equitable if
contribution pursuant to this paragraph (d) were to be determined by pro rata
allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take into account
the equitable considerations referred to in the first sentence of this paragraph
(d). The amount paid by an indemnified party as a result of the losses, claims,
damages or liabilities, or actions in respect thereof, referred to in the first
sentence of this paragraph (d) shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigation, preparing to defend or defending against any action or claim
which is the subject of this paragraph (d). Notwithstanding the provisions of
this paragraph (d), no Underwriter shall be required to contribute any amount in
excess of the underwriting discount applicable to the shares purchased by such
Underwriter. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations in this paragraph (d) to
contribute are several in proportion to their respective underwriting
obligations and not joint.
Each party entitled to contribution agrees that upon the service of a
summons or other initial legal process upon it in any action instituted against
it in respect of which contribution may be sought, it will promptly give written
notice of such service to the party or parties from whom contribution may be
sought, but the omission so to notify such party or parties of any such service
shall not relieve the party from whom contribution may be sought from any
obligation it may have hereunder or otherwise (except as specifically provided
in paragraph (c) of this Section 7).
(e) No indemnifying party will, without the prior written consent of the
indemnified party, settle or compromise or consent to the entry of any judgment
in any pending or threatened claim, action, suit or proceeding in respect of
which indemnification may be sought hereunder (whether or not such person or any
person who controls such person within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act is a party to such claim,
action, suit or proceeding) unless such settlement, compromise or consent
includes an unconditional release of the indemnified party and each such
controlling person from all liability arising out of such claim, action, suit or
proceeding.
(f) The liability of each Selling Securityholder under such Selling
Securityholder's representations and warranties contained in Section 2 hereof
and under the indemnity contribution and reimbursement agreements contained in
the provisions of Section 7 and Section 8 hereof shall be limited to an amount
equal to the initial public offering price of the Shares sold by such Selling
Securityholder to the Underwriters multiplied by the number of Shares sold by
such Selling Securityholder. The Company and the Selling Securityholders may
agree, as among themselves and without limiting the rights of the Underwriters
under this Agreement, as to the respective amounts of such liability for which
they each shall be responsible.
Section 8. Reimbursement of Certain Expenses. In addition to their other
obligations under Section 7 of this Agreement (and subject, in the case of a
Selling Securityholder, to the provisions of paragraph (f) of Section 7), the
indemnifying parties hereby jointly and severally agree to reimburse on a
monthly basis the indemnified parties for all reasonable legal and other
expenses incurred in connection with investigating or defending any claim,
action, investigation, inquiry or other proceeding arising out of or based upon
any statement or omission, or any alleged statement or omission, described in
Section 7 of
<PAGE>
-20-
this Agreement, notwithstanding the absence of a judicial determination as to
the propriety and enforceability of the obligations under this Section 8 and the
possibility that such payments might later be held to be improper; provided,
however, that (i) to the extent any such payment is ultimately held to be
improper, the persons receiving such payments shall promptly refund them and
(ii) such persons shall provide to the indemnifying parties, upon request,
reasonable assurances of their ability to effect any refund, when and if due.
Section 9. Termination. This Agreement may be terminated by you at any time
prior to the Closing Date by giving written notice to the Company and the
Selling Securityholders in accordance with Section 10, or if after the date of
this Agreement trading in the Common Stock shall have been suspended, or if
there shall have occurred (i) the engagement in hostilities or an escalation of
major hostilities by the United States or the declaration of war or a national
emergency by the United States on or after the date hereof, (ii) any outbreak of
hostilities or other national or international calamity or crisis or change in
economic or political conditions if the effect of such outbreak, calamity,
crisis or change in economic or political conditions in the financial markets of
the United States or the Company's industry sector would, in the Underwriters'
reasonable judgment, make the offering or delivery of the shares impracticable,
(iii) suspension of trading in securities generally or a material adverse
decline in value of securities generally on the New York Stock Exchange, the
American Stock Exchange, or The Nasdaq Stock Market, or limitations on prices
(other than limitations on hours or numbers of days of trading) for securities
on either such exchange or system, (iv) the enactment, publication, decree or
other promulgation of any federal or state statute, regulation, rule or order
of, or commencement of any proceeding or investigation by, any court,
legislative body, agency or other governmental authority which in the
Underwriters' reasonable opinion materially and adversely affects or will
materially or adversely affect the business or operations of the Company, or (v)
declaration of a banking moratorium by either federal or New York State
authorities. If this Agreement shall be terminated pursuant to this Section 9,
there shall be no liability of the Company or the Selling Securityholders to the
Underwriters and no liability of the Underwriters to the Company or the Selling
Securityholders; provided, however, that in the event of any such termination
the Company and the Selling Securityholders agree to indemnify and hold harmless
the Underwriters from all costs or expenses incident to the performance of the
obligations of the Company and the Selling Securityholders under this Agreement,
including all costs and expenses referred to in paragraphs (j) and (k) of
Section 6 hereof.
Section 10. Conditions of Underwriters' Obligations. The obligations of the
several Underwriters to purchase and pay for the Shares shall be subject to the
performance by the Company and by the Selling Securityholders of all their
respective obligations to be performed hereunder at or prior to the Closing Date
or any later date on which Optional Shares are to be purchased, as the case may
be, and to the following further conditions:
(a) The Registration Statement shall have become effective; and no stop
order suspending the effectiveness thereof shall have been issued and no
proceedings therefor shall be pending or, to the knowledge of the Company,
threatened by the Commission.
(b) The legality and sufficiency of the sale of the shares hereunder and
the validity and form of the certificates representing the shares, all corporate
proceedings and other legal matters incident to the foregoing, and the form of
the Registration Statement and of the Prospectus (except as to the financial
statements contained therein), shall have been approved at or prior to the
Closing Date by Testa, Hurwitz & Thibeault, LLP, counsel for the Underwriters.
(c) You shall have received from Wiggin & Dana, counsel for the Company and
the Selling
<PAGE>
- -21- Securityholders, and from Saliwanchik, Lloyd & Saliwanchik, patent counsel
for the Company, opinions, addressed to the Underwriters and dated the Closing
Date, covering the matters set forth in Annex A and Annex B hereto,
respectively, and if Optional Shares are purchased at any date after the Closing
Date, additional opinions from each such counsel, addressed to the Underwriters
and dated such later date, confirming that the statements expressed as of the
Closing Date in such opinions remain valid as of such later date.
(d) You shall be satisfied that (i) as of the Effective Date, the
statements made in the Registration Statement and the Prospectus were true and
correct, and neither the Registration Statement nor the Prospectus omitted to
state any material fact required to be stated therein or necessary in order to
make the statements therein, respectively, not misleading; (ii) since the
Effective Date, no event has occurred which should have been set forth in a
supplement or amendment to the Prospectus which has not been set forth in such a
supplement or amendment; (iii) since the respective dates as of which
information is given in the Registration Statement in the form in which it
originally became effective and the Prospectus contained therein, there has not
been any material adverse change or any development involving a prospective
material adverse change in or affecting the business, properties, financial
condition or results of operations of the Company and its subsidiaries, taken as
a whole, whether or not arising from transactions in the ordinary course of
business, and, since such dates, except in the ordinary course of business,
neither the Company nor any of its subsidiaries has entered into any material
transaction not referred to in the Registration Statement in the form in which
it originally became effective and the Prospectus contained therein; (iv) the
Commission has not issued any order preventing or suspending the use of the
Prospectus or any Preliminary Prospectus filed as a part of the Registration
Statement or any amendment thereto; no stop order suspending the effectiveness
of the Registration Statement has been issued; and to the best knowledge of the
respective signers, no proceedings for that purpose have been instituted or are
pending or contemplated under the Securities Act; (v) neither the Company nor
any of its subsidiaries has any material contingent obligations which are not
disclosed in the Registration Statement and the Prospectus; (vi) there are not
any pending or known threatened legal proceedings to which the Company or any of
its subsidiaries is a party or of which property of the Company or any of its
subsidiaries is the subject which are material and which are not disclosed in
the Registration Statement and the Prospectus; (vii) there are not any
franchises, contracts, leases or other documents which are required to be filed
as exhibits to the Registration Statement which have not been filed as required;
and (vii) the representations and warranties of the Company herein are true and
correct in all material respects as of the Closing Date or any later date on
which Optional Shares are to be purchased, as the case may be.
(e) You shall have received on the Closing Date and on any later date on
which Optional Shares are purchased a certificate, dated the Closing Date or
such later date, as the case may be, and signed by the President and the Chief
Financial Officer of the Company, stating that the respective signers of said
certificate have carefully examined the Registration Statement in the form in
which it originally became effective and the Prospectus contained therein and
any supplements or amendments thereto, and that the statements included in
clauses (i) through (viii) of paragraph (d) of this Section 10 are true and
correct.
(f) You shall have received from Deloitte & Touche, LLP, a letter or
letters, addressed to the Underwriters and dated the Closing Date and any later
date on which Optional Shares are purchased, confirming that they are
independent public accountants with respect to the Company within the meaning of
the Securities Act and the applicable published rules and regulations thereunder
and based upon the procedures described in their letter delivered to you
concurrently with the execution of this Agreement (the "Original Letter"), but
carried out to a date not more than three business days prior to the Closing
<PAGE>
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Date or such later date on which Optional Shares are purchased (i) confirming,
to the extent true, that the statements and conclusions set forth in the
Original Letter are accurate as of the Closing Date or such later date, as the
case may be, and (ii) setting forth any revisions and additions to the
statements and conclusions set forth in the Original Letter which are necessary
to reflect any changes in the facts described in the Original Letter since the
date of the Original Letter or to reflect the availability of more recent
financial statements, data or information. The letters shall not disclose any
change, or any development involving a prospective change, in or affecting the
business or properties of the Company or any of its subsidiaries which, in your
sole judgment, makes it impractical or inadvisable to proceed with the public
offering of the shares or the purchase of the Optional Shares as contemplated by
the Prospectus.
(g) You shall have been furnished evidence in usual written or telegraphic
form from the appropriate authorities of the several jurisdictions, or other
evidence satisfactory to you, of the qualifications referred to in paragraph (f)
of Section 6 hereof.
(h) Prior to the Closing Date, the Shares shall have been duly authorized
for listing by the Nasdaq National Market upon, with respect to the Shares to be
issued and sold by the Company, official notice of issuance.
(i) On or prior to the Closing Date, you shall have received from all
directors, officers, and beneficial holders of 1% or more of the outstanding
Common Stock agreements, in form reasonably satisfactory to Volpe Brown Whelan &
Company, as described in Section 1(x) hereof.
(j) Closing of the GeneScreen Acquisition. The GeneScreen Acquisition, as
defined in the Prospectus, shall have closed in conformity with the agreement
relating thereto filed as an exhibit to the Registration Statement.
In case any of the conditions specified in this Section 10 shall not be
fulfilled, this Agreement may be terminated by you by giving notice to the
Company and to the Selling Securityholders. Any such termination shall be
without liability of the Company or the Selling Securityholders to the
Underwriters and without liability of the Underwriters to the Company or the
Selling Securityholders; provided, however, that (i) in the event of such
termination, the Company and the Selling Securityholders agree to indemnify and
hold harmless the Underwriters from all costs or expenses incident to the
performance of the obligations of the Company and the Selling Securityholders
under this Agreement, including all costs and expenses referred to in paragraphs
(j) and (k) of Section 6 hereof, and (ii) if this Agreement is terminated by you
because of any refusal, inability or failure on the part of the Company or the
Selling Securityholders to perform any agreement herein, to fulfill any of the
conditions herein, or to comply with any provision hereof other than by reason
of a default by any of the Underwriters, the Company will reimburse the
Underwriters severally upon demand for all out-of-pocket expenses (including
reasonable fees and disbursements of counsel) that shall have been incurred by
them in connection with the transactions contemplated hereby.
Section 11. Conditions of the Obligation of the Company and the Selling
Securityholders. The obligation of the Company and the Selling Securityholders
to deliver the shares shall be subject to the conditions that (a) the
Registration Statement shall have become effective and (b) no stop order
suspending
<PAGE>
-23-
the effectiveness thereof shall be in effect and no proceedings therefor shall
be pending or threatened by the Commission.
In case either of the conditions specified in this Section 11 shall not be
fulfilled, this Agreement may be terminated by the Company and the Selling
Securityholders by giving notice to you. Any such termination shall be without
liability of the Company and the Selling Securityholders to the Underwriters and
without liability of the Underwriters to the Company or the Selling
Securityholders; provided, however, that in the event of any such termination
the Company and the Selling Securityholders jointly and severally agree to
indemnify and hold harmless the Underwriters from all costs or expenses incident
to the performance of the obligations of the Company and the Selling
Securityholders under this Agreement, including all costs and expenses referred
to in paragraphs (j) and (k) of Section 6 hereof.
Section 12. Persons Entitled to Benefit of Agreement. This Agreement shall
inure to the benefit of the Company, the Selling Securityholders and the several
Underwriters and, with respect to the provisions of Section 7 hereof, the
several parties (in addition to the Company, the Selling Securityholders and the
several Underwriters) indemnified under the provisions of said Section 7, and
their respective personal representatives, successors and assigns. Nothing in
this Agreement is intended or shall be construed to give to any other person,
firm or corporation any legal or equitable remedy or claim under or in respect
of this Agreement or any provision herein contained. The term "successors and
assigns" as herein used shall not include any purchaser, as such purchaser, of
any of the shares from any of the several Underwriters.
Section 13. Notices. Except as otherwise provided herein, all
communications hereunder shall be in writing and, if to the Underwriters, shall
be mailed, faxed or delivered to Volpe Brown Whelan & Company, LLC, One Maritime
Plaza, 11th Floor, San Francisco, California 94111, Attention: Steven D. Piper;
and if to the Company, shall be mailed, faxed or delivered to it at its office,
Lifecodes Corporation, 550 West Avenue, Stamford, CT 06902, Attention: Walter O.
Fredericks; and if to the Selling Securityholders, shall be mailed, faxed or
delivered to the Selling Securityholders in care of Walter O. Fredericks at
Lifecodes Corporation, 550 West Avenue, Stamford, CT 06902.
Section 14. Miscellaneous. The reimbursement, indemnification and
contribution agreements contained in this Agreement and the representations,
warranties and covenants in this Agreement shall remain in full force and effect
regardless of (a) any termination of this Agreement, (b) any investigation made
by or on behalf of any Underwriter or controlling person thereof, or by or on
behalf of the Company or the Selling Securityholders or their respective
directors or officers, and (c) delivery and payment for the shares under this
Agreement; provided, however, that if this Agreement is terminated prior to the
Closing Date, the provisions of paragraphs (l), (m) and (n) of Section 6 hereof
shall be of no further force or effect.
Section 15. Partial Unenforceability. The invalidity or unenforceability of
any Section, paragraph or provision of this Agreement shall not affect the
validity or enforceability of any other Section, paragraph or provision hereof.
If any Section, paragraph or provision of this Agreement is for any reason
determined to be invalid or unenforceable, there shall be deemed to be made such
minor changes (and only such minor changes) as are necessary to make it valid
and enforceable.
Section 16. Applicable Law. This Agreement shall be governed by and
construed in accordance with the internal laws (and not the laws pertaining to
conflicts of laws) of the State of California.
<PAGE>
-24-
Section 17. General. This Agreement constitutes the entire agreement of the
parties to this Agreement and supersedes all prior written or oral and all
contemporaneous oral agreements, understandings and negotiations with respect to
the subject matter hereof. This Agreement may be executed in several
counterparts, each one of which shall be an original, and all of which shall
constitute one and the same document.
In this Agreement, the masculine, feminine and neuter genders and the
singular and the plural include one another. The section headings in this
Agreement are for the convenience of the parties only and will not affect the
construction or interpretation of this Agreement. This Agreement may be amended
or modified, and the observance of any term of this Agreement may be waived,
only by a writing signed by the Company, the Selling Securityholders and you.
Any person executing and delivering this Agreement as Attorney-in-fact for
the Selling Securityholders represents by so doing that he has been duly
appointed as Attorney-in-fact by such Selling Securityholder pursuant to a
validly existing and binding Power of Attorney which authorizes such
Attorney-in-fact to take such action. Any action taken under this Agreement by
any of the Attorneys-in-fact will be binding on all of the Selling
Securityholders.
<PAGE>
-25-
If the foregoing is in accordance with your understanding of our agreement,
kindly sign and return to us the enclosed copies hereof, whereupon, when
confirmed and accepted by the Underwriters as evidenced by the signature of
Volpe Brown Whelan & Company, LLC below, it will become a binding agreement
among the Company and the several Underwriters, including you, all in accordance
with its terms.
Very truly yours,
LIFECODES CORPORATION
By:_______________________________
Title:____________________________
THE SELLING SECURITYHOLDERS
NAMED IN SCHEDULE II ATTACHED HERETO
By:_______________________________
Attorney-in-fact
The foregoing Underwriting Agreement
is hereby confirmed and accepted by us in
San Francisco, California as of the
date first above written.
VOLPE BROWN WHELAN & COMPANY, LLC
Acting for ourselves and as
Representatives of the several
Underwriters named in the
attached Schedule I
By:_______________________________
Principal
<PAGE>
SCHEDULE I
UNDERWRITERS
Number of
Shares
to be
Underwriters Purchased
- --------------------------------------------------------------------------------
Volpe Brown Whelan & Company, LLC ..........................
Vector Securities International, Inc........................
Advest, Inc.................................................
Total ..........................................
==========
I-1
<PAGE>
SCHEDULE II
SELLING SECURITYHOLDERS
<TABLE>
<CAPTION>
Name and Address Number of Number of
of Selling Securityholders Firm Shares Optional Shares
to be Sold
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Total ...............................................
========== ==========
</TABLE>
II-1
<PAGE>
ANNEX A
Matters to be Covered in the Opinion of Wiggin & Dana
Counsel for the Company
and the Selling Securityholders
(i) Each of the Company and its subsidiaries has been duly incorporated and
is validly existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, is duly qualified as a foreign corporation
and in good standing in each state of the United States of America in which the
nature of its business or its ownership or leasing of property requires such
qualification, and has full corporate power and authority to own or lease its
properties and conduct its business as described in the Registration Statement;
all the issued and outstanding capital stock of each of the subsidiaries of the
Company has been duly authorized and validly issued and is fully paid and
nonassessable, and, to the best of counsel's knowledge, is owned by the Company
free and clear of all liens, encumbrances and security interests, and except as
set forth in the Registration Statement, to the best of counsel's knowledge, no
options, warrants or other rights to purchase, agreements or other obligations
to issue or other rights to convert any obligations into shares of capital stock
or ownership interests in such subsidiaries are outstanding;
(ii) the authorized capital stock of the Company consists of _____________
shares of _____________ Stock, $.10 par value, of which there are outstanding
_____________ shares, and _____________ shares of Common Stock, $.10 par value,
of which there are outstanding _____________ shares; all of the outstanding
shares of such capital stock (including the Firm Shares and the Optional Shares
issued, if any) have been duly authorized and validly issued and are fully paid
and nonassessable; any Optional Shares purchased after the Closing Date have
been duly authorized and, when issued and delivered to, and paid for by, the
Underwriters as provided in the Underwriting Agreement, will be validly issued
and fully paid and nonassessable; and no preemptive rights of, or rights of
refusal in favor of, stockholders exist with respect to the Shares, or the issue
and sale thereof, pursuant to the Certificate of Incorporation or Bylaws of the
Company and, to the knowledge of such counsel, there are no contractual
preemptive rights that have not been waived, rights of first refusal or rights
of co-sale which exist with respect to the Shares being sold by the Selling
Securityholders or the issue and sale of the Shares by the Company;
(iii) the Registration Statement has become effective under the Securities
Act and, to the best of such counsel's knowledge, no stop order suspending the
effectiveness of the Registration Statement or suspending or preventing the use
of the Prospectus is in effect and no proceedings for that purpose have been
instituted or are pending or threatened by the Commission;
(iv) the Registration Statement and the Prospectus (except as to the
financial statements and schedules and other financial data contained therein,
as to which such counsel need express no opinion) comply as to form in all
material respects with the requirements of the Securities Act and with the rules
and regulations of the Commission thereunder;
(v) such counsel have no reason to believe that the Registration Statement
(except as to the financial statements and schedules and other financial data
contained therein,
A-1
<PAGE>
as to which such counsel need not express any opinion or belief) at the
Effective Date contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, or that the Prospectus (except as to the financial
statements and schedules and other financial data contained therein, as to which
such counsel need not express any opinion or belief) as of its date or at the
applicable Closing Date, contained or contains any untrue statement of a
material fact or omitted or omits to state a material fact necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading;
(vi) the information required to be set forth in the Registration Statement
in answer to Items 9, 10 (insofar as it relates to such counsel) and 11(c) of
Form S-1 is to the best of such counsel's knowledge accurately and adequately
set forth therein in all material respects or no response is required with
respect to such Items, and, the description of the Company's stock option plans
and the options granted and which may be granted thereunder set forth in the
Prospectus accurately and fairly presents the information required to be shown
with respect to said plans and options to the extent required by the Securities
Act and the rules and regulations of the Commission thereunder;
(vii) such counsel do not know of any franchises, contracts, leases,
documents or legal proceedings, pending or threatened, which in the opinion of
such counsel are of a character required to be described in the Registration
Statement or the Prospectus or to be filed as exhibits to the Registration
Statement, which are not described and filed as required;
(viii) the Underwriting Agreement has been duly authorized, executed and
delivered by the Company;
(ix) the Underwriting Agreement has been duly executed and delivered by or
on behalf of the Selling Securityholders and the Custody Agreement between the
Selling Securityholders and _____________, as Custodian, and the Power of
Attorney referred to in such Custody Agreement have been duly executed and
delivered by the several Selling Securityholders;
(x) the Company has full corporate power and authority to enter into the
Underwriting Agreement and to sell and deliver the Shares to be sold by it to
the several Underwriters; the Underwriting Agreement is a valid and binding
agreement of the Company enforceable in accordance with its terms, except as
enforceability may be limited by general equitable principles, bankruptcy,
insolvency, reorganization, moratorium or other laws affecting creditor's rights
generally and except as to those provisions relating to indemnity or
contribution for liabilities arising under federal and state securities laws (as
to which no opinion need be expressed);
(xi) the Underwriting Agreement, the Custody Agreement and the Power of
Attorney are valid and binding agreements of each of the Selling Securityholders
enforceable in accordance with their terms except as enforceability may be
limited by general equitable principles, bankruptcy, insolvency, reorganization,
moratorium or other laws affecting creditors' rights generally and except with
respect to those provisions relating to indemnity or contribution for
liabilities under the Securities Act, as to which no opinion need be expressed,
and, based solely upon certificates provided by each Selling Securityholder,
each Selling Securityholder has full legal right and authority to enter into the
Underwriting Agreement, the Custody Agreement and the Power of Attorney and to
sell, transfer and deliver in the manner provided in the Underwriting Agreement
the Shares sold by such Selling Securityholder hereunder;
(xii) the issue and sale by the Company of the Shares sold by the Company
as contemplated by the Underwriting Agreement will not conflict with, or result
in a breach of, or constitute a default under the Certificate of Incorporation
or Bylaws of the Company or any of its subsidiaries or any agreement or
instrument known to such counsel to which the Company or any of its subsidiaries
is a party or by which
A-2
<PAGE>
any of its properties may be bound or any applicable law
or regulation, or so far as is known to such counsel, any order, writ,
injunction or decree, of any jurisdiction, court or governmental
instrumentality, the breach or violation of which would have a material adverse
effect on the Company and its subsidiaries taken as a whole;
(xiii) the transfer and sale by the Selling Stockholders of the Shares to
be sold by the Selling Stockholders as contemplated by the Underwriting
Agreement, the Power of Attorney and the Custody Agreement will not conflict
with, result in a breach of, or constitute a default under any agreement or
instrument known to such counsel to which any of the Selling Stockholders is a
party or by which any of the Selling Stockholders or any of their properties may
be bound, or any applicable law or regulation, or so far is known to such
counsel, order, writ, injunction or decree of any jurisdiction, court or
governmental instrumentality body.
(xiv) all holders of securities of the Company having rights to the
registration of shares of Common Stock, or other securities, because of the
filing of the Registration Statement by the Company have waived such rights or
such rights have expired by reason of lapse of time following notification of
the Company's intent to file the Registration Statement;
(xv) upon delivery of such Shares pursuant to the Underwriting Agreement
and payment therefor as contemplated therein the Underwriters will acquire good
and marketable title to the Shares under the Underwriting Agreement, free and
clear of all liens, encumbrances, equities, security interests and claims,
assuming for the purpose of this opinion that the Underwriters purchased the
same in good faith without notice of any adverse claims within the meaning of
Section 8-302 of the Uniform Commercial Code;
(xvi) no consent, approval, authorization or order of any court or
governmental agency or body is required on the part of the Company for the
consummation of the transactions contemplated in the Underwriting Agreement,
except such as have been obtained under the Securities Act, the Exchange Act and
such as may be required under state securities or blue sky laws in connection
with the purchase and distribution of the Shares by the Underwriters and the
clearance of the offering with the NASD; and
(xvii) the Shares sold by the Selling Securityholders are listed and duly
admitted to trading on the Nasdaq National Market, and the shares issued and
sold by the Company will be duly authorized for listing by the Nasdaq National
Market upon official notice of issuance.
------------------------------------
Counsel rendering the foregoing opinion may rely as to questions of law not
involving the laws of the United States, the State of Delaware, or the State of
Connecticut, upon opinions of local counsel satisfactory in form and scope to
counsel for the Underwriters. Copies of any opinions so relied upon shall be
delivered to the Representatives and to counsel for the Underwriters and the
foregoing opinion shall also state that counsel knows of no reason the
Underwriters are not entitled to rely upon the opinions of such local counsel.
A-3
<PAGE>
ANNEX B
Matters to be Covered in the Opinion of Saliwanchik, Lloyd & Saliwanchik
Patent Counsel for the Company
Such counsel are familiar with the technology used by the Company in its
business and the manner of its use thereof and have read the Registration
Statement and the Prospectus, including particularly the portions of the
Registration Statement and the Prospectus referring to patents, trade secrets,
trademarks, service marks or other proprietary information or materials and:
(i) such counsel have no reason to believe that the Registration Statement
or the Prospectus (A) contains any untrue statement of a material fact with
respect to patents, trade secrets, trademarks, service marks or other
proprietary information or materials owned or used by the Company, or the manner
of its use thereof, or (B) omits to state any material fact relating to patents,
trade secrets, trademarks, service marks or other proprietary information or
materials owned or used by the Company, or the manner of its use thereof, or any
allegation of which such counsel have knowledge, that is required to be stated
in the Registration Statement or the Prospectus or is necessary to make the
statements therein not misleading;
(ii) such counsel do not know of any contracts or other documents,
relating to governmental regulation affecting the Company or the Company's
patents, trade secrets, trademarks, service marks or other proprietary
information or materials of a character required to be filed as an exhibit to
the Registration Statement or required to be described in the Registration
Statement or the Prospectus that are not filed or described as required;
(iii) to the best of such counsel's knowledge, there are no infringements
by others of any of the Company's patents, trade secrets, trademarks, service
marks or other proprietary information or materials which in the judgment of
such counsel could affect materially the use thereof by the Company;
(iv) to the best of such counsel's knowledge, the Company owns or possesses
sufficient licenses or other rights to use all patents, trade secrets,
trademarks, service marks or other proprietary information or materials
necessary to conduct the business now being or proposed to be conducted by the
Company as described in the Prospectus;
(v) except as provided in the Prospectus, to the best of such counsel's
knowledge, there are no legal or governmental proceedings pending or threatened
relating to patent rights, trade secrets, trademarks, service marks, or other
proprietary information or materials of the Company; and
(vi) to the best of such counsel's knowledge, the Company is not infringing
or otherwise violating the proprietary rights of others.
B-1
<PAGE>
Lifecodes Corporation
550 West Avenue
Stamford, Connecticut 06902
July 13, 1998
Mr. Keith W. Brown
President and CEO
GeneScreen Inc.
2600 Stemmons Freeway, Suite 133
Dallas, Texas 75207
Dear Keith:
Representatives of Lifecodes Corporation (the "Purchaser") have had
discussions with you and your representatives concerning the prospective
acquisition by Purchaser of all of the issued and outstanding stock, of
GeneScreen Inc. (the "Company").
On the basis of information concerning the Company's assets,
liabilities, business and operations which has been furnished to date,
Purchaser makes the following expression of intent to enter into certain
transactions with the Company, upon terms and conditions set forth below:
1. Merger; Purchase Price.
(a) At the closing of the transactions contemplated hereby (the
"Closing"), the Company shall merge with and into the Purchaser (the
"Merger").
Included among the Company's assets at Closing will be a
royalty-free, fully paid-up, perpetual, transferable, worldwide license from
the Company's wholly-owned subsidiary, Molecular Tool, Inc. ("MTI"), to
patented GBA methods owned or licensed by MTI (the "MTI License"), subject
only to MTI's existing license with Lab Corporation of America (f/k/a Roche
Biomedical Laboratories) ("Lab Corp") in the field of human identity testing
for paternity analysis in the United States (the "Lab Corp License"), together
with an assignment to the Company of all royalty and other payments paid or
payable by Lab Corp to MTI pursuant to the terms of the Lab Corp License. The
MTI License shall be exclusive for service testing and product sales in the
fields of human and animal identity testing and transplantation and animal
pharmacogenetic services; and co-exclusive with MTI for services in the field
of human pharmacogenetics (i.e., exclusive, subject only to the retained right
of MTI to provide services in such field, which right shall not be licensed or
sublicensed by MTI, but may be transferred only to the purchaser of MTI or
substantially all of MTI's assets).
(b) On the date of the Closing (the "Closing Date"), as consideration
for all of the stock of the Company, the Company's stockholders shall receive
an aggregate purchase price of $12,500,000 payable as follows: $5,000,000 in
cash, plus $7,500,000 in registered shares of Lifecodes common stock
("Lifecodes Shares") to be issued simultaneously with the closing of
Lifecodes' underwritten initial public offering ("IPO"); provided that all
shares issued to the
<PAGE>
Mr. Keith W. Brown
July 13, 1998
Page 2
Company's shareholders shall be subject to a 180 day lock-up agreement. The
number of shares will be determined by dividing the purchase price by the
price to the public in the IPO and rounding to the nearest number of shares at
the Closing, except that for purposes of the calculation, the price of such
shares shall not exceed $60 per share on a current, pre-split basis. Payment
of the cash portion of purchase price would be subject to escrow arrangements
for 20% of the aggregate purchase price. Purchaser shall reserve the right to
allocate between cash and Lifecodes Shares as among the Company's selling
shareholders in order to comply with applicable securities laws.
(c) On the Closing Date, the Purchaser would acquire all right, title
and interest in and to all of the issued and outstanding shares of the Company
free and clear of all claims, liens, encumbrances, mortgages, charges,
security interests, options, rights, restrictions or any other interests or
imperfections of title whatsoever, except as otherwise agreed to by Purchaser.
2. Closing Adjustment.
There will be an adjustment at the time of the Closing providing for
the issuance of additional Lifecodes Shares up to a maximum aggregate value
equal to $1,250,000 or reduction in the number of Lifecodes Shares issued to
the Company or refund to Purchaser of cash held in escrow based upon changes
to the Company's balance sheet net worth from May 31, 1998 to the end of the
month immediately preceding the month in which the Closing occurs, with the
Lifecodes Shares valued at the same price as at Closing. Included in such
adjustment shall be a reduction in the purchase price: (i) in the amount of
$327,040 for certain bonus commitments made by the Company (to the extent such
obligations are assumed by Purchaser), (ii) for obligations for arms-length
loans made to the Company after March 31, 1998 but before Closing (including,
any loans or other financial accommodations made by the Purchaser to the
Company or MTI to fund MTI's cash needs), (iii) liability for interim
financing and accounts payable over 60 days, and (iv) any tax obligations or
liabilities incurred by the Company in connection with the MTI Transaction (as
defined in Section 4(i) below).
3. Business Review.
Prior to the consummation of the Merger, each party and its
respective financial advisors, counsel, accountants, employees and agents
shall be afforded full access to all laboratories, plants, personnel and to
all information, including the financial records of the other party, to
determine that the transaction can be consummated in accordance with
applicable statutes and regulations and to verify the accuracy of the
representations heretofore made and hereafter to be made in definitive
documents.
4. Conditions.
The obligations of Purchaser and the Company to consummate the
transactions contemplated hereby shall be subject to, among other things, the
following conditions:
(a) Each party shall have completed its investigation and examination
of all material aspects of the other party to such party's complete
satisfaction.
<PAGE>
Mr. Keith W. Brown
July 13, 1998
Page 3
(b) All approvals, consents and/or waivers from third parties that
are required under any material contract, license or lease which is to be
assigned and assumed by Purchaser in connection with the transactions
contemplated hereby shall have been obtained.
(c) There shall have been no adverse change in the business, assets,
liabilities, operations, prospects, properties or condition, financial or
otherwise, of the other party and no transactions, involving the other party
other than transactions contemplated hereby, the Purchaser's acquisition of
substantially all of the assets of Helix Biotech Ltd. and other transactions
in the ordinary, regular and normal course of its business shall have occurred
prior to the Closing.
(d) Any governmental agency or agencies whose approval is required
shall have unconditionally approved the transactions contemplated hereby and
any and all waiting periods for consummating the transaction shall have
elapsed.
(e) If Purchaser deems it appropriate, Purchaser shall have obtained,
at its sole cost and expense, an environmental report prepared by an
environmental testing or consulting firm of Purchaser's selection stating that
the soil and water of the real property, both surface and subsurface, is free
and clear of all hazardous waste, contaminants, pollutants and toxic
substances of any kind or nature whatsoever.
(f) Each of the agreed upon key stockholders, employees, directors
and officers and the Company shall agree for a period of time satisfactory to
Purchaser not to carry on, be engaged, concerned, or take part in, or render
services to, or own, share in the earnings of, or invest in the stocks, bonds
or other securities of any person, firm, corporation or other business
organization engaged anywhere within geographic areas satisfactory to
Purchaser in a business which is substantially similar to or in competition
with any of the businesses carried on by the Company.
(g) Purchaser shall have obtained any and all security clearances
necessary for Purchaser to perform services for or supply goods to any
governmental agency or bureau of the United States Government currently being
performed or supplied or proposed to be performed or supplied by the Company.
(h) The Securities and Exchange Commission shall have declared the
IPO registration statement effective.
(i) The Company shall have sold its MTI subsidiary or spun off the
shares of MTI to its shareholders ("MTI Transaction").
(j) Approval of the contemplated transactions by the Company's
stockholders.
(k) The parties shall have executed definitive agreements for the
consumption of the proposed transaction, containing such representations,
warranties, covenants and indemnities as are customary for acquisitions of
this nature and providing that such representations and warranties shall
survive for an appropriate period of time.
<PAGE>
Mr. Keith W. Brown
July 13, 1998
Page 4
5. Expenses.
The Company shall pay all of its expenses (including the fees and
expenses of its accountants, brokers, financial advisors and counsel) in
connection with the transactions contemplated hereunder. Purchaser shall pay
all of its expenses (including the fees and expenses of its financial
advisors, accountants and counsel and all registration expenses, but not
customary selling shareholder expenses) in connection with the transactions
contemplated hereunder.
6. Timetable.
We are submitting this letter of intent in good faith. If it is
acceptable to you, please so indicate by having this letter signed where
indicated below and return the same to us within two (2) days of the date of
this letter, whereupon we will instruct our counsel to prepare proposed drafts
of the definitive acquisition documents, in order that we can execute a
definitive agreement by July 31, 1998 and accomplish a Closing of the
transaction by September 4, 1998, provided that if the IPO is not effective by
such date, Purchaser may, at its option, extend the Closing up to and
including November 30, 1998.
7. No Negotiation.
Until such time up to and including November 30, 1998 as this letter
of intent is terminated pursuant to its terms, the Company will not, and will
cause each of its representatives not to, directly or indirectly solicit,
initiate, or encourage any inquiries or proposals from, discuss or negotiate
with, provide any non-public information to, or consider the merits of any
unsolicited inquiries or proposals from, any person or entity (other than
Purchaser) relating to any transaction involving the sale of the Company or
any substantial portion of the business or assets of the Company (other than
in the ordinary course of business and other than the MTI Transaction), or any
of the capital stock of the Company, or any merger, consolidation, business
combination, or similar transaction involving the Company. Notwithstanding the
foregoing, the Company may sell its capital stock or securities convertible
into its capital stock to its existing shareholders, so long as such sales are
at fair market value.
8. Other Matters.
At the Closing, Keith W. Brown shall be elected to the Board of
Directors of Purchaser; thereafter, Mr. Brown's election to the Board will be
subject to customary proxy and state law rules and statutes. Purchaser
presently intends to retain those of the Company's existing employees as shall
be mutually agreed upon at Closing.
9. Nature of Letter; Definitive Agreements.
You hereby represent and warrant to Purchaser that the transactions
contemplated hereby have been approved by the Board of Directors of the
Company. This letter contains an outline of terms only and except for
Paragraph 7 and any nondisclosure agreement between us, shall not be legally
binding upon any of you, Purchaser or the Company. All provisions set forth
herein shall be
<PAGE>
Mr. Keith W. Brown
July 13, 1998
Page 5
refined and reflected in final definitive agreements and in schedules and
ancillary documents containing terms, provisions, representations, warranties,
covenants, conditions, waivers and indemnities (and security therefor) in
accordance with the terms hereof or as are customary for acquisitions of this
kind or agreed to by Purchaser and the Company. Accordingly, if for any reason
whatsoever the aforesaid Merger is not consummated, neither Purchaser nor the
Company shall be entitled to any form of relief whatsoever, including, without
limitation, injunctive relief or damages. In addition, this letter supersedes
in its entirety the letter of intent, dated June 24, 1998, by and between the
Purchaser and Company, regarding the subject matter hereof.
Very truly yours,
LIFECODES CORPORATION
By__________________________________
Walter O. Fredericks
Its President and CEO
Agreed to and accepted
this _____ day of July, 1998.
GENESCREEN INC.
By__________________________________
Keith W. Brown
Its President and CEO
<PAGE>
Exhibit 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
LIFECODES CORPORATION
* * * * * *
Lifecodes Corporation (the "Corporation"), a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware (the "GCL"), hereby certifies as follows:
A. The name of the Corporation is Lifecodes Corporation. The Certificate of
Incorporation of the Corporation was originally filed with the Secretary of
State of Delaware on January 12, 1993.
B. This Amended and Restated Certificate of Incorporation (the
"Certificate"), which restates, integrates and amends the Certificate of
Incorporation of the Corporation, was duly adopted in accordance with the
provisions of Sections 242 and 245 of the GCL, and was approved by the
stockholders of the Corporation in accordance with the provisions of Section 228
of the GCL.
C. The Certificate of Incorporation is hereby restated and amended to read
in its entirety as follows:
FIRST: The name of the Corporation is Lifecodes Corporation.
SECOND: The registered office of the Corporation in the State of Delaware
is located at the Corporation Trust Center, 1209 Orange Street, in the city of
Wilmington, County of New Castle and its registered agent is The Corporation
Trust Company.
THIRD: The purpose of the Corporation and the nature and objects of the
business to be transacted, promoted, and carried on are to engage in any lawful
act or activity for which corporations may be organized under the General
Corporation Law of Delaware.
FOURTH: The total number of shares of stock which the Corporation shall
have authority to issue is Sixteen Million (16,000,000) shares, divided into
Fifteen Million (15,000,000) shares of Common Stock with a par value of ten
cents ($0.10) per share (hereinafter called "Common Stock") and One Million
(1,000,000) shares of Preferred Stock with a par value of ten dollars ($10.00)
per share (hereinafter called "Preferred Stock").
The Board of Directors is authorized, subject to limitations prescribed by
law and the provision of this Article FOURTH, to provide for the issuance of the
shares of Preferred Stock in series, and by filing a certificate pursuant to the
applicable law of the State of Delaware, to establish from time to time the
number of shares to be included in each such series, and to fix the voting
<PAGE>
rights, designations, powers, preferences and rights of the shares of each such
series and the qualifications, limitations or restrictions thereof.
The authority of the Board with respect to each series shall include, but
not be limited to, determination of the following:
(a) The number of shares constituting that series and the distinctive
designation of that series;
(b) The dividend rate on the shares of that series, whether dividends shall
be cumulative, and, if so, from which date or dates, and the relative rights of
priority, if any, of payment of dividends on shares of that series;
(c) Whether that series shall have voting rights, in addition to the voting
rights provided by law, and, if so, the terms of such voting rights;
(d) Whether that series shall have conversion privileges, and, if so, the
terms and conditions of such conversion, including provision for adjustment of
the conversion rate in such events as the Board of Directors shall determine;
(e) Whether or not the shares of that series shall be redeemable, and, if
so, the terms and conditions of such redemption, including the date or date upon
or after which they shall be redeemable, and the amount per share payable in
case of redemption, which amount may vary under different conditions and at
different redemption dates;
(f) Whether that series shall have a sinking fund for the redemption or
purchase of shares of that series, and, if so, the terms and amount of such
sinking fund;
(g) The rights of the shares of that series in the event of voluntary or
involuntary liquidation, dissolution or winding up of the corporation, and the
relative rights of priority, if any, of payment of shares of that series;
(h) Any other relative rights, preferences and limitations of that series.
FIFTH: To the fullest extent permitted by law, the Corporation shall
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative by reason of the fact that he
is or was a director or officer of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), liability, loss, judgment, fines and
amounts paid in settlement actually and reasonably incurred by him in connection
with such action, suit or proceeding if he acted in good faith and in a manner
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceedings, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, upon a plea of nolo contendere or equivalent shall not, of itself,
create a presumption that the person did not act in good faith and in a manner
which he reasonably believed
-2-
<PAGE>
to be in or not opposed to the best interests of the Corporation, and, with
respect of any criminal action or proceeding, had reasonable cause to believe
that his conduct was unlawful.
Such indemnity shall inure to the benefit of the heirs, executors and
administrators of any such person so indemnified pursuant to this Article. The
right to indemnification under this Article shall be a contract right and shall
include, with respect to directors and officers, the right to be paid by the
Corporation the expenses incurred in defending any such proceeding in advance of
its disposition; provided however, that, if the Delaware General Corporation Law
requires, the payment of such expenses incurred by a director or officer in
advance of the final disposition of a proceeding shall be made only upon
delivery to the corporation of an undertaking, by or on behalf of such director
or officer, to repay all amounts so advanced if it shall ultimately be
determined that such director or officer is not entitled to be indemnified under
this Article or otherwise. The Corporation may, by action of its board of
directors, pay such expenses incurred by employees and agents of the Corporation
upon such terms as the board of directors deems appropriate. Such
indemnification and advancement of expenses shall be in addition to any other
rights to which those seeking indemnification and advancement of expenses may be
entitled under any law, Bylaw, agreement, vote of stockholders, or otherwise.
The Corporation may, to the fullest extent permitted by applicable law, at
any time without further stockholder approval, purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee or agent of
the Corporation or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against such
person and incurred by such person in any such capacity, or arising out of such
person's status as such, whether or not the Corporation would have the power to
indemnify such person against such liability under applicable law.
Any repeal or amendment of this Article by the stockholders of the
Corporation or by changes in applicable law shall, to the extent permitted by
applicable law, be prospective only, and shall not adversely affect any right to
indemnification or advancement of expenses of a director or officer of the
Corporation existing at the time of such repeal or amendment. In addition to the
foregoing, the right to indemnification and advancement of expenses shall be to
the fullest extent permitted by the General Corporation Law of the State of
Delaware or any other applicable law and all amendments to such laws as
hereafter enacted from time to time.
SIXTH: The number of directors constituting the entire Board shall be not
less than one as set forth in or determined pursuant to the Bylaws of the
Corporation. The terms of the directors shall be divided into 3 classes with
staggered terms of office. The term of office of the first class ("Class I")
shall expire at the next annual meeting of the shareholders. The term of office
of the second class ("Class II") shall expire one year thereafter and the term
of office of the third class ("Class III") shall expire 2 years thereafter. At
each annual meeting of the shareholders held after such classification and
election, directors shall be chosen for a full term to succeed those whose terms
expire. The directors of each class shall be elected for a term of three years
and shall be entitled to one vote each on such matters as shall come before the
Board. No one class shall have more than one director more than any other class.
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In the event of any increase or decrease in the authorized number of
directors, (i) each director then serving as such shall nevertheless continue as
director of the class of which he or she is a member until the expiration of
such director's current term or his or her prior death, removal or resignation
and (ii) the newly created or eliminated directorships resulting from such
increase or decrease shall be apportioned by the Board of Directors among the
three classes of directors so as to ensure that no one class has more than one
director more than any other class. No decrease in the number of directors
constituting the whole Board of Directors shall shorten the term of an incumbent
Director.
SEVENTH: No director of the corporation shall have any personal liability
to the Corporation or to any of its stockholders for monetary damages for breach
of fiduciary duty as a director; provided, however, that this provision
eliminating such personal liability of a director 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 ss.174 of the General Corporation Law of Delaware, or (iv) for any
transaction from which the director derived an improper personal benefit. If the
Delaware General Corporation Law is amended to authorize corporate action
further eliminating or limiting the personal liability of directors, then the
liability of a director of the Corporation shall be eliminated or limited to the
fullest extent permitted by the Delaware General Corporation Law as so amended.
EIGHTH: The name and address of the sole incorporator is Thomas M. Curtin,
11 Martine Avenue, White Plains, New York 10606.
NINTH: All of the powers of this Corporation, insofar as the same may be
lawfully vested by this Certificate of Incorporation in the Board of Directors,
are hereby conferred upon the Board of Directors of this Corporation. In
furtherance and not in limitation of that power the Board of Directors shall
have the power to make, adopt, alter, amend and repeal from time to time bylaws
of this Corporation, subject to the right of the shareholders entitled to vote
with respect thereto to adopt, alter, amend and repeal by-laws made by the Board
of Directors.
TENTH: The election of directors need not be by written ballot.
ELEVENTH: No holder of shares of the Corporation of any class or series
shall have any preemptive right to subscribe for, purchase, or receive any
shares of the Corporation of any class or series now or hereafter authorized, or
any options or warrants for such shares, or any securities convertible into or
exchangeable for such shares, which may at any time be issued, sold, or offered
for sale by the Corporation. Cumulative voting by the stockholders of the
Corporation at any election of directors of the Corporation is hereby
prohibited.
TWELFTH: The Corporation reserves the right to amend, alter, change, or
repeal any provision contained in this Certificate of Incorporation in the
manner now or hereafter prescribed by law and all rights conferred on officers,
directors, and stockholders herein are granted subject to this reservation.
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THIRTEENTH: The Board of Directors of the Corporation, when evaluating any
offer of another party (a) to make a tender or exchange offer for any equity
security of the Corporation or (b) to effect a business combination, shall, in
connection with the exercise of its judgment in determining what is in the best
interests of the Corporation as a whole, be authorized to give due consideration
to any such factors as the Board of Directors determines to be relevant,
including, without limitation:
(i) the interests of the Corporation's stockholders, including the
possibility that these interests might be best served by the continued
independence of the Corporation;
(ii) whether the proposed transaction might violate federal or state laws;
(iii) not only the consideration being offered in the proposed transaction,
in relation to the then current market price for the outstanding capital
stock of the Corporation, but also to the market price for the capital
stock of the Corporation over a period of years, the estimated price that
might be achieved in a negotiated sale of the Corporation as a whole or in
part or through orderly liquidation, the premiums over market price for the
securities of other corporations in similar transactions, current
political, economic and other factors bearing on securities prices and the
Corporation's financial condition and future prospects; and
(iv) the social, legal and economic effects upon employees, suppliers,
customers, creditors and others having similar relationships with the
Corporation, upon the communities in which the Corporation conducts its
business and upon the economy of the state, region and nation.
In connection with any such evaluation, the Board of Directors is authorized to
conduct such investigations and engage in such legal proceedings as the Board of
Directors may determine.
IN WITNESS WHEREOF, said LIFECODES CORPORATION, has caused this Amended and
Restated Certificate of Incorporation to be signed by Walter O. Fredericks, its
President, this ____ day of ______, 1998 and such signature constitutes the
affirmation, under penalties of perjury, that this instrument is the act and
deed of the Corporation, and that the facts stated herein are true.
LIFECODES CORPORATION
By: ____________________________
Walter O. Fredericks
Its President
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Exhibit 3.2
AMENDED AND RESTATED BYLAWS
OF
LIFECODES CORPORATION
Adopted on July __, 1998
ARTICLE I
OFFICES
SECTION 1.01. Registered Office. The registered office of the corporation
in the State of Delaware shall be in the City of Wilmington, County of New
Castle.
SECTION 1.02. Other Offices. The corporation may also have offices at such
other places both within and without the State of Delaware as the Board of
Directors may from time to time determine or the business of the corporation may
require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 2.01. Place of Meeting. All meetings of stockholders for the
election of directors shall be held at such place, either within or without the
State of Delaware, as shall be designated from time to time by the Board of
Directors and stated in the notice of the meeting.
SECTION 2.02. Annual Meeting. The annual meeting of stockholders shall be
held at such date and time as shall be designated from time to time by the Board
of Directors and stated in the notice of the meeting.
SECTION 2.03. Voting List. The officer who has charge of the stock ledger
of the corporation shall prepare and make, at least 10 days before every meeting
of stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
10 days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice, or if not
so specified, at the place where the meeting is to be held. The list shall also
be produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
SECTION 2.04. Special Meeting. Special meetings of the stockholders, for
any purpose or purposes, unless otherwise prescribed by statute or by the
Certificate of Incorporation,
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may be called by the Chairman of the Board or by the President of the
corporation or by the Board of Directors or by written order of a majority of
the directors or shall be called by the President or the Secretary at the
request in writing of stockholders owning a majority in amount of the entire
capital stock of the corporation issued and outstanding and entitled to vote.
Such request shall state the purposes of the proposed meeting. The Chairman of
the Board or the President of the corporation or directors so calling, or the
stockholders so requesting, any such meeting shall fix the time and any place,
either within or without the State of Delaware, as the place for holding such
meeting.
SECTION 2.05. Notice of Meeting. Written notice of the annual, and each
special meeting of stockholders, stating the time, place, and purpose or
purposes thereof, shall be given to each stockholder entitled to vote thereat,
not less than 10 nor more than 60 days before the meeting.
SECTION 2.06. Quorum. The holders of a majority of the shares of the
corporation's capital stock issued and outstanding and entitled to vote thereat,
present in person or represented by proxy, shall constitute a quorum at any
meeting of stockholders for the transaction of business, except as otherwise
provided by statute or by the Certificate of Incorporation. Notwithstanding the
other provisions of the Certificate of Incorporation or these bylaws, the
holders of a majority of the shares of the corporation's capital stock entitled
to vote thereat, present in person or represented by proxy, whether or not a
quorum is present, shall have power to adjourn the meeting from time to time,
without notice other than announcement at the meeting, until a quorum shall be
present or represented. If the adjournment is for more than 30 days, or if after
the adjournment a new record date is fixed for the adjourned meeting, a notice
of the adjourned meeting shall be given to each stockholder of record entitled
to vote at the meeting. At such adjourned meeting at which a quorum shall be
present or represented, any business may be transacted which might have been
transacted at the meeting as originally notified.
SECTION 2.07. Voting. When a quorum is present at any meeting of the
stockholders, the vote of the holders of a majority of the shares of the
corporation's capital stock having voting power present in person or represented
by proxy shall decide any question brought before such meeting, unless the
question is one upon which, by express provision of the statutes, of the
Certificate of Incorporation or of these bylaws, a different vote is required,
in which case such express provision shall govern and control the decision of
such question. Every stockholder having the right to vote shall be entitled to
vote in person, or by proxy appointed by an instrument in writing subscribed by
such stockholder and filed with the Secretary of the corporation before, or at
the time of, the meeting.
SECTION 2.08. Consent of Stockholders. Whenever the vote of stockholders at
a meeting thereof is required or permitted to be taken for or in connection with
any corporate action by any provision of the statutes, the meeting and vote of
stockholders may be dispensed with if all the stockholders who would have been
entitled to vote upon the action if such meeting were held shall consent in
writing to such corporate action being taken; or on the written consent of the
holders of shares of the corporation's capital stock having not less than the
minimum percentage of the vote required by statute for the proposed corporate
action, and provided that prompt notice must
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be given to all stockholders of the taking of corporate action without a meeting
and by less than unanimous written consent.
SECTION 2.09. Voting of Stock of Certain Holders. Shares of the
corporation's capital stock standing in the name of another corporation,
domestic or foreign, may be voted by such officer, agent, or proxy as the bylaws
of such corporation may prescribe, or in the absence of such provision, as the
Board of Directors of such corporation may determine. Shares standing in the
name of a deceased person may be voted by the executor or administrator of such
deceased person, either in person or by proxy. Shares standing in the name of a
guardian, conservator, or trustee may be voted by such fiduciary, either in
person or by proxy, but no such fiduciary shall be entitled to vote shares held
in such fiduciary capacity without a transfer of such shares into the name of
such fiduciary. Shares standing in the name of a receiver may be voted by such
receiver. A stockholder whose shares are pledged shall be entitled to vote such
shares, unless in the transfer by the pledgor on the books of the corporation,
he has expressly empowered the pledgee to vote thereon, in which case only the
pledgee, or his proxy, may represent the stock and vote thereon.
SECTION 2.10. Treasury Stock. The corporation shall not vote, directly or
indirectly, shares of its own capital stock owned by it; and such shares shall
not be counted in determining the total number of outstanding shares of the
corporation's capital stock.
SECTION 2.11. Fixing Record Date. The Board of Directors may fix in advance
a date, which shall not be more than 60 days nor less than 10 days preceding the
date of any meeting of stockholders, nor more than 60 days preceding the date
for payment of any dividend or distribution, or the date for the allotment of
rights, or the date when any change, or conversion or exchange of capital stock
shall go into effect, or a date in connection with obtaining a consent, as a
record date for the determination of the stockholders entitled to notice of, and
to vote at, any such meeting and any adjournment thereof, or entitled to receive
payment of any such dividend or distribution, or to receive any such allotment
of rights, or to exercise the rights in respect of any such change, conversion
or exchange of capital stock, or to give such consent, and in such case such
stockholders and only such stockholders as shall be stockholders of record on
the date so fixed, shall be entitled to such notice of, and to vote at, any such
meeting and any adjournment thereof, or to receive payment of such dividend or
distribution, or to receive such allotment of rights, or to exercise such
rights, or to give such consent, as the case may be, notwithstanding any
transfer of any stock on the books of the corporation after any such record date
fixed as aforesaid.
ARTICLE III
BOARD OF DIRECTORS
SECTION 3.01. Powers. The business and affairs of the corporation shall be
managed by its Board of Directors, which may exercise all such powers of the
corporation and do all such lawful acts and things as are not by statute or by
the Certificate of Incorporation or by these bylaws directed or required to be
exercised or done by the stockholders.
SECTION 3.02. Number, Election and Term. The number of directors that shall
constitute the whole Board of Directors shall be not less than one. Such number
of directors
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shall from time to time be fixed and determined by the directors and shall be
set forth in the notice of any meeting of stockholders held for the purpose of
electing directors. The directors shall be elected at the annual meeting of
stockholders, except as provided in Section 3.03 or in the Certificate of
Incorporation, and each director elected shall hold office until his successor
shall be elected and shall qualify. Directors need not be residents of Delaware
or stockholders of the corporation.
SECTION 3.03. Vacancies, Additional Directors, and Removal From Office. If
any vacancy occurs in the Board of Directors caused by death, resignation,
retirement, disqualification, or removal from office of any director, or
otherwise, or if any new directorship is created by an increase in the
authorized number of directors, a majority of the directors then in office,
though less than a quorum, or a sole remaining director, may choose a successor
or fill the newly created directorship; and a director so chosen shall hold
office until the next applicable election and until his successor shall be duly
elected and shall qualify, unless sooner displaced. Any director may be removed
either for or without cause at any special meeting of stockholders duly called
and held for such purpose.
SECTION 3.04. Regular Meeting. A regular meeting of the Board of Directors
shall be held each year, without other notice than this bylaw, at the place of,
and immediately following, the annual meeting of stockholders; and other regular
meetings of the Board of Directors shall be held each year, at such time and
place as the Board of Directors may provide, by resolution, either within or
without the State of Delaware, without other notice than such resolution.
SECTION 3.05. Special Meeting. A special meeting of the Board of Directors
may be called by the Chairman of the Board of Directors or by the President of
the corporation and shall be called by the Secretary on the written request of
any two directors. The Chairman or President so calling, or the directors so
requesting, any such meeting shall fix the time and any place, either within or
without the State of Delaware, as the place for holding such meeting.
SECTION 3.06. Notice of Special Meeting. Written notice of special meetings
of the Board of Directors shall be given to each director at least 48 hours
prior to the time of such meeting. Any director may waive notice of any meeting.
The attendance of a director at any meeting shall constitute a waiver of notice
of such meeting, except where a director attends a meeting for the purpose of
objecting to the transaction of any business because the meeting is not lawfully
called or convened. Neither the business to be transacted at, nor the purpose
of, any special meeting of the Board of Directors need be specified in the
notice or waiver of notice of such meeting, except that notice shall be given of
any proposed amendment to the bylaws if it is to be adopted at any special
meeting or with respect to any other matter where notice is required by statute.
SECTION 3.07. Quorum. A majority of the total number of the whole Board of
Directors shall constitute a quorum at all meetings of the Board of Directors.
In the event one or more of the directors shall be disqualified to vote at any
meeting, then the required quorum shall be reduced by one for each such director
so disqualified; provided, however, that in no case shall less than one-third
(1/3) of the total number of the whole Board of Directors constitute a quorum.
In the absence of a quorum at any such meeting, a majority of the directors
present may
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adjourn the meeting from time to time without further notice other than
announcement at the meeting, until a quorum shall be present.
SECTION 3.08. Action Without Meeting. Unless otherwise restricted by the
Certificate of Incorporation or these bylaws, any action required or permitted
to be taken at any meeting of the Board of Directors, or of any committee
thereof as provided in Article IV of these bylaws, may be taken without a
meeting, if a written consent thereto is signed by all members of the Board of
Directors or of such committee, as the case may be, and such written consent is
filed with the minutes of proceedings of the Board of Directors or such
committee.
SECTION 3.09. Compensation. Directors, as such, shall not be entitled to
any stated salary for their services unless voted by the stockholders or the
Board of Directors; but by resolution of the Board of Directors, a fixed sum and
expenses of attendance, if any, may be allowed for attendance at each regular or
special meeting of the Board of Directors or any meeting of a committee of
directors. No provision of these bylaws shall be construed to preclude any
director from serving the corporation in any other capacity and receiving
compensation therefor.
SECTION 3.10. Resignation. Any director may resign by delivering his or her
written resignation to the corporation at its principal office or to the
President of the Secretary. 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.
ARTICLE IV
COMMITTEE OF DIRECTORS
SECTION 4.01. Designation, Powers and Name. The Board of Directors may, by
resolution passed by a majority of the whole Board of Directors, designate one
or more committees, including, if they shall so determine, an Executive
Committee, each such committee to consist of two or more of the directors of the
corporation. The committee shall have and may exercise such of the powers of the
Board of Directors in the management of the business and affairs of the
corporation as may be provided in such resolution. The committee may authorize
the seal of the corporation to be affixed to all papers that may require it. The
Board of Directors may designate one or more directors as alternate members of
any committee, who may replace any absent or disqualified member at any meeting
of such committee. In the absence or disqualification of any member of such
committee or committees, the member or members thereof present at any meeting
and not disqualified from voting, whether or not he or they constitute a quorum,
may unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member. Such committee
or committees shall have such name or names and such limitations of authority as
may be determined from time to time by resolution adopted by the Board of
Directors.
SECTION 4.02. Minutes. Each committee of directors shall keep regular
minutes of its proceedings and report the same to the Board of Directors when
required.
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SECTION 4.03. Compensation. Members of special or standing committees may
be allowed compensation for attending committee meetings, if the Board of
Directors shall so determine.
ARTICLE V
NOTICE
SECTION 5.01. Methods of Giving Notice. Whenever under the provisions of
applicable statutes, the Certificate of Incorporation or these bylaws, notice is
required to be given to any director, member of any committee, or stockholder,
such notice shall be in writing and delivered personally or mailed to such
director, member, or stockholder; provided that in the case of a director or a
member of any committee such notice may be given orally or by telephone or
fascimile. If mailed, notice to a director, member of a committee, or
stockholder shall be deemed to be given when deposited in the United States mail
first class in a sealed envelope, with postage thereon prepaid, addressed, in
the case of a stockholder, to the stockholder at the stockholder's address as it
appears on the records of the corporation or, in the case of a director or a
member of a committee, to such person at his business address.
SECTION 5.02. Written Waiver. Whenever any notice is required to be given
under the provisions of an applicable statute, the Certificate of Incorporation,
or these bylaws, a waiver thereof in writing, signed by the person or persons
entitled to said notice, whether before or after the time stated therein, shall
be deemed equivalent thereto.
ARTICLE VI
OFFICERS
SECTION 6.01. Officers. The officers of the corporation shall be a Chairman
and a Vice Chairman (if such offices are created by the Board), a President, one
or more Vice Presidents, any one or more of which may be designated Executive
Vice President or Senior Vice President, a Secretary and a Treasurer. The Board
of Directors may appoint such other officers and agents, including Assistant
Vice Presidents, Assistant Secretaries, and Assistant Treasurers, in each case
as the Board of Directors shall deem necessary, who shall hold their offices for
such terms and shall exercise such powers and perform such duties as shall be
determined by the Board. Any two or more offices may be held by the same person.
No officer shall execute, acknowledge, verify or countersign any instrument on
behalf of the corporation in more than one capacity, if such instrument is
required by law, by these bylaws or by any act of the corporation to be
executed, acknowledged, verified, or countersigned by two or more officers. The
Chairman and Vice Chairman of the Board shall be elected from among the
directors. With the foregoing exceptions, none of the other officers need be a
director, and none of the officers need be a stockholder of the corporation.
SECTION 6.02. Election and Term of Office. The officers of the corporation
shall be elected annually by the Board of Directors at its first meeting held
after the annual meeting of stockholders or as soon thereafter as conveniently
possible. Each officer shall hold office until
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his successor shall have been chosen and shall have qualified or until his death
or the effective date of his resignation or removal, or until he shall cease to
be a director in the case of the Chairman and the Vice Chairman.
SECTION 6.03. Removal and Resignation. Any officer or agent elected or
appointed by the Board of Directors may be removed without cause by the
affirmative vote of a majority of the Board of Directors whenever, in its
judgment, the best interests of the corporation shall be served thereby, but
such removal shall be without prejudice to the contractual rights, if any, of
the person so removed. Any officer may resign at any time by giving written
notice to the corporation. Any such resignation shall take effect at the date of
the receipt of such notice or at any later time specified therein, and unless
otherwise specified therein, the acceptance of such resignation shall not be
necessary to make it effective.
SECTION 6.04. Vacancies. Any vacancy occurring in any office of the
corporation by death, resignation, removal, or otherwise, may be filled by the
Board of Directors for the unexpired portion of the term.
SECTION 6.05. Salaries. The salaries of all officers and agents of the
corporation shall be fixed by the Board of Directors or pursuant to its
direction; and no officer shall be prevented from receiving such salary by
reason of his also being a director.
SECTION 6.06. Chairman of the Board. The Chairman of the Board (if such
office is created by the Board) shall preside at all meetings of the Board of
Directors and of the stockholders of the corporation. The Chairman of the Board
shall formulate and submit to the Board of Directors or the Executive Committee
matters of general policy for the corporation and shall perform such other
duties as usually appertain to the office or as may be prescribed by the Board
of Directors or the Executive Committee.
SECTION 6.07. Vice Chairman. The Vice Chairman (if such office is created
by the Board) shall, in the absence or disability of the Chairman of the Board,
perform the duties and exercise the powers of the Chairman of the Board. The
Vice Chairman shall perform such other duties as from time to time may be
prescribed by the Board of Directors or the Executive Committee or assigned by
the Chairman of the Board.
SECTION 6.08. President. The President shall be the chief executive officer
of the corporation and, subject to the control of the Board of Directors, shall
in general supervise and control the business and affairs of the corporation. In
the absence of the Chairman of the Board or the Vice Chairman (if such offices
are created by the Board), the President shall preside at all meetings of the
Board of Directors and of the stockholders. He may also preside at any such
meeting attended by the Chairman of the Board or Vice Chairman if he is so
designated by the Chairman of the Board, or in the Chairman of the Board's
absence by the Vice Chairman. He shall have the power to appoint and remove
subordinate officers, agents and employees, except those elected or appointed by
the Board of Directors. The President shall keep the Board of Directors and the
Executive Committee fully informed and shall consult them concerning the
business of the corporation. He may sign with the Secretary or any other officer
of the corporation thereunto authorized by the Board of Directors, certificates
for shares of the corporation and any deeds, bonds,
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mortgages, contracts, checks, notes, drafts, or other instruments that the Board
of Directors has authorized to be executed, except in cases where the signing
and execution thereof has been expressly delegated by these bylaws or by the
Board of Directors to some other officer or agent of the corporation, or shall
be required by law to be otherwise executed. He shall vote, or give a proxy to
any other officer of the corporation to vote, all shares of stock of any other
corporation standing in the name of the corporation and in general he shall
perform all other duties normally incident to the office of President and such
other duties as may be prescribed by the stockholders, the Board of Directors,
or the Executive Committee from time to time.
SECTION 6.09. Vice Presidents. In the absence of the President, or in the
event of his inability or refusal to act, the Executive Vice President (or in
the event there shall be no Vice President designated Executive Vice President,
any Vice President designated by the Board) shall perform the duties and
exercise the powers of the President. Any Vice President may sign, with the
Secretary or Assistant Secretary, certificates for shares of the corporation.
The Vice Presidents shall perform such other duties as from time to time may be
assigned to them by the President, the Board of Directors or the Executive
Committee.
SECTION 6.10. Secretary. The Secretary shall (a) keep the minutes of the
meetings of the stockholders, the Board of Directors and committees of
directors; (b) see that all notices are duly given in accordance with the
provisions of these bylaws and as required by law; (c) be custodian of the
corporate records and of the seal of the corporation, and see that the seal of
the corporation or a facsimile thereof is affixed to all certificates for shares
prior to the issue thereof and to all documents, the execution of which on
behalf of the corporation under its seal is duly authorized in accordance with
the provisions of these bylaws; (d) keep or cause to be kept a register of the
post office address of each stockholder which shall be furnished by such
stockholder; (e) sign with the President, or an Executive Vice President or Vice
President, certificates for shares of the corporation, the issue of which shall
have been authorized by resolution of the Board of Directors; (f) have general
charge of the stock transfer books of the corporation; and (g) in general,
perform all duties normally incident to the office of Secretary and such other
duties as from time to time may be assigned to him by the President, the Board
of Directors or the Executive Committee.
SECTION 6.11. Treasurer. If required by the Board of Directors, the
Treasurer shall give a bond for the faithful discharge of his duties in such sum
and with such surety or sureties as the Board of Directors shall determine. He
shall (a) have charge and custody of and be responsible for all funds and
securities of the corporation; (b) receive and give receipts for moneys due and
payable to the corporation from any source whatsoever and deposit all such
moneys in the name of the corporation in such banks, trust companies, or other
depositories as shall be selected in accordance with the provisions of Section
7.03 of these bylaws; (c) prepare, or cause to be prepared, for submission at
each regular meeting of the Board of Directors, at each annual meeting of the
stockholders, and at such other times as may be required by the Board of
Directors, the President or the Executive Committee, a statement of financial
condition of the corporation in such detail as may be required; and (d) in
general, perform all the duties incident to the office of Treasurer and such
other duties as from time to time may be assigned to him by the President, the
Board of Directors or the Executive Committee.
8
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SECTION 6.12. Assistant Secretary and Treasurer. The Assistant Secretaries
and Assistant Treasurers shall, in general, perform such duties as shall be
assigned to them by the Secretary or the Treasurer, respectively, or by the
President, the Board of Directors, or the Executive Committee. The Assistant
Secretaries and Assistant Treasurers shall, in the absence of the Secretary or
Treasurer, respectively, perform all functions and duties which such absent
officers may delegate, but such delegation shall not relieve the absent officer
from the responsibilities and liabilities of his office. The Assistant
Secretaries may sign, with the President or a Vice President, certificates for
shares of the corporation, the issue of which shall have been authorized by a
resolution of the Board of Directors. The Assistant Treasurers shall
respectively, if required by the Board of Directors, give bonds for the faithful
discharge of their duties in such sums and with such sureties as the Board of
Directors shall determine.
ARTICLE VII
CONTRACTS, CHECKS AND DEPOSITS
SECTION 7.01. Contracts. Subject to the provisions of Section 6.01, the
Board of Directors may authorize any officer, officers, agent, or agents, to
enter into any contract or execute and deliver any instrument in the name of and
on behalf of the corporation, and such authority may be general or confined to
specific instances.
SECTION 7.02. Checks. All checks, demands, drafts, or other orders for the
payment of money, notes, or other evidences of indebtedness issued in the name
of the corporation, shall be signed by such officer or officers or such agent or
agents of the corporation, and in such manner, as shall be determined by the
Board of Directors.
SECTION 7.03. Deposits. All funds of the corporation not otherwise employed
shall be deposited from time to time to the credit of the corporation in such
banks, trust companies, or other depositories as the Board of Directors may
select.
ARTICLE VIII
CERTIFICATES OF STOCK
SECTION 8.01. Issuance. Each stockholder of this corporation shall be
entitled to a certificate or certificates showing the number of shares of
capital stock registered in his name on the books of the corporation. The
certificates shall be in such form as may be determined by the Board of
Directors, shall be issued in numerical order and shall be entered in the books
of the corporation as they are issued. They shall exhibit the holder's name and
number of shares and shall be signed by the President or a Vice President and by
the Secretary or an Assistant Secretary. If any certificate is countersigned (1)
by a transfer agent other than the corporation or any employee of the
corporation, or (2) by a registrar other than the corporation or any employee of
the corporation, any other signature on the certificate may be a facsimile. If
the corporation shall be authorized to issue more than one class of stock or
more than one series of any class, the designations, preferences, and relative
participating, optional, or other special rights of each class of stock or
series thereof and the qualifications, limitations, or restrictions of such
preferences and rights shall be set forth in full or
9
<PAGE>
summarized on the face or back of the certificate which the corporation shall
issue to represent such class of stock; provided that, except as otherwise
provided by statute, in lieu of the foregoing requirements there may be set
forth on the face or back of the certificate which the corporation shall issue
to represent such class or series of stock, a statement that the corporation
will furnish to each stockholder who so requests the designations, preferences
and relative, participating, optional or other special rights of each class of
stock or series thereof and the qualifications, limitations, or restrictions of
such preferences and rights. All certificates surrendered to the corporation for
transfer shall be canceled and no new certificate shall be issued until the
former certificate for a like number of shares shall have been surrendered and
canceled, except that in the case of a lost, stolen, destroyed, or mutilated
certificate a new one may be issued therefor upon such terms and with such
indemnity, if any, to the corporation as the Board of Directors may prescribe.
Certificates shall not be issued representing fractional shares of stock.
SECTION 8.02. Lost Certificates. The Board of Directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the corporation alleged to have been lost,
stolen, or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate or certificates, the Board of
Directors may, in its discretion and as a condition precedent to the issuance
thereof, require (1) the owner of such lost, stolen, or destroyed certificate or
certificates, or his legal representative, to advertise the same in such manner
as it shall require, (2) such owner to give the corporation a bond in such sum
as it may direct as indemnity against any claim that may be made against the
corporation with respect to the certificate or certificates alleged to have been
lost, stolen, or destroyed, or (3) both.
SECTION 8.03. Transfers. Upon surrender to the corporation or the transfer
agent of the corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignment, or authority to
transfer, it shall be the duty of the corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate, and record the
transaction upon its books. Transfers of shares shall be made only on the books
of the corporation by the registered holder thereof, or by his attorney
thereunto authorized by power of attorney and filed with the Secretary of the
corporation or the Transfer Agent.
SECTION 8.04. Registered Stockholders. The corporation shall be entitled to
treat the holder of record of any share or shares of the corporation's capital
stock as the holder in fact thereof and, accordingly, shall not be bound to
recognize any equitable or other claim to or interest in such share or shares on
the part of any other person, whether or not it shall have express or other
notice thereof, except as otherwise provided by the laws of the State of
Delaware.
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ARTICLE IX
DIVIDENDS
SECTION 9.01. Declaration. Dividends with respect to the shares of the
corporation's capital stock, subject to the provisions of the Certificate of
Incorporation, if any, may be declared by the Board of Directors at any regular
or special meeting, pursuant to applicable law. Dividends may be paid in cash,
in property, or in shares of capital stock, subject to the provisions of the
Certificate of Incorporation.
SECTION 9.02. Reserve. Before payment of any dividend, there may be set
aside out of any funds of the corporation available for dividends such sum or
sums as the Board of Directors from time to time, in their absolute discretion,
think proper as a reserve or reserves to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of the corporation, or
for such other purpose as the Board of Directors shall think conducive to the
interest of the corporation, and the Board of Directors may modify or abolish
any such reserve in the manner in which it was created.
ARTICLE X
MISCELLANEOUS
SECTION 10.01. Seal. The corporate seal, if one is authorized by the Board
of Directors, shall have inscribed thereon the name of the corporation, and the
words "Corporate Seal, Delaware." The seal may be used by causing it or a
facsimile thereof to be impressed or affixed or otherwise reproduced.
SECTION 10.02. Books. The books of the corporation may be kept (subject to
any provision contained in the statutes) outside the State of Delaware at the
offices of the corporation, or at such other place or places as may be
designated from time to time by the Board of Directors.
ARTICLE XI
AMENDMENT
These bylaws may be altered, amended, or repealed by a majority of the
number of directors then constituting the Board of Directors at any regular
meeting of the Board of Directors without prior notice, or at any special
meeting of the Board of Directors if notice of such alteration, amendment, or
repeal be contained in the notice of such special meeting.
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LIFECODES CORPORATION
1992 EMPLOYEE STOCK OPTION PLAN
1. Purpose.
The purpose of the Lifecodes Corporation 1992 Employee Stock Option Plan is
to enable the Company to grant to select employees of the Company an opportunity
to acquire Stock, thereby providing employees with an inducement to remain in
the employ of the Company, to contribute to its success, and to aid in
attracting other capable personnel. Some or all of the options granted under the
Plan may be intended to qualify as "incentive stock options" under Section 422
of the Internal Revenue Code.
2. Definitions.
As used in this Plan,
(a) "Board" means the Board of Directors of the Company.
(b) "Committee" means the Compensation Committee, if any, appointed by the
Board from among its members. If no Committee has been appointed, "Committee"
shall refer to the Board, unless the context indicates otherwise.
(c) "Company" means Lifecodes Corporation including any parent or
majority-owned subsidiary corporation.
(d) "Plan" means Lifecodes Corporation's 1992 Employee Stock Option Plan as
amended from time to time.
(e) "Stock" means the common stock, 10 (cents) par value, of the Company.
3. Administration.
(a) Authority of the Committee. The Plan shall be administered by the
Committee. Subject to the provisions of the Plan, the Committee shall have the
sole authority to determine:
(i) the employees to whom options to purchase shares of Stock shall be
granted;
(ii) the number of shares to be optioned to each employee;
(iii) the price to be paid for the shares upon the exercise of each
option;
<PAGE>
(iv) the period within which each option may be exercised, including
any vesting requirements; and
(v) the terms and conditions of each stock option agreement to be
entered into between the Company and employee.
(b) Grants to Committee Members. The Committee may not grant an option to
any member of the Committee. An option may be granted to a member of the
Committee only by action of the Board and only if the Committee member is also
an employee of the Company.
(c) Rules and Regulations. The Committee shall have full and complete
authority to promulgate such rules and regulations as it deems necessary or
desirable for administering and interpreting the Plan. Any determination,
decision, computation or interpretation of the Plan by the Committee shall be
conclusive as to any interested person.
(d) Incentive Stock Options Status. The determination of whether an option
granted under the Plan is intended to qualify as an incentive stock option shall
be made by the Board of the Committee at the time the option is granted. If an
option is intended to so qualify, that fact shall be indicated in the stock
option agreement for that option.
4. Eligibility.
The employees of the Company eligible to be granted options to purchase
Stock hereunder shall be those employees as are designated by the Chief
Executive Officer and approved by the Committee.
5. Stock Subject to Plan.
There shall be a total of 200,000 shares of Stock subject to issuance upon
the exercise of options granted under the Plan, as adjusted in accordance with
Section 8. For options outstanding under the Plan, shares of Stock will be
reserved for issuance from the Company's authorized but unissued Stock. If any
option granted under the Plan shall expire or terminate for any reason without
having been exercised in full, the unpurchased shares shall again be available
for the purpose of the Plan.
6. Terms and Conditions of Options.
Each option granted under the Plan shall be evidenced by a stock option
agreement between the employee to whom the option is granted and the Company and
shall be subject to the following terms
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<PAGE>
and conditions and to such other terms and conditions not inconsistent therewith
as the Committee may deem appropriate in each case:
(a) Option Price. The price to be paid for shares of Stock upon the
exercise of an option shall be determined by the Committee at the time the
option is granted and shall not be less than 100% of the fair market value of
the shares of Stock on the date the option is granted. If an employee owns 10%
or more of the outstanding Stock, then the options if intended to qualify as
Incentive Stock Options as provided in Section 422 of the Internal Revenue Code,
shall be at a price which is not less than 110% of the fair market value of the
shares at the date of grant. The fair market value of the Stock shall be
determined by the Committee or, if a trading market exists for the Stock, the
fair market value of the shares of Stock shall not be less than the closing bid
price for the Stock as reported by NASDAQ or, if applicable, in the Composite
Transactions Reporting System for the date the option is granted (or if there
was no bid on such date, than the closing bid price on the most recent date on
which trading in the Stock occurred).
(b) Period of Option. The period or period within which an option may be
exercised shall be determined by the Committee at the time the option is granted
but shall in no event exceed 10 years from the date the option is granted.
Options granted to employees owning 10% or more of the stock may not be
exercised after five years from the date of grant.
(c) Payment for Stock. Payment for each share of Stock purchased under an
option shall be made at the time of purchase: (i) in cash, (ii) by a full
recourse promissory note with terms determined by the Committee, (iii) in shares
of Stock, in good form for transfer, owned by the optionee or (iv) by a
combination of such Stock, promissory note and cash; unless the Committee in its
sole discretion requires that payment be made in cash. No share of Stock shall
be issued until full payment therefor has been made.
(d) Stock Appreciation Rights. The Committee, in its discretion, may
provide that any option by its terms may permit the participant, upon exercise
of an option, to elect, in lieu of payment for Stock to receive payment from the
Company of any of the following:
(i) cash equal to the excess of the value of one share over the option
price times the number of shares as to which the option is exercised;
(ii) the number of full shares having an aggregate value equal to the
cash amount calculated under alternative (i); or
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<PAGE>
(iii) any combination of cash and Stock having an aggregate
value equal to the cash amount calculated under alternative (i).
(e) Nontransferability. An option shall be nontransferable except by will
or the laws of descent and distribution and shall be exercisable during the
employee's lifetime only by the employee.
(f) Not an Employment Agreement. Nothing in this Plan or in any option
granted hereunder shall affect the right of the Company to terminate at any time
and for any reason the employment of any employee who has been granted an option
hereunder.
(g) Value Limitation. The aggregate fair market value (determined at the
time the option is granted) of the Stock subject to an incentive stock option
granted to an optionee by the Committee in any calendar year shall not exceed
$100,000.
(h) Effective date of Grant. The date of grant of options hereunder shall
be deemed to be the date of the action by the Committee, notwithstanding that
issuance of the option may be conditioned on the execution of a stock option
agreement.
7. Stock Issuance and Rights as Stockholders.
Notwithstanding any other provision of the Plan, no employee shall have any
right as a stockholder of the Company until the date he is issued a stock
certificate.
8. Adjustment of Shares and Accelerated Vesting.
(a) Stock Dividends, etc. In the event of changes in the outstanding Stock
of the Company by reason of Stock dividends, split-ups, consolidation,
recapitalization, reorganization of like events (as determined by the
Committee), an appropriate adjustment shall be made by the Committee in the
number of shares of Stock reserved under the Plan and in the number of shares of
Stock and the option price per share specified in any stock option agreement
with respect to any unpurchased shares. The determination of the Committee as to
what adjustment shall be made shall be conclusive.
(b) Mergers, etc. In the event of any merger, consolidation or other
reorganization of the Company in which the Company is not the surviving or
continuing corporation (as determined by the Committee), then the shares in the
surviving corporation will be substituted for the Company's shares subject to
any option at the valuation established in such reorganization or, in the
alternative, at the Company's option, any option shall, upon notice to employees
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<PAGE>
given not less than 30 days prior to such reorganization, become fully vested
and exercisable, and thereafter such options shall terminate at the effective
date of such reorganization.
(c) All options granted prior to the date of any underwritten public
offering of the Company's Stock shall be fully vested upon the completion of any
said public offering provided, however, that aforesaid provision shall not be
applicable unless the underwriting is for at least $5,000,000 at an offering
price which is higher than the option prices.
(d) If there is any change in control, i.e., any person (other than
existing officers) or entity with his or its affiliates acquires 50% or more of
the outstanding Stock or if the individuals who at the date hereof constitute
the entire Board of Directors of the Company cease to constitute along with any
other individual unanimously appointed by them as a director a majority of the
Board, than all outstanding options shall immediately become fully vested and
exercisable.
9. Securities Law Requirements.
(a) Investment Representation. The Committee may require any person, as a
condition of either the grant or the exercise of an option pursuant to this
Plan, to represent and establish to the satisfaction of the Committee that all
shares of Stock acquired upon the exercise of such option will be acquired for
investment and not for distribution.
(b) Registration Requirements. No shares of Stock shall be issued upon the
exercise of any option if counsel for the Company determines that (1) any
applicable registration requirements under the Securities Act of 1933 or the
Securities Exchange Act of 1934, (2) any applicable listing requirement of any
stock exchange of which the Stock is listed, or (3) any other applicable
provision of state or federal law has not been satisfied.
10. Company Repurchase Option.
Upon the occurrence of any of the following events at a time before the
first underwritten public offering of the Company's stock, (unless a public
offering which is planned to be made within 60 days of the event) the Company
shall have an option (the "Repurchase Option") to repurchase all or a portion of
any shares received upon the exercise of option granted under this Plan from the
then holder thereof at a price equal to the then fair market value of the shares
so repurchased. The Company shall have ninety (90) days from the date of the
event giving rise to the Repurchase Option to elect to exercise its option to
repurchase. If an election is made by the Company to repurchase, payment shall
be made in cash within one hundred twenty (120) days from the date of the event
giving rise to the Repurchase Option. The fair market value of the shares shall
be determined in good faith by the Committee,
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<PAGE>
and the Committee's determination made in good faith shall be conclusive and
binding on all interested parties. The events giving rise to this Repurchase
Option are as follows:
(1) The voluntary or involuntary termination of Employee's employment with
the Company for any reason;
(2) Any attempted sale, disposition, or other transfer of the shares
purchased pursuant to an exercised option; or
(3) The exercise of any option after the Employee's death by the
Employee's estate, heirs or legatees.
11. Amendment.
The Board may amend the Plan at any time, except that without the approval
by vote or written consent of the holders of a majority of the Company's issued
and outstanding shares:
(a) The number of shares of stock which may be made available under the
Plan shall not be increased; and
(b) Any decrease in the provision of paragraph (a) of Section 6 hereof; and
(c) Any extension of the term of this Plan.
12. Shareholder Approval.
This Plan is subject to the approval of the shareholders of the Company on
or before December 31, 1992, and any stock option agreement entered into under
this Plan before that approval shall contain a provision to the effect that the
grant of that option is subject to that shareholder approval.
13. Termination.
The Board may terminate the Plan at any time, and no option hereunder shall
be granted thereafter. Any termination of the Plan shall not affect the validity
of any option then outstanding. The Plan shall expire on December 31, 2002, and
no options shall be granted hereunder after that date.
14. Effective Date.
The Plan became effective on January 1, 1992.
-6-
<PAGE>
Minutes of Meeting of Directors
of
Lifecodes Corporation
October 31, 1997
A meeting of the Board of Directors of Lifecodes Corporation was held at
8:30 a.m. on October 31, 1997 at the Corporation's headquarters in Stamford, CT.
All of the directors except Mr. Elliott and Mr. Sandberg were present at the
start of the meeting. Mr. Somer attended upon invitation of the Board. Mr.
Fredericks acted as Secretary.
RESOLVED, that Section 6 (g) of the Lifecodes Corporation 1992 and 1995
Employee Stock Option Plans be, and hereby are, amended and restated to read as
follows:
"(g) Value Limitation on Incentive Stock Options. Each eligible
employee may be granted incentive stock options only to the extent that, in
the aggregate under this Plan and all incentive stock option plans of the
Company, such incentive stock options do not become exercisable by such
employee during any calendar year in a manner which would entitle the
employee to purchase more than $100,000 in fair market value (determined at
the time the option is granted) of Stock in that year. Any options granted
to an employee in excess of such amount shall be treated as options that do
not qualify as incentive stock options."
There being no further business to come before the meeting, the official
meeting was adjourned at 1:55 p.m. to permit a meeting of the Compensation
Committee.
/s/
-------------------------
Acting Secretary
<PAGE>
LIFECODES CORPORATION
1995 EMPLOYEE STOCK OPTION PLAN
1. Purpose.
The purpose of the Lifecodes Corporation 1995 Employee Stock Option Plan is
to enable the Company to grant to select employees of the Company an opportunity
to acquire Stock, thereby providing employees with an inducement to remain in
the employ of the Company, to contribute to its success, and to aid in
attracting other capable personnel. Some or all of the options granted under the
Plan may be intended to qualify as "incentive stock options" under Section 422
of the Internal Revenue Code.
2. Definitions.
As used in this Plan,
(a) "Board" means the Board of Directors of the Company.
(b) "Committee" means the Compensation Committee, if any, appointed by the
Board from among its members. If no Committee has been appointed, "Committee"
shall refer to the Board, unless the context indicates otherwise.
(c) "Company" means Lifecodes Corporation including any parent or
majority-owned subsidiary corporation.
(d) "Plan" means Lifecodes Corporation's 1995 Employee Stock Option Plan as
amended from time to time.
(e) "Stock" means the common stock, 10 (cents) par value, of the Company.
3. Administration.
(a) Authority of the Committee. The Plan shall be administered by the
Committee. Subject to the provisions of the Plan, the Committee shall have the
sole authority to determine:
(i) the employees to whom options to purchase shares of Stock shall be
granted;
(ii) the number of shares to be optioned to each employee;
(iii) the price to be paid for the shares upon the exercise of each
option;
(iv) the period within which each option may be exercised, including
any vesting requirements; and
<PAGE>
(v) the terms and conditions of each stock option agreement to be
entered into between the Company and employee.
(b) Grants to Committee Members. The Committee may not grant an option to
any member of the Committee. An option may be granted to a member of the
Committee only by action of the Board and only if the Committee member is also
an employee of the Company.
(c) Rules and Regulations. The Committee shall have full and complete
authority to promulgate such rules and regulations as it deems necessary or
desirable for administering and interpreting the Plan. Any determination,
decision, computation or interpretation of the Plan by the Committee shall be
conclusive as to any interested person.
(d) Incentive Stock Options Status. The determination of whether an option
granted under the Plan is intended to qualify as an incentive stock option shall
be made by the Board of the Committee at the time the option is granted. If an
option is intended to so qualify, that fact shall be indicated in the stock
option agreement for that option.
4. Eligibility.
The employees of the Company eligible to be granted options to purchase
Stock hereunder shall be those employees as are designated by the Chief
Executive Officer and approved by the Committee.
5. Stock Subject to Plan.
There shall be a total of 65,000 shares of Stock subject to issuance upon
the exercise of options granted under the Plan, as adjusted in accordance with
Section 8. For options outstanding under the Plan, shares of Stock will be
reserved for issuance from the Company's authorized but unissued Stock. If any
option granted under the Plan shall expire or terminate for any reason without
having been exercised in full, the unpurchased shares shall again be available
for the purpose of the Plan.
6. Terms and Conditions of Options.
Each option granted under the Plan shall be evidenced by a stock option
agreement between the employee to whom the option is granted and the Company and
shall be subject to the following terms and conditions and to such other terms
and conditions not inconsistent therewith as the Committee may deem appropriate
in each case:
(a) Option Price. The price to be paid for shares of Stock upon the
exercise of an option shall be determined by the Committee at the time the
option is granted and shall not be less than 100% of the fair market value of
the shares of Stock on the date the
2
<PAGE>
option is granted. If an employee owns 10% or more of the outstanding Stock,
then the options if intended to qualify as Incentive Stock Options as provided
in Section 422 of the Internal Revenue Code, shall be at a price which is not
less than 110% of the fair market value of the shares at the date of grant. The
fair market value of the Stock shall be determined by the Committee or, if a
trading market exists for the Stock, the fair market value of the shares of
Stock shall not be less than the closing bid price for the Stock as reported by
NASDAQ or, if applicable, in the Composite Transactions Reporting System for the
date the option is granted (or if there was no bid on such date, than the
closing bid price on the most recent date on which trading in the Stock
occurred).
(b) Period of Option. The period or period within which an option may be
exercised shall be determined by the Committee at the time the option is granted
but shall in no event exceed 10 years from the date the option is granted.
Options granted to employees owning 10% or more of the stock may not be
exercised after five years from the date of grant.
(c) Payment for Stock. Payment for each share of Stock purchased under an
option shall be made at the time of purchase: (i) in cash, (ii) by a full
recourse promissory note with terms determined by the Committee, (iii) in shares
of Stock, in good form for transfer, owned by the optionee or (iv) by a
combination of such Stock, promissory note and cash; unless the Committee in its
sole discretion requires that payment be made in cash. No share of Stock shall
be issued until full payment therefor has been made.
(d) Stock Appreciation Rights. The Committee, in its discretion, may
provide that any option by its terms may permit the participant, upon exercise
of an option, to elect, in lieu of payment for Stock to receive payment from the
Company of any of the following:
(i) cash equal to the excess of the value of one share over the option
price times the number of shares as to which the option is exercised;
(ii) the number of full shares having an aggregate value equal to the
cash amount calculated under alternative (i); or
(iii) any combination of cash and Stock having an aggregate value
equal to the cash amount calculated under alternative (i).
(e) Nontransferability. An option shall be nontransferable except by will
or the laws of descent and distribution and shall be exercisable during the
employee's lifetime only by the employee.
(f) Not an Employment Agreement. Nothing in this Plan or in
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<PAGE>
any option granted hereunder shall affect the right of the Company to terminate
at any time and for any reason the employment of any employee who has been
granted an option hereunder.
(g) Value Limitation. The aggregate fair market value (determined at the
time the option is granted) of the Stock subject to an incentive stock option
granted to an optionee by the Committee in any calendar year shall not exceed
$100,000.
(h) Effective date of Grant. The date of grant of options hereunder shall
be deemed to be the date of the action by the Committee, notwithstanding that
issuance of the option may be conditioned on the execution of a stock option
agreement.
7. Stock Issuance and Rights as Stockholders.
Notwithstanding any other provision of the Plan, no employee shall have any
right as a stockholder of the Company until the date he is issued a stock
certificate.
8. Adjustment of Shares and Accelerated Vesting.
(a) Stock Dividends, etc. In the event of changes in the outstanding Stock
of the Company by reason of Stock dividends, split-ups, consolidation,
recapitalization, reorganization of like events (as determined by the
Committee), an appropriate adjustment shall be made by the Committee in the
number of shares of Stock reserved under the Plan and in the number of shares of
Stock and the option price per share specified in any stock option agreement
with respect to any unpurchased shares. The determination of the Committee as to
what adjustment shall be made shall be conclusive.
(b) Mergers, etc. In the event of any merger, consolidation or other
reorganization of the Company in which the Company is not the surviving or
continuing corporation (as determined by the Committee), then the shares in the
surviving corporation will be substituted for the Company's shares subject to
any option at the valuation established in such reorganization or, in the
alternative, at the Company's option, any option shall, upon notice to employees
given not less than 30 days prior to such reorganization, become fully vested
and exercisable, and thereafter such options shall terminate at the effective
date of such reorganization.
(c) All options granted prior to the date of any underwritten public
offering of the Company's Stock shall be fully vested upon the completion of any
said public offering provided, however, that aforesaid provision shall not be
applicable unless the underwriting is for at least $5,000,000 at an offering
price which is higher than the option prices.
(d) If there is any change in control, i.e., any person
4
<PAGE>
(other than existing officers) or entity with his or its affiliates acquires 50%
or more of the outstanding Stock or if the individuals who at the date hereof
constitute the entire Board of Directors of the Company cease to constitute
along with any other individual unanimously appointed by them as a director a
majority of the Board, than all outstanding options shall immediately become
fully vested and exercisable.
9. Securities Law Requirements.
(a) Investment Representation. The Committee may require any person, as a
condition of either the grant or the exercise of an option pursuant to this
Plan, to represent and establish to the satisfaction of the Committee that all
shares of Stock acquired upon the exercise of such option will be acquired for
investment and not for distribution.
(b) Registration Requirements. No shares of Stock shall be issued upon the
exercise of any option if counsel for the Company determines that (1) any
applicable registration requirements under the Securities Act of 1933 or the
Securities Exchange Act of 1934, (2) any applicable listing requirement of any
stock exchange of which the Stock is listed, or (3) any other applicable
provision of state or federal law has not been satisfied.
10. Company Repurchase Option.
Upon the occurrence of any of the following events at a time before the
first underwritten public offering of the Company's stock, (unless a public
offering which is planned to be made within 60 days of the event) the Company
shall have an option (the "Repurchase Option") to repurchase all or a portion of
any shares received upon the exercise of option granted under this Plan from the
then holder thereof at a price equal to the then fair market value of the shares
so repurchased. The Company shall have ninety (90) days from the date of the
event giving rise to the Repurchase Option to elect to exercise its option to
repurchase. If an election is made by the Company to repurchase, payment shall
be made in cash within one hundred twenty (120) days from the date of the event
giving rise to the Repurchase Option. The fair market value of the shares shall
be determined in good faith by the Committee, and the Committee's determination
made in good faith shall be conclusive and binding on all interested parties.
The events giving rise to this Repurchase Option are as follows:
(1) The voluntary or involuntary termination of Employee's employment with
the Company for any reason;
(2) Any attempted sale, disposition, or other transfer of the shares
purchased pursuant to an exercised option; or
(3) The exercise of any option after the Employee's death by
5
<PAGE>
the Employee's estate, heirs or legatees.
11. Amendment.
The Board may amend the Plan at any time, except that without the approval
by vote or written consent of the holders of a majority of the Company's issued
and outstanding shares:
(a) The number of shares of stock which may be made available under the
Plan shall not be increased; and
(b) Any decrease in the provision of paragraph (a) of Section 6 hereof; and
(c) Any extension of the term of this Plan.
12. Shareholder Approval.
This Plan is subject to the approval of the shareholders of the Company on
or before December 31, 1995, and any stock option agreement entered into under
this Plan before that approval shall contain a provision to the effect that the
grant of that option is subject to that shareholder approval.
13. Termination.
The Board may terminate the Plan at any time, and no option hereunder shall
be granted thereafter. Any termination of the Plan shall not affect the validity
of any option then outstanding. The Plan shall expire on December 31, 2005, and
no options shall be granted hereunder after that date.
14. Effective Date.
The Plan became effective on January 10, 1995.
6
<PAGE>
Minutes of Meeting of Directors
of
Lifecodes Corporation
October 31, 1997
A meeting of the Board of Directors of Lifecodes Corporation was held at
8:30 a.m. on October 31, 1997 at the Corporation's headquarters in Stamford, CT.
All of the directors except Mr. Elliott and Mr. Sandberg were present at the
start of the meeting. Mr. Somer attended upon invitation of the Board. Mr.
Fredericks acted as Secretary.
RESOLVED, that Section 6 (g) of the Lifecodes Corporation 1992 and 1995
Employee Stock Option Plans be, and hereby are, amended and restated to read as
follows:
"(g) Value Limitation on Incentive Stock Options. Each eligible
employee may be granted incentive stock options only to the extent that, in
the aggregate under this Plan and all incentive stock option plans of the
Company, such incentive stock options do not become exercisable by such
employee during any calendar year in a manner which would entitle the
employee to purchase more than $100,000 in fair market value (determined at
the time the option is granted) of Stock in that year. Any options granted
to an employee in excess of such amount shall be treated as options that do
not qualify as incentive stock options."
There being no further business to come before the meeting, the official
meeting was adjourned at 1:55 p.m. to permit a meeting of the Compensation
Committee.
/s/
-------------------------
Acting Secretary
<PAGE>
LIFECODES CORPORATION
1998 STOCK PLAN
1. Purpose.
The purpose of this plan (the "Plan") is to secure for Lifecodes
Corporation (the "Corporation") and its stockholders the benefits arising from
capital stock ownership by employees, officers and directors of, and consultants
or advisors to, the Corporation and its subsidiary corporations who are expected
to contribute to the Corporation's future growth and success. The Plan permits
grants of options to purchase shares of Common Stock, $.10 par value per share,
of the Corporation ("Common Stock") and awards of shares of Common Stock that
are restricted as provided in Section 12 ("Restricted Shares"). Those provisions
of the Plan which make express reference to Section 422 of the Internal Revenue
Code of 1986, as amended or replaced from time to time (the "Code"), shall apply
only to Incentive Stock Options (as that term is defined in the Plan).
2. Type of Options and Administration.
(a) Types of Options. Options granted pursuant to the Plan shall be
authorized by action of the Board of Directors of the Corporation (or a
Committee designated by the Board of Directors) and may be either incentive
stock options ("Incentive Stock Options") meeting the requirements of Section
422 of the Code or non-statutory options which are not intended to meet the
requirements of Section 422 of the Code.
(b) Administration. The Plan will be administered by the Board of
Directors of the Corporation, whose construction and interpretation of the terms
and provisions of the Plan shall be final and conclusive. The Board of Directors
may in its sole discretion grant Restricted Shares and options to purchase
shares of Common Stock and issue shares upon exercise of such options as
provided in the Plan. The Board shall have authority, subject to the express
provisions of the Plan, to construe the respective option and Restricted Share
agreements and the Plan, to prescribe, amend and rescind rules and regulations
relating to the Plan, to determine the terms and provisions of the respective
option and Restricted Share agreements, which need not be identical, and to make
all other determinations in the judgment of the Board of Directors necessary or
desirable for the administration of the Plan. The Board of Directors may correct
any defect or supply any omission or reconcile any inconsistency in the Plan or
in any option or Restricted Share agreement in the manner and to the extent it
shall deem expedient to carry the Plan into effect and it shall be the sole and
final judge of such expediency. No director or person acting pursuant to
authority delegated by the Board of Directors shall be liable for any action or
determination under the Plan made in good faith. The Board of Directors may, to
the full extent permitted by or consistent with applicable laws or regulations
(including, without limitation,
<PAGE>
applicable state law and Rule 16b-3 promulgated under the Securities Exchange
Act of 1934 (the "Exchange Act"), or any successor rule ("Rule 16b-3")),
delegate any or all of its powers under the Plan to a committee (the
"Committee") appointed by the Board of Directors, and if the Committee is so
appointed all references to the Board of Directors in the Plan shall mean and
relate to such Committee with respect to the powers so delegated. Any director
to whom an option or stock grant is awarded shall be ineligible to vote upon his
or her option or stock grant, but such option or stock grant may be awarded any
such director by a vote of the remainder of the directors, except as limited
below.
(c) Applicability of Rule 16b-3. Those provisions of the Plan which
make express reference to Rule 16b-3 shall apply to the Corporation only at such
time as the Corporation's Common Stock is registered under the Exchange Act, and
then only to such persons as are required to file reports under Section 16(a) of
the Exchange Act (a "Reporting Person").
(d) Compliance with Section 162(m) of the Code. Section 162(m) of the
Code, added by the Omnibus Budget Reconciliation Act of 1993, generally limits
the tax deductibility to publicly held companies of compensation in excess of
$1,000,000 paid to certain "covered employees" ("Covered Employees"). It is the
Corporation's intention to preserve the deductibility of such compensation to
the extent it is reasonably practicable and to the extent it is consistent with
the Corporation's compensation objectives. For purposes of this Plan, Covered
Employees of the Corporation shall be those employees of the Corporation
described in Section 162(m)(3) of the Code.
(e) Special Provisions Applicable to Non-Statutory Options Granted to
Covered Employees. In order for the full value of non-statutory options granted
to Covered Employees to be deductible by the Corporation for federal income tax
purposes, the Corporation may intend for such non-statutory options to be
treated as "qualified performance based compensation" as described in Treas.
Reg. ss.1.162-27(e) (or any successor regulation). In such case, non-statutory
options granted to Covered Employees shall be subject to the following
additional requirements:
(i) such options and rights shall be granted only by the
Committee; and
(ii) the exercise price of such options shall in no event be
less than the Fair Market Value (as defined below) of the Common Stock as of the
date of grant of such options.
3. Eligibility.
(a) General. Options and Restricted Shares may be granted to persons
who are, at the time of grant, employees, officers or directors of, or
consultants or advisors to, the Corporation; provided, that Incentive Stock
Options may only be granted to individuals who are employees of the Corporation
(within the meaning of Section 3401(c) of the Code). A person who has been
granted an option or Restricted Shares may, if he or she is otherwise eligible,
be granted additional options or Restricted Shares if the Board of Directors
shall so determine.
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<PAGE>
(b) Grant of Options to Reporting Persons. From and after the
registration of the Common Stock of the Corporation under the Exchange Act, the
selection of a director or an officer who is a Reporting Person (as the terms
"director" and "officer" are defined for purposes of Rule 16b-3) as a recipient
of an option or Restricted Shares, the timing of the option or Restricted Share
grant, the exercise price of the option and the number of Restricted Shares or
shares subject to the option shall be determined either (i) by the Board of
Directors, or (ii) by a committee consisting of two or more "Non-Employee
Directors" having full authority to act in the matter. For the purposes of the
Plan, a director shall be deemed to be a "Non-Employee Director" only if such
person qualifies as a "Non-Employee Director" within the meaning of Rule 16b-3,
as such term is interpreted from time to time.
4. Stock Subject to Plan; Directors' Options.
(a) Stock Subject to Plan. The stock subject to options granted under
the Plan or grants of Restricted Shares shall be shares of authorized but
unissued or reacquired Common Stock. Subject to adjustment as provided in
Section 16 below, the maximum number of shares of Common Stock of the
Corporation which may be issued and sold under the Plan is 1,000,000 shares. If
any Restricted Shares shall be reacquired by the Company, forfeited or an option
granted under the Plan shall expire, terminate or is canceled for any reason
without having been exercised in full, the forfeited Restricted Shares or
unpurchased shares subject to such option shall again be available for
subsequent option or Restricted Share grants under the Plan. No employee shall
be granted options for more than 200,000 shares of Common Stock, or awarded more
than 50,000 Restricted Shares under the Plan in any one fiscal year of the
Corporation, subject to adjustments as provided in Section 16 of this Plan.
(b) Directors' Options. Directors of the Corporation who are not
employees or beneficial owners of 1% or more of the outstanding Common Stock of
the Company ("Eligible Directors") will automatically be granted a non-statutory
option ("Director Option") to purchase, on the date on which such person is
elected or appointed to the Board of Directors (in the case of Eligible
Directors who are elected or appointed to the Board of Directors after the date
of approval of this Plan by the stockholders), a one-time option to purchase
20,000 shares of Common Stock. The exercise price for each share subject to a
Director Option shall be equal to the Fair Market Value (as defined below) of
the Common Stock on the date of grant. Director Options shall become exercisable
40% after the second anniversary of the date of grant, 60% after the third
anniversary of the date of grant, 80% after the fourth anniversary of the date
of grant and 100% on the fifth anniversary of the date of grant and will expire
the earlier of 5 years after the date of grant or 90 days after the termination
of the director's service on the Board. This Section 4(b) shall not be amended
more than once every six months, other than to comport with changes in the Code,
the Employee Retirement Income Security Act, or the rules thereunder.
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<PAGE>
5. Forms of Option and Restricted Share Agreements.
As a condition to the grant of Restricted Shares or an option under the
Plan, each recipient of Restricted Shares or an option shall execute an option
or Restricted Share agreement in such form not inconsistent with the Plan as may
be approved by the Board of Directors. Such option or Restricted Share
agreements may differ among recipients.
6. Purchase Price.
(a) General. The purchase price per share of stock deliverable upon the
exercise of an option shall be determined by the Board of Directors at the time
of grant of such option; provided, however, that in the case of an Incentive
Stock Option, the exercise price shall not be less than 100% of the Fair Market
Value (as hereinafter defined) of such stock, at the time of grant of such
option, or less than 110% of such Fair Market Value in the case of options
described in Section 11(b) and further provided in the case of a non-statutory
option be at no less than 50% of Fair Market Value. "Fair Market Value" of a
share of Common Stock of the Corporation as of a specified date for the purposes
of the Plan shall mean the closing price of a share of the Common Stock on the
principal securities exchange on which such shares are traded on the day
immediately preceding the date as of which Fair Market Value is being
determined, or on the next preceding date on which such shares are traded if no
shares were traded on such immediately preceding day, or if the shares are not
traded on a securities exchange, Fair Market Value shall be deemed to be the
average of the high bid and low asked prices of the shares in the
over-the-counter market on the day immediately preceding the date as of which
Fair Market Value is being determined or on the next preceding date on which
such high bid and low asked prices were recorded. If the shares are not publicly
traded, Fair Market Value of a share of Common Stock (including in the case of
any repurchase of shares, any distributions with respect thereto which would be
repurchased with the shares) shall be determined in good faith by the Board of
Directors. In no case shall Fair Market Value be determined with regard to
restrictions other than restrictions which, by their terms, will never lapse.
The Board of Directors may also permit optionees, either on a selective or
aggregate basis, to simultaneously exercise options and sell the shares of
Common Stock thereby acquired, pursuant to a brokerage or similar arrangement,
approved in advance by the Board of Directors, and to use the proceeds from such
sale as payment of the purchase price of such shares.
(b) Payment of Purchase Price. Options granted under the Plan may
provide for the payment of the exercise price by delivery of cash or a check to
the order of the Corporation in an amount equal to the exercise price of such
options, or, to the extent provided in the applicable option agreement, (i) by
delivery to the Corporation of shares of Common Stock of the Corporation having
a Fair Market Value on the date of exercise equal in amount to the exercise
price of the options being exercised, (ii) by any other means (including,
without limitation, by delivery of a promissory note of the optionee payable on
such terms as are specified by the Board of Directors) which the Board of
Directors determines are consistent with the purpose of the Plan and with
applicable laws and regulations (including, without limitation, the provisions
of Rule 16b-3 and Regulation T promulgated by the Federal Reserve Board) or
(iii) by any combination of such methods of payment.
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<PAGE>
7. Option Period.
Subject to earlier termination as provided in the Plan, each option and
all rights thereunder shall expire on such date as determined by the Board of
Directors and set forth in the applicable option agreement, provided, that such
date shall not be later than (10) ten years after the date on which the option
is granted.
8. Exercise of Options.
Each option granted under the Plan shall be exercisable either in full
or in installments at such time or times and during such period as shall be set
forth in the option agreement evidencing such option, subject to the provisions
of the Plan. No option granted to a Reporting Person for purposes of the
Exchange Act, however, shall be exercisable during the first six months after
the date of grant. Subject to the requirements in the immediately preceding
sentence, if an option is not at the time of grant immediately exercisable, the
Board of Directors may (i) in the agreement evidencing such option, provide for
the acceleration of the exercise date or dates of the subject option upon the
occurrence of specified events, and/or (ii) at any time prior to the complete
termination of an option, accelerate the exercise date or dates of such option,
unless it would violate section 422D(i) of the Code.
9. Nontransferability of Options.
No option granted under this Plan shall be assignable or otherwise
transferable by the optionee except by will or by the laws of descent and
distribution or pursuant to a qualified domestic relations order as defined in
the Code or Title I of the Employee Retirement Income Security Act, or the rules
thereunder. An option may be exercised during the lifetime of the optionee only
by the optionee. In the event an optionee dies during his employment by the
corporation or any of its subsidiaries, or during the three-month period
following the date of termination of such employment, his option shall
thereafter be exercisable, during the period specified to the full extent to
which such option was exercisable by the optionee at the time of his death
during the periods set forth in Section 10 or 11(d). If any optionee should
attempt to dispose of or encumber his or her options, other than in accordance
with the applicable terms of this Plan or the applicable option agreement, his
or her interest in such options shall terminate.
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<PAGE>
10. Effect of Termination of Employment or Other Relationship.
Except as provided in Section 11(d) with respect to Incentive Stock
Options, and subject to the provisions of the Plan, an optionee may exercise an
option (but only to the extent such option was exercisable at the time of
termination of the optionee's employment or other relationship with the
Corporation) at any time within three (3) months following the termination of
the optionee's employment or other relationship with the Corporation or within
one (1) year if such termination was due to the death or disability of the
optionee, but, except in the case of the optionee's death, in no event later
than the expiration date of the Option. If the termination of the optionee's
employment is for cause or is otherwise attributable to a breach by the optionee
of an employment or confidentiality or non-disclosure agreement, the option
shall expire immediately upon such termination. The Board of Directors shall
have the power to determine what constitutes a termination for cause or a breach
of an employment or confidentiality or non-disclosure agreement, whether an
optionee has been terminated for cause or has breached such an agreement, and
the date upon which such termination for cause or breach occurs. Any such
determinations shall be final and conclusive and binding upon the optionee.
11. Incentive Stock Options.
Options granted under the Plan which are intended to be Incentive Stock
Options shall be subject to the following additional terms and conditions:
(a) Express Designation. All Incentive Stock Options granted under the
Plan shall, at the time of grant, be specifically designated as such in the
option agreement covering such Incentive Stock Options.
(b) 10% Stockholder. If any employee to whom an Incentive Stock Option
is to be granted under the Plan is, at the time of the grant of such option, the
owner of stock possessing more than 10% of the total combined voting power of
all classes of stock of the Corporation (after taking into account the
attribution of stock ownership rules of Section 424(d) of the Code), then the
following special provisions shall be applicable to the Incentive Stock Option
granted to such individual:
(i) The purchase price per share of the Common Stock subject
to such Incentive Stock Option shall not be less than 110% of the Fair
Market Value of one share of Common Stock at the time of grant; and
(ii) the option exercise period shall not exceed five years
from the date of grant.
(c) Dollar Limitation. For so long as the Code shall so provide,
options granted to any employee under the Plan (and any other incentive stock
option plans of the Corporation) which are intended to constitute Incentive
Stock Options shall not constitute Incentive Stock Options to the extent that
such options, in the aggregate, become exercisable for the first time in
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<PAGE>
any one calendar year for shares of Common Stock with an aggregate Fair Market
Value, as of the respective date or dates of grant, of more than $100,000 (or
such other limitations as the Code may provide).
(d) Termination of Employment, Death or Disability. No Incentive Stock
Option may be exercised unless, at the time of such exercise, the optionee is,
and has been continuously since the date of grant of his or her option, employed
by the Corporation, except that:
(i) an Incentive Stock Option may be exercised within the
period of three months after the date the optionee ceases to be an
employee of the Corporation (or within such lesser period as may be
specified in the applicable option agreement), provided, that the
agreement with respect to such option may designate a longer exercise
period and that the exercise after such three-month period shall be
treated as the exercise of a non-statutory option under the Plan;
(ii) if the optionee dies while in the employ of the
Corporation, or within three months after the optionee ceases to be
such an employee, the Incentive Stock Option may be exercised by the
person to whom it is transferred by will or the laws of descent and
distribution within the period of one year after the date of death (or
within such lesser period as may be specified in the applicable option
agreement); and
(iii) if the optionee becomes disabled (within the meaning of
Section 22(e)(3) of the Code or any successor provisions thereto) while
in the employ of the Corporation, the Incentive Stock Option may be
exercised within the period of one year after the date the optionee
ceases to be such an employee because of such disability (or within
such lesser period as may be specified in the applicable option
agreement).
For all purposes of the Plan and any option granted hereunder, "employment"
shall be defined in accordance with the provisions of Section 1.421-7(h) of the
Incoming Tax Regulations (or any successor regulations). Notwithstanding the
foregoing provisions no Incentive Stock Option may be exercised after its
expiration date.
12. Restricted Shares.
(a) Awards. The Board of Directors may from time to time in its
discretion award Restricted Shares to officers and other key employees and may
determine the number of Restricted Shares awarded and the terms and conditions
of, and the amount of payment, if any, to be made by the employee for such
Restricted Shares. Each award of Restricted Shares will be evidenced by a
written agreement executed on behalf of the Corporation by one or more members
of the Board of Directors and containing terms and conditions not inconsistent
with the Plan as the Board of Directors shall determine to be appropriate in its
sole discretion.
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<PAGE>
(b) Restricted Period; Lapse of Restrictions. At the time an award of
Restricted Shares is made, the Board of Directors shall establish a period of
time (the "Restricted Period") applicable to such award which shall not be less
than one year nor more than ten years. Each award of Restricted Shares may have
a different Restricted Period. In lieu of establishing a Restricted Period, the
Committee may establish restrictions based only on the achievement of specified
performance measures. At the time an award is made, the Board of Directors may,
in its discretion, prescribe conditions for the incremental lapse of
restrictions during the Restricted Period and for the lapse of termination of
restrictions upon the occurrence of other conditions in addition to or other
than the expiration of the Restricted Period with respect to all or any portion
of the Restricted Shares. Such conditions may include, without limitation, the
death or disability of the employee to whom Restricted Shares are awarded,
retirement of the employee pursuant to normal or early retirement under any
retirement plan of the Corporation or termination by the Corporation of the
employee's employment other than for cause, or the occurrence of a change in
control of the Corporation. Such conditions may also include performance
measures, which, in the case of any such award of Restricted Shares to an
employee who is a "covered employee" within the meaning of Section 162(m) of the
Code, shall be based on one or more of the following criteria: earnings per
share, market value per share, return on invested capital, return on operating
assets and return on equity. The Board of Directors may also, in its discretion,
shorten or terminate the Restricted Period or waive any conditions for the lapse
or termination of restrictions with respect to all or any portion of the
Restricted Shares at any time after the date the award is made.
(c) Rights of Holder; Limitations Thereon. Upon an award of Restricted
Shares, a stock certificate representing the number of Restricted Shares awarded
to the employee shall be registered in the employee's name and, at the
discretion of the Board of Directors, will be either delivered to the employee
with an appropriate legend or held in custody by the Corporation or a bank for
the employee's account. The employee shall generally have the rights and
privileges of a stockholder as to such Restricted Shares, including the right to
vote such Restricted Shares, except that the following restrictions shall apply:
(i) with respect to each Restricted Share, the employee shall not be entitled to
delivery of an unlegended certificate until the expiration nor termination of
the Restricted Period, and the satisfaction of any other conditions prescribed
by the Board of Directors, relating to such Restricted Share; (ii) with respect
to each Restricted Share, such share may not be sold, transferred, assigned,
pledged, or otherwise encumbered or disposed of until the expiration of the
Restricted Period, and the satisfaction of any other conditions prescribed by
the Board of Directors, relating to such Restricted Share (except, subject to
the provisions of the employee's stock restriction agreement, by will or the
laws of descent and distribution or pursuant to a qualified domestic relations
order as defined by the Code or Title I of ERISA or the rules promulgated
thereunder) and (iii) all of the Restricted Shares as to which restrictions have
not at the time lapsed shall be forfeited and all rights of the employee to such
Restricted Shares shall terminate without further obligation on the part of the
Corporation unless the employee has remained a regular full-time employee of the
Corporation or any of its subsidiaries, or a consultant to the Corporation or a
subsidiary under a post-employment consulting arrangement, until the expiration
or termination of the Restricted Period and the satisfaction of any other
conditions prescribed by the Board of Directors applicable to such Restricted
Shares. Upon the forfeiture of any Restricted Shares, such forfeited shares
shall be
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<PAGE>
transferred to the Corporation without further action by the employee.
At the discretion of the Board of Directors, cash and stock dividends with
respect to the Restricted Shares may be either currently paid or withheld by the
Corporation for the employee's account, and interest may be paid on the amount
of cash dividends withheld at a rate and subject to such terms as determined by
the Board of Directors. The employee shall have the same rights and privileges,
and be subject to the same restrictions, with respect to any shares received
pursuant to Section 16 hereof.
(d) Delivery of Unrestricted Shares. Upon the expiration or termination
of the Restricted Period and the satisfaction of any other conditions prescribed
by the Board of Directors, the restrictions applicable to the Restricted Shares
shall lapse and a stock certificate for the number of Restricted Shares with
respect to which the restrictions have lapsed shall be delivered, free of all
such restrictions, except any that may be imposed by law including without
limitation securities laws, to the employee or the employee's beneficiary or
estate, as the case may be. The Corporation shall not be required to deliver any
fractional share of Common Stock but will pay, in lieu thereof, the fair market
value (determined as of the date the restrictions lapse) of such fractional
share to the employee or the employee's beneficiary or estate, as the case may
be.
13. Additional Provisions.
(a) Additional Provisions. The Board of Directors may, in its sole
discretion, include additional provisions in option or Restricted Stock
agreements covering options or Restricted Stock granted under the Plan,
including without limitation restrictions on transfer, repurchase rights, rights
of first refusal, commitments to pay cash bonuses, to make, arrange for or
guaranty loans or to transfer other property to optionees upon exercise of
options, or such other provisions as shall be determined by the Board of
Directors; provided, that such additional provisions shall not be inconsistent
with any other term or condition of the Plan and such additional provisions
shall not cause any Incentive Stock Option granted under the Plan to fail to
qualify as an Incentive Stock Option within the meaning of Section 422 of the
Code.
(b) Acceleration, Extension, Etc. The Board of Directors may, in its
sole discretion, (i) accelerate the date or dates on which all or any particular
option or options granted under the Plan may be exercised or (ii) extend the
dates during which all, or any particular, option or options granted under the
Plan may be permitted if it would cause the Plan to fail to comply with Section
422 of the Code or with Rule 16b-3 (if applicable).
14. General Restrictions.
(a) Investment Representations. The Corporation may require any person
to whom Restricted Shares or an option is granted, as a condition of receiving
such Restricted Shares or exercising such option, to give written assurances in
substance and form satisfactory to the Corporation to the effect that such
person is acquiring the Restricted Shares or Common Stock subject to the option
for his or her own account for investment and not with any present intention
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<PAGE>
of selling or otherwise distributing the same, and to such other effects as the
Corporation deems necessary or appropriate in order to comply with federal and
applicable state securities laws, or with covenants or representations made by
the Corporation in connection with any public offering of its Common Stock.
(b) Compliance with Securities Law. Each option and grant of Restricted
Shares shall be subject to the requirement that if, at any time, counsel to the
Corporation shall determine that the listing, registration or qualification of
the Restricted Shares or shares subject to such option upon any securities
exchange or under any state or federal law, or the consent or approval of any
governmental or regulatory body, or that the disclosure of non-public
information or the satisfaction of any other condition is necessary as a
condition of, or in connection with the issuance or purchase of shares
thereunder, such Restricted Shares shall not be granted and such option may not
be exercised, in whole or in part, unless such listing, registration,
qualification, consent or approval, or satisfaction of such condition shall have
been effected or obtained on conditions acceptable to the Board of Directors.
Nothing herein shall be deemed to require the Corporation to apply for or to
obtain such listing, registration or qualification, or to satisfy such
condition.
15. Rights as a Stockholder.
The holder of an option shall have no rights as a stockholder with
respect to any shares covered by the option (including, without limitation, any
rights to receive dividends or non-cash distributions with respect to such
shares) until the date of issue of a stock certificate to him or her for such
shares. No adjustment shall be made for dividends or other rights for which the
record date is prior to the date such stock certificate is issued.
16. Adjustment Provisions for Recapitalization, Reorganizations and Related
Transactions.
(a) Recapitalization and Related Transactions. If, through or as a
result of any recapitalization, reclassification, stock dividend, stock split,
reverse stock split or other similar transaction, (i) the outstanding shares of
Common Stock are increased, decreased or exchanged for a different number or
kind of shares or other securities of the Corporation, or (ii) additional shares
or new or different shares or other non-cash assets are distributed with respect
to such shares of Common Stock or other securities, an appropriate and
proportionate adjustment shall be made in (x) the maximum number and kind of
shares reserved for issuance under the Plan, (y) the number and kind of
Restricted Shares granted and shares or other securities subject to any then
outstanding options under the Plan, and (z) the exercise price for each share
subject to any then outstanding options under the Plan, without changing the
aggregate purchase price as to which such options remain exercisable.
Notwithstanding the foregoing, no adjustment shall be made pursuant to this
Section 16 if such adjustment (i) would cause the Plan to fail to comply with
Section 422 of the Code or with Rule 16b-3 or (ii) would be considered as the
adoption of a new plan requiring stockholder approval.
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(b) Reorganization, Merger and Related Transactions. If the Corporation
shall be the surviving corporation in any reorganization, merger or
consolidation of the Corporation with one or more other corporations, any then
outstanding Restricted Shares or option granted pursuant to the Plan shall
pertain to and apply to the securities to which a holder of the number of shares
of Common Stock subject to such Restricted Shares or options would have been
entitled immediately following such reorganization, merger, or consolidation,
with a corresponding proportionate adjustment of the purchase price as to which
such options may be exercised so that the aggregate purchase price as to which
such options may be exercised shall be the same as the aggregate purchase price
as to which such options may be exercised for the shares remaining subject to
the options immediately prior to such reorganization, merger, or consolidation.
(c) Board Authority to Make Adjustments. Any adjustments made under
this Section 16 will be made by the Board of Directors, whose determination as
to what adjustments, if any, will be made and the extent thereof will be final,
binding and conclusive. No fractional shares will be issued under the Plan on
account of any such adjustments.
17. Merger, Consolidation, Asset Sale, Liquidation, Etc.
(a) General. In the event of a consolidation or merger in which the
Corporation is not the surviving corporation, or sale of all or substantially
all of the assets of the Corporation in which outstanding shares of Common Stock
are exchanged for securities, cash or other property of any other corporation or
business entity or in the event of a liquidation of the Corporation
(collectively, a "Corporate Transaction"), the Board of Directors of the
Corporation, or the board of directors of any corporation assuming the
obligations of the Corporation, may, in its discretion, take any one or more of
the following actions, as to outstanding options: (i) provide that such
Restricted Shares or options shall be assumed, or equivalent Restricted Shares
or options shall be substituted, by the acquiring or succeeding corporation (or
an affiliate thereof), provided that any such options substituted for Incentive
Stock Options shall meet the requirements of Section 424(a) of the Code, (ii)
upon written notice, provide that all unexercised options and Restricted Shares
will terminate immediately prior to the consummation of such transaction unless
such options are exercised by the optionee within a specified period following
the date of such notice, (iii) in the event of a Corporate Transaction under the
terms of which holders of the Common Stock of the Corporation will receive upon
consummation thereof a cash payment for each share surrendered in the Corporate
Transaction (the "Transaction Price"), make or provide for a cash payment to the
optionees equal to the difference between (A) the Transaction Price times the
number of shares of Common Stock subject to such outstanding options (to the
extent then exercisable at prices not in excess of the Transaction Price) and
(B) the aggregate exercise price of all such outstanding options in exchange for
the termination of such options, and (iv) provide that all restrictions on
Restricted Shares shall lapse and all or any outstanding options shall become
exercisable in full immediately prior to such event.
(b) Substitute Restricted Shares or Options. The Corporation may grant
Restricted Shares or options under the Plan in substitution for Restricted
Shares or options held by employees of another corporation who become employees
of the Corporation, or a subsidiary of
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the Corporation, as the result of a merger or consolidation of the employing
corporation with the Corporation or a subsidiary of the Corporation, or as a
result of the acquisition by the Corporation, or one of its subsidiaries, of
property or stock of the employing corporation. The Corporation may direct that
substitute Restricted Shares or options be granted on such terms and conditions
as the Board of Directors considers appropriate in the circumstances.
18. No Special Employment Rights.
Nothing contained in the Plan or in any Restricted Share or option
agreement shall confer upon any holder of Restricted Shares or optionee any
right with respect to the continuation of his or her employment by the
Corporation or interfere in any way with the right of the Corporation at any
time to terminate such employment or to increase or decrease the compensation of
the optionee.
19. Other Employee Benefits.
Except as to plans which by their terms include such amounts as
compensation, the amount of any compensation deemed to be received by an
employee as a result of the grant of Restricted Shares or lapse of restrictions
thereon, the exercise of an option or the sale of shares received upon such
exercise will not constitute compensation with respect to which any other
employee benefits of such employee are determined, including, without
limitation, benefits under any bonus, pension, profit-sharing, life insurance or
salary continuation plan, except as otherwise specifically determined by the
Board of Directors.
20. Amendment of the Plan.
(a) The Board of Directors may at any time, and from time to time,
modify or amend the Plan in any respect, except that if at any time the approval
of the stockholders of the Corporation is required under Section 422 of the Code
or any successor provision with respect to Incentive Stock Options, or under
Rule 16b-3, the Board of Directors may not effect such modification or amendment
without such approval.
(b) The termination or any modification or amendment of the Plan shall
not, without the consent of an optionee or holder of Restricted Shares, affect
his or her rights under an option or grant of Restricted Shares previously
granted to him or her. With the consent of the optionee or holder of Restricted
Shares affected, the Board of Directors may amend outstanding option or
Restricted Share agreements in a manner not inconsistent with the Plan. The
Board of Directors shall have the right to amend or modify (i) the terms and
provisions of the Plan and of any outstanding Incentive Stock Options granted
under the Plan to the extent necessary to qualify any or all such options for
such favorable federal income tax treatment (including deferral of taxation upon
exercise) as may be afforded incentive stock options under Section 422 of the
Code and (ii)
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the terms and provisions of the Plan and of any outstanding option or grant of
Restricted Shares to the extent necessary to ensure the qualification of the
Plan under Rule 16b-3.
21. Withholding.
(a) The Corporation shall have the right to deduct from payments of any
kind otherwise due to the optionee or holder of Restricted Shares any federal,
state or local taxes of any kind required by law to be withheld with respect to
any shares issued upon exercise of options or lapse of restrictions on
Restricted Shares under the Plan. Subject to the prior approval of the
Corporation, which may be withheld by the Corporation in its sole discretion,
the optionee or holder of Restricted Shares may elect to satisfy such
obligations, in whole or in part, (i) by causing the Corporation to withhold
shares of Common Stock otherwise issuable pursuant to the exercise of an option
or lapse of restrictions on Restricted Shares or (ii) by delivering to the
Corporation shares of Common Stock already owned by the optionee or holder of
Restricted Shares. The shares so delivered or withheld shall have a Fair Market
Value equal to such withholding obligation as of the date that the amount of tax
to be withheld is to be determined. An optionee who has made an election
pursuant to this Section 21(a) may satisfy his or her withholding obligation
only with shares of Common Stock which are not subject to any repurchase,
forfeiture, unfulfilled vesting or other similar requirements.
(b) The acceptance of shares of Common Stock upon exercise of an
Incentive Stock Option shall constitute an agreement by the optionee (i) to
notify the Corporation if any or all of such shares are disposed of by the
optionee within two years from the date the option was granted or within one
year from the date the shares were transferred to the optionee pursuant to the
exercise of the option, and (ii) if required by law, to remit to the
Corporation, at the time of and in the case of any such disposition, an amount
sufficient to satisfy the Corporation's federal, state and local withholding tax
obligations with respect to such disposition, whether or not, as to both (i) and
(ii), the optionee is in the employ of the Corporation at the time of such
disposition.
(c) Notwithstanding the foregoing, in the case of a Reporting Person
whose options have been granted in accordance with the provisions of Section
3(b) herein, no election to use shares for the payment of withholding taxes
shall be effective unless made in compliance with any applicable requirements of
Rule 16b-3.
22. Cancellation and New Grant of Options, Etc.
The Board of Directors shall have the authority to effect, at any time
and from time to time, with the consent of the affected optionees or holder of
Restricted Shares: (i) the cancellation of any or all outstanding options under
the Plan and the grant in substitution therefor of new options under the Plan
covering the same or different numbers of shares of Common Stock and having an
option exercise price per share which may be lower or higher than the exercise
price per share of the canceled options or (ii) the amendment of the terms of
any and all
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outstanding options under the Plan to provide an option exercise price per share
which is higher or lower than the then current exercise price per share of such
outstanding options.
23. Effective Date and Duration of the Plan.
(a) Effective Date. The Plan shall become effective when adopted by the
Board of Directors, but no Incentive Stock Option granted under the Plan shall
become exercisable unless and until the Plan shall have been approved by the
Corporation's stockholders. If such stockholder approval is not obtained within
twelve (12) months after the date of the Board's adoption of the Plan, no
options previously granted under the Plan shall be deemed to be Incentive Stock
Options and no Incentive Stock Options shall be granted thereafter. Amendments
to the Plan not requiring stockholder approval shall become effective when
adopted by the Board of Directors; amendments requiring stockholder approval (as
provided in Section 20) shall become effective when adopted by the Board of
Directors, but no Incentive Stock Option granted after the date of such
amendment shall become exercisable (to the extent that such amendment to the
Plan was required to enable the Corporation to grant such Incentive Stock Option
to a particular optionee) unless and until such amendment shall have been
approved by the Corporation's stockholders. If such stockholder approval is not
obtained within twelve (12) months of the Board's adoption of such amendment,
any Incentive Stock Options granted on or after the date of such amendment shall
terminate to the extent that such amendment to the Plan was required to enable
the Corporation to grant such option to a particular optionee. Subject to this
limitation, options may be granted under the Plan at any time after the
effective date and before the date fixed for termination of the Plan.
(b) Termination. Unless sooner terminated in accordance with Section
17, the Plan shall terminate upon the earlier of (i) the close of business on
the day next preceding the tenth anniversary of the date of its adoption by the
Board of Directors, or (ii) the date on which all shares available for issuance
under the Plan shall have been issued pursuant to the exercise or cancellation
of Restricted Shares or options granted under the Plan. If the date of
termination is determined under (i) above, then Restricted Shares or options
outstanding on such date shall continue to have force and effect in accordance
with the provisions of the instruments evidencing such Restricted Shares or
options.
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24. Governing Law.
The provisions of this Plan shall be governed and construed in
accordance with the laws of the State of Delaware without regard to the
principles of conflicts of laws.
25. Share Amounts.
All share amounts set forth in this Plan shall reflect the stock
dividend approved by the Board of Directors on the date of approval of this
Plan.
Adopted by the Board of Directors on July 13, 1998
<PAGE>
EXECUTIVE SEVERANCE AGREEMENT-Walter O. Fredericks
AGREEMENT, dated as of January 2, 1992, by and between Lifecodes
Corporation, a New York corporation having offices at 550 West Avenue, Stamford,
Connecticut 06902 (the "Company"), and Walter O. Fredericks, whose residence
address is Brook Farm Road, Bedford, New York 10506 (the "Executive).
The Company's Board of Directors considers the continued services of key
executives of and consultants to the Company to be in the best interest of the
Company and its stockholders.
The Company's Board of Directors desires to assure and has determined that
it is appropriate and in the best interests of the Company and its stockholders
to reinforce and encourage the continued attention and dedication of key
executives of and consultants to the Company to their duties without personal
distraction of conflict of interest in circumstances arising from the
possibility or occurrence of a change in control of the Company.
In consideration of the premises and the covenants and agreements contained
herein, and other good and valuable consideration, the Company and the Executive
agree as follows:
1. Services During Certain Events. In the event a proposal is made to
effect a Change in Control (as defined in Section 3 hereof), the Executive
agrees that he will not voluntarily leave the employ of or cancel his
consultancy with the Company and will render the services contemplated in the
recitals of this Agreement until such proposal for a Change in Control is
terminated or abandoned or until six (6) months after a Change in Control has
occurred.
2. Termination. For purposes of this Agreement, a "Termination" shall be
deemed to have occurred in the event that the Executive's employment by or
consultancy with the Company is terminated at any time from six months prior to
a Change in Control to two years following a Change in Control;
(a) by the Company for reasons other than "cause" (as defined in
Section 6 hereof), "disability" (as defined in Section 6 hereof), death or
attainment of age 65;
(b) by the Executive following the occurrence of any of the following
events without the Executive's consent:
(i) the assignment of the Executive to any duties or
responsibilities that are inconsistent with his position, duties,
responsibilities or status immediately preceding such change in
Control, or a change in his reporting responsibilities or
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titles within the Company in effect at such time resulting in a
reduction of his responsibilities or position at the Company;
(ii) a reduction of the Executive's annual salary unless it is
part of a general salary reduction plan affecting other Executives;
(iii) a material reduction in any year if the ratio of incentive
compensation or fringe benefits received by the Executive pursuant to
any bonus, incentive or fringe benefit plan (the "Benefit Plans") to
his annual salary in such year, which reduction is greater than the
average reduction in the ratio of such incentive compensation or
fringe benefits to annual salary received by all participants under
the Benefit Plans; as used here, adjustments to incentive compensation
based upon personal or general business performance will not be
considered material;
(iv) a material increase in the amount of travel required of the
Executive in connection with his employment by the Company, or the
transfer of the Executive to a location requiring a change in his
residence; or
(v) any failure by the Company to comply with and satisfy Section
8 of this Agreement; or
(c) by the Executive, if he shall determine in good faith (and give
written notice to the Company's Board of Directors specifying what it is
that prevents him from performing his duties) that due to the Change in
Control (including any changes in circumstances at the Company that
directly of indirectly affect the Executive's position, duties,
responsibilities or status immediately preceding the change in Control) he
is no longer able effectively to discharge his duties and responsibilities
and the situation is not remedied to the reasonable satisfaction of the
Executive within 30 days of receipt by the Company of written notice from
the Executive of such determination.
3. Change in Control. For purposes of this Agreement, a "Change in Control"
of the Company shall be deemed to have occurred if:
(a) the stockholders of the Company shall approve (i) any
consolidation or merger of the Company or any subsidiary of the Company
where (A) the stockholders of the Company, immediately prior to such
consolidation or merger, would not, immediately after such consolidation or
merger, beneficially own, directly or indirectly, Voting Securities (as
defined below) representing in the aggregate more than 50% of the combined
voting power of the Voting Securities of the surviving entity (or of its
ultimate parent corporation, if any) or (B) the members of the Board of
Directors of the Company, immediately prior to the consolidation or
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merger, would not, immediately after the consolidation or merger,
constitute a majority of the Board of Directors of the corporation issuing
cash or securities in the consolidation or merger (or of its ultimate
parent corporation, if any) or (ii) any sale, lease, exchange or other
transfer (in one transaction or a series of transactions contemplated or
arranged by any party as a single plan) of all or substantially all of the
assets of the Company;
(b) individuals who, as of the date hereof, constitute the entire
Board of Directors of the Company (the "Incumbent Directors") cease for any
reason to constitute a majority of the Board, provided that any individual
becoming a director subsequent to the date hereof whose election, or
nomination for election by the Company's stockholders, was approved by a
vote of at least a majority of the then Incumbent Directors (other than an
election or nomination of an individual whose assumption of office is the
result of an actual or threatened election contest relating to the election
of directors of the Company, as such terms are used in Rule 14a-11 under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), shall
be, for purposes of this Agreement, considered as though such individual
were an Incumbent Director; or
Notwithstanding the foregoing, a "Change in Control" of the Company shall not be
deemed to have occurred for purposes of the foregoing clause (c) solely as the
result of an acquisition of securities by the Company which, by reducing the
number of Common Shares of other Voting Securities outstanding increases (i) the
proportionate number of Common Shares beneficially owned by any person to more
than 50% of the Common Shares then outstanding or (ii) the proportionate voting
power represented by more than 50% of the combined voting power of all then
outstanding Voting Securities beneficially owned by any person to more than 50%
of the combined voting power of all then outstanding Voting Securities;
As used herein, the term "Voting Securities" when used with respect to a
corporation shall mean all then outstanding securities of such corporation
entitled under ordinary circumstances to vote in the election of the directors
of such corporation.
4. Rights and Benefits upon Termination or Change in Control.
(a) Severance Payment. Subject to Sections 6 and 11(a) hereof, in the
event of a Termination the Company shall pay the Executive, in twelve equal
monthly installments, or, at the Executive's option, in twenty-four (24)
equal monthly installments, beginning no later than 30 days following the
Executive's Termination, the greater of the Executive's annual salary or
annual consultancy payment as in effect immediately prior to (i) the
Termination or (ii) a Change in Control. The Company agrees to pay a
minimum of four (4) monthly installments.
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(b) Stock Options. Immediately prior to a change in Control, all
outstanding options to buy Company stock held by the Executive shall become
fully vested and immediately exercisable.
(c) Restricted Stock. Immediately prior to Change in Control, any (i)
repurchase agreement or (ii) right first refusal agreement between the
Executive and the Company with respect to the Company stock shall terminate
and the Executive's ownership of all shares of company stock shall fully
vest.
5. Certain Additional Payments by the Company. The Company covenants that
all material facts concerning the payments provided under this Agreement will be
adequately disclosed to the stockholders of the company and that it will use its
best efforts to obtain stockholder approval of the Agreement.
6. Conditions to the Obligations of the Company. The rights and benefits
provided in Section 4 hereof shall not accrue to the Executive if any of the
following events shall occur:
(a) The Company shall terminate the Executive's employment or
consultancy for "cause". For purposes of this Agreement, termination of
employment or consultancy for "cause" shall mean (i) the Executive's
conviction for, or plea of nolo contendere to, a crime involving moral
turpitude or a felony, (ii) the Executive's commission of an act of
personal dishonesty or breach of fiduciary duty resulting in substantial
personal profit in connection with the Executive's employment by the
company, (iii) willful and gross misconduct by the Executive in the course
of his duties, or (iv) deliberate and intentional continuing refusal by the
Executive to perform duties or responsibilities that are properly assigned
to the Executive (except for nonperformance because of incapacity due to
illness or accident).
(b) Following a Termination, the Executive shall not, upon receiving a
written request to do so, resign as a director and/or officer of the
Company and of each subsidiary and affiliate of the Company of which he is
then serving as a director and/or officer.
(c) The Company shall terminate the Executive's employment or
consultancy for "disability". For purposes of this Agreement, "disability"
shall mean a physical or psychological condition of the Executive which
renders him unable to perform his duties for the Company for a period for
six months or longer, as confirmed in writing by the Executive's
independent physician.
7. Arbitration and Expenses.
(a) Any dispute or controversy arising under or in connection with
this Agreement shall be settled by arbitration,
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conducted before a panel of three arbitrators in Stamford, Connecticut, in
accordance with the rules of the American Arbitration Association then in
effect. The arbitrators shall be approved by both the Company and the
Executive and their decision shall be binding on the parties and conclusive
for all purposes. Judgment may be entered on the arbitrators' award in any
court having jurisdiction. The expense of such arbitration shall be borne
by the Company.
(b) The Company shall pay or reimburse the Executive for all
reasonable costs and expenses (including, without limitation, attorneys'
fees) incurred by the Executive as a result of any claim, action or
proceeding (including a claim, action or proceeding in which the Executive
prevails against the Company) arising out of, or challenging the validity,
advisability or enforceability of, this Agreement or any provision hereof.
8. Successors. The Company shall use its reasonable best efforts to cause
any successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business or assets of the Company,
to assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. Upon transfer of the business the new entity will be
responsible for execution of this contract. As used herein, "the Company" shall
include any successor to all or substantially all of the Company's business or
assets which executes and delivers an agreement provided for in this Section 8
or which otherwise becomes bound by all the terms and provisions of this
Agreement by operation of law.
9. Notice of Termination. Any termination of the Executive's employment by
or consultancy with the Company shall be communicated to the Executive at the
address set forth above (or such other address as the Executive shall have
notified the Company in writing for purposes of this Agreement) in a written
notice and, except for termination of "cause", shall specify a termination date
no sooner than 15 days after the giving of such notice.
10. Term of Agreement. This Agreement shall terminate on December 31, 1994;
provided, however, that this Agreement shall automatically renew upon the
anniversary date for successive one-year terms unless the Company's Board of
Directors notifies the Executive in writing at least 30 days prior to a December
31st expiration date that it does not wish to renew the Agreement for an
additional term; and provided further that if a Change in Control occurs during
the term of an additional term of this Agreement, the Agreement shall continue
in effect for two years following such Change in Control.
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11. Miscellaneous.
(a) Duty to Mitigate; Other Severance Payments. If a Termination is
deemed to occur, the Executive shall during the one-year period subsequent
to his termination notify the Company of any employment when obtained, and
the severance payment provided under Section 4(a) hereof shall be offset by
any compensation which he receives from such employment during the one-year
period subsequent to his Termination. Furthermore, the severance payment
provided under Section 4(a) hereof shall also be offset by any other
severance payment which the Executive receives under any employment
agreement with the Company, including damages for breach of any such
agreement. Such mitigation shall not reduce the minimum four (4) month
severance as described in paragraph 4(a).
(b) Assignment. No right, benefit or interest hereunder shall be
subject to assignment, anticipation, alienation, sale, encumbrance, charge,
pledge, hypothecation or set-off in respect of any claim, debt or
litigation, or to execution, attachment, levy or similar process; provided,
however, that the Executive may assign any right, benefit or interest
hereunder if such assignment is permitted under the terms of any plan or
policy of insurance or annuity contract governing such right, benefit or
interest.
(c) Construction of Agreement. Nothing in this Agreement shall be
construed to amend any provision of any plan or policy of the Company. This
Agreement is not, and nothing herein shall be deemed to create, a
commitment of continued employment or consultancy of the Executive by the
Company.
(d) Amendment. This agreement may not be amended, modified or canceled
except by written agreement of the parties.
(e) Waiver. No provision of this Agreement may be waived except by a
writing signed by the party to be bound thereby.
(f) Severability. In the event that any provision or portion of this
Agreement shall be determined to be invalid or unenforceable for any
reason, the remaining provisions of this Agreement shall remain in full
force and effect to the fullest extent permitted by law.
(g) Taxes. Any payment or delivery required under this Agreement shall
be subject to all requirements of the law with regard to withholding of
taxes, filing, making of reports and the like, and the Company shall use
its best efforts to satisfy promptly all such requirements.
(h) Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of
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Connecticut.
(i) Entire Agreement. This Agreement sets forth the entire agreement
and understanding of the parties hereto with respect to the matters covered
hereby.
LIFECODES CORPORATION
By: /s/ Jacob Victor
-------------------------
Vice President
-------------------------
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EXECUTIVE SEVERANCE AGREEMENT
AGREEMENT, dated as of January 2, 1992, by and between Lifecodes
Corporation, a New York corporation having offices at 550 West Avenue, Stamford,
Connecticut 06902 (the "Company"), and Ivan Balazs, whose residence address is
21 Rock Ridge Circle, New Rochelle, New York 10804 (the "Executive).
The Company's Board of Directors considers the continued services of key
executives of and consultants to the Company to be in the best interest of the
Company and its stockholders.
The Company's Board of Directors desires to assure and has determined that
it is appropriate and in the best interests of the Company and its stockholders
to reinforce and encourage the continued attention and dedication of key
executives of and consultants to the Company to their duties without personal
distraction of conflict of interest in circumstances arising from the
possibility or occurrence of a change in control of the Company.
In consideration of the premises and the covenants and agreements contained
herein, and other good and valuable consideration, the Company and the Executive
agree as follows:
1. Services During Certain Events. In the event a proposal is made to
effect a Change in Control (as defined in Section 3 hereof), the Executive
agrees that he will not voluntarily leave the employ of or cancel his
consultancy with the Company and will render the services contemplated in the
recitals of this Agreement until such proposal for a Change in Control is
terminated or abandoned or until six (6) months after a Change in Control has
occurred.
2. Termination. For purposes of this Agreement, a "Termination" shall be
deemed to have occurred in the event that the Executive's employment by or
consultancy with the Company is terminated at any time from six months prior to
a Change in Control to two years following a Change in Control;
(a) by the Company for reasons other than "cause" (as defined in Section 6
hereof), "disability" (as defined in Section 6 hereof), death or attainment of
age 65;
(b) by the Executive following the occurrence of any of the following
events without the Executive's consent:
(i) the assignment of the Executive to any duties or responsibilities that
are inconsistent with his position, duties, responsibilities or status
immediately preceding such change in Control, or a change in his reporting
responsibilities or
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titles within the Company in effect at such time resulting in a reduction of his
responsibilities or position at the Company;
(ii) a reduction of the Executive's annual salary unless it is part of a
general salary reduction plan affecting other Executives;
(iii) a material reduction in any year if the ratio of incentive
compensation or fringe benefits received by the Executive pursuant to any bonus,
incentive or fringe benefit plan (the "Benefit Plans") to his annual salary in
such year, which reduction is greater than the average reduction in the ratio of
such incentive compensation or fringe benefits to annual salary received by all
participants under the Benefit Plans; as used here, adjustments to incentive
compensation based upon personal or general business performance will not be
considered material;
(iv) a material increase in the amount of travel required of the Executive
in connection with his employment by the Company, or the transfer of the
Executive to a location requiring a change in his residence; or
(v) any failure by the Company to comply with and satisfy Section 8 of this
Agreement; or
(c) by the Executive, if he shall determine in good faith (and give written
notice to the Company's Board of Directors specifying what it is that prevents
him from performing his duties) that due to the Change in Control (including any
changes in circumstances at the Company that directly of indirectly affect the
Executive's position, duties, responsibilities or status immediately preceding
the change in Control) he is no longer able effectively to discharge his duties
and responsibilities and the situation is not remedied to the reasonable
satisfaction of the Executive within 30 days of receipt by the Company of
written notice from the Executive of such determination.
3. Change in Control. For purposes of this Agreement, a "Change in Control"
of the Company shall be deemed to have occurred if:
(a) the stockholders of the Company shall approve (i) any consolidation or
merger of the Company or any subsidiary of the Company where (A) the
stockholders of the Company, immediately prior to such consolidation or merger,
would not, immediately after such consolidation or merger, beneficially own,
directly or indirectly, Voting Securities (as defined below) representing in the
aggregate more than 50% of the combined voting power of the Voting Securities of
the surviving entity (or of its ultimate parent corporation, if any) or (B) the
members of the Board of Directors of the Company, immediately prior to the
consolidation or
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merger, would not, immediately after the consolidation or merger, constitute a
majority of the Board of Directors of the corporation issuing cash or securities
in the consolidation or merger (or of its ultimate parent corporation, if any)
or (ii) any sale, lease, exchange or other transfer (in one transaction or a
series of transactions contemplated or arranged by any party as a single plan)
of all or substantially all of the assets of the Company;
(b) individuals who, as of the date hereof, constitute the entire Board of
Directors of the Company (the "Incumbent Directors") cease for any reason to
constitute a majority of the Board, provided that any individual becoming a
director subsequent to the date hereof whose election, or nomination for
election by the Company's stockholders, was approved by a vote of at least a
majority of the then Incumbent Directors (other than an election or nomination
of an individual whose assumption of office is the result of an actual or
threatened election contest relating to the election of directors of the
Company, as such terms are used in Rule 14a-11 under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), shall be, for purposes of this
Agreement, considered as though such individual were an Incumbent Director; or
Notwithstanding the foregoing, a "Change in Control" of the Company shall
not be deemed to have occurred for purposes of the foregoing clause (c) solely
as the result of an acquisition of securities by the Company which, by reducing
the number of Common Shares of other Voting Securities outstanding increases (i)
the proportionate number of Common Shares beneficially owned by any person to
more than 50% of the Common Shares then outstanding or (ii) the proportionate
voting power represented by more than 50% of the combined voting power of all
then outstanding Voting Securities beneficially owned by any person to more than
50% of the combined voting power of all then outstanding Voting Securities;
As used herein, the term "Voting Securities" when used with respect to a
corporation shall mean all then outstanding securities of such corporation
entitled under ordinary circumstances to vote in the election of the directors
of such corporation.
4. Rights and Benefits upon Termination or Change in Control.
(a) Severance Payment. Subject to Sections 6 and 11(a) hereof, in the event
of a Termination the Company shall pay the Executive, in twelve equal monthly
installments, or, at the Executive's option, in twenty-four (24) equal monthly
installments, beginning no later than 30 days following the Executive's
Termination, the greater of the Executive's annual salary or annual consultancy
payment as in effect immediately prior to (i) the Termination or (ii) a Change
in Control. The Company agrees to pay a minimum of four (4) monthly
installments.
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(b) Stock Options. Immediately prior to a change in Control, all
outstanding options to buy Company stock held by the Executive shall become
fully vested and immediately exercisable.
(c) Restricted Stock. Immediately prior to Change in Control, any (i)
repurchase agreement or (ii) right first refusal agreement between the Executive
and the Company with respect to the Company stock shall terminate and the
Executive's ownership of all shares of company stock shall fully vest.
5. Certain Additional Payments by the Company. The Company covenants that
all material facts concerning the payments provided under this Agreement will be
adequately disclosed to the stockholders of the company and that it will use its
best efforts to obtain stockholder approval of the Agreement.
6. Conditions to the Obligations of the Company. The rights and benefits
provided in Section 4 hereof shall not accrue to the Executive if any of the
following events shall occur:
(a) The Company shall terminate the Executive's employment or consultancy
for "cause". For purposes of this Agreement, termination of employment or
consultancy for "cause" shall mean (i) the Executive's conviction for, or plea
of nolo contendere to, a crime involving moral turpitude or a felony, (ii) the
Executive's commission of an act of personal dishonesty or breach of fiduciary
duty resulting in substantial personal profit in connection with the Executive's
employment by the company, (iii) willful and gross misconduct by the Executive
in the course of his duties, or (iv) deliberate and intentional continuing
refusal by the Executive to perform duties or responsibilities that are properly
assigned to the Executive (except for nonperformance because of incapacity due
to illness or accident).
(b) Following a Termination, the Executive shall not, upon receiving a
written request to do so, resign as a director and/or officer of the Company and
of each subsidiary and affiliate of the Company of which he is then serving as a
director and/or officer.
(c) The Company shall terminate the Executive's employment or consultancy
for "disability". For purposes of this Agreement, "disability" shall mean a
physical or psychological condition of the Executive which renders him unable to
perform his duties for the Company for a period for six months or longer, as
confirmed in writing by the Executive's independent physician.
7. Arbitration and Expenses.
(a) Any dispute or controversy arising under or in connection with this
Agreement shall be settled by arbitration,
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conducted before a panel of three arbitrators in Stamford, Connecticut, in
accordance with the rules of the American Arbitration Association then in
effect. The arbitrators shall be approved by both the Company and the Executive
and their decision shall be binding on the parties and conclusive for all
purposes. Judgment may be entered on the arbitrators' award in any court having
jurisdiction. The expense of such arbitration shall be borne by the Company.
(b) The Company shall pay or reimburse the Executive for all reasonable
costs and expenses (including, without limitation, attorneys' fees) incurred by
the Executive as a result of any claim, action or proceeding (including a claim,
action or proceeding in which the Executive prevails against the Company)
arising out of, or challenging the validity, advisability or enforceability of,
this Agreement or any provision hereof.
8. Successors. The Company shall use its reasonable best efforts to cause
any successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business or assets of the Company,
to assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. Upon transfer of the business the new entity will be
responsible for execution of this contract. As used herein, "the Company" shall
include any successor to all or substantially all of the Company's business or
assets which executes and delivers an agreement provided for in this Section 8
or which otherwise becomes bound by all the terms and provisions of this
Agreement by operation of law.
9. Notice of Termination. Any termination of the Executive's employment by
or consultancy with the Company shall be communicated to the Executive at the
address set forth above (or such other address as the Executive shall have
notified the Company in writing for purposes of this Agreement) in a written
notice and, except for termination of "cause", shall specify a termination date
no sooner than 15 days after the giving of such notice.
10. Term of Agreement. This Agreement shall terminate on December 31, 1994;
provided, however, that this Agreement shall automatically renew upon the
anniversary date for successive one-year terms unless the Company's Board of
Directors notifies the Executive in writing at least 30 days prior to a December
31st expiration date that it does not wish to renew the Agreement for an
additional term; and provided further that if a Change in Control occurs during
the term of an additional term of this Agreement, the Agreement shall continue
in effect for two years following such Change in Control.
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11. Miscellaneous.
(a) Duty to Mitigate; Other Severance Payments. If a Termination is deemed
to occur, the Executive shall during the one-year period subsequent to his
termination notify the Company of any employment when obtained, and the
severance payment provided under Section 4(a) hereof shall be offset by any
compensation which he receives from such employment during the one-year period
subsequent to his Termination. Furthermore, the severance payment provided under
Section 4(a) hereof shall also be offset by any other severance payment which
the Executive receives under any employment agreement with the Company,
including damages for breach of any such agreement. Such mitigation shall not
reduce the minimum four (4) month severance as described in paragraph 4(a).
(b) Assignment. No right, benefit or interest hereunder shall be subject to
assignment, anticipation, alienation, sale, encumbrance, charge, pledge,
hypothecation or set-off in respect of any claim, debt or litigation, or to
execution, attachment, levy or similar process; provided, however, that the
Executive may assign any right, benefit or interest hereunder if such assignment
is permitted under the terms of any plan or policy of insurance or annuity
contract governing such right, benefit or interest.
(c) Construction of Agreement. Nothing in this Agreement shall be construed
to amend any provision of any plan or policy of the Company. This Agreement is
not, and nothing herein shall be deemed to create, a commitment of continued
employment or consultancy of the Executive by the Company.
(d) Amendment. This agreement may not be amended, modified or canceled
except by written agreement of the parties.
(e) Waiver. No provision of this Agreement may be waived except by a
writing signed by the party to be bound thereby.
(f) Severability. In the event that any provision or portion of this
Agreement shall be determined to be invalid or unenforceable for any reason, the
remaining provisions of this Agreement shall remain in full force and effect to
the fullest extent permitted by law.
(g) Taxes. Any payment or delivery required under this Agreement shall be
subject to all requirements of the law with regard to withholding of taxes,
filing, making of reports and the like, and the Company shall use its best
efforts to satisfy promptly all such requirements.
(h) Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of
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Connecticut.
(i) Entire Agreement. This Agreement sets forth the entire agreement and
understanding of the parties hereto with respect to the matters covered hereby.
LIFECODES CORPORATION
By: /s/ Walter Fredericks
---------------------------------
President, CEO
<PAGE>
EXECUTIVE SEVERANCE AGREEMENT
AGREEMENT, dated as of January 2, 1992, by and between Lifecodes
Corporation, a New York corporation having offices at 550 West Avenue, Stamford,
Connecticut 06902 (the "Company"), and Jacob Victor, whose residence address is
25 Pleasant Avenue, Passaic, New Jersey 07055 (the "Executive).
The Company's Board of Directors considers the continued services of key
executives of and consultants to the Company to be in the best interest of the
Company and its stockholders.
The Company's Board of Directors desires to assure and has determined that
it is appropriate and in the best interests of the Company and its stockholders
to reinforce and encourage the continued attention and dedication of key
executives of and consultants to the Company to their duties without personal
distraction of conflict of interest in circumstances arising from the
possibility or occurrence of a change in control of the Company.
In consideration of the premises and the covenants and agreements contained
herein, and other good and valuable consideration, the Company and the Executive
agree as follows:
1. Services During Certain Events. In the event a proposal is made to
effect a Change in Control (as defined in Section 3 hereof), the Executive
agrees that he will not voluntarily leave the employ of or cancel his
consultancy with the Company and will render the services contemplated in the
recitals of this Agreement until such proposal for a Change in Control is
terminated or abandoned or until six (6) months after a Change in Control has
occurred.
2. Termination. For purposes of this Agreement, a "Termination" shall be
deemed to have occurred in the event that the Executive's employment by or
consultancy with the Company is terminated at any time from six months prior to
a Change in Control to two years following a Change in Control;
(a) by the Company for reasons other than "cause" (as defined in
Section 6 hereof), "disability" (as defined in Section 6 hereof), death or
attainment of age 65;
(b) by the Executive following the occurrence of any of the following
events without the Executive's consent:
(i) the assignment of the Executive to any duties or
responsibilities that are inconsistent with his position, duties,
responsibilities or status immediately preceding such change in
Control, or a change in his reporting responsibilities or
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titles within the Company in effect at such time resulting in a
reduction of his responsibilities or position at the Company;
(ii) a reduction of the Executive's annual salary unless it is
part of a general salary reduction plan affecting other Executives;
(iii) a material reduction in any year if the ratio of incentive
compensation or fringe benefits received by the Executive pursuant to
any bonus, incentive or fringe benefit plan (the "Benefit Plans") to
his annual salary in such year, which reduction is greater than the
average reduction in the ratio of such incentive compensation or
fringe benefits to annual salary received by all participants under
the Benefit Plans; as used here, adjustments to incentive compensation
based upon personal or general business performance will not be
considered material;
(iv) a material increase in the amount of travel required of the
Executive in connection with his employment by the Company, or the
transfer of the Executive to a location requiring a change in his
residence; or
(v) any failure by the Company to comply with and satisfy Section
8 of this Agreement; or
(c) by the Executive, if he shall determine in good faith (and give
written notice to the Company's Board of Directors specifying what it is
that prevents him from performing his duties) that due to the Change in
Control (including any changes in circumstances at the Company that
directly of indirectly affect the Executive's position, duties,
responsibilities or status immediately preceding the change in Control) he
is no longer able effectively to discharge his duties and responsibilities
and the situation is not remedied to the reasonable satisfaction of the
Executive within 30 days of receipt by the Company of written notice from
the Executive of such determination.
3. Change in Control. For purposes of this Agreement, a "Change in Control"
of the Company shall be deemed to have occurred if:
(a) the stockholders of the Company shall approve (i) any
consolidation or merger of the Company or any subsidiary of the Company
where (A) the stockholders of the Company, immediately prior to such
consolidation or merger, would not, immediately after such consolidation or
merger, beneficially own, directly or indirectly, Voting Securities (as
defined below) representing in the aggregate more than 50% of the combined
voting power of the Voting Securities of the surviving entity (or of its
ultimate parent corporation, if any) or (B) the members of the Board of
Directors of the Company, immediately prior to the consolidation or
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merger, would not, immediately after the consolidation or merger,
constitute a majority of the Board of Directors of the corporation issuing
cash or securities in the consolidation or merger (or of its ultimate
parent corporation, if any) or (ii) any sale, lease, exchange or other
transfer (in one transaction or a series of transactions contemplated or
arranged by any party as a single plan) of all or substantially all of the
assets of the Company;
(b) individuals who, as of the date hereof, constitute the entire
Board of Directors of the Company (the "Incumbent Directors") cease for any
reason to constitute a majority of the Board, provided that any individual
becoming a director subsequent to the date hereof whose election, or
nomination for election by the Company's stockholders, was approved by a
vote of at least a majority of the then Incumbent Directors (other than an
election or nomination of an individual whose assumption of office is the
result of an actual or threatened election contest relating to the election
of directors of the Company, as such terms are used in Rule 14a-11 under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), shall
be, for purposes of this Agreement, considered as though such individual
were an Incumbent Director; or
Notwithstanding the foregoing, a "Change in Control" of the Company shall not be
deemed to have occurred for purposes of the foregoing clause (c) solely as the
result of an acquisition of securities by the Company which, by reducing the
number of Common Shares of other Voting Securities outstanding increases (i) the
proportionate number of Common Shares beneficially owned by any person to more
than 50% of the Common Shares then outstanding or (ii) the proportionate voting
power represented by more than 50% of the combined voting power of all then
outstanding Voting Securities beneficially owned by any person to more than 50%
of the combined voting power of all then outstanding Voting Securities;
As used herein, the term "Voting Securities" when used with respect to a
corporation shall mean all then outstanding securities of such corporation
entitled under ordinary circumstances to vote in the election of the directors
of such corporation.
4. Rights and Benefits upon Termination or Change in Control.
(a) Severance Payment. Subject to Sections 6 and 11(a) hereof, in the
event of a Termination the Company shall pay the Executive, in twelve equal
monthly installments, or, at the Executive's option, in twenty-four (24)
equal monthly installments, beginning no later than 30 days following the
Executive's Termination, the greater of the Executive's annual salary or
annual consultancy payment as in effect immediately prior to (i) the
Termination or (ii) a Change in Control. The Company agrees to pay a
minimum of four (4) monthly installments.
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(b) Stock Options. Immediately prior to a change in Control, all
outstanding options to buy Company stock held by the Executive shall become
fully vested and immediately exercisable.
(c) Restricted Stock. Immediately prior to Change in Control, any (i)
repurchase agreement or (ii) right first refusal agreement between the
Executive and the Company with respect to the Company stock shall terminate
and the Executive's ownership of all shares of company stock shall fully
vest.
5. Certain Additional Payments by the Company. The Company covenants that
all material facts concerning the payments provided under this Agreement will be
adequately disclosed to the stockholders of the company and that it will use its
best efforts to obtain stockholder approval of the Agreement.
6. Conditions to the Obligations of the Company. The rights and benefits
provided in Section 4 hereof shall not accrue to the Executive if any of the
following events shall occur:
(a) The Company shall terminate the Executive's employment or
consultancy for "cause". For purposes of this Agreement, termination of
employment or consultancy for "cause" shall mean (i) the Executive's
conviction for, or plea of nolo contendere to, a crime involving moral
turpitude or a felony, (ii) the Executive's commission of an act of
personal dishonesty or breach of fiduciary duty resulting in substantial
personal profit in connection with the Executive's employment by the
company, (iii) willful and gross misconduct by the Executive in the course
of his duties, or (iv) deliberate and intentional continuing refusal by the
Executive to perform duties or responsibilities that are properly assigned
to the Executive (except for nonperformance because of incapacity due to
illness or accident).
(b) Following a Termination, the Executive shall not, upon receiving a
written request to do so, resign as a director and/or officer of the
Company and of each subsidiary and affiliate of the Company of which he is
then serving as a director and/or officer.
(c) The Company shall terminate the Executive's employment or
consultancy for "disability". For purposes of this Agreement, "disability"
shall mean a physical or psychological condition of the Executive which
renders him unable to perform his duties for the Company for a period for
six months or longer, as confirmed in writing by the Executive's
independent physician.
7. Arbitration and Expenses.
(a) Any dispute or controversy arising under or in connection with
this Agreement shall be settled by arbitration,
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conducted before a panel of three arbitrators in Stamford, Connecticut, in
accordance with the rules of the American Arbitration Association then in
effect. The arbitrators shall be approved by both the Company and the
Executive and their decision shall be binding on the parties and conclusive
for all purposes. Judgment may be entered on the arbitrators' award in any
court having jurisdiction. The expense of such arbitration shall be borne
by the Company.
(b) The Company shall pay or reimburse the Executive for all
reasonable costs and expenses (including, without limitation, attorneys'
fees) incurred by the Executive as a result of any claim, action or
proceeding (including a claim, action or proceeding in which the Executive
prevails against the Company) arising out of, or challenging the validity,
advisability or enforceability of, this Agreement or any provision hereof.
8. Successors. The Company shall use its reasonable best efforts to cause
any successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business or assets of the Company,
to assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. Upon transfer of the business the new entity will be
responsible for execution of this contract. As used herein, "the Company" shall
include any successor to all or substantially all of the Company's business or
assets which executes and delivers an agreement provided for in this Section 8
or which otherwise becomes bound by all the terms and provisions of this
Agreement by operation of law.
9. Notice of Termination. Any termination of the Executive's employment by
or consultancy with the Company shall be communicated to the Executive at the
address set forth above (or such other address as the Executive shall have
notified the Company in writing for purposes of this Agreement) in a written
notice and, except for termination of "cause", shall specify a termination date
no sooner than 15 days after the giving of such notice.
10. Term of Agreement. This Agreement shall terminate on December 31, 1994;
provided, however, that this Agreement shall automatically renew upon the
anniversary date for successive one-year terms unless the Company's Board of
Directors notifies the Executive in writing at least 30 days prior to a December
31st expiration date that it does not wish to renew the Agreement for an
additional term; and provided further that if a Change in Control occurs during
the term of an additional term of this Agreement, the Agreement shall continue
in effect for two years following such Change in Control.
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11. Miscellaneous.
(a) Duty to Mitigate; Other Severance Payments. If a Termination is
deemed to occur, the Executive shall during the one-year period subsequent
to his termination notify the Company of any employment when obtained, and
the severance payment provided under Section 4(a) hereof shall be offset by
any compensation which he receives from such employment during the one-year
period subsequent to his Termination. Furthermore, the severance payment
provided under Section 4(a) hereof shall also be offset by any other
severance payment which the Executive receives under any employment
agreement with the Company, including damages for breach of any such
agreement. Such mitigation shall not reduce the minimum four (4) month
severance as described in paragraph 4(a).
(b) Assignment. No right, benefit or interest hereunder shall be
subject to assignment, anticipation, alienation, sale, encumbrance, charge,
pledge, hypothecation or set-off in respect of any claim, debt or
litigation, or to execution, attachment, levy or similar process; provided,
however, that the Executive may assign any right, benefit or interest
hereunder if such assignment is permitted under the terms of any plan or
policy of insurance or annuity contract governing such right, benefit or
interest.
(c) Construction of Agreement. Nothing in this Agreement shall be
construed to amend any provision of any plan or policy of the Company. This
Agreement is not, and nothing herein shall be deemed to create, a
commitment of continued employment or consultancy of the Executive by the
Company.
(d) Amendment. This agreement may not be amended, modified or canceled
except by written agreement of the parties.
(e) Waiver. No provision of this Agreement may be waived except by a
writing signed by the party to be bound thereby.
(f) Severability. In the event that any provision or portion of this
Agreement shall be determined to be invalid or unenforceable for any
reason, the remaining provisions of this Agreement shall remain in full
force and effect to the fullest extent permitted by law.
(g) Taxes. Any payment or delivery required under this Agreement shall
be subject to all requirements of the law with regard to withholding of
taxes, filing, making of reports and the like, and the Company shall use
its best efforts to satisfy promptly all such requirements.
(h) Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Connecticut.
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(i) Entire Agreement. This Agreement sets forth the entire agreement
and understanding of the parties hereto with respect to the matters covered
hereby.
LIFECODES CORPORATION
By: /s/ Walter Fredericks
------------------------
President CEO
------------------------
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Exhibit 10.7
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT ("Agreement"), made this 3rd day of April, 1998, by
and between International Support for Bone Marrow Drives, Ltd. ("ISBMD"), a
North Carolina corporation, with its principal place of business at 550 West
Avenue, Stamford, CT 06902 and Claude F. Buller ("Consultant"), an individual
with an address of c/o Marco International, Inc., 100 Danbury Road, Suite 1010,
Ridgefield, Connecticut, 06877.
WITNESSETH
WHEREAS, Lifecodes Corporation ("Lifecodes") is actively engaged in research,
development, manufacture and sale of products and services utilizing DNA methods
for human identity and transplantation;
WHEREAS, Lifecodes has acquired the outstanding capital stock of ISBMD, of which
Consultant was a major shareholder and director;
WHEREAS, Lifecodes desires that ISBMD engage Consultant, and Consultant desires
to perform services as an independent contractor for ISBMD, in an effort to
promote the continued growth and improved financial performance of ISBMD;
NOW THEREFORE, in consideration of the premises and other good and valuable
consideration, receipt of which by each of the parties hereto is hereby
acknowledged, each of the parties does hereby, subject to the terms hereinafter
set forth, agree as follows:
1. General Overview
a) ISBMD hereby agrees to engage Consultant as an independent
contractor to assist in the transition of the business from previous
ownership to Lifecodes, to facilitate the retention of key employees and to
assist in the promotion, continued sales and income growth of ISBMD.
b) Consultant hereby agrees to the engagement and agrees to use his
best efforts to carry out the purposes and intent of this Agreement and to
keep himself reasonably informed and to inform ISBMD on all matters covered
by this Agreement. All such work conducted hereunder shall be performed in
a timely manner at the request and reasonable direction of ISBMD.
2. Consulting Fee; Expenses
During the Term (as hereinafter defined) ISBMD agrees to pay Consultant a
consulting fee as follows:
a) Eight Thousand Three Hundred Thirty Three United States Dollars
($8,333) per month, payable in arrears; provided, however, if ISBMD has
generated during the first two years of the Term, more than an aggregate of
90,000 Applicable Samples (as defined below), then commencing upon the
third year of the Term and each year of the Term thereafter, Twelve
Thousand Five Hundred United States Dollars ($12,500) per month, payable in
arrears; plus
<PAGE>
b) All reasonable out of pocket expenses as requested and approved in
advance by ISBMD during the term of this Agreement.
For purposes of this Agreement, "Applicable Samples" shall mean typing
requests or buccal swab samples for bone marrow testing obtained or sent
directly by ISBMD or its agents to laboratories owned or designated by ISBMD or
Lifecodes from sources outside the United States, including samples sent by
ISBMD to Medical Molecular Diagnostics GmbH of Dresden, Germany.
3. Term
a) Unless sooner terminated as provided in Section 5 below, the term of
this Agreement shall be from the commencement date (which shall be the date
first above written) and shall continue for a period of seventy-two months
thereafter (the "Term"). In the event of termination for any reason or upon
expiration of the Agreement without written extension, Consultant shall promptly
return to ISBMD any and all equipment, documents or materials in whatever form
or medium, and all copies made thereof, which Consultant received from ISBMD for
purposes of this Agreement, as well as all Work described in Section 6 of this
Agreement.
4. Duties And Extent Of Services
a) Upon the execution of this Agreement and throughout its term, Consultant
shall assume the position of consultant to ISBMD.
b) During the term of this Agreement, ISBMD may from time to time request
the consulting services of Consultant on specific projects. The parties will at
such times discuss and define the scope of Consultant's duties on such projects.
In addition, Consultant agrees to be available throughout the term of this
Agreement to offer such advice, counsel and similar assistance as ISBMD may
reasonably request with respect to its business activities. Consultant agrees to
perform his duties diligently and faithfully, and to devote his best efforts to
the performance of said duties. Notwithstanding the foregoing, it is the
intention of the parties that the duties of the Consultant shall generally be
defined by described projects not requiring the Consultant to adhere to a
particular work schedule or to perform services on a full-time basis. Consultant
shall devote such time as Consultant may deem necessary to perform his duties
and to advance the interest of ISBMD. It is expressly understood and agreed
Consultant's advice and counsel may be rendered by telephone, letter or in
person.
c) Consultant shall exert Consultant's best efforts and attention to the
affairs of ISBMD. Consultant shall notify ISBMD promptly of any other engagement
or commitment which could reasonably be expected to interfere or conflict with
the performance of services hereunder.
d) If elected, Consultant shall serve as a director of Lifecodes
Corporation without any additional compensation.
5. Termination
Consultant's engagement hereunder shall terminate upon the occurrence of
any of the following events:
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(i) By Consultant, at Consultant's option, for any reason or no
reason, to be exercised by sixty (60) days written notice from Consultant
to ISBMD and provided all open projects have been properly transitioned or
satisfactorily completed;
(ii) Upon Consultant's death; or
(iii) By ISBMD for "cause" which shall mean: commission of a felony or
a crime involving moral turpitude; breach of this Agreement which is not
cured within fifteen (15) days of notice of such breach; failure to follow
the reasonable directives of ISBMD which directions are consistent with
Section 4 hereof; willful misconduct or negligence in the performance of
Consultant's duties hereunder.
6. Work For Hire
a) Consultant agrees that all work product arising directly under this
Agreement, including without limitation, reports, recommendations, computer
programs, applications, code, documentation and other works that are created,
authored or otherwise expressed or produced specifically in connection with the
services to be performed by Consultant hereunder are and shall be "Works for
Hire" as that term is defined under the U.S. Copyright Act and are and shall be
the sole and exclusive property of ISBMD. Any and all such inventions,
improvements, discoveries, computer software developments or other ideas
conceived, created, developed, made by Consultant in whole or in part
specifically in connection with the services to be provided hereunder or
otherwise, that relate directly to ISBMD's businesses, or are made using any of
ISBMD's equipment, facilities, materials, labor, money, time or other resource
or result from any services performed hereunder (collectively, "Works," and
singly, a "Work"), shall belong solely and exclusively to ISBMD and shall be
treated as proprietary information hereunder. Consultant agrees that Consultant
shall communicate promptly to ISBMD any and all Works. Consultant hereby
assigns, transfers and gives to ISBMD his entire right, title and interest in
and to the Works, including all rights therein arising under applicable
copyright laws (including the exclusive rights of reproduction, distribution,
preparation of derivative works, performance and display), all rights therein
arising under applicable patent laws (including all patents and patent
applications therein), all so-called moral rights (including the right to edit,
modify, alter or destroy, combine the Works with other works or otherwise deal
with Works), all other exclusionary and/or proprietary rights, and any renewals
and extensions associated therewith, as each of the foregoing may be secured
under the laws now or hereafter in force and effect in the United States of
America or any other country or countries. Consultant also agrees to furnish
ISBMD, upon request, any records made alone or with others during the course of
performing services pursuant to this Agreement, with all such records.
3
<PAGE>
7. Proprietary Information
a) For purposes of this Agreement, "proprietary information" shall mean
information relating to the business of ISBMD or any affiliated or subsidiary
entity and shall include (but shall not be limited to) information encompassed
in all specifications, drawings, designs, computer programs, source code, object
code, models, algorithms, user documentation, plans, formulas, proposals,
marketing and sale plans, financial information, costs, pricing information,
customer information, and all methods, concepts or ideas in or reasonably
related to the business of ISBMD.
b) Consultant agrees to regard and preserve as confidential, all
proprietary information, whether or not he has such information in writing,
other physical or magnetic form or such information is contained in Consultant's
memory or the memory of any of Consultant's agents or employees. Consultant will
not, without written authority from ISBMD to do so, directly or indirectly, use
for the benefit or purpose, nor disclose to any other person or entity, either
during the term of Consultant's engagement hereunder or thereafter or as may be
required by law, except as required by the conditions of Consultant's engagement
hereunder, any proprietary information.
c) Consultant shall not disclose any reports, recommendations, conclusions
or other results of the services performed hereunder or the existence or the
subject matter of this contract without the prior written consent of ISBMD or as
may be required by law. In Consultant's performance hereunder, Consultant shall
comply with all legal obligations Consultant may now or hereafter have regarding
the information or other property of any other person, firm or corporation.
d) The foregoing obligations of this Paragraph shall not apply to any part
of the information that (i) has been disclosed in publicly available sources of
information, (ii) is, through no fault of Consultant, hereafter disclosed in
publicly available sources of information, (iii) is now in the possession of
Consultant without any obligation of confidentiality, or (iv) has been or is
hereafter lawfully disclosed to Consultant by a third party, but only to the
extent that the use or disclosure thereof has been or is rightfully authorized
by that third party.
8. No Solicitation
During the period commencing on the date hereof and ending two (2) years
after the termination of Consultant's engagement for any reason, Consultant
shall not directly or indirectly induce or attempt to induce any of the
employees of ISBMD or its parent(s), subsidiaries or other affiliated entities
to leave the employment of ISBMD or such parent, subsidiary or other affiliate,
or hire, or assist any other entity or person in the recruitment or hiring of,
any employees of ISBMD or its parent(s), subsidiaries or other affiliated
entities.
9. Injunctive Relief
Consultant acknowledges that the injury to ISBMD resulting from any
violation by Consultant of any of the covenants contained in this Agreement will
be of such a character that ISBMD cannot be adequately compensated by money
damages, and, accordingly, ISBMD may, in addition to pursuing its other
remedies, obtain an injunction from any such violation; and no bond or other
security shall be required in connection with such injunction.
4
<PAGE>
10. No Restrictions
Consultant represents to ISBMD, which relies on such representation, that
Consultant is free to enter into this Agreement in that Consultant is not under
any restrictions from a former employer or business that would preclude
Consultant from making these agreements. Consultant understands that ISBMD does
not want Consultant to disclose to it any confidential information that
Consultant may have obtained from a former employer, although Consultant is free
to use Consultant's general knowledge and past experience in the performance of
the services.
11. Additional Covenants
Consultant further agrees:
a) He shall not assign, subrogate, sell nor convey in any way the rights or
obligations contained herein without the prior written consent of ISBMD.
b) He shall not cause or permit any direct or indirect publicity, other
than as required by law, to be given about this Agreement and agrees to comply
with all applicable laws and regulations relating to his conduct hereunder.
12. General
a) This Agreement shall be interpreted and subject to the laws of the State
of Connecticut without regard to its conflict of laws rules.
b) Consultant shall not be entitled to participate in any fringe benefits
or privileges given or extended by ISBMD to its officers and employees,
including without limitation, medical benefits, social security, social
benefits, retirement plans or stock options. Consultant shall be responsible for
the payment of all national, federal, state and local taxes relating to this
Agreement, and, at the request of ISBMD, Consultant shall provide to ISBMD
written statement that Consultant has timely and appropriately paid all
appropriate taxes. Consultant warrants and represents that Consultant has
complied with, and covenants that during the term of this Agreement, will
continue to comply with all laws, rules and regulations required by appropriate
government authorities for independent contractors, including the appropriate
withholding, reporting and payment of all required taxes. Consultant shall
indemnify and hold ISBMD harmless from and against any claims, debts,
obligations or liabilities arising out of this Section.
c) Any notices hereunder shall be given to the parties at the address first
set above via courier or fax or at such other address as same may be changed
from time to time.
d) This Agreement may be executed in counterparts, each of which shall
constitute an original and all of which shall constitute one and the same
instrument.
[Next page is signature page]
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused their signatures to be set
hereto as duly authorized as of the year and date first set above.
INTERNATIONAL SUPPORT FOR BONE
MARROW DRIVES, LTD.
By
-----------------------------------------
Walter O. Fredericks, President
-----------------------------------------
Claude F. Buller
6
<PAGE>
Exhibit 10.8
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT ("Agreement"), made this 3rd day of April, 1998, by
and between International Support for Bone Marrow Drives, Ltd. ("ISBMD"), a
North Carolina corporation, with its principal place of business at 550 West
Avenue, Stamford, CT 06902 and Gerhard Ehninger ("Consultant"), an individual
with an address of c/o Deutsche Knochemarkspenderdatei GmbH, Postfach 1405,
72004 Tubingen, Germany.
WITNESSETH
WHEREAS, Lifecodes Corporation ("Lifecodes") is actively engaged in research,
development, manufacture and sale of products and services utilizing DNA methods
for human identity and transplantation;
WHEREAS, Lifecodes has acquired the outstanding capital stock of ISBMD, of which
Consultant was a major shareholder and director;
WHEREAS, Lifecodes desires that ISBMD engage Consultant, and Consultant desires
to perform services as an independent contractor for ISBMD, in an effort to
promote the continued growth and improved financial performance of ISBMD;
NOW THEREFORE, in consideration of the premises and other good and valuable
consideration, receipt of which by each of the parties hereto is hereby
acknowledged, each of the parties does hereby, subject to the terms hereinafter
set forth, agree as follows:
1. General Overview
a) ISBMD hereby agrees to engage Consultant as an independent contractor to
assist in the transition of the business from previous ownership to Lifecodes,
to facilitate the retention of key employees and to assist in the promotion,
continued sales and income growth of ISBMD.
b) Consultant hereby agrees to the engagement and agrees to use his best
efforts to carry out the purposes and intent of this Agreement and to keep
himself reasonably informed and to inform ISBMD on all matters covered by this
Agreement. All such work conducted hereunder shall be performed in a timely
manner at the request and reasonable direction of ISBMD.
2. Consulting Fee; Expenses
During the Term (as hereinafter defined) ISBMD agrees to pay Consultant a
consulting fee as follows:
a) Eight Thousand Three Hundred Thirty Three United States Dollars
($8,333) per month, payable in arrears; provided, however, if ISBMD has
generated during the first two years of the Term, more than an aggregate of
90,000 Applicable Samples (as defined below), then commencing upon the
third year of the Term and each year of the Term thereafter, Twelve
Thousand Five Hundred United States Dollars ($12,500) per month, payable in
arrears; plus
<PAGE>
b) All reasonable out of pocket expenses as requested and approved in
advance by ISBMD during the term of this Agreement.
For purposes of this Agreement, "Applicable Samples" shall mean typing
requests or buccal swab samples for bone marrow testing obtained or sent
directly by ISBMD or its agents to laboratories owned or designated by ISBMD or
Lifecodes from sources outside the United States, including samples sent by
ISBMD to Medical Molecular Diagnostics GmbH of Dresden, Germany.
3. Term
a) Unless sooner terminated as provided in Section 5 below, the term of
this Agreement shall be from the commencement date (which shall be the date
first above written) and shall continue for a period of seventy-two months
thereafter (the "Term"). In the event of termination for any reason or upon
expiration of the Agreement without written extension, Consultant shall promptly
return to ISBMD any and all equipment, documents or materials in whatever form
or medium, and all copies made thereof, which Consultant received from ISBMD for
purposes of this Agreement, as well as all Work described in Section 6 of this
Agreement.
4. Duties And Extent Of Services
a) Upon the execution of this Agreement and throughout its term, Consultant
shall assume the position of consultant to ISBMD.
b) During the term of this Agreement, ISBMD may from time to time request
the consulting services of Consultant on specific projects. The parties will at
such times discuss and define the scope of Consultant's duties on such projects.
In addition, Consultant agrees to be available throughout the term of this
Agreement to offer such advice, counsel and similar assistance as ISBMD may
reasonably request with respect to its business activities. Consultant agrees to
perform his duties diligently and faithfully, and to devote his best efforts to
the performance of said duties. Notwithstanding the foregoing, it is the
intention of the parties that the duties of the Consultant shall generally be
defined by described projects not requiring the Consultant to adhere to a
particular work schedule or to perform services on a full-time basis. Consultant
shall devote such time as Consultant may deem necessary to perform his duties
and to advance the interest of ISBMD. It is expressly understood and agreed
Consultant's advice and counsel may be rendered by telephone, letter or in
person.
c) Consultant shall exert Consultant's best efforts and attention to the
affairs of ISBMD. Consultant shall notify ISBMD promptly of any other engagement
or commitment which could reasonably be expected to interfere or conflict with
the performance of services hereunder.
d) If elected, Consultant shall serve as a director of Lifecodes
Corporation without any additional compensation.
5. Termination
Consultant's engagement hereunder shall terminate upon the occurrence of
any of the following events:
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<PAGE>
(i) By Consultant, at Consultant's option, for any reason or no
reason, to be exercised by sixty (60) days written notice from
Consultant to ISBMD and provided all open projects have been properly
transitioned or satisfactorily completed;
(ii) Upon Consultant's death; or
(iii) By ISBMD for "cause" which shall mean: commission of a
felony or a crime involving moral turpitude; breach of this Agreement
which is not cured within fifteen (15) days of notice of such breach;
failure to follow the reasonable directives of ISBMD which directions
are consistent with Section 4 hereof; willful misconduct or negligence
in the performance of Consultant's duties hereunder.
6. Work For Hire
a) Consultant agrees that all work product arising directly under this
Agreement, including without limitation, reports, recommendations, computer
programs, applications, code, documentation and other works that are created,
authored or otherwise expressed or produced specifically in connection with the
services to be performed by Consultant hereunder are and shall be "Works for
Hire" as that term is defined under the U.S. Copyright Act and are and shall be
the sole and exclusive property of ISBMD. Any and all such inventions,
improvements, discoveries, computer software developments or other ideas
conceived, created, developed, made by Consultant in whole or in part
specifically in connection with the services to be provided hereunder or
otherwise, that relate directly to ISBMD's businesses, or are made using any of
ISBMD's equipment, facilities, materials, labor, money, time or other resource
or result from any services performed hereunder (collectively, "Works," and
singly, a "Work"), shall belong solely and exclusively to ISBMD and shall be
treated as proprietary information hereunder. Consultant agrees that Consultant
shall communicate promptly to ISBMD any and all Works. Consultant hereby
assigns, transfers and gives to ISBMD his entire right, title and interest in
and to the Works, including all rights therein arising under applicable
copyright laws (including the exclusive rights of reproduction, distribution,
preparation of derivative works, performance and display), all rights therein
arising under applicable patent laws (including all patents and patent
applications therein), all so-called moral rights (including the right to edit,
modify, alter or destroy, combine the Works with other works or otherwise deal
with Works), all other exclusionary and/or proprietary rights, and any renewals
and extensions associated therewith, as each of the foregoing may be secured
under the laws now or hereafter in force and effect in the United States of
America or any other country or countries. Consultant also agrees to furnish
ISBMD, upon request, any records made alone or with others during the course of
performing services pursuant to this Agreement, with all such records.
3
<PAGE>
7. Proprietary Information
a) For purposes of this Agreement, "proprietary information" shall mean
information relating to the business of ISBMD or any affiliated or subsidiary
entity and shall include (but shall not be limited to) information encompassed
in all specifications, drawings, designs, computer programs, source code, object
code, models, algorithms, user documentation, plans, formulas, proposals,
marketing and sale plans, financial information, costs, pricing information,
customer information, and all methods, concepts or ideas in or reasonably
related to the business of ISBMD.
b) Consultant agrees to regard and preserve as confidential, all
proprietary information, whether or not he has such information in writing,
other physical or magnetic form or such information is contained in Consultant's
memory or the memory of any of Consultant's agents or employees. Consultant will
not, without written authority from ISBMD to do so, directly or indirectly, use
for the benefit or purpose, nor disclose to any other person or entity, either
during the term of Consultant's engagement hereunder or thereafter or as may be
required by law, except as required by the conditions of Consultant's engagement
hereunder, any proprietary information.
c) Consultant shall not disclose any reports, recommendations, conclusions
or other results of the services performed hereunder or the existence or the
subject matter of this contract without the prior written consent of ISBMD or as
may be required by law. In Consultant's performance hereunder, Consultant shall
comply with all legal obligations Consultant may now or hereafter have regarding
the information or other property of any other person, firm or corporation.
d) The foregoing obligations of this Paragraph shall not apply to any part
of the information that (i) has been disclosed in publicly available sources of
information, (ii) is, through no fault of Consultant, hereafter disclosed in
publicly available sources of information, (iii) is now in the possession of
Consultant without any obligation of confidentiality, or (iv) has been or is
hereafter lawfully disclosed to Consultant by a third party, but only to the
extent that the use or disclosure thereof has been or is rightfully authorized
by that third party.
8. No Solicitation
During the period commencing on the date hereof and ending two (2) years
after the termination of Consultant's engagement for any reason, Consultant
shall not directly or indirectly induce or attempt to induce any of the
employees of ISBMD or its parent(s), subsidiaries or other affiliated entities
to leave the employment of ISBMD or such parent, subsidiary or other affiliate,
or hire, or assist any other entity or person in the recruitment or hiring of,
any employees of ISBMD or its parent(s), subsidiaries or other affiliated
entities.
9. Injunctive Relief
Consultant acknowledges that the injury to ISBMD resulting from any
violation by Consultant of any of the covenants contained in this Agreement will
be of such a character that ISBMD cannot be adequately compensated by money
damages, and, accordingly, ISBMD may, in addition to pursuing its other
remedies, obtain an injunction from any such violation; and no bond or other
security shall be required in connection with such injunction.
4
<PAGE>
10. No Restrictions
Consultant represents to ISBMD, which relies on such representation, that
Consultant is free to enter into this Agreement in that Consultant is not under
any restrictions from a former employer or business that would preclude
Consultant from making these agreements. Consultant understands that ISBMD does
not want Consultant to disclose to it any confidential information that
Consultant may have obtained from a former employer, although Consultant is free
to use Consultant's general knowledge and past experience in the performance of
the services.
11. Additional Covenants
Consultant further agrees:
a) He shall not assign, subrogate, sell nor convey in any way the rights or
obligations contained herein without the prior written consent of ISBMD.
b) He shall not cause or permit any direct or indirect publicity, other
than as required by law, to be given about this Agreement and agrees to comply
with all applicable laws and regulations relating to his conduct hereunder.
12. General
a) This Agreement shall be interpreted and subject to the laws of the State
of Connecticut without regard to its conflict of laws rules.
b) Consultant shall not be entitled to participate in any fringe benefits
or privileges given or extended by ISBMD to its officers and employees,
including without limitation, medical benefits, social security, social
benefits, retirement plans or stock options. Consultant shall be responsible for
the payment of all national, federal, state and local taxes relating to this
Agreement, and, at the request of ISBMD, Consultant shall provide to ISBMD
written statement that Consultant has timely and appropriately paid all
appropriate taxes. Consultant warrants and represents that Consultant has
complied with, and covenants that during the term of this Agreement, will
continue to comply with all laws, rules and regulations required by appropriate
government authorities for independent contractors, including the appropriate
withholding, reporting and payment of all required taxes. Consultant shall
indemnify and hold ISBMD harmless from and against any claims, debts,
obligations or liabilities arising out of this Section.
c) Any notices hereunder shall be given to the parties at the address first
set above via courier or fax or at such other address as same may be changed
from time to time.
d) This Agreement may be executed in counterparts, each of which shall
constitute an original and all of which shall constitute one and the same
instrument.
[Next page is signature page]
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused their signatures to be set
hereto as duly authorized as of the year and date first set above.
INTERNATIONAL SUPPORT FOR BONE
MARROW DRIVES, LTD.
By
----------------------------------------------
Walter O. Fredericks, President
----------------------------------------------
Gerhard Ehninger
6
<PAGE>
Exhibit 10.9
SECURED PROMISSORY NOTE
$541,392.28 Stamford, Connecticut
April 3, 1998
FOR VALUE RECEIVED, Claude L. Buller, with an address at c/o Marco
International, Inc. 100 Danbury Road, Ridgefield, Connecticut 06877, (the
"Maker"), unconditionally promises to pay to INTERNATIONAL SUPPORT FOR BONE
MARROW DRIVES, LTD., a North Carolina corporation with offices at 550 West
Avenue, Stamford, Connecticut 06902 ("Payee"), at such office or such other
place as Payee may designate in writing, the principal sum of FIVE HUNDRED FORTY
ONE THOUSAND THREE HUNDRED NINETY TWO AND 28/100 DOLLARS ($541,392.28), together
with interest in arrears thereon from the date hereof at the rate of eight
percent (8.0%) per annum upon the whole of said principal sum remaining from
time to time unpaid. Maker promises to pay the principal and interest on this
Note on demand after March 31, 2004 or at such earlier time provided herein (the
"Maturity Date"). This Note is secured by a pledge of 50,000 shares of common
stock of Lifecodes Corporation ("Lifecodes"), all as set forth in a Stock Pledge
Agreement of even date herewith (the "Pledge Agreement") between Maker and
Payee. This Note shall be non-recourse, other than any rights to proceed against
such collateral, which shall be the sole source of repayment hereunder.
Interest shall accrue, compounded monthly, on the unpaid principal and
interest due hereunder, provided, payment shall be made only on the Maturity
Date or at such time expressly provided in Section 1 hereof. All payments shall
be applied first to the payment of reasonable costs, expenses and attorneys'
fees incurred by Payee as set forth herein, if any, then to the payment of
interest on the unpaid principal of this Note and the balance on account of the
principal of this Note, with any excess proceeds from collateral being payable
to Maker.
1. (a) If Lifecodes common stock is registered pursuant to Section 12(b) or
12(g) of the Securities Exchange Act of 1934, as amended, and an Event of
Default (as defined herein) occurs, Payee can, if payment is not made within ten
(10) days after such Event of Default, thereupon take title to all collateral
under the Pledge Agreement and such collateral shall be applied against amounts
due under this Note at a valuation equal to the "Fair Market Value" of a share
of common stock of Lifecodes on the date of such Event of Default multiplied by
the applicable number of shares. "Fair Market Value" as of a specified date for
the purposes of this Note shall mean the closing price of a share of Lifecodes
common stock on the principal securities exchange on which such shares are
traded on the day immediately preceding the date as of which Fair Market Value
is being determined, or on the next preceding date on which such shares are
traded if no shares were traded on such immediately preceding day, or if the
shares are not traded on a securities exchange, Fair Market Value shall be
deemed to be the average of the high bid and low asked prices of the shares in
the over-the-counter market during the five (5) day period immediately preceding
the date as of which Fair Market Value is being determined or on the next
preceding five (5) days on which such high bid and low asked prices were
recorded.
<PAGE>
(b) If Lifecodes common stock is not registered pursuant to Section 12(b)
or 12(g) of the Securities Exchange Act of 1934, as amended, and an Event of
Default (as defined herein) occurs, Payee can, if payment is not made within ten
(10) days after receipt of the appraisal described below, thereupon take title
to all collateral under the Pledge Agreement and such collateral shall be
applied against amounts due under this Note at a valuation equal to the
"Non-Public Fair Market Value" of a share of common stock of Lifecodes on the
date of such Event of Default multiplied by the applicable number of shares. For
the purpose of determining the "Non-Public Fair Market Value", the value of each
share of Lifecodes common stock shall be determined by Deloitte & Touche LLP or
another nationally recognized accounting firm selected by Payee (the
"Appraiser"), which appraisal shall be final and binding on the parties and
shall be completed not later than 60 days after the Event of Default. The
Appraiser shall determine the fair market value of the Lifecodes common stock by
determining the value of Lifecodes as a going concern and dividing such sum by
the number of shares of common stock of Lifecodes outstanding on a fully diluted
basis; provided, however, for purposes of this Note the value shall not be less
than $9.80 per share. The Appraiser shall promptly notify Payee and Maker in
writing of such determination. Payee and Maker shall share equally the costs of
the appraisal.
2. The principal and accrued interest amounts due under this Note shall be
reduced as follows:
For each quarter commencing in the 37th month following the date of this
Note (i.e. months 37-39, months 40-42, etc.), the principal and interest
reduction, if any, shall be based upon the number of Applicable Samples
generated, as set forth in the following chart:
Applicable Samples Forgiveness Amount
------------------ ------------------
Over 22,500 $50,000
20,001-22,500 $45,000
17,501-20,000 $40,000
15,001-17,500 $30,000
12,500-15,000 $25,000
Under 12,500 $0
Any amounts forgiven shall be determined in good faith by Payee and the
amounts of any forgiveness shall be appended to this Note and shall become a
part thereof.
For purposes of this Section 2, "Applicable Samples" shall mean typing
requests or buccal swab samples for bone marrow testing obtained or sent
directly by Payee or its agents to laboratories owned or designated by Payee or
Lifecodes from sources outside the United States, including samples sent by
Payee to Medical Molecular Diagnostics GmbH of Dresden, Germany.
3. Maker agrees to pay all personal taxes or duties levied or assessed
against Payee on account of this Note (other than taxes on the interest income
to Payee arising from this Note).
2
<PAGE>
Maker further agrees to pay all reasonable out-of-pocket costs, expenses and
attorneys' fees incurred by Payee in any proceeding for the collection of the
debt evidenced hereby, or upon the happening of a default as provided for in
this Note.
4. There shall be an "Event of Default": (i) if Maker defaults for ten (10)
days in making any scheduled payment of principal or interest on this Note, or
any other required payment under this Note, as the same become due, or (ii) if
an order for relief is sought by or against Maker or any guarantor under the
Federal Bankruptcy Code or acts amendatory thereof or supplemental thereto or
under any statute either of the United States or any state or foreign
jurisdiction in connection with insolvency or reorganization or for the
appointment of a receiver or trustee for all or a portion of Maker's or any
guarantor's property, and any such order for relief, receiver or trustee is not
withdrawn, dismissed, discharged, or removed within sixty (60) days, except for
any order sought or consented to by the Maker or any guarantor, in which case
the event of default shall be immediate, or (iii) if an assignment of Maker's or
any guarantor's property is made for the benefit of creditors, or (iv) if Maker
or any guarantor declares in writing its inability to pay debts as they come
due. Except as expressly provided herein, upon the occurrence of an Event of
Default, the entire principal sum with accrued interest thereon due under this
Note shall, at the option of Payee, become immediately due and payable and Payee
may proceed to exercise any rights and remedies Maker has under this Note or at
law, in equity or otherwise. No failure to exercise such option shall be deemed
to be a waiver on the part of Payee of the right to exercise the same in the
event of any subsequent Event of Default.
5. Maker shall have the right to prepay this Note in whole or in part at
any time, without penalty.
6. Maker and each and every endorser, guarantor, and surety of this Note
and all others who may become liable for all or any part of this obligation do
hereby waive diligence, demand, presentment for payment, protest, notice of
protest and notice of non-payment of this Note, and do hereby consent to any
number of renewals or extensions of the time of payment hereof and of the time
for advances, if any, and agree that any such renewals or extensions may be made
without notice to any of said parties and without affecting their liability
herein, all without affecting the liability of the other persons, firms or
corporations liable for the payment of this Note.
7. MAKER ACKNOWLEDGES THAT THIS NOTE AND THE UNDERLYING TRANSACTIONS GIVING
RISE HERETO CONSTITUTE COMMERCIAL BUSINESS TRANSACTED WITHIN THE STATE OF
CONNECTICUT. IN THE EVENT OF ANY LEGAL ACTION BETWEEN MAKER AND PAYEE HEREUNDER,
MAKER HEREBY EXPRESSLY WAIVES ANY RIGHTS WITH REGARD TO NOTICE, PRIOR HEARING
AND ANY OTHER RIGHTS HE MAY HAVE UNDER THE CONNECTICUT GENERAL STATUTES, CHAPTER
903a, AS NOW CONSTITUTED OR HEREAFTER AMENDED OR SUPPLEMENTED, OR OTHER STATUTE
OR STATUTES, STATE OR FEDERAL, AFFECTING PREJUDGMENT REMEDIES, AND PAYEE MAY
INVOKE ANY
3
<PAGE>
PREJUDGMENT REMEDY AVAILABLE TO IT WITH REGARD TO THE COLLATERAL, TO ENFORCE THE
PROVISIONS OF THIS NOTE, WITHOUT GIVING MAKER ANY NOTICE OR OPPORTUNITY FOR A
HEARING.
ADDITIONALLY, MAKER AND PAYEE HEREBY EACH WAIVE THE RIGHT TO TRIAL BY JURY
IN ANY ACTION, DEFENSE, COUNTERCLAIM, CROSSCLAIM AND/OR ANY FORM OF PROCEEDING
BROUGHT IN CONNECTION WITH THIS NOTE OR RELATING TO ANY INDEBTEDNESS EVIDENCED
HEREBY AND/OR ANY COLLATERAL NOW OR HEREAFTER SECURING THIS NOTE.
8. This Note has been made and delivered in the State of Connecticut and
shall be construed and enforced under and in accordance with the laws of the
State of Connecticut.
[Next page is signature page]
4
<PAGE>
IN WITNESS WHEREOF, Maker has hereunto set Maker's hand as of the 3rd day
of April, 1998.
-----------------------------------
Claude L. Buller
5
<PAGE>
Exhibit 10.10
SECURED PROMISSORY NOTE
$632,072.14 Stamford, Connecticut
April 3, 1998
FOR VALUE RECEIVED, Gerhard Ehninger, with an address at c/o Deutsche
Knochenmarkspenderdatei GmbH, Postfach 1405, 72004 Tubingen, Germany, (the
"Maker"), unconditionally promises to pay to INTERNATIONAL SUPPORT FOR BONE
MARROW DRIVES, LTD., a North Carolina corporation with offices at 550 West
Avenue, Stamford, Connecticut 06902 ("Payee"), at such office or such other
place as Payee may designate in writing, the principal sum of SIX HUNDRED THIRTY
TWO THOUSAND SEVENTY TWO AND 14/100 DOLLARS ($632,072.14), together with
interest in arrears thereon from the date hereof at the rate of eight percent
(8.0%) per annum upon the whole of said principal sum remaining from time to
time unpaid. Maker promises to pay the principal and interest on this Note on
demand after March 31, 2004 or at such earlier time provided herein (the
"Maturity Date"). This Note is secured by a pledge of 50,000 shares of common
stock of Lifecodes Corporation ("Lifecodes"), all as set forth in a Stock Pledge
Agreement of even date herewith (the "Pledge Agreement") between Maker and
Payee. This Note shall be non-recourse, other than any rights to proceed against
such collateral, which shall be the sole source of repayment hereunder.
Interest shall accrue, compounded monthly, on the unpaid principal and
interest due hereunder, provided, payment shall be made only on the Maturity
Date or at such time expressly provided in Section 1 hereof. All payments shall
be applied first to the payment of reasonable costs, expenses and attorneys'
fees incurred by Payee as set forth herein, if any, then to the payment of
interest on the unpaid principal of this Note and the balance on account of the
principal of this Note, with any excess proceeds from collateral being payable
to Maker.
1. (a) If Lifecodes common stock is registered pursuant to Section 12(b) or
12(g) of the Securities Exchange Act of 1934, as amended, and an Event of
Default (as defined herein) occurs, Payee can, if payment is not made within ten
(10) days after such Event of Default, thereupon take title to all collateral
under the Pledge Agreement and such collateral shall be applied against amounts
due under this Note at a valuation equal to the "Fair Market Value" of a share
of common stock of Lifecodes on the date of such Event of Default multiplied by
the applicable number of shares. "Fair Market Value" as of a specified date for
the purposes of this Note shall mean the closing price of a share of Lifecodes
common stock on the principal securities exchange on which such shares are
traded on the day immediately preceding the date as of which Fair Market Value
is being determined, or on the next preceding date on which such shares are
traded if no shares were traded on such immediately preceding day, or if the
shares are not traded on a securities exchange, Fair Market Value shall be
deemed to be the average of the high bid and low asked prices of the shares in
the over-the-counter market during the five (5) day period immediately preceding
the date as of which Fair Market Value is being determined or on the next
preceding five (5) days on which such high bid and low asked prices were
recorded.
<PAGE>
(b) If Lifecodes common stock is not registered pursuant to Section 12(b)
or 12(g) of the Securities Exchange Act of 1934, as amended, and an Event of
Default (as defined herein) occurs, Payee can, if payment is not made within ten
(10) days after receipt of the appraisal described below, thereupon take title
to all collateral under the Pledge Agreement and such collateral shall be
applied against amounts due under this Note at a valuation equal to the
"Non-Public Fair Market Value" of a share of common stock of Lifecodes on the
date of such Event of Default multiplied by the applicable number of shares. For
the purpose of determining the "Non-Public Fair Market Value", the value of each
share of Lifecodes common stock shall be determined by Deloitte & Touche LLP or
another nationally recognized accounting firm selected by Payee (the
"Appraiser"), which appraisal shall be final and binding on the parties and
shall be completed not later than 60 days after the Event of Default. The
Appraiser shall determine the fair market value of the Lifecodes common stock by
determining the value of Lifecodes as a going concern and dividing such sum by
the number of shares of common stock of Lifecodes outstanding on a fully diluted
basis; provided, however, for purposes of this Note the value shall not be less
than $9.80 per share. The Appraiser shall promptly notify Payee and Maker in
writing of such determination. Payee and Maker shall share equally the costs of
the appraisal.
2. The principal and accrued interest amounts due under this Note shall be
reduced as follows:
For each quarter commencing in the 37th month following the date of this
Note (i.e. months 37-39, months 40-42, etc.), the principal and interest
reduction, if any, shall be based upon the number of Applicable Samples
generated, as set forth in the following chart:
Applicable Samples Forgiveness Amount
------------------ ------------------
Over 22,500 $50,000
20,001-22,500 $45,000
17,501-20,000 $40,000
15,001-17,500 $30,000
12,500-15,000 $25,000
Under 12,500 $0
Any amounts forgiven shall be determined in good faith by Payee and the
amounts of any forgiveness shall be appended to this Note and shall become a
part thereof.
For purposes of this Section 2, "Applicable Samples" shall mean typing
requests or buccal swab samples for bone marrow testing obtained or sent
directly by Payee or its agents to laboratories owned or designated by Payee or
Lifecodes from sources outside the United States, including samples sent by
Payee to Medical Molecular Diagnostics GmbH of Dresden, Germany.
3. Maker agrees to pay all personal taxes or duties levied or assessed
against Payee on account of this Note (other than taxes on the interest income
to Payee arising from this Note).
2
<PAGE>
Maker further agrees to pay all reasonable out-of-pocket costs, expenses and
attorneys' fees incurred by Payee in any proceeding for the collection of the
debt evidenced hereby, or upon the happening of a default as provided for in
this Note.
4. There shall be an "Event of Default": (i) if Maker defaults for ten (10)
days in making any scheduled payment of principal or interest on this Note, or
any other required payment under this Note, as the same become due, or (ii) if
an order for relief is sought by or against Maker or any guarantor under the
Federal Bankruptcy Code or acts amendatory thereof or supplemental thereto or
under any statute either of the United States or any state or foreign
jurisdiction in connection with insolvency or reorganization or for the
appointment of a receiver or trustee for all or a portion of Maker's or any
guarantor's property, and any such order for relief, receiver or trustee is not
withdrawn, dismissed, discharged, or removed within sixty (60) days, except for
any order sought or consented to by the Maker or any guarantor, in which case
the event of default shall be immediate, or (iii) if an assignment of Maker's or
any guarantor's property is made for the benefit of creditors, or (iv) if Maker
or any guarantor declares in writing its inability to pay debts as they come
due. Except as expressly provided herein, upon the occurrence of an Event of
Default, the entire principal sum with accrued interest thereon due under this
Note shall, at the option of Payee, become immediately due and payable and Payee
may proceed to exercise any rights and remedies Maker has under this Note or at
law, in equity or otherwise. No failure to exercise such option shall be deemed
to be a waiver on the part of Payee of the right to exercise the same in the
event of any subsequent Event of Default.
5. Maker shall have the right to prepay this Note in whole or in part at
any time, without penalty.
6. Maker and each and every endorser, guarantor, and surety of this Note
and all others who may become liable for all or any part of this obligation do
hereby waive diligence, demand, presentment for payment, protest, notice of
protest and notice of non-payment of this Note, and do hereby consent to any
number of renewals or extensions of the time of payment hereof and of the time
for advances, if any, and agree that any such renewals or extensions may be made
without notice to any of said parties and without affecting their liability
herein, all without affecting the liability of the other persons, firms or
corporations liable for the payment of this Note.
7. MAKER ACKNOWLEDGES THAT THIS NOTE AND THE UNDERLYING TRANSACTIONS GIVING
RISE HERETO CONSTITUTE COMMERCIAL BUSINESS TRANSACTED WITHIN THE STATE OF
CONNECTICUT. IN THE EVENT OF ANY LEGAL ACTION BETWEEN MAKER AND PAYEE HEREUNDER,
MAKER HEREBY EXPRESSLY WAIVES ANY RIGHTS WITH REGARD TO NOTICE, PRIOR HEARING
AND ANY OTHER RIGHTS HE MAY HAVE UNDER THE CONNECTICUT GENERAL STATUTES, CHAPTER
903a, AS NOW CONSTITUTED OR HEREAFTER AMENDED OR SUPPLEMENTED, OR OTHER STATUTE
OR STATUTES, STATE OR FEDERAL, AFFECTING PREJUDGMENT REMEDIES, AND PAYEE MAY
INVOKE ANY
3
<PAGE>
PREJUDGMENT REMEDY AVAILABLE TO IT WITH REGARD TO THE COLLATERAL, TO ENFORCE THE
PROVISIONS OF THIS NOTE, WITHOUT GIVING MAKER ANY NOTICE OR OPPORTUNITY FOR A
HEARING.
ADDITIONALLY, MAKER AND PAYEE HEREBY EACH WAIVE THE RIGHT TO TRIAL BY JURY
IN ANY ACTION, DEFENSE, COUNTERCLAIM, CROSSCLAIM AND/OR ANY FORM OF PROCEEDING
BROUGHT IN CONNECTION WITH THIS NOTE OR RELATING TO ANY INDEBTEDNESS EVIDENCED
HEREBY AND/OR ANY COLLATERAL NOW OR HEREAFTER SECURING THIS NOTE.
8. This Note has been made and delivered in the State of Connecticut and
shall be construed and enforced under and in accordance with the laws of the
State of Connecticut.
[Next page is signature page]
4
<PAGE>
IN WITNESS WHEREOF, Maker has hereunto set Maker's hand as of the 3rd day
of April, 1998.
-----------------------------------
Gerhard Ehninger
5
<PAGE>
Exhibit 10.11
STOCK PLEDGE AGREEMENT
STOCK PLEDGE AGREEMENT, dated as of April 3rd, 1998, between Claude L.
Buller, with an address at c/o Marco International, Inc., 100 Danbury Road,
Suite 101, Ridgefield, Connecticut 06877 ("Pledgor") and International Support
for Bone Marrow Drives, Ltd., a North Carolina corporation with an address at
550 West Avenue, Stamford, Connecticut 06902 ("ISBMD").
WHEREAS, Pledgor has received certain shares of the common stock (the
"Stock", as more fully defined in Section 2) of Lifecodes Corporation
("Lifecodes") in consideration for stock of ISBMD pursuant to an Agreement and
Plan of Reorganization of even date herewith;
WHEREAS, Pledgor has previously borrowed $541,392.28 from ISBMD (the
"Loan") and such amount is represented by a promissory note of Pledgor payable
to ISBMD (the "Note") of even date herewith;
WHEREAS, ISBMD asked Pledgor to pledge the Stock as collateral, in the
event of a default by Pledgor under the Note, and Pledgor has agreed to do so
pursuant to this Pledge Agreement;
NOW, THEREFORE, the parties hereto agree as follows:
Section 1. Definition. For all purposes of this Agreement, unless the
context otherwise requires, the term "Event of Default" means an Event of
Default as defined in the Note.
Section 2. Pledge of Pledged Stock. To secure performance of the
obligations of the Pledgor under the Note, the Pledgor hereby pledges and
grants, subject to Section 3 hereof, to ISBMD a first security interest in the
following shares of Stock consisting of:
(a) Fifty Thousand (50,000) shares of the common stock (and certificates
representing such shares) of Lifecodes; and
(b) All additional shares of stock acquired pursuant to a stock dividend or
stock split on such shares; and
(c) Any other or additional securities or property deliverable in respect
of such stock or a result of a reorganization, spin-off or
recapitalization, or as a result of an exchange of shares or merger in
respect of such stock, as more fully described in Section 5(a)(ii) hereof.
(all of the foregoing being hereinafter collectively called the "Pledged
Stock").
Pledgor has delivered to ISBMD a certificate or certificates for the shares
of common stock referred to in paragraph (a) above, registered in the name of
the Pledgor and accompanied by proper instruments of assignment executed by the
Pledgor so that the same shall be negotiable by ISBMD.
<PAGE>
Section 3. Representations. Pledgor hereby represents and warrants to ISBMD
as follows:
(a) Pledgor is the sole legal, beneficial and equitable owner and holder of
the Pledged Stock, has fully paid for the Pledged Stock, and no lien,
charge, encumbrance or other security interest exists against the Pledged
Stock (other than pursuant to this Agreement).
(b) Pledgor is the subject to no legal, contractual or other disability or
obligation which prohibits Pledgor from pledging the Pledged Stock as
provided herein and this pledge of the Pledged Stock will not contravene
any other agreement, order or contract to which the Pledgor is a party or
by which the Pledgor's assets are bound.
(c) There is no other lien, encumbrance, pledge, hypothecation, proxy,
option or arrangement for control or sale or subordination of any incident
of ownership of the Pledged Stock.
(d) There are no outstanding warrants, options, commitments or demands
pertaining to the Pledged Stock.
(e) Pledgor has full power and authority to pledge the Pledged Stock as
provided herein and no consents are necessary to effect this pledge.
(f) This pledge creates a valid and enforceable first priority lien on the
Pledged Stock and the beneficial ownership rights thereby represented.
Section 4. Covenants of Pledgor. Pledgor hereby covenants to ISBMD as
follows:
(a) Pledgor hereby agrees that it will preserve and protect the pledge of
the Pledged Stock as provided herein and will not take any action or fail
to take any action which would jeopardize the pledge as provided herein.
(b) Pledgor hereby agrees to reimburse ISBMD on demand for any and all
expenses and costs (including, without limitation, reasonable attorneys'
fees) incurred by Secured Party in enforcing this Agreement.
Section 5. Voting Rights; Dividends, Etc.
(a) So long as no Event of Default shall have occurred and be continuing:
(i) The Pledgor shall be entitled to exercise any and all voting and
or consensual rights and powers relating or pertaining to the Pledged Stock
for purposes inconsistent with the terms of this Agreement.
2
<PAGE>
(ii) The Pledgor shall be entitled to receive and retain all cash
dividends payable on the Pledged Stock, as well as all other dividends or
stock or liquidating dividends, interest, distributions in property,
returns of capital or other distributions made on or in respect of the
Pledged Stock; provided that all cash and other property received in
exchange for or redemption of any Pledged Stock, shall be become part of
the Pledged Stock and, if received by the Pledgor, shall be held in trust
for the benefit of ISBMD and shall forthwith be delivered to the Pledgor
(registered in the name of the Pledgor and accompanied by proper
instruments of assignment executed by the Pledgor in accordance with
ISBMD's instructions) to be held subject to the terms of this Agreement.
(iii) ISBMD shall execute and deliver (or cause to be executed and
delivered) to the Pledgor all proxies, powers of attorney, dividend
notices, and other instruments as the Pledgor may request for the purpose
of enabling the Pledgor to exercise the voting and/or consensual rights and
powers which it is entitled to exercise pursuant to paragraph (i) above
and/or to receive the dividends and other distributions which it is
authorized to receive and retain pursuant to paragraph (ii) above.
(b) Upon the occurrence and during the continuance of an Event of Default,
all rights of the Pledgor to exercise the voting and/or consensual rights and
powers which it is entitled to exercise pursuant to paragraph (i) above and/or
to receive the dividends and other distributions which it is authorized to
receive and retain pursuant to paragraph (ii) above shall cease, and all such
rights shall thereupon become vested in ISBMD who shall have the sole and
exclusive rights and powers to vote the Stock and to receive and retain the
dividends and other distributions which Pledgor would otherwise be authorized to
retain. Any and all money and other property paid over to or received by ISBMD
pursuant to the provisions of the subsection (b) shall be retained by ISBMD as
part of the Stock and be applied in accordance with the provisions hereof.
Section 6. Remedies. If at any time an Event of Default shall have occurred
and be continuing under the Note, then, in addition to having the rights set
forth in Section 5, ISBMD may, upon 10 days prior written notice to Pledgor,
take title to the Stock in partial or full satisfaction, as the case may be, of
rights and claims ISBMD may have pursuant to the Note; provided, such Stock
shall be valued for purposes of the remedies set forth herein, at the applicable
valuation set forth in the Note.
Section 7. Reasonable Care. ISBMD shall use reasonable care in the custody
and preservation of the Stock. The Pledgor hereby agrees that ISBMD's duty to
use reasonable care in the custody and preservation of the Stock shall be deemed
satisfied in all respects so long as the Stock certificate is in the custody of
ISBMD.
Section 8. Termination of Agreement and Return of Pledged Stock.
(a) When all amounts owed by Pledgor pursuant to the Note have been paid in
full, then this Agreement shall terminate and the Pledged Stock not previously
applied against such obligations as provided in Section 6 hereof and then held
by ISBMD shall be promptly returned to the Pledgor.
3
<PAGE>
(b) Upon reduction of the amount outstanding under the Note for any reason
(including payment, offset or forgiveness) or upon consummation of an initial
public offering by Lifecodes (each, a "Calculation Date"), a calculation shall
be made by ISBMD as to the applicable coverage ratio based upon the value of the
Pledged Stock (as defined below) versus the amount outstanding under the Note.
If the value of the Pledged Stock (as defined below) exceeds the amount
outstanding under the Note on any Calculation Date, ISBMD shall release to
Pledgor such number of shares of Pledged Stock as is required to result in a
coverage ratio of 1 to 1, and such released shares shall no longer constitute
Pledged Stock hereunder.
For purposes of this Section 8(b), the per share value of the Pledged Stock
shall be $9.80 at all times prior to the initial public offering of Lifecodes
common stock and at all times thereafter the value per share of the Pledged
Stock shall be the "Fair Market Value" as such term is defined in the Note.
Section 9. Further Assurances. The Pledgor agrees at its sole cost and
expense to do, file, record, make, execute and deliver all such acts, notices,
instruments, stock powers, financing or like statements as ISBMD reasonably
deems necessary to vest in and assure to ISBMD its security interest in any of
the Stock or to give effect to the rights, powers and remedies of ISBMD
hereunder.
Section 10. Notices. All notices required or permitted by the terms of this
Agreement shall be in writing and shall be deemed to have been given or made
when delivered or mailed first class postage prepaid to the address of such
other party set forth above.
Section 11. Merger. This Agreement constitutes the entire Agreement among
the parties hereto with respect to the transaction contemplated herein, and
supersedes all oral or written agreements, commitments or understandings with
respect to the matter provided herein. Pledgor hereby revokes any prior or other
proxy given before the date of this Agreement.
Section 12. Amendments and Modifications. This Agreement may not be amended
and modified except in writing by an agreement or agreements entered into by the
Pledgor and ISBMD.
Section 13. Successors and Assigns. This Agreement is binding upon and
inures to the benefit of the successors and assigns of the parties hereto.
Section 14. Counterparts/Headings. This Agreement may be executed in
several counterparts, each of which shall be deemed an original and which
together shall constitute but one and the same instrument. Headings used in this
Agreement are for convenience only and shall not be deemed part of this
Agreement.
Section 15. Governing Law. This Agreement shall be governed by the laws of
the State of Connecticut, U.S.A., without giving effect to its conflicts of laws
principles.
[Next page is the signature page]
4
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed on the date first above written.
INTERNATIONAL SUPPORT FOR BONE
MARROW DRIVES, LTD.
By:
------------------------------
Walter O. Fredericks
President
(Pledgor)
-----------------------------------
Claude L. Buller
5
<PAGE>
Exhibit 10.12
STOCK PLEDGE AGREEMENT
STOCK PLEDGE AGREEMENT, dated as of April 3rd, 1998, between Gerhard
Ehninger, with an address at c/o Deutsche Knochenmarkspenderdatei GmbH, Postfach
1405, 72004 Tubingen, Germany ("Pledgor") and International Support for Bone
Marrow Drives, Ltd., a North Carolina corporation with an address at 550 West
Avenue, Stamford, Connecticut 06902 ("ISBMD").
WHEREAS, Pledgor has received certain shares of the common stock (the
"Stock", as more fully defined in Section 2) of Lifecodes Corporation
("Lifecodes") in consideration for stock of ISBMD pursuant to an Agreement and
Plan of Reorganization of even date herewith;
WHEREAS, Pledgor has previously borrowed $632,072.14 from ISBMD (the
"Loan") and such amount is represented by a promissory note of Pledgor payable
to ISBMD (the "Note") of even date herewith;
WHEREAS, ISBMD asked Pledgor to pledge the Stock as collateral, in the
event of a default by Pledgor under the Note, and Pledgor has agreed to do so
pursuant to this Pledge Agreement;
NOW, THEREFORE, the parties hereto agree as follows:
Section 1. Definition. For all purposes of this Agreement, unless the
context otherwise requires, the term "Event of Default" means an Event of
Default as defined in the Note.
Section 2. Pledge of Pledged Stock. To secure performance of the
obligations of the Pledgor under the Note, the Pledgor hereby pledges and
grants, subject to Section 3 hereof, to ISBMD a first security interest in the
following shares of Stock consisting of:
(a) Fifty Thousand (50,000) shares of the common stock (and certificates
representing such shares) of Lifecodes; and
(b) All additional shares of stock acquired pursuant to a stock dividend or
stock split on such shares; and
(c) Any other or additional securities or property deliverable in respect
of such stock or a result of a reorganization, spin-off or
recapitalization, or as a result of an exchange of shares or merger in
respect of such stock, as more fully described in Section 5(a)(ii) hereof.
(all of the foregoing being hereinafter collectively called the "Pledged
Stock").
Pledgor has delivered to ISBMD a certificate or certificates for the shares
of common stock referred to in paragraph (a) above, registered in the name of
the Pledgor and accompanied by proper instruments of assignment executed by the
Pledgor so that the same shall be negotiable by ISBMD.
<PAGE>
Section 3. Representations. Pledgor hereby represents and warrants to ISBMD
as follows:
(a) Pledgor is the sole legal, beneficial and equitable owner and holder of
the Pledged Stock, has fully paid for the Pledged Stock, and no lien,
charge, encumbrance or other security interest exists against the Pledged
Stock (other than pursuant to this Agreement).
(b) Pledgor is the subject to no legal, contractual or other disability or
obligation which prohibits Pledgor from pledging the Pledged Stock as
provided herein and this pledge of the Pledged Stock will not contravene
any other agreement, order or contract to which the Pledgor is a party or
by which the Pledgor's assets are bound.
(c) There is no other lien, encumbrance, pledge, hypothecation, proxy,
option or arrangement for control or sale or subordination of any incident
of ownership of the Pledged Stock.
(d) There are no outstanding warrants, options, commitments or demands
pertaining to the Pledged Stock.
(e) Pledgor has full power and authority to pledge the Pledged Stock as
provided herein and no consents are necessary to effect this pledge.
(f) This pledge creates a valid and enforceable first priority lien on the
Pledged Stock and the beneficial ownership rights thereby represented.
Section 4. Covenants of Pledgor. Pledgor hereby covenants to ISBMD as
follows:
(a) Pledgor hereby agrees that it will preserve and protect the pledge of
the Pledged Stock as provided herein and will not take any action or fail
to take any action which would jeopardize the pledge as provided herein.
(b) Pledgor hereby agrees to reimburse ISBMD on demand for any and all
expenses and costs (including, without limitation, reasonable attorneys'
fees) incurred by Secured Party in enforcing this Agreement.
Section 5. Voting Rights; Dividends, Etc.
(a) So long as no Event of Default shall have occurred and be continuing:
(i) The Pledgor shall be entitled to exercise any and all voting and
or consensual rights and powers relating or pertaining to the Pledged Stock
for purposes inconsistent with the terms of this Agreement.
2
<PAGE>
(ii) The Pledgor shall be entitled to receive and retain all cash
dividends payable on the Pledged Stock, as well as all other dividends or
stock or liquidating dividends, interest, distributions in property,
returns of capital or other distributions made on or in respect of the
Pledged Stock; provided that all cash and other property received in
exchange for or redemption of any Pledged Stock, shall be become part of
the Pledged Stock and, if received by the Pledgor, shall be held in trust
for the benefit of ISBMD and shall forthwith be delivered to the Pledgor
(registered in the name of the Pledgor and accompanied by proper
instruments of assignment executed by the Pledgor in accordance with
ISBMD's instructions) to be held subject to the terms of this Agreement.
(iii) ISBMD shall execute and deliver (or cause to be executed and
delivered) to the Pledgor all proxies, powers of attorney, dividend
notices, and other instruments as the Pledgor may request for the purpose
of enabling the Pledgor to exercise the voting and/or consensual rights and
powers which it is entitled to exercise pursuant to paragraph (i) above
and/or to receive the dividends and other distributions which it is
authorized to receive and retain pursuant to paragraph (ii) above.
(b) Upon the occurrence and during the continuance of an Event of Default,
all rights of the Pledgor to exercise the voting and/or consensual rights and
powers which it is entitled to exercise pursuant to paragraph (i) above and/or
to receive the dividends and other distributions which it is authorized to
receive and retain pursuant to paragraph (ii) above shall cease, and all such
rights shall thereupon become vested in ISBMD who shall have the sole and
exclusive rights and powers to vote the Stock and to receive and retain the
dividends and other distributions which Pledgor would otherwise be authorized to
retain. Any and all money and other property paid over to or received by ISBMD
pursuant to the provisions of the subsection (b) shall be retained by ISBMD as
part of the Stock and be applied in accordance with the provisions hereof.
Section 6. Remedies. If at any time an Event of Default shall have occurred
and be continuing under the Note, then, in addition to having the rights set
forth in Section 5, ISBMD may, upon 10 days prior written notice to Pledgor,
take title to the Stock in partial or full satisfaction, as the case may be, of
rights and claims ISBMD may have pursuant to the Note; provided, such Stock
shall be valued for purposes of the remedies set forth herein, at the applicable
valuation set forth in the Note.
Section 7. Reasonable Care. ISBMD shall use reasonable care in the custody
and preservation of the Stock. The Pledgor hereby agrees that ISBMD's duty to
use reasonable care in the custody and preservation of the Stock shall be deemed
satisfied in all respects so long as the Stock certificate is in the custody of
ISBMD.
Section 8. Termination of Agreement and Return of Pledged Stock.
(a) When all amounts owed by Pledgor pursuant to the Note have been paid in
full, then this Agreement shall terminate and the Pledged Stock not previously
applied against such obligations as provided in Section 6 hereof and then held
by ISBMD shall be promptly returned to the Pledgor.
3
<PAGE>
(b) Upon reduction of the amount outstanding under the Note for any reason
(including payment, offset or forgiveness) or upon consummation of an initial
public offering by Lifecodes (each, a "Calculation Date"), a calculation shall
be made by ISBMD as to the applicable coverage ratio based upon the value of the
Pledged Stock (as defined below) versus the amount outstanding under the Note.
If the value of the Pledged Stock (as defined below) exceeds the amount
outstanding under the Note on any Calculation Date, ISBMD shall release to
Pledgor such number of shares of Pledged Stock as is required to result in a
coverage ratio of 1 to 1, and such released shares shall no longer constitute
Pledged Stock hereunder.
For purposes of this Section 8(b), the per share value of the Pledged Stock
shall be $9.80 at all times prior to the initial public offering of Lifecodes
common stock and at all times thereafter the value per share of the Pledged
Stock shall be the "Fair Market Value" as such term is defined in the Note.
Section 9. Further Assurances. The Pledgor agrees at its sole cost and
expense to do, file, record, make, execute and deliver all such acts, notices,
instruments, stock powers, financing or like statements as ISBMD reasonably
deems necessary to vest in and assure to ISBMD its security interest in any of
the Stock or to give effect to the rights, powers and remedies of ISBMD
hereunder.
Section 10. Notices. All notices required or permitted by the terms of this
Agreement shall be in writing and shall be deemed to have been given or made
when delivered or mailed first class postage prepaid to the address of such
other party set forth above.
Section 11. Merger. This Agreement constitutes the entire Agreement among
the parties hereto with respect to the transaction contemplated herein, and
supersedes all oral or written agreements, commitments or understandings with
respect to the matter provided herein. Pledgor hereby revokes any prior or other
proxy given before the date of this Agreement.
Section 12. Amendments and Modifications. This Agreement may not be amended
and modified except in writing by an agreement or agreements entered into by the
Pledgor and ISBMD.
Section 13. Successors and Assigns. This Agreement is binding upon and
inures to the benefit of the successors and assigns of the parties hereto.
Section 14. Counterparts/Headings. This Agreement may be executed in
several counterparts, each of which shall be deemed an original and which
together shall constitute but one and the same instrument. Headings used in this
Agreement are for convenience only and shall not be deemed part of this
Agreement.
Section 15. Governing Law. This Agreement shall be governed by the laws of
the State of Connecticut, U.S.A., without giving effect to its conflicts of laws
principles.
[Next page is the signature page]
4
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed on the date first above written.
INTERNATIONAL SUPPORT FOR BONE
MARROW DRIVES, LTD.
By:
--------------------------------
Walter O. Fredericks
President
(Pledgor)
-----------------------------------
Gerhard Ehninger
5
<PAGE>
NON-RECOURSE PROMISSORY NOTE AND AGREEMENT
$150,000 December 19,1996
FOR VALUE RECEIVED, the undersigned, Walter 0. Fredericks, (herein called
"Borrower"), hereby promises to pay to the order of Lifecodes Corporation
(herein called the "Corporation"), the principal sum of up to One Hundred Fifty
Thousand United States of America Dollars ($150,000) together with interest on
the unpaid balance thereof as hereinafter set forth, both principal and interest
payable as herein provided in lawful money of the United States of America at
550 West Avenue, Stamford, CT 06902 or at such other place and by such method,
including wire transfer, as from time to time may be designated by the holder of
this Note.
The principal amount of this Note shall be due and payable on December 31,
2001, at which time the unpaid principal balance of this Note and all interest
accrued hereon shall be due and payable in full.
The unpaid principal of this Note from time to time outstanding shall bear
interest on each day outstanding at the rate of eight percent (8%) per annum.
Accrued Interest hereunder shall be paid to the Corporation on December 31,
1997 and on the last day of each year during the term hereof. If interest is not
paid when due, the amount of accrued and unpaid interest shall be added to the
principal amount of this Note and noted on the Grid Schedule attached hereto.
The amount of the loan shall be advanced by Lifecodes to Borrower from time
to time in multiples of $ 1,000.00. The amount of each advance shall be noted by
Lifecodes on the Grid Schedule attached hereto. A copy of the Grid Schedule will
be sent by Lifecodes to Borrower upon request.
The principal amount of this Note shall become immediately due and payable,
together with all interest accrued thereon, upon the occurrence of any of the
following events:
(i) Default by the Borrower in the payment of the principal of this Note or
in the performance, or breach, of any other covenant, agreement or provision
contained in this Note;
(ii) Default by the Borrower in the payment of indebtedness owing to any
bank or institutional lender;
(iii) Entry of a final judgment against the Borrower for the payment of
money in excess of $50,000, without discharge or provision for discharge
thereof, or procurement of a stay of execution thereof, within 60 days from the
date of entry of judgment;
<PAGE>
-2-
(iv) The institution by the Borrower of proceedings under any applicable
bankruptcy code or any chapter thereof, or, the consent to the institution of
bankruptcy or insolvency proceedings against him, or the filing of a petition or
answer or consent seeking reorganization or relief under the applicable
bankruptcy code or any chapter thereof or any other applicable national or state
law, or the consent by him to the filing of any such petition or to the
appointment of a receiver, liquidator, assignee, trustee, conservator,
sequestrator or other similar official of the Borrower or any substantial part
of his properties or assets or the making by him of an assignment for the
benefit of creditors, or the admission by Borrower in writing of his inability
to pay his debts generally as they become due, or the taking of action by the
Borrower in furtherance of any such action;
(v) The death of Borrower or termination of employment of Borrower by the
Corporation.
Borrower has delivered to the Corporation, as security for the payment of
the principal amount of this Note, a notarial deed transferring his business
interest (Geschaftsanteile) in Medical Molecular Diagnostics GmbH ("MMD") to the
Corporation.
Borrower shall have the right at any time, upon written notice to the
Corporation, to cause the Corporation to purchase from him all of his interest
in MMD at a price equal to the then unpaid principal amount of this Note plus
accrued interest therein.
The Corporation shall have the right at any time, upon written notice to
the Borrower, to acquire from the Borrower all of his interest in MMD pledged to
secure payment of this Note in exchange for the cancellation of this Note.
In addition to the interest in MMD pledged by borrower hereunder, Borrower
shall deliver to the Corporation, as further security for the payment of this
Note all additional interest in MMD acquired by him whatsoever.
Notwithstanding any provision of this Note, the Corporation shall have no
recourse against Borrower personally for any payment of principal or interest
hereunder, and its sole remedy upon any default by Borrower hereunder shall be
the right to secure for itself the interest in MMD pledged hereunder.
Borrower waives and shall not apply for or avail himself of any
appraisement, valuation, exemption, extension or other kind of type of
moratorium law now existing as hereinafter enacted.
This Note may not be modified, amended or changed, except by execution of a
written
<PAGE>
-3-
agreement signed by the Corporation and Borrower.
This Note sets forth the entire agreement and understanding of the parties
on the subject matter hereof.
Borrower hereby waives demand, presentment for payment, protest, notice of
protest, notice of intention to accelerate the maturity of this Note, diligence
in collecting, the bringing of any suit against any party and any notice of or
defense on account of any extensions, renewals, partial payments or changes in
any manner of or in this Note or in any of its terms, provisions or covenants,
or any delay, indulgence or other act of any trustee or any holder hereof,
whether before or after maturity.
This Note and the rights and duties of the parties hereto shall be
governed by the laws of Connecticut.
This Note and Agreement has been executed by the Borrower as of the
date first above written.
/s/ Walter O. Fredericks
----------------------------------
Walter O. Fredericks
Agreed to this 19th day of
December 1996.
Lifecodes Corporation
By /s/ Dean Somer
-----------------------------
Dean Somer, Controller
<PAGE>
GRID SCHEDULE
Date Loan Amount New Principal Amount
=========================================================================
12-19-96 $32,806.25 $32,806.25
-------------------------------------------------------------------------
4-11-97 20,335.00 53,141.25
-------------------------------------------------------------------------
10-1-97 50,956.01 104,097.26
-------------------------------------------------------------------------
<PAGE>
ADVANCE ON SALES BONUSES
$50,000 June 1, 1997
FOR VALUE RECEIVED, Michael Petrillo and his heirs, executors and
administrators ("Borrower") hereby Promises to pay Lifecodes Corporation
("Lender") the principal sum of Fifty Thousand Dollars ($50,000) plus interest
on the unpaid principal balance at the rate of 8.5% per annum as described in
the following paragraph.
Payments of principal and interest, at the repayment rate of 50% of Sales
Bonus Earned, shall be made in lawful currency of the United States at the
offices of the Lender at 550 West Ave., Stamford, CT, commencing with the Sales
Bonus Earned for the quarter ended September 30, 1997 and at the end of each
subsequent quarter until all principal and interest is repaid. For the purpose
of interpretation, "Sales Bonus Earned" shall mean the net amount payable to
Borrower as sales commission for each calendar quarter (see "Attachment 11:
Incentive Compensation Plan") after deduction of any state or federal taxes or
fees. Any balance of principal or interest remaining and unpaid on June 30, 2000
shall become immediately payable by Borrower.
The obligations of Borrower are secured ("Collateral") by a first priority
pledge of and security interest in (1) Borrower's rights under his options to
purchase common stock of the Lender, and, (2) any shares of stock of Lender
issuable upon exercise of such options. Borrower agrees that the grant of the
security interest in the Collateral shall be irrevocable and unconditional,
irrespective of the validity, legality or enforceability of the obligations of
the Borrower hereunder.
In the event (A) the Borrower ceases to be employed by the Lender, (B)
Borrower, pursuant to or within the meaning of Title 11, U.S. Code or any
similar foreign, United States federal or state law for the relief of debtors
("Bankruptcy Law"), (i) commences a voluntary proceeding, (ii) consents to entry
of an order for relief against Borrower in an involuntary case or proceeding,
(iii) consents to the appointment for Borrower of a receiver, trustee, assignee,
liquidator, sequestrator or similar official under any Bankruptcy Law (a
"Custodian"), or (iv) makes a general assignment for the benefit of Borrower's
creditors, or (v) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law, or (vi) Borrower is in default under this Agreement,
then in any such case all unpaid principal and interest payable hereunder to
Lender shall immediately become due and payable without any declaration or other
act on the part of the Lender.
<PAGE>
Borrower shall pay all of the costs and expenses of Lender in connection
with any action taken by it to collect or enforce this Agreement or to protect
its rights with respect thereto including reasonable attorney's fees, whether or
not suit is instituted, and Lender may, without limitation, take judgement for
all such amounts.
Borrower hereby submits to the jurisdiction of the courts of the State of
Connecticut and the Federal Courts of the United States of America for
Connecticut in respect to any action or proceeding relating to this Agreement or
the enforcement of any judgement thereto. Borrower hereby waives, and agrees not
to assert as a defense in any action, suit or proceeding for the interpretation
and/or enforcement of this Agreement that Borrower is not subject thereto or
that such action cannot be brought in said courts. Borrower agrees that service
of process in any such action, suit or proceeding shall be deemed in every
respect effective service of process upon him if mailed or delivered to Michael
Petrillo, 718 Broadway, New York, N.Y. ______.
This Agreement shall be governed by and construed in accordance with the
laws of the state of Connecticut applicable to instruments made and to be
performed in Connecticut and cannot be changed orally.
/s/ Michael Petrillo
---------------------------
Michael Petrillo
mikeloan:5-9-97
<PAGE>
FY-1997 PROPOSED INCENTIVE COMPENSATION PLAN
MIKE PETRILLO VICE-PRESIDENT SALES & MARKETING
INCOME HISTORY
BASE INCENTIVE TOTAL
---- --------- -----
ACTUAL 1995 65,000 20,420 85,4220
ACTUAL 1996 67,500 57,611 125,111
PROPOSED 1997 88,700 51,500 140,200
PROPOSED 1997 INCOME BASED UPON A 23% SALES INCREASE TO PLAN.
1) Raise base to $90,000 effective 2-1-97.
2) Raise car allowance from $500 to $600/mo. effective 2-1-97.
3) Retroactive to October 1, 1996, change bonus to:
- 20% of prior year's bonus paid quarterly ($11,500)
- 2% commission of first $400,000 in incremental sales
- 4% commission on next $800,000 in incremental sales
- 5% commission on all sales over Plan ($1.2 delta)
Note: a reduction of 3% an any sales derived from incremental NMDP funding
and a credit of 3% an any lost NMDP funding.
4) Up to 20% of any bonus payable may be taken in Lifecodes stock at most
recent arms-length price (BOD to determine "most recent arms length
price").
/s/ Walter O. Fredericks 1/28/97
------------------------------------------
Walter O. Fredericks Date
/s/ Michael Petrillo 1/28/97
------------------------------------------
Michael Petrillo Date
<PAGE>
PROMISSORY NOTE
U.S. $206,800 Stamford, Connecticut
September 30, 1997
FOR VALUE RECEIVED, the undersigned, MR. RICHARD A. SANDBERG, a resident of
New Canaan, Connecticut ("Borrower"), hereby promises to pay to the order of
LIFECODES CORPORATION, a Delaware corporation located at 550 West Avenue,
Stamford, Connecticut 06902 (the "Corporation"), the principal sum of Two
Hundred Six Thousand Eight Hundred DOLLARS ($206,800) on September 30, 1999,
together with, accrued interest on the unpaid balance hereof at a rate equal to
eight percent (8%).
The first installment of accrued interest shall be due on September 30,
1998, and the remaining installment of accrued interest and the entire principal
amount shall be due on September 30, 1999.
Borrower shall have the right at any time to prepay the entire outstanding
amount of this Note. Borrower shall have the right to make a partial prepayment
of this Note at any time.
As security for the payment and performance of Borrower's obligations under
this Note, Borrower hereby grants the Corporation a security interest in and
pledges and deposits with the Corporation all of the shares of common stock of
the Corporation purchased by Borrower on the date hereof pursuant to the terms
of a Stock Purchase Agreement between the Corporation and Borrower (the
"Shares"). In connection herewith, Borrower shall deliver to the Corporation
Certificate No. 96 representing the Shares, accompanied by stock powers and
other instruments of assignment as Corporation may request, duly endorsed in
blank by Borrower.
The principal amount of this Note shall become immediately due and payable,
together with all interest accrued thereon, upon the occurrence of any of the
following events:
i. Any failure to make payment of any installment of principal or interest
on this Note or any other default in the performance, or breach, of any other
covenant, agreement or provision contained in this Note;
ii. Any default by Borrower in the payment of indebtedness owing to any
bank or institutional lender;
iii. Entry of a final judgment against Borrower for the payment of money in
excess of $50,000, without discharge or provision for discharge thereof, or
procurement of a stay of execution thereof, within 60 days from the date of
entry of judgment;
<PAGE>
iv. The institution by Borrower of proceedings under any applicable
bankruptcy code or any chapter thereof, or the consent to the institution of
bankruptcy or insolvency proceedings against him, or the filing of a petition or
answer or consent seeking reorganization or relief under the applicable
bankruptcy code or any chapter thereof or any other applicable national or state
law, or the consent by him to the filing of any such petition or to the
appointment of a receiver, liquidator, assignee, trustee, conservator,
sequestrator or other similar official of Borrower or any substantial part of
his properties or assets or the making by him of an assignment for the benefit
of creditors, or the admission by Borrower in writing of his inability to pay
his debts generally as they become due, or the taking of action by Borrower in
furtherance of any such action;
v. The death or disability of Borrower or any termination or resignation of
Borrower which results in Borrower no longer serving as either an officer or
director of the Corporation.
At the option of the Corporation, immediately and without notice to
Borrower upon the occurrence of an event of default specified in the foregoing
subparagraphs of this Note, the obligation of Borrower hereunder shall
immediately become due and payable without further action of any kind, and this
Note shall become due and payable without presentment, demand, protest, or other
notice of any kind, all of which are expressly waived by Borrower.
Borrower further promises to pay all costs and expenses, including
reasonable attorneys' fees, that may be incurred by the Corporation in
attempting or effecting payment or collecting hereunder, or in protecting,
sustaining, realizing or foreclosing on the collateral securing this Note, in
each case, whether or not suit is instituted.
Failure by the holder hereof to insist upon performance in accordance with
the terms of this Note shall not be deemed a waiver of any other obligation
under this Note or any collateral securing this Note.
The Corporation reserves the right to pledge, hypothecate or otherwise
dispose of this Note. Any subsequent holder of this Note shall not be subject to
(and Borrower expressly waives as against such subsequent holder) any defenses,
set-offs, counterclaims or other objections to the payment of this Note.
This Note is to be governed by and construed in accordance with the laws of
the State of Connecticut for all purposes, without regard to its conflicts of
laws provisions.
-------------------------------
RICHARD A. SANDBERG
2
<PAGE>
PROMISSORY NOTE
$350,000 October 1, 1997
FOR VALUE RECEIVED, the undersigned, Medical Molecular Diagnostics, GmbH
(herein called the "Borrower", hereby promises to pay to the order of Lifecodes
Corporation (herein called "Lifecodes"), the principal sum of Three Hundred
Fifty Thousand United States of America Dollars ($350,000.00) together with
interest on the unpaid balance thereof as hereinafter set forth, both principal
and interest payable as herein provided in lawful money of the United States of
America at 550 West Avenue, Stamford, CT 06902 or at such other place and by
such method, including wire transfer, as from time to time may designated by the
holder of this Note.
The principal amount of this Note shall be due and payable on December 31,
2001 at which time the unpaid principal balance of this Note and all interest
accrued hereon shall be due and payable in full. This Note replaces in its
entirety the previous Note dated January 21, 1997.
The unpaid principal of this Note (exclusive of any past due interest) from
time to time outstanding shall bear interest on each day outstanding at the rate
of eight percent (8%) per annum. All past due principal and past due interest
owed under this Note shall bear interest at the default rate of twelve percent
(12%) per annum for each day until paid in full.
Accrued Interest hereunder shall be paid to Lifecodes on December 31, 1997
and on the last day of each year during the term hereof.
The amount of the loan shall be advanced by Lifecodes to Borrower from time
to time in multiples of $1,000.00. The amount of each advance shall be noted by
Lifecodes on the Grid Schedule attached hereto. A copy of the Grid Schedule will
be sent by Lifecodes to Borrower upon request.
The principal amount of this Note shall become immediately due and payable,
together with all interest accrued thereon, upon the occurrence of any of the
following events.
(i) Default by the Borrower in the payment of the principal or interest of
this Note or in the performance, or breach of any other covenant, agreement or
provision contained in this Note;
(ii) Default by the Borrower in the payment of indebtedness owing to any
bank or institutional lender;
(iii) Entry of a final judgment against the Borrower for the payment of
money in excess of $50,000, without discharge or provision for discharge
thereof, or procurement of a stay of execution thereof, within 60 days from the
date of entry judgement;
<PAGE>
-2-
(iv) The institution by the Borrower of proceedings under any applicable
bankruptcy code or any chapter thereof, or the consent to the institution of
bankruptcy or insolvency proceedings against it, or the filing of a petition or
answer or consent seeking reorganization or relief under the applicable
bankruptcy code or any chapter thereof or any other applicable national or state
law, or the consent by it to the filing of any such petition or to the
appointment or a receiver, liquidator, assignee, trustee, conservator,
sequestrator or other similar official of the Borrower or any substantial part
of its properties or assets or the making by it of an assignment for the benefit
of creditors, or the admission by Borrower in writing of it's inability to pay
it's debts generally as they become due, or the taking of Corporate action by
the Borrower in furtherance of any such action;
(v) The discontinuance by Borrower of its business operations;
(vi) Failure of Borrower to obtain and keep in force any licenses, permits
or Certifications necessary for it to maintain its laboratory and the operations
thereof;
This Note may be prepaid by Borrower at any time without payment of any
prepayment charge or fee.
Borrower waives and shall not apply for or avail itself of any
appraisement, valuation exemption, extension or other kind of type of moratorium
law now existing as hereinafter enacted.
This Note may not be modified, amended or changed, except by execution of a
written agreement signed by Lifecodes and Borrower.
This Note sets forth the entire agreement and understanding of the parties
on the subject matter hereof.
Borrower hereby waives demand, presentment payment protest, notice of
protest, notice of intention to accelerate the maturity of this Note, diligence
in collecting, the bringing of any suit against any party and any notice of or
defense on account of any extensions, renewals, partial payments or changes in
any manner of or in this Note or in any of its terms, provisions or covenants,
or any delay, indulgence or other act of any trustee or any holder hereof,
whether before or after maturity.
This Note and the rights and duties of the parties hereto shall be governed
by the laws of Connecticut.
<PAGE>
-3-
This Note and Agreement has been executed by the Borrower as of the date
first above written.
Medical Molecular Diagnostics, GmbH
By /s/ Walter O. Fredericks
---------------------------------
Walter O. Fredericks
Agreed to as of the 1 day of
October, 1997
Lifecodes Corporation
By /s/ Dean Somer
--------------------------------
Dean Somer, Controller
<PAGE>
GRID SCHEDULE
- --------------------------------------------------------------------------------
Date Loan Amount New Principal Total
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
3-24-97 $90,689.24
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4-11-97 229,665.00
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
8-11-97 49,043.99
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
9-8-97 100,000.00 $469,398.23
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
10-1-97
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
DM 260,000 repaid
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
260,000 / 1.7745 = (146,520.14) 322,878.09
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
FULL RECOURSE PROMISSORY NOTE
U.S. $82,500 Stamford, Connecticut
January 2, 1998
FOR VALUE RECEIVED, the undersigned, WALTER O. FREDERICKS, a resident of
Bedford, New York ("Borrower"), hereby promises to pay to the order of LIFECODES
CORPORATION, a Delaware corporation located at 550 West Avenue, Stamford, CT
06902 (the "Corporation"), the principal sum of eighty two thousand five hundred
DOLLARS ($82,500) on January 2, 2000, together with accrued interest on the
unpaid balance hereof at a rate equal to eight percent (8%).
The first installment of accrued interest shall be due on January 2, 1999,
and the remaining installment of accrued interest and the entire amount of the
principal shall be due on Januaray 2, 2000.
Borrower shall have the right at any time to prepay the entire outstanding
amount of this Note and shall have the right at any time to make a partial
prepayment.
As security for the payment and performance of Borrower's obligations under this
Note, Borrower hereby grants the Corporation a security interest in and pledges
and deposits with the Corporation ten thousand (10,000) of the shares of the
common stock of the Corporation purchased by the Borrower on the date hereof. In
connection herewith, Borrower shall deliver to the Corporation Certificate No.
_______ representing the Shares, accompanied by the stock powers and other
instruments of assignment as the Corporation may request, duly endorsed in blank
by the Borrower.
The principal amount of the Note shall become immediately due and payable,
together with all interest accrued thereon, upon the occurrence of any of the
following events:
1) Any failure to make payment of any installment of principal or
interest on the Note or any other default in the performance, or
breach, of any other covenant, agreement or provision contained in
this Note;
2) Any default by Borrower in the payment of indebtedness owing to any
bank or institutional lender,
3) Entry of a final judgment against the Borrower for the payment of
money in excess of $50,000, without discharge or provision for
discharge thereof or procurement of a stay of execution thereof,
within 60 days from the date of entry of the judgment;
4) The institution by Borrower of proceedings under any bankruptcy code
or any chapter thereeof, or the consent to the institution of
bankruptcy or insolvency proceedings against him, or the filing of a
petition or answer or consent seeking reorganization or relief under
the applicable bankruptcy code or any chapter thereof or any other
applicable national or state law, or the consent by him to the filing
of any such petition or to the appointment of a receiver, liquidator,
assignee, trustee, conservator, sequestrator or other similar official
of Borrower or any substantial part of his properties or assets or the
making by him of an assignment for the benefit of creditors, or the
admission by Borrower in writing of his inability to pay his debts
generally as they become due, or the taking of action by Borrower in
furtherance of such action;
5) The death or disability of Borrower or any termination or resignation
of Borrower which results in Borrower no longer serving an either an
officer or director of the Corporation.
At the option of the Corporation, immediately and without notice to the
Borrower upon the occurrence of an event of default specified in the foregoing
subparagraphs of this Note, the obligation of
<PAGE>
the Borrower hereunder shall immediately become due and payable without further
action of any kind and this Note shall become due and payable without
presentment, demand, protest or other notice of any kind, all of which are
expressly waived by Borrower.
Borrower further promises to pay all costs and expenses, including
reasonable attorney's fees, that may be incurred by the Corporation in
attempting or effecting payment or collecting hereunder, or in protecting.
sustaining, realizing or foreclosing on the collateral securing this Note, in
each case, whether or not suit is instituted.
Failure by the holder hereof to insist upon performance in accordance with
any of the terms of this Note shall not be deemed a waiver of any other
obligations under this Note or any collateral securing this Note.
The Corporation reserves the right to pledge, hypothecate or otherwise
dispose of this Note. Any subsequent holder of this Note shall not be subject to
(and Borrower expressly waives as against such subsequent holder) any defenses,
set-offs, counterclaims or other objections to the payment of this Note.
This Note is governed by and construed in accordance with the laws of the
State of Connecticut for all purposes, without regard to its conflicts of laws
provisions.
/s/ Walter O. Fredericks
----------------------------
Walter O. Fredericks
optionnote: 1/2/93
<PAGE>
40 Brook Farm Road
Bedford, NY 10506
January 1, 1998
Dean Somer
Lifecodes Corporation
550 West Ave
Stamford, CT 06902
Dear Mr. Somer:
Please find enclosed an executed copy of my January 2, 1993, stock option for
15,000 shares of Lifecodes common stock at $5.50 per share. As described in
Paragraph 4 of that contract, I wish to execute a full recourse promissory note
in the amount of $82,500 to cover this purchase; kindly have your lawyers and
the Committee write and execute a Note for my signature.
I request the option be issued as shares:
a) 10,000 to Walter 0. Fredericks (SS####-##-####)
b) 1,000 to Robert J. Fredericks, 694 McCrey Drive, Ballston Spa, NY
12020 (SS#142-44 6169)
c) 1,000 to Carole A Foran, 18, Rolling Hills Way, Port Murray, NJ 07865
(SS####-##-####)
d) 1,000 to Kristin L. Fredericks, 137 Clapp St, Milton, MA 02196
(SS####-##-####)
e) 1,000 to Drew R. Fredericks (o/o Robert J. Fredericks C/F, Under NY
Uniform Gift to Minors Act) 694 McCrey Drive, Ballston Spa, NY 12020
(SS####-##-####)
f) 1,000 to Julia C. Foran (% Carole M. Foran C/F, Under NJ Transfer to
Minors Act), 18 Rolling Hills Way, Port Murray, NJ 07865
(SS####-##-####)
If the Committee -requires collateral on the Note, I propose to pledge the
10,000 share certificate, above, which, as determined in the recent Empire
Valuations assessment, would cover the amount of the loan.
Thank-you for your prompt attention to this matter.
Sincerely,
/s/ Walter Fredericks
<PAGE>
Roche Molecular Systems
A Member of the Roche Group Roche Molecular Systems, Inc.
1145 Atlantic Avenue
Alameda, California 94501
510-865-5400
February 26, 1997
Mr. Michael Petrillo
Vice President, Sales and Marketing
LIFECODES CORPORATION
550 West Avenue
Stamford, Connecticut 06902
RE: License agreement on HLA products for human tissue typing
Dear Mike,
We refer to the HLA Product License Agreement between our companies dated
February 26, 1997.
You have asked whether Licensed Products under the above referenced agreement
may be used by Lifecodes' customers for parentage determination ("paternity"
testing). As we understand it, the reason for your request is that the product
may be used for "paternity" testing, a field which is currently not licensed to
Lifecodes, and yet Lifecodes will not in all cases be in a position to ascertain
the final customer's actual use of the product.
Based on the above representation of Lifecodes, RMS agrees that Lifecodes'
customers' use of the Licensed Products for paternity testing applications will
not constitute a breach of the above-mentioned agreement, as long as all other
terms and conditions of the said agreement, specifically the reporting and
paying of royalties, are respected. RMS's agreement shall be only for so long as
Lifecodes in fact cannot ascertain the customers' actual use of the product and
so long as Licensed Products can be used in both the tissue typing and paternity
fields.
Lifecodes agrees it will provide to RMS, as part of the contractually required
reporting information about the amount of Licensed Products, an estimate of the
percentage or number of Licensed Products which were used by Lifecodes'
customers for paternity testing applications.
<PAGE>
Mr. Michael Petrillo -2- February 10, 1997
If you are in agreement with the above, please countersign for acceptance and
return two originals for our files.
Yours very truly,
ROCHE MOLECULAR SYSTEMS, INC. F. HOFFMANN-LAROCHE, LTD.
/s/ Kathy Ordonez /s/
- ------------------------------- ------------------------------
Kathy Ordonez Name:
President Title:
Apprv'd As To Form
LAW DEPT.
By FSR
Understood and Accepted
LIFECODES CORPORATION
/s/ Michael Petrillo
- -----------------------------
Michael Petrillo
Vice President, Sales and Marketing
ED/bg
Enclosures
<PAGE>
REDACTED VERSION
[CONFIDENTIAL TREATMENT HAS BEEN
REQUESTED FOR PORTIONS OF
THIS EXHIBIT]
<PAGE>
LICENSE AGREEMENT
by and between
F.HOFFMANN-LA ROCHE Ltd, Grenzacherstr.124, CH-4002 Basel, Switzerland
and
ROCHE MOLECULAR SYSTEMS, INC., 1080 U.S. Highway 202, Branchburg, N.J.
08876, USA (hereinafter jointly referred to as "ROCHE") and
LIFECODES CORPORATION (hereinafter referred to as "LIFECODES").
PREAMBLE
ROCHE and its Affiliates own certain inventions and patent rights relating
to the Polymerase Chain Reaction (PCR) technology and to the reverse
transcription of nucleotides.
LC intends to market products for HLA typing in the field of tissue and
organ transplantation, some of which products and/or their use are covered
by ROCHE's patent rights.
ROCHE is willing to grant to LIFECODES a non-exclusive license under its
patent rights in order to allow LIFECODES to market such HLA typing
products.
1. Definitions
In this Agreement, unless the context otherwise requires:
1.1 "Affiliate" shall mean any corporation, partnership or other business
organization which either party directly or indirectly controls or any
company by which either party is controlled by or is under common control
with or any organization the majority ownership of which is directly or
indirectly common to the majority ownership of a party hereto. For the
purpose of this Agreement "control" shall mean the holding of 50% (fifty
percent) or more of the voting stock or other ownership interests of the
corporation or business entity involved.
1.2 "HLA Typing" shall mean genotyping of specific HLA loci in order to assess
the probability of acceptance of a transplant of a human organ or tissue.
1
<PAGE>
1.3 "Licensed Patents" shall mean the patents and patent applications as
specified in Schedule A as well as any addition, continuation (but not
continuation-in-part), division, extension, reissue, re-examination,
application or substitution with respect thereto, or the equivalent of any
of the foregoing.
1.4 "Licensed Products" shall mean those products the manufacture, use or sale
of which are covered by one or more Valid Claim(s) of Licensed Patents and
which Products are listed in Schedule B. Each such Product will be clearly
identified and distinguished in the market as being a LIFECODES Product. If
LIFECODES desires to add a new product to the list of Licensed Product or
to change any Licensed Product listed in Schedule B, LIFECODES shall submit
to ROCHE the labels and package insert for such product together with its
request for modification of Schedule B. If ROCHE determines that such new
or changed product is clearly identified as a LIFECODES product and that
such product is clearly identified to be used only for HLA-typing, ROCHE
will confirm, within a reasonable time period after receipt of the above
mentioned labels and package inserts, its consent to the modification of
Schedule B in writing.
1.5 "Net Sales" shall mean the gross invoice price for sales or transfers to
final users less deductions for returns (including withdrawals and
recalls), sales rebates (price reduction), volume (quantity) discounts,
sales taxes and other taxes directly linked to sales in the countries
concerned. In addition to this above computed adjusted gross invoice price,
all other expenses like custom duties, transportation costs and other
direct expenses shall be covered by a lump deduction of six percent (6 %).
In the event LIFECODES is unable to account for sales to end users, the Net
Sales shall be calculated as the sales price to distributors, agents or
wholesalers multiplied by 1.67, which factor represents a 40% margin.
Sales to a third party enjoying a special course of dealing with LIFECODES,
or transfers to Lifecodes' HLA testing laboratory, shall be determined by
reference to price for the product sold or transferred which would be
applicable in an arm's length transaction with an unrelated third party.
In the event that a Licensed Product is sold or transferred in such a way
that the sales price for such a Licensed Product does not fairly represent
an actual independent arms-length transaction price for such Licensed
Product, such as for example because of the transfer of any other product
or service to the purchaser, directly or indirectly, by the Licensee, for
the calculation of royalties hereunder, Net Sales will be determined by
applying the average transaction price for Licensed Products in an
at-arms-length transaction or, if no such at-arms-length transactions are
performed, at the average transaction price of products directly competing
with such Licensed Product.
1.6 "Territory" shall mean the territory of the countries defined in Schedule
C.
2
<PAGE>
1.7 "Valid Claim" shall mean a legally enforceable claim in any unexpired
Licensed Patent which has not been disclaimed or held invalid by an
unappealed or unappealable decision of a court of competent jurisdiction or
is not otherwise unenforceable.
2. License
ROCHE hereby grants to LIFECODES and its current Affiliates and LIFECODES
and its Affiliates hereby accept a non-exclusive and non-transferable
license under Licensed Patents in the Territory to manufacture, have
manufactured, use and/or sell, including through distributors, Licensed
Products strictly for the purpose of performing HLA Typing.
3. Royalty
3.1 In consideration of the license granted as per Article 2 of this Agreement,
LIFECODES undertakes to pay to ROCHE:
a) a license issuance fee of CHF [_______________] to be paid within
thirty (30) days upon signature of this Agreement.
b) a royalty of [____________] on its Net Sales of Licensed Products;
3.2 No royalties shall be paid on sales of Licensed Products between LIFECODES
and its Affiliates, but in such event royalty shall be due and payable on
the sales of such Licensed Products by such Affiliate to third parties.
3.3 Royalty shall be payable hereunder on Net Sales in each country of the
Territory starting from the first selling of Licensed Products covered by a
Valid Claim of Licensed Patents in such country or, as the case may be, not
covered by a Valid Claim of Licensed Patents in the country of sale but
manufactured in and imported from a country of the Territory covered by a
Valid Claim of Licensed Patents, and shall continue to be payable as long
as the making, using or selling of Licensed Products is covered by a Valid
Claim of Licensed Patents in effect in the respective country of the
Territory.
3.4 Furthermore, the Parties further understand and agree that the royalty rate
provided in subsection 3.1 b) above shall apply only for so long as any
claim of U.S. Patent No. 4,683,195 and 4,683,202 (Amplification Process
Patents listed in Schedule A), or any claim of corresponding foreign patent
rights, shall be in force. Thereafter, the Parties shall negotiate in good
faith a reduced royalty rate for products licensed hereunder.
3
<PAGE>
4. Reports, Times of Payment and Taxes
4.1 LIFECODES shall, within sixty (60) days after December 31 and June 30 of
each year, provide ROCHE with an account of Net Sales of Licensed Products
on a U.S./ex U.S. basis and of the royalty due in respect to the preceding
calendar half-year and will at the time, when it delivers such account,
make payment of the amount shown to be due.
4.2 Royalty payable hereunder shall be made without any deductions, except for
withholding tax or any other fiscal deductions from time to time required
by the government of any country. All such payments shall be made in Swiss
francs or in such other currency as ROCHE may from time to time direct (so
far as legally permissible). Any necessary currency conversion shall be at
the rate for buying funds as quoted by the Wall Street Journal for the last
business day of the period to which such payments relate.
4.3 Withholding tax, if any, levied by a government of any country of the
Territory on payments made by LIFECODES to ROCHE hereunder shall be borne
by ROCHE. LIFECODES will pay such withholding tax to the respective taxing
authorities and will deduct such amount from the royalty due to ROCHE.
LIFECODES shall use its best efforts to enable ROCHE to claim exception
therefrom under any double taxation or similar agreement in force and shall
produce to ROCHE proper evidence of payments of all withholding taxes.
4.4 LIFECODES shall keep such records as may under recognized accounting
practice enable royalty due under this Agreement to be accurately
determined. LIFECODES shall permit a firm of certified public accountants,
selected by ROCHE and acceptable to LIFECODES, upon request of ROCHE and to
examine such records no more than once in each calendar year during normal
business hours for the purpose of verifying LIFECODES's reports and
accounting hereunder and determining the correctness of said accountings
and the royalty payments made by LIFECODES to ROCHE.
Such examination will be at the cost of ROCHE unless the accountant
concludes that the royalty due has been understated by 5% or more, in which
case the examination will be paid by LIFECODES.
4.5 If LIFECODES should fail to pay any amount specified under this Agreement
at the due date thereof, the amount owed shall bear interest at one and a
half (1.5%) percent per month from the due date until paid.
5. Term and Termination
5.1 The license under this Agreement shall become effective as of April 1, 1997
and, unless terminated sooner as provided hereinbelow or by mutual
agreement, shall remain in effect until the last Licensed Patent having a
Valid Claim will have expired.
5.2 Failure by either party to this Agreement to comply with any of the
obligations and conditions
4
<PAGE>
contained herein shall entitle the other party to give the party in default
written notice requiring it to make good such default. If the default is
not remedied within sixty (60) days after receipt of such notice, the
notifying party shall be entitled, without prejudice to any of its other
rights conferred on it by this Agreement, to terminate the entire Agreement
by giving notice to take effect immediately. The parties understand and
agree in particular that the manufacture, use or sale of a product not
listed in Schedule B which is covered by Licensed Patents is a material
default.
5.3 Either party may terminate this Agreement upon thirty (30) days written
notice if, at any time, the other party shall file a petition in bankruptcy
or insolvency before the courts or apply for an arrangement or for the
appointment of a receiver or trustee for all of its assets or any part
thereof, or if the other party proposes a written agreement of composition
or extension of its debts or if the other party shall be served with an
involuntary petition against it, filed in any insolvency proceeding, and
such petition shall not be dismissed within sixty (60) days after its
filing, or if the other party shall propose or be a party to any
dissolution or liquidation, or if the other party shall make an assignment
for the benefit of creditors.
5.4 Furthermore, ROCHE shall have the right to terminate this Agreement giving
sixty (60) days written notice, if a controlling interest (i.e. a legal
interest which gives the holder effective management control) of LIFECODES
is acquired by a third party having itself or through an Affiliate thereof,
a business in in-vitro human diagnostics.
5.4 Termination of this Agreement for any reason shall be without prejudice to
any other remedies to which either party is or thereafter becomes entitled
hereunder and shall not affect any obligations or rights accrued before
termination hereunder.
5.5 Upon termination of this Agreement, LIFECODES shall notify ROCHE of the
stock of Licensed Products it has on hand and LIFECODES shall pay the
royalty upon the sale thereof. .
6. Labelling
LIFECODES undertakes to clearly identify each Product as being a LIFECODES
product and to mark each Product as follows:
"The use of this product is covered by a license of F.Hoffmann-La
Roche Ltd and Roche Molecular Systems, Inc."
7. Negation of Warranties and Indemnity
7.1 Nothing in this Agreement shall be construed as:
a) a warranty or representation by ROCHE as to the validity or scope of
any Licensed Patent;
5
<PAGE>
c) a warranty or representation that the sale of Licensed Products by
LIFECODES and/or the use of such Licensed Products by LIFECODES's
customers is or will be free from infringement of patents not licensed
hereunder;
d) an obligation to bring or prosecute actions or suits against third
parties for infringement of Licensed Patents. However, it is
understood that it is in the best interest of both parties that third
parties' infringement which have a significant impact on the market,
will be prosecuted by ROCHE;
e) conferring by implication or otherwise any license or rights under any
patents, know-how or other industrial property rights of ROCHE other
than expressly granted hereunder.
8.1 Most Favored Licensee
If after the signature of this Agreement, ROCHE grants to any unrelated
third party a license of substantially the same scope as granted to
LIFECODES herein but under more favorable royalty rates than those given to
LIFECODES under this Agreement, ROCHE shall promptly notify LIFECODES of
said more favorable royalty rates, and LIFECODES shall have the right and
option to elect within thirty (30) days such more favorable royalty rates.
LIFECODES's right to said more favorable royalty rates shall extend only
for so long as and shall be conditioned on LIFECODES's acceptance of all
the same conditions, favorable or unfavorable, under which such more
favorable royalty rates shall be available to such other third party. Upon
LIFECODES's acceptance of all such terms of said third-party agreement, the
more favorable royalty rates shall be effective as to LIFECODES on the
effective date of such other third party license agreement. Notwithstanding
the foregoing, in the event that ROCHE shall receive substantial other
nonmonetary consideration, for example, such as intellectual property
rights, as a part of the consideration for its granting of such license to
a third party, then this Section 8 shall not apply.
9. Miscellaneous
9.1 This Agreement and the license herein granted shall be personal to
LIFECODES and, unless agreed otherwise in writing, shall not be assignable
or otherwise inure to the benefit of successors of LIFECODES or to an
assignee of all or part of the good-will or other assets of LIFECODES.
9.2 This Agreement supersedes all previous agreements, whether written or oral,
with respect to the subject matter hereof.
9.3 No amendments or alterations of this Agreement shall be binding upon either
party unless in writing and duly signed by both parties.
6
<PAGE>
9.4 All titles and captions in this Agreement are for convenience only and
shall not be interpreted as having any substantive meaning.
9.5 Both parties hereby expressly state that it is the intention of neither
party to violate any rule, law or regulations. In the event that a court of
competent jurisdiction holds that a particular provision or requirement of
this Agreement is in violation of any law, such provision or requirement
shall not be enforced but replaced by a valid and enforceable provision or
requirement which will achieve as far as possible the economic business
intentions of the parties. All other provisions and requirements of this
Agreement, however, shall remain in full force and effect.
9.6 Neither party will issue any press release or other public announcement
relating to this Agreement without obtaining the other party's written
approval, which will not be unreasonably withheld.
9.7 LIFECODES hereby warrants that it shall not, and shall cause each of its
Affiliates not to, arrange sales of LIFECODES Licensed Products or
definitions relating thereto to reduce in bad faith the amounts for which
royalties are payable by LIFECODES hereunder.
10. Notices
Any notice required or permitted to be given under this Agreement shall be
considered properly given, upon receipt, if sent by registered air mail,
telecopier transmission or personal courier delivery to the respective
address of each party as follows:
Lifecodes: Lifecodes Corporation
550 West Avenue
Stamford, Connecticut 06902
Attn: Mike Petrillo, Vice President,
Sales and Marketing
ROCHE: F.HOFFMANN-LA ROCHE Ltd
Attn: Corporate Law
Grenzacherstr. 124
CH - 4002 Basel, Switzerland
with a copy to: ROCHE MOLECULAR SYSTEMS, INC.
1145 Atlantic Avenue
Alameda, CA 94501
Attn: Licensing
11. Arbitration and Governing Law
11.1 Governing Law
This Agreement and its effect are subject to and shall be construed and
enforced in accordance with
7
<PAGE>
the law of the State of New Jersey, U.S.A., except as to any issue which by
the law of New Jersey depends upon the validity, scope or enforceability of
any patent within Licensed Patent Rights which issue shall be determined in
accordance with the applicable patent laws of the United States or the
relevant foreign jurisdiction.
The Parties agree that for any dispute or controversy arising from this
Agreement, the exclusive jurisdiction and venue for any such dispute or
controversy shall be in the United States District Court for the District
of New Jersey if federal jurisdiction exists, and if no federal
jurisdiction exists, then in the Superior Court of New Jersey.
11.2 Arbitration
Notwithstanding the provisions of Section 11.1 above, any dispute
concerning solely the determination of facts and which dispute does not
involve a question of law, shall be settled by final and binding
arbitration at a mutually convenient location in the State of New Jersey
pursuant to the commercial arbitration rules of the American Arbitration
Association in accordance with the following procedural process:
(a) The arbitration tribunal shall consist of three arbitrators. Each
party shall nominate in the request for arbitration and the answer
thereto one arbitrator and the two arbitrators so named will then
jointly appoint the third arbitrator within sixty (60) days of the
filing of the answer, said third arbitrator being the chairman of the
arbitration tribunal.
(b) The decision of the arbitration tribunal shall be final and judgment
upon such decision may be entered in any competent court for juridical
acceptance of such an award and order of enforcement.
Each party hereby submits itself to the jurisdiction of the courts of the
place of arbitration, but only for the entry of judgment with respect to
the decision of the arbitrators hereunder.
11.3 Nothing in this Agreement shall be construed so as to require the
commission of any act contrary to law, and wherever there is any conflict
between any provision of this Agreement or concerning the legal right of
the parties to enter into this Agreement and any statute, law, ordinance or
treaty, the latter shall prevail, but in such event the affected provisions
of the Agreement shall be curtailed and limited only to the extent
necessary to bring it within the applicable legal requirements.
11.4 If any provision of this Agreement is held to be unenforceable for any
reason, it shall be adjusted rather than voided, if possible, in order to
achieve the intent of the parties to the extent possible. In any event, all
other provisions of this Agreement shall be deemed valid and enforceable to
the full extent possible
8
<PAGE>
F.HOFFMANN-LA ROCHE Ltd LIFECODES CORPORATION
By:_____________________________ By: ________________________________
Name:___________________________ Name:_______________________________
Place/Date: ____________________ Place/Date: ________________________
ROCHE MOLECULAR SYSTEMS, INC.
By:_____________________________
Name: __________________________
Place/Date: ____________________
<PAGE>
S C H E D U L E A
Licensed Patents
Amplification Process Patents:
U.S. Patent # 4,683,195 and corresponding foreign patent rights
U.S. Patent # 4,683,202 and corresponding foreign patent rights
HLA Patents
U.S. Patent # 5,110920
9
<PAGE>
S C H E D U L E B
Licensed Products
The following products will be offered under this license:
1) Kit I (20 probes)
2) Kit II (22 probes)
3) Kit III (25 probes)
4) Kit IV (31 probes)
5) Kit V (37 probes)
Each kit will include Taq polymerase, PCR buffer, dNTP's, primers, hybe
solution, SSC, Quick-Light buffer, chemiluminescent substrate and development
folders.
<PAGE>
S C H E D U L E C
Territory
Worldwide
<PAGE>
REDACTED VERSION
[CONFIDENTIAL TREATMENT HAS BEEN
REQUESTED FOR PORTIONS OF
THIS EXHIBIT]
<PAGE>
NYCOMED AMERSHAM PLC
MOLECULAR DYNAMICS, INC.
and
LIFECODES CORPORATION
------------------------------------------
TECHNOLOGY ACCESS AGREEMENT
January 15, 1998
------------------------------------------
<PAGE>
TECHNOLOGY ACCESS AGREEMENT
This Technology Access Agreement ("Agreement") is entered into as of
January 15, 1998 by and among:
Nycomed Amersham p1c, a company organized under the laws of England
and Wales ("Amersham" such designation to include its subsidiaries as defined
in Section 736 of the UK Companies Act 1985 (as amended));
Molecular Dynamics Inc., a Delaware corporation ("MD"); and
Lifecodes Corporation, a Delaware corporation ("Customer").
Amersham, MD and Customer are also referred to individually as a
"Party" and collectively, as the "Parties."
RECITALS
1. MD owns, or has or is developing technology and instrumentation
useful in making and scanning microarrays of biological materials.
2. Amersham owns, or has, or is developing technology, reagents and
supplies that complement the technology and instrumentation of MD.
3. MD and Amersham have been providing early access to the above
technology, instrumentation, reagents and supplies to certain organizations in
exchange for a fee pursuant to a technology access program.
4. Both MD and Amersham wish to provide Customer with the
aforementioned technology, instrumentation, reagents, and supplies, and
Customer wishes to obtain same together with support and training services, in
which MD and Amersham have developed special expertise pursuant to their
development programs.
1. DEFINITIONS.
1.1 "Affiliate(s)" of a Party means any corporation, firm,
partnership, or other legal entity, in which [ ] percent [ ] or more of
the voting power and/or equity ownership is directly or indirectly owned by or
under common ownership of such Party; provided, however, that where local laws
require a minimum percentage of local ownership, the status of an Affiliate
will be established if such Party directly or indirectly owns or controls at
least [ ] percent [ ] of the maximum ownership percentage that may, under
such local laws, be owned or controlled by foreign interests; and provided
further, that in no circumstances may a Competing Entity be deemed to be an
Affiliate for the purposes of this Agreement, [ ] are Affiliates of the
Customer.
<PAGE>
1.2 "Approved Collaborators" means any third party nominated by the
Customer and mutually agreed in writing with the other Parties during the
Technology Access Period, and thereafter any terms and conditions of this
Agreement that apply to Customer shall also apply to Approved Collaborators;
provided, however, that in no circumstances may a Competing Entity be an
Approved Collaborator. The Parties agree that [ ] and [ ] are
Approved Collaborators.
1.3 "Approved Site(s)" means the research facilities of Customer
located in Stamford, Connecticut in the U.S. and such other facilities of
Customer and Affiliates of Customer as mutually agreed to in writing by the
Parties.
1.4 "Array Scanner(s)" means an instrument, as detailed in Schedules
I and VI, as developed by MD, and the associated software, specifically having
the ability to rapidly and accurately detect and quantify
fluorescently-labeled probes hybridized or bound to the DNA and/or other
biological materials spotted by an Array Spotter on a glass slide or other
substrate.
1.5 "Array Spotter(s)" means an instrument, as detailed in Schedules
I and VI, as developed by MD, and the associated software, specifically having
the ability to spot DNA and other biological materials on a glass slide or
other substrate.
1.6 "Competing Entity" means any entity primarily engaged in the
development, manufacture, marketing and/or selling of (i) life science
laboratory instrumentation or devices, (ii) life science research reagents
and/or consumables and/or (iii) microarray technologies or services.
1.7 "Confidential Information" means any information disclosed during
the term of this Agreement by MD and/or Amersham to Customer or disclosed by
Customer to MD and/or Amersham which the disclosing Party regards as
confidential, or was similarly defined as such in any
confidentiality/non-disclosure agreements between MD and/or Amersham on the
one hand, and Customer on the other. Confidential Information includes but is
not limited to, information relating to Know-how and/or Products and
information of the Customer relating to drug targets, assays, reagents or
reagent preparative methods. Any such information disclosed during the term of
this Agreement which the disclosing Party regards as being confidential shall
be in writing and marked confidential. If such information is disclosed during
the term of this Agreement initially on an oral basis, it must be reduced to a
written summary, marked confidential and a copy given to the recipient within
thirty (30) days of the oral disclosure.
Confidential Information does not include:
1.7.1 information which at the time of disclosure is in the
public domain or otherwise is or becomes generally available to the public
other than through any act or omission on the part of the receiving Party;
1.7.2 information which was in the possession of the
recipient at the time of disclosure as evidenced by competent records and
which was not acquired directly or indirectly from the disclosing Party;
<PAGE>
1.7.3 information acquired from a third party who has the
lawful right to make such disclosure without violation of any confidentiality
obligations to the disclosing Party; or
1.7.4 information which is independently developed by the
receiving Party without the use of Confidential Information as evidenced by
competent records.
1.8 "Effective Date" means the first date written above.
1.9 "Functional Installation" or "Functionally Installed" means the
unpacking and installation of Array Spotters and Array Scanners and the
demonstration of basic instrument functionality, as defined in Schedule IV.
1.10 "Generation [ ]" and/or "Gen [ ]" means Array Spotters and/or
Array Scanners meeting the specifications set forth in Schedules I and VI.
1.11 "Generation [ ]" and/or "Gen [ ]" means Array Spotters and/or
Array Scanners meeting the specifications set forth in Schedules I and VI and
which have been materially modified and/or materially improved as compared to
Generation [ ] Array Spotters and/or Array Scanners.
1.12 "Generation [ ]" and/or "Gen [ ] Microarray System" means a
system consisting of a Gen [ ] Array Spotter, a Gen [ ] Array Scanner, user
documentation and MD's [ ] software and related documentation.
1.13 "Generation[ ]" and/or "Gen [ ] Microarray System" means a
system consisting of a Gen [ ] Array Spotter, a Gen [ ] Array Scanner, user
documentation and MD's [ ] software and related documentation.
1.14 "Know-how" means certain knowledge, information, data and
experience of MD and Amersham relating to microarray assay technologies and
fluorescent DNA labeling including, but not necessarily limited to that which
is embodied in the Patents.
1.15 "Mechanical Fabrication methods" means any method for the
fabrication of Nucleic Acid Arrays on a solid support by placement of fully
synthesized nucleic acids (clonal polynucleotides, or other presynthesized
polynucleotides) having more than [ ] bases each, solely through mechanically
isolated deposition of such fully synthesized nucleic acids at specific
locations on the array. Without limiting the above, it is understood that the
synthesis of an array in which regions of an array are activated or prepared
for placement of materials by means of controlled direction of electromagnetic
energy at a portion of a support is not a Mechanical Fabrication Method.
1.16 "Nucleic Acid Arrays" means an array of diverse nucleic acids,
each having more than [ ] bases, at defined locations on a solid support and
fabricated by Mechanical Fabrication Methods, provided that in no part of such
solid support may such diverse nucleic adds be
<PAGE>
arranged at a density of more than [ ] locations per square centimeter, and
all of the nucleic acids in any one Nucleic Acid Array may represent no more
than [ ] genes.
1.17 "Patents" means the patent applications and patents and any
substitutions, extensions, supplemental protection certificates, reissues,
renewals, reexaminations, divisionals, provisionals, continuations or
continuations-in-part thereof which are owned or controlled by MD or Amersham.
1.18 "Permitted Purposes" means use of Know-how and/or the Products
for the sole purpose of developing and subsequently performing assay
methodologies and applications within the laboratories at the Approved Sites
of the Customer, Affiliate(s) thereof, and Approved Collaborators for the
purposes of life science research within the field of [ ] for [ ] and
[ ] for [ ] and [ ] only. In addition, the Customer shall be
permitted to perform research and development of [ ] on a noncommercial
basis during the Technology Access Period. The Parties agree to discuss at a
future date terms under which [ ] may be commercialized. For the avoidance
of doubt, [ ] for sale or transfer to third parties (except to Approved
Collaborators) or [ ] whether paid or unpaid, [ ] (except to Approved
Collaborators) is not a Permitted Purpose. The [ ] or [ ] or [ ]
Approved Collaborators shall be a Permitted Purpose [ ] only from the
Effective Date through September 30, 1998 and shall be a Permitted Purpose
[ ] after October 1, 1998, subject to terms and conditions to be agreed
between Amersham and die Customer. For the avoidance of doubt, use of Know-how
and/or the Products for the sole purpose of [ ] and [ ] within the
laboratories of Approved Sites of the Customer, Affiliate(s) thereof and
Approved Collaborators for the purpose of [ ] and the [ ] during the
Technology Access Period are not Permitted Purposes.
1.19 "Product(s)" means the products of MD and Amersham set forth in
Schedules I and II.
1.20 "Strategic Collaborator(s)"means a limited number of companies
and institutions selected solely by MD and Amersham who are granted access to
all or some of the Products in exchange for technology that adds substantial
tangible value to the microarray technologies under development by Amersham
and MD.
1.21 "Technology Access Customers(s)" means the Customer and any
third party granted access to the Products by MD and Amersham, in their sole
discretion, through such third party's participation in MD and Amersham's
microarray technology access program. MD and Amersham agree that prior to the
expiration or termination of this Agreement [ ].
1.22 "Technology Access Fee" means the payments set forth in
Section 6.1
1.23 "Technology Access Period" means the time period beginning on
the Effective Date and ending exactly [ ] thereafter. During the Technology
Access Period, the Products detailed in Schedules I and II will be
preferentially available to the Customer, other Technology Access Customers
and Strategic Collaborators. The Products detailed in Schedules I
<PAGE>
and II will not be commercially available to third parties outside of the
Technology Access Program prior to January 1, 1999 with the sole exception
that the technology embodied in the Array Scanner may be commercially
available after July 1, 1998.
2. TERM.
The term of this Agreement shall commence as of the Effective Date
and shall continue throughout the Technology Access Period unless modified by
mutual written agreement of the Parties or terminated earlier as provided for
in Section 12.
3. SUPPLY OF PRODUCTS.
3.1 MD agrees to supply the Customer with one [ ] Generation [
Microarray System when available. Orders for delivery of additional Gen [ ]
or Gen [ ] Microarray Systems may be placed by the Customer at any time
during the Technology Access Period, pursuant to the pricing terms of Schedule
III hereto. It is currently anticipated that GEN [ ] Microarray Systems will
be available for delivery during the period from [ ]. The delivery date for
the GEN [ ] Microarray System provided for in this Section 3.1 will be
assigned a priority level based on the Effective Date. MD further agrees that a
qualified representative of MD will be sent to the Customer's facilities at
Stamford, Connecticut to begin Functional Installation within two (2) weeks
following Customer's notification to MD of arrival of the GEN [ ] Microarray
[ ] at its facility.
3.2 Amersham agrees to make available for purchase by the Customer
the Products specified in Schedule II within one (1) week of the Functional
Installation of the Gen [ ] Microarray System provided for in Section 3.1
above.
3.3 During the Technology Access Period, the Customer may place
purchase orders with MD for any of the Products listed in Schedule I and with
Amersham for any of the Products listed in Schedule II of this Agreement. MD
and Amersham shall use reasonable commercial efforts to supply the Customer
with such Products on the dates and in the quantities as are specified in the
purchase order, subject to availability during the Technology Access Period.
Pricing of such Products will be pursuant to Schedule III. MD and Amersham
may have such orders placed with and invoiced by each of them or any
Affiliate, subsidiary or sales office thereof.
3.4 The Customer agrees to place purchase orders for additional Array
Spotters and Array Scanners [ ] in advance of the requested delivery dates.
3.5 The Customer agrees to provide Amersham at the end of each
calendar month With a nonbinding forecast of the likely order it will place
for Schedule II Products for the [ ] thereafter.
3.6 Customer acknowledges and agrees that the License granted
pursuant to Section 9.1.2 herein below extends to a maximum of [ ]
Gen [ ] and/or Gen [ ] Array Spotters
<PAGE>
purchased by Customer pursuant to the terms and conditions of this Agreement,
and that additional Array Spotters beyond [ ] may be subject to separate
pricing terms and/or [ ] due to [ ] pursuant to the [ ] more fully
set forth in Section 9.1.2.
4. DELIVERY, RISK AND TITLE.
All Products delivered pursuant to the terms of this Agreement shall
be suitably packed for shipment in accordance with MD's and/or Amersham's
standard practices, marked for shipment to one of Customer's designated
Approved Site(s) as specified in the applicable purchase order (subject to the
terms of Section 3 herein above) and delivered to a carrier or forwarding
agent by the date set forth on the purchase order. The point of delivery for
Products shall be at the designated Approved Site(s) as specified in the
applicable purchase order. The Customer shall notify MD and Amersham if
Products do not arrive within seven (7) days of anticipated arrival. Except as
otherwise specified in this Agreement, MD and Amersham "Standard Terms and
Conditions of Sale" attached as Schedule VII shall apply. The Parties hereby
acknowledge and agree, however, that if there are any conflicts, differences
or inconsistencies between the terms and conditions of this Agreement and the
"Standard Terms and Conditions of Sale" of MD and/or Amersham, the terms and
conditions of this Agreement shall prevail. All freight, insurance and other
shipping expenses and risks, as well as any special packing expenses not
included in the original price quotation for the Products will be paid by
Customer, provided however, that in connection with the [ ] Generation [ ]
Microarray [ ] provided for in Section 3.1 above, all freight, insurance and
other shipping expenses and risks, as well as any special packing expense,
will be paid by MD. The Customer will be responsible for import formalities of
Products, including the payment of import duties.
5. TRAINING AND TECHNICAL SUPPORT SERVICES.
MD shall provide the Customer at an Approved Site with the initial
training described in Schedule IV during the Technology Access Period and
Amersham shall provide the Customer at an Approved Site with the training and
technical support services described in Schedule V during the Technology
Access Period.
6. PAYMENT.
6.1 The Customer will pay the Technology Access Fee of US$[ ]
(comprised of US[ ] for [ ] and US[ ] for the [ ] to be provided
pursuant to Section 3.1) to MD as follows:
US[ ] within [ ] of [ ] to be provided pursuant
to Section 3.1 above;
US[ ] within [ ] of the Effective Date.
6.2 Payments for additional Generation [ ] or Generation [ ]
Array Scanners or Array Spotters shall be made to MD within [ ] days of
invoice.
<PAGE>
6.3 Payments shall be made to Amersham for the Products ordered from
Schedule II within [ ] of invoice.
6.4 All payments for Products, services or other costs to be paid by
Customer hereunder are exclusive of all applicable federal, state and local
excise, sales, use and similar taxes, charges and other duties, and Customer
hereby agrees that sales, use or other similar taxes, or VAT, customs charges
and duties or other similar charges that may be imposed pursuant to this
Agreement associated with the sale and delivery of Products and any payments
made pursuant to this Agreement shall be the responsibility of the Customer.
Customer agrees that it will self-assess such taxes and/or charges, if any.
The Parties agree to cooperate in good faith in the preparation of any
relevant shipping documents associated with such transfer. Nothing in this
Agreement shall be deemed to mean that Customer shall be responsible for
income taxes or similar taxes that may be imposed on Amersham or MD.
6.5 Customer's billing address and contact information is set forth
completely in Schedule VIII hereto.
7. ADDITIONAL APPROVED SITES.
Additional Approved Sites (including without limitation sites of the
Customer's Affiliates) may be added by the Customer if mutually agreed in
writing by the Parties hereto without payment of an additional Technology
Access Fee. For each Approved Site, the Customer must purchase a minimum of [ ]
Array [ ] and [ ] Array [ ] at the prices set forth in Schedule III
within thirty (30) days of such site being confirmed as an additional Approved
Site. Additional training and technical support service charges by MD and
Amersham will be applicable for deliveries to additional Approved Sites.
8. CUSTOMER OBLIGATIONS.
8.1 Customer agrees that it shall provide to MD and to Amersham, as
applicable:
8.1.1 Continuous, timely and confidential feedback, on the
Products, including without limitation its suggestions for improvements to Gen
[ ] and/or Gen [ ] Microarray Systems, including improvements to the
hardware, chemistry and software components.
8.1.2 Recognition of MD and Amersham and their respective
Products in research publications, scientific talks, or any public forum for
work where the Products and/or Know-how were contributing factors.
8.2 The Customer agrees to promptly disclose to Amersham and IUD any
improvements to Know-how or to the Products and hereby grants a non-exclusive
royalty-free license to MD and Amersham with the right to grant sub-licenses
to use any such improvements and to make, use and sell products embodying any
such improvements.
<PAGE>
8.3 The Customer agrees to purchase from Amersham and use during the
Technology Access Period, as its needs dictate, the Products set forth in
Schedule II, so that its results using the Products with the Gen [ ] and/or
Gen [ ] Microarray Systems delivered pursuant to this Agreement may be
compared with the results of experiments being conducted by MD and Amersham.
The Customer agrees that it shall not resell, transfer or otherwise dispose of
such Products or the Gen [ ] and/or Gen [ ] Microarray Systems to any
third party without the express prior written consent of Amersham and MD
during the Technology Access Period. This Section 8.3, however, shall in no
way limit or impede the Customer's right to experiment with and develop
alternate chemistries.
8.4 The Customer agrees that it shall not reverse engineer nor make
any unauthorized modifications to any Gen [ ] or Gen [ ] Microarray
System delivered pursuant to this Agreement, nor shall it decompile, reverse
engineer, modify or make any other unauthorized use of software delivered by
MD pursuant to this Agreement.
9. REPRESENTATIONS AND WARRANTIES; LIMITATION OF LIABILITY.
9.1 MD represents and warrants that:
9.1.1 The technology embodied in the Gen [ ] and Gen [ ]
Microarray systems does not infringe any valid claims in issued U.S. or
granted European third party patents existing as of the Effective Date. The
Customer hereby agrees to notify MD immediately of any claim it receives for
alleged patent infringement regarding the technology embodied in the Gen [ ]
and Gen [ ] Microarray Systems.
9.1.2 MD has entered into [ ] pursuant to which [ ] in
connection with certain [ ] and proprietary technical information. The
[ ] is considered to [ ] during the Technology Access Period, provided
that Customer complies with the [ ] set forth in Schedule IX hereto.
Customer acknowledges and agrees that [ ] are subject to, and shall continue
only so long as, Customer [ ].
9.2 Amersham represents and warrants that use of Amersham's Know-how
and Products in accordance with Amersham's training and technical support
services as referenced in Schedule V and the terms of this Agreement do not
infringe any valid claims in issued U.S. or granted European third party
patents existing as of the Effective Date. The foregoing representation and
warranty does not extend to microarrays comprised of[ ]. The Customer hereby
agrees to notify Amersham immediately of any claim it receives for alleged
patent infringement through use of Amersham's Know-how or Products.
9.3 Notwithstanding anything to the contrary contained in this
Agreement, neither MD nor Amersham shall incur any liability to Customer under
this Agreement to the extent that such alleged infringement results from
Customer's modification of the Products or use of the Products not in
accordance with the Permitted Purposes.
<PAGE>
9.4 Subject to the qualifications set forth in this Section 9, MD and
Amersham hereby warrant that all Products will at the time of receipt by the
Customer be free from defects and conform to the relevant minimum performance
specifications. The minimum performance specifications agreed to by the
Customer and MD for the Generation [ ] and Generation [ ] Array Spotter
and Array Scanner are set forth herein in Schedule VI. As of the date hereof,
Gen [ ] minimum performance specifications have been developed by MD and
[ ] changes are anticipated in connection with such specifications between
the Effective Date and the date of delivery of the Gen [ ] Microarray
Systems. The Customer further acknowledges and agrees that the Products to be
purchased by the Customer pursuant to this Agreement are not finished products
ready for commercial release, but rather they represent collaborative
prototypes for use in the Customer's internal research and development
activities. The Customer fully understands and agrees that significant changes
are expected to be made in the Products during the Technology Access Period.
MD shall inform the Customer of any significant changes to Schedule VI
promptly in writing. Amersham's sole liability for breach of this warranty
shall be at its option to give credit for, replace or repair any Products
described in Schedule II, provided that Amersham is informed in writing of any
breach promptly after any quality control testing on the said Products by the
Customer, and in any event before the expiration date on the pack overlabel,
and the breach is shown to be due to Amersham's defective design, workmanship,
material or packaging. No guarantee can be given that the Customer's own
applications can be made to perform with the levels of sensitivity,
specificity or robustness demonstrated in model systems.
9.5 Each Party hereto represents and warrants that it has full power
and legal authority to execute and deliver this Agreement and to perform its
obligations hereunder, and that such Party's execution and delivery of any
Products hereunder and its performance of the terms and conditions of this
Agreement will not contravene, result in any breach of or constitute a default
under any order, judgment, decree or award of any court or other governmental
body, or any agreement or instrument by which such Party is bound.
9.6 EXCEPT FOR THE EXPRESS WARRANTIES SET FORTH IN THIS SECTION 9,
NEITHER MD NOR AMERSHAM MAKES WARRANTIES AS TO ANY OTHER MATTER, INCLUDING
WITHOUT LIMITATION ANY WARRANTY AS TO MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE.
9.7 NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS AGREEMENT,
EXCEPT AS SET FORTH IN SECTION 10, NONE OF THE PARTIES OR THEIR RESPECTIVE
AGENT(S), REPRESENTATIVE(S) OR EMPLOYEE(S) SHALL BE LIABLE TO THE OTHER
PARTIES PURSUANT TO THIS AGREEMENT FOR AMOUNTS REPRESENTING LOSS OF REVENUES,
LOSS OF PROFITS, LOSS OF BUSINESS OR INDIRECT, CONSEQUENTIAL, SPECIAL OR
PUNITIVE DAMAGES OF ANY OTHER PARTY, HOWEVER CAUSED AND ON ANY THEORY OF
LIABILITY, EVEN IF SUCH OTHER PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF
SUCH DAMAGES.
10. INDEMNITY.
<PAGE>
10.1 The Customer agrees to defend, indemnify and hold harmless MD
and Amersham against any liability, other claim of a third party, including
Customer's Affiliates and Approved Collaborators, for damages, suits, judgment
or costs (including attorneys' fees and costs) arising out of injury, death or
property damage or other loss resulting from use by the Customer of the
Know-how, the Confidential Information, provision by MD and Amersham of
training and technical support services or the supply of the Products, except
to the extent any such claims or losses are caused by the intentional
misconduct, recklessness or gross negligence of MD and Amersham.
10.2 MD and Amersham agree to defend, indemnify and hold harmless the
Customer, its affiliates and Approved Collaborators against any liability,
other claim, damages, suits, judgments or costs (including attorneys' fees and
costs) arising out of injury, death or property damage or other loss resulting
from activities of MD and Amersham in association with performance of the
terms of this Agreement including the use of Confidential Information of
Customer and provision of training and technical support services and the
supply of Products, except to the extent any such claims or losses are caused
by the intentional misconduct or breaches, recklessness or gross negligence of
Customer.
11. CONFIDENTIALITY.
During the Technology Access Period and for ten (10) years
thereafter, each Party agrees that it will make no public announcement or
other disclosure of the Confidential Information of another Party or the
terms of this Agreement, either directly or indirectly, without first
obtaining the written approval of the disclosing Party in the case of
Confidential Information, or the other Parties in the case of disclosure of
the terms of this Agreement, and agreement upon the nature and text of such
announcement or disclosure. The Party desiring to make any such public
announcement or other disclosure shall inform the other Parties of the
proposed announcement or disclosure in sufficient time prior to public
release, and shall provide the other Parties with a written copy thereof, in
order to allow such other Party to comment upon such announcement or
disclosure. The restrictions set forth in the preceding two sentences shall
not be applicable to disclosures required by a governmental agency or court
of law or for recording purposes.
12. TERMINATION AND RENEWAL.
12.1 The Customer shall be entitled to terminate this Agreement:
12.1.1 Sixty (60) days after written notice to MD and
Amersham of a material breach of this Agreement by MD and/or Amersham and the
nature of such breach, and such material breach is not remedied within such
60-day period; or
12.1.2 immediately upon written notice in the event MD
and/or Amersham shall cease to trade, become insolvent, file for bankruptcy,
has a receiver or administrator appointed or if an order shall be made or a
resolution passed for its winding up unless such order or resolution is part
of a scheme for its amalgamation, reconstruction or as part of a merger.
<PAGE>
12.2 MD or Amersham shall be entitled to terminate this Agreement:
12.2.1 Sixty (60) days after written notice to the Customer
of a material breach of this Agreement by the Customer and the nature of such
breach, if such material breach is not remedied within such 60-day period; or
12.2.2 immediately upon written notice in the event Customer
shall cease to trade, becomes insolvent, files for bankruptcy, has a receiver
or administrator appointed or if an order shall be made or a resolution passed
for its winding up unless such order or resolution is part of a scheme for its
amalgamation, reconstruction or as part of a merger.
12.3 In the event of termination of this Agreement as specified in
Section 12.1 or 12.2, MD and Amersham shall return to the Customer, and the
Customer shall return to MD and Amersham, all Confidential Information
received from such Parties and copies thereof except for one copy for archival
purposes. Any unused stocks of Products shall only be returned to MD and/or
Amersham on request by MD or Amersham with an appropriate refund. Termination
of this Agreement and of any licenses hereunder shall be without prejudice to
the rights and obligation of either Party which may have accrued up to the
date of termination. Amersham and MD reserve the right to take back the Gen
[ ] and/or Gen [ ] Microarray Systems or any Products in the event of
a breach of the Customer's obligations with respect to Confidential Information
or use of the Gen [ ] and/or Gen [ ] Microarray Systems or any Products
not in accordance with Permitted Purposes.
12.4 Upon any termination or expiration of this Agreement the
following provisions will not terminate, but will continue in full force and
effect: Sections 1.7, 1.18, 8.1.2, 8.3, 8.4, 9.6, 9.7, 10, 11, 12.3, 13, 14,
15. In addition, (i) any licenses in effect pursuant to Section 8.2 as of the
termination or expiration of this Agreement shall continue in full force and
effect; and (ii) Amersham's sole liability for breach of the warranty set
forth in Section 9.4 shall continue to be at its option to give credit for,
replace or repair any Products described in Schedule II, provided that
Amersham is informed in writing of any breach promptly after any quality
control testing on the said Products by the Customer, and in any event before
the expiration date on the pack overlabel, and the breach is shown to be due
to Amersham's defective design, workmanship, material or packaging.
12.5 By the end of the Technology Access Period, the Customer will be
offered the optional opportunity to enlist in an annual Technology Access
Renewal Program. It is anticipated that such renewal program may include
continuation of technical support services and training, preferential access
to new microarray technologies and applications, instrumentation warranties,
continuation of preferential pricing and continuation of end-user rights
granted under the Affymetrix license in exchange for an annual fee to be
determined and mutually agreed by the Parties.
12.6 MD and Amersham agree to offer, to the extent that they are
legally able, the Customer access to products and technologies developed after
the Effective Date of this Agreement as may be required for the Customer's
applications under terms and conditions
<PAGE>
substantially similar to those terms and conditions offered to other
Technology Access Customers. Such terms and conditions may require the
purchase of a Technology Access Renewal Program.
13. FORCE.
No one Party shall be liable for failure to perform hereunder (other
than the obligation to pay amounts due) as a result of any event of force
majeure beyond the Party's reasonable control. The Party affected shall advise
the others in writing of such event and the term of this Agreement shall then
be suspended for a period of time equal to the total period of delay in
performance. If the period lasts more than six (6) months the Parties whose
performance has not been affected by such event shall be entitled to terminate
this Agreement by at least one (1) month's prior written notice.
14. MISCELLANEOUS.
14.1 No one Party shall assign or sub-contract the whole or any part
of its rights and obligations under this Agreement without the prior written
consent of the other Parties (not to be unreasonably withheld or delayed)
except that any Party may assign the benefit of this Agreement to the
purchaser of the entire part of its business to which the subject matter of
this Agreement relates without the prior written consent of the other Parties.
Any assignment in violation of the preceding sentence shall be void.
14.2 This Agreement grants a non-exclusive license to the Customer
with respect to the Know-how solely for its use in accordance with the
Permitted Purposes. No rights or licenses for commercialization or any other
use are granted.
14.3 Should any part or provision of this Agreement be unenforceable
or otherwise in violation of the law of any jurisdiction, the remainder of
this Agreement shall remain binding upon the Parties.
14.4 Failure of any Party to enforce rights hereunder at any time for
any period shall not be construed as a waiver of such rights.
14.5 This Agreement, including the Schedules hereto, constitutes the
entire Agreement of the Parties hereto with respect to the subject matter
hereof and supersedes all prior agreements and understandings, oral and
written, among the Parties hereto with respect to the subject matter hereto.
14.6 No modification of any provision of this Agreement shall be
binding upon the Parties unless made in writing by a duly authorized
representative of each of the Parties.
14.7 This Agreement shall be construed in accordance with the laws of
the State of New York without regard to choice of law provisions and the
Parties hereby agree to the jurisdiction of the courts of the State of New
York.
<PAGE>
14.8 This Agreement may be executed in counterparts, each of which
shall be deemed an original but all of which taken together shall constitute
one and the same instrument.
15. NOTICES.
Any notice in connection with this Agreement must be in writing, in
English, marked for the attention of the signatories to this Agreement and
left at the address of the Party to be notified or sent to its facsimile
number as set out below. A facsimile shall be deemed received on production of
a transmission report by the machine from which the facsimile was sent
indicating that the facsimile was sent in its entirety to the facsimile number
of the recipient.
Signature Page Follows
<PAGE>
Signed for and on behalf of:
NYCOMED AMERSHAM PLC
Sign: _____________________________________
Title: Vice President, Molecular Biology
Name: Dr. Michael Evans
Address: Amersham Place
Little Chalfont
Buckinghamshire, England HP7 9NA
Fax: 44-1494-542929
MOLECULAR DYNAMICS, INC.
Sign: _____________________________________
Title: President and CEO
Name: Jay Flatley
Address: 928 East Arques Avenue
Sunnyvale, CA 94086 USA
Fax: 408-737-3184
LIFECODES CORPORATION
Sign: _____________________________________
Title: Vice President
Name: Michael Petrillo
Address: 550 West Avenue
Stamford, CT 06902
Fax: 203-328-9599
<PAGE>
Schedule I
MOLECULAR DYNAMICS PRODUCTS
The following products are available for purchase from Molecular
Dynamics during the Technology Access Period:
o Generation [ ] Microarray System consisting of:
o Gen [ ] Array Spotter with Pentium Computer and Control Software
o Gen [ ]Array Scanner with Embedded Controller and Software
o Pentium NT Workstation running [ ] Image Analysis Software
o Gen [ ] Systems are currently available for delivery
o Generation [ ] Microarray System consisting of:
o Gen [ ] Array Spotter with [ ] and Pentium Computer & Control
Software
o Gen [ ] Array Scanner with Embedded Controller and Software
o Pentium NT Workstation with Automated Image Analysis Software
o Currently anticipated to be available for shipment from [ ] onward
o Note: The above Products will not be CE-marked
<PAGE>
Schedule II
AMERSHAM PRODUCTS
The following products or improvements thereof, will be available for purchase
from Amersham during the Technology Access Period. Due to the ongoing
development program the exact nature, format, pack sizes and product codes are
likely to change during the Technology Access Period:
<TABLE>
<CAPTION>
Product Code Product Name Pack Size
- ------------ ------------ ---------
<S> <C> <C>
TBA Cy-3 phosphoramidite To be advised
TBA Cy-5 phosphoramidite To be advised
PA53023 Cy-3dCTP 25nmol (sufficient for 40-200
hybridizations)
PA55023 Cy-5dCTP 25nmol (sufficient for 40-200
hybridizations)
RPK0140 CyDye(TM) First strand cDNA labeling system for 100x1ug mRNA labeling reactions
Microarrays, version 1
RPK0150 Microarray hybridization solution, version 1 10mls (sufficient for more than 100
hybridizations in chambers)
RPK0188 Microarray crosslinking reagent D 5 x 10 mls
RPK0163 Microarray slides Type 4 48 slides
RPK0180 Coverslips for Microarrays 100 cover slips
RPK0175 Hybridization chambers and covers for Microarrays 100 chambers and 100 lids
RPN53N Hybond(TM)membrane for Microarray system 5 rolls
RPK0196 Microarray cover slip auto sealant 1ml (sufficient for 40 slides)
</TABLE>
<PAGE>
Schedule III
PRICING OF TBE PRODUCTS
MOLECULAR DYNAMICS Price
Generation [ ] Microarray System (not CE-marked) US[ ]
Generation [ ] Microarray System (not CE-marked) US[ ]
Price for each system beyond the [ ] Gen [ ]
Microarray [ ] included in the Technology Access
Fee. Array Spotters or Array Scanners may be
purchased separately for US[ ] each.
<TABLE>
<CAPTION>
AMERSHAM
Product Code Product Name Pack Size Standard Price US$ Customer Price US$
- ------------ ------------ --------- ------------------ ------------------
<S> <C> <C> <C> <C>
TBA Cy-3 phophoramidite To be advised [ ] [ ]
TBA Cy-5 phophoramidite To be advised [ ] [ ]
PA53023 Cy-3 dCTP 25nmol (sufficient for [ ] [ ]
40-200 hybridizations)
PA55023 Cy-5 dCTP 25nmol (sufficient for [ ] [ ]
40-200 hybridizations)
RPK0140 CyDye(TM) First strand cDNA 100x1ug mRNA labeling [ ] [ ]
labeling system for reactions
Microarrays version 1
RPK0150 Microarray hybridization 10mls (sufficient for more [ ] [ ]
solution, version 1 than 100 hybrid-izations
in chambers)
RPK0188 Microarray cross linking 5 x 10 mls [ ] [ ]
reagent D
RPK1063 Microarray slides Type 4 48 slides [ ] [ ]
RPK0180 Cover slips for Microarrays 100 cover slips [ ] [ ]
RPK0175 Hybridization chambers and 100 chambers and 100 lids [ ] [ ]
covers for Microarrays
RPN53N Hybond(TM)membrane for 5 rolls [ ] [ ]
Microarray system
RPK0196 Microarray cover slip auto 1ml (sufficient for 40 [ ] [ ]
sealant slides)
</TABLE>
Due to the ongoing development program, the exact nature, format, pack sizes,
product codes and prices are likely to change during the Technology Access
Period.
<PAGE>
Schedule IV
INITIAL INSTALLATION AND TRAINING
TO BE PROVIDED BY MOLECULAR DYNAMICS
As part of the Technology Access Fee, Molecular Dynamics will provide
the Customer with the following:
o For Functional Installation: Prior to shipment of the first Microarray
System, MD will provide the Customer with a customer planning guide
that outlines the minimum facility specifications required at the
Approved Site for the Functional Installation of the Microarray
Systems. A qualified representative of MD will unpack the Microarray
System(s) and install it/them at an Approved Site. The MD
representative shall then confirm the basic functionality of the
system by using the Array Spotter to spot dye solution provided by MD
from [ ] microplates onto [ ] glass slides. All [ ] slides shall
then be scanned using the Array Scanner to confirm that substantially
all of the samples have been successfully deposited and detected.
Functional Installation specifically excludes meeting specific
hybridization levels or using Customer's own samples to assess
performance.
o Initial training on the basic operation of the Array Spotter and Array
Scanner will be provided for up to three (3) staff selected by the
Customer. Initial training will cover both the Array Spotter and Array
Scanner instrument control software and the Molecular Dynamics image
analysis software provided with each system. This does not include
connection to the Customer's network or support of networking
requirements.
o A limited twelve (12) month warranty, from the date of Functional
Installation of each instrument, covering parts, service labor, and
service travel to an "Approved Site" with service labor to be carried
out by a qualified representative of MD. This warranty does not cover
consumables or portions of the instrumentation modified or damaged by
the Customer.
o Service contracts extending beyond the initial twelve (12) month
warranty may be purchased by the Customer and/or Approved
Collaborator(s) from MD at rates quoted by the MD Service Department.
o Relocation of the Array Spotter and Array Scanner instrumentation to
another Approved Site or training of additional staff is available
from MD. Rates will be quoted upon request.
<PAGE>
Schedule V
TRAINING AND TECIINICAL SUPPORT SERVICES PROVIDED BY AMERSHAM
Included in the Technology Access Fee (except for additional training as
specifically noted below), Amersham will provide the Customer with:
o A choice of one-week training courses on gene expression application
(excluding oligonucleotide arrays) at an Approved Site for the first
Microarray System delivered to an Approved Site designated by the
Customer, for up to three (3) staff selected by the Customer. A typical
training course will cover methods for attachment of DNA to derivatized
slides, labeling of probes, hybridization protocols, and detection and
analysis of the data.
o Reasonable follow-on technical support services via telephone, fax and
e-mail during the Technology Access Period to individuals who have
previously completed the above training course.
o Visits to the Approved Site by Amersham project scientists as mutually
agreed during the Technology Access Period.
o Consultancy in the adaptation of current Amersham methods to the
Customer's specific gene expression applications as mutually agreed
between Amersham and the Customer.
o No guarantee can be given that the Customer's own applications can be
made to perform with the levels of sensitivity, specificity or robustness
demonstrated in model systems.
o Additional one week training courses as requested by the Customer are
available and will be charged at US[ ] per course at a time and location
to be mutually agreed by the Customer and Amersham.
<PAGE>
Schedule VI
PERFORMANCE SPECIFICATIONS
Generation [ ] Microarray System
Array Scanner:
Sample: Standard-size microscope slide with
[ ] cover glass(25.0 - 25.5 mm) x
(75.5 - 76.0 mm) x (0.95 - 1.15 mm)
Detected area single swath: [ ] cm x [ ] cm
Number of independent swaths: [ ]
Accuracy of swath position: [ ]
Pixel size (xy): [ ]
Emission filters: [ ] excitation ([ ] bandpass,
[ ] longpass)
[ ] excitation ([ ] bandpass,
[ ] longpass)
Dynamic range: [ ]
Excitation: [ ] lasers automatically
selectable through software:
[ ] mW and [ ] mW
Scan speed (for one [ ] cm swath) [ ] minutes
Repeatability:[ ] [ ] for spots, measured above
the photon limit
Linearity: [ ] RMS over [ ] orders
Environmental handling requirements: To be defined
Array Spotter:
Number of microplates [ ]
Number of slides [ ]
Number of pens [ ]
Microplate type [ ] well [ ]
Spot deposition density [ ] plate per column; [ ] spots
per mm in x-axis
Spot diameter [ ] - [ ] um
Spotting speed [ ] hrs for [ ] microplates
Spot deposition repeatability [ ] RMS [ ]
Spot deposition reliability [ ] over [ ] of [ ] unique
spots in [ ]
Wash efficiency [ ] part carryover in [ ]
Number of manual interventions [ ]
Enviromnental handling requirements To be defined
<PAGE>
Generation [ ] Microarray System
Array Scanner
Sample Standard-size microscope slide with
[ ] cover glass (25.0 - 25.5 mm) x
(75.5 - 76.0 mm) x (0.95 - 1.15 mm)
Detected area single swath: [ ] cm x [ ] cm
Number of independent swaths: [ ]
Accuracy of swath position [ ] um
Pixel size (x,y): [ ] um
Emission filters: [ ] excitation ([ ])
([ ]) excitation ([ ])
Dynamic range [ ]
Excitation: [ ] lasers automatically
selectable through software: [ ]
mW and [ ] mW
Scan speed (for one 5.4 cm swath) [ ] minutes
Repeatability: static [ ] for spots, measured above
the photon limit
Linearity: [ ] RMS over [ ] orders
Environmental handling requirements To be defined
Sample tracking [ ] capability
Database software [ ]
Array Spotter
Number of microplates without manual At least [ ] handling
intervention
Number of slides [ ]
Number of pens [ ] or more
Microplate type [ ] well / TBD
Spot deposition density [ ] plate per column; [ ]
spots per mm in x-axis
Spot diameter [ ] um
Spotting speed [ ] hours for [ ] microplates
Spot deposition repeatability [ ] RMS [ ]
Spot deposition reliability [ ] over [ ] run of [ ]
unique spots in [ ]
Wash efficiency [ ] part carryover in [ ]
Number of manual interventions [ ]
Evaporation during spotting cycle [ ]
Sample tracking [ ] capability
Database software [ ]
<PAGE>
Schedule VII
STANDARD TERMS AND CONDITIONS OF SALE
FOR MOLECULAR DYNAMICS
GENERAL: INTERPRETATION AND COMPLETENESS: This contract is deemed made in the
State of California and shall be interpreted under the Uniform Commercial Code
and other laws of California in force at the date of the contract. The final,
entire agreement pertaining to the sale to Buyer of the Goods described herein
by Molecular Dynamics ("Seller") is set forth on the face and reverse sides
hereof; any prior understandings, agreements and representations, oral or
written, shall be deemed superseded and merged in this contract. Agents and
salesmen of Seller have no authority to make any representations not included
herein. Seller hereby rejects any different or additional terms previously or
hereafter proposed by Buyer, none of which shall be effective unless embodied
in a writing signed by an authorized employee of Seller.
PRICE: The Goods and other items or services covered by this contract shall be
sold and invoiced at Seller's prices and charges in effect at the time of each
shipment of Goods under this contract. Seller reserves the right to change
without notice the published list prices referenced on the face of this
contract. Prices do not include sales, excise, use or other taxes (other than
taxes based on income) not in effect or hereafter levied by reason of this
transaction. Buyer shall pay all such taxes.
PAYMENT TERMS:
A. Payment terms are net 30 days from date of invoice. Seller reserves
the right to require alternative payment terms, including, without
limitation, Sight Draft, Letter of Credit or Payment in Advance. If
shipments are delayed by Buyer, payment shall be made based on
contract price and percent of completion. Buyer shall be liable for
the price of all products substantially conforming to the contract,
notwithstanding that Buyer may not have accepted, or may have revoked
acceptance of same.
B. If payment is not received by the due date, a service charge will be
added at the rate of 1 1/2 % per month (18% per year) or the maximum
legal rate, whichever is less, to unpaid invoices from the due date
thereof.
C. Remittances will be received by a bank simply as clearing agency. The
receiving bank has no authority to determine whether or not the
amount admitted constitutes payment in full. Remittances marked to
indicate payment in full will be deposited by the bank
notwithstanding such markings and such deposit shall not indicate our
acceptance of the remittance as payment in full unless the remittance
actually constitutes payment of all sums owed.
CREDIT: Seller may, at any time and in its sole discretion, limit or cancel
the credit of Buyer as to time and amount, and as a consequence, may demand
payment in cash before delivery of any unfilled portion of this contract, and
may demand assurance of Buyer's due performance. Upon
<PAGE>
making such demand, Seller may suspend production, shipment and/or deliveries.
If, within the period stated in such demand, but in no event longer than 30
days, Buyer fails to agree and comply with such different terms of payment,
and/or fails to give adequate assurance of due performance, Seller may (1) by
notice to Buyer, treat such failure or refusal as a repudiation by Buyer of
the portion of the contract not then fully performed, whereupon Seller may
cancel all further deliveries and any amounts unpaid hereunder shall
immediately become due and payable or, (2) make shipments under reservation of
a security interest and demand payment against tender of documents of title.
If Seller retains a collection agency and/or attorney to collect overdue
amounts, all collection costs, including attorney's fees, shall be payable by
Buyer. Buyer hereby represents to Seller that Buyer is now solvent and agrees
that each acceptance of delivery of the Goods sold hereunder shall constitute
reaffirmation of this presentation at such time.
SEVERAL SHIPMENTS: Seller may deliver in installments and may render a
separate invoice for each installment, which invoice shall be paid when due,
without regard to subsequent deliveries. Each installment shall be deemed a
separate sale. Delay in delivery of any installment shall not relieve Buyer of
its obligation to accept delivery of remaining installments. Any delivery not
in dispute shall be paid for on the due date, as provided in this contract,
without offset, defense or counterclaim and regardless of controversies
relating to other delivery or undelivered products.
TITLE, RISK OF LOSS, INSURANCE: Title to each shipment of the Goods sold
hereunder and risk of loss thereon shall pass to Buyer when Seller or its
agent delivers such shipment to a common carrier or licensed trucker consigned
to Buyer, or his agent, but such shipment shall remain subject to Seller's
rights of stoppage in transit and of reclamation. If a strike, embargo,
governmental action, or any other cause beyond Seller's control prevents
shipment or delivery to Buyer or his agent, or if shipping instructions for
any shipment are not received before shipment date, or if payment is to be
made on or before delivery, title and risk of loss shall pass to Buyer as soon
as the shipment has been set aside by Seller and invoiced to Buyer (subject to
Seller's rights as an unpaid Seller) and payment shall be made in accordance
with invoice as though the Goods had been shipped and accepted by Buyer and
Seller shall be under no duty to carry insurance thereafter.
SECURITY INTEREST: Seller retains a purchase (money) security interest in all
equipment sold and the proceeds thereof until payment in full is received by
Seller. Failure to pay the purchase price of equipment when due shall give
Seller the right to repossess the equipment and to avail itself of any other
legal remedy. Buyer agrees to execute appropriate financing statements upon
request by Seller and to pay all expenses for recording thereof.
CONSIGNED GOODS: Buyer acknowledges that certain Goods provided by Seller may
be supplied on a consignment basis. In the event any Goods are designated on
the face of this form as consigned Goods, then Buyer agrees to execute all
documents provided by Seller necessary to effectuate the consignor-consignee
relationship and, in addition to any terms and conditions of consignment,
specifically agrees that Seller shall retain title to all consigned Goods
until such time as Buyer sells such goods to its customers, at which time
title shall pass directly from Seller to the respective customers. Buyer shall
keep a current and accurate inventory and record of all
<PAGE>
consigned goods and shall permit Seller or Seller's representative to inspect
said Goods at any reasonable time upon demand.
ACCEPTANCE: (1) Buyer or Buyer's agent may inspect the Goods at the place of
manufacture. Buyer shall accept any tender of the Goods by Seller which
substantially conform to the description of the Goods set forth herein. (2)
Buyer shall be deemed to have accepted any product and Buyer's right to
cancel, reject or claim any damages for breach of warranty or breach of
Seller's obligation under this contract shall cease, unless Buyer gives Seller
notice in writing of Seller's breach: (a) in the case of defects discoverable
through inspection, 14 days after arrival of the shipment or (b) in the case
of defects not discoverable through inspection, 30 days after invoice date.
(3) In the case of non-conforming goods, Buyer shall immediately notify Seller
whether or not Buyer will continue to accept similarly non-conforming Goods
and acceptance of any non-conforming Goods shall constitute a waiver by Buyer
of specification requirements for said Goods. (4) In any event, when the
product shall have been altered from its original state, Buyer shall be deemed
to have accepted the product. Buyer's acceptance of Goods tendered under this
contract shall be final and irrevocable.
DELIVERY: Seller will use every reasonable effort to effect shipment on or
before the date indicated. Seller shall not be liable, directly or indirectly,
for any delay or failure in performance or delivery or inability to perform or
deliver where such delay, failure or inability arises or results from any
cause beyond Seller's control or beyond the control of Seller's suppliers or
contractors, including, but not limited to, strike, boycott or other labor
disputes, embargo, governmental regulation, inability or delay in obtaining
materials. In no event shall Seller, in the event of delays or otherwise be
liable to Buyer or any third party for any consequential, special, or
contingent damages. In the event of any such delay or failure in performance,
Seller shall have such additional time within which to perform its obligations
hereunder as may reasonably be necessary under the circumstances; and Seller
shall also have the right, to the extent necessary in Seller's reasonable
judgment, to apportion fairly among its various customers in such manner as
Seller may consider equitable, the goods then available for delivery. If, as a
result of any such contingency, Seller is unable to perform this contract in
whole or in part, then to the extent that it is unable to perform, the
contract shall be deemed terminated without liability to either party, but
shall remain in effect as to the unaffected portion of the contract, if any.
SELLER'S LIABILITY: If Buyer notifies Seller under the terms hereof (which
notice, shall be in writing sent by registered mail) of a claimed defect,
Buyer shall concurrently in writing offer Seller opportunity to investigate
the claim and to inspect allegedly defective Goods. If Seller determines that
Buyer's claim is valid, Seller may repair the defective Goods or replace the
defective Goods with conforming Goods at the F.O.B. point specified in this
contract. Failure to offer Seller such opportunity shall constitute acceptance
by Buyer and waiver of all claims for defects. Seller's liability for damages
on account of a claimed defect in any product delivered by Seller shall in no
event exceed the purchase price of the product on which the claim is based.
Replacement of defective Goods or repayment of the purchase price for any such
product will be made only upon return of the defective product. Specifically,
and without limiting the generality of the foregoing, Seller shall not be
responsible or liable to Buyer or to any third party for any lost profits, or
incidental, consequential, indirect, special or contingent damages for any
breach of
<PAGE>
warranty or other breach of Seller's obligations under this contract. Seller
shall not be liable for damages relating to any instrument, equipment, or
apparatus with which the product sold under this agreement is used.
SELLER'S REMEDIES: If Buyer fails, with or without cause, to furnish Seller
with specifications and/or instructions, for, or refuses to accept deliveries
of, any of the products sold under this contract, or is otherwise in default
under or repudiates this contract or any other contract with Seller or fails
to pay when due any invoice under this contract, then in addition to any and
all remedies allowed by law, Seller without notice (1) may bill and declare
due and payable all undelivered products under this or any other contract
between Seller and Buyer and/or (2) may defer shipment under this or any other
contract between Buyer and Seller until such default, breach or repudiation is
removed and/or (3) may cancel any undelivered portion of this and/or any other
contract in whole or in part (Buyer remaining liable for damages).
PACKING: All products shall be suitably packed for air shipment, unless
otherwise requested by Buyer and agreed to in writing by Seller.
WARRANTY: Seller specifically excludes all express warranties and makes no
implied warranty that the goods sold under this agreement are merchantable or
are at for any particular purpose, except such warranties expressly identified
as warranties as are set forth in Seller's current operating manual, catalog
or written guarantee covering such product. Seller also makes no warranty that
the goods sold under this agreement are delivered free of the rightful claim
of any third party by way of patent infringement or the like. If Buyer
furnishes specifications to Seller, Buyer agrees to hold Seller harmless
against any claim which arises out of compliance with the specifications. Any
description of the Goods contained in this contract is for the sole purpose of
identifying them, and any such description is not part of the basis of the
bargain, and does not constitute a warranty that the goods shall conform to
that description. Any sample or model used in connection with this contract is
for illustrative purposes only, is not part of the basis of the bargain, and
is not to be construed as a warranty that the goods will conform to the sample
or model. No affirmation of fact or promise made by Seller, whether or not in
this contract, shall constitute a warranty that the goods will conform to the
affirmation or promise.
ASSIGNMENT: This contract and Buyer's rights thereunder may not be assigned by
Buyer except with the prior written approval of Seller.
WAIVER: Waiver by Seller of any provision of this contract or of a breach by
Buyer of any provision of this contract shall not be deemed a waiver of future
compliance with this contract, and such provision, as well as all other
provisions of this contract, shall remain in full force and effect.
<PAGE>
STANDARD TERMS AND CONDITIONS OF SALE FOR AMERSHAM
1. DEFINITIONS
1.1. The "COMPANY" shall mean AMERSHAM PHARMACIA BIOTECH INC., its
parent corporations, subsidiaries and affiliates.
1.2. The "CUSTOMER" shall mean the person, firm, company or other
organization entering into the CONTRACT as defined in subsection 1.7. below.
1.3. The "EQUIPMENT" shall mean all items of tangible property
supplied by the COMPANY which are of a capital nature.
1.4. The "GOODS" shall mean all items manufactured or supplied by the
COMPANY other than the EQUIPMENT.
1.5. The "PRODUCTS" shall mean the GOODS or EQUIPMENT.
1.6. The "SERVICES" shall mean all advice given and services
performed by the COMPANY.
1.7. The "CONTRACT" shall mean the agreement arising between the
COMPANY and the CUSTOMER following receipt of the CUSTOMER'S order for the
PRODUCTS and/or SERVICES, comprised in the COMPANY'S quotation or, if no
quotation has been given, the agreement arising on dispatch by the COMPANY of
a written acceptance of the CUSTOMERS order or shipment of the PRODUCTS,
whichever first occurs.
2. GENERAL
All CONTRACTS entered into by the COMPANY are subject to and governed
solely by these terms and conditions of sales which may only be varied by the
COMPANY in writing. Acceptance of any purchase order by the COMPANY is
expressly made conditional on assent by the CUSTOMER to any additional or
different terms or conditions set forth herein.
3. PAYMENT
3. 1. Unless otherwise agreed in writing, payment of all invoices
shall be made to the COMPANY in full in U.S. dollars no later than thirty (30)
days from the date of invoice.
3.2. In the event of delay in payment, the COMPANY reserves the right
to:
3.2.1. suspend deliveries and/or cancel any of its outstanding
obligations under the CONTRACT; and
3.2.2. levy a service charge to cover administrative and other
associated costs in relation to overdue account at the
rate of the lesser of 2% per month of all unpaid amounts
or the maximum percentage permitted by applicable law.
3.3. The CUSTOMER shall have no right to set off any amounts owing to
or alleged to be owing to it by the COMPANY against unpaid invoices due to the
COMPANY.
3.4. The COMPANY shall have the right for reasonable cause to
withdraw or refuse credit facilities or to require from the CUSTOMER cash on
or before delivery or security for payment and to withhold delivery until such
requirement is complied with.
<PAGE>
3.5. Any claim or inquiry by the CUSTOMER in respect to the invoiced
price of the PRODUCTS or SERVICES must be submitted in writing to the COMPANY
within the credit period referred to in subsection 3.1.
3.6. Any and all taxes or charges of any nature, imposed by any
federal, state or local government authority, which shall become payable by
reason of the sale, delivery and/or use of the goods hereunder shall be deemed
for CUSTOMER'S account, and the COMPANY may either bill the same to the
CUSTOMER separately, or add the same to the price of the good shipped
hereunder. The COMPANY will notify CUSTOMER in writing of the nature of any
such tax or charge and of the law imposing same.
4. DELIVERY
4.1. Unless otherwise agreed, PRODUCTS shall be delivered F.O.B.
Arlington Heights, Illinois, in Canada all shipments are F.O.B. Toronto
International Airport, Ontario, Canada.
4.2. Unless otherwise agreed in writing, delivery shall take place
when the PRODUCTS are passed to the carrier or shipping agent or to the
CUSTOMER'S representative, whichever shall first occur.
4.3. The CUSTOMER shall ensure that adequate and safe facilities and
procedures exist for receipt of the PRODUCTS at its premises at the time of
delivery by the COMPANY or its agent or carrier, and warrant to the COMPANY
that the site where it intends to use the PRODUCTS is suitable in all respect
for their intended use and is licensed in accordance with any relevant local,
state and federal regulations.
4.5. The CUSTOMER shall not be entitled unreasonably to delay
delivery or refuse to accept delivery. However, if in the opinion of the
COMPANY the CUSTOMER:
4.5.1. is not ready to receive the PRODUCTS on the day
intended, or
4.5.2. fails to give the COMPANY adequate instructions, or
4.5.3. fails to pick up PRODUCTS intended for pick up, or
4.5.4. fails to comply with the provisions of subsection 4.3 in
whole or in part then the COMPANY shall be entitled to
store, dispose of or otherwise deal with the PRODUCTS in
any way it thinks fit without being liable in any way for
any resulting loss suffered by the CUSTOMER and to charge
for any costs incurred. In addition the COMPANY shall have
the right to cancel the CONTRACT. If the CUSTOMER
unreasonably delays delivery or refuses to accept
delivery, the COMPANY shall be entitled to the full
invoice price for the PRODUCTS plus, any costs of
disposal, less the amount, if any, received by the COMPANY
in disposing of or otherwise dealing with the PRODUCTS.
4.6. The CUSTOMER shall promptly notify the COMPANY in writing in the
event that PRODUCTS do not arrive within seven days of their anticipated
receipt.
<PAGE>
5. WARRANTY
5.1. Certain items of EQUIPMENT manufactured and/or supplied by the
COMPANY benefit from a long term warranty, details of which will be made
available to the CUSTOMER in writing at the time of quotation or prior to
conclusion of the CONTRACT.
5.2. The COMPANY warrants that all other EQUIPMENT and all GOODS at
the time of receipt by the CUSTOMER will be free from defects and conform to
the relevant technical specification and that SERVICES will be carried out by
the COMPANY with reasonable care and skill. THIS WARRANTY EXTENDS TO THE
CUSTOMER ONLY AND NOT TO THE CUSTOMER'S CUSTOMERS OR TO OTHER THIRD PARTIES.
5.3. If the CUSTOMER claims the COMPANY has breached the warranty in
subsection 5.2. by tender of defective goods, the CUSTOMER shall, within seven
days of the failure or defect becoming apparent, notify the COMPANY in
writing, explaining in full detail the claimed defect, and the CUSTOMER shall
hold the PRODUCTS for 90 days from the date of notice for the COMPANY
inspection or, upon the COMPANY'S request, the CUSTOMER shall return the
PRODUCT to the COMPANY at the COMPANY'S expense. Failure to give notice to the
COMPANY or to hold or return the PRODUCTS in accordance with this provision
shall constitute a waiver of any claim and acceptance of such PRODUCTS by the
CUSTOMER.
5.4. The COMPANY'S sole liability for breach of this warranty shall
be at its option to give credit for, replace or repair any PRODUCTS or
reperform any SERVICES provided that the failure or defect is shown to the
COMPANY'S reasonable satisfaction to be due to its faulty design, workmanship,
material or packaging.
5.5. Except in the case of PRODUCTS sold by the COMPANY for use in
research (which PRODUCTS are warranted at date of receipt only), the warranty
in subsection 5.2 shall extend for a period of sixty (60) days from the date
of receipt of the PRODUCTS or completion of the SERVICES, provided that, if a
shorter warranty period is stated in the product literature, then such shorter
period shall govern.
6. EXCLUSIONS AND LIMITATIONS OF LIABILITY
6.1. THE WARRANTIES OF THE COMPANY IN SECTION 5 ARE EXPRESSLY IN
PLACE OF ANY OTIIER WARRANTIES, GUARANTEES, CONDITIONS, OBLIGATIONS OR
LIABIL1TIES WHICH MAY BE EXPRESSED OR IMPLIED BY THE COMPANY OR ITS
REPRESENTATIVES. ALL STATUTORY AND IMPLIED WARRANTIES OR CONDITIONS, INCLUDING
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, AND OTHER
THAN TITLE ARE HEREBY EXPRESSLY NEGATED AND EXCLUDED.
6.2. The COMPANY shall not be bound by any representations or
statement on the part of its employees or agents whether oral or in writing
except where such representations' or statement are expressly made part of the
CONTRACT.
6.3. The maximum liability for breach of warranty shall be the
invoice price of the PRODUCT.
6.4. Except for the warranties in Section 5 the COMPANY shall not be
liable to the CUSTOMER for any direct, indirect, consequential or economic
loss or damage relating to its
<PAGE>
PRODUCTS or SERVICES except in so far as such liability relates to death or
personal injury resulting from the COMPANYS special skills.
6.5. The CUSTOMER shall ensure that the specification of the PRODUCTS
ordered is suitable and safe for the intended use of environment of use except
where it makes known details of such use to the COMPANY in writing prior to
conclusion of the CONTRACT in such a way as clearly to place reliance on the
COMPANY'S special skills.
6.6. The CUSTOMER shall handle the PRODUCTS in a suitable and safe
manner and shall comply with any instructions supplied to it by the COMPANY.
The CUSTOMER shall also pass on to users (including purchasers and users of
other goods and equipment into which the PRODUCTS are incorporated) all
relevant safety information, and shall use best efforts to cause such users to
exercise due care in the handling of the PRODUCTS.
6.7. WHERE THE COMPANY EXPERIENCES TECHNICAL DIFFICULTIES IN THE
PRODUCTION OF NON-STANDARD OR CUSTOM MADE PRODUCTS IT MAY CANCEL THE CONTRACT
WITHOUT BEING LIABLE TO THE CUSTOMER IN ANY WAY.
6.8. Where the CUSTOMER supplies designs, drawings and specifications
to the COMPANY to enable it to manufacture non-standard or custom made
PRODUCTS the CUSTOMER warrants that such manufacture will not infringe the
intellectual property rights of any third party.
7. INDEMNITIES
7.1. The CUSTOMER shall indemnify the COMPANY in respect of any claim
which may be made against the COMPANY:
7.1.1. that the use to which the PRODUCTS are put constitutes a
breach of the Occupational Safety and Health Act or
related regulations or any other relevant state, federal
or international safety legislation and regulations.
7.1.2. that the use to which the PRODUCTS are put infringes the
patent, copyright or other intellectual property rights of
any third party, and/or
7.1.3. arising out of the failure by the CUSTOMER to observe
the terms of the CONTRACT.
7.2. The provisions of subsection 7.1 shall not apply where the claim
arises directly as a result of the negligence of the COMPANY or use of the
PRODUCTS in accordance with the COMPANY'S written instructions.
8. STANDING ORDERS
8.1. Acceptance by the COMPANY of each standing and call off order
received from the CUSTOMER for the supply and delivery of fixed quantities of
GOODS at stated intervals or for the supply of fixed quantities of GOODS at
interval to be advised by the CUSTOMER shall constitute a single contract.
8.2. All such orders, once accepted, are subject to cancellation by
the COMPANY (without liability on the part of the COMPANY) on giving thirty
days' prior written notice to the CUSTOMER, provided that the COMPANY may
cancel without notice in the event that the CUSTOMER is in breach of
subsection 3.1.
<PAGE>
8.3. The CUSTOMER shall only be entitled to cancel such orders on
giving one month's prior written notice to the COMPANY and after repayment to
the COMPANY of the amount of any discount or special price reduction from
which the CUSTOMER has benefited up to the date of cancellation.
9. FORCE MAJEURE
9.1. The COMPANY shall not be liable for any delay in delivery or
nondelivery, in whole of in party cause by the occurrence of any contingency
beyond the control of either of the COMPANY or suppliers of the COMPANY
including but not limited to war (whether declared or not), sabotage,
insurrection, rebellion, riot or other act of civil disobedience, act of a
public enemy, failure or delay in transportation, act of any government or any
agency or subdivision thereof, judicial action, labor dispute, fire, accident,
explosion, epidemic, quarantine, restrictions, storm, flood, earthquake, or
other act of God , shortage of labor, fuel, raw material or machinery or
technical failure, where the COMPANY has exercised ordinary care in the
prevention thereof. If any contingency occurs, the COMPANY may allocate
production and delivery among the COMPANY'S customers.
10. GOVERNING LAW
10.1. The CONTRACT shall be governed by and construed in accordance
with the laws of Illinois.
<PAGE>
Schedule VIII
CUSTOMER BILLING INFORMATION
All invoices for Products sold, services performed, or questions of
payment arising under this Agreement should be sent to the Customer's address
set forth below:
Lifecodes Corporation
550 West Avenue
Stamford, CT 06902
Attention: Michael Petrillo
Telephone #: 203-328-9511
Fax #: 203-328-9599
<PAGE>
Schedule IX
[ ]
[ ]
[ ]
[ ]
[ ]
[ ]
[ ]
[ ]
<PAGE>
[CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED FOR
PORTIONS OF THIS
DOCUMENT]
Mr. M. Petrillo
Lifecodes Corporation
550 West Avenue
Stamford Amersham Holdings, Inc.
Connecticut 06902 2636 S. Clearbrook Drive
USA Arlington Heights, IL
060005
Tel (847) 593-6300
Amersham
The Health Science Group
Dear Mr. Petrillo
Subject to contract
Letter of intent
o Lifecodes Corporation will enter into a Microarray Technology Access
Agreement (TA agreement) with Nycomed Amersham plc and Molecular Dynamics
Inc. for the purposes of Life Science research within the fields of HLA
typing for tissue transplantation and DNA identity testing for forensics
and paternity analysis and DNA Diagnostics during the Effective period of
the TA agreement which lasts [ ] from the Effective Date.
o During the Effective period of the TA agreement, Lifecodes Corporation will
work with the Products listed in Schedules I and II of the TA agreement
("Products"), in order to define and develop further products and/or kits
(reagents and consumables) within the fields of HLA typing and DNA identity
testing and DNA diagnostics defined above, relating to Products. Any
methods, know-how or improvements arising during the Effective period and
relating to the work carried out by Lifecodes, described above, should be
disclosed to Amersham, with Lifecodes granting to Amersham a non-exclusive
license to use any such improvements and to make, use and sell Amersham
products embodying any such improvements under terms of a sole license
agreement. Lifecodes will carry out reformatting required to ensure
compatibility of their products with the MD commercial Array Scanner
currently expected for launch from [ ].
o Amersham will use reasonable endeavors to negotiate a series of agreements
with Lifecodes Corporation to enable Lifecodes Corporation to commence
manufacture and/or commercialization of the kits and/or products developed
by Lifecodes during the Effective period from a date no earlier than
January 1, 1999.
o Lifecodes Corporation will be permitted to perform services or tests for
"Affiliates and Approved Collaborators", defined within TA agreement, on an
unpaid basis from the Effective Date until 30 September 1998, and on a paid
basis after 1 October 1998, subject to terms and conditions to be agreed
between Amersham and Lifecodes.
1 .a. During the Effective period of the TA agreement, Amersham will
in good faith, negotiate terms and conditions for the
sub-license to the relevant patents and licensed technology,
required by Lifecodes Corporation to use and sell licensed
products being restricted to include only the following specific
biological materials labeled with Cy2, Cy3, Cy3.5, Cy5, and
Cy5.5: avidin, streptavidin, nucleotides, nucleic acids and
phosphoramidites, (hereinafter referred to as "Licensed
Products"), excluding resale of Cy-phosphoramidites and Cy
dNTPs. Terms of this sub-license to include non-exclusive rights
to a worldwide license in the fields of HLA typing for tissue
transplantation and DNA identity typing for forensics and
paternity analysis and DNA Diagnostics. Terms of this license
will be subject to a customary and reasonable annual fee and
royalties to be negotiated in good faith payable to Amersham.
<PAGE>
b. Amersham will in good faith negotiate terms and conditions to
grant to Lifecodes Corporation a sole, worldwide CyDye license
to use and sell:
i) Cy 3, Cy 3.5, Cy 5 and Cy 5.5, i.e. Cy dye chemistries
matched to the MD Scanners
ii) dNTP nucleotides labeled with the aforementioned Cy dye
chemistries.
iii)Phosphoramidites labeled with the aforementioned Cy dye
chemistries in the field of HLA typing for tissue
transplantation and DNA identity typing for forensics and
paternity analysis only, onto products listed in Schedule I of
the TA agreement and commercial derivatives thereof. Amersham
and Lifecodes Corporation will work together to complete license
agreements by September 30, 1998. License agreement terms will
include minimum annual payments dependent on volume over a
specified period of time.
2) During the Effective period of the TA agreement, Amersham will, in good
faith, negotiate terms and conditions for a supply agreement, to supply
Products listed in Schedule II of TA Agreement and other Amersham
non-Cy dye Products, to enable Lifecodes Corporation to commercialize
products developed for use onto Products listed in Schedule I of the TA
agreement and commercial derivatives thereof. Terms of this supply
agreement will be dependent on the final product format, "the kit".
Amersham anticipates that Lifecodes Corporation will be sole supplier
of this kit in the field of HLA-typing for tissue transplantation and
DNA identity typing for forensics and paternity analysis onto Products
defined in Schedule I of the TA agreement and commercial derivatives
thereof.
3) Specialized support, from Amersham, on aspects of HLA typing and DNA
identity outside of the gene expression application area, may be
negotiated on a contract R&D Supply of Services basis.
Reference to Amersham and patent references on products will also be
subject to discussion during the agreement negotiations. At a minimum,
packaging should carry reference to relevant Amersham/Pharmacia patents.
Amersham does not warrant that final products developed, manufactured or
sold by Lifecodes do not infringe any third party patents.
For the avoidance of doubt it is agreed that any proprietary information
and/or inventions arising under the terms of the [ ] is
excluded from the terms of the TA agreement.
For the avoidance of doubt it is agreed that should Lifecodes Corporation
wish to incorporate [ ] into the aforementioned kit, then
Lifecodes will negotiate terms and conditions for supply of and license to
these [ ].
The parties intend to negotiate a series of agreements in due course which
will be legally binding and which will provide inter alia detailed
arrangements for financing, payments and exploitation of intellectual
property rights. The parties agree that details set out in this letter are
confidential and for the purposes of discussion and negotiation only and are
not otherwise intended to be legally binding except as otherwise set out in
the existing confidentiality agreement.
<PAGE>
Signed for and on behalf of:
NYCOMED AMERSHAM PLC LIFECODES CORPORATION
Sign:_________________________________ Sign:____________________________
Title: Vice President, Molecular Title:
Biology & Sequencing
Name: Dr. Michael Evans Name: Michael Petrillo
Address: Amersham Place Address:550 West Avenue
Little Chalfont Stamford,
Buckinghamshire, Connecticut 06902
England BP7 9NA USA
Fax: 44-1494-542929 Fax: 203-328-9599
<PAGE>
REDACTED VERSION
[CONFIDENTIAL TREATMENT HAS BEEN
REQUESTED FOR PORTIONS OF
THIS EXHIBIT]
<PAGE>
PARENTAGE TESTING PRODUCT AGREEMENT
This Agreement is made by and among Roche Molecular Systems, Inc., a
Delaware corporation having an office at 1080 U.S. Highway 202, Branchburg
Township, Somerville, New Jersey 08876-3771 ("RMS"), F. Hoffmann-La Roche Ltd, a
Switzerland limited liability company, with offices at Grenzacherstrasse 124,
CH-4070 Basel, Switzerland ("FHRL") (both of which are referred to herein as
"ROCHE", and Lifecodes Corporation ("LIFECODES"), having an office at 550 West
Avenue, Stamford, Connecticut 06902, hereafter collectively referred to as "The
Parties".
BACKGROUND
A. In the United States, RMS owns and has the right to grant licenses under
United States Patent Nos. 4,683,195 and 4,683,202. Outside the United States,
FHRL owns and has the right to grant licenses under the corresponding foreign
counterpart patents and patent applications describing and claiming nucleic acid
amplification techniques, including inter alia, a process known as the
polymerase chain reaction ("PCR") process.
B. LIFECODES has attained substantial expertise in the design, manufacture, and
sale of products for performing parentage determination testing in humans.
C. LIFECODES desires to obtain a license from ROCHE to manufacture and sell
products which are useful in PCR and which enable the user to perform in vitro
parentage determination testing procedures as described herein, and ROCHE is
willing to grant such a license on the terms and subject to the conditions
provided in this Agreement.
NOW, THEREFORE, for and in consideration of the mutual covenants contained
herein, ROCHE and LIFECODES agree as follows:
1. Definitions
For the purpose of this Agreement, and solely for that purpose, the terms
set forth hereinafter shall be defined as follows:
1.1 The term "Affiliate" of a designated party to this Agreement shall
mean:
a) an organization of which fifty percent (50%) or more of the
voting stock is controlled or owned directly or indirectly by
either party to this Agreement;
b) an organization which directly or indirectly owns or controls
fifty percent (50%) or more of the voting stock of either party
to this Agreement;
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c) an organization, the majority ownership of which is directly or
indirectly common to the majority ownership of either party to
this Agreement; and
d) an organization under (a), (b), or (c) above in which the amount
of said ownership is less than fifty percent (50%) and that
amount is the maximum amount permitted pursuant to the law
governing the ownership of said organization.
It is understood and agreed, however, that the term "Affiliate" shall not
include Genentech Inc., a Delaware Corporation.
1.2 "Effective Date" shall mean April 1, 1998.
1.3 "Licensed Product" shall mean a reagent kit manufactured by LIFECODES
containing a thermostable DNA polymerase in combination with all such other
reagents, enzymes or materials, whether packaged together or separately, as are
necessary to perform a PCR-based assay for Parentage Determination Testing,
which is covered by at least one Valid Claim within PCR Technology, and (a)
which is marketed for use in Parentage Determination Testing and (b) bears a
label as specified in Section 2.6, setting forth the license limitations.
1.4 "Net Product Revenues" shall mean gross invoice price for the Royalty
Products sold by LIFECODES to an end user customer less a lump sum deduction of
four percent (4%), which lump sum deduction shall be the only deduction made
from the gross invoice price for sales of Royalty Products and is in lieu of all
other deductions (such as, for example, recalls, returns, taxes, freight,
transportation, insurance, packaging, custom duties, and discounts granted later
than at the time of invoicing.)
Net Product Revenues shall be calculated on the basis of sales or transfers
to end users by LIFECODES or an Affiliate or distributor. In the event LIFECODES
is unable to account for sales to Third-Party end users by its distributors, the
Net Product Revenues shall be calculated as the sales price to such distributors
multiplied by 1.43, which factor represents a 30% margin allowed to the
distributor.
The Net Product Revenues for any Royalty Product sold by LIFECODES to any
person, firm or corporation controlling, controlled by, or under common control
with LIFECODES, or enjoying a special course of dealing with LIFECODES, shall be
determined by reference to the Net Product Revenues which would be applicable
under this Section in an arm's length transaction between LIFECODES and a Third
Party other than such person, firm or corporation.
1.5 "Parentage Determination Testing" shall mean the analysis of genetic
material to ascertain whether two or more individuals are biologically related,
but specifically excludes
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analysis of forensic evidence for a sexual assault investigation. This field
specifically excludes tissue typing. In no event shall the term Parentage
Determination Testing include or be construed to include the performance of any
test for the diagnosis or therapy of humans or other animals, or the manufacture
of any product useful in performing an in vitro diagnostic procedure to detect
the presence, absence or quantity of nucleic acid sequences associated with a
disease or condition of humans or other animals.
1.6 "PCR Technology" shall mean the polymerase chain reaction process
covered by United States Patent Nos. B1 4,683,195 and B1 4,683,202, and any
reissue or reexamination patents thereof, and those claims in foreign patents
and patent applications which correspond to issued claims in the above patents
and which claim priority from the patent applications on which the above patents
are based and access to which claims are necessary for LIFECODES to sell and
promote Licensed Products in accordance with the rights granted in Section 2.2,
hereto. No other ROCHE patents or patent applications, including those directed
to any thermostable DNA polymerase, are included herein by implication, estoppel
or otherwise.
1.7 "Royalty Product" shall mean (a) Licensed Product or (b) a reagent,
component or other material which is sold in connection with the sale of a
Licensed Product by LIFECODES and which is adapted for or promoted or supported
for use by customers in PCR Testing in the Licensed Field. As used herein, "PCR
Testing" shall include all steps involved in the analysis of a sample for the
presence or absence of amplifiable nucleic acid from preparation of the sample
to detection and/or analysis of any amplified product.
1.8 "Territory" shall mean worldwide.
1.9 "Third Party" shall mean a party other than an Affiliate of The Parties
to this Agreement.
1.10 "Valid Claim" shall mean the claim of a patent or pending patent
application which has not otherwise been held invalid or unenforceable by a
court from which no appeal has or can be taken, or has not otherwise finally
been held unpatentable by the appropriate administrative agency.
2. Grant
2.1 Upon the terms and subject to the conditions of this Agreement, ROCHE
hereby grants to LIFECODES, and LIFECODES hereby accepts from ROCHE, a royalty
bearing, limited, non-exclusive license in the Territory, without the right to
sublicense, under PCR Technology to manufacture (but not to have manufactured)
and to sell worldwide, directly or through distributors, Licensed Products for
use in Parentage Determination Testing and to pass with such sales of Licensed
Products to end user purchasers only so much of PCR Technology patent rights as
are necessary to be consistent with labels as required by Section 2.6,
accompanying those Licensed Products. Notwithstanding the foregoing grant,
nothing in
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this Agreement shall be deemed to grant to LIFECODES specific rights to
manufacture any component of Licensed Products covered by patents of ROCHE which
are not licensed herein, such as for example, the DNA polymerase or primers
and/or probes.
2.2 The Parties understand and agree that no rights are hereby granted,
expressly or by implication, under any ROCHE thermostable polymerase patents or
patent applications or under U.S. Patent No. 4,965,188 (the '188 patent,
covering the performance of nucleic acid amplification using a thermostable
polymerase) and any foreign claim covering, inter alia, the performance of PCR
with a thermostable polymerase. An immunity from suit under the '188 patent and
foreign claims claiming priority therefrom, may be obtained by purchase of a
thermostable polymerase that is either manufactured by ROCHE or licensed by
ROCHE under the `188 patent, or by contacting, in the United States, the
Director of Licensing, Roche Molecular Systems, Inc., 1145 Atlantic Avenue,
Suite 100, Alameda, CA 94501 and, outside the United States, the PCR Licensing
Manager at F. Hoffmann-La Roche Ltd, CH 4070 Basel, Switzerland.
2.3 LIFECODES expressly acknowledges and agrees that this license is
personal to LIFECODES alone and LIFECODES shall have no right to sublicense,
assign or otherwise transfer or share its rights under the foregoing license and
shall not authorize any other party, including Affiliates, to practice PCR
Technology, nor shall it practice PCR Technology in conjunction with any other
party.
2.4 The right to extend rights under PCR Technology granted hereunder to
LIFECODES is limited strictly to the sale of Licensed Products and for no other
purpose whatsoever, and no other right, immunity or license is granted
expressly, impliedly or by estoppel.
2.5 Except as is specifically provided herein, this Agreement shall not
limit the rights of ROCHE in any way. It is specifically understood that as
between the parties to this Agreement, ROCHE reserves the right itself or
through its Affiliates to practice under PCR Technology, including the PCR
process itself, and to sublicense, assign or otherwise transfer the PCR
Technology to others for any purpose whatsoever.
2.6 LIFECODES shall affix prominently to each particular Licensed Product,
either on a product insert accompanying the product or on the product itself, a
label as provided in Appendix A hereto, or such other label as ROCHE may
reasonably direct from time to time. With regard to any changes in the label
notice provided in Appendix A, LIFECODES shall have a reasonable time period
over which to change its labels.
To the extent that LIFECODES includes a thermostable polymerase that is
fully licensed by ROCHE under the `188 patent in its Licensed Products or
otherwise becomes separately licensed under ROCHE's `188 patent, then LIFECODES
will use label notice Number 1 in Appendix A, which includes the `188 patent;
otherwise LIFECODES will use
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label notice Number 2 in Appendix A. The Parties understand and agree that using
label notice Number 2 shall not relieve LIFECODES from liability for inducing
infringement of ROCHE's patents.
2.7 With respect to LIFECODES' promotional materials for Licensed Products,
for example advertisements, intended for distribution to Third Parties and in
which it is not practical to include the complete label notice statement
provided for in Section 2.6 above, ROCHE hereby grants to LIFECODES the right
and LIFECODES accepts and agrees to credit ROCHE as the source of patent rights
as follows:
"This product is sold under a license from Roche Molecular Systems, Inc.
and F. Hoffmann-La Roche Ltd, and the use of this product is restricted
thereby."
Such reference will be reasonably prominent and in materials (for example,
catalogues) containing multiple product descriptions, will be directly
associated with information on each specific product covered by this Agreement.
2.8 LIFECODES hereby covenants that it shall sell, market and otherwise
promote products licensed hereunder only for use in accordance with the terms of
this Agreement and shall use its best efforts to ensure that Licensed Products
are used in compliance with the letter and intent of the Agreement.
2.9 LIFECODES agrees that once it is notified by ROCHE or once it
independently becomes aware that a particular purchaser is using or intends to
use any product licensed herein other than as is specifically provided in this
Agreement, LIFECODES shall immediately notify said purchaser in writing that
such use is unlicensed and that a license for said use must be obtained from
ROCHE. LIFECODES shall also require distributors to report to LIFECODES any
unlicensed activities of which they become aware. LIFECODES further agrees that
continued or resumed sales by LIFECODES, or a distributor, to a particular
purchaser of which LIFECODES was previously notified or is otherwise aware is
distributing/using any licensed product other than as expressly licensed in this
Agreement, shall constitute a breach of this Agreement under Section 5.4 of the
Agreement. A written certification by a distributor or purchaser which is
executed by an officer of said distributor or purchaser which officer may
legally bind the distributor or purchaser, that it has ceased the unlicensed
activity, or a written certification by LIFECODES which is executed by an
officer of LIFECODES which officer may legally bind LIFECODES that sales to such
distributor or purchaser have ceased, shall be a cure under Section 5.4.
LIFECODES agrees that it shall provide to ROCHE a copy of each of its
notices to purchasers/distributors pursuant to this section, as well as a copy
of each purchaser/distributor's certification of compliance.
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3. Grant to ROCHE
If LIFECODES elects to license at least one Third Party to make, use or
sell any improvement, modification, invention or discovery (hereinafter referred
to as "Discoveries" in this Section) of LIFECODES which constitutes an
improvement of the PCR Technology, in the performance of PCR-based assays, or of
Licensed Products, ROCHE shall have an option to negotiate a nonexclusive
license under commercially reasonable terms, to use said Discovery and to make,
use and sell products including or incorporating said Discovery directly or
through distributors, and in the event that LIFECODES licenses Third Parties,
ROCHE shall be entitled to the same terms and conditions as the most favorable
license for said Discovery granted by LIFECODES to a Third Party. It is hereby
agreed that ROCHE may sublicense Discoveries under this Section 3 to its
Affiliates as well as licensees of PCR Technology.
4. Royalties, Records and Reports
4.1 Royalties. For the rights and privileges granted under this Agreement,
LIFECODES shall pay to ROCHE royalties on Royalty Products used by LIFECODES or
which are sold, distributed, or otherwise transferred by LIFECODES (with or
without payment) as follows:
a) a nonrefundable, noncreditable license issuance fee in the amount
of [___], to be paid upon execution of this Agreement;
b) Earned Royalties: A royalty of [ ] of the Net Product Revenues of
each Royalty Product.
4.2 LIFECODES shall keep full, true and accurate books of account
containing all particulars which may be necessary for the purpose of showing the
amount payable to ROCHE by way of royalty or by way of any other provision under
this Agreement. Such books and the supporting data shall be open at all
reasonable times, for three (3) years following the end of the calendar year to
which they pertain (and access shall not be denied thereafter, if reasonably
available), to the inspection of ROCHE or an independent certified public
accountant retained by ROCHE for the purpose of verifying LIFECODES' royalty
statements or LIFECODES' compliance in other respects with this Agreement. If in
dispute, such records shall be kept until the dispute is settled. The inspection
of records shall be at ROCHE's sole cost unless the inspector concludes that
royalties reported by LIFECODES for the period being audited are understated by
five percent (5%) or more from actual royalties, in which case the costs and
expenses of such inspection shall be paid by LIFECODES.
4.3 LIFECODES shall within thirty (30) days after the first day of January,
April, July, and October of each year deliver to ROCHE a true and accurate
royalty report. This report shall be in accordance with the royalty report form
attached hereto as Appendix A. This
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report shall be on a country-by-country basis and shall give such particulars of
the business conducted by LIFECODES in each country during the preceding three
(3) calendar months as are pertinent to an accounting for royalty under this
Agreement and shall include at least the following:
a) separately itemized quantities of Royalty Products sold or
otherwise transferred by LIFECODES during those three (3) months;
b) the cumulative gross sales of each Royalty Product;
c) the Net Product Revenues of each Royalty Product; and
d) the calculation of net royalties due ROCHE. If no royalties are
due, it shall be so reported.
The correctness and completeness of each such report shall be attested to
in writing by a responsible financial officer of LIFECODES.
Simultaneously with the delivery of each such royalty report, LIFECODES
shall pay to ROCHE the royalty and any other payments due under this Agreement
for the period covered by such report. All amounts payable hereunder by
LIFECODES to ROCHE shall be payable in U.S. currency and sent by the due date,
together with the royalty report, to the following address:
Roche Molecular Systems, Inc.
P.O. Box 18139
Newark, New Jersey 07191
With a copy of the report to: F. Hoffmann-La Roche Ltd
Bldg. 222/350, CH-4070
Basel, Switzerland
Attn: Licensing Manager
Royalties accruing on account of sales in countries other than the United
States shall be payable in United States dollars in amounts based on the New
York rate of exchange as quoted in The Wall Street Journal (WSJ) for the last
business day of each quarter. If the WSJ does not publish any such rate, a
comparable publication shall be agreed upon from time to time by the parties,
and with respect to each country for which such rate is not published in the WSJ
or in a comparable publication, the parties shall use the applicable rate for
such date by the appropriate governmental agency in such country.
ROCHE may change the above addresses at any time by giving LIFECODES
written notice. Said written notice shall become effective four days after it is
mailed unless ROCHE indicates a later effective date.
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4.4 LIFECODES' obligation to pay royalties pursuant to this Agreement shall
terminate upon a final holding of invalidity or unenforceability of all of the
patents identified in Section 1.6, supra, by a final court decision from which
no appeal is or can be taken.
4.5 If LIFECODES shall fail to pay any amount specified under this
Agreement after the due date thereof, the amount owed shall bear interest at the
Citibank NA base lending rate ("prime rate") plus 3% from the due date until
paid, provided, however, that if this interest rate is held to be unenforceable
for any reason, the interest rate shall be the maximum rate allowed by law at
the time the payment is due.
5. Term and Termination
5.1 The license granted to LIFECODES and LIFECODES' obligation to pay
royalties hereunder, shall commence on the Effective Date and terminate on the
date of expiration of the last to expire of the patents included within the PCR
Technology.
5.2 Notwithstanding any other Section of this Agreement, LIFECODES may
terminate this Agreement for any reason on sixty (60) days' written notice to
ROCHE. If LIFECODES elects to terminate this Agreement pursuant to this section,
it shall within thirty (30) days of said termination, notify each of its
customers that LIFECODES is no longer licensed under PCR Technology, and shall
provide ROCHE a copy of all such notices.
5.3 The license granted hereunder to LIFECODES shall automatically
terminate upon (a) an adjudication of LIFECODES as bankrupt or insolvent, or
LIFECODES' admission in writing of its inability to pay its obligations as they
mature; or (b) an assignment by LIFECODES for the benefit of creditors; or (c)
LIFECODES' applying for or consenting to the appointment of a receiver, trustee
or similar officer for any substantial part of its property or such receiver,
trustee or similar officers' appointment without the application or consent of
LIFECODES, if such appointment shall continue undischarged for a period of
ninety (90) days; or (d) LIFECODES' instituting (by petition, application,
answer, consent or otherwise) any bankruptcy, insolvency arrangement, or similar
proceeding relating to LIFECODES under the laws of any jurisdiction; or (e) the
institution of any such proceeding (by petition, application or otherwise)
against LIFECODES, if such proceeding shall remain undismissed for a period of
ninety (90) days or the issuance or levy of any judgment, writ, warrant of
attachment or execution or similar process against a substantial part of the
property of LIFECODES, if such judgment, writ, or similar process shall not be
released, vacated or fully bonded within ninety (90) days after its issue or
levy.
5.4 Breach. Upon any breach of or default of a material term under this
Agreement by LIFECODES, ROCHE may terminate this Agreement upon thirty (30)
days' written notice to LIFECODES. Said notice shall become effective at the end
of the thirty-day period, unless during said period LIFECODES fully cures such
breach or default to ROCHE's reasonable satisfaction and notifies ROCHE of such
cure. Such 30-day cure period shall not apply to any
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uncontested royalty payments due, which uncontested payments must be made in
accordance with the terms of this Agreement.
5.5 Upon termination of this Agreement as provided herein, all rights and
immunities granted to LIFECODES by ROCHE hereunder shall revert to or be
retained by ROCHE.
5.6 LIFECODES' obligations to report to ROCHE and to pay royalties to ROCHE
as to the sale of Royalty Products sold under the Agreement prior to termination
or expiration of the Agreement shall survive such termination or expiration.
LIFECODES shall have 30 days from the termination of this Agreement to dispose
of its inventory of Licensed Products and to pay the appropriate royalty.
Thereafter, any remaining Licensed Products shall be destroyed and LIFECODES
shall certify to ROCHE in writing that all such remaining products in fact have
been destroyed.
6. Confidentiality-Publicity
6.1 Except as provided in Section 2.5 of this Agreement, LIFECODES agrees
to obtain ROCHE's approval before distributing any written information,
including but not limited to promotional and sales materials, to Third Parties
referring to ROCHE, the PCR Technology, or the terms of this Agreement. ROCHE's
approval shall not be unreasonably withheld or delayed and, in any event,
ROCHE's decision shall be rendered within three (3) weeks of receipt of the
written information. Once approved, such materials, or abstracts of such
materials, which do not materially alter the context of the material originally
approved may be reprinted during the term of the Agreement without further
approval by ROCHE unless ROCHE has notified LIFECODES in writing of its decision
to withdraw permission for such use.
6.2 Each party agrees that any financial, legal or business information or
any technical information disclosed to it (the "Receiving Party") by the other
(the "Disclosing Party") in connection with this Agreement shall be considered
confidential and proprietary and the Receiving Party shall not disclose same to
any Third Party and shall hold it in confidence for a period of five (5) years
and will not use it other than as permitted under this Agreement provided,
however, that any information, know-how or data which is orally disclosed to the
Receiving Party shall not be considered confidential and proprietary unless such
oral disclosure is reduced to writing and given to the Receiving Party in
written form within thirty (30) days after oral disclosure thereof. Such
confidential and proprietary information shall include, without limitation,
marketing and sales information, commercialization plans and strategies,
research and development work plans, and technical information such as patent
applications, inventions, trade secrets, systems, methods, apparatus, designs,
tangible material, organisms and products and derivatives thereof.
6.3 The above obligations of confidentiality shall not be applicable to the
extent:
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a) such information is general public knowledge or, after disclosure
hereunder, becomes general or public knowledge through no fault
of the Receiving Party; or
b) such information can be shown by the Receiving Party by its
written records to have been in its possession prior to receipt
thereof hereunder; or
c) such information is received by the Receiving Party from any
Third Party for use or disclosure by the Receiving Party without
any obligation to the Disclosing Party provided, however, that
information received by the Receiving Party from any Third Party
funded by the Disclosing Party (e.g., consultants,
subcontractors, etc.) shall not be released from confidentiality
under this exception; or
d) the disclosure of such information is reasonably needed for use
in connection with performing, offering and selling Licensed
Products; or
e) the disclosure of such information is required or desirable to
comply with or fulfill governmental requirements, submissions to
governmental bodies, or the securing of regulatory approvals.
6.4 Each party shall, to the extent reasonably practicable, maintain the
confidentiality of the provisions of this Agreement and shall refrain from
making any public announcement (including press releases) or disclosure of the
terms of this Agreement without the prior consent of the other party, except to
the extent a party concludes in good faith that such disclosure is required
under applicable law or regulations, in which case the other party shall be
notified in advance.
7. Compliance
In exercising any and all rights and in performing its obligations
hereunder, LIFECODES shall comply fully with any and all applicable laws,
regulations and ordinances and shall obtain and keep in effect licenses, permits
and other governmental approvals, whether at the federal, state or local levels,
necessary or appropriate to carry on its activities hereunder.
8. Assignment
8.1 This Agreement shall not be assigned by LIFECODES to anyone for any
reason (including without limitation any purported assignment or transfer that
would arise from a sale or transfer of LIFECODES' business).
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8.2 ROCHE may assign all or any part of its rights and obligations under
this Agreement at any time without the consent of LIFECODES. LIFECODES agrees to
execute such further acknowledgments or other instruments as ROCHE may
reasonably request in connection with such assignment.
9. Negation of Warranties and Indemnity
9.1 Nothing in this Agreement shall be construed as:
a) a warranty or representation by ROCHE as to the validity or scope
of any patent included within PCR Technology;
b) a warranty or representation that the manufacture, use or sale of
Licensed Products is or will be free from infringement of patents
of Third Parties;
c) an obligation to bring or prosecute actions or suits against
Third Parties for infringement;
d) except as expressly set forth herein, conferring the right to use
in advertising, publicity or otherwise any trademark, trade name,
or names, or any contraction, abbreviation, simulation or
adaptation thereof, of ROCHE;
e) conferring by implication, estoppel or otherwise any licenses,
immunities or rights under any patents of ROCHE other than those
specified in PCR Technology, regardless of whether such other
patents are dominant or subordinate to those in PCR Technology;
f) an obligation to furnish any know-how not provided in PCR
Technology; or
g) creating any agency, partnership, joint venture or similar
relationship between ROCHE and LIFECODES.
9.2 ROCHE MAKES NO EXPRESS OR IMPLIED WARRANTIES OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE.
9.3 LIFECODES shall assume full responsibility for its use of the PCR
Technology and sale of Licensed Products and shall defend, indemnify and hold
ROCHE harmless from and against all liability, demands, damages, expenses
(including attorneys' fees) and losses for death, personal injury, illness,
property damage or any other injury or damage, including any damages or expenses
arising in connection with state or federal regulatory action,
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in view of the use by LIFECODES, including its officers, directors, agents and
employees, of the PCR Technology, except that LIFECODES shall not be liable to
ROCHE for injury or damage arising solely because of ROCHE's negligence.
10. General
10.1 This Agreement constitutes the entire agreement between LIFECODES and
ROCHE as to the subject matter hereof, and all prior negotiations,
representations, agreements and understandings are merged into, extinguished by
and completely expressed by it. This Agreement may be modified or amended only
by a writing executed by authorized officers of each of The Parties.
10.2 Any notice required or permitted to be given by this Agreement shall
be given by postpaid, first class, registered or certified mail, or by courier,
properly addressed to the other party at the respective address as shown below:
If to ROCHE: Roche Molecular Systems, Inc.
340 Kingsland Street
Nutley, New Jersey 07110
Attn: Corporate Secretary
with a copy to: Roche Molecular Systems, Inc.
1145 Atlantic Avenue, Suite 100
Alameda, California 94501
Attn: Licensing Manager
If to LIFECODES: Lifecodes Corporation
550 West Avenue
Stamford, Connecticut 06902
Attn: Michael Petrillo, Vice President,
Sales and Marketing
Either party may change its address by providing notice to the other party.
Unless otherwise specified herein, any notice given in accordance with the
foregoing shall be deemed given within four (4) full business days after the day
of mailing, or one full day after the date of delivery to the courier, as the
case will be.
10.3 Governing Law and Venue. This Agreement and its effect are subject to
and shall be construed and enforced in accordance with the law of the State of
New Jersey, U.S.A., except as to any issue which by the law of New Jersey
depends upon the validity, scope or enforceability of any patent within PCR
Technology which issue shall be determined in accordance with the applicable
patent laws of the United States or the relevant foreign jurisdiction. The
Parties agree that the exclusive jurisdiction and venue for any dispute or
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controversy arising from this Agreement shall be in the United States District
Court for the District of New Jersey if federal jurisdiction exists, and if no
federal jurisdiction exists, then in the Superior Court of New Jersey.
10.4 Arbitration. Notwithstanding the provisions of Section 10.3 above, any
dispute concerning solely the determination of facts such as, but not limited
to, (1) a determination of royalty rate payments owed pursuant to Section 4.1;
and (2) the proper use of labels pursuant to Section 2.6, and which dispute does
not involve a question of law, shall be settled by final and binding arbitration
in the State of New Jersey pursuant to the commercial arbitration rules of the
American Arbitration Association in accordance with the following procedural
process:
a) The arbitration tribunal shall consist of three arbitrators. In
the request for arbitration and the answer thereto, each party
shall nominate one arbitrator and the two arbitrators so named
will then jointly appoint the third arbitrator within sixty (60)
days of the filing of the answer, said third arbitrator being the
chairman of the arbitration tribunal.
b) The decision of the arbitration tribunal shall be final and
judgment upon such decision may be entered in any competent court
for juridical acceptance of such an award and order of
enforcement.
Each party hereby submits itself to the jurisdiction of the courts of the
place of arbitration, but only for the entry of judgment with respect to the
decision of the arbitrators hereunder.
10.5 Nothing in this Agreement shall be construed so as to require the
commission of any act contrary to law, and wherever there is any conflict
between any provision of this Agreement or concerning the legal right of The
Parties to enter into this contract and any statute, law, ordinance or treaty,
the latter shall prevail, but in such event the affected provisions of the
Agreement shall be curtailed and limited only to the extent necessary to bring
it within the applicable legal requirements.
10.6 If any provision of this Agreement is held to be unenforceable for any
reason, it shall be adjusted rather than voided, if possible, in order to
achieve the intent of the parties to the extent possible. In any event, all
other provisions of this Agreement shall be deemed valid and enforceable to the
full extent possible.
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IN WITNESS WHEREOF, The Parties hereto have set their hands and seals and
duly executed this Agreement on the date(s) indicated below, to be effective on
Effective Date as defined herein.
ROCHE MOLECULAR SYSTEMS, INC. LIFECODES CORPORATION
By: ___________________________ By: ___________________________
Name: Thomas White, Ph.D. Name: Michael Petrillo
Title: Vice President, R & D Title: Vice President, Sales and
Marketing
Date: _________________________ Date: _________________________
Apprv'd As To Form
LAW DEPT.
By: .................
F. HOFFMANN-LA ROCHE LTD
By: ___________________________
Name: _________________________
Title: ________________________
Date: _________________________
14
<PAGE>
APPENDIX A
Label Notice Number 1
License Statement for use on Royalty Products which are Licensed Products
containing a Thermostable Polymerase either Manufactured by Roche or Licensed
Under Roche's `188 Patent
NOTICE TO PURCHASER: LIMITED LICENSE
The purchase price of this product includes limited, non-transferable rights
under U.S. Patents 4,683,202, 4,683,195, and 4,965,188 or their foreign
counterparts, owned by Roche Molecular Systems, Inc. and F. Hoffmann-La Roche
Ltd ("Roche"), to use only this amount of the product to practice the Polymerase
Chain Reaction ("PCR") and related processes described in said patents solely
for the parentage determination testing applications of the purchaser, and
explicitly excludes analysis of forensic evidence. The right to use this product
to perform and to offer commercial services for parentage determination testing
applications, using PCR, including reporting the results of the purchaser's
activities for a fee or other commercial consideration, is also hereby granted.
Further information on purchasing licenses to practice PCR and related processes
may be obtained by contacting the Director of Licensing at Roche Molecular
Systems, Inc., 1145 Atlantic Avenue, Alameda, California, 94501
15
<PAGE>
APPENDIX A, CONTINUED
Label Notice Number 2
License Statement for use on Royalty Products Designed and Sold for use in
Parentage Determination Testing Applications but which Do Not Contain a
Thermostable Polymerase either Manufactured by Roche, or Licensed Under Roche's
`188 Patent and are therefore not Licensed Products.
NOTICE TO PURCHASER: DISCLAIMER OF LICENSE
This product is optimized for use in the Polymerase Chain Reaction ("PCR")
Process, covered by patents owned by Roche Molecular Systems, Inc. and F.
Hoffmann-La Roche Ltd ("Roche"). Further information on purchasing licenses to
practice PCR and related processes may be obtained by contacting the Director of
Licensing at Roche Molecular Systems, Inc., 1145 Atlantic Avenue, Alameda,
California 94501.
16
<PAGE>
<TABLE>
<CAPTION>
SUMMARY ROYALTY REPORT
for the Period ________________ to ____________________ Country ____________________
====================================================================================================================================
Licensee: Lifecodes Corporation Field of Use: Parentage Determination Products
Effective Date: April 1, 1998 Royalty Rate: 15%
============================ ====================== ================== ==================== ====================== =================
Number Cumulative Deductions Allowed
Royalty Product of Product Gross Sales of (4%) Net Product Royalty Due
Units Sold or Royalty Product Revenues
Transferred
============================ ====================== ================== ==================== ====================== =================
<S> <C> <C> <C> <C> <C>
- ---------------------------- ---------------------- ------------------ -------------------- ---------------------- -----------------
- ---------------------------- ---------------------- ------------------ -------------------- ---------------------- -----------------
- ---------------------------- ---------------------- ------------------ -------------------- ---------------------- -----------------
- ---------------------------- ---------------------- ------------------ -------------------- ---------------------- -----------------
- ---------------------------- ---------------------- ------------------ -------------------- ---------------------- -----------------
- ------------------------------------------------------------------------- -------------------------------------------- -------------
Check here if there were no sales for this period ___ Total Royalty Earned
--------------------------------------------
--------------------------------------------
Royalty Payment Due
--------------------------------------------
I hereby certify the information set forth above is correct and
complete with respect to the amounts due under the applicable license agreement.
By: _________________________________________ Title: __________________________________ Date: _______________________
(authorized signature)
Name (please print): ___________________________________________
====================================================================================================================================
Mail completed form and royalty payment to: Roche Molecular Systems, Inc., P. O. Box 18139, Newark, New Jersey 07191
Copy to: F. Hoffmann-La Roche Ltd, Grenzacherstr.124, CH-4070, Basel, Switzerland, Attn: Licensing Manager
</TABLE>
<PAGE>
REDACTED VERSION
[CONFIDENTIAL TREATMENT HAS BEEN
REQUESTED FOR PORTIONS OF
THIS EXHIBIT]
<PAGE>
PURCHASE AND LICENSE AGREEMENT
This agreement is made by and between Molecular Innovations, Inc. ("MI"), a
Delaware Corporation organized and existing in the State of Colorado, and
Lifecodes, Inc. ("Lifecodes") a Delaware Corporation organized and existing in
the State of Connecticut.
WHEREAS, M1 is the owner of patent applications and know how relating to
XtraBind and XtraEasy technology, and is desirous of licensing rights to
Lifecodes for marketing XtraBind and XtraEasy; and
WHEREAS, Lifecodes is interested in acquiring MI's XtraBind and XtraEasy for
exclusive marketing in the forensic, HLA and paternity testing fields of use;
NOW THEREFORE, both parties agree as follows:
1. DEFINITIONS
A. Gross Sales shall mean gross revenue from sales of XtraBind and
XtraEasy by Lifecodes or a Lifecodes affiliate, less customer
allowances and returned goods.
B. Lifecodes Affiliate shall mean any organization in which Lifecodes
owns or controls, directly or indirectly, at least fifty percent (50%)
of its voting stock or similarly owns or controls Lifecodes.
C. M1 Affiliate shall mean any organization in which MI owns or controls
directly or indirectly, at least fifty percent (50%) of its voting
stock or which similarly owns or controls M1,
D. Licensed Patents shall mean those patents and patent applications
relating to the MI XtraBind and XtraEasy technology.
E. XtraBind shall mean Molecular Innovation's patent pending nucleic acid
binding material.
F. XtraEasy shall mean a 96 well format containing pre-dispensed XtraBind
in an amount that provides up to 10 amplification reactions for each
sample.
2. LICENSE
A. MI hereby grants to Lifecodes an exclusive worldwide license to make
(under MI authorization only), as provided below, use and sell
products incorporating XtraBind and XtraEasy technology in the
following fields of use: Forensics, HLA Paternity products
incorporating (the "Licensed Fields"); providing that in connection
with its existing and any renewed Navy, DKMS, NMDP or Department of
Defense contract, Lifecodes may use samples on which it has conducted
tests within one or more Licensed Fields to conduct diagnostic
testing,
18
<PAGE>
in other fields. Otherwise, Lifecodes shall have no rights under this
License with respect to fields outside the Licensed Fields.
B. Lifecodes shall have no right to manufacture products except as
specifically authorized below, or to sublicense, assign or otherwise
transfer its rights under this license except to a subsidiary of
Lifecodes or to a successor in interest to substantially all of the
assets of Lifecodes, whether by purchase, merger or operation of law.
These rights require prior written approval of MI.
C. If MI is unable to supply the needs of Lifecodes for products using
the XtraBind or XtraEasy technology, under this License, for a
continuous period of at least 60 days, then Lifecodes may manufacture
products for the use and sale within the scope of this License;
provided, that Lifecodes shall pay MI a royalty on such products equal
to a percentage (as agreed to by the parties or determined by
arbitration to be a reasonable royalty) of the Gross Sales of such
products. Royalties shall be paid quarterly based on Gross Sales
invoiced during the quarter.
3. COMPENSATION
A. Lifecodes shall pay MI a [____________] license fee in two initial
installments:
(1) [_____________] upon the signing of the license agreement
(2) [_____________] upon the receipt of an acceptable protocol for
utilizing samples collected in the common preservatives, EDTA,
Citrate or Heparin, and from buccal swabs.
B. Costs of validation of the XtraBind and XtraEasy for licensed
applications will be assumed by Lifecodes according to a mutually
agreed upon protocol. (As described in Attachment I)
C. The license obligation shall continue until the later of (1) Five
years after the first commercial sale of XtraBind and XtraEasy, or (2)
The expiration of all Licensed Patents, including any extension
thereof
D. Lifecodes shall remit to MI payment in full for all products delivered
within 30 days.
E. MI shall have the right to have an independent auditor, mutually
agreed upon by MI and Lifecodes, to review Lifecodes books and records
once each calendar year for the purpose of verifying markets and field
of use allowed under the license exclusivity, and (as applicable)
royalty payments.
4. GENERAL PROVISIONS
A. This agreement is not assignable by Lifecodes except to a Lifecodes
<PAGE>
affiliate.
B. All Product will include end user package labeling indicating
Molecular Innovations, Inc. as the original product manufacturer and
patent owner.
C. Lifecodes will promptly notify MI of any actual or expected
infringement of Licensed Patents. MI makes no warrantees concerning
infringement.
D. All information exchanged under the terms of this agreement shall be
considered confidential by the receiving party for a period of ten
(10) years from the date of receipt of such information and shall be
subject to any existing confidentiality agreement. Absent any other
more restrictive agreement, the information considered confidential
under this agreement is that information which:
(1). is clearly marked as "confidential" or if verbal, is verified in
writing and marked "confidential", with a clear reference made to the
verbal information;
(2). is not already known by the receiving party from its own research
or from a third party who has the right to disclose the information to
the receiving party;
(3). is not or does not become the subject of a patent issued by a
third party;
(4). is not or does not become open to the public by means including
disclosure in patents or publications, or public use or sale, except
by breach of the Agreement; or
(5). is not required to be disclosed to government agencies or to
third parties under an appropriate confidentiality agreement anywhere
in the world for legitimate commercial or legal purposes relating to,
inter alia, registration, marketing and patent application filing in
such countries as permitted under this agreement.
E. Any provision herein to the contrary notwithstanding neither party
hereto shall be liable to the other for any loss, injury, delay or
damages or casualty suffered or incurred by any such party to strikes,
riots, storms, fires, acts of God action by any local, state or
federal government body or agency or any other cause which is beyond
the reasonable control of the party, the performance of whose
obligations is effected by such cause.
5. TERMINATION
A. This agreement may be terminated at any time by mutual consent of the
parties.
B. If either party is in breach or default of any of the provisions of
the
<PAGE>
Agreement and does not rectify the breach or default within two (2)
months after receipt of the written notice from the other party
requesting rectification of the breach or default, the other party may
terminate this agreement by written notice to the party in breach or
default.
C. Any termination of this agreement, by written notice of one party to
the other for any reason whatsoever, shall operate as termination of
the licenses granted hereunder.
D. Except for breaches of confidentiality, the parties will be required
to exhaust internal negotiations to resolve all disputes before
pursuing third party arbitration.
IN WITNESS WHEREOF, the parties through their authorized officers have executed
this Agreement as of the date shown below.
MOLECULAR INNOVATIONS, INC. LIFECODES, INC.
By ______________________________ By _______________________________
Title ____________________________ Title ____________________________
Date _____________________________ Date _____________________________
<PAGE>
Attachment I
Molecular Innovations, Inc. offers an exclusive license to Lifecodes for a
limited number of fields of use. In exchange for this license, Molecular
Innovations offers the following fee and payment schedule, and Lifecodes agrees
to disclose to MI and permit MI to use all improvements and developments to the
MI technology. This agreement includes a two part initial license fee, financial
support for a field of use validation plan and a minimum order and delivery
commitment for the first three years of license.
Fields of use: To include all applications XtraBind and XtraEasy in the fields
of human forensic, HLA paternity testing and related diagnostic testing as
authorized by MI on the same sample.
Territory : Worldwide
Compensation:
License Fee: [_____________] provided in two equal installments.
1. [________________] upon signing the License Agreement
2. [________________] upon the receipt of an acceptable protocol
for utilizing samples collected in the common preservatives,
EDTA, Citrate or Heparin, and from buccal swabs. A protocol will
be considered acceptable if it meets the following criteria:
Validation/Optimization:
1 Optimization of XtraEasy with Lifecodes primer sets.
Molecular Innovations will optimize each primer set for the
XtraEasy amplification system. Lifecodes will provide all
necessary reagents with the exception of XtraEasy reagents.
Ml will perform the optimization of each primer set
requested by Lifecodes for a [_________] fee for each primer
set/specimen type.
The isolated DNA can be amplified by MI for Lifecodes' HLA
AMP-FLP and STR kits using quantities for genomic DNA and by
generating amplified product(s) in similar quantities those
obtained with commercial isolation DNA kits such as
Lifecodes' E-Z Prep.
2. Typing results for each primer set will be confirmed using
XtraEasy amplified DNA compared to IAD's standard extraction
protocol. MI will use eight (8) specimens in triplicate for
each primer set/specimen. A protocol will be written, and
Lifecodes will confirm this in their lab using the same
eight (8) specimens typed with their standard protocol as
well as using XtraEasy plates and reagents supplied to
Lifecodes. Total fee will be billed to Lifecodes at IAD's at
standard pricing.
3. 192 NMDP specimens selected to represent all allelic
combination will be typed at Lifecodes using XtraEasy and
the standard MI protocol. The results will be provided to
MI.
<PAGE>
4. 30 buccal and blood samples will be validated at Lifecodes
for XtraEasy paternity testing according to the AABB
standard protocol. ( 10 Cases including; mother, father and
child). The results will be provided to MI.
Initial Purchase Agreement and Stocking Order
1. The initial purchase agreement will have a three year
minimum commitment period, with non-binding forecasts
updated 90 days in advance of each year's anniversary. A
twelve-month rolling purchase forecast will be provided on
the first day of each fiscal quarter.
2. The first year minimum purchase order will total at least
1300 XtraEasy kits and associated reagents representing
approximately 250,000 individual tests. The initial stocking
order will include 650 XtraEasy kits and reagents.
3. Pricing: The XtraEasy system will initially be available
with two different nucleic acid extraction reagent systems.
The extraction system will be agreed upon by Lifecodes prior
to the final transfer from pilot to product. The transfer
price to Lifecodes for the slurry format will be [________]/
XtraEasy kit.
<PAGE>
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT ("Agreement"), dated as of September 30,
1997, by and between LIFECODES CORPORATION, a Delaware corporation having its
principal offices at 550 West Avenue, Stamford, Connecticut 06902 ("Lifecodes"),
and Richard Sandberg, an individual residing at 233 Brushy Ridge Road, New
Canaan, Connecticut 06840 ("Sandberg").
Sandberg desires to purchase from Lifecodes, and Lifecodes desires to issue
and sell to Sandberg, 22,000 shares of Lifecodes's common stock, par value $.10
per share (the "Common Stock") on the terms and conditions set forth in this
Agreement.
NOW THEREFORE, the parties hereto mutually agree as follows:
1. Terms of Purchase and Sale.
1.1 Purchase and Sale of Common Stock. Subject to the terms and conditions
of this Agreement, Lifecodes shall issue and sell to Sandberg, and Sandberg
shall purchase from Lifecodes, 22,000 shares of Common Stock of Lifecodes at a
price per share equal to $9.50, or an aggregate purchase price of $209,000 (the
"Purchase Price"). The shares of Common Stock purchased by Sandberg hereunder
are referred to herein as the "Shares."
1.2 Purchase Price. The Purchase Price shall be paid as follows:
(a) $2,200 shall be paid at Closing (as defined in Section 1.3 below) (the
"Initial Payment"), and
(b) the balance, $206,800, shall be paid in accordance with the terms of a
negotiable, secured promissory note payable to Lifecodes in the form of Exhibit
A attached hereto (the "Note").
1.3 Closing. The purchase and sale of the Shares shall take place at the
offices of Lifecodes located at 550 West Avenue, Stamford, Connecticut 06902, on
September 30, 1997 at 10:00 a.m., or such other time (the "Closing Date") and
place as Lifecodes and Sandberg shall mutually agree (which time and place are
designated as the "Closing"). At the Closing, Lifecodes shall deliver to
Sandberg a certificate representing the Shares (the "Certificate") against
delivery to Lifecodes by Sandberg of (i) a check in the amount of the Initial
Payment and (ii) the Note. In addition, at the Closing, Sandberg shall deliver
and deposit the Certificate with Lifecodes, as security for the payment of all
sums under the Note, with a stock power endorsed in blank and in proper form for
transfer.
<PAGE>
1.4 No Registration of Shares. The Shares will be issued to Sandberg
without registration under the Securities Act of 1933, as amended (the
"Securities Act"), in reliance on Regulation D ("Regulation D") promulgated
thereunder by the Securities and Exchange Commission (the "SEC").
2. Representations, Warranties and Covenants of Lifecodes. Lifecodes hereby
represents and warrants to, and covenants with, Sandberg as follows:
2.1 Organization and Standing. Lifecodes is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware,
and has the requisite corporate power and authority to conduct its business as
currently conducted.
2.2 Authorization. All corporate action on the part of Lifecodes to enter
into this Agreement and to perform the transactions contemplated hereby has been
taken on or prior to the closing. Upon due execution and delivery by Sandberg,
this Agreement shall constitute a valid and legally binding obligation of
Lifecodes, enforceable against Lifecodes in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' and contracting
parties' rights generally and except as enforceability may be subject to general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
2.3 Issuance, Sale and Delivery of the Shares. When issued and fully paid
for in accordance with the terms of this Agreement, the Shares to be sold
hereunder by Lifecodes will be validly issued, fully paid and non-assessable.
2.4 Non-Contravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
violate any constitution, statute, regulation, rule, injunction, order, decree,
ruling, charge, or other restriction of any government agency, or court to which
Lifecodes is subject or any provision of the certificate of incorporation or
bylaws of Lifecodes.
2.5 Consents. Neither the execution and delivery by Lifecodes, nor the
consummation by Lifecodes of any of the transactions contemplated herein,
requires any consent, approval, order or authorization of, or the giving of any
notice to, any governmental agency or any other person, except for such notices,
consents or approvals which have been previously obtained or which will be
obtained before the Closing.
2.6 Other Information. The information concerning Lifecodes set forth in
this Agreement does not contain any untrue statement of material fact or omit to
state a material fact required to be stated herein necessary to make the
statements and facts contained herein, in light of the circumstances in which
they are made, not false or misleading.
-2-
<PAGE>
3. Representations, Warranties and Covenants of Sandberg. Sandberg hereby
represents and warrants to, and covenants with, Lifecodes as follows:
3.1 Authorization. Sandberg has full power, authority and capacity to enter
into this Agreement and to consummate the transactions contemplated hereby.
Sandberg has taken all necessary action to authorize the execution, delivery and
performance of this Agreement, and upon due execution and delivery by Lifecodes,
this Agreement shall constitute a valid and binding obligation of Sandberg
enforceable in accordance with its terms, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors' and contracting parties' rights generally and
except as enforceability may be subject to general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
3.2 Consents. Neither the execution and delivery by Sandberg, nor the
consummation by Sandberg of any of the transactions contemplated herein,
requires any consent, approval, order or authorization of, or the giving of any
notice to, any governmental agency or any other person, except for such notices,
consents or approvals which have been previously obtained or which will be
obtained before the Closing.
3.3 Securities Laws Representations.
(a) Purchase Entirely for Own Account. The Shares are being acquired for
investment for Sandberg's own account, not as a nominee or agent, and not with a
view to the resale or distribution of any part thereof, and Sandberg has no
present intention of selling, granting any participation in, or otherwise
distributing the same. Sandberg does not have any contract, undertaking,
agreement or arrangement with any person to sell, transfer or grant
participation to such person or to any third person, with respect to any of the
Shares.
(b) Disclosure of Information. Sandberg believes he has received all
information he considers necessary or appropriate for deciding whether to
purchase the Shares. Sandberg has had an opportunity to ask questions and
receive answers from Lifecodes regarding the terms and conditions of the
offering of the Shares.
(c) Investment Experience. Sandberg has not relied on any business
representations of Lifecodes regarding his purchase of the Shares and, together
with his advisors, Sandberg has the requisite knowledge and experience to
understand the risks involved in the transactions contemplated hereto.
(d) No Representations on Profits. Sandberg acknowledges and agrees that
Lifecodes has not made any representations or warranties about the future
profits or business prospects of Lifecodes.
-3-
<PAGE>
(e) Restricted Securities. Sandberg understands that the Shares he is
purchasing pursuant to this Agreement are characterized as "restricted
securities" under the federal securities laws inasmuch as they are being
acquired from Lifecodes in a transaction not involving a public offering and
that under such laws and applicable regulations the Shares may be resold without
registration under the Securities Act only in certain limited circumstances. In
this connection, Sandberg is familiar with SEC Rule 144, as presently in effect,
and understands the resale limitations imposed thereby and by the Securities
Act.
(f) Disposition of Shares. Sandberg will not dispose of any of the Shares
(other than pursuant to SEC Rule 144 or any similar or analogous rule or rules)
unless and until (i) Sandberg shall have notified Lifecodes of the proposed
disposition and, if reasonably requested by Lifecodes, Sandberg shall have
furnished Lifecodes with an opinion of counsel reasonably satisfactory in form
and substance to Lifecodes to the effect that such disposition will not require
registration under the Securities Act; or (ii) there is in effect a registration
statement under the Securities Act covering the proposed disposition and the
proposed disposition is made in accordance with such registration statement.
(g) Disposition of Shares. Subject to Section 4.2, Sandberg further agrees
not to make any disposition of all or any portion of the Shares unless and
until:
(i)Such disposition is in accordance with Rule 144, or
(ii) There is then in effect a registration statement under the
Securities Act covering such proposed disposition and such disposition is
made in accordance with such registration statement, or
(iii) Sandberg shall have notified Lifecodes of the proposed
disposition and shall have furnished Lifecodes with a detailed statement of
the circumstances surrounding the proposed disposition, and if reasonably
requested by Lifecodes, Sandberg shall have furnished Lifecodes with an
opinion of counsel, reasonably satisfactory to Lifecodes, that such
disposition will not require registration under the Securities Act.
3.4 Legends. The certificates evidencing the Shares may bear the
restrictive legends set forth below, except that such certificates shall not
bear such legends if the transfer was made in compliance with Rule 144 or if the
opinion of counsel, if any, referred to in Section 3.2(g)(iii) is to the effect
that such legend is not required in order to establish compliance with any
provisions of the Securities Act:
(a) "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933. AS AMENDED ("ACT"), THE SECURITIES
MAY NOT BE TRANSFERRED UNLESS A REGISTRATION
-4-
<PAGE>
STATEMENT UNDER THE ACT IS IN EFFECT AS TO SUCH TRANSFER OR SUCH TRANSFER IS
MADE PURSUANT TO RULE 144 OF THE ACT OR AN EXEMPTION TO THE REGISTRATION
REQUIREMENTS OF THE ACT."
(b) Any legend required by the laws of any applicable state or other
jurisdiction governing the Shares.
4. Market Stand-Off Provision. Sandberg agrees in connection with any
registration of Lifecodes's securities that, upon the request of Lifecodes or
the underwriters managing any underwritten offering of the Lifecodes's
securities, not to sell, make any short sale of, loan, grant any option for the
purchase of, or otherwise dispose of any Shares for such reasonable period of
time from the effective date of such registration as the underwriters may
specify. Lifecodes may impose stop-transfer instructions with respect to the
Shares held by Sandberg that are subject to the foregoing restriction until the
end of such period.
5. Miscellaneous.
5.1 Notices. All notices and communications required hereunder shall be in
writing and if to Sandberg, mailed or delivered to Sandberg at 233 Brushy Ridge,
New Canaan, Connecticut 06840, or if to Lifecodes to 550 West Avenue, Stamford,
Connecticut 06902, with a copy of any notice to James F. Farrington, Esq.,
Wiggin & Dana, Three Stamford Plaza, 301 Tresser Boulevard, Stamford,
Connecticut 06901-3234 or such other address as any party may furnish to the
other in writing. Any notices and communications that are mailed, shall be sent
by registered or certified first-class mail, postage prepaid.
5.2 Entire Agreement. This Agreement, together with the Note, contains the
entire understanding of the parties with respect to the subject matter hereof.
All express or implied agreements and understandings, either oral or written,
heretofore made are expressly merged in and made a part of this Agreement.
5.3 Amendments and Waivers. This Agreement may not be modified or amended
except pursuant to an instrument in writing signed by Lifecodes and Sandberg.
The waiver by either party hereto of any right hereunder or the failure to
perform or of a breach by the other party shall not be deemed a waiver of any
other right hereunder or of any other breach or failure by said other party
whether of a similar nature or otherwise.
5.4 Headings. The headings of the various sections of this Agreement have
been inserted for convenience of reference only and shall not be deemed to be
part of this Agreement.
-5-
<PAGE>
5.5 Severability. In case any provision contained in this Agreement should
be invalid, illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein shall not in any way
be affected or impaired thereby.
5.6 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Connecticut (without giving effect to
the choice of law provisions thereof) and the federal law of the United States
of America.
5.7 Counterparts. This Agreement may be executed in two counterparts, each
of which shall constitute an original, but both of which, when taken together,
shall constitute but one instrument, and shall become effective when one or more
counterparts have been signed by each party hereto and delivered to the other
party.
5.8 No Brokers; Expenses. Each party represents and warrants to the other
that it has not engaged any broker or other person who would be entitled to any
fees or commissions in respect to the execution of this Agreement or the
consummation of the transactions contemplated hereby. Each party shall bear its
own expenses in connection with this Agreement.
IN WITNESS WHEREOF, the parties hereto have cause this Agreement to be
executed by their duly authorized representatives as of the day and year first
above written.
LIFECODES CORPORATION
By:
Name: Walter O. Fredericks
Title: President and Chief Executive Officer
Richard Sandberg
An Individual
-6-
<PAGE>
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD OR OFFERED FOR SALE
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER
SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR THE AVAILABILITY OF AN
EXEMPTION FROM REGISTRATION UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES
LAWS.
No. 1
STOCK SUBSCRIPTION WARRANT
To Purchase Common Stock of
Lifecodes Corporation, a New York Corporation (the "Company")
DATE OF INITIAL ISSUANCE: April 13, 1992
THIS CERTIFIES THAT for value received, CONNECTICUT DEVELOPMENT AUTHORITY
or its registered assigns (hereinafter called the "Holder") is entitled to
purchase from the Company, at any time during the Term of this Warrant, 35,426
shares of common stock, $.10 par value, of the Company (the "Common Stock"), at
the Warrant Price, payable in lawful money of the United States of America to be
paid upon the exercise hereof. The exercise of this Warrant shall be subject to
the provisions, limitations and restrictions herein contained, and may be
exercised in whole or in part.
SECTION 1. Definitions.
For all purposes of this Warrant, the following terms shall have the
meanings indicated:
Common Stock - shall mean and include the Company's authorized Common
Stock, $.10 par value, as constituted at the date hereof, and shall also
include any capital stock of any class of the Company hereafter authorized
which shall not be limited to a fixed sum or percentage of par value 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.
Securities Act - the Securities Act of 1933, as amended.
Term of this Warrant - shall mean the period beginning on the date of
initial issuance hereof and ending on the date eight (8) years from the
date of initial issuance hereof.
Warrant Price - $6.00 per share, subject to adjustment in accordance with
Section 5 hereof.
Warrants - this Warrant and any other Warrant or Warrants issued pursuant
to the Note and Warrant Purchase Agreement between the Company and the
Connecticut Development Authority dated April 13, 1992 (the "Purchase
Agreement") to the original holder of this Warrant, or any transferees from
such original holder or this Holder.
<PAGE>
Warrant Shares - shares of Common Stock purchased or purchasable by the
Holder of this Warrant upon the exercise hereof
SECTION 2. Exercise of Warrant.
2.1. Procedure for Exercise of Warrant. To exercise this Warrant in whole
or in part (but not as to any fractional share of Common Stock), the Holder
shall deliver to the Company at its office referred to in Section 13 hereof at
any time and from time to time during the Term of this Warrant: (i) the Notice
of Exercise in the form attached hereto, (ii) cash, certified or official bank
check payable to the order of the Company in the amount of the Warrant Price for
each share being purchased, and (iii) this Warrant. In the event of any exercise
of the rights represented by this Warrant, a certificate or certificates for the
shares of Common Stock so purchased, registered in the name of the Holder or
such other name or names as may be designated by the Holder, shall be delivered
to the Holder hereof within a reasonable time, not exceeding fifteen (15) 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
(except a remaining fractional share), 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 person in whose name any certificate for shares of
Common Stock is issued upon exercise of this Warrant shall for all purposes be
deemed to have become the holder of record of such shares on the date on which
the Warrant was surrendered and payment of the Warrant Price and any applicable
taxes was made, irrespective of the date of delivery of such certificate, except
that, if the date of such surrender and payment is a date when the stock
transfer books of the Company are closed, such person shall be deemed to have
become the holder of such shares at the close of business on the next succeeding
date on which the stock transfer books are open.
2.2. Transfer Restriction Legend. Each certificate for Warrant Shares shall
bear the following legend (and any additional legend required by (i) any
applicable state securities laws and (ii) any securities exchange upon which
such Warrant Shares may, at the time of such exercise, be listed) on the face
thereof unless at the time of exercise such Warrant Shares shall be registered
under the Securities Act:
"The shares represented by this certificate have not been registered under
the Securities Act of 1933, as amended, and may not be sold or transferred
in the absence of such registration or an exemption therefrom under said
Act."
Any certificate issued at any time in exchange or substitution for any
certificate bearing such legend (except a new certificate issued upon completion
of a public distribution under a registration statement of the securities
represented thereby) shall also bear such legend unless, in the opinion of
counsel for the holder thereof (which counsel shall be reasonably satisfactory
to counsel for the Company) the securities represented thereby are not, at such
time, required by law to bear such legend.
SECTION 3. Covenants as to Common Stock. The Company covenants and agrees that
all shares of Common Stock that may be issued upon the exercise of the rights
represented by this Warrant will, upon issuance, be validly issued, fully paid
and nonassessable, and free from all taxes, liens and charges with respect
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to the issue thereof. The Company further covenants and agrees that it will pay
when due and payable any and all federal and state taxes which may be payable in
respect of the issue of this Warrant or any Common Stock or certificates
therefor issuable upon the exercise of this Warrant. The Company further
covenants and agrees that the Company will at all times have authorized and
reserved, free from preemptive rights, a sufficient number of shares of Common
Stock to provide for the exercise of the rights represented by this Warrant. The
Company further covenants and agrees that if any shares of capital stock to be
reserved for the purpose of the issuance of shares upon the exercise of this
Warrant require registration with or approval of any governmental authority
under any federal or state law before such shares may be validly issued or
delivered upon exercise, then the Company will in good faith and as
expeditiously as possible endeavor to secure such registration or approval, as
the case may be. If and so long as the Common Stock issuable upon the exercise
of this Warrant is listed on any national securities exchange, the Company will,
if permitted by the rules of such exchange, list and keep listed on such
exchange, upon official notice of issuance, all shares of such Common Stock
issuable upon exercise of this Warrant.
SECTION 4. Adjustment of Number of Shares. Upon each adjustment of the Warrant
Price as provided in Section 5, the Holder shall thereafter be entitled to
purchase, at the Warrant Price resulting from such adjustment, the number of
shares (calculated to the nearest tenth of a share) obtained by multiplying the
Warrant Price in effect immediately prior to such adjustment by the number of
shares purchasable pursuant hereto immediately prior to such adjustment and
dividing the product thereof by the Warrant Price resulting from such
adjustment.
SECTION 5. Adjustment of Warrant Price. The Warrant Price shall be subject to
adjustment from time to time as follows:
(i) If the Company shall at any time or from time to time during the Tern of
this Warrant issue shares of Common Stock other than Excluded Stock (as
hereinafter defined) without consideration or for a consideration per share less
than the Warrant Price in effect immediately prior to the issuance of such
Common Stock, the Warrant Price in effect immediately prior to each such
issuance or adjustment shall forthwith (except as provided in this clause (i))
be adjusted to a price equal to the quotient obtained by dividing:
(A) an amount equal to the sum of
(x) the total number of shares of Common Stock outstanding (including any
shares of Common Stock deemed to have been issued pursuant to subdivision (3) of
this clause (i) and to clause (ii) below) immediately prior to such issuance
multiplied by the Warrant Price in effect immediately prior to such issuance,
plus
(y) the consideration received by the Company upon such issuance,
by
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(B) the total number of shares of Common Stock outstanding (including any
shares of Common Stock deemed to have been issued pursuant to subdivision (3) of
this clause (i) and to clause (ii) below) immediately after the issuance of such
Common Stock.
For the purposes of any adjustment of the Warrant Price pursuant to this
clause (i), the following provisions shall be applicable:
(1) In the case of the issuance of Common Stock for cash, the consideration
shall be deemed to be the amount of cash paid therefor after deducting
therefrom any discounts, commissions or other expenses allowed, paid or
incurred by the Company for any underwriting or otherwise in connection
with the issuance and sale thereof.
(2) In the case of the issuance of Common Stock for a consideration in
whole or in part other than cash, the consideration other than cash shall
be deemed to be the fair market value thereof as determined by the Board of
Directors, irrespective of any accounting treatment; provided, however,
that such fair market value as determined by the Board of Directors, shall
not exceed the aggregate Current Market Price (as hereinafter defined) of
the shares of Common Stock being issued.
(3) In the case of the issuance of (i) options to purchase or rights to
subscribe for Common Stock, (ii) securities by their terms convertible into
or exchangeable for Common Stock or (iii) options to purchase or rights to
subscribe for such convertible or exchangeable securities:
(A) the aggregate maximum number of shares of Common Stock deliverable upon
exercise of such options to purchase or rights to subscribe for Common Stock
shall be deemed to have been issued at the time such options or rights were
issued and for a consideration equal to the consideration (determined in the
manner provided in subdivisions (1) and (2) above with the proviso in
subdivision (2) being applied to the number of shares of Common Stock
deliverable upon such exercise), if any, received by the Company upon the
issuance of such options or rights plus the minimum purchase price provided in
such options or rights for the Common Stock covered thereby;
(B) the aggregate maximum number of shares of Common Stock deliverable upon
conversion of or in exchange for any such convertible or exchangeable securities
or upon the exercise of options to purchase or rights to subscribe for such
convertible or exchangeable securities and subsequent conversions or exchanges
thereof shall be deemed to have been issued at the time such securities were
issued or such options or rights were issued and for a consideration equal to
the consideration received by the Company for any such securities and related
options or rights (excluding any cash received on account of accrued interest or
accrued dividends), plus the additional consideration, if any, to be received by
the Company upon the conversion or exchange of such securities or the exercise
of any related options or rights (the consideration in each case to be
determined in the manner provided in subdivisions (1) and (2) above with the
proviso in
<PAGE>
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subdivision (2) being applied to the number of shares of Common Stock
deliverable upon such conversion, exchange or exercise);
(C) on any change in the number of shares of Common Stock deliverable upon
exercise of any such options or rights or conversion of or exchange for such
convertible or exchangeable securities, other than a change resulting from the
antidilution provisions thereof, the Warrant Price shall forthwith be readjusted
to such Warrant Price as would have obtained had the adjustment made upon the
issuance of such options, rights or securities not converted prior to such
change or options or rights related to such securities not converted prior to
such change being made upon the basis of such change; and
(D) on the expiration of any such options or rights, the termination of any
such rights to convert or exchange or the expiration of any options or rights
related to such convertible or exchangeable securities, the Warrant Price shall
forthwith be readjusted to such Warrant Price as would have obtained had the
adjustment made upon the issuance of such options, rights, securities or options
or rights related to such securities being made upon the basis of the issuance
of only the number of shares of Common Stock actually issued upon the conversion
or exchange of such securities or upon the exercise of the options or rights
related to such securities.
(ii) "Excluded Stock" shall mean shares of Common Stock issued by the Company as
a stock dividend payable in shares of Common Stock or upon any subdivision or
split-up of the outstanding shares of Common Stock.
(iii) If, at any time during the Term of this Warrant, the number of shares of
Common Stock outstanding is increased by a stock dividend payable in shares of
Common Stock or by a subdivision or split-up of shares of Common Stock, then,
following the record date fixed for the determination of holders of Common Stock
entitled to receive such stock dividend, subdivision or split-up, the Warrant
Price shall be appropriately decreased so that the number of shares of Common
Stock issuable upon the exercise hereof shall be increased in proportion to such
increase in outstanding shares.
(iv) If, at any time during the Term of this Warrant, the number of shares of
Common Stock outstanding is decreased by a combination of the outstanding shares
of Common Stock, then, following the record date for such combination, the
Warrant Price shall appropriately increase so that the number of shares of
Common Stock issuable upon the exercise hereof shall be decreased in proportion
to such decrease in outstanding shares.
(v) In case, at any time during the Term of this Warrant, the Company shall
declare a cash dividend upon its Common Stock payable otherwise than out of
earnings or earned surplus or shall distribute to holders of its Common Stock
shares of its capital stock (other than Common Stock), stock or other securities
of other persons, evidences of indebtedness issued by the Company or other
persons, assets (excluding cash dividends and distributions) or options or
rights (excluding options to purchase and rights to subscribe for Common Stock
or other securities of the Company convertible into or exchangeable for Common
Stock), then, in each such case, immediately following the record date fixed for
the determination of the holders of Common Stock entitled to receive such
dividend or distribution, the Warrant Price in effect thereafter shall be
determined by
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<PAGE>
multiplying the Warrant Price in effect immediately prior to such record date by
a fraction of which the numerator shall be an amount equal to the difference of
(x) the Current Market Price of one share of Common Stock minus (y) the fair
market value (as determined by the Board of Directors, whose determination shall
be conclusive) of the stock, securities, evidences of indebtedness, assets,
options or rights so distributed in respect of one share of Common Stock, and of
which the denominator shall be such Current Market Price.
(vi) All calculations under this Section 5 shall be made to the nearest cent or
to the nearest one-tenth (1/10) of a share, as the case may be.
(vii) For the purpose of any computation pursuant to this Section 5, the Current
Market Price at any date of one share of Common Stock shall be deemed to be the
average of the daily closing prices for the 30 consecutive business days ending
no more than 15 business days before the day in question (as adjusted for any
stock dividend, split, combination or reclassification that took effect during
such 30 business day period). The closing price for each day shall be the last
reported sales price regular way or, in case no such reported sales took place
on such day, the average of the last reported bid and asked prices regular way,
in either case on the principal national securities exchange on which the Common
Stock is listed or admitted to trading (or if the Common Stock is not at the
time listed or admitted for trading on any such exchange, then such price as
shall be equal to the average of the last reported bid and asked prices, as
reported by the National Association of Securities Dealers Automated Quotations
System ("Nasdaq") on such day, or if, on any day in question, the security shall
not be quoted on the Nasdaq, then such price shall be equal to the average of
the last reported bid and asked prices on such day as reported by The National
Quotation Bureau Incorporated (or any similar reputable quotation and reporting
service, if such quotation is not reported by The National Quotation Bureau
Incorporated); provided, however, that if the Common Stock is not traded in such
manner that the quotations referred to in this clause (vii) are available for
the period required hereunder, the Current Market Price shall be determined in
good faith by the Board of Directors of the Company or, if such determination
cannot be made, by a nationally recognized independent investment banking firm
selected by the Board of Directors of the Company (or if such selection cannot
be made, by a nationally recognized independent investment banking firm selected
by the American Arbitration Association in accordance with its rules).
(viii) Whenever the Warrant Price shall be adjusted as provided in Section 5,
the Company shall prepare a statement showing the facts requiring such
adjustment and the Warrant Price that shall be in effect after such adjustment.
The Company shall cause a copy of such statement to be sent by mail, first class
postage prepaid, to each Holder of this Warrant at its, his or her address
appearing on the Company's records. Where appropriate, such copy may be given in
advance and may be included as part of the notice required to be mailed under
the provisions of subsection (x) of this Section 5.
(ix) Adjustments made pursuant to clauses (iii), (iv) and (v) above shall be
made on the date such dividend, subdivision, split-up, combination or
distribution, as the case may be, is made, and shall become effective at the
opening of business on the business day next following the record date for the
determination of stockholders entitled to such dividend, subdivision, split-up,
combination or distribution.
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<PAGE>
(x) In the event the Company shall propose to take any action of the types
described in clauses (iii), (iv),or (v) of this Section 5, the Company shall
forward, at the same time and in the same manner, to the Holder of this Warrant
such notice, if any, which the Company shall give to the holders of capital
stock of the Company. Failure to give such notice, or any defect therein, shall
not affect the legality or validity of such action.
(xi) In any case in which the provisions of this Section 5 shall require that an
adjustment shall become effective immediately after a record date for an event,
the Company may defer until the occurrence of such event issuing to the Holder
of all or any part of this Warrant which is exercised after such record date and
before the occurrence of such event the additional shares of capital stock
issuable upon such exercise by reason of the adjustment required by such event
over and above the shares of capital stock issuable upon such exercise before
giving effect to such adjustment exercise; provided, however, that the Company
shall deliver to such Holder a due bill or other appropriate instrument
evidencing such Holder's right to receive such additional shares upon the
occurrence of the event requiring such adjustment.
(xii) The sale or other disposition of any Common Stock theretofore held in the
treasury of the Company shall be deemed to be an issuance thereof.
SECTION 6. Ownership.
6.1. Ownership of This Warrant. The Company may deem and treat the person
in whose name this Warrant is registered as the holder and owner hereof
(notwithstanding any notations of ownership or writing hereon made by anyone
other than the Company) for all purposes and shall not be affected by any notice
to the contrary until presentation of this Warrant for registration of transfer
as provided in this Section 6.
6.2. Transfer and Replacement. This Warrant and all rights hereunder are
transferable in whole or in part upon the books of the Company by the Holder
hereof in person or by duly authorized attorney, and a new Warrant or Warrants,
of the same tenor as this Warrant but registered in the name of the transferee
or transferees shall be made and delivered by the Company upon surrender of this
Warrant duly endorsed, at the office of the Company referred to in Section 13
hereof. Upon receipt by the Company of evidence reasonably satisfactory to it of
the loss, theft or destruction, and, in such case, of indemnity or security
reasonably satisfactory to it, and upon surrender of this Warrant if mutilated,
the Company will make and deliver a new Warrant of like tenor, in lieu of this
Warrant; provided that if the Holder hereof is an instrumentality of a state or
local government or an institutional holder or a nominee for such an
instrumentality or institutional holder an irrevocable agreement of indemnity by
such Holder shall be sufficient for all purposes of this Section 6, and no
evidence of loss or theft or destruction shall be necessary. This Warrant shall
be promptly canceled by the Company upon the surrender hereof in connection with
any transfer or replacement. Except as otherwise provided above, in the case of
the loss, theft or destruction of a Warrant, the Company shall pay all expenses,
taxes and other charges payable in connection with any transfer or replacement
of this Warrant, other than stock transfer taxes (if any) payable in connection
with a transfer of this Warrant, which shall be payable by the Holder. Holder
will not transfer this Warrant and the rights hereunder except in compliance
with federal and state securities laws.
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<PAGE>
SECTION 7. Mergers, Consolidation, Sales. In the case of any proposed
consolidation or merger of the Company with another corporation, or the proposed
sale of all or substantially all of its assets to another corporation, or any
proposed reorganization or reclassification of the capital stock of the Company,
then, as a condition of such consolidation, merger, sale, reorganization or
reclassification, lawful and adequate provision shall be made whereby the Holder
of this Warrant shall thereafter have the right to receive upon the basis and
upon the terms and conditions specified herein, in lieu of the shares of the
Common Stock of the Company immediately theretofore purchasable hereunder, such
shares of stock, securities or assets as may (by virtue of such consolidation,
merger, sale, reorganization or reclassification) be issued or payable with
respect to or in exchange for the number of shares of such Common Stock
purchasable hereunder immediately before such consolidation, merger, sale,
reorganization or reclassification. In any such case appropriate provision shall
be made with respect to the rights and interests of the Holder of this Warrant
to the end that the provisions hereof 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 this Warrant. The Company shall not effect any
such consolidation, merger or sale unless prior to or simultaneously with the
consummation thereof the successor corporation or purchaser, as the case may be,
shall assume by written instrument the obligation to deliver to the Holder such
shares of stock, securities or assets as, in accordance with the foregoing
provisions, the Holder is entitled to receive.
SECTION 8. Notice of Dissolution or Liquidation. In case of any
distribution of the assets of the Company in dissolution or liquidation (except
under circumstances when the foregoing Section 7 shall be applicable), the
Company shall give notice thereof to the Holder hereof and shall make no
distribution to shareholders until the expiration of thirty (30) days from the
date of mailing of the aforesaid notice and, in any case, the Holder hereof may
exercise this Warrant within thirty (30) days from the date of the giving of
such notice, and all rights herein granted not so exercised within such
thirty-day period shall thereafter become null and void.
SECTION 9. Notice of Extraordinary Dividends. Subject to further compliance
with Section 11.2 hereof, if the Board of Directors of the Company shall declare
any dividend or other distribution on its Common Stock except out of earned
surplus or by way of a stock dividend payable in shares of its Common Stock, the
Company shall mail notice thereof to the Holder hereof not less than thirty (30)
days prior to the record date fixed for determining shareholders entitled to
participate in such dividend or other distribution, and the Holder hereof shall
not participate in such dividend or other distribution unless this Warrant is
exercised prior to such record date. The provisions of this Section 9 shall not
apply to distributions made in connection with transactions covered by Section
7.
SECTION 10. Fractional Shares. Fractional shares shall not be issued upon
the exercise of this Warrant but in any case where the Holder would, except for
the provisions of this Section 10, be entitled under the terms hereof to receive
a fractional share upon the complete exercise of this Warrant, the Company
shall, upon the exercise of this Warrant for the largest number of whole shares
then called for, pay a sum in cash equal to the excess of the value of such
fractional share (determined in such reasonable manner as may be prescribed in
good faith by the Board of Directors of the Company).
SECTION 11. Special Arrangements of the Company. The Company covenants and
agrees that during the Term of this Warrant, unless otherwise approved by the
Holder of this Warrant:
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<PAGE>
11.1. Will Reserve Shares. The Company will reserve and set apart and have
available for issuance at all times, free from preemptive or other preferential
rights, the number of shares of authorized but unissued Common Stock deliverable
upon the exercise of this Warrant.
11.2. Will Not Issue Certain Stock. The Company will not issue any capital
stock of any class which has rights to be preferred as to dividends or as to the
distribution of assets upon voluntary or involuntary liquidation, dissolution or
winding-up, unless such rights shall be limited to a fixed sum or percentage of
par value in respect of participation in dividends and in the distribution of
assets. The Company will be deemed to have issued stock which is preferred as to
dividends or as to distribution of assets if either (i) the right to preferred
dividends exceeds the amount of fifteen percent (15%) of par value or (ii) the
right to preferred distribution of assets exceeds the amount of one hundred
percent (100%) of par value or of the purchase price of such shares for the
first year after issuance of such stock or one hundred and twenty-five percent
(125%) thereafter.
11.3. Will Not Declare Dividends. The Company will not pay any dividend or
other distribution on any of its capital stock unless such dividend or other
distribution on such share of capital stock and all other dividends or
distributions paid during the prior one year period on such shares of capital
stock are paid out of earned surplus and the aggregate amount thereof is less
than fifteen percent (15%) of the fair market value of the shares of capital
stock (if then ascertainable) on the date of declaration of such dividend or
other distribution.
11.4. Will Bind Successors. This Warrant shall be binding upon any
corporation or other person or entity succeeding to the Company by merger,
consolidation or acquisition of all or substantially all of the Company's
assets.
SECTION 12. Registration rights; etc.
12.1 Certain Definitions. As used in this Section 12, the following terms
shall have the following respective meanings:
"Commission" shall mean the Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act.
"Registrable Securities" shall mean the Warrant Shares less any Warrant
Shares theretofore sold to the public or in a private placement.
The terms "register," "registered" and "registration" shall refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act and applicable rules and regulations
thereunder, and the effectiveness of such registration statement.
"Registration Expenses" shall mean all expenses incurred by the Company in
compliance with Section 12.2 hereof, including, without limitation, all
registration and filing fees, printing expenses, fees and disbursements of
counsel for the Company, blue sky fees and expenses, and the expense of any
special audits incident to or required by any such registration (but excluding
the compensation of regular employees of the Company, which shall be paid in any
event by the Company).
"Selling Expenses" shall mean all underwriting discounts and selling
commissions applicable to the sale of Registrable Securities, all fees and
disbursements of counsel for any Holder and any blue sky fees and expenses
excluded from the definition of "Registration Expenses."
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"Holder" shall mean any holder of outstanding Warrant Shares or Registrable
Securities which (except for purposes of determining "Holders" under Section
12.7 hereof) have not been sold to the public.
"Other Shareholders" shall mean holders of securities of the Company who
are entitled by contract with the Company to have securities included in a
registration of the Company's securities.
12.2 Company Registration.
(a) Notice of Registration. If the Company shall determine to register any
of its securities either for its own account or the account of a security holder
or holders exercising their respective demand registration rights, other than a
registration relating solely to employee benefit plans, or a registration
relating solely to a Commission Rule 145 transaction, or a registration on any
registration form which does not permit secondary sales, the Company will:
(i) promptly give to each Holder written notice thereof (which shall
include a list of the jurisdictions in which the Company intends to attempt
to qualify such securities under the applicable blue sky or other state
securities laws); and
(ii) include in such registration (and any related qualification under blue
sky laws or other compliance), and in any underwriting involved therein,
all the Registrable Securities specified in a written request or requests,
made by any Holder within fifteen (15) days after receipt of the written
notice from. the Company described in clause (i) above, subject to any
limitations on the number of shares as set forth in Section 12.2(b) below.
(b) Underwriting. If the registration of which the Company gives notice is
for a registered public offering involving an underwriting, the Company shall so
advise the Holders as part of the written notice given pursuant to Section
12.2(a)(i). In such event, the right of any Holder to registration pursuant to
Section 12.2 shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting to the extent provided herein. All Holders proposing to distribute
their securities through such underwriting shall (together with the Company,
directors and officers and the Other Shareholders distributing their securities
through such underwriting) enter into an underwriting agreement in customary
form with the underwriter or underwriters selected for underwriting by the
Company.
Notwithstanding any other provision of this Section 12.2, if the
underwriter determines that marketing factors require a limitation on the number
of shares to be underwritten, the underwriter may (subject to the allocation
priority set forth below) exclude from such registration and underwriting some
or all of the Registrable Securities which would otherwise be underwritten
pursuant hereto. The Company shall so advise all holders of securities
requesting registration, and the number of shares of securities that are
entitled to be included in the registration and underwriting shall be allocated
in the following manner. The number of shares that may be included in the
registration and underwriting on behalf of such Holders, directors and officers
and Other Shareholders shall be allocated among such Holders, directors and
officers and Other Shareholders in proportion, as nearly as practicable, to the
respective amounts of Registrable Securities and other securities which they had
requested to be included in such registration at the time of filing the
registration statement.
If any Holder of Registrable Securities or any officer, director or Other
Shareholder disapproves of the terms of any such underwriting, he may elect to
withdraw therefrom by written notice to the Company and the underwriter. Any
Registrable Securities or other securities excluded or withdrawn from such
underwriting shall be withdrawn from such registration.
<PAGE>
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12.3 Demand Registration Rights. In the event that the Company grants
demand registration rights to any other holder of securities of the Company, the
Company will promptly give to the Holder written notice thereof and, if in the
opinion of the Holder such demand registration rights are more favorable than
the registration rights provided under this Warrant, the Holder shall so notify
the Company within thirty (30) days of receipt of the foregoing notice from the
Company, whereupon such demand registration rights shall automatically be deemed
to be incorporated in this Warrant.
12.4 Expenses of Registration. The Company shall bear all Registration
Expenses incurred in connection with registration, qualification and compliance
by the Company pursuant to Section 12.2 hereof All Selling Expenses shall be
borne by the holders of the securities so registered pro rata on the basis of
the number of their shares so registered.
12.5 Registration Procedures. In the case of each registration effected by
the Company pursuant to this Section 12, the Company will keep each Holder
advised in writing as to the initiation of each registration and as to the
completion thereof. The Company will, at its expense:
(a) keep such registration effective for a period of one hundred twenty
(120). days or until the Holder or Holders have completed the distribution
described in the registration statement relating thereto, whichever first
occurs;
(b) furnish such number of prospectuses and other documents incident
thereto as a Holder from time to time may reasonably request; and
(c) use its best efforts to register or qualify the Registrable Securities
under the securities laws or blue sky laws of such jurisdictions as any Holder
may request; provided, however, that the Company shall not be obligated to
register or qualify such Registrable Securities in any particular jurisdiction
in which the Company would be required to execute a general consent to service
of process in order to effect such registration, qualification or compliance,
unless the Company is already subject to service in such jurisdiction and except
as may be required by the Securities Act or applicable rules or regulations
thereunder.
12.6 Indemnification.
(a) The Company, with respect to each registration, qualification and
compliance effected pursuant to this Section 12, will indemnify and hold
harmless each Holder, each of its officers, directors and partners, and each
party controlling such Holder, and each underwriter, if any, and each party who
controls any underwriter, against all claims, losses, damages and liabilities
(or actions in respect thereof) arising out of or based on any untrue statement
(or alleged untrue statement) of a material fact contained in any prospectus,
offering circular or other document (including any related registration
statement, notification or the like) incident to any such registration,
qualification or compliance, or based on any omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, or any violation by the Company of the
Securities Act or any rule or regulation thereunder applicable to the Company
and relating to action or inaction required of the Company in connection with
any such registration, qualification or compliance, and will reimburse each such
Holder, each of its officers, directors and partners, and each party controlling
such Holder, each such underwriter and each party who controls any such
underwriter, for any legal and any other expenses incurred in connection with
investigating or defending any such claim, loss, damage, liability or action,
provided that the Company will not be
<PAGE>
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liable in any such case to the extent that any such claim, loss, damage,
liability or expense arises out of or is based on any untrue statement or
omission based solely upon written information furnished to the Company by such
Holder or underwriter, as the case may be, and stated to be specifically for use
therein.
(b) Each Holder and Other Shareholder will, if Registrable Securities held
by him are included in the securities as to which such registration,
qualification or compliance is being effected, indemnify and hold harmless the
Company, each of its directors and officers and each underwriter, if any, of the
Company's securities covered by such a registration statement, each party who
controls the Company or such underwriter, each other such Holder and Other
Shareholder and each of their respective officers, directors and partners, and
each party controlling such Holder or Other Shareholder, against all claims,
losses, damages and liabilities (or actions in respect thereof) arising out of
or based on any untrue statement (or alleged untrue statement) of a material
fact contained in any such registration statement, prospectus, offering circular
or other document, or any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse the Company and such Holders, Other
Shareholders, directors, officers, partners, parties, underwriters or control
persons for any legal or any other expenses reasonably incurred in connection
with investigating or defending any such claim, loss, damage, liability or
action, in each case to the extent, but only to the extent, that such untrue
statement (or alleged untrue statement) or omission (or alleged omission) is
made in such registration statement, prospectus, offering circular or other
document solely in reliance upon and in conformity with written information
furnished to the Company by such Holder or Other Shareholder and stated to be
specifically for use therein; provided, however, that the obligations of such
Holders and Other Shareholders hereunder shall be limited to an amount equal to
the proceeds to each such Holder or Other Shareholder of securities sold as
contemplated herein.
(c) Each party entitled to indemnification under this Section 12.6 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or any litigation resulting
therefrom, shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld), and the Indemnified Party may participate in such
defense at such party's expense (unless the Indemnified Party shall have been
advised by counsel that actual or potential differing interests or defenses
exist or may exist between the Indemnifying Party and the Indemnified Party, in
which case such expense shall be paid by the Indemnifying Party), and provided
further that the failure of any Indemnified Party to give notice as provide
herein shall not relieve the Indemnifying Party of its obligations under this
Section 12. No Indemnifying Party, in the defense of any such claim or
litigation, shall, except with the consent of each Indemnified Party, consent to
entry of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation. Each Indemnified Party shall provide such information as may be
reasonably requested by an Indemnifying Party in order to enable such
Indemnifying Party to defend a claim as to which indemnity is sought.
12.7 Information by Holder. Each Holder of Registrable Securities, and each
Other Shareholder holding securities included in any registration, shall furnish
to the Company such information regarding such Holder or Other Shareholder as
the Company may reasonably request in writing and as shall be reasonably
required in connection with any registration, qualification or compliance
referred to in this Section 12.
<PAGE>
-12-
12.8 Rule 144 Reporting. With a view to making available the benefits of
certain rules andand regulations of the Commission which may permit the sale of
the Registrable Securities to the public without registration, the Company
agrees to:
(a) Make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act, at all times from
and after ninety (90) days following the effective date of the first
registration under the Securities Act filed by the Company for an offering of
its securities to the general public;
(b) Use its best efforts to file with the Commission in a timely manner all
reports and other documents required of the Company under the Securities Act and
the Exchange Act at any time after it has become subject to such reporting
requirements; and
(c) So long as the Holder owns any Registrable Securities, furnish to the
Holder forthwith upon request a written statement by the Company as to its
compliance with the reporting requirements of Rule 144 (at any time from and
after ninety (90) days following the effective date of the first registration
statement in connection with an offering of its Securities to the general
public), and of the Securities Act and the Securities Exchange Act of 1934, as
amended (at any time after it has become subject to such reporting
requirements), a copy of the most recent annual or quarterly report of the
Company, and such other reports and documents so filed as the Holder may
reasonably request in availing itself of any rule or regulation of the
Commission allowing the Holder to sell any such securities without registration.
SECTION 13. Notices. Any notice or other document required or permitted to
be given or delivered to the Holder shall be delivered at, or sent by certified
or registered mail to, the Holder at 217 Washington Street, Hartford, CT 06106
or to such other address as shall have been furnished to the Company in writing
by the Holder. Any notice or other document required or permitted to be given or
delivered to the Company shall be delivered at, or sent by certified or
registered mail to, the Company at 550 West Avenue, Stamford, Connecticut 06902
or to such other address as shall have been furnished in writing to the Holder
by the Company. Any notice so addressed and mailed by registered or certified
mail shall be deemed to be given when so mailed. Any notice so addressed and
otherwise delivered shall be deemed to be given when actually received by the
addressee.
SECTION 14. No Rights as Stockholder; Limitation of Liability. This Warrant
shall not entitle the Holder to any of the rights of a shareholder of the
Company. No provision hereof, in the absence of affirmative action by the Holder
to purchase shares of Common Stock, and no mere enumeration herein of the rights
or privileges of the Holder, shall give rise to any liability of the Holder for
the Warrant Price hereunder or as a shareholder of the Company, whether such
liability is asserted by the Company or by creditors of the Company.
SECTION 15. Law Governing. This Warrant shall be governed by, and construed
and enforced in accordance with, the laws of the State of Connecticut.
SECTION 16. Miscellaneous.
(a) This Warrant and any provision hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
(or any predecessor in interest thereof) against which enforcement of the same
is sought. The headings in this Warrant are for purposes of reference only and
shall not
<PAGE>
affect the meaning or construction of any of the provisions hereof.
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(b) All capitalized terms used herein and not otherwise defined herein
shall have the meanings ascribed to them in the Purchase Agreement.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its
duly authorized officer this _____ day of________, 1992.
LIFECODES CORPORATION
By:_______________________________
Title:____________________________
<PAGE>
FORM OF NOTICE OF EXERCISE
[To be signed only upon exercise of the Warrant]
TO BE EXECUTED BY THE REGISTERED HOLDER
TO EXERCISE THE WITHIN WARRANT
The undersigned hereby exercises the right to purchase _______________ shares of
Common Stock which the undersigned is entitled to purchase by the terms of the
within Warrant according to the conditions thereof, and herewith makes payment
of the Warrant Price of such shares in full. All shares to be issued pursuant
hereto shall be issued in the name of ________________________ and the initial
address of such person to be entered on the books of the Company shall be:
_________________________________________. The shares are to be issued in
certificates of the following denominations:
-------------------------------
[Type Name of Holder]
By:____________________________
Title:___________________________
Dated:_________________________
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<PAGE>
FORM OF ASSIGNMENT
[To be signed only upon transfer of entire Warrant]
TO BE EXECUTED BY THE REGISTERED HOLDER
TO TRANSFER THE WITHIN WARRANT
FOR VALUE RECEIVED_______________________ hereby sells, assigns and transfers
unto_____________________________________ all rights of the undersigned under
and pursuant to the within Warrant, and the undersigned does hereby irrevocably
constitute and appoint _________________________________ Attorney to transfer
the said Warrant on the books of the Company, with full power of substitution.
[Type Name of Holder]
By:___________________
Title:________________
Dated:______________________
NOTICE
The signature to the foregoing Assignment must correspond to the name as
written upon the face of the within Warrant in every particular, without
alteration or enlargement or any change whatsoever.
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<PAGE>
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD OR OFFERED FOR SALE
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER
SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR THE AVAILABILITY OF AN
EXEMPTION FROM REGISTRATION UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES
LAWS.
No. 2
STOCK SUBSCRIPTION WARRANT
To Purchase Common Stock of
Lifecodes Corporation, a New York Corporation (the "Company")
DATE OF INITIAL ISSUANCE: August 1, 1994
THIS CERTIFIES THAT for value received, CONNECTICUT DEVELOPMENT AUTHORITY
or its registered assigns (hereinafter called the "Holder") is entitled to
purchase from the Company, at any time during the Term of this Warrant, 8,069
shares of common stock, $.10 par value, of the Company (the "Common Stock"), at
the Warrant Price, payable in lawful money of the United States of America to be
paid upon the exercise hereof. The exercise of this Warrant shall be subject to
the provisions, limitations and restrictions herein contained, and may be
exercised in whole or in part.
SECTION 1. Definitions.
For all purposes of this Warrant, the following terms shall have the
meanings indicated:
Common Stock - shall mean and include the Company's authorized Common
Stock, $.10 par value, as constituted at the date hereof, and shall also
include any capital stock of any class of the Company hereafter authorized
which shall not be limited to a fixed sum or percentage of par value 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.
Securities Act - the Securities Act of 1933, as amended.
Term of this Warrant - shall mean the period beginning on the date of
initial issuance hereof and ending on the date ten (10) years from the date
of initial issuance hereof.
Warrant Price - $1.00 per share, subject to adjustment in accordance with
Section 5 hereof.
Warrants - this Warrant and any other Warrant or Warrants issued pursuant
to the original holder of this Warrant, or any transferees from such
original holder of this holder.
<PAGE>
Warrant Shares - shares of Common Stock purchased or purchasable by the Holder
of this Warrant upon the exercise hereof.
SECTION 2. Exercise of Warrant.
2.1. Procedure for Exercise of Warrant. To exercise this Warrant in whole
or in part (but not as to any fractional share of Common Stock), the Holder
shall deliver to the Company at its office referred to in Section 13 hereof at
any time and from time to time during the Term of this Warrant: (i) the Notice
of Exercise in the form attached hereto, (ii) cash, certified or official bank
check payable to the order of the Company in the amount of the Warrant Price for
each share being purchased, and (iii) this Warrant. In the event of any exercise
of the rights represented by this Warrant, a certificate or certificates for the
shares of Common Stock so purchased, registered in the name of the Holder or
such other name or names as may be designated by the Holder, shall be delivered
to the Holder hereof within a reasonable time, not exceeding fifteen (15) 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
(except a remaining fractional share), 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 person in whose name any certificate for shares of
Common Stock is issued upon exercise of this Warrant shall for all purposes be
deemed to have become the holder of record of such shares on the date on which
the Warrant was surrendered and payment of the Warrant Price and any applicable
taxes was made, irrespective of the date of delivery of such certificate, except
that, if the date of such surrender and payment is a date when the stock
transfer books of the Company are closed, such person shall be deemed to have
become the holder of such shares at the close of business on the next succeeding
date on which the stock transfer books are open.
2.2. Transfer Restriction Legend. Each certificate for Warrant Shares shall
bear the following legend (and any additional legend required by (i) any
applicable state securities laws and (ii) any securities exchange upon which
such Warrant Shares may, at the time of such exercise, be listed) on the face
thereof unless at the time of exercise such Warrant Shares shall be registered
under the Securities Act:
"The shares represented by this certificate have not been registered under
the Securities Act of 1933, as amended, and may not be sold or transferred
in the absence of such registration or an exemption therefrom under said
Act."
Any certificate issued at any time in exchange or substitution for any
certificate bearing such legend (except a new certificate issued upon completion
of a public distribution under a registration statement of the securities
represented thereby) shall also bear such legend unless, in the opinion of
counsel for the holder thereof (which counsel shall be reasonably satisfactory
to counsel for the Company) the securities represented thereby are not, at such
time, required by law to bear such legend.
SECTION 3. Covenants as to Common Stock. The Company covenants and agrees that
all shares of Common Stock that may be issued upon the exercise of the rights
represented by this Warrant will, upon issuance, be validly issued, fully paid
and nonassessable, and free from all taxes, liens and charges with respect
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<PAGE>
to the issue thereof. The Company further covenants and agrees that it will pay
when due and payable any and all federal and state taxes which may be payable in
respect of the issue of this Warrant or any Common Stock or certificates
therefor issuable upon the exercise of this Warrant. The Company further
covenants and agrees that the Company will at all times have authorized and
reserved, free from preemptive rights, a sufficient number of shares of Common
Stock to provide for the exercise of the rights represented by this Warrant. The
Company further covenants and agrees that if any shares of capital stock to be
reserved for the purpose of the issuance of shares upon the exercise of this
Warrant require registration with or approval of any governmental authority
under any federal or state law before such shares may be validly issued or
delivered upon exercise, then the Company will in good faith and as
expeditiously as possible endeavor to secure such registration or approval, as
the case may be. If and so long as the Common Stock issuable upon the exercise
of this Warrant is listed on any national securities exchange, the Company will,
if permitted by the rules of such exchange, list and keep listed on such
exchange, upon official notice of issuance, all shares of such Common Stock
issuable upon exercise of this Warrant.
SECTION 4. Adjustment of Number of Shares. Upon each adjustment of the Warrant
Price as provided in Section 5, the Holder shall thereafter be entitled to
purchase, at the Warrant Price resulting from such adjustment, the number of
shares (calculated to the nearest tenth of a share) obtained by multiplying the
Warrant Price in effect immediately prior to such adjustment by the number of
shares purchasable pursuant hereto immediately prior to such adjustment and
dividing the product thereof by the Warrant Price resulting from such
adjustment.
SECTION 5. Adjustment of Warrant Price. The Warrant Price shall be subject to
adjustment from time to time as follows:
(i) If the Company shall at any time or from time to time during the Tern of
this Warrant issue shares of Common Stock other than Excluded Stock (as
hereinafter defined) without consideration or for a consideration per share less
than the Warrant Price in effect immediately prior to the issuance of such
Common Stock, the Warrant Price in effect immediately prior to each such
issuance or adjustment shall forthwith (except as provided in this clause (i))
be adjusted to a price equal to the quotient obtained by dividing:
(A) an amount equal to the sum of
(x) the total number of shares of Common Stock outstanding (including any
shares of Common Stock deemed to have been issued pursuant to subdivision (3) of
this clause (i) and to clause (ii) below) immediately prior to such issuance
multiplied by the Warrant Price in effect immediately prior to such issuance,
plus
(y) the consideration received by the Company upon such issuance,
by
<PAGE>
-3-
(B) the total number of shares of Common Stock outstanding (including any
shares of Common Stock deemed to have been issued pursuant to subdivision (3) of
this clause (i) and to clause (ii) below) immediately after the issuance of such
Common Stock.
For the purposes of any adjustment of the Warrant Price pursuant to this
clause (i), the following provisions shall be applicable:
(1) In the case of the issuance of Common Stock for cash, the consideration
shall be deemed to be the amount of cash paid therefor after deducting
therefrom any discounts, commissions or other expenses allowed, paid or
incurred by the Company for any underwriting or otherwise in connection
with the issuance and sale thereof.
(2) In the case of the issuance of Common Stock for a consideration in
whole or in part other than cash, the consideration other than cash shall
be deemed to be the fair market value thereof as determined by the Board of
Directors, irrespective of any accounting treatment; provided, however,
that such fair market value as determined by the Board of Directors, shall
not exceed the aggregate Current Market Price (as hereinafter defined) of
the shares of Common Stock being issued.
(3) In the case of the issuance of (i) options to purchase or rights to
subscribe for Common Stock, (ii) securities by their terms convertible into
or exchangeable for Common Stock or (iii) options to purchase or rights to
subscribe for such convertible or exchangeable securities:
(A) the aggregate maximum number of shares of Common Stock deliverable upon
exercise of such options to purchase or rights to subscribe for Common Stock
shall be deemed to have been issued at the time such options or rights were
issued and for a consideration equal to the consideration (determined in the
manner provided in subdivisions (1) and (2) above with the proviso in
subdivision (2) being applied to the number of shares of Common Stock
deliverable upon such exercise), if any, received by the Company upon the
issuance of such options or rights plus the minimum purchase price provided in
such options or rights for the Common Stock covered thereby;
(B) the aggregate maximum number of shares of Common Stock deliverable upon
conversion of or in exchange for any such convertible or exchangeable securities
or upon the exercise of options to purchase or rights to subscribe for such
convertible or exchangeable securities and subsequent conversions or exchanges
thereof shall be deemed to have been issued at the time such securities were
issued or such options or rights were issued and for a consideration equal to
the consideration received by the Company for any such securities and related
options or rights (excluding any cash received on account of accrued interest or
accrued dividends), plus the additional consideration, if any, to be received by
the Company upon the conversion or exchange of such securities or the exercise
of any related options or rights (the consideration in each case to be
determined in the manner provided in subdivisions (1) and (2) above with the
proviso in
<PAGE>
-4-
subdivision (2) being applied to the number of shares of Common Stock
deliverable upon such conversion, exchange or exercise);
(C) on any change in the number of shares of Common Stock deliverable upon
exercise of any such options or rights or conversion of or exchange for such
convertible or exchangeable securities, other than a change resulting from the
antidilution provisions thereof, the Warrant Price shall forthwith be readjusted
to such Warrant Price as would have obtained had the adjustment made upon the
issuance of such options, rights or securities not converted prior to such
change or options or rights related to such securities not converted prior to
such change being made upon the basis of such change; and
(D) on the expiration of any such options or rights, the termination of any
such rights to convert or exchange or the expiration of any options or rights
related to such convertible or exchangeable securities, the Warrant Price shall
forthwith be readjusted to such Warrant Price as would have obtained had the
adjustment made upon the issuance of such options, rights, securities or options
or rights related to such securities being made upon the basis of the issuance
of only the number of shares of Common Stock actually issued upon the conversion
or exchange of such securities or upon the exercise of the options or rights
related to such securities.
(ii) "Excluded Stock" shall mean shares of Common Stock issued by the Company as
a stock dividend payable in shares of Common Stock or upon any subdivision or
split-up of the outstanding shares of Common Stock.
(iii) If, at any time during the Term of this Warrant, the number of shares of
Common Stock outstanding is increased by a stock dividend payable in shares of
Common Stock or by a subdivision or split-up of shares of Common Stock, then,
following the record date fixed for the determination of holders of Common Stock
entitled to receive such stock dividend, subdivision or split-up, the Warrant
Price shall be appropriately decreased so that the number of shares of Common
Stock issuable upon the exercise hereof shall be increased in proportion to such
increase in outstanding shares.
(iv) If, at any time during the Term of this Warrant, the number of shares of
Common Stock outstanding is decreased by a combination of the outstanding shares
of Common Stock, then, following the record date for such combination, the
Warrant Price shall appropriately increase so that the number of shares of
Common Stock issuable upon the exercise hereof shall be decreased in proportion
to such decrease in outstanding shares.
(v) In case, at any time during the Term of this Warrant, the Company shall
declare a cash dividend upon its Common Stock payable otherwise than out of
earnings or earned surplus or shall distribute to holders of its Common Stock
shares of its capital stock (other than Common Stock), stock or other securities
of other persons, evidences of indebtedness issued by the Company or other
persons, assets (excluding cash dividends and distributions) or options or
rights (excluding options to purchase and rights to subscribe for Common Stock
or other securities of the Company convertible into or exchangeable for Common
Stock), then, in each such case, immediately following the record date fixed for
the determination of the holders of Common Stock entitled to receive such
dividend or distribution, the Warrant Price in effect thereafter shall be
determined by
-5-
<PAGE>
multiplying the Warrant Price in effect immediately prior to such record date by
a fraction of which the numerator shall be an amount equal to the difference of
(x) the Current Market Price of one share of Common Stock minus (y) the fair
market value (as determined by the Board of Directors, whose determination shall
be conclusive) of the stock, securities, evidences of indebtedness, assets,
options or rights so distributed in respect of one share of Common Stock, and of
which the denominator shall be such Current Market Price.
(vi) All calculations under this Section 5 shall be made to the nearest cent or
to the nearest one-tenth (1/10) of a share, as the case may be.
(vii) For the purpose of any computation pursuant to this Section 5, the Current
Market Price at any date of one share of Common Stock shall be deemed to be the
average of the daily closing prices for the 30 consecutive business days ending
no more than 15 business days before the day in question (as adjusted for any
stock dividend, split, combination or reclassification that took effect during
such 30 business day period). The closing price for each day shall be the last
reported sales price regular way or, in case no such reported sales took place
on such day, the average of the last reported bid and asked prices regular way,
in either case on the principal national securities exchange on which the Common
Stock is listed or admitted to trading (or if the Common Stock is not at the
time listed or admitted for trading on any such exchange, then such price as
shall be equal to the average of the last reported bid and asked prices, as
reported by the National Association of Securities Dealers Automated Quotations
System ("Nasdaq") on such day, or if, on any day in question, the security shall
not be quoted on the Nasdaq, then such price shall be equal to the average of
the last reported bid and asked prices on such day as reported by The National
Quotation Bureau Incorporated (or any similar reputable quotation and reporting
service, if such quotation is not reported by The National Quotation Bureau
Incorporated); provided, however, that if the Common Stock is not traded in such
manner that the quotations referred to in this clause (vii) are available for
the period required hereunder, the Current Market Price shall be determined in
good faith by the Board of Directors of the Company or, if such determination
cannot be made, by a nationally recognized independent investment banking firm
selected by the Board of Directors of the Company (or if such selection cannot
be made, by a nationally recognized independent investment banking firm selected
by the American Arbitration Association in accordance with its rules).
(viii) Whenever the Warrant Price shall be adjusted as provided in Section 5,
the Company shall prepare a statement showing the facts requiring such
adjustment and the Warrant Price that shall be in effect after such adjustment.
The Company shall cause a copy of such statement to be sent by mail, first class
postage prepaid, to each Holder of this Warrant at its, his or her address
appearing on the Company's records. Where appropriate, such copy may be given in
advance and may be included as part of the notice required to be mailed under
the provisions of subsection (x) of this Section 5.
(ix) Adjustments made pursuant to clauses (iii), (iv) and (v) above shall be
made on the date such dividend, subdivision, split-up, combination or
distribution, as the case may be, is made, and shall become effective at the
opening of business on the business day next following the record date for the
determination of stockholders entitled to such dividend, subdivision, split-up,
combination or distribution.
-6-
<PAGE>
(x) In the event the Company shall propose to take any action of the types
described in clauses (iii), (iv),or (v) of this Section 5, the Company shall
forward, at the same time and in the same manner, to the Holder of this Warrant
such notice, if any, which the Company shall give to the holders of capital
stock of the Company. Failure to give such notice, or any defect therein, shall
not affect the legality or validity of such action.
(xi) In any case in which the provisions of this Section 5 shall require that an
adjustment shall become effective immediately after a record date for an event,
the Company may defer until the occurrence of such event issuing to the Holder
of all or any part of this Warrant which is exercised after such record date and
before the occurrence of such event the additional shares of capital stock
issuable upon such exercise by reason of the adjustment required by such event
over and above the shares of capital stock issuable upon such exercise before
giving effect to such adjustment exercise; provided, however, that the Company
shall deliver to such Holder a due bill or other appropriate instrument
evidencing such Holder's right to receive such additional shares upon the
occurrence of the event requiring such adjustment.
(xii) The sale or other disposition of any Common Stock theretofore held in the
treasury of the Company shall be deemed to be an issuance thereof.
SECTION 6. Ownership.
6.1. Ownership of This Warrant. The Company may deem and treat the person
in whose name this Warrant is registered as the holder and owner hereof
(notwithstanding any notations of ownership or writing hereon made by anyone
other than the Company) for all purposes and shall not be affected by any notice
to the contrary until presentation of this Warrant for registration of transfer
as provided in this Section 6.
6.2. Transfer and Replacement. This Warrant and all rights hereunder are
transferable in whole or in part upon the books of the Company by the Holder
hereof in person or by duly authorized attorney, and a new Warrant or Warrants,
of the same tenor as this Warrant but registered in the name of the transferee
or transferees shall be made and delivered by the Company upon surrender of this
Warrant duly endorsed, at the office of the Company referred to in Section 13
hereof. Upon receipt by the Company of evidence reasonably satisfactory to it of
the loss, theft or destruction, and, in such case, of indemnity or security
reasonably satisfactory to it, and upon surrender of this Warrant if mutilated,
the Company will make and deliver a new Warrant of like tenor, in lieu of this
Warrant; provided that if the Holder hereof is an instrumentality of a state or
local government or an institutional holder or a nominee for such an
instrumentality or institutional holder an irrevocable agreement of indemnity by
such Holder shall be sufficient for all purposes of this Section 6, and no
evidence of loss or theft or destruction shall be necessary. This Warrant shall
be promptly canceled by the Company upon the surrender hereof in connection with
any transfer or replacement. Except as otherwise provided above, in the case of
the loss, theft or destruction of a Warrant, the Company shall pay all expenses,
taxes and other charges payable in connection with any transfer or replacement
of this Warrant, other than stock transfer taxes (if any) payable in connection
with a transfer of this Warrant, which shall be payable by the Holder. Holder
will not transfer this Warrant and the rights hereunder except in compliance
with federal and state securities laws.
-7-
<PAGE>
SECTION 7. Mergers, Consolidation, Sales. In the case of any proposed
consolidation or merger of the Company with another corporation, or the proposed
sale of all or substantially all of its assets to another corporation, or any
proposed reorganization or reclassification of the capital stock of the Company,
then, as a condition of such consolidation, merger, sale, reorganization or
reclassification, lawful and adequate provision shall be made whereby the Holder
of this Warrant shall thereafter have the right to receive upon the basis and
upon the terms and conditions specified herein, in lieu of the shares of the
Common Stock of the Company immediately theretofore purchasable hereunder, such
shares of stock, securities or assets as may (by virtue of such consolidation,
merger, sale, reorganization or reclassification) be issued or payable with
respect to or in exchange for the number of shares of such Common Stock
purchasable hereunder immediately before such consolidation, merger, sale,
reorganization or reclassification. In any such case appropriate provision shall
be made with respect to the rights and interests of the Holder of this Warrant
to the end that the provisions hereof 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 this Warrant. The Company shall not effect any
such consolidation, merger or sale unless prior to or simultaneously with the
consummation thereof the successor corporation or purchaser, as the case may be,
shall assume by written instrument the obligation to deliver to the Holder such
shares of stock, securities or assets as, in accordance with the foregoing
provisions, the Holder is entitled to receive.
SECTION 8. Notice of Dissolution or Liquidation. In case of any
distribution of the assets of the Company in dissolution or liquidation (except
under circumstances when the foregoing Section 7 shall be applicable), the
Company shall give notice thereof to the Holder hereof and shall make no
distribution to shareholders until the expiration of thirty (30) days from the
date of mailing of the aforesaid notice and, in any case, the Holder hereof may
exercise this Warrant within thirty (30) days from the date of the giving of
such notice, and all rights herein granted not so exercised within such
thirty-day period shall thereafter become null and void.
SECTION 9. Notice of Extraordinary Dividends. Subject to further compliance
with Section 11.2 hereof, if the Board of Directors of the Company shall declare
any dividend or other distribution on its Common Stock except out of earned
surplus or by way of a stock dividend payable in shares of its Common Stock, the
Company shall mail notice thereof to the Holder hereof not less than thirty (30)
days prior to the record date fixed for determining shareholders entitled to
participate in such dividend or other distribution, and the Holder hereof shall
not participate in such dividend or other distribution unless this Warrant is
exercised prior to such record date. The provisions of this Section 9 shall not
apply to distributions made in connection with transactions covered by Section
7.
SECTION 10. Fractional Shares. Fractional shares shall not be issued upon
the exercise of this Warrant but in any case where the Holder would, except for
the provisions of this Section 10, be entitled under the terms hereof to receive
a fractional share upon the complete exercise of this Warrant, the Company
shall, upon the exercise of this Warrant for the largest number of whole shares
then called for, pay a sum in cash equal to the excess of the value of such
fractional share (determined in such reasonable manner as may be prescribed in
good faith by the Board of Directors of the Company).
SECTION 11. Special Arrangements of the Company. The Company covenants and
agrees that during the Term of this Warrant, unless otherwise approved by the
Holder of this Warrant:
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<PAGE>
11.1. Will Reserve Shares. The Company will reserve and set apart and have
available for issuance at all times, free from preemptive or other preferential
rights, the number of shares of authorized but unissued Common Stock deliverable
upon the exercise of this Warrant.
11.2. Will Not Issue Certain Stock. The Company will not issue any capital
stock of any class which has rights to be preferred as to dividends or as to the
distribution of assets upon voluntary or involuntary liquidation, dissolution or
winding-up, unless such rights shall be limited to a fixed sum or percentage of
par value in respect of participation in dividends and in the distribution of
assets. The Company will be deemed to have issued stock which is preferred as to
dividends or as to distribution of assets if either (i) the right to preferred
dividends exceeds the amount of fifteen percent (15%) of par value or (ii) the
right to preferred distribution of assets exceeds the amount of one hundred
percent (100%) of par value or of the purchase price of such shares for the
first year after issuance of such stock or one hundred and twenty-five percent
(125%) thereafter.
11.3. Will Not Declare Dividends. The Company will not pay any dividend or
other distribution on any of its capital stock unless such dividend or other
distribution on such share of capital stock and all other dividends or
distributions paid during the prior one year period on such shares of capital
stock are paid out of earned surplus and the aggregate amount thereof is less
than fifteen percent (15%) of the fair market value of the shares of capital
stock (if then ascertainable) on the date of declaration of such dividend or
other distribution.
11.4. Will Bind Successors. This Warrant shall be binding upon any
corporation or other person or entity succeeding to the Company by merger,
consolidation or acquisition of all or substantially all of the Company's
assets.
SECTION 12. Registration rights; etc.
12.1 Certain Definitions. As used in this Section 12, the following terms
shall have the following respective meanings:
"Commission" shall mean the Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act.
"Registrable Securities" shall mean the Warrant Shares less any Warrant
Shares theretofore sold to the public or in a private placement.
The terms "register," "registered" and "registration" shall refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act and applicable rules and regulations
thereunder, and the effectiveness of such registration statement.
"Registration Expenses" shall mean all expenses incurred by the Company in
compliance with Section 12.2 hereof, including, without limitation, all
registration and filing fees, printing expenses, fees and disbursements of
counsel for the Company, blue sky fees and expenses, and the expense of any
special audits incident to or required by any such registration (but excluding
the compensation of regular employees of the Company, which shall be paid in any
event by the Company).
"Selling Expenses" shall mean all underwriting discounts and selling
commissions applicable to the sale of Registrable Securities, all fees and
disbursements of counsel for any Holder and any blue sky fees and expenses
excluded from the definition of "Registration Expenses."
<PAGE>
-9-
"Holder" shall mean any holder of outstanding Warrant Shares or Registrable
Securities which (except for purposes of determining "Holders" under Section
12.7 hereof) have not been sold to the public.
"Other Shareholders" shall mean holders of securities of the Company who
are entitled by contract with the Company to have securities included in a
registration of the Company's securities.
12.2 Company Registration.
(a) Notice of Registration. If the Company shall determine to register any
of its securities either for its own account or the account of a security holder
or holders exercising their respective demand registration rights, other than a
registration relating solely to employee benefit plans, or a registration
relating solely to a Commission Rule 145 transaction, or a registration on any
registration form which does not permit secondary sales, the Company will:
(i) promptly give to each Holder written notice thereof (which shall
include a list of the jurisdictions in which the Company intends to attempt
to qualify such securities under the applicable blue sky or other state
securities laws); and
(ii) include in such registration (and any related qualification under blue
sky laws or other compliance), and in any underwriting involved therein,
all the Registrable Securities specified in a written request or requests,
made by any Holder within fifteen (15) days after receipt of the written
notice from. the Company described in clause (i) above, subject to any
limitations on the number of shares as set forth in Section 12.2(b) below.
(b) Underwriting. If the registration of which the Company gives notice is
for a registered public offering involving an underwriting, the Company shall so
advise the Holders as part of the written notice given pursuant to Section
12.2(a)(i). In such event, the right of any Holder to registration pursuant to
Section 12.2 shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting to the extent provided herein. All Holders proposing to distribute
their securities through such underwriting shall (together with the Company,
directors and officers and the Other Shareholders distributing their securities
through such underwriting) enter into an underwriting agreement in customary
form with the underwriter or underwriters selected for underwriting by the
Company.
Notwithstanding any other provision of this Section 12.2, if the
underwriter determines that marketing factors require a limitation on the number
of shares to be underwritten, the underwriter may (subject to the allocation
priority set forth below) exclude from such registration and underwriting some
or all of the Registrable Securities which would otherwise be underwritten
pursuant hereto. The Company shall so advise all holders of securities
requesting registration, and the number of shares of securities that are
entitled to be included in the registration and underwriting shall be allocated
in the following manner. The number of shares that may be included in the
registration and underwriting on behalf of such Holders, directors and officers
and Other Shareholders shall be allocated among such Holders, directors and
officers and Other Shareholders in proportion, as nearly as practicable, to the
respective amounts of Registrable Securities and other securities which they had
requested to be included in such registration at the time of filing the
registration statement.
If any Holder of Registrable Securities or any officer, director or Other
Shareholder disapproves of the terms of any such underwriting, he may elect to
withdraw therefrom by written notice to the Company and the underwriter. Any
Registrable Securities or other securities excluded or withdrawn from such
underwriting shall be withdrawn from such registration.
<PAGE>
-10-
12.3 Demand Registration Rights. In the event that the Company grants
demand registration rights to any other holder of securities of the Company, the
Company will promptly give to the Holder written notice thereof and, if in the
opinion of the Holder such demand registration rights are more favorable than
the registration rights provided under this Warrant, the Holder shall so notify
the Company within thirty (30) days of receipt of the foregoing notice from the
Company, whereupon such demand registration rights shall automatically be deemed
to be incorporated in this Warrant.
12.4 Expenses of Registration. The Company shall bear all Registration
Expenses incurred in connection with registration, qualification and compliance
by the Company pursuant to Section 12.2 hereof All Selling Expenses shall be
borne by the holders of the securities so registered pro rata on the basis of
the number of their shares so registered.
12.5 Registration Procedures. In the case of each registration effected by
the Company pursuant to this Section 12, the Company will keep each Holder
advised in writing as to the initiation of each registration and as to the
completion thereof. The Company will, at its expense:
(a) keep such registration effective for a period of one hundred twenty
(120). days or until the Holder or Holders have completed the distribution
described in the registration statement relating thereto, whichever first
occurs;
(b) furnish such number of prospectuses and other documents incident
thereto as a Holder from time to time may reasonably request; and
(c) use its best efforts to register or qualify the Registrable Securities
under the securities laws or blue sky laws of such jurisdictions as any Holder
may request; provided, however, that the Company shall not be obligated to
register or qualify such Registrable Securities in any particular jurisdiction
in which the Company would be required to execute a general consent to service
of process in order to effect such registration, qualification or compliance,
unless the Company is already subject to service in such jurisdiction and except
as may be required by the Securities Act or applicable rules or regulations
thereunder.
12.6 Indemnification.
(a) The Company, with respect to each registration, qualification and
compliance effected pursuant to this Section 12, will indemnify and hold
harmless each Holder, each of its officers, directors and partners, and each
party controlling such Holder, and each underwriter, if any, and each party who
controls any underwriter, against all claims, losses, damages and liabilities
(or actions in respect thereof) arising out of or based on any untrue statement
(or alleged untrue statement) of a material fact contained in any prospectus,
offering circular or other document (including any related registration
statement, notification or the like) incident to any such registration,
qualification or compliance, or based on any omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, or any violation by the Company of the
Securities Act or any rule or regulation thereunder applicable to the Company
and relating to action or inaction required of the Company in connection with
any such registration, qualification or compliance, and will reimburse each such
Holder, each of its officers, directors and partners, and each party controlling
such Holder, each such underwriter and each party who controls any such
underwriter, for any legal and any other expenses incurred in connection with
investigating or defending any such claim, loss, damage, liability or action,
provided that the Company will not be
<PAGE>
-11-
liable in any such case to the extent that any such claim, loss, damage,
liability or expense arises out of or is based on any untrue statement or
omission based solely upon written information furnished to the Company by such
Holder or underwriter, as the case may be, and stated to be specifically for use
therein.
(b) Each Holder and Other Shareholder will, if Registrable Securities held
by him are included in the securities as to which such registration,
qualification or compliance is being effected, indemnify and hold harmless the
Company, each of its directors and officers and each underwriter, if any, of the
Company's securities covered by such a registration statement, each party who
controls the Company or such underwriter, each other such Holder and Other
Shareholder and each of their respective officers, directors and partners, and
each party controlling such Holder or Other Shareholder, against all claims,
losses, damages and liabilities (or actions in respect thereof) arising out of
or based on any untrue statement (or alleged untrue statement) of a material
fact contained in any such registration statement, prospectus, offering circular
or other document, or any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse the Company and such Holders, Other
Shareholders, directors, officers, partners, parties, underwriters or control
persons for any legal or any other expenses reasonably incurred in connection
with investigating or defending any such claim, loss, damage, liability or
action, in each case to the extent, but only to the extent, that such untrue
statement (or alleged untrue statement) or omission (or alleged omission) is
made in such registration statement, prospectus, offering circular or other
document solely in reliance upon and in conformity with written information
furnished to the Company by such Holder or Other Shareholder and stated to be
specifically for use therein; provided, however, that the obligations of such
Holders and Other Shareholders hereunder shall be limited to an amount equal to
the proceeds to each such Holder or Other Shareholder of securities sold as
contemplated herein.
(c) Each party entitled to indemnification under this Section 12.6 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or any litigation resulting
therefrom, shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld), and the Indemnified Party may participate in such
defense at such party's expense (unless the Indemnified Party shall have been
advised by counsel that actual or potential differing interests or defenses
exist or may exist between the Indemnifying Party and the Indemnified Party, in
which case such expense shall be paid by the Indemnifying Party), and provided
further that the failure of any Indemnified Party to give notice as provide
herein shall not relieve the Indemnifying Party of its obligations under this
Section 12. No Indemnifying Party, in the defense of any such claim or
litigation, shall, except with the consent of each Indemnified Party, consent to
entry of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation. Each Indemnified Party shall provide such information as may be
reasonably requested by an Indemnifying Party in order to enable such
Indemnifying Party to defend a claim as to which indemnity is sought.
12.7 Information by Holder. Each Holder of Registrable Securities, and each
Other Shareholder holding securities included in any registration, shall furnish
to the Company such information regarding such Holder or Other Shareholder as
the Company may reasonably request in writing and as shall be reasonably
required in connection with any registration, qualification or compliance
referred to in this Section 12.
<PAGE>
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12.8 Rule 144 Reporting. With a view to making available the benefits of
certain rules andand regulations of the Commission which may permit the sale of
the Registrable Securities to the public without registration, the Company
agrees to:
(a) . Make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act, at all times from
and after ninety (90) days following the effective date of the first
registration under the Securities Act filed by the Company for an offering of
its securities to the general public;
(b) Use its best efforts to file with the Commission in a timely manner all
reports and other documents required of the Company under the Securities Act and
the Exchange Act at any time after it has become subject to such reporting
requirements; and
(c) So long as the Holder owns any Registrable Securities, furnish to the
Holder forthwith upon request a written statement by the Company as to its
compliance with the reporting requirements of Rule 144 (at any time from and
after ninety (90) days following the effective date of the first registration
statement in connection with an offering of its Securities to the general
public), and of the Securities Act and the Securities Exchange Act of 1934, as
amended (at any time after it has become subject to such reporting
requirements), a copy of the most recent annual or quarterly report of the
Company, and such other reports and documents so filed as the Holder may
reasonably request in availing itself of any rule or regulation of the
Commission allowing the Holder to sell any such securities without registration.
SECTION 13. Notices. Any notice or other document required or permitted to
be given or delivered to the Holder shall be delivered at, or sent by certified
or registered mail to, the Holder at 845 Brook Street, Rocky Hill, CT 06067 or
to such other address as shall have been furnished to the Company in writing by
the Holder. Any notice or other document required or permitted to be given or
delivered to the Company shall be delivered at, or sent by certified or
registered mail to, the Company at 550 West Avenue, Stamford, Connecticut 06902
or to such other address as shall have been furnished in writing to the Holder
by the Company. Any notice so addressed and mailed by registered or certified
mail shall be deemed to be given when so mailed. Any notice so addressed and
otherwise delivered shall be deemed to be given when actually received by the
addressee.
SECTION 14. No Rights as Stockholder; Limitation of Liability. This Warrant
shall not entitle the Holder to any of the rights of a shareholder of the
Company. No provision hereof, in the absence of affirmative action by the Holder
to purchase shares of Common Stock, and no mere enumeration herein of the rights
or privileges of the Holder, shall give rise to any liability of the Holder for
the Warrant Price hereunder or as a shareholder of the Company, whether such
liability is asserted by the Company or by creditors of the Company.
SECTION 15. Law Governing. This Warrant shall be governed by, and construed
and enforced in accordance with, the laws of the State of Connecticut.
SECTION 16. Miscellaneous.
(a) This Warrant and any provision hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
(or any predecessor in interest thereof) against which enforcement of the same
is sought. The headings in this Warrant are for purposes of reference only and
shall not affect the meaning or construction of any of the provisions hereof.
<PAGE>
-13-
(b) All capitalized terms used herein and not otherwise defined herein
shall have the meanings ascribed to them in the Purchase Agreement.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its
duly authorized officer this 1st day of August, 1994.
LIFECODES CORPORATION
By:_____________________________
Title:__________________________
<PAGE>
FORM OF NOTICE OF EXERCISE
[To be signed only upon exercise of the Warrant]
TO BE EXECUTED BY THE REGISTERED HOLDER
TO EXERCISE THE WITHIN WARRANT
The undersigned hereby exercises the right to purchase _______________ shares of
Common Stock which the undersigned is entitled to purchase by the terms of the
within Warrant according to the conditions thereof, and herewith makes payment
of the Warrant Price of such shares in full. All shares to be issued pursuant
hereto shall be issued in the name of ________________________ and the initial
address of such person to be entered on the books of the Company shall be:
_________________________________________. The shares are to be issued in
certificates of the following denominations:
-------------------------------
[Type Name of Holder]
By:____________________________
Title:_________________________
Dated:_________________________
-15-
<PAGE>
FORM OF ASSIGNMENT
[To be signed only upon transfer of entire Warrant]
TO BE EXECUTED BY THE REGISTERED HOLDER
TO TRANSFER THE WITHIN WARRANT
FOR VALUE RECEIVED_______________________ hereby sells, assigns and transfers
unto_____________________________________ all rights of the undersigned under
and pursuant to the within Warrant, and the undersigned does hereby irrevocably
constitute and appoint _________________________________ Attorney to transfer
the said Warrant on the books of the Company, with full power of substitution.
[Type Name of Holder]
By:___________________
Title:________________
Dated:______________________
NOTICE
The signature to the foregoing Assignment must correspond to the name as
written upon the face of the within Warrant in every particular, without
alteration or enlargement or any change whatsoever.
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<PAGE>
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD OR OFFERED FOR SALE
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER
SAID ACT AND ANY APPLICABLE STATE SECuRITIES LAWS OR THE AVAILABILITY OF ANY
EXEMPTION FROM REGISTRATION UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES
LAWS.
No. 2
STOCK SUBSCRIPTION WARRANT
To Purchase Common Stock of
Lifecodes Corporation, a Delaware Corporation (the "Company")
DATE OF INITIAL ISSUANCE: August 1, 1994
THIS CERTIFIES THAT for value received, CROSSROADS CONSTITUTION, L.P. or
registered assigns (hereinafter called the "Holder") is entitled to purchase
from the Company, at any time during the Term of this Warrant, 4,752 shares of
Common Stock, par value $.10 per share, of the Company (the "Common Stock"), at
the Warrant Price, payable in lawful money of the United States of America to be
paid upon the exercise hereof. The exercise of this Warrant shall be subject to
the provisions, limitations and restrictions herein contained and may be
exercised in whole or in part.
SECTION 1. Definitions.
For all purposes of this Warrant, the following terms shall have the meanings
indicated:
Common Stock - shall mean and include the Company's authorized Common Stock,
$.10 par value, as constituted at the date hereof, and shall also include any
capital stock of any class of the Company hereafter authorized which shall not
be limited to a fixed sum or percentage of par value in respect to 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.
Securities Act - the Securities Act of 1933, as amended.
Term of this Warrant - shall mean the period beginning on the date of initial
issuance hereof and ending on the date ten (10) years from the date of initial
issuance hereof.
Warrant Price - $1.00 per share, subject to adjustment in accordance with
Section 5 hereof.
Warrants - this Warrant and any other Warrant or Warrants issued pursuant to the
original holder of this Warrant, or any transferees from such original holder of
this holder.
<PAGE>
Warrant Shares - shares of Common Stock purchased or purchasable by the Holder
of this Warrant upon the exercise hereof.
SECTION 2. Exercise of Warrant.
2.1. Procedure for Exercise of Warrant. To exercise this Warrant in whole
or in part (but not as to any fractional share of Common Stock), the Holder
shall deliver to the Company at its office referred to in Section 13 hereof at
any time and from time to time during the Term of this Warrant: (i) the Notice
of Exercise in the form attached hereto, (ii) cash or certified or official bank
check, payable to the order of the Company in the amount of the Warrant Price
for each share being purchased, and (iii) this Warrant. In the event of any
exercise of the rights represented by this Warrant, a certificate or
certificates for the shares of Common Stock so purchased, registered in the name
of the Holder or such other name or names as may be designated by the Holder,
shall be delivered to the Holder hereof within a reasonable time, not exceeding
fifteen (15) 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 (except a remaining fractional share), 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 person in whose name any certificate for
shares of Common Stock is issued upon exercise of this Warrant shall for all
purposes be deemed to have become the holder of record of such shares on the
date on which the Warrant was surrendered and payment of the Warrant Price and
any applicable taxes was made, irrespective of the date of delivery of such
certificate, except that, if the date of such surrender and payment is a date
when the stock transfer books of the Company are closed, such person shall be
deemed to have become the holder of such shares at the close of business on the
next succeeding date on which the stock transfer books are open.
2.2. Transfer Restriction Legend. Each certificate for Warrant shares shall
bear the following legend (and any additional legend required by (i) any
applicable state securities laws and (ii) any securities exchange upon which
such Warrant Shares may, at the time of such exercise, be listed) on the face
thereof unless at the time of exercise such Warrant Shares shall be registered
under the Securities Act:
"The shares represented by this certificate have not been registered under
the Securities Act of 1933, as amended, and may not be sold or transferred
in the absence of such registration or an exemption therefrom under said
Act."
Any certificate issued at any time in exchange or substitution for any
certificate bearing such legend (except a new certificate issued upon completion
of a public distribution under a registration statement of the securities
represented thereby) shall also bear such legend unless, in the opinion of
counsel for the holder thereof (which counsel shall be reasonably satisfactory
to counsel for the Company) the securities represented thereby are not, at such
time, required by law to bear such legend.
SECTION 3. Covenants as to Common Stock. The Company covenants and agrees that
all shares of Common Stock that may be issued upon the exercise of the rights
represented by this
2
<PAGE>
Warrant will, upon issuance, be validly issued, fully paid and nonassessable,
and free from all taxes, liens and charges with respect to the issue thereof.
The Company further covenants and agrees that it will pay when due and payable
any and all federal and state taxes which may be payable in respect of the issue
of this Warrant, or any Common Stock or certificates therefor issuable upon the
exercise of this Warrant. The Company further covenants and agrees that the
Company will at all times have authorized and reserved, free from preemptive
rights, a sufficient number of shares of Common Stock to provide for the
exercise of the rights represented by this Warrant. The Company further
covenants and agrees that if any shares of capital stock to be reserved for the
purpose of the issuance of shares upon the exercise of this Warrant require
registration with or approval of any governmental authority under any federal or
state law before such shares may be validly issued or delivered upon exercise,
then the Company will in good faith and as expeditiously as possible endeavor to
secure such registration or approval, as the case may be. If and so long as the
Common Stock issuable upon the exercise of this Warrant is listed on any
national securities exchange, the Company will, if permitted by the rules of
such exchange, list and keep listed on such exchange, upon official notice of
issuance, all shares of such Common Stock issuable upon exercise of this
Warrant.
SECTION 4. Adjustment of Number of Shares. Upon each adjustment of the Warrant
Price as provided in Section 5, the Holder shall thereafter be entitled to
purchase, at the Warrant Price resulting from such adjustment, the number of
shares (calculated to the nearest tenth of a share) obtained by multiplying the
Warrant Price in effect immediately prior to such adjustment by the number of
shares purchasable pursuant hereto immediately prior to such adjustment and
dividing the product thereof by the Warrant Price resulting from such
adjustment.
SECTION 5. Adjustment of Warrant Price. The Warrant Price shall be subject to
adjustment from time to time as follows:
(i) If the Company shall at any time or from time to time during the Term
of this Warrant issue shares of Common Stock other than Excluded Stock (as
hereinafter defined) without consideration or for a consideration per share less
than the Warrant Price in effect immediately prior to the issuance of such
Common Stock, the Warrant Price in effect immediately prior to each such
issuance or adjustment shall forthwith (except as provided in this clause (i))
be adjusted to a price equal to the quotient obtained by dividing:
(A) an amount equal to the sum of
(x) the total number of shares of Common Stock outstanding
(including any shares of Common Stock deemed to have been issued
pursuant to subdivision (3) of this clause (i) and to clause (ii)
below) immediately prior to such issuance multiplied by the Warrant
Price in effect immediately prior to such issuance, plus
(y) the consideration received by the Company upon such issuance,
by
3
<PAGE>
(B) the total number of shares of Common Stock outstanding (including
any shares of Common Stock deemed to have been issued pursuant to
subdivision (3) of this clause (i) and to clause (ii) below) immediately
after the issuance of such Common Stock.
For the purposes of any adjustment of the Warrant Price pursuant to this
clause (i), the following provisions shall be applicable:
(1) In the case of the issuance of Common Stock for cash, the
consideration shall be deemed to be the amount of cash paid therefor after
deducting therefrom any discounts, commissions or other expenses allowed,
paid or incurred by the Company for any underwriting or otherwise in
connection with the issuance and sale thereof.
(2) In the case of the issuance of Common Stock for a consideration in
whole or in part other than cash, the consideration other than cash shall
be deemed to be the fair market value thereof as determined by the Board of
Directors, irrespective of any accounting treatment; provided, however,
that such fair market value as determined by the Board of Directors shall
not exceed the aggregate Current Market Price (as hereinafter defined) of
the shares of Common Stock being issued.
(3) In the case of the issuance of (i) options to purchase or rights
to subscribe for Common Stock, (ii) securities by their terms convertible
into or exchangeable for Common Stock or (iii) options to purchase or
rights to subscribe for such convertible or exchangeable securities:
(A) the aggregate maximum number of shares of Common Stock
deliverable upon exercise of such options to purchase or rights
to subscribe for Common Stock shall be deemed to have been issued
at the time such options or rights were issued and for a
consideration equal to the consideration (determined in the
manner provided in subdivisions (1) and (2) above with the
proviso in subdivision (2) being applied to the number of shares
of Common Stock deliverable upon such exercise), if any, received
by the Company upon the issuance of such options or rights plus
the minimum purchase price provided in such options or rights for
the Common Stock covered thereby;
(B) the aggregate maximum number of shares of Common Stock
deliverable upon conversion of or in exchange for any such
convertible or exchangeable securities or upon the exercise of
options to purchase or rights to subscribe for such convertible
or exchangeable securities and subsequent conversions or
exchanges thereof shall be deemed to have been issued at the time
such securities were issued or such options or rights were issued
and for a consideration equal to the consideration received by
the Company for any such securities and related options or rights
(excluding any cash received on account of accrued interest or
accrued dividends), plus the additional consideration, if any, to
be received by the Company upon the conversion or exchange of
such
4
<PAGE>
securities or the exercise of any related options or rights (the
consideration in each case to be determined in the manner
provided in subdivisions (1) and (2) above with the proviso in
subdivision (2) being applied to the number of shares of Common
Stock deliverable upon such conversion, exchange or exercise);
(C) on any change in the number of shares of Common Stock deliverable
upon exercise of any such options or rights or conversion of or
exchange for such convertible or exchangeable securities, other
than a change resulting from the antidilution provisions thereof,
the Warrant Price shall forthwith be readjusted to such Warrant
Price as would have obtained had the adjustment made upon the
issuance of such options, rights or securities not converted
prior to such change or options or rights related to such
securities not converted prior to such change been made upon the
basis of such change; and
(D) on the expiration of any such options or rights, the termination
of any such rights to convert or exchange or the expiration of
any options or rights related to such convertible or exchangeable
securities, the Warrant Price shall forthwith be readjusted to
such Warrant Price as would have obtained had the adjustment made
upon the issuance of such options, rights, securities or options
or rights related to such securities been made upon the basis of
the issuance of only the number of shares of Common Stock
actually issued upon the conversion or exchange of such
securities or upon the exercise of the options or rights related
to such securities.
(ii) "Excluded Stock" shall mean shares of Common Stock issued by the
Company as a stock dividend payable in shares of Common Stock or upon any
subdivision or split-up of the outstanding shares of Common Stock.
(iii) If, at any time during the Term of this Warrant, the number of shares
of Common Stock outstanding is increased by a stock dividend payable in shares
of Common Stock or by a subdivision or split-up of shares of Common Stock, then,
following the record date fixed for the determination of holders of Common Stock
entitled to receive such stock dividend, subdivision or split-up, the Warrant
Price shall be appropriately decreased so that the number of shares of Common
Stock issuable upon the exercise hereof shall be increased in proportion to such
increase in outstanding shares.
(iv) If, at any time during the Term of this Warrant, the number of shares
of Common Stock outstanding is decreased by a combination of the outstanding
shares of Common Stock, then, following the record date for such combination,
the Warrant Price shall appropriately increase so that the number of shares of
Common Stock issuable upon the exercise hereof shall be decreased in proportion
to such decrease in outstanding shares.
(v) In case, at any time during the Term of this Warrant, the Company shall
declare a cash dividend upon its Common Stock payable otherwise than out of
earnings or earned surplus
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or shall distribute to holders of its Common Stock shares of its capital stock
(other than Common Stock), stock or other securities of other persons, evidences
of indebtedness issued by the Company or other persons, assets (excluding cash
dividends and distributions) or options or rights (excluding options to purchase
and rights to subscribe for Common Stock or other securities of the Company
convertible into or exchangeable for Common Stock), then, in each such case,
immediately following the record date fixed for the determination of the holders
of Common Stock entitled to receive such dividend or distribution, the Warrant
Price in effect thereafter shall be determined by multiplying the Warrant Price
in effect immediately prior to such record date by a fraction of which the
numerator shall be an amount equal to the difference of (x) the Current Market
Price of one share of Common Stock minus (y) the fair market value (as
determined by the Board of Directors, whose determination shall be conclusive)
of the stock, securities, evidences of indebtedness, assets, options or rights
so distributed in respect of one share of Common Stock, and of which the
denominator shall be such Current Market Price.
(vi) All calculations under this Section 5 shall be made to the nearest
cent or to the nearest one-tenth (1/10) of a share, as the case may be.
(vii) For the purpose of any computation pursuant to this Section 5, the
Current Market Price at any date of one share of Common Stock shall be deemed to
be the average of the daily closing prices for the 30 consecutive business days
ending no more than 15 business days before the day in question (as adjusted for
any stock dividend, split, combination or reclassification that took effect
during such 30 business day period). The closing price for each day shall be the
last reported sales price regular way or, in case no such reported sales took
place on such day, the average of the last reported bid and asked prices regular
way, in either case on the principal national securities exchange on which the
Common Stock is listed or admitted to trading (or if the Common Stock is not at
the time listed or admitted for trading on any such exchange, then such price as
shall be equal to the average of the last reported bid and asked prices, as
reported by the National Association of Securities Dealers Automated Quotations
System ("NASDAQ") on such day, or if on any day in question, the security shall
not be quoted on the NASDAQ, then such price shall be equal to the average of
the last reported bid and asked prices on such day as reported by The National
Quotation Bureau Incorporated or any similar reputable quotation and reporting
service, if such quotation is not reported by The National Quotation Bureau
Incorporated); provided, however, that if the Common Stock is not traded in such
manner that the quotations referred to in this clause (vii) are available for
the period required hereunder, the Current Market Price shall be determined in
good faith by the Board of Directors of the Company or, if such determination
cannot be made, by a nationally recognized independent investment banking firm
selected by the Board of Directors of the Company (or if such selection cannot
be made, by a nationally recognized independent investment banking firm selected
by the American Arbitration Association in accordance with its rules).
(viii) Whenever the Warrant Price shall be adjusted as provided in Section
5, the Company shall prepare a statement showing the facts requiring such
adjustment and the Warrant Price that shall be in effect after such adjustment.
The Company shall cause a copy of
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such statement to be sent by mail, first class postage prepaid, to each Holder
of this Warrant at his address appearing on the Company's records. Where
appropriate, such copy may be given in advance and may be included as part of
the notice required to be mailed under the provisions of subsection (x) of this
Section 5.
(ix) Adjustments made pursuant to clauses (iii), (iv) and (v) above shall
be made on the date such dividend, subdivision, split-up, combination or
distribution, as the case may be, is made, and shall become effective at the
opening of business on the business day next following the record date for the
determination of stockholders entitled to such dividend, subdivision, split-up,
combination or distribution.
(x) In the event the Company shall propose to take any action of the types
described in clauses (iii), (iv) or (v) of this Section 5, the Company shall
forward, at the same time and in the same manner, to the Holder of this Warrant
such notice, if any, which the Company shall give to the holders of capital
stock of the Company. Failure to give such notice, or any defect therein, shall
not affect the legality or validity of any such action.
(xi) In any case in which the provisions of this Section 5 shall require
that an adjustment shall become effective immediately after a record date for an
event the Company may defer until the occurrence of such event issuing to the
Holder of all or any part of this Warrant which is exercised after such record
date and before the occurrence of such event the additional shares of capital
stock issuable upon such exercise by reason of the adjustment required by such
event over and above the shares of capital stock issuable upon such exercise
before giving effect to such adjustment exercise; provided, however, that the
Company shall deliver to such Holder a due bill or other appropriate instrument
evidencing such Holder's right to receive such additional shares upon the
occurrence of the event requiring such adjustment.
(xii) The sale or other disposition of any Common Stock theretofore held in
the treasury of the Company shall be deemed to be an issuance thereof.
SECTION 6. Ownership.
6.1. Ownership of This Warrant. The Company may deem and treat the person
in whose name this Warrant is registered as the holder and owner hereof
(notwithstanding any notations of ownership or writing hereon made by anyone
other than the Company) for all purposes and shall not be affected by any notice
to the contrary until presentation of this Warrant for registration of transfer
as provided in this Section 6.
6.2. Transfer and Replacement. This Warrant and all rights hereunder are
transferable in whole or in part upon the books of the Company by the Holder
hereof in person or by duly authorized attorney, and a new Warrant or Warrants,
of the same tenor as this Warrant but registered in the name of the transferee
or transferees shall be made and delivered by the Company upon surrender of this
Warrant duly endorsed, at the office of the Company referred to in Section 13
hereof. Upon receipt by the Company of evidence reasonably satisfactory to it of
the loss, theft or destruction, and, in such case, of indemnity or security
reasonably satisfactory to it, and upon surrender of this Warrant if mutilated,
the Company will make and
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<PAGE>
deliver a new Warrant of like tenor, in lieu of this Warrant; provided that if
the Holder hereof is an instrumentality of a state or local government or an
institutional holder or a nominee for such an instrumentality or institutional
holder an irrevocable agreement of indemnity by such Holder shall be sufficient
for all purposes of this Section 6, and no evidence of loss or theft or
destruction shall be necessary. This Warrant shall be promptly cancelled by the
Company upon the surrender hereof in connection with any transfer or
replacement. Except as otherwise provided above, in the case of the loss, theft
or destruction of a Warrant, the Company shall pay all expenses, taxes and other
stock transfer taxes (if any) payable in connection with a transfer of this
Warrant, which shall be payable by the Holder. Holder will not transfer this
Warrant and the rights hereunder except in compliance with federal and state
securities laws.
SECTION 7. Mergers, Consolidation, Sales. In the case of any proposed
consolidation or merger of the Company with another corporation, or the proposed
sale of all or substantially all of its assets to another corporation, or any
proposed reorganization or reclassification of the capital stock of the Company,
then, as a condition of such consolidation, merger, sale, reorganization or
reclassification, lawful and adequate provision shall be made whereby the Holder
of this Warrant shall thereafter have the right to receive upon the basis and
upon the terms and conditions specified herein, in lieu of the shares of the
Common Stock of the Company immediately theretofore purchasable hereunder, such
shares of stock, securities or assets as may (by virtue of such consolidation,
merger, sale, reorganization or reclassification) be issued or payable with
respect to or in exchange for the number of shares of such Common Stock
purchasable hereunder immediately before such consolidation, merger, sale,
reorganization or reclassification. In any such case appropriate provision shall
be made with respect to the rights and interests of the Holder of this Warrant
to the end that the provisions hereof 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 this Warrant. The Company shall not effect any
such consolidation, merger or sale unless prior to or simultaneously with the
consummation thereof the successor corporation or purchaser, as the case may be,
shall assume by written instrument the obligation to deliver to the Holder such
shares of stock, securities or assets as, in accordance with the foregoing
provisions, the Holder is entitled to receive.
SECTION 8. Notice of Dissolution or Liquidation. In case of any distribution of
the assets of the Company in dissolution or liquidation (except under
circumstances when the foregoing Section 7 shall be applicable), the Company
shall give notice thereof to the Holder hereof and shall make no distribution to
shareholders until the expiration of thirty (30) days from the date of mailing
of the aforesaid notice and, in any case, the Holder hereof may exercise this
Warrant within thirty (30) days from the date of the giving of such notice, and
all rights herein granted not so exercised within such thirty-day period shall
thereafter become null and void.
SECTION 9. Notice of Extraordinary Dividends. Subject to further compliance with
Section 11.2 hereof, if the Board of Directors of the Company shall declare any
dividend or other distribution on its Common Stock except out of earned surplus
or by way of a stock dividend payable in shares of its Common Stock, the Company
shall mail notice thereof to the Holder hereof not less than thirty (30) days
prior to the record date fixed for determining
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shareholders entitled to participate in such dividend or other distribution, and
the Holder hereof shall not participate in such dividend or other distribution
unless this Warrant is exercised prior to such record date. The provisions of
this Section 9 shall not apply to distributions made in connection with
transactions covered by Section 7.
SECTION 10. Fractional Shares. Fractional Shares shall not be issued upon the
exercise of this Warrant but in any case where the Holder would, except for the
provisions of this Section 10, be entitled under the terms hereof to receive a
fractional share upon the complete exercise of this Warrant, the Company shall,
upon the exercise of this Warrant for the largest number of whole shares then
called for, pay a sum in cash equal to the excess of the value of such
fractional share (determined in such reasonable manner as may be prescribed in
good faith by the Board of Directors of the Company).
SECTION 11. Special Arrangements of the Company. The Company covenants and
agrees that during the Term of this Warrant, unless otherwise approved by the
Holder of this Warrant:
11.1. Will Reserve Shares. The Company will reserve and set apart and have
at all times, free from preemptive rights, the number of shares of authorized
but unissued Common Stock deliverable upon the exercise of this Warrant.
11.2. Will Not Issue Certain Stock. The Company will not issue any capital
stock of any class which has rights to be preferred as to dividends or as to the
distribution of assets upon voluntary or involuntary liquidation, dissolution or
winding-up, unless such rights shall be limited to a fixed sum or percentage of
par value in respect of participation in dividends and in the distribution of
assets. The Company will be deemed to have issued stock which is preferred as to
dividends or as to distribution of assets if either (i) the right to preferred
dividends exceeds the amount of fifteen percent (15%) of par value or (ii) the
right to preferred distribution of assets exceeds the amount of one hundred
percent (100%) of par value for the first year after issuance of such stock or
one hundred and twenty-five percent (125%) thereafter.
11.3. Will Not Declare Dividends. The Company will not pay any dividend or
other distribution on any of its capital stock unless such dividend or other
distribution on such share of capital stock and all other dividends or
distributions paid during the prior one year period on such shares of capital
stock are paid out of earned surplus and the aggregate amount thereof is less
than fifteen percent (15%) of the fair market value of the shares of capital
stock (if then ascertainable) on the date of declaration of such dividend or
other distribution.
11.4. Will Bind Successors. This Warrant shall be binding upon any
corporation succeeding to the Company by merger, consolidation or acquisition of
all or substantially all of the Company's assets.
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SECTION 12. Registration rights; etc.
12.1. Certain Definitions. As used in this Section 12, the following terms
shall have the following respective meanings:
"Commission" shall mean the Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act.
"Registrable Securities" shall mean the Warrant Shares less any Warrant
Shares theretofore sold to the public or in a private placement.
The terms "register," "registered" and "registration" shall refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act and applicable rules and regulations
thereunder, and the effectiveness of such registration statement.
"Registration Expenses" shall mean all expenses incurred by the Company in
compliance with Section 12.2 hereof, including, without limitation, all
registration and filing fees, printing expenses, fees and disbursements of
counsel for the Company, blue sky fees and expenses, and the expense of any
special audits incident to or required by any such registration (but excluding
the compensation of regular employees of the Company, which shall be paid in any
event by the Company).
"Selling Expenses" shall mean all underwriting discounts and selling
commissions applicable to the sale of Registrable Securities, all fees and
disbursements of counsel for any Holder and any blue sky fees and expenses
excluded from the definition of "Registration Expenses."
"Holder" shall mean any holder of outstanding Warrant Shares or Registrable
Securities (except for purposes of determining "Holders" under Section 12.7
hereof) have not been sold to the public.
"Other Shareholders" shall mean holders of securities of the Company who
are entitled by contract with the Company to have securities included in a
registration of the Company's securities.
12.2. Company Registration.
(a) Notice of Registration. If the Company shall determine to register any
of its securities either for its own account or the account of a security holder
or holders exercising their respective demand registration rights, other than a
registration relating solely to employee benefit plans, or a registration
relating solely to a Commission Rule 145 transaction, or a registration on any
registration form which does not permit secondary sales, the Company will:
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(i) promptly give to each Holder written notice thereof (which shall
include a list of the jurisdictions in which the Company intends to
attempt to qualify such securities under the applicable blue sky or
other state securities laws); and
(ii) include in such registration (and any related qualification under blue
sky laws or other compliance), and in any underwriting involved
therein, all the Registrable Securities specified in a written request
or requests, made by any Holder within fifteen (15) days after receipt
of the written notice from the Company described in clause (i) above,
subject to any limitations on the number of shares as set forth in
Section 12.2(b) below.
(b) Underwriting. If the registration of which the Company gives notice is
for a registered public offering involving an underwriting, the Company shall so
advise the Holders as part of the written notice given pursuant to Section
12.2(a)(i). In such event, the right of any Holder to registration pursuant to
Section 12.2 shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting to the extent provided herein. All Holders proposing to distribute
their securities through such underwriting shall (together with the Company,
directors and officers and the Other Shareholders distributing their securities
through such underwriting) enter into an underwriting agreement in customary
form with the underwriter or underwriters selected for underwriting by the
Company.
Notwithstanding any other provision of this Section 12.2, if the
underwriter determines that marketing factors require a limitation on the number
of shares to be underwritten, the underwriter may (subject to the allocation
priority set forth below) exclude from such registration and underwriting some
or all of the Registrable Securities which would otherwise be underwritten
pursuant hereto. The Company shall so advise all holders of securities
requesting registration, and the number of shares of securities that are
entitled to be included in the registration and underwriting shall be allocated
in the following manner: The number of shares that may be included in the
registration and underwriting on behalf of such Holders, directors and officers
and Other Shareholders shall be allocated among such Holders, directors and
officers and Other Shareholders in proportion, as nearly practicable, to the
respective amounts of Registrable Securities and other securities which they had
requested to be included in such registration at the time of filing the
registration statement.
If any Holder of Registrable Securities or any officer, director or Other
Shareholder disapproves of the terms of any such underwriting, he may elect to
withdraw therefrom by written notice to the Company and the underwriter. Any
Registrable Securities or other securities excluded or withdrawn from such
underwriting shall be withdrawn from such registration.
12.3. Demand Registration Rights. In the event that the Company grants
demand registration rights to any other holder of securities of the Company, the
Company will promptly give to the Holder written notice thereof and, if in the
opinion of the Holder such demand registration rights are more favorable than
the registration rights provided under this
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Warrant, the Holder shall so notify the Company within thirty (30) days of
receipt of the foregoing notice from the Company, whereupon such demand
registration rights shall automatically be deemed to be incorporated in this
Warrant.
12.4. Expenses of Registration. The Company shall bear all Registration
Expenses incurred in connection with any registration, qualification and
compliance by the Company pursuant to Section 12.2 hereof. All Selling Expenses
shall be borne by the holders of the securities so registered pro rata on the
basis of the number of their shares so registered.
12.5. Registration Procedures. In the case of each registration effected by
the Company pursuant to this Section 12, the Company will keep each Holder
advised in writing as to the initiation of each registration and as to the
completion thereof. The Company will, at its expense:
(a) keep such registration effective for a period of one hundred twenty
(120) days or until the Holder or Holders have completed the distribution
described in the registration statement relating thereto, whichever first
occurs;
(b) furnish such number of prospectuses and other documents incident
thereto as a Holder from time to time may reasonably request; and
(c) use its best efforts to register or qualify the Registrable Securities
under the securities laws or blue-sky laws of such jurisdictions as any Holder
may request; provided, however, that the Company shall not be obligated to
register or qualify such Registrable Securities in any particular jurisdiction
in which the Company would be required to execute a general consent to service
of process in order to effect such registration, qualification or compliance,
unless the Company is already subject to service in the jurisdiction and except
as may be required by the Securities Act or applicable rules or regulations
thereunder.
12.6. Indemnification.
(a) The Company, with respect to each registration, qualification and
compliance effected pursuant to this Section 12, will indemnify and hold
harmless each Holder, each of its officers, directors and partners, and each
party controlling such Holder, and each underwriter, if any, and each party who
controls any underwriter, against all claims, losses, damages and liabilities
(or actions in respect thereof) arising out of or based on any untrue statement
(or alleged untrue statement) of a material fact contained in any prospectus,
offering circular or other document (including any related registration
statement, notification or the like) incident to any such registration,
qualification or compliance, or based on any omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, or any violation by the Company of the
Securities Act or any rule or regulation thereunder applicable to the Company
and relating to action or inaction required of the Company in connection with
any such registration, qualification or compliance, and will reimburse each such
Holder, each of its officers, directors and partners, and each party controlling
such Holder, each such underwriter and each party who controls any such
underwriter, for any legal and any other expenses incurred in connection with
investigating or
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defending any such claim, loss, damage, liability or action, provided that the
Company will not be liable in any such case to the extent that any such claim,
loss, damage, liability or expense arises out of or is based on any untrue
statement or omission based solely upon written information furnished to the
Company by such Holder or underwriter, as the case may be, and stated to be
specifically for use therein.
(b) Each Holder and Other Shareholder will, if Registrable Securities held
by him are included in the securities as to which such registration,
qualification or compliance is being effected, indemnify and hold harmless the
Company, each of its directors and officers and each underwriter, if any, of the
Company's securities covered by such a registration statement, each party who
controls the Company or such underwriter, each other such Holder and Other
Shareholder and each of their respective officers, directors and partners, and
each party controlling such Holder and Other Shareholder, against all claims,
losses, damages and liabilities (or actions in respect thereof) arising out of
or based on any untrue statement (or alleged untrue statement) of a material
fact contained in any such registration statement, prospectus, offering circular
or other document, or any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse the Company and such Holders, Other
Shareholders, directors, officers, partners, parties, underwriters or control
persons for any legal or any other expenses reasonably incurred in connection
with investigating or defending any such claim, loss, damage, liability or
action, in each case to the extent, but only to the extent, that such untrue
statement (or alleged untrue statement) or omission (or alleged omission) is
made in such registration statement, prospectus, offering circular or other
document solely in reliance upon and in conformity with written information
furnished to the Company by such Holder or Other Shareholder and stated to be
specifically for use therein; provided, however, that the obligations of such
Holders and Other Shareholders hereunder shall be limited to an amount equal to
the proceeds to each such Holder or Other Shareholder of securities sold as
contemplated herein.
(c) Each party entitled to indemnification under this Section 12.6 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or any litigation resulting
therefrom, shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld), and the Indemnified Party may participate in such
defense at such party's expense (unless the Indemnified Party shall have been
advised by counsel that actual or potential differing interests or defenses
exist or may exist between the Indemnifying Party and the Indemnified Party, in
which case such expense shall be paid by the Indemnifying Party), and provided
further that the failure of any Indemnified Party to give notice as provided
herein shall not relieve the Indemnifying Party of its obligations under this
Section 12. No Indemnifying Party, in the defense of any such claim or
litigation, shall, except with the consent of each Indemnified Party, consent to
entry of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant
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<PAGE>
or plaintiff to such Indemnified Party of a release from all liability in
respect to such claim or litigation. Each Indemnified Party shall provide such
information as may be reasonably requested by an Indemnifying Party in order to
enable such Indemnifying Party to defend a claim as to which indemnity is
sought.
12.7. Information by Holder. Each Holder of Registrable Securities, and
each Other Shareholder holding securities included in any registration, shall
furnish to the Company such information regarding such Holder or Other
Shareholder as the Company may reasonably request in writing and as shall be
reasonably required in connection with any registration, qualification or
compliance referred to in this Section 12.
12.8. Rule 144 Reporting. With a view to making available the benefits of
certain rules and regulations of the Commission which may permit the sale of the
Registrable Securities to the public without registration, the Company agrees
to:
(a) Make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act, at all times from
and after ninety (90) days following the effective date of the first
registration under the Securities Act filed by the Company for an offering of
its securities to the general public;
(b) Use its best efforts to file with the Commission in a timely manner all
reports and other documents required of the Company under the Securities Act and
the Exchange Act at any time after it has become subject to such reporting
requirements; and
(c) So long as the Holder owns any Registrable Securities, furnish to the
Holder forthwith upon request a written statement by the Company as to its
compliance with the reporting requirements of Rule 144 (at any time from and
after ninety (90) days following the effective date of the first registration
statement in connection with an offering of its Securities to the general
public), and of the Securities Act and the Securities Exchange Act of 1934, as
amended (at any time after it has become subject to such reporting
requirements), a copy of the most recent annual or quarterly report of the
Company, and such other reports and documents so filed as the Holder may
reasonably request in availing itself of any rule or regulation of the
Commission allowing the Holder to sell any such securities without registration.
SECTION 13. Notices. Any notice or other document required or permitted to be
given or delivered to the Holder shall be delivered at, or sent by certified or
registered mail to, the Holder at 190 Farmington Avenue, Farmington, CT
06032-1713 or to such other address as shall have been furnished to the Company
in writing by the Holder. Any notice or other document required or permitted to
be given or delivered to the Company shall be delivered at, or sent by certified
or registered mail to, the Company at 550 West Avenue, Stamford, CT 06902 or to
such other address as shall have been furnished in writing to the Holder by the
Company. Any notice so addressed and mailed by registered or certified mail
shall be deemed to be given when so mailed. Any notice so addressed and
otherwise delivered shall be deemed to be given when actually received by the
addressee.
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SECTION 14. No Rights as Stockholder; Limitation of Liability. This Warrant
shall not entitle the Holder to any of the rights of a shareholder of the
company. No provision hereof, in the absence of affirmative action by the Holder
to purchase shares of Common Stock, and no mere enumeration herein of the rights
or privileges of the Holder, shall give rise to any liability of the Holder for
the Warrant Price hereunder or as a shareholder of the Company, whether such
liability is asserted by the Company or by creditors of the Company.
SECTION 15. Law Governing. This Warrant shall be governed by, and construed and
enforced in accordance with, the laws of the State of Connecticut.
SECTION 16. Miscellaneous.
(a) This Warrant and any provision hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
(or any predecessor in interest thereof) against which enforcement of the same
is sought. The headings in this Warrant are for purposes of reference only and
shall not affect the meaning or construction of any of the provisions hereof.
(b) All capitalized terms used herein and not otherwise defined herein
shall have the meanings ascribed to them in the Purchase Agreement.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its
duly authorized officer on this _____ day of December, 1997.
LIFECODES CORPORATION
By: /s/ Walter O. Fredericks
---------------------------------
Walter O. Fredericks
President, CEO
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FORM OF NOTICE OF EXERCISE
[To be signed only upon exercise of the Warrant]
TO BE EXECUTED BY THE REGISTERED HOLDER
TO EXERCISE THE WITHIN WARRANT
The undersigned hereby exercises the right to purchase _________ shares of
Common Stock which the undersigned is entitled to purchase by the terms of the
within Warrant, according to the conditions thereof, and herewith makes payment
of the Warrant Price for such shares in full. All shares to be issued pursuant
hereto shall be issued in the name of __________________________________________
and the initial address of such person to be entered in the books of the Company
shall be: ____________________________. The shares are to be issued in
certificates of the following denominations:
------------------------------------
[Type Name of Holder]
By: ________________________________
Title: _____________________________
Dated: _________________________
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FORM OF ASSIGNMENT
[To be signed only upon transfer of Warrant]
TO BE EXECUTED BY THE REGISTERED HOLDER
TO TRANSFER THE WITHIN WARRANT
FOR VALUE RECEIVED _______________________________ hereby sells, assigns
and transfers unto __________________________________ all rights of the
undersigned under and pursuant to the within Warrant, and the undersigned does
hereby irrevocably constitute and appoint ______________________________
Attorney to transfer the said Warrant on the books of the Company, with full
power or substitution.
------------------------------------
[Type Name of Holder]
By: ________________________________
Title: _____________________________
Dated: _________________________
NOTICE
The signature of the foregoing Assignment must correspond to the name as
written upon the face of the within Warrant in every particular, without
alteration or enlargement or any change whatsoever.
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THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD OR OFFERED FOR SALE
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER
SAID ACT AND ANY APPLICABLE STATE SECuRITIES LAWS OR THE AVAILABILITY OF ANY
EXEMPTION FROM REGISTRATION UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES
LAWS.
No. 2
STOCK SUBSCRIPTION WARRANT
To Purchase Common Stock of
Lifecodes Corporation, a Delaware Corporation (the "Company")
DATE OF INITIAL ISSUANCE: December 9, 1991
THIS CERTIFIES THAT for value received, CROSSROADS CONSTITUTION, L.P. or
registered assigns (hereinafter called the "Holder") is entitled to purchase
from the Company, at any time during the Term of this Warrant, 35,840 shares of
Common Stock, par value $.10 per share, of the Company (the "Common Stock"), at
the Warrant Price, payable in lawful money of the United States of America to be
paid upon the exercise hereof. The exercise of this Warrant shall be subject to
the provisions, limitations and restrictions herein contained and may be
exercised in whole or in part.
SECTION 1. Definitions.
For all purposes of this Warrant, the following terms shall have the meanings
indicated:
Common Stock - shall mean and include the Company's authorized Common Stock,
$.10 par value, as constituted at the date hereof, and shall also include any
capital stock of any class of the Company hereafter authorized which shall not
be limited to a fixed sum or percentage of par value in respect to 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.
Securities Act - the Securities Act of 1933, as amended.
Term of this Warrant - shall mean the period beginning on the date of initial
issuance hereof and ending on the date ten (10) years from the date of initial
issuance hereof.
Warrant Price - $6.63 per share, subject to adjustment in accordance with
Section 5 hereof.
Warrants - this Warrant and any other Warrant or Warrants issued pursuant to the
original holder of this Warrant, or any transferees from such original holder of
this holder.
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Warrant Shares - shares of Common Stock purchased or purchasable by the Holder
of this Warrant upon the exercise hereof.
SECTION 2. Exercise of Warrant.
2.1. Procedure for Exercise of Warrant. To exercise this Warrant in whole
or in part (but not as to any fractional share of Common Stock), the Holder
shall deliver to the Company at its office referred to in Section 13 hereof at
any time and from time to time during the Term of this Warrant: (i) the Notice
of Exercise in the form attached hereto, (ii) cash or certified or official bank
check, payable to the order of the Company in the amount of the Warrant Price
for each share being purchased, and (iii) this Warrant. In the event of any
exercise of the rights represented by this Warrant, a certificate or
certificates for the shares of Common Stock so purchased, registered in the name
of the Holder or such other name or names as may be designated by the Holder,
shall be delivered to the Holder hereof within a reasonable time, not exceeding
fifteen (15) 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 (except a remaining fractional share), 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 person in whose name any certificate for
shares of Common Stock is issued upon exercise of this Warrant shall for all
purposes be deemed to have become the holder of record of such shares on the
date on which the Warrant was surrendered and payment of the Warrant Price and
any applicable taxes was made, irrespective of the date of delivery of such
certificate, except that, if the date of such surrender and payment is a date
when the stock transfer books of the Company are closed, such person shall be
deemed to have become the holder of such shares at the close of business on the
next succeeding date on which the stock transfer books are open.
2.2. Transfer Restriction Legend. Each certificate for Warrant shares shall
bear the following legend (and any additional legend required by (i) any
applicable state securities laws and (ii) any securities exchange upon which
such Warrant Shares may, at the time of such exercise, be listed) on the face
thereof unless at the time of exercise such Warrant Shares shall be registered
under the Securities Act:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended, and may not be sold or
transferred in the absence of such registration or an exemption
therefrom under said Act."
Any certificate issued at any time in exchange or substitution for any
certificate bearing such legend (except a new certificate issued upon completion
of a public distribution under a registration statement of the securities
represented thereby) shall also bear such legend unless, in the opinion of
counsel for the holder thereof (which counsel shall be reasonably satisfactory
to counsel for the Company) the securities represented thereby are not, at such
time, required by law to bear such legend.
SECTION 3. Covenants as to Common Stock. The Company covenants and agrees that
all shares of Common Stock that may be issued upon the exercise of the rights
represented by this
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Warrant will, upon issuance, be validly issued, fully paid and nonassessable,
and free from all taxes, liens and charges with respect to the issue thereof.
The Company further covenants and agrees that it will pay when due and payable
any and all federal and state taxes which may be payable in respect of the issue
of this Warrant, or any Common Stock or certificates therefor issuable upon the
exercise of this Warrant. The Company further covenants and agrees that the
Company will at all times have authorized and reserved, free from preemptive
rights, a sufficient number of shares of Common Stock to provide for the
exercise of the rights represented by this Warrant. The Company further
covenants and agrees that if any shares of capital stock to be reserved for the
purpose of the issuance of shares upon the exercise of this Warrant require
registration with or approval of any governmental authority under any federal or
state law before such shares may be validly issued or delivered upon exercise,
then the Company will in good faith and as expeditiously as possible endeavor to
secure such registration or approval, as the case may be. If and so long as the
Common Stock issuable upon the exercise of this Warrant is listed on any
national securities exchange, the Company will, if permitted by the rules of
such exchange, list and keep listed on such exchange, upon official notice of
issuance, all shares of such Common Stock issuable upon exercise of this
Warrant.
SECTION 4. Adjustment of Number of Shares. Upon each adjustment of the Warrant
Price as provided in Section 5, the Holder shall thereafter be entitled to
purchase, at the Warrant Price resulting from such adjustment, the number of
shares (calculated to the nearest tenth of a share) obtained by multiplying the
Warrant Price in effect immediately prior to such adjustment by the number of
shares purchasable pursuant hereto immediately prior to such adjustment and
dividing the product thereof by the Warrant Price resulting from such
adjustment.
SECTION 5. Adjustment of Warrant Price. The Warrant Price shall be subject to
adjustment from time to time as follows:
(i) If the Company shall at any time or from time to time during the Term
of this Warrant issue shares of Common Stock other than Excluded Stock (as
hereinafter defined) without consideration or for a consideration per share less
than the Warrant Price in effect immediately prior to the issuance of such
Common Stock, the Warrant Price in effect immediately prior to each such
issuance or adjustment shall forthwith (except as provided in this clause (i))
be adjusted to a price equal to the quotient obtained by dividing:
(A) an amount equal to the sum of
(x) the total number of shares of Common Stock outstanding
(including any shares of Common Stock deemed to have been issued
pursuant to subdivision (3) of this clause (i) and to clause (ii)
below) immediately prior to such issuance multiplied by the Warrant
Price in effect immediately prior to such issuance, plus
(y) the consideration received by the Company upon such issuance,
by
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(B) the total number of shares of Common Stock outstanding (including
any shares of Common Stock deemed to have been issued pursuant to
subdivision (3) of this clause (i) and to clause (ii) below) immediately
after the issuance of such Common Stock.
For the purposes of any adjustment of the Warrant Price pursuant to this
clause (i), the following provisions shall be applicable:
(1) In the case of the issuance of Common Stock for cash, the
consideration shall be deemed to be the amount of cash paid therefor after
deducting therefrom any discounts, commissions or other expenses allowed,
paid or incurred by the Company for any underwriting or otherwise in
connection with the issuance and sale thereof.
(2) In the case of the issuance of Common Stock for a consideration in
whole or in part other than cash, the consideration other than cash shall
be deemed to be the fair market value thereof as determined by the Board of
Directors, irrespective of any accounting treatment; provided, however,
that such fair market value as determined by the Board of Directors shall
not exceed the aggregate Current Market Price (as hereinafter defined) of
the shares of Common Stock being issued.
(3) In the case of the issuance of (i) options to purchase or rights
to subscribe for Common Stock, (ii) securities by their terms convertible
into or exchangeable for Common Stock or (iii) options to purchase or
rights to subscribe for such convertible or exchangeable securities:
(A) the aggregate maximum number of shares of Common Stock
deliverable upon exercise of such options to purchase or rights
to subscribe for Common Stock shall be deemed to have been issued
at the time such options or rights were issued and for a
consideration equal to the consideration (determined in the
manner provided in subdivisions (1) and (2) above with the
proviso in subdivision (2) being applied to the number of shares
of Common Stock deliverable upon such exercise), if any, received
by the Company upon the issuance of such options or rights plus
the minimum purchase price provided in such options or rights for
the Common Stock covered thereby;
(B) the aggregate maximum number of shares of Common Stock
deliverable upon conversion of or in exchange for any such
convertible or exchangeable securities or upon the exercise of
options to purchase or rights to subscribe for such convertible
or exchangeable securities and subsequent conversions or
exchanges thereof shall be deemed to have been issued at the time
such securities were issued or such options or rights were issued
and for a consideration equal to the consideration received by
the Company for any such securities and related options or rights
(excluding any cash received on account of accrued interest or
accrued dividends), plus the additional consideration, if any, to
be received by the Company upon the conversion or exchange of
such
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<PAGE>
securities or the exercise of any related options or rights (the
consideration in each case to be determined in the manner
provided in subdivisions (1) and (2) above with the proviso in
subdivision (2) being applied to the number of shares of Common
Stock deliverable upon such conversion, exchange or exercise);
(C) on any change in the number of shares of Common Stock deliverable
upon exercise of any such options or rights or conversion of or
exchange for such convertible or exchangeable securities, other
than a change resulting from the antidilution provisions thereof,
the Warrant Price shall forthwith be readjusted to such Warrant
Price as would have obtained had the adjustment made upon the
issuance of such options, rights or securities not converted
prior to such change or options or rights related to such
securities not converted prior to such change been made upon the
basis of such change; and
(D) on the expiration of any such options or rights, the termination
of any such rights to convert or exchange or the expiration of
any options or rights related to such convertible or exchangeable
securities, the Warrant Price shall forthwith be readjusted to
such Warrant Price as would have obtained had the adjustment made
upon the issuance of such options, rights, securities or options
or rights related to such securities been made upon the basis of
the issuance of only the number of shares of Common Stock
actually issued upon the conversion or exchange of such
securities or upon the exercise of the options or rights related
to such securities.
(ii) "Excluded Stock" shall mean shares of Common Stock issued by the
Company as a stock dividend payable in shares of Common Stock or upon any
subdivision or split-up of the outstanding shares of Common Stock.
(iii) If, at any time during the Term of this Warrant, the number of shares
of Common Stock outstanding is increased by a stock dividend payable in shares
of Common Stock or by a subdivision or split-up of shares of Common Stock, then,
following the record date fixed for the determination of holders of Common Stock
entitled to receive such stock dividend, subdivision or split-up, the Warrant
Price shall be appropriately decreased so that the number of shares of Common
Stock issuable upon the exercise hereof shall be increased in proportion to such
increase in outstanding shares.
(iv) If, at any time during the Term of this Warrant, the number of shares
of Common Stock outstanding is decreased by a combination of the outstanding
shares of Common Stock, then, following the record date for such combination,
the Warrant Price shall appropriately increase so that the number of shares of
Common Stock issuable upon the exercise hereof shall be decreased in proportion
to such decrease in outstanding shares.
(v) In case, at any time during the Term of this Warrant, the Company shall
declare a cash dividend upon its Common Stock payable otherwise than out of
earnings or earned surplus
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or shall distribute to holders of its Common Stock shares of its capital stock
(other than Common Stock), stock or other securities of other persons, evidences
of indebtedness issued by the Company or other persons, assets (excluding cash
dividends and distributions) or options or rights (excluding options to purchase
and rights to subscribe for Common Stock or other securities of the Company
convertible into or exchangeable for Common Stock), then, in each such case,
immediately following the record date fixed for the determination of the holders
of Common Stock entitled to receive such dividend or distribution, the Warrant
Price in effect thereafter shall be determined by multiplying the Warrant Price
in effect immediately prior to such record date by a fraction of which the
numerator shall be an amount equal to the difference of (x) the Current Market
Price of one share of Common Stock minus (y) the fair market value (as
determined by the Board of Directors, whose determination shall be conclusive)
of the stock, securities, evidences of indebtedness, assets, options or rights
so distributed in respect of one share of Common Stock, and of which the
denominator shall be such Current Market Price.
(vi) All calculations under this Section 5 shall be made to the nearest
cent or to the nearest one-tenth (1/10) of a share, as the case may be.
(vii) For the purpose of any computation pursuant to this Section 5, the
Current Market Price at any date of one share of Common Stock shall be deemed to
be the average of the daily closing prices for the 30 consecutive business days
ending no more than 15 business days before the day in question (as adjusted for
any stock dividend, split, combination or reclassification that took effect
during such 30 business day period). The closing price for each day shall be the
last reported sales price regular way or, in case no such reported sales took
place on such day, the average of the last reported bid and asked prices regular
way, in either case on the principal national securities exchange on which the
Common Stock is listed or admitted to trading (or if the Common Stock is not at
the time listed or admitted for trading on any such exchange, then such price as
shall be equal to the average of the last reported bid and asked prices, as
reported by the National Association of Securities Dealers Automated Quotations
System ("NASDAQ") on such day, or if on any day in question, the security shall
not be quoted on the NASDAQ, then such price shall be equal to the average of
the last reported bid and asked prices on such day as reported by The National
Quotation Bureau Incorporated or any similar reputable quotation and reporting
service, if such quotation is not reported by The National Quotation Bureau
Incorporated); provided, however, that if the Common Stock is not traded in such
manner that the quotations referred to in this clause (vii) are available for
the period required hereunder, the Current Market Price shall be determined in
good faith by the Board of Directors of the Company or, if such determination
cannot be made, by a nationally recognized independent investment banking firm
selected by the Board of Directors of the Company (or if such selection cannot
be made, by a nationally recognized independent investment banking firm selected
by the American Arbitration Association in accordance with its rules).
(viii) Whenever the Warrant Price shall be adjusted as provided in Section
5, the Company shall prepare a statement showing the facts requiring such
adjustment and the Warrant Price that shall be in effect after such adjustment.
The Company shall cause a copy of
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<PAGE>
such statement to be sent by mail, first class postage prepaid, to each Holder
of this Warrant at his address appearing on the Company's records. Where
appropriate, such copy may be given in advance and may be included as part of
the notice required to be mailed under the provisions of subsection (x) of this
Section 5.
(ix) Adjustments made pursuant to clauses (iii), (iv) and (v) above shall
be made on the date such dividend, subdivision, split-up, combination or
distribution, as the case may be, is made, and shall become effective at the
opening of business on the business day next following the record date for the
determination of stockholders entitled to such dividend, subdivision, split-up,
combination or distribution.
(x) In the event the Company shall propose to take any action of the types
described in clauses (iii), (iv) or (v) of this Section 5, the Company shall
forward, at the same time and in the same manner, to the Holder of this Warrant
such notice, if any, which the Company shall give to the holders of capital
stock of the Company. Failure to give such notice, or any defect therein, shall
not affect the legality or validity of any such action.
(xi) In any case in which the provisions of this Section 5 shall require
that an adjustment shall become effective immediately after a record date for an
event the Company may defer until the occurrence of such event issuing to the
Holder of all or any part of this Warrant which is exercised after such record
date and before the occurrence of such event the additional shares of capital
stock issuable upon such exercise by reason of the adjustment required by such
event over and above the shares of capital stock issuable upon such exercise
before giving effect to such adjustment exercise; provided, however, that the
Company shall deliver to such Holder a due bill or other appropriate instrument
evidencing such Holder's right to receive such additional shares upon the
occurrence of the event requiring such adjustment.
(xii) The sale or other disposition of any Common Stock theretofore held in
the treasury of the Company shall be deemed to be an issuance thereof.
SECTION 6. Ownership.
6.1. Ownership of This Warrant. The Company may deem and treat the person
in whose name this Warrant is registered as the holder and owner hereof
(notwithstanding any notations of ownership or writing hereon made by anyone
other than the Company) for all purposes and shall not be affected by any notice
to the contrary until presentation of this Warrant for registration of transfer
as provided in this Section 6.
6.2. Transfer and Replacement. This Warrant and all rights hereunder are
transferable in whole or in part upon the books of the Company by the Holder
hereof in person or by duly authorized attorney, and a new Warrant or Warrants,
of the same tenor as this Warrant but registered in the name of the transferee
or transferees shall be made and delivered by the Company upon surrender of this
Warrant duly endorsed, at the office of the Company referred to in Section 13
hereof. Upon receipt by the Company of evidence reasonably satisfactory to it of
the loss, theft or destruction, and, in such case, of indemnity or security
reasonably satisfactory to it, and upon surrender of this Warrant if mutilated,
the Company will make and
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<PAGE>
deliver a new Warrant of like tenor, in lieu of this Warrant; provided that if
the Holder hereof is an instrumentality of a state or local government or an
institutional holder or a nominee for such an instrumentality or institutional
holder an irrevocable agreement of indemnity by such Holder shall be sufficient
for all purposes of this Section 6, and no evidence of loss or theft or
destruction shall be necessary. This Warrant shall be promptly cancelled by the
Company upon the surrender hereof in connection with any transfer or
replacement. Except as otherwise provided above, in the case of the loss, theft
or destruction of a Warrant, the Company shall pay all expenses, taxes and other
stock transfer taxes (if any) payable in connection with a transfer of this
Warrant, which shall be payable by the Holder. Holder will not transfer this
Warrant and the rights hereunder except in compliance with federal and state
securities laws.
SECTION 7. Mergers, Consolidation, Sales. In the case of any proposed
consolidation or merger of the Company with another corporation, or the proposed
sale of all or substantially all of its assets to another corporation, or any
proposed reorganization or reclassification of the capital stock of the Company,
then, as a condition of such consolidation, merger, sale, reorganization or
reclassification, lawful and adequate provision shall be made whereby the Holder
of this Warrant shall thereafter have the right to receive upon the basis and
upon the terms and conditions specified herein, in lieu of the shares of the
Common Stock of the Company immediately theretofore purchasable hereunder, such
shares of stock, securities or assets as may (by virtue of such consolidation,
merger, sale, reorganization or reclassification) be issued or payable with
respect to or in exchange for the number of shares of such Common Stock
purchasable hereunder immediately before such consolidation, merger, sale,
reorganization or reclassification. In any such case appropriate provision shall
be made with respect to the rights and interests of the Holder of this Warrant
to the end that the provisions hereof 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 this Warrant. The Company shall not effect any
such consolidation, merger or sale unless prior to or simultaneously with the
consummation thereof the successor corporation or purchaser, as the case may be,
shall assume by written instrument the obligation to deliver to the Holder such
shares of stock, securities or assets as, in accordance with the foregoing
provisions, the Holder is entitled to receive.
SECTION 8. Notice of Dissolution or Liquidation. In case of any distribution of
the assets of the Company in dissolution or liquidation (except under
circumstances when the foregoing Section 7 shall be applicable), the Company
shall give notice thereof to the Holder hereof and shall make no distribution to
shareholders until the expiration of thirty (30) days from the date of mailing
of the aforesaid notice and, in any case, the Holder hereof may exercise this
Warrant within thirty (30) days from the date of the giving of such notice, and
all rights herein granted not so exercised within such thirty-day period shall
thereafter become null and void.
SECTION 9. Notice of Extraordinary Dividends. Subject to further compliance with
Section 11.2 hereof, if the Board of Directors of the Company shall declare any
dividend or other distribution on its Common Stock except out of earned surplus
or by way of a stock dividend payable in shares of its Common Stock, the Company
shall mail notice thereof to the Holder hereof not less than thirty (30) days
prior to the record date fixed for determining
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<PAGE>
shareholders entitled to participate in such dividend or other distribution, and
the Holder hereof shall not participate in such dividend or other distribution
unless this Warrant is exercised prior to such record date. The provisions of
this Section 9 shall not apply to distributions made in connection with
transactions covered by Section 7.
SECTION 10. Fractional Shares. Fractional Shares shall not be issued upon the
exercise of this Warrant but in any case where the Holder would, except for the
provisions of this Section 10, be entitled under the terms hereof to receive a
fractional share upon the complete exercise of this Warrant, the Company shall,
upon the exercise of this Warrant for the largest number of whole shares then
called for, pay a sum in cash equal to the excess of the value of such
fractional share (determined in such reasonable manner as may be prescribed in
good faith by the Board of Directors of the Company).
SECTION 11. Special Arrangements of the Company. The Company covenants and
agrees that during the Term of this Warrant, unless otherwise approved by the
Holder of this Warrant:
11.1. Will Reserve Shares. The Company will reserve and set apart and have
at all times, free from preemptive rights, the number of shares of authorized
but unissued Common Stock deliverable upon the exercise of this Warrant.
11.2. Will Not Issue Certain Stock. The Company will not issue any capital
stock of any class which has rights to be preferred as to dividends or as to the
distribution of assets upon voluntary or involuntary liquidation, dissolution or
winding-up, unless such rights shall be limited to a fixed sum or percentage of
par value in respect of participation in dividends and in the distribution of
assets. The Company will be deemed to have issued stock which is preferred as to
dividends or as to distribution of assets if either (i) the right to preferred
dividends exceeds the amount of fifteen percent (15%) of par value or (ii) the
right to preferred distribution of assets exceeds the amount of one hundred
percent (100%) of par value for the first year after issuance of such stock or
one hundred and twenty-five percent (125%) thereafter.
11.3. Will Not Declare Dividends. The Company will not pay any dividend or
other distribution on any of its capital stock unless such dividend or other
distribution on such share of capital stock and all other dividends or
distributions paid during the prior one year period on such shares of capital
stock are paid out of earned surplus and the aggregate amount thereof is less
than fifteen percent (15%) of the fair market value of the shares of capital
stock (if then ascertainable) on the date of declaration of such dividend or
other distribution.
11.4. Will Bind Successors. This Warrant shall be binding upon any
corporation succeeding to the Company by merger, consolidation or acquisition of
all or substantially all of the Company's assets.
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SECTION 12. Registration rights; etc.
12.1. Certain Definitions. As used in this Section 12, the following terms
shall have the following respective meanings:
"Commission" shall mean the Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act.
"Registrable Securities" shall mean the Warrant Shares less any Warrant
Shares theretofore sold to the public or in a private placement.
The terms "register," "registered" and "registration" shall refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act and applicable rules and regulations
thereunder, and the effectiveness of such registration statement.
"Registration Expenses" shall mean all expenses incurred by the Company in
compliance with Section 12.2 hereof, including, without limitation, all
registration and filing fees, printing expenses, fees and disbursements of
counsel for the Company, blue sky fees and expenses, and the expense of any
special audits incident to or required by any such registration (but excluding
the compensation of regular employees of the Company, which shall be paid in any
event by the Company).
"Selling Expenses" shall mean all underwriting discounts and selling
commissions applicable to the sale of Registrable Securities, all fees and
disbursements of counsel for any Holder and any blue sky fees and expenses
excluded from the definition of "Registration Expenses."
"Holder" shall mean any holder of outstanding Warrant Shares or Registrable
Securities (except for purposes of determining "Holders" under Section 12.7
hereof) have not been sold to the public.
"Other Shareholders" shall mean holders of securities of the Company who
are entitled by contract with the Company to have securities included in a
registration of the Company's securities.
12.2. Company Registration.
(a) Notice of Registration. If the Company shall determine to register any
of its securities either for its own account or the account of a security holder
or holders exercising their respective demand registration rights, other than a
registration relating solely to employee benefit plans, or a registration
relating solely to a Commission Rule 145 transaction, or a registration on any
registration form which does not permit secondary sales, the Company will:
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(i) promptly give to each Holder written notice thereof (which shall
include a list of the jurisdictions in which the Company intends to
attempt to qualify such securities under the applicable blue sky or
other state securities laws); and
(ii) include in such registration (and any related qualification under blue
sky laws or other compliance), and in any underwriting involved
therein, all the Registrable Securities specified in a written request
or requests, made by any Holder within fifteen (15) days after receipt
of the written notice from the Company described in clause (i) above,
subject to any limitations on the number of shares as set forth in
Section 12.2(b) below.
(b) Underwriting. If the registration of which the Company gives notice is
for a registered public offering involving an underwriting, the Company shall so
advise the Holders as part of the written notice given pursuant to Section
12.2(a)(i). In such event, the right of any Holder to registration pursuant to
Section 12.2 shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting to the extent provided herein. All Holders proposing to distribute
their securities through such underwriting shall (together with the Company,
directors and officers and the Other Shareholders distributing their securities
through such underwriting) enter into an underwriting agreement in customary
form with the underwriter or underwriters selected for underwriting by the
Company.
Notwithstanding any other provision of this Section 12.2, if the
underwriter determines that marketing factors require a limitation on the number
of shares to be underwritten, the underwriter may (subject to the allocation
priority set forth below) exclude from such registration and underwriting some
or all of the Registrable Securities which would otherwise be underwritten
pursuant hereto. The Company shall so advise all holders of securities
requesting registration, and the number of shares of securities that are
entitled to be included in the registration and underwriting shall be allocated
in the following manner: The number of shares that may be included in the
registration and underwriting on behalf of such Holders, directors and officers
and Other Shareholders shall be allocated among such Holders, directors and
officers and Other Shareholders in proportion, as nearly practicable, to the
respective amounts of Registrable Securities and other securities which they had
requested to be included in such registration at the time of filing the
registration statement.
If any Holder of Registrable Securities or any officer, director or Other
Shareholder disapproves of the terms of any such underwriting, he may elect to
withdraw therefrom by written notice to the Company and the underwriter. Any
Registrable Securities or other securities excluded or withdrawn from such
underwriting shall be withdrawn from such registration.
12.3. Demand Registration Rights. In the event that the Company grants
demand registration rights to any other holder of securities of the Company, the
Company will promptly give to the Holder written notice thereof and, if in the
opinion of the Holder such demand registration rights are more favorable than
the registration rights provided under this
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Warrant, the Holder shall so notify the Company within thirty (30) days of
receipt of the foregoing notice from the Company, whereupon such demand
registration rights shall automatically be deemed to be incorporated in this
Warrant.
12.4. Expenses of Registration. The Company shall bear all Registration
Expenses incurred in connection with any registration, qualification and
compliance by the Company pursuant to Section 12.2 hereof. All Selling Expenses
shall be borne by the holders of the securities so registered pro rata on the
basis of the number of their shares so registered.
12.5. Registration Procedures. In the case of each registration effected by
the Company pursuant to this Section 12, the Company will keep each Holder
advised in writing as to the initiation of each registration and as to the
completion thereof. The Company will, at its expense:
(a) keep such registration effective for a period of one hundred twenty
(120) days or until the Holder or Holders have completed the distribution
described in the registration statement relating thereto, whichever first
occurs;
(b) furnish such number of prospectuses and other documents incident
thereto as a Holder from time to time may reasonably request; and
(c) use its best efforts to register or qualify the Registrable Securities
under the securities laws or blue-sky laws of such jurisdictions as any Holder
may request; provided, however, that the Company shall not be obligated to
register or qualify such Registrable Securities in any particular jurisdiction
in which the Company would be required to execute a general consent to service
of process in order to effect such registration, qualification or compliance,
unless the Company is already subject to service in the jurisdiction and except
as may be required by the Securities Act or applicable rules or regulations
thereunder.
12.6. Indemnification.
(a) The Company, with respect to each registration, qualification and
compliance effected pursuant to this Section 12, will indemnify and hold
harmless each Holder, each of its officers, directors and partners, and each
party controlling such Holder, and each underwriter, if any, and each party who
controls any underwriter, against all claims, losses, damages and liabilities
(or actions in respect thereof) arising out of or based on any untrue statement
(or alleged untrue statement) of a material fact contained in any prospectus,
offering circular or other document (including any related registration
statement, notification or the like) incident to any such registration,
qualification or compliance, or based on any omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, or any violation by the Company of the
Securities Act or any rule or regulation thereunder applicable to the Company
and relating to action or inaction required of the Company in connection with
any such registration, qualification or compliance, and will reimburse each such
Holder, each of its officers, directors and partners, and each party controlling
such Holder, each such underwriter and each party who controls any such
underwriter, for any legal and any other expenses incurred in connection with
investigating or
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defending any such claim, loss, damage, liability or action, provided that the
Company will not be liable in any such case to the extent that any such claim,
loss, damage, liability or expense arises out of or is based on any untrue
statement or omission based solely upon written information furnished to the
Company by such Holder or underwriter, as the case may be, and stated to be
specifically for use therein.
(b) Each Holder and Other Shareholder will, if Registrable Securities held
by him are included in the securities as to which such registration,
qualification or compliance is being effected, indemnify and hold harmless the
Company, each of its directors and officers and each underwriter, if any, of the
Company's securities covered by such a registration statement, each party who
controls the Company or such underwriter, each other such Holder and Other
Shareholder and each of their respective officers, directors and partners, and
each party controlling such Holder and Other Shareholder, against all claims,
losses, damages and liabilities (or actions in respect thereof) arising out of
or based on any untrue statement (or alleged untrue statement) of a material
fact contained in any such registration statement, prospectus, offering circular
or other document, or any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse the Company and such Holders, Other
Shareholders, directors, officers, partners, parties, underwriters or control
persons for any legal or any other expenses reasonably incurred in connection
with investigating or defending any such claim, loss, damage, liability or
action, in each case to the extent, but only to the extent, that such untrue
statement (or alleged untrue statement) or omission (or alleged omission) is
made in such registration statement, prospectus, offering circular or other
document solely in reliance upon and in conformity with written information
furnished to the Company by such Holder or Other Shareholder and stated to be
specifically for use therein; provided, however, that the obligations of such
Holders and Other Shareholders hereunder shall be limited to an amount equal to
the proceeds to each such Holder or Other Shareholder of securities sold as
contemplated herein.
(c) Each party entitled to indemnification under this Section 12.6 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or any litigation resulting
therefrom, shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld), and the Indemnified Party may participate in such
defense at such party's expense (unless the Indemnified Party shall have been
advised by counsel that actual or potential differing interests or defenses
exist or may exist between the Indemnifying Party and the Indemnified Party, in
which case such expense shall be paid by the Indemnifying Party), and provided
further that the failure of any Indemnified Party to give notice as provided
herein shall not relieve the Indemnifying Party of its obligations under this
Section 12. No Indemnifying Party, in the defense of any such claim or
litigation, shall, except with the consent of each Indemnified Party, consent to
entry of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant
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or plaintiff to such Indemnified Party of a release from all liability in
respect to such claim or litigation. Each Indemnified Party shall provide such
information as may be reasonably requested by an Indemnifying Party in order to
enable such Indemnifying Party to defend a claim as to which indemnity is
sought.
12.7. Information by Holder. Each Holder of Registrable Securities, and
each Other Shareholder holding securities included in any registration, shall
furnish to the Company such information regarding such Holder or Other
Shareholder as the Company may reasonably request in writing and as shall be
reasonably required in connection with any registration, qualification or
compliance referred to in this Section 12.
12.8. Rule 144 Reporting. With a view to making available the benefits of
certain rules and regulations of the Commission which may permit the sale of the
Registrable Securities to the public without registration, the Company agrees
to:
(a) Make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act, at all times from
and after ninety (90) days following the effective date of the first
registration under the Securities Act filed by the Company for an offering of
its securities to the general public;
(b) Use its best efforts to file with the Commission in a timely manner all
reports and other documents required of the Company under the Securities Act and
the Exchange Act at any time after it has become subject to such reporting
requirements; and
(c) So long as the Holder owns any Registrable Securities, furnish to the
Holder forthwith upon request a written statement by the Company as to its
compliance with the reporting requirements of Rule 144 (at any time from and
after ninety (90) days following the effective date of the first registration
statement in connection with an offering of its Securities to the general
public), and of the Securities Act and the Securities Exchange Act of 1934, as
amended (at any time after it has become subject to such reporting
requirements), a copy of the most recent annual or quarterly report of the
Company, and such other reports and documents so filed as the Holder may
reasonably request in availing itself of any rule or regulation of the
Commission allowing the Holder to sell any such securities without registration.
SECTION 13. Notices. Any notice or other document required or permitted to be
given or delivered to the Holder shall be delivered at, or sent by certified or
registered mail to, the Holder at 190 Farmington Avenue, Farmington, CT
06032-1713 or to such other address as shall have been furnished to the Company
in writing by the Holder. Any notice or other document required or permitted to
be given or delivered to the Company shall be delivered at, or sent by certified
or registered mail to, the Company at 550 West Avenue, Stamford, CT 06902 or to
such other address as shall have been furnished in writing to the Holder by the
Company. Any notice so addressed and mailed by registered or certified mail
shall be deemed to be given when so mailed. Any notice so addressed and
otherwise delivered shall be deemed to be given when actually received by the
addressee.
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SECTION 14. No Rights as Stockholder; Limitation of Liability. This Warrant
shall not entitle the Holder to any of the rights of a shareholder of the
company. No provision hereof, in the absence of affirmative action by the Holder
to purchase shares of Common Stock, and no mere enumeration herein of the rights
or privileges of the Holder, shall give rise to any liability of the Holder for
the Warrant Price hereunder or as a shareholder of the Company, whether such
liability is asserted by the Company or by creditors of the Company.
SECTION 15. Law Governing. This Warrant shall be governed by, and construed and
enforced in accordance with, the laws of the State of Connecticut.
SECTION 16. Miscellaneous.
(a) This Warrant and any provision hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
(or any predecessor in interest thereof) against which enforcement of the same
is sought. The headings in this Warrant are for purposes of reference only and
shall not affect the meaning or construction of any of the provisions hereof.
(b) All capitalized terms used herein and not otherwise defined herein
shall have the meanings ascribed to them in the Purchase Agreement.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its
duly authorized officer on this _____ day of December, 1997.
LIFECODES CORPORATION
By: /s/ Walter O. Fredericks
---------------------------------
Walter O. Fredericks
President, CEO
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FORM OF NOTICE OF EXERCISE
[To be signed only upon exercise of the Warrant]
TO BE EXECUTED BY THE REGISTERED HOLDER
TO EXERCISE THE WITHIN WARRANT
The undersigned hereby exercises the right to purchase _________ shares of
Common Stock which the undersigned is entitled to purchase by the terms of the
within Warrant, according to the conditions thereof, and herewith makes payment
of the Warrant Price for such shares in full. All shares to be issued pursuant
hereto shall be issued in the name of __________________________________________
and the initial address of such person to be entered in the books of the Company
shall be: ____________________________. The shares are to be issued in
certificates of the following denominations:
------------------------------------
[Type Name of Holder]
By: ________________________________
Title: _____________________________
Dated: _________________________
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FORM OF ASSIGNMENT
[To be signed only upon transfer of Warrant]
TO BE EXECUTED BY THE REGISTERED HOLDER
TO TRANSFER THE WITHIN WARRANT
FOR VALUE RECEIVED _______________________________ hereby sells, assigns
and transfers unto __________________________________ all rights of the
undersigned under and pursuant to the within Warrant, and the undersigned does
hereby irrevocably constitute and appoint ______________________________
Attorney to transfer the said Warrant on the books of the Company, with full
power or substitution.
------------------------------------
[Type Name of Holder]
By: ________________________________
Title: _____________________________
Dated: _________________________
NOTICE
The signature of the foregoing Assignment must correspond to the name as
written upon the face of the within Warrant in every particular, without
alteration or enlargement or any change whatsoever.
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THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD OR OFFERED FOR SALE
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER
SAID ACT AND ANY APPLICABLE STATE SECuRITIES LAWS OR THE AVAILABILITY OF ANY
EXEMPTION FROM REGISTRATION UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES
LAWS.
No. 2
STOCK SUBSCRIPTION WARRANT
To Purchase Common Stock of
Lifecodes Corporation, a Delaware Corporation (the "Company")
DATE OF INITIAL ISSUANCE: August 1, 1994
THIS CERTIFIES THAT for value received, DEAN E. FENTON or registered assigns
(hereinafter called the "Holder") is entitled to purchase from the Company, at
any time during the Term of this Warrant, 624 shares of Common Stock, par value
$.10 per share, of the Company (the "Common Stock"), at the Warrant Price,
payable in lawful money of the United States of America to be paid upon the
exercise hereof. The exercise of this Warrant shall be subject to the
provisions, limitations and restrictions herein contained and may be exercised
in whole or in part.
SECTION 1. Definitions.
For all purposes of this Warrant, the following terms shall have the meanings
indicated:
Common Stock - shall mean and include the Company's authorized Common Stock,
$.10 par value, as constituted at the date hereof, and shall also include any
capital stock of any class of the Company hereafter authorized which shall not
be limited to a fixed sum or percentage of par value in respect to 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.
Securities Act - the Securities Act of 1933, as amended.
Term of this Warrant - shall mean the period beginning on the date of initial
issuance hereof and ending on the date ten (10) years from the date of initial
issuance hereof.
Warrant Price - $1.00 per share, subject to adjustment in accordance with
Section 5 hereof.
Warrants - this Warrant and any other Warrant or Warrants issued pursuant to the
original holder of this Warrant, or any transferees from such original holder of
this holder.
<PAGE>
Warrant Shares - shares of Common Stock purchased or purchasable by the Holder
of this Warrant upon the exercise hereof.
SECTION 2. Exercise of Warrant.
2.1. Procedure for Exercise of Warrant. To exercise this Warrant in whole
or in part (but not as to any fractional share of Common Stock), the Holder
shall deliver to the Company at its office referred to in Section 13 hereof at
any time and from time to time during the Term of this Warrant: (i) the Notice
of Exercise in the form attached hereto, (ii) cash or certified or official bank
check, payable to the order of the Company in the amount of the Warrant Price
for each share being purchased, and (iii) this Warrant. In the event of any
exercise of the rights represented by this Warrant, a certificate or
certificates for the shares of Common Stock so purchased, registered in the name
of the Holder or such other name or names as may be designated by the Holder,
shall be delivered to the Holder hereof within a reasonable time, not exceeding
fifteen (15) 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 (except a remaining fractional share), 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 person in whose name any certificate for
shares of Common Stock is issued upon exercise of this Warrant shall for all
purposes be deemed to have become the holder of record of such shares on the
date on which the Warrant was surrendered and payment of the Warrant Price and
any applicable taxes was made, irrespective of the date of delivery of such
certificate, except that, if the date of such surrender and payment is a date
when the stock transfer books of the Company are closed, such person shall be
deemed to have become the holder of such shares at the close of business on the
next succeeding date on which the stock transfer books are open.
2.2. Transfer Restriction Legend. Each certificate for Warrant shares shall
bear the following legend (and any additional legend required by (i) any
applicable state securities laws and (ii) any securities exchange upon which
such Warrant Shares may, at the time of such exercise, be listed) on the face
thereof unless at the time of exercise such Warrant Shares shall be registered
under the Securities Act:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended, and may not be sold or
transferred in the absence of such registration or an exemption
therefrom under said Act."
Any certificate issued at any time in exchange or substitution for any
certificate bearing such legend (except a new certificate issued upon completion
of a public distribution under a registration statement of the securities
represented thereby) shall also bear such legend unless, in the opinion of
counsel for the holder thereof (which counsel shall be reasonably satisfactory
to counsel for the Company) the securities represented thereby are not, at such
time, required by law to bear such legend.
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<PAGE>
SECTION 3. Covenants as to Common Stock. The Company covenants and agrees that
all shares of Common Stock that may be issued upon the exercise of the rights
represented by this Warrant will, upon issuance, be validly issued, fully paid
and nonassessable, and free from all taxes, liens and charges with respect to
the issue thereof. The Company further covenants and agrees that it will pay
when due and payable any and all federal and state taxes which may be payable in
respect of the issue of this Warrant, or any Common Stock or certificates
therefor issuable upon the exercise of this Warrant. The Company further
covenants and agrees that the Company will at all times have authorized and
reserved, free from preemptive rights, a sufficient number of shares of Common
Stock to provide for the exercise of the rights represented by this Warrant. The
Company further covenants and agrees that if any shares of capital stock to be
reserved for the purpose of the issuance of shares upon the exercise of this
Warrant require registration with or approval of any governmental authority
under any federal or state law before such shares may be validly issued or
delivered upon exercise, then the Company will in good faith and as
expeditiously as possible endeavor to secure such registration or approval, as
the case may be. If and so long as the Common Stock issuable upon the exercise
of this Warrant is listed on any national securities exchange, the Company will,
if permitted by the rules of such exchange, list and keep listed on such
exchange, upon official notice of issuance, all shares of such Common Stock
issuable upon exercise of this Warrant.
SECTION 4. Adjustment of Number of Shares. Upon each adjustment of the Warrant
Price as provided in Section 5, the Holder shall thereafter be entitled to
purchase, at the Warrant Price resulting from such adjustment, the number of
shares (calculated to the nearest tenth of a share) obtained by multiplying the
Warrant Price in effect immediately prior to such adjustment by the number of
shares purchasable pursuant hereto immediately prior to such adjustment and
dividing the product thereof by the Warrant Price resulting from such
adjustment.
SECTION 5. Adjustment of Warrant Price. The Warrant Price shall be subject to
adjustment from time to time as follows:
(i) If the Company shall at any time or from time to time during the Term
of this Warrant issue shares of Common Stock other than Excluded Stock (as
hereinafter defined) without consideration or for a consideration per share less
than the Warrant Price in effect immediately prior to the issuance of such
Common Stock, the Warrant Price in effect immediately prior to each such
issuance or adjustment shall forthwith (except as provided in this clause (i))
be adjusted to a price equal to the quotient obtained by dividing:
(A) an amount equal to the sum of
(x) the total number of shares of Common Stock outstanding
(including any shares of Common Stock deemed to have been issued
pursuant to subdivision (3) of this clause (i) and to clause (ii)
below) immediately prior to such issuance multiplied by the Warrant
Price in effect immediately prior to such issuance, plus
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<PAGE>
(y) the consideration received by the Company upon such issuance,
by
(B) the total number of shares of Common Stock outstanding (including
any shares of Common Stock deemed to have been issued pursuant to
subdivision (3) of this clause (i) and to clause (ii) below) immediately
after the issuance of such Common Stock.
For the purposes of any adjustment of the Warrant Price pursuant to this
clause (i), the following provisions shall be applicable:
(1) In the case of the issuance of Common Stock for cash, the
consideration shall be deemed to be the amount of cash paid therefor after
deducting therefrom any discounts, commissions or other expenses allowed,
paid or incurred by the Company for any underwriting or otherwise in
connection with the issuance and sale thereof.
(2) In the case of the issuance of Common Stock for a consideration in
whole or in part other than cash, the consideration other than cash shall
be deemed to be the fair market value thereof as determined by the Board of
Directors, irrespective of any accounting treatment; provided, however,
that such fair market value as determined by the Board of Directors shall
not exceed the aggregate Current Market Price (as hereinafter defined) of
the shares of Common Stock being issued.
(3) In the case of the issuance of (i) options to purchase or rights
to subscribe for Common Stock, (ii) securities by their terms convertible
into or exchangeable for Common Stock or (iii) options to purchase or
rights to subscribe for such convertible or exchangeable securities:
(A) the aggregate maximum number of shares of Common Stock
deliverable upon exercise of such options to purchase or rights
to subscribe for Common Stock shall be deemed to have been issued
at the time such options or rights were issued and for a
consideration equal to the consideration (determined in the
manner provided in subdivisions (1) and (2) above with the
proviso in subdivision (2) being applied to the number of shares
of Common Stock deliverable upon such exercise), if any, received
by the Company upon the issuance of such options or rights plus
the minimum purchase price provided in such options or rights for
the Common Stock covered thereby;
(B) the aggregate maximum number of shares of Common Stock
deliverable upon conversion of or in exchange for any such
convertible or exchangeable securities or upon the exercise of
options to purchase or rights to subscribe for such convertible
or exchangeable securities and subsequent conversions or
exchanges thereof shall be deemed to have been issued at the time
such securities were issued or such options or rights were issued
and for a consideration equal to the consideration
4
<PAGE>
received by the Company for any such securities and related
options or rights (excluding any cash received on account of
accrued interest or accrued dividends), plus the additional
consideration, if any, to be received by the Company upon the
conversion or exchange of such securities or the exercise of any
related options or rights (the consideration in each case to be
determined in the manner provided in subdivisions (1) and (2)
above with the proviso in subdivision (2) being applied to the
number of shares of Common Stock deliverable upon such
conversion, exchange or exercise);
(C) on any change in the number of shares of Common Stock deliverable
upon exercise of any such options or rights or conversion of or
exchange for such convertible or exchangeable securities, other
than a change resulting from the antidilution provisions thereof,
the Warrant Price shall forthwith be readjusted to such Warrant
Price as would have obtained had the adjustment made upon the
issuance of such options, rights or securities not converted
prior to such change or options or rights related to such
securities not converted prior to such change been made upon the
basis of such change; and
(D) on the expiration of any such options or rights, the termination
of any such rights to convert or exchange or the expiration of
any options or rights related to such convertible or exchangeable
securities, the Warrant Price shall forthwith be readjusted to
such Warrant Price as would have obtained had the adjustment made
upon the issuance of such options, rights, securities or options
or rights related to such securities been made upon the basis of
the issuance of only the number of shares of Common Stock
actually issued upon the conversion or exchange of such
securities or upon the exercise of the options or rights related
to such securities.
(ii) "Excluded Stock" shall mean shares of Common Stock issued by the
Company as a stock dividend payable in shares of Common Stock or upon any
subdivision or split-up of the outstanding shares of Common Stock.
(iii) If, at any time during the Term of this Warrant, the number of shares
of Common Stock outstanding is increased by a stock dividend payable in shares
of Common Stock or by a subdivision or split-up of shares of Common Stock, then,
following the record date fixed for the determination of holders of Common Stock
entitled to receive such stock dividend, subdivision or split-up, the Warrant
Price shall be appropriately decreased so that the number of shares of Common
Stock issuable upon the exercise hereof shall be increased in proportion to such
increase in outstanding shares.
(iv) If, at any time during the Term of this Warrant, the number of shares
of Common Stock outstanding is decreased by a combination of the outstanding
shares of Common Stock, then, following the record date for such combination,
the Warrant Price shall appropriately
5
<PAGE>
increase so that the number of shares of Common Stock issuable upon the exercise
hereof shall be decreased in proportion to such decrease in outstanding shares.
(v) In case, at any time during the Term of this Warrant, the Company shall
declare a cash dividend upon its Common Stock payable otherwise than out of
earnings or earned surplus or shall distribute to holders of its Common Stock
shares of its capital stock (other than Common Stock), stock or other securities
of other persons, evidences of indebtedness issued by the Company or other
persons, assets (excluding cash dividends and distributions) or options or
rights (excluding options to purchase and rights to subscribe for Common Stock
or other securities of the Company convertible into or exchangeable for Common
Stock), then, in each such case, immediately following the record date fixed for
the determination of the holders of Common Stock entitled to receive such
dividend or distribution, the Warrant Price in effect thereafter shall be
determined by multiplying the Warrant Price in effect immediately prior to such
record date by a fraction of which the numerator shall be an amount equal to the
difference of (x) the Current Market Price of one share of Common Stock minus
(y) the fair market value (as determined by the Board of Directors, whose
determination shall be conclusive) of the stock, securities, evidences of
indebtedness, assets, options or rights so distributed in respect of one share
of Common Stock, and of which the denominator shall be such Current Market
Price.
(vi) All calculations under this Section 5 shall be made to the nearest
cent or to the nearest one-tenth (1/10) of a share, as the case may be.
(vii) For the purpose of any computation pursuant to this Section 5, the
Current Market Price at any date of one share of Common Stock shall be deemed to
be the average of the daily closing prices for the 30 consecutive business days
ending no more than 15 business days before the day in question (as adjusted for
any stock dividend, split, combination or reclassification that took effect
during such 30 business day period). The closing price for each day shall be the
last reported sales price regular way or, in case no such reported sales took
place on such day, the average of the last reported bid and asked prices regular
way, in either case on the principal national securities exchange on which the
Common Stock is listed or admitted to trading (or if the Common Stock is not at
the time listed or admitted for trading on any such exchange, then such price as
shall be equal to the average of the last reported bid and asked prices, as
reported by the National Association of Securities Dealers Automated Quotations
System ("NASDAQ") on such day, or if on any day in question, the security shall
not be quoted on the NASDAQ, then such price shall be equal to the average of
the last reported bid and asked prices on such day as reported by The National
Quotation Bureau Incorporated or any similar reputable quotation and reporting
service, if such quotation is not reported by The National Quotation Bureau
Incorporated); provided, however, that if the Common Stock is not traded in such
manner that the quotations referred to in this clause (vii) are available for
the period required hereunder, the Current Market Price shall be determined in
good faith by the Board of Directors of the Company or, if such determination
cannot be made, by a nationally recognized
6
<PAGE>
independent investment banking firm selected by the Board of Directors of the
Company (or if such selection cannot be made, by a nationally recognized
independent investment banking firm selected by the American Arbitration
Association in accordance with its rules).
(viii) Whenever the Warrant Price shall be adjusted as provided in Section
5, the Company shall prepare a statement showing the facts requiring such
adjustment and the Warrant Price that shall be in effect after such adjustment.
The Company shall cause a copy of such statement to be sent by mail, first class
postage prepaid, to each Holder of this Warrant at his address appearing on the
Company's records. Where appropriate, such copy may be given in advance and may
be included as part of the notice required to be mailed under the provisions of
subsection (x) of this Section 5.
(ix) Adjustments made pursuant to clauses (iii), (iv) and (v) above shall
be made on the date such dividend, subdivision, split-up, combination or
distribution, as the case may be, is made, and shall become effective at the
opening of business on the business day next following the record date for the
determination of stockholders entitled to such dividend, subdivision, split-up,
combination or distribution.
(x) In the event the Company shall propose to take any action of the types
described in clauses (iii), (iv) or (v) of this Section 5, the Company shall
forward, at the same time and in the same manner, to the Holder of this Warrant
such notice, if any, which the Company shall give to the holders of capital
stock of the Company. Failure to give such notice, or any defect therein, shall
not affect the legality or validity of any such action.
(xi) In any case in which the provisions of this Section 5 shall require
that an adjustment shall become effective immediately after a record date for an
event the Company may defer until the occurrence of such event issuing to the
Holder of all or any part of this Warrant which is exercised after such record
date and before the occurrence of such event the additional shares of capital
stock issuable upon such exercise by reason of the adjustment required by such
event over and above the shares of capital stock issuable upon such exercise
before giving effect to such adjustment exercise; provided, however, that the
Company shall deliver to such Holder a due bill or other appropriate instrument
evidencing such Holder's right to receive such additional shares upon the
occurrence of the event requiring such adjustment.
(xii) The sale or other disposition of any Common Stock theretofore held in
the treasury of the Company shall be deemed to be an issuance thereof.
SECTION 6. Ownership.
6.1. Ownership of This Warrant. The Company may deem and treat the person
in whose name this Warrant is registered as the holder and owner hereof
(notwithstanding any notations of ownership or writing hereon made by anyone
other than the Company) for all purposes and shall not be affected by any notice
to the contrary until presentation of this Warrant for registration of transfer
as provided in this Section 6.
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6.2. Transfer and Replacement. This Warrant and all rights hereunder are
transferable in whole or in part upon the books of the Company by the Holder
hereof in person or by duly authorized attorney, and a new Warrant or Warrants,
of the same tenor as this Warrant but registered in the name of the transferee
or transferees shall be made and delivered by the Company upon surrender of this
Warrant duly endorsed, at the office of the Company referred to in Section 13
hereof. Upon receipt by the Company of evidence reasonably satisfactory to it of
the loss, theft or destruction, and, in such case, of indemnity or security
reasonably satisfactory to it, and upon surrender of this Warrant if mutilated,
the Company will make and deliver a new Warrant of like tenor, in lieu of this
Warrant; provided that if the Holder hereof is an instrumentality of a state or
local government or an institutional holder or a nominee for such an
instrumentality or institutional holder an irrevocable agreement of indemnity by
such Holder shall be sufficient for all purposes of this Section 6, and no
evidence of loss or theft or destruction shall be necessary. This Warrant shall
be promptly cancelled by the Company upon the surrender hereof in connection
with any transfer or replacement. Except as otherwise provided above, in the
case of the loss, theft or destruction of a Warrant, the Company shall pay all
expenses, taxes and other stock transfer taxes (if any) payable in connection
with a transfer of this Warrant, which shall be payable by the Holder. Holder
will not transfer this Warrant and the rights hereunder except in compliance
with federal and state securities laws.
SECTION 7. Mergers, Consolidation, Sales. In the case of any proposed
consolidation or merger of the Company with another corporation, or the proposed
sale of all or substantially all of its assets to another corporation, or any
proposed reorganization or reclassification of the capital stock of the Company,
then, as a condition of such consolidation, merger, sale, reorganization or
reclassification, lawful and adequate provision shall be made whereby the Holder
of this Warrant shall thereafter have the right to receive upon the basis and
upon the terms and conditions specified herein, in lieu of the shares of the
Common Stock of the Company immediately theretofore purchasable hereunder, such
shares of stock, securities or assets as may (by virtue of such consolidation,
merger, sale, reorganization or reclassification) be issued or payable with
respect to or in exchange for the number of shares of such Common Stock
purchasable hereunder immediately before such consolidation, merger, sale,
reorganization or reclassification. In any such case appropriate provision shall
be made with respect to the rights and interests of the Holder of this Warrant
to the end that the provisions hereof 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 this Warrant. The Company shall not effect any
such consolidation, merger or sale unless prior to or simultaneously with the
consummation thereof the successor corporation or purchaser, as the case may be,
shall assume by written instrument the obligation to deliver to the Holder such
shares of stock, securities or assets as, in accordance with the foregoing
provisions, the Holder is entitled to receive.
SECTION 8. Notice of Dissolution or Liquidation. In case of any distribution of
the assets of the Company in dissolution or liquidation (except under
circumstances when the foregoing Section 7 shall be applicable), the Company
shall give notice thereof to the Holder hereof and shall make no distribution to
shareholders until the expiration of thirty (30) days from the date of mailing
of the aforesaid notice and, in any case, the Holder hereof may exercise this
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Warrant within thirty (30) days from the date of the giving of such notice, and
all rights herein granted not so exercised within such thirty-day period shall
thereafter become null and void.
SECTION 9. Notice of Extraordinary Dividends. Subject to further compliance with
Section 11.2 hereof, if the Board of Directors of the Company shall declare any
dividend or other distribution on its Common Stock except out of earned surplus
or by way of a stock dividend payable in shares of its Common Stock, the Company
shall mail notice thereof to the Holder hereof not less than thirty (30) days
prior to the record date fixed for determining shareholders entitled to
participate in such dividend or other distribution, and the Holder hereof shall
not participate in such dividend or other distribution unless this Warrant is
exercised prior to such record date. The provisions of this Section 9 shall not
apply to distributions made in connection with transactions covered by Section
7.
SECTION 10. Fractional Shares. Fractional Shares shall not be issued upon the
exercise of this Warrant but in any case where the Holder would, except for the
provisions of this Section 10, be entitled under the terms hereof to receive a
fractional share upon the complete exercise of this Warrant, the Company shall,
upon the exercise of this Warrant for the largest number of whole shares then
called for, pay a sum in cash equal to the excess of the value of such
fractional share (determined in such reasonable manner as may be prescribed in
good faith by the Board of Directors of the Company).
SECTION 11. Special Arrangements of the Company. The Company covenants and
agrees that during the Term of this Warrant, unless otherwise approved by the
Holder of this Warrant:
11.1. Will Reserve Shares. The Company will reserve and set apart and have
at all times, free from preemptive rights, the number of shares of authorized
but unissued Common Stock deliverable upon the exercise of this Warrant.
11.2. Will Not Issue Certain Stock. The Company will not issue any capital
stock of any class which has rights to be preferred as to dividends or as to the
distribution of assets upon voluntary or involuntary liquidation, dissolution or
winding-up, unless such rights shall be limited to a fixed sum or percentage of
par value in respect of participation in dividends and in the distribution of
assets. The Company will be deemed to have issued stock which is preferred as to
dividends or as to distribution of assets if either (i) the right to preferred
dividends exceeds the amount of fifteen percent (15%) of par value or (ii) the
right to preferred distribution of assets exceeds the amount of one hundred
percent (100%) of par value for the first year after issuance of such stock or
one hundred and twenty-five percent (125%) thereafter.
11.3. Will Not Declare Dividends. The Company will not pay any dividend or
other distribution on any of its capital stock unless such dividend or other
distribution on such share of capital stock and all other dividends or
distributions paid during the prior one year period on such shares of capital
stock are paid out of earned surplus and the aggregate amount thereof is
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less than fifteen percent (15%) of the fair market value of the shares of
capital stock (if then ascertainable) on the date of declaration of such
dividend or other distribution.
11.4. Will Bind Successors. This Warrant shall be binding upon any
corporation succeeding to the Company by merger, consolidation or acquisition of
all or substantially all of the Company's assets.
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SECTION 12. Registration rights; etc.
12.1. Certain Definitions. As used in this Section 12, the following terms
shall have the following respective meanings:
"Commission" shall mean the Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act.
"Registrable Securities" shall mean the Warrant Shares less any Warrant
Shares theretofore sold to the public or in a private placement.
The terms "register," "registered" and "registration" shall refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act and applicable rules and regulations
thereunder, and the effectiveness of such registration statement.
"Registration Expenses" shall mean all expenses incurred by the Company in
compliance with Section 12.2 hereof, including, without limitation, all
registration and filing fees, printing expenses, fees and disbursements of
counsel for the Company, blue sky fees and expenses, and the expense of any
special audits incident to or required by any such registration (but excluding
the compensation of regular employees of the Company, which shall be paid in any
event by the Company).
"Selling Expenses" shall mean all underwriting discounts and selling
commissions applicable to the sale of Registrable Securities, all fees and
disbursements of counsel for any Holder and any blue sky fees and expenses
excluded from the definition of "Registration Expenses."
"Holder" shall mean any holder of outstanding Warrant Shares or Registrable
Securities (except for purposes of determining "Holders" under Section 12.7
hereof) have not been sold to the public.
"Other Shareholders" shall mean holders of securities of the Company who
are entitled by contract with the Company to have securities included in a
registration of the Company's securities.
12.2. Company Registration.
(a) Notice of Registration. If the Company shall determine to register any
of its securities either for its own account or the account of a security holder
or holders exercising their respective demand registration rights, other than a
registration relating solely to employee benefit plans, or a registration
relating solely to a Commission Rule 145 transaction, or a registration on any
registration form which does not permit secondary sales, the Company will:
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(i) promptly give to each Holder written notice thereof (which shall
include a list of the jurisdictions in which the Company intends to
attempt to qualify such securities under the applicable blue sky or
other state securities laws); and
(ii) include in such registration (and any related qualification under blue
sky laws or other compliance), and in any underwriting involved
therein, all the Registrable Securities specified in a written request
or requests, made by any Holder within fifteen (15) days after receipt
of the written notice from the Company described in clause (i) above,
subject to any limitations on the number of shares as set forth in
Section 12.2(b) below.
(b) Underwriting. If the registration of which the Company gives notice is
for a registered public offering involving an underwriting, the Company shall so
advise the Holders as part of the written notice given pursuant to Section
12.2(a)(i). In such event, the right of any Holder to registration pursuant to
Section 12.2 shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting to the extent provided herein. All Holders proposing to distribute
their securities through such underwriting shall (together with the Company,
directors and officers and the Other Shareholders distributing their securities
through such underwriting) enter into an underwriting agreement in customary
form with the underwriter or underwriters selected for underwriting by the
Company.
Notwithstanding any other provision of this Section 12.2, if the
underwriter determines that marketing factors require a limitation on the number
of shares to be underwritten, the underwriter may (subject to the allocation
priority set forth below) exclude from such registration and underwriting some
or all of the Registrable Securities which would otherwise be underwritten
pursuant hereto. The Company shall so advise all holders of securities
requesting registration, and the number of shares of securities that are
entitled to be included in the registration and underwriting shall be allocated
in the following manner: The number of shares that may be included in the
registration and underwriting on behalf of such Holders, directors and officers
and Other Shareholders shall be allocated among such Holders, directors and
officers and Other Shareholders in proportion, as nearly practicable, to the
respective amounts of Registrable Securities and other securities which they had
requested to be included in such registration at the time of filing the
registration statement.
If any Holder of Registrable Securities or any officer, director or Other
Shareholder disapproves of the terms of any such underwriting, he may elect to
withdraw therefrom by written notice to the Company and the underwriter. Any
Registrable Securities or other securities excluded or withdrawn from such
underwriting shall be withdrawn from such registration.
12.3. Demand Registration Rights. In the event that the Company grants
demand registration rights to any other holder of securities of the Company, the
Company will promptly give to the Holder written notice thereof and, if in the
opinion of the Holder such demand registration rights are more favorable than
the registration rights provided under this
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Warrant, the Holder shall so notify the Company within thirty (30) days of
receipt of the foregoing notice from the Company, whereupon such demand
registration rights shall automatically be deemed to be incorporated in this
Warrant.
12.4. Expenses of Registration. The Company shall bear all Registration
Expenses incurred in connection with any registration, qualification and
compliance by the Company pursuant to Section 12.2 hereof. All Selling Expenses
shall be borne by the holders of the securities so registered pro rata on the
basis of the number of their shares so registered.
12.5. Registration Procedures. In the case of each registration effected by
the Company pursuant to this Section 12, the Company will keep each Holder
advised in writing as to the initiation of each registration and as to the
completion thereof. The Company will, at its expense:
(a) keep such registration effective for a period of one hundred twenty
(120) days or until the Holder or Holders have completed the distribution
described in the registration statement relating thereto, whichever first
occurs;
(b) furnish such number of prospectuses and other documents incident
thereto as a Holder from time to time may reasonably request; and
(c) use its best efforts to register or qualify the Registrable Securities
under the securities laws or blue-sky laws of such jurisdictions as any Holder
may request; provided, however, that the Company shall not be obligated to
register or qualify such Registrable Securities in any particular jurisdiction
in which the Company would be required to execute a general consent to service
of process in order to effect such registration, qualification or compliance,
unless the Company is already subject to service in the jurisdiction and except
as may be required by the Securities Act or applicable rules or regulations
thereunder.
12.6. Indemnification.
(a) The Company, with respect to each registration, qualification and
compliance effected pursuant to this Section 12, will indemnify and hold
harmless each Holder, each of its officers, directors and partners, and each
party controlling such Holder, and each underwriter, if any, and each party who
controls any underwriter, against all claims, losses, damages and liabilities
(or actions in respect thereof) arising out of or based on any untrue statement
(or alleged untrue statement) of a material fact contained in any prospectus,
offering circular or other document (including any related registration
statement, notification or the like) incident to any such registration,
qualification or compliance, or based on any omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, or any violation by the Company of the
Securities Act or any rule or regulation thereunder applicable to the Company
and relating to action or inaction required of the Company in connection with
any such registration, qualification or compliance, and will reimburse each such
Holder, each of its officers, directors and partners, and each party controlling
such Holder, each such underwriter and each party who controls any such
underwriter, for any legal and any other expenses incurred in connection with
investigating or
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defending any such claim, loss, damage, liability or action, provided that the
Company will not be liable in any such case to the extent that any such claim,
loss, damage, liability or expense arises out of or is based on any untrue
statement or omission based solely upon written information furnished to the
Company by such Holder or underwriter, as the case may be, and stated to be
specifically for use therein.
(b) Each Holder and Other Shareholder will, if Registrable Securities held
by him are included in the securities as to which such registration,
qualification or compliance is being effected, indemnify and hold harmless the
Company, each of its directors and officers and each underwriter, if any, of the
Company's securities covered by such a registration statement, each party who
controls the Company or such underwriter, each other such Holder and Other
Shareholder and each of their respective officers, directors and partners, and
each party controlling such Holder and Other Shareholder, against all claims,
losses, damages and liabilities (or actions in respect thereof) arising out of
or based on any untrue statement (or alleged untrue statement) of a material
fact contained in any such registration statement, prospectus, offering circular
or other document, or any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse the Company and such Holders, Other
Shareholders, directors, officers, partners, parties, underwriters or control
persons for any legal or any other expenses reasonably incurred in connection
with investigating or defending any such claim, loss, damage, liability or
action, in each case to the extent, but only to the extent, that such untrue
statement (or alleged untrue statement) or omission (or alleged omission) is
made in such registration statement, prospectus, offering circular or other
document solely in reliance upon and in conformity with written information
furnished to the Company by such Holder or Other Shareholder and stated to be
specifically for use therein; provided, however, that the obligations of such
Holders and Other Shareholders hereunder shall be limited to an amount equal to
the proceeds to each such Holder or Other Shareholder of securities sold as
contemplated herein.
(c) Each party entitled to indemnification under this Section 12.6 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or any litigation resulting
therefrom, shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld), and the Indemnified Party may participate in such
defense at such party's expense (unless the Indemnified Party shall have been
advised by counsel that actual or potential differing interests or defenses
exist or may exist between the Indemnifying Party and the Indemnified Party, in
which case such expense shall be paid by the Indemnifying Party), and provided
further that the failure of any Indemnified Party to give notice as provided
herein shall not relieve the Indemnifying Party of its obligations under this
Section 12. No Indemnifying Party, in the defense of any such claim or
litigation, shall, except with the consent of each Indemnified Party, consent to
entry of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant
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<PAGE>
or plaintiff to such Indemnified Party of a release from all liability in
respect to such claim or litigation. Each Indemnified Party shall provide such
information as may be reasonably requested by an Indemnifying Party in order to
enable such Indemnifying Party to defend a claim as to which indemnity is
sought.
12.7. Information by Holder. Each Holder of Registrable Securities, and
each Other Shareholder holding securities included in any registration, shall
furnish to the Company such information regarding such Holder or Other
Shareholder as the Company may reasonably request in writing and as shall be
reasonably required in connection with any registration, qualification or
compliance referred to in this Section 12.
12.8. Rule 144 Reporting. With a view to making available the benefits of
certain rules and regulations of the Commission which may permit the sale of the
Registrable Securities to the public without registration, the Company agrees
to:
(a) Make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act, at all times from
and after ninety (90) days following the effective date of the first
registration under the Securities Act filed by the Company for an offering of
its securities to the general public;
(b) Use its best efforts to file with the Commission in a timely manner all
reports and other documents required of the Company under the Securities Act and
the Exchange Act at any time after it has become subject to such reporting
requirements; and
(c) So long as the Holder owns any Registrable Securities, furnish to the
Holder forthwith upon request a written statement by the Company as to its
compliance with the reporting requirements of Rule 144 (at any time from and
after ninety (90) days following the effective date of the first registration
statement in connection with an offering of its Securities to the general
public), and of the Securities Act and the Securities Exchange Act of 1934, as
amended (at any time after it has become subject to such reporting
requirements), a copy of the most recent annual or quarterly report of the
Company, and such other reports and documents so filed as the Holder may
reasonably request in availing itself of any rule or regulation of the
Commission allowing the Holder to sell any such securities without registration.
SECTION 13. Notices. Any notice or other document required or permitted to be
given or delivered to the Holder shall be delivered at, or sent by certified or
registered mail to, the Holder at 1177 Summer Street, Stamford CT 06905 or to
such other address as shall have been furnished to the Company in writing by the
Holder. Any notice or other document required or permitted to be given or
delivered to the Company shall be delivered at, or sent by certified or
registered mail to, the Company at 550 West Avenue, Stamford, CT 06902 or to
such other address as shall have been furnished in writing to the Holder by the
Company. Any notice so addressed and mailed by registered or certified mail
shall be deemed to be given when so mailed. Any notice so addressed and
otherwise delivered shall be deemed to be given when actually received by the
addressee.
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SECTION 14. No Rights as Stockholder; Limitation of Liability. This Warrant
shall not entitle the Holder to any of the rights of a shareholder of the
company. No provision hereof, in the absence of affirmative action by the Holder
to purchase shares of Common Stock, and no mere enumeration herein of the rights
or privileges of the Holder, shall give rise to any liability of the Holder for
the Warrant Price hereunder or as a shareholder of the Company, whether such
liability is asserted by the Company or by creditors of the Company.
SECTION 15. Law Governing. This Warrant shall be governed by, and construed and
enforced in accordance with, the laws of the State of Connecticut.
SECTION 16. Miscellaneous.
(a) This Warrant and any provision hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
(or any predecessor in interest thereof) against which enforcement of the same
is sought. The headings in this Warrant are for purposes of reference only and
shall not affect the meaning or construction of any of the provisions hereof.
(b) All capitalized terms used herein and not otherwise defined herein
shall have the meanings ascribed to them in the Purchase Agreement.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its
duly authorized officer as of this 12th day of December, 1997.
LIFECODES CORPORATION
By: /s/ Walter O. Fredericks
---------------------------------
Walter O. Fredericks
President, CEO
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FORM OF NOTICE OF EXERCISE
[To be signed only upon exercise of the Warrant]
TO BE EXECUTED BY THE REGISTERED HOLDER
TO EXERCISE THE WITHIN WARRANT
The undersigned hereby exercises the right to purchase _________ shares of
Common Stock which the undersigned is entitled to purchase by the terms of the
within Warrant, according to the conditions thereof, and herewith makes payment
of the Warrant Price for such shares in full. All shares to be issued pursuant
hereto shall be issued in the name of __________________________________________
and the initial address of such person to be entered in the books of the Company
shall be: ____________________________. The shares are to be issued in
certificates of the following denominations:
------------------------------------
[Type Name of Holder]
By: ________________________________
Title: _____________________________
Dated: _________________________
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FORM OF ASSIGNMENT
[To be signed only upon transfer of Warrant]
TO BE EXECUTED BY THE REGISTERED HOLDER
TO TRANSFER THE WITHIN WARRANT
FOR VALUE RECEIVED _______________________________ hereby sells, assigns
and transfers unto __________________________________ all rights of the
undersigned under and pursuant to the within Warrant, and the undersigned does
hereby irrevocably constitute and appoint ______________________________
Attorney to transfer the said Warrant on the books of the Company, with full
power or substitution.
------------------------------------
[Type Name of Holder]
By: ________________________________
Title: _____________________________
Dated: _________________________
NOTICE
The signature of the foregoing Assignment must correspond to the name as
written upon the face of the within Warrant in every particular, without
alteration or enlargement or any change whatsoever.
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THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD OR OFFERED FOR SALE
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER
SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR THE AVAILABILITY OF ANY
EXEMPTION FROM REGISTRATION UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES
LAWS.
No. 2
STOCK SUBSCRIPTION WARRANT
To Purchase Common Stock of
Lifecodes Corporation, a Delaware Corporation (the "Company")
DATE OF INITIAL ISSUANCE: December 9, 1991
THIS CERTIFIES THAT for value received, DEAN E. FENTON or registered assigns
(hereinafter called the "Holder") is entitled to purchase from the Company, at
any time during the Term of this Warrant, 4,704 shares of Common Stock, par
value $.10 per share, of the Company (the "Common Stock"), at the Warrant Price,
payable in lawful money of the United States of America to be paid upon the
exercise hereof. The exercise of this Warrant shall be subject to the
provisions, limitations and restrictions herein contained and may be exercised
in whole or in part.
SECTION 1. Definitions.
For all purposes of this Warrant, the following terms shall have the meanings
indicated:
Common Stock - shall mean and include the Company's authorized Common Stock,
$.10 par value, as constituted at the date hereof, and shall also include any
capital stock of any class of the Company hereafter authorized which shall not
be limited to a fixed sum or percentage of par value in respect to 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.
Securities Act - the Securities Act of 1933, as amended.
Term of this Warrant - shall mean the period beginning on the date of initial
issuance hereof and ending on the date ten (10) years from the date of initial
issuance hereof.
Warrant Price - $6.63 per share, subject to adjustment in accordance with
Section 5 hereof.
Warrants - this Warrant and any other Warrant or Warrants issued pursuant to the
original holder of this Warrant, or any transferees from such original holder of
this holder.
<PAGE>
Warrant Shares - shares of Common Stock purchased or purchasable by the Holder
of this Warrant upon the exercise hereof.
SECTION 2. Exercise of Warrant.
2.1. Procedure for Exercise of Warrant. To exercise this Warrant in whole
or in part (but not as to any fractional share of Common Stock), the Holder
shall deliver to the Company at its office referred to in Section 13 hereof at
any time and from time to time during the Term of this Warrant: (i) the Notice
of Exercise in the form attached hereto, (ii) cash or certified or official bank
check, payable to the order of the Company in the amount of the Warrant Price
for each share being purchased, and (iii) this Warrant. In the event of any
exercise of the rights represented by this Warrant, a certificate or
certificates for the shares of Common Stock so purchased, registered in the name
of the Holder or such other name or names as may be designated by the Holder,
shall be delivered to the Holder hereof within a reasonable time, not exceeding
fifteen (15) 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 (except a remaining fractional share), 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 person in whose name any certificate for
shares of Common Stock is issued upon exercise of this Warrant shall for all
purposes be deemed to have become the holder of record of such shares on the
date on which the Warrant was surrendered and payment of the Warrant Price and
any applicable taxes was made, irrespective of the date of delivery of such
certificate, except that, if the date of such surrender and payment is a date
when the stock transfer books of the Company are closed, such person shall be
deemed to have become the holder of such shares at the close of business on the
next succeeding date on which the stock transfer books are open.
2.2. Transfer Restriction Legend. Each certificate for Warrant shares shall
bear the following legend (and any additional legend required by (i) any
applicable state securities laws and (ii) any securities exchange upon which
such Warrant Shares may, at the time of such exercise, be listed) on the face
thereof unless at the time of exercise such Warrant Shares shall be registered
under the Securities Act:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended, and may not be sold or
transferred in the absence of such registration or an exemption
therefrom under said Act."
Any certificate issued at any time in exchange or substitution for any
certificate bearing such legend (except a new certificate issued upon completion
of a public distribution under a registration statement of the securities
represented thereby) shall also bear such legend unless, in the opinion of
counsel for the holder thereof (which counsel shall be reasonably satisfactory
to counsel for the Company) the securities represented thereby are not, at such
time, required by law to bear such legend.
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SECTION 3. Covenants as to Common Stock. The Company covenants and agrees that
all shares of Common Stock that may be issued upon the exercise of the rights
represented by this Warrant will, upon issuance, be validly issued, fully paid
and nonassessable, and free from all taxes, liens and charges with respect to
the issue thereof. The Company further covenants and agrees that it will pay
when due and payable any and all federal and state taxes which may be payable in
respect of the issue of this Warrant, or any Common Stock or certificates
therefor issuable upon the exercise of this Warrant. The Company further
covenants and agrees that the Company will at all times have authorized and
reserved, free from preemptive rights, a sufficient number of shares of Common
Stock to provide for the exercise of the rights represented by this Warrant. The
Company further covenants and agrees that if any shares of capital stock to be
reserved for the purpose of the issuance of shares upon the exercise of this
Warrant require registration with or approval of any governmental authority
under any federal or state law before such shares may be validly issued or
delivered upon exercise, then the Company will in good faith and as
expeditiously as possible endeavor to secure such registration or approval, as
the case may be. If and so long as the Common Stock issuable upon the exercise
of this Warrant is listed on any national securities exchange, the Company will,
if permitted by the rules of such exchange, list and keep listed on such
exchange, upon official notice of issuance, all shares of such Common Stock
issuable upon exercise of this Warrant.
SECTION 4. Adjustment of Number of Shares. Upon each adjustment of the Warrant
Price as provided in Section 5, the Holder shall thereafter be entitled to
purchase, at the Warrant Price resulting from such adjustment, the number of
shares (calculated to the nearest tenth of a share) obtained by multiplying the
Warrant Price in effect immediately prior to such adjustment by the number of
shares purchasable pursuant hereto immediately prior to such adjustment and
dividing the product thereof by the Warrant Price resulting from such
adjustment.
SECTION 5. Adjustment of Warrant Price. The Warrant Price shall be subject to
adjustment from time to time as follows:
(i) If the Company shall at any time or from time to time during the Term
of this Warrant issue shares of Common Stock other than Excluded Stock (as
hereinafter defined) without consideration or for a consideration per share less
than the Warrant Price in effect immediately prior to the issuance of such
Common Stock, the Warrant Price in effect immediately prior to each such
issuance or adjustment shall forthwith (except as provided in this clause (i))
be adjusted to a price equal to the quotient obtained by dividing:
(A) an amount equal to the sum of
(x) the total number of shares of Common Stock outstanding
(including any shares of Common Stock deemed to have been issued
pursuant to subdivision (3) of this clause (i) and to clause (ii)
below) immediately prior to such issuance multiplied by the Warrant
Price in effect immediately prior to such issuance, plus
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(y) the consideration received by the Company upon such issuance,
by
(B) the total number of shares of Common Stock outstanding (including
any shares of Common Stock deemed to have been issued pursuant to
subdivision (3) of this clause (i) and to clause (ii) below) immediately
after the issuance of such Common Stock.
For the purposes of any adjustment of the Warrant Price pursuant to this
clause (i), the following provisions shall be applicable:
(1) In the case of the issuance of Common Stock for cash, the
consideration shall be deemed to be the amount of cash paid therefor after
deducting therefrom any discounts, commissions or other expenses allowed,
paid or incurred by the Company for any underwriting or otherwise in
connection with the issuance and sale thereof.
(2) In the case of the issuance of Common Stock for a consideration in
whole or in part other than cash, the consideration other than cash shall
be deemed to be the fair market value thereof as determined by the Board of
Directors, irrespective of any accounting treatment; provided, however,
that such fair market value as determined by the Board of Directors shall
not exceed the aggregate Current Market Price (as hereinafter defined) of
the shares of Common Stock being issued.
(3) In the case of the issuance of (i) options to purchase or rights
to subscribe for Common Stock, (ii) securities by their terms convertible
into or exchangeable for Common Stock or (iii) options to purchase or
rights to subscribe for such convertible or exchangeable securities:
(A) the aggregate maximum number of shares of Common Stock
deliverable upon exercise of such options to purchase or rights
to subscribe for Common Stock shall be deemed to have been issued
at the time such options or rights were issued and for a
consideration equal to the consideration (determined in the
manner provided in subdivisions (1) and (2) above with the
proviso in subdivision (2) being applied to the number of shares
of Common Stock deliverable upon such exercise), if any, received
by the Company upon the issuance of such options or rights plus
the minimum purchase price provided in such options or rights for
the Common Stock covered thereby;
(B) the aggregate maximum number of shares of Common Stock
deliverable upon conversion of or in exchange for any such
convertible or exchangeable securities or upon the exercise of
options to purchase or rights to subscribe for such convertible
or exchangeable securities and subsequent conversions or
exchanges thereof shall be deemed to have been issued at the time
such securities were issued or such options or rights were issued
and for a consideration equal to the consideration
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received by the Company for any such securities and related
options or rights (excluding any cash received on account of
accrued interest or accrued dividends), plus the additional
consideration, if any, to be received by the Company upon the
conversion or exchange of such securities or the exercise of any
related options or rights (the consideration in each case to be
determined in the manner provided in subdivisions (1) and (2)
above with the proviso in subdivision (2) being applied to the
number of shares of Common Stock deliverable upon such
conversion, exchange or exercise);
(C) on any change in the number of shares of Common Stock deliverable
upon exercise of any such options or rights or conversion of or
exchange for such convertible or exchangeable securities, other
than a change resulting from the antidilution provisions thereof,
the Warrant Price shall forthwith be readjusted to such Warrant
Price as would have obtained had the adjustment made upon the
issuance of such options, rights or securities not converted
prior to such change or options or rights related to such
securities not converted prior to such change been made upon the
basis of such change; and
(D) on the expiration of any such options or rights, the termination
of any such rights to convert or exchange or the expiration of
any options or rights related to such convertible or exchangeable
securities, the Warrant Price shall forthwith be readjusted to
such Warrant Price as would have obtained had the adjustment made
upon the issuance of such options, rights, securities or options
or rights related to such securities been made upon the basis of
the issuance of only the number of shares of Common Stock
actually issued upon the conversion or exchange of such
securities or upon the exercise of the options or rights related
to such securities.
(ii) "Excluded Stock" shall mean shares of Common Stock issued by the
Company as a stock dividend payable in shares of Common Stock or upon any
subdivision or split-up of the outstanding shares of Common Stock.
(iii) If, at any time during the Term of this Warrant, the number of shares
of Common Stock outstanding is increased by a stock dividend payable in shares
of Common Stock or by a subdivision or split-up of shares of Common Stock, then,
following the record date fixed for the determination of holders of Common Stock
entitled to receive such stock dividend, subdivision or split-up, the Warrant
Price shall be appropriately decreased so that the number of shares of Common
Stock issuable upon the exercise hereof shall be increased in proportion to such
increase in outstanding shares.
(iv) If, at any time during the Term of this Warrant, the number of shares
of Common Stock outstanding is decreased by a combination of the outstanding
shares of Common Stock, then, following the record date for such combination,
the Warrant Price shall appropriately
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increase so that the number of shares of Common Stock issuable upon the exercise
hereof shall be decreased in proportion to such decrease in outstanding shares.
(v) In case, at any time during the Term of this Warrant, the Company shall
declare a cash dividend upon its Common Stock payable otherwise than out of
earnings or earned surplus or shall distribute to holders of its Common Stock
shares of its capital stock (other than Common Stock), stock or other securities
of other persons, evidences of indebtedness issued by the Company or other
persons, assets (excluding cash dividends and distributions) or options or
rights (excluding options to purchase and rights to subscribe for Common Stock
or other securities of the Company convertible into or exchangeable for Common
Stock), then, in each such case, immediately following the record date fixed for
the determination of the holders of Common Stock entitled to receive such
dividend or distribution, the Warrant Price in effect thereafter shall be
determined by multiplying the Warrant Price in effect immediately prior to such
record date by a fraction of which the numerator shall be an amount equal to the
difference of (x) the Current Market Price of one share of Common Stock minus
(y) the fair market value (as determined by the Board of Directors, whose
determination shall be conclusive) of the stock, securities, evidences of
indebtedness, assets, options or rights so distributed in respect of one share
of Common Stock, and of which the denominator shall be such Current Market
Price.
(vi) All calculations under this Section 5 shall be made to the nearest
cent or to the nearest one-tenth (1/10) of a share, as the case may be.
(vii) For the purpose of any computation pursuant to this Section 5, the
Current Market Price at any date of one share of Common Stock shall be deemed to
be the average of the daily closing prices for the 30 consecutive business days
ending no more than 15 business days before the day in question (as adjusted for
any stock dividend, split, combination or reclassification that took effect
during such 30 business day period). The closing price for each day shall be the
last reported sales price regular way or, in case no such reported sales took
place on such day, the average of the last reported bid and asked prices regular
way, in either case on the principal national securities exchange on which the
Common Stock is listed or admitted to trading (or if the Common Stock is not at
the time listed or admitted for trading on any such exchange, then such price as
shall be equal to the average of the last reported bid and asked prices, as
reported by the National Association of Securities Dealers Automated Quotations
System ("NASDAQ") on such day, or if on any day in question, the security shall
not be quoted on the NASDAQ, then such price shall be equal to the average of
the last reported bid and asked prices on such day as reported by The National
Quotation Bureau Incorporated or any similar reputable quotation and reporting
service, if such quotation is not reported by The National Quotation Bureau
Incorporated); provided, however, that if the Common Stock is not traded in such
manner that the quotations referred to in this clause (vii) are available for
the period required hereunder, the Current Market Price shall be determined in
good faith by the Board of Directors of the Company or, if such determination
cannot be made, by a nationally recognized independent investment banking firm
selected by the Board of Directors of the Company (or if such selection cannot
be made, by a nationally recognized
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independent investment banking firm selected by the American Arbitration
Association in accordance with its rules).
(viii) Whenever the Warrant Price shall be adjusted as provided in Section
5, the Company shall prepare a statement showing the facts requiring such
adjustment and the Warrant Price that shall be in effect after such adjustment.
The Company shall cause a copy of such statement to be sent by mail, first class
postage prepaid, to each Holder of this Warrant at his address appearing on the
Company's records. Where appropriate, such copy may be given in advance and may
be included as part of the notice required to be mailed under the provisions of
subsection (x) of this Section 5.
(ix) Adjustments made pursuant to clauses (iii), (iv) and (v) above shall
be made on the date such dividend, subdivision, split-up, combination or
distribution, as the case may be, is made, and shall become effective at the
opening of business on the business day next following the record date for the
determination of stockholders entitled to such dividend, subdivision, split-up,
combination or distribution.
(x) In the event the Company shall propose to take any action of the types
described in clauses (iii), (iv) or (v) of this Section 5, the Company shall
forward, at the same time and in the same manner, to the Holder of this Warrant
such notice, if any, which the Company shall give to the holders of capital
stock of the Company. Failure to give such notice, or any defect therein, shall
not affect the legality or validity of any such action.
(xi) In any case in which the provisions of this Section 5 shall require
that an adjustment shall become effective immediately after a record date for an
event the Company may defer until the occurrence of such event issuing to the
Holder of all or any part of this Warrant which is exercised after such record
date and before the occurrence of such event the additional shares of capital
stock issuable upon such exercise by reason of the adjustment required by such
event over and above the shares of capital stock issuable upon such exercise
before giving effect to such adjustment exercise; provided, however, that the
Company shall deliver to such Holder a due bill or other appropriate instrument
evidencing such Holder's right to receive such additional shares upon the
occurrence of the event requiring such adjustment.
(xii) The sale or other disposition of any Common Stock theretofore held in
the treasury of the Company shall be deemed to be an issuance thereof.
SECTION 6. Ownership.
6.1. Ownership of This Warrant. The Company may deem and treat the person
in whose name this Warrant is registered as the holder and owner hereof
(notwithstanding any notations of ownership or writing hereon made by anyone
other than the Company) for all purposes and shall not be affected by any notice
to the contrary until presentation of this Warrant for registration of transfer
as provided in this Section 6.
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6.2. Transfer and Replacement. This Warrant and all rights hereunder are
transferable in whole or in part upon the books of the Company by the Holder
hereof in person or by duly authorized attorney, and a new Warrant or Warrants,
of the same tenor as this Warrant but registered in the name of the transferee
or transferees shall be made and delivered by the Company upon surrender of this
Warrant duly endorsed, at the office of the Company referred to in Section 13
hereof. Upon receipt by the Company of evidence reasonably satisfactory to it of
the loss, theft or destruction, and, in such case, of indemnity or security
reasonably satisfactory to it, and upon surrender of this Warrant if mutilated,
the Company will make and deliver a new Warrant of like tenor, in lieu of this
Warrant; provided that if the Holder hereof is an instrumentality of a state or
local government or an institutional holder or a nominee for such an
instrumentality or institutional holder an irrevocable agreement of indemnity by
such Holder shall be sufficient for all purposes of this Section 6, and no
evidence of loss or theft or destruction shall be necessary. This Warrant shall
be promptly cancelled by the Company upon the surrender hereof in connection
with any transfer or replacement. Except as otherwise provided above, in the
case of the loss, theft or destruction of a Warrant, the Company shall pay all
expenses, taxes and other stock transfer taxes (if any) payable in connection
with a transfer of this Warrant, which shall be payable by the Holder. Holder
will not transfer this Warrant and the rights hereunder except in compliance
with federal and state securities laws.
SECTION 7. Mergers, Consolidation, Sales. In the case of any proposed
consolidation or merger of the Company with another corporation, or the proposed
sale of all or substantially all of its assets to another corporation, or any
proposed reorganization or reclassification of the capital stock of the Company,
then, as a condition of such consolidation, merger, sale, reorganization or
reclassification, lawful and adequate provision shall be made whereby the Holder
of this Warrant shall thereafter have the right to receive upon the basis and
upon the terms and conditions specified herein, in lieu of the shares of the
Common Stock of the Company immediately theretofore purchasable hereunder, such
shares of stock, securities or assets as may (by virtue of such consolidation,
merger, sale, reorganization or reclassification) be issued or payable with
respect to or in exchange for the number of shares of such Common Stock
purchasable hereunder immediately before such consolidation, merger, sale,
reorganization or reclassification. In any such case appropriate provision shall
be made with respect to the rights and interests of the Holder of this Warrant
to the end that the provisions hereof 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 this Warrant. The Company shall not effect any
such consolidation, merger or sale unless prior to or simultaneously with the
consummation thereof the successor corporation or purchaser, as the case may be,
shall assume by written instrument the obligation to deliver to the Holder such
shares of stock, securities or assets as, in accordance with the foregoing
provisions, the Holder is entitled to receive.
SECTION 8. Notice of Dissolution or Liquidation. In case of any distribution of
the assets of the Company in dissolution or liquidation (except under
circumstances when the foregoing Section 7 shall be applicable), the Company
shall give notice thereof to the Holder hereof and shall make no distribution to
shareholders until the expiration of thirty (30) days from the date of mailing
of the aforesaid notice and, in any case, the Holder hereof may exercise this
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Warrant within thirty (30) days from the date of the giving of such notice, and
all rights herein granted not so exercised within such thirty-day period shall
thereafter become null and void.
SECTION 9. Notice of Extraordinary Dividends. Subject to further compliance with
Section 11.2 hereof, if the Board of Directors of the Company shall declare any
dividend or other distribution on its Common Stock except out of earned surplus
or by way of a stock dividend payable in shares of its Common Stock, the Company
shall mail notice thereof to the Holder hereof not less than thirty (30) days
prior to the record date fixed for determining shareholders entitled to
participate in such dividend or other distribution, and the Holder hereof shall
not participate in such dividend or other distribution unless this Warrant is
exercised prior to such record date. The provisions of this Section 9 shall not
apply to distributions made in connection with transactions covered by Section
7.
SECTION 10. Fractional Shares. Fractional Shares shall not be issued upon the
exercise of this Warrant but in any case where the Holder would, except for the
provisions of this Section 10, be entitled under the terms hereof to receive a
fractional share upon the complete exercise of this Warrant, the Company shall,
upon the exercise of this Warrant for the largest number of whole shares then
called for, pay a sum in cash equal to the excess of the value of such
fractional share (determined in such reasonable manner as may be prescribed in
good faith by the Board of Directors of the Company).
SECTION 11. Special Arrangements of the Company. The Company covenants and
agrees that during the Term of this Warrant, unless otherwise approved by the
Holder of this Warrant:
11.1. Will Reserve Shares. The Company will reserve and set apart and have
at all times, free from preemptive rights, the number of shares of authorized
but unissued Common Stock deliverable upon the exercise of this Warrant.
11.2. Will Not Issue Certain Stock. The Company will not issue any capital
stock of any class which has rights to be preferred as to dividends or as to the
distribution of assets upon voluntary or involuntary liquidation, dissolution or
winding-up, unless such rights shall be limited to a fixed sum or percentage of
par value in respect of participation in dividends and in the distribution of
assets. The Company will be deemed to have issued stock which is preferred as to
dividends or as to distribution of assets if either (i) the right to preferred
dividends exceeds the amount of fifteen percent (15%) of par value or (ii) the
right to preferred distribution of assets exceeds the amount of one hundred
percent (100%) of par value for the first year after issuance of such stock or
one hundred and twenty-five percent (125%) thereafter.
11.3. Will Not Declare Dividends. The Company will not pay any dividend or
other distribution on any of its capital stock unless such dividend or other
distribution on such share of capital stock and all other dividends or
distributions paid during the prior one year period on such shares of capital
stock are paid out of earned surplus and the aggregate amount thereof is
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less than fifteen percent (15%) of the fair market value of the shares of
capital stock (if then ascertainable) on the date of declaration of such
dividend or other distribution.
11.4. Will Bind Successors. This Warrant shall be binding upon any
corporation succeeding to the Company by merger, consolidation or acquisition of
all or substantially all of the Company's assets.
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SECTION 12. Registration rights; etc.
12.1. Certain Definitions. As used in this Section 12, the following terms
shall have the following respective meanings:
"Commission" shall mean the Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act.
"Registrable Securities" shall mean the Warrant Shares less any Warrant
Shares theretofore sold to the public or in a private placement.
The terms "register," "registered" and "registration" shall refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act and applicable rules and regulations
thereunder, and the effectiveness of such registration statement.
"Registration Expenses" shall mean all expenses incurred by the Company in
compliance with Section 12.2 hereof, including, without limitation, all
registration and filing fees, printing expenses, fees and disbursements of
counsel for the Company, blue sky fees and expenses, and the expense of any
special audits incident to or required by any such registration (but excluding
the compensation of regular employees of the Company, which shall be paid in any
event by the Company).
"Selling Expenses" shall mean all underwriting discounts and selling
commissions applicable to the sale of Registrable Securities, all fees and
disbursements of counsel for any Holder and any blue sky fees and expenses
excluded from the definition of "Registration Expenses."
"Holder" shall mean any holder of outstanding Warrant Shares or Registrable
Securities (except for purposes of determining "Holders" under Section 12.7
hereof) have not been sold to the public.
"Other Shareholders" shall mean holders of securities of the Company who
are entitled by contract with the Company to have securities included in a
registration of the Company's securities.
12.2. Company Registration.
(a) Notice of Registration. If the Company shall determine to register any
of its securities either for its own account or the account of a security holder
or holders exercising their respective demand registration rights, other than a
registration relating solely to employee benefit plans, or a registration
relating solely to a Commission Rule 145 transaction, or a registration on any
registration form which does not permit secondary sales, the Company will:
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(i) promptly give to each Holder written notice thereof (which shall
include a list of the jurisdictions in which the Company intends to
attempt to qualify such securities under the applicable blue sky or
other state securities laws); and
(ii) include in such registration (and any related qualification under blue
sky laws or other compliance), and in any underwriting involved
therein, all the Registrable Securities specified in a written request
or requests, made by any Holder within fifteen (15) days after receipt
of the written notice from the Company described in clause (i) above,
subject to any limitations on the number of shares as set forth in
Section 12.2(b) below.
(b) Underwriting. If the registration of which the Company gives notice is
for a registered public offering involving an underwriting, the Company shall so
advise the Holders as part of the written notice given pursuant to Section
12.2(a)(i). In such event, the right of any Holder to registration pursuant to
Section 12.2 shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting to the extent provided herein. All Holders proposing to distribute
their securities through such underwriting shall (together with the Company,
directors and officers and the Other Shareholders distributing their securities
through such underwriting) enter into an underwriting agreement in customary
form with the underwriter or underwriters selected for underwriting by the
Company.
Notwithstanding any other provision of this Section 12.2, if the
underwriter determines that marketing factors require a limitation on the number
of shares to be underwritten, the underwriter may (subject to the allocation
priority set forth below) exclude from such registration and underwriting some
or all of the Registrable Securities which would otherwise be underwritten
pursuant hereto. The Company shall so advise all holders of securities
requesting registration, and the number of shares of securities that are
entitled to be included in the registration and underwriting shall be allocated
in the following manner: The number of shares that may be included in the
registration and underwriting on behalf of such Holders, directors and officers
and Other Shareholders shall be allocated among such Holders, directors and
officers and Other Shareholders in proportion, as nearly practicable, to the
respective amounts of Registrable Securities and other securities which they had
requested to be included in such registration at the time of filing the
registration statement.
If any Holder of Registrable Securities or any officer, director or Other
Shareholder disapproves of the terms of any such underwriting, he may elect to
withdraw therefrom by written notice to the Company and the underwriter. Any
Registrable Securities or other securities excluded or withdrawn from such
underwriting shall be withdrawn from such registration.
12.3. Demand Registration Rights. In the event that the Company grants
demand registration rights to any other holder of securities of the Company, the
Company will promptly give to the Holder written notice thereof and, if in the
opinion of the Holder such demand registration rights are more favorable than
the registration rights provided under this
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Warrant, the Holder shall so notify the Company within thirty (30) days of
receipt of the foregoing notice from the Company, whereupon such demand
registration rights shall automatically be deemed to be incorporated in this
Warrant.
12.4. Expenses of Registration. The Company shall bear all Registration
Expenses incurred in connection with any registration, qualification and
compliance by the Company pursuant to Section 12.2 hereof. All Selling Expenses
shall be borne by the holders of the securities so registered pro rata on the
basis of the number of their shares so registered.
12.5. Registration Procedures. In the case of each registration effected by
the Company pursuant to this Section 12, the Company will keep each Holder
advised in writing as to the initiation of each registration and as to the
completion thereof. The Company will, at its expense:
(a) keep such registration effective for a period of one hundred twenty
(120) days or until the Holder or Holders have completed the distribution
described in the registration statement relating thereto, whichever first
occurs;
(b) furnish such number of prospectuses and other documents incident
thereto as a Holder from time to time may reasonably request; and
(c) use its best efforts to register or qualify the Registrable Securities
under the securities laws or blue-sky laws of such jurisdictions as any Holder
may request; provided, however, that the Company shall not be obligated to
register or qualify such Registrable Securities in any particular jurisdiction
in which the Company would be required to execute a general consent to service
of process in order to effect such registration, qualification or compliance,
unless the Company is already subject to service in the jurisdiction and except
as may be required by the Securities Act or applicable rules or regulations
thereunder.
12.6. Indemnification.
(a) The Company, with respect to each registration, qualification and
compliance effected pursuant to this Section 12, will indemnify and hold
harmless each Holder, each of its officers, directors and partners, and each
party controlling such Holder, and each underwriter, if any, and each party who
controls any underwriter, against all claims, losses, damages and liabilities
(or actions in respect thereof) arising out of or based on any untrue statement
(or alleged untrue statement) of a material fact contained in any prospectus,
offering circular or other document (including any related registration
statement, notification or the like) incident to any such registration,
qualification or compliance, or based on any omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, or any violation by the Company of the
Securities Act or any rule or regulation thereunder applicable to the Company
and relating to action or inaction required of the Company in connection with
any such registration, qualification or compliance, and will reimburse each such
Holder, each of its officers, directors and partners, and each party controlling
such Holder, each such underwriter and each party who controls any such
underwriter, for any legal and any other expenses incurred in connection with
investigating or
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defending any such claim, loss, damage, liability or action, provided that the
Company will not be liable in any such case to the extent that any such claim,
loss, damage, liability or expense arises out of or is based on any untrue
statement or omission based solely upon written information furnished to the
Company by such Holder or underwriter, as the case may be, and stated to be
specifically for use therein.
(b) Each Holder and Other Shareholder will, if Registrable Securities held
by him are included in the securities as to which such registration,
qualification or compliance is being effected, indemnify and hold harmless the
Company, each of its directors and officers and each underwriter, if any, of the
Company's securities covered by such a registration statement, each party who
controls the Company or such underwriter, each other such Holder and Other
Shareholder and each of their respective officers, directors and partners, and
each party controlling such Holder and Other Shareholder, against all claims,
losses, damages and liabilities (or actions in respect thereof) arising out of
or based on any untrue statement (or alleged untrue statement) of a material
fact contained in any such registration statement, prospectus, offering circular
or other document, or any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse the Company and such Holders, Other
Shareholders, directors, officers, partners, parties, underwriters or control
persons for any legal or any other expenses reasonably incurred in connection
with investigating or defending any such claim, loss, damage, liability or
action, in each case to the extent, but only to the extent, that such untrue
statement (or alleged untrue statement) or omission (or alleged omission) is
made in such registration statement, prospectus, offering circular or other
document solely in reliance upon and in conformity with written information
furnished to the Company by such Holder or Other Shareholder and stated to be
specifically for use therein; provided, however, that the obligations of such
Holders and Other Shareholders hereunder shall be limited to an amount equal to
the proceeds to each such Holder or Other Shareholder of securities sold as
contemplated herein.
(c) Each party entitled to indemnification under this Section 12.6 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or any litigation resulting
therefrom, shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld), and the Indemnified Party may participate in such
defense at such party's expense (unless the Indemnified Party shall have been
advised by counsel that actual or potential differing interests or defenses
exist or may exist between the Indemnifying Party and the Indemnified Party, in
which case such expense shall be paid by the Indemnifying Party), and provided
further that the failure of any Indemnified Party to give notice as provided
herein shall not relieve the Indemnifying Party of its obligations under this
Section 12. No Indemnifying Party, in the defense of any such claim or
litigation, shall, except with the consent of each Indemnified Party, consent to
entry of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant
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or plaintiff to such Indemnified Party of a release from all liability in
respect to such claim or litigation. Each Indemnified Party shall provide such
information as may be reasonably requested by an Indemnifying Party in order to
enable such Indemnifying Party to defend a claim as to which indemnity is
sought.
12.7. Information by Holder. Each Holder of Registrable Securities, and
each Other Shareholder holding securities included in any registration, shall
furnish to the Company such information regarding such Holder or Other
Shareholder as the Company may reasonably request in writing and as shall be
reasonably required in connection with any registration, qualification or
compliance referred to in this Section 12.
12.8. Rule 144 Reporting. With a view to making available the benefits of
certain rules and regulations of the Commission which may permit the sale of the
Registrable Securities to the public without registration, the Company agrees
to:
(a) Make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act, at all times from
and after ninety (90) days following the effective date of the first
registration under the Securities Act filed by the Company for an offering of
its securities to the general public;
(b) Use its best efforts to file with the Commission in a timely manner all
reports and other documents required of the Company under the Securities Act and
the Exchange Act at any time after it has become subject to such reporting
requirements; and
(c) So long as the Holder owns any Registrable Securities, furnish to the
Holder forthwith upon request a written statement by the Company as to its
compliance with the reporting requirements of Rule 144 (at any time from and
after ninety (90) days following the effective date of the first registration
statement in connection with an offering of its Securities to the general
public), and of the Securities Act and the Securities Exchange Act of 1934, as
amended (at any time after it has become subject to such reporting
requirements), a copy of the most recent annual or quarterly report of the
Company, and such other reports and documents so filed as the Holder may
reasonably request in availing itself of any rule or regulation of the
Commission allowing the Holder to sell any such securities without registration.
SECTION 13. Notices. Any notice or other document required or permitted to be
given or delivered to the Holder shall be delivered at, or sent by certified or
registered mail to, the Holder at 1177 Summer Street, Stamford, CT 06905 or to
such other address as shall have been furnished to the Company in writing by the
Holder. Any notice or other document required or permitted to be given or
delivered to the Company shall be delivered at, or sent by certified or
registered mail to, the Company at 550 West Avenue, Stamford, CT 06902 or to
such other address as shall have been furnished in writing to the Holder by the
Company. Any notice so addressed and mailed by registered or certified mail
shall be deemed to be given when so mailed. Any notice so addressed and
otherwise delivered shall be deemed to be given when actually received by the
addressee.
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SECTION 14. No Rights as Stockholder; Limitation of Liability. This Warrant
shall not entitle the Holder to any of the rights of a shareholder of the
company. No provision hereof, in the absence of affirmative action by the Holder
to purchase shares of Common Stock, and no mere enumeration herein of the rights
or privileges of the Holder, shall give rise to any liability of the Holder for
the Warrant Price hereunder or as a shareholder of the Company, whether such
liability is asserted by the Company or by creditors of the Company.
SECTION 15. Law Governing. This Warrant shall be governed by, and construed and
enforced in accordance with, the laws of the State of Connecticut.
SECTION 16. Miscellaneous.
(a) This Warrant and any provision hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
(or any predecessor in interest thereof) against which enforcement of the same
is sought. The headings in this Warrant are for purposes of reference only and
shall not affect the meaning or construction of any of the provisions hereof.
(b) All capitalized terms used herein and not otherwise defined herein
shall have the meanings ascribed to them in the Purchase Agreement.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its
duly authorized officer as of this 12th day of December, 1997.
LIFECODES CORPORATION
By: /s/ Walter O. Fredericks
---------------------------------
Walter O. Fredericks
President, CEO
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FORM OF NOTICE OF EXERCISE
[To be signed only upon exercise of the Warrant]
TO BE EXECUTED BY THE REGISTERED HOLDER
TO EXERCISE THE WITHIN WARRANT
The undersigned hereby exercises the right to purchase _________ shares of
Common Stock which the undersigned is entitled to purchase by the terms of the
within Warrant, according to the conditions thereof, and herewith makes payment
of the Warrant Price for such shares in full. All shares to be issued pursuant
hereto shall be issued in the name of __________________________________________
and the initial address of such person to be entered in the books of the Company
shall be: ____________________________. The shares are to be issued in
certificates of the following denominations:
------------------------------------
[Type Name of Holder]
By: ________________________________
Title: _____________________________
Dated: _________________________
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FORM OF ASSIGNMENT
[To be signed only upon transfer of Warrant]
TO BE EXECUTED BY THE REGISTERED HOLDER
TO TRANSFER THE WITHIN WARRANT
FOR VALUE RECEIVED _______________________________ hereby sells, assigns
and transfers unto __________________________________ all rights of the
undersigned under and pursuant to the within Warrant, and the undersigned does
hereby irrevocably constitute and appoint ______________________________
Attorney to transfer the said Warrant on the books of the Company, with full
power or substitution.
------------------------------------
[Type Name of Holder]
By: ________________________________
Title: _____________________________
Dated: _________________________
NOTICE
The signature of the foregoing Assignment must correspond to the name as
written upon the face of the within Warrant in every particular, without
alteration or enlargement or any change whatsoever.
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THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD OR OFFERED FOR SALE
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER
SAID ACT AND ANY APPLICABLE STATE SECuRITIES LAWS OR THE AVAILABILITY OF ANY
EXEMPTION FROM REGISTRATION UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES
LAWS.
No. 2
STOCK SUBSCRIPTION WARRANT
To Purchase Common Stock of
Lifecodes Corporation, a Delaware Corporation (the "Company")
DATE OF INITIAL ISSUANCE: August 1, 1994
THIS CERTIFIES THAT for value received, THEODORE H. ELLIOTT, JR. or registered
assigns (hereinafter called the "Holder") is entitled to purchase from the
Company, at any time during the Term of this Warrant, 624 shares of Common
Stock, par value $.10 per share, of the Company (the "Common Stock"), at the
Warrant Price, payable in lawful money of the United States of America to be
paid upon the exercise hereof. The exercise of this Warrant shall be subject to
the provisions, limitations and restrictions herein contained and may be
exercised in whole or in part.
SECTION 1. Definitions.
For all purposes of this Warrant, the following terms shall have the meanings
indicated:
Common Stock - shall mean and include the Company's authorized Common Stock,
$.10 par value, as constituted at the date hereof, and shall also include any
capital stock of any class of the Company hereafter authorized which shall not
be limited to a fixed sum or percentage of par value in respect to 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.
Securities Act - the Securities Act of 1933, as amended.
Term of this Warrant - shall mean the period beginning on the date of initial
issuance hereof and ending on the date ten (10) years from the date of initial
issuance hereof.
Warrant Price - $1.00 per share, subject to adjustment in accordance with
Section 5 hereof.
Warrants - this Warrant and any other Warrant or Warrants issued pursuant to the
original holder of this Warrant, or any transferees from such original holder of
this holder.
<PAGE>
Warrant Shares - shares of Common Stock purchased or purchasable by the Holder
of this Warrant upon the exercise hereof.
SECTION 2. Exercise of Warrant.
2.1. Procedure for Exercise of Warrant. To exercise this Warrant in whole
or in part (but not as to any fractional share of Common Stock), the Holder
shall deliver to the Company at its office referred to in Section 13 hereof at
any time and from time to time during the Term of this Warrant: (i) the Notice
of Exercise in the form attached hereto, (ii) cash or certified or official bank
check, payable to the order of the Company in the amount of the Warrant Price
for each share being purchased, and (iii) this Warrant. In the event of any
exercise of the rights represented by this Warrant, a certificate or
certificates for the shares of Common Stock so purchased, registered in the name
of the Holder or such other name or names as may be designated by the Holder,
shall be delivered to the Holder hereof within a reasonable time, not exceeding
fifteen (15) 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 (except a remaining fractional share), 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 person in whose name any certificate for
shares of Common Stock is issued upon exercise of this Warrant shall for all
purposes be deemed to have become the holder of record of such shares on the
date on which the Warrant was surrendered and payment of the Warrant Price and
any applicable taxes was made, irrespective of the date of delivery of such
certificate, except that, if the date of such surrender and payment is a date
when the stock transfer books of the Company are closed, such person shall be
deemed to have become the holder of such shares at the close of business on the
next succeeding date on which the stock transfer books are open.
2.2. Transfer Restriction Legend. Each certificate for Warrant shares shall
bear the following legend (and any additional legend required by (i) any
applicable state securities laws and (ii) any securities exchange upon which
such Warrant Shares may, at the time of such exercise, be listed) on the face
thereof unless at the time of exercise such Warrant Shares shall be registered
under the Securities Act:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended, and may not be sold or
transferred in the absence of such registration or an exemption
therefrom under said Act."
Any certificate issued at any time in exchange or substitution for any
certificate bearing such legend (except a new certificate issued upon completion
of a public distribution under a registration statement of the securities
represented thereby) shall also bear such legend unless, in the opinion of
counsel for the holder thereof (which counsel shall be reasonably satisfactory
to counsel for the Company) the securities represented thereby are not, at such
time, required by law to bear such legend.
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SECTION 3. Covenants as to Common Stock. The Company covenants and agrees that
all shares of Common Stock that may be issued upon the exercise of the rights
represented by this Warrant will, upon issuance, be validly issued, fully paid
and nonassessable, and free from all taxes, liens and charges with respect to
the issue thereof. The Company further covenants and agrees that it will pay
when due and payable any and all federal and state taxes which may be payable in
respect of the issue of this Warrant, or any Common Stock or certificates
therefor issuable upon the exercise of this Warrant. The Company further
covenants and agrees that the Company will at all times have authorized and
reserved, free from preemptive rights, a sufficient number of shares of Common
Stock to provide for the exercise of the rights represented by this Warrant. The
Company further covenants and agrees that if any shares of capital stock to be
reserved for the purpose of the issuance of shares upon the exercise of this
Warrant require registration with or approval of any governmental authority
under any federal or state law before such shares may be validly issued or
delivered upon exercise, then the Company will in good faith and as
expeditiously as possible endeavor to secure such registration or approval, as
the case may be. If and so long as the Common Stock issuable upon the exercise
of this Warrant is listed on any national securities exchange, the Company will,
if permitted by the rules of such exchange, list and keep listed on such
exchange, upon official notice of issuance, all shares of such Common Stock
issuable upon exercise of this Warrant.
SECTION 4. Adjustment of Number of Shares. Upon each adjustment of the Warrant
Price as provided in Section 5, the Holder shall thereafter be entitled to
purchase, at the Warrant Price resulting from such adjustment, the number of
shares (calculated to the nearest tenth of a share) obtained by multiplying the
Warrant Price in effect immediately prior to such adjustment by the number of
shares purchasable pursuant hereto immediately prior to such adjustment and
dividing the product thereof by the Warrant Price resulting from such
adjustment.
SECTION 5. Adjustment of Warrant Price. The Warrant Price shall be subject to
adjustment from time to time as follows:
(i) If the Company shall at any time or from time to time during the Term
of this Warrant issue shares of Common Stock other than Excluded Stock (as
hereinafter defined) without consideration or for a consideration per share less
than the Warrant Price in effect immediately prior to the issuance of such
Common Stock, the Warrant Price in effect immediately prior to each such
issuance or adjustment shall forthwith (except as provided in this clause (i))
be adjusted to a price equal to the quotient obtained by dividing:
(A) an amount equal to the sum of
(x) the total number of shares of Common Stock outstanding
(including any shares of Common Stock deemed to have been issued
pursuant to subdivision (3) of this clause (i) and to clause (ii)
below) immediately prior to such issuance multiplied by the Warrant
Price in effect immediately prior to such issuance, plus
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<PAGE>
(y) the consideration received by the Company upon such issuance,
by
(B) the total number of shares of Common Stock outstanding (including
any shares of Common Stock deemed to have been issued pursuant to
subdivision (3) of this clause (i) and to clause (ii) below) immediately
after the issuance of such Common Stock.
For the purposes of any adjustment of the Warrant Price pursuant to this
clause (i), the following provisions shall be applicable:
(1) In the case of the issuance of Common Stock for cash, the
consideration shall be deemed to be the amount of cash paid therefor after
deducting therefrom any discounts, commissions or other expenses allowed,
paid or incurred by the Company for any underwriting or otherwise in
connection with the issuance and sale thereof.
(2) In the case of the issuance of Common Stock for a consideration in
whole or in part other than cash, the consideration other than cash shall
be deemed to be the fair market value thereof as determined by the Board of
Directors, irrespective of any accounting treatment; provided, however,
that such fair market value as determined by the Board of Directors shall
not exceed the aggregate Current Market Price (as hereinafter defined) of
the shares of Common Stock being issued.
(3) In the case of the issuance of (i) options to purchase or rights
to subscribe for Common Stock, (ii) securities by their terms convertible
into or exchangeable for Common Stock or (iii) options to purchase or
rights to subscribe for such convertible or exchangeable securities:
(A) the aggregate maximum number of shares of Common Stock
deliverable upon exercise of such options to purchase or rights
to subscribe for Common Stock shall be deemed to have been issued
at the time such options or rights were issued and for a
consideration equal to the consideration (determined in the
manner provided in subdivisions (1) and (2) above with the
proviso in subdivision (2) being applied to the number of shares
of Common Stock deliverable upon such exercise), if any, received
by the Company upon the issuance of such options or rights plus
the minimum purchase price provided in such options or rights for
the Common Stock covered thereby;
(B) the aggregate maximum number of shares of Common Stock
deliverable upon conversion of or in exchange for any such
convertible or exchangeable securities or upon the exercise of
options to purchase or rights to subscribe for such convertible
or exchangeable securities and subsequent conversions or
exchanges thereof shall be deemed to have been issued at the time
such securities were issued or such options or rights were issued
and for a consideration equal to the consideration
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<PAGE>
received by the Company for any such securities and related
options or rights (excluding any cash received on account of
accrued interest or accrued dividends), plus the additional
consideration, if any, to be received by the Company upon the
conversion or exchange of such securities or the exercise of any
related options or rights (the consideration in each case to be
determined in the manner provided in subdivisions (1) and (2)
above with the proviso in subdivision (2) being applied to the
number of shares of Common Stock deliverable upon such
conversion, exchange or exercise);
(C) on any change in the number of shares of Common Stock deliverable
upon exercise of any such options or rights or conversion of or
exchange for such convertible or exchangeable securities, other
than a change resulting from the antidilution provisions thereof,
the Warrant Price shall forthwith be readjusted to such Warrant
Price as would have obtained had the adjustment made upon the
issuance of such options, rights or securities not converted
prior to such change or options or rights related to such
securities not converted prior to such change been made upon the
basis of such change; and
(D) on the expiration of any such options or rights, the termination
of any such rights to convert or exchange or the expiration of
any options or rights related to such convertible or exchangeable
securities, the Warrant Price shall forthwith be readjusted to
such Warrant Price as would have obtained had the adjustment made
upon the issuance of such options, rights, securities or options
or rights related to such securities been made upon the basis of
the issuance of only the number of shares of Common Stock
actually issued upon the conversion or exchange of such
securities or upon the exercise of the options or rights related
to such securities.
(ii) "Excluded Stock" shall mean shares of Common Stock issued by the
Company as a stock dividend payable in shares of Common Stock or upon any
subdivision or split-up of the outstanding shares of Common Stock.
(iii) If, at any time during the Term of this Warrant, the number of shares
of Common Stock outstanding is increased by a stock dividend payable in shares
of Common Stock or by a subdivision or split-up of shares of Common Stock, then,
following the record date fixed for the determination of holders of Common Stock
entitled to receive such stock dividend, subdivision or split-up, the Warrant
Price shall be appropriately decreased so that the number of shares of Common
Stock issuable upon the exercise hereof shall be increased in proportion to such
increase in outstanding shares.
(iv) If, at any time during the Term of this Warrant, the number of shares
of Common Stock outstanding is decreased by a combination of the outstanding
shares of Common Stock, then, following the record date for such combination,
the Warrant Price shall appropriately
5
<PAGE>
increase so that the number of shares of Common Stock issuable upon the exercise
hereof shall be decreased in proportion to such decrease in outstanding shares.
(v) In case, at any time during the Term of this Warrant, the Company shall
declare a cash dividend upon its Common Stock payable otherwise than out of
earnings or earned surplus or shall distribute to holders of its Common Stock
shares of its capital stock (other than Common Stock), stock or other securities
of other persons, evidences of indebtedness issued by the Company or other
persons, assets (excluding cash dividends and distributions) or options or
rights (excluding options to purchase and rights to subscribe for Common Stock
or other securities of the Company convertible into or exchangeable for Common
Stock), then, in each such case, immediately following the record date fixed for
the determination of the holders of Common Stock entitled to receive such
dividend or distribution, the Warrant Price in effect thereafter shall be
determined by multiplying the Warrant Price in effect immediately prior to such
record date by a fraction of which the numerator shall be an amount equal to the
difference of (x) the Current Market Price of one share of Common Stock minus
(y) the fair market value (as determined by the Board of Directors, whose
determination shall be conclusive) of the stock, securities, evidences of
indebtedness, assets, options or rights so distributed in respect of one share
of Common Stock, and of which the denominator shall be such Current Market
Price.
(vi) All calculations under this Section 5 shall be made to the nearest
cent or to the nearest one-tenth (1/10) of a share, as the case may be.
(vii) For the purpose of any computation pursuant to this Section 5, the
Current Market Price at any date of one share of Common Stock shall be deemed to
be the average of the daily closing prices for the 30 consecutive business days
ending no more than 15 business days before the day in question (as adjusted for
any stock dividend, split, combination or reclassification that took effect
during such 30 business day period). The closing price for each day shall be the
last reported sales price regular way or, in case no such reported sales took
place on such day, the average of the last reported bid and asked prices regular
way, in either case on the principal national securities exchange on which the
Common Stock is listed or admitted to trading (or if the Common Stock is not at
the time listed or admitted for trading on any such exchange, then such price as
shall be equal to the average of the last reported bid and asked prices, as
reported by the National Association of Securities Dealers Automated Quotations
System ("NASDAQ") on such day, or if on any day in question, the security shall
not be quoted on the NASDAQ, then such price shall be equal to the average of
the last reported bid and asked prices on such day as reported by The National
Quotation Bureau Incorporated or any similar reputable quotation and reporting
service, if such quotation is not reported by The National Quotation Bureau
Incorporated); provided, however, that if the Common Stock is not traded in such
manner that the quotations referred to in this clause (vii) are available for
the period required hereunder, the Current Market Price shall be determined in
good faith by the Board of Directors of the Company or, if such determination
cannot be made, by a nationally recognized
6
<PAGE>
independent investment banking firm selected by the Board of Directors of the
Company (or if such selection cannot be made, by a nationally recognized
independent investment banking firm selected by the American Arbitration
Association in accordance with its rules).
(viii) Whenever the Warrant Price shall be adjusted as provided in Section
5, the Company shall prepare a statement showing the facts requiring such
adjustment and the Warrant Price that shall be in effect after such adjustment.
The Company shall cause a copy of such statement to be sent by mail, first class
postage prepaid, to each Holder of this Warrant at his address appearing on the
Company's records. Where appropriate, such copy may be given in advance and may
be included as part of the notice required to be mailed under the provisions of
subsection (x) of this Section 5.
(ix) Adjustments made pursuant to clauses (iii), (iv) and (v) above shall
be made on the date such dividend, subdivision, split-up, combination or
distribution, as the case may be, is made, and shall become effective at the
opening of business on the business day next following the record date for the
determination of stockholders entitled to such dividend, subdivision, split-up,
combination or distribution.
(x) In the event the Company shall propose to take any action of the types
described in clauses (iii), (iv) or (v) of this Section 5, the Company shall
forward, at the same time and in the same manner, to the Holder of this Warrant
such notice, if any, which the Company shall give to the holders of capital
stock of the Company. Failure to give such notice, or any defect therein, shall
not affect the legality or validity of any such action.
(xi) In any case in which the provisions of this Section 5 shall require
that an adjustment shall become effective immediately after a record date for an
event the Company may defer until the occurrence of such event issuing to the
Holder of all or any part of this Warrant which is exercised after such record
date and before the occurrence of such event the additional shares of capital
stock issuable upon such exercise by reason of the adjustment required by such
event over and above the shares of capital stock issuable upon such exercise
before giving effect to such adjustment exercise; provided, however, that the
Company shall deliver to such Holder a due bill or other appropriate instrument
evidencing such Holder's right to receive such additional shares upon the
occurrence of the event requiring such adjustment.
(xii) The sale or other disposition of any Common Stock theretofore held in
the treasury of the Company shall be deemed to be an issuance thereof.
SECTION 6. Ownership.
6.1. Ownership of This Warrant. The Company may deem and treat the person
in whose name this Warrant is registered as the holder and owner hereof
(notwithstanding any notations of ownership or writing hereon made by anyone
other than the Company) for all purposes and shall not be affected by any notice
to the contrary until presentation of this Warrant for registration of transfer
as provided in this Section 6.
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<PAGE>
6.2. Transfer and Replacement. This Warrant and all rights hereunder are
transferable in whole or in part upon the books of the Company by the Holder
hereof in person or by duly authorized attorney, and a new Warrant or Warrants,
of the same tenor as this Warrant but registered in the name of the transferee
or transferees shall be made and delivered by the Company upon surrender of this
Warrant duly endorsed, at the office of the Company referred to in Section 13
hereof. Upon receipt by the Company of evidence reasonably satisfactory to it of
the loss, theft or destruction, and, in such case, of indemnity or security
reasonably satisfactory to it, and upon surrender of this Warrant if mutilated,
the Company will make and deliver a new Warrant of like tenor, in lieu of this
Warrant; provided that if the Holder hereof is an instrumentality of a state or
local government or an institutional holder or a nominee for such an
instrumentality or institutional holder an irrevocable agreement of indemnity by
such Holder shall be sufficient for all purposes of this Section 6, and no
evidence of loss or theft or destruction shall be necessary. This Warrant shall
be promptly cancelled by the Company upon the surrender hereof in connection
with any transfer or replacement. Except as otherwise provided above, in the
case of the loss, theft or destruction of a Warrant, the Company shall pay all
expenses, taxes and other stock transfer taxes (if any) payable in connection
with a transfer of this Warrant, which shall be payable by the Holder. Holder
will not transfer this Warrant and the rights hereunder except in compliance
with federal and state securities laws.
SECTION 7. Mergers, Consolidation, Sales. In the case of any proposed
consolidation or merger of the Company with another corporation, or the proposed
sale of all or substantially all of its assets to another corporation, or any
proposed reorganization or reclassification of the capital stock of the Company,
then, as a condition of such consolidation, merger, sale, reorganization or
reclassification, lawful and adequate provision shall be made whereby the Holder
of this Warrant shall thereafter have the right to receive upon the basis and
upon the terms and conditions specified herein, in lieu of the shares of the
Common Stock of the Company immediately theretofore purchasable hereunder, such
shares of stock, securities or assets as may (by virtue of such consolidation,
merger, sale, reorganization or reclassification) be issued or payable with
respect to or in exchange for the number of shares of such Common Stock
purchasable hereunder immediately before such consolidation, merger, sale,
reorganization or reclassification. In any such case appropriate provision shall
be made with respect to the rights and interests of the Holder of this Warrant
to the end that the provisions hereof 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 this Warrant. The Company shall not effect any
such consolidation, merger or sale unless prior to or simultaneously with the
consummation thereof the successor corporation or purchaser, as the case may be,
shall assume by written instrument the obligation to deliver to the Holder such
shares of stock, securities or assets as, in accordance with the foregoing
provisions, the Holder is entitled to receive.
SECTION 8. Notice of Dissolution or Liquidation. In case of any distribution of
the assets of the Company in dissolution or liquidation (except under
circumstances when the foregoing Section 7 shall be applicable), the Company
shall give notice thereof to the Holder hereof and shall make no distribution to
shareholders until the expiration of thirty (30) days from the date of mailing
of the aforesaid notice and, in any case, the Holder hereof may exercise this
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Warrant within thirty (30) days from the date of the giving of such notice, and
all rights herein granted not so exercised within such thirty-day period shall
thereafter become null and void.
SECTION 9. Notice of Extraordinary Dividends. Subject to further compliance with
Section 11.2 hereof, if the Board of Directors of the Company shall declare any
dividend or other distribution on its Common Stock except out of earned surplus
or by way of a stock dividend payable in shares of its Common Stock, the Company
shall mail notice thereof to the Holder hereof not less than thirty (30) days
prior to the record date fixed for determining shareholders entitled to
participate in such dividend or other distribution, and the Holder hereof shall
not participate in such dividend or other distribution unless this Warrant is
exercised prior to such record date. The provisions of this Section 9 shall not
apply to distributions made in connection with transactions covered by Section
7.
SECTION 10. Fractional Shares. Fractional Shares shall not be issued upon the
exercise of this Warrant but in any case where the Holder would, except for the
provisions of this Section 10, be entitled under the terms hereof to receive a
fractional share upon the complete exercise of this Warrant, the Company shall,
upon the exercise of this Warrant for the largest number of whole shares then
called for, pay a sum in cash equal to the excess of the value of such
fractional share (determined in such reasonable manner as may be prescribed in
good faith by the Board of Directors of the Company).
SECTION 11. Special Arrangements of the Company. The Company covenants and
agrees that during the Term of this Warrant, unless otherwise approved by the
Holder of this Warrant:
11.1. Will Reserve Shares. The Company will reserve and set apart and have
at all times, free from preemptive rights, the number of shares of authorized
but unissued Common Stock deliverable upon the exercise of this Warrant.
11.2. Will Not Issue Certain Stock. The Company will not issue any capital
stock of any class which has rights to be preferred as to dividends or as to the
distribution of assets upon voluntary or involuntary liquidation, dissolution or
winding-up, unless such rights shall be limited to a fixed sum or percentage of
par value in respect of participation in dividends and in the distribution of
assets. The Company will be deemed to have issued stock which is preferred as to
dividends or as to distribution of assets if either (i) the right to preferred
dividends exceeds the amount of fifteen percent (15%) of par value or (ii) the
right to preferred distribution of assets exceeds the amount of one hundred
percent (100%) of par value for the first year after issuance of such stock or
one hundred and twenty-five percent (125%) thereafter.
11.3. Will Not Declare Dividends. The Company will not pay any dividend or
other distribution on any of its capital stock unless such dividend or other
distribution on such share of capital stock and all other dividends or
distributions paid during the prior one year period on such shares of capital
stock are paid out of earned surplus and the aggregate amount thereof is
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less than fifteen percent (15%) of the fair market value of the shares of
capital stock (if then ascertainable) on the date of declaration of such
dividend or other distribution.
11.4. Will Bind Successors. This Warrant shall be binding upon any
corporation succeeding to the Company by merger, consolidation or acquisition of
all or substantially all of the Company's assets.
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SECTION 12. Registration rights; etc.
12.1. Certain Definitions. As used in this Section 12, the following terms
shall have the following respective meanings:
"Commission" shall mean the Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act.
"Registrable Securities" shall mean the Warrant Shares less any Warrant
Shares theretofore sold to the public or in a private placement.
The terms "register," "registered" and "registration" shall refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act and applicable rules and regulations
thereunder, and the effectiveness of such registration statement.
"Registration Expenses" shall mean all expenses incurred by the Company in
compliance with Section 12.2 hereof, including, without limitation, all
registration and filing fees, printing expenses, fees and disbursements of
counsel for the Company, blue sky fees and expenses, and the expense of any
special audits incident to or required by any such registration (but excluding
the compensation of regular employees of the Company, which shall be paid in any
event by the Company).
"Selling Expenses" shall mean all underwriting discounts and selling
commissions applicable to the sale of Registrable Securities, all fees and
disbursements of counsel for any Holder and any blue sky fees and expenses
excluded from the definition of "Registration Expenses."
"Holder" shall mean any holder of outstanding Warrant Shares or Registrable
Securities (except for purposes of determining "Holders" under Section 12.7
hereof) have not been sold to the public.
"Other Shareholders" shall mean holders of securities of the Company who
are entitled by contract with the Company to have securities included in a
registration of the Company's securities.
12.2. Company Registration.
(a) Notice of Registration. If the Company shall determine to register any
of its securities either for its own account or the account of a security holder
or holders exercising their respective demand registration rights, other than a
registration relating solely to employee benefit plans, or a registration
relating solely to a Commission Rule 145 transaction, or a registration on any
registration form which does not permit secondary sales, the Company will:
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<PAGE>
(i) promptly give to each Holder written notice thereof (which shall
include a list of the jurisdictions in which the Company intends to
attempt to qualify such securities under the applicable blue sky or
other state securities laws); and
(ii) include in such registration (and any related qualification under blue
sky laws or other compliance), and in any underwriting involved
therein, all the Registrable Securities specified in a written request
or requests, made by any Holder within fifteen (15) days after receipt
of the written notice from the Company described in clause (i) above,
subject to any limitations on the number of shares as set forth in
Section 12.2(b) below.
(b) Underwriting. If the registration of which the Company gives notice is
for a registered public offering involving an underwriting, the Company shall so
advise the Holders as part of the written notice given pursuant to Section
12.2(a)(i). In such event, the right of any Holder to registration pursuant to
Section 12.2 shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting to the extent provided herein. All Holders proposing to distribute
their securities through such underwriting shall (together with the Company,
directors and officers and the Other Shareholders distributing their securities
through such underwriting) enter into an underwriting agreement in customary
form with the underwriter or underwriters selected for underwriting by the
Company.
Notwithstanding any other provision of this Section 12.2, if the
underwriter determines that marketing factors require a limitation on the number
of shares to be underwritten, the underwriter may (subject to the allocation
priority set forth below) exclude from such registration and underwriting some
or all of the Registrable Securities which would otherwise be underwritten
pursuant hereto. The Company shall so advise all holders of securities
requesting registration, and the number of shares of securities that are
entitled to be included in the registration and underwriting shall be allocated
in the following manner: The number of shares that may be included in the
registration and underwriting on behalf of such Holders, directors and officers
and Other Shareholders shall be allocated among such Holders, directors and
officers and Other Shareholders in proportion, as nearly practicable, to the
respective amounts of Registrable Securities and other securities which they had
requested to be included in such registration at the time of filing the
registration statement.
If any Holder of Registrable Securities or any officer, director or Other
Shareholder disapproves of the terms of any such underwriting, he may elect to
withdraw therefrom by written notice to the Company and the underwriter. Any
Registrable Securities or other securities excluded or withdrawn from such
underwriting shall be withdrawn from such registration.
12.3. Demand Registration Rights. In the event that the Company grants
demand registration rights to any other holder of securities of the Company, the
Company will promptly give to the Holder written notice thereof and, if in the
opinion of the Holder such demand registration rights are more favorable than
the registration rights provided under this
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Warrant, the Holder shall so notify the Company within thirty (30) days of
receipt of the foregoing notice from the Company, whereupon such demand
registration rights shall automatically be deemed to be incorporated in this
Warrant.
12.4. Expenses of Registration. The Company shall bear all Registration
Expenses incurred in connection with any registration, qualification and
compliance by the Company pursuant to Section 12.2 hereof. All Selling Expenses
shall be borne by the holders of the securities so registered pro rata on the
basis of the number of their shares so registered.
12.5. Registration Procedures. In the case of each registration effected by
the Company pursuant to this Section 12, the Company will keep each Holder
advised in writing as to the initiation of each registration and as to the
completion thereof. The Company will, at its expense:
(a) keep such registration effective for a period of one hundred twenty
(120) days or until the Holder or Holders have completed the distribution
described in the registration statement relating thereto, whichever first
occurs;
(b) furnish such number of prospectuses and other documents incident
thereto as a Holder from time to time may reasonably request; and
(c) use its best efforts to register or qualify the Registrable Securities
under the securities laws or blue-sky laws of such jurisdictions as any Holder
may request; provided, however, that the Company shall not be obligated to
register or qualify such Registrable Securities in any particular jurisdiction
in which the Company would be required to execute a general consent to service
of process in order to effect such registration, qualification or compliance,
unless the Company is already subject to service in the jurisdiction and except
as may be required by the Securities Act or applicable rules or regulations
thereunder.
12.6. Indemnification.
(a) The Company, with respect to each registration, qualification and
compliance effected pursuant to this Section 12, will indemnify and hold
harmless each Holder, each of its officers, directors and partners, and each
party controlling such Holder, and each underwriter, if any, and each party who
controls any underwriter, against all claims, losses, damages and liabilities
(or actions in respect thereof) arising out of or based on any untrue statement
(or alleged untrue statement) of a material fact contained in any prospectus,
offering circular or other document (including any related registration
statement, notification or the like) incident to any such registration,
qualification or compliance, or based on any omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, or any violation by the Company of the
Securities Act or any rule or regulation thereunder applicable to the Company
and relating to action or inaction required of the Company in connection with
any such registration, qualification or compliance, and will reimburse each such
Holder, each of its officers, directors and partners, and each party controlling
such Holder, each such underwriter and each party who controls any such
underwriter, for any legal and any other expenses incurred in connection with
investigating or
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defending any such claim, loss, damage, liability or action, provided that the
Company will not be liable in any such case to the extent that any such claim,
loss, damage, liability or expense arises out of or is based on any untrue
statement or omission based solely upon written information furnished to the
Company by such Holder or underwriter, as the case may be, and stated to be
specifically for use therein.
(b) Each Holder and Other Shareholder will, if Registrable Securities held
by him are included in the securities as to which such registration,
qualification or compliance is being effected, indemnify and hold harmless the
Company, each of its directors and officers and each underwriter, if any, of the
Company's securities covered by such a registration statement, each party who
controls the Company or such underwriter, each other such Holder and Other
Shareholder and each of their respective officers, directors and partners, and
each party controlling such Holder and Other Shareholder, against all claims,
losses, damages and liabilities (or actions in respect thereof) arising out of
or based on any untrue statement (or alleged untrue statement) of a material
fact contained in any such registration statement, prospectus, offering circular
or other document, or any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse the Company and such Holders, Other
Shareholders, directors, officers, partners, parties, underwriters or control
persons for any legal or any other expenses reasonably incurred in connection
with investigating or defending any such claim, loss, damage, liability or
action, in each case to the extent, but only to the extent, that such untrue
statement (or alleged untrue statement) or omission (or alleged omission) is
made in such registration statement, prospectus, offering circular or other
document solely in reliance upon and in conformity with written information
furnished to the Company by such Holder or Other Shareholder and stated to be
specifically for use therein; provided, however, that the obligations of such
Holders and Other Shareholders hereunder shall be limited to an amount equal to
the proceeds to each such Holder or Other Shareholder of securities sold as
contemplated herein.
(c) Each party entitled to indemnification under this Section 12.6 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or any litigation resulting
therefrom, shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld), and the Indemnified Party may participate in such
defense at such party's expense (unless the Indemnified Party shall have been
advised by counsel that actual or potential differing interests or defenses
exist or may exist between the Indemnifying Party and the Indemnified Party, in
which case such expense shall be paid by the Indemnifying Party), and provided
further that the failure of any Indemnified Party to give notice as provided
herein shall not relieve the Indemnifying Party of its obligations under this
Section 12. No Indemnifying Party, in the defense of any such claim or
litigation, shall, except with the consent of each Indemnified Party, consent to
entry of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant
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<PAGE>
or plaintiff to such Indemnified Party of a release from all liability in
respect to such claim or litigation. Each Indemnified Party shall provide such
information as may be reasonably requested by an Indemnifying Party in order to
enable such Indemnifying Party to defend a claim as to which indemnity is
sought.
12.7. Information by Holder. Each Holder of Registrable Securities, and
each Other Shareholder holding securities included in any registration, shall
furnish to the Company such information regarding such Holder or Other
Shareholder as the Company may reasonably request in writing and as shall be
reasonably required in connection with any registration, qualification or
compliance referred to in this Section 12.
12.8. Rule 144 Reporting. With a view to making available the benefits of
certain rules and regulations of the Commission which may permit the sale of the
Registrable Securities to the public without registration, the Company agrees
to:
(a) Make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act, at all times from
and after ninety (90) days following the effective date of the first
registration under the Securities Act filed by the Company for an offering of
its securities to the general public;
(b) Use its best efforts to file with the Commission in a timely manner all
reports and other documents required of the Company under the Securities Act and
the Exchange Act at any time after it has become subject to such reporting
requirements; and
(c) So long as the Holder owns any Registrable Securities, furnish to the
Holder forthwith upon request a written statement by the Company as to its
compliance with the reporting requirements of Rule 144 (at any time from and
after ninety (90) days following the effective date of the first registration
statement in connection with an offering of its Securities to the general
public), and of the Securities Act and the Securities Exchange Act of 1934, as
amended (at any time after it has become subject to such reporting
requirements), a copy of the most recent annual or quarterly report of the
Company, and such other reports and documents so filed as the Holder may
reasonably request in availing itself of any rule or regulation of the
Commission allowing the Holder to sell any such securities without registration.
SECTION 13. Notices. Any notice or other document required or permitted to be
given or delivered to the Holder shall be delivered at, or sent by certified or
registered mail to, the Holder at 1177 Summer Street, Stamford, CT 06905 or to
such other address as shall have been furnished to the Company in writing by the
Holder. Any notice or other document required or permitted to be given or
delivered to the Company shall be delivered at, or sent by certified or
registered mail to, the Company at 550 West Avenue, Stamford, CT 06902 or to
such other address as shall have been furnished in writing to the Holder by the
Company. Any notice so addressed and mailed by registered or certified mail
shall be deemed to be given when so mailed. Any notice so addressed and
otherwise delivered shall be deemed to be given when actually received by the
addressee.
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SECTION 14. No Rights as Stockholder; Limitation of Liability. This Warrant
shall not entitle the Holder to any of the rights of a shareholder of the
company. No provision hereof, in the absence of affirmative action by the Holder
to purchase shares of Common Stock, and no mere enumeration herein of the rights
or privileges of the Holder, shall give rise to any liability of the Holder for
the Warrant Price hereunder or as a shareholder of the Company, whether such
liability is asserted by the Company or by creditors of the Company.
SECTION 15. Law Governing. This Warrant shall be governed by, and construed and
enforced in accordance with, the laws of the State of Connecticut.
SECTION 16. Miscellaneous.
(a) This Warrant and any provision hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
(or any predecessor in interest thereof) against which enforcement of the same
is sought. The headings in this Warrant are for purposes of reference only and
shall not affect the meaning or construction of any of the provisions hereof.
(b) All capitalized terms used herein and not otherwise defined herein
shall have the meanings ascribed to them in the Purchase Agreement.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its
duly authorized officer as of this 12th day of December, 1997.
LIFECODES CORPORATION
By: /s/ Walter O. Fredericks
---------------------------------
Walter O. Fredericks
President, CEO
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FORM OF NOTICE OF EXERCISE
[To be signed only upon exercise of the Warrant]
TO BE EXECUTED BY THE REGISTERED HOLDER
TO EXERCISE THE WITHIN WARRANT
The undersigned hereby exercises the right to purchase _________ shares of
Common Stock which the undersigned is entitled to purchase by the terms of the
within Warrant, according to the conditions thereof, and herewith makes payment
of the Warrant Price for such shares in full. All shares to be issued pursuant
hereto shall be issued in the name of __________________________________________
and the initial address of such person to be entered in the books of the Company
shall be: ____________________________. The shares are to be issued in
certificates of the following denominations:
------------------------------------
[Type Name of Holder]
By: ________________________________
Title: _____________________________
Dated: _________________________
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<PAGE>
FORM OF ASSIGNMENT
[To be signed only upon transfer of Warrant]
TO BE EXECUTED BY THE REGISTERED HOLDER
TO TRANSFER THE WITHIN WARRANT
FOR VALUE RECEIVED _______________________________ hereby sells, assigns
and transfers unto __________________________________ all rights of the
undersigned under and pursuant to the within Warrant, and the undersigned does
hereby irrevocably constitute and appoint ______________________________
Attorney to transfer the said Warrant on the books of the Company, with full
power or substitution.
------------------------------------
[Type Name of Holder]
By: ________________________________
Title: _____________________________
Dated: _________________________
NOTICE
The signature of the foregoing Assignment must correspond to the name as
written upon the face of the within Warrant in every particular, without
alteration or enlargement or any change whatsoever.
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<PAGE>
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD OR OFFERED FOR SALE
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER
SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR THE AVAILABILITY OF ANY
EXEMPTION FROM REGISTRATION UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES
LAWS.
No. 2
STOCK SUBSCRIPTION WARRANT
To Purchase Common Stock of
Lifecodes Corporation, a Delaware Corporation (the "Company")
DATE OF INITIAL ISSUANCE: December 9, 1991
THIS CERTIFIES THAT for value received, THEODORE H. ELLIOTT, JR. or registered
assigns (hereinafter called the "Holder") is entitled to purchase from the
Company, at any time during the Term of this Warrant, 4,704 shares of Common
Stock, par value $.10 per share, of the Company (the "Common Stock"), at the
Warrant Price, payable in lawful money of the United States of America to be
paid upon the exercise hereof. The exercise of this Warrant shall be subject to
the provisions, limitations and restrictions herein contained and may be
exercised in whole or in part.
SECTION 1. Definitions.
For all purposes of this Warrant, the following terms shall have the meanings
indicated:
Common Stock - shall mean and include the Company's authorized Common Stock,
$.10 par value, as constituted at the date hereof, and shall also include any
capital stock of any class of the Company hereafter authorized which shall not
be limited to a fixed sum or percentage of par value in respect to 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.
Securities Act - the Securities Act of 1933, as amended.
Term of this Warrant - shall mean the period beginning on the date of initial
issuance hereof and ending on the date ten (10) years from the date of initial
issuance hereof.
Warrant Price - $6.63 per share, subject to adjustment in accordance with
Section 5 hereof.
Warrants - this Warrant and any other Warrant or Warrants issued pursuant to the
original holder of this Warrant, or any transferees from such original holder of
this holder.
<PAGE>
Warrant Shares - shares of Common Stock purchased or purchasable by the Holder
of this Warrant upon the exercise hereof.
SECTION 2. Exercise of Warrant.
2.1. Procedure for Exercise of Warrant. To exercise this Warrant in whole
or in part (but not as to any fractional share of Common Stock), the Holder
shall deliver to the Company at its office referred to in Section 13 hereof at
any time and from time to time during the Term of this Warrant: (i) the Notice
of Exercise in the form attached hereto, (ii) cash or certified or official bank
check, payable to the order of the Company in the amount of the Warrant Price
for each share being purchased, and (iii) this Warrant. In the event of any
exercise of the rights represented by this Warrant, a certificate or
certificates for the shares of Common Stock so purchased, registered in the name
of the Holder or such other name or names as may be designated by the Holder,
shall be delivered to the Holder hereof within a reasonable time, not exceeding
fifteen (15) 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 (except a remaining fractional share), 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 person in whose name any certificate for
shares of Common Stock is issued upon exercise of this Warrant shall for all
purposes be deemed to have become the holder of record of such shares on the
date on which the Warrant was surrendered and payment of the Warrant Price and
any applicable taxes was made, irrespective of the date of delivery of such
certificate, except that, if the date of such surrender and payment is a date
when the stock transfer books of the Company are closed, such person shall be
deemed to have become the holder of such shares at the close of business on the
next succeeding date on which the stock transfer books are open.
2.2. Transfer Restriction Legend. Each certificate for Warrant shares shall
bear the following legend (and any additional legend required by (i) any
applicable state securities laws and (ii) any securities exchange upon which
such Warrant Shares may, at the time of such exercise, be listed) on the face
thereof unless at the time of exercise such Warrant Shares shall be registered
under the Securities Act:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended, and may not be sold or
transferred in the absence of such registration or an exemption
therefrom under said Act."
Any certificate issued at any time in exchange or substitution for any
certificate bearing such legend (except a new certificate issued upon completion
of a public distribution under a registration statement of the securities
represented thereby) shall also bear such legend unless, in the opinion of
counsel for the holder thereof (which counsel shall be reasonably satisfactory
to counsel for the Company) the securities represented thereby are not, at such
time, required by law to bear such legend.
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<PAGE>
SECTION 3. Covenants as to Common Stock. The Company covenants and agrees that
all shares of Common Stock that may be issued upon the exercise of the rights
represented by this Warrant will, upon issuance, be validly issued, fully paid
and nonassessable, and free from all taxes, liens and charges with respect to
the issue thereof. The Company further covenants and agrees that it will pay
when due and payable any and all federal and state taxes which may be payable in
respect of the issue of this Warrant, or any Common Stock or certificates
therefor issuable upon the exercise of this Warrant. The Company further
covenants and agrees that the Company will at all times have authorized and
reserved, free from preemptive rights, a sufficient number of shares of Common
Stock to provide for the exercise of the rights represented by this Warrant. The
Company further covenants and agrees that if any shares of capital stock to be
reserved for the purpose of the issuance of shares upon the exercise of this
Warrant require registration with or approval of any governmental authority
under any federal or state law before such shares may be validly issued or
delivered upon exercise, then the Company will in good faith and as
expeditiously as possible endeavor to secure such registration or approval, as
the case may be. If and so long as the Common Stock issuable upon the exercise
of this Warrant is listed on any national securities exchange, the Company will,
if permitted by the rules of such exchange, list and keep listed on such
exchange, upon official notice of issuance, all shares of such Common Stock
issuable upon exercise of this Warrant.
SECTION 4. Adjustment of Number of Shares. Upon each adjustment of the Warrant
Price as provided in Section 5, the Holder shall thereafter be entitled to
purchase, at the Warrant Price resulting from such adjustment, the number of
shares (calculated to the nearest tenth of a share) obtained by multiplying the
Warrant Price in effect immediately prior to such adjustment by the number of
shares purchasable pursuant hereto immediately prior to such adjustment and
dividing the product thereof by the Warrant Price resulting from such
adjustment.
SECTION 5. Adjustment of Warrant Price. The Warrant Price shall be subject to
adjustment from time to time as follows:
(i) If the Company shall at any time or from time to time during the Term
of this Warrant issue shares of Common Stock other than Excluded Stock (as
hereinafter defined) without consideration or for a consideration per share less
than the Warrant Price in effect immediately prior to the issuance of such
Common Stock, the Warrant Price in effect immediately prior to each such
issuance or adjustment shall forthwith (except as provided in this clause (i))
be adjusted to a price equal to the quotient obtained by dividing:
(A) an amount equal to the sum of
(x) the total number of shares of Common Stock outstanding
(including any shares of Common Stock deemed to have been issued
pursuant to subdivision (3) of this clause (i) and to clause (ii)
below) immediately prior to such issuance multiplied by the Warrant
Price in effect immediately prior to such issuance, plus
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<PAGE>
(y) the consideration received by the Company upon such issuance,
by
(B) the total number of shares of Common Stock outstanding (including
any shares of Common Stock deemed to have been issued pursuant to
subdivision (3) of this clause (i) and to clause (ii) below) immediately
after the issuance of such Common Stock.
For the purposes of any adjustment of the Warrant Price pursuant to this
clause (i), the following provisions shall be applicable:
(1) In the case of the issuance of Common Stock for cash, the
consideration shall be deemed to be the amount of cash paid therefor after
deducting therefrom any discounts, commissions or other expenses allowed,
paid or incurred by the Company for any underwriting or otherwise in
connection with the issuance and sale thereof.
(2) In the case of the issuance of Common Stock for a consideration in
whole or in part other than cash, the consideration other than cash shall
be deemed to be the fair market value thereof as determined by the Board of
Directors, irrespective of any accounting treatment; provided, however,
that such fair market value as determined by the Board of Directors shall
not exceed the aggregate Current Market Price (as hereinafter defined) of
the shares of Common Stock being issued.
(3) In the case of the issuance of (i) options to purchase or rights
to subscribe for Common Stock, (ii) securities by their terms convertible
into or exchangeable for Common Stock or (iii) options to purchase or
rights to subscribe for such convertible or exchangeable securities:
(A) the aggregate maximum number of shares of Common Stock
deliverable upon exercise of such options to purchase or rights
to subscribe for Common Stock shall be deemed to have been issued
at the time such options or rights were issued and for a
consideration equal to the consideration (determined in the
manner provided in subdivisions (1) and (2) above with the
proviso in subdivision (2) being applied to the number of shares
of Common Stock deliverable upon such exercise), if any, received
by the Company upon the issuance of such options or rights plus
the minimum purchase price provided in such options or rights for
the Common Stock covered thereby;
(B) the aggregate maximum number of shares of Common Stock
deliverable upon conversion of or in exchange for any such
convertible or exchangeable securities or upon the exercise of
options to purchase or rights to subscribe for such convertible
or exchangeable securities and subsequent conversions or
exchanges thereof shall be deemed to have been issued at the time
such securities were issued or such options or rights were issued
and for a consideration equal to the consideration
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<PAGE>
received by the Company for any such securities and related
options or rights (excluding any cash received on account of
accrued interest or accrued dividends), plus the additional
consideration, if any, to be received by the Company upon the
conversion or exchange of such securities or the exercise of any
related options or rights (the consideration in each case to be
determined in the manner provided in subdivisions (1) and (2)
above with the proviso in subdivision (2) being applied to the
number of shares of Common Stock deliverable upon such
conversion, exchange or exercise);
(C) on any change in the number of shares of Common Stock deliverable
upon exercise of any such options or rights or conversion of or
exchange for such convertible or exchangeable securities, other
than a change resulting from the antidilution provisions thereof,
the Warrant Price shall forthwith be readjusted to such Warrant
Price as would have obtained had the adjustment made upon the
issuance of such options, rights or securities not converted
prior to such change or options or rights related to such
securities not converted prior to such change been made upon the
basis of such change; and
(D) on the expiration of any such options or rights, the termination
of any such rights to convert or exchange or the expiration of
any options or rights related to such convertible or exchangeable
securities, the Warrant Price shall forthwith be readjusted to
such Warrant Price as would have obtained had the adjustment made
upon the issuance of such options, rights, securities or options
or rights related to such securities been made upon the basis of
the issuance of only the number of shares of Common Stock
actually issued upon the conversion or exchange of such
securities or upon the exercise of the options or rights related
to such securities.
(ii) "Excluded Stock" shall mean shares of Common Stock issued by the
Company as a stock dividend payable in shares of Common Stock or upon any
subdivision or split-up of the outstanding shares of Common Stock.
(iii) If, at any time during the Term of this Warrant, the number of shares
of Common Stock outstanding is increased by a stock dividend payable in shares
of Common Stock or by a subdivision or split-up of shares of Common Stock, then,
following the record date fixed for the determination of holders of Common Stock
entitled to receive such stock dividend, subdivision or split-up, the Warrant
Price shall be appropriately decreased so that the number of shares of Common
Stock issuable upon the exercise hereof shall be increased in proportion to such
increase in outstanding shares.
(iv) If, at any time during the Term of this Warrant, the number of shares
of Common Stock outstanding is decreased by a combination of the outstanding
shares of Common Stock, then, following the record date for such combination,
the Warrant Price shall appropriately
5
<PAGE>
increase so that the number of shares of Common Stock issuable upon the exercise
hereof shall be decreased in proportion to such decrease in outstanding shares.
(v) In case, at any time during the Term of this Warrant, the Company shall
declare a cash dividend upon its Common Stock payable otherwise than out of
earnings or earned surplus or shall distribute to holders of its Common Stock
shares of its capital stock (other than Common Stock), stock or other securities
of other persons, evidences of indebtedness issued by the Company or other
persons, assets (excluding cash dividends and distributions) or options or
rights (excluding options to purchase and rights to subscribe for Common Stock
or other securities of the Company convertible into or exchangeable for Common
Stock), then, in each such case, immediately following the record date fixed for
the determination of the holders of Common Stock entitled to receive such
dividend or distribution, the Warrant Price in effect thereafter shall be
determined by multiplying the Warrant Price in effect immediately prior to such
record date by a fraction of which the numerator shall be an amount equal to the
difference of (x) the Current Market Price of one share of Common Stock minus
(y) the fair market value (as determined by the Board of Directors, whose
determination shall be conclusive) of the stock, securities, evidences of
indebtedness, assets, options or rights so distributed in respect of one share
of Common Stock, and of which the denominator shall be such Current Market
Price.
(vi) All calculations under this Section 5 shall be made to the nearest
cent or to the nearest one-tenth (1/10) of a share, as the case may be.
(vii) For the purpose of any computation pursuant to this Section 5, the
Current Market Price at any date of one share of Common Stock shall be deemed to
be the average of the daily closing prices for the 30 consecutive business days
ending no more than 15 business days before the day in question (as adjusted for
any stock dividend, split, combination or reclassification that took effect
during such 30 business day period). The closing price for each day shall be the
last reported sales price regular way or, in case no such reported sales took
place on such day, the average of the last reported bid and asked prices regular
way, in either case on the principal national securities exchange on which the
Common Stock is listed or admitted to trading (or if the Common Stock is not at
the time listed or admitted for trading on any such exchange, then such price as
shall be equal to the average of the last reported bid and asked prices, as
reported by the National Association of Securities Dealers Automated Quotations
System ("NASDAQ") on such day, or if on any day in question, the security shall
not be quoted on the NASDAQ, then such price shall be equal to the average of
the last reported bid and asked prices on such day as reported by The National
Quotation Bureau Incorporated or any similar reputable quotation and reporting
service, if such quotation is not reported by The National Quotation Bureau
Incorporated); provided, however, that if the Common Stock is not traded in such
manner that the quotations referred to in this clause (vii) are available for
the period required hereunder, the Current Market Price shall be determined in
good faith by the Board of Directors of the Company or, if such determination
cannot be made, by a nationally recognized
6
<PAGE>
independent investment banking firm selected by the Board of Directors of the
Company (or if such selection cannot be made, by a nationally recognized
independent investment banking firm selected by the American Arbitration
Association in accordance with its rules).
(viii) Whenever the Warrant Price shall be adjusted as provided in Section
5, the Company shall prepare a statement showing the facts requiring such
adjustment and the Warrant Price that shall be in effect after such adjustment.
The Company shall cause a copy of such statement to be sent by mail, first class
postage prepaid, to each Holder of this Warrant at his address appearing on the
Company's records. Where appropriate, such copy may be given in advance and may
be included as part of the notice required to be mailed under the provisions of
subsection (x) of this Section 5.
(ix) Adjustments made pursuant to clauses (iii), (iv) and (v) above shall
be made on the date such dividend, subdivision, split-up, combination or
distribution, as the case may be, is made, and shall become effective at the
opening of business on the business day next following the record date for the
determination of stockholders entitled to such dividend, subdivision, split-up,
combination or distribution.
(x) In the event the Company shall propose to take any action of the types
described in clauses (iii), (iv) or (v) of this Section 5, the Company shall
forward, at the same time and in the same manner, to the Holder of this Warrant
such notice, if any, which the Company shall give to the holders of capital
stock of the Company. Failure to give such notice, or any defect therein, shall
not affect the legality or validity of any such action.
(xi) In any case in which the provisions of this Section 5 shall require
that an adjustment shall become effective immediately after a record date for an
event the Company may defer until the occurrence of such event issuing to the
Holder of all or any part of this Warrant which is exercised after such record
date and before the occurrence of such event the additional shares of capital
stock issuable upon such exercise by reason of the adjustment required by such
event over and above the shares of capital stock issuable upon such exercise
before giving effect to such adjustment exercise; provided, however, that the
Company shall deliver to such Holder a due bill or other appropriate instrument
evidencing such Holder's right to receive such additional shares upon the
occurrence of the event requiring such adjustment.
(xii) The sale or other disposition of any Common Stock theretofore held in
the treasury of the Company shall be deemed to be an issuance thereof.
SECTION 6. Ownership.
6.1. Ownership of This Warrant. The Company may deem and treat the person
in whose name this Warrant is registered as the holder and owner hereof
(notwithstanding any notations of ownership or writing hereon made by anyone
other than the Company) for all purposes and shall not be affected by any notice
to the contrary until presentation of this Warrant for registration of transfer
as provided in this Section 6.
7
<PAGE>
6.2. Transfer and Replacement. This Warrant and all rights hereunder are
transferable in whole or in part upon the books of the Company by the Holder
hereof in person or by duly authorized attorney, and a new Warrant or Warrants,
of the same tenor as this Warrant but registered in the name of the transferee
or transferees shall be made and delivered by the Company upon surrender of this
Warrant duly endorsed, at the office of the Company referred to in Section 13
hereof. Upon receipt by the Company of evidence reasonably satisfactory to it of
the loss, theft or destruction, and, in such case, of indemnity or security
reasonably satisfactory to it, and upon surrender of this Warrant if mutilated,
the Company will make and deliver a new Warrant of like tenor, in lieu of this
Warrant; provided that if the Holder hereof is an instrumentality of a state or
local government or an institutional holder or a nominee for such an
instrumentality or institutional holder an irrevocable agreement of indemnity by
such Holder shall be sufficient for all purposes of this Section 6, and no
evidence of loss or theft or destruction shall be necessary. This Warrant shall
be promptly cancelled by the Company upon the surrender hereof in connection
with any transfer or replacement. Except as otherwise provided above, in the
case of the loss, theft or destruction of a Warrant, the Company shall pay all
expenses, taxes and other stock transfer taxes (if any) payable in connection
with a transfer of this Warrant, which shall be payable by the Holder. Holder
will not transfer this Warrant and the rights hereunder except in compliance
with federal and state securities laws.
SECTION 7. Mergers, Consolidation, Sales. In the case of any proposed
consolidation or merger of the Company with another corporation, or the proposed
sale of all or substantially all of its assets to another corporation, or any
proposed reorganization or reclassification of the capital stock of the Company,
then, as a condition of such consolidation, merger, sale, reorganization or
reclassification, lawful and adequate provision shall be made whereby the Holder
of this Warrant shall thereafter have the right to receive upon the basis and
upon the terms and conditions specified herein, in lieu of the shares of the
Common Stock of the Company immediately theretofore purchasable hereunder, such
shares of stock, securities or assets as may (by virtue of such consolidation,
merger, sale, reorganization or reclassification) be issued or payable with
respect to or in exchange for the number of shares of such Common Stock
purchasable hereunder immediately before such consolidation, merger, sale,
reorganization or reclassification. In any such case appropriate provision shall
be made with respect to the rights and interests of the Holder of this Warrant
to the end that the provisions hereof 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 this Warrant. The Company shall not effect any
such consolidation, merger or sale unless prior to or simultaneously with the
consummation thereof the successor corporation or purchaser, as the case may be,
shall assume by written instrument the obligation to deliver to the Holder such
shares of stock, securities or assets as, in accordance with the foregoing
provisions, the Holder is entitled to receive.
SECTION 8. Notice of Dissolution or Liquidation. In case of any distribution of
the assets of the Company in dissolution or liquidation (except under
circumstances when the foregoing Section 7 shall be applicable), the Company
shall give notice thereof to the Holder hereof and shall make no distribution to
shareholders until the expiration of thirty (30) days from the date of mailing
of the aforesaid notice and, in any case, the Holder hereof may exercise this
8
<PAGE>
Warrant within thirty (30) days from the date of the giving of such notice, and
all rights herein granted not so exercised within such thirty-day period shall
thereafter become null and void.
SECTION 9. Notice of Extraordinary Dividends. Subject to further compliance with
Section 11.2 hereof, if the Board of Directors of the Company shall declare any
dividend or other distribution on its Common Stock except out of earned surplus
or by way of a stock dividend payable in shares of its Common Stock, the Company
shall mail notice thereof to the Holder hereof not less than thirty (30) days
prior to the record date fixed for determining shareholders entitled to
participate in such dividend or other distribution, and the Holder hereof shall
not participate in such dividend or other distribution unless this Warrant is
exercised prior to such record date. The provisions of this Section 9 shall not
apply to distributions made in connection with transactions covered by Section
7.
SECTION 10. Fractional Shares. Fractional Shares shall not be issued upon the
exercise of this Warrant but in any case where the Holder would, except for the
provisions of this Section 10, be entitled under the terms hereof to receive a
fractional share upon the complete exercise of this Warrant, the Company shall,
upon the exercise of this Warrant for the largest number of whole shares then
called for, pay a sum in cash equal to the excess of the value of such
fractional share (determined in such reasonable manner as may be prescribed in
good faith by the Board of Directors of the Company).
SECTION 11. Special Arrangements of the Company. The Company covenants and
agrees that during the Term of this Warrant, unless otherwise approved by the
Holder of this Warrant:
11.1. Will Reserve Shares. The Company will reserve and set apart and have
at all times, free from preemptive rights, the number of shares of authorized
but unissued Common Stock deliverable upon the exercise of this Warrant.
11.2. Will Not Issue Certain Stock. The Company will not issue any capital
stock of any class which has rights to be preferred as to dividends or as to the
distribution of assets upon voluntary or involuntary liquidation, dissolution or
winding-up, unless such rights shall be limited to a fixed sum or percentage of
par value in respect of participation in dividends and in the distribution of
assets. The Company will be deemed to have issued stock which is preferred as to
dividends or as to distribution of assets if either (i) the right to preferred
dividends exceeds the amount of fifteen percent (15%) of par value or (ii) the
right to preferred distribution of assets exceeds the amount of one hundred
percent (100%) of par value for the first year after issuance of such stock or
one hundred and twenty-five percent (125%) thereafter.
11.3. Will Not Declare Dividends. The Company will not pay any dividend or
other distribution on any of its capital stock unless such dividend or other
distribution on such share of capital stock and all other dividends or
distributions paid during the prior one year period on such shares of capital
stock are paid out of earned surplus and the aggregate amount thereof is
9
<PAGE>
less than fifteen percent (15%) of the fair market value of the shares of
capital stock (if then ascertainable) on the date of declaration of such
dividend or other distribution.
11.4. Will Bind Successors. This Warrant shall be binding upon any
corporation succeeding to the Company by merger, consolidation or acquisition of
all or substantially all of the Company's assets.
10
<PAGE>
SECTION 12. Registration rights; etc.
12.1. Certain Definitions. As used in this Section 12, the following terms
shall have the following respective meanings:
"Commission" shall mean the Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act.
"Registrable Securities" shall mean the Warrant Shares less any Warrant
Shares theretofore sold to the public or in a private placement.
The terms "register," "registered" and "registration" shall refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act and applicable rules and regulations
thereunder, and the effectiveness of such registration statement.
"Registration Expenses" shall mean all expenses incurred by the Company in
compliance with Section 12.2 hereof, including, without limitation, all
registration and filing fees, printing expenses, fees and disbursements of
counsel for the Company, blue sky fees and expenses, and the expense of any
special audits incident to or required by any such registration (but excluding
the compensation of regular employees of the Company, which shall be paid in any
event by the Company).
"Selling Expenses" shall mean all underwriting discounts and selling
commissions applicable to the sale of Registrable Securities, all fees and
disbursements of counsel for any Holder and any blue sky fees and expenses
excluded from the definition of "Registration Expenses."
"Holder" shall mean any holder of outstanding Warrant Shares or Registrable
Securities (except for purposes of determining "Holders" under Section 12.7
hereof) have not been sold to the public.
"Other Shareholders" shall mean holders of securities of the Company who
are entitled by contract with the Company to have securities included in a
registration of the Company's securities.
12.2. Company Registration.
(a) Notice of Registration. If the Company shall determine to register any
of its securities either for its own account or the account of a security holder
or holders exercising their respective demand registration rights, other than a
registration relating solely to employee benefit plans, or a registration
relating solely to a Commission Rule 145 transaction, or a registration on any
registration form which does not permit secondary sales, the Company will:
11
<PAGE>
(i) promptly give to each Holder written notice thereof (which shall
include a list of the jurisdictions in which the Company intends
to attempt to qualify such securities under the applicable blue
sky or other state securities laws); and
(ii) include in such registration (and any related qualification under
blue sky laws or other compliance), and in any underwriting
involved therein, all the Registrable Securities specified in a
written request or requests, made by any Holder within fifteen
(15) days after receipt of the written notice from the Company
described in clause (i) above, subject to any limitations on the
number of shares as set forth in Section 12.2(b) below.
(b) Underwriting. If the registration of which the Company gives notice is
for a registered public offering involving an underwriting, the Company shall so
advise the Holders as part of the written notice given pursuant to Section
12.2(a)(i). In such event, the right of any Holder to registration pursuant to
Section 12.2 shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting to the extent provided herein. All Holders proposing to distribute
their securities through such underwriting shall (together with the Company,
directors and officers and the Other Shareholders distributing their securities
through such underwriting) enter into an underwriting agreement in customary
form with the underwriter or underwriters selected for underwriting by the
Company.
Notwithstanding any other provision of this Section 12.2, if the
underwriter determines that marketing factors require a limitation on the number
of shares to be underwritten, the underwriter may (subject to the allocation
priority set forth below) exclude from such registration and underwriting some
or all of the Registrable Securities which would otherwise be underwritten
pursuant hereto. The Company shall so advise all holders of securities
requesting registration, and the number of shares of securities that are
entitled to be included in the registration and underwriting shall be allocated
in the following manner: The number of shares that may be included in the
registration and underwriting on behalf of such Holders, directors and officers
and Other Shareholders shall be allocated among such Holders, directors and
officers and Other Shareholders in proportion, as nearly practicable, to the
respective amounts of Registrable Securities and other securities which they had
requested to be included in such registration at the time of filing the
registration statement.
If any Holder of Registrable Securities or any officer, director or Other
Shareholder disapproves of the terms of any such underwriting, he may elect to
withdraw therefrom by written notice to the Company and the underwriter. Any
Registrable Securities or other securities excluded or withdrawn from such
underwriting shall be withdrawn from such registration.
12.3. Demand Registration Rights. In the event that the Company grants
demand registration rights to any other holder of securities of the Company, the
Company will promptly give to the Holder written notice thereof and, if in the
opinion of the Holder such demand registration rights are more favorable than
the registration rights provided under this
12
<PAGE>
Warrant, the Holder shall so notify the Company within thirty (30) days of
receipt of the foregoing notice from the Company, whereupon such demand
registration rights shall automatically be deemed to be incorporated in this
Warrant.
12.4. Expenses of Registration. The Company shall bear all Registration
Expenses incurred in connection with any registration, qualification and
compliance by the Company pursuant to Section 12.2 hereof. All Selling Expenses
shall be borne by the holders of the securities so registered pro rata on the
basis of the number of their shares so registered.
12.5. Registration Procedures. In the case of each registration effected by
the Company pursuant to this Section 12, the Company will keep each Holder
advised in writing as to the initiation of each registration and as to the
completion thereof. The Company will, at its expense:
(a) keep such registration effective for a period of one hundred twenty
(120) days or until the Holder or Holders have completed the distribution
described in the registration statement relating thereto, whichever first
occurs;
(b) furnish such number of prospectuses and other documents incident
thereto as a Holder from time to time may reasonably request; and
(c) use its best efforts to register or qualify the Registrable Securities
under the securities laws or blue-sky laws of such jurisdictions as any Holder
may request; provided, however, that the Company shall not be obligated to
register or qualify such Registrable Securities in any particular jurisdiction
in which the Company would be required to execute a general consent to service
of process in order to effect such registration, qualification or compliance,
unless the Company is already subject to service in the jurisdiction and except
as may be required by the Securities Act or applicable rules or regulations
thereunder.
12.6. Indemnification.
(a) The Company, with respect to each registration, qualification and
compliance effected pursuant to this Section 12, will indemnify and hold
harmless each Holder, each of its officers, directors and partners, and each
party controlling such Holder, and each underwriter, if any, and each party who
controls any underwriter, against all claims, losses, damages and liabilities
(or actions in respect thereof) arising out of or based on any untrue statement
(or alleged untrue statement) of a material fact contained in any prospectus,
offering circular or other document (including any related registration
statement, notification or the like) incident to any such registration,
qualification or compliance, or based on any omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, or any violation by the Company of the
Securities Act or any rule or regulation thereunder applicable to the Company
and relating to action or inaction required of the Company in connection with
any such registration, qualification or compliance, and will reimburse each such
Holder, each of its officers, directors and partners, and each party controlling
such Holder, each such underwriter and each party who controls any such
underwriter, for any legal and any other expenses incurred in connection with
investigating or
13
<PAGE>
defending any such claim, loss, damage, liability or action, provided that the
Company will not be liable in any such case to the extent that any such claim,
loss, damage, liability or expense arises out of or is based on any untrue
statement or omission based solely upon written information furnished to the
Company by such Holder or underwriter, as the case may be, and stated to be
specifically for use therein.
(b) Each Holder and Other Shareholder will, if Registrable Securities held
by him are included in the securities as to which such registration,
qualification or compliance is being effected, indemnify and hold harmless the
Company, each of its directors and officers and each underwriter, if any, of the
Company's securities covered by such a registration statement, each party who
controls the Company or such underwriter, each other such Holder and Other
Shareholder and each of their respective officers, directors and partners, and
each party controlling such Holder and Other Shareholder, against all claims,
losses, damages and liabilities (or actions in respect thereof) arising out of
or based on any untrue statement (or alleged untrue statement) of a material
fact contained in any such registration statement, prospectus, offering circular
or other document, or any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse the Company and such Holders, Other
Shareholders, directors, officers, partners, parties, underwriters or control
persons for any legal or any other expenses reasonably incurred in connection
with investigating or defending any such claim, loss, damage, liability or
action, in each case to the extent, but only to the extent, that such untrue
statement (or alleged untrue statement) or omission (or alleged omission) is
made in such registration statement, prospectus, offering circular or other
document solely in reliance upon and in conformity with written information
furnished to the Company by such Holder or Other Shareholder and stated to be
specifically for use therein; provided, however, that the obligations of such
Holders and Other Shareholders hereunder shall be limited to an amount equal to
the proceeds to each such Holder or Other Shareholder of securities sold as
contemplated herein.
(c) Each party entitled to indemnification under this Section 12.6 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or any litigation resulting
therefrom, shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld), and the Indemnified Party may participate in such
defense at such party's expense (unless the Indemnified Party shall have been
advised by counsel that actual or potential differing interests or defenses
exist or may exist between the Indemnifying Party and the Indemnified Party, in
which case such expense shall be paid by the Indemnifying Party), and provided
further that the failure of any Indemnified Party to give notice as provided
herein shall not relieve the Indemnifying Party of its obligations under this
Section 12. No Indemnifying Party, in the defense of any such claim or
litigation, shall, except with the consent of each Indemnified Party, consent to
entry of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant
14
<PAGE>
or plaintiff to such Indemnified Party of a release from all liability in
respect to such claim or litigation. Each Indemnified Party shall provide such
information as may be reasonably requested by an Indemnifying Party in order to
enable such Indemnifying Party to defend a claim as to which indemnity is
sought.
12.7. Information by Holder. Each Holder of Registrable Securities, and
each Other Shareholder holding securities included in any registration, shall
furnish to the Company such information regarding such Holder or Other
Shareholder as the Company may reasonably request in writing and as shall be
reasonably required in connection with any registration, qualification or
compliance referred to in this Section 12.
12.8. Rule 144 Reporting. With a view to making available the benefits of
certain rules and regulations of the Commission which may permit the sale of the
Registrable Securities to the public without registration, the Company agrees
to:
(a) Make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act, at all times from
and after ninety (90) days following the effective date of the first
registration under the Securities Act filed by the Company for an offering of
its securities to the general public;
(b) Use its best efforts to file with the Commission in a timely manner all
reports and other documents required of the Company under the Securities Act and
the Exchange Act at any time after it has become subject to such reporting
requirements; and
(c) So long as the Holder owns any Registrable Securities, furnish to the
Holder forthwith upon request a written statement by the Company as to its
compliance with the reporting requirements of Rule 144 (at any time from and
after ninety (90) days following the effective date of the first registration
statement in connection with an offering of its Securities to the general
public), and of the Securities Act and the Securities Exchange Act of 1934, as
amended (at any time after it has become subject to such reporting
requirements), a copy of the most recent annual or quarterly report of the
Company, and such other reports and documents so filed as the Holder may
reasonably request in availing itself of any rule or regulation of the
Commission allowing the Holder to sell any such securities without registration.
SECTION 13. Notices. Any notice or other document required or permitted to be
given or delivered to the Holder shall be delivered at, or sent by certified or
registered mail to, the Holder at 1177 Summer Street, Stamford, CT 06905 or to
such other address as shall have been furnished to the Company in writing by the
Holder. Any notice or other document required or permitted to be given or
delivered to the Company shall be delivered at, or sent by certified or
registered mail to, the Company at 550 West Avenue, Stamford, CT 06902 or to
such other address as shall have been furnished in writing to the Holder by the
Company. Any notice so addressed and mailed by registered or certified mail
shall be deemed to be given when so mailed. Any notice so addressed and
otherwise delivered shall be deemed to be given when actually received by the
addressee.
15
<PAGE>
SECTION 14. No Rights as Stockholder; Limitation of Liability. This Warrant
shall not entitle the Holder to any of the rights of a shareholder of the
company. No provision hereof, in the absence of affirmative action by the Holder
to purchase shares of Common Stock, and no mere enumeration herein of the rights
or privileges of the Holder, shall give rise to any liability of the Holder for
the Warrant Price hereunder or as a shareholder of the Company, whether such
liability is asserted by the Company or by creditors of the Company.
SECTION 15. Law Governing. This Warrant shall be governed by, and construed and
enforced in accordance with, the laws of the State of Connecticut.
SECTION 16. Miscellaneous.
(a) This Warrant and any provision hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
(or any predecessor in interest thereof) against which enforcement of the same
is sought. The headings in this Warrant are for purposes of reference only and
shall not affect the meaning or construction of any of the provisions hereof.
(b) All capitalized terms used herein and not otherwise defined herein
shall have the meanings ascribed to them in the Purchase Agreement.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its
duly authorized officer as of this 12th day of December, 1997.
LIFECODES CORPORATION
By: /s/ Walter O. Fredericks
--------------------------------
Walter O. Fredericks
President, CEO
1lt01!.DOC\11852\1\2081.01
<PAGE>
FORM OF NOTICE OF EXERCISE
[To be signed only upon exercise of the Warrant]
TO BE EXECUTED BY THE REGISTERED HOLDER
TO EXERCISE THE WITHIN WARRANT
The undersigned hereby exercises the right to purchase _________ shares of
Common Stock which the undersigned is entitled to purchase by the terms of the
within Warrant, according to the conditions thereof, and herewith makes payment
of the Warrant Price for such shares in full. All shares to be issued pursuant
hereto shall be issued in the name of __________________________________________
and the initial address of such person to be entered in the books of the Company
shall be: ____________________________. The shares are to be issued in
certificates of the following denominations:
-----------------------------------
[Type Name of Holder]
By: _______________________________
Title: ____________________________
Dated: _________________________
16
<PAGE>
FORM OF ASSIGNMENT
[To be signed only upon transfer of Warrant]
TO BE EXECUTED BY THE REGISTERED HOLDER
TO TRANSFER THE WITHIN WARRANT
FOR VALUE RECEIVED _______________________________ hereby sells, assigns
and transfers unto __________________________________ all rights of the
undersigned under and pursuant to the within Warrant, and the undersigned does
hereby irrevocably constitute and appoint ______________________________
Attorney to transfer the said Warrant on the books of the Company, with full
power or substitution.
-----------------------------------
[Type Name of Holder]
By: _______________________________
Title: ____________________________
Dated: _________________________
NOTICE
The signature of the foregoing Assignment must correspond to the name as
written upon the face of the within Warrant in every particular, without
alteration or enlargement or any change whatsoever.
17
<PAGE>
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD OR OFFERED FOR
SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE
SECURITIES UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR THE
AVAILABILITY OF AN EXEMPTION FROM REGISTRATION UNDER SAID ACT AND ANY
APPLICABLE STATE SECURITIES LAWS.
No.
STOCK SUBSCRIPTION WARRANT
To Purchase Common Stock of
LIFECODES CORPORATION (the "Company")
DATE OF INITIAL ISSUANCE: September 26, 1994
THIS CERTIFIES THAT for value received, CONNECTICUT INNOVATIONS,
INCORPORATED or its registered assigns (hereinafter called the "Holder") is
entitled to purchase from the Company, at any time during the Term of this
Warrant, thirteen thousand five hundred (13,500) shares of common stock, $.10
par value, of the Company (the "Common Stock"), at the Warrant Price, payable
in lawful money of the United States of America to be paid upon the exercise
hereof. The exercise of this Warrant shall be subject to the provisions,
limitations and restrictions herein contained, and may be exercised in whole
or in part.
SECTION 1. Definitions.
For all purposes of this Warrant, the following terms shall have the
meanings indicated:
Common Stock - shall mean and include the Company's authorized Common
Stock, $.10 par value, as constituted at the date hereof, and shall
also include any capital stock of any class or series of the Company
hereafter authorized which shall not be limited to a fixed sum or
percentage of par value or of the purchase price of such stock in
respect of the rights of the holders thereof to participate in
dividends and/or in the distribution of assets upon the voluntary or
involuntary liquidation, dissolution or winding up of the Company.
Notwithstanding the foregoing, for purposes of determining the class
or series of the Company's capital stock which the Holder is entitled
to purchase pursuant hereto, the term "common stock" shall mean the
Company's authorized Common Stock $.10 par value, as constituted at
the date hereof.
Exchange Act - shall mean the Securities Exchange Act of
1934, as amended from time to time.
Securities Act - the Securities Act of 1933, as amended.
Term of this Warrant - shall mean the period beginning on the date of
initial issuance hereof and ending on September 26, 2004.
Term of this Warrant - shall mean the period beginning on
the date of initial issuance hereof and ending on September 26, 2004.
<PAGE>
Warrant Price - $1.00 per share, subject to adjustment in
accordance with Section 5 hereof.
Warrants - this Warrant and any other Warrant or Warrants
issued pursuant to the Financing Agreement between the Company and
Connecticut Innovations, Incorporated dated September 26, 1994 (the
"Financing Agreement") to the original holder of this Warrant, or any
transferees from such original holder or this Holder.
Warrant Shares - shares of Common Stock purchased or
purchasable by the Holder of this Warrant upon the exercise hereof
SECTION 2. Exercise of Warrant.
2.1. Procedure for Exercise of Warrant. To exercise this Warrant in
whole or in part (but not as to any fractional share of Common Stock), the
Holder shall deliver to the Company at its office referred to in Section 13
hereof at any time and from time to time during the Term of this Warrant: (i)
the Notice of Exercise in the form attached hereto, (ii) cash, certified or
official bank check payable to the order of the Company, wire transfer of
funds to the Company's account, or evidence of any indebtedness of the Company
to the Holder (or any combination of any of the foregoing) in the amount of
the Warrant Price for each share being purchased, and (iii) this Warrant. In
the event of any exercise of the rights represented by this Warrant, a
certificate or certificates for the shares of Common Stock so purchased,
registered in the name of the Holder or such other name or names as may be
designated by the Holder, shall be delivered to the Holder hereof within a
reasonable time, not exceeding fifteen (15) 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 (except a remaining
fractional share), 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 person in whose name any certificate for shares of Common Stock is
issued upon exercise of this Warrant shall for all purposes be deemed to have
become the holder of record of such shares on the date on which the Warrant
was surrendered and payment of the Warrant Price and any applicable taxes was
made, irrespective of the date of delivery of such certificate, except that,
if the date of such surrender and payment is a date when the stock transfer
books of the Company are closed, such person shall be deemed to have become
the holder of such shares at the close of business on the next succeeding date
on which the stock transfer books are open.
2.2. Transfer Restriction Legend. Each certificate for Warrant Shares
shall bear the following legend (and any additional legend required by (i) any
applicable state securities laws and (ii) any securities exchange upon which
such Warrant Shares may, at the time of such exercise, be listed) on the face
thereof unless at the time of exercise such Warrant Shares shall be registered
under the Securities Act:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended, and may not be sold or
transferred in the absence of such registration or an exemption
therefrom under said Act."
Any certificate issued at any time in exchange or substitution for any
certificate bearing such legend (except a new certificate issued upon
completion of a public distribution under a registration statement of the
-2-
<PAGE>
securities represented thereby) shall also bear such legend unless, in the
opinion of counsel for the holder thereof (which counsel shall be reasonably
satisfactory to counsel for the Company) the securities represented thereby
are not, at such time, required by law to bear such legend.
SECTION 3. Covenants as to Common Stock. The Company covenants and agrees that
all shares of Common Stock that may be issued upon the exercise of the rights
represented by this Warrant will, upon issuance, be validly issued, fully paid
and nonassessable, and free from all taxes, liens and charges with respect to
the issue thereof. The Company further covenants and agrees that it will pay
when due and payable any and all federal and state taxes which may be payable
in respect of the issue of this Warrant or any Common Stock or certificates
therefor issuable upon the exercise of this Warrant. The Company further
covenants and agrees that the Company will at all times have authorized and
reserved, free from preemptive rights, a sufficient number of shares of Common
Stock to provide for the exercise of the rights represented by this Warrant.
The Company further covenants and agrees that if any shares of capital stock
to be reserved for the purpose of the issuance of shares upon the exercise of
this Warrant require registration with or approval of any governmental
authority under any federal or state law before such shares may be validly
issued or delivered upon exercise, then the Company will in good faith and as
expeditiously as possible endeavor to secure such registration or approval, as
the case may be. If and so long as the Common Stock issuable upon the exercise
of this Warrant is listed on any national securities exchange, the Company
will, if permitted by the rules of such exchange, fist and keep listed on such
exchange, upon official notice of issuance, all shares of such Common Stock
issuable upon exercise of this Warrant.
SECTION 4. Adjustment of Number of Shares. Upon each adjustment of the Warrant
Price as provided in Section 5, the Holder shall thereafter be entitled to
purchase, at the Warrant Price resulting from such adjustment, the number of
shares (calculated to the nearest tenth of a share) obtained by multiplying
the Warrant Price in effect immediately prior to such adjustment by the number
of shares purchasable pursuant hereto immediately prior to such adjustment and
dividing the product thereof by the Warrant Price resulting from such
adjustment.
SECTION 5. Adjustment of Warrant Price. The Warrant Price shall be subject to
adjustment from time to time as follows:
(i) If the Company shall at any time or from time to time during the
Tenn of this Warrant issue shares of Common Stock other than Excluded Stock
(as hereinafter defined) without consideration or for a consideration per
share less than the Warrant Price in effect immediately prior to the issuance
of such Common Stock, the Warrant Price in effect immediately prior to each
such issuance or adjustment shall forthwith (except as provided in this clause
(i)) be adjusted to a price equal to the consideration per share for which
such additional shares of Common Stock are so issued.
For the purposes of any adjustment of the Warrant Price pursuant to
this clause (i), the following provisions shall be applicable:
1. In the case of the issuance of Common Stock for cash, the consideration
shall be deemed to be the amount of cash paid therefor after deducting
therefrom
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<PAGE>
any discounts, commissions or other expenses allowed, paid or incurred by the
Company for any underwriting or otherwise in connection with the issuance and
sale thereof.
2. In the case of the issuance of Common Stock for a consideration in whole or
in part other than cash, the consideration other than cash shall be deemed to
be the fair market value thereof as determined by the Board of Directors of
the Company, irrespective of any accounting treatment; provided, however,
that such fair market value as determined by the Board of Directors, together
with any cash consideration being paid, shall not exceed the aggregate
Current Market Price (as hereinafter defined) of the shares of Common Stock
being issued.
3. In the case of the issuance of (i) options to purchase or rights to
subscribe for Common Stock, (ii) securities by their terms convertible into
or exchangeable for Common Stock or (iii) options to purchase or rights to
subscribe for such convertible or exchangeable securities:
(A) the aggregate maximum number of shares of Common Stock
deliverable upon exercise of such options to purchase or
rights to subscribe for Common Stock shall be deemed to have
been issued at the time such options or rights were issued
and for a consideration equal to the consideration
(determined in the manner provided in subdivisions (1) and
(2) above with the proviso in subdivision (2) being applied
to the number of shares of Common Stock deliverable upon such
exercise), if any, received by the Company upon the issuance
of such options or rights plus the minimum purchase price
provided in such options or rights for the Common Stock
covered thereby;
(B) the aggregate maximum number of shares of Common Stock
deliverable upon conversion of or in exchange for any such
convertible or exchangeable securities or upon the exercise
of options to purchase or rights to subscribe for such
convertible or exchangeable securities and subsequent
conversions or exchanges thereof shall be deemed to have
been issued at the time such securities were issued or such
options or rights were issued and for a consideration equal
to the consideration received by the Company for any such
securities and related options or rights (excluding any
cash received on account of accrued interest or accrued
dividends), plus the additional consideration, if any, to
be received by the Company upon the conversion or exchange
of such securities or the exercise of any related options
or rights (the consideration in each case to be determined
in the manner provided in subdivisions (1) and (2) above
with the proviso in subdivision (2) being applied to the
number of shares of Common Stock deliverable upon such
conversion, exchange or exercise);
(C) on any change in the number of shares of Common Stock
deliverable upon exercise of any
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<PAGE>
such options or rights or conversion of or exchange for
such convertible or exchangeable securities, other than a
change resulting from the antidilution provisions thereof,
the Warrant Price shall forthwith be readjusted to such
Warrant Price as would have obtained had the adjustment
made upon the issuance of such options, rights or
securities not converted prior to such change or options or
rights related to such securities not converted prior to
such change being made upon the basis of such change; and
(D) on the expiration of any such options or rights, the
termination of any such rights to convert or exchange or
the expiration of any options or rights related to such
convertible or exchangeable securities, the Warrant Price
shall forthwith be readjusted to such Warrant Price as
would have obtained had the adjustment made upon the
issuance of such options, rights, securities or options or
rights related to such securities being made upon the basis
of the issuance of only the number of shares of Common
Stock actually issued upon the conversion or exchange of
such securities or upon the exercise of the options or
rights related to such securities.
(ii) "Excluded Stock" shall mean shares of Common Stock issued by
the Company to employees pursuant to options or purchase rights at a price
which is not less than the adjusted conversion price of the Series A Preferred
(as defined in the Financing Agreement) or at a price no less than the price
of the most recent arm's length sale of Common Stock.
(iii) If, at any time during the Term of this Warrant, the number
of shares of Common Stock outstanding is increased by a stock dividend payable
in shares of Common Stock or by a subdivision or split-up of shares of Common
Stock, then, following the record date fixed for the determination of holders
of Common Stock entitled to receive such stock dividend, subdivision or
split-up, the Warrant Price shall be appropriately decreased so that the
number of shares of Common Stock issuable upon the exercise hereof shall be
increased in proportion to such increase in outstanding shares.
(iv) If, at any time during the Term of this Warrant, the number
of shares of Common Stock outstanding is decreased by a combination of the
outstanding shares of Common Stock, then, following the record date for such
combination, the Warrant Price shall appropriately increase so that the number
of shares of Common Stock issuable upon the exercise hereof shall be decreased
in proportion to such decrease in outstanding shares.
(v) In case, at any time during the Term of this Warrant, the
Company shall declare a cash dividend upon its Common Stock payable otherwise
than out of earnings or earned surplus or shall distribute to holders of its
Common Stock shares of its capital stock (other than Common Stock), stock or
other securities of other persons, evidences of indebtedness issued by the
Company or other persons, assets (excluding cash dividends and distributions)
or options or rights (excluding options to purchase and rights to subscribe
for Common Stock or other securities of the Company convertible into or
exchangeable for Common Stock), then, in each such case, immediately following
the record date fixed for the determination of the holders of Common Stock
entitled to receive such dividend or distribution, the Warrant Price in effect
thereafter shall be determined by
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<PAGE>
multiplying the Warrant Price in effect immediately prior to such record date
by a fraction of which the numerator shall be an amount equal to the
difference of (x) the Current Market Price of one share of Common Stock minus
(y) the fair market value (as determined by the Board of Directors of the
Company, whose determination shall be conclusive) of the stock, securities,
evidences of indebtedness, assets, options or rights so distributed in respect
of one share of Common Stock, and of which the denominator shall be such
Current Market Price.
(vi) All calculations under this Section 5 shall be made to the
nearest cent or to the nearest one-tenth (1/10) of a share, as the case may
be.
(vii) For the purpose of any computation pursuant to this Section
5, the Current Market Price at any date of one share of Common Stock shall be
deemed to be the average of the daily closing prices for the 30 consecutive
business days ending no more than 15 business days before the day in question
(as adjusted for any stock dividend, split, combination or reclassification
that took effect during such 30 business day period). The closing price for
each day shall be the last reported sales price regular way or, in case no
such reported sales took place on such day, the average of the last reported
bid and asked prices regular way, in either case on the principal national
securities exchange on which the Common Stock is listed or admitted to trading
(or if the Common Stock is not at the time listed or admitted for trading on
any such exchange, then such price as shall be equal to the average of the
last reported bid and asked prices, as reported by the National Association of
Securities Dealers Automated Quotations System ("Nasdaq") on such day, or if,
on any day in question, the security shall not be quoted on the Nasdaq, then
such price shall be equal to the average of the last reported bid and asked
prices on such day as reported by The National Quotation Bureau Incorporated
(or any similar reputable quotation and reporting service, if such quotation
is not reported by The National Quotation Bureau Incorporated); provided,
however, that if the Common Stock is not traded in such manner that the
quotations referred to in this clause (vii) are available for the period
required hereunder, the Current Market Price shall be determined in good faith
by the Board of Directors of the Company or, if such determination cannot be
made, by a nationally recognized independent investment banking firm selected
by the Board of Directors of the Company (or if such selection cannot be made,
by a nationally recognized independent investment banking firm selected by the
American Arbitration Association in accordance with its rules).
(viii) Whenever the Warrant Price shall be adjusted as provided in
Section 5, the Company shall prepare a statement showing the facts requiring
such adjustment and the Warrant Price that shall be in effect after such
adjustment. The Company shall cause a copy of such statement to be sent by
mail, first class postage prepaid, to each Holder of this Warrant at its, his
or her address appearing on the Company's records. Where appropriate, such
copy may be given in advance and may be included as part of the notice
required to be mailed under the provisions of subsection (x) of this Section 5.
(ix) Adjustments made pursuant to clauses (iii), (iv) and (v)
above shall be made on the date such dividend, subdivision, split-up,
combination or distribution, as the case may be, is made, and shall become
effective at the opening of business on the business day next following the
record date for the determination of stockholders entitled to such dividend,
subdivision, split-up, combination or distribution.
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<PAGE>
(x) In the event the Company shall propose to take any action
of the types described in clauses (iii), (iv),or (v) of this Section 5, the
Company shall forward, at the same time and in the same manner, to the Holder
of this Warrant such notice, if any, which the Company shall give to the
holders of capital stock of the Company.
(xi) In any case in which the provisions of this Section 5
shall require that an adjustment shall become effective immediately after a
record date for an event, the Company may defer until the occurrence of such
event issuing to the Holder of all or any part of this Warrant which is
exercised after such record date and before the occurrence of such event the
additional shares of capital stock issuable upon such exercise by reason of
the adjustment required by such event over and above the shares of capital
stock issuable upon such exercise before giving effect to such adjustment
exercise; provided, however, that the Company shall deliver to such Holder a
due bill or other appropriate instrument evidencing such Holder's right to
receive such additional shares upon the occurrence of the event requiring such
adjustment.
(xii) The sale or other disposition of any Common Stock
theretofore held in the treasury of the Company shall be deemed to be an
issuance thereof.
SECTION 6. Ownership.
6.1. Ownership of This Warrant. The Company may deem and treat the
person in whose name this Warrant is registered as the holder and owner hereof
(notwithstanding any notations of ownership or writing hereon made by anyone
other than the Company) for all purposes and shall not be affected by any
notice to the contrary until presentation of this Warrant for registration of
transfer as provided in this Section 6.
6.2. Transfer and Replacement. This Warrant and all rights hereunder
are transferable in whole or in part upon the books of the Company by the
Holder hereof in person or by duly authorized attorney, and a new Warrant or
Warrants, of the same tenor as this Warrant but registered in the name of the
transferee or transferees (and in the name of the Holder, if a partial
transfer is effected) shall be made and delivered by the Company upon
surrender of this Warrant duly endorsed, at the office of the Company referred
to in Section 13 hereof Upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft or destruction, and, in such case, of
indemnity or security reasonably satisfactory to it, and upon surrender of
this Warrant if mutilated, the Company will make and deliver a new Warrant of
like tenor, in lieu of this Warrant; provided that if the Holder hereof is an
instrumentality of a state or local government or an institutional holder or a
nominee for such an instrumentality or institutional holder an irrevocable
agreement of indemnity by such Holder shall be sufficient for all purposes of
this Section 6, and no evidence of loss or theft or destruction shall be
necessary. This Warrant shall be promptly canceled by the Company upon the
surrender hereof in connection with any transfer or replacement. Except as
otherwise provided above, in the case of the loss, theft or destruction of a
Warrant, the Company shall pay all expenses, taxes and other charges payable
in connection with any transfer or replacement of this Warrant, other than
stock transfer taxes (if any) payable in connection with a transfer of this
Warrant, which shall be payable by the Holder.
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<PAGE>
Holder win not transfer this Warrant and the rights hereunder except in
compliance with federal and state securities laws.
SECTION 7. Mergers, Consolidation, Sales. In the case of any proposed
consolidation or merger of the Company with another entity, or the proposed
sale of all or substantially all of its assets to another person or entity, or
any proposed reorganization or reclassification of the capital stock of the
Company, then, as a condition of such consolidation, merger, sale,
reorganization or reclassification, lawful and adequate provision shall be
made whereby the Holder of this Warrant shall thereafter have the right to
receive upon the basis and upon the terms and conditions specified herein, in
lieu of the shares of the Common Stock of the Company immediately theretofore
purchasable hereunder, such shares of stock, securities or assets as may (by
virtue of such consolidation, merger, sale, reorganization or
reclassification) be issued or payable with respect to or in exchange for the
number of shares of such Common Stock purchasable hereunder immediately before
such consolidation, merger, sale, reorganization or reclassification. In any
such case appropriate provision shall be made with respect to the rights and
interests of the Holder of this Warrant to the end that the provisions hereof
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
this Warrant. The Company shall not effect any such consolidation, merger or
sale unless (i) either (A) the Holder shall have given its written consent
thereto, or (B) the other party to the consolidation, merger or sale is not
controlled by, does not control, and is not under common control with, the
Company and the transaction is not being undertaken with the purpose of
diminishing, defeating or avoiding the Holder's rights hereunder, and (ii)
prior to or simultaneously with the consummation thereof the successor
corporation or purchaser, as the case may be, shall assume by written
instrument the obligation to deliver to the Holder such shares of stock,
securities or assets as, in accordance with the foregoing provisions, the
Holder is entitled to receive.
SECTION 8. Notice of Dissolution or Liquidation. In case of any distribution
of the assets of the Company in dissolution or liquidation (except under
circumstances when the foregoing Section 7 shall be applicable), the Company
shall give notice thereof to the Holder hereof and shall make no distribution
to shareholders until the expiration of thirty (30) days from the date of
mailing of the aforesaid notice and, in any case, the Holder hereof may
exercise this Warrant within thirty (30) days from the date of the giving of
such notice, and all rights herein granted not so exercised within such
thirty-day period shall thereafter become null and void.
SECTION 9. Notice of Extraordinary Dividends. Subject to further compliance
with Section 11.2 hereof, if the Board of Directors of the Company shall
declare any dividend or other distribution on its Common Stock except out of
earned surplus or by way of a stock dividend payable in shares of its Common
Stock, the Company shall mail notice thereof to the Holder hereof not less
than thirty (30) days prior to the record date fixed for determining
shareholders entitled to participate in such dividend or other distribution,
and the Holder hereof shall not participate in such dividend or other
distribution unless this Warrant is exercised prior to such record date. The
provisions of this Section 9 shall not apply to distributions made in
connection with transactions covered by Section 7.
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<PAGE>
SECTION 10. Fractional Shares. Fractional shares shall not be issued upon the
exercise of this Warrant but in any case where the Holder would, except for
the provisions of this Section 10, be entitled under the terms hereof to
receive a fractional share upon the complete exercise of this Warrant, the
Company shall, upon the exercise of this Warrant for the largest number of
whole shares then called for, pay a sum in cash equal to the excess of the
value of such fractional share (determined in such reasonable manner as may be
prescribed in good faith by the Board of Directors of the Company) over the
Warrant Price for such fractional share.
SECTION 11. Special Arrangements of the Company. The Company covenants and
agrees that during the Term of this Warrant, unless otherwise approved by the
Holder of this Warrant:
11.1. Will Reserve Shares. The Company will reserve and set apart and
have available for issuance at all times, free from preemptive or other
preferential rights, the number of shares of authorized but unissued Common
Stock deliverable upon the exercise of this Warrant.
11.2. Will Not Issue Certain Stock. The Company will not issue any
capital stock of any class which has rights to be preferred as to dividends
and/or as to the distribution of assets upon voluntary or involuntary
liquidation, dissolution or winding-up, unless (a) such rights shall be
limited to a fixed sum or percentage of par value in respect of participation
in dividends and in the distribution of assets, and (b) such stock is
non-voting. The Company will be deemed to have issued stock which is preferred
as to dividends or as to distribution of assets if either (i) the right to
preferred dividends exceeds the amount of fifteen percent (15%) of par value
or of the purchase price of such shares or (ii) the right to preferred
distribution of assets exceeds the amount of one hundred percent (100%) of par
value or of the purchase price of such shares for the first year after
issuance of such stock or one hundred and twenty-five percent (125%)
thereafter.
11.3. Will Not Declare Dividends. The Company will not pay any
dividend or other distribution on any of its capital stock unless such
dividend or other distribution on such share of capital stock and all other
dividends or distributions paid during the prior one year period on such
shares of capital stock are paid out of earned surplus and the aggregate
amount thereof is less than fifteen percent (15%) of the fair market value of
the shares of capital stock (if then ascertainable) on the date of declaration
of such dividend or other distribution.
11.4. Will Not Amend Certificate. The Company will not amend its
Certificate of Incorporation to eliminate as an authorized class of capital
stock that class denominated as "Common Stock" on the date hereof.
11.5. Will Bind Successors. This Warrant shall be binding upon any
corporation or other person or entity succeeding to the Company by merger,
consolidation or acquisition of all or substantially all of the Company's
assets.
SECTION 12. Registration Rights. The Holder shall have the registration rights
set forth in the Financing Agreement.
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<PAGE>
SECTION 13. Notices. Any notice or other document required or permitted to be
given or delivered to the Holder shall be delivered at, or sent by certified
or registered mail to, the Holder at 40 Cold Spring Road, Rocky Hill, CT 06067
or to such other address as shall have been furnished to the Company in
writing by the Holder. Any notice or other document required or permitted to
be given or delivered to the Company shall be delivered at, or sent by
certified or registered mail to, the Company at 550 West Avenue, Stamford,
Connecticut 06902 or to such other address as shall have been furnished in
writing to the Holder by the Company. Any notice so addressed and mailed by
registered or certified mail shall be deemed to be given when so mailed. Any
notice so addressed and otherwise delivered shall be deemed to be given when
actually received by the addressee.
SECTION 14. No Rights as Stockholder; Limitation of Liability. This Warrant
shall not entitle the Holder to any of the rights of a shareholder of the
Company. No provision hereof, in the absence of affirmative action by the
Holder to purchase shares of Common Stock, and no mere enumeration herein of
the rights or privileges of the Holder, shall give rise to any liability of
the Holder for the Warrant Price hereunder or as a shareholder of the Company,
whether such liability is asserted by the Company or by creditors of the
Company.
SECTION 15. Law Governing. This Warrant shall be governed by, and construed
and enforced in accordance with, the laws of the State of Connecticut.
SECTION 16. Miscellaneous.
(a) This Warrant and any provision hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
(or any predecessor in interest thereof) against which enforcement of the same
is sought. The headings in this Warrant are for purposes of reference only and
shall not affect the meaning or construction of any of the provisions hereof
(b) All capitalized terms used herein and not otherwise defined
herein shall have the meanings ascribed to them in the Financing Agreement.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed
by its duly authorized officer this 26th day of September, 1994.
LIFECODES CORPORATION
By: _____________________________
Title : __________________________
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<PAGE>
FORM OF NOTICE OF EXERCISE
[To be signed only upon exercise of the Warrant]
TO BE EXECUTED BY THE REGISTERED HOLDER
TO EXERCISE THE WITHIN WARRANT
The undersigned hereby exercises the right to purchase _______________
shares of Common Stock which the undersigned is entitled to purchase by the
terms of the within Warrant according to the conditions thereof, and herewith
makes payment of the Warrant Price of such shares in full. All shares to be
issued pursuant hereto shall be issued in the name of and the initial address
of such person to be entered on the books of the Company shall be:
The shares are to be issued in certificates of the following denominations:
---------------------------------
[Type Name of Holder]
By : ____________________________
Title : _________________________
Dated: _________________________
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<PAGE>
FORM OF ASSIGNMENT
(ENTIRE)
[To be signed only upon transfer of entire Warrant]
TO BE EXECUTED BY THE REGISTERED HOLDER
TO TRANSFER THE WITHIN WARRANT
FOR VALUE RECEIVED_______________________ hereby sells, assigns and
transfers unto_____________________________________ all rights of the
undersigned under and pursuant to the within Warrant, and the undersigned does
hereby irrevocably constitute and appoint _________________________________
Attorney to transfer the said Warrant on the books of the Company, with full
power of substitution.
----------------------------
[Type Name of Holder]
By: ________________________
Title: _____________________
Dated: ______________________
NOTICE
The signature to the foregoing Assignment must correspond to the name
as written upon the face of the within Warrant in every particular, without
alteration or enlargement or any change whatsoever.
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<PAGE>
FORM OF ASSIGNMENT
(PARTIAL)
[To be signed only upon partial transfer of Warrant]
TO BE EXECUTED BY THE REGISTERED HOLDER
TO TRANSFER THE WITHIN WARRANT
FOR VALUE RECEIVED____________________ hereby sells, assigns and
transfers unto __________________________________ (i) the rights of the
undersigned to purchase _____________ shares of Common Stock under and
pursuant to the within Warrant, and (ii) on a non-exclusive basis, all other
rights of the undersigned under and pursuant to the within Warrant, it being
understood that the undersigned shall retain, severally (and not jointly) with
the transferee(s) named herein, all rights assigned on such non-exclusive
basis. The undersigned does hereby irrevocably constitute and appoint
_______________________ Attorney to transfer the said Warrant on the books of
the Company, with full power of substitution.
----------------------------
[Type Name of Holder]
By: ________________________
Title: _____________________
Dated: __________________
NOTICE
The signature to the foregoing Assignment must correspond to the name
as written upon the face of the within Warrant in every particular, without
alteration or enlargement or any change whatsoever.
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<PAGE>
THE SECURITIES COVERED BY THIS STOCK WARRANT AGREEMENT HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT 0F 1933, AS AMENDED, OR ANY STATE SECURITY
LAWS. THEY MAY NOT BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT OR AS COVERED UNDER AN EXEMPTION FROM REGISTRATION
UNDER SAID ACT AND ANY APPLICABLE STATE SECURITY LAWS.
SIMPLIFIED
FIVE YEAR STOCK SUBSCRIPTION WARRANT
To Purchase Common Stock of
Lifecodes Corporation, a Delaware Corporation (the "Company")
DATE OF ISSUANCE: FEBRUARY 24, 1994
THIS CERTIFIES THAT for value received, Joseph I. Bishop or registered assigns
(hereinafter called "Holder") is entitled to purchase from the Company, from
this date of issuance and ending five (5) years from the date hereof, 7,500
shares of Common Stock, par value $.10 per share, of the Company (the "Common
Stock"), at the Warrant Price of $5.00 per share, payable in lawful money of
the United States of America to be paid upon the exercise hereof. This Warrant
is subject to the terms and conditions contained herein and may only be
exercised in whole; no fractional exercise will be permitted.
EXERCISE OF WARRANT
To exercise this Warrant the Holder shall deliver to the Company at its
principal place of business: an executed FORM OF NOTICE OF EXERCISE, a sample
of which is attached hereto; cash or certified check payable to the Company;
this Warrant.
The person in whose name any certificate of shares of Common Stock is
issued upon exercise of this Warrant shall for all purposes be deemed to have
become the holder of record of such shares on the date on which the Warrant
was surrendered and payment of the Warrant price and any applicable taxes was
made, irrespective of the date of delivery of such certificate.
Except as provided below under OWNERSHIP, there can be no substitute,
exchange or re-issue of Warrant and Warrant terms provide no protection from
dilution through the issue of new shares, stock dividends or other factors
which may cause more shares to be issued.
In the event the Company completes a private equity sale of not less
than $1,500,000 or a public offering registered under the Securities Act of
1933 of at least $5,000,000, or a consolidation with another company in which
the Company is not the majority shareholder, and providing that any such
transaction is valued at not less than $10.00 per share for the shares then
outstanding, the Company may, upon fifteen (15) days notice to the Holder,
cause this Warrant to terminate effective upon the closing of such transaction
or at any time thereafter.
<PAGE>
COVENANT AS TO COMMON STOCK
The Company covenants and agrees that all shares of Common Stock that
may be issued upon the exercise of this Warrant will, upon issuance, be
validly issued, fully paid and nonassessable, and free from all taxes, liens
and charges with respect to the issue thereof. The Company further covenants
and agrees that the Company will at all times have authorized and reserved,
free from preemptive rights, a sufficient number of shares of Common Stock to
provide for the exercise of this Warrant. In the event of a public offering as
described above, the Company will attempt, as permitted by the securities
exchange and underwriter, to register all shares of Common Stock issuable upon
exercise of this Warrant.
OWNERSHIP
The Company will deem and treat the person in whose name this Warrant is
registered as the holder and owner hereof for all purposes and shall not be
affected by any notice to the contrary until presentation of the Warrant for
registration or transfer as provided for herein.
This Warrant and all rights hereunder are transferable in whole upon the
books of the Company by the Holder hereof upon presentation of the Warrant,
duly endorsed, and with direction as to the transferee. Holder agrees not to
effect any transfer of this Warrant and the rights hereunder except in
compliance with federal and state security laws.
NOTICES AND MISCELLANEOUS
Any notice pertaining to this Warrant shall be by certified mail or
courier and shall be delivered if to the Holder at Hydromotion Corporation, 85
East Bridge Street, Spring City, PA 19475, and to the Company at 550 West
Ave., Stamford, CT 06902.
This Warrant shall not grant or entitle Holder to any rights of a
shareholder of the Company. Any disputes concerning this Warrant shall be
governed by, and construed and enforced in accordance with, the laws of the
State of Connecticut.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officer this 24th day of January, 1994.
LIFECODES CORPORATION
By:___________________________
Title: President, CEO
<PAGE>
FORM OF NOTICE OF EXERCISE
[To be signed only upon exercise of the Warrant]
TO BE EXECUTED BY THE REGISTERED HOLDER
TO EXERCISE THE WITHIN WARRANT
The undersigned hereby exercises the right to purchase ___________
shares of Common Stock which the undersigned is entitled to purchase
by the terms of the within Warrant according to the conditions
thereof, and herewith makes payment of the Warrant Price of such
shares in full. All shares to be issued pursuant hereto shall be
issued in the name of:_______________________________ and the initial
address of such person to be entered on the books of the Company
shall be:______________________. The shares are to be issued in
certificates of the following denominations:
-----------------------------
[Type Name of Holder]
By:
--------------------------
Title:
-----------------------
Dated:
--------------
<PAGE>
STANDARD FORM OF LOFT LEASE
The Real Estate Board of New York, Inc.
Agreement of Lease, made as of this 15th day of December, 1991, between ROBERT
MARTIN COMPANY, a New York partnership, having an office at 100 Clearbrook
Road, Elmsford, New York 10523 party of the first part, hereinafter referred to
as OWNER, and LIFECODES CORPORATION, a New York corporation, having an office
at Saw Mill River Road, Valhalla, New York 10595
Witnesseth: Owner hereby leases to Tenant and Tenant hereby hires from Owner
the area of the upper lower level containing shown on the floor plan annexed
hereto as Exhibit D (the "demised premises") approximately 19,450 square feet,
the ("Rentable Area") in the building known as 550 West Avenue (the "Building")
Stamford, City of Connecticut, for the term of ten (10) years (or until such
term shall sooner cease and expire as hereinafter provided) to commence as set
forth in Article 42 both dates inclusive, at an annual rental rate of (the
"Fixed Annual Rent") $252,850.00 per annum which Tenant agrees to pay in lawful
money of the United States which shall be legal tender in payment of all debts
and public and private, at the time of payment, in equal monthly installments
in advance on the first day of each month during term, at the office of Owner
of such other place as Owner may designate, without any set off or deduction
whatsoever, that Tenant shall pay the first monthly installment(s) on the
execution hereof (unless this lease be a renewal).
In the event that, at the commencement of the term of this lease, or
thereafter, Tenant shall be in default in the paying Owner's option and without
notice to Tenant add the amount of such arrears to any monthly installment of
rent payment hereunder and the same shall be payable to Owner as additional
rent.
The parties hereto, for themselves, their heirs, distributees,
executors, administrators, legal representatives, successors and assigns,
hereby convenant as follows:
Occupancy 1. Tenant shall pay the rent as above and as
hereinafter provided.
2. Tenant shall use and occupy demised premises
for office, warehouse, distribution,
laboratory, light manufacturing, research and
development of bio-medical products provided such
use in accordance with the Certificate of Occupancy
for the building, if any, and for not other purpose.
3. Alterations: Tenant shall make no changes in or to the demised
premises of any nature without Owner's prior written consent. Subject to the
prior written consent of Owner, and to the provisions of this article, Tenant
or Tenant's expense, may make alterations, installations, additions or
improvements which are non-structural and which do not affect utility services
or plumbing and electrical lines, in or to the interior of the demised premises
using contractors or mechanics first approved by Owner. Tenant shall, at its
expense, before making any alterations, additions, installations or
improvements obtain all permits, approval and certificates required by any
governmental or quasi-governmental bodies and (upon completion) certificates of
final approval thereof and shall deliver promptly duplicates of all such
permits, approvals and certificates to Owner. Tenant agrees to carry and will
cause Tenant's contractors and sub-contractors to carry such workman's
compensation, general liability, personal and property damage insurance as
Owner may require. If any mechanic's lien is filed against the demised
premises, or the building of which the same forms a part, for work claimed to
have been done
<PAGE>
for, or materials furnished to Tenant, whether or not done pursuant to
this article, the same shall be discharged by Tenant within ten days
thereafter, at Tenant's expense, by filing the bond required by law or
otherwise. All fixtures and all paneling, partitions, railings and like
installations, installed in the premises at any time, either by Tenant or by
Owner on Tenant's behalf, shall, upon installation, become the property of
Owner and shall remain upon and be surrendered with the demised premises unless
Owner, by notice to Tenant no later than twenty days prior to the date fixed as
the termination of this lease, elects to relinquish Owner's right thereto and
to have them removed by Tenant, in which event the same shall be removed from
the demised premises by Tenant prior to the expiration of the lease, at
Tenant's expense. Nothing in this Article shall be construed to give Owner
title or to prevent Tenant's removal of trade fixtures, moveable office
furniture or equipment, but upon removal of any such from the premises or upon
removal of other installations as may be required by Owner, Tenant shall
immediately and at its expense, repair and restore the premises to the
condition existing prior to installation and repair any damage to the demised
premises or the building due to such removal. All property permitted or
required to be removed, by Tenant at the end of the term remaining in the
premises after Tenant's removal shall be deemed abandoned and may, at the
election of Owner, either be retained by Owner's property or removed from the
premises by Owner, at Tenant's expense. (See Article 56)
4, Repairs: Owner shall maintain and repair the exterior of and the
public portions of the building. Tenant shall, throughout the term of this
lease, take good care of the demised premises including the bathrooms and
lavatory facilities and the windows and window frames and, the fixtures and
appurtenances therein, except if repairs are required on account of damaged
cause by Owner, its employees or contractors, and at Tenant's sole cost and
expense promptly make all repairs thereto and to the building, whether
structural or non-structural in nature, caused by or resulting from the
carelessness, omission, neglect or improper conduct of Tenant, Tenant's
servants, employees, invitees, or licensees, and whether or not arising from
such Tenant conduct or omission, when requiring other provisions of this lease,
including Article 6. Tenant shall also repair all damage to the building and
the demised premises caused by the moving of Tenant's fixtures, furniture or
equipment. All the aforesaid repairs shall be of quality or class equal to the
original work or construction Tenant fails, after ten days notice, to proceed
with due diligence to repairs required to be made by Tenant, the same may be
made by Owner at the expense of Tenant, and the expenses thereof incurred by
Owner shall be collectible, as additional rent, after rendition of a statement
therefor. If the demised premises be or become infested with vermin, Tenant
shall, at its expense, cause the same to be exterminated, Tenant shall give
Owner prompt notice of any defective condition in the plumbing, heating system
or electrical lines located in the demised premises and following such notice,
owner shall remedy the condition with due diligence, but at the expense of
Tenant, if repairs necessitated by damage or injury attributable to Tenant,
Tenant's servants, agents, employees, invitees or licensees as aforesaid.
Except specifically provided in Article 9 or elsewhere in this lease, there
shall be no allowance to the Tenant for a diminution of rental value and not
liability on the part of Owner by reason of inconvenience or annoyance or
injury to business arising from Owner, Tenant or others making or failing to
make any repairs, alterations, additions or improvements in or to a portion of
the building or the demised premises or in and to the fixtures, appurtenances
or equipment thereof. The provisions of this Article 4 respect to the making of
repairs shall not apply in the case of fire or other casualty with regard to
which Article 9 hereof shall apply. (See Article 56)
<PAGE>
5. Window Cleaning: Tenant shall not clean nor require, permit,
or allow any window in the demised premises to be cleaned from the outside in
violation, or of any other body having or asserting jurisdiction.
6. Requirements of Law, Fire Insurance, Floor Loads: Prior to the
commencement of the lease term, Tenant is then in possession, and at all times
thereafter Tenant shall, at Tenant's sole cost and expense, promptly comply
with all present and future laws, orders and regulations of all state, federal,
municipal and local governments, departments, commissions and boards and any
direction the Connecticut Board of Fire Underwriters, or the Insurance Services
Office, or any similar body which shall impose any violation, order or duty
upon Owner or Tenant with respect to the demised premises, whether not arising
out of Tenant's use of manner of use thereof, or, with respect to the building,
if arising out of Tenant's use or manner of use of demised premises or the
building (including the use permitted under lease). Except as provided in
Article 29 hereof, nothing herein shall require Tenant to make structural
repairs or alterations unless Tenant has, by its manner of use of the demised
premises or method of operation therein, violated any such laws, ordinances,
orders, rules, regulations or requirements with respect thereto. Tenant shall
not do or permit any act or thing to be done in or to the demised premises or
the Building or any property adjacent thereto which is contrary to law, or
which will invalidate or be in conflict with public liability, fire or other
policies of insurance at any time carried by or for the benefit of Owner.
Tenant shall not keep anything in the demised premises except as now or
hereafter permitted by the Fire Department, Board of Fire Underwriters, Fire
Insurance Rating Organization and other authority having jurisdiction, and then
only in such manner and such quantity so as not to increase the rate for fire
insurance applicable to the building, nor use the premises in a manner which
will increase the insurance rate for the building or any property located
therein over that in effect as if Tenant were not occupying the Building. If by
reason of failure to comply with the foregoing the fire insurance rate shall,
at the beginning of this lease or at any time thereafter, be higher than it
otherwise would be, then Tenant shall reimburse Owner, as additional rent
hereunder, for that portion of all fire insurance premiums thereafter paid by
Owner which shall have been charged because of such failure by Tenant. In any
action or proceeding wherein Owner and Tenant are parties, a schedule or
"make-up" or rate for the building or demised premises issued by a body making
fire insurance rates applicable to said premises shall be conclusive evidence
of the facts therein stated and of the several items and charges in the fire
insurance rates then applicable to said premises. Tenant shall not place a load
upon any floor of the demised premises exceeding the floor load per square foot
area which it was designed to carry and which is allowed by law. Owner reserves
the right to prescribe the weight and position of all safes, business machines
and mechanical equipment. Such installations shall be placed and maintained by
Tenant, at Tenant's expense, in settings sufficient, in Owner's judgment, to
absorb and prevent vibration, noise and annoyance. (See Article 59)
7. Subordination: This lease is subject and subordinate to all ground
or underlying leases and to all mortgages which may now or hereafter affect
such leases or the real property of which demised premises are a part and to
all renewals, modifications, consolidations, replacements and extensions of any
such underlying leases and mortgages. This clause shall be self-operative and
no further instrument or subordination shall be required by any ground or
underlying lessor or by any mortgagee, affecting any lease or the real property
of which the demised premises are a part. In confirmation of such
subordination, Tenant shall execute promptly any certificate that Owner may
request.
<PAGE>
(See Article 59)
8. Property-Loss, Damage, Reimbursement, Indemnity: Owner or its
agents shall not be liable for any damage to property of Tenant or of others
entrusted to employees of the building, nor for loss of damage to any property
of Tenant by theft or otherwise, nor for any injury or damage to persons or
property resulting from any cause of whatsoever nature, unless caused by or due
to the negligence of Owner, its agents, servants or employees; Owner or its
agents shall not be liable for any damage caused by other tenants or persons
in, upon or about said building or caused by operations in connection of any
private, public or quasi public work. If at any time any windows of the demised
premises are temporarily closed, darkened or bricked up (or permanently closed,
darkened or bricked up, if required by law) for any reason whatsoever
including, but not limited to Owner's own acts. Owner shall not be liable for
any damage Tenant may sustain thereby and tenant shall not be entitled to any
compensation therefor nor abatement or diminution of rent nor shall the same
release Tenant from its obligations or diminution of rent nor shall the same
release Tenant from its obligations hereunder nor constitute an eviction.
Tenant shall indemnify and save harmless Owner against and from all
liabilities, obligations, damages, penalties, claims, costs and expenses for
which Owner shall not be reimbursed by insurance, including reasonable
attorney's fees, paid, suffered or incurred as a result of any breach by
Tenant, Tenant's agents, contractors, employees, invitees, or licensees, of any
covenant or condition of this lease, or the carelessness, negligence or
improper conduct of the Tenant, Tenant's agents, contractors, employees,
invitees or licensees. Tenant's liability under this lease extends to the acts
and omissions of any sub-tenant, and any agent, contractor, employee, invitee
or licensee of any sub-tenant, and any agent, contractor, employee, invitee or
licensee of any sub-tenant. In case any action or proceeding is brought against
Owner by reason of any such claim, Tenant, upon written notice from Owner,
will, at Tenant's expense, resist or defend such action or proceeding by
counsel approved by Owner in writing, such approval not to be unreasonably
withheld.
9. Destruction, Fire and Other Casualty: (a) If the demised premises
or any part thereof shall be damaged by fire or other casualty, Tenant shall
give immediate notice thereof to Owner and this lease shall continue in full
force and effect except as hereinafter set forth. (b) If the demised premises
are partially damaged or rendered partially unusable by fire or other casualty,
the damages thereto shall be repaired by and at the expense of Owner and the
rent, until such repair shall be substantially completed, shall be apportioned
from the day following the casualty according to the part of the premises which
is usable. (c) If the demised premises are totally damaged or rendered wholly
unusable by fire or other casualty, then the rent shall be proportionately paid
up to the time of the casualty and thenceforth shall cease until the date when
the premises shall have been repaired and restored by Owner, subject to Owner's
right to elect not to restore the same as hereinafter provided. (d) If the
demised premises are rendered wholly unusable or (whether or not the demised
premises are damaged in whole or in part) if the building shall be so damaged
that Owner shall decide to demolish it or to rebuild it, then, in any of such
events, Owner may elect to terminate this lease by written notice to tenant,
given within 90 days after such fire or casualty, specifying a date for the
expiration of the lease, which date shall not be more than 60 days after the
giving of such notice, and upon the date specified in such notice the term of
this lease shall expire as fully and completely as if such date were the date
set forth above for the termination of this lease and Tenant shall forthwith
quit, surrender and vacate the premises without prejudice however, to Owner's
rights and remedies against Tenant under the lease provisions in effect prior
to such termination, and any rent owing shall be paid up to such date and any
payments of rent made by
<PAGE>
tenant which were on account of any period subsequent to such date shall be
returned to tenant, unless Owner shall serve a termination notice as provided
for herein, Owner shall make the repairs and restorations under the conditions
of (b) and (c) hereof, with all reasonable expedition, subject to delays due to
adjustment of insurance claims, labor troubles and causes beyond Owner's
control. After any such casualty, Tenant shall cooperate with Owner's
restoration by removing from the premises as promptly as reasonably possible,
all of Tenant's salvageable inventory and movable equipment, furniture, and
other property. Tenant's liability for rent shall resume five (5) days after
written notice from Owner that the premises are substantially ready for
Tenant's occupancy. (c) Nothing contained hereinabove shall relieve Tenant from
liability that may exist as a result of damage from fire or other casualty.
Notwithstanding the foregoing, each party shall look first to any insurance in
its favor before making any claim against the other party for recovery for loss
or damage resulting from fire or other casualty, and to the extent that such
insurance is in force and collectible and to the extent permitted bylaw, Owner
and Tenant each hereby releases and waives all right of recovery against the
other or any one claiming through or under each of them by way of subrogation
or otherwise. The foregoing release and waiver shall be in force only if both
releasors' insurance policies contain a clause providing that such a release or
waiver shall not invalidate the insurance. If, and to the extent, that such
waiver can be obtained only by the payment of additional premiums, then the
party benefiting from the waiver shall pay such premium within ten days after
written demand or shall be deemed to have agreed that the party obtaining
insurance coverage shall be free of any further obligation under the provisions
hereof with respect to waiver of subrogation. Tenant acknowledges that Owner
will not carry insurance on Tenant's furniture and or furnishings or any
fixtures or equipment, improvements, or appurtenances removable by Tenant and
agrees that Owner will not be obligated to repair any damage thereto or replace
the same.
10. Eminent Domain: If the whole or any part of the demised premises
shall be acquired or condemned by Eminent Domain for any public or quasi public
use or purpose, then and in that event, the term of this lease shall cease and
terminate from the date of title vesting in such proceeding and Tenant shall
have no claim for the value of any unexpired term of said. lease.
11. Assignment, Mortgage, Etc.: Tenant, for itself, its heirs,
distributees, executors, administrators, legal representatives, successors and
assigns, expressly covenants that it shall not assign, mortgage or encumber
this agreement, nor underlet, or suffer or permit the demised premises or any
part thereof to be used by others, without the prior written consent of Owner
in each instance. Transfer of the stock of a corporate Tenant shall be deemed
an assignment. If this lease be assigned, or if the demised premises or any
part thereof be underlet or occupied by anybody other than Tenant, Owner may,
after default by Tenant, collect rent from the assignee, under-tenant or
occupant, and apply the net amount collected to the rent herein reserved, but
no such assignment, underletting, occupancy or collection shall be deemed a
waiver of this covenant, or the acceptance of the assignee, under tenant or
occupant as tenant, or a release of Tenant from the further performance by
Tenant of covenants on the part of Tenant herein contained. The consent by
Owner to an assignment or underletting shall not in any wise be construed to
relieve Tenant from obtaining the express consent in writing of Owner to any
further assignment or underletting.
12. Electric Current: Rates and conditions in respect to submetering
or rent inclusion, as the case may be, to be added in RIDER attached hereto.
Tenant convenants and agrees that at all times its use of electric current
shall not exceed the capacity of existing
<PAGE>
leeders to the building or the risers or wiring installation and Tenant may not
use any electrical equipment which, in Owner's opinion, reasonably exercised,
will overload such installations or interfere with the use thereof by other
tenants of the building. The change at any time of the character of electric
service shall in no wise make Owner liable or responsible to Tenant, for any
loss, damages or expenses which Tenant may sustain. (See Article 48)
13. Access to Premises: Owner or Owner's agents shall have the right
(but shall not be obligated) to enter the demised premises in any emergency at
any time, and, at other reasonable times, to examine the same and to make such
repairs, replacements and improvements as Owner may deem necessary and
reasonably desirable to any portion of the building or which Owner may elect to
perform any work which Tenant is obligated to perform under this lease, or for
the purpose of complying with laws, regulations and other directions of
governmental authorities. Tenant shall permit Owner to use and maintain and
replace pipes and conduits in and through the demised premises and to erect new
pipes and conduits therein provided, wherever possible, ducts, they are within
walls or otherwise concealed. owner may during the progress of any work in the
demised premises, take all necessary materials and equipment into said premises
without the same constituting an eviction nor shall the Tenant be entitled to
any abatement of rent while such work is in progress nor to any damages by
reason of loss or interruption of business or otherwise. Throughout the term
hereof owner shall have the right to enter the demised premises at reasonable
hours for the purpose of showing the same to prospective purchasers or
mortgagees of the building, and during the last six months of the term for the
purpose of showing the same to prospective tenants and may, during said six
months period, place upon the premises the usual notices "To Let" and "For
Sale" which notices Tenant shall permit to remain thereon without molestation.
If Tenant is not present to open and permit an entry into the premises, Owner
or Owner's agents may enter the same whenever such entry may be necessary or
permissble by master key or forcibly and provided reasonable care is exercised
to safeguard Tenant's property, such entry shall not render Owner or its agents
liable therefor, nor in any event shall the obligations of Tenant hereunder be
affected. If during the last month of the term Tenant shall have removed all of
substantially all of Tenant's property therefrom. Owner may immediately enter,
alter, renovate or redecorate the demised premises without limitation or
abatement of rent, or incurring liability to Tenant for any compensation and
such act shall have no effect on this lease or Tenant's obligations thereunder.
14. Vault, Vault Space, Area: No vaults, vault space or area, whether
or not enclosed or covered, not within the property line of the building is
leased hereunder, anything contained in or indicated on any sketch, blue print
or plan, or anything contained elsewhere in this lease to the contrary
notwithstanding. Owner makes no representation as to the location of the
property line of the building. All vaults and vault space and all such areas
not within the property line of the building, which Tenant may be permitted to
use and/or occupy, is to be used and/or occupied under a revocable license, and
if any such license be revoked, or if the amount of such space or area be
diminished or required by any federal, state or municipal authority or public
utility, Owner shall not be subject to any liability nor shall Tenant be
entitled to any compensation or diminution or abatement of rent, not shall such
revocation, diminution or requisition be deemed constructive or actual
eviction. Any tax, fee or charge of municipal authorities for such vault or
area shall be paid by Tenant, if used by Tenant, whether or not specifically
leased hereunder.
15. Occupancy: Tenant will not at any time use or occupy the demised
premises in violation of the certificate of occupancy issued for the building
of which the demised premises are a part. Tenant has inspected the premises and
accepts them as is, subject to the riders annexed hereto with respect to
Owner's work, if any. In any event, Owner makes no representations as to the
condition of the premises and Tenant agrees to accept the same subject to
violations, whether or not of record. If any governmental license or permit
<PAGE>
shall be required for the proper and lawful conduct of Tenant's
business, Tenant shall be responsible for and shall procure and maintain such
license or permit.
16. Bankruptcy: (a) Anything elsewhere in this lease to the contrary
notwithstanding, this lease may be cancelled by Owner by sending of a written
notice to Tenant within a reasonable time after the happening of any one or
more of the following events: (1) the commencement of a case in bankruptcy or
under the laws of any state naming Tenant as the debtor; or (2) the making by
Tenant of an assignment or any other arrangement for the benefit of creditors
under any state statute. Neither Tenant nor any person claiming through or
under Tenant, or by reason of any statute or order of court, shall thereafter
be entitled to possession of the premises demised but shall forthwith quit and
surrender the premises. If this lease shall be assigned in accordance with its
terms, the provisions of this Article 16 shall be applicable only to the party
then owning Tenant's interest in this lease.
(b) It is stipulated and agreed that in
the event of the termination of this lease pursuant to (a) hereof, Owner shall
forthwith, notwithstanding any other provisions of this lease to the contrary,
be entitled to recover from Tenant as and for liquidated damages an amount
equal to the difference between the rental reserved hereunder for the unexpired
portion of the term demised and the fair and reasonable rental value of the
demised premises for the same period. In the computation of such damages the
differences between any installment of rent becoming due hereunder after the
date of termination and the fair and reasonable rental value of the demised
premises for the period for which such installment was payable shall be
discounted to the date of termination at the rate of four percent (4%) per
annum. If such premises or any part thereof be re-let by the Owner for the
unexpired term of said lease, or any part thereof, before presentation of proof
of such liquidated damages to any court, commission or tribunal, the amount of
rent reserved upon such re-letting shall be deemed to be the fair and
reasonable rental value for the part or the whole of the premises so re-let
during the term of the re-letting. Nothing herein contained shall limit or
prejudice the right of the Owner to prove for and obtain as liquidated damages
by reason of such termination, an amount equal to the maximum allowed by any
statue or rule of law in effect at the time when, and governing the proceedings
in which, such damages are to be proved, whether or not such amount be greater,
equal to, or less than the amount of the difference referred to above. (See
Article 59)
17. Default: (1) If Tenant defaults in fulfilling any of the covenants
of this lease or any lease between Tenant and Owner or any other entity in
which Owner or partner of Owner is lessor or principal or shareholder oflessor,
other than the covenants for the payment of rent or additional rent; or if the
demised premises becomes vacant or deserted; or if Tenant shall fail more than
3 times during any 12 month period during the term of this lease to make timely
payments of rent; or any other lease between Tenant and Owner or any other
entity which Owner or partner of Owner is lessor or principal or shareholder of
lessor; or if the lease is rejected under ss.235 of Title 11 of the U.S. Code
(bankruptcy code); or if any execution or attachment shall be issued against
Tenant or any of Tenant's property whereupon the demised premises shall make
default with respect to any other lease between Owner and Tenant; or if Tenant
shall have failed, after five (5) days written notice, to redeposit with Owner
any portion of the security deposited hereunder which Owner has applied to the
payment of any rent and additional rent due and payable hereunder or failed to
move into or take possession of the premises within fifteen (15) days after the
commencement of the term of this lease, of which fact Owner shall be the sole
judge; then in any one or more of such events, upon Owner serving a written
five (5) days notice upon tenant specifying the nature of said default and upon
the expiration of said five (5) days, if Tenant shall have failed to comply
with or remedy such default, or if the said default or omission complained of
shall be of a nature that the same cannot be completely cured or remedied
within said five (5) day period, and if Tenant shall not have diligently
commenced curing such default within such five (5) day period, and shall not
thereafter with reasonable diligence and in good faith, proceed to remedy or
cure such default, then Owner may serve a written three (3) days' notice of
cancellation of this lease upon Tenant, and upon the expiration of said three
(3) days this lease and the term thereunder shall end and expire as fully and
completely as if the expiration of such three (3) day period were the date
hereunder definitely fixed for the end and expiration of this lease and the
term thereof and Tenant shall then quit and surrender the demised premises to
Owner but Tenant shall remain liable as hereinafter provided.
(2) If the notice provided for in (1) hereof shall have been
given, and the term shall expire as aforesaid; or if Tenant shall make default
in the payment of the rent reserved herein or any item of additional rent
herein mentioned or any part of either or in making any other payment herein
required; then and in any of such events Owner may without notice, re-enter the
demised premises either by force or otherwise, and dispossess Tenant by
<PAGE>
summary proceedings or otherwise, and the legal representative of Tenant or
other occupant of demised premises and remove their effects and hold the
premises as if this lease had not been made, and Tenant hereby waives the
service of notice of intention to re-enter or to institute legal proceedings to
that end. If Tenant shall make default hereunder prior to the date fixed as the
commencement of any renewal or extension of this lease, Owner may cancel and
terminate such renewal or extension agreement by written notice.
18. Remedies of Owner and Waiver of Redemption: In case of any such
default, re-entry, expiration and/or dispossess by summary proceedings or
otherwise, (a) the rent, and additional rent, shall become due thereupon and be
paid up to the time if such re-entry, dispossess and/or expiration, (b) Owner
may re-let the premises or any part or parts thereof, either in the name of
Owner or otherwise, for a term or terms, which may at Owner's option be less
than or exceed the period which would otherwise have constituted the balance of
the term of this lease and may grant concessions or free rent or charge a
higher rental than that in this lease, (c) Tenant or the legal representatives
of Tenant shall also pay Owner as liquidated damages for the failure of Tenant
to observe and perform said Tenant's covenants herein contained, any deficiency
between the rent hereby reserved and or covenanted to be paid and the net
amount, if any, of the rents collected on account of the subsequent lease or
leases of the demised premises for each month of the period which would
otherwise have constituted the balance of the term of this lease. The failure
of Owner to re-let the premises or any part or parts thereof shall not release
or affect Tenant's liability for damages. In computing such liquidated damages
there shall be added to the said deficiency such expenses as Owner may incur in
connection with re-letting, such as legal expenses, attorneys' fees, brokerage,
advertising and for keeping the demised premises in good order or for preparing
the same for re-letting. Any such liquidated damages shall be paid in monthly
installments by Tenant on the rent day specified in this lease and any suit
brought to collect the amount of the deficiency for any month shall not
prejudice in any way the rights of Owner to collect the deficiency for any
subsequent month by a similar proceeding. Owner, in putting the demised
premises in good order or preparing the same for re-rental may, at Owner's
option, make such alterations, repairs, replacements, and/or decorations in the
demised premises as Owner, in Owner's sole judgment, considers advisable and
necessary for the purpose of re-letting the demised premises, and the making of
such alterations, repairs, replacements, and/or decorations shall not operate
or be construed to release Tenant from liability hereunder as aforesaid. Owner
shall in no event be liable in any way whatsoever for failure to re-let, for
failure to collect the rent thereof under such re-letting, and in no event
shall Tenant be entitled to receive any excess, if any, of such net rents
collected over the sums payable by tenant to Owner hereunder. In the event of a
breach or threatened breach by Tenant of any of the covenants or provisions
hereof, Owner shall have the right of injunction and the right to invoke any
remedy allowed at law or in equity as if re-entry, summary proceedings and
other remedies were not herein provided for. Mention in this lease of any
particular remedy, shall not preclude Owner from any other remedy, in law or in
equity. Tenant hereby expressly waives any and all rights of redemption granted
by or under any present or future laws.
19. Fees and Expenses: If Tenant shall default in the observance or
performance of any term or covenant on Tenant's part to be observed or
performed under or by virtue of any of the terms or provisions in any article
of this lease, then, unless otherwise provided elsewhere in this lease, Owner
may immediately or at any time thereafter and without notice perform the
obligation of Tenant thereunder. If Owner, in connection with the foregoing or
in connection with any default by Tenant in the covenant to pay rent hereunder,
makes any expenditures or incurs any obligations for the payment of money,
including but not limited to attorney's fees, in instituting, prosecuting or
defending any action or proceedings, then Tenant will reimburse Owner for such
sums so paid or obligations incurred with interest and costs. The foregoing
expenses incurred by reason of Tenant's default shall be deemed to be
additional rent hereunder and shall be paid by Tenant to Owner within five (5)
days of rendition of any bill or statement to Tenant therefor. If Tenant's
lease term shall have expired at the time of making if such expenditures or
incurring of such obligations, such sums shall be recoverable by Owner as
damages.
20. Building Alterations and Management: Owner shall have the right at
any time without the same constituting an eviction and without incurring
liability to Tenant therefor to change the arrangement and/or location of
public entrances, passageways, doors, doorways, corridors, elevators, stairs,
toilets or other public parts of the building and to change the name, number or
designation by which the building may be known, provided, however, Owner shall
not change the number of the building unless required by laws and requirements
of public authorities. There shall be no allowance to Tenant for diminution of
rental value and no liability on the part of Owner by reason of inconvenience,
annoyance or injury to business arising from Owner or other Tenant making any
repairs in the building or any such alterations, additions
<PAGE>
and improvements. Furthermore, Tenant shall not have any claim against Owner by
reason of Owner's imposition of any controls of the manner of access to the
building by Tenant's social or business visitors as the Owner may deemed
necessary for the security of the building and its occupants.
21. No Representations by Owner: Neither Owner nor Owner's agents have
made any representations or promises with respect to the physical condition of
the building, the land upon which it is erected or the demised premises, the
rents, leases, expenses of operation or any other matter or thing affecting or
related to the demised premises or the building except as herein expressly set
forth and no rights, easements or licenses are acquired by Tenant by
implication or otherwise except as expressly set forth in the provisions of
this lease. Tenant has inspected the building and the demised premises and is
thoroughly acquainted with their condition and agrees to take the same "as is"
on the date possession is tendered and acknowledges that the taking of
possession of the demised premises by Tenant shall be conclusive evidence that
the said premises and the building of which the same form a part were in good
and satisfactory condition at the time such possession was so taken. All
understandings and agreements heretofore made between the parties hereto are
merged in this contract, which alone fully and completely expresses the
agreement between Owner and Tenant and any executory agreement hereafter made
shall be ineffective to change, modify, discharge or effect an abandonment of
it in whole or in part, unless such executory agreement is in writing and
signed by the party against whom enforcement of the change, modification,
discharge or abandonment is sought.
22. End of Term: Upon the expiration or other termination of the term
of this lease, Tenant shall quit and surrender to Owner the demised premises,
broom clean, in good order and condition, ordinary wear and damages which
tenant is not required to repair as provided elsewhere in this excepted, and
Tenant shall remove all its property from the demised premises. Tenant's
obligation to observe or perform this covenant shall survive the expiration or
other termination of this lease.
23. Quiet Enjoyment: Owner covenants and agrees with Tenant that upon
Tenant paying the rent and additional rent and observing and performing all
terms, covenants and conditions, on Tenant's part to be observed and performed,
Tenant may peaceably and quietly enjoy the premises hereby demised, subject,
nevertheless, to the terms and conditions of this lease including, but not
limited to, Article 34 hereof and to the ground leases, underlying leases and
mortgages hereinbefore mentioned.
24. Failure to Give Possession: If Owner is unable to give possession
of the demised premises on the date of the commencement of the term hereof,
because of the holding-over or retention of possession of any tenant,
undertenant or occupants or of the demised premises are located in a building
being constructed, because such building has not been sufficiently completed to
make the premises ready for occupancy or because of the fact that a certificate
of occupancy has not been procured or of Owner has not completed any work
required to be performed by Owner, or for any other reason, Owner shall not be
subject to any liability for failure to give possession on said date and the
validity of the lease shall not be impaired under such circumstances, nor shall
the same be construed in any wise to extend the term of this lease, but the
rent payable hereunder shall be abated (provided Tenant is not responsible for
Owner's inability to obtain possession or complete any work required) until
after Owner shall have given Tenant notice that the premises are substantially
ready for Tenant's occupancy. If permission is given to tenant to enter into
the possession of the demised premises or to occupy premises other than the
demised premises prior to the date specified as the commencement of the term of
this lease. Tenant covenants and agrees that such occupancy shall be deemed to
be under all the terms, covenants, conditions and provisions of this lease,
except as to the covenant to pay rent.
25. No Waiver: The failure of Owner to seek redress for violation of,
or to insist upon the strict performance of any covenant or condition of this
lease or of any of the Rules or Regulations,. Set forth or hereafter adopted by
Owner, shall not prevent a subsequent act which would have originally
constituted a violation from having all the force and effect of an original
violation. The receipt by Owner of rent with knowledge of the breach of any
covenant of this lease shall not be deemed a waiver of such breach and no
provision of this lease shall be deemed to have been waived by Owner unless
such waiver be in writing signed by Owner. No payment by Tenant or receipt by
Owner of a lesser amount than the monthly rent herein stipulated shall be
deemed to be other than on account of the earliest stipulated rent, nor shall
any endorsement or statement of any check or any letter accompanying any check
or payment as rent be deemed an accord and satisfaction, and Owner may accept
such check or payment without prejudice to Owner's right to recover the balance
of such rent or pursue any other remedy in this lease provided. All checks
tendered to Owner as and for the rent of the demised premises shall be deemed
payments for the account of Tenant. Acceptance by Owner of rent from
<PAGE>
anyone other than Tenant shall not be deemed to operate as an attornment to
Owner by the payor of such rent or as a consent by Owner to an assignment or
subletting by Tenant of the demised premises to such payor, or as a
modification of the provisions of this lease. No act or thing done by Owner or
Owner's agents during the term hereby demised shall be deemed an acceptance of
a surrender of said premises and no agreement to accept such surrender shall be
valid unless in writing signed by Owner. No employee of Owner or Owner's agent
shall have any power to accept the keys to any such agent or employee shall not
operate as a termination of the lease or a surrender of the premises.
26. Waiver by Trial by Jury: It is mutually agreed by and between
Owner and Tenant that the respective parties hereto shall and they hereby do
waive trial by jury in any action,. Proceeding or counterclaim brought by
either of the parties hereto against the other (except for personal injury or
property damage) on any matters whatsoever arising out of or in any way
connected with this lease, the relationship of Owner and Tenant, Tenant's use
of or occupancy of said premises, and any emergency statutory or any other
statutory remedy. It is further mutually agreed that in the event Owner
commences any summary proceeding for possession of the premises, Tenant will
not interpose any counterclaim of whatever nature or description in any such
proceeding.
27. Inability to Perform: This lease and the obligation of Tenant to
pay rent hereunder and perform all of the covenants and agreements hereunder on
part of Tenant to be performed shall in no wise be affected, impaired or
excused because Owner is unable to fulfill any o9f its obligations under this
lease or to supply or is delayed in supplying any service expressly or
impliedly to be supplied or is unable to make, or is delayed in making any
repair, additions, alterations or decorations or is unable to supply or is
delayed in supplying any equipment or fixtures if Owner is prevented or delayed
from so doing by reason of strike or labor troubles or any cause whatsoever
beyond Owner's sole control including, but not limited to, government
preemption in connection a National Emergency or by reason of any rule, order
or regulation of any department or subdivision thereof of any government agency
or by reason of the conditions of supply and demand which have been or are
affected by war or other emergency.
28. Bills and Notices: (See Article 57)
29. Water Charges: If Tenant requires, uses or consumes water for any
purpose in addition to ordinary lavatory purposes (of which fact Tenant
constitutes Owner to be the sole judge) Owner may install a water meter and
thereby measure Tenant's water consumption for all purposes. Tenant shall pay
Owner for the cost of the meter and the cost of the installation, thereof and
throughout the duration of Tenant's occupancy Tenant shall keep said meter and
installation equipment in good working order and repair at Tenant's own cost
and expense in default of which Owner may cause such meter and installation
equipment to be replaced or repaired and collect the cost thereof from tenant,
as additional rent. Tenant covenants and agrees to pay, as additional rent, the
sewer rent, charge or any other tax, rent, levy or charge which now or
hereafter is assessed, imposed or a lien upon the demised premises or the
realty of which they are4 part pursuant to law, order or regulation made or
issued in connection with the use, consumption, maintenance or supply of water,
water system or sewage or sewage connection or system. If the building or the
demised premises or any part thereof is supplied with water through a meter
through which water is also supplied to other premises Tenant shall pay to
Owner, as additional rent, on the first day of each month, Owner's reasonable
estimate of Tenant's share of the total meter charges as tenant's portion.
Independently of and in addition to any of the remedies reserved to Owner
hereinabove or elsewhere in this lease, Owner may sue for and collect any
monies to be paid by Tenant or paid by Owner for any of the reasons or purposes
hereinabove set forth.
30. Sprinklers: Anything else in this lease to the contrary
notwithstanding, if the New York Board of Fire Underwriters of the New York
Fire Insurance Exchange or any bureau, department or official of the federal,
state or city government recommend or require the installation of a sprinkler
system or that any changes, modifications, alternations, or additional
sprinkler system in the fire insurance rate set by any said Exchange or by any
fire insurance company, Tenant shall, at Tenant's expense, promptly make such
sprinkler system installations, changes, modifications, alterations, and supply
additional sprinkler heads or other equipment as required whether the work
involved shall be structural or non-structural in nature. Tenant shall pay to
Owner as additional rent 36.70% of the contract price for sprinkler supervisory
service and alarm service.
31. Elevators, Heat, Cleaning: As long as Tenant is not in default
under any of the covenants of this lease Owner shall clean the public halls and
public portions of the building which are used in common by all tenants. Tenant
shall, at Tenant's expense, keep the demised premises, including the
<PAGE>
windows, clean and in order, to the satisfaction of Owner, and for that purpose
shall employ the person or persons, or corporation approved by Owner. Owner
reserved the right to stop service of the heating, plumbing and electric
systems, when necessary, by reason of accident, or emergency, or for repairs,
alterations, replacements or improvements, in the judgment of Owner desirable
or necessary to be made, until said repairs, alterations, replacements or
improvements shall have been completed.
32. Security: Tenant has deposited with Owner the sum of $42,141.67 as
security for the faithful performance and observance of the terms, provisions
and conditions of this lease; it is agreed that in the event Tenant defaults in
respect of any of the terms, provisions and conditions of this lease,
including, but not limited to, the payment of rent and additional rent, Owner
may use, supply or retain the whole or any part of the security so deposited to
the extent required for the payment of any rent and additional rent or any
other sum as to which tenant is in default or for any sum which Owner may
expend or may be required to expend by reason of Tenant's default in respect of
any of the terms, covenants and conditions of this lease, including but not
limited to, any damages or deficiency in the re-letting of the premises,
whether such damages or deficiency accrued before or after summary proceedings
or other re-entry by Owner. If Owner so uses, applies or retains any part of
the security so deposited, Tenant, upon demand, shall deposit with Owner the
amount so used, applied, retained, so that Owner shall have the full deposit on
hand at all times during the term of this lease. In the event that Tenant shall
fully and faithfully comply with all of the terms, provisions, covenants and
conditions of this lease, the security shall be returned to Tenant after the
date fixed as the end of the Lease and after delivery of entire ossession of
teh demised premises to Owner. In the event of a slae of the land and building
or leasing of the building, of which the demised premises form a part, Owner
shall have the right to transfer the security to the vendee or lessee and Owner
shall thereupon be released by TRenant from all liability for the return of
such security; and Tenant agrees to look to the new Owner solely for the return
of said security, and it is agreed that the provisions hereof shall apply to
every transfer or assignment made of the security to a new Owner. Tenant
further covenants that it will not assign or encumber or attempt to assighn or
encumber the monies deposited herein as security and that neither Owner nor its
successors or assigns shall be bound by any such assignment, encumbrance,
attempted assignment or attempted encumbrance.
33. Captions: The Captions are inserted only as a matter of
convenience for reference and in no way define, limit or describe the scope of
this lease not the intent of any provision thereof.
34. Definitions: Th tern "Owner" as used in this lease means only the
owner of the fee or of the leasehold of the building, or the mortgagee in
possession, for the time being of the land and building (or the owner of a
lease of the building or of the land and building) of which the demised
premises form a part, so that in the event of any sale or sales of said land
and building or of said lease, or in the event of a lease of said building, or
of the land and building, the said Owner shall be and hereby is entirely freed
and relieved of all covenants and obligations of Owner hereunder, and it shall
be deemed and construed without further agreement between the parties or their
successors in interest, or between the parties and the purchaser, at any such
sale, or the said lessee of the building, or of the land and building, that the
purchaser or the lessee of the building has assumed and agreed to carry out any
and all covenants and obligations of Owner hereunder. The words "re-enter" and
"re-entry" as used in this lease are not restricted to their technical legal
meaning. The term "rent" includes the annual rental rate whether so-expressed
or expressed in monthly installments, and "additional rent." "Additional rent"
means all sums which shall be due to new Owner from Tenant under this lease, in
addition to the annual rental rate. The terms "business days" as used in this
lease, shall exclude Saturdays, Sundays and all days observed by the State or
Federal Government as legal holidays and those designated as holidays by the
applicable building service union employees service contract or by the
applicable Operating Engineers contract with respect to HVAC.
35. Adjacent Excavation: If an excavation shall be made upon land
adjacent to the demised premises, or shall be authorized to be made, Tenant
shall afford to the person causing or authorized to cause such excavation,
license to enter upon the demised premises for the purpose of doing such work
as said person shall deem necessary to preserve the wall or the building of
which demised premises form a part from injury or damage and to support the
same proper foundations without any claim for damages or indemnity against
Owner, or diminution or abatement of rent.
36. Rules and Regulations: (See Article 55)
37. Glass: Owner shall replace, at the expense of the Tenant (unless
cause by Owner, its employees or contractors) any and all plate and other
<PAGE>
glass damages or broken from any cause whatsoever in and about the demised
premises. Owner may insure, and keep insured, at tenant's expense, all plate
and other glass in the demised premises for and in the name of Owner. Bills for
the premiums therefor shall be rendered by Owner to Tenant at such times as
Owner may elect, and shall be due from , and payable by, Tenant who rendered,
and the amount thereof shall be deemed to be, and be paid, as additional rent.
38. Estoppel Certificate: Tenant, at any time, and from time to time,
upon at least 10 days' prior notice by Owner, shall execute, acknowledge and
deliver to Owner and/or to any other person, firm or corporation specified by
Owner, a statement certifying that this lease is unmodified in full force and
effect (or, if there have been modifications, that the same is in full force
and effect as modified and stating the modifications), stating the dates to
which the rent and additional rent have been paid, and stating whether or not
there exists any default by Owner under this lease, and, if so, specifying each
such default.
39. Directory Board Listing: (See Article 51)
40. Successors and Assigns: The covenants, conditions and agreements
contained in this lease shall bind and inure to the benefit of Owner and Tenant
and their respective heirs, distributees, executors, administrators,
successors, and except as otherwise provided in this lease, their assigns.
In Witness Whereof, Owner and Tenant have respectively signed and
sealed this lease of the day and year first above written.
Witness for Owner: ROBERT MARTIN COMPANY
By
- ------------------------------ -----------------------------[L.S.]
General Partner
Witness for Tenant: LIFCODES CORPORATION
By
- ------------------------------ -----------------------------[L.S.]
President
<PAGE>
STANDARD FORM OF RIDER TO STANDARD FORM OF LOFT LEASE
Date of Lease: December 1991
Owner: ROBERT MARTIN COMPANY
Tenant: LIFECODES CORPORATION
Building: 550 West Avenue, Stamford, Connecticut
Rentable Area: approximately 19,450 square feet
41. Additional Definitions. For all purposes of this lease, and all
agreements supplemental hereto, the terms defined in this Article shall have
the meanings specified unless the context otherwise requires:
(a) The term laws and requirements of public authorities shall mean
laws and ordinances of federal, state, city, town, and county governments, and
rules, regulations, orders and directives of departments, subdivisions,
bureaus, agencies or offices thereof, or any other governmental, public or
quasi-public authorities having jurisdiction over the Building, and the
directions of any public officer pursuant to law.
(b) The word invitee shall mean any employee, agent, visitor,
customer, contractor, licensee, or other party claiming under, or in the
Building, or in the Park, if applicable, by permission or sufferance of, Owner
or Tenant.
(c) The term requirements of insurance bodies shall mean rules,
regulations, orders and other requirements of the Connecticut Board of Fire
Underwriters or Connecticut Fire Insurance Rating Organization or any similar
body performing the same or similar functions.
(d) The term unavoidable delays shall mean delays due to strikes or
labor troubles, fire or other casualty, governmental restrictions, enemy
action, civil commotion, war or other emergency, acts of God or nature, or any
cause beyond the reasonable control of either party whether or not similar to
any of the causes stated above, but not the inability of either party to obtain
financing which may be necessary to carry out its obligations.
(e) The term Real Property shall mean the tax lot of which the
demised premises is a part.
(f) The term lease year shall mean the 12 month period commencing
with the Commencement Date (as defined in paragraph (a) of Article 42), and
ending the day preceding the first anniversary of the Commencement Date (except
that if the Commencement Date shall occur on a day other than the first day of
a calendar month, such period shall commence with the Commencement Date and end
with the last day of the 12th full calendar month thereafter) and each 12 month
period thereafter, all or part of which falls within the term of this lease.
(g) The word rent shall mean the Fixed Annual Rent and such other
sums due Owner pursuant to this lease. All sums due Owner, other than Fixed
Annual Rent, are included in the term additional rent.
(h) The term "hazardous materials" shall mean (i) any chemical,
materials or substance defined as or included in the definitions of "hazardous
substance", "hazardous materials", "extremely hazardous waste", "restricted
hazardous waste", "toxic substance" or words of similar import, under any
applicable local, state or federal laws, including but not limited to the
Federal Water Pollution Act (33 U.S.C. Section 1251 et seq.), the Hazardous
Materials Transportation Act (49 U.S.C. Action 18ol et sea.) , the Resources
Conservation and Recovery Act (42 U.S.C. C901 A-t seq., 42 U.S.C. Section 7401
et seq.) and CERCLA (42 U.S.C. 9601 et seq.), all as may be amended from time
to time; (ii) petroleum; (iii) asbestos; (iv) polychlorinated biphenyls; (v)
radioactive materials; and (vi) radon gas.
<PAGE>
(i) The term Executive Park or Park shall mean Stamford Executive
Park, located in the City of Stamford, County of Fairfield and State of
Connecticut.
42. Term; Preparation for occupancy and Possession.
(a) The term of this lease and the estate hereby granted shall
commence on a date (the "Commencement Date") which shall be (1) if Owner shall
perform the work as provided in Section (b) below, the earlier of the day (i)
on which the demised premises shall be deemed to be completed as such term is
defined in paragraph (c) of this Article (of which date Tenant shall be given
five (5) days notice), or (ii) Tenant (or anyone claiming under or through
Tenant) shall occupy the demised premises, or (2) if Tenant shall perform the
work as provided in Section (b) below, the earlier of (i) the day on which the
demised premises shall be deemed to be complete, (ii) the day Tenant (or anyone
claiming under or through Tenant) shall occupy the demised premises, or (iii)
April 1, 1992. The term shall expire on the last day of the month ten (10)
years after the month in which the Commencement Date occurs (the "Expiration
Date") or on such earlier date upon which said term may expire or be terminated
pursuant to any provision of this lease or law., *Promptly following the
determination of the Commencement Date, the parties shall enter into &
supplementary written agreement setting forth the Commencement and Expiration
Dates.*
(b) Owner and Tenant: shall cooperate to enable owner's architect to
deliver to Owner and Tenant (i) on or before December 13, 1991, architectural
drawings reasonably satisfactory to owner and Tenant, and (ii) on or before
December 20, 1991, mechanical drawings reasonably satisfactory to Owner and
Tenant (collectively, the "Plans") sufficient in detail to enable Owner and
Tenant to accept bids and obtain a building permit. The Plans shall be
practicable and shall conform to the physical condition of the Building, the
Building plans and specifications and all laws and requirements of public
authorities and requirements of insurance bodies. Owner and Tenant shall
deliver to the other a statement setting forth each party's bid price to
perform the work set forth in the Plans ("Work") on or before January 3, 1992.
If owner's bid price is 105% or less than Tenant's bid price, owner shall
perform the Work. If owner's bid price is greater than 105% of Tenant's bid
price, Owner shall have the option to perform the Work at Tenant's bid price,
provided it gives Tenant notice within three (3) days after receipt of
Tenant's bid,.shall perform the Work as set forth above, Tenant shall receive
a credit in the amount of $150, 000. 00 against the applicable bid price.**
If Owner shall perform the Work, Tenant shall pay the applicable bid
price (subject first to the application of the work credit as set forth below)
to Owner in consideration of such Work as follows: (1) twenty-five (25%)
percent upon acceptance of the bid by Owner, (2) twenty-five (25%) percent
within thirty (30) days of the date of acceptance of the bid by Owner, (3)
twenty-five (25%) percent within sixty (60) days of the date of acceptance of
the bid by Owner, and (4) twenty-five (25%) percent on or before the
Commencement Date. If Owner shall perform the Work as set forth above, Tenant
shall receive a credit in the amount of $150,000.00 against the applicable bid
price.**
If Owner shall perform the work, the mechanical drawings shall be at
Owner's sole cost and expense. If Owner shall not perform the Work, Tenant
shall reimburse owner for the reasonable cost of the mechanical drawings within
10 days after receipt of Owner's invoice.*
If Owner elects not to perform the Work, Owner shall deliver the
demised premises to Tenant in accordance with Exhibit B, and Tenant shall
perform the Work (or cause the Work to be performed) in a first class and
workmanlike manner in accordance with the terms and conditions of this lease,
including, but not limited to, Articles 3 and 56. In such event, Owner shall
pay Tenant the sum of $150,000.00
<PAGE>
to be applied by Tenant toward Tenant's construction of the Work. Such sum
shall be paid by Owner as follows: (i) $37,500.00 upon Owner's election not to
perform the Work, (ii) $37,500.00 within 30 days after Tenant's commencement of
the Work, (iii) $37,500.00 within 60 days after Tenant's commencement of the
Work and (iv) $37,500.00 on or before the Commencement Date.*
The demised premises shall be constructed by the party performing
the Work in accordance with the standards set forth on the Work Specifications
attached hereto as Exhibit C. Both parties shall use reasonable efforts to
cause construction to commence January 13, 1992. Both Owner's contractors and
Tenant's contractors shall coordinate their work and Tenant's contractors
shall accept the administrative supervision of Owner.*
(c) The demised premises shall be deemed completed on the date on
which the Work has been substantially (completed and a (temporary or final)
certificate of occupancy is issued (notwithstanding the fact that minor or
insubstantial details of construction, mechanical adjustment or decoration
remain to be performed, the non-completion of which would not materially
interfere with Tenant's use of the demised premises). if completion of the
demised premises is delayed by reason of:*
(i) any act or omission of Tenant or any of its
employees, agents or contractors, including failure of Tenant to
comply with any of its obligations under the Work Specifications, or
(ii) Tenant's failure to plan or execute Tenant's work
with reasonable speed and diligence, or
(iii) Tenant's failure to make selections required by the
Work Specifications, or
(iv) Tenant's changes by Tenant in its drawings or
specifications or changes or substitutions requested by Tenant, or
(v) Tenant's failure to submit or approve drawings, plans
or specifications timely, including, but not limited to, Tenant's
failure to enable Owner's architect to submit the architectural
drawings to Owner on or before December 13, 1991 or the mechanical
drawings on or before December 20, 1991, or*
(vi) Tenant's failure to deliver Tenant's bid price to
Owner on or before January 3, 1992, or
(vii) Tenant's failure to deliver to Owner the first
month's rent (if required by the provisions on the first page of this
lease), and the security deposit required by Article 32 (if any),
then the demised premises shall be deemed completed, the Commencement Date
shall be deemed to have occurred (and Tenant shall commence paying rent) on the
date when it would have been completed and rent would have been due and payable
but for such delay, and Tenant shall pay Owner all costs and damages which
owner may sustain by reason of such delay.
(d) The Floor Plan attached hereto may be revised by owner in order
to comply with laws and requirements of public authorities and requirements of
insurance bodies. If any of such revisions or changes are due to Tenant's use
of the demised premises, Tenant shall pay for the cost of implementing same. If
any common foyers, exit foyers or exit passages mandated by such requirements
are used by more than one
<PAGE>
tenant, the rental value therefore shall be apportioned to Tenant in relation
to the Tenant's Rentable Area (as compared to the square footage occupied by
all such tenants) and Tenant's Fixed Annual Rent shall be increased
accordingly.
(e) Owner may close or change the arrangement and/or location of
exits, entrances, passageways, doors, doorways, corridors, elevators, stairs,
toilets and other parts of the Building whenever necessary to comply with laws
or requirements of public authorities and requirements of insurance bodies.
Tenant shall pay the cost thereof where the requirement for such change is due
to Tenant's use of the demised premises.
43. Rent.
(a) Payment of the Fixed Annual Rent shall commence on the fourth
(4th) month anniversary of the Commencement Date. If such day is other than
the first day of a calendar month, the first monthly installment of Fixed
Annual Rent shall be prorated to the end of said calendar month.*
(b) All rent shall be paid by currently dated, unendorsed check of
Tenant, payable to the order of Owner or to an agent designated by Owner, and
drawn on a bank or trust company which is a member of the Connecticut Clearing
House.
(c) Tenant shall pay the Fixed Annual Rent without notice or demand.
If no date shall be set forth herein for the payment of any other sum due
owner, then such sum shall be due and payable within 10 business days after the
date upon which Owner makes written demand for such payment.
(d) If at any time during the term the rent, or any part thereof,
shall not be fully collectible by reason of any laws and requirements of public
authorities, Tenant shall enter into such agreements and take such actions as
Owner may request to permit owner to collect the maximum rents which may,
during the continuance of such legal rent restriction, be legally permissible
(but not in excess of the amounts reserved under this lease). Upon termination
of such rent restriction prior to the Expiration Date (i) the rent shall become
and thereafter be payable in accordance with the amounts reserved in this lease
for the period of the term following such termination, and (ii) Tenant shall
pay Owner, if legally permissible, an amount equal to (y) the rent which would
have been paid pursuant to this lease but for such legal rent restriction less
(z) the rents paid by Tenant for the period during which such rent restriction
was in effect.
(e) If any installment of Fixed Annual Rent is not paid when due, or
if any other monies owing by Tenant are not paid within 5 days of the date due
and payable, Tenant shall pay owner, in compensation for Owner's loss of use of
such rent, the additional administrative, bookkeeping and collection expenses
incurred by reason of such overdue sum, a sum calculated by multiplying the
late payment by three percentage points above the prime rate then established
by Chemical Bank (but limited to the maximum legal rate), dividing the product
by 365 and multiplying the quotient by the number of days between the date such
payment was due and the date such payment is in f act paid. Such compensation
shall be without prejudice to any of Owner's other rights and remedies
hereunder.
(f) If any check tendered by Tenant, for any payment due, shall be
dishonored by the payor bank, Tenant shall pay owner, without prejudice to any
of owner's other rights and remedies, in compensation for the additional
administrative, bookkeeping and collection expenses incurred by reason of such
dishonored check, the sum of $100. If during any twelve month period during the
term of this lease, two or
<PAGE>
more checks tendered by Tenant, for any payment due, shall be dishonored by the
payor bank, owner may at any time thereafter require that all future payments
of rent by Tenant shall be made by certified or official bank checks.
44. Parking.
(a) Throughout the term, so long as Tenant shall have performed all
of the agreements on Tenant's part to be performed, owner shall make available
to Tenant the following number of parking spaces, on a non-exclusive basis:
ten (10) spaces for executive cars, which shall be reasonably close
to the front entrance to the demised premises.
forty five (45) spaces for employee cars, which shall be not more than
500 yards from an entrance to the demised premises, unless otherwise provided
for herein.
If Tenant or its invitees use more than the specified number of
spaces set forth above, then after 5 days notice from Owner, Tenant shall, at
the option of Owner, either (i) pay owner's then current charge per month for
each additional space used for each month during which such excess use takes
place (even if for less than the full month) (as of the date of this lease,
Owner's current monthly charge is $40.00 per space), or (ii) cease and desist
immediately from using said additional spaces. If Owner selects the first of
such options, Owner may revoke such choice on 30 days notice.
(b) As necessary, owner shall light (between 7:00 a.m. and 10: 00 p.m.
on business days) , clean, remove snow from and otherwise maintain, the parking
area. Tenant shall be responsible for repairing damage to the parking areas
caused by Tenant or its invitees. Owner shall not be obligated to remove snow
unless the accumulation exceeds 3 inches. In no event shall Owner be obligated
to remove snow from areas obstructed by parked vehicles at the time Owner's
equipment is servicing such areas. Notwithstanding anything herein to the
contrary, Tenant shall be responsible for lighting its entrances to the demised
premises and loading areas and for removing snow and ice at its entrances and
other walkways and areas reserved or designated for Tenant's exclusive use.
(c) Tenant shall require its invitees to park only in areas
designated by Owner, and not to obstruct the parking areas of other tenants.
Tenant shall, upon request, furnish to owner the license numbers of the
automobiles operated by Tenant, its executives and other employees. Owner may
use any lawful means to enforce the parking regulations established pursuant to
Article 55, including, but not limited to, the towing away of improperly parked
or unauthorized cars and pasting of warning notices on car windows and
windshields.
(d) owner may temporarily close any area not leased to Tenant in
order to make repairs or changes, to prevent the acquisition of public rights,
or to discourage unauthorized parking. owner may do such other acts in and to
such areas as, in its judgment, may be desirable to improve same.
(e) The parking areas for trucks and delivery vehicles in front of
loading docks or loading areas (if any) adjacent to the demised premises are
not to be used by Tenant or its invitees, as parking spaces, unless otherwise
directed by Owner. Such loading docks or loading areas are provided solely for
the loading and unloading of Tenant's goods and no vehicles may be parked in
such areas longer than necessary, in owner's reasonable judgment, for the
efficient discharge of such purposes. If the use of any loading dock at the
Building interferes with the use of another loading dock, the tenant occupying
<PAGE>
more rentable area in the Building shall have priority in use of the loading
docks. In no event shall access to any loading dock be blocked for more than 15
minutes.
(f) Neither Tenant nor its invitees shall park automobiles, trucks or
other motor vehicles overnight within the park. Notwithstanding the foregoing,
Tenant may park not more than four (4) cars overnight in an area designated by
Owner. Such overnight parking shall be a Tenant's sole risk.*
45. Tax Escalation.
(i) Definitions. As used in this lease:
(a) "Taxes" shall mean the total amount of real estate taxes
and assessments now or hereafter levied, imposed, confirmed or
assessed against the Real Property, (or, during any period the
Real Property, is owned by an industrial development agency, such
as would be levied, imposed, confirmed or assessed as if Owner
named herein were the fee owner), including but not limited to
city, county, town, village, school and transit taxes, water fees
and sewer and refuse disposal charges, or taxes, assessments or
charges levied, imposed, confirmed or assessed against, or a lien
on, the Real Property by any taxing authority, whether general or
specific, ordinary or extraordinary, foreseen or unforeseen and
whether fox, public betterments, improvements or otherwise. If,
due to any change in the method of taxation, any franchise,
capital stock, capital, income, profit, sales, rental, use or
occupancy tax or charge shall be levied, assessed, confirmed or
imposed upon owner in lieu of, or in addition to, any real estate
taxes or assessments upon or with respect to the Real Property,
such tax shall be included in the term Taxes. Penalties and
interest on Taxes (except to the extent imposed upon timely
payments of assessments that may be, and are in fact, paid in
installments) and income, franchise, transfer, inheritance and
capital stock taxes shall be deemed excluded from Taxes except to
the extent provided in the immediately preceding sentence.
(b) "Base Tax" is the product of the tax rates set forth on
tax bills rendered for each Tax for the Tax Year during which this
lease is executed, multiplied by the assessed valuations of the
Real Property for the Tax Year during which the Commencement Date
occurs. "Tax Year" shall mean the fiscal period for each Tax. Any
and all tax abatements shall be for the benefit of owner.
(c) "Tenant's Proportionate Share" shall mean 36.70%.
(ii) Tax Payments. (a) If Taxes for any Tax Year during the lease term
("Tax Comparison Year") shall exceed the Base Tax, Tenant shall pay Owner, as
additional rent for each such Tax Comparison Year, Tenant's Proportionate Share
of such excess ("Tax Payment").
(b) Subsequent to owner's receipt of the tax bills for each
Tax Comparison Year, owner shall submit to Tenant a statement showing (i) the
Tax Payments due for such Tax Comparison Year, and (ii) the basis of
calculations ("Owner's Tax Statement"). Tenant shall (y) pay Owner the unpaid
portion (if any) of the Tax Payment within 30 days after receipt of Owner's Tax
Statement, and (z) on account of the immediately following Tax Comparison Year,
pay Owner commencing as of the first day of the month during which owner's Tax
Statement is rendered, and on the first day of each month thereafter until a
new Owner's Tax Statement is rendered, 1/12th of the total payment for the
current Tax Comparison Year. The monthly payments based on the total
<PAGE>
payment for the current Tax Comparison Year shall be adjusted from time to time
to reflect owner's reasonable estimate of increases in Taxes for the
immediately following Tax Comparison Year.
(iii) Reduction of Comparison Year Taxes. If Taxes for a Tax Comparison
Year are reduced, the amount of Owner's costs and expenses of obtaining- such
reduction (including legal, appraisers I and consultants' fees) shall be added
to and deemed part of Taxes for such Tax Comparison Year. If Owner obtains a
refund of Taxes for a Tax Comparison Year for which a Tax Payment has been made,
owner shall credit against Tenant's next succeeding Tax Payment (s) , Tenant's
Proportionate Share of the refund (but not more than the Tax Payment that was
the subject of the refund) . If no Tax Payment shall thereafter be due, Owner
shall pay Tenant's Proportionate Share of such refund to Tenant.
(iv) Reduction of Base Tax. If owner obtains a reduction in the Base Tax,
the Base Tax shall be reduced, prior Tax Payments (if any) shall be recalculated
and Tenant shall pay Owner, within 30 days after billing, Tenant's Proportionate
Share of the increased amount of Tax Payment for each prior Tax Comparison
Year.*
(v) Tax Protests. While proceedings for reduction in assessed valuations
are pending, the computation and payment of Tax Payments shall be based upon the
original assessments for the years in question. Tenant shall have no right to
institute or participate in any tax proceedings or other proceedings of each
similar nature. The commencement, maintenance, settlement and conduct thereof
shall be in the sole discretion of owner.
(vii) Tenant's Improvements. In the event an increase in assessed
valuation of the Real Property is caused by Tenant's improvements to the demised
premises, not including the work set forth in the Work Specifications, Tenant
shall pay the entire increase in Taxes attributable -to such improvements. If
the assessed valuation for such improvements are not separately stated, Tenant's
obligation under this subparagraph shall be reasonably determined by Owner.
(viii) No Credit. If in a Tax Comparison Year the Taxes are less than the
Base Tax, the Tenant shall not be entitled to receive a credit, by way of a
reduction in Fixed Annual Rent, a refund of all or a portion of prior (or a
credit against future) Tax Payments or otherwise.
(ix) Partial (comparison Year. If the Expiration Date or earlier date upon
which the term may expire or terminate shall be a date other than the last day
of a Tax Comparison Year, Tenant's Tax Payment for such partial Tax Comparison
Year shall be prorated, (based upon Owner's reasonable estimate of the tax
payments for such Tax Comparison Year if same have not been established as of
such date).
46. Common Area Maintenance Charge.
(i) For the purposes of this Article:
(a) "Index" shall mean the Revised Consumer
Price Index for Urban Wage Earners and Clerical Workers for the Connecticut
- -Northeastern New Jersey Area, 1967 = 100, published by the United States
Department of Labor, Bureau of Labor Statistics.
(b) "Base Index" shall mean the Index for the
first full calendar month preceding the date of execution of this lease.
(ii) There is included in the Fixed Annual Rent an amount
equal to $1.50 per square foot to cover the initial cost to owner of the
expenses of common area maintenance.
<PAGE>
(iii) In the manner and at the times hereinafter set forth,
Tenant shall pay Owner as additional rent, for each lease year, for common area
maintenance, a sum computed by multiplying $1.50 per square foot (i.e.
$29,175.00) by the percentage increase, if any, by which the Index for the
month preceding the last month of such lease year exceeds the Base Index. In no
event shall any such adjustment result in a decrease of the Fixed Annual Rent
as set forth on page 1 of this lease.
(iv) Within 135 days after the end of each lease year, owner
shall deliver to Tenant a statement setting forth the amount (and supporting
calculations) of additional rent due to Owner for such prior lease year in
accordance with the provisions of clause (iii) above ("Owner's Statement").
Tenant shall (x) make payment of any unpaid portion of such additional rent
within 30 days after receipt of owner's Statement, and (y) pay to Owner on
account of the then current lease year, within 30 days after receipt of Owner's
Statement, an amount equal to the product obtained by multiplying the total
payment required for the preceding lease year by a fraction, the denominator of
which shall be 12 and the numerator of which shall be the number of months of
the current lease year which shall have elapsed prior to the first day of the
month immediately following the rendition of Owner's Statement, and (z) pay
Owner on account of the then current lease year, commencing as of the first day
of the month immediately following the rendition of Owner's Statement and on
the first day of each month thereafter until a new Owner's Statement is
rendered, 1/12 of the total payment for the preceding lease year. The monthly
payments based on the total payment for the preceding lease year shall be
adjusted from time to time during a lease year to reflect owner's reasonable
estimate of increases in the Index. The payments required to be made under
clauses (y) and (z) above shall be subject to adjustment as and when Owner's
Statement for such lease year is rendered by Owner. If the payments required to
be made under clauses (y) and (z) above exceed the amount due for such lease
year pursuant to Owner's Statement, such excess shall be credited against the
next required payments due hereunder. If no such payments shall thereafter be
due, owner shall pay such excess to Tenant.
(v) If any lease year shall be a period of less than 12
months, Tenant's liability under this Article shall be prorated.
(vi) If the Index is altered, modified, converted or revised
such that it is no longer comparable to the Base Index then the Index shall be
adjusted to the figure that would have been arrived at had the change in the
manner of computing the Index not been altered. If such Index shall no longer
be published, then any substitute or successor index published by the Bureau of
Labor Statistics or other governmental agency of the United States, and
similarly adjusted as aforesaid, shall be used. If such Index (or a successor
or substitute index similarly adjusted) is not available, a reliable
governmental or other reputable publication selected by Owner shall be used.
47. Cleaning Trash Removal.
(a) Tenant shall, at Tenant's expense, keep the demised premises
clean and in good order, to the satisfaction of owner. Tenant shall, at
Tenant's expense, hire a reputable cleaning contractor to clean -the office
portion of the demised premises, if any.
(b) Tenant shall pay the cost of removal of Tenant's refuse and
rubbish from the Building. Tenant shall contract for the removal of such refuse
and rubbish. owner reserves the right to select a refuse disposal contractor to
serve the Building. The name of such contractor shall be available from Owner
upon request, and Tenant shall employ no
<PAGE>
other refuse disposal or carting contractor without prior written approval from
owner. The removal of refuse and rubbish shall be subject to such rules and
regulations as in the judgment of owner are necessary for the proper operation
of the Building and of the Park.
48. Utilities.
(a) Tenant shall obtain all utilities necessary for its use of the
demised premises directly from the utility companies or vendors servicing the
demised premises. The cost of such services shall be paid by Tenant directly to
such companies. owner shall permit electric feeders, risers and wiring
servicing the demised premises to be used by Tenant to the extent available and
safely capable of being used for such purpose.
(b) Notwithstanding anything herein to the contrary, Owner may
redistribute or furnish electricity and/or gas ("utilities") to the demised
premises in a manner and in such reasonable quantities as may be required by
Tenant to service Tenant's permitted use in the demised premises. In such
event, Tenant shall pay to Owner within 30 days after billing, as additional
rent, a sum ("Utility Rent") determined in the manner set forth below. Such sum
shall be determined by an independent engineer or consulting firm selected by
owner (the "Engineer"). The Engineer shall make a survey of Tenant's utility
usage in the demised premises, to determine the Utility Rent. In the event
Tenant disputes any such determination, Tenant may employ a consultant to make
a survey of the cost of such utility to the demised premises. The determination
of such consultant shall be promptly submitted to Owner. If Owner's and
Tenant's consultants cannot mutually agree as to the cost of such utility, the
matter shall be submitted to arbitration to the office of the American
Arbitration Association nearest the Building, in accordance with rules of such
American Arbitration Association. Pending such determination, Tenant: shall
continue to pay the charges as billed by Owner. Each party shall pay the cost
of its own consultant. Any final adjustment shall be made at the time of the
arbitration award.
(c) If either the quantity or character of the utility service is
changed by the utility company supplying such service to the Building, or is no
longer available or suitable for Tenant's requirements, or if there shall be a
change, interruption or termination of such service due to a failure or defect
on the part of the utility company, no such change, unavailability,
unsuitability, failure or defect shall constitute an actual or constructive
eviction, in whole or in part, or entitle Tenant to any payment from owner for
any loss, damage or expense, or to abatement or diminution of Fixed Annual Rent
or additional rent, or otherwise relieve Tenant from any of its obligations
under this lease, or impose any obligation upon Owner or its agents. In no
event shall Owner be responsible for any failures of the utility providing such
service or the negligence or other acts of third parties causing any such
interruption.
49. Amendments for Financing; Information for Mortgagees.
(a) If, in connection with obtaining or renewing financing for the
Real Property an institutional lender, shall request modifications in this
lease as a condition to such financing, Tenant will not withhold, delay or
defer its consent thereto, provided that such modifications neither increase
the monetary obligations of Tenant nor decrease the size of the demised
premises, the number of parking spaces provided for in Article 44 or the
service required to be provided by Owner.
(b) Tenant: shall, within a reasonable time after being requested,
submit such financial information as may be reasonably required by Owner's
mortgagee(s).
<PAGE>
50. Broker. Tenant represents that, in the negotiation of this lease,
it dealt with no broker or any other person legally entitled to claim a
- -brokerage commission or finder's or consultant's fee with respect to this
transaction except New England Land Company Ltd. and Douglas Elliman Pickering
Associates, Inc. and based thereupon owner shall pay one commission per a
separate agreement. Tenant shall indemnify, defend and hold owner harmless from
and against all losses, costs, damages, expenses, claims and liabilities
(including court costs and attorneys' fees and disbursements) arising out of
any inaccuracy or alleged inaccuracy of this representation.
51. Signs.
(a) Owner shall, upon Tenant's request, list on the Building's
directory ("Directory"), if any, the name of Tenant. In addition, Tenant may
install, at its sole cost and expense, a ground mounted sign having a size,
design and location satisfactory to Owner and Tenant. Tenant shall comply with
the provisions of Article 51(b) prior to its installation of such sign.*
(b) No sign, advertisement, notice or other lettering shall be
exhibited, inscribed, painted or affixed by or in behalf of Tenant on any part
of the outside of the demised premises or the Building or on the inside of the
demised premises if the same is visible from the outside of the demised
premises, without the prior written consent of Owner. Requests for such signs
shall be accompanied by a sketch of the sign, its size, type and manner of
mounting, specifying the manner of mounting, and the materials and finishes
employed in the manufacture of same. Approval by owner shall not constitute
approval for purposes of complying with laws and requirements of public
authorities. It shall be Tenant's obligation to secure such approvals at
Tenant's expense. In the event of the installation of any sign by Tenant in
violation of the foregoing, Owner may remove same without liability and may
charge the expense incurred by such removal to Tenant.
(c) owner shall have the right, from time to time, to designate a
name for the Building and to change the name and/or address of the Building,
provided, however, that owner shall not change the address of the Building,
unless required by laws and requirements of public authorities.*
52. Holdover: Tenant acknowledges that possession of the demised
premises must be surrendered at the expiration or sooner termination of the
term, time being of the essence. Tenant shall indemnify, defend and save Owner
harmless against all liabilities, obligations, damages, penalties, claims,
costs, charges and expenses, including reasonable attorneys' fees and claims
made by a successor tenant based upon the failure or refusal of Tenant to
surrender the demised premises in a timely fashion. The parties agree that the
damage to owner resulting from failure by Tenant to surrender possession of the
demised premises timely will be extremely substantial, will exceed the amount
of rent payable hereunder and will be impossible of accurate measurement.
Consequently, Tenant shall pay Owner for each month and for any portion of a
month during which Tenant holds over in the demised premises after expiration
or sooner termination of the term of this lease, a sum equal to 200% of the
average monthly rent which was payable per month under this lease during the
last 3 months of the term. Nothing contained herein shall be deemed to
authorize Tenant to remain in occupancy of the demised premises after the
expiration or sooner termination of the term.
53. Insurance and Indemnity.
(a) Tenant shall provide, prior to entry upon the demised premises,
and maintain throughout the term of this lease, at its own
<PAGE>
cost, and with companies rated not less than B+ (class IX by A.M. Best Company,
Inc. , or its successor and authorized to do business in the State of
Connecticut (i) public liability and property damage insurance in an amount not
less than $5,000,000 combined single limit for personal injury, death and
property damage arising out of any one occurrence, protecting Owner and Tenant
against all claims for personal injury, death or property damage occurring in,
upon or adjacent to the demised premises and any part thereof, or arising from,
related to, or in any way connected with the conduct and operation of Tenant's
use or occupancy of the demised premises, which insurance shall be written on
an occurrence basis and name Owner (and at Owner's request, Owner's mortgagees)
as additional insureds, and (ii) workers' compensation insurance covering all
persons employed by Tenant or its contractors in connection with work performed
by or for Tenant. Tenant's insurance shall be in a form reasonably satisfactory
to Owner and provide that it shall not be canceled, terminated or changed
except after 20 days' written notice to Owner. All such policies and
certificates (with evidence of payment of the premium) shall be deposited with
owner not less than 30 days prior to the day such insurance is required to be
in force and upon renewals not less than 30 days prior to the expiration of the
term of coverage. owner shall have the right from time to time during the term,
on not less than 30 days notice, to require that Tenant increase the amount
and/or types of coverage required to be maintained under this Article to the
amounts and/or types generally required of tenants in comparable buildings in
Fairfield County. The minimum limits of liability insurance required pursuant
to clause (i) shall in no way limit or diminish Tenant's liability under
paragraph (d) of this Article.
(b) Tenant: shall not commit or permit anything to be done in, to or
about the demised premises, the Building, the Real Property, the Park, if
applicable, or any adjacent property, contrary to law, or which will invalidate
or be in conflict with the insurance policies carried by owner or by others for
Owner's benefit, or do or permit anything to be done, or keep, or permit
anything to be kept, in the demised premises, which (i) could result in
termination of any of such policies, (ii) could adversely affect owner's right
of recovery under any such policies, (iii) could subject owner to any liability
or responsibility to any person, or (iv) would result in reputable and
independent insurance companies refusing to insure the Building or property of
owner therein or in the Park, if applicable, in amounts satisfactory, to its
mortgagees. If any such action by Tenant, or any failure by Tenant to comply
with the requirements of insurance bodies or to perform Tenant's obligations
hereunder, or any use of the demised premises by Tenant shall result in the
cancellation of any such insurance or an increase in the rate of premiums
payable with respect to such policies, Tenant shall indemnify, defend and hold
Owner harmless against all losses, including but not limited to any loss which
would have been covered by such insurance and the resulting additional premiums
paid by Owner. Tenant shall make such reimbursement within 30 days after
receipt of notice and evidence from owner that such additional premiums have
been paid, without limiting owner's rights otherwise provided in this lease.
(c) Tenant shall procure a clause in, or endorsement on, each of its
policies for fire or extended coverage insurance covering the demised premises
or personal property, fixtures or equipment located therein, pursuant to which
the insurance company waives subrogation or consents to a waiver of right of
recovery against Owner. Tenant agrees not to make ' claims against, or seek to
recover from, Owner for loss or damage to its property or property of others
covered by such insurance. To the extent Tenant shall be a self-insurer, Tenant
waives the right of recovery, if any, against owner, its agents and employees,
for loss, damages or destruction of Tenant's property.
<PAGE>
(d) Tenant shall defend, indemnify and save harmless Owner, its
agents and employees from and against any and all liabilities, obligations,
damages, penalties, claims, costs, charges and expenses, including reasonable
attorneys' fees, which may be imposed or incurred by or asserted against owner
and/or its agents or employees by reason of any of the following occurring
during the term, or during any time prior to the Commencement Date that Tenant
has access to or possession of any part of Tenant or its invitees, (iii) any
accident, injury or damage to any person or property occurring in, on or about
the demised premises, or vault, passageway or space adjacent thereto caused by
the negligence of Tenant or its invitees, and (iv) any failure by Tenant to
perform or comply with any of the covenants, agreement, terms, provisions,
conditions or limitations in this lease to be performed or complied with by
Tenant. If any action or proceeding is brought against owner by reason of any
such claim, Tenant shall, upon the request of owner and at Tenant's expense,
resist or defend such action or proceeding by counsel reasonably acceptable to
Owner. Counsel selected by Tenant's approved insurance companies shall be
deemed acceptable.
54. Exculpation. Tenant shall look solely to the estate and interest
of Owner, its successors and assigns, in the Building for the collection of any
judgment (or other judicial process) recovered against Owner and based upon
breach by Owner of any of the terms, conditions or covenants of this lease on
the part of owner to be performed. No other property or assets of Owner shall
be subject to levy, execution or other enforcement procedures for the
satisfaction of Tenant's remedies under or with respect to either this lease,
the relationship of landlord and tenant hereunder, or Tenant's use and
occupancy of the demised premises.
55. Rules and Regulations. Tenant and Tenant's invitees shall observe
and comply with the Rules and Regulations attached as Exhibit A, and such
additional Rules and Regulations as Owner or owner's agents may from time to
time adopt. Notice of additional Rules and Regulations shall be given to
Tenant. Owner shall have no duty or obligation to enforce the Rules and
Regulations or the terms, covenants or conditions in any other lease, against
any other tenant of the Building or in the Park, if applicable, and owner shall
not be liable to Tenant for violation of the same by any other tenant or its
invitees. In the event of a conflict between the Rules and Regulations and the
provisions of the lease, the provisions of the lease shall prevail.
56. Tenant's Alterations and Maintenance.
(a) Tenant shall not employ contractors in connection with any
services, provisions, alterations or maintenance, unless Owner has consented in
writing to the contractor, it being the intention of Owner to limit the number
of such contractors employed in the Building or Park, if applicable. If such
consent has not been obtained Tenant shall, if requested by Owner, forthwith
cancel such contract. Owner's disapproval of any contractor selected by Tenant
must be accompanied by the designation of one or more contractors acceptable to
Owner, whose prices must be reasonably competitive. If owner does not approve
or disapprove Tenant's contractor within 7 business days after receipt of
written request therefor, the contractor so selected by Tenant shall be deemed
approved by Owner. Tenant shall not employ persons in connection With any such
services, provisions, alterations or maintenance the employment of whom would
cause a strike, work stoppage or slowdown by employees of contractors of owner
in the Building or Park, if applicable. owner does not consent to the
reservation of title by any conditional vendor, or the retention of a security
interest by a secured party, to any property which may be affixed to the
realty.
<PAGE>
(b) Alterations performed by Tenant in accordance with the provisions
of Article 3 must be performed in a good and workmanlike manner, in accordance
with the plans and specifications prepared by Tenant, at its expense which
plans and specifications shall be subject to Owner's approval prior to the
performance of any such alteration. If Owner does not approve or disapprove
such plans and specifications within 15 business days after Tenant shall have
submitted five sets therof to Owner, Owner shall be deemed to have approved
same. The quality standards applicable to such alterations shall in no event be
less than Owner's standards for the Building at the time such work is
performed. Upon completion of the alterations Tenant shall, at its expense,
deliver to Owner five sets of "as-built" drawings with respect thereto.
(c) If due to Tenant's alterations, changes in the Building's
sprinklers, passages, exits or other common areas or systems, are required,
Tenant shall perform same, pursuant to the provisions of this lease. In no
event, however, shall Tenant perform any work or cause any work to be done
which shall, in owner's opinion, adversely affect the Building. In no event
shall Tenant make any installation on or through the roof of the Building
without the prior consent of Owner. Owner may, at its sole discretion, make
such rules and regulations as it deems necessary regarding access to or through
the roof. Owner makes no representation as to the load bearing capacity of the
roof.
57. Notice.
(a) At the request of the holder(s) of any mortgage encumbering the
Real Property, Tenant shall serve upon such mortgagee(s) it copy of all notices
given by Tenant to Owner pursuant to paragraph (b) below, such service to be by
registered or certified mail addressed to such mortgagee(s) at the address
provided by such mortgagee(s) to Tenant.
(b) Except for rent bills, any notice, approval, consent, bill,
statement or other communication required or permitted to be given, rendered or
made by either party hereto to the other, pursuant -to this lease or pursuant
to any applicable law or requirement of public authority (collectively,
"notices") , shall be in writing and shall be delivered personally or by
registered or certified mail, addressed to the other party at the address
hereinabove set forth. All notices given by either party pursuant to this
Article may be given by such party, their agents or attorneys. Either party
may, by notice as aforesaid, designate a different address or-addresses for
notices intended for it. All notices given pursuant to this Article shall be
deemed given on the second business day after posting if mailed in Fairfield
County, and on the third business day after posting if mailed outside of
Fairfield County, or upon delivery if made personally. On and after the
Commencement Date notices directed to Tenant shall be addressed to Tenant at
the Building.
58. Miscellaneous.
(a) Whenever it is provided that Owner shall not unreasonably
withhold or delay consent or, approval or shall exercise its judgment
reasonably (such consent or approval and such exercise of judgment being
collectively referred to as "consent"); if owner shall delay or refuse such
consent, Tenant shall not be entitled to make any claim, and Tenant waives any
claim for money damages (nor shall Tenant claim any money damage by way of
setoff, counterclaim or defense) based upon any claim or assertion that Owner
unreasonably withheld or delayed consent. Tenant's sole remedy shall be an
action or proceeding for specific performance, injunction or declaratory
judgment to enforce any such provision, but any such equitable remedy which can
be cured by the expenditure of money may be enforced personally against Owner
<PAGE>
only to the extent of interest in the Building. Failure on the part of Tenant
to seek relief within 30 days after the date upon which Owner has withheld its
consent shall be deemed a waiver of any right to dispute the reasonableness of
such withholding of consent.
(b) Owner shall have no liability or responsibility if any service
or utility required to be provided by Owner is interrupted or stopped by
reason of unavoidable delays.
(c) If Tenant shall request the consent or approval of owner to the
making of any alterations or to any other thing, and owner shall seek and pay
a separate fee for the opinion of Owner's counsel, architect, engineer or
other representative or agent as to the form or substance thereof, Tenant
shall pay owner, as additional rent, within 30 days after demand, all
reasonable costs and expenses of owner incurred in connection therewith,
including, in case of any alterations, costs and expenses of Owner in
reviewing plans and specifications.
(d) This lease is submitted to Tenant for signature with the
understanding that it shall not bind Owner unless and until it has been
executed by Owner and delivered to Tenant or Tenant's attorney.
(e) Striking out or deletion of any portion of this lease (and the
insertion of asterisks at various points) was done as d matter of convenience
in preparing the lease for execution. The language omitted (as well as the use
or placement of such asterisks) is not to be given any effect in construing
this lease.
(f) Whenever reference is made to public halls, elevators,
corridors, etc. and if none such are present on or about the premises demised
herein then such reference shall have no relevance to the terms herein.
(g) In the event of any conflict between the printed provisions of
the lease and the Rider to the lease, the provisions of this Rider shall
prevail.
(h) owner's failure to prepare and/or deliver any statement or bill
required to be delivered to Tenant, or Owner's failure to make demand for
payment of Fixed Annual Rent or additional rent shall not be a waiver of, or
cause Owner to forfeit or surrender its rights to collect, any rent due.
Tenant's liability for all such payments shall continue unabated during the
term and shall survive the expiration or sooner termination of the term.
(i) Tenant: shall repair and replace, as necessary, and maintain in
good working order, the heating and air conditioning units and systems
servicing the demised premises. Such maintenance shall include changing the
systems filters not less frequently than four times per year. Tenant shall
enter into contracts for such maintenance pursuant to Article 56 and submit
to owner copies of such agreements as well as copies of all invoices
indicating dates of service and work performed.
(j) Tenant shall not substantially vacate the demised premises
during the term of this lease unless it shall give owner at least 10 days
written notice prior to such vacating. Notwithstanding the above, in the
event Tenant vacates the demised premises prior to the Expiration Date or
such earlier date upon which said term may expire or be terminated, Tenant
shall remove all fixtures, and installations (including but not limited to
telephone systems, communication systems and security systems) , unless owner
has otherwise notified Tenant pursuant to Article 3.
After such vacating, Owner may, but shall not be obligated
to, enter the demised premises, at anytime, to make such repairs,
<PAGE>
replacements and improvements as Owner may deem necessary. Notwithstanding the
foregoing, Tenant's obligations under this lease shall remain in full force and
effect, including the obligation to maintain and secure the demised premises.
(k) The Certificate of Occupancy for the Building shall be for a
building of Low Hazard Occupancy as defined by the Connecticut State Building
Code. The Certificate of Occupancy covering the demised premises as of the
Commencement Date shall permit the intended use of the demised premises as set
forth in Article 2. *
(1) Tenant shall not cause (or allow any of its contractors,
agents or other persons or entities over whom or which it exercises any degree
of control to cause) to occur within the demised premises, or Executive Park,
any use, presence, discharge, spillage, disposal, uncontrolled loss,
generation, seepage or filtration of Hazardous Materials. Notwithstanding the
foregoing, Tenant shall be entitled to use and store only those Hazardous
Materials which are necessary for the conduct of Tenant's permitted business in
the demised premises (as set forth in Article 2), provided that such usage and
storage is in full compliance with all applicable laws and requirements of
public authorities and insurance bodies. Tenant shall, from time to time and
upon owner's request, submit to Owner a written report with respect to
Hazardous Materials upon the demised premises and within the Building and
Executive Park as a result of the activities of Tenant (its contractors, agents
or other persons or entities over whom it exercises any degree of control).
Such report shall be in such form as may be prescribed by owner and shall be
submitted to Owner within ten (10) days after request by owner (or immediately
upon receipt of any notice of violation received from any governmental agency).
owner shall have the right at all times during the term of this lease to (i)
inspect the demised premises, and (ii) conduct (or cause to be conducted) tests
and investigations to determine whether Tenant is in compliance with the
provisions of this Section. The cost of all such inspections, tests and
investigations shall be borne by Tenant. Owner's consent to Tenant's use or
maintenance of Hazardous Materials within the demised premises shall in no way
limit Tenant's indemnification obligations as otherwise set forth in this
lease.
If Tenant obtains knowledge of the actual or suspected
release of Hazardous Materials, then Tenant shall promptly notify owner of such
actual or suspected release. Tenant shall immediately notify owner of any
inquiry, test, investigation or enforcement proceeding by or against Tenant
involving a release. If Tenant or its agents, employees or contractors shall
cause or permit a. release, Tenant shall promptly notify Owner of such release
and immediately begin investigation and remediation of such release, as
required by all applicable laws and requirements of public authorities and
insurance bodies.
(m) Anything herein to the contrary notwithstanding, if the first
month's rent or the security deposit shall not have been delivered to Owner
upon execution and delivery of this lease by Tenant to Owner (if required by
the provisions of this lease) , then (in addition to such other remedies
available to owner hereunder, at law or in equity) Owner shall not be obligated
to commence preparation of the demised premises for occupancy (if required by
the provisions of this lease) until such sums shall have been delivered to
owner.
(n) Tenant agrees not to disclose the terms, covenants, conditions or
other facts with respect to this lease, including, but not limited to, the
Fixed Annual Rent, to any person, corporation, partnership, association,
newspaper, periodical or other entity. This non-disclosure and confidentiality
agreement shall be binding upon
<PAGE>
Tenant without limitation as to time, and a breach of this paragraph shall
constitute a material breach under this lease.
59. Amendments to Printed Form.
(a) Article 6 is further amended by adding the following
at the end thereof:
In the event of any increase in the fire insurance rate on
the Building and/or its contents during the term of this lease, caused by
Tenant or the nature or conduct of Tenant's use of the demised premises, Tenant
shall pay to Owner, the amount of the increase in the cost of such insurance to
Owner and other tenants of the Building, within ten (10) days after Owner has
submitted to Tenant a statement setting forth the amount due. In determining
whether Tenant's use or occupancy has resulted in an increase in the rate of
fire insurance applicable to the Building or any property located therein, the
basis of comparison shall be the rate which would be in effect were the Tenant
not occupying the Building.
(b) Article 7 is amended by adding the following paragraph:
Notwithstanding anything contained herein to the contrary,
and at the election of the holder of any current or future mortgage encumbering
all or a portion of the demised premises, such mortgage shall be subordinate to
this lease with the same force and effect as if this lease had been executed,
delivered and recorded prior to the execution, delivery and recording of the
said mortgage, except however that the said subordination of the mortgage to
the lease shall not affect nor be applicable to and does expressly exclude:
(i) The prior right, claim or lien of the said mortgagee in,
to and upon any award or other compensation heretofore or hereafter
to be made for any taking by eminent domain of any part of the
'mortgaged premises, and to the right of disposition thereof in
accordance with the provisions of the said mortgage;
(ii) The prior right, claim and lien of the said mortgagee
in, to and upon any proceeds payable under all policies of fire and
rent insurance upon the said mortgaged premises and as to the right
of disposition thereof in accordance with the terms of the said
mortgage; and
(iii) Any lien, right, power or interest, if any; which may
have arisen or intervened in the period between the recording of the
said mortgage and the execution of this lease, or any lien or
judgment which may arise at any time under the terms of this lease.
Although this clause shall be self-operative upon the election of any
such mortgagee, in confirmation hereof, Tenant shall execute promptly any
certificate that Owner or such mortgagee may request.
(c) Article 11 is amended by adding the following paragraph:
(1) Notwithstanding the foregoing provision of this Article,
Tenant may sublet all of the demised premises, but not less than all, to one
subtenant, for occupancy and use as permitted by Article 2, provided however,
that Tenant shall first obtain the consent of Owner. In addition, Tenant may
sublet up to 5,000 square feet of rentable area of the demised premises to one
subtenant, for occupancy and use as permitted by Article 2, provided, however,
that Tenant shall first obtain the consent of Owner. The consent of Owner to
any subletting
<PAGE>
shall not in any way be considered to relieve Tenant from obtaining the express
consent of Owner to any further subletting.
(2) If Tenant shall have a bona fide intention to sublet all
of the demised premises or less than 5,000 square feet of the demised premises,
as stated above, it shall first notify Owner of such fact and of the terms of
Tenant's proposed subrental and other terms of subletting, and:
(i) If Tenant intends to sublet all of the demised
premises or less than 5,000 square feet of the demised premises, then
and in such event owner shall have the option, exercisable by notice
within 30 days after the date of Tenant's notice, to elect (i) in the
case of a subletting of all of the demised premises, to cancel this
lease, effective as of 6 months from the last day of the month in
which Owner shall have given such notice or (ii) in the case of
intention to sublet less than 5,000 square feet of the demised
premises, to delete from the demised premises the space which Tenant
proposes to sublet, owner's election to be made and to be effective
as of the time set forth in clause (i) hereof.*
If space is deleted from the demised
premises, at owner's election as aforedescribed, then effective as
of the date of such deletion of space, the Fixed Annual Rent payable
by Tenant hereunder shall abate proportionately according to the
ratio that the number of square feet of Rentable Area in the
surrendered space bears to the square feet of Rentable Area in the
entire demised premises, the number of parking spaces available to
Tenant pursuant to Article 44 shall be proportionately reduced, and
all other provisions of this lease shall be appropriately amended
(and the parties shall execute and deliver an amendment to this
lease) so as to reflect such diminished square footage of Rentable
Area' of the demised premises. Upon any such cancellation of lease
or deletion of space by Owner, Tenant shall have no further
obligation to Owner with respect to this lease (in the case of
cancellation) or with respect to the deleted space, except for
obligations accrued up to the date of cancellation or space
deletion. Any work required to separate deleted space from the
remainder of the demised premises shall be performed by Owner at
Tenant's expense. Upon any such cancellation of this lease by Owner,
Tenant shall have no further obligations to Owner with respect to
this lease except for obligations accrued up to the date of
cancellation.*
(ii) If Owner shall not have elected to cancel or delete
space as aforedescribed, and if within a period of 6 months from the
date of Tenant's notice, Tenant has not requested Owner's consent to
a specific subletting, then the provisions of this Article requiring
Tenant to give notice to owner of intended subletting, and any
owner's rights to elect, shall again prevail.*
(iii) If owner shall riot exercise the, option to cancel this
lease or delete space Tenant may actively seek to obtain an
appropriate subtenant, and Tenant shall submit (x) the name and
address of such proposed subtenant, (y) reasonably satisfactory
information as to the nature and character of the business of the
proposed subtenant, and as to the proposed nature of its proposed
use of the space, and (z) banking, financial and other information
relating to the proposed subtenant reasonably sufficient to enable
Owner to determine the financial responsibility and character of the
proposed subtenant.*
(iv) In determining whether or not to consent to a proposed
subletting, Owner may take into consideration all relevant
<PAGE>
factors surrounding the proposed sublease, including the following:
a. The business reputation of the proposed subtenant.
b. The nature of the business and the proposed use of
the demised premises by the proposed subtenant.
C. The financial condition of the proposed
subtenant.
d. Restrictions contained in leases of other tenants
of the Building (but said restrictions shall not
prohibit the use of the demised premises specified
in Article 2).
(3) If such proposed subletting is effected by Tenant,
Tenant shall pay to Owner a sum equal to 50% of (i) any rent or other
considerations paid to Tenant by any subtenant less expenses of such subleasing
(including but not limited to brokerage commissions and costs of improvements)
in excess of the rent allocable to the subleased space which is then payable by
Tenant to owner pursuant to the terms hereof, and (ii) any other profit or gain
realized by Tenant from any such subletting. All sums payable hereunder by
Tenant shall be payable to Owner upon receipt thereof by Tenant.
(4) Tenant shall not advertise its space for subletting at a
rental rate lower than the greater of the then comparable rental rate for such
space in the City of Stamford or the rental rate under this lease for such
space. When Owner has other, equivalent space in the Building or the Park, if
applicable, available for leasing by Owner, Tenant shall not sublet a portion
of the demised premises to an occupant of any space in the Building or the Park
or to any party which has negotiated with Owner f or space in the Building or
the Park during the nine (9) months immediately preceding Tenant's request for
Owner's consent.*
(5) Tenant: may not: exercise its rights under this Article
prior to the Commencement Date.
(6) No sublease of the demised premises shall be effective
unless and until Tenant delivers to Owner duplicate originals of the instrument
of sublease (containing the provisions required by Section (7)) and any
accompanying documents. Any such sublease shall be subject and subordinate to
this lease.
(7) All subleases shall (i) be expressly subject to all of
Tenant's obligations hereunder, (A) provide that the sublease shall not be
assigned, encumbered or otherwise transferred, that the premises thereunder
shall not be further sublet by the sublessee, in whole or in part, and that the
sublease shall neither suffer nor permit any portion of the sublet premises to
be used or occupied by others without the prior consent of Owner in each
instance and (iii) contain substantially the following provision:
"In the event a default under any superior lease of all or an
portion of the premises demised hereby results in the
termination of such superior lease, this lease shall, at the
option of the lessor under any such superior lease, remain in
full force and effect and the tenant hereunder shall attorn
to and recognize such lessor as Owner hereunder and shall
promptly upon such lessor's request, execute and deliver all
instruments necessary or appropriate to confirm such
attornment and recognition. The Tenant hereunder hereby
waives all rights under any present or future laws or
otherwise to elect, by reason of the termination of such
<PAGE>
superior lease, to terminate this sublease or surrender
possession of the premises demised hereby."
(8) Tenant. shall remain fully responsible and liable for
all acts and omissions of any subtenant or anyone claiming under or through any
subtenant which shall be in violation of any of the obligations of Tenant
hereunder and any such violation shall be deemed a violation by Tenant. Tenant
shall pay owner on demand any reasonable expenses incurred by Owner in acting
upon any request for consent to subletting pursuant to this Article.
(9) Whether or not Owner shall give its consent to any
proposed sublease, Tenant shall indemnify, defend and save harmless owner
against and front any and all liabilities, obligations, damages, penalties,
claims, costs, charges and expenses (including reasonable attorney's fees)
resulting from any claims that may be made against Owner by the proposed
sublessee, or by any brokers or other persons claiming a commission or similar
compensation in connection with the proposed or final sublease.*
(d) Article 16 is amended by adding the. following
paragraph:
Without limiting any of the provisions of Articles 16, 17 or
18, if pursuant to the Bankruptcy Code of 1978, as the same may be amended,
Tenant is permitted to assign this lease in disregard of the restrictions
contained in Article 11, Tenant agrees that adequate assurance of future
performance by the assignee permitted under such Code shall mean the deposit of
cash security with Owner in an amount equal. to the sum of one year I s Fixed
Annual Rent then reserved hereunder 'plus an amount equal to all additional
rent payable under this lease for the calendar year preceding the year in which
such assignment is intended to become effective. Such deposit shall be held by
owner, for the balance of the term of this lease, as security for the full and
faithful performance of all of the obligations under this lease on the part of
Tenant yet to be performed, in the manner set forth in Article 32
(notwithstanding the possible prior deletion of Article 32 from this lease) .
If Tenant receives or is to -receive any valuable consideration for such art
assignment of this lease, such consideration, after deducting therefrom (i) the
brokerage commissions, if any, and other expenses reasonably incurred by Tenant
for such assignment and (ii) any portion of such consideration reasonably
designated by the assignee as paid for the purchase of Tenant's property in the
demised premises, shall be the sole and exclusive property of owner and shall
be paid over to owner directly by such assignee.
(e) Article 32 is hereby amended by adding the following:
"If this lease is in full force and effect one (1) year
after the Commencement Date and Tenant is not in default hereunder, owner shall
return to Tenant the sum of $26,310.83 in accordance with the provisions
hereof."*
60. Option to Extend.
(a) If the term of this lease shall then be in full force and effect and Tenant
has complied fully with its obligations hereunder, Tenant shall have the option
to extend the term of this lease for a period of 5 years (the "Extension Term")
commencing on the day immediately following the Expiration Date, provided
however that Tenant shall give Owner notice of its election to extend the term
no earlier than fifteen (15) months prior to the Expiration Date nor later than
twelve (12) months prior to the Expiration Date of the initial term Time shall
be of the essence in connection with the exercise of Tenant's option pursuant
to this Article.
<PAGE>
(b) Such extension of the term of this lease shall be upon the same
covenants and conditions, as herein set forth except for the Fixed Annual Rent
(which shall be determined in the manner set forth below), and except that
Tenant shall have no further right to extend the term of this lease after the
exercise of the single option described in paragraph (a) of this Section. If
Tenant shall duly give notice of its election to extend the term of this lease,
the Extension Term shall be added to and become a part of the term of this
lease (but shall not be considered a part of the initial term), and any
reference in this lease to the "term of this lease", the "term hereof". or any
similar expression shall be deemed to include such Extension Term, and, in
addition, the term "Expiration Date" shall thereafter mean the last day of such
Extension Term. owner shall have no obligation to perform any alteration or
preparatory or other work in and to the demised premises and Tenant shall
continue possession thereof in its "as is" condition.
(c) If Tenant exercises its option for the Extension Term, the Fixed
Annual Rent during the Extension Term shall be 95% of the fair market rent for
the demised premises, as hereinafter defined.
(d) Owner and Tenant shall use their best efforts, within 30 days
after Owner receives Tenant's notice of its election to extend the term of this
lease for the Extension Term ("Negotiation Period"), to agree upon the Fixed
Annual Rent to be paid by Tenant during the Extension Term. If Owner and Tenant
shall agree upon the Fixed Annual Rent for the Extension Term, the parties
shall promptly execute an. amendment to this lease stating the Fixed Annual
Rent for the Extension Term.
(e) If the parties are unable to agree on the Fixed Annual Rent for
the Extension Term during the Negotiation Period, then within 15 days after
notice from the other party, given after expiration of the Negotiation Period,
each party, at its cost and upon notice to the other party, shall appoint a
person to act as an appraiser hereunder, to determine the fair market rent for
the premises for the Extension Term. Each such person shall be a real estate
broker or appraiser with at least ten years' active commercial real estate
appraisal or brokerage experience (involving the leasing of comparable space as
agent for both landlords and tenants) in Fairfield County. If a party does not
appoint a person to act as an appraiser within said 15 day period, the person
appointed by the other party shall be the sole appraiser and shall determine
the aforesaid fair market rent. Each notice containing the name of a person to
act as appraiser shall contain also the person's address. Before proceeding to
establish the fair market rent, the appraisers shall subscribe and swear to an
oath fairly and impartially to determine such rent.
If the two appraisers are appointed by the parties as stated in the
immediately preceding paragraph, they shall meet promptly and attempt to
determine the fair market rent. If they are unable to agree within 45 days
after the appointment of the second appraiser, they shall attempt to select a
third person meeting the qualifications stated in the immediately preceding
paragraph within 15 days after the last day the two appraisers are given to
determine the fair market rent. If they are unable to agree on the third person
to act as appraiser within said 15 day period, the third person shall be
appointed by the American Arbitration Association, upon the application of
Owner or Tenant to the office of the Association nearest the Building. The
person appointed to act as appraiser by the Association shall be required to
meet the qualifications stated in the immediately preceding paragraph. Each of
the parties shall bear 50% of the cost of appointing the third person and of
paying the third person's fees. The third person, however selected, shall be
required to take an oath similar to that described above.
<PAGE>
The three appraisers shall meet and determine the fair market rent. A
decision in which two of the three appraisers concur shall be binding and
conclusive upon the parties. In deciding the dispute, the appraisers shall act
in accordance with the rules then in force of the American Arbitration
Association, subject however, to such limitations as may be placed on them by
the provisions of this lease.
Notwithstanding the foregoing, in no event shall the Fixed Annual
Rent during the Extension Term be less than the Fixed Annual Rent during the
last year of the initial term of this lease.
(f) After the fair market rent for the Extension Term has been
determined by the appraiser or appraisers and the appraiser or appraisers shall
have notified the parties, at the request of either party, both parties shall
execute and deliver to each other an amendment of this lease stating the Fixed
Annual Rent for the Extension Term.
(g) If the Fixed Annual Rent for the Extension Term has not been
agreed to or established prior to the commencement of the Extension Term, then
Tenant shall pay to Owner an annual rent ("Temporary Rent") which Temporary
Rent shall be equal to 200% of the Fixed Annual Rent payable by Tenant for the
last year of the initial term. Thereafter, if the parties shall agree upon a
Fixed Annual Rent, or the Fixed Annual Rent shall be established upon the
determination of the fair market rent by the appraiser or appraisers, at a rate
at variance with the Temporary Rent (i) if such Fixed Annual Rent is greater
than the Temporary Rent, Tenant shall promptly pay to owner the difference
between the Fixed Annual Rent determined by agreement or the appraisal process
and the Temporary Rent, or (ii) if such Fixed Annual Rent is less than the
Temporary Rent, owner shall credit to Tenant's subsequent monthly installments
of Fixed Annual Rent the difference between the Temporary Rent and the Fixed
Annual Rent determined by agreement or the appraisal process.
(h) In describing the fair market rent during the Extension Term, the
appraiser or appraisers shall be required to take into account the rentals at
which leases are then being concluded (as of the last day of the initial 'term)
(for 5 year leases without renewal options with the lessor and lessee each
acting prudently, with knowledge and for self-interest, and assuming that
neither is under undue duress) for comparable space in the Building and in
comparable buildings in the Park.
(i) The option granted to Tenant under this Article 60 may be
exercised only by Tenant, its affiliates, permitted successors and assigns, and
not by any subtenant or any successor to the interest of Tenant by reason of
any action under the Bankruptcy Code, or by any public officer, custodian,
receiver, United States Trustee, trustee or liquidator of Tenant or
substantially all of Tenant's property. Tenant shall have no right to exercise
this option subsequent to the date Owner shall have the right to give the
notice of termination referred to in Article 17 unless Tenant cures the default
within the applicable grace period. Notwithstanding the foregoing, Tenant shall
have no right to extend the term if, at the time it gives notice of its
election (i) Tenant shall not be in occupancy of substantially all of the
demised premises or (ii) the demised premises (or any part thereof) shall be
the subject of a sublease. If Tenant shall have elected to extend the term,
such election shall be deemed withdrawn if, at any time after the giving of
notice of such election and prior to the commencement of the Extension Term,
Tenant shall sublease all or any portion of the demised premises.*
61. Option for Additional Space.
<PAGE>
a. (i) Subject to the provisions of this Article, Tenant
shall have the option to lease from Owner only the units contiguous to the
demised premises (after its initial leasing) and designated as Additional Space
on the attached floor plan ("Additional Space") (subject, however, to Owner's
right to subdivide such units to any size or configuration it shall deem to be
in its best interest) at the expiration of the initial space lease(s) for such
Additional Space (subject to owner's right to renew such lease(s)). If the term
of this lease shall be in full force anti effect on the expiration or
termination date of the initial space lease(s) for the Additional Space and the
date upon which Tenant shall exercise the option hereinafter referred to and
Tenant shall then be the largest tenant in the Building, Tenant shall have the
option to lease all, but not less than all of each unit of the Additional Space
that is the subject of Owner's notice on an as-is basis, provided Tenant gives
owner written notice of such election within 30 days after Tenant shall receive
owner's notice that such portion of the Additional Space is available for
leasing to Tenant. If Tenant fails or refuses to exercise this option within
the time period set forth above (time being of the essence) , then and in such
event Tenant shall have no further rights under this Section with respect to
the remaining portions of the Additional Space not leased by Tenant. If Tenant
shall elect to lease said Additional Space: (w) said Additional Space shall be
deemed incorporated within and part of the demised premises on the date that
Owner shall notify Tenant that such Additional Space is ready for occupancy by
Tenant, (x) the Fixed Annual Rent payable under the lease shall be increased by
an amount such that during the balance of the term of this lease the Fixed
Annual Rent for said Additional Space shall be the then fair market rent for
the Additional Space, as determined in the manner set forth in clause (ii)
below, (y) Tenant's Proportionate Share shall be increased by .002% for each
square foot of Rentable Area of the Additional Space leased by Tenant, and (z)
all other terms and provisions set forth in the lease shall apply, except that
Owner not be required to perform any work with respect to said Additional
Space.*
The parties shall promptly execute an amendment of this
lease confirming Tenant's election to lease said Additional Space and the
incorporation of said Additional Space into the demised premises.
(ii) owner and Tenant shall use their best efforts, within 30 days
after owner receives Tenant's notice of its election to lease said Additional
Space, ("Negotiation Period") to agree to upon the Fixed annual Rent to be paid
by Tenant for said Additional Space. If Owner and Tenant shall agree upon the
Fixed Annual Rent, the parties shall promptly execute an amendment to this
lease stating the Fixed Annual Rent for the Additional Space.
If the parties are unable to agree on the Fixed Annual Rent for said
Additional Space during the Negotiation Period, then within 15 days notice from
the other party, given after expiration of the Negotiation Period, each party,
at its cost and upon notice to the other party, shall appoint a person to act
as an appraiser hereunder, to determine the fair market rent for the Additional
Space. Each such person shall be a real estate broker or appraiser with at
least ten years' active commercial real estate appraisal or brokerage
experience (involving the leasing of similar space as agent for both landlords
and tenants) in Fairfield County. If a party does not appoint a person to act
as an appraiser within said 15 day period, the person appointed by the other
party shall be the sole appraiser and shall determine the aforesaid fair market
rent. Each notice containing the name of a person to act as appraiser shall
contain the person's address. Before proceeding to establish the fair market
rent, the appraisers shall subscribe and swear to an oath fairly and
impartially to determine such rent.
<PAGE>
If the two appraisers are appointed by the parties as stated
in the immediately preceding paragraph, they shall meet promptly and attempt to
determine the fair market rent. If they are unable to agree within 45 days
after the appointment of the second appraiser, they shall attempt to select a
third person meeting the qualifications stated in the immediately preceding
paragraph within 15 days after the last day the two appraisers are given to
determine the fair market rent. If they are unable to agree on the third person
to act as appraiser within said 15 day period, the third person shall be
appointed by the American Arbitration Association, upon the application of
Owner or Tenant to the office of the Association nearest the Building. The
person appointed to act as appraiser by the Association shall be required to
meet the qualifications stated in the immediately preceding paragraph. Each of
the parties shall bear 50% of the cost of appointing the third person and of
paying the third person's fees. The third person, however selected, shall be
required to take an oath similar to that described above.
The three appraisers shall meet and determine the fair market
rent. A decision in which two of the three appraisers concur shall be binding
and conclusive upon the parties. In deciding the dispute, the appraisers shall
act in accordance with the rules then in force of the American Arbitration
Association, subject however, to such limitations as may be placed on them by
the provisions of this lease.
After the Fixed Annual Rent for the Additional Space has been
determined by the appraiser or appraisers and the appraiser or appraisers shall
have notified the parties, at the request of either party, both parties shall
execute and deliver to each other an amendment of this lease stating the Fixed
Annual Rent for the Additional Space.
If the Fixed Annual Rent for said Additional Space has not
been agreed to or established prior to the incorporation of said Additional
Space in the demised premises, then Tenant shall pay to Owner an annual rent
("Temporary Rent") which Temporary Rent on a per square foot basis shall be
equal to the Fixed Annual Rent, on a per square foot basis, then being paid by
Tenant for the demised premises.
Thereafter, if the parties shall agree upon a Fixed Annual Rent, or
the Fixed Annual Rent shall be established upon the determination of the fair
market rent by the appraiser or appraisers, at a rate at variance with the
Temporary Rent (i) if such Fixed Annual Rent is greater than the Temporary
Rent, Tenant shall promptly pay to Owner the difference between the Fixed
Annual Rent determined by agreement or the appraisal process and the Temporary
Rent, or (ii) if such Fixed Annual Rent is less than the Temporary Rent, Owner
shall credit to Tenant's subsequent monthly installments of Fixed Annual Rent
the difference between the Temporary Rent and the Fixed Annual Rent determined
by agreement or the appraisal process.
In determining the fair market rent for said Additional
Space, the appraiser or appraisers shall be required to take into account the
rentals at which leases are then being concluded for comparable space in the
Building and in comparable buildings in the Park. In no event shall the Fixed
Annual Rent for the Additional Space, on a per square foot basis, be less than
the Fixed Annual Rent for the demised premises, on a per square foot basis.*
B. The option granted to Tenant under this Article 61 may be
exercised only by Tenant, its permitted successors and assigns, and not by any
subtenant or any successor to the interest of Tenant by reason of any action
under the Bankruptcy Code, or by any public officer, custodian, receiver,
United States Trustee, trustee or liquidator of Tenant or substantially all of
Tenant's property. Tenant
<PAGE>
shall have no right to exercise any of such options subsequent to the
date owner shall have the right to give the notice of termination referred to
in Article 17.*
<PAGE>
Exhibit "A"
Rules and Regulations
1. Tenant shall keep the loading dock areas free of refuse and debris.
2. The sidewalks, entrances, passages, lobbies, elevators, vestibules,
stairways, corridors and halls shall not be obstructed or encumbered
by Tenant or used f or any purpose other than ingress and egress to
and from the demised premises. Tenant shall not permit any of its
invitees to congregate in any of said areas. No door mat shall be
placed or left in any public hall (or outside any entry door of the
demised premises) . No property of Tenant may be kept or placed
outside the demised premises.
3. Tenant and its invitees shall not litter any portion of any public
area of the Building, the Park, if applicable, or the Real Property.
Tenant shall promptly remove snow, litter and debris from such areas.
4. Tenant shall not mark, paint, drill into or in any way deface any part
of the demised premises or the Building. No boring, cutting or
stringing of wires shall be permitted, except with the prior consent
of owner, and as owner may direct.
5. The sashes, sash doors, skylights, windows and doors that reflect or
admit light and air into the halls, passageways and other public
places shall not Joe covered or obstructed by Tenant. Bottles, parcels
and other articles shall not be placed on window sills by Tenant.
6. No showcases or other articles shall be put in front of or affixed to
any part of the exterior of the Building, nor placed in the halls,
corridors or vestibules by Tenant.
7. Tenant shall not discharge or permit to be discharged any materials,
which may cause damage, into waste lines, vents or flues. The water
and wash closets and other plumbing fixtures shall not be used for any
purpose other than those for which they were designed and constructed,
and no sweepings, rubbish, rags, corrosives, acids or other substances
shall be thrown or deposited therein. All damages resulting from any
misuse of such fixtures shall be borne by the tenant who, or whose
invitees, shall have caused the same.
8. No noise (including, but not limited to, music or the playing of
musical instruments, recordings, radio or television) which, in
owner's judgment, might disturb other tenants in the Building or the
Park, if applicable, shall be made or permitted by Tenant. Nothing
shall be done or permitted in the demised premises by Tenant which
would impair or interfere with the use or enjoyment by any other
tenant of any other space in the Building or the Park, if applicable.
Tenant shall not throw anything out of the doors, windows or skylights
M" into the passageways.
9. No equipment which generates noise or vibration may be installed in
the demised premises except with the prior consent of Owner, and as
Owner may direct. Any condition which causes transmission of sounds,
noise or vibrations outside of the demised premises shall be corrected
by Tenant.
10. Neither Tenant nor its invitees shall bring or keep upon the demised
premises any explosive fluid, chemical or substance, nor any flammable
or combustible objects or materials except as may
<PAGE>
be required by Tenant in the ordinary course of its business, provided
that such usage is in reasonable quantities and otherwise complies
with all laws and requirements of public authorities.*
11. No awnings or other projections shall be attached to the outside walls
of the Building. No curtains, blinds, shades, or screens shall be
attached -to or hung in, or used in connection with, any window or
door of the demised premises, without the prior consent of owner. Such
curtains, blinds, shades or screens must be of a quality, type, design
and color, and attached in the manner, approved by Owner.
12. No sign, insignia, advertisements, object, notice or other lettering
shall be exhibited, inscribed, painted or affixed by any Tenant on any
part of the outside or inside of the demised premises or the Building
without the prior written consent of Owner. In the event of the
violation of the foregoing by Tenant, Owner may remove the same
without any liability, and may charge the expense incurred in such
removal to Tenant. Interior signs and lettering on doors and directory
tablets shall, if and when approved by owner, be inscribed, painted or
affixed by Owner at the expense of Tenant, and shall be of a size,
color and style acceptable to Owner.
13. Owner reserves the right to rescind, alter or waive any Rule or
Regulation at any time prescribed for the Building, when, in its
judgment, it deems it necessary or desirable for the reputation,
safety, care or appearance of the Building, Real Property or the Park,
if applicable, or the preservation of good order therein, or the
operation or maintenance of the Building, or - the Park, if
applicable, or the equipment thereof, or the comfort of tenants or
others in the Building. No recision, alteration or waiver of any Rule
or Regulation in favor of one tenant shall operate as a rescission,
alteration or waiver in favor of any other tenant.
14. Tenant shall, upon the termination of its tenancy, turn over to owner
all keys of the demised premises and stores, offices and toilet rooms,
either furnished to, or otherwise procured by, Tenant and in the event
of the loss of any keys, Tenant shall pay to Owner the cost of
replacing the locks and keys.
15. The demised premises shall not be used for lodging or sleeping or for
any immoral or illegal purpose. Canvassing, soliciting and peddling in
the Building are prohibited and Tenant shall cooperate to prevent the
same. Tenant shall not cause or permit any odors of cooking or other
processes or any odors to emanate from the demised premises which
would annoy other tenants or create a public or private nuisance. No
cooking shall be done in the demised premises except as is expressly
permitted in the lease. Notwithstanding the foregoing, Tenant may use
a microwave oven in the demised premises.*
16. Tenant shall keep all windows in the demised premises clean at all
times. However, Tenant shall not be required to clean window more
often than once every two (2) months.
17. Owner shall not unreasonably withhold or delay from Tenant any
approval provided for in the Rules and Regulations.
<PAGE>
Exhibit "B"
WORK SPECIFICATIONS
Premises will be delivered in broom clean condition unfinished except as set
forth below.
1. Demising Partitions:
Partitions between -tenants shall be of sound attenuating
construction, to the underside of the deck, metal stud drywall
construction, two layers of sheetrock on both sides and taped with
sound insulation batting between studs.
2. Exterior Entrance Doors:
Exterior doors (310" X 710") shall be plate glass and framed in
architectural metal with a door closer as is presently installed.
3. Ceilings:
open bar joist ceilings and exposed deck.
4. Floors:
A reinforced concrete slab floor with the floor load for the upper
level being 125 pounds per square foot (framed slab) and for the lower
level, 300 pounds per square foot (slab on grade).
5. Windows and Blinds:
owner shall provide building standard blinds on all windows. Window
coverings are mandatory for all of tenant's windows.
6. Exterior Site Work:
Site work as shown on the lease plan will be furnished by owner
including the loading dock and location of dumpster in a location
satisfactory to Owner and Tenant. Adequate front and rear entrances
with grading, walkways and/or stairs furnish by owner in accordance
with laws and requirements of public authorities.
7. Adequate front and rear entrances with grading, walkways, and/or
stairs furnished by owner in accordance with laws and requirements of
public authorities.
RIDER to be attached to and forming part of Lease dated December 1991, between
ROBERT MARTIN COMPANY, as Owner, and LIFECODES CORPORATION, as Tenant.
Re: P/O 550 West Avenue
Stamford, Connecticut
<PAGE>
Exhibit "C"
Campus Warehouse
WORK SPECIFICATIONS
Warehouse area to be generally unfinished open space except as
specifically provided for below:
1. Walls: .
A. Walls shall be sheetrock, one coat taped, to underside of
deck.
2. Doors:
A. Exterior Glass Doors:
Plate glass, framed in architectural metal, with door closer
310" nominal width X 710" as is presently installed.
B. Interior Connecting Doors (to Tenant offices):
31011 X 618" solid core birch door stained or painted 1 3/4"
thick set in hollow metal frame.
3. Ceilings:
A. open bar joist ceilings and exposed metal roofing deck.
4. Floors:
A. Concrete slab on ground with reinforced 61 X 61 - #10/#10
wire mesh or fiber mesh reinforcement rated for 300 lbs.
per square foot.
5. Hardware:
A. Passage set on connecting door, lock sets on access doors
including hinges, bucks and door stops where required.
6. Heating and Air Conditioning:
A. Heating and air conditioning shall be by a roof mounted unit
separately zoned from office.
7. Lighting:
A. Lighting shall be by means of 2 lamp 9611 fluorescent
fixtures installed on bar joist webs. Initial light
intensity shall be 30 foot candle average.
8. outlets and Terminals:
A. One electric panel at each electrical meter location with at
least 24 circuit breakers. Distribution of electricity to
wire lighting and heating fixtures.
9. Switches:
A. Switches will be provided for one bank of lighting at the
main entrance door and at any connecting door to Tenant's
office premises. All other lighting circuits to be on the
main panel.
10. Telephone:
<PAGE>
A. Tenant shall make application directly to the telephone
company or other installer for the installation of telephone
service.
11. Windows and Blinds:
A. Window coverings are mandatory for all of tenant's windows.
B. owner to provide window coverings of the thin slat Levolor
type blinds.
12. Utilities:
A. Tenant will install electric service to tenant's premises of
(to be determined) AMPS, 277/48OV, 3 phase, 4 wire.
B. Gas service will be adequate for Tenant's needs.
C. Water shall be supplied for all ordinary- sanitary and
janitorial purposes and shall install a water heater with
adequate capacity for normal rest room use. Tenant will
install own water meter.
13. Tenant shall not impose a floor load of greater than 125 lbs. per
square foot on the upper level and 300 lbs. per square foot on the
lower level.
14. Rest Rooms:
A. Male and female rest rooms shall be in accordance with the
requirements of applicable building code or approximately one major
fixture for 15 employees or fraction thereof. One basin to be provided
for at least each 2 major fixtures or fraction thereof. Rest rooms to
be provided with toilet paper dispensers, mirror and exhaust fan.
Plumbing fixtures to be white. Multiple fixtures to be separated by,
metal partitions. All floors and wainscoting to 41611 to be ceramic
tile. In the event office space is leased in conjunction with
warehouse space, then the rest room specification shall be considered
as a joint requirement for both office and warehousing spaces.
Real estate taxes assessed against any item of construction which is a part of
Owner's standard work letter of customary installation are included as part of
the Lease terms set forth herein. If any additional specifications, extras or
non-standard items of improvement give rise to the assessment of additional
real estate taxes, such taxes shall be for the account of Tenant.
All selections or designations to be made by Tenant are to be made within five
(5) business days after request by Owner. If Tenant has not made such
designations or selections within said period, the owner shall be authorized to
do so on behalf of the Tenant.
<PAGE>
Campus Office
WORK SPECIFICATIONS
The following standards shall pertain to office and laboratory
improvements:
1. Partitions:
A. Interior Partitions:
Partitions shall be of metal stud drywall construction to
underside of hung ceiling, with sheetrock finish taped on
both sides, painted, provided with vinyl base.
B. Demising Partitions:
Partitions between tenants shall be of sound attenuating
construction, to the underside of the roof, metal stud
drywall construction, two layers of sheetrock both sides
finished, taped and painted on tenant's office side, with
sound insulation batts between studs (currently installed).
2. Doors:
A. Exterior Entrance Doors:
Exterior doors shall be plate glass, framed in architectural
metal, with door closer, 3'0" nominal width X 7'0" as is
presently installed.
B. Interior Doors:
(i) Main Passage:
3'0" X 6'8" solid core flush birch doors stained or
painted 1 3/4" thick, set in hollow metal frame.
(ii) Minor Passage and Office Doors:
3'0" X 6'8" solid core flush doors stained birch or
painted 1 3/4" thick set in hollow metal frame.
(iii) Executive Offices:
3'0" X 6'8" solid core birch door stained or
painted 1 3/4" thick set in hollow metal frame.
(iv) Closet and Bathroom Doors:
3'0"X 6'8" hollow core birch door stained or
painted 1 3/4" thick set in hollow metal frame.
(v) Sliding Doors:
2 or 3 panel as required hollow core stained or
painted 1 3/4" thick set in trimmed opening with
metal track.
3. Hardware:
A. Supply and install all necessary hardware such as passage
sets, hinges, bucks and door stops where required. Locks
<PAGE>
will be furnished only on entrance and exit doors. Private
rest rooms shall have privacy locks.
4. Ceilings:
A. Ceilings shall be 2' X 4" textured acoustical ceiling panels
laid in a suspended tee system. Grid system may be continuous
or room-contained at Owner's option.
5. Window Coverings:
A. Owner to provide all window coverings. Window coverings are
mandatory for all of tenant's windows.
B. owner to provide window coverings of the thin slat Levolor
type blinds.
6. Flooring:
A. All floors shall be covered with Owner's standard grade of
carpet or vinyl composition tile or similar to be selected
from Owner's standard samples as to type and color.
7. Painting:
A. Painting wherever specified shall consist of two coats in
flat latex colors to be selected from Owner's color chart. No
more than one color for each enclosure.
8. Air-conditioning and Heating:
A. Entire office area shall be heated and air-conditioned by a
roof-mounted combination heating/cooling unit and a duct
system, to maintain, for heating 70 degrees F. inside when
outside temperature of 0 degrees F. with a maximum wind
velocity of 15 MPH and, for cooling inside 80 degrees F. wet
bulb. Air conditioning specifications are designed on the
basis of doors and windows being closed, as well as all glass
areas in the air conditioned premises being provided with
venetian blinds, shades or drapes which shall be closed,
depending on the position of the sun. Ceiling diffusers shall
be metal, vaned with manual adjusting dampers. Return
registers shall be of plastic egg crate type. Number and size
of roof-mounted units and zoning shall be as determined by
owner's engineers.
9. Water:
A. Water shall be supplied for all ordinary sanitary and
janitorial purposes. A water heater shall be installed with
adequate capacity for normal rest room use. The hot water
shall be available within 30 seconds after being turned on.*
10. Lighting:
A. Supply and install 2' X 4" drop-in fluorescent lighting
fixtures (4 lamp, 40W each) with plastic lenses, not to
exceed one fixture for every 80 square feet of ceiling area.
11. Convenience Outlets:
A. Install, in interior partitions, up to one duplex convenience
outlet (110 volt) for each 100 square feet of floor area
(approximately 6 outlets per 20 amp circuit).
<PAGE>
12. Switches:
A. Wall-mounted switches will be provided in any entrance foyer,
all private offices, rest rooms, and for open areas at major
passage doors.
13. Telephone:
A. Tenant shall make application directly to the telephone
company or other installer for the installation of telephone
service. owner does not provide or initiate such service.
14. Rest Rooms.
A. As per warehouse specifications.
15. Utilities:
A. Premises will be provided with 3/4" water service, adequate
for normal heating and hot water requirements. Tenant shall
install own water meter if water consumption exceeds normal
sanitary needs.
B. Owner shall furnish and install electric meter and gas
meter and regulator. The cost of such meters shall be borne
equally by Owner and Tenant, provided, however, that Tenant's
cost shall not exceed $3500.
C. Tenant shall make direct application for gas and electric
service to applicable local utility company.
16. Substitutions:
A. No credit will be given for building standard items omitted.
17. Generator and Propane Tank:
A. Tenant may, at its sole cost and expense, install a generator
and propane tank in an area mutually acceptable to Owner and
Tenant. Tenant shall comply with all laws and requirements of
public authorities in connection with such installation. The
installation of the generator and propane tank shall not be
part of the Work on which Owner shall calculate its bid
pursuant to Article 42.*
Real estate taxes assessed against any item of construction which is a part of
Owner's standard work letter or customary installation are included as part of
the Lease terms set forth herein. If any additional specifications, extras or
non-standard items of improvement give rise to the assessment of additional
real estate taxes, such taxes shall be for the account of Tenant.
All selections or designations to be made by Tenant are to be made within five
(5) business days after request by Owner. If Tenant has not made such
designations or selections within said period, the owner shall be authorized to
do so on behalf of the Tenant.
RIDER to be attached to and forming part of Lease dated December 1991 between
ROBERT MARTIN COMPANY as Owner And LIFECODES CORPORATION, as Tenant.
<PAGE>
EXPAN/1992
FIRST AMENDMENT
AGREEMENT, made this 24th day of April, 1992 entered into between
ROBERT MARTIN COMPANY, a New York partnership, having its principal office at
100 Clearbrook Road, Elmsford, New York (herein referred to as "Owner"), and
LIFECODES CORPORATION, a New York corporation, having an office at 550 West
Avenue, Stamford, Connecticut (herein referred to as "Tenant").
W I T N E S S E T H
WHEREAS, Owner and Tenant entered into a written Lease Agreement dated
December 15, 1991 (hereinafter called the "Lease") wherein and whereby the
Owner leased to Tenant and the Tenant hired from the owner approximately 19,450
square feet in the building known as 550 West Avenue, Stamford, Connecticut for
a term of ten years.
WHEREAS, the parties hereto desire to amend said Lease by enlarging
the premises pursuant to the terms and provisions set forth below;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, each to the other in hand
paid, IT IS AGREED as follows:
1. As of the Additional Premises Commencement Date (as defined below),
the following shall be effective:
a) The demised premises consisting of approximately 19,450
square feet ("Existing Premises") shall be enlarged by approximately 4,560
square feet ("Additional Premises") to form a combined space consisting of
approximately 24,010 square feet ("New Premises") as shown on the floor plan
attached and made a part hereof as Exhibit A-1. Owner shall deliver the
Additional Premises to Tenant subject to the work set forth herein and shown on
Exhibit A-1.
b) The Fixed Annual Rent as set forth on page 1 of the Lease
shall be deleted in its entirety and the following shall be substituted in
place thereof:
"$-0- per annum for the first 4 months of the term
of this lease, $252,850.00 per annum for the next 2 months of the term of this
lease, $287,050.00 per annum for the next 18 months of the term of this lease,
$297,310.00 per annum for the next 36 months of the term of this lease,
$303,701.67 per annum for the remaining 60 months of the term of this lease"
c) The references to "19,450 square feet" on pages 1 and 6 of
the Lease shall be amended by deleting such references and substituting "24,010
square feet" in place thereof.
<PAGE>
d) The security amount set forth in Article 32 of the Lease
shall be amended by deleting "$42,141.67" therein and substituting "$52,021.67"
in place thereof. Such additional security in the amount of $9,880.00 shall be
deposited by Tenant with Owner upon the execution and delivery of this First
Amendment from Tenant to Owner. Article 59 (e) of the Lease (security) shall be
amended by "$21,070.83" therein and substituting "$26,010.84" in place thereof.
e) Article 43(a) of the Lease shall be deleted in its
entirety and following shall be substituted in place thereof:
"If the Commencement Date if other than the first day of a
calendar month, the first monthly installment of Fixed Annual Rent shall be
prorated to the end of said calendar month."
EXPAN/1992
f) Tenant's Proportionate Share set forth in Articles 30
(Sprinklers) and 45 (Taxes) of the Lease shall be amended by deleting "36.70%"
therein and substituting "45.30%" in place thereof.
g) The common area maintenance charge set forth in Article
46(iii) shall be amended by deleting "$29,750.00" therein and substituting
"$36,015.00" in place thereof.
3. The Additional Premises shall be deemed complete on the earliest
date on which Owner's work, as set forth herein in the Additional Premises has
been substantially completed (the "Additional Premises Commencement Date"),
notwithstanding the fact that minor or insubstantial details of construction,
mechanical adjustment or decoration remain to be performed, the non-completion
of, which would not materially interfere with Tenant's use of the Additional
Premises. If completion of the Additional Premises is delayed by reason of:
(i) any act or omission of Tenant or any of its
employees, agents or contractors, or
(ii) failure to plan or execute Tenant's work, if any, with
reasonable speed and diligence, or
(iii) failure to make selections required hereunder, or
(iv) changes by Tenant in its drawings or specifications or
changes or substitutions requested by Tenant, or
(v) failure to submit or approve drawings, plans or
specifications timely,
(vi) Tenant's failure to deliver to owner the additional
security deposit required hereunder,
then the Additional Premises shall be deemed complete (and Tenant shall
commence paying the rental set forth in Paragraph 1 (b)) on the date when it
would have been completed but for such delay, and Tenant shall pay Owner all
costs and damages which Owner may sustain by reason of such delay.
Notwithstanding anything contained herein to the contrary, the Additional
Premises Commencement Date and the Commencement Date under the Lease shall
occur simultaneously. The Additional Premises Commencement Date and the
Commencement Date shall not be deemed to have occurred until the Additional
Premises has been deemed complete (as set forth herein) and the Existing
Premises shall be deemed complete (as set forth in Article 42 of the Lease) .
Promptly after determination of the Additional Premises Commencement Date and
the Commencement Date the parties shall enter into a supplementary agreement
setting forth the Additional Premises Commencement Date and the Commencement
Date.
4. Upon execution and delivery of this First Amendment by Tenant to
Owner, Owner shall perform
<PAGE>
or cause to have performed in the Additional Premises only the following work:
(i) install Owner's standard 72" warehouse lighting mounted on bar joists, (ii)
install two suspended heating units, (iii) pour a concrete slab and (iv) create
a 10' x 10' archway between the Existing Premises and the Additional Premises.
Such work shall be performed simultaneously with the work to be performed in
the Existing Premises under the Lease and the construction contract between
Owner and Tenant executed in connection therewith.*
5. The Tenant represents that it has dealt with no broker in
connection with this First Amendment.
EXPAN/1992
6. Except as otherwise set forth herein, all terms and provisions
contained in the Lease shall remain in full force and effect.
7. It is understood and agreed that this First Amendment is submitted
to the Tenant for signature with the understanding that it shall not bind the
owner unless and until it has been executed by the Owner and delivered to the
Tenant or Tenant's attorney.
8. This Lease, as hereby amended, shall be binding upon the parties
hereto, their successors and assigns.
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands
and seals the day and year first above written.
ROBERT MARTIN COMPANY
By
------------------------------
General Partner
LIFECODES CORPORATION
By
------------------------------
President
<PAGE>
EXPAN/1991
SECOND AMENDMENT
AGREEMENT, made this 30th day of October, 1997, entered into between
RM STAMFORD REALTY ASSOCIATES, a Connecticut limited partnership, having its
principal office at 100 Clearbrook Road, Elmsford, New York (herein referred to
as "Owner"), and LIFECODES CORPORATION, a New York corporation, having its
principal office at 550 West Avenue, Stamford, New York (herein referred to as
"Tenant").
W I T N E S S E T H :
WHEREAS, Owner and Tenant entered into a written lease agreement dated
December 15, 1991, as amended by First Amendment dated April 24, 1992
(hereinafter collectively referred to as the "Lease") wherein and whereby the
Owner leased to Tenant and the Tenant hired from the Owner approximately 24,010
square feet in the building known as 550 West Avenue, Stamford, Connecticut,
for a term which currently expires April 30, 2002, and
WHEREAS, the parties hereto desire to amend said Lease by enlarging
the premises pursuant to the terms and provisions set forth below;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other good and valuable consideration, each to the other in hand
paid, IT IS AGREED as follows:
1. As of the Second Additional Premises Commencement Date, the
following shall be effective:
a) The demised premises shall be enlarged by approximately
3,935 square feet ("Second Additional Premises") as shown on the floor plan
attached hereto as Exhibit A-2. Owner shall deliver the Second Additional
Premises to Tenant "as-is", except that Owner shall close the archways to
demise the space, remove the existing mezzanine and deliver the space with
separate utility meters.
b) Commencing on the second month anniversary of the Second
Additional Premises Commencement Date through and including April 30, 2002, the
Fixed Annual Rent shall be increased by $62,960.00 per annum.
c) The Rentable Area of the Lease shall be increased by
3,935 square feet.
<PAGE>
d) Tenant's Proportionate Share set forth in Articles 30 and
45 of the Lease shall be increased by 7.42%.
e) The number of parking spaces for executive cars set forth
in Section 44(a) of the Lease shall be increased by three (3) spaces and the
number of parking spaces for employee cars set forth in Section 44(a) of the
Lease shall be increased by five (5) spaces.
f) The common area maintenance charge set forth in Section
46(iii) of the Lease shall be increased by $5,902.50.
2. The Second Additional Premises Commencement Date shall be deemed to
occur on the earlier of (i) the date of the Second Additional Premises shall be
deemed complete (as defined below) or (ii) the date Tenant or anyone claiming
under or through Tenant shall occupy the Second Additional Premises. The Second
Additional Premises shall be deemed complete on the earliest date on which
Owner's work, as set forth on Exhibit A-2, in the Second Additional Premises
has been substantially completed, notwithstanding the fact that minor or
insubstantial details of construction, mechanical adjustment, or decoration
remain to be performed, the non-completion of which would not materially
interfere with Tenant's use of the Second Additional Premises. If completion of
the Second Additional Premises is delayed by reason of:
(i) any act or omission of Tenant or any of its employees,
agents or contractors, or
(ii) failure to plan or execute Tenant's work, if any, with
reasonable speed and diligence, or
(iii) failure to make selections required hereunder, or
(iv) changes by Tenant in its drawings or specifications or
changes or substitutions requested by Tenant, or
(v) failure to submit or approve drawings, plans or
specifications timely,
then the Second Additional Premises shall be deemed complete (and Tenant shall
commence paying the rental set forth in Paragraph 1 (b)) on the date when it
would have been completed but for such delay, and Tenant shall pay Owner all
costs and damages which Owner may sustain by reason of such delay.
Promptly following the completion of the Second Additional Premises as
described above, the parties shall enter into a supplementary written agreement
setting forth the Second Additional Premises Commencement Date.
3. As of the Third Additional Premises Commencement Date, the
following shall be effective:
a) The demised premises shall be enlarged by approximately
3,660 square feet ("Third Additional Premises") as shown on the floor plan
attached hereto as Exhibit A-2. Owner shall deliver the Third Additional
Premises to Tenant "as-is", except that Owner shall create one archway, provide
heat in warehouse portion of the Third Additional Premises only, deliver the
air conditioning unit in the tech area in good operating condition (which will
have been inspected and serviced by Owner) and connect utilities to Tenant's
existing meters.
b) Commencing on the second month anniversary of the Third
Additional Premises Commencement Date through and including April 30, 2002, the
Fixed Annual Rent shall be increased by $43,920.00 per annum.
c) The Rentable Area of the Lease shall be increased by
3,660 square feet.
<PAGE>
d) Tenant's Proportionate Share set forth in Articles 30 and
45 of the Lease shall be increased by 6.91%.
e) The number of parking spaces for executive cars set forth
in Section 44(a) of the Lease shall be increased by two (2) spaces and the
number of parking spaces for employee cars set forth in Section 44(a) of the
Lease shall be increased by five (5) spaces.
f) The common area maintenance charge set forth in Section
46(iii) of the Lease shall be increased by $5,490.00.
4. The Third Additional Premises Commencement Date shall be deemed to
occur on the earlier of (i) the date the Third Additional Premises shall be
deemed complete (as defined below) or (ii) the date Tenant or anyone claiming
under or through Tenant shall occupy the Third Additional Premises. The Third
Additional Premises shall be deemed complete on the earliest date on which
Owner's work, as set forth on Exhibit A-2, in the Third Additional Premises has
been substantially completed, notwithstanding the fact that minor or
insubstantial details of construction, mechanical adjustment or decoration
remain to be performed, the non-completion of which would not materially
interfere with Tenant's use of the Third Additional Premises. If completion of
the Third Additional Premises is delayed by reason of:
(i) any act or omission of Tenant or any of its employees,
agents or contractors, or
(ii) failure to plan or execute Tenant's work, if any, with
reasonable speed and diligence, or
(iii) failure to make selections required hereunder, or
(iv) changes by Tenant in its drawings or specifications or
changes or substitutions requested by Tenant, or
(v) failure to submit or approve drawings, plans or
specifications timely,
then the Third Additional Premises shall be deemed complete (and Tenant shall
commence paying the rental set forth in Paragraph 3 (b)) on the date when it
would have been completed but for such delay, and Tenant shall pay Owner all
costs and damages which Owner may sustain by reason of such delay.
Promptly following the completion of the Third Additional Premises as described
above, the parties shall enter into a supplementary written agreement setting
forth the Third Additional Premises Commencement Date.
5. Tenant agrees not to disclose the terms, covenants, conditions or
other facts with respect to the Lease, including, but not limited to, the Fixed
Annual Rent, to any person, corporation, partnership, association, newspaper,
periodical or other entity. This non-disclosure and confidentiality agreement
shall be binding upon Tenant without limitation as to time, and a breach of
this paragraph shall constitute a material breach under the Lease.
6. The Tenant represents that it has dealt with no broker in
connection with this Second Amendment.
7. Except as otherwise set forth herein, all terms and provisions
contained in the Lease shall remain in full force and effect.
8. It is understood and agreed that this Second Amendment is submitted
<PAGE>
to the Tenant for signature with the understanding that it shall not bind the
Owner unless and until it has been executed by the, Owner and delivered to the
Tenant or Tenant's attorney.
9. This Lease, as hereby amended, shall be binding upon the parties
hereto, their successors and assigns.
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands
and seals the day and year first above written.
RM STAMFORD REALTY ASSOCIATES
By: Cali Sub XII, Inc.1
general partner
By:
----------------------------------
Executive Vice President
LIFECODES CORPORATION
By:
----------------------------------
President
<PAGE>
Robert Martin Company
April 24, 1992
Lifecodes Corp.
Saw Mill River Road
Valhalla, New York 10595
RE: Premises and Additional Premises
at 550 West Avenue
Stamford, Connecticut
Gentlemen:
In connection with the Lease dated 12/15/91 as amended by First Amendment dated
4/24/92 (collectively "Lease") entered into between you, as Tenant, and the
undersigned, as owner, and notwithstanding the commencement date and the
additional premises commencement date set forth therein, it is agreed that the
actual commencement date and the additional premises commencement date of said
Lease is 5/l/92 and the expiration date of said Lease shall be 4/30/2002.
Kindly affix your signature to the enclosed copy of this letter and return same
to our office within ten (10) business days as required under the Lease.
Very truly Yours,
ROBERT MARTIN COMPANY
Brad W. Berger
Executive Vice President
BWB:jb
The foregoing is consented to and agreed:
- ----------------------------
100 Clearbrook Road, Elmsford, New York 10523 - 914 592 4800 - Fax 914 592 4836
<PAGE>
Exhibit 21.1
Subsidiary Jurisdiction of Incorporation
---------- -----------------------------
1. Cellmark Diagnostics, Inc. Delaware
2. Medical Molecular Diagnostics, GmbH Germany
3. Genomics International Corporation Delaware
4. National Legal Laboratories, Inc.*
5. International Support for Bone Marrow Drives, Ltd. North Carolina
6. Micro Diagnostics, Inc.*
7. Genomics / Lifecodes Canadian Acquisition Corp. Delaware
8. 3018524 Nova Scotia ULC Nova Scotia
9. Lifecodes Europe BVBA Belgium
10. Lifebank, Inc. New York
- ---------------------------------------------------------------------------
* an unincorporated division of Genomics International Corporation
<PAGE>
Exhibit 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to use in this registration statement of Lifecodes Corporation on
Form S-1 of our report dated December 24, 1997 (July 13, 1988 as to Notes 13 and
5(e)) on the consolidated financial statements of Lifecodes Corporation, our
report dated May 22, 1998 (July 13, 1998 as to note 13) on the supplemental
consolidated financial statements of Lifecodes Corporation, our report dated May
22, 1998, on the financial statements of Micro Diagnostics Inc., our report
dated June 19, 1998 on the financial statements of International Support for
Bone Marrow Drives, Ltd., and our report dated May 26, 1998 on the financial
statements of GeneScreen, Inc. appearing in the Prospectus, which is part of
this Registration Statement. We also consent to the reference to us under the
heading "Experts" in such Prospectus.
DELOITTE & TOUCHE LLP
Stamford, Connecticut
July 15, 1998
<PAGE>
Exhibit 23.3
INDEPENDENT ACCOUNTANTS' CONSENT
We consent to use in this Registration Statement of Lifecodes Corporation on
Form S-1 of our report dated February 20, 1998 accompanying the financial
statements appearing in the Prospectus, which is part of this Registration
Statement. We also consent to the reference to us under the heading "Experts" in
such Prospectus.
Schlattman & Associates, P.C.
Mason, Michigan
July 15, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C> <C>
<PERIOD-TYPE> YEAR 6-MOS
<FISCAL-YEAR-END> SEP-30-1997 SEP-30-1998
<PERIOD-END> DEC-31-1997 MAR-31-1998
<CASH> 615,000 689,000
<SECURITIES> 0 0
<RECEIVABLES> 2,477,000 3,526,000
<ALLOWANCES> 181,000 257,000
<INVENTORY> 1,252,000 1,169,000
<CURRENT-ASSETS> 4,475,000 5,433,000
<PP&E> 1,621,000 2,983,000
<DEPRECIATION> 686,000 880,000
<TOTAL-ASSETS> 6,702,000 10,154,000
<CURRENT-LIABILITIES> 3,204,000 4,517,000
<BONDS> 0 0
0 0
215,000 215,000
<COMMON> 194,000 201,000
<OTHER-SE> 1,996,000 2,928,000
<TOTAL-LIABILITY-AND-EQUITY> 6,702,000 10,154,000
<SALES> 12,224,000 8,384,000
<TOTAL-REVENUES> 12,224,000 8,384,000
<CGS> 4,896,000 3,348,000
<TOTAL-COSTS> 5,581,000 3,428,000
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 224,000 48,000
<INCOME-PRETAX> 1,566,00 1,636,000
<INCOME-TAX> 174,000 753,000
<INCOME-CONTINUING> 1,747,000 1,609,000
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 1,392,000 884,000
<EPS-PRIMARY> .76 .43
<EPS-DILUTED> .58 .31
</TABLE>
<PAGE>
Exhibit 99.1
CONSENT
The undersigned hereby consents to the reference in the Registration
Statement on Form S-1 and related Prospectus of Lifecodes Corporation (the
"Company") to the undersigned serving as a director of the Company at the time
of the consummation of the offering described in the Prospectus. The undersigned
agrees that, if nominated and elected, he will serve as a director of the
Company.
-----------------------------
John Hansen M.D.
<PAGE>
Exhibit 99.2
CONSENT
The undersigned hereby consents to the reference in the Registration
Statement on Form S-1 and related Prospectus of Lifecodes Corporation (the
"Company") to the undersigned serving as a director of the Company at the time
of the consummation of the offering described in the Prospectus. The undersigned
agrees that, if nominated and elected, he will serve as a director of the
Company.
-----------------------------
Keith Brown
